UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
-------------------------
COMMISSION FILE #0-16640
UNITED BANCORP, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2606280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 E. CHICAGO BOULEVARD, TECUMSEH, MI 49286
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (517) 423-8373
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter periods that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer as defined
in Rule 12b-2 of the Act. Yes [X] No [ ]
As of July 31, 2005, there were outstanding 2,492,617 shares of the registrant's
common stock, no par value.
Page 1
CROSS REFERENCE TABLE
ITEM NO. DESCRIPTION PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Condensed Consolidated Balance Sheets 3
(b) Condensed Consolidated Statements of Income 4
(c) Condensed Consolidated Statements of Shareholders' Equity 5
(d) Condensed Consolidated Statements of Cash Flows 6
(e) Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary 9
Financial Condition 11
Liquidity and Capital Resources 14
Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
Item 4. Controls and Procedures 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
Exhibits 22
Page 2
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(a) CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands of dollars
(unaudited) (unaudited)
June 30, December 31, June 30,
2005 2004 2004
------------ ------------ ------------
ASSETS
Cash and demand balances in other banks $ 16,981 $ 18,188 $ 21,636
Federal funds sold 2,500 - -
------------ ------------ ------------
Total cash and cash equivalents 19,481 18,188 21,636
Securities available for sale 104,260 103,786 108,084
Loans held for sale 1,816 1,102 949
Portfolio loans 528,325 495,796 474,944
------------ ------------ ------------
Total loans 530,141 496,898 475,893
Less allowance for loan losses 6,078 5,766 5,729
------------ ------------ ------------
Net loans 524,063 491,132 470,164
Premises and equipment, net 13,191 13,147 13,631
Goodwill 3,469 3,469 3,469
Bank-owned life insurance 10,891 10,694 10,491
Accrued interest receivable and other assets 10,205 9,935 10,089
------------ ------------ ------------
TOTAL ASSETS $ 685,560 $ 650,351 $ 637,564
============ ============ ============
LIABILITIES
Deposits
Noninterest bearing $ 86,381 $ 85,598 $ 87,741
Interest bearing deposits 485,865 444,280 432,970
------------ ------------ ------------
Total deposits 572,246 529,878 520,711
Federal funds purchased and other short term borrowings 76 8,726 9,576
Other borrowings 42,278 42,847 42,847
Accrued interest payable and other liabilities 5,835 6,676 5,020
------------ ------------ ------------
TOTAL LIABILITIES 620,435 588,127 578,154
COMMITMENT AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Common stock and paid in capital, no par value;
5,000,000 shares authorized; 2,492,617, 2,355,097, and
2,355,552 shares issued and outstanding 63,057 54,133 54,085
Retained earnings 1,986 7,992 5,470
Accumulated other comprehensive income (loss), net of tax 82 99 (145)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 65,125 62,224 59,410
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 685,560 $ 650,351 $ 637,564
============ ============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 3
(b) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
In thousands of dollars, except per share data
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ------------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
INTEREST INCOME
Interest and fees on loans $ 8,620 $ 6,884 $ 16,478 $ 13,658
Interest on securities
Taxable 511 490 1,042 1,006
Tax exempt 265 275 526 582
Interest on federal funds sold 5 5 38 20
------------ ------------ ------------ ------------
Total interest income 9,401 7,654 18,084 15,266
INTEREST EXPENSE
Interest on deposits 2,345 1,484 4,398 2,964
Interest on short term borrowings 52 6 59 8
Interest on other borrowings 480 488 957 954
------------ ------------ ------------ ------------
Total interest expense 2,877 1,978 5,414 3,926
------------ ------------ ------------ ------------
NET INTEREST INCOME 6,524 5,676 12,670 11,340
Provision for loan losses 302 304 625 566
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,222 5,372 12,045 10,774
NONINTEREST INCOME
Service charges on deposit accounts 744 685 1,401 1,327
Trust & Investment fee income 948 920 1,944 1,809
Gains (losses) on securities transactions 1 (34) (1) (33)
Income from loan sales and servicing 324 445 568 700
ATM, debit and credit card fee income 418 375 794 689
Income from sale of nondeposit investment products 221 186 385 368
Income from bank-owned life insurance 99 120 197 241
Other income 194 201 360 340
------------ ------------ ------------ ------------
Total noninterest income 2,949 2,898 5,648 5,441
NONINTEREST EXPENSE
Salaries and employee benefits 3,814 3,388 7,424 6,801
Occupancy and equipment expense, net 1,044 1,002 2,088 2,006
External data processing 312 289 586 563
Advertising and marketing 280 112 526 222
Other expense 1,019 1,021 1,918 1,851
------------ ------------ ------------ ------------
Total noninterest expense 6,469 5,812 12,542 11,443
------------ ------------ ------------ ------------
INCOME BEFORE FEDERAL INCOME TAX 2,702 2,458 5,151 4,772
Federal income tax 745 707 1,410 1,305
------------ ------------ ------------ ------------
NET INCOME $ 1,957 $ 1,751 $ 3,741 $ 3,467
============ ============ ============ ============
Basic earnings per share $ 0.777 $ 0.702 $ 1.490 $ 1.393
Diluted earnings per share $ 0.774 $ 0.696 $ 1.483 $ 1.383
Cash dividends declared per share of common stock $ 0.350 $ 0.324 $ 0.683 $ 0.632
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
(c) CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
In thousands of dollars
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY
Balance at beginning of period $ 63,559 $ 59,332 $ 62,224 $ 57,383
Net Income 1,957 1,751 3,741 3,467
Other comprehensive income:
Net change in unrealized gains (losses) on
securities available for sale, net 403 (926) (17) (725)
----------- ----------- ----------- -----------
Total comprehensive income 2,360 825 3,724 2,742
Cash dividends declared (873) (803) (1,700) (1,563)
Common stock transactions 79 56 877 848
----------- ----------- ----------- -----------
Balance at end of period $ 65,125 $ 59,410 $ 65,125 $ 59,410
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
(d) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In thousands of dollars
Six Months Ended
June 30,
----------------------------
2005 2004
----------- -----------
Cash Flows from Operating Activities
Net income $ 3,741 $ 3,467
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation and amortization 1,043 1,270
Provision for loan losses 625 566
Gain on sale of loans (439) (602)
Proceeds from sales of loans originated for sale 28,784 43,928
Loans originated for sale (28,345) (44,185)
Losses on securities transactions 1 33
Change in accrued interest receivable and other assets (341) 1,169
Gain on investment in bank-owned life insurance (197) (241)
Loss on Investment in limited partnership 72 27
Change in accrued interest payable and other liabilities (850) (1,342)
----------- -----------
Net cash from operating activities 4,094 4,090
Cash Flows from Investing Activities
Securities available for sale
Purchases (10,381) (34,703)
Sales - 4,626
Maturities and calls 5,944 25,607
Principal payments 3,747 3,560
Net change in portfolio loans (33,726) (29,037)
Premises and equipment expenditures, net (759) (361)
----------- -----------
Net cash from investing activities (35,175) (30,308)
Cash Flows from Financing Activities
Net change in deposits 42,368 18,128
Net change in short term borrowings (8,650) 1,500
Proceeds from other borrowings - 8,000
Principal payments on other borrowings (569) (528)
Proceeds from common stock transactions 877 848
Dividends paid (1,652) (1,519)
----------- -----------
Net cash from financing activities 32,374 26,429
----------- -----------
Net change in cash and cash equivalents 1,293 211
Cash and cash equivalents at beginning of year 18,188 21,425
----------- -----------
Cash and cash equivalents at end of period $ 19,481 $ 21,636
=========== ===========
Supplement Disclosure of Cash Flow Information:
Interest paid $ 5,273 $ 3,930
Income tax paid 1,200 1,000
Loans transferred to other real estate 170 489
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 6
(e) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of United Bancorp,
Inc. (the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The condensed consolidated balance sheet of the
Company as of December 31, 2004 has been derived from the audited consolidated
balance sheet of the Company as of that date. Operating results for the three
month period ending June 30, 2005 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2005. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Proxy Statement for the year ended December
31, 2004. Certain amounts for 2004 have been reclassified to conform to 2005
classifications.
STOCK OPTIONS
In 2004, Shareholders approved the Company's 2005 Stock Option Plan (the "2005
Plan"). The plan is a non-qualified stock option plan as defined under Internal
Revenue Service regulations. Under the plan, directors and management of the
Company and subsidiaries are given the right to purchase stock of the Company at
a stipulated price, adjusted for stock dividends, over a specific period of
time. The 2005 Plan will continue in effect until the end of 2009, and is the
only plan in effect in 2005. The 2005 Plan is the successor to the Company's
1999 Stock Option Plan (the "1999 Plan") that continued in effect until the end
of 2004.
The stock subject to the options are shares of authorized and unissued common
stock of the Company. Options under the Plans are granted to directors and
certain key members of management at the then-current market price at the time
the option is granted. The options have a three-year vesting period, and with
certain exceptions, expire at the end of ten years, or three years after
retirement. The following is summarized option activity for the 1999 and 2005
Plans, adjusted for stock dividends:
Stock Options
-----------------------------
Options Weighted Avg.
Outstanding Exercise Price
----------- --------------
Balance at January 1, 2005 106,025 $ 45.75
Options granted 52,500 63.81
Options exercised (32,881) 42.71
Options forfeited (163) 51.66
-------
Balance at June 30, 2005 125,481 $ 54.09
=======
Total options granted during the period ending June 30, 2005 were 52,500, and
the weighted fair value of the options granted was $6.78. For stock options
outstanding at June 30, 2005, the range of average exercise prices was $35.82 to
$63.81 and the weighted average remaining contractual term was 8.10 years. At
June 30, 2005, 45,578 options are exercisable under the Plans.
Page 7
The following pro forma information presents net income and earnings per share
had the fair value method been used to measure compensation cost for stock
option grants. The exercise price of the option grants is equivalent to the
market value of the underlying stock at the grant date, adjusted for stock
dividends. Accordingly, no compensation cost was recorded for the period ended
June 30, 2005 and 2004.
In thousands of dollars, except per share data
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net income, as reported $ 1,957 $ 1,751 $ 3,741 $ 3,467
Less: Total stock-based compensation cost, net of taxes 31 18 62 36
----------- ----------- ----------- -----------
Pro forma net income $ 1,926 $ 1,733 $ 3,679 $ 3,431
=========== =========== =========== ===========
Earnings per share:
Basic As reported $ 0.777 $ 0.702 $ 1.490 $ 1.393
Basic Pro forma $ 0.765 $ 0.695 $ 1.465 $ 1.379
Diluted As reported $ 0.774 $ 0.696 $ 1.483 $ 1.383
Diluted Pro forma $ 0.761 $ 0.689 $ 1.458 $ 1.369
NOTE 2 - LOANS HELD FOR SALE
Mortgage loans serviced for others are not included in the accompanying
consolidated financial statements. The unpaid principal balance of mortgage
loans serviced for others was $244,256,000 and $263,087,000 at the end of June,
2005 and 2004. The balance of loans serviced for others related to servicing
rights that have been capitalized was $242,513,000 and $260,638,000 at June 30,
2005 and 2004. Mortgage servicing rights activity in thousands of dollars for
the six months ended June 30, 2005 and 2004 follows:
2005 2004
--------- ---------
Balance at January 1 $ 1,820 $ 1,832
Amount capitalized year to date 75 277
Amount amortized year to date (182) (224)
--------- ---------
Balance at June 30 $ 1,713 $ 1,885
========= =========
No valuation allowance was considered necessary for mortgage servicing rights at
period end 2005 and 2004.
NOTE 3 - COMMON STOCK AND EARNINGS PER SHARE
Basic earnings per share are based upon the weighted average number of shares
outstanding plus contingently issuable shares during the year. Diluted earnings
per share further assumes the dilutive effect of additional common shares
issuable under stock options. During March of 2005 and 2004, the Company
declared 5% stock dividends payable in May 2005 and 2004. Earnings per share,
dividends per share and weighted average shares have been restated to reflect
these stock dividends. A reconciliation of basic and diluted earnings per share
follows:
In thousands of dollars, except per share data
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net income $ 1,957 $ 1,751 $ 3,741 $ 3,467
=========== =========== =========== ===========
Basic earnings:
Weighted average common shares outstanding 2,492,848 2,471,819 2,486,206 2,466,686
Weighted average contingently issuable shares 24,892 22,544 24,824 22,177
----------- ----------- ----------- -----------
Total weighted average shares outstanding 2,517,740 2,494,363 2,511,030 2,488,863
=========== =========== =========== ===========
Basic earnings per share $ 0.777 $ 0.702 $ 1.490 $ 1.393
=========== =========== =========== ===========
Diluted earnings:
Weighted average common shares outstanding
from basic earnings per share 2,517,740 2,494,363 2,511,030 2,488,863
Dilutive effect of stock options 12,112 20,850 11,669 17,625
----------- ----------- ----------- -----------
Total weighted average shares outstanding 2,529,852 2,515,213 2,522,699 2,506,489
=========== =========== =========== ===========
Diluted earnings per share $ 0.774 $ 0.696 $ 1.483 $ 1.383
=========== =========== =========== ===========
Page 8
A total of 573 shares represented by stock options granted are not included in
the above calculations as they are non-dilutive as of the date of this report.
NOTE 4 - ACCOUNTING DEVELOPMENTS
In April 2005, the SEC issued an amendment to SFAS No. 123(R), which allows
companies to implement SFAS 123(R) at the beginning of their next fiscal year,
instead of the next reporting period, that begins after June 15, 2005. The rule
does not change the accounting required by SFAS No. 123(R), but only changes the
dates for compliance with the standard. Early adoption is permitted in periods
in which financial statements have not yet been issued. The Company expects to
adopt SFAS No. 123(R) on January 1, 2006.
In June, 2005 the FASB Board decided not to provide additional guidance on the
meaning of other-than-temporary impairment, but directed the FASB staff to
issue a staff position (FSP) which will be retitled FSP 115-1 "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments." The
final FSP will supersede EITF Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments," and
EITF Topic D-44, "Recognition of Other-Than-Temporary Impairment upon the
Planned Sale of a Security Whose Cost Exceeds Fair Value." FSP FAS 115-1 will
replace guidance in EITF Issue 03-1 on loss recognition with references to
existing other-than-temporary impairment guidance, such as FASB Statement No.
115, "Accounting for Certain Investments in Debt Securities." FSP FAS 115-1 will
clarify that an investor should recognize an impairment loss no later than when
the impairment is deemed other than temporary, even if a decision to sell has
not been made.
FSP FAS 115-1 will be effective for other-than-temporary impairment analysis
conducted in periods beginning after September 15, 2005. The Company has
consistently followed the loss recognition guidance in SFAS No. 115, so the
adoption of FSP FAS 115-1 will not have any significant impact on the Company's
financial condition or results of operation.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion provides information about the consolidated financial condition
and results of operations of United Bancorp, Inc. (the "Company") and its
subsidiary banks, United Bank & Trust ("UBT") and United Bank & Trust -
Washtenaw ("UBTW") for the three and six month periods ending June 30, 2005 and
2004.
EXECUTIVE SUMMARY
The Company is a financial holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under the
Bank Holding Company Act. The Company has corporate power to engage in such
activities as permitted to business corporations under the Michigan Business
Corporation Act, subject to the limitations of the Bank Holding Company Act and
regulations of the Federal Reserve System. The Company's subsidiary banks (the
"Banks") offer a full range of services to individuals, corporations,
fiduciaries and other institutions. Banking services include checking, NOW
accounts, savings, time deposit accounts, money market deposit accounts, safe
deposit facilities and money transfers. Lending operations provide real estate
loans, secured and unsecured business and personal loans, consumer installment
loans, and check-credit loans, home equity loans, accounts receivable and
inventory financing, equipment lease financing and construction financing.
Page 9
While unemployment in Michigan remains among the highest in the Nation, the
markets served by the Banks are impacted to varying degrees. The Ann Arbor
market has much lower unemployment levels than other areas within Michigan. At
the same time, unemployment level in Lenawee County is lower than the overall
State average, but some economic softness is noted in the market area.
The Company's subsidiary banks offer the sale of nondeposit investment products
through licensed representatives in their banking offices, and sell credit and
life insurance products. In addition, the Banks are co-owners of Michigan
Banker's Title Insurance Company of Mid-Michigan LLC and derive income from the
sale of various insurance products to banking clients. UBT operates a trust
department, and provides trust services to UBTW on a contract basis. The Trust &
Investment Group offer a wide variety of fiduciary services to individuals,
corporations and governmental entities, including services as trustee for
personal, corporate, pension, profit sharing and other employee benefit trusts.
The department provides securities custody services as an agent, acts as the
personal representative for estates and as a fiscal, paying, and escrow agent
for corporate customers and governmental entities, and provides trust services
for clients of the Banks. These products help to diversify the Company's sources
of income.
Steady asset growth continued during the second quarter of 2005. Total assets
reached $685.6 million, for an increase of $48.0 million, or 7.5%, in the
trailing 12 months. During the most recent quarter, the Company's loan portfolio
increased by $13.8 million, deposits increased by $27.0 million, and assets
under management by the Trust & Investment Group of United Bank & Trust
increased by $1.6 million.
Consolidated net income of $1,957,453 for the second quarter of 2005 resulted in
the best second quarter earnings in the Company's history, increasing by 11.8%
over the second quarter of 2004. At the same time, consolidated net income for
the first six months of 2005 increased 7.9% over the same time period in 2004.
Net interest income continues its steady growth, and noninterest income has
improved following a small decline in the first quarter of the year. Expenses
have increased during the second quarter of 2005, primarily in compensation,
advertising and marketing costs. Compared to the second quarter of last year,
income and expense categories are up, with an improvement of $206,000 in
consolidated net income. The chart below shows the trends in the major
components of earnings for the last five quarters.
2005 2004
--------------------- ----------------------------------
in thousands of dollars, where appropriate 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
-------- -------- -------- -------- --------
Net interest income $ 6,524 $ 6,145 $ 6,031 $ 5,926 $ 5,676
Provision for loan losses 302 323 253 229 304
Noninterest income 2,949 2,699 2,771 2,797 2,898
Noninterest expense 6,469 6,072 5,649 5,553 5,812
Federal income tax provision 745 665 816 839 707
Net income $ 1,957 $ 1,784 $ 2,084 $ 2,102 $ 1,751
Return on average assets (a) 1.14% 1.09% 1.27% 1.30% 1.13%
Return on average shareholders' equity (a) 12.04% 11.45% 13.38% 13.80% 11.83%
(a) annualized
Page 10
FINANCIAL CONDITION
SECURITIES
Balances in the Company's investment securities portfolio increased $4.4 million
during the second quarter of 2005, and the mix continues to evolve. The increase
in the portfolio reflects the continued growth of the Company, and reflects
deposit growth in excess of loan increases. The chart below shows the percentage
composition of the Company's investment portfolio as of the end of the current
quarter for 2005 and 2004, and at December 31, 2004.
6/30/05 12/31/2004 6/30/04
------- ---------- -------
U.S. Treasury and agency securities 40.7% 41.0% 39.5%
Mortgage backed agency securities 19.8% 21.7% 24.3%
Obligations of states and political subdivisions 36.4% 34.2% 33.4%
Corporate, asset backed, and other securities 3.1% 3.1% 2.8%
----- ----- -----
Total Securities 100.0% 100.0% 100.0%
===== ===== =====
The Company is conservative in its investments, preferring to concentrate its
risks within the loan portfolio. Investments in U.S. Treasury and agency
securities are considered to possess low credit risk. Obligations of U.S.
government agency mortgage-backed securities possess a somewhat higher interest
rate risk due to certain prepayment risks. The corporate, asset backed and other
securities portfolio also contains a moderate level of credit risk. The
municipal portfolio contains a small amount of geographic risk, as less than 5%
of that portfolio is issued by political subdivisions located within Lenawee
County, Michigan. The Company's portfolio contains no "high risk" mortgage
securities or structured notes.
The Company's current and projected tax position continues to make carrying
tax-exempt securities beneficial, and the Company does not anticipate being
subject to the alternative minimum tax in the near future. The investment in
local municipal issues also reflects the Company's commitment to the development
of the local area through support of its local political subdivisions.
LOANS
Loan balances increased by $13.8 million in the second quarter of 2005, and have
grown by $54.2 million since the second quarter of 2004. During this period, the
Banks continue to experience some refinancing in the residential mortgage
portfolios into products that are sold on the secondary market, resulting in a
decline in the relative proportion of mortgage balances within the loan
portfolio. Personal loan balances increased along with business loans and
commercial mortgages, and construction and development loan growth continues to
be strong.
Page 11
The mix of the loan portfolio continues a long-term trend toward an increased
percentage of business loans, which include construction and development loans.
At the same time, the trend of declining percentages of residential mortgage
loans and personal loans continues. The table below shows total loans
outstanding, in thousands of dollars and their percentage of the total loan
portfolio. All loans are domestic and contain no significant concentrations by
industry or client.
June 30, 2005 December 31, 2004 June 30, 2004
--------------------- --------------------- ---------------------
Balance % of total Balance % of total Balance % of total
-------- ---------- -------- ---------- -------- ----------
Total loans:
Personal $ 79,822 15.1% $ 74,142 14.9% $ 73,717 15.5%
Business loans and
commercial mortgages 300,143 56.6% 278,838 56.1% 260,324 54.7%
Tax exempt 3,190 0.6% 3,325 0.7% 1,330 0.3%
Residential mortgage 70,690 13.3% 76,228 15.3% 79,275 16.7%
Construction & development 76,296 14.4% 64,365 13.0% 61,247 12.9%
-------- ---------- -------- ---------- -------- ----------
Total loans $530,141 100.0% $496,898 100.00% $475,893 100.0%
======== ===== ======== ====== ======== =====
CREDIT QUALITY
The Company continues to maintain a high level of asset quality as a result of
actively monitoring delinquencies, nonperforming assets and potential problem
loans. The aggregate amount of nonperforming loans is presented in the table
below. For purposes of that summary, loans renewed on market terms existing at
the time of renewal are not considered troubled debt restructurings. The accrual
of interest income is discontinued when a loan becomes ninety days past due
unless it is both well secured and in the process of collection, or the
borrower's capacity to repay the loan and the collateral value appear
sufficient. The following chart shows the aggregate amount of the Company's
nonperforming assets by type, in thousands of dollars.
6/30/05 3/31/05 12/31/2004 6/30/04
----------- ----------- ----------- -----------
Nonaccrual loans $ 4,223 $ 3,738 $ 3,709 $ 2,789
Loans past due 90 days or more 3,318 1,510 1,674 1,160
Troubled debt restructurings - - - -
----------- ----------- ----------- -----------
Total nonperforming loans 7,541 5,248 5,383 3,949
Other real estate (ORE) 1,014 944 844 945
----------- ----------- ----------- -----------
Total nonperforming assets $ 8,555 $ 6,192 $ 6,227 $ 4,894
=========== =========== =========== ===========
Percent of nonperforming loans to total loans 1.42% 1.02% 1.08% 0.83%
Percent of nonperforming assets to total assets 1.25% 0.93% 0.96% 0.77%
The Company's total nonperforming assets are up from the end of the first
quarter and from year-end totals. Nonaccrual loan balances have increased, with
a number of busines loans in the process of liquidation or workout. The total of
loans past due ninety days or more have also increased, with the increase
primarily in the business and commercial categories of the loan portfolio.
Balances in other real estate have increased marginally. Collection efforts are
underway with past due and nonaccrual loans, and the Company remains adequately
secured. The amount listed in the table above as other real estate reflects a
small number of properties that were acquired in lieu of foreclosure. Properties
have been leased to a third party with an option to purchase or are listed for
sale, and no significant losses are anticipated.
The Company's allowance for loan losses remains at a level consistent with its
estimated losses, and the allowance provides for currently estimated losses
inherent in the portfolio. An analysis of the allowance for loan losses, in
thousands of dollars, for the six months ended June 30, 2005 and 2004 follows:
2005 2004
------- -------
Balance at January 1 $ 5,766 $ 5,497
Loans charged off (374) (499)
Recoveries credited to allowance 61 165
Provision charged to operations 625 566
------- -------
Balance at June 30 $ 6,078 $ 5,729
======= =======
Page 12
The following table presents the allocation of the allowance for loan losses
applicable to each loan category in thousands of dollars, as of June 30, 2005
and 2004, and December 31, 2004.
6/30/05 12/31/2004 6/30/04
--------- ---------- ---------
Business and commercial mortgage $ 5,196 $ 5,036 $ 4,901
Tax exempt - - -
Residential mortgage 13 20 52
Personal 762 710 707
Construction - - -
Unallocated 107 - 69
--------- ---------- ---------
Total $ 6,078 $ 5,766 $ 5,729
========= ========== =========
Loans to finance residential mortgages make up 13.4% of the portfolio at June
30, 2005, and are well-secured and have had historically low levels of net
losses. That percentage continues to decline from prior periods, however, as
loans have refinanced and many have been sold into the secondary market.
Personal and business loans, including business mortgages and development loans,
make up the balance of the portfolio. The personal loan portfolio consists of
direct and indirect installment, credit cards, home equity and unsecured
revolving line of credit loans. Installment loans consist primarily of loans for
consumer durable goods, principally automobiles. Indirect personal loans consist
of loans for automobiles, marine and manufactured housing.
Business loans carry the largest balances per loan, and therefore, any single
loss would be proportionally larger than losses in other portfolios. Because of
this, the Company uses an independent loan review firm to assess the continued
quality of its business loan portfolios. This is in addition to the precautions
taken with credit quality in the other loan portfolios. Business loans contain
no significant concentrations other than geographic concentrations within the
market areas served by the Banks.
DEPOSITS
Deposit growth continued during the second quarter of 2005, as total deposits
increased at an annualized rate of 19.8%, and growth over the past twelve months
was 9.9%. Short-term interest bearing accounts continue to be very popular with
clients, while demand deposit continue to grow modestly. The Banks are
experiencing renewed interest by consumers in certificates of deposit, and while
clients continue to evaluate alternatives to certificates of deposit in search
of the best yields on their funds, traditional banking products continue to be
an important part of the Company's product line.
The majority of the Company's deposits are derived from core client sources,
relating to long term relationships with local personal, business and public
clients. The Banks do not support their growth through purchased or brokered
deposits. The Banks' deposit rates are consistently competitive with other banks
in their market areas. The chart below shows the percentage makeup of the
deposit portfolio as of June 30, 2005 and 2004.
2005 2004
----- -----
Noninterest bearing deposits 15.1% 16.9%
Interest bearing deposits 84.9% 83.1%
----- -----
Total deposits 100.0% 100.0%
====== ======
Page 13
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY, CASH EQUIVALENTS AND BORROWED FUNDS
The Company maintains correspondent accounts with a number of other banks for
various purposes. In addition, cash sufficient to meet the operating needs of
its banking offices is maintained at its lowest practical levels. At times, the
Banks are a participant in the federal funds market, either as a borrower or
seller. Federal funds are generally borrowed or sold for one-day periods. The
Banks also have the ability to utilize short term advances from the Federal Home
Loan Bank ("FHLB") and borrowings at the discount window of the Federal Reserve
Bank as additional short-term funding sources. Federal funds were used during
2004 and 2005. Short term advances and discount window borrowings were not
utilized during either year.
The Company periodically finds it advantageous to utilize longer term borrowings
from the Federal Home Loan Bank of Indianapolis. These long-term borrowings
served to provide a balance to some of the interest rate risk inherent in the
Company's balance sheet. No advances were added during the second quarter of
2005.
CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions at June 30, 2005. The following table shows the
Company's capital ratios and ratio calculations at June 30, 2005 and 2004, and
December 31, 2004. Dollars are shown in thousands.
Regulatory Guidelines United Bancorp, Inc.
----------------------- ---------------------------------
Adequate Well 6/30/05 12/31/2004 6/30/04
---------- ---------- -------- ---------- ---------
Tier 1 capital to average assets 4% 5% 9.2% 9.3% 9.1%
Tier 1 capital to risk weighted assets 4% 6% 11.3% 11.5% 11.5%
Total capital to risk weighted assets 8% 10% 12.4% 12.7% 12.7%
Total shareholders' equity $ 65,125 $ 62,224 $ 59,410
Intangible assets (3,469) (3,469) (3,469)
Disallowed servicing assets - - -
Unrealized (gain) loss on securities available for sale (82) (99) 145
-------- ---------- ---------
Tier 1 capital 61,574 58,656 56,086
Allowable loan loss reserves 6,078 5,766 5,729
-------- ---------- ---------
Tier 2 capital $ 67,652 $ 64,422 $ 61,815
======== ========== =========
RESULTS OF OPERATIONS
Consolidated net income for the second quarter of 2005 was the best second
quarter in the Company's history, surpassing the earnings of the second quarter
of 2004 by 11.8%. At the same time, year to date earnings are up 7.9% from the
same period in 2004. The following discussion provides an analysis of these
changes.
NET INTEREST INCOME
Net interest income continues to increase quarter over quarter, as the Banks
continue to benefit from asset growth. The Company's year to date yield on
earning assets was up 43 basis points from the same period of 2004, while the
Company's cost of funds increased from the six-month 2004 levels by 45 basis
points, resulting in a reduction of tax equivalent spread of one basis point.
The following table shows the year to date daily average consolidated balance
sheets, interest earned (on a taxable equivalent basis) or paid, and the
annualized effective yield or rate, for the periods ended June 30, 2005 and
2004.
Page 14
Six Months Ended June 30,
------------------------------------------------------------------
dollars in thousands 2005 2004
- -------------------- -------------------------------- -------------------------------
Average Interest Yield/ Average Interest Yield/
ASSETS Balance (b) Rate (c) Balance (b) Rate (c)
---------- -------- -------- --------- -------- --------
Interest earning assets (a)
Federal funds sold $ 3,142 $ 38 2.43% $ 4,124 $ 20 0.95%
Taxable securities 73,601 1,042 2.83% 74,586 1,006 2.70%
Tax exempt securities (b) 27,961 764 5.47% 29,784 870 5.85%
Taxable loans 510,077 16,408 6.43% 455,377 13,629 5.99%
Tax exempt loans (b) 3,247 102 6.30% 1,400 44 6.33%
---------- -------- --------- --------
Total int. earning assets (b) 618,028 18,354 5.94% 565,271 15,569 5.51%
Less allowance for loan losses (5,877) (5,619)
Other assets 59,365 59,593
---------- ---------
TOTAL ASSETS $ 671,516 $ 619,245
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
NOW accounts $ 120,765 626 1.04% $ 112,904 265 0.47%
Savings deposits 174,758 1,195 1.37% 176,094 736 0.84%
CDs $100,000 and over 51,888 813 3.13% 33,865 514 3.04%
Other interest bearing deposits 118,785 1,764 2.97% 105,738 1,449 2.74%
---------- -------- --------- --------
Total int. bearing deposits 466,196 4,398 1.89% 428,601 2,964 1.38%
Short term borrowings 3,770 59 3.11% 1,388 8 1.09%
Other borrowings 42,748 957 4.48% 41,840 954 4.56%
---------- -------- --------- --------
Total int. bearing liabilities 512,714 5,414 2.11% 471,829 3,926 1.66%
-------- --------
Noninterest bearing deposits 86,120 82,736
Other liabilities 8,720 5,616
Shareholders' equity 63,962 59,064
---------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 671,516 $ 619,245
========== =========
Net interest income (b) 12,941 11,643
-------- --------
Net spread (b) 3.83% 3.84%
==== ====
Net yield on interest earning assets (b) 4.19% 4.12%
==== ====
Tax equivalent adjustment on interest income (271) (303)
-------- --------
Net interest income per income statement $ 12,670 $ 11,340
======== ========
Ratio of interest earning assets to interest 1.21 1.20
bearing liabilities ==== ====
(a) Non-accrual loans and overdrafts are included in the average balances of
loans.
(b) Fully tax-equivalent basis, net of nondeductible interest impact; 34% tax
rate.
(c) Annualized
As noted from the data in the following table, interest income and expense for
the first six months of 2005 increased from the same period of 2004, as net
interest income improved by nearly $1.3 million. During that time, interest
income and interest expense both increased as a result of volume and rate
increases, with growth providing the biggest portion of the improvement. The
following table shows the effect of volume and rate changes on net interest
income for the six months ended June 30, 2005 and 2004 on a taxable equivalent
basis, in thousands of dollars.
Page 15
2005 Compared to 2004 2004 Compared to 2003
--------------------------------- ---------------------------------------
Increase (Decrease) Due To: (a) Increase (Decrease) Due To: (a)
--------------------------------- ---------------------------------------
Volume Rate Net Volume Rate Net
--------- -------- -------- -------- --------- -------
Interest earned on:
Federal funds sold $ (6) $ 25 $ 19 $ (88) $ (22) $ (110)
Taxable securities (13) 49 36 166 (342) (176)
Tax exempt securities (51) (55) (106) 13 (47) (34)
Taxable loans 1,712 1,067 2,779 1,050 (1,178) (128)
Tax exempt loans 58 - 58 2 (6) (4)
--------- -------- -------- -------- --------- -------
Total interest income $ 1,700 $ 1,086 $ 2,786 $ 1,143 $ (1,595) $ (452)
========= ======== ======== ======== ========= =======
Interest paid on:
NOW accounts $ 20 $ 341 $ 361 $ 53 $ (150) $ (97)
Savings deposits (6) 465 459 87 (200) (113)
CDs $100,000 and over 282 17 299 125 (156) (31)
Other interest bearing deposits 188 127 315 (270) (60) (330)
Short term borrowings 25 26 51 6 1 7
Other borrowings 21 (18) 3 43 (83) (40)
--------- -------- -------- -------- --------- -------
Total interest expense $ 530 $ 958 $ 1,488 $ 44 $ (648) $ (604)
========= ======== ======== ======== ========= =======
Net change in net interest
income $ 1,170 $ 128 $ 1,298 $ 1,099 $ (947) $ 152
========= ======== ======== ======== ========= =======
(a) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
NONINTEREST INCOME
Total noninterest income in the second quarter of 2005 was $51,000 better than
the second quarter of 2004, and was $250,000 higher than the first quarter of
2005. Compared to the first quarter of 2005, noninterest income is up 9.3%, with
several categories contributing to the improvement. Service charges on deposits
improved 13.2%, while income from loan sales & servicing increased 32.8%,
reflecting renewed activity in the sale of mortgage loans in the secondary
market. ATM, debit and credit card fee income continued to grow, and income from
sale of nondeposit investment products improved 34.8%. Trust & Investment fee
income continues to decline, as a result of lower market value of assets
managed.
Year to date noninterest income is 3.8% above the same period of 2004, with most
categories exhibiting improvement. The one notable exception is income from loan
sales and servicing, which is down 18.9% from the first half of 2004, when
consumer activity in mortgage refinancing was quite high. In addition, income on
bank-owned life insurance is down from the first half of 2004 as long-term rates
have declined.
The Banks generally market their production of fixed rate long-term mortgages in
the secondary market, and retain adjustable rate mortgages for their portfolios.
The Company maintains a portfolio of sold residential real estate mortgages,
which it continues to service. This servicing provides ongoing income for the
life of the loans. No write downs in mortgage servicing rights were required in
2005 or 2004.
Page 16
NONINTEREST EXPENSES
Total noninterest expenses were up 6.5% during the second quarter of 2005, with
the biggest increases in external data processing, advertising and marketing
expenses. External data processing expenses relate primarily to the costs of
ATM, debit card, credit card and merchant processing. Year to date, noninterest
expenses are up 9.6% over the same period of 2004. Most categories of expense
have increased somewhat, reflecting the continued growth of the Company. Staff
additions to support that growth have caused increases in salaries and benefit
costs, and increases in advertising and marketing expenses reflect a number of
new initiatives for the Company for 2005.
FEDERAL INCOME TAX
The Company's effective tax rate was relatively unchanged from 2004 to 2005, at
27.4% for the first six months of 2005, compared to 27.3% for the second quarter
of 2004.
NET INCOME
Improvements in net income for the second quarter of 2005 compared to the same
period of 2004 have resulted primarily from increased net interest income, while
noninterest income is up slightly and expenses have increased as a result of
continued growth. While second quarter earnings are not the highest ever
achieved, they represent the Company's best-ever second quarter earnings. Net
income for the first six months of 2005 is 7.9% better than the same period of
2004, reflecting steady earnings growth for the Company.
CRITICAL ACCOUNTING POLICIES
Generally accepted accounting principles are complex and require management to
apply significant judgments to various accounting, reporting and disclosure
matters. The Company's Management must use assumptions and estimates to apply
these principles where actual measurement is not possible or practical. For a
complete discussion of the Company's significant accounting policies, see "Notes
to the Consolidated Financial Statements" in United Bancorp, Inc.'s 2004 Annual
Report on pages A-27 to A-30. Certain policies are considered critical because
they are highly dependent upon subjective or complex judgments, assumptions and
estimates. Changes in such estimates may have a significant impact on the
financial statements. Management has reviewed the application of these policies
with the Audit Committee of the Company's Board of Directors. For a discussion
of applying critical accounting policies, see Critical Accounting Policies on
pages A-19 and A-20 in United Bancorp, Inc.'s 2004 Annual Report.
FORWARD-LOOKING STATEMENTS
Statements contained in Management's Discussion and Analysis of Financial
Condition and Results of Operations include forward-looking statements that are
based on management's beliefs, assumptions, current expectations, estimates and
projections about the financial services industry, the economy, and about the
Company itself. Words such as "anticipate," "believe," "determine," "estimate,"
"expect," "forecast," "intend," "is likely," "plan," "project," "opinion,"
variations of such terms, and similar expressions are intended to identify such
forward-looking statements. The presentations and discussions of the provision
and allowance for loan losses, and determinations as to the need for other
allowances presented in this report are inherently forward-looking statements in
that they involve judgments and statements of belief as to the outcome of future
events. These statements are not guarantees of future performance and involve
certain risks, uncertainties, and assumptions that are difficult to predict with
regard to timing, extent, likelihood, and degree of occurrence. Therefore,
actual results and outcomes may materially differ from what may be expressed or
forecasted in such forward-looking statements. Internal and external factors
that may cause such a difference include changes in interest rates and interest
rate relationships; demand for products and services; the degree of competition
by traditional and non-traditional competitors; changes in
Page 17
banking laws and regulations; changes in tax laws; changes in prices, levies,
and assessments; the impact of technological advances; governmental and
regulatory policy changes; the outcomes of pending and future litigation and
contingencies; trends in customer behavior and customer ability to repay loans;
software failure, errors or miscalculations; and the vicissitudes of the
national economy. The Company undertakes no obligation to update, amend or
clarify forward-looking statements, whether as a result of new information,
future events, or otherwise.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FUNDS MANAGEMENT AND INTEREST RATE RISK
The composition of the Company's balance sheet consists of investments in
interest earning assets (loans and investment securities) that are funded by
interest bearing liabilities (deposits and borrowings). These financial
instruments have varying levels of sensitivity to changes in market interest
rates resulting in market risk. Policies place strong emphasis on stabilizing
net interest margin, with the goal of providing a sustained level of
satisfactory earnings. The Funds Management, Investment and Loan policies
provide direction for the flow of funds necessary to supply the needs of
depositors and borrowers. Management of interest sensitive assets and
liabilities is also necessary to reduce interest rate risk during times of
fluctuating interest rates.
A number of measures are used to monitor and manage interest rate risk,
including interest sensitivity and income simulation analyses. An interest
sensitivity model is the primary tool used to assess this risk with supplemental
information supplied by an income simulation model. The simulation model is used
to estimate the effect that specific interest rate changes would have on twelve
months of pretax net interest income assuming an immediate and sustained up or
down parallel change in interest rates of 200 basis points. Key assumptions in
the models include prepayment speeds on mortgage related assets; cash flows and
maturities of financial instruments held for purposes other than trading;
changes in market conditions, loan volumes and pricing; and management's
determination of core deposit sensitivity. These assumptions are inherently
uncertain and, as a result, the models cannot precisely estimate net interest
income or precisely predict the impact of higher or lower interest rates on net
interest income. Actual results will differ from simulated results due to
timing, magnitude, and frequency of interest rate changes and changes in market
conditions.
Based on the results of the simulation model as of March 31, 2005, the Company
would expect a maximum potential reduction in net interest margin of less than
13% if market rates decreased under an immediate and sustained parallel shift of
200 basis points. The Company's interest sensitivity position continues to be
asset sensitive, continuing a trend evident throughout 2004. The Company
anticipates that interest rates will rise, and has positioned its balance sheet
to take advantage of this expected increase in rates. As a result, current net
interest income has been lowered in order to improve net interest margin in the
future.
The Company and each Bank maintains Funds Management Committees, which review
exposure to market risk on a regular basis. The Committees' overriding policy
objective is to manage assets and liabilities to provide an optimum and
consistent level of earnings within the framework of acceptable risk standards.
The Funds Management Committees are also responsible for evaluating and
anticipating various risks other than interest rate risk. Those risks include
prepayment risk, credit risk and liquidity risk. The Committees are made up of
senior members of management, and monitor the makeup of interest sensitive
assets and liabilities to assure appropriate liquidity, maintain interest
margins and to protect earnings in the face of changing interest rates and other
economic factors.
Page 18
The Funds Management policies provide for a level of interest sensitivity which,
Management believes, allows the Banks to take advantage of opportunities within
their markets relating to liquidity and interest rate risk, allowing flexibility
without subjecting the Company to undue exposure to risk. In addition, other
measures are used to evaluate and project the anticipated results of
Management's decisions.
ITEM 4 - CONTROLS AND PROCEDURES
INTERNAL CONTROL
The Company maintains internal controls that contain self-monitoring mechanisms,
and actions are taken to correct deficiencies as they are identified. The Board,
operating through its Audit and Compliance Committee, provides oversight to the
financial reporting process. Even effective internal controls, no matter how
well designed, have inherent limitations, including the possibility of
circumvention or overriding of controls. Accordingly, even effective internal
controls can provide only reasonable assurance with respect to financial
statement preparation. Furthermore, the effectiveness of internal controls may
vary over time.
The Company's Audit and Compliance Committee is composed entirely of Directors
who are not officers or employees of the Company.
As of June 30, 2005, an evaluation was carried out under the supervision and
with the participation of United Bancorp's management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934). Based on their
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that United Bancorp's disclosure controls and procedures as of the end
of the quarter ended June 30, 2005 are, to the best of their knowledge,
effective to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act are recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There have been no changes in the Company's
internal controls over financial reporting identified in connection with the
evaluation that occurred during the quarter ended June 30, 2005 that has
materially affected, or is likely to materially affect, the Company's internal
control over financial reporting.
PART II
OTHER INFORMATION
ITEM 1- LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings. The Company's
banking subsidiaries are involved in ordinary routine litigation incident to its
business; however, no such proceedings are expected to result in any material
adverse effect on the operations or earnings of the Banks. Neither the Banks nor
the Company are involved in any proceedings to which any director, principal
officer, affiliate thereof, or person who owns of record or beneficially five
percent (5%) or more of the outstanding stock of the Company, or any associate
of the foregoing, is a party or has a material interest adverse to the Company
or the Banks.
ITEM 2- CHANGES IN SECURITIES AND USE OF PROCEEDS AND ISSUER PURCHASES
OF EQUITY SECURITIES
The Company did not repurchase any of its securities during the quarter ended
June 30, 2005.
Page 19
ITEM 3- DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities relevant to the requirements
of this section during the quarter ended June 30, 2005.
ITEM 4- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Company was held on April 19, 2005. At
that meeting, election of directors was the only matter submitted to a vote of
the shareholders. There were 2,231,707 voting shares outstanding on April 19,
2005. The following directors were elected to three-year terms:
Action For Against Abstain
---------- --------- ------- -------
John H. Foss re-elected 1,753,889 11,288 -
David S. Hickman re-elected 1,757,761 7,416 -
James G. Haeussler elected 1,763,810 1,367 -
Directors James D. Buhr, Joseph D. Butcko, George H. Cress, Robert K. Chapman,
James C. Lawson, Donald J. Martin, David E. Maxwell and Kathryn M. Mohr hold
terms that continue after the meeting. Director Patricia M. Garcia did not seek
re-election at the expiration of her term, but contines as a Director of United
Bank & Trust - Washtenaw.
No other matters were considered by shareholders at that meeting or at any other
time during the quarter.
ITEM 5- OTHER INFORMATION
None.
ITEM 6- EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits (numbered as in Item 601 of Regulation S-K):
Exhibit 31.1 Certification of principal executive officer
pursuant to Rule 13a - 14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of principal financial officer
pursuant to Rule 13a - 14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K filed during the quarter ended June 30, 2005.
Report on Form 8-K filed April 19, furnishing in Items 2.02 and 7.01,
thereof, information on quarterly results of operations for the quarter
ended March 31, 2005.
Report on Form 8-K filed June 13, furnishing in Items 8.01 thereof,
information regarding the declaration of cash dividends.
Page 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED BANCORP, INC.
August 9, 2005
/S/ David S. Hickman
- --------------------------------------------------
David S. Hickman
Chairman and Chief Executive Officer
(Principal Executive Officer)
/S/ Dale L. Chadderdon
- --------------------------------------------------
Dale L. Chadderdon
Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
Page 21
Exhibit Index
Exhibit No. Description
- ----------- -------------------------------------------------------------
31.1 Certification of principal executive officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of principal financial officer pursuant to Rule
13a-14(a) of the Securites Exchange Act of 1934, as adopted
pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.