UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
----------
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 Exchange Act. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company as defined in
Rule 12b-2 of the Exchange Act. Yes [ ] No [X]
As of October 31, 2005, there were outstanding 2,493,394 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 6. Exhibits 20
Signatures 20
Exhibits 21
Page 2
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(A) CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (unaudited)
September 30, December 31, September 30,
In thousands of dollars 2005 2004 2004
- ----------------------- ------------- ------------ -------------
ASSETS
Cash and demand balances in other banks $ 23,011 $ 18,188 $ 20,478
Federal funds sold 11,500 -- 1,000
-------- -------- --------
Total cash and cash equivalents 34,511 18,188 21,478
Securities available for sale 101,790 103,786 105,745
Loans held for sale 2,359 1,102 990
Portfolio loans 535,182 495,796 482,530
-------- -------- --------
Total loans 537,541 496,898 483,520
Less allowance for loan losses 6,266 5,766 5,734
-------- -------- --------
Net loans 531,275 491,132 477,786
Premises and equipment, net 13,095 13,147 13,345
Goodwill 3,469 3,469 3,469
Bank-owned life insurance 10,991 10,694 10,593
Accrued interest receivable and other assets 10,686 9,935 9,575
-------- -------- --------
TOTAL ASSETS $705,817 $650,351 $641,991
======== ======== ========
LIABILITIES
Deposits
Noninterest bearing $ 85,904 $ 85,598 $ 84,602
Interest bearing deposits 503,832 444,280 447,106
-------- -------- --------
Total deposits 589,736 529,878 531,708
Federal funds purchased and other short term borrowings 76 8,726 76
Other borrowings 43,228 42,847 42,847
Accrued interest payable and other liabilities 6,412 6,676 6,121
-------- -------- --------
TOTAL LIABILITIES 639,452 588,127 580,752
COMMITMENT AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Common stock and paid in capital, no par value;
5,000,000 shares authorized; 2,492,356, 2,355,097, and
2,355,312 shares issued and outstanding 63,106 54,133 54,114
Retained earnings 3,319 7,992 6,740
Accumulated other comprehensive income (loss), net of tax (60) 99 385
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 66,365 62,224 61,239
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $705,817 $650,351 $641,991
======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 3
(B) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
In thousands of dollars, except per share data 2005 2004 2005 2004
- ---------------------------------------------- ------ ------ ------- -------
INTEREST INCOME
Interest and fees on loans $9,124 $7,257 $25,602 $20,916
Interest on securities
Taxable 483 540 1,524 1,546
Tax exempt 314 271 840 853
Interest on federal funds sold 78 14 116 33
------ ------ ------- -------
Total interest income 9,999 8,082 28,082 23,348
INTEREST EXPENSE
Interest on deposits 2,809 1,649 7,207 4,612
Interest on short-term and other borrowings 480 507 1,496 1,469
------ ------ ------- -------
Total interest expense 3,289 2,156 8,703 6,081
------ ------ ------- -------
NET INTEREST INCOME 6,710 5,926 19,379 17,267
Provision for loan losses 329 229 954 795
------ ------ ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,381 5,697 18,425 16,472
NONINTEREST INCOME
Service charges on deposit accounts 809 764 2,210 2,091
Trust & Investment fee income 984 935 2,928 2,744
Gains (losses) on securities transactions -- 4 (1) (29)
Income from loan sales and servicing 337 270 905 970
ATM, debit and credit card fee income 448 394 1,242 1,083
Income from sale of nondeposit investment products 232 178 617 546
Income from bank-owned life insurance 100 102 297 342
Other income 150 151 510 492
------ ------ ------- -------
Total noninterest income 3,060 2,798 8,708 8,239
NONINTEREST EXPENSE
Salaries and employee benefits 3,668 3,250 11,092 10,051
Occupancy and equipment expense, net 1,055 1,008 3,143 3,014
External data processing 338 294 924 857
Advertising and marketing 277 113 804 335
Other expense 957 888 2,873 2,740
------ ------ ------- -------
Total noninterest expense 6,295 5,553 18,836 16,997
------ ------ ------- -------
INCOME BEFORE FEDERAL INCOME TAX 3,146 2,942 8,297 7,714
Federal income tax 882 839 2,292 2,144
------ ------ ------- -------
NET INCOME $2,264 $2,103 $ 6,005 $ 5,570
====== ====== ======= =======
Basic earnings per share $0.899 $0.843 $ 2.389 $ 2.236
Diluted earnings per share $0.897 $0.840 $ 2.376 $ 2.219
Cash dividends declared per share of common stock $0.370 $0.324 $ 1.053 $ 0.956
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
(C) CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
In thousands of dollars 2005 2004 2005 2004
- ----------------------- ------- ------- ------- -------
TOTAL SHAREHOLDERS' EQUITY
Balance at beginning of period $65,125 $59,410 $62,224 $57,383
Net Income 2,264 2,103 6,005 5,570
Other comprehensive income:
Net change in unrealized gains (losses) on
securities available for sale, net (142) 529 (159) (195)
------- ------- ------- -------
Total comprehensive income 2,122 2,632 5,846 5,375
Cash dividends declared (922) (824) (2,622) (2,387)
Common stock transactions 40 21 917 868
------- ------- ------- -------
Balance at end of period $66,365 $61,239 $66,365 $61,239
======= ======= ======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
(D) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
-------------------
In thousands of dollars 2005 2004
- ----------------------- -------- --------
Cash Flows from Operating Activities
Net income $ 6,005 $ 5,570
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation and amortization 1,575 1,927
Provision for loan losses 954 795
Gain on sale of loans (701) (792)
Proceeds from sales of loans originated for sale 45,580 56,135
Loans originated for sale (44,879) (56,243)
Losses on securities transactions 1 29
Change in accrued interest receivable and other assets (705) 1,570
Increase in cash surrender value on bank-owned life insurance (297) (342)
Loss on Investment in limited partnership 142 13
Change in accrued interest payable and other liabilities (286) (226)
-------- --------
Net cash from operating activities 7,389 8,436
Cash Flows from Investing Activities
Securities available for sale
Purchases (17,928) (47,027)
Sales -- 4,626
Maturities and calls 12,159 39,402
Principal payments 7,236 5,106
Net change in portfolio loans (41,488) (37,123)
Premises and equipment expenditures, net (1,027) (513)
-------- --------
Net cash from investing activities (41,048) (35,529)
Cash Flows from Financing Activities
Net change in deposits 59,858 29,125
Net change in short term borrowings (8,650) (8,000)
Proceeds from other borrowings 950 8,000
Principal payments on other borrowings (569) (528)
Proceeds from common stock transactions 917 868
Dividends paid (2,524) (2,319)
-------- --------
Net cash from financing activities 49,982 27,146
-------- --------
Net change in cash and cash equivalents 16,323 53
Cash and cash equivalents at beginning of year 18,188 21,425
-------- --------
Cash and cash equivalents at end of period $ 34,511 $ 21,478
======== ========
Supplement Disclosure of Cash Flow Information:
Interest paid $ 8,302 $ 6,066
Income tax paid 2,050 1,500
Loans transferred to other real estate 391 765
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 nine
month period ending September 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 Annual Report on Form 10-K 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 1999 and 2005 Plans (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 53,500 63.88
Options exercised (32,881) 42.71
Options forfeited (2,187) 55.70
-------
Balance at September 30, 2005 124,457 $54.17
=======
Total options granted during the period ending September 30, 2005 were 53,500,
and the weighted fair value of the options granted was $6.81. For stock options
outstanding at September 30, 2005, the range of average exercise prices was
$35.82 to $67.50 and the weighted average remaining contractual term was 7.86
years. At September 30, 2005, 46,016 options are exercisable under the Plans.
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 are 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
September 30, 2005 and 2004.
Page 7
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
In thousands of dollars, except per share data 2005 2004 2005 2004
- ---------------------------------------------- ------ ------ ------ ------
Net income, as reported $2,264 $2,103 $6,005 $5,570
Less: Total stock-based compensation
cost, net of taxes 31 18 93 54
------ ------ ------ ------
Pro forma net income $2,233 $2,085 $5,912 $5,516
====== ====== ====== ======
Earnings per share:
Basic As reported $0.899 $0.843 $2.389 $2.236
Basic Pro forma $0.887 $0.835 $2.352 $2.214
Diluted As reported $0.897 $0.840 $2.376 $2.219
Diluted Pro forma $0.885 $0.833 $2.339 $2.198
NOTE 2 - LOAN SERVICING
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 $240,640,000 and $259,554,000 at the end of
September, 2005 and 2004. The balance of loans serviced for others related to
servicing rights that have been capitalized was $239,041,000 and $256,936,000 at
September 30, 2005 and 2004. Mortgage servicing rights activity in thousands of
dollars for the nine months ended September 30, 2005 and 2004 follows:
2005 2004
------ ------
Balance at January 1 $1,820 $1,832
Amount capitalized year to date 118 323
Amount amortized year to date (262) (308)
------ ------
Balance at September 30 $1,676 $1,847
====== ======
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:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
In thousands of dollars, except per share data 2005 2004 2005 2004
- ---------------------------------------------- ---------- ---------- ---------- ----------
Net income $ 2,264 $ 2,103 $ 6,005 $ 5,570
========== ========== ========== ==========
Basic earnings:
Weighted average common shares outstanding 2,492,608 2,473,199 2,488,363 2,468,879
Weighted average contingently issuable shares 24,892 22,790 24,847 22,383
---------- ---------- ---------- ----------
Total weighted average shares outstanding 2,517,500 2,495,990 2,513,210 2,491,262
========== ========== ========== ==========
Basic earnings per share $ 0.899 $ 0.843 $ 2.389 $ 2.236
========== ========== ========== ==========
Diluted earnings:
Weighted average common shares outstanding
from basic earnings per share 2,517,500 2,495,990 2,513,210 2,491,262
Dilutive effect of stock options 5,318 7,031 13,977 18,800
---------- ---------- ---------- ----------
Total weighted average shares outstanding 2,522,818 2,503,020 2,527,187 2,510,062
========== ========== ========== ==========
Diluted earnings per share $ 0.897 $ 0.840 $ 2.376 $ 2.219
========== ========== ========== ==========
Page 8
A total of 7 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)
"Share-Based-Payment", 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 FSP115-1 "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 nine month periods ended September 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") are Michigan banking corporations, and 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 third quarter of 2005. Total assets
reached $705.8 million, for an increase of $63.8 million, or 9.9%, in the
trailing 12 months. During the most recent quarter, the Company's loan portfolio
increased by $7.4 million, deposits increased by $17.5 million, and assets under
management by the Trust & Investment Group of United Bank & Trust increased by
$12.4 million.
Consolidated net income of $2,264,000 for the third quarter of 2005 resulted in
the best quarterly earnings in the Company's history, increasing by 7.7% over
the third quarter of 2004 and 15.7% over the prior quarter. At the same time,
consolidated net income for the first nine months of 2005 increased 7.8% 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 decreased during the third quarter of 2005, primarily in compensation,
advertising and marketing costs. Compared to the third quarter of last year,
both income and expense categories are up, resulting in an improvement of
$161,000 in consolidated net income.
While Return on Average Assets ("ROA") and Return on Average Shareholders'
Equity ("ROE") are improved from the prior three quarters, both ratios remain
below those of the same quarter of 2004. The chart below shows the trends in the
major components of earnings for the past five quarters.
2005 2004
--------------------------- -----------------
in thousands of dollars, where appropriate 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
- ------------------------------------------ ------- ------- ------- ------- -------
Net interest income $6,710 $6,524 $6,145 $6,031 $5,926
Provision for loan losses 329 302 323 253 229
Noninterest income 3,060 2,949 2,699 2,771 2,798
Noninterest expense 6,295 6,469 6,072 5,649 5,553
Federal income tax provision 882 745 665 816 839
Net income $2,264 $1,957 $1,784 $2,084 $2,103
Return on average assets (a) 1.27% 1.14% 1.09% 1.27% 1.30%
Return on average shareholders' equity (a) 13.64% 12.04% 11.45% 13.38% 13.80%
(a) annualized and based on year to date average balances
Page 10
FINANCIAL CONDITION
SECURITIES
Balances in the Company's investment securities portfolio decreased $2.5 million
during the third quarter of 2005. The decrease in the portfolio reflects
scheduled maturities and calls within the investment portfolio. 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.
9/30/05 12/31/04 9/30/04
------- -------- -------
U.S. Treasury and agency securities 40.3% 41.0% 40.5%
Mortgage backed agency securities 16.8% 21.7% 23.4%
Obligations of states and political subdivisions 39.7% 34.2% 33.2%
Corporate, asset backed, and other securities 3.2% 3.1% 2.9%
----- ----- -----
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 $7.4 million in the third quarter of 2005, and have
grown by $54.0 million since the third 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.
The mix of the loan portfolio continues a long-term trend toward an increased
percentage of business loans, which include construction and development loans.
Personal loans have grown from year-end 2004, while the trend of declining
percentages of residential mortgage 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.
September 30, 2005 December 31, 2004 September 30, 2004
--------------------- --------------------- ---------------------
Balance % of total Balance % of total Balance % of total
-------- ---------- -------- ---------- -------- ----------
Total loans:
Personal $ 81,078 15.1% $ 74,142 14.9% $ 73,978 15.3%
Business loans and
commercial mortgages 305,904 56.9% 278,838 56.1% 268,347 55.5%
Tax exempt 3,255 0.6% 3,325 0.7% 1,254 0.3%
Residential mortgage 66,943 12.5% 76,228 15.3% 76,920 15.9%
Construction & development 80,361 14.9% 64,365 13.0% 63,021 13.0%
-------- ----- -------- ------ -------- -----
Total loans $537,541 100.0% $496,898 100.00% $483,520 100.0%
======== ===== ======== ====== ======== =====
Page 11
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 this 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.
9/30/05 6/30/05 12/31/04 9/30/04
------- ------- -------- -------
Nonaccrual loans $4,378 $4,223 $3,709 $4,368
Loans past due 90 days or more 570 3,318 1,674 1,116
Troubled debt restructurings 898 -- -- --
------ ------ ------ ------
Total nonperforming loans 5,846 7,541 5,383 5,484
Other real estate (ORE) 1,234 1,014 844 1,104
------ ------ ------ ------
Total nonperforming assets $7,080 $8,555 $6,227 $6,588
====== ====== ====== ======
Percent of nonperforming loans to total loans 1.09% 1.42% 1.08% 1.13%
Percent of nonperforming assets to total assets 1.00% 1.25% 0.96% 1.03%
The Company's total nonperforming assets are down from the end of the second
quarter, but remain higher than year-end 2004 totals. Nonaccrual loan balances
have increased, with a number of business loans in the process of liquidation or
workout. The total of loans past due ninety days or more has decreased
considerably from the high levels of June 30, with the decrease primarily in the
business and commercial categories of the loan portfolio. The Company moved one
commercial property to the status of troubled debt restructuring during the
quarter. Concessions on the interest rate of the loan should assist the borrower
in meeting the revised terms of his agreement with the Company, and no loss is
anticipated on the property.
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 nine months ended September 30, 2005 and 2004
follows:
2005 2004
------ ------
Balance at January 1 $5,766 $5,497
Loans charged off (573) (816)
Recoveries credited to allowance 119 258
Provision charged to operations 954 795
------ ------
Balance at September 30 $6,266 $5,734
====== ======
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 September 30,
2005 and 2004, and December 31, 2004.
9/30/05 12/31/04 9/30/04
------- -------- -------
Business and commercial mortgage $5,452 $5,036 $4,935
Tax exempt -- -- --
Residential mortgage 13 20 45
Personal 776 710 713
Construction -- -- --
Unallocated 25 -- 41
------ ------ ------
Total $6,266 $5,766 $5,734
====== ====== ======
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.
Loans to finance residential mortgages make up 12.5% of the portfolio at
September 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.
DEPOSITS
Deposit growth continued during the third quarter of 2005, as total deposits
increased at an annualized rate of 12.2%, and growth over the past twelve months
was 10.9%. Short-term interest bearing accounts continue to be very popular with
clients, while demand deposits declined 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. In addition, the Banks have
increased their emphasis on gathering longer-term deposits while the yield curve
is relatively flat, in order to fund anticipated future loan growth. The Banks'
deposit rates are consistently competitive with other banks in their market
areas.
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 brokered deposits,
although they do participate in gathering out-of-market certificates of deposit
through an automated network. The chart below shows the percentage makeup of the
deposit portfolio as of September 30, 2005 and 2004.
2005 2004
----- -----
Noninterest bearing deposits 14.6% 15.9%
Interest bearing deposits 85.4% 84.1%
----- -----
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
serve primarily to provide a balance to some of the interest rate risk inherent
in the Company's balance sheet. A small amount of advances were obtained during
the third quarter.
CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions at September 30, 2005. The following table shows the
Company's capital ratios and ratio calculations as of September 30, 2005 and
2004, and December 31, 2004. Dollars are shown in thousands.
Regulatory Guidelines United Bancorp, Inc.
--------------------- ----------------------------
Adequate Well 9/30/05 12/31/04 9/30/04
-------- ---- ------- -------- -------
Tier 1 capital to average assets 4% 5% 9.3% 9.3% 9.2%
Tier 1 capital to risk weighted assets 4% 6% 11.2% 11.5% 11.7%
Total capital to risk weighted assets 8% 10% 12.3% 12.7% 12.8%
Total shareholders' equity $66,365 $62,224 $61,239
Intangible assets (3,469) (3,469) (3,469)
Disallowed servicing assets -- -- --
Unrealized (gain) loss on securities
available for sale 60 (99) (385)
------- ------- -------
Tier 1 capital 62,956 58,656 57,385
Allowable loan loss reserves 6,266 5,766 5,734
------- ------- -------
Tier 2 capital $69,222 $64,422 $63,119
======= ======= =======
RESULTS OF OPERATIONS
Consolidated net income for the third quarter of 2005 resulted in the best
quarter in the Company's history, surpassing the earnings of the third quarter
of 2004 by 7.7%. At the same time, year to date earnings are up 7.8% 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 53 basis points from the same period of 2004, while the
Company's cost of funds increased from the nine-month 2004 levels by the same
amount,
Page 14
with substantially no change in the tax equivalent spread. 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 September 30, 2005 and 2004.
Nine Months Ended September 30,
---------------------------------------------------------------
2005 2004
------------------------------ ------------------------------
Average Interest Yield/ Average Interest Yield/
dollars in thousands Balance (b) Rate (c) Balance (b) Rate (c)
- -------------------- -------- -------- -------- -------- -------- --------
ASSETS
Interest earning assets (a)
Federal funds sold $ 5,090 $ 116 3.04% $ 3,986 $ 33 1.10%
Taxable securities 72,042 1,524 2.82% 75,687 1,546 2.72%
Tax exempt securities (b) 29,832 1,246 5.57% 29,128 1,275 5.85%
Taxable loans 517,584 25,497 6.57% 463,297 20,875 6.01%
Tax exempt loans (b) 3,270 156 6.35% 1,371 62 6.33%
-------- ------- -------- -------
Total int. earning assets (b) 627,818 28,539 6.06% 573,469 23,791 5.53%
Less allowance for loan losses (5,977) (5,661)
Other assets 59,940 59,498
-------- --------
TOTAL ASSETS $681,781 $627,306
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
NOW accounts $122,191 1,037 1.13% $113,481 433 0.51%
Savings deposits 174,929 1,931 1.47% 176,555 1,176 0.89%
CDs $100,000 and over 56,659 1,398 3.29% 36,741 815 2.96%
Other interest bearing deposits 122,426 2,840 3.09% 105,907 2,188 2.75%
-------- ------- -------- -------
Total int. bearing deposits 476,205 7,207 2.02% 432,684 4,612 1.42%
Short term borrowings 2,541 59 3.09% 2,589 27 1.39%
Other borrowings 42,620 1,437 4.50% 42,175 1,442 4.56%
-------- ------- -------- -------
Total int. bearing liabilities 521,366 8,703 2.23% 477,448 6,081 1.70%
------- -------
Noninterest bearing deposits 86,567 84,402
Other liabilities 9,218 5,840
Shareholders' equity 64,633 59,616
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $681,784 $627,306
======== ========
Net interest income (b) 19,837 17,710
------- -------
Net spread (b) 3.84% 3.83%
==== ====
Net yield on interest earning assets (b) 4.21% 4.12%
==== ====
Tax equivalent adjustment on interest income (458) (443)
------- -------
Net interest income per income statement $19,379 $17,267
======= =======
Ratio of interest earning assets to interest
bearing liabilities 1.20 1.20
==== ====
(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 nine months of 2005 increased from the same period of 2004, as net
interest income improved by just over $2.1 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. More
than half of the improvement in total interest income is a result of increases
in volume, while the increase in the Company's cost of funds is primarily
Page 15
related to changes in rate. The following table shows the effect of volume and
rate changes on net interest income for the nine months ended September 30, 2005
and 2004 on a taxable equivalent basis, in thousands of dollars.
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 $ 11 $ 72 $ 83 $ (145) $ (4) $(149)
Taxable securities (76) 54 (22) 217 (377) (160)
Tax exempt securities 31 (60) (29) (56) (26) (82)
Taxable loans 2,573 2,049 4,622 1,914 (1,507) 407
Tax exempt loans 94 -- 94 (2) (11) (13)
------ ------ ------ ------ ------- -----
Total interest income $2,633 $2,115 $4,748 $1,928 $(1,925) $ 3
====== ====== ====== ====== ======= =====
Interest paid on:
NOW accounts $ 36 $ 568 $ 604 $ 69 $ (138) $ (69)
Savings deposits (11) 766 755 101 (169) (68)
CDs $100,000 and over 483 100 583 261 (233) 28
Other interest bearing deposits 365 287 652 (385) (21) (406)
Short term borrowings (1) 33 32 26 -- 26
Other borrowings 15 (20) (5) 107 (104) 3
------ ------ ------ ------ ------- -----
Total interest expense $ 887 $1,734 $2,621 $ 179 $ (665) $(486)
====== ====== ====== ====== ======= =====
Net change in net interest income $1,746 $ 381 $2,127 $1,749 $(1,260) $ 489
====== ====== ====== ====== ======= =====
(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
Growth of noninterest income slowed in the third quarter of 2005. Total
noninterest income in the third quarter of 2005 was just $262,000 better than
the third quarter of 2004, and was $111,000 higher than the second quarter of
2005. Compared to the second quarter of 2005, noninterest income is up 3.8%,
with several categories contributing to the improvement. Service charges on
deposits improved 8.7%, while income from loan sales & servicing increased 4.0%,
reflecting slowing of 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 5.0%. Trust & Investment fee
income was up slightly for the quarter, and is ahead of the first nine months of
2004 by 6.7%
Year to date noninterest income is 5.7% 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 6.7% from the first nine months of 2004, when
consumer activity in mortgage refinancing was quite high. In addition, income on
bank-owned life insurance is down from the first three quarters 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 down 2.7% during the third quarter of 2005, with
declines in salaries and benefits, advertising and marketing and other expenses
offsetting increases in external data processing and occupancy and equipment
expense. 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 10.8% 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 down slightly from 2004 to 2005, at 27.6%
for the first nine months of 2005, compared to 27.8% for the same period of
2004.
NET INCOME
Improvements in net income for the third 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. Net income for the first nine months of 2005 is 7.8% better
than the same period of 2004, reflecting steady earnings growth for the Company.
While earnings continue to be strong, the Company anticipates that tightening
margins and increased expenses will cause fourth quarter earnings to be lower
than those achieved in the third quarter of 2005.
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" on pages A-27 to A-30 of the Company's
Annual Report on Form 10-K/A for the year ended December 31, 2004. 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 of such
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
Page 17
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 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 September 30, 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 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
of Directors of the Company, 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 September 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 September 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 that occurred during the quarter
ended September 30, 2005 that has materially affected, or are 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.
Page 19
ITEM 6-EXHIBITS
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED BANCORP, INC.
October 31, 2005
/S/ David S. Hickman /S/ Dale L. Chadderdon
- ------------------------------------- ----------------------------------------
David S. Hickman Dale L. Chadderdon
Chairman and Chief Executive Officer Executive Vice President & Chief
(Principal Executive Officer) Financial Officer
(Principal Financial Officer)
Page 20
Exhibit Index
Exhibit No. Description
- ------------ -----------
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.