Press Release

Evaluate Research Releases Update Report on United Bancorp, Inc.

Company Release - 1/28/2020 1:49 PM ET

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.

United Bancorp, Inc. logo (PRNewsfoto/United Bancorp, Inc.)

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.

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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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