Clinton, NJ, January 23, 2019 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported record net income of $5.8 million, or $0.53 per diluted share, for the quarter ended December 31, 2018, compared to $2.5 million, or $0.23 per diluted share, for the prior year’s quarter. Approximately $912 thousand, or $0.08 per diluted share, of this increase is attributed to the lower effective tax rate due to the Tax Cuts and Jobs Act (the “Tax Act.”)
For the year ended December 31, 2018, Unity reported net income of $21.9 million, or $2.01 per diluted share, compared to $12.9 million, or $1.20 per diluted share for the prior year’s period. Approximately $3.2 million, or $0.29 per diluted share, of this increase is attributed to the lower effective tax rate due to the Tax Act.
Net income for the fourth quarter and year-ended December 31, 2017, includes an additional $1.7 million in income tax expense as a result of the Company adjusting its deferred income tax balances in response to the Tax Act which was signed into law on December 22, 2017.
Fourth Quarter Earnings Highlights
Balance Sheet Highlights
- Net interest income, our primary driver of earnings, increased $1.7 million to $14.2 million for the quarter ended December 31, 2018, compared to the prior year’s quarter, due to strong loan growth and an increased net interest margin.
- Net interest margin expanded 10 basis points to 4.01%, compared to 3.91% for the prior year’s quarter and increased 9 basis points from 3.92% in the prior sequential quarter ended September 30, 2018. The net interest margin is expected to remain stable.
- The provision for loan losses was $500 thousand for the quarters ended December 31, 2018 and 2017. Asset quality remains favorable.
- Noninterest income decreased $83 thousand to $2.0 million compared to the prior year’s quarter and $525 thousand compared to the prior sequential quarter. The quarter included $193 thousand in write-downs on equity securities.
- Noninterest expense increased $639 thousand to $8.3 million compared to the prior year’s quarter and decreased $533 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. The decline over the quarter ended September 30, 2018 was due to the two nonrecurring transactions last quarter: an $850 thousand supplemental executive retirement (“SERP”) benefit expense, partially offset by a $317 thousand recovery related to an OREO property.
- The effective tax rate declined to 21.0% for the quarter compared to 61.0% in the prior year’s quarter, as a result of the Tax Act, which was enacted December 22, 2017, and lowered the federal corporate tax rate. In addition, the prior year’s quarter included a $1.7 million adjustment to our deferred tax asset as a result of the Tax Act.
- Total loans increased $133.9 million, or 11.4%, from year-end 2017 to $1.3 billion at December 31, 2018. Residential mortgage, commercial and consumer loan portfolios increased $70.9 million, $65.2 million, and $14.0 million, respectively, partially offset by a decline of $16.3 million in SBA loans. Our pipeline remains strong. Mortgage originations for the year totaled $225.0 million and reached a record level.
- Total deposits increased $164.6 million, or 15.8%, from year-end 2017 to $1.2 billion at December 31, 2018. Growth in noninterest-bearing demand deposits was 5.5% from year-end 2017.
- Borrowed funds decreased $65.0 million to $210.0 million at December 31, 2018, due to decreased overnight borrowings, the maturity of a repo and FHLB advances being called.
- Shareholders’ equity was $138.5 million at December 31, 2018, an increase of $20.4 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 and the payment of dividends.
- Book value per common share was $12.85 as of December 31, 2018.
- At December 31, 2018, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 9.90%, 11.40%, 12.24% and 13.49% respectively, all in excess of the ratios required to be deemed “well-capitalized.”
- Credit quality remains strong with nonperforming assets to total assets of 0.44% at December 31, 2018.
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.
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 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, and results of regulatory exams, among other factors.
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.