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….
As we reflect on another year, it is with a profound sense of gratitude and optimism that I share with you
the achievements and progress of United Bancorp, Inc. (UBCP) throughout 2023. Amidst a dynamic
economic landscape, characterized by continued adjustments in monetary policy and evolving market
conditions, our Company not only navigated these challenges with resilience; but, it also evolved and
capitalized on emerging opportunities to maintain its relevance and deliver commendable financial
performance and strategic growth.
Scott A. Everson
President and CEO
As I have communicated to you in previous reports, what truly strange times these last three years have
been for everyone! Beginning in 2020, we experienced a world-wide pandemic for which we had been
“theoretically” preparing for many years at the guidance of our regulatory authorities. Quite frankly, many
within our industry thought that doing the “table top” testing in our business continuity planning for such
an event was an act of frivolity. This global pandemic, no doubt, changed the world forever and was projected to have a cataclysmic impact
on the financial services industry. But, overall, our industry and Company prevailed and performed at relatively high levels throughout its
duration… all things considered.
In 2021, our country started to somewhat recover from the pandemic and our economy started to slowly open, once again--- albeit, not in a
linear fashion throughout the entirety of our country. During this timeframe, we started to see inflation rear its ugly head at levels we had not
seen since the early 1980’s… after thinking for many years that this “inflation beast” was a thing of the past! In reality, our monetary policy
was too accommodating for far too long--- being at Zero Interest Rate Policy (ZIRP) or, at least extremely relaxed relative to historic levels for
the better part of the previous fourteen plus years. This relaxed and overly accommodating monetary policy started in 2008 with the general
concern about our country’s low economic growth that arose out of the Great Recession (and, the real risk of deflation that prevailed at that
time) and, ended in 2022 after the shutdown of our economy in response to the pandemic and the supply chain disruption resulting therefrom.
During the latter part of this period… and, for the first time in almost forty years… we experienced heightening levels of inflation. But, we
were told by the “experts” at The Federal Reserve and other national economists that the phenomena of heightened inflation that we had not
seen for many years was simply “transitory” (or, would be short-lived) and that it would moderate as our economy recovered from the
pandemic-induced slow-down and more fully normalized. How wrong they were!
As the year 2021 progressed and we entered 2022, we started to experience levels of inflation that started to create stress for everyone---
culminating in a Consumer Price Index (CPI) reaching nearly double digits. In 2022 and in response to the heightened inflation that we were
experiencing, the Federal Open Market Committee of the Federal Reserve (FOMC) finally realized that inflation was more than “transitory” and
started to increase the target for the Federal Funds Rate (FFR) in March of that year. Over the course of the next sixteen months, the FOMC
increased the target for the FFR eleven (11) times by raising the range for the target rate from a range of zero to twenty-five basis points (0%
to 0.25%) to a level of five and a quarter percent to five and a half percent (5.25% to 5.50%) by July of 2023. The rapidity of and degree to
which the target for the FFR rose during this relatively short-timeframe is historically unprecedented and started to create both a drag on the
earnings that our industry produced due to declining net interest incomes and compressing margins, along with putting stress on the tangible
capital levels of many banks due to the unrealized losses in their securities portfolios.
As we entered the year 2023, inflation was coming down--- albeit, rather slowly--- from the higher levels that peaked in June of 2022. At the
beginning of this past year, it was projected that inflation would normalize as the tightened monetary policy and elevated interest rates would finally
push our economy into a recession. With an inverted yield curve for the entirety of the year (and, for the better part of the previous year for that
matter), the markets certainly thought that a recession would occur and that interest rates would also decline sometime during the year. One
by-product of the dramatic increase in overall interest rate levels from 2022 and continuing into 2023 was the reality that some banks were not
managed prudently and had overinvested in longer-term assets over the course of 2020 and 2021 when monetary policy was Zero Interest Rate
Policy (ZIRP) and overnight interest rates were at zero or close thereto. During this timeframe, the free-flow of lower-cost deposits (which were highly
liquid since they were typically uninsured and not term funds) into these banks enticed them to invest longer-term to generate a profitable spread.
UNITEDBANCORP INC.
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A Letter from the President and CEO - Continued
Unfortunately for these few banks, when interest rates dramatically rose over the course of a short period of time, the cost of these formally low-cost
deposits increased and caused financial hardship for them. Arguably, only a handful of banks were in this situation; but, the media sensationalized
this as being an industry-wide phenomena, which created issues for our industry as a whole and caused concern with investors that many banks
would fail or need to sell. This put extreme pressure on the market values of most banks in our country and induced unwarranted panic among many
regarding the general health of the financial services industry.
With all of this turmoil that has occurred over the course of these past three years and the challenges with which our Company has been
confronted, it is quite remarkable that United Bancorp, Inc. (UBCP) had the three best years of earnings performance in its entire one hundred
twenty-one(121) year history during this period. Arguably, 2023 was the best year of performance that UBCP has ever seen on a “core”
operating basis… when the negative provisioning realized by our Company in each of these three years is not considered. But, looking at the
reported financial performance of UBCP (including the positive impact of negative provisioning), our Company had the second highest level of
earnings performance in its history in 2023. For the year ended December 31, 2023, UBCP produced net income of $8,950,000 and diluted
earnings per share of $1.57, respective increases over the results achieved for each the previous year of $293,000, or 3.4%, and $0.07 or 4.7%
(and, only lower that that achieved in 2021). At the earnings level achieved in 2023, UBCP had a return on average assets (ROA) of 1.12% and
a return on average equity of 17.12%, which compares very favorably with our peer group of banks and industry. In addition, Management was
also extremely happy to report that UBCP, once again, was recognized by American Banker in their annual “Top 200 Publicly Traded Community
Banks”, coming in at number 84, which matched the same rank achieved the previous year.
As previously mentioned, the year 2023 was marked by continued adjustment in monetary policy, with the Federal Reserve maintaining its
stance on interest rates to navigate inflationary pressures and economic shifts. In addition, it was further marked by the “media-driven”
banking crisis that develop late in the first quarter, which gave our entire industry a black eye. But, this event, in reality, was isolated to a few
financial institutions within our industry and primarily caused by the poor management of these specific banks. Nonetheless, these events
continued to create headwinds for our Company. Despite these challenges, United Bancorp, Inc. (UBCP) remained well-positioned to leverage
the environment to our advantage by responding to each accordingly.
United Bancorp, Inc. (UBCP) has been able to capitalize on the historically extreme tightening of monetary policy undertaken by the Federal Open
Market Committee of the Federal Reserve (FOMC) over the course of a short period of sixteen months. Although it has been somewhat challenging
to produce improving results in such a fast-paced, increasing interest rate environment, UBCP was properly positioned to take advantage of this
historic and dramatic increase in interest rates and our Company experienced an improvement in the level of net interest income that it realized this
past year, while maintaining a very stable net interest margin… a feat not experienced by many financial institutions in 2023!
On the asset-side of our balance sheet, we achieved the positive result of increasing net interest income and a stabile net interest margin partly by
seeing our overall loan portfolio yield increase in the current rising rate environment, even though from a volume perspective, our average loans were
relatively flat, only increasing for the year ending December 31, 2023 by $920,000 or 0.20%. Of note is that our Company did see a more significant
uptick in gross loans during the fourth quarter of this past year by $22.4 million, or 4.9%, to a level of $483.2 million at year-end.
More strongly contributing to the improvement in United Bancorp, Inc.’s (UBCP) net interest income level achieved and its stabile net interest margin
in 2023 were its higher balance sheet totals for both average cash and due from the Federal Reserve Bank and average investment securities. Our
Company’s overnight funds, that are parked in cash equivalents, have benefited from the inverted yield curve that continued over the course of the
past year, which was driven by the aggressive tightening policy of the Federal Open Market Committee (FOMC). At year-end 2023, the average
balance of these overnight, liquid funds totaled $53.8 million, an increase of $9.2 million, or 20.5%, over the previous year, and yielded approximately
5.1% for our Company after the final increase in the target for the federal funds rate by the FOMC in July of this past year. Each time the FOMC
increased the target for the federal funds rate, UBCP benefited by seeing the yield on these liquid funds increase by a like amount.
But, the most impactful force upon our Company achieving a higher level of net interest income in 2023 was the higher average balance in our
investment securities portfolio in a rising rate environment. As we have previously reported, we did not invest in securities for almost two years
beginning in March of 2020, when rates dramatically decreased due to the Zero Interest Rate Policy (ZIRP) by the Federal Open Market Committee
(FOMC) due to the onset of the pandemic. Quite simply, we patiently waited for policy tightening by the FOMC to begin and rates to increase to more
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2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
historically normalized levels. Accordingly, our Company started to, once again, invest in securities when rates began to rise to more appealing levels
toward the end of the first quarter of 2022 and continued to regularly invest in new security offerings until March of 2023… when challenges arose
for our industry and liquidity became more of a focus for us due to the aforementioned “media-driven” banking crisis. Even though this fabricated
crisis caused our Company to refrain from purchasing investment securities from early March and throughout the majority of this past year in order
to maintain a strong liquidity position, we did benefit from the leveraged position that we developed in our investment portfolio over the previous
twelve months and, for the year, our average securities for our Company increased by $54.7 million, or 31.3%, to a level of $229.6 million.
On the liability-side of the balance sheet, this past year United Bancorp, Inc. (UBCP) did experience an increase in the interest expense that it
incurred. As could be expected with the dramatic increase in interest rates that continued during the course of this past year, total interest
expense increased by $7.7 million, or 236.5%, year-over-year in 2023. But, even with this dramatic increase in interest expense for our
Company, we were able to control the level of increase in this key area; thereby, maintaining the previously discussed increase in our Company’s
net interest income and a stabile net interest margin. We achieved this result by becoming less liability-sensitive in the first quarter in reaction
to the “media driven” banking crisis, when liquidity became “king” for our industry and Company. With the developments that occurred within
our industry in the late first quarter of 2023, we transitioned into a more conservative operating position that greatly increased our overall
liquidity and “locked in” a fair portion of our funding as a hedge against further interest rate increases by taking a $75.0 million advance from
the Federal Home Loan Bank (FHLB). Initially, this significant advance had somewhat of a dilutive impact on our returns and margins (such as
our return on assets and our net interest margin); but, it was immediately accretive to our bottom-line earnings. Since rates continued to rise
after the origination of these now competitively priced advances (to which we locked-in on a blended basis at a rate of approximately 4.2% for
an approximate term of four years), we were able to more selectively manage our depository portfolio by allowing a portion of the “rate
sensitive” funding to either roll-off or reinvest in other higher cost depository products which still cost less than overnight federal funds; thus,
helping us to control our interest expense, while maintaining very adequate liquidity levels and generating increasing returns on this strategic
posture. For the first time in several years, UBCP did experience a decline in its total deposits, which decreased by $28.5 million, or 4.4%, in
2023. This decline in total deposits included a decrease in low-cost deposits (consisting of noninterest bearing deposits, interest bearing
demand and savings balances) of $78.1 million, which was partially offset by an increase in time deposits of $49.6 million. With this change
in the mix of our funding, our Company’s interest expense to total assets was 1.34% at year-end, an increase of 91 basis points year-over-year.
As previously mentioned, even with this increase in interest expense, UBCP was able to maintain a relatively stable net interest margin this past
year, which only dropped by 8 basis points to a level of 3.65% at year-end. Each of these metrics compare very favorably to peer and
contributed to UBCP achieving its solid earnings performance in 2023.
Relating to the noninterest margin of United Bancorp, Inc. (UBCP) in 2023, our Company was able to maintain the level of noninterest income
that it generated even though there was both extreme political and regulatory pressure on the purported “junk fees” that our industry is accused
of charging… even though, most customers believe that the fees charged by the banking industry are fair and the services provided relating
thereto are desired. With a focus on the future, in September our Company hired new staffing relating to our newest division, Unified Mortgage.
With the need to develop or enhance revenue lines within our Company, we hired an individual who successfully ran a mortgage company for
over twenty years. In addition, we have developed a model; whereby, we finally have dedicated mortgage originators that strictly focus on the
production of purchase money consumer mortgage loans. As we ramp up the operations of Unified Mortgage by revamping our product
offerings and leveraging our origination platform, we are confident that we will generate higher levels of noninterest or fee income in the coming
years, even though both nonsufficient fund and interchange income will remain under attack. In 2023, UBCP generated noninterest income of
$4.1 million, a marginal decline of $29,000, or 0.71%, over the previous year.
Relating to the other half of the noninterest margin, United Bancorp, Inc. (UBCP) was able to somewhat control the inevitable increase in its
noninterest expense level. Considering that inflation continues to remain well-above historic norms, our Company saw its noninterest expense
increase by a respectable $962,000 or 4.8%. Much of this increase is attributed to higher personnel related expenses incurred to keep
adequate staffing during this very challenging time--- when wage inflation remained high (along with a high level of job openings) and
unemployment remained relatively low. In addition, UBCP maintained its focus on remaining relevant by keeping a focus on digital transformation
and investing in the digital delivery services and channels demanded by our customer base, which further added to noninterest expense levels.
Lastly, and very excitedly, our Company successfully negotiated a lease on a prime parcel of real estate in the desirable Wheeling, West Virginia
Market that added to our noninterest expense in the fourth quarter. We are in the process of designing and building a new regional banking
UNITEDBANCORP INC.
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3
A Letter from the President and CEO - Continued
center at this location which should be finished sometime in the late fourth quarter of 2024 or early 2025. Overall, our Company is committed
to eliminating unnecessary expenses where warranted… but, prudently taking on expenses in areas that will help us to maintain our relevancy
and ensure our future success.
In 2023, even with the continued heightened inflation levels and related increases in interest rates that impacted our borrowers with higher operating
costs and potential rate resets to higher interest rate levels and payments on their loans, United Bancorp, Inc. (UBCP) maintained credit-related
strength and stability in its loan portfolio. At year-end, our Company’s total nonaccrual loans and loans past due 30 plus days were $1.15 million, or
0.24%, which is a slight increase of $540,000 year-over-year. Nonaccrual loans and OREO to average assets wat 0.48%, a decrease of one(1) basis
point over the previous year. Also, further highlighting the overall strength of our loan portfolio, our Company had net loans charged off of (-$19,000),
or a net loan recovery (exclusive of overdraft charge-offs), this past year. Amazingly, all of the charge off activity that UBCP experienced in 2023
related to overdraft activity, which totaled $120,000 for the year. With the enhanced loan loss reserve build-up under CECL that occurred on January
1, 2023 (and, our Company’s stable and solid credit quality metrics), we were able to have a negative provision for credit losses, once again, this past
year. Though UBCP’s provision for credit losses was a negative amount in 2023… it still increased by $501,000 over the previous year, which
reduced net income and diluted earnings per share by respective amounts of $396,000 and $0.07, relative to the prior year. Even with this lower
level of negative credit provisioning in 2023, we firmly believe that we are well reserved with very strong coverage… having a total allowance for
credit losses to total loans of 0.81% and a total allowance for credit losses to nonperforming loans of 706% at year-end.
At United Bancorp, Inc. (UBCP), our primary focus is protecting the investment of our valued shareholders in our Company and rewarding you
in a balanced fashion by growing our Company’s market value over time and paying an attractive cash dividend. This past year was a
challenging one for the market values of all bank-related stocks and--- even though we had very solid earnings results--- we did see the market
value of our Company’s stock decline from the previous year. At year-end, UBCP’s stock closed at $12.84. Once again in 2023, our Company
rewarded its shareholders with a very solid dividend payout of $0.8150 per share, which was higher than the previous year’s cash dividend
payout of $0.7750… an increase of $0.04 per share or 5.2%. At this dividend payout level and our year-end market value, our dividend yield
is a very solid 6.3%. In looking at the Total Return Performance Chart in this annual report, the five-year total return performance--- which
considers both market value appreciation and cash dividend payouts--- shows that your investment in UBCP compared very favorably to all of
the other bank related indices, to which our Company compares, listed on this chart. As always, our goal is to provide the highest level of return
to you, our valued shareholders, while growing our company in a safe and sound manner!
As you can see, United Bancorp, Inc. (UBCP) had one of its highest performing years in terms of earnings performance in 2023, while operating in
a very dynamic economic and regulatory environment. But… your management team will never be satisfied resting on past performance and
laurels. This past year, we grew our total assets by $62.1 million, or 8.2%, to a level of $819.4 million. Moving forward, we continue to remain
strongly focusing on achieving our goal of becoming a $1.0 billion community banking organization in, hopefully, the not too distant future. While
striving to reach this goal, we will maintain our commitment to and standard of producing stellar, above peer, performance-related results as we
confidently move forward as one of the premier community banks in our industry. UBCP is truly blessed to have a “Unified and United” team,
management, board of directors and shareholder group. As a successful financial services company, we truly appreciate everyone’s continued
support… Together, We Will Accomplish More!
Scott A. Everson
President and Chief Executive Officer
ceo@unitedbancorp.com
February 19, 2024
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.
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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
2024 ANTICIPATED
DIVIDEND PAYABLE DATES
First Quarter
March 20, 2024
Second Quarter*
June 20, 2024
Third Quarter*
September 20, 2024
Fourth Quarter*
December 20, 2024
*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)
$
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
$
0.685
$
0.775
$
0.815
Special Cash Dividends
and Stock Dividends
-
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
–
–
10¢ Per Share Special Dividend
15¢ Per Share Special Dividend
15¢ Per Share Special Dividend
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
2021
2022
2023
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, 2016
December 29, 2017
December 29, 2018
December 28, 2019
–
–
March 19, 2022
March 18, 2022
March 20, 2023
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 Index
S&P U.S. BMI Banks Index
S&P U.S. SmallCap Banks Index
S&P U.S. BMI Banks - Midwest Region Index
Dow Jones Index
350
300
250
200
150
100
50
e
u
l
a
V
x
e
d
n
I
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
Index
United Bancorp, Inc.
NASDAQ Composite Index
S&P U.S. BMI Banks Index
S&P U.S. SmallCap Banks Index
S&P U.S. BMI Banks - Midwest Region Index
Dow Jones Index
12/31/18
100.00
100.00
100.00
100.00
100.00
100.00
12/31/19
131.06
136.69
137.36
125.46
130.10
125.34
12/31/20
126.17
198.10
119.83
113.94
111.85
137.53
12/31/21
166.62
242.03
162.92
158.62
147.78
166.34
12/31/22
154.34
163.28
135.13
139.85
127.53
154.92
12/31/23
143.61
236.17
147.41
140.55
130.20
180.00
5
Directors
Erin S. Ball
Jonathan C. Clark
Scott A. Everson
Gary W. Glessner
Brian M. Hendershot
John R. Herzig
John M. Hoopingarner
Richard L. Riesbeck
Bethany E. Schunn
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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.
Brian M. Hendershot. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, Ohio-West Virginia Excavating, Shadyside, Ohio
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
Bethany E. Schunn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Plant Manager, Cardinal Operating Company, Brilliant, Ohio
James W. Everson ............................................................................................................................................................... Chairman Emeritus 1969 - 2017
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 & Corporate Secretary
DIRECTORS OF UNIFIED BANK
Erin S. Ball. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President, Carenbauer Distributing Corporation, Wheeling, West Virginia
Jonathan C. Clark, Esq.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney at Law, Lancaster, Ohio
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.
Brian M. Hendershot. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, Ohio-West Virginia Excavating, Shadyside, Ohio
John R. Herzig. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, Toland-Herzig Funeral Homes & Crematory, Strasburg and Dover, Ohio
John M. Hoopingarner, Esq.1,2. . . . . . . . . . . . . . . . . . . . . . . . .Of Counsel, McMahon, DeGulis LLP, Columbus, Cleveland and Cincinnati, Ohio
Richard L. Riesbeck1,2, F . . . . . . . . . . . . . . . . .Chairman, United Bancorp, Inc.; President, Riesbeck Food Markets, Inc., St. Clairsville, Ohio
Bethany E. Schunn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Plant Manager, Cardinal Operating Company, Brilliant, Ohio
James W. Everson ............................................................................................................................................................... Chairman Emeritus 1969 - 2017
1 = Executive Committee 2 = Audit Committee 3 = Compensation Committee
4 = Nominating and Governance Committee F = Lead Director
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
7
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 121 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 2019, 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., 2018-2021
* Past Chairman
8
2 02 3 | 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 2023, there were 6,063,851 shares issued, held among approximately
3,000 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, 2023 to December 31, 2023 compared to the same periods in 2022 as reported by
the NASDAQ.
Market Price Range
High ($)
Low ($)
Cash Dividends
Quarter ($)
Cumulative ($)
2 0 2 3
31-Mar 30-Jun 30-Sep 31-Dec
2 0 2 2
31-Mar 30-Jun 30-Sep
31-Dec
$ 15.43
$ 12.26
14.37
11.14
12.24
11.23
13.95
9.90
$ 18.38
$ 16.51
20.60
15.40
18.04
14.99
16.70
14.35
$ 0.3125
$ 0.3125
0.1650
0.4775
0.1675
0.6450
0.1700
0.8150
$ 0.3025
$ 0.3025
0.1550
0.4575
0.1575
0.6150
0.1600
0.7750
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:
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
Phone (US Shareholders):
+1 (800) 937-5449
Phone (Non-US Shareholders):
+1 (718) 921-8124
Raymond James
222 South Riverside Plaza
7th Floor
Chicago, Illinois 60606
Anthony LanFranco
312-655-2961
Piper | Sandler
Johathan Rook
1 Greewich Plz
Greewich, CT 06830-6352
212-466-8036
The Annual Meeting of Shareholders
will be held at 2:00 p.m., April 17,
2024 at the Corporate Offices in
Martins Ferry, Ohio.
Internet:
Please look us up at
http//:www.unitedbancorp.com
Independent Auditors:
S.R. Snodgrass, P.C.
2009 Mackenzie Way, Suite 340
Cranberry Township, PA 16066
(724) 934 0344
Corporate Offices:
Unified Bank Building
201 South 4th Street, Martins Ferry, Ohio 43935
Randall M. Greenwood
Corporate Secretary
(888) 275-5566 (EXT 6181)
(740) 633-0445 (EXT 6181)
(740) 633-1448 (FAX)
Transfer Agent and Registrar:
For transfers and general correspondence,
please contact:
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
Phone (US Shareholders): +1 (800) 937-5449
Phone (Non-US Shareholders): +1 (718) 921-8124
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
9
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, 2023 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. (NASDAQ: UBCP) reported diluted
earnings per share of $0.42 for the three months ended
December 31, 2023, an increase of $0.02, or 5.00%, over the
quarterly earnings reported for the same period in 2022.
For the year ending December 31, 2023, UBCP reported
diluted earnings per share of $1.57, an increase of $0.07, or
4.7%, over the previous year.
We are exceedingly pleased to report on the earnings
performance of United Bancorp, Inc. (UBCP) for the fourth
quarter and year ended December 31, 2023. For the quarter,
our Company achieved solid net income and diluted
earnings per share results of $2,389,000 and $0.42, which
were respective increases of $83,000, or 3.6%, and $0.02, or
5.0%, over the results achieved during the fourth quarter of
last year. For the year ended December 31, 2023, our
Company produced net income of $8,950,000 and diluted
earnings per share of $1.57, increases over the results
achieved for each the prior year of $293,000, or 3.4%, and
$0.07, or 4.7%, respectively. As we have previously reported,
UBCP was been able to capitalize on the historically extreme
tightening of monetary policy undertaken by the Federal
Open Market Committee of the Federal Reserve (FOMC)
over the course of a short period of sixteen months, over
which timeframe the target for the Federal Funds Rate
rapidly rose from a range of 25 to 50 basis points in March
Total Assets (In Thousands)
$820,000
$780,000
$740,000
$700,000
$660,000
$620,000
$580,000
$724,456
$757,400
$819,449
2021
2022
2023
2022 to a range of 5.25% to 5.50% as of July 2023 (and,
remaining at this level through year-end). Although it has
been somewhat challenging to produce improving results
in such a fast-paced, increasing interest rate environment,
our Company was properly positioned to take advantage of
this historic and dramatic increase in interest rates over the
course of the past twenty-one months and, accordingly, we
experienced an improvement in the level of net interest
income that we generated, once again, this past year
ending, December 31, 2023.
We are grateful to see that our net interest income and net
interest margin levels have either increased or remained
very stable with only minimal declines in the current,
10 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
dynamic economic and monetary policy environment in
which we are operating. We have achieved this positive
result by seeing our overall loan portfolio yield increase in
the current rising rate environment, even though from a
volume perspective, our average loans were relatively flat,
only increasing for the year-ended December 31, 2023 by
$920,000 or 0.20%. Of note is that our Company did see a
more significant uptick in gross loans toward the end of the
fourth quarter by $22.4 million, or 4.9%, to a level of $483.2
million as of December 31, 2023. More strongly contributing
to the improvement in our net interest income level
achieved and our stabile net interest margin in 2023 were
our higher balance sheet totals for both our average Cash
and due from the Federal Reserve Bank and average
investment securities. Our overnight funds, that are parked
in cash-equivalents, have benefited from the inverted yield
curve that we have experienced over the course of the past
year, which has been driven by the aggressive tightening
policy of the Federal Open Market Committee (FOMC). As
of December 31, 2023, the average balance of these
overnight, liquid funds totaled $64.8 million, an increase of
$11.8 million, or 22.3%, over the previous year, and yielded
approximately 5.4% for our Company after the final increase
in the target for the federal funds rate by the FOMC in July
of this past year. Each time the FOMC increased the target
for the federal funds rate, our Company benefited by seeing
the yield on these liquid funds increase by a like amount.
The most impactful force upon our Company’s improving
level of net interest income in 2023 was the increased
balance in our investment securities portfolio in the rising
rate environment that we continued to experience. As we
have previously stated, we did not invest in securities for
almost two years beginning in March of 2020, when rates
dramatically decreased due to the Zero Interest Rate policy
implemented by the FOMC due to the pandemic. Quite
simply, we patiently waited for policy tightening by the
FOMC to begin and rates to increase to more historically
normalized levels. Accordingly, our Company started to,
once again, invest in securities when rates began to rise to
more appealing levels toward the end of the first quarter of
2022 and continued to regularly invest in new security
offerings until March of 2023, when challenges arose for our
industry and liquidity became more of a focus for us. On a
year-over-year basis, average securities for our Company
increased by $56.6 million to a level of $245.7 million. In
addition, even with our Company’s higher investment level
in securities in 2023, as of December 31, 2023, our
accumulated other comprehensive loss, net of taxes (AOCI)
actually declined on a year-over-year basis by $1.9 million, or
20.0%, to a level of $7.5 million. On a linked-quarter basis,
the decline in our AOCI was $9.5 million or 56.1%. With this
year-over-year decline in AOCI, our tangible shareholders
equity increased to a level of $62.7 million, an increase of
Loans-Net (In Thousands)
$480,000
$460,000
$440,000
$420,000
$400,000
$380,000
$360,000
$450,699
$458,823
$479,318
2021
2022
2023
$4.1 million, or 6.9%, and our tangible book value increased
to $10.66, an increase of $0.74, or 7.5%, both on a year-over-
year basis. Also, on a linked-quarter basis, our tangible
shareholder equity increased by $11.1 million, or 21.5%, and
our tangible book value increased by $1.89 or 21.6%.
Overall, our Company continues to be considered well-
capitalized from a regulatory perspective with equity to
assets of 7.8%, which is up from 6.5% at the end of the third
quarter of 2023. With the overall quality of our investment
portfolio, our well capitalized position, our solid liquidity
position and our low level of uninsured deposits (which
were 16.8% of total deposits as of December 31, 2023), we
firmly believe that any issues which could potentially create
a risk to our capital and capital position are very minimal.
Even with the continued heightened inflation levels and
related increases in interest rates that may be impacting
some of our borrowers with higher operating costs and rate
resets to higher interest rate levels on their loans, we have
successfully maintained credit-related strength and stability
within our loan portfolio as of year-end. As of December 31,
2023, our Company’s total nonaccrual loans and loans past
due 30 plus days were $1.15 million, or 0.24%, which is a
slight increase of $539,000 year-over-year. Nonaccrual loans
and OREO to average assets was 0.47%, a decrease of two
basis points over the previous year. Also, further highlighting
the overall strength of our loan portfolio, our Company had
net loans charged off of (-$19,000), or a net loan recovery, in
2023. All of the charge off activity that our Company
experienced this past year related to overdraft activity,
which totaled $120,000 for the year. With the enhanced
credit loss reserve build-up under CECL that occurred on
January 1, 2023 (and, our Company’s stable and solid credit
quality metrics), we were able to have a negative provision
for credit losses in the fourth quarter of $154,000, which
relative to the fourth quarter of last year added approximately
$133,000 to net income and $0.02 to diluted earnings per
share. For the year ending December 31, 2023, though, our
Company’s provision for credit losses increased (although it
was still negative for the entire year) by $501,000 over the
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
11
$765,000
$725,000
$685,000
$645,000
$605,000
$565,000
$525,000
Total Average Earning Assets
(In Thousands)
$666,744
$685,476
$750,544
2021
2022
2023
previous year, which reduced net income and diluted
earnings per share by respective amounts of $396,000 and
$0.07, relative to the prior year. We are very happy that we
were able to overcome the lower level of negative credit
provisioning in the current year while maintaining a total
allowance for credit losses to total loans of 0.81% and
having a total allowance for credit losses to nonperforming
loans of 804%. Overall, we firmly believe that we are
presently well reserved with very strong coverage.
Considering the exceedingly dynamic economic and
monetary policy environments in which we have operated
for almost two years and the more recent issues which have
impacted our industry since mid-March, we are very happy
to report on the very strong earnings performance that
United Bancorp, Inc. (UBCP) achieved for the year ended
December 31, 2023. Relating to the excessive tightening of
our country’s monetary policy during this aforementioned
timeframe, we are extremely pleased that we have been
able to grow the level of interest income that our Company
generated while controlling overall interest expense levels;
thereby, expanding the level of net interest income that we
realized and having a stable net interest margin. This is
somewhat of a counter-trend to what occurred within our
industry over this same period. With the aforementioned
developments that occurred within our industry late in the
first quarter of 2023, we transitioned into a more conservative
operating position that greatly increased our overall
liquidity and locked in a fair portion of our funding as a
hedge against further interest rate increases by taking a
$75.0 million advance from the Federal Home Loan Bank
(FHLB). Initially, this significant advance had somewhat of a
dilutive impact on our returns and margins (such as our
return on assets and our net interest margin); but, it was
immediately accretive to our bottom-line earnings. Since
rates have continued to rise since the origination of this now
competitively priced advance (to which we locked in on a
blended basis at a rate of approximately 4.24% for an
approximate term of four years), we have been able to more
selectively manage our depository portfolio; thus, helping
us to control our interest expense, while maintaining very
adequate liquidity levels and generating increasing returns
on this strategic posture. Overall, our capital levels remain
very strong and our Company is classified as being well-
capitalized based on industry standards. We firmly believe
with our strong liquidity, our relatively stable core deposits
base with minimal levels of uninsured deposits and our
solid earnings our risk to capital
low, and,
fundamentally, our Company’s financial position and future
prospects are very solid.
is very
Our primary focus is protecting the investment of our
shareholders in our Company and rewarding them in a
balanced fashion by growing their value and paying an
attractive cash dividend. In the fourth quarter, we paid a
regular cash dividend of $0.17, which was an increase of
$0.01, or 6.3%, over that paid in the fourth quarter of the
previous year. At December 31, 2023, on a year-over-year
basis, our total cash dividend payout was $0.8150, which
included a special cash dividend of $0.15 paid in the first
quarter. This is a 5.2% increase over the total cash dividend
paid during the previous year and produces a near-industry
leading total dividend yield of 6.4%, considering our
Company’s year-ending market value of $12.84. Even
though our fair market value decreased year-over-year (as
did the fair market value of most financial institution stocks),
our Company still had a market price to tangible book value
of 121%, which compares favorably to industry standards as
of year-end.
Considering that we continue to operate in a challenging
economic and concerning industry-related environment,
we are very pleased with our overall present performance
and future prospects. Even with the present threats with
which our overall industry is exposed, we are very optimistic
about the future growth and earnings potential for United
Bancorp, Inc. (UBCP). We firmly believe that with the
challenges that our industry has experienced over the
course of the past few years, our Company has evolved into
a more fundamentally sound organization with a focus of
growing to achieve greater efficiencies and scales, while
controlling overall costs. We have invested in areas that will
lead to our continued and future relevancy within our
industry along with anticipated higher revenue generation
while implementing cost control initiatives, where needed,
by consolidating delivery channels in markets in which we
had low banking center performance and considerable
overlap. We still have a vision of growing UBCP to an asset
threshold of $1.0 billion or greater in the near term in a
prudent and profitable fashion. Excitingly, our Company
announced in the third quarter that we have plans to open
a new regional banking center in the very appealing market
12
2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
of Wheeling, West Virginia. We anticipate breaking ground
on this exciting new regional banking center toward the
end of the first quarter of the current year. Our Company
already has a very solid customer base in the Wheeling,
West Virginia- market, which we firmly believe we can more
fully leverage to help us achieve our growth goals in a
profitable fashion. We are truly excited about our Company’s
direction and the potential that it brings. In addition, we
will continue to build upon our solid foundation and
maintain a longer-term vision. With a keen focus on
continual process improvement, product development and
delivery, we firmly believe the future for our Company is
very bright.
Earning Assets - Loans
The Company’s gross loans totaled $483.2 million at
December 31, 2023, representing a $22.4 million, or 4.86%,
increase over the $460.9 million at December 31, 2022.
Average loans totaled $463.6 million for 2023, representing
a 0.20% increase compared to average loans of $462.7
million for 2022.
The increase in gross loans from December 31, 2022 to
December 31, 2023 was primarily an increase in commercial
real estate by $21.5 million.
The Company's commercial and commercial real estate loan
portfolio represents 79.3% of the total portfolio at December
31, 2023 compared to 78.3% at December 31, 2022. The
Company’s commercial and commercial real estate loans
increased approximately $22.3 million from December 31,
2022 to December 31, 2023. 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
1.4% of the total portfolio at December 31, 2023, compared
to 1.3% at December 31, 2022. Competition for installment
Net Income (In Thousands)
$9,500
$8,000
$6,500
$5,000
$3,500
$2,000
$500
$9,451
$8,657
$8,950
2021
2022
2023
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, 2023, compared
to 20.4% at December 31, 2022. 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 $29,000 in 2023 and a gain of $36,000 in
2022.
The Company adopted ASU No. 2016-13 effective January 1,
2023. The impact of the adoption was $2.4 million in the
allowance for credit losses. The allowance for credit losses
totaled $3.9 million at December 31, 2023, which represented
0.81% of total loans. The allowance for loan losses, prior to
adopting ASU 2016-13 as of December 31, 2022, was $2.1
million or 0.45% of total loans. The allowance represents the
amount which management and the Board of Directors
estimates is adequate to provide for probable losses
inherent in the loan portfolio. The allowance balance and
the provision charged to expense are reviewed by
management and the Board of Directors monthly using a
risk evaluation model that considers borrowers’ past due
experience, economic conditions and various other
circumstances that are subject to change over time.
Management believes the current balance of the allowance
for credit losses is adequate to absorb future expected
credit losses associated with the loan portfolio. Net loan
(recoveries) charge-offs (exclusive of overdrafts net charge-
offs of $120,000) for the year ended December 31, 2023 were
approximately ($19,000) . Net loans charged off (exclusive of
overdrafts net charge-offs $108,000) was $558,000) for the
year ended December 31, 2022.
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
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
13
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.
December 31, 2027 $35 million (4.24% fixed rate) and
December 31, 2028 $20 million (4.11% fixed rate).
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, 2023 increased
approximately $25.1 million from December 31, 2022 totals.
Sources of Funds – Deposits
The Company’s primary source of funds is retail core
deposits from individuals and business customers. These
demand,savings and time deposits. Total deposits decreased
$28.5 million, or 4.4%, from $649.9 million at December 31,
2022 to $621.4 million at December 31, 2023. Overall the
total deposit decrease was mainly focused on non-interest
and interest bearing demand and deposit accounts and
savings accounts.
On average, 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.
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 SOFR 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).
Performance Overview 2023 to 2022
Net Income
The Company reported basic and diluted earnings per
share of $1.57 and net income of $8,950,000 for the year
ended December 31, 2023, an increase of $293,000, or 3.4%,
over net income of $8,657,000 for the year ended December
31, 2022.
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.
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 $8.7 million from December 31,
2022 to December 31, 2023. Securities sold under
agreements to repurchase totaled $26.8 million and $18.1
million at December 31, 2023 and 2022, respectively. At
December 31, 2023, advances from the Federal Home Loan
Bank were $75 million. The Company did not have any
advances from the Federal Home Loan Bank at December
31, 2022. At December 31, 2023, required annual payments
on Federal Home Loan Bank advances were for years
ending December 31, 2026 $20 million (4.39% fixed rate),
1.00%
0.85%
0.70%
0.55%
0.40%
0.25%
0.10%
Total Allowance for Credit Losses
to Total Loans
0.81%
0.45%
0.81%
2021
2022
2023
14 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Average interest-earning assets increased $65.1 million in
2023, as compared to 2022 while the associated weighted
average yield on these interest-earning assets increased
from 4.21% in 2022 to 5.12% for 2023. Average interest
bearing liabilities increased $76.5 million in 2023 as
compared to 2022, while the associated weighted-average
costs on these interest-bearing liabilities increased from
0.63% in 2022 to 1.84% in 2023. 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.
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, deposit service fees,
insurance and other
earnings on bank-owned
miscellaneous items.
life
Noninterest income for the year ended December 31, 2023
was $4,054,000, a decrease of $29,000, compared to
$4,083,000 for the year ended December 31, 2022.
Provision for (Reversal of ) Credit Loss Expense - Loans
The provision for (reversal of) credit losses is a charge or
credit to expense recorded to maintain the related balance
sheet allowance for credit losses at an amount considered
adequate by Management and the Board of Directors to
cover expected future credit losses in the portfolio. In 2023
the Company released $454,000 in credit reserves as
compared to a $955,000 credit release in 2022.
Noninterest Expense
Our Company experienced an increase in total noninterest
expense. In 2023, total noninterest expense increased by
$962,000 or 4.8%. Most of this increase in non-interest
expense is correlated to a higher IT-related expense due to
our investment in our future and higher customer utilization
of our suite of products and higher deposit insurance
premiums due mainly to an increase in rate from the FDIC.
At December 31, 2023, our total non-accrual loans were
$487,000 or 0.10% of total loans. This level of non-accrual
loans was an increase of $305,000 over the previous year. In
addition, other real estate and repossession (OREO)
decreased by $142,000 year-over-year. At year-end,
nonaccrual loans and OREO to total assets was a very solid
0.47%, along with loans past due 30+ days at $659,000 or
0.13% of total loans.
Income tax expense for 2023 was $541,000 compared to
$879,000 in 2022, a decrease of $338,000. The Company’s
effective income tax rate was 5.7% in 2023 and 9.2% in 2022.
Refer to Note 9 Income Taxes for a reconciliation of the
effective tax rate for the Company.
(In thousands)
2023
2022
Noninterest income
Customer service fees............................................................................................................................................................$
Gains on sales of loans ..........................................................................................................................................................
Earnings on bank-owned life insurance .........................................................................................................................
Other income ............................................................................................................................................................................
Total noninterest income ..................................................................................................................................................$
Noninterest expense
Salaries and employee benefits .........................................................................................................................................$
Occupancy and equipment.................................................................................................................................................
Professional services ..............................................................................................................................................................
Insurance ....................................................................................................................................................................................
FDIC Insurance .........................................................................................................................................................................
Franchise and other taxes ....................................................................................................................................................
Advertising ................................................................................................................................................................................
Printing and office supplies .................................................................................................................................................
Amortization of intangibles ................................................................................................................................................
Other expenses ........................................................................................................................................................................
Total noninterest expense ..............................................................................................................................................$
2,940
29
725
360
4,054
10,272
2,064
1,465
623
375
555
361
113
150
4,874
20,852
$
$
$
$
2,978
36
708
361
4,083
10,305
2,217
1,451
568
198
562
346
110
150
3,983
19,890
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
15
Asset/Liability Management and \Sensitivity
to Market Risks
and prepayment penalties may prevent certain loans and
securities from adjusting to the market rate.
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.
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 interestbearing
liability, which can have its interest rate changed to a
market rate during the specified time period. Caps, collars
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 in 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
can cause acceptable profits
interest rate
environments and unacceptable profits in others. A sound
asset/liability management program combines gap and
spread management into a single cohesive system.
in some
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
16 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
The projected volatility of the net present value at both
December 31, 2023 and 2022 fall within the general
guidelines established by the Board of Directors. The 2023
NPV table shows that in a falling interest rate environment,
in the event of a 100 basis point change, the NPV would
decrease 2%. In the event of a 200 basis point change, the
NPV would decrease 6%.
In an upward change in interest rates, the Company’s NPV
would decrease 1% with a 100 basis point interest rate
increase. In a 200 basis point rate increase, the Company’s
NPV would also decrease 2%.
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.
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, 2023
Change in Rates
+200
+100
Base
-100
-200
$ Amount $ Change % Change
(3,624)
131,619
(682)
134,561
-
135,243
(2,917)
132,326
(10,378)
124,865
-3%
-1%
-
-2%
-8%
(Dollars in Thousands)
Net Portfolio Value - December 31, 2022
Change in Rates
+200
+100
Base
-100
-200
$ Amount $ Change % Change
1,133
176,852
1,517
177,236
-
175,719
(5,128)
170,591
(16,358)
159,361
1%
1%
-
-3%
-9%
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
17
The following table is a summary of selected quarterly results of operations for the years ended December 31, 2023 and 2022.
Three Months Ended
March 31
June 30
September 30
December 31
(In thousands, except per share data)
2023
Total interest income
Total interest expense
Net interest income
(Credit) 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
$
$
$
$
8,208
1,785
6,423
-
1,016
5,438
2,001
113
1,888
0.33
0.33
$
$
$
$
9,286
2,941
6,345
(146)
1,046
5,089
2,448
168
2,280
0.40
0.40
$
$
$
$
9,651
3,085
6,566
(154)
963
5,233
2,450
58
2,392
0.42
0.42
$
$
$
$
9,704
3,203
6,501
(154)
1,029
5,092
2,592
202
2,390
0.42
0.42
Three Months Ended
March 31
June 30
September 30
December 31
(In thousands, except per share data)
2022
Total interest income
Total interest expense
Net interest income
(Credit) 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
$
$
$
$
5,997
487
5,510
(500)
987
5,110
1,887
136
1,751
0.30
0.30
$
$
$
$
6,445
477
5,968
(485)
988
4,849
2,592
295
2,297
0.40
0.40
$
$
$
$
7,297
928
6,369
15
1,043
4,879
2,518
215
2,303
0.40
0.40
$
$
$
$
7,922
1,381
6,541
15
1,065
5,052
2,539
233
2,306
0.40
0.40
18
2 02 3 | 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,
2023 and 2022. 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 credit losses. Interest income has been adjusted to
taxequivalent basis.
(Dollars In thousands)
2023
Interest
Average
Income/ Yield/
Balance Expense Rate
2022
Interest
Average
Income/ Yield/
Balance Expense Rate
25,261
2,741
7,430
2,752
254
38,438
5.45%
3.63
4.82
5.11
7.34
5.12
$ 462,692
54,852
120,073
44,668
3,191
685,476
20,748
1,899
5,565
493
139
28,844
4.48%
3.46
4.63
1.10
4.35
4.21
Assets
Interest-earning assets
Loans (1) ..................................................................................................... $ 463,612
Taxable securities - AFS .............................................................................
75,494
Tax-exempt securities - AFS (1) .............................................................. 154,151
53,826
Federal funds sold .......................................................................................
FHLB stock and other.................................................................................
3,461
Total interest-earning assets ................................................................... 750,544
Noninterest-earning assets
Cash and due from banks ...................................................................
8,967
Premises and equipment (net) ..........................................................
12,222
Other nonearning assets .....................................................................
34,244
Less: allowance for loan losses ..........................................................
(3,923)
51,510
Total noninterest-earning assets ...........................................................
Total assets ..................................................................................................... $ 802,054
Liabilities & stockholders’ equity
Interest-bearing liabilities
Demand deposits ................................................................................... $ 216,947
Savings deposits ..................................................................................... 137,862
Time deposits ............................................................................................... 134,011
23,787
Subordinated debentures ........................................................................
25,049
Repurchase agreements ...........................................................................
Advances from Federal Home Loan .....................................................
60,081
Total interest-bearing liabilities ............................................................. 597,737
1,923
132
3,818
1,532
1,053
2,556
11,014
0.89
0.10
2.85
6.44
4.20
4.25
1.84
Noninterest-bearing liabilities
Demand deposits ................................................................................... 146,987
Other liabilities ........................................................................................
5,042
Total noninterest-bearing liabilities ..................................................... 152,029
Total liabilities ............................................................................................... 749,766
52,288
Total stockholders’ equity ........................................................................
Total liabilities & stockholders’ equity ................................................. $ 802,054
Net interest income ....................................................................................
Net interest spread .....................................................................................
$ 27,424
Net yield on interest-earning assets ....................................................
8,301
12,547
32,471
(3,020)
50,299
$ 735,775
$ 262,763
144,283
67,848
23,726
22,581
-
521,201
151,842
4,016
155,858
677,059
58,716
$ 735,775
845
77
722
1,387
242
-
3,273
0.32%
0.05
1.06
5.85
1.07
-
0.63
3.28%
3.65%
$ 25,571
3.58%
3.73%
• For purposes of this schedule, nonaccrual loans are included in loans.
• Fees collected on loans are included in interest on loans. Not material for comparative purposes.
(1) Shown on a tax equivalent basis. Federal taxes of 21%.
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
19
For purposes of this schedule, nonaccrual loans are included
in loans.
Fees collected on loans are included in interest on loans.
Not material for comparative purposes.
Shown on a tax equivalent basis. Federal taxes of 21%.
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 2023. 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.
• Rate/volume variance results when the change in volume
is multiplied by the change in rate.
Diluted Earning Per Share
$1.70
$1.50
$1.30
$1.10
$0.90
$0.70
$0.50
1.62
1.50
1.57
2021
2022
2023
NOTE: The rate/volume variance was allocated to volume
variance and rate variance in proportion to the relationship
of the absolute dollar amount of the change in each.
Nonaccrual loans are ignored for purposes of the calculations
due to the nominal amount of the loans.
Capital Resources
Internal capital growth, through the retention of
earnings, is the primary means of maintaining capital
2023 Compared to 2022
Increase/(Decrease)
(In thousands)
Interest and dividend income
Loans ....................................................................................................................................$
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 ....................................................................................................................
Subordinated debentures ............................................................................................
Repurchase agreements ................................................................................................
Advances from federal home loan bank .....................................................................
Total interest expense ........................................................................................................$
Total
Change
4,508
842
1,866
2,259
119
9,594
1,078
55
3,096
145
811
2,556
7,741
Change
Due To
Volume
$
41
745
1,057
121
12
1,976
( 171 )
( 4 )
1,136
-
29
2,556
$ 3,546
Change
Due To
Rate
$ 4,467
97
809
2,138
107
7,618
1,249
59
1,960
145
782
-
$ 4,195
Net interest income .............................................................................................................$
1,853
$ ( 1,570 )
$ 3,423
20 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
adequacy for the Bank. The Company’s stockholders’ equity
was $63.6 million and $59.8 million at December 31, 2023
and 2022, respectively. Total stockholders’ equity in relation
to total assets was 7.76% at December 31, 2023 and 7.89% at
December 31, 2022. Please refer to the Consolidated
Statements of Stockholders’ Equity for a detailed roll
forward of stockholders’ equity from 2022 to 2023.
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.
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, 2023, the Company
has not issued any preferred shares.
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 SOFR 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
Cash Dividends Per Share
$0.85
$0.75
$0.65
$0.55
$0.45
$0.35
$0.25
$0.685
$0.775
$0.815
2021
2022
2023
Equity Capital (In Thousands)
$75,000
$70,000
$65,000
$60,000
$55,000
$50,000
$45,000
$71,701
$59,737
$63,593
2021
2022
2023
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).
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 which mature in 2035. 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 SOFR 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 $283.5 million at December 31, 2023,
compared to $247.7 million at December 31, 2022. 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
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
21
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 2023 and 2022 follows.
Net cash provided by operating activities totaled $8.7
million and $8.5 million for the years ended December 31,
2023 and 2022, 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 credit losses, Federal
Home Loan Bank stock dividends, net amortization of
securities and net changes in other assets and liabilities.
1.35%
1.25%
1.15%
1.05%
0.95%
0.85%
0.75%
Return On Average Assets
1.31%
1.18%
1.12%
2021
2022
2023
For the year ended December 31, 2023, net cash used in
investing activities totaled $47.7 million. For the year ended
December 31, 2022 net cash used in investing activities
totaled $103.3 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 provided by financing activities totaled $49.7
million for the year ended December 31, 2023. For the year
ended December 31, 2022 net cash provided by financing
activities totaled $41.9 million. The net cash provided by
financing activities in 2023 was primarily attributable to a
$75.0 million advance 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.
investments
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
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 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Report of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of United Bancorp, Inc.
Opinion on the Financial Statements
To the Shareholders and the Board of Directors of United Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of United Bancorp, Inc. (the
Opinion on the Financial Statements
“Company”) as of December 31, 2023 and 2022; the related consolidated statements of income,
comprehensive income, stockholders’ equity, and cash flows for the years then ended; and the related
We have audited the accompanying consolidated balance sheets of United Bancorp, Inc. (the
notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the
“Company”) as of December 31, 2023 and 2022; the related consolidated statements of income,
financial statements present fairly, in all material respects, the financial position of the Company as of
comprehensive income, stockholders’ equity, and cash flows for the years then ended; and the related
December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then
notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the
ended, in conformity with accounting principles generally accepted in the United States of America.
financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then
Change in Accounting Principle
ended, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the financial statements, the Company changed its method of accounting for
Change in Accounting Principle
credit losses effective January 1, 2023, due to the adoption of Accounting Standards Codification (ASC)
Topic 326, Financial Instruments – Credit Losses.
As discussed in Note 1 to the financial statements, the Company changed its method of accounting for
credit losses effective January 1, 2023, due to the adoption of Accounting Standards Codification (ASC)
Basis for Opinion
Topic 326, Financial Instruments – Credit Losses.
These financial statements are the responsibility of the Company’s management. Our responsibility is to
Basis for Opinion
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
These financial statements are the responsibility of the Company’s management. Our responsibility is to
are required to be independent, with respect to the Company, in accordance with U.S. federal securities
express an opinion on the Company’s financial statements based on our audits. We are a public accounting
laws and the applicable rules and regulations of the Securities and Exchange Commission and the
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
PCAOB.
are required to be independent, with respect to the Company, in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
PCAOB.
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
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
were we engaged to perform, an audit of its internal control over financial reporting. As part of our
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
audits, we are required to obtain an understanding of internal control over financial reporting but not for
free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
were we engaged to perform, an audit of its internal control over financial reporting. As part of our
financial reporting. Accordingly, we express no such opinion.
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.
PITTSBURGH, PA
PHILADELPHIA, PA
WHEELING, WV
STEUBENVILLE, OH
2009 Mackenzie Way • Suite 340
PITTSBURGH, PA
Cranberry Township, PA 16066
(724) 934-0344
2009 Mackenzie Way • Suite 340
Cranberry Township, PA 16066
(724) 934-0344
2100 Renaissance Blvd. • Suite 110
PHILADELPHIA, PA
King of Prussia, PA 19406
(610) 278-9800
2100 Renaissance Blvd. • Suite 110
980 National Road
WHEELING, WV
Wheeling, WV 26003
(304) 233-5030
980 National Road
King of Prussia, PA 19406
S.R. Snodgrass, P.C. d/b/a S.R. Snodgrass, A.C. in West Virginia
(610) 278-9800
Wheeling, WV 26003
(304) 233-5030
511 N. Fourth Street
STEUBENVILLE, OH
Steubenville, OH 43952
(304) 233-5030
511 N. Fourth Street
Steubenville, OH 43952
(304) 233-5030
S.R. Snodgrass, P.C. d/b/a S.R. Snodgrass, A.C. in West Virginia
Report of Independent Registered Public Accounting Firm
Basis for Opinion (Continued)
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 included 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the
financial statements that were communicated or required to be communicated to the Audit Committee
and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involve
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 matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses (ACL) – Qualitative Adjustments
The Company’s loan portfolio totaled $483 million as of December 31, 2023, and the associated ACL
was $3.9 million. As discussed in Notes 1 and 4 to the consolidated financial statements, determining
the amount of the ACL requires significant judgment about the expected future losses, which is based
on a baseline lifetime loss rate, calculated using a weighted-average remaining maturities method, which
is then adjusted for current qualitative conditions and reasonable and supportable forecasts.
Management applies these qualitative adjustments to the baseline lifetime loss rate to reflect changes in
the current and forecasted environment, both internal and external, that are different from the conditions
that existed during the historical loss calculation period.
We identified these qualitative adjustments within the ACL as critical audit matters because they involve
a high degree of subjectivity. While the determination of these qualitative adjustments includes analysis
of observable data over the historical loss period, the judgments required to assess the directionality and
magnitude of adjustments is highly subjective. Auditing these complex judgments and assumptions
involved especially challenging auditor judgment due to the nature of audit evidence and the nature and
extent of effort required to address these matters.
The primary procedures we performed to address this critical audit matter included:
Testing the design, implementation, and operating effectiveness of internal controls over the
calculation of the allowance for credit losses, including the qualitative factor adjustments.
Testing the completeness and accuracy of the significant data points that management uses in
their evaluation of the qualitative adjustments.
Evaluating the directional consistency and reasonableness of management's conclusions
regarding basis points applied based on the trends identified in the underlying data.
Testing the mathematical accuracy of the application of the qualitative adjustments to the loan
segments within the ACL calculation
Report of Independent Registered Public Accounting Firm
We have served as the Company’s auditor since 2022.
Cranberry Township, Pennsylvania
March 20, 2024
December 31, 2004 and 2003
ASSETS
2004
2003
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
Loans – net
Premises and equipment
Assets
Accrued interest receivable
Cash and due from banks
Other real estate and repossessions
Interest-bearing demand deposits
Core deposit and other intangible assets
Bank owned life insurance
Cash and cash equivalents
Other assets
$ 7,580,576
$ 8,386,575
Consolidated Balance Sheets
137,816,329
United Bancorp, Inc.
December 31, 2023 and 2022
Consolidated Balance Sheets
14,947,520
December 31, 2023 and 2022
(In thousands, except share data)
4,115,200
(In thousands, except share data)
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
140,818,167
15,594,408
3,954,300
198,608,574
(2,843,484 )
195,765,090
8,152,480
2,373,573
$
940,015
57,452
7,185,507
2,295,402
Available-for-sale securities, amortized cost of $251,683 net of allowance for credit losses of $0
$397,521,584
$ 385,522,969
Total assets
at December 31, 2023
LIABILITIES AND SHAREHOLDERS’ EQUITY
Loans, net of allowance for credit losses of $3,918 and $2,052 at December 31, 2023 and 2022,
2023
2022
$
7,352
33,418
40,770
8,279
21,801
30,080
242,760
217,624
respectively
Demand deposits
Premises and equipment
Noninterest-bearing
Interest-bearing
Federal Home Loan Bank stock
Savings deposits
Foreclosed assets held for sale, net
Time deposits – under $100,000
Core deposit intangible assets
Time deposits - $100,000 and over
Goodwill
Total deposits
Federal funds purchased
Accrued interest receivable
Advances from the Federal Home Loan Bank
Deferred federal income tax
Securities sold under agreements to repurchase
Bank-owned life insurance
Other borrowed funds
Accrued expenses and other liabilities
Other assets
Total liabilities
Total Assets
Liabilities and Stockholders’ Equity
Commitments
Liabilities
Deposits
Shareholders’ equity
Demand
Preferred stock - 2,000,000 shares without par value authorized;
no shares issued
Savings
Common stock - $1 par value; 10,000,000 shares authorized;
Time
4,126,970 and 3,752,105 shares issued at December 31,
Total deposits
2004 and 2003, respectively
Additional paid-in capital
Retained earnings
Stock held by deferred compensation plan; 62,977 and 55,825
shares at December 31, 2004 and 2003, respectively – at cost
Treasury stock – 273,017 and 227,803 shares at December 31,
2004 and 2003, respectively - at cost
Accumulated comprehensive loss, unrealized losses on
securities designated as available for sale, net of tax
Securities sold under repurchase agreements
Subordinated debentures
Advances Federal Home Loan Bank
Lease liability – finance lease
Interest payable and other liabilities
Total liabilities
Stockholders’ Equity
Total shareholders’ equity
$ 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
$
479,318
14,984
3,979
3,377
260
682
4,098
2,409
19,423
7,389
819,449
$ 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
-
-
$
-
339,280
130,821
151,358
621,459
26,781
23,787
75,000
2,764
6,065
755,856
4,126,970
25,831,585
7,021,185
3,752,105
25,712,990
6,047,652
(752,437)
(633,842)
(2,767,751)
(2,115,855)
(635,441)
32,824,111
(248,591 )
32,514,459
458,823
12,144
2,499
3,519
410
682
3,403
2,423
19,000
6,793
757,400
402,341
145,836
101,736
649,913
18,106
23,726
—
—
5,918
697,663
$
$
Total liabilities and shareholders’ equity
Preferred stock, no par value, authorized 2,000,000 shares; no shares issued
Common stock, $1 par value; authorized 10,000,000 shares; issued 2023 – 6,063,851 shares,
2022 - 6,043,851 shares; outstanding 2023 – 5,702,685 shares, 2022 – 5,740,251 shares
$397,521,584
$ 385,522,969
Additional paid-in capital
Retained earnings
Stock held by deferred compensation plan; 2023 – 181,803 shares, 2022 – 174,237 shares
Unearned ESOP compensation
Accumulated other comprehensive loss
Treasury stock, at cost 2023 – 179,363 shares, 2022 – 129,363 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
$
––
––
6,064
25,913
44,018
(2,363)
—
(7,478)
(2,561)
63,593
819,449
$
6,044
24,814
41,945
(1,902)
—
(9,336)
(1,828)
59,737
757,400
26 2 02 3 | 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.
Years Ended December 31, 2023 and 2022
Consolidated Statements of Income
Years Ended December 31, 2023 and 2022
(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 (reversal of ) Credit Losses
Net Interest Income After Provision for (reversal of) Credit Losses
Noninterest Income
Customer service fees
Net gains on loan sales
Earnings on bank-owned life insurance
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
Advertising 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
2023
2022
$
25,232
$
20,734
2,741
5,870
2,752
254
36,849
5,873
5,141
11,014
25,835
(454)
26,289
2,940
29
725
360
4,054
10,272
2,064
1,465
623
375
555
361
113
150
4,874
20,852
9,491
541
$
8,950
1.57 $
1.57 $
1,899
4,396
493
139
27,661
1,643
1,630
3,273
24,388
(955)
25,343
2,978
36
708
361
4,083
10,305
2,217
1,451
568
198
562
346
110
150
3,983
19,890
9,536
879
8,657
1.50
1.50
$
$
$
See Notes to Consolidated Financial Statements
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
27
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2023 and 2022
(In thousands)
United Bancorp, Inc.
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2023 and 2022
(In thousands)
Net income
Other comprehensive income (loss), net of tax
2023
8,950 $
2022
8,657
$
Unrealized holding gain (losses) losses on available-for-sale securities during the period, net of taxes
(benefits) of $432 and $4,605 for each respective period
Change in funded status of defined benefit plan, net of taxes of $69 and $252 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 $10 and $38 for each
1,624
263
(17,322)
947
(70)
(70)
respective period
Comprehensive income (loss)
See Notes to Consolidated Financial Statements
37
10,808 $
145
(7,643)
$
28 2 02 3 | 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, 2023 and 2022
Years Ended December 31, 2023 and 2022
(In thousands, except per share data)
(In thousands except per share data)
Additional
Paid-in
Capital
Common
Stock
$ 6,054 $ 23,635 $
Treasury
Stock and
Deferred
Accumulated
Other
Retained Comprehensive
Compensation Earnings Income (Loss) Total
Balance, January 1, 2022
Net income
Other comprehensive loss
Cash dividends - $0.775 per share
Shares activity for deferred compensation plan
Shares purchased for treasury stock
Expense related to share-based compensation plans
Restricted stock activity
—
—
—
—
—
—
(10)
—
—
—
164
—
1,005
10
(2,799) $ 37,847 $
—
—
—
(164)
(767)
—
—
8,657
—
(4,559)
—
—
—
—
Balance, December 31, 2022
6,044 $ 24,814 $
(3,730) $ 41,945 $
Net income
Other comprehensive income
Cash dividends - $0.815 per share
Shares activity for deferred compensation plan
Shares purchased for treasury stock
Cumulative effect of adoption of ASU 2016-13
Expense related to share-based compensation plans
Restricted stock activity
—
—
—
—
—
—
—
20
—
—
—
461
—
—
658
(20)
—
—
—
(461)
(733)
—
—
—
8,950
—
(4,789)
—
—
(2,088)
—
—
—
(16,300)
—
—
—
—
—
6,964 $ 71,701
8,657
(16,300)
(4,559)
—
(767)
1,005
—
(9,336) $ 59,737
8,950
1,858
(4,789)
—
(733)
(2,088)
658
—
—
1,858
—
—
—
—
—
—
Balance, December 31, 2023
$ 6,064 $ 25,913 $
(4,924) $ 44,018 $
(7,478) $ 63,593
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
29
Consolidated Statements of Cash Flows
United Bancorp, Inc.
Years Ended December 31, 2023 and 2022
Consolidated Statements of Cash Flows
(In thousands)
Years Ended December 31, 2023 and 2022
(In thousands)
Operating Activities
Net income
Items not requiring (providing) cash:
Depreciation and amortization
Provision for (reversal of) credit loss expense
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
Expense related to share-based compensation plans
Net loss (gain) or on sale or write-down of foreclosed assets and other repossessed assets
Increase in cash surrender value of bank-owned life insurance
Amortization of debt issuance costs
Changes in:
Accrued interest receivable
Other assets
Interest payable and other liabilities
Net cash provided by operating activities
Investing Activities
Purchases of available-for-sale securities
Maturities, prepayments and calls
Net change in loans
Purchase of Federal Home Loan Bank Stock
Redemption of Federal Home Loan Bank Stock
Purchases of premises and equipment, net
Proceeds from sale of premises and equipment
Proceeds from sales of foreclosed assets
Net cash used in investing activities
See Notes to Consolidated Financial Statements
2023
2022
$
8,950
$
8,657
997
(454)
512
150
13
(615)
644
(29)
658
12
(422)
61
(695)
(288)
(31)
9,463
(25,918)
2,330
(22,465)
(3,149)
1,669
(1,081)
9
133
(48,472)
1,013
(955)
533
150
342
(1,891)
1,927
(36)
1,005
23
(191)
61
(1,058)
(824)
(275)
8,481
(99,992)
6,190
(10,415)
—
1,205
(511)
111
156
(103,256)
30 2 02 3 | 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, 2023 and 2022
Consolidated Statements of Cash Flows (continued)
(In thousands)
December 31, 2023 and 2022
(In thousands)
Financing Activities
Net (decrease) increase in deposits
Net change in securities sold under repurchase agreements
Repurchase of common stock
Proceeds from Federal Home Loan Bank Advances
Cash dividends paid
Net cash provided by financing activities
Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
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
Adoption of ASU 2016-13
Finance lease asset and liability
See Notes to Consolidated Financial Statements
2023
2022
$
$
$
$
$
$
$
(28,454)
8,675
(733)
75,000
(4,789)
49,699
10,690
30,080
40,770
10,585
—
33
2,089
2,764
$
$
$
$
$
$
$
44,777
2,405
(767)
—
(4,559)
41,856
(52,919)
82,999
30,080
3,150
230
3,283
—
3,283
See Notes to Consolidated Financial Statements
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
31
Notes to Consolidated Financial Statements
Note 1: Nature of Operations and Summary of Significant Accounting Policies
December 31, 2023 and 2022
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 Bridgeport, Colerain, Dellroy, 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 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.
Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our statements
of income 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 credit
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 credit losses and the valuation of foreclosed assets held for sale, management obtains
independent appraisals for significant properties.
Notes to Consolidated Financial Statements
Cash Equivalents
December 31, 2023 and 2022
The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At
December 31, 2023 and 2022, 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, 2023 and 2022, the Company’s various cash accounts
did not exceed the federally insured limit of $250,000. At December 31, 2023 and 2022, the Company held $33,418,000 and
$21,541,000 at the Federal Home Loan Bank and the Federal Reserve Bank, respectively, which are not subject to FDIC limits.
Investment Securities
Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such
designation as of each balance sheet date.
Investment securities classified as available for sale are those securities that the Company intends to hold for an indefinite
period of time but not necessarily to maturity. Securities available for sale are carried at fair value. Any decision to sell a
security classified as available for sale would be based on various factors, including significant movements in interest rates,
changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other
similar factors. Unrealized gains or losses are reported as increases or decreases in other comprehensive income (loss), net of
the deferred tax effect. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included
in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.
Allowance for Credit Losses – Available for Sale Securities
The Company measures expected credit losses on available-for-sale debt securities when the Company does not intend to sell,
or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If
either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair
value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company
evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the
Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a
rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that
a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized
cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a
credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less
than the amortized cost basis. Economic forecast data is utilized to calculate the present value of expected cash flows. The
Company utilizes independent firms to evaluate the Company’s State and Municipal Obligations and Subordinated Notes to
measure any expected credit losses. Any impairment that has not been recorded through an allowance for credit losses is
recognized in other comprehensive income (loss).
The allowance for credit losses on available-for-sale debt securities is included within investment securities available-for-sale
on the consolidated balance sheets. Changes in the allowance for credit losses are recorded within provision for credit losses
on the consolidated statements of income. Losses are charged against the allowance when the Company believes the
collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell
is met.
Accrued interest receivable on available-for-sale debt securities totaled $2.7 million at December 31, 2023 and is included
within the line item accrued interest receivable on the consolidated balance sheets. This amount is excluded from the estimate
of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment
of principal or interest has become 90 days past due or management has serious doubts about the further collectability of
principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income
is reversed.
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,
2023 and 2022, the Company did not have any loans held for sale.
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
33
Notes to Consolidated Financial Statements
Loans
December 31, 2023 and 2022
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are
stated at their outstanding unpaid principal balances, net of an allowance for credit losses and any deferred fees or costs.
Accrued interest receivable totaled $1.4 million at December 31, 2023 and was reported in the line item accrued interest
receivable on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on
the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an
adjustment of the yield (interest income) of the related loans. The Company is amortizing these amounts over the contractual
life of the loan. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective
yield method.
The loans receivable portfolio is segmented into commercial and industrial, which are typically utilized for general business
purposes and commercial real estate, which are collaterized by real estate. Homogenouse loans consisting similar products that
are smaller in amount and distributed over a large number of individual borrowers include residential real estate and consumer
loans.
For all classes of loans receivable, the accrual of interest is discontinued when the contractual payment of principal or interest
has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though
the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed
or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed
and unpaid interest accrued in prior years is charged against the allowance for credit losses. Interest generally is either applied
against principal or reported as interest income on a cash basis, according to management’s judgment as to the collectability of
principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance
with the contractual terms for a reasonable period of time (generally six months), and the ultimate collectability of the total
contractual principal and interest is no longer in doubt. The past-due status of all classes of loans receivable is determined based
on contractual due dates for loan payments.
Accounting Pronouncements Adopted in 2023
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments” and subsequent related updates. This ASU replaces the incurred loss methodology for
recognizing credit losses and requires businesses and other organizations to measure the current expected credit losses (CECL)
on financial assets measured at amortized cost, including loans and held-to-maturity securities, net investments in leases, off-
balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires
credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down when management
does not intend to sell or believes that it is not more likely than not they will be required to sell. This guidance became effective
on January 1, 2023 for the Company. The results reported for periods beginning after January 1, 2023 are presented under ASC
326 while prior period amounts continue to be reported in accordance with previously applicable accounting standards.
The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial
assets measured at amortized cost, including loans and available-for-sale debt securities and unfunded commitments. On
January 1, 2023, the Company recorded a cumulative effect decrease to retained earnings of $2,088,000, net of tax, of which
$1,911,000 related to loans, $177,000 related to unfunded commitments.
The Company adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for-sale
debt securities prior to January 1, 2023 using the prospective transition approach, though no such charges had been recorded
on the securities held by the Company as of the date of adoption. The Company did not change the segmentation from the
incurred loss method upon adoption of ASC 326.
In January 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt
restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors
when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis. Upon adoption of this
guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing financial difficulty.
Instead, these modifications are included in their historical loss rate which is applied to the current loan balance to arrive at the
quantitative baseline portion of the Allowance for Credit Losses.
Notes to Consolidated Financial Statements
Allowance for Credit Losses - Loans
December 31, 2023 and 2022
The allowance for credit losses (“ACL”) is a valuation reserve established and maintained by charges against income and is
deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or
portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the
aggregate of amounts previously charged-off and expected to be charged-off.
The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss
experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently
subjective and may have significant changes from period to period.
The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups
of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with
other loans.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company
uses the call report classification as its segment breakout and measures the allowance for credit losses using the Weighted
Average Remaining Maturity method for all loan segments.
Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools
of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative
adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss
information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on a 2 year unemployment
forecast provided by Bloomberg and management judgment. For periods beyond our reasonable and supportable forecast, we
revert back to historical annual loss rates for the remainder of the life of each pool after the forecast period. The qualitative
adjustments for current conditions are based upon current level of inflation and the rapid increase in interest rates, changes in
lending policies and practices, experience and ability of lending staff, quality of the Company’s loan review system, value of
underlying collateral, the existence of and changes in concentrations and other external factors. These modified historical loss
rates are multiplied by the outstanding principal balance of each loan to calculate a required reserve.
The Company has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on
non-accrual status, any outstanding accrued interest is reversed against interest income.
The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer
shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all
commercial and industrial and commercial real estate loans, as well as residential and installment loans greater than $100,000
that meet the following criteria: 1) when it is determined that foreclosure is probable, 2) substandard, doubtful and
nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral,
3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Specific reserves
are established based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future
cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of
the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of
collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition
costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the loan
balance. The impact of the change from incurred loss model to the current expected credit loss model is detailed below (in
thousands)
January 1, 2023
Loan Categories (in thousands)
Commercial and Industrial
Commercial Real Estate
Residential Real Estate
Consumer
Pre-adoption Adoption Impact As Reported
970
$
1,203
2,195
103
755 $
388
1,379
(103)
215 $
815
816
206
$
2,052 $
2,419 $
4,471
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
35
Notes to Consolidated Financial Statements
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
December 31, 2023 and 2022
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via
a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance
for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes
consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to
be funded over its estimated life.
Premises and Equipment
Land is carried at cost. Depreciable assets are stated at cost less accumulated depreciation which range from 10-39 years for
Company buildings, 3-7 years for furniture and equipment, and 1-3 years for computer software. 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. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions and
improvements are capitalized.
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.
Income Taxes
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
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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, 2023, 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 2020.
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
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, 2023 and 2022.
Comprehensive Income (Loss)
Comprehensive income consists of net income (loss) and other comprehensive (loss) income, net of applicable income taxes.
Other comprehensive (loss) income includes unrealized appreciation (depreciation) on available-for-sale securities and changes
in the funded status of the defined benefit pension plan.
Advertising
Advertising expenses are expensed as incurred.
Note 2: Restriction on Cash and Due From Banks
The Company did not have a reserve requirement at December 31, 2023 and 2022.
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
37
Notes to Consolidated Financial Statements
Note 3: Securities
December 31, 2023 and 2022
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, 2023:
U.S. government agencies
Subordinated notes
State and municipal obligations
Total debt securities
Available-for-sale Securities:
December 31, 2022:
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
$
45,000 $
29,013
177,670
$ 251,683 $
(732) $
44,268
— $
24,300
(4,713)
—
2,264
174,192
(5,742)
2,264 $ (11,187) $ 242,760
$
45,000 $
31,160
152,447
$ 228,607 $
(968) $
— $
44,032
—
(3,066)
28,094
145,498
(7,408)
459
459 $ (11,442) $ 217,624
There were no allowance for credit losses as of December 31, 2023.
There were no sales of investment securities during 2023 and 2022.
The amortized cost and fair value of available-for-sale securities at December 31, 2023, 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.
Less than one year
One to five years
Five to ten years
Over ten years
Totals
Amortized
Cost
Fair
Value
(In thousands)
15,000 $
30,597
32,930
173,156
251,683 $
14,869
29,937
28,234
169,720
242,760
$
$
The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $72.8 million and
$68.7 million at December 31, 2023 and 2022, 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, 2023 and 2022, was $123.1 million and $166.1 million, which represented
approximately 51% and approximately 76%, 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 not credit
related.
38 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
The following tables show the Company’s investments’ gross unrealized losses and fair value for which an allowance for credit
losses has not been recorded,, aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position at December 31, 2023 and 2022:
Description of
Securities
US government agencies
Subordinated notes
State and municipal obligations
Total temporarily impaired securities
Description of
Securities
US government agencies
Subordinated notes
State and municipal obligations
Total temporarily impaired securities
Less than 12 Months
Fair
Value
Unrealized
Losses
12 Months or More
Fair
Value
Unrealized
Losses
Total
Fair
Value
Unrealized
Losses
December 31, 2023
(In thousands)
$
— $ — $ 44,268 $
3,717
3,365
$ 7,082 $
(732) $ 44,268 $
(732)
(4,713)
(799)
(12)
(5,742)
(811) $ 116,014 $ (10,376) $ 123,096 $ (11,187 )
(3,914)
(5,730)
24,300
54,528
20,583
51,163
Less than 12 Months
December 31, 2022
12 Months or More
Total
Fair
Value
Unrealized Fair
Value
Losses
Unrealized
Losses
Fair
Value
Unrealized
Losses
(In thousands)
— $
(968) $
$ 44,032 $
11,185
100,599
(968)
(3,066)
(7,408)
$ 155,816 $ (9,941) $ 10,300 $ (1,501) $ 166,116 $ (11,442)
21,485
100,599
10,300
—
(1,501)
—
(1,565)
(7,408)
— $ 44,032 $
The unrealized losses on the Company’s investments in US government agencies, state and municipal obligations, and
subordinated notes were caused by interest rate increases. 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 require an allowance for credit losses to be
recognized.
Note 4: Loans and Allowance for Credit Losses
Categories of loans at December 31, include:
Commercial and industrial loans
Commercial real estate
Residential real estate
Consumer loans
Total gross loans
Less allowance for credit losses
Total loans
2023
2022
(In thousands)
91,294
291,859
93,364
6,719
483,236
(3,918)
479,318
$
$
90,548
270,312
94,012
6,003
460,875
(2,052)
458,823
$
$
The risk characteristics of each loan portfolio segment are as follows:
Commercial and Industrial
Commercial and industrial 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 and industrial 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
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
39
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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.
40 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
The following tables present the balance in the allowance for credit losses and the recorded investment in loans based on
portfolio segment and impairment method as of December 31, 2023 and 2022:
Allowance for credit losses:
Balance, beginning of year
Provision for (reversal of)
credit losses
Impact of adopting ASC 326
Losses charged off
Recoveries
Commercial
2023
Commercial
snd
Industrial
Real Estate
Residential
(In thousands)
Consumer
Total
$
215 $
815 $
816 $
206
$
2,052
(421)
755
—
24
205
388
—
—
1,408 $
(352)
1,379
—
—
1,843 $
114
(103)
(138)
15
94
$
(454)
2,419
(138)
39
3,918
Balance, end of year
Ending balance: individually evaluated for credit
$
573 $
loss
$
— $
— $
— $
—
$
—
Ending balance: collectively evaluated for credit
loss
Loans:
Ending balance: individually evaluated for credit
$
573 $
1,408 $
1,843 $
94
$
3,918
loss
$
— $
8 $
318 $
—
$
326
Ending balance: collectively evaluated for credit
loss
$ 91,294 $ 291,851 $
93,046 $
6,719
$ 482,910
2022
Commercial
Commercial
Real Estate
Residential
(In thousands)
Installment
Total
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
$
$
1,046 $
(842)
(16)
27
215 $
1,235 $
141
(561)
—
815 $
1,121 $
(303)
(2)
—
816 $
271 $
49
(143)
29
206 $
3,673
(955)
(722)
56
2,052
impairment
$
— $
— $
— $
— $
—
Ending balance: collectively evaluated for
impairment
$
215 $
815 $
816 $
206 $
2,052
Loans:
Ending balance: individually evaluated for
impairment
$
— $
123 $
— $
— $
123
Ending balance: collectively evaluated for
impairment
$
90,548 $ 270,189 $
94,012 $
6,003 $ 460,752
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
41
Notes to Consolidated Financial Statements
The following tables show the portfolio quality indicators.
December 31, 2023 and 2022
Based on the most recent analysis performed, the following table presents the recorded investment in non-homogeneous loans
by internal risk rating system as of December 31, 2023 (in thousands):
2023
2022
2021
2020
2019
Prior
Revolving Revolving
Loans
Loans
Amortized Converted
to Term
Cost Basis
Total
$ 21,847 $ 14,723 $
—
—
—
26
—
—
$ 21,847 $ 14,752 $
13,067 $
—
—
—
13,067 $
14,042 $
—
—
—
14,042 $
6,017 $
—
—
—
6,017 $
5,292 $ 15,019 $
128
—
—
1,133
—
—
5,459 $ 16,152 $
— $
—
—
—
— $
90,007
1,287
—
—
91,294
December 31, 2023
Commercial and industrial
Risk Rating
Pass
Special Mention
Substandard
Doubtful
Total
Commercial and industrial
Current period gross charge-offs
$
— $
— $
— $
— $
— $
— $ — $
— $
—
Commercial real estate
Risk Rating
Pass
Special Mention
Substandard
Doubtful
Total
Commercial real estate
$ 29,246 $ 35,721 $
—
—
—
—
—
—
$ 29,246 $ 35,721 $
48,569 $
242
—
—
48,811 $
34,671 $
2,050
—
—
36,721 $
26,562 $
—
—
—
26,562 $
57,441 $ 55,141 $
2,121
95
—
—
—
—
59,657 $ 55,141 $
— $ 287,351
4,413
—
95
—
—
—
— $ 291,859
Current period gross charge-offs
$
— $
— $
— $
— $
— $
— $
— $
— $
—
Total
Pass
Special Mention
Substandard
Doubtful
Total
Current period gross charge-offs
$ 51,093 $ 50,444 $
—
—
—
26
—
—
$ 51,093 $ 50,473 $
— $
$
--- $
61,636 $
242
—
—
62,853 $
— $
48,713 $
2,050
—
—
50,763 $
— $
32,579 $
—
—
—
32,579 $
— $
62,733 $ 70,160 $
2,249
95
—
1,133
—
—
65,047 $ 71,293 $
— $
— $
— $ 377,358
5,700
—
95
—
—
—
— $ 383,153
—
— $
42 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due 90
days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed quarterly. The
following table presents the amortized cost in residential and consumer loans based on payment activity (in thousands):
December 31, 2023
Residential Real Estate
Payment Performance
Performing
Nonperforming
Total
Residential real estate
Current period gross
charge-offs
Consumer
Payment Performance
Performing
Nonperforming
Total
Consumer
Current period gross
charge-offs
Total
Payment Performance
Performing
Nonperforming
Total
Current period gross
charge-offs
2023
2022
2021
2020
2019
Prior
Revolving Revolving
Loans
Amortized Converted
to Term
Cost Basis
Loans
Total
$ 12,036 $ 18,297 $ 16,343 $ 19,476 $ 5,687 $ 21,046 $
—
—
—
38
—
441
$ 12,036 $ 18,297 $ 16,343 $ 19,514 $ 5,687 $ 21,487 $
— $
—
— $
— $
—
— $
92,885
479
93,364
$
— $
— $
— $
— $
— $
— $
— $
— $
—
$ 2,484 $ 1,396 $
—
—
$ 2,484 $ 1,396 $
674 $
—
674 $
456 $
—
456 $
385 $
—
385 $
953 $
—
953 $
371 $
—
371 $
— $
—
— $
6,719
—
6,719
$
138 $ — $
— $
— $
— $
— $
— $
— $
138
$ 14,520 $ 19,693 $ 17,017 $ 19,932 $ 6,072 $ 21,999 $
—
—
—
38
—-
441
$ 14,520 $ 19,693 $ 17,017 $ 19,970 $ 6,072 $ 24,440 $
371 $
—
371 $
99,604
— $
—
479
— $ 100,083
$
138 $
— $
— $
— $
— $
— $
— $
— $
138
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 credit 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.
For the years ended December 31, 2023 and 2022, the Company recorded a credit to the loan credit provision of $454,000 and
$955,000, respectively.
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
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
43
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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, 2022:
Pass Grade
Special Mention
Substandard
Doubtful
Loan Class
Commercial
Commercial
Real Estate
Residential
(In thousands)
Installment
Total
$
$
90,548 $
—
—
—
90,548 $
262,472 $
4,066
3,774
—
270,312 $
94,012 $
—
—
—
94,012 $
6,003 $
—
—
—
6,003 $
453,035
4,066
3,774
—
460,875
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 2022.
The following table shows the loan portfolio aging analysis of the recorded investment in loans as of December 31, 2023:
30‑59 Days 60‑89 Days Greater
Than 90
Days and
Accruing
Past
Due and
Accruing
Past
Due and
Accruing
Total Past
Due and
Non Accrual
Non
Accrual
(In thousands)
Current
Total Loans
Receivable
Commercial and industrial
Commercial real estate
Residential
Consumer
Total
$
$
10 $
---
201
5
216 $
48 $
242
---
—
290 $
154 $
—
—
—
154 $
— $
8
479
—
487 $
212 $ 91,082 $ 91,294
291,859
250
291,609
93,364
680
92,770
6,719
5
6,714
1,147 $ 482,175 $ 483,236
The following table shows the loan portfolio aging analysis of the recorded investment in loans as of December 31, 2022:
30‑59 Days 60‑89 Days Greater
Than 90
Days and
Accruing
Past
Due and
Accruing
Past
Due and
Accruing
Total Past
Due and
Non Accrual
Non
Accrual
(In thousands)
Current
Total Loans
Receivable
Commercial and industrial
Commercial real estate
Residential
Installment
Total
Nonperforming Loans
$
$
126 $
158
102
15
401 $
— $
—
24
—
24 $
— $
—
—
—
— $
— $
9
173
—
182 $
126 $ 90,422 $ 90,548
270,312
167
270,145
94,012
299
93,713
6,003
15
5,988
607 $ 460,268 $ 460,875
The following table present the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing
interest as of December 31, 2023:
Nonaccrual with no ACL Nonaccrual with ACL Total Nonaccrual Still Accruing
Loans Past
Due Over 90 Days
Total
Nonperforming
Commercial and industrial
Commercial real estate
Residential
Consumer
Total
$
$
— $
8
479
—
487 $
(In thousands)
— $
—
—
—
— $
— $
8
479
—
487 $
154 $
—
—
—
154 $
154
8
479
—
641
The Company did recognized approximately $13,000 interest income on nonaccrual loans during the the period ended
December 31, 2023.
44 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
Impaired Loans
December 31, 2023 and 2022
For 2022, 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 and industrial 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, 2022:
Average
Unpaid
Recorded Principal
Balance
Balance
Specific
Allowance
(In thousands)
Investment in
Impaired
Loans
Interest
Income
Recognized
Loans without a specific valuation allowance:
Commercial and industrial
Commercial real estate
Real Estate
Installment
Loans with a specific valuation allowance:
Commercial and industrial
Commercial real estate
Real Estate
Total:
Commercial and industrial
Commercial Real Estate
Real Estate
Installment
$
$
$
$
$
$
$
$
— $
123
—
—
123 $
— $
123
—
—
123 $
— $
—
—
— $
— $
—
—
— $
— $
—
—
—
— $
— $
—
—
— $
27 $
130
—
—
157 $
— $
3,653
—
3,653 $
— $
123 $
— $
— $
— $
123 $
— $
— $
— $
— $
— $
— $
27 $
3,783 $
— $
— $
1
11
—
—
12
—
40
—
40
1
51
—
—
At December 31, 2022, 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.
The following tables present information regarding troubled debt restructurings by class and by type of modification for the year
ended December 31, 2022:
Commercial and industrial
Commercial Real Estate
Commercial and industrial
Commercial Real Estate
Year Ended December 31, 2022
Pre-Modification Post-Modification
Number of
Contracts
Outstanding
Recorded
Investment
(In thousands)
Outstanding
Recorded
Investment
— $
1 $
— $
48 $
—
48
Year Ended December 31, 2022
Interest
Only
$
$
— $
1 $
Total
Term
Combination Modification
(In thousands)
— $
1 $
— $
— $
—
1
During the year ended December 31, 2022, troubled debt restructurings did not have an impact on the allowance for loan losses.
At December 31, 2022, there were no material defaults of any troubled debt restructurings that were modified in the last
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
45
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
12 months. The Company generally considers TDR’s that become 90 days or more past due under the modified terms as
subsequently defaulted.
Note 5: Premises and Equipment
Major classifications of premises and equipment, stated at cost, are as follows:
2023
2022
(In thousands)
Land, buildings and improvements
Furniture and equipment
Computer software
Less accumulated depreciation
Net premises and equipment
$
22,927 $
15,398
2,546
40,871
(25,887)
20,493
15,567
2,460
38,520
(26,376)
12,144
$
14,984 $
Depreciation and amortization charged to operations was $997,000 in 2023 and $1,013,000 in 2022.
Note 6: Time Deposits
Time deposits in denominations of $250,000 or more were $37.6 million at December 31, 2023 and $11.3 million at December
31, 2022. At December 31, 2023, the scheduled maturities of time deposits are as follows:
Due during the year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Note 7: Borrowings
(In thousands)
$
$
79,670
63,073
7,961
163
230
261
151,358
At December 31, 2023 and 2022, as a member of the Federal Home Loan Bank system the Bank had the ability to obtain up to
$87.5 million and $177.2 million, respectively, in additional borrowings based on securities and certain loans pledged to the
FHLB. At December 31, 2023, Advances from the Federal Home Loan Bank were $75 million. The Company did not have
any advances from the Federal Home Loan Bank at December 31, 2022. At December 31, 2023, required annual payments on
Federal Home Loan Bank advances were for year ending December 31, 2026 $20 million (4.39% fixed rate), December 31,
2027 $35 million (4.24% fixed rate) and December 31, 2028 $20 million (4.11% fixed rate).
At December 31, 2023 and 2022, the Bank had approximately $251.0 million and $248.0 million, respectively of one- to four-
family residential real estate and commercial real estate loans pledged as collateral for borrowings. Also at December 31, 2023
and 2022, 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. At December 31, 2022 the
Company had no outstanding borrowings with the FHLB.
Securities sold under repurchase agreements were approximately $26.8 million and $18.1 million at December 31, 2023 and
2022, respectively.
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
46 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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
2022
2023
(Dollars in thousands)
$ 26,781
$ 25,049
$ 18,106
$ 22,581
4.17 %
1.02 %
$ 30,509
$ 28,114
4.58 %
3.04 %
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, 2023
Repurchase Agreements
State and municipal obligations
Total
Overnight and
Continuous
Up to 30 Days 30‑90 Days
Greater than 90
Days
Total
$
$
26,781 $
26,781 $
— $
— $
— $
— $
— $ 26,781
— $ 26,781
December 31, 2022
Overnight and
Continuous Up to 30 Days 30‑90 Days
Greater than 90
Days
Total
Repurchase Agreements
U.S government agencies
Total
$
$
18,106 $
18,106 $
— $
— $
— $
— $
— $ 18,106
— $ 18,106
Securities with an approximate carrying value of $41.1 million and $38.8 million at December 31, 2023 and 2022, respectively,
were pledged as collateral for repurchase borrowings.
Note 8: Subordinated Debentures
On May 14, 2019 the Company issued $20,000,000 of junior subordinated debentures. 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 SOFR plus 3.625%, resetting
quarterly. Interest on the subordinated notes is 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 $337,000
and $398,000 as of December 31, 2023 and 2022, 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 SOFR plus 1.35% and is payable quarterly. Subordinated debentures, net of unamortized debt costs, totaled $23.8
million and $23.7 million at December 31, 2023 and 2022, respectively.
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
47
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
Note 9: Income Taxes
The provision for income taxes includes these components:
Taxes currently payable
Deferred income taxes
Income tax expense
2023
2022
$
(In thousands)
528 $
13
$
541 $
537
342
879
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
2023
2022
(In thousands)
$
1,993 $
2,003
(1,256)
(152)
(49)
5
541 $
(935)
(149)
(49)
9
879
$
The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:
Deferred tax assets
Allowance for credit losses
Stock based compensation
Deferred compensation, and other accruals
Employee benefit expense
Non-accrual loan interest
Unrealized loss on securities available for sale
Other
Total deferred tax assets
Deferred tax liabilities
Depreciation
Deferred loan costs, net
FHLB stock dividends
Prepaid expenses
Intangibles
Employee benefit expense
Total deferred tax liabilities
Net deferred tax asset
$
2023
2022
(In thousands)
870 $
238
80
525
6
1,874
---
3,593
431
310
507
—
1
2,307
10
3,566
(410)
(2)
(60)
(55)
(58)
(599)
(1,184)
2,409 $
(414)
(11)
(182)
(68)
(78)
(390)
(1,143)
2,423
$
Note 10: Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:
Net unrealized loss on securities available-for-sale
Net unrealized loss for funded status of defined benefit plan liability
Tax effect
Net-of-tax amount
2023
2022
(In thousands)
(8,922)
(543)
(9,465)
1,987
(7,478)
$
$
(10,984)
(835)
(11,819)
2,483
(9,336)
$
$
48 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
Note 11: Regulatory Matters
December 31, 2023 and 2022
Unified is 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.
The Basel III capital rules became effective for 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, 2023, 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.
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
49
Notes to Consolidated Financial Statements
The Bank’s actual capital amounts and ratios are presented in the following table.
December 31, 2023 and 2022
Actual
Amount
Ratio
For Capital Adequacy
Purposes
Amount
Ratio
(Dollars in thousands)
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Ratio
81,811
13.9
46,975
8.0
$
58,719
10.0 %
77,893
13.3
26,424
4.5
$
38,167
6.5 %
77,893
13.3
35,231
6.0
$
46,975
8.0 %
77,893
9.7
32,302
4.0
$
40,378
5.0 %
79,551
14.2
44,778
8.0
$
55,973
10.0 %
77,499
13.9
25,188
4.5
$
36,383
6.5 %
77,499
13.9
33,584
6.0
$
44,778
8.0 %
77,499
10.1
30,617
4.0
$
38,272
5.0 %
As of December 31, 2023
Total Capital (to Risk-Weighted Assets)
Unified
Common Equity Tier 1 Capital (to Risk-
Weighted Assets)
Unified
Tier I Capital (to Risk-Weighted Assets)
Unified
Tier I Capital (to Average Assets)
Unified
As of December 31, 2022
Total Capital (to Risk-Weighted Assets)
Unified
Common Equity Tier 1 Capital (to Risk-
Weighted Assets)
Unified
Tier I Capital (to Risk-Weighted Assets)
Unified
Tier I Capital (to Average Assets)
Unified
Note 12: Related Party Transactions
At December 31, 2023 and 2022, 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
2023
2022
(In thousands)
$
$
20,041 $
4,394
(2,212)
22,223 $
20,347
1,726
(2,032)
20,041
Deposits from related parties held by the Bank at December 31, 2023 and 2022, totaled approximately $5.9 million and
$3.3 million, respectively. The Company is under a purchase contract to acquire real estate from a related party. The amount
of the purchase is approximately $2.8 million and it will be used for future expansion.
50 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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 $672,000
to the plan in 2024.
The Company has certain agreements which provide for a fixed number of payments once the individual reaches normal
retirement age. At December 31, 2023, the present value of these future payments was approximately $383,000.
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 gain (loss)
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
Funded status at end of year
Pension Benefits
2023
2022
(In thousands)
$
$
(5,078)
(302)
(311)
(229)
441
(7,558)
(519)
(274)
2,991
282
(5,479)
(5,078)
6,988
1,092
742
(441)
7,744
(1,217)
744
(283)
8,381
6,988
$
2,902
$
1,910
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
2023
2022
(In thousands)
770
(227)
$
1,150
(315)
543
$
835
$
$
The estimated net loss and prior service credit for the defined benefit pension plan that will be amortized from accumulated
other comprehensive loss as a credit into net periodic benefit cost over the next fiscal year is approximately $89,000. The
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
51
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
accumulated benefit obligation for the defined benefit pension plan was $4.7 million and $4.4 million at December 31, 2023
and 2022, 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
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,
2023
2022
(In thousands)
5,479
4,695
8,381
$
$
$
5,078
4,421
6,988
December 31,
2023
2022
(In thousands)
$
303
311
(531)
(89)
48
519
274
(575)
(89)
183
$
42
$
312
Pension Benefits
2023
2022
3.75 %
3.50 %
3.75 %
3.50 %
3.75 %
7.00 %
3.50 %
3.75 %
7.00 %
3.50 %
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 following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of
December 31, 2023:
2024
2025
2026
2027
2028
2029-2033
Total
Pension
Benefits
(In thousands)
316
339
312
635
529
5,104
7,235
$
$
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.
52 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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 2023 and 2022 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%
At December 31, 2023 and 2022, 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,
2023
2022
69.2 %
27.5
3.3
70.0 %
27.8
2.2
100.0 %
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, 2023
and 2022, the Plan did not contain Level 2 or Level 3 investments.
The fair values of Company’s pension plan assets at December 31st, by asset category are as follows:
December 31, 2023
Asset Category
Mutual money market
Mutual funds – equities
ETF mutual funds
Large and small Cap
International
Mutual funds – fixed income
Fixed income
ETF fixed income
Total
Fair Value Measurements Using
Quoted Prices Significant
in Active
Other
Significant
Markets for
Observable Unobservable
Total Fair Identical Assets
Value
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
$
279 $
(In thousands)
279 $
— $
5,283
159
356
1,559
745
5,283
159
356
1,559
745
—
—
—
—
$
8,381 $
8,381 $
— $
—
—
—
—
—
—
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
53
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
December 31, 2022
Asset Category
Mutual money market
Mutual funds – equities
ETF mutual funds
Large and small Cap
International
Mutual funds – fixed income
Fixed income
ETF fixed income
Total
Fair Value Measurements Using
Quoted Prices Significant
in Active
Other
Significant
Markets for
Observable Unobservable
Total Fair
Value
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
$
154 $
(In thousands)
154 $
— $
4,445
142
301
1,348
598
4,445
142
301
1,348
598
—
—
—
—
$
6,988 $
6,988 $
— $
—
—
—
—
—
—
Employee Stock Ownership and 401(k) Plans
The Company has an Employee Stock Ownership Plan (“ESOP”) with an integrated 401(k) plan covering substantially all
employees of the Company. The Company’s 401(k) matching percentage was 50% of the employees’ first 6% of contributions
for 2023 and 2022.
The Company’s 401(k) expense for the years ended December 31, 2023 and 2022 was approximately $142,000 and $141,000,
respectively.
Share information for the ESOP is as follows at December 31, 2023 and 2022:
Allocated shares at beginning of the year
Net shares distributed due to retirement/diversification
Total ESOP shares
2023
384,404
(6,534)
2022
398,104
(13,700)
377,870
384,404
Fair value of unearned shares at December 31st
$
—
$
—
At December 31, 2023, the fair value of the 377,870 the shares held by the ESOP was approximately $4,852,000. There were
no unearned ESOP shares as of December 31, 2023 and 2022.
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 $2.0 million and $1.9 million at December 31, 2023 and 2022, respectively.
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, 2023, 162,500 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.
54 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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, 2023, and changes during the year
then ended, is presented below:(cid:3)
Nonvested, beginning of year
Granted
Vested
Forfeited
Nonvested, end of year
Weighted-
Average
Grant-Date
Fair Value
$
$
11.86
12.03
12.19
—
11.79
Shares
257,500
20,000
(50,000)
—
227,500
Total compensation cost recognized in the income statement for share-based payment arrangements during the years ended
December 31, 2023 and 2022 was $658,000 and $1,006,000, respectively.
The recognized tax benefits related thereto were $138,000 and $211,000, for the years ended December 31, 2023 and 2022,
respectively.
As of December 31, 2023 and 2022, there was $1,253,000 and $1,549,000, 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 3.8 years.
Note 15: Earnings Per Share
Earnings per share (EPS) were computed as follows:
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
Year Ended December 31, 2023
Weighted-
Average
Shares
Outstanding
Per Share
Amount
$
Net
Income
(In thousands)
8,950
(167)
(190)
8,593
5,490,488
$
1.57
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
55
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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
Year Ended December 31, 2022
Weighted-
Average
Shares
Per Share
Outstanding
Amount
$
Net
Income
(In thousands)
8,657
(185)
(203)
8,269
5,483,305
$
1.50
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:
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.
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, 2023 and 2022:
December 31, 2023
Fair Value Measurements Using
Quoted Prices in Significant
Active Markets
for Identical
Assets
(Level 1)
Inputs
(Level 2)
Other
Significant
Inputs
(Level 3)
Observable Unobservable
Fair
Value
U.S government agencies
Subordinated notes
State and municipal obligation
$ 44,268 $
24,300
174,192
(In thousands)
— $ 44,268 $
—
—
24,300
174,192
—
—
—
56 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
December 31, 2022
Fair Value Measurements Using
Quoted Prices in Significant
Active Markets
Other
Significant
for Identical
Assets
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Fair
Value
(In thousands)
U.S government agencies
Subordinated notes
State and municipal obligation
$ 44,032 $
28,094
145,498
— $ 44,032 $
—
—
28,094
145,498
—
—
—
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.
Collateral Dependent
Collateral dependent loans consisted primarily of loans secured by nonresidential real estate. Management has determined fair
value measurements on collateral dependent loans primarily through evaluations of appraisals performed. Due to the nature of
the valuation inputs, collateral dependent loans are classified within Level 3 of the hierarchy.
The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other
factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent
loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the
Company’s Chief Lender. Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender. Appraisers
are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to
consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the
collateral. These discounts and estimates are developed by the Company’s Chief Lender by comparison to historical results.
Foreclosed Assets Held for Sale
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value (based on current
appraised value) at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically
performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Management
has determined fair value measurements on other real estate owned primarily through evaluations of appraisals performed, and
current and past offers for the other real estate under evaluation. Due to the nature of the valuation inputs, foreclosed assets
held for sale are classified within Level 3 of the hierarchy.
Appraisals of 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, 2023 and 2022:
Collateral dependent impaired loans
Foreclosed assets held for sale
December 31, 2023
Fair Value Measurements Using
Quoted Prices in Significant
Active Markets
Other
Significant
for Identical
Assets
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Fair
Value
$
— $
3,273
(In thousands)
— $
—
— $
—
—
3,273
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
57
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
December 31, 2022
Fair Value Measurements Using
Quoted Prices in Significant
Active Markets
Other
Significant
for Identical
Assets
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Fair
Value
$
9 $
3,519
(In thousands)
— $
—
— $
—
9
3,519
Collateral dependent impaired loans
Foreclosed assets held for sale
Unobservable (Level 3) Inputs
The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value
measurements.
Collateral-dependent loans
Foreclosed assets held for sale
$
— Market comparable properties Comparability adjustments 5% – 10%
10% – 35%
3,273 Market comparable properties Marketability discount
Fair Value at
12/31/23
(In thousands)
Valuation
Technique
Unobservable Inputs
Range
Collateral-dependent loans
Foreclosed assets held for sale
$
9 Market comparable properties Comparability adjustments 5% – 10%
10% – 35%
3,519 Market comparable properties Marketability discount
Fair Value at
12/31/22
(In thousands)
Valuation
Technique
Unobservable Inputs
Range
There were no significant changes in the valuation techniques used during 2023.
The following tables presents estimated fair values of the Company’s financial instruments not required to be reported at fair
value. 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
58 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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
Carrying
Amount
Identical
Assets
(Level 1)
Significant
Other
Significant
Unobservable
Observable Inputs
(Level 2)
Inputs
(Level 3)
(In thousands)
December 31, 2023
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
December 31, 2022
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
$
40,770 $
479,318
3,979
4,098
40,770 $
—
—
—
— $
—
3,979
4,098
—
459,759
—
—
$ 621,459 $
26,781
75,000
23,787
579
— $
—
—
—
—
623,813 $
26,781
74,911
22,146
579
—
—
—
—
—
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(In thousands)
Carrying
Amount
Significant
Unobservable
Inputs
(Level 3)
$
30,080 $
458,823
2,499
3,403
30,080 $
—
—
—
— $
—
2,499
3,403
—
444,704
—
—
$ 649,913 $
18,106
23,726
304
— $
—
—
—
646,455 $
18,106
24,454
304
—
—
—
—
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.
UNITEDBANCORP INC.
2 0 2 3 | A N N UA L R E P O RT
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Notes to Consolidated Financial Statements
Deposits
December 31, 2023 and 2022
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 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.
Advances from the Federal Home Loan Bank
The fair values of advances from the Federal Home Loan Bank, are based on the discounted value of estimated cash flows. The
discounted rate is estimated using market rates currently offered for debts with similar credit rating, terms and remaining
maturities.
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, 2023 and 2022.
Note 17: Significant Estimates and Concentrations
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 credit 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
consolidated balance sheets.
Note 18: Commitments and Credit Risk
At December 31, 2023 and 2022, total commercial and commercial real estate loans made up 79.3% and 78.3%, respectively,
of the loan portfolio. Installment loans account for 1.4% and 1.3%, respectively, of the loan portfolio. Real estate loans comprise
19.3% and 20.4% of the loan portfolio as of December 31, 2023 and 2022, respectively, and primarily include first mortgage
loans on residential properties and home equity lines of credit.
Included in cash and cash and cash equivalents as of December 31, 2023 and 2022 is $33.4 million and $21.5 million,
respectively, of deposits with the Federal Reserve Bank of Cleveland and the Federal Home Loan Bank.
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
60 2 02 3 | A N N UA L R E P O RT
UNITEDBANCORP INC.
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and
residential real estate.
At December 31, 2023 and 2022, the Company had outstanding commitments to originate variable rate loans aggregating
approximately $91.7 million and $77.9 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, 2023 or 2022.
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 $136,000 and $136,000 at December 31, 2023 and 2022, respectively in outstanding standby letters of credit.
At both December 31, 2023 and 2022, 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, 2023, the Company had granted unused lines of credit to borrowers aggregating approximately $93.7 million
and $37.0 million for commercial lines and open-end consumer lines, respectively. At December 31, 2022, the Company had
granted unused lines of credit to borrowers aggregating approximately $79.7 million and $37.6 million for commercial lines
and open-end consumer lines, respectively.
Note 19: Recent Accounting Pronouncements
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures,
which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid
information. This guidance is effective for public business entities for annual period beginning after December 15, 2024. This
Update is not expected to have a significant impact on the Company’s financial statements.
In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP
guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market
transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing
Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance
calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the
contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional
expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate
reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that
reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon
UNITEDBANCORP INC.
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Notes to Consolidated Financial Statements
December 31, 2023 and 2022
issuance through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):
Deferral of the Sunset Date of Topic 848, which extends the sunset (or expiration) date of Accounting Standards Codification
(ASC) Topic 848 to December 31, 2024. This gives reporting entities two additional years to apply the accounting relief
provided under ASC Topic 848 for matters related to reference rate reform. ASU 2022-06 is effective for all reporting entities
immediately upon issuance and must be applied on a prospective basis. This Update is not expected to have a significant impact
on the Company’s financial statements.
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
Total liabilities and stockholders’ equity
Condensed Statements of Income and Comprehensive Income
Operating Income
Dividends from subsidiary
Interest and dividend income from securities and federal funds
Total operating income
General, Administrative and Other Expenses
Income (Loss) Before Income Taxes and Equity in Undistributed Income of Subsidiary
Income Tax Benefits
Income (Loss) Before Equity in Undistributed Income of Subsidiary
Equity in Undistributed Income of Subsidiary
Net Income
Comprehensive Income (Loss)
December 31,
2023
2022
(In thousands)
$
$
12,094
71,787
4,078
11,273
69,914
3,110
$
87,959
$
84,297
$
$
23,787
579
63,593
23,726
834
59,737
$
87,959
$
84,297
Years Ended December 31,
2022
2023
(In thousands)
$
12,103
9
$
10,779
—
12,112
10,779
4,390
7,722
983
8,705
245
4,498
6,281
1,095
7,376
1,281
$
$
8,950
$
8,657
10,808
$
(7,643)
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Notes to Consolidated Financial Statements
December 31, 2023 and 2022
Condensed Statements of Cash Flows
Operating Activities
Net income
Items not requiring (providing) cash
Equity in undistributed income of subsidiary
Amortization of share-based compensation plans
Net change in other assets and other liabilities
Net cash provided by operating activities
Investing Activities
Years Ended December 31,
2022
2023
(In thousands)
$
8,950
$
8,657
(245)
658
(3,021)
(1,281)
1,005
(874)
6,342
7,507
Net cash used in investing activities
—
—
Financing Activities
Repurchase of common stock
Cash dividends paid
Net cash used in financing activities
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
(733)
(4,788)
(767)
(4,559)
(5,521)
(5,326)
821
11,273
2,181
9,092
Cash and Cash Equivalents at End of Year
$
12,094
$
11,273
Note 21: Quarterly Financial Data (Unaudited)
The following tables summarize the Company’s quarterly results of operations for the years ended December 31, 2023 and
2022.
2023:
Total interest income
Total interest expense
Net interest income
Provision (Credit) 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)
$
8,208 $
1,785
9,286 $
2,941
9,651 $
3,085
9,704
3,203
6,423
6,345
6,566
6,501
—
1,016
5,438
2,001
113
(146)
1,046
5,089
2,448
168
(154)
963
5,233
2,450
58
(154)
1,029
5,092
2,592
202
$
1,888 $
2,280 $
2,392 $
2,390
$
$
0.33 $
0.33 $
0.40 $
0.40 $
0.42 $
0.42 $
0.42
0.42
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Notes to Consolidated Financial Statements
December 31, 2023 and 2022
2022:
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
Note 22: Goodwill and Core Deposits
Three Months Ended
March 31, June 30,
September 30, December 31,
(In thousands, except per share data)
$
5,997 $
487
6,445 $
477
7,297 $
928
7,922
1,381
5,510
5,968
6,369
6,541
(500)
987
5,110
1,887
136
(485)
988
4,849
2,592
295
15
1,043
4,879
2,518
215
15
1,065
5,052
2,539
233
$
1,751 $
2,297 $
2,303 $
2,306
$
$
0.30 $
0.30 $
0.40 $
0.40 $
0.40 $
0.40 $
0.40
0.40
The following table shows the changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022
(in thousands):
Balance beginning of year
Additions from acquisition
Balance, end of year
2023
2022
$
$
682
—
682
$
$
682
—
682
Intangible assets in the consolidated balance sheets at December 31, 2023 and 2022 were as follows (in thousands):
2023
2022
Core deposit intangibles
Gross
Intangible
Assets
$
1,041 $
Accumulated
Amortization
Net Intangible
Assets
Gross
Intangible
Assets
Accumulated
Amortization
Net Intangible
Assets
781 $
260 $
1,041 $
631 $
410
The estimated aggregate future amortization expense for each of the next two years for intangible assets remaining as of
December 31, 2023 is as follows (in thousands):
2024
2025
Note 23: Finance Lease
$
150
110
The Company has a finance lease in connection with the expansion into Wheeling, West Virginia to build a banking center
during 2024. The finance lease term is 40 years with two additional 10 year terms available. The payment structure for this
lease is fixed and will either increase or decrease on pre-dertemined dates at a pre-determined amount.
In accordance with ASC 842, the Company recognized a financing lease asset and corresponding lease liability related to the
ground lease. The financing lease asset represents the Company’s right to use an underlying asset for the lease terms, and the
lease liability represents the Company’s obligation to make lease payments over the lease term.
The lease is a net lease and, therefore does not contain non-lease components. The Company either pays directly or
reimburses the lessor for property and casualty insurance cost and the the propery taxes asserted on the property, as well as a
portion of the common area maintenance associated with the property which as categorized as non-components as outline in
the applicable guidance.
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Notes to Consolidated Financial Statements
December 31, 2023 and 2022
This financing lease asset and lease liability was determined at the commencement date of the lease based on the present
value of the lease payments. This lease does not provide an implicit interest rate. The Company used its incremental
collateralized borrowing rate at the Federal Home Loan Bank with similar terms of repayment. The Company used a discount
rate of 6.86% and recorded a right of use asset (ROU) and lease liability of $2,764,000. The effective date of the lease was
November 21, 2023 and therefore the remaining term is 439 months and the amount of amortization of the ROU assest was
not material to the Company’s is 2023. At December 31, 2023 the ROU asset is included in Premise and Equipment on the
Consilidated Balance Sheet.
Maturities of the finance lease liability as December 31, 2023 are as follows:
Due during the year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Interest
Lease Liability
(In thousands)
$
$
$
93
130
210
210
207
8,760
9,610
(6,846)
2,764
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