-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WVWOeTFltm54qD5DgpMYpc+JfBBH4F8oxHSxh3A9eolG0R19y780iCp6C0koo5RJ EwfFQYYOkR9oFcxbnOj34Q== 0000725806-96-000005.txt : 19960329 0000725806-96-000005.hdr.sgml : 19960329 ACCESSION NUMBER: 0000725806-96-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED OKLAHOMA BANKSHARES INC CENTRAL INDEX KEY: 0000725806 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 730969432 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12047 FILM NUMBER: 96539728 BUSINESS ADDRESS: STREET 1: 4600 S E 29TH ST CITY: DEL CITY STATE: OK ZIP: 73115 BUSINESS PHONE: 4056778711 MAIL ADDRESS: STREET 1: 4600 S E 29 CITY: DEL CITY STATE: OK ZIP: 73115 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the Fiscal year ended December 31, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the transition period from____________ to_________________ Commission file number 0-12047 UNITED OKLAHOMA BANKSHARES, INC. (Exact name of registrant as specified in its charter) Oklahoma 73-0969432 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4600 S.E. 29th Street Del City, Oklahoma 73115 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (405) 677-8711 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock,$1 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of February 1, 1996, based on the reported average bid and asked prices, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $1,266,000. As of February 1, 1996, 2,532,237 shares of the registrant's common stock, par value $1.00 per share, were outstanding. NOTE: See pages 49-51 for Form 10-K Cross Reference Index BUSINESS United Oklahoma Bankshares, Inc. (the "Company") is a one-bank holding company registered under the Bank Holding Company Act of 1956, as amended. The principal business of the Company is the ownership and supervision of United Bank ("UB"), Del City, Oklahoma. As of December 31, 1995, the Company and its subsidiaries had 53 full time equivalent employees. UB is a state chartered banking association whose deposits are insured pursuant to the Federal Deposit Insurance Act. UB, which operates primarily in Oklahoma, competes with other financial institutions in its trade area in providing a full range of traditional banking and related financial services to the commercial, consumer, energy, real estate and financial sectors. UB operates two wholly owned subsidiaries, United Del City Tower, Inc. ("UDCT") and 4600 Corporation. UDCT owns and manages United Del City Tower of which the first and part of the second floors are occupied by UB. The facility is approximately 100% occupied at year end. 4600 Corporation was formed to sell assets on which UB foreclosed. In 1991, the Company borrowed the sum of $1,400,000 from John E. Kirkpatrick of Oklahoma City, Oklahoma, a preferred stockholder of the Company. The note was collateralized by 100% of the stock of UB. The note was paid in full as of December 31, 1994. PROPERTIES The Company's corporate headquarters are located in United Del City Tower at 4600 S.E. 29th Street, Del City, Oklahoma. This facility is located on approximately 8 acres and comprises approximately 77,000 square feet of usable space. The Tower houses the main banking functions and the Company's executive offices. UB occupies 27% of the building and approximately 73% is leased to various tenants. In 1993, UB completed construction of a new drive-in facility attached to the United Del City Tower. UB also sold its previous drive-in facility during 1993. LEGAL The Company and its subsidiaries are not defendants in any material legal proceedings. COMMON STOCK On January 30, 1995, certain shareholders of the Company entered into a Stock Purchase Agreement with Ameribank Corporation ("Ameribank"). The shareholders collectively agreed to sell all their common stock in the Company and their 9% cumulative, non-voting preferred stock in the Company. The shareholders collectively owned approximately 25% of all the issued and outstanding shares of common stock and 30% of the issued and outstanding preferred stock of the Company. The Stock Purchase Agreement was closed and the shares transferred on May 16, 1995. In July, Ameribank made an offer to purchase stock and acquired an additional 5.69% of the preferred stock. 2 On November 3, 1995, Ameribank made a tender offer to the common stock shareholders of the Company. After the purchase of shares through the tender offer, Ameribank owned an additional 23.2% of the common stock of the Company. On January 5, 1996, Ameribank filed its Final Amendment on Schedule 14D-1, indicating that as of that date it had acquired 23,706 shares of common stock in private transactions which represents a total of 1,514,118 or approximately 59.8% of the common stock of the Company. Since Ameribank's offer to the preferred shareholders in July, 1995, Ameribank has purchased an additional 5,883 shares of preferred stock in private transactions for a total of 106,929 or approximately 73.6% of the preferred stock of the Company. As of March 15, 1996, Ameribank purchased an additional 1,100 shares of common stock and 2,510 shares of preferred stock of the Company. DISCLAIMER This annual report has not been reviewed, or confirmed for accuracy or relevance, by the Federal Deposit Insurance Corporation. 3 SELECTED FINANCIAL DATA UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES The Selected Financial Data which follows should be read in conjunction with the consolidated financial statements (including the notes thereto) of the Company and its subsidiaries appearing elsewhere herein. Years ended December 31, 1995 1994 1993 1992 1991 (In thousands except per share amounts) Summary of Income: Interest income............ $ 6,015 5,160 5,235 5,460 5,309 Interest expense........... (2,569) (1,801) (1,847) (2,299) (2,646) Provision for loan losses.. (279) (90) (236) (128) (165) Non-interest income........ 1,016 1,030 837 795 1,114 Non-interest expense....... (3,155) (3,206) (3,068) (2,735) (4,215) Income (loss) before income taxes and cumulative effect of change in accounting principle.................. 775 829 655 648 (358) Cumulative effect of change in accounting principle.... - - 116 - - Net income (loss).......... $ 775 829 771 648 (358) Per share data: Income (loss) before cumulative effect of change in accounting principle.................. $ 0.15 0.17 0.10 0.10 (0.28) Cumulative effect of change in accounting principle.... - - 0.04 - - Net income (loss).......... $ 0.15 0.17 0.14 0.10 (0.28) Average outstanding common shares..................... 2,532 2,616 2,644 2,644 2,644 Period end balances: Cash and due from banks.... $ 2,584 2,440 1,907 3,270 2,695 Federal funds sold......... 6,300 - 460 1,560 2,085 Investment securities...... 28,800 30,588 29,794 33,352 30,722 Loans, net of unearned discount and allowance for loan losses 43,604 41,401 36,509 33,804 30,185 Total assets............... 86,071 79,720 74,564 78,556 72,689 Deposits................... 76,270 69,647 66,094 70,302 64,825 Long-term debt............. - - 450 900 1,400 Stockholders' equity....... 7,823 6,949 6,289 5,518 4,870
4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is designed to provide a better understanding of the significant factors related to the Company's results of operations, financial condition, liquidity and capital resources (including its subsidiary bank, UB, and its non-bank subsidiaries, UDCT and 4600 Corporation). Such discussion and analysis should be read in conjunction with the Consolidated Financial Statements (including the notes thereto) and Selected Financial Data appearing elsewhere in this annual report. RESULTS OF OPERATIONS General. Net income totaled $.8 million in 1995, compared to $.8 million in 1994 and in 1993. Earnings per share were $.15 in 1995, compared to $.17 per share in 1994 and $.14 per share in 1993. Net income in 1993 included $.1 million ($.04 per share) cumulative effect of change in accounting principle as a result of adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Management is unaware of any trends, events or uncertainties that will have or that are reasonably likely to have a material effect on the operations. Net Interest Income. Net interest income, the difference between gross interest and fees on earning assets (primarily loans and investments) and interest paid on deposits and borrowed funds necessary to support such assets, is a major component of a financial institution's earnings. Net interest income aggregated $3,446,000 and $3,359,000 in 1995 and 1994, respectively, an increase of $87,000. Net interest income decreased $29,000 between 1994 and 1993. From 1994 to 1995, the volume of average earning assets increased $4.4 million, while average interest bearing liabilities increased $2.2 million. The yield on average earning assets increased 71 basis points from 1994 to 1995, while the rate paid on average interest bearing liabilities increased 119 basis points during the same time period resulting in a decrease in the spread between the yield on earning assets and rate paid on interest bearing liabilities of 48 basis points. As a result of the increase in the rate earned on interest earning assets and an even greater increase in the rate paid on interest bearing liabilities, net interest margin decreased 16 basis points from 4.75% in 1994 to 4.59% in 1995. From 1993 to 1994, the volume of average earning assets increased $.1 million, while average interest bearing liabilities decreased $2.1 million. The yield on average earning assets decreased 11 basis points from 1993 to 1994, while the rate paid on average interest bearing liabilities increased 4 basis points during the same time period resulting in a decrease in the spread between the yield on earning assets and rate paid on interest bearing liabilities of 15 basis points. As a result of the decrease in the rate earned on interest bearing assets and the increase in the 5 rate paid on interest bearing liabilities, net interest margin decreased 5 basis points from 4.80% in 1993 to 4.75% in 1994. As management deems necessary and to the extent it has the flexibility, it will alter the volume and mix of earning assets and supporting liabilities so as to obtain optimal interest margins while maintaining sufficient liquid resources. The following table illustastrates volume and yield/rate variances on an actual basis (versus a taxable equivalent basis) for the years indicated. The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amount of the change in each. Year Ended December 31, Year ended December 31, 1995 Compared to 1994 1994 Compared to 1993 Increase/Decrease Increase/Decrease Due to Change in: Due to Change in: Yield/ Yield/ Volume Rate Net Volume Rate Net Earning assets: Investment securities..$ (87) 96 9 (181) (26) (207) Federal funds sold..... 72 44 116 (11) 15 4 Loans net of unearned discounts............ 398 332 730 157 (29) 128 Total interest income 383 472 855 (35) (40) (75) Interest bearing liabilities: Interest bearing deposits 75 698 773 (52) 39 (13) Short-term borrowings.. 1 - 1 3 - 3 Long-term debt......... (3) (3) (6) (33) (3) (36) Total interest expense 73 695 768 (82) 36 (46) Net interest income......$ 310 (223) 87 47 (76) (29)
6 Risk Elements of Earning Assets. Risk elements of the Company's earning assets are evidenced, in part, by non-performing loans consisting of loans contractually past due 90 days or more, loans placed on non-accrual status and other real estate which has been acquired in full or partial settlement of defaulted loans. Non- performing assets are carried by the Company at estimated net realizable value and known losses of principal have been charged off. At December 31, 1995, non-performing loans totaled $184,000. Non- performing loans as a percentage of all loans outstanding were .42% at December 31, 1995. The majority of non-performing loans are secured. The following table sets forth such loans and other real estate at the dates indicated: Years ended December 31, 1995 1994 1993 (Dollars in thousands) Non-accrual loans.....................$ 184 178 481 Other real estate..................... 63 180 552 Total non-performing asset..........$ 247 358 1,033 Non-performing loans to total loans... .42% .43% 1.32%
Under the Company's lending policies, all commercial loans are reviewed and graded according to their perceived credit risk (borrower's financial strength; value and type of collateral; borrower's performance, etc.). Based on this grading system, credits requiring special attention are placed on special monitoring for the attention of management and the Board of Directors. Management, through this special monitoring system, in conjunction with past loan loss experience, current and perceived future economic conditions and other factors, determines the level at which the allowance for loan losses should be maintained to adequately cover the loan portfolio risk. Non-accrual status loans are identified through the special monitoring system and periodic review of past due loans by officers and management. When doubt exists as to the ultimate collectibility of interest or principal, such loans are placed on non-accrual status. When a loan is placed on non-accrual status, interest previously accrued but uncollected on such loans is reversed and charged against current income. Subsequent payments collected on such loans are credited to loan principal if, in the opinion of management, full collectibility of principal is doubtful; otherwise, the payment is credited to income and principal according to the loan terms. Loans on which interest had ceased to be accrued approximated $184,000, $178,000 and $481,000 at December 31, 1995, 1994 and 1993, respectively. Approximately $6,000 was recognized on these loans in 1995 and in 1994, and $17,000 was recognized in 1993. 7 Had the accrual status of these loans been normal, approximately $21,000, $47,000 and $42,000 of additional interest would have been earned in 1995, 1994 and 1993, respectively. None of these loans are restructured troubled debt. Internally classified assets of UB, which approximate the same as classifications by regulatory authorities and includes other real estate, decreased from $769,000 at December 31, 1994 to $310,000 at December 31, 1995, a decrease of 60%. At December 31, 1995, the Company had approximately $67,000 of loans for which payments were contractually past due less than 90 days, and the borrowers were experiencing financial difficulties. These loans are included in the special monitoring loans which are subject to management's attention and review. Allowance and Provision for Loan Losses. The allowance for loan losses totaled $538,000, $559,000 and $437,000 at December 31, 1995, 1994 and 1993, respectively. The provision charged to expense amounted to $279,000 in 1995 compared to $90,000 and $236,000 in 1994 and 1993, respectively. Net losses (recoveries) on loans were approximately $300,000 in 1995, compared to $(32,000) in 1994 and $268,000 in 1993. The amount of provision charged to expense is based on the current level of net loan losses, perceived economic conditions, changes in the size and character of the loan portfolio, and management's assessment of the loan portfolio's inherent risk in relation to the allowance for loan losses (see Note 5 to Consolidated Financial Statements). The allowance for loan losses as a percentage of total loans was 1.22%, 1.33% and 1.18% at December 31, 1995, 1994 and 1993, respectively. Non-interest Income. Years ended December 31, 1995 1994 1993 (In thousands) Service charges on deposits............$ 790 748 675 Other service charges and fees, net.... 226 178 162 Securities gains....................... - 104 - Total................................$1,016 1,030 837
Non-interest Expense. Non-interest expense amounted to $3.2 million in 1995 and in 1994 and $3.1 million in 1993 representing no change in 1995 and a 3.2% increase in 1994. Salaries and employee benefits continue to represent a large portion of non- interest expense. Net costs and write downs associated with other real estate owned approximated $(15,000), $92,000 and $66,000 in 1995, 1994 and 1993, respectively, and represent amounts provided for decreases in the market value of the properties, net gains and losses on sales of the properties, and net expenses incurred for the maintenance of the properties. 8 Years ended December 31, 1995 1994 1993 (In thousands) Salaries and employee benefits........$ 1,911 1,739 1,567 Occupancy expense, net................ 250 271 309 Other real estate owned, net.......... (15) 92 66 Other................................. 1,009 1,104 1,126 Total...............................$ 3,155 3,206 3,068
LIQUIDITY Liquidity is defined as a company's ability to meet maturing obligations and existing commitments and withstand fluctuations in funding needs, while also maintaining sufficient levels of highly liquid assets. Liquidity ultimately depends on profitability, asset quality and mix, asset and liability maturities and repriceability, and borrowing ability. The asset side of the balance sheet provides liquidity through regular amortization and maturities of loans, maturities of investment securities and money market instruments, maturities of deposits in other banks, and other assets available for sale. Deposit growth, diversification of liability products and access to other funding sources provide liquidity from the liability side. Management is unaware of any trends, events or uncertainties that will have or that are reasonably likely to have a material effect on the Company's liquidity. INDEBTEDNESS In 1991, the Company borrowed the sum of $1,400,000 from John E. Kirkpatrick of Oklahoma City, Oklahoma, a preferred stockholder of the Company. The note was collateralized by 100% of the stock of UB. The note was paid in full as of December 31, 1994. PREFERRED STOCK The Company has $4.4 million of preferred stock outstanding with 9% cumulative dividends in arrears since October 1, 1985. Cumulative unpaid dividends in arrears at December 31, 1995 approximated $4,018,410. RATE SENSITIVITY Both liquidity and net interest margin are significantly affected by the sensitivity that assets and liabilities have to changes in market interest rates, levels of earning assets and funding mixes, the direction of interest rate movements, the velocity at which changes occur and the absolute level of interest rates. Interest rate risk can arise when an investment's interest rate level changes, or its cash flows occur, in time periods that are different from those of supporting funding sources. 9 The following table depicts the Company's rate sensitivity position, based on next repricing date, at December 31, 1995. Sensitivity Period 0-30 31-90 91-180 181-365 Over Days Days Days Days 1 Year (In thousands) Rate sensitive assets: Federal funds sold..........$ 6,300 - - - - Investment securities(1).... 7,652 - 435 4,855 15,956 Loans....................... 15,890 2,692 1,156 2,250 21,970 Total rate sensitive assets 29,842 2,692 1,591 7,105 37,926 Rate sensitive liabilities: Savings and interest bearing deposits................. 15,166 - - - 15,167 Time deposits............... 14,830 4,659 4,949 4,618 1,586 Total rate sensitive liabilities............ 29,996 4,659 4,949 4,618 16,753 Period sensitivity gap........$ (154) (1,967) (3,358) 2,487 21,173 Cumulative sensitivity gap....$ (154) (2,121) (5,479) (2,992) 18,181 (1) The amortized cost is used for investment securities.
The Company includes only rate sensitive assets and liabilities in its sensitivity analysis. CAPITAL RESOURCES Capital provides a base for expansion of the asset portion of the balance sheet, which in turn provides the opportunity for increased profitability. Capital adequacy depends on such factors as quality and diversification of assets, current and historical earnings and liquidity. Primary capital of the Company consists of funds which are permanently committed to the Company, including: common stock, preferred stock, additional paid-in capital, retained earnings, and allowance for loan losses. For regulatory purposes primary capital is reduced by amounts representing intangible assets. Management is unaware of any trends, events or uncertainties that will have or that are reasonably likely to have a material effect on the Company's capital resources. Following are the Company's and UB's primary and equity capital to assets ratios for December 31, 1995 and 1994, respectively: 1995 1994 Company's primary capital to assets ratio 10.13% 9.37% Company's equity capital to assets ratio 9.54 8.89 UB's primary capital to assets ratio 10.07% 9.32% UB's equity capital to assets ratio 9.48 8.84 10 During 1989, regulatory agencies approved regulations to implement a risk-based capital framework that makes capital requirements more sensitive to the risk profiles of individual banking companies. These regulations define capital as either core capital (Tier 1) or supplementary capital (Tier 2). Core capital consists primarily of common stockholders' equity, while supplementary capital is comprised of preferred stock, certain debt instruments, and a portion of the allowance for loan losses. The required core capital is 4.00% and total risk-based capital is 8.00%. Because the Company has assets of less than $150 million, its capital requirements are computed on a bank-only basis. UB's core and total risk-based capital exceed regulatory guidelines at December 31, 1995 and 1994. 1995 1994 Tier 1 capital (core) 14.29% 13.05% Tier 2 capital (total risk-based) 15.28 14.11 EFFECT OF INFLATION The financial statements and related data presented in this report have been prepared in accordance with generally accepted accounting principles which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time. Changing prices, particularly during periods of high inflation rates, can have a significant impact on industries and business enterprises taken as a whole. However, the impact of inflation on financial institutions differs significantly from that of industrial or commercial companies. This is due to the fact that a major portion of a bank's balance sheet is comprised of monetary assets and liabilities versus a basically non-monetary balance sheet associated with industrial concerns. Even though inflation doesn't generally have a material impact on banks it can indirectly affect the interest rates and the underlying value of assets collateralizing certain earning assets, as well as non- interest income and expense categories. How well a bank is positioned to respond to changing interest rates and collateral values can only be assessed by an analysis of its asset and liability structure. Therefore, attention is directed to the rate sensitivity schedule, the maturity distribution of loans and securities, the loan concentrations data and the rate and volume variances analysis found elsewhere in this report. 11 REGULATORY MATTERS The Company was operating under a written agreement with the Federal Reserve Bank until March, 1994, at which time the agreement was terminated and the Company was released from the restrictions under the agreement. ACCOUNTING STANDARDS NOT YET ADOPTED The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The Company will be required to comply with this statement beginning January 1, 1996. The impact of this statement is not expected to have a material effect on the Company's consolidated financial statements. 12 UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 1995 1994 1993 (In thousands except per share amounts) Interest income: Interest and fees on loans..............$ 4,101 3,371 3,243 Interest on federal funds sold.......... 176 60 56 Interest on investment securities Taxable............................... 1,309 1,331 1,767 Nontaxable............................ 429 398 169 Total interest income............... 6,015 5,160 5,235 Interest expense: Interest on deposits (Note 7)........... 2,564 1,791 1,804 Interest on short-term borrowings....... 5 4 1 Interest on long-term debt.............. - 6 42 Total interest expense.............. 2,569 1,801 1,847 Net interest income................. 3,446 3,359 3,388 Provision for loan losses (Note 5)...... 279 90 236 Net interest income after provision for loan losses................... 3,167 3,269 3,152 Non-interest income: Service charges on deposits............. 790 748 675 Other service charges and fees, net..... 226 178 162 Securities gains........................ - 104 - Total non-interest income............. 1,016 1,030 837 Non-interest expense: Salaries and employee benefits.......... 1,911 1,739 1,567 Occupancy expense, net.................. 250 271 309 Other real estate owned, net............ (15) 92 66 Other (Note 9).......................... 1,009 1,104 1,126 Total non-interest expense............ 3,155 3,206 3,068 Income before income taxes and cumulative effect of change in accounting principle 1,028 1,093 921 Income tax expense (Note 10).............. 253 264 266 Income before cumulative effect of change in accounting principle............... 775 829 655 Cumulative effect of change in accounting principle (Note 10)................... - - 116 Net income..........................$ 775 829 771 Earnings per share: Income before cumulative effect of change in accounting principle..............$ 0.15 0.17 0.10 Cumulative effect of change in accounting principle................. - - 0.04 Net income.............................$ 0.15 0.17 0.14 Average outstanding common shares......... 2,532 2,616 2,644 See accompanying notes to consolidated financial statements.
13 UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1995 1994 (In thousands) ASSETS Cash and due from banks...............................$ 2,584 2,440 Federal funds sold.................................... 6,300 - Investment securities (Note 3)........................ 28,800 30,588 Loans (Notes 4 & 12).................................. 44,144 41,974 Unearned discounts.................................. (2) (14) Allowance for loan losses (Note 5).................. (538) (559) Loans, net........................................ 43,604 41,401 Property and equipment, net (Note 6).................. 3,880 4,051 Other real estate owned............................... 63 180 Accrued interest receivable........................... 589 612 Accounts receivable................................... 93 90 Other assets.......................................... 158 358 $ 86,071 79,720 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Interest bearing (Note 7)...........................$ 60,975 56,178 Non-interest bearing................................ 15,295 13,469 Total deposits................................... 76,270 69,647 Securities sold under repurchase agreement (Note 8)... - 1,500 Deferred income taxes (Note 10)....................... 1,209 1,199 Other liabilities..................................... 769 425 Total liabilities................................ 78,248 72,771 Commitments and contingencies (Note 13, 14 & 15)...... - - Stockholders' equity (Note 15): Preferred stock, 9% cumulative, nonvoting $30 par value, redeemable at the Company's option at par plus cumulative unpaid dividends. Cumulative unpaid preferred dividends amount to $4,018,410 or $27.68 per share at December 31, 1995. Authorized 150,000 shares; issued and outstanding 145,200 shares in 1995 and 1994. Liquidation preference of $8,374,410 and $7,982,370, respectively..................................... 4,356 4,356 Class B preferred stock, $1 par value. Authorized 500,000 shares; non issued or outstanding........ - - Common stock, $1 par value. Authorized 10,000,000 shares; issued 2,805,385 shares in 1995 and 1994 2,805 2,805 Additional paid-in capital......................... 7,358 7,358 Accumulated deficit................................ (5,540) (6,315) Net unrealized holding loss on investment securities available-for-sale, net of deferred taxes........ (59) (158) 8,920 8,046 Less cost of common stock held in treasury (273,148 shares in 1995 and 1994)......................... (1,097) (1,097) Net stockholders' equity....................... 7,823 6,949 $ 86,071 79,720 See accompanying notes to consolidated financial statements.
14 UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Years ended December 31, 1995 1994 1993 (In thousands) Preferred stock: Balance at beginning and end of year........$ 4,356 4,356 4,356 Common stock: Balance at beginning and end of year........ 2,805 2,805 2,805 Additional paid-in capital: Balance at beginning and end of year........ 7,358 7,358 7,358 Accumulated deficit: Balance at beginning of year................ (6,315) (7,144) (7,915) Net income.................................. 775 829 771 Balance at end of year...................... (5,540) (6,315) (7,144) Net unrealized holding gain (loss) on investment securities available-for-sale: (Note 3) Balance at beginning of year................ (158) - - Implementation of change in accounting for for investment securities, net of deferred taxes............................ - 170 - Change in net unrealized holding gain (loss) on investment securities available-for-sale, net of deferred taxes..................... 99 (328) - Balance at end of year...................... (59) (158) - Treasury stock: Balance at beginning of year................ (1,097) (1,086) (1,086) Purchase stock.............................. - (11) - Balance at end of year...................... (1,097) (1,097) (1,086) Net stockholders' equity................$ 7,823 6,949 6,289 See accompanying notes to consolidated financial statements.
15 UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Years ended December 31, 1995 1994 1993 (In thousands) Cash flows from operating activities: Net income......................................$ 775 829 771 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.................................. 416 378 368 Provision for loan losses..................... 279 90 236 Provision for market decline-other real estate owned....................................... 9 85 63 Amortization of intangibles included in other assets...................................... 147 147 147 Amortization of premium, accretion of discounts, net......................................... 83 113 175 Gain on sale of investment securities......... - (104) - Loss on sale of property and equipment........ - - 49 Increase (decrease) in interest payable....... 310 29 (89) Decrease (increase) in interest receivable.... 23 (75) (66) Decrease in other real estate owned, accounts receivable and other assets................. 158 387 155 (Decrease) increase in deferred income taxes.. (55) (15) 40 Increase (decrease) in other liabilities...... 34 (17) (56) Total adjustments............................ 1,404 1,018 1,022 Net cash provided by operating activities......... 2,179 1,847 1,793 Cash flows from investing activities: Proceeds from sales of maturities of investment securities.................................... 1,775 3,239 - Proceeds from principal payments on mortgage- backed securities............................. 1,789 3,192 9,861 Purchase of investment securities............... (1,695) (7,496) (6,478) Net increase in loans........................... (2,482) (4,982) (2,941) Capital expenditures............................ (245) (319) (336) Proceeds from sale of property and equipment.... - - 296 Net cash (used in) provided by investing activities (858) (6,366) 402 Cash flows from financing activities: Net increase (decrease) in interest bearing and non-interest bearing demand deposits, savings, and certificates of deposit................... 6,623 3,553 (4,208) (Decrease) increase in securities sold under repurchase agreement.......................... (1,500) 1,500 - Repayment of long-term debt..................... - (450) (450) Purchase of treasury stock...................... - (11) - Net cash provided by (used in) financing activities 5,123 4,592 (4,658) Net increase (decrease) in cash and cash equivalents..................................... 6,444 73 (2,463) Cash and cash equivalents at beginning of year.... 2,440 2,367 4,830 Cash and cash equivalents at end of year..........$ 8,884 2,440 2,367 Supplemental disclosure of noncash investing activities: Change in unrealized holding loss on investment securities available-for-sale, net of deferred taxes of $65,000 in 1995 and $104,000 in 1994.$ 99 158 - See accompanying notes to consolidated financial statements.
16 UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 1. Summary of Significant Accounting Policies United Oklahoma Bankshares, Inc. (the "Company") and its subsidiaries provide a full range of banking services to individual and corporate customers principally in eastern Oklahoma county. The Company is subject to competition from other financial service companies and financial institutions. The Company is subject to regulations of the Federal Reserve Bank. United Bank (UB) is subject to regulations of the Federal Deposit Insurance Corporation and the Oklahoma State Banking Department. The Company and UB undergo periodic examinations by those regulatory authorities. Principles of Consolidation and Basis of Presentation The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions relate principally to the determination of the allowance for loan losses and the valuation of assets acquired in foreclosure. The accounting policies for these items and other significant accounting policies are presented below. The consolidated financial statements include the accounts of the Company and its subsidiaries, all wholly owned, after elimination of all significant intercompany accounts and transactions. Cash and Short Term Investments UB is required to maintain average reserve balances with the Federal Reserve Bank. The average amount of those reserve balances for the year ended December 31, l995, was approximately $516,000. In making short-term investment decisions, the Company considers its board-approved policies, liquidity needs, potential rate of return, and credit risk. For purposes of evaluating credit risk, the stability of the financial institutions and other entities conducting business with the Company is periodically reviewed. The Company had concentrations of credit risk with one financial institution in the form of a correspondent bank account and federal funds sold in the amount of $1,912,000 and $1,483,000 at December 31, 1995 and 1994, 17 respectively. If the financial institution failed to completely perform under the terms of the financial instruments, the exposure for credit loss would be the amount of the financial instruments less the amount covered by the Federal Deposit Insurance Corporation (FDIC) of $100,000. For the purposes of the Statements of Cash Flows, the Company considers overnight Federal funds sold to be cash equivalents. Cash paid for interest was approximately $2,259,000, $1,772,000, and $1,937,000 in 1995, 1994, and 1993, respectively. Investment Securities The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," at January 1, 1994. Under SFAS No. 115, the Company has classified its debt and marketable equity securities in one of three categories: trading, available-for -sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. No investment securities within the portfolio are considered trading. Held-to-maturity securities are those securities for which the Company has the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale. Available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses, net of related tax effect, on available-for-sale securities are not included in earnings and are reported as a separate component of stockholders' equity until realized. A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using a method that approximates the interest method. Dividend and interest income are recognized when earned. Realized gains and losses for securities classified as available-for-sale and held-to-maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold. Loans and Other Real Estate Owned Loans are generally carried at amounts advanced less payments received. Interest income is recorded on discounted loans by use of a method which produces a reasonable approximation of constant yield on the outstanding principal. Interest income is accrued as earned on non-discounted loans except for loans designated as non-accrual. 18 Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full, timely collection of interest or principal, or when a loan becomes contractually past due by ninety days or more with respect to principal or interest. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current period income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Accruals are resumed on loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loan is estimated to be fully collectible as to both principal and interest. The allowance for loan losses is maintained at levels which management considers necessary to reflect the credit risks of the loan portfolio. For financial reporting purposes, the provision to be charged as an operating expense is based on an assessment of specific problem loans, local economic conditions, past due loan loss experience, and such other factors which in management's judgment deserve current recognition necessary to maintain the allowance at an adequate level. Effective January 1, 1995, the Company adopted the provisions of Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," and Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures." The Company's nonperforming loan policies which address non-accrual loans, meet the definition set forth for "impaired loans" in SFAS No. 114. The Company had no significant impaired loans outstanding in 1995 under the guidelines of SFAS No. 114. Under these standards, the 1995 allowance for loan losses related to loans that have been identified as impaired is based on discounted cash flows using the loan's effective interest rate, or the fair value of the collateral for collateral-dependent loans, or observable market price of the impaired loan. Loans are considered impaired when it is probable that the Company will not collect all amounts due in accordance with the contractual terms of the loan. The Company recognizes interest income on impaired loans using the same method as that used for non-accrual loans. Real estate and other assets acquired through foreclosure are recorded at fair value as of that date. Fair value is based on independent appraisals and other relevant factors. This value becomes the asset's new "cost." After foreclosure, these assets are carried at the lower of "cost" or fair value minus estimated costs to sell. Any subsequent write-downs are charged against non- interest expense. Operating expenses of such properties, 19 net of related income, and gains and losses on their disposition are included in non-interest income and expense. While management uses all available information to recognize losses on loans and other real estate owned, future losses may become necessary based on changes in economic conditions, particularly in the local economies in which the Company operates. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses and carrying values of assets acquired in foreclosure. Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is charged to operating expense and is computed by use of the straight- line method over the estimated useful lives of the depreciable assets. The estimated useful lives are 2 to 40 years for buildings and improvements, and 3 to 20 years for furniture, fixtures and equipment. Maintenance and repairs are charged directly to expense as incurred while improvements are capitalized. When assets are retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed from the respective accounts and the resulting gain or loss is reflected in operations. Income Taxes The Company files a consolidated income tax return with its subsidiaries. The Company's subsidiaries are charged for income taxes attributable to their taxable income and reimbursed for any tax benefit resulting from their tax losses and tax credits utilized by the Company to reduce consolidated taxable income. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," and reported the cumulative effect of that change in the method of accounting for income taxes in the 1993 consolidated statement of operations. SFAS No. 109 requires a change from the deferred method of accounting for income taxes to the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in 20 which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on 8deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Computation of Earnings Per Share Earnings per share are based on the weighted average number of shares of common stock outstanding during the year after considering cumulative preferred stock dividends. Cumulative preferred stock dividends accrue annually at approximately $392,000. 2. Fair Value of Financial Instruments Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Statements," requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company's financial instruments. December 31, 1995 (In thousands) Carrying Estimated value fair value Financial Assets Cash and due from banks.........$ 2,584 2,584 Federal funds sold.............. 6,300 6,300 Investment securities........... 28,800 28,830 Loans........................... 43,604 43,520 Financial Liabilities Non-interest-bearing deposits... 15,295 15,295 Interest-bearing deposits....... 60,975 61,107 Off-balance sheet financial instruments Commitments to extend credit.... - - Standby letters of credit....... - -
Cash and Due From Banks and Federal Funds Sold 3 The carrying amounts of these financial instruments approximate fair value due to the short maturity of these financial instruments. Investment Securities The fair value of investment securities, except certain obligations of states and municipalities, is estimated based on bid prices published in financial newspapers or bid quotations received from securities dealers. The fair value of certain obligations of state and municipalities are not readily available through market sources other than dealer quotations, so fair value estimates are based on quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instruments being valued. 21 Loans Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, real estate, installment and credit card loans. Each loan category is further segmented into fixed and adjustable rate interest terms. The fair value of loans, except credit card loans, is calculated by discounting scheduled cash flows through the estimated maturity using rates of notes of similar terms and type. The fair value of credit card loans are assumed to be at carrying value. Liabilities Under SFAS No. 107, the fair value of deposits with no stated maturity, such as demand deposits, savings, and money market accounts is equal to the amount payable on demand as of December 31, 1995. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered of similar remaining maturities. The fair value estimates above do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. Commitments to Extend Credit and Standby Letters of Credit The fair value of commitments to extend credit and standby letters of credit is considered to be equal to carrying value. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of particular financial instruments. Because no market exists for the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off- balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered 22 financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. 3. Investment Securities As discussed in note 1, the Company adopted SFAS No. 115 as of January 1, 1994. The net effect of this change in accounting principle of $170,063, net of deferred taxes, was determined as of January 1, 1994, and is reported as a separate component of stockholders' equity. In December 1995, the Company transferred investments held-to-maturity with a carrying value totaling $21,128,000 to available-for-sale. The securities were transferred at fair value of approximately $21,037,000, resulting in an unrealized loss of $91,000. The transfer occurred as allowed by the Financial Accounting Standards Board's provision that allowed entities to reassess by December 31, 1995, the appropriateness of the classifications of all investment securities. Management believes there has been no permanent impairment in the value of the Company's investment securities. Investment securities at December 31, 1995 and 1994, consist of (in thousands): 1995 1994 Available-for-sale, at fair value........$ 28,009 7,137 Held-to-maturity, at amortized cost...... 791 23,451 $ 28,800 30,588
23 The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available- for-sale and held-to-maturity securities by major security type at December 31, 1995, were as follows (in thousands): Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available-for-sale: U. S. Treasury securities.......$ 2,094 20 - 2,114 Securities of other U. S. government agencies........... 747 3 (7) 743 State and municipals............ 9,074 43 (71) 9,046 11,915 66 (78) 11,903 Mortgage-backed securities...... 16,192 106 (192) 16,106 $28,107 172 (270) 28,009 Held-to-Maturity: State and municipals............$ 791 30 - 821
The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available- for-sale and held-to-maturity securities by major security type at December 31, 1994 were as follows (in thousands): Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available-for-sale: U. S. Treasury securities......$ 829 - (11) 818 Mortgage-backed securities..... 6,570 - (251) 6,319 $ 7,399 - (262) 7,137 Held-to-maturity: U. S. Treasury securities......$ 1,264 - (78) 1,186 Securities of other U. S. government agencies.......... 747 - (62) 685 States and municipals.......... 9,972 3 (545) 9,430 11,983 3 (685) 11,301 Mortgage-backed securities..... 11,468 6 (490) 10,984 $23,451 9 (1,175) 22,285
24 The amortized cost and fair value of investment securities at December 31, 1995, by contractual maturity, in thousands, are shown below. Expected maturities will differ from contractual maturities because issuers of investment securities may have the right to call or prepay obligations. Amortized Cost Fair Value Available-for-sale: Due in one year or less...................$ 1,495 1,503 Due after one year through five years..... 7,588 7,594 Due after five years through ten years.... 2,612 2,585 Due after ten years....................... 220 221 11,915 11,903 Mortgage-backed securities................ 16,192 16,106 $ 28,107 28,009 Held-to-maturity: Due after one year through five years......$ 78 82 Due after five years through ten years..... 713 739 791 821 $ 28,898 28,830
There were no sales of investment securities in 1995 or 1993. Proceeds from sales of available-for-sale securities during 1994 were approximately $3,239,000 and the gross realized gains were approximately $104,000. None of the investment securities were sold for losses. Investment securities having a carrying value of approximately $12,104,000 and $14,656,000 at December 31, 1995 and 1994, respectively, were pledged to secure public funds on deposit and for other purposes required by law. 4. Loans A summary of the Company's loans is as follows: 1995 1994 (In thousands) Commercial, financial and agricultural....$ 11,450 11,917 Real estate-construction.................. 2,785 1,556 Real estate-mortgage...................... 19,662 19,708 Credit card receivables................... 522 625 Installment............................... 9,725 8,168 Total loans.........................$ 44,144 41,974
25 At December 31, 1995 and 1994, loans on which interest had ceased to be accrued approximated $184,000 and $178,000, respectively. Had the accrual status of these been normal, approximately $21,000 and $47,000 of additional interest would have been earned in l995 and l994, respectively. At December 31, 1995 and 1994, there were no commitments to lend additional funds to borrowers with loans on which the accrual of interest has been discontinued. At December 31, l995 and l994, loans to executive officers, directors, their immediate families and companies in which they own a significant interest aggregated approximately $80,000 and $151,000, respectively. During 1995 approximately $31,000 of loan advances were made, and repayments totaled $102,000. In management's opinion, such transactions were made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk. The Company grants commercial, real estate, and consumer loans to customers principally in the state of Oklahoma. Although the Company has a diversified loan portfolio, the majority of its customers consist of individual and corporate borrowers in eastern Oklahoma county. Contractual maturity and rate sensitivity distribution of loans at December 31, 1995, is as follows: One year One to Over five or less five years years Total (In thousands) Commercial, financial and agricultural............$ 8,533 2,570 347 11,450 Real estate-construction.. 2,139 141 505 2,785 Real estate-mortgage...... 2,795 13,519 3,348 19,662 Credit card receivables... 522 - - 522 Installment............... 1,263 8,036 426 9,725 Total................$ 15,252 24,266 4,626 44,144 Interest sensitivity of loans by contractual maturity: Predetermined rate...... 7,134 19,611 1,565 28,310 Variable rate........... 8,118 4,655 3,061 15,834 Total...............$ 15,252 24,266 4,626 44,144
26 5. Allowance for Loan Losses A summary of transactions in the allowance for loan losses is as follows: Years ended December 31, 1995 1994 1993 (In thousands) Balance at beginning of year........$ 559 437 469 Provisions charged to expense....... 279 90 236 Recoveries.......................... 50 123 19 Loans charged off................... (350) (91) (287) Balance at end of year..............$ 538 559 437
6. Property and Equipment Property and equipment is summarized as follows: 1995 1994 (In thousands) Land.........................................$ 751 751 Bank buildings and equipment................. 5,681 5,601 Furniture and equipment...................... 861 713 7,293 7,065 Less accumulated depreciation................ 3,413 3,014 $ 3,880 4,051
7. Deposits Included in interest bearing deposits are certificates of deposit in amounts of $100,000 or more. These certificates and their remaining maturities at December 31, 1995 and 1994 are as follows: 1995 1994 (In thousands) 3 months or less...............................$ 5,418 8,555 Over 3 months through 6 months................. 1,294 1,446 Over 6 months through 12 months................ 750 1,314 Over 12 months................................. 100 198 $ 7,562 11,513
The interest expense on these deposits approximated $530,000 and $375,000 for the years ended December 31, 1995 and 1994, respectively. 27 8. Securities Sold Under Repurchase Agreement In 1994, the Company sold a mortgage-backed security under a repurchase agreement. The agreement was for less than 1 month. In 1995, the security was repurchased for the same amount as it was sold for plus interest at 6.1%. 9. Other Non-interest Expense Years ended December 31, 1995 1994 1993 (In thousands) Outside service expenses...............$ 157 181 161 Advertising and business development... 153 156 94 Postage................................ 73 65 57 Stationery, printing and supplies...... 96 83 71 Collection expense..................... 30 56 107 Data processing expense................ 113 112 124 Other.................................. 387 451 512 $1,009 1,104 1,126
10.Income taxes As discussed in note 1, the Company adopted SFAS No. 109 as of January 1, 1993. The cumulative effect of this change in accounting for income taxes of $116,000 was determined as of January 1, 1993 and is reported separately in the consolidated statement of operations for the year ended December 31, 1993. The components of income taxes are as follows: Years ended December 31, 1995 1994 1993 (In thousands) Current: Federal..............................$ 225 228 208 State................................ 54 - - 279 228 208 Deferred: Federal.............................. (22) (14) 16 State................................ (4) 50 42 (26) 36 58 Income tax expense.....................$ 253 264 266
(PAGE> 28 The Company's tax provision on income before provision for income taxes differs from a normal 34% tax rate as shown below: Years ended December 31, 1995 1994 1993 (In thousands) Income before income taxes multiplied by 34% in 1995, 1994 and 1993............$ 350 372 313 Tax exempt interest...................... (132) (158) (83) State income taxes....................... 33 33 28 Other, net............................... 2 17 8 $ 253 264 266
Cash paid for income taxes was approximately $212,000, $291,000 and $95,000 in 1995, 1994 and 1993, respectively. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994, are presented below: 1995 1994 (In thousands) Deferred tax assets: Other real estate, principally due to charge-offs..$ 6 30 Alternative minimum tax credit carryforward........ 100 97 Other.............................................. 22 - Total gross deferred tax assets before net unrealized holding loss on investment securities available-for-sale............................... 128 127 Deferred tax asset on net unrealized holding loss on investment securities available-for-sale...... 39 104 Total gross deferred tax assets................... 167 231 Deferred tax liabilities: Property and equipment, principally due to difference in depreciation................................... 540 549 Loans, principally due to allowance for loan losses 836 828 Purchased core deposit intangible, principally due to difference in amortization..................... - 53 Total gross deferred tax liabilities............... 1,376 1,430 Net deferred tax liability.........................$1,209 1,199
A valuation allowance for deferred tax assets was not required as of December 31, 1995, 1994, or 1993 due to management's expectation of the future reversal of deferred tax liabilities. At December 31, 1995, the Company has an alternative minimum tax credit carryforward of approximately $100,000 which is available to reduce future federal regular income taxes, if any, over an indefinite period. 11.Employee Benefit Plans The Company sponsors a defined contribution 401(k) plan covering substantially all employees under which employees' contributions may be partially matched by the Company. The Company's contributions in 1995, 1994, and 1993 were $53,000, $50,000, and $41,000, respectively. 12.Relationships with Certain Stockholders and Affiliates The Company and its subsidiaries, through common owners and/or directors, are considered to be related parties for financial reporting purposes with one other bank holding company and its bank. UB sold loan participations to this bank totaling $97,000 and $169,000 at December 31, 1995 and 1994, respectively. 13.Financial Instruments With Off-Balance Sheet Credit Risk The Company is a party to financial instruments with off- balance sheet credit risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company's exposure to credit loss in the event of nonperformance by one of the other parties to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Financial instruments whose contract amounts represent credit risk at December 31 are as follows: 1995 1994 Committments to extend credit....$6,496,000 5,341,000 Standby letters of credit........ 588,000 948,000 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the 30 total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of the collateral obtained if deemed necessary by the Company upon extension of credit is based on management's credit evaluation of the customer. Collateral held varies but may include certificates of deposit, accounts receivable, inventory, property and equipment, real estate, livestock, and income producing properties. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements. All of the standby letters of credit at December 31, 1995, are short-term guarantees; they expire prior to December 31, 1996. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. When deemed necessary, the Company may hold a variety of collateral to support these commitments similar to the types of collateral held for commitments to extend credit. 14.Commitments and Contingencies The Company, through its United Del City Tower subsidiary, leases excess office space. Future minimum rentals for non-cancelable office leases, with initial or remaining terms of one year or more consisted of the following at December 31, 1995: 1996..............................$ 378,000 1997............................. 285,000 1998............................ 85,000 1999................................ 14,000 15. Regulatory Capital Requirements United Bank is subject to certain regulatory capital regulations which require the maintenance of certain levels of capital as a percentage of risk-adjusted assets. These regulations define capital as either core capital (Tier 1) or supplementary capital (Tier 2). Core capital consists primarily of common shareholders' equity, while supplementary capital is comprised of preferred stock, certain debt instruments, and a portion of the allowance for loan losses. At December 31, 1995, the required core capital is 4.00% and total risk-based capital is 8.00%. UB's core and total risk-based capital exceed regulatory guidelines at December 31, 1995 and 1994, respectively, and are as follows: 1995 1994 Tier 1 capital (core) 14.29% 13.05% Tier 2 capital (total risk-based) 15.28 14.11 31 The payment of dividends by the subsidiaries is restricted by regulatory capital requirements. At December 31, 1995, approximately $1,328,000 is available from United Bank's retained earnings for distribution as a dividend to the Company in 1996 without regulatory approval. 16. Parent Company Financial Statements Following are the condensed financial statements for United Oklahoma Bankshares, Inc. (Parent Company only): Statement of Operations Years ended December 31, 1995 1994 1993 (In thousands) Income: Dividend from UB............................$ - 275 450 Interest.................................... 40 8 8 Total..................................... 40 283 458 Expenses: Interest.................................... - 6 42 Other....................................... 20 20 72 Total..................................... 20 26 114 Income before income taxes, undistributed income of subsidiaries and cumulative effect of change in accounting principle.............. 20 257 344 Income tax (expense) benefit.................. (8) 7 40 Income before undistributed income of subsidiaries and cumulative effect of change in accounting principle.............. 12 264 384 Equity in undistributed income of subsidiaries 763 565 271 Income before cumulative effect of change in accounting principle........................ 775 829 655 Cumulatve effect of change in accounting principle................................... - - 116 Net income..............................$ 775 829 771
32 Balance Sheets December 31, 1995 1994 (In thousands) Assets Cash and cash equivalents............................$ 163 68 Investment in UB at equity........................... 7,770 6,908 Other assets......................................... 61 60 $ 7,994 7,036 Liabilities and Stockholders' Equity Accrued expenses and other liabilities, principally deferred income taxes..............................$ 171 87 Total liabilities.............................. 171 87 Preferred stock...................................... 4,356 4,356 Common stock......................................... 2,805 2,805 Additional paid-in capital........................... 7,358 7,358 Accumulated deficit.................................. (5,540) (6,315) Net unrealized holding loss on investment securities available-for-sale held by UB, net of deferred taxes (59) (158) 8,920 8,046 Less cost of common stock held in treasury........... (1,097) (1,097) Net stockholders' equity........................ 7,823 6,949 $ 7,994 7,036
33 Statements of Cash Flows Years ended December 31, 1995 1994 1993 (In thousands) Cash flows from operating activities: Net income.................................$ 775 829 771 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiaries............................ (763) (565) (271) Loss on sale of land..................... - - 49 Cumulative effect of change in accounting principle............................... - - (116) Increase in other assets................. (1) - - Increase (decrease) in other liabilities. 84 (94) 151 Total adjustments................... (680) (659) (187) Net cash provided by operating activities.... 95 170 584 Cash flows from investing activities: Proceeds from sale of land................. - - 93 Cash flows from financing activities: Purchase of treasury stock................. - (11) - Repayment of long-term debt................ - (450) (450) Net cash used in financing................... 95 (291) 227 Cash and cash equivalents at beginning of year 68 359 132 Cash and cash equivalents at end of year.....$ 163 68 359
34 INDEPENDENT AUDITORS' REPORT UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES The Board of Directors and Stockholders United Oklahoma Bankshares, Inc.: We have audited the accompanying consolidated balance sheets of United Oklahoma Bankshares, Inc. and subsidiaries (the Company) as of December 31, l995 and l994, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, l995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Oklahoma Bankshares, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in note 1 to the consolidated financial statements, the Company adopted the provisions of Statements of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures," in 1995, No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1994 and No. 109, "Accounting for Income Taxes," in 1993. KPMG Peat Marwick LLP Oklahoma City, Oklahoma February 16, 1996 35 SELECTED STATISTICAL INFORMATION UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES CONDENSED AVERAGE BALANCE SHEETS Years ended December 31, 1995 1994 (In thousands) Average Assets: Cash and due from banks.................$ 2,630 3.21% $ 2,605 3.33% Federal funds sold...................... 3,022 3.68 1,599 2.04 Investment securities................... 30,437 37.11 31,869 40.76 Loans................................... 41,444 50.53 37,263 47.66 Less: Allowance for loans losses....... (568) (0.69) (534) (0.68) Property and equipment, net............. 3,966 4.84 4,047 5.18 Accrued interest and other assets....... 1,093 1.32 1,334 1.71 $82,024 100.00% $ 78,183 100.00% Average Liabilites and Stockholders' Equity: Deposits: Demand: Individuals, partnerships and corporations.....................$14,287 17.42 $ 13,422 17.17% Money market checking................. 9,129 11.13 9,772 12.50 Savings and money market savings...... 17,424 21.24 18,962 24.25 Time.................................. 31,864 38.85 27,425 35.08 Total deposits...................... 72,704 88.64 69,581 89.00 Short-term borrowings................... 89 0.11 79 0.10 Long-term debt.......................... - 0.00 97 0.12 Accrued interest and other liabilites... 1,846 2.25 1,771 2.27 Total liabilites.................... 74,639 91.00 71,528 91.49 Stockholders' equity: Preferred stock....................... 4,356 5.31 4,356 5.57 Common stock.......................... 2,805 3.42 2,805 3.59 Additional paid-in capital............ 7,358 8.97 7,358 9.41 Accumulated deficit................... (5,926) (7.22) (6,779) (8.67) Net unrealized holding gain (loss) on investment securities available-for- sale, net of deferred taxes......... (111) (0.14) 3 0.00 8,482 10.34 7,743 9.90 Less cost of common stock held in treasury............................ (1,097) (1.34) (1,088) (1.39) Net stockholders' equity.......... 7,385 9.00 6,655 8.51 $82,024 100.00% $ 78,183 100.00%
36 SELECTED STATISTICAL INFORMATION UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES ANALYSIS OF NET INTEREST INCOME Years ended December 31, 1995 1994 Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate Earning assets: Investment securities(1): Taxable..................$ 20,587 1,309 6.36% $ 22,387 1,331 5.95% Nontaxable............... 10,036 429 4.27 9,477 398 4.20 30,623 1,738 5.68 31,864 1,729 5.43 Federal funds sold......... 3,022 176 5.82 1,599 60 3.75 Loans, net of unearned discount(2).............. 41,444 4,101 9.90 37,263 3,371 9.05 Total earning assets/ total interest income..$ 75,089 6,015 8.01% $ 70,726 5,160 7.30% Interest bearing liabilities: Interest bearing deposits..$ 58,417 2,564 4.39% $ 56,159 1,791 3.19% Short-term borrowings...... 89 5 5.62 79 4 5.06 Long-term debt............. - - 0.00 97 6 6.19 Total interest bearing liabilites/total interest expense......$ 58,506 2,569 4.39% $ 56,335 1,801 3.20% Differentials/net interest income...................$ 16,583 3,446 3.62% $ 14,391 3,359 4.10% Net interest income as reported/interest earning assets 4.59% 4.75% (1) The amortized cost is used in the average balance calculation. (2) Loans classified as non-accruing are included in the average balance calculation.
37 SELECTED STATISTICAL INFORMATION UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES LOAN CONCENTRATIONS December 31, 1995 Percent Amount of total (In thousands) Commercial, financial and agricultural..............$ 11,450 25.94% Real estate-construction............................ 2,785 6.31 Real estate-mortgage................................ 19,662 44.54 Credit card receivables............................. 522 1.18 Installment......................................... 9,725 22.03 Total loans....................................$ 44,144 100.00% Participations purchased amounting to $163,000 at December 31, 1995 are included in commercial. In addition, it should be noted that certain commercial loans may be secured by real estate.
38 SELECTED STATISTICAL INFORMATION UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES Years ended December 31, 1995 1994 (In thousands) Balance at beginning of year......................$ 559 437 Charge-offs: Commercial, financial and agricultural.......... (176) (82) Installment..................................... (174) (9) Total charge-offs..................... (350) (91) Recoveries: Commercial, financial and agricultural.......... 42 109 Installment..................................... 8 14 Total recoveries...................... 50 123 Net (charge-offs) recoveries...................... (300) 32 Additions charged to operating expense............ 279 90 Balance at end of year............................$ 538 559 Total average loans, net of unearned discount.....$ 41,444 37,263 Ratio of net charge-offs (recoveries) to total average loans, net of unearned discount......... 0.72% (0.09)% Total loans, net of unearned discount.............$ 44,142 41,960 Ratio of allowance for loan losses to total loans, net of unearned discount........................ 1.22% 1.33%
39 SELECTED STATISTICAL INFORMATION UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES ALLOCATION OF ALLOWANCE FOR LOAN LOSSES Years ended December 31, 1995 1994 % of Loans % of Loans in each in each Amount category Amount category (In thousands) Commercial, financial and agricultural $ 187 25.94% $ 122 28.40% Real estate-construction.............. - 6.31 1 3.71 Real estate-mortgage.................. 5 44.54 13 46.95 Credit card receivables and installment - 23.21 - 20.94 Total.............................. 192 100.00% 136 100.00% Unallocated........................... 346 423 Total allowance.................... $ 538 $ 559
The basis of allocation of the allowance for loan losses is a review of individual loans, based on the bank's credit review and grading system, for possible exposure to loss, excet for installment loans whose allocation is based primarily on historical net charge-off experience. The unallocated portion of the allowance provides for unforeseen credit risk exposure. The specific allocation of the allowance, therefore, represents only a numerical evaluation of identified risks in the portfolio at a point in time and does not necessarily represent anticipated charge-offs. 40 SELECTED STATISTICAL INFORMATION UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES MATURITY DISTRIBUTION OF INVESTMENT SECURITIES Within After 1 year After 5 years 1 year but within but within After 5 years 10 years 10 years Total Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield December 31, 1995 (1) (In thousands) U. S. Treasury....$ 1,003 6.70% $ 1,091 5.50% $- - % $ - -% $ 2,094 6.08% Other U. S. government agencies.... - - 747 5.75 - - - - 747 5.75 Mortgage- backed...... - - - - - - - - 16,192 6.50 State & municipals.. 492 3.46 5,828 4.23 3,324 4.58 221 4.13 9,865 4.31 Total amount /yield......$ 1,495 5.63% $ 7,666 4.56% $3,324 4.58% $221 4.13% $28,898 5.70% Average maturity (in years)* 14.70 December 31, 1994 (1) U. S. Treasury....$ - - % $ 2,093 6.09% $ - - % $ - - % $ 2,093 6.09% Other U. S. government agencies.... - - 747 5.75 - - - - 747 5.75 Mortgage- backed...... - - - - - - - - 18,038 6.40 State & municipals.. 527 2.91 4,774 4.07 4,335 4.50 336 4.37 9,972 4.21 Total amount /yield $ 527 2.91% $ 7,614 4.81% $4,335 4.50% $ 336 4.37%$30,850 5.65% Average maturity (in years)* 15.58
*Includes contractual maturities of mortgage-backed securities which may vary significantly from actual cash flows due to prepayments. (1) The amortized cost of investment securities are represented in this table. DISTRIBUTION OF AVERAGE DEPOSITS Years ended December 31, 1995 1994 Average Average Amount Rate Amount Rate (In thousands) Demand: Individuals, partnerships and corporations.$ 14,287 - % $ 13,422 - % NOW and money market checking................ 9,129 2.57 9,772 2.49 Savings and money market savings............. 17,424 3.03 18,962 2.83 Time of less than $100,000................... 22,213 5.72 16,853 3.75 Time of $100,000 or more..................... 9,651 5.49 10,572 3.55 TOTAL...................................$ 72,704 3.53% $ 69,581 2.57%
41 SELECTED STATISTICAL INFORMATION UNITED OKLAHOMA BANKSHARES, INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS The following table summarizes information with respect to certain short-term borrowings for the years indicated. Amount Outstanding Maximum Average Amount End of Year Amount Outstanding Average Outstanding Average Interest at any Interest Amount Rate Month End Amount Rate (In thousands) 1995 Federal funds purchased and securities sold..........$ - - $ - $ 89 5.58% 1994 Federal funds purchased and securities sold..........$ 1,500 6.13% $ 1,500 $ 79 4.26% 1995 Federal funds purchased and securities sold..........$ - - % $ - $ 18 2.93%
RETURN ON EQUITY AND ASSETS Years ended December 31, 1995 1994 1993 Ratio of net income to: Average earning assets....................... 1.03% 1.18 1.09% Average total assets......................... 0.94 1.06 0.98 Average stockholders' equity.................10.49 12.46 13.09 Ratio of average stockholders' equity to: Average total assets......................... 9.00 8.51 7.47 Average total loans..........................17.82 17.86 16.58 Dividend payment ratio......................... N/A N/A N/A
42 DIRECTORS AND EXECUTIVE OFFICERS UNITED OKLAHOMA BANKSHARES, INC. George N. Cook, 50. Chairman of the Board. Mr. Cook also serves as President and Chief Executive Officer of American National Bank and Director of Ameribank Corporation. Mr. Cook is also a director of United Bank and its subsidiaries and the First National Bank of Medicine Lodge, Kansas. D. Wesley Schubert, 43. President of the Company. Mr. Schubert is a Certified Public Accountant. Mr. Schubert has been the Vice Chairman of American National Bank and Vice President of Ameribank Corporation since 1991. Mr. Schubert also serves as a director of United Bank and director of First National Bank of Medicine Lodge, Kansas. J. Michael Adcock, 47. Secretary of the Company. Mr. Adcock also serves as a member of the Board of Directors of Grant Geophysical Inc., Ameribank Corporation, American National Bank, First National Bank of Medicine Lodge, Kansas, and United Bank and its subsidiaries. Mr. Adcock is in the private practice of law. June A. O'Steen, 59. Executive Vice President of UB, and Principal Accountant for the Company since June, 1989. Prior to that time Ms. O'Steen was Senior Vice President and General Auditor of UB, since 1984, and the Company, since 1980. 43 EXECUTIVE COMPENSATION The executive compensation disclosures required by Regulation S-K will be included in the annual meeting proxy statement to be filed not later than 120 days after the end of the fiscal year and are hereby incorporated by reference. 44 SECURITY OWNERSHIP BY MANAGEMENT The following table sets forth the beneficial ownership by management of the Company's common and 9% preferred stock, which are the only classes of capital stock of the Company outstanding, as of December 31, 1995, together with the percentage of the outstanding shares of each class so owned by each director, and by all officers and directors of the Company and its subsidiaries as a group. Unless otherwise indicated, each person has sole voting and investment power with respect to the indicated shares. The preferred stock does not carry voting rights. Name of Beneficial Ownership Percent of Class Beneficial Owner Common 9% Preferred Common 9% Preferred George N. Cook, Jr.(1) 247,435 17,309 9.36% 11.92% D. Wesley Schubert(1) 247,435 17,309 9.36% 11.92% J. Michael Adcock(1) 247,435 17,309 9.36% 11.92% All officers and directors as a group 792,521 51,927 29.97% 35.76% ________________________ (1)Ameribank Corporation and Messrs. George N. Cook, D. Wesley Schubert and J. Michael Adcock have entered into a Stock Purchase Agreement, dated November 3, 1995, which provides that Ameribank will sell to each of Messrs. Cook, Schubert and Adcock 16.33% of the total number of shares of Common Stock and 9% Cumulative Non-Voting Preferred Stock which Ameribank owns or acquires in future purchases. The terms provide that the purchase price for such stock shall be the price at which Ameribank acquired the shares plus interest, accrued from the date of acquisition of such stock to the closing of the purchase contemplated by the agreement, at a rate equal to the base rate of interest of Chase Manhattan Bank, N.A. from time to time. The consummation of the transactions are subject to (1) approval from the Board of Governors of the Federal Reserve System; (2) the entering into by the parties of a Shareholders' Agreement restricting the future transfer of the stock by Messrs. Adcock, Schubert and Cook; and (3) the entering into by the parties of a Voting Trust Agreement appointing Ameribank as trustee to vote the shares of Common Stock. 45 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows the name and address of each shareholder who beneficially owns more than 5% of the Company's common stock, the number of shares beneficially owned by each, and the percentage of outstanding common stock so owned as of December 31, 1995. Unless otherwise indicated, each person has sole voting and investment power with respect to the shares beneficially owned. Title Amount and Nature of Percent of Class Name and Address Beneficial Ownership of Class(1) Common Ameribank Corporation 1,490,412(2) 58.86% 201 N Broadway Shawnee, OK 74801 Common Sooner Southwest Bankshares, Inc. 106,796(3) 4.22% P. O. Box 1020 Bristow, OK 74010 Common Illinois Refining Company 58,096(3) 2.29% P. O. Box 1020 Bristow, OK 74010 Common Robert B. Krumme 5,000(3) 0.02% P. O. Box 1020 Bristow, OK 74010 ________________________ (1)All percentages were calculated after excluding shares held in treasury stock. (2)All of Ameribank Corporation's shares are pledged on a Security Agreement as collateral for the repayment of note held by a financial institution. (3)On July 6, 1995, the Company was notified that Sooner Southwest Bankshares, Inc., Illinois Refining Company and Robert B. Krumme filed a Schedule 13D reporting the ownership as a group of the shares listed above. 46 CERTAIN TRANSACTIONS In the ordinary course of business, the Bank has had banking transactions with some of the directors, executive officers and controlling shareholders of the Company. All such loans are and have been made in compliance with applicable laws, in the ordinary course of business and on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with unaffiliated persons. In the opinion of management, none of such loans involved more than the normal risk of collectibility or presented any other unfavorable features. interest in the transaction or loan. All transactions entered into between the Company or the Bank and any officer, director or controlling shareholder of the Company are made on terms no less favorable to the Company or the Bank than could be obtained from unaffiliated parties. It is the policy of the Company that transactions with and loans to officers and directors be approved by a majority of the directors of the Company other than those with an interest in the transaction or loan. Messrs. Cook, Schubert, Adcock and Bodard are members of Enterprise Technology Group, L.L.C. ("ETG") which provides computer hardware and software technology solutions and consulting services to banks as well as other private and governmental entities. ETG has provided services to the banking subsidiary of the Company relating to processing technology. The subsidiary banks of Ameribank and the Company have decided to implement a plan to upgrade their processing techniques, and ETG will advise both subsidiary banks and consult with them regarding such implementation. The fees payable by the subsidiary banks of Ameribank and the Company to ETG will be approximately $75,000 each. Such fees will not exceed the prices charged other customers of ETG and are competitive with those charged by other companies in the business of providing such services. 47 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED OKLAHOMA BANKSHARES, INC. By:/s/ George N. Cook, Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ George N. Cook Chairman of the Board ) /s/ June A. O'Steen Principal Accountant )March 18, 1996 /s/ D. Wesley Schubert President /s/ J. Michael Adcock Secretary 2 *By: /s/ George N. Cook * As attorney-in-fact pursuant to Power of attorney filed as exhibit 25 48 FORM 10-K CROSS REFERENCE SECTION Page Part I Item 1 Business..............................................2 Item 2 Properties............................................2 Item 3 Legal Proceedings.....................................2 Item 4 Submission of Matters to a Vote of Security Holders (during the fourth quarter of 1995) * Part II Item 5 Market for the Company's Common Stock and Related Stockholders Matters...........................2 Item 6 Selected Financial Data...............................3 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations............4-10 Item 8 Financial Statements and Supplementary Data...........11-37 Item 9 Disagreements on Accounting and Financial Disclosure.. * Part III Item 10 Directors and Executive Officers and Corporations.....38 Item 11 Executive Compensation................................39 Item 12 Security Ownership of Certain Beneficial Owners and Management....................................40,41 Item 13 Certain Relationships and Related Transactions........42 Part IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1) Financial Statements: o Independent Auditors' Report...............30 o Consolidated Statements of Operations- years ended December 31, 1995, 1994, 1993..11 o Consolidated Balance Sheets December 31, 1995 and 1994.................12 o Consolidated Statements of Changes in Stockholders' Equity-years ended December 31, 1995, 1994, and 1993...................13 o Consolidated Statements of Cash Flows-years ended December 31, 1995, 1994 and 1993.....14 o Notes to Consolidated Financial Statements- years ended December 31, 1995, 1994, 1993..15-29 (2) Financial Statement Schedules: o All schedules normally required by Form 10-K are omitted since they are either not applicable or the required information is shown in the consolidated financial statements or the notes thereto. 49 Part IV Item 14 Exhibit: (continued) (a) (3) Exhibits: Exhibit No. PAGE 3 Articles of incorporation and bylaws (filed as ** Exhibit 3(a) and 3(b) to Company's registration Statement No. 2-85935, "Registration Statement") 4 Instruments defining the rights of security holders, including indentures (filed as Exhibit 3(a) to Company's registration Statement) ** 10 Material Contracts: (a) United Oklahoma Bankshares, Inc. Incentive ** Stock Option Plan of 1982 (filed as Exhibit 10(a) to Company's Registration Statement) (b) Forms of United Oklahoma Bankshares, Inc. ** Incentive Stock Option Agreements (filed as Exhibit 10(b) to Company's registration Statement) (c) United Oklahoma Bankshares, Inc. Employee ** Stock Ownership Plan and Trust of 1982 (filed as Exhibit 10(c) to Company's Registration Statement) (d) Stockholders' resolutions establising United Oklahoma Bankshares Employees' Stock Purchase Plan of 1983 (filed as Exhibit 10(d) to Company's registration Statement) (e) Form of agreements relating to stock purchased under the United Oklahoma Bankshares ** Employees' Stock Purchase Plan of 1983 (filed as Exhibit 10(e) to Company's Registration Statement) (f) Letter Agreement, dated April 26, 1982, between United Oklahoma Bankshares, Inc. and Fort Worth National Bank, as amended (filed as Exhibit 10(1) to Company's Registration Statement) (g) Promissory Note and Security Agreement ** dated April 29, 1982, between United Oklahoma Bankshares, Inc. Employee Stock Ownership Plan and Trust of 1982 and The Fort Worth National Bank (filed as Exhibit 10 (m) to Company's Registration Statement) 50 Part IV Item 14 Exhibits: (continued) (a) (3) Exhibits: Exhibit No. 10 Material contracts: (h) Deposit Insurance Transfers and ** Asset Purchase Agreement, dated May 11, 1984, between United Oklahoma Bankshares, Inc., as agent for United Del City Bank, and the Federal Deposit Insurance Corporation (filed as Exhibit to Form 8-K dated May 25, 1984) (i) Stock Purchase Agreement between United Del City Bank and United Oklahoma Bank (filed as Exhibit 10 ** to Form 10-K dated December 31, 1986) (j) Accounts Receivable Purchase Agreement between United Del City Bank and United Oklahoma Bank (filed as Exhibit to Form 10-K dated December 31, 1986) ** 22 Subsidiaries of Company 47 25 Power of Attorney 48,49 (b) Reports on Form 8-K 50 * Not Applicable ** Included in previous filings 51 SUBSIDIARIES The Company has two wholly owned subsidiaries, United Bank and United Loan and Thrift Company, Inc. The following corporations are wholly owned subsidiaries of United Bank: United Del City Tower Inc. 4600 Corporation 52 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That each of the undersigned do hereby constitute and appoint George N. Cook his true and lawful attorney-in-fact and agent with full power of substitution, for him and in his name, place and stead, and in any and all capacities to execute and sign Annual Report on Form 10-K for the 1995 fiscal year of United Oklahoma Bankshares, Inc. and to file the same, with all exhibits thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. DATED THIS 18th day of March, 1996. George N. Cook, Director D. Wesley Schubert, Director J. Michael Adcock, Director STATE OF OKLAHOMA ) ) ss. COUNTY OF OKLAHOMA) The foregoing instrument was acknowledged before me this 18th day of March, 1996, by George N. Cook. Kathleen A. Rudd My commission expires: 6-6-98 Notary Public 53 STATE OF OKLAHOMA ) ) ss. COUNTY OF OKLAHOMA) The foregoing instrument was acknowledged before me this 18th day of March, 1996, by D. Wesley Schubert. Kathleen A. Rudd My commission expires: 6-6-98 Notary Public STATE OF OKLAHOMA ) ) ss. COUNTY OF OKLAHOMA) The foregoing instrument was acknowledged before me this 18th day of March, 1996, by J. Michael Adcock. Kathleen A. Rudd My commission expires: 6-6-98 Notary Public STATE OF OKLAHOMA ) ) ss. COUNTY OF OKLAHOMA) 54 REPORTS ON FORM 8-K The Company did not file any reports on Form 8-K during the fourth quarter of 1995. 55 EX-27 2
9 12-MOS DEC-31-1995 DEC-31-1995 2,584 60,975 6,300 0 28,009 791 821 44,144 (538) 86,071 76,270 0 1,978 0 2,805 0 4,356 662 86,071 4,101 1,738 176 6,015 2,564 2,569 3,446 279 0 3,155 1,028 0 0 0 775 0.15 0 0 184 0 0 0 559 (350) 50 538 0 0 346
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