Unity Bancorp Reports Quarterly Earnings of $10.0 Million and Full Year Earnings of $38.5 Million

James A. Hughes, President and CEO, commented on the financial results: 
“It is with great pleasure that we announce another record year for Unity Bancorp, Inc. For the quarter, we 
realized $10.0 million of net income, or $0.93 per diluted share. For the year, we generated $38.5 million of net 
income, or $3.59 per diluted share. In the fourth quarter, the FDIC and NJDOBI terminated the BSA Consent Order, to which Unity Bank had been subject. As a result, we are eager to resume our geographic expansion, specifically in Bergen, Ocean, and Morris counties, New Jersey. Throughout 2022, the Federal Reserve has increased interest rates at an unprecedented velocity, which has resulted in an inverted yield curve. This will likely pose turbulence for our customers and the banking industry in 2023. We will continue to monitor our balance sheet composition and as necessary, adjust course swiftly to manage market and credit risk, and meanwhile continue to deliver best in class customer service.” 

Clinton, NJ -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $10.0 million, or $0.93 per diluted share, for the quarter ended December 31, 2022, compared to net income of $9.7 million, or $0.93 per diluted share for the prior year’s fourth quarter. This represents a 2.2% increase in net income and net income per diluted share remains flat. For the twelve months ended December 31, 2022, Unity reported net income of $38.5 million, or $3.59 per diluted share, compared to $36.1 million or $3.43 per diluted share for the prior year. This represents a 6.5% increase in net income and a 4.7% increase in net income per diluted share. 

Fourth Quarter Earnings Highlights:
 Net interest income, our primary driver of earnings, increased $3.9 million to $24.7 million for the quarter ended December 31, 2022, compared to $20.8 million for the prior year’s quarter. The increase was primarily due to higher interest income on loans, resulting from loan growth. 

 Net interest margin (“NIM”) increased 23 basis points to 4.47% for the quarter ended December 31, 2022, 
compared to the prior year’s quarter, and decreased 14 basis points from 4.61% for the quarter ended 
September 30, 2022 because the cost of interest-bearing liabilities increased faster than the repricing of 
interest-earning assets. 

 The provision for loan losses was $1.6 million for the quarter ended December 31, 2022, compared to $1.5 million in provision for loan losses for the quarter ended September 30, 2022. The increase was primarily driven by the sizable increase in total loans period over period.

 Non-interest income was $1.9 million for the quarter ended December 31, 2022. This represented an increase of $0.8 million compared to the quarter ended September 30, 2022. The increase was primarily driven by net unrealized securities gains for the quarter ended December 31, 2022. 

 Non-interest expense was $11.4 million for the quarter ended December 31, 2022, an increase of $1.3 million compared to the prior sequential quarter and an increase of $0.7 million compared to the prior year’s quarter.

 The effective tax rate was 27.0% compared to 25.8% in the prior year’s quarter as a result of one-time activities in the real estate investment trust subsidiary.

Balance Sheet Highlights:
 Total gross loans increased $457.1 million, or 27.7%, from year-end 2021 primarily due to increases in commercial loans, residential mortgage loans and residential construction loans. SBA PPP loans decreased $40.5 million due to loans being forgiven. 

 Total deposits increased $28.6 million, or 1.6%, from year-end 2021. The Company’s deposit composition at 
December 31, 2022 consisted of 33.1% in savings deposits, 27.6% in noninterest-bearing demand deposits, 23.8% in time deposits and 15.5% in interest-bearing demand deposits. 

 Borrowed funds increased $343.0 million from year-end 2021. The increase was due to loan demand. 

 Shareholders’ equity was $239.2 million at December 31, 2022 compared to $205.7 million at year-end 2021. 

 Book value per common share was $22.60 as of December 31, 2022, compared to $19.80 as of December 31, 2021. 

 At December 31, 2022, the Community Bank Leverage Ratio was 10.45%, compared to 10.51% at December 31, 2021. 

 Nonperforming assets were $9.1 million at December 31, 2022, compared to $9.7 million at December 31, 2021. The allowance to total loans ratio was 1.20% at December 30, 2022, compared to 1.35% at December 31, 2021. The decrease in the allowance to total loans ratio was primarily driven by the resolution of certain nonperforming loans, as well as a shift in loan product mix toward residential mortgage loans.

Other Highlights:
 In November 2022, the FDIC and NJDOBI terminated the BSA Consent Order previously issued in July 2020.

 In December 2022, Unity Bank opened a new full service branch in Lakewood, New Jersey’s fastest growing municipality, to service customers in Ocean County. Additionally, in Q1 2023, Unity plans to open a Fort Lee branch to expand the bank’s footprint in Bergen County. Further, Unity plans to open its first Morris County location mid2023.

 In Q4 2022, Unity Bank commenced an online account opening process to facilitate customer servicing and streamline deposit gathering.

 As of December 31, 2022, the loan to deposit ratio was approximately 118%, which is above the Company’s target threshold of 110%. In addition to the new branches discussed above, which are expected to assist in deposit aggregation, for 2023 the Company plans to reduce transactional-based lending and focus on lending to entities that will result in full-banking relationships, such as owner-occupied businesses.

Unity Bancorp, Inc. is a financial services organization headquartered in Clinton, New Jersey, with approximately $2.4 billion in assets and $1.8 billion in deposits. Unity Bank, the Company’s wholly owned subsidiary, provides financial services to retail, corporate and small business customers through its robust branch network located in Bergen, Hunterdon, Middlesex, Ocean, 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 amended or supplemented by our subsequent filings with the SEC, 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, results of regulatory exams, and the impact of COVID-19 on the Bank, its employees and customers, among other factors.

January 13 2023

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