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, 2002
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 (IRS) Employer
incorporation or organization) Identification No.)
201 SOUTH FOURTH STREET, MARTINS FERRY, OHIO 43935
(Address of principal executive offices) (ZIP Code)
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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)
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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|
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12B-2). YES | | NO |X|
STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON EQUITY HELD
BY NON-AFFILIATES COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE COMMON EQUITY
WAS LAST SOLD, OR THE AVERAGE BID AND ASKED PRICE OF SUCH COMMON EQUITY, AS OF
THE LAST BUSINESS DAY OF THE REGISTRANT'S MOST RECENTLY COMPLETED SECOND FISCAL
QUARTER. $42,631,172.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12b-2). YES | | NO |X|
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF MARCH 5, 2003.
COMMON STOCK, $1.00 PAR VALUE: $44,123,445
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS OF MARCH 5, 2003.
COMMON STOCK, $1.00 PAR VALUE: 3,223,042 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ANNUAL SHAREHOLDERS REPORT FOR THE YEAR ENDED DECEMBER 31, 2002 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 23, 2003 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
------ ---------------- -----------------------------------------
4 Part I, Item 1, (a) Incorporated by reference to Pages 9-13
of the Annual Report To Shareholders.
4 Part I, Item 1, (b) Incorporated by reference to Page 35,
Note 1 of the Annual Report To
Shareholders.
6 Part I, Item 1, I Incorporated by reference to Pages 26-27
of the Annual Report To Shareholders.
7 Part I, Item 1, II, B Incorporated by reference to Page 39,
Note 2 of the Annual Report To
Shareholders.
9 Part I, Item 1, III, C, 4 Incorporated by reference to Page 46,
Note 12 of the Annual Report To
Shareholders.
10 Part I, Item 1, IV Incorporated by reference to Page 20 and
Pages 36, Note 1 the Annual Report To
Shareholders.
12 Part I, Item 1, V, A Incorporated by reference to Page 26 of
the Annual Report To Shareholders.
13 Part I, Item 1, VII, A Incorporated by reference to Page 26 of
the Annual Report To Shareholders.
13 Part I, Item 2 Incorporated by reference to Pages 9-13
of the Annual Report To Shareholders.
13 Part I, Item 3 Incorporated by reference to Page 38,
Note 1 of the Annual Report To
Shareholders.
13 Part II, Item 5 Incorporated by reference to Page 4 of
the Annual Report To Shareholders.
14 Part II, Item 6 Incorporated by reference to inside front
cover of the Annual Report To
Shareholders.
14 Part II, Item 7 Incorporated by reference to Pages 15-29,
of the Annual Report To Shareholders.
14 Part II, Item 7A Incorporated by reference to Pages 23-24
of the Annual Report To Shareholders.
14 Part II, Item 8 Incorporated by reference to Pages 30-52
of the Annual Report To Shareholders.
14 Part III, Item 10 Incorporated by reference to Pages 3-9 of
the Proxy Statement.
14 Part III, Item 11 Incorporated by reference to Pages 10-12
of the Proxy Statement.
15 Part III, Item 12 Incorporated by reference to Pages 5-6 of
the Proxy Statement.
15 Part III, Item 13 Controls and Procedures.
15 Part IV, Item 14, (a), 1 Incorporated by reference to Pages 30-52
of the Annual Report To Shareholders.
15 Part IV, Item 14, (a), 2 Incorporated by reference to Page 52 of
the Annual Report To Shareholders.
16 Part IV, Item 14, (a), 3, Incorporated by reference to Pages 9-10
Exhibit 10 of the Proxy Statement.
16 Part IV, Item 14, (a), 3, Incorporated by reference to Page 37 and
Exhibit 11 Page 51 of the Annual Report To
Shareholders.
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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 9-11 and 12-13, Corporate Profile, in the Annual Report To Shareholders for the year ended December 31, 2002. Our annual report is available on line at www.unitedbancorp.com
(b) FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
Refer to Page 35, Note 1 of the Annual Report To Shareholders.
(c) 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 64 Chairman, President and Chief Executive Officer
Alan M. Hooker 51 Executive Vice President - Administration
Scott Everson 34 Senior Vice President and Chief Operating
Officer
Randall M. Greenwood 38 Senior Vice President - Chief Financial
Officer, Treasurer
James A. Lodes 56 Vice President - Lending
Norman F. Assenza, Jr. 56 Vice President - Operations and Secretary
Michael A. Lloyd 34 Vice President - Information Systems
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Each individual has held the position noted during the past five years, except for the following:
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.
Scott A. Everson served as Senior Vice President, Operations and Retail Banking of The Citizens Savings Bank from May 1999 to April 2002 and prior to that he served Assistant Vice President/Branch Manager Bridgeport Office from 1997 to May 1999. In addition, he is currently President and Chief Operating Office and a Director of The Citizens Savings Bank. He has held this position since April 2002.
Michael A. Lloyd served as Senior Vice President Management Information Systems from October 1999 to April 2002 of the Citizens Savings Bank and prior to that he served as Vice President Management Information Systems from April 1999 to October 1999. He served as Data Processing Manager from 1994 to April 1999 for The Citizens Savings Bank.
Each of these Executive Officers are serving at-will in their current positions. The Officers have held the positions for the following time periods: James W. Everson, 20 years, Norman F. Assenza, Jr., 20 years, James A. Lodes, 7 years, Randall M. Greenwood, 5 years.
UNITED BANCORP, INC. FORM 10-K
PART I
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
(d) 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, southeastern and south central 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. CITIZENS offers full service brokerage service with securities provided through UVEST(R) 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, the Graham-Leach-Bliley Act of 1999 ("GLB Act") was enacted, 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.
The Company's two subsidiary banks are subject to regulation by the Ohio Division of Financial Institutions ("ODFI") 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.
UNITED BANCORP, INC. FORM 10-K
PART I
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
(d) NARRATIVE DESCRIPTION OF BUSINESS (CONTINUED)
The Company itself, as a shell holding company, has no compensated employees. CITIZENS has 83 full time employees, with 24 of these serving in a management capacity and 13 part time employees. COMMUNITY has 34 full time employees, with 11 serving in a management capacity and 9 part time employees. The Company considers employee relations to be good at all subsidiary locations.
(e) 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 26 of the Annual Report To Shareholders
B Refer to Page 26 of the Annual Report To Shareholders
C Refer to Page 27 of the Annual Report To Shareholders
II INVESTMENT PORTFOLIO
A Securities available for sale at year-end 2002 increased $18,825,000, or 16.5% over 2001, while securities held to maturity increased $2,547,000, or 24.5%. In our planning process, Management's projection for 2002 was for a steady to slightly rising interest rate environment. For the first half of 2002, Management maintained an average of $13.8 million in fed funds sold. As the economy continued to weaken, and threat of war surfaced, Management's, posture on interest rates for the remainder of 2002 and heading into 2003 changed from one that interest rates may rise to a position that rates will go basically unchanged for the next twelve months. Therefore, by December 31, 2002, Management invested the Company's excess liquidity in investment securities and in loans. During 2002 the Company recognized gains of $320,485 on the sale of investment securities. Management's strategy in 2002, took into consideration the relative volatility in the bond market. At times during the year Management realized there were opportunities to sell certain bonds in the portfolio when overall interest rates were depressed. Security gains are non recurring income and depending on future interest rate scenarios, the gains on the sale of investment securities may negatively impact the yield on the investment portfolio in future periods, and also negatively impact the Company's net interest margin
The following table sets forth the carrying amount of securities at December 31, 2002, 2001 and 2000:
DECEMBER 31,
-------------------------------
(In thousands) 2002 2001 2000
-------- -------- -------
AVAILABLE FOR SALE
US Agency obligations $ 93,262 $ 99,490 $75,685
Mortgage-backed obligations 14,075 153 1,930
Collaterallized mortgage obligations 998
State and municipal obligations 20,714 10,748 13,434
Other securities 3,820 3,654 3,390
-------- -------- -------
$132,869 $114,045 $94,439
======== ======== =======
HELD TO MATURITY
State and municipal obligations 12,926 10,379 8,306
-------- -------- -------
$ 12,926 $ 10,379 $ 8,306
======== ======== =======
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UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
II INVESTMENT PORTFOLIO (CONTINUED)
B Contractual maturities of securities at year-end 2002 were as follows:
AVERAGE
AMORTIZED ESTIMATED TAX EQUIVALENT
AVAILABLE FOR SALE COST FAIR VALUE YIELD
------------ ------------ --------------
US AGENCY OBLIGATIONS
1 - 5 Years $ 2,626,210 $ 2,635,307 5.12%
5 - 10 Years 13,295,933 13,384,501 5.12%
Over 10 Years 76,172,098 77,241,951 6.16%
------------ ------------ ------------
Total 92,094,241 93,261,759 5.98%
------------ ------------ ------------
MORTGAGE-BACKED SECURITIES
5 - 10 Years 6,254,515 6,288,262 3.82%
Over 10 Years 8,796,978 8,785,099 4.63%
------------ ------------ ------------
15,051,493 15,073,361 4.29%
------------ ------------ ------------
STATE AND MUNICIPAL OBLIGATIONS
Under 1 Year 4,771,468 4,852,429 5.94%
1 - 5 Years 928,793 988,856 6.47%
5 - 10 Years 7,057,634 7,164,884 5.79%
Over 10 Years 7,703,664 7,707,732 6.65%
------------ ------------ ------------
Total 20,461,559 20,713,901 5.98%
------------ ------------ ------------
OTHER SECURITIES
Equity securities 3,803,019 3,820,463 6.55%
------------ ------------ ------------
TOTAL SECURITIES AVAILABLE FOR SALE $131,410,312 $132,869,484 5.80%
============ ============ ============
HELD TO MATURITY
STATE AND MUNICIPAL OBLIGATIONS
Under 1 Year 151,999 152,762 8.86%
1 - 5 Years 4,501,248 4,800,651 7.36%
5 - 10 Years 3,162,795 3,411,256 7.20%
Over 10 Years 5,109,475 5,269,508 7.03%
------------ ------------ ------------
TOTAL SECURITIES HELD TO MATURITY $ 12,925,517 $ 13,634,177 7.21%
============ ============ ============
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C Refer to Page 39, Note 2 of the Annual Report To Shareholders.
D 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, 2002.
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO
A TYPES OF LOANS
The amounts of gross loans outstanding at December 31, 2002, 2001, 2000, 1999 and 1998 are shown in the following table according to types of loans:
DECEMBER 31,
--------------------------------------------------------
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
(In thousands)
Commercial loans $ 21,060 $ 21,502 $ 20,415 $ 15,463 $ 12,912
Commercial real estate loans 69,287 61,963 64,812 60,305 54,195
Real estate loans 52,535 54,153 55,931 51,357 49,438
Installment loans 45,006 45,722 55,339 53,391 47,676
-------- -------- -------- -------- --------
Total loans $187,888 $183,340 $196,497 $180,516 $164,221
======== ======== ======== ======== ========
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Construction loans were not significant for the periods discussed.
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, 2002 maturing within the various time frames indicated:
ONE YEAR ONE THROUGH AFTER xx
(In thousands) OR LESS FIVE YEARS FIVE YEARS TOTAL
----------- ----------- ----------- -----------
Commercial loans $ 18,965 $ 1,966 $ 129 $ 21,060
Commercial real estate loans 27,086 35,728 6,473 69,287
----------- ----------- ----------- -----------
Total $ 46,051 $ 37,694 $ 6,602 $ 90,347
=========== =========== =========== ===========
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The following is a schedule of fixed rate and variable rate commercial and commercial real estate loans at December 31, 2002 due to mature after one year:
(In thousands) FIXED RATE VARIABLE RATE TOTAL > ONE YEAR
---------- ------------- ----------------
Commercial loans $ 1,812 $ 283 $ 2,095
Commercial real estate loans 7,843 34,358 42,201
---------- ---------- ----------
Total $ 9,655 $ 34,641 $ 44,296
========== ========== ==========
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Variable rate loans are those loans with floating or adjustable interest rates.
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO (CONTINUED)
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, 2002, 2001, 2000, 1999 and 1998:
DECEMBER 31,
------------------------------------------------------------
(In thousands) 2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Nonaccrual basis $ 685 $ 661 $ 793 $ 987 $ 399
Accruing loans 90 days or greater past due 85 157 124 36 150
Troubled debt restructuring N/A N/A N/A N/A N/A
Impaired loans (1) (1) (1) (1) (1)
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(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 $43,047 for the year-ended December 31, 2002.
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.
1. POTENTIAL PROBLEM LOANS
The Company had no potential problem loans as of December 31, 2002 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 46, Note 11 of the Annual Report To Shareholders.
D. OTHER INTEREST-BEARING ASSETS
Not applicable.
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO (CONTINUED)
IV SUMMARY OF LOAN LOSS EXPERIENCE
For additional explanation of factors which influence management's judgment in determining amounts charged to expense, refer to Page 20, "Management Discussion and Analysis" and Page 36, Note 1 of the Annual Report To Shareholders.
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, 2002, 2001, 2000, 1999, and 1998:
(In thousands) 2002 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- --------
Loans
Loans outstanding $187,888 $183,340 $196,497 $180,516 $164,221 $171,477
Average loans outstanding $184,131 $188,114 $190,386 $168,868 $168,626 $169,066
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year $ 2,879 $ 2,790 $ 3,110 $ 3,033 $ 3,039 $ 2,756
Loan charge-offs:
Commercial 135 268 125 85 139 125
Commercial real estate 45 79 30
Real estate 84 67 275 21 51 20
Installment 507 728 716 807 861 661
-------- -------- -------- -------- -------- --------
Total loan charge-offs 771 1,063 1,195 943 1,051 806
-------- -------- -------- -------- -------- --------
Loan recoveries
Commercial 17 27 2 50 87 32
Commercial real estate 28 12 --
Real estate 1 10 4 3 9 3
Installment 215 335 254 228 151 122
-------- -------- -------- -------- -------- --------
Total loan recoveries 233 372 288 293 247 157
-------- -------- -------- -------- -------- --------
Net loan charge-offs 538 691 907 650 804 649
Provision for loan losses 630 780 587 727 798 932
-------- -------- -------- -------- -------- --------
Balance at end of year $ 2,971 $ 2,879 $ 2,790 $ 3,110 $ 3,033 $ 3,039
======== ======== ======== ======== ======== ========
Ratio of net charge-offs to average
loans outstanding for the year 0.29% 0.37% 0.49% 0.38% 0.48% 0.38%
======== ======== ======== ======== ======== ========
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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, 2002, 2001, 2000, 1999, and 1998. Management adjusts the allowance periodically to account for changes in national trends and economic conditions in the Banks service areas. 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:
2002 2001
----------------------- -----------------------
% OF LOANS % OF LOANS
(In thousands) ALLOWANCE TO TOTAL (In thousands) ALLOWANCE TO TOTAL
Loan type AMOUNT LOANS Loan type AMOUNT LOANS
---------- ---------- ---------- ----------
Commercial $ 361 11.73% Commercial $ 325 11.73%
Commercial real estate 965 33.80% Commercial real estate 872 33.80%
Real estate 403 29.54% Real estate 381 29.54%
Installment 879 24.93% Installment 613 24.93%
Unallocated 363 N/A Unallocated 688 N/A
---------- ---------- ---------- ----------
Total $ 2,971 100.00% Total $ 2,879 100.00%
========== ========== ========== ==========
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2000 1999
----------------------- -----------------------
% OF LOANS % OF LOANS
(In thousands) ALLOWANCE TO TOTAL (In thousands) ALLOWANCE TO TOTAL
Loan type AMOUNT LOANS Loan type AMOUNT LOANS
---------- ---------- ---------- ----------
Commercial $ 263 10.39% Commercial $ 195 8.57%
Commercial real estate 835 32.98% Commercial real estate 439 33.40%
Real estate 461 28.46% Real estate 343 28.45%
Installment 781 28.17% Installment 620 29.58%
Unallocated 450 N/A Unallocated 1,513 N/A
---------- ---------- ---------- ----------
Total $ 2,790 100.00% Total $ 3,110 100.00%
========== ========== ========== ==========
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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%
========== ==========
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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 26 of the Annual Report To Shareholders.
(2) Refer to Page 26 of the Annual Report To Shareholders.
(3) Refer to Page 26 of the Annual Report To Shareholders.
(4) Refer to Page 26 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, 2002:
(In thousands)
Three months or less $17,562
Over three through six months 3,722
Over six through twelve months 2,565
Over twelve months 18,991
-------
Total $42,840
=======
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Refer to Page 41 for further information concerning certificates of deposit.
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,
2002 2001 2000
---------- ---------- ----------
Dividend Payout Ratio 50.51% 56.82% 58.82%
Equity to Assets 8.89% 8.93% 8.85%
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(1) For other ratios refer to inside of front cover of the Annual Report To Shareholders.
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) 2002 2001 2000
---------- ---------- ----------
Balance at December 31, $ 7,010 $ 7,811 $ 4,861
Weighted average interest rate at December 31, 0.91% 1.39% 5.52%
Average daily balance during the year $ 8,567 $ 10,695 $ 5,177
Average interest rate during the year 1.19% 3.59% 5.45%
Maximum month-end balance during the year $ 11,659 $ 20,653 $ 6,117
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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) 2002 2001 2000
---------- ---------- ----------
Balance at December 31, $ 10,100 $ 14,824
Weighted average interest rate at December 31, 2.05% 6.75%
Average daily balance during the year $ 1,722 $ 14,783 $ 13,545
Average interest rate during the year 1.83% 4.01% 6.26%
Maximum month-end balance during the year $ 6,799 $ 24,995 $ 20,217
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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 9-11 and 12-13, "Corporate Profile" in the Annual Report To Shareholders. Management believes the properties described on Pages 9-11 and 12-13 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 38, 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 2002.
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 and refer to Page 48, Note 14 of the Annual Report To Shareholders for a discussion of dividend restrictions imposed on banking subsidiaries.
UNITED BANCORP, INC. FORM 10-K
PART II
ITEM 6 SELECTED FINANCIAL DATA
Refer to inside front cover, "Decade of Progress" of the Annual Report To Shareholders.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Refer to Pages 15-29, "Management's Discussion and Analysis" of the Annual Report To Shareholders.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to Pages 23-24, "Asset/Liability Management and Sensitivity to Market Risks" of the Annual Report To Shareholders.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to Pages 30-52 of the Annual Report To Shareholders.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
(a) There were no disagreements with accountants. Effective for the fiscal year beginning January 1, 2003, the Company engaged the firm of Grant Thornton, LLP as its new independent public accountant, replacing the firm of Crowe, Chizek and Company, LLP.
PART III
ITEM 10 EXECUTIVE COMPENSATION
Refer to Pages 9 - 12 of the Proxy Statement.
The following table is a disclosure of securities authorized for issuance under equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
BE ISSUED UPON EXERCISE EXERCISE PRICE OF FUTURE ISSUANCE UNDER
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EQUITY COMPENSATION PLANS
WARRANTS AND RIGHTS WARRANTS AND RIGHTS (EXCLUDING SECURITIES
REFLECTED IN COLUMN (A))
----------------------- -------------------- -------------------------
EQUITY COMPENSATION
PLANS APPROVED BY 84,318 $11.39 49,259
SECURITY HOLDERS
EQUITY COMPENSATION
PLANS NOT APPROVED
BY SECURITY HOLDERS
TOTAL 84,318 $11.39 49,259
|
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Refer to Pages 5-6 of the Proxy Statement.
UNITED BANCORP, INC. FORM 10-K
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Regulations of the Securities and Exchange Commission require the disclosure of any related party transactions with members of the Compensation Committee. During the past year, certain directors and officers, including members of the Compensation Committee, and one or more of their associates may have been customers of and had business transactions with one or more of the bank subsidiaries of United Bancorp, Inc. All loans included in such transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other persons, and did not involve more than normal risk of collectability or present other unfavorable features. It is expected that similar transactions will occur in the future. In addition, The Citizens Savings Bank, a wholly-owned subsidiary of the Corporation, pursuant to the terms of a lease entered into on April 1, 1998, paid Riesbeck Food Markets, Inc. $25,128 in 2002, and over the five-year term of the lease, payments will total $130,000 as lease payments for space used in an in-store banking location at St. Clairsville, Ohio. Mr. Riesbeck, Chairman of the Compensation Committee, is an officer, director and shareholder of Riesbeck Food Markets, Inc. Management believes the lease between Riesbeck Food Markets, Inc. and the Corporation was made on an arms-length basis. Management employed a third party consulting firm that specializes in grocery store banking facilities to establish the terms of the lease.
ITEM 13 CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of United Bancorp's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in United Bancorp's internal controls or in other factors that could significantly affect its internal control, including any corrective actions with regard to significant deficiencies and material weaknesses.
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 2002 Annual Report To Shareholders and are incorporated by reference:
Report of Independent Auditors Page 30 Consolidated Balance Sheets Page 31 Consolidated Statements of Income Page 32 Consolidated Statements of Shareholders' Equity Page 33 Consolidated Statements of Cash Flow Page 34 Notes to the Consolidated Financial Statements Pages 35 - 52 |
2. The summary of selected quarterly results of operations appears on Page 52 in the 2002 Annual Report To Shareholders and is incorporated by reference.
UNITED BANCORP, INC. FORM 10-K
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(a) DOCUMENTS FILED AS PART OF FORM 10-K (CONTINUED)
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 Change-in-Control Arrangements. The Company has
entered into change-in-control agreements with
Messrs. James W. Everson, Hooker, Scott A. Everson,
Greenwood and Assenza. The agreements provide that
Mr. James W. Everson, Mr. Hooker, Mr. Scott A.
Everson, Mr. Greenwood and Mr. Assenza will be
entitled to a lump sum severance benefit in the
event of their involuntary termination of
employment (other than for cause) following a
"change in control" of the Corporation. A change in
control is defined to include the acquisition of
the Corporation and certain other changes in the
voting control of the Corporation. In the event of
a change in control and the involuntary termination
of employment, the agreements provide that Mr.
James W. Everson will receive 2.99 times his annual
compensation, Mr. Hooker will receive 2.0 times his
annual compensation Mr. Scott A. Everson will
receive 2.0 times his annual compensation, Mr.
Greenwood will receive 1.0 time his annual
compensation and Mr. Assenza will receive 1.0 times
his annual compensation in a lump sum cash payment.
Each agreement has a term of one year and is
automatically extended for one additional year
unless, not later than June 30 of the preceding
year, the Corporation gives notice of termination
of the agreement. The right of the Corporation to
terminate the employment of Mr. James W. Everson,
Mr. Hooker. Mr. Scott A. Everson, Mr. Greenwood and
or Mr. Assenza prior to a change in control is
unaffected by these agreements. In the event a
change in control had occurred on January 1, 2003,
and Mr. James W. Everson's, Mr. Hooker's, Mr Scott
A. Everson's, Mr. Greenwood's or Mr. Assenza'a
employment had been involuntarily terminated on
such date (other than for cause), Mr. James W.
Everson, Mr. Hooker, Mr. Scott A. Everson, Mr.
Greenwood and Mr. Assenza would have been entitled
to receive lump sum severance benefits of $752,448,
$248,778, $208,968, $101,868 and $105,841
respectively. In the event a potential change in
control is announced, the agreements obligate Mr.
James W. Everson, Mr. Hooker, Mr Scott A. Everson,
Mr. Greenwood and Mr. Assenza to remain in the
employment of the Corporation for not less than one
year following the change in control of the
Corporation. The Change in control contracts can be
found in Exhibits 10.1 through 10.7.
11 Statement regarding computation of per share
earnings (included in Note 1 to the consolidated
financial statements on page 37 and Note 15 on
Page 51 of the Annual Report To Shareholders.)
12 Not applicable.
13 Reference to the Annual Report To Shareholders for
the fiscal year ended December 31, 2002.
16 Not applicable.
17 Not applicable.
|
UNITED BANCORP, INC. FORM 10-K
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(b) DOCUMENTS FILED AS PART OF FORM 10-K (CONTINUED)
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.
|
(c) The Company filed an SEC Form 8-K during the last quarter of the period covered by this report. The SEC Form 8-K was filed on November 19, 2002 for the dismissal of Crowe, Chizek and Company LLP ("Crowe Chizek") as the Corporation's independent public accountant, effective for the fiscal year beginning January 1, 2003, and engaged the firm of Grant Thornton, LLP as its new independent public accountant, effective for the fiscal year beginning January 1, 2003.
EXHIBIT INDEX
Exhibit No. Description SK Item 601 No.
----------- ----------- ---------------
1 Annual Report to Shareholders 13
2 Consents of Independent Auditors 23
10 Change in control agreements
10.1 James W. Everson
10.2 Randall M. Greenwood
10.3 Alan M. Hooker
10.4 Scott A. Everson
10.5 Norman F. Assenza
10.6 James A. Lodes
10.7 Michael A. Lloyd
Certification pursuant to 18 U.S.C.
99.1 Section 1350, As Adopted Pursuant
to Section 906 of The Sarbanes-Oxley
Act of 2002.
99.2 Certification pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant
to Section 906 of The Sarbanes-Oxley
Act of 2002.
|
UNITED BANCORP INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) United Bancorp, Inc.
By: /s/ James W. Everson March 15, 2003
------------------------------------
James W. Everson, Chairman, President & CEO
|
Persuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ James W. Everson March 15, 2003
-------------------------
James W. Everson, Chairman, President & CEO
By: /s/ Randall M. Greenwood March 15, 2003
-------------------------
Randall M. Greenwood, Senior Vice President & CFO
By: /s/ Michael J. Arciello March 15, 2003
-------------------------
Michael J. Arciello
By: /s/ Terry A. McGhee March 15, 2003
-------------------------
Terry A. McGhee
By: /s/ John M. Hoopingarner March 15, 2003
-------------------------
John M. Hoopingarner
By: /s/ Richard L. Riesbeck March 15, 2003
-------------------------
Richard L. Riesbeck
By: /s/ L.E. Richardson, Jr. March 15, 2003
--------------------------
L.E. Richardson, Jr.
By: /s/ Matthew C. Thomas March 15, 200
-------------------------
Matthew C. Thomas
|
UNITED BANCORP, INC.
CERTIFICATIONS
I, James W. Everson, certify that:
1. I have reviewed this annual report on Form 10-K of United Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date or our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date March 15, 2003
___________________________________________________________________
By /s/ James W. Everson
____________________________________________________________________
James W. Everson, Chairman, President and Chief Executive Officer
|
UNITED BANCORP, INC.
CERTIFICATIONS
|
I, Randall M. Greenwood, certify that:
1. I have reviewed this annual report on Form 10-K of United Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
d) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
e) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
f) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
c) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
d) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date or our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
By /s/ Randall M. Greenwood _______________________________________________________________________ Randall M. Greenwood, Senior Vice President and Chief Financial Officer |
EXHIBIT 10.1
UNITED BANCORP, INC. FORM 10-K
UNITED BANCORP, INC.
SPECIAL SEVERANCE AGREEMENT
Agreement made as of the _____ day of _____________________, 199___ between United Bancorp, Inc. (the "Company") and James W. Everson (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Company's management to their assigned duties in the face of potential circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.
In order to induce the Executive to remain in the employ of the Company and in consideration of the agreement set forth in Subsection 2(ii) hereof, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event of a "change in control of the Company" (as defined in Section 2 hereof) and employment of the Executive is subsequently terminated under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1996; provided, however, that commencing January 1, 1997, and each January 1st thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless not later than June 30 of 1996 and any year after, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a change in control of the Company, as defined in Section 2 hereof, shall have occurred during such term.
2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and the Executive employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule
UNITED BANCORP, INC. FORM 10-K
14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof; or (C) the business of the Company for which your services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement which provides for or contemplates a change in control of the Company; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) the Board adopts a resolution to the effect that a potential change in control of the Company for purposes of this Agreement has occurred. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, he will remain in the employ of the Company for not less than one (1) year following the initial occurrence of such a potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, the Executive shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of employment during the term of this Agreement unless such termination is (A) because of his death or retirement, (B) by the Company for cause or disability or (C) by him other than for good reason.
(i) Disability; Retirement. If, as a result of incapacity due to physical
or mental illness, the Executive shall have been absent from duties with the
Company on a full-time basis for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given, he shall not have
returned to the full-time performance of duties, the Company may terminate
employment for "disability." Termination of employment based on "retirement"
shall mean termination in accordance with the Company's retirement policy,
generally applicable to its salaried employees or in accordance with any
retirement arrangement with respect to the Executive established with his
consent.
(ii) Cause. Termination by the Company of your employment for "cause" shall mean termination upon (A) the willful and continued failure by the Executive substantially to perform
UNITED BANCORP, INC. FORM 10-K
duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for good reason), after a demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes that duties have not been substantially performed, or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company. For purposes of this Subsection, no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(iii) Good Reason. The Executive shall be entitled to terminate employment for good reason. For purposes of this Agreement, "good reason" shall, without express written consent, mean:
(A) the assignment of any duties inconsistent with his status as an executive of the Company or a substantial alteration in the nature or status of responsibilities from those in effect immediately prior to a change in control of the Company;
(B) a reduction by the Company in annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company;
(C) the relocation of Executive's offices to a location more than fifty
(50) miles from their present location;
(D) the failure by the Company to continue in effect any current compensation plan or program in which the Executive participates, or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to each such plan in connection with the change in control of the Company, or the failure by the Company to continue the Executive's participation therein;
(E) the failure by the Company to continue to provide benefits substantially similar to those enjoyed under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of a change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the change in control of the Company, or the failure by the Company to provide the number of paid vacation days on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control; or
(F) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof.
UNITED BANCORP, INC. FORM 10-K
(iv) Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of duties on a full-time basis during such thirty (30) day period),
and (B) if employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such notice of
termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and, except as provided
in Subsection 4(v) below, shall not be offset against or reduce any other
amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
(i) During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness, he shall continue to receive full base salary at the rate then in effect and all compensation, including under the Annual Incentive Plan or any other bonus or compensation plan or policy, paid during the period until this Agreement is terminated pursuant to Subsection 3(I) hereof. Thereafter, benefits shall be determined in accordance with the Company's disability program then in effect.
(ii) If the Executive retires pursuant to Subsection 3(i) hereof, this agreement is terminated.
(iii) If employment shall be terminated for Cause, the Company shall pay full base
UNITED BANCORP, INC. FORM 10-K
salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations under this Agreement.
(iv) If employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) for Good Reason, then the Executive shall be entitled to the benefits provided below:
(A) the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay as severance pay, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to 2.99 times the sum of (I) annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof and (ii) the amount of any bonus paid pursuant to the Annual Incentive Plan in the year preceding that in which the Date of Termination occurs. Such payment shall be reduced as appropriate, to not exceed the amount equal to a fraction of this payment, the numerator of which is the number of full months remaining to the Executive's normal retirement date and the denominator of which is (12, 24 or 36).
(C) notwithstanding any provision of the Annual Incentive Plan, the Company shall pay, not later than the fifth day following the Date of Termination, a lump sum amount equal to the sum of (I) any incentive compensation which has been allocated for the fiscal year preceding that in which the Date of Termination occurs but which has not yet been paid, and (ii) any award under the Annual Incentive Plan which has not yet been paid for any period which has closed prior to the Date of Termination.
(D) The Company shall also pay all legal fees and expenses incurred as a result of the termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).
(v) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned as the result of employment by
another employer or by retirement benefits after the Date of Termination, or
otherwise, and in Subsection 4(vi) below.
(vi) In the event that any payment or benefit (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible because of Section 280G of the Internal Revenue Code of 1954, as amended (the "Code"), the aggregate amount payable hereunder shall be reduced, so that after giving effect to such reduction, no payment made or benefit under the terms of this Agreement will not be deductible because of Section 280G of the Code. In determining whether any payment under the terms of this Agreement would not be
UNITED BANCORP, INC. FORM 10-K
deductible under Section 280G of the Code, all present and future payments and benefits shall be included (and, in the case of stock option, other non-cash benefits or deferred cash payments, shall be valued by a national independent accounting firm (at the Company's expense) acceptable to the Executive in accordance with the principles of Sections 280G(d) (3) and (4) of the Code and any regulations promulgated thereunder) except payments and benefits which, in the written opinion of independent tax counsel selected by a national independent accounting firm and acceptable to the Executive, do not constitute "parachute payments" within the meaning of Section 280G(b) (2) of the Code.
5. Successors; Binding Agreement. (I) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would have been entitled hereunder if employment is terminated for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid.
7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio applicable to instruments under seal.
UNITED BANCORP, INC. FORM 10-K
8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its corporate seal to be hereunder affixed on the day and year first above written, and the Executive has hereunto set his hand and seal on the day and year specified.
ATTEST:
UNITED BANCORP, INC. EXECUTIVE
By__________________________________ By_________________________________
(Name and Title) (Name)
|
EXHIBIT 10.2
UNITED BANCORP, INC. FORM 10-K
UNITED BANCORP, INC.
SPECIAL SEVERANCE AGREEMENT
Agreement made as of the _____ day of _____________________, 199___ between United Bancorp, Inc. (the "Company") and Randall M. Greenwood (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Company's management to their assigned duties in the face of potential circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.
In order to induce the Executive to remain in the employ of the Company and in consideration of the agreement set forth in Subsection 2(ii) hereof, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event of a "change in control of the Company" (as defined in Section 2 hereof) and employment of the Executive is subsequently terminated under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1996; provided, however, that commencing January 1, 1997, and each January 1st thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless not later than June 30 of 1996 and any year after, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a change in control of the Company, as defined in Section 2 hereof, shall have occurred during such term.
2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and the Executive employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in
UNITED BANCORP, INC. FORM 10-K
control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof; or (C) the business of the Company for which your services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement which provides for or contemplates a change in control of the Company; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) the Board adopts a resolution to the effect that a potential change in control of the Company for purposes of this Agreement has occurred. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, he will remain in the employ of the Company for not less than one (1) year following the initial occurrence of such a potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, the Executive shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of employment during the term of this Agreement unless such termination is (A) because of his death or retirement, (B) by the Company for cause or disability or (C) by him other than for good reason.
(i) Disability; Retirement. If, as a result of incapacity due to physical
or mental illness, the Executive shall have been absent from duties with the
Company on a full-time basis for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given, he shall not have
returned to the full-time performance of duties, the Company may terminate
employment for "disability." Termination of employment based on "retirement"
shall mean termination in accordance with the Company's retirement policy,
generally applicable to its salaried employees or in accordance with any
retirement arrangement with respect to the Executive established with his
consent.
UNITED BANCORP, INC. FORM 10-K
(ii) Cause. Termination by the Company of your employment for "cause" shall mean termination upon (A) the willful and continued failure by the Executive substantially to perform duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for good reason), after a demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes that duties have not been substantially performed, or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company. For purposes of this Subsection, no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(iii) Good Reason. The Executive shall be entitled to terminate employment for good reason. For purposes of this Agreement, "good reason" shall, without express written consent, mean:
(A) the assignment of any duties inconsistent with his status as an executive of the Company or a substantial alteration in the nature or status of responsibilities from those in effect immediately prior to a change in control of the Company;
(B) a reduction by the Company in annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company;
(C) the relocation of Executive's offices to a location more than fifty
(50) miles from their present location;
(D) the failure by the Company to continue in effect any current compensation plan or program in which the Executive participates, or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to each such plan in connection with the change in control of the Company, or the failure by the Company to continue the Executive's participation therein;
(E) the failure by the Company to continue to provide benefits substantially similar to those enjoyed under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of a change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the change in control of the Company, or the failure by the Company to provide the number of paid vacation days on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control; or
UNITED BANCORP, INC. FORM 10-K
(F) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof.
(iv) Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of duties on a full-time basis during such thirty (30) day period),
and (B) if employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such notice of
termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and, except as provided
in Subsection 4(v) below, shall not be offset against or reduce any other
amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
(i) During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness, he shall continue to receive full base salary at the rate then in effect and all compensation, including under the Annual Incentive Plan or any other bonus or compensation plan or policy, paid during the period until this Agreement is terminated pursuant to Subsection 3(I) hereof. Thereafter, benefits shall be determined in accordance with the Company's disability program then in effect.
UNITED BANCORP, INC. FORM 10-K
(ii) If the Executive retires pursuant to Subsection 3(i) hereof, this agreement is terminated.
(iii) If employment shall be terminated for Cause, the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations under this Agreement.
(iv) If employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) for Good Reason, then the Executive shall be entitled to the benefits provided below:
(A) the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay as severance pay, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to one times the sum of (I) annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof and (ii) the amount of any bonus paid pursuant to the Annual Incentive Plan in the year preceding that in which the Date of Termination occurs. Such payment shall be reduced as appropriate, to not exceed the amount equal to a fraction of this payment, the numerator of which is the number of full months remaining to the Executive's normal retirement date and the denominator of which is (12, 24 or 36).
(C) notwithstanding any provision of the Annual Incentive Plan, the Company shall pay, not later than the fifth day following the Date of Termination, a lump sum amount equal to the sum of (I) any incentive compensation which has been allocated for the fiscal year preceding that in which the Date of Termination occurs but which has not yet been paid, and (ii) any award under the Annual Incentive Plan which has not yet been paid for any period which has closed prior to the Date of Termination.
(D) The Company shall also pay all legal fees and expenses incurred as a result of the termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).
(v) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned as the result of employment by
another employer or by retirement benefits after the Date of Termination, or
otherwise, and in Subsection 4(vi) below.
(vi) In the event that any payment or benefit (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible because of Section 280G of the
UNITED BANCORP, INC. FORM 10-K
Internal Revenue Code of 1954, as amended (the "Code"), the aggregate amount payable hereunder shall be reduced, so that after giving effect to such reduction, no payment made or benefit under the terms of this Agreement will not be deductible because of Section 280G of the Code. In determining whether any payment under the terms of this Agreement would not be deductible under Section 280G of the Code, all present and future payments and benefits shall be included (and, in the case of stock option, other non-cash benefits or deferred cash payments, shall be valued by a national independent accounting firm (at the Company's expense) acceptable to the Executive in accordance with the principles of Sections 280G(d) (3) and (4) of the Code and any regulations promulgated thereunder) except payments and benefits which, in the written opinion of independent tax counsel selected by a national independent accounting firm and acceptable to the Executive, do not constitute "parachute payments" within the meaning of Section 280G(b) (2) of the Code.
5. Successors; Binding Agreement. (I) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would have been entitled hereunder if employment is terminated for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid.
7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio applicable to instruments under seal.
UNITED BANCORP, INC. FORM 10-K
8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its corporate seal to be hereunder affixed on the day and year first above written, and the Executive has hereunto set his hand and seal on the day and year specified.
ATTEST:
UNITED BANCORP, INC. EXECUTIVE
By__________________________________ By_________________________________
(Name and Title) (Name)
|
EXHIBIT 10.3
UNITED BANCORP, INC. FORM 10-K
UNITED BANCORP, INC.
SPECIAL SEVERANCE AGREEMENT
Agreement made as of the _____ day of _____________________, 199___ between United Bancorp, Inc. (the "Company") and Alan M. Hooker (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Company's management to their assigned duties in the face of potential circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.
In order to induce the Executive to remain in the employ of the Company and in consideration of the agreement set forth in Subsection 2(ii) hereof, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event of a "change in control of the Company" (as defined in Section 2 hereof) and employment of the Executive is subsequently terminated under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1998; provided, however, that commencing January 1, 1999, and each January 1st thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless not later than June 30 of 1999 and any year after, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a change in control of the Company, as defined in Section 2 hereof, shall have occurred during such term.
2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and the Executive employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule
UNITED BANCORP, INC. FORM 10-K
14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof; or (C) the business of the Company for which your services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement which provides for or contemplates a change in control of the Company; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) the Board adopts a resolution to the effect that a potential change in control of the Company for purposes of this Agreement has occurred. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, he will remain in the employ of the Company for not less than one (1) year following the initial occurrence of such a potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, the Executive shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of employment during the term of this Agreement unless such termination is (A) because of his death or retirement, (B) by the Company for cause or disability or (C) by him other than for good reason.
(i) Disability; Retirement. If, as a result of incapacity due to physical
or mental illness, the Executive shall have been absent from duties with the
Company on a full-time basis for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given, he shall not have
returned to the full-time performance of duties, the Company may terminate
employment for "disability." Termination of employment based on "retirement"
shall mean termination in accordance with the Company's retirement policy,
generally applicable to its salaried employees or in accordance with any
retirement arrangement with respect to the Executive established with his
consent.
(ii) Cause. Termination by the Company of your employment for "cause" shall mean termination upon (A) the willful and continued failure by the Executive substantially to perform
UNITED BANCORP, INC. FORM 10-K
duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for good reason), after a demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes that duties have not been substantially performed, or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company. For purposes of this Subsection, no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(iii) Good Reason. The Executive shall be entitled to terminate employment for good reason. For purposes of this Agreement, "good reason" shall, without express written consent, mean:
(A) the assignment of any duties inconsistent with his status as an executive of the Company or a substantial alteration in the nature or status of responsibilities from those in effect immediately prior to a change in control of the Company;
(B) a reduction by the Company in annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company;
(C) the relocation of Executive's offices to a location more than fifty
(50) miles from their present location;
(D) the failure by the Company to continue in effect any current compensation plan or program in which the Executive participates, or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to each such plan in connection with the change in control of the Company, or the failure by the Company to continue the Executive's participation therein;
(E) the failure by the Company to continue to provide benefits substantially similar to those enjoyed under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of a change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the change in control of the Company, or the failure by the Company to provide the number of paid vacation days on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control; or
(F) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof.
UNITED BANCORP, INC. FORM 10-K
(iv) Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of duties on a full-time basis during such thirty (30) day period),
and (B) if employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such notice of
termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and, except as provided
in Subsection 4(v) below, shall not be offset against or reduce any other
amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
(i) During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness, he shall continue to receive full base salary at the rate then in effect and all compensation, including under the Annual Incentive Plan or any other bonus or compensation plan or policy, paid during the period until this Agreement is terminated pursuant to Subsection 3(I) hereof. Thereafter, benefits shall be determined in accordance with the Company's disability program then in effect.
(ii) If the Executive retires pursuant to Subsection 3(i) hereof, this agreement is terminated.
(iii) If employment shall be terminated for Cause, the Company shall pay full base
UNITED BANCORP, INC. FORM 10-K
salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations under this Agreement.
(iv) If employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) for Good Reason, then the Executive shall be entitled to the benefits provided below:
(A) the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay as severance pay, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to two times the sum of (I) annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof and (ii) the amount of any bonus paid pursuant to the Annual Incentive Plan in the year preceding that in which the Date of Termination occurs. Such payment shall be reduced as appropriate, to not exceed the amount equal to a fraction of this payment, the numerator of which is the number of full months remaining to the Executive's normal retirement date and the denominator of which is (12, 24 or 36).
(C) notwithstanding any provision of the Annual Incentive Plan, the Company shall pay, not later than the fifth day following the Date of Termination, a lump sum amount equal to the sum of (I) any incentive compensation which has been allocated for the fiscal year preceding that in which the Date of Termination occurs but which has not yet been paid, and (ii) any award under the Annual Incentive Plan which has not yet been paid for any period which has closed prior to the Date of Termination.
(D) The Company shall also pay all legal fees and expenses incurred as a result of the termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).
(v) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned as the result of employment by
another employer or by retirement benefits after the Date of Termination, or
otherwise, and in Subsection 4(vi) below.
(vi) In the event that any payment or benefit (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible because of Section 280G of the Internal Revenue Code of 1954, as amended (the "Code"), the aggregate amount payable hereunder shall be reduced, so that after giving effect to such reduction, no payment made or benefit under the terms of this Agreement will not be deductible because of Section 280G of the Code. In determining whether any payment under the terms of this Agreement would not be
UNITED BANCORP, INC. FORM 10-K
deductible under Section 280G of the Code, all present and future payments and benefits shall be included (and, in the case of stock option, other non-cash benefits or deferred cash payments, shall be valued by a national independent accounting firm (at the Company's expense) acceptable to the Executive in accordance with the principles of Sections 280G(d) (3) and (4) of the Code and any regulations promulgated thereunder) except payments and benefits which, in the written opinion of independent tax counsel selected by a national independent accounting firm and acceptable to the Executive, do not constitute "parachute payments" within the meaning of Section 280G(b) (2) of the Code.
5. Successors; Binding Agreement. (I) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would have been entitled hereunder if employment is terminated for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid.
7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio applicable to instruments under seal.
UNITED BANCORP, INC. FORM 10-K
8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its corporate seal to be hereunder affixed on the day and year first above written, and the Executive has hereunto set his hand and seal on the day and year specified.
ATTEST:
UNITED BANCORP, INC. EXECUTIVE
By__________________________________ By_________________________________
(Name and Title) (Name)
|
EXHIBIT 10.4
UNITED BANCORP, INC. FORM 10-K
UNITED BANCORP, INC.
SPECIAL SEVERANCE AGREEMENT
Agreement made as of the _____ day of _____________________, 200___ between United Bancorp, Inc. (the "Company") and Scott A Everson (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Company's management to their assigned duties in the face of potential circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.
In order to induce the Executive to remain in the employ of the Company and in consideration of the agreement set forth in Subsection 2(ii) hereof, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event of a "change in control of the Company" (as defined in Section 2 hereof) and employment of the Executive is subsequently terminated under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2002; provided, however, that commencing January 1, 2003, and each January 1st thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless not later than June 30 of 2003 and any year after, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a change in control of the Company, as defined in Section 2 hereof, shall have occurred during such term.
2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and the Executive employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in
UNITED BANCORP, INC. FORM 10-K
control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof; or (C) the business of the Company for which your services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement which provides for or contemplates a change in control of the Company; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) the Board adopts a resolution to the effect that a potential change in control of the Company for purposes of this Agreement has occurred. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, he will remain in the employ of the Company for not less than one (1) year following the initial occurrence of such a potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, the Executive shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of employment during the term of this Agreement unless such termination is (A) because of his death or retirement, (B) by the Company for cause or disability or (C) by him other than for good reason.
(i) Disability; Retirement. If, as a result of incapacity due to physical
or mental illness, the Executive shall have been absent from duties with the
Company on a full-time basis for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given, he shall not have
returned to the full-time performance of duties, the Company may terminate
employment for "disability." Termination of employment based on "retirement"
shall mean termination in accordance with the Company's retirement policy,
generally applicable to its salaried employees or in accordance with any
retirement arrangement with respect to the Executive established with his
consent.
UNITED BANCORP, INC. FORM 10-K
(ii) Cause. Termination by the Company of your employment for "cause" shall mean termination upon (A) the willful and continued failure by the Executive substantially to perform duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for good reason), after a demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes that duties have not been substantially performed, or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company. For purposes of this Subsection, no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(iii) Good Reason. The Executive shall be entitled to terminate employment for good reason. For purposes of this Agreement, "good reason" shall, without express written consent, mean:
(A) the assignment of any duties inconsistent with his status as an executive of the Company or a substantial alteration in the nature or status of responsibilities from those in effect immediately prior to a change in control of the Company;
(B) a reduction by the Company in annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company;
(C) the relocation of Executive's offices to a location more than fifty
(50) miles from their present location;
(D) the failure by the Company to continue in effect any current compensation plan or program in which the Executive participates, or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to each such plan in connection with the change in control of the Company, or the failure by the Company to continue the Executive's participation therein;
(E) the failure by the Company to continue to provide benefits substantially similar to those enjoyed under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of a change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the change in control of the Company, or the failure by the Company to provide the number of paid vacation days on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control; or
UNITED BANCORP, INC. FORM 10-K
(F) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof.
(iv) Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of duties on a full-time basis during such thirty (30) day period),
and (B) if employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such notice of
termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and, except as provided
in Subsection 4(v) below, shall not be offset against or reduce any other
amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
(i) During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness, he shall continue to receive full base salary at the rate then in effect and all compensation, including under the Annual Incentive Plan or any other bonus or compensation plan or policy, paid during the period until this Agreement is terminated pursuant to Subsection 3(I) hereof. Thereafter, benefits shall be determined in accordance with the Company's disability program then in effect.
UNITED BANCORP, INC. FORM 10-K
(ii) If the Executive retires pursuant to Subsection 3(i) hereof, this agreement is terminated.
(iii) If employment shall be terminated for Cause, the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations under this Agreement.
(iv) If employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) for Good Reason, then the Executive shall be entitled to the benefits provided below:
(A) the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay as severance pay, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to two times the sum of (I) annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof and (ii) the amount of any bonus paid pursuant to the Annual Incentive Plan in the year preceding that in which the Date of Termination occurs. Such payment shall be reduced as appropriate, to not exceed the amount equal to a fraction of this payment, the numerator of which is the number of full months remaining to the Executive's normal retirement date and the denominator of which is (12, 24 or 36).
(C) notwithstanding any provision of the Annual Incentive Plan, the Company shall pay, not later than the fifth day following the Date of Termination, a lump sum amount equal to the sum of (I) any incentive compensation which has been allocated for the fiscal year preceding that in which the Date of Termination occurs but which has not yet been paid, and (ii) any award under the Annual Incentive Plan which has not yet been paid for any period which has closed prior to the Date of Termination.
(D) The Company shall also pay all legal fees and expenses incurred as a result of the termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).
(v) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned as the result of employment by
another employer or by retirement benefits after the Date of Termination, or
otherwise, and in Subsection 4(vi) below.
(vi) In the event that any payment or benefit (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible because of Section 280G of the
UNITED BANCORP, INC. FORM 10-K
Internal Revenue Code of 1954, as amended (the "Code"), the aggregate amount payable hereunder shall be reduced, so that after giving effect to such reduction, no payment made or benefit under the terms of this Agreement will not be deductible because of Section 280G of the Code. In determining whether any payment under the terms of this Agreement would not be deductible under Section 280G of the Code, all present and future payments and benefits shall be included (and, in the case of stock option, other non-cash benefits or deferred cash payments, shall be valued by a national independent accounting firm (at the Company's expense) acceptable to the Executive in accordance with the principles of Sections 280G(d) (3) and (4) of the Code and any regulations promulgated thereunder) except payments and benefits which, in the written opinion of independent tax counsel selected by a national independent accounting firm and acceptable to the Executive, do not constitute "parachute payments" within the meaning of Section 280G(b) (2) of the Code.
5. Successors; Binding Agreement. (I) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would have been entitled hereunder if employment is terminated for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid.
7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio applicable to instruments under seal.
UNITED BANCORP, INC. FORM 10-K
8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its corporate seal to be hereunder affixed on the day and year first above written, and the Executive has hereunto set his hand and seal on the day and year specified.
ATTEST:
UNITED BANCORP, INC. EXECUTIVE
By__________________________________ By_________________________________
(Name and Title) (Name)
|
EXHIBIT 10.5
UNITED BANCORP, INC. FORM 10-K
UNITED BANCORP, INC.
SPECIAL SEVERANCE AGREEMENT
Agreement made as of the _____ day of _____________________, 199___ between United Bancorp, Inc. (the "Company") and Norman F. Assenza (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Company's management to their assigned duties in the face of potential circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.
In order to induce the Executive to remain in the employ of the Company and in consideration of the agreement set forth in Subsection 2(ii) hereof, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event of a "change in control of the Company" (as defined in Section 2 hereof) and employment of the Executive is subsequently terminated under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1996; provided, however, that commencing January 1, 1997, and each January 1st thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless not later than June 30 of 1996 and any year after, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a change in control of the Company, as defined in Section 2 hereof, shall have occurred during such term.
2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and the Executive employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule
UNITED BANCORP, INC. FORM 10-K
14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof; or (C) the business of the Company for which your services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement which provides for or contemplates a change in control of the Company; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) the Board adopts a resolution to the effect that a potential change in control of the Company for purposes of this Agreement has occurred. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, he will remain in the employ of the Company for not less than one (1) year following the initial occurrence of such a potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, the Executive shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of employment during the term of this Agreement unless such termination is (A) because of his death or retirement, (B) by the Company for cause or disability or (C) by him other than for good reason.
(i) Disability; Retirement. If, as a result of incapacity due to physical
or mental illness, the Executive shall have been absent from duties with the
Company on a full-time basis for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given, he shall not have
returned to the full-time performance of duties, the Company may terminate
employment for "disability." Termination of employment based on "retirement"
shall mean termination in accordance with the Company's retirement policy,
generally applicable to its salaried employees or in accordance with any
retirement arrangement with respect to the Executive established with his
consent.
(ii) Cause. Termination by the Company of your employment for "cause" shall mean termination upon (A) the willful and continued failure by the Executive substantially to perform
UNITED BANCORP, INC. FORM 10-K
duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for good reason), after a demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes that duties have not been substantially performed, or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company. For purposes of this Subsection, no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(iii) Good Reason. The Executive shall be entitled to terminate employment for good reason. For purposes of this Agreement, "good reason" shall, without express written consent, mean:
(A) the assignment of any duties inconsistent with his status as an executive of the Company or a substantial alteration in the nature or status of responsibilities from those in effect immediately prior to a change in control of the Company;
(B) a reduction by the Company in annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company;
(C) the relocation of Executive's offices to a location more than fifty
(50) miles from their present location;
(D) the failure by the Company to continue in effect any current compensation plan or program in which the Executive participates, or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to each such plan in connection with the change in control of the Company, or the failure by the Company to continue the Executive's participation therein;
(E) the failure by the Company to continue to provide benefits substantially similar to those enjoyed under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of a change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the change in control of the Company, or the failure by the Company to provide the number of paid vacation days on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control; or
(F) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof.
UNITED BANCORP, INC. FORM 10-K
(iv) Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of duties on a full-time basis during such thirty (30) day period),
and (B) if employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such notice of
termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and, except as provided
in Subsection 4(v) below, shall not be offset against or reduce any other
amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
(i) During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness, he shall continue to receive full base salary at the rate then in effect and all compensation, including under the Annual Incentive Plan or any other bonus or compensation plan or policy, paid during the period until this Agreement is terminated pursuant to Subsection 3(I) hereof. Thereafter, benefits shall be determined in accordance with the Company's disability program then in effect.
(ii) If the Executive retires pursuant to Subsection 3(i) hereof, this agreement is terminated.
(iii) If employment shall be terminated for Cause, the Company shall pay full base
UNITED BANCORP, INC. FORM 10-K
salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations under this Agreement.
(iv) If employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) for Good Reason, then the Executive shall be entitled to the benefits provided below:
(A) the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay as severance pay, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to one times the sum of (I) annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof and (ii) the amount of any bonus paid pursuant to the Annual Incentive Plan in the year preceding that in which the Date of Termination occurs. Such payment shall be reduced as appropriate, to not exceed the amount equal to a fraction of this payment, the numerator of which is the number of full months remaining to the Executive's normal retirement date and the denominator of which is (12, 24 or 36).
(C) notwithstanding any provision of the Annual Incentive Plan, the Company shall pay, not later than the fifth day following the Date of Termination, a lump sum amount equal to the sum of (I) any incentive compensation which has been allocated for the fiscal year preceding that in which the Date of Termination occurs but which has not yet been paid, and (ii) any award under the Annual Incentive Plan which has not yet been paid for any period which has closed prior to the Date of Termination.
(D) The Company shall also pay all legal fees and expenses incurred as a result of the termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).
(v) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned as the result of employment by
another employer or by retirement benefits after the Date of Termination, or
otherwise, and in Subsection 4(vi) below.
(vi) In the event that any payment or benefit (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible because of Section 280G of the Internal Revenue Code of 1954, as amended (the "Code"), the aggregate amount payable hereunder shall be reduced, so that after giving effect to such reduction, no payment made or benefit under the terms of this Agreement will not be deductible because of Section 280G of the Code. In determining whether any payment under the terms of this Agreement would not be
UNITED BANCORP, INC. FORM 10-K
deductible under Section 280G of the Code, all present and future payments and benefits shall be included (and, in the case of stock option, other non-cash benefits or deferred cash payments, shall be valued by a national independent accounting firm (at the Company's expense) acceptable to the Executive in accordance with the principles of Sections 280G(d) (3) and (4) of the Code and any regulations promulgated thereunder) except payments and benefits which, in the written opinion of independent tax counsel selected by a national independent accounting firm and acceptable to the Executive, do not constitute "parachute payments" within the meaning of Section 280G(b) (2) of the Code.
5. Successors; Binding Agreement. (I) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would have been entitled hereunder if employment is terminated for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid.
7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio applicable to instruments under seal.
UNITED BANCORP, INC. FORM 10-K
8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its corporate seal to be hereunder affixed on the day and year first above written, and the Executive has hereunto set his hand and seal on the day and year specified.
ATTEST:
UNITED BANCORP, INC. EXECUTIVE
By__________________________________ By_________________________________
(Name and Title) (Name)
|
EXHIBIT 10.6
UNITED BANCORP, INC. FORM 10-K
UNITED BANCORP, INC.
SPECIAL SEVERANCE AGREEMENT
Agreement made as of the _____ day of _____________________, 200___ between United Bancorp, Inc. (the "Company") and James Lodes (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Company's management to their assigned duties in the face of potential circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.
In order to induce the Executive to remain in the employ of the Company and in consideration of the agreement set forth in Subsection 2(ii) hereof, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event of a "change in control of the Company" (as defined in Section 2 hereof) and employment of the Executive is subsequently terminated under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2002; provided, however, that commencing January 1, 2003, and each January 1st thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless not later than June 30 of 2003 and any year after, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a change in control of the Company, as defined in Section 2 hereof, shall have occurred during such term.
2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and the Executive employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule
UNITED BANCORP, INC. FORM 10-K
14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof; or (C) the business of the Company for which your services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement which provides for or contemplates a change in control of the Company; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) the Board adopts a resolution to the effect that a potential change in control of the Company for purposes of this Agreement has occurred. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, he will remain in the employ of the Company for not less than one (1) year following the initial occurrence of such a potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, the Executive shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of employment during the term of this Agreement unless such termination is (A) because of his death or retirement, (B) by the Company for cause or disability or (C) by him other than for good reason.
(i) Disability; Retirement. If, as a result of incapacity due to physical
or mental illness, the Executive shall have been absent from duties with the
Company on a full-time basis for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given, he shall not have
returned to the full-time performance of duties, the Company may terminate
employment for "disability." Termination of employment based on "retirement"
shall mean termination in accordance with the Company's retirement policy,
generally applicable to its salaried employees or in accordance with any
retirement arrangement with respect to the Executive established with his
consent.
(ii) Cause. Termination by the Company of your employment for "cause" shall mean termination upon (A) the willful and continued failure by the Executive substantially to perform
UNITED BANCORP, INC. FORM 10-K
duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for good reason), after a demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes that duties have not been substantially performed, or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company. For purposes of this Subsection, no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(iii) Good Reason. The Executive shall be entitled to terminate employment for good reason. For purposes of this Agreement, "good reason" shall, without express written consent, mean:
(A) the assignment of any duties inconsistent with his status as an executive of the Company or a substantial alteration in the nature or status of responsibilities from those in effect immediately prior to a change in control of the Company;
(B) a reduction by the Company in annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company;
(C) the relocation of Executive's offices to a location more than fifty
(50) miles from their present location;
(D) the failure by the Company to continue in effect any current compensation plan or program in which the Executive participates, or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to each such plan in connection with the change in control of the Company, or the failure by the Company to continue the Executive's participation therein;
(E) the failure by the Company to continue to provide benefits substantially similar to those enjoyed under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of a change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the change in control of the Company, or the failure by the Company to provide the number of paid vacation days on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control; or
(F) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof.
UNITED BANCORP, INC. FORM 10-K
(iv) Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of duties on a full-time basis during such thirty (30) day period),
and (B) if employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such notice of
termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and, except as provided
in Subsection 4(v) below, shall not be offset against or reduce any other
amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
(i) During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness, he shall continue to receive full base salary at the rate then in effect and all compensation, including under the Annual Incentive Plan or any other bonus or compensation plan or policy, paid during the period until this Agreement is terminated pursuant to Subsection 3(I) hereof. Thereafter, benefits shall be determined in accordance with the Company's disability program then in effect.
(ii) If the Executive retires pursuant to Subsection 3(i) hereof, this agreement is terminated.
(iii) If employment shall be terminated for Cause, the Company shall pay full base
UNITED BANCORP, INC. FORM 10-K
salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations under this Agreement.
(iv) If employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) for Good Reason, then the Executive shall be entitled to the benefits provided below:
(A) the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay as severance pay, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to one times the sum of (I) annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof and (ii) the amount of any bonus paid pursuant to the Annual Incentive Plan in the year preceding that in which the Date of Termination occurs. Such payment shall be reduced as appropriate, to not exceed the amount equal to a fraction of this payment, the numerator of which is the number of full months remaining to the Executive's normal retirement date and the denominator of which is (12, 24 or 36).
(C) notwithstanding any provision of the Annual Incentive Plan, the Company shall pay, not later than the fifth day following the Date of Termination, a lump sum amount equal to the sum of (I) any incentive compensation which has been allocated for the fiscal year preceding that in which the Date of Termination occurs but which has not yet been paid, and (ii) any award under the Annual Incentive Plan which has not yet been paid for any period which has closed prior to the Date of Termination.
(D) The Company shall also pay all legal fees and expenses incurred as a result of the termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).
(v) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned as the result of employment by
another employer or by retirement benefits after the Date of Termination, or
otherwise, and in Subsection 4(vi) below.
(vi) In the event that any payment or benefit (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible because of Section 280G of the Internal Revenue Code of 1954, as amended (the "Code"), the aggregate amount payable hereunder shall be reduced, so that after giving effect to such reduction, no payment made or benefit under the terms of this Agreement will not be deductible because of Section 280G of the Code. In determining whether any payment under the terms of this Agreement would not be
UNITED BANCORP, INC. FORM 10-K
deductible under Section 280G of the Code, all present and future payments and benefits shall be included (and, in the case of stock option, other non-cash benefits or deferred cash payments, shall be valued by a national independent accounting firm (at the Company's expense) acceptable to the Executive in accordance with the principles of Sections 280G(d) (3) and (4) of the Code and any regulations promulgated thereunder) except payments and benefits which, in the written opinion of independent tax counsel selected by a national independent accounting firm and acceptable to the Executive, do not constitute "parachute payments" within the meaning of Section 280G(b) (2) of the Code.
5. Successors; Binding Agreement. (I) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would have been entitled hereunder if employment is terminated for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid.
7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio applicable to instruments under seal.
UNITED BANCORP, INC. FORM 10-K
8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its corporate seal to be hereunder affixed on the day and year first above written, and the Executive has hereunto set his hand and seal on the day and year specified.
ATTEST:
UNITED BANCORP, INC. EXECUTIVE
By__________________________________ By_________________________________
(Name and Title) (Name)
|
EXHIBIT 10.7
UNITED BANCORP, INC. FORM 10-K
UNITED BANCORP, INC.
SPECIAL SEVERANCE AGREEMENT
Agreement made as of the _____ day of _____________________, 199___ between United Bancorp, Inc. (the "Company") and Michael A. Lloyd (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Company's management to their assigned duties in the face of potential circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.
In order to induce the Executive to remain in the employ of the Company and in consideration of the agreement set forth in Subsection 2(ii) hereof, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event of a "change in control of the Company" (as defined in Section 2 hereof) and employment of the Executive is subsequently terminated under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1996; provided, however, that commencing January 1, 1997, and each January 1st thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless not later than June 30 of 1996 and any year after, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a
UNITED BANCORP, INC. FORM 10-K
change in control of the Company, as defined in Section 2 hereof, shall have occurred during such term.
2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and the Executive employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof; or (C) the business of the Company for which your services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement which provides for or contemplates a change in control of the Company; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) the Board adopts a resolution to the effect that a potential change in control of the Company for purposes of this Agreement has occurred. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, he will remain in the employ of the Company for not less than one (1) year following the initial occurrence of such a potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, the Executive shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of employment during the term of this Agreement unless such termination is (A) because of his death or retirement, (B) by the Company for cause or disability or (C) by him other than for good reason.
UNITED BANCORP, INC. FORM 10-K
(i) Disability; Retirement. If, as a result of incapacity due to physical
or mental illness, the Executive shall have been absent from duties with the
Company on a full-time basis for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given, he shall not have
returned to the full-time performance of duties, the Company may terminate
employment for "disability." Termination of employment based on "retirement"
shall mean termination in accordance with the Company's retirement policy,
generally applicable to its salaried employees or in accordance with any
retirement arrangement with respect to the Executive established with his
consent.
(ii) Cause. Termination by the Company of your employment for "cause" shall mean termination upon (A) the willful and continued failure by the Executive substantially to perform duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for good reason), after a demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes that duties have not been substantially performed, or (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company. For purposes of this Subsection, no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(iii) Good Reason. The Executive shall be entitled to terminate employment for good reason. For purposes of this Agreement, "good reason" shall, without express written consent, mean:
(A) the assignment of any duties inconsistent with his status as an executive of the Company or a substantial alteration in the nature or status of responsibilities from those in effect immediately prior to a change in control of the Company;
(B) a reduction by the Company in annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company;
(C) the relocation of Executive's offices to a location more than fifty
(50) miles from their present location;
UNITED BANCORP, INC. FORM 10-K
(D) the failure by the Company to continue in effect any current compensation plan or program in which the Executive participates, or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to each such plan in connection with the change in control of the Company, or the failure by the Company to continue the Executive's participation therein;
(E) the failure by the Company to continue to provide benefits substantially similar to those enjoyed under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of a change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the change in control of the Company, or the failure by the Company to provide the number of paid vacation days on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control; or
(F) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof.
(iv) Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of duties on a full-time basis during such thirty (30) day period),
and (B) if employment is terminated pursuant to Subsection (ii) or (iii) above
or for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall not be less
than thirty (30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such notice of
termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgement, order or decree
UNITED BANCORP, INC. FORM 10-K
of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and, except as provided in Subsection 4(v) below, shall not be offset against or reduce any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
(i) During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness, he shall continue to receive full base salary at the rate then in effect and all compensation, including under the Annual Incentive Plan or any other bonus or compensation plan or policy, paid during the period until this Agreement is terminated pursuant to Subsection 3(I) hereof. Thereafter, benefits shall be determined in accordance with the Company's disability program then in effect.
(ii) If the Executive retires pursuant to Subsection 3(i) hereof, this agreement is terminated.
(iii) If employment shall be terminated for Cause, the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations under this Agreement.
(iv) If employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) for Good Reason, then the Executive shall be entitled to the benefits provided below:
(A) the Company shall pay full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay as severance pay, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to one times the sum of (I) annual
UNITED BANCORP, INC. FORM 10-K
base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof and (ii) the amount of any bonus paid pursuant to the Annual Incentive Plan in the year preceding that in which the Date of Termination occurs. Such payment shall be reduced as appropriate, to not exceed the amount equal to a fraction of this payment, the numerator of which is the number of full months remaining to the Executive's normal retirement date and the denominator of which is (12, 24 or 36).
(C) notwithstanding any provision of the Annual Incentive Plan, the Company shall pay, not later than the fifth day following the Date of Termination, a lump sum amount equal to the sum of (I) any incentive compensation which has been allocated for the fiscal year preceding that in which the Date of Termination occurs but which has not yet been paid, and (ii) any award under the Annual Incentive Plan which has not yet been paid for any period which has closed prior to the Date of Termination.
(D) The Company shall also pay all legal fees and expenses incurred as a result of the termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).
(v) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned as the result of employment by
another employer or by retirement benefits after the Date of Termination, or
otherwise, and in Subsection 4(vi) below.
(vi) In the event that any payment or benefit (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible because of Section 280G of the Internal Revenue Code of 1954, as amended (the "Code"), the aggregate amount payable hereunder shall be reduced, so that after giving effect to such reduction, no payment made or benefit under the terms of this Agreement will not be deductible because of Section 280G of the Code. In determining whether any payment under the terms of this Agreement would not be deductible under Section 280G of the Code, all present and future payments and benefits shall be included (and, in the case of stock option, other non-cash benefits or deferred cash payments, shall be valued by a national independent accounting firm (at the Company's expense) acceptable to the Executive in accordance with the principles of Sections 280G(d) (3) and (4) of the Code and any regulations promulgated thereunder) except payments and benefits which, in the written opinion of independent tax counsel selected by a national independent accounting
UNITED BANCORP, INC. FORM 10-K
firm and acceptable to the Executive, do not constitute "parachute payments" within the meaning of Section 280G(b) (2) of the Code.
5. Successors; Binding Agreement. (I) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would have been entitled hereunder if employment is terminated for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid.
7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio applicable to instruments under seal.
UNITED BANCORP, INC
8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its corporate seal to be hereunder affixed on the day and year first above written, and the Executive has hereunto set his hand and seal on the day and year specified.
ATTEST:
UNITED BANCORP, INC. EXECUTIVE
By__________________________________ By_________________________________
(Name and Title) (Name)
|
2002
ANNUAL REPORT
UNITED BANCORP, INC.
Martins Ferry, OH
(LOGO)
(CITIZENS BANK LOGO) (COMMUNITY BANK LOGO)
"Providing all the core banking products and financial services our customers and shareholders expect through the convenience of technology, with a personalized touch..."
United Bancorp, Inc. is a nationally traded Bank holding company whose mission is to continue earning the respect:
o Of its Shareholders, through continued growth in shareholder value by sustaining profitability and acquiring well managed and capitalized businesses in the financial services industry;
o Of its Customers, through reaching out with the technology they want and offering the financial services they need;
o Of its Communities, through support of civic activities that make our communities better places to live and work;
o Of its Team Members, through training development and career growth opportunities in a comfortable environment with modern equipment;
o Of its Affiliates, through providing data processing, item processing, accounting, human resource and management support.
Although it is recognized there is more competition from non-bank businesses for market share, the general mission for United Bancorp, Inc. is to remain independent. We will accomplish this through an aggressive acquisition program, the management of technological change, and the placement of ATM and/or new office construction when deemed economically feasible.
-----------------------------------Bank With Us---------------------------------
www.thecitizensbank.com
www.thecommunitybank.com
A LETTER FROM THE PRESIDENT
TO OUR PRESENT AND FUTURE SHAREHOLDERS:
In a year of uncertainty fueled by the tensions of probable war, historic low interest rates and unprecedented governance issues in corporate America, we are pleased to report that United Bancorp, Inc. (UBCP) has experienced a record year of earnings. The positive performance of your company as depicted from the numbers within this report reflects the cooperative dedication of many fine people who make up our team. To these Employees, Officers and Directors, my sincere thanks for making it happen.
Earnings for 2002 were $3,220,163 compared to $2,755,587 for 2001. On a per share basis, earnings were $0.99 for the twelve months ended on December 31, 2002 compared to $0.84 for the prior twelve month period. This represents an increase of 17.9% and considers the 5% share dividend paid to our shareholders in the fourth quarter of 2002.
(PHOTO)
JAMES W. EVERSON
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Our balance sheet on December 31, 2002 also showed positive growth with assets up 6% at $361,711,069, loans up 2.5% at $184,916,798, securities up 17.2% at $145,795,001 and Shareholders' Equity up 5.5% at $32,154,862. We closed the year with a Return on Average Assets (ROA) of 0.94% and a Return on Average Equity (ROE) of 10.34%, up 14.63% and 13.25% respectively over the prior year.
These numbers reflect the continued strong performance at The Citizens Savings Bank, Martins Ferry, Ohio and the return to profitability of The Community Bank, Lancaster, Ohio. On a comparative basis, The Community Bank posted positive earnings of $128,072 in 2002 as compared to a loss the previous year of $154,136. The earnings of The Community Bank continue to reflect the start up cost associated with the growth and development of the bank's new three office franchise in Lancaster. The Citizens Savings Bank posted earnings for the year in the amount of $3,312,576 with a 1.34% ROA and 15.74% ROE. Its performance places the bank in the 75th percentile of peer group measurement. To date, we are pleased with the progress and acceptance of our expansion into the Lancaster, Ohio market area. The Community Bank's performance, though much improved, is in the 7th percentile of peer group measurement. Management continues to focus its direction on their profit improvement which will continue to add to shareholder value.
Our Shareholders received a 5% share dividend in the fourth quarter of
2002. UBCP and its lead bank, The Citizens Savings Bank, have a history of
declaring stock splits and share dividends which has rewarded shareholder's for
the Company's growth and performance. Shareholder's 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 and a 100% share dividend in 1992 and 1993 plus 10% share dividends in
1994, 1996, 1997 and 5% share dividends in 1998, 1999, 2000, 2001 and 2002. A
shareholder purchasing 100 shares of The Citizens Savings Bank stock in 1970 for
$10,000 now holds 16,305 shares of UBCP stock valued over $228,000 and receives
$8,478 annu-
2002
ANNUAL
REPORT
(BAR CHART)
ally in dividends based upon the current market price and dividend rate.
Much media coverage has been given this past year to the misdeeds within the accounting practices and board rooms of corporate America. Washington was quick to react with the passage of the Sarbanes-Oxley Act of 2002. This act imposes new duties on public companies and their executives, directors and auditors. It also enhances the authority and resources of the Securities and Exchange Commission and expands criminal and civil liabilities for violations of securities laws. We are pleased to report that our Board and Management have responded and are in compliance with the corporate governance changes brought about by this Act.
The Sarbanes-Oxley Act of 2002 forbids an Accounting Firm performing the External Audit Function for a publicly traded company to also perform the Internal Audit Function. Since 1990, Crowe, Chizek and Company LLP has been the External Auditing Firm for UBCP and for the past ten years, has provided our outsourced Internal Auditing services. By invitation, the UBCP Audit Committee sought three independent bids for these services becoming effective January 1, 2003. Based upon their independent review of proposed services and pricing considerations, independent of management recommendations per the Sarbanes-Oxley Act of 2002,the Audit Committee unanimously recommended and the UBCP Board accepted three year proposals to engage Grant Thornton LLP as External Auditor and Plante & Moran LLP as Internal Auditor. Crowe, Chizek and Company LLP will continue providing Electronic Data Processing General Controls Review and Intrusion Detection and Remote Monitoring of our Electronic Banking Programs. Working with Crowe, Chizek and Company LLP over the years, your company has grown and prospered.
This past year, we have had a lot of fun at our Citizens Bank affiliate celebrating our 100th Anniversary of banking service. What began in 1902 as a vision, with a small group of businessmen in Martins Ferry,has grown today into a multi-bank holding company with seventeen banking offices,an Operations Center and two UVEST Investment Services(R) brokerage offices located in Ohio serving Athens, Belmont, Carroll, Columbiana, Fairfield, Harrison, Hocking, Jefferson and Tuscarawas Counties. The Citizens Bank is quite unique with its consistency of leadership for most of its 100 years. 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. In preparation for its second century of service,the Bank's Board of Directors has developed a management succession plan, promoting from within to preserve the bank's culture, appointing James W. Everson as Chairman and Chief Executive Officer; Scott A. Everson as Director, President and Chief Operating Officer; Randall M. Greenwood as Executive Vice President and Chief
2002
ANNUAL
REPORT
Financial Officer and Michael A. Lloyd, Senior Vice President and Chief Information Officer. Scott and Randy were also appointed Senior Vice Presidents and Michael, Vice President of UBCP.
At our August 20th Board Meeting, your Board of Directors approved a renewal of UBCP's Stock Buy Back Program and authorized management to purchase up to 10% of our common shares in the open market. Your Board of Directors believes that UBCP's stock is undervalued in the market and the continuance of our Buy Back Program is warranted. Repurchases will be made from time to time on the open market or in privately negotiated transactions pursuant to SEC guidelines and repurchased shares will be added to the company's treasury stock. Since initiating a repurchase program in mid 2000, we have repurchased 188,265 shares as of February 1st, 2003.
Our goal as a multi-bank holding company is providing all the core banking products and financial services our customers and shareholders expect through the convenience of technology with a personalized touch....offering the best in hometown banking service.....24 X 7. Using our new technology, a ShareLINK 100 depository account was designed by us to serve you, our Shareholder.....even if you do not live in one of our market areas. Ownership does have its benefits. Please call 1.866.754.6510 to learn more about our ShareLINK 100 Account.
As we write this letter, much uncertainty surrounds our great country with the looming threat of war. If ever a time the leaders of our country and world need our prayers for wisdom and knowledge, it is now. Let us be mindful of this need.
Very truly yours,
/s/ JAMES W. EVERSON ----------------------------------------------- James W. Everson Chairman, President and Chief Executive Officer UNITED BANCORP, INC. |
ceo@unitedbancorp.com
(PHOTO)
United Bancorp Officers (seated left to right) Randall M. Greenwood, Alan M. Hooker, James W. Everson, and Scott A. Everson (standing left to right) Michael A. Lloyd, James A. Lodes, and Norman F. Assenza, Jr.
2002
ANNUAL
REPORT
SHAREHOLDER INFORMATION
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 2002, there were 3,413,307 shares outstanding, held among approximately 2,000 shareholders of record and in street name. The following table sets forth the quarterly high and low closing prices of the Company's common stock from January 1, 2002 to December 31, 2002 compared to the same periods in 2001 as reported by the NASDAQ. The price quotes have been adjusted for comparison purposes for the 5% stock dividends distributed on December 20, 2002 and 2001. The price quotations presented should not necessarily be relied on in determining the value of the shareholders' investment.
2002 2001
------------------------------------------------- -------------------------------------------------
31-MAR 30-JUN 30-SEP 31-DEC 31-MAR 30-JUN 30-SEP 31-DEC
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Market Price Range
High ($) 13.238 13.762 14.240 14.000 11.791 12.200 12.698 13.333
Low ($) 11.667 11.952 12.900 12.490 9.070 8.889 10.885 11.292
Cash Dividends
Quarter ($) .123 .123 .124 .130 .117 .117 .118 .124
Cumulative ($) .123 .246 .370 .500 .117 .234 .352 .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
6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
1-800-278-4353
ANNUAL MEETING:
The Annual Meeting of Shareholders will be held at 2:00 p.m., April 23, 2003 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)
TRANSFER AGENT AND REGISTRAR:
For transfers and general
correspondence, please contact:
American Stock Transfer and Trust
Company 6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
1-800-937-5449
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
FTN Financial
350 Madison Avenue 18th Floor
New York, NY 10017
Michael O'Boyle
866-268-6529
2002
ANNUAL
REPORT
DIVIDEND AND STOCK HISTORY
Distribution Date of
Cash Dividends Dividends and
Declared(1) Stock Dividends Exchanges
-------------- --------------- --------------------
1983 $ 0.09 -- --
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 $ 0.15 -- --
1991 $ 0.16 -- --
1992 $ 0.17 100% Stock Dividend September 10, 1992
1993 $ 0.18 100% Stock Dividend November 30, 1993
1994 $ 0.20 10% Stock Dividend September 9, 1994
1995 $ 0.28 -- --
1996 $ 0.30 10% Stock Dividend June 20, 1996
1997 $ 0.34 10% Stock Dividend September 19, 1997
1998 $ 0.39 5% Stock Dividend December 18, 1998
1999 $ 0.44 5% Stock Dividend December 20, 1999
2000 $ 0.46 5% Stock Dividend December 20, 2000
2001 $ 0.48 5% Stock Dividend December 20, 2001
2002 $ 0.50 5% Stock Dividend December 20, 2002
|
2003 ANTICIPATED DIVIDEND
(PAYABLE DATES)
FIRST QUARTER
March 20, 2003
SECOND QUARTER*
June 20, 2003
THIRD QUARTER*
September 19, 2003
FOURTH QUARTER*
December 19, 2003
*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
(PERFORMANCE GRAPH)
2002
ANNUAL
REPORT
DIRECTORS
(PHOTO) (PHOTO) (PHOTO)
MICHAEL J. ARCIELLO(1),(2) HERMAN E. BORKOSKI(2) JAMES W. EVERSON(1),(2),(3)
(PHOTO) (PHOTO) (PHOTO)
SCOTT A. EVERSON(2) LEON F. FAVEDE, O.D.(2) PAUL J. GERIG(3)
(PHOTO) (PHOTO) (PHOTO)
JOHN R. HERZIG(2) ALAN M. HOOKER(3) JOHN M. HOOPINGARNER(1),(2)
(1)= UNITED BANCORP, INC. (2)= THE CITIZENS SAVINGS BANK (3)= THE COMMUNITY BANK
2002
ANNUAL
REPORT
DIRECTORS
(PHOTO) (PHOTO) (PHOTO)
SAMUEL J. JONES(3) PHILIP D. KASLER(3) TERRY A. MCGHEE(1),(3)
(PHOTO) (PHOTO) (PHOTO)
L.E. RICHARDSON, JR.(1),(3) ROBIN L. RHODES, M.D.(3) 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
2002
ANNUAL
REPORT
DIRECTORS AND OFFICERS
DIRECTORS OF UNITED BANCORP, INC.
Michael J. Arciello(2) ...................................................................................Retired Vice President of
Finance, Nickles Bakeries, Inc., Navarre, Ohio
James W. Everson(1) ...........................................Chairman, President & Chief Executive Officer, United Bancorp, Inc.,
Chairman & Chief Executive Officer The Citizens Savings Bank, Martins Ferry, Ohio
& Chairman, The Community Bank, Lancaster, 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.(3) ............................Retired President, Southern Ohio Community Bancorporation, Inc., 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 & Chief Administration Officer
Scott A. Everson ...................................................................Senior Vice President & Chief Operating Officer
Randall M. Greenwood .....................................................Senior Vice President, Chief Financial Officer & Treasurer
Norman F. Assenza, Jr. ..................................................................................Vice President - Compliance
Michael A. Lloyd ..............................................................................Vice President - Information Systems
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, President & Chief Executive Officer, United Bancorp, Inc.,
Chairman & Chief Executive Officer The Citizens Savings Bank, Martins Ferry, Ohio
& Chairman, The Community Bank, Lancaster, Ohio
Scott A. Everson(1) ..........................................Senior Vice President & Chief Operating Officer, United Bancorp, Inc.
& President & Chief Operating Officer The Citizens Savings Bank, Martins Ferry, Ohio
Leon F. Favede, O.D. .................................................................................Optometrist, Bridgeport, Ohio
John R. Herzig .............................................................President, Toland-Herzig Funeral Homes, Strasburg, Ohio
John M. Hoopingarner(1) ..........................General Manager, Muskingum Watershed Conservancy District, 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. & The Citizens Savings Bank
Donald A. Davison, Director Emeritus 1963-1997...................................United Bancorp, Inc. & The Citizens Savings Bank
Albert W. Lash, Director Emeritus 1975-1996 ......................................United Bancorp, Inc.& The Citizens Savings Bank
DIRECTORS OF THE COMMUNITY BANK, LANCASTER, OHIO
James W. Everson(1) ...........................................Chairman, President & Chief Executive Officer, United Bancorp, Inc.,
Chairman & Chief Executive Officer The Citizens Savings Bank, Martins Ferry, Ohio
& Chairman, The Community Bank,Lancaster, 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
Executive Vice President & Chief Administration Officer, United Bancorp, Inc.
Samuel J. Jones(1,2) ................................................................................Business Owner, Glouster, Ohio
Philip D. Kasler(2) .........................................................................Farming & 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
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(1)= Executive Committee (2)= Audit Committee (3)= Compensation Committee
2002
ANNUAL
REPORT
THE CITIZENS SAVINGS BANK PROFILE
A CENTURY OF SERVICE AT THE
CITIZENS SAVINGS BANK
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 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.
In May 1999, The Citizens Savings Bank and its affiliate, The Citizens-State Bank then 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. The Bank's first branch office was opened on November 18, 1974. 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,
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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.
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 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 it's offices in New Philadelphia and Sherrodsville in April 1992; and the purchase of it's 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 Lancaster 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 the purchase and renovation of the adjoining property formerly 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.
In April 2002, the Citizens Bank Board of Directors announced its senior management reorganization plans for the beginning of its second century of service. James W. Everson, who continues in an active role as the bank's Chief Executive Officer and Chairman, announced the Board's appointment of Scott A. Everson as Director, President and Chief Operating Officer and Randall M. Greenwood as Executive Vice President and Chief Financial Officer.
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;
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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; John H. Clark, Jr., 1976-2001; Dwain R. Hicks, 1999-2002; and Michael A. Ley, 1999-2002.
Today, The Citizens Savings Bank is Martins Ferry's only 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, President and Chief Executive Officer of United Bancorp, Inc., Chairman and Chief Executive Officer of The Citizens Savings Bank and Chairman, The Community Bank of Lancaster; Scott A. Everson, Senior Vice President and Chief Operating Officer of United Bancorp Inc. and Director, President and Chief Operating Officer of The Citizens Savings Bank; Dr. Leon F. Favede, Optometrist; John R. Herzig,
In April 2002, the Bank's Board of Directors announced its senior
management reorganization plans for the beginning of its second century of
service. James W. Everson, who will continue in an active role as the bank's
Chief Executive Officer and Chairman, announced the Board's appointment of Scott
A. Everson as President and Chief Operating Officer and Randall M. Greenwood as
Executive Vice President and Chief Financial Officer.
James W. Everson will continue to serve as Chairman, President and CEO of United Bancorp, Inc., the holding company for The Citizens Bank and The Community Bank of Lancaster, Ohio.
Scott A. Everson was appointed President and Chief Operating Officer and a Director of the Bank. He most recently served as Senior Vice President of Operations and Retail Banking. He began his career as a student intern and is a 13-year veteran of the Bank. Everson, who is a life-long resident of Martins Ferry and a member of The First Presbyterian Church, graduated from Linsly School in Wheeling and Westminster College in New Wilmington, Pennsylvania with a degree in Business Administration/Finance. He completed The Ohio School of Consumer Credit and the Ohio School of Banking. He also received a diploma from The Graduate School of Banking at the University of Wisconsin-Madison, a 30-month bank-focused program covering economic and regulatory environments, as well as strategic planning and contemporary trends affecting the financial services industry. He is also attending the Sheshunoff Executive Management Institute.
Everson was recently appointed Senior Vice President and Chief Operating Officer of United Bancorp, Inc.
Randall M. Greenwood was appointed Executive Vice President and Chief Financial Officer of The Citizens Bank. He was born and reared in Bellaire and returned to the Ohio Valley from Columbus to join The Citizens Bank team in December 1997 as Senior Vice President and Chief Financial Officer and as Vice President, Chief Financial Officer and Treasurer of United Bancorp, Inc. He has directed the financial functions and significantly enhanced the accounting, regulatory reporting, budgeting, asset/liability management and forecasting for the Bank as well as United Bancorp, Inc.
(PHOTO)
James W. Everson, Chairman & Chief Executive Officer (seated) with (left to right) Randall M. Greenwood, Executive Vice President & Chief Financial Officer and Scott A. Everson, President & Chief Operating Officer.
Greenwood is a summa cum laude graduate of Ohio University in Athens, Ohio, with a bachelor's degree in Accounting. In addition, he is a Certified Public Accountant and had 12 years senior management experience in Columbus, Ohio, in auditing and consulting in banking, brokerage and insurance with the accounting firm of Coopers & Lybrand, LLP and with Bank One prior to joining The Citizens Bank. He has also been promoted to Senior Vice President, Chief Financial Officer and Treasurer of United Bancorp, Inc.
In making the announcements for the Board of Directors, which is committed to preserving the Bank's culture by promoting from within, James W. Everson remarked, "It is with great pleasure that we make these new appointments. Both Scott and Randy have been very involved with the daily operations of The Citizens Bank for a number of years, and have contributed enormously to its growth and success. These changes will redefine the leadership of our Bank as we move forward into our second century of service and will allow me to begin stepping back yet remain very much a part in the transition of our management teams of both The Citizens Bank and United Bancorp, Inc."
Richard L. Riesbeck, President of Riesbeck Food Markets, Inc.; Errol C. Sambuco, Consultant; and Matthew C. Thomas, President, M. C. Thomas Insurance Agency Inc.
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THE COMMUNITY BANK PROFILE
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 close 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.
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 in 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 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.
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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 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.
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TABLE OF CONTENTS - FINANCIAL
TABLE OF CONTENTS
MANAGEMENT DISCUSSION AND ANALYSIS .........................................................15 REPORT OF INDEPENDENT AUDITORS .............................................................30 FINANCIAL STATEMENTS .......................................................................31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................35 |
FOR THE TWELVE MONTHS ENDED DECEMBER 31.
2002 2001 CHANGE
----------- ----------- -----------
EARNINGS
Total interest income $22,095,682 $24,595,769 -10.16%
Total interest expense 9,328,867 12,348,548 -24.45%
Net interest income 12,766,815 12,247,221 4.24%
Provision for loan losses 630,000 780,000 -19.23%
Total noninterest income 2,059,173 1,606,046 28.21%
Total noninterest expense 9,989,172 9,382,984 6.46%
Net income 3,220,163 2,755,587 16.86%
PER SHARE
Earnings per common share - Basic $ 0.99 $ 0.84 17.86%
Earnings per common share - Diluted 0.99 0.84 17.86%
Cash Dividends paid 0.50 0.48 4.17%
Book value (end of period) 10.03 9.29 7.97%
SHARES OUTSTANDING
Average - Basic 3,247,559 3,300,096 --
Average - Diluted 3,257,216 3,304,660 --
|
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7 [MANAGEMENT'S DISCUSSION AND ANALYSIS]
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, 2002 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 a second straight year, the Company and its competitors faced an interest rate environment that continued at its historical low levels. A weak 2001, created by the financial and emotional events surrounding 9/11 did not leave the economy on firm footing for a strong 2002. In 2002, the business world had to deal with a continued sluggish economy, a mid-year crisis in the financial markets caused by corporate mistrust and the unrest caused by the possibility of war.
With all this said your Company reported record earnings for 2002. The Company posted a 17.9% increase in earnings per share and maintained our strong credit quality for the past year. As would be expected, our customers wanted to "lock-in" their loan rates while the depository preferences were for shorter term certificates of deposits and liquid transaction accounts. With rates at their historical low, the Company did attract longer-term certificates of deposits at above market interest rates. Although in today's interest rate environment the rates were slightly higher than our competitors, Management feels this is a prime opportunity to lock in retail based funding for terms over 60 months. The Company did take advantage of the volatility in the bond market and realized approximately $320,000 in gains on the sale of available for sale securities in 2002.
(BAR CHART)
For the year ended December 31, 2002, the Company's total assets increased $20,393,874, or 6.0% over December 31, 2001 totals. Average total earning assets increased $2,997,000 or slightly less than 1% over $316,812,000 for 2001.
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EARNING ASSETS - LOANS
Gross loans totaled $187,888,000 at year-end 2002, representing a 2.5% increase from $183,340,000 at year-end 2001. Average loans decreased by $3,983,000, or 2.1% from 2001 to 2002.
Installment loans decreased $716,000, or 1.6%, real estate loans decreased $1,618,000, or 3.0%. Real estate refinancing was brisk throughout the year. We retain the loan servicing for our customers in the secondary market program but limit our interest rate risk by selling the fixed rate residential real estate loans in the secondary market, causing the reduction in real estate loans. Commercial real estate loans increased $7,324,000 or 11.8% from December 31, 2001. Commercial loans decreased $442,000 or 2.1% from December 31, 2001. As discussed previously, the overall slow down in the economy coupled with historical low interest rates caused management to be cautious in growing longer term fixed-rate loans during this period of uncertainty. Similar to 2001 consumers and businesses during the past year were 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 they felt the economy would rebound over the next several years and would result in higher interest rates. Based upon the Asset/Liability model utilized by the Company, Management decided not to over extend fixed-rate products with rates at or near historical low levels during 2001 and 2002.
Loan production for CITIZENS and COMMUNITY during 2002 yielded a growth in both Banks' loan portfolios. In the year 2000, unlike 2002 and 2001, the Company experienced a slow down in prepayments and refinancing on commercial real estate and residential real estate loans as interest rates increased in the first half of the year and held constant for the remainder of the year. The historical low levels of interest rates in 2001 and 2002 caused the Company to struggle to maintain its loan portfolio, both in generating new business and to also maintain its current customer relationships. As a result, the loan portfolio grew by a modest 2.5% in 2002.
(BAR CHART)
The Company's installment lending portfolio decreased by 1.6% from December 31, 2001 to December 31, 2002. These loans represented 24.0% of the total portfolio at year-end 2002 compared to 24.9% at year-end 2001. The targeted installment lending areas encompass the geographic areas serviced by the affiliate Banks, which are diverse, thereby reducing the risk to changes in economic conditions. Competition for installment loans principally came from within the auto industry when the captive finance companies offered 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 interest rates, the remaining market share to compete for was vastly smaller. Management did not feel it was prudent, given the competition and low yields that were available, to aggressively price our installment loan product to capture this residual business.
However, Management has mitigated some of this low interest rate competition and responded 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 and commercial real estate portfolio represented approximately 48.1% of the total loan portfolio at December 31, 2002 compared to 45.5% for December 31, 2001. The Company's commercial loan portfolio decreased by $442,000, or 2.1%. However, the commercial real estate loan portfolio increase of $7,324,000 more than offset the decrease in the commercial portfolio. Management is pleased with the overall increase in the combined commercial and commercial real estate loan portfolios given the lower interest rate environment and sluggish economy. 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
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(BAR CHART)
rate floors and wider repricing indices were established during 2001 and that structure was updated and carried forward into 2002. This strategy may have caused our price sensitive customers to seek alternative financing arrangements in the short term. However, in Management's view, this will help preserve the Company's net interest margins 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 financed 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 serviced and originated by CITIZENS but are sold immediately in the secondary market. Therefore, our customers enjoy the convenience of working with and paying at a local bank and are able to obtain long-term fixed-rate financing for their home. As mentioned, 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 might look elsewhere for their home financing needs. As the overall interest rate environment remained at historical low levels, consumer preferences remained focused on fixed-rate loan products. Given the historical low interest rates in 2002 the Company's Secondary Market Program experienced a high volume of activity for the second consecutive year which has generated non-interest income.
For 2002 and 2001 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 $94,813 in 2002 and $71,421 in 2001. Although it was profitable to originate and sell these fixed rate mortgages, some were refinancings of loans already in the mortgage portfolio. Consequently, the Company's residential real estate portfolio declined $1,618,000 or 3.0%.
COMMUNITY continued their growth from the previous years, with an increase in loans of $3,021,000, or 6.0%. 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 $2,098,000 and in the commercial real estate portfolio of $2,851,000. This growth was offset by a decrease of $1,753,000 in the installment portfolio.
CITIZENS however, experienced a modest increase in loans for 2002. Total loans increased $1,527,000, or 1.2% from December 31, 2001. The increase primarily came in the commercial real estate portfolio of $4,473,000. However, this increase was offset by a decrease in the real estate portfolio of $3,715,000, or 10.9% for 2002.
The allowance for loan losses represents the amount which management and the Board of Directors estimates is 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, with established 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 scores to help in the determination of credit quality and pricing.
The Company generally recognizes interest income on the accrual basis, except for certain loans which are placed on non-accrual status, when in the opinion of Management, doubt exists as to collection on the loan. 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 non-accrual status, interest income is recognized as cash payment is received.
Management believes the current balance of the allowance for loan losses is sufficient to cover probable
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incurred losses. Net charge-offs to average loans for the year-ended 2002 was 0.29% compared to 0.21% for 2001. Refer to Provision for Loan Losses section 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 most obligations of states 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 2002 increased $18,825,000, or 16.5% over 2001, while securities held to maturity increased $2,547,000, or 24.5%.
In our planning process, Management's prediction for 2002 was for a steady to slightly rising interest rate environment. For the first half of 2002, Management maintained an average of $13.8 million in fed funds sold. As the economy continued to weaken, and threat of war surfaced, Management's posture on interest rates for the remainder of 2002 and heading into 2003 changed from one that interest rates may rise to a position that rates will go basically unchanged for the next twelve months. Therefore, by December 31, 2002, Management invested the Company's excess liquidity in investment securities and in loans. As of December 31, 2002, the Company had approximately $2 million in Fed Funds sold.
(BAR CHART)
(BAR CHART)
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 2002, core deposits increased $12,423,000, or 5.1%. Core deposit growth for CITIZENS and COMMUNITY was $6,948,000 and $5,475,000, respectively, for the year ended December 31, 2002. The Company continues to benefit from strong depository growth as a direct result of the expansion of COMMUNITY into Fairfield County (Lancaster). Over the past year, COMMUNITY has developed several large depository customers. As of December 31, 2002, their eight largest depository customers accounted for approximately 32.5% of COMMUNITY'S certificate of deposits and approximately 86.3% of total certificates of deposits greater than $100,000. These customers also represent 12.2% of demand deposits at December 31, 2002. Total concentration of retail funding is approximately 29.3% of COMMUNITY'S total deposits at December 31, 2002. On a consolidated level, this represents approximately 8.51% of total retail deposits at December 31, 2002. This concentration does pose additional liquidity and earnings risk for COMMUNITY. The earnings risks would be triggered if COMMUNITY would be placed in a position to sell assets above or below book value to meet current liquidity needs. This risk is mitigated with COMMUNITY'S capability to borrow wholesale funding from its correspondent banks. Management has an active asset/liability committee that monitors, among other items, monthly liquidity needs on a 90 day time horizon.
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
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with the Company due to various funding and disbursement timeframes.
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 needs. At year-end 2002, certificates of deposit greater than $100,000 increased $4,402,000, or 11.5% over year-end 2001 totals. COMMUNITY accounted for approximately the entire growth of certificates of deposits greater than $100,000.
Generally, the repricing structure and duration of the Company's earnings 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 of and retention of core deposits continues to be a challenge to the Company and the overall banking industry. Alternative financial products are continuously being introduced by our competition whether through a traditional bank or brokerage services company.
However, during 2001 and in 2002, 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 preferences seem to have modified their investment strategies. The Company experienced a consumer preference to maintain liquidity in traditional bank product accounts in a 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 and Loan notes payable and Federal Home Loan Bank advances. Securities sold under agreements to repurchase decreased by $801,000, while other borrowed funds increased significantly by $9,148,000.
FHLB Cash Management and Federal Funds purchased totaled approximately $2.1 million at December 31, 2002 compared with $10.2 million as of December 31, 2001, a decrease of $8.1 million. As previously discussed, management in the second half of 2002 invested the Company's excess liquidity in investment securities and in the loan portfolio. In December 2002, the Company borrowed $5,000,000 from the FHLB for 60 months at 3.86% to lock into what Management believes to be a low cost of funds.
OTHER ASSETS
The Company also invested approximately $6,861,000 in Bank Owned Life Insurance during 2002. Refer to Performance Overview 2002 to 2001, Noninterest Income section for further information.
PERFORMANCE OVERVIEW 2002 TO 2001
NET INCOME
The Company reported earnings of $3,220,163 in 2002 compared with $2,755,587 in 2001. This earnings performance equates to a 0.94% Return on Average Assets ("ROA") and 10.34% Return on Average Equity ("ROE") for 2002 compared to 0.82% and 9.13% for 2001. Basic and Diluted Earnings per share ("EPS") was $0.99 for 2002 compared to $0.84 for 2001. Per share amounts for all periods have been restated to reflect the 5% stock dividends distributed in December 2002, 2001 and 2000.
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 $519,594, or 4.2% in 2002. The net interest margin increased to 4.00% from 3.86%. Overall, the Company has seen both its earning assets and interest paying liabilities repricing downward given the interest rate environment in 2002 as previously discussed.
Average interest-earning assets increased $2,977,000, or 0.9% in 2002 while the associated weighted-average yield on these interest-earning assets decreased from 7.76% in 2001, to 6.91% for 2002.
(BAR CHART)
2002
ANNUAL
REPORT
Average interest-bearing liabilities increased $1,435,000 in 2002 over 2001. The average cost of funds decreased to 3.29% from 4.38% for the year ended December 31, 2001.
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 incurred losses incurred in the normal course of lending. The total provision for loan losses was $630,000 in 2002 compared to $780,000 in 2001, a decrease of $150,000, or 19.2%. The decrease from 2001 of 19.2% in the provision for loan losses can be attributed to Management's continued efforts to monitor credit quality in the loan portfolio. Management reduced the provision in 2002 due to the continued improvement in credit quality statistics for the Company throughout 2001 and into 2002. Management considered such factors as lower past due percentages, slower loan growth and a reduced level of net loans charged-off. Net loans charged-off for 2002 were approximately $538,000 compared to $691,000 for 2001. Considering the item just mentioned along with modest loan growth, the provision expense for 2002 was reduced.
The Company's total allowance for loan losses compared to nonaccrual loans is 434% at December 31, 2002, compared to 436% at December 31, 2001. The Company's non-accrual loans to total loans remained constant at 0.36% at year-end 2002 and 2001. Both ratios measure in common size the relative risk and coverage in the allowance for loan losses.
(BAR CHART)
(BAR CHART)
The allowance for loan losses as a percentage of loans increased to 1.58% at year-end 2002, from 1.57% at year-end 2001. CITIZENS and COMMUNITY utilize a consistent reserve methodology with the detail reserve allocations specific to their individual loan portfolio.
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 box 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. In addition, both CITIZENS and COMMUNITY invested in Bank Owned Life Insurance (BOLI) in 2002. The earnings from this investment are reflected in the Company's noninterest income. Total noninterest income for 2002 was $2,059,173, an increase of $453,127, or 28.2% over 2001 totals.
The increase in 2002 can be attributed to several factors. During 2002, CITIZENS and COMMUNITY invested approximately $6,861,000 in BOLI. This product offers an attractive tax deferred yield. For the year ended December 31, 2002 the pre-tax yield on this investment was approximately 5.5% or a tax equivalent yield of approximately 7.3%. The additional tax deferred income generated from the BOLI investment in 2002 was $180,741. Also explaining the growth in noninterest income in 2002 is $320,485 related to gains on the sale of investment securities. Management's strategy in 2002, took into consideration the relative volatility in the bond market. At times during the year Management realized there was an opportunity to sell certain bonds in the portfolio at a gain when overall interest rates were depressed. Also contributing to the increase in noninterest income is the Company's secondary market
2002
ANNUAL
REPORT
mortgage program which generated total income of $94,813 compared to $71,421 in 2001, an increase of $23,392. Service charges on deposit accounts increased $42,135, or 4.6%. The Company recognized gains on other real estate property of $6,693 in 2002 and $44,794 in 2001.
NONINTEREST EXPENSE
Noninterest expense for 2002 increased $606,188, or 6.5% over 2001.
Salaries and employee benefits increased $572,617, or 12.5% from 2001 to 2002. Contributing to the increase is additional staffing associated with expansion activities and the rapidly escalating cost of health care.
Occupancy and equipment decreased $12,458 and other expense decreased $144,766 for the year.
Since franchise taxes are based on the Banks' equity, net of unrealized security gains, net of tax, the resulting impact of lower interest rates is an increase in the fair market value of the fixed interest rates securities in the available for sale portfolio. Since we have experienced an overall decline in the interest rate environment over the past two years the unrealized loss on available for sale securities decreased and therefore resulted in a higher base for franchise taxes.
The increase in stationery and office supplies is attributable to higher loan and depository related items. Included in this category are costs related to loan coupon books and depository customer checks.
Insurance expense increased $38,879 from 2001 to 2002. The Company renewed its Directors and Officers insurance for a three-year period in 2002. The cost of this and other insurance has increased dramatically over the past year.
(BAR CHART)
Increased advertising of $25,000 was budgeted for 2002 for CITIZENS to celebrate its 100th year anniversary, which attributed to the increase in advertising expense of $31,727.
Other expenses decreased 7.1%, or approximately $144,766. Overall there is not a single line item that contributes significantly to this decrease.
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 0.83% and 9.88% for 2000. Basic and Diluted Earnings per share ("EPS") was $0.84 for 2001 compared to $0.77 for 2000. Per share amounts for all periods have been
2002 2001 2000
--------------- --------------- ---------------
Noninterest income
Service charges on deposit accounts $ 946,706 $ 904,571 $ 864,343
Net realized gain on sales of securities 320,485 39,358 26,674
Net realized gain on sales of loans 94,813 71,421 (27,544)
Other income 697,169 590,696 505,513
--------------- --------------- ---------------
Total noninterest income $ 2,059,173 $ 1,606,046 $ 1,368,986
=============== =============== ===============
Noninterest expense
Salaries and employee benefits $ 5,165,633 $ 4,593,016 $ 4,196,960
Occupancy and equipment 1,453,346 1,465,804 1,435,207
Professional services 314,814 309,797 256,577
Insurance 188,328 149,449 209,751
Franchise and other taxes 353,759 320,622 250,151
Advertising 310,458 278,731 396,858
Stationery and office supplies 289,080 208,999 233,668
Other expenses 1,913,754 2,056,566 1,732,483
--------------- --------------- ---------------
Total noninterest expense $ 9,989,172 $ 9,382,984 $ 8,711,655
=============== =============== ===============
|
2002
ANNUAL
REPORT
restated to reflect the 5% stock dividends distributed in December 2002, 2001 and 2000.
NET INTEREST INCOME
Net interest income increased $850,000, or 7.5% in 2001. The net margin did not change in 2001 from 2000 and remained at 3.86%. Overall, the Company saw both its earning assets and interest bearing liabilities reprice downward given the interest rate environment in 2001.
Average interest-earning assets increased $27,046,000, or 9.3% in 2001 while the associated weighted-average yield on these interest-earning assets 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% from the year ended 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 total provision for loan losses was $780,000 in 2001 compared to $587,000 in 2000, an increase of $193,000, or 32.9%. 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 352% at December 31, 2001, compared to 304% at December 31, 2000. The Company's nonperforming loans to total loans decreased from 0.47% at year-end 2000 to 0.45% 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 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.
The allowance is maintained by Management at a level considered adequate to cover probable incurred 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
Total noninterest income for 2001 was $1,606,000, or 17.3% over 2000 totals. 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%. The gain on other real estate property 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 is additional staffing associated with expansion activities and the rapidly escalating health care costs.
Since franchise taxes are based on the Banks' equity, net of unrealized security gains, net of tax, the resulting impact of lower interest rates is an increase in the fair market value of the fixed interest rates securities in the available for sale portfolio. This resulted in increased net equity producing a higher tax base. The decrease in stationery and office supplies was a direct result of Management's focus on cost containment.
Professional fees increased approximately $53,000 due mainly to increased collection expenses.
Decreased advertising was budgeted for 2001 as the year 2000 was abnormally high due to significant advertising deemed necessary to successfully enter into the Lancaster market.
Other expenses increased 19.5%, or approximately $332,000. Contributing to this was increased data communication lines of $24,300, merchant processing expenses of
2002
ANNUAL
REPORT
$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.
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, a 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. The Company's goal is to have acceptable profits under any interest rate environment. To avoid volatile profits as a result of interest rate fluctuations, 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 at least 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.
2002
ANNUAL
REPORT
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 following tables present 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, 2002 and 2001 fall within the general guidelines established by the Board of Directors. The NPV table shows that in a falling interest rate environment, the NPV would decrease 9%. In Management's view there is a low probability that interest rates would decrease another 100 to 200 basis points. In the upward change in interest rates the Company's NPV would increase 5% with a 100 basis point interest rate increase. In a 200 basis point rate increase the Company's NPV would decrease 7%. This decrease is a result of the Company's available for sale securities portfolio that are invested in fixed-rate securities. As interest rates increase, the market value of the securities decrease. However, since the Company currently has the ability to hold these securities to their final maturity, it would not have to incur any losses.
(Dollars in Thousands)
Net Portfolio Value - December 31, 2002
Change in Rates $ Amount $ Change % Change
--------------- -------- -------- --------
+200 27,138 (1,912) -7%
+100 30,396 1,346 5%
Base 29,050
-100 26,391 (2,659) -9%
-200 26,553 (2,497) -9%
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%
|
2002
ANNUAL
REPORT
The following table is a summary of selected quarterly results of operations for the years ended December 31, 2002 and 2001.
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
--------------- --------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2002
Interest and dividend income $ 5,633 $ 5,546 $ 5,382 $ 5,535
Interest expense 2,464 2,323 2,290 2,252
--------------- --------------- --------------- ---------------
Net interest income 3,169 3,223 3,092 3,283
Provision for loan losses 158 158 157 157
--------------- --------------- --------------- ---------------
Net interest income after
provision for loan losses 3,011 3,065 2,935 3,126
Noninterest income 445 442 471 700
Noninterest expense 2,535 2,411 2,458 2,586
--------------- --------------- --------------- ---------------
Income before income tax 921 1,096 948 1,240
Income tax expense 242 293 212 240
--------------- --------------- --------------- ---------------
Net income $ 679 $ 803 $ 736 $ 1,000
=============== =============== =============== ===============
Earnings per common share - Basic $ 0.21 $ 0.24 $ 0.22 $ 0.32
=============== =============== =============== ===============
Earnings per common share - Diluted $ 0.21 $ 0.24 $ 0.22 $ 0.32
=============== =============== =============== ===============
Dividends declared per share $ 0.123 $ 0.123 $ 0.124 $ 0.130
=============== =============== =============== ===============
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 $ 0.18 $ 0.22 $ 0.21 $ 0.23
=============== =============== =============== ===============
Earnings per common share - Diluted $ 0.18 $ 0.22 $ 0.21 $ 0.23
=============== =============== =============== ===============
Dividends declared per share $ 0.117 $ 0.117 $ 0.118 $ 0.124
=============== =============== =============== ===============
|
2002
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, 2002, 2001 and 2000. 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 historical basis without tax-equivalent adjustment.
2002 2001
----------------------------------- -------------------------------------
(DOLLARS IN THOUSANDS) INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- ----------- ---------- ----------- ----------- -----------
ASSETS
Interest-earning assets
Loans $ 184,131 $ 14,767 8.02% $ 188,114 $ 16,570 8.81%
Taxable securities - AFS 94,464 5,773 6.11 99,195 6,544 6.60
Taxable securities - HTM 629 49 7.79
Tax-exempt securities - AFS 14,034 620 4.51 13,076 656 5.02
Tax-exempt securities - HTM 11,813 568 4.81 8,926 433 4.85
Federal funds sold 11,588 196 1.69 3,462 88 2.54
FHLB stock and other 3,759 172 4.55 3,529 256 7.23
----------- ----------- ----------- -----------
Total interest-earning assets 319,789 22,096 6.91 316,812 24,596 7.76
Noninterest-earning assets
Cash and due from banks 8,487 8,971
Premises and equipment (net) 8,779 9,241
Other nonearning assets 8,250 4,835
Less: allowance for loan losses (3,021) (2,887)
----------- -----------
Total noninterest-earning assets 22,495 20,160
----------- -----------
Total assets 342,284 $ 336,972
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Demand deposits $ 47,372 502 1.06 $ 43,846 843 1.92
Savings deposits 50,718 407 0.80 48,850 713 1.46
Time deposits 165,155 7,787 4.71 158,778 9,411 5.93
Fed funds purchased & TT&L 539 7 1.30 818 41 5.01
FHLB advances 11,231 528 4.67 19,160 958 5.00
Repurchase agreements 8,567 98 1.14 10,695 383 3.58
----------- ----------- ----------- -----------
Total interest-bearing liabilities 283,582 9,329 3.29 282,147 12,349 4.38
----------- -----------
Noninterest-bearing liabilities
Demand deposits 26,093 23,186
Other liabilities 1,473 1,471
----------- -----------
Total noninterest-bearing liabilities 27,566 24,657
----------- -----------
Total liabilities 306,804 306,804
Total shareholders' equity 31,136 30,168
=========== ===========
Total liabilities & shareholders'
equity $342,284 $ 336,972
=========== ===========
Net interest income $ 12,767 $ 12,247
=========== ===========
Net interest spread 3.62% 3.38%
========== ===========
Net yield on interest-earning assets 4.00% 3.86%
========== ===========
2000
-------------------------------------
(DOLLARS IN THOUSANDS) INTEREST
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
----------- ----------- -----------
ASSETS
Interest-earning assets
Loans $ 190,386 $ 17,145 9.01%
Taxable securities - AFS 71,670 5,066 6.55
Taxable securities - HTM 2,495 179 7.17
Tax-exempt securities - AFS 13,914 701 5.02
Tax-exempt securities - HTM 7,876 383 4.86
Federal funds sold 130 7 5.38
FHLB stock and other 3,295 253 7.68
----------- -----------
Total interest-earning assets 289,766 23,734 8.03
Noninterest-earning assets
Cash and due from banks 9,687
Premises and equipment (net) 9,191
Other nonearning assets 6,003
Less: allowance for loan losses (3,039)
-----------
Total noninterest-earning assets 21,842
-----------
Total assets $ 311,608
===========
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Demand deposits $ 41,488 1,121 2.70
Savings deposits 53,131 1,097 2.06
Time deposits 139,363 8,282 5.94
Fed funds purchased & TT&L 4,244 292 6.88
FHLB advances 19,767 1,263 6.39
Repurchase agreements 5,177 282 5.45
----------- -----------
Total interest-bearing liabilities 263,170 12,337 4.69
-----------
Noninterest-bearing liabilities
Demand deposits 21,167
Other liabilities 1,093
-----------
Total noninterest-bearing liabilities 22,260
-----------
Total liabilities 285,430
Total shareholders' equity 26,178
-----------
Total liabilities & shareholders'
equity $ 311,608
===========
Net interest income $ 11,397
===========
Net interest spread 3.34%
=====
Net yield on interest-earning assets 3.86%
=====
|
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.
2002
ANNUAL
REPORT
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:
* Volume variance results when the change in volume is multiplied by the previous year's rate.
* Rate variance results when the change in rate is multiplied by the previous year's volume.
* 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.
(BAR CHART)
CAPITAL RESOURCES
Internal capital growth, through the retention of earnings, is the primary means of maintaining capital adequacy for the Banks. The Company's shareholders' equity at year-end 2002 was $32,154,862 compared to $30,474,195 at year-end 2001, representing an increase of 5.5%. Equity totals include $963,990 in accumulated other comprehensive income which is comprised solely of a net unrealized gain on securities available for sale, net of tax, at year-end
2002 COMPARED TO 2001 2001 COMPARED TO 2000
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 $ (1,804) $ (345) $ (1,459) $ (574) $ (203) $ (371)
Taxable securities available for sale (774) (268) (506) 1,478 1,809 (331)
Taxable securities held to maturity (49) (49) -- (130) (144) 14
Tax-exempt securities available for sale (35) 15 (50) (45) (23) (22)
Tax-exempt securities held to maturity 135 139 (4) 50 51 (1)
Federal funds sold 108 146 (38) 81 87 (6)
FHLB stock and other (85) 14 (99) 2 17 (15)
----------- ----------- ----------- ----------- ----------- -----------
Total interest and dividend income (2,504) (348) (2,152) 862 1,594 (732)
Interest expense
Demand deposits (341) 63 (404) (278) 61 (339)
Savings deposits (306) 26 (332) (384) (83) (301)
Time deposits (1,624) 365 (1,989) 1,129 1,151 (22)
Fed funds purchased & T, T & L (34) (11) (23) (251) (188) (63)
FHLB advances (434) (374) (60) (305) (38) (267)
Repurchase agreements (285) (64) (221) 101 223 (122)
----------- ----------- ----------- ----------- ----------- -----------
Total interest expense (3,024) 5 (3,029) 12 1,126 (1,114)
----------- ----------- ----------- ----------- ----------- -----------
Net interest earnings $ 520 $ (353) $ 877 $ 850 $ 468 $ 382
=========== =========== =========== =========== =========== ===========
|
2002
ANNUAL
REPORT
2002, compared to a $56,569 loss at year-end 2001. Total shareholders' equity in relation to total assets was 8.9% at December 31, 2002 and 2001.
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 Company'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 $143 million at December 31,2002 compared to $137 million at December 31, 2001. Management recognizes securities may need to be sold in the future to help fund loan demand and, accordingly, as of December 31, 2002, $132.9 million of the securities portfolio was classified as available for sale. The Company's residential real estate portfolio, can be used to collateralize borrowings as an additional source of liquidity. Management believes its current liquidity level is sufficient to meet anticipated future growth.
(BAR CHART)
(BAR CHART)
The Cash Flows 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 2002, 2001 and 2000 follows. The Company experienced a net increase in cash from operating activities in 2002, 2001 and 2000. Net cash from operating activities was a positive $4.1 million, $3.4 million and $3.5 million for the years ended December 31, 2002, 2001 and 2000, respectively. 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 FROM INVESTING ACTIVITIES was $(31.6 million), $(4.4 million) and $(24.6 million) for the years ended December 31, 2002, 2001 and 2000, respectively. The reasons for the changes in net cash from investing activities include loan growth, as well as normal maturities, security calls and reinvestments of securities and premises and equipment expenditures. In 2002, 2001 and 2000, the Company received $47.9 million, $5.5 million and $3.0 million, respectively, from sales of securities available for sale, while proceeds from securities which matured or were called were $83.9 million, $72.4 million and $1.0 million in 2002, 2001 and 2000, respectively. As mentioned previously, the decrease in interest rates dramatically impacted the Company's cash flows from investing activities.
2002
ANNUAL
REPORT
NET CASH FROM FINANCING ACTIVITIES was $14.5 million, $13.8 million and $20.0 million for the years ended December 31, 2002, 2001 and 2000, respectively. The net cash from financing activities was primarily attributable to growth in total deposits of $16.8 million, $15.8 million and $32.0 million in 2002, 2001 and 2000, respectively.
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 shareholders' equity.
2002
ANNUAL
REPORT
REPORT OF INDEPENDENT AUDITORS
(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, 2002 and 2001, 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, 2002. 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 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, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
/s/ CROWE, CHIZEK AND COMPANY LLP
CROWE, CHIZEK AND COMPANY LLP
Columbus, Ohio
January 15, 2003
|
2002
ANNUAL
REPORT
CONSOLIDATED BALANCE SHEETS
2002 2001
--------------- ---------------
ASSETS
Cash and due from financial institutions ....................................... $ 8,248,554 $ 9,427,756
Federal Funds sold ............................................................. 2,040,000 13,962,000
--------------- ---------------
Total cash and cash equivalents ............................................. 10,288,554 23,389,756
Securities available for sale .................................................. 132,869,484 114,044,617
Securities held to maturity (Estimated fair value
of $13,634,177 in 2002 and $10,617,845 in 2001) ............................. 12,925,517 10,378,811
Total loans .................................................................... 187,887,914 183,339,603
Allowance for losses ........................................................... (2,971,116) (2,879,065)
--------------- ---------------
Loans net ................................................................... 184,916,798 180,460,538
Premises and equipment ......................................................... 8,932,684 9,083,891
Accrued interest receivable .................................................... 2,602,091 2,796,442
Other real estate and repossessions ............................................ 698,065 119,888
Core deposit and other intangible assets ....................................... 75,452 99,940
Bank owned life insurance ...................................................... 6,860,601
Other assets ................................................................... 1,541,823 943,312
--------------- ---------------
Total assets ................................................................ $ 361,711,069 $ 341,317,195
=============== ===============
LIABILITIES
Demand deposits
Noninterest-bearing ......................................................... $ 26,843,394 $ 26,297,805
Interest-bearing ............................................................ 48,341,237 42,423,962
Savings deposits ............................................................... 50,382,277 49,396,199
Time deposits - under $100,000 ................................................. 131,794,499 126,820,233
Time deposits - $100,000 and over .............................................. 42,840,126 38,437,724
--------------- ---------------
Total deposits .............................................................. 300,201,533 283,375,923
Federal funds purchased ........................................................ 2,055,000 116,000
FHLB line of credit ............................................................ 10,100,000
Securities sold under agreements to repurchase ................................. 7,009,799 7,811,230
Other borrowed funds ........................................................... 17,347,429 8,199,230
Accrued expenses and other liabilities ......................................... 2,942,446 1,240,617
--------------- ---------------
Total liabilities ........................................................... $ 329,556,207 310,843,000
SHAREHOLDERS' EQUITY
Preferred stock, without par value: 2,000,000 shares authorized and unissued
Common stock - $1 par value: 10,000,000 shares authorized;
2002 - 3,411,307 and 2001 - 3,249,227 shares issued ............................ 3,411,307 3,249,227
Additional paid-in capital ..................................................... 25,651,879 23,619,610
Retained earnings .............................................................. 4,472,544 5,044,540
Stock held by deferred compensation plan, 42,828 shares
at cost in 2002 and 36,550 in 2001 .......................................... (572,731) (517,838)
Treasury stock, 163,065 shares at cost in 2002 and 85,791 in 2001 .............. (1,772,127) (864,775)
Accumulated other comprehensive income (loss), net of tax ...................... 963,990 (56,569)
--------------- ---------------
Total shareholders' equity .................................................. 32,154,862 30,474,195
--------------- ---------------
Total liabilities and shareholders' equity .................................. $ 361,711,069 $ 341,317,195
=============== ===============
|
2002
ANNUAL
REPORT
CONSOLIDATED STATEMENTS OF INCOME
2002 2001 2000
--------------- --------------- ---------------
Interest and dividend income
Loans,including fees .................................... $ 14,766,443 $ 16,569,452 $ 17,112,362
Taxable securities ...................................... 5,773,081 6,593,114 5,244,590
Non-taxable securities .................................. 1,188,098 1,088,942 1,083,310
Federal funds sold ...................................... 195,809 87,776 26,321
Dividends on Federal Home Loan Bank stock and other ..... 172,251 256,485 267,502
--------------- --------------- ---------------
Total interest and dividend income .................. 22,095,682 24,595,769 23,734,085
Interest expense
Deposits
Demand ............................................... 501,714 842,893 1,121,150
Savings .............................................. 406,867 712,754 1,096,782
Time ................................................. 7,787,256 9,411,154 8,282,081
Other borrowings ........................................ 633,030 1,381,747 1,836,656
--------------- --------------- ---------------
Total interest expense ............................... 9,328,867 12,348,548 12,336,669
--------------- --------------- ---------------
Net interest income ............................................. 12,766,815 12,247,221 11,397,416
Provision for loan losses ....................................... 630,000 780,000 587,000
--------------- --------------- ---------------
Net interest income after provision for loan losses ............. 12,136,815 11,467,221 10,810,416
Noninterest income
Service charges on deposit accounts ..................... 946,706 904,571 864,343
Net realized gain on sales/calls of securities .......... 320,485 39,358 26,674
Net realized gain/(loss) on sales of loans .............. 94,813 71,421 (27,544)
Other income ............................................ 697,169 590,696 505,513
--------------- --------------- ---------------
Total noninterest income .............................. 2,059,173 1,606,046 1,368,986
Noninterest expense
Salaries and employee benefits .......................... 5,165,633 4,593,016 4,196,960
Occupancy and equipment ................................. 1,453,346 1,465,804 1,435,207
Professional services ................................... 314,814 309,797 256,577
Insurance ............................................... 188,328 149,449 209,751
Franchise and other taxes ............................... 353,759 320,622 250,151
Advertising ............................................. 310,458 278,731 396,858
Stationery and office supplies .......................... 289,080 208,999 233,668
Amortization of Intangibles ............................. 24,488 22,534 30,595
Other expenses .......................................... 1,889,266 2,034,032 1,701,888
--------------- --------------- ---------------
Total noninterest expense ............................. 9,989,172 9,382,984 8,711,655
--------------- --------------- ---------------
Income before income taxes ...................................... 4,206,816 3,690,283 3,467,747
Income tax expense ........................................... 986,653 934,696 880,772
--------------- --------------- ---------------
Net Income ...................................................... $ 3,220,163 $ 2,755,587 $ 2,586,975
=============== =============== ===============
Earnings per common share - Basic ............................... $ 0.99 $ 0.84 $ 0.77
=============== =============== ===============
Earnings per common share - Diluted ............................. $ 0.99 $ 0.84 $ 0.77
=============== =============== ===============
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SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2002
ANNUAL
REPORT
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
TREASURY
ADDITIONAL STOCK &
COMMON PAID-IN DEFERRED
SHARES STOCK CAPITAL PLAN
--------------- --------------- --------------- ---------------
BALANCE AT JANUARY 1, 2000 ............................ $ 2,942,885 $ 2,942,885 $ 19,660,205 $
Net Income ............................................
Shares issued in Dividend Reinvestment Plan ........... 4,954 4,954 47,288
5% Stock dividend ..................................... 147,392 147,043 1,580,701
Cash paid in lieu of fractional shares on 5% stock
dividend ............................................ (349)
Cash Dividends - $0.46 per share ......................
Recognition of shares held by deferred
compensation plan - at cost ......................... (15,509) 288,628 (288,628)
Shares purchased for deferred compensation plan ....... (10,855) 122,810 (122,810)
Purchases of treasury stock shares at cost ............ (28,499) (283,564)
Change in unrealized gain (loss) on securities
available for sale, net of reclassifications and
tax effects .........................................
Comprehensive income/(loss) ...........................
=============== =============== =============== ===============
BALANCE AT DECEMBER 31, 2000 .......................... 3,040,019 3,094,882 21,699,632 (695,002)
Net Income ............................................
5% Stock dividend ..................................... 152,221 154,345 1,813,578
Cash paid in lieu of fractional shares on 5% stock
dividend .......................................... (399)
Cash dividends - $0.48 per share ......................
Shares purchased for deferred compensation plan ....... (9,088) 106,400 (106,400)
Purchases of treasury stock shares at cost ............ (55,867) (581,211)
Change in unrealized gain (loss) on securities
available for sale, net of reclassifications and
tax effects .........................................
Comprehensive income/(loss) ...........................
=============== =============== =============== ===============
BALANCE AT DECEMBER 31, 2001 .......................... 3,126,886 3,249,227 23,619,610 (1,382,613)
Net Income ............................................
5% Stock dividend ..................................... 153,916 162,080 1,977,376
Cash paid in lieu of fractional shares on 5% stock
dividend ............................................ (381)
Cash dividends - $0.50 per share ......................
Shares purchased for deferred compensation plan ....... (7,793) 104,733
Shares distributed from deferred compensation plan .... 3,531 (49,840) 49,840
Purchases of Treasury Stock - shares at cost .......... (70,745) (907,352)
Change in unrealized gain (loss) on securities
available for sale, net of reclassifications and
tax effects .........................................
Comprehensive income/(loss) ...........................
=============== =============== =============== ===============
BALANCE AT DECEMBER 31, 2002 .......................... $ 3,205,414 $ 3,411,307 $ 25,651,879 $ (2,344,858)
=============== =============== =============== ===============
ACCUMULATED
OTHER TOTAL
RETAINED COMPREHENSIVE COMPREHENSIVE SHAREHOLDERS'
EARNINGS INCOME INCOME EQUITY
--------------- --------------- --------------- ---------------
BALANCE AT JANUARY 1, 2000 ............................ $ 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 ........... 52,242
5% Stock dividend ..................................... (1,727,744)
Cash paid in lieu of fractional shares on 5% stock
dividend ............................................ (4,111) (4,111)
Cash Dividends - $0.46 per share ...................... (1,545,547) (1,545,547)
Recognition of shares held by deferred
compensation plan - at cost .........................
Shares purchased for deferred compensation plan .......
Purchases of treasury stock shares at cost ............ (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 .......................... 5,852,284 (1,272,709) 28,679,087
Net Income ............................................ 2,755,587 $ 2,755,587 2,755,587
5% Stock dividend ..................................... (1,967,923)
Cash paid in lieu of fractional shares on 5% stock
dividend .......................................... (5,188) (5,188)
Cash dividends - $0.48 per share ...................... (1,590,220) (1,590,220)
Shares purchased for deferred compensation plan .......
Purchases of treasury stock shares at cost ............ (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 .......................... 5,044,540 (56,569) 30,474,195
Net Income ............................................ 3,220,163 $ 3,220,163 3,220,163
5% Stock dividend ..................................... (2,139,456)
Cash paid in lieu of fractional shares on 5% stock
dividend ............................................ (5,033) (5,033)
Cash dividends - $0.50 per share ...................... (1,647,670) (1,647,670)
Shares purchased for deferred compensation plan .......
Shares distributed from deferred compensation plan ....
Purchases of Treasury Stock - shares at cost .......... (907,352)
Change in unrealized gain (loss) on securities
available for sale, net of reclassifications and
tax effects ......................................... 1,020,559 1,020,559 1,020,559
---------------
Comprehensive income/(loss) ........................... $ 4,240,722
=============== =============== =============== ===============
BALANCE AT DECEMBER 31, 2002 .......................... $ 4,472,544 $ 963,990 $ 32,154,862
=============== =============== ===============
|
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2002
ANNUAL
REPORT
CONSOLIDATED STATEMENTS OF CASH FLOW
2002 2001 2000
--------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ 3,220,163 $ 2,755,587 $ 2,586,975
Depreciation and amortization .............................. 878,121 901,145 894,956
Provision for loan losses .................................. 630,000 780,000 587,000
Deferred taxes ............................................. 81,794 (84,270) 151,192
Federal Home Loan Bank stock dividend ...................... (177,200) (247,400) (198,200)
Net realized gains on sales or calls of securities ......... (320,485) (39,358) (26,674)
(Accretion)/amortization of securities, net ................ 32,534 (57,020) 8,316
Net realized (gains)/losses on sales of loans .............. (94,813) (71,421) 27,544
Amortization of mortgage servicing rights .................. 84,870 63,704 46,045
Net realized (gains)/losses on sale of real estate owned ... (6,693) (44,794)
Proceeds from sale of assets ............................... 11,062
Net realized (gains)/losses on sale of assets .............. 34,328
Net change in accrued interest receivable & other assets ... (486,466) (297,535) (462,836)
Net change in accrued expenses and other liabilities ....... 206,896 (304,175) (192,015)
--------------- --------------- ---------------
Net cash from operating activities ......................... 4,059,783 3,354,463 3,456,631
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale
Sales ...................................................... 47,896,297 5,480,956 3,026,674
Maturities, prepayments and calls .......................... 83,878,546 72,402,575 980,070
Purchases .................................................. (147,615,438) (95,326,510) (8,978,438)
Securities held to maturity
Maturities, prepayments and calls .......................... 2,600,000 178,500
Purchases .................................................. (2,521,253) (2,152,763) (1,175,555)
Net change in loans .......................................... (5,413,694) 12,611,249 (17,213,721)
Net improvements in real estate owned ........................ (290,570)
Proceeds from sale of real estate owned ...................... 27,893 403,282
Purchase of bank owned life insurance ........................ (6,860,601)
Purchases of premises and equipment .......................... (713,488) (441,456) (1,411,084)
--------------- --------------- ---------------
Net cash from investing activities ......................... (31,612,308) (4,422,667) (24,593,554)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits ....................................... 16,825,610 15,823,048 32,013,010
Net change in short-term borrowings .......................... (8,962,431) (1,945,836) (9,504,707)
Proceeds from long-term debt ................................. 10,162,062 2,852,590
Principal payments on long-term debt ......................... (1,013,863) (789,341) (773,237)
Cash dividends paid .......................................... (1,647,670) (1,590,220) (1,545,547)
Cash paid in lieu of fractional shares in stock dividend ..... (5,033) (5,188) (4,111)
Proceeds from stock issuance ................................. 52,242
Treasury stock purchases ..................................... (907,352) (581,211) (283,564)
--------------- --------------- ---------------
Net change from financing activities ....................... 14,451,323 13,763,842 19,954,086
--------------- --------------- ---------------
Net change in cash and cash equivalents .............................. (13,101,202) 12,695,638 (1,182,837)
Cash and cash equivalents at beginning of year ....................... 23,389,756 10,694,118 11,876,955
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ............................. $ 10,288,554 $ 23,389,756 $ 10,694,118
=============== =============== ===============
Interest paid ........................................................ $ 9,428,364 $ 12,545,238 $ 12,238,551
Income taxes paid .................................................... $ 979,474 $ 930,469 $ 854,470
Non-cash transfer from loans to other real estate & repossesions ..... $ 308,807 $ 144,688 $ 298,170
|
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2002
ANNUAL
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, end 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 leans are secured by specific terms of collateral including business assets, consumer assets end 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 so 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 on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. Consumer loans are typically charged-off no later than 120 days past due. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Interest received on such loans is accounted for on a cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
2002
ANNUAL
REPORT
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a valuation allowance for probable incurred credit losses, 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, 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 loans existing rate or at the fair value of collateral if repayment is expected solely from the collateral.
PREMISES AND EQUIPMENT:
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 5 to 39 years. Furniture, fixtures, and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 5 years. 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. Net loan servicing rights totaled $168,264 and $151,723 at year-end 2002 and 2001 respectively.
COMPANY OWNED LIFE INSURANCE:
The Company has purchased life insurance policies on certain key executives. Company owned life insurance is recorded at its cash surrender value, or the amount that can be realized.
INTANGIBLE ASSETS:
Intangible assets consist of core deposits arising from branch acquisitions. They are initially recorded at fair value and then amortized on an accelerated method over eight years.
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 21 and have completed one year of service. Eligible employees may contribute up to $11,000 in 2002 and employees who have attained the age of 50 years or older may contribute an additional $1,000 in 2002. The Company may make a discretionary matching contribution equal to 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.
2002
ANNUAL
REPORT
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK COMPENSATION:
Employee compensation expense under stock options is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income, as all options granted had an exercise plan equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation. Pro forma net income exceeded reported net income for 2000 due to the forfeiture of options previously expensed for purposes of reporting pro forms disclosures in accordance with SFAS No. 123. No stock options were granted in 2002, 2001 or 2000.
2002 2001 2000
------------- ------------- -------------
Net income as reported $ 3,220,163 $ 2,755,587 $ 2,586,975
Pro forma net income 3,191,526 2,722,991 2,594,308
Earnings per share as reported - Basic $ 0.99 $ 0.84 $ 0.77
Earnings per share as reported - Diluted 0.99 $ 0.84 $ 0.77
Pro forma earnings per share - Basic 0.98 $ 0.83 $ 0.77
Pro forma earnings per share - Diluted 0.98 $ 0.82 $ 0.77
|
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 consideration of customer collateral or ability to reply. 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 19, 2002, a 5% stock dividend was approved for all shareholders of record on December 2, 2002 and distributed on December 20, 2002. 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. All per share data has been retroactively adjusted for the 5% stock dividends in 2002, 2001 and 2000.
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. Those restrictions pose no practical limit on the ability of the Banks or Holding Company to pay dividends at historical levels.
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. 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.
2002
ANNUAL
REPORT
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME:
Comprehensive income consists of net income and ether comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity.
LOSS CONTINGENCIES:
Loss contingencies, 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 $l,726,000 and $1,598,000 was required to meet the regulatory reserve and clearing requirements at year-end 2002 and 2001. These balances do not earn interest.
RECLASSIFICATIONS:
Some items in prior financial statements have been reclassified to conform to the current presentation.
NEWLY ISSUED BUT NOT YET EFFECTIVE ACCOUNTING STANDARDS:
New accounting standards on asset retirement obligations, restructuring activities and exit costs, operating leases, and early extinguishment of debt were issued in 2002. Management determined that when the new accounting standards are adopted in 2003 they would not have a material impact on the Company's financial condition or results of operations.
NOTE 2 - SECURITIES
The fair value of available for sale securities and the related gross
unrealized gains and losses recognized in accumulated other comprehensive income
(loss) were as follows:
ESTIMATED GROSS GROSS
FAIR VALUE UNREALIZED GAINS UNREALIZED LOSSES
------------- ---------------- -----------------
2002
U.S. Government and federal agency $ 93,261,759 $ 1,186,116 $ (17,179)
State and municipal 20,713,901 310,894 (58,552)
Mortgage-backed 14,074,772 50,763 (31,647)
Collateralized mortgage obligations 998,589 2,752
------------- ------------- -------------
Total debt securities 129,049,021 1,550,525 (107,378)
------------- ------------- -------------
Other securities 3,820,463 18,200 (756)
------------- ------------- -------------
$ 132,869,484 $ 1,568,725 $ (108,134)
============= ============= =============
2001
U.S. Government and federal agency $ 99,489,773 $ 508,193 $ (911,894)
State and municipal 10,748,353 293,400 (8,563)
Mortgage-backed 152,732 3,794
Collateralized mortgage obligations
------------- ------------- -------------
Total debt securities $ 110,390,858 $ 805,387 $ (920,457)
------------- ------------- -------------
Other securities 3,653,759 29,359
------------- ------------- -------------
$ 114,044,617 $ 834,746 $ (920,457)
============= ============= =============
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2002
ANNUAL
REPORT
NOTE 2 - SECURITIES (CONTINUED)
The carrying amount, unrecognized gains and losses, and fair value of securities held to maturity were as follows:
GROSS GROSS
CARRYING UNRECOGNIZED UNRECOGNIZED
AMOUNT GAINS LOSSES FAIR VALUE
------------ ------------ ------------ ------------
2002
State and municipal $ 12,925,517 $ 712,282 $ (3,622) $ 13,634,177
============ ============ ============ ============
2001
State and municipal $ 10,378,811 $ 293,163 $ (54,129) $ 10,617,845
============ ============ ============ ============
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Sales of available for sale securities were as follows:
2002 2001 2000
------------ ------------ ------------
Proceeds $ 47,896,297 $ 5,480,956 $ 3,026,674
Gross gains 346,973 34,358 26,674
Gross losses 26,493
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The fair value of debt securities and carrying amount, if different, at year-end 2002 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.
Held-to-maturity Available for
------------------------------- sale
Carrying Amount Fair Value Fair Value
--------------- ------------ ------------
Due in one year or less $ 151,999 $ 152,762 $ 4,852,429
Due from one to five years 4,501,248 4,800,651 3,624,165
Due from five to ten years 3,162,795 3,411,256 20,549,385
Due after ten years 5,109,475 5,269,508 84,949,681
Mortgage backed 14,074,772
Collateralized mortgage obligation 998,589
------------ ------------ ------------
Total $ 12,925,517 $ 13,634,177 $129,049,021
============ ============ ============
|
Securities with a carrying value of $49,715,952 at December 31, 2002 and $58,817,931 at December 31, 2001 were pledged to secure public deposits, repurchase agreements and other liabilities as required or permitted by law.
At year end 2002 and 2001, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.
2002
ANNUAL
REPORT
NOTE 3 - LOANS
Year-end loans were as follows:
2002 2001
------------ ------------
Commercial loans $ 21,059,890 $ 21,502,208
Commercial real estate loans 69,286,653 61,962,953
Real estate loans 52,535,507 54,153,041
Installment loans 45,005,864 45,721,401
------------ ------------
Total loans $187,887,914 $183,339,603
============ ============
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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, 2001 $ 4,869,367
New loans 2,870,108
Repayments (3,181,677)
------------
Aggregate balance - December 31, 2002 $ 4,557,798
============
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The activity In the allowance for loan loss was as follows:
2002 2001 2000
------------ ------------ ------------
Balance January 1, $ 2,879,065 $ 2,790,133 $ 3,109,821
Provision for loan losses 630,000 780,000 587,000
Loans charged-off (771,278) (1,063,444) (1,194,840)
Recoveries of previous charge-offs 233,329 372,376 288,152
------------ ------------ ------------
Balance December 31, $ 2,971,116 $ 2,879,065 $ 2,790,133
============ ============ ============
|
Non-performing loans were as follows at year end:
2002 2001
------------ ------------
Loans past due over 90 days still on accrual $ 85,000 $ 157,000
Nonaccrual loans $ 685,000 $ 661,000
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As of December 31, 2002 and 2001 and for each of the three years in the period ended December 31, 2002 Impaired loans were not material.
NOTE 4 - PREMISES AND EQUIPMENT
Year-end premises and equipment were as follows:
2002 2001
------------ ------------
Buildings and land $ 10,085,506 $ 10,030,383
Furniture and equipment 6,163,299 5,790,192
Leasehold improvements 263,977 263,977
Computer software 1,198,083 948,462
------------ ------------
Total 17,710,865 17,033,014
Accumulated depreciation and amortization 8,778,181 7,949,123
------------ ------------
Premises and equipment, net $ 8,932,684 $ 9,083,891
============ ============
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2002
ANNUAL
REPORT
NOTE 4 - PREMISES AND EQUIPMENT (CONTINUED)
Depreciation expense was $841,633, $865,951, and $879,176 for the years 2002, 2001, and 2000 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, 2902. This lease was renewed for the second five-year term at a rate of $26,000 annually beginning April 1, 2002. Rental expense was $25,128 for the year ended December 31, 2002, and $22,500 for the years ended December 31, 2001 and December 31, 2000.
NOTE 5 - TIME DEPOSITS
The scheduled maturities of time deposits as of December 31, 2002 were as follows:
Under $100,000 Over $100,000 Totals
-------------- -------------- ------------
2003 $ 52,734,469 $ 23,849,074 $ 76,583,543
2004 28,039,057 6,638,619 34,677,676
2005 22,651,477 6,688,218 29,339,695
2006 9,001,293 1,509,719 10,511,012
2007 4,872,329 1,299,323 6,171,652
Thereafter 14,495,874 2,855,173 17,351,047
------------ ------------ ------------
$131,794,499 $ 42,840,126 $174,634,625
============ ============ ============
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NOTE 6 - INTANGIBLE ASSETS
Acquired intangible assets were as follows at year end:
GROSS
CARRYING ACCUMULATED
AMOUNT AMORTIZATION
------------ ------------
Amortized intangible assets;
Core deposit intangibles $ 119,861 $ 44,409
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Aggregate amortization expense was $24,488, $27,569, and $30,595 for 2002, 2001 and 2000,
Estimated amortization expense for each of the next five years;
2003 $ 18,000 2004 18,000 2005 18,000 2006 13,000 2007 3,452 |
2002
ANNUAL
REPORT
NOTE 7 - 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;
2002 2001
-------------- --------------
Average daily balance during the year $ 8,567,000 $ 10,695,000
Average interest rate during the year 1.19% 3.59%
Maximum month-end balance during the year $ 11,659,000 $ 20,653,000
Weighted average interest rate at year end 0.91% 1.39%
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Securities underlying these agreements at year-end were as follows:
2002 2001
------------ ------------
Carrying value of securities $23,910,741 $ 28,695,446
Fair value of securities 24,048,764 28,667,567
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At year-end, advances from the Federal Home Loan Bank and borrowings under a Treasury Tax and Loan Note were as follows:
2002 2001
------------ ------------
Maturities November 2003 through January 2022, primarily
fixed rate at rates from 1.84% to 7.20%, averaging 3.83% $ 16,337,365
Maturities March 2008 through January 2022, primarily
fixed rate at rates from 3.60% to 7.20%, averaging 5.56% 7,959,229
Cash management line of credit, 2.05% at December 31, 2001 10,100,000
Treasury Tax and Loan Note 1,010,064 240,001
------------ ------------
Total $ 17,347,429 $ 18,299,230
============ ============
|
At year end, lines of credit from correspondent banks were as follows:
2002 2001
------------ ------------
Correspondent banks line of credit $ 2,055,000 $ 116,000
|
At year-end 2002, required annual principal payments on Federal Home Loan Bank advances and lines of credit were as follows:
2003 4,095,400
2004 1,059,675
2005 1,590,712
2006 1,123,546
2007 6,387,644
Thereafter 5,145,452
------------
$ 19,402,429
============
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2002
ANNUAL
REPORT
NOTE 7 - BORROWED FUNDS (CONTINUED)
Additionally, as members of the Federal Home Loan Bank system at year-end 2002, the Banks had the ability to obtain up to $29,708,000 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, 2002, the Company and its Banks have $58,965,000 in Federal Home Loan Bank Stock and 1-4 family residential real estate loans pledged as collateral for borrowings. Also at December 31, 2002, the Company and its Banks have cash management lines of credit (excluding FHLB cash management lines of credit) enabling borrowings up to $18.8 million with various correspondent banks.
NOTE 8 - BENEFIT PLANS
Information about the pension plan was as follows:
2002 2001
------------ ------------
Change in benefit obligation:
Beginning benefit obligation $ 2,081,184 $ 1,954,428
Service cost 162,610 157,915
Interest cost 142,912 144,507
Actuarial (gain)/loss (154,452) 132,443
Plan amendments 114,069
Benefits paid (70,822) (308,109)
------------ ------------
Ending benefits obligation 2,275,501 2,081,184
Changes in plan assets, at fair value
Beginning plan assets 1,952,695 2,076,833
Actual return (203,376) (17,355)
Employer contributions 462,575 201,326
Benefits paid (70,822) (308,109)
------------ ------------
Ending plan assets 2,141,072 1,952,695
Funded status (134,429) (128,489)
Unrecognized net actuarial loss 452,646 220,189
Unrecognized prior service cost 166,163 67,321
------------ ------------
Prepaid benefit cost $ 484,380 $ 159,021
============ ============
|
Pension expense includes the following:
2002 2001 2000
------------ ------------ ------------
Service cost $ 162,610 $ 157,915 $131,781
Interest cost 142,912 144,507 133,223
Expected return on assets (183,533) (182,294) (172,171)
Amortization of prior service cost,
transition liability, act gain,
and plan amendment 15,227 431 (7,024)
------------ ------------ ------------
Pension expense $ 137,216 $ 120,559 $ 85,819
============ ============ ============
|
Significant assumption used;
2002 2001 2000
------------ ------------ ------------
Discount rate on benefit obligation 7.00% 7.50% 7.40%
Rate of compensation increase 2.50% 4.50% 4.00%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
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2002
ANNUAL
REPORT
NOTE 8 - BENEFIT PLANS (CONTINUED)
The Company's 401(k) matching percentage was 50% of the employees' contribution for 2002, 2001 and 2000. The cash contribution and related expense included in salaries and employee benefits totaled $77,620 in 2002, $73,350 in 2001 and $71,200 in 2000.
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 9 - INCOME TAXES
Income tax expense was as follows:
2002 2001 2000
------------ ------------ ------------
Current $ 904,859 $ 1,018,966 $ 729,580
Deferred 81,794 (84,270) 151,192
------------ ------------ ------------
Total $ 986,653 $ 934,696 $ 880,772
============ ============ ============
|
The effective tax rate differs from the federal statutory rate applied to financial statement income due to the following:
2002 2001 2000
------------ ------------ ------------
Statutory rate 34.00% 34.00% 34.00%
------------ ------------ ------------
Income taxes computed at the statutory federal tax rate $ 1,430,317 $ 1,254,696 $ 1,179,034
Effect of:
Tax exempt interest income (384,676) (340,286) (336,629)
Officer and director life insurance (61,805) (3,997) (5,588)
Other 2,817 24,283 43,955
------------ ------------ ------------
Total $ 986,653 $ 934,696 $ 880,772
============ ============ ============
Effective tax rate 23.5% 25.3% 25.4%
============ ============ ============
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Year-end gross deferred tax assets and gross deferred tax liabilities were due to the following:
ITEMS GIVING RISE TO DEFERRED TAX ASSETS 2002 2001
------------ ------------
Allowance for loan losses in excess of tax reserve $ 781,719 $ 731,014
Amortization of intangibles 60,016 65,426
Deferred compensation 194,729 176,065
Unrealized loss on securities available for sale 29,083
------------ ------------
Total deferred tax assets 1,036,464 1,001,588
ITEMS GIVING RISE TO DEFERRED TAX LIABILITIES
Depreciation (377,889) (428,982)
Deferred loan costs, net (95,613) (56,622)
Accretion (11,680) (14,372)
FHLB stock dividends (268,668) (224,366)
Mortgage servicing rights (57,210) (51,586)
Unrealized gain on securities available for sale (496,601)
Pension expense (170,208) (59,587)
------------ ------------
Total deferred tax liabilities (1,477,869) (835,515)
------------ ------------
Net deferred tax asset (liability) $ (441,405) $ 166,073
============ ============
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2002
ANNUAL
REPORT
NOTE 10 - 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 he 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, 15,242 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.
A summary of the status of the Company's stock option plan as of year-end 2002, 2001, and 2000 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.
2002 2001 2000
-------------------------- -------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at beginning of year 86,310 $ 11.35 86,310 $ 11.35 101,753 $ 11.10
Granted
Exercised
Forfeited (1,992) 9.68 (15,443) 9.68
---------- ---------- ----------
Outstanding at end of year 84,318 11.39 86,310 11.35 86,310 11.35
========== ========== ==========
Remaining shares unavailable for
grant at year-end 49,259 47,267 47,267
Options exercisable at year-end 5,960 5,960 5,960
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The following table summarized information about stock options outstanding at December 31, 2002:
NUMBER NUMBER
EXERCISE OUTSTANDING DATE OF EXERCISABLE
PRICE AT 12/31/02 EXPIRATION AT 12/31/02
------------ ------------ ------------ ------------
$ 9.68 61,449 11/21/05 3,012
10.16 1,811 11/21/O5
15.57 12,763 11/21/05 1,787
17.24 6,381 11/21/05 893
20.18 1,914 11/21/05 268
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NOTE 11 - 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 instruments, 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 commitments.
2002
ANNUAL
REPORT
NOTE 11 - OFF-BALANCE SHEET ACTIVITIES (CONTINUED)
A summary of the notional or contractual amounts of financial instruments with off-balance sheet risk at year-end was as follows:
2002 2001
------------ ------------
Commitments to extend credit $ 25,423,442 $ 18,779,162
Credit card and Ready Reserve Lines 1,384,224 1,275,919
Standby letters of credit 490,200 471,000
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At year-end 2002, and included above, commitments to make fixed-rate loans at current market rates totaled $2,087,373 with the interest rates on those fixed-rate commitments ranging from 4.75% to 9.75%. The fixed-rate commitments at year-end 2001 were $2,416,731 with the interest rates ranging from 6.50% to 10.00%.
NOTE 12 - 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, 2002, and 2001, total commercial and commercial real estate loans made up 48.1% and 46.1% respectively of the loan portfolio, with 15.6% and 13.9% of these loans secured by commercial real estate and business assets mainly in the Columbus, Ohio area. Installment loans account for 24.0% and 24.7% of the loan portfolio and are secured by consumer assets including automobiles, which account for 86.8% and 90.4%, respectively, of the installment loan portfolio. Real estate loans comprise 28.0% and 29.2% of the loan portfolio as of December 31, 2002 and 2001, 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, 2002 and 2001, is $3,630,511 and $2,848,186 respectively on deposit with Bank One, NA, Detroit, Michigan. Also included in cash and due from banks and federal funds sold as of December 31, 2001 is $1,673,841 on deposit with Mellon Bank, NA, Pittsburgh, Pennsylvania.
NOTE 13 - 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.
2002
ANNUAL
REPORT
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated year-end fair values of financial instruments were:
2002 2001
------------------------------ ------------------------------
CARRYING FAIR CARRYING FAIR
(Dollars in thousands) AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
Financial assets:
Cash and cash equivalents $ 10,289 $ 10,289 $ 23,390 $ 23,390
Securities available for sale 132,869 132,869 114,045 114,045
Securities held to maturity 12,926 13,634 10,379 10,618
Loans receivable, net 184,917 185,883 180,461 186,249
Loan servicing rights 168 168 152 152
Accrued interest receivable 2,602 2,602 2,796 2,796
Financial liabilities:
Demand and savings deposits $ (125,567) $ (125,567) $ (118,118) $ (118,118)
Time deposits (174,635) (189,042) (165,258) (174,119)
Short-term borrowings (3,065) (3,065) (10,456) (10,456)
Repurchase agreements (7,010) (7,010) (7,811) (7,811)
Long-term debt (16,337) (19,303) (7,959) (8,695)
Accrued interest payable (570) (570) (669) (669)
|
NOTE 14 - 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, 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 2002 and 2001 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.
2002
ANNUAL
REPORT
NOTE 14 - REGULATORY MATTERS (CONTINUED)
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
----------- ----------- ----------- ----------- ----------- -----------
2002
Total capital (to risk weighted assets)
Consolidated $ 33,767 14.9% $ 18,080 8.0% $ 22,600 10.0%
Citizens 23,085 14.0 13,236 8.0 16,546 10.0
Community 7,721 13.0 4,771 8.0 5,963 10.0
Tier I capital (to risk weighted assets)
Consolidated $ 31,102 13.8% $ 9,040 4.0% $13,560 6.0%
Citizens 21,005 12.7 6,618 4.0 9,927 6.0
Community 7,136 12.0 2,385 4.0 3,578 6.0
Tier I capital (to average assets)
Consolidated $ 31,102 9.1% $ 13,691 4.0% $ 17,114 5.0%
Citizens 21,005 8.3 10,132 4.0 12,666 5.0
Community 7,136 7.6 3,758 4.0 4,697 5.0
2OO1
Total capital (to risk weighted assets)
Consolidated $ 32,985 16.4% $ 16,057 8.0% $ 20,071 10.0%
Citizens 22,171 14.5 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 I 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
|
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. Generally, capital distributions are limited to undistributed net income for the current and prior two years. At year-end 2002, $687,996 of retained earnings was available for dividend declaration without prior regulatory approval.
2002
ANNUAL
REPORT
NOTE 15 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
Following are condensed parent company financial statements:
Condensed Balance Sheets December 31, 2002 and 2001
2002 2001
------------ ------------
Assets:
Cash and cash equivalents $ 1,920,185 $ 3,288,585
Securities available for sale, at fair value 664 311,995
Investment in subsidiaries 29,192,606 26,235,841
Building\Land 174,564 175,212
Other assets 967,642 654,486
------------ ------------
$ 32,255,661 $ 30,666,119
============ ============
Liabilities and shareholders' equity:
Other liabilities $ 100,799 $ 191,924
Shareholders' equity 32,154,862 30,474,195
------------ ------------
Total liabilities and shareholders' equity $ 32,255,661 $ 30,666,119
============ ============
|
Condensed Statements of Income Years ended December 31, 2002, 2001 and 2000
2002 2001 2000
------------ ------------ ------------
Operating income
Dividends from subsidiaries $ 2,610,204 $ 3,448,355 $ 2,511,286
Interest and dividend income from securities and fed funds 12,952 67,136 138,119
Other income 11,555 8,568 14,305
------------ ------------ ------------
Total operating income 2,634,711 3,524,059 2,663,710
Operating expenses 430,804 703,328 219,232
------------ ------------ ------------
Income before income taxes and equity in undistributed net income 2,203,907 2,820,731 2,444,478
Income tax expense (benefit) (185,811) (199,802) (20,000)
------------ ------------ ------------
Income before equity in undistributed earnings of subsidiaries 2,389,718 3,020,533 2,464,478
Equity in undistributed (distributions in excess of) earnings of subsidiaries 830,445 (264,946) 122,497
------------ ------------ ------------
Net income $ 3,220,163 $ 2,755,587 $ 2,586,975
============ ============ ============
|
2002
ANNUAL
REPORT
NOTE 15 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Condensed Statements of Cash Flows
Years ended December 31, 2002, 2001 and 2000
2002 2001 2000
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,220,163 $ 2,755,587 $ 2,586,975
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and Amortization 648 698 26,480
Distributions in excess of earnings of
subsidiaries (Equity in undistributed earnings) (830,445) 264,946 (122,497)
Net realized gains on sales or calls of securities (6,767)
Net change in other assets and other liabilities (414,732) (183,333) 136,551
(Accretion)/amortization of securities, net (183) (298) 440
Amortization of intangibles 12,000 12,000 12,000
------------ ------------ ------------
Net cash from operating activities 1,980,684 2,849,600 2,639,949
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale
Proceeds from maturities and calls 1,500,000
Proceeds from sale of securities 310,971
Purchases of premises and equipment (174,000) (565,586)
Capital contributions to subsidiary (1,100,000)
------------ ------------ ------------
Net cash from investing activities (789,029) 1,326,000 (565,586)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to shareholders (1,647,670) (1,590,220) (1,545,547)
Cash paid in lieu of fractional shares (5,033) (5,188) (4,111)
Purchases of treasury stock (907,352) (581,211) (283,564)
Proceeds from stock issuance 52,242
------------ ------------ ------------
Net cash from financing activities (2,560,055) (2,176,619) (1,780,980)
------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,368,400) 1,998,981 293,383
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,288,585 1,289,604 996,221
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,920,185 $ 3,288,585 $ 1,289,604
============ ============ ============
Noncash transfer of Land and Building to
subsidiary bank $ 2,375,206
|
2002
ANNUAL
REPORT
NOTE 16 - EARNINGS PER SHARE
The factors used in the earnings per share computation follow:
2002 2001 2000
------------ ------------ ------------
BASIC
Net income $ 3,220,163 $ 2,755,587 $ 2,586,975
============ ============ ============
Weighted average common shares outstanding 3,247,559 3,300,096 3,366,113
============ ============ ============
Basic earnings per common share $ 0.99 $ 0.84 $ 0.77
============ ============ ============
DILUTED
Net income $ 3,220,163 $ 2,755,587 $ 2,586,975
============ ============ ============
Weighted average common shares outstanding for basic
earnings per common share 3,247,559 3,300,096 3,366,113
Add: Dilutive effects of assumed exercise of stock
options 9,657 4,564 1,262
------------ ------------ ------------
Average shares and dilutive potential common shares 3,257,216 3,304,660 3,367,375
============ ============ ============
Average shares and dilutive potential common shares $ 0.99 $ 0.84 $ 0.77
============ ============ ============
|
Stock options for 21,058, 21,058 and 22,869 shares of common stock were not considered in computing diluted earnings from common share for 2002, 2001 and 2000 because they were antidilutive.
NOTE 17-OTHER COMPREHENSIVE INCOME (LOSS)
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2001 2000
----------- ----------- -----------
Unrealized holding gains and (losses)
on securities available for sale $ 1,866,787 $ 1,882,083 $ 3,925,291
Reclassification adjustment for
(gains) and losses later recognized in income (320,485) (39,358) (26,674)
----------- ----------- -----------
Net unrealized gains and (losses) 1,546,302 1,842,725 3,898,617
Tax effect 525,743 626,585 1,323,498
----------- ----------- -----------
Other comprehensive income (loss) $ 1,020,559 $ 1,216,140 $ 2,575,119
=========== =========== ===========
|
2002
ANNUAL
REPORT
NOTE 18 - QUARTERLY FINANCIAL DATA (UNAUDITED)
NET INTEREST
INCOME AFTER FULLY DILUTED
INTEREST NET INTEREST PROVISION FOR BASIC EARNINGS EARNINGS PER
INCOME INCOME LOAN LOSS NET INCOME PER SHARE SHARE
------------ ------------ ------------- ------------ -------------- -------------
(In thousands except per share data)
2002
First Quarter $ 5,633 $ 3,169 $ 3,011 $ 680 $ 0.21 $ 0.21
Second Quarter 5,546 3,223 3,065 804 $ 0.24 $ 0.24
Third Quarter 5,382 3,092 2,935 736 $ 0.22 $ 0.22
Fourth Quarter 5,535 3,283 3,126 1,000 $ 0.32 $ 0.32
2001
First Quarter $ 6,204 $ 2,879 $ 2,684 $ 605 $ 0.18 $ 0.18
Second Quarter 6,321 3,124 2,929 737 $ 0.22 $ 0.22
Third Quarter 6,203 3,119 2,924 678 $ 0.21 $ 0.21
Fourth Quarter 5,868 3,125 2,930 736 $ 0.23 $ 0.23
|
The per share data has been adjusted to account for the 5% share dividends paid in 2001 and 2002.
2002
ANNUAL
REPORT
DECADE OF PROGRESS
(Unaudited)
(as originally reported) (1)
1992 1993 1994 1995
------------- ------------- ------------- -------------
Interest and dividend income $ 12,166,789 $ 11,656,336 $ 12,283,260 $ 14,351,522
Interest expense 5,948,713 5,259,839 5,439,213 6,575,486
------------- ------------- ------------- -------------
Net interest income 6,218,076 6,396,497 6,844,047 7,776,036
Provision for loan losses 302,000 270,500 281,000 465,000
------------- ------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,916,076 6,125,997 6,563,047 7,311,036
Noninterest income, including security
gains/(losses) 603,325 878,731 805,355 876,285
Noninterest expense 4,457,545 4,799,745 4,867,794 5,174,452
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 2,061,856 2,204,983 2,500,608 3,012,869
Income tax expense 490,352 477,205 545,523 768,577
------------- ------------- ------------- -------------
NET INCOME $ 1,571,504 $ 1,727,778 $ 1,955,085 $ 2,244,292
============= ============= ============= =============
Total assets $ 164,675,155 $ 171,682,025 $ 185,634,119 $ 191,199,526
Deposits 145,648,647 152,334,470 163,312,482 166,604,359
Shareholders' equity 14,078,527 15,375,942 16,518,060 18,451,873
Loans receivable, net 79,642,462 86,696,640 106,952,378 120,907,269
Term federal funds -- -- -- --
Allowance for loan losses 1,039,360 1,256,322 1,437,734 1,775,383
Net charge-offs 109,464 53,538 99,588 127,351
Full time employees (average equivalents) 83 80 82 83
Banking locations Seven Seven Eight Eight
Earnings per common share - Basic (2) $ 0.54 $ 0.61 $ 0.68 $ 0.78
Earnings per common share - Diluted (2) 0.54 0.61 0.68 0.78
Dividends per share (2) 0.17 0.18 0.20 0.28
Book value per share (2) 4.93 5.38 5.79 6.47
Market value range per share (2) 4.05 - 5.60 5.89 - 10.90 11.50 - 14.57 8.26 - 12.63
Cash dividends paid $ 483,000 $ 512,400 $ 564,472 $ 776,136
Return on average assets (ROA) 1.01% 1.04% 1.11% 1.18%
Return on average equity (ROE) 11.60% 11.73% 12.24% 12.85%
1996 1997 1998 1999
------------- ------------- ------------- -------------
Interest and dividend income $ 15,006,091 $ 16,205,162 $ 21,126,421 $ 21,638,690
Interest expense 6,747,357 7,346,629 9,657,844 9,844,827
------------- ------------- ------------- -------------
Net interest income 8,258,734 8,858,533 11,468,577 11,793,863
Provision for loan losses 455,400 444,000 797,957 726,806
------------- ------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,803,334 8,414,533 10,670,620 11,067,057
Noninterest income, including security
gains/(losses) 920,951 1,027,166 1,581,139 1,285,519
Noninterest expense 5,289,273 5,654,659 8,007,689 8,189,260
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 3,435,012 3,787,040 4,244,070 4,163,316
Income tax expense 851,023 940,472 1,089,091 1,003,062
------------- ------------- ------------- -------------
NET INCOME $ 2,583,989 $ 2,846,568 $ 3,154,979 $ 3,160,254
============= ============= ============= =============
Total assets $ 202,364,858 $ 211,742,313 $ 285,492,897 $ 298,764,079
Deposits 171,512,241 175,791,296 229,110,372 235,539,865
Shareholders' equity 20,016,011 21,924,638 27,320,749 25,297,973
Loans receivable, net 130,637,621 137,308,856 161,187,833 177,406,092
Term federal funds -- -- -- --
Allowance for loan losses 2,022,987 2,238,522 3,033,105 3,109,821
Net charge-offs 207,796 228,465 803,374 650,090
Full time employees (average equivalents) 84 86 112 135
Banking locations Eight Nine Thirteen Seventeen
Earnings per common share - Basic (2) $ 0.90 $ 0.99 $ 0.92 $ 0.92
Earnings per common share - Diluted (2) 0.90 0.98 0.90 0.92
Dividends per share (2) 0.30 0.34 0.39 0.44
Book value per share (2) 7.01 7.69 8.02 7.43
Market value range per share (2) 9.49 - 15.50 12.10 - 21.46 14.70 - 23.31 11.01 - 21.39
Cash dividends paid $ 876,153 $ 988,820 $ 1,254,340 $ 1,477,686
Return on average assets (ROA) 1.32% 1.38% 1.17% 1.09%
Return on average equity (ROE) 13.49% 13.56% 11.80% 11.94%
2000 2001 2002
------------- ------------- -------------
Interest and dividend income $ 23,734,085 $ 24,595,769 $ 22,095,682
Interest expense 12,336,669 12,348,548 9,328,867
------------- ------------- -------------
Net interest income 11,397,416 12,247,221 12,766,815
Provision for loan losses 587,000 780,000 630,000
------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,810,416 11,467,221 12,136,815
Noninterest income, including security
gains/(losses) 1,368,986 1,606,046 2,059,173
Noninterest expense 8,711,655 9,382,984 9,989,172
------------- ------------- -------------
INCOME BEFORE INCOME TAXES 3,467,747 3,690,283 4,206,816
Income tax expense 880,772 934,696 986,653
------------- ------------- -------------
NET INCOME $ 2,586,975 $ 2,755,587 $ 3,220,163
============= ============= =============
Total assets $ 323,885,801 $ 341,317,195 $ 361,711,069
Deposits 267,552,875 283,375,923 300,201,533
Shareholders' equity 28,679,087 30,474,195 32,154,862
Loans receivable, net 193,707,099 180,460,538 184,916,798
Term federal funds -- -- --
Allowance for loan losses 2,790,133 2,879,065 2,971,116
Net charge-offs 906,688 691,068 537,949
Full time employees (average equivalents) 136 130 130
Banking locations Seventeen Seventeen Seventeen
Earnings per common share - Basic (2) $ 0.77 $ 0.84 $ 0.99
Earnings per common share - Diluted (2) 0.77 0.84 0.99
Dividends per share (2) 0.46 0.48 0.50
Book value per share (2) 8.55 9.29 10.03
Market value range per share (2) 6.91 - 12.96 8.89 - 13.33 12.45 - 14.35
Cash dividends paid $ 1,549,657 $ 1,590,220 $ 1,647,670
Return on average assets (ROA) 0.83% 0.82% 0.94%
Return on average equity (ROE) 9.88% 9.13% 10.34%
|
(1) Not restated for the July 7, 1998 Acquisition of Southern Ohio Community Bancorporation, Inc.
(2) All years restated for common share dividends.
2002
ANNUAL
REPORT
(LOGO)
UNITED BANCORP, INC.
Martins Ferry, OH
We Are United
To Better Serve You
www.unitedbancorp.com
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 15, 2003, relating to the consolidated balance sheets of United Bancorp, Inc. as of December 31, 2002 and 2001 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, 2002.
Crowe, Chizek and Company LLP
Columbus, Ohio
March 14, 2003
EXHIBIT 99.1
UNITED BANCORP, INC
EXHIBITS
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of United Bancorp, Inc. (the "Company") on Form 10-K for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James W. Everson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ James W. Everson James W. Everson Chairman, President and Chief Executive Officer March 15, 2003 |
EXHIBIT 99.2
UNITED BANCORP, INC
EXHIBITS
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of United Bancorp, Inc. (the "Company") on Form 10-K for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Randall M. Greenwood, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Randall M. Greenwood Randall M. Greenwood Senior Vice President and Chief Financial Officer March 15, 2003 |