James A. Hughes, President & CEO, commented on the financial results: “We are pleased to announce another strong quarter for Unity Bancorp, Inc. For the quarter, we achieved $9.6 million of net income, equivalent to $0.93 per diluted share. Our core deposit franchise has demonstrated steady growth, reinforcing the strength of our balance sheet and contributing to impressive first quarter earnings metrics -- NIM of 4.09%, ROA of 1.58% and ROE of 14.49%.
At Unity, we remain steadfast in our commitment to our shareholders. In addition to producing best-in-class earnings, we previously announced another increase to our cash dividend payout, the fifth increase in four years. This quarter, we repurchased approximately 150,000 of our shares. While we maintain a conservative capital position, we have demonstrated a commitment to return capital to our shareholders as opportunities arise. Our dedication also extends to our customers, communities and employees. At our core, our relationship bankers provide top-notch white-glove services, and our flexible product suite caters to our customers’ evolving needs. This ultimately fosters the continued economic development within our local communities. Looking ahead, we have the financial strength to leverage capital and grow earning assets. This includes increasing our origination of high quality real estate loans and other organic growth opportunities.”
Clinton, NJ -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $9.6 million, or $0.93 per diluted share, for the quarter ended March 31, 2024, compared to net income of $9.8 million, or $0.96 per diluted share for the quarter ended December 31, 2023. This represents a 1.9% decrease in net income and a 3.1% decrease in net income per diluted share.
First Quarter Earnings Highlights:
- Net interest income, the primary driver of earnings, was $23.8 million for the quarter ended March 31, 2024, a decrease of $0.2 million, as compared to $24.0 million for the quarter ended December 31, 2023. Net interest margin (“NIM”) increased 3 basis points to 4.09% for the quarter ended March 31, 2024, compared to the quarter ended December 31, 2023. The increase was primarily due to assets repricing and the mix shift of interest-bearing liabilities.
- The provision for credit losses on loans was $0.6 million for the quarter ended March 31, 2024, compared to $0.4 million for the quarter ended December 31, 2023. The increase was primarily driven by increases in the general and specific reserve calculations.
- Noninterest income was $1.7 million for the quarter ended March 31, 2024, compared to $2.6 million for the quarter ended December 31, 2023. The $0.9 million decrease was primarily due to smaller mark-to-market increases in the Company’s equity portfolio, lower SBA sale gains and lower service and loan fee income. The Bank sold $2.4 million of SBA loans during the quarter ended March 31, 2024, compared to $4.7 million during the quarter ended December 31, 2023.
- Noninterest expense was $12.1 million for the quarter ended March 31, 2024, compared to $11.7 million for the quarter ended December 31, 2023. The increase was primarily driven by higher compensation expenses and other expenses. These increases were partially offset by lower professional services and furniture and equipment related expenses.
- The effective tax rate was 25.0% for the quarter ended March 31, 2024, compared to 25.1% for the quarter ending December 31, 2023.
Balance Sheet Highlights:
- Total gross loans increased $2.4 million, or 0.1%, from December 31, 2023, primarily due to increases in commercial loans. These increases were partially offset by decreases in the residential mortgage and residential construction loan categories.
- As of March 31, 2024, the allowance for credit losses as a percentage of gross loans was 1.20%.
- Total deposits increased $37.1 million, or 1.9%, from December 31, 2023. As of March 31, 2024, 17.2% of total deposits were uninsured or uncollateralized. The Company’s deposit composition as of March 31, 2024, consisted of 20.2% in noninterest bearing demand deposits, 16.6% in interest-bearing demand deposits, 28.8% in savings deposits, and 34.4% in time deposits.
- As of March 31, 2024, the loan to deposit ratio was approximately 110.9%, representing a continued reduction from 112.9% as of December 31, 2023. As the Company continues to operate closer to 110%, management will re-evaluate lending initiatives.
- As of March 31, 2024, investments comprised 5.4% of total assets. Available for sale debt securities (“AFS”) were $94.7 million or 3.7% of total assets. Held to maturity (“HTM”) debt securities were $36.1 million or 1.4% of total assets. As of March 31, 2024, pre-tax net unrealized losses on AFS and HTM were $4.5 million and $7.0 million, respectively. These pre-tax unrealized losses represent approximately 4.1% of the Company’s Tier 1 capital. Equity securities were $7.9 million or 0.3% of total assets as of March 31, 2024.
- Borrowed funds decreased $57.0 million from December 31, 2023. Borrowed funds were entirely comprised of borrowings from the FHLB.
- Shareholders’ equity was $266.8 million as of March 31, 2024, compared to $261.4 million as of December 31, 2023. The $5.3 million increase was primarily driven by first quarter earnings, partially offset by share repurchases and dividend payments. In the first quarter of 2024, Unity Bancorp repurchased 150,000 shares for approximately $4.1 million, or a weighted average price of $27.17 per share.
- Book value per common share was $26.56 as of March 31, 2024, compared to $25.98 as of December 31, 2023 primarily reflecting earnings, dividend payouts and share repurchases.
- Below is a summary of the Company’s regulatory capital ratios:
o Leverage Ratio increased 25 basis points to 11.39% at March 31, 2024, compared to 11.14% at December 31, 2023. o Common Equity Tier 1 Capital Ratio increased 20 basis points to 12.90% at March 31, 2024, compared to 12.70% at December 31, 2023.
o Tier 1 Capital Ratio increased 20 basis points to 13.38% at March 31, 2024, compared to 13.18% at December 31, 2023.
o Total Capital Ratio increased 20 basis points, to 14.63% at March 31, 2024, compared to 14.43% at December 31, 2023.
- At March 31, 2024, the Company held $183.0 million of cash and cash equivalents. Further, the Company maintained approximately $546.0 million of funding available from various funding sources, including the FHLB, FRB Discount Window and other lines of credit. Additionally, the Company can pledge securities for further borrowing capacity. Total available funding plus cash on hand represented 215.6% of uninsured or uncollateralized deposits.
- As of March 31, 2024, nonperforming assets were $16.9 million, compared to $19.2 million as of December 31, 2023. The Company diligently reviews nonperforming assets and potential problem credits, taking proactive measures to promptly address and resolve any issues. Nonperforming loans to total loans was 0.78% as of March 31, 2024. Nonperforming assets to total assets was 0.66% as of March 31, 2024.
Other Highlights:
- In February 2024, Unity Bancorp Inc. announced an 8% increase in its first quarter dividend, to $0.13 per common share compared to $0.12 per common share in the prior quarter. This represents the fifth increase in the last four years.
- In March 2024, Unity Bank qualified for the FHLBNY’s 0% Development Advance Program (ZDA). Under this program, Unity Bank was approved for a $4.4 million zero percent advance because the Bank originated small business community development loans that qualified under the FHLBNY’s program guidelines. Unity Bank has also participated in this program in 2023 when it similarly qualified for a $4.4 million advance.
- On April 25, 2024, Unity Bancorp Inc. will hold its annual shareholder meeting. Investors are encouraged to submit their proxy votes at: meetnow.global/M52SR5Z
For further details and release graphics, please visit:
https://s1.q4cdn.com/250148987/files/doc_news/2024/04/Q1-2024-UNTY-ER.pdf