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, 2007
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:
NONE N/A
(Title of class) (Name of each exchange on which registered)
Common Stock, Par Value $1.00 a share NASDAQ Capital Market
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
INDICATE BY CHECK MARK IF THE REGISTRANT IS A WELL-KNOWN SEASONED ISSUER, AS
DEFINED IN RULE 405 OF THE SECURITIES ACT. YES NO X .
--- ---
INDICATED BY CHECK MARK IF THE REGISTRANT IS NOT REQUIRED TO FILE REPORTS
PURSUANT TO SECTION 13 OR SECTION 15(D) OF THE EXCHANGE ACT. YES NO X .
--- ---
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 A LARGE ACCELERATED FILER, AN
ACCELERATED FILER, A NON-ACCELERATED FILER, OR A SMALLER REPORTING COMPANY. SEE
THE DEFINITIONS OF "LARGE ACCELERATED FILER," "ACCELERATED FILER" AND "SMALLER
REPORTING COMPANY" IN RULE 12B-2 OF THE EXCHANGE ACT.
LARGE ACCELERATED FILER [ ] ACCELERATED FILER [ ]
NON-ACCELERATED FILER [ ] SMALLER REPORTING COMPANY [X]
(DO NOT CHECK IF A SMALLER REPORTING COMPANY)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN
RULE 12B-2 OF THE EXCHANGE ACT).
YES NO X
--- ---
AS OF JUNE 30, 2007 THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S COMMON STOCK
HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $38,910,783 BASED ON THE CLOSING
SALE PRICE AS REPORTED ON THE NATIONAL ASSOCIATION OF SECURITIES DEALERS
AUTOMATED QUOTATION SYSTEM.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE REGISTRANT HAD 5,000,038 COMMON
SHARES OUTSTANDING AS OF MARCH 6, 2008.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE PROXY STATEMENT FOR THE ANNUAL SHAREHOLDERS MEETING TO BE HELD
APRIL 16, 2008 ARE INCORPORATED BY REFERENCE INTO PART III.
PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31,
2007 ARE INCORPORATED BY REFERENCE INTO PARTS I AND II.
PART I
ITEM 1 BUSINESS
BUSINESS
United Bancorp, Inc. (Company) is a bank holding company headquartered
in Martins Ferry, Ohio. The Company at December 31, 2007, has one
wholly-owned subsidiary bank, The Citizens Savings Bank, Martins
Ferry, Ohio (CITIZENS). On July 1, 2007, the Company received
regulatory approval for the merger of its two wholly-owned
subsidiaries, The Glouster Community Bank ("Community"), Lancaster,
Ohio, and The Citizens Savings Bank ("Citizens"), Martins Ferry, Ohio,
under the charter of the latter. The Boards of both Citizens and
Community endorsed this consolidation. The Company continues to
capitalize on the established branding in the market places of each
institution.
CITIZENS serves customers in northeastern, eastern, southeastern and
south central Ohio and is engaged in the business of commercial and
retail banking in Belmont, Harrison, Tuscarawas, Carroll, Athens,
Hocking, and Fairfield counties and the surrounding localities. The
Bank provides a broad range of banking and financial services, which
includes accepting demand, savings and time deposits and granting
commercial, real estate and consumer loans. CITIZENS conducts its
business through its main office and stand alone operations center in
Martins Ferry, Ohio and sixteen branches located in the counties
memtioned above. CITIZENS also offers full brokerage service through
UVEST(R) member NASD/SIPC.
CITIZENS has 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.
COMPETITION
The markets in which CITIZENS operates 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.
CITIZENS also encounters similar competition for loans and deposits
throughout the Athens, Hocking, and Fairfield County geographic areas
of central and southeastern Ohio.
SUPERVISION AND REGULATION
GENERAL
The Company is a corporation organized under the laws of the State of
Ohio. The business in which the Company and its subsidiary are engaged
is subject to extensive supervision, regulation and examination by
various bank regulatory authorities. The supervision, regulation and
examination to which the Company and its subsidiary are subject are
intended primarily for the protection of depositors and the deposit
insurance funds that insure the deposits of banks, rather than for the
protection of shareholders.
Several of the more significant regulatory provisions applicable to
banks and bank holding companies to which the Company and CITIZENS are
subject are discussed below. To the extent that the following
information describes statutory or regulatory provisions, it is
qualified in its entirety by reference to the particular statutory
provisions. Any change in applicable law or regulation may have a
material effect on the business and prospects of the Company and
CITIZENS.
REGULATORY AGENCIES
The Company is a registered bank holding company and is subject to
inspection, examination and supervision by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") pursuant to
the Bank Holding Company Act of 1956, as amended.
CITIZENS is an Ohio chartered commercial bank. It is subject to
regulation and examination by both the Ohio Division of Financial
Institutions (the "ODFI") and the FDIC.
THE HOLDING COMPANY
As a holding company incorporated and doing business within the State
of Ohio, the Company is subject to regulation and supervision under
the Bank Holding Act of 1956, as amended (the "Act"). The Company is
required to file with the Federal Reserve Board on quarterly basis
information pursuant to the Act. The Federal Reserve Board may conduct
examinations or inspections of the Company and CITIZENS.
The Company is required to obtain prior approval from the Federal
Reserve Board for the acquisition of more than five percent of the
voting shares or substantially all of the assets of any bank or bank
holding company. In addition, the Company is generally prohibited by
the Act from acquiring direct or indirect ownership or control of more
than five percent of the voting shares of any company which is not a
bank or bank holding company and from engaging directly or indirectly
in activities other than those of banking, managing or controlling
banks or furnishing services to its subsidiaries. The Company may,
however, subject to certain prior approval requirements of the Federal
Reserve Board, engage in, or acquire shares of companies engaged in
activities which are deemed by the Federal Reserve Board by order or
by regulation to be financial in nature or closely related to banking.
On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was
enacted into law. The GLB Act made sweeping changes with respect to
the permissible financial services which various types of financial
institutions may now provide. The Glass-Steagall Act, which had
generally prevented banks from affiliation with securities and
insurance firms, was repealed. Pursuant to the GLB Act, bank holding
companies may elect to become a "financial holding company," provided
that all of the depository institution subsidiaries of the bank
holding company are "well capitalized" and "well managed" under
applicable regulatory standards.
Under the GLB Act, a bank holding company that has elected to become a
financial holding company may affiliate with securities firms and
insurance companies and engage in other activities that are financial
in nature. Activities that are "financial in nature" include
securities underwriting, dealing and market-making, sponsoring mutual
funds and investment companies, insurance underwriting and agency,
merchant banking, and activities that the Federal Reserve Board has
determined to be closely related to banking. No Federal Reserve Board
approval is required for the Company to acquire a company, other than
a bank holding company, bank or savings association, engaged in
activities that are financial in nature or incidental to activities
that are financial in nature, as determined by the Federal Reserve
Board. Prior Federal Reserve Board approval is required before the
Company may acquire the beneficial ownership or control of more than
5% of the voting shares, or substantially all of the assets, of a bank
holding company, bank or savings association. If any subsidiary bank
of the Company ceases to be "well capitalized" or "well managed" under
applicable regulatory standards, the Federal Reserve Board may, among
other actions, order the Company to divest the subsidiary bank.
Alternatively, the Company may elect to conform its activities to
those permissible for a bank holding company that is not also a
financial holding company. If any subsidiary bank of the Company
receives a rating under the Community Reinvestment Act of 1977 of less
than satisfactory, the Company will be prohibited from engaging in new
activities or acquiring companies other than bank holding companies,
banks or savings associations. The Company is not a financial holding
company and has no current intention of making such an election.
THE BANK
General. CITIZENS is an Ohio-chartered bank that is not a member of
the Federal Reserve System. CITIZENS is therefore regulated by the
ODFI as well as the FDIC. The regulatory agencies have the authority
to regularly examine CITIZENS, which is subject to all applicable
rules and regulations promulgated by its supervisory agencies. In
addition, the deposits of CITIZENS are insured by the FDIC to the
fullest extent permitted by law.
Deposit Insurance. As an FDIC-insured institution, CITIZENS is
required to pay deposit insurance premium assessments to the FDIC. The
FDIC has adopted a risk-based assessment system under which all
insured depository institutions are placed into one of nine categories
and assessed insurance premiums based upon their respective levels of
capital and results of supervisory evaluations. Institutions
classified as well-capitalized (as defined by the FDIC) and considered
healthy pay the lowest premium while institutions that are less than
adequately capitalized (as defined by the FDIC) and considered of
substantial supervisory concern pay the highest premium. Risk
classification of all insured institutions is made by the FDIC for
each semi-annual assessment period.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the
institution has engaged or is engaging in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations or has
violated any applicable law,
regulation, order, or any condition imposed in writing by, or written
agreement with, the FDIC. The FDIC may also suspend deposit insurance
temporarily during the hearing process for a permanent termination of
insurance if the institution has no tangible capital. Management of
the Company is not aware of any activity or condition that could
result in termination of the deposit insurance of CITIZENS.
Capital Requirements. The Federal Reserve Board, ODFI and FDIC require
banks and holding companies to maintain minimum capital ratios. The
"risk-adjusted" capital guidelines for CITIZENS and the Company
involve a mathematical process of assigning various risk weights to
different classes of assets, then evaluating the sum of the
risk-weighted balance sheet structure against CITIZENS's and Company's
capital base. The rules set the minimum guidelines for the ratio of
capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) at 8%. Tier 1 Capital
is comprised of common equity, retained earnings, and a limited amount
of perpetual preferred stock less certain intangible items. At least
half of the total capital is to be Tier 1 Capital. The remainder may
consist of a limited amount of subordinated debt, other preferred
stock, and a portion of the loan loss reserves (not to exceed 1.25% of
risk-weighted assets). CITIZENS anticipates maintaining capital at a
level sufficient to be classified as "well capitalized" pursuant to
the Federal Reserve guidelines.
In addition, the federal banking regulatory agencies have adopted
leverage capital guidelines for banks and bank holding companies.
Under these guidelines, banks and bank holding companies must maintain
a minimum ratio of three percent (3%) Tier 1 Capital to total assets.
However, most banking organizations are expected to maintain capital
ratios well in excess of the minimum level and generally must keep
their Tier 1 ratio at or above 5%. CITIZENS intends to maintain
capital well above the regulatory minimum.
The capital requirements described above are minimum requirements.
Higher capital levels will be required if warranted by the particular
circumstances or risk profiles of individual institutions. For
example, the regulations provide that additional capital may be
required to take adequate account of, among other things, interest
rate risk or the risks posed by concentrations of credit,
nontraditional activities or securities trading activities. As of
December 31, 2007, CITIZENS exceeded its minimum regulatory capital
requirements with a total risk-based capital ratio of 14.14%, a Tier 1
risk-based capital ratio of 13.23% and aTier 1 leverage ratio of
8.07%.
In addition to the minimum regulatory capital requirements discussed
above, provisions contained in the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") expressly provide for certain
supervisory actions which are directly keyed to the capital levels of
an insured depository institution. These "prompt corrective action"
provisions impose progressively more restrictive constraints on
operations, management and capital distributions of a particular
institution as its regulatory capital decreases. Using Tier 1
risk-based, total risk-based, and Tier 1 leverage capital ratios as
the relevant measures, FDIC insured depository institutions are
grouped into one of the following five prompt corrective action
capital categories: well capitalized, adequately capitalized;
undercapitalized; significantly undercapitalized; and critically
undercapitalized. An institution is considered well capitalized if it
has a total risk-based capital ratio of at least 10%, a Tier 1
risk-based capital ratio of at least 6% and a Tier 1 leverage capital
ratio of at least 5%, provided, however, such institution is not
subject to a written advisement, order or capital directive to meet
and maintain a specific capital level for any particular capital
measure. An adequately capitalized institution must have a total
risk-based capital ratio of at least 8%, a Tier 1 risk-based capital
ratio of at least 4% and a Tier 1 leverage capital ratio of at least
4% (3% if the institution has achieved the highest composite rating in
its most recent examination). At December 31, 2007, CITIZENS satisfied
all requirements for inclusion in the "well capitalized" category.
Dividends. Ohio law prohibits CITIZENS, without the prior approval of
the ODFI, from paying dividends in an amount greater than the lesser
of its undivided profits or the total of its net income for that year,
combined with its retained net income from the preceding two years.
The payment of dividends by any financial institution or its holding
company is also affected by the requirement to maintain adequate
capital pursuant to applicable capital adequacy guidelines and
regulations, and a financial institution generally is prohibited from
paying any dividends if, following payment thereof, the institution
would be under-capitalized. As described above, CITIZENS exceeded its
minimum capital requirements under applicable guidelines as of
December 31, 2007.
Branching Authority. Ohio chartered banks have the authority under
Ohio law to establish branches anywhere in the State of Ohio, subject
to receipt of all required regulatory approvals. Additionally, in May
1997 Ohio adopted legislation "opting in" to the provisions of
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Act") which allows banks to establish interstate
branch networks through acquisitions of other banks, subject to
certain conditions, including certain limitations
on the aggregate amount of deposits that may be held by the surviving
bank and all of its insured depository institution affiliates. The
establishment of de novo interstate branches or the acquisition of
individual branches of a bank in another state (rather than the
acquisition of an out-of-state bank in its entirety) is also allowed
by the Riegle-Neal Act and authorized by Ohio law.
Affiliate Transactions. Various governmental requirements, including
Sections 23A and 23B of the Federal Reserve Act, limit borrowings by
holding companies and non-bank subsidiaries from affiliated insured
depository institutions, and also limit various other transactions
between holding companies and their non-bank subsidiaries, on the one
hand, and their affiliated insured depository institutions on the
other. Section 23A of the Federal Reserve Act also generally requires
that an insured depository institution's loan to its non-bank
affiliates be secured, and Section 23B of the Federal Reserve Act
generally requires that an insured depository institution's
transactions with its non-bank affiliates be on arms-length terms.
Depositor Preference. The Federal Deposit Insurance Act provides that,
in the event of the "liquidation or other resolution" of an insured
depository institution, the claims of depositors of the institution,
including the claims of the FDIC as subrogee of insured depositors,
and certain claims for administrative expenses of the FDIC as a
receiver, will have priority over other general unsecured claims
against the institution. If an insured depository institution fails,
insured and uninsured depositors, along with the FDIC, will have
priority in payment ahead of unsecured, non deposit creditors and
shareholders of the institution.
Privacy Provisions of Gramm-Leach-Bliley Act. Under GLB, federal
banking regulators adopted rules that limit the ability of banks and
other financial institutions to disclose non-public information about
consumers to non-affiliated third parties. These limitations require
disclosure of privacy policies to consumers and, in some
circumstances, allow consumers to prevent disclosure of certain
personal information to non-affiliated third parties. The privacy
provisions of GLB affect how consumer information is transmitted
through diversified financial companies and conveyed to outside
vendors.
Anti-Money Laundering Provisions of the USA Patriot Act of 2001. On
October 26, 2001, the USA Patriot Act of 2001 (the "Patriot Act") was
signed into law. The Patriot Act is intended to strengthen U.S. law
enforcement's and the intelligence community's ability to work
cohesively to combat terrorism on a variety of fronts. The potential
impact of the Patriot Act on financial institutions of all kinds is
significant and wide-ranging. The Patriot Act contains sweeping
anti-money laundering and financial transparency laws and requires
various regulations, including: (a) due diligence requirements for
financial institutions that administer, maintain, or manage private
bank accounts or correspondent accounts for non-U.S. persons; (b)
standards for verifying customer identification at account opening;
and (c) rules to promote cooperation among financial institutions,
regulators and law enforcement entities in identifying parties that
may be involved in terrorism or money laundering.
Fiscal and Monetary Policies. CITIZENS's business and earnings are
affected significantly by the fiscal and monetary policies of the
federal government and its agencies. CITIZENS is particularly affected
by the policies of the Federal Reserve Board, which regulates the
supply of money and credit in the United States. Among the instruments
of monetary policy available to the Federal Reserve are (a) conducting
open market operations in United States government securities, (b)
changing the discount rates of borrowings of depository institutions,
(c) imposing or changing reserve requirements against depository
institutions' deposits, and (d) imposing or changing reserve
requirements against certain borrowing by banks and their affiliates.
These methods are used in varying degrees and combinations to affect
directly the availability of bank loans and deposits, as well as the
interest rates charged on loans and paid on deposits. For that reason
alone, the policies of the Federal Reserve Board have a material
effect on the earnings of CITIZENS.
Additional and Pending Regulation. CITIZENS is also subject to federal
regulation as to such matters as the maintenance of required reserves
against deposits, limitations in connection with affiliate
transactions, limitations as to the nature and amount of its loans and
investments, regulatory approval of any merger or consolidation,
issuance or retirement by CITIZENS of its own securities and other
aspects of banking operations. In addition, the activities and
operations of CITIZENS are subject to a number of additional detailed,
complex and sometimes overlapping laws and regulations. These include
state usury and consumer credit laws, state laws relating to
fiduciaries, the Federal Truth-in-Lending Act and Regulation Z, the
Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit
Reporting Act, the Truth in Savings Act, the Community Reinvestment
Act, anti-redlining legislation and antitrust laws.
Congress regularly considers legislation that may have an impact upon
the operation of the Company and CITIZENS. At this time, the Company
is unable to predict whether any proposed legislation will be
enacted and, therefore, is unable to predict the impact such
legislation may have on the operations of the Company.
EMPLOYEES
The Company itself, as a holding company, has no compensated
employees. CITIZENS has 104 full time employees, with 30 of these
serving in a management capacity, and 19 part time employees.
INDUSTRY SEGMENTS
United Bancorp and its subsidiary are engaged in one line of business,
banking. Item 8 of this 10-K provides financial information for United
Bancorp's business.
REPORTS TO SECURITY HOLDERS
The Company files annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and proxy solicitation
materials, as applicable, under Commission Regulation 14A. The public
may read and copy any materials the Company files with the Commission
at the SEC's Public Reference Room at 100 F. Street, NE, Washington,
DC 20549, on official business days during the hours of 10:00 am to
3:00 pm. The public may obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that
file electronically with the Commission at HTTP://WWW.SEC.GOV. The
Company's internet website is WWW.UNITEDBANCORP.COM.
I DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
Refer to Management's Discussion and Analysis "Average Balances, Net
Interest Income and Yields Earned and Rates Paid" beginning on page 23
of our 2007 Annual Report, which is incorporated by reference.
II INVESTMENT PORTFOLIO
A The following table sets forth the carrying amount of securities at
December 31, 2007, 2006 and 2005:
DECEMBER 31,
------------------------------
(In thousands) 2007 2006 2005
-------- -------- --------
AVAILABLE FOR SALE (AT MARKET)
US Government agency obligations $113,002 $ 79,864 $ 75,483
Mortgage-backed securities 23,602 28,221 35,440
Collateralized mortgage obligations 630 765 2,230
State and municipal obligations 28,070 24,953 8,769
Equity securities 20 5 24
-------- -------- --------
$165,324 $133,808 $121,946
======== ======== ========
HELD TO MATURITY (AT COST)
State and municipal obligations $ 16,142 $ 17,870 $ 20,262
======== ======== ========
B Contractual maturities of securities at year-end 2007 were as follows:
AVERAGE
AMORTIZED ESTIMATED TAX EQUIVALENT
AVAILABLE FOR SALE COST FAIR VALUE YIELD
------------------ --------- ---------- --------------
(Dollars in Thousands)
US GOVERNMENT AGENCY OBLIGATIONS
Under 1 year -- -- --
1-5 years $ 5,892 $ 5,908 4.34%
5-10 years 19,007 19,048 5.11%
Over 10 years 87,571 88,046 5.80%
-------- -------- ----
Total 112,470 113,002 5.60%
-------- -------- ----
MORTGAGE-BACKED SECURITIES
Under 1 year 273 273 4.23%
1-5 years 4,128 4,075 4.11%
5-10 years 3,505 3,487 4.43%
Over 10 years 16,008 15,767 4.57%
-------- -------- ----
Total 23,914 23,602 4.46%
-------- -------- ----
COLLATERALIZED MORTGAGE OBLIGATIONS
Under 1 year -- -- --
1-5 years 190 189 4.29%
5-10 years 238 235 4.31%
Over 10 years 207 206 4.59%
-------- -------- ----
Total 635 630 4.40%
-------- -------- ----
STATE AND MUNICIPAL OBLIGATIONS
Under 1 year -- -- --
1-5 years 1,752 1,776 6.42%
5-10 years 4,765 4,760 5.05%
Over 10 years 21,556 21,534 5.76%
-------- -------- ----
Total 28,073 28,070 5.68%
-------- -------- ----
OTHER SECURITIES
Equity securities 4 20 0.00%
-------- -------- ----
TOTAL SECURITIES AVAILABLE FOR SALE $165,096 $165,324 5.32%
======== ======== ====
HELD TO MATURITY
STATE AND MUNICIPAL OBLIGATIONS
Under 1 year -- -- --
1-5 years $ 2,803 $ 2,894 6.96%
5-10 years 5,714 5,858 6.99%
Over 10 years 7,625 7,729 6.06%
-------- -------- ----
TOTAL SECURITIES HELD TO MATURITY $ 16,142 $ 16,481 6.23%
======== ======== ====
C Excluding holdings of U.S. Agency obligations, there were no
investments in securities of any one issuer exceeding 10% of the
Company's consolidated shareholders' equity at December 31, 2007.
III LOAN PORTFOLIO
A TYPES OF LOANS
The amounts of gross loans outstanding at December 31, 2007,
2006, 2005, 2004 and 2003 are shown in the following table
according to types of loans:
December 31,
----------------------------------------------------
(In thousands) 2007 2006 2005 2004 2003
----------------------------- -------- -------- -------- -------- --------
Commercial loans $ 59,785 $ 40,512 $ 32,675 $ 35,309 $ 28,049
Commercial real estate loans 74,660 92,895 97,706 83,103 68,902
Residential real estate loans 58,524 56,167 57,746 55,062 52,237
Installment loans 41,675 41,943 43,884 41,973 49,421
-------- -------- -------- -------- --------
Total loans $234,644 $231,517 $232,011 $215,447 $198,609
======== ======== ======== ======== ========
Construction loans were not significant at any date indicated above.
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, 2007 maturing within the various time frames
indicated:
One Year One Through After
(In thousands) Or Less Five Years Five Years Total
---------------------------- -------- ----------- ---------- --------
Commercial loans $13,808 $16,805 $29,172 $ 59,785
Commercial real estate loans 12,717 8,193 53,750 74,660
------- ------- ------- --------
Total $26,525 $24,998 $82,922 $134,445
======= ======= ======= ========
The following is a schedule of fixed-rate and variable-rate commercial
and commercial real estate loans at December 31, 2007 due to mature
after one year:
FIXED VARIABLE TOTAL >
(In thousands) RATE RATE ONE YEAR
---------------------------- ------- -------- --------
Commercial loans $27,284 $18,693 $ 45,977
Commercial real estate loans 10,689 51,254 61,943
------- ------- --------
Total $37,973 $69,947 $107,920
======= ======= ========
Variable rate loans are those loans with floating or adjustable
interest rates.
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, and impaired loans
at December 31, 2007, 2006 2005, 2004 and 2003:
DECEMBER 31,
----------------------------------------
(In thousands) 2007 2006 2005 2004 2003
---------------------- ------ ------ ------ ------ ----
Nonaccrual basis (1) $1,822 $3,396 $1,144 $1,106 $101
Accruing loans 90 days
or greater past due
(4) $2,585 $ 55 $ 417 $ 500 $655
Impaired loans (2) (3) $3,399 $3,122 $ 875 -- --
Impaired loans with
related allowance
for unconfirmed
losses (5) $2,347 $1,012 -- -- --
Impaired loans without
related allowance
for unconfirmed
losses(6) $1,051 $2,110 $ 875 -- --
(1) There were no restructured loans at any of the dates indicated above. For
years 2003 through 2006,, all of the Company's impaired loans were on a
nonaccrual basis. For 2007, includes $1,675,000 of impaired loans
(2) Loans considered impaired under the provisions of SFAS No. 114 and interest
recognized on a cash received basis were not material for 2003 through
2004, inclusive. Interest recognized on impaired loans in 2007 was $84,000
and in 2006 it was $309,000.
(3) Additional information incorporated by reference on page 44 of the Notes to
Consolidated Financial Statements set forth in our 2007 Annual Report,
which is incorporated herein by reference.
(4) Loans past due greater than 90 days and still accruing totaling $1,724,000
in 2007 are also classified as impaired loans.
(5) Includes $1,082,000 of loans past due greater than 90 days and still
accruing and $1,266,000 of nonaccrrual loans at December 31, 2007.
(6) Includes $642,000 of loans past due greater than 90 days and $409,000 of
nonaccrual loans at December 31, 2007.
The additional amount of interest income that would have been recorded
on nonaccrual loans, had they been current, totaled approximately
$128,000 and $218,000 for the years ended December 31, 2007 and 2006.
At that date, all impaired loans were commercial or commercial real
estate loans.
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.
The allowance for loan losses is a valuation allowance for probable
incurred credit losses, increased by the provision for loan losses and
decreased by charge-offs less recoveries. Management estimates the
allowance balance required based on past loan loss experience, the
nature and volume of the portfolio, information about specific
borrower situations and estimated collateral values, economic
conditions and other factors. Allocations of the allowance may be made
for specific loans, but the entire allowance is available for any loan
that, in management's judgment, should be charged-off. Loan losses are
charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed. The Company accounts
for impaired loans in accordance with SFAS No. 114, "Accounting for
Creditors for Impairment of a Loan." SFAS 114 requires that impaired
loans be measured based upon the present value of expected future cash
flows discounted at the loan's effective interest rate or, as an
alternative, at the loan's observable market price or fair value of
the collateral. A loan is defined under SFAS No. 114 as impaired when,
based on current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. In applying the provisions of
SFAS No. 114, the Company considers its investment in one-to-four
family residential loans and consumer installment loans to be
homogenous and therefore excluded from separate identification for
evaluation of impairment. With respect to the Company's investment in
nonresidential and multi-family residential real estate loans, and its
evaluation of impairment thereof, such loans are generally collateral
dependent and, as a result, are carried as a practical expedient at
the fair value of the collateral.
Collateral dependent loans which are more than ninety days delinquent
are considered to constitute more than a minimum delay in repayment
and are evaluated for impairment under SFAS No. 114 at that time.
2. POTENTIAL PROBLEM LOANS
The Company had no potential problem loans as of December 31, 2007
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. LOAN CONCENTRATIONS
Refer to Page 67, Note 19 of Notes to Consolidated Financial
Statements set forth in our 2007 Annual Report, which is incorporated
herein by reference.
IV SUMMARY OF LOAN LOSS EXPERIENCE
For additional explanation of factors which influence management's
judgment in determining amounts charged to expense, refer to pages 13
and 16 of the "Management's Discussion and Analysis" and Notes to
Consolidated Financial Statements set forth in our 2007 Annual Report,
which is incorporated herein by reference.
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, 2007, 2006, 2005, 2004 and 2003:
(Dollars in thousands) 2007 2006 2005 2004 2003
---------------------------- -------- -------- -------- -------- --------
LOANS
Loans outstanding $234,644 $231,517 $232,011 $215,447 $198,608
Average loans outstanding $228,673 $234,436 $224,945 $208,658 $192,725
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year $ 2,345 $ 2,904 $ 2,995 $ 2,843 $ 2,971
Loan Charge-offs:
Commercial 206 1,420 89 58 250
Commercial real estate -- -- -- -- 79
Residential real estate 349 350 331 16 28
Installment 583 377 342 645 459
-------- -------- -------- -------- --------
Total loan charge-offs 1,138 2,147 762 719 816
-------- -------- -------- -------- --------
Loan recoveries
Commercial 9 22 7 4 3
Commercial real estate -- -- -- -- --
Residential real estate 52 34 50 7 3
Installment 186 148 202 242 142
-------- -------- -------- -------- --------
Total loan recoveries 247 204 259 253 148
-------- -------- -------- -------- --------
Net loan charge-offs 891 1,943 503 466 668
Provision for loan losses 993 1,384 412 618 540
-------- -------- -------- -------- --------
Balance at end of year $ 2,447 $ 2,345 $ 2,904 $ 2,995 $ 2,843
======== ======== ======== ======== ========
Ratio of net charge-offs to
average loans 0.39% 0.83% 0.22% 0.22% 0.35%
-------- -------- -------- -------- --------
B ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table allocates the allowance for loan losses at
December 31, 2007, 2006, 2005, 2004 and 2003. Management adjusts the
allowance periodically to account for changes in national trends and
economic conditions in the Bank's 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:
(Dollars in
thousands) 2007 2006 2005 2004 2003
---------------- -------------------- -------------------- -------------------- -------------------- --------------------
% Loans % Loans % Loans % Loans % Loans
Allowance to Total Allowance to Total Allowance to Total Allowance to Total Allowance to Total
Loan type Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
---------------- --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
Commercial $ 765 25.48% $ 636 17.50% $ 502 14.08% $ 530 16.39% $ 452 14.13%
Commercial Real
Estate 974 31.82% 777 40.12% 1,092 42.11% 1,136 38.57% 1,005 34.69%
Residential Real
Estate 117 24.94% 138 24.26% 310 24.89% 313 25.56% 387 26.30%
Installment 243 17.76% 442 18.12% 739 18.92% 532 19.48% 982 24.88%
Unallocated 348 N/A 352 N/A 261 N/A 484 N/A 17 N/A
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total $2,447 100.00% $2,345 100.00% $2,904 100.00% $2,995 100.00% $2,843 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
V DEPOSITS
A SCHEDULE OF AVERAGE DEPOSIT AMOUNTS AND RATES
Refer to Management's Discussion and Analysis and Results of
Operations "Average Balances, Net Interest Income and Yields
Earned and Rates Paid" set forth in our 2007 Annual Report and
incorporated herein by reference.
B MATURITY ANALYSIS OF TIME DEPOSITS GREATER THAN $100,000.
The time to remaining maturity for time deposits in excess of $100,000
are:
(Dollars in thousands) 2007
------------------------ -------
Less than 3 months $ 9,870
Over 3 through 6 months 8,567
Over 6 through 12 months 13,371
Over 12 months 6,704
-------
Totals $38,512
=======
VI RETURN ON EQUITY AND ASSETS
Our dividend payout ratio and equity to assets ratio were as follows:
DECEMBER 31,
----------------------
2007 2006 2005
----- ------ -----
Dividend Payout Ratio 91.23% 106.67% 61.97%
Equity to Assets 7.51% 7.73% 7.88%
For other ratios refer to the inside front cover of our 2007 Annual
Report to Shareholders, incorporated herein by reference.
VII SHORT-TERM BORROWINGS
Information concerning securities sold under agreements to repurchase
is summarized as follows:
(Dollars In thousands) 2007 2006 2005
---------------------------------------------- ------- ------- -------
Balance at December 31, $10,942 $ 6,218 $ 7,142
Weighted average interest rate at December 31 3.77% 4.26% 2.49%
Average daily balance during the year $11,864 $10,557 $10,129
Average interest rate during the year 4.47% 4.18% 2.58%
Maximum month-end balance during the year $14,967 $22,659 $14,555
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:
(Dollars in thousands) 2007 2006 2005
---------------------------------------------- ------- ------- -------
Balance at December 31, $34,500 $33,175 $35,000
Weighted average interest rate at December 31, 4.74% 5.79% 3.62%
Average daily balance during the year $11,360 $31,034 $27,217
Average interest rate during the year 4.39% 4.99% 3.44%
Maximum month-end balance during the year $34,500 $39,510 $36,057
No other individual component of borrowed funds comprised more than
30% of shareholders' equity and accordingly is not disclosed in
detail.
SUPPLEMENTAL ITEM - EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following
information on the executive officers of the Company is included as an
additional item in Part I:
Executive Officers Positions held with Company;
Name Age Business Experience
---------------------- --- ------------------------------------------------------------
James W. Everson 69 Chairman, President and Chief Executive Officer
Scott Everson 40 Senior Vice President and Chief Operating Officer
Randall M. Greenwood 44 Senior Vice President and Chief Financial Officer, Treasurer
James A. Lodes 62 Vice President - Chief Lending Officer
Norman F. Assenza, Jr. 62 Vice President - Chief Compliance Officer
Michael A. Lloyd 39 Vice President - Chief Information Officer
Each individual has held the position noted during the past five
years, except for the following:
Scott A. Everson served as President and Chief Operating Officer from
April 2002 to November 2004 and Senior Vice President, Operations and
Retail Banking, of The Citizens Savings Bank from May 1999 to April
2002. Prior to that he served as Assistant Vice President/Branch
Manager Bridgeport Office from 1997 to May 1999. In addition, he is
currently President and Chief Executive Office and a Director of The
Citizens Savings Bank. He has held this position since November 2004.
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, 25 years, Norman F. Assenza, Jr., 25 years,
James A. Lodes, 12 years, Michael Lloyd, 5 years and Randall M.
Greenwood, 10 years.
ITEM 1A. RISK FACTORS
An investment in the Company's common stock is subject to risks
inherent to the Company's business. The material risks and
uncertainties that management believes affect the Company are
described below. Before making an investment decision, investors
should carefully consider the risks and uncertainties described below
together with all the other information included or incorporated by
reference in this report. The risks and uncertainties described below
are not the only ones facing the Company. Additional risks and
uncertainties that Management is not aware of or focused on or that
management currently deems immaterial may also impair the Company's
business operations. This report is qualified in its entirety by these
risk factors.
If any of the following risks actually occur, the Company's financial
condition and results of operations could be materially and adversely
affected. If this were to happen, the value of the Company's common
stock could decline significantly, and investors would lose all or
part of their investment.
RISKS RELATED TO THE COMPANY'S BUSINESS
INTEREST RATE RISK - The Company's earnings and cash flows are largely
dependent upon its net interest income. Net interest income is the
difference between interest income earned on interest earning assets
such as loans and securities and interest expense paid on interest
bearing liabilities such as deposits and borrowings. Interest rates
are highly sensitive to many factors that are beyond the Company's
control, including general economic and market conditions and policies
of various governmental and regulatory agencies and, in particular,
the Board of Governors of the Federal Reserve System. Changes in
monetary policy, including changes in interest rates, could influence
not only the interest the Company receives on loans and investment
securities and the amount of interest it pays on deposits and
borrowings, but such changes could also affect the Company's ability
to originate loans and obtain deposits and the fair values of the
Company's financial assets and liabilities. If the interest rates paid
on deposits and other borrowings increase at a faster rate or decrease
at a slower rate than the interest rates received on loans and
investments, the Company's net interest income, and therefore
earnings, could be adversely affected.
Although management believes it has implemented effective asset and
liability management strategies to reduce the potential effects of
changes in interest rates on the Company's results of operations, any
substantial, unexpected, or prolonged change in market interest rates
or in the term structure of interest rates could have a material
adverse effect on the Company's financial condition and results of
operations. See Item 7A. Quantitative and Qualitative Disclosures
about Market Risk in this report for further discussion related to the
Company's management if interest rate risk.
LENDING RISK - There are inherent risks associated with the Company's
lending activities. These risks include, among other things, the
impact of changes in interest rates and changes in economic conditions
in the markets where the Company operates as well as those across the
State of Ohio and the United States. Increases in interest rates
and/or weakening economic conditions could adversely impact the
ability of borrowers to repay outstanding loans or the value of the
collateral securing these loans. The Company is also subject to
various laws and regulations that affect its lending activities.
Failure to comply with applicable laws and regulations could subject
the Company to regulatory enforcement action that could result in the
assessment of significant civil money penalties against the Company.
The Company maintains an Allowance for Loan Losses, which is a reserve
established through a provision for loan losses charged to expense,
that represents management's best estimate of probable and inherent
loan losses that have been incurred within the existing portfolio of
loans. The Allowance, in the judgment of management, is necessary to
reserve for estimated loan losses and risks inherent in the loan
portfolio. The level of the Allowance reflects management's continuing
evaluation of loan loss experience, current loan portfolio quality,
present economic, political, and regulatory conditions, and
unidentified losses inherent in the current loan portfolio. The
determination of the appropriate level of the Allowance inherently
involves a high degree of subjectivity and requires the Company to
make significant estimates of current credit risks and future trends,
all of which may undergo material changes. Changes in economic
conditions affecting borrowers, new information regarding existing
loans, identification of additional problem loans, and other factors,
both within and outside of the Company's control, may require an
increase in the Allowance. In addition, bank regulatory agencies
periodically review the Company's Allowance and may require an
increase in the provision for loan losses or the recognition of
further loan charge-offs, based on judgments different from those of
management.
ECONOMIC RISK - The Company's success depends significantly on the
general economic conditions of Southeastern and Central Ohio. Unlike
larger regional or national banks that are more geographically
diversified, the Company provides banking and financial services to
customers primarily in Southeast and Central Ohio and Northeast West
Virginia. The local economic conditions in these areas have a
significant impact on the demand for the Company's products and
services as well as the ability of the Company's customers to repay
loans, the value of the collateral securing loans, and the stability
of the Company's deposit funding sources. A significant decline in
general economic conditions caused by inflation, recession, acts of
terrorism, unemployment, changes in securities markets or other
factors could impact these local economic conditions and, in turn,
have a material adverse effect on the Company's financial condition
and results of operations.
COMPETITIVE RISK - The Company faces substantial competition in all
areas of its operations from a variety of different competitors, many
of which are larger and may have more financial resources. Such
competitors primarily include regional and national banks within the
market the Company operates. The Company also faces competition from
many other types of financial institutions, including savings and loan
institutions, credit unions, finance companies, brokerage firms,
insurance companies, and other financial intermediaries. The financial
services industry could become even more competitive as a result of
legislative, regulatory, and technological changes and continued
consolidation. Banks, securities firms, and insurance companies can
merge under the umbrella of a financial holding company, which can
offer virtually any type of financial service, including banking,
securities underwriting, and insurance. Also, technology has lowered
barriers to entry and made it possible for non-banks to offer products
and services traditionally provided by banks, such as automatic
transfer and automatic payment systems. Many of the Company's
competitors have fewer regulatory constraints, and may have lower cost
structures. Additionally, many competitors may be able to achieve
economies of scale, and as a result, may offer a broader range of
products and services as well as better pricing for those products and
services. Increased competition could adversely affect the Company's
growth and profitability, which, in turn, could have a material
adverse effect on the Company's financial condition and results of
operations.
REGULATORY RISK - The Company is subject to extensive federal and
state regulation and supervision. Banking regulations are primarily
intended to protect depositors' funds, federal deposit insurance
funds, and the banking system as a whole, not shareholders. These
regulations affect the Company's lending practices, capital structure,
investment practices, dividend policy, and growth, among other things.
Congress and federal regulatory agencies continually review banking
laws, regulations, and policies for possible changes. Changes to
statutes, regulations, or regulatory policies, including changes in
interpretation or implementation of statutes, regulations, or
policies, could affect the Company in substantial and unpredictable
ways. Such changes could subject the Company to additional costs,
limit the types of financial services and products the Company may
offer and/or increase the ability of non-banks to offer competing
financial products and services, among other things. Failure to comply
with laws, regulations, or policies could result in sanctions by
regulatory agencies, civil money penalties, and/or reputation damage,
which could have a material adverse effect on the Company's business,
financial condition, and results of operations. While the Company has
policies and procedures designed to prevent any such violations, there
can be no assurance that such violations will not occur.
FAILURE OR CIRCUMVENTION OF CONTROLS AND PROCEDURES - Management
regularly reviews and updates the Company's internal controls,
disclosure controls, and procedures, and corporate governance policies
and procedures. Any system of controls, however well designed and
operated, is based in part on certain assumptions and can provide only
reasonable, not absolute, assurances that the objectives of the system
are met. Any failure or circumvention of the Company's controls and
procedures or failure to comply with regulations related to controls
and procedures could have a material adverse effect on the Company's
business, results of operations, and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2 PROPERTIES
The Company owns and operates its Main Office and stand alone
operations center in Martins Ferry, Ohio and the following offices:
Location
--------
Bridgeport, Ohio Owned
Colerain, Ohio Owned
Jewett, Ohio Owned
St. Clairsville, Ohio Leased
Dover, Ohio Owned
Dellroy, Ohio Owned
New Philadelphia, Ohio Owned
Strasburg, Ohio Owned
Sherrodsville, Ohio Owned
Glouster, Ohio Owned
Glouster, Ohio Owned
Amesville, Ohio Owned
Nelsonville, Ohio Owned
Lancaster, Ohio Owned
Lancaster, Ohio Owned
Lancaster, Ohio Owned
Management believes the properties described above to be in good
operating condition for the purpose for which they are used. The
properties are unencumbered by any mortgage or security interest and
are, in management's opinion, adequately insured.
ITEM 3 LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to its business, to which the Company or its
subsidiary is a party or to which any of its property is subject.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders for a vote during the fourth
quarter of 2007.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Refer to Page 7, "Shareholder Information" of the 2007 Annual Report
To Shareholders and refer to Page 39, Note 1 of the Notes to the
Consolidated Financial Statements of the Company in the 2007 Annual
Report To Shareholders for common stock trading ranges, cash dividends
declared and information relating to dividend restrictions, which are
incorporated herein by reference.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
(D)
(C) MAXIMUM NUMBER
TOTAL NUMBER (OR APPROXIMATE
OF SHARES (OR DOLLAR VALUE) OF
(A) (B) UNITS) PURCHASED AS SHARES (OR UNITS)
TOTAL NUMBER AVERAGE PRICE PART OF PUBLICLY THAT MAY YET BE
OF SHARES (OR PAID PER SHARE ANNOUNCED PLANS PURCHASED UNDER THE
PERIOD UNITS) PURCHASED (OR UNIT) OR PROGRAMS PLANS OR PROGRAMS
------------ ---------------- -------------- ------------------- -------------------
Month #l
10/1/2007 to 4,095 $10.87 4,095 $1,256,170
10/31/2007
Month #2
11/1/2007 to 764 $10.65 764 $1,248,030
11/30/2007
Month #3
12/1/2007 to 30,837 $10.01 30,837 $ 939,452
12/31/2007
------ ------ ------ ----------
Total 35,696 $10.12 35,696 $ 361,225
====== ====== ====== ==========
UNITED BANCORP PURCHASED THESE SHARES UNDER A STOCK PURCHASE PROGRAM PUBLICLY
ANNOUNCED BY A PRESS RELEASE ISSUED ON NOVEMBER 21, 2006, UNDER WHICH ITS BOARD
OF DIRECTORS AUTHORIZED MANAGEMENT TO CAUSE THE COMPANY TO PURCHASE UP TO $2
MILLION OF ITS COMMON SHARES OVER A TWO-YEAR PERIOD. SUCH AUTHORIZATION WILL
EXPIRE ON NOVEMBER 21, 2008.
ITEM 6 SELECTED CONSOLIDATED FINANCIAL DATA
Refer to inside front cover, "Decade of Progress" of the 2007 Annual
Report To Shareholders, which is incorporated herein by reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Refer to Pages 12-26, "Management's Discussion and Analysis" of the
2007 Annual Report To Shareholders.
CRITICAL ACCOUNTING POLICY
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of
America and follow general practices within the financial services
industry. The application of these principles requires management to
make certain estimates, assumptions and judgements that affect the
amounts reported in the financial statements and footnotes. These
estimates, assumptions and judgements are based on information
available as of the date of the financial statements, and as this
information changes, the financial statements could reflect different
estimates, assumptions, and judgements.
The procedures for assessing the adequacy of the allowance for loan
losses reflect our evaluations of credit risk after careful
consideration of all information available to management. In
developing this assessment, management must rely on estimates and
exercise judgement regarding matters where the ultimate outcome is
unknown such as economic factors, development affecting companies in
specific industries and issues with respect to single borrowers.
Depending on changes in circumstances, future assessments of credit
risk may yield materially different results, which may require an
increase or a decrease in the allowance for loan losses.
The allowance is regularly reviewed by management to determine whether
the amount is considered adequate to absorb probable losses. This
evaluation includes specific loss estimates on certain individually
reviewed loans, statistical losses, estimates for loan pools that are
based on historical loss experience, and general loss estimates that
are based on the size, quality and concentration characteristics of
the various loan portfolios, adverse situations that may affect a
borrower's ability to repay, and current economic and industry
conditions. Also considered as part of that judgement is a review of
the bank's trends in delinquencies and loan losses, and economic
factors.
The allowance for loan losses is maintained at a level believed
adequate by management to absorb probable losses inherent in the loan
portfolio. Management's evaluation of the adequacy of the allowance is
an estimate based on management's current judgement about the credit
quality of the loan portfolio. While the Company strives to reflect
all known risk factors in its evaluation, judgement errors may occur.
The following table sets forth the Company's contractual obligations at December
31, 2007:
PAYMENT DUE BY PERIOD
(IN "000")
------------------------------------------------
LESS THAN 1-3 3-5 MORE THAN
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS
--------------------------- -------- --------- ----- ----- ---------
Long term debt obligations $ 58,926 $34,594 $295 $448 $23,589
Operating lease obligations 98 30 68 --
Loan and standby letters
of credit commitments 45,300, 45,300 -- -- --
-------- ------- ---- ---- -------
Total $104,324 $79,924 $363 $448 $23,589
======== ======= ==== ==== =======
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to Page 19-21 "Asset/Liability Management and Sensitivity to
Market Risks" of the 2007 Annual Report to Shareholders, which is
incorporated herein by reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the 2007 Annual Report To Shareholders, which is incorporated
herein by reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 9A CONTROLS AND PROCEDURES
The Company, under the supervision, and with the participation, of its
management, including the Company's Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the design and
operation of the Company's disclosure controls and procedures as of
December 31, 2007, pursuant to the requirements of Exchange Act Rule
13a-15. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective as of December 31, 2007, in
timely alerting them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in
the Company's periodic SEC filings.
Management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. Under the
supervision and with the participation of management, including our
principal executive and principal financial officers, we conducted an
evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, as required by paragraph (c) of Section
240.13a-15 of this chapter. Based on the evaluation under Internal
Control - Integrated Framework, management concluded that the
Company's internal control over financial reporting was effective as
of December 31, 2007. This annual report does not include an
attestation report of the Company's registered public accounting firm
regarding internal
control over financial reporting. Management's report was not subject
to attestation by the Company's registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission
that permit the Company to provide only management's report in this
annual report.
There was no change in the Company's internal control over financial
reporting that occurred during the Company's fiscal quarter ended
December 31, 2007 that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over
financial reporting.
ITEM 9B OTHER INFORMATION
None.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning executive officers of the Company is set forth
in Part I, "Supplemental Item - Executive Officers of Registrant."
Other information responding to this Item 10 is included in the
Registrant's Proxy Statement for the 2008 Annual Meeting of
Shareholders and is incorporated by reference under the captions
"Proposal 1 - Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance". Information concerning the
designation of the Audit Committee and the Audit Committee Financial
Expert is included in the Registrant's Proxy Statement for the 2008
Annual Meeting of Shareholders under the caption "Committees of the
Board - Audit Committee", and is incorporated herein by reference.
The Company's Board of Directors has adopted a Code of Ethics that
applies to its Principal Executive, Principal Financial, and Principal
Accounting Officers. A copy of the Company's Code of Ethics is posted
and can be viewed on the Company's internet web site at
http://www.unitedbancorp.com. In the event the Company amends or
waives any provision of its Code of Ethics which applies to its
Principal Executive, Principal Financial, or Principal Accounting
Officers, and which relates to any element of the code of ethics
definition set forth in Item 406(b) of Regulation S-K, the Company
shall post a description of the nature of such amendment or waiver on
its internet web site. With respect to a waiver of any relevant
provision of the code of ethics, the Company shall also post the name
of the person to whom the waiver was granted and the date of the
waiver grant.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference
from the captions titled "Executive Compensation and Other
Information" and "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions" of the Registrant's Proxy
Statement for 2008 Annual Meeting of Shareholders.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCK HOLDER MATTERS
The information contained in the Registrant's Proxy Statement for the
2008 Annual Meeting of Shareholders under the caption "Ownership of
Voting Shares" is incorporated herein by reference. The following
table is a disclosure of securities authorized for issuance under
equity compensation plans:
Equity Compensation Plan Information
---------------------------------------------------------------------------------------
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average exercise equity compensation
exercise of outstanding outstanding options, price plans (excluding securities
options, warrants and rights of warrants and rights reflected in column (a))
---------------------------- -------------------------- ---------------------------
Equity compensation plans approved by
security holders 55,529 $10.34 0
Equity compensation plans not approved
by security holders
------ ------ ---
Total 55,529 $10.34 0
====== ====== ===
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the sections in the Registrant's Proxy Statement for the
2008 Annual Meeting of Shareholders captioned "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions,"
"Certain Transactions" and "Proposal 1-Election of Directors."
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference
from the section under the caption "Principal Accounting Firm Fees" of
the Registrant's Proxy Statement for the 2008 Annual Meeting of
Shareholders.
PART IV
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT/SCHEDULES
FINANCIAL STATEMENTS
(a) The following Consolidated Financial Statements and related Notes
to Consolidated Financial Statements, together with the reports
of Independent Registered Public Accounting Firms, appear on
pages 27 through 74 of the United Bancorp, Inc. 2007 Annual
Report and are incorporated herein by reference.
Consolidated Balance Sheets
December 31, 2007 and 2006
Consolidated Statements of Income
Years Ended December 31, 2007, 2006 and 2005
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2007, 2006 and 2005
Consolidated Statements of Cash Flows
Years Ended December 31, 2007, 2006 and 2005
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
Reports of Independent Registered Public Accounting Firms
EXHIBITS
Exhibit
Number Exhibit Description
------- -------------------
3.1 Amended Articles of Incorporation (1)
3.2 Amended Code of Regulations (2)
10.1 James W. Everson Change in Control Agreement (3)
10.2 Randall M. Greenwood Change in Control agreement (3)
10.3 Scott A. Everson Change in Control Agreement (3)
10.4 Norman F. Assenza Change in Control Agreement (3)
10.5 James A. Lodes Change in Control Agreement (3)
10.6 Michael A. Lloyd Change in Control Agreement (3)
10.7 United Bancorp, Inc. Stock Option Plan (4)
10.8 United Bancorp, Inc. and Subsidiaries Director Supplemental Life
Insurance Plan, covering Messrs. Hoopingarner, McGehee, Riesbeck and
Thomas. (5)
10.9 United Bancorp, Inc. and Subsidiaries Senior Executive Supplemental
Life Insurance Plan, covering James W. Everson, Scott A. Everson,
Randall M. Greenwood, Norman F. Assenza, Michael A. Lloyd and James A.
Lodes. (5)
10.10 United Bancorp, Inc. and United Bancorp, Inc. Affiliate Banks
Directors Deferred Compensation Plan. (5)
10.11 Amended and Restated Trust Agreement among United Bancorp, Inc. as
Depository, Wilmington Trust Company, as Property Trustee, Wilmington
Trust Company, as Delaware Trustee, and Administrative Trustees, dated
as of November 17, 2005. (6)
10.12 Junior Subordinated Indenture between United Bancorp, Inc. and
Wilmington Trust Company, as Trustee, dated as of November 17, 2005.
(6)
10.13 Guaranty Agreement between United Bancorp, Inc., as Guarantor, and
Wilmington Trust Company, as Guarantee Trustee, dated as of November
17, 2005. (6)
13 2007 Annual Report
21 Subsidiaries of the Registrant (5)
23.1 Consent of BKD, LLP
23.2 Consent of Grant Thornton LLP
31.1 Rule 13a-14(a) Certification - CEO
31.2 Rule 13a-14(a) Certification - CFO
32.1 Section 1350 Certification - CEO
32.2 Section 1350 Certification - CFO
(1) Incorporated by reference to Appendix B to the registrant's Definitive
Proxy Statement filed with the Securities and Exchange Commission on March
14, 2001.
(2) Incorporated by reference to Appendix C to the registrant's Definitive
Proxy Statement filed with the Securities and Exchange Commission on March
14, 2001.
(3) Incorporated by reference to the registrant's 10-K filed with the
Securities and Exchange Commission on March 27, 2003.
(4) Incorporated by reference to Exhibit A to the registrant's Definitive Proxy
Statement filed with the Securities and Exchange Commission on March 11,
1996.
(5) Incorporated by reference to the registrant's 10-K filed with the
Securities and Exchange Commission on March 29, 2004.
(6) Incorporated by reference to the registrant's 10-K filed with the
Securities and Exchanges Commission on March 30, 2006.
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 28, 2008
---------------------------------
James W. Everson, Chairman,
President & CEO
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.
By: /s/ James W. Everson March 28, 2008
---------------------------------
James W. Everson, Chairman,
President & CEO
By: /s/ Randall M. Greenwood March 28, 2008
---------------------------------
Randall M. Greenwood, Senior Vice
President & CFO
By: /s/ Michael J. Arciello March 28, 2008
---------------------------------
Michael J. Arciello, Director
By: /s/ Terry A. McGhee March 28, 2008
---------------------------------
Terry A. McGhee, Director
By: /s/ John M. Hoopingarner March 28, 2008
---------------------------------
John M. Hoopingarner, Director
By: /s/ Richard L. Riesbeck March 28, 2008
---------------------------------
Richard L. Riesbeck, Director
By: /s/ Samual J. Jones March 28, 2008
---------------------------------
Samual J. Jones , Director
By: /s/ Matthew C. Thomas March 28, 2008
---------------------------
Matthew C. Thomas, Director
EXHIBIT INDEX
Exhibit
Number Exhibit Description
------- -------------------
3.1 Amended Articles of Incorporation (1)
3.2 Amended Code of Regulations (2)
10.1 James W. Everson Change in Control Agreement (3)
10.2 Randall M. Greenwood Change in Control agreement (3)
10.3 Scott A. Everson Change in Control Agreement (3)
10.4 Norman F. Assenza Change in Control Agreement (3)
10.5 James A. Lodes Change in Control Agreement (3)
10.6 Michael A. Lloyd Change in Control Agreement (3)
10.7 United Bancorp, Inc. Stock Option Plan (4)
10.8 United Bancorp, Inc. and Subsidiaries Director Supplemental Life
Insurance Plan, covering Messrs. Hoopingarner, McGehee, Riesbeck and
Thomas. (5)
10.9 United Bancorp, Inc. and Subsidiaries Senior Executive Supplemental
Life Insurance Plan, covering James W. Everson, Scott A. Everson,
Randall M. Greenwood, Norman F. Assenza, Michael A. Lloyd and James A.
Lodes. (5)
10.10 United Bancorp, Inc. and United Bancorp, Inc. Affiliate Banks
Directors Deferred Compensation Plan. (5)
10.11 Amended and Restated Trust Agreement among United Bancorp, Inc. as
Depository, Wilmington Trust Company, as Property Trustee, Wilmington
Trust Company, as Delaware Trustee, and Administrative Trustees, dated
as of November 17, 2005. (6)
10.12 Junior Subordinated Indenture between United Bancorp, Inc. and
Wilmington Trust Company, as Trustee, dated as of November 17, 2005.
(6)
10.13 Guaranty Agreement between United Bancorp, Inc., as Guarantor, and
Wilmington Trust Company, as Guarantee Trustee, dated as of November
17, 2005. (6)
13 2007 Annual Report
21 Subsidiaries of the Registrant (5)
23.1 Consent of BKD, LLP
23.2 Consent of Grant Thornton LLP
31.1 Rule 13a-14(a) Certification - CEO
31.2 Rule 13a-14(a) Certification - CFO
32.1 Section 1350 Certification - CEO
32.2 Section 1350 Certification - CFO
(1) Incorporated by reference to Appendix B to the registrant's Definitive
Proxy Statement filed with the Securities and Exchange Commission on March
14, 2001.
(2) Incorporated by reference to Appendix C to the registrant's Definitive
Proxy Statement filed with the Securities and Exchange Commission on March
14, 2001.
(3) Incorporated by reference to the registrant's 10-K filed with the
Securities and Exchange Commission on March 27, 2003.
(4) Incorporated by reference to Exhibit A to the registrant's Definitive Proxy
Statement filed with the Securities and Exchange Commission on March 11,
1996.
(5) Incorporated by reference to the registrant's 10-K filed with the
Securities and Exchange Commission on March 29, 2004.
(6) Incorporated by reference to the registrant's 10-K filed with the
Securities and Exchanges Commission on March 30, 2006.