Unity Bancorp, Inc.
Annual Report 2019

Plain-text annual report

201 9 ANN UAL RE PORT UNITY BANCORP, INC. (Nasdaq: UNTY) is the holding company for Unity Bank, a commercial bank insured by the FDIC, headquartered in Clinton, New Jersey. The Bank offers complete deposit and lending solutions to businesses and consumers. Small Business is BIG here is a mantra the Bank lives and breathes. Unity delivers a holistic approach to business clients leveraging seasoned Commercial and SBA lending expertise with deposit products and services with the latest technology advantages. The Bank’s brand promise of Growing with You is applied to all Unity stakeholders. The Bank is dedicated to the growth of our communities, customers, employees and shareholders. THE BAN K’S BR AND PROMI SE O F growing with you! IS APPLIED TO ALL UNITY STAKEHOLDERS. E S I M O R P D N A R B R U O FI NAN C IAL HIGHLIGHTS Amounts in thousands, except per share data and performance ratios Year ended December 31, 2019 2018 2017 Selected Results of Operations Interest income $ 75,648 $ 67,263 $ 55,310 Interest expense Net interest income Provision for loan losses Noninterest income Noninterest expense Provision for income taxes Net income Per Share Data Net income per common share - Basic Net income per common share - Diluted Book value per common share Market value per common share Cash dividends declared on common shares Selected Balance Sheet Data Assets Loans Allowance for loan losses Securities Deposits Borrowed funds and subordinated debentures Shareholders’ equity Common shares outstanding Performance Ratios Return on average assets Return on average equity Efficiency ratio Net interest margin 18,055 57,593 2,100 9,539 34,717 6,662 13,516 53,747 2,050 9,031 33,421 5,388 9,453 45,857 1,650 8,270 30,044 9,540 23,653 $ 21,919 $ 12,893 $ 2.18 2.14 14.77 22.57 0.31 $ 2.04 2.01 12.85 20.76 0.27 1.22 1.20 11.13 19.75 0.23 $ $ $ 1,718,942 $ 1,579,157 $ 1,455,496 1,425,558 1,304,566 1,170,674 (16,395) 66,564 (15,488) 63,732 (13,556) 69,800 1,250,114 1,207,687 1,043,137 293,310 160,709 10,881 220,310 138,488 10,780 285,310 118,105 10,615 1.54 % 1.53 % 1.02 % 15.86 52.00 3.95 17.10 53.07 3.97 11.47 55.57 3.83 S R E D L O H E R A H S R U O O T On behalf of the entire Unity Bancorp (“Unity”) team, I am pleased to report another year of record growth and profitability. Net Income grew to $24 million, an increase of 7.9% from last year. Our return on average assets and average equity were 1.54% and 15.86% respectively, and our net interest margin remained stable at 3.95%. Unity’s loan portfolio grew 9.3% to $1.4 billion and our deposit base ended the year at $1.3 billion. The bank’s capital base continued to grow as our strong earnings performance outpaced the growth in our balance sheet. Not only was 2019 a year of great accomplish- ment, Unity also received accolades from leading industry publications. Unity was recognized by WE A RE COMMI TTE D TO PR OV I DI N G COMPETITIV E S E R VIC E S TH AT ME E T THE NEW WAYS CUSTOMERS NEED AND WANT TO BANK. American Banker magazine as the 13th highest performing publicly traded community bank in the nation for banks and thrifts less than $2 bil- lion in assets. In addition, Unity Bank was named one of the best places to work in NJ for the third consecutive year by NJBiz. The primary objective at Unity is to ensure our customers sincerely believe they have a trusted advisor that is vested in their success. We take a comprehensive approach to understanding and knowing our customers to deliver the best service for their unique needs. Along with supporting our customer base, Unity remains committed to our brand promise of “growing with you” for the communities and businesses we serve. We believe it is our responsibility to support our communities through various volunteer programs with local organizations and contributing to non-profits and charitable groups. In 2019, Unity participated in over 500 community events. Giving back to our communities is an integral part of our culture. Unity’s business model focuses on supporting smaller loans at competitive yields with owner occupied businesses. Diversity of lending is the basis of our stability. Our portfolio is a well-rounded mix of Commercial, SBA, Mortgage, Consumer and Construction loans.  Our residential mortgage department had T HE PRIMARY OBJECTIVE AT U N I T Y I S TO ENSURE OUR C USTOMER S SI NC E R ELY BELIEVE THEY HAVE A TRUSTED ADVISOR THAT IS VESTED IN THEIR SUCCESS. another year of continued success, with over $250 million in loan production. In 2019 our mortgage department fulfilled the dreams of home ownership to over 400 customers. Our construction loan division continued to be a high performing line of business with above average market returns secured by properly leveraged assets. Our commercial loan division had continued success with over $180 million in total volume for the year. During 2019, we continued to grow our franchise with a disciplined approach of growing revenue and managing expenses which resulted in increased profitability. There will be continued challenges in the coming year with the flat yield curve, volatile stock market, trade wars and the current political environment. Our balance sheet is well positioned, and we expect to continue to outperform our peers. As always, we will continue to invest in our culture and attract and retain top talent to meet the challenges ahead. Unity remains anchored in our commitment to exceptional customer service, personal attention, local decision-making and concern for the financial well- being of our customers and shareholders. We are moving forward in 2020 with a strong hold on our expenses, a commitment to improve our efficiency and the expectation that we will build on the positive momentum of 2019.  The Board of Directors, management and staff thank our loyal customers and shareholders for their continued support. David D. Dallas Chairman of the Board James A. Hughes President & CEO DILUTED EARNINGS PER SHARE DIVIDENDS PER SHARE $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $15.00 $12.00 $ 9.00 $ 6.00 $ 3.00 $ 0.00 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 BOOK VALUE MARKET PRICE $25.00 $20.00 $15.00 $10.00 $ 5.00 $ 0.00 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 with community bank service. Our portfolio performance remains strong, guided by people and policies which emphasize geographic and loan diversification. S We continue to support local neighborhoods S E C C U S The commercial loan portfolio increased in 2019 at a measurable pace. We continue to focus on our customers, core products and existing territories. Our residential mortgage program growth is infused by deep relationships with strategic referral partners. OUR PORTFOLIO PERFORMANCE REMAINS STRONG, GUIDED BY PEOPLE AND POLICIES WHICH EMPHASIZE GEOGRAPHIC AND LOAN TYPE DIVERSIFICATION. G N I D N E L LENDING PORTFOLIO 54% Commercial Loans SBA Loans Consumer Loans 3% 10% 33% Residential Mortgage 35% 98.44% Investment 65% Owner Occupied Performing 30-59 Days Delinquent .78% Seriously Delinquent .78% 5 YEAR LOAN GROWTH S E G A G T R O M L A I T N E D S E R I S N A O L I L A C R E M M O C 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 0 $100 $200 $300 $400 $500 $600 $700 $800 in Millions RESIDENTIAL MORTGAGE DISTRIBUTION RESIDENTIAL MORTGAGE PERFORMANCE Investment 35% 98.44% 65% Owner Occupied Performing 30-59 Days Delinquent .78% Seriously Delinquent .78% 54% Commercial Loans SBA Loans Consumer Loans 3% 10% 33% Residential Mortgage caring personal service. E Secure convenient technology delivered with C N E The digital banking needs of customers are always evolving. Our mobile banking app continues to have a strong adoption rate and more customers are taking advantage of digital offerings than ever before. To help protect our customers, we introduced Card Control in 2019. This service offers fraud protection through real-time alerts and geographic controls. Customers have the convenience of turning debit cards on and off. Business customers can monitor spending and set limits for cards issued to their employees. We continue to survey our customers and enhance digital offerings based on the challenges our customers face. WE C ONTINUE TO SU RV E Y OUR CUSTOME RS AND ENH AN CE DIGI TAL OFFE RI NGS BASE D ON TH E CH ALLE NGE S OUR CU STOME RS FAC E. Small Business is big at Unity. In 2019, we saw the completion of a multi-year project to provide our top tier small business owners who have complex cash management detailed analysis of their activity. Customers were personally introduced and trained on a new statement system which provides better insight to their activity. The new system helps them understand their cash flow better and minimizes charges by taking advantage of earnings credits. I R E P X E G N I K N A B R U O In addition to customer digital offerings, we continue to invest in technology for operations. The Unity culture is customer-centric, and Senior Management is committed to providing tools for employees that ensure our customers have the best banking experience. In 2019, we replaced desktop computers and phones with equipment containing the latest capabilities. We enhanced our network infrastructure to streamline our internal IT support and provide faster, easier assistance to employees. In 2019, we launched a new loan origination system. The new system ensures loans flow through the process as efficiently as possible. It allows for any missing information to be detected early avoiding delays and providing all operational areas a single, stream-lined platform. Customers have a digital portal to send and receive information with the latest security protection. The system compliments our ability to be a nimble, local lender and grow our local business communities. We are committed to investing in technology and information security while always improving our customer’s experience. Y T I N U M M O C E H T N I Y T I N U Unity Bank is committed to bettering the communities it serves. Unity participated in over 500 community events, sponsorships and volunteer opportunities in 2019. In addition to traditional donations, Unity Bank supports community programs that keep the Bank and its employees personally connected to the people in our markets. THE BANK ENCOURAGES AND SUPPORTS ALL LEVELS OF STAFF TO MAKE A DIFFERENCE IN THEIR COMMUNITY. Non-profits are given assistance to help make their mission successful. Events and programs are promoted by the Bank; organizations also receive marketing and volunteer support. The Bank encourages and supports all levels of staff to make a difference in their community. Internal administrative support is provided for organized programs with America’s Grow- a-Row, NORWESCAP and Center for Hope Hospice to ensure these efforts are well executed. America’s Grow-A-Row is an award-winning local farm whose mission is to provide fresh, healthy produce to those in need. In addition to sponsoring events, the Bank sends a team of employees every month to work on the farm. Unity has been recognized by this organization as an outstanding partner supplying consistent support year to year. For over a decade, the Bank has coordinated a special holiday service project. Employees have the option to donate any amount through payroll deduction and the Bank matches the amount. At the end of the year these funds are donated to a local food pantry in the immediate community of each branch. 2019 was a record fundraising year for the Bank. The program donated a record $28,500 to nineteen food pantries in our footprint. Representatives from the branches deliver the donations and employees see the impact in their own neighborhood. Unity’s Start Smart Financial Education Program is a comprehensive financial literacy program designed for grades Pre-K through 12. The Bank has provided this program to schools and the community over the past nine years. The initiative is even more important today because New Jersey recently expanded the financial literacy educational requirements for middle school students. The program is offered to schools and community groups at no cost. In 2019, Unity partnered with Union Township and South Plainfield school districts to offer long-term programming. Unity Bank was honored at the Hunterdon Healthcare Foundation’s annual Crystal Ball with the 2019 Corporate Spirit of Hunterdon Award. This award highlights an organization that has driven economic growth in the region and significantly impacted the success of Hunterdon Healthcare’s efforts in our local community. UNITY PARTICIPATED IN 500+ community events, sponsorships & volunteer opportunities in 2019 1 hand = 20 events 19 FOOD PANTRIES received funds through employee deductions matched by Unity Bank CORPORATE SPIRIT OF HUNTERDON AWARD RECIPIENT presented by the Hunterdon Healthcare Foundation Executive & Senior Management James Hughes President Chief Executive Officer Michael Novak Senior Vice President Commercial Loan Officer Janice Bolomey Executive Vice President Chief Administrative Officer/ Director of Sales Christopher Bono First Vice President Retail Regional Sales Manager John Kauchak Executive Vice President Chief Operating Officer Vincent Geraci First Senior Vice President Mortgage Sales Manager Stephen Rooney First Senior Vice President Chief Lending Officer David Bove Senior Vice President Chief Technology Officer Laureen Cook Senior Vice President Controller Christopher Burke First Vice President Senior Credit Officer Christopher Fenimore First Vice President Chief Compliance Officer Michelle Kirmser First Vice President General Counsel Rebecca Kugelman First Vice President Deposit Operations Manager Kenneth Plinio First Vice President Mortgage & Consumer Operations Manager Rosemary Fellner Senior Vice President Chief Marketing Officer Bridget Walsh First Vice President Human Resources Director David Hensley Senior Vice President Commercial Loan Officer N O I T A M R O F N I E T A R O P R O C Board of Directors David Dallas Chairman of the Board CEO, Dallas Group of America, Inc. Allen Tucker Vice Chairman of the Board Chairman, Tucker Enterprises Dr. Mark Brody Director Managing Member, Financial Planning Analysts, LLC Wayne Courtright Director Retired, Former Banker James Hughes Director President/CEO, Unity Bank Peter Maricondo Director Retired Financial Consultant Raj Patel Director President/CEO, Raja Group Donald Souders, Jr. Director Attorney/Partner, Florio, Perrucci, Steinhardt & Fader, LLC Robert Dallas, II Director President, Dallas Group of America, Inc. Aaron Tucker Director President, Tucker Enterprises Dr. Mary Gross Director Founder, Human Edge Resources, LLC Shareholder Information Annual Meeting Shareholders of Unity Bancorp, Inc. are cordially invited to the Annual Meeting of Shareholders. The meeting will be held at 9:00 am, April 23, 2020 at The Coach House of The Ryland Inn, Whitehouse Station, NJ. Stock Listing NASDAQ Symbol: UNTY Transfer Agent and Registrar Computershare, Inc. PO Box 30170 College Station, Texas 77842-3170 800.368.5948 Computershare.com Investor Inquiries James Hughes 908.713.4306 | James.Hughes@unitybank.com Independent Registered Public Accounting Firm RSM US LLP Blue Bell, Pennsylvania Legal Counsel Windels Marx Lane & Mittendorf, LLP New Brunswick, New Jersey LOCATI ONS New Jersey Bergen County: 4 Emerson Plaza West  Emerson, NJ 07630 475 Franklin Turnpike  Ramsey, NJ 07446 Hunterdon County: 64 Old Highway 22  Clinton, NJ 08809 157 Main St.  Flemington, NJ 08822 370 Route 22 W.  Whitehouse Station, NJ 08889 Middlesex County: 1746 Oak Tree Rd.  Edison, NJ 08820 104 Raritan Ave.  Highland Park, NJ 08904 1230 Bound Brook Rd.  Middlesex, NJ 08846 2426 Plainfield Ave.  South Plainfield, NJ 07080 Somerset County: 450 Somerset St.  North Plainfield, NJ 07060 (pictured on back cover) 120 Cedar Grove Ln.  Somerset, NJ 08873 12 Mountain Ave.  Somerville, NJ 08876 Union County: 628 North Wood Ave.  Linden, NJ 07036 2222 South Ave.  Scotch Plains, NJ 07076 952 Stuyvesant Ave.  Union, NJ 07083 Warren County: 1225 Route 22 W.  Phillipsburg, NJ 08865 5 E. Asbury Anderson Rd.  Washington, NJ 07882 Pennsylvania Northampton County: 2850 Easton Ave.  Bethlehem, PA 18017 (pictured on front cover) 1700 Sullivan Trail  Forks, PA 18040 UN ITY BAN COR P, INC 64 Old Highway 22  Clinton, NJ 08809 unitybank.com  800.618.2265 

Continue reading text version or see original annual report in PDF format above