Clinton, NJ, January 21, 2020 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $6.1 million, or $0.55 per diluted share, for the quarter ended December 31, 2019, a 5.5% increase compared to the $5.8 million, or $0.53 per diluted share reported for the prior year’s fourth quarter. For the year ended December 31, 2019, Unity reported net income of $23.7 million, or $2.14 per diluted share, a 7.9% increase compared to $21.9 million or $2.01 per diluted share for the prior year’s period.
Fourth Quarter Earnings Highlights
- Net interest income, our primary driver of earnings, increased $599 thousand to $14.8 million for the quarter ended December 31, 2019, compared to the prior year’s quarter, due to strong loan growth.
- Net interest margin decreased to 3.88% for the quarter ended December 31, 2019, compared to 4.01% for the prior year’s quarter due to recent interest rate cuts by the Federal Reserve Board. Our net interest margin remained stable compared to the 3.90% for the prior sequential quarter.
- The provision for loan losses was $500 thousand for the quarter ended December 31, 2019 and 2018 as asset quality remains favorable.
- Noninterest income increased $442 thousand to $2.4 million compared to the prior year’s quarter and decreased $314 thousand compared to the prior sequential quarter. The year-over-year increase was primarily due to market value fluctuations on our equity securities, increased gains on the sale of securities and increased mortgage gains as a result of an increase in volume in the current period. The decrease from the prior sequential quarter was primarily due to the $768 thousand gain on the sale of our Union, NJ branch building in September 2019.
- Noninterest expense increased $451 thousand to $8.7 million compared to the prior year’s quarter and decreased $10 thousand compared to the prior sequential quarter. The year-over-year increase was primarily due to increased compensation and mortgage commissions paid on a higher origination volume.
- The effective tax rate was 22.9% compared to 21.0% in the prior year’s quarter due to recent New Jersey tax legislation changes. The effective tax rate may increase in the future as a result of this legislation.
Balance Sheet Highlights
- Total loans increased $121.0 million, or 9.3%, from year-end 2018 to $1.4 billion at December 31, 2019. Commercial, residential mortgage and consumer loan portfolios increased $70.9 million, $31.7 million and $19.6 million, respectively, partially offset by a decline of $1.2 million in SBA loans. Loan growth was impacted by increased payoffs in 2019; however, our pipeline remains strong.
- Total deposits increased $42.4 million, or 3.5%, from year-end 2018 to $1.3 billion at December 31, 2019. Core growth resulted primarily from time deposit promotions. There was a planned reduction of $22.9 million in brokered deposits in 2019.
- Borrowed funds increased $73.0 million to $283.0 million at December 31, 2019, primarily due to the reduction in brokered deposits and a new $40.0 million fixed rate advance with a maturity date of August 22, 2024, at a rate of 1.81%.
- Shareholders’ equity was $160.7 million at December 31, 2019, an increase of $22.2 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 $14.77 as of December 31, 2019.
- At December 31, 2019, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 10.59%, 11.97%, 12.73% and 13.49% respectively, all in excess of the ratios required to be deemed “well-capitalized.”
- Nonperforming loans totaled $5.6 million and included $3.9 million of well-secured residential mortgage loans, compared to nonperforming loans of $6.9 million in the prior year. Nonperforming assets to total assets were 0.43% at December 31, 2019 and 0.44% at December 31, 2018 and the allowance to total loans ratio was 1.15% at December 31, 2019 and 1.19% at December 31, 2018. Net charge-offs were $107 thousand for the quarter.
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.
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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