Clinton, NJ, April 15, 2021 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $8.5 million, or $0.80 per diluted share, for the quarter ended March 31, 2021, a 58.3% increase compared to net income of $5.4 million, or $0.49 per diluted share for the prior year’s first quarter, primarily due to revenue generated by the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), improved net interest margin and an increase in non-interest income.
First Quarter Earnings Highlights
- Net interest income, our primary driver of earnings, increased $2.8 million to $18.0 million for the quarter ended March 31, 2021, compared to the prior year’s quarter, due to SBA PPP loans, commercial loan growth and a reduction in the cost of funds.
- Net interest margin (“NIM”) increased to 4.09% for the quarter ended March 31, 2021, compared to 3.92% for the prior year’s quarter.
- The provision for loan losses was $500 thousand for the quarter ended March 31, 2021, a decrease of $1.0 million from the prior year’s quarter due to an improved outlook on credit quality and higher levels of allowance.
- Noninterest income increased $1.2 million to $3.7 million compared to the prior year’s quarter, primarily due to increased gains on mortgage loan sales and increased net gains on securities. For the quarter ended March 31, 2021, residential mortgage loan sales were $101.9 million, compared to $28.8 million for the prior year’s quarter.
- Noninterest expense increased $479 thousand to $9.8 million compared to the prior year’s quarter, primarily due to increased compensation as a result of mortgage commissions paid.
- The effective tax rate was 25.7% compared to 22.9% in the prior year’s quarter.
Balance Sheet Highlights
- Total loans increased $40.6 million, or 2.5%, from year-end 2020 to $1.7 billion at March 31, 2021. The increase was primarily due to increases in SBA PPP and commercial loans.
- Total deposits increased $70.4 million, or 4.5%, from year-end 2020 to $1.6 billion at March 31, 2021.
- Borrowed funds decreased $30.0 million to $170.0 million at March 31, 2021, due to decreased FHLB advances.
- Shareholders’ equity was $181.1 million at March 31, 2021.
- Book value per common share was $17.37 as of March 31, 2021.
- At March 31, 2021, the Community Bank Leverage Ratio was 10.19%.
- Net nonperforming assets were $11.6 million at March 31, 2021, compared to $11.7 million at December 31, 2020. Most of the nonperforming assets are residential loans, the resolution of which has been impacted by foreclosure restrictions due to COVID-19. The allowance to total loans ratio excluding SBA PPP loans was 1.45% at March 31, 2021.
Paycheck Protection Program Loans
As of March 31, 2021, the Company funded 723 Small Business Administration Paycheck Protection Program Round 2 loans, totaling $85.6 million. This is in addition to the 1,224 SBA PPP loans, totaling $143.0 million funded during the year ended December 31, 2020.
The Bank’s initiative to work with borrowers that were unable to meet their contractual obligations because of the effects of COVID-19 was a successful effort. Loan deferrals which were granted have steadily declined during the first quarter to $20.2 million, from $32.5 million at December 31, 2020.
Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $2.0 billion in assets and $1.6 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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