MARTINS FERRY, Ohio,
Jan. 28, 2020 /PRNewswire/ -- On
January 27,
2020, Evaluate Research released an Update on United
Bancorp, Inc. (NASDAQ: UBCP) reporting solid results for Q4
and FY 2019, with a 59% increase in full-year net income and,
adjusted for a higher share count resulting from the highly
successful and accretive Powhatan acquisition, diluted EPS surged
by 45%. Reported FY EPS of $1.19, and
Q4 EPS of $0.31, were in-line with
published forecasts of $1.20 and
$0.32, respectively. These
results were driven by strong 16% YoY growth in earning assets,
which was roughly evenly split between healthy loan growth of 7.8%,
and a surge in the investment portfolio by 50.4%. This sharp
growth in higher yielding earning assets, driven in part by the
Powhatan deal, resulted in a sharp 27% YoY growth interest income,
and this was a key highlight of UBCP's record earnings in
2019. While loan growth was just slightly higher than
Evaluate Research's model, interest income was nicely ahead of its
24% expectation.
Internal metrics were strong for UBCP, with ROA increasing to
1.05%, up from 0.84% in 2018, and ROE increasing to 11.3%, up from
9.1% in the prior year. As detailed in the Update Note, both
these metrics are ahead of peers within the overall banking
sector. UBCP's Q4 results reflect a continuation of positive
trends resulting from the firm's "playbook strategy" of growing
both organically as well as with small tuck-in acquisitions.
Increasing returns on assets and equity have been a key focus of
management, and CEO Scott Everson
noted, "We are extremely delighted that we are presently achieving
this [higher returns] and strongly anticipate this trend will carry
into 2020." Our conversations with management suggest further
gradual upticks in ROA and ROE going forward, driven by 10%
earnings growth estimated for 2020, and a continued return of
excess capital to shareholders via a robust dividend payout
ratio.
Evaluate Research reiterated its Buy rating and $17.00 price target for UBCP, which suggests a
total return potential of 30%. Given the sharp rise in broad
equity market valuations in the USA during Q4 and 2019, there is now an upward
bias to the price target. UBCP remains undervalued despite
recent share price appreciation, and is trading at just 10.4x P/E
[9.4x on 2021est], 1.1 Price/Book
[P/B], and a 4.1% dividend yield, all based on 2020 estimates.
Firing on all cylinders, UBCP remains in a "sweet spot" in its life
cycle in terms of strong organic and acquisition-related growth,
with favorable tailwinds of a benign supportive external
environment. UBCP is both undiscovered and undervalued, with
Evaluate Research the only firm now covering the stock.
This results announcement very much reinforces Evaluate
Research's thesis of robust earnings growth, increasing returns on
capital, strong balance sheet and capital adequacy, and a high
dividend yield. In addition to excess liquidity and being
underleveraged, UBCP remains well capitalized with 17.0% total
capital to risk-weighted assets, including 12.1% in Tier 1 capital,
as of September 2019 [the most
recently reported/released 10Q]. And all this is with a very
conservative balance sheet and leverage, as the loans-to-deposits
are only at 80%, versus a more optimal target level of around 90%,
which suggests ample room to further increase earnings going
forward. Finally, UBCP has an experienced management team
focused on growth, shareholder return and raising the stock
price.
Read the full report:
As of December 31, 2019, United
Bancorp, Inc. has total assets of $685.7
million and total shareholder's equity of $59.9 million. Through its single bank
charter, Unified Bank, the Company currently has
nineteen banking offices that serve the Ohio Counties of Athens, Belmont, Carroll, Fairfield, Harrison, Jefferson and Tuscarawas. The Company also operates a Loan
Production Office in Wheeling,
WV. United Bancorp, Inc. trades on the NASDAQ Capital Market
tier of the NASDAQ Stock Market under the symbol UBCP, Cusip
#909911109.
Certain statements contained herein are not based on historical
facts and are "forward-looking statements" within the meaning of
Section 21A of the Securities Exchange Act of 1934.
Forward-looking statements, which are based on various assumptions
(some of which are beyond the Company's control), may be identified
by reference to a future period or periods, or by the use of
forward-looking terminology, such as "may," "will," "believe,"
"expect," "estimate," "anticipate," "continue," or similar terms or
variations on those terms, or the negative of these terms.
Actual results could differ materially from those set forth in
forward-looking statements, due to a variety of factors, including,
but not limited to, those related to the economic environment,
particularly in the market areas in which the company operates,
competitive products and pricing, fiscal and monetary policies of
the U.S. Government, changes in government regulations affecting
financial institutions, including regulatory fees and capital
requirements, changes in prevailing interest rates, acquisitions
and the integration of acquired businesses, credit risk management,
asset/liability management, changes in the financial and securities
markets, including changes with respect to the market value of our
financial assets, and the availability of and costs
associated with sources of liquidity. The Company undertakes
no obligation to update or carry forward-looking statements,
whether as a result of new information, future events or
otherwise.
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SOURCE United Bancorp, Inc.