United Bancorp, Inc. Annual Report 2020

FY2020 Annual Report · United Bancorp, Inc.

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We Are UNITED...To Better Serve You!

A N N UA L R E P O R T

We Are UNITED...To Better Serve You!

A Letter from the President and CEO

To the shareholders of United Bancorp, Inc….

t is with extreme gratitude that I report to you, our valued shareholders, on the
strong earnings and solid operational performance that United Bancorp, Inc.
(UBCP) achieved in 2020--- (Yes, I am truly thankful for the results that we were
able to produce this past year, since at the beginning of 2020… none of us
could have imagined what extreme twist was in the proverbial road ahead, that could
have easily thrown our Company’s financial performance off course)! This past year,
UBCP reported diluted earnings per share of $1.39 and net income of $7,953,000.
These levels were $0.20 per share and $1,143,000 greater than the respective levels
for each of these earnings metrics reported the previous year (an increase of 17% for
both). And, yes… at these levels, our Company has produced record earnings, once
again, for the fourth consecutive year!

Scott A. Everson
President and CEO

I humbly report these record levels of earnings to you, since this past year proved to be epically more challenging
for our industry and all businesses (on both a national and global basis) due to the unprecedented COVID-19
pandemic, which erupted within our country in the first quarter of this past year and wreaked extreme havoc upon
the economies in which we all operate. The scale of this pandemic was truly unfathomable and had not been
experienced since the last great pandemic-outbreak that occurred over one century ago. Quite frankly, a
pandemic of this magnitude is something of which we were aware and for which we had prepared through years
of training; but, a situation that seemed highly improbable during these “modern” times. Yes, the COVID-19
pandemic did cause our Company to veer off course relating to our goal of growing our assets at an annual pace
that would lead us to becoming a billion-dollar community banking organization within the near term. But,
through proper preparation for and a fluid response to this unimaginable event, our Company was able to shine
in terms of its overall performance… even during these darkest of times. As of this report, we are still dealing
with COVID-19 and its negative effects on our country and world; but, things are slowly improving. We are
hopeful that the worst of this metaphorical storm is behind us and, at this time, are grateful that we were left
relatively unscathed by such a treacherous event. For this, we are truly appreciative and our Company is highly
fortunate and, ultimately, blessed!

A Sudden, and Unexpected, Change and An Event That Shifted the Paradigm of Our Industry (and, Company): As we all well know, this
past year proved to be one of the most challenging in history for all businesses and economies, both nationally and globally, due to the outbreak
and spread of the COVID-19 virus and the related pandemic. As the year began, we heard about a virus that was on foreign territory and not
yet in the United States. Many of our government officials and citizens wondered what, if any, impact this virus would have on us?
Economically-speaking, our country was in a very sound position and our economy was performing at a very high level. Monetary policy was
easing somewhat; but, we only anticipated potentially one cut in the target for the Federal Funds Rate by the Federal Open Market Committee
(FOMC), which the timing thereof was projected to be at mid-year. As a company that had experienced record growth and earnings for the
previous three years, we had very high expectations of continued high performance… with a laser-like focus on becoming a $1.0 billion
community banking organization. Also, with a keen focus on digital transformation, internal process and product improvement and the
aforementioned desire for accelerated growth to gain certain economies of scale and the potential efficiencies related thereto, our strategic
vision looked out over multiple years. When the COVID-19 pandemic abruptly hit, almost overnight, the FOMC reverted to the Zero Interest
Rate Policy (ZIRP) that it had first undertaken during the course of the Great Recession, which put pressure on the margins and earnings of
all banks. In addition, our long-term vision (which focused on growing our balance sheet, generating increasing earnings and maintaining our
relevance) became very short term: focusing on the day to day, week to week and month to month operations and activities of our Company.
It suddenly seemed that each quarter was now a year within a year! This reality forced our Company to hyper-focus on being extremely nimble
in order to effectively address the unknown. Quite simply, we were in uncharted waters and everyone within our industry (and, others) was
doing their best to address an extremely volatile situation. Accordingly, we had to quickly analyze and comprehend the evolving guidance

UNITEDBANCORP INC.

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A Letter from the President and CEO - Continued

communicated by government, regulatory and public health officials in order to effectively maintain as much normalcy in our operations as
reasonably possible under such extreme circumstances. Immediately, our Company went from an offensive focus to a defensive posture in
order to effectively and timely deal with this great uncertainty thrown upon us!

Continuing a Trend of Positive Performance this Past Year (Although, Subdued by the Pandemic): Even with these pandemically-induced,
economic headwinds and the sudden change in monetary policy that United Bancorp, Inc. (UBCP) faced during the course of 2020, our
Company continued its recent trend of producing record growth and earnings. For the year ending December 31, 2020, United Bancorp, Inc.
(UBCP) had net income of $7,953,000 and diluted earnings per share of $1.39. These earnings metrics were $1,143,000 and $0.20 higher
than the previous record levels achieved the prior year, an increase of seventeen percent (17%) for each. UBCP achieved this record level of
earnings even though an additional $2,429,000 was booked in the loan loss provision in 2020. This additional provisioning (which, we thought
was prudent given the nature of the circumstances with which we were confronted) raised the level of our total allowance for loan losses to
total loans from fifty-one basis points (0.51%) to one hundred and fifteen basis points (1.15%) at year end. Strongly contributing to UBCP’s
achievement of a sound level of earnings this past year was the solid growth that our Company experienced in its earning assets during this
time of uncertainty. This level of growth in earning assets was achieved even though we elected not to participate in the Paycheck Protection
Program… a program that fueled the growth of many of our peer within the financial services industry this past year. In 2020, average loans
increased by $25.8 million, or 6.1%, and average securities and other required stock increased by $9.8 million or 6.2%. The latter increased
even though the Company sold roughly $32 million in investment securities that produced gains which lessened the bottom-line impact of the
increased provisioning to the loan loss reserve as previously mentioned. Even with the Federal Open Market Committee (FOMC) implementing
its Zero Interest Rate Policy (ZIRP) beginning in the first quarter of 2020 due to the COVID-19 pandemic, our solid growth in earning assets,
along with our robust loan fee generation (which increased by $575,000, or 61%, year-over-year), led to an increase of $594,000 in the level
of total interest income realized by our Company--- an improvement of 2.2% over the previous year.

From an interest expense perspective, UBCP was in a prime position to benefit from the sudden acceleration in the loosening of our country’s
monetary policy this past year. As we have formerly disclosed, our Company prudently started to position its balance sheet to being more
liability sensitive early in the second quarter of 2019 when the FOMC began to first loosen its monetary policy with its first cut in the target
for the Federal Funds Rate after a few years of tightening said policy. Our Company’s quick reaction to this newly adopted loosening posture
at that time put us in a more strategic position to fully benefit from the ZIRP that was introduced, almost overnight by the FOMC, in the first
quarter of 2020. Such a monumental change in our monetary policy was needed when the potential negative impact of the COVID-19
pandemic on our country and economy were more fully understood. Being in a very good position from a sensitivity perspective when this
sudden and drastic change in monetary policy occurred, UBCP saw its total interest expense decrease in 2020 from the previous year by
$1,389,000 or 22.7%... a reduction that had not been seen by our Company on a year-over-year basis for several years. As we enter a new
year, our Company anticipates further benefitting from our proper and responsive posture in addressing a loosening monetary policy or ZIRP.
But, if interest rates remain lower for longer as the FOMC has telegraphed, our Company could experience pressure on its net interest margin.
Ultimately, though, our focus last year on both growing earning assets and aggressively managing sensitivity led to our Company seeing a
year-over-year increase in its net interest income of $1,983,000 or 9.5%. As of December 31, 2020, UBCP’s net interest margin was 3.76%,
which is an increase of nine basis points (0.09%) over the previous year and compares very favorably to our peer (many of which experienced
declining net interest margins over the course of this past year).

From a credit quality perspective, UBCP was able to successfully maintain overall strength and stability within its loan portfolio in 2020. Even
though our loan portfolio had the potential to be severely stressed as a result of the negative impacts on our economy created by the COVID-
19 pandemic, UBCP continued to have very solid credit quality-related metrics. As of December 31, 2020, our Company had a relatively low
level of nonaccrual loans and loans past due thirty (30) plus days, which were $832,000, or nineteen basis points (0.19%) of total loans. This
was a decrease of $1,828,000, or forty-one basis points (0.41%), over the previous year when our economy was much more stable and higher
performing. Further, net loans charged off, excluding overdrafts, was a very respectable $378,000, or eight basis points (0.08%), which
compares very favorably to our peer. With our Company’s increased provision for loan losses in 2020, the total allowance for loan losses
more than doubled year-over-year and total loan losses to nonaccrual loans was eight hundred and sixteen percent (816%) at year end… a
coverage level that is, on average, much greater than our peer and which gives our Company tremendous cushion to protect against future
potential losses. If losses within our presently high performing loan portfolio do not materialize, this robust reserve number could help
contribute to future earnings in a positive fashion.

2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Regarding the COVID-19 pandemic and the impact that it had on our borrowers’ ability to repay in a timely manner--- UBCP was committed
throughout the course of this past year to working closely with our valued loan customers and helping them keep their loans current. We
achieved this by strictly adhering to and following the payment relief practices that were strongly encouraged and fully supported by both our
regulatory and accounting partners through their astute guidance. We are happy to report that by working closely with our loan customers
and giving them multiple options to remain in good standing, an overwhelming majority of them were able to overcome the challenges that
the pandemic posed to their operations, cash flows, and incomes. As of December 31, 2020, we were encouraged to see most of our loan
customer base that had previously received some level of payment relief in 2020 make either contractual or interest-only payments on their
loans. We are hopeful that this trend will continue in the current year; but, our Company recognizes that its credit quality metrics could
potentially deteriorate if our economy does not improve in the near term and normalize throughout the course of this new year.

Relating to our overall levels of capitalization as of year-end 2020, UBCP continues to have very sound levels of capital. With the Company
producing record earnings… and, having a Return on Assets (ROA) of 1.15% and a Return on Equity (ROE) of 11.45%... capital levels and
measurements were enhanced over the course of this past year. As our Company has previously disclosed, in the second quarter of 2019 at the
bank subsidiary level, overall capital levels were greatly enhanced with the issuance of $20.0 million in subordinated debt at very favorable terms.
Even though this capital is not measured at the corporate, holding company level, it has provided some welcome cushion during these very
challenging times in the COVID-19 pandemic era. Overall, UBCP saw its shareholders’ equity grow by $8.4 million, or 14.0%, and its book value
increase by $1.21, or 11.8%, year-over-year. And, yes… at these levels, our Company is considered to be well-capitalized by industry and
regulatory standards. Even though we closely focused on our capital levels during these clearly uncertain times, our Company is extremely proud
of the reality that it was able to maintain (and, not reduce or even suspend) payment of its cash dividend to its valued shareholders. During the
course of 2020, UBCP paid cash dividends of $0.57… an increase of $0.025, or five percent (5%). Based on the market value of our Company’s
stock at year-end, this payment level produces a yield of 4.32%, which is well above current market rates in this present ZIRP environment.

Overcoming Extreme Challenges and Achieving Solid Operational Performance in 2020--- Continuing to Build for Our Future:
From an operational perspective, the COVID-19 pandemic presented UBCP with an extreme challenge… one like we had never seen. But,
ultimately, our Company was up to hitting the curve ball that it was thrown and meeting this great challenge, which was no small feat under
such trying circumstances! Fortunately, we had well-developed policies relating to business continuity and resumption that were the “torch
lights” that guided us through this period of darkness. When government officials issued the stay at home orders, we were able to effectively
adjust and keep our operations functioning at a very high level; especially, since we were considered to be an essential business. During that
time, many of our valued team members did work remotely and away from our physical locations. Our lobbies did close and we only met with
customers at our drive-ups or on an appointment-only basis. Yes, this did have a negative impact on achieving our growth objectives; but,
quite frankly, our focus during this time was to primarily meet the more basic needs of our customers. After a couple of months operating in
this restricted fashion, we were finally able to safely reopen our lobbies to our valued customers and, once again, begin somewhat normalized
operations. Yes, we did take extreme precautions by following all of the health and safety-related guidance provided by both our government
and health authorities, which served us well. Once fully reopening in June, 2020, we were able to get back on track without any more severely
impactful disruptions to our operations, while protecting the health and well-being of both our valued customers and team members. For this,
we are extremely grateful.

Remarkably and despite the shock and negative impact felt by the COVID-19 pandemic, UBCP was able to continue focusing on building its
brand, achieving operational improvements, and improving the overall customer experience, through the efforts of:

Our Marketing Team, which stepped up and ensured that we were able to effectively communicate with our customers and the general
public by developing effective social media-driven marketing campaigns and communications. In addition, with the utilization of
analytics, we were able to identify opportunities to better serve our customers and build better, more well-rounded relationships.
Also, brand building and community development remained a central focus of our marketing function and reinforced our steadfast
commitment to building better relationships and gaining recognition within our communities!

Our Technology Team, that successfully implemented and introduced a new internet banking platform that helps us to remain relevant
in this ever-more competitive industry in which we compete. With COVID-19 shifting our service or delivery paradigm, we were able
to more effectively provide service to our customers--- even though it was on a remote basis--- by giving them the enhanced

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

A Letter from the President and CEO - Continued

electronic functionality and connectivity that they desire. Digital services such as: P2P (person-to-person) same-day payments,
contactless and instant issue debit cards, mobile banking, virtual wallets, electronic bill presentment and payment, online account
origination, a nationwide service charge free ATM network and a complete treasury management solution for our business clients
(among other services)… tremendously helped us serve our customers at a high level during this time of crisis! Focusing on our internal
operations, our technology team was able to introduce Robotic Process Automation (RPA), which helped us to improve our delivery,
achieve additional efficiency and gain intelligence which, collectively, helped us to enhance our operation and become more relevant.

Our Retail Delivery Team, which… even during this pandemically-challenged year… was able to construct, staff, and open our
newest banking center. In August, we opened a banking center in Moundsville, West Virginia, which is in the heart of the proposed
ethane cracker plant area. This is our Company’s first full-service banking center in the State of West Virginia and twentieth overall.
We are extremely encouraged by the potential for growth that this new location provides and are exceptionally happy to have the
opportunity to introduce the “Unified Way” to a new, vibrant community.

Our Unified Care Center Team, which is our bank-level call center that was in operation for its first full year and proved to be invaluable
in servicing our cherished customer base and meeting their individual needs during the COVID-19 pandemic. This operation has
helped us to extend our customer service hours to as-late-as 10:00pm and tremendously improve the overall customer experience.

And… every Unified Team Member within our organization that helped us to continue and improve our operations and differentiate
our brand during this most atypical and uncommon year!

As you all well know, this past year was one of the most trying in the great history of our nation. Our thoughts and prayers go out to everyone
as we all continue to work through and address the challenges presented to us by this horrible COVID-19 pandemic. Our number one priority
continues to be protecting the health and welfare of our team members and customer base, while delivering the highest quality service possible
under the circumstances. During this time of great uncertainty, we are truly blessed to have both personnel and systems capable of delivering
uninterrupted and quality service and support to our valued customers. Our Team is extremely caring and resilient… and, they truly are our
Number One Asset (or, the “secret sauce” which differentiates our brand)! Quite simply and sincerely, through the effort of our Team in 2020,
our Company was able to perform at a record level during arguably the most demanding environment in which any of us has ever worked or
experienced. For this, our Team is to be commended and--- as always--- I am exceptionally proud of their willingness to overcome extreme
obstacles; their ability to produce stellar results under trying circumstances; and, in general, their overall fortitude. Our Company is uncommonly
blessed to have such a motivated, dedicated and “United and Unified” Team! In addition, as a successful financial services company, we greatly
benefit from the uncompromising support of our management, board of directors, and shareholders. Together, we will accomplish more!

Scott A. Everson
President and Chief Executive Officer
ceo@unitedbancorp.com
March 10, 2021

Certain statements contained herein are not based on historical facts and are "forward-looking statements" within the meaning of Section 21A of the
Securities Exchange Act of 1934. Forward-looking statements, which are based on various assumptions (some of which are beyond the Company's control),
may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate,"
"anticipate," "continue," or similar terms or variations on those terms, or the negative of these terms. Actual results could differ materially from those set
forth in forward-looking statements, due to a variety of factors, including, but not limited to, those related to the economic environment, particularly in the
market areas in which the company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in
government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions
and the integration of acquired businesses, credit risk management, asset/liability management, changes in the financial and securities markets, including
changes with respect to the market value of our financial assets, and the availability of and costs associated with sources of liquidity. The Company
undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

D I V I D E N D A N D S T O C K H I S T O R Y
D I V I D E N D A N D S T O C K H I S T O R Y

2021 ANTICIPATED
DIVIDEND PAYABLE DATES

First Quarter
March 19, 2021

Second Quarter*
June 18, 2021

Third Quarter*
September 20, 2021

Fourth Quarter*
December 20, 2021

*Subject to action by
Board of Directors

(1) Adjusted for stock dividends and exchanges.

(2) Formation of United Bancorp, Inc. (UBCP). Unified

Bank (formerly The Citizen's Saving Bank)
shareholders received 4 shares of UBCP stock in
exchange for 1 share of bank stock.

Cash Dividends
Declared (1)

Special Cash Dividends
and Stock Dividends

1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

0.05
0.06
0.07
0.09
0.09
0.10
0.10
0.11
0.12
0.12
0.12
0.13
0.19
0.20
0.23
0.26
0.30
0.31
0.32
0.33
0.35
0.39
0.43
0.48
0.52
0.54
0.56
0.56
0.56
0.42
0.29
0.33
0.37
0.42
0.46
0.52
0.545
0.57

-
4 for 1 Exchange(2)
-
-
50% Stock Dividend
-
-
-
-
100% Stock Dividend
100% Stock Dividend
10% Stock Dividend
-
10% Stock Dividend
10% Stock Dividend
5% Stock Dividend
5% Stock Dividend
5% Stock Dividend
5% Stock Dividend
5% Stock Dividend
10% Stock Dividend
10% Stock Dividend
10% Stock Dividend
10% Stock Dividend
–
–
–
–
–
–
–
–
5¢ Per Share Special Dividend
5¢ Per Share Special Dividend
5¢ Per Share Special Dividend
5¢ Per Share Special Dividend
–
–

Distribution Date of
Dividends and
Exchanges
-
January 2, 1984
-
-
October 2, 1987
-
-
-
-

September 10, 1992
November 30, 1993
September 9, 1994
-
June 20, 1996
September 19, 1997
December 18, 1998
December 20, 1999
December 20, 2000
December 20, 2001
December 20, 2002
December 19, 2003
December 20, 2004
December 20, 2005
December 20, 2006

–
–
–
–
–
–
–
–

December 29, 2015
December 29, 2016
December 29, 2017
December 28, 2018

–
–

T O T A L R E T U R N P E R F O R M A N C E

United Bancorp, Inc.
NASDAQ Composite
SNL Bank Index
SNL $500M-$1B Index
SNL Midwest Bank Index
Dow Jones

300

250

200

150

100

e
u
l
a
V
x
e
d
n
I

12/31/15

12/31/16

12/31/17

12/31/18

12/31/19

12/31/20

Index
United Bancorp, Inc.
NASDAQ Composite
SNL Bank Index
SNL Bank $500M-$1B Index
SNL Midwest Bank
Dow Jones

12/31/15
100.00
100.00
100.00
100.00
100.00
100.00

12/31/16
147.00
108.87
126.35
135.02
133.61
116.50

12/31/17
150.44
141.13
149.21
164.73
143.58
149.24

12/31/18
135.70
137.12
124.00
159.00
122.61
144.05

12/31/19
177.85
187.44
167.93
204.78
159.51
180.56

12/31/20
171.35
271.64
145.49
176.93
136.96
198.11

Directors

Jonathan C. Clark2

Scott A. Everson1,2,4

Gary W. Glessner1,2

Brain M. Hendershot2

John R. Herzig2

John M. Hoopingarner1,2

Richard L. Riesbeck1,2,3

1 = United Bancorp, Inc. 2 = Unified Bank
3 = Chairman - United Bancorp Inc. 4 = Chairman - Unified Bank

2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Directors and Officers

DIRECTORS OF UNITED BANCORP, INC.

Scott A. Everson1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .President & Chief Executive Officer, United Bancorp, Inc.
Chairman, President & Chief Executive Officer, Unified Bank, Martins Ferry, Ohio

Gary W. Glessner2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .CPA & CGMA, Managing Member, Glessner & Associates, PLLC;
Glessner Wharton Andrews Insurance, LLC; Tiffany's, LLC; GWA Realty, LLC,
GW Rentals, LLC; Trustee, Windmill Truckers Center, Inc.

John M. Hoopingarner, Esq.1,2,3,4 . . . . . . . . . . . . . . . . . . . . . . . . . Of Counsel, McMahon, DeGulis LLP, Columbus, Cleveland & Cincinnati, Ohio

Richard L. Riesbeck1,2,3,4 . . . . . . . . . . . . . . . . . Chairman, United Bancorp, Inc.; President, Riesbeck Food Markets, Inc., St. Clairsville, Ohio

James W. Everson ............................................................................................................................................................... Chairman Emeritus 1969 - 2015

OFFICERS OF UNITED BANCORP, INC.

Scott A. Everson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President & Chief Executive Officer

Matthew F. Branstetter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Senior Vice President, Chief Operating Officer

Randall M. Greenwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President, Chief Financial Officer & Treasurer

Lisa A. Basinger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Corporate Secretary

DIRECTORS OF UNIFIED BANK

Jonathan C. Clark, Esq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney at Law, Lancaster, Ohio

Brian M. Hendershot. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, Ohio-West Virginia Excavating, Shadyside, Ohio

John R. Herzig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, Toland-Herzig Funeral Homes & Crematory, Strasburg, Ohio

John M. Hoopingarner, Esq.1,2 . . . . . . . . . . . . . . . . . . . . . . . . . . . Of Counsel, McMahon, DeGulis LLP, Columbus, Cleveland & Cincinnati, Ohio

Richard L. Riesbeck1,2, F . . . . . . . . . . . . . . . . . . Chairman, United Bancorp, Inc.; President, Riesbeck Food Markets, Inc., St. Clairsville, Ohio

1 = Executive Committee 2 = Audit Committee 3 = Compensation Committee
4 = Nominating and Governance Committee F = Lead Director

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Bank Past Presidents & Directors

The journey to becoming the institution we are today began in Martins Ferry,
Ohio in 1902. Originally founded as The German Savings Bank and renamed
to The Citizens Savings Bank in 1918, the last 118 years have seen growth
and change that would have been unimaginable at its' founding. The bank
has grown through sound management, the addition of new offices and the
acquisition of others. With the name change from The Citizens Savings Bank to
Unified Bank in 2018, it has and will continue to move forward.

The growth and success of the bank has been attributed to the association of
many dedicated individuals.

PAST PRESIDENTS
Edward E. McCombs, 1902-1936
John E. Reynolds, 1936 – 1940
Harold H. Riethmiller, 1940 – 1973
James W. Everson, 1973 – 2002

Past Board of Directors
Edward E. McCombs, 1902-1936*
John E. Reynolds, 1902-1940
Dr. Joseph W. Darrah, 1902-1937
J.A. Crossley, 1902-1903
William M. Lupton, 1902-1902
F.K. Dixon, 1902-1909
Dr. R.H. Wilson, 1902-1905
Chris A. Heil, 1903-1909
David Coss, 1904-1938
L.L. Scheele, 1905-1917
A.T. Selby, 1906-1954
H.H. Rothermund, 1907-1912
Dr. J.G. Parr, 1912-1930
T.E. Pugh, 1920-1953
J.J. Weiskircher, 1925-1942
David H. James, 1925-1963
Dr. C.B. Messerly, 1931-1957
H.H. Riethmiller, 1936-1980*
E.M. Nickles, 1938-1968
L.A. Darrah, 1939-1962
R.L. Heslop, 1941-1983
Joseph E. Weiskircher, 1943-1975
Edward M. Selby, 1953-1976
David W. Thompson, 1954-1966

Dr. Charles D. Messerly, 1957-1987
James M. Blackford, 1962-1968
John H. Morgan, 1967-1976
Emil F. Snyder, 1968-1975
James H. Cook, 1976-1986
Paul Ochsenbein, 1978-1991
David W. Totterdale, 1981-1995
Albert W. Lash, 1975-1996
Premo R. Funari, 1976-1997
Donald A. Davison, 1963-1997*
Harold W. Price, 1999-1999
John H. Clark, Jr., 1976-2001
Dwain R. Hicks, 1999-2002
Michael A. Ley, 1999-2002
Michael J. Arciello 1992 - 2009
Leon F. Favede, O.D., 1981-2012
Herman E. Borkoski, 1987-2012
James W. Everson, 1969-2014*
Robin L. Rhodes, 2007-2015
Andrew C. Phillips, 2007-2015
Errol C. Sambuco, 1996-2015
Samuel J. Jones, 2007-2015
Matthew C. Thomas, 1988-2016
Terry A. McGhee, 2001-2017
Carl A Novak, D.D.S., 2018-2020

* Past Chairman

2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Shareholder Information

United Bancorp, Inc.’s (the Company) common stock trades on The Nasdaq Capital Market tier of The Nasdaq Stock Market
under the symbol UBCP, CUSIP #909911109. At year-end 2020, there were 6,046,351 shares issued, held among approximate-
ly 3,300 shareholders of record and in street name. The following table sets forth the quarterly high and low closing prices of
the Company’s common stock from January 1, 2020 to December 31, 2020 compared to the same periods in 2019 as reported
by the NASDAQ.

Market Price Range

High ($)
Low ($)

Cash Dividends
Quarter ($)
Cumulative ($)

2 0 2 0
31-Mar 30-Jun 30-Sep 31-Dec

2 0 1 9

31-Mar 30-Jun 30-Sep

31-Dec

$ 14.75
9.31
$

10.70
9.10

12.67
10.50

13.35
11.80

$ 11.75
$ 10.25

11.84
10.57

11.85
11.01

15.30
10.87

$ 0.1425
$ 0.1425

0.1425
0.2850

0.1425
0.4275

0.1425
0.5700

$ 0.1325
$ 0.1325

0.1350
0.2675

0.1375
0.4050

0.1400
0.5450

Investor Relations:

Annual Meeting:

Stock Trading:

A copy of the Company’s Annual
Report on form 10-K as filed with
the SEC, will be furnished free of
charge upon written or E-mail
request to:
Randall M. Greenwood, CFO
United Bancorp, Inc.
201 South 4th Street
PO Box 10
Martins Ferry, OH 43935
or
cfo@unitedbancorp.com

Dividend Reinvestment and
Stock Purchase Plan:

Shareholders may elect to reinvest
their dividends in additional shares of
United Bancorp, Inc.’s common stock
through the Company’s Dividend
Reinvestment Plan. Shareholders may
also invest optional cash payments of
up to $5,000 per month in our
common stock at market price. To
arrange automatic purchase of shares
with quarterly dividend proceeds,
please contact:
American Stock Transfer
and Trust Company
Attn: Dividend Reinvestment
6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
1-800-278-4353

The Annual Meeting of Shareholders
will be held at 2:00 p.m., April 21,
2021 at the Corporate Offices in
Martins Ferry, Ohio.

Internet:

Please look us up at
http//:www.unitedbancorp.com

Independent Auditors:

BKD LLP
312 Walnut Street, Suite 3000
Cincinnati, Ohio 45202
(513) 621-8300

Corporate Offices:

Raymond James
222 South Riverside Plaza
7th Floor
Chicago, Illinois 60606
Anthony LanFranco
312-655-2961

Stifel, Nicolaus & Company Inc.
655 Metro Place South
Dublin, Ohio 43017
Steven Jefferis
877-875-9352

Tom Thurston
Piper Sandler Companies
1251 Avenue of the Americas
New York, NY 10020
212-466-8027

Unified Bank Building
201 South 4th Street, Martins Ferry, Ohio 43935
Lisa A. Basinger
Corporate Secretary
(888) 275-5566 (EXT 6113)
(740) 633-0445 (EXT 6113)
(740) 633-1448 (FAX)

Transfer Agent and Registrar:

For transfers and general correspondence,
please contact:
American Stock Transfer and Trust Company
6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
1-800-937-5449

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Management’s Discussion and Analysis

In the following pages, management presents an analysis of United Bancorp, Inc.’s financial condition and results of operations as of and for the
year ended December 31, 2020 as compared to prior years. This discussion is designed to provide shareholders with a more comprehensive review of
the operating results and financial position than could be obtained from an examination of the financial statements alone. This analysis should be
read in conjunction with the Consolidated Financial Statements and related footnotes and the selected financial data included elsewhere in this report.

When used in this discussion or future filings by the Company with the Securities and Exchange Commission, or other public or shareholder
communications, or in oral statements made with approval of an authorized executive officer, the words or phrases “will likely result,” “are expected
to,” “will continue,” “is anticipated,” “estimate,” “project,” “believe,” or similar expressions are intended to identify “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and
national economic conditions, changes in levels of market interest rates, credit risks of lending activities and competitive and regulatory factors,
could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those
anticipated or projected.

The Company is not aware of any trends, events or uncertainties that will have or are reasonably likely to have a material effect on its liquidity, capital
resources or operations except as discussed herein. The Company is not aware of any current recommendations by regulatory authorities that would
have such effect if implemented.

The Company does not undertake, and specifically disclaims, any obligation to publicly release any revisions that may be made to any forward-
looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Financial Condition

Overview
United Bancorp, Inc. reported diluted earnings per share
of $1.39 and net income of $7,953,000 for the twelve months
ended December 31, 2020, as compared to its previous
record levels of $1.19 and $6,810,000, respectively, for the
corresponding twelve-month period
The
Company’s diluted earnings per share for the three months
ended December 31, 2020 was $0.46, as compared to $0.31
for the same period in the previous year, an increase of
48.4%. Even though the Company achieved record earnings
in 2020, overall earnings were negatively affected by a
higher provision for loan losses and other expenses or
revenue losses that it realized due to the impact of the
COVID-19 pandemic that ravaged our national economy
and country this past year.

in 2019.

For the fourth quarter of 2020, United Bancorp, Inc. achieved
net income of $2,640,000 and diluted earnings per share of
$0.46, which was a respective increase for each of $872,000
and $0.15, or 48.4%, over the previous year. For the twelve
months ending December 31, 2020, the Company had net
income of $7,953,000 and diluted earnings per share of
$1.39 versus $6,810,000 and $1.19 respectively for the
preceding year, an increase for both of 16.8% --- even
though we booked an additional $2,429,000 in loan loss
provision during the current year, raising the level of our
total allowance for loan losses to total loans from 0.51% to

Total Assets (In Thousands)

$700,000

$625,000

$550,000

$475,000

$400,000

$325,000

$250,000

$593,213

$685,706

$693,402

2018

2019

2020

1.15% as of year-end. Contributing to the achievement of a
sound level of earnings this past year was the solid growth
the Company experienced in its earning assets. Year-over-
year, average loans increased by $25.8 million, or 6.1%, and
average securities and other required stock increased by
$9.8 million or 6.2%. Even with the FOMC implementing its
Zero Interest Rate Policy (ZIRP) early in 2020 due to the
COVID-19 pandemic, our solid growth in our earning assets,
along with our robust loan fee generation (which increased
by $575,000, or 61%, year-over-year), led to an increase of
$594,000 in our level of total interest income realized --- an
improvement of 2.2% over the previous year. As we have
formerly disclosed, our Company prudently started to
position its balance sheet to be more liability sensitive early

10 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

in the second quarter of 2019 in response to the FOMC’s
change in the direction of monetary policy at that time.
This action put us in a more strategic position to fully
benefit from the ZIRP implemented almost overnight by
the FOMC in the first quarter of 2020 when the potential
effects of the COVID-19 pandemic on our country and
economy were more fully understood. Being in a very good
position from a sensitivity perspective when this sudden
and drastic change in monetary policy occurred, our
Company saw its total interest expense decrease in 2020
from the previous year by $1,389,000 or 22.7% --- a level
which helped us lower our overall total interest expense on
a year-over-year basis for the first time in several years as we
had properly and responsively prepared for the downward
trending rate environment in which we presently operate
and foresee operating within for an extended period. With
our focus on both growing earning assets and aggressively
managing our sensitivity, our Company saw a year-over-
year increase in its net interest income of $1,983,000 or
9.5%. As of December 31, 2020, our Company’s net interest
margin was 3.76%, which is an increase of nine basis points
year-over-year and compares very favorably to our peer.
Obviously, if rates stay lower for longer as the FOMC has
communicated, this could challenge us to maintain our net
interest margin at its present level.

Loans-Net (In Thousands)

$440,000

$420,000

$400,000

$380,000

$360,000

$340,000

$320,000

$407,640

$439,317

$438,378

2018

2019

2020

current trend will continue; but, being realistic, we firmly
recognize that our credit quality metrics could deteriorate if
our economy does not normalize in the near term. United
Bancorp, Inc. continues to have very sound levels of capital.
As previously announced in the second quarter of 2019, we
enhanced our capital levels by issuing $20.0 million in
subordinated debt at very favorable terms. Even though
this capital is only measured at the bank-level, it has
provided some very welcome cushion during these very
challenging times. Overall, our Company saw shareholders’
equity grow by $8.4 million, or 14.0%, and its book value
increase by $1.21, or 11.8%, year-over-year.

Even though we fully realize that the continuing pandemic
situation has the potential to change our qualitative metrics
relating to credit, we have successfully maintained overall
strength and stability within our loan portfolio throughout
the course of this past year and at year-end. As of December
31, 2020, United Bancorp, Inc. continues to have very solid
credit quality-related metrics supported by a relatively low
level of nonaccrual loans and loans past due 30 plus days,
which were $832,000, or 0.19% of total loans, versus
$2,660,000 and 0.63%, respectively, the previous year.
Further, net loans charged off, excluding overdrafts, was
$378,000, or 0.08% . With our increased provision for loan
losses this past year, our total allowance for loan losses
more than doubled year-over-year and our total allowance
for loan losses to nonaccrual loans was 816.4% at year-end.
We remain committed to closely working with our valued
loan customers to keep their loans current by following
payment relief practices fully supported by both regulatory
and accounting guidance. We are hopeful that these
positive actions will allow our customers who are still being
negatively impacted by the pandemic to weather the storm
and our Company to maintain its present state of sound
credit quality. Over the course of this most recently ended
quarter, we were encouraged to see most of our loan
customer base that had previously received some level of
payment relief in 2020 make either contractual or interest
only payments on their loans. We are hopeful that this

As United Bancorp, Inc. navigated through an unprecedented
and highly uncertain operating environment in 2020, I am
extremely proud to report that we responded well to the
challenges with which we were confronted and produced
record earnings. We are exceptionally grateful for the level
of increased earnings that we achieved in the pandemic-
challenged economy in which we operated this past year
and continue to be both mindful and respectful of the
continuing challenges that it will pose for our Company in
the current year. Accordingly, we continue to posture our
Company for a longer duration downturn due to the
negative macroeconomic forces with which we continue to
be confronted related to the impacts of the pandemic on
both our domestic and world economies. But, with the
recent development of a COVID-19 vaccine and our solid
credit related metrics and loss coverage related thereto, our
Company did not contribute an additional provision to our
relatively robust loan loss reserve this past quarter. Giving
consideration to our exceptionally strong coverage ratio at
year-end, we may be able to continue this course in the
coming year if our credit metrics remain solid and the
economy continues to improve and get closer to pre-
pandemic performance levels. Our Company continues to
be well capitalized under regulatory and industry guidelines,
which should help us weather any storm that may confront
us. In addition, our Company has always had a long-term
view, predicated on sound underwriting practices, superior

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Total Average Earning Assets

(In Thousands)

$446.3 million for 2020, representing a 6.1% increase
compared to average loans of $420.5 million for 2019.

$710,000

$650,000

$590,000

$530,000

$470,000

$410,000

$350,000

$479,975

$597,260

$643,465

2018

2019

2020

liquidity and capital
customer service and prudent
management, which has served us well through various
operating environments. We are confident that this
philosophy will again prove to be sound as we support our
customers and work through this present crisis; therefore,
protecting our shareholder value.

This past year was extremely trying for our nation and our
thoughts and prayers continue to go out to everyone as we
all work through the challenges presented to us by this
horrible COVID-19 pandemic. Our number one priority
continues to be protecting the health and welfare of our
team members and customer base, while delivering the
highest quality service possible under the circumstances.
During this time of great uncertainty, we are blessed to
have both systems and personnel capable of delivering
quality service and support to our valued customers. From
an operating perspective, our Company was back to full
operations and availability for the entire second half of
2020. The Company’s newest banking center opened in
Moundsville, West Virginia, during this timeframe. This new
location, our Company’s twentieth full-service banking
center, is our first one located in the State of West Virginia.
Although we are open to the public, we are taking extreme
precautions in our operations by following the strict and
further evolving guidance provided by both governmental
and health authorities. We are truly blessed to have an
extremely caring and resilient team of employees that helped
our Company perform at a record level during arguably the
most demanding environment in which any of us have ever
worked. It is only through the diligence of our team members
that we have been able to execute at a high level and achieve
the record level of earnings that we did in 2020.

Earning Assets -Loans
The Company’s gross loans totaled $443.4 million at
December 31, 2020, representing a 0.04% increase over the
$441.5 million at December 31, 2019. Average loans totaled

2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

The increase in gross loans from December 31, 2019 to
December 31, 2020 was primarily an increase in residential
real estate by $8.6 million.

The Company's commercial and commercial real estate
loan portfolio represents 78.8% of the total portfolio
at December 31, 2020 compared to 80.3% at December 31,
2019. The Company’s commercial and commercial real
estate loans decreased approximately $5.2 million from
December 31, 2019 to December 31, 2020. We utilize all the
SBA, Ohio Department of Development and State of Ohio
loan programs as well as local revolving loan funds to best
fit the needs of our customers.

The Company’s installment lending portfolio represented
1.9% of the total portfolio at December 31, 2020, compared
to 2.2% at December 31, 2019. Competition for installment
loans principally comes from the captive finance companies
offering low to zero percent financing for extended terms.

The Company's residential real estate portfolio represents
19.3% of the total portfolio at December 31, 2020, compared
to 17.5% at December 31, 2019. Residential real estate loans
are comprised of 1-, 3-, and 5-year adjustable-rate mortgages
and 15-year fixed rate loans used to finance 1-4 family units.
The Company also offers fixed-rate real estate loans through
our Secondary Market Real Estate Mortgage Program.
Once these fixed-rate loans are originated and immediately
sold without recourse in what is referred to as the secondary
market, the Company does not assume credit risk or interest
rate risk in this portfolio. This arrangement is quite common
in banks and saves our customers from looking elsewhere
for their home financing needs.

The Company did recognize a gain on the sale of secondary
market loans of $180,000 in 2020 and a gain of $54,000 in
2019.

The allowance for loan losses represents the amount which
management and the Board of Directors estimates is
adequate to provide for probable incurred losses in the
loan portfolio. Accounting for the allowance and the related
provision for loan losses is viewed by management as a
critical accounting policy. The allowance balance and the
annual provision charged to expense are reviewed by
management and the Board of Directors on a monthly
basis. The allowance calculation is determined by utilizing a
risk grading model that considers borrowers’ past due
experience, coverage ratio to industry averages, economic

conditions and various other circumstances that are subject
to change over time. In general, the loan loss policy for
installment loans requires a charge-off if the loan reaches
120-day delinquent status or if notice of bankruptcy
liquidation is received. The Company follows lending
policies, with established criteria for determining the
repayment capacity of borrowers, requirements for down
payments and current market appraisals or other valuations
of collateral when loans are originated. Installment lending
also utilizes credit scoring to help in the determination of
credit quality and pricing.

The Company generally recognizes interest income on the
accrual basis, except for certain loans which are placed on
non-accrual status, when in the opinion of management
doubt exists as to collection on the loan. The Company’s
policy is to generally place loans greater than 90 days past
due on non-accrual status unless the loan is both well
secured and in the process of collection. When a loan is
placed on non-accrual status, interest income may be
recognized on a cash basis as payment is received if the
loan is well secured. If the loan is not deemed well secured,
payments are credited to principal.

Management and the Board of Directors believe the current
balance of the allowance for loan losses is sufficient to cover
probable incurred losses. Refer to the Provision for Loan
Losses section for further discussion on the Company’s
credit quality.

Earning Assets – Securities and Federal Funds Sold
The securities portfolio is comprised of U.S. Government
agency-backed securities, tax-exempt obligations of state
and political subdivisions and certain other investments.
Securities available for sale at December 31, 2020 decreased
approximately $30.7 million from December 31, 2019 totals.
To take advantage of a favorable yield curve on state and
municipal obligation, the Company sold certain available-

Net Income (In Thousands)

$8,400

$7,200

$6,000

$4,800

$3,600

$2,400

$1,200

$4,282

$6,810

$7,953

2018

2019

2020

for-sale securities for a total gain of approximately $2.6
million during 2020.

Sources of Funds – Deposits
The Company’s primary source of funds is retail core
deposits from individuals and business customers. These
core deposits include all categories of time deposits,
excluding certificates of deposit greater than $250,000.
Total deposits increased $31.5 million, or 5.7%, from $548.0
million at December 31, 2019 to $579.5 million at December
31, 2020. Overall total deposit growth was mainly focused
on interest bearing money market and savings accounts.

The Company has a strong deposit base from public
agencies, including local school districts, city and township
municipalities, public works facilities and others, which may
tend to be more seasonal in nature resulting from the
receipt and disbursement of state and federal grants. These
entities have maintained relatively stable balances with the
Company due to various funding and disbursement
timeframes.

Certificates of deposit greater than $250,000 are not
considered part of core deposits and, as such, are used to
balance rate sensitivity as a tool of funds management. At
December 31, 2020, certificates of deposit greater than
$250,000 decreased $6.2 million, from December 31, 2019
totals.

Sources of Funds – Securities Sold Under Agreements
to Repurchase and Other Borrowed Funds
Other interest-bearing liabilities include securities sold
under agreements to repurchase, and Federal Home Loan
Bank (“FHLB”) advances. Securities sold under agreements
to repurchase increased approximately $5.8 million from
December 31, 2019 to December 31, 2020.

Advances from the Federal Home Loan Bank (FHLB)
decreased $39.8 million from December 31, 2019 to
December 31, 2020.

On May 14, 2019 the Company issued $20,000,000 of junior
subordinated debentures in denominations of not less than
$250,000. The debentures bear interest at a fixed rate of
6.0% until May 2024, which then becomes a floating interest
rate equal to the three-month LIBOR (or an equivalent
index) plus 3.625%, resetting quarterly. Interest on the
subordinated notes will be payable semiannually through
May 2024 and quarterly thereafter through the maturity
date of May 2029. Principal is due upon maturity. The
debentures are unsecured and payable to various investors.
For purposes of computing regulatory capital, the

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

debentures are included in Tier 2 Capital. The subordinated
notes may not be repaid in whole or in part prior to the fifth
anniversary of the issue date (May 2019).

Performance Overview 2020 to 2019

Net Income
The Company reported basic and diluted earnings per
share of $1.39 and net income of $7,953,000 for the year
ended December 31, 2020, an increase of $1.1 million, or
16.8%, over net income of $6,810,000 for the year ended
December 31, 2019.

Net Interest Income
Net interest income, by definition, is the difference
between interest income generated on interest-earning
assets and the interest expense incurred on interest-bearing
liabilities. Various factors contribute to changes in net
interest income, including volumes, interest rates and the
composition or mix of interest-earning assets in relation to
interest-bearing liabilities. Comparing the year ended
December 31, 2020 to 2019, the Company’s net interest
margin was 3.76% compared to 3.67%, an increase of 9 basis
points.

Average interest-earning assets increased $46.2 million in
2020 as compared to 2019 while the associated weighted-
average yield on these interest-earning assets decreased
from 4.69% in 2019 to 4.49% for 2020. Average interest-
bearing liabilities increased $45.2 million in 2020 as
compared to 2019, while the associated weighted-average
costs on these interest-bearing liabilities decreased from
1.31% in 2019 to 0.92% in 2020.

Refer to the sections on Asset and Liability Management
and Sensitivity to Market Risks and Average Balances, Net
Interest Income and Yields Earned and Rates Paid elsewhere
herein for further information.

Provision For Loan Losses
The provision for loan losses is a charge to expense
recorded to maintain the related balance sheet allowance
for loan losses at an amount considered adequate by
Management and the Board of Directors to cover probable
incurred losses in the portfolio.

Gross loans were up $1.9 million year-over-year to a level of
$443.4 million as of December 31, 2020. During this same
period, the Company’s non-accrual
loans decreased
$826,000, or 56.9%, to a level of $626,000 and net loans
charged off were down by $223,000, or 37.1%, to a level of
$378,000 (exclusive of overdraft charge off). With the

concerns around COVID-19 and the surge in unemployment,
the Company increased the provision for loan losses which
was $3.3 million for the year ended December 31, 2020
compared to $908,000 for the year ended December 31,
2019, an increase of $2.4 million year-over-year. Total
allowance for loan losses to total loans was 1.15% and the
total allowance for loan losses to nonperforming loans was
816.7% at year end 2020, compared to 0.51% and 153.6% at
year end 2019.

Noninterest Income
Total noninterest income is made up of bank-related fees
and service charges, as well as other income-producing
services, sales of loans in the secondary market, ATM income,
early-redemption penalties for certificates of deposit, safe
deposit rental income, internet bank service fees, earnings
on bank-owned life insurance, realized gains on available-for-
sale securities and other miscellaneous items.

Noninterest income for the year ended December 31, 2020
was $6.9 million, an increase of $3.0 million, compared to
$3.9 million for the year ended December 31, 2019. The
main driver of this increase was the $2.6 million gain
recognized on the sale of available-for- sale securities.

Noninterest Expense

In 2020, our Company saw its overall noninterest expense
levels increase as we continued to build for the future and
support our overall mission for growth. Most of the
increase in our noninterest expense levels occurred in the
following areas: hiring additional personnel to support
service delivery, opening a full service banking center in
Moundsville West Virginia and enhancing our digital
channel to improve the overall customer experience
Overall noninterest expense for 2020 increased $1.4 million,
as compared to 2019.

Salaries and employee benefits increased $535,000, or 6.1%,
from 2019 to 2020. As described above, we had an increased

Total Allowance for Loan Losses
to Total Loans

1.15%

1.00%

0.85%

0.70%

0.55%

0.40%

0.25%

0.50%

0.51%

1.15%

2018

2019

2020

14 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

level of personnel from the opening of our Moundsville,
West Virginia office in the third quarter of 2020

Other expenses
increased $637,000, or 25.1%. Items
contributing to this increase were ATM expense of $208,000,
as we issue and grow our debit card usage. We also saw an
increase of $117,000 related to our Unified Care Center
customer support group, which, once again, was
implemented to improve the overall customer experience
levels This service was rolled out in the fourth quarter of
2019 and provides a “live” personal service to our valued
customer base six days a week, Monday through Saturday,
at hours as late as 10:00 p.m.

Income tax expense for 2020 was $629,000 compared to
$599,000 in 2019, an increase of $30,000. The Company’s
effective income tax rate was 7.3% in 2020 and 8.1% in 2019.
Refer to Note 9 Income Taxes for a reconciliation of the
effective tax rate for the Company.

Asset/Liability Management and Sensitivity
to Market Risks

In the environment of changing business cycles, interest
rate fluctuations and growing competition, it has become
increasingly difficult for banks to produce adequate
earnings on a consistent basis. Although management can
anticipate changes in interest rates, it is not possible to
reliably predict the magnitude of interest rate changes. As a
result, the Company must establish a sound asset/liability
management policy, which will minimize exposure to
interest rate risk while maintaining an acceptable interest
rate spread and insuring adequate liquidity.

The principal goal of asset/liability management – earnings
management – can be accomplished by establishing
decision processes and control procedures for all bank
assets and liabilities. Thus, the full scope of asset/liability
management encompasses the entire balance sheet of the
Company. The broader principal components of asset/
liability management include, but are not limited to liquidity
planning, capital planning, gap management and spread
management.

By definition, liquidity is measured by the Company’s ability
to raise cash at a reasonable cost or with a minimum amount
of loss. Liquidity planning is necessary so the Company will
be capable of funding all obligations to its customers at all
times, from meeting their immediate cash withdrawal
requirements to fulfilling their short-term credit needs.

Capital planning is an essential portion of asset/liability
management, as capital is a limited Bank resource, which,
due to minimum capital requirements, can place possible
restraints on Bank growth. Capital planning refers to
maintaining capital standards through effective growth
management, dividend policies and asset/liability
strategies.

Gap is defined as the dollar difference between rate
sensitive assets and rate sensitive liabilities with respect to
a specified time frame. A gap has three components – the
asset component, the liability component, and the time
component. Gap management involves the management
of all three components.

(In thousands)

2020

2019

Noninterest income
Customer service fees............................................................................................................................................................$
Gains on sales of loans ..........................................................................................................................................................
Earnings on bank-owned life insurance .........................................................................................................................
Realized gains on available-for-sale securities .............................................................................................................
Other income ............................................................................................................................................................................

Total noninterest income ..................................................................................................................................................$

Noninterest expense

Salaries and employee benefits .........................................................................................................................................$

Occupancy and equipment.................................................................................................................................................
Professional services ..............................................................................................................................................................
Insurance ....................................................................................................................................................................................
Deposit insurance premiums ..............................................................................................................................................
Franchise and other taxes ....................................................................................................................................................
Marketing expense .................................................................................................................................................................
Printing and office supplies .................................................................................................................................................
Amortization of intangibles ................................................................................................................................................
Other expenses ........................................................................................................................................................................

Total noninterest expense ..............................................................................................................................................$

2,580
180
706
2,593
856
6,915

9,311
2,406
1,232
486
184
492
339
122
150
3,168
17,890

2,843
54
533
-
458
3,888

8,776
2,263
1,292
468
75
408
383
136
150
2,531
16,482

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Gap management is defined as those actions taken to
measure and match rate-sensitive assets to rate-sensitive
liabilities. A rate-sensitive asset is any interest-earning
asset, which can be repriced to a market rate in a given time
frame. Similarly, a rate-sensitive liability is any interest-
bearing liability, which can have its interest rate changed to
a market rate during the specified time period. Caps, collars
and prepayment penalties may prevent certain loans and
securities from adjusting to the market rate.

A negative gap is created when rate-sensitive liabilities
exceed rate-sensitive assets and, conversely, a positive gap
occurs when rate-sensitive assets exceed rate-sensitive
liabilities. Generally, a negative gap position will cause
profits to decline in a rising interest rate environment and
cause profits to increase in a falling interest rate environment.
Conversely, a positive gap will cause profits to decline in a
falling interest rate environment and increase is a rising
interest rate environment. The Company’s goal is to have
acceptable profits under any interest rate environment. To
avoid volatile profits as a result of interest rate fluctuations,
the Company attempts to match interest rate sensitivities.
The Company achieves this by pricing both the asset and
liability components to yield a sufficient interest rate spread,
so that profits will remain relatively consistent across
interest rate cycles.

Management of the income statement is called spread
management and is defined as managing investments,
loans, and liabilities to achieve an acceptable spread
between the Company’s return on its earning assets and its
cost of funds. Gap management without consideration of
interest spread can cause unacceptably low profit margins.
Spread management without consideration of gap positions
interest rate
can cause acceptable profits
environments and unacceptable profits in others. A sound

in some

asset/liability management program combines gap and
spread management into a single cohesive system.

Management measures the Company’s interest rate risk by
computing estimated changes in net interest income and
the Net Portfolio Value (“NPV”) of its cash flows from assets,
liabilities and off-balance-sheet items in the event of a
range of assumed changes in market interest rates. The
Bank’s senior management and the Executive Committee of
the Board of Directors, comprising the Asset/Liability
Committee (“ALCO”), review the exposure to interest rates
monthly. Exposure to interest rate risk is measured with the
use of an interest rate sensitivity analysis to determine the
change in NPV in the event of hypothetical changes in
interest rates, while interest rate sensitivity gap analysis is
used to determine the repricing characteristics of the assets
and liabilities.

NPV represents the market value of portfolio equity and is
equal to the market value of assets minus the market value
of liabilities, with adjustments made for off-balance-sheet
items.

Computations of prospective effects of hypothetical
interest rate changes are based on numerous assumptions,
including relative levels of market interest rates, loan
prepayments and deposit decay rates, and should not be
relied upon as indicative of actual results. Further, the
computations do not contemplate any actions the Company
may undertake in response to changes in interest rates. The
NPV calculation is based on the net present value of
discounted cash flows utilizing market prepayment
assumptions and market rates of interest provided by
surveys performed during each quarterly period, with
adjustments made to reflect the shift in the Treasury yield
curve between the survey date and quarter-end date.

16 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Certain shortcomings are inherent in this method of analysis
presented in the computation of estimated NPV. Certain
assets such as adjustable-rate loans have features that
restrict changes in interest rates on a short-term basis and
over the life of the asset. In addition, the portion of
adjustable-rate loans in the Company’s portfolio could
decrease in future periods if market interest rates remain at
or decrease below current levels due to refinancing activity.
Further, in the event of a change in interest rates, prepayment
and early withdrawal levels would likely deviate from those
assumed in the table. Finally, the ability of many borrowers
to repay their adjustable-rate debt may decrease in the case
of an increase in interest rates.

The following tables present an analysis of the potential
sensitivity of the Company’s net present value of its financial
instruments to sudden and sustained changes in the
prevailing interest rates.

(Dollars in Thousands)

Net Portfolio Value - December 31, 2020

Change in Rates
+200
+100
Base
-100

$ Amount $ Change % Change
13,597
133,203
8,005
127,611
-
119,606
(14,082)
105,524

10%
6%
-
-13%

(Dollars in Thousands)

Net Portfolio Value - December 31, 2019

Change in Rates
+200
+100
Base
-100
-200

$ Amount $ Change % Change
(1,627)
128,125
(364)
129,388
-
129,752
120,886
(8,866)
(23,881)
105,871

-1%
0%
-
-7%
-23%

The projected volatility of the net present value at both
December 31, 2020 and 2019 fall within the general
guidelines established by the Board of Directors. The 2020
NPV table shows that in a falling interest rate environment,
in the event of a 100 basis point change, the NPV would
decrease 13%. The other consideration is that once rates
decrease 100 basis points from current levels, we tend to

reach a floor on how low depository rates can adjust
downward.

In an upward change in interest rates, the Company’s NPV
would increase 6% with a 100 basis point interest rate
increase. In a 200 basis point rate increase, the Company’s
NPV would increase 10%.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

The following table is a summary of selected quarterly results of operations for the years ended December 31, 2020 and 2019.

Three Months Ended

March 31

June 30

September 30

December 31

(In thousands, except per share data)
2020

Total interest income
Total interest expense

Net interest income

Provision for losses on loans
Other income
General, administrative and
other expense

Income before income taxes
Federal income taxes

Net income

Earnings per share
Basic
Diluted

7,319
1,685

5,634

563
1,044

4,410

1,705
126

1,579

0.28
0.28

6,949
1,427

5,522

1,408
2,156

4,579

1,691
16

1,675

0.29
0.29

6,692
948

5,744

1,333
2,340

4,492

2,259
200

2,059

0.36
0.36

6,668
674

5,994

33
1,375

4,409

2,927
287

2,640

0.46
0.46

Three Months Ended

March 31

June 30

September 30

December 31

(In thousands, except per share data)
2019

Total interest income
Total interest expense

Net interest income

Provision for losses on loans
Other income
General, administrative and
other expense

Income before income taxes
Federal income taxes

Net income

Earnings per share
Basic
Diluted

6,315
1,207

5,108

90
945

4,162

1,801
187

1,614

0.28
0.28

6,648
1,469

5,179

120
947

4,172

1,834
188

1,646

0.29
0.29

6,921
1,726

5,195

120
1,003

4,162

1,916
135

1,781

0.31
0.31

7,150
1,721

5,429

578
993

3,986

1,858
89

1,769

0.31
0.31

2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Average Balances, Net Interest Income and Yields
Earned and Rates Paid
The following table provides average balance sheet
information and reflects the taxable equivalent average
yield on interest-earning assets and the average cost of
interest-bearing liabilities for the years ended December 31,
2020 and 2019. The yields and costs are calculated by
dividing income or expense by the average balance of
interest-earning assets or interest-bearing liabilities.

The average balance of available-for-sale securities is
computed using the carrying value of securities while the
yield for available for sale securities has been computed
using the average amortized cost. Average balances are
derived from average month-end balances, which include
nonaccruing loans in the loan portfolio, net of the allowance
for loan losses. Interest income has been adjusted to tax-
equivalent basis.

(Dollars In thousands)

2020

Interest
Average
Income/ Yield/
Balance Expense Rate

2019
Interest
Average
Income/ Yield/
Balance Expense Rate

Assets
Interest-earning assets
Loans (1) ..................................................................................................... $ 446,256
Taxable securities - AFS ........................................................................
29,472
Tax-exempt securities - AFS (1) .............................................................. 137,948
25,522
Federal funds sold .......................................................................................
FHLB stock and other.................................................................................
4,267
Total interest-earning assets ................................................................... 643,465

Noninterest-earning assets
Cash and due from banks ...................................................................
7,864
Premises and equipment (net) ..........................................................
13,164
Other nonearning assets .....................................................................
42,228
Less: allowance for loan losses ..........................................................
(3,794)
59,462
Total noninterest-earning assets ...........................................................
Total assets..................................................................................................... 702,927

Liabilities & stockholders’ equity
Interest-bearing liabilities
Demand deposits ................................................................................... $ 248,167
Savings deposits ..................................................................................... 114,709
94,168
Time deposits ...............................................................................................
9,341
FHLB advances .............................................................................................
9,472
Federal funds purchased ..........................................................................
23,604
Subordinated debentures ........................................................................
Repurchase agreements ...........................................................................
12,524
Total interest-bearing liabilities ............................................................. 511,985

Noninterest-bearing liabilities
Demand deposits ................................................................................... 115,340
Other liabilities ........................................................................................
6,145
Total noninterest-bearing liabilities ..................................................... 121,485
Total liabilities ...............................................................................................
Total stockholders’ equity ........................................................................
69,457
Total liabilities & stockholders’ equity ................................................. $ 702,927
Net interest income ....................................................................................
Net interest spread .....................................................................................

$ 24,172

Net yield on interest-earning assets ....................................................

• For purposes of this schedule, nonaccrual loans are included in loans.
• Fees collected on loans are included in interest on loans.
(1) Shown on a tax equivalent basis.

22,106
596
6,057
49
98
28,906

4.95%
2.02
4.39
0.19
2.29
4.49

$ 420,487
48,911
106,528
17,285
4,049
597,260

21,803
996
4,687
333
211
28,030

5.19%
2.04
4.40
1.93
5.21
4.69

1,395
37
1,709
174
60
1,329
30
4,734

0.56%
0.03
1.81
1.86
0.63
5.63
0.24
0.92

5,405
12,232
22,787
(2,127)
38,297
635,557

$ 209,810
109,806
112,211
27
8,933
16,276
9,699
466,762

109,349
5,054
114,403

54,392
$ 635,557

2,381
188
2,258
1
185
975
136
6,124

1.13%
0.17
2.01
3.70
2.07
5.99
1.40
1.31

3.57%

3.76%

$ 21,906

3.38%

3.67%

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Rate/Volume Analysis
The table below describes the extent to which changes
in interest rates and changes in volume of interest-earning
assets and interest-bearing liabilities have affected interest
income and expense during 2020. For purposes of this
table, changes in interest due to volume and rate were
determined using the following methods:

• Volume variance results when the change in volume is
multiplied by the previous year’s rate.

• Rate variance results when the change in rate is multiplied
by the previous year’s volume.

$1.50

$1.35

$1.20

$1.05

$0.90

$0.75

$0.60

Diluted Earning Per Share

0.82

1.19

1.39

2018

2019

2020

• Rate/volume variance results when the change in volume

is multiplied by the change in rate.

Capital Resources

NOTE: The rate/volume variance was allocated to volume
variance and rate variance in proportion to the relationship
of the absolute dollar amount of the change in each.
Nonaccrual loans are ignored for purposes of the calculations
due to the nominal amount of the loans.

Internal capital growth, through the retention of
earnings, is the primary means of maintaining capital
adequacy for the Bank. The Company’s stockholders’
equity was $68.3 million and $59.9 million at December 31,
2020 and 2019, respectively. Total stockholders’ equity in
relation to total assets was 9.85% at December 31, 2020 and

2020 Compared to 2019
Increase/(Decrease)
(In thousands)

Total
Change

Change
Due To
Volume

Interest and dividend income
Loans ....................................................................................................................................$
Taxable securities available for sale ..........................................................................
Tax-exempt securities available for sale ..................................................................
Federal funds sold ...........................................................................................................
FHLB stock and other .....................................................................................................
Total interest and dividend income ..............................................................................

Interest expense
Demand deposits.............................................................................................................
Savings deposits...............................................................................................................
Time deposits ....................................................................................................................
FHLB advances ..................................................................................................................
Federal funds purchased ...............................................................................................
Subordinated debentures ............................................................................................
Repurchase agreements................................................................................................
Total interest expense ........................................................................................................

303
( 400 )
1,370
( 284 )
( 113 )
876

( 986 )
( 151 )
( 549 )
173
( 125 )
354
( 106 )
( 1,390 )

1,302
( 550 )
1,380
109
11
2,252

377
8
( 341 )
174
11
-
31
260

Change
Due To
Rate

( 999 )
150
( 10 )
( 393 )
( 124 )
( 1,376 )

( 1,363 )
( 159 )
( 208 )
( 1 )
( 136 )
354
( 137 )
( 1,650 )

Net interest income .............................................................................................................$

2,266

1,992

274

20 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

8.74% at December 31, 2019. Please refer to the Consolidated
Statements of Stockholders’ Equity for a detailed roll
forward of stockholders’ equity from 2019 to 2020.

The Company has established a Dividend Reinvestment
Plan (“The Plan”) for stockholders under which the
Company’s common stock will be purchased by The Plan for
participants with automatically reinvested dividends. The
Plan does not represent a change in the dividend policy or
a guarantee of future dividends. Stockholders who do not
wish to participate in The Plan continue to receive cash
dividends, as declared in the usual and customary manner.

$65,000

$60,000

$55,000

$50,000

$45,000

$40,000

$35,000

Equity Capital (In Thousands)

$50,643

$59,922

$68,328

2018

2019

2020

The Company’s Articles of Incorporation permits the
creation of a class of preferred shares with 2,000,000
authorized shares. If utilized, this will enable the Company,
at the option of the Board of Directors, to issue series of
preferred shares in a manner calculated to take advantage
of financing techniques which may provide a lower effective
cost of capital to the Company. The class of preferred
shares provides greater flexibility to the Board of Directors
in structuring the terms of equity securities that may be
issued by the Company. As of December 31, 2020, the
Company has not issued any preferred shares.

Cash Dividends Per Share

(Without Special Dividend)

$0.60

$0.55

$0.50

$0.45

$0.40

$0.35

$0.30

$0.520

$0.545

$0.570

2018

2019

2020

In 2005, a Delaware statutory business trust owned by the
Company, United Bancorp Statutory Trust I (“Trust I” or the
“Trust”), issued $4.1 million of mandatorily redeemable
debt securities. The sale proceeds were utilized to purchase
$4.1 million of the Company’s subordinated debentures.
The Company’s subordinated debentures are the sole asset
of Trust I. The Company’s investment in Trust I is not
consolidated herein as the Company is not deemed the
primary beneficiary of the Trust. However, the $4.1 million
of mandatorily redeemable debt securities issued by the
Trust are includible for regulatory purposes as a component
of the Company’s Tier 1 Capital. The interest rate is a
variable rate per annum, reset quarterly, equal to three-
month LIBOR plus 1.35% and is payable quarterly.

Liquidity

Liquidity relates primarily to the Company's ability to
fund loan demand, meet deposit customers' withdrawal
requirements and provide for operating expenses. Assets
used to satisfy these needs consist of cash and due from
banks, federal funds sold and securities available-for-sale.
These assets are commonly referred to as liquid assets.
Liquid assets were $209.7 million at December 31, 2020,
compared to $203.8 million at December 31, 2019.
Management recognizes securities may need to be sold in
the future to help fund loan demand and, accordingly, as of
December 31, 2020, $158.1 million of the securities portfolio
was classified as available for sale. The Company’s residential
real estate portfolio can and has been readily used to
collateralize borrowings as an additional source of liquidity.
Management believes its current liquidity level is sufficient
to meet cash requirements.

The Cash Flow Statements for the periods presented
provide an indication of the Company’s sources and uses of
cash as well as an indication of the ability of the Company
to maintain an adequate level of liquidity. A discussion of
the cash flow statements for 2020 and 2019 follows.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Net cash provided by operating activities totaled $9.4
million and $8.6 million for the years ended December 31,
2020 and 2019, respectively. The adjustments to reconcile
net income to net cash from operating activities consisted
mainly of depreciation and amortization of premises and
equipment and intangibles, gain on sales of loans, securities
and other assets, the provision for loan losses, Federal
Home Loan Bank stock dividends, net amortization of
securities and net changes in other assets and liabilities.

Net cash provided by investing activities totaled $33.7
million for the year ended December 31, 2020. For the year
ended December 31, 2019, net cash used by investing
activities totaled $95.8 million. The changes in net cash
from investing activities include loan growth, security
purchases, as well as normal maturities, security calls/sales
and reinvestments of securities and premises and
equipment expenditures.

Net cash used in financing activities totaled $6.4 million for
the year ended December 31, 2020. Net cash provided by
financing activities totaled $76.9 million for the year ended
December 31, 2019. The net cash used in financing activities
in 2020 was primarily attributable to a decrease in
borrowings from the Federal Home Loan Bank.

Management feels that it has the capital adequacy,
profitability, liquidity and reputation to meet the current
and projected financial needs of its customers.

Inflation
The majority of assets and liabilities of the Company are
monetary in nature and therefore the Company differs
greatly from most commercial and industrial companies

Return On Average Assets

1.20%

1.10%

1.00%

0.90%

0.80%

0.70%

0.60%

0.83%

1.07%

1.15%

2018

2019

2020

investments

in fixed assets or
that have significant
inventories. However, inflation does have an important
impact on the growth of total assets in the banking industry
and the resulting need to increase equity capital at higher
than normal rates in order to maintain an appropriate
equity to assets ratio.
Inflation significantly affects
noninterest expense, which tends to rise during periods of
general inflation. Management believes the most significant
impact on financial results is the Company’s ability to react
to changes in interest rates. Management seeks to maintain
an essentially balanced position between interest sensitive
assets and liabilities and actively manages the amount of
securities available for sale in order to protect against the
effects of wide interest rate fluctuations on net income and
shareholders' equity.

22 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee
United Bancorp, Inc.
Martins Ferry, Ohio

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of United Bancorp, Inc. (the "Company")
as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for each of the years in the two-year period ended December 31, 2020,
and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
years in the two-year period ended December 31, 2020, in conformity with accounting principles generally
accepted in the United States of America.

Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we
are required to obtain an understanding of internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.

Report of Independent Registered Public Accounting Firm

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matters or on the accounts or
disclosures to which it relates.

Allowance for Loan Losses
As described in Note 4 to the consolidated financial statements, the Company’s consolidated allowance
for loan losses (ALL) was $5.1 million at December 31, 2020. The Company also describes in Note 1 of the
consolidated financial statements the "Allowance for Loan Losses" accounting policy around this estimate.
The ALL is an estimate of losses inherent in the loan portfolio. The determination of the reserve requires
significant judgment reflecting the Company’s best estimate of probable 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 determines
that an outstanding loan will not be collected. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a monthly basis by Company 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 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 charge-off experience is determined by portfolio segment and
is based on the actual loss history experienced by the Company over the prior five years. Other adjustments
for each segment, such as qualitative or environmental considerations 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.

The primary reason for our determination that the allowance for loan losses is a critical audit matter is that
auditing the estimated allowance for loan losses involved significant judgment and complex review. There is a

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

United Bancorp, Inc.

Martins Ferry, Ohio

high degree of subjectivity in evaluating management’s estimate, such as evaluating management's assessment
of economic conditions and other environmental factors including the impact of the COVID-19 pandemic on
the loan portfolio, evaluating the adequacy of specific allowances associated with impaired loans and assessing
the appropriateness of loan grades.

We have audited the accompanying consolidated balance sheets of United Bancorp, Inc. as of December
31, 2011 and 2010, and the related consolidated statements of income, stockholders’ equity and cash
flows for each of the years in the two-year period ended December 31, 2011. The Company's
management is responsible for these financial statements. Our responsibility is to express an opinion on
these financial statements based on our audits.

•

Testing clerical and computational accuracy of the ALL model.

Testing the completeness and accuracy of the underlying information utilized in the ALL model.

Our audit procedures related to the estimated allowance for loan losses included:

• Computing an independent calculation of an acceptable range and comparing it to the

Company's estimate.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing
auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we
express no such opinion. Our audits also included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

•

Evaluating the qualitative and environmental adjustments to the historical loss rates, including
assessing the basis for the adjustments and the reasonableness, reliability and relevance of the
significant assumptions and underlying data.

Evaluating the relevance and reliability of data and assumptions.

Testing of the loan review function and the accuracy of loan grades determined. Specifically, utilizing
internal loan review professionals to assist us in evaluating the appropriateness of loan grades and to
assess the reasonableness of specific impairments on loans.

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of United Bancorp, Inc. as of December 31, 2011 and 2010, and the results
of its operations and its cash flows for each of the years in the two-year period ended December 31, 2011,
in conformity with accounting principles generally accepted in the United States of America.

We have served as the Company's auditor since 2007.

•

Evaluating the accuracy and completeness of disclosures in the consolidated financial statements.

Cincinnati, Ohio

March 2, 2012

Cincinnati, Ohio
March 19, 2021

December 31, 2004 and 2003

ASSETS

2004

2003

$ 7,580,576

$ 8,386,575

Cash and due from financial institutions

Securities available for sale - at market
Securities held to maturity – estimated fair value of
$15,475,005 and $16,344,353 at December 31, 2004
and 2003, respectively
Federal Home Loan Bank stock – at cost
Total loans
Allowance for loan losses
Assets
Premises and equipment
Accrued interest receivable
Other real estate and repossessions
Core deposit and other intangible assets
Bank owned life insurance
Other assets

Cash and due from banks
Interest-bearing demand deposits
Cash and cash equivalents

Consolidated Balance Sheets
United Bancorp, Inc.
Consolidated Balance Sheets
December 31, 2020 and 2019
December 31, 2020 and 2019
14,947,520
(In thousands, except share data)
(In thousands, except share data)
4,115,200
215,446,870
(2,995,422 )
212,451,448
7,760,360
2,253,212
1,014,207
34,417
7,517,548
2,030,767

137,816,329

Loans – net

140,818,167

15,594,408
3,954,300
198,608,574
(2,843,484 )
2020
195,765,090
8,152,480
$
2,373,573
940,015
57,452
7,185,507
2,295,402

11,637 $
39,955
51,592

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Available-for-sale securities
Loans, net of allowance for loan losses of $5,113 and $2,231 at December 31,
2020 and 2019, respectively
Premises and equipment
Demand deposits
Federal Home Loan Bank stock
Noninterest-bearing
Foreclosed assets held for sale, net
Interest-bearing
Core deposit intangible assets
Savings deposits
Time deposits – under $100,000
Goodwill
Time deposits - $100,000 and over
Accrued interest receivable
Total deposits
Bank-owned life insurance
Other assets

$397,521,584

Federal funds purchased
Advances from the Federal Home Loan Bank
Securities sold under agreements to repurchase
Other borrowed funds
Accrued expenses and other liabilities

Total Assets

Liabilities and Stockholders’ Equity

$ 31,777,495
62,038,985
45,143,133
122,018,788
39,651,142
300,629,543
3,180,000
46,680,311
12,612,270
399,283
1,196,066
364,697,473

158,067

$ 385,522,969

438,378
13,743
4,177
721
710
682
2,901
18,109
4,322
693,402 $

$ 30,049,919
61,137,605
48,274,042
128,443,059
36,621,372
304,525,997
9,714,000
30,974,611
5,485,399
$
159,398
2,149,105
353,008,510

Total liabilities

Liabilities
Deposits

Commitments

Demand
Savings
Time

Shareholders’ equity
Preferred stock - 2,000,000 shares without par value authorized;
Total deposits
no shares issued
Common stock - $1 par value; 10,000,000 shares authorized;
Securities sold under repurchase agreements
4,126,970 and 3,752,105 shares issued at December 31,
Federal Home Loan Bank advances
2004 and 2003, respectively
Subordinated debentures
Additional paid-in capital
Retained earnings
Deferred federal income tax
Stock held by deferred compensation plan; 62,977 and 55,825
Interest payable and other liabilities
shares at December 31, 2004 and 2003, respectively – at cost
Total liabilities
Treasury stock – 273,017 and 227,803 shares at December 31,
2004 and 2003, respectively - at cost
Stockholders’ Equity
Accumulated comprehensive loss, unrealized losses on
securities designated as available for sale, net of tax

376,287 $
122,549
80,699
579,535
-
12,705
––
23,604
2,185
7,045
625,074

3,752,105
25,712,990
6,047,652

(633,842)

(2,115,855)

4,126,970
25,831,585
7,021,185

(752,437)

(2,767,751)
Preferred stock, no par value, authorized 2,000,000 shares; no shares issued
(635,441)
Common stock, $1 par value; authorized 10,000,000 shares; issued 2020 –
32,824,111

Total shareholders’ equity

6,046,351 shares, 2019 - 5,959,351 shares; outstanding 2020 – 5,791,853, 2019
Total liabilities and shareholders’ equity
– 5,740,817

$397,521,584

$ 385,522,969

––

(248,591 )
32,514,459

Additional paid-in capital
Retained earnings
Stock held by deferred compensation plan; 2020 – 174,905 shares, 2019 –
176,134 shares
Unearned ESOP compensation
Accumulated other comprehensive income
Treasury stock, at cost 2020 – 79,593 shares, 2019 – 42,400 shares

Total stockholders’ equity
Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these statements.

See Notes to Consolidated Financial Statements

6,046
23,166
32,497

(1,675 )
––
9,283
(989 )
68,328
693,402 $

5,959
22,871
27,905

(1,659 )
(228 )
5,536
(462 )
59,922
685,706

2019

5,697
9,288
14,985

188,785

439,317
12,402
4,012
819
860
682
2,697
17,196
3,951
685,706

334,380
108,218
105,471
548,069
6,915
39,800
23,543
1,736
5,721
625,784

26 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

See Notes to Consolidated Financial Statements

Consolidated Statements of Income
United Bancorp, Inc.
Consolidated Statements of Income
Years Ended December 31, 2020 and 2019
Years Ended December 31, 2020 and 2019
(In thousands, except per share data)
(In thousands except per share data)

Interest and Dividend Income

Loans
Securities
Taxable
Tax-exempt
Federal funds sold
Dividends on Federal Home Loan Bank and other stock

Total interest and dividend income

Interest Expense

Deposits
Borrowings

Total interest expense

Net Interest Income
Provision for Loan Losses
Net Interest Income After Provision for Loan Losses
Noninterest Income

Customer service fees
Net gains on loan sales
Earnings on bank-owned life insurance
Realized gains on available-for-sale securities
Other

Total noninterest income

Noninterest Expense

Salaries and employee benefits
Net occupancy and equipment expense
Professional fees
Insurance
Deposit insurance premiums
Franchise and other taxes
Marketing expense
Printing and office supplies
Amortization of intangible assets
Other

Total noninterest expense

Income Before Federal Income Taxes
Provision for Federal Income Taxes
Net Income
Basic Earnings Per Share
Diluted Earnings Per Share

See Notes to Consolidated Financial Statements

2020

2019

22,099 $

21,790

596
4,785
49
99
27,628

3,141
1,593
4,734
22,894
3,337
19,557

2,580
180
706
2,593
856
6,915

9,311
2,406
1,232
486
184
492
339
122
150
3,168
17,890

8,582
629
7,953 $
1.39 $
1.39 $

$
$
$

996
3,704
333
211
27,034

4,827
1,296
6,123
20,911
908
20,003

2,843
54
533
––
458
3,888

8,776
2,263
1,292
468
75
408
383
136
150
2,531
16,482

7,409
599
6,810
1.19
1.19

See Notes to Consolidated Financial Statements

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Consolidated Statements of Comprehensive Income
United Bancorp, Inc.
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2020 and 2019
Years Ended December 31, 2020 and 2019
(In thousands)
(In thousands)

Net income
Other comprehensive income (loss), net of tax

2020

2019

7,953 $

6,810

Reclassification adjustment for realized gains on available-for-sale securities

included in net income, net of taxes $544 and $— for each respective period
Unrealized holding gains on available-for-sale securities during the period, net of

taxes of $1,841 and $1,622 for each respective period

Change in funded status of defined benefit plan, net of tax benefits of $312 and

$150 for each respective period

Amortization of prior service included in net periodic pension expense, net of tax

benefits of $19 and $19 for each respective period

Amortization of net loss included in net periodic pension cost, net of taxes of $30

and $20 for each respective period

(2,049 )

––

6,925

6,107

(1,174 )

(564 )

(70 )

115

(70 )

Comprehensive income

11,700 $

12,356

See Notes to Consolidated Financial Statements

28 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

See Notes to Consolidated Financial Statements

Consolidated Statements of Stockholders' Equity
United Bancorp, Inc.
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2020 and 2019
Years Ended December 31, 2020 and 2019
(In thousands, except per share data)
(In thousands except per share data)

Treasury
Additional Stock and
Common Paid-in Deferred
Stock

Shares
Acquired
By
Capital Compensation ESOP Earnings Gain (Loss)

Accumulated
Other

Retained Comprehensive

Total

Balance, January 1,
2019

$ 5,927 $

22,556 $

(1,747 ) $

(404 ) $ 24,321 $

(10 ) $ 50,643

Net income
Other comprehensive
loss
Cash dividends -
$0.545 per share
Shares purchased for
deferred compensation
plan
Shares purchased for
treasury stock
Expense related to
share-based
compensation plans
Restricted stock
activity
Amortization of ESOP

Balance, December 31,
2019

Net income
Other comprehensive
income
Cash dividends - $0.57
per share
Shares activity for
deferred compensation
plan
Shares purchased for
treasury stock
Expense related to
share-based
compensation plans
Restricted stock
activity
Amortization of ESOP

––

(42 )

––

6,810

–– 6,810

––

5,546 5,546

––

(3,226 )

–– (3,226 )

––

(416 )

––

(416 )

––

293

––

293

32
––

(32 )
96

––
––

––
176

––
––

––
272

5,959

22,871

(2,121 )

(228 ) 27,905

5,536 59,922

––

7,953

–– 7,953

––

3,747 3,747

––

(3,361 )

–– (3,361 )

(17 )

––

(526 )

––

(526 )

––

324

––

324

87
––

(87 )
41

––
––

––
228

––
––

––
269

Balance, December 31,
2020

$ 6,046 $

23,166 $

(2,664 ) $

–– $ 32,497 $

9,283 $ 68,328

See Notes to Consolidated Financial Statements

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Consolidated Statements of Cash Flows
United Bancorp, Inc.
Years Ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows
Years Ended December 31, 2020 and 2019
(In thousands)
(In thousands)

Operating Activities

Net income
Items not requiring (providing) cash
Depreciation and amortization
Provision for loan losses
Gain on sale of available-for-sale securities
Amortization of premiums and discounts on securities-net
Amortization of intangible assets
Deferred income taxes
Originations of loans held for sale
Proceeds from sale of loans held for sale
Net gains on sales of loans
Amortization of ESOP
Expense related to share-based compensation plans
(Gain) loss on sale of real estate and other repossessed assets
Increase in cash surrender value of bank-owned life insurance
Gain on sale of fixed assets
Amortization of debt issuance costs

Changes in

Accrued interest receivable
Other assets
Interest payable and other liabilities

2020

2019

7,953 $

6,810

1,157
3,337
(2,593 )
407
150
(547 )
(8,040 )
8,220
(180 )
270
324
(5 )
(463 )
––
61

(205 )
(1,800 )
1,324

1,040
908
––
326
150
42
(2,796 )
2,850
(54 )
272
293
5
(81 )
(8 )
36

(898 )
(1,188 )
910

Net cash provided by operating activities

9,370

8,617

Investing Activities

Purchases of available-for-sale securities
Sale of available-for-sale securities
Maturities, prepayments and calls
Net change in loans
(Purchase) mandatory redemption of Federal Home Loan Bank Stock
Purchases of bank-owned life insurance
Purchases of premises and equipment, net
Proceeds from sale of premises and equipment
Proceeds from sales of foreclosed assets

(22,602 )
31,675
30,003
(2,658 )
(165 )
(450 )
(2,519 )
21
363

(102,645 )
45,255
––
(33,403 )
231
(4,000 )
(1,336 )
19
86

Net cash used provided by (used in) investing activities

33,668

(95,793 )

See Notes to Consolidated Financial Statements

30 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

See Notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows Continued
United Bancorp, Inc.
Years Ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows (continued)
(In thousands)
December 31, 2020 and 2019
(In thousands)

Financing Activities

Net increase in deposits
Proceeds of Federal Home Loan Bank advances
Repayments of Federal Home Loan Bank advances
Proceeds from issuance of subordinated debentures, net of origination fees
Net change in securities sold under repurchase agreements
Repurchase of common stock
Cash dividends paid

Net cash (used in) provided by financing activities

Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Year

2020

2019

31,466 $
(39,800 )
––
––
5,790
(526 )
(3,361 )

22,626
39,800
(106 )
19,383
(1,153 )
(416
(3,226 )

(6,431 )

76,908

36,607

(10,268 )

14,985

25,253

Cash and Cash Equivalents, End of Year

51,592 $

14,985

Supplemental Cash Flows Information

Interest paid on deposits and borrowings

Federal income taxes paid

Supplemental Disclosure of Non-Cash Investing Activities

Transfers from loans to foreclosed assets held for sale

See Notes to Consolidated Financial Statements

4,723 $

6,098

990 $

260 $

818

See Notes to Consolidated Financial Statements

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Note 1: Nature of Operations and Summary of Significant Accounting Policies

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” or
“Unified”). 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. 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. 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 policy, 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.

32 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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

The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the
allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowance for loan losses and the valuation
of foreclosed assets held for sale, management obtains independent appraisals for significant properties.

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash
equivalents. At December 31, 2020 and 2019, cash equivalents consisted primarily of due from accounts with
the Federal Reserve and other correspondent banks.

Currently, the FDIC’s insurance limits are $250,000. At December 31, 2020 and 2019, the Company’s
various cash accounts did not exceed the federally insured limit of $250,000. At December 31, 2020 and
2019, the Company held $37,738,000 and $7,830,000 at the Federal Home Loan Bank and the Federal
Reserve Bank, respectively, which are not subject to FDIC limits.

Securities

Certain debt securities that management has the positive intent and ability to hold to maturity would be
classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity,
including equity securities with readily determinable fair values, are classified as “available for sale” and
recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other
comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest
method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade
date and are determined using the specific identification method.

For debt securities with fair value below amortized cost, when the Company does not intend to sell a debt
security, and it is more likely than not the Company will not have to sell the security before recovery of its
cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in
earnings and the remaining portion in other comprehensive income.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or
fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by
charges to income. At December 31, 2020 and 2019, the Company did not have any loans held for sale.

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.

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.

34 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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
uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a monthly basis by Bank 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.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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.

36 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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.

On March 27, 2020, the President of the United State signed the Coronavirus Aid, Relief, and Economic
Security Act (the “CARES Act”), which provides entities with optional temporary relief from certain
accounting and financial reporting requirements under U.S. GAAP. Section 4013 of the CARES Act allows
financial institutions to suspend application of certain TDR accounting guidance for loan and lease
modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December
31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met.
Section 4013 of the CARES Act was amended on December 27, 2020 to extend this relief until January 1,
2022. The relief can be applied to loan and lease modifications for borrowers that were not more than 30
days past due as of December 31, 2019 and to loan and lease modifications that defer or delay the payment
of principal or interest, or change the interest rate on the loan. The Company chose to apply this relief to
eligible loan and lease modifications.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using
the straight-line method over the estimated useful lives of the assets. An accelerated method is used for tax
purposes.

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal
Home Loan Bank system. The required investment in the common stock is based on a predetermined formula,
carried at cost and evaluated for impairment.

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,
less costs to sell, 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. Revenue and expenses from operations and changes in the valuation
allowance are included in net income or expense from foreclosed assets.

Bank-Owned Life Insurance

The Company and the Bank have purchased life insurance policies on certain key executives. Company and
bank-owned life insurance is recorded at its cash surrender value, or the amount that can be realized.

Treasury Stock

Common shares repurchased are recorded at cost. Cost of shares retired or reissued is determined using the
weighted average cost.

Restricted Stock Awards

The Company has a share-based employee compensation plan, which is described more fully in Note 14.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

Income Taxes

December 31, 2020 and 2019

The Company accounts for income taxes in accordance with income tax accounting guidance
(ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax
expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current
period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over
revenues. The Company determines deferred income taxes using the liability (or balance sheet) method.
Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between
the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in
the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.
Deferred tax assets are reduced by a valuation allowance if based on the weight of evidence available it is
more likely than not that some portion or all of a deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax
position will be realized or sustained upon examination. The term more likely than not means a likelihood of
more than 50 percent; the terms examined and upon examination also include resolution of the related appeals
or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is
initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent
likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant
information. The determination of whether or not a tax position has met the more-likely-than-not recognition
threshold considers the facts, circumstances and information available at the reporting date and is subject to
management’s judgment. At December 31, 2020, the Company had no uncertain tax positions.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiary. With a few exceptions, the Company
is no longer subject to the examination by tax authorities for years before 2017.

Deferred Compensation Plan

Directors have the option to defer all or a portion of fees for their services into a deferred stock compensation
plan that invests in common shares of the Company. Officers of the Company have the option to defer up to
50% of their annual incentive award into this plan. The plan does not permit diversification and must be
settled by the delivery of a fixed number of shares of the Company stock. The stock held in the plan is
included in equity as deferred shares and is accounted for in a manner similar to treasury stock. Subsequent
changes in the fair value of the Company’s stock are not recognized. The deferred compensation obligation
is also classified as an equity instrument and changes in the fair value of the amount owed to the participant
are not recognized.

The Company has entered into supplemental income agreements for certain individuals. These agreements
call for a fixed payment over 180 months after the individual reaches normal retirement age.

Stockholders’ Equity and Dividend Restrictions

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior
regulatory approval. Generally, the Bank’s payment of dividends is limited to net income for the current year
plus the two preceding calendar years, less capital distributions paid over the comparable time period.
Dividend payments to the stockholders may be legally paid from additional paid-in capital or retained
earnings.

Earnings Per Share

38 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Basic earnings per share allocated to common stockholders is calculated using the two-class method and is
computed by dividing net income allocated to common stockholders by the weighted average number of
commons shares outstanding during the period. Diluted earnings per share is adjusted for the dilutive effects
of stock based compensation and is calculated using the two-class method or the treasury method. There were
no dilutive effects for the years ended December 31, 2020 and 2019.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income, net of applicable income
taxes. Other comprehensive income includes unrealized appreciation (depreciation) on available-for-sale
securities and changes in the funded status of the defined benefit pension plan.

Advertising

Advertising costs are expensed as incurred.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Note 2: Restriction on Cash and Due From Banks

The Company was required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank.
The reserve required at December 31, 2019, was $5.8 million. The Company did not have a reserve requirement
at December 31, 2020.

Note 3:

Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses of securities are
as follows:

Available-for-sale Securities:

December 31, 2020:

U.S. government agencies
Subordinated notes
State and municipal obligations
Total debt securities

Available-for-sale Securities:

December 31, 2019:

U.S. government agencies
Subordinated notes
State and municipal obligations
Total debt securities

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

(In thousands)

Fair Value

10,000 $
4,500
129,006 $
143,506 $

53 $
6
14,503
14,562 $

–– $
(1 )
––
(1 ) $

10,053
4,505
143,509
158,067

40,000 $
4,500
135,897 $
180,397 $

–– $
36
8,993
9,029 $

(472 ) $
(4 )
(165 )
(641 ) $

39,528
4,532
144,725
188,785

The amortized cost and fair value of available-for-sale securities at December 31, 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.

40 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Under 1 year
One to five years
Over ten years

Fair
Value

Amortized
Cost
(In thousands)
–– $

––
14,500 14,558
129,006 143,509

Totals

$ 143,506 $ 158,067

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $55.8
million and $46.8 million at December 31, 2020 and 2019, 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 December 31, 2020 and 2019, was $1.0 million and $50.3 million,
which represented approximately less than 1% 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.

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 December 31, 2020 and 2019:

Description of
Securities

Less than 12 Months

Fair
Value

Unrealized
Losses
(In thousands)

December 31, 2020
12 Months or More
Fair
Value

Unrealized
Losses

Total

Fair
Value

Unrealized
Losses

US government agencies
Subordinated notes
State and municipal obligations

Total temporarily impaired securities

$
$
$
$

–– $
–– $
–– $
–– $

–– $
1,000 $
–– $
1,000 $

–– $
(1 ) $
–– $
(1 ) $

–– $
1,000 $
–– $
1,000 $

––
(1 )
––
(1 )

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Description of
Securities

US government agencies
Subordinated notes
State and municipal obligations

Total temporarily impaired securities

Less than 12 Months

Fair
Value

Unrealized
Losses
(In thousands)

$
$

39,528 $
996 $
9,831 $
50,355 $

(472 ) $
(4 ) $
(165 ) $
(641 ) $

December 31, 2019
12 Months or More
Fair
Value

Unrealized
Losses

Total

Fair
Value

Unrealized
Losses

–– $
–– $
–– $
–– $

39,528 $
996 $
9,831 $
50,355 $

(472 )
(4 )
(165 )
(641 )

The unrealized losses on the Company’s investments in direct obligations of U. S. Government agencies and
state and political obligation were caused by interest rate increases. 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
December 31, 2020.

Note 4:

Loans and Allowance for Loan Losses

Categories of loans at December 31, include:

Commercial loans
Commercial real estate
Residential real estate
Installment loans

Total gross loans

Less allowance for loan losses

Total loans

2020

2019

(In thousands)

103,277 $
246,167
85,789
8,258

99,995
254,651
77,205
9,697

443,491

441,548

(5,113 )

(2,231 )

438,378 $

439,317

42 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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.

Residential and Consumer

Residential 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.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The following tables present the balance in the allowance for loan losses and the recorded investment in loans
based on portfolio segment and impairment method as of December 31, 2020 and 2019:

Allowance for loan losses:
Balance, beginning of year

Provision charged to expense
Losses charged off
Recoveries

Balance, end of year
Ending balance: individually evaluated for
impairment
Ending balance: collectively evaluated for
impairment
Loans:
Ending balance: individually evaluated for
impairment
Ending balance: collectively evaluated for
impairment

Allowance for loan losses:
Balance, beginning of year

Provision charged to expense
Losses charged off
Recoveries

Commercial

Commercial
Real Estate Residential Installment Unallocated Total

(In thousands)

2020

568 $
875
(69 )
23
1,397 $

792 $
1,254
(225 )
––
1,821 $

572 $
986
(104 )
17
1,471 $

299 $
222
(169 )
72
424 $

–– $
––
––
––
–– $

2,231
3,337
(567 )
112
5,113

–– $

1 $

–– $

1,397 $

1,820 $

1,471 $

424 $

–– $

5,112

80 $

182 $

114 $

–– $

376

103,197 $

245,985 $

85,675 $

8,258 $

–– $ 443,115

Commercial

Commercial
Real Estate Residential Installment Unallocated Total

(In thousands)

2019

389 $
196
(18 )
1
568 $

672 $
551
(431 )
––
792 $

519 $
180
(141 )
14
572 $

463 $
(19 )
(180 )
35
299 $

–– $
––
––
––
–– $

2,043
908
(770 )
50
2,231

–– $

––

568 $

792 $

572 $

299 $

–– $

2,231

71 $

371 $

594 $

–– $

1,036

99,924 $

254,280 $

76,611 $

9,697 $

–– $ 440,512

44 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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 allowance for loan loss estimate, 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.

The following table shows the portfolio quality indicators as of December 31, 2020:

Loan Class

Pass Grade
Special Mention
Substandard
Doubtful

Commercial

Commercial
Real Estate

103,181
15
81
––

239,862
3,422
2,883
––

Residential
(In thousands)
85,675
$
––
114
––

Installment

Total

8,258
––
––
––

436,976
3,437
3,078
––

103,277

246,167

85,789

8,258

443,491

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The following table shows the portfolio quality indicators as of December 31, 2019:

Loan Class

Commercial

Commercial
Real Estate Residential Installment

Total

Pass Grade
Special Mention
Substandard
Doubtful

(In thousands)

99,924 $
––
71
––

249,563 $
4,016
1,072
––

76,611 $
––
594
––

9,697 $
––
––
––

435,795
4,016
1,737
––

99,995 $

254,651 $

77,205 $

9,697 $

441,548

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology
on an ongoing basis. No significant methodology changes were made during 2020 and 2019.

The following table shows the loan portfolio aging analysis of the recorded investment in loans 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

Total
Past Due
and Non
Accrual Current

Total
Loans
Receivable

Non

Accrual

–– $
––
120
7
127 $

–– $
––
59
20
79 $

(In thousands)

–– $
––
––
––
–– $

83 $
98
445
––
626 $

83 $ 103,194 $ 103,277
98 246,069 246,167
85,789
85,165
624
27
8,258
8,231
832 $ 442,659 $ 443,491

Commercial
Commercial real estate
Residential
Installment
Total

The following table shows the loan portfolio aging analysis of the recorded investment in loans 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

Total
Past Due
and Non
Accrual Current

Total
Loans
Receivable

Non

Accrual

129 $
––
448
58
635 $

132 $
214
––
1
347 $

(In thousands)

–– $
197
29
––
226 $

30 $
348
1,074
––
1,452 $

99,995
99,704 $
291 $
759 253,892 254,651
77,205
75,654
9,697
9,638
2,660 $ 438,888 $ 441,548

1,551
59

Commercial
Commercial real estate
Residential
Installment
Total

46 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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.

The following table presents impaired loans for the year ended December 31, 2020:

Loans without a specific valuation allowance:

Commercial
Commercial real estate
Real Estate
Installment

Loans with a specific valuation allowance:

Commercial
Commercial real estate
Real Estate

Total:

Commercial
Commercial Real Estate
Real Estate
Installment

Recorded
Balance

Unpaid
Principal
Balance

Specific
Allowance
(In thousands)

Average
Investment
in
Impaired
Loans

Interest
Income
Recognized

80 $
110
114
––

80 $
196
121
14

–– $
––
––
––

78 $
136
118
––

304

411

––

332

–– $
72
––

–– $
1
––

92 $
3
––

72 $

1 $

95 $

$
$
$
$

80 $
182 $
114 $
–– $

80 $
268 $
121 $
14 $

–– $
1 $
–– $
–– $

170 $
139 $
118 $
–– $

11
8
22
5

––
3
––

11
11
22
5

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The following table presents impaired loans for the year ended December 31, 2019:

Recorded
Balance

Unpaid
Principal
Balance

Specific
Allowance
(In thousands)

Average
Investment
in
Impaired
Loans

Interest
Income
Recognized

Loans without a specific valuation allowance:
$

Commercial
Commercial real estate
Installment

71 $
371
594

–– $
––
––

71 $
356
683

1,036

––

1,110

Loans with a specific valuation allowance:

Commercial
Commercial real estate
Installment

Total:

Commercial
Commercial Real Estate
Installment

$
$
$

–– $
––
––

–– $

71 $
371 $
594 $

–– $
––
––

–– $

71 $
371 $
594 $

–– $
––
––

–– $

–– $
–– $
–– $

–– $
––
––

–– $

71 $
356 $
683 $

13
8
23

––
––
––

––

13
8
23

At December 31, 2020 and 2019, the Company had certain loans that were modified in troubled debt
restructurings and impaired. The modification of terms of such loans included one or a combination of the
following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the
recorded investment in the loan.

48 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The Company did not have any troubled debt restructurings that occurred during the year ended
December 31, 2019. The following tables present information regarding troubled debt restructurings by class and by
type of modification for the year ended December 31, 2020 and 2019:

Commercial
Commercial Real Estate

Commercial

Year Ended December 31, 2020
Post-
Pre-
Modification
Modification
Outstanding
Outstanding
Recorded
Recorded
Investment
Investment

Number of
Contracts

–– $
1 $

(In thousands)
–– $
86 $

––
86

Year Ended December 31, 2020

Interest
Only

Term

Combination

(In thousands)

Total
Modification

$
$

–– $
–– $

–– $
86 $

–– $
–– $

––
86

Year Ended December 31, 2019
Post-
Pre-
Modification
Modification
Outstanding
Outstanding
Recorded
Recorded
Investment
Investment

Number of
Contracts

2 $

(In thousands)
83 $

Year Ended December 31, 2019

Interest
Only

Term

Combination

(In thousands)

Total
Modification

Commercial

–– $

83 $

–– $

During the 2019 and 2020, troubled debt restructurings did not have an impact on the allowance for loan
losses. At December 31, 2020 and 2019 and for the years then ended, 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.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Note 5:

Premises and Equipment

Major classifications of premises and equipment, stated at cost, are as follows:

Land, buildings and improvements
Furniture and equipment
Computer software

Less accumulated depreciation
Net premises and equipment

Note 6:

Time Deposits

2020

2019

(In thousands)
19,956 $
15,051
2,225
37,232
(23,489)
13,743 $

18,297
14,220
2,196
34,713
(22,311)
12,402

Time deposits in denominations of $250,000 or more were $7.8 million at December 31, 2020 and $14.0
million at December 31, 2019. At December 31, 2020, the scheduled maturities of time deposits are as
follows:

Due during the year ending December 31,

2021
2022
2023
2024
2025
Thereafter

(In
thousands)

56,558
18,907
3,648
601
496
489
80,699

Note 7:

Borrowings

At December 31, advances from the Federal Home Loan Bank were as follows:

Cash Management Advances maturities from January 2020 to March 2020 at
floating rates averaging 1.73%

2020

2019

(In thousands)

–– $

39,800

At December 31, 2020 and 2019, as a member of the Federal Home Loan Bank system the Bank had the
ability to obtain up to $140.5 million and $119.0 million, respectively, in additional borrowings based on
securities and certain loans pledged to the FHLB. At December 31, 2020 and 2019, the Bank had
approximately $207.9 million and $194.3 million, respectively of one- to four-family residential real estate
and commercial real estate loans pledged as collateral for borrowings. Also at December 31, 2020 and 2019,
the Company and the Bank have cash management lines of credit with various correspondent banks
(excluding FHLB cash management lines of credit) enabling additional borrowings of up to $18.0 million.

50 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Securities sold under repurchase agreements were approximately $12.7 million and $6.9 million at
December 31, 2020 and 2019.

Securities sold under agreements to repurchase are financing arrangements whereby the Company sells
securities and agrees to repurchase the identical securities at the maturities of the agreements at specified
prices. Physical control is maintained for all securities sold under repurchase agreements. Information
concerning securities sold under agreements to repurchase is summarized as follows:

Balance outstanding at year end
Average daily balance during the year
Average interest rate during the year
Maximum month-end balance during the year
Weighted-average interest rate at year end

2019
2020
(Dollars in thousands)

$
$

12,705 $
12,524 $
0.29 %
16,503 $
0.29 %

6,915
9,272

1.37 %

13,441

1.40 %

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.

The following table presents the Company’s repurchase agreements accounted for as secured borrowings:

Remaining Contractual Maturity of the Agreement

(In thousands)

December 31, 2020

Repurchase Agreements

U.S government agencies

Total

December 31, 2019

Repurchase Agreements

U.S government agencies

Total

Overnight
and
Continuous

Up to 30
Days

30-90
Days

Greater
than 90
Days

Total

$
$

12,705 $
12,705 $

–– $
–– $

12,705
12,705

Overnight
and
Continuous

Up to 30
Days

30-90
Days

Greater
than 90
Days

Total

$
$

6,915 $
6,915 $

–– $
–– $

6,915
6,915

Securities with an approximate carrying value of $30.1 million and $9.4 million at December 31, 2020 and
2019, respectively, were pledged as collateral for repurchase borrowings.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Note 8:

Subordinated Debentures

On May 14, 2019 the Company issued $20,000,000 of junior subordinated debentures in denominations of
not less than $250,000. The debentures bear interest at a fixed rate of 6.0% until May 2024, which then
becomes a floating interest rate equal to the three-month LIBOR (or an equivalent index) plus 3.625%,
resetting quarterly. Interest on the subordinated notes will be payable semiannually through May 2024 and
quarterly thereafter through the maturity date of May 2029. Principal is due upon maturity. The debentures
are unsecured and payable to various investors. For purposes of computing regulatory capital, the debentures
are included in Tier 2 Capital. The subordinated notes may not be repaid in whole or in part prior to the fifth
anniversary of the issue date (May 2019). Unamortized debt costs were $519,511 and $580,787 as of
December 31, 2020 and 2019, respectively.

In 2005, a Delaware statutory business trust owned by the Company, United Bancorp Statutory Trust I (“Trust
I” or the “Trust”), issued $4.1 million of mandatorily redeemable debt securities. The sale proceeds were
utilized to purchase $4.1 million of the Company’s subordinated debentures which mature in 2035. The
Company’s subordinated debentures are the sole asset of Trust I. The Company’s investment in Trust I is not
consolidated herein as the Company is not deemed the primary beneficiary of the Trust. However, the $4.1
million of mandatorily redeemable debt securities issued by the Trust are includible for regulatory purposes
as a component of the Company’s Tier I Capital. Interest on the Company’s subordinated debentures is equal
to three month LIBOR plus 1.35% and is payable quarterly.

Subordinated debentures, net of unamortized debt costs, totaled $23.6 million and $23.5 million at December
31, 2020 and 2019, respectively.

52 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Note 9:

Income Taxes

The provision for income taxes includes these components:

Taxes currently payable
Deferred income taxes
Income tax expense

2020

2019

(In thousands)
1,176 $
(547 )
629 $

557
42
599

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is
shown below:

Computed at the statutory rate (21%)
(Decrease) increase resulting from

Tax exempt interest
Earnings on bank-owned life insurance - net
Low income housing credit
Other

Actual tax expense

2020

2019

(In thousands)
1,802 $

1,556

(967 )
(148 )
(131 )
73
629 $

(780 )
(112 )
(74 )
9
599

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

Deferred tax assets

Allowance for loan losses
Stock based compensation
Deferred compensation, and other accruals
Employee benefit expense
Non-accrual loan interest
Other

Total deferred tax assets

Deferred tax liabilities

Depreciation
Deferred loan costs, net
FHLB stock dividends
Unrealized gains on securities available for sale
Prepaid expenses
Intangibles
Employee benefit expense

Total deferred tax liabilities

Net deferred tax liability

2020

2019

(In thousands)

992 $
187
456
159
2
10
1,806

326
138
494
—
8
13
979

(390 )
(51 )
(304 )
(3,058 )
(70 )
(118 )
––

(266 )
(73 )
(321 )
(1,762 )
(48 )
(138 )
(107 )

(3,991 )

(2,715 )

(2,185 ) $

(1,736 )

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

Note 10:

Accumulated Other Comprehensive Income

December 31, 2020 and 2019

The components of accumulated other comprehensive income, included in stockholders’ equity, are as
follows:

Net unrealized gain on securities available-for-sale
Net unrealized loss for funded status of defined benefit plan liability

Tax effect

Net-of-tax amount

2020

2019

(In thousands)
14,561 $
(2,810)

8,389
(1,381)

11,751
(2,468)

7,008
(1,472)

9,283 $

5,536

Reclassifications out of accumulated other comprehensive income during 2020 and 2019 and the affected
line items in the Consolidated Financial Statements of Income were as follows:

Realized gains on securities available-for-sale
Less provision for federal income taxes

Reclassification adjustment, net of taxes

Note 11:

Regulatory Matters

2020

2019

(In thousands)
2,593 $
544

2,049 $

---
---

---

The Company and the Bank are subject to various regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory–and possibly
additional discretionary–actions by regulators that, if undertaken, could have a direct material effect on the
Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines
that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company
and the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial
statements.

In July 2013, the Federal Reserve approved final rules, referred to herein as the Basel III Rules, establishing
a new comprehensive capital framework for U.S. banking organizations. The Basel III Rules generally
implement the Basel Committee on Banking Supervision’s December 2010 final capital framework referred
to as “Basel III” for strengthening international capital standards. The Basel III Rules substantially revise the
risk-based capital requirements applicable to bank holding companies and their depository institution
subsidiaries, including the Company and Unified, as compared to the current U.S. general risk-based capital
rules. The Basel III Rules revise the definitions and the components of regulatory capital, as well as address
other issues affecting the computation of regulatory capital ratios. The Basel III rules added another capital
ratio component “Tier 1 Common Capital Ratio” which is a measurement of a bank’s core equity capital
compared with its total risk-weighted assets The Basel III Rules also prescribe a new standardized approach
for risk weightings that expand the risk-weighting categories from the current categories to a larger more
risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for
U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk
weights for a variety of asset classes.

54 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The Basel III capital rules became effective for the Company and Unified on January 1, 2015, subject to
phase-in periods for certain components. The net unrealized gain or loss on available-for-sale securities is
not included in computing regulatory capital.

As of December 31, 2020, the Company exceeded its minimum regulatory capital requirements with a total
risk-based capital ratio of 18.9%, common equity tier 1 ratio of 13.1%, Tier 1 risk-based capital ratio of
13.9% and a Tier 1 leverage ratio of 10.1%.

As of December 31, 2020, the most recent notification from Federal Deposit Insurance Corporation
categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be
categorized as well-capitalized, the Bank must maintain capital ratios as set forth in the table. There are no
conditions or events since that notification that management believes have changed the Bank’s category.

The Company’s and Bank’s actual capital amounts and ratios are presented in the following table.

Actual

Amount Ratio

For Capital Adequacy
Purposes

Amount Ratio
(Dollars in thousands)

To Be Well Capitalized
Under Prompt
Corrective
Action Provisions
Amount Ratio

As of December 31, 2020

Total Capital (to Risk-Weighted Assets)
$

Consolidated
Unified

Common Equity Tier 1 Capital (to Risk-

94,085
80,494

18.9 % $
16.2

39,746
39,860

8.0 %
8.0 $

N/A
48,825

N/A
10.0 %

Weighted Assets)
Consolidated
Unified

64,972
75,831

13.1 % $
15.2

22,357
22,421

4.5 %
4.5 $

N/A
32,386

N/A

6.5 %

Tier I Capital (to Risk-Weighted Assets)
$

Consolidated
Unified

68,972
75,831

13.9 % $
15.2

29,810
29,895

6.0 %
6.0 $

N/A
39,860

N/A

8.0 %

Tier I Capital (to Average Assets)

Consolidated
Unified

68,972
75,831

10.1 % $
11.2

27,572
27,007

4.0 %
4.0 $

N/A
33,759

N/A

5.0 %

As of December 31, 2019

Total Capital (to Risk-Weighted Assets)
$

Consolidated
Unified

Common Equity Tier 1 Capital (to Risk-

83,653
68,953

16.7 % $
13.8

40,027
39,972

8.0 %
8.0 $

N/A
49,776

N/A
10.0 %

Weighted Assets)
Consolidated
Unified

57,422
66,722

11.5 % $
13.4

22,515
22,484

4.5 %
4.5 $

N/A
32,355

N/A

6.5 %

Tier I Capital (to Risk-Weighted Assets)
$

Consolidated
Unified

61,422
66,722

12.3 % $
13.4

30,020
29,979

6.0 %
6.0 $

N/A
39,821

N/A

8.0 %

Tier I Capital (to Average Assets)

Consolidated
Unified

61,422
66,722

9.5 % $
10.1

30,020
29,979

4.0 %
4.0 $

N/A
33,160

N/A

5.0 %

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Note 12:

Related Party Transactions

At December 31, 2020 and 2019, the Bank had loan commitments outstanding to executive officers, directors,
significant stockholders and their affiliates (related parties). In management’s opinion, such loans and other
extensions of credit and deposits were made in the ordinary course of business and were made on substantially
the same terms (including interest rates and collateral) as those prevailing at the time for comparable
transactions with other persons. Further, in management’s opinion, these loans did not involve more than
normal risk of collectability or present other unfavorable features. Such loans are summarized below.

Aggregate balance – January 1
New loans
Repayments

Aggregate balance – December 31

2020

2019

(In thousands)
17,768 $
5,236
(2,020 )

14,106
4,459
(797 )

20,984 $

17,768

Deposits from related parties held by the Bank at December 31, 2020 and 2019, totaled approximately $6.1
million and $2.5 million, respectively.

Note 13:

Benefit Plans

Pension and Other Postretirement Benefit Plans

The Company has a noncontributory defined benefit pension plan covering all employees who meet the
eligibility requirements. The Company’s funding policy is to make the minimum annual contribution that is
required by applicable regulations, plus such amounts as the Company may determine to be appropriate from
time to time. The Company expects to contribute $657,000 to the plan in 2021.

In connection with the acquisition of Powhatan Point Community Bancshares, Inc., the Company assumed
supplemental income agreements for certain individuals. The agreements provide for a fixed number of
payments once the individual reaches normal retirement age. At December 31, 2020, the present value of
these future payments was approximately $418,000.

56 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The Company uses a December 31st measurement date for the plan. Information about the plan’s funded
status and pension cost follows:

Change in benefit obligation

Beginning of year
Service cost
Interest cost
Actuarial (loss) gain
Benefits paid

End of year

Change in fair value of plan assets

Beginning of year

Actual return on plan assets
Employer contribution
Benefits paid

End of year

Pension Benefits
2019
2020

(In thousands)

(5,587) $
(390)
(234)
(1,534)
530

(4,157)
(299)
(218)
(1,276)
362

(7,215)

(5,588)

6,111
563
378
(530)

5,041
967
465
(362)

6,522

6,111

Funded status at end of year

693 $

523

Amounts recognized in accumulated other comprehensive loss not yet recognized as components of net
periodic benefit cost consist of:

Unamortized net loss
Unamortized prior service

Pension Benefits
2019
2020

(In thousands)
3,302 $
(492)

2,009
(581)

2,810 $

1,428

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The estimated net loss and prior service credit for the defined benefit pension plan that will be amortized
from accumulated other comprehensive income as a credit into net periodic benefit cost over the next fiscal
year is approximately $182,000. The accumulated benefit obligation for the defined benefit pension plan was
$6.2 million and $5.0 million at December 31, 2020 and 2019, respectively.

Information for the pension plan with respect to accumulated benefit obligation and plan assets is as
follows:

Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

Components of net periodic benefit cost

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service (credit) cost
Amortization of net loss

Net periodic benefit cost

Significant assumptions include:

Weighted-average assumptions used to determine benefit obligation:

Discount rate
Rate of compensation increase

Weighted-average assumptions used to determine benefit cost:

Discount rate
Expected return on plan assets
Rate of compensation increase

December 31,

2020

2019

(In thousands)
7,215 $
6,168 $
6,522 $

5,588
5,032
6,111

$
$
$

December 31,

2020

2019

(In thousands)

390 $
234
(468 )
(89 )
145

299
218
(468 )
(89 )
145

212 $

105

Pension Benefits
2019

2020

3.41 %
3.50 %

4.39 %
3.50 %

3.41 %
7.00 %
3.50 %

4.39 %
7.50 %
3.00 %

58 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The Company has estimated the long-term rate of return on plan assets based primarily on historical returns
on plan assets, adjusted for changes in target portfolio allocations and recent changes in long-term interest
rates based on publicly available information. The long-term rate of return assumption was decreased 50
basis points from 2019 to 2020.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be
paid as of December 31, 2020:

2021
2022
2023
2024
2025
2026--2029

Total

Pension
Benefits
(In
thousands)
391
$
522
433
508
402
3,703

5,959

Plan assets are held by an outside trustee which invests the plan assets in accordance with the provisions of
the plan agreement. All equity and fixed income investments are held in various mutual funds with quoted
market prices. Mutual fund equity securities primarily include investment funds that are comprised of large-
cap, mid-cap and international companies. Fixed income mutual funds primarily include investments in
corporate bonds, mortgage-backed securities and U.S. Treasuries. Other types of investments include a prime
money market fund.

The asset allocation strategy of the plan is designed to allow flexibility in the determination of the appropriate
investment allocations between equity and fixed income investments. This strategy is designed to help
achieve the actuarial long term rate on plan assets of 7.0%. The target asset allocation percentages for both
2020 and 2019 are as follows:

Large-Cap stocks
Small-Cap stocks
Mid-Cap stocks
International equity securities
Fixed income investments
Alternative investments

Not to exceed 68%
Not to exceed 23%
Not to exceed 23%
Not to exceed 30%
Not to exceed 35%
Not to exceed 19%

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

At December 31, 2020 and 2019, the fair value of plan assets as a percentage of the total was invested in the
following:

Equity securities
Debt securities
Cash and cash equivalents

Pension Plan Assets

December 31,

2020

2019

70.3 %
28.1
1.6

70.6 %
29.1
0.3

100.0 %

Following is a description of the valuation methodologies used for pension plan assets measured at fair value
on a recurring basis, as well as the general classification of pension plan assets pursuant to the valuation
hierarchy.

Where quoted market prices are available in an active market, plan assets are classified within Level 1 of the
valuation hierarchy. Level 1 plan assets include investments in mutual funds that involve equity, bond and
money market investments. All of the Plan’s assets are classified as Level 1. If quoted market prices are not
available, then fair values are estimated by using pricing models, quoted prices of plan assets with similar
characteristics or discounted cash flows. In certain cases where Level 1 or Level 2 inputs are not available,
plan assets are classified within Level 3 of the hierarchy. At December 31, 2020 and 2019, the Plan did not
contain Level 2 or Level 3 investments.

60 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The fair values of Company’s pension plan assets at December 31st, by asset category are as follows:

Total

6,522 $

–– $

Asset Category

Mutual money market
Mutual funds – equities
ETF mutual funds
Large and small Cap
International
Commodities

Mutual funds – fixed income

Fixed income
ETF fixed income

Asset Category

Mutual money market
Mutual funds – equities
ETF mutual funds
Large and small Cap
International
Commodities

Mutual funds – fixed income

Fixed income
ETF fixed income

December 31, 2020

Fair Value Measurements Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Fair
Value

103 $

(In thousands)

103 $

4,190
111
287
––

1,193
638

4,190
111
287
––

1,193
638

–– $

––
––

––

––
––

December 31, 2019

Fair Value Measurements Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Fair
Value

186 $

(In thousands)

186 $

3,404
317
419
178

1,324
283

3,404
317
419
178

1,324
283

–– $

––
––

––

––
––

––

––
––

––

––
––

––

––
––

––

––
––

––

Total

6,111 $

–– $

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Employee Stock Ownership Plan

The Company has an Employee Stock Ownership Plan (“ESOP”) with an integrated 401(k) plan covering
substantially all employees of the Company. The ESOP acquired 354,551 shares of Company common stock
at $9.64 per share in 2005 with funds provided by a loan from the Company. Accordingly, $3.4 million of
common stock acquired by the ESOP was shown as a reduction of stockholders’ equity. Shares are released
to participants proportionately as the loan is repaid. Dividends on allocated shares are recorded as dividends
and charged to retained earnings. Compensation expense is recorded equal to the fair market value of the
stock when contributions, which are determined annually by the Board of Directors of the Company, are
made to the ESOP. The Company’s 401(k) matching percentage was 50% of the employees’ first 6% of
contributions for 2020 and 2019.

ESOP and 401(k) expense for the years ended December 31, 2020 and 2019 was approximately $270,000
and $272,000, respectively.

Share information for the ESOP is as follows at December 31, 2020 and 2019:

Allocated shares at beginning of the year
Shares released for allocation during the year
Net shares distributed due to retirement/diversification
Unearned shares

Total ESOP shares

2020

2019

411,411 416,982
23,635
(52,841 )
23,635

23,635
(17,960 )
––

417,086 411,411

Fair value of unearned shares at December 31st

–– $ 338,000

At December 31, 2020, the fair value of the 417,086 allocated shares held by the ESOP was approximately
$5,497,000.

Split Dollar Life Insurance Arrangements

The Company has split-dollar life insurance arrangements with its executive officers and certain directors
that provide certain death benefits to the executive’s beneficiaries upon his or her death. The agreements
provide a pre- and post-retirement death benefit payable to the beneficiaries of the executive in the event of
the executive’s death. The Company has purchased life insurance policies on the lives of all participants
covered by these agreements in amounts sufficient to provide the sums necessary to pay the beneficiaries,
and the Company pays all premiums due on the policies. In the case of an early separation from the Company,
the nonvested executive portion of the death benefit is retained by the Company. The accumulated post
retirement benefit obligation was $1.7 million and $1.6 million at December 31, 2020 and December 31,
2019, respectively.

62 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Note 14:

Restricted Stock Plan

During 2018, the Company’s stockholders authorized the adoption of the United Bancorp, Inc. 2018 Stock
Incentive Plan (the “2018 Plan”). No more than 500,000 shares of the Company’s common stock may be
issued under the 2018 Plan. As of December 31, 2020, 82,500 shares have been issued under this plan. The
shares that may be issued can be authorized but unissued shares or treasury shares. The 2018 Plan permits
the grant of incentive awards in the form of options, stock appreciation rights, restricted share and share unit
awards, and performance share awards. The 2018 Plan contains annual limits on certain types of awards to
individual participants. In any calendar year, no participant may be granted awards covering more than
25,000 shares.

During 2008, the Company’s stockholders authorized the adoption of the United Bancorp, Inc. 2008 Stock
Incentive Plan (the “2008 Plan”). No more than 500,000 shares of the Company’s common stock may be
issued under the 2008 Plan. The shares that may be issued can be authorized but unissued shares or treasury
shares. The 2008 Plan permits the grant of incentive awards in the form of options, stock appreciation rights,
restricted share and share unit awards, and performance share awards. The 2008 Plan contains annual limits
on certain types of awards to individual participants. In any calendar year, no participant may be granted
awards covering more than 25,000 shares. As of December 31, 2018, no additional shares can be awarded
under the 2008 Plan.

The Company believes that such awards better align the interests of its employees with those of its
stockholders. Stock options are generally granted with an exercise price, and restricted stock awards are
valued, equal to the market price of the Company’s stock at the date of grant; stock option awards generally
vest within 9.5 years of continuous service and have a 9.5 year contractual term. Restricted stock awards
generally vest over a 9.5 year contractual term, or over the period to retirement, whichever is shorter.
Restricted stock awards have no post-vesting restrictions. Restricted stock awards provide for accelerated
vesting if there is a change in control (as defined in the Plans).

A summary of the status of the Company’s nonvested restricted shares as of December 31, 2020, and
changes during the year then ended, is presented below:

Nonvested, beginning of year

Granted
Vested
Forfeited

Nonvested, end of year

Weighted-
Average
Grant-
Date
Fair Value
11.15
12.89
12.02
10.98
11.73

237,500 $
105,000
(4,500 )
(18,000 )
320,000 $

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Total compensation cost recognized in the income statement for share-based payment arrangements during
the years ended December 31, 2020 and 2019 was $324,000 and $293,000, respectively.

The recognized tax benefits related thereto were $68,000 and $62,000, for the years ended December 31,
2020 and 2019, respectively.

As of December 31, 2020 and 2019, there was $2,864,000 and $2,114,000, respectively, of total unrecognized
compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That
cost is expected to be recognized over a weighted-average period of 6.9 years.

Note 15:

Earnings Per Share

Earnings per share (EPS) were computed as follows:

Year Ended December 31, 2020

Net income
Less allocated earnings on non-vested restricted stock
Less allocated dividends on non-vested restricted stock
Net income allocated to common stockholders

Basic and diluted earnings per share

Net income
Less allocated earnings on non-vested restricted stock
Less allocated dividends on non-vested restricted stock
Net income allocated to common stockholders

Basic and diluted earnings per share

Per Share
Amount

Weighted-
Average
Shares

Net
Income
(In
thousands)
7,953
(141 )
(253 )
7,559

5,458,365
$

1.39

Year Ended December 31, 2019

Weighted-
Average
Shares

Per Share
Amount

Net
Income
(In
thousands)
6,810
(111 )
(145 )
6,554

5,525,965
$

1.19

Note 16:

Disclosures about Fair Value of Financial Instruments and Other Assets and Liabilities

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:

64 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Level 1 Quoted prices in active markets for identical assets or liabilities

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

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring
basis and recognized in the accompanying balance sheets, as well as the general classification of such assets
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.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The following tables present the fair value measurements of assets recognized in the accompanying 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 December 31, 2020 and 2019:

December 31, 2020
Fair Value Measurements Using

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Fair
Value

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

$ 10,053 $
$ 4,505
$ 143,509

(In thousands)
–– $
10,053 $
4,505
–– $
–– $ 143,509

––
––
––

December 31, 2019
Fair Value Measurements Using

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Fair
Value

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

$ 39,528 $
$ 4,532
$ 144,725

(In thousands)
39,528 $
–– $
–– $
4,532
–– $ 144,725

––
––
––

U.S government agencies
Subordinated notes
State and municipal obligations

Following is a description of the valuation methodologies used for instruments measured at fair value on a
non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification
of such instruments pursuant to the valuation hierarchy.

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.

66 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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 other real estate owned (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.

The following tables present the fair value measurements of assets recognized in the accompanying balance
sheets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which
the fair value measurements fall at December 31, 2020 and 2019:

December 31, 2020
Fair Value Measurements Using

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Fair
Value

Collateral dependent impaired loans
Foreclosed assets held for sale

71 $
––

(In thousands)
–– $
––

–– $
––

71
––

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

December 31, 2019
Fair Value Measurements Using

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Fair
Value

Collateral dependent impaired loans
Foreclosed assets held for sale

–– $
––

(In thousands)
–– $
––

–– $
––

––
––

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and
nonrecurring Level 3 fair value measurements.

Fair Value
at
12/31/20
(In

thousands)

Valuation
Technique

Unobservable
Inputs

Range

Collateral-dependent impaired
loans

Foreclosed assets held for sale

Market comparable
properties
Market comparable
properties

––

Comparability
adjustments
Marketability
discount

5% – 10%

10% – 35%

Fair Value
at
12/31/19
(In

thousands)

Valuation
Technique

Unobservable
Inputs

Range

Collateral-dependent impaired
loans

Foreclosed assets held for sale

Market comparable
properties
Market comparable
properties

––

Comparability
adjustments
Marketability
discount

5% - 10%

10% – 35%

There were no significant changes in the valuation techniques used during 2020.

68 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 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. Fair value is the estimated amount at which financial assets or liabilities could be
exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. 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

Quoted
Prices
in Active
Markets
for
Identical
Assets

(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In thousands)

Carrying
Amount

51,592 $
438,378
4,177
2,901

51,592 $
––
––
––

–– $
––
4,177
2,901

––
436,893
––
––

December 31, 2020
Financial assets

Cash and cash equivalents
Loans, net of allowance
Federal Home Loan Bank stock
Accrued interest receivable

Financial liabilities

Deposits
Securities sold under repurchase agreements
Subordinated debentures
Interest payable

579,535
12,705
23,604
224

––
––
––
––

580,130
12,705
21,989
224

––
––
––
––

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

The classification of the assets and liabilities pursuant to the valuation hierarchy as of December 31, 2019
in the following table have not been audited. The fair value has been derived from the December 31, 2019
audited consolidated financial statements.

Fair Value Measurements Using

Quoted
Prices
in Active
Markets
for
Identical
Assets

(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In thousands)

Carrying
Amount

14,985 $
439,317
4,012
2,697

14,985 $
––
––
––

–– $
––
4,012
2,697

––
437,688
––
––

548,069
6,915
39,800
23,543
213

––
––
––
––
––

548,130
6,915
39,800
22,857
213

––
––
––
––
––

December 31, 2019
Financial assets

Cash and cash equivalents
Loans, net of allowance
Federal Home Loan Bank stock
Accrued interest receivable

Financial liabilities

Deposits
Securities sold under repurchase agreements
Federal Home Loan Bank advances
Subordinated debentures
Interest payable

70 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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.

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.

Securities Sold Under Repurchase Agreements, 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 December 31, 2020 and 2019.

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

Note 17: Significant Estimates and Concentrations

December 31, 2020 and 2019

Accounting principles generally accepted in the United States of America require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the
allowance for loan losses are reflected in the footnote regarding loans. Current vulnerabilities due to certain
concentrations of credit risk are discussed in the footnote on commitments and credit risk.

The Company invests in various investment securities. Investment securities are exposed to various risks
such as interest rate, market and credit risks. Due to the level of risk associated with certain investment
securities, it is possible that changes in the values of investment securities may occur and that such changes
could affect the amounts reported in the accompanying statements of financial position.

Note 18: Commitments and Credit Risk

At December 31, 2020 and 2019, total commercial and commercial real estate loans made up 78.3% and
80.3%, respectively, of the loan portfolio. Installment loans account for 1.9% and 2.2%, respectively, of the
loan portfolio. Real estate loans comprise 19.8% and 17.5% of the loan portfolio as of December 31, 2020
and 2019, respectively, and primarily include first mortgage loans on residential properties and home equity
lines of credit.

Included in cash and cash and due from banks as of December 31, 2020 and 2019 is $39.7 and $8.3 million,
respectively, of deposits with the Federal Reserve Bank of Cleveland.

COVID-19: Update on Company Action and Ongoing Risks

In December 2019, a novel coronavirus (COVID-19) was reported in China, and, in March 2020, the World
Health Organization declared it a pandemic. On March 12, 2020, the President of the United States declared
the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused
significant economic dislocation in the United States as many state and local governments have ordered non-
essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented
slow-down in economic activity and a related increase in unemployment. As a result of the spread of COVID-
19, economic uncertainties arose which can ultimately affect the financial position, results of operations and
cash flows of the Company as well as the Company’s customers. The Coronavirus Aid, Relief, and Economic
Security Act passed by Congress in March 2020 (CARES Act) included relief for individual Americans,
health care workers, small businesses and certain industries hit hard by the COVID-19 pandemic. The 2021
Consolidated Appropriations Act, passed by Congress in December 2020, extended certain provisions of the
CARES Act affecting the Company into 2021.

The CARES Act included several provisions designed to help financial institutions like the Bank in working
with their customers. Section 4013 of the CARES Act, as extended, allows a financial institution to elect to
suspend generally accepted accounting principles and regulatory determinations with respect to qualifying
loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring
(TDR) until January 1, 2022. The Bank has taken advantage of this provision to extend certain payment
modifications to loan customers in need. As of December 31, 2020, the Bank has $16.9 million of
outstanding loans that were modified and are paying interest only and $2.6 million of loans on total payment
deferrals. These modifications were granted in 2020 under the CARES Act guidance.

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since a portion of the commitments may expire without being
drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each
customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if
deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies,

72 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and
residential real estate.

December 31, 2020 and 2019

At December 31, 2020 and 2019, the Company had outstanding commitments to originate variable rate loans
aggregating approximately $49.0 million and $38.7 million, respectively. The commitments extended over
varying periods of time with the majority being disbursed within a one-year period.

Mortgage loans in the process of origination represent amounts that the Company plans to fund within a
normal period of 60 to 90 days, some of which are intended for sale to investors in the secondary market.
The Company did not have any mortgage loans in the process of origination which are intended for sale at
December 31, 2020 or 2019.

Standby Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. Financial standby letters of credit are primarily issued to support
public and private borrowing arrangements, including commercial paper, bond financing and similar
transactions. Performance standby letters of credit are issued to guarantee performance of certain customers
under non-financial contractual obligations. The credit risk involved in issuing standby letters of credit is
essentially the same as that involved in extending loans to customers. Fees for letters of credit are initially
recorded by the Company as deferred revenue and are included in earnings at the termination of the respective
agreements. Should the Company be obligated to perform under the standby letters of credit, the Company
may seek recourse from the customer for reimbursement of amounts paid.

The Company had $22,000 and $46,000 at December 31, 2020 and 2019, respectively in outstanding standby
letters of credit. At both December 31, 2020 and 2019, the Company had no deferred revenue under standby
letter of credit agreements.

Lines of Credit and Other

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line
may expire without being drawn upon, the total unused lines do not necessarily represent future cash
requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of
collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable, inventory, property, plant and equipment,
commercial real estate and residential real estate. Management uses the same credit policies in granting lines
of credit as it does for on-balance-sheet instruments.

At December 31, 2020, the Company had granted unused lines of credit to borrowers aggregating
approximately $49.4 million and $39.6 million for commercial lines and open-end consumer lines,
respectively. At December 31, 2019, the Company had granted unused lines of credit to borrowers
aggregating approximately $40.5 million and $38.6 million for commercial lines and open-end consumer
lines, respectively.

Note 19: 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-

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

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 December 31, 2020, the Company is working
with a third party and continues to run projections and review segmentation to ensure it is fully compliant with
the amendments at adoption date. For additional information on the allowance for loan losses, see Note 4.

Note 20: Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash
flows of the Company:

Condensed Balance Sheets

Assets

Cash and cash equivalents
Investment in the Bank
Other assets

Total assets

Liabilities and Stockholders’ Equity

Subordinated debentures
Other liabilities
Stockholders’ equity

December 31,

2020

2019

(In thousands)

3,684 $
88,276
1,564

6,846
74,890
2,719

93,524 $

84,455

23,603 $
1,593
68,328

23,543
990
59,922

Total liabilities and stockholders’ equity

93,524 $

84,455

74 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Condensed Statements of Income and Comprehensive Income

Years Ended
December 31,

2020

2019

(In thousands)

Operating Income

Dividends from subsidiary
Interest and dividend income from securities and federal funds

2,392 $
—

7,625
1

Total operating income

General, Administrative and Other Expenses

(Loss) income Before Income Taxes and Equity in Undistributed Income of
Subsidiary

Income Tax Benefits

Income Before Equity in Undistributed Income of Subsidiary

Equity in Undistributed Income of Subsidiary

Net Income

Comprehensive Income

2,392

7,626

3,733

3,456

(1,341 )

4,170

785

710

(556 )

4,880

8,509

1,930

7,953 $

6,810

11,700 $

12,356

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

Condensed Statements of Cash Flows

Operating Activities

Net income
Items not requiring (providing) cash

Equity in undistributed income of subsidiary
Amortization of ESOP and share-based compensation plans
Net change in other assets and other liabilities

Net cash provided by operating activities

Investing Activities

Equity infusion into the Bank

Net cash used in investing activities

Financing Activities

Proceeds from issuance of subordinated debentures, net of origination fees
Repurchase of Common Stock
Dividends paid to stockholders

Net cash provided by (used in) financing activities

Net Change in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

Years Ended
December 31,

2020

2019

(In thousands)

7,953 $

6,810

(8,509 )
594
687

(1,930 )
565
65

725

5,510

—

(16,000 )

—

(16,000 )

—
(526 )
(3,361 )

19,383
(416 )
(3,226 )

(3,887 )

15,741

(3,162 )

5,251

6,846

1,595

Cash and Cash Equivalents at End of Year

3,684 $

6,846

76 2 02 0 | A N N UA L R E P O RT UNITEDBANCORP INC.

Notes to Consolidated Financial Statements

Note 21: Quarterly Financial Data (Unaudited)

December 31, 2020 and 2019

The following tables summarize the Company’s quarterly results of operations for the years ended
December 31, 2020 and 2019.

2020:

Total interest income
Total interest expense

Net interest income

Provision for loan losses
Noninterest income
Noninterest expense

Income before income taxes
Federal income taxes

Net income

Earnings per share

Basic
Diluted

Three Months Ended
March 31, June 30, September 30, December 31,
(In thousands, except per share data)

7,319 $
1,685

6,949 $
1,427

6,692 $
948

6,668
674

5,634

5,522

5,744

5,994

563
1,044
4,410

1,408
2,156
4,579

1,705
126

1,691
16

1,333
2,340
4,492

2,259
200

33
1,375
4,409

2,927
287

1,579 $

1,675 $

2,059 $

2,640

$
$

0.28 $
0.28 $

0.29 $
0.29 $

0.36 $
0.36 $

0.46
0.46

UNITEDBANCORP INC.

2 0 2 0 | A N N UA L R E P O RT

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

2019:

Total interest income
Total interest expense

Net interest income

Provision for loan losses
Noninterest income
Noninterest expense

Income before income taxes
Federal income taxes

Net income

Earnings per share

Basic
Diluted

Three Months Ended
March 31, June 30, September 30, December 31,
(In thousands, except per share data)

6,315 $
1,207

6,648 $
1,469

6,921 $
1,727

7,150
1,721

5,108

5,179

5,194

5,429

90
945
4,162

120
947
4,172

1,801
187

1,834
188

120
1,003
4,162

1,916
135

578
993
3,986

1,858
89

1,614 $

1,646 $

1,781 $

1,769

$
$

0.28 $
0.28 $

0.29 $
0.29 $

0.31 $
0.31 $

0.31
0.31

Note 22: Core Deposits and Other Intangible Assets

The following table shows the changes in the carrying amount of goodwill for the years ended
December 31, 2020 and 2019 (in thousands):

Balance beginning of year
Additions from acquisition
Balance, end of year

2020
$

2019

682 $
––
682 $

682
––
682

Intangible assets in the consolidated balance sheets at December 31, 2020 and 2019 were as follows (in
thousands):

2020

2019

Core deposit intangibles

1,041

Gross
Intangible
Assets

Accumulated
Amortization
331

Net
Intangible
Assets

Gross
Intangible
Assets

710

1,041

Accumulated
Amortization
181

Net
Intangible
Assets

860

The estimated aggregate future amortization expense for each of the next five years for intangible assets
remaining as of December 31, 2020 is as follows (in thousands):

2021
2022
2023
2024
2025

150
150
150
150
110

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