Executive Summary

Q1 2022 EPS was $0.77 on net income of $2.52M, down sharply YoY (vs $1.26 and $4.12M in Q1 2021) as mortgage banking volumes and gain-on-sale margins contracted; management cited PPP fee runoff and mortgage headwinds amid inflation and rising rates as key pressures .
Non-interest income fell 46.3% YoY to $3.08M on lower mortgage loan sales ($55.3M vs $117.6M YoY) and a net gain-on-sale decline to 0.86% (vs 3.70% YoY); hedging income partially offset (+$1.25M) .
Net interest income declined 5.2% YoY to $8.20M as PPP fee amortization waned (–$712K YoY), partially offset by lower deposit costs (–$272K) .
Equity fell $19.7M QoQ to $99.4M on AOCI losses from rising long-term Treasury yields; deposits rose 1.6% QoQ to $944.8M, and gross loans increased modestly QoQ to $614.2M .

What Went Well and What Went Wrong

What Went Well
- Core franchise stability: deposits grew to $944.8M (+$14.4M QoQ), while gross loans increased to $614.2M (+$4.6M QoQ) .
- Expense control: non-interest expense fell 7.8% YoY to $8.40M, with lower salaries/benefits (–$472K) and loan fees (–$264K) leading improvements .
- Management leaning into long-term growth: “we remain excited about the growing pipeline in our SBA product lines,” and chose to continue expanding mortgage despite the downturn for long-term returns .
What Went Wrong
- Mortgage banking compression: non-interest income fell 46.3% YoY to $3.08M as mortgage loans sold dropped to 192/$55.3M (from 460/$117.6M), and net gain-on-sale margin fell to 0.86% (from 3.70%) .
- Net interest income headwind: NII declined 5.2% YoY to $8.20M driven by lower PPP fee recognition (–$712K YoY) despite lower deposit costs (–$272K) .
- Tangible capital hit from rates: shareholders’ equity decreased $19.7M QoQ primarily due to higher unrealized AFS losses as long-term Treasury yields rose .

Financial Results

Income statement snapshot (quarterly)

Metric	Q3 2021	Q4 2021	Q1 2022
Net Income ($M)	$4.09	$2.72	$2.52
Basic EPS ($)	$1.25	$0.83	$0.77
Non-Interest Income ($M)	$4.71	$3.12	$3.08
Non-Interest Expense ($M)	$9.68	$8.85	$8.40

Balance sheet snapshot (period-end)

Metric	Sep 30, 2021	Dec 31, 2021	Mar 31, 2022
Assets ($M)	$1,070.25	$1,076.56	$1,069.36
Gross Loans ($M)	$589.93	$609.56	$614.20
Deposits ($M)	$927.81	$930.41	$944.83
Shareholders’ Equity ($M)	$116.14	$119.10	$99.37
Common Shares (000s)	3,275	3,273	3,279

Mortgage banking KPIs

KPI	Q3 2021	Q4 2021	Q1 2022
Loans Sold (Units)	328	276	192
Loans Sold ($M)	$90.4	$72.5	$55.3
Net Gain-on-Sale (%)	N/A	2.90%	0.86%

Selected ratios

Ratio	Q3 2021 (YTD/Ann.)	FY 2021	Q1 2022 (Ann.)
ROAA (%)	1.39%	1.29%	0.94%
ROATCE (%)	17.03%	15.83%	11.96%
Net Interest Margin (TE, %)	3.84%	3.77%	3.42%
Efficiency Ratio (TE, %)	66.68%	68.14%	72.95%
Loans/Deposits (%)	63.58%	66.50%	65.01%

Notes: Q3 2021 ratios are year-to-date/annualized; FY 2021 are full-year; Q1 2022 are quarter annualized as presented by the company .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per common share	Payable 6/15/2022 (record 5/31/2022)	$0.21 per share, payable 3/15/2022 (record 2/28/2022)	$0.21 per share, payable 6/15/2022 (record 5/31/2022)	Maintained

No quantitative revenue/EPS/NIM guidance was provided in the company’s filings and shareholder letter for Q1 2022 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2021 and Q4 2021)	Current Period (Q1 2022)	Trend
Mortgage banking	Focus on residential mortgage production; volumes moderating vs 2020 boom .	“Earnings…suppressed by significant headwinds for our residential mortgage team,” with lower activity and gain-on-sale margins .	Deteriorating QoQ/Yoy in Q1 2022.
PPP fee runoff / Core loan growth	Q3/Q4 pivot to rebuilding traditional loans post-PPP; strong pipeline into 2022 .	NII pressured by PPP fee decline (–$712K YoY) despite lower deposit costs; gross loans +$4.6M QoQ .	Transition to core NII continues; near-term NII pressure.
Inflation and rates	Noted macro/regulatory variability; deposit growth momentum .	Inflation and rising long-term Treasury yields cited; AFS unrealized losses reduced equity by $21.6M net of tax QoQ .	Rates rising; AOCI volatility increased.
Technology/branch initiatives	Retail branch restructuring and tech enhancements highlighted in 2021 .	Continued investment implied by strategic plan execution .	Ongoing.
SBA/government lending	Governmental Lending Unit highlighted; relationship banking focus .	“Growing pipeline in our SBA product lines” as a key non-interest income driver .	Building as mortgage wanes.
Capital/Shareholder returns	Dividend trajectory increases noted in 2021 .	Dividend maintained at $0.21/share .	Stable payout; capital impacted by AOCI.

Management Commentary

“Your Company is off to a solid start in 2022… pre-tax income of approximately $2.9 million… 11.96% return on average tangible shareholders’ equity, strong asset quality metrics and modest increases in gross loans and total deposits.”
“Earnings for the quarter were suppressed by significant headwinds for our residential mortgage team and growing inflation… [but] the team successfully built core marginal income sources over the past four quarters to offset some of those negative impacts.”
“While many banks and mortgage companies have decided to eliminate or greatly downsize residential mortgage… we believe that continuing to expand in this space will provide strong long-term returns… We also remain excited about the growing pipeline in our SBA product lines.”

Q&A Highlights

A public earnings call transcript for Q1 2022 was not located in company filings; management’s detailed commentary is from the shareholder letter included with the Q1 2022 8-K .

Estimates Context

S&P Global consensus EPS and revenue estimates for Q1 2022 were unavailable from our feed at this time; therefore, we cannot assess beats/misses vs consensus for this quarter. Results should be evaluated on absolute and sequential trends until consensus can be retrieved [GetEstimates error].

Key Drivers and Explanations

Non-interest income decline: driven by mortgage volume drop (192 loans/$55.3M vs 460/$117.6M YoY) and gain-on-sale margin compression to 0.86% (from 3.70% YoY), partially offset by +$1.25M loan hedging income .
Net interest income pressure: PPP fee recognition decline (–$712K YoY) more than offset lower deposit costs (–$272K), producing –5.2% YoY NII .
Capital/AOCI: Equity down $19.7M QoQ primarily due to rising long-term Treasury yields impacting AFS securities marks (AOCI), despite positive net income .
Expense discipline: Non-interest expense down 7.8% YoY, led by salaries/benefits and loan fees reductions .
Franchise growth: Deposits +$14.4M QoQ; gross loans +$4.6M QoQ, supporting core earnings durability into higher-rate environment .

Implications

Near-term: Mortgage banking headwinds and PPP runoff weigh on fee income and NII; AOCI-driven equity volatility could constrain capital deployment but doesn’t impact regulatory capital absent realized losses, while core deposit and loan growth support earnings resilience .
Medium-term: As SBA and core commercial lending scale, fee/NII mix should normalize; rising rates may aid NIM over time, but pace depends on asset sensitivity and deposit beta; continued expense control remains a lever .

Appendix: Additional Detail

Dividend action

Declared $0.21 per share dividend payable June 15, 2022 to holders of record May 31, 2022; prior quarter dividend was also $0.21 (payable March 15, 2022) .

Operating detail YoY

Interest income $8.77M (–$0.73M YoY), interest expense $0.56M (–$0.27M YoY), NII $8.20M (–5.2% YoY); non-interest income $3.08M (–46.3% YoY), non-interest expense $8.40M (–7.8% YoY) .

Non-GAAP ratios (company-defined)

NIM (tax-equivalent) 3.42%, efficiency ratio 72.95%, ROATCE 11.96% for Q1 2022 (annualized) .

All citations:

Q1 2022 results and shareholder letter:
Q4 2021 results and shareholder letter:
Q3 2021 results and shareholder letter:
Q2 2021 context for themes:

UNITED BANCSHARES INC/OH (UBOH)·Q1 2022 Earnings Summary