Unity Bancorp, Inc.
64 Old Highway 22
Clinton, NJ 08809
800 618-BANK
www.unitybank.com
NewsNewsNewsNewsNews
For Immediate Release:
April 26, 2012
News Media & Financial Analyst Contact:
Alan J. Bedner, EVP
Chief Financial Officer
(908) 713-4308
Unity Bancorp Reports First Quarter Earnings of $0.07 per Share
Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $509 thousand, or $0.07 per diluted share, for the quarter ended March 31, 2012, compared to a net loss attributable to common shareholders of $164 thousand, or $0.02 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.45% and 3.81%, respectively, compared to 0.11% and (1.31)% for the same period a year ago.
James A. Hughes, President and CEO, stated, “The continued improvement in our operating results is the result of our strategic initiatives. We have reduced the portfolio of loans outside our footprint, expanded our in-market business relationships and further reduced our cost of funds. I am extremely optimistic that the repositioning of the Company’s balance sheet will allow us to further increase our profitability.” He added, “We successfully opened our fifteenth branch in Washington Township (Warren County), New Jersey in March of this year.”
Net Interest Income
Our net interest income has been impacted by the sustained low interest rate environment, which the Federal Open Market Committee (“FOMC”) forecasts will continue into 2014. This rate environment has resulted in a tighter net interest margin as our earning assets continue to re-price at lower rates. Partially offsetting these declines are lower funding costs. However, as the Bank has been steadily reducing rates on its deposit products, the reduction in yield on earning assets is anticipated to exceed the benefits of further declines in the cost of funds.
Net interest income decreased $667 thousand to $6.8 million for the three months ended March 31, 2012 compared to the prior year’s quarter. Factors affecting net interest income for the quarterly periods included:
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The yield on earning assets fell 63 basis points to 4.71%.
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Quarter over quarter, our mix of earning assets shifted as average loans decreased $27.9 million and federal funds sold increased $31.4 million.
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The cost of interest-bearing liabilities decreased 29 basis points to 1.41% for the quarter.
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Net interest margin contracted 36 basis points to 3.56% for the quarter ended March 31, 2012.
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Noninterest Income
Our noninterest income consists primarily of branch and loan fee income, gains on the sale of SBA and mortgage loans and BOLI income. For the three months ended March 31, 2012, noninterest income amounted to $1.7 million, an increase of $460 thousand from the prior year period. Noninterest income was affected by the following factors:
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Branch fee income, which consists of deposit service charges and overdraft fees, increased $42 thousand or 12.2 percent compared to the prior year’s quarter, as increased overdraft activity offset reduced deposit account service charges.
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Service and loan fee income increased $59 thousand compared to the prior year’s period due to higher servicing fee income, partially offset by reduced payoff charges and other processing fees.
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Gains on sales of SBA loans amounted to $157 thousand on $1.9 million in sales, compared to $111 thousand on $1.2 million in sales in the prior year period.
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Gains on sales of residential mortgage loans amounted to $411 thousand, compared to $169 thousand in the prior year period due to a significant increase in the volume of mortgage loans originated and sold.
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Security gains of $224 thousand were realized during the quarter, compared to $125 thousand in the prior year.
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Noninterest Expense
For the three months ended March 31, 2012, noninterest expenses were $6.0 million, a decrease of $199 thousand or 3.2% from the same period a year ago. Factors which affected noninterest expense include:
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Compensation and benefits expense increased $125 thousand or 4.1%, due to higher payroll expenses, mortgage origination commissions and equity compensation and related costs.
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Occupancy expense decreased $111 thousand or 15.4%, as the mild winter resulted in lower snow removal costs and prior year branch closures resulted in lower rental and leasehold depreciation expenses.
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Loan collection costs decreased $44 thousand or 19.6%, due to lower loan legal, forced placed insurance and other collection related expenses.
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OREO expenses fell $98 thousand or 44.1%, due to lower maintenance, utility and legal related expenses, partially offset by losses on the sale of OREO properties.
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Deposit insurance expense decreased $148 thousand to $171 thousand for the quarter. Effective April 1, 2011, the FDIC modified its assessment calculation method from a deposits-based method to an assets-based method. This resulted in a significantly lower assessment for the Company.
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Financial Condition
At March 31, 2012, total assets were $810.2 million, flat from the prior year-end.
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Total securities increased $20.5 million since December 31, 2011, due to $32.1 million in security purchases, partially offset by sales and an increased level of prepayments.
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Total loans decreased $9.8 million or 1.7%, from $592.6 million at December 31, 2011 to $582.8 million at March 31, 2012. The Company plans to continue to shrink the SBA portfolio. Future loan growth is expected in both the commercial and residential portfolios. The net decrease was the result of the following:
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SBA 7(a) loans decreased $1.6 million or 2.2%,
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SBA 504 loans decreased $7.5 million or 13.5%,
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Commercial loans increased $1.8 million or 0.6%,
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Residential mortgage loans decreased $1.9 million or 1.4%, and
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Consumer loans decreased $665 thousand or 1.4%.
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Core deposits, which exclude time deposits, increased $8.6 million during the year to $493.2 million. The increase was primarily due to a:
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$7.4 million or 7.3% increase in noninterest-bearing demand deposits, and a
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$2.9 million increase in savings deposits, partially offset by a
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$1.7 million decrease in interest-bearing demand deposits.
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Time deposits decreased $9.5 million from year-end due to planned run off of a maturing high rate promotion that was completed late in 2008 to bolster liquidity.
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Shareholders’ equity was $74.0 million at March 31, 2012, an increase of $444 thousand from year-end 2011, primarily due to the increase in net income.
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Book value per common share was $7.28 as of March 31, 2012.
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At March 31, 2012 the leverage, Tier I and Total Risk Based Capital ratios were 10.67%, 14.44% and 15.71%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.
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Credit Quality
“Nonperforming assets declined from the prior year as the Company was successful in liquidating Bank owned properties”, said James A. Hughes. “Nonperforming assets are down 10.2 percent from a year ago and there has been a reduction in our problem accounts from the prior year, and I expect this trend to continue. We are now well into the litigation process with our workout credits, and as a result, I expect that we will begin to see a predictable reduction in nonperforming assets in the future.”
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Nonperforming assets totaled $23.8 million at March 31, 2012, or 4.08% of total loans and OREO, compared to $25.8 million or 4.33% of total loans and OREO at year-end 2011.
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At March 31, 2012, nonperforming loans totaled $22.2 million, a decrease of $563 thousand over the prior year-end.
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OREO assets totaled $1.6 million at March 31, 2012, a decrease of $1.4 million, compared to $3.0 million at year-end 2011.
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The allowance for loan losses totaled $16.3 million at March 31, 2012, or 2.80% of total loans. The provision for loan losses for the quarter ended March 31, 2012 was $1.2 million compared to $2.5 million for the prior year’s quarter. .
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Net charge-offs were $1.2 million for the three months ended March 31, 2012, compared to $1.6 million for the same period a year ago.
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Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $810 million in assets and $643 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.
