Back to GetFilings.com
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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________________
Commission file number 0-19214
-----------
UNION NATIONAL FINANCIAL CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-2415179
------------ ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
101 East Main Street, P.O. Box 567
Mount Joy, Pennsylvania 17552
----------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(717) 653-1441
--------------
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.25 Par Value
-----------------------------
(Title of Class)
PAGE 1 OF 57 SEQUENTIALLY NUMBERED PAGES
EXHIBIT INDEX IS LOCATED ON SEQUENTIAL PAGE 21
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. [ ]
The aggregate market value of the shares of Common Stock of the
Registrant held by nonaffiliates of the Registrant was $53,525,983 as of March
17, 1997. As of March 17, 1997, the Registrant had 2,374,513 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Excerpts from Registrant's 1996 Annual Report to Stockholders (the
"1996 Annual Report") are incorporated by reference into Parts I, II and IV,
hereof. The Registrant's Proxy Statement for its 1997 Annual Meeting is
incorporated by reference in response to Parts III and IV, hereof.
UNION NATIONAL FINANCIAL CORPORATION
FORM 10-K
INDEX
PAGE #
PART I
Item 1 - Business............................................1
Item 2 - Properties.........................................10
Item 3 - Legal Proceedings..................................11
Item 4 - Submission of Matters to a
Vote of Security Holders...........................11
PART II
Item 5 - Market for Registrant's Common Equity and
Related Shareholder Matters........................12
Item 6 - Selected Financial Data............................12
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of
Operation..........................................12
Item 8 - Financial Statements and Supplementary Data........12
Item 9 - Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure.............13
PART III
Item 10 - Directors and Executive Officers of
the Registrant.....................................13
Item 11 - Executive Compensation.............................13
Item 12 - Security Ownership of Certain Beneficial
Owners and Management..............................13
Item 13 - Certain Relationships and
Related Transactions...............................13
PART IV
Item 14 - Exhibits, Financial Statements, Schedules
and Reports on Form 8-K............................14
Signatures ....................................................16
i
PART I
ITEM 1. BUSINESS.
Union National Financial Corporation (the "Registrant"), a Pennsylvania
business corporation, is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "BHC Act") and is supervised by the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
The Registrant was incorporated on June 26, 1986, under the Business Corporation
Law of the Commonwealth of Pennsylvania. The Registrant commenced operations on
January 2, 1987, upon consummation of the acquisition of all of the outstanding
shares of The Union National Mount Joy Bank (the "Bank"). The Registrant's
business consists primarily of managing and supervising the Bank, and its
principal source of income is dividends paid by the Bank. The Registrant has one
wholly-owned subsidiary, the Bank.
The Bank was organized in 1865 under a national charter. The Bank is a
national banking association and a member of the Federal Reserve System. The
deposits of the Bank are insured by the Federal Deposit Insurance Corporation
(the "FDIC") to the maximum extent permitted by law. The Bank, having one main
office with an annex and six branch locations within Lancaster County,
Pennsylvania, is a full service commercial bank, providing a wide range of
services to individuals and small to medium-sized businesses in its south
central Pennsylvania market area, including accepting time, demand, and savings
deposits and making secured and unsecured commercial, real estate and consumer
loans. The Bank also has a full-service trust department.
The Registrant's executive offices are located at 101 East Main Street,
P.O. Box 567, Mount Joy, Pennsylvania 17552 (telephone number: (717) 653-1441).
The Registrant operates in a heavily regulated environment. Changes in
laws and regulations affecting the Registrant and it's subsidiary, the Bank, may
have an impact on operations. See "Supervision and Regulation--The Registrant"
and "Supervision and Regulation--The Bank" and page 25 of the 1996 Annual
Report, which page is included at Exhibit 13 hereto, and incorporated herein by
reference.
The Registrant experiences substantial competition in attracting and
retaining deposits and in lending funds. Primary factors in competing for
deposits are the ability to offer attractive rates and the convenience of office
locations. Direct competition for deposits comes primarily from other commercial
banks and thrift institutions. Competition for deposits also comes from money
market mutual funds, corporate and government securities and credit unions. The
primary factors in the competition for loans are interest rates, loan
origination fees and the range of products and services offered. Competition for
origination of real estate loans normally comes from other commercial banks,
thrift institutions, mortgage bankers, mortgage brokers and insurance companies.
For additional information with respect to the Registrant's business
activities, see Part II, Item 7 hereof. Certain significant regulatory matters
are discussed below.
1
Supervision and Regulation - The Registrant
The Registrant is subject to the provisions of the BHC Act, and to
supervision by the Federal Reserve Board. The BHC Act requires that the
Registrant secure the prior approval of the Federal Reserve Board before it owns
or controls, directly or indirectly, more than 5 percent of the voting shares or
substantially all of the assets of any institution, including another bank. In
addition, the BHC Act has been amended by the Riegle-Neal Interstate Banking and
Branching Efficiency Act, which amended the BHC Act, permits bank holding
companies to acquire a bank located in any state subject to certain limitations
and restrictions as more fully described below.
A bank holding company is prohibited from engaging in or acquiring
direct or indirect control of more than 5 percent of the voting shares of any
company engaged in non-banking activities unless the Federal Reserve Board, by
order or regulation, has found such activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making this determination, the Federal Reserve Board considers whether the
performance of these activities by a bank holding company would offer benefits
to the public that outweigh possible adverse effects.
Federal law also prohibits acquisitions of control of a bank holding
company without prior notice to certain federal bank regulators. Control is
defined for this purpose as the power, directly or indirectly, to direct the
management or policies of the bank or bank holding company or to vote 25 percent
or more of any class of voting securities.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, on investments in the stock
or other securities of the bank holding company and on taking of such stock or
securities as collateral for loans to any borrower.
Permitted Activities
The Federal Reserve Board permits bank holding companies to engage in
certain activities so closely related to banking or managing or controlling
banks as to be a proper incident thereto. Other than making equity investments
in low to moderate income housing limited partnerships, the Registrant does not
at this time engage in any other permissible activities, nor does the Registrant
have any current plans to engage in any other permissible activities in the
foreseeable future.
Legislation and Regulatory Changes
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other financial
institutions are frequently made in Congress, and before various bank regulatory
agencies. Management cannot predict the likelihood of any major changes or the
impact such changes might have on the Registrant and its subsidiary bank.
Certain changes of potential significance to the Registrant which have been
2
enacted recently and others which are currently under consideration by Congress
or various regulatory or professional agencies are discussed below.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking and Branch Act") permitted interstate banking after
September 29, 1995. Bank holding companies, pursuant to an amendment to the BHC
Act, can acquire a bank located in any state, as long as the acquisition does
not result in the bank holding company controlling more than 10 percent of the
deposits in the United States, or 30 percent of the deposits in the target
bank's state. The legislation permits states to waive the concentration limits
and require that the target institution be in existence for up to five years
before it can be acquired by an out-of-state bank or bank holding company.
Interstate branching and merging of existing banks is permitted after three
years from the enactment of the Interstate Banking and Branching Act, if the
bank is adequately capitalized and demonstrates good management. Branch merging
will be permitted earlier if a state undertakes to enact a law which allows it
and states may also enact a law to permit banks to branch de novo. See also,
page 25 of Registrant's 1996 Annual Report, which page is included in Exhibit
13, hereto, and incorporated herein by reference. The Interstate Banking and
Branching Act also amends the International Banking Act to allow a foreign bank
to establish and operate a federal branch or agency upon approval of the
appropriate federal and state banking regulator. As a national bank, the Bank
currently can relocate its main office across state lines by utilizing a
provision in the National Bank Act which permits such relocation to a location
not more than thirty miles from its existing main office. In effect, a national
bank can thereby move across state lines as long as the relocation does not
exceed thirty miles, and also retain as branches the offices located in the
original state.
The Federal Reserve Board, the FDIC and the Comptroller of the Currency
(the "Comptroller") have issued certain risk-based capital guidelines, which
supplement existing capital requirements. The guidelines require all United
States banks and bank holding companies to maintain a minimum risk-based capital
ratio of 8 percent (of which at least 4 percent must be in the form of common
stockholders' equity). Assets are assigned to five risk categories, with higher
levels of capital required for the categories perceived as representing greater
risk. The required capital will represent equity and (to the extent permitted)
nonequity capital as a percentage of total risk-weighted assets. The risk-based
capital rules are designed to make regulatory capital requirements more
sensitive to differences in risk profiles among banks and bank holding companies
and to minimize disincentives for holding liquid assets. On the basis of an
analysis of the rules and the projected composition of the Registrant's
consolidated assets, management does not believe that the risk-based capital
rules have a material effect on the Registrant's business and capital plans. The
Bank has capital ratios exceeding the regulatory requirements. See also, pages
24 and 25 of Registrant's 1996 Annual Report for information concerning the
Registrant's actual ratios, which page is included at Exhibit 13, hereto, and
incorporated herein by reference.
The United States Supreme Court recently rendered a decision in favor
of nationwide insurance sales by banks. The decision also bars states from
blocking insurance sales by national banks in towns with populations of no more
than 5,000. Subsequent to the Supreme Court's ruling, the Office of the
Comptroller of the Currency has issued draft guidelines for national banks to
sell insurance. This federal guidance, however, will not necessarily ease state
restrictions which currently hinder bank insurance sales. States that have
traditionally been opposed to bank insurance sales could impose licensing
requirements and other restrictions hampering bank insurance activities.
3
Because the insurance industry is opposed to banks selling and underwriting
insurance, it is difficult to determine to what extent banks will be allowed to
engage in insurance activities and the regulatory costs that will be attached to
such activities.
Pending Legislation
Management cannot anticipate what changes Congress may enact or, if
enacted, their impact on the Registrant's financial position and reported
results of operation. As a consequence of the extensive regulation of commercial
banking activities in the United States, the Registrant's and the Bank's
business is particularly susceptible to being affected by federal and state
legislation and regulations that may increase the costs of doing business. See
also, page 25 of Registrant's 1996 Annual Report, which page is included at
Exhibit 13, hereto, and incorporated herein by reference.
Effects of Inflation
Inflation has some impact on the Registrant's and the Bank's operating
costs. Unlike many industrial companies, however, substantially all of the
Bank's assets and liabilities are monetary in nature. As a result, interest
rates have a more significant impact on the Registrant's and the Bank's
performance than the general level of inflation. Over short periods of time,
interest rates may not necessarily move in the same direction or in the same
magnitude as prices of goods and services.
Monetary Policy
The earnings of the Registrant and the Bank are affected by domestic
economic conditions and the monetary and fiscal policies of the United States
Government and its agencies. An important function of the Federal Reserve System
is to regulate the money supply and interest rates. Among the instruments used
to implement those objectives are open market operations in United States
government securities and changes in reserve requirements against member bank
deposits. These instruments are used in varying combinations to influence
overall growth and distribution of bank loans, investments and deposits, and
their use may also affect rates charged on loans or paid for deposits.
The Bank is a member of the Federal Reserve System and, therefore, the
policies and regulations of the Federal Reserve Board have a significant effect
on its deposits, loans and investment growth, as well as the rate of interest
earned and paid, and are expected to affect the Bank's operations in the future.
The effect of such policies and regulations upon the future business and
earnings of the Registrant and the Bank cannot be predicted.
Federal Taxation. The Registrant and the Bank are subject to those
rules of federal income taxation generally applicable to corporations and report
their respective income and expenses on the accrual method of accounting. The
Registrant and its subsidiaries file a consolidated federal income tax return on
a calendar year basis. Intercompany distributions (including dividends) and
certain other items of income and loss derived from intercompany transactions
are eliminated upon consolidation of all the consolidated group members'
respective taxable income and losses.
4
The Internal Revenue Code (the "IRC") imposes a corporate alternative
minimum tax (AMT). The corporate AMT only applies if such tax exceeds a
corporation's regular tax liability. In general, the AMT is calculated by
multiplying the corporate AMT rate of 20% by an amount equal to the excess of
(i) the sum of (a) regular taxable income plus (b) certain adjustments and tax
preference items ("alternative minimum taxable income" or "AMTI") over (ii) an
exemption amount ($40,000 for a corporation, that such amount is reduced by 25%
of the excess of AMTI over $150,000 and is completely eliminated when AMTI
equals $310,000). There are certain applicable adjustment and preference items
(E.G., the adjustment for depreciation) for determining AMTI. If a banking
institution is subject to AMT, then all or a portion of the amount of a
preference will effectively be subject to a 20% surtax.
State Tax. The Registrant is subject to the Pennsylvania Corporate Net
Income Tax and Capital Stock Tax. The Corporate Net Income Tax rate for 1996 and
thereafter is 9.99% and is imposed upon a corporate taxpayer's unconsolidated
taxable income for federal tax purposes with certain adjustments. In general,
the Capital Stock Tax is a property tax imposed on a corporate taxpayer's
capital stock value apportionable to the Commonwealth of Pennsylvania, which is
determined in accordance with a fixed formula based upon average book income and
net worth. In the case of a holding company, an optional elective method permits
the corporate taxpayer to be taxed on only 10% of such capital stock value. The
Capital Stock Tax rate is presently 1.275%.
Environmental Laws. Neither the Registrant nor the Bank anticipate that
compliance with environmental laws and regulations will have any material effect
on capital, expenditures, earnings, or on its competitive position. However,
environmentally related hazards have become a source of high risk and
potentially unlimited liability for financial institutions. Environmentally
contaminated properties owned by an institution's borrowers may result in a
drastic reduction in the value of the collateral securing the institution's
loans to such borrowers, high environmental clean up costs to the borrower
affecting its ability to repay the loans, the subordination of any lien in favor
of the institution to a state or federal lien securing clean up costs, and
liability to the institution for clean up costs if it forecloses on the
contaminated property or becomes involved in the management of the borrower. To
minimize this risk, the Bank may require an environmental examination of and
report with respect to the property of any borrower or prospective borrower if
circumstances affecting the property indicate a potential for contamination,
taking into consideration a potential loss to the institution in relation to the
borrower. Such examination must be performed by an engineering firm experienced
in environmental risk studies and acceptable to the institution, and the cost of
such examinations and reports are the responsibility of the borrower. These
costs may be substantial and may deter prospective borrower from entering into a
loan transaction with the Bank. The Registrant is not aware of any borrower who
is currently subject to any environmental investigation or clean up proceeding
that is likely to have a material adverse effect on the financial condition or
results of operations of the Bank.
In 1995, the Pennsylvania General Assembly enacted the Economic
Development Agency, Fiduciary and Lender Environmental Liability Protection Act
which, among other things, provides protection to lenders from environmental
liability and remediation costs under the environmental laws for releases and
contamination caused by others. A lender who engages in activities involved in
5
the routine practices of commercial lending, including, but not limited to, the
providing of financial services, holding of security interests, workout
practices, foreclosure or the recovery of funds from the sale of property shall
not be liable under the environmental acts or common law equivalents to the
Pennsylvania Department of Environmental Resources or to any other person by
virtue of the fact that the lender engages in such commercial lending practice.
A lender, however, will be liable if it, its employees or agents, directly cause
an immediate release or directly exacerbate a release of regulated substances on
or from the property, or knowingly and willfully compelled the borrower to
commit an action which caused such release or violate an environmental act. The
Economic Development Agency, Fiduciary and Lender Environmental Liability
Protection Act, however, does not limit federal liability which still exists
under certain circumstances.
As discussed above, there are several federal and state statutes that
regulate the obligations and liabilities of financial institutions pertaining to
environmental issues. In addition to the potential for attachment of liability
resulting from its own actions, a bank may be held liable under certain
circumstances for the actions of its borrowers, or third parties, when such
actions result in environmental problems on properties that collateralize loans
held by the Bank. Further, the liability has the potential to far exceed the
original amount of the loan issued by the Bank. Currently, neither the
Registrant nor the Bank is a party to any pending legal proceeding pursuant to
any environmental statute, nor is the Registrant or the Bank aware of any
circumstances that may give rise to liability under any such statute.
Supervision and Regulation - Bank
The operations of the Bank are subject to federal and state statutes
applicable to banks chartered under the banking laws of the United States, to
members of the Federal Reserve System and to banks whose deposits are insured by
the FDIC. Bank operations are also subject to regulations of the Comptroller,
the Federal Reserve Board and the FDIC.
The primary supervisory authority of the Bank is the Comptroller, which
regulates and examines the Bank. The Comptroller has the authority under the
Financial Institutions Supervisory Act to prevent a national bank from engaging
in an unsafe or unsound practice in conducting its business.
Federal and state banking laws and regulations govern, among other
things, the scope of a bank's business, the investments a bank may make, the
reserves against deposits a bank must maintain, loans a bank makes and
collateral it takes, the maximum interest rates a bank may pay on deposits, the
activities of a bank with respect to mergers and consolidations and the
establishment of branches.
As a subsidiary of a bank holding company, the Bank is subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of
credit to the parent bank holding company or its subsidiaries, on investments in
the stock or other securities of the bank holding company or its subsidiaries
and on taking such stock or securities as collateral for loans. The Federal
Reserve Act and Federal Reserve Board regulations also place certain limitations
and reporting requirements on extensions of credit by a bank to principal
shareholders of its parent holding company, among others, and to related
6
interests of such principal shareholders. In addition, such legislation and
regulations may affect the terms upon which any person becoming a principal
shareholder of a holding company may obtain credit from banks with which the
subsidiary bank maintains a correspondent relationship.
FDIA
Under the Federal Deposit Insurance Act, the Comptroller possesses the
power to prohibit institutions regulated by it (such as the Bank) from engaging
in any activity that would be an unsafe or unsound banking practice or would
otherwise be in violation of the law.
CRA
In 1995, federal regulators revised the CRA rules to emphasize
performance over process and documentation. Under the revised rules, a
five-point rating scale is used; A bank's compliance is determined by a
three-prong test whereby examiners assign a numerical score for a bank's
performance in each of three areas: lending, service and investment. The area of
lending is weighted to increase its importance in the application of the test.
When rating a bank in the area of lending, regulators examine the number and
amount of loan originations, the location of where the loans were made, and the
income levels of the borrowers. Although banks, under the revised rules, are not
required to make loans in every area, if there are apparent tracts in which
there is little lending, examiners will focus their investigations in that area.
The service prong evaluates how a bank delivers its products to the community
through branching. As with lending, banks are not required to branch in every
area, although conspicuous gaps will be investigated. The third prong,
investment in community, examines how the bank meets the investment needs in the
community within which it operates. Assessment of investment is accomplished
using a "performance context" pursuant to which regulators meet with civic,
community and bank officials in order to determine the credit needs of the
community.
HMDA
Expanded Home Mortgage Disclosure Act reporting requirements were also
approved for large banks and thrifts which require reporting of census tract
data on mortgages made outside of the delineated communities. In addition,
effective March 1, 1997, institutions with assets above $250 million are
required to report their aggregate small business loans made by geographic
region. Independent banks with total assets of less than $250 million and bank
subsidiaries with total assets of less than $250 million that have holding
companies with total assets of less than $1 billion are subjected to less
stringent CRA examinations.
Under the new regulation, banks enjoy a reduction in compliance burden.
Banks are not required to keep extensive documentation to prove that directors
have participated in drafting and review of CRA policies. A formal CRA statement
need not be prepared. The efforts banks make to market in low- and
moderate-income communities do not have to be documented, nor will banks have to
justify the basis for their community delineation or the methods used to
determine the credit needs of the community.
7
BSA
Under the Bank Secrecy Act ("BSA"), banks and other financial
institutions are required to report to the Internal Revenue Service currency
transactions of more than $10,000 or multiple transactions of which the Bank is
aware in any one day that aggregate in excess of $10,000. Civil and criminal
penalties are provided under the BSA for failure to file a required report, for
failure to supply information required by the BSA or for filing a false or
fraudulent report.
FDICIA
Capital Categories
Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") institutions must be classified in one of five defined categories as
illustrated below (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized).
Total Tier 1 Under a
Risk- Risk- Tier 1 Capital
Based Based Leverage Order or
Ratio Ratio Ratio Directive
----- ----- ----- ---------
CAPITAL CATEGORY
Well capitalized greater than/=10.0 greater than/= 6.0 greater than/= 5.0 No
Adequately capitalized greater than/= 8.0 greater than/= 4.0 greater than/= 4.0*
Undercapitalized less than 8.0 less than 4.0 less than 4.0*
Significantly undercapitalized less than 6.0 l ess than 3.0 less than 3.0
Critically undercapitalized less than/= 2.0
*3.0 for those banks having the highest available regulatory rating.
Prompt Corrective Action
In the event an institution's capital deteriorates to the
undercapitalized category or below, FDICIA prescribes an increasing amount of
regulatory intervention, including: (1) the institution by a bank of a capital
restoration plan and a guarantee of the plan by a parent institution; and (2)
the placement of a hold on increases in assets, number of branches or lines of
business. If capital has reached the significantly or critically
undercapitalized levels, further material restrictions can be imposed, including
restrictions on interest payable on accounts, dismissal of management and (in
critically undercapitalized situations) appointment of a receiver. For well
capitalized institutions, FDICIA provides authority for regulatory intervention
where the institution is deemed to be engaging in unsafe or unsound practices or
receives a less than satisfactory examination report rating for asset quality,
management, earnings or liquidity. All but well capitalized institutions are
prohibited from accepting brokered deposits without prior regulatory approval.
8
Operational Controls
Under FDICIA, financial institutions are subject to increased
regulatory scrutiny and must comply with certain operational, managerial and
compensation standards to be developed by Federal Reserve Board regulations.
FDICIA also requires the regulators to issue new rules establishing certain
minimum standards to which an institution must adhere including standards
requiring a minimum ratio of classified assets to capital, minimum earnings
necessary to absorb losses and minimum ratio of market value to book value for
publicly held institutions. Additional regulations are required to be developed
relating to internal controls, loan documentation, credit underwriting, interest
rate exposure, asset growth and excessive compensation, fees and benefits.
Truth-In-Savings
A separate subtitle within FDICIA, called the "Bank Enterprise Act of
1991", requires "truth- in-savings" on consumer deposit accounts so that
consumers can make meaningful comparisons between the competing claims of banks
with regard to deposit accounts and products. Under this provision, the Bank is
required to provide information to depositors concerning the terms of their
deposit accounts, and in particular, to disclose the annual percentage yield.
There are some operational costs of complying with the Truth-In-Savings law.
Management believes that full implementation of FDICIA has had no
material impact on liquidity, capital resources or reported results of
operation. If FDIC insurance premiums assessments increase in the future,
Management believes such future increase may have a material impact on future
reported results of operations.
Other
From time to time, various types of federal and state legislation have
been proposed that could result in additional regulation of, and restrictions
on, the business of the Bank. It cannot be predicted whether any such
legislation will be adopted or, if adopted, how such legislation would affect
the business of the Bank. As a consequence of the extensive regulation of
commercial banking activities in the United States, the Bank's business is
particularly susceptible to being affected by federal legislation and
regulations that may increase the costs of doing business.
Statistical Data
The information required by this Item is incorporated by reference from
pages 14 through 25 of the Registrant's 1996 Annual Report.
Employees
As of March 17, 1997, the Bank had 96 full-time employees and 12
part-time employees. None of these employees is represented by a collective
bargaining agent, and the Registrant believes it enjoys good relations with its
personnel.
9
ITEM 2. PROPERTIES.
The Bank owns its main office, five branch offices, the administration
services center and certain parking facilities related to its banking offices,
all of which are free and clear of any lien. The Bank's main office is located
in the central business district of Mount Joy, Pennsylvania. Below is a table
containing the location and date of acquisition of the Bank's properties. In
addition, the Bank leases office space for one branch office located in Manheim,
Pennsylvania.
PROPERTIES OWNED BY THE BANK
Office and Address Description of Property Date Acquired
------------------ ----------------------- -------------
Main Office Main Bank Office 1911
101 East Main Street Cut limestone and brick.
Mount Joy, PA 17552 1995 addition is concrete
over steel construction.
Containing approximately
a total of 22,251 sq. ft.
of space.
Main Office Annex Wood frame construction September, 1992
115 East Main Street with aluminum siding.
Mount Joy, PA 17552 Containing approximately
1,632 sq. ft. of space.
Maytown Branch Office Branch Bank April, 1972
100 West High Street Brick veneer, shingled roof
Maytown, PA 17550 with wood trusses. Containing
approximately 4,960 sq. ft.
of space.
Salunga Branch Office Branch Bank June, 1979
190 Stony Battery Road Brick with wood shingle roof.
Salunga, PA 17538 Containing approximately
4,619 sq. ft. of space.
Elizabethtown Branch Office Branch Bank January, 1988
1275 South Market Street Brick veneer, shingled roof
Elizabethtown, PA 17022 with wood trusses.
Containing approximately
6,668 sq. ft. of space.
10
Motor Bank Branch Office Drive-up Bank Branch November, 1972
21 North Barbara Street Brick on frame.
Mount Joy, PA 17552 Containing approximately
445 sq. ft. of space.
Administration Services Center Brick on concrete block with December, 1984
Bank Administration Building wood and steel frame.
25 North Barbara Street Containing approximately
Mount Joy, PA 17552 9,398 sq. ft. of space.
Columbia Branch Office Branch Bank October, 1992
921 Lancaster Avenue One story brick building
Columbia, PA 17512 containing approximately
2,257 sq. ft. of space.
PROPERTY LEASED BY THE BANK
Office and Address Description of Property Date Leased
------------------ ----------------------- -----------
Manheim Branch Office Concrete block building January, 1995
701 Lancaster Road containing 4,266 sq. ft.
Manheim, PA 17545 of space of which approximately
2,600 sq. ft. of space is
currently used for banking
purposes.
In management's opinion, the above properties are in good condition and
are adequate for the Bank's purposes.
ITEM 3. LEGAL PROCEEDINGS.
Management, after consulting with the Registrant's legal counsel, is
not aware of any litigation that would have a material adverse effect on the
consolidated financial position of the Registrant. There are no proceedings
pending other than ordinary routine litigation incident to the business of the
Registrant and its subsidiary, the Bank. In addition, no material proceedings
are known to be contemplated by governmental authorities against the Registrant
or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Market and dividend information required by this Item is incorporated
by reference herein, from the inside front cover of the Registrant's 1996 Annual
Report. The Registrant's common stock is traded on a very limited basis in the
local over-the-counter market. Bid and asked information is not regularly
quoted. Information concerning actual trades is included on the inside front
cover of the Registrant's 1996 Annual Report. This information represents a
limited amount of share transfer activity.
The Registrant and, prior to the Registrant's organization as a bank
holding company, the Bank paid regular cash dividends on their common stock for
more than thirty-five years. The Registrant expects to pay future dividends,
however, payment of such dividends will depend upon earnings of the Registrant
and of the Bank, their financial condition, capital requirements and other
factors, such as regulatory and legal requirements. It is anticipated that
substantially all of the funds available for the payment of dividends by the
Registrant will be derived from dividends paid to it by the Bank.
Additional information required by this Item regarding dividend
restrictions is incorporated by reference herein, from page 11 of the
Registrant's 1996 Annual Report, which page is included in Exhibit 13, attached
hereto.
As of March 17, 1997, there were approximately 786 holders of record of
the Registrant's common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is incorporated by reference
herein, from page 15 of the Registrant's 1996 Annual Report, which page is
included in Exhibit 13, attached hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
The information required by this Item is incorporated by reference
herein, from pages 16 through 25 of the Registrant's 1996 Annual Report, which
page is included in Exhibit 13, attached hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is incorporated by reference
herein, from pages 2 through 14 of the Registrant's 1996 Annual Report, which
page is included in Exhibit 13, attached hereto.
12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is incorporated by reference
herein, from pages 6 through 9 and pages 17 through 19 of the Registrant's Proxy
Statement for its 1997 Annual Meeting of Shareholders.
Section 16(a) Beneficial Ownership Compliance. Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Registrant's officers
and directors, and persons who own more than 10 percent of a registered class of
the Registrant's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than 10 percent shareholders are required by SEC
regulation to furnish the Registrant with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Registrant believes that during the period
January 1, 1996 through December 31, 1996, its officers and directors were in
compliance with all filing requirements applicable to them, with the exception
of Mr. Benjamin W. Piersol, Jr. who did not timely file a Form 4 reporting one
transaction, during 1996.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference
herein, from pages 10 through 14 of the Registrant's Proxy Statement for its
1997 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this Item is incorporated by reference
herein, from pages 3 through 5 and pages 17 and 18 of the Registrant's Proxy
Statement for its 1997 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference
herein, from pages 16 and 17 of the Registrant's Proxy Statement for its 1997
Annual Meeting of Shareholders.
13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements.
The following financial statements are included by
reference in Part II, Item 8 hereof.
Independent Auditors' Report.
Consolidated Balance Sheets.
Consolidated Statement of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders'
Equity
Notes to Consolidated Financial Statements
2. The financial statement schedules required by this
Item are omitted because the information is either
inapplicable, not required or is in the consolidated
financial statements as a part of this Report.
3. The following Exhibits are filed herewith, or
incorporated by reference as a part of this Report:
3(i) Registrant's Amended Articles of
Incorporation. (Incorporated by
reference to Exhibit 3(i) to
Registrant's Current Report on Form
8-K, filed with the Commission on
March 25, 1997.)
3(ii) Registrant's Amended By-laws.
(Incorporated by reference to
Exhibit 3(ii) to Registrant's
Current Report on Form 8-K, filed
with the Commission on March 25,
1997.)
11 Statement re: Computation of
Earnings Per Share. (Included herein
at Exhibit 13, on the inside cover
page of Registrant's 1996 Annual
Report.)
13 Excerpts from Registrant's 1996
Annual Report to Shareholders.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
14
(b) No Current Report on Form 8-K was filed by the Registrant
during the fourth quarter of the 1996 fiscal year.
(c) The exhibits required to be filed by this Item are listed
under Item 14(a)3, above.
(d) NOT APPLICABLE.
15
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.
UNION NATIONAL FINANCIAL CORPORATION
------------------------------------
(Registrant)
By /s/ William E. Eby
-----------------------------------
William E. Eby, President
and Chief Executive Officer
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
DATE
----
By /s/ Donald H. Wolgemuth March 27, 1997
--------------------------------------------
Donald H. Wolgemuth
Chairman of the Board of Directors
and Director
By /s/ William E. Eby March 27, 1997
--------------------------------------------
William E. Eby
President, Chief Executive Officer and
Director (principal executive officer)
By /s/ Clement M. Hoober March 27, 1997
---------------------------------------------
Clement M. Hoober, CPA,
Chief Financial Officer (principal
financial officer and principal
accounting officer)
By /s/ Franklin R. Eichler March 27, 1997
--------------------------------------------
Franklin R. Eichler, Director
By /s/ E. Ralph Garber March 27, 1997
--------------------------------------------
E. Ralph Garber, Director
By /s/ Mark D. Gainer March 27, 1997
--------------------------------------------
Mark D. Gainer, Director and
Vice President
By /s/ Daniel C. Gohn March 27, 1997
--------------------------------------------
Daniel C. Gohn, Director
By /s/ Carl R. Hallgren March 27, 1997
--------------------------------------------
Carl R. Hallgren, Director
By /s/ David G. Heisey March 27, 1997
--------------------------------------------
David G. Heisey, Director
By /s/ William D. Linkous March 27, 1997
--------------------------------------------
William D. Linkous, Director
By /s/ Daniel H. Raffensperger March 27, 1997
--------------------------------------------
Daniel H. Raffensperger, Director
By /s/ Benjamin W. Piersol, Jr. March 27, 1997
--------------------------------------------
Benjamin W. Piersol, Jr., Director
EXHIBIT INDEX
Sequential Page
Number in Manually
Exhibit Number Signed Original
- -------------- ---------------
3(i) Registrant's Amended Articles of Incorporation. (Incorporated by
reference to Exhibit 3(i) to Registrant's Current Report on Form
8-K, filed with the Commission on March 25, 1997.)
3(ii) Registrant's Amended By-laws. (Incorporated by reference to Exhibit
3(ii) to Registrant's Current Report on Form 8-K, filed with the
Commission on March 25, 1997.)
11 Statement re: Computation of Earnings Per Share. (Included
herein at Exhibit 13 on inside cover page of Registrant's 1996
Annual Report.)
13 Excerpts from Registrant's 1996 Annual Report. 25
21 Subsidiaries of the Registrant. 51
23 Consent of Independent Auditors. 53
27 Financial Data Schedule. 55