UNITED BANCSHARES INC/OH - Quarter Report: 2006 June (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2006

Commission file number 000-29283

UNITED BANCSHARES, INC.

(Exact name of Registrant as specified in its charter)

Ohio

(State or other jurisdiction of incorporation or organization)

100 S. High Street, Columbus Grove, Ohio

(Address of principal executive offices)

34-1516518

(I.R.S. Employer Identification Number)

45830

(Zip Code)

(419) 659-2141

(Registrant’s telephone number, including area code)

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 X No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ____ Accelerated filer ____ Non-accelerated filer X

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

Yes No X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 11, 2006: 3,605,074.

This document contains 33 pages. The Exhibit Index is on page 23 immediately preceding the filed exhibits.

UNITED BANCSHARES, INC.

Table of Contents


	Page

Part I – Financial Information

*Item 1* – Financial Statements	3

*Item 2* – Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

*Item 3* – Quantitative and Qualitative Disclosures about Market Risk	19

*Item 4* – Controls and Procedures	20

Part II – Other Information

Item 1 – Legal Proceedings Item 1A – Risk Factors	20 20

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3 – Defaults upon Senior Securities	21

Item 4 – Submission of Matters to a Vote of Security Holders	21

Item 5 – Other Information	22

Item 6 – Exhibits	22

PART 1 - FINANCIAL INFORMATION

ITEM 1

United Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets (Unaudited)


		June 30,	December 31,
		2006	2005
ASSETS

CASH AND CASH EQUIVALENTS
	Cash and due from banks	$ 8,425,534	$ 8,968,880
	Interest-bearing deposits in other banks	911,078	75,488
	Federal funds sold	-	1,070,000
Total cash and cash equivalents		9,336,612	10,114,368

SECURITIES, available-for-sale		173,639,455	183,351,256
FEDERAL HOME LOAN BANK STOCK, at cost		4,567,000	4,439,600
LOANS HELD FOR SALE		433,790	440,432

LOANS		322,878,070	309,564,672
Allowance for loan losses		(2,538,991)	(2,540,301)
Net loans		320,339,079	307,024,371

PREMISES AND EQUIPMENT, net		6,058,472	6,198,467
GOODWILL CASH SURRENDER VALUE OF LIFE INSURANCE		7,282,013 10,709,939	7,282,013 10,479,078
OTHER ASSETS, including accrued interest receivable
	and other intangible assets	8,567,426	6,879,087

TOTAL ASSETS		$ 540,933,786	$ 536,208,672

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Deposits
	Non-interest bearing	$ 34,512,368	$ 34,628,941
	Interest bearing	327,191,316	322,291,895
Total deposits		361,703,684	356,920,836

Federal Home Loan Bank borrowings Securities sold under agreements to repurchase		64,948,118 59,151,129	61,687,394 59,000,000
Junior subordinated deferrable interest debentures		10,300,000	10,300,000
Accrued expenses and other liabilities		2,247,739	4,507,929

	Total liabilities	498,350,670	492,416,159



SHAREHOLDERS' EQUITY
Common stock, $1 stated value; 10,000,000 shares authorized in 2006 and 4,750,000 shares
	authorized in 2005; 3,760,557 shares issued	3,760,557	3,760,557
Surplus		14,651,596	14,651,596
Retained earnings		30,506,828	29,026,911
Accumulated other comprehensive loss		(3,891,898)	(1,521,648)
Treasury stock, 159,372 shares at June 30, 2006 and 139,108 shares at December 31, 2005, at cost		(2,443,967)	(2,124,903)
	Total shareholders' equity	42,583,116	43,792,513

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$ 540,933,786	$ 536,208,672

See notes to consolidated financial statements


United Bancshares, Inc. and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)


			Three months ended June 30,		Six months ended June 30,
			2006	2005	2006	2005
INTEREST INCOME
	Loans, including fees		$ 5,987,986	$ 5,176,503	$ 11,577,053	$ 10,135,630
	Securities:
		Taxable	1,618,706	1,928,758	3,286,994	3,800,815
		Tax-exempt	482,545	408,873	934,624	830,794
	Other		6,474	23,598	14,030	47,782
Total interest income			8,095,711	7,537,732	15,812,701	14,815,021

INTEREST EXPENSE
	Deposits		2,215,161	1,594,706	4,100,598	3,010,120
	Other borrowings		1,483,969	1,358,620	2,928,793	2,775,613
Total interest expense			3,699,130	2,953,326	7,029,391	5,785,733

NET INTEREST INCOME			4,396,581	4,584,406	8,783,310	9,029,288

PROVISION FOR LOAN LOSSES			40,000	175,000	140,000	325,000
NET INTEREST INCOME AFTER
	PROVISION FOR LOAN LOSSES		4,356,581	4,409,406	8,643,310	8,704,288

NON-INTEREST INCOME
		Gain on sales of loans	77,590	110,792	140,640	195,093
		Gain on sales of securities Other	- 664,824	73,762 518,914	(4,001) 1,358,070	120,182 1,051,370
Total non-interest income			742,414	703,468	1,494,709	1,366,645

NON-INTEREST EXPENSES			3,550,151	3,633,758	7,104,810	7,155,011

Income before income taxes			1,548,844	1,479,116	3,033,209	2,915,922
PROVISION FOR INCOME TAXES			306,000	346,000	609,000	700,000
NET INCOME			$ 1,242,844 ========	$ 1,133,116 =======	$ 2,424,209 ========	$ 2,215,922 ========

NET INCOME PER SHARE
		Basic	$ 0.34	$ 0.31	$ 0.67	$ 0.60
		Weighted average common shares outstanding	3,601,185	3,707,274	3,607,311	3,706,630

		Diluted:	$ 0.34	$ 0.30	$ 0.67	$ 0.60
		Weighted average common shares outstanding	3,613,383	3,717,440	3,619,075	3,717,910

See notes to consolidated financial statements


United Bancshares, Inc. and Subsidiary
Consolidated Statements of Shareholder's Equity (Unaudited)
Six months ended June 30, 2006 and 2005

	Common Stock	Surplus	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Total
BALANCE AT DECEMBER 31, 2005	$ 3,760,557	$ 14,651,596	$ 29,026,911	$ (1,521,648)	$ (2,124,903)	$ 43,792,513
Comprehensive income:
Net income			2,424,209			2,424,209
Change in unrealized loss on securities, net of tax				(2,370,250)		(2,370,250)
Total comprehensive income						53,959

Dividends declared ($0.26 per share)			(937,283)			(937,283)
4,086 shares issued in connection with the Corporation’s Employee Stock Purchase Plan			(7,009)		62,415	55,406
Purchase of 24,350 common shares		_________			(381,479)	(381,479)
BALANCE AT JUNE 30, 2006	$ 3,760,557 ========	14,651,596 =======	30,506,828 =======	(3,891,898) ========	(2,443,967) =======	$ 42,583,116 ========

	Common Stock	Surplus	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Total
BALANCE AT DECEMBER 31, 2004	$ 3,760,557	14,598,030	26,166,782	713,857	(1,010,039)	$ 44,229,187
Comprehensive income:
Net income			2,215,922			2,215,922
Change in unrealized gain(loss) on securities, net of tax				(515,669)		(515,669)
Total comprehensive income						1,700,253

Dividends declared ($0.24 per share)			(889,746)			(899,746)
6,253 shares issued in connection with the Corporation’s Employee Stock Purchase Plan					88,239	88,239
Exercise of stock options (12,040 shares)		53,566			169,901	223,467
BALANCE AT JUNE 30, 2005	$ 3,760,557 ========	14,651,596 =======	27,492,958 =======	198,188 ========	(751,899) =======	$ 45,351,400 ========

See notes to consolidated financial statements


United Bancshares, Inc. and Subsidiary
Condensed Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands)

			Six months ended June 30,
			2006	2005

Cash flows from operating activities			$ 1,809,875	$ 1,596,189

Cash flows from investing activities:
	Purchases of available-for-sale securities, net of proceeds
		from sales or maturities	4,133,741	23,723,377
	Net increase in loans Purchase of bank owned life insurance		(13,606,614) -	(7,386,639) (4,500,000)
	Expenditures for premises and equipment		(128,306)	(113,202)
		Net cash from investing activities	(9,600,179)	11,723,536

Cash flows from financing activities:
	Net change in deposits		4,864,051	(5,166,333)
	Net change in long-term debt		3,411,853	(7,218,646)
	Proceeds from issuance of common stock Purchase of treasury stock		55,406 (381,479)	88,239 -
	Cash dividends paid		(937,283)	(889,746)
		Net cash from financing activities	7,012,548	(13,186,486)

Net change in cash and cash equivalents			(777,756)	133,239

Cash and cash equivalents:
	At beginning of period		10,114,368	14,571,949
	At end of period		$ 9,336,612 =========	$ 14,705,188 ========

Cash paid during period: Interest Income taxes See notes to consolidated financial statements			$ 6,771,108 ======== $ 570,000 ========	$ 5,624,858 ======== $ 265,000 ========

United Bancshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2006

Note 1 – Consolidated Financial Statements

The consolidated financial statements of United Bancshares, Inc. and subsidiary (the “Corporation”) have been prepared without audit and in the opinion of management reflect all adjustments (which include normal recurring adjustments) necessary to present fairly such information for the periods and dates indicated. Since the unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q, they do not contain all information and footnotes typically included in financial statements prepared in conformity with generally accepted accounting principles. Operating results for the quarterly and six–month periods ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. Complete audited consolidated financial statements with footnotes thereto are included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005.

The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary. Significant inter-company accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Corporation conform to generally accepted practices within the banking industry. The Corporation considers all of its principal activities to be banking related.

Note 2 – Junior Subordinated Deferrable Interest Debentures

The Corporation has formed and invested $300,000 in a business trust, United (OH) Statutory Trust (United Trust) which is not consolidated by the Corporation. United Trust issued $10,000,000 of trust preferred securities, which are guaranteed by the Corporation, and are subject to mandatory redemption upon payment of the debentures. United Trust used the proceeds from the issuance of the trust preferred securities, as well as the Corporation’s capital investment, to purchase $10,300,000 of junior subordinated deferrable interest debentures issued by the Corporation. The debentures mature on March 26, 2033, which date may be shorten to March 26, 2008, if certain conditions are met, as well as quarterly thereafter. The interest rate of the debentures is fixed at 6.40% for a five-year period through March 2008. Thereafter, interest is at a floating rate adjustable quarterly and equal to 315 basis points over the 3-month LIBOR. Interest is payable quarterly. The Corporation has the right, subject to events in default, to defer payments of interest on the debentures by extending the interest payment period for a period not exceeding 20 consecutive quarterly periods. Interest expense on the debentures amounted to $320,000 for the six-month periods ended June 30, 2006 and 2005 and is included in interest expense-borrowings in the accompanying consolidated statements of income.

Each issue of the trust preferred securities carries an interest rate identical to that of the related debenture. The securities have been structured to qualify as Tier I capital for regulatory purposes and the dividends paid on such are tax deductible. However, the securities cannot be used to constitute more than 25% of the Corporation’s core tax Tier I capital under Federal Reserve Board guidelines inclusive of these securities.

NOTE 3 - Securities

The amortized cost and fair value of available-for-sale securities as of June 30, 2006 and December 31, 2005 are as follows (dollars in thousands):


	June 30, 2006		December 31, 2005
	Amortized cost	Fair value	Amortized cost	Fair value
U.S. Treasury and agencies	$ 29,655	$ 28,568	$ 29,642	$ 28,877
Obligations of states and political subdivisions	45,976	45,254	42,190	42,357
Mortgage-backed	103,852	99,764	113,772	112,064
Other	53	53	53	53

Total	$ 179,536 ========	$ 173,639 =======	$ 185,657 =======	$ 183,351 =======

A summary of gross unrealized gains and losses on available-for-sale securities at June 30, 2006 and December 31, 2005 follows (dollars in thousands):


	June 30, 2006		December 31, 2005
	Gross unrealized gains	Gross unrealized losses	Gross unrealized gains	Gross unrealized losses

U.S. Treasury and agencies	$ 0	$ 1,087	$ 0	$ 765
Obligations of states and political subdivisions	208	930	412	245
Mortgage-backed	6	4,094	38	1,746

Total	$214 ========	$ 6,111 =======	$ 450 =======	$ 2,756 =======

NOTE 4 - Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) and related tax effects are as follows for the six-month periods ended June 30, 2006 and 2005 (dollars in thousands):


	2006	2005
Unrealized holding losses on available-for-sale securities	$ (3,595)	$ (662)
Reclassification adjustments for securities losses (gains) realized to income	4	(120)

Net unrealized losses	(3,591)	(782)

Tax effect	(1,221)	(266)

Net-of-tax amount	$ (2,370) =======	$ (516) ======

Note 5 - Commitments

The Union Bank Company (“Union”), the Corporation’s wholly-owned subsidiary, has entered into contracts for the purchase of land in Columbus Grove and Bowling Green, Ohio for construction of new banking centers. The total cost of the contracts aggregates $810,000 of which Union has made deposits of $25,000 at June 30, 2006. Union is expected to close on both contracts during the third quarter of 2006.

Note 6 - New Accounting Pronouncement

In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156, "Accounting for Servicing of Financial Assets an amendment of FASB Statement 140" (Statement 156). Statement 156 amends Statement 140 with respect to separately recognized servicing assets and liabilities. Statement 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract and requires all servicing assets and liabilities to be initially measured at fair value, if practicable. Statement 156 also permits entities to subsequently measure servicing assets and liabilities using an amortization method or fair value measurement method. Under the amortization method, servicing assets and liabilities are amortized in proportion to and over the estimated period of servicing. Under the fair value measurement method, servicing assets are measured at fair value at each reporting date and changes in fair value are reported in net income for the period the change occurs.

Adoption of Statement 156 is required as of the beginning of fiscal years beginning subsequent to September 15, 2006. Earlier adoption is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued financial statements, including interim financial statements.

The Corporation expects to adopt Statement 156 at the beginning of 2007 and has not yet determined how its servicing assets will be measured subsequent to acquisition.

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

SELECTED FINANCIAL DATA

The following data should be read in conjunction with the unaudited consolidated financial statements and management’s discussion and analysis that follow:


	As of or for the Three Months Ended June 30,		As of or for the Six Months Ended June 30,
	2006	2005	2006	2005
SIGNIFICANT RATIOS (Unaudited)
Net income to: Average assets (a) Average shareholders’ equity (a)	0.92% 11.53%	0.82% 10.20%	0.90% 11.17%	0.80% 10.04%
Net interest margin (a)	3.70%	3.62%	3.70%	3.59%
Efficiency ratio (b)	65.90%	66.09%	66.03%	66.10%
Average shareholders’ equity to average assets	7.98%	8.02%	8.06%	7.94%
Loans to deposits (end of period) (c)	89.39%	86.06%	89.39%	86.06%
Allowance for loan losses to loans (end of period) (d)	0.79%	0.92%	0.79%	0.92%
Cash dividends to net income	37.67%	39.26%	38.66%	40.15%


Book value per share	$ 11.82	$ 12.23	$ 11.82	$ 12.23

(a) Net income to average assets, net income to average shareholders’ equity and net interest margin are presented on an annualized basis. Net interest margin is calculated using fully-tax equivalent net interest income as a percentage of average interest earning assets.

(b) Efficiency ratio is a ratio of non-interest expense as a percentage of fully tax equivalent net interest income plus non-interest income.

(d) Excludes loans held for sale.

Introduction

When or if used in the Corporation’s Securities and Exchange Commission filings or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases: “anticipate,” “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “is estimated,” “is projected,” or similar expressions are intended to identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any such statements are subject to the risks and uncertainties that include but are not limited to: changes in economic conditions in the Corporation’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Corporation’s market area, and competition. All or some of these factors could cause actual results to differ materially from historical earnings and those presently anticipated or projected.

The Corporation cautions readers not to place undue reliance on any such forward looking statements, which speak only as of the date made, and advises readers that various factors, including regional and national economic conditions, substantial changes in the levels of market interest rates, credit and other risks associated with lending and investing activities, and competitive and regulatory factors could affect the Corporation’s financial performance and could cause the Corporation’s actual results for future periods to differ materially from those anticipated or projected. The Corporation does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

The following discussion and analysis of the consolidated financial statements of the Corporation is presented to provide insight into management’s assessment of the financial results.

United Bancshares, Inc. (the “Corporation”), an Ohio corporation, is a bank holding Corporation registered under the Bank Holding Company Act of 1956, as amended, and is subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Corporation was incorporated and organized in 1985. The executive offices of the Corporation are located at 100 S. High Street, Columbus Grove, Ohio 45830. The Corporation is a one-bank holding company, as that term is defined by the Federal Reserve Board.

The Union Bank Company (“Union”), a wholly-owned subsidiary of the Corporation, is engaged in the business of commercial banking. Union is an Ohio state-chartered bank, which serves Allen, Putnam, Sandusky, Van Wert and Wood Counties, with office locations in Bowling Green, Columbus Grove, Delphos, Gibsonburg, Kalida, Leipsic, Lima, Ottawa, and Pemberville.

Union offers a full range of commercial banking services, including checking and NOW accounts, savings and money market accounts; time certificates of deposit; automatic teller machines; commercial, consumer, agricultural, residential mortgage loans and home equity loans; credit card services; safe deposit box rentals; and other personalized banking services.

The Corporation is registered as a Securities Exchange Act of 1934 reporting company.

RESULTS OF OPERATIONS

Overview of the Income Statement

For the quarter ended June 30, 2006, United Bancshares, Inc. reported net income of $1,243,000, or $0.34 basic earnings per share. This compares to second quarter 2005 net income of $1,133,000, or $0.31 basic earnings per share. Compared with the same period in 2005, second quarter 2006 net income increased $110,000 or 9.7%. The increase in net income for the quarter was the result of an increase in non-interest income of $39,000 and decreases in the provision for income taxes of $40,000, provision for loan losses of $135,000 and non-interest expenses of $84,000, offset by a decrease of $188,000 in net interest income.

Net income for the six months ended June 30, 2006, totaled $2,424,000, or $0.67 basic earnings per share compared to net income of $2,216,000, or $0.60 basic earnings per share for the same period in 2005. The increase in net income for the six-month period was the result of an increase of $128,000 in non-interest income and decreases in the provision for loan losses of $185,000, non-interest expenses of $50,000 and the provision for income taxes of $91,000, offset by a decrease in net interest income of $246,000.

Interest Income and Expense

Net interest income is the amount by which interest income from interest-earning assets exceeds interest incurred on interest-bearing liabilities. Interest-earning assets consist principally of loans and investment securities while interest-bearing liabilities include interest-bearing deposit accounts and borrowed funds. Net interest income remains the primary source of revenue for the Corporation. Changes in market interest rates, as well as changes in the mix and volume of interest-bearing assets and interest-bearing liabilities, impact net interest income. Net interest income was $4,397,000 for the second quarter of 2006 compared to $4,584,000 for the same period of 2005, a $188,000 decrease. Net interest income was $8,783,000 for the first half of 2006 compared to $9,029,000 for the same period of 2005, a decrease of $246,000. Although net interest margin was improved in 2006 compared to 2005, net interest income for the six-month period ended June 30, 2006 was reduced due to a decrease in average net interest-earning assets for the comparable period.

Net interest margin is calculated by dividing net interest income (adjusted to reflect tax-exempt municipal income on a taxable equivalent basis) by average interest-earning assets. The resultant percentage serves as a measurement for the Corporation in comparing its results with those of past periods as well as those of peer companies. For the three and six month periods ended June 30, 2006, the net interest margin (on a tax equivalent basis) was 3.70%, compared with 3.62% and 3.59% for the same periods of 2005. Management believes that this increase was primarily the result of changes in its interest rate pricing strategies and yield improvements as a result of the ongoing transfer of assets from the Corporation’s investment portfolio to the Corporation’s loan portfolio.

Provision for Loan Losses

The provision for loan losses is determined based upon management’s continuing calculation of the allowance for loan losses and is reflective of the quality of management’s assessment of the portfolio and overall management of the inherent credit risk. Changes in the provision for loan losses are dependent, among other things, on loan delinquencies, portfolio risk, and general

economic conditions in the Corporation’s markets. As a result of management’s analysis, a $40,000 provision for loan losses was made for the second quarter of 2006, and a $140,000 provision was made for the six months ended June 30, 2006, compared to provisions for loan losses of $175,000 for the three month and $325,000 for the six month periods ended June 30, 2005. See “Allowance for Loan Losses” under Financial Condition for further discussion of the provision for loan losses.

Non-Interest Income

The Corporation’s non-interest income is largely generated from activities related to the origination and servicing of fixed rate mortgages, sales of security investments, customer deposit account fees, and income arising from sales of products, such as investments to customers. The income related to deposit accounts provides a relatively steady flow of income while the other sources are more volatile and can vary from quarter to quarter.

Gain on sales of loans amounted to $78,000 for the quarter ended June 30, 2006 compared to $111,000 for the comparable 2005 period, a decrease of $33,000 (30.0%). Such gains included capitalized servicing rights of $50,000 for each of the quarters, on $4.4 million and $5.9 million originated loan sales during the respective quarters. The balance of the gain on sales of loans represented cash gains. During the quarter ended June 30, 2005, the Corporation realized a $74,000 gain on the sale of securities (none for the quarter ended June 30, 2006).

Gain on sales of loans amounted to $141,000 for the six-month period ended June 30, 2006 compared to $195,000 for the comparable 2005 period, a decrease of $54,000 (27.7%). Such gains included capitalized servicing rights of $95,000 and $107,000 on $9.0 million and $11.4 million originated loan sales during the respective periods. The balance of the gain on sales of loans represented cash gains. Additionally, during the six-month period ended June 30, 2006, the Corporation realized a net loss on the sale of securities of $4,000, compared to a net gain of $120,000 for the same period in 2005.

Other non-interest income increased principally due to the increase in income from Bank Owned Life Insurance (“BOLI”), which was $122,000 and $231,000, respectively, for the quarter and six-month periods ended June 30, 2006, compared to $19,000 and $33,000, respectively, for the same periods in 2005.

Non-Interest Expenses

For the quarter ended June 30, 2006, non-interest expenses totaled $3,550,000 compared to $3,634,000 for the comparable period of 2005, a decrease of $84,000 (2.3%). For the six-month period ended June 30, 2006, non-interest expenses totaled $7,105,000 compared to $7,155,000 for the comparable period of 2005, a decrease of $50,000 (0.7%).

The operating results for the three and six month periods included an adjustment to the provision for stock options based on the Corporation’s closing stock price as of June 30, 2006. As a result of this adjustment, non-interest expenses were reduced $31,000 and $24,000, respectively, for the three and six-month periods ended June 30, 2006. Non-interest expenses were reduced $9,000 and $84,000, respectively, for the three and six-month periods ended June 30, 2005. Management believes that the Corporation’s non-interest expenses are acceptable, considering the increases in the costs of conducting business and the costs associated with various additional regulatory compliance, including compliance efforts regarding Section 404 of the Sarbanes-Oxley Act of 2002. In addition to the Corporation’s ongoing commitment to the improvement of internal controls and the overall operational

environment, the Corporation has and will continue to identify and implement cost saving strategies. Such strategies have led to the containment or reduction of non-interest expenses for the three and six month periods ending June 30, 2006 compared to the same periods in 2005.

Maintaining acceptable levels of non-interest expenses and operating efficiency are key performance indicators for the Corporation in its strategic initiatives. The financial services industry uses the efficiency ratio (total non-interest expense as a percentage of the aggregate of fully-tax equivalent net interest income and non-interest income) as a key indicator of performance.

For the quarter ended June 30, 2006, the Corporation’s efficiency ratio was 65.90% compared to 66.09% for the same period of 2005. The Corporation’s efficiency ratio improved as a result of the aforementioned reduction in non-interest expenses and an increase in non-interest income offset by a reduction in net interest income. For the six-month period ended June 30, 2006, the Corporation’s efficiency ratio was 66.03% compared to 66.10% for the same period of 2005. The 2006 year-to-date improvement compared to 2005 was also the result of the aforementioned factors.

Provision for Income Taxes

The provision for income taxes for the quarter ended June 30, 2006 was $306,000 or 19.8% of income before income taxes, compared to $346,000 or 23.4%, for the comparable 2005 period. The provision for income taxes for the six-month period ended June 30, 2006 was $609,000, or 20.1% of income before income taxes, compared to $700,000, or 24.0%, for the comparable 2005 period. The decrease in the effective tax rates was due to tax-exempt interest income and tax-exempt non-interest income associated with BOLI comprising a larger portion of pre-tax income for the 2006 periods.

Return on Assets

Return on average assets was 0.92% for the second quarter of 2006, compared to 0.82% for the comparable quarter of 2005. Return on average assets for the six months ended June 30, 2006 was 0.90% compared to 0.80% for the same period in 2005. Such increases reflect the increase in 2006 earnings as compared to 2005.

Return on Equity

Return on average shareholders’ equity for the second quarter of 2006 was 11.53% compared to 10.20% for the same period of 2005. Return on average equity for the six months ended June 30, 2006 was 11.17% compared to 10.04% for the same period in 2005. The Corporation and Union met all regulatory capital requirements and Union is considered “well capitalized” under regulatory and industry standards of risk-based capital.

FINANCIAL CONDITION

Overview of Balance Sheet

Total assets amounted to $540.9 million at June 30, 2006, compared to $536.2 million at December 31, 2005, an increase of $4.7 million, or .9%. Loans at June 30, 2006, net of the allowance for loan losses, increased $13.3 million (4.3%) from December 31, 2005. Securities available-for-sale decreased $9.7 million (5.3%) during this six-month period. Deposits during

this same period increased $4.8 million (1.3%). Other borrowings increased $3.3 million (5.3%) during the six-month period.

Shareholders’ equity decreased from $43.8 million at December 31, 2005 to $42.6 million at June 30, 2006. This decrease was primarily the result of a $2.4 million, net of tax, increase in unrealized losses on securities, the repurchase of 24,350 common shares ($381,000) and the payment of dividends ($937,000), offset by net income ($2.4 million) and the sale of 4,086 treasury shares ($55,000) under the Corporation’s Employee Stock Purchase Plan. The aforementioned increase in unrealized securities losses from December 31, 2005, was primarily the result of customary and expected changes in the bond market. At the present, the Corporation has both the ability and intent to hold securities in a loss position until such time as market conditions change or the respective securities mature. Consequently, such losses are considered to be temporary and have not been reflected in the Corporation’s earnings results. The unrealized losses on securities is reported as accumulated other comprehensive loss in the consolidated balance sheets.

Cash and Cash Equivalents

Cash and cash equivalents totaled $9.3 million at June 30, 2006 compared to $10.1 million at December 31, 2005 (December 31, 2005 includes Federal funds sold of $1.1 million).

Management believes the current level of cash and cash equivalents is sufficient to meet the Corporation’s present liquidity and performance needs. Total cash and cash equivalents fluctuate on a daily basis due to transactions in process and other liquidity needs. Management believes the Corporation’s liquidity needs in the near term will be satisfied by the current balance of cash and cash equivalents, readily available access to traditional and non-traditional funding sources, and the portions of the investment and loan portfolios that will mature within one year. These sources of funds should enable the Corporation to meet cash obligations and off-balance sheet commitments as they come due. In addition, the Corporation has access to various sources of additional borrowings by virtue of long-term assets that can be used as collateral for such borrowings.

Securities

At June 30, 2006, securities totaled $173.6 million, a decrease of $9.7 million from December 31, 2005. All of the Corporation’s securities are classified as available-for-sale. The decrease in available-for-sale securities was the result of management’s decision to take the portfolio’s cash flows and using those cash flows to fund loan growth instead of reinvesting them in the securities portfolio. Management believes classifying securities as available-for-sale provides the Corporation flexibility and facilitates greater interest rate risk management opportunities. At June 30, 2006, the amortized cost of the Corporation’s available-for-sale securities totaled $179.5 million, resulting in net unrealized losses of approximately $5.9 million and a corresponding after tax decrease in shareholders’ equity of $3.9 million.

Management monitors the earnings performance and liquidity of the investment portfolio on a regular basis through Asset/Liability Committee meetings.

Loans

The Corporation’s lending is primarily centered in northwestern and west central Ohio. Gross loans (including loans held for sale) totaled $323.3 million at June 30, 2006 compared to $310.0 million at December 31, 2005, an increase of $13.3 million (4.3%). The increase in loan

balances was primarily the result of loan growth in agricultural real estate and participations in commercial real estate.

Allowance for Loan Losses

The allowance for loan losses as a percentage of loans (excluding loans held for sale) was 0.79% at June 30, 2006 compared to 0.82% at December 31, 2005. The decrease in the allowance for loan losses, as a percent of total loans, is largely attributable to improvement in the credit quality of certain large classified credits. Management believes the level of allowance is adequate given the composition of and risk inherent in the loan portfolio of Union. Throughout 2006, management will continue to monitor the risk of credit loss associated with the loan portfolio, and will adjust the allowance accordingly.

The following table presents changes in the allowance for loan losses for the six months ended June 30, 2006 and 2005, respectively:


	(dollars in thousands)

	2006	2005
Balance, beginning of period	$2,540	$2,758

Charge offs	(268)	(297)
Recoveries	127	91
Net charge offs	(141)	(206)

Provision for loan losses	140	325
Balance, end of period	$2,539 =====	$2,877 =====

Loans on non-accrual status as a percentage of outstanding loans was 0.77% at June 30, 2006, compared to 0.76% at December 31, 2005. Non-accrual loans totaled $2,495,000 and $2,060,000 at June 30, 2006 and December 31, 2005, respectively. Management believes the current level of non-accrual loans is acceptable and is a reflection of the quality of Union’s loan portfolio as well as the adequacy of staffing levels devoted to monitoring and pursuing the collection of these credits.

Funding Sources

The Corporation considers a number of alternatives, including but not limited to, deposits, as well as short-term and long-term borrowings when evaluating funding sources. Traditional deposits continue to be the most significant source of funds for the Corporation, totaling $361.7 million, or 72.9% of the Corporation’s funding sources at June 30, 2006.

Non-interest bearing deposits remain a smaller portion of the funding source for the Corporation than for most of its peers. Non-interest bearing deposits comprised 9.5% of total deposits at June 30, 2006.

In addition to traditional deposits, the Corporation maintains both short-term and long-term borrowing arrangements. These borrowings consisted of FHLB borrowings totaling $64.9 million and $61.7 million at June 30, 2006 and December 31, 2005, respectively, and

repurchase agreements totaling $59.2 million and $59.0 million at June 30, 2006 and December 31, 2005, respectively. Management plans to maintain access to various borrowing alternatives as an appropriate funding source.

Shareholders’ Equity

For the six month period ended June 30, 2006, the Corporation had net income of $2,424,000 from traditional operations and dividends of $937,000, resulting in a dividend payout ratio of 38.66% of net income. Management believes the overall equity level supports this payout ratio. During the six month period ended June 30, 2006 and 2005, the Corporation transferred 4,086 and 6,253 shares, respectively of treasury stock to participants of the Corporation’s Employee Stock Purchase Plan. In addition, during the six month period ended June 30, 2006, the Corporation purchased 24,350 shares through its share repurchase program.

The increase in net unrealized loss on available-for-sale securities, net of income taxes, was $2.4 million for the six month period ended June 30, 2006. Since all the securities in the Corporation’s portfolio are classified as available-for-sale, both the securities and equity sections of the consolidated balance sheet are sensitive to the changing market values of securities.

The Corporation has also complied with the standards of capital adequacy mandated by the banking industry. Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets banks hold in their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, or 100% (highest risk assets) is assigned to each asset on the balance sheet and to certain off-balance sheet commitments.

Liquidity and Interest Rate Sensitivity

The objective of the Corporation’s asset/liability management function is to maintain consistent growth in net interest income through management of the Corporation’s balance sheet liquidity and interest rate exposure based on changes in economic conditions, interest rate levels, and customer preferences.

The Corporation manages interest rate risk to minimize the impact of fluctuating interest rates on earnings. The Corporation uses simulation techniques that attempt to measure the volatility of changes in the level of interest rates, basic banking interest rate spreads, the shape of the yield curve, and the impact of changing product growth patterns. The primary method of measuring the sensitivity of earnings of changing market interest rates is to simulate expected cash flows using varying assumed interest rates while also adjusting the timing and magnitude of non-contractual deposit repricing to more accurately reflect anticipated pricing behavior. These simulations include adjustments for the lag in prime loan repricing and the spread and volume elasticity of interest-bearing deposit accounts, regular savings and money market deposit accounts.

The principal function of interest rate risk management is to maintain an appropriate relationship between those assets and liabilities that are sensitive to changing market interest rates. The Corporation closely monitors the sensitivity of its assets and liabilities on an ongoing basis and projects the effect of various interest rate changes on its net interest margin. Interest sensitive assets and liabilities are defined as those assets or liabilities that mature or reprice within a designated time frame. The difference between rate sensitive assets and rate sensitive liabilities for a specified period of time is know as “gap”.

Management believes the Corporation’s current mix of assets and liabilities provides a reasonable level of risk related to significant fluctuations in net interest income and the resulting volatility of the Corporation’s earning base. The Corporation’s management reviews interest rate risk in relation to its effect on net interest income, net interest margin, and the volatility of the earnings base of the Corporation.

Effects of Inflation on Financial Statements

Substantially all of the Corporation’s assets relate to banking and are monetary in nature. Therefore, they are not impacted by inflation to the same degree as companies in capital-intensive industries in a replacement cost environment. During a period of rising prices, a net monetary asset position results in loss in purchasing power and conversely a net monetary liability position results in an increase in purchasing power. In the banking industry, typically monetary assets exceed monetary liabilities. Therefore, as prices have recently increased, financial institutions experienced a decline in the purchasing power of their net assets.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The only significant market risk to which the Corporation is exposed is interest rate risk. The business of the Corporation and the composition of its balance sheet consist of investments in interest-earning assets (primarily loans and securities), which are funded by interest bearing liabilities (deposits and borrowings). These financial instruments have varying levels of sensitivity to changes in the market rates of interest, resulting in market risk. None of the Corporation’s financial instruments are held for trading purposes.

The Corporation manages interest rate risk regularly through its Asset Liability Committee. The Committee meets on a regular basis and reviews various asset and liability management information, including but not limited to, the bank’s liquidity positions, projected sources and uses of funds, interest rate risk positions and economic conditions.

The Corporation monitors its interest rate risk through a sensitivity analysis, whereby it measures potential changes in its future earnings and the fair values of its financial instruments that may result from one or more hypothetical changes in interest rates, this analysis is performed by estimating the expected cash flows of the Corporation’s financial instruments using interest rates in effect at year-end. For the fair value estimates, the cash flows are then discounted to year-end to arrive at an estimated present value of the Corporation’s financial instruments. Hypothetical changes in interest rates are then applied to the financial instruments, and the cash flows and fair values are again estimated using these hypothetical rates. For the net interest income estimates, the hypothetical rates are applied to the financial instruments based on the assumed cash flows. The Corporation applies these interest rate “shocks” to its financial instruments up and down 100, 200, and 300 basis points.

There have been no material changes in the quantitative and qualitative information about market risk from the information provided in the December 31, 2005 Form 10-K.

ITEM 4

CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures.

With the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")); as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that:

(a)

information required to be disclosed by the Corporation in this Quarterly Report on Form 10-Q would be accumulated and communicated to the Corporation’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure;

(b)

information required to be disclosed by the Corporation in this Quarterly Report on Form 10-Q would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(c)

the Corporation’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that material information relating to the Corporation and its consolidated subsidiary is made known to them, particularly during the period for which our periodic reports, including this Quarterly Report on Form 10-Q, are being prepared.

Changes in Internal Control over Financial Reporting.

There were no significant changes during the period covered by this Quarterly Report on Form 10-Q in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – Other Information

Item 1: Legal Proceedings.

There are no pending legal proceedings to which the Corporation or its subsidiary are a party or to which any of their property is subject except routine legal proceedings to which the Corporation or its subsidiary are a party incident to the banking business. None of such proceedings are considered by the Corporation to be material.

Item 1A: Risk Factors

There have been no material changes in the discussion pertaining to risk factors that was provided in the December 31, 2005 Form 10-K.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds.

The table below includes certain information regarding the Corporation’s purchase of United Bancshares, Inc. common stock during the quarterly period ended June 30, 2006:


Period	Total number of shares purchased	Average price paid per share	Total number shares purchased as part of publicly announced plan or program	Maximum number of shares that may yet be purchased under the plan or program(a)

04/1/06 - 04/30/06	None	None	None	86,269

05/01/06 - 05/31/06	None	None	None	86,269

06/1/06 - 06/30/06	None	None	None	86,269

(a) A stock repurchase program (“Plan”) was announced on July 29, 2005 and expanded on December 23, 2005. The Plan authorizes the Corporation to repurchase up to 200,000 of the Corporation’s common shares from time to time in a program of market purchases or in privately negotiated transactions as the securities laws and market conditions permit.

Item 3: Defaults upon Senior Securities.

None

Item 4: Submission of Matters to a Vote of Security Holders.

On April 26, 2006, The Corporation held its annual shareholders’ meeting at its corporate headquarters in Columbus Grove, Ohio.

The shareholders adopted the proposal to elect directors at the meeting by the votes indicated below:


	FOR	WITHHELD
Robert L. Benroth	2,860,144.46	140,118.41
Robert L. Dillhoff	2,821,968.65	178,294.22
Joe S. Edwards, Jr.	2,806,030.45	194,232.41
P. Douglas Harter	2,808,282.16	191,980.70
James N. Reynolds	2,792,930.02	207,332.84
H. Edward Rigel	2,810,637.45	189,625.41
David P. Roach	2,827,555.22	172,707.64
Daniel W. Schutt	2,853,410.79	146,852.07
R. Steven Unverferth	2,870,405.10	129,857.76

The proposal to Amend the Articles of Incorporation to classify the Board of Directors did not receive the necessary two-thirds majority vote to pass (votes for 2,069,458.38, votes against 353,189.50 and votes abstained 78,261.98).

The proposal to amend the Articles of Incorporation to increase the number of authorized shares of common stock to 10,000,000 was approved by the shareholders. The proposal received the necessary two-thirds majority vote (votes for, 2,594,728.28; votes against, 318,084.25 and votes abstain, 87,450.33).

Item 5: Other Information.

Form 11-K was filed on June 28, 2006 reporting on the United Bancshares, Inc ESOP.

Item 6: Exhibits

(a) Exhibits

Exhibit 3(i) Amended and Restated Articles or Incorporation

Exhibit 3(ii) Regulations

Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of CEO

Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of CFO

Exhibit 32.1 Section 1350 CEO’s Certification

Exhibit 32.2 Section 1350 CFO’s Certification

Exhibit 99.1 Safe Harbor under The Private Securities Litigation Reform Act of 1995

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.
Date:	July 21, 2006	By: /s/ Brian D. Young
		Brian D. Young
		Chief Financial Officer

EXHIBIT INDEX

UNITED BANCSHARES, INC. QUARTERLY REPORT ON FORM 10-Q

FOR PERIOD ENDED JUNE 30, 2006


Exhibit Number	Description	Exhibit Location
3(i)	Amended and Restated Articles of Incorporation	Filed herewith
3(ii)	Exhibit 3(ii) – Regulations	Incorporate by reference to Corporation’s Definitive Proxy Statement filed March 8, 2002
31.1	Rule 13a-14(a)/15d-14(a) Certification of CEO	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of CFO	Filed herewith
32.1	Section 1350 CEO’s Certification	Filed herewith
32.2	Section 1350 CFO’s Certification	Filed herewith
99.1	Safe Harbor under the Private Securities Litigation Reform Act of 1995	Filed herewith

Exhibit 3(i)

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF UNITED BANCSHARES, INC.

ARTICLE I

The name of the Corporation is United Bancshares, Inc.

ARTICLE II

The place in the State of Ohio where the principal office of the Corporation is located is in the Village of Columbus Grove, County of Putnam.

ARTICLE III

The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be formed under the Ohio General Corporation Laws (ORC Sections 1701.01 et seq.).

ARTICLE IV

The maximum number of shares which the Corporation is authorized to have outstanding is 10,000,000, all of which shall be designated Common Shares and shall be without par value.

ARTICLE V

The amount of stated capital with which the Corporation will commence business is at least five hundred dollars ($500.00).

ARTICLE VI

The Board of Directors of the Corporation is hereby authorized to determine whether any and, if any, what part of its surplus, however created or arising, shall be used or disposed of or declared in dividends or paid to shareholders, and without action by the shareholders, to use and apply such surplus or any part thereof at any time or from time to time in the purchase or acquisition of shares of any class, voting trust certificates for shares, bonds, debentures, notes, scripts, warrants, obligations, evidences of indebtedness of the Corporation or other securities of the Corporation, to such extent or amount and in such manner and upon such terms as the Board of Directors of the Corporation shall deem expedient to the extent not prohibited by law.

ARTICLE VII

The Corporation shall have the power to indemnify its present and past directors, officers, employees and agents, and such other persons as it shall have the powers to indemnify, to the full extent permitted under, and subject to the limitations of, Title 17 of the Ohio Revised Code.

The Corporation may, upon the affirmative vote of a majority of its Board of Directors, purchase insurance for the purpose of indemnifying its directors, officers, employees and agents to the extent that such indemnification is allowed in the preceding paragraph.

ARTICLE VIII

The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an Executive Committee, which committee shall have and may exercise, to the extent provided by law, all of the authority of the Board of Directors in the management of the Corporation.

ARTICLE IX

Each shareholder shall be entitled to one vote for each share of stock standing in his name on the books of the Corporation. No shareholder shall have the right to cumulate his voting power.

ARTICLE X

(A)

Except as set forth in paragraph (B) of this Article, the affirmative vote or consent of the holders of not less than eighty percent (80%) of the outstanding shares of stock of this Corporation entitled to vote in elections of directors shall be required.

(1)

to adopt any agreement for, or to approve, the merger or consolidation of this Corporation or any subsidiary with or into any other person.

(2)

to authorize any sale, lease, transfer, exchange, mortgage, pledge or other disposition to any other person of all or substantially all of the assets of this Corporation or any other subsidiary, or

(3)

to authorize the issuance or transfer by this Corporation or any subsidiary of any voting securities or securities convertible into voting securities of this Corporation or any subsidiary in exchange or payment for the securities or assets of any other person, if such authorization is otherwise required by law or by any other agreement to which the Corporation or any subsidiary is a party. If in any such case, as of the record date for the determination of shareholders entitled to notice thereof and to vote thereon or consent thereto, such other person is, or at any time within the preceding twelve months has been, the beneficial owner of 5% or more of the outstanding shares of stock of the Corporation entitled to vote in elections of directors. If such other person is not, and has not been, such a 5% beneficial owner, the provisions of this paragraph (A) shall not apply, and the provisions of Ohio law shall apply.

(B)

The provisions of paragraph (A) of this article shall not apply, and the provisions of Ohio law shall apply, to (1) any transactions described herein if the Board of Directors by resolution shall have approved an agreement in principle with such other person setting forth the principal terms of such transaction and such transaction is substantially consistent therewith, provided that a majority of those members of the Board of Directors voting in favor of such resolution were duly elected and acting members of the Board of Directors prior to the time such other person became the beneficial owner of 5% or more of the outstanding shares of stock of the Corporation entitled to vote in elections of directors; or (2) any transaction described herein if such other person is a corporation of which a majority of the outstanding shares of all classes of stock entitled to vote in elections of directors is owned of record or beneficially by the Corporation or its subsidiaries.

(C)

The affirmative vote or consent of the holders of not less than eighty percent (80%) of the outstanding shares of stock of the Corporation entitled to vote in elections of directors, voting for purposes of this Article as one class, shall be required for the adoption of any plan for the dissolution of the Corporation if the Board of Directors shall not have, by resolution adopted by the unanimous vote of all directors then in office, recommended to the shareholders the adoption of such plan for dissolution of the Corporation. If the Board of Directors shall have so recommended to the shareholders such plan for dissolution of the Corporation, the provisions of Ohio law shall apply.

(D)

For purposes of this Article,

(1)

any specified person shall be deemed to be the “beneficial owner” of shares of stock of the Corporation (a) which such specified person or any of its affiliates or associates owns directly or indirectly, whether of record or not, (b) which such specified person or any of its affiliates or associates has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, or (c) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clauses (a) and (b) above), by any other person with such specified person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of stock of the Corporation;

(2)

a “subsidiary” is any corporation more than 49% of the voting securities of which are owned, directly or indirectly, by the Corporation;

(3)

a “person” is any individual, corporation or other entity;

(4)

an “affiliate” of a specified person is any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person;

(5)

an “associate” of a specified person is (a) any person of which such specified person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities, (b) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar capacity, or (c) any relative or spouse of such specified person, or any relative of such spouse, who has the same home as such specified person or any corporation which controls or is controlled by such specified person; and

(6)

an “agreement in principle” is a writing signed by another person and by the Board of Directors of this Corporation, or by a duly authorized officer thereof, which establishes the principal terms of a transaction described in paragraph (A) of this Article, and manifests an intention to negotiate toward a definitive agreement.

(E)

For purposes of determining whether a person owns beneficially 5% or more of the outstanding shares of the Corporation entitled to vote in elections of directors, the outstanding shares of stock of the Corporation shall include shares deemed owned through application of clauses (a), (b) or (c) in paragraph (D)(1) above, but shall not include any other shares which may be issuable pursuant to any agreement upon exercise of conversion rights, warrants or options, or otherwise.

(F)

The Board of Directors shall have the power and duty to determine, for purposes of this Article, on the basis of information known to such board:

(1)

whether any person referred to in paragraph (A) of this Article owns beneficially 5% or more of the outstanding shares of stock of the Corporation entitled to vote in elections of directors; and

(2)

whether a proposed transaction is substantially consistent with any agreement in principle of the character referred to in paragraph (B) of this Article.

ARTICLE XI

No holder of any share or shares of any class issued by the Corporation shall be entitled as such, as a matter of right, at any time, to subscribe for or purchase (i) shares of any class issued by the Corporation, now or hereafter authorized, (ii) securities of the Corporation convertible into or exchangeable for shares of any class issued by the Corporation, now or hereafter authorized, or (iii) securities of the Corporation to which shall be attached or appertain to any rights or options whether by the terms of such securities or in the contracts, warrants, or other instruments (whether transferable or non-transferable or separable or inseparable from such securities) evidencing such rights or options entitling the holders thereof to subscribe for or purchase shares of any class issued by the Corporation, now or hereafter authorized; it being the intent and is the effect of this Article Tenth to fully eliminate any and all pre-emptive rights with respect to the shares of any class issued by the Corporation now or hereafter authorized.

These Amended and Restated Articles of Incorporation shall supersede all prior Articles of Incorporation.

Exhibit 31.1

Rule 13a–14(a)/15d–14(a) CERTIFICATION

I, Daniel W. Schutt, President and Chief Executive Officer of United Bancshares, Inc., certify, that:

(1) I have reviewed this Quarterly Report on Form 10-Q of United Bancshares, Inc.;

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Daniel W. Schutt

Daniel W. Schutt

President and Chief Executive Officer

July 21, 2006

Exhibit 31.2

Rule 13a–14(a)/15d–14(a) CERTIFICATION

I, Brian D. Young, Chief Financial Officer of United Bancshares, Inc., certify, that:

(1) I have reviewed this Quarterly Report on Form 10-Q of United Bancshares, Inc.;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Brian D. Young

Brian D. Young

Chief Financial Officer

July 21, 2006

Exhibit 32.1

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report of United Bancshares, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel W. Schutt, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Daniel W. Schutt

Daniel W. Schutt

Chief Executive Officer

Date: July 21, 2006

*This certification is being furnished as required by Rule 13a –14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

Exhibit 32.2

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report of United Bancshares, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Brian D. Young, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brian D. Young

Brian D. Young

Chief Financial Officer

Date: July 21, 2006

Exhibit 99.1

SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The Private Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their companies, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. United Bancshares, Inc. ("Corporation") desires to take advantage of the "safe harbor" provisions of the Act. Certain information, particularly information regarding future economic performance and finances and plans and objectives of management, contained or incorporated by reference in the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, is forward-looking. In some cases, information regarding certain important factors that could cause actual results of operations or outcomes of other events to differ materially from any such forward-looking statement appears together with such statement. In addition, forward-looking statements are subject to other risks and uncertainties affecting the financial institutions industry, including, but not limited to, the following:

Interest Rate Risk

The Corporation’s operating results are dependent to a significant degree on its net interest income, which is the difference between interest income from loans, investments and other interest-earning assets and interest expense on deposits, borrowings and other interest-bearing liabilities. The interest income and interest expense of the Corporation change as the interest rates on interest-earning assets and interest-bearing liabilities change. Interest rates may change because of general economic conditions, the policies of various regulatory authorities and other factors beyond the Corporation's control. In a rising interest rate environment, loans tend to prepay slowly and new loans at higher rates increase slowly, while interest paid on deposits increases rapidly because the terms to maturity of deposits tend to be shorter than the terms to maturity or prepayment of loans. Such differences in the adjustment of interest rates on assets and liabilities may negatively affect the Corporation's income.

Possible Inadequacy of the Allowance for Loan Losses

The Corporation maintains an allowance for loan losses based upon a number of relevant factors, including, but not limited to, trends in the level of non-performing assets and classified loans, current economic conditions in the primary lending area, past loss experience, possible losses arising from specific problem loans and changes in the composition of the loan portfolio. While the Board of Directors of the Corporation believe that it uses the best information available to determine the allowance for loan losses, unforeseen market conditions could result in material adjustments, and net earnings could be significantly adversely affected if circumstances differ substantially from the assumptions used in making the final determination.

Loans not secured by one to four family residential real estate are generally considered to involve greater risk of loss than loans secured by one- to four-family residential real estate due, in part, to the effects of general economic conditions. The repayment of multifamily residential, nonresidential real estate and commercial loans generally depends upon the cash flow from the operation of the property or business, which may be negatively affected by national and local economic conditions. Construction loans may also be negatively affected by such economic

conditions, particularly loans made to developers who do not have a buyer for a property before the loan is made. The risk of default on consumer loans increases during periods of recession, high unemployment and other adverse economic conditions. When consumers have trouble paying their bills, they are more likely to pay mortgage loans than consumer loans. In addition, the collateral securing such loans, if any, may decrease in value more rapidly than the outstanding balance of the loan.

Competition

The Corporation competes for deposits with other savings associations, commercial banks and credit unions and issuers of commercial paper and other securities, such as shares in money market mutual funds. The primary factors in competing for deposits are interest rates and convenience of office location. In making loans, the Corporation competes with other commercial banks, savings associations, consumer finance companies, credit unions, leasing companies, mortgage companies and other lenders. Competition is affected by, among other things, the general availability of lendable funds, general and local economic conditions, current interest rate levels and other factors that are not readily predictable. The size of financial institutions competing with the Corporation are likely to increase as a result of changes in statutes and regulations eliminating various restrictions on interstate and inter-industry branching and acquisitions. Such increased competition may have an adverse effect upon the Corporation.

Legislation and Regulation that may Adversely Affect the Corporation's Earnings

The Corporation is subject to extensive regulation by the State of Ohio, Division of Financial Institutions (the “ODFI”), the Federal Reserve Bank (the “FED”), and the Federal Deposit Insurance Corporation (the "FDIC") and is periodically examined by such regulatory agencies to test compliance with various regulatory requirements. Such supervision and regulation of the Corporation and the bank are intended primarily for the protection of depositors and not for the maximization of shareholder value and may affect the ability of the Corporation to engage in various business activities. The assessments, filing fees and other costs associated with reports, examinations and other regulatory matters are significant and may have an adverse effect on the Corporation's net earnings.