<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 SEPTEMBER 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 October 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> <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 11
Results of Operations 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 16
</TABLE>
Page 2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(a) CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30 DECEMBER 31, SEPTEMBER 30
1995 1994 1994
IN THOUSANDS OF DOLLARS (UNAUDITED) (AUDITED) (UNAUDITED)
========================================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and demand balances in other banks $7,602 $7,049 $8,599
Federal funds sold 1,100 0 0
- ------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 8,702 7,049 8,599
Securities available for sale 53,460 41,900 46,003
Securities held to maturity (fair value of
$29,687, $32,911 and $32,807, respectively) 28,527 32,896 32,292
- ------------------------------------------------------------------------------------------------------------------------
Total securities 81,987 74,796 78,295
Loans held for sale 0 1,301 259
Portfolio loans 215,171 209,458 202,462
- ------------------------------------------------------------------------------------------------------------------------
Total loans 215,171 210,759 202,721
Less: allowance for loan losses 2,246 2,127 2,234
- ------------------------------------------------------------------------------------------------------------------------
Net loans 212,925 208,632 200,487
Premises and equipment, net 8,353 8,310 7,771
Accrued interest receivable and other assets 5,279 5,474 5,459
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $317,246 $304,261 $300,611
========================================================================================================================
LIABILITIES
Deposits
Noninterest bearing $26,529 $26,712 $25,541
Interest bearing certificates of deposit of $100,000 or more 27,491 24,016 27,303
Other interest bearing deposits 221,071 213,556 211,117
- ------------------------------------------------------------------------------------------------------------------------
Total deposits 275,091 264,284 263,961
Short term borrowings 5,787 6,800 4,200
Other borrowings 6,000 6,000 6,000
Accrued interest payable and other liabilities 2,440 2,019 1,521
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 289,318 279,103 275,682
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 16,786 14,791 14,308
Unrealized gain (loss) on securities available for sale,
net of tax of $41, $440, and $309, respectively. (79) (854) (600)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 27,928 25,158 24,929
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $317,246 $304,261 $300,611
========================================================================================================================
BOOK VALUE PER SHARE OF COMMON STOCK $18.76 $16.90 $16.75
</TABLE>
Page 3
<PAGE> 4
(b) CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
IN THOUSANDS OF DOLLARS 1995 1994 1995 1994
===================================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans
Taxable $4,843 $4,118 $14,007 $11,864
Tax exempt 17 25 60 78
Interest on securities
Available for sale - taxable 592 605 1,699 1,743
Held to maturity - taxable 61 115 242 397
Held to maturity - tax exempt 367 372 1,108 1,111
Interest on federal funds sold 66 2 115 49
- -------------------------------------------------------------------------------------------------------------------
Total interest income 5,946 5,237 17,231 15,242
INTEREST EXPENSE
Interest on certificates of deposit of $100,000 or more 443 341 1,345 955
Interest on other deposits 2,201 1,852 6,382 5,693
Interest on short term borrowings 91 62 193 122
Interest on other borrowings 83 71 226 211
- -------------------------------------------------------------------------------------------------------------------
Total interest expense 2,818 2,326 8,146 6,981
- -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 3,128 2,911 9,085 8,261
Provision for loan losses 102 83 306 249
- -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,026 2,828 8,779 8,012
OTHER INCOME
Service charges on deposit accounts 255 221 708 589
Trust & Investment fee income 218 210 688 614
Gains on securities transactions 0 1 4 155
Loan sales and servicing 85 60 261 236
Other income 70 73 331 269
- -------------------------------------------------------------------------------------------------------------------
Total other income 628 565 1,992 1,863
OTHER EXPENSE
Salaries and employee benefits 1,294 1,066 3,637 3,097
Occupancy and equipment expense 397 330 1,132 1,027
Federal deposit insurance premiums (9) 151 289 454
Other expense 588 550 1,869 1,699
- -------------------------------------------------------------------------------------------------------------------
Total other expense 2,270 2,097 6,927 6,277
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAX 1,384 1,296 3,844 3,598
Federal income tax 369 332 985 883
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $1,015 $964 $2,859 $2,715
===================================================================================================================
Net income per share of common stock $0.68 $0.65 $1.92 $1.82
Cash dividends declared per share of common stock $0.200 $0.185 $0.580 $0.553
Return on average assets (annualized) 1.32% 1.27% 1.25% 1.21%
Return on average equity (annualized) 15.64% 15.95% 14.33% 14.95%
</TABLE>
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<PAGE> 5
(c) STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
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 2,859 2,859
Cash dividends declared, $0.580 per share (864) (864)
Net change in unrealized gain (loss)
on securities available for sale 775 775
- -------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1995 $4,961 $6,260 $16,786 ($79) $27,928
===================================================================================================================
</TABLE>
(a) Unrealized Gain (Loss) on Securities Available for Sale
Page 5
<PAGE> 6
(d) YEAR TO DATE CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
IN THOUSANDS OF DOLLARS 1995 1994
===================================================================================================================
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $2,859 $2,715
- -------------------------------------------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
- -------------------------------------------------------------------------
Depreciation 674 635
Accretion/amortization on securities 268 369
Provision for loan losses 306 249
Gain on sale of securities (4) (155)
Loans originated for sale (16,058) (19,560)
Proceeds from sales of loans originated for sale 17,359 22,595
Change in deferred loan fees (229) (217)
Change in accrued interest receivable and other assets (205) (123)
Change in accrued interest payable and other liabilities 510 (4)
- -------------------------------------------------------------------------------------------------------------------
Total adjustments 2,621 3,789
- -------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 5,480 6,504
- -------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
- ------------------------------------
Proceeds from maturities of securities available for sale 3,546 3,000
Proceeds from sales of securities available for sale 93 4,317
Principal payments on securities available for sale 1,982 4,644
Purchase of securities available for sale (16,136) (11,206)
Proceeds from maturities of securities held to maturity 4,400 5,691
Proceeds from sales of securities held to maturity 0 0
Purchase of securities held to maturity (165) (3,656)
Net increase in portfolio loans (5,671) (8,318)
Premises and equipment expenditures, net (717) (1,376)
- -------------------------------------------------------------------------------------------------------------------
Net cash from investing activities (12,668) (6,904)
- -------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
- ------------------------------------
Net change in deposits 10,807 (3,185)
Net change in short term borrowings (1,013) 4,200
Dividends paid (953) (920)
- -------------------------------------------------------------------------------------------------------------------
Net cash from financing activities 8,841 95
- -------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 1,653 (305)
Cash and cash equivalents at beginning of year 7,049 8,904
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $8,702 $8,599
===================================================================================================================
Cash Paid During the Period for
- -------------------------------
Interest $8,146 $7,113
Income taxes $875 $825
===================================================================================================================
</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 nine month period ending September 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 September 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 $22,138 $26 ($104) $22,060
Mortgage backed agency securities 28,014 149 (191) 27,972
Asset backed and other securities 3,429 2 (3) 3,428
----------------------------------------------------
Total $53,581 $177 ($298) $53,460
====================================================
SECURITIES HELD TO MATURITY
- ---------------------------
Tax exempt obligations of states and
political subdivisions $24,912 $1,183 ($29) $26,066
Corporate and taxable municipal securities 3,615 6 0 3,621
----------------------------------------------------
Total $28,527 $1,189 ($29) $29,687
====================================================
</TABLE>
The amortized cost and fair value of securities by contractual maturity at
September 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 $22,511 $22,408 $3,535 $3,548
Due after one year through five years 31,070 31,052 10,253 10,643
Due after five years through ten years 13,886 14,562
Due after ten years 853 934
----------------------------------------------------
Total $53,581 $53,460 $28,527 $29,687
====================================================
</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.
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<PAGE> 8
Sales activity of securities for the periods ending September 30, 1995 and 1994
are shown in the following table, in thousands of dollars. All sales were
identified as available for sale.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Sales proceeds $93 $4,317
Gross gains 4 155
Gross losses 0 0
</TABLE>
Securities carried at $16,154,000 as of September 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
nine months ended September 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance at beginning of period $2,127 $2,074
Loans charged off (229) (125)
Recoveries credited to allowance 42 36
Provision charged to operations 306 249
------ ------
Balance at end of period $2,246 $2,234
</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 nine months ended September 30, 1995.
<TABLE>
<CAPTION>
1995
----
<S> <C>
Average investment in impaired loans $248
Interest income recognized on impaired loans 14
Portion for which interest income recognized on cash basis 3
Balance of impaired loans $204
Portion for which no allowance for loan losses is allocated 0
Portion for which an allowance for loan losses is allocated 204
Portion of allowance for loan losses allocated to impaired loans 61
</TABLE>
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<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 September 30.
<TABLE>
<CAPTION>
1995 1994
----- ------
<S> <C> <C>
Outstanding commitments to make fixed rate loans $1,606 $1,200
Outstanding commitments to make variable rate loans 1,838 1,800
Unused lines of credit - fixed rate 1,948 2,090
Unused lines of credit - variable rate 28,978 22,289
Standby letters of credit - fixed rate 0 0
Standby letters of credit - variable rate 4,273 4,358
</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 nine month period ending September 30, 1995.
FINANCIAL CONDITION
SECURITIES
Investment balances increased during the third quarter of 1995, as a result of
deposit growth which outpaced loan demand. During the quarter, the Company
increased its balances in money market deposit accounts, and invested the
proceeds in variable rate mortgage backed government agency investments. This
had the effect of moving the mix of the portfolio toward more U.S. Government
agency issues, and changed the balance of the portfolio between available for
sale and held to maturity. At June 30, 1995, 57.8% of the portfolio was
Available for Sale investments, while this number increased to 65.3% at
September 30, 1995.
LOANS
Total portfolio loans increased during the third quarter, following flat
balances during the first two quarters of 1995. The growth has originated
primarily in personal loans, and is relatively consistent across the personal
loan portfolios. However, Management believes that business lending will follow
with increases, and loan growth should continue its steady improvement.
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<PAGE> 10
The mix of the portfolio has remained relatively unchanged from prior periods,
although the general trend is toward an increased percentage of personal loans,
with slight declines in business, tax exempt and residential mortgage loans.
The table below shows total portfolio loans outstanding, in thousands of
dollars, at December 31 and September 30, and their percentage of the total
loan portfolio. All loans are domestic and contain no concentrations by
industry or customer.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 DECEMBER 31, 1994 SEPTEMBER 30, 1994
-------------------------- ------------------------- -------------------------
PORTFOLIO LOANS: BALANCE % OF TOTAL BALANCE % OF TOTAL BALANCE % OF TOTAL
<S> <C> <C> <C> <C> <C> <C>
Personal $55,008 25.6% 47,102 22.5% $42,974 21.2%
Business 54,471 25.3% 56,765 27.1% 52,551 26.0%
Tax exempt 1,189 0.6% 1,513 0.7% 1,604 0.8%
Residential mortgage 99,329 46.2% 100,028 47.8% 98,298 48.6%
Construction 5,174 2.4% 4,050 1.9% 7,035 3.5%
-------------------------- ------------------------- -------------------------
Total portfolio loans $215,171 100.0% $209,458 100.0% $202,462 100.0%
</TABLE>
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>
9/30/95 12/31/94 9/30/94
------- -------- -------
<S> <C> <C> <C>
Nonaccrual loans $42 $110 $161
Loans past due 90 days or more 230 517 238
Troubled debt restructurings 0 2 0
------- -------- -------
Total nonperforming loans $272 $629 $399
Percent of total loans 0.13% 0.30% 0.20%
</TABLE>
DEPOSITS
Interest bearing deposit balances increased during the third quarter of 1995,
primarily as a result of efforts to increase large balances in money market
deposit accounts. Other interest bearing deposits also experienced growth
during the quarter.
Noninterest bearing deposits continue to fluctuate with swings in corporate and
public fund balances, but the Company continued to experienced growth during
the third quarter 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 the balance of 1995 will
continue to 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. In addition, due to the recent decrease
in FDIC insurance premiums, it is likely that balances currently carried in
repurchase agreements will return to the CD portfolio as the rate advantage of
the repurchase agreements diminishes.
Page 10
<PAGE> 11
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Loan growth improved slightly during the quarter, following minimal growth in
the first two quarters. However, deposit growth continued, resulting in
improved liquidity. This liquidity was also enhanced by runoff in the
investment portfolio due to maturities and principal repayments on asset backed
investments. While investment purchases and improved loan growth somewhat
reduced the amount of funds sold in the daily federal funds market, liquidity
remained strong during the quarter.
Management anticipates that deposit growth will continue to match or exceed
loan growth in the near future, and therefore does not anticipate a return in
the near future to the net borrowing position experienced during 1994.
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
+/-15% of total assets. The interest sensitivity position of the Bank has
remained relatively unchanged during the third quarter, with cumulative gap
ratios at the one year time frame of just under 1 to 1.
The following table shows the rate sensitivity of earning assets and
liabilities, in thousands of dollars, as of September 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 fund $25,893 $20,251 $24,944 $11,298 $701 $83,087
Loans 48,105 62,074 67,173 21,650 16,168 215,170
-----------------------------------------------------------------------------------
Total earning assets $73,998 $82,325 $92,117 $32,948 $16,869 $298,257
===================================================================================
Interest bearing deposits and
repurchase agreements $115,787 $44,383 $81,230 $12,949 $254,349
Other borrowings 3,000 3,000 6,000
-----------------------------------------------------------------------------------
Total interest bearing liabilities $115,787 $47,383 $84,230 $12,949 $0 $260,349
===================================================================================
Net asset (liability)
funding gap ($41,789) $34,942 $7,887 $19,999 $16,869 $37,908
Cumulative net asset
(liability) funding gap ($41,789) ($6,847) $1,040 $21,039 $37,908
Cumulative gap ratio 0.64 0.96 1.00 1.08 1.15 to 1
Cumulative gap, % of assets -13.2% -2.2% 0.3% 6.6% 11.9%
</TABLE>
Page 11
<PAGE> 12
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 September 30, 1995 and 1994 and December 31,
1994. Dollars are shown in thousands.
<TABLE>
<CAPTION>
REGULATORY GUIDELINES UNITED BANCORP, INC.
--------------------- --------------------
ADEQUATE WELL 9/30/95 12/31/94 9/30/94
-------- ---- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tier 1 leverage ratio 4% 5% 8.3% 7.9% 7.9%
Tier 1 risk adjusted capital ratio 4% 8% 13.1% 12.5% 12.5%
Total risk adjusted capital ratio 8% 10% 14.3% 13.6% 13.6%
Total shareholders' equity $27,928 $25,158 $24,929
Intangible assets (1,741) (1,915) (1,976)
Unrealized (gain) loss on securities available for sale 79 854 600
-----------------------------------------
Tier 1 capital 26,266 24,097 23,553
Qualifying loan loss reserves 2,246 2,127 2,234
-----------------------------------------
Tier 2 capital $28,512 $26,224 $25,787
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income continued to show improvement during the first three
quarters of 1995, following minimal changes since 1992. This reflects continued
changes in market interest rates, as well as a decline in dependence on
borrowed funds as discussed under "Liquidity," above. The spread at September
30, 1995 was 3.97%, compared to 3.95% at June 30, 1995 and 3.81% for all of
1994. The net yield on interest earning assets improved to 4.50%, from 4.19%
for 1994.
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<PAGE> 13
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 September 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 $2,460 $115 6.23% $1,965 $49 3.32%
Taxable securities 47,968 1,941 5.40% 57,503 2,140 4.96%
Tax exempt securities (b) 25,102 1,679 8.92% 24,875 1,683 9.02%
Taxable loans 210,071 14,007 8.89% 196,030 11,864 8.07%
Tax exempt loans (b) 1,305 91 9.29% 1,764 118 8.93%
----------------------- ------------------------
Total int. earning assets (b) 286,906 $17,833 8.29% 282,137 $15,855 7.49%
----------------------- ------------------------
Cash and due from banks 7,740 6,755
Premises and equipment, net 8,391 7,170
Intangible assets 1,833 2,014
Other assets 3,104 3,179
Unrealized gain securities-AFS (559) 0
Less allowance for loan losses (2,169) (2,163)
--------- ---------
TOTAL ASSETS $305,246 $299,092
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
Interest bearing demand
deposits $35,986 $566 2.10% $32,130 $507 2.10%
Savings deposits 70,783 1,498 2.82% 79,139 1,487 2.51%
CDs $100,000 and over 29,424 1,345 6.09% 23,700 955 5.37%
Other interest bearing deposits 104,974 4,318 5.48% 104,454 3,699 4.72%
----------------------- ------------------------
Total int. bearing deposits 241,167 7,727 4.27% 239,423 6,648 3.70%
Short term borrowings 4,221 193 6.10% 3,686 122 4.41%
Other borrowings 6,000 226 5.02% 6,000 211 4.69%
----------------------- ------------------------
Total int. bearing liabilities 251,388 $8,146 4.32% 249,109 $6,981 3.74%
--------- ---------
Noninterest bearing deposits 25,171 24,276
Other liabilities 2,019 1,514
Shareholders' equity 26,668 24,193
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $305,246 $299,092
========= =========
Net interest income $9,687 $8,874
========== =========
Net spread (b) 3.97% 3.76%
========== =========
Net yield on interest earning assets (b) 4.50% 4.19%
========== =========
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.
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<PAGE> 14
The table below shows the effect of volume and rate changes on net interest
income for the nine months ended September 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 $15 $66 $66 $6 $49 $49
Taxable securities (375) (199) (199) (35) 2,140 2,140
Tax exempt securities 15 (5) (5) (24) 1,683 1,683
Taxable loans 885 2,143 2,143 372 11,864 11,864
Tax exempt loans (32) (27) (27) (16) 118 118
--------------------------------------------------------------------------------
Total interest income $508 $1,978 $1,978 $303 $15,854 $15,854
================================================================================
Interest paid on:
NOW accounts $61 $59 $59 $5 $507 $507
Savings deposits (166) 11 11 2 1,487 1,487
CDs $100,000 and over 251 390 390 113 955 955
Other interest bearing deposits 19 619 619 (277) 3,699 3,699
Short term borrowings 20 71 71 (25) 122 122
Other borrowings 0 15 15 140 211 211
--------------------------------------------------------------------------------
Total interest expense $185 $1,165 $1,165 ($42) $6,981 $6,981
================================================================================
Net change in net interest
income $323 $813 $813 $345 $8,873 $8,873
================================================================================
</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
Noninterest income continues to improve, although at a slower rate than in
previous periods. Year to date figures are up 6.9% over 1994, although third
quarter income was down slightly. Declines occurred principally in Trust &
Investment income and other income, but no changes were significant.
Income from sales and servicing of loans stabilized following declines in prior
quarters. 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 1995 and the third quarter of 1994. Increases in salaries and
benefits reflect the continued growth and expansion of the Bank. Occupancy and
equipment expenses reflect recent physical expansion, but continue at
manageable levels. The decrease in FDIC insurance premiums retroactively to
June 1 caused adjustments in expenses during the third quarter, and will result
in significantly less expense in this area in future periods. 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 nine months of 1995.
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<PAGE> 15
NET INCOME
Year to date consolidated net income was $2,859,000 compared to $2,715,000 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 up 5.02%, while year to date net income is up 3.5% Return on
consolidated average assets for the quarter was 1.32%, compared to 1.21% for
1994, and 1.27% for the third 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
September 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 September 30, 1995.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended September 30, 1995.
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<PAGE> 16
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
September 30, 1995.
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.
November 8, 1995
/S/ Dale L. Chadderdon
--------------------------------------------
Dale L. Chadderdon
Senior Vice President, Secretary & Treasurer
Page 16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,602
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,460
<INVESTMENTS-CARRYING> 28,527
<INVESTMENTS-MARKET> 29,687
<LOANS> 215,171
<ALLOWANCE> 2,246
<TOTAL-ASSETS> 317,246
<DEPOSITS> 275,091
<SHORT-TERM> 5,787
<LIABILITIES-OTHER> 2,440
<LONG-TERM> 6,000
<COMMON> 4,961
0
0
<OTHER-SE> 22,967
<TOTAL-LIABILITIES-AND-EQUITY> 317,246
<INTEREST-LOAN> 14,067
<INTEREST-INVEST> 3,049
<INTEREST-OTHER> 115
<INTEREST-TOTAL> 17,231
<INTEREST-DEPOSIT> 7,727
<INTEREST-EXPENSE> 8,146
<INTEREST-INCOME-NET> 9,085
<LOAN-LOSSES> 306
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 6,927
<INCOME-PRETAX> 3,844
<INCOME-PRE-EXTRAORDINARY> 3,844
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,859
<EPS-PRIMARY> 1.92
<EPS-DILUTED> 1.92
<YIELD-ACTUAL> 4.50
<LOANS-NON> 42
<LOANS-PAST> 230
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 162
<ALLOWANCE-OPEN> 2,127
<CHARGE-OFFS> 229
<RECOVERIES> 42
<ALLOWANCE-CLOSE> 2,246
<ALLOWANCE-DOMESTIC> 1,361
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 885
</TABLE>
