CLINTON, N.J., July 20, 2015 (GLOBE NEWSWIRE) — Unity Bancorp, Inc. (NASDAQ:UNTY), parent company of Unity Bank, reported increased second quarter and year-to-date earnings. Major contributing factors included strong loan growth, increased deposits and improved credit quality. Both commercial and consumer lending were up; with over ten percent growth in residential mortgages year-to-date.
"Our growth is a reflection of our investment in our communities and employees," reported James A. Hughes, President and CEO. "Our customers tell us what they need, and we deliver. When our communities grow, we grow. It's a win-win."
Net income was $2.4 million, or $0.28 per diluted share, for the three months ended June 30, 2015, a 58.9% increase compared to net income of $1.5 million, or $0.20 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 1.01% and 13.35%, respectively, compared to 0.68% and 10.31% for the same period a year ago.
- 7.9% loan growth since year-end 2014 - 18.3% growth in consumer loans, 10.1% growth in residential mortgage loans, and 6.6% growth in commercial loans.
- 14.7% increase in noninterest-bearing demand deposits since year-end 2014.
- 14.6% increase in net interest income compared to the prior year's quarter due to strong loan growth.
- Net interest margin of 3.70% this quarter compared to 3.49% in the prior year's quarter.
- Improved credit quality metrics and reduced loan loss provision – net recoveries posted compared to net charge-offs in the prior year's quarter and a 25.9% decrease in nonperforming loans.
"I am extremely pleased with the operating results of the Bank," said James A. Hughes, President and CEO. "The record earnings are the direct result of an organization that focuses on sales and service. With a vast array of products that are tailored to our customers' needs, we are experiencing very strong loan and deposit growth. I am proud to see the continued improvement in the bank's progress, as it is a direct reflection of a great team of employees that are providing the highest level of service to our valued customers."
For the six months ended June 30, 2015, net income totaled $4.4 million, or $0.51 per diluted share, compared to $2.8 million or $0.37 per diluted share in the prior year's period. Return on average assets and average common equity for the six month periods were 0.92% and 12.23%, respectively, compared to 0.64% and 9.70% for the same period a year ago.
Net Interest Income
Our core source of earnings, net interest income, increased $1.1 million to $8.4 million for the quarter ended June 30, 2015 compared to the prior year's period. This increase was the result of the strong loan growth in residential mortgage, commercial and consumer loans. Quarterly average residential mortgage loans have increased $58.8 million, average commercial loans increased $52.0 million and consumer loans increased $19.6 million compared to the comparable quarter in 2014. Partially offsetting this increase was the lower level of interest income due to our smaller investment portfolio and the slight increase in deposit interest expense.
The net interest margin increased 21 basis points to 3.70% for the quarter ended June 30, 2015 compared to 3.49% for the prior year's quarter. The expansion in the net interest margin was due to strong loan growth, lower security balances and the repayment of $10 million in high rate borrowings.
Provision for Loan Losses
There was no provision for loan losses posted in the quarter ended June 30, 2015, compared to $550 thousand for the prior year period. For the six months ended June 30, 2015, the provision for loan losses was $200 thousand compared to $1.2 million for the same period last year. The decrease was the result of lower levels of net charge-offs facilitated by recoveries and reduced nonperforming assets.
Noninterest income increased $253 thousand to $1.9 million for the three months ended June 30, 2015, compared to the same period last year. For the six months ended June 30, 2015, noninterest income increased $368 thousand to $3.5 million, compared to the same period a year ago. Quarterly and year-to-date noninterest income increased due to higher gains on the sale of mortgage loans and increased service and loan fee income.
During the quarter, $49.8 million in residential mortgage loans were originated, of which $24.0 million were sold at a gain of $687 thousand, compared to $36.3 million originated and $11.1 million sold at a gain of $188 thousand during the prior year's quarter. For the six month period, $86.9 million in residential mortgage loans were originated, of which $42.2 million were sold at a gain of $1.0 million, compared to $58.5 million originated and $28.6 million sold at a gain of $553 thousand in the first half of 2014. All residential mortgage loans originated in 2015 that are held in portfolio for investment are adjustable rate mortgages or 15 year or less fixed rate mortgages.
Service and loan fee income increased $181 thousand and $182 thousand respectively for the three and six months ended June 30, 2015 due to increased loan processing and payoff charges.
In addition to the noninterest income increases noted above, other notable items included: 1) there were no SBA loan sales this quarter and 2) gains on the sale of securities were significantly less at $28 thousand this quarter compared to $268 thousand in the prior year's quarter.
Noninterest expense increased $508 thousand to $6.7 million for the quarter and increased $751 thousand to $13.2 million for the six months ended June 30, 2015, respectively. The majority of the increase in each period was due to higher compensation and benefits expenses. Compensation and benefits expenses have increased over the past twelve months due to increased head count in loan origination and support staff; as well as higher mortgage commission expense due to the larger volume of mortgages originated.
Other expense increases included: higher software maintenance expense, advertising, marketing agreements and seasonal events expense as well as director fees. OREO expenses for the quarterly and six month periods decreased due to lower property tax, maintenance, utility and legal costs to hold these properties.
At June 30, 2015, total assets were $1.02 billion, an increase of $15.5 million from year-end 2014:
- Total loans increased $59.9 million or 7.9%, from year-end 2014 to $821.7 million at June 30, 2015. The majority of the growth came in our commercial, residential mortgage and consumer loan portfolios which increased $26.4 million, $22.4 million and $10.8 million, respectively.
- Total deposits increased $21.1 million or 2.7%, to $815.4 million at June 30, 2015, due primarily to increased time deposits and noninterest-bearing demand deposits, partially offset by decreased savings deposits and interest-bearing demand deposits.
- Shareholders' equity was $73.7 million at June 30, 2015, an increase of $3.6 million from year-end 2014, due to year-to-date net income less the dividends paid.
- Book value per common share was $8.75 as of June 30, 2015.
- At June 30, 2015, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 9.09%, 9.39%, 11.33% and 12.59% respectively, all in excess of the ratios required to be deemed "well-capitalized".
- Nonperforming assets totaled $11.1 million at June 30, 2015, or 1.35% of total loans and OREO, compared to $12.5 million or 1.64% of total loans and OREO at year-end 2014.
- Nonperforming loans decreased 22.2% to $8.8 million at June 30, 2015 from year-end.
- OREO increased $1.1 million to $2.3 million at June 30, 2015 from year-end.
- The allowance for loan losses totaled $12.4 million at June 30, 2015, or 1.51% of total loans compared to $12.6 million and 1.65% at December 31, 2014.
- Net recoveries were $223 thousand for the three months ended June 30, 2015, compared to net charge-offs of $499 thousand for the same period a year ago. For the six months ended June 30, 2015, net charge-offs were $347 thousand, a decrease of $1.1 million compared to the prior year's period.