Magazine article American Banker

Keefe Reduces Estimate for United National of N.J

Magazine article American Banker

Keefe Reduces Estimate for United National of N.J

Article excerpt

Keefe, Bruyette & Woods Inc. lowered its 2000 per-share earnings estimate for United National Bancorp by 10 cents Tuesday, to $1.60, and reiterated its "market perform" rating for the Bridgewater, N.J., banking company.

Analyst Kevin T. Szocik noted a "drastic decline" in its net interest margin.

Most small banks' margins have suffered from the Federal Reserve's rate hikes since June 1999, Mr. Szocik said, but $2 billion-asset United National may have been hit harder than most, because it started with lower-cost funds. "Six months ago United National was one of the better ones in the group," he said.

Its per-share earnings rose 77.2% from a year earlier in the second quarter, to 39 cents. United National shares rose to $17.875 on August 25, after plunging to $16.062 on July 18 from $21.375 on March 31.

But last week the stock began to slide again. It fell 43.75 cents, or 2.5% to close at $17.0625 Tuesday.

Mr. Szocik, whose target price for the stock is $20, said it is thinly traded and therefore subject to fluctuations, even in the absence of major events. The stock, which is trading at just under 11 times this year's expected per-share earnings, is cheap in comparison to its peers, he said.

In a statement released with the second-quarter earnings report on July 19, Thomas C. Gregor, chairman and chief executive officer of United National, said that the management is "developing strategies designed to further improve earnings and reduce our sensitivity to interest rates." The bank will focus on developing a high-quality loan portfolio, controlling costs, and building core deposits as well as fee-based revenues, he said. …

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