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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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
COMMISSION FILE #0-16640
UNITED BANCORP, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2606280
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
205 E. CHICAGO BOULEVARD, TECUMSEH, MI 49286
(Address of principal executive offices, including Zip code)
Registrant's telephone number, including area code: (517) 423-8373
Securities registered pursuant to Section 12(b) of the Act: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no par value
(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 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 Rule 12b-2 of the Act). Yes.... No....
As of February 21, 2003, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $84,612,000 (common stock, no par value.)
As of February 21, 2003, there were outstanding 2,144,343 shares of registrant's
common stock, no par value.
Documents Incorporated By Reference:
Portions of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held April 15, 2003, including Management's Discussion and Analysis of
Condition and Results of Operations, Reports of Independent Auditors,
Consolidated Financial Statements and Notes to Consolidated Financial
Statements, are incorporated by reference into Parts I, II, III and IV.
Page 1
CROSS REFERENCE TABLE
Page
ITEM NO. DESCRIPTION Numbers
- -----------------------------------------------------------------------------------------------------------------------------
PART I
1. Business 3
I Selected Statistical Information 6
(A) Distribution of Assets, Liabilities and Shareholders' Equity 6
(B) Interest Rates and Interest Differential 6
II Investment Portfolio 6
III Loan Portfolio 7
(A) Types of Loans 7
(B) Maturities and Sensitivities of Loans to Changes in Interest Rates 7
(C) Risk Elements 8
(D) Other Interest Bearing Assets 8
IV Summary of Loan Loss Experience 8
(A) Changes in Allowance for Loan Losses 8
(B) Allocation of Allowance for Loan Losses 9
V Deposits 9
VI Return on Equity and Assets 9
VII Short-Term Borrowings 10
2. Properties 10
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
7A. Quantitative and Qualitative Disclosures About Market Risk 12
8. Financial Statements and Supplementary Data 12
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 12
PART III
10. Directors and Executive Officers of the Registrant 13
11. Executive Compensation 13
12. Security Ownership of Certain Beneficial Owners and Management 13
13. Certain Relationships and Related Transactions 13
PART IV
14. Controls and Procedures 13
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14
Signatures 15
Certifications of Principal Executive Officer and Principal Financial Officer 17
Exhibit Index 19
Page 2
PART I
ITEM 1 - BUSINESS
United Bancorp, Inc. (the "Company") was incorporated on May 31, 1985 as a
business corporation under the Michigan Business Corporation Act, pursuant to
the authorization and direction of the Directors of United Bank & Trust
("UBT").
The Company is a financial holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under the
Bank Holding Company Act. The Company has corporate power to engage in such
activities as permitted to business corporations under the Michigan Business
Corporation Act, subject to the limitations of the Bank Holding Company Act and
regulations of the Federal Reserve System. In general, the Bank Holding Company
Act and regulations restrict the Company with respect to its own activities and
activities of any subsidiaries to the business of banking or such other
activities which are closely related to the business of banking.
United Savings Bank (the "Bank") opened in 1933 as a result of a merging of
charters of Lilley State Bank and Tecumseh State Savings Bank. Since that time,
the Bank has grown from a single office in Tecumseh to sixteen offices located
in three counties in Southeast Michigan. The Bank changed its name to United
Bank & Trust on January 1, 1992, at the time it acquired Thompson Savings Bank
in Hudson, and UBT was acquired by the Company on January 1, 1986.
UBT delivers financial services through a system of sixteen banking offices
plus fifteen automated teller machines, all in Lenawee, Washtenaw, and Monroe
Counties, Michigan. The business base of the area is primarily agricultural and
light manufacturing, with its manufacturing sector exhibiting moderate
dependence on the automotive and refrigeration and air conditioning industries.
In November of 2000, the Company filed applications with its regulators for
permission to establish a second bank as a subsidiary of the Company. United
Bank & Trust - Washtenaw ("UBTW") opened for business on April 2, 2001, and is
headquartered in Ann Arbor. UBTW operates with its own local management and
board of directors, and targets the Washtenaw County market for its growth.
Banking services are delivered by UBTW through one banking office and one
off-site automated teller machine in Washtenaw County, Michigan. The employment
base of Washtenaw County is centered around health care, education and
automotive high technology. Economic stability is provided to a great extent by
the University of Michigan, which is a major employer and is not as
economically sensitive to the fluctuations of the automotive industry. The
services and public sectors account for a substantial percentage of total
industry employment, in a large part due to the University of Michigan and the
U of M Medical Center.
The Company's subsidiary banks (the "Banks") offer a full range of services to
individuals, corporations, fiduciaries and other institutions. Banking services
include checking, NOW accounts, savings, time deposit accounts, money market
deposit accounts, safe deposit facilities and money transfers. Lending
operations provide real estate loans, secured and unsecured business and
personal loans, consumer installment loans, credit card and check-credit loans,
home equity loans, accounts receivable and inventory financing, equipment lease
financing and construction financing.
The Banks maintain correspondent bank relationships with a small number of
larger banks, which involve check clearing operations, securities safekeeping,
transfer of funds, loan participation, and the purchase and sale of federal
funds and other similar services. UBTW also maintains a correspondent banking
relationship with UBT.
Page 3
The Company's Banks offer the sale of nondeposit investment products through
licensed representatives in their banking offices, and sell credit and life
insurance products. In addition, the Company and/or the Banks are co-owners of
Michigan Banker's Title Insurance Company of Mid-Michigan LLC and Michigan
Bankers Insurance Center, LLC, and derive income from the sale of various
insurance products to banking clients.
The following table shows comparative information concerning the Banks as of
December 31, 2002, in thousands of dollars:
Assets Loans Deposits
--------- --------- ---------
United Bank & Trust $ 530,949 $ 375,880 $ 437,933
United Bank & Trust - Washtenaw 60,304 54,646 37,592
UBT operates a trust department, and provides trust services to UBTW on a
contract basis. The Trust & Investment Group offers a wide variety of fiduciary
services to individuals, corporations and governmental entities, including
services as trustee for personal, corporate, pension, profit sharing and other
employee benefit trusts. The department provides securities custody services as
an agent, acts as the personal representative for estates and as a fiscal,
paying and escrow agent for corporate customers and governmental entities, and
provides trust services for clients of the Banks.
Supervision and Regulation
As a bank holding company within the meaning of the Bank Holding Company Act,
the Company is required by said Act to file quarterly and annual reports of its
operations and such additional information as the Federal Reserve Board may
require and is subject, along with its subsidiaries, to examination by the
Federal Reserve Board. The Federal Reserve is the primary regulator of the
Company.
The Bank Holding Company Act requires every bank holding company to obtain
prior approval of the Federal Reserve Board before it may merge with or
consolidate into another bank holding company, acquire substantially all the
assets of any bank, or acquire ownership or control of any voting shares of any
bank if after such acquisition it would own or control, directly or indirectly,
more than 5% of the voting shares of such bank holding company or bank. The
Federal Reserve Board may not approve the acquisition by the Company of voting
shares or substantially all the assets of any bank located in any state other
than Michigan unless the laws of such other state specifically authorize such
an acquisition. The Bank Holding Company Act also prohibits a bank holding
company, with certain exceptions, from acquiring direct or indirect ownership
or control of more than 5% of the voting shares of any company which is not a
bank and from engaging in any business other than that of banking, managing and
controlling banks or furnishing services to banks and their subsidiaries.
However, holding companies may engage in, and may own shares of companies
engaged in, certain businesses found by the Federal Reserve Board to be so
closely related to banking or the management or control of banks as to be a
proper incident thereto.
Under current regulations of the Board of Governors, a holding company and its
nonbank subsidiaries are permitted, among other activities, to engage, subject
to certain specified limitations, in such banking related business ventures as
sales and consumer finance, equipment leasing, computer service bureau and
software operations, data processing and services transmission, discount
securities brokerage, insurance, mortgage banking and brokerage, sale and
leaseback and other forms of real estate banking. The Bank Holding Company Act
does not place territorial restrictions on the activities of nonbank
subsidiaries of bank holding
Page 4
companies. In addition, federal legislation prohibits acquisition of "control"
of a bank or bank holding company without prior notice to certain federal bank
regulators. "Control" in certain cases may include the acquisition of as little
as 10% of the outstanding shares of capital stock.
In March of 2000, the Gramm-Leach-Bliley Act of 1999 (the "GLB Act") was
enacted. Under the act, new opportunities became available for banks and other
depository institutions, insurance companies and securities firms to enter into
combinations that permit a single financial services 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," with the Federal Reserve Board as the umbrella regulator.
Functional regulation of the separately regulated subsidiaries of a financial
holding company will be conducted by their primary functional regulator.
In order to qualify as a financial holding company, a bank holding company must
file an election to become a financial holding company and each of its banks
must be "well capitalized" and "well managed." In addition, the GLB Act
requires satisfactory or above Community Reinvestment Act compliance for
insured depository institutions and their financial holding companies 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 its Banks are also subject to certain state laws that deal with
the use and distribution of non-public personal information. The Company
believes that the GLB Act could significantly increase competition in its
business, and the Company elected to become a financial holding company during
2000.
Michigan's banking laws restrict the payment of cash dividends by a state bank
by providing, subject to certain exceptions, that dividends may be paid only
out of net profits then on hand after deducting therefrom its losses and bad
debts and no dividends may be paid unless the bank will have a surplus
amounting to not less than twenty percent (20%) of its capital after the
payment of the dividend.
UBT and UBTW are Michigan banking corporations, and as such are subject to the
regulation of, and supervision and regular examination by, the Michigan
Division of Financial Institutions ("DFI") and also the Federal Deposit
Insurance Corporation ("FDIC"). The DFI is the primary regulator of the Banks.
Deposit accounts of the Banks are insured by the FDIC. Requirements and
restrictions under the laws of the United States and the State of Michigan
include the requirement that banks maintain reserves against certain deposits,
restrictions on the nature and amount of loans which may be made by a bank and
the interest that may be charged thereon, restrictions on the payment of
interest on certain deposits and restrictions relating to investments and other
activities of a bank.
The Federal Reserve Board has established guidelines for risk-based capital by
bank holding companies. These guidelines establish a risk adjusted ratio
relating capital to risk-weighted assets and off-balance-sheet exposures. These
capital guidelines primarily define the components of capital, categorize
assets into different risk classes, and include certain off-balance-sheet items
in the calculation of capital requirements. Tier I capital consists of
shareholders' equity less intangible assets and unrealized gain or loss on
securities available for sale, and Tier 2 capital consists of Tier 1 capital
plus qualifying loan loss reserves.
The capital ratios of the Company and Banks exceed the regulatory guidelines
for well capitalized institutions, and in conjunction with regulatory ratings,
have qualified the Bank for the lowest FDIC insurance rate available to insured
financial institutions. Information in Note 18 on Page A-35 of the Company's
Proxy provides additional information regarding the Company's capital ratios,
and is incorporated herein by reference.
Information regarding accounting standards adopted by the Company are discussed
beginning on Page A-24 of the Company's Proxy, and is incorporated herein by
reference.
Page 5
Competition
The banking business in the Company's service area is highly competitive. In
its market, the Banks compete with credit unions, savings associations, and
various finance companies and loan production offices. This competition is in
addition to a number of community banks and subsidiaries of large multi-state,
multi-bank holding companies.
The Company believes that the market perceives a competitive benefit to an
independent, locally controlled commercial bank. Much of the Company's
competition comes from affiliates of organizations controlled from outside the
area. Against these competitors, the subsidiary banks continue to expand their
loan and deposit portfolios. Coupled with the fact that the Company offers the
only locally-based trust department in Lenawee County, this local focus has
provided a significant competitive advantage.
Employees
On December 31, 2002, the Company and its subsidiaries employed 183 full-time
and 52 part-time employees. This compares to 188 full time and 54 part time
employees as of December 31, 2001. The Company has no full time employees. Its
operation and business are carried out by officers and employees of the Banks,
who are not compensated by the Company.
I SELECTED STATISTICAL INFORMATION
(A) DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
(B) INTEREST RATES AND INTEREST DIFFERENTIAL:
The information required by these sections are contained on Pages A-3, A-4 and
A-5 of the Company's 2003 Proxy Statement, and are incorporated herein by
reference.
II INVESTMENT PORTFOLIO
The following table reflects the carrying values and yields of the Company's
securities portfolio for 2002. Average yields are based on amortized costs and
the average yield on tax exempt securities of states and political subdivisions
is adjusted to a taxable equivalent basis, assuming a 34% marginal tax rate.
Carrying Values and Yields of Investments
-----------------------------------------
In thousands of dollars where applicable 0 - 1 1 - 5 5 - 10 Over 10
Available For Sale Year Years Years Years Total
------------------ --------- --------- -------- ---------- ---------
U.S. Treasury and government agencies (1) $ 13,231 $ 28,074 $ 2,108 $ - $ 43,413
Weighted average yield 3.09% 4.50% 5.35% - 4.11%
Obligations of states and political subdivisions $ 12,888 $ 11,479 $ 6,419 $ 7,257 $ 38,043
Weighted average yield 4.58% 5.61% 7.61% 7.61% 5.97%
Equity and other securities (2) $ 9,245 $ 6,679 $ - $ - $ 15,924
Weighted average yield 5.17% 4.97% - - 5.09%
Total securities $ 35,364 $ 46,232 $ 8,527 $ 7,257 $ 97,380
Weighted average yield 4.18% 4.84% 7.04% 7.61% 4.99%
(1) Reflects the scheduled amortization and an estimate of future
prepayments based on past and current experience of amortizing U.S.
agency securities.
(2) Reflects the scheduled amortization and an estimate of future
prepayments based on past and current experience of the issuer for
various collateralized mortgage obligations.
Page 6
As of December 31, 2002, the Company's securities portfolio contains no
concentrations by issuer greater than 10% of shareholders' equity. Additional
information concerning the Company's securities portfolio is included on Page
A-7, and in Note 3 on Page A-27 of the Company's 2003 Proxy Statement, and is
incorporated herein by reference.
III LOAN PORTFOLIO
(A) TYPES OF LOANS
The tables below show loans outstanding (net of unearned interest) at December
31, and the percentage makeup of the portfolios. All loans are domestic and
contain no concentrations by industry or customer. Balances are stated in
thousands of dollars.
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
Personal $ 71,010 $ 62,792 $ 59,172 $ 59,045 $ 58,797
Business and commercial mortgage 212,611 163,329 115,155 99,832 82,521
Tax exempt 1,417 1,878 2,030 1,710 1,381
Residential mortgage (1) 110,985 117,553 127,768 114,150 104,903
Construction 34,503 33,172 34,382 33,530 22,647
--------- --------- --------- --------- ---------
Total loans (1) $ 430,526 $ 378,724 $ 338,507 $ 308,267 $ 270,249
========= ========= ========= ========= =========
Personal 16.5% 16.6% 17.5% 19.2% 21.8%
Business and commercial mortgage 49.4% 43.1% 34.0% 32.4% 30.5%
Tax exempt 0.3% 0.5% 0.6% 0.6% 0.5%
Residential mortgage (1) 25.8% 31.0% 37.7% 37.0% 38.8%
Construction 8.0% 8.8% 10.2% 10.9% 8.4%
--------- --------- --------- --------- ---------
Total loans (1) 100.0% 100.0% 100.0% 100.0% 100.0%
========= ========= ========= ========= =========
(1) Includes loans held for sale
(B) MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
The following table presents the maturity of total loans outstanding, other
than residential mortgages and personal loans, as of December 31, 2002,
according to scheduled repayments of principal. All figures are stated in
thousands of dollars.
0 - 1 1 - 5 After 5
Year Years Years Total
--------- --------- --------- ---------
Business and commercial mortgage - fixed rate $ 13,664 $ 60,334 $ 21,121 $ 95,119
Business and commercial mortgage - variable rate 33,543 50,459 33,490 117,492
Tax exempt - fixed rate 34 868 515 1,417
Tax exempt - variable rate - - - -
Construction -fixed rate 6,619 1,357 984 8,960
Construction -variable rate 24,639 904 - 25,543
--------- --------- --------- ---------
Total fixed rate 20,317 62,559 22,620 105,496
Total variable rate 58,182 51,363 33,490 143,035
--------- --------- --------- ---------
Total $ 78,499 $ 113,922 $ 56,110 $ 248,531
========= ========= ========= =========
Page 7
(C) RISK ELEMENTS
Non-Accrual, Past Due and Restructured Loans
The following shows the effect on interest revenue of nonaccrual and troubled
debt restructured loans as of December 31, 2002, in thousands of dollars:
Gross amount of interest that would have been recorded at original rate $ 149
Interest that was included in revenue -
-----
Net impact on interest revenue $ 149
=====
Additional information concerning nonperforming loans, the Company's nonaccrual
policy, and loan concentrations is provided on Pages A-8, A-9 and A-10, in Note
1 on Pages A-24 and A-25 and Notes 5 and 6 on Pages A-28 and A-29 of the
Company's Proxy Statement, and is incorporated herein by reference.
At December 31, 2002, the Banks had two loans, other than those disclosed
above, for a total of $313,000 which would cause management to have serious
doubts as to the ability of the borrowers to comply with the present loan
repayment terms. These loans were included on the Banks' "watch lists" and were
classified as impaired; however, payments are current.
(D) OTHER INTEREST BEARING ASSETS
As of December 31, 2002, other than $467,000 in other real estate, there were
no other interest bearing assets that would be required to be disclosed under
Item III, Parts (C)(1) or (C)(2) of the Loan Portfolio listing if such assets
were loans.
IV SUMMARY OF LOAN LOSS EXPERIENCE
(A) CHANGES IN ALLOWANCE FOR LOAN LOSSES
The table below summarizes changes in the allowance for loan losses for the
years 1998 through 2002, in thousands of dollars.
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
Balance at beginning of period $ 4,571 $ 4,032 $ 3,300 $ 2,799 $ 2,467
Charge-offs:
Business and commercial mortgage 338 73 171 166 9
Residential mortgage - 50 - 10 -
Personal 484 238 314 792 1,097
-------- -------- -------- -------- --------
Total charge-offs 822 361 485 968 1,106
-------- -------- -------- -------- --------
Recoveries:
Business and commercial mortgage 16 40 4 24 29
Residential mortgage - - - - -
Personal 105 138 184 185 161
-------- -------- -------- -------- --------
Total recoveries 121 178 188 209 190
-------- -------- -------- -------- --------
Net charge-offs 701 183 297 759 916
-------- -------- -------- -------- --------
Additions charged to operations 1,105 722 1,129 1,260 1,248
Adjustment for credit cards sold - - (100) - -
-------- -------- -------- -------- --------
Balance at end of period $ 4,975 $ 4,571 $ 4,032 $ 3,300 $ 2,799
======== ======== ======== ======== ========
Ratio of net charge-offs to average loans 0.17% 0.05% 0.09% 0.27% 0.35%
Allowance as percent of total loans 1.16% 1.21% 1.19% 1.07% 1.04%
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb losses inherent in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an
Page 8
evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, amount and composition of the loan portfolio, and other
factors. The provision charged to earnings was $1,105,000 in 2002, compared to
$722,000 in 2001 and $1,129,000 in 2000. The allowance is based on the analysis
of the loan portfolio and a four year historical average of net charge offs to
average loans of 0.15% of the portfolio.
(B) ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The following table presents the portion of the allowance for loan losses
applicable to each loan category in thousands of dollars, as of December 31. A
table showing the percent of loans in each category to total loans is included
in Section III (A), above.
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
Business and commercial mortgage $ 3,950 $ 3,060 $ 2,580 $ 1,130 $ 864
Tax exempt - - - - -
Residential mortgage 15 20 7 22 36
Personal 571 496 638 646 762
Construction - - - - -
Unallocated 439 995 807 1,502 1,137
-------- -------- -------- -------- --------
Total $ 4,975 $ 4,571 $ 4,032 $ 3,300 $ 2,799
======== ======== ======== ======== ========
The allocation method used takes into account specific allocations for
identified credits and a four year historical loss average in determining the
allocation for the balance of the portfolio.
V DEPOSITS
The information concerning average balances of deposits and the
weighted-average rates paid thereon, is included on Page A-4 and maturities of
time deposits is provided in Note 9 on Page A-30 of the Company's Proxy
Statement, and is incorporated herein by reference. There were no foreign
deposits. As of December 31, 2002, outstanding time certificates of deposit in
amounts of $100,000 or more were scheduled to mature as shown below. All
amounts are in thousands of dollars.
Time
Certificates
------------
Within three months $ 6,262
Over three through six months 5,612
Over six through twelve months 3,219
Over twelve months 13,346
------------
Total $ 28,439
============
VI RETURN ON EQUITY AND ASSETS
Various ratios required by this section and other ratios commonly used in
analyzing bank holding company financial statements are included on Page A-2
and A-3 of the Company's Proxy Statement, and are incorporated herein by
reference.
Page 9
VII SHORT-TERM BORROWINGS
The information required by this section is contained in Note 10 on Page A-30
of the Company's Proxy Statement, and is incorporated herein by reference. No
additional information is required as for all reporting periods, there were no
categories of short-term borrowings for which the average balance outstanding
during the period was 30% or more of shareholders' equity at the end of the
period.
ITEM 2 - PROPERTIES
The executive offices of the Company are located at the main office of United
Bank & Trust, 205 East Chicago Boulevard, Tecumseh, Michigan. UBT owns and
occupies the entire two-story building, which was built in 1980. UBT operates a
12,000 square foot operations and training center in Tecumseh, and also
operates three other banking offices in the Tecumseh area, two in the city of
Adrian, one each in the cities of Hudson and Morenci, one in the village of
Blissfield, and one each in Clinton, Rollin and Raisin Townships, all in
Lenawee County. In addition, the Bank operates one office each in the city of
Saline and the villages of Dexter and Manchester, Washtenaw County, Michigan,
and owns and operates one office in Dundee, Monroe County, Michigan. The bank
owns all of the buildings except for the Manchester office, and leases the land
for one office in the city of Adrian and for the Dexter office. All offices
except Manchester offer drive-up facilities.
United Bank & Trust - Washtenaw operates one banking office in an office park
in the City of Ann Arbor. UBTW holds a short-term lease on the facilities for
its office, and plans to move to new leased facilities in 2003.
ITEM 3 - LEGAL PROCEEDINGS
The Company and its subsidiaries are not involved in any material legal
proceedings. They are involved in ordinary routine litigation incident to its
business; however, no such proceedings are expected to result in any material
adverse effect on the operations or earnings of the Company. Neither the
Company nor it subsidiaries are involved in any proceedings to which any
director, principal officer, affiliate thereof, or person who owns of record or
beneficially more than five percent (5%) of the outstanding stock of the
Company, or any associate of the foregoing, is a party or has a material
interest adverse to the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2002.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
PRICE RANGE FOR COMMON STOCK
The following table shows the high and low selling prices of common stock of
the Company for each quarter of 2002 and 2001 as reported by Raymond James
Financial Services. These prices do not reflect private trades not involving
Raymond James Financial Services. The common stock of the Company is traded
over the counter, and there is no established public trading market for the
common stock. The Company had 1,184 shareholders as of December 31, 2002. The
prices and dividends per share have been adjusted to reflect the 2002 and 2001
stock dividends.
Page 10
2002 2001
-------------------------------- ---------------------------------
Market price Cash Market price Cash
-------------------- dividends --------------------- dividends
Quarter High Low declared High Low declared
------- -------------------------------- ---------------------------------
1st $ 51.00 $ 48.57 $ 0.287 $ 46.26 $ 45.35 $ 0.271
2nd 52.00 51.00 0.300 48.57 46.26 0.286
3rd 53.00 52.00 0.300 48.57 48.57 0.286
4th 54.00 53.00 0.450 48.57 48.57 0.400
All equity compensation plans have been approved by the Company's shareholders.
ITEM 6 - SELECTED FINANCIAL DATA
The following tables present five years of financial data for the Company, for
the years ended December 31. (In thousands, except per share data).
FINANCIAL CONDITION 2002 2001 2000 1999 1998
------------------- ---- ---- ---- ---- ----
ASSETS
Cash and demand balances in other banks $ 16,719 $ 15,980 $ 16,822 $ 17,469 $ 12,348
Federal funds sold 7,700 10,800 21,300 -- --
Securities available for sale 97,380 90,243 72,679 81,923 58,468
Securities held to maturity -- -- -- -- 36,919
Net loans 425,551 374,153 334,475 304,967 267,450
Other assets 26,549 27,526 23,585 23,162 18,510
-------- -------- -------- -------- --------
Total Assets $573,899 $518,702 $468,861 $427,521 $393,695
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits $ 71,976 $ 61,845 $ 52,555 $ 46,829 $ 42,468
Interest bearing certificates of deposit of
$100,000 or more 28,439 29,462 46,445 32,445 31,108
Other interest bearing deposits 371,135 359,991 308,957 281,569 263,691
-------- -------- -------- -------- --------
Total deposits 471,550 451,298 407,957 360,843 337,267
Short term borrowings 75 1,019 -- 19,300 3,874
Other borrowings 41,867 12,009 12,328 3,624 10,900
Other liabilities 7,027 6,199 3,522 2,790 2,890
-------- -------- -------- -------- --------
Total Liabilities 520,519 470,525 423,807 386,557 354,931
Shareholders' Equity 53,380 48,177 45,054 40,964 38,764
-------- -------- -------- -------- --------
Total Liabilities and Shareholders' Equity $573,899 $518,702 $468,861 $427,521 $393,695
======== ======== ======== ======== ========
Page 11
RESULTS OF OPERATIONS 2002 2001 2000 1999 1998
--------------------- ---- ---- ---- ---- ----
Interest income $ 33,535 $ 34,400 $ 33,549 $ 29,408 $ 28,993
Interest expense 10,716 14,919 15,900 12,254 13,032
-------- -------- -------- -------- --------
Net Interest Income 22,819 19,481 17,649 17,154 15,961
Provision for loan losses 1,105 722 1,129 1,260 1,248
Noninterest income 9,999 8,641 7,396 6,142 5,400
Noninterest expense 21,644 20,537 16,096 15,102 13,208
-------- -------- -------- -------- --------
Income before Federal income tax 10,069 6,863 7,820 6,934 6,905
Federal income tax 2,934 1,857 2,194 1,819 1,803
-------- -------- -------- -------- --------
Net Income $ 7,135 $ 5,006 $ 5,626 $ 5,115 $ 5,102
======== ======== ======== ======== ========
Basic earnings per share (1) (2) $ 3.36 $ 2.36 $ 2.66 $ 2.42 $ 2.42
Diluted earnings per share (1) (2) 3.35 2.36 2.66 2.42 2.42
Cash dividends declared per share (2) 1.34 1.24 1.18 1.08 0.98
(1) Earnings per share data is based on average shares outstanding plus
average contingently issuable shares.
(2) Adjusted to reflect the stock dividends paid in 2002, 2001, 2000,
1999 and 1998.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is contained on pages A-2 through A-17 in
the Company's 2003 Proxy Statement, and is incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is contained on pages A-11 through A-14
in the Company's 2003 Proxy Statement, and is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained on pages A-19 through A-38
in the Company's 2003 Proxy Statement, and is incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The information required by this item is contained on page 14 of the Company's
2003 Proxy Statement under the heading "Relationship With Independent Public
Accountants" and is incorporated herein by reference.
Page 12
PART III
Information called for by some of the items within this part is contained in
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held
April 15, 2003, and is incorporated herein by reference, as follows:
Pages in Proxy
Statement
---------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 3-6
ITEM 11 - EXECUTIVE COMPENSATION 7-12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 12-13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information appearing on page 14 and in Note 14 on Page A-32 of the Company's
2003 Proxy Statement for the Annual Meeting of Shareholders to be held April
15, 2003, is incorporated herein by reference in response to this item.
PART IV
ITEM 14 - CONTROLS AND PROCEDURES
(a) The term "disclosure controls and procedures" is defined in Rules
13a-14(C)and 15d-14(C)of the Securities Exchange Act of 1934 (the
"Exchange Act"). These rules refer to the controls and other procedures
of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files under the
Exchange Act is recorded, processed, summarized and reported, within
required time periods. Our Chief Executive Officer and Principal
Financial Officer have evaluated the effectiveness of our disclosure
controls and procedures as of a date within 90 days before the filing
of this annual report (the "Evaluation Date"), and have concluded that,
as of the Evaluation Date, our disclosure controls and procedures are
effective in providing them with material information relating to the
Company known to others within the Company which is required to be
included in our periodic reports filed under the Exchange Act.
(b) There have been no significant changes in the Company's internal
controls or in other factors which could significantly affect internal
controls subsequent to the Evaluation Date.
Page 13
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as a part of this report:
1. The following financial statements of the Company and its
subsidiaries, included in the Company's 2003 Proxy Statement are
incorporated herein by reference:
Pages in Proxy
Statement
---------
Consolidated Balance Sheets - December 31, 2002 and 2001 A-20
Consolidated Statements of Income - Years Ended December 31,
2002, 2001 and 2000 A-21
Consolidated Statements of Cash Flows - Years Ended December 31,
2002, 2001 and 2000 A-22
Consolidated Statements of Changes in Shareholders' Equity -
Years Ended December 31, 2002, 2001 and 2000 A-23
Notes to Consolidated Financial Statements A-24-A-38
Report of Independent Accountants, BKD LLP, Dated January 31, 2003 A-19
2. Financial statement schedules are not applicable.
(b) On November 15, 2002, the Company filed a report on Form 8-K disclosing
in Item 4 thereof changes in the Company's certifying accountant. No
other reports on Form 8-K were filed during the fourth quarter of 2002.
(c) Listing of Exhibits (numbered as in Item 601 of Regulation S-K):
Exhibit #
3(a) Restated Articles of Incorporation of United Bancorp, Inc., filed
as Exhibit (4)(a) to registrant's registration statement on Form
S-8 (File Number 333-03305) dated May 8, 1996, and incorporated
herein by reference.
3(b) Bylaws of United Bancorp, Inc., filed as Exhibit (4)(b) to
registrant's registration statement on Form S-8 (File Number
333-03305) dated May 8, 1996, and incorporated herein by
reference.
4(a) Restated Articles of Incorporation of United Bancorp, Inc., filed
as Exhibit (4)(a) to registrant's registration statement on Form
S-8 (File Number 333-03305) dated May 8, 1996, and incorporated
herein by reference.
4(b) Bylaws of United Bancorp, Inc., filed as Exhibit (4)(b) to
registrant's registration statement on Form S-8 (File Number
333-03305) dated May 8, 1996, and incorporated herein by
reference.
Page 14
4(c) United Bancorp, Inc. Director Retainer Stock Plan, filed as
Appendix A to registrant's proxy statement dated March 25, 1996
(file number 0-16640) and incorporated herein by reference.
4(d) United Bancorp, Inc. Senior Management Bonus Deferral Stock Plan,
filed as Appendix B to registrant's proxy statement dated March
25, 1996 (file number 0-16640) and incorporated herein by
reference.
4(e) United Bancorp, Inc. 1999 Stock Option Plan, filed as Appendix B
to the Company's proxy statement dated March 24, 2000 (file
number 0-16640) and incorporated herein by reference.
11 Statement re Computation of Per Share Earnings - this information
is incorporated by reference in Note 1 on Page A-26 and Note 19
on Page A-36 of the Company's 2003 Proxy Statement.
13 Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 2002 which incorporates Management's
Discussion and Analysis of Financial Condition and Results of
Operations, Reports of Independent Accountants, Consolidated
Financial Statements and Notes to Consolidated Financial
Statements included in the Company's 2003 Proxy Statement (not
deemed filed except for those portions which are specifically
incorporated herein by reference).
21 Listing of Subsidiaries, filed herewith.
23(a) Consent of BKD LLP, Independent Accountants, filed herewith.
23(b) Consent of Crowe, Chizek and Company LLP, Independent
Accountants, filed herewith.
24 Powers of Attorney contained on the signature pages of the 2002
Annual Report on Form 10-K.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(d) All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
United Bancorp, Inc.
/s/ David S. Hickman February 12, 2003
----------------------------------- ---------------------
David S. Hickman, Chairman and Date
Chief Executive Officer, Director
Page 15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints David S. Hickman and Dale L. Chadderdon, and each of
them, his true and lawful attorney(s)-in-fact and agent(s), with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this report and to
file the same, with all exhibits and schedules thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney(s)-in-fact and agent(s) full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney(s)-in-fact and agent(s), or
their substitute(s), may lawfully do or cause to be done by virtue hereof.
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 indicated, on February 12, 2003.
/s/ Joseph D. Butcko /s/ Donald J. Martin
- -------------------------------------------- --------------------------------------------
Joseph D. Butcko, Director Donald J. Martin, Director
/s/ Robert K. Chapman /s/ David E. Maxwell
- -------------------------------------------- --------------------------------------------
Robert K. Chapman, Vice Chairman, Director David E. Maxwell, Director
/s/ George H. Cress /s/ Chris L. McKenney
- -------------------------------------------- --------------------------------------------
George H. Cress, Director Chris L. McKenney, Director
/s/ John H. Foss /s/ John J. Wanke
- -------------------------------------------- --------------------------------------------
John H. Foss, Director John J. Wanke, President and Chief
Operating Officer, Director
/s/ Patricia M. Garcia
- --------------------------------------------
Patricia M. Garcia, Director /s/ Dale L. Chadderdon
--------------------------------------------
Dale L. Chadderdon, Senior Vice President,
Secretary and Treasurer
/s/ James C. Lawson
- --------------------------------------------
James C. Lawson, Director
Page 16
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
DISCLOSURE PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David S. Hickman, certify that:
1. I have reviewed this annual report on Form 10-K of United Bancorp, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statements 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 quarterly 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 the registrant's board of directors:
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
quarterly 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 of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ David S. Hickman February 12, 2003
- ------------------------------------ -------------------
David S. Hickman Date
Chairman and Chief Executive Officer
Page 17
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
DISCLOSURE PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dale L. Chadderdon, certify that:
1. I have reviewed this annual report on Form 10-K of United Bancorp, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statements 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 quarterly 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 the registrant's board of directors:
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
quarterly 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 of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Dale L. Chadderdon February 12, 2003
- ------------------------------------ -------------------
Dale L. Chadderdon Date
Senior Vice President, Secretary & Treasurer
Page 18
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
Exhibit 13 Management's Discussion and Analysis of Financial Condition and
Results of Operations, Report of Independent Auditors,
Consolidated Financial Statements and Notes to Consolidated
Financial Statements of Registrant's Annual Report to Shareholders
for the fiscal year ended December 31, 2002 which is incorporated
from the Company's 2003 Proxy Statement (not deemed filed
except for those portions which are specifically incorporated herein
by reference.
Exhibit 21 Subsidiaries 20
Exhibit 23 Consent of Independent Accountants - BKD LLP 21
Exhibit 24 Power of Attorney contained on the signature pages of the 2002 16
Annual Report on Form 10-K.
Exhibit 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted 22
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Report of Prior Independent Auditors - Crowe Chizek 23
Page 19