United Bancorp, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; interim financial statements are unaudited. United Bancorp is a community bank holding company operating principally in Ohio and West Virginia. Results are not necessarily indicative of full-year performance.
Financial performance and position
| Metric | Q1 2023 / March 31, 2023 | Comparable period / prior date |
|---|---|---|
| Net income | $1.888 million | $1.751 million in Q1 2022 |
| Diluted EPS | $0.33 | $0.30 in Q1 2022 |
| Net interest income | $6.423 million | $5.510 million in Q1 2022 |
| Net interest margin | 3.75% | 3.45% in Q1 2022 |
| Noninterest income / expense | $1.016 million / $5.438 million | $0.987 million / $5.110 million in Q1 2022 |
| Cash and cash equivalents | $100.589 million | $30.080 million at December 31, 2022 |
| Total assets | $847.493 million | $757.400 million at December 31, 2022 |
| Loans, gross | $463.688 million | $460.875 million at December 31, 2022 |
| Deposits | $653.365 million | $649.913 million at December 31, 2022 |
| Stockholders’ equity | $59.005 million; 6.96% of assets | $59.737 million; 7.75% of assets at December 31, 2022 |
Net cash provided by operating activities was $0.841 million, versus $5.021 million in Q1 2022. Investing activities used $18.606 million; financing activities provided $88.274 million, including $75 million of new FHLB advances. The company paid $1.848 million in dividends and repurchased $0.733 million of stock. The filing does not present a consolidated margin figure beyond the stated net interest margin.
Changes and notable items
- Interest and dividend income rose to $8.208 million from $5.997 million, while interest expense increased to $1.785 million from $0.487 million. Management attributed improved net interest income to loan repricing and growth in higher-yielding securities amid rising rates.
- Available-for-sale securities were $234.059 million, up from $217.624 million at year-end. The portfolio had $9.951 million of gross unrealized losses; management attributed the declines mainly to higher market rates and said it did not intend, and was not likely required, to sell before recovery.
- Cash and cash equivalents increased substantially during the quarter as management shifted to a more liquid position following banking-industry stress. Cash was 11.9% of assets at quarter-end. FHLB advances were $75 million, with fixed-rate maturities in 2026–2028; repurchase-agreement balances were $30.509 million.
- The company adopted CECL on January 1, 2023. Adoption reduced retained earnings by $2.088 million, net of tax. The allowance for credit losses was $4.452 million at March 31, versus $2.052 million at year-end; no Q1 2023 provision was recorded. Q1 2022 included a $0.500 million reversal of credit loss expense.
- Nonperforming loans were $0.235 million; management reported total nonaccrual loans and loans past due 30 or more days of $0.529 million, or 0.11% of gross loans. Net loan recoveries were approximately $4,000. Bank capital ratios were: common equity Tier 1 12.97%, Tier 1 12.97%, total capital 13.71%, and leverage 10.01%.
Outlook, commentary and risks
Management said the stronger liquidity position and term funding may modestly weigh on returns and net interest margin in the short term, while describing the funding change as immediately accretive to earnings. Management expressed optimism about growth and earnings, stated a near-term aspiration to reach $1 billion or more in assets, and referred to plans it hoped to announce within the next few months; no quantified earnings or margin guidance was provided.
Key disclosed risks include economic conditions in the bank’s markets, interest-rate fluctuations, loan demand, competition, regulatory-policy changes and credit quality. Commercial real estate repayment depends in part on property and business performance. Approximately 14% of deposits were uninsured, according to management. The company reported an AOCI loss of $7.730 million and said it considered capital risk from the securities position and uninsured deposits minimal. Management stated disclosure controls were effective; CECL adoption prompted new and modified financial-reporting controls. Legal proceedings were limited to ordinary routine litigation.
Important facts for investors to verify
- Reconcile reported net income: the financial statements show $1.888 million, while MD&A states $1.889 million.
- Verify the special-dividend amount: the income statement footnote refers to a $0.015 special dividend, while MD&A describes a $0.15 special dividend and $0.3125 total quarterly dividend per share.
- Review liquidity and funding composition, including the $75 million FHLB advances, overnight repurchase agreements, deposit mix and uninsured-deposit estimate.
- Assess exposure to unrealized securities losses, interest-rate sensitivity, and the assumptions and adequacy of the CECL allowance.
- Confirm subsequent share-count and dividend information: 5,690,251 common shares were outstanding as of May 9, 2023, versus 5,703,628 at March 31.