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

Rhea-AI Summary

U & I Financial Corp. has reported a net loss of $827 thousand or $0.15 per share for Q2 2024, a significant decrease compared to a net income of $2.4 million or $0.44 per share in the same period last year.

The decline is primarily due to a $3.0 million increase in Provision for Credit Losses in Q2 2024. Other key metrics include:

• Total Assets: $572.6 million, down 5.7% from the previous year.
• Net Loans: $441.5 million, down 8.4%.
• Total Deposits: $451.9 million, a 12.6% decrease.
• Allowance for Credit Losses (ACL) on Loans: $17.7 million as of June 30, 2024.
• ACL on Off-Balance Sheet Credit Exposure: $2.2 million.

The financial decline stems from ongoing challenges with commercial-equipment loans, necessitating increased reserves and impacting overall credit quality.

Positive

• None.

Negative

• Net loss of $827 thousand or $0.15 per share in Q2 2024.
• Net income decreased by $3.2 million year-over-year.
• Provision for Credit Losses increased by $3.0 million in Q2 2024.
• Total Assets decreased by 5.7% to $572.6 million.
• Net Loans decreased by 8.4% to $441.5 million.
• Total Deposits decreased by 12.6% to $451.9 million.
• Allowance for Credit Losses on Loans increased to $17.7 million from $5.1 million.
• Challenges related to commercial-equipment loans continue to affect the bank.

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.

View the original press release on accesswire.com

FAQ

What were U & I Financial Corp.'s earnings for Q2 2024?

U & I Financial Corp. reported a net loss of $827 thousand or $0.15 per share for Q2 2024.

How did U & I Financial Corp.'s Q2 2024 earnings compare to Q2 2023?

The company reported a net loss of $827 thousand in Q2 2024, compared to a net income of $2.4 million in Q2 2023.

What caused the increase in Provision for Credit Losses for UNIF in Q2 2024?

The Provision for Credit Losses increased by $3.0 million due to challenges with commercial-equipment loans.

How much did U & I Financial Corp.'s Total Assets decrease by June 30, 2024?

Total Assets decreased by $34.6 million or 5.7% to $572.6 million.

What was the change in Net Loans for U & I Financial Corp. by June 30, 2024?

Net Loans decreased by $40.5 million or 8.4% to $441.5 million.

What was the Total Deposits for U & I Financial Corp. as of June 30, 2024?

Total Deposits were $451.9 million as of June 30, 2024, a 12.6% decrease from the previous year.

What is the Allowance for Credit Losses (ACL) on Loans for U & I Financial Corp.?

As of June 30, 2024, the Allowance for Credit Losses on Loans was $17.7 million.

What challenges did U & I Financial Corp. face in Q2 2024?

The company faced challenges related to commercial-equipment loans, impacting credit quality and necessitating increased reserves.