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7/25/2013

Unity Bancorp Reports 53.4% Increase in Quarterly Earnings and Increased Six Month Earnings  

CLINTON, N.J. - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $882 thousand, or $0.11 per diluted share, for the three months ended June 30, 2013, a 53.4% increase compared to $575 thousand, or $0.07 per diluted share, for the same period a year ago.


Return on average assets and average common equity for the quarter were 0.67% and 6.11%, respectively, compared to 0.49% and 4.25% for the same period a year ago. Second quarter highlights included:


- Repurchased $10.3 million of preferred stock issued in connection with Unity's participation in the Treasury's Capital Purchase Program ("CPP") during the quarter with the remaining $10.3 million repurchased July 3, 2013.


- Paid our first cash dividend to shareholders since prior to entering into the CPP program in December 2008.


- Total loans increased 6.0% from year-end 2012, driven by strong loan demand.


- Noninterest-bearing deposits reached a record high of $128.0 million, an 11.9% increase from year-end, and now represent 20.4% of total deposits.


- Continued asset quality improvement as evidenced by: a 36.4% decrease in nonperforming assets from a year ago and a 68.2% decrease in net charge-offs.


- Net interest margin continued to remain strong versus prior periods.


- Increased gains on the sales of mortgage loans resulting from record residential mortgage loan originations.


- Total noninterest expense continued to be stable compared to the prior year period.


- Remained well-capitalized in excess of regulatory requirements after the CPP repurchase and dividend payment.


- Launched the Unity Bank Facebook page on June 10, 2013.


- Closed on the purchase of three of our previously leased branch locations which will result in future cost savings.


- Opened a residential mortgage loan production office in Elmwood Park, New Jersey.


"This was a milestone quarter for Unity," reported James A. Hughes, President and CEO. "Due to significantly improved fundamentals of the Company, we were able to repay $20.6 million in high cost capital. In addition, loan demand has improved significantly, which should bolster revenue and enhance our future performance."


For the six months ended June 30, 2013, net income available to common shareholders totaled $1.7 million, or $0.21 per diluted share, compared to $1.1 million or $0.14 per diluted share. Return on average assets and average common equity for the six month periods were 0.63% and 5.88%, respectively, compared to 0.47% and 4.03% for the same period a year ago.


Net Interest Income


Compared to a year ago, net interest income decreased $55 thousand and $172 thousand for the three and six month periods, respectively. The net interest margin was 3.66% and 3.59% in the quarter and year-to-date periods, respectively. While slightly lower than the prior year, the net interest margin has stabilized and increased compared to the quarter ending March 31, 2013, as the increased loan volume offset lower yields on our securities and loan portfolios.


Provision for Loan Losses


The provision for loan losses for the quarter ended June 30, 2013 was $300 thousand compared to $1.0 million for the prior year's quarter, and for the six month period ended June 30, 2013, the provision declined to $950 thousand from $2.2 million in the first six months of 2012. The reduced provision reflects a lower level of net charge-offs for the quarter and year- to-date periods as well as a lower level of nonperforming assets.


Noninterest Income


Noninterest income decreased $183 thousand to $1.7 million for the three months and $74 thousand to $3.5 million for the six months ended June 30, 2013, compared to the same periods last year. The decreases were driven by lower levels of security gains being recognized, a lower volume of SBA loans being sold during the periods and recognition of lower gains on sales, and decreased fees on overdrawn accounts during the periods. Partially offsetting these decreases were increased gains on the sale of residential mortgage loans due to a higher volume of loans sold. We do not anticipate a material reduction in mortgage loan volume due to the recent increase in interest rates.


Noninterest Expense


Noninterest expense decreased $130 thousand to $6.1 million for the three months ended June 30, 2013, while year-to-date expense increased $38 thousand to $12.2 million. During both of these periods, occupancy, other real estate owned ("OREO") and advertising expenses decreased. Occupancy expense decreased as a result of cost savings realized from the purchase of three of our previously leased locations in April 2013. OREO expenses fell during each period as the number of properties and subsequent property taxes, maintenance and insurance costs declined compared to the prior year's periods. Advertising expenses varied based on the timing of retail branch related promotions such as the opening of the new branch in Washington Township, New Jersey in 2012. Loan collection costs remain elevated in both periods due to higher loan legal, insurance and other collection costs. Other expenses increased due to higher employee recruiting, increased director fees and an increase to the reserve for unfunded loan commitments.


Financial Condition


 At June 30, 2013, total assets were $824.6 million, an increase of $4.8 million from the prior year end:


- Total loans increased $35.3 million or 6.0%, to $622.3 million at June 30, 2013. This growth came from our residential mortgage and commercial loan portfolios. Future loan growth is expected in both the commercial and residential portfolios. The Company plans to continue shrinking its out of market SBA portfolio.


- Total deposits decreased $20.4 million to $628.4 million at June 30, 2013. Noninterest-bearing demand deposits have increased 11.9% since year-end and represent 20.4% of total deposits. Time deposits remain relatively flat at $126.0 million while savings and interest-bearing demand deposits decreased due to a reduction in municipal deposits.


- Shareholders' equity was $68.3 million at June 30, 2013, a decrease of $9.2 million from year-end 2012, due primarily to the repurchase of $10.3 million in preferred stock issued in connection with the CPP during the second quarter. The remaining preferred stock was repurchased on July 3rd.


- Book value per common share was $7.70 as of June 30, 2013.


- At June 30, 2013 the leverage, Tier I and Total Risk Based Capital ratios were 10.23%, 13.36% and 14.63% respectively, all in excess of the ratios required to be deemed "well- capitalized". If the remaining $10.3 million in preferred stock which was repurchased on July 3, 2013 had been repurchased prior to quarter-end, the leverage, Tier I and Total Risk Based Capital ratios would have been 9.05%, 11.71% and 12.98% respectively, all in excess of the ratios required to be deemed "well-capitalized".


Credit Quality


- Nonperforming assets totaled $14.1 million at June 30, 2013 or 2.26% of total loans and OREO, compared to $19.3 million or 3.28% of total loans and OREO at year-end 2012.


- OREO decreased $1.1 million to $752 thousand at June 30, 2013 due to the sale of 5 properties.


- The allowance for loan losses totaled $14.3 million at June 30, 2013 or 2.30% of total loans. The provision for loan losses for the quarter ended June 30, 2013 was $300 thousand compared to $1.0 million for the prior year's quarter.


- Net charge-offs were $336 thousand for the three months ended June 30, 2013, compared to $1.1 million for the same period a year ago. For the six months ended June 30, 2013, net charge-offs wer.


- $1.4 million compared to $2.3 million for the prior year period.


- Troubled debt restructurings ("TDRs") decreased $2.4 million from year-end to $12.3 million. At June 30, 2013, 86.5% of our TDRs were performing.


Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $825 million in assets and $628 million in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 15 retail service centers located in Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County, Pennsylvania. For additional information about Unity, visit our website at www.unitybank.com, or call 800- 618-BANK.


This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements may be identified by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond the company's control and could impede its ability to achieve these goals. These factors include those items included in our Annual Report on Form 10-K under the heading "Item IA-Risk Factors" as well as general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, our ability to manage and reduce the level of our nonperforming assets, and results of regulatory exams, among other factors.

 

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