Unity Bancorp, Inc.
NewsNewsNewsNewsNews
For Immediate Release: February 3, 2010
News Media & Financial Analyst Contact:
Alan J. Bedner, EVP
Chief Financial Officer
(908) 713-4308
Unity Bancorp Reports Fourth Quarter and Year End Results
Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported a net loss attributable to common shareholders of $239 thousand or ($0.03) per diluted share for the quarter ended December 31, 2009, compared to net income available to common shareholders of $474 thousand or $0.07 per diluted share for the fourth quarter of 2008. The Company recognized an impairment charge during the quarter of $862 thousand, or $0.08 per diluted share after tax, due to further deterioration of the underlying collateral for two pooled trust preferred securities. Excluding impairment charges, net income available to common shareholders would have been $330 thousand or $0.05 per diluted share for the quarter ended December 31, 2009, compared to net income available to common shareholders of $698 thousand, or $0.10 per diluted share for the same period a year ago.
For the year ended December 31, 2009, the Company reported a net loss attributable to common shareholders of $2.6 million, or ($0.36) per diluted share, compared to net income available to common shareholders of $1.8 million, or $0.25 per diluted share, for the same period a year ago. Earnings for 2009 were materially impacted by an impairment charge of $2.6 million, or $0.24 per diluted share after tax, on the two pooled trust preferred securities noted above and a one-time FDIC special assessment of $408 thousand, or $0.04 per diluted share after tax in June 2009. Excluding impairment charges and the FDIC special assessment, net loss attributable to common shareholders would have been $584 thousand or ($0.08) per diluted share for the year ended December 31, 2009, compared to net income available to common shareholders of $2.8 million or $0.39 per diluted share for 2008.
James A. Hughes, Unity Bancorp’s President and CEO, said, “We are facing the most challenging economic environment in decades. Our loss for 2009 was the result of the magnitude of the recession and its impact on our customers and our investment portfolio. While New Jersey has fared much better than other states, our portfolio of Commercial and SBA loans continues to be a challenge. Although there have been recent signs of stability, the recovery is expected to be slow and measured. We continue to remain positive and have focused on growing our customer relationships and investing in our future. This year we had record core deposit growth, and we are extremely optimistic that our redefined strategic plan will enhance our franchise. Our capital levels continue to be strong and we expect 2010 to be a turnaround year for our performance.”
Net Interest Income
For the quarter ended December 31, 2009, net interest income was $7.3 million, an increase of $477 thousand or 7.0% from the quarter ended September 30, 2009, and an increase of $599 thousand or 8.9% from the quarter ended December 31, 2008. Quarter over quarter, net interest margin expanded as higher cost certificates of deposit repriced in a lower rate environment. Factors affecting fourth quarter net interest income include:
| · | The yield on interest-earning assets decreased 73 basis points to 5.45% from 6.18% for the same period last year. |
| · | The cost of interest-bearing liabilities decreased 85 basis points to 2.44% from 3.29% for the same period last year. |
| · | Average earning assets, consisting primarily of loans, rose 6.3%. |
| · | Net interest margin was 3.30%, a 7 basis point increase from 3.23% in the fourth quarter of 2008. |
Year-to-date, net interest income was $27.8 million, an increase of $537 thousand or 2.0% from 2008. Factors affecting year-to-date net interest income include:
| · | The yield on interest-earning assets decreased from 6.52% for 2008, to 5.71% for 2009. |
| · | The cost of interest-bearing liabilities decreased from 3.39% for 2008, to 2.84% for 2009. |
| · | Average earning assets, consisting primarily of loans, rose 11.0%. |
| · | Net interest margin for the year ended December 31, 2009 was 3.22%, a decline of 29 basis points from 2008. |
Noninterest Income
Historically, Unity had generated significant revenue from the sale of its SBA loans. In the fourth quarter of 2008, Unity exited the National SBA program and closed all SBA loan production offices outside its primary trade area. Consequently, revenue on the sale of SBA loans will no longer be material to total revenue.
For the quarter ended December 31, 2009, noninterest income was flat from the quarter ended December 31, 2008. Noninterest income was affected by the following factors:
| · | Service charges on deposit accounts increased $28 thousand, or 8.0% compared to the prior year period, primarily due to a larger account base. |
| · | Loan fee income declined $66 thousand, or 19.7% due to a decrease in loan prepayment fees. |
| · | Other-than-temporary impairment charges on investment securities amounted to $862 thousand, compared to $339 thousand in the prior year period. |
| · | Gains on the sale of residential mortgage loans amounted to $33 thousand. |
| · | Gains on the sale of SBA loans amounted to $364 thousand, compared $9 thousand a year ago. |
| · | Gains on the sales of investment securities amounted to $180 thousand, compared to $15 thousand in the prior year period. |
For the year ended December 31, 2009, noninterest income amounted to $2.1 million, a decrease of $554 thousand from the year ended December 31, 2008. Noninterest income was affected by the following factors:
| · | Service charges on deposit accounts and loan fee income remained relatively flat compared to the prior year period. |
| · | Other-than-temporary impairment charges on investment securities amounted to $2.6 million, compared to $1.5 million in the prior year period. |
| · | Gains on sales of SBA loans amounted to $393 thousand, compared to $1.2 million a year ago. |
| · | Gains on the sales of residential mortgage loans amounted to $217 thousand, compared to $40 thousand in the prior year period. |
| · | Gains on the sale of investment securities amounted to $855 thousand, compared to a loss of $378 thousand in the prior year period. |
Noninterest Expense
As a result of current market conditions, the Company undertook many expense saving measures. However, these expense reductions were offset by increases in FDIC insurance premiums.
For the quarter ended December 31, 2009, noninterest expenses were $6.1 million, an increase of $303 thousand or 5.2% from the quarter ended December 31, 2008. The following factors affected our noninterest expense:
| · | Compensation and benefits expense amounted to $2.9 million, flat from the prior year period. |
| · | Communications and delivery expense declined $60 thousand or 10.3%, due to reduced communications costs from renegotiated contracts and a decline in capital expenditures. |
| · | Occupancy expense declined $48 thousand or 7.2%, due to a reduction in rental expense from a renegotiated lease. |
| · | FF&E and professional services expense remained flat from the prior year period. |
| · | Loan collection costs amounted to $330 thousand, an increase of $114 thousand or 52.8%, due to increased collection costs on delinquent loans. |
| · | FDIC insurance premiums amounted to $346 thousand, an increase of $48 thousand or 16.1%, due to the increase in FDIC insurance rates. |
| · | Other expenses amounted to $531 thousand, an increase of $238 thousand or 81.2%, due primarily to increases in other real estate owned (“OREO”) expenses. |
For the year ended December 31, 2009, noninterest expenses were $23.9 million, an increase of $1.0 million, or 4.4% from the same period a year ago. The following factors affected our noninterest expense:
| · | Compensation and benefits expense amounted to $11.2 million, a decrease of $742 thousand or 6.2%, due to reduced head count. |
| · | Communications and delivery expense amounted to $2.1 million, a decrease of $174 thousand or 7.7%, due to reduced communications costs from renegotiated contracts and a decline in capital expenditures. |
| · | Occupancy expense amounted to $2.6 million, a decline of $221 thousand or 8.0%, due a reduction in rental expense from a renegotiated lease. |
| · | FF&E expense amounted to $1.8 million, an increase of $154 thousand or 9.2%, primarily due to depreciation expense on new equipment and software and increased software maintenance charges. |
| · | Professional fees amounted to $1.0 million, an increase of $144 thousand or 16.0%, due to increased consulting, legal and audit costs. |
| · | Loan collection costs amounted to $1.0 million, an increase of $361 thousand or 54.5%, due to increased collection costs on delinquent loans. |
| · | FDIC insurance premiums amounted to $1.7 million, an increase of $1.1 million, due primarily to the increase in FDIC insurance rates and a $408 thousand special assessment in the second quarter of 2009. |
| Other expenses amounted to $1.9 million, an increase of $289 thousand or 17.5%, due primarily to increases in other real estate owned (“OREO”) expenses. |
Financial Condition
At December 31, 2009, total assets were $930.4 million, a 3.6% increase from a year ago.
| · | Total loans decreased $28.9 million or 4.2%, from $685.9 million at December 31, 2008. SBA 7(a), SBA 504, commercial and consumer loans decreased 5.8%, 8.0%, 4.7%, and 3.6%, respectively. |
| · | Total securities increased $19.5 million as Unity took advantage of favorable credit spreads to invest excess liquidity. |
| · | Total deposits increased 7.2% or $51.1 million to $758.2 million at December 31, 2009. This increase was due to a $151.5 million increase in savings deposits, a $13.0 million increase in interest- bearing checking accounts and a $6.0 million increase in demand deposits. These increases were partially offset by a $119.3 million decrease in time deposits. |
| · | Total borrowed funds decreased $20.0 million from a year ago. |
| · | Shareholders’ equity was $67.9 million at December 31, 2009, flat from a year ago. |
| · | Book value per common share was $6.91. |
| · | At December 31, 2009 the leverage, Tier I and Total Risk Based Capital ratios were 8.83%, 11.75% and 13.01%, respectively, all in excess of the ratios required to be deemed “well capitalized”. |
Credit Quality
| · | Nonperforming assets totaled $27.0 million at December 31, 2009, or 4.10% of total loans and other real estate owned (“OREO”) compared to $27.5 million, or 4.17% of total loans and OREO at September 30, 2009 and $16.8 million, or 2.45% of total loans and OREO a year ago. The SBA 7(a), SBA 504, commercial, residential and consumer nonaccrual loans were $6.6 million, $5.6 million, $7.4 million, $5.6 million and $387 thousand, respectively. OREO amounted to $1.5 million. The increase in nonperforming assets was primarily related to an increase in SBA, residential mortgage and commercial accounts. Almost all nonperforming assets are secured by real estate. |
| · | The allowance for loan losses totaled $13.8 million at December 31, 2009, or 2.11% of total loans. The provision for loan losses for the fourth quarter of 2009 amounted to $2.0 million, an increase of $700 thousand from the same period a year ago. The provision for loan losses for year ended December 31, 2009, amounted to $8.0 million, an increase of $3.5 million from the same period a year ago. |
| · | Net charge-offs were $603 thousand for the three months ended December 31, 2009, compared to $887 thousand for the same period a year ago. Net charge-offs were $4.5 million for the year ended December 31, 2009, compared to $2.6 million for the same period a year ago. |
Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $930 million in assets and $758 million in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 16 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 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 general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors
