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 March 31, 2021, 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, 2020 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 ended March 31, 2021, 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, 2020 has been derived from the audited consolidated balance sheet of the Company as of
that date.
Principles of Consolidation
The consolidated financial statements
include the accounts of United Bancorp, Inc. (“United” or “the Company”) and its wholly-owned subsidiary, Unified
Bank of Martins Ferry, Ohio (“the Bank”). All intercompany transactions and balances have been eliminated in consolidation.
Nature of Operations
The Company’s revenues,
operating income and assets are almost exclusively derived from banking. Accordingly, all of the Company’s banking operations
are considered by management to be aggregated in one reportable operating segment. Customers are mainly located in Athens, Belmont,
Carroll, Fairfield, Harrison, Jefferson and Tuscarawas Counties in Ohio and Marshall and Ohio Counties in West Virginia and the
surrounding localities in northeastern, east-central and southeastern Ohio and include a wide range of individuals, businesses and
other organizations. Unified Bank conducts its business through its main office in Martins Ferry, Ohio and branches in Amesville,
Bridgeport, Colerain, Dellroy, Dillonvale, Dover, Glouster, Jewett, Lancaster Downtown, Lancaster East, Nelsonville, New
Philadelphia, Powhatan Point, St. Clairsville East, St. Clairsville West, Sherrodsville, Strasburg, Tiltonsville, Ohio and
Moundsville West Virginia.
United Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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. Commercial loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by
both residential and commercial real estate. Net interest income is affected by the relative amount of interest-earning assets and interest-bearing
liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Company can be significantly
influenced by a number of environmental factors, such as governmental monetary and fiscal policies, that are outside of management’s
control.
Revenue Recognition
Accounting Standards Codification ("ASC")
606, Revenue from Contracts with Customers ("ASC 606"), 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.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
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.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
For all classes, all interest accrued
but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans
is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status
when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual
loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no
longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance
of not less than six months before returning a nonaccrual loan to accrual status.
When cash payments are received on
impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal
amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize
interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction
has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least
six months.
Allowance for Loan Losses
The allowance for loan losses is established
as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance
when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated
on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical
experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated
value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates
that are susceptible to significant revision as more information becomes available.
The allowance consists of allocated
and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified
as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired
loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off
experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced
by the Company over the prior five years. Management believes the five year historical loss experience methodology
is appropriate in the current economic environment. Other adjustments (qualitative/environmental considerations) for each segment
may be added to the allowance for each loan segment after an assessment of internal or external influences on credit quality that are
not fully reflected in the historical loss or risk rating data.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A loan is considered impaired when,
based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal
or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment
include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due based on
the loan’s current payment status and the borrower’s financial condition including available sources of cash flows. Loans
that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance
of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan
and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount
of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for non-homogenous type
loans such as commercial, non-owner residential and construction loans by either the present value of expected future cash flows discounted
at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan
is collateral dependent. For impaired loans where the Company utilizes the discounted cash flows to determine the level of impairment,
the Company includes the entire change in the present value of cash flows as bad debt expense.
The fair values of collateral dependent
impaired loans are based on independent appraisals of the collateral. In general, the Company acquires an updated appraisal upon identification
of impairment and annually thereafter for commercial, commercial real estate and multi-family loans. If the most recent appraisal is over
a year old, and a new appraisal is not performed, due to lack of comparable values or other reasons, the existing appraisal is utilized
and discounted generally 10% -35% based on the age of the appraisal, condition of the subject property, and overall economic conditions.
After determining the collateral value as described, the fair value is calculated based on the determined collateral
value less selling expenses. The potential for outdated appraisal values is considered in our determination of the allowance for loan
losses through our analysis of various trends and conditions including the local economy, trends in charge-offs and delinquencies, etc.
and the related qualitative adjustments assigned by the Company.
Segments of loans with similar risk
characteristics are collectively evaluated for impairment based on the segment’s historical loss experience adjusted for changes
in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify
individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement
due to financial difficulties of the borrower.
In the course of working with borrowers,
the Company may choose to restructure the contractual terms of certain loans. In this scenario, the Company attempts to work-out an alternative
payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified are reviewed by the Company
to identify if a troubled debt restructuring (“TDR”) has occurred, which is when, for economic or legal reasons related to
a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms
may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan
may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If
such efforts by the Company do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure
proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Company may terminate foreclosure proceedings
if the borrower is able to work-out a satisfactory payment plan.
It is the Company’s policy to
have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until six months of
satisfactory borrower performance at which time management would consider its return to accrual status. If a loan was accruing at the
time of restructuring, the Company reviews the loan to determine if it is appropriate to continue the accrual of interest on the restructured
loan.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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
Earnings per share (EPS) were computed as follows:
|
|
Three Months Ended March 31, 2021
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Net
|
|
|
Average
|
|
|
Per Share
|
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,908
|
|
|
|
|
|
|
|
|
|
Less allocated earnings on non-vested restricted stock
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
Less allocated dividends on non-vested restricted stock
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
Net income allocated to common stockholders
|
|
|
1,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,472,033
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.33
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Net
|
|
|
Average
|
|
|
Per Share
|
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,579
|
|
|
|
|
|
|
|
|
|
Less allocated earnings on non-vested restricted stock
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
Less allocated dividends on non-vested restricted stock
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
Net income allocated to common stockholders
|
|
|
1,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,463,739
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.28
|
|
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 2017.
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.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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. The Company continues to run projections and review segmentation
to ensure it is fully compliant with the amendments at adoption date. Additional work will be needed once additional guidance or clarification
in the standard is given during the delay. For additional information on the allowance for loan losses, see Note 3.
The amortized cost and 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
4,000
|
|
|
$
|
22
|
|
|
$
|
---
|
|
|
$
|
4,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated notes
|
|
|
4,500
|
|
|
|
25
|
|
|
|
(2
|
)
|
|
|
4,523
|
|
State and municipal obligations
|
|
|
125,998
|
|
|
$
|
11,770
|
|
|
|
---
|
|
|
|
137,768
|
|
Total debt securities
|
|
$
|
134,498
|
|
|
$
|
11,817
|
|
|
$
|
(2
|
)
|
|
$
|
146,313
|
|
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Available-for-sale Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
10,000
|
|
|
$
|
53
|
|
|
$
|
---
|
|
|
$
|
10,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated notes
|
|
|
4,500
|
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
4,505
|
|
State and municipal obligations
|
|
|
129,006
|
|
|
$
|
14,503
|
|
|
|
---
|
|
|
|
143,509
|
|
Total debt securities
|
|
$
|
143,506
|
|
|
$
|
14,562
|
|
|
$
|
(1
|
)
|
|
$
|
158,067
|
|
The amortized cost and fair value of
available-for-sale securities at March 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Under 1 year
|
|
$
|
---
|
|
|
$
|
---
|
|
One to five years
|
|
|
---
|
|
|
|
---
|
|
Five to ten years
|
|
|
8,500
|
|
|
|
8,545
|
|
Over ten years
|
|
|
125,998
|
|
|
|
137,768
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
134,498
|
|
|
$
|
146,313
|
|
The carrying value of securities pledged
as collateral, to secure public deposits and for other purposes, was $57.2 million and $55.8 million at March 31, 2021 and December 31,
2020, respectively.
Certain investments in debt securities
are reported in the financial statements at an amount less than their historical cost. The total fair value of these investments at March
31, 2021 was $998,000, which represented less than 1% of the Company’s available-for-sale investment portfolio. The total fair value
of these investments at December 31, 2020 was $1.0 million, which represented less than 1% of the Company’s available-for-sale.
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 of an increase in longer term interest rates.
United
Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 March 31, 2021:
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
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)
|
U.S. Government agencies
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
State and municipal obligations
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Subordinated notes
|
|
|
998
|
|
|
|
(2
|
)
|
|
|
---
|
|
|
|
---
|
|
|
|
998
|
|
|
|
(2
|
)
|
Total temporarily impaired securities
|
|
$
|
998
|
|
|
$
|
(2
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
998
|
|
|
$
|
(2
|
)
|
|
|
December 31, 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
|
|
|
---
|
|
|
|
---
|
|
|
|
1,000
|
|
|
|
(1
|
)
|
|
|
1,000
|
|
|
|
(1
|
)
|
State and municipal obligations
|
|
$
|
---
|
|
|
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
---
|
|
|
$
|
|
|
|
$
|
1,000
|
|
|
$
|
(1
|
)
|
|
$
|
1,000
|
|
|
$
|
(1
|
)
|
The unrealized losses on the Company’s
investments in available for sale securities were caused primarily by interest rate changes. The contractual terms of those investments
do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company
does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before
recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily
impaired at March 31, 2021.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
During the quarter ended March 31,
2020 the Company 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 months ended March 31, 2021.
Note 3:
|
Loans and Allowance for Loan Losses
|
Categories of loans include:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial loans
|
|
$
|
99,728
|
|
|
$
|
103,277
|
|
Commercial real estate
|
|
|
254,577
|
|
|
|
246,167
|
|
Residential real estate
|
|
|
88,114
|
|
|
|
85,789
|
|
Installment loans
|
|
|
7,615
|
|
|
|
8,258
|
|
|
|
|
|
|
|
|
|
|
Total gross loans
|
|
|
450,034
|
|
|
|
443,491
|
|
|
|
|
|
|
|
|
|
|
Less allowance for loan losses
|
|
|
(4,807
|
)
|
|
|
(5,113
|
)
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
445,227
|
|
|
$
|
438,378
|
|
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.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Commercial Real Estate
Commercial real estate loans are viewed
primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher
loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the
loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions
in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate
portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates
commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose
projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied
commercial real estate versus nonowner-occupied loans.
Residential Real Estate and Consumer
Residential real estate and consumer
loans consist of two segments - residential mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4
family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private
mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences,
and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal
loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the
personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment
can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller
individual amounts and spread over a large number of borrowers.
Allowance for Loan Losses and Recorded Investment
in Loans
As of and for the three month period ended March
31, 2021
|
|
Commercial
|
|
|
Commercial
Real
Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Total
|
|
(In
thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
1,397
|
|
|
$
|
1,821
|
|
|
$
|
1,471
|
|
|
$
|
424
|
|
|
$
|
5,113
|
|
Provision
(credit) charged to expense
|
|
|
(98
|
)
|
|
|
(1
|
)
|
|
|
(75
|
)
|
|
|
(31
|
)
|
|
|
(205
|
)
|
Losses
charged off
|
|
|
(78
|
)
|
|
|
---
|
|
|
|
(17
|
)
|
|
|
(18
|
)
|
|
|
(113
|
)
|
Recoveries
|
|
|
---
|
|
|
|
---
|
|
|
|
2
|
|
|
|
10
|
|
|
|
12
|
|
Balance,
end of period
|
|
$
|
1,221
|
|
|
$
|
1,820
|
|
|
$
|
1,381
|
|
|
$
|
385
|
|
|
$
|
4,807
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
---
|
|
|
$
|
85
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
85
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
1,221
|
|
|
$
|
1,735
|
|
|
$
|
1,381
|
|
|
$
|
385
|
|
|
$
|
4,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
---
|
|
|
$
|
2,594
|
|
|
$
|
114
|
|
|
$
|
---
|
|
|
$
|
2,708
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
99,728
|
|
|
$
|
251,983
|
|
|
$
|
88,000
|
|
|
$
|
7,615
|
|
|
$
|
447,326
|
|
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 month period ended March
31, 2020
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Total
|
|
(In
thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
568
|
|
|
$
|
792
|
|
|
$
|
572
|
|
|
$
|
299
|
|
|
$
|
2,231
|
|
Provision
charged to expense
|
|
|
529
|
|
|
|
19
|
|
|
|
1
|
|
|
|
14
|
|
|
|
563
|
|
Losses
charged off
|
|
|
(42
|
)
|
|
|
(30
|
)
|
|
|
(6
|
)
|
|
|
(31
|
)
|
|
|
(109
|
)
|
Recoveries
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
23
|
|
|
|
23
|
|
Balance,
end of period
|
|
$
|
1,055
|
|
|
$
|
781
|
|
|
$
|
567
|
|
|
$
|
305
|
|
|
$
|
2,708
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
16
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
16
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
1,039
|
|
|
$
|
781
|
|
|
$
|
567
|
|
|
$
|
305
|
|
|
$
|
2,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
138
|
|
|
$
|
758
|
|
|
$
|
505
|
|
|
$
|
---
|
|
|
$
|
1,401
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
106,338
|
|
|
$
|
251,593
|
|
|
$
|
79,646
|
|
|
$
|
9,359
|
|
|
$
|
446,936
|
|
Allowance for Loan Losses and Recorded Investment
in Loans
As of December 31, 2020
|
|
Commercial
|
|
|
Commercial Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
––
|
|
|
$
|
1
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
1
|
|
Ending balance: collectively
evaluated for impairment
|
|
$
|
1,397
|
|
|
$
|
1,820
|
|
|
$
|
1,471
|
|
|
$
|
424
|
|
|
$
|
5,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually
evaluated for impairment
|
|
$
|
80
|
|
|
$
|
182
|
|
|
$
|
114
|
|
|
$
|
––
|
|
|
$
|
376
|
|
Ending balance: collectively
evaluated for impairment
|
|
$
|
103,197
|
|
|
$
|
245,985
|
|
|
$
|
85,675
|
|
|
$
|
8,258
|
|
|
$
|
443,115
|
|
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following tables show the portfolio quality indicators.
|
|
March 31, 2021
|
|
Loan Class
|
|
Commercial
|
|
|
Commercial Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Pass Grade
|
|
$
|
99,721
|
|
|
$
|
248,895
|
|
|
$
|
88,000
|
|
|
$
|
7,615
|
|
|
$
|
444,231
|
|
Special Mention
|
|
|
7
|
|
|
|
2,885
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,892
|
|
Substandard
|
|
|
---
|
|
|
|
2,797
|
|
|
|
114
|
|
|
|
---
|
|
|
|
2,911
|
|
Doubtful
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,728
|
|
|
$
|
254,577
|
|
|
$
|
88,114
|
|
|
$
|
7,615
|
|
|
$
|
450,034
|
|
|
|
December 31, 2020
|
|
Loan Class
|
|
Commercial
|
|
|
Commercial Real Estate
|
|
|
Residential
|
|
|
Installment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Pass Grade
|
|
$
|
103,181
|
|
|
$
|
239,862
|
|
|
$
|
85,675
|
|
|
$
|
8,258
|
|
|
$
|
436,976
|
|
Special Mention
|
|
|
15
|
|
|
|
3,422
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,437
|
|
Substandard
|
|
|
81
|
|
|
|
2,883
|
|
|
|
114
|
|
|
|
---
|
|
|
|
3,078
|
|
Doubtful
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
103,277
|
|
|
$
|
246,167
|
|
|
$
|
85,789
|
|
|
$
|
8,258
|
|
|
$
|
443,491
|
|
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 past year to date period.
Loan Portfolio Aging Analysis
As of March 31, 2021
|
|
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
|
|
$
|
124
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
124
|
|
|
$
|
99,604
|
|
|
$
|
99,728
|
|
Commercial real estate
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,586
|
|
|
|
2,586
|
|
|
|
251,991
|
|
|
|
254,577
|
|
Residential
|
|
|
---
|
|
|
|
74
|
|
|
|
---
|
|
|
|
377
|
|
|
|
451
|
|
|
|
87,663
|
|
|
|
88,114
|
|
Installment
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
19
|
|
|
|
19
|
|
|
|
7,596
|
|
|
|
7,615
|
|
Total
|
|
$
|
124
|
|
|
$
|
74
|
|
|
$
|
---
|
|
|
$
|
2,982
|
|
|
$
|
3,180
|
|
|
$
|
446,854
|
|
|
$
|
450,034
|
|
Loan Portfolio Aging Analysis
As of December 31, 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
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
83
|
|
|
$
|
83
|
|
|
$
|
103,194
|
|
|
$
|
103,277
|
|
Commercial real estate
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
98
|
|
|
|
98
|
|
|
|
246,069
|
|
|
|
246,167
|
|
Residential
|
|
|
120
|
|
|
|
59
|
|
|
|
---
|
|
|
|
445
|
|
|
|
624
|
|
|
|
85,165
|
|
|
|
85,789
|
|
Installment
|
|
|
7
|
|
|
|
20
|
|
|
|
---
|
|
|
|
---
|
|
|
|
27
|
|
|
|
8,231
|
|
|
|
8,258
|
|
Total
|
|
$
|
127
|
|
|
$
|
79
|
|
|
$
|
---
|
|
|
$
|
626
|
|
|
$
|
832
|
|
|
$
|
442,659
|
|
|
$
|
443,491
|
|
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
March 31, 2021
|
|
Three Months Ended
March 31, 2021
|
|
|
|
Recorded Balance
|
|
Unpaid
Principal Balance
|
|
Specific Allowance
|
|
Average Investment in
Impaired Loans
|
|
Interest Income Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Loans without a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
---
|
|
$
|
---
|
|
$
|
---
|
|
$
|
---
|
|
$
|
---
|
|
Commercial real estate
|
|
|
105
|
|
|
105
|
|
|
---
|
|
|
112
|
|
|
---
|
|
Residential
|
|
|
114
|
|
|
114
|
|
|
---
|
|
|
118
|
|
|
---
|
|
|
|
|
219
|
|
|
219
|
|
|
---
|
|
|
230
|
|
|
---
|
|
Loans with a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
---
|
|
|
---
|
|
|
---
|
|
|
---
|
|
|
---
|
|
Commercial real estate
|
|
|
2,489
|
|
|
2,489
|
|
|
85
|
|
|
2,489
|
|
|
---
|
|
Residential
|
|
|
---
|
|
|
---
|
|
|
---
|
|
|
---
|
|
|
---
|
|
|
|
|
2,489
|
|
|
2,489
|
|
|
85
|
|
|
2,489
|
|
|
---
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
---
|
|
$
|
|
|
$
|
---
|
|
$
|
---
|
|
$
|
---
|
|
Commercial real estate
|
|
$
|
2,594
|
|
$
|
2,594
|
|
$
|
85
|
|
$
|
2,601
|
|
$
|
---
|
|
Residential
|
|
$
|
114
|
|
$
|
114
|
|
$
|
---
|
|
$
|
118
|
|
$
|
---
|
|
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Impaired Loans
|
|
As of
December 31, 2020
|
|
|
Three Months Ended
March 31, 2020
|
|
|
|
Recorded
Balance
|
|
|
Unpaid
Principal
Balance
|
|
|
Specific
Allowance
|
|
|
Average
Investment in
Impaired
Loans
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Loans without a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
80
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
101
|
|
|
$
|
7
|
|
Commercial real estate
|
|
|
110
|
|
|
|
196
|
|
|
|
—
|
|
|
|
761
|
|
|
|
---
|
|
Residential
|
|
|
114
|
|
|
|
121
|
|
|
|
—
|
|
|
|
590
|
|
|
|
2
|
|
Installment
|
|
|
---
|
|
|
|
14
|
|
|
|
—
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
304
|
|
|
|
411
|
|
|
|
—
|
|
|
|
1,452
|
|
|
|
9
|
|
Loans with a specific valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
42
|
|
|
|
1
|
|
Commercial real estate
|
|
|
72
|
|
|
$
|
72
|
|
|
|
1
|
|
|
|
---
|
|
|
|
---
|
|
Residential
|
|
|
––
|
|
|
|
––
|
|
|
|
—
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
72
|
|
|
|
72
|
|
|
|
1
|
|
|
|
42
|
|
|
|
1
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
80
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
143
|
|
|
$
|
8
|
|
Commercial real estate
|
|
$
|
182
|
|
|
|
268
|
|
|
$
|
1
|
|
|
$
|
761
|
|
|
$
|
---
|
|
Residential
|
|
$
|
114
|
|
|
|
121
|
|
|
$
|
—
|
|
|
$
|
590
|
|
|
$
|
2
|
|
Installment
|
|
$
|
---
|
|
|
|
14
|
|
|
$
|
—
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Interest income recognized on a cash basis was not materiality
different than interest income recognized.
United Bancorp,
Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 March 31, 2021
|
|
|
|
Number of
Contracts
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
|
1
|
|
|
$
|
86
|
|
|
$
|
67
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Installment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Three Months ended March 31, 2021
|
|
|
|
Interest
Only
|
|
|
Term
|
|
|
Combination
|
|
|
Total
Modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
67
|
|
|
$
|
—
|
|
|
$
|
67
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Three Months ended March 31, 2020
|
|
|
|
|
Number of
Contracts
|
|
|
|
Pre- Modification
Outstanding
Recorded
Investment
|
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
|
2
|
|
|
$
|
83
|
|
|
$
|
83
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Installment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Three Months ended March 31, 2020
|
|
|
|
|
Interest
Only
|
|
|
|
Term
|
|
|
|
Combination
|
|
|
|
Total
Modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
83
|
|
|
$
|
—
|
|
|
$
|
83
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
United Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
During the three months ended March
31, 2021 and 2020, there were no material 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
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Service cost
|
|
$
|
132
|
|
|
$
|
98
|
|
Interest cost
|
|
|
60
|
|
|
|
59
|
|
Expected return on assets
|
|
|
(122
|
)
|
|
|
(117
|
)
|
Amortization of prior service cost and net loss
|
|
|
45
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Pension expense
|
|
$
|
115
|
|
|
$
|
53
|
|
All components
of pension expense are reflected within the salaries and employee benefits line of the income statement.
Note 5:
|
Off-balance-sheet Activities
|
Some financial instruments, such as
loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs. These are agreements
to provide credit or to support the credit of others, as long as conditions established in the contracts are met, and usually have expiration
dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments,
although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including
obtaining collateral at exercise of the commitment.
A summary of the notional or contractual amounts of financial
instruments with off-balance-sheet risk at the indicated dates is as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial loans unused lines of credit
|
|
$
|
63,153
|
|
|
$
|
49,384
|
|
Commitment to originate loans
|
|
|
60,710
|
|
|
|
49,035
|
|
Consumer open end lines of credit
|
|
|
38,167
|
|
|
|
39,559
|
|
Standby lines of credit
|
|
|
46
|
|
|
|
22
|
|
United Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 6:
|
Accumulated Other Comprehensive Income
|
The components of accumulated other
comprehensive loss, included in stockholders’ equity, are as follows:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Net unrealized gain (loss) on securities available-for-sale
|
|
$
|
11,815
|
|
|
$
|
14,561
|
|
Net unrealized loss for unfunded status of defined benefit plan liability
|
|
|
(2,810
|
)
|
|
|
(2,810
|
)
|
|
|
|
9,005
|
|
|
|
11,751
|
|
Less: Tax effect
|
|
|
(1,892
|
)
|
|
|
(2,468
|
)
|
Net-of-tax amount
|
|
$
|
7,113
|
|
|
$
|
9,283
|
|
Reclassifications out of accumulated other
comprehensive income during the three months ended March 31, 2021 and 2020 and the affected line items in the Consolidated Financial
Statements of Income were as follows:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Realized gains on securities available-for-sale
|
|
$
|
---
|
|
|
$
|
69
|
|
Less provision for federal income taxes
|
|
|
---
|
|
|
|
14
|
|
Reclassification adjustment, net of taxes
|
|
$
|
---
|
|
|
$
|
55
|
|
Note 7:
|
Fair Value Measurements
|
The Company defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The Company also utilizes a fair value hierarchy which requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used
to measure fair value:
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date
|
|
|
|
|
Level 2
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
|
|
|
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
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 recurring basis and recognized in the accompanying consolidated balance sheets,
as well as the general classification of such instruments pursuant to the valuation hierarchy.
Available-for-sale Securities
Where quoted market prices are available
in an active market, securities are classified within Level 1 of the valuation hierarchy. The Company’s equity securities are
classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted
prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based
or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults,
cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy.
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 March 31, 2021 and December 31, 2020:
|
|
|
|
|
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)
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
4,022
|
|
|
$
|
—
|
|
|
$
|
4,022
|
|
|
$
|
—
|
|
Subordinated Notes
|
|
$
|
4,523
|
|
|
|
—
|
|
|
$
|
4,523
|
|
|
|
—
|
|
State and municipal obligations
|
|
$
|
137,768
|
|
|
|
—
|
|
|
$
|
137,768
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
10,053
|
|
|
$
|
—
|
|
|
$
|
10,053
|
|
|
$
|
—
|
|
Subordinated Notes
|
|
$
|
4,505
|
|
|
|
—
|
|
|
$
|
4,505
|
|
|
|
—
|
|
State and municipal obligations
|
|
$
|
143,509
|
|
|
$
|
—
|
|
|
$
|
143,509
|
|
|
$
|
—
|
|
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 for the other real estate under evaluation. Due
to the nature of the valuation inputs, foreclosed assets held for sale are classified within Level 3 of the hierarchy.
Appraisals of OREO 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 March 31, 2021 and December 31, 2020.
|
|
|
|
|
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)
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent impaired loans
|
|
$
|
2,489
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,489
|
|
Foreclosed assets held for sale
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent impaired loans
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71
|
|
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
3/31/21
|
|
|
Valuation
Technique
|
|
Unobservable Inputs
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Collateral-dependent impaired loans
|
|
$
|
2,489
|
|
|
Market comparable properties
|
|
Comparability adjustments
|
|
5% - 10%
|
United Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
|
Fair Value
at 12/31/20
|
|
|
Valuation
Technique
|
|
Unobservable Inputs
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Collateral-dependent impaired loans
|
|
$
|
71
|
|
|
Market comparable properties
|
|
Comparability adjustments
|
|
|
5% - 10%
|
|
There were no significant changes in the valuation techniques used
during 2020.
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)
|
|
March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
97,051
|
|
|
$
|
97,051
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Loans, net of allowance
|
|
|
445,227
|
|
|
|
—
|
|
|
|
—
|
|
|
|
443,931
|
|
Federal Home Loan Bank stock
|
|
|
4,097
|
|
|
|
—
|
|
|
|
4,097
|
|
|
|
—
|
|
Accrued interest receivable
|
|
|
2,581
|
|
|
|
—
|
|
|
|
2,581
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
608,022
|
|
|
|
—
|
|
|
|
608,434
|
|
|
|
—
|
|
Short term borrowings
|
|
|
27,180
|
|
|
|
—
|
|
|
|
27,180
|
|
|
|
—
|
|
Subordinated debentures
|
|
|
23,619
|
|
|
|
—
|
|
|
|
21,246
|
|
|
|
—
|
|
Interest payable
|
|
|
549
|
|
|
|
—
|
|
|
|
549
|
|
|
|
—
|
|
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, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
51,592
|
|
|
$
|
51,592
|
|
|
$
|
––
|
|
|
$
|
––
|
|
Loans, net of allowance
|
|
|
438,378
|
|
|
|
––
|
|
|
|
––
|
|
|
|
436,893
|
|
Federal Home Loan Bank stock
|
|
|
4,177
|
|
|
|
––
|
|
|
|
4,177
|
|
|
|
––
|
|
Accrued interest receivable
|
|
|
2,901
|
|
|
|
––
|
|
|
|
2,901
|
|
|
|
––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
579,535
|
|
|
|
––
|
|
|
|
580,130
|
|
|
|
––
|
|
Short term borrowings
|
|
|
12,705
|
|
|
|
––
|
|
|
|
12,705
|
|
|
|
––
|
|
Subordinated debentures
|
|
|
23,604
|
|
|
|
––
|
|
|
|
21,989
|
|
|
|
––
|
|
Interest payable
|
|
|
224
|
|
|
|
––
|
|
|
|
224
|
|
|
|
––
|
|
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 March 31, 2021 and December 31, 2020.
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.
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)
March
31, 2021
|
|
Overnight
and Continuous
|
|
|
Up
to 30 Days
|
|
|
30-90
Days
|
|
|
Greater
than 90 Days
|
|
|
Total
|
|
Repurchase Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government agencies
|
|
$
|
27,180
|
|
|
|
––
|
|
|
|
––
|
|
|
|
––
|
|
|
$
|
27,180
|
|
Total
|
|
$
|
27,180
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
27,180
|
|
(In thousands)
December
31, 2020
|
|
Overnight
and
Continuous
|
|
|
Up
to 30 Days
|
|
|
30-90
Days
|
|
|
Greater
than
90 Days
|
|
|
Total
|
|
Repurchase Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government agencies
|
|
$
|
12,705
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
12,705
|
|
Total
|
|
$
|
12,705
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
––
|
|
|
$
|
12,705
|
|
These borrowings were collateralized with U.S. government and agency
securities with a carrying value of $32.6 million at March 31, 2021 and $30.1 million at December 31, 2020. Declines in the fair value
would require the Company to pledge additional securities.
Note 9:
|
Core Deposits and Other Intangible Assets
|
The following table shows the changes in the carrying amount of goodwill
for March 31, 2021 and December 31, 2020 (in thousands):
|
|
March 31 ,
2021
|
|
|
December 31, 2020
|
|
Balance beginning of year
|
|
$
|
682
|
|
|
$
|
682
|
|
Additions from acquisition
|
|
|
––
|
|
|
|
––
|
|
Balance, end of period
|
|
$
|
682
|
|
|
$
|
682
|
|
Intangible assets in the consolidated balance sheets at March 31, 2021
and December 31, 2020 were as follows (in thousands):
United Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
|
Three
Months Ended
March 31, 2021
|
|
|
Year
Ended
December 31, 2020
|
|
|
|
Gross
Intangible
Assets
|
|
|
Accumulated
Amortization
|
|
|
Net
Intangible
Assets
|
|
|
Gross
Intangible
Assets
|
|
|
Accumulated
Amortization
|
|
|
Net
Intangible
Assets
|
|
Core deposit intangibles
|
|
$
|
1,041
|
|
|
|
368
|
|
|
|
673
|
|
|
|
1,041
|
|
|
|
331
|
|
|
|
710
|
|
The estimated aggregate future amortization expense for each
of the next five years for intangible assets remaining as of March 31, 2021 is as follows (in thousands):
2021
|
|
$
|
116
|
|
2022
|
|
|
150
|
|
2023
|
|
|
150
|
|
2024
|
|
|
150
|
|
2025
|
|
|
110
|
|
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 March 31, 2021 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.