UB Bancorp Releases Earnings for the Quarter & Six Months Ended June 30, 2020

GREENVILLE, N.C.--(BUSINESS WIRE)--UB Bancorp (OTCQX: UBNC) (the “Company”) the parent of Union Bank (the “Bank”) is pleased to report its results for the quarter and six months ended June 30, 2020.

The second quarter of 2020 was notable for our Company for a variety of reasons. Some of the highlights include:

• On May 1st we began operations as UB Bancorp, the bank holding company for Union Bank.
• On May 29th UB Bancorp completed a $25.0 million private placement of subordinated notes.
• Union Bank supported our communities by assisting almost 1,000 small businesses with accessing over $65.0 million of funding through the Small Business Administration’s Payroll Protection Loan Program (the “PPP”).
• Union Bank provided loan payment relief to over 300 customers to assist them in their struggles during this time of economic stress caused by the pandemic.
• Union Bank maintained solid credit quality metrics.
• Union Bank provided $2.2 million to our allowance for future loan losses.
• UB Bancorp crossed the $1.0 billion mark in total assets.
• Union Bank continued to grow our core deposit base, particularly non-maturity deposits.
• Union Bank completed the consolidation of our Cary branch location in with our Raleigh office.
• On June 30^th UB Bancorp paid a semi-annual cash dividend to our shareholders of $0.10 per share.

Net income for the second quarter of 2020 was $612,000 or $0.10 per basic common share versus $1.8 million or $0.30 per basic common share earned for the same period in 2019. The Company’s return on average assets and average tangible equity for the second quarter of 2020 was 0.26% and 3.89%, respectively. Revenues continue to be positively impacted by solid growth in both our loan portfolio as well as our noninterest bearing checking balances. The addition of $65.1 million of PPP loans during the second quarter contributed $546,000 to the Company’s revenue in the period. As noted above, the Company provisioned $2.2 million to support its allowance for future loan losses. Absent these additional provisions the Company generated $2.9 million of pre-tax pre-provision net income which compares favorably to the $2.5 million of pre-tax pre-provision net income earned during the second quarter of 2019.

Net income for the six month period ended June 30, 2020 was $2.3 million and represented a 0.53% return on average assets and a 7.00% return on average tangible equity. For the same six month period of 2019 the Company posted $3.4 million of net income. Excluding taxes and $2.6 million of provisions for future loan losses, the Company generated $5.4 million of net income during the first six months of 2020. These results were favorable as compared to the $4.7 million of pre-tax pre-provision net income for the same six month period one year ago.

Revenues have benefited from a higher level of earning assets than in prior periods. Total assets as of June 30, 2020 were $1.0 billion, an increase of $179.7 million or 21.9%, compared to $821.3 million of total assets at December 31, 2019. Over this same six month time period gross loans grew $62.6 million or 10.8%, ending the period at $642.6 million. With a goal of putting to work funds received from our subordinated note offering, our available-for-sale investment portfolio increased $42.4 million since year end 2019 and totaled $206.4 million at June 30, 2020. This earning asset growth was funded partially through growth in our core deposit base. Total deposits at June 30, 2020 were $748.2 million compared to $678.2 million at December 31, 2019, an increase of $70.0 million or 10.3%. During this same time period noninterest bearing deposits increased $85.9 million or 40.1% to $300.1 million. While some of this growth is due to funds from the PPP loan program, the Bank has actively grown new deposit customers.

Given the lack of clarity with respect to the overall economic environment we have continued to be extremely focused on lending to high quality borrowers. As a result, asset quality remains solid, with total non-performing assets representing only 0.05% of total assets as of June 30, 2020. We anticipate that as a result of the Covid-19 pandemic, some of our customers will face economic challenges. As we work with our borrowers, we anticipate that our asset quality metrics could be negatively impacted in future periods. While our current credit metrics are sound, we have been adding to our allowance for loan losses due to this uncertain future for our borrowers. As of June 30, 2020, our allowance to total loans stands at 1.17%. However, our allowance relative to our originated loan portfolio (excluding purchased loans), net of PPP loans, stands at 1.48% at the end of the second quarter of 2020. In addition, capital levels at our Bank remain strong, with the Bank’s tier 1 leverage ratio at 8.96% , common equity tier 1 to risk-weighted assets of 12.66%, and total risk-based capital of 14.80% at quarter-end. Our Bank’s equity position was supported by an injection of $7.25 million of funds during the second quarter from its parent, UB Bancorp.

Rob Jones, President and Chief Executive Officer stated, “We have accomplished a lot during this quarter, formation of a bank holding company, issuing $25.0 million of subordinated notes, building our allowance for future loan losses, and working with our customers to support them during this economic downturn. Our earnings, margins, and balance sheet have been, and will continue to be, impacted by the effects of the novel coronavirus. While our current asset quality picture remains strong, we have been proactive in setting aside provisions for future loan losses. Our Company remains a strong and secure financial institution with a solid capital base that will allow us to work with our customers during these trying economic times. We are proud that Union Bank has provided over $65.0 million of PPP funding to our local communities.”

Mr. Jones went on to note that, “We will likely feel the impact of Covid-19 on our Company and our industry for months to come. We are confident of our position to weather this crisis and look forward to a more positive operating environment in the future.”

UB Bancorp and Union Bank are headquartered in Greenville, North Carolina and operate 15 branches located in 12 counties throughout Eastern and Central North Carolina. UB Bancorp stock is traded on the OTCQX under the symbol UBNC.

This press release includes certain forward-looking statements in reliance on the “safe-harbor” provisions of The Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are subject to a number of risks and uncertainties. Actual results may differ materially from those anticipated in any such forward-looking statements. The Company undertakes no obligation to update or revise any such forward-looking statements. This press release contains financial information determined by methods other than in accordance with GAAP. The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. These measures typically adjust GAAP performance measures to exclude the effects of transactions that are infrequent in nature. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses.

UB Bancorp
Consolidated Balance Sheets
($000's omitted)
				As of the Period Ended
				June 30,		December 31,		June 30,
				2020		2019		2019
ASSETS				(un-audited)		*		(un-audited)
Cash and due from banks			$	10,136	$	9,359	$	9,523
Interest-bearing deposits with banks				95,028		16,867		23,254
Investment securities available-for-sale				206,425		164,040		154,418
Loans - gross				642,601		580,024		540,823
Net fair value marks				(2,241)		(3,285)		(4,395)
Allowance for loan losses				(7,478)		(4,988)		(4,685)
	Net Loans			632,882		571,751		531,743
Bank premises and equipment, net				15,217		18,819		19,254
Bank-owned life insurance				17,121		16,897		16,670
Other real estate owned				-		-		108
Goodwill				12,897		12,897		12,897
Core deposit intangible				949		1,243		1,577
Other assets				10,338		9,448		7,712
		Total Assets	$	1,000,993	$	821,321	$	777,156
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
	Deposits		$	748,192	$	678,190	$	643,527
	Advances from the Federal Home Loan Bank			61,725		47,000		40,000
	Subordinated debentures			30,625		6,000		6,000
	Other borrowings			65,116		-		-
	Accrued expenses and other liabilities			4,629		4,686		4,539
		Total Liabilities		910,287		735,876		694,066
Stockholders' Equity
	Common stock, no par value			70,813		70,928		71,291
	Retained earnings			15,381		13,623		10,461
	Accumulated other comprehensive income / (loss)			4,512		894		1,338
		Total Stockholders' Equity		90,706		85,445		83,090
		Total Liabilities and Stockholders' Equity	$	1,000,993	$	821,321	$	777,156
	*	Derived from audited financial statements

UB Bancorp
Consolidated Statements of Operations
($000's omitted except per share data)
			For the Three Months Ended				For the Six Months Ended
			June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
			(un-audited)		(un-audited)		(un-audited)		(un-audited)
Interest Income		$	8,907	$	8,491	$	17,637	$	16,750
Interest Expense			1,460		1,760		3,179		3,415
	Net Interest Income		7,447		6,731		14,458		13,335
Provision for Loan Losses			2,200		260		2,555		472
	Net Interest Income after Provision for Loan Losses		5,247		6,471		11,903		12,863
Noninterest Income			1,033		966		1,839		1,768
Noninterest Expense			5,594		5,221		10,913		10,368
	Income Before Income Taxes		686		2,216		2,829		4,263
Income Taxes			74		445		484		853
	Net Income	$	612	$	1,771	$	2,345	$	3,410
	Net Income Available Per Basic Common Share	$	0.10	$	0.30	$	0.39	$	0.57