Company Overview

United Bancshares, Inc. (UBOH) is a diversified financial holding company with a rich history of serving its local communities in Ohio. Established in 1985, the company has grown to become a respected player in the regional banking landscape, offering a comprehensive suite of commercial and consumer banking services, as well as wealth management solutions. UBOH operates primarily in the Northwestern, West Central, and Central Ohio regions, with no significant presence outside of this local market area.

Historical Background

The company's origins can be traced back to the founding of The Union Bank Company in 1904, which served as the foundation for United Bancshares' expansion and evolution over the decades. United Bancshares, Inc. was incorporated and organized in 1985 as a registered financial holding company under Ohio law, subject to regulation by the Board of Governors of the Federal Reserve System. As a one-bank holding company, The Union Bank Company operates as its wholly-owned subsidiary.

The Union Bank Company, an Ohio state-chartered bank, has established a significant presence across several counties in Ohio. With office locations in Bowling Green, Columbus Grove, Delaware, Delphos, Findlay, Gahanna, Gibsonburg, Kalida, Leipsic, Lima, Marion, Ottawa, Paulding, Pemberville, Plymouth, Westerville, and Worthington, the bank offers a full range of commercial and consumer banking services. These services include deposit accounts, loans, treasury management, wealth management, and other supportive services tailored to meet the diverse needs of its customers.

Acquisitions and Growth

In 2014, United Bancshares made a strategic move by acquiring The Ohio State Bank, further strengthening its foothold in the Ohio market. This was followed by the acquisition of Benchmark Bank in 2017, solidifying the company's position as a prominent regional financial institution. While these acquisitions expanded the company's geographic footprint and customer base, they also presented operational challenges that required careful navigation and integration efforts.

Navigating Challenges

Throughout its history, United Bancshares has faced significant economic challenges, including the 2008 financial crisis and the COVID-19 pandemic. During these difficult times, the company remained committed to maintaining the quality of its loan portfolio and providing support to its customers. The credit administration department played a crucial role in closely monitoring higher-risk segments of the loan portfolio and providing regular reports to senior management and the board of directors, ensuring a proactive approach to risk management.

Financial Performance

United Bancshares' financial performance has been marked by a consistent focus on prudent risk management and disciplined lending practices. As of the latest reported quarter in 2024, the company boasted a robust balance sheet, with total assets of $1.07 billion and a well-capitalized position, as evidenced by its Tier 1 capital ratio of 12.0%. The company's net interest margin, a key measure of profitability, stood at 3.65% during the same period, reflecting its ability to navigate the challenging interest rate environment.

For the most recent fiscal year (2022), UBOH reported revenue of $43.74 million and a net income of $11.31 million. The company generated operating cash flow (OCF) of $16.78 million and free cash flow (FCF) of $13.20 million. In the most recent quarter (Q3 2022), revenue was $16.44 million with a net income of $2.47 million.

The company's loan portfolio has shown resilience, with a non-performing loan ratio of just 0.16% as of the most recent quarter. The allowance for loan losses, a buffer against potential credit risks, was maintained at a healthy 1.63% of total loans, demonstrating United Bancshares' proactive approach to risk management. As of September 30, 2022, UBOH's gross loans totaled $637.43 million, an increase of $27.80 million or 4.60% compared to December 31, 2021. This growth was primarily driven by increases in commercial and multi-family real estate loans, as well as residential 1-4 family real estate loans.

Liquidity Position

In terms of liquidity, United Bancshares has maintained a strong position, with a loan-to-deposit ratio of 66.35% as of the latest quarter. The company's ample liquidity is further bolstered by its access to various funding sources, including deposits, short-term and long-term borrowings, and the ability to pledge securities as collateral for additional borrowings. As of September 30, 2022, UBOH had $30.68 million in cash and cash equivalents, along with $177.29 million in available borrowing capacity under various line-of-credit agreements. The company's debt-to-equity ratio stood at 0.17, indicating a conservative capital structure.

Revenue Diversification

United Bancshares' diversified revenue streams have been a key factor in its ability to weather economic challenges. The company operates through two primary business segments: lending and wealth management. The lending segment, which comprises the majority of UBOH's assets and revenues, includes a diverse range of loan products such as commercial and multi-family real estate loans, residential 1-4 family real estate loans, commercial loans, agricultural loans, and consumer loans.

The wealth management segment has contributed to revenue diversification by offering investment services and products, including financial needs analysis, mutual funds, securities trading, annuities, and life insurance. These services are provided through an arrangement with LPL Financial LLC, a registered broker-dealer. For the nine months ended September 30, 2022, wealth management income increased to $357,000, up from $304,000 in the same period of 2021, reflecting growth in assets under management and increased customer demand for investment products.

Strategic Initiatives

Despite the headwinds faced by the banking industry, United Bancshares has demonstrated its resilience and adaptability. The company has proactively implemented various strategic initiatives to enhance its competitive positioning and meet the evolving needs of its customers. These efforts have included investments in technology, optimization of its branch network, and the development of tailored products and services to better serve its client base.

Future Outlook

Looking ahead, United Bancshares' management team remains cautiously optimistic about the company's future prospects. While the economic environment continues to present challenges, the company's strong capital position, diversified revenue streams, and proven track record of navigating through difficult times position it well to capitalize on future growth opportunities.

In conclusion, United Bancshares, Inc. (UBOH) has established itself as a resilient and adaptable financial institution, leveraging its rich history, prudent risk management, and strategic initiatives to navigate the evolving landscape of the banking industry. As the company continues to serve its local communities and explore new avenues for growth, investors and stakeholders can take comfort in its demonstrated commitment to long-term sustainability and value creation.