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 MARCH 31, 2006
----------
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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated Filer [ ] Accelerated filer [X] Non-accelerated filer [ ]
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 April 30, 2006, there were outstanding 2,499,123 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
Background 10
Executive Summary 11
Financial Condition 12
Liquidity and Capital Resources 15
Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 1a. Risk Factors 21
Item 6. Exhibits 21
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)
March 31, December 31, March 31,
2006 2005 2005
----------- ------------ -----------
ASSETS
Cash and demand balances in other banks $ 20,430 $ 20,416 $ 16,130
Federal funds sold 12,000 -- --
-------- -------- --------
Total cash and cash equivalents 32,430 20,416 16,130
Securities available for sale 95,746 103,432 99,850
Loans held for sale 316 1,060 3,345
Portfolio loans 558,748 557,052 512,961
-------- -------- --------
Total loans 559,064 558,112 516,306
Less allowance for loan losses 6,581 6,361 5,893
-------- -------- --------
Net loans 552,483 551,751 510,413
Premises and equipment, net 12,737 12,998 13,102
Goodwill 3,469 3,469 3,469
Bank-owned life insurance 11,190 11,091 10,792
Accrued interest receivable and other assets 10,271 10,622 10,404
-------- -------- --------
TOTAL ASSETS $718,326 $713,779 $664,160
======== ======== ========
LIABILITIES
Deposits
Noninterest bearing $ 88,943 $ 88,404 $ 78,159
Interest bearing deposits 514,234 502,248 467,044
-------- -------- --------
Total deposits 603,177 590,652 545,203
Federal funds purchased and other short term borrowings 76 6,376 5,876
Other borrowings 39,228 42,228 42,847
Accrued interest payable and other liabilities 5,984 6,901 6,675
-------- -------- --------
TOTAL LIABILITIES 648,465 646,157 600,601
COMMITMENT AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Common stock and paid in capital, no par value;
5,000,000 shares authorized; 2,499,038, 2,493,238,
and 2,371,356 shares issued and outstanding 63,431 63,186 54,940
Stock dividend payable -- -- 7,925
Retained earnings 6,839 4,705 1,015
Accumulated other comprehensive income (loss), net of tax (409) (269) (321)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 69,861 67,622 63,559
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $718,326 $713,779 $664,160
======== ======== ========
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
March 31,
------------------
2006 2005
------- ------
INTEREST INCOME
Interest and fees on loans $10,076 $7,857
Interest on securities
Taxable 531 531
Tax exempt 353 261
Interest on federal funds sold 71 34
------- ------
Total interest income 11,031 8,683
INTEREST EXPENSE
Interest on deposits 3,344 2,054
Interest on short term and other borrowings 484 484
------- ------
Total interest expense 3,828 2,538
------- ------
NET INTEREST INCOME 7,203 6,145
Provision for loan losses 366 323
------- ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,837 5,822
NONINTEREST INCOME
Service charges on deposit accounts 763 657
Trust & Investment fee income 993 996
Gains (losses) on securities transactions (2) (2)
Income from loan sales and servicing 182 244
ATM, debit and credit card fee income 431 376
Income from sale of nondeposit investment products 227 164
Income from bank-owned life insurance 99 98
Other income 198 166
------- ------
Total noninterest income 2,891 2,699
NONINTEREST EXPENSE
Salaries and employee benefits 3,874 3,610
Occupancy and equipment expense, net 1,091 1,044
External data processing 350 274
Advertising and marketing 270 246
Professional Fees 269 51
Other expense 928 847
------- ------
Total noninterest expense 6,782 6,072
------- ------
INCOME BEFORE FEDERAL INCOME TAX 2,946 2,449
Federal income tax 801 665
------- ------
NET INCOME $ 2,145 $1,784
======= ======
Basic earnings per share $ 0.850 $0.712
Diluted earnings per share $ 0.850 $0.709
Cash dividends declared per share of common stock $ -- $0.333
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
March 31,
------------------
2006 2005
------- -------
TOTAL SHAREHOLDERS' EQUITY
Balance at beginning of period $67,622 $62,224
Net Income 2,145 1,784
Other comprehensive income:
Net change in unrealized gains (losses) on
securities available for sale, net
of reclass adjustments for realized
gains (losses) and related taxes (140) (420)
------- -------
Total comprehensive income 2,005 1,364
Cash dividends declared -- (828)
Common stock transactions 234 799
------- -------
Balance at end of period $69,861 $63,559
======= =======
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
Three Months Ended
March 31,
------------------
2006 2005
------- --------
Cash Flows from Operating Activities
Net income $ 2,145 $ 1,784
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation and amortization 416 522
Provision for loan losses 366 323
Gain on sale of loans (95) (177)
Proceeds from sales of loans originated for sale 4,899 11,421
Loans originated for sale (4,059) (13,487)
Losses on securities transactions 2 2
Change in accrued interest receivable and other assets 354 (277)
Increase in cash surrender value on bank-owned life insurance (99) (98)
Change in Investment in limited partnership (69) 17
Excess tax benefits from exercised stock options (26) --
Change in accrued interest payable and other liabilities 170 33
------- --------
Net cash from operating activities 4,004 63
Cash Flows from Investing Activities
Securities available for sale
Purchases -- (29)
Sales -- --
Maturities and calls 6,075 1,834
Principal payments 1,357 1,397
Net change in portfolio loans (1,903) (17,461)
Premises and equipment expenditures, net (81) (312)
------- --------
Net cash from investing activities 5,448 (14,571)
Cash Flows from Financing Activities
Net change in deposits 12,525 15,325
Net change in short term borrowings (6,300) (2,850)
Proceeds from other borrowings -- --
Principal payments on other borrowings (3,000) --
Proceeds from common stock transactions 234 799
Excess tax benefits from exercised stock options 26 --
Dividends paid (923) (824)
------- --------
Net cash from financing activities 2,562 12,450
------- --------
Net change in cash and cash equivalents 12,014 (2,058)
Cash and cash equivalents at beginning of year 20,416 18,188
------- --------
Cash and cash equivalents at end of period $32,430 $ 16,130
======= ========
Supplement Disclosure of Cash Flow Information:
Interest paid $ 3,578 $ 2,457
Income tax paid -- --
Loans transferred to other real estate 60 100
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, 2005 has been derived from the audited consolidated
balance sheet of the Company as of that date. Operating results for the three
month period ending March 31, 2006 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2006. 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, 2005. Certain amounts for 2005 have been reclassified to conform to
2006 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 2006. 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, 2006 121,136 $54.51
Options granted 25,000 62.00
Options exercised (5,317) 45.62
Options forfeited (2,368) 61.86
------- ------
Balance at March 31, 2006 138,451 $56.08
======= ======
Total options granted during the period ending March 31, 2006 were 25,000, and
the weighted fair value of the options granted was $7.65. For stock options
outstanding at March 31, 2006, the range of average exercise prices was $35.82
to $67.50 and the weighted average remaining contractual term was 7.85 years. At
March 31, 2006, 70,896 options are exercisable under the Plans.
Effective January 1, 2006, the Company adopted Statement of Accounting Standards
No. 123(R) Share-Based Payment ("SFAS 123 (R)"). SFAS 123(R) addresses all
forms of share-based payment awards, including shares under employee stock
purchase plans, stock options, restricted stock and stock appreciation rights.
SFAS 123 (R) requires all share-based payments to be recognized as expense,
based upon their fair values, in the financial statements over the vesting
period of the awards. The Company has
Page 7
elected the modified prospective application method and, as a result, has
recorded approximately $56,005 in compensation expense related to vested stock
options less estimated forfeitures for the three month period ended March 31,
2006. As of March 31, 2006, unrecognized compensation expense related to the
stock options totaled $403,321 and is expected to be recognized over 3 years.
At March 31, 2006, the aggregate intrinsic value of options outstanding totaled
$727,839. This value represents the difference between the Company's closing
stock price on the last day of trading for the first quarter and the exercise
price multiplied by the number of in-the-money options assuming all option
holders had exercised their stock options on March 31, 2006.
The aggregate intrinsic value of stock options exercised during the first
quarter of 2006 was $76,126. Exercise of options during this same period
resulted in cash receipts of $44,780 and the Company recognized a tax benefit of
approximately $25,600 on the exercise of these options and has been recorded as
an increase in equity.
The following pro forma information presents net income and earnings per share
had SFAS 123 been used to measure compensation cost for stock option grants as
of March 31, 2005. 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
March 31, 2005.
In thousands of dollars, except per share data
Three months
Ended March
31, 2005
------------
Net income, as reported $1,784
Less: Total stock-based compensation cost, net of taxes 15
------
Pro forma net income $1,769
======
Earnings per share:
Basic As reported $0.712
Basic Pro forma $0.706
Diluted As reported $0.709
Diluted Pro forma $0.703
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 $232,716,000 and $250,374,000 at the end of March,
2006 and 2005. The balance of loans serviced for others related to servicing
rights that have been capitalized was $231,398,000 and $248,529,000 at March 31,
2006 and 2005. Mortgage servicing rights activity in thousands of dollars for
the three months ended March 31, 2006 and 2005 follows:
2006 31, 2005
------ --------
Balance at January 1 $1,645 $1,820
Amount capitalized year to date 18 29
Amount amortized year to date (59) (85)
------ ------
Balance at March 31 $1,604 $1,764
====== ======
No valuation allowance was considered necessary for mortgage servicing rights at
period end 2006 and 2005.
Page 8
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, the Company declared a 5%
stock dividend payable in May 2005. Earnings per share, dividends per share and
weighted average shares have been restated to reflect this stock dividend. A
reconciliation of basic and diluted earnings per share follows:
In thousands of dollars, except per share data
Three Months Ended
March 31,
-----------------------
2006 2005
---------- ----------
Net income $ 2,145 $ 1,784
========== ==========
Basic earnings:
Weighted average common shares outstanding 2,497,948 2,479,490
Weighted average contingently issuable shares 25,638 24,755
---------- ----------
Total weighted average shares outstanding 2,523,586 2,504,245
========== ==========
Basic earnings per share $ 0.850 $ 0.712
========== ==========
Diluted earnings:
Weighted average common shares outstanding
from basic earnings per share 2,523,586 2,504,245
Dilutive effect of stock options 852 13,651
---------- ----------
Total weighted average shares outstanding 2,524,438 2,517,896
========== ==========
Diluted earnings per share $ 0.850 $ 0.709
========== ==========
A total of 74,986 and 52,500 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.
During 2006, the Board of Directors of the Company (the "Board") changed the
schedule of its meetings. In the past, the Board has met in March, and has
declared a cash dividend payable in April. With this change in meeting schedule,
the normal March meeting was held in April, 2006. As a result of this change,
there was no cash dividend declared during the first quarter of 2006. A cash
dividend of $0.37 per share was declared at the regular meeting of the Board
in April, 2006.
In addition, the Board has declared a 5% stock dividend in April, 2006, payable
to shareholders of record in May, 2006. Since the stock dividend was not
declared and is not payable during the first quarter of 2006, no restatement of
the number of shares or per share amounts were included in these financial
statements for current or previous periods.
NOTE 4 - ACCOUNTING DEVELOPMENTS
In March 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 156. This Statement amends SFAS 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, with respect to the accounting for separately recognized
servicing assets and servicing liabilities.
SFAS No. 156 requires an entity to initially recognize a servicing asset or
servicing liability at fair value each time it undertakes an obligation to
service a financial asset by entering into a servicing contract in other
specific situations. In addition, SFAS No. 156 permits an entity to choose
either of the following subsequent measurement methods for each class of
separately recognized servicing assets and servicing liabilities.
Page 9
Amortization Method - Amortize servicing assets or servicing liabilities in
proportion to and over the period of estimated net servicing income or net
servicing loss and assess servicing assets or servicing liabilities for
impairment or increased obligation based on fair value at each reporting
date.
Fair value measurement method - Measure servicing assets or servicing
liabilities at fair value at each reporting date and report changes in fair
value in earnings in the period in which the change occurs.
SFAS No. 156 is effective at the beginning of an entity's fiscal year that
begins after September 15, 2006 and should be applied prospectively for
recognition and initial measurement of servicing assets and servicing
liabilities. Earlier adoption is permitted as of the beginning of an entity's
fiscal year, provided the entity has not yet issued financial statements,
including interim financial statements, for any period of that fiscal year.
The Company did not elect to adopt SFAS No. 156 on January 1, 2006. The Company
is currently evaluating the effect of adopting this Statement on the Company's
financial condition and results of operations.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion provides information about the consolidated financial condition
and results of operations of United Bancorp, Inc. and its subsidiary banks,
United Bank & Trust ("UBT") and United Bank & Trust - Washtenaw ("UBTW") for the
three month periods ended March 31, 2006 and 2005.
In accordance with Rule 14a-3 (c) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the information contained in the narrative and tabular
information and in the consolidated financial statements and notes thereto is
provided solely for the information of shareholders and the Securities and
Exchange Commission (the "Commission"). Such information shall not be deemed to
be "soliciting material" or to be "filed" with the Commission or subject to
Regulation 14A under the Exchange Act (except as provided in Rule 14a-3) or to
the liabilities of Section 18 of the Exchange Act, unless, and only to the
extent that, it is expressly incorporated by reference into the Form 10-K of the
Company for its fiscal year ended December 31, 2005.
BACKGROUND
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 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 10
The Company's 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 Company and/or 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 offers 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.
While unemployment in Michigan remains among the highest in the U.S., the
markets served by the Banks are only marginally impacted. In particular, the Ann
Arbor market has much lower unemployment levels than does the rest of the State.
While recent downturns in the economy have impacted some small companies, in
general the Banks have not felt the impact of this decline. In addition, in part
through the addition of its Ann Arbor subsidiary in 2001, the Company continues
to gain market share in its market areas.
EXECUTIVE SUMMARY
Asset growth slowed during the first quarter of 2006, but total assets are up
significantly from the same period of 2005. Total assets reached $718.3 million,
for an increase of $54.2 million, or 8.2%, in the trailing 12 months. During the
current quarter, the Company's loan portfolio increased by just under $1
million, deposits increased by $12.5 million, and total assets were up 0.64%
from the end of 2005. Assets under management by the Trust & Investment Group of
United Bank & Trust increased by $11.0 million during the quarter, reaching
$616.9 million at March 31, 2006.
Consolidated net income of $2,145,000 for the first quarter of 2006 resulted in
the best first quarter earnings in the Company's history, increasing by 20.2%
over the first quarter of 2005. At the same time, earnings were down slightly
from the fourth quarter of 2005. Net interest income continues to generate
improvement in earnings, while noninterest income was down from the fourth
quarter of 2005 and expenses increased. The Bank's provision for loan loss was
down from the fourth quarter of 2005.
While Return on Average Assets ("ROA") and Return on Average Shareholders'
Equity ("ROE") declined from the prior two quarters, both ratios remain well
above those of the same quarter of 2005. The chart below shows the trends in the
major components of earnings for the past five quarters.
2006 2005
------- -------------------------------------
in thousands of dollars, where appropriate 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
------- ------- ------- ------- -------
Net interest income $7,203 $6,984 $6,710 $6,524 $6,145
Provision for loan losses 366 378 329 302 323
Noninterest income 2,891 2,961 3,060 2,949 2,699
Noninterest expense 6,782 6,359 6,294 6,469 6,072
Federal income tax provision 801 889 882 745 665
Net income $2,145 $2,319 $2,265 $1,957 $1,784
Return on average assets (a) 1.21% 1.30% 1.27% 1.14% 1.09%
Return on average shareholders' equity (a) 12.62% 13.77% 13.64% 12.04% 11.45%
(a) annualized
Page 11
FINANCIAL CONDITION
SECURITIES
Balances in the Company's investment securities portfolio decreased $7.7 million
during the first quarter of 2006. The decrease in the portfolio reflects
scheduled maturities and calls within the investment portfolio that have not
been replaced.
The mix of the Company's investment portfolio has shifted somewhat during the
past twelve months, as the percentage of investments held in mortgage backed
agency securities has declined and the percentage of municipal obligations has
increased. The mix of the portfolio is relatively unchanged from December 31,
2005.
The chart below shows the percentage composition of the Company's investment
portfolio as of the end of the current quarter for 2006 and 2005, and at
December 31, 2005.
3/31/06 12/31/05 3/31/05
------- -------- -------
U.S. Treasury and agency securities 42.5% 42.2% 42.4%
Mortgage backed agency securities 14.1% 14.4% 21.0%
Obligations of states and political subdivisions 40.0% 40.2% 33.4%
Corporate, asset backed, and other securities 3.4% 3.2% 3.2%
----- ----- -----
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 $952,000 in the first quarter of 2006, and have grown
by $42.8 million since the first quarter of 2005. During the most recent
quarter, personal loan balances declined slightly, and the Banks continued to
experience some refinancing in the residential mortgage portfolios into products
that are sold on the secondary market. However, that refinancing has slowed from
prior periods, resulting in a slowing in the decline in the relative amount of
mortgage balances within the loan portfolio. During the first quarter of 2006,
business loans and commercial mortgage balances declined by $14.3 million.
Construction and development loans, however, increased by nearly $16 million
during the same period. During the trailing twelve months, personal loan
balances increased along with business loans and commercial mortgages, and
construction and development loan growth continues to be strong.
Page 12
The mix of the loan portfolio continues a long-term trend toward an increased
percentage of business loans, as well as construction and development loans.
Personal loans and residential mortgages continue the trend of declining
balances. 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.
March 31, 2006 December 31, 2005 March 31, 2005
--------------------- --------------------- ---------------------
Balance % of total Balance % of total Balance % of total
-------- ---------- -------- ---------- -------- ----------
Total loans:
Personal $ 81,078 14.5% $ 81,571 14.6% $ 75,917 14.7%
Business loans and commercial mortgages 305,904 54.7% 320,188 57.4% 293,489 56.8%
Tax exempt 3,255 0.6% 3,133 0.6% 3,242 0.6%
Residential mortgage 66,943 12.0% 67,246 12.0% 75,410 14.6%
Construction & development 101,884 18.2% 85,975 15.4% 68,248 13.2%
-------- ----- -------- ------ -------- -----
Total loans $559,064 100.0% $558,112 100.00% $516,306 100.0%
======== ===== ======== ====== ======== =====
CREDIT QUALITY
The Company continues to maintain a process 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.
3/31/06 12/31/05 3/31/05
------- -------- -------
Nonaccrual loans $4,052 $5,609 $3,738
Loans past due 90 days or more 566 1,153 1,510
Troubled debt restructurings 898 -- --
------ ------ ------
Total nonperforming loans 5,516 6,762 5,248
Other real estate (ORE) 611 871 944
------ ------ ------
Total nonperforming assets $6,127 $7,633 $6,192
====== ====== ======
Percent of nonperforming loans to total loans 0.99% 1.21% 1.02%
Percent of nonperforming assets to total assets 0.85% 1.07% 0.93%
The Company's total nonperforming assets improved from year-end 2005 totals, and
are also below the levels of March 31, 2005. Nonaccrual loan balances declined
by more than $1.5 million during the quarter, and a number of business loans
remain in the process of liquidation or workout. The total of loans past due
ninety days or more also decreased considerably from year end 2005, with the
decrease primarily in the business and commercial categories of the loan
portfolio. Collection efforts are underway with past due and nonaccrual loans,
and the Company remains adequately secured.
The Company moved one commercial property to the status of troubled debt
restructuring during the first quarter of 2006. 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. 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.
Page 13
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 three months ended March 31, 2006 and 2005
follows:
2006 2005
------ ------
Balance at January 1 $6,361 $5,766
Loans charged off (161) (214)
Recoveries credited to allowance 15 18
Provision charged to operations 366 323
------ ------
Balance at March 31 $6,581 $5,893
====== ======
The following table presents the allocation of the allowance for loan losses
applicable to each loan category in thousands of dollars, as of March 31, 2006
and 2005, and December 31, 2005.
3/31/06 12/31/05 3/31/05
------- -------- -------
Business and commercial mortgage $5,676 $5,471 $5,101
Tax exempt -- -- --
Residential mortgage 15 14 14
Personal 776 777 712
Construction -- -- --
Unallocated 114 99 66
------ ------ ------
Total $6,581 $6,361 $5,893
====== ====== ======
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 12.0% of the portfolio at March
31, 2006, 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 first quarter of 2006, as total deposits
increased at an annualized rate of 8.5%, and growth over the past twelve months
was 10.6%. Short-term interest bearing accounts continue to be very popular with
clients, and demand deposit balances increased modestly. The Banks continue to
experience interest by consumers in certificates of deposit, and 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
Page 14
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 March 31, 2006
and 2005.
2006 2005
----- -----
Noninterest bearing deposits 14.7% 14.3%
Interest bearing deposits 85.3% 85.7%
----- -----
Total deposits 100.0% 100.0%
===== =====
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
2005 and 2006. 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. No advances were obtained and some maturing
advances were not replaced during the first quarter of 2006, resulting in a
decrease in the amount of FHLB borrowings outstanding at the end of the quarter.
CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions at March 31, 2006 and 2005 and December 31, 2005. The
following table shows the Company's capital ratios and ratio calculations as of
March 31, 2006 and 2005, and December 31, 2005. Dollars are shown in thousands.
Regulatory Guidelines United Bancorp, Inc.
--------------------- ----------------------------
Adequate Well 3/31/06 12/31/05 3/31/05
-------- ---- ------- -------- -------
Tier 1 capital to average assets 4% 5% 9.3% 9.4% 9.1%
Tier 1 capital to risk weighted assets 4% 6% 11.6% 11.1% 11.4%
Total capital to risk weighted assets 8% 10% 12.7% 12.2% 12.6%
Total shareholders' equity $69,861 $67,622 $63,559
Intangible assets (3,469) (3,469) (3,469)
Disallowed servicing assets -- -- --
Unrealized (gain) loss on securities available for sale 409 269 321
------- ------- -------
Tier 1 capital 66,801 64,422 60,411
Allowable loan loss reserves 6,581 6,361 5,893
------- ------- -------
Tier 2 capital $73,382 $70,783 $66,304
======= ======= =======
RESULTS OF OPERATIONS
Consolidated net income for the first quarter of 2006 resulted in the best first
quarter in the Company's history and the third-best quarter ever. Net income for
the quarter surpassed the earnings of the first quarter of 2005 by 20.2%. The
following discussion provides an analysis of these changes.
Page 15
NET INTEREST INCOME
Net interest income continues to increase quarter over quarter, as the Banks
continue to benefit from asset growth and increased short-term market rates. The
Company's year to date yield on earning assets was up ninety-four basis points
from the same period of 2005, while its cost of funds increased from the three-
month 2005 levels by seventy-six basis points, resulting in an improvement of
eighteen basis points 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 March 31, 2006 and
2005.
dollars in thousands
Three Months Ended March 31,
---------------------------------------------------------------
2006 2005
------------------------------ ------------------------------
Average Interest Yield/ Average Interest Yield/
Balance (b) Rate (c) Balance (b) Rate (c)
-------- -------- -------- -------- -------- --------
ASSETS
Interest earning assets (a)
Federal funds sold $ 6,336 $ 71 4.48% $ 5,647 $ 34 2.40%
Taxable securities 62,756 531 3.38% 74,180 531 2.86%
Tax exempt securities (b) 37,024 523 5.65% 27,630 431 6.24%
Taxable loans 555,675 10,043 7.23% 500,366 7,823 6.25%
Tax exempt loans (b) 3,122 49 6.27% 3,291 58 6.99%
-------- ------- -------- --------
Total int. earning assets (b) 664,913 11,217 6.75% 611,114 8,876 5.81%
Less allowance for loan losses (6,420) (5,793)
Other assets 59,395 59,446
-------- --------
TOTAL ASSETS $717,888 $664,767
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
NOW accounts $115,886 354 1.22% $123,205 285 0.93%
Savings deposits 181,257 994 2.19% 173,551 555 1.28%
CDs $100,000 and over 79,155 795 4.02% 49,426 376 3.04%
Other interest bearing deposits 135,275 1,201 3.55% 117,074 838 2.86%
-------- ------- -------- --------
Total int. bearing deposits 511,573 3,344 2.61% 463,256 2,054 1.77%
Short term borrowings 3,314 40 4.87% 1,090 7 2.52%
Other borrowings 39,615 444 4.48% 42,847 477 4.45%
-------- ------- -------- --------
Total int. bearing liabilities 554,502 3,828 2.76% 507,193 2,538 2.00%
------- --------
Noninterest bearing deposits 86,544 85,487
Other liabilities 7,906 8,923
Shareholders' equity 68,936 63,164
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $717,888 $664,767
======== ========
Net interest income (b) 7,388 6,338
------- --------
Net spread (b) 3.99% 3.81%
==== ====
Net yield on interest earning assets (b) 4.44% 4.15%
==== ====
Tax equivalent adjustment on interest income (185) (193)
------- -------
Net interest income per income statement $ 7,203 $ 6,145
======= ========
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
Page 16
As noted from the data in the following table, interest income and expense for
the first three months of 2006 increased from the same period of 2005, and net
interest income improved by just over $1.0 million. During that time, interest
income and interest expense both increased as a result of volume and rate
increases. Just over half of the improvement in total interest income is a
result of increases in rate, while the increase in the Company's changes in rate
were derived primarily from its loan portfolio.
The following table shows the effect of volume and rate changes on net interest
income for the three months ended March 31, 2006 and 2005 on a taxable
equivalent basis, in thousands of dollars.
2006 Compared to 2005 2005 Compared to 2004
------------------------------- -------------------------------
Increase (Decrease) Due To: (a) Increase (Decrease) Due To: (a)
------------------------------- -------------------------------
Volume Rate Net Volume Rate Net
------ ------ ------ ------ ---- ------
Interest earned on:
Federal funds sold $ 5 $ 32 $ 37 $ (2) $ 21 $ 19
Taxable securities (89) 89 -- 27 (12) 15
Tax exempt securities 136 (44) 92 (64) 37 (27)
Taxable loans 921 1,299 2,220 790 274 1,064
Tax exempt loans (3) (6) (9) 33 2 35
---- ------ ------ ---- ---- ------
Total interest income $970 $1,370 $2,340 $784 $322 $1,106
==== ====== ====== ==== ==== ======
Interest paid on:
NOW accounts $(18) $ 87 $ 69 $ 11 $140 $ 151
Savings deposits 26 413 439 (1) 197 196
CDs $100,000 and over 273 146 419 125 (3) 122
Other interest bearing deposits 143 220 363 70 35 105
Short term borrowings 23 11 34 1 4 5
Other borrowings (36) 3 (33) 26 (16) 10
---- ------ ------ ---- ---- ------
Total interest expense $411 $ 880 $1,291 $232 $357 $ 589
==== ====== ====== ==== ==== ======
Net change in net interest
income $559 $ 490 $1,049 $552 $(35) $ 517
==== ====== ====== ==== ==== ======
(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.
PROVISION FOR LOAN LOSS
The provision for loan losses for the first quarter of 2006 was $366,000,
compared to $378,000 for the fourth quarter of 2005 and $323,000 for the first
quarter of last year.
NONINTEREST INCOME
Noninterest income was up from the same period last year, but was down 2.4% from
the fourth quarter of 2005. Trust & Investment fee income improved 5.0% for the
quarter, and income from the sale of nondeposit investment products was up 25.4%
over the fourth quarter of 2005. At the same time, most other categories of
noninterest income were flat or down during the quarter. Deposit service charges
were down 5.5% from the strong levels achieved in the fourth quarter of 2005.
Income from loan sales and servicing provided the biggest decline, at 41.3%,
reflecting continued slowing of activity in the sale of mortgages in the
secondary market.
Page 17
Compared to the same period of 2005, quarterly noninterest income was up 7.1%,
with all categories of noninterest income other than income from loan sales and
servicing increasing. 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 2006 or 2005.
NONINTEREST EXPENSES
Total noninterest expenses were up 6.7% over the fourth quarter of 2005, with
substantially all of that increase in the areas of salaries and benefits and
occupancy and equipment costs. These increases reflect continued growth and
expansion of the Company. Other categories of expense were down from the prior
quarter. In comparing expenses to the same quarter of last year, most expense
categories were up, and total noninterest expense was up 11.7% over the first
quarter of 2005.
FEDERAL INCOME TAX
The Company's effective tax rate remained consistent from 2005 to 2006, at 27.2%
for the first three months of each year, and 27.7% for the fourth quarter of
2005.
NET INCOME
Overall, net interest income continues to be the driver behind the Company's
strong net income. Noninterest income will likely continue to exhibit some
degree of decline as the Company's income from loan sales and servicing slows,
and overall noninterest income levels become more dependent on other categories
of income. Expenses remain at acceptable levels, but will also increase during
the remainder of the year as the Company expands its markets and fills
currently-vacant staff positions.
While earnings continue to be strong, the Company anticipates that tightening
margins, slowing of noninterest income and increased expenses could cause second
quarter earnings to be lower than those achieved in the first quarter of 2006.
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-26 to A-29 of the Company's
Annual Report on Form 10-K for the year ended December 31, 2005. 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.
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
Page 18
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 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, 2006, 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 2005.
Page 19
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.
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 March 31, 2006, 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 March 31, 2006 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 March 31, 2006 that 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
Page 20
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 1A - RISK FACTORS
The Company's factors are substantially unchanged from those disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2005.
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.
May 4, 2006
/S/ Robert K. Chapman /S/ Dale L. Chadderdon
- ------------------------------------- ----------------------------------------
Robert K. Chapman Dale L. Chadderdon
President and Chief Executive Officer Executive Vice President & Chief
(Principal Executive Officer) Financial Officer (Principal Financial
Officer)
Page 21
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.