CapitalCubeUnity Bancorp, Inc. reports financial results for the quarter ended March 31, 2017.
We analyze the earnings along side the following peers of Unity Bancorp, Inc. – Parke Bancorp, Inc., Bancorp of New Jersey, Inc., Sussex Bancorp, Two River Bancorp, Stewardship Financial Corporation, Lakeland Bancorp, Inc., Sun Bancorp, Inc. and Brunswick Bancorp (PKBK-US, BKJ-US, SBBX-US, TRCB-US, SSFN-US, LBAI-US, SNBC-US and BRBW-US) that have also reported for this period.
Highlights
- Summary numbers: Revenues of USD 12.59 million, Net Earnings of USD 3.19 million.
- Net interest income margins widened from 81.68% to 82.50% compared to the same period last year.
- Net loan assets changed 13.32% compared to same period last year and 3.15% from previous period, total deposits changed 5.81% compared to same period last year and 3.70% from previous period.
- Year-on-year change in operating cash flow of -36.08% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
- Earnings declined although operating margins improved from 38.14% to 38.94%.
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):
| 2017-03-31 | 2016-12-31 | 2016-09-30 | 2016-06-30 | 2016-03-31 | |
|---|---|---|---|---|---|
| Relevant Numbers (Quarterly) | |||||
| Revenues (mil) | 12.59 | 12.43 | 12.05 | 11.58 | 11 |
| Revenue Growth (%YOY) | 14.46 | 14 | 10.54 | 12.8 | 13.89 |
| Earnings (mil) | 3.19 | 3.16 | 3.02 | 2.82 | 4.21 |
| Earnings Growth (%YOY) | -24.09 | 19.74 | 18.38 | 16.31 | 116.86 |
| Net Margin (%) | 25.35 | 25.43 | 25.07 | 24.4 | 38.22 |
| EPS | 0.3 | 0.32 | 0.32 | 0.3 | 0.44 |
| Return on Equity (%) | 11.84 | 13 | 13.96 | 13.51 | 20.93 |
| Return on Assets (%) | 1.06 | 1.08 | 1.06 | 1 | 1.52 |
Access our Ratings and Scores for Unity Bancorp, Inc.
Market Share Versus Profits
UNTY-US‘s change in revenue this period compared to the same period last year of 14.46% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that UNTY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 1.34% and earnings by 1.01% compared to the immediate last period.
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Earnings Growth Analysis
The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 81.68% to 82.50% and net interest income after provisions margins improved from 79.86% to 80.51% over this period. In addition, loan loss provisions as a percentage of net interest income were 2.41% this period , and 2.23% a year ago.
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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.
1496674237.png "Loan Assets Growth Rate History (Qtr YOY)")
1496674239.png "Total Deposits Growth Rate History (Qtr 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 13.32% compared to the same period last year and 3.15% from the previous period. Total deposits changed 5.81% compared to the same period last year and 3.70% from the previous period.
Cash Versus Earnings – Sustainable Performance?
It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.
UNTY-US‘s change in operating cash flow of -36.08% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.
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Margins
The company’s earnings declined despite overall improvement in operating margins. Operating margins went from 38.14% to 38.94%. The decline in earnings seems to be largely because of one-time item. Pretax margins narrowed from 58.71% to 38.94%.
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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. It 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. The company was founded in 1994 and is headquartered in Clinton, NJ.
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