UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT

For the transition period from ___________ to___________

Commission File Number: 0-16540

UNITED BANCORP, INC.

(Exact name of registrant as specified in its charter)

Ohio		34-1405357
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)

201 South Fourth Street, Martins Ferry, Ohio 43935-0010

(Address of principal executive offices)

(740) 633-0445

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $1.00	UBCP	NASDQ Capital Market

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 such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ⌧☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ⌧☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth ~~company.~~company. See ~~definition~~the definitions of ~~“accelerated filer”,~~ “large accelerated filer,” ~~“small~~“accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒	~~Smaller Reporting Company~~ ☒
~~Emerging growth company~~ ☐
Smaller Reporting Company ☒		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange ~~Act~~Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

Indicate the number of shares outstanding of the issuer’s classes of common stock as of the latest practicable date: As of August ~~12, 2022, 5,914,488~~9, 2023, 5,690,251 shares of the Company’s common stock, $1.00 par value, were issued and outstanding.

Table of Contents


PART I - FINANCIAL INFORMATION

Item 1	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Income	4

	Condensed Consolidated Statements of Comprehensive Income (Loss)	5

	Condensed Consolidated Statements of ~~Shareholders~~Stockholders’ Equity	6

	Condensed Consolidated Statements of Cash Flows	87

	Notes to Condensed Consolidated Financial Statements	108

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3430

Item 3	Quantitative and Qualitative Disclosures About Market Risk	4136

Item 4	Controls and Procedures	4136

PART II - OTHER INFORMATION

Item 1	Legal Proceedings	4237

Item 1A	Risk Factors	4237

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4237

Item 3	Defaults Upon Senior Securities	4237

Item 4	~~Other Information~~Mine Safety Disclosures	4337

Item 5	Other Information	37

Item 6	Exhibits	4338

SIGNATURES		4439

Table of Contents

ITEM 1. Financial Statements

United Bancorp, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

June 30,

December 31,

2022

2021

(Unaudited)

Assets




Cash and due from banks

$
7,731

$
7,653
Interest-bearing demand deposits

9,060

75,346
Cash and cash equivalents

16,791

82,999
Available-for-sale securities

190,175

146,313
Loans, net of allowance for loan losses of $2,653 and $3,673 at June 30, 2022 and December 31, 2021, respectively

464,736

450,699
Premises and equipment

12,587

12,757
Federal Home Loan Bank stock

3,704

3,704
Foreclosed assets held for sale, net

237

415
Core deposit intangible assets

485

560
Goodwill

682

682
Accrued interest receivable

2,638

2,345
Bank-owned life insurance

18,793

18,809
Other assets

8,277

5,173
Total assets

$
719,105

$
724,456
Liabilities and Stockholders’ Equity




Liabilities




Deposits




Demand

$
415,496

$
408,296
Savings

146,874

140,598
Time

44,940

56,242
Total deposits

607,310

605,136
Securities sold under repurchase agreements

24,476

15,701
Subordinated debentures

23,695

23,665
Interest payable and other liabilities

5,311

8,253
Total liabilities

660,792

652,755

Stockholders’ Equity




Preferred stock, 0 par value, authorized 2,000,000 shares; 0 shares issued

—

—
Common stock, $1 par value; authorized 10,000,000 shares; issued 6,043,851 shares June 30, 2022 and December 31, 2021 – 6,053,851 shares; outstanding 2022 – 5,914,488; 2021 – 5,791,853

6,044

6,054
Additional paid-in capital

24,528

23,635
Retained earnings

39,169

37,847
Stock held by deferred compensation plan; 2022 – 168,441 shares, 2021 – 172,538 shares

(1,790)

(1,738)
Accumulated other comprehensive (loss) income

(7,810)

6,964
Treasury stock, at cost 2022 – 129,363 shares, 2021 – 84,363 shares

(1,828)

(1,061)
Total stockholders’ equity

58,313

71,701
Total liabilities and stockholders’ equity

$
719,105

$
724,456


	June 30,		December 31,
	2023		2022
	(Unaudited)
Assets
Cash and due from banks	$	7,355	$	8,279
Interest-bearing demand deposits		74,408		21,801
Cash and cash equivalents		81,763		30,080
Available-for-sale securities, amortized cost of $247,525 net of allowance for credit losses of $0 at June 30, 2023		236,053		217,624
Loans, net of allowance for credit losses of $4,281 and $2,052 at June 30, 2023 and December 31, 2022, respectively		458,590		458,823
Premises and equipment		12,161		12,144
Federal Home Loan Bank stock		3,979		2,499
Foreclosed assets held for sale, net		3,475		3,519
Core deposit other intangible asset		335		410
Goodwill		682		682
Accrued interest receivable		3,547		3,403
Deferred federal income tax		3,267		2,423
Bank-owned life insurance		19,215		19,000
Other assets		7,217		6,793
Total assets	$	830,284	$	757,400
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Demand	$	361,385	$	402,341
Savings		138,393		145,836
Time		143,838		101,736
Total deposits		643,616		649,913
Securities sold under repurchase agreements		23,690		18,106
Subordinated debentures		23,756		23,726
Advances Federal Home Loan Bank		75,000		—
Interest payable and other liabilities		5,813		5,918
Total liabilities		771,875		697,663

Stockholders’ Equity
Preferred stock, no par value, authorized 2,000,000 shares; no shares issued		—		—
Common stock, $1 par value; authorized 10,000,000 shares; issued 6,043,851 shares at June 30, 2023, and 6,043,851 shares at December 31, 2022; outstanding - 5,696,495 and 5,740,251 shares at June 30, 2023 and December 31, 2022, respectively		6,044		6,044
Additional paid-in capital		25,328		24,814
Retained earnings		41,223		41,945
Stock held by deferred compensation plan; 167,993 and 174,237 shares at June 30, 2023 and December 31, 2022		(1,903)		(1,902)
Accumulated other comprehensive loss		(9,722)		(9,336)
Treasury stock, at cost 179,363 and 129,363 shares at June 30, 2023 and December 31, 2022, respectively		(2,561)		(1,828)
Total stockholders’ equity		58,409		59,737
Total liabilities and stockholders’ equity	$	830,284	$	757,400

See Notes to Condensed Consolidated Financial Statements

Table of Contents

United Bancorp, Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,				Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Interest and dividend income
Loans, including fees	$	4,914	$	5,091	$	9,705	$	10,004	$	6,126	$	4,914	$	11,935	$	9,705
Taxable securities		402		21		670		50		685		402		1,361		670
Non-taxable securities		1,035		1,086		1,926		2,194		1,501		1,035		2,857		1,926
Federal funds sold		66		20		94		31		936		66		1,262		94
Dividends on Federal Home Loan Bank stock and other		28		15		47		42		38		28		79		47
Total interest and dividend income		6,445		6,233		12,442		12,321		9,286		6,445		17,494		12,442
Interest expense
Deposits
Demand		106		72		179		167		532		106		952		179
Savings		3		4		7		11		34		3		68		7
Time		23		263		96		567		921		23		1,524		96
Borrowings		345		337		682		706		1,454		345		2,182		682
Total interest expense		477		676		964		1,451		2,941		477		4,726		964
Net interest income		5,968		5,557		11,478		10,870		6,345		5,968		12,768		11,478
Credit for loan losses		(485)		(250)		(985)		(455)
Provision for (reversal of) credit loss expense - loans										(146)		(485)		(146)		(985)
Net interest income after credit for loan losses		6,453		5,807		12,463		11,325		6,491		6,453		12,914		12,463
Noninterest income
Service charges on deposit accounts		746		809		1,427		1,401		777		746		1,498		1,427
Realized gains on sales of loans		15		88		27		164		7		15		7		27
Other income		227		245		521		503		262		227		557		521
Total noninterest income		988		1,142		1,975		2,068		1,046		988		2,062		1,975
Noninterest expense
Salaries and employee benefits		2,384		2,331		5,389		4,635		2,470		2,384		5,334		5,389
Net occupancy and equipment expense		579		574		1,162		1,174		507		579		1,004		1,162
Professional services		360		328		623		647		343		360		729		623
Insurance		139		130		278		259		154		139		304		278
Deposit insurance premiums		50		49		99		98		85		50		171		99
Franchise and other taxes		137		140		272		274		138		137		278		272
Advertising		123		112		153		225		100		123		200		153
Stationery and office supplies		21		28		46		51		29		21		59		46
Amortization of core deposit premium		38		38		75		75		38		38		75		75
Other expenses		1,018		820		1,862		1,561		1,225		1,018		2,373		1,862
Total noninterest expense		4,849		4,550		9,959		8,999		5,089		4,849		10,527		9,959
Income before federal income taxes		2,592		2,399		4,479		4,394		2,448		2,592		4,449		4,479
Federal income taxes		295		214		431		301		168		295		281		431
Net income	$	2,297	$	2,185	$	4,048	$	4,093	$	2,280	$	2,297	$	4,168	$	4,048
EARNINGS PER COMMON SHARE
Basic	$	0.40	$	0.38	$	0.70	$	0.71	$	0.40	$	0.40	$	0.73	$	0.70
Diluted	$	0.40	$	0.38	$	0.70	$	0.71	$	0.40	$	0.40	$	0.73	$	0.70
DIVIDENDS PER COMMON SHARE	$	0.1550	$	0.1450	$	0.4575	$	0.3875	$	0.1650	$	0.1550	$	0.4775	$	0.4575

See Notes to Condensed Consolidated Financial Statements

Table of Contents

United Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three and Six Months Ended June 30, 2023 and 2022

(In ~~thousands)~~thousands, except per share data)

(Unaudited)


	Three months ended				Six months ended				Three months ended				Six months ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Net income	$	2,297	$	2,185	$	4,048	$	4,093	$	2,280	$	2,297	$	4,168	$	4,048
Unrealized holding gains (losses) on securities during the period, net of tax (benefit) of ($1,868), $327, ($3,927) and ($249) for each respective period		(7,026)		1,232		(14,774)		(938)
Comprehensive (loss) income	$	(4,729)	$	3,417	$	(10,726)	$	3,155
Unrealized holding losses on securities during the period, net of tax (benefit) of ($530), ($1,868), ($101) and ($3,927) for each respective period										(1,992)		(7,026)		(386)		(14,774)
Comprehensive income (loss)									$	288	$	(4,729)	$	3,782	$	(10,726)

See Notes to Condensed Consolidated Financial Statements

Table of Contents

United Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Three ~~and Six~~ Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

(In thousands except per share data)

(Unaudited)

Treasury

Accumulated

Additional

Stock and

Other

Common

Paid-in

Deferred

Retained

Comprehensive


Stock

Capital

Compensation

Earnings

Income (Loss)

Total
Balance, April 1, 2021

6,046

23,174

(2,569)

32,958

7,113

66,722
Net income

—

—

—

2,185

—

2,185
Other comprehensive income

—

—

—

—

1,232

1,232
Cash dividends - $0.1450 per share

—

—

—

(866)

—

(866)
Shares purchased for deferred compensation plan

—

91

(91)

—

—

—
Restricted stock activity

—

103

—

—

—

103
Balance, June 30, 2021

$
6,046

$
23,368

$
(2,660)

$
34,277

$
8,345

$
69,376
Balance April 1, 2022

6,054

24,457

(3,641)

37,815

(784)

63,901
Net income

—

—

—

2,297

—

2,297
Other comprehensive loss

—

—

—

—

(7,026)

(7,026)
Cash dividends - $0.1550 per share

—

—

—

(943)

—

(943)
Shares purchased for deferred compensation plan

—

(23)

23

—

—

—
Expense/shares repurchase related to share-based compensation plans

(10)

94

—

—

—

84
Balance, June 30, 2022

$
6,044

$
24,528

$
(3,618)

$
39,169

$
(7,810)

$
58,313

~~See Notes to Condensed Consolidated Financial Statements~~

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Consolidated Statements of Stockholders’ Equity~~

~~Three and Six Months Ended June 30, 2022 and 2021~~

~~(In thousands except per share data)~~

~~(Unaudited)~~

Treasury

Accumulated

Additional

Stock and

Other

Common

Paid-in

Deferred

Retained

Comprehensive


Stock

Capital

Compensation

Earnings

Income (Loss)

Total
Balance January 1, 2021

6,046

23,166

(2,664)

32,497

9,283

68,328
Net income

—

—

—

4,093

—

4,093
Other comprehensive loss

—

—

—

—

(938)

(938)
Cash dividends - $0.3875 per share

—

—

—

(2,313)

—

(2,313)
Shares sold for deferred compensation plan

—

(4)

4

—

—

—
Repurchase of common stock

—

—

—

—

—

—
Expense related to share-based compensation plans

—

206

—

—

—

206
Balance, June 30, 2021

$
6,046

$
23,368

$
(2,660)

$
34,277

$
8,345

$
69,376

Balance January 1, 2022

6,054

23,635

(2,799)

37,847

6,964

71,701
Net income

—

—

—

4,048

—

4,048
Other comprehensive loss

—

—

—

—

(14,774)

(14,774)
Cash dividends - $0.4575 per share

—

—

—

(2,726)

—

(2,726)
Deferred compensation plan activity

—

51

(51)

—

—

—
Repurchase of common stock

—

—

(768)

—

—

(768)
Expense/shares repurchase related to share-based compensation plans

(10)

842

—

—

—

832
Balance, June 30, 2022

$
6,044

$
24,528

$
(3,618)

$
39,169

$
(7,810)

$
58,313


					Treasury				Accumulated
			Additional		Stock and				Other
	Common		Paid-in		Deferred		Retained		Comprehensive
	Stock		Capital		Compensation		Earnings		Income (Loss)		Total
Balance April 1, 2022	$	6,054	$	24,457	$	(3,641)	$	37,815	$	(784)	$	63,901
Net income		—		—		—		2,297		—		2,297
Other comprehensive loss		—		—		—		—		(7,026)		(7,026)
Cash dividends - $0.1550 per share		—		—		—		(943)		—		(943)
Deferred compensation plan activity		—		(23)		23		—		—		—
Expense/shares repurchase related to share-based compensation plans		(10)		94		—		—		—		84
Balance, June 30, 2022	$	6,044	$	24,528	$	(3,618)	$	39,169	$	(7,810)	$	58,313
Balance April 1, 2023		6,044		25,172		(4,376)		39,895		(7,730)		59,005
Net income		—		—		—		2,280		—		2,280
Other comprehensive loss		—		—		—		—		(1,992)		(1,992)
Cash dividends - $0.1650 per share		—		—		—		(952)		—		(952)
Cumulative effect of adoption of ASU 2016-13		—		—		—		—		—		—
Deferred compensation plan activity		—		88		(88)		—		—		—
Expense/shares repurchase related to share-based compensation plans		—		68		—		—		—		68
Balance, June 30, 2023	$	6,044	$	25,328	$	(4,464)	$	41,223	$	(9,722)	$	58,409


					Treasury				Accumulated
			Additional		Stock and				Other
	Common		Paid-in		Deferred		Retained		Comprehensive
	Stock		Capital		Compensation		Earnings		Income (Loss)		Total
Balance January 1, 2022	$	6,054	$	23,635	$	(2,799)	$	37,847	$	6,964	$	71,701
Net income		—		—		—		4,048		—		4,048
Other comprehensive loss		—		—		—		—		(14,774)		(14,774)
Cash dividends - $0.4575 per share		—		—		—		(2,726)		—		(2,726)
Deferred compensation plan activity		—		51		(51)		—		—		—
Repurchase of common stock		—		—		(768)		—		—		(768)
Expense/shares repurchase related to share-based compensation plans		(10)		842		—		—		—		832
Balance, June 30, 2022	$	6,044	$	24,528	$	(3,618)	$	39,169	$	(7,810)	$	58,313
Balance January 1, 2023		6,044		24,814		(3,730)		41,945		(9,336)		59,737
Net income		—		—		—		4,168		—		4,168
Other comprehensive loss		—		—		—		—		(386)		(386)
Cash dividends - $0.4775 per share		—		—		—		(2,800)		—		(2,800)
Cumulative effect of adoption of ASU 2016-13		—		—		—		(2,090)		—		(2,090)
Deferred compensation plan activity		—		1		(1)		—		—		—
Repurchase of common stock		—		—		(733)		—		—		(733)
Expense/shares repurchase related to share-based compensation plans		—		513		—		—		—		513
Balance, June 30, 2023	$	6,044	$	25,328	$	(4,464)	$	41,223	$	(9,722)	$	58,409

See Notes to Condensed Consolidated Financial Statements

Table of Contents

United Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2023 and 2022

(In ~~thousands)~~thousands except per share data)

(Unaudited)

Six months ended

June 30,

2022

2021
Operating Activities

Net income

$
4,048

$
4,093
Items not requiring (providing) cash

Accretion of premiums and discounts on securities, net

255

187
Amortization of intangible asset

75

75
Depreciation and amortization

523

576
Expense related to share based compensation plans

832

206
Provision (Credit) for loan losses

(985)

(455)
Increase in value of bank-owned life insurance

(84)

(225)
Gain on sale of loans

(27)

(164)
Proceeds from sale of loans held for sale

1,017

7,923
Originations of loans held for sale

(990)

(7,759)
Gain on sale or write down of foreclosed assets

24

(75)
Amortization of debt instrument costs

30

30
Net change in accrued interest receivable and other assets

(1,467)

(829)
Net change in accrued expenses and other liabilities

(882)

(133)

Net cash provided by operating activities

2,369

3,450

Investing Activities

Securities available for sale:

Maturities, prepayments and calls

4,540

12,305
Purchases

(67,360)

0
Proceeds from sale of available-for-sale securities

0

0
Net change in loans

(13,012)

(15,198)
(Purchase) redemption of Federal Home Loan Bank Stock

0

280
Purchases of premises and equipment

(360)

(460)
Proceeds from sale of foreclosed and fixed assets

162

456

Net cash used in investing activities

(76,030)

(2,617)

~~See Notes to Condensed Consolidated Financial Statements~~

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Condensed Consolidated Statements of Cash Flows (continued)~~

~~(In thousands)~~

~~(Unaudited)~~


	Six months ended				Six months ended
	June 30,				June 30,
	2022		2021		2023		2022
Operating Activities
Net income					$	4,168	$	4,048
Items not requiring (providing) cash
Accretion of premiums and discounts on securities, net						267		255
Amortization of intangible asset						75		75
Depreciation and amortization						493		523
Expense related to share based compensation plans						513		832
Provision for (reversal of) credit loss expense						(146)		(985)
Increase in value of bank-owned life insurance						(215)		(84)
Gain on sale of loans						(7)		(27)
Proceeds from sale of loans held for sale						361		1,017
Originations of loans held for sale						(354)		(990)
Loss on sale or write down of foreclosed assets						44		24
Amortization of debt instrument costs						30		30
Net change in accrued interest receivable and other assets						(1,317)		(1,467)
Net change in accrued expenses and other liabilities						(282)		(882)

Net cash provided by operating activities						3,630		2,369

Investing Activities
Securities available for sale:
Maturities, prepayments and calls						260		4,540
Purchases						(19,446)		(67,360)
Net change in loans						(1,525)		(13,012)
Purchase of FHLB stock						(3,149)		—
Redemption of Federal Home Loan Bank Stock						1,669		—
Purchases of premises and equipment						(526)		(360)
Proceeds from sale of foreclosed and fixed assets						16		162

Net cash used in investing activities						(22,701)		(76,030)

Financing Activities
Net change in deposits	$	2,172	$	24,615	$	(6,297)	$	2,172
Net change in securities sold under repurchase agreements		8,775		11,622		5,584		8,775
Peoceeds from Federal Home Loan Bank advances						75,000		—
Repurchase of common stock		(768)		—		(733)		(768)
Cash dividends paid on common stock		(2,726)		(2,313)		(2,800)		(2,726)
Net cash provided by financing activities		7,453		33,924		70,754		7,453

(Decrease) Increase in Cash and Cash Equivalents		(66,208)		34,757
Increase (Decrease) in Cash and Cash Equivalents						51,683		(66,208)
Cash and Cash Equivalents, Beginning of Period		82,999		51,592		30,080		82,999

Cash and Cash Equivalents, End of Period	$	16,791	$	86,349	$	81,763	$	16,791

Supplemental Cash Flows Information
Interest paid on deposits and borrowings	$	990	$	1,442	$	4,924	$	990

Federal income taxes paid	$	300	$	200	$	—	$	300

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Transfers from loans to foreclosed assets held for sale	$	—	$	70	$	—	$	—

See Notes to Condensed Consolidated Financial Statements

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

Note 1: Summary of Significant Accounting Policies

These interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position of United Bancorp, Inc. (“Company”) at June 30, ~~2022,~~2023, and its results of operations and cash flows for the interim periods presented. All such adjustments are normal and recurring in nature. The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not purport to contain all the necessary financial disclosures required by accounting principles generally accepted in the United States of America that might otherwise be necessary in the circumstances and should be read in conjunction with the Company’s consolidated financial statements and related notes for the year ended December 31, ~~2021~~2022 included in its Annual Report on Form 10-K. Reference is made to the accounting policies of the Company described in the Notes to the Consolidated Financial Statements contained in its Annual Report on Form 10-K. The results of operations for the three ~~months~~ and six months ended June ~~30,2022,~~30,2023, are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet of the Company as of December 31, ~~2021~~2022 has been derived from the audited consolidated balance sheet of the Company as of that date.

Principles of Consolidation

The consolidated financial statements include the accounts of United Bancorp, Inc. (“United” or “the Company”) and its wholly-owned subsidiary, Unified Bank of Martins Ferry, Ohio (“the Bank”). All intercompany transactions and balances have been eliminated in consolidation.

Nature of Operations

The Company’s revenues, operating income and assets are almost exclusively derived from banking. Accordingly, all of the Company’s banking operations are considered by management to be aggregated in one reportable operating segment. Customers are mainly located in Athens, Belmont, Carroll, Fairfield, Harrison, Jefferson and Tuscarawas Counties in Ohio and Marshall and Ohio Counties in West Virginia and the surrounding localities in northeastern, east-central and southeastern Ohio and include a wide range of individuals, businesses and other organizations. Unified Bank conducts its business through its main office in Martins Ferry, Ohio and branches in ~~Amesville,~~ Bridgeport, Colerain, Dellroy, ~~Dillonvale,~~ Dover, Glouster, Jewett, Lancaster Downtown, Lancaster East, Nelsonville, New Philadelphia, Powhatan Point, St. Clairsville East, St. Clairsville West, Sherrodsville, Strasburg, ~~and~~ Tiltonsville, Ohio and Moundsville West Virginia.

The Company’s primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential mortgage, commercial and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and real estate and are not considered “sub prime” type loans. The targeted lending areas of our Bank operations encompass four separate metropolitan areas, minimizing the risk to changes in economic conditions in the communities housing the Company’s branch locations.

estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by both residential and commercial real estate. Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Company can be significantly influenced by a number of environmental factors, such as governmental monetary and fiscal policies, that are outside of management’s control.

Revenue Recognition

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC ~~606”~~606��), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as ~~our~~ loans, investment securities, as well as revenue related to ~~our~~ mortgage banking activities, as these activities are subject to other GAAP discussed elsewhere within ~~our~~the Company’s disclosures.

Descriptions of ~~our~~the Company’s revenue-generating activities that are within the scope of ASC 606, which are presented in the income statements as components of non-interest income are as follows:

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands)

Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when ~~our~~the performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

Use of Estimates

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided and future results could differ. The allowance for ~~loan~~credit losses and fair values of financial instruments are particularly subject to change.

Investment Securities

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Investment securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Securities available for sale are carried at fair value. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Unrealized gains or losses are reported as increases or decreases in other comprehensive income (loss), net of the deferred tax effect. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Allowance for Credit Losses – Available for Sale Securities

The Company measures expected credit losses on available-for-sale debt securities when the Company does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Economic forecast data is utilized to calculate the present value of expected cash flows. The Company utilizes independent firms to evaluate the Company’s State and Municipal Obligations and Subordinated Notes to measure any expected credit losses. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The allowance for credit losses on available-for-sale debt securities is included within investment securities available-for-sale on the consolidated balance sheet. Changes in the allowance for credit losses are recorded within provision for credit losses on the consolidated statement of income. Losses are charged against the allowance when the Company believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands)

Accrued interest receivable on available-for-sale debt securities totaled $2.4 million at June 30, 2023 and is included within the line item accrued interest receivable on the balance sheet on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

Loans

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or ~~payoffs~~payoff are ~~reported~~stated at their outstanding unpaid principal balances, ~~adjusted for unearned income, charge-offs, the~~net of an allowance for ~~loan~~credit losses and any ~~unamortized~~ deferred fees or ~~costs~~costs. Accrued interest receivable totaled $1.2 million at June 30, 2023 and was reported in the line item accrued interest receivable on ~~originated loans~~the Consolidated Balance Sheets and ~~unamortized premiums or discounts on purchased loans.~~

~~For loans amortized at cost, interest~~is excluded from the estimate of credit losses. Interest income is accrued ~~based~~ on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, ~~as well as premiums and discounts,~~ are deferred and ~~amortized~~recognized as ~~a level~~an adjustment of the yield ~~adjustment~~(interest income) of the related loans. The Company is amortizing these amounts over the ~~respective term~~contractual life of the loan. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective yield method.

The loans receivable portfolio is segmented into commercial and industrial, which are typically utilized for general business purposes and commercial real estate, which are collaterized by real estate. Homogenouse loans consisting similar products that are smaller in amount and distributed over a large number of individual borrowers include residential real estate and consumer loans.

For all ~~loan~~ classes of loans receivable, the accrual of interest is discontinued atwhen the ~~time the loan is~~contractual payment of principal or interest has become 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or ~~charged off at an earlier date if collection~~management has serious doubts about further collectability of principal or interest, even though the loan is ~~considered doubtful.~~currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest generally is either applied against principal or reported as interest income on a cash basis, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months), and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past-due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

~~Management’s general practice~~Allowance for Credit Losses - Loans

The allowance for credit losses (“ACL”) is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to ~~proactively charge down~~present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company uses the call report classification as its segment breakout and measures the allowance for credit losses using the Weighted Average Remaining Maturity method for all loan segments.

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands)

Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on a 2 year unemployment forecast provided by Bloomberg and management judgment. For periods beyond our reasonable and supportable forecast, we revert back to historical annual loss rates for the remainder of the life of each pool after the forecast period. The qualitative adjustments for current conditions are based upon current level of inflation, changes in lending policies and practices, experience and ability of lending staff, quality of the Company’s loan review system, value of underlying collateral, the existence of and changes in concentrations and other external factors. These modified historical loss rates are multiplied by the outstanding principal balance of each loan to calculate a required reserve.

The Company has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and therefore, should be individually ~~evaluated~~assessed. We evaluate all commercial and industrial loans and residential and installment loans greater than $100,000 that meet the following criteria: 1) when it is determined that foreclosure is probable, 2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, 3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Specific reserves are established based on the following three acceptable methods for ~~impairment to~~measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the ~~underlying collateral. Consistent with regulatory guidance, charge-offs~~collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the loan balance.


			January 1, 2023
Loan Categories (in thousands)	Pre-adoption		Adoption Impact		As Reported
Commercial and Industrial	$	215	$	755	$	970
Commercial Real Estate		815		388		1,203
Residential Real Estate		816		1,379		2,195
Consumer		206		(103)		103

	$	2,052	$	2,419	$	4,471

Allowance for Credit Losses on ~~all loan segments are taken when specific loans, or portions thereof, are considered uncollectible.~~ Off-Balance Sheet Credit Exposures

The ~~Company’s policy is to promptly charge these loans off~~Company estimates expected credit losses over the contractual period in ~~the period the uncollectible loss is reasonably determined.~~

~~For all loan portfolio segments except residential and consumer loans,~~which the Company ~~promptly charges-off loans, or portions thereof, when available information confirms~~is exposed to credit risk via a contractual obligation to extend credit, unless that ~~specific loans are uncollectible based~~obligation is unconditionally cancellable by the Company. The allowance for credit losses on ~~information that~~off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes ~~but is not limited to, (1) the deteriorating financial condition~~consideration of the ~~borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy,~~likelihood that ~~impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered~~funding will occur and an estimate of expected credit losses on commitments expected to be ~~solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.~~funded over its estimated life.

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

The Company charges-off residential and consumer loans when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value, less costs to sell, when the loan is 120 days past due; charge-off of unsecured open-end loans when the loan is 120 days past due; and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost- recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.

~~Allowance for Loan Losses~~

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior five years. ~~Management believes the five year historical loss experience methodology is appropriate in the current economic environment.~~ Other adjustments (qualitative/environmental considerations) for each segment may be added to the allowance for each loan segment after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due based on the loan’s current payment status and the borrower’s financial condition including available sources of cash flows. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for non-homogenous type loans such as commercial, non-owner residential and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Company utilizes the discounted cash flows to determine the level of impairment, the Company includes the entire change in the present value of cash flows as bad debt expense.

The fair values of collateral dependent impaired loans are based on independent appraisals of the collateral. In general, the Company acquires an updated appraisal upon identification of impairment and annually thereafter for commercial, commercial real estate and multi-family loans. If the most recent appraisal is over a year old, and a new appraisal is not performed, due to lack of comparable values or other reasons, the existing appraisal is utilized and discounted generally 10% - 35% based on the age of the appraisal, condition of the subject property, and overall economic conditions. After determining the collateral value as described, the fair value is calculated based on the determined collateral value less selling expenses. The potential for outdated appraisal values is considered in our determination of the allowance for loan losses through our analysis of various trends and conditions including the local economy, trends in charge-offs and delinquencies, etc. and the related qualitative adjustments assigned by the Company.

Segments of loans with similar risk characteristics are collectively evaluated for impairment based on the segment’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In this scenario, the Company attempts to work-out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified are reviewed by the Company to identify if a troubled debt restructuring (“TDR”) has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Company do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Company may terminate foreclosure proceedings if the borrower is able to work-out a satisfactory payment plan.

It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until six months of satisfactory borrower performance at which time management would consider its return to accrual status. If a loan was accruing at the time of restructuring, the Company reviews the loan to determine if it is appropriate to continue the accrual of interest on the restructured loan.

With regard to determination of the amount of the allowance for credit losses, trouble debt restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each period. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock awards and are determined using the treasury stock method.

~~Treasury stock shares, deferred compensation shares are not deemed outstanding for earnings per share calculations.~~

Earnings per share (EPS) were computed as follows:

Three Months Ended June 30, 2022

Three Months Ended June 30, 2023

Weighted-

Per

Weighted-

Per

Net

Average

Share

Net

Average

Share

Income

Shares

Amount

Income

Shares

Amount

(In thousands)

Net income

2,297

2,280

Less allocated earnings on non-vested restricted stock

(40)

(16)

Less allocated dividends on non-vested restricted stock

(23)

(34)

Net income allocated to common stockholders

2,234

2,230

5,484,701

5,496,049

Basic and diluted earnings per share

0.40


	Three Months Ended June 30, 2021					Three Months Ended June 30, 2022
			Weighted-					Weighted-
	Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount
	(In thousands)					(In thousands)
Net income	$	2,185				$	2,297
Less allocated earnings on non-vested restricted stock		(73)					(40)
Less dividends on non-vested restricted stock		(46)
Less allocated dividends on non-vested restricted stock							(23)
Net income allocated to common stockholders		2,066					2,234
			5,478,583					5,484,701
Basic and diluted earnings per share				$	0.38				$	0.40

Six Months Ended June 30, 2022

Weighted-

Per

Six Months Ended June 30, 2023

Net

Average

Share

Weighted-

Per

Income

Shares

Amount

Net

Average

Share

(In thousands)

Income

Shares

Amount

(In thousands)

Net income

4,048

4,168

Less allocated earnings on non-vested restricted stock

(121)

(115)

Less allocated dividends on non-vested restricted stock

(107)

(94)

Net income allocated to common stockholders

3,820

3,959

5,483,282

5,490,620

Basic and diluted earnings per share

0.70

0.73


	Six Months Ended June 30, 2022
			Weighted-
			Average	Per Share
	Net Income		Shares	Amount
	(In thousands)
Net income	$	4,048
Less allocated earnings on non-vested restricted stock		(121)
Less dividends on non-vested restricted stock		(107)
Net income allocated to common stockholders		3,820
			5,483,282
Basic and diluted earnings per share				$	0.70

1412

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

Six Months Ended June 30, 2021

Weighted-

Average

Per Share


Net Income

Shares

Amount

(In thousands)

Net income

$
4,093

Less allocated earnings on non-vested restricted stock

(98)

Less dividends on non-vested restricted stock

(124)

Net income allocated to common stockholders

3,871

5,475,273

Basic and diluted earnings per share

$
0.71

Income Taxes

The Company is subject to income taxes in the U.S. federal jurisdiction, as well as various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before ~~2018.~~2019.

~~Recent~~ Accounting Pronouncements Adopted in 2023

In June 2016, the FASB issued ASU No. 2016-13, ““Financial ~~Instruments-Credit~~Instruments – Credit Losses (Topic 326) -: Measurement of Credit Losses on Financial ~~Instruments.”~~Instruments” ~~The provisions of~~and subsequent related updates. This ASU ~~2016-13 were issued~~replaces the incurred loss methodology for recognizing credit losses and requires businesses and other organizations to ~~provide financial statement users with more decision-useful information about~~measure the current expected credit losses (CECL) on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized cost, including loans and held-to-maturity securities, net investments in leases, off-balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires credit losses on available-for-sale debt securities to be presented atas an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not they will be required to sell. This guidance became effective on January 1, 2023 for the ~~net amount expected~~Company. The results reported for periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be ~~collected, through an allowance~~reported in accordance with previously applicable accounting standards.

The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.

~~For purchased~~ financial assets ~~with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are~~ measured at amortized cost, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Subsequent changes in the allowance for credit losses on PCD assets are recognized through the statement of income as a credit loss expense.

~~Credit losses relating to~~including loans and available-for-sale debt securities ~~will be~~and unfunded commitments. On January 1, 2023, the Company recorded ~~through an allowance for credit losses rather than as~~ a ~~direct write-down~~cumulative effect decrease to ~~the security.~~retained earnings of $2,088,000, net of tax, of which $1,911,000 related to loans, $177,000 related to unfunded commitments.

~~On October 16, 2019, FASB approved a final ASU delaying the effective date of ASU 2016-13 for small reporting companies to interim and annual periods beginning after December 15, 2022.~~ The Company ~~is currently evaluating~~adopted the ~~impact~~provisions of ~~these amendments~~ASC 326 related to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The Allowance for Loan Losses (ALL) estimate is material to the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the ALL at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the ALL, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. In addition, the current accounting policy and procedures for thepresenting other-than-temporary impairment on available-for-sale debt securities ~~will be replaced with an allowance approach. It is anticipated~~prior to January 1, 2023 using the prospective transition approach, though no such charges had been recorded on the securities held by the Company ~~will use~~as of the ~~Weighted-Average Remaining Maturity (WARM)~~date of adoption. The Company did not change the segmentation from the incurred loss method upon adoption of ASC 326.

In January 2023, the Company adopted ASU ~~No. 2016-13. The~~2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis. Upon adoption of this guidance, the Company ~~continues~~no longer establishes a specific reserve for modifications to ~~run projections and review segmentation~~borrowers experiencing financial difficulty. Instead, these modifications are included in their historical loss rate which is applied to ~~ensure it is fully compliant with~~ the ~~amendments~~current loan balance to arrive at ~~adoption date. For additional information on~~ the ~~allowance~~quantitative baseline portion of the Allowance for ~~loan losses, see Note 3.~~Credit Losses.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Note 2: Securities

The amortized cost and ~~approximate~~ fair values, together with gross unrealized gains and losses of securities are as follows:


			Gross		Gross						Gross		Gross		Allowance
			Unrealized		Unrealized						Unrealized		Unrealized		for Credit
	Amortized Cost		Gains		Losses		Fair Value		Amortized Cost		Gains		Losses		Losses		Fair Value

	(In thousands)								(In thousands)
Available-for-sale Securities:
June 30, 2022:
June 30, 2023:
U.S. government agencies	$	30,000	$	0	$	(179)	$	29,821	$	45,000	$	—	$	(1,350)	$	—	$	43,650
Subordinated notes		31,250		0		(1,564)		29,686
State and municipal obligations		136,684		518		(6,534)		130,668		171,452		669		(6,561)		—		165,560
Subordinated notesState and municipal obligations										31,073		—		(4,230)		—		26,843
Total debt securities	$	197,934	$	518	$	(8,277)	$	190,175	$	247,525	$	669	$	(12,141)	$	—	$	236,053

Gross

Gross

Unrealized

Unrealized


Amortized Cost

Gains

Losses

Fair Value

(In thousands)
Available-for-sale Securities:








December 31, 2021:








Subordinated notes

$
28,837

$
76

$
(148)

$
28,765
State and municipal obligations

106,533

11,015

—

117,548
Total debt securities

$
135,370

$
11,091

$
(148)

$
146,313

The amortized cost and fair value of available-for-sale securities at June 30, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-sale

Amortized

Fair

Cost

Value

(In thousands)
Within one year

$
340

$
342
One to five years

30,677

30,363
Five to ten year

33,507

31,842
Due after ten years

133,410

127,628
Totals

$
197,934

$
190,175

~~The carrying value of securities pledged to secure public deposits and for other purposes, was $60.7 million and $64.4 million at June 30, 2022 and December 31, 2021, respectively.~~

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. The total fair value of these investments December 31, 2021, was $14.2 million which represented approximately 10% of the Company’s available-for-sale investment portfolio. The total fair value of these investments at June 30, 2022, was $146.0 million which represented approximately 77% of the Company’s available-for-sale investment portfolio.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

1613

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)


			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value

	(In thousands)
Available-for-sale Securities:
December 31, 2022:
U.S. government agencies	$	45,000	$	—	$	(968)	$	44,032
State and municipal obligations		152,447		459		(7,408)		145,498
Subordinated obligations		31,160		—		(3,066)		28,094
Total debt securities	$	228,607	$	459	$	(11,442)	$	217,624

The amortized cost and fair value of available-for-sale securities at June 30, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized		Fair
	Cost		Value

	(In thousands)
Under 1 year	$	5,000	$	4,890
One to five years		42,624		41,111
Five to ten years		31,376		27,325
Over ten years		168,525		162,727
Totals	$	247,525	$	236,053

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $71.0 million and $68.7 million at June 30, 2023 and December 31, 2022, respectively.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. The total fair value of these investments at June 30, 2023 was $159.8 million, which represented 68% of the Company’s available-for-sale investment portfolio. The total fair value of these investments at December 31, 2022 was $166.1 million, which represented less than 76% of the Company’s available-for-sale.

The following tables show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, ~~2022 and December 31, 2021:~~2023:


	June 30, 2022												June 30, 2023
	Less than 12 Months				12 Months or More				Total				Less than 12 Months				12 Months or More				Total
Description of			Unrealized				Unrealized				Unrealized				Unrealized				Unrealized				Unrealized
Securities	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses

	(In thousands)												(In thousands)
US government agencies	$	29,820	$	(179)	$	0	$	0	$	29,820	$	(179)
U.S. Government agencies													$	14,667	$	(333)	$	28,983	$	(1,017)	$	43,650	$	(1,350)
State and municipal obligations														49,406		(356)		46,415		(6,205)		95,821		(6,561)
Subordinated notes	$	27,186	$	(1,564)	$	0	$	0	$	27,186	$	(1,564)		2,108		(392)		18,186		(3,838)		20,294		(4,230)
State and municipal obligations	$	88,993	$	(6,534)	$	0	$	0	$	88,993	$	(6,534)
Total temporarily impaired securities	$	145,999	$	(8,277)	$	0	$	0	$	145,999	$	(8,277)	$	66,181	$	(1,081)	$	93,584	$	(11,060)	$	159,765	$	(12,141)

December 31, 2021

Less than 12 Months

12 Months or More

Total
Description of

Unrealized

Unrealized

Unrealized
Securities

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)
US government agencies

$
0

$
0

$
0

$
0

$
0

$
0
Subordinated notes

$
14,204

$
(148)

$
0

$
0

$
14,204

$
(148)
State and municipal obligations

$
0

$
0

$
0

$
0

$
0

$
0
Total temporarily impaired securities

$
14,204

$
(148)

$
0

$
0

$
14,204

$
(148)

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands)


	December 31, 2022
	Less than 12 Months				12 Months or More				Total
Description of			Unrealized				Unrealized				Unrealized
Securities	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses

	(In thousands)
US government agencies	$	44,032	$	(968)	$	—	$	—	$	44,032	$	(968)
Subordinated notes		11,185		(1,565)		10,300		(1,501)		21,485		(3,066)
State and municipal obligations		100,599		(7,408)		—		—		100,599		(7,408)
Total temporarily impaired securities	$	155,816	$	(9,941)	$	10,300	$	(1,501)	$	166,116	$	(11,442)

The unrealized losses on the Company’s 125 investments in available for sale securities were caused primarily by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost ~~bases,~~basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, ~~2022~~2023.

There were no sales of investment securities for the three and ~~December 31, 2021.~~six months ended June 30, 2023 and 2022.

Note 3: Loans and Allowance for ~~Loan~~Credit Losses

Categories of loans include:


	June 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022

	(In thousands)				(In thousands)
Commercial loans	$	90,891	$	90,892
Commercial and Industrial					$	89,961	$	90,548
Commercial real estate		274,628		266,777		274,291		270,312
Residential real estate		95,591		90,132		92,072		94,012
Installment loans		6,279		6,571
Consumer loans						6,547		6,003

Total gross loans		467,389		454,372		462,871		460,875

Less allowance for loan losses		(2,653)		(3,673)
Less allowance for credit losses						(4,281)		(2,052)

Total loans	$	464,736	$	450,699	$	458,590	$	458,823

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The risk characteristics of each loan portfolio segment are as follows:

Commercial and Industrial, and Commercial Real Estate

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

~~Commercial Real Estate~~

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

~~Residential and Installment~~

Residential and installment loans consist of two segments - residential mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some installment personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

1815

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

Residential Real Estate and Consumer

Residential real estate and consumer loans consist of two segments - residential mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Allowance for ~~Loan~~Credit Losses and Recorded Investment in Loans

As of and for the three and six month periods ended June 30, ~~2022~~2023

Commercial


Commercial

Real Estate

Residential

Installment

Total
Allowance for loan losses:

Balance, April 1, 2022

$
648

$
1,289

$
959

$
278

$
3,174
Provision (credit) charged to expense

(151)

(70)

(145)

(119)

(485)
Losses charged off

—

—

—

(39)

(39)
Recoveries

—

—

—

3

3
Balance, June 30, 2022

$
497

$
1,219

$
814

$
123

$
2,653
Balance, January 1, 2022

$
1,046

$
1,235

$
1,121

$
271

$
3,673
Provision (credit) charged to expense

(571)

(16)

(307)

(91)

(985)
Losses charged off

—

—

—

(74)

(74)
Recoveries

22

—

—

17

39
Balance, June 30, 2022

$
497

$
1,219

$
814

$
123

$
2,653

Allocation:

Ending balance: individually evaluated for impairment

$
—

$
415

$
—

$
—

$
415
Ending balance: collectively evaluated for impairment

$
497

$
804

$
814

$
123

$
2,238
Loans:

Ending balance: individually evaluated for impairment

$
—

$
3,803

$
—

$
—

$
3,803
Ending balance: collectively evaluated for impairment

$
90,891

$
270,825

$
95,591

$
6,279

$
463,586


			Commercial
	Commercial		Real Estate		Residential		Consumer		Total
Allowance for credit losses:

Balance, April 1, 2023	$	990	$	1,202	$	2,156	$	104	$	4,452
Provision (credit) for credit loss exposure		(93)		(123)		(64)		134		(146)
Losses charged off		—		—		—		(33)		(33)
Recoveries		5		—		—		3		8
Balance, June 30, 2023	$	902	$	1,079	$	2,092	$	208	$	4,281
Balance, January 1, 2023	$	215	$	815	$	816	$	206	$	2,052
Impact of adopting ASC 326		755		388		1,379		(103)		2,419
Provision (credit) for credit loss exposure		(78)		(124)		(103)		159		(146)
Losses charged off		—		—		—		(62)		(62)
Recoveries		10		—		—		8		18
Balance, June 30, 2023	$	902	$	1,079	$	2,092	$	208	$	4,281

Allocation:

Ending balance: individually evaluated for credit losses	$	99	$	—	$	—	$	—	$	99
Ending balance: collectively evaluated for credit losses	$	803	$	1,079	$	2,092	$	208	$	4,182
Loans:
Ending balance: individually evaluated for credit losses	$	99	$	—	$	—	$	—	$	99
Ending balance: collectively evaluated for credit losses	$	89,861	$	274,291	$	92,072	$	6,547	$	462,871

1916

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

Allowance for Loan Losses and Recorded Investment in Loans

As of and for the three and six month periods ended June 30, ~~2021~~2022



			Commercial										Commercial
	Commercial		Real Estate		Residential		Installment		Total		Commercial		Real Estate		Residential		Consumer		Total
Allowance for loan losses:

Balance, April 1, 2021	$	1,221	$	1,820	$	1,381	$	385	$	4,807
Provision charged to expense		(81)		(110)		(24)		(35)		(250)
Balance, April 1, 2022											$	648	$	1,289	$	959	$	278	$	3,174
Provision (credit) charged to expense												(151)		(70)		(145)		(119)		(485)
Losses charged off		—		—		(9)		(20)		(29)		—		—		—		(39)		(39)
Recoveries		—		—		5		9		14		—		—		—		3		3
Balance, June 30, 2021	$	1,140	$	1,710	$	1,353	$	339	$	4,542
Balance, January 1, 2021	$	1,397	$	1,821	$	1,471	$	424	$	5,113
Provision charged to expense		(179)		(111)		(99)		(66)		(455)
Balance, June 30, 2022											$	497	$	1,219	$	814	$	123	$	2,653
Balance, January 1, 2022											$	1,046	$	1,235	$	1,121	$	271	$	3,673
Provision (credit) charged to expense												(571)		(16)		(307)		(91)		(985)
Losses charged off		(78)		—		(26)		(38)		(142)		—		—		—		(74)		(74)
Recoveries		—		—		7		19		26		22		—		—		17		39
Balance, June 30, 2021	$	1,140	$	1,710	$	1,353	$	339	$	4,542
Balance, June 30, 2022											$	497	$	1,219	$	814	$	123	$	2,653

Allocation:

Ending balance: individually evaluated for impairment	$	—	$	85	$	—	$	—	$	85	$	—	$	415	$	—	$	—	$	415
Ending balance: collectively evaluated for impairment	$	1,140	$	1,625	$	1,353	$	339	$	4,457	$	497	$	804	$	814	$	123	$	2,238
Loans:
Ending balance: individually evaluated for impairment	$	—	$	2,591	$	113	$	—	$	2,704	$	—	$	3,803	$	—	$	—	$	3,803
Ending balance: collectively evaluated for impairment	$	99,370	$	260,721	$	88,734	$	7,138	$	455,963	$	90,891	$	270,825	$	95,591	$	6,279	$	463,586

Allowance for Loan Losses and Recorded Investment in Loans

As of December 31, ~~2021~~2022


			Commercial										Commercial
	Commercial		Real Estate		Residential		Installment		Total		Commercial		Real Estate		Residential		Consumer		Total

	(In thousands)										(In thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	—	$	230	$	––	$	––	$	230	$	—	$	—	$	––	$	––	$	—
Ending balance: collectively evaluated for impairment	$	1,046	$	1,005	$	1,121	$	271	$	3,443	$	215	$	815	$	816	$	206	$	2,052

Loans:
Ending balance: individually evaluated for impairment	$	—	$	3,933	$	—	$	—	$	3,933	$	—	$	57	$	—	$	—	$	57
Ending balance: collectively evaluated for impairment	$	90,892	$	262,844	$	90,132	$	6,571	$	450,439	$	90,548	$	270,255	$	94,012	$	6,003	$	460,875

2017

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

The following tables show the portfolio quality indicators.

June 30, 2022

Commercial

Loan Class

Commercial

Real Estate

Residential

Installment

Total

(In thousands)
Pass Grade

$
90,891

$
262,897

$
95,591

$
6,279

$
455,658
Special Mention

—

4,108

—

—

4,108
Substandard

—

7,623

—

—

7,623
Doubtful

—

—

—

—

—

$
90,891

$
274,628

$
95,591

$
6,279

$
467,389

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogeneous loans by internal risk rating system as of June 30, 2023 (in thousands):


	December 31, 2021																						Revolving		Revolving
			Commercial																				Loans		Loans
Loan Class	Commercial		Real Estate		Residential		Installment		Total

	(In thousands)																						Amortized		Converted
Pass Grade	$	90,892	$	254,760	$	90,132	$	6,571	$	442,355
June 30, 2023											2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial and industrial
Risk Rating
Pass											$	10,469	$	17,617	$	15,589	$	16,075	$	7,235	$	6,790	$	15,935	$	—	$	89,710
Special Mention		—		4,115		—		—		7,943		—		26		—		—		—		126		—		—		152
Substandard		—		7,902		—		—		4,074		—		—		—		—		—		—		99		—		99
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total											$	10,469	$	17,643	$	15,589	$	16,075	$	7,235	$	6,916	$	16,034	$	—	$	89,961
	$	90,892	$	266,777	$	90,132	$	6,571	$	454,372
Commercial and industrial
Current period gross charge-offs											$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Risk Rating
Pass											$	5,005	$	32,710	$	49,603	$	25,633	$	27,749	$	63,721	$	65,536	$	—	$	269,957
Special Mention												—		—		—		2,083		—		1,940		245		—		4,268
Substandard												—		—		—		—		—		66		—		—		66
Doubtful												—		—		—		—		—		—		—		—		—
Total											$	5,005	$	32,710	$	49,603	$	27,716	$	27,749	$	65,727	$	65,781	$	—	$	274,291

Commercial real estate
Current period gross charge-offs											$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands)

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed quarterly. The following table presents the amortized cost in residential and consumer loans based on payment activity:


													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential Real Estate
Payment Performance
Performing	$	5,723	$	19,036	$	16,863	$	20,349	$	6,080	$	23,828	$	—	$	—	$	91,879
Nonperforming		—		—		—		—		24		169		—		—		193
Total	$	5,723	$	19,036	$	16,863	$	20,349	$	6,104	$	23,997	$	—	$	—	$	92,072

Residential real estate
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Payment Performance
Performing	$	1,529	$	1,715	$	852	$	551	$	403	$	1,125	$	372	$	—	$	6,547
Nonperforming		—		—		—		—		—		—		—		—		—
Total	$	1,529	$	1,715	$	852	$	551	$	403	$	1,125	$	372	$	—	$	6,547

Consumer
Current period gross charge-offs	$	62	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	62

Total
Payment Performance
Performing	$	7,252	$	20,751	$	17,715	$	20,900	$	6,483	$	24,953	$	372	$	—	$	98,426
Nonperforming		—		—		—		—		24		169		—		—		193
Total	$	7,252	$	20,751	$	17,715	$	20,900	$	6,507	$	25,122	$	372	$	—	$	98,619


	December 31, 2022
			Commercial
Loan Class	Commercial		Real Estate		Residential		Consumer		Total

	(In thousands)
Pass Grade	$	90,548	$	262,472	$	94,012	$	6,003	$	453,035
Special Mention		—		4,066		—		—		4,066
Substandard		—		3,774		—		—		3,774
Doubtful		—		—		—		—		—

	$	90,548	$	270,312	$	94,012	$	6,003	$	460,875

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands)

To facilitate the monitoring of credit quality within the loan portfolio, and for purposes of analyzing historical loss rates used in the determination of the ~~ALLL,~~allowance for credit losses, the Company utilizes the following categories of credit grades: pass, special mention, substandard, and doubtful. The four categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass ratings, which are assigned to those borrowers that do not have identified potential or well defined weaknesses and for which there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on at least a quarterly basis.

The Company assigns a special mention rating to loans that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan or the Company’s credit position.

The Company assigns a substandard rating to loans that are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. Substandard loans have well defined weaknesses or weaknesses that could jeopardize the orderly repayment of the debt. Loans and leases in this grade also are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies noted are not addressed and corrected.

The Company assigns a doubtful rating to loans that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage of and strengthen the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding, capital injection, perfecting liens on additional collateral or refinancing plans.

The Company evaluates the loan risk grading system definitions and allowance for credit losses methodology on an ongoing basis. No significant changes were made to either during the past year to date period.

Loan Portfolio Aging Analysis

As of June 30, 2023


	30-59 Days		60‑89 Days		Greater
	Past Due		Past Due		Than 90 Days				Total Past
	and		and		and				Due and				Total Loans
	Accruing		Accruing		Accruing		Non Accrual		Non Accrual		Current		Receivable

	(In thousands)
Commercial	$	50	$	—	$	—	$	99	$	149	$	89,812	$	89,961
Commercial real estate		—		—		—		51		51		274,240		274,291
Residential		154		79		—		248		481		91,591		92,072
Consumer		4		—		—		—		4		6,543		6,547
Total	$	208	$	79	$	—	$	398	$	685	$	462,186	$	462,871

2120

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the current and past year to date periods presented.

~~Loan Portfolio Aging Analysis~~

~~As of June 30, 2022~~

30-59 Days

60‑89 Days

Greater Than

Total Past

Past Due and

Past Due and

90 Days and

Due and Non

Total Loans


Accruing

Accruing

Accruing

Non Accrual

Accrual

Current

Receivable

(In thousands)
Commercial

$
83

$
0

$
0

$
0

$
83

$
90,808

$
90,891
Commercial real estate

160

57

0

3,803

4,020

270,608

274,628
Residential

123

2

0

194

319

95,272

95,591
Installment

1

0

0

0

1

6,278

6,279
Total

$
367

$
59

$
0

$
3,997

$
4,423

$
462,966

$
467,389

Loan Portfolio Aging Analysis

As of December 31, ~~2021~~2022


															30‑59 Days		60‑89 Days		Greater
	30‑59 Days		60‑89 Days		Greater Than				Total Past						Past Due		Past Due		Than 90 Days				Total Past
	Past Due and		Past Due and		90 Days and				Due and Non				Total Loans		and		and		and				Due and				Total Loans
	Accruing		Accruing		Accruing		Non Accrual		Accrual		Current		Receivable		Accruing		Accruing		Accruing		Non Accrual		Non Accrual		Current		Receivable

	(In thousands)														(In thousands)
Commercial	$	63	$	0	$	0	$	0	$	63	$	90,829	$	90,892	$	126	$	—	$	—	$	—	$	126	$	90,422	$	90,548
Commercial real estate		220		0		0		3,818		4,038		262,739		266,777		158		—		—		9		167		270,145		270,312
Residential		22		0		0		391		413		89,719		90,132		102		24		—		173		299		93,713		94,012
Installment		40		0		0		0		40		6,531		6,571
Consumer																15		—		—		—		15		5,988		6,003
Total	$	345	$	0	$	0	$	4,209	$	4,554	$	449,818	$	454,372	$	401	$	24	$	—	$	182	$	607	$	460,268	$	460,875

ANonperforming Loans

The following table present the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing interest as of June 30, 2023:


							Loans Past
							Due Over 90 Days		Total
	Nonaccrual with no ACL		Nonaccrual with ACL		Total Nonaccrual		Still Accruing		Nonperforming

	(In thousands)
Commercial	$	—	$	99	$	99	$	—	$	99
Commercial real estate		51		—		51		—		51
Residential		248		—		248		—		248
Consumer		—		—		—		—		—
Total	$	299	$	99	$	398	$	—	$	398

The Company did recognized approximately $6,000 interest income on nonaccrual loans during the the period ended June 30, 2023.

Impaired Loans

For 2022, a loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

2221

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

~~Impaired Loans~~

As of

For the three months ended

For the six months ended

June 30, 2022

June 30, 2022

June 30, 2022

Average

Unpaid

Investment

Interest

Average

Interest

Recorded

Principal

Specific

in Impaired

Income

Investment in

Income


Balance

Balance

Allowance

Loans

Recognized

Impaired Loans

Recognized

(In thousands)
Loans without a specific valuation allowance:



Commercial

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Commercial real estate

2,840

2,840

—

2,844

—

2,841

20
Residential

—

—

—

—

—

—

—
Installment

—

—

—

—

—

—

—

2,840

2,840

—

2,844

—

2,841

20
Loans with a specific valuation allowance:



Commercial

—

—

—

—

—

—

—
Commercial real estate

963

963

415

983

—

983

—
Residential

—

—

—

—

—

—

––
Installment

––

––

––

––

—

—

—

963

963

415

983

—

983

—
Total:

Commercial

$
—

$
—

$
415

$
—

$
—

$
—

$
—
Commercial real estate

$
3,803

$
3,803

$
—

$
3,827

$
—

$
3,824

$
20
Residential

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Installment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Impaired Loans


							For the three months ended				For the six months ended
		As of December 31, 2021					June 30, 2021				June 30, 2021										For the three months ended				For the six months ended
							Average								As of June 30, 2022						June 30, 2022				June 30, 2022
			Unpaid				Investment in		Interest		Average		Interest				Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Specific		Impaired		Income		Investment in		Income		Recorded		Principal		Specific		Investment in		Income		Investment in		Income
	Balance		Balance		Allowance		Loans		Recognized		Impaired Loans		Recognized		Balance		Balance		Allowance		Impaired Loans		Recognized		Impaired Loans		Recognized

	(In thousands)														(In thousands)
Loans without a specific valuation allowance:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate		128		128		—		106		1		105		1		2,840		2,840		—		2,844		—		2,841		20
Residential		—		—		—		117		—		118		—		—		—		—		—		—		—		—
Installment		—		—		0		—		—		—		—
Consumer																—		—		—		—		—		—		—
		128		128		—		213		1		223		1		2,840		2,840		—		2,844		—		2,841		20
Loans with a specific valuation allowance:
Commercial		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Commercial real estate		3,805		3,805		230		2,489		—		2,489		—		963		963		415		983		—		983		—
Real Estate		––		—		—		—		—		—		—
Residential																—		—		—		—		—		—		––
Consumer																––		––		––		––		––		—		—
		3,805		3,805		230		2,489		—		2,489		—		963		963		415		983		—		983		—
Total:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate	$	3,933	$	3,933	$	230	$	2,595	$	1	$	2,594	$	1
Real Estate	$	—	$	—	$	—	$	117	$	—	$	118	$	—
Installment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate															$	3,803	$	3,803	$	415	$	3,827	$	—	$	3,824	$	20
Residential															$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer															$	—	$	—	$	—	$	—	$	—	$	—	$	—

Interest income recognized on a cash basis was not materiality different than interest income recognized.

For the TDRs noted in the tables below, the Company extended the maturity dates and granted interest rate concessions as part of each of those loan restructurings. The loans included in the tables are considered impaired and specific loss calculations are performed on the individual loans. In conjunction with the restructuring there were no amounts charged-off.

Three Months ended June 30, 2022

Pre-

Post-

Modification

Modification

Outstanding

Outstanding

Number of

Recorded

Recorded


Contracts

Investment

Investment

(In thousands)
Commercial

0

$
0

$
0
Commercial real estate

—

—

—
Residential

—

—

—
Installment

—

—

—

Three Months Ended June 30, 2022

Interest

Total


Only

Term

Combination

Modification

(In thousands)
Commercial

$
0

$
0

$
0

$
0
Commercial real estate

—

—

—

—
Residential

—

—

—

—
Consumer

—

—

—

—


	Six Months ended June 30, 2022
		Pre- Modification		Post-Modification
		Outstanding		Outstanding
	Number of	Recorded		Recorded
	Contracts	Investment		Investment

	(In thousands)
Commercial	—	$	—	$	—
Commercial real estate	—		—		—
Residential	—		—		—
Installment	—		—		—

2422

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

Six Months ended June 30, 2022

Pre- Modification

Post-Modification

Outstanding

Outstanding

Number of

Recorded

Recorded


Contracts

Investment

Investment

(In thousands)
Commercial

0

$
0

$
0
Commercial real estate

—

—

—
Residential

—

—

—
Installment

—

—

—

Six Months Ended June 30, 2022

Interest

Total


Only

Term

Combination

Modification

(In thousands)
Commercial

$
0

$
0

$
0

$
0
Commercial real estate

—

—

—

—
Residential

—

—

—

—
Consumer

—

—

—

—

Three Months ended June 30, 2021

Pre- Modification

Post-Modification

Outstanding

Outstanding

Number of

Recorded

Recorded


Contracts

Investment

Investment

(In thousands)
Commercial

0

$
0

$
0
Commercial real estate

—

—

—
Residential

—

—

—
Installment

—

—

—

Three Months Ended June 30, 2021

Interest

Total


Only

Term

Combination

Modification

(In thousands)
Commercial

$
0

$
0

$
0

$
0
Commercial real estate

—

—

—

—
Residential

—

—

—

—
Consumer

—

—

—

—

Six Months ended June 30, 2021

Pre- Modification

Post-Modification

Outstanding

Outstanding

Number of

Recorded

Recorded


Contracts

Investment

Investment

(In thousands)
Commercial

0

$
0

$
0
Commercial real estate

—

—

—
Residential

—

—

—
Installment

—

—

—

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Six Months Ended June 30, 2021

Interest

Total


Only

Term

Combination

Modification

(In thousands)
Commercial

$
0

$
0

$
0

$
0
Commercial real estate

—

—

—

—
Residential

—

—

—

—
Consumer

—

—

—

—

Six Months Ended June 30, 2022

Interest

Total

Only

Term

Combination

Modification

(In thousands)

Commercial

—

Commercial real estate

—

Residential

—

Consumer

—

During the six months ended June 30, 2022 ~~and 2021 troubled debt restructurings did not have an impact on the allowance for loan losses. At June 30, 2022 and 2021 and for three and six month periods then ended,~~ there were no material defaults of any modified loans or troubled debt restructurings that were modified in the last 12 months. The Company generally considers TDR’s that become 90 days or more past due under the modified terms as subsequently defaulted.

Note 4: Benefit Plans

Pension expense includes the following:


	Three months ended				Six months ended				Three months ended				Six months ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022

	(In thousands)								(In thousands)
Service cost	$	130	$	98	$	260	$	196	$	76	$	130	$	152	$	260
Interest cost		68		59		136		118		78		68		156		136
Expected return on assets		(144)		(117)		(288)		(234)		(133)		(144)		(266)		(288)
Amortization of prior service cost and net loss		24		13		48		26
Amortization (accretion) of prior service cost and net loss										(10)		24		(20)		48

Pension expense	$	78	$	53	$	156	$	106	$	11	$	78	$	(22)	$	156

All components of pension expense are reflected within the salaries and employee benefits line of the consolidated income statement.

Note 5: Off-balance-sheet Activities

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contracts are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

A summary of the notional or contractual amounts of financial instruments with off-balance-sheet risk at the indicated dates is as follows:


	June 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022

	(In thousands)				(In thousands)
Commercial loans unused lines of credit	$	30,848	$	78,148	$	94,089	$	79,718
Commitment to originate loans		29,481		75,832		91,612		77,889
Consumer open end lines of credit		37,475		39,622		38,312		37,600
Standby lines of credit		241		127		261		136

The Company adopted the provisions of ASC 326 and recognized an initial implementation amount of $224,000. During the six months ended June 30, 2023, there was no change in the provision for credit expense for off balance sheet exposure.

2623

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

Note 6: Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:


	June 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022

	(In thousands)				(In thousands)
Net unrealized gain (loss) on securities available-for-sale	$	(7,759)	$	10,943
Net unrealized loss on securities available-for-sale					$	(11,472)	$	(10,984)
Net unrealized loss for unfunded status of defined benefit plan liability		(2,127)		(2,127)		(835)		(835)
		(9,886)		8,816		(12,307)		(11,819)
Tax effect		2,076		(1,852)
Less: Tax effect						2,585		2,483
Net-of-tax amount	$	(7,810)	$	6,964	$	(9,722)	$	(9,336)

Note 7: Fair Value Measurements

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company also utilizes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Company’s equity securities are classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy.

2724

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

Fair Value Measurements Using




Quoted Prices




in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

Inputs

Fair Value

(Level 1)

(Level 2)

(Level 3)
June 30, 2022

U.S. government agencies

$
29,821

$
0

$
29,821

$
0
Subordinated Notes

$
29,686

$
0

$
29,686

$
0
State and municipal obligations

$
130,668

$
0

$
130,668

$
0

December 31, 2021








Subordinated Notes

$
28,765

$
0

$
28,765

$
0
State and municipal obligations

$
117,548

$
0

$
117,548

$
0


			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)

	(In thousands)
June 30, 2023
U.S. government agencies	$	43,650	$	—	$	43,650	$	—
Subordinated Notes		26,843		—		26,843		—
State and municipal obligations		165,560		—		165,560		—


December 31, 2022
U.S. government agencies	$	44,032	$	—	$	44,032	$	—
Subordinated Notes		28,094		—		28,094		—
State and municipal obligations		145,498		—		145,498		—

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

~~Impaired Loans (Collateral Dependent)~~Collateral Dependent

Collateral dependent ~~impaired~~ loans consisted primarily of loans secured by nonresidential real estate. Management has determined fair value measurements on ~~impaired~~collateral dependent loans primarily through evaluations of appraisals performed. Due to the nature of the valuation inputs, impaired loans are classified within Level 3 of the hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the Company’s Chief Lender. Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Company’s Chief Lender by comparison to historical results.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value (based on current appraised value) at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Management has determined fair value measurements on other real estate owned primarily through evaluations of appraisals performed, and current and past ~~offers.~~offers for the other real estate under evaluation. Due to the nature of the valuation inputs, foreclosed assets held for sale are classified within Level 3 of the hierarchy.

Appraisals of ~~foreclosed assets held for sale~~OREO are obtained when the real estate is acquired and subsequently as deemed necessary by the Company’s Chief ~~Lender.~~lender. Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender and are selected from the list of approved appraisers maintained by management.

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Fair Value Measurements Using




Quoted Prices




in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair

Assets

Inputs

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

(In thousands)
June 30, 2022








Collateral dependent impaired loans

$
547

$
0

$
0

$
547
Foreclosed assets held for sale

237

0

0

237






December 31, 2021








Collateral dependent impaired loans

$
2,822

$
0

$
0

$
2,822


			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

	(In thousands)
June 30, 2023
Collateral dependent loans	$	—	$	—	$	—	$	—
Foreclosed assets held for sale		3,475		—		—		3,475

December 31, 2022
Collateral dependent loans	$	9	$	—	$	—	$	9
Foreclosed assets held for sale		3,519		—		—		3,519

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

Fair Value at

Valuation




6/30/22

Technique

Unobservable Inputs

Range

(In thousands)
Collateral-dependent impaired loans

$
547

Market comparable properties

Marketability discount

10% – 25%
Foreclosed assets held for sale

$
237

Market comparable properties

Marketability discount

10% – 35%


	Fair Value at		Valuation	Unobservable
	6/30/23		Technique	Inputs	Range

	(In thousands)
Collateral-dependent loans	$	—	Market comparable properties	Comparability adjustments	5% – 10%
Foreclosed assets held for sale		3,475	Market comparable properties	Marketability discount	10% – 35%

Fair Value at

Valuation

Unobservable

Fair Value at

Valuation

Unobservable

12/31/21

Technique

Inputs

Range

12/31/22

Technique

Inputs

Range

(In thousands)

Collateral-dependent impaired loans

2,822

Market comparable properties

Comparability adjustments

5% – 10%

Collateral-dependent loans

Market comparable properties

Comparability adjustments

5% – 10%

Foreclosed assets held for sale

3,519

Market comparable properties

Marketability discount

10% – 35%

~~There were no significant changes in the valuation techniques used during 2022 and 2021.~~

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

There were no significant changes in the valuation techniques used during 2023.

The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.


			Fair Value Measurements Using								Fair Value Measurements Using
			Quoted Prices								Quoted Prices
			in Active		Significant						in Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs		Carrying		Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)		Amount		(Level 1)		(Level 2)		(Level 3)

	(In thousands)								(In thousands)
June 30, 2022
June 30, 2023:

Financial assets
Cash and cash equivalents	$	16,791	$	16,791	$	—	$	—	$	81,763	$	81,763	$	—	$	—
Loans, net of allowance		464,736		—		—		464,266		458,590		—		—		436,337
Federal Home Loan Bank stock		3,704		—		3,704		—		3,979		—		3,979		—
Accrued interest receivable		2,638		—		2,638		—		3,547		—		3,547		—

Financial liabilities
Deposits		607,310		—		605,941		—		643,616		—		642,184		—
Short term borrowings		24,476		—		24,476		—
Securities sold under agreements to repurchase										23,690		—		23,690		—
Subordinated debentures		23,695		—		21,791		—		23,756		—		21,805		—
Advance Federal Home Loan Bank										75,000		—		74,072		—
Interest payable		170		—		170		—		502		—		502		—


			Fair Value Measurements Using								Fair Value Measurements Using
			Quoted Prices								Quoted Prices
			in Active		Significant						in Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs		Carrying		Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)		Amount		(Level 1)		(Level 2)		(Level 3)

	(In thousands)								(In thousands)
December 31, 2021:
December 31, 2022:

Financial assets
Cash and cash equivalents	$	82,999	$	82,999	$	––	$	––	$	30,080	$	30,080	$	—	$	—
Loans, net of allowance		450,699		––		––		459,031		458,823		—		—		440,704
Federal Home Loan Bank stock		3,704		––		3,704		––		2,499		—		2,499		—
Accrued interest receivable		2,345		––		2,345		––		3,403		—		3,403		—

Financial liabilities
Deposits		605,136		––		605,855		––		649,913	$	—	$	646,455	$	—
Securities sold under repurchase agreements		15,701		––		15,701		––
Securities sold under agreements to repurchase										18,106		—		18,106		—
Subordinated debentures		23,665		––		23,575		––		23,726		—		24,080		—
Interest payable		180		––		180		––		304		—		304		—

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

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United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(In thousands)

~~The following methods and assumptions were used to estimate the fair value of each class of financial instruments.~~

Cash and Cash Equivalents, Accrued Interest Receivable and Federal Home Loan Bank Stock

The carrying amounts approximate fair value.

Loans

Fair values of loans and leases are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors.

Deposits

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Interest Payable

The carrying amount approximates fair value.

~~Short-term Borrowings,~~Securities sold under agreements to repurchase, Federal Home Loan Bank Advances and Subordinated Debentures

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Originate Loans, Letters of Credit and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. Fair values of commitments were not material at June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Note 8: Repurchase Agreements

Securities sold under agreements to repurchase (“repurchase agreements”) with customers represent funds deposited by customers, generally on an overnight basis that are collateralized by investment securities owned by the Company.

At June 30, 2022 and December 31, 2021, repurchase agreement borrowings totaled $24,476,000 and $15,701,000, respectively and are included in securities sold under repurchase agreements on the consolidated condensed balance sheets. All repurchase agreements are subject to term and conditions of repurchase/security agreements between the Company and the customer and are accounted for as secured borrowings and reflected in securities sold under repurchase agreements.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The following table presents the Company’s repurchase agreements accounted for as secured borrowings:

Remaining Contractual Maturity of the Agreement

(In thousands)


	Overnight						Greater				Overnight and						Greater than
	and		Up to 30				than
June 30, 2022	Continuous		Days		30‑90 Days		90 Days		Total
June 30, 2023											Continuous		Up to 30 Days		30‑90 Days		90 Days		Total
Repurchase Agreements
U.S. government agencies	$	24,476	$	0	$	0	$	0	$	24,476
State and municipal obligations											$	23,690	$	—	$	—	$	—	$	23,690
Total	$	24,476	$	0	$	0	$	0	$	24,476	$	23,690	$	—	$	—	$	—	$	23,690

Table of Contents

United Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands)


	Overnight						Greater				Overnight and						Greater than
	and			Up to 30			than
December 31, 2021	Continuous		Days		30‑90 Days		90 Days		Total
December 31, 2022											Continuous		Up to 30 Days		30‑90 Days		90 Days		Total
Repurchase Agreements
U.S. government agencies	$	15,701	$	0	$	0	$	0	$	15,701
State and municipal obligations											$	18,106	$	—	$	—	$	—	$	18,106
Total	$	15,701	$	0	$	0	$	0	$	15,701	$	18,106	$	—	$	—	$	—	$	18,106

These borrowings were collateralized with ~~U.S. government~~state and ~~agency securities~~municipal obligations with a carrying value of ~~$40.7~~$39.1 million at June 30, ~~2022~~2023 and ~~$37.5~~$38.8 million at December 31, ~~2021.~~2022. Declines in the fair value ~~may~~would require the Company to pledge additional securities.

Note 9: Core Deposits and ~~Other~~ Intangible Assets

The following table shows the changes in the carrying amount of goodwill for June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


	June 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Balance beginning of year	$	682	$	682	$	682	$	682
Additions from acquisition		0		0		—		—
Balance, end of period	$	682	$	682	$	682	$	682

Intangible assets in the consolidated balance sheets at June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows (in thousands):

Six Months Ended June 30, 2022

Year Ended December 31, 2021

Six Months Ended June 30, 2023

Year Ended December 31, 2022

Gross

Intangible

Accumulated

Net Intangible

Intangible

Accumulated

Net Intangible

Intangible

Accumulated

Net Intangible

Intangible

Accumulated

Net Intangible

Assets

Amortization

Assets

Amortization

Assets

Amortization

Assets

Amortization

Assets

Core deposit intangibles

1,041

556

485

1,041

481

560

1,041

706

335

1,041

631

410

The estimated aggregate future amortization expense ~~for each of the next five years for intangible assets~~ remaining as of June 30, 2022 is as follows (in thousands):


2022	$	75
2023		150	$	77
2024		150		150
2025		110		108

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

At each reporting date between annual goodwill impairment tests, the Company considers potential indicators of impairment. Given the current economic uncertainty and volatility surrounding COVID-19, the Company assessed whether the events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. Impairment indicators considered comprised the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting unit; performance of the Company’s stock and other relevant events. The Company further considered the amount by which fair value exceeded book value in the most recent quantitative analysis and sensitivities performed. At the conclusion of the assessment, the Company determined that as of June 30, ~~2022~~2023 it was more likely than not that the fair value exceeded its carrying values. The Company will continue to monitor ~~developments regarding~~ the ~~COVID-19 pandemic and measures implemented in response to the pandemic, market capitalization,~~ overall economic conditions and any other triggering events or circumstances that may indicate an impairment of goodwill in the future.

Note 10: Advances from the Federal Home Loan Bank

At June 30, 2023, advance from the Federal Home Loan Bank were $75 million. The Company did not have any advances from the Federal Home Loan Bank at December 31, 2022.

At June 30, 2023, required annual payments on Federal Home Loan Bank advances were for year ending December 31, 2026 $20 million (4.39% fixed rate), December 31, 2027 $35 million (4.24% fixed rate) and December 31, 2028 $20 million (4.11% fixed rate).

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United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discusses the consolidated financial condition of the Company as of June 30, ~~2022,~~2023, as compared to December 31, ~~2021,~~2022, and the results of consolidated operations for the three and six months ended June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. This discussion should be read in conjunction with the interim condensed consolidated financial statements and related footnotes included herein.

Introduction

~~United Bancorp, Inc. (NASDAQ: UBCP)~~The Company reported diluted earnings per share of $0.40 and net income of ~~$2,297,000~~$2,280,000 for the three months ended June 30, ~~2022, increases of $0.02 per share and $113,000 over the previous year.~~2023. For the first six months of the current year, UBCP reported diluted earnings per share of ~~$0.70~~$0.73, an increase of 4.3%, and net income of ~~$4,048,000.~~

$4,168,000, an increase of 3.0%, over the previous year.

We are pleased to report on the earnings performance of United Bancorp, Inc. (UBCP) for the second quarter ended June 30, 2023 and the first six months of 2023. For the quarter, our Company achieved solid net income and diluted earnings per share results of $2,280,000 and $0.40, which were in-line with our Company’s earnings results achieved during the second quarter of last year. For the six months ended June 30, 2023, our Company produced net income of $4,168,000 and diluted earnings per share of $0.73, which were both respective increases of $120,000, or 3.0%, and $0.03, or 4.3%, over the results achieved for the first six months of the prior year. As we have previously reported, UBCP has been able to capitalize on the extreme tightening of monetary policy undertaken by the Federal Open Market Committee of the Federal Reserve (FOMC) over the course of the past fifteen months, which has caused interest rates to rise rapidly during this timeframe from a range of 25 to 50 basis points in March 2022 to a range of 5.00% to 5.25% as of June 2023. Our Company was properly positioned to take advantage of this dramatic increase in interest rates over the course of the past fifteen months and, accordingly, we experienced an improvement in the level of net interest income that we generated of $1,289,000, an increase of 11.23%, for the first six months of the current year relative to the previous year and a net interest margin of 3.58% as of June 30, 2023. We are pleased to see that our net interest income continues to increase; although, we did experience marginal compression of our net interest margin on a linked-quarter basis by 17 basis points. Year-over-year, the level of net interest income that we realized was positively impacted by a slight increase in average loans of $1.1 million and the significant increases in both average securities and average cash and due from the Federal Reserve Bank of $84.0 million, or 52.7%, and $55.3 million, or 628.5%, respectively. This year-over-year increase in earning assets was funded by growth achieved in our total deposits of $36.3 million and advances from the Federal Home Loan Bank of $75 million… the latter of which we previously disclosed in our first quarter earnings release as a defensive play to both generate liquidity in response to the industry challenges that arose in mid-March and to provide a hedge against the potential of a substantial rise in interest rates in our current operating environment. Although the advance at the Federal Home Loan Bank taken last quarter did have a dilutive impact on both our net interest margin and return on assets in the most recently ended quarter, it did have a positive impact on our bottom-line net income, since we were able to park those funds in overnight investments at a positive spread.

Adding additional leverage to our balance sheet while controlling our funding costs and enhancing the returns on our earning assets has allowed our Company to see improvement in our net interest margin and overall earnings on a year-over-year basis. Of note relating to our earnings improvement achieved in both the second quarter and the first six months of ~~2022.~~2023 relative to our previous year’s results, our Company did not have a negative provision for credit losses in the first quarter and only a very minimal negative provision in the second quarter, which was driven by our newly adopted Current Expected Credit Loss (CECL) loan loss reserve methodology. For the current year, the negative provision in the second quarter ~~ending~~was $339,000 less than the negative provision during the same period the previous year. Also, for the first six months ended June 30, ~~2022,~~2023, the negative provision (or, credit) attributed to releases from our ~~Company achieved~~Company’s loan loss reserve was $839,000 lower than the first six months of 2022. Last year, this added approximately $268,000, or $0.05, respectively to net income ~~of $2,297,000~~ and diluted earnings per share ~~of $0.40, which were respective increases of $113,000, or 5.2%,~~in the second quarter and, ~~$0.02, or 5.3%, over~~for the ~~previous year. For the~~first six months ~~ending~~ended June 30, ~~2022,~~2023, added approximately $663,000 and $0.12, respectively, to our ~~Company produced~~ net income ~~of $4,048,000~~ and diluted earnings per share of $0.70, which were both respectively lower than the same period the previous year by $44,000 and $0.01. As our economy has normalized over the course of the current year and heated-up with inflation being at over forty-year highs, we have capitalized on opportunities in the first six months of 2022 to change the mix of assets on our balance sheet. With the tightening bias of the Federal Open Market Committee (FOMC) with monetary policy beginning in the first quarter of this year and becoming much stronger over the course of the most recently ended quarter, we have experienced a prime opportunity to invest, once again, in both municipal and agency securities as both intermediate and longer-term yields have risen to levelsresults. We are exceedingly happy that we have not seen for a couple of years. Having remained patient and not invested in any municipal or agency securities since the first quarter of 2020 until this year, we are presently pleased with this opportunity that we have to change the overall mix of our balance sheet from a more cash-intensive, liquid position to one that is longer-duration and higher yielding. Although our total assets were slightly lower on a year-over-year basis as of mid-year, totaling $719.1 million versus $730.3 million the previous year, this reduction is primarily due to the unrealized loss in our securities portfolio. Even with this decline in our total assets, we have seen both our gross loans and securities and other restricted stock increase. As of June 30, 2022, gross loans increased by $8.7 million, or 1.9%, over the previous year to a level of $467.4 million. Regarding securities and other restricted stock, we saw our balances increase year-over-year by $45.6 million, or 30.7%, to a level of $193.9 million. Of significance is the quarter-ending balances for both gross loans and securities and other restricted stock are at higher levels than their respective quarterly averages by $8.3 million and $34.5 million. With the changing mix of and added horsepower to our balance sheet in the first six months of 2022, we have seen for the first time since the second quarter of 2020 (which was the first full quarter impacted by the pandemic) an increase in the level of interest income that we generated. During the second quarter of 2022, we experienced a year-over-year increase in our level of interest income realized of $213,000 or 3.4%. We are optimistic that we will continue to see improvement in the level of interest income that we will generate in the coming quarters.

Considering the increase in the level of interest income that we generated and the continued reduction in our total interest expense in the second quarter ending June 30, 2022, our Company experienced an increase in the net interest income that it realized during the quarter of $411,000 or 7.4%. We were able to ~~achieve~~overcome this ~~increase in our net interest income because we continued to have success~~fairly large earnings hurdle in the current year on an operating basis; especially, in lowering our overall interest expense. In the second quarter, our interest expense decreased by $198,000, or 29.3%, from the previous year. Even though our ability to lower the interest expense of our Company will diminish as the monetary policy of the FOMC tightens, we believe that the increase in the level of the interest income that we realize will outpace the degree to which interest expense increases in the current year; thus, continuing the increasing trend in our Company’s net interest income. Interestingly, we reduced our interest expense levels even though our total deposits increased by $3.2 million, to a level of $607.3 million. We achieved this by attracting lower-cost funding, consisting of demand and savings balances, and reducing our higher-cost time balances. As of June 30, 2022, our lower-cost demand and savings balances increased on a year-over-year basis by $27.6 million, or 5.2%, to a level of $562.4 million. During this same timeframe, our higher-cost time balances decreased by $24.5 million, or 35.3%, to a level of $44.9 million. As of June 30, 2022 and on a linked-quarter basis, we saw our net interest margin increase by nine basis points from 3.45% to 3.54%. We anticipate this positive trend to continue for the remainder of the current year.

~~Over the course of the first six months of 2022, our Company’s bottom-line net income was impacted by the inflationary and rising-rate~~exceedingly challenging environment in which we are ~~presently~~ operating. As of June 30, 2022, with the decline in some of our fee-income related lines of business (primarily relating to mortgage origination), our non-interest income declined by $94,000 or 4.5%. In addition, total noninterest

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Table of Contents

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

~~expense increased year-over-year by $960,000 or 10.7%. This increase~~Even with the economic headwinds with which our country continues to be confronted and the significant increases in our noninterest expense during the current year is mostly attributed to a higher level of employee-related expenses tied to more optimum staffing levels throughout our company, higher wage levels attributed to the tight labor market and a non-recurring incentive payoutinterest rates that occurred in the first quarter. For the most recently ended quarter, total noninterest expense increased by $299,000 or 6.6%. With this declining trend in noninterest expense and our Company’s recently announced closure and consolidationmay have affected some of our ~~Amesville Banking Center into our Glouster Banking Center (which will occur in the early third quarter of 2022),~~borrowers with rate resets to higher interest rate levels on their loans, we anticipate our noninterest expense levels to continue lowering over the course of this year. With our Company’s commitment to eliminating unnecessary expenses and generating greater operational efficiencies, we firmly believe that we have positive operating leverage which will improve our net-noninterest margin and benefit our overall performance in the coming quarters.

We have successfully maintained credit-related strength and stability within our loan portfolio ~~over the course~~as of ~~the past two years during the economic downturn and this trend continued for our Company into~~ the most recently ended quarter. As of June 30, ~~2022,~~2023, our Company’s total nonaccrual loans and loans past due 30 plus days were ~~$4.0~~$685,000, or 0.15% of gross loans, a decrease of $3.7 million, or ~~0.86%~~85%, year-over-year. Non-accrual loans and OREO to total assets was 0.47%, a decrease of ~~gross loans. Even though this total has increased year-over-year, a majority~~twelve basis points over the previous year, and net charge-offs to average loans totaled 0.02% annualized as of the non-accrual loans balance is with one commercial relationship, which accounts for approximately $3.8 million, or 95%, of this total. We have allocated a portion of specific reserves to this one relationship and, overall, the underlying trend of solid credit quality within our loan portfolio has remained stable. Regarding net loans charged off in the first half of 2022, our Company actually realized a net-recovery of $19,000. Considering our overall sound credit quality and the generally improving economy,June 30, 2023. Interestingly, our Company had ~~credit reserve releases~~net charge offs of ~~$485,000 during~~$44,000 year-to-date, which included a net recovery of $10,000 in loans and a net charge off in overdrafts of $54,000. As of the most recently ended ~~quarter.~~quarter and with the enhanced loan loss reserve build-up under CECL in the current year (and, our Company’s improved credit quality metrics), our total allowance for credit losses to total loans was 0.92% and our total allowance for credit losses to nonperforming loans was 1,076%. As of June 30, ~~2022,~~2023, our Company continues to be very well capitalized with equity to assets of ~~8.1%~~7.0% and total average shareholders’ equity of ~~$58.3~~$58.6 million. As with most financial institutions in this ~~time of rising rates from an exceedingly low-rate~~extreme, rising-rate environment in which we are all presently operating, our Company ~~did see~~continues to experience a ~~reduction~~loss in accumulated other comprehensive ~~income. This was primarily~~income (AOCI) due to the ~~decreased value~~loss position within our securities portfolio. As of June 30, 2023, our Company’s AOCI loss totaled $9.7 million, which is a modest level that is 14.3% of total capital (prior to the AOCI loss adjustment). With the overall quality of our investment portfolio, our well capitalized position, and our low level of uninsured deposits (which are approximately 16.5% of total deposits as of the most recent quarter-end), we firmly believe that any issues, which ~~had an impact~~could potentially create a risk to our capital and capital position, are very minimal.

Considering the exceedingly dynamic monetary policy environment in which we have operated for the past fifteen months and the more recent issues which have impacted our industry since mid-March, we are very happy to report on the very strong earnings performance that United Bancorp, Inc. (UBCP) achieved in the first six months of 2023. Relating to the excessive tightening of our ~~capital-related metrics. Accordingly, we saw our book value decline from $11.96 to $9.65, a decrease of 19.3% period-over-period.~~

~~As our economy has strengthened and started to heat-up~~country’s monetary policy over the course of the ~~first six months of this~~past year plus, we are extremely pleased that we have ~~seen opportunities~~been able to ~~more fully leverage our capital by changing~~grow the ~~mix~~level of our balance sheet into longer-term, higher-yielding assets and, once again, focus on growing our Company. Even though the Federal Open Market Committee (FOMC) of the Federal Reserve has aggressively raised the target rate for federal funds over this period, we are hopefulinterest income that our ~~positive trend in rebalancing and growing our balance sheet will continue as the year progresses. Assuming that the FOMC is able to achieve the soft landing that they pursue~~Company generated while combatting the real threat of inflation to our economy--- and avoid a hard-landing which could potentially lead to a recession--- we believe that rising rates should benefit the bottom-line of our Company in future periods. For the second quarter in a row, we saw an increase incontrolling overall interest expense levels; thereby, expanding the level of net interest income that ~~our Company generated after not experiencing this for several quarters. With the change in the mix of our balance sheet into higher yielding assets,~~ we ~~also saw~~realized and our net interest ~~margin increase~~margin. We achieved this while growing our level of assets and funding some of this expansion with growth in our overall deposits in a ~~positive fashion~~cost-effective manner. This is somewhat of a counter-trend to what occurred within our industry over this ~~past quarter. In addition, by investing~~timeframe. With the aforementioned developments that occurred within our industry late in ~~municipal securities and having higher balances in these tax-exempt investments for~~ the first ~~time since~~quarter of this year, we transitioned into a more conservative operating position that greatly increased our overall liquidity and locked in a fair portion of our funding as a hedge against further interest rate increases. Although this will have a marginal impact on our returns and margins (such as our return on assets and our net interest margin) in the ~~beginning of the pandemic, we~~short-term, it is immediately accretive to our bottom-line earnings. Overall, our capital levels remain very strong and our Company is classified as being well-capitalized based on industry standards. We firmly believe that with our ~~Company will see greater tax efficiency going forward which should provide additional benefit~~strong liquidity, above industry-average growth in core deposits and minimal levels of uninsured deposits that our risk to capital is very low, and, fundamentally, our ~~bottom-line. Our growth goal for our Company remains to increase our total assets to a level of $1.0 billion or greater in the short to intermediate term. We~~Company’s financial position and future prospects are optimistic that we will see better opportunities to achieve the growth that we seek as our economy gets back to more normalized (and, hopefully, stabilized) performance. We have seen some increase in our overhead expense level as we set-the stage for growth. But, we believe that we have positive operating leverage that will help us achieve greater efficiencies and better returns as we execute on our strategy for growth.

very solid.

Our primary focus is protecting the investment of our shareholders in our Company and rewarding them in a balanced fashion by growing their value and paying an attractive cash dividend. In ~~these areas,~~the second quarter, we paid a regular cash dividend of $0.165, which was an increase of $0.01, or 6.5%, over that paid in the second quarter of the previous year. On a year-to-date basis, our ~~shareholders have been nicely rewarded with a year-over-year increase in~~total cash ~~dividends paid of $0.07, or 18.1%, (inclusive of~~dividend payout was $0.4775, which included a special cash dividend of $0.15 paid in the first ~~quarter),~~quarter. This is a 4.4% increase over the total cash dividend paid during the first six months of the previous year and produces a near-industry leading total dividend yield of 6.8%. This total dividend yield is based on our second quarter cash dividend on a forward basis, plus the special dividend paid in the first quarter (which combined total $0.81) and our quarter-end fair market value ~~increase~~ of ~~$2.13, or 14.9%, to a level of $16.39 as of June 30, 2022.~~$11.97. Even though our fair market value decreased during the most recent quarter (as did the fair market value of many financial institution stocks), our Company ~~and~~still had a market price to book value of 120%, which compares favorably to industry ~~have been through a couple~~standards as of challenging years from an operating perspective due to the pandemic, we are now fully looking forward and focusing on growing and building a better, more profitable company. In the short-term, there is clearly a threatquarter-end.

Considering that the FOMC could overcorrect by raising rates too quickly and highly; thus, having a negative impact on our economy by pushing it into a recessionary state. We are hopeful that this does not occur and get in the way of our vision for growth. As always, we continue to beoperate in a challenging economic and concerning industry-related environment, we are very pleased with our overall present performance and future prospects. Even with the present threats with which our overall industry is exposed, we are very optimistic about the ~~potential~~future growth and earnings prospects for United Bancorp, Inc. (UBCP). We firmly believe that with the challenges that our industry has experienced over the course of the past few years, our ~~Company. Over~~Company has evolved into a more fundamentally sound organization with a focus of growing to achieve greater efficiencies and scales, while controlling overall costs. We have invested in areas that will lead to our continued and future relevancy within our industry along with anticipated higher revenue generation while implementing cost control initiatives, where needed, by consolidating delivery channels in markets in which we had low banking center performance and considerable overlap. We still have a vision of growing UBCP to an asset threshold of $1.0 billion or greater in the ~~last couple of years, we have become more efficient and better at delivering our products and services~~near term in a ~~fashion demanded by our evolving markets. We~~prudent and profitable fashion. In addition, we will continue to build upon our solid foundation and ~~have~~maintain a longer-term vision. With a keen focus on continual process improvement, product development and delivery, we firmly believe the future for our Company is very bright.

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United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Forward-Looking Statements

When used in this document, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” ~~“projected,” “we believe.” “we are optimistic that”~~“projected” or similar expressions are intended to identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of ~~1995, which~~1995. Such statements are subject to ~~numerous assumptions,~~certain risks and ~~uncertainties. Actual~~uncertainties including changes in economic conditions in the Bank’s market areas, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Bank’s market areas and competition, that could affect the Company’s financial performance and cause actual results ~~could~~to differ materially from historical earnings and those ~~contained~~presently anticipated or ~~implied by~~projected with respect to future periods. These risks and uncertainties should be considered in evaluating forward looking statements, and undue reliance should not be placed on such ~~statements for a variety of~~statements. Additional information concerning the Company and its business, including other factors ~~including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies;~~that could materially affect the nature, extent, and timing of government actions and reforms; and extended disruption of vital infrastructure and the impact of the COVID-19 pandemic. Significant progress has been made to combat the outbreak of COVID-19, and while it appears that the epidemiological and macroeconomic conditions are trending in a positive direction, if thereCompany’s financial results, is ~~a resurgence~~included in the ~~virus,~~Company’s filings with the ~~Company could experience further adverse effects on its business, financial condition, results of operations~~Securities and ~~cash flows.~~Exchange Commission.

The Company is not aware of any trends, events or uncertainties that will have or are reasonably likely to have a material effect on its financial condition, results of operations, liquidity or capital resources except as discussed herein. The Company is not aware of any current recommendation by regulatory authorities that would have such effect if implemented except as discussed herein.

The Company does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date such statements were made or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Management makes certain judgments that affect the amounts reported in the financial statements and footnotes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements, and as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.

~~The procedures~~See Note 1, “Summary of Significant Accounting Policies” for ~~assessing~~additional information on the ~~adequacy~~adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans, investment securities, and off balance sheet exposures, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for ~~loan~~credit losses ~~reflect our evaluation of credit risk after careful consideration of all information available~~on loans to management. In developing this assessment, management must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase orbe a ~~decrease in the allowance for loan losses.~~critical accounting policy.

~~The allowance is regularly reviewed by management and the board to determine whether the amount is considered adequate to absorb probable losses.~~ This evaluation includes specific loss estimates on certain individually reviewed loans, statistical loss estimates for loan pools that are based on historical loss experience, and general loss estimates that are based on the size, quality and concentration characteristics of the various loan portfolios, adverse situations that may affect a borrower’s ability to repay and current economic and industry conditions. Also, considered as part of that judgment, is a reviewdiscussion of the Company’s ~~trend~~critical accounting policies should be read in ~~delinquencies~~conjunction with the Company’s consolidated financial statements and ~~loan losses, and economic factors.~~

~~The allowance for loan losses is maintained at a level believed adequate by management to absorb probable loan losses inherent in~~ the ~~loan portfolio. Management’s evaluation~~accompanying notes presented elsewhere herein, as well as other relevant portions of the adequacy of the allowance is an estimate based on management’s current judgment about the credit quality of the loan portfolio. While the Company strives to reflect all known risk factors in its evaluation, judgment errors may occur.

~~Table of Contents~~

~~United Bancorp, Inc.~~

Management’s Discussion and Analysis of Financial

Condition and Results of ~~Operations~~Operations.

Analysis of Financial Condition

Earning Assets – Loans

~~Our~~The Company’s focus as a community bank is to meet the credit needs of the markets ~~we serve.~~it serves. At June 30, ~~2022,~~2023, gross loans were ~~$467.4~~$462.9 million, compared to ~~$454.4~~$460.9 million at December 31, ~~2021,~~2022, an increase of ~~$13.0~~$2.0 million ~~or 2.8%~~ after offsetting repayments for the period. The overall increase in the loan portfolio was comprised of a ~~$7.9~~$3.4 million increase in commercial and commercial real estate loans ~~a $5.4 million increase in residential loans~~ and a ~~$300,000~~$2.0 million decrease in real estate lending and a $544,000 increase in installment loans since December 31, ~~2021.~~2022.

Commercial and commercial real estate loans comprised ~~78.2%~~78.7% of total loans at June 30, ~~2022,~~2023, compared to ~~78.7%~~78.3% at December 31, ~~2021.~~2022. Commercial and commercial real estate loans have increased $3.4 million, or less than 1.0% since December 31, 2022. This segment of the loan portfolio includes originated loans in ~~our~~its market areas and purchased participations in loans from other ~~banks.~~banks for out-of-area commercial and commercial real estate loans to benefit from consistent economic growth outside the Company’s primary market area.

Installment loans represented ~~1.3%~~1.4% of total loans at ~~June 30, 2022~~March 31, 2023 and ~~1.5%~~1.3% at December 31, ~~2021.~~2022. Some of the installment loans carry somewhat more risk than real estate lending; however, it also provides for higher yields. Installment loans have ~~decreased $300,000~~increased $544,000, or 9.1%, since December 31, ~~2021.~~2022. The targeted lending areas encompass four separate metropolitan areas, minimizing the risk to changes in economic conditions in the communities housing the Company’s banking locations.

Table of Contents

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Residential real estate loans were ~~20.5%~~19.9% of total loans at June 30, ~~2022~~2023 and ~~19.8%~~20.4% at December 31, ~~2021,~~2022, representing ~~an increase~~a decrease of ~~$5.4~~$2.0 million or 2.1% since December 31, ~~2021.~~2022. At June 30, ~~2022,~~2023, the Company did not hold any loans for sale.

The Company adopted ASU No. 2016-13 effective January 1, 2023. The impact of the adoption was and $2.4 million in the allowance for credit losses. The allowance for credit losses totaled $4.5 million at March 31, 2023, which represented 0.96% of total loans. The allowance for loan losses ~~totaled $2.7 million at June 30, 2022, which represented 0.57% of total loans, and $3.7 million at~~prior to adopting ASU 2016-13 December 31, 2021, or ~~0.81%~~was $2.1 million or 0.45% of total loans. The allowance represents the amount which management and the Board of Directors estimates is adequate to provide for probable losses inherent in the loan portfolio. The allowance balance and the provision charged to expense are reviewed by management and the Board of Directors monthly using a risk evaluation model that considers borrowers’ past due experience, economic conditions and various other circumstances that are subject to change over time. For the three and six month ended June 30, 2022 and 2021, Management did update its model to account for the market conditions brought on by the COVID-19 pandemic and has adjusted its assumptions based upon current events. Management believes the current balance of the allowance for ~~loan~~credit losses is adequate to absorb probable incurred credit losses associated with the loan portfolio. ~~The Company had (excluding overdrafts)~~Net loan (recoveries) charge-offs (exclusive of overdrafts net ~~recoveries (charge-offs)~~charge-offs of $54,000) for the six months ended June 30, 2023 were approximately ($10,000) . Net loans charged off (exclusive of overdrafts net charge-offs $54,000) was $19,000 for the six months ended June 30, ~~2022 compared to ($95,000) for the six months ended June 30, 2021.~~2022.

Earning Assets – Securities

The securities portfolio is comprised of U.S. Government agency-backed securities, tax-exempt obligations of state and political subdivisions and certain other investments. Securities available for sale at June 30, ~~2022~~2023 increased approximately ~~$43.9~~$18.4 million from December 31, ~~2021~~2022 totals.

Sources of Funds – Deposits

The Company’s primary source of funds is core deposits from retail and business customers. These core deposits include all categories of interest-bearing and noninterest-bearing deposits, ~~excluding~~and certificates of ~~deposit greater than $250,000.~~deposits. For the period ended June 30, ~~2022,~~2023, total ~~core~~ deposits ~~increased~~decreased approximately ~~$4.1~~$6.3 million, or 1.0%~~. The Company’s savings accounts increased $6.3 million, or 4.5%,~~ from December 31, ~~2021~~2022 totals. The ~~Company’s interest-bearing~~Company has experienced a shift of deposits from interest bearing and ~~non-interest bearing demand~~savings to certificate of deposits ~~increased $7.0 million, or 1.7%, while certificates of deposit under $250,000 decreased by $9.2 million, or 17.8%. The Company considers core deposit to be stable; therefore,~~during the ~~amount of funds anticipated to flow out in the next three to~~ six months ~~is not considered material to the overall liquidity position of the Company.~~ended June 30, 2023.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Management’s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

The Company has a strong deposit base from public agencies, including local school districts, city and township municipalities, public works facilities and others that may tend to be more seasonal in nature resulting from the receipt and disbursement of state and federal grants. These entities have maintained fairly static balances with the Company due to various funding and disbursement timeframes.

Certificates of deposit greater than $250,000 are not considered part of core deposits and, as such, are used to balance rate sensitivity as a tool of funds management. At June 30, 2022, certificates of deposit greater than $250,000 decreased $2.1 million or 48.4%, from December 31, 2021 totals.

~~Sources of Funds - Long Term Debt~~

During the second quarter of 2019 the Company announced a private placement of $20 million in fixed-to-floating rate subordinated notes due 2029 (the “Notes”). The Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines, and the proceeds from the sale of the Notes are being utilized to support regulatory capital ratios and for general corporate purposes, including growth initiatives at United Bancorp.

Sources of Funds – Securities Sold under Agreements to Repurchase and Other Borrowings

Other interest-bearing liabilities include securities sold under agreements to repurchase and Federal Home Loan Bank (“FHLB”) advances. The majority of the Company’s repurchase agreements are with local school districts and city and county governments. The Company’s ~~short-term borrowings~~repurchase agreements increased approximately ~~$8.8~~$5.6 million from December 31, ~~2021~~2022 totals. At June 30, 2023, the Company has $75 million of fixed rate advances that mature over the next 3 to 5 years. Refer to footnote 10 for further information.

Results of Operations for the Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

Net Income

For the six months ended June 30, ~~2022~~2023 the Company reported net earnings of ~~$4,048,000,~~$4,168,000, compared to ~~$4,093,000~~$4,048,000 for the six months ended June 30, ~~2021.~~2022. On a per share basis, the Company’s diluted earnings were $0.73 for the six months ended June 30, 2023 and $0.70 for the six months ended June 30, 2022, ~~and $0.71 for the six months ended June 30, 2021, a decrease~~an increase of ~~less than 2.0%~~4.3%.

Net Interest Income

Net interest income, by definition, is the difference between interest income generated on interest-earning assets and the interest expense incurred on interest-bearing liabilities. Various factors contribute to changes in net interest income, including volumes, interest rates and the composition or mix of interest-earning assets in relation to interest-bearing liabilities. Net interest income before the provision for ~~loan~~credit losses increased ~~5.6%~~11.2%, or ~~$609,000~~$1.3 million for the six months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022. The increase is mainly attributable to an increase in available-for-sale securities and ~~loan growth.~~the repricing of loans in an updward rate environment.

Table of Contents

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Provision for ~~Loan Losses~~(Reversal of ) Credit Loss Expense - Loans

Net loans recovered for the six month ended June 30, 2023, excluding overdrafts, was ~~$18,500.~~$10,000. Giving strong consideration to our overall solid credit related metrics our Company had a reversal of credit ~~reserve releases~~loss expense of ~~$985,000~~$146,000 during the six months ended June 30, ~~2022.The~~2023. The overall improvement in the economy post COVID also contributed to the reversal of credit ~~reserve release.~~loss expense.

Noninterest Income

Total noninterest income is made up of bank related fees and service charges, as well as other income producing services provided, sales of loans in the secondary market, sales of investment securities, ATM income, early redemption penalties for certificates of deposit, safe deposit rental income, internet bank service fees, earnings on bank-owned life insurance and other miscellaneous items.

Noninterest income for the six months ended June 30, ~~2022~~2023 as compared to the same period in ~~2021 decreased $93,000~~2022 increased $87,000 or 4.4%. The main component of the ~~decrease~~increase is ~~the reduced level~~increased service charges on ~~the gain on sale of loans~~deposit accounts for the six months ended June 30, ~~2022 as a result of higher interest rates.~~2023.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Management’s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

Noninterest Expense

The Company saw its noninterest expense increase by ~~$960,000~~$568,000 or ~~10.7%~~5.7% year-over-year. ~~Salary and employee benefits increased $754,000 year over year. This majority of this~~A general increase ~~was~~ due to inflation contributed to most of the ~~one time vesting of certain stock awards.~~increase in noninterest expense.

Federal Income Taxes

The provision for federal income taxes was ~~$431,000~~$281,000 for the six months ended June 30, ~~2022, an increase~~2023, a decrease of ~~$130,000~~$150,000 compared to the same period in ~~2021.~~2022. The effective tax rate was ~~9.6%~~6.3% and ~~6.9%~~9.6% for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Results of Operations for the Three Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

Net Income

For the three months ended June 30, ~~2022~~2023 the Company reported net earnings of ~~$2,297,000,~~$2,280,000, compared to ~~$2,185,000~~$2,297,000 for the three months ended June 30, ~~2021.~~2022. On a per share basis, the Company’s diluted earnings were $0.40 for the three months ended June 30, ~~2022~~2023 and ~~$0.38~~$0.40 for ~~2021, an increase of 5.3%.~~2022.

Net Interest Income

Net interest income increased ~~7.40%~~6.32%, or ~~$411,000,~~$377,000, for the three months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022. This increase was mainly driven by income on securities and fed funds sold of ~~$390,000, or 34.1%,~~$1,628,000, for the three months ended June 30, ~~2022~~2023 over the same period in ~~2021.~~2022.

Provision for ~~Loan Losses~~(Reversal of ) Credit Loss Expense - Loans

Giving strong consideration to our overall solid credit related metrics and the improving economy, our Company had a reversal of credit ~~reserve releases~~loss expense of ~~$485,000~~$146,000 during the three months ended June 30, ~~2022.~~2023. During the six months ended June 30, 2022, the also had a reversal of credit loss expense of $485,000.

Noninterest Income

Noninterest income for the three months ended June ~~20, 2022~~30, 2023 as compared to the same period in ~~2021 decreased $154,000~~2022 increased $58,000 or ~~13.5%~~5.9%. The main component of the ~~decrease~~increase is ~~the reduced level~~increased service charges on ~~the gain on sale of loans for the six months ended June 30, 2022 as a result of higher interest rates.~~

~~Noninterest Expense~~

~~The Company saw its noninterest expense increase by $299,000 or 6.6% year-over-year.~~

~~Federal Income Taxes~~

~~The provision for federal income taxes was $293,000~~deposit accounts for the three months ended June 30, ~~2022, an increase of $81,000 compared to the same period in 2021.~~

~~COVID-19: Update on Company Action and Ongoing Risks~~

The U.S. economy continued its recovery during the first quarter of 2022 despite pressures from higher inflation and rising energy prices as well as concerns over the Russia-Ukraine war and the continued economic uncertainty caused by the COVID-19 pandemic. As previously discussed, the COVID-19 pandemic has resulted in disruption to business and economic activity. While the Omicron variant2023.

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Table of Contents

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

~~took COVID-19 infection rates~~Noninterest Expense

The Company saw its noninterest expense increase by $240,000 or 4.9% year-over-year.

Federal Income Taxes

The provision for federal income taxes was $168,000 for the three months ended June 30, 2023, a decrease of $127,000 compared to ~~a new high~~the same period in January 2022, COVID-19 cases declined by the end of the first quarter. However, the duration of the pandemic, including the emergence of new variants, and the ultimate repercussions continue to remain unclear2022.

Capital Resources

Internal capital growth, through the retention of earnings, is the primary means of maintaining capital adequacy for the Company. Stockholders’ equity totaled ~~$58.3~~$58.4 million at June 30, ~~2022~~2023, compared to ~~$71.1~~$59.7 million at December 31, ~~2021,~~2022, a ~~$13.4~~$1.3 million ~~decrease mainly driven by the accumulated other comprehensive loss in the Company’s available-for-sale securities .~~decrease. The Company ~~does have~~adopted this guidance, and subsequent related updates, using the ~~ability~~modified retrospective approach for all financial assets measured at amortized cost, including loans and ~~the liquidity hold these bonds to final maturity. At final maturity~~available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Company ~~receives the entire principle invested.~~ adopted ASU 2016-12 and recorded a cumulative effect decrease to retained earnings of $2,088,000, net of tax, of which $1,911,000 related to loans, $177,000 related to unfunded commitments.

Total stockholders’ equity in relation to total assets was ~~8.11%~~7.03% at June 30, ~~2022~~2023 and ~~9.90%~~7.89% at December 31, 2021. On May 14, 2019 the Company issued $20,000,000 of junior subordinated debentures in denominations of not less than $250,000. To increase the capital level of Unified Bank, $16 million of the proceeds were paid as a dividend during the second quarter of 2019.

2022. The Company’s Articles of Incorporation ~~provides flexibility to create~~allows for a class of preferred shares with 2,000,000 authorized shares. This enables the Company, at the option of the Board of Directors, to issue series of preferred shares in a manner calculated to take advantage of financing techniques which may provide a lower effective cost of capital to the Company. The ~~ability to issue preferred shares~~amendment also provides greater flexibility to the Board of Directors in structuring the terms of equity securities that may be issued by the Company. Although this preferred stock is a financial tool, it has not been utilized to date.

The Company has offered for many years a Dividend Reinvestment Plan (“The Plan”) for shareholders under which the ~~Company's~~Company’s common stock will be purchased by the Plan for participants with automatically reinvested dividends. The Plan does not represent a change in the Company’s dividend policy or a guarantee of future dividends.

The Company is subject to the regulatory requirements of The Federal Reserve System as a bank holding company. The Bank is subject to regulations of the FDIC and the State of Ohio, Division of Financial Institutions. The most important of these various regulations address capital adequacy.

On January 1, 2015, the final rules of the Federal Reserve Board went into effect implementing in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Under the final rule, minimum requirements increased for both the quality and quantity of capital held by banking organizations. The rule requires a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent and a common equity tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets that will apply to all supervised financial institutions. The rule also ~~requires a~~raises the minimum ratio of tier 1 capital to risk-weighted assets offrom 4 percent to 6 percent and includes a minimum leverage ratio of 4 percent for all banking organizations.

The ~~Company~~Bank continues to be well-capitalized in accordance with Federal regulatory capital requirements as the capital ratios below show:


Common equity tier 1 capital ratio	~~10.31~~13.65	%
Tier 1 capital ratio	~~11.03~~13.65	%
Total capital ratio	~~15.12~~14.40	%
Leverage ratio	~~8.49~~9.39	%

Table of Contents

United Bancorp, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity

Management’s objective in managing liquidity is maintaining the ability to continue meeting the cash flow needs of ~~the Company’s~~its customers, such as borrowings or deposit withdrawals, as well as its own financial commitments. The principal sources of liquidity are net income, loan payments, maturing securities and sales of securities available for sale, federal funds sold and cash and deposits with banks. Along with its liquid assets, the Company has additional sources of liquidity available to ensure that adequate funds are available as needed. These include, but are not limited to, the purchase of federal funds, the ability to borrow funds under line of credit agreements with correspondent banks, a borrowing agreement with the Federal Home Loan Bank of Cincinnati and the adjustment of interest rates to obtain depositors. Management feels that it has the capital adequacy and profitability to meet the current and projected liquidity needs of its customers.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Management’s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

Inflation

Substantially all of the Company’s assets and liabilities relate to banking activities and are monetary in nature. The consolidated financial statements and related financial data are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). U.S. GAAP currently requires the Company to measure the financial position and results of operations in terms of historical dollars, with the exception of securities available for sale, certain ~~impaired~~collateral dependent loans and certain other real estate and loans that may be measured at fair value. Changes in the value of money due to rising inflation can cause purchasing power loss.

Management’s opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other, but do not always move in correlation with each other. The Company’s ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company’s performance.

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

~~There has been no significant change from disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.~~Smaller Reporting Companies are not required to provide this disclosures.

ITEM 4.Controls and Procedures

The Company, under the supervision, and with the participation, of its management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to the requirements of Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, ~~2022,~~2023, in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be included in the Company’s periodic SEC filings.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

4136

Table of Contents

United Bancorp, Inc.

Part II – Other Information

ITEM 1. Legal Proceedings

None, other than ordinary routine litigation incidental to the Company’s business.

ITEM 1A. Risk Factors

~~There have been no material changes from risk factors as previously disclosed in Part 1 Item 1A of the Company’s Form 10-K for the year ended December 31, 2021, filed on March 18 2022.~~Smaller reporting companies are not required to provide this information.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

(a)

(c)

(d)

(c)

(d)

Total

Total Number of

Maximum Number or

Total Number of

Maximum Number or

Number

Shares (or Units)

Approximate Dollar

Shares (or Units)

Approximate Dollar

Purchased as Part

Value) of Shares (or

(a)

Purchased as Part

Value) of Shares (or

Shares (or

(b)

Of Publicly

Units) that May Yet Be

Total Number of

(b)

Of Publicly

Units) that May Yet

Units)

Average Price Paid

Announced Plans

Purchased Under the

Shares (or Units)

Average Price Paid

Announced Plans

Be Purchased Under

Period

Purchased

Per Share (or Unit)

Or Programs

Plans or Programs

Purchased

Per Share (or Unit)

Or Programs

the Plans or Programs

Month #1 4/1/2022 to 4/30/2022

––

Month #2 5/1/2022 to 5/31/2022

2,965

17.28

––

Month #3 6/1/2022 to 6/30/2022

––

Month #1 4/1/2023 to 4/30/2023

––

Month #2 5/1/2023 to 5/31/2023

4,568

12.36

––

Month #3 6/1/2023 to 6/30/2023

––

The Company adopted the United Bancorp, Inc. Affiliate Banks Directors and Officers Deferred Compensation Plan (the “Plan”), which is an unfunded deferred compensation plan. Amounts deferred pursuant to the Plan remain unrestricted assets of the Company, and the right to participate in the Plan is limited to members of the Board of Directors and Company officers. Under the Plan, directors or other eligible participants may defer fees and up to 50% of their annual incentive award payable to them by the Company, which are used to acquire common shares which are credited to a participant’s respective account. Except in the event of certain emergencies, no distributions are to be made from any account as long as the participant continues to be an employee or member of the Board of Directors. Upon termination of service, the aggregate number of shares credited to ~~the~~a participant’s account ~~are~~is distributed ~~to him or her along~~ with any cash proceeds credited to the account which have not yet been invested in the Company’s stock. All purchases under this deferred compensation plan are funded with either earned director fees or officer incentive award payments. No underwriting fees, discounts, or commissions are paid in connection with the Plan. The shares allocated to participant accounts have not been registered under the Securities Act of 1933 in reliance upon the exemption provided by Section 4(2) thereof. On May 22, 2023, the Company purchased 4,568 shares to fund deferred compensation plan acquisitions at a weighted average price per share of $12.36.

ITEM 3.Defaults Upon Senior Securities

Not applicable.

~~Table of Contents~~

~~United Bancorp, Inc.~~

~~Part II – Other Information~~

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5.

Not applicable

Table of Contents

United Bancorp, Inc.

Part II – Other Information

ITEM 5.6. Exhibits


	~~EX 3.1~~EX-3.1		Amended Articles of Incorporation of United Bancorp, Inc. ⁽¹⁾

	~~EX 3.2~~EX-3.2		Amended and Restated Code of Regulations of United Bancorp, Inc. ⁽²⁾

	~~EX 4.1~~EX-4.1		Description of Registrant’s Common Stock ⁽³⁾

	EX 4.2		~~Form~~Forms of 6.00% Fixed to Floating Rate Subordinated ~~Notes~~Note due May 15, 2029 ⁽⁴⁾

	EX 31.1		Rule 13a-14(a) Certification – CEO

	EX 31.2		Rule 13a-14(a) Certification – CFO

	EX 32.1		Section 1350 Certification – CEO

	EX 32.2		Section 1350 Certification – CFO

	EX 101.INS		XBRL Instance Document

	EX 101.SCH		XBRL Taxonomy Extension Schema Document

	EX 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

	EX 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

	EX 101.LAB		XBRL Taxonomy Extension Label Linkbase Document

	EX 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

(1)

Incorporated by reference to Appendix B to the registrant’s Definitive Proxy Statement filed with the Securities and Exchange Commission on March 14, 2001.

(2)

Incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2016.

(3)

Incorporated by reference to Exhibit 4 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, ~~2020~~2020.

(4)

Incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, ~~2019~~2019.

4338

Table of Contents

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.


	/s/ United Bancorp, Inc.

Date: August ~~15, 2022~~14, 2023	By:	/s/Scott A. Everson
		Scott A. Everson
		President and Chief Executive Officer

Date: August ~~15, 2022~~14, 2023	By:	/s/Randall M. Greenwood
		Randall M. Greenwood
		~~Senior Vice President, Chief Financial Officer and Treasurer~~EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL AND RISK OFFICER

4439

~~Table of Contents~~

~~Exhibit Index~~


~~Exhibit No.~~			~~Description~~
~~31.1~~			~~Rule 13a-14(a) Certification – Principal Executive Officer~~
~~31.2~~			~~Rule 13a-14(a) Certification – Principal Financial Officer~~
~~32.1~~			~~Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of The Sarbanes-Oxley act of 2002.~~
~~32.2~~			~~Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.~~


	Six Months Ended June 30, 2021
			Weighted-
			Average	Per Share
	Net Income		Shares	Amount
	(In thousands)
Net income	$	4,093
Less allocated earnings on non-vested restricted stock		(98)
Less dividends on non-vested restricted stock		(124)
Net income allocated to common stockholders		3,871
			5,475,273
Basic and diluted earnings per share				$	0.71


	Available-for-sale
	Amortized		Fair
	Cost		Value

	(In thousands)
Within one year	$	340	$	342
One to five years		30,677		30,363
Five to ten year		33,507		31,842
Due after ten years		133,410		127,628
Totals	$	197,934	$	190,175


				As of			For the three months ended				For the six months ended
		June 30, 2022					June 30, 2022				June 30, 2022
							Average
			Unpaid				Investment		Interest		Average		Interest
	Recorded		Principal		Specific		in Impaired		Income		Investment in		Income
	Balance		Balance		Allowance		Loans		Recognized		Impaired Loans		Recognized

	(In thousands)
Loans without a specific valuation allowance:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate		2,840		2,840		—		2,844		—		2,841		20
Residential		—		—		—		—		—		—		—
Installment		—		—		—		—		—		—		—
		2,840		2,840		—		2,844		—		2,841		20
Loans with a specific valuation allowance:
Commercial		—		—		—		—		—		—		—
Commercial real estate		963		963		415		983		—		983		—
Residential		—		—		—		—		—		—		––
Installment		––		––		––		––		—		—		—
		963		963		415		983		—		983		—
Total:
Commercial	$	—	$	—	$	415	$	—	$	—	$	—	$	—
Commercial real estate	$	3,803	$	3,803	$	—	$	3,827	$	—	$	3,824	$	20
Residential	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Installment	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	Three Months ended June 30, 2022
		Pre-		Post-
		Modification		Modification
		Outstanding		Outstanding
	Number of	Recorded		Recorded
	Contracts	Investment		Investment

	(In thousands)
Commercial	0	$	0	$	0
Commercial real estate	—		—		—
Residential	—		—		—
Installment	—		—		—


	Fair Value at		Valuation
	6/30/22		Technique	Unobservable Inputs	Range

	(In thousands)
Collateral-dependent impaired loans	$	547	Market comparable properties	Marketability discount	10% – 25%
Foreclosed assets held for sale	$	237	Market comparable properties	Marketability discount	10% – 35%