<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 MARCH 31, 1996
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 April 15, 1996, there were outstanding 1,489,840 shares of the
registrant's common stock, no par value.
Page 1
<PAGE> 2
CROSS REFERENCE TABLE
ITEM NO. DESCRIPTION PAGE NO.
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 10
Liquidity and Funds Management 12
Results of Operations 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 17
Page 2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(a) CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
In thousands of dollars, except per share data 1996 1995 1995
-------- --------- --------
<S> <C> <C> <C>
ASSETS
Cash and demand balances in other banks $ 9,154 $ 10,017 $ 8,092
Federal funds sold 1,800 8,700 4,300
-------- -------- --------
Total cash and cash equivalents 10,954 18,717 12,392
Securities available for sale 48,178 45,420 40,001
Securities held to maturity (fair value of
$32,792, $31,833 and $32,208, respectively) 31,749 30,495 31,534
-------- -------- --------
Total securities 79,927 75,915 71,535
Loans held for sale 498 261 125
Portfolio loans 220,100 217,566 208,961
-------- -------- --------
Total loans 220,598 217,827 209,086
Less: allowance for loan losses 2,250 2,197 2,152
-------- -------- --------
Net loans 218,348 215,630 206,934
Premises and equipment, net 8,562 8,404 8,299
Accrued interest receivable and other assets 5,010 4,770 5,347
-------- -------- --------
TOTAL ASSETS $322,801 $323,436 $304,507
======== ======== ========
LIABILITIES
Deposits
Noninterest bearing $ 25,307 $ 29,565 $ 25,444
Interest bearing certificates of deposit of $100,000 or more 38,338 34,439 31,328
Other interest bearing deposits 220,279 221,168 213,544
-------- -------- --------
Total deposits 283,924 285,172 270,316
Short term borrowings 586 578 0
Other borrowings 6,000 6,000 6,000
Accrued interest payable and other liabilities 2,761 2,833 1,967
-------- -------- --------
TOTAL LIABILITIES 293,271 294,583 278,283
SHAREHOLDERS' EQUITY
Common stock, no par value; 5,000,000 shares authorized;
1,489,840, 1,489,840 and 1,488,375 shares issued and
outstanding, respectively 11,262 11,262 11,221
Stock dividend payable, 74,492 shares at $29 market value 2,160
Retained earnings 16,113 17,486 15,403
Unrealized gain (loss) on securities available for sale,
net of tax of $2, $(54), and $206, respectively (5) 105 (400)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 29,530 28,853 26,224
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $322,801 $323,436 $304,507
======== ======== ========
Book value per share of common stock $ 19.82 $ 19.37 $ 17.62
</TABLE>
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<PAGE> 4
(b) CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
In thousands of dollars, except per share data 1996 1995
------ ------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans
Taxable $4,911 $4,501
Tax exempt 17 23
Interest on securities
Taxable 698 650
Tax exempt 417 373
Interest on federal funds sold 55 11
------ ------
Total interest income 6,098 5,558
INTEREST EXPENSE
Interest on certificates of deposit of $100,000 or more 525 439
Interest on other deposits 2,210 2,055
Interest on short term borrowings 13 52
Interest on other borrowings 82 69
------ ------
Total interest expense 2,830 2,615
------ ------
NET INTEREST INCOME 3,268 2,943
Provision for loan losses 126 102
------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,142 2,841
NONINTEREST INCOME
Service charges on deposit accounts 268 211
Trust & Investment fee income 249 231
Gains on securities transactions 0 0
Loan sales and servicing 181 96
Income from sale of nondeposit investment products 72 53
Other income 112 146
------ ------
Total noninterest income 882 737
NONINTEREST EXPENSE
Salaries and employee benefits 1,345 1,186
Occupancy and equipment expense 478 426
Federal deposit insurance premiums 7 149
Other expense 687 631
------ ------
Total noninterest expense 2,517 2,392
------ ------
INCOME BEFORE FEDERAL INCOME TAX 1,507 1,186
Federal income tax 392 291
------ ------
NET INCOME $1,115 $ 895
====== ======
Net income per share of common stock $ 0.75 $ 0.60
Cash dividends declared per share of common stock $ 0.22 $ 0.19
Return on average assets (annualized) 1.40% 1.20%
Return on average equity (annualized) 15.46% 13.70%
</TABLE>
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(c) STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Retained
In thousands of dollars Stock Dividend Earnings (a) Total
------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $11,221 $0 $14,791 ($854) $25,158
Net income, 1995 4,035 4,035
Cash dividends declared, $0.90 per share (1,340) (1,340)
Common stock issued, 1,465 shares 41 41
Net change in unrealized gain (loss)
on securities available for sale 959 959
------- ------ ------- ---- -------
Balance, December 31, 1995 11,262 0 17,486 105 28,853
Net income YTD 1996 1,115 1,115
Cash dividends declared, $0.22 per share (328) (328)
Stock dividend declared, 74,492 shares 2,160 (2,160) 0
Net change in unrealized gain (loss)
on securities available for sale (110) (110)
------- ------ ------- ---- -------
Balance, March 31, 1996 $11,262 $2,160 $16,113 ($5) $29,530
======= ====== ======= ==== =======
</TABLE>
(a) Unrealized Gain (Loss) on Securities Available for Sale
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<PAGE> 6
(d) YEAR TO DATE CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
In thousands of dollars 1996 1995
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 1,115 $ 895
------- -------
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation 243 225
Accretion/amortization on securities 97 89
Provision for loan losses 126 102
Loans originated for sale (8,786) (1,984)
Proceeds from sales of loans originated for sale 8,549 3,160
Change in accrued interest receivable and other assets (240) (108)
Change in accrued interest payable and other liabilities 133 53
------- -------
Total adjustments 122 1,537
------- -------
Net cash from operating activities 1,237 2,432
------- -------
Cash Flows from Investing Activities
Proceeds from maturities of securities available for sale 6,000 2,000
Principal payments on securities available for sale 1,226 515
Purchase of securities available for sale (10,225) 0
Proceeds from maturities of securities held to maturity 510 1,345
Purchase of securities held to maturity (1,786) 0
Net change in portfolio loans (2,607) 420
Premises and equipment expenditures, net (401) (214)
------- -------
Net cash from investing activities (7,283) 4,066
------- -------
Cash Flows from Financing Activities
Net change in noninterest bearing demand, savings and NOW deposits (5,963) (4,970)
Net change in time deposits 4,715 11,002
Net change in short term borrowings 8 (6,800)
Dividends paid (477) (387)
------- -------
Net cash from financing activities (1,717) (1,155)
------- -------
Net change in cash and cash equivalents (7,763) 5,343
Cash and cash equivalents at beginning of year 18,717 7,049
------- -------
Cash and cash equivalents at end of period $10,954 $12,392
======= =======
Cash Paid During the Period for
Interest $ 2,822 $ 2,591
Income taxes $ 39 $ 100
======= =======
</TABLE>
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(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
three month period ending March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996. 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, 1995.
NOTE 2 - SECURITIES
The amortized cost and fair value of securities at March 31, 1996 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 $14,066 $ 24 $ (40) $14,050
Mortgage backed agency securities 31,060 212 (205) 31,067
Asset backed and other securities 3,059 3 (1) 3,061
------- ------- ----- -------
Total $48,185 $ 239 $(246) $48,178
======= ======= ===== =======
Securities Held to Maturity
Tax exempt obligations of states and
political subdivisions $30,140 $ 1,090 $ (56) $31,174
Corporate and taxable municipal securities 1,609 9 0 1,618
------- ------- ----- -------
Total $31,749 $ 1,099 $ (56) $32,792
======= ======= ===== =======
</TABLE>
The amortized cost and fair value of securities by contractual maturity at March
31, 1996 are low, 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 $ 8,054 $ 8,040 $ 2,020 $ 2,028
Due after one year through five years 40,131 40,138 12,802 13,185
Due after five years through ten years 14,458 15,041
Due after ten years 2,469 2,538
------- ------- ------- -------
Total $48,185 $48,178 $31,749 $32,792
======= ======= ======= =======
</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
There were no sales of securities during the period ending March 31, 1996 and
1995.
Securities carried at $10,783,000 as of March 31, 1996 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 - LOANS HELD FOR SALE
The Company adopted Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" ("SFAS No. 122") at January 1, 1996.
This Statement changes the accounting for mortgage servicing rights retained by
the loan originator. Under the Statement, if the originator sells or
securitizes mortgage loans and retains the related servicing rights, the total
cost of the mortgage loan is allocated between the loan (without the servicing
rights) and the servicing rights, based on their relative fair values. The
costs allocated to mortgage servicing rights are recorded as a separate asset
and amortized in proportion to, and over the life of, the net servicing income.
The Company currently retains servicing on almost all loans originated and sold
into the secondary market. Accordingly, the Statement applies to most loan
sales. In general, this Statement increases the amount of income recognized
when loans are sold and reduces the amount of income recognized during the
servicing period.
The carrying value of the mortgage servicing is periodically evaluated for
impairment. Impairment is recognized using the fair value of individual
stratum of servicing rights based on the underlying risk characteristics of the
serviced loan portfolio. Substantially all notes originated for sale are fixed
rate loans from Lenawee county which are sold to Fannie Mae. Impairment
evaluation is based on interest rates, prepayment rates, remaining term and
other factors.
Mortgage servicing rights activity in thousands of dollars for the three months
ended March 31, 1996 follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Mortgage servicing rights at January 1 $ 0
Amount capitalized year to date 61
Amount amortized year to date (1)
---
Mortgage servicing rights at period end $60
Valuation allowance for mortgage servicing rights at period end $ 0
</TABLE>
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<PAGE> 9
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses, in thousands of dollars, for the
three months ended March 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance at beginning of period $2,197 $2,127
Loans charged off (88) (93)
Recoveries credited to allowance 15 16
Provision charged to operations 126 102
------ ------
Balance at end of period $2,250 $2,152
</TABLE>
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
amount and composition of the loan portfolio, and other factors. The allowance
is increased by provisions for loan losses charged to income and reduced by net
charge-offs.
In May of 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS No. 114") and later amended by Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures." The Company adopted SFAS No. 114 and 118
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, as a practical expedient, 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 No. 114 at January 1, 1995.
Smaller-balance homogeneous loans are residential first mortgage loans secured
by one-to-four family residences, residential construction loans, and
automobile, home equity and second mortgage loans, and are collectively
evaluated for impairment. Commercial loans and mortgage loans secured by other
properties are evaluated individually for impairment. When credit analysis of
borrower operating results and financial condition indicates that underlying
cash flows of the borrower's business are not adequate to meet its debt service
requirements, including the Bank's loans to the borrower, the loan is evaluated
for impairment. Often this is associated with a delay or shortfall of payments
of 30 days or more. Commercial loans are rated "Class 1", "Class 2" and "All
Other". Class 2 are special mention loans and Class 1 are deemed substandard.
Loans in these categories are individually evaluated for impairment. All other
loans are considered to be satisfactory. Loans are generally moved to
nonaccrual status when 90 days or more past due. These loans are often also
considered impaired. Impaired loans, or portions thereof, are charged off when
deemed uncollectible. This typically occurs when the loan is 120 or more days
past due. SFAS Nos. 114 and 118 disclosures for impaired loans are not
expected to be materially different from nonaccrual and renegotiated loans
disclosures or non-performing and past-due asset disclosures.
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<PAGE> 10
Information regarding impaired loans, in thousands of dollars, is as follows
for the three months ended March 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Average investment in impaired loans $536 $613
Interest income recognized on impaired loans 4 14
Interest income recognized on cash basis 0 0
</TABLE>
Information regarding impaired loans, in thousands of dollars, at the end of
March 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Balance of impaired loans $536 $613
Portion for which no allowance for loan losses is allocated 391 350
Portion for which an allowance for loan losses is allocated 145 263
Portion of allowance for loan losses allocated to impaired loans 54 63
</TABLE>
NOTE 5 - 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 March 31.
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Outstanding commitments to make fixed rate loans $ 3,559 $ 1,292
Outstanding commitments to make variable rate loans 1,269 2,080
Unused lines of credit - fixed rate 2,374 881
Unused lines of credit - variable rate 31,801 28,027
Standby letters of credit - fixed rate 0 0
Standby letters of credit - variable rate 4,222 4,383
</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 three month period ending March 31, 1996.
FINANCIAL CONDITION
SECURITIES
Investment balances increased during the first quarter of 1996. These increases
are due in part to a move from fed funds sold at December 31, 1995, as a result
of a steepening of the yield curve which made it more desirable to invest in
securities. The mix of the portfolio remained relatively unchanged from
December 31 and March 31, 1995.
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LOANS
During the first quarter of 1996, the Company sold $8.5 million of loans
originated for sale, compared to $3.2 million sold in the first quarter of
1995. Balances of portfolio loans increased during the first three months of
1996, reflecting continued activity in personal loans. On the other hand, the
demand for residential mortgage loans has shifted from variable to fixed rate
loans, resulting in a greater number of loans being sold on the secondary
market rather than being retained in the portfolio. Loan volume has
traditionally softened during the first quarter of the year, but this has not
been the case during the first quarter of 1996. Management believes that loan
growth should continue at a moderate pace for the balance of 1996.
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 March 31, and their percentage of the total loan
portfolio. All loans are domestic and contain no concentrations by industry or
customer.
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
------------------------ --------------------------- ------------------------
Portfolio loans: Balance % of total Balance % of total Balance % of total
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Personal $ 61,461 27.9% $ 57,418 26.4% $ 49,376 23.6%
Business 57,361 26.0% 56,946 26.1% 54,498 26.1%
Tax exempt 1,088 0.5% 1,224 0.6% 1,383 0.7%
Residential mortgage 94,797 43.0% 97,000 44.5% 100,820 48.2%
Construction 5,891 2.7% 5,239 2.4% 3,009 1.4%
-------- ----- -------- ----- -------- -----
Total loans $220,598 100.0% $217,827 100.0% $209,086 100.0%
</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>
3/31/96 12/31/95 3/31/95
------- -------- -------
<S> <C> <C> <C>
Nonaccrual loans $ 391 $ 41 $ 93
Loans past due 90 days or more 559 163 386
Troubled debt restructurings 0 0 0
----- ----- -----
Total nonperforming loans $ 950 $ 204 $ 479
Percent of total loans 0.43% 0.09% 0.23%
</TABLE>
The increase noted above in delinquent loans reflect seasonal increases, as
well as some deterioration due to temporary staffing problems in the loan
collection area. These increases are anticipated to be temporary, and losses
are not expected to increase significantly as a result of these problems.
Page 11
<PAGE> 12
DEPOSITS
Interest bearing deposit balances continued to increase during the first
quarter of 1996. This growth occurred principally in certificates of deposit of
$100,000 or more, reflecting typical seasonal growth in public funds deposits.
Other interest bearing deposits remained relatively flat during the quarter.
Noninterest bearing deposits continue to fluctuate with swings in corporate and
public fund balances, but the Company experienced growth during the quarter in
personal noninterest bearing deposits as a result of the continued popularity
of the Freedom Checking product introduced late in 1994.
Management anticipates that deposit growth during 1996 will be steady, with
growth anticipated from new markets, as well as from consumer re-entry into the
certificate of deposit market.
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Loan balances increased during the quarter, and coupled with deposit declines,
resulted in decreased liquidity during the quarter. Short term funds sold were
reduced by these factors, as well as an increase in investments during the
quarter.
Management anticipates moving in and out of the fed funds market as liquidity
needs, with funds sales being the norm, and borrowings being the exception. The
Company has a number of additional liquidity sources should the need arise, but
Management has no concerns for the liquidity position of the Company.
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. While the internal measures as dictated by policy are
calculated slightly different than shown in the table below, all funds
management ratios remain within policy under either measure. During the first
quarter of 1996, these ratios have not changed significantly from those
reported at December 31, 1995, in spite of significant shifts in the Bank's
liquidity position.
Page 12
<PAGE> 13
The following table shows the rate sensitivity of earning assets and
liabilities, in thousands of dollars, as of March 31, 1996.
<TABLE>
<CAPTION>
0-3 4-12 1-5 5-10 Over 10
Months Months Years Years Years Total
-------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Securities & federal funds $ 21,801 $ 9,944 $ 34,746 $13,462 $ 1,774 $ 81,727
Loans 58,863 49,581 78,012 19,792 14,350 220,598
-------- -------- -------- ------- -------- --------
Total earning assets $ 80,664 $ 59,525 $112,758 $33,254 $ 16,124 $302,325
======== ======== ======== ======= ======== ========
Interest bearing deposits $153,016 $ 42,645 $ 62,883 $ 73 $258,617
Other borrowings 3,586 3,000 6,586
-------- -------- -------- ------- -------- --------
Total interest bearing liabilities $156,602 $ 42,645 $ 65,883 $ 73 $ 0 $265,203
======== ======== ======== ======= ======== ========
Net asset (liability)
funding gap $(75,938) $ 16,880 $ 46,875 $33,181 $ 16,124 $ 37,122
Cumulative net asset
(liability) funding gap $(75,938) $(59,058) $(12,183) $20,998 $ 37,122
Cumulative gap ratio 0.52 0.70 0.95 1.08 1.14 to 1
Cumulative gap, % of assets -23.5% -18.3% -3.8% 6.5% 11.5%
</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 March 31, 1996 and 1995 and December 31, 1995.
Dollars are shown in thousands.
<TABLE>
<CAPTION>
Regulatory Guidelines United Bancorp, Inc.
--------------------- ----------------------------------
Adequate Well 3/31/96 12/31/95 3/31/95
-------- ---- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tier 1 leverage ratio 4% 5% 8.7% 8.4% 8.2%
Tier 1 risk adjusted capital ratio 4% 8% 13.5% 13.3% 12.9%
Total risk adjusted capital ratio 8% 10% 14.6% 14.4% 14.0%
Total shareholders' equity $29,530 $28,853 $26,224
Intangible assets (1,635) (1,683) (1,857)
Unrealized (gain) loss on securities available for sale 5 (105) 400
------- ------- -------
Tier 1 capital 27,900 27,065 24,767
Qualifying loan loss reserves 2,250 2,197 2,152
------- ------- -------
Tier 2 capital $30,150 $29,262 $26,919
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income continued the improvements begun in 1995. Effective
asset-liability management, as well as careful control of interest costs, has
contributed to this trend. The spread at March 31, 1996 was 4.09%, compared to
3.92% for all of 1995. The net yield on interest earning assets improved to
4.62%, from 4.41% for 1995.
Page 13
<PAGE> 14
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 March 31, 1996 and
1995.
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
1996 1995
-------------------------------------- --------------------------------------
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 $ 3,868 $ 55 5.68% $ 745 $ 11 5.91%
Taxable securities 47,093 698 5.93% 48,892 650 5.32%
Tax exempt securities (b) 29,738 604 8.13% 25,369 566 8.92%
Taxable loans 217,761 4,911 9.02% 209,215 4,501 8.61%
Tax exempt loans (b) 1,178 24 8.31% 1,487 35 9.41%
-------- -------- -------- --------
Total int. earning assets (b) 299,638 $ 6,293 8.40% 285,708 $ 5,763 8.07%
-------- -------- -------- --------
Cash and due from banks 8,554 7,980
Premises and equipment, net 8,486 8,366
Intangible assets 1,663 1,892
Other assets 2,526 2,614
Unrealized gain securities-AFS 187 (1,023)
Less allowance for loan losses (2,211) (2,146)
-------- --------
TOTAL ASSETS $318,843 $303,391
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
Interest bearing demand
deposits $ 37,753 $ 170 1.80% $ 35,913 $ 187 2.08%
Savings deposits 66,659 559 3.36% 72,707 508 2.79%
CDs $100,000 and over 35,588 525 5.91% 29,861 439 5.88%
Other interest bearing deposits 115,510 1,480 5.13% 103,916 1,360 5.23%
-------- -------- -------- --------
Total int. bearing deposits 255,510 2,735 4.28% 242,397 2,494 4.12%
Short term borrowings 970 13 5.34% 3,607 52 5.75%
Other borrowings 6,000 82 5.45% 6,000 70 4.67%
-------- -------- -------- --------
Total int. bearing liabilities 262,480 $ 2,830 4.31% 252,004 $ 2,616 4.15%
-------- -------- -------- --------
Noninterest bearing deposits 24,875 24,542
Other liabilities 2,557 369
Shareholders' equity 28,931 26,476
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $318,843 $303,391
======== ========
Net interest income (b) $ 3,463 $ 3,147
======= ========
Net spread (b) 4.09% 3.92%
==== ====
Net yield on interest earning assets (b) 4.62% 4.41%
==== ====
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 14
<PAGE> 15
The table below shows the effect of volume and rate changes on net interest
income for the three months ended March 31, on a taxable equivalent basis, in
thousands of dollars.
<TABLE>
<CAPTION>
1996 Compared to 1995 1995 Compared to 1994
------------------------------- -------------------------------
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 $ 44 $ 0 $ 44 $(36) $ 16 $(20)
Taxable securities (25) 73 48 (117) 78 (39)
Tax exempt securities 92 (54) 38 33 (14) 19
Taxable loans 188 222 410 300 344 644
Tax exempt loans (7) (4) (11) (10) 3 (7)
---- ---- ---- ---- ---- ----
Total interest income $292 $237 $529 $170 $427 $597
==== ==== ==== ==== ==== ====
Interest paid on:
NOW accounts $ 9 $(26) $(17) $ 25 $ (4) $ 21
Savings deposits (45) 96 51 (67) 60 (7)
CDs $100,000 and over 84 2 86 106 35 141
Other interest bearing deposits 149 (29) 120 (46) 132 86
Short term borrowings (36) (3) (39) 50 1 51
Other borrowings 0 12 12 0 0 0
---- ---- ---- ---- ---- ----
Total interest expense $161 $ 52 $213 $ 68 $224 $292
==== ==== ==== ==== ==== ====
Net change in net interest
income $131 $185 $316 $102 $203 $305
==== ==== ==== ==== ==== ====
</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
Substantially all categories of noninterest income increased from the same
period in 1995. The increase in income from sales and servicing of loans
reflects the capitalization of mortgage servicing rights as discussed in Note
3, above, as well as an increase in the volume of fixed rate residential real
estate loans being sold in the secondary market.
OTHER EXPENSES
Most categories of noninterest expense showed moderate increases over the first
quarter of 1995, reflecting continued growth and expansion of the Bank. One
notable decline is in the cost of FDIC insurance, as a result of the rate
reductions enjoyed by the banking industry in mid-1995. Other expenses continue
at levels consistent with the same period in 1995, 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 three months of 1996.
Page 15
<PAGE> 16
NET INCOME
Year to date consolidated net income was $1,115,000 compared to $895,000 for
the same period in 1995. Improved interest margin, combined with improved
noninterest income, as well as careful control of operating expenses, have
contributed to this improvement. Net income for the year is 24.6% above the
same period last year. Return on consolidated average assets for the quarter
was 1.40%, compared to 1.30% for 1995, and 1.20% for the first quarter period
in 1995.
PROSPECTIVE ACCOUNTING CHANGES
Management does not anticipate adopting any prospective accounting changes
during 1996.
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
March 31, 1996.
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 March 31, 1996.
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 March 31, 1996.
Page 16
<PAGE> 17
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
March 31, 1996.
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.
May 9, 1996
/S/ Dale L. Chadderdon
--------------------------------------------
Dale L. Chadderdon
Senior Vice President, Secretary & Treasurer
Page 17
<PAGE> 18
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,154
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,178
<INVESTMENTS-CARRYING> 31,749
<INVESTMENTS-MARKET> 32,792
<LOANS> 220,598
<ALLOWANCE> 2,250
<TOTAL-ASSETS> 322,801
<DEPOSITS> 283,924
<SHORT-TERM> 586
<LIABILITIES-OTHER> 2,761
<LONG-TERM> 6,000
0
0
<COMMON> 11,262
<OTHER-SE> 18,268
<TOTAL-LIABILITIES-AND-EQUITY> 322,801
<INTEREST-LOAN> 4,928
<INTEREST-INVEST> 1,115
<INTEREST-OTHER> 55
<INTEREST-TOTAL> 6,098
<INTEREST-DEPOSIT> 2,735
<INTEREST-EXPENSE> 2,830
<INTEREST-INCOME-NET> 3,268
<LOAN-LOSSES> 126
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,517
<INCOME-PRETAX> 1,507
<INCOME-PRE-EXTRAORDINARY> 1,507
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,115
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 4.62
<LOANS-NON> 391
<LOANS-PAST> 559
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 86
<ALLOWANCE-OPEN> 2,197
<CHARGE-OFFS> 88
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 2,250
<ALLOWANCE-DOMESTIC> 1,243
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,007
</TABLE>
