CLINTON, N.J., Jan. 30, 2014 /PRNewswire/ -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $1.3 million, or $0.17 per diluted share, for the three months ended December 31, 2013, a 66.8% increase compared to $759 thousand, or $0.10 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.57% and 8.87%, respectively, compared to 0.57% and 5.34% for the same period a year ago.
Fourth quarter highlights include:
- 4.2% growth in commercial loans since September 30, 2013 and 20.5% since year-end 2012.
- 5.2% growth in residential mortgage loans since September 30, 2013 and 37.8% since year-end 2012.
- Closed $30.8 million in residential mortgage loans for the quarter and $153.7 million for the twelve month period.
- 1.6% deposit growth during the fourth quarter included the planned outflow of a short-term $36 million noninterest-bearing demand deposit. Since year-end 2012, total deposits increased 13.9% with an 18.9% increase in noninterest-bearing demand deposits.
- Growth in net interest income compared to the third quarter 2013 and the prior year's quarter due to strong commercial and residential loan portfolio growth.
- Continued reduction in noninterest expenses compared to the prior quarter periods.
- Decreased nonperforming loans and other real estate owned compared to the prior quarter and year-end periods.
"We have continued to build on our positive momentum," reported James A. Hughes, President and CEO. "We have had a record year, with loans growing in excess of 15% and deposits growing by nearly 14%. We are now seeing this growth contribute to an increase in top line revenues, and we expect this trend to continue. We look forward to continued improvement in 2014."
For the year ended December 31, 2013, net income available to common shareholders totaled $4.1 million, or $0.53 per diluted share, a 56.2% increase compared to $2.6 million or $0.34 per diluted share for 2012. Return on average assets and average common equity for the annual periods were 0.61% and 7.22%, respectively, compared to 0.53% and 4.80% for the same period a year ago.
Net Interest Income
Year over year, net interest income was flat at $27.4 million; however, net interest income increased $326 thousand to $7.1 million for the quarter ended December 31, 2013 compared to the prior year's quarter. Net interest income also showed an increase of $192 thousand over the quarter ending September 30, 2013. The strong growth in commercial and residential mortgage loan volume over the past year has helped to offset lower yields on our securities and loan portfolios. We expect net interest income to continue to expand in future quarters due to strong loan growth. The net interest margin was 3.42% and 3.53% for the quarter and year-to-date periods, respectively.
Provision for Loan Losses
The provision for loan losses for the quarters ended December 31, 2013 and December 31, 2012 was $800 thousand. For the twelve month period ended December 31, 2013, the provision declined to $2.4 million from $4.0 million in 2012. The reduced provision, year over year, reflects an improvement in credit quality and a lower level of net charge-offs.
Noninterest income decreased $537 thousand to $1.5 million for the three months and $734 thousand to $6.6 million for the year ended December 31, 2013, compared to the same periods last year. The decreases during both periods were driven by lower sales volume of residential mortgage loans. In addition, there was a reduced volume of SBA loan sales and consequent gains realized. These decreases were partially offset by increased service and fee income on loans and bank owned life insurance ("BOLI") income.
During the quarter, $15.8 million in residential mortgage loans were sold at a gain of $312 thousand, compared to $34.0 million sold at a gain of $748 thousand during the prior year's quarter. For the year, $78.4 million in residential mortgage loans were sold at a gain of $1.7 million, compared to $105.5 million sold at a gain of $2.3 million during the prior year's period. We do not anticipate the rise in interest rates to have a material impact on our residential mortgage origination volume.
SBA loan sales totaled $2.1 million with gains on sale of $262 thousand for the fourth quarter 2012. There were no sales during the quarter ended December 31, 2013. For the twelve month period, SBA loan sales totaled $6.3 million with gains on sale of $628 thousand compared to sales of $6.8 million and $688 thousand in gains during the prior year. We anticipate an increase in the volume of sales in 2014, due to the addition of SBA business development officers.
Noninterest expense decreased $273 thousand to $5.9 million for the three months ended December 31, 2013, while year-to-date expense decreased $300 thousand to $24.0 million. The decreases in each of these periods were the result of lower mortgage commissions, reduced salary compensation from position vacancies and lower occupancy expense as a result of cost savings realized from the purchase of three of our previously leased locations. Partially offsetting these decreases were increased processing and communications expenses related to merchant services, electronic banking and check cashing services. Other notable expense fluctuations included a decrease in other expenses during the quarter compared to the prior year period due to a retail loss in 2012 reflected in noninterest expense during the year ago period. On a year-to-date basis, advertising expenses declined based on the timing of retail related promotions and the utilization of cost effective avenues such as social media, loan collection costs remain elevated due to higher appraisal, insurance and other collection costs, and recruiting and director expenses increased.
At December 31, 2013, total assets were $921.1 million, an increase of $101.4 million from the prior year-end:
- Total loans increased $91.7 million or 15.6%, to $678.7 million at December 31, 2013. This growth came in our commercial and residential mortgage loan portfolios which increased $61.8 million and $50.0 million, respectively. Future loan growth is expected to be primarily in commercial loans, while the Company plans to continue shrinking its out of market SBA portfolio.
- Total deposits increased $89.9 million or 13.9%, to $738.7 million at December 31, 2013, due to growth in time deposits, noninterest-bearing demand deposits, and interest-bearing demand deposits. Time deposits have increased $80.4 million from year-end, with the majority of this coming in the third and fourth quarters in response to a certificate of deposit ("CD") promotion and the addition of brokered CDs.
- Shareholders' equity was $57.2 million at December 31, 2013, a decrease of $20.3 million from year-end 2012, due primarily to the redemption of $20.6 million in preferred stock issued in connection with the CPP and repurchase of the related warrants for $2.7 million.
- Book value per common share was $7.55 as of December 31, 2013.
- At December 31, 2013, the leverage, Tier I and Total Risk Based Capital ratios were 8.08%, 10.74% and 11.99% respectively, all in excess of the ratios required to be deemed "well-capitalized."
- Nonperforming assets totaled $15.9 million at December 31, 2013, or 2.34% of total loans and OREO, compared to $19.3 million or 3.28% of total loans and OREO at year-end 2012.
- OREO decreased $1.2 million to $633 thousand at December 31, 2013, due to the sale of 12 properties.
- The allowance for loan losses totaled $13.1 million at December 31, 2013, or 1.94% of total loans.
- Net charge-offs were $1.2 million for the three months ended December 31, 2013, compared to $1.3 million for the same period a year ago. For the year ended December 31, 2013, net charge-offs were $4.0 million compared to $5.6 million for the prior year period, representing a 29.0% decline.
- Troubled debt restructurings ("TDRs") decreased $6.7 million from year-end to $7.9 million due to payoffs, note sales, a refinanced transaction and principal pay downs, partially offset by the addition of two loans. At December 31, 2013, 94.1% of our TDRs were performing.
"In 2014, we plan to raise a limited amount of capital through a common stock rights offering. This capital will allow for continued loan and asset growth and will allow our existing shareholders to increase their investment in Unity," said James A. Hughes, President and CEO.
Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $921 million in assets and $739 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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