Yahoo Finance Should You Hold United Bancorporation of Alabama (UBAB)?
Bonhoeffer Capital Management, an asset management company, released its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. Bonhoeffer Fund shifted slower-growing companies, throughout 2023 to robust, growing companies in temporary down-turning industries. In the current year, the fund is still looking for chances of this nature. The fund returned 12.9% net of fees in the fourth quarter of 2023 and 17.0% for 2023 overall. The MSCI World ex-US, a broad-based index, returned 9.8%, and the DFA International Small Cap Value Fund, the closest benchmark, returned 9.3% during the same period. The fund’s portfolio holds the highest-quality businesses in the fund’s history. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Bonhoeffer Capital Management featured stocks such as United Bancorporation of Alabama, Inc. (OTC:UBAB) in the fourth quarter 2023 investor letter. Headquartered in Atmore, Alabama, United Bancorporation of Alabama, Inc. (OTC:UBAB) is a bank holding company for United Bank that provides banking services. On February 14, 2024, United Bancorporation of Alabama, Inc. (OTC:UBAB) stock closed at $39.80 per share. One-month return of United Bancorporation of Alabama, Inc. (OTC:UBAB) was -1.12%, and its shares lost 0.65% of their value over the last 52 weeks. United Bancorporation of Alabama, Inc. (OTC:UBAB) has a market capitalization of $140.601 million.
Bonhoeffer Capital Management stated the following regarding United Bancorporation of Alabama, Inc. (OTC:UBAB) in its fourth quarter 2023 investor letter:
"The financial services industry is an out-of-favor industry whose participants engage in multiple businesses. As a review from last quarter’s letter, some background of the banking industry is provided below.
Most banks have both a lending franchise and deposit franchise. The lending franchise generates value by originating creditworthy loans at interest rates that more than compensate for loan losses, impairment, and the cost of funds. Banks can have niches (such as SBA loans and mortgages) in which parts of the loans or the whole loans are sold to third parties, and the originator retains the servicing, making the operations capital light. Some banks specialize in the purchasing of third-party-originated loans from the FDIC (in the case of failed banks) or as a result of a regulatory stipulation in a bank merger. The leading KPI in the lending franchise is the total asset return or yield (equal to yield plus fees plus principal less any losses). Losses can be estimated based upon the historical write-offs and losses incurred. Banks reserve for expected loan losses via loan loss reserves. Recent financial reporting changes have introduced the metric of criticized loans to get an idea of which loans are having problems before becoming nonperforming and actual losses. Since banks are levered firms, small amounts of losses can result in large declines in equity.
The first, mentioned in the last letter, is United Bancorporation of Alabama, Inc. (OTC:UBAB), a CDFI bank operating in southwest Alabama and northwest Florida. UBAB has a low-cost deposit base (0.6% annual cost of funds in Q3 2023). It has increased its loan book at 17% annually over the past three years because it is located in a fast-growing region of the country (Gulf Coast beach communities) and it has benefitted from low-cost capital from CDFI specialized lending programs. UBAB’s current net interest margin is 4.6%. UBAB has a good underwriting process which has generated, as of Q3 2023, NPAs of 1.0% with corresponding loan loss reserves of 1.7% and criticized loans of 6.0% (impaired loans and loans on a watch list). UBAB’s efficiency is above average at 48% for Q3 2023. UBAB has utilized the various programs available to CDFIs such as financial assistance awards, BEA Program awards, and the Small Dollar Loan Program to generate fee income, as well as the low cost of funds. UBAB has a division that focuses on low-income real estate development and utilizes the New Markets Tax Credit Program and Community Housing Capital. These programs have generated fee income of about 20-25% net interest income over the past few years. Although not predictable in advance, these programs have provided steady non-interest income in the past…” (Click here to read the full text)
An image of a customer in a bank carrying a bag full of documents and smiling confidently.
United Bancorporation of Alabama, Inc. (OTC:UBAB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
