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U & I Financial Corp. Reports Second Quarter 2024 Financial Results

LYNNWOOD, WA / ACCESSWIRE / July 31, 2024 / U & I Financial Corp. (OTCQX:UNIF), the holding company ("Company") for UniBank ("Bank"), today reported a quarterly Net Loss of $827 thousand or $0.15 loss per share in the second quarter of 2024, compared to $2.4 million of Net Income or $0.44 earnings per share for the same quarter of 2023. Net income decreased by $3.2 million or $0.59 per share, primarily due to an increase in the Provision for Credit Losses of $3.0 million in the second quarter of 2024, compared to no provision during the same period last year.

As of June 30, 2024, Total Assets was $572.6 million, a decrease of $34.6 million or 5.7% from $607.2 million at June 30, 2023. Net Loans were $441.5 million at June 30, 2024, decreasing by $40.5 million or 8.4% from $482.1 million at June 30, 2023. Total Deposits decreased by $65.0 million or 12.6% to $451.9 million at June 30, 2024 compared to $516.9 million a year earlier.

As mentioned in previous earnings releases, the Bank has experienced credit deterioration from Bank borrowers with "commercial-equipment" loans. These loans had provided financing to borrowers to purchase equipment from manufacturers. The manufacturers also service the equipment through operating arrangements with the respective borrowers. The Bank will continue to monitor equipment loans and will continue to adjust our reserves as needed. As of June 30, 2024, the Allowance for Credit Losses (ACL) on Loans and ACL on Off-Balance Sheet Credit Exposure were $17.7 million and $2.2 million, respectively, as compared to $5.1 million and $15 thousand, respectively, as of June 30, 2023. Additional information on credit quality is presented in the tables below.

"During the second quarter the Bank continued to face challenges caused by commercial-equipment loans," said President & CEO Stephanie Yoon. "It will take time to work through these problems so that the Bank can resume its prior growth."

Non-GAAP Financial Metrics

This news release contains certain non-GAAP financial measure disclosures. Management believes these non-GAAP financial measures provide meaningful supplemental information regarding the Company's operational performance, credit quality and capital levels.

About U & I Financial Corp.

UniBank, the wholly owned subsidiary of U & I Financial Corp. (OTCQX: UNIF). Founded in 2006 and based in Lynnwood, Washington, the Bank serves small to medium-sized businesses, professionals, and individuals across the United States with a particular emphasis on government guaranteed loan programs. Customers can access their accounts in any of the four branches - Lynnwood, Bellevue, Federal Way and Tacoma - online, or through the Bank's ATM network.

For more information visit www.unibankusa.com or call (425) 275-9700.

Forward-Looking Statement Safe Harbor: This news release contains comments or information that constitutes forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Forward-looking statements describe the Company's projections, estimates, plans and expectations of future results and can be identified by words such as "believe," "intend," "estimate," "likely," "anticipate," "expect," "looking forward," and other similar expressions. They are not guarantees of future performance. Actual results may differ materially from the results expressed in these forward-looking statements, which because of their forward-looking nature, are difficult to predict. Investors should not place undue reliance on any forward-looking statement, and should consider factors that might cause differences including but not limited to the degree of competition by traditional and nontraditional competitors, declines in real estate markets, an increase in unemployment or sustained high levels of unemployment; changes in interest rates; adverse changes in local, national and international economies; changes in the Federal Reserve's actions that affect monetary and fiscal policies; changes in legislative or regulatory actions or reform, including without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act; demand for products and services; further declines in the quality of the loan portfolio that results in continued losses and our ability to succeed in our problem-asset resolution efforts; including, but not limited to, continued credit deterioration of commercial-equipment loans and future increases in the Provision for Credit Losses, the impact of technological advances; changes in tax laws; and other risk factors. U & I Financial Corp. undertakes no obligation to publicly update or clarify any forward-looking statement to reflect the impact of events or circumstances that may arise after the date of this release.

STATEMENT OF INCOME (Unaudited)




















Jun-24



Mar-24



Jun-23



Jun-24



Jun-23



Dec-23


(Dollars in thousands except EPS)


QTD



QTD



QTD



YTD



YTD



YTD


Interest Income


$

9,362



$

9,285



$

9,955



$

18,647



$

18,730



$

37,652


Interest Expense



4,769




4,698




3,723




9,467




6,623




15,388


Net Interest Income



4,593




4,587




6,232




9,180




12,107




22,264


Provision for Credit Losses



2,966




-




-




2,966




-




26,411


Gain (Loss) on Loan Sales



179




-




-




179




824




1,410


Loan Servicing Fees, Net of Amortization



175




184




172




359




377




624


Other Non-interest Income



195




185




329




380




502




851


Non-interest Income



549




369




501




918




1,703




2,885


Salaries & Benefits



1,445




1,989




2,395




3,434




5,029




8,241


Occupancy Expense



189




192




175




381




354




729


Other Expense



1,629




1,184




1,055




2,813




2,006




3,712


Non-interest Expense



3,263




3,365




3,625




6,628




7,389




12,682


Net Income (Loss) before Income Taxes



(1,087

)



1,591




3,108




504




6,421




(13,944

)

Income Tax Expense (Benefit)



(260

)



322




738




62




1,376




(3,136

)

Net Income (Loss)


$

(827

)


$

1,269



$

2,370



$

442



$

5,045




(10,808

)

























Total Outstanding Shares (in thousands)



5,477




5,476




5,441




5,477




5,441




5,466


Basic Earnings (Loss) per Share


$

(0.15

)


$

0.23



$

0.44



$

0.08



$

0.93



$

(1.98

)

























Statement of Condition (Unaudited)


























Jun-24



Mar-24



Jun-23



Variance



Variance



Dec-23


(Dollars in thousands)


Qtr End



Qtr End



Qtr End



Prior Qtr



Prior Year



Qtr End


























Cash and Due from Banks


$

46,299



$

46,495



$

48,684



$

(196

)


$

(2,385

)


$

61,254


Investments


50,996




52,355




49,714




(1,359

)



1,282




51,346


Loans Held for Sale


-




6,110




-




(6,110

)



-




-


Gross Loans


459,196




471,081




487,126




(11,885

)



(27,930

)



490,636


Allowance for Credit Losses (ACL) on Loans


(17,680

)



(14,634

)



(5,076

)



(3,046

)



(12,604

)



(25,950

)

Net Loans


441,516




456,447




482,050




(14,931

)



(40,534

)



464,686


Fixed Assets


6,140




6,268




6,702




(128

)



(562

)



6,438


Other Assets


27,676




27,029




20,089




647




7,587




26,325


Total Assets


$

572,627



$

594,704



$

607,239



$

(22,077

)


$

(34,612

)


$

610,049


























Checking


$

88,860



$

95,698



$

107,476



$

(6,838

)


$

(18,616

)


$

100,135


NOW


10,925




13,025




13,905




(2,100

)



(2,980

)



13,504


Money Market


144,471




151,058




213,825




(6,587

)



(69,354

)



200,966


Savings


6,895




7,468




9,744




(573

)



(2,849

)



8,063


Certificates of Deposit


200,758




207,696




171,986




(6,938

)



28,772




191,733


Total Deposits


451,909




474,945




516,936




(23,036

)



(65,027

)



514,401


Borrowed Funds


54,000




52,000




10,000




2,000




44,000




20,000


ACL on Off-Balance Sheet Credit Exposure


2,176




2,256




15




(80

)



2,161




5,551


Other Liabilities


3,387




3,039




3,177




348




210




8,678


Total Liabilities


511,472




532,240




530,128




(20,768

)



(18,656

)



548,630


Shareholders' Equity


61,155




62,464




77,111




(1,309

)



(15,956

)



61,419


Total Liabilities & Equity


$

572,627



$

594,704



$

607,239



$

(22,077

)


$

(34,612

)


$

610,049



Financial Ratios




















Jun-24



Mar-24



Jun-23



Jun-24



Jun-23



Dec-23


(Dollars in thousands except BVS)


QTD



QTD



QTD



YTD



YTD



YTD


Performance Ratios



















Return on Average Assets*



(0.57

%)



0.86

%



1.59

%



0.15

%



1.72

%



(1.85

%)

Return on Average Equity*



(5.29

%)



8.25

%



12.48

%



1.42

%



13.59

%



(14.53

%)

Net Interest Margin*



3.21

%



3.10

%



4.32

%



3.16

%



4.24

%



3.83

%

Efficiency Ratio



63.43

%



67.87

%



53.85

%



65.63

%



53.51

%



50.36

%

*Quarterly results are annualized














Well
Capitalized
Minimum
































Capital























Tier 1 Leverage Ratio**



10.22

%



10.22

%



13.11

%



5.00

%









Common Equity Tier 1 Ratio**



12.82

%



12.56

%



16.31

%



6.50

%









Tier 1 Risk-Based Capital Ratio**



12.82

%



12.56

%



16.31

%



8.00

%









Total Risk-Based Capital Ratio **



14.10

%



13.83

%



17.36

%



10.00

%









Book Value per Share (BVS)


$

11.17



$

11.41



$

14.17














**Represents Bank capital ratios

















































Asset Quality

























Net Credit Charge-Offs (Recoveries)


$

0



$

14,611



$

(942

)













Allowance for Credit Losses to Loans %



3.85

%



3.11

%



1.04

%













Nonperforming Assets to Total Assets



1.02

%



0.78

%



0.00

%














Additional Credit Disclosures

Loan Segmentation - The following tables present the Bank's total loans outstanding at amortized cost by portfolio segment and by internally assigned grades as of June 30, 2024 and March 31, 2024 (in thousands):

June 30, 2024





Special














Portfolio Segment


Pass



Mention



Substandard



Doubtful



Loss



Total


Commercial real estate


$

199,692



$

24,254



$

492



$

-



$

-



$

224,438


Residential real estate



172,278




-




-




-




-




172,278


Commercial - equipment



28,072




2,972




15,319




2,985




-




49,348


Commercial - all other



9,267




-




-




-




-




9,267


Multifamily



2,844




-




-




-




-




2,844


Construction and land



932




-




-




-




-




932


Consumer and other



89




-




-




-




-




89



$

413,174



$

27,226



$

15,811



$

2,985



$

-



$

459,196


























March 31, 2024






Special


















Portfolio Segment


Pass



Mention



Substandard



Doubtful



Loss



Total


Commercial real estate


$

205,433



$

25,360



$

-



$

-



$

-



$

230,793


Residential real estate



174,798




-




-




-




-




174,798


Commercial - equipment



31,270




2,975




15,394




3,005




-




52,644


Commercial - all other



8,951




-




-




-




-




8,951


Multifamily



2,864




-




-




-




-




2,864


Construction and land



955




-




-




-




-




955


Consumer and other



76




-




-




-




-




76



$

424,347



$

28,335



$

15,394



$

3,005



$

-



$

471,081



Descriptions of the various risk grades are as follows :

Special Mention: Assets having potential weaknesses that if left uncorrected, may result in decline in borrower's repayment ability. However, these assets are not adversely classified and do not expose the Bank to sufficent risk to warrant adverse classification.

Substandard: An asset is considered substandard if it is inadequately protected by the current net worth and pay capacity of the borrower or of any collateral pledged. Substandard assets include those characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful: Assets classified as doubtful have all the weaknesses inherent in those classified substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions, and values.

Loss: Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Any loans downgraded to this category are generally charged off soon after.

Allowance for Credit Losses on Loans - The following tables present the allowance for credit losses under ASC 326, Financial Instruments - Credit Losses by portfolio segment and by internally assigned grades as of June 30, 2024 and March 31, 2024 (in thousands):

June 30, 2024





Special














Portfolio Segment


Pass



Mention



Substandard



Doubtful



Loss



Total


Commercial real estate


$

1,182



$

113



$

4



$

-



$

-



$

1,299


Residential real estate



3,124




-




-




-




-




3,124


Commercial - equipment



865




1,972




7,281




2,985




-




13,103


Commercial - all other



120




-




-




-




-




120


Multifamily



3




-




-




-




-




3


Construction and land



27




-




-




-




-




27


Consumer and other



4




-




-




-




-




4



$

5,325



$

2,085



$

7,285



$

2,985



$

-



$

17,680


























March 31, 2024






Special


















Portfolio Segment


Pass



Mention



Substandard



Doubtful



Loss



Total


Commercial real estate


$

1,059



$

111



$

-



$

-



$

-



$

1,170


Residential real estate



2,141




-




-




-




-




2,141


Commercial - equipment



467




1,487




6,274




2,989




-




11,217


Commercial - all other



70




-




-




-




-




70


Multifamily



3




-




-




-




-




3


Construction and land



30




-




-




-




-




30


Consumer and other



3




-




-




-




-




3



$

3,773



$

1,598



$

6,274



$

2,989



$

-



$

14,634



Past due loans -The following table presents past due loans at amortized cost by portfolio segment as of June 30, 2024 and March 31, 2024 (in thousands):

June 30, 2024


30 - 59 Days



60 - 89 Days



90 Days or



Total






Total


Portfolio Segment


Past Due



Past Due



More



Past Due



Current



Loans


Commercial real estate


$

220



$

1,053



$

572



$

1,845



$

222,593



$

224,438


Residential real estate



-




-




-




-




172,278




172,278


Commercial - equipment



5,562




5,058




3,448




14,068




35,280




49,348


Commercial - all other



-




-




-




-




9,267




9,267


Multifamily



-




-




-




-




2,844




2,844


Construction and land



-




-




-




-




932




932


Consumer and other



-




-




-




-




89




89



$

5,782



$

6,111



$

4,020



$

15,913



$

443,283



$

459,196


























March 31, 2024


30 - 59 Days



60 - 89 Days



90 Days or



Total







Total


Portfolio Segment


Past Due



Past Due



More



Past Due



Current



Loans


Commercial real estate


$

220



$

79



$

-



$

299



$

230,494



$

230,793


Residential real estate



-




-




-




-




174,798




174,798


Commercial - equipment



247




2,585




162




2,994




49,650




52,644


Commercial - all other



-




-




-




-




8,951




8,951


Multifamily



-




-




-




-




2,864




2,864


Construction and land



-




-




-




-




955




955


Consumer and other



-




-




-




-




76




76



$

467



$

2,664



$

162



$

3,293



$

467,788



$

471,081


Non-accrual loans - Loans are placed on nonaccrual once the loan is 90 days past due or sooner if, in management's opinion, the borrower may be unable to meet payment of obligations as they become due, as well as when required by regulatory provisions. The following table presents the nonaccrual loans at amortized cost by portfolio segment as of June 30, 2024 and March 31, 2024 (in thousands):

June 30, 2024

Portfolio Segment


Nonaccrual with no Allowance for Credit Losses



Nonaccrual with Allowance for Credit Losses



Total Nonaccrual



Loans Past Due Over 89 Days Still Accruing


Commercial real estate


$

-



$

2,402



$

2,402



$

-


Commercial - equipment



-




3,448




3,448




-



















$

-



$

5,850



$

5,850



$

-


















March 31, 2024

Portfolio Segment


Nonaccrual with no Allowance for Credit Losses



Nonaccrual with Allowance for Credit Losses



Total Nonaccrual



Loans Past Due Over 89 Days Still Accruing


Commercial real estate


$

-



$

1,883



$

1,883



$

-


Commercial - equipment



-




2,747




2,747




-



















$

-



$

4,630



$

4,630



$

-


Off-Balance Sheet Credit Exposure - The Bank has originated certain loans in the commercial-equipment segment with government guarantees and has subsequently sold many of the guaranteed portions of these loans in the secondary market. Upon defaults by the borrowers, the Bank would be required to repurchase the guaranteed portions of the loans and submit the repayment requests to the respective government agency. The agency may decide not to honor the guarantees if certain conditions are not met. Guarantees, as defined under ASC 460, Guarantees , that create off-balance sheet credit exposure are in the scope of ASC 326-20 (CECL) when such guarantees for loans have an implicit repurchase arrangement and thus may present an off-balance sheet credit risk . As of June 30, 2024 and March 31, 2024 the Bank had $3.5 million and $3.9 million, respectively, of such guarantees sold of commercial-equipment loans that were graded below Pass. The Allowance for Credit Losses on Off-Balance Sheet Credit Exposure for these sold guarantees was $2.2 million and $2.3 million as of June 30, 2024 and March 31, 2024, respectively.

U & I Financial Corp.
Investor Relations
IR@unibankusa.com

SOURCE: U & I Financial Corp.



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