Unity Bancorp, Inc. :UNTY-US: Earnings Analysis: 2016 By the Numbers : January 31, 2017

Unity Bancorp, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Unity Bancorp, Inc. – Parke Bancorp, Inc., Two River Bancorp and Lakeland Bancorp, Inc. (PKBK-US, TRCB-US and LBAI-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 80.91% to 81.31% compared to the same period last year.
  • Net loan assets changed 9.61% compared to same period last year and 9.61% from previous period, total deposits changed 5.73% compared to same period last year and 5.73% from previous period.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 47.05 42.01 36.79 33.49 34.77
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 11.73 9.56 6.41 5.12 4.24
Earnings Growth (YOY) 22.7 49.14 25.28 20.52 66.69
Net Margin 24.92 22.75 17.42 15.27 12.21
EPS 1.23 1.02 0.74 0.48 0.31
Return on Equity 12.69 12.86 10.07 6.13 3.5
Return on Assets 1.03 0.91 0.66 0.59 0.52

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Earnings Growth Analysis

The company’s earnings growth was influenced by the year-on-year improvement in net interest income margins from 80.91% to 81.31%. However, the company’s loan loss provisions have prevented it from fully capitalizing on these net interest income margin improvements. UNTY-US‘s net interest income after provisions margin showed no improvement. Loan loss provisions as a percentage of net interest income were 3.19% this period, and 1.47% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

UNTY-US‘s improvement in net interest income margins came in spite of relative drops in the levels of net loan assets and total deposits. On an absolute basis, net loan assets changed 9.61% compared to the same period last year and 9.61% from the previous period. Total deposits changed 5.73% compared to the same period last year and 5.73% from the previous period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 34.20% to 38.68% and (2) one-time items. The company’s pretax margins are now 38.68%, compared to 34.20% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Unity Bancorp, Inc.

Company Profile

Unity Bancorp, Inc. operates as a bank holding company which conducts a traditional and community-oriented commercial banking business and financial services to retail, corporate, and small business customers. The company accepts personal and business checking accounts, time deposits, money market accounts, and regular savings accounts, as well as demand and savings deposits. Its loan portfolio comprises commercial, small business administration, consumer, mortgage, home equity, and personal loans. Unity Bancorp was founded in 1994 and is headquartered in Clinton, NJ.

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