Unity Bancorp (UNTY) 8-K Unity Bancorp Reports Quarterly Earnings of $6.1 Million and Full Year Earnings of $23.7 Million

For Immediate Release	News Media & Financial Analyst Contact:
Unity Bancorp, Inc. (NSDQ: UNTY)	Alan J. Bedner, EVP and CFO
January 21, 2020	(908) 713-4308

Unity Bancorp Reports

Quarterly Earnings of $6.1 Million and

Full Year Earnings of $23.7 Million

Clinton, NJ, January 21, 2020 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $6.1 million, or $0.55 per diluted share, for the quarter ended December 31, 2019, a 5.5% increase compared to the $5.8 million, or $0.53 per diluted share reported for the prior year’s fourth quarter.   For the year ended December 31, 2019, Unity reported net income of $23.7 million, or $2.14 per diluted share, a 7.9% increase compared to $21.9 million or $2.01 per diluted share for the prior year’s period.

Fourth Quarter Earnings Highlights

• Net interest income, our primary driver of earnings, increased $599 thousand to $14.8 million for the quarter ended December 31, 2019, compared to the prior year’s quarter, due to strong loan growth.

• Net interest margin decreased to 3.88% for the quarter ended December 31, 2019, compared to 4.01% for the prior year’s quarter due to recent interest rate cuts by the Federal Reserve Board. Our net interest margin remained stable compared to the 3.90% for the prior sequential quarter.

• The provision for loan losses was $500 thousand for the quarter ended December 31, 2019 and 2018 as asset quality remains favorable.

• Noninterest income increased $442 thousand to $2.4 million compared to the prior year’s quarter and decreased $314 thousand compared to the prior sequential quarter. The year-over-year increase was primarily due to market value fluctuations on our equity securities, increased gains on the sale of securities and increased mortgage gains as a result of an increase in volume in the current period. The decrease from the prior sequential quarter was primarily due to the $768 thousand gain on the sale of our Union, NJ branch building in September 2019.

• Noninterest expense increased $451 thousand to $8.7 million compared to the prior year’s quarter and decreased $10 thousand compared to the prior sequential quarter. The year-over-year increase was primarily due to increased compensation and mortgage commissions paid on a higher origination volume.

• The effective tax rate was 22.9% compared to 21.0% in the prior year’s quarter due to recent New Jersey tax legislation changes. The effective tax rate may increase in the future as a result of this legislation.

Balance Sheet Highlights

• Total loans increased $121.0 million, or 9.3%, from year-end 2018 to $1.4 billion at December 31, 2019. Commercial, residential mortgage and consumer loan portfolios increased $70.9 million, $31.7 million and $19.6 million, respectively, partially offset by a decline of $1.2 million in SBA loans. Loan growth was impacted by increased payoffs in 2019; however, our pipeline remains strong.

• Total deposits increased $42.4 million, or 3.5%, from year-end 2018 to $1.3 billion at December 31, 2019. Core growth resulted primarily from time deposit promotions. There was a planned reduction of $22.9 million in brokered deposits in 2019.

• Borrowed funds increased $73.0 million to $283.0 million at December 31, 2019, primarily due to the reduction in brokered deposits and a new $40.0 million fixed rate advance with a maturity date of August 22, 2024, at a rate of 1.81%.

• Shareholders’ equity was $160.7 million at December 31, 2019, an increase of $22.2 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 $14.77 as of December 31, 2019.

• At December 31, 2019, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 10.59%, 11.97%, 12.73% and 13.49% respectively, all in excess of the ratios required to be deemed “well-capitalized.”

• Nonperforming loans totaled $5.6 million and included $3.9 million of well-secured residential mortgage loans, compared to nonperforming loans of $6.9 million in the prior year. Nonperforming assets to total assets were 0.43% at December 31, 2019 and 0.44% at December 31, 2018 and the allowance to total loans ratio was 1.15% at December 31, 2019 and 1.19% at December 31, 2018. Net charge-offs were $107 thousand for the quarter.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.7 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

December 31, 2019

													Dec 31, 2019 vs.
													Sep 30, 2019		Dec 31, 2018
(In thousands, except percentages and per share amounts)	Dec 31, 2019				Sep 30, 2019				Dec 31, 2018				%		%
BALANCE SHEET DATA:
Total assets	$	1,718,942			$	1,664,308			$	1,579,157			3.3	%	8.9	%
Total deposits	1,250,114				1,273,362				1,207,687				(1.8	)	3.5
Total loans	1,425,558				1,368,474				1,304,566				4.2		9.3
Total securities	66,564				63,991				63,732				4.0		4.4
Total shareholders' equity	160,709				154,884				138,488				3.8		16.0
Allowance for loan losses	(16,395		)		(16,002		)		(15,488		)		2.5		5.9
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	7,940			$	7,635			$	7,350			4.0		8.0
Provision for income taxes	1,820				1,676				1,547				8.6		17.6
Net income	$	6,120			$	5,959			$	5,803			2.7		5.5
Net income per common share - Basic	$	0.56			$	0.55			$	0.54			1.8		3.7
Net income per common share - Diluted	$	0.55			$	0.54			$	0.53			1.9		3.8
Performance ratios:
Return on average assets	1.53			%	1.53			%	1.56			%
Return on average equity	15.41			%	15.57			%	17.00			%
Efficiency ratio	51.29			%	51.06			%	50.69			%
Net interest margin	3.88			%	3.90			%	4.01			%
Noninterest expense to average assets	2.17			%	2.24			%	2.22			%
FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes	$	30,315							$	27,307					11.0
Provision for income taxes	6,662								5,388						23.6
Net income	$	23,653							$	21,919					7.9
Net income per common share - Basic	$	2.18							$	2.04					6.9
Net income per common share - Diluted	$	2.14							$	2.01					6.5
Performance ratios:
Return on average assets	1.54			%					1.53			%			0.7
Return on average equity	15.86			%					17.1			%			(7.3	)
Efficiency ratio	52.00			%					53.07			%			(2.0	)
Net interest margin	3.95			%					3.97			%			(0.5	)
Noninterest expense to average assets	2.25			%					2.34			%			(3.8	)
SHARE INFORMATION:
Market price per share	$	22.57			$	22.15			$	20.76			1.9		8.7
Dividends paid	$	0.08			$	0.08			$	0.07			—		14.3
Book value per common share	$	14.77			$	14.25			$	12.85			3.6		14.9
Average diluted shares outstanding (QTD)	11,057				11,036				10,935				0.2		1.1
CAPITAL RATIOS:
Total equity to total assets	9.35			%	9.31			%	8.77			%
Leverage ratio	10.59			%	10.54			%	9.90			%
Common equity tier 1 risk-based capital ratio	11.97			%	12.24			%	11.40			%
Tier 1 risk-based capital ratio	12.73			%	13.04			%	12.24			%
Total risk-based capital ratio	13.48			%	14.28			%	13.49			%

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	7,372		$	7,305		$	6,929		0.9	6.3
QTD net chargeoffs (annualized) to QTD average loans	0.03		%	0.21		%	—		%
Allowance for loan losses to total loans	1.15		%	1.17		%	1.19		%
Nonperforming assets to total loans and OREO	0.52		%	0.53		%	0.53		%
Nonperforming assets to total assets	0.43		%	0.44		%	0.44		%

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2019

										Dec 31, 2019 vs.
										Sep 30, 2019		Dec 31, 2018
(In thousands, except percentages)	Dec 31, 2019			Sep 30, 2019			Dec 31, 2018			%		%
ASSETS
Cash and due from banks	$	21,106		$	29,426		$	20,028		(28.3	) %	5.4	%
Federal funds sold, interest-bearing deposits and repos	136,910			137,334			125,487			(0.3	)	9.1
Cash and cash equivalents	158,016			166,760			145,515			(5.2	)	8.6
Securities:
Securities available for sale	64,275			47,295			46,713			35.9		37.6
Securities held to maturity	—			14,332			14,875			(100.0	)	(100.0	)
Equity securities	2,289			2,364			2,144			(3.2	)	6.8
Total securities	66,564			63,991			63,732			4.0		4.4
Loans:
SBA loans held for sale	13,529			13,053			11,171			3.6		21.1
SBA loans held for investment	35,767			36,380			39,333			(1.7	)	(9.1	)
Commercial loans	765,032			723,249			694,102			5.8		10.2
Residential mortgage loans	467,706			456,963			436,056			2.4		7.3
Consumer loans	143,524			138,829			123,904			3.4		15.8
Total loans	1,425,558			1,368,474			1,304,566			4.2		9.3
Allowance for loan losses	(16,395		)	(16,002		)	(15,488		)	2.5		5.9
Net loans	1,409,163			1,352,472			1,289,078			4.2		9.3
Premises and equipment, net	21,315			21,700			23,371			(1.8	)	(8.8	)
Bank owned life insurance ("BOLI")	26,323			25,302			24,710			4.0		6.5
Deferred tax assets	5,559			5,768			5,350			(3.6	)	3.9
Federal Home Loan Bank ("FHLB") stock	14,184			10,899			10,795			30.1		31.4
Accrued interest receivable	6,984			6,858			6,399			1.8		9.1
Other real estate owned ("OREO")	1,723			1,723			56			—		2,976.8
Goodwill	1,516			1,516			1,516			—		—
Other assets	7,595			7,319			8,635			3.8		(12.0	)
Total assets	$	1,718,942		$	1,664,308		$	1,579,157		3.3	%	8.9	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	279,793		$	279,238		$	270,152		0.2	%	3.6	%
Interest-bearing demand	176,335			179,661			185,792			(1.9	)	(5.1	)
Savings	389,795			394,333			394,727			(1.2	)	(1.2	)
Time Deposits	404,191			420,130			357,016			(3.8	)	13.2
Total deposits	1,250,114			1,273,362			1,207,687			(1.8	)	3.5
Borrowed funds	283,000			210,000			210,000			34.8		34.8
Subordinated debentures	10,310			10,310			10,310			—		—
Accrued interest payable	455			420			406			8.3		12.1
Accrued expenses and other liabilities	14,354			15,332			12,266			(6.4	)	17.0
Total liabilities	1,558,233			1,509,424			1,440,669			3.2		8.2
Shareholders' equity:
Common stock	90,113			89,753			88,484			0.4		1.8
Retained earnings	70,442			65,199			50,161			8.0		40.4
Accumulated other comprehensive (loss) income	154			(68		)	(157		)	NM		NM
Total shareholders' equity	160,709			154,884			138,488			3.8		16.0
Total liabilities and shareholders' equity	$	1,718,942		$	1,664,308		$	1,579,157		3.3	%	8.9	%
Issued and outstanding common shares	10,881			10,869			10,780

NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2019

									Dec 31, 2019 vs.
	For the three months ended								Sep 30, 2019					Dec 31, 2018
(In thousands, except percentages and per share amounts)	Dec 31, 2019		Sep 30, 2019			Dec 31, 2018			$			%		$			%
INTEREST INCOME
Federal funds sold, interest-bearing deposits and repos	$	182	$	271		$	210		$	(89	)	(32.8	)%	$	(28	)	(13.3	)%
FHLB stock	110		82			104			28			34.1		6			5.8
Securities:
Taxable	527		463			466			64			13.8		61			13.1
Tax-exempt	22		26			28			(4		)	(15.4	)	(6		)	(21.4	)
Total securities	549		489			494			60			12.3		55			11.1
Loans:
SBA loans	900		943			974			(43		)	(4.6	)	(74		)	(7.6	)
Commercial loans	9,684		9,467			9,167			217			2.3		517			5.6
Residential mortgage loans	5,782		5,606			5,172			176			3.1		610			11.8
Consumer loans	2,105		2,197			1,939			(92		)	(4.2	)	166			8.6
Total loans	18,471		18,213			17,252			258			1.4		1,219			7.1
Total interest income	19,312		19,055			18,060			257			1.3		1,252			6.9
INTEREST EXPENSE
Interest-bearing demand deposits	506		438			389			68			15.5		117			30.1
Savings deposits	996		1,194			1,103			(198		)	(16.6	)	(107		)	(9.7	)
Time deposits	2,439		2,577			1,861			(138		)	(5.4	)	578			31.1
Borrowed funds and subordinated debentures	608		442			543			166			37.6		65			12.0
Total interest expense	4,549		4,651			3,896			(102		)	(2.2	)	653			16.8
Net interest income	14,763		14,404			14,164			359			2.5		599			4.2
Provision for loan losses	500		750			500			(250		)	(33.3	)	—			—
Net interest income after provision for loan losses	14,263		13,654			13,664			609			4.5		599			4.4
NONINTEREST INCOME
Branch fee income	383		373			413			10			2.7		(30		)	(7.3	)
Service and loan fee income	432		522			690			(90		)	(17.2	)	(258		)	(37.4	)
Gain on sale of SBA loans held for sale, net	355		—			298			355			10,000.0		57			19.1
Gain on sale of mortgage loans, net	565		545			277			20			3.7		288			104.0
BOLI income	152		138			165			14			10.1		(13		)	(7.9	)
Net security gains (losses)	157		18			(193		)	139			772.2		350			181.3
Other income	352		1,114			304			(762		)	(68.4	)	48			15.8
Total noninterest income	2,396		2,710			1,954			(314		)	(11.6	)	442			22.6
NONINTEREST EXPENSE
Compensation and benefits	5,282		5,353			4,845			(71		)	(1.3	)	437			9.0
Occupancy	652		651			681			1			0.2		(29		)	(4.3	)
Processing and communications	711		749			716			(38		)	(5.1	)	(5		)	(0.7	)
Furniture and equipment	806		711			616			95			13.4		190			30.8
Professional services	222		274			252			(52		)	(19.0	)	(30		)	(11.9	)
Loan collection & OREO expenses (recoveries)	33		(48		)	31			81			168.8		2			6.5
Other loan expenses (income)	70		89			(2		)	(19		)	(21.3	)	72			3,600.0
Deposit insurance	—		—			189			—			—		(189		)	(100.0	)
Advertising	302		334			360			(32		)	(9.6	)	(58		)	(16.1	)
Director fees	175		171			169			4			2.3		6			3.6
Other expenses	466		445			411			21			4.7		55			13.4
Total noninterest expense	8,719		8,729			8,268			(10		)	(0.1	)	451			5.5
Income before provision for income taxes	7,940		7,635			7,350			305			4.0		590			8.0
Provision for income taxes	1,820		1,676			1,547			144			8.6		273			17.6
Net income	$	6,120	$	5,959		$	5,803		$	161		2.7	%	$	317		5.5	%

Effective tax rate	22.9		%	22.0		%	21.0		%
Net income per common share - Basic	$	0.56		$	0.55		$	0.54
Net income per common share - Diluted	$	0.55		$	0.54		$	0.53
Weighted average common shares outstanding - Basic	10,872			10,863			10,765
Weighted average common shares outstanding - Diluted	11,057			11,036			10,935

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2019

	For the twelve months ended December 31,					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	$	906	$	773		$	133		17.2	%
FHLB stock	385		462			(77		)	(16.7	)
Securities:
Taxable	1,926		1,907			19			1.0
Tax-exempt	104		117			(13		)	(11.1	)
Total securities	2,030		2,024			6			0.3
Loans:
SBA loans	3,780		4,338			(558		)	(12.9	)
Commercial loans	37,577		33,886			3,691			10.9
Residential mortgage loans	22,483		18,837			3,646			19.4
Consumer loans	8,487		6,943			1,544			22.2
Total loans	72,327		64,004			8,323			13.0
Total interest income	75,648		67,263			8,385			12.5
INTEREST EXPENSE
Interest-bearing demand deposits	1,795		1,202			593			49.3
Savings deposits	4,497		3,871			626			16.2
Time deposits	9,460		5,903			3,557			60.3
Borrowed funds and subordinated debentures	2,303		2,540			(237		)	(9.3	)
Total interest expense	18,055		13,516			4,539			33.6
Net interest income	57,593		53,747			3,846			7.2
Provision for loan losses	2,100		2,050			50			2.4
Net interest income after provision for loan losses	55,493		51,697			3,796			7.3
NONINTEREST INCOME
Branch fee income	1,502		1,519			(17		)	(1.1	)
Service and loan fee income	1,965		2,130			(165		)	(7.7	)
Gain on sale of SBA loans held for sale, net	909		1,680			(771		)	(45.9	)
Gain on sale of mortgage loans, net	2,090		1,719			371			21.6
BOLI income	588		975			(387		)	(39.7	)
Net security gains (losses)	373		(199		)	572			287.4
Other income	2,112		1,207			905			75.0
Total noninterest income	9,539		9,031			508			5.6
NONINTEREST EXPENSE
Compensation and benefits	20,666		20,119			547			2.7
Occupancy	2,650		2,739			(89		)	(3.2	)
Processing and communications	2,924		2,788			136			4.9
Furniture and equipment	2,894		2,348			546			23.3
Professional services	1,061		934			127			13.6
Loan collection & OREO expenses (recoveries)	41		(361		)	402			111.4
Other loan expenses	272		208			64			30.8
Deposit insurance	301		782			(481		)	(61.5	)
Advertising	1,358		1,411			(53		)	(3.8	)
Director fees	673		671			2			0.3
Other expenses	1,877		1,782			95			5.3
Total noninterest expense	34,717		33,421			1,296			3.9
Income before provision for income taxes	30,315		27,307			3,008			11.0
Provision for income taxes	6,662		5,388			1,274			23.6
Net income	$	23,653	$	21,919		$	1,734		7.9	%

Effective tax rate	22.0		%	19.7		%
Net income per common share - Basic	$	2.18		$	2.04
Net income per common share - Diluted	$	2.14		$	2.01
Weighted average common shares outstanding - Basic	10,845			10,726
Weighted average common shares outstanding - Diluted	11,029			10,916

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

December 31, 2019

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	December 31, 2019								December 31, 2018
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	44,147		$	182		1.64	%	$	34,551		$	210		2.41	%
FHLB stock	6,949			110			6.28		5,762			104			7.16
Securities:
Taxable	62,986			527			3.32		58,350			466			3.17
Tax-exempt	4,106			27			2.61		4,776			35			2.91
Total securities (A)	67,092			554			3.28		63,126			501			3.15
Loans:
SBA loans	50,016			900			7.14		53,803			974			7.18
Commercial loans	742,071			9,684			5.18		698,609			9,167			5.21
Residential mortgage loans	460,450			5,782			4.98		423,674			5,172			4.84
Consumer loans	140,458			2,105			5.95		121,214			1,939			6.35
Total loans (B)	1,392,995			18,471			5.26		1,297,300			17,252			5.28
Total interest-earning assets	$	1,511,183		$	19,317		5.07	%	$	1,400,739		$	18,067		5.12	%
Noninterest-earning assets:
Cash and due from banks	27,964								25,410
Allowance for loan losses	(16,293		)						(15,266		)
Other assets	69,226								66,925
Total noninterest-earning assets	80,897								77,069
Total assets	$	1,592,080							$	1,477,808
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	196,638		$	506		1.02	%	$	187,827		$	389		0.82	%
Total savings deposits	397,401			996			0.99		406,681			1,103			1.08
Total time deposits	411,445			2,439			2.35		356,520			1,861			2.07
Total interest-bearing deposits	1,005,484			3,941			1.56		951,028			3,353			1.40
Borrowed funds and subordinated debentures	132,533			608			1.82		108,465			543			1.99
Total interest-bearing liabilities	$	1,138,017		$	4,549		1.59	%	$	1,059,493		$	3,896		1.46	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	279,925								271,440
Other liabilities	16,611								11,454
Total noninterest-bearing liabilities	296,536								282,894
Total shareholders' equity	157,527								135,421
Total liabilities and shareholders' equity	$	1,592,080							$	1,477,808
Net interest spread				$	14,768		3.48	%				$	14,171		3.66	%
Tax-equivalent basis adjustment				(5		)						(7		)
Net interest income				$	14,763							$	14,164
Net interest margin							3.88	%							4.01	%

(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

December 31, 2019

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	December 31, 2019								September 30, 2019
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	44,147		$	182		1.64	%	$	51,744		$	271		2.08	%
FHLB stock	6,949			110			6.28		5,138			82			6.33
Securities:
Taxable	62,986			527			3.32		58,144			463			3.16
Tax-exempt	4,106			27			2.61		4,418			32			2.87
Total securities (A)	67,092			554			3.28		62,562			495			3.14
Loans:
SBA loans	50,016			900			7.14		47,187			943			7.93
Commercial loans	742,071			9,684			5.18		713,785			9,467			5.26
Residential mortgage loans	460,450			5,782			4.98		450,105			5,606			4.94
Consumer loans	140,458			2,105			5.95		136,239			2,197			6.40
Total loans (B)	1,392,995			18,471			5.26		1,347,316			18,213			5.36
Total interest-earning assets	$	1,511,183		$	19,317		5.07	%	$	1,466,760		$	19,061		5.16	%
Noninterest-earning assets:
Cash and due from banks	27,964								24,345
Allowance for loan losses	(16,293		)						(16,224		)
Other assets	69,226								70,484
Total noninterest-earning assets	80,897								78,605
Total assets	$	1,592,080							$	1,545,365
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	196,638		$	506		1.02	%	$	176,953		$	438		0.98	%
Total savings deposits	397,401			996			0.99		398,676			1,194			1.19
Total time deposits	411,445			2,439			2.35		432,035			2,577			2.37
Total interest-bearing deposits	1,005,484			3,941			1.56		1,007,664			4,209			1.66
Borrowed funds and subordinated debentures	132,533			608			1.82		92,326			442			1.90
Total interest-bearing liabilities	$	1,138,017		$	4,549		1.59	%	$	1,099,990		$	4,651		1.68	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	279,925								279,150
Other liabilities	16,611								14,364
Total noninterest-bearing liabilities	296,536								293,514
Total shareholders' equity	157,527								151,861
Total liabilities and shareholders' equity	$	1,592,080							$	1,545,365
Net interest spread				$	14,768		3.48	%				$	14,410		3.48	%
Tax-equivalent basis adjustment				(5		)						(6		)
Net interest income				$	14,763							$	14,404
Net interest margin							3.88	%							3.90	%

(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

December 31, 2019

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the twelve months ended
	December 31, 2019								December 31, 2018
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	43,305		$	906		2.09	%	$	40,700		$	773		1.90	%
FHLB stock	6,066			385			6.35		6,786			462			6.81
Securities:
Taxable	59,459			1,926			3.24		60,734			1,907			3.14
Tax-exempt	4,394			129			2.94		5,104			145			2.84
Total securities (A)	63,853			2,055			3.22		65,838			2,052			3.12
Loans:
SBA loans	48,686			3,780			7.76		60,321			4,338			7.19
Commercial loans	715,301			37,577			5.25		668,144			33,886			5.07
Residential mortgage loans	449,003			22,483			5.01		396,731			18,837			4.75
Consumer loans	133,918			8,487			6.34		116,311			6,943			5.97
Total loans (B)	1,346,908			72,327			5.37		1,241,507			64,004			5.16
Total interest-earning assets	$	1,460,132		$	75,673		5.18	%	$	1,354,831		$	67,291		4.97	%
Noninterest-earning assets:
Cash and due from banks	25,761								24,598
Allowance for loan losses	(16,058		)						(14,640		)
Other assets	69,987								65,770
Total noninterest-earning assets	79,690								75,728
Total assets	$	1,539,822							$	1,430,559
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	182,540		$	1,795		0.98	%	$	177,022		$	1,202		0.68	%
Total savings deposits	397,122			4,497			1.13		404,613			3,871			0.96
Total time deposits	409,406			9,460			2.31		314,224			5,903			1.88
Total interest-bearing deposits	989,068			15,752			1.59		895,859			10,976			1.23
Borrowed funds and subordinated debentures	113,511			2,303			2.03		134,664			2,540			1.89
Total interest-bearing liabilities	$	1,102,579		$	18,055		1.64	%	$	1,030,523		$	13,516		1.32	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	273,338								261,976
Other liabilities	14,755								9,903
Total noninterest-bearing liabilities	288,093								271,879
Total shareholders' equity	149,150								128,157
Total liabilities and shareholders' equity	$	1,539,822							$	1,430,559
Net interest spread				$	57,618		3.54	%				$	53,775		3.65	%
Tax-equivalent basis adjustment				(25		)						(28		)
Net interest income				$	57,593							$	53,747
Net interest margin							3.95	%							3.97	%

(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

December 31, 2019

Amounts in thousands, except percentages	Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	16,002		$	15,965		$	15,684		$	15,488		$	14,988
Provision for loan losses charged to expense	500			750			350			500			500
	16,502			16,715			16,034			15,988			15,488
Less: Chargeoffs
SBA loans	43			98			85			308			—
Commercial loans	—			500			—			1			10
Residential mortgage loans	75			130			—			—			—
Consumer loans	—			—			—			1			—
Total chargeoffs	118			728			85			310			10
Add: Recoveries
SBA loans	7			12			2			1			4
Commercial loans	4			3			4			5			5
Residential mortgage loans	—			—			—			—			—
Consumer loans	—			—			10			—			1
Total recoveries	11			15			16			6			10
Net chargeoffs	107			713			69			304			—
Balance, end of period	$	16,395		$	16,002		$	15,965		$	15,684		$	15,488
LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans	$	1,164		$	503		$	437		$	814		$	1,560
Commercial loans	529			629			54			1,046			1,076
Residential mortgage loans	3,936			4,427			3,924			5,243			4,211
Consumer loans	20			23			—			171			26
Total nonperforming loans (1)	5,649			5,582			4,415			7,274			6,873
Other real estate owned ("OREO")	1,723			1,723			921			273			56
Nonperforming assets	7,372			7,305			5,336			7,547			6,929
Less: Amount guaranteed by SBA	59			63			68			68			89
Net nonperforming assets	$	7,313		$	7,242		$	5,268		$	7,479		$	6,840
Loans 90 days past due & still accruing	$	930		$	140		$	—		$	39		$	98
Performing Troubled Debt Restructurings (TDRs)	$	705		$	718		$	728		$	738		$	745
(1) Nonperforming TDRs included in nonperforming loans	—			—			—			—			—
Total TDRs	$	705		$	718		$	728		$	738		$	745
Allowance for loan losses to:
Total loans at quarter end	1.15		%	1.17		%	1.19		%	1.19		%	1.19		%
Nonperforming loans (1)	290.43			286.67			361.61			215.62			225.35
Nonperforming assets	222.40			219.06			299.19			207.82			223.52
Net nonperforming assets	224.19			220.96			303.06			209.71			226.43
QTD net chargeoffs (recoveries) (annualized) to QTD average loans:
SBA loans	0.29		%	0.72		%	0.70		%	2.49		%	(0.03		)%
Commercial loans	—			0.28			—			—			—
Residential mortgage loans	0.06			0.11			—			—			—
Consumer loans	—			—			(0.03		)	—			—
Total loans	0.03		%	0.21		%	0.02		%	0.09		%	—		%
Nonperforming loans to total loans	0.40		%	0.41		%	0.33		%	0.55		%	0.53		%
Nonperforming loans and TDRs to total loans	0.45			0.46			0.38			0.61			0.58
Nonperforming assets to total loans and OREO	0.52			0.53			0.40			0.57			0.53
Nonperforming assets to total assets	0.43			0.44			0.33			0.47			0.44

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

December 31, 2019

(In thousands, except percentages and per share amounts)	Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
SUMMARY OF INCOME:
Total interest income	$	19,312		$	19,055		$	18,781		$	18,500		$	18,060
Total interest expense	4,549			4,651			4,571			4,284			3,896
Net interest income	14,763			14,404			14,210			14,216			14,164
Provision for loan losses	500			750			350			500			500
Net interest income after provision for loan losses	14,263			13,654			13,860			13,716			13,664
Total noninterest income	2,396			2,710			2,411			2,022			1,954
Total noninterest expense	8,719			8,729			8,791			8,478			8,268
Income before provision for income taxes	7,940			7,635			7,480			7,260			7,350
Provision for income taxes	1,820			1,676			1,646			1,520			1,547
Net income	$	6,120		$	5,959		$	5,834		$	5,740		$	5,803
Net income per common share - Basic	$	0.56		$	0.55		$	0.54		$	0.53		$	0.54
Net income per common share - Diluted	$	0.55		$	0.54		$	0.53		$	0.52		$	0.53
COMMON SHARE DATA:
Market price per share	$	22.57		$	22.15		$	22.70		$	18.88		$	20.76
Dividends paid	$	0.08		$	0.08		$	0.08		$	0.07		$	0.07
Book value per common share	$	14.77		$	14.25		$	13.76		$	13.28		$	12.85
Weighted average common shares outstanding - Basic	10,872			10,863			10,843			10,801			10,765
Weighted average common shares outstanding - Diluted	11,057			11,036			11,026			10,955			10,935
Issued and outstanding common shares	10,881			10,869			10,856			10,822			10,780
PERFORMANCE RATIOS (Annualized):
Return on average assets	1.53		%	1.53		%	1.54		%	1.55		%	1.56		%
Return on average equity	15.41			15.57			16.01			16.52			17.00
Efficiency ratio	51.29			51.06			53.20			52.53			50.69
Noninterest expense to average assets	2.17			2.24			2.32			2.29			2.22
BALANCE SHEET DATA:
Total assets	1,718,942			1,664,308			1,626,737			1,590,046			1,579,157
Total deposits	1,250,114			1,273,362			1,264,353			1,226,586			1,207,687
Total loans	1,425,558			1,368,474			1,344,757			1,312,994			1,304,566
Total securities	66,564			63,991			62,122			62,962			63,732
Total shareholders' equity	160,709			154,884			149,383			143,717			138,488
Allowance for loan losses	(16,395		)	(16,002		)	(15,965		)	(15,684		)	(15,488		)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets	5.07		%	5.16		%	5.24		%	5.28		%	5.12		%
Interest-bearing liabilities	1.59			1.68			1.69			1.60			1.46
Net interest spread	3.48			3.48			3.55			3.68			3.66
Net interest margin	3.88			3.90			3.96			4.06			4.01
CREDIT QUALITY:
Nonperforming assets	7,372			7,305			5,336			7,547			6,929
QTD net chargeoffs (annualized) to QTD average loans	0.03		%	0.21		%	0.02		%	0.09		%	—		%
Allowance for loan losses to total loans	1.15			1.17			1.19			1.19			1.19
Nonperforming assets to total loans and OREO	0.52			0.53			0.40			0.57			0.53
Nonperforming assets to total assets	0.43			0.44			0.33			0.47			0.44

(In thousands, except percentages and per share amounts)	Dec 31, 2019		Sep 30, 2019		Jun 30, 2019		Mar 31, 2019		Dec 31, 2018
CAPITAL RATIOS AND OTHER:
Total equity to total assets	9.35	%	9.31	%	9.18	%	9.04	%	8.77	%
Leverage ratio	10.59		10.54		10.36		10.09		9.90
Common equity tier 1 risk-based capital ratio	11.97		12.24		11.99		11.78		11.40
Tier 1 risk-based capital ratio	12.73		13.04		12.81		12.62		12.24
Total risk-based capital ratio	13.49		14.28		14.06		13.87		13.49
Number of banking offices	19		19		19		19		19
Number of ATMs	20		20		20		20		20
Number of employees	203		194		185		190		198