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Board Declares Semi-Annual Cash Dividend
UB Bancorp (OTCQX: UBNC) (the "Company") the parent of Union Bank (the "Bank") is pleased to report its results for the quarter and nine months ended September 30, 2020.
The third quarter of 2020 was very positive for the Company:
Completed our first full quarter of operations as UB Bancorp
Continued building our allowance for loan losses, providing an additional $2.1 million during the quarter
Posted pre-tax, pre-provision earnings of $3.1 million for the third quarter of 2020, an increase of 15.5% from the $2.7 million of pre-tax, pre-provision earnings for the third quarter of 2019
Robust core deposit growth continued in the third quarter, year-to-date our core deposits have increased $105.4 million or 16.8%
Given our core deposit growth, our liquidity position is very strong
Most customers that received pandemic related loan payment relief are returning to normal payments
Asset quality metrics remain strong
Capital levels are solid and remain well above regulatory thresholds to be considered ‘Well Capitalized’
The Board of Directors has declared a semi-annual cash dividend to shareholders
Dr. William A. Keyes IV has joined Union Bank’s Board of Directors
Net income for the third quarter of 2020 was $793,000 or $0.13 per basic common share versus $1.9 million or $0.32 per basic common share earned for the same period in 2019. The Company’s return on average assets and average tangible equity for the third quarter of 2020 was 0.32% and 4.55%, respectively. The earnings performance for the third quarter of 2020 relative to that of the same quarter in 2019 was hampered by an increase in provisions for loan losses and lower yields on our earning asset base. This decline in earning assets yields has been partially offset by a reduction in our cost of funds coupled with a larger base of earning assets. Excluding taxes and provisions for loan losses the Company earned $3.1 million during the third quarter of 2020 which compares favorably to the $2.7 million of pre-tax pre-provision income earned for the same three month period in 2019.
Net income for the nine month period ended September 30, 2020 was $3.1 million and represented a 0.45% return on average assets and a 6.15% return on average tangible equity. For the same nine month period of 2019 the Company posted $5.3 million of net income. Excluding taxes and $4.7 million of provisions for loan losses, the Company generated $8.5 million of income during the first nine months of 2020. These results were favorable to the $7.4 million of pre-tax pre-provision income for the same nine month period one year ago.
Revenues have benefited from a larger balance sheet and a higher level of earning assets than the Company had at year end 2019. Total assets as of September 30, 2020 were $970.9 million, an increase of $149.5 million or 18.2%, compared to $821.3 million of total assets at December 31, 2019. Over this same nine month time period gross loans grew $65.7 million or 11.3%, ending the period at $645.7 million. With a goal of putting to work funds received from our subordinated note offering, our available-for-sale investment portfolio increased $76.9 million since year end 2019 and totaled $241.0 million at September 30, 2020. This earning asset growth was funded primarily through growth in our core deposit base. Total deposits at September 30, 2020 were $741.2 million compared to $678.2 million at December 31, 2019, an increase of $63.0 million or 9.3%. During this same time period noninterest bearing deposits increased $84.2 million or 39.3% to $298.5 million. While some of this growth is due to activity from the Paycheck Protection Program ("PPP"), the Bank has actively grown new deposit customers.
Given the unclear future of the overall economic environment we have continued to be extremely focused on lending to high quality borrowers as well as setting aside additional provisions to support our allowance for loan losses. Currently our asset quality remains very solid with total non-performing assets representing only 0.02% of total assets as of September 30, 2020. As of the end of the third quarter we have not experienced any credit deterioration beyond what we would anticipate through our normal course of doing business. Through September 30, 2020, we had granted loan payment deferrals to just over 340 customers with total outstanding balances of approximately $92.4 million. As of this same date we had 145 loan customers with balances of approximately $56.9 million, or 9.8% of our loan portfolio (excluding PPP loans) still in deferral, a decline of 57.7% in the number of customers with deferrals. As of the end of the third quarter, of our borrowers that had been granted a Covid payment deferral, only 6, with outstanding balances of $4.7 million, had requested additional relief. We do anticipate that as a result of the pandemic, some of our customers may face economic challenges. As we continue to work with our borrowers, we anticipate that our asset quality metrics could be negatively impacted in future periods. As a result, we have been adding to our allowance for loan losses due to this pandemic related uncertainty. As of September 30, 2020, our allowance to total loans stands at 1.48%. Furthermore, our allowance relative to our originated loan portfolio (excluding purchased loans), net of PPP loans, stands at 1.86% at the end of the third quarter of 2020. Going forward, we anticipate maintaining our allowance at its current level until we get further clarity on the pandemic’s impact on our borrowers.
Capital levels at our Bank remain strong, with total risk-based capital of 14.72%, common equity tier 1 to risk-weighted assets of 12.54%, and the Bank’s tier 1 leverage ratio of 8.98% 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, "Given the business uncertainty created by the Covid-19 pandemic, including historically low interest rates, the operating environment for financial institutions remains challenging. However, I could not be more pleased with the results of our Company for the quarter and year-to-date. Forming our holding company and raising $25.0 million of subordinated debt, combined with an aggressive approach to building our reserve for loan losses has put our Company in a solid position to take advantage of market opportunities that may arise as this pandemic comes to a close." Mr. Jones continued, "I also want to note how excited we are about the recent appointment of Dr. William A. Keyes IV to our Bank’s Board of Directors. Dr. Keyes’ vast experience in leadership development will be a significant benefit to our Company’s future."
The Company’s Board of Directors has approved, effective October 15, 2020, a semi-annual cash dividend of $0.10 per share on UB Bancorp’s common stock. This cash dividend is payable to on December 31, 2020, to shareholders of record at the close of business on December 15, 2020.
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.
Consolidated Balance Sheets
As of the Period Ended
Cash and due from banks
Interest-bearing deposits with banks
Investment securities available-for-sale
Loans - gross
Net fair value marks
Allowance for loan losses
Bank premises and equipment, net
Bank-owned life insurance
Other real estate owned
Core deposit intangible
LIABILITIES AND STOCKHOLDERS' EQUITY
Advances from the Federal Home Loan Bank
Accrued expenses and other liabilities
Common stock, no par value
Accumulated other comprehensive income / (loss)
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
Derived from audited financial statements
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($000's omitted except per share data)
For the Three Months Ended
For the Nine Months Ended
Sept 30, 2020
Sept 30, 2019
Sept 30, 2020
Sept 30, 2019
Net Interest Income
Provision for Loan Losses
Net Interest Income after Provision for Loan Losses
Income Before Income Taxes
Net Income Available Per Basic Common Share
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Scott C. McLean
Chief Financial Officer