UNITED BANCORP INC OH

Previous 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.

Current wording

The following discusses the consolidated financial condition of the Company as of September 30, 2024, as compared to December 31, 2023, and the results of consolidated operations for the three and nine months ended September 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

United Bancorp, Inc. (NASDAQ: UBCP) reported diluted earnings per share of $0.30 and net income of $1,739,00 for the three months ended June 30, 2024. For the first six months of the current year, UBCP reported diluted earnings per share of $0.64 and net income of $3,732,000.

Current wording

Our Company reported diluted earnings per share of $0.31 and net income of $1,820,000 for the three months ended September 30, 2024. For the first nine months of the current year, UBCP reported diluted earnings per share of $0.95 and net income of $5,553,000.

Previous wording

We are happy to report on the solid earnings and, overall, stable performance of United Bancorp, Inc. (UBCP) for the second quarter ended June 30, 2024 and year to date. For the quarter, our Company produced net income and diluted earnings per share results of $1,739,000 and $0.30, which were respective decreases of $540,000 and $0.10 from the results achieved for the second quarter of the previous year. For the first six months of 2024, UBCP produced net income and diluted earnings per share of $3,732,000 and $0.64, which were respective decreases of $436,000 and $0.09 compared to the results achieved for the same period in 2023. As we navigated the first six months of 2024, our Company, like most companies operating in the financial services industry, are fighting the battle of both net interest margin compression and limited or decreasing growth as interest rates remained elevated and economic activity was relatively stagnant. As we started the current year, the interest rate forecast by most economists and the financial markets indicated that we could expect up to seven rate cuts throughout the year, which, overall, was projected to be favorable for our industry as it would help control funding costs. As we progressed through the first half of the current year and ended the second quarter, interest rates have been higher for longer than anticipated, with the potential of fewer rate cuts this year. This higher for longer posturing of the Federal Open Market Committee of the Federal Reserve (FOMC) is creating challenges for our industry by putting pressure on the net interest margins and bottom-line performances of many financial institutions. In addition, it has also been challenging for many financial institutions to grow their balance sheets and optimally leverage their capital as economic activity in the current year has been fairly stagnant overall, as evidenced by a somewhat weak Gross Domestic Product (GDP) at present. Our Company is not immune from these challenges influenced by current monetary policy and macroeconomic trends as seen in our performance for the current quarter and year-to-date in 2024 in comparison to the same periods in the previous year, which were some of the highest performing periods in our Company’s history. Regardless of these challenges and all things considered at present, we are generally satisfied with the current performance of our Company. We firmly believe that these challenges will be short-lived and will be overcome as we execute on some of our strategic objectives and get a return on current capital investments over the course of the next twelve to twenty-four months, which should lead to higher levels of growth and improved performance in future periods.

Current wording

We are happy to report on the solid earnings and, overall, stable performance of United Bancorp, Inc. (UBCP) for the third quarter ended September 30, 2024 and year to date. For the quarter, our Company produced net income and diluted earnings per share results of $1,820,000 and $0.31, which were respective decreases of $573,000 and $0.11 from the results achieved for the third quarter of the previous year. But, on a linked-quarter basis, net income and diluted earnings per share respectively increased by $81,000, or 4.6%, and $0.01, or 3.3%, over the same levels achieved the prior quarter. For the first nine months of 2024, UBCP produced net income and diluted earnings per share of $5,553,000 and $0.95, which were respective decreases of $1,007,000 and $0.20 compared to the results achieved for the same period in 2023. As we navigated the first nine months of 2024, our Company, like most companies operating in the financial services industry, are fighting the battle of both net interest margin compression and limited or decreasing growth as interest rates remained elevated and economic activity was sluggish. As we started the current year, the interest rate forecast by most economists and the financial markets indicated that we could expect up to seven rate cuts throughout the year, which, overall, was projected to be favorable for our industry as it would help control funding costs. As we progressed through the first nine months of the current year and ended the third quarter, interest rates have been higher for longer than anticipated, with the potential of fewer rate cuts this year. Although the Federal Open Market Committee of the Federal Reserve (FOMC) did finally cut the target for the Federal Funds Rate (FFR) by fifty-basis points toward the end of the most recently ended quarter, monetary policy is still more restrictive than forecast at the beginning of the year as of September 30, 2024 and is creating challenges for our industry by putting pressure on the net interest margins and bottom-line performances of many financial institutions. In addition, it has also been challenging for many financial institutions to grow their balance sheets and optimally leverage their capital as economic activity has been relatively weak overall; thus, having a negative impact on loan demand and growth in loans outstanding, which has been in the low to mid-single digits for many financial institutions in the current year. Our Company is not immune from these challenges influenced by current monetary policy and macroeconomic trends as seen in our performance for the current quarter and year-to-date in 2024 in comparison to the same periods in the previous year, which were some of the highest performing periods in our Company’s history. Regardless of these challenges and all things considered at present, we are generally satisfied with the current performance of our Company. We believe that these challenges will be short-lived and will be overcome as we exe…

Excerpt shortened here; the source contains the full paragraph.

Previous 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,

Current wording

At September 30, 2024 and as previously mentioned, in the presently uncertain economic environment in which we are operating, it has been a challenge to profitably leverage our balance sheet and, accordingly, UBCP has only achieved marginal growth in assets in the current year. As of September 30, 2024, our Company’s total average assets were $826.2 million, an increase of $19.0 million, or 2.4%, year-over-year. For this same period, our Company’s average loans increased by $20.4 million, or 4.4%, to a level of $480.8 million. Also, as of the most recently ended quarter, our Company saw an increase in its average investment securities of $13.4 million, or 5.5%, over the previous year to a level of $259.3 million. With this marginally higher level of earning assets and our loans outstanding continuing to reprice in a higher interest rate environment, we were able to increase the total level of total interest income that our Company generated by $2.3 million, or 8.5%, for the first nine months of the current year relative to last year. But, this year-over-year increase in total interest income was more than offset by the increase in total interest expense experienced by UBCP. At September 30, 2024, our Company’s total interest expense increased year-over-year by $3.2 million, or 40.7%, even though average total deposits decreased by ($19.6) million, or (3.1%), as of the most recently ended quarter. 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 2023 for the entirety of this year. Relating to the change in the mix of our retail funding, lower cost demand and savings balances decreased by ($40.6) million, or (8.3%), while higher cost time balances increased by $28.4 million or 20.4%. Accordingly, year-over-year, the level of net interest income that we achieved declined by ($880,000), or (4.6%), to a level of $18.5 million and our net interest margin declined by 13 basis points from 3.63% to 3.50%. During the third quarter of 2024, our Company was able to better control the level of decline of its net interest margin experiencing a decrease on a linked quarter basis of four basis points. We are optimistic that we will be able to overcome this trend in the coming quarters as the monetary policy of the Federal Open Market Committee (FOMC) becomes less restrictive and, hopefully, helps us lower our overall funding costs. Lastly relating to our retail deposit base and of significance our Company does not have any brokered deposits and total uninsured deposits as of September 30, 2024 totaled 18.4% of total deposits, which are both very low compared to industry standards and strongly indicative of our Company’s focus on building strong relationships with long-term, core depo…

Excerpt shortened here; the source contains the full paragraph.

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 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.

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 September 30, 2024, our Company’s total nonaccrual loans and loans past due 30 plus days were $1.0 million, or 0.21% of gross loans, which is up from last year by $295,000 but, down on a linked-quarter basis by $142,000 or 2 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 increase from last year and the same level as last quarter. Further highlighting the overall strength of our loan portfolio, our Company had net loans charged off of (excluding overdrafts of $141,000), which annualized is (0.04%) of average loans and primarily related to a single relationship. With some of the economic uncertainty and macroeconomic trends at present, our Company had a provision for credit loss expense of $69,000 for the quarter and $174,000 year-to-date (versus a negative provision for credit loss expense the previous year for each period), which are respective increases of $223,000 for the quarter and $474,000 year-over-year. For the quarter-end and nine months ended September 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 for the quarter of $0.03 and for the year of approximately $0.07. 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 0.84% and its total allowance for credit losses to nonaccrual loans 1,053% as of September 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 $13.0 million, or 25.2%, to a level of $64.6 million (up by $4.9, or 8.3%, on a linked-quarter basis) and its tangible book value per share increase by $2.07, or 23.6% (up $0.80, or 7.9%, on a linked-quarter basis), to a level of $10.84 at the most recently ended quarter. Also, as of September 30, 2024, UBCP’s equity to assets increased by 1.48% year-over-year to a level of 7.94.

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 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.

Current wording

United Bancorp, Inc. (UBCP), like most banking organizations, has felt 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 has created different challenges for us and most banks. Fortunately, we are hopeful that the unwinding of the restrictive monetary policy that began toward the end of this most recent quarter by the Federal Open Market Committee (FOMC) will help alleviate some of this pressure in the coming quarters; especially, relating to our cost of deposit pricing and the impact that it has had on our net interest margin, among other things. Overall, we are very happy with the solid financial performance that our Company achieved during the third quarter and first nine months of 2024. As previously mentioned, even though UBCP experienced solid year-over-year growth in the level of total interest income that it generated for the first nine months ended September 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, to this point, 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. With a present net interest margin of 3.50% as of September 30, 2024, we believe that this performance metric compares favorably to that of our peer group and industry at present.

Previous 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.

Current 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 while continuing with a focus of prudently growing our Company and remaining relevant in a very challenging and competitive environment. 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 generate 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. In this area, year-over-year, our Company has experienced an increase of $355,000 on the net realized gain on the sale of loans and we anticipate the level of income to grow in this business-line as we further scale this revenue generating function, which has a tremendous level of positive operating leverage at present. 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 produce 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 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 in the third quarter of 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. 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…

Excerpt shortened here; the source contains the full paragraph.

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 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.

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 nine months of 2024, we, once again, paid both our regular cash dividend, which increased by $0.03 to a level of $0.5250, and a special cash dividend of $0.15 for a total payout of $0.6750 in the current year. This is an increase for the quarter and the year of $0.01, or 6.0%, and $0.03, or 4.7%, respectively. This total dividend payout level for the current year produces a near-industry leading total dividend yield of 6.4%. This total dividend yield is based on our third quarter cash dividend on a forward basis, plus the special dividend (which combined total $0.86) and our quarter-end fair market value of $13.13. On a year-over-year basis as of September 30, 2024, the fair market value of our Company’s stock was up $1.58, or 13.7%, from the prior year and our Company’s market price to tangible book value was 121%, which compares favorably to our peer group.

Previous wording

See Note 1, “Summary of Significant Accounting Policies” for additional information on the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans, investment securities, and off balance sheet exposures, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses on loans to be a critical accounting policy.

Current wording

See Note 1, “Summary of Significant Accounting Policies” for additional information on the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans, investment securities, and off balance sheet exposures, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses on loans to be a critical accounting policy. The procedures for assessing the adequacy of the allowance for credit losses reflect our evaluations of credit risk after careful consideration of all information available to management. In developing this assessment, management must rely on estimates and exercise judgement regarding matters where the ultimate outcome is unknown such as economic factors, development affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase or a decrease in the allowance for credit loan losses.

Previous 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.

Current wording

The Company’s focus as a community bank is to meet the credit needs of the markets it serves. At September 30, 2024, gross loans were $475.0 million, compared to $483.2 million at December 31, 2023, a decrease of $8.2 million after offsetting repayments for the period. The overall decrease in the loan portfolio was comprised of a $9.0 million decrease in commercial and commercial real estate loans and a $2.1 million decrease in residential real estate lending and a $2.8 million increase in installment loans since December 31, 2023.

Previous 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.

Current wording

Commercial and commercial real estate loans comprised 78.8% of total loans at September 30, 2024, compared to 79.3% at December 31, 2023. Commercial and commercial real estate loans have decreased $8.2 million, or 1.7% 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 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.

Current wording

Installment loans represented 2.0% of total loans at September 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 $2.8 million since December 31, 2023.

Previous 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.

Current wording

Residential real estate loans were 19.2% of total loans at September 30, 2024 and 19.3% at December 31, 2023, representing a decrease of $2.0 million or 2.2% since December 31, 2023. At September 30, 2024, the Company did not hold any loans for sale.

Previous 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.

Current wording

The allowance for credit losses totaled $4.0 million at September 30, 2024, which represented 0.84% of total loans. The allowance for loan losses at December 31, 2023, or was $3.9 million or 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 estimated credit losses associated with the loan portfolio. Net loan charge-offs (exclusive of overdrafts net charge-offs of $80,000) for the nine months ended September 30, 2024 were approximately $141,000. Net loans charged off (exclusive of overdrafts net charge-offs $82,000) was ($22,000) for the nine months ended September 30, 2023.

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 June 30, 2024 decreased approximately $2.6 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 September 30, 2024 increased approximately $7.4 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, 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.

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 September 30, 2024, total deposits decreased approximately $5.6 million, or less than 1.0% from December 31, 2023 totals. In addition to the decrease in deposits for the nine months ended September 30, 2024, the Company has also experienced a shift of deposits from interest bearing and savings to certificate of deposits during the nine months ended September 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 $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.

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 $9.3 million from December 31, 2023 totals. At September 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

For the six months ended June 30, 2024 the Company reported net earnings of $3,732,000, compared to $4,168,000 for the six months ended June 30, 2023. On a per share basis, the Company’s diluted earnings were $0.64 for the six months ended June 30, 2024 and $0.73 for the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024 the Company reported net earnings of $5,553,000, compared to $6,560,000 for the nine months ended September 30, 2023. On a per share basis, the Company’s diluted earnings were $0.95 for the nine months ended September 30, 2024 and $1.15 for the nine months ended September 30, 2023.

Previous wording

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. Net interest income before the provision for credit losses decreased 3.5%, or $451,000 for the six months ended June 30, 2024 compared to the same period in 2023. The decrease is mainly attributable to an overall increase in the cost of funds.

Current wording

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. Net interest income before the provision for credit losses decreased 4.5%, or $878,000 for the nine months ended September 30, 2024 compared to the same period in 2023. The increase is mainly attributable to an increase in the overall fuding costs for the Company.

Previous wording

Total noninterest income is made up of bank related fees and service charges, as well as other income producing services provided, sales of loans in the secondary market, sales of investment securities, ATM income, early redemption penalties for certificates of deposit, safe deposit rental income, internet bank service fees, earnings on bank-owned life insurance and other miscellaneous items.

Current wording

Total noninterest income is made up of bank related fees and service charges, as well as other income producing services provided, sales of loans in the secondary market, ATM income, early redemption penalties for certificates of deposit, safe deposit rental income, internet bank service fees, earnings on bank-owned life insurance and other miscellaneous items.

Previous wording

Noninterest income for the six months ended June 30, 2024 as compared to the same period in 2023 decreased $12,000. The main component of the decrease is due to the loss on the sale of available -for -sale securities of $116,000 for the six months ended June 30, 2024. This loss was off set by the strong increase of $188,000 gains from the sale of loans period over period.

Current wording

Noninterest income for the nine months ended September 30, 2024 as compared to the same period in 2023 increased $240,000 or 7.9%. The net realized gain on sale of loans increased $355,000 for the nine months ended September 30, 2024. This was offset by a net realized loss on the sale of available-for-sale securities of $116,000 for the same period.

Previous wording

The Company saw its noninterest expense increase by $581,000. Salaries and benefits increased $205,000 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.

Current wording

The Company saw its noninterest expense increase by $275,000 or 1.7% year-over-year. Our Company was able to successfully apply and be approved for an Employee Retention Credit (ERC) in the first quarter which helped to offset the general increase due to inflation during 2024.

Previous wording

For the three months ended June 30, 2024 the Company reported net earnings of $1,739,000, compared to $2,280,000 for the three months ended June 30, 2023. On a per share basis, the Company’s diluted earnings were $0.30 for the three months ended June 30, 2024 and $0.40 for 2023.

Current wording

For the three months ended September 30, 2024 the Company reported net earnings of $1,820,000, compared to $2,392,000 for the three months ended September 30, 2023. On a per share basis, the Company’s diluted earnings were $0.31 for the three months ended September 30, 2024 and $0.42 for 2023.

Previous wording

Net interest income decreased 2.3%, or $143,000, for the three months ended June 30, 2024 compared to the same period in 2023. This decrease was mainly driven by the increased cost of funds for the Company.

Current wording

Net interest income decreased 6.5%, or $427,000, for the three months ended September 30, 2024 compared to the same period in 2023. This decrease was mainly driven by an increase in the Company’s cost of funds for the three months ended September 30, 2024.

Previous wording

Provision for (Reversal of ) Credit Loss Expense - Loans

Current wording

Provision for (Reversal of ) Credit Loss Expense – Loans and Off Balance Sheet Commitments

Previous wording

Total noninterest income is made up of bank related fees and service charges, as well as other income producing services provided, sales of loans in the secondary market, sales of investment securities, ATM income, early redemption penalties for certificates of deposit, safe deposit rental income, internet bank service fees, earnings on bank-owned life insurance and other miscellaneous items.

Current wording

Total noninterest income is made up of bank related fees and service charges, as well as other income producing services provided, sales of loans in the secondary market, ATM income, early redemption penalties for certificates of deposit, safe deposit rental income, internet bank service fees, earnings on bank-owned life insurance and other miscellaneous items.

Previous wording

Noninterest income for the three months ended June 30, 2024 as compared to the same period in 2023 increased $138,000 or 13.2%. The main component of the increase is due to the gains on the sale of of loans of $111,000 and on the sale of available -for -sale securities of $78,000 for the three months ended June 30, 2024.

Current wording

Noninterest income for the three months ended September 30, 2024 as compared to the same period in 2023 increased $253,000 or 26.2%. The net realized gain on sale of loans increased $167,000 for the three months ended September 30, 2024.

Previous wording

The (credit) provision for federal income taxes was ($127,000) for the three months ended June 30, 2024, compared to a provision of $168,000 for the same period in 2023. The credit for federal income taxes is a result of the increased level of non taxable income year over year.

Current wording

The (credit) provision for federal income taxes was ($64,000) for the three months ended September 30, 2024, compared to a provision of $58,000 for the same period in 2023. The credit for federal income taxes is a result of the increased level of non taxable income period year period.

Previous wording

Internal capital growth, through the retention of earnings, is the primary means of maintaining capital adequacy for the Company. Stockholders’ equity totaled $60.6 million at June 30, 2024, compared to $63.6 million at December 31, 2023, a $3.0 million decrease. 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.

Current wording

Internal capital growth, through the retention of earnings, is the primary means of maintaining capital adequacy for the Company. Stockholders’ equity totaled $65.5 million at September 30, 2024, compared to $63.6 million at December 31, 2023, a $1.9 million increase.

Previous 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.

Current wording

According to the Federal Reserve, inflation has continued to moderate during the third quarter of 2024. However, the prices of some food staples, such as eggs and dairy, have increased more sharply in some regions, and acute pressures from rising insurance and healthcare costs are being felt by some consumers. 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 Company’s financial condition and results of operations more acutely in the short term 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.

Previous wording

Inflation, however, can directly impact the Company’s performance by potentially reducing the spending power of its borrowers. Higher costs continue to present a risk to the economy. Interest rate levels and energy prices, in combination with global economic conditions and fiscal and monetary policy, will likely continue to impact our results in 2024. The Company continues to closely monitor and analyze the higher risk segments within the loan portfolio, tracking past due accounts. Based on the Company’s capital levels, prudent underwriting policies, loan concentration diversification and our geographic footprint, senior management is cautiously optimistic that the Company is positioned to continue managing the impact of the varied set of risks and uncertainties currently impacting the economy and remain adequately capitalized. However, the Company may be required to make additional credit loss provisions as warranted by the extremely fluid economic condition.

Current wording

Inflation, however, can directly impact the Company’s performance by potentially reducing the spending power of its borrowers. Higher costs continue to present a risk to the economy. Interest rate levels and energy prices, in combination with global economic conditions and fiscal and monetary policy, will likely continue to impact our results for the remainder of 2024 and into 2025. The Company continues to closely monitor and analyze the higher risk segments within the loan portfolio, tracking past due accounts. Based on the Company’s capital levels, prudent underwriting policies, loan concentration diversification and our geographic footprint, senior management is cautiously optimistic that the Company is positioned to continue managing the impact of the varied set of risks and uncertainties currently impacting the economy and remain adequately capitalized. However, the Company may be required to make additional credit loss provisions as warranted by the extremely fluid economic condition.