UB Bancorp Reports Record Earnings for the First Quarter of 2021

UB Bancorp (OTCQX: UBNC) (the “Company”) the parent of Union Bank (the “Bank”) is pleased to report its results for the quarter ended March 31, 2021.

Highlights of the Company’s first quarter of 2021 included:

• The Company earned a record $2.98 million or $0.50 per basic common share during the first quarter
• Achieved net revenue of approximately $1.1 million from Paycheck Protection Program (“PPP”) loans in the quarter
• Generated an additional $20.9 million of Round 2 PPP loans in support of our customers
• Grew core deposits at a robust pace, increasing $64.3 million or 9.0% during the quarter
• Increased our balance sheet $68.9 million or 6.98% in the quarter, pushing the Company above $1.0 billion in total assets
• Continued to lower our funding costs, down 9 basis points from the 4^th quarter of 2020
• Maintained strong liquidity position
• Worked with customers, such that almost all customers that received pandemic related loan payment relief have returned to normal payments
• Maintained strong asset quality
• Maintained capital levels at the Bank that are solid and remain well above regulatory thresholds to be considered ‘Well Capitalized’
• Repurchased over 36,250 shares of UBNC common stock during the quarter
• Ended the quarter with 5,957,513 common shares outstanding
• Increased the semi-annual cash dividend to $0.105 per share of UBNC common stock, a 5.0% annualized increase
• Added Raleigh native Ms. Donna Curtis McClatchey to the Company’s Bank Board of Directors

Net income for the first quarter of 2021 was $2.98 million or $0.50 per basic common share versus $1.73 million or $0.29 per basic common share earned for the same three-month period in 2020. The Company’s annualized return on average assets and average tangible equity (*) for the first quarter of 2021 was 1.19% and 12.78%, respectively. These returns were favorable when compared to the 0.84% annualized return on average assets and 9.53% return on average tangible equity for the first quarter of 2020. The earnings for the first quarter of 2021 relative to that of the same quarter in 2020 benefited from a much larger earning asset base coupled with a reduction in funding costs and $1.1 million of net PPP revenue, which have helped offset declining asset yields. Average earning assets for the quarter ended March 31, 2021, were $948.4 million , an increase of $180.8 million when compared to the same quarter one year ago. However, the yield on our earning assets for the first quarter of 2021, versus the first quarter of 2020, is 66 basis points lower. In response to this dramatic drop in interest rates related to the COVID-19 pandemic, the Company aggressively reduced its deposit pricing. The cost of interest bearing deposits for the quarter ended March 31, 2021, was 0.31%, an 85 basis point reduction from the 1.16% cost for the same quarter one year prior.

Rob Jones, President and Chief Executive Officer, stated, “We are pleased to report a record quarter of earnings and an increase in our semi-annual cash dividend. In addition, we are excited about the appointment of Donna Curtis McClatchey to our Bank’s Board of Directors.” Jones continued, “Since the beginning of the pandemic, the impact of COVID-19 on the performance of our Company has been unusual. Extremely low interest rates have put downward pressure on our earning asset yields. Deposits at our Bank and throughout the industry have grown at an unsustainable pace, during a time when we have had restricted access to our branch lobbies. At the same time, the credit problems anticipated at the beginning of the pandemic have not materialized as of this date. With additional government stimulus and a successful vaccine rollout we see continued economic improvement and a positive outlook for the remainder of the year.”

PPP loans have impacted our Company in a variety of ways. They have increased our balance sheet, generating additional revenue, and provided us with another avenue to assist our customers and communities. As of March 31, 2021, the Company had approximately $52.0 million of PPP loans on its books. This balance includes approximately $32.0 million of PPP loans from the initial round of the program in 2020, as well as an additional $20.0 million from the second round of funding in 2021. During the first quarter of 2021, the Company assisted customers with gaining forgiveness on $24.5 million of PPP loans. This volume of forgiveness activity, along with the net interest income generated from this book of loans, resulted in the Company recognizing $1.1 million in net pre-tax revenue during the first quarter of 2021. While we cannot know the timing of future forgiveness for our customers, we do anticipate that we will recognize additional fee revenue as loans from both rounds of the PPP seek forgiveness from the Small Business Administration throughout the balance of 2021.

As of March 31, 2021, the Company had total assets of $1.1 billion, an increase of $189.8 million or 21.9% from the end of the first quarter of 2020. Over this same period gross loans have grown $49.3 million or 8.2%, ending the period at $650.4 million. We have utilized additional liquidity from growth in our core deposit base, as well as from our subordinated note offering, in our available-for-sale investment portfolio. These investments have increased $116.0 million when compared to the end of the first quarter one year ago and totaled $297.0 million on March 31, 2021. Total deposits on March 31, 2021, were $867.1 million compared to $675.2 million on March 31, 2020, an increase of $191.9 million or 28.4%. During this same period noninterest bearing deposits have increased $116.8 million or 53.2% to $336.2 million. While a portion of this growth is due to activity from the PPP, th