Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note 1:
|
Summary of Significant
Accounting Policies
|
These
interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary
to present fairly the financial position of United Bancorp, Inc. (“Company”) at September 30, 2020, and its results
of operations and cash flows for the interim periods presented. All such adjustments are normal and recurring in nature. The accompanying
condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore,
do not purport to contain all the necessary financial disclosures required by accounting principles generally accepted in the
United States of America that might otherwise be necessary in the circumstances and should be read in conjunction with the Company’s
consolidated financial statements and related notes for the year ended December 31, 2019 included in its Annual Report on Form
10-K. Reference is made to the accounting policies of the Company described in the Notes to the Consolidated Financial Statements
contained in its Annual Report on Form 10-K. The results of operations for the three months and nine months ended September 30,
2020, are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet
of the Company as of December 31, 2019 has been derived from the audited consolidated balance sheet of the Company as of that
date.
Principles
of Consolidation
The
consolidated financial statements include the accounts of United Bancorp, Inc. (“United” or “the Company”)
and its wholly-owned subsidiary, Unified Bank of Martins Ferry, Ohio (“the Bank”). All intercompany transactions and
balances have been eliminated in consolidation.
Nature
of Operations
The
Company’s revenues, operating income and assets are almost exclusively derived from banking. Accordingly, all of the Company’s
banking operations are considered by management to be aggregated in one reportable operating segment. Customers are mainly located
in Athens, Belmont, Carroll, Fairfield, Harrison, Jefferson and Tuscarawas Counties and the surrounding localities in northeastern,
east-central and southeastern Ohio and include a wide range of individuals, businesses and other organizations. Unified Bank conducts
its business through its main office in Martins Ferry, Ohio and branches in Amesville, Bridgeport, Colerain, Dellroy, Dillonvale,
Dover, Glouster, Jewett, Lancaster Downtown, Lancaster East, Nelsonville, New Philadelphia, Powhatan, St. Clairsville East, St.
Clairsville West, Sherrodsville, Strasburg, Tiltonsville, Ohio and Moudssville West Virginia. The Bank also operates a Loan Production
Office in Wheeling, West Virginia.
The
Company’s primary deposit products are checking, savings, and term certificate accounts, and its primary lending products
are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral
including business assets, consumer assets and real estate and are not considered “sub prime” type loans. The targeted
lending areas of our Bank operations encompass four separate metropolitan areas, minimizing the risk to changes in economic conditions
in the communities housing the Company’s branch locations.
Commercial
loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by both residential
and commercial real estate. Net interest income is affected by the relative amount of interest-earning assets and interest-bearing
liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Company can
be significantly influenced by a number of environmental factors, such as governmental monetary and fiscal policies, that are
outside of management’s control.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Revenue
Recognition
Accounting
Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes
principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the
entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict
the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to
receive in exchange for those goods or services recognized as performance obligations are satisfied.
The
majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments,
such as our loans, investment securities, as well as revenue related to our mortgage banking activities, as these activities are
subject to other GAAP discussed elsewhere within our disclosures.
Descriptions
of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components
of non-interest income are as follows:
Service
charges on deposit accounts - these represent general service fees for monthly account maintenance and activity- or transaction-based
fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual
attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account
maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations
are generally received at the time the performance obligations are satisfied.
Use
of Estimates
To
prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management
makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in
the financial statements and the disclosures provided and future results could differ. The allowance for loan losses and fair
values of financial instruments are particularly subject to change.
Loans
Loans
that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their
outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred
fees or costs on originated loans and unamortized premiums or discounts on purchased loans.
For
loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain
direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective
term of the loan.
For
all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured
and in process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance
of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual
due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or
interest is considered doubtful.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Management’s
general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying
collateral. Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof,
are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible
loss is reasonably determined.
For
all loan portfolio segments except residential and consumer loans, the Company promptly charges-off loans, or portions thereof,
when available information confirms that specific loans are uncollectible based on information that includes, but is not limited
to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including
bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered
to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or
other appropriate valuation of the collateral.
The
Company charges-off residential and consumer loans when the Company reasonably determines the amount of the loss. The Company
adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and
junior lien mortgages to the net realizable value less costs to sell when the loan is 120 days past due, charge-off of unsecured
open-end loans when the loan is 120 days past due, and charge down to the net realizable value when other secured loans are 120
days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both
well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged
off.
For
all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against
interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management,
the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest
or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual
loan to accrual status.
When
cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection
of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the
loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in
compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform
in accordance with the renegotiated terms for a period of at least six months.
Allowance
for Loan Losses
The
allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged
to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.
The
allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of
the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations
that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.
This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information
becomes available.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired.
For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value
or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired
loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment
and is based on the actual loss history experienced by the Company over the prior five years. Management
believes the five year historical loss experience methodology is appropriate in the current economic environment. Other
adjustments (qualitative/environmental considerations) for each segment may be added to the allowance for each loan segment after
an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk
rating data.
A loan is considered impaired when, based on current information and events, it is probable that the Company will
be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.
Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due based on the loan’s current payment status and the borrower’s financial
condition including available sources of cash flows. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a
case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length
of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation
to the principal and interest owed. Impairment is measured on a loan-by-loan basis for non-homogenous type loans such as commercial,
non-owner residential and construction loans by either the present value of expected future cash flows discounted at the loan’s
effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral
dependent. For impaired loans where the Company utilizes the discounted cash flows to determine the level of impairment,
the Company includes the entire change in the present value of cash flows as bad debt expense.
The
fair values of collateral dependent impaired loans are based on independent appraisals of the collateral. In general, the Company
acquires an updated appraisal upon identification of impairment and annually thereafter for commercial, commercial real estate
and multi-family loans. If the most recent appraisal is over a year old, and a new appraisal is not performed, due to lack of
comparable values or other reasons, the existing appraisal is utilized and discounted generally 10% - 35% based on the age of
the appraisal, condition of the subject property, and overall economic conditions. After determining the collateral value as described,
the fair value is calculated based on the determined collateral value less selling expenses. The potential
for outdated appraisal values is considered in our determination of the allowance for loan losses through our analysis of various
trends and conditions including the local economy, trends in charge-offs and delinquencies, etc. and the related qualitative adjustments
assigned by the Company.
Segments
of loans with similar risk characteristics are collectively evaluated for impairment based on the segment’s historical loss
experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly,
the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans
are the subject of a restructuring agreement due to financial difficulties of the borrower.
In
the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In this scenario,
the Company attempts to work-out an alternative payment schedule with the borrower in order to optimize collectability of the
loan. Any loans that are modified are reviewed by the Company to identify if a troubled debt restructuring (“TDR”)
has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants
a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to
repay in line with its current financial status and the restructuring of the loan may include the transfer of assets from the
borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Company do not
result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated.
At any time prior to a sale of the property at foreclosure, the Company may terminate foreclosure proceedings if the borrower
is able to work-out a satisfactory payment plan.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
It
is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain
on nonaccrual status until six months of satisfactory borrower performance at which time management would consider its return
to accrual status. If a loan was accruing at the time of restructuring, the Company reviews the loan to determine if it
is appropriate to continue the accrual of interest on the restructured loan.
With
regard to determination of the amount of the allowance for credit losses, trouble debt restructured loans are considered to be
impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings
is the same as detailed previously.
Earnings Per
Share
Basic
earnings per share represents income available to common stockholders divided by the weighted-average number of common shares
outstanding during each period. Diluted earnings per share reflects additional potential common shares that would have been outstanding
if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.
Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock awards and
are determined using the treasury stock method.
Treasury
stock shares, deferred compensation shares and unearned ESOP shares are not deemed outstanding for earnings per share calculations.
Earnings per share
(EPS) were computed as follows:
|
|
Three
Months Ended September 30, 2020
|
|
|
|
Net
Income
|
|
|
Weighted-
Average
Shares
|
|
|
Per
Share
Amount
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less allocated earnings on non-vested restricted
stock
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less allocated dividends
on non-vested restricted stock
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated to common stockholders
|
|
|
1,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,467,745
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.36
|
|
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
|
|
Three
Months Ended September 30, 2019
|
|
|
|
Net
Income
|
|
|
Weighted-
Average
Shares
|
|
|
Per
Share
Amount
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less allocated
earnings on non-vested restricted stock
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less dividends on
non-vested restricted stock
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated to common stockholders
|
|
|
1,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,519,677
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.31
|
|
|
|
Nine
Months Ended September 30, 2020
|
|
|
|
Net
Income
|
|
|
Weighted-
Average
Shares
|
|
|
Per
Share
Amount
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less allocated earnings on non-vested restricted
stock
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less allocated dividends
on non-vested restricted stock
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated to common stockholders
|
|
|
5,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,465,854
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.93
|
|
|
|
Nine
Months Ended September 30, 2019
|
|
|
|
Net
Income
|
|
|
Weighted-
Average
Shares
|
|
|
Per
Share
Amount
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less allocated earnings on non-vested restricted
stock
|
|
|
(92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less dividends on
non-vested restricted stock
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated to common stockholders
|
|
|
4,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,518,500
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.88
|
|
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Income Taxes
The Company is subject to income
taxes in the U.S. federal jurisdiction, as well as various state jurisdictions. Tax regulations within each jurisdiction are subject
to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the
Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before 2016.
Recently Adopted Accounting
Pronouncements
On February 25, 2016, the FASB
issued ASU 2016-02 “Leases (Topic 842).” ASU 2016-02 is intended to improve financial reporting about leasing
transactions. This ASU affects all companies and other organization that lease assets such as real estate, airplanes, and manufacturing
equipment.
Under the current accounting model,
an organization applies a classification test to determine the accounting for the lease arrangement:
|
(a)
|
Some leases are classified as capital where by the lessee would recognize lease assets and liabilities on the balance sheet.
|
|
(b)
|
Other leases are classified as operating leases whereby the lessee would not recognize lease assets and liabilities on the balance sheet.
|
Under the new guidance, a lessee
will be required to recognize assets and liabilities for all leases with lease terms of more than 12 months. Consistent with Generally
Accepted Accounting Principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a
lease by a lessee primarily will depend on its classification as a finance or operating lease.
However, unlike current GAAP—which
requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized
on the balance sheet. Right of use assets represents the Company’s right to use the underlying assets for their lease terms
and lease liabilities represent the obligation to make lease payments.
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
The
Company adopted ASU 2016-02 January 1, 2019. The right of use asset and lease obligation recorded as of March 31, 2019 was
approximately $126,000 and is reflected in other assets and interest payable and other liabilities, respectively on the balance
sheet. The modified retrospective method was applied. Due to the immateriality of the impact, certain disclosures under ASU 842
have been omitted.
Recent Accounting Pronouncements
In June 2016, the FASB issued
ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.”
The provisions of ASU 2016-13 were issued to provide financial statement users with more decision-useful information about the
expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held
for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to
extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized
cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the
amortized cost basis. The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect
an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical
experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.
For purchased financial assets
with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at
amortized cost, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss
expense. Subsequent changes in the allowance for credit losses on PCD assets are recognized through the statement of income as
a credit loss expense.
Credit losses relating to available-for-sale
debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security.
On October 16, 2019, FASB approved
a final ASU delaying the effective date of ASU 2016-13 for small reporting companies to interim and annual periods beginning after
December 15, 2022. The Company is currently evaluating the impact of these amendments to the Company’s financial position
and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments
as a result of the complexity and extensive changes from the amendments. The Allowance for Loan Losses (ALL) estimate is material
to the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of
the loan, there is the potential for an increase in the ALL at adoption date. The Company is anticipating a significant change
in the processes and procedures to calculate the ALL, including changes in assumptions and estimates to consider expected credit
losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. In addition, the
current accounting policy and procedures for the other-than-temporary impairment on available-for-sale securities will be replaced
with an allowance approach. As of September 30, 2020, the Company is working with a third party to continues to run projections
and reviewing segmentation to ensure it is fully compliant with the amendments at adoption date. For additional information on
the allowance for loan losses, see Note 3.
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
The amortized cost and approximate
fair values, together with gross unrealized gains and losses of securities are as follows:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Available-for-sale Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
10,000
|
|
|
$
|
89
|
|
|
$
|
---
|
|
|
$
|
10,089
|
|
Subordinated notes
|
|
|
4,500
|
|
|
|
---
|
|
|
|
(49
|
)
|
|
|
4,451
|
|
State and municipal obligations
|
|
|
130,195
|
|
|
|
13,509
|
|
|
|
---
|
|
|
|
143,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
$
|
144,695
|
|
|
$
|
13,598
|
|
|
$
|
(49
|
)
|
|
$
|
158,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
40,000
|
|
|
$
|
––
|
|
|
$
|
(472
|
)
|
|
$
|
39,528
|
|
Subordinated notes
|
|
|
4,500
|
|
|
|
36
|
|
|
|
(4
|
)
|
|
|
4,532
|
|
State and municipal obligations
|
|
$
|
135,897
|
|
|
$
|
8,993
|
|
|
$
|
(165
|
)
|
|
$
|
144,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
$
|
180,397
|
|
|
$
|
9,029
|
|
|
$
|
(641
|
)
|
|
$
|
188,785
|
|
The amortized cost and fair value
of available-for-sale securities at September 30, 2019, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment
penalties.
|
|
Available-for-sale
|
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Within one year
|
|
$
|
---
|
|
|
$
|
---
|
|
One to five years
|
|
|
---
|
|
|
|
---
|
|
Five to ten year
|
|
|
14,500
|
|
|
|
14,540
|
|
Due after ten years
|
|
|
130,195
|
|
|
|
143,704
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
144,695
|
|
|
$
|
158,244
|
|
The carrying value of securities
pledged to secure public deposits and for other purpose, was $44.0 million and $46.8 million at September 30, 2020 and December
31, 2019, respectively.
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Certain investments in debt securities
are reported in the financial statements at an amount less than their historical cost. The total fair value of these investments
at September 30, 2020 and December 31, 2019, was $4.5 million and $50.3 million, which represented approximately 3% and 27%, respectively,
of the Company’s available-for-sale investment portfolio.
Based on evaluation of available
evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory
filings, management believes the declines in fair value for these securities are temporary and are a result on an general increase
in longer term interest rates.
Should the impairment of any
of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized
in net income in the period the other-than-temporary impairment is identified.
The following tables show the
Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time
that individual securities have been in a continuous unrealized loss position at September 30, 2020 and December 31, 2019:
|
|
September 30, 2020
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
Description of
Securities
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
US Government agencies
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Subordinated notes
|
|
|
4,500
|
|
|
|
(49
|
)
|
|
|
---
|
|
|
|
---
|
|
|
|
4,500
|
|
|
|
(49
|
)
|
State and municipal obligations
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
4,500
|
|
|
$
|
(49
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
4,500
|
|
|
$
|
(49
|
)
|
|
|
December 31, 2019
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
Description of
Securities
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
US Government agencies
|
|
$
|
39,528
|
|
|
$
|
(472
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
39,528
|
|
|
$
|
(472
|
)
|
Subordinated notes
|
|
|
996
|
|
|
|
(4
|
)
|
|
|
---
|
|
|
|
---
|
|
|
|
996
|
|
|
|
(4
|
)
|
State and municipal obligations
|
|
$
|
9,831
|
|
|
$
|
(165
|
)
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
9,831
|
|
|
$
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
50,355
|
|
|
$
|
(641
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
50,355
|
|
|
$
|
(641
|
)
|
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
The unrealized losses on the
Company’s investments in U.S. Government agencies were caused primarily by interest rate changes. The contractual terms of
those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.
Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to
sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those
investments to be other-than-temporarily impaired at September 30, 2020 and December 31, 2019.
During the nine months ended
September 30, 2020 the Company sold $23.7 million of State and Municipal securities for a total gain of approximately $2,525,000
and the Company also sold $8.0 million of US Government Agency bonds for a total gain of approximately $69,000. There were no sales
of investment securities for the three and nine months ended September 30, 2019.
Note 3:
|
Loans and Allowance for Loan Losses
|
Categories of loans include:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial loans
|
|
$
|
100,460
|
|
|
$
|
99,995
|
|
Commercial real estate
|
|
|
245,343
|
|
|
|
254,651
|
|
Residential real estate
|
|
|
88,618
|
|
|
|
77,205
|
|
Installment loans
|
|
|
8,855
|
|
|
|
9,697
|
|
|
|
|
|
|
|
|
|
|
Total gross loans
|
|
|
443,276
|
|
|
|
441,548
|
|
|
|
|
|
|
|
|
|
|
Less allowance for loan losses
|
|
|
(5,228
|
)
|
|
|
(2,231
|
)
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
438,048
|
|
|
$
|
439,317
|
|
The risk characteristics of each loan portfolio segment
are as follows:
Commercial
Commercial loans are primarily
based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash
flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial
loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include
a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable,
the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect
amounts due from its customers.
Commercial Real Estate
Commercial real estate loans
are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically
involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the
property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more
adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing
the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s
market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria.
In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate
risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Residential and Installment
Residential and installment loans
consist of two segments - residential mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4
family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires
private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4
family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles.
Some installment personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these
loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market
areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk
is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
Allowance for Loan Losses and Recorded
Investment in Loans
As of and for the three and nine month
periods ended September 30, 2020
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 1, 2020
|
|
$
|
2,344
|
|
|
$
|
751
|
|
|
$
|
600
|
|
|
$
|
320
|
|
|
$
|
---
|
|
|
$
|
4,015
|
|
Provision charged to expense
|
|
|
(1,031
|
)
|
|
|
1,202
|
|
|
|
988
|
|
|
|
174
|
|
|
|
---
|
|
|
|
1,333
|
|
Losses charged off
|
|
|
(5
|
)
|
|
|
(63
|
)
|
|
|
(21
|
)
|
|
|
(55
|
)
|
|
|
––
|
|
|
|
(144
|
)
|
Recoveries
|
|
|
13
|
|
|
|
---
|
|
|
|
1
|
|
|
|
10
|
|
|
|
––
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
$
|
1,321
|
|
|
$
|
1,890
|
|
|
$
|
1,568
|
|
|
$
|
449
|
|
|
$
|
---
|
|
|
$
|
5,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2020
|
|
$
|
568
|
|
|
$
|
792
|
|
|
$
|
572
|
|
|
$
|
299
|
|
|
$
|
---
|
|
|
$
|
2,231
|
|
Provision charged to expense
|
|
|
777
|
|
|
|
1,288
|
|
|
|
1,027
|
|
|
|
212
|
|
|
|
|
|
|
|
3,304
|
|
Losses charged off
|
|
|
(47
|
)
|
|
|
(190
|
)
|
|
|
(33
|
)
|
|
|
(115
|
)
|
|
|
––
|
|
|
|
(385
|
)
|
Recoveries
|
|
|
23
|
|
|
|
---
|
|
|
|
2
|
|
|
|
53
|
|
|
|
––
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
$
|
1,321
|
|
|
$
|
1,890
|
|
|
$
|
1,568
|
|
|
$
|
449
|
|
|
$
|
---
|
|
|
$
|
5,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
4
|
|
|
$
|
21
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
25
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
1,317
|
|
|
$
|
1,869
|
|
|
$
|
1,568
|
|
|
$
|
449
|
|
|
$
|
---
|
|
|
$
|
5,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
22
|
|
|
$
|
614
|
|
|
$
|
525
|
|
|
$
|
134
|
|
|
$
|
---
|
|
|
$
|
1,295
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
100,438
|
|
|
$
|
244,729
|
|
|
$
|
88,093
|
|
|
$
|
8,721
|
|
|
$
|
---
|
|
|
$
|
441,981
|
|
United Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Allowance for Loan Losses and Recorded
Investment in Loans
As of and for the three and nine month
period ended September 30, 2019
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Installment
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 1, 2019
|
|
$
|
262
|
|
|
$
|
799
|
|
|
$
|
747
|
|
|
$
|
334
|
|
|
$
|
---
|
|
|
$
|
2,142
|
|
Provision charged to expense
|
|
|
95
|
|
|
|
(93
|
)
|
|
|
53
|
|
|
|
65
|
|
|
|
---
|
|
|
|
120
|
|
Losses charged off
|
|
|
---
|
|
|
|
---
|
|
|
|
(100
|
)
|
|
|
(54
|
)
|
|
|
––
|
|
|
|
(154
|
)
|
Recoveries
|
|
|
---
|
|
|
|
---
|
|
|
|
1
|
|
|
|
12
|
|
|
|
––
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
|
$
|
357
|
|
|
$
|
706
|
|
|
$
|
701
|
|
|
$
|
357
|
|
|
$
|
---
|
|
|
$
|
2,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019
|
|
$
|
389
|
|
|
$
|
672
|
|
|
$
|
519
|
|
|
$
|
463
|
|
|
$
|
---
|
|
|
$
|
2,043
|
|
Provision charged to expense
|
|
|
(15
|
)
|
|
|
34
|
|
|
|
311
|
|
|
|
---
|
|
|
|
|
|
|
|
330
|
|
Losses charged off
|
|
|
(18
|
)
|
|
|
––
|
|
|
|
(140
|
)
|
|
|
(136
|
)
|
|
|
––
|
|
|
|
(294
|
)
|
Recoveries
|
|
|
1
|
|
|
|
---
|
|
|
|
11
|
|
|
|
30
|
|
|
|
––
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
|
$
|
357
|
|
|
$
|
706
|
|
|
$
|
701
|
|
|
$
|
357
|
|
|
$
|
---
|
|
|
$
|
2,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
63
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
63
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
294
|
|
|
$
|
706
|
|
|
$
|
701
|
|
|
$
|
357
|
|
|
$
|
---
|
|
|
$
|
2,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
1,330
|
|
|
$
|
369
|
|
|
$
|
558
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,257
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
100,476
|
|
|
$
|
234,469
|
|
|
$
|
73,969
|
|
|
$
|
10,094
|
|
|
$
|
---
|
|
|
$
|
419,008
|
|
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Allowance for Loan Losses and Recorded
Investment in Loans
As of December 31, 2019
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Allowance
for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
---
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
568
|
|
|
$
|
792
|
|
|
$
|
572
|
|
|
$
|
299
|
|
|
$
|
---
|
|
|
$
|
2,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
71
|
|
|
$
|
371
|
|
|
$
|
594
|
|
|
$
|
---
|
|
|
$
|
––
|
|
|
$
|
1,036
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
99,924
|
|
|
$
|
254,280
|
|
|
$
|
76,611
|
|
|
$
|
9,697
|
|
|
$
|
––
|
|
|
$
|
440,512
|
|
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
The following tables show the portfolio quality indicators.
|
|
September 30, 2020
|
|
Loan Class
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Pass Grade
|
|
$
|
100,435
|
|
|
$
|
241,780
|
|
|
$
|
88,093
|
|
|
$
|
8,721
|
|
|
$
|
439,029
|
|
Special Mention
|
|
|
---
|
|
|
|
2,727
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,727
|
|
Substandard
|
|
|
25
|
|
|
|
836
|
|
|
|
525
|
|
|
|
134
|
|
|
|
1,520
|
|
Doubtful
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,460
|
|
|
$
|
245,343
|
|
|
$
|
88,618
|
|
|
$
|
8,855
|
|
|
$
|
443,276
|
|
|
|
December 31, 2019
|
|
Loan Class
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Pass Grade
|
|
$
|
99,924
|
|
|
$
|
249,563
|
|
|
$
|
76,611
|
|
|
$
|
9,697
|
|
|
$
|
435,795
|
|
Special Mention
|
|
|
---
|
|
|
|
4,016
|
|
|
|
––
|
|
|
|
––
|
|
|
|
4,016
|
|
Substandard
|
|
|
71
|
|
|
|
1,072
|
|
|
|
594
|
|
|
|
---
|
|
|
|
1,737
|
|
Doubtful
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,995
|
|
|
$
|
254,651
|
|
|
$
|
77,205
|
|
|
$
|
9,697
|
|
|
$
|
441,548
|
|
To facilitate the monitoring
of credit quality within the loan portfolio, and for purposes of analyzing historical loss rates used in the determination of the
ALLL, the Company utilizes the following categories of credit grades: pass, special mention, substandard, and doubtful. The four
categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers
and updated periodically thereafter. Pass ratings, which are assigned to those borrowers that do not have identified potential
or well defined weaknesses and for which there is a high likelihood of orderly repayment, are updated periodically based on the
size and credit characteristics of the borrower. All other categories are updated on at least a quarterly basis.
The Company assigns a special
mention rating to loans that have potential weaknesses that deserve management’s close attention. If left uncorrected, these
potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan or the Company’s
credit position.
The Company assigns a substandard
rating to loans that are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral
pledged. Substandard loans have well defined weaknesses or weaknesses that could jeopardize the orderly repayment of the debt.
Loans and leases in this grade also are characterized by the distinct possibility that the Company will sustain some loss if the
deficiencies noted are not addressed and corrected.
The Company assigns a doubtful
rating to loans that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection
or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The
possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to
the advantage of and strengthen the credit quality of the loan or lease, its classification as an estimated loss is deferred until
its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding,
capital injection, perfecting liens on additional collateral or refinancing plans.
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
The Company evaluates the loan
risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made
to either during the current and past year to date periods presented.
Loan Portfolio Aging Analysis
As of September 30, 2020
|
|
30-59 Days
Past Due
and
Accruing
|
|
|
60-89 Days
Past Due
and
Accruing
|
|
|
Greater
Than 90
Days and
Accruing
|
|
|
Non
Accrual
|
|
|
Total Past
Due and
Non Accrual
|
|
|
Current
|
|
|
Total Loans
Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
37
|
|
|
$
|
37
|
|
|
$
|
100,423
|
|
|
$
|
100,460
|
|
Commercial real estate
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
497
|
|
|
|
497
|
|
|
|
244,846
|
|
|
|
245,343
|
|
Residential
|
|
|
108
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,010
|
|
|
|
1,118
|
|
|
|
87,500
|
|
|
|
88,618
|
|
Installment
|
|
|
9
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
9
|
|
|
|
8,846
|
|
|
|
8,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
117
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,544
|
|
|
$
|
1,661
|
|
|
$
|
441,615
|
|
|
$
|
443,276
|
|
Loan Portfolio Aging Analysis
As of December 31, 2019
|
|
30-59 Days
Past Due
and
Accruing
|
|
|
60-89 Days
Past Due
and
Accruing
|
|
|
Greater
Than 90
Days and
Accruing
|
|
|
Non
Accrual
|
|
|
Total Past
Due and
Non Accrual
|
|
|
Current
|
|
|
Total Loans
Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
$
|
129
|
|
|
$
|
132
|
|
|
$
|
---
|
|
|
$
|
30
|
|
|
$
|
291
|
|
|
$
|
99,704
|
|
|
$
|
99,995
|
|
Commercial real estate
|
|
|
---
|
|
|
|
214
|
|
|
|
197
|
|
|
|
348
|
|
|
|
759
|
|
|
|
253,892
|
|
|
|
254,651
|
|
Residential
|
|
|
448
|
|
|
|
---
|
|
|
|
29
|
|
|
|
1,074
|
|
|
|
1,551
|
|
|
|
75,654
|
|
|
|
77,205
|
|
Installment
|
|
|
58
|
|
|
|
1
|
|
|
|
––
|
|
|
|
---
|
|
|
|
59
|
|
|
|
9,638
|
|
|
|
9,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
635
|
|
|
$
|
347
|
|
|
$
|
226
|
|
|
$
|
1,452
|
|
|
$
|
2,660
|
|
|
$
|
438,888
|
|
|
$
|
441,548
|
|
A loan is considered impaired,
in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable
the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired
loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions
have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest
rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Impaired
Loans
|
|
As of September 30, 2020
|
|
|
For the three months ended
September 30, 2020
|
|
|
For the nine months ended
September 30, 2020
|
|
|
|
Recorded
Balance
|
|
|
Unpaid
Principal
Balance
|
|
|
Specific
Allowance
|
|
|
Average
Investment in
Impaired Loans
|
|
|
Interest
Income
Recognized
|
|
|
Average
Investment in
Impaired Loans
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Loans without a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
––
|
|
|
$
|
---
|
|
|
$
|
(5
|
)
|
|
$
|
---
|
|
|
$
|
1
|
|
Commercial real estate
|
|
|
522
|
|
|
|
585
|
|
|
|
––
|
|
|
|
593
|
|
|
|
9
|
|
|
|
589
|
|
|
|
14
|
|
Residential
|
|
|
525
|
|
|
|
532
|
|
|
|
––
|
|
|
|
525
|
|
|
|
7
|
|
|
|
493
|
|
|
|
21
|
|
Installment
|
|
|
134
|
|
|
|
148
|
|
|
|
––
|
|
|
|
150
|
|
|
|
1
|
|
|
|
151
|
|
|
|
5
|
|
|
|
|
1,181
|
|
|
|
1,265
|
|
|
|
––
|
|
|
|
1,268
|
|
|
|
12
|
|
|
|
1,233
|
|
|
|
41
|
|
Loans with a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
22
|
|
|
|
22
|
|
|
|
4
|
|
|
|
23
|
|
|
|
—
|
|
|
|
24
|
|
|
|
1
|
|
Commercial real estate
|
|
|
92
|
|
|
|
92
|
|
|
|
21
|
|
|
|
92
|
|
|
|
3
|
|
|
|
92
|
|
|
|
3
|
|
Residential
|
|
|
—
|
|
|
|
—
|
|
|
|
---
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
––
|
|
Installment
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
—
|
|
|
|
––
|
|
|
|
—
|
|
|
|
|
114
|
|
|
|
114
|
|
|
|
25
|
|
|
|
115
|
|
|
|
3
|
|
|
|
116
|
|
|
|
4
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
22
|
|
|
$
|
22
|
|
|
$
|
4
|
|
|
$
|
23
|
|
|
$
|
(5
|
)
|
|
$
|
24
|
|
|
$
|
2
|
|
Commercial real estate
|
|
$
|
614
|
|
|
$
|
677
|
|
|
$
|
21
|
|
|
$
|
685
|
|
|
$
|
12
|
|
|
$
|
681
|
|
|
$
|
17
|
|
Residential
|
|
$
|
525
|
|
|
$
|
532
|
|
|
$
|
—
|
|
|
$
|
525
|
|
|
$
|
7
|
|
|
$
|
493
|
|
|
$
|
21
|
|
Installment
|
|
$
|
134
|
|
|
$
|
148
|
|
|
$
|
––
|
|
|
$
|
150
|
|
|
$
|
1
|
|
|
$
|
151
|
|
|
$
|
5
|
|
Impaired Loans
|
|
As of December 31, 2019
|
|
|
For the three months ended
September 30, 2019
|
|
|
For the nine months ended
September 30, 2019
|
|
|
|
Recorded
Balance
|
|
|
Unpaid
Principal
Balance
|
|
|
Specific
Allowance
|
|
|
Average
Investment in
Impaired Loans
|
|
|
Interest
Income
Recognized
|
|
|
Average
Investment in
Impaired Loans
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Loans without a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
71
|
|
|
$
|
71
|
|
|
$
|
––
|
|
|
$
|
966
|
|
|
$
|
9
|
|
|
$
|
956
|
|
|
$
|
13
|
|
Commercial real estate
|
|
|
371
|
|
|
|
371
|
|
|
|
––
|
|
|
|
374
|
|
|
|
2
|
|
|
|
350
|
|
|
|
8
|
|
Residential
|
|
|
594
|
|
|
|
594
|
|
|
|
––
|
|
|
|
640
|
|
|
|
11
|
|
|
|
644
|
|
|
|
18
|
|
Installment
|
|
|
—
|
|
|
|
—
|
|
|
|
––
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
1,036
|
|
|
|
1,036
|
|
|
|
––
|
|
|
|
1,980
|
|
|
|
22
|
|
|
|
1,950
|
|
|
|
39
|
|
Loans with a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
366
|
|
|
|
---
|
|
|
|
365
|
|
|
|
3
|
|
Commercial real estate
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Installment
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
—
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
366
|
|
|
|
---
|
|
|
|
365
|
|
|
|
3
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
71
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
1,332
|
|
|
$
|
9
|
|
|
$
|
1,321
|
|
|
$
|
16
|
|
Commercial real estate
|
|
$
|
371
|
|
|
$
|
371
|
|
|
$
|
---
|
|
|
$
|
374
|
|
|
$
|
2
|
|
|
$
|
350
|
|
|
$
|
8
|
|
Residential
|
|
$
|
594
|
|
|
$
|
594
|
|
|
$
|
––
|
|
|
$
|
640
|
|
|
$
|
11
|
|
|
$
|
644
|
|
|
$
|
18
|
|
Installment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
––
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Interest income recognized on
a cash basis was not materiality different than interest income recognized.
For the TDRs noted in the tables
below, the Company extended the maturity dates and granted interest rate concessions as part of each of those loan restructurings.
The loans included in the tables are considered impaired and specific loss calculations are performed on the individual loans.
In conjunction with the restructuring there were no amounts charged-off.
|
|
Three Months ended September 30, 2020
|
|
|
|
Number of
Contracts
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Commercial real estate
|
|
|
---
|
|
|
|
---
|
|
|
|
––
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Installment
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
Three Months Ended September 30, 2020
|
|
|
|
Interest
Only
|
|
|
Term
|
|
|
Combination
|
|
|
Total
Modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Commercial
|
|
$
|
––
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Commercial real estate
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Consumer
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
Nine Months ended September 30, 2020
|
|
|
|
Number of
Contracts
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
|
3
|
|
|
$
|
67
|
|
|
$
|
67
|
|
Commercial real estate
|
|
|
1
|
|
|
|
86
|
|
|
|
86
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Installment
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
Interest
Only
|
|
|
Term
|
|
|
Combination
|
|
|
Total
Modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Commercial
|
|
$
|
---
|
|
|
$
|
23
|
|
|
$
|
44
|
|
|
$
|
67
|
|
Commercial real estate
|
|
|
––
|
|
|
|
86
|
|
|
|
––
|
|
|
|
87
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Consumer
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
|
|
|
Three Months ended September 30, 2019
|
|
|
|
|
Number of
Contracts
|
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
|
2
|
|
|
$
|
82
|
|
|
$
|
82
|
|
Commercial real estate
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Installment
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
Interest
Only
|
|
|
|
Term
|
|
|
|
Combination
|
|
|
|
Total
Modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
$
|
––
|
|
|
$
|
82
|
|
|
$
|
––
|
|
|
$
|
82
|
|
Commercial real estate
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Consumer
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
|
Nine Months ended September 30, 2019
|
|
|
|
|
Number of
Contracts
|
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
|
2
|
|
|
$
|
82
|
|
|
$
|
82
|
|
Commercial real estate
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Installment
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
Interest
Only
|
|
|
|
Term
|
|
|
|
Combination
|
|
|
|
Total
Modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
$
|
2
|
|
|
$
|
82
|
|
|
$
|
––
|
|
|
$
|
82
|
|
Commercial real estate
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
Consumer
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
During the nine months ended
September 30, 2019 and 2020 troubled debt restructurings did not have an impact on the allowance for loan losses. At September
30, 2020 and 2019 and for three and nine month periods then ended, there were no defaults of any troubled debt restructurings that
were modified in the last 12 months. The Company generally considers TDR’s that become 90 days or more past due under the
modified terms as subsequently defaulted.
Pension expense includes the
following:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Service cost
|
|
$
|
98
|
|
|
$
|
75
|
|
|
$
|
294
|
|
|
$
|
225
|
|
Interest cost
|
|
|
59
|
|
|
|
55
|
|
|
|
177
|
|
|
|
165
|
|
Expected return on assets
|
|
|
(117
|
)
|
|
|
(102
|
)
|
|
|
(351
|
)
|
|
|
(306
|
)
|
Amortization of prior service cost and net loss
|
|
|
13
|
|
|
|
1
|
)
|
|
|
39
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension expense
|
|
$
|
53
|
|
|
$
|
29
|
|
|
$
|
159
|
|
|
$
|
87
|
|
Note 5:
|
Off-balance-sheet Activities
|
Some financial instruments,
such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as long as conditions established in the contracts are
met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists
up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to
make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
A summary of the notional or
contractual amounts of financial instruments with off-balance-sheet risk at the indicated dates is as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial loans unused lines of credit
|
|
$
|
33,406
|
|
|
$
|
40,538
|
|
Commitment to originate loans
|
|
|
30,927
|
|
|
|
38,722
|
|
Consumer open end lines of credit
|
|
|
39,244
|
|
|
|
38,575
|
|
Standby lines of credit
|
|
|
22
|
|
|
|
46
|
|
|
Note 6:
|
Accumulated Other Comprehensive Income (Loss)
|
The components of accumulated
other comprehensive income (loss), included in stockholders’ equity, are as follows:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Net unrealized gain on securities available-for-sale
|
|
$
|
13,549
|
|
|
$
|
8,389
|
|
Net unrealized loss for unfunded status of defined benefit plan liability
|
|
|
(1,381
|
)
|
|
|
(1,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
12,168
|
|
|
|
7,008
|
|
Tax effect
|
|
|
(2,555
|
)
|
|
|
(1,472)
|
|
|
|
|
|
|
|
|
|
|
Net-of-tax amount
|
|
$
|
9,613
|
|
|
$
|
5,536
|
|
|
Note 7:
|
Fair Value Measurements
|
The Company defines fair value
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The Company also utilizes a fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that
may be used to measure fair value:
Level
1 Quoted prices in active markets for identical assets or liabilities
that the entity can access at the measurement date
Level
2 Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Level
3 Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities
Following is a description of
the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated
balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Available-for-sale Securities
Where quoted market prices are
available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices
are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent
asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including,
but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows.
Such securities are classified in Level 2 of the valuation hierarchy.
The following table presents
the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring
basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2020 and December
31, 2019:
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Fair Value
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
10,089
|
|
|
$
|
—
|
|
|
$
|
10,089
|
|
|
$
|
—
|
|
State and municipal obligations
|
|
|
143,704
|
|
|
|
—
|
|
|
|
143,704
|
|
|
|
—
|
|
Subordinated notes
|
|
|
4,451
|
|
|
|
—
|
|
|
|
4,451
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
39,528
|
|
|
$
|
––
|
|
|
$
|
39,528
|
|
|
$
|
––
|
|
State and municipal obligations
|
|
$
|
144,725
|
|
|
$
|
––
|
|
|
$
|
144,725
|
|
|
$
|
––
|
|
Subordinated notes
|
|
$
|
4,532
|
|
|
$
|
––
|
|
|
$
|
4,532
|
|
|
$
|
––
|
|
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Following is a description of
the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated
balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified
within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.
Impaired Loans (Collateral Dependent)
Collateral dependent impaired
loans consisted primarily of loans secured by nonresidential real estate. Management has determined fair value measurements on
impaired loans primarily through evaluations of appraisals performed. Due to the nature of the valuation inputs, impaired loans
are classified within Level 3 of the hierarchy.
The Company considers the appraisal
or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that
may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined
to be collateral-dependent and subsequently as deemed necessary by the Company’s Chief Lender. Appraisals are reviewed for
accuracy and consistency by the Company’s Chief Lender. Appraisers are selected from the list of approved appraisers maintained
by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment
or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Company’s
Chief Lender by comparison to historical results.
Foreclosed Assets Held for Sale
Assets acquired through, or
in lieu of, loan foreclosure are held for sale and are initially recorded at fair value (based on current appraised value) at the
date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management
and the assets are carried at the lower of carrying amount or fair value less cost to sell. Management has determined fair value
measurements on other real estate owned primarily through evaluations of appraisals performed, and current and past offers. Due
to the nature of the valuation inputs, foreclosed assets held for sale are classified within Level 3 of the hierarchy.
Appraisals of foreclosed assets
held for sale are obtained when the real estate is acquired and subsequently as deemed necessary by the Company’s Chief Lender.
Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender and are selected from the list of approved
appraisers maintained by management.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The following table presents
the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring
basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2020 and December
31, 2019.
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent impaired loans
|
|
$
|
89
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
89
|
|
Foreclosed assets held for sale
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent impaired loans
|
|
$
|
---
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
---
|
|
Foreclosed assets held for sale
|
|
|
---
|
|
|
|
––
|
|
|
|
––
|
|
|
|
---
|
|
Unobservable (Level 3) Inputs
The following table presents
quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.
|
|
Fair Value at
9/30/20
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Collateral-dependent impaired loans
|
|
$
|
89
|
|
|
Market
comparable
properties
|
|
Marketability discount
|
|
10% - 25%
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed assets held for sale
|
|
$
|
---
|
|
|
Market
comparable
properties
|
|
Marketability discount
|
|
10% – 35%
|
|
|
Fair Value at 12/31/19
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Collateral-dependent impaired loans
|
|
$
|
---
|
|
|
Market
comparable
properties
|
|
Comparability adjustments
|
|
Not available
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed assets held for sale
|
|
$
|
---
|
|
|
Market
comparable
properties
|
|
Marketability discount
|
|
10% – 35%
|
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
There
were no significant changes in the valuation techniques used during 2020 and 2019.
The
following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these
instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties.
Because no market exists for certain of these financial instruments and because management does not intend to sell these financial
instruments, the Company does not know whether the fair values shown below represent values at which the respective financial
instruments could be sold individually or in the aggregate.
|
|
|
|
|
Fair
Value Measurements Using
|
|
|
|
Carrying
Amount
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level
1)
|
|
|
Significant
Other
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50,937
|
|
|
$
|
50,937
|
|
|
$
|
––
|
|
|
$
|
––
|
|
Loans, net of allowance
|
|
|
438,048
|
|
|
|
––
|
|
|
|
––
|
|
|
|
436,722
|
|
Federal Home Loan
Bank stock
|
|
|
4,252
|
|
|
|
––
|
|
|
|
4,252
|
|
|
|
––
|
|
Accrued interest receivable
|
|
|
3,070
|
|
|
|
––
|
|
|
|
3,070
|
|
|
|
––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
576,856
|
|
|
|
––
|
|
|
|
577,842
|
|
|
|
––
|
|
Short term borrowings
|
|
|
17,027
|
|
|
|
––
|
|
|
|
17,027
|
|
|
|
––
|
|
Subordinated debentures
|
|
|
23,589
|
|
|
|
––
|
|
|
|
23,524
|
|
|
|
––
|
|
Interest payable
|
|
|
660
|
|
|
|
|
|
|
|
660
|
|
|
|
––
|
|
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
|
|
|
|
|
Fair
Value Measurements Using
|
|
|
|
Carrying
Amount
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level
1)
|
|
|
Significant
Other
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
14,985
|
|
|
$
|
14,985
|
|
|
$
|
––
|
|
|
$
|
––
|
|
Loans, net of allowance
|
|
|
439,317
|
|
|
|
––
|
|
|
|
––
|
|
|
|
437,688
|
|
Federal Home Loan
Bank stock
|
|
|
4,012
|
|
|
|
––
|
|
|
|
4,012
|
|
|
|
––
|
|
Accrued interest receivable
|
|
|
2,697
|
|
|
|
––
|
|
|
|
2,697
|
|
|
|
––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
548,069
|
|
|
|
––
|
|
|
|
548,130
|
|
|
|
––
|
|
Short term borrowings
|
|
|
6,915
|
|
|
|
––
|
|
|
|
6,915
|
|
|
|
––
|
|
Federal Home Loan
Bank Advances
|
|
|
39,800
|
|
|
|
––
|
|
|
|
39,800
|
|
|
|
––
|
|
Subordinated debentures
|
|
|
23,543
|
|
|
|
––
|
|
|
|
22,857
|
|
|
|
––
|
|
Interest payable
|
|
|
213
|
|
|
|
––
|
|
|
|
213
|
|
|
|
––
|
|
The
following methods and assumptions were used to estimate the fair value of each class of financial instruments.
Cash and Cash Equivalents,
Accrued Interest Receivable and Federal Home Loan Bank Stock
The
carrying amounts approximate fair value.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Loans
Fair
values of loans and leases are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability
factors.
Deposits
Deposits
include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount approximates fair
value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities.
Interest Payable
The
carrying amount approximates fair value.
Short-term Borrowings,
Federal Home Loan Bank Advances and Subordinated Debentures
Rates
currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of
existing debt.
Commitments to Originate
Loans, Letters of Credit and Lines of Credit
The
fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan
commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair
values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated
cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. Fair values of commitments
were not material at September 30, 2020 and December 31, 2019.
Note 8:
|
Repurchase Agreements
|
Securities
sold under agreements to repurchase (“repurchase agreements”) with customers represent funds deposited by customers,
generally on an overnight basis that are collateralized by investment securities owned by the Company.
At September
30, 2020 and December 31, 2019, repurchase agreement borrowings totaled $17,027,000 and $6,915,000, respectively and are included
in short-term borrowings on the consolidated condensed balance sheets. All repurchase agreements are subject to term and conditions
of repurchase/security agreements between the Company and the customer and are accounted for as secured borrowings. The Company’s
repurchase agreements reflected in short-term borrowings, consist of customer accounts and securities which are pledged on an
individual security basis.
United
Bancorp, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The following
table presents the Company’s repurchase agreements accounted for as secured borrowings:
Remaining
Contractual Maturity of the Agreement
(In thousands)
September 30, 2020
|
|
Overnight and
Continuous
|
|
|
Up to 30 Days
|
|
|
30-90 Days
|
|
|
Greater than
90 Days
|
|
|
Total
|
|
Repurchase Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
17,027
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
17,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,027
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
17,027
|
|
December
31, 2019
|
|
Overnight
and
Continuous
|
|
|
Up
to 30 Days
|
|
|
30-90
Days
|
|
|
Greater
than
90 Days
|
|
|
Total
|
|
Repurchase
Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government agencies
|
|
$
|
6,915
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
6,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,915
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
6,915
|
|
These
borrowings were collateralized with U.S. government and agency securities with a carrying value of $17.9
million at September 30, 2020 and $9.4 million at December 31, 2019. Declines in the fair value would require the Company to pledge
additional securities.
Note 9:
|
Goodwill and
Intangible Assets
|
The following table shows the
changes in the carrying amount of goodwill for September 30, 2020 and December 31, 2019 (in thousands):
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Balance beginning of year
|
|
$
|
682
|
|
|
$
|
682
|
|
Additions from acquisition
|
|
|
---
|
|
|
|
---
|
|
Balance, end of period
|
|
$
|
682
|
|
|
$
|
682
|
|
Intangible assets in the consolidated
balance sheets at September 30, 2020 and December 31, 2019 were as follows (in thousands):
|
|
Nine Months Ended
September 30, 2020
|
|
|
Year Ended
December 31, 2019
|
|
|
|
Gross
Intangible
Assets
|
|
|
Accumulated
Amortization
|
|
|
Net Intangible
Assets
|
|
|
Gross
Intangible
Assets
|
|
|
Accumulated
Amortization
|
|
|
Net Intangible
Assets
|
|
Core deposit intangibles
|
|
$
|
1,041
|
|
|
|
294
|
|
|
|
747
|
|
|
|
1,041
|
|
|
|
181
|
|
|
|
860
|
|
The estimated aggregate future
amortization expense for each of the next five years for intangible assets remaining as of June 30, 2020 is as follows (in thousands):
2020
|
|
$
|
38
|
|
2021
|
|
|
181
|
|
2022
|
|
|
181
|
|
2023
|
|
|
181
|
|
2024
|
|
|
166
|
|
At
each reporting date between annual goodwill impairment tests, the Company considers potential indicators of impairment. Given
the current economic uncertainty and volatility surrounding COVID-19, the Company assessed
whether the events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less
than its carrying value. Impairment indicators considered comprised the condition of the economy and banking industry; government
intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting unit;
performance of the Company’s stock and other relevant events. The Company further considered the amount by which fair
value exceeded book value in the most recent quantitative analysis and sensitivities performed. At the conclusion
of the assessment, the Company determined that as of September 30, 2020 it was more likely than not that the fair value exceeded
its carrying values. The Company will continue to monitor developments regarding the COVID-19 pandemic and measures implemented
in response to the pandemic, market capitalization, overall economic conditions and any other triggering events or circumstances
that may indicate an impairment of goodwill in the future.
United
Bancorp, Inc.