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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A TO N/A
COMMISSION FILE NUMBER 0-16540
UNITED BANCORP, INC.
(Exact name of registrant as specified in its Charter.)
OHIO 34-1405357
(State or other jurisdiction of (IRS) Employer
incorporation or organization) Identification No.)
201 SOUTH FOURTH STREET, MARTINS FERRY, OHIO 43935
(Address of principal executive offices) (ZIP Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (740) 633-0445
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, PAR VALUE $1.00 A SHARE NASDAQ REGULAR MARKET (SMALLCAP)
(Title of class) (Name of each exchange on which
registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $1.00 A SHARE
(Title of class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO | |
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED TO THE BEST
OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. |X|
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN EXCHANGE ACT RULE 12B-2). YES | | NO |X|
STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON EQUITY HELD
BY NON-AFFILIATES COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE COMMON EQUITY
WAS LAST SOLD, OR THE AVERAGE BID AND ASKED PRICE OF SUCH COMMON EQUITY, AS OF
THE LAST BUSINESS DAY OF THE REGISTRANT'S MOST RECENTLY COMPLETED SECOND FISCAL
QUARTER. $42,631,172.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN EXCHANGE ACT RULE 12b-2). YES | | NO |X|
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF MARCH 5, 2003.
COMMON STOCK, $1.00 PAR VALUE: $44,123,445
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS
OF MARCH 5, 2003.
COMMON STOCK, $1.00 PAR VALUE: 3,223,042 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ANNUAL SHAREHOLDERS REPORT FOR THE YEAR ENDED DECEMBER 31, 2002
ARE INCORPORATED BY REFERENCE INTO PARTS I AND II, (INDEX ON PAGE 2) PORTIONS OF
THE PROXY STATEMENT FOR THE ANNUAL SHAREHOLDERS MEETING TO BE HELD APRIL 23,
2003 ARE INCORPORATED BY REFERENCE INTO PART III (INDEX ON PAGE 2).
UNITED BANCORP, INC. FORM 10-K
INDEX OF ITEMS INCORPORATED BY REFERENCE WITHIN FORM 10-K
FORM 10-K
PAGE # ITEM DESCRIPTION REFERENCE DESCRIPTION
------ ---------------- -----------------------------------------
4 Part I, Item 1, (a) Incorporated by reference to Pages 9-13
of the Annual Report To Shareholders.
4 Part I, Item 1, (b) Incorporated by reference to Page 35,
Note 1 of the Annual Report To
Shareholders.
6 Part I, Item 1, I Incorporated by reference to Pages 26-27
of the Annual Report To Shareholders.
7 Part I, Item 1, II, B Incorporated by reference to Page 39,
Note 2 of the Annual Report To
Shareholders.
9 Part I, Item 1, III, C, 4 Incorporated by reference to Page 46,
Note 12 of the Annual Report To
Shareholders.
10 Part I, Item 1, IV Incorporated by reference to Page 20 and
Pages 36, Note 1 the Annual Report To
Shareholders.
12 Part I, Item 1, V, A Incorporated by reference to Page 26 of
the Annual Report To Shareholders.
13 Part I, Item 1, VII, A Incorporated by reference to Page 26 of
the Annual Report To Shareholders.
13 Part I, Item 2 Incorporated by reference to Pages 9-13
of the Annual Report To Shareholders.
13 Part I, Item 3 Incorporated by reference to Page 38,
Note 1 of the Annual Report To
Shareholders.
13 Part II, Item 5 Incorporated by reference to Page 4 of
the Annual Report To Shareholders.
14 Part II, Item 6 Incorporated by reference to inside front
cover of the Annual Report To
Shareholders.
14 Part II, Item 7 Incorporated by reference to Pages 15-29,
of the Annual Report To Shareholders.
14 Part II, Item 7A Incorporated by reference to Pages 23-24
of the Annual Report To Shareholders.
14 Part II, Item 8 Incorporated by reference to Pages 30-52
of the Annual Report To Shareholders.
14 Part III, Item 10 Incorporated by reference to Pages 3-9 of
the Proxy Statement.
14 Part III, Item 11 Incorporated by reference to Pages 10-12
of the Proxy Statement.
15 Part III, Item 12 Incorporated by reference to Pages 5-6 of
the Proxy Statement.
15 Part III, Item 13 Controls and Procedures.
15 Part IV, Item 14, (a), 1 Incorporated by reference to Pages 30-52
of the Annual Report To Shareholders.
15 Part IV, Item 14, (a), 2 Incorporated by reference to Page 52 of
the Annual Report To Shareholders.
16 Part IV, Item 14, (a), 3, Incorporated by reference to Pages 9-10
Exhibit 10 of the Proxy Statement.
16 Part IV, Item 14, (a), 3, Incorporated by reference to Page 37 and
Exhibit 11 Page 51 of the Annual Report To
Shareholders.
2
UNITED BANCORP, INC. FORM 10-K
PART I
ITEM 1 DESCRIPTION OF BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
United Bancorp, Inc. (Company) is a financial holding company
headquartered in Martins Ferry, Ohio. The Company has two
wholly-owned subsidiary banks, The Citizens Savings Bank, Martins
Ferry, Ohio (CITIZENS) and The Community Bank, Lancaster, Ohio
(COMMUNITY), collectively "Banks". For additional information about
the Company's location and description of business, refer to Pages
9-11 and 12-13, Corporate Profile, in the Annual Report To
Shareholders for the year ended December 31, 2002. Our annual report
is available on line at www.unitedbancorp.com
(b) FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
Refer to Page 35, Note 1 of the Annual Report To Shareholders.
(c) DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Refer to Pages 3 - 9 of the Proxy Statement.
(b) Executive Officers of the Registrant:
James W. Everson 64 Chairman, President and Chief Executive Officer
Alan M. Hooker 51 Executive Vice President - Administration
Scott Everson 34 Senior Vice President and Chief Operating
Officer
Randall M. Greenwood 38 Senior Vice President - Chief Financial
Officer, Treasurer
James A. Lodes 56 Vice President - Lending
Norman F. Assenza, Jr. 56 Vice President - Operations and Secretary
Michael A. Lloyd 34 Vice President - Information Systems
Each individual has held the position noted during the past five years,
except for the following:
Alan M. Hooker served as President of Fairfield National Division of
the Park National Bank where he also served on their Advisory Board.
He has held senior level banking positions with financial
institutions in Washington, D.C., and Baltimore, Maryland. He has
served as President and Chief Executive Officer of The Community
Bank, Glouster, Ohio and as Executive Vice President -
Administration of United Bancorp, Inc. since October 26, 1998.
Scott A. Everson served as Senior Vice President, Operations and
Retail Banking of The Citizens Savings Bank from May 1999 to April
2002 and prior to that he served Assistant Vice President/Branch
Manager Bridgeport Office from 1997 to May 1999. In addition, he is
currently President and Chief Operating Office and a Director of The
Citizens Savings Bank. He has held this position since April 2002.
Michael A. Lloyd served as Senior Vice President Management
Information Systems from October 1999 to April 2002 of the Citizens
Savings Bank and prior to that he served as Vice President
Management Information Systems from April 1999 to October 1999. He
served as Data Processing Manager from 1994 to April 1999 for The
Citizens Savings Bank.
Each of these Executive Officers are serving at-will in their
current positions. The Officers have held the positions for the
following time periods: James W. Everson, 20 years, Norman F.
Assenza, Jr., 20 years, James A. Lodes, 7 years, Randall M.
Greenwood, 5 years.
3
UNITED BANCORP, INC. FORM 10-K
PART I
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
(d) NARRATIVE DESCRIPTION OF BUSINESS
The Company is a financial holding company as defined under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). The BHC Act
regulates acquisitions by the Company of voting shares or assets of
any bank or other company. The Company is subject to the reporting
requirements of, and examination and regulation by, the Board of
Governors of the Federal Reserve System, as well as reporting
requirements under the Securities and Exchange Commission Act of
1934.
The Banks' are located in northeastern, eastern, southeastern and
south central Ohio and are engaged in the business of commercial and
retail banking in Belmont, Harrison, Tuscarawas, Carroll, Athens,
Hocking, and Fairfield counties and the surrounding localities. The
Banks provide a broad range of banking and financial services, which
include accepting demand, savings and time deposits and granting
commercial, real estate and consumer loans. CITIZENS conducts its
business through its main office in Martins Ferry, Ohio and nine
branches located in Bridgeport, Colerain, Dellroy, Dover, Jewett,
New Philadelphia, St. Clairsville, Sherrodsville, and Strasburg,
Ohio. CITIZENS offers full service brokerage service with securities
provided through UVEST(R) member NASD/SIPC. COMMUNITY conducts its
business through its seven offices in Amesville, Glouster,
Lancaster, and Nelsonsville, Ohio.
The markets in which the Banks' operate continue to be highly
competitive. CITIZENS competes for loans and deposits with other
retail commercial banks, savings and loan associations, finance
companies, credit unions and other types of financial institutions
within the Mid-Ohio valley geographic area along the eastern border
of Ohio, extending into the northern panhandle of West Virginia and
the Tuscarawas and Carroll County geographic areas of northeastern
Ohio. COMMUNITY also encounters similar competition for loans and
deposits throughout the Athens, Hocking, and Fairfield County
geographic areas of central and southeastern Ohio.
On November 12, 1999, the Graham-Leach-Bliley Act of 1999 ("GLB
Act") was enacted, which is intended to modernize the financial
services industry. The GLB Act sweeps away large parts of a
regulatory framework that had its origins in the Depression Era of
the 1930s. Effective March 11, 2000, new opportunities became
available for banks, other depository institutions, insurance
companies and securities firms to enter into combinations that
permit a single financial service organization to offer customers a
more complete array of financial products and services. The GLB Act
provides a new regulatory framework for regulation through the
financial holding company, which will have as its umbrella regulator
the Federal Reserve Board. The functional regulation of the
financial holding company's separately regulated subsidiaries will
be conducted by their primary functional regulator. The GLB Act
makes satisfactory or above Community Reinvestment Act compliance
for insured depository institutions and their financial holding
companies necessary in order for them to engage in new financial
activities. The GLB Act provides a federal right to privacy of
non-public personal information of individual customers. The Company
and Banks are also subject to certain state laws that deal with the
use and distribution of non-public personal information.
The Company's two subsidiary banks are subject to regulation by the
Ohio Division of Financial Institutions ("ODFI") and the Federal
Deposit Insurance Corporation ("FDIC"). The regulations and
restrictions affecting the Banks
pertain to, among other things, allowable loans, guidelines for
allowance for loan losses, accountability for fair and accurate
disclosures to customers and regulatory agencies, permissible
investments and limitations of risk and regulation of capital
requirements for safe and sound operation of the financial
institution.
The Banks have no single customer or related group of customers
whose banking activities, whether through deposits or lending, would
have a material impact on the continued earnings capabilities if
those activities were removed.
4
UNITED BANCORP, INC. FORM 10-K
PART I
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
(d) NARRATIVE DESCRIPTION OF BUSINESS (CONTINUED)
The Company itself, as a shell holding company, has no compensated
employees. CITIZENS has 83 full time employees, with 24 of these
serving in a management capacity and 13 part time employees.
COMMUNITY has 34 full time employees, with 11 serving in a
management capacity and 9 part time employees. The Company considers
employee relations to be good at all subsidiary locations.
(e) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Not applicable.
I DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
A Refer to Page 26 of the Annual Report To Shareholders
B Refer to Page 26 of the Annual Report To Shareholders
C Refer to Page 27 of the Annual Report To Shareholders
II INVESTMENT PORTFOLIO
A Securities available for sale at year-end 2002 increased $18,825,000, or 16.5%
over 2001, while securities held to maturity increased $2,547,000, or 24.5%. In
our planning process, Management's projection for 2002 was for a steady to
slightly rising interest rate environment. For the first half of 2002,
Management maintained an average of $13.8 million in fed funds sold. As the
economy continued to weaken, and threat of war surfaced, Management's, posture
on interest rates for the remainder of 2002 and heading into 2003 changed from
one that interest rates may rise to a position that rates will go basically
unchanged for the next twelve months. Therefore, by December 31, 2002,
Management invested the Company's excess liquidity in investment securities and
in loans. During 2002 the Company recognized gains of $320,485 on the sale of
investment securities. Management's strategy in 2002, took into consideration
the relative volatility in the bond market. At times during the year Management
realized there were opportunities to sell certain bonds in the portfolio when
overall interest rates were depressed. Security gains are non recurring income
and depending on future interest rate scenarios, the gains on the sale of
investment securities may negatively impact the yield on the investment
portfolio in future periods, and also negatively impact the Company's net
interest margin
The following table sets forth the carrying amount of securities at December 31,
2002, 2001 and 2000:
DECEMBER 31,
-------------------------------
(In thousands) 2002 2001 2000
-------- -------- -------
AVAILABLE FOR SALE
US Agency obligations $ 93,262 $ 99,490 $75,685
Mortgage-backed obligations 14,075 153 1,930
Collaterallized mortgage obligations 998
State and municipal obligations 20,714 10,748 13,434
Other securities 3,820 3,654 3,390
-------- -------- -------
$132,869 $114,045 $94,439
======== ======== =======
HELD TO MATURITY
State and municipal obligations 12,926 10,379 8,306
-------- -------- -------
$ 12,926 $ 10,379 $ 8,306
======== ======== =======
5
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
II INVESTMENT PORTFOLIO (CONTINUED)
B Contractual maturities of securities at year-end 2002 were as follows:
AVERAGE
AMORTIZED ESTIMATED TAX EQUIVALENT
AVAILABLE FOR SALE COST FAIR VALUE YIELD
------------ ------------ --------------
US AGENCY OBLIGATIONS
1 - 5 Years $ 2,626,210 $ 2,635,307 5.12%
5 - 10 Years 13,295,933 13,384,501 5.12%
Over 10 Years 76,172,098 77,241,951 6.16%
------------ ------------ ------------
Total 92,094,241 93,261,759 5.98%
------------ ------------ ------------
MORTGAGE-BACKED SECURITIES
5 - 10 Years 6,254,515 6,288,262 3.82%
Over 10 Years 8,796,978 8,785,099 4.63%
------------ ------------ ------------
15,051,493 15,073,361 4.29%
------------ ------------ ------------
STATE AND MUNICIPAL OBLIGATIONS
Under 1 Year 4,771,468 4,852,429 5.94%
1 - 5 Years 928,793 988,856 6.47%
5 - 10 Years 7,057,634 7,164,884 5.79%
Over 10 Years 7,703,664 7,707,732 6.65%
------------ ------------ ------------
Total 20,461,559 20,713,901 5.98%
------------ ------------ ------------
OTHER SECURITIES
Equity securities 3,803,019 3,820,463 6.55%
------------ ------------ ------------
TOTAL SECURITIES AVAILABLE FOR SALE $131,410,312 $132,869,484 5.80%
============ ============ ============
HELD TO MATURITY
STATE AND MUNICIPAL OBLIGATIONS
Under 1 Year 151,999 152,762 8.86%
1 - 5 Years 4,501,248 4,800,651 7.36%
5 - 10 Years 3,162,795 3,411,256 7.20%
Over 10 Years 5,109,475 5,269,508 7.03%
------------ ------------ ------------
TOTAL SECURITIES HELD TO MATURITY $ 12,925,517 $ 13,634,177 7.21%
============ ============ ============
C Refer to Page 39, Note 2 of the Annual Report To Shareholders.
D Excluding holdings of U.S. Agency, there were no investments in securities
of any one issuer exceeding 10% of the Company's consolidated
shareholders' equity at December 31, 2002.
6
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO
A TYPES OF LOANS
The amounts of gross loans outstanding at December 31, 2002,
2001, 2000, 1999 and 1998 are shown in the following table
according to types of loans:
DECEMBER 31,
--------------------------------------------------------
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
(In thousands)
Commercial loans $ 21,060 $ 21,502 $ 20,415 $ 15,463 $ 12,912
Commercial real estate loans 69,287 61,963 64,812 60,305 54,195
Real estate loans 52,535 54,153 55,931 51,357 49,438
Installment loans 45,006 45,722 55,339 53,391 47,676
-------- -------- -------- -------- --------
Total loans $187,888 $183,340 $196,497 $180,516 $164,221
======== ======== ======== ======== ========
Construction loans were not significant for the periods
discussed.
B MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST
RATES
The following is a schedule of commercial and commercial real
estate loans at December 31, 2002 maturing within the various
time frames indicated:
ONE YEAR ONE THROUGH AFTER xx
(In thousands) OR LESS FIVE YEARS FIVE YEARS TOTAL
----------- ----------- ----------- -----------
Commercial loans $ 18,965 $ 1,966 $ 129 $ 21,060
Commercial real estate loans 27,086 35,728 6,473 69,287
----------- ----------- ----------- -----------
Total $ 46,051 $ 37,694 $ 6,602 $ 90,347
=========== =========== =========== ===========
The following is a schedule of fixed rate and variable rate
commercial and commercial real estate loans at December 31, 2002
due to mature after one year:
(In thousands) FIXED RATE VARIABLE RATE TOTAL > ONE YEAR
---------- ------------- ----------------
Commercial loans $ 1,812 $ 283 $ 2,095
Commercial real estate loans 7,843 34,358 42,201
---------- ---------- ----------
Total $ 9,655 $ 34,641 $ 44,296
========== ========== ==========
Variable rate loans are those loans with floating or adjustable
interest rates.
7
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO (CONTINUED)
C RISK ELEMENTS
1. NONACCRUAL, PAST DUE, RESTRUCTURED AND IMPAIRED LOANS
The following schedule summarizes nonaccrual loans, accruing
loans which are contractually 90 days or more past due,
troubled debt restructurings and impaired loans at December
31, 2002, 2001, 2000, 1999 and 1998:
DECEMBER 31,
------------------------------------------------------------
(In thousands) 2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Nonaccrual basis $ 685 $ 661 $ 793 $ 987 $ 399
Accruing loans 90 days or greater past due 85 157 124 36 150
Troubled debt restructuring N/A N/A N/A N/A N/A
Impaired loans (1) (1) (1) (1) (1)
(1) Loans considered impaired under the provisions of SFAS No.
114 and interest recognized on a cash received basis were not
considered material during any of the periods presented.
The additional amount of interest income that would have been
recorded on nonaccrual loans, had they been current, totaled
$43,047 for the year-ended December 31, 2002.
Interest income is not reported when full loan repayment is
doubtful, typically when the loan is impaired or payments are
past due over 90 days. Payments received on such loans are
reported as principal reductions.
A loan is impaired when full payment under the loan terms is
not expected. Impairment is evaluated in total for
smaller-balance loans of similar nature such as residential
mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired,
a portion of the allowance is allocated so that the loan is
reported, net, at the present value of estimated future cash
flows using the loan's existing rate or at the fair value of
collateral if repayment is expected solely from the
collateral.
1. POTENTIAL PROBLEM LOANS
The Company had no potential problem loans as of December 31,
2002 which have not been disclosed in Table C 1., but where
known information about possible credit problems of borrowers
causes management to have serious doubts as to the ability of
such borrowers to comply with the present loan repayment terms
and which may result in disclosure of such loans into one of
the problem loan categories.
3. FOREIGN OUTSTANDING
Not applicable.
4. LOAN CONCENTRATIONS
Refer to Page 46, Note 11 of the Annual Report To
Shareholders.
D. OTHER INTEREST-BEARING ASSETS
Not applicable.
8
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO (CONTINUED)
IV SUMMARY OF LOAN LOSS EXPERIENCE
For additional explanation of factors which influence
management's judgment in determining amounts charged to
expense, refer to Page 20, "Management Discussion and
Analysis" and Page 36, Note 1 of the Annual Report To
Shareholders.
A ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The following schedule presents an analysis of the allowance
for loan losses, average loan data and related ratios for the
years ended December 31, 2002, 2001, 2000, 1999, and 1998:
(In thousands) 2002 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- --------
Loans
Loans outstanding $187,888 $183,340 $196,497 $180,516 $164,221 $171,477
Average loans outstanding $184,131 $188,114 $190,386 $168,868 $168,626 $169,066
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year $ 2,879 $ 2,790 $ 3,110 $ 3,033 $ 3,039 $ 2,756
Loan charge-offs:
Commercial 135 268 125 85 139 125
Commercial real estate 45 79 30
Real estate 84 67 275 21 51 20
Installment 507 728 716 807 861 661
-------- -------- -------- -------- -------- --------
Total loan charge-offs 771 1,063 1,195 943 1,051 806
-------- -------- -------- -------- -------- --------
Loan recoveries
Commercial 17 27 2 50 87 32
Commercial real estate 28 12 --
Real estate 1 10 4 3 9 3
Installment 215 335 254 228 151 122
-------- -------- -------- -------- -------- --------
Total loan recoveries 233 372 288 293 247 157
-------- -------- -------- -------- -------- --------
Net loan charge-offs 538 691 907 650 804 649
Provision for loan losses 630 780 587 727 798 932
-------- -------- -------- -------- -------- --------
Balance at end of year $ 2,971 $ 2,879 $ 2,790 $ 3,110 $ 3,033 $ 3,039
======== ======== ======== ======== ======== ========
Ratio of net charge-offs to average
loans outstanding for the year 0.29% 0.37% 0.49% 0.38% 0.48% 0.38%
======== ======== ======== ======== ======== ========
9
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
IV SUMMARY OF LOAN LOSS EXPERIENCE (CONTINUED)
B ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table allocates the allowance for possible loan
losses at December 31, 2002, 2001, 2000, 1999, and 1998.
Management adjusts the allowance periodically to account for
changes in national trends and economic conditions in the Banks
service areas. The allowance has been allocated according to the
amount deemed to be reasonably necessary to provide for the
probability of losses being incurred within the following
categories of loans at the dates indicated:
2002 2001
----------------------- -----------------------
% OF LOANS % OF LOANS
(In thousands) ALLOWANCE TO TOTAL (In thousands) ALLOWANCE TO TOTAL
Loan type AMOUNT LOANS Loan type AMOUNT LOANS
---------- ---------- ---------- ----------
Commercial $ 361 11.73% Commercial $ 325 11.73%
Commercial real estate 965 33.80% Commercial real estate 872 33.80%
Real estate 403 29.54% Real estate 381 29.54%
Installment 879 24.93% Installment 613 24.93%
Unallocated 363 N/A Unallocated 688 N/A
---------- ---------- ---------- ----------
Total $ 2,971 100.00% Total $ 2,879 100.00%
========== ========== ========== ==========
2000 1999
----------------------- -----------------------
% OF LOANS % OF LOANS
(In thousands) ALLOWANCE TO TOTAL (In thousands) ALLOWANCE TO TOTAL
Loan type AMOUNT LOANS Loan type AMOUNT LOANS
---------- ---------- ---------- ----------
Commercial $ 263 10.39% Commercial $ 195 8.57%
Commercial real estate 835 32.98% Commercial real estate 439 33.40%
Real estate 461 28.46% Real estate 343 28.45%
Installment 781 28.17% Installment 620 29.58%
Unallocated 450 N/A Unallocated 1,513 N/A
---------- ---------- ---------- ----------
Total $ 2,790 100.00% Total $ 3,110 100.00%
========== ========== ========== ==========
1998
-----------------------
% OF LOANS
(In thousands) ALLOWANCE TO TOTAL
Loan type AMOUNT LOANS
---------- ----------
Commercial $ 215 7.87%
Commercial real estate 432 33.00%
Real estate 567 30.10%
Installment 818 29.03%
Unallocated 1,001 N/A
---------- ----------
Total $ 3,033 100.00%
========== ==========
10
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
V DEPOSITS
A SCHEDULE OF AVERAGE DEPOSIT AMOUNTS AND RATES
(1) Refer to Page 26 of the Annual Report To Shareholders.
(2) Refer to Page 26 of the Annual Report To Shareholders.
(3) Refer to Page 26 of the Annual Report To Shareholders.
(4) Refer to Page 26 of the Annual Report To Shareholders.
(5)-(8) Not applicable.
B OTHER CATEGORIES
Not applicable.
C FOREIGN DEPOSITS
Not applicable.
D MATURITY ANALYSIS OF TIME DEPOSITS GREATER THAN $100,000.
The following schedule details the maturities of time
certificates of deposit in amounts of $100,000 or more for the
year ended December 31, 2002:
(In thousands)
Three months or less $17,562
Over three through six months 3,722
Over six through twelve months 2,565
Over twelve months 18,991
-------
Total $42,840
=======
Refer to Page 41 for further information concerning
certificates of deposit.
E TIME DEPOSITS GREATER THAN $100,000 ISSUED BY FOREIGN OFFICES.
Not applicable.
VI RETURN ON EQUITY AND ASSETS
The ratio of net income to daily average total assets and
average shareholders' equity, and certain other ratios, were
as follows:
DECEMBER 31,
2002 2001 2000
---------- ---------- ----------
Dividend Payout Ratio 50.51% 56.82% 58.82%
Equity to Assets 8.89% 8.93% 8.85%
(1) For other ratios refer to inside of front cover of the
Annual Report To Shareholders.
11
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
VII SHORT-TERM BORROWINGS
Information concerning securities sold under agreements to
repurchase is summarized as follows:
(In thousands) 2002 2001 2000
---------- ---------- ----------
Balance at December 31, $ 7,010 $ 7,811 $ 4,861
Weighted average interest rate at December 31, 0.91% 1.39% 5.52%
Average daily balance during the year $ 8,567 $ 10,695 $ 5,177
Average interest rate during the year 1.19% 3.59% 5.45%
Maximum month-end balance during the year $ 11,659 $ 20,653 $ 6,117
Securities sold under agreements to repurchase are financing
arrangements whereby the Company sells securities and agrees
to repurchase the identical securities at the maturities of
the agreements at specified prices.
Information concerning the cash management line of credit from
the Federal Home Loan Bank of Cincinnati, Ohio is summarized
as follows:
(In thousands) 2002 2001 2000
---------- ---------- ----------
Balance at December 31, $ 10,100 $ 14,824
Weighted average interest rate at December 31, 2.05% 6.75%
Average daily balance during the year $ 1,722 $ 14,783 $ 13,545
Average interest rate during the year 1.83% 4.01% 6.26%
Maximum month-end balance during the year $ 6,799 $ 24,995 $ 20,217
No other individual component of the borrowed funds total comprised
more than 30% of shareholders' equity and accordingly are not
disclosed in detail.
ITEM 2 PROPERTIES
Refer to Pages 9-11 and 12-13, "Corporate Profile" in the Annual Report To
Shareholders. Management believes the properties described on Pages 9-11
and 12-13 of the Annual Report to be in good operating condition for the
purpose for which it is used. The properties are unencumbered by any
mortgage or security interest and is, in management's opinion, adequately
insured.
ITEM 3 LEGAL PROCEEDINGS
Refer to Page 38, Note 1 of the Annual Report To Shareholders.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No motions were submitted to shareholders for a vote during the fourth
quarter of 2002.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Refer to Page 4, "Shareholder Information" of the Annual Report To
Shareholders and refer to Page 48, Note 14 of the Annual Report To
Shareholders for a discussion of dividend restrictions imposed on banking
subsidiaries.
12
UNITED BANCORP, INC. FORM 10-K
PART II
ITEM 6 SELECTED FINANCIAL DATA
Refer to inside front cover, "Decade of Progress" of the Annual Report To
Shareholders.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Refer to Pages 15-29, "Management's Discussion and Analysis" of the Annual
Report To Shareholders.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to Pages 23-24, "Asset/Liability Management and Sensitivity to
Market Risks" of the Annual Report To Shareholders.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to Pages 30-52 of the Annual Report To Shareholders.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
(a) There were no disagreements with accountants. Effective for the
fiscal year beginning January 1, 2003, the Company engaged the firm
of Grant Thornton, LLP as its new independent public accountant,
replacing the firm of Crowe, Chizek and Company, LLP.
PART III
ITEM 10 EXECUTIVE COMPENSATION
Refer to Pages 9 - 12 of the Proxy Statement.
The following table is a disclosure of securities authorized for
issuance under equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
BE ISSUED UPON EXERCISE EXERCISE PRICE OF FUTURE ISSUANCE UNDER
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EQUITY COMPENSATION PLANS
WARRANTS AND RIGHTS WARRANTS AND RIGHTS (EXCLUDING SECURITIES
REFLECTED IN COLUMN (A))
----------------------- -------------------- -------------------------
EQUITY COMPENSATION
PLANS APPROVED BY 84,318 $11.39 49,259
SECURITY HOLDERS
EQUITY COMPENSATION
PLANS NOT APPROVED
BY SECURITY HOLDERS
TOTAL 84,318 $11.39 49,259
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Refer to Pages 5-6 of the Proxy Statement.
13
UNITED BANCORP, INC. FORM 10-K
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Regulations of the Securities and Exchange Commission require the
disclosure of any related party transactions with members of the
Compensation Committee. During the past year, certain directors and
officers, including members of the Compensation Committee, and one or more
of their associates may have been customers of and had business
transactions with one or more of the bank subsidiaries of United Bancorp,
Inc. All loans included in such transactions were made in the ordinary
course of business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other persons, and did not involve more than normal risk
of collectability or present other unfavorable features. It is expected
that similar transactions will occur in the future. In addition, The
Citizens Savings Bank, a wholly-owned subsidiary of the Corporation,
pursuant to the terms of a lease entered into on April 1, 1998, paid
Riesbeck Food Markets, Inc. $25,128 in 2002, and over the five-year term
of the lease, payments will total $130,000 as lease payments for space
used in an in-store banking location at St. Clairsville, Ohio. Mr.
Riesbeck, Chairman of the Compensation Committee, is an officer, director
and shareholder of Riesbeck Food Markets, Inc. Management believes the
lease between Riesbeck Food Markets, Inc. and the Corporation was made on
an arms-length basis. Management employed a third party consulting firm
that specializes in grocery store banking facilities to establish the
terms of the lease.
ITEM 13 CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing date of this report, an
evaluation was carried out under the supervision and with the
participation of United Bancorp's management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act
Rules13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934).
Based on their evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and
procedures are, to the best of their knowledge, effective to ensure that
information required to be disclosed, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission
rules and forms. Subsequent to the date of their evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that there
were no significant changes in United Bancorp's internal controls or in
other factors that could significantly affect its internal control,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF FORM 10-K
1. The following consolidated financial statements appear in the
2002 Annual Report To Shareholders and are incorporated by
reference:
Report of Independent Auditors Page 30
Consolidated Balance Sheets Page 31
Consolidated Statements of Income Page 32
Consolidated Statements of Shareholders' Equity Page 33
Consolidated Statements of Cash Flow Page 34
Notes to the Consolidated Financial Statements Pages 35 - 52
2. The summary of selected quarterly results of operations
appears on Page 52 in the 2002 Annual Report To Shareholders
and is incorporated by reference.
14
UNITED BANCORP, INC. FORM 10-K
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(a) DOCUMENTS FILED AS PART OF FORM 10-K (CONTINUED)
3. Exhibits
2 Not Applicable
3(i)(ii) Articles of Incorporation of United Bancorp, Inc.
including amendments and By Laws, previously filed
with the Securities and Exchange Commission on
November 16, 1983.
4 Not applicable.
9 Not applicable.
10 Change-in-Control Arrangements. The Company has
entered into change-in-control agreements with
Messrs. James W. Everson, Hooker, Scott A. Everson,
Greenwood and Assenza. The agreements provide that
Mr. James W. Everson, Mr. Hooker, Mr. Scott A.
Everson, Mr. Greenwood and Mr. Assenza will be
entitled to a lump sum severance benefit in the
event of their involuntary termination of
employment (other than for cause) following a
"change in control" of the Corporation. A change in
control is defined to include the acquisition of
the Corporation and certain other changes in the
voting control of the Corporation. In the event of
a change in control and the involuntary termination
of employment, the agreements provide that Mr.
James W. Everson will receive 2.99 times his annual
compensation, Mr. Hooker will receive 2.0 times his
annual compensation Mr. Scott A. Everson will
receive 2.0 times his annual compensation, Mr.
Greenwood will receive 1.0 time his annual
compensation and Mr. Assenza will receive 1.0 times
his annual compensation in a lump sum cash payment.
Each agreement has a term of one year and is
automatically extended for one additional year
unless, not later than June 30 of the preceding
year, the Corporation gives notice of termination
of the agreement. The right of the Corporation to
terminate the employment of Mr. James W. Everson,
Mr. Hooker. Mr. Scott A. Everson, Mr. Greenwood and
or Mr. Assenza prior to a change in control is
unaffected by these agreements. In the event a
change in control had occurred on January 1, 2003,
and Mr. James W. Everson's, Mr. Hooker's, Mr Scott
A. Everson's, Mr. Greenwood's or Mr. Assenza'a
employment had been involuntarily terminated on
such date (other than for cause), Mr. James W.
Everson, Mr. Hooker, Mr. Scott A. Everson, Mr.
Greenwood and Mr. Assenza would have been entitled
to receive lump sum severance benefits of $752,448,
$248,778, $208,968, $101,868 and $105,841
respectively. In the event a potential change in
control is announced, the agreements obligate Mr.
James W. Everson, Mr. Hooker, Mr Scott A. Everson,
Mr. Greenwood and Mr. Assenza to remain in the
employment of the Corporation for not less than one
year following the change in control of the
Corporation. The Change in control contracts can be
found in Exhibits 10.1 through 10.7.
11 Statement regarding computation of per share
earnings (included in Note 1 to the consolidated
financial statements on page 37 and Note 15 on
Page 51 of the Annual Report To Shareholders.)
12 Not applicable.
13 Reference to the Annual Report To Shareholders for
the fiscal year ended December 31, 2002.
16 Not applicable.
17 Not applicable.
15
UNITED BANCORP, INC. FORM 10-K
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(b) DOCUMENTS FILED AS PART OF FORM 10-K (CONTINUED)
21.1 Reference to The Citizens Savings Bank, Martins Ferry,
Ohio, incorporated on December 31, 1902, previously
filed with the Securities and Exchange Commission.
21.2 Reference to The Community Bank, Lancaster, Ohio,
incorporated on August 1, 1949, previously filed with
the Securities and Exchange Commission.
22 Not applicable.
23 Consents of Experts and Council.
24 Not applicable.
99 Not applicable.
(c) The Company filed an SEC Form 8-K during the last quarter of the
period covered by this report. The SEC Form 8-K was filed on
November 19, 2002 for the dismissal of Crowe, Chizek and Company LLP
("Crowe Chizek") as the Corporation's independent public accountant,
effective for the fiscal year beginning January 1, 2003, and engaged
the firm of Grant Thornton, LLP as its new independent public
accountant, effective for the fiscal year beginning January 1, 2003.
16
EXHIBIT INDEX
Exhibit No. Description SK Item 601 No.
----------- ----------- ---------------
1 Annual Report to Shareholders 13
2 Consents of Independent Auditors 23
10 Change in control agreements
10.1 James W. Everson
10.2 Randall M. Greenwood
10.3 Alan M. Hooker
10.4 Scott A. Everson
10.5 Norman F. Assenza
10.6 James A. Lodes
10.7 Michael A. Lloyd
Certification pursuant to 18 U.S.C.
99.1 Section 1350, As Adopted Pursuant
to Section 906 of The Sarbanes-Oxley
Act of 2002.
99.2 Certification pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant
to Section 906 of The Sarbanes-Oxley
Act of 2002.
17
UNITED BANCORP INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
(Registrant) United Bancorp, Inc.
By: /s/ James W. Everson March 15, 2003
------------------------------------
James W. Everson, Chairman, President & CEO
Persuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
By: /s/ James W. Everson March 15, 2003
-------------------------
James W. Everson, Chairman, President & CEO
By: /s/ Randall M. Greenwood March 15, 2003
-------------------------
Randall M. Greenwood, Senior Vice President & CFO
By: /s/ Michael J. Arciello March 15, 2003
-------------------------
Michael J. Arciello
By: /s/ Terry A. McGhee March 15, 2003
-------------------------
Terry A. McGhee
By: /s/ John M. Hoopingarner March 15, 2003
-------------------------
John M. Hoopingarner
By: /s/ Richard L. Riesbeck March 15, 2003
-------------------------
Richard L. Riesbeck
By: /s/ L.E. Richardson, Jr. March 15, 2003
--------------------------
L.E. Richardson, Jr.
By: /s/ Matthew C. Thomas March 15, 200
-------------------------
Matthew C. Thomas
UNITED BANCORP, INC.
CERTIFICATIONS
I, James W. Everson, certify that:
1. I have reviewed this annual report on Form 10-K of United Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date or our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date March 15, 2003
___________________________________________________________________
By /s/ James W. Everson
____________________________________________________________________
James W. Everson, Chairman, President and Chief Executive Officer
UNITED BANCORP, INC.
CERTIFICATIONS
I, Randall M. Greenwood, certify that:
1. I have reviewed this annual report on Form 10-K of United Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
d) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
e) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
f) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
c) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
d) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date or our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date March 15, 2003
____________________________________________________________________
By /s/ Randall M. Greenwood
_______________________________________________________________________
Randall M. Greenwood, Senior Vice President and Chief Financial Officer