This is the only analysis of United Bank and Trust (Tecumseh MI) that you can find on the web.
After 3 years of steadily declining stock price, I decided to determine why this has been such a bad investment. I’ve analyzed the Financial Statements and quarterly management comments to try to piece together the picture.
This has not been easy, because not only are the Financial Statements of banks hard to understand, but also in my opinion, management of UBT has not told the whole story. Here is the story that we do know:
Tecumseh is located about 60 miles from ground zero of the destruction of the domestic auto industry. UBT is not the only bank in the area that has been hurt by the descent of the once mighty Big 3. The economic hard times have caused home prices to fall and businesses to close. Tecumseh Products closed down and moved to Ann Arbor. Michigan’s government has seen this coming for years, and seems to have no idea how to improve the economic environment. Everyone living in Southeast Michigan recognizes the poor economic environment. And obviously UBT is having trouble making money in this environment.
I believe that UBT management is not acknowledging the whole story, and has been diverting shareholders’ attention from nagging issues. We know that the value of UBT stock as declined over 80% in the past 3 years. Even before the recent bad economic problems, Retained Earnings has been declining, and is now in a deficit. Instead of cutting the dividend (which might have been prudent, yet unpopular) it asked for and received authorization to double the number of available shares (to be used for strategic purposes). Once approved, the board then declared a two for one stock split. which hid all the warts, did nothing strategic for the company except make the stock easier to sell.
Last year in the Third Quarter (a rough quarter) as it announced its Q3 results, it told the world that it was a well capitalized bank. Less than a month later, it signs up to take TARP money. What changed in the month or so? They didn’t really say, but they did give nice sounding reasons as to why it was the right thing to do.
To me, that was the last straw. Maybe taking the money (The Government now has a preferred equity position in the bank which costs shareholders $1M per year in dividend payments) was the right thing to do, but explain why you did it. Own up to the problems.
This is my attempt to explain the bank’s performance to anyone who cares to read it. I will admit I am skeptical when I read much of what comes out of the Financial Statements of UBT. I believe that in many cases they are trying to divert attention from bad news and problems, and simply manage shareholders opinions. I don’t know everything about banking, but I’ll try to explain my interpretation and you can consider it alongside management’s explanation. Hopefully, between the two, you’ll get a better idea what’s going on at the bank.