<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-Q
/x/ Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------------
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, 1996, there were outstanding 1,564,271 shares of the
registrant's common stock, no par value.
Page 1
<PAGE> 2
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION PAGE NO.
- -----------------------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Condensed)
(a) Consolidated Balance Sheets 3
(b) Consolidated Statements of Income 4
(c) Consolidated Statements of Cash Flows 5
(d) Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
Financial Condition 7
Liquidity and Funds Management 9
Results of Operations 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
Exhibit Index 14
</TABLE>
Page 2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(a) CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
September 30, December 31, September 30,
In thousands of dollars 1996 1995 1995
===========================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and demand balances in other banks $8,644 $10,017 $7,602
Federal funds sold 0 8,700 1,100
- -----------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 8,644 18,717 8,702
Securities available for sale 46,168 45,420 53,460
Securities held to maturity (fair value of
$33,389, $31,833 and $29,687, respectively) 32,522 30,495 28,527
- -----------------------------------------------------------------------------------------------------------
Total securities 78,690 75,915 81,987
Loans held for sale 302 261 0
Portfolio loans 234,896 217,566 215,171
- -----------------------------------------------------------------------------------------------------------
Total loans 235,198 217,827 215,171
Less: allowance for loan losses 2,256 2,197 2,246
- -----------------------------------------------------------------------------------------------------------
Net loans 232,942 215,630 212,925
Premises and equipment, net 8,837 8,404 8,353
Accrued interest receivable and other assets 5,137 4,770 5,279
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $334,250 $323,436 $317,246
===========================================================================================================
LIABILITIES
Deposits
Noninterest bearing $27,984 $29,565 $26,529
Interest bearing certificates of deposit of $100,000
or more 38,857 34,439 27,491
Other interest bearing deposits 216,833 221,168 221,071
- -----------------------------------------------------------------------------------------------------------
Total deposits 283,674 285,172 275,091
Federal funds and other short term borrowings 3,601 578 5,787
Other borrowings 13,000 6,000 6,000
Accrued interest payable and other liabilities 2,783 2,833 2,440
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 303,058 294,583 289,318
SHAREHOLDERS' EQUITY
Common stock, no par value; 5,000,000 shares authorized;
1,564,271, 1,489,840 and 1,488,375 shares issued and
outstanding, respectively 13,428 11,262 11,221
Retained earnings 17,803 17,486 16,786
Unrealized gain (loss) on securities available for sale,
net of tax of $20, $(54), and $41, respectively (39) 105 (79)
- -----------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 31,192 28,853 27,928
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $334,250 $323,436 $317,246
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3
<PAGE> 4
<TABLE>
<CAPTION>
(b) CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
In thousands of dollars, except per share data 1996 1995 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans
Taxable $5,172 $4,843 $15,104 $14,007
Tax exempt 15 17 47 60
Interest on securities
Taxable 749 653 2,195 1,940
Tax exempt 427 367 1,259 1,108
Interest on federal funds sold 0 66 77 115
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest income 6,363 5,946 18,682 17,230
INTEREST EXPENSE
Interest on certificates of deposit of $100,000 or more 538 443 1,595 1,345
Interest on other deposits 2,146 2,201 6,506 6,382
Interest on short term borrowings 109 91 143 193
Interest on other borrowings 120 83 278 225
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,913 2,818 8,522 8,145
- -----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 3,450 3,128 10,160 9,085
Provision for loan losses 126 102 378 306
- -----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,324 3,026 9,782 8,779
NONINTEREST INCOME
Service charges on deposit accounts 320 255 891 708
Trust & Investment fee income 244 218 728 688
Gains on securities transactions 0 0 7 4
Loan sales and servicing 131 85 440 261
Sales of nondeposit investment products 63 48 200 161
Other income 110 70 368 331
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 868 676 2,634 2,153
NONINTEREST EXPENSE
Salaries and employee benefits 1,342 1,294 3,999 3,637
Occupancy and equipment expense 477 445 1,433 1,294
Federal deposit insurance premiums 74 (9) 89 288
Other expense 664 588 2,103 1,869
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,557 2,318 7,624 7,088
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAX 1,635 1,384 4,792 3,844
Federal income tax 434 369 1,267 985
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $1,201 $1,015 $3,525 $2,859
===================================================================================================================================
Net income per share of common stock $0.77 $0.65 $2.25 $1.83
Cash dividends declared per share of common stock $0.240 $0.190 $0.670 $0.552
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4
<PAGE> 5
<TABLE>
<CAPTION>
(c) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------
Nine Months Ended
September 30
In thousands of dollars 1996 1995
=====================================================================================================
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $3,525 $2,859
- -----------------------------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation 741 674
Accretion/amortization on securities 244 268
Provision for loan losses 378 306
Gain on sale of securities (7) (4)
Loans originated for sale (19,574) (16,058)
Proceeds from sales of loans originated for sale 19,533 17,359
Change in accrued interest receivable and other assets (368) (205)
Change in accrued interest payable and other liabilities 126 510
- -----------------------------------------------------------------------------------------------------
Total adjustments 1,073 2,850
- -----------------------------------------------------------------------------------------------------
Net cash from operating activities 4,598 5,709
- -----------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from maturities of securities available for sale 14,000 3,546
Proceeds from sales of securities 739 93
Principal payments on securities available for sale 4,651 1,982
Purchase of securities available for sale (20,523) (16,136)
Proceeds from maturities of securities held to maturity 1,495 4,400
Purchase of securities held to maturity (3,586) (165)
Increase in portfolio loans (17,649) (5,900)
Premises and equipment expenditures, net (1,174) (717)
- -----------------------------------------------------------------------------------------------------
Net cash from investing activities (22,047) (12,897)
- -----------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net change in noninterest bearing demand, savings and NOW deposits (6,523) 3,577
Net change in time deposits 5,025 7,230
Net change in short term borrowings 3,023 (1,013)
Principal payments on other borrowings (8,000) (3,000)
Proceeds from advances in other borrowings 15,000 3,000
Dividends paid (1,149) (953)
- -----------------------------------------------------------------------------------------------------
Net cash from financing activities 7,376 8,841
- -----------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (10,073) 1,653
Cash and cash equivalents at beginning of year 18,717 7,049
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $8,644 $8,702
=====================================================================================================
Cash Paid During the Period for
Interest $8,370 $8,146
Income taxes $1,294 $875
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5
<PAGE> 6
(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 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, 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 - 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 FNMA. Impairment evaluation
is based on interest rates, prepayment rates, remaining term and other factors.
Mortgage servicing rights activity in thousands of dollars for the nine months
ended September 30, 1996 follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Mortgage servicing rights at January 1 $0
Amount capitalized year to date 142
Amount amortized year to date (5)
------
Mortgage servicing rights at period end $137
Valuation allowance for mortgage servicing rights at
period end $0
</TABLE>
Page 6
<PAGE> 7
NOTE 3 - COMMON STOCK AND EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of shares
outstanding during the year. On May 27, 1996, the Company issued a 5% stock
dividend. Earnings per share, dividends per share and weighted average shares
have been restated to reflect the stock dividend. The weighted average number
of shares outstanding was 1,564,279 for 1996 and 1,562,794 for 1995.
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 and nine month periods ending September 30,
1996.
FINANCIAL CONDITION
SECURITIES
Investment balances remained flat during the third quarter of 1996, although
balances have increased from December 31, 1995. Continued strong loan growth
combined with flat deposit growth continues to be the largest single factor
limiting investment growth.
The mix of the investment portfolio remained relatively unchanged from December
31 and September 30, 1995.
LOANS
Loan balances continued to enjoy strong growth during the third quarter of
1996, following the trend of the first two quarters of 1996. Both business and
personal loans increased during the quarter and year to date, while residential
mortgages continued to remained flat as a result of continued sale of loans on
the secondary market. Clients continue to move from variable rate to fixed rate
loans, resulting in a greater number of loans being sold on the secondary
market rather than being retained in the portfolio.
The mix of the portfolio has remained relatively unchanged from prior periods,
although the general trend is toward an increased percentage of personal and
business loans, with slight declines in tax exempt and residential mortgage
loans. The table below shows total loans outstanding, in thousands of dollars,
at September 30 and December 31, and their percentage of the total loan
portfolio. All loans are domestic and contain no concentrations by industry or
customer.
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995 September 30, 1995
------------------------ --------------------------- -------------------------
Portfolio loans: Balance % of total Balance % of total Balance % of total
------- ------------ -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Personal $67,422 28.7% $57,418 26.4% $55,008 25.6%
Business 62,258 26.5% 56,946 26.1% 54,471 25.3%
Tax exempt 1,129 0.5% 1,224 0.6% 1,189 0.6%
Residential mortgage 94,200 40.1% 97,000 44.5% 99,329 46.2%
Construction 10,189 4.3% 5,239 2.4% 5,174 2.4%
--------------------- ------------------------- ---------------------
Total loans $235,198 100.0% $217,827 100.0% $215,171 100.0%
</TABLE>
Page 7
<PAGE> 8
CREDIT QUALITY
The Company continues to maintain a high level of asset quality compared to
peers, 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. The Company's classification of nonperforming loans are
generally consistent with loans identified as impaired.
<TABLE>
<CAPTION>
9/30/96 12/31/95 9/30/95
------- -------- --------
<S> <C> <C> <C>
Nonaccrual loans $1,125 $41 $42
Loans past due 90 days or more 410 163 230
Troubled debt restructurings 0 0 0
----------------------- -------
Total nonperforming loans $1,535 $204 $272
Percent of total loans 0.65% 0.09% 0.13%
</TABLE>
Nonperforming loans again increased from second quarter totals, and the
greatest share of these loans consists of nonaccrual loans for two business
loan clients. Minimal loss is anticipated, but the delinquency is expected to
remain high until the disposition of these two credits takes place. Both
dispositions will be from the sale of the assets of the companies. Overall,
delinquency is well below industry standards, although is higher than
traditionally experienced by the Company.
An analysis of the allowance for loan losses, in thousands of dollars, for the
nine months ended September 30, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Balance at beginning of period $2,197 $2,127
Loans charged off (378) (229)
Recoveries credited to allowance 59 42
Provision charged to operations 378 306
------- ------
Balance at end of period $2,256 $2,246
</TABLE>
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb potential losses in the loan portfolio.
Deposits
Total deposits remained relatively flat during the third quarter, and are down
slightly year to date. Noninterest bearing deposits continue to fluctuate with
swings in corporate and public fund balances, but the Company continued to
experience growth in noninterest bearing deposits.
Other interest bearing deposit balances declined slightly during the third
quarter of 1996 but was offset by the temporary growth at September 30 in
certificates of deposit of $100,000 or more, reflecting typical seasonal growth
in public funds deposits. Other interest bearing deposits are down slightly
year to date. Management anticipates that deposit growth during the remainder
of 1996 will be steady, with anticipated growth from new markets, as well as
from consumer re-entry into the certificate of deposit market.
Page 8
<PAGE> 9
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Loan balances increased during the quarter, and coupled with no deposit growth,
resulted in the borrowing of funds during the period. Short term borrowings
decreased as a result of $10 million of new six month advances from the Federal
Home Loan Bank which were received during the third quarter.
Management anticipates moving in and out of the fed funds market as liquidity
needs require. Seasonal deposit fluctuations, with continued loan demand, will
cause the borrowed funds position of the Company to vary. 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 tolerances for the cumulative
gap ratio and total interest rate exposure. 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. During the third
quarter of 1996, these ratios have changed only modestly from those reported at
June 30, 1996 and December 31, 1995, in spite of significant shifts in the
Bank's liquidity position.
The following table shows the rate sensitivity of earning assets and
liabilities, in thousands of dollars, as of September 30, 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 $12,492 $11,316 $43,469 $10,820 $593 $78,690
Loans 65,562 47,827 90,519 18,734 12,556 235,198
-------------------------------------------------------------------------------------
Total earning asset $78,054 $59,143 $133,988 $29,554 $13,149 $313,888
=====================================================================================
Interest bearing deposits $153,893 $47,051 $54,702 $44 $255,690
Other borrowings 3,602 10,000 3,000 16,602
-------------------------------------------------------------------------------------
Total interest bearing liabilities $157,495 $57,051 $57,702 $44 $0 $272,292
=====================================================================================
Net asset (liability)
funding gap ($79,441) $2,092 $76,286 $29,510 $13,149 $41,596
Cumulative net asset
(liability) funding gap ($79,441) ($77,349) ($1,063) $28,447 $41,596
Cumulative gap ratio 0.50 0.64 1.00 1.10 1.15 to 1
Cumulative gap, % of assets -23.8% -23.1% -0.3% 8.5% 12.4%
</TABLE>
Page 9
<PAGE> 10
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, 1996 and 1995 and December 31,
1995. Dollars are shown in thousands.
<TABLE>
<CAPTION>
Regulatory Guidelines United Bancorp, Inc.
--------------------- --------------------
Adequate Well 9/30/96 12/31/95 9/30/95
-------- ---- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tier 1 leverage ratio 4% 5% 8.9% 8.4% 8.3%
Tier 1 risk adjusted capita 4% 8% 13.4% 13.3% 13.1%
Total risk adjusted capital 8% 10% 14.4% 14.4% 14.3%
Total shareholders' equity $31,192 $28,853 $27,928
Intangible assets (1,539) (1,683) (1,741)
Unrealized (gain) loss on securities available
for sale 39 (105) 79
------- -------------------
Tier 1 capital 29,692 27,065 26,266
Qualifying loan loss reserves 2,256 2,197 2,246
------- -------------------
Tier 2 capital $31,948 $29,262 $28,512
</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 September 30, 1996 was 4.16%, compared
to 4.17% at June 30, 1996 and 3.92% for all of 1995. The net yield on interest
earning assets remained at 4.71% for the third quarter, but improved from 4.41%
for 1995.
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, 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 $1,814 $77 5.63% $2,460 $115 6.23%
Taxable securities 48,434 2,195 6.04% 47,968 1,941 5.40%
Tax exempt securities (b) 30,160 1,826 8.07% 25,102 1,679 8.92%
Taxable loans 222,778 15,104 9.04% 210,071 14,007 8.89%
Tax exempt loans (b) 1,088 69 8.41% 1,305 91 9.30%
--------------------- -------------------------
Total int. earning assets (b) 304,274 $19,271 8.44% 286,906 $17,833 8.29%
--------------------- -------------------------
Less allowance for loan losses (2,227) (2,169)
Other assets 21,698 20,509
TOTAL ASSETS $323,745 $305,246
======== =========
</TABLE>
Page 10
<PAGE> 11
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES (CONTINUED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance (b) Rate Balance (b) Rate
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
NOW accounts $39,318 $526 1.78% $35,986 $566 2.10%
Savings deposits 75,449 1,606 2.84% 70,783 1,498 2.82%
CDs $100,000 and over 36,523 1,596 5.82% 29,424 1,345 6.09%
Other interest bearing deposits 103,963 4,374 5.61% 104,974 4,318 5.48%
-------------------- ------------------------
Total int. bearing deposits 255,253 8,101 4.23% 241,167 7,727 4.27%
Short term borrowings 3,521 143 5.42% 4,221 193 6.10%
Other borrowings 6,555 278 5.65% 6,000 226 5.02%
-------------------- ------------------------
Total int. bearing liabilities 265,329 $8,522 4.28% 251,388 $8,146 4.32%
---------- -----------
Noninterest bearing deposits 25,996 25,171
Other liabilities 2,481 2,019
Shareholders' equity 29,939 26,668
--------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $323,745 $305,246
========= ========
Net interest income (b) $10,748 $9,687
========== ===========
Net spread (b) 4.16% 3.97%
========== =========
Net yield on interest earning assets (b) 4.71% 4.50%
========== =========
Ratio of interest earning assets to
interest bearing liabilities 1.15 1.14
========= ========
</TABLE>
(a) Non-accrual loans and overdrafts are included in the average balances of
loans.
(b) Fully tax-equivalent basis; 34% tax rate.
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>
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 ($28) ($10) ($38) $15 $51 $66
Taxable securities 19 235 254 (375) 176 (199)
Tax exempt securities 317 (170) 147 15 (19) (4)
Taxable loans 858 239 1,097 886 1,256 2,142
Tax exempt loans (14) (8) (22) (32) 5 (27)
----------------------------------------------------------------
Total interest income $1,152 $286 $1,438 $509 $1,469 $1,978
================================================================
Interest paid on:
NOW accounts $49 ($89) ($40) $61 ($2) $59
Savings deposits 99 9 108 (166) 177 11
CDs $100,000 and over 313 (62) 251 251 139 390
Other interest bearing deposits (42) 98 56 19 600 619
Short term borrowings (30) (20) (50) 20 51 71
Other borrowings 22 30 52 0 15 15
----------------------------------------------------------------
Total interest expense $411 ($34) $377 $185 $980 $1,165
================================================================
Net change in net interest
income $741 $320 $1,061 $324 $489 $813
================================================================
</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.
Page 11
<PAGE> 12
NONINTEREST INCOME
Substantially all categories of noninterest income increased for the current
quarter as well as year to date from the same period in 1995. Total noninterest
income remained relatively unchanged from the second quarter, but is up 28%
from the third quarter 1995, and up 22% from year to date 1995.
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. This income remained constant in the third quarter of 1996,
while year to date is above levels achieved in 1995.
NONINTEREST EXPENSES
Most categories of noninterest expense showed moderate increases year to date
and over the third 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. However, a
one time assessment passed by the congress on September 30, 1996 added $66,000
to third quarter expense. Other expenses continue at levels consistent with the
same period in 1995 and the first two quarters of 1996, 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 current quarter or the first nine months of 1996.
NET INCOME
Consolidated net income for the quarter remained flat from the second quarter
but increased from same period last year. Year to date consolidated net income
was $3,525,000 compared to $2,859,000 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 23.3% above the same period last year. Return on consolidated
average assets for the quarter was 1.45%, compared to 1.32% for 1995, and is
1.45% for the first nine months of 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.
Page 12
<PAGE> 13
ITEM 2 - CHANGES IN SECURITIES
No changes in the securities of the Company occurred during the quarter ended
September 30, 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 September 30, 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 September 30, 1996.
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, 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.
October 30, 1996
/S/ Dale L. Chadderdon
----------------------------------------------
Dale L. Chadderdon
Senior Vice President, Secretary & Treasurer
Page 13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
Page 14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,644
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,168
<INVESTMENTS-CARRYING> 32,522
<INVESTMENTS-MARKET> 33,389
<LOANS> 235,198
<ALLOWANCE> 2,256
<TOTAL-ASSETS> 334,250
<DEPOSITS> 283,674
<SHORT-TERM> 3,601
<LIABILITIES-OTHER> 2,783
<LONG-TERM> 13,000
0
0
<COMMON> 13,428
<OTHER-SE> 17,764
<TOTAL-LIABILITIES-AND-EQUITY> 334,250
<INTEREST-LOAN> 15,151
<INTEREST-INVEST> 3,454
<INTEREST-OTHER> 77
<INTEREST-TOTAL> 18,682
<INTEREST-DEPOSIT> 8,101
<INTEREST-EXPENSE> 8,522
<INTEREST-INCOME-NET> 10,160
<LOAN-LOSSES> 378
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 7,624
<INCOME-PRETAX> 4,792
<INCOME-PRE-EXTRAORDINARY> 4,792
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,525
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 0.00
<YIELD-ACTUAL> 4.71
<LOANS-NON> 1,125
<LOANS-PAST> 410
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 104
<ALLOWANCE-OPEN> 2,197
<CHARGE-OFFS> 378
<RECOVERIES> 59
<ALLOWANCE-CLOSE> 2,256
<ALLOWANCE-DOMESTIC> 1,510
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 746
</TABLE>
