Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

Annual report pursuant to Section 13 of the

Securities Exchange Act of 1934, as amended

For the year ended December 31, 2000

Commission File No.: 000-29283

UNITED BANCSHARES, INC.

(exact name of registrant as specified in its charter)

100 S. High Street, Columbus Grove, Ohio 45830

(Address of principal executive offices)

Registrant's telephone number, including area code: (419) 659-2141

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, stated value $1.00 per share

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X_____ No ________

Indicated 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 the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. __________

The aggregate market value of the voting stock held by non-affiliates of the registrant, i.e., persons other than the directors and executive officers of the registrant, was $29,950,000, based upon the last sales price as quoted on the Nasdaq National Markets Exchange on March 9, 2001.

The number of shares of Common Stock outstanding as of March 9, 2001: 3,687,404

DOCUMENTS INCORPORATED BY REFERENCE

The Annual Report to Shareholders for the year ended December 31, 2000 is incorporated by reference into Parts I, II and IV. The Joint Proxy Statement for the Annual Meeting of Shareholders is incorporated by reference to Part III.

PART I

Item 1. Business

Forward Looking Statements

Certain matters disclosed herein may be deemed to be forward-looking statements that involve risks and uncertainties, including regulatory policy changes, interest rate fluctuations, loan demand, loan delinquencies and losses, and other risks. Actual strategies and results in future time periods may differ materially from those currently expected. Such forward-looking statements represent management's judgment as of the current date. The Corporation disclaims; however, any intent or obligation to update such forward-looking statements.

General

United Bancshares, Inc., an Ohio corporation (the "Corporation"), is a bank holding company under the Bank Holding Company Act of 1956, as amended, and is subject to regulation by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). The executive offices of the Corporation are located at 100 S. High Street, Columbus Grove, Ohio 45830.

Through its subsidiaries, The Union Bank Company, Columbus Grove, Ohio, The Bank of Leipsic Company, Leipsic, Ohio, and Citizens Bank of Delphos, Delphos, Ohio, the Corporation is engaged in the business of commercial banking.

General Description of Holding Company Subsidiaries and Recent Acquisition

The Union Bank Company is an Ohio state-chartered bank. The main office of The Union Bank Company is located in Columbus Grove, Ohio. The Union Bank Company presently operates two branch offices in Putnam County, Ohio (one in the village of Kalida and one in the village of Ottawa) and three branch offices in Allen County, Ohio (all in the city of Lima). At December 31, 2000, The Union Bank Company had 72 full-time equivalent employees.

The Bank of Leipsic Company is an Ohio state-chartered bank. The main office of The Bank of Leipsic Company and its only branch are both located in the village of Leipsic, Putnam County, Ohio. At December 31, 2000, The Bank of Leipsic Company had 15 full-time equivalent employees. Effective January 22, 2001, Brent A. Gibson was elected President and Chief Executive Officer of The Bank of Leipsic Company. Mr. Gibson has over thirteen years experience in the banking industry and also was elected as a director of the bank. Mr. Gibson succeeds Larry D. Place who will remain with the bank in a sales capacity.

On February 28, 2001, the Corporation consummated the acquisition of Delphos Citizens Bancorp, Inc. Delphos Citizens Bancorp, Inc. is a unitary savings and loan holding company, subject to regulation by the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission. Its sole subsidiary, Citizens Bank of Delphos is a savings bank. The main, and only, office of Citizens Bank of Delphos is located in the town of Delphos, Allen County, Ohio. Effective March, 2001, John P. Miller was elected President and Chief Executive Officer of Citizens Bank of Delphos. Mr. Miller has over seventeen years experience in the banking industry and also was elected as a director of the bank. Mr. Miller succeeds Joseph R. Reinemeyer who resigned effective February 28, 2001.

The Union Bank Company, The Bank of Leipsic Company, and Citizens Bank of Delphos all offer a full range of commercial banking services, including checking and NOW accounts; passbook savings and money market accounts; time certificates of deposit; automatic teller machines; commercial, consumer, agricultural, residential mortgage loans and home equity loans; credit card services; safe deposit box rentals; and other personalized banking services.

The Corporation is registered as a Securities Exchange Act of 1934 (the "1934 Act") reporting company.

Competition

All subsidiaries experience significant competition in attracting loan and deposit customers. Competition in lending activities comes principally from other commercial banks, savings associations, governmental agencies and credit unions. The primary factors in competing for loans are interest rates charged, levels of service provided, and structure of terms.

Competition for deposits comes from other commercial banks, savings associations, money market funds, credit unions, insurance companies, and securities brokerage firms. The primary factors in competing for deposits are interest rates paid, account liquidity and convenience of office location.

Supervision and Regulation

The following is a summary of certain statutes and regulations affecting the Corporation and its subsidiaries. The summary is qualified in its entirety by reference to such statutes and regulations.

The Corporation 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 shares 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 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 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 or extensions of credit 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. 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 Board. A bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with extensions of credit and/or the provision of other property or services to a customer by the bank holding company or its subsidiaries.

As Ohio state-chartered banks, The Union Bank Company and Bank of Leipsic are supervised and regulated by the Ohio Division of Financial Institutions and the Federal Deposit Insurance Corporation ("FDIC"). Citizens Bank of Delphos is a federally chartered savings bank that is supervised and regulated by the Office of Thrift Supervision and the FDIC. The deposits of all three subsidiaries are insured by the FDIC and the banks are subject to the applicable provisions of the Federal Deposit Insurance Act. A subsidiary of a bank holding company can be liable to reimburse the FDIC, if the FDIC incurs or anticipates a loss because of a default of another FDIC-insured subsidiary of the bank holding company or in connection with FDIC assistance provided to such subsidiary in danger of default. In addition, the holding company of any insured financial institution that submits a capital plan under the federal banking agencies' regulations on prompt corrective action guarantees a portion of the institution's capital shortfall, as discussed below.

Various requirements and restrictions under the laws of the United States and the State of Ohio affect the operations of the banks including requirements to maintain reserves against deposits, restrictions on the nature and amount of loans which may be made and the interest that 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.

The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies. The risk-based capital guidelines include both a definition and a framework for calculating risk weighted assets by assigning assets and off-balance sheet items to broad risk categories. The minimum ratio of total capital to risk weighted assets (including certain off-balance sheet items, such as standby letters of credit) is 8%. At least 4.0% is to be comprised of common stockholders' equity (including retained earnings but excluding treasury stock), noncumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock, and minority interest in equity accounts of consolidated subsidiaries, less goodwill and certain other intangible assets ("Tier 1 capital"). The remainder ("Tier 2 capital") may consist, among other things, of mandatory convertible debt securities, a limited amount of subordinated debt, other preferred stock and a limited amount of allowance for loan losses. The Federal Reserve Board also imposes a minimum leverage ratio (Tier 1 capital to total assets) of 4% for bank holding companies and state member banks that meet certain specified conditions, including having the highest regulatory rating. The minimum leverage ratio is 1%-2% higher for other bank holding companies and state member banks based on their particular circumstances and risk profiles and those experiencing or anticipating significant growth. State non-member bank subsidiaries, such as The Union Bank Company and Bank of Leipsic, are subject to similar capital requirements adopted by the FDIC.

The Corporation and its subsidiaries currently satisfy all capital requirements. Failure to meet applicable capital guidelines could subject a banking institution to a variety of enforcement remedies available to federal and state regulatory authorities, including the termination of deposit insurance by the FDIC.

The federal banking regulators have established regulations governing prompt corrective action to resolve capital deficient banks. Under these regulations, institutions which become undercapitalized become subject to mandatory regulatory scrutiny and limitations, which increase as capital decreases. Such institutions 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 institution at the time it becomes undercapitalized.

The ability of a bank holding company 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 its subsidiary banks and other subsidiaries. However, the Federal Reserve Board expects the Corporation to serve as a source of strength to its subsidiary banks, which may require it to retain capital for further investment in the subsidiaries, rather than for dividends for shareholders of the Corporation. The Union Bank Company and Bank of Leipsic may not pay dividends to the Corporation if, after paying such dividends, it would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements. The Union Bank Company and Bank of Leipsic must have the approval of its regulatory authorities if a dividend in any year would cause the total dividends for that year to exceed the sum of the current year's net income and the retained net income for the preceding two years, less required transfers to surplus. Payment of dividends by a bank subsidiary 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. These provisions could have the effect of limiting the Corporation's ability to pay dividends on its outstanding common shares.

Deposit Insurance Assessments and Recent Legislation

The FDIC is authorized to establish separate annual assessment rates for deposit insurance for members of the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF"). The Union Bank Company and the Bank of Leipsic are member of BIF and Citizens Bank of Delphos is a member of SAIF. The FDIC may increase assessment rates for either fund if necessary to restore the fund's ratio of reserves to insured deposits to its target level within a reasonable time and may decrease such rates if such target level has been met. The FDIC has established a risk-based assessment system for both BIF and SAIF members. Under this system, assessments vary based on the risk the institution poses to its deposit insurance fund. The risk level is determined based on the institution's capital level and the FDIC's level of supervisory concern about the institution.

Monetary Policy and Economic Conditions

The commercial banking business is affected not only by general economic conditions, but also by the policies of various governmental regulatory authorities, including the Federal Reserve Board. The Federal Reserve Board regulates money and credit conditions and interest rates in order to influence general economic conditions primarily through open market operations in U.S. Government securities, changes in the discount rate on bank borrowings and changes in reserve requirements against bank deposits. These policies and regulations significantly affect the overall growth and distribution of bank loans, investments and deposits, and the interest rates charged on loans as well as the interest rates paid on deposits and accounts.

The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of commercial banks in the past and are expected to continue to have significant effects in the future. In view of the changing conditions in the economy and the money market and the activities of monetary and fiscal authorities, no definitive predictions can be made as to future changes in interest rates, credit availability or deposit level.

Statistical Financial Information Regarding the Corporation

The following schedules and tables analyze certain elements of the consolidated balance sheets and statements of income of the Corporation and its subsidiaries, as required under Exchange Act Industry Guide 3 promulgated by the Securities and Exchange Commission, and should be read in conjunction with the narrative analysis presented in ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and the Consolidated Financial Statements of the Corporation and its subsidiaries.

I DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY, INTEREST RATES AND INTEREST DIFFERENTIAL

A. The following are the average balance sheets for the years ended December 31:

(1) Securities available for sale are carried at fair value. The average balance includes quarterly average balances of the market value adjustments and daily average balances for the amortized cost of securities.

(2) Loan balances include principal balances of nonaccrual loans.

(3) Stockholders' equity is shown net of average net unrealized appreciation (depreciation) on securities available for sale, net of tax.

I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (CONTINUED)

B. The following tables set forth, for the years indicated, the condensed average balances of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average interest rates earned or paid thereon.

(1) Securities balances represent daily average balances for the amortized cost of securities. The average rate is calculated based on the amortized cost of securities.

(2) Computed on tax equivalent basis for non-taxable securities (34% statutory rate in 2000).

(3) Loan balances include principal balances of non-accrual loans.

(4) Interest income on loans includes fees on loans of $458,688.

I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (CONTINUED)

(1) Securities balances represent daily average balances for the amortized cost of securities. The average rate is calculated on the amortized cost of securities.

(2) Computed on tax equivalent basis for non-taxable securities (34% statutory rate in 1999).

(3) Loan balances include principal balance of non-accrual loans.

(4) Interest income on loans includes fees on loans of $354,281.

I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (CONTINUED)

(1) Securities balances represent daily average balances for the amortized cost of securities. The average rate is calculated based on the amortized cost of securities.

(2) Computed on tax equivalent basis for non-taxable securities (34% statutory rate in 1998).

(3) Loan balances include principal balances of non-accrual loans.

(4) Interest income on loans includes fees on loans of $398,403.

I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (CONTINUED)

C. The following tables set forth the effect of volume and rate changes on interest income and expenses for the periods indicated. 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.

            This variance was allocated to volume variances and rate variances in proportion to the relationship of the absolute dollar amount of the change in each.

Interest on non-taxable securities has been adjusted to a fully tax equivalent basis using a statutory tax rate of 34% in all years presented.

I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (CONTINUED)

(in thousands)

II. INVESTMENT PORTFOLIO

A. The book value of securities available for sale as of December 31 are summarized as follows:

B. The maturity distribution by fair value and weighted average yield of securities available for sale at December 31, 2000 are as follows:

(1) Yields are presented on a tax-equivalent basis.

(2) Maturity based upon estimated weighted-average life.

The weighted average interest rates are based on coupon rates for securities purchased at par value and on effective interest rates considering amortization or accretion if the securities were purchased at a premium or discount.

C. Excluding those holdings of the investment portfolio in U.S. Treasury securities and other agencies of the U.S. Government, there were no securities of any one issuer which exceeded 10% of the shareholders' equity at December 31, 2000.

III. LOAN PORTFOLIO

A. Types of Loans - Total loans on the balance sheet are comprised of the following classifications at December 31 for the years indicated:

							(in thousands)
					2000		1999		1998		1997		1996
Commercial and
	agricultural			$	90,262	$	72,843	$	55,667	$	52,462	$	42,476
Real estate
	mortgage				70,152		72,146		63,734		45,548		42,211
Consumer loans
	to individuals				18,537		22,240		22,090		19,610		19,140
				$	178,951 ======	$	167,229 ======	$	141,491 =====	$	117,620 ======	$	103,827 ======

III. LOAN PORTFOLIO (CONTINUED)

C. Risk Elements - Non-accrual, Past Due, Restructured and Impaired Loans - The following table summarizes non-accrual, past due, restructured and impaired loans at December 31:

Management believes the allowance for loan losses at December 31, 2000 is adequate to absorb any losses on non-performing loans, as the allowance balance is maintained by management at a level considered adequate to cover losses that are currently anticipated based on past loss experience, general economic conditions, information about specific borrower situations including their financial position and collateral values, and other factors and estimates which are subject to change over time.

                                                                                                                                2000

                                                                                                                          (in thousands)

Gross interest income that would have been recorded in 2000 on non-

accrual loans outstanding at December 31, 2000 if the loans had been

current, in accordance with their original terms and had been

outstanding throughout the period or since origination if held for

part of the period                                                                                          $           13

Interest income actually recorded on non-accrual loans and included

in net income for the period                                                                                        3

                                                                                                                               ------

Interest income not recognized during the period                                       $ 10

                                                                                                                        =======

1. Discussion of the non-accrual policy

The accrual of interest income is discontinued when the collection of a loan or interest, in whole or in part, is doubtful. When interest accruals are discontinued, interest income accrued in the current period is reversed. While loans which are past due 90 days or more as to interest or principal payments are considered for non-accrual status, management may elect to continue the accrual of interest when the estimated net realizable value of collateral, in management's judgment, is sufficient to cover the principal balance and accrued interest. These policies apply to both commercial and consumer loans.

III. LOAN PORTFOLIO (CONTINUED)

2. Potential problem loans

As of December 31, 2000, in addition to the $1,719,000 of loans reported under Item III, C.1., there are approximately $11,617,000 in other outstanding loans where known information causes management to have 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 pursuant to Item III, C.1., at some future date. Consideration was given to loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed in Section 1 above. To the extent that such loans are not included in the $11,617,000 potential problem loans described above, management believes that such loans will not materially impact future operating results, liquidity, or capital resources.

3. Foreign outstandings

None

4. Loan concentrations

At December 31, 2000, loans outstanding relating to agricultural operations or collateralized by agricultural real estate aggregated approximately $29,594,000. At December 31