uboh20190331

10-Q 1 uboh20210331_10q.htm FORM 10-Q uboh20190331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

Commission file number 333-86453

UNITED BANCSHARES, INC.

(Exact name of Registrant as specified in its charter)

Ohio

(State or other jurisdiction of incorporation or organization)

105 Progressive Drive, Columbus Grove, Ohio

(Address of principal executive offices)

34-1516518

(I.R.S. Employer Identification Number)

45830

(Zip Code)

(419) 659-2141

(Registrant’s telephone number, including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of Each Exchange
Common Stock, No Par Value	UBOH	NASDAQ Global Market

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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller Reporting Company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of March 31, 2021: 3,278,789.

This document contains 39 pages. The Exhibit Index is on page 38 immediately preceding the filed exhibits.

UNITED BANCSHARES, INC.

Table of Contents


		Page

Part I – Financial Information

	Item 1 – Financial Statements	3

	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

	Item 3 – Quantitative and Qualitative Disclosures about Market Risk	35

	Item 4 – Controls and Procedures	36

Part II – Other Information

	Item 1 – Legal Proceedings	37

	Item 1A – Risk Factors	37

	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	37

	Item 3 – Defaults Upon Senior Securities	37

	Item 4 – Mine Safety Disclosures	38

	Item 5 – Other Information	38

	Item 6 – Exhibits	38

PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

United Bancshares, Inc. and Subsidiaries

Consolidated Balance Sheets

March 31, 2021 (unaudited) and December 31, 2020

	(in thousands except share data)
	March 31,			December 31,
	2021			2020
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks	$	10,559		$	10,446
Interest-bearing deposits in other banks		87,327			46,588
Total cash and cash equivalents		97,886			57,034
SECURITIES, available-for-sale		200,436			194,580
FEDERAL HOME LOAN BANK STOCK, at cost		5,598			5,598
LOANS HELD FOR SALE		17,873			18,427
LOANS AND LEASES		636,373			634,103
Less allowance for loan and lease losses		10,301			9,994
Net loans and leases		626,072			624,109
PREMISES AND EQUIPMENT, net		19,253			19,341
GOODWILL		28,616			28,616
CORE DEPOSIT INTANGIBLE ASSETS, net		607			643
CASH SURRENDER VALUE OF LIFE INSURANCE		19,099			18,981
OTHER ASSETS, including accrued interest receivable		11,534			11,203
TOTAL ASSETS	$	1,026,974		$	978,532
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest-bearing	$	187,511		$	185,915
Interest-bearing		701,050			652,463
Total deposits		888,561			838,378
Other borrowings		7,500			7,750
Junior subordinated deferrable interest debentures		12,950			12,942
Other liabilities		5,892			7,863
Total liabilities		914,903			866,933
SHAREHOLDERS’ EQUITY
Common stock, stated value $1.00, authorized 10,000,000 shares; issued 3,760,557 shares		3,761			3,761
Surplus		15,476			15,438
Retained earnings		96,308			92,716
Accumulated other comprehensive income		4,090			7,355
Treasury stock, at cost, 481,768 shares at March 31, 2021 and 488,573 shares at December 31, 2020		(7,564	)		(7,671	)
Total shareholders’ equity		112,071			111,599
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,026,974		$	978,532

The accompanying notes are an integral part of the consolidated financial statements.

United Bancshares, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

Three months ended March 31, 2021 and 2020 (unaudited)

	(in thousands except share data)
	Three months ended March 31,
	2021			2020
INTEREST INCOME
Loans and leases, including fees	$	8,407		$	7,945
Securities:
Taxable		414			612
Tax-exempt		617			498
Other		52			177
Total interest income		9,490			9,232
INTEREST EXPENSE
Deposits		632			1,535
Other borrowings		203			573
Total interest expense		835			2,108
Net interest income		8,655			7,124
PROVISION FOR LOAN AND LEASE LOSSES		300			550
Net interest income after provision for loan and lease losses		8,355			6,574
NON-INTEREST INCOME
Gain on sale of loans		4,576			2,583
Net securities losses		(5	)		-
Other non-interest income		1,170			251
Total non-interest income		5,741			2,834
NON-INTEREST EXPENSES		9,106			8,210
INCOME BEFORE INCOME TAXES		4,990			1,198
PROVISION FOR INCOME TAXES		873			110
NET INCOME	$	4,117		$	1,088
NET INCOME PER SHARE
Basic	$	1.26		$	0.33
Diluted	$	1.24		$	0.33
Weighted average common shares outstanding (basic)		3,277,744			3,270,066
Weighted average common shares outstanding (diluted)		3,311,260			3,270,066

The accompanying notes are an integral part of the consolidated financial statements.

United Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Three months ended March 31, 2021 and 2020 (unaudited)

	(in thousands)
	Three months ended March 31,
	2021			2020

NET INCOME	$	4,117		$	1,088

OTHER COMPREHENSIVE INCOME
Unrealized gain on securities:
Unrealized holding gains (losses) during period		(4,138	)		3,733
Reclassification adjustments for losses included in net income		5			-
Other comprehensive income (loss), before income taxes		(4,133	)		3,733
Income tax expense (benefit) related to items of other comprehensive income		(868	)		784
Other comprehensive income (loss)		(3,265	)		2,949
COMPREHENSIVE INCOME	$	852		$	4,037

The accompanying notes are an integral part of the consolidated financial statements.

United Bancshares, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(in thousands except share data)

Three months ended March 31, 2021 and 2020 (unaudited)

	Common stock		Surplus			Retained earnings			Accumulated other comprehensive income			Treasury stock			Total
BALANCE AT DECEMBER 31, 2020	$	3,761	$	15,438		$	92,716		$	7,355		$	(7,671	)	$	111,599
Comprehensive income:
Net income		-		-			4,117			-			-			4,117
Other comprehensive loss		-		-			-			(3,265	)		-			(3,265	)
6,805 shares issued from treasury in connection with the Corporation's Employee Stock Purchase Plan		-		4			-			-			107			111
Stock option expense		-		45			-			-			-			45
Stock option exercise				(11	)											(11	)
Cash dividends declared, $0.16 per share		-		-			(525	)		-			-			(525	)
BALANCE AT MARCH 31, 2021	$	3,761	$	15,476		$	96,308		$	4,090		$	(7,564	)	$	112,071

BALANCE AT DECEMBER 31, 2019	$	3,761	$	15,251		$	80,629		$	2,872		$	(7,732	)	$	94,781
Comprehensive income:
Net income		-		-			1,088			-			-			1,088
Other comprehensive income		-		-			-			2,949			-			2,949
2,304 shares issued from treasury in connection with the Corporation's Employee Stock Purchase Plan		-		26			-			-			36			62
Stock option expense		-		60			-			-			-			60
Cash dividends declared, $0.14 per share		-		-			(458	)		-			-			(458	)
BALANCE AT MARCH 31, 2020	$	3,761	$	15,337		$	81,259		$	5,821		$	(7,696	)	$	98,482

The accompanying notes are an integral part of the consolidated financial statements.

United Bancshares, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

Three months ended March 31, 2021 and 2020 (unaudited)

	(in thousands)
	Three months ended March 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES	$	3,527		$	(1,474	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales, calls and maturities of available-for-sale securities		10,001			6,908
Purchases of available-for-sale securities		(20,186	)		(7,494	)
Purchases of FHLB stock		-			(296	)
Net increase in loans and leases		(1,876	)		3,385
Purchases of premises and equipment		(125	)		(14	)
Net cash provided by (used in) investing activities		(12,186	)		2,489

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		50,175			17,991
Repayments of other borrowings		(250	)		(250	)
Proceeds from sale of treasury shares		111			62
Cash dividends paid		(525	)		(458	)
Net cash provided by financing activities		49,511			17,345
NET INCREASE IN CASH AND CASH EQUIVALENTS		40,852			18,360
CASH AND CASH EQUIVALENTS
At beginning of period		57,034			26,412
At end of period	$	97,886		$	44,772
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest	$	875		$	2,153
Federal income taxes	$	-		$	-
Non-cash investing activities:
Change in net unrealized gain or loss on available-for-sale securities	$	(4,133	)	$	3,733

The accompanying notes are an integral part of the consolidated financial statements.

United Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2021

NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements of United Bancshares, Inc. and subsidiaries (the “Corporation”) have been prepared without audit and in the opinion of management reflect all adjustments (which include normal recurring adjustments) necessary to present fairly such information for the periods and dates indicated. Since the unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q, they do not contain all information and footnotes typically included in financial statements prepared in conformity with generally accepted accounting principles. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The balance sheet as of December 31, 2020 is derived from completed audited consolidated financial statements with footnotes, which are included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020.

The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The Union Bank Company (the “Bank”). The Bank has formed a wholly-owned subsidiary, UBC Investments, Inc. (“UBC”), to hold and manage its securities portfolio. The operations of UBC are located in Wilmington, Delaware. The Bank has also formed a wholly-owned subsidiary, UBC Property, Inc. (“UBC Property”), to hold and manage certain property. All significant intercompany balances and transactions have been eliminated in consolidation. The accounting and reporting policies of the Corporation conform to generally accepted practices within the banking industry. The Corporation considers all of its principal activities to be banking related.

NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. Management has developed four different models for calculating the allowance for loan losses under the requirements of ASU 2016-13 and has been running them parallel to the Bank’s existing methodology. Management has not yet determined the expected impact the adoption of ASU 2016-13 will have on the consolidated financial statements. For public companies, this update was to be effective for interim and annual periods beginning after December 15, 2019. On July 17, 2019, the FASB voted to issue a proposal for public comment that would potentially result in a postponement of the required implementation date for ASU 2016-13. On October 16, 2019, the FASB extended the implementation deadline until the fiscal year and interim periods beginning after December 15, 2022.

In April, 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. This update is not expected to have a significant impact on the Corporation's consolidated financial statements.

In December, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for the areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective, or prospective basis. The Corporation does not expect adoption of this guidance to have a material impact on its consolidated financial statements.

In January, 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments clarify that for the purpose of applying paragraph 815-10-15-141(a) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825. An entity also would evaluate the remaining characteristics in paragraph 815-10-15-141 to determine the accounting for those forward contracts and purchased options. The amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, including early adoption in an interim period for which financial statements have not yet been issued. This update is not expected to have a significant impact on the Corporation's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This update affects a wide variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. This update is not expected to have a significant impact on the Corporation's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Corporation does not expect this guidance to have a material impact on its consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which is in response to stakeholder concerns related to reference rate reform. The amendments in this Update are elective and apply to all entities that have derivative instruments that use an interest rate for managing, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments in this Update are effective immediately for all entities. The Corporation is currently reviewing the amendments in this Update, but does not expect this guidance to have a material impact on its consolidated financial statements.

NOTE 3 - SECURITIES

The amortized cost, unrealized gains and losses, and fair value of available-for-sale securities as of March 31, 2021 and December 31, 2020 are as follows:

	(in thousands)
March 31, 2021	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale:
Agency	$	2,500	$	-	$	15	$	2,485
Obligations of states and political subdivisions		97,562		4,675		571		101,666
Mortgage-backed		94,049		1,942		853		95,138
Other		1,147		-		-		1,147

Total	$	195,258	$	6,617	$	1,439	$	200,436

	(in thousands)
December 31, 2020	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale:
Obligations of states and political subdivisions	$	93,406	$	6,400	$	1	$	99,805
Mortgage-backed		90,712		2,904		5		93,611
Other		1,151		13		-		1,164

Total	$	185,269	$	9,317	$	6	$	194,580

NOTE 4 – LOANS AND LEASES

The following tables present the activity in the allowance for loan and lease losses by portfolio segment for the three month periods ended March 31, 2021 and 2020:

	(in thousands)
	Residential 1 – 4 family real estate		Commercial and multi-family real estate		Commercial			Consumer			Total
Balance at December 31, 2020	$	1,683	$	6,664	$	1,515		$	132		$	9,994
Provision charged to expenses		40		239		26			(5	)		300
Losses charged off		-		-		-			(2	)		(2	)
Recoveries		-		9		-			-			9
Balance at March 31, 2021	$	1,723	$	6,912	$	1,541		$	125		$	10,301

Balance at December 31, 2019	$	592	$	2,536	$	939		$	64		$	4,131
Provision charged to expenses		109		422		9			10			550
Losses charged off		-		-		(4	)		(5	)		(9	)
Recoveries		3		3		9			-			15
Balance at March 31, 2020	$	704	$	2,961	$	953		$	69		$	4,687

The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases by portfolio segment and based on impairment method as of March 31, 2021 and December 31, 2020:

	(in thousands)
March 31, 2021	Residential 1 – 4 family real estate		Commercial and multi-family real estate		Commercial		Consumer		Total
Allowance for loan and lease losses:
Attributable to loans and leases individually evaluated for impairment	$	-	$	-	$	222	$	-	$	222
Collectively evaluated for impairment		1,723		6,912		1,319		125		10,079
Total allowance for loan and lease losses	$	1,723	$	6,912	$	1,541	$	125	$	10,301

Loans and leases:
Individually evaluated for impairment	$	-	$	1,455	$	1,416	$	-	$	2,871
Acquired with deteriorated credit quality		67		75		-		-		142
Collectively evaluated for impairment		105,134		364,320		157,618		6,288		633,360
Total ending loans and leases balance	$	105,201	$	365,850	$	159,034	$	6,288	$	636,373

December 31, 2020	Residential 1 – 4 family real estate		Commercial and multi-family real estate		Commercial		Consumer		Total
Allowance for loan and lease losses:
Attributable to loans and leases individually evaluated for impairment	$	-	$	6	$	249	$	-	$	255
Collectively evaluated for impairment		1,683		6,658		1,266		132		9,739
Total allowance for loan and lease losses	$	1,683	$	6,664	$	1,515	$	132	$	9,994

Loans and leases:
Individually evaluated for impairment	$	-	$	1,047	$	1,978	$	-	$	3,025
Acquired with deteriorated credit quality		60		104		-		-		164
Collectively evaluated for impairment		111,001		373,681		139,302		6,930		630,914
Total ending loans and leases balance	$	111,061	$	374,832	$	141,280	$	6,930	$	634,103

The average recorded investment in impaired loans and leases (excluding loans and leases acquired with deteriorated credit quality) for the three month period ended March 31, 2021 was $2,948,000 compared to $2,847,000 for the three month period ended March 31, 2020. There was $222,000 of allowance for loan and lease losses specifically reserved as of March 31, 2021 for impaired loans compared to $400,000 as of March 31, 2020. Additionally, there was approximately $6,000 in interest income recognized by the Corporation on impaired loans and leases on an accrual or cash basis for the three month period ended March 31, 2021 and $12,000 for the three month period ended March 31, 2020.

The following table presents the recorded investment in nonaccrual loans and leases, loans and leases past due over 90 days still on accrual and troubled debt restructurings by class of loans as of March 31, 2021 and December 31, 2020. Nonaccrual loans primarily consist of smaller dollar homogenous loans that are collectively evaluated for impairment.

	(in thousands)
March 31, 2021	Nonaccrual		Loans and leases past due over 90 days still accruing		Accruing Troubled Debt Restructurings
Residential 1-4 family real estate	$	263	$	59	$	157
Commercial and multi-family real estate		495		-		506
Agricultural real estate		6		-		-
Commercial		-		-		768
Agriculture		-		-		-
Consumer		-		-		-
Total	$	764	$	59	$	1,431

December 31, 2020
Residential 1-4 family real estate	$	363	$	60	$	175
Commercial and multi-family real estate		570		-		546
Agricultural real estate		11		-		-
Commercial		-		-		769
Agriculture		-		-		-
Consumer		6		-		-
Total	$	950	$	60	$	1,490

The following table presents the aging of the recorded investment in past due loans and leases as of March 31, 2021 and December 31, 2020 by class of loans and leases:

	(in thousands)
March 31, 2021	30 – 59 days past due		60 – 89 days past due		Greater than 90 days past due		Total past due		Loans and leases not past due		Total
Residential 1-4 family real estate	$	154	$	-	$	104	$	258	$	104,943	$	105,201
Commercial and multi-family real estate		967		-		212		1,179		318,405		319,584
Agricultural real estate		-		-		-		-		46,266		46,266
Commercial		-		-		-		-		151,156		151,156
Agriculture		-		-		-		-		7,878		7,878
Consumer		-		-		-		-		6,288		6,288
Total	$	1,121	$	-	$	316

SEC Form 10-Q filed by United Bancshares, Inc.