Unity Bancorp (UNTY) 8-K Unity Bancorp Reports Third Quarter Earnings Highlights

For Immediate Release	News Media & Financial Analyst Contact:
Unity Bancorp, Inc. (NSDQ: UNTY)	Alan J. Bedner, EVP and CFO
October 18, 2019	(908) 713-4308

Unity Bancorp Reports

Quarterly Earnings up 8.5%

Clinton, NJ, October 17, 2019 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $6.0 million, or $0.54 per diluted share, for the quarter ended September 30, 2019, an 8.5 percent increase compared to the $5.5 million, or $0.50 per diluted share reported for the prior year’s third quarter.   For the nine months ended September 30, 2019, Unity reported net income of $17.5 million, or $1.59 per diluted share, an 8.8 percent increase compared to $16.1 million or $1.48 per diluted share for the prior year’s period.

Quarterly net income included a $768 thousand gain on the sale of our Union, NJ branch building. The sale was in response to the Union, NJ redevelopment initiative. We will be relocating our Union, NJ branch to a new facility located across the street from the current branch. Also included in quarterly net income is a Federal Deposit Insurance assessment credit of $146 thousand. On September 30, 2018, the Deposit Insurance Fund Reserve Ratio reached 1.36 percent and the Federal Deposit Insurance Corporation (“FDIC”) announced that small banks would be awarded assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from 1.15 percent to 1.35 percent, to be applied when the reserve ratio is at least 1.38 percent. The initial credits were applied in September 2019.

Third Quarter Earnings Highlights

• Net interest income, our primary driver of earnings, increased $837 thousand to $14.4 million for the quarter ended September 30, 2019, compared to the prior year’s quarter, due to loan growth and a stable net interest margin.

• Net interest margin decreased slightly to 3.90% for the quarter ended September 30, 2019, compared to 3.92% for the prior year’s quarter due to recent interest rate cuts by the Federal Reserve Board.

• The provision for loan losses was $750 thousand for the quarter ended September 30, 2019, an increase of $250 thousand from the prior year’s quarter. The provision for loan losses increased as a result of loan charge-offs and growth in the portfolio.

• Noninterest income increased $231 thousand to $2.7 million compared to the prior year’s quarter and increased $299 thousand compared to the prior sequential quarter. The increase was primarily due to the gain on the sale of the Union, NJ building. The Company elected not to sell SBA loans and residential mortgage portfolio loans during the quarter.

• Noninterest expense decreased $72 thousand to $8.7 million compared to the prior year’s quarter and decreased $62 thousand compared to the prior sequential quarter. Quarterly noninterest expense included an FDIC assessment credit of $146 thousand. The year-over-year decrease was the result of an $850 thousand supplemental executive retirement (“SERP”) benefit expense in the prior year’s quarter, partially offset by a $317 thousand legal settlement related to one OREO property in the prior year’s quarter.

• The effective tax rate was 22.0% compared to 18.6% in the prior year’s quarter due to recent New Jersey tax legislation changes. The effective tax rate is expected to increase in the future as a result of this legislation.

Balance Sheet Highlights

• Total loans increased $63.9 million, or 4.9%, from year-end 2018 to $1.4 billion at September 30, 2019. Commercial, residential mortgage and consumer loan portfolios increased $29.1 million, $20.9 million and $14.9 million, respectively, partially offset by a decline of $1.1 million in SBA loans. Overall loan growth was impacted by increased payoffs.

• Total deposits increased $65.7 million, or 5.4%, from year-end 2018 to $1.3 billion at September 30, 2019. Growth resulted primarily from time deposit promotions.

• Borrowed funds remained flat at $210.0 million at September 30, 2019.

• Shareholders’ equity was $154.9 million at September 30, 2019, an increase of $16.4 million from year-end 2018, due to retained net income. Shareholders’ equity continues to grow organically at a rate that exceeds balance sheet growth.

• Book value per common share was $14.25 as of September 30, 2019.

• At September 30, 2019, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 10.54%, 12.24%, 13.04% and 14.28% respectively, all in excess of the ratios required to be deemed “well-capitalized.”

• Nonperforming loans totaled $5.6 million and included $4.4 million of well-secured residential mortgage loans. Nonperforming assets to total assets were 0.44% and the allowance to total loans ratio remained at 1.17% at September 30, 2019. Net charge-offs were $713 thousand for the quarter. This included a $500 thousand charge-off on a contractually performing loan due to a decline in the borrower’s cash flow.

Other Highlights

• Unity Bancorp has been named to the Sandler O’Neill Sm-All Stars Class of 2019. This prestigious award recognizes financial institutions, with a market capitalization below $2.5 billion, based on criteria such as growth, profitability, credit quality and capital strength. Unity was one of only thirty publicly traded banks and thrifts recognized and one of five banks headquartered in New Jersey, which were recognized.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.7yu billion in assets and $1.3 billion in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 19 retail service centers located in Bergen, Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County in 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

September 30, 2019

														Sep 30, 2019 vs.
														Jun 30, 2019		Sep 30, 2018
(In thousands, except percentages and per share amounts)		Sep 30, 2019				Jun 30, 2019				Sep 30, 2018				%		%
BALANCE SHEET DATA:
Total assets		$	1,664,308			$	1,626,737			$	1,553,152			2.3	%	7.2	%
Total deposits		1,273,362				1,264,353				1,219,473				0.7		4.4
Total loans		1,368,474				1,344,757				1,283,304				1.8		6.6
Total securities		63,991				62,122				63,399				3.0		0.9
Total shareholders' equity		154,884				149,383				133,067				3.7		16.4
Allowance for loan losses		(16,002		)		(15,965		)		(14,988		)		0.2		6.8
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes		$	7,635			$	7,480			$	6,745			2.1		13.2
Provision for income taxes		1,676				1,646				1,255				1.8		33.5
Net income		$	5,959			$	5,834			$	5,490			2.1		8.5
Net income per common share - Basic		$	0.55			$	0.54			$	0.51			1.9		7.8
Net income per common share - Diluted		$	0.54			$	0.53			$	0.50			1.9		8.0
Performance ratios:
Return on average assets		1.53			%	1.54			%	1.50			%
Return on average equity		15.57			%	16.01			%	16.64			%
Efficiency ratio		51.06			%	53.20			%	54.86			%
Net interest margin		3.90			%	3.96			%	3.92			%
Noninterest expense to average assets		2.24			%	2.32			%	2.41			%
FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes		$	22,375							$	19,958					12.1
Provision for income taxes	��	4,842								3,841						26.1
Net income		$	17,533							$	16,117					8.8
Net income per common share - Basic		$	1.62							$	1.50					8.0
Net income per common share - Diluted		$	1.59							$	1.48					7.4
Performance ratios:
Return on average assets		1.54			%					1.52			%			1.3
Return on average equity		16.02			%					17.14			%			(6.5	)
Efficiency ratio		52.25			%					53.90			%			(3.1	)
Net interest margin		3.97			%					3.95			%			0.5
Noninterest expense to average assets		2.28			%					2.38			%			(4.2	)
SHARE INFORMATION:
Market price per share		$	22.15			$	22.70			$	22.90			(2.4	)	(3.3	)
Dividends paid		$	0.08			$	0.08			$	0.07			—		14.3
Book value per common share		$	14.25			$	13.76			$	12.37			3.6		15.2
Average diluted shares outstanding (QTD)		11,036				11,026				10,936				0.1		0.9
CAPITAL RATIOS:
Total equity to total assets		9.31			%	9.18			%	8.57			%
Leverage ratio		10.54			%	10.36			%	9.74			%
Common equity tier 1 risk-based capital ratio		12.24			%	11.99			%	11.15			%
Tier 1 risk-based capital ratio		13.04			%	12.81			%	12.00			%
Total risk-based capital ratio		14.28			%	14.06			%	13.25			%

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	7,305		$	5,336		$	6,251		36.9	16.9
QTD net chargeoffs (annualized) to QTD average loans	0.21		%	0.02		%	0.05		%
Allowance for loan losses to total loans	1.17		%	1.19		%	1.17		%
Nonperforming assets to total loans and OREO	0.53		%	0.40		%	0.49		%
Nonperforming assets to total assets	0.44		%	0.33		%	0.40		%

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2019

										Sep 30, 2019 vs.
										Dec 31, 2018		Sep 30, 2018
(In thousands, except percentages)	Sep 30, 2019			Dec 31, 2018			Sep 30, 2018			%		%
ASSETS
Cash and due from banks	$	29,426		$	20,028		$	23,217		46.9	%	26.7	%
Federal funds sold, interest-bearing deposits and repos	137,334			125,487			121,339			9.4		13.2
Cash and cash equivalents	166,760			145,515			144,556			14.6		15.4
Securities:
Securities available for sale	47,295			46,713			46,874			1.2		0.9
Securities held to maturity	14,332			14,875			15,325			(3.7	)	(6.5	)
Equity securities	2,364			2,144			1,200			10.3		97.0
Total securities	63,991			63,732			63,399			0.4		0.9
Loans:
SBA loans held for sale	13,053			11,171			13,029			16.8		0.2
SBA loans held for investment	36,380			39,333			41,051			(7.5	)	(11.4	)
Commercial loans	723,249			694,102			697,075			4.2		3.8
Residential mortgage loans	456,963			436,056			413,652			4.8		10.5
Consumer loans	138,829			123,904			118,497			12.0		17.2
Total loans	1,368,474			1,304,566			1,283,304			4.9		6.6
Allowance for loan losses	(16,002		)	(15,488		)	(14,988		)	3.3		6.8
Net loans	1,352,472			1,289,078			1,268,316			4.9		6.6
Premises and equipment, net	21,700			23,371			23,416			(7.1	)	(7.3	)
Bank owned life insurance ("BOLI")	25,302			24,710			24,544			2.4		3.1
Deferred tax assets	5,768			5,350			5,310			7.8		8.6
Federal Home Loan Bank ("FHLB") stock	10,899			10,795			9,445			1.0		15.4
Accrued interest receivable	6,858			6,399			6,412			7.2		7.0
Other real estate owned ("OREO")	1,723			56			56			2,976.8		2,976.8
Goodwill	1,516			1,516			1,516			—		—
Other assets	7,319			8,635			6,182			(15.2	)	18.4
Total assets	$	1,664,308		$	1,579,157		$	1,553,152		5.4	%	7.2	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	279,238		$	270,152		$	271,321		3.4	%	2.9	%
Interest-bearing demand	179,661			185,792			180,189			(3.3	)	(0.3	)
Savings	394,333			394,727			408,927			(0.1	)	(3.6	)
Time Deposits	420,130			357,016			359,036			17.7		17.0
Total deposits	1,273,362			1,207,687			1,219,473			5.4		4.4
Borrowed funds	210,000			210,000			180,000			—		16.7
Subordinated debentures	10,310			10,310			10,310			—		—
Accrued interest payable	420			406			506			3.4		(17.0	)
Accrued expenses and other liabilities	15,332			12,266			9,796			25.0		56.5
Total liabilities	1,509,424			1,440,669			1,420,085			4.8		6.3
Shareholders' equity:
Common stock	89,753			88,484			88,149			1.4		1.8
Retained earnings	65,199			50,161			45,121			30.0		44.5
Accumulated other comprehensive (loss) income	(68		)	(157		)	(203		)	NM		NM
Total shareholders' equity	154,884			138,488			133,067			11.8		16.4
Total liabilities and shareholders' equity	$	1,664,308		$	1,579,157		$	1,553,152		5.4	%	7.2	%
Issued and outstanding common shares	10,869			10,780			10,756

NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2019

										Sep 30, 2019 vs.
	For the three months ended									Jun 30, 2019					Sep 30, 2018
(In thousands, except percentages and per share amounts)	Sep 30, 2019			Jun 30, 2019			Sep 30, 2018			$			%		$			%
INTEREST INCOME
Federal funds sold, interest-bearing deposits and repos	$	271		$	232		$	187		$	39		16.8	%	$	84		44.9	%
FHLB stock	82			77			101			5			6.5		(19		)	(18.8	)
Securities:
Taxable	463			461			465			2			0.4		(2		)	(0.4	)
Tax-exempt	26			27			28			(1		)	(3.7	)	(2		)	(7.1	)
Total securities	489			488			493			1			0.2		(4		)	(0.8	)
Loans:
SBA loans	943			942			1,050			1			0.1		(107		)	(10.2	)
Commercial loans	9,467			9,357			8,784			110			1.2		683			7.8
Residential mortgage loans	5,606			5,535			4,803			71			1.3		803			16.7
Consumer loans	2,197			2,150			1,776			47			2.2		421			23.7
Total loans	18,213			17,984			16,413			229			1.3		1,800			11.0
Total interest income	19,055			18,781			17,194			274			1.5		1,861			10.8
INTEREST EXPENSE
Interest-bearing demand deposits	438			442			330			(4		)	(0.9	)	108			32.7
Savings deposits	1,194			1,188			1,049			6			0.5		145			13.8
Time deposits	2,577			2,437			1,739			140			5.7		838			48.2
Borrowed funds and subordinated debentures	442			504			509			(62		)	(12.3	)	(67		)	(13.2	)
Total interest expense	4,651			4,571			3,627			80			1.8		1,024			28.2
Net interest income	14,404			14,210			13,567			194			1.4		837			6.2
Provision for loan losses	750			350			500			400			114.3		250			50.0
Net interest income after provision for loan losses	13,654			13,860			13,067			(206		)	(1.5	)	587			4.5
NONINTEREST INCOME
Branch fee income	373			378			357			(5		)	(1.3	)	16			4.5
Service and loan fee income	522			569			465			(47		)	(8.3	)	57			12.3
Gain on sale of SBA loans held for sale, net	—			238			253			(238		)	(100.0	)	(253		)	(100.0	)
Gain on sale of mortgage loans, net	545			630			597			(85		)	(13.5	)	(52		)	(8.7	)
BOLI income	138			147			464			(9		)	(6.1	)	(326		)	(70.3	)
Net security gains	18			98			2			(80		)	(81.6	)	16			800.0
Other income	1,114			351			341			763			217.4		773			226.7
Total noninterest income	2,710			2,411			2,479			299			12.4		231			9.3
NONINTEREST EXPENSE
Compensation and benefits	5,353			5,186			5,704			167			3.2		(351		)	(6.2	)
Occupancy	651			653			675			(2		)	(0.3	)	(24		)	(3.6	)
Processing and communications	749			748			709			1			0.1		40			5.6
Furniture and equipment	711			718			586			(7		)	(1.0	)	125			21.3
Professional services	274			277			270			(3		)	(1.1	)	4			1.5
Loan collection & OREO (recoveries) expenses	(48		)	(10		)	(331		)	(38		)	(380.0	)	283			85.5
Other loan expenses	89			67			51			22			32.8		38			74.5
Deposit insurance	—			134			191			(134		)	(100.0	)	(191		)	(100.0	)
Advertising	334			374			370			(40		)	(10.7	)	(36		)	(9.7	)
Director fees	171			164			175			7			4.3		(4		)	(2.3	)
Other expenses	445			480			401			(35		)	(7.3	)	44			11.0
Total noninterest expense	8,729			8,791			8,801			(62		)	(0.7	)	(72		)	(0.8	)
Income before provision for income taxes	7,635			7,480			6,745			155			2.1		890			13.2
Provision for income taxes	1,676			1,646			1,255			30			1.8		421			33.5
Net income	$	5,959		$	5,834		$	5,490		$	125		2.1	%	$	469		8.5	%

Effective tax rate	22.0		%	22.0		%	18.6		%
Net income per common share - Basic	$	0.55		$	0.54		$	0.51
Net income per common share - Diluted	$	0.54		$	0.53		$	0.50
Weighted average common shares outstanding - Basic	10,863			10,843			10,743
Weighted average common shares outstanding - Diluted	11,036			11,026			10,936

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2019

	For the nine months ended September 30,					Current YTD vs Prior YTD
(In thousands, except percentages and per share amounts)	2019		2018			$			%
INTEREST INCOME
Federal funds sold, interest-bearing deposits and repos	$	724	$	563		$	161		28.6	%
FHLB stock	275		359			(84		)	(23.4	)
Securities:
Taxable	1,400		1,442			(42		)	(2.9	)
Tax-exempt	81		88			(7		)	(8.0	)
Total securities	1,481		1,530			(49		)	(3.2	)
Loans:
SBA loans	2,880		3,365			(485		)	(14.4	)
Commercial loans	27,892		24,718			3,174			12.8
Residential mortgage loans	16,702		13,666			3,036			22.2
Consumer loans	6,382		5,003			1,379			27.6
Total loans	53,856		46,752			7,104			15.2
Total interest income	56,336		49,204			7,132			14.5
INTEREST EXPENSE
Interest-bearing demand deposits	1,289		813			476			58.5
Savings deposits	3,500		2,768			732			26.4
Time deposits	7,023		4,042			2,981			73.8
Borrowed funds and subordinated debentures	1,695		1,997			(302		)	(15.1	)
Total interest expense	13,507		9,620			3,887			40.4
Net interest income	42,829		39,584			3,245			8.2
Provision for loan losses	1,600		1,550			50			3.2
Net interest income after provision for loan losses	41,229		38,034			3,195			8.4
NONINTEREST INCOME
Branch fee income	1,120		1,107			13			1.2
Service and loan fee income	1,533		1,441			92			6.4
Gain on sale of SBA loans held for sale, net	554		1,383			(829		)	(59.9	)
Gain on sale of mortgage loans, net	1,525		1,442			83			5.8
BOLI income	435		810			(375		)	(46.3	)
Net security gains (losses)	216		(6		)	222			3,700.0
Other income	1,758		900			858			95.3
Total noninterest income	7,141		7,077			64			0.9
NONINTEREST EXPENSE
Compensation and benefits	15,384		15,274			110			0.7
Occupancy	1,997		2,057			(60		)	(2.9	)
Processing and communications	2,213		2,072			141			6.8
Furniture and equipment	2,086		1,732			354			20.4
Professional services	839		682			157			23.0
Loan collection & OREO expenses (recoveries)	9		(320		)	329			102.8
Other loan expenses	202		137			65			47.4
Deposit insurance	301		593			(292		)	(49.2	)
Advertising	1,056		1,051			5			0.5
Director fees	499		502			(3		)	(0.6	)
Other expenses	1,409		1,373			36			2.6
Total noninterest expense	25,995		25,153			842			3.3
Income before provision for income taxes	22,375		19,958			2,417			12.1
Provision for income taxes	4,842		3,841			1,001			26.1
Net income	$	17,533	$	16,117		$	1,416		8.8	%

Effective tax rate	21.6		%	19.2		%
Net income per common share - Basic	$	1.62		$	1.50
Net income per common share - Diluted	$	1.59		$	1.48
Weighted average common shares outstanding - Basic	10,836			10,713
Weighted average common shares outstanding - Diluted	11,019			10,910

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

September 30, 2019

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	September 30, 2019								June 30, 2019
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	51,744		$	271		2.08	%	$	39,103		$	232		2.38	%
FHLB stock	5,138			82			6.33		5,236			77			5.90
Securities:
Taxable	58,144			463			3.16		57,939			461			3.19
Tax-exempt	4,418			32			2.87		4,470			33			2.96
Total securities (A)	62,562			495			3.14		62,409			494			3.17
Loans:
SBA loans	47,187			943			7.93		47,542			942			7.95
Commercial loans	713,785			9,467			5.26		707,021			9,357			5.31
Residential mortgage loans	450,105			5,606			4.94		445,315			5,535			4.99
Consumer loans	136,239			2,197			6.40		132,804			2,150			6.49
Total loans (B)	1,347,316			18,213			5.36		1,332,682			17,984			5.41
Total interest-earning assets	$	1,466,760		$	19,061		5.16	%	$	1,439,430		$	18,787		5.24	%
Noninterest-earning assets:
Cash and due from banks	24,345								24,625
Allowance for loan losses	(16,224		)						(15,955		)
Other assets	70,484								69,664
Total noninterest-earning assets	78,605								78,334
Total assets	$	1,545,365							$	1,517,764
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	176,953		$	438		0.98	%	$	174,391		$	442		1.02	%
Total savings deposits	398,676			1,194			1.19		395,185			1,188			1.21
Total time deposits	432,035			2,577			2.37		422,458			2,437			2.31
Total interest-bearing deposits	1,007,664			4,209			1.66		992,034			4,067			1.64
Borrowed funds and subordinated debentures	92,326			442			1.90		94,568			504			2.14
Total interest-bearing liabilities	$	1,099,990		$	4,651		1.68	%	$	1,086,602		$	4,571		1.69	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	279,150								271,359
Other liabilities	14,364								13,697
Total noninterest-bearing liabilities	293,514								285,056
Total shareholders' equity	151,861								146,106
Total liabilities and shareholders' equity	$	1,545,365							$	1,517,764
Net interest spread				$	14,410		3.48	%				$	14,216		3.54	%
Tax-equivalent basis adjustment				(6		)						(6		)
Net interest income				$	14,404							$	14,210
Net interest margin							3.90	%							3.96	%

(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 nondeductable portion of interest expense, assuming a federal tax rate of 21 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, 2019

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	September 30, 2019								September 30, 2018
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	51,744		$	271		2.08	%	$	40,060		$	187		1.85	%
FHLB stock	5,138			82			6.33		5,805			101			6.90
Securities:
Taxable	58,144			463			3.16		59,916			465			3.08
Tax-exempt	4,418			32			2.87		5,095			35			2.73
Total securities (A)	62,562			495			3.14		65,011			500			3.05
Loans:
SBA loans	47,187			943			7.93		56,837			1,050			7.33
Commercial loans	713,785			9,467			5.26		683,632			8,784			5.10
Residential mortgage loans	450,105			5,606			4.94		404,439			4,803			4.71
Consumer loans	136,239			2,197			6.40		116,421			1,776			6.05
Total loans (B)	1,347,316			18,213			5.36		1,261,329			16,413			5.16
Total interest-earning assets	$	1,466,760		$	19,061		5.16	%	$	1,372,205		$	17,201		4.97	%
Noninterest-earning assets:
Cash and due from banks	24,345								25,560
Allowance for loan losses	(16,224		)						(14,909		)
Other assets	70,484								65,645
Total noninterest-earning assets	78,605								76,296
Total assets	$	1,545,365							$	1,448,501
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	176,953		$	438		0.98	%	$	173,515		$	330		0.75	%
Total savings deposits	398,676			1,194			1.19		407,287			1,049			1.02
Total time deposits	432,035			2,577			2.37		350,747			1,739			1.97
Total interest-bearing deposits	1,007,664			4,209			1.66		931,549			3,118			1.33
Borrowed funds and subordinated debentures	92,326			442			1.90		109,408			509			1.85
Total interest-bearing liabilities	$	1,099,990		$	4,651		1.68	%	$	1,040,957		$	3,627		1.38	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	279,150								266,833
Other liabilities	14,364								9,805
Total noninterest-bearing liabilities	293,514								276,638
Total shareholders' equity	151,861								130,906
Total liabilities and shareholders' equity	$	1,545,365							$	1,448,501
Net interest spread				$	14,410		3.48	%				$	13,574		3.59	%
Tax-equivalent basis adjustment				(6		)						(7		)
Net interest income				$	14,404							$	13,567
Net interest margin							3.90	%							3.92	%

(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 nondeductable portion of interest expense, assuming a federal tax rate of 21 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, 2019

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the nine months ended
	September 30, 2019								September 30, 2018
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	43,021		$	724		2.25	%	$	42,772		$	563		1.76	%
FHLB stock	5,768			275			6.37		7,131			359			6.73
Securities:
Taxable	58,271			1,400			3.21		61,538			1,442			3.13
Tax-exempt	4,491			101			3.01		5,214			109			2.80
Total securities (A)	62,762			1,501			3.20		66,752			1,551			3.11
Loans:
SBA loans	48,238			2,880			7.98		62,517			3,365			7.20
Commercial loans	706,280			27,892			5.28		657,879			24,718			5.02
Residential mortgage loans	445,145			16,702			5.02		387,651			13,666			4.71
Consumer loans	131,714			6,382			6.48		114,658			5,003			5.83
Total loans (B)	1,331,377			53,856			5.41		1,222,705			46,752			5.11
Total interest-earning assets	$	1,442,928		$	56,356		5.22	%	$	1,339,360		$	49,225		4.91	%
Noninterest-earning assets:
Cash and due from banks	25,019								24,325
Allowance for loan losses	(15,979		)						(14,429		)
Other assets	70,243								65,380
Total noninterest-earning assets	79,283								75,276
Total assets	$	1,522,211							$	1,414,636
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	177,789		$	1,289		0.97	%	$	173,381		$	813		0.63	%
Total savings deposits	397,029			3,500			1.18		403,916			2,768			0.92
Total time deposits	408,718			7,023			2.30		299,970			4,042			1.80
Total interest-bearing deposits	983,536			11,812			1.61		877,267			7,623			1.16
Borrowed funds and subordinated debentures	107,101			1,695			2.12		143,492			1,997			1.86
Total interest-bearing liabilities	$	1,090,637		$	13,507		1.66	%	$	1,020,759		$	9,620		1.26	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	271,118								258,787
Other liabilities	14,129								9,382
Total noninterest-bearing liabilities	285,247								268,169
Total shareholders' equity	146,327								125,708
Total liabilities and shareholders' equity	$	1,522,211							$	1,414,636
Net interest spread				$	42,849		3.56	%				$	39,605		3.65	%
Tax-equivalent basis adjustment				(20		)						(21		)
Net interest income				$	42,829							$	39,584
Net interest margin							3.97	%							3.95	%

(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 nondeductable portion of interest expense, assuming a federal tax rate of 21 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, 2019

Amounts in thousands, except percentages	Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018			Sep 30, 2018
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	15,965		$	15,684		$	15,488		$	14,988		$	14,634
Provision for loan losses charged to expense	750			350			500			500			500
	16,715			16,034			15,988			15,488			15,134
Less: Chargeoffs
SBA loans	100			84			308			—			169
Commercial loans	500			—			1			10			—
Residential mortgage loans	130			—			—			—			—
Consumer loans	—			—			1			—			—
Total chargeoffs	730			84			310			10			169
Add: Recoveries
SBA loans	14			1			1			3			1
Commercial loans	3			4			5			5			5
Residential mortgage loans	—			—			—			—			—
Consumer loans	—			10			—			2			17
Total recoveries	17			15			6			10			23
Net chargeoffs	713			69			304			—			146
Balance, end of period	$	16,002		$	15,965		$	15,684		$	15,488		$	14,988
LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans	$	504		$	437		$	814		$	1,560		$	1,297
Commercial loans	629			54			1,046			1,076			1,234
Residential mortgage loans	4,427			3,924			5,243			4,211			3,536
Consumer loans	23			—			171			26			128
Total nonperforming loans (1)	5,582			4,415			7,274			6,873			6,195
Other real estate owned ("OREO")	1,723			921			273			56			56
Nonperforming assets	7,305			5,336			7,547			6,929			6,251
Less: Amount guaranteed by SBA	63			68			68			89			104
Net nonperforming assets	$	7,242		$	5,268		$	7,479		$	6,840		$	6,147
Loans 90 days past due & still accruing	$	140		$	—		$	39		$	98		$	546
Performing Troubled Debt Restructurings (TDRs)	$	718		$	728		$	738		$	745		$	755
(1) Nonperforming TDRs included in nonperforming loans	—			—			—			—			—
Total TDRs	$	718		$	728		$	738		$	745		$	755
Allowance for loan losses to:
Total loans at quarter end	1.17		%	1.19		%	1.19		%	1.19		%	1.17		%
Nonperforming loans (1)	286.67			361.61			215.62			225.35			241.94
Nonperforming assets	219.06			299.19			207.82			223.52			239.77
Net nonperforming assets	220.96			303.06			209.71			226.43			243.83
QTD net chargeoffs (recoveries) (annualized) to QTD average loans:
SBA loans	0.72		%	0.70		%	2.49		%	(0.02		)%	1.17		%
Commercial loans	0.28			—			—			—			—
Residential mortgage loans	0.11			—			—			—			—
Consumer loans	—			(0.03		)	—			(0.01		)	(0.06		)
Total loans	0.21		%	0.02		%	0.09		%	—		%	0.05		%
Nonperforming loans to total loans	0.41		%	0.33		%	0.55		%	0.53		%	0.48		%
Nonperforming loans and TDRs to total loans	0.46			0.38			0.61			0.58			0.54
Nonperforming assets to total loans and OREO	0.53			0.40			0.57			0.53			0.49
Nonperforming assets to total assets	0.44			0.33			0.47			0.44			0.40

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

September 30, 2019

(In thousands, except percentages and per share amounts)	Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018			Sep 30, 2018
SUMMARY OF INCOME:
Total interest income	$	19,055		$	18,781		$	18,500		$	18,060		$	17,194
Total interest expense	4,651			4,571			4,284			3,896			3,627
Net interest income	14,404			14,210			14,216			14,164			13,567
Provision for loan losses	750			350			500			500			500
Net interest income after provision for loan losses	13,654			13,860			13,716			13,664			13,067
Total noninterest income	2,710			2,411			2,020			1,954			2,479
Total noninterest expense	8,729			8,791			8,476			8,268			8,801
Income before provision for income taxes	7,635			7,480			7,260			7,350			6,745
Provision for income taxes	1,676			1,646			1,520			1,547			1,255
Net income	$	5,959		$	5,834		$	5,740		$	5,803		$	5,490
Net income per common share - Basic	$	0.55		$	0.54		$	0.53		$	0.54		$	0.51
Net income per common share - Diluted	$	0.54		$	0.53		$	0.52		$	0.53		$	0.50
COMMON SHARE DATA:
Market price per share	$	22.15		$	22.70		$	18.88		$	20.76		$	22.90
Dividends paid	$	0.08		$	0.08		$	0.07		$	0.07		$	0.07
Book value per common share	$	14.25		$	13.76		$	13.28		$	12.85		$	12.37
Weighted average common shares outstanding - Basic	10,863			10,843			10,801			10,765			10,743
Weighted average common shares outstanding - Diluted	11,036			11,026			10,955			10,935			10,936
Issued and outstanding common shares	10,869			10,856			10,822			10,780			10,756
PERFORMANCE RATIOS (Annualized):
Return on average assets	1.53		%	1.54		%	1.55		%	1.56		%	1.50		%
Return on average equity	15.57			16.01			16.52			17.00			16.64
Efficiency ratio	51.06			53.20			52.53			50.69			54.86
Noninterest expense to average assets	2.24			2.32			2.29			2.22			2.41
BALANCE SHEET DATA:
Total assets	1,664,308			1,626,737			1,590,046			1,579,157			1,553,152
Total deposits	1,273,362			1,264,353			1,226,586			1,207,687			1,219,473
Total loans	1,368,474			1,344,757			1,312,994			1,304,566			1,283,304
Total securities	63,991			62,122			62,962			63,732			63,399
Total shareholders' equity	154,884			149,383			143,717			138,488			133,067
Allowance for loan losses	(16,002		)	(15,965		)	(15,684		)	(15,488		)	(14,988		)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets	5.16		%	5.24		%	5.28		%	5.12		%	4.97		%
Interest-bearing liabilities	1.68			1.69			1.60			1.46			1.38
Net interest spread	3.48			3.54			3.68			3.66			3.59
Net interest margin	3.90			3.96			4.06			4.01			3.92
CREDIT QUALITY:
Nonperforming assets	7,305			5,336			7,547			6,929			6,251
QTD net chargeoffs (annualized) to QTD average loans	0.21		%	0.02		%	0.09		%	—		%	0.05		%
Allowance for loan losses to total loans	1.17			1.19			1.19			1.19			1.17
Nonperforming assets to total loans and OREO	0.53			0.40			0.57			0.53			0.49
Nonperforming assets to total assets	0.44			0.33			0.47			0.44			0.40

(In thousands, except percentages and per share amounts)	Sep 30, 2019		Jun 30, 2019		Mar 31, 2019		Dec 31, 2018		Sep 30, 2018
CAPITAL RATIOS AND OTHER:
Total equity to total assets	9.31	%	9.18	%	9.04	%	8.77	%	8.57	%
Leverage ratio	10.54		10.36		10.09		9.90		9.74
Common equity tier 1 risk-based capital ratio	12.24		11.99		11.78		11.40		11.15
Tier 1 risk-based capital ratio	13.04		12.81		12.62		12.24		12.00
Total risk-based capital ratio	14.28		14.06		13.87		13.49		13.25
Number of banking offices	19		19		19		19		19
Number of ATMs	20		20		20		20		20
Number of employees	194		185		190		198		195