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

LYNWOOD, WA / ACCESSWIRE / April 30, 2024 / U & I Financial Corp. (OTCQX:UNIF), the holding company ("Company") for UniBank ("Bank"), today reported quarterly net income of $1.3 million or $0.23 per share in the first quarter of 2024, compared to $2.7 million or $0.49 per share for the same quarter of 2023, decreasing by $1.4 million or $0.26 per share, primarily due to less net interest income. The net income turned positive after the restated net loss of $18.2 million or $3.33 loss per share in fourth quarter of 2023, primarily due to not having to accrue for Provision for Credit Losses in the first quarter 2024 as compared to $26.3 million in provision for the fourth quarter of 2023.

As of March 31, 2024 in comparison to March 31, 2023, total assets increased by $4.9 million or 0.8% to $594.7 million from the year earlier period of $589.8 million. Net loans ended at $456.4 million, decreasing by $8.6 million or 1.8% from $465.0 million a year earlier. The net decrease was primarily due to higher Allowance for Credit Losses (ACL) on Loans by $10.1 million as compared to the same period of the previous year. Finally, total deposits decreased by $28.8 million or 5.7% to $474.9 million from the year earlier period balance of $503.7 million.

As noted above, the Company recorded a Provision for Credit Losses of $26.3 million in the fourth quarter of 2023, resulting in $26.4 million for the full fiscal year 2023. The ACL on Loans and ACL on Off-Balance Sheet Credit Exposure ended at $26.0 million and $5.6 million, respectively, at December 31, 2023. During the first quarter of 2024, the Bank charged-off $14.6 million in total credits, which had been fully reserved in ACL on Loans and ACL on Off-Balance Sheet Credit Exposure for $11.6 million and $3.0 million, respectively. Additional disclosures on credit quality are presented in the tables below.

Also discussed in the restated fourth quarter earnings release, certain borrowers of commercial-equipment loans have filed a lawsuit in Washington state court against the Bank after the case was dismissed in federal court caused by actions by the Securities and Exchange Commission against the manufacturer of the equipment for fraudulent activities. The Bank will continue to defend this litigation vigorously.

"It has been a challenging time for the Company over the past several months, and the dust seems to be settling as reflected in the first quarter 2024 results," said Stephanie Yoon, Interim-CEO. "It will take time to work though these loans. In the interim we hope to complete the search for the new CEO and continue our efforts to build franchise value. Meanwhile, the Bank continues to exceed the regulatory minimum well capitalized ratios by comfortable margins and have sufficient liquidity."

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 [phone].

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; 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)

		Mar-24				Dec-23				Mar-23				Mar-23				Mar-23
(Dollars in thousands except EPS)		QTD				QTD				QTD				$ Var				% Var
Interest Income		$	9,285			$	9,306			$	8,775			$	510				5.8	%
Interest Expense			4,698				4,592				2,900				1,798				62.0	%
Net Interest Income			4,587				4,714				5,875				(1,288	)			(21.9	%)
Provision for Credit Losses			-				26,253				-				-				-
Gain (Loss) on Loan Sales			-				(23	)			824				(824	)			(100.0	%)
Loan Servicing Fees, Net of Amortization			184				83				205				(21	)			(10.2	%)
Other Non-interest Income			185				173				173				12				6.9	%
Non-interest Income			369				233				1,202				(833	)			(69.3	%)
Salaries & Benefits			1,989				1,250				2,634				(645	)			(24.5	%)
Occupancy Expense			192				188				179				13				7.3	%
Other Expense			1,184				586				951				233				24.5	%
Non-interest Expense			3,365				2,024				3,764				(399	)			(10.6	%)
Net Income (Loss) before Income Taxes			1,591				(23,330	)			3,313				(1,722	)			(52.0	%)
Income Tax Expense (Benefit)			322				(5,122	)			638				(316	)			(49.5	%)
Net Income (Loss)		$	1,269			$	(18,208	)		$	2,675			$	(1,406	)			(52.6	%)
Total Outstanding Shares (in thousands)			5,476				5,466				5,441				34
Basic Earnings (Loss) per Share		$	0.23			$	(3.33	)		$	0.49			$	(0.26	)
Statement of Condition (Unaudited)
		Mar-24				Dec-23				Mar-23				Mar-23				Mar-23
(Dollars in thousands)		Qtr End				Qtr End				Qtr End				$ Var				% Var
Cash and Due from Banks		$	46,495			$	61,254			$	47,550			$	(1,055	)			(2.2	%)
Investments			52,355				51,346				50,303				2,052				4.1	%
Loans Held for Sale			6,110				-				-				6,110				100.0	%
Gross Loans			471,081				490,636				469,614				1,467				0.3	%
Allowance for Credit Losses (ACL) on Loans			(14,634	)			(25,950	)			(4,580	)			(10,054	)			219.5	%
Net Loans			456,447				464,686				465,034				(8,587	)			(1.8	%)
Fixed Assets			6,268				6,438				6,840				(572	)			(8.4	%)
Other Assets			27,029				26,325				20,062				6,967				34.7	%
Total Assets		$	594,704			$	610,049			$	589,789			$	4,915				0.8	%
Checking		$	95,698			$	100,135			$	111,023			$	(15,325	)			(13.8	%)
NOW			13,025				13,504				14,339				(1,314	)			(9.2	%)
Money Market			151,058				200,966				221,312				(70,254	)			(31.7	%)
Savings			7,468				8,063				11,448				(3,980	)			(34.8	%)
Certificates of Deposit			207,696				191,733				145,614				62,082				42.6	%
Total Deposits			474,945				514,401				503,736				(28,791	)			(5.7	%)
Borrowed Funds			52,000				20,000				7,000				45,000				642.9	%
ACL on Off-Balance Sheet Credit Exposure			2,256				5,551				15				2,241				100.0	%
Other Liabilities			3,039				8,678				3,801				(762	)			(20.0	%)
Total Liabilities			532,240				548,630				514,552				17,688				3.4	%
Shareholders' Equity			62,464				61,419				75,237				(12,773	)			(17.0	%)
Total Liabilities & Equity		$	594,704			$	610,049			$	589,789			$	4,915				0.8	%
Financial Ratios
		Mar-24				Dec-23				Mar-23				Mar-23				Mar-23
(Dollars in thousands except BVS)		QTD				QTD				QTD				YTD				YTD
Performance Ratios
Return on Average Assets*			0.86	%			(11.85	%)			1.84	%			0.86	%			(1.85	%)
Return on Average Equity*			8.25	%			(92.41	%)			14.73	%			8.25	%			(14.53	%)
Net Interest Margin*			3.10	%			3.18	%			4.17	%			3.10	%			3.83	%
Efficiency Ratio			67.87	%			40.91	%			53.20	%			67.87	%			50.36	%
*Quarterly results are annualized														Well
														Capitalized
Capital														Minimum
Tier 1 Leverage Ratio**			10.22	%			10.16	%			12.96	%			5.00	%
Common Equity Tier 1 Ratio**			12.56	%			12.42	%			16.36	%			6.50	%
Tier 1 Risk-Based Capital Ratio**			12.56	%			12.42	%			16.36	%			8.00	%
Total Risk-Based Capital Ratio **			13.83	%			13.71	%			17.24	%			10.00	%
Book Value per Share (BVS)		$	11.41			$	11.24			$	13.83
**Represents Bank capital ratios
Asset Quality
Net Credit Charge-Offs (Recoveries)		$	14,611			$	0			$	0
Allowance for Credit Losses to Loans %			3.11	%			5.29	%			0.98	%
Nonperforming Assets to Total Assets			0.78	%			2.42	%			0.05	%

Additional Credit Disclosures

Loan Segmentation - The following table presents the Bank's total loans outstanding at amortized cost by portfolio segment and by internally assigned grades as of March 31, 2024 and December 31, 2023 (in thousands):

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
December 31, 2023						Special
Portfolio Segment		Pass				Mention				Substandard				Doubtful				Loss				Total
Commercial real estate		$	239,876			$	1,570			$	-			$	-			$	-			$	241,446
Residential real estate			168,708				-				-				-				-				168,708
Commercial - equipment			33,770				14,630				4,173				2,898				11,643				67,114
Commercial - all other			9,429				-				-				-				-				9,429
Multifamily			2,884				-				-				-				-				2,884
Construction and land			979				-				-				-				-				979
Consumer and other			76				-				-				-				-				76
		$	455,722			$	16,200			$	4,173			$	2,898			$	11,643			$	490,636

The commercial real estate (CRE) loans that were graded Special Mention increased to $25.4 million as of March 31, 2024, increasing by $23.8 million from December 31, 2023. The increase was due to the downgrades of three franchise hotel loans, each with a Loan-to-value (LTV) less than 50%. Per the grading definitions below, they did not warrant adverse classifications but may require actions by the Bank to prevent further degradations. In addition, the commercial-equipment loans graded Substandard increased to $15.4 million, increasing by $11.2 million from December 31, 2023. The increase was composed of loans that migrated from Special Mention as of December 31, 2023. Management did not believe any more provisions would be required on these loans as they were generally current on payments and the ACL on these migrated loans totaled $5.7 million or approximately 50%.

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 classificaiton.

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 table presents the allowance for credit losses under ASC 326, Financial Instruments - Credit Losses by portfolio segment and by internally assigned grades as of March 31, 2024 and December 31, 2023 (in thousands):

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			69				-				-				-				-				69
Multifamily			3				-				-				-				-				3
Construction and land			30				-				-				-				-				30
Consumer and other			3				-				-				-				-				3
		$	3,772			$	1,598			$	6,274			$	2,989			$	-			$	14,633
December 31, 2023						Special
Portfolio Segment		Pass				Mention				Substandard				Doubtful				Loss				Total
Commercial real estate		$	1,641			$	48			$	-			$	-			$	-			$	1,689
Residential real estate			1,252				-				-				-				-				1,252
Commercial - equipment			426				7,315				621				2,898				11,643				22,903
Commercial - all other			65				-				-				-				-				65
Multifamily			3				-				-				-				-				3
Construction and land			34				-				-				-				-				34
Consumer and other			4				-				-				-				-				4
		$	3,425			$	7,363			$	621			$	2,898			$	11,643			$	25,950

Past due loans - The following table presents past due loans at amortized cost by portfolio segment as of March 31, 2024 and December 31, 2023 (in thousands):

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
December 31, 2023		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		$	-			$	-			$	484			$	484			$	240,962			$	241,446
Residential real estate			-				-				-				-				168,708				168,708
Commercial - equipment			260				407				10,186				10,853				56,261				67,114
Commercial - all other			-				-				-				-				9,429				9,429
Multifamily			-				-				-				-				2,884				2,884
Construction and land			-				-				-				-				979				979
Consumer and other			-				-				-				-				76				76
		$	260			$	407			$	10,670			$	11,337			$	479,299			$	490,636

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 March 31, 2024 and December 31, 2023 (in thousands):

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			$	-
December 31, 2023 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		$	-			$	484			$	484			$	-
Commercial - equipment			-				14,281				14,281				-
		$	-			$	14,765			$	14,765			$	-

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 March 31, 2024 and December 31, 2023 the Bank had $3.9 million and $7.1 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 were $2.3 million and $5.5 million as of March 31, 2024 and December 31, 2023, respectively.

CONTACT:

U & I Financial Corp.
Investor Relations
[e-mail]

SOURCE: U & I Financial Corp.

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The U&I Financial Stock at the time of publication of the news with a raise of +0,39 % to 6,425USD on Nasdaq OTC stock exchange (27. April 2024, 02:10 Uhr).