United Bancorp Inc. Reports Operating Results (10-Q)
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 $38 million; its shares were traded at around $7.5 with a P/E ratio of 11 and P/S ratio of 1.3. The dividend yield of United Bancorp Inc. stocks is 7.4%. Highlight of Business Operations:Service charge income on deposit accounts for the nine month period ended September 30, 2009 increased $161,000. The Company s nine month 2009 earnings level was accomplished despite a period over period increase of $109,000 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 insurance premiums increased approximately $649,000 during the first nine 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 September 30, 2009, and authorized the FDIC to impose up to two additional 5 basis point assessments in the third and fourth quarters of 2009. The Company s noninterest expense for the first nine months of 2009 increased $1,067,000, or 11.6%, as compared to the same period in 2008. 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 September 30, 2009, total core deposits decreased approximately $15.1 million, or 5.0%. The Company s interest-bearing demand deposits decreased $12.8 million, or 10.8%, noninterest-bearing demand deposits decreased $2.4 million, or 9.8%, while certificates of deposit under $100,000 decreased by $3.6 million, or 3.0%. The Company s savings accounts increased $3.7 million, or 9.2%, from December 31, 2008 totals.
Noninterest income for the nine months ended September 30, 2009 was $2.4 million, an increase of $178,000, or 7.9%, compared to $2.3 million for the nine-month period ended September 30, 2008. During the nine-months ended September 30, 2009, the increase in noninterest income was primarily driven by an increase in customer service fees of $161,000 and an increase in gains on sale of foreclosed real estate of approximately $75,000. 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 September 30, 2009, the Company s mortgage servicing asset was approximately $280,000, 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 September 30, 2009 totaled $0.16 compared with $0.20, for the three months ended September 30, 2008, a decrease of 20.0%. In dollars, the Company s net income was $757,000 for the three months ended September 30, 2009 a decrease of $140,000, or 15.6% compared to net income of $897,000 for the same quarter in 2008.
Noninterest income for the three months ended September 30, 2009 was $828,000, an increase of $90,000, or 12.2%, compared to $738,000 for the same three-month period ended September 30, 2008. During the three-months ended September 30, 2009, the increase in noninterest income was primarily driven by an increase in customer service fees of approximately $77,000 and an increase in gains on sale of loans of approximately $33,000.
Noninterest expense was $3.4 million for the three months ended September 30, 2009 an increase of $170,000, or 5.2%, over the three months ended September 30, 2008. This was primarily driven by increased FDIC insurance expense of $209,000 for the three months ended September 30, 2009 over the same period in 2008. As previously discussed, this increased level of insurance premiums will continue into 2010. The Company has also experienced an increase in noninterest expense due to the September 2008 branch acquisition. Occupancy and equipment expense increased $167,000, or 33.7% for the first three months ended September 30, over the same period in 2008, due to increased depreciation expense from the additional offices from the September 2008 acquisition and on computer hardware and software and related service maintenance. Amortization expense of intangible assets was $26,000 for the three months ended September 30, 2009 versus zero for the same period in 2008, relating to the intangible asset recorded in connection with the 2008 acquisition of a failed bank. Professional fees decreased $171,000, for the three months ended September 2009 compared to the same period in 2008 due to a decrease in legal fees associated with collection efforts. Advertising and stationary and office supplies expenses decreased for the three months ended September 30, 2009 compared to the higher expenditures for the same period in 2008 due to the branch acquisition.
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