10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

Amendment No. 1

(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

OR

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                    to

Commission file number: 0-25976

UNITED BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2802415
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

30 S. 15th Street
Philadelphia, PA	19102
(Address of principal	(Zip code)
executive offices)

Registrant's telephone number, including area code:  (215)351-4600

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 [ X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ ]  No [X ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):
Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [ X]
(Do not check if a smaller
reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [ ]  No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 As of June 30, 2017, the aggregate number of the shares of the Registrant’s Common Stock issued was 826,921.  

 The Series Preferred Stock consists of 500,000 authorized shares of stock of which 250,000 have been designated as Series A and 7,000 have been designated as Series B Preferred stock of which 99,342 and 1,350 Shares, respectively, are issued as of June 30, 2017.   

EXPLANATORY NOTE

The sole purpose of this amendment to our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, originally filed with the Securities and Exchange Commission on June 9, 2017, is to furnish Exhibit 101 to the Form 10-K which contains the XBRL (eXtensible Business Reporting Language) Interactive Data File for the financial statements and notes included in Part 1, Item 1 of the Form 10-K. As permitted by Rule 405(a)(2)(ii) of Regulation S-T, Exhibit 101 was required to be furnished with the original filing.

No changes have been made to the Form 10-K other than the furnishing of Exhibit 101 described above. This amendment does not reflect subsequent events occurring after the original filing date of the Form 10-K or modify or update in any way disclosures made in the Form 10-K.

Pursuant to Rule 406T of Regulation S-T, the Interactive Data File on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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 BANCSHARES, INC
	(Registrant)
June 30, 2017	/s/ Evelyn F. Smalls
Date	Evelyn F. Smalls
	President and Chief Executive Officer
June 30, 2017	/s/ Brenda Hudson-Nelson
Date	Executive Vice President,
	Chief Financial Officer

Exhibit No.	Description
3.1	Certificate of Incorporation (1)
3.2	Bylaws (1)
31.1	Rule 13a-14(a)/15d-14(a) Certifications (1)
31.2	Rule 13a-14(a)/15d-14(a) Certifications (1)
32.1	Section 1350 Certifications (1)
32.2 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE	Section 1350 Certifications (1) XBRL Instance Document (2) XBRL Taxonomy Extension Schema Document(2) XBRL Taxonomy Extension Calculation Linkbase Document(2) XBRL Taxonomy Extension Definition Linkbase Document(2) XBRL Taxonomy Extension Label Linkbase Document(2) XBRL Taxonomy Extension Presentation Linkbase Document(2)
(1)	Filed previously.
(2)	Furnished herewith.

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Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2015	Mar. 31, 2017	Jun. 30, 2015
Details
Registrant Name	UNITED BANCSHARES INC /PA
Registrant CIK	0000944792
SEC Form	10-K
Period End date	Dec. 31, 2015
Fiscal Year End	--12-31
Trading Symbol	usbi
Tax Identification Number (TIN)	232802415
Number of common stock shares outstanding		826,921
Public Float			$ 0
Filer Category	Smaller Reporting Company
Current with reporting	Yes
Voluntary filer	No
Well-known Seasoned Issuer	No
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY
Contained File Information, File Number	0-25976
Entity Incorporation, State Country Name	Pennsylvania
Entity Address, Address Line One	The Graham Building, 30 South 15th Street, Suite 1200
Entity Address, City or Town	Philadelphia
Entity Address, State or Province	Pennsylvania
Entity Address, Postal Zip Code	19102
City Area Code	215
Local Phone Number	351-4600

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CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Assets:
Cash and due from banks	$ 2,107,359	$ 1,919,494
Interest-bearing deposits with banks	310,739	310,088
Federal funds sold	8,364,000	1,007,000
Cash and cash equivalents	10,782,098	3,236,582
Investment securities:
Available-for-sale, at fair value	7,572,029	8,539,892
Loans held for sale, at fair value	3,260,761	6,160,183
Loans held at fair value	2,458,930	628,750
Loans and Leases Receivable, Net of Deferred Income	33,519,042	40,861,890
Less allowance for loan losses	(418,013)	(734,567)
Net loans	33,101,029	40,127,323
Bank premises and equipment, net	492,730	549,466
Accrued interest receivable	175,416	249,571
Other real estate owned	479,627	563,543
Prepaid expenses and other assets	661,618	408,956
Total assets	58,984,238	60,464,266
Liabilities:
Demand deposits, noninterest-bearing	16,417,150	14,984,387
Demand deposits, interest-bearing	13,605,888	13,738,476
Savings deposits	11,680,878	12,091,282
Time deposits, under $250,000	7,505,729	8,642,512
Time deposits, $250,000 and over	6,752,759	7,505,656
Total deposits	55,962,404	56,962,313
Accrued interest payable	9,157	16,253
Accrued expenses and other liabilities	332,915	305,060
Total liabilities	56,304,476	57,283,626
Shareholders' equity:
Series A preferred stock, noncumulative, 6%, $0.01 par value, 500,000 shares authorized; 99,342 and 136,842 issued and outstanding at December 31, 2015 and 2014, respectively	993	1,368
Common stock, $0.01 par value; 2,000,000 shares authorized;826,921 and 1,068,588 issued and outstanding at December 31, 2015 and 2014, respectively	8,269	8,769
Class B Non-voting common stock; 250,000 shares authorized; $0.01 par value;0 and 191,667 issued and outstanding at December 31, 2015 and 2014, respectively	0	1,917
Additional paid-in-capital	14,752,644	14,749,852
Accumulated deficit	(12,062,818)	(11,568,043)
Accumulated other comprehensive loss	(19,326)	(13,223)
Total shareholders' equity	2,679,762	3,180,640
Total liabilities and shareholders' equity	$ 58,984,238	$ 60,464,266

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CONSOLIDATED BALANCE SHEETS - Parenthetical - $ / shares		12 Months Ended
	Dec. 31, 2014	Dec. 31, 2015
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	2,000,000	2,000,000
Common Stock, Shares, Issued	1,068,588	826,921
Common Stock, Shares, Outstanding	1,068,588	826,921
Series A Preferred Stock
Preferred Stock, Dividend Rate, Percentage	6.00%	6.00%
Preferred Stock, Shares Authorized	500,000	500,000
Preferred Stock, Shares Issued	136,842	99,342
Preferred Stock, Shares Outstanding	136,842	99,342
Class B NonVoting Common Stock
Common Stock, Shares Authorized	250,000	250,000
Common Stock, Shares, Issued	191,667	0
Common Stock, Shares, Outstanding	191,667	0

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Interest income:
Interest and fees on loans	$ 2,392,183	$ 2,685,241
Interest on investment securities	179,065	233,486
Interest on federal funds sold	15,418	8,345
Interest on time deposits with other banks	659	3,319
Total interest income	2,587,325	2,930,391
Interest expense:
Interest on time deposits	38,070	39,847
Interest on demand deposits	25,125	26,893
Interest on savings deposits	5,882	6,176
Total interest expense	69,077	72,916
Net interest income	2,518,248	2,857,475
(Credit) provision for loan losses	(68,000)	162,000
Net interest income after provision for loan losses	2,586,248	2,695,475
Noninterest income:
Customer service fees	416,480	385,633
ATM fee income	118,550	154,788
Loan syndication fee income	150,000	152,550
Net (loss) gain on sale of other real estate	(16,848)	11,321
Gain on sale of investment securities	0	6,216
Net change in fair value of financial instruments	232,797	353,035
Gain on sale of loans	410,040	228,239
Other income	85,894	85,196
Total noninterest income	1,396,913	1,376,978
Noninterest expense:
Salaries, wages and employee benefits	1,572,595	1,623,194
Occupancy and equipment	972,561	1,000,007
Office operations and supplies	308,070	282,372
Marketing and public relations	73,590	89,765
Professional services	318,774	312,954
Data processing	389,008	418,040
Loan and collection costs	255,809	147,553
Other real estate owned, net	11,303	20,600
Deposit insurance assessments	134,800	140,400
Other operating	441,426	380,635
Total noninterest expense	4,477,936	4,415,520
Net loss before income taxes	(494,775)	(343,067)
Provision for income taxes	0	0
Net loss	$ (494,775)	$ (343,067)
Net loss per common share-basic and diluted	$ (0.57)	$ (0.32)
Weighted average number of common shares	863,999	1,068,588
Comprehensive Loss
Net loss	$ (494,775)	$ (343,067)
Unrealized (losses) gains on available for sale securities	(6,103)	313,823
Total comprehensive loss	$ (500,878)	$ (29,244)

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)	Series A Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	AOCI Attributable to Parent	Total
Balance at December 31, 2013 at Dec. 31, 2013	$ 1,368	$ 10,686	$ 14,749,852	$ (11,224,976)	$ (327,046)	$ 3,209,884
Shares, Outstanding, Beginning Balance at Dec. 31, 2013	136,842	1,068,588
Net loss	$ 0	$ 0	0	(343,067)	0	(343,067)
Other comprehensive income (loss), net of tax	0	0	0	0	313,823	313,823
Balance at year end at Dec. 31, 2014	$ 1,368	$ 10,686	14,749,852	(11,568,043)	(13,223)	3,180,640
Shares, Outstanding, Ending Balance at Dec. 31, 2014	136,842	1,068,588
Cancellation of common stock	$ 0	$ (2,417)	2,417	0	0	0
Cancellation Of Common Stock Shares		(241,667)
Cancellation of Preferred Series A stock	$ (375)	$ 0	375	0	0	0
Cancellation Of Preferred Series A Stock Shares	(37,500)
Net loss	$ 0	0	0	(494,775)	0	(494,775)
Other comprehensive income (loss), net of tax	0	0	0	0	(6,103)	(6,103)
Balance at year end at Dec. 31, 2015	$ 993	$ 8,269	$ 14,752,644	$ (12,062,818)	$ (19,326)	$ 2,679,762
Shares, Outstanding, Ending Balance at Dec. 31, 2015	99,342	826,921

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net loss	$ (494,775)	$ (343,067)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
(Credit) provision for loan losses	(68,000)	162,000
Net (loss) gain on sale of other real estate	16,848	(11,321)
Gain on sale of loans	(410,040)	(228,239)
Gain on sale of investment securities	0	(6,216)
Amortization of premiums on investments	16,996	23,107
Depreciation on fixed assets	177,987	175,465
(Write-up) write-down of other real estate owned	(39,294)	13,250
Loans originated for sale	(4,721,164)	(6,257,496)
Proceeds from sale of loans held-for-sale	6,433,243	2,124,192
Net change in fair value of financial instruments	(232,797)	(353,035)
(Increase) decrease in accrued interest receivable and other assets	(178,507)	123,201
Increase (decrease) in accrued interest payable and other liabilities	20,759	(110,013)
Net cash provided by (used in) operating activities	521,256	(4,688,172)
Cash flows from investing activities:
Purchase of available-for-sale investment securities	(1,200,118)	(48)
Proceeds from maturity and principal reductions of available-for-sale investment securities	2,144,881	421,149
Proceeds from sale of available-for sale investment securities	0	915,918
Proceeds from sale of other real estate owned	254,603	107,115
Net decrease in loans	6,946,054	914,146
Purchase of bank premises and equipment	(121,251)	(75,772)
Net cash provided by investing activities	8,024,169	2,282,508
Cash flows from financing activities:
Net decrease in deposits	(999,909)	(147,532)
Net cash used in financing activities	(999,909)	(147,532)
Net increase (decrease) in cash and cash equivalents	7,545,516	(2,553,196)
Cash and cash equivalents at beginning of year	3,236,582	5,789,778
Cash and cash equivalents at end of year	10,782,098	3,236,582
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	71,176	69,385
Noncash transfer of loans to other real estate owned	$ 148,241	$ 239,500

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1. Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Notes

1. Summary of Significant Accounting Policies

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      United Bancshares, Inc. (“the Company”) is the holding company for United Bank of Philadelphia (the “Bank”).  The Company was incorporated under the laws of the Commonwealth of Pennsylvania on April 8, 1993 and provides financial services through the Bank. 

      Principles of Consolidation

      The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank.  All significant intercompany transactions and balances have been eliminated.

      Management’s Use of Estimates

The preparation of the financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, the fair value of loans held at fair value, valuation allowance for deferred tax assets, the carrying value of other real estate owned, the determination of other than temporary impairment for securities.

Marketing and Advertising

Marketing and advertising costs are expensed as incurred.

      Statement of Cash Flows

      For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest bearing deposits with banks that mature within 90 days and federal funds sold on an overnight basis.  Changes in loans made to and deposits received from customers are reported on a net basis.

      Securities

      Bonds, notes, and debentures for which the Company has both the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. Investment securities that would be held for indefinite periods of time but not necessarily to maturity, including securities that would be used as part of the Bank’s asset/liability management strategy and possibly sold in response to changes in interest rates, prepayments and similar factors are classified as “Available for Sale.”  These securities are carried at fair value, with any temporary unrealized gains or losses reported as a separate component of other comprehensive loss, net of the related income tax effect.  Gains and losses on the sale of such securities are accounted for on the specific identification basis in the statements of operations on the trade date. 

      If transfers between the available-for-sale and held-to-maturity portfolios occur, they are accounted for at fair value and unrealized holding gains and losses are accounted for at the date of transfer.  For securities transferred to available-for-sale from held-to-maturity, unrealized gains and losses as of the date of the transfer are recognized in accumulated other comprehensive loss as a separate component of shareholders’ equity. For securities transferred into the held-to-maturity portfolio from available-for-sale, unrealized gains and losses as of the date of the transfer continue to be reported in accumulated other comprehensive loss, and are amortized over the remaining life of the security as an adjustment to its yield, consistent with amortization of the premium or accretion of the discount.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation.  Declines in the fair value of individual debt securities below their cost that are deemed to be other than temporary result in write-downs of the individual securities to their fair value.  Debt securities that are deemed to be other-than-temporarily impaired are reflected in earnings as realized losses to the extent impairment is related to credit losses. The amount of the impairment for debt securities related to other factors is recognized in other comprehensive loss.  In evaluating whether impairment is temporary or other-than-temporary, management first considers whether the Bank intends to sell the security or it is more-likely-than-not that the Bank will be required to sell the security prior to recovery.  In these circumstances, the loss is determined to be other-than-temporary and the difference between the security’s fair value and its amortized cost is reflected as a loss in the statement of operations.  If management does not intend to sell the security and likely will not be required to sell the security prior to forecasted recovery, management evaluates whether it expects to recover the entire amortized cost of the debt security or if there is a credit loss.  In evaluating whether there is a credit loss, management considers various qualitative factors which include (1) the length of time and the extent to which the fair value has been less than cost, (2) the reasons for the decline in the fair value, and (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events.  If, based on an analysis of these factors, management concludes that there is a credit loss, then management calculates the expected cash flows and records a loss in earnings equal to the difference between the amortized cost of the debt security and the expected present value of cash flows.  The portion of the decline in fair value that is due to factors other than credit loss is recognized in other comprehensive loss.  No investment securities held by the Bank as of December 31, 2015 and 2014 were subjected to a write-down due to credit related other-than-temporary impairment.  Interest income from securities adjusted for the amortization of premiums and accretion of discounts is recognized in interest income using the interest method over the contractual lives of the related securities.  Realized gains and losses, determined using the amortized cost value of the specific securities sold, are included in noninterest income in the statement of operations.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when all the components meet the definition of a participating interest and when control over the assets has been surrendered.  A participating interest generally represents (1) a proportionate (pro rata) ownership interest in an entire financial assets, (2) a relationship where from the date of transfer all cash flows received from the entire financial asset are divided proportionately among the participating interest holders in an amount equal  to their share of ownership, (3) the priority of cash flows has certain characteristics, including no reduction in priority, subordination of interest, or recourse to the transferor other than standard representation or warranties, and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to pledge or exchange the entire financial asset.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Loans Held for Sale

From time to time, the Bank originates SBA loans for which the guaranteed portion is intended to be sold within a short period of time in the secondary market.  These loans are classified as held-for-sale and carried at estimated fair value based on a loan-by-loan valuation using actual market bids in accordance with the irrevocable option permitted under Accounting Standards Codification (“ASC”) 825-10-25 Financial Instruments.  For the years ended December 31, 2015 and 2014, the Bank recorded a net change in fair value of financial instruments totaling approximately $233,000 and $353,000, respectively, related to the SBA loans held for sale and the retained un-guaranteed portion of SBA loans held by the Bank and carried at fair value.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

    Loans Held at Fair Value

     From time to time, the Bank originates SBA loans for which the un-guaranteed portion is retained after the guaranteed portion is sold in the secondary market.  Management has elected to carry these loans at fair value.  Fair value of these loans is estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries.

     Loans

      The Bank has both the positive intent and ability to hold the majority of its loans to maturity.  These loans are stated at the amount of unpaid principal, reduced by net unearned discount and an allowance for loan losses.  Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding and accretion of discount.  It is the Bank’s policy to discontinue the accrual of interest income when a default of principal or interest exists for a period of 90 days except when, in management’s judgment, the loan is well collateralized and in the process of collection. Interest received on nonaccrual loans is either applied against principal or reported as interest income according to management’s judgment as to collectability of principal.  When interest accruals are discontinued, unpaid accrued interest previously credited to income is reversed and the loan is classified as impaired.

      Non-accrual and Past Due Loans

      Loans are considered past due if the required principal and interest payments have not been received 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

      Unearned discounts are amortized over the weighted average maturity of the related mortgage loan portfolio.  Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loan’s yield.  The Bank is amortizing these amounts over the contractual life of the loan.

      For purchased loans, the discount remaining after the loan loss allocation is being amortized over the remaining life of the purchased loans using the interest method.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses.  Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance.  When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.  Such periodic assessments may, in management’s judgment, require the Bank to recognize additions or reductions to the allowance. 

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Various regulatory agencies periodically review the adequacy of the Bank’s allowance for loan losses as an integral part of their examination process.  Such agencies may require the Bank to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination.  It is reasonably possible that the above factors may change significantly and, therefore, affects management’s determination of the allowance for loan losses in the near term.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical charge-off experience, other qualitative factors, and adjustments made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.  The Bank does not allocate reserves for unfunded commitments to fund lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank will identify and assess loans that may be impaired through any of the following processes:

·      During regularly scheduled meetings of the Asset Quality Committee

·      During regular reviews of the delinquency report

·      During the course of routine account servicing, annual review, or credit file update

·      Upon receipt of verifiable evidence of a material reduction in the value of collateral to a level that creates a less than desirable loan-to-value ratio

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

      Large groups of smaller, homogeneous loans, including consumer installment and home equity loans, 1-4 family residential mortgages, and student loans are evaluated collectively for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.

Bank Premises and Equipment

      Bank premises and equipment are stated at cost less accumulated depreciation.  Depreciation is computed on the straight-line method over the estimated useful lives of the assets.  Amortization of leasehold improvements is computed over the shorter of the related lease term or the useful life of the assets.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Income Taxes

      The liability method is used in accounting for income taxes.  Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.  Realization of deferred tax assets is dependent on generating sufficient taxable income in the future.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more-likely-than not recognition threshold are measured as the largest amount of tax benefit that is more than 50  percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  It is the Bank’s policy to recognize interest and penalties related to unrecognized tax liabilities within income tax expense in the statement of operations.

The Bank does not have an accrual for uncertain tax positions as of December 31, 2015 or 2014, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law.

Loss Per Share (“EPS”)

Basic EPS excludes dilution and is computed by dividing income (loss) available to common shareholders by the weighted average common shares outstanding during the period.  Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

Off-Balance-Sheet Financial Instruments

In the ordinary course of business, the Bank has entered into off-balance-sheet financial instruments consisting of commitments to extend credit and letters of credit.  Such financial instruments are recorded in the financial statements when they become payable.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Other Real Estate Owned

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value, net of estimated cost to sell, at the date of foreclosure, establishing a new cost basis.  After foreclosure, valuations are periodically performed by management, and the real estate is carried at the lower of carrying amount or fair value less the cost to sell.  Revenue and expenses from operations and changes in valuation allowance are charged to operations. 

Segments

      The Company has one reportable segment, “Community Banking.” All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the other.  For example, commercial lending is dependent upon the ability of the Bank to fund it with retail deposits and other borrowings and to manage interest rate and credit risk.  This situation is also similar for consumer and residential mortgage lending.  Accordingly, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.

Reclassifications

Certain reclassifications have been made to the prior years’ financial statements to conform to the 2015 presentation, with no impact on earnings or shareholders’ equity.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Comprehensive (Loss) Income

Comprehensive (loss) income includes net loss as well as certain other items that result in a change to equity during the period.

The components of other comprehensive (loss) income are as follows:

	December 31, 2015
(in 000’s)	Before tax	Tax	Net of tax
	amount	Benefit	Amount
Unrealized loss on securities	$ (9)	$   3	$  (6)
Unrealized holding loss arising during period	-	-	-
Less: reclassification adjustment for gains
realized in net loss	-	-	-
Other comprehensive loss, net	$ (9)	$  3	$  (6)
	December 31, 2014
	Before tax	Tax	Net of tax
	amount	(Expense)	Amount
Unrealized income on securities:
Unrealized holding income arising during period	$  475	$   (157)	$    318
Less: reclassification adjustment for gains
realized in net loss	(7)	3	(4)
Other comprehensive income, net	$ 468	$  (154)	$    314

Recent Accounting Pronouncements

ASU 2014-04, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. ASU 2014-04 clarifies that an in substance repossession or foreclosure occurs and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan though completion of a deed in lieu of foreclosure or through a similar legal agreement.  The amendments require interim and annual disclosure of both the amount of the foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of this amendment had no impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

 ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the 69 Effective Date. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016- 08, “Principal versus Agent Considerations (Reporting Gross versus Net),” which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers and 2016-12, Narrow-Scope Improvements and Practical Expedients, both of which provide additional clarification of certain provisions in Topic 606. These Accounting Standards Codification (“ASC”) updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or retrospectively with the cumulative effect transition method. The Company is currently in the process of evaluating all revenue streams, accounting policies, practices and reporting to identify and understand any impact on the Consolidated Financial Statements. The preliminary evaluation suggests that adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

 ASU 2017-04 (Topic 350), “Intangibles – Goodwill and Others” Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is evaluating the effect that ASU 2017-04 will have on its consolidated financial statements and related disclosures.

 ASU 2017-01 (Topic 805), “Business Combinations” Issued in January 2017, ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 is effective for annual periods beginning after December 15, 2017 including interim periods within those periods. The Company is evaluating the effect that ASU 2017-01 will have on its consolidated financial statements and related disclosures.

 ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments” Issued in June 2016, ASU 2016-13 significantly changes how companies measure and recognize credit impairment for many financial assets. The new current expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are in the scope of the standard. The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities. ASU 2016-13 is effective for the annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

 ASU 2016-02 (Topic 842), “Leases” Issued in February 2016, ASU 2016-02 revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. ASU 2016-02 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective transition 70 approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

ASU 2016-01 (Subtopic 825-10), “Financial Instruments – Overall, Recognition and Measurement of Financial Assets and Financial Liabilities” Issued in January 2016, ASU 2016-01 provides that equity investments will be measured at fair value with changes in fair value recognized in net income. When fair value is not readily determinable an entity may elect to measure the equity investment at cost, minus impairment, plus or minus any change in the investment’s observable price. For financial liabilities that are measured at fair value, the amendment requires an entity to present separately, in other comprehensive income, any change in fair value resulting from a change in instrument-specific credit risk. ASU 2016-01 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities may apply this guidance on a prospective or retrospective basis. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures.

ASU 2016-15 (Topic 320), “Classification of Certain Cash Receipts and Cash Payments” Issued in August 2016, ASU 2016-15 provides guidance on eight specific cash flow issues and their disclosure in the consolidated statements of cash flows. The issues addressed include debt prepayment, settlement of zero-coupon debt, contingent consideration in business combinations, proceeds from settlement of insurance claims, proceeds from settlement of BOLI, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the Predominance principle. 2016-15 is effective for the annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of this guidance and does not anticipate a material impact on its consolidated financial statements.

ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”  Issued on August 15, 2014, ASU 2014-15 describes how an entity should assess its ability to meet obligations and sets disclosure requirements for how this information should be disclosed in the financial statements. The standard provides accounting guidance that will be used with existing auditing standards. The new standard applies to all entities for the first annual period ending after December 15, 2016, and interim periods thereafter. The Company is evaluating the effect that ASU 2014-15 will have on its consolidated financial statements and related disclosures as adoption of the new accounting standard could result in a different conclusion.

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2. Cash and Due From Bank Balances

12 Months Ended

Dec. 31, 2015

Notes

2. Cash and Due From Bank Balances

2.  CASH AND DUE FROM BANK BALANCES

The Bank maintains various deposit accounts with other banks to meet normal fund transaction requirements and to compensate other banks for certain correspondent services.  The withdrawal or usage restrictions of these balances did not have a significant impact on the operations of the Bank as of December 31, 2015.  Required reserve balances were $100,000 as of December 31, 2015 and 2014.

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3. Investments

12 Months Ended

Dec. 31, 2015

Notes

3. Investments

3.  INVESTMENTS

The amortized cost, gross unrealized holding gains and losses, and estimated fair value of the available-for-sale and held-to-maturity investment securities by major security type at December 31, 2015 and 2014 are as follows:

(In 000’s)	2015
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	Value
Available-for-sale:
U.S. Government agency securities	$  3,697	$  3	$  (38)	$   3,662
Government Sponsored Enterprises  residential mortgage-backed securities	3,774	36	(30)	3,780
Investments in money market funds	130	-	-	130
	$  7,601	$  39	$ (68)	$  7,572

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

3.   INVESTMENTS-Continued

	2014
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	Value
Available-for-sale:
U.S. Government agency securities	$    4,097	$     -	$     (61)	$  4,036
Government Sponsored Enterprises  residential mortgage-backed securities	4,333	60	(20)	4,374
Investments in money market funds	130	-	-	130
	$    8,560	$  60	$    (81)	$  8,540

In 2015, $1,600,000 in U.S. Government agencies securities were called. There were no gross gains or losses from these transactions during 2015.  No securities were called in 2014. 

There were no sales of securities in 2015.  In 2014, the Bank sold securities with a book value totaling approximately $910,000, for which a gain of approximately $6,000 was recognized.  

The table below indicates the length of time individual securities held-to-maturity have been in a continuous unrealized loss position at December 31, 2015 (in thousands):  

	Number	Less than 12 months		12 months or longer		Total
Description of	Of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	Securities	value	Losses	Value	Losses	value	Losses
U.S. Government
agency securities	9	$  2,416	$   (32)	$  243	$   (6)	$  2,659	$  (38)
Mortgage backed
securities	8	1,486	(19)	227	(11)	1,713	(30)
Total temporarily
impaired investment
securities	17	$ 3,902	$   (51)	$ 470	$  (17)	$ 4,372	$  (68)

The table below indicates the length of time individual securities held-to-maturity have been in a continuous unrealized loss position at December 31, 2014 (in thousands):  

	Number	Less than 12 months		12 months or longer		Total
Description of	Of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	Securities	value	Losses	Value	Losses	value	losses
U.S. Government
agency securities	13	$  246	$    (4)	$  3,290	$  (57)	$   3,536	$   (61)
Mortgage backed
securities	6	-	-	1,440	(20)	1,440	(20)
Total temporarily
impaired investment
securities	19	$  246	$    (4)	$ 4,730	$   (77)	$  4,976	$  (81)

U.S. Government and Agency Securities. Unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were caused by market rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2015 and 2014.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

Residential Government Sponsored Enterprise Mortgage-Backed Securities. Unrealized losses on the Company’s investment in government sponsored enterprise mortgage-backed securities were caused by market rate changes. The Company purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2015 and 2014.

The Company has a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  On a quarterly basis, we review all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. The Company considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value. 

Maturities of investment securities classified as available-for-sale at December 31, 2015 were as follows. Expected maturities may differ from contractual maturities because the underlying mortgages supporting mortgage backed securities may be prepaid without any penalties. Consequently, mortgage-backed securities are not presented by maturity category.

(In 000’s)

	Amortized	Fair
	Cost	Value
Available-for-sale:
Due in one year	$         -	$       -
Due after one year through five years	-	-
Due after five years through ten years	3,697	3,662
Government-sponsored enterprises      residential mortgage-backed securities	3,774	3,780
Total debt securities	7,471	7,442
Investments in money market funds	130	130
	$ 7,601	$ 7,572

As of December 31, 2015 and 2014, investment securities with a carrying value of $7,075,883 and $6,898,559, respectively, were pledged as collateral to secure public deposits and contingent borrowing at the Discount Window.

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4. Loans and Allowance For Loan Losses

12 Months Ended

Dec. 31, 2015

Notes

4. Loans and Allowance For Loan Losses

 4.  LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the net loans is as follows:

	December 31,	December 31,
(In 000's)	2015	2014
Commercial and industrial:
Commercial	$               1,535	$                 2,563
SBA loans	40	168
Asset-based	1,487	1,904
Total commercial and industrial	3,062	4,635
Commercial real estate:
Commercial mortgages	13,774	15,470
SBA loans	353	525
Construction	2,175	3,423
Religious organizations	10,112	12,138
Total commercial real estate	26,414	31,556
Consumer real estate:
Home equity loans	897	1,047
Home equity lines of credit	20	22
1-4 family residential mortgages	1,924	2,228
Total consumer real estate	2,841	3,297
Total real estate	29,255	34,853
Consumer and other:
Consumer installment	-	7
Student loans	1,081	1,221
Other	121	145
Total consumer and other	1,202	1,373
Loans, net	$            33,519	$               40,861

At December 31, 2015 and 2014, unamortized net deferred fees totaled $253,139 and $52,909 respectively, and are included in the related loan accounts. At December 31, 2015 and 2014, the unearned discount totaled $22,272 and $26,177, respectively, and is included in the related loan accounts.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

Loan Origination/Risk Management.  The Bank has lending policies and procedures in place to maximize loan income within an acceptable level of risk.  Management reviews and approves these policies and procedures on a regular basis.  A reporting system supplements the review process by providing management with periodic reports related to loan origination, asset quality, concentrations of credit, loan delinquencies and non-performing and emerging problem loans.  Diversification in the portfolio is a means of managing risk with fluctuations in economic conditions.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate prudently to service the projected debt.  Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Bank’s management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed.  Commercial and industrial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not be as expected and collateral securing these loans may fluctuate in value.  Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable. The Bank may also seek credit enhancements for commercial and industrial loans from the Small Business Administration, Department of Transportation or other available programs.  Generally, the Bank utilizes an advance formula for loans secured by eligible accounts receivable and other available programs to mitigate risk.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans. These loans are viewed as cash flow loans first and secondarily as loans secured by real estate.  Commercial real estate loans typically have higher principal amounts and the repayment of these loans is dependent on the successful operation of property securing the loan or business conducted on the property securing the loan.  Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.  The Bank tracks the level of owner occupied versus non-owner occupied loans.   Typically, owner-occupied real estate loans represent less risk for the Bank.

The Bank’s commercial real estate loans are largely concentrated in loans to religious organizations. These loans are generally made to these organizations are primarily for expansion and repair of church facilities (construction loans).  The source of repayment is viewed as cash flow from tithes and offerings and secondarily as loans secured by real estate.

The Bank’s construction lending has primarily involved lending for construction of commercial properties although the Bank does lend funds for construction of single-family residences. Construction loans are underwritten utilizing feasibility studies, independent appraisals, analysis of lease rates, and the financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates can be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Loan proceeds are disbursed during the construction phase according to a draw schedule based on the stage of completion. Construction projects are inspected by contracted inspectors or bank personnel. These loans are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, regulations of real property, general economic conditions and the availability of long-term financing.

Consumer loans are underwritten after an analysis of the borrower’s past and present financial information including credit score, personal financial statements, tax returns and other information deemed necessary to calculate debt service ratios that determine the ability of a borrower to repay the loan.  Minimum debt service ratios have been established by policy.  Underwriting standards for home equity loans are also heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage of 80% and documentation requirements.  

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The Bank performs an annual loan review by an independent third party firm that reviews and validates the credit risk program.  The results of these reviews are presented to the board and management.  The loan review process reinforces the risk identification and assessment decisions made by lenders and credit administration personnel, as well as the Bank’s policies and procedures.

  Concentrations of Credit.  The Bank’s loan portfolio is concentrated in commercial real estate and commercial and industrial loans.  Approximately $17 million of these loans are secured by owner occupied commercial real estate as of December 31, 2015. The Bank continues to have a significant concentration in lending to religious organizations for which total loans at December 31, 2015 were $10 million, or 34%, of the commercial portfolio.  

Related Party Loans.  In the ordinary course of business, the Bank granted loans to certain directors, executive officers and their affiliates (collectively referred to as “related parties”).  These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unaffiliated persons and do not involve more than normal risk of collectability. Disaffiliations include directors who do not stand for re-election and are no longer affiliated with the Bank. 

Activity in related party loans is presented in the following table. 

	2015	2014
Balance outstanding at December 31,	$ 845,477	$    858,861
Principal additions	-	52,000
Disaffiliations	-	-
Principal reductions	(70,399)	(65,384)
Balance outstanding at December 31,	$ 775,078	$     845,477

Non-accrual and Past Due Loans.  Loans are considered past due if the required principal and interest payments have not been received 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Interest on loans past due 90 days or more ceases to accrue except for loans that are well collateralized and in the process of collection.  When a loan is placed on nonaccrual status, previously accrued and unpaid interest is reversed out of income.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

An age analysis of past due loans, segregated by class of loans, as of December 31, 2015 is as follows:

(In 000's)		Accruing
	Loans	Loans 90 or
	30-89 Days	More Days		Total Past	Current
	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	$       -	$        -	$         110	$       110	$      1,425	$      1,535
SBA loans	-	-	40	40	-	40
Asset-based	11	-	289	300	1,187	1,487
Total commercial and industrial	11	-	439	450	2,612	3,062
Commercial real estate:
Commercial mortgages	169	39	1,335	1,543	12,231	13,774
SBA loans	-	-	271	271	82	353
Construction	-	-	-	-	2,175	2,175
Religious organizations	-	-	471	471	9,641	10,112
Total commercial real estate	169	39	2,077	2,285	24,129	26,414
Consumer real estate:
Home equity loans	56	125	358	539	358	897
Home equity lines of credit	-	-	-	-	20	20
1-4 family residential mortgages	35	-	129	164	1,760	1,924
Total consumer real estate	91	125	487	703	2,138	2,841
Total real estate	260	164	2,564	2,988	26,267	29,255
Consumer and other:
Consumer installment	-	-	-	-	-	-
Student loans	66	129	-	195	886	1,081
Other	2	-	-	2	119	121
Total consumer and other	68	129	-	197	1,005	1,202
Total loans	$   339	$    293	$      3,003	$      3,635	$    29,884	$    33,519

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

An age analysis of past due loans, segregated by class of loans, as of December 31, 2014 is as follows:

(In 000's)		Accruing
	Loans	Loans 90 or
	30-89 Days	More Days		Total Past	Current
	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	$                 -	$             -	$              248	248	$          2,315	$             2,563
SBA loans	-	-	48	48	120	168
Asset-based	-	-	-	-	1,904	1,904
Total Commercial and industrial	-	-	296	296	4,339	4,635
Commercial real estate:
Commercial mortgages	17	83	985	1,085	14,385	15,470
SBA loans	-	-	118	118	407	525
Construction	-	-	-	-	3,423	3,423
Religious organizations	-	-	520	520	11,618	12,138
Total Commercial real estate	17	83	1,623	1,723	29,833	31,556
Consumer real estate:
Home equity loans	246	-	368	614	433	1,047
Home equity lines of credit	-	-	-	-	22	22
1-4 family residential mortgages	-	-	194	194	2,034	2,228
Total consumer real estate	246	-	562	808	2,489	3,297
Total real estate	263	83	2,185	2,531	32,322	34,853
Consumer and other:
Consumer installment	-	-	-	-	7	7
Student loans	136	88	-	224	997	1,221
Other	12	-	-	12	133	145
Total consumer and other	148	88	-	236	1,137	1,373
Total loans	$            411	$          171	$           2,481	$         3,063	$        37,798	$           40,861

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

Impaired Loans. The Bank identifies a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. The Bank recognizes interest income on impaired loans under the cash basis when the collateral on the loan is sufficient to cover the outstanding obligation to the Bank.   If these factors do not exist, the Bank will record interest payments on the cost recovery basis.

In accordance with guidance provided by ASC 310-10, Accounting by Creditors for Impairment of a Loan, management employs one of three methods to determine and measure impairment: the Present Value of Future Cash Flow Method; the Fair Value of Collateral Method; or the Observable Market Price of a Loan Method.  To perform an impairment analysis, the Company reviews a loan’s internally assigned grade, its outstanding balance, guarantors, collateral, strategy, and a current report of the action being implemented. Based on the nature of the specific loans, one of the impairment methods is chosen for the respective loan and any impairment is determined, based on criteria established in ASC 310-10.  

The Company records partial charge-offs of impaired loans when the impairment is deemed permanent and is considered a loss.  To date, these charge-offs have only included the unguaranteed portion of Small Business Administration (“SBA”) loans.  Specific reserves are allocated to cover “other-than-permanent” impairment for which the underlying collateral value may fluctuate with market conditions.  In 2015 and 2014, the Bank made a partial charge-offs totaling approximately $212,000 and $253,000, respectively, related to one impaired commercial and industrial loan. Consumer real estate and other loans are not individually evaluated for impairment, but collectively evaluated, because they are pools of smaller balance homogeneous loans.

  Year-end 2015 impaired loans are set forth in the following table.

(In 000’s)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total		Average	Interest recognized
	Principal	With No	With	Recorded	Related	Recorded	on impaired
	Balance	Allowance	Allowance	Investment	Allowance	Investment	loans
Commercial and industrial:
Commercial	$  818	$  353	$     -	$    353	$     -	$   446	$       -
SBA  loans	46	-	46	46	-	38	2
Asset-based	40	40	-	40	-	54	2
Total Commercial and industrial	904	393	46	439	-	538	4
Commercial real estate:
Commercial mortgages	1,334	810	524	1,334	91	579	9
SBA  Loans	271	271	-	271	-	161	2
Religious Organizations	471	471	-	471	-	630	2
Total Commercial real estate	2,076	1,552	524	2,076	91	1,370	13
Total Loans	$  2,980	$ 1,945	$  570	$ 2,515	$  91	$ 1,908	$     17

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

Year-end 2014 impaired loans are set forth in the following table.

(In 000’s)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total		Average	Interest recognized
	Principal	With No	With	Recorded	Related	Recorded	on impaired
	Balance	Allowance	Allowance	Investment	Allowance	Investment	loans
Commercial and industrial:
Commercial	$ 501	$  38	$   210	$   248	$  199	$   248	$   3
SBA  loans	94	46	48	94	48	52	-
Asset-based	40	40	-	40	-	4	1
Total Commercial and industrial	635	124	258	382	247	304	4
Commercial real estate:
Commercial mortgages	985	616	369	985	27	933	3
SBA  Loans	118	118	-	118	-	124	-
Religious Organizations	520	520	-	520	-	607	-
Total Commercial real estate	1,623	1,254	369	1,623	27	1,664	3
Total Loans	$2,258	$1,378	$  627	$  2,005	$ 274	$ 1,968	$   7

Credit Quality Indicators.  For commercial loans, management uses internally assigned risk ratings as the best indicator of credit quality.  Each loan’s internal risk weighting is assigned at origination and updated at least annually and more frequently if circumstances warrant a change in risk rating.  The Bank uses a 1 through 8 loan grading system that follows regulatory accepted definitions as follows:

·      Risk ratings of “1” through “3” are used for loans that are performing and meet and are expected to continue to meet all of the terms and conditions set forth in the original loan documentation and are generally current on principal and interest payments.  Loans with these risk ratings are reflected as “Good/Excellent” and “Satisfactory” in the following table.

·      Risk ratings of “4” are assigned to “Pass/Watch” loans which may require a higher degree of regular, careful attention.  Borrowers may be exhibiting weaker balance sheets and positive but inconsistent cash flow coverage. Borrowers in this classification generally exhibit a higher level of credit risk and are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Loans with this rating would not normally be acceptable as new credits unless they are adequately secured and/or carry substantial guarantors. Loans with this rating are reflected as “Pass” in the following table. 

·      Risk ratings of “5” are assigned to “Special Mention” loans that do not presently expose the Bank to a significant degree of risks, but have potential weaknesses/deficiencies deserving Management’s closer attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. No loss of principal or interest is envisioned.  Borrower is experiencing adverse operating trends, which potentially could impair debt, services capacity and may necessitate restructuring of credit.  Secondary sources of repayment are accessible and considered adequate to cover the Bank's exposure. However a restructuring of the debt should result in repayment.  The asset is currently protected, but is potentially weak.  This category may include credits with inadequate loan agreements, control over the collateral or an unbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized but exceptions are considered material. These borrowers would have limited ability to obtain credit elsewhere.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

·      Risk ratings of “6” are assigned to ‘Substandard” loans which are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets must have a well-defined weakness. They are characterized by the distinct possibility that some loss is possible if the deficiencies are not corrected. The borrower’s recent performance indicated an inability to repay the debt, even if restructured. Primary source of repayment is gone or severely impaired and the Bank may have to rely upon the secondary source. Secondary sources of repayment (e.g., guarantors and collateral) should be adequate for a full recovery. Flaws in documentation may leave the bank in a subordinated or unsecured position when the collateral is needed for the repayment.

·      Risk ratings of “7” are assigned to “Doubtful” loans which have all the weaknesses inherent in those classified “Substandard” with the added characteristic that the weakness makes the collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.  The borrower's recent performance indicates an inability to repay the debt.  Recovery from secondary sources is uncertain.  The possibility of a loss is extremely high, but because of certain important and reasonably- specific pending factors, its classification as a loss is deferred.

·      Risk rating of “8” are assigned to “Loss” loans which are considered non-collectible and do not warrant classification as active assets.  They are recommended for charge-off if attempts to recover will be long term in nature.  This classification does not mean that an asset has no recovery or salvage value, but rather, that it is not practical or desirable to defer writing off the loss, although a future recovery may be possible.  Loss should always be taken in the period in which they surface and are identified as non-collectible as a result there is no tabular presentation.

For consumer and residential mortgage loans, management uses performing versus nonperforming as the best indicator of credit quality.  Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being in default for a period of 90 days or more or when the ability to collect principal and interest according to contractual terms is in doubt.  These credit quality indicators are updated on an ongoing basis.  A loan is placed on nonaccrual status as soon as management believes there is doubt as to the ultimate ability to collect interest on a loan. 

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The tables below detail the Bank’s loans by class according to their credit quality indictors discussed above.

(In 000's)		Commercial Loans, December 31, 2015
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$    285	$     922	$      16	$     58	$    254	$      -	$  1,535
SBA loans	-	-	-	-	40	-	40
Asset-based	-	900	222	-	289	76	1,487
	285	1,822	238	58	583	76	3,062
Commercial real estate:
Commercial mortgages	-	10,689	1,098	613	1,151	223	13,774
SBA Loans	-	82	-	-	271	-	353
Construction	-	2,175	-	-	-	-	2,175
Religious organizations	-	7,624	1,131	886	471	-	10,112
	-	20,570	2,229	1,499	1,893	223	26,414
Total commercial loans	$    285	$ 22,393	$  2,467	$ 1,557	$   2,476	$   299	$29,476

			Residential Mortgage and Consumer Loans December 31, 2015
	Performing	Nonperforming		Total
Consumer Real Estate:
Home equity	$     539	$   358		$    897
Home equity line of credit	20	-		20
1-4 family residential mortgages	1,795	129		1,924
	2,354	487		2,841
Consumer Other:
Consumer Installment	-	-		-
Student loans	1,081	-		1,081
Other	121	-		121
	1,202	-		1,202
Total  consumer loans	$  3,556	$   487		$ 4,043
Total loans					$33,519

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

(In 000's)		Commercial Loans, December 31, 2014
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$ 300	$ 1,321	$ 474	$ 220	$ 113	$ 135	$ 2,563
SBA loans	-	80	-	-	88	-	168
Asset-based	-	1,734	124	-	46	-	1,904
	300	3,135	598	220	247	135	4,635
Commercial real estate:
Commercial mortgages	-	13,024	724	57	1,348	317	15,470
SBA Loans	-	237	170	-	118	-	525
Construction	-	3,423	-	-	-	-	3,423
Religious organizations	-	9,730	1,185	703	520	-	12,138
	-	26,414	2,079	760	1,986	317	31,556
Total commercial loans	$ 300	$ 29,549	$ 2,677	$ 980	$ 2,233	$ 452	$ 36,191

		Residential Mortgage and Consumer Loans December 31, 2014
	- Performing/Nonperforming
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$ 679	$ 368	$ 1,047
Home equity line of credit	22	-	22
1-4 family residential mortgages	2,034	194	2,228
	2,735	562	3,297
Consumer Other:
Consumer Installment	7	-	7
Student loans	1,221	-	1,221
Other	145	-	145
	1,373	-	1,373
Total  consumer loans	$ 4,108	$ 562	$ 4,670
Total loans				$40,861

UNITED BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

Allowance for loan losses.  The determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance is the accumulation of three components that are calculated based on various independent methodologies that are based on management’s estimates.  The three components are as follows:

•              Specific Loan Evaluation Component – Includes the specific evaluation of impaired loans. 

•              Historical Charge-Off Component – Applies a rolling, eight-quarter historical charge-off rate to all pools of non-classified loans.

•              Qualitative Factors Component – The loan portfolio is broken down into multiple homogenous sub classifications, upon which multiple factors (such as delinquency trends, economic conditions, concentrations, growth/volume trends, and management/staff ability) are evaluated, resulting in an allowance amount for each of the sub classifications. The sum of these amounts comprises the Qualitative Factors Component.

All of these factors may be susceptible to significant change.  During 2015, the Bank reduced several of its qualitative factors in the commercial real estate segment of the loan portfolio for which it has not experienced losses or charge-offs.  In addition, the average historical loss factors increased for the commercial and industrial segment of the portfolio as a result of a $212,000 charge-off during the year. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.

According to the Bank’s policy, a loss (“charge-off”) is to be recognized and charged to the allowance for loan losses as soon as a loan is recognized as uncollectible.  All credits that are 90 days or more past due must be analyzed for the Bank’s ability to collect the outstanding principal and/or interest.  Once a loss is known to exist, the charge-off approval process must be followed for all loan types. 

An analysis of the activity in the allowance for loan losses for the years 2015 and 2014 is as follows:

(in 000's)		For the Year Ended December 31, 2015
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Beginning balance	$             403	$          300	$                20	$            12	$         735
Provision for loan losses	3	(47)	(18)	(6)	(68)
Charge-offs	(259)	(3)	-	(17)	(279)
Recoveries	4	-	6	20	30
Net charge-offs	(255)	(3)	6	3	(249)
Ending balance	$            151	$          250	$              8	$             9	$        418

(in 000's)		For the Year Ended December 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Beginning balance	$       483	$       280	$          59	$         17	$      839
Provision for loan losses	169	20	(28)	1	162
Charge-offs	(253)	-	(19)	(30)	(302)
Recoveries	4	-	8	24	36
Net charge-offs	(249)	-	(11)	(6)	(266)
Ending balance	$       403	$      300	$         20	$         12	$      735

(in 000's)		As of December 31, 2015
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$ -	$ 91	$ -	$ -	$ 91
Loans collectively  evaluated for impairment	151	159	8	9	327
	$ 151	$ 250	$ 8	$ 9	$ 418
Loans, ending balance:
Loans individually evaluated for impairment	$ 439	$ 2,076	$ -	$ -	$ 2,515
Loans collectively  evaluated for impairment	2,623	24,338	2,841	1,202	31,314
Total	$ 3,062	$ 26,414	$ 2,841	$ 1,202	$ 33,519

		As of December 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$ 247	$ 27	$ -	$ -	$ 274
Loans collectively  evaluated for impairment	156	273	20	12	461
	$ 403	$ 300	$ 20	$ 12	$ 735
Loans, ending balance:
Loans individually evaluated for impairment	$ 382	$ 1,623	$ -	$ -	$ 2,005
Loans collectively  evaluated for impairment	4,253	29,933	3,297	1,373	$ 38,856
Total	$ 4,635	$ 31,566	$ 3,297	$ 1,373	$ 40,861

Troubled debt restructurings (“TDRs”).  TDRs occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider, such as a below market interest rate, extending the maturity of a loan, or a combination of both. The Company made modifications to certain loans in its commercial loan portfolio that included the term out of lines of credit to begin the amortization of principal.  The terms of these loans do not include any financial concessions and are consistent with the current market.  Management reviews all loan modifications to determine whether the modification qualifies as a TDR (i.e. whether the creditor has been granted a concession or is experiencing financial difficulties).  Based on this review and evaluation, none of the loans modified during 2015 and 2014 met the criteria of a TDR.  In addition, the Company had no loans classified as TDRs at December 31, 2015 and 2014.

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5. Bank Premises and Equipment

12 Months Ended

Dec. 31, 2015

Notes

5. Bank Premises and Equipment

5.  BANK PREMISES AND EQUIPMENT

The major classes of bank premises and equipment and the total accumulated depreciation are as follows at December 31:

(In 000’s)	Estimated
	useful life	2015	2014
Leasehold improvements	10-15 years	$   788	$  785
Furniture and equipment	3- 7 years	1,297	1,179
		2,085	1,964
Less accumulated depreciation		(1,592)	(1,415)
		$   493	$   549

Depreciation expense on fixed assets totaled $177,987 and $175,465 for the years ended December 31, 2015 and 2014, respectively.

The Bank leases its facilities and certain equipment under non-cancelable operating lease agreements. The amount of expense for operating leases for the years ended December 31, 2015 and 2014 was $481,721 and $496,981, respectively.

Future minimum lease payments under operating leases are as follows:

 (In 000’s)

Year ending December 31,	Operating     leases
2016	$  423
2017	408
2018	416
2019	411
2020	332
Thereafter	888
Total minimum lease payments	$2,878

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6. Other Real Estate Owned

12 Months Ended

Dec. 31, 2015

Notes

6. Other Real Estate Owned

 6.  Other Real Estate Owned

  Other real estate owned (“OREO”) consists of properties acquired as a result of deed in-lieu-of foreclosure and foreclosures. Properties or other assets are classified as OREO and are reported at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of assets are capitalized, and costs relating to holding the property are charged to expense.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The following schedule reflects the components of other real estate owned at December 31, 2015 and 2014:

(in 000’s)	2015	2014	2013
Commercial real estate	$  297	$  191	$  191
Residential real estate	183	373	242
Total	$  480	$  564	$ 433

A summary of the change in other real estate owned follows:

(in 000’s)	Year Ended December 31, 2015	Year Ended December 31, 2014
Beginning Balance	$    564	$   433
Additions, transfers from loans	148	240
Sales	(272)	(96)
	441	577
Write-ups (write-downs)	39	(13)
Ending Balance	$    480	$  564

The following table details the components of net expense of other real estate owned.

(in 000’s)	Year ended December 31, 2015	Year ended December 31, 2014
Insurance	$  15	$ 21
Legal fees	-	2
Maintenance	-	-
Professional fees	-	-
Real estate taxes	14	20
Utilities	3	4
Transfer-in write-up	(88)	(47)
Impairment charges	49	13
Other	18	8
Total	$11	$  21

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7. Deposits

12 Months Ended

Dec. 31, 2015

Notes

7. Deposits

7.  DEPOSITS

At December 31, 2015, the scheduled maturities of time deposits (certificates of deposit) are as follows:

(In 000’s)	2016	$13,074
	2017	644
	2018	438
	2019	43
	2020	15
	Thereafter	45
		$14,259

The Company has a significant deposit relationship with the City of Philadelphia for which deposits totaled approximately $5 million.

Total deposits in excess of $250,000 totaled $6,753,000 and $7,507,000 at December 31, 2015 and 2014,   respectively.

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8. Borrowings

12 Months Ended

Dec. 31, 2015

Notes

8. Borrowings

8.   BORROWINGS

      At December 31, 2015, the Bank has the ability to borrow up to $700,000 on a fully secured basis at the Discount Window of the Federal Reserve Bank for which the Bank currently has $750,000 in securities pledged.  As of December 31, 2015 and 2014, the Bank had no borrowings outstanding.

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9. Income Taxes

12 Months Ended

Dec. 31, 2015

Notes

9. Income Taxes

9.   INCOME TAXES

      At December 31, 2015, the Bank has net operating loss carry forwards of approximately $10,430,000 for income tax purposes that expire in 2022 through 2036.

                Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.  For financial reporting purposes, a valuation allowance of $3,934,024 and $3,774,484 as of December 31, 2015 and 2014, respectively, has been recognized to offset the net deferred tax assets related to the cumulative temporary differences and the tax loss carry forwards. 

Significant components of the Bank’s net deferred tax assets are as follows:

	December 31,
(in 000’s)	2015	2014
Deferred tax assets(liabilities):
Provision for loan losses	$     46	$ 161
Unrealized gain on investment securities	10	7
Depreciation	(36)	7
Net operating carryforwards	3,538	3,233
Other, net	386	373
Valuation allowance for deferred tax assets	(3,934)	(3,774)
Net deferred tax assets	$     10	$      7

	2015	2014
Effective rate reconciliation:
Tax at statutory rate (34%)	$  (168)	$ (117)
Nondeductible expenses	8	9
Increase in valuation allowance	160	95
Other	-	13
Total tax expense	$        -	$           -

At December 31, 2015 and 2014, no valuation allowance was recorded for the deferred tax asset related to the unrealized holding losses on securities available-for-sale because the Company had the intent and the ability to hold these securities until recovery of the unrealized losses, which may be at maturity.  The Company will continue to monitor its deferred tax position and may make changes to the valuation allowance recorded as circumstances change.

Management has evaluated the Bank’s tax positions and concluded that the Bank has taken no uncertain tax positions that require adjustment to the financial statements. With few exceptions, the Bank is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for the years before 2010.

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10. Financial Instrument Commitments

12 Months Ended

Dec. 31, 2015

Notes

10. Financial Instrument Commitments

10.  FINANCIAL INSTRUMENT COMMITMENTS

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and letters of credit, which are conditional commitments issued by the Bank to guarantee the performance of an obligation of a customer to a third party.  Both arrangements have credit risk essentially the same as that involved in extending loans and are subject to the Bank’s normal credit policies.  Collateral may be obtained based on management’s assessment of the customer. 

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments is      represented by the contractual amount of those instruments.

A summary of the Bank’s financial instrument commitments is as follows:

	2015	2014
Commitments to extend credit	$5,903,000	$ 8,262,000
Outstanding letters of credit	333,000	1,036,000

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract and unused credit card lines.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

      Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

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11. Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Notes

11. Fair Value Measurements

11.  FAIR VALUE MEASUREMENTS        

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Bank's various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried or disclosed at fair value in three levels as follows:

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

Level 1 Inputs          

·      Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 

Level 2 Inputs

·      Quoted prices for similar assets or liabilities in active markets. 

·      Quoted prices for identical or similar assets or liabilities in markets that are not active. 

·      Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.” 

Level 3 Inputs

·      Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities. 

·      These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. 

An asset’s or liability’s financial categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

      Fair Value on a Recurring Basis

Securities Available for Sale:  Where quoted prices are available in an active market, securities would be classified within Level 1 of the valuation hierarchy. Level 1 securities include money market funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities include U.S. agency securities and agency mortgage backed securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Loans Held for Sale. Fair values are estimated by using actual quoted market bids on a loan by loan basis.

Loans Held at Fair Value. Fair values are estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries. 

Assets on the consolidated balance sheets measured at fair value on a recurring basis are summarized below.

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets/Liabilities Measured at Fair Value at	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs	Significant Unobservable Inputs
	31-Dec-15		(Level 2)	(Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$3,662	$  -	$3,662	$    -
Government Sponsored Enterprises residential mortgage-backed securities	3,780	-	3,780	-
Money Market Funds	130	130	-	-
Total	$7,572	$130	$7,572	-
Loans held for sale	$3,261	$   -	$3,261	-
Loans held at fair value	$2,459	$     -	$       -	$2,459

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets/Liabilities Measured at Fair Value at	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs	Significant Unobservable Inputs
	31-Dec-14		(Level 2)	(Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$4,036	$    -	$4,036	$  -
Government Sponsored Enterprises residential mortgage-backed securities	4,374	-	$4,374	-
Money Market Funds	130	130	-	-
Total	$8,540	$130	$8,410	-
Loans held for sale	$6,160	$     -	$6,160	-
Loans held at fair value	$629	$     -	$      -	$629

As of December 31, 2015 and 2014, the fair value of the Bank’s available-for-sale securities portfolio was approximately $7,572,000 and $8,540,000, respectively.  All the residential mortgage-backed securities were issued or guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).  The underlying loans for these securities are residential mortgages that are geographically dispersed throughout the United States.  The valuation of AFS securities using Level 2 inputs was primarily determined using the market approach, which uses quoted prices for similar instruments and model-based valuation techniques for which the significant assumptions can be corroborated by market data.  There were no transfers between Level 1 and Level 2 assets during the years ended December 31, 2015 or 2014.

When estimating the fair value of our Level 3 financial instruments, management uses various observable and unobservable inputs. 

These inputs include estimated cashflows, prepayment speeds, average projected default rate and discount rates as follows:

(in 000’s)

Assets measured at fair value	December 31,  2015 Fair value	December 31,  2014 Fair value	Principal valuation techniques	Significant observable inputs	December 31, 2015 Range of inputs	December 31, 2014 Range of inputs
Loans held at fair value:	$2,459	$629	Discounted cash flow	Constant prepayment rate	7.10% to 9.88%	7.58% to 8.52%
				Weighted average life	3.40 yrs to 8.78 yrs	3.75 yrs to 4.25 yrs
				Discount rate	7.76% to 9.94%	9.02% to 9.24%

Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, fair value as determined by management may fluctuate from period to period.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The following table summarizes additional information about assets measured at fair value on a recurring basis for which level 3 inputs were utilized to determine fair value:

(in 000’s)	2015	2014
Balance at December 31,	$   629	$  447
Origination of loans	2,017	209
Principal repayments	(185)	(20)
Change in fair value of financial instruments	(2)	(7)
Balance at December 31,	$ 2,459	$  629

Fair Value on a Nonrecurring Basis

Certain assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Impaired Loans (net of specific reserves):  The carrying value of certain impaired loans is derived in accordance with FASB ASC Topic 310, “Receivables”.  Impairment is determined based on the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.  Appraised and reported values for collateral dependent The valuation allowance for impaired loans is adjusted as necessary based on changes in the value of collateral as well as the cost of liquidation.

Other real estate owned:  Other real estate owned (“OREO”) consists of properties acquired as a result of foreclosures and deeds in-lieu-of foreclosure. Properties are classified as OREO and are reported at the lower of cost or fair value less cost to sell. The measured impairment for collateral dependent of impaired loans is determined by the fair value of the collateral less estimated liquidation costs.  Collateral values for OREO are determined by annual or more frequent appraisals if warranted by volatile market conditions, which may be discounted up to 10% based upon management’s review and the estimated cost of liquidation. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made on the appraisal process by the appraisers for differences between the comparable sales and income data available.  The valuation allowance for OREO at December 31, 2015 and 2014 was approximately $39,000 and $13,000, respectively.  

The following table presents the assets carried on the consolidated balance sheets by level within the fair value hierarchy as of December 31, 2015, for which a nonrecurring change in fair value has been recorded during the year ended December 31, 2015.

Carrying Value at December 31, 2015:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total fair value loss during the year ended December 31, 2015
Impaired Loans	$2,424	-	-	$2,424	$     -
Other real estate owned	$ 480	-	-	$  480	$  39

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The following table presents the assets and liabilities carried on the consolidated balance sheets by level within the fair value hierarchy as of December 31, 2014, for which a nonrecurring change in fair value has been recorded during the year ended December 31, 2014.

Carrying Value at December 31, 2014:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total fair value  loss during the year ended December 31, 2014
Impaired Loans	$1,731	-	-	$1,731	$(142)
Other real estate owned	564	-	-	564	(13)

Fair Value of Financial Instruments

FASB ASC Topic 825 “Disclosure About Fair Value of Financial Instruments”, requires the disclosure of the fair value of financial instruments.  The methodology for estimating the fair value of financial assets that are measured on a recurring or non recurring basis are discussed above.

The following methods and assumptions were used by the Bank in estimating its fair value disclosures for other financial instruments:

      Cash and cash equivalents, accrued interest receivable, and accrued interest payable: The carrying amounts reported in the balance sheet approximates fair value.

      Investment securities: Fair values for investment securities available for sale are as described above.

Loans Held for Sale. Fair values for loans held for sale are estimated by using actual quoted market bids on a loan by loan basis.

Loans Held at Fair Value. The fair value of loans was estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, default and voluntary prepayments as well as loan specific assumptions for losses and recoveries. 

Loans (other than impaired loans): The fair value of loans was estimated using a discounted cash flow analysis, which considered estimated pre­payments, amortizations, and non performance risk.  Prepayments and discount rates were based on current marketplace estimates and rates. 

Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings, and certain types of money market accounts) are equal to the amounts payable on demand at the reporting date (e.g., their carrying amounts).  The carrying amounts for variable-rate, fixed-term money market accounts and certificates of deposit approximate the fair values at the reporting date.  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation.  The Treasury Yield Curve was utilized for discounting cash flows as it approximates the average marketplace certificate of deposit rates across the relevant maturity spectrum. 

Commitments to extend credit: The carrying amounts for commitments to extend credit approximate fair value as such commitments are not substantially different from the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparts.  Such amounts were not significant.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The fair value of financial instruments at year-end are presented below:

  (in 000’s)

	Level in	2015		2014
	Value	Carrying	Fair	Carrying	Fair
Assets:	Hierarchy	Amount	Value	Amount	Value
Cash and cash equivalents	Level 1	$10,782	$10,782	$3,237	$3,237
Available for sale securities	(1)	7,572	7,572	8,540	8,540
Loans held for sale	Level 2	3,261	3,261	6,160	6,160
Loans held at fair value	Level 3	2,459	2,459	629	629
Loans, net of allowance for loan losses	(2)	33,101	33,082	40,127	40,069
Interest receivable	Level 2	175	175	250	250
Liabilities:
Demand deposits	Level 2	30,022	30,022	28,723	28,723
Savings deposits	Level 2	11,681	11,681	12,091	12,091
Time deposits	Level 2	14,259	14,242	16,148	16,157
Interest Payable	Level 2	9	9	16	16

(1) Level 1 for money market funds; Level 2 for all other securities.

(2) Level 2 for non-impaired loans; Level 3 for impaired loans.

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12. Consolidated Financial Information-parent Company Only

12 Months Ended

Dec. 31, 2015

Notes

12. Consolidated Financial Information-parent Company Only

12.  CONSOLIDATED FINANCIAL INFORMATION—PARENT COMPANY ONLY

Condensed Balance Sheets

(Dollars in thousands)	2015	2014
Assets:
Cash and cash equivalents	$       -	$       -
Investment in United Bank of Philadelphia	2,680	3,181
Total assets	$2,680	$3,181
Shareholders’ equity:
Series A preferred stock	1	1
Common stock	8	11
Additional paid-in capital	14,753	14,750
Accumulated deficit	(12,063)	(11,568)
Net unrealized holding losses on securities available-for-sale	(19)	(13)
Total shareholders’ equity	$2,680	$3,181

Condensed Statements of Operations

Years ended December 31,
(Dollars in thousands)	2015	2014
Other Expenses	$        -	$           -
Equity in net loss of subsidiary	(495)	(343)
Net loss	$ (495)	$    (343)

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

12.  CONSOLIDATED FINANCIAL INFORMATION—PARENT COMPANY ONLY (continued)

Condensed Statements of Cash Flows

Years ended December 31,
(Dollars in thousands)	2015	2014
Cash flows from operating activities:
Net loss	$ (495)	$ (343)
Adjustments:
Equity in net loss of subsidiary	495	343
Net cash used in operating activities	-	-
Cash and cash equivalents at beginning of year	-	-
Cash and cash equivalents at end of year	$       -	$       -

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13. Regulatory Matters

12 Months Ended

Dec. 31, 2015

Notes

13. Regulatory Matters

13.  REGULATORY MATTERS 

      The Bank engages in the commercial banking business, with a particular focus on serving African Americans, Hispanics and women, and is subject to substantial competition from financial institutions in the Bank’s service area.  As a bank holding company and a banking subsidiary, the Company and the Bank, respectively, are subject to regulation by the FDIC and the Pennsylvania Department of Banking (“PADOB”) and are required to maintain capital requirements established by those regulators. Effective January 1, 2010, the FDIC became the Bank’s primary regulator after it voluntarily surrendered its Federal Reserve Membership.

      Prompt corrective actions may be taken by those regulators against banks that do not meet minimum capital requirements.  Prompt corrective actions range from restriction or prohibition of certain activities to the appointment of a receiver or conservator of an institution’s net assets.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that if undertaken, could have a direct material effect on the Bank’s financial statements.  Under capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices, the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

      Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total Tier I capital (as defined in the regulations) for capital adequacy purposes to risk-weighted assets (as defined). 

The most recent notification as of December 31, 2015, from the FDIC and PADOB categorized the Bank as “adequately capitalized” under the regulatory framework for prompt and corrective action due to the Consent Orders described below.  The Bank’s growth and other operating factors such as the need for additional pro­visions to the allowance for loans losses may have an adverse effect on its capital ratios.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

      The Company and the Bank’s actual capital amounts and ratios are as follows:

	December 31, 2015				December 31, 2014
(In 000’s	Actual		Minimum to be Well Capitalized		Actual		Minimum to be Well Capitalized
	Amount	Ratio	Amount	Ratio	Amount	Ratio	Amount	Ratio
Total (Tier II) capital to risk weighted assets:
Company	$3,081	8.50%	N/A		$3,684	8.60%	N/A
Bank	3,081	8.50	$3,623	10.00%	3,684	8.60	$4,283	10.00%
Tier I capital to risk weighted assets
Company	2,663	7.35	N/A		3,146	7.35	N/A
Bank	2,663	7.35	$2,899	8.00%	3,146	7.35	$2,570	6.00%
Common equity Tier I capital to risk weighted assets
Company	2,663	7.35	N/A		3,146	7.35	N/A	N/A
Bank	2,663	7.35	$2,355	6.50%	3,146	7.35	N/A	N/A
Tier I Leverage ratio (Tier I capital to total quarterly average assets)
Company	2,663	4.57	N/A		3,146	5.18	N/A
Bank	2,663	4.57	$2,915	5.00%	3,146	5.18	$3,038	5.00%
Tangible common equity to tangible assets
Company	2,663	4.52	N/A	N/A	3,146	5.20	N/A	N/A
Bank	2,663	4.52	N/A	N/A	3,146	5.20	N/A	N/A

On January 31, 2012, the Bank entered into stipulations consenting to the issuance of Consent Orders with the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking (“Department”).  The material terms of the Consent Orders are identical.  The Consent Orders require the Bank to:

·      increase participation of the Bank’s board of directors in the Bank’s affairs by having the board assume full responsibility for approving the Bank’s policies and objectives and for supervising the Bank’s management;

·      have and retain qualified management, and notify the FDIC and the Department of any changes in the Bank’s board of directors or senior executive officers;

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

·      retain a bank consultant acceptable to the FDIC and the Department to develop a written analysis and assessment of the Bank’s management needs and thereafter formulate a written management plan;

·      formulate and implement written profit and budget plans for each year during which the orders are in effect;

·      develop and implement a strategic plan for each year during which the orders are in effect, to be revised annually;

·      develop a written capital plan detailing the manner in which the Bank will meet and maintain a ratio of Tier 1 capital to total assets (“leverage ratio”) of at least 8.5% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) of at least 12.5%, within a reasonable but unspecified time period;

·      formulate a written plan to reduce the Bank’s risk positions in each asset or loan in excess of $100,000 classified as “Doubtful” or “Substandard” at its current regulatory examination;

·      eliminate all assets classified as “Loss” at its current regulatory examination;

·      revise the Bank’s loan policy to establish and monitor procedures for adherence to the loan policy and to eliminate credit administration and underwriting deficiencies identified at its current regulatory examination;

·      develop a comprehensive policy and methodology for determining the allowance for loan and lease losses;

·      develop an interest rate risk policy and procedures to identify, measure, monitor and control the nature and amount of interest rate risk the Bank takes;

·      revise its liquidity and funds management policy and update and review the policy annually;

·      refrain from accepting any brokered deposits;

·      refrain from paying cash dividends without prior approval of the FDIC and the Department;

·      establish an oversight committee of the board of directors of the Bank with the responsibility to ensure the Bank’s compliance with the orders, and

·      prepare and submit quarterly reports to the FDIC and the Department detailing the actions taken to secure compliance with the orders.

The Consent Orders will remain in effect until modified or terminated by the FDIC and the Department and do not restrict the Bank from transacting its normal banking business.  The Bank will continue to serve its customers in all areas including making loans, establishing lines of credit, accepting deposits and processing banking transactions.  Customer deposits remain fully insured to the highest limits set by the FDIC.  The FDIC and the Department did not impose or recommend any monetary penalties in connection with the Consent Orders.

As of December 31, 2015, the Bank’s tier one leverage capital ratio was 4.57% and its total risk based capital ratio was 8.50%. These ratios are below the levels required by the Consent Orders.  Management is in the process of addressing all matters outlined in the Consent Orders.  The Bank has increased the participation of the Bank’s Board of Directors in

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

the Bank’s affairs and has established an oversight committee of the Board of Directors of the Bank with the responsibility to insure the Bank’s compliance with the Consent Orders.  Management has developed the written plans and policies required by the Consent Orders and will continue to endeavor to comply with the terms and conditions of the Orders.

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14. Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Notes

14. Commitments and Contingencies

14.  COMMITMENTS AND CONTINGENCIES

The Bank is a defendant in certain claims and legal actions arising in the ordinary course of business.  In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of the Company.

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15. SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2015

Notes

15. SUBSEQUENT EVENTS

15.  SUBSEQUENT EVENTS

In 2016, correspondence was sent to financial institutions in the region to encourage them to consider an investment for CRA credit. In March 2017, the Bank received a preferred stock investment from Fulton Financial totaling $675,000.   As a result of this preferred stock investment, the Bank’s Tier 1 capital improved to 5.53% at March 31, 2017.  Under PCA standards, the Bank is considered “well capitalized”.

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16. EARNINGS PER SHARE COMPUTATION

12 Months Ended

Dec. 31, 2015

Notes

16. EARNINGS PER SHARE COMPUTATION

16.  EARNINGS PER SHARE COMPUTATION

Net loss per common share is calculated as follows:

	Year ended December 31, 2015
	Loss	Shares	Per share
	(numerator)	(denominator)	amount
Net loss	$ (494,775)
Basic  EPS
Loss attributable to common stockholders	$ (494,775)	863,999	$  (0.57)
Diluted EPS
Loss attributable to common stockholders	$ (494,775)	863,999	$  (0.57)

	Year ended December 31, 2014
	Loss	Shares	Per share
	(numerator)	(denominator)	amount
Net loss	$(343,067)
Basic  EPS
Loss attributable to common stockholders	$(343,067)	1,068,588	$  (0.32)
Diluted EPS
Loss attributable to common stockholders	$(343,067)	1,068,588	$  (0.32)

There were no common stock equivalents for the years December 31, 2015 and 2014.

The preferred stock is non cumulative and the Company is restricted from paying dividends.  Therefore, no effect of the preferred stock is included in the earnings per share calculations.

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17. Summary of Quarterly Results (unaudited)

12 Months Ended

Dec. 31, 2015

Notes

17. Summary of Quarterly Results (unaudited)

17.  SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

The following summarizes the company’s consolidated results of operations during 2015 and 2014, on a quarterly basis:  

      (Dollars in thousands)

	2015
	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
Interest income	$   609	$   636	$  630	$712
Interest expense	17	17	17	18
Net interest income	592	619	613	694
Provision for loan losses	(51)	83	(40)	(60)
Net interest after provision for loan losses	643	536	653	754
Noninterest income	420	334	307	336
Noninterest expense	1,245	1,080	1,078	1,075
Net income (loss)	$ (182)	$ (210)	$ (118)	$  15
Basic income (loss) per common share	$ (0.21)	$ (0.24)	$(0.13)	$ 0.01
Diluted income (loss) per common share	$ (0.21)	$ (0.24)	$(0.13)	$ 0.01

      (Dollars in thousands)

	2014
	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
Interest income	$ 779	$  738	$   700	$ 713
Interest expense	18	19	18	18
Net interest income	761	719	682	695
Provision for loan losses	30	62	30	40
Net interest after provision for loan losses	731	657	652	655
Noninterest income	723	231	252	171
Noninterest expense	1,190	1,071	1,107	1,047
Net income (loss)	$   264	$ (183)	$ (203)	$  (221)
Basic income (loss) per common share	$  0.25	$(0.17)	$ (0.19)	$ (0.21)
Diluted income (loss) per common share	$  0.25	$(0.17)	$ (0.19)	$ (0.21)

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1. Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Policies

Principles of Consolidation

      Principles of Consolidation

      The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank.  All significant intercompany transactions and balances have been eliminated.

Management's Use of Estimates

      Management’s Use of Estimates

The preparation of the financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, the fair value of loans held at fair value, valuation allowance for deferred tax assets, the carrying value of other real estate owned, the determination of other than temporary impairment for securities.

Marketing and Advertising

Marketing and Advertising

Marketing and advertising costs are expensed as incurred.

Statement of Cash Flows

      Statement of Cash Flows

      For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest bearing deposits with banks that mature within 90 days and federal funds sold on an overnight basis.  Changes in loans made to and deposits received from customers are reported on a net basis.

Securities

      Securities

      Bonds, notes, and debentures for which the Company has both the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. Investment securities that would be held for indefinite periods of time but not necessarily to maturity, including securities that would be used as part of the Bank’s asset/liability management strategy and possibly sold in response to changes in interest rates, prepayments and similar factors are classified as “Available for Sale.”  These securities are carried at fair value, with any temporary unrealized gains or losses reported as a separate component of other comprehensive loss, net of the related income tax effect.  Gains and losses on the sale of such securities are accounted for on the specific identification basis in the statements of operations on the trade date. 

      If transfers between the available-for-sale and held-to-maturity portfolios occur, they are accounted for at fair value and unrealized holding gains and losses are accounted for at the date of transfer.  For securities transferred to available-for-sale from held-to-maturity, unrealized gains and losses as of the date of the transfer are recognized in accumulated other comprehensive loss as a separate component of shareholders’ equity. For securities transferred into the held-to-maturity portfolio from available-for-sale, unrealized gains and losses as of the date of the transfer continue to be reported in accumulated other comprehensive loss, and are amortized over the remaining life of the security as an adjustment to its yield, consistent with amortization of the premium or accretion of the discount.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation.  Declines in the fair value of individual debt securities below their cost that are deemed to be other than temporary result in write-downs of the individual securities to their fair value.  Debt securities that are deemed to be other-than-temporarily impaired are reflected in earnings as realized losses to the extent impairment is related to credit losses. The amount of the impairment for debt securities related to other factors is recognized in other comprehensive loss.  In evaluating whether impairment is temporary or other-than-temporary, management first considers whether the Bank intends to sell the security or it is more-likely-than-not that the Bank will be required to sell the security prior to recovery.  In these circumstances, the loss is determined to be other-than-temporary and the difference between the security’s fair value and its amortized cost is reflected as a loss in the statement of operations.  If management does not intend to sell the security and likely will not be required to sell the security prior to forecasted recovery, management evaluates whether it expects to recover the entire amortized cost of the debt security or if there is a credit loss.  In evaluating whether there is a credit loss, management considers various qualitative factors which include (1) the length of time and the extent to which the fair value has been less than cost, (2) the reasons for the decline in the fair value, and (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events.  If, based on an analysis of these factors, management concludes that there is a credit loss, then management calculates the expected cash flows and records a loss in earnings equal to the difference between the amortized cost of the debt security and the expected present value of cash flows.  The portion of the decline in fair value that is due to factors other than credit loss is recognized in other comprehensive loss.  No investment securities held by the Bank as of December 31, 2015 and 2014 were subjected to a write-down due to credit related other-than-temporary impairment.  Interest income from securities adjusted for the amortization of premiums and accretion of discounts is recognized in interest income using the interest method over the contractual lives of the related securities.  Realized gains and losses, determined using the amortized cost value of the specific securities sold, are included in noninterest income in the statement of operations.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when all the components meet the definition of a participating interest and when control over the assets has been surrendered.  A participating interest generally represents (1) a proportionate (pro rata) ownership interest in an entire financial assets, (2) a relationship where from the date of transfer all cash flows received from the entire financial asset are divided proportionately among the participating interest holders in an amount equal  to their share of ownership, (3) the priority of cash flows has certain characteristics, including no reduction in priority, subordination of interest, or recourse to the transferor other than standard representation or warranties, and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to pledge or exchange the entire financial asset.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Loans Held For Sale

Loans Held for Sale

From time to time, the Bank originates SBA loans for which the guaranteed portion is intended to be sold within a short period of time in the secondary market.  These loans are classified as held-for-sale and carried at estimated fair value based on a loan-by-loan valuation using actual market bids in accordance with the irrevocable option permitted under Accounting Standards Codification (“ASC”) 825-10-25 Financial Instruments.  For the years ended December 31, 2015 and 2014, the Bank recorded a net change in fair value of financial instruments totaling approximately $233,000 and $353,000, respectively, related to the SBA loans held for sale and the retained un-guaranteed portion of SBA loans held by the Bank and carried at fair value.

Loans Held At Fair Value

    Loans Held at Fair Value

     From time to time, the Bank originates SBA loans for which the un-guaranteed portion is retained after the guaranteed portion is sold in the secondary market.  Management has elected to carry these loans at fair value.  Fair value of these loans is estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries.

Loans

     Loans

      The Bank has both the positive intent and ability to hold the majority of its loans to maturity.  These loans are stated at the amount of unpaid principal, reduced by net unearned discount and an allowance for loan losses.  Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding and accretion of discount.  It is the Bank’s policy to discontinue the accrual of interest income when a default of principal or interest exists for a period of 90 days except when, in management’s judgment, the loan is well collateralized and in the process of collection. Interest received on nonaccrual loans is either applied against principal or reported as interest income according to management’s judgment as to collectability of principal.  When interest accruals are discontinued, unpaid accrued interest previously credited to income is reversed and the loan is classified as impaired.

Non-accrual and Past Due Loans.

      Non-accrual and Past Due Loans

      Loans are considered past due if the required principal and interest payments have not been received 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

      Unearned discounts are amortized over the weighted average maturity of the related mortgage loan portfolio.  Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loan’s yield.  The Bank is amortizing these amounts over the contractual life of the loan.

      For purchased loans, the discount remaining after the loan loss allocation is being amortized over the remaining life of the purchased loans using the interest method.

Allowance For Loan Losses

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses.  Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance.  When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.  Such periodic assessments may, in management’s judgment, require the Bank to recognize additions or reductions to the allowance. 

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Various regulatory agencies periodically review the adequacy of the Bank’s allowance for loan losses as an integral part of their examination process.  Such agencies may require the Bank to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination.  It is reasonably possible that the above factors may change significantly and, therefore, affects management’s determination of the allowance for loan losses in the near term.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical charge-off experience, other qualitative factors, and adjustments made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.  The Bank does not allocate reserves for unfunded commitments to fund lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank will identify and assess loans that may be impaired through any of the following processes:

·      During regularly scheduled meetings of the Asset Quality Committee

·      During regular reviews of the delinquency report

·      During the course of routine account servicing, annual review, or credit file update

·      Upon receipt of verifiable evidence of a material reduction in the value of collateral to a level that creates a less than desirable loan-to-value ratio

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

      Large groups of smaller, homogeneous loans, including consumer installment and home equity loans, 1-4 family residential mortgages, and student loans are evaluated collectively for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.

Bank Premises and Equipment

Bank Premises and Equipment

      Bank premises and equipment are stated at cost less accumulated depreciation.  Depreciation is computed on the straight-line method over the estimated useful lives of the assets.  Amortization of leasehold improvements is computed over the shorter of the related lease term or the useful life of the assets.

Income Taxes

Income Taxes

      The liability method is used in accounting for income taxes.  Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.  Realization of deferred tax assets is dependent on generating sufficient taxable income in the future.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more-likely-than not recognition threshold are measured as the largest amount of tax benefit that is more than 50  percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  It is the Bank’s policy to recognize interest and penalties related to unrecognized tax liabilities within income tax expense in the statement of operations.

The Bank does not have an accrual for uncertain tax positions as of December 31, 2015 or 2014, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law.

Loss Per Share ("eps")

Loss Per Share (“EPS”)

Basic EPS excludes dilution and is computed by dividing income (loss) available to common shareholders by the weighted average common shares outstanding during the period.  Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

Off-Balance-Sheet Financial Instruments

Off-Balance-Sheet Financial Instruments

In the ordinary course of business, the Bank has entered into off-balance-sheet financial instruments consisting of commitments to extend credit and letters of credit.  Such financial instruments are recorded in the financial statements when they become payable.

Other Real Estate Owned

Other Real Estate Owned

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value, net of estimated cost to sell, at the date of foreclosure, establishing a new cost basis.  After foreclosure, valuations are periodically performed by management, and the real estate is carried at the lower of carrying amount or fair value less the cost to sell.  Revenue and expenses from operations and changes in valuation allowance are charged to operations. 

Segments

Segments

      The Company has one reportable segment, “Community Banking.” All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the other.  For example, commercial lending is dependent upon the ability of the Bank to fund it with retail deposits and other borrowings and to manage interest rate and credit risk.  This situation is also similar for consumer and residential mortgage lending.  Accordingly, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.

Reclassifications

Reclassifications

Certain reclassifications have been made to the prior years’ financial statements to conform to the 2015 presentation, with no impact on earnings or shareholders’ equity.

Comprehensive Loss

Comprehensive (Loss) Income

Comprehensive (loss) income includes net loss as well as certain other items that result in a change to equity during the period.

The components of other comprehensive (loss) income are as follows:

	December 31, 2015
(in 000’s)	Before tax	Tax	Net of tax
	amount	Benefit	Amount
Unrealized loss on securities	$ (9)	$   3	$  (6)
Unrealized holding loss arising during period	-	-	-
Less: reclassification adjustment for gains
realized in net loss	-	-	-
Other comprehensive loss, net	$ (9)	$  3	$  (6)
	December 31, 2014
	Before tax	Tax	Net of tax
	amount	(Expense)	Amount
Unrealized income on securities:
Unrealized holding income arising during period	$  475	$   (157)	$    318
Less: reclassification adjustment for gains
realized in net loss	(7)	3	(4)
Other comprehensive income, net	$ 468	$  (154)	$    314

Recent Accounting Pronouncements

Recent Accounting Pronouncements

ASU 2014-04, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. ASU 2014-04 clarifies that an in substance repossession or foreclosure occurs and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan though completion of a deed in lieu of foreclosure or through a similar legal agreement.  The amendments require interim and annual disclosure of both the amount of the foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of this amendment had no impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

 ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the 69 Effective Date. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016- 08, “Principal versus Agent Considerations (Reporting Gross versus Net),” which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers and 2016-12, Narrow-Scope Improvements and Practical Expedients, both of which provide additional clarification of certain provisions in Topic 606. These Accounting Standards Codification (“ASC”) updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or retrospectively with the cumulative effect transition method. The Company is currently in the process of evaluating all revenue streams, accounting policies, practices and reporting to identify and understand any impact on the Consolidated Financial Statements. The preliminary evaluation suggests that adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

 ASU 2017-04 (Topic 350), “Intangibles – Goodwill and Others” Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is evaluating the effect that ASU 2017-04 will have on its consolidated financial statements and related disclosures.

 ASU 2017-01 (Topic 805), “Business Combinations” Issued in January 2017, ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 is effective for annual periods beginning after December 15, 2017 including interim periods within those periods. The Company is evaluating the effect that ASU 2017-01 will have on its consolidated financial statements and related disclosures.

 ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments” Issued in June 2016, ASU 2016-13 significantly changes how companies measure and recognize credit impairment for many financial assets. The new current expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are in the scope of the standard. The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities. ASU 2016-13 is effective for the annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

 ASU 2016-02 (Topic 842), “Leases” Issued in February 2016, ASU 2016-02 revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. ASU 2016-02 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective transition 70 approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

ASU 2016-01 (Subtopic 825-10), “Financial Instruments – Overall, Recognition and Measurement of Financial Assets and Financial Liabilities” Issued in January 2016, ASU 2016-01 provides that equity investments will be measured at fair value with changes in fair value recognized in net income. When fair value is not readily determinable an entity may elect to measure the equity investment at cost, minus impairment, plus or minus any change in the investment’s observable price. For financial liabilities that are measured at fair value, the amendment requires an entity to present separately, in other comprehensive income, any change in fair value resulting from a change in instrument-specific credit risk. ASU 2016-01 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities may apply this guidance on a prospective or retrospective basis. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures.

ASU 2016-15 (Topic 320), “Classification of Certain Cash Receipts and Cash Payments” Issued in August 2016, ASU 2016-15 provides guidance on eight specific cash flow issues and their disclosure in the consolidated statements of cash flows. The issues addressed include debt prepayment, settlement of zero-coupon debt, contingent consideration in business combinations, proceeds from settlement of insurance claims, proceeds from settlement of BOLI, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the Predominance principle. 2016-15 is effective for the annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of this guidance and does not anticipate a material impact on its consolidated financial statements.

ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”  Issued on August 15, 2014, ASU 2014-15 describes how an entity should assess its ability to meet obligations and sets disclosure requirements for how this information should be disclosed in the financial statements. The standard provides accounting guidance that will be used with existing auditing standards. The new standard applies to all entities for the first annual period ending after December 15, 2016, and interim periods thereafter. The Company is evaluating the effect that ASU 2014-15 will have on its consolidated financial statements and related disclosures as adoption of the new accounting standard could result in a different conclusion.

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1. Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Components of Other Comprehensive Loss

The components of other comprehensive (loss) income are as follows:

	December 31, 2015
(in 000’s)	Before tax	Tax	Net of tax
	amount	Benefit	Amount
Unrealized loss on securities	$ (9)	$   3	$  (6)
Unrealized holding loss arising during period	-	-	-
Less: reclassification adjustment for gains
realized in net loss	-	-	-
Other comprehensive loss, net	$ (9)	$  3	$  (6)
	December 31, 2014
	Before tax	Tax	Net of tax
	amount	(Expense)	Amount
Unrealized income on securities:
Unrealized holding income arising during period	$  475	$   (157)	$    318
Less: reclassification adjustment for gains
realized in net loss	(7)	3	(4)
Other comprehensive income, net	$ 468	$  (154)	$    314

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3. Investments (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Available-for-sale Securities Reconciliation

The amortized cost, gross unrealized holding gains and losses, and estimated fair value of the available-for-sale and held-to-maturity investment securities by major security type at December 31, 2015 and 2014 are as follows:

(In 000’s)	2015
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	Value
Available-for-sale:
U.S. Government agency securities	$  3,697	$  3	$  (38)	$   3,662
Government Sponsored Enterprises  residential mortgage-backed securities	3,774	36	(30)	3,780
Investments in money market funds	130	-	-	130
	$  7,601	$  39	$ (68)	$  7,572

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

3.   INVESTMENTS-Continued

	2014
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	Value
Available-for-sale:
U.S. Government agency securities	$    4,097	$     -	$     (61)	$  4,036
Government Sponsored Enterprises  residential mortgage-backed securities	4,333	60	(20)	4,374
Investments in money market funds	130	-	-	130
	$    8,560	$  60	$    (81)	$  8,540

Schedule of Continuous Unrealized Loss Positions on Held-To-Maturity Investments

The table below indicates the length of time individual securities held-to-maturity have been in a continuous unrealized loss position at December 31, 2015 (in thousands):  

	Number	Less than 12 months		12 months or longer		Total
Description of	Of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	Securities	value	Losses	Value	Losses	value	Losses
U.S. Government
agency securities	9	$  2,416	$   (32)	$  243	$   (6)	$  2,659	$  (38)
Mortgage backed
securities	8	1,486	(19)	227	(11)	1,713	(30)
Total temporarily
impaired investment
securities	17	$ 3,902	$   (51)	$ 470	$  (17)	$ 4,372	$  (68)

The table below indicates the length of time individual securities held-to-maturity have been in a continuous unrealized loss position at December 31, 2014 (in thousands):  

	Number	Less than 12 months		12 months or longer		Total
Description of	Of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	Securities	value	Losses	Value	Losses	value	losses
U.S. Government
agency securities	13	$  246	$    (4)	$  3,290	$  (57)	$   3,536	$   (61)
Mortgage backed
securities	6	-	-	1,440	(20)	1,440	(20)
Total temporarily
impaired investment
securities	19	$  246	$    (4)	$ 4,730	$   (77)	$  4,976	$  (81)

Schedule of Investments Classified by Contractual Maturity Date

Maturities of investment securities classified as available-for-sale at December 31, 2015 were as follows. Expected maturities may differ from contractual maturities because the underlying mortgages supporting mortgage backed securities may be prepaid without any penalties. Consequently, mortgage-backed securities are not presented by maturity category.

(In 000’s)

	Amortized	Fair
	Cost	Value
Available-for-sale:
Due in one year	$         -	$       -
Due after one year through five years	-	-
Due after five years through ten years	3,697	3,662
Government-sponsored enterprises      residential mortgage-backed securities	3,774	3,780
Total debt securities	7,471	7,442
Investments in money market funds	130	130
	$ 7,601	$ 7,572

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4. Loans and Allowance For Loan Losses (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of the Composition of Net Loans

The composition of the net loans is as follows:

	December 31,	December 31,
(In 000's)	2015	2014
Commercial and industrial:
Commercial	$               1,535	$                 2,563
SBA loans	40	168
Asset-based	1,487	1,904
Total commercial and industrial	3,062	4,635
Commercial real estate:
Commercial mortgages	13,774	15,470
SBA loans	353	525
Construction	2,175	3,423
Religious organizations	10,112	12,138
Total commercial real estate	26,414	31,556
Consumer real estate:
Home equity loans	897	1,047
Home equity lines of credit	20	22
1-4 family residential mortgages	1,924	2,228
Total consumer real estate	2,841	3,297
Total real estate	29,255	34,853
Consumer and other:
Consumer installment	-	7
Student loans	1,081	1,221
Other	121	145
Total consumer and other	1,202	1,373
Loans, net	$            33,519	$               40,861

Schedule of Activity in Related Party Loans

Activity in related party loans is presented in the following table. 

	2015	2014
Balance outstanding at December 31,	$ 845,477	$    858,861
Principal additions	-	52,000
Disaffiliations	-	-
Principal reductions	(70,399)	(65,384)
Balance outstanding at December 31,	$ 775,078	$     845,477

Schedule of Age Analysis of Past Due Loans

An age analysis of past due loans, segregated by class of loans, as of December 31, 2015 is as follows:

(In 000's)		Accruing
	Loans	Loans 90 or
	30-89 Days	More Days		Total Past	Current
	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	$       -	$        -	$         110	$       110	$      1,425	$      1,535
SBA loans	-	-	40	40	-	40
Asset-based	11	-	289	300	1,187	1,487
Total commercial and industrial	11	-	439	450	2,612	3,062
Commercial real estate:
Commercial mortgages	169	39	1,335	1,543	12,231	13,774
SBA loans	-	-	271	271	82	353
Construction	-	-	-	-	2,175	2,175
Religious organizations	-	-	471	471	9,641	10,112
Total commercial real estate	169	39	2,077	2,285	24,129	26,414
Consumer real estate:
Home equity loans	56	125	358	539	358	897
Home equity lines of credit	-	-	-	-	20	20
1-4 family residential mortgages	35	-	129	164	1,760	1,924
Total consumer real estate	91	125	487	703	2,138	2,841
Total real estate	260	164	2,564	2,988	26,267	29,255
Consumer and other:
Consumer installment	-	-	-	-	-	-
Student loans	66	129	-	195	886	1,081
Other	2	-	-	2	119	121
Total consumer and other	68	129	-	197	1,005	1,202
Total loans	$   339	$    293	$      3,003	$      3,635	$    29,884	$    33,519

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

An age analysis of past due loans, segregated by class of loans, as of December 31, 2014 is as follows:

(In 000's)		Accruing
	Loans	Loans 90 or
	30-89 Days	More Days		Total Past	Current
	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	$                 -	$             -	$              248	248	$          2,315	$             2,563
SBA loans	-	-	48	48	120	168
Asset-based	-	-	-	-	1,904	1,904
Total Commercial and industrial	-	-	296	296	4,339	4,635
Commercial real estate:
Commercial mortgages	17	83	985	1,085	14,385	15,470
SBA loans	-	-	118	118	407	525
Construction	-	-	-	-	3,423	3,423
Religious organizations	-	-	520	520	11,618	12,138
Total Commercial real estate	17	83	1,623	1,723	29,833	31,556
Consumer real estate:
Home equity loans	246	-	368	614	433	1,047
Home equity lines of credit	-	-	-	-	22	22
1-4 family residential mortgages	-	-	194	194	2,034	2,228
Total consumer real estate	246	-	562	808	2,489	3,297
Total real estate	263	83	2,185	2,531	32,322	34,853
Consumer and other:
Consumer installment	-	-	-	-	7	7
Student loans	136	88	-	224	997	1,221
Other	12	-	-	12	133	145
Total consumer and other	148	88	-	236	1,137	1,373
Total loans	$            411	$          171	$           2,481	$         3,063	$        37,798	$           40,861

Schedule of Impaired Loans

  Year-end 2015 impaired loans are set forth in the following table.

(In 000’s)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total		Average	Interest recognized
	Principal	With No	With	Recorded	Related	Recorded	on impaired
	Balance	Allowance	Allowance	Investment	Allowance	Investment	loans
Commercial and industrial:
Commercial	$  818	$  353	$     -	$    353	$     -	$   446	$       -
SBA  loans	46	-	46	46	-	38	2
Asset-based	40	40	-	40	-	54	2
Total Commercial and industrial	904	393	46	439	-	538	4
Commercial real estate:
Commercial mortgages	1,334	810	524	1,334	91	579	9
SBA  Loans	271	271	-	271	-	161	2
Religious Organizations	471	471	-	471	-	630	2
Total Commercial real estate	2,076	1,552	524	2,076	91	1,370	13
Total Loans	$  2,980	$ 1,945	$  570	$ 2,515	$  91	$ 1,908	$     17

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

Year-end 2014 impaired loans are set forth in the following table.

(In 000’s)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total		Average	Interest recognized
	Principal	With No	With	Recorded	Related	Recorded	on impaired
	Balance	Allowance	Allowance	Investment	Allowance	Investment	loans
Commercial and industrial:
Commercial	$ 501	$  38	$   210	$   248	$  199	$   248	$   3
SBA  loans	94	46	48	94	48	52	-
Asset-based	40	40	-	40	-	4	1
Total Commercial and industrial	635	124	258	382	247	304	4
Commercial real estate:
Commercial mortgages	985	616	369	985	27	933	3
SBA  Loans	118	118	-	118	-	124	-
Religious Organizations	520	520	-	520	-	607	-
Total Commercial real estate	1,623	1,254	369	1,623	27	1,664	3
Total Loans	$2,258	$1,378	$  627	$  2,005	$ 274	$ 1,968	$   7

Schedule of Bank Loans by Class According to Credit Quality

The tables below detail the Bank’s loans by class according to their credit quality indictors discussed above.

(In 000's)		Commercial Loans, December 31, 2015
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$    285	$     922	$      16	$     58	$    254	$      -	$  1,535
SBA loans	-	-	-	-	40	-	40
Asset-based	-	900	222	-	289	76	1,487
	285	1,822	238	58	583	76	3,062
Commercial real estate:
Commercial mortgages	-	10,689	1,098	613	1,151	223	13,774
SBA Loans	-	82	-	-	271	-	353
Construction	-	2,175	-	-	-	-	2,175
Religious organizations	-	7,624	1,131	886	471	-	10,112
	-	20,570	2,229	1,499	1,893	223	26,414
Total commercial loans	$    285	$ 22,393	$  2,467	$ 1,557	$   2,476	$   299	$29,476

			Residential Mortgage and Consumer Loans December 31, 2015
	Performing	Nonperforming		Total
Consumer Real Estate:
Home equity	$     539	$   358		$    897
Home equity line of credit	20	-		20
1-4 family residential mortgages	1,795	129		1,924
	2,354	487		2,841
Consumer Other:
Consumer Installment	-	-		-
Student loans	1,081	-		1,081
Other	121	-		121
	1,202	-		1,202
Total  consumer loans	$  3,556	$   487		$ 4,043
Total loans					$33,519

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

(In 000's)		Commercial Loans, December 31, 2014
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$ 300	$ 1,321	$ 474	$ 220	$ 113	$ 135	$ 2,563
SBA loans	-	80	-	-	88	-	168
Asset-based	-	1,734	124	-	46	-	1,904
	300	3,135	598	220	247	135	4,635
Commercial real estate:
Commercial mortgages	-	13,024	724	57	1,348	317	15,470
SBA Loans	-	237	170	-	118	-	525
Construction	-	3,423	-	-	-	-	3,423
Religious organizations	-	9,730	1,185	703	520	-	12,138
	-	26,414	2,079	760	1,986	317	31,556
Total commercial loans	$ 300	$ 29,549	$ 2,677	$ 980	$ 2,233	$ 452	$ 36,191

		Residential Mortgage and Consumer Loans December 31, 2014
	- Performing/Nonperforming
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$ 679	$ 368	$ 1,047
Home equity line of credit	22	-	22
1-4 family residential mortgages	2,034	194	2,228
	2,735	562	3,297
Consumer Other:
Consumer Installment	7	-	7
Student loans	1,221	-	1,221
Other	145	-	145
	1,373	-	1,373
Total  consumer loans	$ 4,108	$ 562	$ 4,670
Total loans				$40,861

Schedule of Age Analysis of Allowance for Loan Losses

An analysis of the activity in the allowance for loan losses for the years 2015 and 2014 is as follows:

(in 000's)		For the Year Ended December 31, 2015
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Beginning balance	$             403	$          300	$                20	$            12	$         735
Provision for loan losses	3	(47)	(18)	(6)	(68)
Charge-offs	(259)	(3)	-	(17)	(279)
Recoveries	4	-	6	20	30
Net charge-offs	(255)	(3)	6	3	(249)
Ending balance	$            151	$          250	$              8	$             9	$        418

(in 000's)		For the Year Ended December 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Beginning balance	$       483	$       280	$          59	$         17	$      839
Provision for loan losses	169	20	(28)	1	162
Charge-offs	(253)	-	(19)	(30)	(302)
Recoveries	4	-	8	24	36
Net charge-offs	(249)	-	(11)	(6)	(266)
Ending balance	$       403	$      300	$         20	$         12	$      735

(in 000's)		As of December 31, 2015
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$ -	$ 91	$ -	$ -	$ 91
Loans collectively  evaluated for impairment	151	159	8	9	327
	$ 151	$ 250	$ 8	$ 9	$ 418
Loans, ending balance:
Loans individually evaluated for impairment	$ 439	$ 2,076	$ -	$ -	$ 2,515
Loans collectively  evaluated for impairment	2,623	24,338	2,841	1,202	31,314
Total	$ 3,062	$ 26,414	$ 2,841	$ 1,202	$ 33,519

		As of December 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$ 247	$ 27	$ -	$ -	$ 274
Loans collectively  evaluated for impairment	156	273	20	12	461
	$ 403	$ 300	$ 20	$ 12	$ 735
Loans, ending balance:
Loans individually evaluated for impairment	$ 382	$ 1,623	$ -	$ -	$ 2,005
Loans collectively  evaluated for impairment	4,253	29,933	3,297	1,373	$ 38,856
Total	$ 4,635	$ 31,566	$ 3,297	$ 1,373	$ 40,861

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5. Bank Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Major Classes of Bank Premises and Equipment

The major classes of bank premises and equipment and the total accumulated depreciation are as follows at December 31:

(In 000’s)	Estimated
	useful life	2015	2014
Leasehold improvements	10-15 years	$   788	$  785
Furniture and equipment	3- 7 years	1,297	1,179
		2,085	1,964
Less accumulated depreciation		(1,592)	(1,415)
		$   493	$   549

Schedule of Future Minimum Lease Payments Under Operating Leases

Future minimum lease payments under operating leases are as follows:

 (In 000’s)

Year ending December 31,	Operating     leases
2016	$  423
2017	408
2018	416
2019	411
2020	332
Thereafter	888
Total minimum lease payments	$2,878

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6. Other Real Estate Owned (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Components Of Other Real Estate Owned

The following schedule reflects the components of other real estate owned at December 31, 2015 and 2014:

(in 000’s)	2015	2014	2013
Commercial real estate	$  297	$  191	$  191
Residential real estate	183	373	242
Total	$  480	$  564	$ 433

Schedule of Change in Other Real Estate Owned

A summary of the change in other real estate owned follows:

(in 000’s)	Year Ended December 31, 2015	Year Ended December 31, 2014
Beginning Balance	$    564	$   433
Additions, transfers from loans	148	240
Sales	(272)	(96)
	441	577
Write-ups (write-downs)	39	(13)
Ending Balance	$    480	$  564

Schedule of Components of Net Expense of Other Real Estate Owned

The following table details the components of net expense of other real estate owned.

(in 000’s)	Year ended December 31, 2015	Year ended December 31, 2014
Insurance	$  15	$ 21
Legal fees	-	2
Maintenance	-	-
Professional fees	-	-
Real estate taxes	14	20
Utilities	3	4
Transfer-in write-up	(88)	(47)
Impairment charges	49	13
Other	18	8
Total	$11	$  21

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7. Deposits (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Maturity of Time Deposits

At December 31, 2015, the scheduled maturities of time deposits (certificates of deposit) are as follows:

(In 000’s)	2016	$13,074
	2017	644
	2018	438
	2019	43
	2020	15
	Thereafter	45
		$14,259

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9. Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Deferred Tax Assets and Liabilities

Significant components of the Bank’s net deferred tax assets are as follows:

	December 31,
(in 000’s)	2015	2014
Deferred tax assets(liabilities):
Provision for loan losses	$     46	$ 161
Unrealized gain on investment securities	10	7
Depreciation	(36)	7
Net operating carryforwards	3,538	3,233
Other, net	386	373
Valuation allowance for deferred tax assets	(3,934)	(3,774)
Net deferred tax assets	$     10	$      7

Schedule of Effective Income Tax Rate Reconciliation

	2015	2014
Effective rate reconciliation:
Tax at statutory rate (34%)	$  (168)	$ (117)
Nondeductible expenses	8	9
Increase in valuation allowance	160	95
Other	-	13
Total tax expense	$        -	$           -

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10. Financial Instrument Commitments (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Financial Instruments Commitments

A summary of the Bank’s financial instrument commitments is as follows:

	2015	2014
Commitments to extend credit	$5,903,000	$ 8,262,000
Outstanding letters of credit	333,000	1,036,000

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11. Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Fair Value of Assets on a Recurring Basis

Assets on the consolidated balance sheets measured at fair value on a recurring basis are summarized below.

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets/Liabilities Measured at Fair Value at	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs	Significant Unobservable Inputs
	31-Dec-15		(Level 2)	(Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$3,662	$  -	$3,662	$    -
Government Sponsored Enterprises residential mortgage-backed securities	3,780	-	3,780	-
Money Market Funds	130	130	-	-
Total	$7,572	$130	$7,572	-
Loans held for sale	$3,261	$   -	$3,261	-
Loans held at fair value	$2,459	$     -	$       -	$2,459

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets/Liabilities Measured at Fair Value at	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs	Significant Unobservable Inputs
	31-Dec-14		(Level 2)	(Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$4,036	$    -	$4,036	$  -
Government Sponsored Enterprises residential mortgage-backed securities	4,374	-	$4,374	-
Money Market Funds	130	130	-	-
Total	$8,540	$130	$8,410	-
Loans held for sale	$6,160	$     -	$6,160	-
Loans held at fair value	$629	$     -	$      -	$629

Schedule of Inputs in Estimation of Fair Value of Level 3 Financial Instruments

These inputs include estimated cashflows, prepayment speeds, average projected default rate and discount rates as follows:

(in 000’s)

Assets measured at fair value	December 31,  2015 Fair value	December 31,  2014 Fair value	Principal valuation techniques	Significant observable inputs	December 31, 2015 Range of inputs	December 31, 2014 Range of inputs
Loans held at fair value:	$2,459	$629	Discounted cash flow	Constant prepayment rate	7.10% to 9.88%	7.58% to 8.52%
				Weighted average life	3.40 yrs to 8.78 yrs	3.75 yrs to 4.25 yrs
				Discount rate	7.76% to 9.94%	9.02% to 9.24%

Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, fair value as determined by management may fluctuate from period to period.

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The following table summarizes additional information about assets measured at fair value on a recurring basis for which level 3 inputs were utilized to determine fair value:

(in 000’s)	2015	2014
Balance at December 31,	$   629	$  447
Origination of loans	2,017	209
Principal repayments	(185)	(20)
Change in fair value of financial instruments	(2)	(7)
Balance at December 31,	$ 2,459	$  629

Schedule of Fair Value of Assets Measured on a Nonrecurring Basis

The following table presents the assets carried on the consolidated balance sheets by level within the fair value hierarchy as of December 31, 2015, for which a nonrecurring change in fair value has been recorded during the year ended December 31, 2015.

Carrying Value at December 31, 2015:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total fair value loss during the year ended December 31, 2015
Impaired Loans	$2,424	-	-	$2,424	$     -
Other real estate owned	$ 480	-	-	$  480	$  39

United Bancshares, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 31, 2015 and 2014

The following table presents the assets and liabilities carried on the consolidated balance sheets by level within the fair value hierarchy as of December 31, 2014, for which a nonrecurring change in fair value has been recorded during the year ended December 31, 2014.

Carrying Value at December 31, 2014:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total fair value  loss during the year ended December 31, 2014
Impaired Loans	$1,731	-	-	$1,731	$(142)
Other real estate owned	564	-	-	564	(13)

Schedule of Fair Value of Financial Instruments at Year-End

The fair value of financial instruments at year-end are presented below:

  (in 000’s)

	Level in	2015		2014
	Value	Carrying	Fair	Carrying	Fair
Assets:	Hierarchy	Amount	Value	Amount	Value
Cash and cash equivalents	Level 1	$10,782	$10,782	$3,237	$3,237
Available for sale securities	(1)	7,572	7,572	8,540	8,540
Loans held for sale	Level 2	3,261	3,261	6,160	6,160
Loans held at fair value	Level 3	2,459	2,459	629	629
Loans, net of allowance for loan losses	(2)	33,101	33,082	40,127	40,069
Interest receivable	Level 2	175	175	250	250
Liabilities:
Demand deposits	Level 2	30,022	30,022	28,723	28,723
Savings deposits	Level 2	11,681	11,681	12,091	12,091
Time deposits	Level 2	14,259	14,242	16,148	16,157
Interest Payable	Level 2	9	9	16	16

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12. Consolidated Financial Information-parent Company Only (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Condensed Balance Sheet

Condensed Balance Sheets

(Dollars in thousands)	2015	2014
Assets:
Cash and cash equivalents	$       -	$       -
Investment in United Bank of Philadelphia	2,680	3,181
Total assets	$2,680	$3,181
Shareholders’ equity:
Series A preferred stock	1	1
Common stock	8	11
Additional paid-in capital	14,753	14,750
Accumulated deficit	(12,063)	(11,568)
Net unrealized holding losses on securities available-for-sale	(19)	(13)
Total shareholders’ equity	$2,680	$3,181

Schedule of Condensed Income Statement

Condensed Statements of Operations

Years ended December 31,
(Dollars in thousands)	2015	2014
Other Expenses	$        -	$           -
Equity in net loss of subsidiary	(495)	(343)
Net loss	$ (495)	$    (343)

Schedule of Condensed Cash Flow Statement

Condensed Statements of Cash Flows

Years ended December 31,
(Dollars in thousands)	2015	2014
Cash flows from operating activities:
Net loss	$ (495)	$ (343)
Adjustments:
Equity in net loss of subsidiary	495	343
Net cash used in operating activities	-	-
Cash and cash equivalents at beginning of year	-	-
Cash and cash equivalents at end of year	$       -	$       -

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13. Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of the Company and the Bank's Actual Capital

      The Company and the Bank’s actual capital amounts and ratios are as follows:

	December 31, 2015				December 31, 2014
(In 000’s	Actual		Minimum to be Well Capitalized		Actual		Minimum to be Well Capitalized
	Amount	Ratio	Amount	Ratio	Amount	Ratio	Amount	Ratio
Total (Tier II) capital to risk weighted assets:
Company	$3,081	8.50%	N/A		$3,684	8.60%	N/A
Bank	3,081	8.50	$3,623	10.00%	3,684	8.60	$4,283	10.00%
Tier I capital to risk weighted assets
Company	2,663	7.35	N/A		3,146	7.35	N/A
Bank	2,663	7.35	$2,899	8.00%	3,146	7.35	$2,570	6.00%
Common equity Tier I capital to risk weighted assets
Company	2,663	7.35	N/A		3,146	7.35	N/A	N/A
Bank	2,663	7.35	$2,355	6.50%	3,146	7.35	N/A	N/A
Tier I Leverage ratio (Tier I capital to total quarterly average assets)
Company	2,663	4.57	N/A		3,146	5.18	N/A
Bank	2,663	4.57	$2,915	5.00%	3,146	5.18	$3,038	5.00%
Tangible common equity to tangible assets
Company	2,663	4.52	N/A	N/A	3,146	5.20	N/A	N/A
Bank	2,663	4.52	N/A	N/A	3,146	5.20	N/A	N/A

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16. EARNINGS PER SHARE COMPUTATION (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Net Loss per Common Share

Net loss per common share is calculated as follows:

	Year ended December 31, 2015
	Loss	Shares	Per share
	(numerator)	(denominator)	amount
Net loss	$ (494,775)
Basic  EPS
Loss attributable to common stockholders	$ (494,775)	863,999	$  (0.57)
Diluted EPS
Loss attributable to common stockholders	$ (494,775)	863,999	$  (0.57)

	Year ended December 31, 2014
	Loss	Shares	Per share
	(numerator)	(denominator)	amount
Net loss	$(343,067)
Basic  EPS
Loss attributable to common stockholders	$(343,067)	1,068,588	$  (0.32)
Diluted EPS
Loss attributable to common stockholders	$(343,067)	1,068,588	$  (0.32)

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17. Summary of Quarterly Results (unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Tables/Schedules

Schedule of Condensed Income Statement

The following summarizes the company’s consolidated results of operations during 2015 and 2014, on a quarterly basis:  

      (Dollars in thousands)

	2015
	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
Interest income	$   609	$   636	$  630	$712
Interest expense	17	17	17	18
Net interest income	592	619	613	694
Provision for loan losses	(51)	83	(40)	(60)
Net interest after provision for loan losses	643	536	653	754
Noninterest income	420	334	307	336
Noninterest expense	1,245	1,080	1,078	1,075
Net income (loss)	$ (182)	$ (210)	$ (118)	$  15
Basic income (loss) per common share	$ (0.21)	$ (0.24)	$(0.13)	$ 0.01
Diluted income (loss) per common share	$ (0.21)	$ (0.24)	$(0.13)	$ 0.01

      (Dollars in thousands)

	2014
	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
Interest income	$ 779	$  738	$   700	$ 713
Interest expense	18	19	18	18
Net interest income	761	719	682	695
Provision for loan losses	30	62	30	40
Net interest after provision for loan losses	731	657	652	655
Noninterest income	723	231	252	171
Noninterest expense	1,190	1,071	1,107	1,047
Net income (loss)	$   264	$ (183)	$ (203)	$  (221)
Basic income (loss) per common share	$  0.25	$(0.17)	$ (0.19)	$ (0.21)
Diluted income (loss) per common share	$  0.25	$(0.17)	$ (0.19)	$ (0.21)

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1. Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2015
Details
Entity Incorporation, Date of Incorporation	Apr. 08, 1993

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1. Summary of Significant Accounting Policies: Comprehensive Loss: Schedule of Components of Other Comprehensive Loss (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Details
Unrealized holding income loss arising during period, before tax amount	$ (9)	$ 475
Unrealized holding income loss arising during period, tax benefit (expense)	3	(157)
Unrealized holding income loss arising during period, net of tax amount	(6)	318
Less: reclassification adjustment for gains realized in net income loss, before tax amount	0	(7)
Less: reclassification adjustment for gains realized in net income loss, tax benefit	0	3
Less: reclassification adjustment for gains realized in net income loss, net of tax amount	0	(4)
Other comprehensive income loss, net, before tax amount	(9)	468
Other comprehensive income loss, net, tax (expense) benefit	3	(154)
Other comprehensive income loss, net, net after tax amount	$ (6)	$ 314

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2. Cash and Due From Bank Balances (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Details
Reserve balances, due from banks	$ 100,000	$ 100,000

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3. Investments: Schedule of Available-for-sale Securities Reconciliation (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Available-for-sale Securities, Amortized Cost Basis	$ 7,601,000	$ 8,560,000
Available-for-sale Securities, Gross Unrealized Gain	39,000	60,000
Available-for-sale Securities, Gross Unrealized Loss	(68,000)	(81,000)
Available-for-sale, at fair value	7,572,029	8,539,892
Thousand
Available-for-sale, at fair value	7,572,000	8,540,000
US Government Agencies Debt Securities
Available-for-sale Securities, Amortized Cost Basis	3,697,000	4,097,000
Available-for-sale Securities, Gross Unrealized Gain	3,000	0
Available-for-sale Securities, Gross Unrealized Loss	(38,000)	(61,000)
Available-for-sale, at fair value	3,662,000	4,036,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis	3,774,000	4,333,000
Available-for-sale Securities, Gross Unrealized Gain	36,000	60,000
Available-for-sale Securities, Gross Unrealized Loss	(30,000)	(20,000)
Available-for-sale, at fair value	3,780,000	4,374,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis	130,000	130,000
Available-for-sale Securities, Gross Unrealized Gain	0	0
Available-for-sale Securities, Gross Unrealized Loss	0	0
Available-for-sale, at fair value	$ 130,000	$ 130,000

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3. Investments (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Held-to-maturity Securities, Gross Gains (Losses), Derivatives	$ 0
Proceeds from sale of available-for sale investment securities	0	$ 915,918
Available for Sale Securities, Gain (Loss) Recognized		6,000
Held-to-maturity Securities Pledged as Collateral	7,075,883	6,898,559
Thousand
Proceeds from sale of available-for sale investment securities		910,000
US Government Agencies Debt Securities
Held-to-maturity Securities	$ 1,600,000	$ 0

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3. Investments: Schedule of Continuous Unrealized Loss Positions on Held-To-Maturity Investments (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Total
Number of Securities	17	19
Less than Twelve Months, Fair Value	$ 3,902	$ 246
Less than 12 Months, Unrealized Losses	(51)	(4)
Twelve Months or Longer, Fair Value	470	4,730
12 Months or Longer, Unrealized Losses	(17)	(77)
Total Fair Value	4,372	4,976
Total Unrealized Losses	$ (68)	$ (81)
US Government Agencies Debt Securities
Number of Securities	9	13
Less than Twelve Months, Fair Value	$ 2,416	$ 246
Less than 12 Months, Unrealized Losses	(32)	(4)
Twelve Months or Longer, Fair Value	243	3,290
12 Months or Longer, Unrealized Losses	(6)	(57)
Total Fair Value	2,659	3,536
Total Unrealized Losses	$ (38)	$ (61)
Collateralized Mortgage Backed Securities
Number of Securities	8	6
Less than Twelve Months, Fair Value	$ 1,486	$ 0
Less than 12 Months, Unrealized Losses	(19)	0
Twelve Months or Longer, Fair Value	227	1,440
12 Months or Longer, Unrealized Losses	(11)	(20)
Total Fair Value	1,713	1,440
Total Unrealized Losses	$ (30)	$ (20)

XML

3. Investments: Schedule of Investments Classified by Contractual Maturity Date (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Amortized Cost, due in one year	$ 0
Fair Value, due in one year	0
Amortized Cost, due after one year through five years	0
Fair Value, due after one year through five years	0
Amortized Cost, due after five years through ten years	3,697,000
Fair Value, due after five years through ten years	3,662,000
Available-for-sale Securities, Amortized Cost Basis	7,601,000	$ 8,560,000
Available-for-sale, at fair value	7,572,029	8,539,892
Total debt securities, Amortized Cost Basis	7,471,000
Total debt securities, Fair Value	7,442,000
Total
Available-for-sale Securities, Amortized Cost Basis	7,601,000
Available-for-sale, at fair value	7,572,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis	3,774,000	4,333,000
Available-for-sale, at fair value	3,780,000	4,374,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis	130,000	130,000
Available-for-sale, at fair value	$ 130,000	$ 130,000

XML

4. Loans and Allowance For Loan Losses: Schedule of the Composition of Net Loans (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Commercial and industrial	$ 3,062	$ 4,635
Commercial real estate	26,414	31,556
Consumer real estate	2,841	3,297
Total Real estate	29,255	34,853
Consumer loans other	1,202	1,373
Thousand
Loans, net	33,519	40,861
Commercial And Industrial | Commercial
Commercial and industrial	1,535	2,563
Commercial And Industrial | :S B A Loans
Commercial and industrial	40	168
Commercial And Industrial | Asset Based Loans
Commercial and industrial	1,487	1,904
Commercial Real Estate Portfolio Segment | :S B A Loans
Commercial real estate	353	525
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	13,774	15,470
Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	2,175	3,423
Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	10,112	12,138
Consumer Real Estate | Home Equity Line of Credit
Consumer real estate	20	22
Consumer Real Estate | Home Equity Loans
Consumer real estate	897	1,047
Consumer Real Estate | Family Residential Mortgage
Consumer real estate	1,924	2,228
Consumer And Other Loans | Consumer Installment
Consumer loans other	0	7
Consumer And Other Loans | Student Loans
Consumer loans other	1,081	1,221
Consumer And Other Loans | Other 1
Consumer loans other	$ 121	$ 145

XML

4. Loans and Allowance For Loan Losses (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Loans and Leases Receivable, Deferred Income	$ 253,139	$ 52,909
Unearned discount	22,272	26,177
Commercial real estate	26,414	31,556
Owner Occupied
Commercial real estate	$ 17,000,000
Religious Organizations
Loans Receivable Portfolio Percentage (by segment)	34.00%
Religious Organizations | Thousand
Commercial real estate	$ 10,000,000
Commercial And Industrial
Net Credit Loss on Loans Managed or Securitized or Asset-backed Financing Arrangement	$ 212,000	$ 253,000

XML

4. Loans and Allowance For Loan Losses: Schedule of Activity in Related Party Loans (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Details
Balance outstanding, starting	$ 845,477	$ 858,861
Principal additions	0	52,000
Disafilliations	0	0
Principal Reductions	(70,399)	(65,384)
Balance outstanding, ending	$ 775,078	$ 845,477

XML

4. Loans and Allowance For Loan Losses: Schedule of Age Analysis of Past Due Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Loans and Leases Receivable, Gross	$ 29,476	$ 36,191
Thousand
Past Due Loans	3,635	3,063
Nonaccrual	3,003	2,481
Current Loans	29,884	37,798
Loans and Leases Receivable, Gross	33,519	40,861
Commercial And Industrial
Past Due Loans	450	296
Nonaccrual	439	296
Current Loans	2,612	4,339
Loans and Leases Receivable, Gross	3,062	4,635
Commercial And Industrial | Commercial
Past Due Loans	110	248
Nonaccrual	110	248
Current Loans	1,425	2,315
Loans and Leases Receivable, Gross	1,535	2,563
Commercial And Industrial | :S B A Loans
Past Due Loans	40	48
Nonaccrual	40	48
Current Loans	0	120
Loans and Leases Receivable, Gross	40	168
Commercial And Industrial | Asset Based Loans
Past Due Loans	300	0
Nonaccrual	289	0
Current Loans	1,187	1,904
Loans and Leases Receivable, Gross	1,487	1,904
Commercial Real Estate Portfolio Segment
Past Due Loans	2,285	1,723
Nonaccrual	2,077	1,623
Current Loans	24,129	29,833
Loans and Leases Receivable, Gross	26,414	31,556
Commercial Real Estate Portfolio Segment | :S B A Loans
Past Due Loans	271	118
Nonaccrual	271	118
Current Loans	82	407
Loans and Leases Receivable, Gross	353	525
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Past Due Loans	1,543	1,085
Nonaccrual	1,335	985
Current Loans	12,231	14,385
Loans and Leases Receivable, Gross	13,774	15,470
Commercial Real Estate Portfolio Segment | Construction
Past Due Loans	0	0
Nonaccrual	0	0
Current Loans	2,175	3,423
Loans and Leases Receivable, Gross	2,175	3,423
Commercial Real Estate Portfolio Segment | Religious Organizations
Past Due Loans	471	520
Nonaccrual	471	520
Current Loans	9,641	11,618
Loans and Leases Receivable, Gross	10,112	12,138
Consumer Real Estate
Past Due Loans	703	808
Nonaccrual	487	562
Current Loans	2,138	2,489
Loans and Leases Receivable, Gross	2,841	3,297
Consumer Real Estate | Home Equity Line of Credit
Past Due Loans	0	0
Nonaccrual	0	0
Current Loans	20	22
Loans and Leases Receivable, Gross	20	22
Consumer Real Estate | Home Equity Loans
Past Due Loans	539	614
Nonaccrual	358	368
Current Loans	358	433
Loans and Leases Receivable, Gross	897	1,047
Consumer Real Estate | Family Residential Mortgage
Past Due Loans	164	194
Nonaccrual	129	194
Current Loans	1,760	2,034
Loans and Leases Receivable, Gross	1,924	2,228
Total Real Estate
Past Due Loans	2,988	2,531
Nonaccrual	2,564	2,185
Current Loans	26,267	32,322
Loans and Leases Receivable, Gross	29,255	34,853
Consumer And Other Loans
Past Due Loans	197	236
Nonaccrual	0	0
Current Loans	1,005	1,137
Loans and Leases Receivable, Gross	1,202	1,373
Consumer And Other Loans | Consumer Installment
Past Due Loans	0	0
Nonaccrual	0	0
Current Loans	0	7
Loans and Leases Receivable, Gross	0	7
Consumer And Other Loans | Student Loans
Past Due Loans	195	224
Nonaccrual	0	0
Current Loans	886	997
Loans and Leases Receivable, Gross	1,081	1,221
Consumer And Other Loans | Other 1
Past Due Loans	2	12
Nonaccrual	0	0
Current Loans	119	133
Loans and Leases Receivable, Gross	121	145
Financing Receivables 30 To 89 Days Past Due | Thousand
Past Due Loans	339	411
Financing Receivables 30 To 89 Days Past Due | Commercial And Industrial
Past Due Loans	11	0
Financing Receivables 30 To 89 Days Past Due | Commercial And Industrial | Commercial
Past Due Loans	0	0
Financing Receivables 30 To 89 Days Past Due | Commercial And Industrial | :S B A Loans
Past Due Loans	0	0
Financing Receivables 30 To 89 Days Past Due | Commercial And Industrial | Asset Based Loans
Past Due Loans	11	0
Financing Receivables 30 To 89 Days Past Due | Commercial Real Estate Portfolio Segment
Past Due Loans	169	17
Financing Receivables 30 To 89 Days Past Due | Commercial Real Estate Portfolio Segment | :S B A Loans
Past Due Loans	0	0
Financing Receivables 30 To 89 Days Past Due | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Past Due Loans	169	17
Financing Receivables 30 To 89 Days Past Due | Commercial Real Estate Portfolio Segment | Construction
Past Due Loans	0	0
Financing Receivables 30 To 89 Days Past Due | Commercial Real Estate Portfolio Segment | Religious Organizations
Past Due Loans	0	0
Financing Receivables 30 To 89 Days Past Due | Consumer Real Estate
Past Due Loans	91	246
Financing Receivables 30 To 89 Days Past Due | Consumer Real Estate | Home Equity Line of Credit
Past Due Loans	0	0
Financing Receivables 30 To 89 Days Past Due | Consumer Real Estate | Home Equity Loans
Past Due Loans	56	246
Financing Receivables 30 To 89 Days Past Due | Consumer Real Estate | Family Residential Mortgage
Past Due Loans	35	0
Financing Receivables 30 To 89 Days Past Due | Total Real Estate
Past Due Loans	260	263
Financing Receivables 30 To 89 Days Past Due | Consumer And Other Loans
Past Due Loans	68	148
Financing Receivables 30 To 89 Days Past Due | Consumer And Other Loans | Consumer Installment
Past Due Loans	0	0
Financing Receivables 30 To 89 Days Past Due | Consumer And Other Loans | Student Loans
Past Due Loans	66	136
Financing Receivables 30 To 89 Days Past Due | Consumer And Other Loans | Other 1
Past Due Loans	2	12
Financing Receivables, Equal to Greater than 90 Days Past Due | Thousand
Past Due Loans	293	171
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial And Industrial
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial And Industrial | Commercial
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial And Industrial | :S B A Loans
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial And Industrial | Asset Based Loans
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial Real Estate Portfolio Segment
Past Due Loans	39	83
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial Real Estate Portfolio Segment | :S B A Loans
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Past Due Loans	39	83
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial Real Estate Portfolio Segment | Construction
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Commercial Real Estate Portfolio Segment | Religious Organizations
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer Real Estate
Past Due Loans	125	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer Real Estate | Home Equity Line of Credit
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer Real Estate | Home Equity Loans
Past Due Loans	125	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer Real Estate | Family Residential Mortgage
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Total Real Estate
Past Due Loans	164	83
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer And Other Loans
Past Due Loans	129	88
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer And Other Loans | Consumer Installment
Past Due Loans	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer And Other Loans | Student Loans
Past Due Loans	129	88
Financing Receivables, Equal to Greater than 90 Days Past Due | Consumer And Other Loans | Other 1
Past Due Loans	$ 0	$ 0

XML

4. Loans and Allowance For Loan Losses: Schedule of Impaired Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Total
Unpaid Contractual Principal Balance	$ 2,980	$ 2,258
Recorded Investment With No Allowance	1,945	1,378
Recorded Investment With Allowance	570	627
Total Recorded Investment	2,515	2,005
Related Allowance	91	274
Average Recorded Investment	1,908	1,968
Interest recognized on impaired loans	17	7
Commercial And Industrial
Unpaid Contractual Principal Balance	904	635
Recorded Investment With No Allowance	393	124
Recorded Investment With Allowance	46	258
Total Recorded Investment	439	382
Related Allowance	0	247
Average Recorded Investment	538	304
Interest recognized on impaired loans	4	4
Commercial And Industrial | Commercial
Unpaid Contractual Principal Balance	818	501
Recorded Investment With No Allowance	353	38
Recorded Investment With Allowance	0	210
Total Recorded Investment	353	248
Related Allowance	0	199
Average Recorded Investment	446	248
Interest recognized on impaired loans	0	3
Commercial And Industrial | :S B A Loans
Unpaid Contractual Principal Balance	46	94
Recorded Investment With No Allowance	0	46
Recorded Investment With Allowance	46	48
Total Recorded Investment	46	94
Related Allowance	0	48
Average Recorded Investment	38	52
Interest recognized on impaired loans	2	0
Commercial And Industrial | Asset Based Loans
Unpaid Contractual Principal Balance	40	40
Recorded Investment With No Allowance	40	40
Recorded Investment With Allowance	0	0
Total Recorded Investment	40	40
Related Allowance	0	0
Average Recorded Investment	54	4
Interest recognized on impaired loans	2	1
Commercial Real Estate Portfolio Segment
Unpaid Contractual Principal Balance	2,076	1,623
Recorded Investment With No Allowance	1,552	1,254
Recorded Investment With Allowance	524	369
Total Recorded Investment	2,076	1,623
Related Allowance	91	27
Average Recorded Investment	1,370	1,664
Interest recognized on impaired loans	13	3
Commercial Real Estate Portfolio Segment | :S B A Loans
Unpaid Contractual Principal Balance	271	118
Recorded Investment With No Allowance	271	118
Recorded Investment With Allowance	0	0
Total Recorded Investment	271	118
Related Allowance	0	0
Average Recorded Investment	161	124
Interest recognized on impaired loans	2	0
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Unpaid Contractual Principal Balance	1,334	985
Recorded Investment With No Allowance	810	616
Recorded Investment With Allowance	524	369
Total Recorded Investment	1,334	985
Related Allowance	91	27
Average Recorded Investment	579	933
Interest recognized on impaired loans	9	3
Commercial Real Estate Portfolio Segment | Religious Organizations
Unpaid Contractual Principal Balance	471	520
Recorded Investment With No Allowance	471	520
Recorded Investment With Allowance	0	0
Total Recorded Investment	471	520
Related Allowance	0	0
Average Recorded Investment	630	607
Interest recognized on impaired loans	$ 2	$ 0

XML

4. Loans and Allowance For Loan Losses: Schedule of Bank Loans by Class According to Credit Quality (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Loans and Leases Receivable, Gross	$ 29,476,000	$ 36,191,000
Commercial real estate	26,414	31,556
Consumer real estate	2,841	3,297
Consumer loans other	1,202	1,373
Commercial And Industrial
Loans and Leases Receivable, Gross	3,062,000	4,635,000
Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross	1,535,000	2,563,000
Commercial And Industrial | :S B A Loans
Loans and Leases Receivable, Gross	40,000	168,000
Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross	1,487,000	1,904,000
Commercial Real Estate Portfolio Segment
Loans and Leases Receivable, Gross	26,414,000	31,556,000
Commercial Real Estate Portfolio Segment | :S B A Loans
Loans and Leases Receivable, Gross	353,000	525,000
Commercial real estate	353	525
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Loans and Leases Receivable, Gross	13,774,000	15,470,000
Commercial real estate	13,774	15,470
Commercial Real Estate Portfolio Segment | Construction
Loans and Leases Receivable, Gross	2,175,000	3,423,000
Commercial real estate	2,175	3,423
Commercial Real Estate Portfolio Segment | Religious Organizations
Loans and Leases Receivable, Gross	10,112,000	12,138,000
Commercial real estate	10,112	12,138
Consumer Real Estate
Loans and Leases Receivable, Gross	2,841,000	3,297,000
Consumer And Other Loans
Loans and Leases Receivable, Gross	1,202,000	1,373,000
Good Excellent
Loans Receivable, Gross, Commercial, Mortgage	285,000	300,000
Good Excellent | Commercial And Industrial
Loans Receivable, Gross, Commercial, Mortgage	285,000	300,000
Good Excellent | Commercial And Industrial | Commercial
Loans Receivable, Gross, Commercial, Mortgage	285,000	300,000
Good Excellent | Commercial And Industrial | :S B A Loans
Loans Receivable, Gross, Commercial, Mortgage	0	0
Good Excellent | Commercial And Industrial | Asset Based
Loans Receivable, Gross, Commercial, Mortgage	0	0
Good Excellent | Commercial Real Estate Portfolio Segment
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | :S B A Loans
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	0	0
Satisfactory
Loans Receivable, Gross, Commercial, Mortgage	22,393,000	29,549,000
Satisfactory | Commercial And Industrial
Loans Receivable, Gross, Commercial, Mortgage	1,822,000	3,135,000
Satisfactory | Commercial And Industrial | Commercial
Loans Receivable, Gross, Commercial, Mortgage	922,000	1,321,000
Satisfactory | Commercial And Industrial | :S B A Loans
Loans Receivable, Gross, Commercial, Mortgage	0	80,000
Satisfactory | Commercial And Industrial | Asset Based
Loans Receivable, Gross, Commercial, Mortgage	900,000	1,734,000
Satisfactory | Commercial Real Estate Portfolio Segment
Commercial real estate	20,570,000	26,414,000
Satisfactory | Commercial Real Estate Portfolio Segment | :S B A Loans
Commercial real estate	82,000	237,000
Satisfactory | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	10,689,000	13,024,000
Satisfactory | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	2,175,000	3,423,000
Satisfactory | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	7,624,000	9,730,000
Pass 1
Loans Receivable, Gross, Commercial, Mortgage	2,467,000	2,677,000
Pass 1 | Commercial And Industrial
Loans Receivable, Gross, Commercial, Mortgage	238,000	598,000
Pass 1 | Commercial And Industrial | Commercial
Loans Receivable, Gross, Commercial, Mortgage	16,000	474,000
Pass 1 | Commercial And Industrial | :S B A Loans
Loans Receivable, Gross, Commercial, Mortgage	0	0
Pass 1 | Commercial And Industrial | Asset Based
Loans Receivable, Gross, Commercial, Mortgage	222,000	124,000
Pass 1 | Commercial Real Estate Portfolio Segment
Commercial real estate	2,229,000	2,079,000
Pass 1 | Commercial Real Estate Portfolio Segment | :S B A Loans
Commercial real estate	0	170,000
Pass 1 | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	1,098,000	724,000
Pass 1 | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Pass 1 | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	1,131,000	1,185,000
Special Mention
Loans Receivable, Gross, Commercial, Mortgage	1,557,000	980,000
Special Mention | Commercial And Industrial
Loans Receivable, Gross, Commercial, Mortgage	58,000	220,000
Special Mention | Commercial And Industrial | Commercial
Loans Receivable, Gross, Commercial, Mortgage	58,000	220,000
Special Mention | Commercial And Industrial | :S B A Loans
Loans Receivable, Gross, Commercial, Mortgage	0	0
Special Mention | Commercial And Industrial | Asset Based
Loans Receivable, Gross, Commercial, Mortgage	0	0
Special Mention | Commercial Real Estate Portfolio Segment
Commercial real estate	1,499,000	760,000
Special Mention | Commercial Real Estate Portfolio Segment | :S B A Loans
Commercial real estate	0	0
Special Mention | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	613,000	57,000
Special Mention | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Special Mention | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	886,000	703,000
Substandard
Loans Receivable, Gross, Commercial, Mortgage	2,476,000	2,233,000
Substandard | Commercial And Industrial
Loans Receivable, Gross, Commercial, Mortgage	583,000	247,000
Substandard | Commercial And Industrial | Commercial
Loans Receivable, Gross, Commercial, Mortgage	254,000	113,000
Substandard | Commercial And Industrial | :S B A Loans
Loans Receivable, Gross, Commercial, Mortgage	40,000	88,000
Substandard | Commercial And Industrial | Asset Based
Loans Receivable, Gross, Commercial, Mortgage	289,000	46,000
Substandard | Commercial Real Estate Portfolio Segment
Commercial real estate	1,893,000	1,986,000
Substandard | Commercial Real Estate Portfolio Segment | :S B A Loans
Commercial real estate	271,000	118,000
Substandard | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	1,151,000	1,348,000
Substandard | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Substandard | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	471,000	520,000
Doubtful
Loans Receivable, Gross, Commercial, Mortgage	299,000	452,000
Doubtful | Commercial And Industrial
Loans Receivable, Gross, Commercial, Mortgage	76,000	135,000
Doubtful | Commercial And Industrial | Commercial
Loans Receivable, Gross, Commercial, Mortgage	0	135,000
Doubtful | Commercial And Industrial | :S B A Loans
Loans Receivable, Gross, Commercial, Mortgage	0	0
Doubtful | Commercial And Industrial | Asset Based
Loans Receivable, Gross, Commercial, Mortgage	76,000	0
Doubtful | Commercial Real Estate Portfolio Segment
Commercial real estate	223,000	317,000
Doubtful | Commercial Real Estate Portfolio Segment | :S B A Loans
Commercial real estate	0	0
Doubtful | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	223,000	317,000
Doubtful | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Doubtful | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	0	0
Performing
Consumer real estate	2,354,000	2,735,000
Consumer loans other	1,202,000	1,373,000
Total consumer loans	3,556,000	4,108,000
Performing | Consumer Real Estate | Home Equity 1
Consumer real estate	539,000	679,000
Performing | Consumer Real Estate | Home Equity Line Of Credit
Consumer real estate	20,000	22,000
Performing | Consumer Real Estate | N14 Family Residential Mortgages
Consumer real estate	1,795,000	2,034,000
Performing | Consumer And Other Loans | Consumer Installment
Consumer loans other	0	7,000
Performing | Consumer And Other Loans | Student Loans
Consumer loans other	1,081,000	1,221,000
Performing | Consumer And Other Loans | Other 1
Consumer loans other	121,000	145,000
Nonperforming
Consumer real estate	487,000	562,000
Consumer loans other	0	0
Total consumer loans	487,000	562,000
Nonperforming | Consumer Real Estate | Home Equity 1
Consumer real estate	358,000	368,000
Nonperforming | Consumer Real Estate | Home Equity Line Of Credit
Consumer real estate	0	0
Nonperforming | Consumer Real Estate | N14 Family Residential Mortgages
Consumer real estate	129,000	194,000
Nonperforming | Consumer And Other Loans | Consumer Installment
Consumer loans other	0	0
Nonperforming | Consumer And Other Loans | Student Loans
Consumer loans other	0	0
Nonperforming | Consumer And Other Loans | Other 1
Consumer loans other	0	0
Subtotal
Consumer real estate	2,841,000
Consumer loans other	1,202,000
Total consumer loans	4,043,000
Subtotal | Consumer Real Estate | Home Equity 1
Consumer real estate	897,000
Subtotal | Consumer Real Estate | Home Equity Line Of Credit
Consumer real estate	20,000
Subtotal | Consumer Real Estate | N14 Family Residential Mortgages
Consumer real estate	1,924,000
Subtotal | Consumer And Other Loans | Consumer Installment
Consumer loans other	0
Subtotal | Consumer And Other Loans | Student Loans
Consumer loans other	1,081,000
Subtotal | Consumer And Other Loans | Other 1
Consumer loans other	$ 121,000
Total
Consumer real estate		3,297,000
Consumer loans other		1,373,000
Total consumer loans		4,670,000
Total | Consumer Real Estate | Home Equity 1
Consumer real estate		1,047,000
Total | Consumer Real Estate | Home Equity Line Of Credit
Consumer real estate		22,000
Total | Consumer Real Estate | N14 Family Residential Mortgages
Consumer real estate		2,228,000
Total | Consumer And Other Loans | Consumer Installment
Consumer loans other		7,000
Total | Consumer And Other Loans | Student Loans
Consumer loans other		1,221,000
Total | Consumer And Other Loans | Other 1
Consumer loans other		$ 145,000

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4. Loans and Allowance For Loan Losses: Schedule of Age Analysis of Allowance for Loan Losses (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Period-end amount allocated to: Total	$ 418,013	$ 734,567
Loans and Leases Receivable, Net of Deferred Income	33,519,042	40,861,890
Less allowance for loan losses	418,013	734,567
Total
Beginning balance	735,000	839,000
Provision for loan losses	(68,000)	162,000
Charge-offs	(279,000)	(302,000)
Recoveries	30,000	36,000
Net charge-offs	(249,000)	(266,000)
Ending balance	418,000	735,000
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	91,000	274,000
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	327,000	461,000
Period-end amount allocated to: Total	418,000	735,000
Loans, ending balance: Loans individually evaluated for impairment	2,515,000	2,005,000
Loans, ending balance: Loans collectively evaluated for impairment	31,314,000	38,856,000
Loans and Leases Receivable, Net of Deferred Income	33,519,000	40,861,000
Less allowance for loan losses	418,000	735,000
Commercial And Industrial
Beginning balance	403,000	483,000
Provision for loan losses	3,000	169,000
Charge-offs	(259,000)	(253,000)
Recoveries	4,000	4,000
Net charge-offs	(255,000)	(249,000)
Ending balance	151,000	403,000
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	0	247,000
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	151	156,000
Period-end amount allocated to: Total		403,000
Loans, ending balance: Loans individually evaluated for impairment	439	382,000
Loans, ending balance: Loans collectively evaluated for impairment	2,623	4,253,000
Less allowance for loan losses		403,000
Commercial And Industrial | Thousand
Period-end amount allocated to: Total	151
Loans and Leases Receivable, Net of Deferred Income	3,062	4,635,000
Less allowance for loan losses	151
Commercial Real Estate Portfolio Segment
Beginning balance	300,000	280,000
Provision for loan losses	(47,000)	20,000
Charge-offs	(3,000)	0
Recoveries	0	0
Net charge-offs	(3,000)	0
Ending balance	250,000	300,000
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	91	27,000
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	159	273,000
Period-end amount allocated to: Total		300,000
Loans, ending balance: Loans individually evaluated for impairment	2,076	1,623,000
Loans, ending balance: Loans collectively evaluated for impairment	24,338	29,933,000
Less allowance for loan losses		300,000
Commercial Real Estate Portfolio Segment | Thousand
Period-end amount allocated to: Total	250
Loans and Leases Receivable, Net of Deferred Income	26,414	31,566,000
Less allowance for loan losses	250
Consumer Real Estate
Beginning balance	20,000	59,000
Provision for loan losses	(18,000)	(28,000)
Charge-offs	0	(19,000)
Recoveries	6,000	8,000
Net charge-offs	6,000	(11,000)
Ending balance	8,000	20,000
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	8	20,000
Period-end amount allocated to: Total		20,000
Loans, ending balance: Loans individually evaluated for impairment	0	0
Loans, ending balance: Loans collectively evaluated for impairment	2,841	3,297,000
Less allowance for loan losses		20,000
Consumer Real Estate | Thousand
Period-end amount allocated to: Total	8
Loans and Leases Receivable, Net of Deferred Income	2,841	3,297,000
Less allowance for loan losses	8
Consumer And Other Loans
Beginning balance	12,000	17,000
Provision for loan losses	(6,000)	1,000
Charge-offs	(17,000)	(30,000)
Recoveries	20,000	24,000
Net charge-offs	3,000	(6,000)
Ending balance	9,000	12,000
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	9	12,000
Period-end amount allocated to: Total		12,000
Loans, ending balance: Loans individually evaluated for impairment	0	0
Loans, ending balance: Loans collectively evaluated for impairment	1,202	1,373,000
Less allowance for loan losses		12,000
Consumer And Other Loans | Thousand
Period-end amount allocated to: Total	9
Loans and Leases Receivable, Net of Deferred Income	1,202	$ 1,373,000
Less allowance for loan losses	$ 9

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5. Bank Premises and Equipment: Schedule of Major Classes of Bank Premises and Equipment (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment, Gross	$ 2,085,000	$ 1,964,000
Less accumulated depreciation	(1,592,000)	(1,415,000)
Bank premises and equipment, net	492,730	549,466
Thousand
Bank premises and equipment, net	493,000	549,000
Leaseholds and Leasehold Improvements
Property, Plant and Equipment, Gross	$ 788,000	785,000
Leaseholds and Leasehold Improvements | Minimum
Estimated Useful Life	10 years
Leaseholds and Leasehold Improvements | Maximum
Estimated Useful Life	15 years
Furniture and Fixtures
Property, Plant and Equipment, Gross	$ 1,297,000	$ 1,179,000
Furniture and Fixtures | Minimum
Estimated Useful Life	3 years
Furniture and Fixtures | Maximum
Estimated Useful Life	7 years

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5. Bank Premises and Equipment (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Details
Depreciation on fixed assets	$ 177,987	$ 175,465
Operating Leases, Rent Expense	$ 481,721	$ 496,981

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5. Bank Premises and Equipment: Schedule of Future Minimum Lease Payments Under Operating Leases (Details) $ in Thousands	Dec. 31, 2015 USD ($)
Details
2015	$ 423
2016	408
2017	416
2018	411
2019	332
Total minimum lease payments	$ 2,878

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6. Other Real Estate Owned: Schedule of Components Of Other Real Estate Owned (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Commercial Real Estate
Other real estate owned	$ 297	$ 191	$ 191
Residential Real Estate
Other real estate owned	$ 183	$ 373	$ 242

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6. Other Real Estate Owned: Schedule of Change in Other Real Estate Owned (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Other Real Estate, Beginning Balance	$ 563,543
Additions, transfers from loans	148,000	$ 240,000
Sales	(272,000)	(96,000)
Other Real Estate, Period Increase (Decrease)	441,000	577,000
Less: write-downs	39,000	(13,000)
Other Real Estate, Ending Balance	479,627	563,543
Thousand
Other Real Estate, Beginning Balance	564,000	433,000
Other Real Estate, Ending Balance	$ 480,000	$ 564,000

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6. Other Real Estate Owned: Schedule of Components of Net Expense of Other Real Estate Owned (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Professional fees	$ 318,774	$ 312,954
Impairment charges (net)	39,294	(13,250)
Totals	11,000	21,000
Other Real Estate 1
Insurance	15,000	21,000
Legal fees	0	2,000
Maintenance	0	0
Professional fees	0	0
Real estate taxes	14,000	20,000
Utilities	3,000	4,000
Transfer-in write up	(88,000)	(47,000)
Impairment charges (net)	49,000	13,000
Other	$ 18,000	$ 8,000

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7. Deposits: Schedule of Maturity of Time Deposits (Details) $ in Thousands	Dec. 31, 2015 USD ($)
Details
2015	$ 13,074
2016	644
2017	438
2018	43
2019	15
Thereafter	45
Time Deposits, Total	$ 14,259

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7. Deposits (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Total deposits	$ 55,962,404	$ 56,962,313
Time deposits, $250,000 and over	6,753,000	$ 7,507,000
City Of Philadelphia
Total deposits	$ 5,000,000

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8. Borrowings (Details) - Secured Borrowing Federal Reserve - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Line of Credit Facility, Maximum Borrowing Capacity	$ 700,000
Securities Held as Collateral, at Fair Value	750,000
Long-term Line of Credit	$ 0	$ 0

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9. Income Taxes (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Operating Loss Carryforwards	$ 10,430,000
Valuation allowance for deferred tax assets	3,934,000	$ 3,774,000
Exact
Valuation allowance for deferred tax assets	$ 3,934,024	$ 3,774,484

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9. Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Deferred tax assets (liabilities):
Provision for loan losses	$ 46	$ 161
Unrealized (loss) gain on investment securities	10	7
Depreciation	(36)	7
Net operating carryforwards	3,538	3,233
Other, net	386	373
Valuation allowance for deferred tax assets	(3,934)	(3,774)
Net deferred tax assets	$ 10	$ 7

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9. Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Effective rate reconciliation
Tax at statutory rate (34%)	$ (168,000)	$ (117,000)
Nondeductible expenses	8,000	9,000
Increase in valuation allowance	160,000	95,000
Other	0	13,000
Provision for income taxes	0	0
Total
Effective rate reconciliation
Provision for income taxes	$ 0	$ 0

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10. Financial Instrument Commitments: Schedule of Financial Instruments Commitments (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Outstanding letters of credit	$ 333,000	$ 1,036,000
Commitments to Extend Credit
Commitments to extend credit	$ 5,903,000	$ 8,262,000

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11. Fair Value Measurements: Schedule of Fair Value of Assets on a Recurring Basis (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Assets, Fair Value Disclosure, Recurring	$ 7,572,000	$ 8,540,000
Loans held for sale, at fair value	3,260,761	6,160,183
Loans held at fair value	2,458,930	628,750
Thousand
Loans held for sale, at fair value	3,261,000	6,160,000
Loans held at fair value	2,459,000	629,000
Fair Value, Inputs, Level 1
Assets, Fair Value Disclosure, Recurring	130,000	130,000
Fair Value, Inputs, Level 1 | Thousand
Loans held for sale, at fair value	0	0
Loans held at fair value	0	0
Fair Value, Inputs, Level 2
Assets, Fair Value Disclosure, Recurring	7,572,000	8,410,000
Fair Value, Inputs, Level 2 | Thousand
Loans held for sale, at fair value	3,261,000	6,160,000
Loans held at fair value	0	0
Fair Value, Inputs, Level 3
Assets, Fair Value Disclosure, Recurring	0	0
Fair Value, Inputs, Level 3 | Thousand
Loans held for sale, at fair value	0	0
Loans held at fair value	2,459,000	629,000
US Government Agencies Debt Securities
Assets, Fair Value Disclosure, Recurring	3,662,000	4,036,000
US Government Agencies Debt Securities | Fair Value, Inputs, Level 1
Assets, Fair Value Disclosure, Recurring	0	0
US Government Agencies Debt Securities | Fair Value, Inputs, Level 2
Assets, Fair Value Disclosure, Recurring	3,662,000	4,036,000
US Government Agencies Debt Securities | Fair Value, Inputs, Level 3
Assets, Fair Value Disclosure, Recurring	0
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Assets, Fair Value Disclosure, Recurring	3,780,000	4,374,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises | Fair Value, Inputs, Level 1
Assets, Fair Value Disclosure, Recurring	0	0
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises | Fair Value, Inputs, Level 2
Assets, Fair Value Disclosure, Recurring	3,780,000	4,374,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises | Fair Value, Inputs, Level 3
Assets, Fair Value Disclosure, Recurring	0	0
Money Market Funds
Assets, Fair Value Disclosure, Recurring	130,000	130,000
Money Market Funds | Fair Value, Inputs, Level 1
Assets, Fair Value Disclosure, Recurring	130,000	130,000
Money Market Funds | Fair Value, Inputs, Level 2
Assets, Fair Value Disclosure, Recurring	0	0
Money Market Funds | Fair Value, Inputs, Level 3
Assets, Fair Value Disclosure, Recurring	$ 0	$ 0

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11. Fair Value Measurements (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Available-for-sale, at fair value	$ 7,572,029	$ 8,539,892
Valuation Allowance for Other Real Estate Owned	(39,294)	13,250
Rounded
Available-for-sale, at fair value	7,572,000	8,540,000
Thousand
Available-for-sale, at fair value	7,572,000	8,540,000
Valuation Allowance for Other Real Estate Owned	$ 39,000	$ 13,000

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11. Fair Value Measurements: Schedule of Inputs in Estimation of Fair Value of Level 3 Financial Instruments (Details) - USD ($)			12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Loans held at fair value	$ 2,458,930	$ 628,750	$ 2,458,930	$ 628,750
Change in fair value of financial instruments	(2,000)	(7,000)
Loans Held At Fair Value
Balance	2,459,000	629,000	$ 2,459,000	$ 629,000
Origination of loans	2,017,000	209,000
Principal repayments	(185,000)	(20,000)
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3
Fair Value Measurements, Valuation Techniques			Discounted cash flow
Average projected default rate			7.76%	9.02%
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | Minimum
Constant prepayment rate			7.10%	7.58%
Weighted average life			3 years 4 months 24 days	3 years 9 months
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | Maximum
Constant prepayment rate			9.88%	8.52%
Weighted average life			8 years 9 months 11 days	4 years 3 months
Thousand
Loans held at fair value	2,459,000	629,000	$ 2,459,000	$ 629,000
Thousand | Loans Held At Fair Value
Balance		629,000		629,000	$ 447,000
Thousand | Fair Value, Inputs, Level 3
Loans held at fair value	$ 2,459,000	$ 629,000	$ 2,459,000	$ 629,000

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11. Fair Value Measurements: Schedule of Fair Value of Assets Measured on a Nonrecurring Basis (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Impaired Loans
Assets, Fair Value Disclosure, Nonrecurring	$ 2,424	$ 1,731
Total fair value loss during the year	0	(142)
Other Real Estate Owned
Assets, Fair Value Disclosure, Nonrecurring	480	564
Total fair value loss during the year	39	(13)
Fair Value, Inputs, Level 1 | Impaired Loans
Assets, Fair Value Disclosure, Nonrecurring	0	0
Fair Value, Inputs, Level 1 | Other Real Estate Owned
Assets, Fair Value Disclosure, Nonrecurring	0	0
Fair Value, Inputs, Level 2 | Impaired Loans
Assets, Fair Value Disclosure, Nonrecurring	0	0
Fair Value, Inputs, Level 2 | Other Real Estate Owned
Assets, Fair Value Disclosure, Nonrecurring	0	0
Fair Value, Inputs, Level 3 | Impaired Loans
Assets, Fair Value Disclosure, Nonrecurring	2,424	1,731
Fair Value, Inputs, Level 3 | Other Real Estate Owned
Assets, Fair Value Disclosure, Nonrecurring	$ 480	$ 564

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11. Fair Value Measurements: Schedule of Fair Value of Financial Instruments at Year-End (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash and cash equivalents	$ 10,782,098	$ 3,236,582	$ 5,789,778
Available for sale securities	7,572,029	8,539,892
Loans held for sale, at fair value	3,260,761	6,160,183
Loans held at fair value	2,458,930	628,750
Loans, net of allowance for loan losses	33,101,029	40,127,323
Savings deposits	11,680,878	12,091,282
Time deposits	14,259,000
Accrued interest payable	9,157	16,253
Carrying Amount
Available for sale securities	7,572,000	8,540,000
Loans, net of allowance for loan losses	33,101,000	40,127,000
Carrying Amount | Fair Value, Inputs, Level 1
Cash and cash equivalents	10,782,000	3,237,000
Carrying Amount | Fair Value, Inputs, Level 2
Loans held for sale, at fair value	3,261,000	6,160,000
Interest Receivable	175,000	250,000
Demand Deposits	30,022,000	28,723,000
Savings deposits	11,681,000	12,091,000
Time deposits	14,259,000	16,148,000
Accrued interest payable	9,000	16,000
Carrying Amount | Fair Value, Inputs, Level 3
Loans held at fair value	2,459,000	629,000
Fair Value
Available for sale securities	7,572,000	8,540,000
Loans, net of allowance for loan losses	33,082,000	40,069,000
Fair Value | Fair Value, Inputs, Level 1
Cash and cash equivalents	10,782,000	3,237,000
Fair Value | Fair Value, Inputs, Level 2
Loans held for sale, at fair value	3,261,000	6,160,000
Interest Receivable	175,000	250,000
Demand Deposits	30,022,000	28,723,000
Savings deposits	11,681,000	12,091,000
Time deposits	14,242,000	16,157,000
Accrued interest payable	9,000	16,000
Fair Value | Fair Value, Inputs, Level 3
Loans held at fair value	$ 2,459,000	$ 629,000

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12. Consolidated Financial Information-parent Company Only: Schedule of Condensed Balance Sheet (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Assets:
Cash and cash equivalents at beginning of year	$ 10,782,098	$ 3,236,582	$ 5,789,778
Total assets	58,984,238	60,464,266
Shareholders' equity:
Series A preferred stock, noncumulative, 6%, $0.01 par value, 500,000 shares authorized; 99,342 and 136,842 issued and outstanding at December 31, 2015 and 2014, respectively	993	1,368
Common stock, $0.01 par value; 2,000,000 shares authorized;826,921 and 1,068,588 issued and outstanding at December 31, 2015 and 2014, respectively	8,269	8,769
Additional paid-in-capital	14,752,644	14,749,852
Accumulated deficit	(12,062,818)	(11,568,043)
Accumulated other comprehensive loss	(19,326)	(13,223)
Total shareholders' equity	2,679,762	3,180,640	3,209,884
Parent Company
Assets:
Cash and cash equivalents at beginning of year	0	0	$ 0
Investment in United Bank of Philadelphia	2,680,000	3,181,000
Total assets	2,680,000	3,181,000
Shareholders' equity:
Series A preferred stock, noncumulative, 6%, $0.01 par value, 500,000 shares authorized; 99,342 and 136,842 issued and outstanding at December 31, 2015 and 2014, respectively	1,000	1,000
Common stock, $0.01 par value; 2,000,000 shares authorized;826,921 and 1,068,588 issued and outstanding at December 31, 2015 and 2014, respectively	8,000	11,000
Additional paid-in-capital	14,753,000	14,750,000
Accumulated deficit	(12,063,000)	(11,568,000)
Accumulated other comprehensive loss	(19,000)	(13,000)
Total shareholders' equity	$ 2,680,000	$ 3,181,000

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12. Consolidated Financial Information-parent Company Only: Schedule of Condensed Income Statement (Details) - Parent Company - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Other	$ 0	$ 0
Equity in net loss of subsidiary	(495)	(343)
Net loss	$ (495)	$ (343)

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12. Consolidated Financial Information-parent Company Only: Schedule of Condensed Cash Flow Statement (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net cash provided by (used in) operating activities	$ 521,256	$ (4,688,172)
Cash and cash equivalents at beginning of year	3,236,582	5,789,778
Cash and cash equivalents at end of year	10,782,098	3,236,582
Parent Company
Cash flows from operating activities:
Net loss	(495,000)	(343,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Equity in net loss of subsidiary	495,000	343,000
Net cash provided by (used in) operating activities	0	0
Cash and cash equivalents at beginning of year	0	0
Cash and cash equivalents at end of year	$ 0	$ 0

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13. Regulatory Matters: Schedule of the Company and the Bank's Actual Capital (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Actual Amount | Company
Total capital to risk-weighted assets:
Capital	$ 3,081,000	$ 3,684,000
Tier I capital to risk-weighted assets:
Tier One Risk Based Capital	2,663,000	3,146,000
Common Equity Tier One Capital
Common Equity Tier One Capital	2,663,000	3,146,000
Tier One Leverage Capital
Tier One Leverage Capital	2,663,000	3,146,000
Tangible Capital
Tangible Capital	2,663,000	3,146,000
Actual Amount | Bank
Total capital to risk-weighted assets:
Capital	3,081,000	3,684,000
Tier I capital to risk-weighted assets:
Tier One Risk Based Capital	2,663,000	3,146,000
Common Equity Tier One Capital
Common Equity Tier One Capital	2,663,000	3,146,000
Tier One Leverage Capital
Tier One Leverage Capital	2,663,000	3,146,000
Tangible Capital
Tangible Capital	2,663,000	3,146,000
Actual Ratio | Company
Total capital to risk-weighted assets:
Capital	0.0850	0.0860
Tier I capital to risk-weighted assets:
Tier One Risk Based Capital	7.35	7.35
Common Equity Tier One Capital
Common Equity Tier One Capital	7.35	7.35
Tier One Leverage Capital
Tier One Leverage Capital	4.57	5.18
Tangible Capital
Tangible Capital	4.52	5.20
Actual Ratio | Bank
Total capital to risk-weighted assets:
Capital	8.50	8.60
Tier I capital to risk-weighted assets:
Tier One Risk Based Capital	7.35	7.35
Common Equity Tier One Capital
Common Equity Tier One Capital	7.35	7.35
Tier One Leverage Capital
Tier One Leverage Capital	4.57	5.18
Tangible Capital
Tangible Capital	4.52	5.20
Capitalized Amount | Bank
Total capital to risk-weighted assets:
Capital	3,623,000	4,283,000
Tier I capital to risk-weighted assets:
Tier One Risk Based Capital	2,899,000	2,570,000
Common Equity Tier One Capital
Common Equity Tier One Capital	2,355,000
Tier One Leverage Capital
Tier One Leverage Capital	2,915,000	3,038,000
Capitalized Ratio | Bank
Total capital to risk-weighted assets:
Capital	0.1000	0.1000
Tier I capital to risk-weighted assets:
Tier One Risk Based Capital	0.0800	0.0600
Common Equity Tier One Capital
Common Equity Tier One Capital	0.0650
Tier One Leverage Capital
Tier One Leverage Capital	$ 0.0500	$ 0.0500

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13. Regulatory Matters (Details)	12 Months Ended
	Dec. 31, 2015
Details
Description of Regulatory Requirements, Prompt Corrective Action	develop a written capital plan detailing the manner in which the Bank will meet and maintain a ratio of Tier 1 capital to total assets (“leverage ratio”) of at least 8.5% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) of at least 12.5%, within a reasonable but unspecified time period;

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15. SUBSEQUENT EVENTS (Details) - Subsequent Event	1 Months Ended
	Mar. 31, 2017 USD ($)
Tier 1 capital ratio	5.53%
Fulton Financial
Proceeds from preferred stock issuance	$ 675,000

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16. EARNINGS PER SHARE COMPUTATION: Schedule of Net Loss per Common Share (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Details
Net loss	$ (182,000)	$ (210,000)	$ (118,000)	$ 15,000	$ 264,000	$ (183,000)	$ (203,000)	$ (221,000)	$ (494,775)	$ (343,067)
Loss attributable to common stockholders, basic (numerator)									$ (494,775)	$ (343,067)
Weighted Average Number of Shares Outstanding, Basic (denominator)									863,999	1,068,588
Earnings Per Share, Basic	$ (0.21)	$ (0.24)	$ (0.13)	$ 0.01	$ 0.25	$ (0.17)	$ (0.19)	$ (0.21)	$ (0.57)	$ (0.32)
Loss attributable to common stockholders, diluted (numerator)									$ (494,775)	$ (343,067)
Weighted Average Number of Shares Outstanding, Diluted (denominator)									863,999	1,068,588
Earnings Per Share, Diluted	$ (0.21)	$ (0.24)	$ (0.13)	$ 0.01	$ 0.25	$ (0.17)	$ (0.19)	$ (0.21)	$ (0.57)	$ (0.32)

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16. EARNINGS PER SHARE COMPUTATION (Details) - shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Details
Common stock equivalents	0	0

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17. Summary of Quarterly Results (unaudited): Schedule of Condensed Income Statement (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Details
Interest income	$ 609,000	$ 636,000	$ 630,000	$ 712,000	$ 779,000	$ 738,000	$ 700,000	$ 713,000	$ 2,587,325	$ 2,930,391
Interest expense	17,000	17,000	17,000	18,000	18,000	19,000	18,000	18,000	69,077	72,916
Net interest income	592,000	619,000	613,000	694,000	761,000	719,000	682,000	695,000	2,518,248	2,857,475
(Credit) provision for loan losses	(51,000)	83,000	(40,000)	(60,000)	30,000	62,000	30,000	40,000	(68,000)	162,000
Net interest after provision for loan losses	643,000	536,000	653,000	754,000	731,000	657,000	652,000	655,000	2,586,248	2,695,475
Total noninterest income	420,000	334,000	307,000	336,000	723,000	231,000	252,000	171,000	1,396,913	1,376,978
Noninterest expense	1,245,000	1,080,000	1,078,000	1,075,000	1,190,000	1,071,000	1,107,000	1,047,000	4,477,936	4,415,520
Net income (loss)	$ (182,000)	$ (210,000)	$ (118,000)	$ 15,000	$ 264,000	$ (183,000)	$ (203,000)	$ (221,000)	$ (494,775)	$ (343,067)
Basic income (loss) per common share	$ (0.21)	$ (0.24)	$ (0.13)	$ 0.01	$ 0.25	$ (0.17)	$ (0.19)	$ (0.21)	$ (0.57)	$ (0.32)
Diluted income (loss) per common share	$ (0.21)	$ (0.24)	$ (0.13)	$ 0.01	$ 0.25	$ (0.17)	$ (0.19)	$ (0.21)	$ (0.57)	$ (0.32)

XML

Label	Element	Value
Total
Other real estate owned	us-gaap_OtherRealEstate	$ 480,000
Other real estate owned	us-gaap_OtherRealEstate	564,000
Other real estate owned	us-gaap_OtherRealEstate	$ 433,000