SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1997 OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM ______________ TO _____________
UNITED BANCSHARES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
0-25976
-------
SEC File Number
Pennsylvania 23-2802415
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
714 Market Street, Philadelphia, PA 19106
----------------------------------- -----
(Address of principal executive office) (Zip Code)
(215) 829-2265
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether 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 twelve months (or 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____
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Registrant has two classes of capital stock authorized - 2,000,000 shares
of $.01 par value common stock, of which as of April 30, 1997, 816,355 shares
were issued and outstanding and 500,000 authorized shares of Series Preferred
Stock. The Board of Directors of United Bancshares, Inc. designated one series
of the Series Preferred Stock (the "Series A Preferred Stock") of which 93,150
shares were outstanding as of July 31, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
United Bancshares, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
ASSETS
<S> <C> <C>
Cash and due from banks $ 5,665,386 $ 3,544,110
Interest bearing deposits with banks 327,482 320,202
Federal funds sold 7,845,000 5,380,000
----------- ----------
Cash and cash equivalents 13,837,867 9,244,312
Investment securities:
Held-to-maturity, at amortized cost 10,967,227 8,476,638
Available-for-sale, at market value 5,675,854 5,983,461
Loans held for sale, net of unearned discount -- 4,906,455
Loans, net of unearned discount 68,252,507 64,717,914
Less: allowance for loan losses (530,120) (527,507)
----------- ----------
Net loans 67,722,387 69,096,862
Bank premises & equipment, net 1,809,924 1,788,937
Accrued interest receivable 1,406,093 1,376,416
Deferred branch acquisition cost 115,114 154,475
Prepaid expenses and other assets 755,070 648,300
----------- ----------
102,289,536 96,769,401
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits, non-interest bearing 16,953,506 12,393,256
Demand deposits, interest bearing 13,927,411 13,126,327
Savings deposits 23,428,186 23,484,301
Time deposits, $100,000 and over 13,658,945 14,001,981
Time deposits 24,705,969 25,755,107
----------- ----------
92,674,017 88,760,971
Long-term debt 59,306 74,561
Reverse repurchase agreement 1,522,439 0
Accrued interest payable 574,817 525,161
Accrued expenses and other liabilities 535,131 650,040
----------- ----------
Total liabilities 95,365,710 90,010,733
Shareholders' equity:
Preferred Stock, Series A, non-cum., 6%, $.01 par value 932 932
500,000 shares authorized, 93,150 issued and outstanding
Common stock, $.01 par value; 2,000,000 shares authorized;
820,095 issued and outstanding 8,201 8,164
Additional-paid-in-capital l0,383,208 10,348,989
Accumulated deficit (3,529,753) (3,618,692)
Net unrealized gain on securities available-for-sale 61,239 19,276
----------- ----------
Total shareholders' equity 6,923,826 6,758,668
----------- ----------
102,289,536 96,769,401
=========== ==========
</TABLE>
<PAGE>
United Bancshares, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Quarter ended Quarter ended
June 30, June 30,
1997 1996
------------- -------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 1,466,622 $ 1,365,654
Interest on investment securities 237,353 201,788
Interest on federal funds sold 136,242 82,382
Interest on time deposits with other banks 9,424 4,777
---------- -----------
Total interest income 1,849,641 1,654,601
Interest expense:
Interest on time deposits 465,377 406,536
Interest on demand deposits 91,727 73,775
Interest on savings deposits 115,003 127,609
Interest on borrowed funds 16,727 1,274
---------- -----------
Total interest expense 688,834 609,194
Net interest income 1,160,807 1,045,407
Provision for loan losses 22,500 22,500
---------- -----------
Net interest income less provision for loan losses 1,138,307 1,022,907
---------- -----------
Noninterest income:
Gain on sale of loans 5,210 0
Customer senice fees 294,462 229,048
Gain on sale of investments 0 0
Other income 43,634 28,188
---------- -----------
Total noninterest income 343,306 257,236
Non-interest expense
Salaries, wages, and employee benefits 565,275 561,108
Occupancy and equipment 237,119 204,575
Office operations and supplies 127,542 125,813
Marketing and public relations 57,006 46,593
Professional services 93,363 48,145
Data processing 214,141 242,437
Other noninterest expense 162,269 171,738
---------- -----------
Total non-interest expense 1,456,715 1,400,409
---------- -----------
Net income (loss) $ 24,898 ($ 120,266)
========== ===========
Earnings (loss) per share $ 0.03 ($ 0.15)
========== ===========
Weighted average number of shares 820,095 802,480
========== ===========
</TABLE>
<PAGE>
United Bancshares, Inc.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, June 30,
1997 1996
------- --------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) 89,536 (233,369)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for loan losses 45,000 40,000
Gain on sale of loans 120,862 (289)
Depreciation and amortization 274,921 127,878
Realized investment securities gains -- (9,157)
Increase in accrued interest receivable (136,447) (235,947)
(Decrease) in accrued interest payable (65,254) (92,176)
---------- ----------
Net cash provided by (used in) operating activities 328,618 (403,060)
Cash flows from investing activities
Purchase of investments--Available-for-Sale (1,009,516) (3,503,840)
Purchase of investments--Held-to-Maturity (3,511,452) (6,095,331)
Proceeds from maturity & principal reductions of invest 1,325,985 1,198,132
Proceeds from maturity & principal reductions of invest 1,022,352 5,107,749
Proceeds from sale of investment securities--Available-for -- 4,562,444
Proceeds from sale of loans 5,110,843 --
Net increase in loans (3,902,230) (2,875,945)
Purchase of premises and equipment (224,934) (131,425)
---------- ----------
Net cash (used in) investing activities (1,188,952) (1,738,216)
Cash flows from financing activities
Net increase in deposits 3,913,046 1,287,478
Repayments on long term debt (15,255) (14,522)
Reverse repurchase agreement 1,522,439 --
Net proceeds from issuance of common stock 33,659 53,516
---------- ----------
Net cash provided by financing activities 5,453,889 1,326,472
Increase (decrease) in cash and cash equivalents 4,593,555 (814,804)
Cash and cash equivalents at beginning of period 9,244,312 10,825,547
---------- ----------
Cash and cash equivalents at end of period 13,837,866 10,010,743
========== ==========
Supplemental disclosures of cash flow information
Cash paid during the period for interest 1,295,765 1,232,317
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The purpose of this discussion is to focus on information about the Bank's
financial condition and results of operations which is not otherwise apparent
from the consolidated financial statements included in this report. Reference
should be made to those statements and the selected financial data presented
elsewhere in this report for an understanding of the following discussion and
analysis.
Selected Financial Data
The following table sets forth selected financial data for the each of the
following periods:
(Thousands of dollars, except per share data)
Quarter ended Quarter ended
June 30, 1997 June 30, 1996
------------- -------------
Net interest income $1,161 $1,045
Provision for loan losses 23 23
Noninterest income 343 205
Noninterest expense 1,457 1,400
Net income (loss) $25 $(120)
Earnings (Loss) per share $.03 $(0.15)
Balance sheet totals: March 31, 1997 December 31, 1996
-------------- -----------------
Total assets $102,290 $96,769
Loans, net $ 67,722 $69,097
Investment securities $ 16,643 $14,460
Deposits $ 92,674 $88,761
Shareholders' equity $ 6,924 $ 6,759
Ratios
Return on assets .09% (.89)%
Return on equity 1.37% (12.02)%
Equity to assets ratio 6.56% 7.45%
<PAGE>
Financial Condition
Sources and Uses of Funds
The Bank's financial condition can be evaluated in terms of trends in its
sources and uses of funds. The comparison of average balances in the following
table indicates how the Bank has managed these elements. Average funding uses
increased approximately $108 thousand or .12% during the quarter ending June 30,
1997. Average funding sources increased $4 million for the same quarter.
Sources and Uses of Funds Trends
<TABLE>
<CAPTION>
June 30, 1997 March 31, 1997
Average Increase (Decrease) Average
Balance Amount % Balance
------- ------ --- -------
<S> <C> <C> <C> <C>
Funding uses:
Loans $68,990 ($ 667) (.96%) $69,657
Investment securities
Held-to-maturity 9,969 976 10.85% 8,993
Available-for-sale 4,872 (694) (12.46%) 5,566
Federal funds sold 9,559 494 5.45% 9,065
------- ------- -------
Total uses $93,282 $ 108 $93,282
======= ======= =======
Funding sources:
Demand deposits
Noninterest-bearing $15,111 $ 2,418 19.05% $12,693
Interest-bearing 14,280 934 7.00% 13,347
Savings deposits 23,396 8 .03% 23,389
Time deposits 39,162 (239) (.61%) 39,400
Other borrowed funds 1,576 841 114.26 736
------- ------- -------
Total sources $93,526 $ 3,962 $89,564
======= ======= =======
</TABLE>
4
<PAGE>
Loans
Average loans decreased approximately $667 thousand or .96% during the
quarter ended June 30, 1997. This decrease was primarily due to the sale of
approximately $4.9 million of student loans in February 1997. During the quarter
ended June 30, much of the proceeds were used to fund higher yielding commercial
loans. New loan originations were offset by paydowns/payoffs of purchased Small
Business Administration (SBA) loans.
The following table shows the composition of the Bank's loan portfolio by
type loan.
(Thousands of Dollars)
June 30, December 31,
1997 1996
---- --------
Commercial and industrial $11,017 $10,107
Commercial real estate 1,871 649
Consumer loans 19,152 17,240
Residential mortgages 36,213 36,622
Loans held-for-sale -- 4,906
------- -------
Total Loans $68,253 $69,624
======= =======
Residential mortgage loans at June 30, 1997 continue to comprise the
greatest percentage of total loans representing approximately 53% of the total
portfolio. However, these loans as a percentage of the total portfolio continue
to decline as mortgage loan balances remain relatively constant while other loan
categories such as commercial loans (primarily SBA guaranteed) and consumer
loans continue to increase.
Nonperforming and nonaccrual Loans
The Bank generally determines a loan to be "nonperforming" when interest or
principal is past due 90 days or more. If it otherwise appears doubtful that the
loan will be repaid, management may consider the loan to be "nonperforming"
before the lapse of 90 days. The Bank's policy is to charge-off unsecured loans
after 90 days past due. Interest on "nonperforming" loans ceases to accrue
except for loans which are well collateralized and in the process of collection.
When a loan is placed on non-accrual, previously accrued and unpaid interest is
generally reversed out of income unless adequate collateral from which to
collect the principal of and interest on the loan appears to be available. At
June 30, 1997, non-accrual loans were $929 thousand. Approximately $638 thousand
of the total nonaccrual loans were residential mortgages while the remainder
consisted primarily of loans with SBA loans. There is no known information about
possible credit problems other than those classified as nonaccrual that causes
management to be uncertain as to the ability of any borrower to comply with
present loan terms.
The Bank grants commercial, residential, and consumer loans to customers
primarily located in Philadelphia County, Pennsylvania and surrounding counties
in the Delaware Valley. Although the Bank has a diversified loan portfolio, its
debtors' ability to honor their contracts is influenced by the region's economy.
At June 30, 1997, approximately 31% of the Bank's commercial loan portfolio
was concentrated in loans made to religious organizations. From inception, the
Bank has received support in the form of investments and deposits and has
developed strong relationships with the Philadelphia region's religious
community. Loans made to these organizations were primarily for expansion and
repair of church facilities. At June 30, 1997, none of these loans were
nonperforming.
5
<PAGE>
Investment Securities and other short-term investments
Investment securities, including Federal Funds Sold, increased on average
by 3.28% or $776 thousand during the quarter ended June 30, 1997. The increase
is due to an increase in demand deposits which were invested in Federal Funds
Sold but will be used to fund the origination of higher yielding commercial
loans.
The Bank's investment portfolio primarily consists of mortgage-backed
pass-through agency securities, U.S. Treasury securities, and other
government-sponsored agency securities. The Bank does not invest in high-risk
securities or complex structured notes.
Deposits
Non-interest bearing demand deposits increased on average by approximately
$2.4 million or 19.05% during the quarter ended June 30, 1997. The increase was
primarily due to significant corporate business development efforts which
resulted in new large demand deposit accounts. In addition, continued
enforcement of compensating balance arrangements with commercial loan borrowers
has resulted in additional demand deposits.
Other Borrowed Funds
The average balance for other borrowed funds increased $841 thousand, or
114.27%, from March 31, 1997 to June 30, 1997. The increase is due to a $1.5
million reverse repurchase agreement the Bank entered into in February 1997. The
level of other borrowed funds is dependent on many items such as capital
adequacy, loan growth, deposit growth and interest rates paid on these funds.
Commitments and Lines of Credit
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and letters of
credit, which are conditional commitments issued by the Bank to guarantee the
performance of an obligation of a customer to a third party. Both arrangements
have credit risk essentially the same as that involved in extending loans, and
are subject to the Bank's normal credit policies. Collateral may be obtained
based on management's assessment of the customer. The Bank's exposure to credit
loss in the event of nonperformance by the other party to the financial
instruments is represented by the contractual amount of those instruments.
The Bank's financial instrument commitments at June 30, 1997 are summarized
below:
Commitments to extend credit $3,112,000
Outstanding letter of credit $ 109,000
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract. Since
many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee.
Liquidity and Interest Rate Sensitivity Management
The primary functions of asset/liability management are to assure adequate
liquidity and maintain appropriate balance between interest-sensitive earning
assets and interest-bearing liabilities. Liquidity management involves the
ability to meet cash flow requirements of customers who may be either depositors
wanting to withdraw funds or borrowers needing assurance that sufficient funds
will be available to meet their credit needs. Interest rate sensitivity
management seeks to avoid fluctuating net interest margins and to enhance
consistent growth of net interest income through periods of changing interest
rate.
6
<PAGE>
The Bank is required to maintain minimum levels of liquid assets as defined
by FRB regulations. This requirement is evaluated in relation to the composition
and stability of deposits; the degree and trend of reliance on short-term,
volatile sources of funds, including any undue reliance on particular segments
of the money market or brokered deposits; any difficulty in obtaining funds; and
the liquidity provided by securities and other assets. In addition,
consideration is given to the nature, volume and anticipated use of commitments;
the adequacy of liquidity and funding policies and practices, including the
provision for alternate sources of funds; and the nature and trend of
off-balance-sheet activities. As of June 30, 1997, management believes the
Bank's liquidity is satisfactory and in compliance with the FRB regulations.
The Bank's principal sources of asset liquidity include investment
securities consisting principally of U.S. Government and agency issues,
particularly those of shorter maturities, and mortgage-backed securities with
monthly repayments of principal and interest. Securities maturing in one year or
less amounted to $3.6 million at June 30, 1997, representing 25% of the
investment portfolio. Other types of assets such as federal funds sold, as well
as maturing loans, are sources of liquidity. Approximately $3.8 million in loans
are scheduled to mature within one year.
The Bank's overall liquidity has been enhanced by a significant level of
core deposits which management has determined are less sensitive to interest
rate movements. The Bank has avoided reliance on large denomination time
deposits as well as brokered deposits.
The following is a summary of the remaining maturities of time deposits of
$100,000 or more outstanding at June 30, 1997:
(Thousands of dollars)
----------------------
3 months or less $10,300
Over 3 through 12 months 2,944
Over 1 through five years 306
Over five years 109
-------
Total $13,987
=======
Interest rate sensitivity varies with different types of interest-earning
assets and interest-bearing liabilities. Overnight federal funds on which rates
change daily and loans which are tied to prime or other short term indices
differ considerably from long-term investment securities and fixed-rate loans.
Similarly, time deposits are much more interest sensitive than passbook savings
accounts. The shorter term interest rate sensitivities are key to measuring the
interest sensitivity gap, or excess earning assets over interest-bearing
liabilities. Management of interest sensitivity involves matching repricing
dates of interest-earning assets with interest-bearing liabilities in a manner
designed to optimize net interest income within the limits imposed by regulatory
authorities, liquidity determinations and capital considerations.
The following table sets forth the maturity distribution of the Bank's
interest-earning assets and interest-bearing liabilities at June 30, 1997, the
Bank's interest-rate sensitivity gap ratio (i.e. excess of interest rate
sensitive assets over interest rate sensitive liabilities, divided by total
assets) and the Bank's cumulative interest rate sensitivity gap ratio. For
purposes of the table, except for savings deposits, an asset or liability is
considered rate sensitive within a specified period when it matures or could be
repriced within such period or repriced within such period in accordance with
its contractual terms. At June 30, 1997, a liability sensitive position is
maintained on a cumulative basis through 1 year of -6.08% which is within the
Bank's policy guidelines of +/- 15% on a cumulative 1-year basis. The current
gap position is primarily due to the high concentration of fixed rate mortgage
loans the Bank has in its loan portfolio but is somewhat mitigated by the Bank's
high level of core deposits which have been placed in longer repricing
intervals. For purposes of the gap analysis, such deposits (savings, MMA, NOW)
which do not have definitive maturity dates and do not readily react to changes
in interest rates have been pushed out to longer repricing intervals versus
immediate repricing timeframes making the analysis more reflective of the Bank's
historical experience. Generally, because of the Bank's negative gap position in
shorter time frames, the Bank can anticipate that increases in market rates will
have a negative impact on the net interest income, while decreases will have the
opposite effect.
7
<PAGE>
Interest Sensitivity Analysis
<TABLE>
<CAPTION>
Interest Rate Sensitivity Gaps
As of June 30, 1997
More than More than More than More
0 to 3 3 to 6 6 to 12 1 to 5 than 5
(Thousands of dollars) months months months years years Cumulative
- ---------------------- ------ ------ ------ ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-sensitive assets
Time deposits 42 105 180 -- -- 327
Investment securities:
Held-to-maturity 1,365 -- 1,994 4,998 2,609 10,966
Available-for-sale 2,858 5 647 1,844 5,354
Federal funds sold 7,845 -- -- -- -- 7,845
Loans and leases 27,549 -- 1,301 2,830 35,643 67,323
------- ------- ------- ------- ------- -------
Total interest-sensitive assets 39,659 105 3,480 8,475 40,096 91,815
------- ------- ------- ------- ------- -------
Cumulative totals 39,659 39,764 43,244 51,719 91,815
------- ------- ------- ------- -------
Interest-sensitive liabilities
Interest checking accounts 124 373 1,541 2,933 -- 4,971
Money market accounts 322 965 3,988 7,590 -- 12,865
Savings accounts 488 1,464 6,051 11,516 -- 19,519
Certificates of deposit 17,478 7,173 7,342 6,263 -- 38,365
Other borrowings -- -- 1,507 67 -- 1,581
------- ------- ------- ------- ------- -------
Total Interest-sensitive
liabilities 18,412 9,975 20,444 28,361 109 77,301
------- ------- ------- ------- ------- -------
Cumulative totals 18,412 28,387 48,831 77,192 77,301
======= ======= ======= ======= =======
Interest sensitivity gap 21,247 (9,870) (16,964) (19,886) 40,946
======= ======= ======= ======= =======
Cumulative gap 21,247 11,378 (5,587) (25,743) 14,514
======= ======= ======= ======= =======
Cumulative gap/total earning assets 23.14% 12.39% (6.08%) (28.03%) 15.81%
======= ======= ======= ======= =======
Interest sensitive assets to
interest sensitive liabilities 2.15 .01 .17 .29 367.85
======= ======= ======= ======= =======
</TABLE>
In 1996, banking regulators issued a "Joint Agency Policy Statement:
Interest Rate Risk" (FDICIA 305). The agencies agreed that the focus should be
on the risk to both net interest income (or net income) as outlined in the table
above in the traditional gap analysis and economic (or fair) value of equity.
The premise is that changes in interest rates affect a bank's earnings by
changing its net interest income and the level of other interest-sensitive
income and operating expenses. However, changes in interest rates also affect
the underlying economic value of the bank's assets, liabilities and
off-balance-sheet instruments because the present value of future cash flows
and, in some cases, cash flows themselves, change when interest rates change.
The combined effects of the changes in these present values reflect the change
in the bank's underlying economic value. At a minimum, this Policy Statement
requires that policies and procedures be implemented to determine acceptable
levels of interest rate risk exposure, given the Bank's profile and capital
position and to monitor and control the Bank's overall interest-rate risk. The
regulators did not quantify the impact on capital standards in their policy
statement, but left it up to banks to determine their own limits, with a minimum
requirement based on exposure to a +/- 200 basis point rate change.
The Bank's policies and procedures conform with FDICIA 305 and indicate a
limit of +/- 3% as an acceptable fair value equity change in a +/- 200 basis
point rate shock environment. Management performs a fair value simulation which
demonstrates the fair value of equity increasing .80% if rates decrease 200
basis points and declining 1.65% if rates increase 200 basis points. This
analysis confirms that the Bank has more exposure to increasing rates than to
decreasing rates.
8
<PAGE>
The Bank's Board of Directors and management consider all of the relevant
factors and conditions in the asset/liability planning process. Interest-rate
exposure is not considered to be significant and is within the Bank's policy
limits at June 30, 1997. However, if significant interest rate risk arises, the
Board of Directors and management may take (but are not limited to) one or all
of the following steps to reposition the balance sheet as appropriate:
1. Limit jumbo certificates of deposit (CDs) and movement into money
market deposit accounts and short-term CDs through pricing and other
marketing strategies.
2. Purchase quality loan participations with appropriate interest
rate/gap match for the Bank's balance sheet.
3. Restructure the Bank's investment portfolio.
The Board of Directors has determined that active supervision of the
interest-rate spread between yield on earnings assets and cost of funds will
decrease the Bank's vulnerability to interest-rate cycles.
Capital Resources
Total shareholders' equity increased approximately $104 thousand during the
quarter ended June 30, 1997. The increase during the quarter was due to internal
capital generation in the form of net income of approximately $25 thousand, $33
thousand in proceeds from stock sold as a result of warrant exercise, and a $47
thousand increase in the unrealized gain on available-for-sale securities.
The Federal Reserve Bank's ("FRB") standards for measuring capital adequacy
for U.S. Banking organizations requires that banks maintain capital based on
"risk-adjusted" assets so that categories of assets with potentially higher risk
will require more capital backing than assets with lower risk. In addition,
banks are required to maintain capital to support, on a risk-adjusted basis,
certain off-balance-sheet activities such as loan commitments. The FRB standards
classify capital into two tiers, referred to as Tier 1 and Tier 2. Tier 1
consists of common shareholders' equity, noncumulative and cumulative perpetual
preferred stock, and minority interests less goodwill. Tier 2 capital consists
of allowance for loan losses, hybrid capital instruments, term subordinated
debt, and intermediate-term preferred stock. Banks are required to meet a
minimum ratio of 8% of qualifying capital to risk-adjusted total assets with at
least 4% Tier 1 capital and a Tier I Leverage ratio of at least 6%. Capital that
qualifies as Tier 2 capital is limited to 100% of Tier 1 capital.
As indicated in the table below, the Bank's risk-based capital ratios are
above the minimum requirements. Management continues the objective of raising
additional capital by offering additional stock (preferred and common) for sale
to the public as well as increasing the rate of internal capital growth as a
means of maintaining the required capital ratios. The Company and the Bank do
not anticipate paying dividends in the near future.
June 30, December 31,
1997 1996
---- ----
Tier 1 Capital $6,718 $6,558
Tier 2 Capital 530 504
------ ------
Total Qualifying Capital $7,248 $7,062
====== ======
Risk Adjusted Total Assets
(including off-balance sheet exposures) $44,764 $40,306
Tier 1 Risk-Based Capital Ratio 15.01% 16.27%
Tier 2 Risk-Based Capital Ratio 16.19% 17.52%
Leverage Ratio 6.64% 7.09%
Results of Operations
Summary
The Bank had net income of approximately $25 thousand for the quarter ended
June 30, 1997 compared to a loss of $120 thousand for the same quarter in 1996.
The improvement in the Bank's earnings performance is primarily attributable to
an increase in the Bank's net interest margin and an increased level of other
noninterest income -- from $257 thousand in 1996 to $343 thousand in 1997.
Customer service fees accounted for most of this increase as the number of
9
<PAGE>
transactional accounts increased significantly as a result of new checking
account products and compensating balance requirements. Also, in September 1996,
the Bank implemented a surcharge for all non-customer use of its Automated
Teller Machines (ATMs).
On a per common share basis, there was an improvement from ($.15) at June
30, 1996 to $.03 at June 30, 1997.
Net Interest Income
Net interest income is an effective measure of how well management has
balanced the Bank's interest rate sensitive assets and liabilities. Net interest
income, the difference between (a) interest and fees on interest earning assets
and interest paid on interest-bearing liabilities, is a significant component of
the Bank's earnings. Changes in net interest income result primarily from
increases or decreases in the average balances of interest earning assets, the
availability of particular sources of funds and changes in prevailing interest
rates.
Net interest income was $1.160 million for the quarter ending June 30, 1997
compared to $1.045 million for the same quarter in 1996. The primary
determinants of the increase was the increase in the Bank's average earning
assets from $85.5 million at June 30, 1996 to $93.3 million at June 30, 1997.
This growth in earning assets is primarily attributable to an increase in
average demand deposit balances due to continued growth in new checking account
products--"free" checking and "entrepreneurial-25" checking. These products
provide a low-cost/minimum balance option for personal and small business
customers who have relatively low-volume activity in their checking accounts.
While benefiting customers, these products also serve as means of generating
noninterest-bearing funds for the Bank as well as a source of service charge
income from overdraft fees. The increase in volume of investable funds was
primarily used to fund new loan originations and temporary investments in
Federal Funds Sold.
Provision for Loan Losses
The Bank adopted Statement of Financial Accounting Standard ("SFAS") No.
114, "Accounting by Creditors for Impairment of a Loan," and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures," effective January 1, 1995. As a result of applying the new rules,
certain impaired loans are reported at the present value of expected future cash
flows using the loan's initial effective interest rate, or as a practical
expedient, at the loan's observable market price or at the fair value of the
collateral if the loan is collateral dependent. The adoption of these standards
did not have a material impact on the Bank's financial position or results of
operations.
The provision is based on management's estimate of the amount needed to
maintain an adequate allowance for loan losses. This estimate is based on the
review of the loan portfolio, the level of net credit losses, past loan loss
experience, the general economic outlook and other factors management feels are
appropriate.
The provision for loan losses charged against earnings for the quarter
ending June 30, 1997 was $23 thousand, consistent with the quarter ended June
30, 1996. The gradual change in the composition of the loan portfolio during
recent years from residential mortgage loans to purchased or originated
commercial SBA loans and student loans resulted in a portfolio with
significantly lower credit risk characteristics due to the related government
guarantees.
Noninterest Income
The amount of the Bank's noninterest income generally reflects the volume
of the transactional and other accounts handled by the Bank and includes such
fees and charges as low balance account charge, overdrafts, account analysis,
and other customer service fees. Deposit-related noninterest income increased
from 1.07% of average total assets to 1.26% for the quarter ended June 30, 1996
compared to the quarter ended June 30, 1997. The increase is primarily
attributable to a continued increase in transactional deposit
10
<PAGE>
accounts as a result of the success of product offerings introduced in
1995--"free" checking" and "entrepreneurial-25" checking. In addition, the Bank
continues to strongly enforce compensating balance arrangements with its loan
customers. Also contributing to the increase was the implementation of a
surcharge for all non-customer use of the Bank's Automated Teller Machines
(ATMs) in September 1996 and the continued expansion of the ATM network.
Noninterest expense
Salaries and benefits represented 2.23% and 2.25% of total average assets
for the quarters ended June 30, 1997 and 1996, respectively. For the quarter
ended June 30, 1997, staffing levels remained relatively constant with some
planned attrition and management's concerted effort to minimize new hirings and
control personnel expense.
Data processing expenses represented .85% and .97% of the total average
assets for the quarters ended June 30, 1997 and 1996, respectively. Data
processing expenses are a result of the Bank's management decision to out source
data processing to third party processors the bulk of its data processing. Such
expenses are reflective of the high level of accounts being serviced for which
the Bank is charged a per account charge by processors. In addition, the Bank
uses outside loan servicing companies to service its mortgage, credit card,
installment and student loan portfolios. The decline in data processing expenses
compared to June 30, 1996 is due to the sale of student loans during the quarter
ended March 31, 1997. The Bank continues to study methods by which it may reduce
its data processing costs, including but not limited to a consolidation of
servicers, in-house processing versus out-sourcing, and the possible
renegotiation of existing contracts with servicers.
Occupancy expense increased approximately $33 thousand for the quarter
ended June 30, 1996 compared to the quarter ended June 30, 1997. This increase
is primarily attributable to annual escalations in lease payments and
maintenance contracts to service the Bank's growing ATM network.
All other expenses are reflective of the general cost to do business and
compete in the current regulatory environment and maintenance of adequate
insurance coverage.
Regulatory Matters
At June 30, 1997, the Bank is operating under a Supervisory Letter from its
primary regulator. The Supervisory Letter among other things, prevents the Bank
and the Company from declaring or paying dividends without the prior written
approval of its regulators, and prohibits the Bank and the Company from issuing
debt.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
No material claims have been instituted or threatened by or against
Registrant or its affiliates other than in the ordinary course of business.
Item 2. Working Capital Restrictions on Payment of Dividends.
The holders of the Common Stock are entitled to such dividends as may be
declared by the Board of Directors out of funds legally available therefor under
the laws of the Commonwealth of Pennsylvania. Under the Pennsylvania Banking
Code of 1965, funds available for cash dividend payments by a bank are
restricted to accumulated net earnings and if the surplus of a Bank is less than
the amount of its capital the Registrant shall, until surplus is equal to such
amount, transfer to surplus an amount which is at least 10% of the net earnings
of the Registrant for the period since the end of the last fiscal year or any
shorter period since the declaration of a dividend. If the surplus of a bank is
less than 50% of the amount of its capital, no dividend may be declared or paid
by the bank without prior approval of the Secretary of Banking of the
Commonwealth of Pennsylvania.
Under the Federal Reserve Act, if a bank has sustained losses up to or
exceeding its undivided profits, no dividend shall be paid, and no dividends can
ever be paid in an amount greater than such bank's net profits less losses and
bad debts. Cash dividends must be approved by the Federal Reserve Board if the
total of all cash dividends declared by a bank in any calendar year, including
the proposed cash dividend, exceeds the total of the Registrant's net profits
for that year plus its retained net profits from the preceding two years, less
any required transfers to surplus or to a fund for the retirement of preferred
stock. Under the Federal Reserve Act, the Board has the power to prohibit the
payment of cash dividends by a bank if it determines that such a payment would
be an unsafe or unsound banking practice.
The Federal Deposit Insurance act generally prohibits all payments of
dividends a bank which is in default of any assessment to the Federal Deposit
Insurance Corporation.
Item 3. Defaults Upon Senior Securities.
(a) There has been no material default in the payment of principal,
interest, a sinking or purchase fund installment, or any material default with
respect to any indebtedness of the Registrant exceeding five percent of the
total assets of the Registrant.
(b) There have been no material arrearage or delinquencies as discussed in
Item 3(b). Registrant has declared and issued a Series A Preferred Stock. No
obligations pursuant to those securities have become due.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
(a) An annual meeting of the security holders of the Registrant was held on
May 19, 1997.
(b) Proxies for the annual meeting of the Registrant scheduled for May 19,
1997, (the "Annual Meeting") were solicited by proxy statement filed with the
Commission on April 21, 1997.
(c) The following matters were voted upon at the Annual Meeting:
1. ELECTION OF DIRECTORS
The following individuals were elected as directors of the Registrant:
Luis A. Cortes, Jr.
Angela M. Huggins
Kemel G. Dawkins
Elmer Young, Jr.
An affirmative vote of approximately 395,000 shares representing 83% of the
votes cast and 48% of the shares entitled to vote were cast in favor of the
election of these Board members.
2. INDEPENDENT ACCOUNTANT
The matter of ratification of independent accountants were submitted to the
shareholders at the Annual Meeting. The Board of Directors selected Ernst &
Young, LLP as independent accountants to audit and certify financial statements
of the Bank and the Registrant for the year ending December 31, 1996 and to
provide certain accounting services to the Bank during the 1997 fiscal year.
Ernst & Young, LLP has served in this capacity since the Bank's inception. In
connection with the audit function, Ernst & Young, LLP also reviewed the
Registrant's annual report to shareholders and filings with the Securities and
Exchange Commission. Neither Ernst & Young, LLP nor any of its partners has any
direct or material indirect financial interest in the Bank. The selection of
Ernst & Young, LLP as the Registrants independent accountant was ratified and
approved by the shareholders at the meeting.
An affirmative vote of approximately 397,000 shares, representing 84%
of the votes cast at the Annual Meeting and 49% of the shares entitled to vote
at the Annual Meeting were cast in favor of the proposal to ratify the
appointment of Ernst & Young, LLP as Registrant's Independent accountants for
the 1996 year.
<PAGE>
Item 5. Other Information.
Bancshares Limited offering of Common Stock and Warrants
Beginning April 24, 1995, Registrant commenced a private offering solely to
existing stockholders of 250,000 shares of its common stock and 750,000 warrants
to purchase a share of the common stock. 18,465 shares and 55,395 warrants were
sold pursuant to this offering. Each unit, consisting of one share of common
stock and three warrants to purchase one share of common stock in each of three
subsequent years (total 3 shares), will be issued at $12.00 per unit. The
warrant exercise price was $8.00 per share for the 1996 Warrant, $9.00 per share
for the 1997 Warrant and will be $10.00 per share for the 1998 Warrant. The
exercise price of the warrants may be adjusted to avoid dilution of warrant
holders. The units were offered pursuant to an exemption from registration
contained in section 4(2) and 3(a)(5) of the Act. No underwriters were used and
no commissions were paid as a result of this offering. The offering closed on
September 30, 1995.
A copy of the Offering Memorandum was filed with the Registrant's periodic
report on Form 10-Q for the period ending June 30, 1995 and is incorporated by
reference.
Pursuant to the exercise of the 1996 Warrants, the Registrant has received
offers to purchase an additional 6,942 shares of its common stock at $8.00 per
share. These shares were sold pursuant to an exemption from registration
contained in section 4(2) of the Act. Pursuant to the exercise of the 1997
Warrants, the Registrant has received offers to purchase an additional 3,667
shares of its common stock at $9.00 per share. These shares were sold pursuant
to an exemption from registration contained in section 4(2) of the Act. No
underwriters were used and no commission was paid as a result of any warrant
exercise.
Beginning May 10, 1996, Registrant commenced a private offering solely to
existing stockholders of 250,000 shares of its common stock. 6,934 shares were
sold pursuant to this offering. The stock was offered pursuant to an exemption
from registration contained in 4(2) and 3(a)(5) of the Act.
A copy of the Offering Memorandum was filed with the Registrant's periodic
report on Form 10-Q for the period ending June 30, 1995 and is incorporated by
reference.
Beginning May 19, 1997, Registrant commenced a private offering solely to
existing stockholders of 250,000 shares of its common stock. No shares were yet
sold pursuant to this offering. The stock is offered pursuant to an exemption
from registration contained in 4(2) and 3(a)(5) of the Act.
Item 6. Exhibits and Reports on Form 8-K.
(a) A list of the exhibits submitted with this Form 10-Q is as follows:
Offering Memorandum for private offering of Registrant's
Common Stock solely to existing shareholders.
The following exhibit is filed in paper format on Form SE.
Copy of the Registrant's Call Report for the Period ending
June 30, 1997.
(b) No reports on Form 8-K have been filed during the quarter for
which this Form 10-Q is filed.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED BANCSHARES, INC.
Date: _________, 1997 /s/ Emma C. Chappell
--------------------------
Emma C. Chappell
Chairman, President & CEO
Exhibit 99
UNITED BANCSHARES, INC.
250,000 Shares of Common Stock
United Bancshares, Inc., (the "Company"), is offering 250,000 Shares of its
$.01 par value Common Stock (the "Common Stock") on a best efforts basis at a
price of $12.00 per share (individually "Share," or collectively "Shares") (the
"Offering").
Securities will be sold initially on a pro-rata basis only to investors who
are security holders of the Company as of the date of this Offering Memorandum
which is May 19, 1997. In any event no securities will be sold to any person who
is not a security holder of the Company.
The Company reserves the right to either increase or decrease the number of
Shares offered at its sole discretion. The Company also reserves the right at
its sole discretion to accept subscriptions only in certain increments. The
Company has a class of 2,000,000 shares of $.01 par value common stock (the
"Common Stock") of which approximately 818,555 shares were issued and
outstanding as of the date of this Offering Memorandum. The Company also has a
class of Series Preferred Stock of which one series has been designated (the
"Series A Preferred Stock"). The Preferred Stock is non-voting and has been
accorded limited rights under the Certificate of Designations, Preferences and
Rights of a First Series of Preferred Stock on file with the Company and
attached to the Articles of Incorporation of the Company filed with the
Secretary of State, Commonwealth of Pennsylvania (the "Certificate of
Designations"). Upon the declaration of any dividend by the Company, the
Certificate of Designations provides that each of the Series A Preferred Shares
will be accorded a non-cumulative dividend preference equal to the purchase
price of the Preferred Stock multiplied by 6% per annum prior to the payment of
any dividend on account of any other class or series of the Company's stock (the
"Dividend Preference"). As of the date of this Offering Memorandum, 93,150
Series A Preferred Shares were issued and outstanding.
Prior to this offering, there has been no market for the Common Stock, and
there can be no assurance that an active or liquid trading market will develop.
INVESTMENTS IN THESE UNITS INVOLVE A HIGH
DEGREE OF RISK.
SEE "RISK FACTORS"
THE SHARES ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE PENNSYLVANIA SECURITIES
ACT OF 1972, AND HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION NOR HAVE THEY BEEN APPROVED OR
DISAPPROVED BY THE PENNSYLVANIA DEPARTMENT OF BANKING OR
PENNSYLVANIA SECURITIES COMMISSION OR THE FEDERAL RESERVE BOARD.
NEITHER THE PENNSYLVANIA DEPARTMENT OF BANKING PENNSYLVANIA
SECURITIES AND EXCHANGE COMMISSION, SECURITIES AND EXCHANGE
COMMISSION NOR THE FEDERAL RESERVE BOARD HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Offering Memorandum is May 19, 1997.
<PAGE>
The Company is a shell bank holding company formed on April 8, 1993, for
United Bank of Philadelphia (the "Bank"). The Bank was organized and is
incorporated under the laws of the Commonwealth of Pennsylvania, is a member of
the Federal Reserve System (the "FRS"), and its deposits are insured by the
Federal Deposit Insurance Corporation ("FDIC"). The Bank opened to the public on
Monday, March 23, 1992, after receiving its Certificate of Authorization to do
Business (the "Charter") from the Commonwealth of Pennsylvania. The Bank
operates from six branch facilities located at: 714 Market Street, Philadelphia,
Pennsylvania; 1562 East Wadsworth Avenue, Philadelphia, Pennsylvania; 2 Penn
Center, Philadelphia, Pennsylvania; 38th Street and Lancaster Avenue,
Philadelphia, Pennsylvania; 4806 Frankford Avenue, Philadelphia, Pennsylvania;
and 2820 West Girard Avenue, Philadelphia, Pennsylvania.
The Company currently acts solely as a shell for the purpose of management
of the affairs of the Bank. The Company does not anticipate engaging in any
other business or transaction other than the management of the affairs of the
Bank for the foreseeable future.
-------------------------------------
NO AGENT OR OFFICER OF THE COMPANY OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE OFFERING
MEMORANDUM, AND IF GIVEN OR MADE, SUCH INFORMATION AND
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
------------------------------------
The Company, through its officers and directors, is hereby offering on a
best efforts basis an aggregate of 250,000 shares. The purchase price per Share
is $12.00. The Shares will be offered only to existing security holders of the
Company initially on a pro-rata basis. The offering will continue until
September 30, 1997, unless extended in the discretion of the Company (the later
of such dates being hereinafter referred to as the "Expiration Date"). No
selling fees or commissions will be paid by the Company in connection with the
offering. The Company may accept subscriptions for Shares when and as received
and may, in its sole discretion, reject any subscription tendered.
ii
<PAGE>
--------------------------------------
THE SECURITIES OFFERED HEREBY WILL BE SUBJECT TO SUBSTANTIAL
RESTRICTIONS ON TRANSFERABILITY. SEE "RISK FACTORS - LIMITED
TRANSFERABILITY"
-------------------------------------
EACH INVESTOR, AT HIS OWN EXPENSE, SHOULD CONSULT HIS OWN COUNSEL,
ACCOUNTANTS AND/OR BUSINESS ADVISORS CONCERNING LEGAL, TAX AND
OTHER RELATED MATTERS REGARDING AN INVESTMENT IN THE SHARES.
-----------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS OFFERING
MEMORANDUM IN CONNECTION WITH THIS OFFERING, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS OFFERING
MEMORANDUM DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION IN
WHICH AN OFFER MAY NOT LEGALLY BE MADE. NEITHER THE DELIVERY OF
THIS OFFERING MEMORANDUM NOR ANY SALES OF UNITS HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE COMPANY'S AFFAIRS SINCE THE DATE OF THIS
OFFERING MEMORANDUM.
-------------------------------------
TWO-DAY RIGHT OF RECISION FOR PENNSYLVANIA RESIDENTS: UNDER
SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF 1972, ANY
RESIDENT OF PENNSYLVANIA WHO SUBSCRIBES FOR SHARES HAS THE RIGHT
TO TERMINATE HIS OR HER SUBSCRIPTION, WITHOUT LIABILITY TO THE
COMPANY OR ANY OTHER PERSON, WITHIN TWO BUSINESS DAYS AFTER THE
COMPANY RECEIVES HIS OR HER EXECUTED SUBSCRIPTION
AGREEMENT, WHICH CONTAINS A NOTICE AS TO HIS OR HER
RIGHTS UNDER SECTION 207(m).
SEE "THE OFFERING - RIGHT OF WITHDRAWAL."
---------------------------------------
iii
<PAGE>
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE OR JURISDICTION, AND ARE BEING OFFERED AND SOLD IN
RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND SUCH OTHER SECURITIES LAWS. THE SECURITIES OFFERED
HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD UNLESS SUCH SECURITIES ARE
REGISTERED UNDER THE ACT AND SUCH OTHER SECURITIES LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION UNDER THE ACT AND SUCH OTHER
LAWS IS AVAILABLE.
---------------------------------------
THERE IS NO PUBLIC MARKET FOR THE SECURITIES, AND IT IS
NOT EXPECTED THAT A PUBLIC MARKET WILL DEVELOP IN THE
FORESEEABLE FUTURE.
FURTHERMORE, SECURITIES LAWS SEVERELY RESTRICT THE
TRANSFERABILITY OF THE SECURITIES. THUS, THE SHARES SHOULD BE
CONSIDERED FOR PURCHASE ONLY AS A LONG-TERM
INVESTMENT.
-------------------------------------
THIS OFFERING MEMORANDUM CONTAINS ESSENTIAL INFORMATION ABOUT
THE COMPANY AND THE SECURITIES BEING OFFERED HEREBY. EACH OFFEREE
SHOULD REVIEW CAREFULLY THIS OFFERING MEMORANDUM IN ITS ENTIRETY
AND THE EXHIBITS HERETO BEFORE DECIDING TO ACQUIRE ANY SHARES.
---------------------------------------
EACH INVESTOR AND HIS/HER ADVISORS WILL BE GIVEN, UPON REQUEST, THE
OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE ANSWERS FROM, THE
COMPANY AND ITS OFFICERS AND DIRECTORS CONCERNING THIS OFFERING
AND TO OBTAIN ANY ADDITIONAL INFORMATION NECESSARY TO VERIFY THE
ACCURACY OF THE INFORMATION CONTAINED IN THIS OFFERING
MEMORANDUM.
---------------------------------------
iv
<PAGE>
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR THE BENEFIT OF THE SHAREHOLDER
INTERESTED IN THE SECURITIES, AND CONSTITUTES AN OFFER ONLY TO THE SHAREHOLDER
TO WHICH THIS MEMORANDUM WAS ORIGINALLY DELIVERED. DISTRIBUTION OF THIS
MEMORANDUM TO ANY PERSON OTHER THAN SUCH SHAREHOLDER AND THOSE PERSONS RETAINED
TO ADVISE SUCH SHAREHOLDER WITH RESPECT THERETO IS UNAUTHORIZED, AND ANY
REPRODUCTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY
OF ITS CONTENTS WITHOUT THE PRIOR WRITTEN CONSENT OF UNITED BANCSHARES, INC. IS
PROHIBITED. EACH SHAREHOLDER, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREES
TO RETURN IT AND ALL OTHER DOCUMENTS RECEIVED BY SUCH SHAREHOLDER TO THE OFFICES
OF THE COMPANY IF: (1) SUCH SHAREHOLDER DOES NOT SUBSCRIBE FOR THE PURCHASE OF
ANY STOCK; (2) THE SHAREHOLDER'S SUBSCRIPTION AGREEMENT IS NOT ACCEPTED BY THE
COMPANY; OR (3) THIS OFFERING IS TERMINATED. NEITHER THE DELIVERY OF THIS
MEMORANDUM NOR ANY SALES OF SECURITIES MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF, OR THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
v
<PAGE>
SUMMARY
SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Offering Memorandum and should be read
in conjunction there with.
COMPANY SUMMARY
The Company, is an African-American controlled and managed shell bank
holding company for United Bank of Philadelphia (the "Bank"), a commercial bank
chartered by the Pennsylvania Department of Banking and a member of the Federal
Reserve System. The Bank focuses on providing full service community banking in
Philadelphia neighborhoods that have traditionally been underserviced by
commercial banks.
The Bank. The Bank operates as an African-American-controlled and managed
commercial bank chartered by the Pennsylvania Department of Banking. The Bank's
deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC"),
and the Bank is a member of the Federal Reserve System (the "FRS").
Services and Market Area. The Bank offers a wide range of consumer and
commercial banking services in Philadelphia with an emphasis on service to
neighborhoods and local communities. As a community bank, the Bank seeks to be
flexible and responsive to the needs of the residents in the areas it serves.
Management. The Bank is under the direction of its Founder, Chairman of the
Board, President and Chief Executive Officer of the Company and the Bank, Emma
C. Chappell, who has in excess of 38 years of commercial banking experience in
the Philadelphia metropolitan area. Dr. Chappell, and certain other directors of
the Bank, are actively involved in the business, academic, and religious
leadership of the African-American community in Philadelphia.
William X. Smith serves as Executive Vice President and Chief Operating
Officer of the Bank. Mr. Smith has extensive experience in the field of
commercial banking and serves in his capacity pursuant to a two year employment
agreement with the Bank.
Office Locations. The Bank conducts all its banking activities through its
six offices located as follows: (i) Main Branch 714 Market Street, Philadelphia,
PA; (ii) Center City Branch Two Penn Center, Philadelphia, PA; (iii) Mount Airy
Branch 1562 East Wadsworth Avenue, Philadelphia, PA; and (iv) Frankford Branch
4806 Frankford Avenue, Philadelphia, PA; (v) West Philadelphia Branch 38th
Street and Lancaster Avenue, Philadelphia, Pennsylvania; and (vi) 2820 West
Girard Avenue, Philadelphia, Pennsylvania. Through these locations, the Bank
offers a broad range of commercial and consumer banking services. Although the
Bank's primary service area for Community Reinvestment Act purposes is
Philadelphia County, it also services the Delaware Valley, which consists of
portions of Montgomery, Bucks, Chester, and Delaware
1
<PAGE>
Counties in Pennsylvania; New Castle County in Delaware; and Camden, Burlington,
and Glouchester Counties in New Jersey (the "Delaware Valley").
OFFERING SUMMARY
The following summary of certain terms and conditions of the offering of
Shares of the Company is qualified in its entirety by reference to the actual
documents to which this summary relates.
<TABLE>
<CAPTION>
<S> <C>
Securities Offered: 250,000 Shares of Common Stock on a best
effort basis, only to security holders
of record as of the date of this offering
memorandum on a pro-rata basis.
Gross Proceeds: $3,000,000 maximum
Price: $12.00 per share
Minimum Investment: None
Maximum Investment: None
Registration Rights
(Restrictions on Transfer) The Shares will not be registered under the Securities Exchange
Act of 1933 (the "Act") or the securities laws of any jurisdiction.
The shareholders will have no rights to require that the Shares be
registered. It is uncertain whether registration will take place in the
future. In order to ensure compliance with applicable federal and
state securities laws, the Subscription Agreement will provide that
no transfer of the Shares may be made except upon receipt by the
Company of an opinion of counsel satisfactory to it in form and
substance that the proposed transfer will not require registration
under the Act or any state securities laws.
Use of Proceeds: The Company will receive proceeds of approximately $3,000,000 in the
case of the maximum offering. The Company intends to use the net
proceeds to contribute capital to the Bank as is
necessary for expansion and provision of financial services
in neighborhoods that have been traditionally underserved.
Tax Considerations: Prospective purchasers of the Shares are urged to consult with their
tax advisors prior to making an investment in the Shares.
2
<PAGE>
Subscription
Agreement: The purchase of the Shares shall be made pursuant to a
Subscription Agreement which shall contain, among other things,
customary representations and warranties by the Company, certain
covenants of the Company, and such investment representations by
the purchaser as may be required by the Act and the applicable
"blue sky" laws. A form of Subscription Agreement is included
with this Offering Memorandum.
Expenses: All proposed purchasers of the Shares will be responsible for their
own costs, fees and expenses, including the costs, fees and expenses
of their counsel and other advisors.
</TABLE>
INVESTOR SUITABILITY STANDARDS
The Shares (also referred to as the "Securities") represent a non-liquid
investment. Consequently, the Shares are suitable only for persons who have no
need for liquidity in their investment. No public market exists for the Shares,
and it is unlikely that a public market will develop in the foreseeable future.
Moreover, there are substantial restrictions on the transferability of the
Securities. Accordingly, holders of the Shares may not be able to liquidate
their investment in the event of an emergency or for any other reason.
Securities will be sold on a pro-rata basis only to investors who are
security holders of the Company as of the date of this Offering Memorandum which
is May 10, 1996.
RISK FACTORS
AN INVESTMENT IN THE SECURITIES IS SUBJECT TO A HIGH DEGREE OF RISK AND IS
SUITABLE ONLY FOR PERSONS WHO HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT.
PRIOR TO SUBSCRIBING FOR ANY SECURITIES, PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS AMONG OTHERS DESCRIBED ELSEWHERE IN THIS
OFFERING MEMORANDUM:
1. Operating Experience; Operating Losses. Although the Bank has joined the
FRS and has FDIC insurance, the Bank and the Company have only approximately
five years of operating experience. From the Bank's inception it has experienced
only limited profitability. From inception through 1993 and from 1993 through
December 31, 1996 the Company experienced losses.
In 1993 the Company had modest profits, however, these profits did not
result from customary bank operations, but from the sale of a loan portfolio. As
of March 31, 1997, the
3
<PAGE>
Company has accumulated deficit of $3,554,650. There can be no assurance that
the Company will achieve profitable operations in the future. No assurance can
be given that the Company will ever pay dividends or that the purchasers of the
Common Stock will receive a return on their investment even if the Company is
profitable.
2. Arbitrary Determination of Offering Price. The offering price of $12.00
per unit has been established by the Company's Board of Directors based upon the
amount of capital the Company wants to raise, and is not based upon earnings,
book value, assets or any other customary measure of value. The offering price
should not be regarded as indicative of the actual value of the Stock.
3. No Dividends. The net proceeds from this Offering, together with any
income earned thereon, will be invested in the capital of the Bank and used to
fund stability. The ability of the Company to pay cash dividends is indirectly
subject to the restrictions set forth in the Pennsylvania Banking Code of 1965,
as amended, the Federal Deposit Insurance Act of 1933, as amended, and the
Federal Reserve Act. See "Dividend Policies." The Company has not paid any
dividends on its stock to date. The Company intends to retain earnings, if any
to finance the operations of its business and therefore does not anticipate
payment of dividends in the forseeable future. The Company is prohibited from
the payment of dividends by the Pennsylvania Banking Code of 1965, the Federal
Deposit Insurance Act and the Federal Reserve Act so long as an accumulated
deficit exists. The Company anticipates that the accumulated deficit will not be
significantly reduced for the forseeable future. The payment of dividends is
also subject to the payment of a dividend preference to holders of the Company's
Series A Preferred Stock. See "Risk Factors - Preferred Stock; Prior Dividend
Right."
4. Dependence on Key Individuals. As of the date of this Offering
Memorandum, the Bank has approximately 70 employees. Emma C. Chappell, Chairman,
President and Chief Executive Officer (CEO), has signed an Employment Agreement
with the Bank and the Company which commenced on January 1, 1994, which provides
for an employment term through December 21, 2000. Although Dr. Chappell has 38
years of banking experience, including significant commercial banking expertise,
until becoming CEO of the Bank, she had never been a CEO of a bank. A majority
of the Bank's co-founders have no banking experience. Under the Employment
Agreement, Dr. Chappell is serving as the Chairman of the Board of Directors,
President and Chief Executive Officer of the Bank and the Company. Dr. Chappell,
since July 1990, has devoted her efforts entirely to the Bank. From that date to
February 29, 1992, Dr. Chappell was compensated as a consultant.
If for any reason the services of Dr. Chappell or various key Board members
or staff were no longer available to the Bank, there is no assurance that a
replacement could be found. The unavailability of a replacement for these key
individuals could have a materially adverse effect on the Bank. The Bank
maintains a life insurance policy on the life of Dr. Chappell in the face amount
of $1,000,000 to partially compensate the Bank for the loss of Dr. Chappell's
services in the case of her death.
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5. Need for Additional Capital. Bank supervisory authorities generally
require that a bank maintain capital equal to a certain percentage of its total
assets. The Bank's capital may be reduced by additional operating losses in the
future. There may be additional need for capital in the future, and there can be
no assurances that the Company will be able to raise sufficient amounts of
additional capital if and when needed.
6. Changing Regulatory Environment. Federal legislation in the past several
years has significantly affected the operations of federally insured and
regulated financial institutions and has increased competition among savings
banks, commercial banks, and other financial institutions. Various legislative
proposals have been made which would further deregulate or restructure the
financial services industry. It is not possible to predict if any of these
proposals will be enacted, or if enacted, what impact they might have on the
operation of the Company.
7. Governmental Monetary Policy and Economic Conditions. The business of
the Company will be subject to fluctuations in interest rates and national and
local economic conditions as well as consumer confidence in the Bank. These
fluctuations are neither predictable nor controllable and may have materially
adverse consequences upon the operations and financial condition of the Bank.
The Bank's profitability will depend on its ability to attract deposits and make
loans and otherwise invest its assets profitably. The Bank's profitability is
dependent upon a wide variety of factors, including both the volume of business
conducted by the Bank and the Bank's interest rate spread, which is the
difference between (i) the interest rate paid by the Bank on its deposits and
other interest bearing liabilities, and (ii) the interest rate the Bank receives
from its loans, securities and other interest earning assets.
8. Competition. The banking environment is extremely competitive. In
Pennsylvania, in general, and specifically in Philadelphia, larger banks
dominate the commercial banking industry. These institutions generally have
significantly greater capital than the Bank. They are therefore able to lend
significantly more than the Bank to a single customer, and offer services that
the Bank does not offer. The Bank will also be subject to competition from other
financial institutions such as savings banks, savings and loan associations,
credit unions, and others.
9. Limited Trading Market. Prior to this Offering, there has been no market
for the Common Stock and there can be no assurance that a regular trading market
will develop or that, if developed, will be sustained. There can be no assurance
that an investor will be able to sell his or her shares of Common Stock at any
particular time.
10. Limited Transferability of the Securities. Each prospective investor
should consider an investment in the Company to be a long-term investment. There
are a variety of restrictions upon the transferability of the Securities Stock
(a) The Securities will not be registered under the Securities Act of
1993, as amended (the "Act"), or under the securities laws of any other
jurisdiction.
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<PAGE>
(b) It is unlikely that any market will develop for the purchase and
sale of the Securities in the foreseeable future. Consequently, apart from
the restrictions referred to above, a holder of the Securities may not be
able to liquidate its investment and may be required to retain its
investment indefinitely. Furthermore, it is unlikely that the Securities
will be acceptable collateral to be pledged or hypothecated to secure a
loan or for any other reason.
11. Preferred Stock; Prior Dividend Rights. The Preferred Stock is entitled
to a non-cumulative dividend preference of 6% per annum prior to any dividend
being declared on account of ownership of the Common Stock. This prior
commitment will reduce the amount available for dividend to the Common
Stockholders. See - "Dividend Policies".
12. Adverse Effect of Warrant Redemption. Pursuant to an offering conducted
by the Company in 1995, the Company issued warrants to purchase Common Stock at
a purchase price less than the price at which Common Stock is offered in this
offering. As a result, over the three year term of the warrants, an investor's
ownership will be subject to dilution by warrantholders. See - "Capitalization."
CAPITALIZATION
The authorized capital stock of the Company is 2,000,000 shares of common
stock $.01 par value and 500,000 shares of Series Preferred Stock. As of the
date of this Offering Memorandum, the Company has outstanding 818,555 shares of
common stock $.01 par value. The Company sold a total of 818,555 shares of the
Series A Preferred Stock at $20.00 per share.
The Company engaged in an offering of warrants to purchase common stock in
1995. Pursuant to this offering warrants to purchase up to 18,465 shares of
Common stock at $8.00 per share were exercisable in 1996; warrants to purchase
up to 18,465 share of common stock at $9.00 per share are exercisable in 1997;
and warrants to purchase up to 18,465 shares of common stock at $10.00 per share
are exercisable in 1998. In 1996, warrants for 6,942 shares were exercised. In
1997, as of May 10, 1997, 2,200 warrants were exercised.
Assuming the Company accepts subscriptions for all 250,000 shares in this
offering, the purchasers thereof will have paid an aggregate of $3,000,000 to
the Company.
6
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USE OF PROCEEDS
If the Company sells all 250,000 Shares offered hereby, as to which there
can be no assurance, the Company will realize gross proceeds of this offering of
$3,000,000. The Company expects to use these proceeds substantially as follows:
Total Proceeds from Offering $3,000,000
Cost of Offering ($ 25,000)
Capital Contribution to United Bank of Philadelphia* ($2,975,000)
- ----------
* Investment will be used to augment capital in the Bank and for future
expansion.
BUSINESS
General
The Company is a Pennsylvania corporation formed in April, 1993, to become
a shell bank holding company of the Bank. The Company became a holding company
for the Bank on October 14, 1994.
The Company currently acts solely as a shell for the purpose of management
of the affairs of the Bank. The Company does not anticipate engaging in any
other business or transaction other than the management of the affairs of the
Bank for the foreseeable future.
The Bank
Upon the completion of the Bank's organization, which occurred on March 23,
1992, the Bank commenced operations as an African-American-controlled and
managed commercial bank chartered by the Pennsylvania Department of Banking. The
Bank's deposits are insured by the FDIC and the Bank is a member of the FRS. The
Bank offers a wide range of consumer and commercial banking services in
Philadelphia with an emphasis on service to neighborhoods and local communities.
As a community bank, the Bank seeks to be flexible and responsive to the needs
of the residents in the areas it serves. The Bank believes that its business
development activities will be enhanced by the close ties of its directors to
the African-American community in Philadelphia and vicinity.
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History
The Bank filed its Application for Permission to Establish a
State-Chartered Banking Institution (the "Application") with the Pennsylvania
Department of Banking (the "Department") on July 3, 1990, and received
preliminary approval on September 17, 1990. The Department conditioned receipt
of the Bank's Certificate of Authorization to do Business (the "Charter") upon,
among other things, the Bank's raising of at least $5,000,000 in capital and
Federal Reserve Board (the "FRB") approval of the Bank's Application for
Membership in the FRS (the "Federal Applica tion"). The Bank filed its Federal
Application with the FRB in August, 1991. The Bank raised $6,042,950 and was
accepted for membership into the FRS on January 29, 1992. Due to a change in
Federal Regulations, the Bank was required to file an application for Federal
Deposit Insurance on January 27, 1992. The Bank received notification of
Insurance from the Federal Deposit Insurance Corporation ("FDIC") on March 18,
1992, and received its Certificate of Authorization to do Business from the
Department on March 19, 1992. The Bank opened for business on March 23, 1992.
In 1993, the Bank acquired five (5) branch locations from the Resolution
Trust Corporation ("RTC"). The first of these acquisitions included both
branches and all of the deposits of Chase Federal Savings and Loan Association
("Chase"). Pursuant to the Chase acquisition, the Bank acquired approximately
$11,800,000 in deposits from the RTC and established branch locations at 1562
East Wadsworth Avenue, in the Mt. Airy section of Philadelphia, and at 1015
North Marshall Street in North Philadelphia. The RTC has provided these
locations to the Bank on a rent-free basis for a period of five years from the
date of the acquisition. Additionally, pursuant to the acquisition of Chase, the
Bank received the right to purchase residential real estate loans from the RTC
totalling approximately $11,800,000.
In August, 1993, the Bank acquired the deposits of three branches of Home
Unity Savings and Loan Association ("Home Unity"), totalling approximately
$97,000,000. Pursuant to the Home Unity acquisition, the Bank established
locations at Two Penn Center, Philadelphia, PA and 4806 Frankford Avenue,
Philadelphia, PA. The Bank sold the third acquired branch, which was located
outside of the Bank's current market area in Bensalem, PA, to PNC Bank, along
with approximately $34,500,000 in deposits associated with that branch.
Additionally, pursuant to the acquisition of Home Unity, the Bank received the
right to purchase up to approximately $97,000,000 of residential real estate
loans from the RTC.
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The Bank exercised its right to acquire loans equal to the amount of
deposits acquired in the branch acquisitions on December 22, 1993. The Bank
acquired loans with outstanding principal balances totalling approximately
$107,600,000 for $104,400,000 net of a discount of $3,200,000. The Bank
immediately sold $64,800,000 of these loans at a net gain of $2,600,000.
In March, 1994, the Bank sold approximately $13,100,000 of the acquired
loans. After paying PNC Bank $350,000 (the amount attributable to the loans
acquired by PNC Bank in connection with the acquisition of the Bensalem branch),
the net gain on the sale was approximately $191,000. The payment to PNC Bank was
contingent upon the Bank's sale of loans during 1994.
In 1994, the Bank acquired two (2) branch locations. The first of these
acquisitions included one branch and deposits of Ukrainian Federal Savings and
Loan ("Ukrainian") from the RTC. Pursuant to the Ukrainian acquisition, the Bank
acquired approximately $17,500,000 in deposits from the RTC and established a
branch location at 1321 West Lindley Avenue, in North Philadelphia. The RTC has
provided this location to the Bank on a rent-free basis for a period of five
years from the date of the acquisition. Additionally, pursuant to the
acquisition of Ukrainian, the Bank received the right to purchase residential
real estate loans from the RTC totalling approximately $17,500,000. Due to
inappropriate pricing, the Bank never exercised its right to purchase these
loans. Instead, it was offered a compromise whereunder the Bank would receive
the amount of accrued interest due. The amount of the accrued interest is in
controversy. See "Litigation".
In August, 1994, the Bank acquired the branch location and deposits of one
branch of Central Pennsylvania Savings Association, totalling approximately
$7,500,000. Pursuant to the Central Penn acquisition, the Bank established a
location at 2820 West Girard Avenue, Philadelphia, PA.
In 1996, the Bank closed two unprofitable branch locations acquired from
the RTC, located at 1015 North Marshall Street, Philadelphia, Pennsylvania and
1321 West Lindley Avenue, Philadelphia, Pennsylvania. Also in 1996, the Bank
opened a branch facility at 38th Street and Lancaster Avenue, Philadelphia,
Pennsylvania.
MANAGEMENT
The business of the Company will be managed by the Board of Directors. The
names and ages of the current officers and directors of the Company are as
follows:
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NAME AGE POSITION
- ---- --- --------
James F. Bodine 75 Vice Chairman
S. Amos Brackeen 78 Director
Emma C. Chappell 56 Chairman, President and CEO
Luis A. Cortes, Jr 39 Director
Kemel G. Dawkins 73 Director
Verdaynea F. Eason 34 Director
L. Armstead Edwards 54 Treasurer, Director
Marionette Y. Frazier 51 Director
William C. Green 72 Director
Angela M. Huggins 56 Director
William B. Moore 54 Secretary, Director
Ernest L. Wright 68 Director
Elmer Young, Jr 72 Director
Information concerning the Board of Directors and officers of the Company
is as follows:
Emma C. Chappell, age 56, is the Founder, President, Chairman of the Board
and Chief Executive Officer of the Bank and the Company, a shareholder, and a
director. Dr. Chappell has held her positions with the Bank since July, 1990 and
held her positions with the Company since its inception. From 1959 to June,
1990, Dr. Chappell was employed by Continental Bank ("Continental") and its
predecessors in various capacities where she rose to become the first woman vice
president of any major commercial bank in Pennsylvania. Dr. Chappell served as
Vice President, Assistant Vice President, and Assistant Treasurer of Continental
from 1977 to 1990, 1975 to 1977, and 1971 to 1974, respectively. In the period
most recent to her move to the Bank, Dr. Chappell served as Vice President in
charge of the Urban Development Services Department of Continental. Dr. Chappell
received her education at Berean Institute, Temple University and the Stonier
Graduate School of Banking at Rutgers University.
James F. Bodine, age 75, Vice Chairman of the Board of Directors and a
shareholder of the Company, has been retired as the Managing Partner of The
Urban Affairs Partnership since 1987, a position he held for approximately seven
years. From 1979 to 1980, Mr. Bodine served as the
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<PAGE>
Secretary of Commerce of the Commonwealth of Pennsylvania. Mr. Bodine served as
the President of First Pennsylvania Bank, Philadelphia, Pennsylvania from 1972
to 1978. From 1948 to 1972 Mr. Bodine was employed by First Pennsylvania Bank in
various capacities, including Executive Vice President, Senior Vice President,
Vice President, Assistant Vice President, and Treasurer. Mr. Bodine received a
Bachelor of Arts degree from Yale University in 1943 and a Master of Business
Administration degree from Harvard University in 1948. Mr. Bodine is active in
numerous business, cultural, and community organizations committed to social
issues of inner- city low income minorities, including the Philadelphia Youth
Service Corps. and the Informal Coalition on Homelessness, for which Mr. Bodine
serves as Chairman.
Reverend S. Amos Brackeen, age 78, a director and shareholder of the
Company, is the founder and pastor of the Philippian Baptist Church of
Philadelphia. He formerly served as a regional supervisor for the Atlanta Life
Insurance Company, as an auditor for the Baptist State Convention and the
Baptist Ministers Conference of Philadelphia, and as a consultant to the
Mortgage Bankers of New York. He received his Bachelor of Divinity degree from
Oberlin School of Theology and a Master of Divinity degree from Vanderbilt
University, Nashville, Tennessee.
Reverend Luis A. Cortes, Jr., age 39, a director and shareholder of the
Company, is an ordained minister of the American Baptist Churches, USA. He has
served since 1988 as Executive Director of the Hispanic Clergy of Philadelphia &
Vicinity. From 1984 to 1988, Reverend Cortes was Associate Executive Minister
and Fund-raiser for the Philadelphia Baptist Association. Reverend Cortes also
served as a Professor at Eastern Theological Seminary from 1981 to 1984. He
received his Bachelor of Arts degree from City College of New York and a Master
of Divinity degree from Union Theological Seminary, New York.
Kemel G. Dawkins, age 73, a director and shareholder of the Company, has
been President of Kemrodco Development and Construction Company, Inc. and
Kem-Her Construction Company, Inc. since 1972. Prior to organizing his own
companies, he served as journeyman, carpenter foreman, and superintendent for
McCloskey and Company, general contractors, for over 20 years.
Verdaynea C. Eason, age 34 is a director and shareholder of the Company.
Ms. Eason served as Vice President, Compliance for the Bank from its inception
through 1994. Ms. Eason served an integral role in the formation of the Bank.
Ms. Eason received a Bachelors degree from Howard University and a Masters of
Business Administration from the Wharton School of the University of
Pennsylvania.
L. Armstead Edwards, age 54, is Treasurer and a director and shareholder of
the Company. Mr. Edwards has been the owner and president of P.A.Z., Inc., an
entertainment management company located in Philadelphia, since 1980. Mr.
Edwards received a Bachelor's degree in
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Elementary Education from Cheyney University in 1964, a Master's degree in Urban
Education from Temple University in 1973, and his Elementary Principal
Certification from Temple University in 1973.
Marionette Y. Frazier, age 52, a director and shareholder of the Company.
Ms. Frazier is secretary and treasurer of John Frazier, Inc., Philadelphia,
Pennsylvania, a position that she has held since 1981. Ms. Frazier has 15 years
experience in the commercial construction field.
William C. Green, age 72, a director and shareholder of the Company, is a
co-founder of the Ivy Leaf Middle School. Mr. Green has been a teacher with the
School District of Philadelphia for 32 years at the elementary, junior high, and
senior high school levels, and from 1970 to 1981, he served as Director of the
Division on African and Afro-American Studies. Mr. Green received his Bachelor
of Science degree from Morgan State College and a Master of Education degree
from the University of Pennsylvania.
Angela M. Huggins, age 53, is a director and shareholder of the Company.
Since 1984, Ms. Huggins has served as the Director of Facilities Services for
RMS Technologies, Inc. in Marlton, New Jersey. Ms. Huggins holds a Bachelor of
Arts degree from Howard University and a Master of Science degree from Drexel
University.
Reverend William B. Moore, age 54, is Secretary, director and shareholder
of the Company. Reverend Moore has served as pastor of the Tenth Memorial
Baptist Church, Philadelphia, Pennsylvania, since 1974. Reverend Moore served as
the Chairman, First Vice President and President of the Black Clergy of
Philadelphia and Vicinity from 1978 to 1982, 1985 to 1986, and January, 1987 to
January 1990, respectively. He is also currently a member of the Baptist
Ministers Conference of Philadelphia and Vicinity and the Missionary Baptist
Pastors Conference of Philadelphia and Vicinity.
Ernest L. Wright, age 67, a director and shareholder of the Company, is the
founder, President and Chief Executive Officer of Ernest L. Wright Construction
Company. Mr. Wright has held this position since 1972. Mr. Wright has been
active in the construction industry for over 45 years with both business and
technical experience.
Elmer Young, Jr., age 71, a director and shareholder of the Company retired
in 1988 from The Glenmede Trust Company, where he served as Vice President since
1983. Previously, Mr. Young served as Senior Vice President of First
Pennsylvania Bank, Philadelphia, Pennsylvania, where he worked since 1971. Mr.
Young has been serving on the board of directors of North Carolina Mutual Life
Insurance Company, Durham, North Carolina since 1980.
The Company is a party to an employment contract with Dr. Emma C. Chappell
ending December 31, 2000 (the "Employment Agreement").
Dr. Chappell is entitled to receive health, disability, life and other
insurance benefits and is entitled to participate in or receive benefits under
employee benefit, retirement, pension, profit-
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sharing or other similar plans to be established at the discretion of the Board
of Directors of the Company.
One Hundred Thousand shares of the Company's common stock are subject to a
Long Term Incentive Compensation Plan (the "Plan") under which options to
purchase the Company's common stock may be granted to key employees at a price
not less than the fair market value thereof at the date of the grant
("Options"), and common stock may be awarded as Restricted Stock, subject for a
period of time to substantial risk of forfeiture and restrictions on disposition
as determined by the Board of Directors as of the date of the grant ("Restricted
Stock"). Pursuant to the Plan, Options are granted in tandem with Stock
Appreciation Rights allowing the holder of an Option to surrender the Option and
receive an amount equal to the appreciation in market value of a fixed number of
shares of common stock from the date of the grant of the Option ("SARs"). SARs
may be payable in common stock or cash or a combination of both. The Plan also
allows the Board of Directors to grant Performance Shares, which are contingent
rights to receive, when certain performance criteria have been attained, amounts
of common stock and cash determined by the Board of Directors for such an award
("Performance Shares"). Such rights are subject to forfeiture or reduction if
performance goals specified are not met during the performance period.
The following table sets forth the identity of the members of the Board of
Directors of the Company, the percentage of the common stock that is currently
beneficially owned by such shareholders:
Directors and Officers of the Bank
Shares of Registrant's Common Stock
Name Beneficially Owned Percentage
- ---- ------------------ ----------
James F. Bodine 10,833 1.33%
S. Amos Brackeen 5,000 .61%
Emma C. Chappell(1) 7,000 .86%
Luis A. Cortes, Jr 500 .06%
Kemel G. Dawkins 8,333 1.02%
Verdaynea F. Eason 300 .04%
L. Armstead Edwards 10,833 1.33%
Marionette Y. Frazier 9,350 1.14%
William C. Green (2) 13,833 1.69%
Angela M. Huggins 4,200 .51%
William B. Moore 1,000 .12%
Ernest L. Wright 5,000 .62%
Elmer Young, Jr 100 .01%
------ ----
TOTAL 80,815 9.44%
====== ====
- ----------
(1) Dr. Chappell also acts as Trustee of a voting trust agreement pursuant to
which Fahnstock, Inc deposited 5,209 shares of Common Stock of UBS with Dr.
Chappell as Trustee, to be voted by Dr. Chappell pursuant to the terms of
the Voting Trust. The term of the Voting Trust is ten years.
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Dr. Chappell acts as Trustee of a voting trust agreement pursuant to which
NationsBank Corporation deposited 33,500 shares of Common Stock of UBS with
Dr. Chappell as Trustee, to be voted by Dr. Chappell pursuant to the terms
of the Voting Trust. The term of the Voting Trust is ten years.
Dr. Chappell also owns options to purchase up to 29,694 shares of the
common stock of UBS at a purchase price of $8.54 per share . This option
was awarded on September 15, 1993 and remains in effect for a term of five
years from that date.
(2) Owned jointly with Liller B. Green, his wife.
Dr. Chappell also acts as Trustee of a voting trust agreement, pursuant to
which Fahnstock, Inc deposited 5,209 shares of Common Stock of UBS with Dr.
Chappell as Trustee, to be voted by Dr. Chappell pursuant to the terms of
the Voting Trust. The term of the Voting Trust is ten years.
Dr. Chappell acts as Trustee of a voting trust agreement, pursuant to which
NationsBank Corporation deposited 33,500 shares of Common Stock of UBS with
Dr. Chappell as Trustee, to be voted by Dr. Chappell pursuant to the terms
of the Voting Trust. The term of the Voting Trust is ten years.
Dr. Chappell also owns options to purchase up to 29,694 shares of the
common stock of UBS for a purchase price of $8.54 per share. This option
was awarded on September 15, 1993 and remains in effect for a term of five
years from that date.
THE OFFERING
The Units
A maximum of 250,000 Shares are being offered on a best efforts basis by
the officers and directors of the Company at a price of $12.00 per Share. No
selling fees or commissions will be paid in connection with the offer and sale
of the Shares. The offering of the Shares will continue until September 30,
1996, unless extended in the discretion of the Company.
Shares will be sold only to persons who are existing Shareholders of the
Company. The Company shall have the right in its absolute discretion to accept
or reject any subscription for a Share. No fractional Shares will be issued.
Subscription Agreement
Each person desiring to subscribe for Shares will be required to enter into
a Subscription
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Agreement with the Company in the form attached as Exhibit B hereto. Prospective
investors must execute the Subscription Agreement and return it to the Company
together with a check in the amount of $12.00 per Share payable to United
Bancshares, Inc.
Determination of the Offering Price
The offering price for the Shares has been determined solely by the Company
and is based on the amount of funds that the Company currently anticipates
requiring for expansion. The offering price should not be regarded as an
indication of the value of the Shares, or the value of the Company.
Investment Restrictions
No public market exists for the Shares and it is unlikely that a public
market will arise in the future. Accordingly, it may be difficult or impossible
for a purchaser to resell the Shares. Moreover, the Shares are being offered
pursuant to exemptions from registration under the Act and applicable state
securities laws, the availability of which depends, among other conditions, upon
the intent of the subscribers to purchase such Shares for investment purposes
only and not with a view toward the resale or distribution thereof. By executing
the Subscription Agreement an investor will represent that he/she is purchasing
the Shares for investment purposes only and will agree not to sell, transfer or
otherwise dispose of the Shares unless they are registered under the Act and
applicable state securities laws (which the Company is neither required to do
nor anticipates doing) or an exemption from such registration requirements is
available. In addition, Pennsylvania law requires that investors who are
Pennsylvania residents or domiciliaries not sell the Shares for a period of
twelve months from the date of purchase.
Right of Withdrawal
Any Pennsylvania resident who has entered into the Subscription Agreement
may elect, within two business days from the date of receipt by the Company of
the Subscription Agreement, to withdraw from the Subscription Agreement and
receive a full refund of all monies paid.
In the event of such a withdrawal, the subscriber will not incur any
further liability to the Company or to any other person. To accomplish this
withdrawal, a subscriber need only send a letter or telegram, which must be
postmarked prior to the end of the aforementioned second business day, to the
Company indicating his intention to withdraw. If a subscriber chooses to
withdraw by letter, it is prudent to send it by certified mail, return receipt
requested, to ensure that the letter is received and also to evidence the time
of mailing. A subscriber making an oral request for withdrawal must ask for
written confirmation that such request has been received.
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DIVIDEND POLICIES
The Company intends to retain its earnings, if any, for the purpose of
making additions to the Bank's capital and reserves. Accordingly, the Company
does not anticipate it will pay any cash dividends for the foreseeable future,
and there can be no assurance that the Company will ever pay cash dividends.
If the Company has stable profitable operations, the Company's dividend
policy will be subject to various regulatory considerations and to the
discretion of the Company's Board of Directors, which will consider a number of
factors, including the Bank's operating results, financial condition, and
prevailing economic conditions. The Company's ability to dividend to the holders
of the Common Stock will be directly related, therefore, to the Bank's
performance and ability to dividend to the Company. The Bank's ability to
declare dividends is subject to the restrictions set forth in the Banking Code,
the Federal Reserve Act, and the Federal Deposit Insurance Act.
The Banking Code provides that cash dividends may be declared and paid only
from accumulated net earnings and that, prior to the declaration of any
dividend, if the surplus of a bank is less than the amount of its capital the
bank shall, until surplus is equal to such amount, transfer to surplus an amount
which is at least ten percent of the net earnings of the bank for the period
since the end of the last fiscal year or any shorter period since the
declaration of a dividend. If the surplus of a bank is less than 50% of the
amount of its capital, no dividend may be declared or paid by the bank without
the prior approval of the Department.
Under the Federal Reserve Act, if a bank has sustained losses equal to or
exceeding its undivided profits then on hand, no dividend shall be paid, and no
dividends can ever be paid in an amount greater than such bank's net profits
less losses and bad debts. Cash dividends must be approved by the Board if the
total of all cash dividends declared by a bank in any calendar year, including
the proposed cash dividend, exceeds the total of the Bank's net profits for that
year plus its retained net profits from the preceding two years less any
required transfers to surplus or to a fund for the retirement of preferred
stock. Under the Federal Reserve Act, the Board has the power to prohibit the
payment of cash dividends by a bank if it determines that such a payment would
be an unsafe or unsound banking practice.
The Federal Deposit Insurance Act generally prohibits all payments of
dividends by a bank which is in default of any assessment to the FDIC.
The Series A Preferred Stock is accorded limited rights under the
Certificate of Designations, Preferences and Rights of a First Series of
Preferred Stock of United Bancshares, Inc. (the "Certificate of Designations").
Upon any declaration of a dividend by the Company, the Certificate of
Designations provides that, so long as the Company has sufficient assets legally
available for distribution, each share of the Series A Preferred Stock will be
accorded a dividend preference equal to 6% of the original purchase price. The
holders of the Series A Preferred Stock will be paid this amount prior to any
amount being paid on account of the Common Stock.
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The availability of this preference may be limited by the funds available
for dividend or by management policies. No assurance can be given that there
will be available to the Company a sufficient amount to cover this dividend
preference either in whole or in part.
The Series A Preferred Stock does not have any conversion rights, and,
except as otherwise required by applicable law, does not have any voting rights.
The Certificate of Designations provides that the Company's Articles of
Incorporation shall not be amended in any manner that would materially affect
the rights of the Series A Preferred Stock without consent of the holders of al
least 51% of the outstanding Series A Preferred Stock.
LIMITATION OF LIABILITY.
Pursuant to the Pennsylvania Director's Liability Act, the Bylaws of the
Company provide that a director of the Company is not personally liable for
monetary damages as such for any act taken, or any failure to take action,
unless (a) the director has breached or failed to perform the duties of his
office, and (b) the breach or failure constitutes self-dealing, willful
misconduct, or recklessness. The Bylaw provision does not eliminate the personal
monetary liability of a director of the Company where such director is
responsible or liable pursuant to any criminal statute or for the payment of
taxes.
LITIGATION
There is no pending, or to the best of our knowledge and after reasonable
inquiry of the Officers, threatened actions, suits or proceedings before any
court, governmental agency, arbitrator or instrumentality other than in the
ordinary course of the Company's business.
ADDITIONAL INFORMATION
All original documentation and information with respect to the offering of
the Shares not previously defined are available for inspection at the office of
the Company at 714 Market Street, Philadelphia, Pennsylvania 19106. Prospective
investors or their representatives may, at any time, during normal business
hours, prior to the sale of the Units, ask questions of the officers of the
Company with respect to the terms and conditions of the offering of the Units
and request additional information. Any such requests should be addressed to the
attention of the Secretary of the Company. The officers of the Company will
provide answers to such questions and provide information to the extent such
answers and information are available to it or can be obtained without
unreasonable effort or expense.
16
<PAGE>
EXHIBIT A
UNAUDITED BALANCE SHEET OF THE COMPANY AT MARCH 31, 1997
<PAGE>
Balance Sheet
of
United Bancshares, Inc.
March 31, 1997
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
---------------------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest bearing balances and currency and coin 2,987
Interest bearing balances 310
Securities:
Held-to-maturity securities 7,164
Available-for-sale securities 6,968
Federal funds sold and securities purchased under agreements to resell:
Federal funds sold 6,038
Securities purchased under agreements to resell 0
Loans and lease financing receivables:
Loans and leases, net of unearned income 63,881
Allowance for loan and leases losses (494)
Loans and leases, net of unearned income, allowance and reserve 63,387
Trading assets 0
Premises and fixed assets 1,530
Other real estate owned 0
Investments in unconsolidated subsidiaries and associated companies 0
Customers' liability to this bank on acceptances outstanding 0
Intangible assets 236
Other assets 1,684
------
Total assets 90,304
LIABILITIES
Deposits, interest bearing 71,997
Deposits, noninterest bearing 10,074
Long term debt 97
Accrued expenses and other liabilities 816
-------
Total liabilities 82,984
EQUITY CAPITAL
Perpetual preferred stock and related surplus 1,863
Common stock 802
Surplus 7,554
Undivided profits and capital reserves (2,900)
Net unrealized holding gains unavailable for sale securities 1
-------
Total equity capital 7,320
Total liabilities and equity capital 90,304
</TABLE>
A-1
<PAGE>
United Bancshares, Inc.
Statement of Operations
March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Interest income:
Interest and fees on loans 1,354
Interest on investment securities 218
Interest on federal funds sold 61
Interest on time deposits with other banks 5
------
Total interest income 1,638
Interest expense:
Interest on deposits 421
Interest on demand deposits 13
Interest on savings deposits 183
Interest on borrowed funds 1
------
Total interest expense 618
Net interest income 1,020
Provision for loan losses 18
Net interest income after provision for loan losses 1,002
Noninterest income:
Customer service fees 136
Other income 60
------
Total noninterest income 196
Realized gain on available for sale securities 9
Noninterest expense
Salary, wages and employee benefits 568
Occupancy and equipment 199
Other noninterest expense 553
------
Total non-interest expense 1,320
Net (loss) income (113)
</TABLE>
A-2
<PAGE>
EXHIBIT B
SUBSCRIPTION AGREEMENT
<PAGE>
SUBSCRIPTION AGREEMENT
United Bancshares, Inc.
714 Market Street
Philadelphia, PA 19106
The undersigned is entering into this Subscription Agreement (the
"Agreement") in connection with his or her subscription for _____________ shares
of Common Stock (the "Shares") in United Bancshares, Inc. (the "Company"). The
purchase price is $12 per Share.
1. Subscription. Subject to the terms and conditions set forth herein, the
undersigned hereby irrevocably subscribes for and agrees to purchase the
above-designated number of Shares. The purchase price for the Shares will be
payable upon submission by the undersigned of this executed Subscription
Agreement.
If this subscription for Shares is rejected by the Company the undersigned
will promptly be refunded all amounts he or she has paid for the Shares without
interest.
2. Acceptance of Subscription. The undersigned understands and agrees that
this subscription is made subject to the following terms and conditions:
(a) The Company shall have the right in its discretion to reject this
subscription in whole or in part.
(b) The Company shall have no obligation to accept subscriptions in the
order in which they are received.
3. Representations and Warranties of the Undersigned. The undersigned
understands that the Shares are being offered and sold under an exemption from
registration of the Securities Act of 1933, as amended (the "Act") and under
similar exemptions under applicable state securities laws; that he/she is
subscribing for Shares without being furnished any offering literature or
prospectus other than the Confidential Offering Memorandum dated May 19, 1997
(the "Offering Memorandum"); that this transaction has not been examined by the
United States Securities and Exchange Commission or by any administrative agency
charged with the administration of the securities laws of any other
jurisdiction; that all documents, records and books pertaining to this
investment requested by the undersigned have been made available by the Company
to the undersigned and his representatives, including his/her attorney, his/her
accountant and/or his/her purchaser representative; and that the books and
records of the Company have been and will be available upon reasonable notice
for inspection by investors during reasonable business hours at the Company's
offices. The undersigned hereby further represents and warrants as follows:
(a) The undersigned, if he or she is an individual, is at least 21
years of age.
(b) The undersigned, if a corporation or partnership, is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was organized, and has all requisite corporate or
partnership authority to execute and deliver this agreement and to
consummate the transactions contemplated hereby.
(c) The undersigned understands that the Shares are a speculative
investment that involves a degree of risk of loss by the undersigned of his
or her investment therein. The undersigned understands that the Company was
formed in April, 1993 and has not conducted profitable operations to date.
The Company's ownership interest in United Bank of Philadelphia (the
"Bank") is its sole asset.
(d) The undersigned confirms that he or she understands and has fully
considered for purposes of this investment that there are substantial
restrictions on the transferability of the Shares, there will be no public
B-1
<PAGE>
market for the Shares and, accordingly, it probably will not be possible
for the undersigned to liquidate his or her investment in the Shares in the
case of an emergency or to use the Shares as collateral for a loan.
(e) The undersigned confirms that, in making his or her decision to
purchase the Shares hereby subscribed for, he or she has relied solely upon
the information contained herein and in the Offering Memorandum and upon
independent investigations made by him or her and/or his or her
representatives and that he or she and such representatives have been given
the opportunity to ask questions of and to receive answers from the Company
concerning any information delivered to the undersigned by the Company, to
the extent the Company can do so without unreasonable effort or expense.
(f) The Shares hereby subscribed for are being acquired by the
undersigned, in his or her own name, in good faith solely for his or her
own personal account for investment purposes only and is not being
purchased with a view to or for resale, distribution, subdivision or
fractionization thereof; the undersigned has no contract, understanding,
undertaking, agreement or arrangement, formal or informal, with any person
to sell, transfer or pledge to any person the Shares for which he or she
hereby subscribes or any part thereof; the undersigned has no current plans
to enter into any such contract, undertaking, agreement, understanding or
arrangement; and the undersigned understands that the legal consequences of
the representations and warranties are that he or she must bear the
economic risk of an investment in the Shares for an indefinite period of
time because the Shares have not been registered under the Act or under the
applicable state securities laws and therefore cannot be sold unless they
are subsequently registered under the Act and such state securities laws
(which the Company is not obligated to do and has no current intention of
doing) or an exemption from such registration is available.
(g) The undersigned consents to the placement of a legend on the
certificate representing the Shares being purchased by him or her and the
shares purchased pursuant to warrant exercise, which legend will be in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY JURISDICTION. THE SALE OR OTHER DISPOSITION OF THESE
SECURITIES IS PROHIBITED UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO IT AND ITS COUNSEL THAT
SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND OTHER
APPLICABLE REGISTRATION STATUTES. BY ACQUIRING THE
SECURITIES REPRESENTED HEREBY, THE HOLDER HEREOF REPRESENTS
THAT HE OR SHE WILL NOT SELL OR OTHERWISE DISPOSE OF THESE
SECURITIES WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH
THE AFORESAID ACTS AND RULES AND REGULATIONS THEREUNDER
AND, WILL NOT SELL OR OTHERWISE DISPOSE OF THESE SECURITIES
FOR IN ANY EVENT A PERIOD OF TWO YEARS AFTER THE DATE OF
PURCHASE.
(h) The undersigned has been advised by the Company and understands
that pursuant to Section 207(m) of the Pennsylvania Securities Act of 1972,
(i) he or she has the right to cancel and withdraw this subscription
agreement upon written notice to the Company given within two business days
following receipt by the Company of this executed subscription agreement,
(ii) upon such cancellation or withdrawal, he or she will have no
obligation or duty under this subscription agreement to the Company or any
other person and will be entitled to full refund without interest of any
amounts paid by him pursuant to this subscription agreement, and (iii) any
notice of cancellation or withdrawal should be made by telegraph or
certified or registered mail and will be effective when delivered to
Western Union or deposited in the United States mails as aforesaid, with
postage or other transmittal fees prepaid.
B-2
<PAGE>
(i) The undersigned hereby represents that he or she is a stockholder
of the Company
The foregoing representations, warranties and undertakings are made by the
undersigned with the intent that they be relied upon in determining his or her
suitability as an investor in the Company, and the undersigned hereby agrees
that such representations and warranties shall survive his or her purchase of
the Shares.
4. Revocation. The undersigned agrees that, except as and to the extent set
forth in paragraph 3(h) hereof, he or she may not cancel, terminate or revoke
this agreement or any agreement of the undersigned made hereunder and that this
Agreement shall be legally binding upon the undersigned's heirs, executors,
administrators, successors and assigns.
5. No Waiver of Rights. Notwithstanding any of the representations,
warranties, acknowledgements or agreements made herein, the undersigned does not
thereby or in any other manner waive any rights granted to him or her under
applicable federal or state securities laws.
6. Miscellaneous.
(a) All notices or other communications given or made hereunder shall be in
writing and shall be delivered or mailed by registered or certified mail, return
receipt requested, postage prepaid, to the parties hereto at the addressees set
forth in the records of the Company, or such other address as the addressee
shall designate.
(b) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, without reference to the conflict
of laws provisions thereof.
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and may be amended only by a
writing executed by the parties.
B-3
<PAGE>
UNITED BANCSHARES, INC.
Signature Page to Subscription Agreement
(Please Print)
INDIVIDUAL SUBSCRIBER CORPORATION OR PARTNERSHIP SUBSCRIBER
__________________________________ ______________________________________
NAME NAME OF CORPORATION OR PARTNERSHIP
__________________________________ By:__________________________________
Subscriber's Signature Name:________________________________
Title:_______________________________
Subscriber Address Subscriber Address
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
Telephone Number Telephone Number
( ) ( )
__________________________________ __________________________________
Social Security Number Taxpayer Identification Number
__________________________________ __________________________________
Date: ____________________________ Date: ____________________________
Number of Shares: ________________ Number of Shares: ________________
B-4
<PAGE>
ACCEPTANCE
This Subscription Agreement is hereby accepted.
DATE: ____________________________ UNITED BANCSHARES, INC.
By__________________________________
Title_______________________________
B-5
<PAGE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,665
<INT-BEARING-DEPOSITS> 327
<FED-FUNDS-SOLD> 7,845
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,676
<INVESTMENTS-CARRYING> 10,967
<INVESTMENTS-MARKET> 10,956
<LOANS> 68,252
<ALLOWANCE> (530)
<TOTAL-ASSETS> 102,290
<DEPOSITS> 92,674
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,692
<LONG-TERM> 0
0
1
<COMMON> 8
<OTHER-SE> 6,915
<TOTAL-LIABILITIES-AND-EQUITY> 102,290
<INTEREST-LOAN> 1,467
<INTEREST-INVEST> 237
<INTEREST-OTHER> 145
<INTEREST-TOTAL> 1,850
<INTEREST-DEPOSIT> 671
<INTEREST-EXPENSE> 17
<INTEREST-INCOME-NET> 1,161
<LOAN-LOSSES> 23
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,457
<INCOME-PRETAX> 25
<INCOME-PRE-EXTRAORDINARY> 25
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.691
<LOANS-NON> 929
<LOANS-PAST> 2,789
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 551
<CHARGE-OFFS> 79
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 530
<ALLOWANCE-DOMESTIC> 530
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
