-----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, V1F4h6/hgSicgDTAvVJ+4JWlZHcqkSkX56j1oe0UXxbcHcNyjpWYZzpNpsGnoA4V uGTQIMcvjW2/pnTOT70Sjw== 0000950124-96-004889.txt : 19961113 0000950124-96-004889.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950124-96-004889 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED BANCORP INC /OH/ CENTRAL INDEX KEY: 0000731653 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 341405357 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16540 FILM NUMBER: 96659082 BUSINESS ADDRESS: STREET 1: 4TH AT HICKORY STREET STREET 2: P O BOX 10 CITY: MARTINS FERRY STATE: OH ZIP: 43935 BUSINESS PHONE: 6146330445 MAIL ADDRESS: STREET 1: 4TH AT HICKORY STREET STREET 2: P O BOX 10 CITY: MARTINS FERRY STATE: OH ZIP: 43935 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A ---------------------------------------- Commission File Number: 0-16540 ------- UNITED BANCORP, INC. -------------------- (Exact name of registrant as specified in its charter.) OHIO 34-1405357 ---- ---------- (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
FOURTH AT HICKORY STREET, MARTINS FERRY, OHIO 43935 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) (614) 633-0445 -------------- (Registrant's telephone number, including area code) NOT APPLICABLE -------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ----- Indicate the number of shares outstanding of the issuer's classes of common stock as of the latest practicable date. COMMON STOCK, $1.00 PAR VALUE 2,033,385 SHARES AS OF OCTOBER 30, 1996 2 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets . . . September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Income . . . Three and Nine Months Ended September 30, 1996 and 1995 . . . . 4 Condensed Consolidated Statements of Cash Flows . . . Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 - 13 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 - 19 PART II OTHER INFORMATION ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ITEM 3. Default Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2 3 UNITED BANCORP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) FORM 10-Q (IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ ASSETS Cash and due from banks $ 6,604 $ 6,382 Federal funds sold 4,210 600 -------- -------- TOTAL CASH AND DUE FROM BANKS 10,814 6,982 Investment securities available for sale 24,806 27,108 Investment securities held to maturity (Estimated fair value of $30,985 at 09/30/96 and $29,986 at 12/31/95) 30,718 29,363 LOANS Commercial loans 10,481 10,802 Commercial real estate loans 40,224 35,510 Real estate loans 34,129 33,294 Installment loans 42,645 43,077 -------- -------- TOTAL LOANS 127,479 122,683 Allowance for loan losses (1,999) (1,775) -------- -------- Net loans 125,480 120,908 Premises and equipment, net 5,264 4,901 Accrued interest receivable and other assets 2,416 1,938 -------- -------- TOTAL ASSETS $199,498 $191,200 ======== ======== LIABILITIES DEPOSITS Noninterest bearing $ 13,246 $ 12,617 Interest bearing 157,953 153,987 -------- -------- TOTAL DEPOSITS 171,199 166,604 Short-term borrowings 6,783 4,569 US Treasury note account 746 64 Accrued expenses and other liabilities 1,346 1,511 -------- -------- TOTAL BORROWINGS AND OTHER LIABILITIES 8,875 6,144 TOTAL LIABILITIES 180,074 172,748 -------- -------- SHAREHOLDERS' EQUITY Common stock:($1 Par Value) 10,000,000 shares authorized; issued and outstanding: 2,032,588 shares at 9/30/96 and 1,847,942 at 12/31/95 2,033 1,848 Additional-paid-in-capital 11,713 9,359 Retained earnings 5,691 6,946 Unrealized gain/(loss) on securities available for sale, net of tax (13) 299 -------- -------- TOTAL SHAREHOLDERS' EQUITY 19,424 18,452 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $199,498 $191,200 ======== ========
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 3 4 UNITED BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FORM 10-Q (IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ---------------------- ---------------------- INTEREST INCOME Interest and fees on loans $ 2,898 $ 2,737 $ 8,491 $ 7,703 Interest on investment securities Taxable 538 688 1,703 2,142 Tax exempt 274 242 786 726 Interest on federal funds sold 46 18 127 67 Dividends 18 0 29 0 ---------- ---------- ---------- ---------- TOTAL INTEREST INCOME 3,774 3,685 11,136 10,638 ---------- ---------- ---------- ---------- INTEREST EXPENSE Deposits 1,631 1,581 4,743 4,663 Other 76 95 243 216 ---------- ---------- ---------- ---------- TOTAL INTEREST EXPENSE 1,707 1,676 4,986 4,879 ---------- ---------- ---------- ---------- NET INTEREST INCOME 2,067 2,009 6,150 5,759 Provision for loan losses (111) (125) (344) (294) ---------- ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,956 1,884 5,806 5,465 ---------- ---------- ---------- ---------- NONINTEREST INCOME Service charges on deposit accounts 152 137 453 397 Investment security gains, net - - 27 12 Other 96 73 285 278 ---------- ---------- ---------- ---------- TOTAL NONINTEREST INCOME 248 210 765 687 ---------- ---------- ---------- ---------- NONINTEREST EXPENSE Salaries and employee benefits 662 658 2,005 1,953 Premises, furniture and equipment expense 221 48 613 447 Other operating expense 475 522 1,384 1,515 ---------- ---------- ---------- ---------- TOTAL NONINTEREST EXPENSE 1,358 1,228 4,002 3,915 ---------- ---------- ---------- ---------- INCOME BEFORE TAXES 846 866 2,569 2,237 Provision for income taxes (214) (229) (632) (566) ---------- ---------- ---------- ---------- NET INCOME $ 632 $ 637 $ 1,937 $ 1,671 ========== ========== ========== ========== PER SHARE DATA: Earnings per common share $ 0.31 $ 0.31 $ 0.95 $ 0.82 ========== ========== ========== ========== Average number of shares outstanding 2,032,588 2,032,588 2,032,588 2,032,588 Dividends per common share $0.11 $0.10 $0.32 $0.28
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 4 5 UNITED BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FORM 10-Q (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 --------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,937 $ 1,671 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization 331 272 Amortization of intangibles 69 66 Provision for loan losses 344 294 Deferred taxes (39) 91 Federal Home Loan Bank stock dividend (29) Gain on sale/call of investment securities (27) (12) Amortization of investment securities, net 8 60 Net changes in: Accrued interest receivable and other assets (521) 19 Accrued expenses and other liabillities 43 (143) ------- ------- Net cash from Operating Activities 2,116 2,318 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Investment securities available for sale Proceeds from sales of investment securities 3,623 500 Proceeds from maturities/calls of investment securities 10,000 Purchase of investment securities (11,697) (2,144) Investment securities held to maturity Proceeds from maturities/calls of investment securities 3,435 6,224 Purchase of investment securities (4,839) (791) Net change in loans (4,940) (13,562) Property and equipment expenditures (707) (114) ------- ------- NET CASH FROM INVESTING ACTIVITIES (5,125) (9,887) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in deposits 4,595 3,565 Net change in short-term obligations 2,896 3,871 Cash dividends (650) (573) ------- ------- NET CASH FROM FINANCING ACTIVITIES 6,841 6,863 ------- ------- NET CHANGE IN CASH AND CASH EQUIVALENTS 3,832 (706) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,982 6,730 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,814 $ 6,024 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION CASH PAID DURING THE PERIOD FOR: Interest expense $ 5,018 $ 4,919 Income taxes 710 535 NONCASH ACTIVITIES Transfers from Loans to Real Estate Owned $ 24 $ -
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 5 6 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed in the preparation of the accompanying condensed consolidated financial statements. NATURE OF OPERATIONS The accompanying condensed consolidated financial statements include the accounts of United Bancorp, Inc. (COMPANY) and its wholly owned subsidiaries, The Citizens Savings Bank of Martins Ferry, Ohio (CITIZENS-MARTINS FERRY) and The Citizens-State Bank of Strasburg, Strasburg, Ohio (CITIZENS-STRASBURG). For purposes of consolidation, all material intercompany balances and transactions have been eliminated. The results of operations for the period ended September 30, 1996 are not necessarily indicative of the operating results for the full year of 1996. These interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly the consolidated financial position of the COMPANY at September 30, 1996 and its results of operations and statements of cash flows for the periods presented. These adjustments are of a normal and recurring nature. The accompanying condensed consolidated financial statements do not purport to contain all the necessary financial disclosures required by generally accepted accounting principles that might otherwise be necessary in the circumstances and should be read in conjunction with the 1995 United Bancorp, Inc. consolidated financial statements and related notes thereto included in its Annual Report To Shareholders for the year ended December 31, 1995. The COMPANY is engaged in the business of commercial and retail banking in Belmont, Tuscarawas and Carroll Counties and the surrounding localities in north eastern and eastern Ohio. The subsidiary Banks provide a broad range of banking and financial services, which include accepting demand, savings and time deposits and granting commercial, real estate and consumer loans. CITIZENS-MARTINS FERRY conducts its business through its main office in Martins Ferry, Ohio and two branches located in Bridgeport and Colerain, Ohio. CITIZENS-STRASBURG conducts its business through its main office in Strasburg, Ohio and its four branches located in Dover, New Philadelphia, Sherrodsville and Dellroy, Ohio. INVESTMENT SECURITIES The COMPANY classifies securities into held-to-maturity, available-for-sale and trading categories. Held-to-maturity securities are those which the COMPANY has the positive intent and ability to hold to maturity, and are reported at amortized cost. Available-for-sale securities are those which the COMPANY may decide to sell if needed for liquidity, asset/liability management, or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains or losses included as a separate component of shareholders' equity, net of tax. Trading securities are bought principally for sale in the near term and are reported at fair value with unrealized gains or losses included in earnings. The COMPANY had no trading securities through September 30, 1996. Realized gains or losses are determined based on the amortized cost of the specific security sold. Interest and dividend income, adjusted by amortization of purchase premium or discount is included in earnings. 6 7 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q ALLOWANCE FOR LOAN LOSSES The allowance for loan losses represents that amount which management and the Board of Directors estimates is adequate to provide for inherent losses in its loan portfolio. The allowance balance and the annual provision charged to expense are reviewed by management and the Board of Directors monthly, using a risk code model that considers the borrowers past due experience, economic conditions and various other circumstances that are subject to change over time. The COMPANY adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting By Creditors for Impairment Of A Loan" and SFAS No. 118, "Accounting By Creditors For Impairment Of A Loan - Income Recognition And Disclosures" at January 1, 1995. Under SFAS No. 114, loans considered to be impaired are reduced to the present value of expected future cash flows or to the fair value of collateral, by allocating a portion of the allowance for loan losses to such loans. If these allocations cause the allowance for loan losses to increase, such increases are reported as bad debt expense. The effect of adopting these standards had no impact on the COMPANY'S allowance for loan losses at January 1, 1995. Management analyzes commercial and commercial real estate loans on an individual basis and classifies a loan as impaired when an analysis of the borrower's operating results and financial condition indicates that underlying cash flows are not adequate to meet its debt service requirement. Often this is associated with a delay or shortfall in payments of 30 days or more. Smaller-balance homogeneous loans are evaluated for impairment in total. Such loans include residential first mortgage loans secured by one-to-four family residences, residential construction loans, consumer automobile, boat and home equity loans. Loans are generally moved to nonaccrual status when they are 90 days or more past due. These loans are often also considered impaired. Impaired loans, or portions thereof, are charged-off when deemed uncollectible. The nature of disclosures for impaired loans is considered generally comparable to prior nonaccrual loans and nonperforming and past due asset disclosures. INTEREST AND FEES ON LOANS Interest income on loans is accrued over the term of the loans based on the principal amount outstanding. The accrual of interest is discontinued and adjusted back to the date of nonpayment when, in management's opinion, the collection of all or a portion of the loan principal has become doubtful. Loan fees and direct costs associated with originating or acquiring loans are deferred and recognized over the life of the related loan as an adjustment of the yield. The net amount of fees and costs deferred is reported in the condensed consolidated balance sheets as part of loans. Under SFAS No. 114, as amended by SFAS No. 118, the carrying values of impaired loans are periodically adjusted to reflect cash payments, revised estimates of future cash flows and increases in the present value of expected cash flows due to the passage of time. Cash payments representing interest income are reported as such and other cash payments are reported as reductions in carrying value. Increases or decreases in carrying value due to changes in estimates of future payments or the passage of time are reported as reductions or increases in bad debt expense. 7 8 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation. Premises and related components are depreciated using the straight-line method with lives ranging primarily from 20 to 50 years. Furniture and equipment are depreciated using the straight-line method, with lives ranging primarily from 5 to 15 years. Maintenance and repairs are expensed and major improvements are capitalized. At the time of sale or disposition of an asset, the applicable cost and accumulated depreciation amounts are removed from the accounting records. OTHER REAL ESTATE Other real estate is included in other assets at fair value, less estimated costs to sell. Any reduction from the carrying value of the related loan to estimated fair value at the time the property is acquired is accounted for as a loan charge-off. Any subsequent reductions in the estimated fair value are reflected in a valuation allowance through a charge to other real estate expense. Expenses incurred to carry other real estate are charged to operations as incurred. There was $23,998 in other real estate held at September 30, 1996 and $0 at December 31, 1995. INCOME TAXES The COMPANY follows the liability method in accounting for income taxes. The liability method provides that deferred tax assets and liabilities are recorded based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. EARNINGS AND DIVIDENDS PER COMMON SHARE Earnings per common share have been computed based on the weighted average number of shares outstanding during the periods presented. On April 17, 1996, a 10% share dividend was approved for all shareholders of record on May 20, 1996 and distributed on June 20, 1996. This stock dividend was recorded by transferring the fair market value of the shares issued from Retained Earnings to Common Stock and Additional-Paid-In-Capital. All per share data has been retroactively adjusted for the stock dividend. The weighted average number of shares used in the computation of earnings per share was 2,032,588 for all periods presented. Stock options outstanding do not presently have a dilutive effect of greater than 3% on earnings per common share and are therefore not considered for purposes of the earnings per share disclosure. STATEMENT OF CASH FLOWS For purposes of the Statements of Cash Flows, the COMPANY considers "cash and cash equivalents" to include cash, deposits with financial institutions and Federal funds sold. The COMPANY reports net cash flows for customer loan transactions, deposit transactions, securities sold under agreements to repurchase and other borrowed funds. INDUSTRY SEGMENT INFORMATION The single industry in which the COMPANY is involved through the activities of its two subsidiary Banks is commercial community banking serving the financial needs of local commercial, individual and public entity customers. Revenue received by the COMPANY is derived primarily from upstream dividends paid by the two subsidiary banks with disbursement to shareholders through UNITED BANCORP, INC. dividends. Subsidiary income is generated from activities specific to the commercial banking industry. 8 9 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q 2. INVESTMENT SECURITIES The amortized cost and estimated fair values of investment securities are as follows:
SEPTEMBER 30, 1996 AMORTIZED GROSS GROSS ESTIMATED COST UNREALIZED GAIN UNREALIZED LOSS MARKET VALUE ----------- ---------------- --------------- ------------ INVESTMENT SECURITIES AVAILABLE FOR SALE US Treasury obligations $3,715,419 $51,170 $3,766,589 US Agency obligations 20,031,952 56,604 ($140,497) 19,948,059 State and Municipal obligations 456,588 13,457 470,045 Other investments 620,850 620,850 ----------- -------- -------- ----------- TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE $24,824,809 $121,231 ($140,497) $24,805,543 =========== ======== ======== =========== INVESTMENT SECURITIES HELD TO MATURITY US Agency obligations $10,187,612 ($168,334) $10,019,278 State and Municipal obligations 20,530,737 $447,495 (12,135) 20,966,097 ----------- -------- -------- ----------- TOTAL INVESTMENT SECURITIES HELD TO MATURITY $30,718,349 $447,495 ($180,469) $30,985,375 =========== ======== ======== ===========
DECEMBER 31, 1995 AMORTIZED GROSS GROSS ESTIMATED COST UNREALIZED GAIN UNREALIZED LOSS MARKET VALUE ----------- ---------------- --------------- ------------ INVESTMENT SECURITIES AVAILABLE FOR SALE US Treasury obligations $6,937,596 $171,964 ($4,061) $7,105,499 US Agency obligations 18,789,021 270,386 (1,779) 19,057,628 State and Municipal obligations 336,419 16,822 353,241 Other investments 591,900 591,900 ----------- -------- -------- ----------- TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE $26,654,936 $459,172 ($5,840) $27,108,268 =========== ======== ======== =========== INVESTMENT SECURITIES HELD TO MATURITY US Agency obligations $12,397,123 $8,533 ($84,591) $12,321,065 State and Municipal obligations 16,965,114 749,374 (49,641) 17,664,847 ----------- -------- -------- ----------- TOTAL INVESTMENT SECURITIES HELD TO MATURITY $29,362,237 $757,907 ($134,232) $29,985,912 =========== ======== ======== ===========
Total proceeds from sales of investment securities classified as available for sale for the three and nine month periods ended September 30, 1996 were $607,797 and $3,623,266 with $5,416 and $31,936 realized as gross gains and $5,416 and $0, respectively realized as gross losses on those sales. Total proceeds from sales of investment securities classified as available for sale for the three and nine months ended September 30, 1995 were $0 and $500,312, with gross gains of $0 and $11,778, respectively realized on those sales. The amortized cost and estimated fair value of debt securities at September 30, 1996 by contractual maturity are shown in the following table. Actual maturities may differ from contractual maturities because issuers may have the right to call or repay obligations with or without call or prepayment penalties. The average interest rates are based on coupon rates adjusted for amortization and accretion. Yields on investment securities available for sale have been computed on the basis of amortized cost. Yields on tax-exempt securities have been computed on a tax equivalent basis. 9 10 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q
INVESTMENT SECURITIES AVAILABLE FOR SALE AMORTIZED ESTIMATED WEIGHTED AVERAGE SEPTEMBER 30, 1996 COST FAIR VALUE AVERAGE MATURITY YIELD ---------------------------------------- ----------- ----------- ---------------------- ------- US TREASURY OBLIGATIONS 6 - 12 Months $ 498,515 $ 503,281 6.0 Mos. 7.50% 1 - 2 Years 1,737,618 1,754,246 1 Yr 11.2 Mos. 6.86% 2 - 5 Years 1,479,286 1,509,062 2 Yrs 6.3 Mos. 7.26% ----------- ----------- ---------------------- ------- Total 3,715,419 3,766,589 1 Yr 11.7 Mos. 7.10% ----------- ----------- ---------------------- ------- US AGENCY OBLIGATIONS 3 - 6 Months 1,505,120 1,512,031 5.5 Mos. 6.64% 6 - 12 Months 999,900 1,001,250 8.7 Mos. 6.17% 1 - 2 Years 3,425,800 3,474,143 1 Yr 4.3 Mos. 7.17% 2 - 5 Years 11,098,696 11,027,290 4 Yrs 4.0 Mos. 6.89% 5 - 10 Years 3,002,436 2,933,345 9 Yrs 1.8 Mos. 7.25% ----------- ----------- ---------------------- ------- Total 20,031,952 19,948,059 3 Yrs 11.1 Mos. 6.93% ----------- ----------- ---------------------- ------- STATE AND MUNICIPAL OBLIGATIONS 5 - 10 Years 336,588 347,849 8 Yrs 2.3 Mos. 8.37% Over 10 Years 120,000 122,196 11 Yrs 2.0 Mos. 8.33% ----------- ----------- ---------------------- ------- Total 456,588 470,045 8 Yrs 11.6 Mos. 8.36% ----------- ----------- ---------------------- ------- OTHER INVESTMENTS Equity securities 620,850 620,850 ----------- ----------- ---------------------- ------- TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE $24,824,809 $24,805,543 3 YRS 7.5 MOS. 6.98% =========== =========== ====================== =======
INVESTMENT SECURITIES HELD TO MATURITY AMORTIZED ESTIMATED WEIGHTED AVERAGE SEPTEMBER 30, 1996 COST FAIR VALUE AVERAGE MATURITY YIELD -------------------------------------- ----------- ----------- ---------------------- ------- US AGENCY OBLIGATIONS 0 - 3 Months $ 500,000 $ 499,219 1.5 Mos. 4.62% 3 - 6 Months 500,000 498,125 4.3 Mos. 4.78% 6 - 12 Months 89,285 89,285 6.7 Mos. 6.10% 1 - 2 Years 5,499,999 5,412,376 1 Yr 7.0 Mos. 5.25% 2 - 5 Years 3,598,328 3,520,273 2 Yrs 9.9 Mos. 5.64% ----------- ----------- ---------------------- ------- Total 10,187,612 10,019,278 1 Yr 10.6 Mos. 5.34% ----------- ----------- ---------------------- ------- STATE AND MUNICIPAL OBLIGATIONS 0 - 3 Months 775,685 776,339 2.2 Mos. 6.62% 6 - 12 Months 290,621 291,943 8.4 Mos. 6.72% 1 - 2 Years 447,728 444,658 1 Yr 3.8 Mos 6.54% 2 - 5 Years 4,777,073 4,943,727 3 Yrs 7.3 Mos 8.59% 5 - 10 Years 13,752,643 14,027,338 6 Yrs 7.9 Mos. 7.98% Over 10 Years 486,987 482,092 10 Yrs 3.9 Mos. 7.69% ----------- ----------- ---------------------- ------- Total 20,530,737 20,966,097 5 Yrs 7.0 Mos. 8.02% ----------- ----------- ---------------------- ------- TOTAL INVESTMENT SECURITIES HELD TO MATURITY $30,718,349 $30,985,375 4 YRS 4.3 MOS. 7.13% =========== =========== ====================== =======
10 11 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q 2. INVESTMENT SECURITIES (CONTINUED) Securities with a par value of approximately $23,445,000 at September 30, 1996 and $22,485,000 at December 31, 1995 were pledged to secure public deposits, repurchase agreements and other liabilities as required or permitted by law. 3. LOANS The COMPANY has, and expects to have in the future, banking transactions with directors and officers of the COMPANY and its subsidiaries. Loans to such borrowers, their immediate families, affiliated corporations, and other entities in which they own more than a 10% voting interest are summarized below: Aggregate balance - December 31, 1995 $2,972,508 New loans 668,857 Repayments (1,541,565) ---------- Aggregate balance - September 30, 1996 $2,099,800 ==========
4. ALLOWANCE FOR LOAN LOSSES The allowance in the allowance for loan losses is summarized as follows:
1996 1995 ---------- ---------- Balance 01/01/96 and 01/01/95 $1,775,383 $1,437,734 Provision charged to operating expense 344,400 465,000 Loans charged-off (160,514) (151,200) Recoveries 39,337 23,849 ---------- ---------- Balance 09/30/96 and 12/31/95 $1,998,606 $1,775,383 ========== ==========
There were no loans at September 30, 1996 and December 31, 1995 for which impairment was required to be evaluated on an individual , loan by loan basis. The average outstanding balance of impaired loans for the nine months ended September 30, 1996 and September 30, 1995 was $0 and $212,000, respectively. There was no interest recognized on a cash received basis on impaired loans for the nine months ended September 30, 1996. Interest recognized on a cash basis on impaired loans was $9,000 for the nine months ended September 30, 1995. Loans past due 90 days or more were not significant at September 30, 1996. 5. PREMISES AND EQUIPMENT Premises and equipment, at cost, and accumulated depreciation and amortization as of September 30, 1996 and December 31, 1995 are as follows:
1996 1995 ---------- ---------- Buildings and land $5,297,993 $5,302,750 Furniture and equipment 2,621,001 2,224,331 Computer software 626,774 385,587 ---------- ---------- Total 8,545,768 7,912,668 Accumulated depreciation and amortization 3,281,565 3,011,431 ---------- ---------- PREMISES AND EQUIPMENT, NET $5,264,203 $4,901,237 ========== ==========
11 12 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q 6. COMMITMENTS AND CONTINGENCIES The COMPANY'S subsidiaries are parties to financial instruments with off-balance sheet risk in the normal course of business, to meet the financing needs of their customers. These financial instruments include lines of credit and commitments to make loans. The COMPANY'S exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The COMPANY follows the same credit policy to make such commitments as is followed for those loans recorded in the financial statements.
SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------- Commitments to extend credit $10,987,000 $11,833,000 Standby letters of credit 156,000 286,000
Since many commitments to make loans expire without being used, the amount does not necessarily represent future cash commitments. The COMPANY does not anticipate any losses as result of these commitments. In addition, 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. Collateral obtained upon the exercise of the commitment is determined using the COMPANY'S evaluation of the borrower, and may include business assets, real estate and other items. The COMPANY on an ongoing basis, is a defendant in legal actions arising from normal business activities. Management believes that those actions are without merit or that the ultimate liability, if any, resulting from them will not materially affect the COMPANY'S financial statements. At September 30, 1996 and December 31, 1995, the COMPANY was required to have $656,000 and $694,000, respectively, of cash on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve requirements. These balances do not earn interest. 7. CONCENTRATION OF CREDIT RISK The Banks grant commercial, commercial real estate, real estate and installment loans to customers mainly in Belmont, Tuscarawas and Carroll Counties and the surrounding localities. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, commercial real estate and residential real estate. At September 30, 1996 and December 31, 1995, total commercial and commercial real estate loans made up 39.8% and 37.8%, respectively of the loan portfolio, with 30.9% and 28.4% of these loans secured by commercial and residential real estate and business assets in the Columbus, Ohio area. Installment loans account for 33.5% and 35.1% of the loan portfolio and are secured by consumer assets including automobiles which account for 86.0% and 76.5%, respectively of the installment loan portfolio. Real estate loans comprise 26.8% and 27.1% of the loan portfolio as of September 30, 1996 and December 31, 1995, respectively and primarily include first mortgage loans on residential properties and home equity lines of credit. Included in cash and due from banks and Federal funds sold as of September 30, 1996 and December 31, 1995 is $6,680,503 and $2,313,146, respectively on deposit with Mellon Bank, NA, Pittsburgh, Pennsylvania. 12 13 UNITED BANKCORP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FORM 10-Q 8. BENEFIT PLANS The COMPANY adopted a nonqualified stock option plan on November 21, 1995, ratified by shareholders on April 17, 1996. Options granted under this plan shall not exceed 5% of the total number of shares of Common Stock outstanding at the date of grant. The option purchase price shall be determined by a committee, but shall be no less than 100% of the fair market value of the shares on the date of grant. Generally, no stock option will be exercisable after the expiration of ten years from the date it is granted. The options become exercisable in whole at the end of nine years and three months except to the extent certain performance goals are achieved, thereby allowing the options to be exercised in whole or in part in five years. As of September 30, 1996, the COMPANY has granted 63,500 in options to buy shares of common stock at an option price of $13.58 per share adjusted for the 10% stock dividend distributed June 20, 1996. In October 1995, the FASB issued SFAS No. 123, "Accounting For Stock-Based Compensation." SFAS No. 123 encourages, but does not require, entities to use a "fair value based method" to account for stock-based compensation plans. If the fair value accounting encouraged by SFAS No. 123 is not adopted, entities must still disclose the pro forma effect on net income and on earnings per share had the accounting method been adopted. Fair value of a stock option is to be estimated using an option-pricing model, such as Black-Scholes, that considers: exercise price, expected life of the option, current price of the stock, expected price volatility, expected dividends on the stock, and the risk-free interest rate. Once estimated, the fair value of an option is not later changed. This statement is effective for fiscal years beginning after December 15, 1995. The COMPANY will not adopt the fair value based method to account for the stock option plan, but will disclose the pro forma effect on net income and on earnings per share had the accounting method been adopted in the December 31, 1996 financial statements. 9. DIVIDEND RESTRICTION Dividends paid by the subsidiary banks are the primary source of funds available to the COMPANY for payment of dividends to shareholders and for other working capital needs. Applicable state statutes and regulations impose restrictions on the amount of dividends that may be declared by the COMPANY. Those restrictions generally limit dividends to the current and prior two years earnings, (as defined), totaling $4,263,000 as of September 30, 1996. In addition to these restrictions, as a practical matter, dividend payments cannot reduce regulatory capital levels below minimum regulatory guidelines. These restrictions would not limit the COMPANY'S ability to pay normal dividends. 13 14 UNITED BANCORP, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FORM 10-Q In the following pages, Management presents an analysis of UNITED BANCORP, INC.'S financial condition at September 30, 1996 compared to December 31, 1995 and results of operations for the three and nine month periods ended September 30, 1996 compared to the same three and nine month periods ended September 30, 1995. This discussion is designed to provide shareholders with a more comprehensive review of the operating results and financial position than could be obtained from an examination of the financial statements alone. This analysis should be read in conjunction with the financial statements and related footnotes and the selected financial data included elsewhere in this report. UNITED BANCORP, INC. is a multi-bank holding company located in Martins Ferry, Ohio. The COMPANY originally became incorporated as a one bank holding company in July of 1983, through the acquisition of 100% of the voting stock of The Citizens Savings Bank of Martins Ferry, Ohio As a shell holding company, the COMPANY is headquartered at the main office location of The Citizens Savings Bank at 4th at Hickory Street, Martins Ferry, Ohio. The COMPANY became a multi-bank holding company in December of 1986, through the purchase of 100% of the voting stock of The Citizens-State Bank of Strasburg, Strasburg, Ohio. UNITED BANCORP, INC.'S common stock has been traded on The Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the trading symbol of UBCP since February of 1993. The markets served by both Bank subsidiaries are rich in tradition, culture and heritage. CITIZENS-MARTINS FERRY meets the commercial banking needs of residents, businesses and industry of the eastern reaches of the upper Ohio Valley. This area is experiencing a renaissance through diversification of its economy. Industry is modernizing while new centers of technology and retail complexes are strengthening the economic base. CITIZENS-STRASBURG serves the market area of northeastern Ohio, including the Dover and New Philadelphia market areas and portions of the Akron-Canton metropolitan areas. The residential communities of this service area continue to prosper, driven by an economy fueled by light industry. Both Bank subsidiaries serve the traditional needs of their customers while always reaching toward tomorrow by introducing new technologies, products and services. FINANCIAL CONDITION EARNING ASSETS LOANS At September 30, 1996, gross loans were $127,479,000 compared to $122,683,000 at December 31, 1995, representing an increase of 3.91%. Commercial real estate lending showed strong growth with a 13.27% increase in volume compared to December 31, 1995. Real estate lending also experienced growth with a slight increase of 2.51% over year end volume. Installment lending has softened somewhat with a decline of less than 1%. This decline in installment lending growth may possibly reflect the effects of increased consumer debt burdens and attempts to pay down existing debts before purchasing additional or replacement consumer items. The COMPANY maintains a well balanced portfolio with continued involvement in all types of consumer lending, as well as the more common types of domestic commercial lending. CITIZENS-MARTINS FERRY continues to be aggressive in the indirect automobile lending market with recent expansion into the CITIZENS-STATE market area. 14 15 UNITED BANCORP, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FORM 10-Q LOANS (CONTINUED) The indirect lending type of financing carries somewhat more risk than real estate lending, however, it also provides for higher yields. The targeted lending areas encompass four metropolitan areas, minimizing the risk to changes in economic conditions in the communities housing the COMPANY'S eight branch locations. The ongoing expansion and development of the commercial lending products at both subsidiary Banks has provided numerous opportunities for additional market penetration within the local market and also outside local market areas. The various types of commercial loans as a mix of the total portfolio continue to be diverse, with no material concentration in any one industry. Risk associated with local economic dependence upon a single employer is not considered to be material. Out of area loans occur mostly in the Columbus and Akron-Canton, Ohio areas. Lending beyond the local area has been for low risk projects and for borrowers with substantial net worth. The majority of these loans are secured by real estate. A slight concentration of loans continues to develop in the hotel and motel industry and in loans for the construction or expansion of churches. None of the loans in these two industries is delinquent or has been classified and neither industry exceeded 10% of loans. The allowance for loan losses represents that amount which management and the Board of Directors estimates is adequate to provide for inherent losses in its loan portfolio. The allowance balance and the annual provision charged to expense are reviewed by management and the Board of Directors monthly using a risk code model that considers borrowers past due experience, economic conditions and various other circumstances that are subject to change over time. INVESTMENT SECURITIES Investment securities available for sale at September 30, 1996 decreased $2,303,000, or 8.49% from December 31, 1995 totals. This downward movement resulted partially from the liquidity needs necessary to sustain known and anticipated loan growth at both Bank subsidiaries as well as increasing investments in state and municipal obligations held to maturity by $3,566,000. Investment securities held to maturity increased a net $1,356,000, or 4.62% over December 31, 1995 totals primarily through the acquisition of municipal bonds indicated above which were partially offset by $2,210,000 in maturities of U.S. Government agency obligations. The investment portfolio is comprised of U.S. Treasury notes and other U.S. Government agency-backed securities, tax-exempt obligations of states and political subdivisions and certain other investments. The COMPANY does not hold any collateralized mortgage-backed securities or derivatives. The quality rating of obligations of state and political subdivisions within Ohio is no less than Aaa, Aa or A, with all out-of-state bonds rated at AAA. Board policy permits the purchase of certain non rated bonds of local schools, townships and municipalities, based on their known levels of credit risk. 15 16 UNITED BANCORP, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FORM 10-Q SOURCES OF FUNDS DEPOSITS The COMPANY'S primary source of funds is core deposits from retail and business customers. These core deposits include interest bearing and noninterest bearing deposits, excluding certificates of deposit over $100,000. Total core deposits increased $2,354,000 during the nine months ended September 30, 1996 primarily from demand deposit and certificates of deposit less than $100,000. The COMPANY has a strong deposit base from public agencies, including local school districts, city and township municipalities, public works facilities and others which may tend to be more seasonal in nature resulting from the receipt and disbursement of state and Federal grants. These entities have maintained fairly static balances with the COMPANY due to non similar funding and disbursement timeframes. Certificates of deposit over $100,000 are not considered part of core deposits and as such are used to balance rate sensitivity as a tool of funds management. At September 30, 1996, certificates of deposit over $100,000 increased $2,250,000, or 19.30% over December 31, 1995 totals. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT-TERM BORROWINGS Other interest-bearing liabilities include securities sold under agreements to repurchase, sweep accounts, Federal funds purchased, Treasury, Tax & Loan note payable and Federal Home Loan Bank advances. September 30, 1996 total short-term borrowings increased $2,896,000, or 62.53% over December 31, 1995 totals due primarily to increased daily sweep account balances. PERFORMANCE OVERVIEW Net income for the three months ended September 30, 1996 decreased $5,000, or 0.83% over the same three month period in 1995. The decrease in earnings for the three months ended September 30, 1996 compared to the same three month period ended September 30, 1995 was primarily the result of realization of depreciation expense on the new generation data processing and item processing equipment which became fully operational during the third quarter of 1996. Costs benefits were derived during the third quarter of 1995 from the fully depreciated data processing equipment in use at that time. Additionally, the FDIC Bank Insurance Fund refund occurred during September 1995 which resulted in a one-time benefit to pretax earnings of $104,649. The nine month comparison shows an increase for September 30, 1996 of $265,000, or 15.87% over the same nine month period in 1995. This annualized nine month performance yielded a Return on Average Assets of 1.33% and a Return on Average Equity of 13.64%. The year-to-date increase resulted from continued loan growth in higher yielding commercial and commercial real estate portfolios, with only moderate increases to the cost of funds on depository products. The COMPANY also had higher levels of fee income related to deposit accounts because of continued high levels of service charge and overdraft activity. Additionally, the COMPANY realized security gains of $26,519 on investment securities sold from the available for sale portion of the portfolio. Net interest income, by definition, is the difference between interest income generated on interest earning assets and the interest expense incurred on interest bearing liabilities. Various factors contribute to changes in net interest income, including volumes, interest rates and the composition or mix of interest earning assets in relation to interest bearing liabilities. The COMPANY has continued to employ aggressive marketing and pricing concepts to generate a higher yielding product mix within the loan portfolio as well as increasing the percentage of loans to earning assets to increase interest income. 16 17 UNITED BANCORP, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FORM 10-Q PERFORMANCE OVERVIEW (CONTINUED) Total interest income for the three and nine months ended September 30, 1996 when compared to the same three and nine months ended September 30, 1995 increased $89,000, or 2.43% and $498,000, or 4.69%, respectively. Interest and fees on loans increased $161,000, or 5.88% and $788,000, or 10.23% for the three and nine months ended September 30, 1996. Total interest expense for the three and nine months ended September 30, 1996 increased $32,000, or 1.92% and $107,000, or 2.20% respectively over the same periods in 1995. Despite a decrease in the COMPANY'S cost of funds, total interest expense increased due to a higher volume of interest bearing liabilities. NONINTEREST INCOME AND EXPENSE Noninterest income for the three and nine month periods presented increased $38,000, or 18.09% and $78,000, or 11.35%, respectively. Increases for the three month period were the result of continued high volumes of service fee activity. The nine month period includes investment security gains on sales of securities available for sale. Noninterest expense for the three months ended September 30, 1996 increased $130,000, or 10.59% over the three months ended September 30, 1995. The largest contributor to this change was the additional depreciation expense recognized on new data processing and item processing equipment which was installed during the third quarter of 1996. The prior year three month period had reduced expense due to the original Data Processing equipment being fully depreciated in May of 1995. Noninterest expense for the nine month comparative period increased $88,000, or 2.24% due to primarily the same reasons discussed above. CAPITAL RESOURCES Internal capital growth, through the retention of earnings, is the primary means of maintaining capital adequacy for the COMPANY. Shareholder equity at September 30, 1996 was $19,424,000 compared to $18,452,000 at December 31, 1995, a 5.27% increase. Equity at September 30, 1996 includes a $13,000 unrecognized loss in equity due to the after tax impact of the fair value of securities categorized as available for sale as compared to a $299,000 increase in equity at December 31, 1995. Total shareholder's equity in relation to total assets was 9.74% at September 30, 1996 compared to 9.65% at December 31, 1995. The ratios for Average Equity-to-Average Total Assets for the nine months ended September 30, 1996 and the year ended December 31, 1995 were 9.77% and 9.10%, respectively. On February 20, 1996, the COMPANY issued a Prospectus describing initiation of a Dividend Reinvestment Plan (The Plan) for shareholders under which the COMPANY'S common stock will be purchased by the Plan for participants with automatically reinvested dividends. The Plan provides an economical and convenient method for the holders of shares of the COMPANY'S common stock to purchase additional shares of common stock at market prices and without payment of brokerage commissions or service charges. The Plan does not represent a change in the COMPANY'S dividend policy or a guarantee of future dividends. Shareholders who do not wish to participate in the Plan will continue to receive cash dividends, as declared in the usual and customary manner. The COMPANY has approved the issuance of 150,000 authorized and unissued shares of the COMPANY'S common stock for purchase under The Plan. To date, all shares purchased by the Plan except for 797 shares purchased on October 21, 1996 have been purchased on the open market. 17 18 UNITED BANCORP, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FORM 10-Q CAPITAL RESOURCES(CONTINUED) Regulatory standards require banks and bank holding companies to maintain capital based on "risk adjusted" assets so that categories of assets with potentially higher credit risk require more capital backing than assets with lower risk. Additionally, banks and bank holding companies are required to maintain capital to support, on a risk-adjusted basis, certain off-balance sheet activities such as standby letters of credit and interest rate swaps. In order to monitor relative levels of risk throughout the financial institution industry, the Federal Reserve Board classifies capital into two tiers. Tier 1 capital consists of common shareholders' equity, non cumulative and cumulative perpetual preferred stock, and minority interest less goodwill. Tier 2 capital consists of allowance for loan and lease losses, perpetual preferred stock (not included in Tier 1), hybrid capital instruments, term subordinated debt, and intermediate-term preferred stock. All banks are required to meet a minimum ratio of 8.0% of qualifying total capital to risk-adjusted total assets. The tier 1 capital ratio must be at least 4.0%. Capital qualifying as tier 2 capital is limited to 1.25% of gross risk-weighted assets. The minimum leverage ratio for a bank holding company is 3.0% calculated by dividing tier 1 capital by adjusted total assets. The impact of SFAS 115 is disregarded by banking regulators in determining compliance with capital requirements. Under a current regulatory proposal, interest rate risk would become an additional element in measuring risk-based capital. This proposed change is not expected to significantly impact the COMPANY'S compliance with capital guidelines. The following table illustrates the COMPANY'S risk-weighted capital ratios at September 30, 1996:
JUNE 30, 1996 ------------- Common Shareholders' Equity $ 19,424,219 Tier 1 Capital $ 19,240,260 Tier 2 Capital $ 1,622,463 Tier 1 and 2 Capital $ 20,862,723 Adjusted Total Assets $195,282,340 Total Risk Adjusted Assets $129,797,008 Leverage Ratio 9.85% Tier 1 Risk-Based Capital Ratio 14.82% Tier 1 and Tier 2 Risk-Based Capital Ratio 16.07%
LIQUIDITY The COMPANY'S objective in managing liquidity is to maintain the ability to continue to meet the cash flow needs of its customers, such as borrowings or deposit withdrawals, as well as its own financial commitments. The principal sources of liquidity are net income, loan payments, maturing investment securities and investment securities available-for-sale, Federal funds sold and cash and deposits with banks. Along with its liquid assets, the COMPANY has additional sources of liquidity available to ensure that adequate funds are available as needed which include, but are not limited to, the purchase of Federal funds, the ability to borrow funds under line of credit agreements with correspondent banks and a borrowing agreement with the Federal Home Loan Bank of Cincinnati, Ohio and the adjustment of interest rates to obtain deposits. Management feels that it has the capital adequacy, profitability and reputation to meet the current and projected needs of its customers. 18 19 UNITED BANCORP, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FORM 10-Q LIQUIDITY(CONTINUED) For the period ended September 30, 1996, the adjustments to reconcile net income to net cash from operating activities consist mainly of depreciation and amortization of premises and equipment and intangibles, the provision for loan losses, gain on sales of investment securities, net amortization of investment securities and net changes in other assets and liabilities. The most significant use of the net cash from investing activities was $16,536,000 in investment security purchases, $4,916,000 used to fund the net change in loans and $707,000 utilized for the purchase of the next generation of in-house Data Processing and Item Processing hardware and software. This was partially offset by $17,058,000 in proceeds from investment securities sold, called or maturing. Financing activities include net changes in deposits and short-term borrowings and cash dividends paid. Deposits and Short-term obligations were the primary sources of funds providing a net cash infusion of $6,841,000. For a more detailed illustration of the COMPANY'S sources and uses of cash, refer to the condensed consolidated statements of cash flows. INFLATION Substantially all of the COMPANY'S assets and liabilities relate to banking activities and are monetary in nature. The consolidated financial statements and related financial data are presented in accordance with Generally Accepted Accounting principles (GAAP). GAAP currently requires the COMPANY to measure the financial position and results of operations in terms of historical dollars, with the exception of securities available-for-sale which are measured at fair value. Changes in the value of money due to rising inflation can cause purchasing power loss. Management's opinion is that movements in interest rates affects the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do effect each other, but do not always move in correlation with each other. The COMPANY'S ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the COMPANY'S performance. REGULATORY REVIEW The COMPANY is subject to the regulatory requirements of The Federal Reserve System as a multi-bank holding company. The affiliate banks are subject to regulations of the Federal Deposit Insurance Corporation (FDIC) and the State of Ohio, Division of Financial Institutions. 19 20 UNITED BANCORP, INC. OTHER INFORMATION FORM 10-Q PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K (a) Exhibits (b) Reports on Form 8 K The COMPANY filed no form 8 Ks with the Securities Exchange Commission during the quarter ending September 30, 1996. 20 21 UNITED BANCORP, INC. OTHER INFORMATION FORM 10-Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. October 30, 1996 By: /s/ James W. Everson - ---------------- --------------------------------- Date James W. Everson President and Chief Executive Officer October 30, 1996 By: /s/ Ronald S. Blake - ---------------- ---------------------------------- Date Ronald S. Blake Treasurer 21 22 UNITED BANCORP EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule 22 EX-27 2 EXHIBIT 27
9 9-MOS SEP-30-1996 SEP-30-1996 6,604 0 4,210 0 24,806 30,718 30,985 127,479 1,999 199,498 171,199 7,529 1,346 0 0 0 2,033 17,391 199,498 8,491 2,518 127 11,136 4,743 4,986 6,150 344 27 4,002 2,569 2,569 0 0 1,937 0.95 0.95 4.38 134 101 0 0 1,775 160 39 1,999 1,999 0 969
-----END PRIVACY-ENHANCED MESSAGE-----