<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, 1997
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, 1997, there were outstanding 1,644,103 shares of the
registrant's common stock, no par value.
Page 1
<PAGE> 2
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION PAGE NO.
- ------------------------------------------------------------------------------------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements (Condensed)
(a) Consolidated Balance 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 7
Results of Operations 10
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
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 14
Exhibit Index 15
</TABLE>
Page 2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(a) CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
June 30, December 31, June 30,
In thousands of dollars 1997 1996 1996
==============================================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and demand balances in other banks $ 11,766 $ 10,252 $ 9,232
Federal funds sold 11,400
- ------------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 11,766 21,652 9,232
Securities available for sale 50,510 44,990 47,501
Securities held to maturity (fair value of
$31,540, $34,391 and $31,877, respectively) 30,747 33,348 31,213
- ------------------------------------------------------------------------------------------------------------------------------
Total securities 81,257 78,338 78,714
Loans held for sale 799 272
Portfolio loans 250,363 241,054 225,195
- ------------------------------------------------------------------------------------------------------------------------------
Total loans 250,363 241,853 225,467
Less: allowance for loan losses 2,317 2,320 2,244
- ------------------------------------------------------------------------------------------------------------------------------
Net loans 248,046 239,533 223,223
Premises and equipment, net 8,789 8,775 8,767
Accrued interest receivable and other assets 5,127 5,072 4,782
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $354,985 $353,370 $324,718
==============================================================================================================================
LIABILITIES
Deposits
Noninterest bearing $ 32,438 $ 30,335 $ 28,065
Interest bearing certificates of deposit of $100,000 or more 40,863 42,060 36,066
Other interest bearing deposits 229,644 225,308 219,161
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 302,945 297,703 283,292
Federal funds and other short term borrowings 5,325 609 5,894
Other borrowings 10,000 20,000 3,000
Accrued interest payable and other liabilities 3,161 3,010 2,362
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 321,431 321,322 294,548
SHAREHOLDERS' EQUITY
Common stock, no par value; 5,000,000 shares authorized;
1,644,103, 1,565,890 and 1,564,307 shares issued and
outstanding, respectively 16,268 13,500 13,421
Retained earnings 17,199 18,419 16,978
Unrealized gain (loss) on securities available for sale,
net of tax of $(45), $(67), and $118, respectively 87 129 (229)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 33,554 32,048 30,170
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $354,985 $353,370 $324,718
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3
<PAGE> 4
(b) CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
In thousands of dollars, except per share data 1997 1996 1997 1996
==============================================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans
Taxable $ 5,583 $ 5,020 $10,884 $ 9,932
Tax exempt 16 16 29 32
Interest on securities
Taxable 841 749 1,593 1,447
Tax exempt 416 416 844 832
Interest on federal funds sold 27 21 187 76
- ------------------------------------------------------------------------------------------------------------------------------
Total interest income 6,883 6,222 13,537 12,319
INTEREST EXPENSE
Interest on certificates of deposit of $100,000 or more 601 532 1,215 1,057
Interest on other deposits 2,372 2,150 4,727 4,359
Interest on short term borrowings 48 21 56 34
Interest on other borrowings 151 76 387 158
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 3,172 2,779 6,385 5,608
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 3,711 3,443 7,152 6,711
Provision for loan losses 190 126 370 252
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,521 3,317 6,782 6,459
NONINTEREST INCOME
Service charges on deposit accounts 358 304 663 571
Trust & Investment fee income 251 235 528 484
Loan sales and servicing 129 129 273 310
Sales of nondeposit investment products 95 117 152 215
Other income 110 99 222 186
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 943 884 1,838 1,766
NONINTEREST EXPENSE
Salaries and employee benefits 1,421 1,312 2,932 2,657
Occupancy and equipment expense 511 478 1,024 956
Other expense 797 761 1,552 1,455
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,729 2,551 5,508 5,068
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAX 1,735 1,650 3,112 3,157
Federal income tax 473 442 820 833
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,262 $ 1,208 $ 2,292 $ 2,324
==============================================================================================================================
Net income per share of common stock $ 0.77 $ 0.74 $ 1.39 $ 1.41
Cash dividends declared per share of common stock 0.240 0.210 0.469 0.410
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4
<PAGE> 5
(c) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
In thousands of dollars 1997 1996
==============================================================================================================================
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 2,292 $ 2,324
- ------------------------------------------------------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation and amortization 693 678
Provision for loan losses 370 252
Loans originated for sale (10,462) (13,657)
Proceeds from sales of loans originated for sale 11,261 13,668
Change in accrued interest receivable and other assets (149) (13)
Change in accrued interest payable and other liabilities 389 (166)
- ------------------------------------------------------------------------------------------------------------------------------
Total adjustments 2,102 762
- ------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 4,394 3,086
- ------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Securities available for sale
Purchases (9,309) (16,396)
Sales 50 725
Maturities 993 10,000
Principal payments 2,707 2,939
Securities held to maturity
Purchases (5,205) (1,786)
Maturities 7,735 1,025
Increase in portfolio loans (9,682) (7,856)
Premises and equipment expenditures, net (570) (853)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash from investing activities (13,281) (12,202)
- ------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net change in deposits 5,242 (1,880)
Net change in short term borrowings 4,716 5,316
Principal payments on other borrowings (10,000) (3,000)
Proceeds from stock transactions 30
Dividends paid (987) (805)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash from financing activities (999) (369)
- ------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (9,886) (9,485)
Cash and cash equivalents at beginning of year 21,652 18,717
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 11,766 $ 9,232
==============================================================================================================================
Cash Paid During the Period for
Interest $ 6,296 $ 5,624
Income taxes 718 894
==============================================================================================================================
</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 six month
period ending June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997. 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,
1996.
NOTE 2 - LOANS HELD FOR SALE
Mortgage loans serviced for others are not included in the accompanying
consolidated statements. The unpaid principal balances of mortgage loans
serviced for others was $92,641,000 and $78,864,000 at the end of June ___, 1997
and 1996. The balance of loans serviced for others related to servicing rights
that have been capitalized was $34,756,000 and $13,449,000 at June 30, 1997 and
1996
Mortgage servicing rights activity in thousands of dollars for the six months
ended June 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
Unamortized cost of mortgage servicing rights 1997 1996
---- ----
<S> <C> <C>
Balance at January 1 $ 185 $ -
Amount capitalized year to date 83 102
Amount amortized year to date (13) (2)
----- ------
Balance at period end $ 255 $ 100
</TABLE>
No valuation allowance was considered necessary for mortgage servicing rights
at period end 1997 and 1996.
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 30, 1997 and May 27, 1996, the Company
issued 5% stock dividends. 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 1,644,097 for 1997 and 1,642,539 for
1996.
Page 6
<PAGE> 7
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion provides information about the consolidated financial condition
and results of operations of United Bancorp, Inc. and its subsidiary, United
Bank & Trust ("Bank") for the six month period ending June 30, 1997.
FINANCIAL CONDITION
SECURITIES
Investment balances declined during the second quarter, following a modest
increase during the first three months of 1997. Some maturities in the
portfolio were not replaced, as a result of strong loan demand during the
quarter.
The mix of the investment portfolio remained relatively unchanged from December
31 and June 30, 1996
LOANS
Loan volume increased during the second quarter of 1997, following declines in
the first quarter of the year. All categories of loans enjoyed strong growth
during the quarter, reflecting the economic activity of the area. The trend by
clients toward fixed rates slowed somewhat during the quarter, resulting in a
decline in the number of residential real estate mortgages sold in the
secondary market during the period.
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 June 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>
June 30, 1997 December 31, 1996 June 30, 1996
------------------------ ---------------------- ----------------------
Portfolio loans: Balance % of total Balance % of total Balance % of total
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Personal $ 71,400 28.5% $ 69,477 28.7% $ 63,001 27.9%
Business/commercial mtgs 69,395 27.7% 65,823 27.2% 59,823 26.5%
Tax exempt 1,317 0.5% 1,078 0.4% 1,005 0.4%
Residential mortgage 95,638 38.2% 94,255 39.0% 93,084 41.3%
Construction 12,613 5.0% 11,220 4.6% 8,554 3.8%
------------------------ ---------------------- ----------------------
Total loans $ 250,363 100.0% $241,853 100.0% $225,467 100.0%
</TABLE>
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.
Page 7
<PAGE> 8
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>
6/30/97 12/31/96 6/30/96
------- -------- -------
<S> <C> <C> <C>
Nonaccrual loans $ 255 $ 450 $472
Loans past due 90 days or more 737 663 134
Troubled debt restructurings - - -
-----------------------------------
Total nonperforming loans $ 992 $1,113 $606
Other real estate 335 335 -
-----------------------------------
Total nonperforming assets $1,327 $1,448 $606
Percent of total loans 0.53% 0.58% 0.27%
</TABLE>
Nonperforming loans decreased from end of year, although balances are higher
than at the end of the first quarter and June 30, 1996. Loans past due ninety
days or more continue to increase modestly, reflecting portfolio growth.
Overall, nonperforming loans as a percent of total loans remain well below
industry standards, although higher than traditionally experienced by the
Company. The amount listed for other real estate relates to property that has
been leased to a third party with an option to purchase, and no loss is
anticipated. The Company has no troubled debt restructurings.
An analysis of the allowance for loan losses, in thousands of dollars, for the
six months ended June 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Balance at beginning of period $ 2,320 $2,197
Loans charged off (404) (246)
Recoveries credited to allowance 31 41
Provision charged to operations 370 252
------- -------
Balance at end of period $ 2,317 $2,244
</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 are up from June 30 and December 31, 1996, although they are
down somewhat from March 31, 1997. Noninterest bearing and interest bearing
balances continue to fluctuate with swings in corporate and public fund
balances.
Other interest bearing deposit balances increased during the first three months
of 1997 reflecting growth in Cash Management and Certificates of Deposit
accounts. Seasonal increases in public sector funds account for a significant
portion of this growth during the first quarter, and these balances declined
during the second quarter. Other interest bearing deposits remain relatively
flat year to date. Management anticipates that deposit growth during the
remainder of 1997 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
Loan balances increased during the quarter, and coupled with slight deposit
declines, resulted in decreased liquidity during the period. The Bank moved
from a net fed funds sold position to a net funds borrowed position during the
quarter. Management anticipates moving in and out of the fed funds market as
liquidity needs require. Seasonal deposit fluctuations, coupled 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 with a slight difference than shown in the
table below, all funds management ratios remain within policy. During the
second quarter of 1997, these ratios have changed modestly from those reported
at June 30 and December 31, 1996, reflecting periodic 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, 1997.
<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 $ 12,174 $ 15,056 $ 46,780 $ 6,286 $ 961 $ 81,257
Loans 64,556 50,311 101,348 22,578 11,570 250,363
-------------------------------------------------------------------------------------
Total earning assets $ 76,730 $ 65,367 $ 148,128 $ 28,864 $ 12,531 $331,620
=====================================================================================
Interest bearing deposits $162,440 $ 52,775 $ 55,224 $ 69 $270,508
Other borrowings 5,325 3,000 7,000 15,325
-------------------------------------------------------------------------------------
Total interest bearing liabilities $167,765 $ 55,775 $ 62,224 $ 69 $ - $285,833
=====================================================================================
Net asset (liability)
funding gap $(91,035) $ 9,592 $ 85,904 $ 28,795 $ 12,531 $ 45,787
Cumulative net asset
(liability) funding gap $(91,035) $(81,443) $ 4,461 $ 33,256 $ 45,787
Cumulative gap ratio 0.46 0.64 1.02 1.12 1.16 to 1
Cumulative gap, % of assets -25.6% -22.9% 1.3% 9.4% 12.9%
</TABLE>
CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions. The following table shows the Company's capital
ratios and ratio calculations at June 30, 1997 and 1996 and December 31, 1996.
Dollars are shown in thousands.
Page 9
<PAGE> 10
<TABLE>
<CAPTION>
Regulatory Guidelines United Bancorp, Inc.
--------------------- --------------------
Adequate Well 6/30/97 12/31/96 6/30/96
-------- ---- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tier 1 capital to average assets 4% 5% 9.2% 9.3% 9.0%
Tier 1 risk adjusted capital ratio 4% 6% 13.5% 13.2% 13.5%
Total risk adjusted capital ratio 8% 10% 14.4% 14.2% 14.5%
Total shareholders' equity $ 33,554 $ 32,048 $ 30,170
Intangible assets (1,398) (1,491) (1,587)
Unrealized (gain) loss on securities available for sale (87) (129) 229
--------- -------------------------
Tier 1 capital 32,069 30,428 28,812
Qualifying loan loss reserves 2,317 2,320 2,244
--------- -------------------------
Tier 2 capital $ 34,386 $ 32,748 $ 31,056
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Second quarter net interest income improved over first quarter 1997 and second
quarter 1996. At the same time, net spread showed some improvement over the
first three months of the year, although remaining below the 1996 numbers. This
is a result of aggressive pricing on the part of competitors which has caused
United to match rates in order to retain and attract new business. In general,
yields on earning assets have remained flat compared to 1996, while the
Company's cost of funds has increased.
A factor in the improvement in yield over the first quarter is a decrease in
the temporary excess liquidity experienced during the first quarter, resulting
in high levels of funds sold at relatively low rates. Management has taken
steps to invest this excess liquidity to provide a better return while
remaining flexible to meet loan demand.
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, 1997 and 1996.
<TABLE>
<CAPTION>
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES
-------------------------------------------------------------
DOLLARS IN THOUSANDS
--------------------
-------------------------------------------------------------------------------------------
1997 1996
-------------------------------------------------------------------------------------------
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 $ 7,041 $ 187 5.30% $ 2,717 $ 76 5.59%
Taxable securities 49,698 1,592 6.41% 48,508 1,447 5.97%
Tax exempt securities (b) 30,608 1,221 7.98% 29,771 1,207 8.11%
Taxable loans 242,387 10,884 8.98% 219,316 9,932 9.06%
Tax exempt loans (b) 1,098 42 7.74% 1,126 47 8.35%
------------------------- -----------------------
Total int. earning assets (b) 330,832 $13,927 8.42% 301,438 $12,709 8.43%
------------------------- -----------------------
Less allowance for loan losses (2,301) (2,216)
Other assets 23,042 21,619
----------- ---------
TOTAL ASSETS $ 351,573 $ 320,841
=========== =========
</TABLE>
Page 10
<PAGE> 11
Yield Analysis of Consolidated Average Assets and Liabilities (continued)
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------------------------------------
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 $ 38,662 $ 308 1.59% $ 39,320 $ 352 1.79%
Savings deposits 69,372 963 2.78% 75,967 1,089 2.87%
CDs $100,000 and over 41,779 1,215 5.82% 36,310 1,057 5.82%
Other interest bearing deposits 123,309 3,456 5.61% 104,405 2,919 5.59%
------------------------- -----------------------
Total int. bearing deposits 273,122 5,942 4.35% 256,002 5,417 4.23%
Short term borrowings 2,098 56 5.32% 1,385 34 4.91%
Other borrowings 12,983 387 5.96% 5,769 158 5.48%
------------------------ -----------------------
Total int. bearing liabilities 288,203 $ 6,385 4.43% 263,156 $ 5,609 4.26%
--------- ---------
Noninterest bearing deposits 27,627 25,609
Other liabilities 2,805 2,491
Shareholders' equity 32,938 29,585
---------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 351,573 320,841
========== =========
Net interest income (b) $ 7,542 $ 7,100
========= =========
Net spread (b) 3.99% 4.17%
======== =========
Net yield on interest earning assets (b) 4.56% 4.71%
======== =========
Ratio of interest earning assets to
interest bearing liabilities 1.15 1.15
========== =========
</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>
1997 Compared to 1996 1996 Compared to 1995
---------------------------------------------------------------------------------------
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 $ 115 $ (4) $ 111 $ 29 $ (2) $ 27
Taxable securities 36 109 145 17 143 160
Tax exempt securities 34 (20) 14 192 (109) 83
Taxable loans 1,036 (84) 952 455 313 768
Tax exempt loans (1) (4) (5) (11) (7) (18)
---------------------------------------------------------------------------------------
Total interest income $ 1,220 $ (3) $ 1,217 $ 682 $ 338 $ 1,020
=======================================================================================
Interest paid on:
NOW accounts $ (6) $ (38) $ (44) $ 32 $ (58) $ (26)
Savings deposits (92) (34) (126) 73 22 95
CDs $100,000 and over 159 (1) 158 183 (28) 155
Other interest bearing deposits 530 7 537 110 110
Short term borrowings 19 3 22 (52) (16) (68)
Other borrowings 214 15 229 (6) 21 15
---------------------------------------------------------------------------------------
Total interest expense $ 824 $ (48) $ 776 $ 230 $ 51 $ 281
=======================================================================================
Net change in net interest
income $ 396 $ 45 $ 441 $ 452 $ 287 $ 739
=======================================================================================
</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
Most categories of noninterest income increased from the same period in 1996.
However, due to volume decreases, income from sales and servicing of loans and
income from sales of nondeposit products continue to show modest declines from
same periods of 1996. Total noninterest income for the first six months is up
by 4.1% from the same period of 1996.
NONINTEREST EXPENSES
Most categories of noninterest expense showed moderate increases over the same
periods of 1996, reflecting continued growth and expansion of the Bank. Total
noninterest expense, excluding provision for loan losses, for the first six
months is 8.7% above the same period for 1996.
FEDERAL INCOME TAX
There is no significant change in the income tax position of the Company during
the first six months of 1997.
NET INCOME
Consolidated net income for the year is slightly behind that of the same
periods in 1996, although net income for the quarter exceeded that of the second
quarter of 1996. Management anticipates that income will continue to improve,
and will exceed year to date 1996 levels during the third quarter of the year.
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings. The Company's
sole subsidiary, United Bank & Trust, is involved in ordinary routine
litigation incident to its business; however, no such proceedings are expected
to result in any material adverse effect on the operations or earnings of the
Bank. Neither the Bank nor the Company is involved in any proceedings to which
any director, principal officer, affiliate thereof, or person who owns of
record or beneficially five percent (5%) or more of the outstanding stock of
the Company or the Bank, or any associate of the foregoing, is a party or has a
material interest adverse to the Company or the Bank.
ITEM 2 - CHANGES IN SECURITIES
No changes in the securities of the Company occurred during the quarter ended
June 30, 1997.
Page 12
<PAGE> 13
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, 1997.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Company was held on April 15, 1997.
At that meeting, the following matters were submitted to a vote of the
shareholders. There were 1,565,890 voting shares outstanding on April 15, 1997.
The following directors were re-elected to three year terms:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
David N. Berlin 1,253,513 37 -
Merlyn H. Downing 1,253,513 37 -
Charles E. Gross 1,252,157 1,393 -
Linda J. Herrick 1,252,853 697 -
John J. Wanke 1,253,513 37 -
</TABLE>
Directors Bush, Farver, Foss, Hickman, Knisel, Lawson, Martin, Maxwell,
Robideau, Whelan, 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, 1997. The vote was as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Ratification of auditors 1,246,056 - 16,130
</TABLE>
No other matters were considered by shareholders at that meeting.
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, 1997.
Page 13
<PAGE> 14
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 31, 1997
/S/ Dale L. Chadderdon
---------------------------------------------
Dale L. Chadderdon
Senior Vice President, Secretary & Treasurer
Page 14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
Page 15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,766
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 50,510
<INVESTMENTS-CARRYING> 30,747
<INVESTMENTS-MARKET> 31,540
<LOANS> 250,363
<ALLOWANCE> 2,317
<TOTAL-ASSETS> 354,985
<DEPOSITS> 302,945
<SHORT-TERM> 5,325
<LIABILITIES-OTHER> 3,161
<LONG-TERM> 10,000
0
0
<COMMON> 16,268
<OTHER-SE> 17,286
<TOTAL-LIABILITIES-AND-EQUITY> 354,985
<INTEREST-LOAN> 10,913
<INTEREST-INVEST> 2,437
<INTEREST-OTHER> 187
<INTEREST-TOTAL> 13,537
<INTEREST-DEPOSIT> 5,942
<INTEREST-EXPENSE> 6,385
<INTEREST-INCOME-NET> 7,152
<LOAN-LOSSES> 370
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,508
<INCOME-PRETAX> 3,112
<INCOME-PRE-EXTRAORDINARY> 3,112
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,292
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 0.00
<YIELD-ACTUAL> 4.56
<LOANS-NON> 255
<LOANS-PAST> 737
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 50
<ALLOWANCE-OPEN> 2,320
<CHARGE-OFFS> 404
<RECOVERIES> 31
<ALLOWANCE-CLOSE> 2,317
<ALLOWANCE-DOMESTIC> 1,405
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 912
</TABLE>
