<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 JUNE 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 July 15, 1996, there were outstanding 1,564,307 shares of the
registrant's common stock, no par value.
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<PAGE> 2
CROSS REFERENCE TABLE
ITEM NO. DESCRIPTION PAGE NO.
- ----------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
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 14
Item 6.Exhibits and Reports on Form 8-K 14
Signatures 14
Exhibit Index 15
Page 2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(A) CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
June 30, December 31, June 30,
In thousands of dollars 1996 1995 1995
==============================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and demand balances in other banks $ 9,232 $ 10,017 $ 7,885
Federal funds sold 8,700 5,900
--------- -------- --------
Total cash and cash equivalents 9,232 18,717 13,785
--------- -------- --------
Securities available for sale 47,501 45,420 41,626
Securities held to maturity (fair value of
$31,877, $31,833 and $31,646, respectively) 31,213 30,495 30,570
--------- -------- --------
Total securities 78,714 75,915 72,196
Loans held for sale 272 261 413
Portfolio loans 225,195 217,566 210,636
--------- -------- --------
Total loans 225,467 217,827 211,049
Less: allowance for loan losses 2,244 2,197 2,173
--------- -------- --------
Net loans 223,223 215,630 208,876
Premises and equipment, net 8,767 8,404 8,426
Accrued interest receivable and other assets 4,782 4,770 4,858
--------- -------- --------
TOTAL ASSETS $324,718 $323,436 $308,141
========= ======== ========
LIABILITIES
Deposits
Noninterest bearing $ 28,065 $ 29,565 $ 27,959
Interest bearing certificates of deposit of $100,000 or more 36,066 34,439 28,213
Other interest bearing deposits 219,161 221,168 210,877
--------- -------- --------
Total deposits 283,292 285,172 267,049
Federal funds and other short term borrowings 5,894 578 5,782
Other borrowings 3,000 6,000 6,000
Accrued interest payable and other liabilities 2,362 2,833 2,155
--------- -------- --------
TOTAL LIABILITIES 294,548 294,583 280,986
SHAREHOLDERS' EQUITY
Common stock, no par value; 5,000,000 shares authorized;
1,564,307, 1,489,840 and 1,488,375 shares issued and
outstanding, respectively 13,421 11,262 11,221
Retained earnings 16,978 17,486 16,069
Unrealized gain (loss) on securities available for sale,
net of tax of $118, $(54), and $70, respectively (229) 105 (135)
--------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 30,170 28,853 27,155
--------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $324,718 $323,436 $308,141
========= ======== ========
</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 Six Months Ended
June 30, June 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 $5,020 $4,663 $ 9,932 $ 9,164
Tax exempt 16 20 32 43
Interest on securities
Taxable 749 637 1,447 1,287
Tax exempt 416 367 832 742
Interest on federal funds sold 21 39 76 49
------ ------ ------- -------
Total interest income 6,222 5,726 12,319 11,285
INTEREST EXPENSE
Interest on certificates of deposit of $100,000 or more 532 463 1,057 902
Interest on other deposits 2,150 2,126 4,359 4,181
Interest on short term borrowings 21 50 34 102
Interest on other borrowings 76 73 158 143
------ ------ ------- -------
Total interest expense 2,779 2,712 5,608 5,328
------ ------ ------- -------
NET INTEREST INCOME 3,443 3,014 6,711 5,957
Provision for loan losses 126 102 252 204
------ ------ ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,317 2,912 6,459 5,753
NONINTEREST INCOME
Service charges on deposit accounts 304 242 571 453
Trust & Investment fee income 235 239 483 470
Gains on securities transactions 7 4 7 4
Loan sales and servicing 129 80 310 176
Sales of nondeposit investment products 64 61 137 113
Other income 145 115 258 261
------ ------ ------- -------
Total noninterest income 884 741 1,766 1,477
NONINTEREST EXPENSE
Salaries and employee benefits 1,312 1,157 2,657 2,343
Occupancy and equipment expense 477 423 956 849
Federal deposit insurance premiums 9 149 16 297
Other expense 753 649 1,439 1,281
------ ------ ------- -------
Total noninterest expense 2,551 2,378 5,068 4,770
------ ------ ------- -------
INCOME BEFORE FEDERAL INCOME TAX 1,650 1,275 3,157 2,460
Federal income tax 442 325 833 616
------ ------ ------- -------
NET INCOME $1,208 $ 950 $ 2,324 $ 1,844
====== ====== ======= =======
Net income per share of common stock $ 0.77 $ 0.61 $ 1.49 $ 1.18
Cash dividends declared per share of common stock $0.220 $0.181 $ 0.430 $ 0.362
</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)
- -------------------------------------------------------------------------------------------------
Six Months Ended
June 30
-------
In thousands of dollars 1996 1995
=================================================================================================
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 2,324 $ 1,844
-------- -------
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation 490 450
Accretion/amortization on securities 188 167
Provision for loan losses 252 204
Gain on sale of securities (7) (4)
Loans originated for sale (13,657) (6,661)
Proceeds from sales of loans originated for sale 13,668 7,549
Change in accrued interest receivable and other assets (13) 246
Change in accrued interest payable and other liabilities (166) 240
Total adjustments 755 2,191
-------- -------
Net cash from operating activities 3,079 4,035
-------- -------
Cash Flows from Investing Activities
Proceeds from maturities of securities available for sale 10,000 3,000
Proceeds from sales of securities 732 93
Principal payments on securities available for sale 2,939 887
Purchase of securities available for sale (16,396) (2,659)
Proceeds from maturities of securities held to maturity 1,025 2,370
Purchase of securities held to maturity (1,786) (165)
Increase in portfolio loans (7,856) (1,336)
Premises and equipment expenditures, net (853) (566)
-------- -------
Net cash from investing activities (12,195) 1,624
-------- -------
Cash Flows from Financing Activities
Net change in noninterest bearing demand, savings and NOW deposits (667) (5,464)
Net change in time deposits (1,213) 8,229
Net change in short term borrowings 5,316 (1,018)
Principal payments on other borrowings (3,000) (3,000)
Proceeds from advances in other borrowings 0 3,000
Dividends paid (805) (670)
-------- -------
Net cash from financing activities (369) 1,077
-------- -------
Net change in cash and cash equivalents (9,485) 6,736
Cash and cash equivalents at beginning of year 18,717 7,049
-------- -------
Cash and cash equivalents at end of period $ 9,232 $13,785
======== =======
Cash Paid During the Period for
Interest $ 5,624 $ 5,234
Income taxes $ 894 $ 525
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5
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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 the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six month
period ending June 30, 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 six months
ended June 30, 1996 follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Mortgage servicing rights at January 1 $ 0
Amount capitalized year to date 102
Amount amortized year to date (2)
----
Mortgage servicing rights at period end $100
Valuation allowance for mortgage servicing rights at period end $ 0
</TABLE>
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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 1,564,294 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 six month periods ending June 30, 1996.
FINANCIAL CONDITION
SECURITIES
Investment balances declined moderately during the second quarter of 1996,
although balances have increased from December 31, 1996. 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 June 30, 1995.
LOANS
Loan balances continued to enjoy strong growth during the second quarter of
1996, following the trend of the first quarter of 1996. Both business and
personal loans increased during the quarter and year to date, while residential
mortgages continued to decline slightly 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 loans,
with slight declines in business, tax exempt and residential mortgage loans.
The table below shows total loans outstanding, in thousands of dollars, at
December 31 and June 30, and their percentage of the total loan portfolio. All
loans are domestic and contain no concentrations by industry or customer.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995 June 30, 1995
-------------------- ----------------------- ---------------------
Portfolio loans: Balance % of total Balance % of total Balance % of total
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Personal $ 63,001 27.9% $ 57,418 26.4% $51,380 24.3%
Business 59,823 26.5% 56,946 26.1% 55,843 26.5%
Tax exempt 1,005 0.4% 1,224 0.6% 1,014 0.5%
Residential mortgage 93,084 41.3% 97,000 44.5% 99,943 47.4%
Construction 8,554 3.8% 5,239 2.4% 2,869 1.4%
-------- ----- -------- ----- -------- -----
Total loans $225,467 100.0% $217,827 100.0% $211,049 100.0%
</TABLE>
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<PAGE> 8
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. The Company's
classification of nonpeforming loans are generally consistent with loans
identified as impaired.
<TABLE>
<CAPTION>
6/30/96 12/31/95 6/30/95
------- -------- -------
<S> <C> <C> <C>
Nonaccrual loans $ 472 $ 41 $ 126
Loans past due 90 days or more 134 163 236
Troubled debt restructurings 0 0 0
----- ----- -----
Total nonperforming loans $ 606 $ 204 $ 362
Percent of total loans 0.27% 0.09% 0.17%
</TABLE>
The increase noted above in delinquent loans is somewhat misleading, as the
numbers reflect significant decreases from the levels reached at March 31,
1996. At that time, delinquent loans were .43% of total loans, and it was noted
that the increases were anticipated to be temporary, and losses were not
expected to increase significantly as a result of the increase. That continues
to be the prognosis, and delinquency continues to improve and is well below
industry standards.
An analysis of the allowance for loan losses, in thousands of dollars, for the
six months ended June 30, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Balance at beginning of period $2,197 $2,127
Loans charged off (246) (180)
Recoveries credited to allowance 41 22
Provision charged to operations 252 204
------ ------
Balance at end of period $2,244 $2,173
</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 second 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 during the quarter in personal noninterest bearing deposits
as a result of the continued popularity of the Freedom Checking product
introduced late in 1994.
Interest bearing deposit balances declined slightly during the second quarter
of 1996. The temporary growth at March 31 in certificates of deposit of
$100,000 or more, reflecting typical seasonal growth in public funds deposits,
was reversed somewhat during the second quarter. Other interest bearing
deposits remained relatively flat during the quarter, and are down slightly
year to date. 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
Page 8
<PAGE> 9
certificate of deposit market.
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Loan balances increased during the quarter, and coupled with deposit declines,
resulted in the borrowing of funds during the quarter. Short term borrowings
increased also as a result of the maturity of $3 million of advances from the
Federal Home Loan Bank which were not renewed.
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 second
quarter of 1996, these ratios have not changed significantly from those
reported at March 31, 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 June 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 $ 17,566 $ 8,780 $ 40,397 $11,322 $ 649 $ 78,714
Loans 57,915 51,676 84,068 19,960 11,848 225,467
-------- ------- -------- ------- ------- --------
Total earning assets $ 75,481 $60,456 $124,465 $31,282 $12,497 $304,181
======== ======= ======== ======= ======= ========
Interest bearing deposits $145,114 $47,965 $ 62,078 $ 70 $255,227
Other borrowings 5,894 3,000 8,894
-------- ------- -------- ------- ------- --------
Total interest bearing liabilities $151,008 $47,965 $ 65,078 $ 70 $ 0 $264,121
======== ======= ======== ======= ======= ========
Net asset (liability)
funding gap ($75,527) $12,491 $ 59,387 $31,212 $12,497 $ 40,060
Cumulative net asset
(liability) funding gap ($75,527) ($63,036) ($3,649) $27,563 $40,060
Cumulative gap ratio 0.50 0.68 0.99 1.10 1.15 to 1
Cumulative gap, % of assets -23.3% -19.4% -1.1% 8.5% 12.3%
</TABLE>
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CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions. The following table shows the Company's capital
ratios and ratio calculations at June 30, 1996 and 1995 and December 31, 1995.
Dollars are shown in thousands.
<TABLE>
<CAPTION>
Regulatory Guidelines United Bancorp, Inc.
--------------------- --------------------
Adequate Well 6/30/96 12/31/95 6/30/95
-------- ---- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tier 1 leverage ratio 4% 5% 8.9% 8.4% 8.3%
Tier 1 risk adjusted capital ratio 4% 8% 13.5% 13.3% 13.1%
Total risk adjusted capital ratio 8% 10% 14.5% 14.4% 14.2%
Total shareholders' equity $30,170 $28,853 $27,155
Intangible assets (1,587) (1,683) (1,798)
Unrealized (gain) loss on securities available for sale 229 (105) 135
------- ------- -------
Tier 1 capital 28,812 27,065 25,492
Qualifying loan loss reserves 2,244 2,197 2,173
------- ------- -------
Tier 2 capital $31,056 $29,262 $27,665
</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 June 30, 1996 was 4.17%, compared to
4.09% at March 31, 1996 and 3.92% for all of 1995. The net yield on interest
earning assets improved to 4.71%, from 4.62% at March 31 and 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 June 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 $ 2,717 $ 76 5.61% $ 1,676 $ 49 5.85%
Taxable securities 48,508 1,447 5.97% 47,889 1,287 5.37%
Tax exempt securities (b) 29,771 1,207 8.11% 25,182 1,124 8.93%
Taxable loans 219,316 9,932 9.06% 209,142 9,164 8.76%
Tax exempt loans (b) 1,126 47 8.34% 1,389 65 9.36%
------------------- -------------------
Total int. earning assets (b) 301,438 $12,709 8.43% 285,278 $11,689 8.19%
------------------- -------------------
Less allowance for loan losses (2,216) (2,152)
Other assets 21,619 20,499
TOTAL ASSETS $320,841 $303,625
======== ========
</TABLE>
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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 $ 39,320 $ 352 1.79% $36,054 $ 378 2.10%
Savings deposits 75,967 1,089 2.87% 70,849 994 2.81%
CDs $100,000 and over 36,310 1,057 5.82% 30,039 902 6.01%
Other interest bearing deposits 104,405 2,919 5.59% 104,416 2,809 5.38%
-------- ------ -------- ------
Total int. bearing deposits 256,002 5,417 4.23% 241,358 5,083 4.21%
Short term borrowings 1,385 34 4.92% 3,409 102 5.98%
Other borrowings 5,769 158 5.47% 6,000 143 4.77%
-------- ------ -------- ------
Total int. bearing liabilities 263,156 $5,609 4.26% 250,767 $5,328 4.25%
------ ------
Noninterest bearing deposits 25,609 24,665
Other liabilities 2,491 1,499
Shareholders' equity 29,585 26,694
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $320,841 $303,625
======== ========
Net interest income (b) $7,100 $6,361
====== ======
Net spread (b) 4.17% 3.95%
Net yield on interest earning ==== ====
assets (b) 4.71% 4.46%
==== ====
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 six months ended June 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 $ 29 ($2) $ 27 ($25) $ 27 $ 2
Taxable securities 17 143 160 (289) 155 (134)
Tax exempt securities 192 (109) 83 21 (17) 4
Taxable loans 455 313 768 592 827 1,419
Tax exempt loans (11) (7) (18) (20) 5 (15)
---- ----- ------ ----- ---- ------
Total interest income $682 $ 338 $1,020 $ 279 $997 $1,276
==== ===== ====== ===== ==== ======
Interest paid on:
NOW accounts $ 32 ($58) ($26) $ 49 ($2) $ 47
Savings deposits 73 22 95 (129) 123 (6)
CDs $100,000 and over 183 (28) 155 205 83 288
Other interest bearing deposits 0 110 110 (43) 342 299
Short term borrowings (52) (16) (68) 14 28 42
Other borrowings (6) 21 15 0 3 3
---- ----- ------ ----- ---- ------
Total interest expense $230 $ 51 $ 281 $ 96 $577 $ 673
==== ===== ====== ===== ==== ======
Net change in net interest
income $452 $ 287 $ 739 $ 183 $420 $ 603
==== ===== ====== ===== ==== ======
</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 year to date and
from the same period in 1995. One exception is Trust & Investment fee income,
which is up from 1995, but has remained relatively flat year to date.
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 slowed somewhat in the second quarter of 1996,
while remaining above year to date levels achieved in 1995.
NONINTEREST EXPENSES
Most categories of noninterest expense showed moderate increases year to date
and over the second 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 and the
first quarter 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 six months of 1996.
NET INCOME
Consolidated net income for the quarter increased over the first quarter and
the same period last year. Year to date consolidated net income was $2,324,000
compared to $1,844,000 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 26.0% above the same period last year. Return on consolidated average
assets for the quarter was 1.50%, compared to 1.27% for 1995, and is 1.45% for
the first six 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.
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<PAGE> 13
ITEM 2 CHANGES IN SECURITIES
No changes in the securities of the Company occurred during the quarter ended
June 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 June 30, 1996.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Company was held on April 16, 1996.
At that meeting, the following matters were submitted to a vote of the
shareholders. There were 1,489,840 voting shares outstanding on April 16,1996.
The following directors were re-elected to a three year term:
For Against Abstain
John H. Foss 1,145,560 0 849
David S. Hickman 1,145,560 0 849
Ann Hinsdale Knisel 1,145,389 171 849
Jeffrey T. Robideau 1,145,058 502 849
Richard S. Whelan 1,145,560 0 849
Directors Berlin, Bush, Downing, Farver, Gross, Herrick, Lawson, Martin,
Maxwell, Wanke, and Whitehouse hold terms which continue after the meeting.
Crowe, Chizek and Company LLP of Grand Rapids, Michigan were ratified as
independent auditors for the Company and its subsidiary for the year ending
December 31, 1996. The vote was as follows:
For Against Abstain
Ratification of auditors 1,104,863 4,202 37,344
The Shareholders of the Company adopted a deferred compensation plan,
designated as the Director Retainer Stock Plan (the "Director Plan"). The
Director Plan is intended to provide eligible directors of the Company and/or
the Bank with a means of deferring payment of retainers and certain fees
payable to them for Board service while at the same time expressing their
commitment to the Company by subjecting such deferred amounts to the market
performance of the Company's Common Stock. The Director Plan does not increase
any cash retainers or fees payable for board service, the amounts of which
would continue to be as established from time to time by the appropriate board,
and any retainers or fees elected to be deferred under the plan by an eligible
director ultimately would be payable in shares or cash equivalent to the market
value of shares, thus more closely aligning the interest of such a director
with those of the Company's shareholders.
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Director's Retainer Stock Plan For Against Abstain
Ratification of plan 949,218 157,388 39,803
The Shareholders also adopted a deferred compensation plan designated as the
Senior Management Bonus Deferral Stock Plan (the "Management Plan"). The
Management Plan has essentially the same purposes as the Director Plan
discussed above and would permit eligible employees of the Company or of the
Bank or another Affiliated Entity (as defined in the Management Plan) to elect
cash bonus deferrals and, after employment termination, to receive payouts in
whole or in part in the form of Shares (defined as in the Director Plan) on
terms substantially similar to those of the Director Plan. The Management Plan
would not increase the amounts of cash bonuses potentially payable to any
employee and, due to the nature of payouts under the plan, should serve to more
closely align the interest of participating employees with those of the
Company's shareholders.
Senior Management Bonus Deferral Stock Plan For Against Abstain
Ratification of plan 953,315 157,737 35,357
ITEM 5 OTHER INFORMATION
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits (numbered as in Item 601 of Regulation S-K):
27. Financial Data Schedule.
(b) The Company has filed no reports on Form 8-K during the quarter ended
June 30, 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.
July 19, 1996
/S/ Dale L. Chadderdon
-----------------------------------------------
Dale L. Chadderdon
Senior Vice President, Secretary & Treasurer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- --------------------------------------------------------------------------------
27 Financial Data Schedule
Page 15
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,232
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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<TOTAL-ASSETS> 324,718
<DEPOSITS> 283,292
<SHORT-TERM> 5,894
<LIABILITIES-OTHER> 2,362
<LONG-TERM> 3,000
0
0
<COMMON> 13,421
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<EXPENSE-OTHER> 5,068
<INCOME-PRETAX> 3,157
<INCOME-PRE-EXTRAORDINARY> 3,157
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,324
<EPS-PRIMARY> 1.49
<EPS-DILUTED> 0.00
<YIELD-ACTUAL> 4.71
<LOANS-NON> 472
<LOANS-PAST> 134
<LOANS-TROUBLED> 0
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