Clinton, NJ, October 18, 2018 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $5.5 million, or $0.50 per diluted share, for the quarter ended September 30, 2018, compared to $3.8 million, or $0.35 per diluted share, for the prior year’s third quarter. Approximately $775 thousand, or $0.07 per diluted share, of this increase is attributed to the lower effective tax rate due to the tax reform bill.
For the nine months ended September 30, 2018, Unity reported net income of $16.1 million, or $1.48 per diluted share, compared to $10.4 million, or $0.97 per diluted share for the prior year’s period. Approximately $2.3 million, or $0.21 per diluted share, of this increase is attributed to the lower effective tax rate due to the tax reform bill. Third Quarter Earnings Highlights • Net interest income, our primary driver of earnings, increased $1.8 million to $13.6 million for the quarter ended September 30, 2018, compared to the prior year’s quarter, due to strong loan growth and an increased net interest margin. • Net interest margin expanded 4 basis points to 3.92%, compared to 3.88% for the prior year’s quarter. The net interest margin declined slightly from 3.95% in the prior sequential quarter ended June 30, 2018, due to the rising cost of deposits. The net interest margin is expected to remain stable as we actively manage the spread between our loan pricing and cost of funding in this rising interest rate environment. • The provision for loan losses was stable at $500 thousand during the quarters ended September 30, 2018 and 2017. Asset quality remains strong. • Noninterest income increased $471 thousand to $2.5 million compared to the prior year’s quarter and $167 thousand compared to the prior sequential quarter. The quarter included a $291 thousand death benefit on bank-owned life insurance. • Noninterest expense increased $1.2 million to $8.8 million compared to the prior year’s quarter and $643 thousand compared to the prior sequential quarter. The year-over-year increase was the result of expansion costs from two additional branches and increased headcount which resulted in higher compensation, benefits, occupancy and equipment expenses. Noninterest expense included two nonrecurring transactions this quarter: an $850 thousand supplemental executive retirement (“SERP”) benefit expense, partially offset by a $317 thousand legal settlement related to an OREO property. The SERP expense represents the time of service cost due to modifying the SERP benefit for our President and CEO to equal 60 percent of the average of his base salary for the thirty-six months prior to separation, as compared to the previous 40 percent. • The effective tax rate declined to 18.6% for the quarter compared to 34.9% in the prior year’s quarter, as a result of the “Tax Cuts and Jobs Act,” which was enacted December 22, 2017, and lowered the corporate tax rate. The effective tax rate in the quarter also benefited from the exercise of stock options. The effective tax rate is expected to range between 25% and 27% in January 2019 as a result of the recent NJ tax legislation. Balance Sheet Highlights • Total loans increased $112.6 million, or 9.6%, from year-end 2017 to $1.3 billion at September 30, 2018. Commercial, residential mortgage and consumer loan portfolios increased $68.2 million, $48.5 million, and $8.6 million, respectively, partially offset by a decline of $12.7 million in SBA loans. Our pipeline in all categories remains strong. Mortgage originations year-to-date totaled $170.5 million through September 30, 2018 and are at a record level. • Total deposits increased $176.3 million, or 16.9%, from year-end 2017 to $1.2 billion at September 30, 2018. Growth in noninterest-bearing demand deposits was 5.9% from year-end 2017. • Borrowed funds decreased $95.0 million to $180.0 million at September 30, 2018, due to decreased overnight borrowings, the maturity of a repo and FHLB advances being called. • Shareholders’ equity was $133.1 million at September 30, 2018, an increase of $15.0 million from year-end 2017, due to retained net income offset in part by declines in other comprehensive income resulting from unrealized losses on securities. • Book value per common share was $12.37 as of September 30, 2018. 2 • At September 30, 2018, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 9.74%, 11.15%, 12.00% and 13.25% respectively, all in excess of the ratios required to be deemed “well-capitalized.” • Credit quality remains strong with nonperforming assets to total assets of 0.39% at September 30, 2018. Other Highlights • Unity Bancorp has been named to the Sandler O’Neill Sm-All Stars Class of 2018. 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 two banks headquartered in New Jersey, which were recognized. Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.6 billion in assets and $1.2 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.