Clinton, NJ, October 17, 2019 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $6.0 million, or $0.54 per diluted share, for the quarter ended September 30, 2019, an 8.5 percent increase compared to the $5.5 million, or $0.50 per diluted share reported for the prior year’s third quarter. For the nine months ended September 30, 2019, Unity reported net income of $17.5 million, or $1.59 per diluted share, an 8.8 percent increase compared to $16.1 million or $1.48 per diluted share for the prior year’s period.
Quarterly net income included a $768 thousand gain on the sale of our Union, NJ branch building. The sale was in response to the Union, NJ redevelopment initiative. We will be relocating our Union, NJ branch to a new facility located across the street from the current branch. Also included in quarterly net income is a Federal Deposit Insurance assessment credit of $146 thousand. On September 30, 2018, the Deposit Insurance Fund Reserve Ratio reached 1.36 percent and the Federal Deposit Insurance Corporation (“FDIC”) announced that small banks would be awarded assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from 1.15 percent to 1.35 percent, to be applied when the reserve ratio is at least 1.38 percent. The initial credits were applied in September 2019.
Third Quarter Earnings Highlights
• Net interest income, our primary driver of earnings, increased $837 thousand to $14.4 million for the quarter ended September 30, 2019, compared to the prior year’s quarter, due to loan growth and a stable net interest margin.
• Net interest margin decreased slightly to 3.90% for the quarter ended September 30, 2019, compared to 3.92% for the prior year’s quarter due to recent interest rate cuts by the Federal Reserve Board.
• The provision for loan losses was $750 thousand for the quarter ended September 30, 2019, an increase of $250 thousand from the prior year’s quarter. The provision for loan losses increased as a result of loan charge-offs and growth in the portfolio.
• Noninterest income increased $231 thousand to $2.7 million compared to the prior year’s quarter and increased $299 thousand compared to the prior sequential quarter. The increase was primarily due to the gain on the sale of the Union, NJ building. The Company elected not to sell SBA loans and residential mortgage portfolio loans during the quarter.
• Noninterest expense decreased $72 thousand to $8.7 million compared to the prior year’s quarter and decreased $62 thousand compared to the prior sequential quarter. Quarterly noninterest expense included an FDIC assessment credit of $146 thousand. The year-over-year decrease was the result of an $850 thousand supplemental executive retirement (“SERP”) benefit expense in the prior year’s quarter, partially offset by a $317 thousand legal settlement related to one OREO property in the prior year’s quarter.
• The effective tax rate was 22.0% compared to 18.6% in the prior year’s quarter due to recent New Jersey tax legislation changes. The effective tax rate is expected to increase in the future as a result of this legislation.
Balance Sheet Highlights
• Total loans increased $63.9 million, or 4.9%, from year-end 2018 to $1.4 billion at September 30, 2019. Commercial, residential mortgage and consumer loan portfolios increased $29.1 million, $20.9 million and $14.9 million, respectively, partially offset by a decline of $1.1 million in SBA loans. Overall loan growth was impacted by increased payoffs.
• Total deposits increased $65.7 million, or 5.4%, from year-end 2018 to $1.3 billion at September 30, 2019. Growth resulted primarily from time deposit promotions.
• Borrowed funds remained flat at $210.0 million at September 30, 2019.
• Shareholders’ equity was $154.9 million at September 30, 2019, an increase of $16.4 million from year-end 2018, due to retained net income. Shareholders’ equity continues to grow organically at a rate that exceeds balance sheet growth.
• Book value per common share was $14.25 as of September 30, 2019.
• At September 30, 2019, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 10.54%, 12.24%, 13.04% and 14.28% respectively, all in excess of the ratios required to be deemed “well-capitalized.” 2
• Nonperforming loans totaled $5.6 million and included $4.4 million of well-secured residential mortgage loans. Nonperforming assets to total assets were 0.44% and the allowance to total loans ratio remained at 1.17% at September 30, 2019. Net charge-offs were $713 thousand for the quarter. This included a $500 thousand charge-off on a contractually performing loan due to a decline in the borrower’s cash flow.
• Unity Bancorp has been named to the Sandler O’Neill Sm-All Stars Class of 2019. This prestigious award recognizes financial institutions, with a market capitalization below $2.5 billion, based on criteria such as growth, profitability, credit quality and capital strength. Unity was one of only thirty publicly traded banks and thrifts recognized and one of five banks headquartered in New Jersey, which were recognized.
Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.7 billion in assets and $1.3 billion in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 19 retail service centers located in Bergen, Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County in 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.