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

Rhea-AI Summary

U & I Financial Corp. (UNIF) reported a significant quarterly Net Loss of $15.0 million ($2.73 per share) in Q3 2024, compared to Net Income of $2.4 million in Q3 2023. The loss primarily stems from a $19.5 million Provision for Credit Losses. Total Assets decreased 7.0% to $569.6 million, Net Loans fell 14.0% to $410.3 million, and Total Deposits declined 10.3% to $468.2 million year-over-year. The bank faced credit deterioration in commercial-equipment loans, which totaled $38.3 million. Despite challenges, capital ratios remain above regulatory 'well capitalized' minimums.

Positive

• Capital ratios remain above regulatory 'well capitalized' minimums
• 63% of remaining $38M commercial equipment loans are reserved

Negative

• Q3 2024 Net Loss of $15.0M vs Net Income of $2.4M in Q3 2023
• Significant Provision for Credit Losses of $19.5M in Q3 2024
• Total Assets decreased 7.0% YoY to $569.6M
• Net Loans declined 14.0% YoY to $410.3M
• Total Deposits dropped 10.3% YoY to $468.2M
• $23M in commercial equipment loans charged off

10/30/2024 - 03:00 AM

LYNNWOOD, WA / ACCESSWIRE / October 30, 2024 / U & I Financial Corp. (OTCQX:UNIF), the holding company ("Company") for UniBank ("Bank"), today reported a quarterly Net Loss of $15.0 million or a loss of $2.73 per share in the third quarter of 2024, compared to the Net Income of $2.4 million or earnings of $0.43 per share for the same quarter of 2023, primarily due to the Provision for Credit Losses of $19.5 million recognized during the third quarter of this year. For the nine months ended September 30, 2024, the Net Loss was $14.5 million or a loss of $2.65 per share, as a result of the $22.4 million Provision for Credit Losses, compared to the Net Income of $7.4 million or earnings of $1.36 per share for the same period of 2023.

At September 30, 2024, Total Assets were $569.6 million, a decrease of $42.6 million or 7.0% from $612.2 million at September 30, 2023. Net Loans were $410.3 million at September 30, 2024, decreasing by $66.6 million or 14.0% from $476.9 million at September 30, 2023. Total Deposits decreased by $54.0 million or 10.3% to $468.2 million at September 30, 2024 compared to $522.1 million a year earlier.

The Bank has experienced credit deterioration from Bank borrowers with "commercial-equipment" loans. As of September 30, 2024, these loans totaled $38.3 million as compared to $49.3 million as of June 30, 2024. The Allowance for Credit Losses (ACL) on Loans and ACL on Off-Balance Sheet Credit Exposure were $24.1 million and $1.7 million, respectively, as of September 30, 2024, compared to $13.1 million and $2.2 million, respectively, as of June 30, 2024. Additional information on credit quality is presented in the tables below.

The Bank's capital ratios remained above the regulatory "well capitalized" minimums at 7.53%, 9.56% and 10.87% for Tier 1 Leverage Ratio, Tier 1 Risk-Based Capital Ratio and Total Risk-Based Capital Ratio, respectively, as of September 30, 2024.

"As a result of the ongoing issues with commercial equipment loans, it was necessary to recognize a large provision in the third quarter. Although the Bank has charged off $23 million of these loans and has reserved for 63% of the remaining $38 million, its capital ratios are still above regulatory ‘well capitalized' minimum ratios," said President & CEO Stephanie Yoon. "While we are disappointed to recognize another large provision in the third quarter due to these loans, we are encouraged by the work of our new, solid credit team as they actively work to resolve these issues."

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)
		sSep-24				Jun-24				Sep-23				Sep-24				Sep-23				Dec-23
(Dollars in thousands except EPS)		QTD				QTD				QTD				YTD				YTD				YTD
Interest Income		$	8,270			$	9,362			$	9,616			$	26,917			$	28,346			$	37,652
Interest Expense			4,820				4,769				4,173				14,287				10,796				15,388
Net Interest Income			3,450				4,593				5,443				12,630				17,550				22,264
Provision for Credit Losses			19,479				2,966				158				22,445				158				26,411
Gain (Loss) on Loan Sales			-				179				609				179				1,433				1,410
Loan Servicing Fees, Net of Amortization			168				175				164				527				541				624
Other Non-interest Income			212				195				176				592				678				851
Non-interest Income			380				549				949				1,298				2,652				2,885
Salaries & Benefits			1,514				1,445				1,962				4,948				6,991				8,241
Occupancy Expense			205				189				187				586				541				729
Other Expense			1,568				1,629				1,120				4,381				3,126				3,712
Non-interest Expense			3,287				3,263				3,269				9,915				10,658				12,682
Net Income (Loss) before Income Taxes			(18,936	)			(1,087	)			2,965				(18,432	)			9,386				(13,944	)
Income Tax Expense (Benefit)			(3,983	)			(260	)			610				(3,921	)			1,986				(3,136	)
Net Income (Loss)		$	(14,953	)		$	(827	)		$	2,355			$	(14,511	)		$	7,400				(10,808	)
Total Outstanding Shares (in thousands)			5,477				5,477				5,466				5,477				5,466				5,466
Basic Earnings (Loss) per Share		$	(2.73	)		$	(0.15	)		$	0.43			$	(2.65	)		$	1.36			$	(1.98	)

Statement of Condition (Unaudited)
		Sep-24				Jun-24				Sep-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		$	70,527			$	46,299			$	58,923			$	24,228			$	11,604			$	61,254
Investments			50,344				50,996				48,841				(652	)			1,503				51,346
Loans Held for Sale			-				-				-				-				-				-
Gross Loans			439,233				459,196				482,132				(19,963	)			(42,899	)			490,636
Allowance for Credit Losses (ACL) on Loans			(28,964	)			(17,680	)			(5,234	)			(11,284	)			(23,730	)			(25,950	)
Net Loans			410,269				441,516				476,898				(31,247	)			(66,629	)			464,686
Fixed Assets			6,078				6,140				6,577				(62	)			(499	)			6,438
Other Assets			32,387				27,676				20,978				4,711				11,409				26,325
Total Assets		$	569,605			$	572,627			$	612,217			$	(3,022	)		$	(42,612	)		$	610,049
Checking		$	86,708			$	88,860			$	105,770			$	(2,152	)		$	(19,062	)		$	100,135
NOW			5,233				10,925				14,588				(5,692	)			(9,355	)			13,504
Money Market			128,136				144,471				197,296				(16,335	)			(69,160	)			200,966
Savings			6,258				6,895				9,050				(637	)			(2,792	)			8,063
Certificates of Deposit			241,840				200,758				195,429				41,082				46,411				191,733
Total Deposits			468,175				451,909				522,133				16,266				(53,958	)			514,401
Borrowed Funds			50,000				54,000				8,000				(4,000	)			42,000				20,000
ACL on Off-Balance Sheet Credit Exposure			1,695				2,176				15				(481	)			1,680				5,551
Other Liabilities			2,710				3,387				3,901				(677	)			(1,191	)			8,678
Total Liabilities			522,580				511,472				534,049				11,108				(11,469	)			548,630
Shareholders' Equity			47,025				61,155				78,168				(14,130	)			(31,143	)			61,419
Total Liabilities & Equity			569,605			$	572,627			$	612,217			$	(3,022	)		$	(42,612	)		$	610,049

Financial Ratios
		Sep-24				Jun-24				Sep-23				Sep-24				Sep-23				Dec-23
(Dollars in thousands except BVS)		QTD				QTD				QTD				YTD				YTD				YTD
Performance Ratios
Return on Average Assets*			(10.30	%)			(0.57	%)			1.54	%			(3.30	%)			1.65	%			(1.85	%)
Return on Average Equity*			(96.78	%)			(5.29	%)			11.92	%			(31.24	%)			13.01	%			(14.53	%)
Net Interest Margin*			2.44	%			3.21	%			3.65	%			2.92	%			4.05	%			3.83	%
Efficiency Ratio			85.82	%			63.43	%			51.14	%			71.36	%			52.76	%			50.36	%
*Quarterly results are annualized
Capital		Sep-24 QTD				Jun-24 QTD				Sep-23 QTD				Well Capitalized Minimum
Tier 1 Leverage Ratio**			7.53	%			10.22	%			13.26	%			5.00	%
Common Equity Tier 1 Ratio**			9.56	%			12.82	%			16.54	%			6.50	%
Tier 1 Risk-Based Capital Ratio**			9.56	%			12.82	%			16.54	%			8.00	%
Total Risk-Based Capital Ratio **			10.87	%			14.10	%			17.61	%			10.00	%
Book Value per Share (BVS)		$	8.59			$	11.17			$	14.30
**Represents Bank capital ratios
Asset Quality		Sep-24 QTD				Jun-24 QTD				Sep-23 QTD				Sep-24 YTD				Sep-23 YTD				Dec-23|YTD
Net Credit Charge-Offs (Recoveries)***		$	8,676			$	0			$	0			$	23,288			$	0			$	0
Allowance for Credit Losses to Loans %			6.59	%			3.85	%			1.09	%
Nonperforming Assets to Total Assets			2.74	%			1.02	%			0.74	%
*** Includes Off-Balance Sheet Credit Exposure

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 September 30, 2024 and June 30, 2024 (in thousands):

September 30, 2024						Special
Portfolio Segment		Pass				Mention				Substandard				Doubtful				Loss				Total
Commercial real estate		$	188,980			$	29,274			$	792			$	-			$	-			$	219,046
Residential real estate			168,714				-				-				499				-				169,213
Commercial - equipment			-				18,066				7,639				3,554				9,057				38,316
Commercial - all other			8,857				-				-				-				-				8,857
Multifamily			2,823				-				-				-				-				2,823
Construction and land			907				-				-				-				-				907
Consumer and other			71				-				-				-				-				71
		$	370,352			$	47,340			$	8,431			$	4,053			$	9,057			$	439,233

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

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

September 30, 2024						Special
Portfolio Segment		Pass				Mention				Substandard				Doubtful				Loss				Total
Commercial real estate		$	1,234			$	113			$	48			$	-			$	-			$	1,395
Residential real estate			3,088				-				-				195				-				3,283
Commercial - equipment			-				9,033				3,820				2,475				8,791				24,119
Commercial - all other			135				-				-				-				-				135
Multifamily			2				-				-				-				-				2
Construction and land			27				-				-				-				-				27
Consumer and other			3				-				-				-				-				3
		$	4,489			$	9,146			$	3,868			$	2,670			$	8,791			$	28,964

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

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

September 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		$	930			$	3,896			$	-			$	4,826			$	214,220			$	219,046
Residential real estate			-				-				-				-				169,213				169,213
Commercial - equipment			6,425				5,810				8,093				20,328				17,988				38,316
Commercial - all other			-				-				-				-				8,857				8,857
Multifamily			-				-				-				-				2,823				2,823
Construction and land			-				-				-				-				907				907
Consumer and other			-				-				-				-				71				71
		$	7,355			$	9,706			$	8,093			$	25,154			$	414,079			$	439,233

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

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 September 30, 2024 and June 30, 2024 (in thousands):

September 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		$	-			$	2,564			$	2,564			$	-
Commercial - equipment			-				12,976				12,976				-
		$	-			$	15,539			$	15,539			$	-

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			$	-

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 September 30, 2024 and June 30, 2024 the Bank had $2.6 million and $3.5 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 $1.7 million and $2.2 million as of September 30, 2024 and June 30, 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 was UNIF's net loss in Q3 2024?

U & I Financial Corp. reported a net loss of $15.0 million ($2.73 per share) in Q3 2024.

How much did UNIF's total deposits decrease in Q3 2024?

Total deposits decreased by $54.0 million or 10.3% to $468.2 million compared to the previous year.

What caused UNIF's significant losses in Q3 2024?

The losses were primarily due to a $19.5 million Provision for Credit Losses, mainly related to deterioration in commercial-equipment loans.

What are UNIF's capital ratios as of September 30, 2024?

UNIF maintained capital ratios of 7.53% (Tier 1 Leverage), 9.56% (Tier 1 Risk-Based), and 10.87% (Total Risk-Based), all above regulatory 'well capitalized' minimums.