Clinton, NJ, October 15, 2021 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $9.5 million, or $0.90 per diluted share, for the quarter ended September 30, 2021, a 64.2% increase compared to net income of $5.8 million, or $0.54 per diluted share for the prior year’s third quarter. For the nine months ended September 30, 2021, Unity reported net income of $26.4 million, or $2.50 per diluted share, a 61.8% increase compared to net income of $16.3 million or $1.50 per diluted share for the prior year’s period.
Third Quarter Earnings Highlights
- Net interest income, our primary driver of earnings, increased $3.4 million to $19.7 million for the quarter ended September 30, 2021, compared to $16.3 million for the prior year’s quarter, due to commercial loan growth, receipt of SBA PPP loan fees on forgiveness, residential construction loan growth and SBA loan growth.
- Net interest margin (“NIM”) increased 49 basis points to 4.27% for the quarter ended September 30, 2021, compared to 3.78% for the prior year’s quarter and increased 24 basis points from 4.03% in the prior sequential quarter ended June 30, 2021. The cost of funding decreased 64 basis points to 0.51% when compared to the prior year’s quarter, primarily due to deposits being repriced at a lower rate while our yield on assets remains relatively flat.
- The Company reported no provision for loan losses for the quarter ended September 30, 2021 compared to $2.0 million for the prior year’s quarter. The provision for loan losses decreased $5.5 million for the nine months ended September 30, 2021 compared to the prior year’s period. The decreases were due to an improved economic environment.
- Noninterest income decreased $527 thousand to $2.8 million compared to the prior year’s quarter, primarily due to a decrease in the gains on residential mortgage loan sales and a decision to not sell SBA available for sale loans in the third quarter. Noninterest income increased $738 thousand for the nine months ended September 30, 2021, compared to the prior year’s period, primarily due to an increase in servicing and loan fee income and an increase in the fair market value of our equity securities. For the quarter ended September 30, 2021, quarterly residential mortgage loan sales were $45.5 million with a gain of 2.13%, compared to $92.1 million with a gain of 1.86% for the quarter ended September 30, 2020.
- Noninterest expense decreased $178 thousand to $9.9 million compared to the prior year’s quarter, primarily due to a reduction in BSA expenses. Noninterest expense decreased $601 thousand compared to the prior sequential quarter, primarily due to decreased compensation expenses as the result of a one-time deferred compensation adjustment in the prior quarter and a decrease in residential mortgage commissions paid, as well as a decrease in advertising expenses.
- The effective tax rate was 25.4% compared to 24.5% in the prior year’s quarter.
Balance Sheet Highlights
- Total loans increased $37.1 million, or 2.3%, from year-end 2020 to $1.7 billion at September 30, 2021. The increase was primarily due to increases in commercial loans, residential construction loans, SBA loans and consumer loans. SBA PPP loans decreased $36.4 million due to loans being forgiven and paid off. Residential mortgage loans decreased 10.0%. Excluding SBA PPP loans, total loans increased 4.0% compared to the prior sequential quarter, 4.9% from year-end 2020 and 7.4% when compared to prior year’s quarter.
- Total deposits increased $148.2 million, or 9.5%, from year-end 2020 to $1.7 billion at September 30, 2021. The Company’s deposit composition at September 30, 2021 consisted of 36.5% in savings deposits, 30.5% in noninterest-bearing demand deposits, 18.7% in time deposits and 14.3% in interest-bearing demand deposits.
- Borrowed funds decreased $140.0 million to $60.0 million at September 30, 2021, due to decreased FHLB advances resulting from core deposit growth, SBA PPP forgiveness and residential mortgage paydowns.
- Shareholders’ equity was $196.3 million at September 30, 2021 compared to $173.9 million at year-end 2020.
- Book value per common share was $18.94 as of September 30, 2021. During the third quarter, the Company repurchased 85,055 shares of common stock at a total cost of $1.9 million.
- At September 30, 2021, the Community Bank Leverage Ratio was 10.70%, compared to 10.09% at December 31, 2020.
- Net nonperforming assets were $8.7 million at September 30, 2021, compared to $11.7 million at December 31, 2020. The allowance to total loans ratio excluding SBA PPP loans was 1.42% at September 30, 2021.
Paycheck Protection Program Loans
As of September 30, 2021, the Company funded 955 Small Business Administration Paycheck Protection Program Round 2 loans, totaling $101.0 million. This is in addition to the 1,224 SBA PPP loans, totaling $143.0 million funded during the year ended December 31, 2020.
Loan Deferrals
The Bank continues to work with its borrowers who were and are unable to meet their contractual obligations because of the effects of COVID-19. At September 30, 2021, $17.6 million in loans, or 1.06% of the total loan portfolio, were on deferral.
Other Highlights
On August 26, 2021, the Company announced a cash dividend of $0.09 per common share, payable on September 24, 2021, to shareholders of record as of September 10, 2021.
Unity Bancorp, Inc. is a financial services organization headquartered in Clinton, New Jersey, with approximately $2.0 billion in assets and $1.7 billion in deposits. Unity Bank, the Company’s wholly owned subsidiary, 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 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.
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