Clinton, NJ, January 20, 2022 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $9.7 million, or $0.92 per diluted share, for the quarter ended December 31, 2021, a 32.7 percent increase compared to net income of $7.3 million, or $0.69 per diluted share for the prior year’s fourth quarter. For the year ended December 31, 2021, Unity reported net income of $36.1 million, or $3.43 per diluted share, compared to net income of $23.6 million, or $2.19 per diluted share for the year ended December 31, 2020.
Quarterly and Year over Year Earnings Highlights
- Net interest income, our primary driver of earnings, increased $3.5 million to $20.8 million for the quarter ended December 31, 2021, compared to $17.3 million for the prior year’s quarter, primarily due to commercial loan growth, receipt of SBA PPP loan fees on forgiveness, and residential construction loan growth.
- Net interest margin (“NIM”) increased 27 basis points to 4.24% for the quarter ended December 31, 2021, compared to 3.97% for the prior year’s quarter. For the year ended December 31, 2021, the NIM increased 31 basis points to 4.16%, compared to 3.85% for the year ended December 31, 2020.
- The Company released $382 thousand of its provision for loan losses for the quarter ended December 31, 2021. The provision for loan losses decreased $6.8 million for the twelve months ended December 31, 2021 compared to the prior year’s period. The decreases were primarily due to a reduction of specific reserves on impaired loans.
- Noninterest income decreased $1.6 million to $2.6 million compared to the prior year’s quarter and decreased $892 thousand in the current year compared to the year ended December 31, 2020. The decreases were primarily due to a decline in the gains on residential mortgage loan sales and a decision to not sell SBA available for sale loans in the fourth quarter, partially offset by an increase in servicing and loan fee income. For the quarter ended December 31, 2021, quarterly residential mortgage loan sales were $38.6 million with a gain of 2.03%, compared to $106.0 million with a gain of 1.91% for the quarter ended December 31, 2020.
- Noninterest expense decreased $65 thousand to $10.7 million compared to the prior year’s quarter, primarily due to a reduction in BSA expenses. Noninterest expense increased $800 thousand compared to the prior sequential quarter, primarily due to increased compensation expenses as the result of a one-time deferred compensation adjustment.
- The effective tax rate was 25.8% compared to 25.6% in the prior year’s quarter.
Balance Sheet Highlights
- Total loans increased $21.6 million, or 1.3%, from year-end 2020. The increase was primarily due to increases in commercial loans, residential construction loans, SBA loans and consumer loans. SBA PPP loans decreased $71.8 million due to loans being forgiven and paid off. Residential mortgage loans decreased 12.5%. Excluding SBA PPP loans, total loans increased 1.3% compared to the prior sequential quarter and 6.2% from year-end 2020. For the year ended December 31, 2021, the yield on average loans increased 5 basis points to 5.01% compared to the year ended December 31, 2020.
- Total deposits increased $200.9 million, or 12.9%, from year-end 2020 to $1.8 billion at December 31, 2021. The Company’s deposit composition at December 31, 2021 consisted of 39.5% in savings deposits, 30.1% in noninterest-bearing demand deposits, 16.6% in time deposits and 13.9% in interest-bearing demand deposits. For the year ended December 31, 2021, the yield on average interest-bearing deposits decreased 61 basis points to 0.57% compared to the year ended December 31, 2020.
- Borrowed funds decreased $160.0 million to $50.3 million at December 31, 2021, due to decreased FHLB advances resulting from core deposit growth, SBA PPP forgiveness and residential mortgage paydowns.
- Shareholders’ equity was $205.7 million at December 31, 2021 compared to $173.9 million at year-end 2020. • Book value per common share was $19.80 as of December 31, 2021. During the fourth quarter, the Company repurchased 3,483 shares of common stock at a total cost of $87 thousand.
- At December 31, 2021, the Community Bank Leverage Ratio was 10.51%, compared to 10.09% at December 31, 2020.
- Net nonperforming assets were $9.6 million at December 31, 2021, compared to $11.7 million at December 31, 2020. The allowance to total loans ratio excluding SBA PPP loans was 1.39% at December 31, 2021.
Paycheck Protection Program Loans:
As of December 31, 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. During the quarter ended December 31, 2021, the Company earned $1.8 million on SBA PPP fees.
Loan Deferrals:
Because of COVID-19, the Bank worked with its borrowers who were unable to meet their contractual obligations. Loans which have been granted deferrals have significantly declined. At December 31, 2021, $8.4 million in loans, or 0.51% of the total loan portfolio, were on deferral, compared to $32.5 million in loans, or 2.00% of the total loan portfolio at December 31, 2020.
Other Highlights:
On November 16, 2021, The Adult Day Center (“ADC”) of Somerset County honored President & CEO, James Hughes, at the Generations Gala. The ADC is a nonprofit agency providing compassionate day care services for vulnerable seniors, adults living with a disability or dementia-related illness, as well as support and education for their caregiving families. Unity Bank has been an important corporate partner of the ADC for the past six years and has funded their caregiver support group, program expansion and special events. All proceeds from the Generations Gala support the programs and services of the Adult Day Center of Somerset County. The Generations Gala raised over $270 thousand to support the vital services the ADC provides; this could not have been done without the support of Unity Bank and its customers and vendors.
Unity opened a Loan Production office in Lakewood, NJ, which will be used as a hub for commercial and residential lending in Ocean County. This office will be Unity’s southernmost office location, expanding Unity’s presence to New Jersey’s fastest growing municipality. The new lending office is a free-standing building in a strip mall. The space is approximately 1,800-square-foot, was previously operated as a bank branch by another financial institution and provides room for expansion.
Unity Bancorp, Inc. is a financial services organization headquartered in Clinton, New Jersey, with approximately $2.0 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 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 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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Q-4 2021 earnings release (40887439.DOCX;1) (q4cdn.com)