Market Overview

Unity Bancorp Reports 18% Increase in Quarterly Net Income

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CLINTON, N.J., Oct. 25, 2016 (GLOBE NEWSWIRE) -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported increased quarterly and year-to-date earnings.  Major contributing factors included strong loan growth, expanded net interest margin, increased levels of noninterest income and expense control. 

Net income was $3.0 million, or $0.32 per diluted share, for the three months ended September 30, 2016, an 18.4% increase compared to net income of $2.6 million, or $0.27 per diluted share, for the same period a year ago.  Return on average assets and average common equity for the quarter were 1.05% and 13.90%, respectively, compared to 1.00% and 13.54% for the same period a year ago. 

Year-to-date net income was $10.0 million, or $1.06 per diluted share, for the nine months ended September 30, 2016, a 45.3% increase compared to net income of $6.9 million, or $0.74 per diluted share, for the same period a year ago.  Return on average assets and average common equity for the period were 1.20% and 16.09%, respectively, compared to 0.95% and 12.69% for the same period a year ago. 

During the first quarter, the Company repurchased $5.0 million of its outstanding subordinated debentures at a price of $0.5475 per dollar, thus reducing its outstanding subordinated debt to $10.3 million.  The repurchase resulted in a nonrecurring pre-tax gain of approximately $2.26 million.  Net income, excluding the nonrecurring gain on the repurchased subordinated debentures, was $8.6 million, or $0.91 per diluted share, for the nine months ended September 30, 2016, compared to net income of $6.9 million, or $0.74 per diluted share, for the same period a year ago.  Return on average assets and average common equity for the nine months ended September 30, 2016, excluding the gain, would have been 1.03% and 13.73%, respectively, compared to 0.95% and 12.69% for the same period a year ago. 

Management believes excluding the nonrecurring gain from year-to-date net income and reporting it in a format which is not in compliance with generally accepted accounting principles ("non-GAAP") is beneficial to the reader and provides better comparability of the Company's performance over both periods. 

Third quarter highlights included:

  • Opening our 16th branch location in Emerson, New Jersey.  Our 17th branch in Somerville, New Jersey, is expected to open in November 2016.
  • Ringing NASDAQ's closing bell to commemorate our 25th Anniversary.
  • Increasing the quarterly cash dividend 25% to $.05 per common share from $.04 as well as paying a 10% stock dividend to shareholders.
  • Total loans increased 11.0% compared to September 30, 2015.
  • Total deposits increased 7.7% and noninterest-bearing demand deposits grew 19.3% since September 30, 2015. 
  • Net interest income increased 14.5% compared to the prior year's quarter due to strong loan growth. 
  • Net interest margin increased to 3.63% this quarter compared to 3.60% in the prior year's quarter.
  • Credit quality has continued to improve.   

"We had record earnings and strong financial results for the third quarter," stated James A. Hughes, President and CEO.  "We are now focusing on growing our market presence.  We opened our Emerson branch on October 17th and we anticipate opening our Somerville office in November.  In addition, we have hired two seasoned lenders in the Lehigh Valley market, so we will now be looking for opportunities in Pennsylvania.  We are extremely excited about our future and look forward to the challenges ahead."

Net Interest Income
Net interest income increased $1.3 million to $9.9 million for the quarter ended September 30, 2016 compared to the prior year's period, while year-to-date, net interest income increased $3.2 million to $28.2 million.  The net interest margin was 3.63% for the quarter-ended September 30, 2016, an increase of 3 basis points from the quarter-ended September 30, 2015 and 3.58% for the nine months ended September 30, 2016 compared to 3.65% in the prior year's period.  The increase in the net interest margin for the quarter was due to growth in our loan portfolio and the restructuring of our FHLB borrowings.  

Each period saw continued strong commercial, residential mortgage and consumer loan growth over the prior year period.  Quarterly average commercial loans increased $57.5 million, average residential mortgage loans have increased $21.6 million and consumer loans increased $13.0 million compared to the third quarter in 2015.

The cost of interest-bearing liabilities has remained relatively stable at 1.04% for the quarter and 1.05% for the year-to-date periods.  The quarterly cost of deposits increased 13 basis points to 0.84% due to the intentional growth of five year time deposits and a promotional savings product.  The quarterly cost of borrowed funds and subordinated debentures decreased 121 basis points compared to the prior year due to the modification of borrowings with the Federal Home Loan Bank ("FHLB") over the past year.  

Provision for Loan Losses

The provision for loan losses was $420 thousand for the three months ended September 30, 2016 and $1.0 million for the nine months ended September 30, 2016.  In the prior year's periods, there was a $200 thousand loan loss provision during the quarter ended September 30, 2015 and a $400 thousand loan loss provision for the nine months ended September 30, 2015.  The increase in the quarterly and year-to-date provision for 2016 versus 2015 was due to higher net charge-offs in each period.  Net charge-offs were $493 thousand for the quarter and $1.1 million year-to-date at September 30, 2016, compared to net charge-offs of $183 thousand and $530 thousand for the quarter and year-to-date periods ended September 30, 2015.   

Noninterest Income
Noninterest income decreased $102 thousand to $2.2 million for the three months ended September 30, 2016, compared to the same period last year.  While gains on the sale of SBA and mortgage loans were consistent with the prior quarter, noninterest income decreased due to lower branch and loan fee income.  Year-to-date, noninterest income increased $613 thousand to $6.4 million due to higher gains on the sale of SBA loans and securities, partially offset by lower branch and loan fee income.

Notable items included: 

  • Branch fee income declined in the quarterly and year-to-date periods due to lower levels of overdraft fees and service charges from commercial checking accounts.
  • Service and loan fee income declined in the quarterly and year-to-date periods due to the write-down of a mortgage servicing asset as a result of large principal pay-downs on a sold mortgage pool.  On a year-to-date basis, service and loan fee income was also impacted by lower loan payoff charges and processing fees.
  • SBA loan sales during the third quarter of 2016 totaled $7.8 million with a net gain of $639 thousand.  During the prior year's quarter, SBA loan sales totaled $3.4 million with a net gain of $308 thousand.  Year-to-date, SBA loan sales totaled $18.4 million in 2016 and $6.9 million in 2015 with net gains on sale of $1.6 million and $671 thousand, respectively. 
  • During the quarter, $25.6 million in residential mortgage loans were sold at a gain of $609 thousand, compared to $35.7 million in loans sold at a gain of $926 thousand during the prior year's quarter.  Year-to-date, $76.7 million in residential mortgage loans were sold at a gain of $1.9 million compared to $77.9 million in loans sold at a gain of $2.0 million during the prior year's period.  Our mortgage pipeline remains strong.    

Noninterest Expense

Noninterest expenses increased $141 thousand or 2.1% to $7.0 million for the quarter and $324 thousand or 1.6% for the nine months ended September 30, 2016.  The increases in each period, evidence investment in Unity's retail network, corporate infrastructure and its staff. 

In 2016, our compensation and benefits expense has risen as we expand our branch network, lending and support staff.  This additional headcount has resulted in higher salary and benefit expense.  This year, we also committed to our future by purchasing the Clinton, New Jersey corporate headquarters building, which resulted in lower occupancy expenses.  However, investment in our retail network through the addition of branches in Emerson and Somerville, New Jersey will increase future occupancy expenses.  Furniture and equipment expense has increased due to investment in our technology infrastructure through network and software upgrades that will improve our efficiency and keep our data secure.  Advertising expenses have risen in support of our retail and lending sales as well as the branch expansions.  Other expenses that increased were officer and employee training and director compensation fees.  OREO costs remain elevated as legal and property tax expenses are incurred on these properties. 

Financial Condition
At September 30, 2016, total assets were $1.2 billion, an increase of $68.0 million from year-end 2015:

  • Total loans increased $60.9 million or 6.8%, from year-end 2015 to $949.8 million at September 30, 2016. Commercial, residential mortgage and consumer loan portfolios increased $30.5 million, $17.8 million and $11.0 million, respectively. 
  • Other assets increased due to the purchase of the Company's Clinton, New Jersey headquarters, as well as two new branch sites in Emerson, New Jersey and the Somerville, New Jersey, both of which were purchased facilities.
  • Total deposits increased $38.8 million or 4.3%, to $933.3 million at September 30, 2016.  Savings deposits grew $43.3 million and noninterest-bearing demand deposits increased $23.9 million, while time deposits declined $25.6 million and noninterest-bearing demand deposits declined $2.8 million, respectively.  The declines were due to reduced levels of municipal deposits from year-end and a roll-off of institutional certificates of deposit.
  • Borrowed funds increased $23.0 million to $115.0 million at September 30, 2016, due to the addition of $30.0 million Federal Home Loan Bank (FHLB) term borrowings partially offset by reduced overnight borrowings.  Also, during the nine month period, $10.0 million in FHLB borrowings at an average cost of 4.27% were extended to 2020 at an average rate of 2.10%. 
  • Subordinated debentures decreased from year-end due to the repurchase of $5.0 million at a discount of $0.5475 per dollar.
  • Shareholders' equity was $88.2 million at September 30, 2016, an increase of $9.7 million from year-end 2015 due to year-to-date net income less the dividends paid to shareholders.  During the quarter, a $.05 cash dividend and a 10 percent stock dividend were paid.
  • Book value per common share was $9.45 as of September 30, 2016.
  • At September 30, 2016, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 8.49%, 9.63%, 10.74% and 11.48% respectively, all in excess of the ratios required to be deemed "well-capitalized". 

Credit Quality

  • Nonperforming assets totaled $8.2 million at September 30, 2016, or 0.86% of total loans and OREO, compared to $8.9 million or 0.99% of total loans and OREO at year-end 2015. 
  • Nonperforming loans decreased 10.1% to $6.5 million at September 30, 2016 from year-end.
  • OREO increased $112 thousand to $1.7 million at September 30, 2016 from year-end.
  • The allowance for loan losses totaled $12.7 million at September 30, 2016, or 1.34% of total loans compared to $12.4 million and 1.45% at September 30, 2015.
  • Net charge-offs were $493 thousand for the three months ended September 30, 2016, compared to $183 thousand for the same period a year ago.  Net charge-offs were $1.1 million for nine months ended September 30, 2016, compared to $530 thousand for the same period a year ago. 

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.2 billion in assets and $933 million in deposits.  Unity Bank provides financial services to retail, corporate and small business customers through its 16 retail service centers located in Bergen, Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County, 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.

 

                
UNITY BANCORP, INC. 
SUMMARY FINANCIAL HIGHLIGHTS  
NON-GAAP 
September 30, 2016 
                
                
         Sept. 30, 2016 vs. 
         Jun. 30, 2016 Sept. 30, 2015 
(In thousands, except percentages and per share amounts) Sept. 30, 2016 Jun. 30, 2016 Sept. 30, 2015   %   %  
BALANCE SHEET DATA:               
Total assets $   1,152,896   $ 1,128,370  $ 1,052,711    2.2 % 9.5 %
Total deposits     933,320     912,198    866,247    2.3   7.7  
Total loans     949,832     915,043    855,560    3.8   11.0  
Total securities     72,360     73,994    71,492    (2.2)  1.2  
Total shareholders' equity     88,152     84,967    76,065    3.7   15.9  
Allowance for loan losses      (12,685)   (12,758)   (12,421)   0.6   2.1  
                
FINANCIAL DATA - QUARTER TO DATE:               
Income before provision for income taxes and gain on subordinated debenture $   4,633   $ 4,448  $ 3,845    4.2   20.5  
Provision for income taxes     1,613     1,624    1,294    (0.7)  24.7  
Net income $   3,020   $ 2,824  $ 2,551    6.9   18.4  
                
                
Net income per:               
Common share - basic $   0.32   $ 0.30  $ 0.28    6.7   14.3  
Common share - diluted $   0.32   $ 0.30  $ 0.27    6.7   18.5  
                
                
Performance ratios:               
Return on average assets     1.05  % 1.03 %  1.00 %  1.9   5.0  
Return on average equity     13.90  % 13.59 %  13.54 %  2.3   2.7  
Efficiency ratio     58.11  % 58.53 %  62.88 %  (0.7)  (7.6) 
Net interest margin     3.63  % 3.61 %  3.60 %  0.6   0.8  
                
FINANCIAL DATA - YEAR TO DATE:               
Income before provision for income taxes and gain on subordinated debenture $   13,276      $ 10,414      27.5  
Provision for income taxes     4,700        3,496      34.4  
Net income before gain on subordinated debenture $   8,576      $ 6,918      24.0  
Gain on subordinated debenture, net of tax     1,473        -      NM  
Net income $   10,049      $ 6,918      45.3  
                
Net income before gain on subordinated debenture per:               
Common share - basic $   0.92      $ 0.75      22.7  
Common share - diluted $   0.91      $ 0.74      23.0  
                
Net income per:               
Common share - basic $   1.08      $ 0.75      44.0  
Common share - diluted $   1.06      $ 0.74      43.2  
                
Net income before gain on subordinated debenture ratios:               
Return on average assets     1.03  %    0.95 %    8.4  
Return on average equity     13.73  %    12.69 %    8.2  
Efficiency ratio     59.03  %    64.97 %    (9.1) 
                
Performance ratios:               
Return on average assets     1.20  %    0.95 %    26.3  
Return on average equity     16.09  %    12.69 %    26.8  
Efficiency ratio     55.39  %    64.97 %    (14.7) 
Net interest margin     3.58  %    3.65 %    (1.9) 
                
SHARE INFORMATION:               
Market price per share $   12.82   $ 11.56  $ 8.89    10.9   44.2  
Dividends paid $   0.05   $ 0.04  $ 0.04    0.3   0.3  
Book value per common share $   9.45   $ 9.10  $ 8.20    3.8   15.2  
Average diluted shares outstanding (QTD)     9,496     9,468    9,389    0.3   1.1  
                
CAPITAL RATIOS:               
Total equity to total assets     7.65  % 7.53 %  7.23 %  1.6   5.8  
Leverage ratio     8.49  % 8.52 %  8.92 %  (0.4)  (4.8) 
Common equity tier 1 risk-based capital ratio     9.63  % 9.70 %  9.37 %  n/a   n/a  
Tier 1 risk-based capital ratio     10.74  % 10.85 %  11.25 %  (1.0)  (4.5) 
Total risk-based capital ratio     11.48  % 12.11 %  12.50 %  (5.2)  (8.2) 
                
CREDIT QUALITY AND RATIOS:               
Nonperforming assets $   8,230   $ 8,243  $ 12,501    (0.2)  (34.2) 
QTD net chargeoffs (annualized) to QTD average loans     0.21  % 0.12 %  0.09 %  75.0   133.3  
Allowance for loan losses to total loans     1.34  % 1.39 %  1.45 %  (3.6)  (7.6) 
Nonperforming assets to total loans
and OREO
     0.86  % 0.90 %  1.46 %  (4.4)  (41.1) 
Nonperforming assets to total assets     0.71  %  0.73 %  1.19 %  (2.7)% (40.3)%
                
                
All share information has been adjusted for the 10% stock dividend paid September 30, 2016
 
  


   UNITY BANCORP, INC. 
   CONSOLIDATED BALANCE SHEETS  
   September 30, 2016 
                
                
            Sept. 30, 2016 vs. 
            December 31, 2015 Sept. 30, 2015 
(In thousands, except percentages) Sept. 30, 2016 December 31, 2015 Sept. 30, 2015   %   %  
ASSETS               
Cash and due from banks $   23,811   $ 22,681  $ 21,863    5.0 % 8.9 %
Federal funds sold and interest-bearing deposits     60,859     65,476    66,994    (7.1)  (9.2) 
Cash and cash equivalents     84,670     88,157    88,857    (4.0)  (4.7) 
Securities:               
Securities available for sale     44,186     52,865    53,470    (16.4)  (17.4) 
Securities held to maturity     28,174     18,471    18,022    52.5   56.3  
Total securities     72,360     71,336    71,492    1.4   1.2  
Loans:               
SBA loans held for sale     15,611     13,114    13,937    19.0   12.0  
SBA loans held for investment     41,795     39,393    39,728    6.1   5.2  
SBA 504 loans     26,067     29,353    29,221    (11.2)  (10.8) 
Commercial loans     496,008     465,518    442,970    6.5   12.0  
Residential mortgage loans     282,317     264,523    255,447    6.7   10.5  
Consumer loans     88,034     77,057    74,257    14.2   18.6  
Total loans     949,832     888,958    855,560    6.8   11.0  
Allowance for loan losses     (12,685)   (12,759)   (12,421)   0.6   2.1  
Net loans     937,147     876,199    843,139    7.0   11.1  
Premises and equipment, net     22,302     15,171    15,297    47.0   45.8  
Bank owned life insurance ("BOLI")     13,664     13,381    13,285    2.1   2.9  
Deferred tax assets     6,008     5,968    6,107    0.7   (1.6) 
Federal Home Loan Bank ("FHLB") stock     5,767     4,600    4,510    25.4   27.9  
Accrued interest receivable     4,165     3,884    3,704    7.2   12.4  
Other real estate owned ("OREO")     1,703     1,591    1,759    7.0   (3.2) 
Goodwill and other intangibles     1,516     1,516    1,516    -   -  
Other assets     3,594     3,063    3,045    17.3   18.0  
Total assets $   1,152,896   $ 1,084,866  $ 1,052,711    6.3 % 9.5 %
                
LIABILITIES AND SHAREHOLDERS' EQUITY            
Liabilities:               
Deposits:               
Noninterest-bearing demand $   209,122   $ 185,267  $ 175,298    12.9 % 19.3 %
Interest-bearing demand     127,845     130,605    123,984    (2.1)  3.1  
Savings     344,772     301,447    299,017    14.4   15.3  
Time, under $100,000     134,448     134,468    124,348    -   8.1  
Time, $100,000 and over, under $250,000     86,366     104,106    115,912    (17.0)  (25.5) 
Time, $250,000 and over     30,767     38,600    27,688    (20.3)  11.1  
Total deposits     933,320     894,493    866,247    4.3   7.7  
Borrowed funds     115,000     92,000    90,000    25.0   27.8  
Subordinated debentures     10,310     15,465    15,465    (33.3)  (33.3) 
Accrued interest payable     446     461    460    (3.3)  (3.0) 
Accrued expenses and other liabilities     5,668     3,977    4,474    42.5   26.7  
Total liabilities     1,064,744     1,006,396    976,646    5.8   9.0  
Shareholders' equity:               
Common stock     70,450     59,371    59,205    18.7   19.0  
Retained earnings     18,117     19,566    17,270    (7.4)  4.9  
Accumulated other comprehensive loss     (415)   (467)   (410)   NM   NM  
Total shareholders' equity     88,152     78,470    76,065    12.3   15.9  
Total liabilities and shareholders' equity $   1,152,896   $ 1,084,866  $ 1,052,711    6.3 % 9.5 %
                
Issued and outstanding common shares   9,331    9,279    9,272       
                
NM=Not meaningful               
                



                        
   UNITY BANCORP, INC. 
   QTD CONSOLIDATED STATEMENTS OF INCOME  
   NON-GAAP 
   September 30, 2016 
                        
       
             Sept. 30, 2016 vs.  
   For the three months ended   Jun. 30, 2016 Sept. 30, 2015 
(In thousands, except percentages and per share amounts) Sept. 30, 2016 Jun. 30, 2016 Sept. 30, 2015   $   %   $   %  
INTEREST INCOME                       
Federal funds sold and interest-bearing deposits $  50  $41 $11  $ 9    22.0 %$ 39    354.5 %
FHLB stock    67   55  36    12    21.8    31    86.1  
Securities:                       
Taxable    456   427  349    29    6.8    107    30.7  
Tax-exempt    43   55  71    (12)   (21.8)   (28)   (39.4) 
Total securities    499   482  420    17    3.5    79    18.8  
Loans:                       
SBA loans    822   788  696    34    4.3    126    18.1  
SBA 504 loans    321   344  353    (23)   (6.7)   (32)   (9.1) 
Commercial loans    6,138   5,860  5,378    278    4.7    760    14.1  
Residential mortgage loans    3,138   2,937  2,811    201    6.8    327    11.6  
Consumer loans    1,046   980  849    66    6.7    197    23.2  
Total loans    11,465   10,909  10,087    556    5.1    1,378    13.7  
Total interest income    12,081   11,487  10,554    594    5.2    1,527    14.5  
INTEREST EXPENSE                       
Interest-bearing demand deposits    129   124  108    5    4.0    21    19.4  
Savings deposits    458   381  255    77    20.2    203    79.6  
Time deposits    920   954  839    (34)   (3.6)   81    9.7  
Borrowed funds and subordinated debentures    701   686  730    15    2.2    (29)   (4.0) 
Total interest expense    2,208   2,145  1,932    63    2.9    276    14.3  
Net interest income    9,873   9,342  8,622    531    5.7    1,251    14.5  
Provision for loan losses    420   400  200    20    5.0    220    110.0  
Net interest income after provision for loan losses    9,453   8,942  8,422    511    5.7    1,031    12.2  
NONINTEREST INCOME                       
Branch fee income    321   286  399    35    12.2    (78)   (19.5) 
Service and loan fee income    274   267  306    7    2.6    (32)   (10.5) 
Gain on sale of SBA loans held for sale, net    639   637  308    2    0.3    331    107.5  
Gain on sale of mortgage loans, net    609   593  926    16    2.7    (317)   (34.2) 
BOLI income    97   93  95    4    4.3    2    2.1  
Net security gains    11   81  -    (70)   (86.4)   11    100.0  
Other income    222   277  241    (55)   (19.9)   (19)   (7.9) 
Total noninterest income    2,173   2,234  2,275    (61)   (2.7)   (102)   (4.5) 
NONINTEREST EXPENSE                       
Compensation and benefits    3,872   3,709  3,814    163    4.4    58    1.5  
Occupancy    611   513  598    98    19.1    13    2.2  
Processing and communications    647   600  631    47    7.8    16    2.5  
Furniture and equipment    432   395  393    37    9.4    39    9.9  
Professional services    216   239  251    (23)   (9.6)   (35)   (13.9) 
Loan costs    86   59  265    27    45.8    (179)   (67.5) 
OREO expenses     74   82  15    (8)   (9.8)   59    393.3  
Deposit insurance    168   165  163    3    1.8    5    3.1  
Advertising    304   303  203    1    0.3    101    49.8  
Other expenses    583   663  519    (80)   (12.1)   64    12.3  
Total noninterest expense    6,993   6,728  6,852    265    3.9    141    2.1  
Income before provision for income taxes and gain on subordinated debenture    4,633   4,448  3,845    185    4.2    788    20.5  
Provision for income taxes    1,613   1,624  1,294    (11)   (0.7)   319    24.7  
Net income $  3,020  $2,824 $2,551  $ 196    6.9 %$ 469    18.4 %
                        
Effective tax rate    34.8 % 36.5% 33.7%             
                        
                        
Net income per:                       
Common share - basic $  0.32  $0.30 $0.28              
Common share - diluted $  0.32  $0.30 $0.27              
                        
Weighted average common shares outstanding - Basic    9,339   9,318  9,270              
Weighted average common shares outstanding - Diluted    9,496   9,468  9,389              
                        


                
UNITY BANCORP, INC.  
YTD CONSOLIDATED STATEMENTS OF INCOME  
September 30, 2016  
                
        
   For the nine months ended September 30,    Current YTD vs. Prior YTD  
(In thousands, except percentages and per share amounts) 2016 2015   $   %   
INTEREST INCOME               
Federal funds sold and interest-bearing deposits $  135  $26  $ 109    419.2 % 
FHLB stock    173   117    56    47.9   
Securities:               
Taxable    1,246   1,100    146    13.3   
Tax-exempt    160   213    (53)   (24.9)  
Total securities    1,406   1,313    93    7.1   
Loans:               
SBA loans    2,331   1,980    351    17.7   
SBA 504 loans    1,050   1,068    (18)   (1.7)  
Commercial loans    17,676   15,720    1,956    12.4   
Residential mortgage loans    9,017   8,108    909    11.2   
Consumer loans    2,956   2,322    634    27.3   
Total loans    33,030   29,198    3,832    13.1   
Total interest income    34,744   30,654    4,090    13.3   
INTEREST EXPENSE               
Interest-bearing demand deposits    390   317    73    23.0   
Savings deposits    1,206   789    417    52.9   
Time deposits    2,824   2,250    574    25.5   
Borrowed funds and subordinated debentures     2,122   2,289    (167)   (7.3)  
Total interest expense    6,542   5,645    897    15.9   
Net interest income    28,202   25,009    3,193    12.8   
Provision for loan losses    1,020   400    620    155.0   
Net interest income after provision for loan losses    27,182   24,609    2,573    10.5   
NONINTEREST INCOME               
Branch fee income    940   1,118    (178)   (15.9)  
Service and loan fee income    796   1,068    (272)   (25.5)  
Gain on sale of SBA loans held for sale, net    1,584   671    913    136.1   
Gain on sale of mortgage loans, net    1,917   1,957    (40)   (2.0)  
BOLI income    283   284    (1)   (0.4)  
Net security gains    186   28    158    564.3   
Other income    716   683    33    4.8   
Total noninterest income    6,422   5,809    613    10.6   
NONINTEREST EXPENSE               
Compensation and benefits    11,130   10,767    363    3.4   
Occupancy    1,742   1,871    (129)   (6.9)  
Processing and communications    1,845   1,841    4    0.2   
Furniture and equipment    1,247   1,189    58    4.9   
Professional services    710   729    (19)   (2.6)  
Loan costs    343   647    (304)   (47.0)  
OREO expenses    179   117    62    53.0   
Deposit insurance    494   496    (2)   (0.4)  
Advertising    848   728    120    16.5   
Other expenses    1,790   1,619    171    10.6   
Total noninterest expense    20,328   20,004    324    1.6   
Income before provision for income taxes and gain on subordinated debenture    13,276   10,414    2,862    27.5   
Provision for income taxes    4,700   3,496    1,204    34.4   
Net income before gain on subordinated debenture $  8,576  $6,918  $ 1,658    24.0 % 
Gain on subordinated debenture, net of tax    1,473   -    1,473    100.0   
Net income $  10,049  $6,918  $ 3,131    45.3 % 
                
Effective tax rate    35.3 % 33.6        
                
Net income before gain on subordinated debenture per:               
Common share - basic $0.92 0.75         
Common share - diluted $0.91 0.74         
                
Net income per:               
Common share - basic $ 1.08 0.75         
Common share - diluted $1.06 0.74         
                
Weighted average common shares outstanding - Basic    9,320     9,265         
Weighted average common shares outstanding - Diluted    9,468     9,377         
                


                    
   UNITY BANCORP, INC. 
   QUARTER TO DATE NET INTEREST MARGIN  
   September 30, 2016 
              
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis) 
  For the three months ended 
  September 30, 2016 June 30, 2016 
  Average Balance Interest  Rate/Yield  Average Balance Interest  Rate/Yield  
ASSETS                   
Interest-earning assets:                   
Federal funds sold and interest-bearing deposits $ 70,628  $ 50     0.28 %$ 62,652  $ 41   0.26%
FHLB stock   5,728    67     4.65    4,904    55   4.51 
Securities:                   
Taxable   63,871    456     2.84    62,561    427   2.75 
Tax-exempt   6,478    66     4.05    8,177    83   4.08 
Total securities (A)   70,349    522     2.95    70,738    510   2.90 
Loans:                   
SBA loans   57,122    822     5.72    56,719    788   5.59 
SBA 504 loans   26,562    321     4.81    27,273    344   5.07 
Commercial loans   490,776    6,138     4.98    474,573    5,860   4.97 
Residential mortgage loans   276,413    3,138     4.52    264,599    2,937   4.46 
Consumer loans   85,632    1,046     4.86    82,295    980   4.79 
Total loans (B)   936,505    11,465     4.87    905,459    10,909   4.85 
Total interest-earning assets $ 1,083,210  $ 12,104     4.45 %$ 1,043,753  $ 11,515   4.44%
                    
Noninterest-earning assets:                   
Cash and due from banks   19,831          25,993        
Allowance for loan losses     (12,769)         (12,850)       
Other assets   52,000          49,250        
Total noninterest-earning assets   59,062          62,393        
Total assets $ 1,142,272        $ 1,106,146        
                    
LIABILITIES AND SHAREHOLDERS' EQUITY                   
Interest-bearing liabilities:                   
Total interest-bearing demand deposits $ 129,310  $ 129     0.40 %$ 129,263  $ 124   0.39%
Total savings deposits   331,588    458     0.55    310,329    381   0.49 
Total time deposits   256,884    920     1.42    275,700    954   1.39 
Total interest-bearing deposits   717,782    1,507     0.84    715,292    1,459   0.82 
Borrowed funds and subordinated debentures   123,136    701     2.26    106,277    686   2.60 
Total interest-bearing liabilities $ 840,918  $ 2,208     1.04 %$ 821,569  $ 2,145   1.05%
                    
Noninterest-bearing liabilities:                   
Noninterest-bearing demand deposits   197,937          194,649        
Other liabilities   16,990          6,370        
Total noninterest-bearing liabilities   214,927          201,019        
Total shareholders' equity   86,427          83,558        
Total liabilities and shareholders' equity $ 1,142,272        $ 1,106,146        
                    
Net interest spread    $ 9,896     3.41 %   $ 9,370   3.39%
Tax-equivalent basis adjustment        (23)         (28)    
Net interest income    $ 9,873        $ 9,342     
Net interest margin          3.63 %       3.61%
                    
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis.  They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state rates. 
              
(B) The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.
 
  


                    
   UNITY BANCORP, INC. 
   QUARTER TO DATE NET INTEREST MARGIN  
   September 30, 2016 
                    
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis) 
  For the three months ended 
  September 30, 2016 September 30, 2015 
  Average Balance Interest  Rate/Yield  Average Balance Interest  Rate/Yield  
ASSETS                   
Interest-earning assets:                   
Federal funds sold and interest-bearing deposits $ 70,628  $ 50     0.28 %$ 34,465  $ 11   0.13%
FHLB stock   5,728    67     4.65    3,517    36   4.06 
Securities:                   
Taxable   63,871    456     2.84    61,542    349   2.25 
Tax-exempt   6,478    66     4.05    11,612    105   3.59 
Total securities (A)   70,349    522     2.95    73,154    454   2.46 
Loans:                   
SBA loans   57,122    822     5.72    53,325    696   5.18 
SBA 504 loans   26,562    321     4.81    29,268    353   4.79 
Commercial loans   490,776    6,138     4.98    433,285    5,378   4.92 
Residential mortgage loans   276,413    3,138     4.52    254,765    2,811   4.38 
Consumer loans   85,632    1,046     4.86    72,641    849   4.64 
Total loans (B)   936,505    11,465     4.87    843,284    10,087   4.75 
Total interest-earning assets $ 1,083,210  $ 12,104     4.45 %$ 954,420  $ 10,588   4.40%
                    
Noninterest-earning assets:                   
Cash and due from banks   19,831          24,990        
Allowance for loan losses     (12,769)         (12,619)       
Other assets   52,000          44,098        
Total noninterest-earning assets   59,062          56,469        
Total assets $ 1,142,272        $ 1,010,889        
                    
LIABILITIES AND SHAREHOLDERS' EQUITY                   
Interest-bearing liabilities:                   
Total interest-bearing demand deposits $ 129,310  $ 129     0.40 %$ 125,405  $ 108   0.34%
Total savings deposits   331,588    458     0.55    290,413    255   0.35 
Total time deposits   256,884    920     1.42    256,216    839   1.30 
Total interest-bearing deposits   717,782    1,507     0.84    672,034    1,202   0.71 
Borrowed funds and subordinated debentures   123,136    701     2.26    83,383    730   3.47 
Total interest-bearing liabilities $ 840,918  $ 2,208     1.04 %$ 755,417  $ 1,932   1.01%
                    
Noninterest-bearing liabilities:                   
Noninterest-bearing demand deposits   197,937          176,085        
Other liabilities   16,990          4,663        
Total noninterest-bearing liabilities   214,927          180,748        
Total shareholders' equity   86,427          74,724        
Total liabilities and shareholders' equity $ 1,142,272        $ 1,010,889        
                    
Net interest spread    $ 9,896     3.41 %   $ 8,656   3.39%
Tax-equivalent basis adjustment        (23)         (34)    
Net interest income    $ 9,873        $ 8,622     
Net interest margin          3.63 %       3.60%
                    
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis.  They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state rates.
 
              
(B) The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.
 
  


                    
  UNITY BANCORP, INC. 
  YEAR TO DATE NET INTEREST MARGIN  
  September 30, 2016 
                    
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis) 
  For the nine months ended 
  September 30, 2016 September 30, 2015 
  Average Balance Interest  Rate/Yield  Average Balance Interest  Rate/Yield  
ASSETS                   
Interest-earning assets:                   
Federal funds sold and interest-bearing deposits $ 70,654  $ 135     0.26 %$ 30,657  $ 26   0.11%
FHLB stock   5,063    173     4.56    3,694    117   4.23 
Securities:                   
Taxable   61,869    1,246     2.69    64,121    1,100   2.29 
Tax-exempt   8,062    241     3.99    11,798    315   3.57 
Total securities (A)   69,931    1,487     2.84    75,919    1,415   2.49 
Loans:                   
SBA loans   55,932    2,331     5.57    49,678    1,980   5.33 
SBA 504 loans   27,685    1,050     5.07    30,720    1,068   4.65 
Commercial loans   476,477    17,676     4.96    420,682    15,720   5.00 
Residential mortgage loans   268,436    9,017     4.49    241,675    8,108   4.49 
Consumer loans   82,098    2,956     4.81    67,488    2,322   4.60 
Total loans (B)   910,628    33,030     4.85    810,243    29,198   4.82 
Total interest-earning assets $ 1,056,276  $ 34,825     4.40 %$ 920,513  $ 30,756   4.47%
                    
Noninterest-earning assets:                   
Cash and due from banks   24,261          26,537        
Allowance for loan losses     (12,848)         (12,583)       
Other assets   48,922          43,637        
Total noninterest-earning assets   60,335          57,591        
Total assets $ 1,116,611        $ 978,104        
                    
LIABILITIES AND SHAREHOLDERS' EQUITY                   
Interest-bearing liabilities:                   
Total interest-bearing demand deposits $ 129,968  $ 390     0.40 %$ 125,216  $ 317   0.34%
Total savings deposits   317,441    1,206     0.51    289,445    789   0.36 
Total time deposits   271,511    2,824     1.39    229,512    2,250   1.31 
Total interest-bearing deposits   718,920    4,420     0.82    644,173    3,356   0.69 
Borrowed funds and subordinated debentures   111,298    2,122     2.55    87,714    2,289   3.49 
Total interest-bearing liabilities $ 830,218  $ 6,542     1.05 %$ 731,887  $ 5,645   1.03%
                    
Noninterest-bearing liabilities:                   
Noninterest-bearing demand deposits   193,288          168,852        
Other liabilities   9,656          4,463        
Total noninterest-bearing liabilities   202,944          173,315        
Total shareholders' equity   83,449          72,902        
Total liabilities and shareholders' equity $ 1,116,611        $ 978,104        
                    
Net interest spread    $ 28,283     3.35 %   $ 25,111   3.44%
Tax-equivalent basis adjustment        (81)         (102)    
Net interest income    $ 28,202        $ 25,009     
Net interest margin          3.58 %       3.65%
                    
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis.  They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state rates. 
  
(B) The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued. 


                 
   UNITY BANCORP, INC. 
   QUARTERLY ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES  
   September 30, 2016 
                 
Amounts in thousands, except percentages  Sept. 30, 2016 Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 
ALLOWANCE FOR LOAN LOSSES:                
Balance, beginning of period $12,758 $12,634 $12,759 $ 12,421  $12,404 
Provision for loan losses charged to expense  420  400  200   100   200 
   13,178  13,034  12,959   12,521   12,604 
Less: Chargeoffs                
SBA loans  140  142  86   151   86 
Commercial loans  376  152  228   52   10 
Residential mortgage loans    -   -  -   -   50 
Consumer loans    -   -  28   41   52 
Total chargeoffs  516  294  342   244   198 
Add: Recoveries                
SBA loans  17  4  11   6   10 
Commercial loans  6  13  6   476   5 
Consumer loans    -   1  -   -   - 
Total recoveries  23  18  17   482   15 
Net chargeoffs (recoveries)  493  276  325   (238)  183 
Balance, end of period $12,685 $12,758 $12,634 $ 12,759  $12,421 
                 
LOAN QUALITY INFORMATION:                
Nonperforming loans (1) $6,527 $6,541 $6,887 $ 7,260  $10,742 
Other real estate owned ("OREO")  1,703  1,702  1,417   1,591   1,759 
Nonperforming assets  8,230  8,243  8,304   8,851   12,501 
Less:  Amount guaranteed by SBA  624  134  243   288   225 
Net nonperforming assets $7,606 $8,109 $8,061 $ 8,563  $12,276 
                 
Loans 90 days past due & still accruing $  -  $485 $  -  $ -  $272 
                 
Performing Troubled Debt Restructurings (TDRs) $665 $772 $844 $ 3,015  $3,268 
(1) Nonperforming TDRs included in nonperforming loans  154  161  293   293   2,808 
Total TDRs $819 $933 $1,137 $ 3,308  $6,076 
                 
Allowance for loan losses to:                
Total loans at quarter end    1.34 % 1.39% 1.42%  1.44 % 1.45%
Nonperforming loans (1)    194.35   195.05  183.45   175.74   115.63 
Nonperforming assets    154.13   154.77  152.14   144.15   99.36 
Net nonperforming assets    166.78   157.33  156.73   149.00   101.18 
                 
QTD net chargeoffs (annualized) to QTD average loans:                
SBA loans    0.86 % 0.98% 0.56%  1.05 % 0.57%
Commercial loans    0.30   0.12  0.19   (0.37)  - 
Residential mortgage loans    -    -  -   -   0.08 
Consumer loans    -    -  0.14   0.21   0.28 
Total loans    0.21 % 0.12% 0.15%  (0.11)% 0.09%
                 
Nonperforming loans to total loans    0.69 % 0.71% 0.78%  0.82 % 1.26%
Nonperforming loans and TDRs to total loans    0.76   0.80  0.87   1.16   1.64 
Nonperforming assets to total loans and OREO    0.86   0.90  0.93   0.99   1.46 
Nonperforming assets to total assets    0.71   0.73  0.74   0.82   1.19 
                 


     
   UNITY BANCORP, INC. 
   QUARTERLY FINANCIAL DATA  
   NON-GAAP 
   September 30, 2016 
                 
(In thousands, except percentages and per share amounts) Sept. 30, 2016 Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 
SUMMARY OF INCOME:                
Total interest income $ 12,081  $ 11,487  $ 11,176  $ 10,995  $ 10,554  
Total interest expense   2,208    2,145    2,189    2,015    1,932  
Net interest income   9,873    9,342    8,987    8,980    8,622  
Provision for loan losses   420    400    200    100    200  
Net interest income after provision for loan losses   9,453    8,942    8,787    8,880    8,422  
Total noninterest income   2,173    2,234    2,016    1,920    2,275  
Total noninterest expense   6,993    6,728    6,607    6,846    6,852  
Income before provision for income taxes and gain on  subordinated debenture   4,633    4,448    4,196    3,954    3,845  
Provision for income taxes   1,613    1,624    1,464    1,315    1,294  
Net income before gain on subordinated debenture $ 3,020  $ 2,824  $ 2,732  $ 2,639  $ 2,551  
Gain on subordinated debenture, net of tax     -     -    1,473    -    -  
Net income $ 3,020  $ 2,824  $ 4,205  $ 2,639  $ 2,551  
                 
Net income per common share - Basic $   0.32   $ 0.30  $ 0.45  $ 0.28  $ 0.28  
Net income per common share - Diluted $   0.32   $ 0.30  $ 0.44  $ 0.28  $ 0.27  
                 
COMMON SHARE DATA:                
Market price per share $   12.82   $ 11.56  $ 10.34  $ 11.34  $ 8.89  
Dividends paid $   0.05   $ 0.04  $ 0.04  $ 0.04  $ 0.04  
Book value per common share $   9.45   $ 9.10  $ 8.83  $ 8.46  $ 8.20  
Weighted average common shares outstanding - Basic   9,339    9,318    9,304    9,273    9,270  
Weighted average common shares outstanding - Diluted   9,496    9,468    9,550    9,402    9,389  
Issued and outstanding common shares   9,331    9,336    9,315    9,279    9,272  
                 
OPERATING RATIOS (Annualized):                
Return on average assets     1.05  %  1.03 %  1.54 %  1.00 %  1.00 %
Return on average equity     13.90     13.59    21.05    13.59    13.54  
Efficiency ratio     58.11     58.53    50.16    62.81    62.88  
                 
BALANCE SHEET DATA:                
Total assets $ 1,152,896  $ 1,128,370  $ 1,120,955  $ 1,084,866  $ 1,052,711  
Total deposits   933,320    912,198    926,819    894,493    866,247  
Total loans   949,832    915,043    886,990    888,958    855,560  
Total securities   72,360    73,994    66,729    71,336    71,492  
Total shareholders' equity   88,152    84,967    82,276    78,470    76,065  
Allowance for loan losses     (12,685)   (12,758)   (12,634)   (12,759)   (12,421) 
                 
TAX EQUIVALENT YIELDS AND RATES:                
Interest-earning assets     4.45  %  4.44 %  4.33 %  4.40 %  4.40 %
Interest-bearing liabilities     1.04     1.05    1.06    1.02    1.01  
Net interest spread     3.41     3.39    3.27    3.38    3.39  
Net interest margin     3.63     3.61    3.48    3.60    3.60  
                 
CREDIT QUALITY:                
Nonperforming assets   8,230    8,243    8,304    8,851    12,501  
QTD net chargeoffs (annualized) to QTD average loans     0.21  %  0.12 %  0.15 %  (0.11)%  0.09 %
Allowance for loan losses to total loans     1.34     1.39    1.42    1.44    1.45  
Nonperforming assets to total loans and OREO     0.86     0.90    0.93    0.99    1.46  
Nonperforming assets to total assets     0.71     0.73    0.74    0.82    1.19  
                 
CAPITAL RATIOS AND OTHER:                
Total equity to total assets     7.65  %  7.53 %  7.34 %  7.23 %  7.23 %
Leverage ratio     8.49     8.52    8.31    8.82    8.92  
Common equity tier 1 risk-based capital ratio     9.63     9.70    9.77    9.37    9.37  
Tier 1 risk-based capital ratio     10.74     10.85    10.97    11.18    11.25  
Total risk-based capital ratio     11.48     12.11    12.22    12.43    12.50  
Number of banking offices     15     15    15    15    15  
Number of ATMs     16     16    16    16    16  
Number of employees     180     172    172    162    163  
                 


News Media & Financial Analyst Contact: Alan J. Bedner, EVP Chief Financial Officer (908) 713-4308

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