UNITED BANCORP INC OH

Previous wording

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Current wording

Management’s Discussion and Analysis of Financial

Previous wording

The following discusses the consolidated financial condition of the Company as of March 31, 2024, as compared to December 31, 2023, and the results of consolidated operations for the three months ended March 31, 2024, compared to the same period in 2022. This discussion should be read in conjunction with the interim condensed consolidated financial statements and related footnotes included herein.

Current wording

The following discusses the consolidated financial condition of the Company as of June 30, 2024, as compared to December 31, 2023, and the results of consolidated operations for the three and six months ended June 30, 2024, compared to the same period in 2023. This discussion should be read in conjunction with the interim condensed consolidated financial statements and related footnotes included herein.

Previous wording

At March 31, 2024 and as previously mentioned, United Bancorp, Inc. (UBCP) did achieve a higher level of bottom-line earnings on a year-over-year basis. But, like most other financial institutions in the current “higher for longer” interest rate environment in which we are operating, our Company did also experience a decline in the level of net interest income that it achieved. Even though our total interest income realized on a year-over-year basis was higher by $1.4 million, or 17.2%, our total interest expense increased by $1.7 million, or 96.4%, during the same time period. Accordingly, the level of net interest income that we achieved declined by ($308,000), or (4.8%), to a level of $6.1 million. In addition, UBCP’s net interest margin declined by twenty-nine basis points (-29 bps) over the previous year, to a level of 3.46%, as of the most recently ended quarter. Even though our Company’s total assets declined from last year by $13.5 million, or 1.6%, to a level of $834.0 million due to a runoff in retail deposit funding and cash balances, we were able to generate a higher level of total interest income due to our loans outstanding continuing to reprice in a higher interest rate environment along with our gross loans increasing $16.6 million, or 3.6%, to a level of $480.3 million as of this year’s quarter-end. In addition, our investment securities balances increased by $17.8 million, or 7.5%, year-over-year to a level of $255.8 million. But, as mentioned, this increase in total interest income was more than offset by the increase in total interest expense experienced by UBCP. Our Company’s total interest expense increased even though total deposits decreased by $27.6 million year-over-year. The increase in our Company’s total interest expense can be attributed to both the change in the mix of our retail depository funding from lower cost demand and savings balances to higher cost term funding, along with having a previously disclosed $75.0 million Federal Home Loan Bank (FHLB) Advance which we originated in mid-March of 2023 for the entirety of this year’s first quarter. Relating to the change in the mix of our retail funding, lower cost demand and savings balances decreased by (-$66.8) million, or 12.6%, while higher cost time balances increased by $39.2 million or 31.6%. Of importance, our Company does not have any brokered deposits and total uninsured deposits as of March 31, 2024 totaled 18.2%, which is very low compared to industry standards.

Current wording

At June 30, 2024 and as previously mentioned, United Bancorp, Inc. (UBCP) did produce a lower level of earnings for the most recently ended quarter and year-to-date relative to the same periods last year. Like most other financial institutions in the current higher for longer interest rate environment in which we are operating, our Company did also experience a decline in the level of net interest income that it achieved and a decrease in its net interest margin. Even though our total interest income realized on a year-over-year basis through mid-year was higher by $2.0 million, or 11.5%, our total interest expense increased by $2.5 million, or 52.0%, during the same period. Accordingly, year-over-year, the level of net interest income that we achieved declined by ($451,000), or (3.5%), to a level of $12.3 million and our net interest margin declined by 4 basis points from 3.58% to 3.54%. Encouragingly, though, during the second quarter of 2024, our Company was able to better control the rate of increase in total interest expense and experienced a deceleration in the decline of its net interest income, which was down by a more modest ($143,000) or (2.3%). Ultimately, we are happy with this present trend, which has led to a linked-quarter improvement in our Company’s net interest margin of 8 basis points, increasing from 3.46% in the first quarter of 2024 to 3.54% in the second quarter. We are optimistic that this trend will continue into the second half of this year. Even though our Company’s total assets declined from last year by ($8.5million), or (1.0%), to a level of $821.8 million due to a runoff of retail deposit funding and cash balances, we were able to generate a higher level of total interest income due to our loans outstanding continuing to reprice in a higher interest rate environment, along with our gross loans increasing by $21.6 million, or 4.7%, to a level of $484.5 million as of June 30, 2024. In addition, our investment securities balances increased by $4.1 million, or 1.7%, year-over-year to a level of $244.2 million. But, as mentioned, this increase in total interest income was more than offset by the increase in total interest expense experienced by UBCP. Our Company’s total interest expense increased even though total deposits decreased by ($20.4) million,

Previous wording

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 March 31, 2024, our Company’s total nonaccrual loans and loans past due 30 plus days were $1.43 million, or 0.30% of gross loans, which is up from last year by $901,000. Also, as of the most recently ended quarter, United Bancorp, Inc.’s (UBCP) nonperforming assets to total assets was a very respectable 0.51%, a seven-basis point increase over the previous year. Further highlighting the overall strength of our loan portfolio, our Company had net loans charged off of (-$28,000), which is (-0.01%) of average loans. With the enhanced loan credit reserve build-up under CECL over the course of the past year and our Company’s stable and solid credit quality metrics, we did not have a provision for credit losses in the most recently ended quarter, which matched last year. We are very happy that we were able to forgo, once again, a credit provision in the current year due to our Company’s overall solid credit quality, 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 438%. Overall, we firmly believe that we are presently well reserved with very strong coverage.

Current wording

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 June 30, 2024, our Company’s total nonaccrual loans and loans past due 30 plus days were $1.15 million, or 0.24% of gross loans, which is up from last year by $463,000 but, down on a linked-quarter basis by $284,000 or 6 basis points. Also, as of the most recently ended quarter, United Bancorp, Inc.’s (UBCP) nonperforming assets to total assets was a very respectable 0.46%, a 1 basis point decline from last year and a 5 basis point decline from the first quarter of 2024. Further highlighting the overall strength of our loan portfolio, our Company had net loans charged off of ($117,000), which annualized is (0.05%) of average loans and primarily related to a single relationship. With some of the economic uncertainty and macroeconomic trends at present, for the first time in several quarters our Company had a provision for credit loss expense of $104,000 for the quarter and year-to-date (versus a negative provision for credit loss expense the previous year), which was an increase on a year-over-year basis of $250,000. For the six months ended June 30, 2024, this year-over-year increase in the provision for credit loss expense caused a decrease in our Company’s diluted earnings per share of approximately $0.04. With the increased provision for credit loss expense in the current year and continued solid credit quality-related metrics, our Company’s total allowance for credit losses to total loans of 0.82% and its total allowance for credit losses to nonaccrual loans 1102% as of June 30, 2024. Overall, we firmly believe that we are presently well reserved with very strong coverage. In addition, our Company remains very well capitalized by industry standards seeing its tangible shareholders equity increase year-over-year by $2.3 million, or 4.1%, to a level of $59.7 million and its tangible book value per share increase by $0.24, or 2.5%, to a level of $10.03 at the most recently ended quarter.

Previous wording

United Bancorp, Inc. (UBCP), like most banking organizations, is currently feeling the pressure of operating in an environment wherein monetary policy has driven interest rates higher for a longer duration than many of us anticipated which is creating different challenges for us and all banks. But, overall, we are very happy with the solid financial performance that our Company achieved during the first quarter of 2024. As previously mentioned, both our net income and diluted earnings per share are higher than the levels that we produced in the first quarter of the previous year. But, as you might expect in this higher-for-longer interest rate environment in which we are presently operating, our Company did experience a decline in the level of net interest income that it realized and compression of its net interest margin in the most recently ended quarter for the first time in quite a while. Even though UBCP experienced year-over-year, double-digit percentage growth in the level of total interest income that it generated this past quarter, our Company experienced a greater increase in the total interest expense that it incurred, which caused the aforementioned decline in our net interest income. Fortunately for our Company, taking the $75.0 million advance from the Federal Home Loan Bank (FHLB) toward the end of the first quarter of last year (at terms which are now considered very competitive) has helped us to somewhat mitigate this decline in our net interest income by affording us the ability to be more selective in the pricing of our offering rates on our interest-bearing depository products. Although

Current wording

United Bancorp, Inc. (UBCP), like most banking organizations, is currently feeling the pressure of operating in an environment wherein monetary policy has driven interest rates higher for a longer duration than many of us anticipated which is creating different challenges for us and most banks. But, overall, we are very happy with the solid financial performance that our Company achieved during the second quarter and first six months of 2024. As previously mentioned, even though UBCP experienced year-over-year, double-digit percentage growth in the level of total interest income that it generated for the first six months ended June 30, 2024, our Company experienced a greater increase in the total interest expense that it incurred, which caused the aforementioned decline in our net interest income. Fortunately for our Company, taking the $75.0 million advance from the Federal Home Loan Bank (FHLB) toward the end of the first quarter of last year (at terms which are now considered very competitive) has helped us to somewhat mitigate this decline in our net interest income by affording us the ability to be more selective in the pricing of our offering rates on our interest-bearing depository products while maintaining adequate levels of liquidity. Over the course of the second quarter of this year, we actually saw the rate of decline in the level of net interest income that we achieved actually lower somewhat over that of the first quarter of 2024 and our net interest margin improve on a linked quarter basis. With a present net interest margin of 3.54% as of June 30, 2024, we believe that this performance metric compares favorably to that of our peer group and industry at present.

Previous wording

With the current pressure on our net interest margin and net interest income, United Bancorp, Inc. (UBCP) is focused on controlling its net noninterest margin. Regarding the noninterest income-side of the noninterest margin, some fee generating services and lines of business continue to be under attack by both regulatory and political authorities, which has ultimately put pressure on the level of noninterest income that our Company is able to realize. Accordingly (and, instead of dwelling on this negative reality), UBCP is looking to find new alternatives to generating additional levels of both noninterest income and other sources of revenue. One of these new alternatives is our focus on enhancing our mortgage origination function with the development of Unified Mortgage, which is beginning to help our Company generate higher levels of fee income with the heightened production and sale of secondary market mortgage products, along with the enhancement of our interest income levels through the origination of higher levels of portfolio-type mortgage products. Another alternative is our stronger commitment to developing our Treasury Management function, which offers fee-based services to our commercial customers in the areas of cash management and payments that produces noninterest income in addition to helping to control interest expense by generating a higher level of low or no-cost depository balances for our Company. Lastly, another alternative to enhancing the overall performance of UBCP (and, one that should strongly contribute to our Company attaining its goal growing its total assets to a level of $1.0 billion or greater) is the development of our newest banking center, which is soon to be constructed in the highly favorable market of Wheeling, West Virginia. Our Company already has many solid customer relationships in this coveted marketplace and we firmly believe that by finally having a “brick-and-mortar” location therein, we will be able to more fully leverage these already existing relationships, while having the opportunity to build many new relationships within this prime market. Obviously, these new alternatives that can lead to additional noninterest income and revenue enhancement opportunities for UBCP do have a cost, which will lead to additional expense or overhead for our Company. But, sometimes you have to take one-step back in order to take several-steps forward and that is what we firmly believe that we are doing by undertaking these new initiatives. With the revenue challenges that both we and the players within our industry are currently facing, we firmly believe now is the time for our Company to focus on enhancing and expanding existing lines of business and growing new lines of business thus, achieving the organic growth that will lead to the continued and future relevance of UBCP.

Current wording

helping to control interest expense by generating a higher level of low or no-cost depository balances for our Company. Lastly, another alternative to enhancing the overall performance of UBCP (and, one that should strongly contribute to our Company attaining its goal of growing its total assets to a level of $1.0 billion or greater) is the development of our newest banking center, which is currently under construction in the highly favorable market of Wheeling, West Virginia and should be completed for opening by mid-2025. Our Company already has many solid customer relationships in this coveted marketplace and we firmly believe that by finally having a brick-and-mortar location therein, we will be able to more fully leverage these already existing relationships, while having the opportunity to build many new relationships within this prime market. Everson further stated, “Obviously, these new alternatives that can lead to additional noninterest income and revenue enhancement opportunities for UBCP do have a cost, which already has and will continue to lead to additional expense or overhead for our Company. But, sometimes you have to take one-step back in order to take several-steps forward and that is what we firmly believe that we are doing by undertaking these new initiatives. With the revenue challenges that both we and the players within our industry are currently facing, we strongly feel that now is the time for our Company to focus on enhancing and expanding existing lines of business and growing new lines of business… thus, achieving the organic growth that will lead to the continued and future relevance of UBCP.

Previous wording

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 these areas, our shareholders have been nicely rewarded. In the first quarter of this year, we, once again paid both our regular cash dividend, which increased by $0.0025 to a level of $0.1725, and a special cash dividend of $0.15 for a total payout of $0.3225 for the quarter. This is a 3.2% increase over the total cash dividend paid in the first quarter of the previous year and produces a near-industry leading total dividend yield of 5.81%. This total dividend yield is based on our first quarter cash dividend on a forward basis, plus the special dividend (which combined total $0.84) and our quarter-end fair market value of $14.47. On a year-over-year basis as of March 31, 2024, the fair market value of our Company’s stock remained relatively stable in comparison to the prior year and our Company’s market price to book value was 136%, which compares favorably to current industry standards.

Current wording

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 these areas, our shareholders have been nicely rewarded. In the first six months of 2024, we, once again, paid both our regular cash dividend, which increased by $0.02 to a level of $0.3475, and a special cash dividend of $0.15… for a total payout of $0.4975 in the current year. This is an increase for the quarter and the year of $0.01, or 6.1%, $0.02, or 4.2%, respectively. This total dividend payout level for the current year produces a near-industry leading total dividend yield of 6.8%. This total dividend yield is based on our second quarter cash dividend on a forward basis, plus the special dividend (which combined total $0.85) and our quarter-end fair market value of $12.55. On a year-over-year basis as of June 30, 2024, the fair market value of our Company’s stock was up slightly from the prior year and our Company’s market price to tangible book value was 125%, which compares favorably to our peer group.

Previous wording

Considering that we continue to operate in a challenging economic and concerning industry-related environment, we are very pleased with our current 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 on evolving and growing in order to achieve greater efficiencies and scales and generate higher levels of revenue while prudently managing expenses and controlling overall costs. We have and continue to invest in areas that will lead to our continued and future relevancy within our industry. Although such initiatives can stress the short-term performance of our Company, we firmly believe that the will help us fulfil our intermediate and longer-term goals and produce above industry earnings and overall performance. As previously mentioned, 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. We are truly excited about our Company’s direction and the potential that it brings. With a keen focus on continual process improvement, product development and delivery, we firmly believe the future for our Company is very bright.

Current wording

Considering that we continue to operate in a concerning economic and challenging industry-related environment, we are very pleased with our current 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 on evolving and growing in order to achieve greater efficiencies and scales and generate higher levels of revenue--- while prudently managing expenses and controlling overall costs. We have and continue to invest in areas that will lead to our continued and future relevancy within our industry. Although such initiatives can stress the short-term performance of our Company, we firmly believe that they will help us fulfil our intermediate and longer-term goals and produce above industry average earnings and overall performance. As previously mentioned, 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. We are truly excited about our Company’s direction and the potential that it brings.

Previous wording

The Company’s focus as a community bank is to meet the credit needs of the markets it serves. At March 31, 2024, gross loans were $480.3 million, compared to $483.2 million at December 31, 2023, a decrease of $2.9 million after offsetting repayments for the period. The overall decrease in the loan portfolio was comprised of a $4.0 million decrease in commercial and commercial real estate loans and a $652,000 decrease in real estate lending and a $1.8 million increase in installment loans since December 31, 2023.

Current wording

The Company’s focus as a community bank is to meet the credit needs of the markets it serves. At June 30, 2024, gross loans were $484.5 million, compared to $483.2 million at December 31, 2023, an increase of $1.3 million after offsetting repayments for the period. The overall increase in the loan portfolio was comprised of a $856,000 decrease in commercial and commercial real estate loans and a $1.2 million decrease in real estate lending and a $3.3 million increase in installment loans since December 31, 2023.

Previous wording

Commercial and commercial real estate loans comprised 78.9% of total loans at March 31, 2024, compared to 79.4% at December 31, 2023. Commercial and commercial real estate loans have decreased $4.0 million, or approximately 1.0% since December 31, 2023. This segment of the loan portfolio includes originated loans in its market areas and purchased participations in loans from other banks for out-of-area commercial and commercial real estate loans to benefit from consistent economic growth outside the Company’s primary market area.

Current wording

Commercial and commercial real estate loans comprised 78.9% of total loans at June 30, 2024, compared to 79.3% at December 31, 2023. Commercial and commercial real estate loans have decreased $856,000, or less than 1.0% since December 31, 2023. This segment of the loan portfolio includes originated loans in its market areas and purchased participations in loans from other banks for out-of-area commercial and commercial real estate loans to benefit from consistent economic growth outside the Company’s primary market area.

Previous wording

Installment loans represented 1.8% of total loans at March 31, 2024 and 1.4% at December 31, 2023. Some of the installment loans carry somewhat more risk than real estate lending; however, it also provides for higher yields. Installment loans have increased $1.8

Current wording

Installment loans represented 2.1% of total loans at June 30, 2024 and 1.4% at December 31, 2023. Some of the installment loans carry somewhat more risk than real estate lending; however, it also provides for higher yields. Installment loans have increased $3.3 million since December 31, 2023.

Previous wording

Residential real estate loans were 19.3% of total loans at March 31, 2024 and 19.3% at December 31, 2023, representing a decrease of $652,000, less than 1% since December 31, 2023. At March 31, 2024, the Company did not hold any loans for sale.

Current wording

Residential real estate loans were 19.0% of total loans at June 30, 2024 and 19.3% at December 31, 2023, representing a decrease of $1.2 million or 1.3% since December 31, 2023. At June 30, 2024, the Company did not hold any loans for sale.

Previous wording

The allowance for credit losses totaled $3.9 million at March 31, 2024, which represented 0.81% 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 credit losses over the life of the loan portfolio. Net loan (recoveries) charge-offs (exclusive of overdrafts net charge-offs of $19,000) for the three months ended March 31, 2024 were approximately $29,000 . Net loans charged off (exclusive of overdrafts net charge-offs $23,000) was ($4,000) for the three months ended March 31, 2023. The Company adopted ASU No. 2016-13 effective January 1, 2023. The impact of the adoption was a $2.4 million increase in the allowance for credit losses.

Current wording

The allowance for credit losses totaled $4.0 million at June 30, 2024, which represented 0.82% 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 credit losses over the life of the loan portfolio. Net loan (recoveries) charge-offs (exclusive of overdrafts net charge-offs of $46,000) for the six months ended June 30, 2024 were approximately $117,000. Net loans charged off (exclusive of overdrafts net charge-offs of $27,000) was $89,000 for the three months ended June 30, 2024. The Company adopted ASU No. 2016-13 effective January 1, 2023. The impact of the adoption was a $2.4 million increase in the allowance for credit losses.

Previous wording

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 March 31, 2024 increased approximately $9.0 million from December 31, 2023 totals.

Current wording

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 June 30, 2024 decreased approximately $2.6 million from December 31, 2023 totals.

Previous wording

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 $250,000. For the period ended March 31, 2024, total core deposits (interest and non interest bearing accounts and savings) increased approximately $4.3 million, or 0.7% from December 31, 2023 totals. The Company’s savings accounts decreased $2.0 million or 1.5% from December 31, 2023 totals. The Company’s interest-bearing and non-interest bearing demand deposits decreased $5.7 million while certificates of deposit under $250,000 increased by $12.0 million.

Current wording

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, and certificates of deposits. For the period ended June 30, 2024, total deposits increased approximately $1.7 million, or less than 1.0% from December 31, 2023 totals. The Company has experienced a shift of deposits from interest bearing and savings to certificate of deposits during the six months ended June 30, 2024.

Previous wording

Other interest-bearing liabilities include securities sold under agreements to repurchase and Federal Home Loan Bank (“FHLB”) advances. The majority of the Company’s repurchase agreements are with local school districts and city and county governments. The Company’s repurchase agreements increased approximately $11.0 million from December 31, 2023 totals. At March 31, 2024, the Company has $75 million of fixed rate advances that mature over the next 2 to 4 years. Refer to footnote 10 for further information.

Current wording

Other interest-bearing liabilities include securities sold under agreements to repurchase and Federal Home Loan Bank (“FHLB”) advances. The majority of the Company’s repurchase agreements are with local school districts and city and county governments. The Company’s repurchase agreements increased approximately $3.7 million from December 31, 2023 totals. At June 30, 2024, the Company has $75 million of fixed rate advances that mature over the next 2 to 4 years. Refer to footnote 10 for further information.

Previous wording

The Company saw its noninterest expense decreased by $600,000 or 11.1% year-over-year. The Company has taken on some additional expenses relating to our revenue enhancement and growth initiatives such as our recently implemented Unified Mortgage focus and the announcement of our new Wheeling Banking Center. Our Company was able to successfully apply and be approved for an Employee Retention Credit (ERC) in the first quarter. This tax credit helped offset the expenses associated with these new initiatives along with other expenses and the impact of inflation on salaries and employee benefit.

Current wording

The Company saw its noninterest expense decreased by $21,000 year-over-year. The Company has taken on some additional expenses relating to our revenue enhancement and growth initiatives such as our recently implemented Unified Mortgage focus and the announcement of our new Wheeling Banking Center. Our Company was able to successfully apply and be approved for an Employee Retention Credit (ERC) in the first quarter. This tax credit helped offset the expenses associated with these new initiatives along with other expenses and the impact of inflation on salaries and employee benefit.

Previous wording

Over the first quarter of 2024, incoming U.S. economic data continue to show consistent growth in the labor market, household consumption, and business investment, even as post-pandemic inflation remains stubbornly elevated. Although headline GDP growth slowed more than expected in the first quarter, underlying demand from households and businesses remained remarkably strong, with the national unemployment rate continuing to remain low. Inflation, however, has been slower to come down than expected after the rapid decline observed in 2023, and the cumulative effect of elevated prices compared with the pre-pandemic era may be weighing on consumer sentiment. The principal mechanism used by the Federal Reserve to combat rising inflation involves increasing interest rates, and it is management’s opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. The Company’s ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company’s performance.

Current wording

Over the first half of 2024, incoming U.S. economic data continue to show consistent growth in the labor market, household consumption, and business investment, even as post-pandemic inflation remains stubbornly elevated. Although headline GDP growth slowed more than expected in the first quarter, underlying demand from households and businesses remained remarkably strong, with the national unemployment rate continuing to remain low. Inflation, however, has been slower to come down than expected after the rapid decline observed in 2023, and the cumulative effect of elevated prices compared with the pre-pandemic era may be weighing on consumer sentiment. The principal mechanism used by the Federal Reserve to combat rising inflation involves increasing interest rates, and it is management’s opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. The Company’s ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company’s performance.