UB Bancorp Releases Results for the Quarter and Six Months Ended June 30, 2022

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, 2022.

The second quarter of 2022 was an eventful quarter for the Company. Some of the highlights included:

• On June 1, 2022, the Company announced the signing of a definitive merger agreement for FNB Corporation to acquire the Company in an all-stock transaction which is contemplated to be completed during the fourth quarter of 2022
• Net income of $2.5 million, or 42 cents per basic common share for the quarter
• Net income for the first six months of $5.1 million, or 86 cents per basic common share
• The Company incurred $382,000 of merger related expenses during the first half of 2022
• Total assets of $1.14 billion as of quarter end, a year-over-year increase of $57.9 million or 5.4%
• Core loans (excluding PPP loans) grew $18.2 million or 2.7% during the second quarter
• Total deposits of $1.02 billion at the end of the second quarter with non-interest deposits growing $23.9 million during the quarter
• Sound credit quality metrics
• Solid capital at the Bank, above the regulatory ‘Well Capitalized’ thresholds
• Strong liquidity levels
• 5,978,076 common shares outstanding with tangible book value per share of $11.41 (*) at quarter end
• Paid a semi-annual cash dividend to our shareholders of $0.11 per share on June 30, 2022

Rob Jones commented, “We are pleased to report solid operating results for the quarter and first six months of 2022. Excluding merger related expenses, core earnings on a pretax basis are up 12.1% compared to the same six-month period of 2021. In addition, we have been pleased with our ability to generate solid loan growth during the first half of 2022. As expected, deposit growth has slowed compared to the unsustainable level of growth during the COVID pandemic period of the last two years.”

Mr. Jones went on to say, “Our expectation is that inflation, combined with rising interest rates will have a cooling effect on the economy in general. We believe that our loan portfolio is well positioned to deal with a cooling off period. As we stand today, our asset quality metrics remain outstanding.”

Jones continued, “As you are aware, we announced our merger with FNB Corporation late in the second quarter. We are excited about the transaction and the many benefits for our shareholders, customers, and employees. As previously reported, the transaction, which is subject to approval by regulators and UB Bancorp shareholders, is expected to close in the fourth quarter of 2022.”

Net income for the second quarter of 2022 was $2.5 million, or $0.42 per basic common share, versus $2.9 million, or $0.49 per basic common share, earned for the same period in 2021. The Company’s return on average assets and average tangible equity (*) for the second quarter of 2022 was 0.88% and 14.24%, respectively. Revenues were positively impacted by solid growth in our earning assets coupled with reduced funding costs on our deposit base. These factors help offset the reduction in net Paycheck Protection Program (PPP) revenue. Average earning assets for second quarter of 2022 were $1.1 billion, an increase of $76.6 million from the same three-month period one year ago. The Company’s cost of funds fell 7 basis points to 0.27% for the second quarter of 2022 versus 0.34% for the same quarter one year ago. This reduction in funding costs helped offset a 25-basis-point decline in earning asset yields between these same time periods. Net pre-tax revenue from PPP fees totaled $90,000 for the three-month period ended June 30, 2022 versus $682,000 during the second quarter of 2021.

Net income for the six month period ended June 30, 2022, was $5.1 million, or $0.86 per basic common share, and represented a 0.90% return on average assets and a 13.54% return on average tangible equity (*). For the same six-month period of 2021, the Company posted $5.9 million of net income, or $0.99 per basic common share. During the first half of 2021, PPP activity contributed $1.8 million to net pre-tax revenues for the Company versus $492,000 during the first half of 2022. When adjusting earnings to exclude net PPP revenues, provisions for loan losses, and merger related expenses on a pre-tax basis the Company earned $6.3 million through the first half of 2022. These results compare favorably to $5.6 million of adjusted earnings generated by the Company during the same six-month period of 2021.

Year-to-date earnings have also benefited from a higher level of earning assets and lower funding costs, helping to offset the reduction in net PPP revenues. Total assets as of June 30, 2022 were $1.14 billion. This balance is $57.9 million or 5.4% above that of our total assets at June 30, 2021. Over this same twelve-month time frame gross loans grew $18.7 million or 2.8%, ending the period at $684.6 million. This loan growth, in conjunction with a higher level of cash on our balance sheet due to additional deposit growth, resulted in an elevated level of earning assets. Total deposits at June 30, 2022, were $1.02 billion versus $905.9 million as of June 30, 2021, an increase of $114.7 million, or 12.7%. During this same time period non-interest-bearing deposits have increased $80.6 million, or 22.6%, to $437.1 million. With this larger balance sheet our average earning assets have expanded $112.4 million on a year-over-year basis. This growth, coupled with a 9 basis point reduction in our funding cost has helped us to offset the reduced revenues from the PPP.

Asset quality metrics for the Company remain sound. Our level of nonperforming assets relative to total assets was 0.06% at the end of the second quarter of 2022. In addition, our level of nonperforming loans comprised only 0.10% of total loans outstanding at the end of the quarter. Our allowance for loan losses at $7.7 million as of June 30, 2022, represented 1.13% of total loans outstanding. The allowance for our originated loan portfolio (excluding purchased as well as PPP loans) at $7.6 million represented 1.16% of those loans as of the end of the second quarter.

Capital levels at our Bank continue to be strong with total risk-based capital of 15.61%, common equity tier 1 to risk-weighted assets 13.81% and the tier 1 leverage ratio at 9.16% as of June 30, 2022. In addition, the parent company, UB Bancorp, has the capacity to act as a source of strength for the Bank should a need arise.

On June 30, 2022, the Company paid a cash dividend of $0.11 per share to shareholders of record at the close of business on June 15, 2022.

UB Bancorp and Union Bank are headquartered in Greenville, North Carolina and operate 14 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.

Contacts

Scott C. McLean

Chief Financial Officer

(252) 917-5735