Categories : Capital Issues


A few weeks ago, United Bank and Trust issued its preliminary prospectus detailing its new stock offering.  With the prospectus, I got a few answers to some of the questions:

  • Question:  How much are you trying to raise?  Answer:  Targeting 5 Million shares, at a market price of around $3.80 on November 11, gives around $19M.  The bank hope to get net proceeds of  $17.4 M if there is no excess demand for the new shares.
  • Question:  What will you use the money for?  Answer:  Mostly to bolster the capital reserves, but also to give some flexibility to pursue growth.  We might even pay back the TARP money. (Who suggested that??  See posts below if you've forgotten.)  I really don't think this is in the cards in the short term, but it was a nice bone to throw out to investors like me who think this is the right thing to do.

Like all prospectuses, this one lists several reasons you might consider investing, and several risk factors.  In the next few days, I'll discuss more points in the prospectus.  The pro investing points are largely what I've mentioned here (four income source strategy, stable assets, growing market in Washtenaw county), and the main risks factors I've also mentioned (Hey potential investors-  There could be more significant loan loss accruals down the road).

The prospectus is usually written for the larger investment houses that will buy chunks of the stock then sell it to individual investors, so the investment houses have to be convinced that investing in UBT is a good idea.  These are the people who usually read the prospectus (or get the summarized version from the road show), and if they think it's a good investment, they'll buy a block then try to sell it to their clients.  So try to read the prospectus if you want to (, ticker symbol UBMI), but if you don't understand most of it, remember it wasn't really written for individual investors).

I just learned that there was an info session at the bank yesterday, to explain things to investors who wanted to buy more stock.  If anyone attended, please feel free to comment on what they said, as I was unable to attend.

Just one final comment, one I've been shouting for two years.  The reason that the bank must sell new shares is because it's endured over two years of catastrophic loan losses.  People to whom the bank lent money are unable to make payments or to refinance.  The bank blames it on the bad Michigan economy, but I ask were you not monitoring the economic situation in Michigan during the last ten years?  What was your thought process when you lent money (around $60M) to people who cannot now pay it back?  The management team in place at the top in the last five to ten years is the same as the team going forward, so what makes anyone think they're going to manage the new $17M any better than they managed the $60 M that's now gone?

In the next few days I'll make some comments about the prospectus and comment whether there are any better responses to questions I've asked in the past.

 Posted on : November 24, 2010
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