Unity Bancorp (UNTY) 8-K Results of Operations and Financial Condition

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

April 22, 2015

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports Net Income Increased 50%

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $1.9 million, or $0.23 per diluted share, for the three months ended March 31, 2015, a 50.0% increase compared to net income of $1.3 million, or $0.17 per diluted share, for the same period a year ago.  Return on average assets and average common equity for the quarter were 0.82% and 11.08%, respectively, compared to 0.59% and 9.06% for the same period a year ago. 

Highlights include:

· 3.0% loan growth since year-end 2014 – 6.6% growth in residential mortgage loans, 5.8% growth in consumer loans and 2.2% growth in commercial loans.

· 10.1% increase in net interest income compared to the prior year’s quarter due to strong loan growth. 

· Net interest margin of 3.64% this quarter compared to 3.57% in the prior year’s quarter.

· Improved credit quality metrics and reduced loan loss provision - 24.1% decrease in nonperforming loans and lower level of net charge-offs compared to the prior year’s quarter.  

“Our continued earnings momentum is a direct result of our commitment to providing exceptional service to our customers,” reported James A. Hughes, President and CEO.  “We are realizing record loan volume, as all of our loan departments are exceeding their goals.   I have never been more confident about our ability to continue to grow market share, which in turn will result in increased shareholder value.  I know this year will be a defining year for Unity, as we continue to build an organization that focuses on service and sales.   I look forward to reporting our future successes.” 

Net Interest Income

Our core source of earnings, net interest income, increased $733 thousand to $8.0 million for the quarter ended March 31, 2015 compared to the prior year’s period.  This increase was the result of the strong loan growth over the past twelve months in commercial, residential mortgage and consumer loans.  Quarterly average residential mortgage loans have increased $45.1 million, average commercial loans increased $41.8 million and consumer loans increased $16.4 million compared to the comparable quarter in 2014. Partially offsetting this increase was the lower level of interest income due to our smaller investment portfolio and the increase in deposit interest expense.

The net interest margin increased 7 basis points to 3.64% for the quarter ended March 31, 2015 compared to 3.57% for the prior year’s quarter.  We expect net interest income and net interest margin to continue to expand in future quarters due to strong loan growth.

Provision for Loan Losses

The provision for loan losses decreased $400 thousand to $200 thousand for the quarter ended March 31, 2015, compared to $600 thousand for the prior year period.  The decrease was the result of improving credit quality as evidenced by lower levels of net charge-offs and reduced nonperforming assets. 

Noninterest Income

Noninterest income increased $115 thousand to $1.6 million for the three months ended March 31, 2015, compared to the same period last year.  Quarterly noninterest income increased due to higher gains on the sale of SBA loans.   SBA loan sales totaled $3.5 million with net gains on sale of $363 thousand this quarter compared to sales of $928 thousand and net gains of $83 thousand in the prior year’s quarter.

Quarterly gains on the sale of mortgage loans decreased slightly on a lower sales volume.  During the quarter, $37.1 million in residential mortgage loans were originated, of which $15.0 million were sold at a gain of $344 thousand, compared to $22.2 million originated and $17.4 million sold at a gain of $365 thousand during the prior year’s quarter.  Approximately $7.5 million of the loans sold during the first quarter 2014 were from our portfolio, with the remainder consisting of new production. 

Security gains totaled $110 thousand for the prior year’s quarter.  There were no security gains or losses on sales realized during the quarter.   

Branch fee income, which consists of service charges and overdraft fees, declined $31 thousand in the quarter.  The decreases were due to a lower volume of overdraft fees.

Noninterest Expense

Noninterest expense increased $244 thousand to $6.5 million for the quarter ended March 31, 2015.  Compensation and benefits expenses have increased over the past twelve months due to increased head count   in loan origination and support staff.  Other expense increases included professional services, advertising, marketing agreements and promotional gift expense as well as director fees.  Other real estate owned (“OREO”) expenses decreased $212 thousand this quarter compared to a year ago due to the disposition of properties which had higher holding costs such as property maintenance, taxes and legal costs in the prior year’s period.

Financial Condition

At March 31, 2015, total assets were $1.0 billion, an increase of $26.6 million from year-end 2014:

· Total loans increased $22.8 million or 3.0%, from year-end 2014 to $784.6 million at March 31, 2015. The majority of the growth came in our residential mortgage, commercial and consumer loan portfolios which increased $14.5 million, $8.8 million and $3.5 million, respectively. 

· Total deposits decreased $4.9 million or 0.6%, to $789.4 million at March 31, 2015, due primarily to decreased savings, interest-bearing demand and time deposits, partially offset by an increase in noninterest-bearing demand deposits.  The decreased savings and interest-bearing demand deposit balances were due to seasonal reductions in municipal deposits.

· Shareholders’ equity was $72.0 million at March 31, 2015, an increase of $1.9 million from year-end 2014, due to year-to-date net income less the dividends paid.

· Book value per common share was $8.55 as of March 31, 2015.

· At March 31, 2015, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 8.93%, 9.25, 11.22% and 12.48% respectively, all in excess of the ratios required to be deemed “well-capitalized”. 

Credit Quality

· Nonperforming assets totaled $11.1 million at March 31, 2015, or 1.41% of total loans and OREO, compared to $12.5 million or 1.64% of total loans and OREO at year-end 2014. 

· Nonperforming loans decreased 19.6 % to $9.1 million at March 31, 2015 from year-end.

· OREO increased $813 thousand to $2.0 million at March 31, 2015 from year-end.

· The allowance for loan losses totaled $12.2 million at March 31, 2015, or 1.55% of total loans compared to $12.6 million and 1.65% at December 31, 2014.

· Net charge-offs were $570 thousand for the three months ended March 31, 2015, down from $934 thousand for the same period a year ago. 

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.0 billion in assets and $789 million in deposits.  Unity Bank provides financial services to retail, corporate and small business customers through its 15 retail service centers located in 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

March 31, 2015

										March 31, 2015 vs.
										December 31, 2014		March 31, 2014
(In thousands, except percentages and per share amounts)	March 31, 2015			December 31, 2014			March 31, 2014			%		%
BALANCE SHEET DATA:
Total assets	$	1,035,404		$	1,008,788		$	961,168		2.6	%	7.7	%
Total deposits		789,441			794,341			767,624		(0.6)		2.8
Total loans		784,642			761,825			683,951		3.0		14.7
Total securities		77,308			80,082			109,459		(3.5)		(29.4)
Total shareholders' equity		71,987			70,123			58,810		2.7		22.4
Allowance for loan losses		(12,181)			(12,551)			(12,807)		(2.9)		(4.9)
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	2,959		$	2,653		$	1,955		11.5		51.4
Provision for income taxes		1,020			952			662		7.1		54.1
Net income	$	1,939		$	1,701		$	1,293		14.0		50.0
Net income per common share - Basic (1)	$	0.23		$	0.21		$	0.17		9.5		35.3
Net income per common share - Diluted (1)	$	0.23		$	0.20		$	0.17		15.0		35.3
Return on average assets		0.82	%		0.70	%		0.59	%	17.1		39.0
Return on average equity (2)		11.08	%		9.78	%		9.06	%	13.3		22.3
Efficiency ratio		67.30	%		63.68	%		71.91	%	5.7		(6.4)
SHARE INFORMATION:
Market price per share	$	9.08		$	9.43		$	7.95		(3.7)		14.2
Dividends paid	$	0.03		$	0.03		$	0.02		-		0.5
Book value per common share	$	8.55		$	8.36		$	7.74		2.3		10.5
Average diluted shares outstanding (QTD)		8,514			8,478			7,654		0.4		11.2
CAPITAL RATIOS:
Total equity to total assets		6.95	%		6.95	%		6.12	%	-		13.6
Leverage ratio		8.93	%		8.71	%		8.19	%	2.5		9.0
Common equity tier 1 risk-based capital ratio		9.25	%		n/a			n/a		n/a		n/a
Tier 1 risk-based capital ratio		11.22	%		11.57	%		10.77	%	(3.0)		4.2
Total risk-based capital ratio		12.48	%		12.83	%		12.03	%	(2.7)		3.7
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	11,116		$	12,530		$	14,513		(11.3)		(23.4)
QTD net chargeoffs (annualized) to QTD average loans		0.30	%		0.63	%		0.56	%	(52.4)		(46.4)
Allowance for loan losses to total loans		1.55	%		1.65	%		1.87	%	(6.1)		(17.1)
Nonperforming assets to total loans and OREO		1.41	%		1.64	%		2.11	%	(14.0)		(33.2)
Nonperforming assets to total assets		1.07	%		1.24	%		1.51	%	(13.7)	%	(29.1)	%

(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

(2) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by average shareholders' equity (excluding preferred stock).

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

March 31, 2015

							March 31, 2015 vs.
							December 31, 2014		March 31, 2014
(In thousands, except percentages)	March 31, 2015		December 31, 2014		March 31, 2014		%		%
ASSETS
Cash and due from banks	$	25,282	$	29,351	$	30,025	(13.9)	%	(15.8)	%
Federal funds sold and interest-bearing deposits		108,563		100,470		98,188	8.1		10.6
Cash and cash equivalents		133,845		129,821		128,213	3.1		4.4
Securities:
Securities available for sale		57,875		60,073		86,154	(3.7)		(32.8)
Securities held to maturity		19,433		20,009		23,305	(2.9)		(16.6)
Total securities		77,308		80,082		109,459	(3.5)		(29.4)
Loans:
SBA loans held for sale		6,929		5,179		6,517	33.8		6.3
SBA loans held for investment		39,155		40,401		47,737	(3.1)		(18.0)
SBA 504 loans		29,893		34,322		33,550	(12.9)		(10.9)
Commercial loans		410,742		401,949		368,909	2.2		11.3
Residential mortgage loans		235,371		220,878		180,129	6.6		30.7
Consumer loans		62,552		59,096		47,109	5.8		32.8
Total loans		784,642		761,825		683,951	3.0		14.7
Allowance for loan losses		(12,181)		(12,551)		(12,807)	2.9		4.9
Net loans		772,461		749,274		671,144	3.1		15.1
Premises and equipment, net		15,465		15,231		15,474	1.5		(0.1)
Bank owned life insurance ("BOLI")		13,095		13,001		12,845	0.7		1.9
Deferred tax assets		5,743		5,860		6,308	(2.0)		(9.0)
Federal Home Loan Bank ("FHLB") stock		7,382		6,032		5,752	22.4		28.3
Accrued interest receivable		3,637		3,518		3,212	3.4		13.2
Other real estate owned ("OREO")		1,975		1,162		2,467	70.0		(19.9)
Goodwill and other intangibles		1,516		1,516		1,516	-		-
Other assets		2,977		3,291		4,778	(9.5)		(37.7)
Total assets	$	1,035,404	$	1,008,788	$	961,168	2.6	%	7.7	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	163,535	$	152,785	$	172,010	7.0	%	(4.9)	%
Interest-bearing demand deposits		124,110		128,875		134,321	(3.7)		(7.6)
Savings deposits		290,843		300,348		253,109	(3.2)		14.9
Time deposits, under $100,000		112,671		113,119		112,150	(0.4)		0.5
Time deposits, $100,000 and over		98,282		99,214		96,034	(0.9)		2.3
Total deposits		789,441		794,341		767,624	(0.6)		2.8
Borrowed funds		155,000		125,000		115,000	24.0		34.8
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		478		474		455	0.8		5.1
Accrued expenses and other liabilities		3,033		3,385		3,814	(10.4)		(20.5)
Total liabilities		963,417		938,665		902,358	2.6		6.8
Shareholders' equity:
Common stock		58,927		58,785		52,237	0.2		12.8
Retained earnings		12,880		11,195		6,739	15.1		91.1
Accumulated other comprehensive income		180		143		(166)	25.9		208.4

Total shareholders' equity		71,987		70,123		58,810	2.7		22.4
Total liabilities and shareholders' equity	$	1,035,404	$	1,008,788	$	961,168	2.6	%	7.7	%
Issued and outstanding common shares		8,423		8,388		7,602

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

March 31,  2015

										March 31, 2015 vs.
	For the three months ended									December 31, 2014					March 31, 2014
(In thousands, except percentages and per share amounts)	March 31, 2015			December 31, 2014			March 31, 2014			$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	9		$	13		$	9		$	(4)		(30.8)	%	$	-		-	%
Federal Home Loan Bank stock		44			38			47			6		15.8			(3)		(6.4)
Securities:
Taxable		387			444			726			(57)		(12.8)			(339)		(46.7)
Tax-exempt		72			79			105			(7)		(8.9)			(33)		(31.4)
Total securities		459			523			831			(64)		(12.2)			(372)		(44.8)
Loans:
SBA loans		679			605			583			74		12.2			96		16.5
SBA 504 loans		346			425			399			(79)		(18.6)			(53)		(13.3)
Commercial loans		5,066			5,064			4,601			2		-			465		10.1
Residential mortgage loans		2,582			2,461			2,058			121		4.9			524		25.5
Consumer loans		699			673			495			26		3.9			204		41.2
Total loans		9,372			9,228			8,136			144		1.6			1,236		15.2
Total interest income		9,884			9,802			9,023			82		0.8			861		9.5
INTEREST EXPENSE
Interest-bearing demand deposits		106			112			111			(6)		(5.4)			(5)		(4.5)
Savings deposits		264			270			182			(6)		(2.2)			82		45.1
Time deposits		686			715			644			(29)		(4.1)			42		6.5
Borrowed funds and subordinated debentures		808			817			799			(9)		(1.1)			9		1.1
Total interest expense		1,864			1,914			1,736			(50)		(2.6)			128		7.4
Net interest income		8,020			7,888			7,287			132		1.7			733		10.1
Provision for loan losses		200			850			600			(650)		(76.5)			(400)		(66.7)
Net interest income after provision for loan losses		7,820			7,038			6,687			782		11.1			1,133		16.9
NONINTEREST INCOME
Branch fee income		346			362			377			(16)		(4.4)			(31)		(8.2)
Service and loan fee income		296			388			295			(92)		(23.7)			1		0.3
Gain on sale of SBA loans held for sale, net		363			342			83			21		6.1			280		337.3
Gain on sale of mortgage loans, net		344			323			365			21		6.5			(21)		(5.8)
Net security gains		-			55			110			(55)		(100.0)			(110)		(100.0)
Other income		292			190			296			102		53.7			(4)		(1.4)
Total noninterest income		1,641			1,660			1,526			(19)		(1.1)			115		7.5
NONINTEREST EXPENSE
Compensation and benefits		3,472			3,197			3,217			275		8.6			255		7.9
Occupancy		672			596			659			76		12.8			13		2.0
Processing and communications		596			615			582			(19)		(3.1)			14		2.4
Furniture and equipment		373			397			357			(24)		(6.0)			16		4.5
Professional services		236			131			211			105		80.2			25		11.8
Loan costs		221			211			170			10		4.7			51		30.0
OREO expenses		35			72			247			(37)		(51.4)			(212)		(85.8)
Deposit insurance		183			162			178			21		13.0			5		2.8
Advertising		182			269			151			(87)		(32.3)			31		20.5
Other expenses		532			395			486			137		34.7			46		9.5
Total noninterest expense		6,502			6,045			6,258			457		7.6			244		3.9
Income before provision for income taxes		2,959			2,653			1,955			306		11.5			1,004		51.4
Provision for income taxes		1,020			952			662			68		7.1			358		54.1
Net income	$	1,939		$	1,701		$	1,293		$	238		14.0	%	$	646		50.0	%
Effective tax rate		34.5	%		35.9	%		33.9	%

Net income per common share - Basic (1)	$	0.23	$	0.21	$	0.17
Net income per common share - Diluted (1)	$	0.23	$	0.20	$	0.17
Weighted average common shares outstanding - Basic		8,417		8,378		7,586
Weighted average common shares outstanding - Diluted		8,514		8,478		7,654

(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

UNITY BANCORP, INC.

QTD NET INTEREST MARGIN

March 31, 2015

	For the three months ended
	March 31, 2015							December 31, 2014
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	37,280	$	9		0.10	%	$	50,929	$	13		0.10	%
Federal Home Loan Bank ("FHLB") stock		3,847		44		4.64			3,807		38		3.96
Securities:
Taxable		67,046		387		2.34			71,542		444		2.48
Tax-exempt		11,984		106		3.59			13,226		117		3.54
Total securities (A)		79,030		493		2.53			84,768		561		2.65
Loans:
SBA loans		48,405		679		5.69			50,816		605		4.76
SBA 504 loans		33,397		346		4.20			34,533		425		4.88
Commercial loans		406,095		5,066		5.06			401,215		5,064		5.01
Residential mortgage loans		226,125		2,582		4.63			217,008		2,461		4.54
Consumer loans		62,355		699		4.55			57,923		673		4.61
Total loans (B)		776,377		9,372		4.90			761,495		9,228		4.82
Total interest-earning assets	$	896,534	$	9,918		4.49	%	$	900,999	$	9,840		4.35	%
Noninterest-earning assets:
Cash and due from banks		29,908							30,346
Allowance for loan losses		(12,701)							(13,074)
Other assets		43,206							43,577
Total noninterest-earning assets		60,413							60,849
Total assets	$	956,947						$	961,848
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	126,593	$	106		0.34	%	$	126,788	$	112		0.35	%
Savings deposits		290,006		264		0.37			298,166		270		0.36
Time deposits		211,425		686		1.32			219,866		715		1.29
Total interest-bearing deposits		628,024		1,056		0.68			644,820		1,097		0.68
Borrowed funds and subordinated debentures		91,909		808		3.57			91,009		817		3.51
Total interest-bearing liabilities	$	719,933	$	1,864		1.05	%	$	735,829	$	1,914		1.03	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		161,729							152,359
Other liabilities		4,307							4,616
Total noninterest-bearing liabilities		166,036							156,975
Total shareholders' equity		70,978							69,044
Total liabilities and shareholders' equity	$	956,947						$	961,848
Net interest spread			$	8,054		3.44	%			$	7,926		3.32	%
Tax-equivalent basis adjustment				(34)							(38)
Net interest income			$	8,020						$	7,888
Net interest margin						3.64	%						3.49	%

(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 34 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.

QTD NET INTEREST MARGIN

March 31, 2015

	For the three months ended
	March 31, 2015							March 31, 2014
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	37,280	$	9		0.10	%	$	42,029	$	9		0.09	%
FHLB stock		3,847		44		4.64			3,988		47		4.78
Securities:
Taxable		67,046		387		2.34			92,808		726		3.13
Tax-exempt		11,984		106		3.59			16,841		155		3.68
Total securities (A)		79,030		493		2.53			109,649		881		3.21
Loans:
SBA loans		48,405		679		5.69			54,790		583		4.26
SBA 504 loans		33,397		346		4.20			31,719		399		5.10
Commercial loans		406,095		5,066		5.06			364,343		4,601		5.12
Residential mortgage loans		226,125		2,582		4.63			181,058		2,058		4.55
Consumer loans		62,355		699		4.55			45,939		495		4.37
Total loans (B)		776,377		9,372		4.90			677,849		8,136		4.85
Total interest-earning assets	$	896,534	$	9,918		4.49	%	$	833,515	$	9,073		4.39	%
Noninterest-earning assets:
Cash and due from banks		29,908							23,389
Allowance for loan losses		(12,701)							(13,410)
Other assets		43,206							43,599
Total noninterest-earning assets		60,413							53,578
Total assets	$	956,947						$	887,093
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	126,593	$	106		0.34	%	$	131,187	$	111		0.34	%
Savings deposits		290,006		264		0.37			266,321		182		0.28
Time deposits		211,425		686		1.32			205,130		644		1.27
Total interest-bearing deposits		628,024		1,056		0.68			602,638		937		0.63
Borrowed funds and subordinated debentures		91,909		808		3.57			91,265		799		3.50
Total interest-bearing liabilities	$	719,933	$	1,864		1.05	%	$	693,903	$	1,736		1.01	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		161,729							132,167
Other liabilities		4,307							3,169
Total noninterest-bearing liabilities		166,036							135,336
Total shareholders' equity		70,978							57,854
Total liabilities and shareholders' equity	$	956,947						$	887,093
Net interest spread			$	8,054		3.44	%			$	7,337		3.38	%
Tax-equivalent basis adjustment				(34)							(50)
Net interest income			$	8,020						$	7,287
Net interest margin						3.64	%						3.57	%

(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 34 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

March 31, 2015

Amounts in thousands, except percentages	March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	12,551		$	12,918		$	12,858		$	12,807		$	13,141
Provision for loan losses charged to expense		200			850			550			550			600
		12,751			13,768			13,408			13,357			13,741
Less: Chargeoffs
SBA loans		128			569			232			199			53
SBA 504 loans		589			-			-			-			92
Commercial loans		100			377			72			134			454
Residential mortgage loans		-			362			201			5			172
Consumer loans		30			-			211			203			179
Total chargeoffs		847			1,308			716			541			950
Add: Recoveries
SBA loans		37			12			111			10			7
SBA 504 loans		-			-			-			-			-
Commercial loans		201			31			95			31			9
Residential mortgage loans		39			40			20			-			-
Consumer loans		-			8			-			1			-
Total recoveries		277			91			226			42			16
Net chargeoffs		570			1,217			490			499			934
Balance, end of period	$	12,181		$	12,551		$	12,918		$	12,858		$	12,807
LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	9,141		$	11,368		$	11,212		$	11,929		$	12,046
Other real estate owned ("OREO")		1,975			1,162			1,658			1,115			2,467
Nonperforming assets		11,116			12,530			12,870			13,044			14,513
Less:  Amount guaranteed by SBA		270			1,569			200			2,305			1,320
Net nonperforming assets	$	10,846		$	10,961		$	12,670		$	10,739		$	13,193
Loans 90 days past due & still accruing	$	5		$	890		$	-		$	-		$	5
Performing Troubled Debt Restructurings (TDRs)	$	3,458		$	3,548		$	4,194		$	6,965		$	7,363
(1) Nonperforming TDRs included in nonperforming loans		2,911			2,960			3,473			741			448
Total TDRs	$	6,369		$	6,508		$	7,667		$	7,706		$	7,811
Allowance for loan losses to:
Total loans at quarter end		1.55	%		1.65	%		1.74	%		1.81	%		1.87	%
Nonperforming loans (1)		133.26			110.41			115.22			107.79			106.32
Nonperforming assets		109.58			100.17			100.37			98.57			88.25
Net nonperforming assets		112.31			114.51			101.96			119.73			97.07
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		0.76	%		4.35	%		0.90	%		1.40	%		0.34	%
SBA 504 loans		7.15			-			-			-			1.18
Commercial loans		(0.10)			0.34			(0.02)			0.11			0.50
Residential mortgage loans		(0.07)			0.59			0.36			0.01			0.39
Consumer loans		0.20			(0.05)			1.58			1.70			1.58
Total loans		0.30	%		0.63	%		0.27	%		0.29	%		0.56	%
Nonperforming loans to total loans		1.16	%		1.49	%		1.51	%		1.68	%		1.76	%
Nonperforming loans and TDRs to total loans		1.61			1.96			2.07			2.67			2.84
Nonperforming assets to total loans and OREO		1.41			1.64			1.73			1.84			2.11
Nonperforming assets to total assets		1.07			1.24			1.33			1.40			1.51

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

March 31, 2015

(In thousands, except percentages and per share amounts)	March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014
SUMMARY OF INCOME:
Total interest income	$	9,884		$	9,802		$	9,491		$	9,102		$	9,023
Total interest expense		1,864			1,914			1,859			1,797			1,736
Net interest income		8,020			7,888			7,632			7,305			7,287
Provision for loan losses		200			850			550			550			600
Net interest income after provision for loan losses		7,820			7,038			7,082			6,755			6,687
Total noninterest income		1,641			1,660			1,853			1,640			1,526
Total noninterest expense		6,502			6,045			6,241			6,144			6,258
Income before provision for income taxes		2,959			2,653			2,694			2,251			1,955
Provision for income taxes		1,020			952			808			723			662
Net income	$	1,939		$	1,701		$	1,886		$	1,528		$	1,293
Net income per common share - Basic (1)	$	0.23		$	0.21		$	0.24		$	0.20		$	0.17
Net income per common share - Diluted (1)	$	0.23		$	0.20		$	0.24		$	0.20		$	0.17
COMMON SHARE DATA:
Market price per share	$	9.08		$	9.43		$	9.63		$	9.28		$	7.95
Dividends paid	$	0.03		$	0.03		$	0.03		$	0.02		$	0.02
Book value per common share	$	8.55		$	8.36		$	8.17		$	7.95		$	7.74
Weighted average common shares outstanding - Basic		8,417			8,378			7,847			7,605			7,586
Weighted average common shares outstanding - Diluted		8,514			8,478			7,946			7,690			7,654
Issued and outstanding common shares		8,423			8,388			8,370			7,607			7,602
OPERATING RATIOS (Annualized):
Return on average assets		0.82	%		0.70	%		0.82	%		0.68	%		0.59	%
Return on average equity (2)		11.08			9.78			11.89			10.31			9.06
Efficiency ratio		67.30			63.68			65.80			70.81			71.91
BALANCE SHEET DATA:
Total assets	$	1,035,404		$	1,008,788		$	969,593		$	932,414		$	961,168
Total deposits		789,441			794,341			781,920			728,083			767,624
Total loans		784,642			761,825			744,366			708,889			683,951
Total securities		77,308			80,082			86,879			90,470			109,459
Total shareholders' equity		71,987			70,123			68,384			60,477			58,810
Allowance for loan losses		(12,181)			(12,551)			(12,918)			(12,858)			(12,807)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.49	%		4.35	%		4.43	%		4.34	%		4.39	%
Interest-bearing liabilities		1.05			1.03			1.05			1.03			1.01
Net interest spread		3.44			3.32			3.38			3.31			3.38
Net interest margin		3.64			3.49			3.56			3.49			3.57
CREDIT QUALITY:
Nonperforming assets		11,116			12,530			12,870			13,044			14,513
QTD net chargeoffs (annualized) to QTD average loans		0.30	%		0.63	%		0.27	%		0.29	%		0.56	%
Allowance for loan losses to total loans		1.55			1.65			1.74			1.81			1.87
Nonperforming assets to total loans and OREO		1.41			1.64			1.73			1.84			2.11
Nonperforming assets to total assets		1.07			1.24			1.33			1.40			1.51
CAPITAL RATIOS AND OTHER:
Total equity to total assets		6.95	%		6.95	%		7.05	%		6.49	%		6.12	%
Leverage ratio		8.93			8.71			8.96			8.24			8.19

Common equity tier 1 risk-based capital ratio	9.25	n/a	n/a	n/a	n/a
Tier 1 risk-based capital ratio	11.22	11.57	11.58	10.86	10.77
Total risk-based capital ratio	12.48	12.83	12.84	12.12	12.03
Number of banking offices	15	15	15	15	15
Number of ATMs	16	16	16	16	16
Number of employees	166	169	163	171	162

1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

2) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by average shareholders' equity (excluding preferred stock).