-----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, Q1meX6Y1YAHFuTHl/S2IesN3IRkeWpXVyb/KCoXIh/P7ibKH51+4bmwk9zEFPkw/ aScKU6VqALGwl8QmcLzDZQ== 0000950134-02-002431.txt : 20020415 0000950134-02-002431.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950134-02-002431 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020322 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-16540 FILM NUMBER: 02581835 BUSINESS ADDRESS: STREET 1: 201 SOUTH FOURTH STREET STREET 2: P O BOX 10 CITY: MARTINS FERRY STATE: OH ZIP: 43935 BUSINESS PHONE: 7406330445 MAIL ADDRESS: STREET 1: 201 SOUTH FERRY STREET STREET 2: P O BOX 10 CITY: MARTINS FERRY STATE: OH ZIP: 43935 10-K405 1 k68179e10-k405.txt ANNUAL REPORT FOR FISCAL YEAR ENDED 12/31/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] 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.)
201 SOUTH FOURTH STREET, MARTINS FERRY, OHIO 43935 - --------------------------------------------------- ---------------- (Address of principal executive offices) (ZIP Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (740) 633-0445 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, PAR VALUE $1.00 A SHARE NASDAQ REGULAR MARKET (SMALLCAP) ------------------------------------- ------------------------------------------- (Title of class) (Name of each exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $1.00 A SHARE ----------------------------------------------- (Title of class) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ----- ----- 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. [X] THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF MARCH 5, 2002. COMMON STOCK, $1.00 PAR VALUE: $36,885,979 ------------------------------------------ THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS OF MARCH 5, 2002. COMMON STOCK, $1.00 PAR VALUE: 3,148,836 SHARES ----------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF THE ANNUAL SHAREHOLDERS REPORT FOR THE YEAR ENDED DECEMBER 31, 2001 ARE INCORPORATED BY REFERENCE INTO PARTS I AND II, (INDEX ON PAGE 2) PORTIONS OF THE PROXY STATEMENT FOR THE ANNUAL SHAREHOLDERS MEETING TO BE HELD APRIL 17, 2002 ARE INCORPORATED BY REFERENCE INTO PART III (INDEX ON PAGE 2). UNITED BANCORP, INC. FORM 10-K INDEX OF ITEMS INCORPORATED BY REFERENCE WITHIN FORM 10-K
FORM 10-K PAGE # ITEM DESCRIPTION REFERENCE DESCRIPTION - ------------------------------------------------------------------------------------------------------------------------------------ 3 Part I, Item 1, (a) Incorporated by reference to Pages 16-24 of the Annual Report To Shareholders. 3 Part I, Item 1, (b) Incorporated by reference to Page 48, Note 1 of the Annual Report To Shareholders. 4 Part I, Item 1, I Incorporated by reference to Pages 39-40 of the Annual Report To Shareholders. 5 Part I, Item 1, II, B Incorporated by reference to Page 52, Note 2 of the Annual Report To Shareholders. 7 Part I, Item 1, III, C, 4 Incorporated by reference to Page 59, Note 11 of the Annual Report To Shareholders. 7 Part I, Item 1, IV Incorporated by reference to Page 33-34 and Pages 48-49, Note 1 the Annual Report To Shareholders. 10 Part I, Item 1, V, A Incorporated by reference to Page 39 of the Annual Report To Shareholders. 10 Part I, Item 1, VI, A Incorporated by reference to Page 39 of the Annual Report To Shareholders. 11 Part I, Item 2 Incorporated by reference to Pages 16-24 of the Annual Report To Shareholders. 11 Part I, Item 3 Incorporated by reference to Page 50, Note 1 of the Annual Report To Shareholders. 11 Part II, Item 5 Incorporated by reference to Page 4 of the Annual Report To Shareholders. 12 Part II, Item 6 Incorporated by reference to inside back cover of the Annual Report To Shareholders. 12 Part II, Item 7 Incorporated by reference to Pages 28-42, of the Annual Report To Shareholders. 12 Part II, Item 7A Incorporated by reference to Pages 36-37 of the Annual Report To Shareholders. 12 Part II, Item 8 Incorporated by reference to Pages 43-64 of the Annual Report To Shareholders. 13 Part III, Item 10 Incorporated by reference to Pages 3-9 of the Proxy Statement. 13 Part III, Item 11 Incorporated by reference to Pages 10-12 of the Proxy Statement. 13 Part III, Item 12 Incorporated by reference to Pages 5-6 of the Proxy Statement. 13 Part III, Item 13 Not applicable. 14 Part IV, Item 14, (a), 1 Incorporated by reference to Pages 43-64 of the Annual Report To Shareholders. 14 Part IV, Item 14, (a), 2 Incorporated by reference to Page 64 of the Annual Report To Shareholders. 14 Part IV, Item 14, (a), 3, Exhibit 10 Incorporated by reference to Pages 9-10 of the Proxy Statement. 14 Part IV, Item 14, (a), 3, Exhibit 11 Incorporated by reference to Page 50 and Page 63 of the Annual Report To Shareholders.
2 UNITED BANCORP, INC. FORM 10-K PART I ITEM 1 DESCRIPTION OF BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS United Bancorp, Inc. (Company) is a financial holding company headquartered in Martins Ferry, Ohio. The Company has two wholly-owned subsidiary banks, The Citizens Savings Bank, Martins Ferry, Ohio (CITIZENS) and The Community Bank, Lancaster, Ohio (COMMUNITY), collectively "Banks". For additional information about the Company's location and description of business, refer to Pages 16-20 and 21-24, Corporate Profile, in the Annual Report To Shareholders for the year ended December 31, 2001. (b) FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS Refer to Page 48, Note 1 of the Annual Report To Shareholders. (c) NARRATIVE DESCRIPTION OF BUSINESS The Company is a financial holding company as defined under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). The BHC Act regulates acquisitions by the Company of voting shares or assets of any bank or other company. The Company is subject to the reporting requirements of, and examination and regulation by, the Board of Governors of the Federal Reserve System, as well as reporting requirements under the Securities and Exchange Commission Act of 1934. The Banks' are located in northeastern, eastern, and southeastern Ohio and are engaged in the business of commercial and retail banking in Belmont, Harrison, Tuscarawas, Carroll, Athens, Hocking, and Fairfield counties and the surrounding localities. The 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 conducts its business through its main office in Martins Ferry, Ohio and nine branches located in Bridgeport, Colerain, Dellroy, Dover, Jewett, New Philadelphia, St. Clairsville, Sherrodsville, and Strasburg, Ohio. In 1999, CITIZENS opened a full service brokerage division known as Brokerage United with securities provided through Raymond James Financial Services, Inc. member NASD/SIPC. COMMUNITY conducts its business through its seven offices in Amesville, Glouster, Lancaster, and Nelsonsville, Ohio. The markets in which the Banks' operate continue to be highly competitive. CITIZENS competes for loans and deposits with other retail commercial banks, savings and loan associations, finance companies, credit unions and other types of financial institutions within the Mid-Ohio valley geographic area along the eastern border of Ohio, extending into the northern panhandle of West Virginia and the Tuscarawas and Carroll County geographic areas of northeastern Ohio. COMMUNITY also encounters similar competition for loans and deposits throughout the Athens, Hocking, and Fairfield County geographic areas of central and southeastern Ohio. On November 12, 1999, President Clinton signed the Graham-Leach-Bliley Act of 1999 ("GLB Act"), which is intended to modernize the financial services industry. The GLB Act sweeps away large parts of a regulatory framework that had its origins in the Depression Era of the 1930s. Effective March 11, 2000, new opportunities became available for banks, other depository institutions, insurance companies and securities firms to enter into combinations that permit a single financial service organization to offer customers a more complete array of financial products and services. The GLB Act provides a new regulatory framework for regulation through the financial holding company, which will have as its umbrella regulator the Federal Reserve Board. The functional regulation of the financial holding company's separately regulated subsidiaries will be conducted by their primary functional regulator. The GLB Act makes satisfactory or above Community Reinvestment Act compliance for insured depository institutions and their financial holding companies necessary in order for them to engage in new financial activities. The GLB Act provides a federal right to privacy of non-public personal information of individual customers. The Company and Banks are also subject to certain state laws that deal with the use and distribution of non-public personal information. 3 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) (c) NARRATIVE DESCRIPTION OF BUSINESS (CONTINUED) The Company's two subsidiary banks are subject to regulation by the Ohio Division of Financial Institutions and the Federal Deposit Insurance Corporation ("FDIC"). The regulations and restrictions affecting the Banks pertain to, among other things, allowable loans, guidelines for allowance for loan losses, accountability for fair and accurate disclosures to customers and regulatory agencies, permissible investments and limitations of risk and regulation of capital requirements for safe and sound operation of the financial institution. The Banks have no single customer or related group of customers whose banking activities, whether through deposits or lending, would have a material impact on the continued earnings capabilities if those activities were removed. The Company itself, as a shell holding company, has no compensated employees. CITIZENS has 78 full time employees, with 25 of these serving in a management capacity and 14 part time employees. COMMUNITY has 31 full time employees, with 12 serving in a management capacity and 7 part time employees. The Company considers employee relations to be good at all subsidiary locations. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS Not applicable. I DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL A Refer to Page 39 of the Annual Report To Shareholders B Refer to Page 39 of the Annual Report To Shareholders C Refer to Page 40 of the Annual Report To Shareholders 4 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) II INVESTMENT PORTFOLIO A The following table sets forth the carrying amount of securities at December 31, 2001, 2000 and 1999:
DECEMBER 31, ------------------------------- (In thousands) 2001 2000 1999 --------- --------- -------- AVAILABLE FOR SALE US Agency obligations $ 99,490 $ 75,685 $ 65,952 Mortgage-backed obligations 153 1,930 2,017 State and municipal obligations 10,748 13,434 14,187 Other securities 3,654 3,390 3,206 -------- -------- -------- $114,045 $ 94,439 $ 85,362 ======== ======== ======== HELD TO MATURITY US Agency obligations $ -- $ 2,496 $ 2,494 State and municipal obligations 10,379 8,306 7,300 -------- -------- -------- $ 10,379 $ 10,802 $ 9,794 ======== ======== ========
B Refer to Page 52, Note 2 of the Annual Report To Shareholders. C Excluding holdings of U.S. Agency, there were no investments in securities of any one issuer exceeding 10% of the Company's consolidated shareholders' equity at December 31, 2001. III LOAN PORTFOLIO A TYPES OF LOANS The amounts of gross loans outstanding at December 31, 2001, 2000, 1999, 1998 and 1997 are shown in the following table according to types of loans:
DECEMBER 31, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (In thousands) Commercial loans $ 21,502 $ 20,415 $ 15,463 $ 12,912 $ 16,636 Commercial real estate loans 61,963 64,812 60,305 54,195 49,189 Real estate loans 54,153 55,931 51,357 49,438 49,857 Installment loans 45,722 55,339 53,391 47,676 55,795 -------- -------- -------- -------- -------- Total loans $183,340 $196,497 $180,516 $164,221 $171,477 ======== ======== ======== ======== ========
Construction loans were not significant for the periods discussed. 5 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) III LOAN PORTFOLIO (CONTINUED) B MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES The following is a schedule of commercial and commercial real estate loans at December 31, 2001 maturing within the various time frames indicated:
ONE YEAR ONE THROUGH AFTER (In thousands) OR LESS FIVE YEARS FIVE YEARS TOTAL ------------- ---------------- --------------- ------------ Commercial loans $ 18,298 $ 1,648 $ 1,556 $ 21,502 Commercial real estate loans 23,568 29,109 9,286 61,963 ------------- ---------------- --------------- ------------ Total $ 41,866 $ 30,757 $ 10,842 $ 83,465 ============= ================ =============== ============
The following is a schedule of fixed rate and variable rate commercial and commercial real estate loans at December 31, 2001 due to mature after one year:
(In thousands) FIXED RATE VARIABLE RATE TOTAL > ONE YEAR ------------- --------------- ---------------- Commercial loans $ 3,204 $ - $ 3,204 Commercial real estate loans 11,479 26,916 38,395 ------------- ---------------- --------------- Total $ 14,683 $ 26,916 $ 41,599 ============= ================ ===============
Variable rate loans are those loans with floating or adjustable interest rates. C RISK ELEMENTS 1. NONACCRUAL, PAST DUE, RESTRUCTURED AND IMPAIRED LOANS The following schedule summarizes nonaccrual loans, accruing loans which are contractually 90 days or more past due, troubled debt restructurings and impaired loans at December 31, 2001, 2000, 1999, 1998 and 1997:
DECEMBER 31, ------------------------------------------- (In thousands) 2001 2000 1999 1998 1997 ------- ------- ------- ------- ------- Nonaccrual basis $ 661 $ 793 $ 987 $ 399 $ 480 Accruing loans 90 days or greater past due 157 124 36 150 319 Troubled debt restructuring N/A N/A N/A N/A N/A Impaired loans (1) (1) (1) (1) (1)
(1) Loans considered impaired under the provisions of SFAS No. 114 and interest recognized on a cash received basis were not considered material during any of the periods presented. The additional amount of interest income that would have been recorded on nonaccrual loans, had they been current, totaled $81,272 for the year-ended December 31, 2001. 6 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) III LOAN PORTFOLIO (CONTINUED) 1. NONACCRUAL, PAST DUE, RESTRUCTURED AND IMPAIRED LOANS (CONTINUED) Interest income is not reported when full loan repayment is doubtful, typically when the loan is impaired or payments are past due over 90 days. Payments received on such loans are reported as principal reductions. A loan is impaired when full payment under the loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. 2. POTENTIAL PROBLEM LOANS The Company had no potential problem loans as of December 31, 2001 which have not been disclosed in Table C 1., but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans into one of the problem loan categories. 3. FOREIGN OUTSTANDING Not applicable. 4. LOAN CONCENTRATIONS Refer to Page 59, Note 11 of the Annual Report To Shareholders. D. OTHER INTEREST-BEARING ASSETS Not applicable. IV SUMMARY OF LOAN LOSS EXPERIENCE For additional explanation of factors which influence management's judgment in determining amounts charged to expense, refer to Pages 33-34, "Management Discussion and Analysis" and Pages 48 - 49, Note 1 of the Annual Report To Shareholders. 7 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) IV SUMMARY OF LOAN LOSS EXPERIENCE (CONTINUED) A ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES The following schedule presents an analysis of the allowance for loan losses, average loan data and related ratios for the years ended December 31, 2001, 2000, 1999, 1998, and 1997:
(In thousands) 2001 2000 1999 1998 1997 ------------- ------------- -------------- -------------- ------------- LOANS Loans outstanding $ 183,340 $ 196,497 $ 180,516 $ 164,221 $ 171,477 Average loans outstanding $ 188,114 $ 190,386 $ 168,868 $ 168,626 $ 169,066 ALLOWANCE FOR LOAN LOSSES Balance at beginning of year $ 2,790 $ 3,110 $ 3,033 $ 3,039 $ 2,756 Loan charge-offs: Commercial 268 125 85 139 125 Commercial real estate 79 30 Real estate 67 275 21 51 20 Installment 728 716 807 861 661 ------------- ------------- -------------- -------------- ------------- Total loan charge-offs 1,063 1,195 943 1,051 806 ------------- ------------- -------------- -------------- ------------- Loan recoveries Commercial 27 2 50 87 32 Commercial real estate 28 12 - Real estate 10 4 3 9 3 Installment 335 254 228 151 122 ------------- ------------- -------------- -------------- ------------- Total loan recoveries 372 288 293 247 157 ------------- ------------- -------------- -------------- ------------- Net loan charge-offs 691 907 650 804 649 Provision for loan losses 780 587 727 798 932 ------------- ------------- -------------- -------------- ------------- Balance at end of year $ 2,879 $ 2,790 $ 3,110 $ 3,033 $ 3,039 ============= ============= ============== ============== ============= Ratio of net charge-offs to average loans outstanding for the year 0.37% 0.49% 0.38% 0.48% 0.38% ============= ============= ============== ============== =============
8 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) IV SUMMARY OF LOAN LOSS EXPERIENCE (CONTINUED) B ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES The following table allocates the allowance for possible loan losses at December 31, 2001, 2000, 1999, 1998, and 1997. The allowance has been allocated according to the amount deemed to be reasonably necessary to provide for the probability of losses being incurred within the following categories of loans at the dates indicated:
2001 --------------------------- % OF LOANS (In thousands) ALLOWANCE TO TOTAL Loan type AMOUNT LOANS ----------- -------------- Commercial $ 325 11.73% Commercial real estate 872 33.80% Real estate 381 29.54% Installment 613 24.93% Unallocated 688 N/A ----------- -------------- Total $ 2,879 100.00% =========== ============== 2000 -------------------------- % OF LOANS (In thousands) ALLOWANCE TO TOTAL Loan type AMOUNT LOANS ------------ ------------- Commercial $ 263 10.39% Commercial real estate 835 32.98% Real estate 461 28.46% Installment 781 28.17% Unallocated 450 N/A ------------ ------------- Total $ 2,790 100.00% ============ ============= 1999 --------------------------- % OF LOANS (In thousands) ALLOWANCE TO TOTAL Loan type AMOUNT LOANS ----------- -------------- Commercial $ 195 8.57% Commercial real estate 439 33.40% Real estate 343 28.45% Installment 620 29.58% Unallocated 1,513 N/A ----------- -------------- Total $ 3,110 100.00% =========== ============== 1998 -------------------------- % OF LOANS (In thousands) ALLOWANCE TO TOTAL Loan type AMOUNT LOANS ------------ ------------- Commercial $ 215 7.87% Commercial real estate 432 33.00% Real estate 567 30.10% Installment 818 29.03% Unallocated 1,001 N/A ------------ ------------- Total $ 3,033 100.00% ============ ============= 1997 --------------------------- % OF LOANS (In thousands) ALLOWANCE TO TOTAL Loan type AMOUNT LOANS ----------- -------------- Commercial $ 403 9.70% Commercial real estate 322 28.69% Real estate 606 29.07% Installment 1,200 32.54% Unallocated 508 N/A ----------- -------------- Total $ 3,039 100.00% =========== ==============
9 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) V DEPOSITS A SCHEDULE OF AVERAGE DEPOSIT AMOUNTS AND RATES (1) Refer to Page 39 of the Annual Report To Shareholders. (2) Refer to Page 39 of the Annual Report To Shareholders. (3) Refer to Page 39 of the Annual Report To Shareholders. (4) Refer to Page 39 of the Annual Report To Shareholders. (5) - (8) Not applicable. B OTHER CATEGORIES Not applicable. C FOREIGN DEPOSITS Not applicable. D MATURITY ANALYSIS OF TIME DEPOSITS GREATER THAN $100,000. The following schedule details the maturities of time certificates of deposit in amounts of $100,000 or more for the year ended December 31, 2001:
(In thousands) Three months or less $ 10,894 Over three through six months 7,604 Over six through twelve months 6,918 Over twelve months 13,022 ------------------ Total $ 38,438 ==================
E TIME DEPOSITS GREATER THAN $100,000 ISSUED BY FOREIGN OFFICES. Not applicable. VI RETURN ON EQUITY AND ASSETS The ratio of net income to daily average total assets and average shareholders' equity, and certain other ratios, were as follows:
DECEMBER 31, 2001 2000 1999 ---------- ---------- ----------- Dividend Payout Ratio 56.82% 58.82% 46.73% Equity to Assets 8.93% 8.85% 8.85%
(1) For other ratios refer to the inside back cover of the Annual Report To Shareholders. 10 UNITED BANCORP, INC. FORM 10-K ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED) VII SHORT-TERM BORROWINGS Information concerning securities sold under agreements to repurchase is summarized as follows:
(In thousands) 2001 2000 1999 -------------- -------------- -------------- Balance at December 31, $ 7,811 $ 4,861 $ 5,788 Weighted average interest rate at December 31 1.39% 5.52% 3.80% Average daily balance during the year $ 10,695 $ 5,177 $ 7,306 Average interest rate during the year 3.59% 5.45% 4.30% Maximum month-end balance during the year $ 20,653 $ 6,117 $ 8,506
Securities sold under agreements to repurchase are financing arrangements whereby the Company sells securities and agrees to repurchase the identical securities at the maturities of the agreements at specified prices Information concerning the cash management line of credit from the Federal Home Loan Bank of Cincinnati, Ohio is summarized as follows:
(In thousands) 2001 2000 1999 -------------- -------------- -------------- Balance at December 31, $ 10,100 $ 14,824 $ 19,145 Weighted average interest rate at December 31 2.05% 6.75% 4.75% Average daily balance during the year $ 14,783 $ 13,545 $ 9,363 Average interest rate during the year 4.01% 6.26% 5.55% Maximum month-end balance during the year $ 24,995 $ 20,217 $ 22,028
No other individual component of the borrowed funds total comprised more than 30% of shareholders' equity and accordingly are not disclosed in detail. ITEM 2 PROPERTIES Refer to Pages 16-20 and 21-24, "Corporate Profile" in the Annual Report To Shareholders. Management believes the properties described on Pages 16-20 and 21-24 of the Annual Report to be in good operating condition for the purpose for which it is used. The properties are unencumbered by any mortgage or security interest and is, in management's opinion, adequately insured. ITEM 3 LEGAL PROCEEDINGS Refer to Page 50, Note 1 of the Annual Report To Shareholders. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No motions were submitted to shareholders for a vote during the fourth quarter of 2001. 11 UNITED BANCORP, INC. FORM 10-K PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Refer to Page 4, "Shareholder Information" of the Annual Report To Shareholders. ITEM 6 SELECTED FINANCIAL DATA Refer to inside back cover, "Five Year Performance Summary" and pages 26-27 of the Annual Report To Shareholders. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Refer to Pages 28 - 42, "Management's Discussion and Analysis" of the Annual Report To Shareholders. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Refer to Pages 36 - 37, "Asset/Liability Management and Sensitivity to Market Risks" of the Annual Report To Shareholders. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Refer to Pages 43 - 64 of the Annual Report To Shareholders. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS There were no changes in or disagreements with accountants. 12 UNITED BANCORP, INC. FORM 10-K PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Refer to Pages 3 - 9 of the Proxy Statement. (b) Executive Officers of the Registrant: James W. Everson 63 Chairman, President and Chief Executive Officer Alan M. Hooker 50 Executive Vice President - Administration Norman F. Assenza, Jr. 55 Vice President - Operations and Secretary Randall M. Greenwood 37 Vice President - Chief Financial Officer, Treasurer James A. Lodes 55 Vice President - Lending
(1) Each individual has held the position noted during the past five years, except for the following: Randall M. Greenwood served as a Business Assurance Manager of Coopers and Lybrand LLP of Columbus, Ohio from 1993 to November of 1997. He served as a Manager for BankOne Corporation in Columbus, Ohio from February 1991 to August 1993 and as a Supervisor at Coopers and Lybrand LLP in Columbus, Ohio from September 1986 through February 1991. He has served as Vice President - Chief Financial Officer of United Bancorp, Inc. and as Senior Vice President - Chief Financial Officer of The Citizens Savings Bank, Martins Ferry, Ohio since December 1997. Alan M. Hooker served as President of Fairfield National Division of the Park National Bank where he also served on their Advisory Board. He has held senior level banking positions with financial institutions in Washington, D.C., and Baltimore, Maryland. He has served as President and Chief Executive Officer of The Community Bank, Glouster, Ohio and as Executive Vice President - Administration of United Bancorp, Inc. since October 26, 1998. ITEM 11 EXECUTIVE COMPENSATION Refer to Pages 9 - 12 of the Proxy Statement. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Refer to Pages 5-6 of the Proxy Statement. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not Applicable. 13 UNITED BANCORP, INC. FORM 10-K PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED AS PART OF FORM 10-K 1. The following consolidated financial statements appear in the 2001 Annual Report To Shareholders and are incorporated by reference: Report of Independent Auditors Page 43 Consolidated Balance Sheets Page 44 Consolidated Statements of Income Page 45 Consolidated Statements of Shareholders' Equity Page 46 Consolidated Statements of Cash Flow Page 47 Notes to the Consolidated Financial Statements Pages 48 - 64
2. The summary of selected quarterly results of operations appears on Page 64 in the 2001 Annual Report To Shareholders and is incorporated by reference. 3. Exhibits 2 Not Applicable 3 (i)(ii) Articles of Incorporation of United Bancorp, Inc. including amendments and By Laws, previously filed with the Securities and Exchange Commission on November 16, 1983. 4 Not applicable. 9 Not applicable. 10 Reference to special severance agreement on Page 9 of the Proxy Statement 11 Statement regarding computation of per share earnings (included in Note 1 to the consolidated financial statements on page 50 and Note 15 on Page 63 of the Annual Report To Shareholders.) 12 Not applicable. 13 Reference to the Annual Report To Shareholders for the fiscal year ended December 31, 2001. 16 Not applicable. 18 Not applicable. 21.1 Reference to The Citizens Savings Bank, Martins Ferry, Ohio, incorporated on December 31, 1902, previously filed with the Securities and Exchange Commission. 21.2 Reference to The Community Bank, Lancaster, Ohio, incorporated on August 1, 1949, previously filed with the Securities and Exchange Commission. 22 Not applicable. 23 Consents of Experts and Council. 24 Not applicable. 99 Not applicable.
(b) The Company filed no reports on SEC Form 8-K during the last quarter of the period covered by this report. 14 UNITED BANCORP, INC. FORM 10-K 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.
(Registrant) United Bancorp, Inc. By: March 15, 2002 ------------------------------------- James W. Everson, Chairman, President & CEO By: March 15, 2002 ------------------------------------- Randall M. Greenwood, CFO By: March 15, 2002 ------------------------------------- Michael J. Arciello By: March 15, 2002 ------------------------------------- Terry A. McGhee By: March 15, 2002 ------------------------------------- John M. Hoopingarner By: March 15, 2002 ------------------------------------- Richard L. Riesbeck By: March 15, 2002 ------------------------------------- L.E. Richardson, Jr. By: March 15, 2002 ------------------------------------- Matthew C. Thomas
15 UNITED BANCORP, INC. FORM 10-K EXHIBIT INDEX
Exhibit No. Description SK Item 601 No. ----------- ----------- --------------- 1 Annual Report to Shareholders 13 2 Consents of Independent Auditors 23
16 EX-13 3 k68179ex13.txt ANNUAL REPORT TO SHAREHOLDERS ================================================================================ 2001 ANNUAL REPORT [PHOTO] [PHOTO] [UNITED BANCORP, INC. LOGO] UNITED BANCORP, INC. Martins Ferry, Ohio www.unitedbancorp.com ================================================================================ 2001 BANK NOTES October 2001 In This Issue . . . Chairman's Chambers Page 1 The Community Bank Pages 2-3 A View from the North Page 4 United Way Campaign Page 4 Compliance Clinic Page 5 Employee Picnic Pages 6-7 Mortgage Rates Page 8 Supplementary Insurance Benefits Page 8 Vacation News Page 9 The Lighter Side Page 10
- -------------------------------------------------------------------------------- FROM THE CHAIRMAN'S CHAMBERS WITH ALL OF THE RECENT EVENTS, WILL AMERICA EVER BE THE SAME? [FLAG PICTURE] What a difference a day makes, twenty-four little hours... was it Doris Day who sang that? I know, many reading this are saying, "Who was Doris Day?" Life was altered on the day of December 7, 1941 -- the day Pearl Harbor was attacked. It was altered on the day of November 22, 1963 -- the day President John F. Kennedy was assassinated. I guess there are not too many on our bank team who can remember just where they were or what they were doing when Pearl Harbor was devastated. I am too young to recall that event. But, I remember vividly that ill-fated day when John F. Kennedy fell victim to an assassin's bullet. Marlene and I were just married a few months before November 22, 1963 and on that early afternoon, I was interviewing Paul and Maxine Briggs for a home improvement loan in the newly opened Consumer Loan Office at our old bank location on the corner of Fourth and Walnut Streets. Back then, it was highly improper to have music or radio playing in the bank or at least my mentor, Mr. Harold Riethmiller, had me believing that. When what to my dismayed ears occurred was loud radio playing in the bookkeeping department. Of course I had to excuse myself to go remind those foolish ladies that radio playing was not proper nor permitted... when I was told, "Listen to the news flash--President Kennedy is dead." Life stopped for a moment, well actually for several days, while we adjusted to the fact that America would never be the same. When I returned to my office and shared the horrible news, my saddened customers left to go home. We were all dismayed, and they wanted to go home and turn on the TV. Yes, they did return, and we did close the loan the next week. I guess much of the activity surrounding President Kennedy's political career and his death is only known by what most of our bank associates have read in the history books or have seen on the history channel. But, today we all have another day etched into the history books and into our memories that we shall never forget... just where we were and what we were doing on... 9-11!!!!, another day in infamy. September 11, 2001 was to be The Citizens Bank Board of Directors' Annual golf outing. To accommodate the early afternoon start, we scheduled our Executive Committee meeting for 8:30 a.m. to be followed by our full board meeting at 10:00 a.m. We were just getting into our Executive Committee meeting when a tap came on the conference room door. It was John Assenza who said, "Gentlemen, something is happening and you may want to go into Jim's office and turn on the television." John Hoopingarner, Richard Riesbeck and Matt Thomas joined me to see an immediate first time replay of that first horrific event. And as we watched in wonderment, we witnessed the live performance of the tragic hit of the second twin tower of the World Trade Center. Little did we know, at that moment, the full impact of what was occurring. Nor could we remove ourselves from watching the crumbling event unfold. As 10:00 a.m. neared, the balance of our remaining board members arrived, some knowing from their car radios that something terrible was happening. Needless to say, your Board of Directors will forever remember where we were and what we were doing on that ill-fated day that life altered again. We eventually held an abbreviated board meeting, but cancelled our golf outing. [STATUTE OF LIBERTY PICTURE] Yes, with all our recent events, America will never be the same. When you stop and think about it, nothing is really ever the same... It is either better or worse. History has proven that once we recovered from Pearl Harbor and the assassination of John F. Kennedy, life slowly got better. And once we pick ourselves up and get on with life, I strongly feel that America will again be better. We shall always remember and grieve the losses experienced, but our nation will again arise above itself. With flags displayed and flying high and worn on our lapels and blouses, we shall build upon the kindred spirit of patriotism that is abounding in this great land of ours. Yes, even our government once filled with bipartisanship has unified and rallied together behind our leaders. At the grass roots, I am finding people more considerate of one another and really expressing concern for one another. Sure, we have to be more vigilant today, but maybe we started to take too much for granted. Next month, we shall begin the holiday season, a time for thanksgiving and of celebration. As we gather together let us celebrate that we are together once again as a family and as a nation. And please remember to give thanks for all of our continued rich blessings. And foremost, ask God to bless America and its leaders. /s/ JAMES W. EVERSON Chairman, President & CEO [UNITED BANCORP LOGO] A LETTER FROM THE PRESIDENT 2001 [PHOTO] JAMES W. EVERSON CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER TO OUR PRESENT AND FUTURE SHAREHOLDERS OF UNITED BANCORP INC.... The year 2001 for all will be remembered as the most historic year experienced. To paraphrase Charles Dickens, it certainly can be characterized as one of.... "the best of times and the worst of times". For United Bancorp, Inc. and its subsidiary banks, The Community Bank and The Citizens Savings Bank, we look back at 2001 feeling good about our company's progress and accomplishments. This past year was certainly historic with eleven interest rate drops totaling 4 3/4%. And it has been challenging to both preserve our bottom line and preserve our customer relationships. I am proud of our Team Members who have met these challenges and both grew our customer franchise and met our business plan and earnings goals. Our reported earnings show improvement per our business plan developed in 2000 when we expanded into Lancaster, Ohio with the opening of three new locations. The Community Bank's earnings were a negative $154,136 compared to a negative $389,514 in 2000, a $235,378 improvement or 60.4% improvement over the prior year. As planned, The Community Bank posted a profitable fourth quarter and will be profitable for the year 2002. Management's challenge is to bring this affiliate's earnings in line with industry standards within the next three years. The Citizens Savings Bank's year-to-date earnings were $3,337,545 or $314,250 above the prior year. On a consolidated basis, United Bancorp, Inc. earned $2,755,587 up 6.52% from the prior year's earnings of $2,586,975. On a per share basis, basic earnings were $.88 for the twelve months ended December 31, 2001 compared to $.81 for the same period ended December 31, 2000, an increase of 8.64%. Contributing to these increases were the overall growth in earning assets and the Company's ability to maintain its net interest margin at 3.86% while interest rates decreased. Also contributing to the improved earnings was an increase in non-interest income resulting in part from the many loan re-financings during this year with the unprecedented rate drops imposed by The Federal Reserve Bank. This past December 20th, shareholders of United Bancorp, Inc. received a 5% share dividend plus a 5% increase in their fourth quarter dividend payment. Your company and its lead bank, The Citizens Savings Bank of Martins Ferry, Ohio have had a history of declaring stock splits and paying share dividends which have rewarded shareholders for the Company's growth and performance. Shareholders of the Citizens Savings Bank received a 100% share dividend in 1971 and 1981 and exchanged their stock on a four-for-one basis when UBCP was formed in 1983. UBCP paid a 50% share dividend in 1987, a 100% share dividend in 1992 and 1993 plus 10% share dividends in 1994, 1996, 1997, and 5% share dividends in 1998, 1999, 2000 and 2001. Those holding one hundred shares of The Citizens Savings Bank stock in 1970 now hold 15,529 shares of UBCP stock. In today's dollars, an initial investment of $10,000 is now valued in excess of $200,000 with a current annualized cash dividend of over $8,000. The projected 52 cents per share cash dividend provides a very attractive current yield of 4% based on recent market pricings. UNITED BANCORP, INC. 2001 ANNUAL REPORT 1 [CASH DIVIDENDS BAR CHART]
YEAR CASH DIVIDENDS - ---- -------------- 2001 $1,590,220 2000 $1,545,547 1999 $1,477,686 1998 $1,254,340 1997 $1,035,889
Your Management Team and Board of Directors are pleased to report the required voting power of UBCP was received to approve all of the proposals as outlined in our proxy statement dated and mailed on March 16, 2001. We are pleased that our shareholders approved the changes that were recommended by our legal counsel and unanimously approved by your Board of Directors. Shareholders approved the authorization of 2 million shares of preferred stock, the elimination of cumulative voting, the addition of a super majority shareholder vote and fair price provisions, the reduction of shareholder vote required to amend and restate the Articles of Incorporation in the future from two-thirds of the total voting power of shareholders to a majority of the voting power, plus technical revisions to the Articles of Incorporation and the Amendment and Restatement of the Code of Regulations as outlined in the Proxy Statement. We firmly believe these changes give UBCP greater flexibility and place us in a better position to take advantage of potential acquisition, capital raising and other opportunities as they may arise. We are pleased with the continued growth and acceptance of both our Voice Response Banking Programs and Internet Banking Programs introduced at each affiliate bank. Today, our banks service over 2400 voice-response accounts and facilitate 8,000 calls per month. Over 1,600 customers now use our banks' Internet Services for cash management or access to their accounts, plus enjoy electronic bill payment, current news, weather, stock pricing and shopping opportunities, and much more. Click www.thecitizensbank.com or www.the-communitybank.com to check us out. Internet Banking has really expanded our ability to provide banking services. You will be receiving during the fourth week of April an invitation to join a new banking service exclusively for United Bancorp, Inc. shareholders, ShareLINK 100. This new account is being designed to provide our shareholders who own one hundred or more shares of UBCP stock and direct deposit their dividend payments, a fully secured personal banking venue without regard to geographic location or time...24x7x365. Alan M. Hooker, Executive Vice President of United Bancorp, Inc. and President and Chief Executive Officer of The Community Bank, and our Community Bank affiliate were recognized this past year at the Annual Meeting of The Ohio Bankers Association. The Community Bank was one of only twelve in Ohio to receive a Bank Marketing Award of Merit for its 2000 grand opening campaign under the theme, "Just What Lancaster Needs...another bank, The Community Bank". Alan this past year was appointed to The Ohio Bankers Association Board of Directors. I find this exciting having served as a member of the OBA board and as its President during the 1980's In November of this past year, Joseph D. Kittle, Sr., retired to the position of Director Emeritus of the Board of Directors of The Community Bank. After serving in the Korean War and then working in construction, Joe established a feed and animal supply business in Glouster, Ohio in 1952. It grew into 2 UNITED BANCORP, INC. 2001 ANNUAL REPORT Kittle Farm Supply and Feed Mill through the years, and was sold in 1981. Joe joined The Glouster Community Bank Board in 1985, and never missed a meeting during his tenure as a board member. His commitment to the bank and the Glouster community will long be remembered and always appreciated. January 27, 2002 marked the 100th Anniversary of the charter of The Citizens Savings Bank. For 100 years, The Citizens Bank has been offering Hometown Banking to families and businesses and providing financial services to thousands of customers throughout the Ohio and Tuscarawas Valley's. Today, it is the only locally owned financial institution in Martins Ferry. Harold H. Riethmiller began his banking career with our bank in 1911 and became my banking mentor in 1959 when I joined the bank as a student intern. Mr. Riethmiller ran the bank as Cashier from 1918 and became the bank's first active President in 1940, retiring in January of 1973 when I was appointed The Citizens Bank's fourth President. Our organization is quite unique with its consistency of leadership for most of its 100 years. Our accomplishments over the first 100 years of service are the result of many loyal shareholders and customers and the dedication of many who have served from the front lines to the board room. Throughout this report, you will see many of our current Team Members who are the foundation for continuing our founders' vision into the next century of service. Very truly yours, /s/ JAMES W. EVERSON James W. Everson Chairman, President & Chief Executive Officer ceo@unitedbancorp.com February 16th, 2002 [PHOTO] United Bancorp Officers (from left) Randall M. Greenwood, James A. Lodes, James W. Everson, Norman F. Assenza, Jr. and Alan M. Hooker. UNITED BANCORP, INC. 2001 ANNUAL REPORT 3 [UNITED BANCORP LOGO] SHAREHOLDER INFORMATION 2001 United Bancorp, Inc.'s common stock trades on The Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the symbol UBCP, CUSIP #90991109. At year-end 2001, there were 3,249,227 shares outstanding, held among approximately 1,500 shareholders of record. The following table sets forth the quarterly high and low closing prices of the Company's common stock from January 1, 2001 to December 31, 2001 compared to the same periods in 2000 as reported by the NASDAQ. The price quotes have been adjusted for comparison purposes for the 5% stock dividends distributed on December 20, 2001 and 2000. The price quotations presented should not necessarily be relied on in determining the value of the shareholders' investment.
2001 2000 --------------------------------- --------------------------------- 31-MAR 30-JUN 30-SEP 31-DEC 31-MAR 30-JUN 30-SEP 31-DEC ------ ------ ------ ------ ------ ------ ------ ------ Market Price Range High ($) 12.381 12.810 13.333 14.000 13.038 13.606 10.885 11.905 Low ($) 9.524 9.333 11.429 11.857 9.070 8.620 7.256 8.929 Cash Dividends Quarter ($) 0.123 0.123 0.124 0.130 0.117 0.117 0.118 0.124 Cumulative ($) 0.123 0.246 0.370 0.500 0.117 0.234 0.352 0.476
INVESTOR RELATIONS: A copy of the Company's Annual Report on form 10-K as filed with the SEC, will be furnished free of charge upon written or E-mail request to: Randall M. Greenwood, CFO United Bancorp, Inc. 201 South 4th Street PO Box 10 Martins Ferry, OH 43935 or cfo@unitedbancorp.com DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN: Shareholders may elect to reinvest their dividends in additional shares of United Bancorp, Inc.'s common stock through the Company's Dividend Reinvestment Plan. Shareholders may also invest optional cash payments of up to $5,000 per quarter in our common stock at market price. To arrange automatic purchase of shares with quarterly dividend proceeds, please contact: American Stock Transfer and Trust Company Attn: Dividend Reinvestment 40 Wall Street,46th Floor New York, NY 10005 1-800-278-4353 ANNUAL MEETING: The Annual Meeting of Shareholders will be held at 2:00 p.m., April 17, 2002 at the Corporate Offices in Martins Ferry, Ohio. INTERNET: Please look us up at http//:www.unitedbancorp.com INDEPENDENT AUDITORS: Crowe, Chizek and Company LLP Certified Public Accountants 10 West Broad Street Columbus, OH 43215 (614) 469-0001 CORPORATE OFFICES: The Citizens Savings Bank Building 201 South 4th Street Martins Ferry, OH 43935 (740) 633-0445 (740) 633-1448 (FAX) STOCK TRADING: UVEST Investment Services(R) Member NASD, SIPC 740-633-2663 Toll Free: 888-275-5566, Ext:197 Located at: The Citizens Bank 201 South Fourth Street Martins Ferry, Ohio 43935 Advest, Inc. 340 S. Hollywood Plaza Steubenville, OH 43952 1-800-761-8008 George Crim 800-761-8008 Stifel, Nicolaus & Company Inc. 655 Metro Place South Dublin, OH 43017 Steven Jefferis 877-875-9352 TRANSFER AGENT AND REGISTRAR: For transfers and general correspondence, please contact: American Stock Transfer and Trust Company 40 Wall Street, 46th Floor New York, NY 10005 1-800-937-5449 4 UNITED BANCORP, INC. 2001 ANNUAL REPORT DIVIDEND AND STOCK HISTORY
Distribution Date of Cash Dividends Dividends and Declared(1) Stock Dividends Exchanges -------------- --------------- -------------------- 1983 $ 0.10 -- -- 1984 $ 0.10 4 for 1 Exchange(2) January 2, 1984 1985 $ 0.11 -- -- 1986 $ 0.13 -- -- 1987 $ 0.13 50% Stock Dividend October 2, 1987 1988 $ 0.14 -- -- 1989 $ 0.14 -- -- 1990 $ 0.16 -- -- 1991 $ 0.17 -- -- 1992 $ 0.18 100% Stock Dividend September 10, 1992 1993 $ 0.19 100% Stock Dividend November 30, 1993 1994 $ 0.21 10% Stock Dividend September 9, 1994 1995 $ 0.29 -- -- 1996 $ 0.31 10% Stock Dividend June 20, 1996 1997 $ 0.36 10% Stock Dividend September 19, 1997 1998 $ 0.41 5% Stock Dividend December 18, 1998 1999 $ 0.46 5% Stock Dividend December 20, 1999 2000 $ 0.48 5% Stock Dividend December 20, 2000 2001 $ 0.50 5% Stock Dividend December 20, 2001
2002 ANTICIPATED DIVIDEND PAYABLE DATES FIRST QUARTER March 20, 2002 - -------------------------------------------------------------------------------- SECOND QUARTER* June 20, 2002 - -------------------------------------------------------------------------------- THIRD QUARTER* September 20, 2002 - -------------------------------------------------------------------------------- FOURTH QUARTER* December 20, 2002 - -------------------------------------------------------------------------------- *Subject to action by Board of Directors - -------------------------------------------------------------------------------- (1) Adjusted for stock dividends and exchanges. Does not include dividends from Southern Ohio Community Bancorporation, Inc. prior to the merger. (2) Formation of United Bancorp, Inc. (UBCP). The Citizens Savings Bank share holders received 4 shares of UBCP stock in exchange for 1 share of The Citizens Savings Bank. TOTAL RETURN PERFORMANCE [LINE GRAPH] UNITED BANCORP, INC. 2001 ANNUAL REPORT 5 [UNITED BANCORP LOGO] DIRECTORS AND OFFICERS [PHOTO] [PHOTO] [PHOTO] MICHAEL J. ARCIELLO(1,2) HERMAN E. BORKOSKI(2) JAMES W. EVERSON(1,2,3) [PHOTO] [PHOTO] [PHOTO] DR. LEON F. FAVEDE(2) PAUL J. GERIG(3) JOHN R. HERZIG(2) [PHOTO] [PHOTO] [PHOTO] DWAIN R. HICKS(2) ALAN M. HOOKER(3) JOHN M. HOOPINGARNER(1,2) (1)=United Bancorp, Inc. (2)=The Citizens Savings Bank (3)=The Community Bank 6 UNITED BANCORP, INC. 2001 ANNUAL REPORT 2001 [PHOTO] [PHOTO] [PHOTO] SAMUEL J. JONES(3) PHILIP D. KASLER(3) MICHAEL A. LEY(2) [PHOTO] [PHOTO] [PHOTO] TERRY A. MCGHEE(1,3) L. E. RICHARDSON, JR.(1,3) ROBIN L. RHODES, M.D.(3) [PHOTO] RICHARD L. RIESBECK(1,2) [PHOTO] [PHOTO] [PHOTO] ERROL C. SAMBUCO(2) MATTHEW C. THOMAS(1,2) BARI J. WATKINS, PH.D.(3) (1)=United Bancorp, Inc. (2)=The Citizens Savings Bank (3)=The Community Bank UNITED BANCORP, INC. 2001 ANNUAL REPORT 7 DIRECTORS OF UNITED BANCORP,INC. Michael J. Arciello(2,3) ...................................Retired Vice President of Finance, Nickles Bakeries, Inc., Navarre, Ohio James W. Everson(1) ...........................................Chairman, The Community Bank, Lancaster, Ohio - Chairman, President & Chief Executive Officer, United Bancorp, Inc. and The Citizens Savings Bank, Martins Ferry, Ohio John M. Hoopingarner(1,3) .........................General Manager, Muskingum Watershed Conservancy District, New Philadelphia, Ohio Terry A. McGhee(1,2) ..............................................President & Chief Executive Officer, Westerman Inc., Bremen, Ohio L.E. Richardson, Jr. ..........................................................Retired President, The Community Bank, Glouster, Ohio Richard L. Riesbeck(1,3) ..............................................President, Riesbeck Food Markets, Inc., St. Clairsville, Ohio Matthew C. Thomas(2) ................................................President, M.C. Thomas Insurance Agency, Inc., Bridgeport, Ohio OFFICERS OF UNITED BANCORP,INC. James W. Everson ......................................................................Chairman, President & Chief Executive Officer Alan M. Hooker ............................................................................Executive Vice President - Administration Norman F. Assenza, Jr. ....................................................................Vice President - Operations and Secretary Randall M. Greenwood ............................................................Vice President - Chief Financial Officer, Treasurer James A. Lodes .............................................................................................Vice President - Lending DIRECTORS OF THE CITIZENS SAVINGS BANK, MARTINS FERRY, OHIO Michael J. Arciello(2) .....................................Retired Vice President of Finance, Nickles Bakeries, Inc., Navarre, Ohio Herman E. Borkoski(2) ...................................................President, Borkoski Funeral Homes, Inc., Tiltonsville, Ohio James W. Everson(1) Chairman, The Community Bank, Lancaster, Ohio - Chairman, President & Chief Executive Officer, United Bancorp, Inc. and The Citizens Savings Bank, Martins Ferry, Ohio Dr. Leon F. Favede ....................................................................................Optometrist, Bridgeport, Ohio John R. Herzig ..............................................................President, Toland-Herzig Funeral Homes, Strasburg, Ohio Dwain R. Hicks ....................................................President, Hicks Consulting and Investing, New Philadelphia, Ohio John M. Hoopingarner(1) ...........................General Manager, Muskingum Watershed Conservancy District, New Philadelphia, Ohio Michael A. Ley ....................................................President and Owner, Robert's Men's Shops, New Philadelphia, Ohio Richard L. Riesbeck(1) ................................................President, Riesbeck Food Markets, Inc., St. Clairsville, Ohio Errol C. Sambuco(2) .................................................................................Consultant, Martins Ferry, Ohio Matthew C. Thomas(1,2) ..............................................President, M.C. Thomas Insurance Agency, Inc., Bridgeport, Ohio John H. Clark, Jr., Director Emeritus; 1976-2001 .........................United Bancorp, Inc. and The Citizens Savings Bank Donald A. Davison, Director Emeritus 1963-1997 ...........................United Bancorp, Inc. and The Citizens Savings Bank Albert W. Lash, Director Emeritus 1975-1996 ..............................United Bancorp, Inc. and The Citizens Savings Bank DIRECTORS OF THE COMMUNITY BANK, LANCASTER, OHIO James W. Everson(1) ...........................................Chairman, The Community Bank, Lancaster, Ohio - Chairman, President & Chief Executive Officer, United Bancorp, Inc. and The Citizens Savings Bank, Martins Ferry, Ohio Paul J. Gerig ........................................................................Attorney at Law, Gerig and Gerig, Athens, Ohio Alan M. Hooker(1) ..........................................President & Chief Executive Officer, The Community Bank, Lancaster, Ohio Samuel J. Jones(1,2) .................................................................................Business Owner, Glouster, Ohio Philip D. Kasler(2) ........................................................................Farming and Real Estate, Amesville, Ohio Terry A. McGhee(1,2) ..............................................President & Chief Executive Officer, Westerman Inc., Bremen, Ohio Robin L. Rhodes, M.D. ...........................................Physician, Pediatric Associates of Lancaster, Inc., Lancaster, Ohio L. E. Richardson, Jr.(1) Retired President, Southern Ohio Community Bancorporation, Inc., Glouster, Ohio Bari J. Watkins, Ph.D. ......................................................................Dean - Ohio University, Lancaster, Ohio Joseph D. Kittle, Director Emeritus 1985-2001 ............................................................The Community Bank Dean A. Kasler, Director Emeritus 1970-1999 ..............................................................The Community Bank
(1)=Executive Committee (2)=Audit Committee (3)=Compensation Committee 8 UNITED BANCORP, INC. 2001 ANNUAL REPORT [UNITED BANCORP LOGO] MANAGEMENT TEAM 2001 OUR COMMUNITIES...YOUR HOMETOWN BANKS & STAFF UNITED BANCORP, INC. . . . Provides its Team Members career growth and training. UNITED BANCORP, INC. . . . Provides the latest in technology and financial services in a centralized environment. UNITED BANCORP,INC. . . . Earns the respect of its customers through support of civic activities that make their communities better places to live. Whether a current shareholder of United Bancorp, Inc., a future shareholder, or a customer of its affiliate banks-The Citizens Savings Bank or The Community Bank-one would agree the presence of a strong corporate culture is critical for long-term success. The statements above are part of United Bancorp, Inc's MISSION STATEMENT. The Board of Directors, along with Senior Management, feel strongly about the Mission Statement which is annually reviewed and reaffirmed to instill its value and fundamental time-proven concepts. The primary objective of any company is the creation of shareholder value. This is the centerpiece of our Mission Statement. Our mission is to earn the respect of our shareholders through continued growth in shareholder value by sustaining profitability and acquiring well managed and capitalized businesses in the financial service industry. It is vital to develop strategies that make attaining this goal possible. SERVICE is our primary product. Our success is measured by how well we meet and exceed our customers' expectations. Customer satisfaction creates a benefit for everyone-management, staff and shareholders. United Bancorp, Inc. and its affiliate banks are proud of their reputation for stability, consistency and integrity. Pride in our past history, however, does not mean we maintain an inflexible view of the future. It means a commitment to the philosophy that has made this Company successful. The rapidly changing environment of the banking industry requires us to understand and integrate technological change and enhance service delivery channels. Meeting this challenge will provide an environment for our current and future team members to continue providing quality products and services, which our customers have grown to expect from us. Our Annual Reports in previous years have provided a focus on our banking customers and their geographic and industry diversification. We have demonstrated Management's ability to establish and maintain strong relationships with our customers through decades of service and consistency of quality personnel. We have focused on delivery of the latest in Electronic Banking technology and new products, such as our Internet Banking, Telephone Banking and Cash Management programs. This year, our Annual Report focuses on the Team Members of your company. Their daily commitment to our customers and our organization make the difference in realizing the goals of our Mission Statement. Our Team Members are our most valuable resource. UNITED BANCORP, INC. 2001 ANNUAL REPORT 9 [PHOTO] Electronic Banking Committee (front row left to right) Linda Koledin, Scott Everson, Norman (John) Assenza (back row left to right) Judy Leonard, Michael Lloyd, Richard Pollock, James Lodes, Jeffery Urban, Ida Neely and Thomas Buck CUSTOMER SERVICE ENHANCEMENTS During the past 18 months, the Electronic Banking Committee has effectively implemented critical electronic delivery channels to improve customers' access to their accounts 24x7x365. This committee, with representatives from both affiliate banks, has oversight responsibility on the implementation and continued monitoring of the Company's Phone Banking System, Retail Internet and Corporate Cash Management Programs. These programs offer consumers and businesses better ways to control finances with greater convenience and accuracy than ever before. Our Electronic Programs streamline routine banking tasks safely and securely, while being flexible enough to suit the unique requirements of each individual or business. Our Internet Banking Program is like having a banking center in your home or office-anywhere, anytime. TECHNOLOGICAL ADVANCES Changing technology enables us to develop new business practices and procedures to take advantage of available automated tools and products. Ultimately, successful implementation of these tools will help us better serve our customers. We will continue to invest in new technology over the next several years, in order to improve customer service. Managing technology is Michael A. Lloyd, Senior Vice President-Management Information Systems of The Citizens Savings Bank. Supervisor for the consolidated Item Processing of the Company is Dolores A. Schafer, and Richard J. Pollock is in charge of Network Administration for the 17 banking locations of both affiliate banks. [PHOTO] Item Processing (from left) Nicole Caraway, Jennifer Bland, Candy Rykowski and Dolores Shafer [PHOTO] [PHOTO] Michael Lloyd, Richard Data Processing - Thomas Pollock and Dolores Shafer Gibson and Jill Marshall 10 UNITED BANCORP, INC. 2001 ANNUAL REPORT FINANCIAL REPORTING & BOOKEEPING Consolidated Corporate Accounting, is located in the Operations Center of The Citizens Savings Bank. It is responsible for United Bancorp's financial and regulatory reporting requirements, development and maintenance of both affiliates' Asset/Liability modeling systems, and overall funds management and budget process. Managing the Corporate Accounting area is Randall M. Greenwood, Senior Vice President and Chief Financial Officer of The Citizens Savings Bank. Larry D. Browning, Vice President and Treasurer, is responsible for the Asset/Liability and budget systems of the Company and Matthew D. Jenkins, Assistant Vice President and Controller, is in charge of the regulatory reporting and funds management areas. Veronica L. Morris, Accounting Supervisor, oversees the consolidated bookkeeping area. [PHOTO] (from left) Matthew Jenkins, Larry Browning, Veronica Morris and Randall Greenwood COMPLIANCE & HUMAN RESOURCES Realizing the need to have common policies and procedures, the Company has put together the experienced team of Norman F. Assenza, Jr., Senior Vice President-Regulatory Compliance and Secretary and Jean E. Huff, Vice President-Human Resources and Assistant Secretary, both of The Citizens Savings Bank. Utilizing this consolidated approach, the affiliates have a common compliance-testing program that is reviewed and approved annually by the Audit Committee. The coordination of employee benefits such as health, dental, retirement and 401(k) programs is administered by United Bancorp, Inc. under the direction of Jean E. Huff. [PHOTO] Jean Huff and Norman (John) Assenza UNITED BANCORP, INC. 2001 ANNUAL REPORT 11 [PHOTO] The Community Bank THE COMMUNITY BANK "COME GROW WITH US" Realizing the significant growth The Community Bank has experienced over the past two years, the bank established several committees to handle the issues that result from this expansion. TRAINING COMMITTEE With growth comes the need for additional staff and identification of career paths. With this in mind, a Training Committee, consisting of Alan M. Hooker, President and CEO, Holly R. Shonebarger, Operations Specialist, Nancy J. Monks, New Accounts Representative and Marissa D. Wagner, Receptionist was set in place. This committee works closely with the Officers and Staff to develop and deliver courses and programs. These range in scope from operational training to product knowledge training and from sales training to supervisory skills training. [PHOTO] Training Committee (from left) Holly Shoneburger, Marissa Wagner, Alan Hooker and Nancy Monks 12 UNITED BANCORP, INC. 2001 ANNUAL REPORT ASSET LIABILITY COMMITTEE With each Bank affiliate in a separate and distinct market, it is critical to have local decision-making on pricing to stay competitive and maintain the culture of the local bank making local decisions. The Community Bank's Asset/Liability Committee serves that need with monthly discussions on loan and deposit pricing as well as market surveys. All areas of the bank are represented, and Alan M. Hooker, President and Chief Executive Officer, chairs the committee whose members include Randall M. Greenwood, Vice President and CFO of United Bancorp, Inc., Thomas E. Buck, Senior Vice President, and Ida M. Neely, Treasurer of The Community Bank. [PHOTO] Asset Liability Committee - Ida Neely, Thomas Buck and Alan Hooker [PHOTO] Ida Neely, Debbie Hinerman, Lori McElfresh, Angela Kempton and Thomas Buck CONTINUOUS QUALITY IMPROVEMENT COMMITEE An additional challenge is to make sure the products and services are delivered in an efficient and effective manner. The Continuous Quality Improvement Committee regularly reviews procedures to make sure customers are receiving timely service that is beyond their expectations. Chaired by Senior Vice President, Thomas E. Buck, the Continuous Quality Improvement Committee is made up of Debbie L. Hinerman, Manager, Nelsonville Office, Lori A. McElfresh, Manager, East Main Street Office, Angela R. Kempton, Loan Administration Manager and Ida M. Neely, Treasurer. UNITED BANCORP, INC. 2001 ANNUAL REPORT 13 [PHOTO] The Citizens Savings Bank - Martins Ferry,Ohio THE CITIZENS SAVINGS BANK A Century of Service, 1902-2002 Celebrating 100 years of service, The Citizens Savings Bank has a long history of success developed through consistent and dedicated leadership. As the bank moves forward into its second century of service, responding to customers needs and differentiation of services offered will be necessary to carry forward our rich tradition of growth and superior earnings performance. COMMERCIAL LENDING TEAM IN EASTERN REGION The Citizens Bank has established an experienced Lending Team to respond to the needs of our local communities. This loan team is comprised of loan officers who are knowledgeable and experienced in commercial credit, residential real estate lending and consumer loans. [PHOTO] Commercial Lending Team in Eastern Region (left to right) James Everson, Michael Goclan, James Lodes, Bryan Ramsey and Scott Everson 14 UNITED BANCORP, INC. 2001 ANNUAL REPORT LOAN TEAM IN EASTERN REGION Also critical to the lending function is the support from Loan Operations which is a strong, qualified group of experienced professionals. Our centralized Loan Center serves all 10 banking locations of The Citizens Savings Bank and provides support services, such as loan participations and secondary market mortgage loan programs for The Community Bank. [PHOTO] Loan Team in Eastern Region (left to right) Scott Everson, Raye Ackerman, Lloyd Hood, Michael Goclan, Ray Jablonski, James Everson, James Lodes and Bryan Ramsey [PHOTO] Marketing Committee (left to right) Scott Everson, James Lodes, Linda Koledin and Jeffrey Urban MARKETING COMMITTEE The Citizens Bank Marketing Committee, made up of Scott A. Everson, Senior Vice President-Operations and Retail Banking, James A. Lodes, Senior Vice President-Bank Lending, and Jeffrey K. Urban, Senior Vice President-Area Manager of Northern and Central Regions, was established in January 2000 to meet the challenges of promoting a positive image to the communities served and respond to customer requirements. Linda J. Koledin joined the Bank Team as Marketing Director in May 2001 to provide additional resources in this area. With an internal Marketing presence now established, communication is enhanced and the committee can respond promptly to advertising and promotional needs. UNITED BANCORP, INC. 2001 ANNUAL REPORT 15 [UNITED BANCORP LOGO] THE CITIZENS SAVINGS BANK PROFILE 2001 A CENTURY OF SERVICE AT THE CITIZENS SAVINGS BANK [SEAL] ANNIVERSARY 1902-2002 In the year 1902, a group of hometown businessmen in Martins Ferry felt there was room for another bank in the community in addition to the two already established and proceeded to organize. On the 27th of January, 1902, a charter was granted to The German Savings Bank of Martins Ferry, Ohio with an authorized capital of $50,000. Martins Ferry is nestled among the scenic foothills along the Upper Ohio Valley across the river from the greater metropolitan area of Wheeling, West Virginia, 60 miles southwest of Pittsburgh, Pennsylvania and 125 miles east of Columbus, Ohio. The area has a strong network of transportation including easy access to major interstate highway systems, nearby river and railway transportation and within 45 minutes of the Pittsburgh International Airport. Organization was completed by electing the original Board of Directors: Attorney Edward E. McCombs, John E. Reynolds, Henry H. Rothermund, William M. Lupton, Dr. Joseph W. Darrah, Chris A. Heil, Fred K. Dixon, Thomas J. Ball and Dr. R.H. Wilson. The first officers were Edward E. McCombs, President; John E. Reynolds, Vice President; William C. Bergundthal, Cashier; and William H. Wood, Assistant Cashier. A room in the old Henderson Building located at the alley on Hanover Street between Fourth and Fifth Streets, currently occupied by a local realtor, was rented. A vault and counters were installed and the new Bank opened for business on Saturday, April 26, 1902. This was the beginning of The Citizens Savings Bank. Upon Mr. Bergundthal's death in 1918, Harold H. Riethmiller, who began his banking career at the bank in 1911, was rehired by the Bank as Cashier. He had previously worked for the Bank and had been working for 6 months at the Citizens-Peoples Trust Company in Wheeling. Mr. Riethmiller brought with him an assistant, David W. Thompson, who upon his death in 1966 was Vice President and Cashier. In 1936 the Bank suffered a loss with the sudden death of Edward E. McCombs, who had served as President and Attorney for the Bank during the 34 years since its beginning. John E. Reynolds was then elected President with Attorney David H. James as Vice President. Mr. Reynolds served as the bank's second President until his death in 1940, at which time Harold H. Riethmiller was elected President. Upon Harold H. Riethmiller's retirement in January of 1973, James W. Everson, who began his banking career as a student intern with the Bank in 1959, was elected as the Bank's fourth President and Chief Executive Officer. [PHOTO] Citizens Bank Senior Management Team (standing left to right) Michael Lloyd, Randall Greenwood, James Lodes, Norman (John) Assenza (seated left to right) Jeffery Urban, James Everson and Scott Everson 16 UNITED BANCORP, INC. 2001 ANNUAL REPORT May 1999, The Citizens Savings Bank and its affiliate, The Citizens-State Bank of Strasburg, Ohio were merged into one Bank under the leadership of James W. Everson continuing as Chairman and Harold W. Price as the bank's fifth President and Chief Executive Officer since its founding in 1902. Harold W. Price served as President and CEO for five months, suffering a fatal heart attack on September 12th, 1999, after which James W. Everson was reappointed Chairman, President and CEO. Continuing growth and increased business at The German Savings Bank brought the need for larger quarters, and in 1917 the Bank relocated into a new banking building on the corner of Fourth and Walnut streets where they were located until February 21, 1984 when they moved to their current banking center located one block south at the corner of Fourth and Hickory Street in Martins Ferry. The First World War brought the name 'German' into bad repute, making a change in name necessary. On May 1, 1918, the old German Savings Bank became The Citizens Savings Bank of Martins Ferry, Ohio. In 1957, a total remodeling of the first level was completed at the Fourth and Walnut location enlarging the banking lobby by taking the adjoining room formerly occupied by the Mear Drug Store. In 1963, the Bank opened a Consumer Loan Office at the Fourth and Walnut Street location by expanding into the space occupied by the former Packer Insurance Agency. Upon James W. Everson becoming President in January 1973, the bank began an expanded growth program. November 18, 1974 was the date the Bank's first branch office was opened. A banking center was opened in Colerain, Ohio offering full service banking to that area, including safe deposit boxes and a modern new home for the Colerain, Ohio Post Office. On June 12, 1978, the Bank opened its second full service branch at the corner of Howard and DeKalb Streets in Bridgeport, Ohio. Recognizing the continued growth of the Bank, the Board of Directors authorized the purchase in July 1979 of an .8 acre site formerly occupied by the vacated Central School, one block south on the Corner of Fourth and Hickory Streets, for the purpose of future expansion. A Phase I building program was completed on May 12, 1980 with the opening of a limited-service four-station auto teller with a two-station lobby and large off-street parking facility. [PHOTO] Pictured is a view of the inside of The Citizens Bank in Martins Ferry,Ohio UNITED BANCORP, INC. 2001 ANNUAL REPORT 17 [PHOTO] Pictured is Corrina DeNoon, a customer service representative selecting a gift from the Salvation Army Gift Giving Tree for children In October of 1982, approval was granted by the State Banking Department and the Federal Deposit Insurance Corporation to relocate the bank's Main Office to the corner of Fourth and Hickory streets in Martins Ferry and ground was immediately broken for a new banking center. As a result of 5 years of strategic planning, The Citizens Savings Bank introduced a new era of banking to the Ohio Valley on February 21, 1984 with the opening of their new 21,500 square foot headquarters office located at the corner of Fourth and Hickory streets. This new banking center offered state-of-the-art security with high-tech scanning and alarm equipment, and the latest in electronic data processing programs for banking. The new Bank building was designed by the architectural firm of Jack H. Tribbie and Associates of Martins Ferry and was constructed by the Byrum Construction Company of Martins Ferry. The new building was of colonial design in keeping with the Bank's Colerain and Bridgeport offices, with the interior of the Bank tastefully decorated in the Williamsburg period. On July 3, 1983, the Bank's Board of Directors positioned itself for continued growth by forming United Bancorp, Inc. of Martins Ferry, Ohio, a Citizens Savings Bank holding company. At formation, the shareholders of The Citizens Savings Bank exchanged their stock on a one-for-four basis for shares in the United Bancorp, Inc. On December 29, 1986, United Bancorp, Inc. became one of Ohio's then 21 multi-bank holding companies by acquiring the outstanding shares of stock of The $12.5 Million Asset based Citizens-State Bank of Strasburg, Ohio. Under the leadership of James W. Everson as Chairman and Charles E. Allensworth as President and CEO, The Citizens-State Bank then grew from its one office in Strasburg by opening a new banking center at 2909 N. Wooster Avenue in Dover, Ohio in February 1990; the purchase of their offices in New Philadelphia and Sherrodsville in April 1992; and the purchase of its Dellroy Office in June 1994. Harold W. Price was appointed President and CEO of The Citizens-State Bank of Strasburg in April 1993. The Citizens Savings Bank of Martins Ferry further expanded into St. Clairsville with an in store location at Riesbeck's Food Market in July 1997 and purchased a full service banking center in Jewett, Ohio in January 1999. United Bancorp entered Northern Athens County in July 1998 when The $47.8 million asset based Community Bank of Glouster was purchased, expanding United Bancorp, Inc. to a three bank holding company. Today, The Community Bank is headquartered in Lancaster, Ohio with three locations in addition to its two offices in Glouster and offices in Amesville and Nelsonville, Ohio As space in the new headquarters became occupied, property across from the new Main Office on the other corner of Fourth and Hickory Streets was acquired in 1993 to support the continued growth. It was renovated into a modern Operations Center now housing the Data and Item Processing Equipment for the affiliate banks of United Bancorp, Inc. and the offices for United Bancorp, Inc.'s Accounting Group. With the introduction of 24 x 7 x 365 Automated Call Center and Internet Banking in 2001, the Accounting and Operations Center was further expanded through and purchase and renovation of the adjoining property formerly 18 UNITED BANCORP, INC. 2001 ANNUAL REPORT [PHOTO] Jeff Urban covering items in a staff meeting in our Northern and Central Region known as the Fullerton Bakery Building. Today the Accounting and Operations Center Building supports the back room operations for the seventeen banking offices of The Citizens Bank and The Community Bank of Lancaster. On April 21, 1999 the $74.1 million asset based Citizens-State Bank of Strasburg was merged into The Citizens Savings Bank. This expanded customer service under the charter of The Citizens Savings Bank to 10 locations in Belmont, Carroll, Harrison and Tuscarawas counties. Harold W. Price, who had served as President and CEO of The Citizens-State Bank of Strasburg was appointed The Citizens Savings Bank's fifth President and CEO with James W. Everson continuing as Chairman, in addition to serving as Chairman of The Community Bank and Chairman, President and CEO of United Bancorp. Everson was reappointed Chairman, President and CEO of The Citizens Savings Bank five months later upon Harold W. Price's sudden death. The growth and success of The Citizens Savings Bank and the United Bancorp, Inc. have been attributed to the association of many dedicated men and women. Having served on the Board of Directors are Edward E. McCombs, 1902-1936; John E. Reynolds, 1902-1940; Dr. J.W. Darrah, 1902- 1937; J.A. Crossley, 1902-1903; William M. Lupton, 1902-1902; F.K. Dixon, 1902-1909; Dr. R.H. Wilson, 1902-1905; C.A. Heil, 1903-1909; David Coss, 1904-1938; L.L. Scheele, 1905-1917; A.T. Selby, 1906-1954; H.H. Rothermund, 1907-1912; Dr. J.G. Parr, 1912-1930; T.E. Pugh, 1920-1953; J.J. Weiskircher, 1925-1942; David H. James, 1925-1963; Dr. C.B. Messerly, 1931-1957; H.H. Riethmiller, 1936-1980; E.M. Nickles, 1938-1968; L.A. Darrah, 1939-1962; R.L. Heslop, 1941-1983; Joseph E. Weiskircher, 1943-1975; Edward M. Selby, 1953-1976; David W. Thompson, 1954-1966; Dr. Charles D. Messerly, 1957-1987; James M. Blackford, 1962-1968; John H. Morgan, 1967-1976; Emil F. Snyder, 1968-1975; James H. Cook, 1976-1986; Paul Ochsenbein, 1978-1991; David W. Totterdale, 1981-1995; Albert W. Lash, 1975-1996; Premo R. Funari, 1976-1997; Donald A. Davison, 1963-1997; Harold W. Price, 1999-1999; and John H. Clark, Jr., l976-2001. Today, The Citizens Savings Bank is Martins Ferry's only [PHOTO] Pictured are the Director of the United Way of the Upper Ohio Valley Chris Marshall, Mike Goclan, James Everson and James Lodes, celebrating at the bank's annual Plaza West Fest in St. Clairsville, Ohio UNITED BANCORP, INC. 2001 ANNUAL REPORT 19 [PHOTO] Dee Graham and her grandson Frankie Carpenter participating in the 2001 Martins Ferry Christmas Parade locally owned financial institution. The general objective of The Citizens Savings Bank as outlined in its Mission Statement which was adopted by its Board of Directors on June 8, 1982 and renewed annually is to remain an independent state-chartered commercial bank and expand its asset base and market share through acquisitions and new branch construction where financially feasible. Currently serving on the bank's board of directors are Michael J. Arciello, Retired Vice President of Finance, Nickles Bakery, Inc; Herman E. Borkoski, President, Borkoski Funeral Homes, Inc; James W. Everson, Chairman, The Community Bank of Lancaster, Chairman, President and Chief Executive Officer of United Bancorp, Inc. and The Citizens Savings Bank; Dr. Leon F. Favede, Optometrist; John R. Herzig, President, Toland-Herzig Funeral Homes; Dwain R. Hicks, President, Hicks Consulting and Investing; John M. Hoopingarner, General Manager and Secretary-Treasurer of the Muskingum Watershed Conservancy District; Michael A. Ley, President and Owner, Robert's Men's Shops; Richard L. Riesbeck, President of Riesbeck Food Markets, Inc.; Errol C. Sambuco, Consultant; and Matthew C. Thomas, President, M. C. Thomas Insurance Agency Inc. [PHOTO] Randy Greenwood & son Matthew, Pat Ketzell, Rosemary Bayliss & granddaughter Brittany & Nancy Strama passing out balloons at the Bank's Annual Plaza West Fest in St.Clairsville, Ohio 20 UNITED BANCORP, INC. 2001 ANNUAL REPORT [UNITED BANCORP LOGO] THE COMMUNITY BANK PROFILE 2001 COMMUNITY was established in August 1945 with corporate offices in downtown Glouster, Ohio, in Athens County. Its founder was L.E. Richardson, a local entrepreneur. At that time, Athens County was booming with the industries of gas, oil and coal mining. COMMUNITY was then known as The Glouster Community Bank. The bank played a vital role in the region as it developed, earning a reputation for friendliness, quality customer service and responsiveness to the individual financial needs of its customers, as well as the community. More than 25 years later, Richardson turned over the day-to-day management of the bank to his son, L.E. Richardson, Jr., in 1971. With that foundation, COMMUNITY acquired the First National Bank of Amesville, Ohio in 1976. The bank's prosperity continued, and, in 1978, a three-lane Auto Bank drive-up facility was constructed on the west side of Glouster. In 1984, the bank created a holding company, Southern Ohio Community Bancorp, Inc. in anticipation of future growth and diversification of products and services. In 1987, the service area was expanded once again. A modular office in Nelsonville served the village and the surrounding communities. A few years later, on December 6, 1993 a ribbon cutting ceremony was held for a newly constructed Nelsonville office. The brick building, which replaced the mobile bank unit, features four drive-up lanes and a drive-up ATM. Night deposit and safe deposit box services were also introduced to the Nelsonville area. COMMUNITY has a long and rich association with Hocking College. The two-year college combines academics with hands-on technical learning, and attracts students from all over the United States and the world. COMMUNITY is pleased to meet the financial needs of Hocking College's faculty, staff and students. To enhance customer service, COMMUNITY has two automatic teller machines on the 2,300-acre Nelsonville campus, one at the Student Center and the other in the School of Nursing building. In 1996, COMMUNITY completed an extensive renovation of its downtown Glouster office, including the addition of a 24-hour access ATM in the vestibule. In 1998, COMMUNITY became affiliated with United Bancorp, Inc. of Martins Ferry, Ohio, when United Bancorp purchased The Glouster Community Bank and its holding company, Southern Ohio Community Bancorp, Inc. [PHOTO] Pictured is a view of the inside of The Community Bank in Lancaster,Ohio UNITED BANCORP, INC. 2000 ANNUAL REPORT 21 [PHOTO] Ida Neely and Lori McElfresh at the Lancaster/Fairfield County Chamber of Commerce Annual Meeting That acquisition led to COMMUNITY establishing a Loan Production Office (LPO) in 1998 in Lancaster, Ohio. This LPO provided the opportunity for COMMUNITY to build its franchise along the U.S. Route 33 corridor from Athens County through Fairfield County. Lancaster, the county seat of Fairfield County, is approximately 30 miles southeast of Columbus, Ohio and is considered a bedroom community to Columbus. According to the city's Economic Development Office, Fairfield County is the fourth fastest growing county in Ohio and is ranked among the top six counties for growth potential. To strengthen COMMUNITY'S presence is this fast growing area, the bank undertook significant expansion efforts in Fairfield County under the leadership of Alan M. Hooker. Hooker was named President and CEO of COMMUNITY in October 1998. A well-known Lancaster resident, he brought to COMMUNITY more than 30 years of bank management experience. COMMUNITY opened its first Fairfield County banking office in December 1999. The [PHOTO] Pictured is the AutoBank In Lancaster,Ohio 22 UNITED BANCORP, INC. 2001 ANNUAL REPORT East Main Street Banking Office in Lancaster offers full service banking with extended evening and Saturday hours. The office features a three-lane drive-up, a drive-up ATM and night depository. In January 2000, COMMUNITY relocated its Main Office from Glouster to downtown Lancaster. This substantial investment significantly strengthened COMMUNITY'S presence in Fairfield County. Formerly a furniture store, the historic 1919 building was restored to as near the original appearance as possible. The building was further enhanced with a Verdin Company clock. The 435-pound timepiece is attached to the southeast corner of the building. The interior of the building was converted from a [PHOTO] Angela Wright helping out the Salvation Army [PHOTO] UNITED BANCORP, INC. 2001 ANNUAL REPORT 23 furniture store to a modern full service banking office. Of special note is the historical mural of Fairfield County landmarks, painted by local stencil artist Cheryl Fey, which graces the main stairway. The renovation added greatly to the city's business district, as the Main Office complements the downtown revitalization that also was completed in 2000. COMMUNITY'S Auto Bank, located across the street from the Main Office, also was opened in January 2000. The structure is unique to the market, because of its walk-in lobby. It also features a four-lane drive-thru, night depository and automatic teller machine. In July 2000, COMMUNITY opened its Community Room, also unique to the area. The Community Room has grown quickly into a convenient and frequently used location for meeting of area civic organizations. It is also a popular gallery for local artists to display their talents. From the rolling hills of Athens County to the bustling commerce of Fairfield County, COMMUNITY continues to play a vital role in the lives of its customers and the region it serves. The bank not only has built upon its customer base through the years, but upon its reputation for friendliness, quality customer service and responsiveness to the individual financial needs of its customers and the communities it proudly serves. 24 UNITED BANCORP, INC. 2001 ANNUAL REPORT [UNITED BANCORP LOGO] TABLE OF CONTENTS - FINANCIAL 2001 TABLE OF CONTENTS DECADE OF PROGRESS ...................................................... 26 MANAGEMENT DISCUSSION AND ANALYSIS ...................................... 28 REPORT OF INDEPENDENT AUDITORS .......................................... 43 FINANCIAL STATEMENTS .................................................... 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .......................... 48 FIVE YEAR PERFORMANCE SUMMARY ............................... INSIDE BACK COVER
- -------------------------------------------------------------------------------- FOR THE TWELVE MONTHS ENDED DECEMBER 31,
2001 2000 CHANGE ----------- ----------- -------- EARNINGS Total interest income $24,595,769 $23,734,085 3.63% Total interest expense 12,348,548 12,336,669 0.10% Net interest income 12,247,221 11,397,416 7.46% Provision for loan losses 780,00 587,000 32.88% Total noninterest income 1,606,046 1,368,986 17.32% Total noninterest expense 9,382,984 8,711,655 7.71% Net income 2,755,587 2,586,975 6.52% PER SHARE Earnings per common share - Basic $ 0.88 $ 0.81 8.64% Earnings per common share - Diluted 0.88 0.81 8.64% Cash Dividends paid 0.50 0.48 4.17% Book value (end of period) 9.75 8.98 8.57% SHARES OUTSTANDING Average - Basic 3,142,949 3,205,822 -- Average - Diluted 3,147,295 3,206,997 --
UNITED BANCORP, INC. 2001 ANNUAL REPORT 25 [UNITED BANCORP LOGO] DECADE OF PROGRESS
(Unaudited) (as originally reported)(1) 1991 1992 1993 ------------ ------------ ------------ Interest and dividend income $ 11,699,233 $ 12,166,789 $ 11,656,336 Interest expense 6,712,916 5,948,713 5,259,839 ------------ ------------ ------------ Net interest income 4,986,317 6,218,076 6,396,497 Provision for loan losses 222,000 302,000 270,500 ------------ ------------ ------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,764,317 5,916,076 6,125,997 Noninterest income, including security gains/(losses) 505,476 603,325 878,731 Noninterest expense 3,625,772 4,457,545 4,799,745 ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 1,644,021 2,061,856 2,204,983 Income tax expense 361,021 490,352 477,205 NET INCOME $ 1,283,000 $ 1,571,504 $ 1,727,778 ============ ============ ============ Total assets $135,881,746 $164,675,155 $171,682,025 Deposits 118,059,873 145,648,647 152,334,470 Shareholders' equity 12,990,023 14,078,527 15,375,942 Loans receivable, net 77,137,769 79,642,462 86,696,640 Term federal funds 1,000,000 -- -- Allowance for loan losses 846,824 1,039,360 1,256,322 Net charge-offs 96,032 109,464 53,538 Full time employees (average equivalents) 71 83 80 Banking locations Five Seven Seven Earnings per common share - Basic(2) $ 0.48 $ 0.57 $ 0.64 Earnings per common share - Diluted(2) 0.48 0.57 0.64 Dividends per share(2) 0.17 0.18 0.19 Book value per share(2) 4.78 5.18 5.65 Market value range per share(2) 4.02-4.48 4.25-5.88 6.18-11.44 Cash dividends paid $ 462,000 $ 483,000 $ 512,400 Return on average assets(ROA) 0.95% 1.01% 1.04% Return on average equity(ROE) 10.21% 11.60% 11.73%
- ---------- (1) Not restated for the July 7, 1998 Acquisition of Southern Ohio Community Bancorporation, Inc. (2) All years restated for common share dividends. 26 UNITED BANCORP, INC. 2001 ANNUAL REPORT 2001
1994 1995 1996 1997 1998 1999 2000 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 12,283,260 $ 14,351,522 $ 15,006,091 $ 16,205,162 $ 21,126,421 $ 21,638,690 $ 23,734,085 $ 24,595,769 5,439,213 6,575,486 6,747,357 7,346,629 9,657,844 9,844,827 12,336,669 12,348,548 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 6,844,047 7,776,036 8,258,734 8,858,533 11,468,577 11,793,863 11,397,416 12,247,221 281,000 465,000 455,400 444,000 797,957 726,806 587,000 780,000 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 6,563,047 7,311,036 7,803,334 8,414,533 10,670,620 11,067,057 10,810,416 11,467,221 805,355 876,285 920,951 1,027,166 1,581,139 1,285,519 1,368,986 1,606,046 4,867,794 5,174,452 5,289,273 5,654,659 8,007,689 8,189,260 8,711,655 9,382,984 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 2,500,608 3,012,869 3,435,012 3,787,040 4,244,070 4,163,316 3,467,747 3,690,283 545,523 768,577 851,023 940,472 1,089,091 1,003,062 880,772 934,696 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 1,955,085 $ 2,244,292 $ 2,583,989 $ 2,846,568 $ 3,154,979 $ 3,160,254 $ 2,586,975 2,755,587 ============ ============ ============ ============ ============ ============ ============ ========= $185,634,119 $191,199,526 $202,364,858 $211,742,313 $285,492,897 $298,764,079 $323,885,801 $341,317,195 163,312,482 166,604,359 171,512,241 175,791,296 229,110,372 235,539,865 267,552,875 283,375,923 16,518,060 18,451,873 20,016,011 21,924,638 27,320,749 25,297,973 28,679,087 30,474,195 106,952,378 120,907,269 130,637,621 137,308,856 161,187,833 177,406,092 193,707,099 180,460,538 -- -- -- -- -- -- -- -- 1,437,734 1,775,383 2,022,987 2,238,522 3,033,105 3,109,821 2,790,133 2,879,065 99,588 127,351 207,796 228,465 803,374 650,090 906,688 691,068 82 83 84 86 112 135 136 130 Eight Eight Eight Nine Thirteen Seventeen Seventeen Seventeen $ 0.71 $ 0.82 $ 0.95 $ 1.04 $ 0.97 $ 0.97 $ 0.81 0.88 0.71 0.82 0.95 1.03 0.94 0.97 0.81 0.88 0.21 0.29 0.32 0.36 0.41 0.46 0.48 0.50 6.08 6.79 7.36 8.07 8.42 7.80 8.98 9.75 12.07-15.30 8.67-13.26 9.96-16.27 12.71-22.53 15.43-24.48 11.56-22.46 7.26-13.61 9.33-14.00 $ 564,472 $ 776,136 $ 876,153 $ 988,820 $ 1,254,340 $ 1,477,686 $ 1,549,657 $ 1,590,220 1.11% 1.18% 1.32% 1.38% 1.17% 1.09% 0.83% 0.82% 12.24% 12.85% 13.49% 13.56% 11.80% 11.94% 9.88% 9.13%
UNITED BANCORP, INC. 2001 ANNUAL REPORT 27 [UNITED BANCORP LOGO] MANAGEMENT'S DISCUSSION AND ANALYSIS 2001 In the following pages, management presents an analysis of United Bancorp, Inc.'s financial condition and results of operations as of and for the year ended December 31,2001 as compared to prior years. 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 consolidated financial statements and related footnotes and the selected financial data included elsewhere in this report. When used in this discussion or future filings by the Company with the Securities and Exchange Commission, or other public or shareholder communications, or in oral statements made with approval of an authorized executive officer, the words or phrases "will likely result,""are expected to,""will continue,""is anticipated,""estimate,""project,""believe," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national economic conditions, changes in levels of market interest rates, credit risks of lending activities and competitive and regulatory factors, could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from those anticipated or projected. The Company is not aware of any trends, events or uncertainties that will have or are reasonably likely to have a material effect on its liquidity, capital resources or operations except as discussed herein. The Company is not aware of any current recommendations by regulatory authorities that would have such effect if implemented. The Company does not undertake, and specifically disclaims, any obligation to publicly release any revisions that may be made to any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements. FINANCIAL CONDITION OVERVIEW For the year ended December 31, 2001, the Company and its competitors faced an interest rate environment that is historical in nature with eleven interest rate decreases by the Federal Open Market Committee ("FOMC"). This dropped the bank prime lending rate from 7.5% at December 31, 2000 to 4.75% at December 31, 2001. With a slowing economy and the tragic events of September 11, 2001, the FOMC reacted with the interest rate cuts to help stimulate a struggling economy. The financial events that have taken place in 2001 significantly impacted both the Company's loan/deposit pricing and liquidity management. It also impacted how our customers responded to those decisions. As would be expected our customers wanted to "lock-in" their loan rates for longer terms, while the depository preferences were for shorter term certificates of deposits and liquid transaction accounts. For the year ended December 31, 2001, the Company's total assets increased $17,431,394, or 5.4% over December 31, 2000 totals. Average total earning assets increased $27,046,000, or 9.3% over $289,766,000 for 2000.
[TOTAL ASSETS CHART] (In Thousands) YEAR TOTAL ASSETS - ---- ------------ 2001 $341,317 2000 $323,886 1999 $298,764 1998 $285,493 1997 $263,607
28 UNITED BANCORP, INC. 2001 ANNUAL REPORT
[LOANS NET CHART] (In Thousands) YEAR LOAN NET - ---- -------- 2001 $180,461 2000 $193,707 1999 $177,406 1998 $161,188 1997 $168,439
EARNING ASSETS - LOANS Gross loans totaled $183,340,000 at year-end 2001, representing a 6.7% decrease from $196,497,000 at year-end 2000. However, average loans only decreased by $2,272,320, or 1.2% from 2000 to 2001. Installment loans decreased $9,617,000, or 17.4%, real estate loans decreased $1,779,000, or 3.2% and commercial real estate loans decreased $2,849,000 from December 31, 2000. Commercial loans increased $3,087,000 from December 31, 2000. As discussed previously the overall slow down in the economy coupled with historical low interest rates caused management to be cautious in growing loans during this period of uncertainty. Consumers and businesses during the past year became extremely price and term sensitive and were looking for longer term fixed rate loans. Management priced our loan products competitively but not overly aggressively as it was felt the economy would rebound over the next several years and with that would come higher interest rates. Based upon the Asset/Liability model utilized by the Company, Management decided not to over extend into fixed-rate products with rates at or near historical low levels during 2001. Loan production for CITIZENS and COMMUNITY during 2001 yielded different results. 2001 was a contrast to 2000. During 2000, the Company experienced a slow down in prepayments and refinancing on commercial real estate and residen- tial real estate loans as interest rates increased in the first half of the year and held constant for the remainder of the year. The Company's installment lending portfolio decreased by 17.4% from December 31, 2000 to December 31, 2001. These loans represented 24.9% of the total portfolio at year-end 2001 compared to 28.2% at year-end 2000. The targeted installment lending areas encompass the geographic areas serviced by the affiliate Banks, which are diverse, reducing the risk to changes in economic conditions. Competition for installment loans in 2001 principally came from the captive finance companies offering low to zero percent financing for extended terms. With a large share of the consumers being lured to the captive finance companies offering the promotional low rates, the remaining market share to compete for was vastly smaller. Management did not feel it was prudent, given the competition and low yield that were available, to aggressively price our installment loan product to capture this residual business. However, Management has responded to direct competition through customer service enhancements by extending our customer service hours into the evening to provide our customers with the ability to arrange financing at their convenience. In addition, customers may access the Company's 24/7 Internet Banks' and view rates and even inquire about financing at their convenience. They can leave an e-mail and a loan officer will return their call and provide the information requested. The commercial business and commercial real estate portfolio represented approximately 45.5% of the total loan portfolio at December 31, 2001 compared to 43.4% for December 31, 2000. The Company's commercial loan portfolio grew by $3,087,000, or 15.12%. However, the commercial real estate loan portfolio's decrease of $2,849,000 partially offset the growth. Management is pleased with the modest overall increase in the commercial and commercial real estate loan portfolios given the interest rate environment. The Company was able to retain the majority of its corporate accounts during a time when the industry was experiencing a high rate of loan refinancing. To protect the Company's future net interest margin and mitigate its exposure to rising interest rates in future reporting periods, certain interest rate UNITED BANCORP, INC. 2001 ANNUAL REPORT 29
[TOTAL EARNING ASSETS CHART] (In Thousands) YEAR TOTAL EARNING ASSETS - ---- -------------------- 2001 $307,763 2000 $301,738 1999 $276,452 1998 $267,076 1997 $244,362
floors and wider repricing indices were established during 2001. This strategy may have in the short term caused our price sensitive customers to seek alternative financing arrangements. However, in Management's view, this will help preserve the Company's net interest margins and future earning increases if and when interest rates increase and the Company is not locked into historical low rates on its financial assets. Residential real estate loans are comprised of 1, 3 and 5 year adjustable rate mortgages financing to 1-4 family units. The Company does offer fixed rate real estate loans through our Secondary Market Real Estate Mortgage Program. The fixed rate mortgages are originated and serviced by CITIZENS but are sold immediately in the secondary market. Therefore, our customers enjoy the convenience of working and paying with a local bank and are able to obtain long-term fixed-rate financing for their home. Once these loans are originated they are immediately sold in what is referred to as the secondary market. Since the loans are sold, the Company does not assume any interest rate risk in this portfolio. This arrangement is quite common in banks and without such an option our customers would look elsewhere for their home financing needs. As the overall interest rate environment increased during 2000, consumer preferences shifted from fixed rate loan products to variable rate loans. However, with the historical low interest rates in 2001 the Company's Secondary Market Program experienced a high volume of activity. The interest rate environment was favorable to the fixed-rate mortgage loan product and resulted in a high volume of customers refinancing. The Company recognized gains on the sale of secondary market loans of $71,421 in 2001. However, the residential real estate portfolio declined. In 2000, the Company experienced a loss of $27,544 in this program. COMMUNITY continued their growth from the previous years, with an increase in loans of $1,165,000 or 2.4%. The increase this past year is due to the continued expansion of COMMUNITY into the Fairfield County market. COMMUNITY'S loan growth came primarily in the real estate portfolio of $2,042,000 and in the commercial real estate portfolio of $1,803,000. This growth was offset by a decrease of $2,889,000 in the consumer portfolio. CITIZENS bank, experienced a decrease in loans for 2001. Total loans decreased $12,323,000, or 8.35% from December 31, 2000. The decrease primarily came in the consumer portfolio of $6,729,000 and the commercial real estate portfolio of $4,652,000. The allowance for loan losses represents the amount which management and the Board of Directors estimates as adequate to provide for probable incurred losses in the 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 grading model that considers borrowers' past due experience, economic conditions and various other circumstances that are subject to change over time. The loan loss policy for installment loans requires a charge-off if the loan reaches 120-day delinquent status or if notice of bankruptcy is received. The Company follows lending policies, which establish criteria for determining the repayment capacity of borrowers, requirements for down payments and current market appraisals or other valuations of collateral when loans are originated. Installment lending also utilizes credit scoring to help in the determination of credit quality and pricing. The Company recognizes interest income on the accrual basis, except for certain loans which are placed on non-accrual status, when 30 UNITED BANCORP, INC. 2001 ANNUAL REPORT
[RETURN ON AVERAGE ASSETS CHART] (Percent) RETURN ON YEAR AVERAGE ASSETS - ---- -------------- 2001 0.82% 2000 0.83% 1999 1.09% 1998 1.17% 1997 1.10%
in the opinion of Management, doubt exists as to collectability. The Company's policy is to not allow loans greater than 90 days past due to accrue interest unless the loan is both well secured and in the process of collection. When a loan is placed on a non-accrual status, interest income may be recognized as cash payment is received. Management and the Board of Directors believe the current balance of the allowance for loan losses is sufficient to deal with probable incurred losses. Net charge-offs to average loans for the year-ended 2001 was 0.21% compared to 0.49% for 2000. Refer to section Provision for Loan Losses for further discussion on the Company's credit quality. EARNING ASSETS - SECURITIES AND FEDERAL FUNDS SOLD The securities portfolio is comprised of US 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, other than those issued by US Government agencies. The Company does not hold any derivative securities. 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. Securities available for sale at year-end 2001 increased $19,606,000, or 20.8% over 2000, while securities held to maturity decreased $423,000, or 3.9%. Management anticipated that a slow down in the economy would cause interest rates to decline in 2001. With that assumption on interest rates, Management purchased approximately $31 million of government callable agency securities with at least a year "call protection". This strategy enabled the Company to lock into fixed rate securities prior to interest rates decreasing in 2001. As discussed previously, Management anticipated that a slow down in the economy would result in a lower number of loan originations. In addition, Management expected lower interest rates which would increase the risk of loans refinanced. The Company temporarily borrowed from its correspondent banks to purchase the $31 million of securities until cash flow came back to the Company from loans that were repaid. While Management did predict lower interest rates in 2001, the degree on which interest rates decreased was not anticipated. As a result, the Company's investment securities were called at a faster pace and loans decreased more than anticipated which resulted in increased liquidity. At December 31, 2001 the Company had approximately $13,962,000 in Fed Funds Sold.
[NET INCOME CHART] (In Thousands) YEAR NET INCOME - ---- ---------- 2001 $2,756 2000 $2,587 1999 $3,160 1998 $3,155 1997 $2,848
UNITED BANCORP, INC. 2001 ANNUAL REPORT 31 SOURCES OF FUNDS - DEPOSITS The Company's primary source of funds is core deposits from retail and business customers. These core deposits include all categories of interest-bearing deposits, excluding certificates of deposit greater than $100,000. During 2001, deposits increased $6,803,000 or 2.9%. Deposit growth for CITIZENS and COMMUNITY was $2,856,000 and $3,947,000, respectively, for the year ended December 31, 2001. The Company continues to benefit from strong depository growth as a direct result of the expansion of COMMUNITY into Fairfield County (Lancaster). The Company maintains strong deposit relationships with 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 relatively stable balances with the Company due to various funding and disbursement time-frames. Certificates of deposit greater than $100,000 are not considered part of core deposits and, as such, are used as a tool to balance funding requirements. At year-end 2001, certificates of deposit greater than $100,000 increased $9,020,000 or 30.7% over year-end 2000 totals. COMMUNITY accounted for approximately 84% of this growth. Generally, the repricing structure and duration of the Company's earning assets and interest paying liabilities is such as to create a negative GAP position for interest rate management. Refer to section Asset/Liability Management and Sensitivity to Market Risks for further discussion. The attraction and retention of core deposits continues to pose a challenge to the Company and the overall banking industry. Alternative financial products are continuously being introduced by our competition whether through traditional banks or brokerage service companies. During 2001, the Company observed a "flight to safety" effect for deposit products. As the economy weakened and the stock market declined and the events of September 11, 2001 unfolded, our customers seem to have modified their investment strategies. The Company experienced a consumer preference to maintain liquidity in traditional bank product accounts during this time of economic uncertainty. SOURCES OF FUNDS - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS Other interest-bearing liabilities include securities sold under agreements to repurchase, federal funds purchased Treasury, Tax & Loan notes payable and Federal Home Loan Bank advances. Securities sold under agreements to repurchase increased by $2,948,000, while other borrowed funds decreased significantly by $9,351,476 or 60.7%. FHLB Cash Management and Federal Funds purchased totaled approximately $10.2 million at December 31, 2001 compared with $15.2 million as of December 31, 2000, a decrease of $5.0 million. PERFORMANCE OVERVIEW 2001 TO 2000 NET INCOME The Company reported earnings of $2,756,000 in 2001 compared with $2,587,000 in 2000. This earnings performance equates to a 0.82% Return on Average Assets ("ROA") and 9.13% Return on Average Equity ("ROE") for 2001 compared to .83% and 9.88% for 2000. Basic and Diluted Earnings per share ("EPS") was $0.88 for 2001 compared to $0.81 for 2000. Per share amounts for all periods have been restated to reflect the 5% stock dividends dis-
[RETURN ON AVERAGE EQUITY CHART] (Percent) YEAR RETURN ON AVERAGE EQUITY ---- ------------------------ 2001 9.13% 2000 9.88% 1999 11.94% 1998 11.80% 1997 11.48%
32 UNITED BANCORP, INC. 2001 ANNUAL REPORT
[DILUTED EARNINGS PER SHARE CHART] YEAR DILUTED EARNINGS PER SHARE ---- -------------------------- 2001 $0.88 2000 $0.81 1999 $0.97 1998 $0.96 1997 $1.03
tributed in December 2001, 2000 and 1999. NET INTEREST INCOME 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. Net interest income increased $850,000, or 7.5% in 2001. The net margin did not change in 2001 from 2000 and remains at 3.86%. Overall, the Company has seen both its earning assets and interest paying liabilities repricing downward given the interest rate environment in 2001 as previously discussed. Average interest-earning assets increased $27,046,000, or 9.3% in 2001 while the associated weighted-average yield on these interest-earning assets has decreased from 8.03% in 2000, to 7.76% for 2001. Average interest-bearing liabilities increased $18,977,000, or 7.2% in 2001 over 2000. The average cost of funds decreased to 4.38% from 4.69% at December 31, 2000. Refer to the sections on Asset and Liability Management and Sensitivity to Market Risks and Average Balances, Net Interest Income and Yields Earned and Rates Paid elsewhere for further discussion. PROVISION FOR LOAN LOSSES The provision for loan losses is an operating expense recorded to maintain the related balance sheet allowance for loan losses at an amount considered adequate to cover probable losses incurred in the normal course of lending. The total provision for loan losses was $780,000 in 2001 compared to $587,000 in 2000, an increase of $193,000 or 32.9%. The increase from 2000 of 32.9% in the provision for loan losses can be attributed to Management's continued efforts to monitor credit quality in the loan portfolio. Although total loans decreased from 2000 to 2001, Management did not reduce the provision in 2001 due to the continued economic slowdown experienced during the year. The Company's total allowance for loan losses compared to nonperforming loans is 436% at December 31, 2001, compared to 352% at December 31, 2000. Despite a decrease in outstanding loans, the Company's nonperforming loans to total loans decreased from 0.40% at year-end 2000 to 0.36% at year-end 2001. Both ratios measure in common size the relative risk and coverage in the allowance for loan losses. The allowance for loan losses as a percentage of loans increased to [TOTAL ALLOWANCE FOR LOAN LOSSES TO TOTAL LOANS CHART] (Percent)
YEAR TOTAL ALLOWANCE FOR LOAN LOSSES TO TOTAL LOANS - ---- ---------------------------------------------- 2001 1.57% 2000 1.42% 1999 1.72% 1998 1.85% 1997 1.77%
UNITED BANCORP, INC. 2001 ANNUAL REPORT 33 [NET CHARGEOFFS TO AVERAGE LOANS CHART] (Percent)
YEAR NET CHARGEOFFS TO AVERAGE LOANS - ---- ------------------------------- 2001 0.21% 2000 0.49% 1999 0.38% 1998 0.48% 1997 0.38%
1.57% at year-end 2001, from 1.42% at year-end 2000, which occurred because of the increase in the 2001 provision coupled with a decrease in total outstanding loans. CITIZENS and COMMUNITY utilize a consistent reserve methodology with the detail reserve allocations specific to their individual loan portfolios. The unallocated loans loss reserve at December 31, 2001 is approximately $597,000 compared to $450,000 for 2000. The allowance is maintained by Management at a level considered adequate to cover losses currently anticipated based upon past loss experience, economic conditions, information about specific borrower situations including their financial position and collateral values, and other factors and estimates which are subject to change over time. NONINTEREST INCOME Noninterest income is made up of Bank related fees and service charges, as well as other income-producing services. These include secondary market loan servicing fees, ATM/interchange income, internet bank fees, early redemption penalties for certificates of deposit, safe deposit rental income, net gain or loss on sales of securities available for sale and loans, leased rental property, cash management services and other miscellaneous items. Total noninterest income for 2001 was $1,606,000, or 17.3% over 2000 totals, an increase of $237,060. The increase in 2001 can be attributed to several factors. The Fairfield County expansion generated additional fee based accounts, as well as additional ATM and credit card merchant income. During the year, Management focused on service charges assessed on non-sufficient funds checks and updated our policies to clearly define when a customer service representative may waive fees on an account. Also contributing to the increase in noninterest income is the Company's secondary market mortgage program which generated total income of approximately $71,000 compared with a $28,000 loss for 2000, an increase of $99,000. Service charges on deposit accounts increased $40,000 or 4.7%. A gain on other real estate property sold was approximately $45,000 for 2001. The Company did not have any similar gains reported in 2000. NONINTEREST EXPENSE Noninterest expense for 2001 increased $671,000, or 7.7% over 2000. Salaries and employee benefits increased $396,000 or 9.4% from 2000 to 2001. Contributing to the increase was additional staffing associated with expansion activities and the rapidly escalating health care cost which for 2001 increased over 45% for the majority of the employees covered by the Company. Occupancy and equipment and other expense contributed $31,000 to
2001 2000 1999 ----------- ----------- ----------- Noninterest income Service charges on deposit accounts $ 904,571 $ 864,343 $ 745,797 Net realized gain on sales of securities 39,358 26,674 38,833 Net realized gain on sales of loans 71,421 (27,544) 41,289 Other income 590,696 505,513 459,600 ----------- ----------- ----------- Total noninterest income $ 1,606,046 $ 1,368,986 $ 1,285,519 =========== =========== =========== Noninterest expense Salaries and employee benefits $ 4,593,016 $ 4,196,960 $ 4,052,095 Occupancy and equipment 1,465,804 1,435,207 1,287,170 Professional services 309,797 256,577 152,653 Insurance 149,449 209,751 193,615 Franchise and other taxes 320,622 250,151 284,125 Advertising 278,731 396,858 302,655 Stationery and office supplies 208,999 233,668 276,995 Other expenses 2,056,566 1,732,483 1,639,952 ----------- ----------- ----------- Total noninterest expense $ 9,382,984 $ 8,711,655 $ 8,189,260 =========== =========== ===========
34 UNITED BANCORP, INC. 2001 ANNUAL REPORT the increase or 2.2% for the year. Since franchise taxes are based on the net equity of CITIZENS and COMMUNITY, the resulting impact of lower interest rates was an increase in the fair market value of the fixed interest rate securities in the available for sale portfolio. This resulted in increased net equity producing a higher tax base and tax pay- ment. The decrease in stationery and office supplies was a direct result of Management's focus on cost containment. Other expenses increased 18.7% or approximately $324,000. Contributing to this was increased data communication lines of $24,300, merchant processing expenses of $46,200, bank service fees of $22,000, brokerage office expenses of $17,300, travel and entertainment of $10,400, director and committee fees of $16,700 and other losses of $82,200. Professional fees increased approximately $53,000 due mainly to increased loan collection expenses. Decreased advertising was budgeted for 2001 since increased advertising in 2000 was deemed necessary to successfully enter into the Lancaster market and to offset the cost of hiring a full time Marketing Director at CITIZENS. PERFORMANCE OVERVIEW 2000 TO 1999 NET INCOME The Company reported earnings of $2,587,000 in 2000 compared with $3,160,000 in 1999. Basic and Diluted Earnings per share ("EPS") was $0.81 for 2000 compared to $0.97 for 1999. NET INTEREST INCOME Net interest income decreased $396,000, or 3.4% from 1999 to 2000. The net margin decreased from 4.30% for 1999 to 3.86% in 2000. Overall, the Company experienced higher depository costs in 2000 when compared to 1999. Loan growth was strong in 2000 and as a result, this was funded with typically higher rate certificates of deposit. Average interest-earning assets increased $17,790,000, or 6.5% in 2000 while the associated weighted-average yield on these interest-earning assets was also increased from 7.9% in 1999, to 8.0% for 2000. Average interest-bearing liabilities increased $20,826,000, or 8.6% in 2000 over 1999. The average cost of funds increased to 4.69% from 4.06% at December 31, 1999. PROVISION FOR LOAN LOSSES The total provision for loan losses was $587,000 in 2000 compared to $727,000 in 1999, a decrease of $140,000 or 19.3%. With the acquisition of COMMUNITY in mid 1998, Management believed it was necessary to carry a higher allowance for loan losses due to the perceived credit quality problems the Company acquired with this acquisition. Prior to the acquisition, COMMUNITY was under a Memorandum of Understanding with The Ohio Division of Financial Institutions mainly due to past management credit quality concerns. As a result, COMMUNITY'S loan loss reserve increased prior to the merger. These increases were attributed to the loan loss reserve methodology of prior management and upon the merger reviewed and tested by current management. Over the past three years, Management has come to realize that the potential credit losses supported by prior management in their reserving methodology have not yet materialized and therefore the loan loss reserve allocated to such loans was not entirely warranted. With the additional history on COMMUNITY'S loan loss history, Management reduced the provision in 2000. NONINTEREST INCOME Total noninterest income for 2000 was $1,369,000, a modest growth of $83,000 or 6.5% over 1999 totals. The secondary market mortgage program incurred a net loss of $28,000 for 2000 compared to a net gain of $41,000 for 1999 amounting to a decrease of $69,000 from 1999 to 2000. This decrease in losses on secondary market loans sold offset a growth in service charge income of $118,546 or 15.9% from 1999 to 2000. NONINTEREST EXPENSE Noninterest expense increased $522,000, or 6.4% from 1999 to 2000. Management had expected the increase in noninterest expense from 1999 to 2000. Since the end of 1999, the Company has been preparing for the expansion into Fairfield County. Towards the end of 1998 and continually into 1999, Management and UNITED BANCORP, INC. 2001 ANNUAL REPORT 35 staff were added at COMMUNITY to prepare for their eventual grand opening of three banking locations in Lancaster, Ohio. The gradual building of staffing over the past two years contributed to the 3.6% increase in salaries and employee benefits from 1999 to 2000. Occupancy and equipment and other expense contributed to the most significant increases from 1999 to 2000. During the construction mode in 1999, the Company did not incur any depreciation expense nor did they have maintenance contracts on all the new facilities. These expenses did not begin until 2000 when the facilities were opened. Stationery and office supplies and franchise taxes accounted for the largest decreases in 2000 compared to 1999. Since franchise taxes are based on the net equity of CITIZENS and COMMUNITY, the resulting impact of rising rates reduced the fair market value of the securities in the available for sale portfolio which in turn is an off-set to net equity producing a lower tax base. Professional fees increased approximately $104,000 mainly due to the services provided in connection with the Lancaster expansion. Also, as the loan portfolio continues to grow certain legal and collection expenses will grow also. Increased advertising was deemed necessary to successfully enter into the Lancaster market. As expected by management, a majority of these expenses were incurred in the first quarter of 2000 for the grand opening events of this expansion strategy. ASSET/LIABILITY MANAGEMENT AND SENSITIVITY TO MARKET RISKS In the environment of changing business cycles, interest rate fluctuations and growing competition, it has become increasingly more difficult for banks to produce adequate earnings on a consistent basis. Although Management can anticipate changes in interest rates, it is not possible to reliably predict the magnitude of interest rates changes. As a result the Company must establish a sound asset/liability management policy, which will minimize exposure to interest rate risk while maintaining an acceptable interest rate spread and insuring adequate liquidity. The principal goal of asset/liability management - profit management - can be accomplished by establishing decision processes and control procedures for all bank assets and liabilities. Thus, the full scope of asset/liability management encompasses the entire balance sheet of the Company. The broader principal components of asset/liability management include, but are not limited to liquidity planning, capital planning, gap management and spread management. By definition, liquidity is measured by the Company's ability to raise cash at a reasonable cost or with a minimum amount of loss. Liquidity planning is necessary so the Company will be capable of funding all obligations to its customers at all times, from meeting their immediate cash withdrawal requirements to fulfilling their short-term credit needs. Capital planning is an essential portion of asset/liability management, as capital is a limited bank resource, which, due to minimum capital requirements, can place possible restraints on bank growth. Capital planning refers to maintaining capital standards through effective growth management, dividend policies and asset/liability strategies. Gap is defined as the dollar difference between rate sensitive assets and rate sensitive liabilities with respect to a specified time frame. A gap has three components - the asset component, the liability component, and the time component. Gap management involves the management of all three components. Gap management is defined as those actions taken to measure and match rate sensitive assets to rate sensitive liabilities. A rate sensitive asset is any interest-earning asset, which can be repriced to a market rate in a given time frame. Similarly, a rate sensitive liability is any interest-bearing liability, which can have its interest rate changed to a market rate during the specified time period. Caps and collars may prevent certain loans and securities from adjusting to the market rate. A negative gap is created when rate sensitive liabilities exceed rate sensitive assets and, conversely, positive gap occurs when rate sensitive assets exceed rate sensitive liabilities. A negative gap position will cause profits to decline in a rising interest rate environment and a positive gap will cause profits to decline in a falling interest rate environment. Under either scenario, profits suffer. The Company's goal is to have acceptable profits under any interest rate environment. To avoid volatile profits as a result of interest rate fluc- 36 UNITED BANCORP, INC. 2001 ANNUAL REPORT (Dollars in Thousands) NET PORTFOLIO VALUE - DECEMBER 31, 2001
CHANGE IN RATES $ AMOUNT $ CHANGE % CHANGE -------- -------- -------- +200 bp 38,205 (3,349) -8% +100 bp 42,965 (1,411) -3% Base 41,554 - -100 bp 37,711 (3,843) -9% - -200 bp 35,921 (5,633) -14%
NET PORTFOLIO VALUE - DECEMBER 31, 2000
CHANGE IN RATES $ AMOUNT $ CHANGE % CHANGE -------- -------- -------- +200 bp 26,501 (3,765) -12% +100 bp 28,811 (1,455) -5% Base 30,266 - -100 bp 33,171 2,905 10% - -200 bp 33,507 3,241 11%
tuations, the Company attempts to match interest rate sensitivities, while pricing both the asset and liability components to yield a sufficient interest rate spread so that profits will remain relatively consistent across interest rate cycles. Management of the income statement is called spread management and is defined as managing investments, loans, and liabilities to achieve an acceptable spread between the Company's return on its earning assets and its cost of funds. Gap management without consideration of interest spread can cause unacceptable low profit margins while assuring that the level of profits is steady. Spread management without consideration of gap positions can cause acceptable profits in some interest rate environments and unacceptable profits in others. A sound asset/liability management program combines gap and spread management into a single cohesive system. Management measures the Company's interest rate risk by computing estimated changes in net interest income and the net portfolio value ("NPV") of its cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. The Banks' senior management and the Executive Committee of the Board of Directors, comprising the Asset/Liability Committee ("ALCO") review the exposure to interest rates quarterly. Exposure to interest rate risk is measured with the use of an interest rate sensitivity analysis to determine the change in NPV in the event of hypothetical changes in interest rates, while interest rate sensitivity gap analysis is used to determine the repricing characteristics of the assets and liabilities. NPV represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay rates, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Company may undertake in response to changes in interest rates. The NPV calculation is based on the net present value of discounted cash flows utilizing market prepayment assumptions and market rates of interest provided by surveys performed during each quarterly period, with adjustments made to reflect the shift in the Treasury yield curve between the survey date and quarter-end date. Certain shortcomings are inherent in this method of analysis presented in the computation of estimated NPV. Certain assets such as adjustable-rate loans have features that restrict changes in interest rates on a short-term basis and over the life of the asset. In addition, the portion of adjustable-rate loans in the Company's portfolio could decrease in future periods if market interest rates remain at or decrease below current levels due to refinancing activity. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate from those assumed in the table. Finally, the ability of many borrowers to repay their adjustable-rate debt may decrease in the case of an increase in interest rates. The table above presents an analysis of the potential sensitivity of the Company's net present value of its financial instruments to sudden and sustained changes in the prevailing interest rates. The projected volatility of the net present value at both December 31, 2001 and 2000 fall within the general guidelines established by the Board of Directors. UNITED BANCORP, INC. 2001 ANNUAL REPORT 37 The following table is a summary of selected quarterly results of operations for the years ended December 31, 2001 and 2000.
1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 Interest and dividend income $6,204 $6,321 $6,203 $5,868 Interest expense 3,325 3,197 3,084 2,743 ------ ------ ------ ------ Net interest income 2,879 3,124 3,119 3,125 Provision for loan losses 195 195 195 195 ------ ------ ------ ------ Net interest income after provision for loan losses 2,684 2,929 2,924 2,930 Noninterest income 368 385 395 459 Noninterest expense 2,260 2,418 2,357 2,348 ------ ------ ------ ------ Income before income tax 792 896 962 1,041 Income tax expense 187 159 284 305 ------ ------ ------ ------ Net income $ 605 $ 737 $ 678 $ 736 ====== ====== ====== ====== Earnings per common share - Basic $ 0.19 $ 0.24 $ 0.22 $ 0.24 ====== ====== ====== ====== Earnings per common share - Diluted $ 0.19 $ 0.24 $ 0.22 $ 0.24 ====== ====== ====== ====== Dividends declared per share $0.124 $0.124 $0.124 $0.130 ====== ====== ====== ====== 2000 Interest and dividend income $5,593 $5,800 $6,125 $6,216 Interest expense 2,752 2,952 3,270 3,363 ------ ------ ------ ------ Net interest income 2,841 2,848 2,855 2,853 Provision for loan losses 116 115 116 240 ------ ------ ------ ------ Net interest income after provision for loan losses 2,725 2,733 2,739 2,613 Noninterest income 325 334 331 379 Noninterest expense 2,290 2,131 2,128 2,163 ------ ------ ------ ------ Income before income tax 760 936 942 829 Income tax expense 184 230 274 192 ------ ------ ------ ------ Net income $ 576 $ 706 $ 668 $ 637 ====== ====== ====== ====== Earnings per common share - Basic $ 0.18 $ 0.22 $ 0.21 $ 0.20 ====== ====== ====== ====== Earnings per common share - Diluted $ 0.18 $ 0.22 $ 0.21 $ 0.20 ====== ====== ====== ====== Dividends declared per share $0.118 $0.118 $0.118 $0.124 ====== ====== ====== ======
38 UNITED BANCORP, INC. 2001 ANNUAL REPORT AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID The following table provides information relating to average balance sheet information and reflects the average yield on interest-earning assets and the average cost of interest-bearing liabilities for the years ended December 31, 2001, 2000 and 1999. The yields and costs are calculated by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities. The average balance of available for sale securities is computed using the carrying value of securities while the yield for available for sale securities has been computed using the average amortized cost. Average balances are derived from average month-end balances, which include nonaccruing loans in the loan portfolio, net of the allowance for loan losses. Interest income is on a his-
2001 2000 --------------------------------------- ------------------------------------- (DOLLARS IN THOUSANDS) INTEREST INTEREST AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ------- ------- ----- ------- ------- ---- ASSETS Interest-earning assets Loans $ 188,114 $ 16,570 8.81% $ 190,386 $ 17,145 9.01% Taxable securities - AFS 98,706 6,544 6.60 71,670 5,066 6.55 Taxable securities - HTM 629 49 7.79 2,495 179 7.17 Tax-exempt securities - AFS 13,446 656 5.02 13,914 701 5.02 Tax-exempt securities - HTM 8,926 433 4.85 7,876 383 4.86 Federal funds sold 3,462 88 2.54 130 7 5.38 FHLB stock and other 3,529 256 7.23 3,295 253 7.68 --------- --------- --------- --------- Total interest-earning assets 316,812 24,596 7.76 289,766 23,734 8.03 Noninterest-earning assets Cash and due from banks 8,971 9,687 Premises and equipment (net) 9,241 9,191 Other nonearning assets 4,835 6,003 Less: allowance for loan losses (2,887) (3,039) --------- --------- Total noninterest-earning assets 20,160 21,842 --------- --------- Total assets $ 336,972 $ 311,608 ========== ========= LIABILITIES & SHAREHOLDERS' EQUITY Interest-bearing liabilities Demand deposits $ 43,846 843 1.92 $ 41,488 1,121 2.70 Savings deposits 48,850 713 1.46 53,131 1,097 2.06 Time deposits 158,778 9,411 5.93 139,363 8,282 5.94 Fed funds purchased & TT&L 818 41 5.01 4,244 292 6.88 FHLB advances 19,160 958 5.00 19,767 1,263 6.39 Repurchase agreements 10,695 383 3.58 5,177 282 5.45 --------- --------- --------- --------- Total interest-bearing liabilities 282,147 12,349 4.38 263,170 12,337 4.69 --------- --------- Noninterest-bearing liabilities Demand deposits 23,186 21,167 Other liabilities 1,471 1,093 --------- --------- Total noninterest-bearing liabilities 24,657 22,260 --------- --------- Total liabilities 306,804 285,430 Total shareholders' equity 30,168 26,178 --------- --------- Total liabilities & shareholders' equity $ 336,972 $ 311,608 ========== ========= Net interest income $ 12,247 $ 11,397 ========= ========= Net interest spread 3.38% 3.34% ==== ==== Net yield on interest-earning assets 3.86% 3.86% ==== ==== 1999 ------------------------------------- (DOLLARS IN THOUSANDS) INTEREST AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE ------- ------- ---- ASSETS Interest-earning assets Loans $ 168,868 $ 15,130 8.96% Taxable securities - AFS 72,668 4,886 6.49 Taxable securities - HTM 1,382 90 6.51 Tax-exempt securities - AFS 10,127 598 5.99 Tax-exempt securities - HTM 14,480 676 4.67 Federal funds sold 2,307 100 4.33 FHLB stock and other 2,144 158 7.37 --------- --------- Total interest-earning assets 271,976 21,638 7.88 Noninterest-earning assets Cash and due from banks 9,341 Premises and equipment (net) 7,543 Other nonearning assets 3,866 Less: allowance for loan losses (3,071) --------- Total noninterest-earning assets 17,679 ---------- Total assets $ 289,655 ========= LIABILITIES & SHAREHOLDERS' EQUITY Interest-bearing liabilities Demand deposits $ 41,258 898 2.18 Savings deposits 59,559 1,248 2.10 Time deposits 113,133 6,198 5.48 Fed funds purchased & TT&L 4,156 214 5.15 FHLB advances 16,932 972 5.74 Repurchase agreements 7,306 314 4.30 --------- --------- Total interest-bearing liabilities 242,344 9,844 4.06 --------- Noninterest-bearing liabilities Demand deposits 19,851 Other liabilities 991 --------- Total noninterest-bearing liabilities 20,842 --------- Total liabilities 263,186 Total shareholders' equity 26,469 --------- Total liabilities & shareholders' equity $ 289,655 ========= Net interest income $ 11,794 ========= Net interest spread 3.82% ==== Net yield on interest-earning assets 4.30% ====
o For purposes of this schedule,,nonaccrual loans are included in loans. o Net interest income is reported on an historical basis without tax equivalent adjustment. o Fees collected on loans are included in interest on loans. UNITED BANCORP, INC. 2001 ANNUAL REPORT 39 [DIVIDENDS PER SHARE CHART]
YEAR DIVIDENDS PER SHARE - ---- ------------------- 2001 $0.50 2000 $0.48 1999 $0.46 1998 $0.41 1997 $0.36
torical basis without tax-equivalent adjustment. RATE/VOLUME ANALYSIS The table below describes the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected interest income and expense during the periods indicated. For purposes of this table, changes in interest due to volume and rate were determined using the following methods: o Volume variance results when the change in volume is multiplied by the previous year's rate. o Rate variance results when the change in rate is multiplied by the previous year's volume. o Rate/volume variance results when the change in volume is multiplied by the change in rate. Note: The rate/volume variance was allocated to volume variance and rate variance in proportion to the relationship of the absolute dollar amount of the change in each. Nonaccrual loans are ignored for purposes of the calculations due to the nominal amount of the loans. CAPITAL RESOURCES Internal capital growth, through the retention of earnings, is the primary means of maintaining capital adequacy for the Banks. The Company's shareholder equity at year-end 2001 was $30,474,195 compared to $28,679,087 at year-
2001 COMPARED TO 2000 2000 COMPARED TO 1999 INCREASE/(DECREASE) INCREASE/(DECREASE) ------------------------------------ ---------------------------------- (IN THOUSANDS) CHANGE CHANGE CHANGE CHANGE TOTAL DUE TO DUE TO TOTAL DUE TO DUE TO CHANGE VOLUME RATE CHANGE VOLUME RATE -------- -------- -------- ------- ------ ------ Interest and dividend income Loans $ (575) $ (203) $ (372) $ 2,015 $ 1,937 $ 78 Taxable securities available for sale 1,478 1,809 (331) 180 129 51 Taxable securities held to maturity (130) (144) 14 89 79 10 Tax-exempt securities available for sale (45) (23) (22) 103 210 (107) Tax-exempt securities held to maturity 50 (24) (74) (293) (320) 27 Federal funds sold 81 87 (6) (93) (113) 20 FHLB stock and other 3 17 (14) 95 88 7 ------- ------- ------- ------- ------- ------- Total interest and dividend income 862 1,519 (657) 2,096 2,010 86 Interest expense Demand deposits (278) 61 (339) 223 5 218 Savings deposits (384) (83) (301) (151) (133) (18) Time deposits 1,129 1,151 (22) 2,084 1,526 558 Fed funds purchased & T, T & L (251) (188) (63) 78 4 74 FHLB advances (305) (38) (267) 291 174 117 Repurchase agreements 101 223 (122) (32) (104) 72 ------- ------- ------- ------- ------- ------- Total interest expense 12 1,126 (1,114) 2,493 1,472 1,021 ------- ------- ------- ------- ------- ------- Net interest earnings $ 850 $ 393 $ 457 $ (397) $ 538 $ (935) ======= ======= ======= ======= ======= =======
40 UNITED BANCORP, INC. 2001 ANNUAL REPORT [BOOK VALUE PER SHARE CHART]
YEAR BOOK VALUE PER SHARE - ---- -------------------- 2001 $9.75 2000 $8.98 1999 $7.80 1998 $8.43 1997 $8.07
end 2000, representing an increase of 6.3%. Equity totals include $56,569 in accumulated other comprehensive loss which is comprised solely of a net unrealized loss on securities available for sale, net of tax, at year end 2001, compared to a $1,272,709 loss at year-end 2000. Total shareholder's equity in relation to total assets was 8.9% at December 31, 2001 and 2000. The Company has established 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 does not represent a change in the 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. In May 2001 the Company's shareholders approved an amendment to the Company's Articles of Incorporation to create a class of preferred shares with 2,000,000 authorized shares. This will enable the Company, at the option of the Board of Directors, to issue series of preferred shares in a manner calculated to take advantage of financing techniques which may provide a lower effective cost of capital to the Company. The amendment also provides greater flexibility to the Board of Directors in structuring the terms of equity securities that may be issued by the Company. LIQUIDITY Liquidity relates primarily to the Corporation's ability to fund loan demand, meet deposit customers' withdrawal requirements and provide for operating expenses. Assets used to satisfy these needs consist of cash and due from banks, federal funds sold and securities available for sale. These assets are commonly referred to as liquid assets. Liquid assets were $137 million at December 31, 2001 compared to $105 million at December 31, 2000. Management recognizes securities may need to be sold in the future to help fund loan demand and, accordingly, as of December 31, 2001, $114.0 million of the securities portfolio was classified as available for sale. The Company's residential real estate portfolio which can and has been readily used to collateralize borrowings, is an additional source of liquidity. Management believes its current liquidity level is sufficient to meet anticipated future growth. The Cash Flow Statements for the periods presented provide an indication of the Company's sources and uses of cash as well as an indication of the ability of the Company to maintain an adequate level of liquidity. A discussion of the cash flow statements for 2001, 2000 and 1999 follows. The Company experienced a net increase in cash from operating activities in 2001, 2000 and 1999. [EQUITY CAPITAL CHART] (In Thousands)
YEAR EQUITY CAPITAL - ---- -------------- 2001 $30,474 2000 $28,679 1999 $25,298 1998 $27,321 1997 $25,713
UNITED BANCORP, INC. 2001 ANNUAL REPORT 41 Net cash from operating activities was $3.4 million, $3.5 million and $4.1 million for the years ended December 31, 2001, 2000 and 1999, respectively. For the year-ended 2001, the adjustments to reconcile net income to net cash from operating activities consisted mainly of depreciation and amortization of premises and equipment and intangibles, gain on sales of loans, securities and other assets, the provision for loan losses, Federal Home Loan Bank stock dividends, net amortization of securities and net changes in other assets and liabilities. NET CASH FLOW FROM INVESTING ACTIVITIES was $(4.4 million), $(24.6 million) and $(22.5 million) for the years ended December 31, 2001, 2000 and 1999, respectively. The changes in net cash from investing activities include lending, as well as normal maturities, security calls and reinvestments of securities and premises and equipment expenditures. In 2001, 2000 and 1999, the Company received $5.5 million, $3.0 million and $7.3 million, respectively, from sales of securities available for sale, while proceeds from securities called were $72.4 million, $0.9 million and $13.2 million in 2001, 2000 and 1999, respectively. As mentioned previously, the decrease in interest rates dramatically impacted the Company's cash flow from investing activities. NET CASH FLOW FROM FINANCING ACTIVITIES was $13.8 million, $20.0 million and $13.8 million for the years ended December 31, 2001, 2000 and 1999, respectively. The net cash increase was primarily attributable to growth in total deposits of $15.8 million and $32.0 million in 2001 and 2000 respectively, and growth in short term borrowings of $8.1 million in 1999. Management feels that it has the capital adequacy, profitability, and reputation to meet the current and projected needs of its customers. INFLATION The majority of assets and liabilities of the Company are monetary in nature and therefore the Company differs greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an important impact on the growth of total assets in the banking industry and the resulting need to increase equity capital at higher than normal rates in order to maintain an appropriate equity to assets ratio. Inflation significantly affects noninterest expense, which tends to rise during periods of general inflation. Management believes the most significant impact on financial results is the Company's ability to react to changes in interest rates. Management seeks to maintain an essentially balanced position between interest sensitive assets and liabilities and actively manages the amount of securities available for sale in order to protect against the effects of wide interest rate fluctuations on net income and shareholder's equity. NEW ACCOUNTING PRONOUNCEMENTS A new accounting standard requires all business combinations to be recorded using the purchase method of accounting for any transaction initiated after June 30, 2001. Under the purchase method, all identifiable tangible and intangible assets and liabilities of the acquired company must be recorded at fair value at date of acquisition, and the excess of cost over fair value of net assets acquired is recorded as goodwill. Identifiable intangible assets must be separated from goodwill. Identifiable intangible assets with finite useful lives will be amortized under the new standard, whereas goodwill, both amounts previously recorded and future amounts purchased, will cease being amortized starting in 2002. Annual impairment testing will be required for goodwill with impairment being recorded if the carrying amount of goodwill exceeds its implied fair value. Adoption of this standard on January 1, 2002 will not have a material effect on the Company's financial statements. 42 UNITED BANCORP, INC. 2001 ANNUAL REPORT [UNITED BANCORP LOGO] REPORT OF INDEPENDENT AUDITORS 2001 [CROWE CHIZEK LOGO] Board of Directors and Shareholders United Bancorp, Inc. Martins Ferry, Ohio We have audited the accompanying consolidated balance sheets of United Bancorp, Inc. as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 Bancorp, Inc. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally in the United States of America. /s/ CROWE, CHIZEK AND COMPANY LLP CROWE, CHIZEK AND COMPANY LLP Columbus, Ohio January 10, 2002 UNITED BANCORP, INC. 2001 ANNUAL REPORT 43 [UNITED BANCORP LOGO] CONSOLIDATED BALANCE SHEETS 2001
2001 2000 -------------- -------------- ASSETS Cash and due from financial institutions $ 9,427,756 $ 10,694,118 Federal funds sold 13,962,000 -- ------------- ------------- Total cash and cash equivalents 23,389,756 10,694,118 Securities available for sale 114,044,617 94,438,970 Securities held to maturity (Estimated fair value of $10,617,845 in 2001 and $10,946,251 in 2000) 10,378,811 10,802,213 Total loans 183,339,603 196,497,232 Allowance for loan losses (2,879,065) (2,790,133) ------------- ------------- Loans, net 180,460,538 193,707,099 Premises and equipment, net 9,083,891 9,521,046 Accrued interest receivable 2,796,442 2,758,634 Other real estate and repossessions 119,888 333,682 Other assets 1,043,252 1,630,039 ------------- ------------- Total assets $ 341,317,195 $ 323,885,801 ============= ============= LIABILITIES Demand deposits Noninterest-bearing $ 26,297,805 $ 22,708,636 Interest-bearing 42,423,962 45,470,957 Savings deposits 49,396,199 49,158,941 Time deposits - under $100,000 126,820,233 120,797,039 Time deposits - $100,000 and over 38,437,724 29,417,302 ------------- ------------- Total deposits 283,375,923 267,552,875 Federal funds purchased 116,000 371,000 FHLB line of credit 10,100,000 14,824,000 Securities sold under agreements to repurchase 7,811,230 4,861,430 Other borrowed funds 8,199,230 6,052,616 Accrued expenses and other liabilities 1,240,617 1,544,793 ------------- ------------- Total liabilities 310,843,000 295,206,714 SHAREHOLDERS' EQUITY Preferred stock, without par value: 2,000,000 shares authorized and unissued Common stock - $1 par value: 10,000,000 shares authorized; 2001 - 3,249,227 and 2000 - 3,094,882 shares issued 3,249,227 3,094,882 Additional paid-in capital 23,619,610 21,699,632 Retained earnings 5,044,540 5,852,284 Stock held by deferred compensation plan, 36,550 shares at cost in 2001 and 27,462 in 2000 (517,838) (411,438) Treasury stock, 85,791 shares at cost in 2001 and 29,924 in 2000 (864,775) (283,564) Accumulated other comprehensive income(loss), net of tax (56,569) (1,272,709) ------------- ------------- Total shareholders' equity 30,474,195 28,679,087 ------------- ------------- Total liabilities and shareholders' equity $ 341,317,195 $ 323,885,801 ============= =============
See Accompanying Notes to the Consolidated Financial Statements 44 UNITED BANCORP, INC. 2001 ANNUAL REPORT [UNITED BANCORP LOGO] CONSOLIDATED STATEMENTS OF INCOME 2001
2001 2000 1999 ------------ ------------ ------------ Interest and dividend income Loans, including fees $ 16,569,452 $ 17,112,362 $ 15,129,533 Taxable securities 6,593,114 5,244,590 4,976,318 Non-taxable securities 1,088,942 1,083,310 1,274,083 Federal funds sold 87,776 26,321 100,341 Dividends on Federal Home Loan Bank stock and other 256,485 267,502 158,415 ------------ ------------ ------------ Total interest and dividend income 24,595,769 23,734,085 21,638,690 Interest expense Deposits Demand 842,893 1,121,150 898,450 Savings 712,754 1,096,782 1,248,199 Time 9,411,154 8,282,081 6,198,199 Other borrowings 1,381,747 1,836,656 1,499,979 ------------ ------------ ------------ Total interest expense 12,348,548 12,336,669 9,844,827 ------------ ------------ ------------ Net interest income 12,247,221 11,397,416 11,793,863 Provision for loan losses 780,000 587,000 726,806 ------------ ------------ ------------ Net interest income after provision for loan losses 11,467,221 10,810,416 11,067,057 Noninterest income Service charges on deposit accounts 904,571 864,343 745,797 Net realized gain on sales/calls of securities 39,358 26,674 38,833 Net realized gain/(loss) on sales of loans 71,421 (27,544) 41,289 Other income 590,696 505,513 459,600 ------------ ------------ ------------ Total noninterest income 1,606,046 1,368,986 1,285,519 Noninterest expense Salaries and employee benefits 4,593,016 4,196,960 4,052,095 Occupancy and equipment 1,465,804 1,435,207 1,287,170 Professional services 309,797 256,577 152,653 Insurance 149,449 209,751 193,615 Franchise and other taxes 320,622 250,151 284,125 Advertising 278,731 396,858 302,655 Stationery and office supplies 208,999 233,668 276,995 Other expenses 2,056,566 1,732,483 1,639,952 ------------ ------------ ------------ Total noninterest expense 9,382,984 8,711,655 8,189,260 ------------ ------------ ------------ Income before income taxes 3,690,283 3,467,747 4,163,316 Income tax expense 934,696 880,772 1,003,062 ------------ ------------ ------------ Net Income $ 2,755,587 $ 2,586,975 $ 3,160,254 ============ ============ ============ Earnings per common share - Basic $ 0.88 $ 0.81 $ 0.97 ============ ============ ============ Earnings per common share - Diluted $ 0.88 $ 0.81 $ 0.97 ============ ============ ============
See Accompanying Notes to the Consolidated Financial Statements UNITED BANCORP, INC. 2001 ANNUAL REPORT 45 [UNITED BANCORP LOGO] CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 2001
--------------------------------------------------------------------------------------------------- TREASURY ACCUMULATED ADDITIONAL STOCK AND OTHER TOTAL COMMON PAID-IN DEFERRED RETAINED COMPREHENSIVE COMPREHENSIVE SHAREHOLDERS' STOCK CAPITAL PLAN EARNINGS INCOME INCOME EQUITY ---------- ----------- ------------ ------------ ------------- ------------- ------------- BALANCE AT JANUARY 1, 1999 $2,800,298 $17,801,437 $ -- $ 6,839,877 $ (120,863) $27,320,749 Net income 3,160,254 $ 3,160,254 3,160,254 5% Stock dividend 139,720 1,833,769 (1,973,489) Cash paid in lieu of fractional shares on 5% stock dividend (6,245) (6,245) Proceeds and tax benefit from exercise of stock options, net of shares redeemed 2,867 24,999 27,866 Cash dividends -- $0.46 per share (1,477,686) (1,477,686) Change in unrealized gain (loss) on securities available for sale, net of reclassifications and tax effects (3,726,965) (3,726,965) (3,726,965) ----------- Comprehensive income/(loss) $ (566,711) =========== ---------- ----------- ----------- ----------- ------------ ----------- BALANCE AT DECEMBER 31, 1999 2,942,885 19,660,205 -- 6,542,711 (3,847,828) 25,297,973 Net income 2,586,975 $ 2,586,975 2,586,975 Shares issued in Dividend Reinvestment Plan 4,954 47,288 52,242 5% Stock dividend 147,043 1,580,701 (1,727,744) Cash paid in lieu of fractional shares on 5% stock dividend (4,111) (4,111) Cash dividends -- $0.48 per share (1,545,547) (1,545,547) Recognition of shares held by deferred compensation plan -- 16,064 at cost 288,628 (288,628) 11,398 shares purchased for deferred compensation plan 122,810 (122,810) Purchases of Treasury Stock -- 29,924 shares at cost (283,564) (283,564) Change in unrealized gain (loss) on securities available for sale, net of reclassifications and tax effects 2,575,119 2,575,119 2,575,119 ----------- Comprehensive income/(loss) $ 5,162,094 =========== ---------- ----------- ----------- ----------- ------------ ----------- BALANCE AT DECEMBER 31, 2000 3,094,882 21,699,632 (695,002) 5,852,284 (1,272,709) 28,679,087 Net income 2,755,587 $ 2,755,587 2,755,587 5% Stock dividend 154,345 1,813,578 (1,967,923) Cash paid in lieu of fractional shares on 5% stock dividend -- (5,188) (5,188) Cash dividends -- $0.50 per share (1,590,220) (1,590,220) 9,088 shares purchased for deferred compensation plan 106,400 (106,400) Purchases of Treasury Stock -- 55,867 shares at cost -- (581,211) (581,211) Change in unrealized gain (loss) on securities available for sale, net of reclassifications and tax effects 1,216,140 1,216,140 1,216,140 ----------- Comprehensive income/(loss) $ 3,971,727 =========== ---------- ----------- ----------- ----------- ------------ ----------- BALANCE AT DECEMBER 31, 2001 $3,249,227 $23,619,610 $(1,382,613) $ 5,044,540 $ (56,569) $30,474,195 ========== =========== =========== =========== ============ ===========
See Accompanying Notes to the Consolidated Financial Statements 46 UNITED BANCORP, INC. 2001 ANNUAL REPORT [UNITED BANCORP LOGO] CONSOLIDATED STATEMENTS OF CASH FLOW 2001
2001 2000 1999 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,755,587 $ 2,586,975 $ 3,160,254 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization 901,145 894,956 766,229 Provision for loan losses 780,000 587,000 726,806 Deferred taxes (84,270) 151,192 (117,985) Federal Home Loan Bank stock dividend (247,400) (198,200) (144,400) Net realized gains on sales or calls of securities (39,358) (26,674) (38,833) (Accretion)/amortization of securities, net (57,020) 8,316 45,767 Net realized (gains)/losses on sales of loans (71,421) 27,544 (41,289) Amortization of mortgage servicing rights 63,704 46,045 47,490 Net realized (gains)/losses on sale of real estate owned (44,794) Net realized (gains)/losses on sale of assets 34,328 (10,032) Net change in accrued interest receivable and other assets (297,535) (462,836) (133,552) Net change in accrued expenses and other liabilities (304,175) (192,015) (124,838) ------------ ------------ ------------ Net cash from operating activities 3,354,463 3,456,631 4,135,617 CASH FLOWS FROM INVESTING ACTIVITIES Securities available for sale Sales 5,480,956 3,026,674 7,271,884 Maturities, prepayments and calls 72,402,575 980,070 13,178,601 Purchases (95,326,510) (8,978,438) (19,468,023) Securities held to maturity Maturities, prepayments and calls 2,600,000 178,500 -- Purchases (2,152,763) (1,175,555) (3,960,549) Net change in loans 12,611,249 (17,213,721) (17,034,756) Proceeds from sale of assets 305,554 Proceeds from sale of real estate owned 403,282 Purchases of premises and equipment (441,456) (1,411,084) (2,823,215) ------------ ------------ ------------ Net cash from investing activities (4,422,667) (24,593,554) (22,530,504) CASH FLOWS FROM FINANCING ACTIVITIES Net change in deposits 15,823,048 32,013,010 (3,881,264) Cash and cash equivalents received from deposit assumption, net of assets acquired 10,163,299 Net change in short-term borrowings (1,945,836) (9,504,707) 8,079,507 Proceeds from long-term debt 2,852,590 3,693,000 Principal payments on long-term debt (789,341) (773,237) (2,818,386) Cash dividends paid (1,590,220) (1,545,547) (1,477,686) Cash paid in lieu of fractional shares in stock dividend (5,188) (4,111) (6,245) Proceeds from stock issuance 52,242 Treasury stock purchases (581,211) (283,564) Proceeds and tax benefit from exercise of stock options, net of shares redeemed 27,866 ------------ ------------ ------------ Net change from financing activities 13,763,842 19,954,086 13,780,091 ------------ ------------ ------------ Net change in cash and cash equivalents 12,695,638 (1,182,837) (4,614,796) Cash and cash equivalents at beginning of year 10,694,118 11,876,955 16,491,751 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 23,389,756 $ 10,694,118 $ 11,876,955 ============ ============ ============ Interest paid $ 12,545,238 $ 12,238,551 $ 9,883,868 Income taxes paid 930,469 854,470 1,078,302 Non-cash transfer from loans to other real estate and repossessions $ 144,688 $ 298,170 $ 279,758 Non-cash transfer of securities from held to maturity to available for sale upon adoption of SFAS No. 133 16,004,920
See Accompanying Notes to the Consolidated Financial Statements UNITED BANCORP, INC. 2001 ANNUAL REPORT 47 [UNITED BANCORP LOGO] NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2001 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of United Bancorp, Inc. ("UNITED") and its wholly-owned subsidiaries, ("Banks"), The Citizens Savings Bank of Martins Ferry, Ohio ("CITIZENS") and The Community Bank, Glouster, Ohio ("COMMUNITY"), together referred to as the "COMPANY". Intercompany transactions and balances have been eliminated in consolidation. NATURE OF OPERATIONS/SEGMENTS: The Company's revenues, operating income, and assets are primarily from the banking industry. Accordingly, all of the Company's banking operations are considered by Management to be aggregated in one reportable operating segment. Customers are mainly located in Athens, Belmont, Carroll, Fairfield, Harrison, Hocking, and Tuscarawas Counties and the surrounding localities in northeastern, eastern and southeastern Ohio, and include a wide range of individuals, business and other organizations. CITIZENS conducts its business through its main office in Martins Ferry, Ohio and nine branches in Bridgeport, Colerain, Dellroy, Dover, Jewett, New Philadelphia, St. Clairsville, Sherrodsville, and Strasburg Ohio. COMMUNITY conducts its business through its seven offices in Amesville, Glouster, Lancaster, and Nelsonville, Ohio. The Company's primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by both residential and commercial real estate. Other financial instruments which potentially represent concentrations of credit risk include deposit accounts in other financial institutions. USE OF ESTIMATES: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments and status of contingencies are particularly subject to change. CASH FLOW REPORTING: Cash and cash equivalents includes cash and due from banks and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, securities sold under agreements to repurchase and short-term borrowings with original maturities of 90 days or less. SECURITIES: Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. Other securities such as Federal Home Loan Bank stock are carried at cost. Interest income includes amortization of purchase premiums and discounts. Realized gains and losses on sales are based on the amortized cost of the security sold. Securities are written down to fair value when a decline in fair value is not temporary. LOANS: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff, are reported at the principal balance outstanding, net of deferred loan fees and costs, and the allowance for loan losses. Loans held for sale are reported at the lower of cost or market, on an aggregate basis. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Interest income is not reported when full loan repayment is doubtful, typically when the loan is impaired or payments are past due over 90 days. Payments received on such loans are reported as principal reductions. ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation allowance for probable incurred credit loss, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the allowance balance required based on past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, 48 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ALLOWANCE FOR LOAN LOSSES (CONTINUED): economic conditions and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. A loan is impaired when full payment under the loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed over the assets useful lives on the straight-line method. These assets are reviewed for impairment when events indicate the carrying amount may not be recoverable. FORECLOSED ASSETS: Assets acquired through or instead of loan foreclosure are initially recorded at fair value when acquired, establishing a new cost basis. After acquisition, a valuation allowance reduces the reported amount to the lower of the initial amount or fair value less costs to sell. Expenses, gains and losses on disposition and changes in the valuation allowance are reported in other expenses. LOAN SERVICING RIGHTS: Loan servicing rights are recognized as assets for purchased rights and for the allocated value of retained servicing rights on loans sold. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of underlying loans with similar characteristics. Any impairment of a grouping is reported as a valuation allowance. INTANGIBLE ASSETS: Identified intangibles include the value of depositor relationships purchased which are being amortized on an accelerated method over eight years. Unidentified intangibles include goodwill, which is being amortized on a straight-line method over eleven years. Intangible assets are assessed for impairment based on estimated undiscounted cash flows and written down if necessary. At year-end 2001 and 2000, intangibles, net of accumulated amortization, totaled $99,940 and $122,474 and are included in other assets in the accompanying consolidated balance sheets. REPURCHASE AGREEMENTS: Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance. EMPLOYEE BENEFITS: A defined benefit pension plan covers all employees who have completed 1,000 hours of service during an anniversary year, measured from their date of hire, who have attained age 21. The plan calls for benefits to be paid to eligible employees at retirement, based primarily upon years of service and compensation rates near retirement. Contributions to the plan reflect benefits attributed to employees' services to date, as well as services expected to be earned in the future. Plan assets consist of primarily common stock and debt instruments. Pension expense is the net of service and interest cost, return on plan assets, and amortization of gains and losses not immediately recognized. The Company offers a 401(k) plan, which covers all employees who have attained the age of 2l and have completed one year of service. Eligible employees may contribute up to 15% of their compensation subject to maximum statutory limitation. The Company may make a discretionary matching contribution equal to a percentage of each participant's elective deferral not to exceed 6% of the participant's annual compensation. Employee contributions are always vested. Employer contributions become 100% vested after 3 years of service. STOCK COMPENSATION: Employee compensation expense under stock option plans is reported only if options are granted below market price at grant date. Pro forma disclosures of net income and earnings per share are provided using the fair value method of Statement of UNITED BANCORP, INC. 2001 ANNUAL REPORT 49 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STOCK COMPENSATION (CONTINUED): Financial Accounting Standards ("SFAS") No. 123 to measure expense for options granted after 1994, using an option pricing model to estimate fair value. INCOME TAXES: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. FINANCIAL INSTRUMENTS Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. EQUITY: Common stock has $1.00 par and 10,000,000 shares are authorized. Preferred stock has no par value and 2,000,000 shares are authorized. Treasury stock is carried at cost. Transfers from retained earnings are made for stock dividends using the fair value of shares issued. On November 20, 2001, a 5% stock dividend was approved for all shareholders of record on December 1, 2001 and distributed on December 20, 2001. On November 21, 2000, a 5% stock dividend was approved for all shareholders of record on December 1, 2000 and distributed on December 20, 2000. On November 16, 1999, a 5% stock dividend was approved for all shareholders of record on December 1, 1999 and distributed on December 20, 1999. All per share data has been retroactively adjusted for the 5% stock dividends in 2001,2000 and 1999. DIVIDEND RESTRICTION: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Banks to the holding company or by the holding company to shareholders. FAIR VALUES OF FINANCIAL INSTRUMENTS: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed separately. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. EARNINGS PER COMMON SHARE: Basic earnings per common share (EPS) is net income divided by the weighted-average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock dividends through the date of issuance of the financial statements. COMPREHENSIVE INCOME: Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale which is also recognized as a separate component of equity. LOSS CONTINGENCIES: Loss contengencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements. RESTRICTIONS ON CASH: Cash on hand or on deposit with the Federal Reserve Bank of $1,598,000 and $1,254,000 was required to meet regulatory reserve and clearing requirements at year end 2001 and 2000. These balances do not earn interest. RECLASSIFICATIONS: Some items in prior financial statements have been reclassified to conform to the current presentation. 50 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NEW ACCOUNTING PRONOUNCEMENTS: A new accounting standard requires all business combinations to be recorded using the purchase method of accounting for any transaction initiated after June 30, 2001. Under the purchase method, all identifiable tangible and intangible assets and liabilities of the acquired company must be recorded at fair value at date of acquisition, and the excess of cost over fair value of net assets acquired is recorded as goodwill. Identifiable intangible assets must be separated from goodwill. Identifiable intangible assets with finite useful lives will be amortized under another new standard, whereas goodwill, both amounts previously recorded and future amounts purchased, will cease being amortized starting in 2002. Annual impairment testing will be required for goodwill with impairment being recorded if the carrying amount of goodwill exceeds its implied fair value. Adoption of these standards on January 1, 2002 will not have a material effect on the Company's financial statements. NOTE 2 - SECURITIES Securities at year end were as follows:
----------------------------------------------------------------------------- AMORTIZED GROSS GROSS ESTIMATED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE ------------- ---------------- ----------------- ------------- AVAILABLE FOR SALE 2001 US Agency obligations $ 99,893,474 $ 508,193 $ (911,894) $ 99,489,773 State and municipal obligations 10,463,516 293,400 (8,563) 10,748,353 Mortgage-backed obligations 148,938 3,794 152,732 Other securities 3,624,400 29,359 3,653,759 --------------- --------------- --------------- --------------- $ 114,130,328 $ 834,746 $ (920,457) $ 114,044,617 =============== =============== =============== =============== AVAILABLE FOR SALE 2000 US Agency obligations $ 77,808,200 $ 62,193 $ (2,185,777) $ 75,684,616 State and municipal obligations 13,247,607 207,123 (20,430) 13,434,300 Mortgage-backed obligations 1,934,599 (4,470) 1,930,129 Other securities 3,377,000 12,925 3,389,925 --------------- --------------- --------------- --------------- $ 96,367,406 $ 282,241 $ (2,210,677) $ 94,438,970 =============== =============== =============== =============== HELD TO MATURITY 2000 State and municipal obligations $ 10,378,811 $ 293,163 $ (54,129) $ 10,617,845 --------------- --------------- --------------- --------------- $ 10,378,811 $ 293,163 $ (54,129) $ 10,617,845 =============== =============== =============== =============== HELD TO MATURITY 2000 US Agency obligations $ 2,495,865 $ 2,432 $ (13,077) $ 2,485,220 State and municipal obligations $ 8,306,348 $ 194,352 $ (39,669) $ 8,461,031 --------------- --------------- --------------- --------------- $ 10,802,213 $ 196,784 $ (52,746) $ 10,946,251 =============== =============== =============== ===============
Sales of securities available for sale were as follows:
2001 2000 1999 ---------- ---------- ---------- Proceeds $5,480,956 $3,026,674 $7,271,884 Gross gains 34,358 26,674 56,068 Gross losses 17,235
UNITED BANCORP, INC. 2001 ANNUAL REPORT 51 NOTE 2 - SECURITIES (CONTINUED) Contractual maturities of securities at year-end 2001 were as follows:
AVERAGE AMORTIZED ESTIMATED TAX EQUIVALENT AVAILABLE FOR SALE COST FAIR VALUE YIELD --------------- --------------- --------------- US AGENCY OBLIGATIONS 1-5 Years $ 3,500,000 $ 3,487,930 4.41% 5-10 Years 25,256,983 25,361,149 6.29% Over 10 Years 71,136,491 70,640,694 6.51% --------------- --------------- --------------- Total 99,893,474 99,489,773 6.38% --------------- --------------- --------------- MORTGAGE-BACKED SECURITIES 5-10 Years 148,938 152,732 6.01% STATE AND MUNICIPAL OBLIGATIONS Under 1 Year 4,241,960 4,343,107 7.52% 1-5 Years 3,716,486 3,860,697 7.50% 5-10 Years 1,902,467 1,939,430 7.09% Over 10 Years 602,603 605,119 7.07% --------------- --------------- --------------- Total 10,463,516 10,748,353 7.41% --------------- --------------- --------------- OTHER SECURITIES Equity securities 3,624,400 3,653,759 7.00% --------------- --------------- --------------- TOTAL SECURITIES AVAILABLE FOR SALE $ 114,130,328 $ 114,044,617 6.49% =============== =============== =============== HELD TO MATURITY STATE AND MUNICIPAL OBLIGATIONS 1-5 Years 4,002,230 4,179,318 7.44% 5-10 Years 3,333,540 3,416,804 7.20% Over 10 Years 3,043,041 3,021,723 7.21% --------------- --------------- --------------- TOTAL SECURITIES HELD TO MATURITY $ 10,378,811 $ 10,617,845 7.30% =============== =============== ===============
Securities with a carrying value of $58,817,931 at December 31, 2001 and $49,414,697 at December 31, 2000 were pledged to secure public deposits, repurchase agreements and other liabilities as required or permitted by law. 52 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 3 -- LOANS Year-end loans were as follows:
2001 2000 ------------- ------------- Commercial loans $ 21,502,208 $ 20,414,810 Commercial real estate loans 61,962,953 64,811,940 Real estate loans 54,153,041 55,931,621 Installment loans 45,721,401 55,338,861 ------------- ------------- Total loans $ 183,339,603 $ 196,497,232 ============= =============
Loans to directors and officers, 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, 2000 $ 3,770,020 New loans 2,181,411 Repayments (1,082,064) ------------ Aggregate balance - December 31, 2001 $ 4,869,367 ============
The activity in the allowance for loan loss was as follows:
2001 2000 1999 ----------- ----------- ----------- Balance January 1, $ 2,790,133 $ 3,109,821 $ 3,033,105 Provision for loan losses 780,000 587,000 726,806 Loans charged-off (1,063,444) (1,194,840) (943,124) Recoveries of previous charge-offs 372,376 288,152 293,034 ----------- ----------- ----------- Balance December 31, $ 2,879,065 $ 2,790,133 $ 3,109,821 =========== =========== ===========
Non-performing loans were as follows at year end:
2001 2000 --------- --------- Loans past due over 90 days still on accrual $ 157,000 $ 124,000 Nonaccrual loans $ 661,000 $ 793,000
Loans required to be evaluated individually for impairment under the provisions of SFAS No. 114 were not material during any of the periods presented. NOTE 4 -- PREMISES AND EQUIPMENT Year-end premises and equipment were as follows:
2001 2000 ------------ ------------ Buildings and land $ 10,030,383 $ 9,856,383 Furniture and equipment 5,790,192 5,524,629 Leasehold improvements 263,977 263,977 Computer software 948,462 946,569 ------------ ------------ Total 17,033,014 16,591,558 Accumulated depreciation and amortization 7,949,123 7,070,512 ------------ ------------ Premises and equipment, net $ 9,083,891 $ 9,521,046 ============ ============
UNITED BANCORP, INC. 2001 ANNUAL REPORT 53 NOTE 4 -- PREMISES AND EQUIPMENT (CONTINUED) Depreciation expense was $865,951, $879,176, and $721,485 for the years 2001, 2000, and 1999 respectively. On April 1, 1997, CITIZENS entered in to a five-year noncancelable operating lease for an in-store retail branch. The lessor is a business in which a director of the Company and CITIZENS holds an interest. The lease may be renewed for up to two additional five-year terms after March 31, 2002. Annual rent expense during the initial term of the lease is $22,500. Annual rent during the second and third five-year terms would be $26,000 and $30,000, respectively. Rental expense was $22,500 for the years ended December 31, 2001, 2000 and 1999. Future minimum lease payments are $5,625 for 2002. This lease is expected to be renewed for the second five year term at a rate of $26,000 annually beginning April 1, 2002. NOTE 5 -- TIME DEPOSITS The scheduled maturities of time deposits as of December 31, 2001 were as follows:
Under $100,000 Over $100,000 Totals -------------- ------------- ------------ 2002 $ 82,444,939 $ 25,416,084 $107,861,023 2003 28,339,786 9,834,186 38,173,972 2004 10,264,420 1,953,241 12,217,661 2005 1,951,082 590,888 2,541,970 2006 2,893,931 643,325 3,537,256 926,075 926,075 ------------ ------------ ------------ Thereafter $126,820,233 $ 38,437,724 $165,257,957 ============ ============ ============
NOTE 6 -- BORROWED FUNDS Securities sold under agreements to repurchase are financing arrangements whereby the Company sells securities and agrees to repurchase the identical securities at the maturities of the agreements at specified prices. Physical control is maintained for all securities sold under repurchase agreements. Information concerning securities sold under agreements to repurchase is summarized as follows:
2001 2000 ---- ---- Average daily balance during the year $ 10,695,000 $ 5,177,000 Average interest rate during the year 3.59% 5.45% Maximum month-end balance during the year $ 20,653,000 $ 6,117,396
Securities underlying these agreements at year-end were as follows:
2001 2000 ---- ---- Carrying value of securities $ 28,695,446 $ 8,176,616 Fair value of securities 28,667,567 7,897,487
At year end, advances from the Federal Home Loan Bank were as follows.
2001 2000 ---- ---- Maturities March 2008 through January 2022, primarily fixed rate at rates from 3.60% to 7.20%, averaging 5.56% $ 7,959,229 Maturities March 2008 through September 2019, primarily fixed rate at rates from 5.85% to 7.20%, averaging 6.25% $ 5,895,979 Cash management line of credit, 2.05% at December 31, 2001 and 6.75% at December 31, 2000 $ 10,100,000 S 14,824,000 ------------ ------------ Total $ 18,059,229 $ 20,719,979 ============ ============
54 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 6 - BORROWED FUNDS (CONTINUED) At year end, lines of credit from correspondent banks were as follows.
2001 2000 ------------ ------------ Correspondent banks line of credit $ 116,000 $ 371,000 Treasury, tax and loan note $ 240,001 $ 156,637
At year-end 2001, required annual principal payments were as follows: 2002 $ 10,905,088 2003 481,656 2004 509,082 2005 538,122 2006 568,872 Thereafter 5,412,410 -------------- $ 18,415,230 ==============
Additionally, as members of the Federal Home Loan Bank system at year-end 2001, the Banks had the ability to obtain up to $40,232,000 based on current FHLB stock ownership, or up to 50% of their total assets in advances from the FHLB subject to increased share ownership of FHLB stock and 1-4 family residential real estate loan collateral availability. At December 31, 2001, the Company and its Banks have $62,199,000 in Federal Home Loan Bank Stock and 1-4 family residential real estate loans pledged as collateral for borrowings. Also at December 31, 2001, the Company and its Banks have cash management lines of credit (excluding FHLB cash management lines of credit) enabling borrowings up to $18.4 million with various correspondent banks. NOTE 7-- BENEFIT PLANS Information about the pension plan was as follows:
2001 2000 ------------ ------------ Change in benefit obligation: Beginning benefit obligation $ 1,954,428 $ 1,741,598 Service cost 157,915 131,781 Interest cost 144,507 133,233 Actuarial (gain)/loss 132,443 33,272 Plan amendments -- -- Benefits paid (308,109) (85,456) ------------ ------------ Ending benefits obligation 2,081,184 1,954,428 Changes in plan assets, at fair value Beginning plan assets 2,076,833 2,153,900 Actual return (17,355) (133,245) Employer contributions 201,326 141,634 Benefits paid (308,109) (85,456) ------------ ------------ Ending plan assets 1,952,695 2,076,833 Funded status (128,489) 122,405 Unrecognized net actuarial loss/(gain) 220,189 (120,624) Unrecognized prior service cost 67,321 76,473 ------------ ------------ Prepaid benefit cost $ 159,021 $ 78,254 ============ ============
UNITED BANCORP, INC 2001 ANNUAL REPORT 55 NOTE 7 - BENEFIT PLANS (CONTINUED)
Pension expense includes the following: 2001 2000 1999 --------- --------- --------- Service cost $ 157,915 $ 131,781 $ 131,950 Interest cost 144,507 133,233 122,963 Expected return on assets (182,294) (172,171) (155,634) Amortization of prior service cost, transition liability, net gain, and plan amendment 431 (7,024) 3,503 --------- --------- --------- Pension expense $ 120,559 $ 85,819 $ 102,782 ========= ========= ========= Significant assumption used: 2001 2000 1999 --------- --------- --------- Discount rate on benefit obligation 7.50% 7.50% 7.00% Rate of compensation increase 4.50% 4.00% 4.00% Expected long-term rate of return on assets 8.00% 8.00% 7.50%
The Company's 401(k) matching percentage was 50% of the employees' contribution for 2001, 2000 and 1999. The cash contribution and related expense included in salaries and employee benefits totaled $73,350 in 2001, $71,200 in 2000 and $66,425 in 1999. The Company entered into severance agreements with certain holding company officers. The original agreements were for a one-year period and extend automatically each year unless notice is given prior to June 30. No benefits are payable unless there has been a change in control and change in duties of the officers occurs. NOTE 8 - INCOME TAXES Income tax expense was as follows:
2001 2000 1999 ---------- -------- ---------- Current $1,018,966 $729,580 $1,121,047 Deferred (84,270) 151,192 (117,985) ---------- -------- ---------- Total $ 934,696 $880,772 $1,003,062 ========== ======== ==========
The effective tax rate differs from the federal statutory rate applied to financial statement income due to the following:
2001 2000 1999 ---------- ---------- ---------- Statutory rate 34.00% 34.00% 34.00% ---------- ---------- ---------- Income taxes computed at the statutory federal tax rate $1,254,696 $1,179,034 $1,415,527 Effect of: Tax exempt interest income (340,286) (336,629) (407,506) Other 20,286 38,367 (4,959) ---------- ---------- ---------- Total $ 934,696 $ 880,772 $1,003,062 ========== ========== ========== Effective tax rate 25.3% 25.4% 24.1% ========== ========== ==========
56 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 8 -- INCOME TAXES (CONTINUED) Year-end gross deferred tax assets and gross deferred tax liabilities were due to the following:
2001 2000 ---------- ---------- ITEMS GIVING RISE TO DEFERRED TAX ASSETS Allowance for loan losses in excess of tax reserve $ 731,014 $ 669,971 Amortization of intangibles 65,426 69,787 Deferred compensation 176,065 139,889 Unrealized loss on securities available for sale 29,083 655,668 ---------- ---------- Total deferred tax assets 1,001,588 1,535,315 ITEMS GIVING RISE TO DEFERRED TAX LIABILITIES Depreciation (428,982) (469,031) Deferred loan costs, net (56,622) (90,462) Accretion (14,372) (17,136) FHLB stock dividends (224,366) (163,404) Mortgage servicing rights (51,586) (38,643) Difference in accrued income, net of accrued expenses -- (16,126) Pension expense (59,587) (32,125) ---------- ---------- Total deferred tax liabilities (835,515) (826,927) ---------- ---------- Net deferred tax asset $ 166,073 $ 708,388 ========== ==========
NOTE 9 -- STOCK OPTIONS The Company maintains a nonqualified stock option plan for directors and bank holding company officers. The exercise price for options granted under this plan will be no less than 100% of the fair market value of the shares on the date of grant adjusted for stock dividends and stock splits. The options are first exercisable after February 21, 2005, except in the event certain financial performance criteria are met. Based on meeting portions of the established criteria, 14,516 became exercisable at December 31, 1998. All options become immediately exercisable upon retirement, death or in the event of a change in control of the Company. During 1999, 12,650 options vested due to the death of an executive officer. A summary of the status of the Company's stock option plan as of year-end 2001, 2000, and 1999 and changes during those years is presented in the table following. All share and per share prices have been restated to reflect stock dividends distributed or declared prior to issuance of the financial statements.
2001 2000 1999 ------------------------ ------------------------ ------------------------ WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ -------- ------- --------- -------- --------- Outstanding at beginning of year 82,200 $ 11.92 96,908 $ 11.65 103,689 $ 11.56 Granted -- -- -- -- -- -- Exercised -- -- -- -- (6,781) 10.19 Forfeited -- -- (14,708) 10.16 -- -- ------ ------- ------- Outstanding at end of year 82,200 11.92 82,200 11.92 96,908 11.65 ====== ======= ======= Remaining shares available for grant at year-end 44,708 44,708 30,000 Options exercisable at year-end 5,679 5,679 20,387
UNITED BANCORP, INC. 2001 ANNUAL REPORT 57 NOTE 9 -- STOCK OPTIONS (CONTINUED) The following table summarized information about stock options outstanding at December 31, 2001:
NUMBER NUMBER EXERCISE OUTSTANDING DATE OF EXERCISABLE PRICE AT 12/31/01 EXPIRATION AT 12/31/01 --------- ----------- ---------- ----------- $ 10.16 60,420 11/21/05 2,870 10.67 1,724 11/21/05 -- 16.35 12,155 11/21/05 1,702 18.10 6,078 11/21/05 851 21.19 1,823 11/21/05 256
SFAS No. 123 requires pro forma disclosures for options granted during 1995 and in subsequent years by corporations that do not adopt its fair value accounting method for stock-based employee compensation. Accordingly, the following pro forma information presents net income and earnings per share had the Statement's fair value method been used to measure compensation cost for stock option plans. No compensation expense was actually recognized for any of the periods presented. Pro forma net income exceeded reported net income for 2000 due to the forfeiture of options previously expensed for purposes of reporting pro forma disclosures in accordance with SFAS No. 123.
2001 2000 1999 -------- -------- -------- Net income as reported $2,755,587 $2,586,975 $3,160,254 Pro forma net income 2,706,198 2,598,085 3,070,715 Earnings per share as reported - Basic $ 0.88 $ 0.81 $ 0.97 Earnings per share as reported - Diluted 0.88 0.81 0.97 Pro forma earnings per share - Basic 0.86 0.81 0.95 Pro forma earnings per share - Diluted 0.86 0.81 0.94
NOTE 10 -- OFF-BALANCE SHEET ACTIVITIES Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contracts are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instructions, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. A summary of the notional or contractual amounts of financial instruments with off-balance sheet risk at year-end was as follows:
2001 2000 ----------- ----------- Commitments to extend credit $18,779,162 $16,656,030 Credit card and Ready Reserve Lines 1,275,919 1,256,090 Standby letters of credit 471,000 596,000
At year-end 2001, and included above, commitments to make fixed-rate loans at current market rates totaled $2,416,731 with the interest rates on those fixed-rate commitments ranging from 6.50% to 10.00%. The fixed-rate commitments at year-end 2000 were $2,740,105 with the interest rates ranging from 7.50% to 10.00%. 58 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 11 -- CONCENTRATIONS OF CREDIT RISK The Banks grant commercial, commercial real estate, real estate and installment loans to customers mainly in Athens, Belmont, Carroll, Fairfield, Harrison, Hocking and Tuscarawas Counties and the surrounding localities. The Banks also grant commercial and commercial real estate loans in the Columbus, Ohio area. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, commercial real estate and residential real estate. At December 31, 2001, and 2000, total commercial and commercial real estate loans made up 46.1% and 43.4% respectively of the loan portfolio, with 13.9% and 16.0% of these loans secured by commercial real estate and business assets mainly in the Columbus, Ohio area. Installment loans account for 24.7% and 28.1% of the loan portfolio and are secured by consumer assets including automobiles, which account for 90.4% and 92.8%, respectively, of the installment loan portfolio. Real estate loans comprise 29.2% and 28.5% of the loan portfolio as of December 31, 2001 and 2000, 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 December 31, 2001 and 2000, is $1,673,841 and $5,662,566, respectively on deposit with Mellon Bank, NA, Pittsburgh, Pennsylvania. Also included in cash and due from banks and federal funds sold as of December 31, 2001 is $2,848,186 on deposit with Bank One, NA, Detroit, Michigan. NOTE 12 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate fair values for financial instruments. The carrying amount is considered to approximate fair value for cash and cash equivalents, deposit liabilities subject to immediate withdrawal, short-term borrowings, loan servicing rights, accrued interest receivable and payable and variable-rate loans that reprice at intervals of less than six months. Securities fair values are based on quoted market prices or, if no quotes are available, on the rate and term of the security and on information about the issuer. For fixed-rate loans that reprice less frequently than each six months, time deposits and long-term debt, the fair value is estimated by a discounted cash flow analysis using current market rates for the estimated life and credit risk. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values, where applicable. Fair value of loans held for sale is based on market estimates. The fair value of off-balance sheet items is based on the current fees or cost that would be charged to enter into or terminate such arrangements. The estimated year-end fair values of financial instruments were:
2001 2000 ---------------------- ---------------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE (Dollars in thousands) --------- ---------- --------- ---------- Financial assets: Cash and cash equivalents $ 23,390 $ 23,390 $ 10,694 $ 10,694 Securities available for sale 114,045 114,045 94,439 94,439 Securities held to maturity 10,379 10,618 10,802 10,946 Loans receivable, net 180,461 186,249 193,707 192,486 Loan servicing rights 152 152 113 113 Accrued interest receivable 2,796 2,796 2,759 2,759 Financial liabilities: Demand and savings deposits $(118,118) $(118,118) $(117,339) $(117,339) Time deposits (165,258) (174,119) (150,214) (150,209) Short-term borrowings (10,456) (10,456) (15,352) (15,352) Repurchase agreements (7,811) (7,811) (4,861) (4,861) Long-term debt (7,959) (8,695) (5,896) (5,832) Accrued interest payable (669) (669) (866) (866)
NOTE 13 -- REGULATORY MATTERS The Company and Banks are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, UNITED BANCORP, INC. 2001 ANNUAL REPORT 59 NOTE 13 - REGULATORY MATTERS (CONTINUED) liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet various capital requirements can initiate regulatory action. Prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The Company and Banks at year-end 2001 and 2000 were categorized as well capitalized. Management is not aware of any conditions subsequent to their last regulatory notification that would change the Company's or the Banks' capital category. At year-end, consolidated and Bank only actual capital levels and minimum levels (in thousands) were:
MINIMUM REQUIRED MINIMUM REQUIRED TO BE WELL CAPITALIZED FOR CAPITAL UNDER PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION REGULATIONS ----------------------- ----------------------- ----------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO ---------- ---------- ---------- ---------- ---------- ---------- 2001 Total capital (to risk weighted assets) Consolidated $ 32,985 16.4% $ 16,057 8.0% $ 20,071 10.0% Citizens 22,171 14.8 11,992 8.0 14,990 10.0 Community 6,581 11.9 4,409 8.0 5,512 10.0 Tier 1 capital (to risk weighted assets) Consolidated $ 30,421 15.1% $ 8,028 4.0% $ 12,042 6.0% Citizens 20,280 13.5 5,996 4.0 8,994 6.0 Community 5,908 10.7 2,205 4.0 3,307 6.0 Tier 1 capital (to average assets) Consolidated $ 30,421 9.0% $ 13,470 4.0% $ 16,838 5.0% Citizens 20,280 8.3 9,770 4.0 12,213 5.0 Community 5,908 6.4 3,696 4.0 4,620 5.0 2000 Total capital (to risk weighted assets) Consolidated $ 32,476 15.3% $ 16,995 8.0% $ 21,244 10.0% Citizens 22,377 13.9 12,848 8.0 16,060 10.0 Community 6,707 13.0 4,121 8.0 5,151 10.0 Tier 1 capital (to risk weighted assets) Consolidated $ 29,819 14.0% $ 8,498 4.0% $ 12,746 6.0% Citizens 20,368 12.7 6,424 4.0 9,636 6.0 Community 6,063 11.8 2,060 4.0 3,091 6.0 Tier 1 capital (to average assets) Consolidated $ 29,819 9.4% $ 12,711 4.0% $ 15,889 5.0% Citizens 20,368 8.5 9,603 4.0 12,003 5.0 Community 6,063 7.8 3,105 4.0 3,881 5.0
The Company's primary source of funds to pay dividends to shareholders is the dividends it receives from the Banks. The Banks are subject to certain restrictions on the amount of dividends that they may declare without prior regulatory approval. At year-end 2001, $1,439,459 of retained earnings was available for dividend declaration without prior regulatory approval. 60 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 14 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS Following are condensed parent company financial statements: Condensed Balance Sheets December 31, 2001 and 2000
2001 2000 ---- ---- Assets: Cash and cash equivalents $ 3,288,585 $ 1,289,604 Securities available for sale, at fair value 311,995 1,796,638 Investment in subsidiaries 26,235,841 25,481,528 Building/Land 175,212 1,910 Other assets 654,486 361,307 ----------- ----------- $30,666,119 $28,930,987 =========== =========== Liabilities and shareholders' equity: Other liabilities $ 191,924 $ 251,900 Shareholders' equity 30,474,195 $28,679,087 ----------- ----------- Total liabilities and shareholders' equity $30,666,119 $28,930,987 =========== ===========
Condensed Statements of Income Year ended December 31, 2001, 2000 and 1999
2001 2000 1999 ---- ---- ---- Operating income Dividends from subsidiaries $ 3,448,355 $ 2,511,286 $ 1,612,561 Interest and dividend income from securities and fed funds 67,136 138,119 211,179 Other income 8,568 14,305 5,424 ----------- ----------- ----------- Total operating income 3,524,059 2,663,710 1,829,164 Operating expenses 703,328 219,232 267,947 ----------- ----------- ----------- Income before income taxes and Equity in undistributed net income. 2,820,731 2,444,478 1,561,217 Income tax expense (benefit) (199,802) (20,000) (17,129) ----------- ----------- ----------- Income before Equity in undistributed earnings of subsidiaries 3,020,533 2,464,478 1,578,346 Equity in undistributed earnings of subsidiaries (264,946) 122,497 1,581,908 ----------- ----------- ----------- Net income $ 2,755,587 $ 2,586,975 $ 3,160,254 =========== =========== ===========
UNITED BANCORP, INC. 2001 ANNUAL REPORT 61 NOTE 14-PARENT COMPANY CONDENSED FINANCIAL STATEMENTS (CONTINUED) Condensed Statements of Cash Flows Years ended December 31, 2001, 2000 and 1999
2001 2000 1999 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,755,587 $ 2,586,975 $ 3,160,254 Adjustments to reconcile net income to net cash from operating activities: Depreciation and Amortization 698 26,480 Equity in undistributed earnings of subsidiaries 264,946 (122,497) (1,581,908) Net change in other assets and other liabilities (183,333) 136,551 (17,789) (Accretion)/amortization of securities, net (298) 440 412 Amortization of intangibles 12,000 12,000 12,307 ----------- ----------- ----------- Net cash from operating activities 2,849,600 2,639,949 1,573,276 CASH FLOWS FROM INVESTING ACTIVITIES Net change in certificates of deposit Securities available for sale Proceeds from maturities and calls 1,500,000 1,000,000 Purchases of premises and equipment (174,000) (565,586) (1,838,010) ----------- ----------- ----------- Net cash from investing activities 1,326,000 (565,586) (838,010) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid to shareholders (1,590,220) (1,545,547) (1,477,686) Proceeds and tax benefit from exercise of stock options, net of shares redeemed 27,866 Cash paid in lieu of fractional shares (5,188) (4,111) (6,245) Purchases of treasury stock (581,211) (283,564) Proceeds from stock issuance 52,242 ----------- ----------- ----------- Net cash from financing activities (2,176,619) (1,780,980) (1,456,065) ----------- ----------- ----------- NET CHANGE IN CASH AND CASH EQUIVALENTS 1,998,981 293,383 (720,799) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,289,604 996,221 1,717,020 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,288,585 $ 1,289,604 $ 996,221 =========== =========== =========== Noncash transfer of Land and Building to subsidiary bank $ 2,375,206
62 UNITED BANCORP, INC. 2001 ANNUAL REPORT NOTE 15 - EARNINGS PER SHARE The factors used in the earnings per share computation follow:
2001 2000 1999 ---------- ---------- ---------- BASIC Net income $2,755,587 $2,586,975 $3,160,254 ========== ========== ========== Weighted average common shares outstanding 3,142,949 3,205,822 3,243,648 ========== ========== ========== Basic earnings per common share $ 0.88 $ 0.81 $ 0.97 ========== ========== ========== DILUTED Net income $2,755,587 $2,586,975 $3,160,254 ========== ========== ========== Weighted average common shares outstanding for basic earnings per common share 3,142,949 3,205,822 3,243,648 Add: Dilutive effects of assumed exercise of stock options 4,346 1,202 18,382 ---------- ---------- ---------- Average shares and dilutive potential common shares 3,147,295 3,207,024 3,262,030 ========== ========== ========== Average shares and dilutive potential common shares $ 0.88 $ 0.81 $ 0.97 ========== ========== ==========
Stock options for 20,056, 60,419 and 20,057 shares of common stock were not considered in computing diluted earnings per common share for 2001, 2000 and 1999 because they were antidilutive. NOTE 16 - OTHER COMPREHENSIVE INCOME (LOSS)
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 2000 1999 ----------- ----------- ----------- Unrealized holding gains and (losses) on securities available for sale $ 1,882,083 $ 3,925,291 $(6,279,955) Reclassification adjustment for (gains) and losses later recognized in income (39,358) (26,674) (38,833) Cumulative effect adjustment for the transfer of securities from held to maturity to available for sale upon adoption of SFAS No. 133 674,194 ----------- ----------- ----------- Net unrealized gains and (losses) 1,842,725 3,898,617 (5,644,594) Tax effect 626,585 1,323,498 1,917,629 ----------- ----------- ----------- Other comprehensive income (loss) $ 1,216,140 $ 2,575,119 $(3,726,965) =========== =========== ===========
UNITED BANCORP, INC. 2001 ANNUAL REPORT 63 NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED)
FULLY DILUTED INTEREST NET INTEREST BASIC EARNINGS EARNINGS PER INCOME INCOME NET INCOME PER SHARE SHARE -------- ------------ ---------- -------------- ------------- (In thousands except per share data) 2001 - ---- First Quarter $ 6,204 $ 2,879 $ 605 $ 0.19 $ 0.19 Second Quarter 6,321 3,124 737 $ 0.24 $ 0.24 Third Quarter 6,203 3,119 678 $ 0.22 $ 0.22 Fourth Quarter 5,868 3,125 736 $ 0.24 $ 0.24 2000 - ---- First Quarter $ 5,593 $ 2,841 $ 576 $ 0.18 $ 0.18 Second Quarter 5,800 2,848 706 $ 0.22 $ 0.22 Third Quarter 6,125 2,855 668 $ 0.21 $ 0.21 Fourth Quarter 6,216 2,853 637 $ 0.20 $ 0.20
The per share data has been adjusted to account for the 5% share dividends paid in 2000 and 2001. 64 UNITED BANCORP, INC. 2001 ANNUAL REPORT FIVE YEAR PERFORMANCE SUMMARY(1) (UNAUDITED) 2001
$(THOUSANDS,EXCEPT RATIOS AND PER SHARE DATA) 2001 2000 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------- INCOME AND EXPENSE: Interest and dividend income $ 24,596 $ 23,734 $ 21,639 $ 21,126 $ 20,802 Interest expense 12,349 12,337 9,845 9,657 9,410 Provision for loan losses 780 587 727 798 932 Noninterest income 1,606 1,369 1,285 1,581 1,307 Noninterest expense 9,383 8,712 8,189 8,008 7,946 Income tax expense 935 880 1,003 1,089 973 Net income 2,756 2,587 3,160 3,155 2,848 PER COMMON SHARE DATA: Net income, basic $ 0.88 $ 0.81 $ 0.97 $ 0.97 $ 0.88 Net income, diluted 0.88 0.81 0.97 0.94 0.87 Cash dividends paid 0.50 0.48 0.46 0.41 0.36 Book value 9.75 8.98 7.80 8.42 7.93 BALANCE SHEET: Loans receivable, net $ 180,461 $ 193,707 $ 177,406 $ 161,188 $ 168,439 Deposits 283,376 267,553 235,540 229,110 223,489 Total assets 341,317 323,886 298,764 285,493 263,607 OPERATING RATIOS: Return on average assets 0.82% 0.83% 1.09% 1.17% 1.10% Net interest margin(2) 3.86% 3.86% 4.30% 4.48% 4.62% Efficiency ratio(3) 64.95% 65.17% 57.50% 56.37% 57.50% EQUITY RATIO: Return on average shareholder's equity 9.13% 9.88% 11.94% 11.80% 11.48% CREDIT QUALITY: Net charge-offs to average loans 0.21% 0.49% 0.38% 0.48% 0.38% Ending allowance for loan losses 1.57% 1.42% 1.72% 1.85% 1.77%
(1) All share and per share amounts have been restated to reflect common stock dividends (2) As a percent of average earning assets (3) Noninterest expense divided by net interest income plus noninterest income UNITED BANCORP, INC. 2001 ANNUAL REPORT [UNITED BANCORP, INC. LOGO] UNITED BANCORP, INC. Martins Ferry, OH WE ARE UNITED TO BETTER SERVE YOU www.unitedbancorp.com EX-23 4 k68179ex23.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 UNITED BANCORP, INC. FORM 10-K CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in the prospectus constituting part of the Registration Statement on Form S-3 (Registration No. 333-01081) for United Bancorp, Inc., the 1995 Dividend Reinvestment Plan, of our report dated January 10, 2002 appearing in this annual report on Form 10-K of United Bancorp, Inc relating to the consolidated balance sheets of United Bancorp, Inc. as of December 31, 2001 and 2000 and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. Crowe, Chizek and Company LLP Columbus, Ohio March 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----