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Section 1: 10-Q (10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

xQUARTERLY REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended                   March 31, 2018                      

 

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT

 

For the transition period from ____________ to _______________

 

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 Identification No.)
incorporation or organization)    

 

201 South Fourth Street, Martins Ferry, Ohio  43935-0010
(Address of principal executive offices)
 
(740) 633-0445
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if changed since last report)

 

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   x   Yes     ¨    No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12-b-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)  
   
  Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 3(a) of the Exchange Act.  ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

 

Yes   ¨        No  x

 

Indicate the number of shares outstanding of the issuer’s classes of common stock as of the latest practicable date: As of May 2, 2018, 5,560,304 shares of the Company’s common stock, $1.00 par value, were issued and outstanding.

 

 

 

 

 

  

PART I - FINANCIAL INFORMATION  
     
Item 1 Condensed Consolidated Balance Sheets 3
     
  Condensed Consolidated Statements of Income 4
     
  Condensed Consolidated Statements of Comprehensive Income 5
     
  Condensed Consolidated Statements of Cash Flows 6
     
  Notes to Condensed Consolidated Financial Statements 7
     
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 35
     
Item 3 Quantitative and Qualitative Disclosures About Market Risk 42
     
Item 4 Controls and Procedures 43
     
PART II - OTHER INFORMATION  
     
Item 1  Legal Proceedings 44
     
Item 1A  Risk Factors 44
     
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 44
     
Item 3  Defaults Upon Senior Securities 44
     
Item 4  Other Information 45
     
Item 5  Exhibits 45
     
SIGNATURES 46

 

  2

 

ITEM 1. Financial Statements

 

United Bancorp, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

 

   March 31,   December 31, 
   2018   2017 
   (Unaudited)     
Assets          
Cash and due from banks  $4,388   $4,662 
Interest-bearing demand deposits   10,383    9,653 
Cash and cash equivalents   14,771    14,315 
Available-for-sale securities   71,065    44,959 
Loans, net of allowance for loan losses of $2,125 and $2,122 at March 31, 2018 and December 31, 2017, respectively   368,360    366,467 
Premises and equipment   11,914    11,740 
Federal Home Loan Bank stock   4,164    4,164 
Foreclosed assets held for sale, net   385    397 
Accrued interest receivable   1,068    993 
Deferred income taxes   

271

    349 
Bank-owned life insurance   12,191    12,114 
Other assets   4,188    3,834 
Total assets  $488,377   $459,332 
           
Liabilities and Stockholders’ Equity          
Liabilities          
Deposits          
Demand  $249,964   $237,980 
Savings   84,475    82,169 
Time   69,625    65,817 
Total deposits   404,064    385,966 
Securities sold under repurchase agreements   15,583    11,085 
Federal Home Loan Bank advances   8,195    10,022 
Subordinated debentures   4,124    4,124 
Interest payable and other liabilities   12,137    4,240 
Total liabilities   444,103    415,437 
Stockholders’ Equity          
Preferred stock, no par value, authorized 2,000,000 shares; no shares issued        
Common stock, $1 par value; authorized 10,000,000 shares; issued 5,560,304 shares at March 31, 2018, and 5,435,304 shares at December 31, 2017;  outstanding – 5,385,635 and 5,244,105 shares at March 31, 2018 and December 31, 2017, respectively   5,560    5,435 
Additional paid-in capital   17,819    18,020 
Retained earnings   23,735    23,260 
Stock held by deferred compensation plan; 168,928 and 185,355 shares at
March 31, 2018 and December 31, 2017
   (1,543)   (1,671)
Unearned ESOP compensation   (614)   (683)
Accumulated other comprehensive loss   (627)   (420)
Treasury stock, at cost          
5,744 shares at March 31, 2018 and December 31, 2017   (46)   (46)
Total stockholders’ equity   44,274    43,895 
Total liabilities and stockholders’ equity  $488,377   $459,332 

 

See Notes to Condensed Consolidated Financial Statements

 

  3

 

 

United Bancorp, Inc.

Condensed Consolidated Statements of Income

Three Months Ended March 31, 2018 and 2017

(In thousands, except per share data)

(Unaudited)

 

   2018   2017 
Interest and Dividend Income          
Loans, including fees  $4,331   $4,017 
Securities          
Taxable   174    103 
Non-taxable   32    6 
Federal funds sold   27    11 
Dividends on Federal Home Loan Bank and other stock   61    47 
Total interest and dividend income   4,625    4,184 
           
Interest Expense          
Deposits   457    229 
Borrowings   66    209 
Total interest expense   523    438 
           
Net Interest Income   4,102    3,746 
           
Provision for Loan Losses   57    25 
           
Net Interest Income After Provision for Loan Losses   4,045    3,721 
           
Noninterest Income          
Service charges on deposit accounts   631    597 
Realized gains on sales of loans   14    15 
Other income   235    220 
Total noninterest income   880    832 
           
Noninterest Expense          
Salaries and employee benefits   1,832    1,768 
Occupancy and equipment   540    523 
Loss on sale of foreclosed assets   13     
Professional services   192    201 
FDIC insurance   49    44 
Insurance   103    67 
Franchise and other taxes   96    84 
Advertising   137    109 
Stationery and office supplies   36    36 
Other expenses   581    502 
Total noninterest expense   3,579    3,334 
           
Income Before Federal Income Taxes   1,346    1,219 
           
Provision for Federal Income Taxes   198    369 
           
Net Income  $1,148   $850 
           
Basic Earnings Per Share  $0.22   $0.17 
           
Diluted Earnings Per Share  $0.22   $0.17 
           
Dividends Per Share  $0.13   $0.11 

 

See Notes to Condensed Consolidated Financial Statements

 

  4

 

  

United Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31, 2018 and 2017

(In thousands)

(Unaudited)

 

   2018   2017 
         
Net Income  $1,148   $850 
Other comprehensive income, net of related tax effects        
Unrealized holding (loss) gain on securities during the period, net of (benefits) taxes of ($44) and $82 in 2018 and 2017, respectively   (170)   155 
           
Comprehensive Income  $978   $1,005 

 

See Notes to Condensed Consolidated Financial Statements

 

  5

 

 

United Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2018 and 2017

(In thousands)

(Unaudited)

 

   2018   2017 
Operating Activities          
Net income  $1,148   $850 
Items not requiring (providing) cash          
Depreciation and amortization   238    223 
Premium amortization on securities   3     
Provision for loan losses   57    25 
Gain on sale of loans   (14)   (15)
Increase in value of bank-owned life insurance   (77)   (80)
Amortization of mortgage servicing rights   2    2 
Originations of loans held for sale   (1,208)   (653)
Proceeds from sale of loans held for sale   1,222    668 
Loss on sale of foreclosed assets   13     
Expense related to share-based compensation plans and ESOP   122    70 
Net change in accrued interest receivable and other assets   (75)   (36)
Net change in accrued expenses and other liabilities   (567)   (936)
           
Net cash provided by operating activities   864    118 
           
Investing Activities          
Securities available for sale:          
Purchases   (18,107)    
Proceeds from maturity of held-to-maturity securities       999 
Net change in loans   (1,936)   1,947 
Proceeds from sale of foreclosed and fixed assets       9 
Purchases of premises and equipment   (413)   (280)
           
Net cash provided by (used in) investing activities   (20,456)   2,675 
           
Financing Activities          
Net change in deposits  $18,097   $21,008 
Net change in securities sold under repurchase agreements   4,498    6,175 
Repayment of Federal Home Loan Bank advances   (1,827)   (24,538)
Cash dividends paid   (721)   (596)
           
Net cash provided by financing activities   20,048    2,049 
           
Increase in Cash and Cash Equivalents   456    4,842 
           
Cash and Cash Equivalents, Beginning of Period   14,315    11,541 
           
Cash and Cash Equivalents, End of Period  $14,771   $16,383 
           
Supplemental Cash Flows Information          
Interest paid on deposits and borrowings  $517   $449 

 

See Notes to Condensed Consolidated Financial Statements

 

  6

 

  

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

  

Note 1: Summary of Significant Accounting Policies

 

These interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position of United Bancorp, Inc. (“Company”) at March 31, 2018, and its results of operations and cash flows for the interim periods presented. All such adjustments are normal and recurring in nature. The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not purport to contain all the necessary financial disclosures required by accounting principles generally accepted in the United States of America that might otherwise be necessary in the circumstances and should be read in conjunction with the Company’s consolidated financial statements and related notes for the year ended December 31, 2017 included in its Annual Report on Form 10-K. Reference is made to the accounting policies of the Company described in the Notes to the Consolidated Financial Statements contained in its Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2018, are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet of the Company as of December 31, 2017 has been derived from the audited consolidated balance sheet of the Company as of that date.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of United Bancorp, Inc. (“United” or “the Company”) and its wholly-owned subsidiary, Unified Bank of Martins Ferry, Ohio (“the Bank”). All intercompany transactions and balances have been eliminated in consolidation.

 

Nature of Operations

 

The Company’s revenues, operating income and assets are almost exclusively derived from banking. Accordingly, all of the Company’s banking operations are considered by management to be aggregated in one reportable operating segment. Customers are mainly located in Athens, Belmont, Carroll, Fairfield, Harrison, Jefferson and Tuscarawas Counties and the surrounding localities in northeastern, east-central and southeastern Ohio and include a wide range of individuals, businesses and other organizations. Unified Bank conducts its business through its main office in Martins Ferry, Ohio and branches in Amesville, Bridgeport, Colerain, Dellroy, Dillonvale, Dover, Glouster, Jewett, Lancaster Downtown, Lancaster East, Nelsonville, New Philadelphia, St. Clairsville East, St. Clairsville West, Sherrodsville, Strasburg and Tiltonsville, Ohio. The Bank also operates a Loan Production Office in Wheeling, West Virginia.

 

The Company’s primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential mortgage, commercial and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by both residential and commercial real estate. Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Company can be significantly influenced by a number of environmental factors, such as governmental monetary and fiscal policies, that are outside of management’s control.

 

  7

 

  

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Revenue Recognition

 

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. 

 

The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, investment securities, as well as revenue related to our mortgage banking activities, as these activities are subject to other GAAP discussed elsewhere within our disclosures.

 

Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of non-interest income are as follows:

 

Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

 

Use of Estimates

 

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided and future results could differ. The allowance for loan losses and fair values of financial instruments are particularly subject to change.

 

Loans

 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

 

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

 

  8

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

 

Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral. Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

 

For all loan portfolio segments except residential and consumer loans, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

 

The Company charges-off residential and consumer loans when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 120 days past due, charge-off of unsecured open-end loans when the loan is 120 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

 

  9

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

 

When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.

 

Allowance for Loan Losses

 

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

 

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

 

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior five years. Management believes the five year historical loss experience methodology is appropriate in the current economic environment. Other adjustments (qualitative/environmental considerations) for each segment may be added to the allowance for each loan segment after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

 

  10

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due based on the loan’s current payment status and the borrower’s financial condition including available sources of cash flows. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for non-homogenous type loans such as commercial, non-owner residential and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Company utilizes the discounted cash flows to determine the level of impairment, the Company includes the entire change in the present value of cash flows as bad debt expense.

 

The fair values of collateral dependent impaired loans are based on independent appraisals of the collateral. In general, the Company acquires an updated appraisal upon identification of impairment and annually thereafter for commercial, commercial real estate and multi-family loans. If the most recent appraisal is over a year old, and a new appraisal is not performed, due to lack of comparable values or other reasons, the existing appraisal is utilized and discounted generally 10% -35% based on the age of the appraisal, condition of the subject property, and overall economic conditions. After determining the collateral value as described, the fair value is calculated based on the determined collateral value less selling expenses. The potential for outdated appraisal values is considered in our determination of the allowance for loan losses through our analysis of various trends and conditions including the local economy, trends in charge-offs and delinquencies, etc. and the related qualitative adjustments assigned by the Company.

 

Segments of loans with similar risk characteristics are collectively evaluated for impairment based on the segment’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

 

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In this scenario, the Company attempts to work-out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified are reviewed by the Company to identify if a troubled debt restructuring (“TDR”) has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Company do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Company may terminate foreclosure proceedings if the borrower is able to work-out a satisfactory payment plan.

 

It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until six months of satisfactory borrower performance at which time management would consider its return to accrual status. If a loan was accruing at the time of restructuring, the Company reviews the loan to determine if it is appropriate to continue the accrual of interest on the restructured loan.

 

  11

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

With regard to determination of the amount of the allowance for credit losses, trouble debt restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously.

 

Earnings Per Share

 

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each period. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock awards and are determined using the treasury stock method.

 

Treasury stock shares, deferred compensation shares and unearned ESOP shares are not deemed outstanding for earnings per share calculations.

 

   Three months ended
March 31,
 
   2018   2017 
   (In thousands, except share and per share data) 
Basic          
Net income  $1,148   $850 
Dividends on non-vested restricted stock   (26)   (9)
Net earnings allocated to stockholders  $1,122   $841 
Weighted average common shares outstanding   4,987,108    4,930,956 
           
Basic earnings per common share  $0.22   $0.17 
           
Diluted          
Net earnings allocated to stockholders  $1,122   $841 
           
Weighted average common shares outstanding for basic earnings per common share   4,987,108    4,930,956 
           
Add:  Dilutive effects of assumed exercise of restricted stock   185,478    120,269 
           
Average shares and dilutive potential common shares   5,172,586    5,051,225 
           
Diluted earnings per common share  $0.22   $0.17 

 

  12

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Income Taxes

 

The Company is subject to income taxes in the U.S. federal jurisdiction, as well as various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before 2014.

 

Recently Adopted Accounting Pronouncements

 

ASU No. 2018-02 was issued in February 2018 to provide guidance to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Act and will improve usefulness of information reported to financial statement users. The amendments in this ASU will also require certain disclosures about stranded tax effects and is effective for fiscal years beginning after December 31, 2018. The Company early adopted ASU 2018-02 effective January 1, 2018 and reclassified approximately $48,000 in stranded tax effects in the adoption using the specific identification method.

 

ASU No. 2017-09 was issued in May 2017 and provides guidance about which changes to the terms or condition of a share-based payment award require and entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company has adopted ASU 2017-09 on January 1, 2018 and it did not have a significant impact on its accounting and disclosures.

 

ASU No. 2017-07 was issued in March 2017 and applies to all employers that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715. The amendments in this update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost, as defined, are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in ASU No. 2017-07 are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amendments in this update are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement. The Company has adopted ASU 2017-07 on January 1, 2018 and it did not have a significant impact on its accounting and disclosures.

 

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-15 "Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides cash flow statement classification guidance for certain transactions including how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has adopted ASU 2016-15 on January 1, 2018 and it did not have a significant impact on its accounting and disclosures.

 

  13

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

ASU No. 2016-01 was issued in January 2016 and applies to all entities that hold financial assets or owe financial liabilities. ASU 2016-01 is intended to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income; requiring public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured and amortized at cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instruments specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU 2016-01 is effective for annual periods and interim periods within those periods, beginning after December 15, 2017. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity instruments that exist as of the date of adoption. The Company is currently evaluating the impact of these amendments, but does not expect them to have a material effect on the Company’s financial position or results of operations since it does not have any equity securities or a valuation allowance. However, the amendments will have an impact on certain items that are disclosed at fair value that are not currently utilizing the exit price notion when measuring fair value. The Company has adopted ASU 2016-01 on January 1, 2018 and it did not have a material effect on its fair value disclosures and other disclosure requirements. For additional information on fair value of assets and liabilities, see Note 16.

 

ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities"

 

In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09). This update to the ASC is the culmination of efforts by the FASB and the International Accounting Standards Board (IASB) to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (IFRS). ASU 2014-09 supersedes Topic 605 – Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in ASU 2014-09 describes a 5-step process entities can apply to achieve the core principle of revenue recognition and requires disclosures sufficient to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers and the significant judgments used in determining that information. Originally, the amendments in ASU 2014-09 were effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and early application is not allowed. In July 2015, the FASB extended the implementation date to annual reporting periods beginning after December 15, 2017 including interim periods within that reporting period. Transitional guidance is included in the update. Earlier adoption is permitted only as of annual reporting periods beginning after December 31, 2016, including interim periods within that reporting period. The Company’s revenue is comprised of net interest income, which is explicitly excluded from the scope of ASU 2014-09, and non interest income. The Company has adopted ASU 2014-09 on January 1, 2018 and it did not identify any changes in the timing of revenue recognition when considering the amended accounting guidance. The Company included additional disclosures beginning in the first quarter of 2018 as required by the guidance.

 

  14

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” The provisions of ASU 2016-13 were issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. 

 

For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at amortized cost, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Subsequent changes in the allowance for credit losses on PCD assets are recognized through the statement of income as a credit loss expense. 

 

Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. 

 

ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The Allowance for Loan Losses (ALL) estimate is material to the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the ALL at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the ALL, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. In addition, the current accounting policy and procedures for the other-than-temporary impairment on available-for-sale securities will be replaced with an allowance approach. The Company continues to work with an outside vendor on data collection and reviewing segmentation to ensure it is fully compliant with the amendments at adoption date. For additional information on the allowance for loan losses, see Note 4.

 

On February 25, 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” ASU 2016-02 is intended to improve financial reporting about leasing transactions. This ASU affects all companies and other organization that lease assets such as real estate, airplanes, and manufacturing equipment.

 

Under the current accounting model, an organization applies a classification test to determine the accounting for the lease arrangement:

 

(a)Some leases are classified as capital where by the lessee would recognize lease assets and liabilities on the balance sheet.
  15

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

(b)Other leases are classified as operating leases whereby the lessee would not recognize lease assets and liabilities on the balance sheet.

 

Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with Generally Accepted Accounting Principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.

 

However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet.

 

For public companies, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Thus, for a calendar year company, it would be effective January 1, 2019. The impact is not expected to have a material effect on the Company’s financial position or results of operations since the Company does not have a material amount of lease agreements.

 

Note 2: Securities

 

The amortized cost and fair values, together with gross unrealized gains and losses of securities are as follows:

 

   Amortized Cost   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair Value 
   (In thousands) 
Available-for-sale Securities:                    
March 31, 2018:                    
U.S. government agencies  $45,250   $   $(549)  $44,701 
State and political subdivisions   26,319    51    (6)   26,364 
                     
   $71,569   $51   $(555)  $71,065 
                     
Available-for-sale Securities:                    
December 31, 2017:                    
U.S. government agencies  $45,249   $   $(290)  $44,959 
                     
   $45,249   $   $(290)  $44,959 

 

The amortized cost and fair value of available-for-sale securities and held-to-maturity securities at March 31, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

  16

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

   Available-for-sale 
   Amortized
Cost
   Fair
Value
 
   (In thousands) 
Within one year  $   $ 
One to five years   45,250    44,701 
Five to ten year        
Due after ten years   26,319    26,364 
           
Totals  $71,569   $71,065 

 

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $41.7 million and $42.0 million at March 31, 2018 and December 31, 2017, respectively.

 

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. The total fair value of these investments at March 31, 2018 was $46.8 million, which represented approximately 66% of the Company’s available-for-sale investment portfolio.

 

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. The total fair value of these investments at December 31, 2017 was $44.9 million, which represented approximately 100% of the Company’s available-for-sale and held-to-maturity investment portfolio.

 

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary and are a result on an increase in longer term interest rates.

 

Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

 

The following tables show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2017:

 

    March 31, 2018      
   Less than 12 Months   12 Months or More   Total 
Description of
Securities
  Fair Value   Unrealized
Losses
   Fair Value   Unrealized
Losses
   Fair Value   Unrealized
Losses
 
    (In thousands)
U.S. Government agencies  $12,115   $(135)  $32,586   $(414)  $44,701   $(549)
                               
State and political subdivisions           2,094    (6)   2,094    (6)
                               
Total  $12,115   $(135)  $34,680   $(420)  $46,795   $(555)

 

    December 31, 2017    
   Less than 12 Months   12 Months or More   Total 
Description of
Securities
  Fair Value   Unrealized
Losses
   Fair Value   Unrealized
Losses
   Fair Value   Unrealized
Losses
 
    (In thousands)
U.S. Government agencies  $12,190   $(59)  $32,769   $(231)  $44,959   $(290)

 

  17

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The unrealized losses on the Company’s investments in U.S. Government agencies were caused primarily by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2018.

 

There were no sales of investment securities for the three months ended March 31, 2018 and March 31, 2017.

 

Note 3: Loans and Allowance for Loan Losses

 

Categories of loans include:

 

   March 31,   December 31, 
   2018   2017 
   (In thousands) 
         
Commercial loans  $84,433   $81,327 
Commercial real estate   199,334    198,936 
Residential real estate   74,563    75,853 
Installment loans   12,155    12,473 
           
Total gross loans   370,485    368,589 
           
Less allowance for loan losses   (2,125)   (2,122)
           
Total loans  $368,360   $366,467 

 

The risk characteristics of each loan portfolio segment are as follows:

 

Commercial

 

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

 

  18

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Commercial Real Estate

 

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

 

Residential Real Estate and Consumer

 

Residential real estate and consumer loans consist of two segments - residential mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

 

Allowance for Loan Losses and Recorded Investment in Loans

As of and for the three month period ended March 31, 2018

 

   Commercial   Commercial
Real Estate
   Residential   Installment   Unallocated   Total 
    (In thousands)
Allowance for loan losses:                              
                               
Balance, beginning of period  $537   $843   $436   $218   $88   $2,122 
Provision charged to expense   (16    (173)   9    239    (2)   57 
Losses charged off               (69)       (50)
Recoveries   1    1    1    12        15 
                               
Balance, end of period  $522   $671   $446   $400   $86   $2,125 
                               
Ending balance:  individually evaluated for impairment  $   $77   $   $   $   $77 
                               
Ending balance:  collectively evaluated for impairment  $522   $594   $446   $400   $86   $2,048 
                               
Loans:                              
                               
Ending balance:  individually evaluated for impairment  $9   $612   $   $406   $   $1,027 
                               
Ending balance:  collectively evaluated for impairment  $84,424   $198,722   $74,563   $11,749   $   $369,458 

 

  19

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Allowance for Loan Losses and Recorded Investment in Loans

As of and for the three month period ended March 31, 2017

 

   Commercial   Commercial
Real Estate
   Residential   Installment   Unallocated   Total 
    (In thousands)
Allowance for loan losses:                              
                               
Balance, beginning of period  $495   $804   $591   $107   $344   $2,341 
Provision charged to expense   3    (12)   (13)   94    (47)   25 
Losses charged off               (50)       (50)
Recoveries       1    5    11        17 
                               
Balance, end of period  $498   $793   $583   $162   $297   $2,333 
                               
Ending balance:  individually evaluated for impairment  $16   $95   $   $57   $   $168 
                               
Ending balance:  collectively evaluated for impairment  $482   $698   $583   $105   $297   $2,165 
                               
Loans:                              
                               
Ending balance:  individually evaluated for impairment  $341   $985   $   $416   $   $1,742 
                               
Ending balance:  collectively evaluated for impairment  $72,783   $191,752   $75,145   $13,333   $   $353,344 

 

Allowance for Loan Losses and Recorded Investment in Loans

As of December 31, 2017

 

   Commercial   Commercial
Real Estate
   Residential   Installment   Unallocated   Total 
   (In thousands) 
Allowance for loan losses:                              
                               
Ending balance:  individually evaluated for impairment  $   $73   $   $   $   $73 
                               
Ending balance:  collectively evaluated for impairment  $537   $770   $436   $218   $88   $2,049 
                               
Loans:                              
                               
Ending balance:  individually evaluated for impairment  $83   $619   $   $306   $   $1,008 
                               
Ending balance:  collectively evaluated for impairment  $75,205   $195,108   $76,501   $12,567   $   $359,381 

 

  20

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The following tables show the portfolio quality indicators.

 

   March 31, 2018 
Loan Class  Commercial   Commercial
Real Estate
   Residential   Installment   Total 
   (In thousands) 
                     
Pass Grade  $82,052   $195,512   $74,563   $11,749   $363,876 
Special Mention       2,978            2,978 
Substandard   2,381    844        406    3,631 
Doubtful                    
                          
   $84,433   $199,334   $74,563   $12,155   $370,485 

 

   December 31, 2017 
Loan Class  Commercial   Commercial
Real Estate
   Residential   Installment   Total 
   (In thousands) 
                     
Pass Grade  $78,652   $195,063   $75,853   $12,167   $361,735 
Special Mention   20    3,066            3,086 
Substandard   2,655    807        306    3,768 
Doubtful                    
                          
   $81,327   $198,936   $75,853   $12,473   $368,589 

 

To facilitate the monitoring of credit quality within the loan portfolio, and for purposes of analyzing historical loss rates used in the determination of the ALLL, the Company utilizes the following categories of credit grades: pass, special mention, substandard, and doubtful. The four categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass ratings, which are assigned to those borrowers that do not have identified potential or well defined weaknesses and for which there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on at least a quarterly basis.

  

The Company assigns a special mention rating to loans that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan or the Company’s credit position.

 

The Company assigns a substandard rating to loans that are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. Substandard loans have well defined weaknesses or weaknesses that could jeopardize the orderly repayment of the debt. Loans and leases in this grade also are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies noted are not addressed and corrected.

 

The Company assigns a doubtful rating to loans that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage of and strengthen the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding, capital injection, perfecting liens on additional collateral or refinancing plans.

  

  21

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the past year to date period.

 

Loan Portfolio Aging Analysis

As of March 31, 2018

 

   30-59 Days
Past Due
and
Accruing
   60-89 Days
Past Due
and
Accruing
   Greater
Than 90
Days and
Accruing
   Non
Accrual
   Total Past
Due and
Non Accrual
   Current   Total Loans
Receivable
 
   (In thousands) 
Commercial  $80   $   $   $9   $89   $84,344   $84,433 
Commercial real estate   466            490    956    198,378    199,334 
Residential   1,192    145        876    2,213    72,350    74,563 
Installment   116            20    136    12,019    12,155 
Total  $1,854   $145   $   $1,395   $3,394   $367,091   $370,485 

 

Loan Portfolio Aging Analysis

As of December 31, 2017

 

  

30-59 Days

Past Due
and
Accruing

   60-89 Days
Past Due
and
Accruing
   Greater
Than 90
Days and
Accruing
   Non
Accrual
   Total Past
Due and
Non Accrual
   Current   Total Loans
Receivable
 
   (In thousands) 
Commercial  $56   $   $   $83   $139   $81,188   $81,327 
Commercial real estate   262            500    762    198,174    198,936 
Residential   559    306        760    1,625    74,228    75,853 
Installment   61    40        52    153    12,320    12,473 
Total  $938   $346   $   $1,395   $2,679   $365,910   $368,589 

 

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

 

  22

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Impaired Loans

 

   As of
March 31, 2018
   Three Months Ended
March 31, 2018
 
   Recorded
Balance
   Unpaid
Principal
Balance
   Specific
Allowance
   Average
Investment in
Impaired
Loans
   Interest
Income
Recognized
 
   (In thousands) 
Loans without a specific valuation allowance:                         
Commercial  $9   $9   $   $10   $ 
Commercial real estate   203    203        624    4 
Residential                    
Installment   406    406        406    1 
    618    618        1,040    5 
Loans with a specific valuation allowance:                         
Commercial                    
Commercial  real estate   409    409    77    422     
Residential                    
Installment                    
    409    409    77    422     
Total:                         
Commercial  $9   $9   $   $10   $ 
Commercial real estate  $612   $612   $77   $1,046   $4 
Residential  $   $   $   $   $ 
Installment  $406   $406   $   $406   $1 

 

  23

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Impaired Loans

 

   As of
December 31, 2017
   Three Months Ended
March 31, 2017
 
   Recorded
Balance
   Unpaid
Principal
Balance
   Specific
Allowance
   Average
Investment in
Impaired
Loans
   Interest
Income
Recognized
 
   (In thousands) 
Loans without a specific valuation allowance:                         
Commercial  $83   $83   $   $86   $1 
Commercial real estate   209    317        986    2 
Residential                    
Installment   306    306        325     
    598    598        1,397    3 
Loans with a specific valuation allowance:                         
Commercial               259    3 
Commercial  real estate   410    410    73    564    6 
Residential                    
Installment               91     
    410    410    73    914    9 
Total:                         
Commercial  $83   $83   $   $345   $4 
Commercial real estate  $619   $619   $73   $1,550   $8 
Residential  $   $   $   $   $ 
Installment  $306   $306   $   $416   $ 

 

Interest income recognized on a cash basis was not materiality different than interest income recognized.

 

  24

 

  

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

For the TDRs noted in the tables below, the Company extended the maturity dates and granted interest rate concessions as part of each of those loan restructurings. The loans included in the tables are considered impaired and specific loss calculations are performed on the individual loans. In conjunction with the restructuring there were no amounts charged-off.

 

   Three Months ended March 31, 2018 
   Number of
Contracts
   Pre- Modification
Outstanding Recorded
Investment
   Post-Modification
Outstanding
Recorded
Investment
 
   (In thousands) 
             
Commercial      $   $ 
Commercial real estate            
Residential            
Installment            

 

   Three Months ended March 31, 2018 
   Interest
Only
   Term   Combination   Total
Modification
 
       (In thousands)     
                 
Commercial  $   $   $   $ 
Commercial real estate                
Residential                
Consumer                

 

   Three Months ended March 31, 2017 
   Number of
Contracts
   Pre- Modification
Outstanding
Recorded
Investment
   Post-Modification
Outstanding
Recorded
Investment
 
   (In thousands) 
             
Commercial   1   $17   $17 
Commercial real estate   1    29    29 
Residential            
Installment            

 

   Three Months ended March 31, 2017 
   Interest
Only
   Term   Combination   Total
Modification
 
       (In thousands)     
                 
Commercial  $17   $   $   $17 
Commercial real estate   29            29 
Residential                
Consumer                

 

  25

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

During the three months ended March 31, 2017, troubled debt restructurings did not have a reserve allocation. At March 31, 2018 and 2017 and for three month periods then ended, there were no material defaults of any troubled debt restructurings that were modified in the last 12 months. The Company generally considers TDR’s that become 90 days or more past due under the modified terms as subsequently defaulted.

 

Note 4: Benefit Plans

 

Pension expense includes the following:

 

   Three months ended
March 31,
 
   2018   2017 
   (In thousands) 
     
Service cost  $76   $68 
Interest cost   55    50 
Expected return on assets   (111)   (90)
Amortization of prior service cost and net loss   (10)   (6)
           
Pension expense  $10   $22 

 

All components of pension expense are reflected within the salaries and employee benefits line of the income statement.

 

Note 5: Off-balance-sheet Activities

 

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contracts are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

 

A summary of the notional or contractual amounts of financial instruments with off-balance-sheet risk at the indicated dates is as follows:

 

   March 31,   December 31, 
   2018   2017 
   (In thousands) 
         
Commercial loans unused lines of credit  $26,792   $25,814 
Commitment to originate loans   15,499    15,350 
Consumer open end lines of credit   37,074    36,938 
Standby lines of credit   46    46 

 

  26

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

  

Note 6: Accumulated Other Comprehensive Loss

 

The components of accumulated other comprehensive loss, included in stockholders’ equity, are as follows:

 

   March 31,
2018
   December 31,
2017
 
   (In thousands) 
         
Net unrealized loss on securities available-for-sale  $(444)  $(290)
Net unrealized loss for unfunded status of defined benefit plan liability   (289)   (289)
           
    (733)   (579)
Tax effect   154    159 
           
Net-of-tax amount   (579)   (420)
           
Reclassification of stranded tax effects due to the Tax Cuts and Job Act   (48)    
Ending Balance  $(627)  $(420)

 

Note 7: Fair Value Measurements

 

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company also utilizes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1 Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date
   
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
   
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

 

  27

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

  

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

 

Available-for-sale Securities

 

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Company’s equity securities are classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy.

 

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2018 and December 31, 2017:

 

       Fair Value Measurements Using 
   Fair Value  

Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)

  

Significant

Other
Observable
Inputs

(Level 2)

  

Significant

Unobservable
Inputs

(Level 3)

 
   (In thousands) 
March 31, 2018                    
U.S. government agencies  $44,701   $   $44,701   $ 
State and political subdivisions   26,364        26,364     
                     
December 31, 2017                    
U.S. government agencies  $44,959   $   $44,959   $ 

 

  28

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

 

Impaired Loans (Collateral Dependent)

 

Collateral dependent impaired loans consisted primarily of loans secured by nonresidential real estate. Management has determined fair value measurements on impaired loans primarily through evaluations of appraisals performed. Due to the nature of the valuation inputs, impaired loans are classified within Level 3 of the hierarchy.

 

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the Company’s Chief Lender. Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Company’s Chief Lender by comparison to historical results.

 

Foreclosed Assets Held for Sale

 

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value (based on current appraised value) at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Management has determined fair value measurements on other real estate owned primarily through evaluations of appraisals performed, and current and past offers for the other real estate under evaluation. Due to the nature of the valuation inputs, foreclosed assets held for sale are classified within Level 3 of the hierarchy.

 

Appraisals of OREO are obtained when the real estate is acquired and subsequently as deemed necessary by the Company’s Chief lender. Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender and are selected from the list of approved appraisers maintained by management.

 

  29

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2018 and December 31, 2017.

 

       Fair Value Measurements Using 
   Fair
Value
  

Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)

  

Significant
Other
Observable
Inputs

(Level 2)

  

Significant
Unobservable
Inputs

(Level 3)

 
   (In thousands) 
March 31, 2018                
Collateral dependent impaired loans  $366   $   $   $333 
                     
                     
December 31, 2017                    
Collateral dependent impaired loans  $336   $   $   $336 
                     
Foreclosed assets held for sale   34            34 

 

Unobservable (Level 3) Inputs

 

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

 

   Fair Value at
3/31/18
   Valuation
Technique
  Unobservable Inputs  Range
   (In thousands)
Collateral-dependent impaired loans  $366   Market comparable properties  Comparability adjustments  Not available

 

   Fair Value at
12/31/17
   Valuation
Technique
  Unobservable Inputs  Range
   (In thousands)
              
Collateral-dependent impaired loans  $336   Market comparable properties  Comparability adjustments  Not available
               
Foreclosed assets held for sale   34   Market comparable properties  Marketability discount  10% – 35%

 

There were no significant changes in the valuation techniques used during 2018.

 

  30

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

 

       Fair Value Measurements Using 
   Carrying
Amount
  

Quoted Prices

in Active
Markets for
Identical
Assets

(Level 1)

  

Significant

Other
Observable
Inputs

(Level 2)

  

Significant
Unobservable
Inputs

(Level 3)

 
   (In thousands) 
March 31, 2018:                    
                     
Financial assets                    
Cash and cash equivalents  $14,771   $14,771   $   $ 
Loans, net of allowance   368,360            364,486 
Federal Home Loan Bank stock   4,164        4,164     
Accrued interest receivable   1,068        1,068     
                     
Financial liabilities                    
Deposits   404,064        366,907     
Short term borrowings   15,583        15,583     
Federal Home Loan Bank Advances   8,195        8,186     
Subordinated debentures   4,124        3,590     
Interest payable   76        76     

 

  31

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

       Fair Value Measurements Using 
   Carrying
Amount
  

Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)

  

Significant
Other
Observable
Inputs

(Level 2)

  

Significant
Unobservable
Inputs

(Level 3)

 
   (In thousands) 
December 31, 2017:                
                 
Financial assets                    
Cash and cash equivalents  $14,315   $14,315   $   $ 
Loans, net of allowance   366,467            368,033 
Federal Home Loan Bank stock   4,164        4,164     
Accrued interest receivable   993        993     
                     
Financial liabilities                    
Deposits   385,966        358,722     
Short term borrowings   11,085        11,085     
Federal Home Loan Bank Advances   10,022        10,012     
Subordinated debentures   4,124        3,590     
Interest payable   70        70     

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

 

Cash and Cash Equivalents, Accrued Interest Receivable and Federal Home Loan Bank Stock

 

The carrying amounts approximate fair value.

 

  32

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Loans

 

For March 31, 2018, fair values of loans and leases are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors. This is not comparable with the fair values disclosed for December 31, 2017, which were based on an entrance price basis. For that date, fair values of variable rate loans and leases that reprice frequently and with no significant change in credit risk were based on carrying values. The fair values of other loans and leases as of that date were estimated using discounted cash flow analyses which used interest rates then being offered for loans and leases with similar terms to borrowers of similar credit quality.

 

Deposits

 

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

 

Interest Payable

 

The carrying amount approximates fair value.

 

Short-term Borrowings, Federal Home Loan Bank Advances and Subordinated Debentures

 

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

 

Commitments to Originate Loans, Letters of Credit and Lines of Credit

 

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. Fair values of commitments were not material at March 31, 2018 and December 31, 2017.

 

  33

 

 

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 8: Repurchase Agreements

 

Securities sold under agreements to repurchase (“repurchase agreements”) with customers represent funds deposited by customers, generally on an overnight basis that are collateralized by investment securities owned by the Company.

 

The following table presents the Company’s repurchase agreements accounted for as secured borrowings:

 

   Remaining Contractual Maturity of the Agreement 
   (In thousands) 
March 31, 2018  Overnight and
Continuous
   Up to 30 Days   30-90 Days   Greater than 90
Days
   Total 
                     
Repurchase Agreements  U.S. government agencies   15,583      —         —       —    15,583 
                          
Total  $15,583   $   $   $   $15,583 

 

These borrowings were collateralized with U.S. government and agency securities with a carrying value of $18.3 million at March 31, 2018. Declines in the fair value would require the Company to pledge additional securities.

 

   (In thousands) 
December 31, 2017  Overnight and
Continuous
   Up to 30 Days   30-90 Days   Greater than 90
Days
   Total 
     
Repurchase Agreements  U.S. government agencies  $11,085   $    —   $    —   $   —   $11,085 
                          
Total  $11,085   $   $   $   $11,085 

 

Securities with an approximate carrying value of $18.4 million at December 31, 2017, were pledged as collateral for repurchase borrowings.

 

  34

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

 

The following discusses the financial condition of the Company as of March 31, 2018, as compared to December 31, 2017, and the results of operations for the three months ended March 31, 2018, compared to the same period in 2017. This discussion should be read in conjunction with the interim condensed consolidated financial statements and related footnotes included herein.

 

Introduction

 

The Company reported diluted earnings per share of $0.22 and net income of $1,148,000 for the quarter ended March 31, 2018, as compared to $0.17 and $850,000, respectively, for 2017. These year-over-year improvements in UBCP’s earnings are directly related to the lower base corporate tax rate resulting from the passage of the Tax Cuts and Jobs Act (the “Tax Act”) in the fourth quarter of 2017 and the benefit of operational improvements on which the company is starting to see a positive return. Each of these realities should benefit the company in future periods.

 

The Company experienced a solid quarterly performance for the three-month period ended March 31, 2018, resulting primarily from strong growth of net income before taxes from operations and bolstered by the impact the impact of the Tax Act. Overall, operational enhancements led to forty-three percent (43%) of the improvement in net income in the first quarter. The Company had a solid increase in net income before taxes of $127,000, or 10.4%, for the quarter ended March 31, 2018 over the quarter ended March 31, 2017. The primary drivers of this year-over-year increase in net income before taxes were the increases in interest income and fees on loans, which were up by $300,000, or 7.5%, and interest income on securities, which was up by $141,000, or 90.2%.

 

The Company had an increase in its gross loans of $15.7 million, or 4.4%, for the quarter ended March 31, 2018 as compared to March 31, 2017. While growing the loan portfolio, the Company was able to maintain its overall stability in credit quality. Year-over-year, we continued to have very solid credit quality-related metrics supported by nonaccrual loans decreasing from a level of $1.8 million to $1.4 million, a decline of $400,000 or 22.1%. Further, net loans charged off, excluding overdrafts, was $32,000 for the three months ended March 31, 2018, which is a modest increase of $20,000 from the three months ended March 31, 2017. Annualized net charge offs to average loans was 0.06% for the three months ended March 31, 2018 as compared to 0.04% for the three months ended March 31, 2017.

 

Due to the rising rate environment in which we are currently operating, we are seeing opportunities in the area of securities investments; whereby yields have reached levels that warrant using added leverage, mostly through increased core deposits, to increase the Company’s investment portfolio. During the first quarter of 2018, the Company saw an increase in securities and other restricted stock of $32.1 million, or 74.3%, as compared to March 31, 2017. With our quarter-ending securities and other restricted stock position of $75.2 million being above the quarterly average of $52.5 million, we strongly anticipate more contribution to interest income from this area in future periods.

 

With the enhanced level of total interest income that we realized in the first quarter, net interest income for the three months ended March 31, 2018 for the Company increased by $355,000, or 9.5%, even as we focused on growing retail core deposits to fund our growth. Total deposits increased by $44.3 million, or 12.3%, to a level of $394.1 million as of March 31, 2018 as compared to March 31, 2017. Even with this significant increase in total deposits, we were able to control our overall interest expense levels by attracting lower-cost retail funding to replace higher-cost wholesale funding advances that matured over the past 12 months. Overall, the Company saw low-cost retail funding (consisting of non-interest and interest bearing demand and savings deposits) comprise $34.9 million of its growth in retail deposits year-over-year. In addition, time deposits, which consist of certificate of deposit or term funding, increased by $9.3 million, or 15.4%, for the same period. This above-peer growth in retail core deposit funding led to a slight elevation in our interest expense to average assets, which increased from 0.40% for the three months ended March 31, 2017 to 0.45% for the three months ended March 31, 2018.

 

  35

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

 

The Company’s total noninterest income increased $48,000, or 5.8%, quarter over quarter. A majority of this increase was realized in the area of service charges on deposit accounts, which is the area in which the Company performs at a high level relative to peer. On the noninterest expense-side of the net noninterest margin (and, as budgeted), we experienced an increase in our noninterest expense of $245,000 or 7.3%. Most of the increase in noninterest expense continues to be related to infrastructure enhancement and personnel-related expenses as we prepare for the future growth that we envision. Considering that most of the aforementioned expenses are “fixed,” we firmly believe that we have positive operating leverage, which should allow us to drive higher levels of revenue without significantly adding to our overall noninterest expense levels in the short-term; therefore, enhancing the Company’s earnings and returns.

 

The Company has benefited from the enactment of the Tax Act, which has reduced the overall tax rate for companies, such as ours, from 35% to 21%. Overall, the Tax Act contributed fifty-seven percent (57%) of our increase in net income in the first quarter ended March 31, 2018. Management is also pleased that our investment in both the infrastructure and personnel of the Company is starting to pay off. On an operating basis, we saw an improvement in our earnings before income taxes, which contributed forty-three percent (43%) of the increase that we had in our bottom line earnings! With our focus on continuing to enhance our lending platforms, we anticipate seeing stronger loan growth in the coming year. In addition, with the implementation of an investment strategy during the course of the first quarter, we anticipate having more investment securities-based leverage on our balance sheet in the coming quarters. Each of these realities should lead to the Company generating higher levels of interest income. Increasing leverage at an acceptable spread should allow the Company to pay slightly higher rates to attract retail-based core funding to fund our growth, while maintaining our net interest margin and improving our overall level of net interest income. Year-over-year, we saw the net interest margin of the Company improve by nine (9) basis points to a level of 3.86% as of March 31, 2018. Our enhanced net interest margin led to our net interest income improving on a year-over-year basis by $356,000 or 9.5%.

 

We have stated for many quarters that our goal is to grow the Company so long as it can be accomplished in a profitable fashion. We are glad that we are in a positive position, at present, to accomplish this. At this most recent quarter end, the Company had total assets of $488.4 million, which is an increase of $47.5 million, or 10.8%, over the previous year. This is the highest level of total assets in the Company’s history and we look forward to crossing the $500.0 million total asset threshold during the course of this current year. Our viewpoint is that profitable growth will lead to positive opportunities for further growth for the Company. As initially announced in this year’s annual report to shareholders, we have very high expectations for the Company over the course of the next three years. Our ultimate goal is to become a “hybrid” or “omnichannel” bank; whereby, we can serve our present and future customers on “their” terms. By having both exceptional “in-branch” and “virtual” service options for our customers, we believe that the Company will have relevance within our industry for many years to come. In addition, we will be able to deliver on our current vision for growth, which is to have total assets greater than $1.0 billion.”

 

  36

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

  

Forward-Looking Statements

 

When used in this document, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “projected” or similar expressions are intended to identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the Bank’s market areas, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Bank’s market areas and competition, that could affect the Company’s financial performance and cause actual results to differ materially from historical earnings and those presently anticipated or projected with respect to future periods. These risks and uncertainties should be considered in evaluating forward looking statements, and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

 

The Company is not aware of any trends, events or uncertainties that will have or are reasonably likely to have a material effect on its financial condition, results of operations, liquidity or capital resources except as discussed herein. The Company is not aware of any current recommendation by regulatory authorities that would have such effect if implemented except as discussed herein.

 

The Company does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date such statements were made or to reflect the occurrence of anticipated or unanticipated events.

 

Critical Accounting Policies

 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Management makes certain judgments that affect the amounts reported in the financial statements and footnotes. These estimates, assumptions and judgments 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 judgments.

 

Based on its consideration of accounting policies that involve the most complex and subjective decisions and assessments, management has identified its most critical accounting policies to be those which are related to the allowance for loan losses. The procedures for assessing the adequacy of the allowance for loan losses reflect our evaluation of credit risk after careful consideration of all information available to management. In developing this assessment, management must rely on estimates and exercise subjective judgment regarding matters where the ultimate outcome is unknown such as economic factors, developments 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 and the board to determine whether the amount is considered adequate to absorb probable losses. This evaluation includes specific loss estimates on certain individually reviewed loans, statistical loss 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 judgment is a review of the Bank’s trend 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 loan losses inherent in the loan portfolio. Management’s evaluation of the adequacy of the allowance is an estimate based on management’s current judgment about the credit quality of the loan portfolio. While the Company strives to reflect all known risk factors in its evaluation, judgment errors may occur.

 

This discussion of the Company’s critical accounting policies should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes presented elsewhere herein, as well as other relevant portions of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

  37

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

  

Analysis of Financial Condition

 

Earning Assets – Loans

 

Our focus as a community bank is to meet the credit needs of the markets we serve. At March 31, 2018, gross loans were $370.5 million, compared to $368.6 million at December 31, 2017, an increase of $1.9 million after offsetting repayments for the period. The overall increase in the loan portfolio was comprised of a $3.5 million increase in commercial and commercial real estate loans and a $1.3 million decrease in real estate lending and a $318,000 decrease in installment loans since December 31, 2017.

 

Commercial and commercial real estate loans comprised 76.6% of total loans at March 31, 2018, compared to 76.0% at December 31, 2017. Commercial and commercial real estate loans have increased $3.5 million, or 1.3% since December 31, 2017. This segment of the loan portfolio includes originated loans in our market areas and purchased participations in loans from other banks for out-of-area commercial and commercial real estate loans to benefit from consistent economic growth outside the Company’s primary market area.

 

Installment loans represented 3.3% of total loans at March 31, 2018 and 3.4% at December 31, 2017. Some of the installment loans carry somewhat more risk than real estate lending; however, it also provides for higher yields. Installment loans have decreased $318,000, or 2.6%, since December 31, 2017. The targeted lending areas encompass four separate metropolitan areas, minimizing the risk to changes in economic conditions in the communities housing the Company’s banking locations.

 

Residential real estate loans were 20.1% of total loans at March 31, 2018 and 20.6% at December 31, 2017, representing a decrease of $1.3 million, or 1.7% since December 31, 2017. As of March 31, 2018, the Bank has approximately $5.0 million in fixed-rate loans that have been sold in the secondary market but still serviced by the Company as compared to $5.3 million at December 31, 2017. The level of fixed rate mortgages serviced by the Company will continue to decline as the Company will not retain servicing rights on new sales going forward for these types of products. The Company will continue to service these loans for a fee that is typically 25 basis points. At March 31, 2018, the Company did not hold any loans for sale.

 

The allowance for loan losses totaled $2.1 million at March 31, 2018, which represented 0.57% of total loans, and $2.1 million at December 31, 2017, or 0.58% of total loans. The allowance represents the amount which management and the Board of Directors estimates is adequate to provide for probable losses inherent in the loan portfolio. The allowance balance and the provision charged to expense are reviewed by management and the Board of Directors monthly using a risk evaluation model that considers borrowers’ past due experience, economic conditions and various other circumstances that are subject to change over time. Management believes the current balance of the allowance for loan losses is adequate to absorb probable incurred credit losses associated with the loan portfolio. Net loan charge-offs (exclusive of overdrafts) for the three months ended March 31, 2018 were approximately $32,000. Net loans charged off increased approximately $21,000 for the three months ended March 31, 2018 as compared to the same period in 2017.

 

  38

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

 

Earning Assets – Securities

 

The securities portfolio is comprised of U.S. Government agency-backed securities, tax-exempt obligations of state and political subdivisions and certain other investments. Securities available for sale at March 31, 2018 increased approximately $26.1 million from December 31, 2017 totals. Due to the rising rate environment in which we are currently operating, we are seeing opportunities in the area of securities investments; whereby, we are finally seeing yields that are at acceptable levels, which is encouraging us to leverage-up on state and political subdivision investments.

 

Sources of Funds – Deposits

 

The Company’s primary source of funds is core deposits from retail and business customers. These core deposits include all categories of interest-bearing and noninterest-bearing deposits, excluding certificates of deposit greater than $250,000. For the period ended March 31, 2018, total core deposits (interest and non interest bearing accounts and savings) increased approximately $16.0 million, or 4.2% from December 31, 2017 totals. The Company’s savings accounts increased $2.3 million or 2.8% from December 31, 2017 totals. The Company’s interest-bearing and non-interest bearing demand deposits increased $12.0 million while certificates of deposit under $250,000 increased by $3.3 million.

 

The Company has a strong deposit base from public agencies, including local school districts, city and township municipalities, public works facilities and others that may tend to be more seasonal in nature resulting from the receipt and disbursement of state and federal grants. These entities have maintained fairly static balances with the Company due to various funding and disbursement timeframes.

 

Certificates of deposit greater than $250,000 are not considered part of core deposits, and as such, are used to balance rate sensitivity as a tool of funds management. At March 31, 2017, certificates of deposit greater than $250,000 increased $517,000 or 9.7%, from December 31, 2017 totals.

 

Sources of Funds – Securities Sold under Agreements to Repurchase and Other Borrowings

 

Other interest-bearing liabilities include securities sold under agreements to repurchase and Federal Home Loan Bank (“FHLB”) advances. The majority of the Company’s repurchase agreements are with local school districts and city and county governments. The Company’s repurchase agreements increased approximately $4.5 million from December 31, 2017 totals.

 

Results of Operations for the Three Months Ended March 31, 2018 and 2017

 

Net Income

 

The reported diluted earnings per share was $0.22 for the quarter ended March 31, 2018 compared to $0.17 for the quarter ended March 31, 2017.

 

  39

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

  

Net Interest Income

 

Net interest income increased $356,000 or 9.5% for the three months ended March 31, 2018 compared to the same period in 2017. As previously mentioned, the growth of loans and investment securities was the driver for the increase in net interest income.

 

Provision for Loan Losses

 

The provision for loan losses was $57,000 for the three months ended March 31, 2018, compared to $25,000 for the same period in 2017. With the overall growth in the loan portfolio, the provision increased slightly year over year.

 

Noninterest Income

 

Noninterest income of the Company was up by $48,000 year-over-year. This increase in the fee-based income of the Company is directly attributed to the service charges on deposit accounts increasing by a like amount over the same period.

 

Noninterest Expense

 

In anticipation of building its infrastructure for future growth, the Company saw its noninterest expense increase by $245,000 or 7.3% year-over-year. Most of the increase in our noninterest expense levels was related to personnel-related expenses on the production-side, which should lead to the Company realizing higher levels of revenue in the coming quarters. Considering that most of this expense is “fixed”, we firmly believe that we should be able to drive higher levels of revenue without significantly adding to our overall noninterest expense levels in the short-term; therefore, enhancing the Company’s earnings and returns.

 

Federal Income Taxes

 

The provision for federal income taxes was $198,000 for the three months ended March 31, 2018, a decrease of $170,000 compared to the same period in 2017. The effective tax rate was approximately 14.7% and 30.3% for the three months ended March 31, 2018 and 2017, respectively. As previously discussed, the effective tax rate is lower due to the passage of the Tax Act in the fourth quarter of 2017.

 

  40

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

 

Capital Resources

 

Internal capital growth, through the retention of earnings, is the primary means of maintaining capital adequacy for the Company. Stockholders’ equity totaled $44.3 million at March 31, 2018 compared to $43.9 million at December 31, 2017, a $380,000 increase. Total average stockholders’ equity in relation to total assets was 9.05% at March 31, 2018 and 9.73% at December 31, 2018. Our shareholders approved an amendment to the Company’s Articles of Incorporation to create a class of preferred shares with 2,000,000 authorized shares. This enables the Company, at the option of the Board of Directors, to issue series of preferred shares in a manner calculated to take advantage of financing techniques which may provide a lower effective cost of capital to the Company. The amendment also provides greater flexibility to the Board of Directors in structuring the terms of equity securities that may be issued by the Company. Although this preferred stock is a financial tool, it has not been utilized to date.

 

The Company has offered for many years a Dividend Reinvestment Plan (“The Plan”) for shareholders under which the Company’s common stock will be purchased by the Plan for participants with automatically reinvested dividends. The Plan does not represent a change in the Company’s dividend policy or a guarantee of future dividends.

 

The Company is subject to the regulatory requirements of The Federal Reserve System as a bank holding company. The Bank is subject to regulations of the FDIC and the State of Ohio, Division of Financial Institutions. The most important of these various regulations address capital adequacy.

 

On January 1, 2015, the final rules of the Federal Reserve Board went into effect implementing in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

Under the final rule, minimum requirements increased for both the quality and quantity of capital held by banking organizations. The rule requires a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent and a common equity tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets from 4 percent to 6 percent and includes a minimum leverage ratio of 4 percent for all banking organizations.

 

The Company continues to be well-capitalized in accordance with Federal regulatory capital requirements as the capital ratios below show:

 

Common equity tier 1 capital ratio   10.97%
Tier 1 capital ratio   11.97%
Total capital ratio   12.50%
Leverage ratio   10.41%

 

  41

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

 

Liquidity

 

Management’s objective in managing liquidity is maintaining the ability to continue meeting the cash flow needs of its customers, such as borrowings or deposit withdrawals, as well as its own financial commitments. The principal sources of liquidity are net income, loan payments, maturing securities and sales of securities available for sale, federal funds sold and cash and deposits with banks. Along with its liquid assets, the Company has additional sources of liquidity available to ensure that adequate funds are available as needed. These include, but are not limited to, the purchase of federal funds, the ability to borrow funds under line of credit agreements with correspondent banks, a borrowing agreement with the Federal Home Loan Bank of Cincinnati and the adjustment of interest rates to obtain depositors. Management feels that it has the capital adequacy and profitability to meet the current and projected liquidity needs of its customers.

 

Inflation

 

Substantially all of the Company’s assets and liabilities relate to banking activities and are monetary in nature. The consolidated financial statements and related financial data are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). U.S. GAAP currently requires the Company to measure the financial position and results of operations in terms of historical dollars, with the exception of securities available for sale, certain impaired loans and certain other real estate and loans that may be measured at fair value. Changes in the value of money due to rising inflation can cause purchasing power loss.

 

Management’s opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other, but do not always move in correlation with each other. The Company’s ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company’s performance.

 

ITEM 3Quantitative and Qualitative Disclosures About Market Risk

 

There has been no significant change from disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

  42

 

 

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

 Condition and Results of Operations

 

ITEM 4.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 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 March 31, 2018, in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be included in the Company's periodic SEC filings.

 

There was no change in the Company's internal control over financial reporting that occurred during the Company's fiscal quarter ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

  43

 

 

United Bancorp, Inc.

 Part II – Other Information

 

ITEM 1.Legal Proceedings

 

None, other than ordinary routine litigation incidental to the Company’s business.

 

ITEM 1A.Risk Factors

 

There have been no material changes from risk factors as previously disclosed in Part 1 Item 1A of the Company’s Form 10-K for the year ended December 31, 2017, filed on March 20, 2018.

 

ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

ISSUER PURCHASES OF EQUITY SECURITIES

 

Period 

(a)

Total Number of

Shares (or Units)

Purchased

  

(b)

Average Price Paid

Per Share (or Unit)

  

(c)

Total Number of

Shares (or Units)

Purchased as Part

Of Publicly

Announced Plans

Or Programs

  

(d)

Maximum Number or

Approximate Dollar
Value) of Shares (or

Units) that May Yet Be
Purchased Under the
Plans or Programs

 
Month #1
1/1/2018 to
1/31/2018
    —             
Month #2
2/1/2018 to
2/28/2018
                
Month #3
3/1/2018 to
3/31/2018
                

 

The Company adopted the United Bancorp, Inc. Affiliate Banks Directors and Officers Deferred Compensation Plan (the “Plan”), which is an unfunded deferred compensation plan. Amounts deferred pursuant to the Plan remain unrestricted assets of the Company, and the right to participate in the Plan is limited to members of the Board of Directors and Company officers. Under the Plan, directors or other eligible participants may defer fees and up to 50% of their annual incentive award payable to them by the Company, which are used to acquire common shares which are credited to a participant’s respective account. Except in the event of certain emergencies, no distributions are to be made from any account as long as the participant continues to be an employee or member of the Board of Directors. Upon termination of service, the aggregate number of shares credited to the participant accounts are distributed to him or her along with any cash proceeds credited to the account which have not yet been invested in the Company’s stock. All purchases under this deferred compensation plan are funded with either earned director fees or officer incentive award payments. No underwriting fees, discounts, or commissions are paid in connection with the Plan. The shares allocated to participant accounts have not been registered under the Securities Act of 1933 in reliance upon the exemption provided by Section 4(2) thereof.

 

ITEM 3.Defaults Upon Senior Securities

 

Not applicable.

 

  44

 

 

United Bancorp, Inc.

 Part II – Other Information

 

ITEM 4.Mine Safety Disclosures

 

Not applicable.

 

ITEM 5.Exhibits

 

  EX-3.1 Amended Articles of Incorporation of United Bancorp, Inc. (1)
     
  EX-3.2 Amended and Restated Code of Regulations of United Bancorp, Inc. (2)
     
  EX-4.0 Instruments Defining the Rights of Security Holders (See Exhibits 3.1 and 3.2)
     
  EX 31.1 Rule 13a-14(a) Certification – CEO
     
  EX 31.2 Rule 13a-14(a) Certification – CFO
     
  EX 32.1 Section 1350 Certification – CEO
     
  EX 32.2 Section 1350 Certification – CFO
     
  EX 101.INS XBRL Instance Document
     
  EX 101.SCH XBRL Taxonomy Extension Schema Document
     
  EX 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
     
  EX 101.DEF XBRL Taxonomy Extension Definition Linkbase Document
     
  EX 101.LAB XBRL Taxonomy Extension Label Linkbase Document
     
  EX 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

(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 Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 22, 2014.

 

  45

 

 

SIGNATURES

 

Pursuant to the requirements 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.

 

  /s/United Bancorp, Inc.
       
Date: May 15, 2018 By: /s/Scott A. Everson
    Scott A. Everson
    President and Chief Executive Officer
     
Date: May 15, 2018 By: /s/Randall M. Greenwood
    Randall M. Greenwood
    Senior Vice President, Chief Financial Officer and Treasurer

 

  46

 

 

Exhibit Index

 

Exhibit No.   Description
     
31.1   Rule 13a-14(a) Certification – Principal Executive Officer
     
31.2   Rule 13a-14(a) Certification – Principal Financial Officer
     
32.1   Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of The Sarbanes-Oxley act of 2002.
     
32.2   Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

 

  47

  

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Section 2: EX-31.1 (EXHIBIT 31.1)

 

Exhibit 31.1

 

CERTIFICATIONS

 

I, Scott A. Everson, President and Chief Executive Officer of United Bancorp, Inc., certify that:

 

1.I have reviewed this Form 10-Q of United Bancorp, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 15, 2018 /s/Scott A. Everson
  Scott A. Everson, President and CEO

 

 

 

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Section 3: EX-31.2 (EXHIBIT 31.2)

 

Exhibit 31.2

 

CERTIFICATIONS

 

I, Randall M. Greenwood, Chief Financial Officer of United Bancorp, Inc., certify that:

 

1.I have reviewed this Form 10-Q of United Bancorp, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(b)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  May 15, 2018 /s/Randall M. Greenwood
  Randall M. Greenwood, CFO

 

 
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Section 4: EX-32.1 (EXHIBIT 32.1)

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of United Bancorp, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott A. Everson, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/Scott A. Everson  
Scott A. Everson,  
President and Chief Executive Officer  
   
May 15, 2018  

 

 

 

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Section 5: EX-32.2 (EXHIBIT 32.2)

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of United Bancorp, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Randall M. Greenwood, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/Randall M. Greenwood  
Randall M. Greenwood,  
Chief Financial Officer  
   
May 15, 2018  

 

 

 

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