<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
/x/ Quarterly Report Pursuant to Section 13
of the Securities Exchange Act of 1934
_________________________
FOR THE QUARTER ENDED JUNE 30, 1995
COMMISSION FILE #0-16640
UNITED BANCORP, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2606280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 E. CHICAGO BOULEVARD, TECUMSEH, MI 49286
(Address of principal executive offices, including Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (517) 423-8373
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 shorter periods 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
----- -----
As of July 15, 1995, there were outstanding 1,488,375 shares of the registrant's
common stock, no par value.
Page 1
<PAGE> 2
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION PAGE NO.
- -------------------------------------------------------------------------------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Condensed)
(a) Consolidated Balance Sheet 3
(b) Consolidated Statement of Income 4
(c) Consolidated Statement of Changes in Shareholder Equity 5
(d) Consolidated Statement of Cash Flows 6
(e) Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
Financial Condition 9
Liquidity and Funds Management 10
Results of Operations 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
Page 2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(A) CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------------------------------------------------
June 30, December 31, June 30,
1995 1994 1994
In thousands of dollars (unaudited) (audited) (unaudited)
==========================================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and demand balances in other banks $7,885 $7,049 $9,958
Federal funds sold 5,900 0 0
- ------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 13,785 7,049 9,958
Securities available for sale 41,626 41,900 46,712
Securities held to maturity (fair value of
$31,646, $32,911 and $35,290, respectively) 30,570 32,896 34,656
- ------------------------------------------------------------------------------------------------------------------------
Total securities 72,196 74,796 81,368
Loans held for sale 413 1,301 2,960
Portfolio loans 210,636 209,458 195,836
- ------------------------------------------------------------------------------------------------------------------------
Total loans 211,049 210,759 198,796
Less: allowance for loan losses 2,173 2,127 2,195
- ------------------------------------------------------------------------------------------------------------------------
Net loans 208,876 208,632 196,601
Premises and equipment, net 8,426 8,310 7,148
Accrued interest receivable and other assets 4,858 5,474 5,210
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $308,141 $304,261 $300,285
========================================================================================================================
LIABILITIES
Deposits
Noninterest bearing $27,959 $26,712 $33,202
Interest bearing certificates of deposit of $100,000 or more 28,213 24,016 22,104
Other interest bearing deposits 210,877 213,556 212,995
- ------------------------------------------------------------------------------------------------------------------------
Total deposits 267,049 264,284 268,301
Short term borrowings 5,782 6,800 300
Other borrowings 6,000 6,000 6,000
Accrued interest payable and other liabilities 2,155 2,019 1,463
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 280,986 279,103 276,064
SHAREHOLDERS' EQUITY
Common stock, no par value; 5,000,000 shares authorized;
1,488,375 shares issued and outstanding. 4,961 4,961 4,961
Capital surplus 6,260 6,260 6,260
Retained earnings 16,069 14,791 13,620
Unrealized gain (loss) on securities available for sale,
net of tax of $70, $440, and $319, respectively. (135) (854) (620)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 27,155 25,158 24,221
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $308,141 $304,261 $300,285
========================================================================================================================
Book value per share of common stock $18.24 $16.90 $16.27
</TABLE>
Page 3
<PAGE> 4
<TABLE>
<CAPTION>
(B) CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
In thousands of dollars 1995 1994 1995 1994
=====================================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans
Taxable $4,663 $3,888 $9,164 $7,745
Tax exempt 20 26 43 53
Interest on securities
Available for sale - taxable 548 590 1,106 1,139
Held to maturity - taxable 88 141 181 282
Held to maturity - tax exempt 368 378 742 739
Interest on federal funds sold 39 16 49 47
- --------------------------------------------------------------------------------------------------------------------
Total interest income 5,726 5,039 11,285 10,005
INTEREST EXPENSE
Interest on certificates of deposit of $100,000 or more 463 316 902 614
Interest on other deposits 2,126 1,886 4,181 3,841
Interest on short term borrowings 50 60 102 60
Interest on other borrowings 73 70 143 140
- --------------------------------------------------------------------------------------------------------------------
Total interest expense 2,712 2,332 5,328 4,655
- --------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 3,014 2,707 5,957 5,350
Provision for loan losses 102 65 204 166
- --------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,912 2,642 5,753 5,184
OTHER INCOME
Service charges on deposit accounts 242 191 453 368
Trust & Investment fee income 239 190 470 404
Gains on securities transactions 4 125 4 154
Loan sales and servicing 80 75 176 176
Other income 115 80 261 196
- --------------------------------------------------------------------------------------------------------------------
Total other income 680 661 1,364 1,298
OTHER EXPENSE
Salaries and employee benefits 1,157 1,020 2,343 2,031
Occupancy and equipment expense 362 326 736 697
Federal deposit insurance premiums 149 151 297 303
Other expense 649 531 1,281 1,149
- --------------------------------------------------------------------------------------------------------------------
Total other expense 2,317 2,028 4,657 4,180
- --------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAX 1,275 1,275 2,460 2,302
Federal income tax 325 316 616 551
- --------------------------------------------------------------------------------------------------------------------
NET INCOME $950 $959 $1,844 $1,751
====================================================================================================================
Net income per share of common stock $0.64 $0.64 $1.24 $1.18
Cash dividends declared per share of common stock $0.190 $0.183 $0.380 $0.368
Return on average assets (annualized) 1.27% 1.28% 1.22% 1.18%
Return on average equity (annualized) 14.61% 16.03% 13.93% 14.70%
</TABLE>
Page 4
<PAGE> 5
<TABLE>
<CAPTION>
(C) STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
Common Capital Retained
In thousands of dollars Stock Surplus Earnings (a) Total
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $4,961 $6,260 $12,417 $196 $23,834
Net income, 1994 3,584 3,584
Cash dividends declared, $0.813 per share (1,210) (1,210)
Net change in unrealized gain (loss)
on securities available for sale (1,050) (1,050)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 4,961 6,260 14,791 (854) 25,158
Net income YTD 1995 1,844 1,844
Cash dividends declared, $0.380 per share (566) (566)
Net change in unrealized gain (loss)
on securities available for sale 719 719
- -----------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 $4,961 $6,260 $16,069 ($135) $27,155
=============================================================================================================================
</TABLE>
(a) Unrealized Gain (Loss) on Securities Available for Sale
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<PAGE> 6
<TABLE>
<CAPTION>
(D) YEAR TO DATE CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
In thousands of dollars 1995 1994
=============================================================================================================
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $1,844 $1,751
- ------------------------------------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation 450 413
Accretion/amortization on securities 167 264
Provision for loan losses 204 166
Gain on sale of securities (4) (154)
Loans originated for sale (6,661) (17,432)
Proceeds from sales of loans originated for sale 7,549 17,766
Change in deferred loan fees (154) (124)
Change in accrued interest receivable and other assets 246 127
Change in accrued interest payable and other liabilities 240 (51)
- ------------------------------------------------------------------------------------------------------------
Total adjustments 2,037 975
- ------------------------------------------------------------------------------------------------------------
Net cash from operating activities 3,881 2,726
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from maturities of securities available for sale 3,000 3,000
Proceeds from sales of securities available for sale 0 4,317
Principal payments on securities available for sale 887 3,976
Purchase of securities available for sale (2,659) (11,206)
Proceeds from maturities of securities held to maturity 2,370 3,360
Proceeds from sales of securities held to maturity 93 0
Purchase of securities held to maturity (165) (3,656)
Net increase in portfolio loans (1,182) (1,741)
Premises and equipment expenditures, net (566) (532)
- ------------------------------------------------------------------------------------------------------------
Net cash from investing activities 1,778 (2,482)
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net increase in deposits 2,765 1,155
Net change in short term borrowings (1,018) 300
Dividends paid (670) (645)
- ------------------------------------------------------------------------------------------------------------
Net cash from financing activities 1,077 810
- ------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 6,736 1,054
Cash and cash equivalents at beginning of year 7,049 8,904
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $13,785 $9,958
============================================================================================================
Cash Paid During the Period for
Interest $5,234 $4,781
Income taxes $525 $550
============================================================================================================
</TABLE>
Page 6
<PAGE> 7
(E) NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of United Bancorp,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six month period ending June 30, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
NOTE 2 - SECURITIES
The amortized cost and fair value of securities at June 30, 1995 are shown
below, in thousands of dollars.
<TABLE>
<CAPTION>
------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Available for Sale
U.S. Treasury and agency securities $22,689 $35 ($160) $22,564
Mortgage backed agency securities 15,559 86 (164) 15,481
Asset backed and other securities 3,583 5 (7) 3,581
------------------------------------------------------------
Total $41,831 $126 ($331) $41,626
============================================================
Securities Held to Maturity
Tax exempt obligations of states and
political subdivisions $24,952 $1,089 ($22) $26,019
Corporate and taxable municipal securities 5,618 11 (2) 5,627
------------------------------------------------------------
Total $30,570 $1,100 ($24) $31,646
============================================================
</TABLE>
The amortized cost and fair value of securities by contractual maturity at June
30, 1995 are shown below, in thousands of dollars.
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------------- ------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------------------- ------------------------
<S> <C> <C> <C> <C>
Due in one year or less $18,942 $18,836 $5,331 $5,347
Due after one year through five years 22,889 22,790 10,393 10,764
Due after five years through ten years 13,988 14,600
Due after ten years 858 935
------------------------- ------------------------
Total $41,831 $41,626 $30,570 $31,646
========================= ========================
</TABLE>
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. Asset backed securities are included in periods based on
their estimated average lives. Equity securities are included with securities
available for sale due in one year or less.
Page 7
<PAGE> 8
Sales activity of securities for the periods ending June 30, 1995 and 1994 are
shown in the following table, in thousands of dollars. Proceeds for 1995 include
one security from the Held to Maturity category which was sold due to credit
quality problems. All sales during 1994 were of securities identified as
available for sale.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Sales proceeds $93 $4,317
Gross gains 4 154
Gross losses 0 0
</TABLE>
Securities carried at $16,206,000 as of June 30, 1995 were pledged to secure
deposits of public funds and for other purposes as required by law. A "Blanket
Collateral" agreement with the Federal Home Loan Bank was in effect to secure
advances. This agreement, however, does not require the pledging of specific
securities.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses, in thousands of dollars, for the
six months ended June 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance at beginning of period $2,127 $2,074
Loans charged off (180) (61)
Recoveries credited to allowance 22 16
Provision charged to operations 204 166
------ ------
Balance at end of period $2,173 $2,195
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," ("SFAS 114") at January 1,
1995. Under this standard, the carrying value of loans considered to be impaired
is reduced to the present value of expected future cash flows or to the fair
value of the collateral by allocating a portion of the allowance for loan losses
to such loans. If these allocations cause the allowance for loan losses to
require increase, such increase is reported as bad debt expense. There was no
increase in the allowance for loan losses due to the adoption of SFAS 114 at
January 1, 1995.
Information regarding impaired loans, in thousands of dollars, is as follows for
the six months ended June 30, 1995.
<TABLE>
<CAPTION>
1995
----
<S> <C>
Average investment in impaired loans $263
Interest income recognized on impaired loans including
interest income recognized on cash basis 7
Interest income recognized on cash basis 0
</TABLE>
Information regarding impaired loans, in thousands of dollars, at the end of
June 30, 1995 follows.
<TABLE>
<CAPTION>
1995
----
<S> <C>
Balance of impaired loans $263
Portion for which no allowance for loan losses is allocated 0
Portion for which an allowance for loan losses is allocated 263
Portion of allowance for loan losses allocated to impaired loans 62
</TABLE>
Page 8
<PAGE> 9
NOTE 4 - COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS
The following table shows the commitments to make loans and the unused lines of
credit, in thousands of dollars, available to Bank customers at June 30.
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Outstanding commitments to make fixed rate loans $1,471 $1,720
Outstanding commitments to make variable rate loans 1,822 2,580
Unused lines of credit - fixed rate 1,836 1,670
Unused lines of credit - variable rate 29,188 26,879
Standby letters of credit - fixed rate 0 0
Standby letters of credit - variable rate 4,383 4,348
</TABLE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This discussion provides information about the consolidated financial condition
and results of operations of United Bancorp, Inc. and its subsidiary, United
Bank & Trust ("Bank") for the six month period ending June 30, 1995.
FINANCIAL CONDITION
SECURITIES
Investment balances remained relatively flat during the second quarter of 1995.
The mix of the portfolio remained relatively unchanged from December 31 and June
30, 1994.
LOANS
Total portfolio loans increased slightly during the second quarter, following a
decrease during the first three months of 1995. This reflects continued slowing
of demand for residential mortgage loans following record levels achieved in
1993 and 1994. Loan volume has traditionally softened during the first half of
the year, and the Bank experienced similar balance changes from December 31,
1993 to June 30, 1994. Management does not believe that this slowdown will be
representative of loan growth for the balance of 1995.
The percentage makeup of the loan portfolio is not significantly changed from
December 31 or June 30, 1994, although personal loans continue to make up a
larger percent of the portfolio. The table below shows total portfolio loans
outstanding, in thousands of dollars, at December 31 and June 30, and their
percentage of the total loan portfolio. All loans are domestic and contain no
concentrations by industry or customer.
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994 June 30, 1994
--------------------- --------------------- ---------------------
Portfolio loans: Balance % of total Balance % of total Balance % of total
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Personal $51,380 24.4% 47,102 22.5% $40,034 20.4%
Business 55,843 26.5% 56,765 27.1% 50,424 25.7%
Tax exempt 1,014 0.5% 1,513 0.7% 1,635 0.8%
Residential mortgage 99,530 47.3% 100,028 47.8% 97,089 49.6%
Construction 2,869 1.4% 4,050 1.9% 6,654 3.4%
--------------------- --------------------- ---------------------
Total portfolio loans $210,636 100.0% $209,458 100.0% $195,836 100.0%
</TABLE>
Page 9
<PAGE> 10
CREDIT QUALITY
The Company continues to maintain a high level of asset quality as a result of
actively monitoring delinquencies, nonperforming assets and potential problem
loans. In addition, the Bank uses an independent loan review firm to assess the
continued quality of its business loan portfolio. Nonperforming loans are
comprised of (1) loans accounted for on a nonaccrual basis: (2) loans
contractually past due 90 days or more as to interest or principal payments (but
not included in the nonaccrual loans in (1) above); and (3) other loans whose
terms have been renegotiated to provide a reduction or deferral of interest or
principal because of a deterioration in the financial position of the borrower
(exclusive of loans in (1) or (2) above). The aggregate amount of nonperforming
loans, in thousands of dollars, is shown in the table below.
<TABLE>
<CAPTION>
6/30/95 12/31/94 6/30/94
------- -------- -------
<S> <C> <C> <C>
Nonaccrual loans $126 $110 $162
Loans past due 90 days or more 236 517 71
Troubled debt restructurings 0 2 0
--------------------------------
Total nonperforming loans $362 $629 $233
Percent of total loans 0.17% 0.30% 0.12%
</TABLE>
DEPOSITS
Interest bearing deposit balances decreased during the second quarter of 1995,
primarily reflecting a transfer of funds to repurchase agreements offered to
certain large customers as an investment alternative to deposit products. Other
interest bearing deposits remained flat during the quarter, reversing deposit
declines experienced in 1994.
Noninterest bearing deposits continue to fluctuate with swings in corporate and
public fund balances, but the Company experienced growth during the first and
second quarters in personal noninterest bearing deposits as a result of a new
product introduced during the fourth quarter of 1994.
Management anticipates that deposit growth during 1995 will be steady, with
growth anticipated from new markets, as well as from consumer re-entry into the
certificate of deposit market following sharp increases in rates experienced in
1994.
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Loan growth improved slightly during the second quarter, following declines in
the first quarter. However, deposit growth continued, resulting in improved
liquidity during the quarter. Short term borrowed funds were eliminated by the
end of the first quarter, and during the second quarter, the Bank was regularly
selling excess funds in the federal funds market. This liquidity was also
enhanced by runoff in the investment portfolio due to maturities and principal
repayments on asset backed investments. Finally, sale during the first quarter
of $1.3 million of loans held for sale at December 31, 1994 contributed to the
Company's liquidity.
Management anticipates that deposit growth will outpace loan growth in the near
future, and therefore does not anticipate a return in the near future to
borrowing levels experienced during 1994.
Page 10
<PAGE> 11
FUNDS MANAGEMENT
The Funds Management Policy of the Bank provides for a cumulative gap
ratio between .8 and 1.1 to one at the one year time period, with total
exposure of plus or minus 15% of total assets. During the second quarter of
1995, the gap ratio has increased to .93 from .88 at March 31, 1995 and .87 at
December 31, 1994, while the asset ratio has increased from (6.3%) to (3.3%)
for the same time periods.
The following table shows the rate sensitivity of earning assets and
liabilities, in thousands of dollars, as of June 30, 1995.
<TABLE>
<CAPTION>
0-3 Mo. 4-12 Mo. 1-5 Yrs 5-10 Yrs Over 10 Yrs Total
------- -------- ------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Securities & federal funds $15,858 $21,238 $30,785 $9,689 $526 $78,096
Loans 41,762 66,468 61,525 23,491 17,803 211,049
--------------------------------------------------------------------
Total earning assets $57,620 $87,706 $92,310 $33,180 $18,329 $289,145
====================================================================
Interest bearing deposits and
repurchase agreements $92,960 $59,502 $79,876 $12,534 $244,872
Other borrowings 3,000 3,000 6,000
--------------------------------------------------------------------
Total interest bearing liabilities $92,960 $62,502 $82,876 $12,534 $0 $250,872
====================================================================
Net asset (liability)
funding gap ($35,340) $25,204 $9,434 $20,646 $18,329 $38,273
Cumulative net asset
(liability) funding gap ($35,340) ($10,136) ($702) $19,944 $38,273
Cumulative gap ratio 0.62 0.93 1.00 1.08 1.15 to 1
Cumulative gap, % of assets -11.5% -3.3% -0.2% 6.5% 12.4%
</TABLE>
CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions. The following table shows the Company's capital
ratios and ratio calculations at June 30, 1995 and 1994 and December 31, 1994.
Dollars are shown in thousands.
<TABLE>
<CAPTION>
Regulatory Guidelines United Bancorp, Inc.
--------------------- -----------------------------
Adequate Well 6/30/95 12/31/94 6/30/94
-------- ---- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tier 1 leverage ratio 4% 5% 8.3% 7.9% 7.6%
Tier 1 risk adjusted capital ratio 4% 8% 13.1% 12.5% 12.3%
Total risk adjusted capital ratio 8% 10% 14.2% 13.6% 13.5%
Total shareholders' equity $27,155 $25,158 $24,221
Intangible assets (1,798) (1,915) (2,014)
Unrealized (gain) loss on securities available for sale 135 854 620
-----------------------------
Tier 1 capital 25,492 24,097 22,827
Qualifying loan loss reserves 2,173 2,127 2,195
-----------------------------
Tier 2 capital $27,665 $26,224 $25,022
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income began to show improvement during the first two quarters of
1995, following minimal changes since 1992. This reflects recent changes in
market interest rates, as well as a decline in dependence on borrowed funds as
discussed under "Liquidity," above. The spread at June 30, 1995 was 3.95%,
compared to 3.81% for all of 1994. The net yield on interest earning assets
improved to 4.46%, from 4.26% for 1994.
Page 11
<PAGE> 12
The table below shows the year to date daily average Consolidated Balance Sheet,
interest earned (on a taxable equivalent basis) or paid, and the annualized
effective rate or yield, for the period ended June 30, 1995 and 1994.
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1995 1994
---------------------------------------------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance (b) Rate Balance (b) Rate
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets (a)
Federal funds sold $1,676 $49 5.85% $2,856 $47 3.29%
Taxable securities 47,889 1,287 5.37% 59,098 1,421 4.81%
Tax exempt securities (b) 25,182 1,124 8.93% 24,716 1,120 9.06%
Taxable loans 209,142 9,164 8.76% 194,854 7,745 7.95%
Tax exempt loans (b) 1,389 65 9.38% 1,832 80 8.73%
------------------- -------------------
Total int. earning assets (b) 285,278 $11,689 8.20% 283,356 $10,413 7.35%
------------------- -------------------
Cash and due from banks 7,735 6,769
Premises and equipment, net 8,420 7,050
Intangible assets 1,862 2,025
Other assets 3,227 2,916
Unrealized gain securities-AFS (745) (234)
Less allowance for loan losses (2,152) (2,142)
-------- --------
TOTAL ASSETS $303,625 $299,740
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
Interest bearing demand
deposits $36,054 $378 2.10% $31,366 $331 2.11%
Savings deposits 70,849 994 2.81% 80,607 1,000 2.48%
CDs $100,000 and over 30,039 902 6.01% 23,002 614 5.34%
Other interest bearing deposits 104,416 2,809 5.38% 106,229 2,510 4.73%
------------------- -------------------
Total int. bearing deposits 241,358 5,083 4.21% 241,204 4,455 3.69%
Short term borrowings 3,409 102 5.98% 2,833 60 4.24%
Other borrowings 6,000 143 4.77% 6,000 140 4.67%
------------------- -------------------
Total int. bearing liabilities 250,767 $5,328 4.25% 250,037 $4,655 3.72%
------- -------
Noninterest bearing deposits 24,665 23,861
Other liabilities 1,499 1,825
Shareholders' equity 26,694 24,017
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $303,625 $299,740
======== ========
Net interest income $6,361 $5,758
======= =======
Net spread (b) 3.95% 3.63%
===== =====
Net yield on interest earning assets (b) 4.46% 4.06%
===== =====
Ratio of interest earning assets to
interest bearing liabilities 1.14 1.13
======== ========
</TABLE>
(a) Non-accrual loans and overdrafts are included in the average balances of
loans.
(b) Fully tax-equivalent basis; 34% tax rate.
Page 12
<PAGE> 13
The table below shows the effect of volume and rate changes on net interest
income for the six months ended June 30, on a taxable equivalent basis, in
thousands of dollars.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1995 Compared to 1994 1994 Compared to 1993
-----------------------------------------------------------------------
Increase (Decrease) Due To: (a) Increase (Decrease) Due To: (a)
------------------------------- -------------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Federal funds sold ($25) $27 $2 $9 $3 $12
Taxable securities (289) 155 (134) 26 (141) (115)
Tax exempt securities 21 (17) 4 (43) (37) (80)
Taxable loans 592 827 1,419 292 (618) (326)
Tax exempt loans (21) 6 (15) (14) (12) (26)
----------------------------------------------------------------------
Total interest income $278 $998 $1,276 $270 ($805) ($535)
======================================================================
Interest paid on:
NOW accounts $49 ($2) $47 ($4) ($73) ($77)
Savings deposits (129) 123 (6) 24 (146) (122)
CDs $100,000 and over 205 83 288 49 (57) (8)
Other interest bearing deposits (43) 342 299 (166) (181) (347)
Short term borrowings 14 28 42 (15) (12) (27)
Other borrowings 0 3 3 135 0 135
----------------------------------------------------------------------
Total interest expense $96 $577 $673 $23 ($469) ($446)
======================================================================
Net change in net interest
income $182 $421 $603 $247 ($336) ($89)
======================================================================
</TABLE>
(a) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
OTHER INCOME
Total noninterest income increased 3.0% for the second quarter and 5.1% year to
date from the same periods in 1994. All categories are up with the exception of
income from securities transactions.
Income from sales and servicing of loans reflects the slowing of the demand for
residential real estate mortgages, following the unprecedented origination
volume experienced throughout the country in 1993 and 1992. Rising interest
rates substantially reduced the income generated from gains on the sale of fixed
rate residential real estate loans in 1994, and continuing into 1995. On the
other hand, the Company continues to service a portfolio of sold loans, which
provides a steady stream of income.
OTHER EXPENSES
Most categories of noninterest expense showed moderate increases over the second
quarter of 1994. Increases in salaries and benefits reflect the continued growth
and expansion of the Bank. Occupancy and equipment expenses have leveled out,
following conversion to new data processing hardware and software late in 1993.
Year to date totals for this category are virtually unchanged from the same
period in 1994. Other expenses continue at levels consistent with the same
period in 1994, reflecting efforts to control overhead where possible.
FEDERAL INCOME TAX
There is no significant change in the income tax position of the Company during
the first six months of 1995.
Page 13
<PAGE> 14
NET INCOME
Year to date consolidated net income was $1,844,000 compared to $1,751,000 for
the same period in 1994. Improved interest margin, combined with improved
noninterest income and careful control of operating expenses, have contributed
to this improvement. Compared to the same periods last year, net income for the
quarter is down 0.9%, while year to date net income is up 5.3%. Return on
consolidated average assets for the quarter was 1.27%, compared to 1.20% for
1994, and 1.28% for the second quarter period in 1994.
PROSPECTIVE ACCOUNTING CHANGES
Management does not anticipate adopting any prospective accounting changes
during 1995.
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings. The Company's
sole subsidiary, United Bank & Trust, is involved in ordinary routine
litigation incident to its business; however, no such proceedings are expected
to result in any material adverse effect on the operations or earnings of the
Bank. Neither the Bank nor the Company is involved in any proceedings to which
any director, principal officer, affiliate thereof, or person who owns of record
or beneficially five percent (5%) or more of the outstanding stock of the
Company or the Bank, or any associate of the foregoing, is a party or has a
material interest adverse to the Company or the Bank.
ITEM 2 - CHANGES IN SECURITIES
No changes in the securities of the Company occurred during the quarter ended
June 30, 1995.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities relevant to the requirements
of this section during the three months ended June 30, 1995.
Page 14
<PAGE> 15
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Company was held on April 18, 1995. At
that meeting, the following matters were submitted to a vote of the
shareholders. There were 1,488,375 voting shares outstanding on April 18,1995.
The following directors were re-elected to a three year term:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Patrick D. Farver 1,106,587 1,317 0
James C. Lawson 1,107,274 630 0
Donald J. Martin 1,107,874 30 0
David E. Maxwell 1,106,749 1,155 0
James K. Whitehouse 1,107,904 0 0
</TABLE>
The following new director was elected to a one year term:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Jeffrey T. Robideau 1,107,693 211 0
</TABLE>
Crowe Chizek & Company of Grand Rapids, Michigan were ratified as independent
auditors for the Company and its subsidiary for the year ending December 31,
1995. The vote was as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Ratification of auditors 1,107,887 0 17
</TABLE>
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits (numbered as in Item 601 of Regulation S-K):
27. Financial Data Schedule.
(b) The Company has filed no reports on Form 8-K during the quarter ended June
30, 1995.
Page 15
<PAGE> 16
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.
United Bancorp, Inc.
August 8, 1995
/S/ Dale L. Chadderdon
--------------------------------------------
Dale L. Chadderdon
Senior Vice President, Secretary & Treasurer
Page 16
<PAGE> 17
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 7,885
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41,626
<INVESTMENTS-CARRYING> 30,570
<INVESTMENTS-MARKET> 31,646
<LOANS> 211,049
<ALLOWANCE> 2,173
<TOTAL-ASSETS> 308,141
<DEPOSITS> 267,049
<SHORT-TERM> 5,782
<LIABILITIES-OTHER> 2,155
<LONG-TERM> 6,000
<COMMON> 4,961
0
0
<OTHER-SE> 22,194
<TOTAL-LIABILITIES-AND-EQUITY> 308,141
<INTEREST-LOAN> 9,207
<INTEREST-INVEST> 2,029
<INTEREST-OTHER> 49
<INTEREST-TOTAL> 11,285
<INTEREST-DEPOSIT> 5,083
<INTEREST-EXPENSE> 5,328
<INTEREST-INCOME-NET> 5,957
<LOAN-LOSSES> 204
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 4,657
<INCOME-PRETAX> 2,460
<INCOME-PRE-EXTRAORDINARY> 2,460
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,844
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
<YIELD-ACTUAL> 4.46
<LOANS-NON> 126
<LOANS-PAST> 236
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 137
<ALLOWANCE-OPEN> 2,127
<CHARGE-OFFS> 180
<RECOVERIES> 22
<ALLOWANCE-CLOSE> 2,173
<ALLOWANCE-DOMESTIC> 359
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,814
</TABLE>
