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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 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
Commission File Number 0-13270
UNB Corp.
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(Exact name of Registrant as specified in its charter)
Ohio 34-1442295
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State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
220 Market Avenue South, Canton, Ohio 44701
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 454-5821
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Stated 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 (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
--- ---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 8, 1996: $134,042,166.
The number of shares outstanding of each of the Registrant's common stock, as
of March 8, 1996: 2,874,899 shares of $1.00 per share stated value common
stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 UNB Corp. Annual Report to Shareholders (Exhibit 13) is
incorporated into Part I, Item 1(c), 1(e) and Part II, Items 5, 6, 7, and 8.
Portions of the Definitive Proxy Statement of UNB Corp. dated February 23,
1996, for the Annual Shareholders Meeting to be held on April 16, 1996, are
incorporated into Part III, Items 10, 11, 12, and 13.
Total Number of Pages is 80
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Exhibit Index is on Page 22
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UNB CORP.
FORM 10-K
1995
PART I Page
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Item 1 Business 3-15
Item 2 Properties 16
Item 3 Legal Proceedings 16
Item 4 Submission of Matters to a Vote of Security Holders 16
PART II
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Item 5 Market Price of and Dividends on the Common Equity and Related
Shareholder Matters 16
Item 6 Selected Financial Data 16-17
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Item 8 Financial Statements and Supplementary Data 17
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
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Item 10 Directors and Executive Officers of the Registrant 18
Item 11 Executive Compensation 18
Item 12 Security Ownership of Certain Beneficial Owners and Management 18
Item 13 Certain Relationships and Related Transactions 18
PART IV
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Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 18-19
Signatures 20-21
Exhibit Index 22
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PART I
Item 1 - Business
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a. General Development of Business
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UNB Corp. (Registrant) was incorporated under the laws of the State of Ohio
during 1983. Its principal business is to act as a bank holding company
for the United National Bank & Trust Company (Bank). Effective October 1,
1984, in a transaction accounted for as an internal reorganization, the
Registrant acquired all of the outstanding stock of the United National
Bank & Trust Company. The Corporation exchanged two shares of common stock
for each previously outstanding share of the United National Bank & Trust
Company. The Registrant did not have any operations prior to the business
combination. UNB Corp. is registered under the Bank Holding Company Act of
1956, as amended. A substantial portion of UNB Corp.'s revenue is derived
from cash dividends paid by the Bank.
b. Financial Information About Industry Segments
---------------------------------------------
The Registrant and its subsidiary bank are engaged in commercial and retail
banking. Reference is hereby made to Item 1(e), "Statistical Disclosure",
and Item 8 of this Form 10-K for financial information pertaining to the
Registrant's banking business.
c. Description of UNB Corp.'s Business
-----------------------------------
The Bank is a full-service bank offering a wide range of commercial and
personal banking services primarily to customers in northern Stark and
southern Summit Counties of Ohio. These services include a broad range of
loan, deposit and trust products and various miscellaneous services. Loan
products include commercial and commercial real estate loans, a variety of
mortgage and construction loan products, installment loans, home equity
lines of credit, MasterCard lines of credit, accounts receivable and lease
financing. Deposit products include interest and non-interest bearing
checking accounts, various savings accounts, certificates of deposit, and
IRAs. The Trust Department provides services in the areas of employee
benefits and personal trusts. Miscellaneous services include safe deposit
boxes, night depository, United States savings bonds, traveler's checks,
money orders and cashier checks, bank-by-mail service, money transfers,
wire services, utility bill payments and collections, notary public
services, discount brokerage services and alternative investments. In
addition, the Bank has correspondent relationships with major banks in New
York, Pittsburgh and Detroit pursuant to which the Bank receives various
financial services. The Bank accounts for substantially all (98%) of UNB
Corp.'s consolidated assets at December 31, 1995.
The Bank's primary lending area consists of Stark County, Ohio, and its
contiguous counties. Loans outside the primary lending area are considered
for creditworthy applicants. Lending decisions are made in accordance with
written loan policies designed to maintain loan quality.
Retail lending products are comprised of credit card loans, overdraft
lines, personal lines of credit and installment loans. Credit cards are
unsecured credit accounts, on which the credit limits are determined by
analysis of two criteria, the borrowers debt service and gross income.
Overdraft lines of credit are lines attached to checking accounts to cover
overdrafts and/or allow customers to write themselves a loan. Credit
limits are based on a percentage of gross income and average deposits.
Personal lines of credit
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include lines secured by junior mortgages (home equity) and Private Banking
lines which are generally secured by junior mortgages but may be unsecured
or secured by other collateral. The lines have a five year draw period and
may then be renewed or amortized over ten years. Credit limits are
determined by comparing three criteria, appraised value, debt service and
gross income. Criteria for determining credit limits on private banking
products also consider the applicant's annual income, net worth and average
deposits. Installment loans include both direct and indirect loans. The
term can range from three to 180 months, depending upon the collateral
which includes new and used automobiles, boats and recreational vehicles as
well as junior mortgages and unsecured personal loans. Retail lending
underwriting guidelines include evaluating the entire credit using the Five
C's of Credit, character, capacity, capital, condition and collateral.
Credit scoring, analysis of credit bureau ratings and debt to income ratios
are the major tools used by the lender in the underwriting process.
The Bank offers a variety of mortgage loan programs, including a variety of
fixed and adjustable rate mortgages ranging from 120 to 360 months. The
Bank also offers some specialty products such as jumbo mortgages, Mortgage
Assistance Programs for low income individuals, construction and bridge
loans. The underwriting guidelines include those for consumer loans and
those necessary to meet secondary market guidelines. The Bank may sell
loans to the secondary market when it deems it profitable and desirable to
do so. Residential real estate decisions focus on loan to value limits,
debt to income ratio, housing to income ratio, credit history, and in some
cases, whether private mortgage insurance is obtained.
Business credit products include commercial loans and commercial real
estate loans, Business Manager and leases. Commercial loans include lines
and letters of credit, fixed, and adjustable rate term loans, demand and
time notes. Commercial real estate loans include fixed, and adjustable
mortgages. Loans are generally to owner occupied businesses. The
portfolio also includes loans to churches, residential rental property,
shopping plazas and residential development loans. Loans to businesses
often entail greater risk because the primary source of repayment is
typically dependent upon adequate cash flow. Cash flow of a business can
be subject to adverse conditions in the economy or a specific industry.
Should cash flow fail, the lender looks to the assets of the business
and/or the ability of the comakers to support the debt. Commercial lenders
consider the Five C's of Credit, character, capacity, capital, condition
and collateral in making commercial credit decisions. Business Manager is
a system which the Bank uses to assist creditworthy businesses with
accounts receivable management. It is a hybrid program combining funding
and billing with cash management, monitoring and reporting functions. The
Bank purchases creditworthy receivables at full recourse with a flexible
reserve. The Bank may earn a discount, interest and/or fees. The Bank has
provided both direct and indirect leasing on a limited basis. The direct
leases are for specific equipment and may be open-end or closed-end.
Indirect leases are established by granting a lease line to a dealer, while
the Bank holds title and files a UCC lien for an assignment of the lease.
Each vehicle has its own amortization.
In addition to the underwriting guidelines followed for specific loan
types, the Bank has underwriting guidelines common to all loan types. With
regard to collateral, the Bank follows supervisory limits set forth in
Regulation H for transactions secured by real estate. Loans in excess of
these guidelines are reported to the Board of Directors on a monthly basis.
Loans not secured by real estate are analyzed on a loan by loan basis,
based on collateral type guidelines set forth in the loan policy.
Appraisal policies follow and comply with provisions outlined under Title
XI of FIRREA. All appraisals are done by
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outside independent appraisers approved by the Board of Directors. The
Bank, as a general rule, gets an appraisal on all real estate transactions
even when not required by Title XI. The Bank may occasionally rely on a
tax appraisal. Senior Loan Committee has the option of requiring equipment
appraisals. Approval procedures include loan authorities approved by the
Board of Directors for individual lenders and loan committees. Retail and
residential loans are centrally underwritten by their respective
departments. Business credits can be approved by the individual commercial
lender or taken to Loan Committee if it exceeds individual approval limits.
Senior Loan Committee approves aggregate loan commitments in excess of the
lender's authority up to $1 million. Executive Loan Committee approves
aggregate loan commitments in excess of $1 million up to the Bank's legal
lending limit. Loans to Directors and Executive Officers are approved by
the Board of Directors. Business loans within a lender's authority are
reported in the Senior Loan Committee minutes. Retail and residential real
estate loan transactions are also reported to Senior Loan Committee at
certain dollar limits. Exceptions and/or overrides are tracked and
reported to Senior Loan Committee.
The Loan Quality Review Committee meets on a monthly basis. The Committee
reviews Bank lending trends, the Past Due Report, the Watch List and
various other reports in order to monitor and maintain credit quality. The
Committee also reviews on a relationship basis, customers on the Bank's
Watch List and credits with aggregate commitments in excess of $1 million.
Revenues from loans accounted for 75%, 73%, and 71% of consolidated
revenues in 1995, 1994, and 1993, respectively. Revenues from interest and
dividends on investment and mortgage-backed securities accounted for 14%,
13%, and 14%, of consolidated revenues in 1995, 1994, and 1993,
respectively.
The Registrant formed the United Credit Life Insurance Company (United
Credit Life) to engage in the underwriting of credit life and credit
accident and health insurance directly related to the extension of credit
by the Bank to its customers. United Credit Life commenced business in
May, 1986. The insurance is currently written by Union Fidelity Life
Insurance Company; however, United Credit Life has entered into reinsurance
treaties with Union Fidelity Life Insurance Company whereby United Credit
Life assumes up to $25,000 of liability on each life policy.
In September, 1994, the Bank purchased four branch offices of the former
TransOhio Federal Savings Bank headquartered in Cleveland, Ohio, from the
Resolution Trust Corporation (RTC). Included in this purchase were $70.4
million in deposits and other liabilities assumed and $0.6 million in cash,
premises and equipment, and other assets. The intangible assets acquired in
the transaction amounted to $6.6 million.
The business of the Registrant is not seasonal to any material degree, nor
is it dependent upon a single or small group of customers whose loss would
result in a material adverse effect on the Registrant or its subsidiaries.
Regulation and Supervision
--------------------------
UNB Corp. is a bank holding company under the Bank Holding Company Act of
1956, as amended, which restricts the activities of the Corporation and the
acquisition by the Corporation of voting stock or assets of any bank,
savings association or other company. The Corporation is also subject to
the reporting requirements of, and examination and regulation by, the Board
of Governors of the Federal Reserve system (Federal Reserve Board).
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on transactions with
affiliates, including any loans
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or extensions of credit to the bank holding company or any of its
subsidiaries, investments in the stock or other securities thereof and the
taking of such stock or securities as collateral for loans to any borrower;
the issuance of guarantees, acceptances or letters of credit on behalf of
the bank holding company and its subsidiaries; purchases or sales of
securities or other assets; and the payment of money or furnishing of
services to the bank holding company and other subsidiaries. Banks and
bank holding companies are prohibited from engaging in certain tie-in
arrangements in connection with extensions of credit or provision of
property or services.
Bank holding companies are prohibited from acquiring direct or indirect
control of more than 5% of any class of voting stock or substantially all
of the assets of any bank holding company without the prior approval of the
Federal Reserve. In addition, acquisitions across state lines are limited
to acquiring banks in those states specifically authorizing such interstate
acquisitions. However, in September 1995, federal law permitted interstate
acquisitions of banks, if the acquired bank retains its separate charter.
As a national bank, United National Bank & Trust Co. is supervised and
regulated by the Comptroller of the Currency (Comptroller). The deposits
of the Bank are insured by the Bank Insurance Fund (BIF) and the deposits
assumed from savings and loans in 1994 and 1991 are insured by the Savings
Association Insurance Fund (SAIF) of the Federal Deposit Insurance
Corporation (FDIC). The Bank is subject to the applicable provisions of
the Federal Deposit Insurance Act. Various requirements and restrictions
under the laws of the United States and the State of Ohio affect the
operations of the Bank, including requirements to maintain reserves against
deposits, restrictions on the nature and amount of loans which may be made
and the interest which may be charged thereon, restrictions relating to
investments and other activities, limitations on credit exposure to
correspondent banks, limitations on activities based on capital and
surplus, limitations on payment of dividends, and limitations on branching.
Under current laws, the Bank may establish branch offices throughout the
State of Ohio. Pursuant to recent federal legislation, the Bank may branch
across state lines, if permitted by the law of the other state. In
addition, effective June 1997, such interstate branching by the Bank will
be authorized, unless the law of the other state specifically prohibits the
interstate branching authority granted by federal law.
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. The risk-based capital guidelines include both a
definition of capital and a framework for calculating risk-based assets by
assigning assets and off-balance sheet items to broad risk categories. The
required minimum ratio of capital to risk-weighted assets (including
certain off-balance sheet items, such as standby letters of credit) was
10.00% at December 31, 1995 as disclosed in Note 14 of UNB Corp.'s 1995
Annual Report (See Exhibit 13). At least half of the total regulatory
capital is to be comprised of common stockholders' equity, including
retained earnings, noncumulative perpetual preferred stock, a limited
amount of cumulative perpetual preferred stock, and minority interests in
equity accounts of consolidated subsidiaries less goodwill (Tier 1
capital). The remainder (Tier 2 capital) may consist of, among other
things, mandatory convertible debt securities, a limited amount of
subordinated debt, other preferred stock and a limited amount of allowance
for loan and lease losses. The Federal Reserve Board has also imposed a
minimum leverage ratio (Tier 1 capital to total assets) of 4% for bank
holding companies that meet certain specified conditions, including no
operational, financial or supervisory deficiencies, and including those
having the highest regulatory (CAMEL) rating. The minimum leverage ratio
is 1.0-2.0% higher for other holding companies based on their
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particular circumstances and risk profiles and those experiencing or
anticipating significant growth. National banks are subject to similar
capital requirements adopted by the Comptroller.
UNB Corp. and its subsidiaries currently satisfy all regulatory capital
requirements. Failure to meet the capital guidelines could subject a
banking institution to a variety of enforcement remedies available to
federal regulatory authorities, including dividend restrictions and the
termination of deposit insurance by the FDIC.
Under an outstanding proposal of the Comptroller and the FDIC, the Bank may
be required to have additional capital if its interest rate risk exposure
exceeds acceptable levels provided for in the regulation. In addition,
those regulators have established regulations governing prompt corrective
action to resolve capital deficient banks. Under these regulations, banks
which become undercapitalized become subject to mandatory regulatory
scrutiny and limitations, which increase as capital continues to decrease.
Such banks are also required to file capital plans with their primary
federal regulator, and their holding companies must guarantee the capital
shortfall up to 5% of the assets of the capital deficient bank at the time
it becomes undercapitalized.
The ability of UNB Corp. to obtain funds for the payment of dividends and
for other cash requirements is largely dependent on the amount of dividends
which may be declared by the Bank. However, the Federal Reserve expects
UNB Corp. to serve as a source of strength to its subsidiaries, which may
require it to retain capital for further investment in the subsidiaries,
rather than for dividends for shareholders of the Corporation. Generally,
United National Bank & Trust Co. must have the approval of its regulatory
authority if a dividend in any year would cause the total dividends for
that year to exceed the sum of current year's net profits and retained net
profits for the preceding two years, less required transfers to surplus. A
national bank may not pay a dividend in an amount greater than its net
profits then on hand after deducting its losses and bad debts or, if less
than 1/10 of net profits for the preceding six months, for a quarterly or
semiannual dividend, or the preceding year for an annual dividend, was
transferred to surplus. The Bank may not pay dividends to the Corporation
if, after such payment, it would fail to meet the required minimum levels
under the risk-based capital guidelines and the minimum leverage ratio
requirements. Payment of dividends by the Bank may be restricted at any
time at the discretion of the regulatory authorities, if they deem such
dividends to constitute an unsafe and/or unsound banking practice or if
necessary to maintain adequate capital for the bank. These provisions
could have the effect of limiting the Corporation's ability to pay
dividends on its outstanding common shares.
Management is not aware of any recommendations by regulatory authorities
which, if they were to be implemented, would have a material effect on the
Registrant.
Government Monetary Policies
----------------------------
The earnings and growth of UNB Corp. are affected not only by general
economic conditions, but also by the fiscal and monetary policies of the
federal government and its agencies and regulatory authorities,
particularly the Federal Reserve Board. Its policies influence the growth
and mix of bank loans, investments and deposits and the interest rates
earned and paid thereon, and thus have an effect on earnings of the
Corporation.
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Due to the changing conditions in the economy and the activities of
monetary and fiscal authorities, no predictions can be made regarding
future changes in interest rates, credit availability or deposit
levels.
Competition
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The Bank competes with nine state and national banks located in Stark and
Summit Counties as well as an additional four in Summit County alone. The
Bank also competes with a large number of other financial institutions,
such as savings and loan associations, savings banks, insurance companies,
consumer finance companies, credit unions, mortgage banking companies, and
commercial finance and leasing companies, for deposits, loans and financial
services business. Money market mutual funds, brokerage houses, and
similar organizations provide many of the financial services offered by the
Bank. Many competitors have substantially greater resources than the Bank.
In the opinion of management, the principal methods of competition are the
rates of interest charged for loans, the rates of interest paid for
deposits and borrowing, the fees charged for services, the availability and
quality of services provided and the convenience of its branch locations.
Effects of Compliance with Environmental Regulations
----------------------------------------------------
Compliance with Federal, State and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment has not had a material effect upon the
capital expenditures, earnings or competitive position of the Registrant or
its subsidiaries. The Registrant anticipates, based on the nature of its
business, that it will have no material capital expenditures for the
purpose of protecting the environment in the foreseeable future. From time
to time the Bank may be required to make capital expenditures for
environmental control facilities related to properties acquired through
foreclosure proceedings. Currently the Bank owns such a parcel of OREO
property in the northwest quadrant of Stark County. The Bank continues to
negotiate with a large national petroleum company, owner of the facility at
the date it was taken out of service and also the party responsible for the
cleanup according to the State of Ohio's Bureau of Underground Storage
Tanks (BUSTER) regulations. Environmental assessments by the Bank and the
petroleum company have been filed with the State agency, which has
requested further validation of the Bank's assessment. Upon completion of
the second assessment report, the Bank will ask for another ruling by the
State. The outcome will determine whether the Bank can proceed with the
marketing of the property for sale and/or any legal action against the
national oil company to remediate the contamination of the property. The
estimated costs, should they become the responsibility of the Bank, are not
material to the business or financial condition of the Registrant and have
been set up as an allowance against the property's value on the
Registrant's Consolidated Balance Sheet.
Employees
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As of December 31, 1995, UNB Corp. and its subsidiaries had 263 full-time
employees and 65 part-time employees. UNB Corp. and its subsidiaries are
not a party to any collective bargaining agreement and management considers
its relationship with its employees to be good.
d. Financial Information About Foreign and Domestic Operations and Export
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Sales
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The Registrant and its subsidiaries do not have any offices located in
foreign countries and they have no foreign assets, liabilities, or related
income and expense for the years presented.
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e. Statistical Disclosure
----------------------
The following section contains certain financial disclosures related to the
Registrant as required under the Securities and Exchange Commission's
Industry Guide 3, "Statistical Disclosures by Bank Holding Companies", or a
specific reference as to the location of the required disclosures in the
Registrant's 1995 Annual Report to Shareholders, portions of which are
incorporated in this Form 10-K by reference.
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UNB CORP.'S STATISTICAL INFORMATION
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I. DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY; INTEREST
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RATES AND INTEREST DIFFERENTIAL
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A. & B. The average balance sheet information and the related analysis of net
interest earnings for the years ending December 31, 1995, 1994, and
1993 are included in Table 4 - "Average Balance Sheet and Related
Yields", within Management's Discussion and Analysis of Financial
Condition and Results of Operations found on page 31 of the
Registrant's 1995 Annual Report to Shareholders and is incorporated
into this Item I by reference.
All interest is reported on a fully taxable equivalent basis using a
marginal tax rate of 35%. Nonaccruing loans, for the purpose of the
computations, are included in the daily average loan amounts outstanding.
Loan fees in the amount of $2,901,438 are included in interest on loans.
C. Tables setting forth the effect of volume and rate changes on interest
income and expense for the years ended December 31, 1995 and 1994 are
included in Table 2 - "Changes in Net Interest Differential - Rate/Volume
Analysis", within Management's Discussion and Analysis of Financial
Condition and Results of Operations found on Page 29 of the Registrant's
1995 Annual Report to Shareholders and is incorporated into this Item I by
reference. For purposes of these tables, changes in interest due to volume
and rate were determined as follows:
Volume Variance - change in volume multiplied by the previous year's
rate.
Rate Variance - change in rate multiplied by the previous year's
volume.
Rate/Volume Variance - change in volume multiplied by the change in
rate.
The rate/volume variance was allocated to volume variance and rate variance
in proportion to the relationship of the absolute dollar amount of the
change in each.
II. INVESTMENT PORTFOLIO
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A. Investment Securities
The carrying value of investment and mortgage-backed securities at the dates
indicated are summarized below:
December 31,
(Dollars in thousands) 1995 1994 1993
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U.S. Treasury securities and securities
of U.S. Government agencies and corporations $ 53,991 $ 63,070 $ 44,619
Obligations of states and political subdivisions 1,238 3,439 3,126
Mortgage-backed securities 63,087 61,586 42,472
Other securities 9,900 11,414 9,159
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Total investment and mortgage-backed securities $128,216 $139,509 $ 99,376
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B. The carrying value and weighted average interest yield for each investment
category listed in Part A at December 31, 1995 which are due (1) in one
year or less, (2) after one year through five years, (3) after five years
through ten years, and (4) after ten years are presented in Note 3 -
Securities, found on page 18 in the Notes to Consolidated Financial
Statements in the Registrant's 1995 Annual Report to Shareholders and is
incorporated herein by reference. The weighted average yields have been
computed by dividing the total interest income adjusted for amortization of
premiums or accretion of discount over the life of the security by the par
value of the securities outstanding. The weighted average yields of tax
exempt obligations are presented on an after tax basis.
C. Excluding those holdings of the investment portfolio in U.S. Treasury
Securities and other agencies and corporations of the U.S. Government,
there were no investments in securities of any one issuer which exceeded
10% of the consolidated shareholder's equity of the Registrant at December
31, 1995.
III. LOAN PORTFOLIO
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A. Types of Loans - Total loans on the balance sheet are comprised of the
following classifications at December 31,
(Dollars in thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Commercial $ 64,811 $ 61,094 $ 61,209 $ 69,935 $ 66,835
Commercial real estate 60,478 53,252 46,723 n/a n/a
Residential real estate 172,283 115,354 81,495 110,957 128,645
Consumer loans 221,158 182,822 161,041 140,046 106,002
------- ------- ------- ------- -------
Total loans $518,730 $412,522 $350,468 $320,938 $301,482
======= ======= ======= ======= =======
The dollar amounts of loans contained in the Commercial real estate
category are not available for the years ending December 31, 1992 and 1991.
Balances for this category of loans are included in the Commercial and
Residential real estate loan categories for those years.
B. Maturities and Sensitivities of Loans to Changes in Interest Rates - The
following is a schedule of contractual maturities and repayments excluding
residential real estate mortgage and installment loans, as of December 31,
1995:
(Dollars in thousands) Commercial and
Commercial Real Estate
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Due in one year or less $ 27,000
Due after one year, but within five years 35,824
Due after five years 62,465
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Total $125,289
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The following is a schedule of fixed rate and variable rate commercial and
commercial real estate loans due after one year (variable rate loans are
those loans with floating or adjustable interest rates):
(Dollars in thousands) Fixed Rate Variable Rate
---------- -------------
Total commercial, and commercial real estate
loans due after one year $13,062 $85,227
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C. Risk Elements
1. Nonaccrual, Past Due and Restructured Loans - The following schedule
summarizes nonaccrual, past due, and restructured loans:
(Dollars in thousands) 1995 1994 1993 1992 1991
----- ---- ---- ---- ----
Nonaccrual loans $ 1,066 $ 1,039 $ 605 $ 29 $ 2,094
Accrual loans past due 90 days 254 19 40 200 449
Restructured loans 212 375 689 530 3
------ ------ ------ ------- --------
Total 1,532 1,433 1,334 759 2,546
Potential problem loans 1,075 5,386 5,521 2,855 2,426
----- ----- ------ ----- -----
Total $2,607 $6,819 $6,855 $ 3,614 $ 4,972
====== ====== ====== ======= =======
For the year ended December 31, 1995, $17,799 of interest income would
have been earned under the original terms of those loans classified as
nonaccrual. The policy for placing loans on nonaccrual status is to
cease accruing interest on loans when management believes that the
collection of interest is doubtful, or when loans are past due
as to principal or interest ninety days or more. The loans must be
brought current and kept current for six consecutive months before
being removed from nonaccrual status. When loans are charged-off, any
accrued interest recorded in the current fiscal year is charged
against interest income. The remaining balance is treated as a loan
charge-off.
The Corporation adopted SFAS No. 114 and SFAS No. 118 effective
January 1, 1995. At December 31, 1995, loans totaling $566 thousand
were classified as impaired. All loans classified as impaired at
December 31, 1995 were also classified as nonaccrual loans, and
therefore the adoption of SFAS No. 114 and SFAS NO. 118 had no effect
on the comparability of non-performing assets at December 31, 1995 to
prior periods.
2. Potential Problem Loans - As shown in the table above, at December
31, 1995, there are approximately $1.1 million of loans not otherwise
identified which are included on management's watch list.
Management's watch list includes both loans which management has some
doubt as to the borrowers' ability to comply with the present
repayment terms and loans which management is actively monitoring due
to changes in the borrowers financial condition. These loans and
their potential loss exposure have been considered in management's
analysis of the adequacy of the allowance for loan losses.
3. Foreign Outstandings - There were no foreign outstandings at December
31, 1995, 1994, or 1993.
4. Loan Concentrations - As of December 31, 1995, indirect installment
loans comprise 33.4% of loans. The dealer network from which the
indirect loans are generated included 162 active relationships at
December 31, 1995, the largest of which was responsible for 7% of
total indirect volume for 1995. There are no additional
concentrations of loans greater than 10% of total loans which are not
otherwise disclosed as a category of loans pursuant to Item III. A.
above. Also refer to the Note 1, Concentrations of Credit Risk,
found on Page 16 of the 1995 Annual Report incorporated herein by
reference.
5. No material amount of loans that have been classified by regulatory
examiners as loss, substandard, doubtful, or special mention have
been excluded from the amounts disclosed as nonaccrual, past due 90
days or more, restructured, or potential problem loans.
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D. Other Interest Bearing Assets - As of December 31, 1995, there are no
other interest bearing assets that would be required to be disclosed
under Item III C.1 or 2 if such assets were loans. The Registrant
had Other Real Estate Owned at December 31, 1995, in the amount of
$325,000.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
-------------------------------
A. The following schedule presents an analysis of the allowance for loan
losses, average loan data, and related ratios for the years ended December
31,
(Dollars in thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Average loans outstanding during the
period (net of unearned income) $ 464,314 $ 385,619 $ 339,468 $ 310,562 $ 266,011
========== ========== ========= ========== =========
Allowance for loan losses
at beginning of year $ 6,348 $ 6,056 $ 4,355 $ 3,221 $ 2,972
Loans charged off:
Commercial 26 13 37 518 2,270
Commercial real estate 20 52 11 n/a n/a
Residential real estate 71 3 11 37 7
Consumer loans 1,441 1,095 822 1,313 747
--------- --------- -------- -------- --------
Total charge-offs 1,558 1,163 881 1,868 3,024
Recoveries:
Commercial 29 52 69 187 111
Commercial real estate 26 7 - n/a n/a
Residential real estate 71 11 7 - -
Consumer loans 576 365 311 315 88
-------- --------- --------- ----------- ---------
Total recoveries 702 435 387 502 199
-------- --------- --------- --------- --------
Net charge-offs 856 728 494 1,366 2,825
Additions from loans acquired - - - - 387
Addition to provision for loan
loss charged to operations 1,750 1,020 2,195 2,500 2,687
------- -------- -------- -------- -------
Allowance for loan losses at end of year $ 7,242 $ 6,348 $ 6,056 $ 4,355 $ 3,221
======== ======== ======= ======== =======
Ratio of net charge-offs to average
loans, net of unearned income 0.18% 0.19% 0.15% 0.44% 1.06%
======= ======= ======= ======= =======
The allowance for loan losses balance and the provision charged to expense
are judgmentally determined by management based upon the periodic review
of the loan portfolio, an analysis of impaired loans, past loan loss
experience, economic conditions, anticipated loan portfolio growth, and
various other circumstances which are subject to change over time. In
making this judgment, management reviews selected large loans as well as
delinquent loans, nonaccrual loans, problem loans, and loans to industries
experiencing economic difficulties. The collectability of these loans is
evaluated after considering the current financial position of the
borrower, the estimated market value of the collateral, guarantees, and
the Company's collateral position versus other creditors. Judgments,
which are necessarily subjective, as to the probability of loss and the
amount of such loss, are formed on these loans, as well as other loans in
the aggregate.
13
14
B. The following schedule is a breakdown of the allowance for loan losses
allocated by type of loan and related ratios:
Allocation of the Allowance for Loan Losses
----------------------------------------------------------------------------
Percentage Percentage
of Loans of Loans
in Each in Each
Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars in thousands)
December 31, 1995 December 31, 1994
------------------------------ ------------------------------------
Commercial $2,160 12.5% $1,660 14.9%
Commercial real estate 782 11.7 840 13.0
Residential real estate 129 33.2 1,257 28.2
Consumer 2,174 42.6 2,129 43.9
Unallocated 1,997 -- 462 --
------ ------ ------ -----
Total $7,242 100.0% $6,348 100.0%
====== ====== ====== =====
December 31, 1993 December 31, 1992
--------------------------------- ------------------------------------
Commercial $1,638 17.5% $ 877 21.8%
Commercial real estate 701 13.3 N/A N/A
Residential real estate 1,230 23.2 953 34.6
Consumer 1,412 46.0 1,490 43.6
Unallocated 1,075 - 1,035 -
------ ------ ------ -----
Total $6,056 100.0% $4,355 100.0%
====== ====== ====== =====
December 31, 1991
--------------------------------
Commercial $1,526 22.2%
Commercial real estate N/A N/A
Residential real estate 152 42.7
Consumer 834 35.1
Unallocated 709 -
------ ------
Total $3,221 100.0%
====== ======
A comparison of allocations of the allowance for loan losses between
December 31, 1995 and prior year ends shows a significant shift in the
dollars allocated to each of the four loan categories. During the third
quarter of 1995, a change in the methodology used to determine the
allocation of the allowance for loan losses among the various loan
categories was approved by the Executive Committee of the Board of
Directors and instituted by management. Management will continue to use
the same three methodologies it has historically used to determine the
allocation of the allowance, however, it will select the single
methodology that results in the highest aggregate calculation for
allocation of the allowance among the various loan categories, and not the
highest specific allocation for each loan category from among the three
methodologies. Management believes this change reflects a more reliable
analysis of the Bank's risk of loan loss.
At December 31, 1995, $188 thousand was specifically allocated to
commercial loans in connection with the adoption of SFAS No. 114. Because
management's analysis of problem loans would have provided a similar
allocation prior to
14
15
adopting SFAS No. 114, the adoption of SFAS No. 114 had no impact on the
comparability of the December 31, 1995 allowance for loan loss allocation
to prior periods.
While management's periodic analysis of the adequacy of the allowance for
loan loss may allocate portions of the allowance for specific problem loan
situations, the entire allowance is available for any loan charge-offs
that occur.
V. DEPOSITS
--------
The following is a schedule of average deposit amounts and average rates
paid on each category for the periods included:
(Dollars in thousands) Years Ended December 31,
-------------------------------------------------------------------
1995 1994 1993
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
Noninterest bearing
demand deposits $ 66,329 - $ 58,788 - $ 52,342 -
Interest bearing
demand deposits 68,361 1.92% 66,667 1.91% 63,118 2.31%
Savings 151,229 2.63 151,768 2.47 144,707 2.82
Certificates and other
time deposits 216,187 5.67 149,771 4.40 144,459 4.38
------- ------- -------
$502,106 $426,994 $404,626
======= ======= =======
The following table summarizes time deposits issued in amounts of $100,000
or more as of December 31, 1995 by time remaining until maturity:
(Dollars in thousands)
Maturing in:
Under 3 months $ 11,178
Over 3 to 6 months 9,931
Over 6 to 12 months 5,967
Over 12 months 8,303
-------
$ 35,379
=======
VI. RETURN ON EQUITY AND ASSETS
---------------------------
Information required by this section is incorporated by reference to the
information appearing in the table under the caption "Five-Year Summary of
Selected Data" located on Page 38 of the Registrant's 1995 Annual Report
to Shareholders.
VII. SHORT-TERM BORROWING
--------------------
Information required by this section is incorporated by reference to Note
8 - "Short-term Borrowing" on Page 20 of the 1995 Annual Report to
Shareholders incorporated herein by reference.
15
16
Item 2 - Properties
-------------------
The Bank's main office in the United Bank Building at 220 Market Avenue
South, Canton, Ohio, housing its executive offices and the Corporation's
executive offices, is leased through 2003 with five three-year options
extending through 2018. The properties occupied by fourteen of the Bank's
branches are owned by the Bank, while properties occupied by its remaining
six branches are leased with various expiration dates running through 2002
with renewal options. Property has been purchased to consolidate the two
branch offices in Hartville, Ohio, into a new facility with construction
to begin the first quarter of 1996.
The Bank's Operations Center, at 624 Market Avenue North, Canton, Ohio, is
owned by the Bank which leases approximately 13,000 square feet of this
facility to a law firm. There is no mortgage debt owing on any of the
above property owned by the Bank. A listing of all branch offices is
located under the caption "Banking Centers" found on page 8 of the
Registrant's 1995 Annual Report to Shareholders, and is incorporated
herein by reference. With the new Hartville facility and scheduled
renovations and enhancements to the Bank's Belden Village, Wales Square
and Beach City offices as well as its Operations Center, management
considers its properties to be satisfactory for its current operations.
Item 3 - Legal Proceedings
- --------------------------
The Company is subject to various pending and threatened lawsuits in which
claims for monetary damages are asserted in the ordinary course of
business. While any litigation involves an element of uncertainty, in the
opinion of management, liabilities, if any, arising from such litigation
or threat thereof will not have a material effect on the Company.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
During the fourth quarter of the year ended December 31, 1995, there were
no matters submitted to a vote of security holders.
PART II
Item 5 - Market Price of and Dividends on the Common Equity and Related
- -----------------------------------------------------------------------
Shareholder Matters
-------------------
The information required under this item is incorporated by reference to
the information appearing under the caption "Market Price Ranges for
Common Stock" located on Page 37 of the Registrant's 1995 Annual Report to
Shareholders. In addition, attention is directed to the caption "Capital
Resources" within Management's Discussion and Analysis located on page 33
of the Registrant's 1995 Annual Report to Shareholders and to Note 14
"Commitments and Contingencies" located on page 23 therein. Such
information is incorporated herein by reference.
Item 6 - Selected Financial Data
- --------------------------------
The information required under this item is incorporated by reference to
the information appearing under the caption "Five Year Summary of Selected
Data"
16
17
located on page 38 of the 1995 Annual Report to Shareholders. See Note 1
under the caption "Allowance for Loan Losses" on page 15 and Note 4 -
Loans on page 19 of the 1995 Annual Report to Shareholders, incorporated
herein by reference for a discussion of the impact of the adoption on
January 1, 1995 of SFAS No. 114 and No. 118, "Accounting by Creditors for
Impairment of a Loan". See Note 2 on page 17 of the 1995 Annual Report to
Shareholders for a discussion of the impact on the Registrant of the
acquisition of certain assets and assumption of certain deposits and other
liabilities of the former TransOhio Federal Savings Bank from the
Resolution Trust Company in 1994. See Note 1 under the caption "Federal
Income Taxes" on page 16 of the Annual Report to Shareholders for a
discussion of the impact of adopting SFAS No. 109, "Accounting for Income
Taxes", on the Registrant's Consolidated Statement of Income in 1993.
Item 7 - Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" appears on pages 27 through 36 of the Registrant's 1995
Annual Report to Shareholders and is incorporated herein by reference.
Item 8 - Financial Statements and Supplementary Financial Data
- --------------------------------------------------------------
The Registrant's Report of Independent Auditors and Consolidated Financial
Statements are listed below and are incorporated herein by reference to
UNB Corp.'s 1995 Annual Report to Shareholders (Exhibit 13), pages 10
through 26. The supplementary financial information specified by Item 302
of Regulation S-K, selected quarterly financial data, is included in Note
17 to the consolidated financial statements found on page 26.
Report of Independent Auditors
Consolidated Balance Sheets
December 31, 1995 and 1994
Consolidated Statements of Income
For the three years ended December 31, 1995
Consolidated Statements of Changes in Shareholders' Equity
For the three years ended December 31, 1995
Consolidated Statements of Cash Flows
For the three years ended December 31, 1995
Notes to Consolidated Financial Statements
Item 9 - Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
--------------------
Crowe, Chizek and Company LLP, Certified Public Accountants, served as
independent public accountants for the purpose of auditing the
Corporation's Annual Consolidated Financial Statements and for the
preparation of consolidated tax returns for the fiscal years ending
December 31, 1995, 1994, and 1993. The appointment of independent public
accountants is approved annually by the Board of Directors. For the year
1996, the Board of Directors has again authorized the engagement of Crowe,
Chizek and Company LLP as independent auditors.
17
18
PART III
Information relating to the following items is included in the Registrant's
definitive proxy statement for the annual meeting of shareholders to be held
Tuesday, April 16, 1996, ("1995 Proxy Statement") filed with the Commission
pursuant to Section 14(A) of the Securities Exchange Act of 1934 and is
incorporated by reference into this Form 10-K Annual Report (Exhibit 22).
Item 10 - Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Item 11 - Executive Compensation
- --------------------------------
Item 12 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
- --------------------------------------------------------------------------
A. Financial Statement Schedules
-----------------------------
1. Financial Statements
--------------------
The following consolidated financial statements of the Registrant
appear in the 1995 Annual Report to Shareholders (Exhibit 13) on the
pages referenced and are specifically incorporated by reference under
Item 8 of this Form 10-K:
Annual Report
Page Numbers
-------------
Report of Independent Auditors 10
Consolidated Balance Sheets, December 31, 1995 and 1994 11
Consolidated Statements of Income,
For the three years ended December 31, 1995 12
Consolidated Statements of Changes in Shareholders' Equity,
For the three years ended December 31, 1995 13
Consolidated Statements of Cash Flows,
For the three years ended December 31, 1995 14
Notes to Consolidated Financial Statements 15-26
2. Financial Statement Schedules
-----------------------------
Financial statement schedules are omitted as they are not required or
are not applicable, or the required information is included in the
financial statements found in the Registant's 1995 Annual Report to
Shareholders.
18
19
3. Exhibits
--------
Reference is made to the Exhibit Index which is found on Page 22 of
this Form 10-K.
B. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of the year
ending December 31, 1995.
19
20
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.
UNB Corp.
By /s/ Robert L. Mang
----------------------------------
Robert L. Mang, President and CEO
Date March 25, 1996
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert L. Mang
- --------------------------------- President, CEO March 25, 1996
Robert L. Mang and Director
(Principal Executive Officer)
/s/ James J. Pennetti
- --------------------------------- Vice President March 14, 1996
James J. Pennetti and Treasurer
(Principal Financial
and Accounting Officer)
/s/ Donald W. Schneider
- --------------------------------- Chairman of March 14, 1996
Donald W. Schneider the Board
/s/ E. Lang D'Atri
- --------------------------------- Director March 14, 1996
E. Lang D'Atri
/s/ Edgar W. Jones, Jr.
- --------------------------------- Director March 14, 1996
Edgar W. Jones, Jr.
20
21
SIGNATURES (continued)
UNB Corp.
__________________________________ Director ___________________
James A. O'Donnell
/s/ John D. Regula March 14, 1996
__________________________________ Director ___________________
John D. Regula
/s/ James P. Rodman March 14, 1996
__________________________________ Director ___________________
James P. Rodman
21
22
EXHIBIT INDEX
--------------
Exhibit Number Exhibit Description
- -------------- ---------------------------------------------------------------------------------------------
11 Statement regarding Computation of Per Share Earnings (included in Note 1 to the Consolidated
Financial Statements, 1995 Annual Report to Shareholders under the caption "Earnings and
Dividends Declared Per Share").
13 Annual Report to Shareholders of UNB Corp. for the Fiscal Year Ended December 31, 1995
21 Subsidiaries of the Registrant (exhibit is filed herewith).
22 Proxy Statement of UNB Corp. dated February 23, 1996, for the Annual Meeting of Shareholders
on April 16, 1996.
27 Financial Data Schedule (submitted as part of electronic filing only)
22