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United Bancorp Inc. Reports Operating Results (10-Q)

August 13, 2009 | About:

United Bancorp Inc. (UBCP) filed Quarterly Report for the period ended 2009-06-30.

UNITED BANCORP INC. (OH) is a multi-bank holding company which through its subsidiaries is engaged in general banking business. United Bancorp Inc. has a market cap of $37.3 million; its shares were traded at around $8.1001 with a P/E ratio of 11.2 and P/S ratio of 1.3. The dividend yield of United Bancorp Inc. stocks is 6.9%.

Highlight of Business Operations:

Service charge income on deposit accounts for 2009 increased $84,000. The Company s six month 2009 earnings level was accomplished despite a period over period increase of $95,000 in the provision for loan losses, and an impairment loss on the Company s secondary market loan servicing asset of approximately $76,000, due to the low interest rate environment and the related accelerating payoff of loan balances. Overall in 2009, the deposit insurance premiums assessed by the Federal Deposit Insurance Corporation (FDIC) have increased dramatically in response to a number of bank failures during the past 18 months. The FDIC s regular insurance premiums increased approximately $240,000 during the first six months of 2009 as compared to the same period in 2008. This level of assessment is expected to continue for the remainder of 2009 and beyond. In addition, on May 22, 2009, the FDIC adopted a final rule to impose a special 5 basis point assessment on total assets less Tier 1 capital on all banks as of June 30, 2009, and authorized the FDIC to impose up to two additional 5 basis point assessments in the third and fourth quarters of 2009. This special assessment increased the Company s FDIC insurance premium expense by approximately $225,000 for the six months ended June 30, 2009. The Company s noninterest expense increased $897,000, or 15%, period over period. Excluding the effect of the FDIC insurance premiums, the majority of this increase relates to additional staff and operating expenses following our September 19, 2008 acquisition of three new banking offices from the FDIC.

The Company s primary source of funds is core deposits from retail and business customers. These core deposits include all categories of interest-bearing and noninterest-bearing deposits, excluding certificates of deposit greater than $100,000. For the period ended June 30, 2009, total core deposits decreased approximately $6.3 million, or 2.1%. The Company s interest-bearing demand deposits decreased $9.1 million, or 7.7%, noninterest-bearing demand deposits decreased $3.2 million, or 13.5%, while certificates of deposit under $100,000 increased by $3.0 million, or 2.5%. The Company s savings accounts increased $3.1 million, or 7.6%, from December 31, 2008 totals.

Noninterest income for the six months ended June 30, 2009 was $1,602,000, an increase of $88,000, or 5.8%, compared to $1,514,000 for the six-month period ended June 30, 2008. During the six-months ended June 30, 2009, the increase in noninterest income was primarily driven by an increase in customer service fees of $84,000 and an increase in gains on sale of foreclosed real estate of approximately $76,000. These items were offset by an impairment charge of approximately $76,000 related to the Company s secondary market mortgage servicing asset. With interest rates at historical low levels, the overall mortgage industry and the Company have seen an increase in mortgage refinancing. As the pace of mortgage refinancing increases the computed value of the Company s mortgage servicing asset has decreased in value and resulted in the impairment charge previously mentioned. As of June 30, 2009, the Company s mortgage servicing asset was approximately $287,000, and it is currently valued at approximately 92 basis points of the secondary market loans the Company services.

Basic and diluted earnings per share for the three months ended June 30, 2009 totaled $0.15 compared with $0.22, for the three months ended June 30, 2008, a decrease of 31.8%. In dollars, the Company s net income was $672,000 for the three months ended June 30, 2009 a decrease of $353,000, or 34.4% compared to net income of $1,025,000 for the same quarter in 2008.

Noninterest income for the three months ended June 30, 2009 was $813,000, an increase of $55,000, or 7.3%, compared to $758,000 for the same three-month period ended June 30, 2008. During the three-months ended June 30, 2009, the increase in noninterest income was primarily driven by an increase in customer service fees of approximately $63,000 and an increase in gains on sale of foreclosed real estate of approximately $36,000. These items were offset by an impairment charge of approximately $76,000 related to the Company s secondary market mortgage servicing asset. With interest rates at historical low levels, the overall mortgage industry and the Company have seen an increase in mortgage refinancing. As the pace of mortgage refinancing increases the computed value of the Company s mortgage servicing asset has decreased in value and resulted in the impairment charge previously mentioned. As of June 30, 2009, the Company s mortgage servicing asset was approximately $287,000 and it is currently valued at approximately 92 basis points of the secondary market loans the Company services.

Noninterest expense was $3.6 million for the three months ended June 30, 2009, an increase of $565,000, or 18.8%, over the three months ended June 30, 2008. This was primarily driven by increased insurance expense of $208,000, or 198%, for the three months ended June 30, 2009 over the same period in 2008. This increase is due to the FDIC increasing the level of deposit insurance premiums. As previously discussed, the FDIC also imposed a special 5 basis point assessment on the Bank s total assets less Tier 1 capital as of June 30, 2009. The Company has also experienced an increase in noninterest expense due to the September 2008 branch acquisition. With this acquisition the Company expanded from 17 to 20 offices and as a result increased staff and general overhead from this expansion. Salaries and employee benefits expense increased $57,000, or 3.5%, for the three month period ended June 30, 2009 over the same period in 2008. This increase was primarily due to staffing increases, normal merit increases and increased incentive award and ESOP expenses. Professional fees increased $18,000, for the three month period ended June 30, 2009 over the same period in 2008. It is anticipated this trend will continue for the remainder of 2009 as the Company is working out of several problem credit situations. Occupancy and equipment expense increased $63,000, or 18.5% for the three months ended June 30, 2009 over the same period in 2008. Increased depreciation expense on computer hardware and software and related service maintenance was the primary reason for the increase. Amortization expense of intangible assets was $30,000 for the three months ended June 30, 2009. This amortization expense is due to the intangible asset in connection with the 2008 branch acquisition.

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Rating: 4.0/5 (3 votes)

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