United Bancshares, Inc. (UBOH) is a financial holding company that has demonstrated its ability to navigate turbulent times and maintain its position as a trusted community bank. With a rich history spanning decades, the company has evolved to meet the changing needs of its customers while upholding its commitment to prudent risk management and sustainable growth.

Company Background and History

Established in 1985, United Bancshares has grown to become a significant player in the Ohio banking landscape. The company's principal asset and operating subsidiary is The Union Bank Company, an Ohio state-chartered commercial bank that has been serving the financial needs of consumers and small businesses in the communities it operates since 1904. United Bancshares has expanded its footprint through strategic acquisitions, including the 2000 acquisition of the Bank of Leipsic and the 2001 acquisition of the Citizens Bank of Delphos. Today, The Union Bank Company operates 22 full-service banking offices serving customers in 11 counties across northwest and central Ohio.

A key milestone for United Bancshares was its election in 2018 to become a financial holding company, which provided the company with expanded powers and flexibility to serve the financial needs of its consumer and small business customers. This transition coincided with a focus on building long-term customer relationships through high-quality service, ethical standards, and a commitment to safe and sound assets. Throughout its history, United Bancshares has maintained a strong community orientation, empowering its employees to provide personalized attention and tailored financial solutions to meet the needs of its customers.

Competitive Landscape and Challenges

One of the challenges faced by United Bancshares has been navigating the highly competitive financial services industry and market area in which it operates. The company competes with national, regional, and community banks, as well as other financial institutions, for deposits and loans. Consolidation in the industry has also put added pressure on the company's core banking products and services over the years. Despite these challenges, United Bancshares' disciplined approach to credit risk management has been critical in weathering economic cycles and upheaval in financial markets.

Resilience in the Face of Economic Challenges

Over the years, United Bancshares has weathered various economic challenges, including the 2008 financial crisis and the COVID-19 pandemic. The company's resilience is evident in its ability to maintain a strong financial position and continue to deliver value to its shareholders. As of December 31, 2022, United Bancshares reported total assets of $1.10 billion, an increase of 4.49% from the prior year. This growth was primarily driven by an increase in the company's loan portfolio, as it continued to support its lending activities.

Core Business Focus

United Bancshares operates through two main business segments: Commercial Banking and Consumer Banking. The Commercial Banking segment is the primary driver of the company's operations, contributing the majority of its revenue and earnings. This segment offers a variety of commercial lending products, including commercial and industrial loans, commercial real estate loans, agricultural loans, and small business administration (SBA) loans. Commercial loans accounted for 68.47% of the total loan portfolio as of December 31, 2022.

The Consumer Banking segment provides a range of retail banking products and services to individual customers, including residential mortgage loans, home equity loans, consumer loans, and personal deposit accounts such as checking, savings, and money market accounts. Residential real estate loans comprised 19.40% of the total loan portfolio as of December 31, 2022, while consumer loans accounted for 0.80% of the total.

Despite the headwinds, United Bancshares has remained focused on its core business of providing personalized banking services to its customers. The company's loan portfolio stood at $628.19 million as of December 31, 2022, a significant increase of 8.80% from $618.62 million a year earlier. This growth was driven by the bank's commitment to supporting local businesses and individuals, even in the face of economic uncertainty.

Financials

United Bancshares reported annual revenue of $43.74 million for the fiscal year 2022, with a net income of $11.31 million. The company's annual operating cash flow stood at $16.78 million, while free cash flow was $13.20 million. For the fourth quarter of 2022, revenue was $16.44 million with a net income of $2.47 million. However, the company experienced year-over-year revenue growth of -25.2% and net income growth of -40.9% in Q4 2022 compared to Q4 2021. These declines were primarily due to lower net interest income and higher noninterest expenses.

The company's net interest income, a key measure of its profitability, stood at $36.68 million in 2022, up slightly by 0.45% from $35.73 million in the previous year. This increase was primarily due to growth in the loan portfolio and the rising interest rate environment. However, United Bancshares' management team has demonstrated its ability to navigate these challenges, as evidenced by the company's efforts to optimize its cost structure. The efficiency ratio, a measure of operating expenses as a percentage of revenue, improved to 71.55% in 2022 from 73.97% in the prior year.

One of the notable developments in 2022 was the appointment of Klint D. Manz as the company's Chief Financial Officer. Manz's previous experience as the Chief Lending Officer at The Union Bank Company has provided him with a deep understanding of the company's operations, positioning him well to guide United Bancshares' financial strategy.

Despite the challenges faced in 2022, United Bancshares' commitment to prudent risk management and sustainable growth has continued to pay dividends. The company maintains a strong capital position, with a total risk-based capital ratio of 16.70% and a tier 1 leverage ratio of 10.10% as of December 31, 2022, well above the regulatory minimums. This solid capital base has allowed United Bancshares to navigate the economic uncertainties and continue to support its customers and communities.

Liquidity

In terms of liquidity, United Bancshares reported cash and cash equivalents of $30.68 million as of December 31, 2022, down from $75.20 million in the prior year. This decrease was primarily due to the reallocation of funds to support the company's lending activities and investment portfolio. However, United Bancshares' liquidity position remains robust, with a current ratio of 0.75 and a quick ratio of 0.67, both of which are within industry standards.

The company's debt-to-equity ratio stands at 0.17, indicating a conservative approach to leverage. United Bancshares also had access to a $1.5 million line of credit as of December 31, 2022, providing additional financial flexibility if needed.

Risks and Challenges

One of the key risks facing United Bancshares is the continued uncertainty in the macroeconomic environment. Factors such as rising interest rates, inflationary pressures, and potential economic slowdown could impact the company's lending activities and investment portfolio. Additionally, the highly competitive nature of the banking industry, particularly in the markets where United Bancshares operates, poses a challenge to the company's ability to maintain its market share and profitability.

The banking industry in the United States has seen modest growth in recent years, with a compound annual growth rate (CAGR) of around 3-4% for assets and deposits. Competition remains intense, particularly from larger national banks and fintech companies. United Bancshares must continue to innovate and adapt to changing customer preferences to maintain its competitive edge.

Despite these risks, United Bancshares has demonstrated its ability to adapt and thrive in the face of adversity. The company's management team has a proven track record of making prudent decisions and implementing strategic initiatives to enhance long-term shareholder value.

Future Outlook

Looking ahead, United Bancshares' future outlook remains cautiously optimistic. The company's diverse business model, focus on personalized customer service, and strong market position in its local communities have enabled it to navigate the challenging operating environment and continue to deliver value to its shareholders.

United Bancshares primarily operates in the U.S. state of Ohio, with a focus on the Ohio counties of Allen, Delaware, Franklin, Hancock, Huron, Putnam, Marion, Sandusky, Van Wert, and Wood. This geographic concentration allows the company to leverage its deep understanding of local markets and customer needs.

Conclusion

In conclusion, United Bancshares, Inc. (UBOH) has consistently demonstrated its resilience and ability to navigate challenging market conditions. The company's solid financial position, prudent risk management, and customer-centric approach have positioned it well to continue to serve the needs of its communities and deliver value to its shareholders. As the company navigates the evolving landscape, investors will be keen to see how United Bancshares leverages its strengths to capitalize on future opportunities and overcome any potential obstacles. With its strong foundation and commitment to sustainable growth, United Bancshares is well-positioned to weather future challenges and continue its legacy as a trusted financial partner in the communities it serves.