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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
|X| Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
or
| | Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
-------------------------
COMMISSION FILE #0-16640
UNITED BANCORP, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2606280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 E. CHICAGO BOULEVARD, TECUMSEH, MI 49286
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (517) 423-8373
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter periods that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes |X| No | |
As of November 3, 2003, there were outstanding 2,225,041 shares of the
registrant's common stock, no par value.
Page 1
CROSS REFERENCE TABLE
ITEM NO. DESCRIPTION PAGE NO.
- ----------------------------------------------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Condensed Consolidated Balance Sheets 3
(b) Condensed Consolidated Statements of Income 4
(c) Condensed Consolidated Statements of Changes in Shareholders' Equity 5
(d) Condensed Consolidated Statements of Cash Flows 6
(e) Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Financial Condition 10
Liquidity and Capital Resources 13
Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 19
Exhibits
Disclosures Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 21
Disclosure Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 23
Page 2
PART I
FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
(A) CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands of dollars (unaudited) (unaudited)
September 30, December 31, September 30,
ASSETS 2003 2002 2002
-------- -------- --------
Cash and demand balances in other banks $ 24,266 $ 16,719 $ 15,351
Federal funds sold 18,900 7,700 11,700
-------- -------- --------
Total cash and cash equivalents 43,166 24,419 27,051
Securities available for sale 105,685 97,380 97,902
Loans held for sale 1,583 7,873 8,620
Portfolio loans 422,622 422,653 415,577
-------- -------- --------
Total loans 424,205 430,526 424,197
Less allowance for loan losses 5,363 4,975 5,009
-------- -------- --------
Net loans 418,842 425,551 419,188
Premises and equipment, net 14,381 14,123 14,497
Goodwill 3,469 3,469 3,270
Accrued interest receivable and other assets 19,616 8,957 8,952
-------- -------- --------
TOTAL ASSETS $605,159 $573,899 $570,860
======== ======== ========
LIABILITIES
Deposits
Noninterest bearing $ 81,098 $ 71,976 $ 69,646
Interest bearing deposits 424,334 399,574 404,457
-------- -------- --------
Total deposits 505,432 471,550 474,103
Federal funds purchased and other short term borrowings 76 75 525
Other borrowings 37,375 41,867 38,067
Accrued interest payable and other liabilities 5,897 7,027 5,940
-------- -------- --------
TOTAL LIABILITIES 548,780 520,519 518,635
COMMITMENT AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Common stock and paid in capital, no par value;
5,000,000 shares authorized; 2,225,041, 2,114,765 and
2,111,848 shares issued and outstanding 45,748 39,122 38,911
Retained earnings 9,919 12,977 11,949
Accumulated other comprehensive income, net of tax 712 1,281 1,365
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 56,379 53,380 52,225
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $605,159 $573,899 $570,860
======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 3
(B) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
In thousands of dollars, except per share data September 30, September 30,
---------------------- ----------------------
2003 2002 2003 2002
------- ------- ------- -------
INTEREST INCOME
Interest and fees on loans $ 6,729 $ 7,534 $20,518 $21,756
Interest on securities
Taxable 524 696 1,706 2,140
Tax exempt 298 351 909 1,105
Interest on federal funds sold 52 25 182 127
------- ------- ------- -------
Total interest income 7,603 8,606 23,315 25,128
INTEREST EXPENSE
Interest on deposits 1,591 2,236 5,126 6,921
Interest on short term borrowings 1 2 1 7
Interest on other borrowings 446 502 1,439 1,191
------- ------- ------- -------
Total interest expense 2,038 2,740 6,566 8,119
------- ------- ------- -------
NET INTEREST INCOME 5,565 5,866 16,749 17,009
Provision for loan losses 248 264 857 673
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,317 5,602 15,892 16,336
NONINTEREST INCOME
Service charges on deposit accounts 707 623 1,927 1,693
Trust & Investment fee income 806 706 2,253 2,188
Gains on securities transactions - - 85 9
Loan sales and servicing 1,016 387 2,649 993
ATM, debit and credit card fee income 376 367 1,101 1,015
Sales of nondeposit investment products 252 165 513 603
Other income 262 126 555 412
------- ------- ------- -------
Total noninterest income 3,419 2,374 9,083 6,913
NONINTEREST EXPENSE
Salaries and employee benefits 3,546 3,058 10,110 9,132
Occupancy and equipment expense, net 1,015 968 3,000 2,839
External data processing 316 299 938 864
Advertising and marketing 114 145 340 433
Other expense 839 916 2,676 2,736
------- ------- ------- -------
Total noninterest expense 5,830 5,386 17,064 16,004
------- ------- ------- -------
INCOME BEFORE FEDERAL INCOME TAX 2,906 2,590 7,911 7,245
Federal income tax 840 767 2,361 2,093
------- ------- ------- -------
NET INCOME $ 2,066 $ 1,823 $ 5,550 $ 5,152
======= ======= ======= =======
Basic earnings per share $ 0.92 $ 0.82 $ 2.48 $ 2.31
Diluted earnings per share 0.92 0.82 2.46 2.30
Cash dividends declared per share of common stock 0.34 0.29 0.98 0.84
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
(C) CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
In thousands of dollars
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
TOTAL SHAREHOLDERS' EQUITY 2003 2002 2003 2002
-------- -------- -------- --------
Balance at beginning of period $ 55,446 $ 50,725 $ 53,380 $ 48,177
Net Income 2,066 1,823 5,550 5,152
Other comprehensive income:
Net change in unrealized gains (losses)
on securities available for sale, net (407) 253 (569) 610
-------- -------- -------- --------
Total comprehensive income 1,659 2,076 4,981 5,762
Cash dividends declared (756) (634) (2,190) (1,871)
5% stock dividend declared - - - -
Common stock transactions 30 58 208 157
-------- -------- -------- --------
Balance at end of period $ 56,379 $ 52,225 $ 56,379 $ 52,225
======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
(D) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In thousands of dollars Nine Months Ended
September 30,
---------------------------
2003 2002
--------- ---------
Cash Flows from Operating Activities
Net income $ 5,550 $ 5,152
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation and amortization 2,196 2,395
Provision for loan losses 857 673
Gain on sale of loans (3,077) (992)
Proceeds from sales of loans originated for sale 189,432 71,833
Loans originated for sale (180,065) (72,775)
Gains on securities transactions (85) (9)
Change in accrued interest receivable and other assets (66) (458)
Change in accrued interest payable and other liabilities (936) (50)
--------- ---------
Net cash from operating activities 13,806 5,769
Cash Flows from Investing Activities
Securities available for sale
Purchases (51,709) (36,330)
Sales 3,933 -
Maturities and calls 33,309 24,597
Principal payments 4,570 4,315
Net change in portfolio loans (607) (43,850)
Net investment in bank owned life insurance (10,131) -
Premises and equipment expenditures, net (1,639) (676)
--------- ---------
Net cash from investing activities (22,274) (51,944)
Cash Flows from Financing Activities
Net change in deposits 33,882 22,805
Net change in short term borrowings 1 (494)
Proceeds from other borrowings 3,000 28,400
Principal payments on other borrowings (7,492) (2,342)
Proceeds from common stock transactions 208 157
Dividends paid (2,384) (2,080)
--------- ---------
Net cash from financing activities 27,215 46,446
--------- ---------
Net change in cash and cash equivalents 18,747 271
Cash and cash equivalents at beginning of year 24,419 26,780
--------- ---------
Cash and cash equivalents at end of period $ 43,166 $ 27,051
========= =========
Supplement Disclosure of Cash Flow Information:
Interest paid $ 6,727 $ 8,261
Income tax paid 2,100 2,150
Loans transferred to other real estate 169 76
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 6
(E) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of United Bancorp,
Inc. (the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The condensed consolidated balance sheet of the
Company as of December 31, 2002 has been derived from the audited consolidated
balance sheet of the Company as of that date. Operating results for the nine
month period ending September 30, 2003 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2003. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002.
STOCK OPTIONS
In 2000, Shareholders approved the Company's 1999 Stock Option Plan as proposed.
The plan is a non- qualified stock option plan as defined under Internal Revenue
Service regulations. Under the plan, directors and management of the Company and
subsidiaries are given the right to purchase stock of the Company at a
stipulated price, adjusted for stock dividends, over a specific period of time.
The Plan will continue in effect for five years, unless it is extended with the
approval of the Shareholders.
The stock subject to the options are shares of authorized and unissued common
stock of the Company. As defined in the plan, options representing no more than
132,490 shares (adjusted for stock dividends declared) are to be made available
to the plan. Options under this plan are granted to directors and certain key
members of management at the then-current market price at the time the option is
granted. The options have a three-year vesting period, and with certain
exceptions, expire at the end of ten years, or three years after retirement. The
following is summarized option activity for the plan, adjusted for stock
dividends:
Options Weighted Average
Outstanding Exercise Price
----------- --------------
Balance at January 1, 2003 83,812 $ 42.67
Options granted 25,150 52.17
Options exercised (10,499) 40.23
Options forfeited (2,936) 48.74
--------
Balance at September 30, 2003 95,527 $ 45.25
========
Options granted under the plan during the current year were 22,050 on January
10, 2003, 1,050 on February 17, 2003, 1,050 on March 12, 2003 and 1,000 on
August 20, 2003. The weighted fair value of the options granted was $3.85. For
stock options outstanding at September 30, 2003, the range of average exercise
prices was $39.49 to $62.00 and the weighted average remaining contractual term
was 7.8 years. At September 30, 2003, 49,028 options were exercisable at the
weighted average exercise price of $41.82.
The following pro forma information presents net income and earnings per share
had the fair value method been used to measure compensation cost for stock
option grants. The exercise price of the option grants is equivalent to the
market value of the underlying stock at the grant date, adjusted for stock
dividends. Accordingly, no compensations cost was recorded for the period ended
September 30, 2003 and 2002.
Page 7
Three Months Ended Nine Months Ended
In thousands of dollars, except per share data September 30, September 30,
------------------------------------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net income, as reported $ 2,066 $ 1,823 $ 5,550 $ 5,152
Less: Total stock-based compensation cost,
net of taxes 21 26 64 78
--------- --------- --------- ---------
Pro forma net income $ 2,045 $ 1,797 $ 5,486 $ 5,074
========= ========= ========= =========
Earnings per share:
Basic As reported $ 0.92 $ 0.82 $ 2.48 $ 2.31
Basic Pro forma 0.91 0.80 2.45 2.27
Diluted As reported $ 0.92 $ 0.82 $ 2.46 $ 2.30
Diluted Pro forma 0.91 0.80 2.43 2.27
NOTE 2 - LOANS HELD FOR SALE
Mortgage loans serviced for others are not included in the accompanying
consolidated financial statements. The unpaid principal balance of mortgage
loans serviced for others was $249,884,000 and $176,553,000 at the end of
September 2003 and 2002. The balance of loans serviced for others related to
servicing rights that have been capitalized was $245,476,000 and $164,079,000 at
September 30, 2003 and 2002.
Mortgage servicing rights activity in thousands of dollars for the nine months
ended September 30, 2003 and 2002 follows:
2003 2002
------- -------
Balance at January 1 $ 1,352 $ 1,100
Amount capitalized year to date 1,289 420
Amount amortized year to date (848) (337)
------- -------
Balance at period end $ 1,793 $ 1,183
======= =======
No valuation allowance was considered necessary for mortgage servicing rights at
period end 2003 and 2002.
NOTE 3 - COMMON STOCK AND EARNINGS PER SHARE
Basic earnings per share are based upon the weighted average number of shares
outstanding plus contingently issuable shares during the year. Diluted earnings
per share further assumes the dilutive effect of additional common shares
issuable under stock options. During March of 2003 and 2002, the Company
declared 5% stock dividends payable in May 2003 and 2002. Earnings per share,
dividends per share and weighted average shares have been restated to reflect
these stock dividends. A reconciliation of basic and diluted earnings per share
follows:
Three Months Ended Nine Months Ended
In thousands of dollars, except per share data September 30, September 30,
-------------------------------------------------------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income $ 2,066 $ 1,823 $ 5,550 $ 5,152
========== ========== ========== ==========
Basic earnings:
Weighted average common shares outstanding 2,224,846 2,217,333 2,222,142 2,216,037
Weighted average contingently issuable shares 18,304 16,265 18,059 15,740
---------- ---------- ---------- ----------
Total weighted average shares outstanding 2,243,150 2,233,598 2,240,201 2,231,776
========== ========== ========== ==========
Basic earnings per share $ 0.92 $ 0.82 $ 2.48 $ 2.31
========== ========== ========== ==========
Page 8
Three Months Ended Nine Months Ended
Diluted earnings: September 30, September 30,
-------------------------------------------------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Weighted average common shares outstanding
from basic earnings per share 2,243,150 2,233,598 2,240,201 2,231,776
Dilutive effect of stock options 6,178 3,027 13,930 6,791
--------- --------- --------- ---------
Total weighted average shares outstanding 2,249,328 2,236,625 2,254,131 2,238,567
========= ========= ========= =========
Diluted earnings per share $ 0.92 $ 0.82 $ 2.46 $ 2.30
========= ========= ========= =========
A small number of shares represented by stock options granted are not included
in the above calculations as they are non-dilutive as of the date of this
report.
NOTE 4: EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In May 2003, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
150 establishes standards for classification and measurement in the statement of
financial position of certain financial instruments with characteristics of both
liabilities and equity. The Company has determined that it has no such
instruments.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This statement clarifies
reporting of contracts as either derivatives or hybrid instruments. The Company
has determined that it has no such instruments.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities. FIN 46 provides guidance with
respect to variable interest entities and when the assets, liabilities,
noncontrolling interest, and results of operations of a variable interest entity
need to be included in a company's consolidated financial statements. A variable
interest entity exists when either the total equity investment at risk is not
sufficient to permit the entity to finance its activities by itself, or the
equity investors lack one of three characteristics associated with owning a
controlling financial interest. Those characteristics are the direct or indirect
ability to make decisions about an entity's activities through voting rights or
similar rights, the obligation to absorb the expected losses of an entity if
they occur, and the right to receive the expected residual returns of the entity
if they occur.
FIN No. 46 was effective immediately for new entities that were created or
acquired after January 31, 2003 and became effective on July 1, 2003. The effect
of the adoption did not have a material impact on the results of operations,
financial position or cash flows of the Company.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-based
Compensation - Transition and Disclosure, which provides guidance for transition
from the intrinsic value method of accounting for stock-based compensation under
Accounting Principles Board ("APB") Opinion No. 25 to SFAS No. 123's fair value
method of accounting, if a company so elects. The Company applies APB Opinion
No. 25 and related Interpretations in accounting for the stock option plan.
Accordingly, no compensation costs have been recognized, as all options granted
had an exercise price equal to the market value of the underlying common stock
on the date of grant. Had compensation cost for the Company's stock option plan
been recorded based on the fair value at the grant dates for awards under the
plan consistent with the method prescribed by SFAS No. 123, net income and net
income per share would have been adjusted to the proforma amounts indicated in
Note 1.
In November 2002, FASB Interpretation No. 45 ("FIN 45"), Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others was issued. FIN
Page 9
45 requires the disclosures to be made by a guarantor in its financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The Company has determined that its standby letters of
credit obligations under FIN 45 are not material for disclosure.
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion provides information about the consolidated financial condition
and results of operations of United Bancorp, Inc. and its subsidiaries for the
three and nine month periods ending September 30, 2003 and 2002.
FINANCIAL CONDITION
Securities
Balances in the Company's investment securities portfolio continued to increase
during the third quarter of 2003, as investment securities absorbed some of the
Company's deposit growth in excess of loan growth. This increase in the
portfolio was primarily in short term investments, which caused the mix of the
securities portfolio to shift somewhat. However, during the quarter, the Company
also increased its investment in Agency and Municipal bonds, as prepayment
decreased outstanding balances in mortgage-backed Agency obligations. The
following chart shows the percentage mix of the securities portfolio.
9/30/2003 12/31/2002 9/30/2002
---------- ----------- ----------
U.S. Treasury and agency securities 33.3% 30.6% 30.3%
Mortgage backed agency securities 19.0% 14.0% 13.2%
Obligations of states and political subdivisions 39.1% 39.1% 40.2%
Corporate, asset backed, and other securities 8.6% 16.3% 16.3%
--------- ---------- ---------
Total Securities 100.0% 100.0% 100.0%
========= ========== =========
The Company's current and projected tax position continues to make carrying
tax-exempt securities beneficial, and the Company does not anticipate being
subject to the alternative minimum tax in the near future. The investment in
local municipal issues also reflects the Company's commitment to the development
of the local area through support of its local political subdivisions.
Investments in U.S. Treasury and agency securities are considered to possess low
credit risk. Obligations of U.S. government agency mortgage-backed securities
possess a somewhat higher interest rate risk due to certain prepayment risks.
The corporate, asset backed and other securities portfolio also contains a
moderate level of credit risk. The municipal portfolio contains a small amount
of geographic risk, as approximately 6.4% of that portfolio is issued by
political subdivisions located within Lenawee County, Michigan. The Company's
portfolio contains no "high risk" mortgage securities or structured notes.
LOANS
Loan balances increased slightly in the third quarter of 2003 while gross loans
have declined 1.1% during the first nine months of the year, substantially all
as a result of refinancing in the Company's residential mortgage portfolios into
products that are sold on the secondary market.
Page 10
The mix of the loan portfolio continues a long-term trend toward an increased
percentage of business loans, with declining percentages of residential mortgage
loans and personal loans. The table below shows total loans outstanding, in
thousands of dollars and their percentage of the total loan portfolio. All loans
are domestic and contain no significant concentrations by industry or client.
September 30, 2003 December 31, 2002 September 30, 2002
----------------------- ------------------------ ------------------------
Total loans: Balance % of total Balance % of total Balance % of total
-------- ---------- ------- ---------- -------- ----------
Personal $ 70,663 16.7% $ 71,010 16.5% $ 73,277 17.3%
Business loans and
commercial mortgages 236,633 55.8% 212,611 49.4% 203,244 47.9%
Tax exempt 1,408 0.3% 1,417 0.3% 1,529 0.4%
Residential mortgage 85,023 20.0% 110,985 25.8% 115,753 27.2%
Construction 30,478 7.2% 34,503 8.0% 30,394 7.2%
-------- ------ -------- ------ -------- ------
Total loans $424,205 100.0% $430,526 100.00% $424,197 100.0%
======== ====== ======== ====== ======== ======
The Company's subsidiary Banks ("Banks") continue to be providers of residential
mortgage loans. As full service lenders, the Banks offer a variety of home
mortgage loan products in their markets. Demand for loans continues to be strong
in all loan portfolios, although a significant portion of the Company's
production of residential real estate mortgages is sold in the secondary
markets.
CREDIT QUALITY
The Company continues to maintain a high level of asset quality as a result of
actively monitoring delinquencies, nonperforming assets and potential problem
loans. The aggregate amount of nonperforming loans is presented in the table
below. For purposes of that summary, loans renewed on market terms existing at
the time of renewal are not considered troubled debt restructurings. The accrual
of interest income is discontinued when a loan becomes ninety days past due
unless it is both well secured and in the process of collection, or the
borrower's capacity to repay the loan and the collateral value appear
sufficient. The chart below shows the aggregate amount of the Company's
nonperforming assets by type, in thousands of dollars.
9/30/2003 12/31/2002 9/30/2002
---------- ---------- ---------
Nonaccrual loans $3,633 $1,583 $2,336
Loans past due 90 days or more 483 748 697
Troubled debt restructurings - - 128
------ ------ ------
Total nonperforming loans 4,116 2,331 3,161
Other real estate 502 467 255
------ ------ ------
Total nonperforming assets $4,618 $2,798 $3,416
====== ====== ======
Percent of nonperforming loans to total loans 0.97% 0.54% 0.75%
Percent of nonperforming assets to total assets 0.76% 0.49% 0.60%
The Company's classification of nonperforming loans is generally consistent with
loans identified as impaired. The amount listed in the table above as other real
estate reflects a small number of properties that were acquired in lieu of
foreclosure. Total dollars in this category is up slightly from December 31,
2002. Properties have been leased to a third party with an option to purchase or
are listed for sale, and no significant losses are anticipated.
Nonperforming assets have declined from the end of the second quarter, but
remain above year-end 2002 levels. Balances in non-accrual loans are down nearly
$1 million from the second quarter, but are up compared to the levels achieved
at December 31 and September 30, 2002. Delinquencies have declined from year end
2002 and the end of the second quarter of 2003. Overall, the Company's ratios of
nonperforming loans have increased since December of 2002, substantially all as
a result of the increase in nonaccrual loans, but have improved from the
second-quarter levels.
Page 11
The Company's allowance for loan losses remains at a level consistent with its
estimated losses. The allowance provides for currently estimated losses inherent
in the portfolio. An analysis of the allowance for loan losses, in thousands of
dollars, for the nine months ended September 30, 2003 and 2002 follows:
2003 2002
------- -------
Balance at January 1: $ 4,975 $ 4,571
Loans charged off (560) (323)
Recoveries credited to allowance 91 88
Provision charged to operations 857 673
------- -------
Balance at September 30 $ 5,363 $ 5,009
======= =======
The Company has increased its provision for loan losses over the same period in
2002 as a result of continued loan growth and changes in the mix of the loan
portfolio, as well as increases in the amount of nonperforming loans held by the
Company. The following table presents the allocation of the allowance for loan
losses applicable to each loan category in thousands of dollars, as of September
30, 2003 and 2002, and December 31, 2002.
9/30/2003 12/31/2002 9/30/2002
--------- ---------- ---------
Business and commercial mortgage $4,679 $3,950 $4,122
Tax exempt - - -
Residential mortgage 36 15 21
Personal 648 571 604
Construction - - -
Unallocated - 439 262
------ ------ ------
Total $5,363 $4,975 $5,009
====== ====== ======
One of the Company's largest single category of loans is also generally the one
with the least risk. Loans to finance residential mortgages, including
construction loans, make up 27.2% of the portfolio at September 30, 2003, and
are well-secured and have had historically low levels of net losses. Personal
and business loans make up the balance of the portfolio.
The personal loan portfolio consists of direct and indirect installment, credit
cards, home equity and unsecured revolving line of credit loans. Installment
loans consist primarily of loans for consumer durable goods, principally
automobiles. Indirect personal loans consist of loans for automobiles and
manufactured housing, but make up a small percent of the personal loans.
Business loans carry the largest balances per loan, and therefore, any single
loss would be proportionally larger than losses in other portfolios. Because of
this, the Company uses an independent loan review firm to assess the continued
quality of its business loan portfolios. This is in addition to the precautions
taken with credit quality in the other loan portfolios. Business loans contain
no significant concentrations other than geographic concentrations within
Lenawee, Monroe and Washtenaw Counties in Michigan.
DEPOSITS
Deposit growth slowed somewhat in the third quarter of 2003, as total deposits
increased at an annualized rate of 9.6% year to date. Products such as money
market deposit accounts, Cash Management Checking and Cash Management Accounts
continue to be very popular with clients, aiding in continued deposit growth. At
the same time, demand deposit balances continue their steady growth. Although
clients continue to evaluate alternatives to certificates of deposit in search
of the best yields on their funds, traditional banking products continue to be
an important part of the Company's product line.
As in the past, the majority of the Company's deposits are derived from core
client sources, relating to long
Page 12
term relationships with local personal, business and public clients. The Banks
do not support their growth through purchased or brokered deposits. The Banks'
deposit rates are consistently competitive with other banks in their market
areas. The chart below shows the percentage makeup of the deposit portfolio as
of September 30, 2003 and 2002.
2003 2002
----- -----
Noninterest bearing deposits 16.0% 14.7%
Interest bearing deposits 84.0% 85.3%
----- -----
Total deposits 100.0% 100.0%
===== =====
LIQUIDITY, CASH EQUIVALENTS AND BORROWED FUNDS
The Company maintains correspondent accounts with a number of other banks for
various purposes. In addition, cash sufficient to meet the operating needs of
its banking offices is maintained at its lowest practical levels. At times, the
Banks are a participant in the federal funds market, either as a borrower or
seller. Federal funds are generally borrowed or sold for one-day periods. The
Banks also have the ability to utilize short term advances from the Federal Home
Loan Bank ("FHLB") and borrowings at the discount window of the Federal Reserve
Bank as additional short-term funding sources. Federal funds were used during
2003 and 2002. Short term advances and discount window borrowings were not
utilized during either year.
The Company periodically finds it advantageous to utilize longer term borrowings
from the Federal Home Loan Bank of Indianapolis. These long-term borrowings
served to provide a balance to some of the interest rate risk inherent in the
Company's balance sheet.
CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions. The following table shows the Company's capital ratios
and ratio calculations at September 30, 2003 and 2002, and December 31, 2002.
Dollars are shown in thousands.
Regulatory Guidelines United Bancorp, Inc.
--------------------- --------------------
Adequate Well 9/30/2003 12/31/2002 9/30/2002
-------- ---- --------- ---------- ---------
Tier 1 capital to average assets 4% 5% 8.9% 8.8% 8.7%
Tier 1 capital to risk weighted assets 4% 6% 11.8% 11.6% 11.7%
Total capital to risk weighted assets 8% 10% 13.0% 12.8% 12.9%
Total shareholders' equity $ 56,379 $ 53,380 $ 52,225
Intangible assets (3,469) (3,469) (3,270)
Disallowed servicing assets (179) (97) -
Unrealized (gain) loss on securities available for sale (712) (1,281) (1,365)
-------- -------- --------
Tier 1 capital 52,019 48,533 47,590
Allowable loan loss reserves 5,251 4,975 5,009
-------- -------- --------
Tier 2 capital $ 57,270 $ 53,508 $ 52,599
======== ======== ========
RESULTS OF OPERATIONS
Consolidated net income for the third quarter of 2003 was up significantly from
all prior quarters, and represents the Company's best quarterly earnings in its
history. The following discussion provides an analysis of these changes.
NET INTEREST INCOME
Net interest income continues to be pressured by historically low market rates
and ongoing refinancing of residential real estate mortgages from the portfolios
of the Banks. Net interest income was virtually flat from the second quarter of
2003, and was down 5.4% from the second quarter of this year. Year to date net
interest income is slightly below first nine months of 2002. During the third
quarter of 2003, yields on
Page 13
earning assets and the cost of funds continued to
decline as a result of the unprecedented decline in market interest rates
initiated by the Federal Reserve during 2001, 2002 and 2003. At the same time,
the Company's level of excess funding remains high, contributing to lower
overall yields on earning assets, and year to date, spread and net interest
margin are lower than that of the same period of 2002. The following table shows
the year to date daily average consolidated balance sheets, interest earned (on
a taxable equivalent basis) or paid, and the annualized effective yield or rate,
for the periods ended September 30, 2003 and 2002.
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES
Nine months ended September 30,
-----------------------------------------------------------------------
dollars in thousands 2003 2002
--------- ---------
Average Interest Yield/ Average Interest Yield/
ASSETS Balance (b) Rate (c) Balance (b) Rate (c)
--------- --------- -------- -------- -------- --------
Interest earning assets (a)
Federal funds sold $ 21,430 $ 182 1.13% $ 10,369 $ 127 1.63%
Taxable securities 66,488 1,706 3.42% 64,646 2,140 4.41%
Tax exempt securities (b) 30,344 1,357 5.96% 33,356 1,650 6.60%
Taxable loans 422,125 20,468 6.46% 401,951 21,691 7.20%
Tax exempt loans (b) 1,401 75 7.15% 1,715 97 7.56%
--------- --------- --------- ---------
Total int. earning assets (b) 541,788 23,789 5.85% 512,037 25,705 6.69%
Less allowance for loan losses (5,198) (4,769)
Other assets 49,896 43,588
--------- ---------
TOTAL ASSETS $ 586,486 $ 550,856
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
NOW accounts $ 98,512 502 0.68% $ 88,990 635 0.95%
Savings deposits 162,594 1,244 1.02% 142,410 1,541 1.44%
CDs $100,000 and over 26,390 787 3.98% 30,039 1,067 4.74%
Other interest bearing deposits 124,549 2,594 2.78% 142,018 3,679 3.45%
--------- --------- --------- ---------
Total int. bearing deposits 412,045 5,126 1.66% 403,457 6,922 2.29%
Short term borrowings 78 1 1.18% 687 7 1.37%
Other borrowings 39,163 1,439 4.90% 27,852 1,191 5.70%
--------- --------- --------- ---------
Total int. bearing liabilities 451,286 6,566 1.94% 431,996 8,119 2.51%
--------- ---------
Noninterest bearing deposits 73,394 62,683
Other liabilities 6,733 5,935
Shareholders' equity 55,073 50,242
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 586,486 $ 550,856
========= =========
Net interest income (b) 17,222 17,586
--------- ---------
Net spread (b) 3.91% 4.19%
===== ====
Net yield on interest earning assets (b) 4.24% 4.58%
===== ====
Tax equivalent adjustment on interest income (473) (577)
--------- ---------
Net interest income per income statement $ 16,749 $ 17,009
========= =========
Ratio of interest earning assets to
interest bearing liabilities 1.20 1.19
========= =========
(a) Non-accrual loans and overdrafts are included in the average balances of
loans.
(b) Fully tax-equivalent basis, net of nondeductible interest impact; 34% tax
rate.
(c) Annualized
As noted from the data in the following table, interest income and interest
expense declined during the first nine months of 2003 as a result of changes in
rates. At the same time, net interest income improved as a result of changes in
volume compared to the same period of 2002. The following table shows the effect
of
Page 14
volume and rate changes on net interest income for the nine months ended
September 30, 2003 and 2002 on a taxable equivalent basis, in thousands of
dollars.
2003 Compared to 2002 2002 Compared to 2001
--------------------- ---------------------
Increase (Decrease) Due To: (a) Increase (Decrease) Due To: (a)
------------------------------ -------------------------------
Volume Rate Net Volume Rate Net
------- ------- ------- ------- ------- -------
Interest earned on:
Federal funds sold $ 103 $ (48) $ 55 $ (234) $ (329) $ (563)
Taxable securities 59 (493) (434) 754 (540) 214
Tax exempt securities (142) (151) (293) 37 (156) (119)
Taxable loans 1,052 (2,275) (1,223) 2,962 (3,362) (400)
Tax exempt loans (17) (5) (22) (11) 2 (9)
------- ------- ------- ------- ------- -------
Total interest income $ 1,055 $(2,972) $(1,917) $ 3,508 $(4,385) $ (877)
======= ======= ======= ======= ======= =======
Interest paid on:
NOW accounts $ 63 $ (196) $ (133) $ 269 $ (845) $ (576)
Savings deposits 198 (495) (297) 713 (1,052) (339)
CDs $100,000 and over (121) (159) (280) (193) (275) (468)
Other interest bearing deposits (418) (667) (1,085) (962) (2,018) (2,980)
Short term borrowings (5) (1) (6) 3 (9) (6)
Other borrowings 433 (184) 249 686 (127) 559
------- ------- ------- ------- ------- -------
Total interest expense $ 150 $(1,702) $(1,552) $ 516 $(4,326) $(3,810)
======= ======= ======= ======= ======= =======
Net change in net interest
income $ 905 $(1,270) $ (365) $ 2,992 $ (59) $ 2,933
======= ======= ======= ======= ======= =======
(a) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
NONINTEREST INCOME
Total noninterest income continues to improve on a quarter-by-quarter basis, and
for the first nine months of 2003, is ahead of the same period of 2002 by 31.4%.
While income from the sale of nondeposit investment products is down, most other
categories of noninterest income are improved from the same period last year.
The largest increases achieved continue to be in income from loan sales and
servicing.
Service charges on deposit accounts are up 13.8% over the first nine months of
2002 and 58.3% above the second quarter of 2003. No significant changes were
made in the Company's service charge structure during the quarter, and the
increase reflects continued growth of the Company's deposit base. The Trust &
Investment Group of UBT continues to provide significant contribution to the
Company's noninterest income, through continued growth and expansion. This
growth has been hindered during the past several quarters by declines in the
equity markets, which impact the market value of assets managed and the
resulting fee income. However, significant improvements were noted during the
third quarter. Income in this category is up 3.0% year to date from 2002, and is
up 31.2% over the second quarter of 2003 on an annualized basis, as a result of
improving equity markets during the quarter.
The Banks generally market their production of fixed rate long-term mortgages in
the secondary market, and retain adjustable rate mortgages for their portfolios.
The Company maintains a portfolio of sold residential real estate mortgages,
which it continues to service. This servicing provides ongoing income for the
life of the loans. During 2002 and 2003, clients continued to exhibit a
preference for fixed rate loans as market rates declined, resulting in a greater
proportion of those loans originated by the Banks being sold in the secondary
market. Volume of residential mortgage lending continues to be very strong, and
income from the sale and servicing of loans was up 13.8% from the second quarter
of 2003, and is up 166.8% over the first nine months of 2002. The Company does
not believe that this volume of business is sustainable, and is anticipated to
decline significantly when interest rates increase. As the Company is
conservative in its approach
Page 15
to valuation of mortgage servicing rights, no write-downs in mortgage servicing
rights were required in 2003 or 2002 as a result of declining market rates.
NONINTEREST EXPENSES
Total noninterest expenses increased 8.3% from the second quarter of 2003, with
most of the increase in compensation expense. This primarily reflects
commissions paid to generate the record income earned on the sale of residential
mortgages on the secondary market. Year to date, noninterest expenses are 6.6%
higher than the same period of last year, with the costs of the new main office
of United Bank & Trust - Washtenaw also contributing to the increases. This
growth in expense reflects the ongoing expansion of the Banks within their
markets.
FEDERAL INCOME TAX
There has been no significant change in the income tax position of the Company.
The effective tax rate was 28.9% for the third quarter of 2003 and 29.8% year to
date, compared to 30.7% for the second quarter of 2003 and 28.9% for the first
nine months of 2002.
NET INCOME
Income for the third quarter of 2003 represents the best quarter in the
Company's history, with an improve- ment of 13.3% from the same period in 2002.
Management anticipates that net income will remain strong for the remainder of
the year, but with a substantial decrease in the amount of income attributed to
gains on the sale of loans in the secondary market. At the same time, it is
anticipated that other categories of income will improve from year to date
levels, resulting in earnings for the year near 2002 levels.
CRITICAL ACCOUNTING POLICIES
Generally accepted accounting principles are complex and require management to
apply significant judgments to various accounting, reporting and disclosure
matters. The Company's Management must use assumptions and estimates to apply
these principles where actual measurement is not possible or practical. For a
complete discussion of the Company's significant accounting policies, see "Notes
to the Consolidated Financial Statements" in United Bancorp, Inc.'s 2002 Annual
Report on pages A-24 to A-27. Certain policies are considered critical because
they are highly dependent upon subjective or complex judgments, assumptions and
estimates. Changes in such estimates may have a significant impact on the
financial statements. Management has reviewed the application of these policies
with the Audit Committee of the Company's Board of Directors. For a discussion
of applying critical accounting policies, see "Critical Accounting Policies" on
pages A-16 and A17 in United Bancorp, Inc.'s 2002 Annual Report.
FORWARD-LOOKING STATEMENTS
Statements contained in Management's Discussion and Analysis of Financial
Condition and Results of Operations include forward-looking statements that are
based on management's beliefs, assumptions, current expectations, estimates and
projections about the financial services industry, the economy, and about the
Company itself. Words such as "anticipate," "believe," "determine," "estimate,"
"expect," "forecast," "intend," "is likely," "plan," "project," "opinion,"
variations of such terms, and similar expressions are intended to identify such
forward-looking statements. The presentations and discussions of the provision
and allowance for loan losses, and determinations as to the need for other
allowances presented in this report are inherently forward-looking statements in
that they involve judgments and statements of belief as to the outcome of future
events. These statements are not guarantees of future performance and involve
certain risks, uncertainties, and assumptions that are difficult to predict with
regard to timing, extent, likelihood, and degree of occurrence. Therefore,
actual results and outcomes may materially differ from what may be expressed or
forecasted in such forward-looking statements. Internal and external factors
that may cause such a difference include changes in interest rates and interest
rate relationships; demand for products and services; the degree
Page 16
of competition by traditional and non-traditional competitors; changes in
banking laws and regulations; changes in tax laws; changes in prices, levies,
and assessments; the impact of technological advances; governmental and
regulatory policy changes; the outcomes of pending and future litigation and
contingencies; trends in customer behavior and customer ability to repay loans;
software failure, errors or miscalculations; and the vicissitudes of the
national economy. The Company undertakes no obligation to update, amend or
clarify forward-looking statements, whether as a result of new information,
future events, or otherwise.
ITEM 3- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FUNDS MANAGEMENT AND INTEREST RATE RISK
The composition of the Company's balance sheet consists of investments in
interest earning assets (loans and investment securities) that are funded by
interest bearing liabilities (deposits and borrowings). These financial
instruments have varying levels of sensitivity to changes in market interest
rates resulting in market risk. Policies place strong emphasis on stabilizing
net interest margin, with the goal of providing a sustained level of
satisfactory earnings. The Funds Management, Investment and Loan policies
provide direction for the flow of funds necessary to supply the needs of
depositors and borrowers. Management of interest sensitive assets and
liabilities is also necessary to reduce interest rate risk during times of
fluctuating interest rates.
A number of measures are used to monitor and manage interest rate risk,
including interest sensitivity and income simulation analyses. An interest
sensitivity model is the primary tool used to assess this risk with supplemental
information supplied by an income simulation model. The simulation model is used
to estimate the effect that specific interest rate changes would have on twelve
months of pretax net interest income assuming an immediate and sustained up or
down parallel change in interest rates of 200 basis points. Key assumptions in
the models include prepayment speeds on mortgage related assets; cash flows and
maturities of financial instruments held for purposes other than trading;
changes in market conditions, loan volumes and pricing; and management's
determination of core deposit sensitivity. These assumptions are inherently
uncertain and, as a result, the models cannot precisely estimate net interest
income or precisely predict the impact of higher or lower interest rates on net
interest income. Actual results will differ from simulated results due to
timing, magnitude, and frequency of interest rate changes and changes in market
conditions.
Based on the results of the simulation model as of September 30, 2003, the
Company would expect a maximum potential reduction in net interest margin of
less than 12% if market rates increased under an immediate and sustained
parallel shift of 200 basis points. The Company's interest sensitivity position
continues to be asset- sensitive, continuing a trend evident throughout 2002.
The Company anticipates that interest rates will rise, and has positioned its
balance sheet to take advantage of this expected increase in rates. As a result,
current net interest income has been lowered in order to improve net interest
margin in the future.
Each Bank maintains a Funds Management Committee, which reviews exposure to
market risk on a regular basis. The Committees' overriding policy objective is
to manage assets and liabilities to provide an optimum and consistent level of
earnings within the framework of acceptable risk standards. The Funds Management
Committees are also responsible for evaluating and anticipating various risks
other than interest rate risk. Those risks include prepayment risk, credit risk
and liquidity risk. The Committees are made up of senior members of management,
and continually monitor the makeup of interest sensitive assets and liabilities
to assure appropriate liquidity, maintain interest margins and to protect
earnings in the face of changing interest rates and other economic factors.
The Funds Management policies provide for a level of interest sensitivity which,
Management believes, allows the Banks to take advantage of opportunities within
their markets relating to liquidity and interest rate risk, allowing flexibility
without subjecting the Company to undue exposure to risk. In addition, other
Page 17
measures are used to evaluate and project the anticipated results of
Management's decisions.
ITEM 4- CONTROLS AND PROCEDURES
INTERNAL CONTROL
The Company maintains internal controls that contain self-monitoring mechanisms,
and actions are taken to correct deficiencies as they are identified. The Board,
operating through its Audit and Compliance Committee, provides oversight to the
financial reporting process. Even effective internal controls, no matter how
well designed, have inherent limitations, including the possibility of
circumvention or overriding of controls. Accordingly, even effective internal
controls can provide only reasonable assurance with respect to financial
statement preparation. Furthermore, the effectiveness of internal controls may
vary over time.
The Company's Audit and Compliance Committee is composed entirely of Directors
who are not officers or employees of the Company.
Within the 90-day period prior to the filing date of this report, an evaluation
was carried out under the supervision and with the participation of United
Bancorp's management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that United Bancorp's disclosure
controls and procedures are, to the best of their knowledge, effective to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms. Subsequent to the date of their evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that there were no
significant changes in the company's internal controls or in other factors that
could significantly affect its internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.
PART II
OTHER INFORMATION
ITEM 1- LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings. The Company's
banking subsidiaries are involved in ordinary routine litigation incident to its
business; however, no such proceedings are expected to result in any material
adverse effect on the operations or earnings of the Banks. Neither the Banks nor
the Company are involved in any proceedings to which any director, principal
officer, affiliate thereof, or person who owns of record or beneficially five
percent (5%) or more of the outstanding stock of the Company, or any associate
of the foregoing, is a party or has a material interest adverse to the Company
or the Banks.
ITEM 2- CHANGES IN SECURITIES AND USE OF PROCEEDS
No changes in the securities of the Company occurred during the quarter ended
September 30, 2003.
ITEM 3- DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities relevant to the requirements
of this section during the three months ended September 30, 2003.
Page 18
ITEM 4- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended
September 30, 2003.
ITEM 5- OTHER INFORMATION
None.
ITEM 6- EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits (numbered as in Item 601 of Regulation S-K):
Exhibit 31.1 Certification of principal executive officer
pursuant to Rule 13a - 14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of principal financial officer
pursuant to Rule 13a - 14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) The Company has filed no reports on Form 8-K during the quarter ended
September 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED BANCORP, INC.
November 12, 2003
/S/ Dale L. Chadderdon
- --------------------------------------------------------------
Dale L. Chadderdon
Senior Vice President, Secretary & Treasurer
Page 19
EXHIBIT INDEX
EXHIBIT NO. LIST OF EXHIBITS
Exhibit 31.1 Certification of principal executive officer pursuant to
Rule 13a - 14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Exhibit 31.2 Certification of principal financial officer pursuant to
Rule 13a - 14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
Page 20