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

Exhibit 99.1

Clinton, NJ -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $10.3 million, or $0.96 per diluted share, for the quarter ended March 31, 2023, compared to net income of $10.0 million, or $0.93 per diluted share for the quarter ended December 31, 2022. This represents a 3.0% increase in net income and a 3.2% increase in net income per diluted share.  

First Quarter Earnings Highlights

● Net interest income, our primary driver of earnings, decreased $0.8 million to $23.9 million for the quarter ended March 31, 2023, compared to $24.7 million for the prior quarter. Net interest margin (“NIM”) decreased 28 basis points to 4.19% for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022. The decrease was primarily due to the cost of interest-bearing liabilities increasing faster than the yield of interest-earning assets.

● The provision for loan losses for loans was $0.1 million for the quarter ended March 31, 2023, compared to $1.6 million for the quarter ended December 31, 2022.  The decrease was largely due to lower loan growth.  Refer to the Balance Sheet Highlights section for further considerations regarding the adoption of the Current Expected Credit Loss (“CECL”) accounting standard.

● Non-interest income was $1.4 million for the quarter ended March 31, 2023 compared to $1.9 million for the quarter ended December 31, 2022. The $0.5 million decrease was primarily driven by mark-to-market decreases on the Company’s equity portfolio, which is primarily comprised of bank stocks. The decrease was complemented by lower servicing and loan fee income resulting from less prepayment penalties. The decrease was partially offset by increased realized gains on the sale of Small Business Administration (“SBA”) loans.

● Non-interest expense was $11.4 million for the quarters ended March 31, 2023 and December 31, 2022. The quarter ended March 31, 2023 included $0.5 million of one-time expenses due to the resignation of the Company’s Chief Administrative Officer.

● The effective tax rate was 25.4% for the quarter ended March 31, 2023 compared to 27.0% for the quarter ending December 31, 2022.

Balance Sheet Highlights

● Total gross loans modestly increased $24.4 million, or 1.2%, from December 31, 2022 primarily due to increases in commercial loans and residential mortgage loans. In Q1 2023, the Company sold $7.1 million of portfolio residential mortgage loans and $3.5 million of SBA held for sale loans, realizing gains of $0.1 million and $0.3 million, respectively.  

● The Company adopted the CECL accounting standard effective January 1, 2023. As a result, the adoption increased the Allowance for Credit Losses (“ACL”) by $0.8 million, as well as increased the reserve for unfunded credit commitments by $0.1 million. Further associated with CECL adoption, there was a decrease to retained earnings of $0.6 million, net of tax.  As of March 31, 2023, the ACL as a percentage of gross loans was 1.23%.

● Total deposits increased $36.4 million, or 2.0%, from December 31, 2022 to $1.8 billion as of March 31, 2023.  As of March 31, 2023, 18% of total deposits were uninsured and the average deposit account size was approximately $38,000. Further, the Bank’s deposit base was 44.8% retail, 27.1 % business, 17.3% municipal, and 10.8% Brokered CDs.

● As of March 31, 2023, the loan to deposit ratio was approximately 116.8%, which is above the Company’s target threshold of 110%. During the quarter ended March 31, 2023, the Bank opened a new branch in Fort Lee, New Jersey to expand its footprint in Bergen County, New Jersey. Additionally, Unity plans to open its first Morris County, New Jersey location in the summer of 2023.  Further, the Company is reducing transactional-based lending and focusing on lending to owner-occupied businesses that will result in full banking relationships including primary deposit accounts.

● As of March 31, 2023, investments comprised 5.6% of total assets. Available for sale debt securities (“AFS”) were $94.1 million or 3.8% of total assets. Held to maturity (“HTM”) debt securities were $35.8 million or 1.4% of total assets. As of March 31, 2023, pre-tax adjusted net unrealized losses on AFS and HTM were $4.6 million and $6.0 million, respectively. These pre-tax unrealized losses represent approximately 4.4% of the Bank’s capital. Equity securities were $8.3 million or 0.3% of total assets as of March 31, 2023.

● Borrowed funds decreased $9.0 million from year-end 2022 due to net deposit inflows during the quarter. Borrowed funds were entirely comprised of borrowings from the FHLB.

● Shareholders’ equity was $240.5 million at March 31, 2023, compared to $239.2 million at year-end 2022. The $1.3 million increase was primarily driven by first quarter 2023 earnings and equity-based compensation share issuance, partially offset by share repurchase activities in the first quarter of 2023. Throughout the first quarter of 2023, Unity Bancorp repurchased 337,945 shares for approximately $8.2 million, or a weighted average price of $24.29 per share.

● Book value per common share was $23.34 as of March 31, 2023, compared to $22.60 as of December 31, 2022.

● At March 31, 2023, the Community Bank Leverage Ratio was 10.38%, compared to 10.88% at December 31, 2022. The decrease was primarily driven by share repurchases, as well as, a higher average asset base for the quarter ended March 31, 2023.

● At March 31, 2023, the Company held $127.1 million of cash on hand. Further, the Company maintained approximately $316.9 million of funding available from various funding sources, including the FHLB, FRB Discount Window, and other lines of credit. Total available funding plus cash on hand represented 132.6% of uninsured deposits.

● As of March 31, 2023, nonperforming assets were $14.7 million gross, and $11.1 million net, of the guarantee by the SBA, respectively. As of December 31, 2022, nonperforming assets were $9.1 million gross and net of the SBA guarantee. As of March 31, 2023, criticized, classified and nonaccrual assets were $35.4 million gross, and $31.7 million net, of the SBA guarantee, respectively. The Company diligently oversees nonperforming assets and potential problem credits, taking proactive measures to promptly address and resolve any issues.  

Other Highlights

❖ Unity Bank offers savings, checking, and CD products that offer 100% insurance for deposits above the standard FDIC insurance limits.

❖ In February 2023, Unity Bancorp announced a 9% increase in its Q1 2023 dividend to $0.12 per common share. The Company does not anticipate that this increase will adversely impact its liquidity or capital positioning.

❖ In February 2023, Unity Bank opened a branch in Fort Lee, NJ, enhancing its Bergen County presence. Unity Bank has also received regulatory approval to open a branch in Lake Hiawatha, NJ. Lake Hiawatha will be the Bank’s first Morris County, New Jersey location and is expected to open over the coming months.

❖ After over 25 years with the organization, John Kauchak, Executive Vice President Chief Operating Officer, announced his retirement, effective June 30, 2023. During his tenure, he has made countless contributions to the organization.  Further, after over 20 years with the organization, Janice Bolomey, Executive Vice President Director of Sales and Chief Administrative Officer, announced her resignation effective June 30, 2023. Management is currently evaluating the open executive management positions.

Unity Bancorp, Inc. is a financial services organization headquartered in Clinton, New Jersey, with approximately $2.5 billion in assets and $1.8 billion in deposits.  Unity Bank, the Company’s wholly owned subsidiary, provides financial services to retail, corporate and small business customers through its robust branch network located in Bergen, Hunterdon, Middlesex, Ocean, 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 amended or supplemented by our subsequent filings with the SEC, 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, results of regulatory exams, and the impact of COVID-19 on the Bank, its employees and customers, among other factors.

UNITY BANCORP, INC.

SUMMARY FINANCIAL HIGHLIGHTS

March 31, 2023

										March 31, 2023 vs.
										December 31, 2022		March 31, 2022
(In thousands, except percentages and per share amounts)	March 31, 2023			December 31, 2022			March 31, 2022			%		%
BALANCE SHEET DATA
Total assets	$	2,475,851		$	2,444,948		$	2,067,692		1.3	%	19.7	%
Total deposits		1,823,921			1,787,528			1,771,168		2.0		3.0
Total gross loans		2,130,919			2,106,559			1,701,384		1.2		25.2
Total securities		138,264			140,946			116,254		(1.9)		18.9
Total shareholders' equity		240,459			239,227			214,928		0.5		11.9
Allowance for credit losses		26,201			25,196			22,168		4.0		18.2
FINANCIAL DATA - QUARTER TO DATE
Income before provision for income taxes	$	13,791		$	13,634		$	11,911		1.2		15.8
Provision for income taxes		3,504			3,678			2,803		(4.7)		25.0
Net income	$	10,287		$	9,956		$	9,108		3.3		12.9
Net income per common share - Basic	$	0.98		$	0.94		$	0.87		4.3		12.6
Net income per common share - Diluted		0.96			0.93			0.85		3.2		12.9
PERFORMANCE RATIOS - QUARTER TO DATE
Return on average assets		1.72	%		1.72	%		1.80	%
Return on average equity		17.14			16.82			17.64
Efficiency ratio		44.56			43.24			45.86
Net interest margin		4.19			4.47			4.11
Noninterest expense to average assets		1.91			1.96			2.06
SHARE INFORMATION
Market price per share	$	22.81		$	27.33		$	27.98		(16.5)		(18.5)
Dividends paid		0.12			0.11			0.10		9.1		20.0
Book value per common share		23.34			22.60			20.48		3.3		14.0
Average diluted shares outstanding (QTD)		10,686			10,740			10,664		(0.5)		0.2
CAPITAL RATIOS
Total equity to total assets		9.71	%		9.78	%		10.39	%
Community bank leverage ratio		10.38			10.88			10.87
CREDIT QUALITY AND RATIOS
Nonperforming assets	$	14,683		$	9,065		$	9,301		62.0		57.9
QTD annualized net chargeoffs/(recoveries) to QTD average loans		(0.01)	%		0.06	%		(0.01)	%
Allowance for credit losses to total loans		1.23			1.20			1.30
Nonperforming loans (gross SBA guarantee) to total loans		0.69			0.43			0.55
Nonperforming assets (gross SBA guarantee) to total assets		0.59			0.37			0.45

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

March 31, 2023

							March 31, 2023 vs.
							December 31, 2022		March 31, 2022
(In thousands, except percentages)	March 31, 2023		December 31, 2022		March 31, 2022		%		%
ASSETS
Cash and due from banks	$	23,893	$	19,699	$	26,728	21.3	%	(10.6)	%
Interest-bearing deposits		103,194		95,094		160,998	8.5		(35.9)
Cash and cash equivalents		127,087		114,793		187,726	10.7		(32.3)
Securities:
Debt securities available for sale		94,113		95,393		77,878	(1.3)		20.8
Debt securities held to maturity		35,824		35,760		30,367	0.2		18.0
Equity securities with readily determinable fair values		8,327		9,793		8,009	(15.0)		4.0
Total securities		138,264		140,946		116,254	(1.9)		18.9
Loans:
SBA loans held for sale		23,314		27,928		25,282	(16.5)		(7.8)
SBA loans held for investment		39,370		38,468		33,048	2.3		19.1
SBA PPP loans		2,545		5,908		28,618	(56.9)		(91.1)
Commercial loans		1,205,642		1,187,543		979,911	1.5		23.0
Residential mortgage loans		619,140		605,091		427,165	2.3		44.9
Consumer loans		76,784		78,164		77,702	(1.8)		(1.2)
Residential construction loans		164,124		163,457		129,658	0.4		26.6
Total loans		2,130,919		2,106,559		1,701,384	1.2		25.2
Allowance for credit losses		(26,201)		(25,196)		(22,168)	4.0		18.2
Net loans		2,104,718		2,081,363		1,679,216	1.1		25.3
Premises and equipment, net		19,868		20,002		19,593	(0.7)		1.4
Bank owned life insurance ("BOLI")		26,856		26,776		26,652	0.3		0.8
Deferred tax assets		12,360		12,345		9,928	0.1		24.5
Federal Home Loan Bank ("FHLB") stock		18,688		19,064		3,541	(2.0)		427.8
Accrued interest receivable		14,314		13,403		9,568	6.8		49.6
Goodwill		1,516		1,516		1,516	-		-
Prepaid expenses and other assets		12,180		14,740		13,698	(17.4)		(11.1)
Total assets	$	2,475,851	$	2,444,948	$	2,067,692	1.3	%	19.7	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	450,058	$	494,184	$	541,990	(8.9)	%	(17.0)	%
Interest-bearing demand		289,451		276,218		240,757	4.8		20.2
Savings		560,711		591,826		707,498	(5.3)		(20.7)
Brokered time deposits		197,792		189,644		113,368	4.3		74.5
Time deposits		325,909		235,656		167,555	38.3		94.5
Total deposits		1,823,921		1,787,528		1,771,168	2.0		3.0
Borrowed funds		374,000		383,000		40,000	(2.3)		835.0
Subordinated debentures		10,310		10,310		10,310	-		-
Accrued interest payable		932		691		132	34.9		606.1
Accrued expenses and other liabilities		26,229		24,192		31,154	8.4		(15.8)
Total liabilities		2,235,392		2,205,721		1,852,764	1.3		20.7
Shareholders' equity:
Common stock		98,197		97,204		94,853	1.0		3.5
Retained earnings		165,335		156,958		131,100	5.3		26.1
Treasury stock, at cost		(19,894)		(11,675)		(11,633)	(70.4)		(71.0)
Accumulated other comprehensive (loss) income		(3,179)		(3,260)		608	2.5		2.5
Total shareholders' equity		240,459		239,227		214,928	0.5		11.9
Total liabilities and shareholders' equity	$	2,475,851	$	2,444,948	$	2,067,692	1.3	%	19.7	%
COMMON SHARES AT PERIOD END:
Shares issued		11,335		11,289		11,196
Shares outstanding		10,292		10,584		10,493
Treasury shares		1,043		705		703
*NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

March 31, 2023

										March 31, 2023 vs.
	For the three months ended									December 31, 2022					March 31, 2022
(In thousands, except percentages and per share amounts)	March 31, 2023			December 31, 2022			March 31, 2022			$		%			$		%
INTEREST INCOME
Interest-bearing deposits	$	333		$	319		$	96		$	14		4.4	%	$	237		246.9	%
FHLB stock		331			220			33			111		50.5			298		903.0
Securities:
Taxable		1,739			1,589			652			150		9.4			1,087		166.7
Tax-exempt		19			19			6			-		-			13		216.7
Total securities		1,758			1,608			658			150		9.3			1,100		167.2
Loans:
SBA loans		1,404			1,370			923			34		2.5			481		52.1
SBA PPP loans		77			50			777			27		54.0			(700)		(90.1)
Commercial loans		17,401			15,894			11,497			1,507		9.5			5,904		51.4
Residential mortgage loans		8,109			7,111			4,390			998		14.0			3,719		84.7
Consumer loans		1,354			1,217			921			137		11.3			433		47.0
Residential construction loans		2,586			2,536			1,824			50		2.0			762		41.8
Total loans		30,931			28,178			20,332			2,753		9.8			10,599		52.1
Total interest income		33,353			30,325			21,119			3,028		10.0			12,234		57.9
INTEREST EXPENSE
Interest-bearing demand deposits		982			703			164			279		39.7			818		498.8
Savings deposits		1,953			1,475			345			478		32.4			1,608		466.1
Time deposits		2,709			1,258			480			1,451		115.3			2,229		464.4
Borrowed funds and subordinated debentures		3,799			2,180			226			1,619		74.3			3,573		1,581.0
Total interest expense		9,443			5,616			1,215			3,827		68.1			8,228		677.2
Net interest income		23,910			24,709			19,904			(799)		(3.2)			4,006		20.1
Provision (benefit) for credit losses		108			1,632			(178)			(1,524)		(93.4)			286		NM*
Net interest income after provision for credit losses		23,802			23,077			20,082			725		3.1			3,720		18.5
NONINTEREST INCOME
Branch fee income		235			224			275			11		4.9			(40)		(14.5)
Service and loan fee income		503			618			584			(115)		(18.6)			(81)		(13.9)
Gain on sale of SBA loans held for sale, net		309			103			852			206		200.0			(543)		(63.7)
Gain on sale of mortgage loans, net		244			167			521			77		46.1			(277)		(53.2)
BOLI income		80			142			163			(62)		(43.7)			(83)		(50.9)
Net securities (losses) gains		(322)			319			(557)			(641)		NM*			235		NM*
Other income		368			373			401			(5)		(1.3)			(33)		(8.2)
Total noninterest income		1,417			1,946			2,239			(529)		(27.2)			(822)		(36.7)
NONINTEREST EXPENSE
Compensation and benefits		7,090			7,160			6,508			(70)		(1.0)			582		8.9
Processing and communications		804			682			752			122		17.9			52		6.9
Occupancy		770			758			775			12		1.6			(5)		(0.6)
Furniture and equipment		689			683			576			6		0.9			113		19.6
Professional services		427			341			447			86		25.2			(20)		(4.5)
Advertising		260			339			225			(79)		(23.3)			35		15.6
Other loan expenses		128			1			135			127		12,700.0			(7)		(5.2)
Deposit insurance		348			270			269			78		28.9			79		29.4
Director fees		217			218			233			(1)		(0.5)			(16)		(6.9)
Loan collection expenses		47			140			58			(93)		(66.4)			(11)		(19.0)
Other expenses		648			797			432			(149)		(18.7)			216		50.0
Total noninterest expense		11,428			11,389			10,410			39		0.3			1,018		9.8
Income before provision for income taxes		13,791			13,634			11,911			157		1.2			1,880		15.8
Provision for income taxes		3,504			3,678			2,803			(174)		(4.7)			701		25.0
Net income	$	10,287		$	9,956		$	9,108		$	331		3.3	%	$	1,179		12.9	%
Effective tax rate		25.4	%		27.0	%		23.5	%
Net income per common share - Basic	$	0.98		$	0.94		$	0.87
Net income per common share - Diluted		0.96			0.93			0.85
Weighted average common shares outstanding - Basic		10,538			10,557			10,446
Weighted average common shares outstanding - Diluted		10,686			10,740			10,664
*NM=Not meaningful

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

March 31, 2023

	For the three months ended
(Dollar amounts in thousands, interest amounts and	March 31, 2023							March 31, 2022
interest rates/yields on a fully tax-equivalent basis)	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Interest-bearing deposits	$	32,778	$	333		4.12	%	$	210,601	$	96		0.18	%
FHLB stock		16,776		331		7.99			3,550		33		3.81
Securities:
Taxable		138,379		1,739		5.03			84,739		652		3.12
Tax-exempt		1,753		20		4.49			990		8		3.07
Total securities (A)		140,132		1,759		5.02			85,729		660		3.12
Loans:
SBA loans		66,625		1,404		8.43			63,543		923		5.89
SBA PPP loans		4,243		77		7.26			36,989		777		8.52
Commercial loans		1,199,577		17,401		5.80			949,948		11,497		4.91
Residential mortgage loans		614,936		8,109		5.27			413,308		4,390		4.31
Consumer loans		77,121		1,354		7.02			78,989		921		4.73
Residential construction loans		163,821		2,586		6.31			122,993		1,824		6.01
Total loans (B)		2,126,323		30,931		5.82			1,665,770		20,332		4.95
Total interest-earning assets	$	2,316,009	$	33,354		5.84	%	$	1,965,650	$	21,121		4.36	%
Noninterest-earning assets:
Cash and due from banks		22,738							23,679
Allowance for credit losses		(25,778)							(22,331)
Other assets		111,104							79,631
Total noninterest-earning assets		108,064							80,979
Total assets	$	2,424,073						$	2,046,629
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	287,749	$	982		1.38	%	$	249,329	$	164		0.27	%
Total savings deposits		571,843		1,953		1.39			701,281		345		0.20
Total time deposits		485,679		2,709		2.26			288,155		480		0.68
Total interest-bearing deposits		1,345,271		5,644		1.70			1,238,765		989		0.32
Borrowed funds and subordinated debentures		342,398		3,799		4.44			50,310		226		1.82
Total interest-bearing liabilities	$	1,687,669	$	9,443		2.27	%	$	1,289,075	$	1,215		0.38	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		468,407							526,931
Other liabilities		24,541							21,217
Total noninterest-bearing liabilities		492,948							548,148
Total shareholders' equity		243,456							209,406
Total liabilities and shareholders' equity	$	2,424,073						$	2,046,629
Net interest spread			$	23,911		3.57	%			$	19,906		3.98	%
Tax-equivalent basis adjustment				(1)							(2)
Net interest income			$	23,910						$	19,904
Net interest margin						4.19	%						4.11	%

(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

March 31, 2023

	For the three months ended
(Dollar amounts in thousands, interest amounts and	March 31, 2023							December 31, 2022
interest rates/yields on a fully tax-equivalent basis)	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Interest-bearing deposits	$	32,778	$	333		4.12	%	$	37,640	$	319		3.37	%
FHLB stock		16,776		331		7.99			11,785		220		7.39
Securities:
Taxable		138,379		1,739		5.03			134,661		1,589		4.72
Tax-exempt		1,753		20		4.49			1,741		20		4.47
Total securities (A)		140,132		1,759		5.02			136,402		1,609		4.72
Loans:
SBA loans		66,625		1,404		8.43			67,448		1,370		8.13
SBA PPP loans		4,243		77		7.26			6,355		50		3.17
Commercial loans		1,199,577		17,401		5.80			1,134,102		15,894		5.48
Residential mortgage loans		614,936		8,109		5.27			569,698		7,111		4.99
Consumer loans		77,121		1,354		7.02			75,229		1,217		6.33
Residential construction loans		163,821		2,586		6.31			156,282		2,536		6.35
Total loans (B)		2,126,323		30,931		5.82			2,009,114		28,178		5.49
Total interest-earning assets	$	2,316,009	$	33,354		5.84	%	$	2,194,941	$	30,326		5.48	%
Noninterest-earning assets:
Cash and due from banks		22,738							20,352
Allowance for credit losses		(25,778)							(24,301)
Other assets		111,104							109,515
Total noninterest-earning assets		108,064							105,566
Total assets	$	2,424,073						$	2,300,507
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	287,749	$	982		1.38	%	$	289,524	$	703		0.96	%
Total savings deposits		571,843		1,953		1.39			636,230		1,475		0.92
Total time deposits		485,679		2,709		2.26			385,423		1,258		1.29
Total interest-bearing deposits		1,345,271		5,644		1.70			1,311,177		3,436		1.04
Borrowed funds and subordinated debentures		342,398		3,799		4.44			231,720		2,180		3.68
Total interest-bearing liabilities	$	1,687,669	$	9,443		2.27	%	$	1,542,897	$	5,616		1.44	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		468,407							496,993
Other liabilities		24,541							25,820
Total noninterest-bearing liabilities		492,948							522,813
Total shareholders' equity		243,456							234,797
Total liabilities and shareholders' equity	$	2,424,073						$	2,300,507
Net interest spread			$	23,911		3.57	%			$	24,710		4.04	%
Tax-equivalent basis adjustment				(1)							(1)
Net interest income			$	23,910						$	24,709
Net interest margin						4.19	%						4.47	%

(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

March 31, 2023

Amounts in thousands, except percentages	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	25,196		$	23,861		$	22,858		$	22,168		$	22,302
Impact of the adoption of ASU 2016-13 ("CECL")		847
Provision (benefit) for loan losses charged to expense		108			1,632			1,517			1,188			(178)
		26,151			25,493			24,375			23,356			22,124
Less: Chargeoffs
SBA loans		113			59			-			-			-
Commercial loans		-			-			501			501			-
Residential mortgage loans		-			-			-			-			-
Consumer loans		120			300			50			40			6
Residential construction loans		-			-			-			-			-
Total chargeoffs		233			359			551			541			6
Add: Recoveries
SBA loans		-			-			5			6			22
Commercial loans		271			26			23			32			28
Residential mortgage loans		-			2			-			1			-
Consumer loans		12			34			9			4			-
Residential construction loans		-			-			-			-			-
Total recoveries		283			62			37			43			50
Net (chargeoffs)/recoveries		50			(297)			(514)			(498)			44
Balance, end of period	$	26,201		$	25,196		$	23,861		$	22,858		$	22,168
LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans	$	4,325		$	690		$	1,491		$	604		$	537
Commercial loans		1,144			1,582			1,147			1,717			2,292
Residential mortgage loans		5,565			3,361			3,404			2,668			2,999
Consumer loans		-			-			-			-			200
Residential construction loans		3,473			3,432			1,991			2,691			3,273
Total nonperforming loans		14,507			9,065			8,033			7,680			9,301
OREO		176			-			-			-			-
Nonperforming assets		14,683			9,065			8,033			7,680			9,301
Less: Amount guaranteed by Small Business Administration		3,625			-			-			15			1,102
Nonperforming assets, net of SBA guarantee		11,058			9,065			8,033			7,665			8,199
Loans 90 days past due & still accruing	$	-		$	-		$	75		$	43		$	488
Allowance for loan losses to:
Total loans at quarter end		1.23	%		1.20	%		1.23	%		1.27	%		1.30
Total nonperforming loans		178.44			277.95			297.04			297.63			238.34
Total nonperforming assets, net of SBA guarantee		236.94			277.95			297.04			298.21			270.37

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

March 31, 2023

(In thousands, except percentages and per share amounts)	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
SUMMARY OF INCOME:
Total interest income	$	33,353		$	30,325		$	26,224		$	23,071		$	21,119
Total interest expense		9,443			5,616			2,486			1,314			1,215
Net interest income		23,910			24,709			23,738			21,757			19,904
Provision (benefit) for credit losses		108			1,632			1,517			1,188			(178)
Net interest income after provision for credit losses		23,802			23,077			22,221			20,569			20,082
Total noninterest income		1,417			1,946			1,110			2,750			2,239
Total noninterest expense		11,428			11,389			10,064			10,710			10,410
Income before provision for income taxes		13,791			13,634			13,267			12,609			11,911
Provision for income taxes		3,504			3,678			3,325			3,158			2,803
Net income	$	10,287		$	9,956		$	9,942		$	9,451		$	9,108
Net income per common share - Basic	$	0.98		$	0.94		$	0.94		$	0.90		$	0.87
Net income per common share - Diluted		0.96			0.93			0.93			0.88			0.85
COMMON SHARE DATA:
Market price per share	$	22.81		$	27.33		$	25.11		$	26.48		$	27.98
Dividends paid		0.12			0.11			0.11			0.11			0.10
Book value per common share		23.34			22.60			21.86			21.01			20.48
Weighted average common shares outstanding - Basic		10,538			10,557			10,522			10,504			10,446
Weighted average common shares outstanding - Diluted		10,686			10,740			10,714			10,706			10,664
Issued common shares		11,335			11,289			11,236			11,214			11,196
Outstanding common shares		10,292			10,584			10,533			10,511			10,493
Treasury shares		1,043			705			703			703			703
PERFORMANCE RATIOS (Annualized):
Return on average assets		1.72	%		1.72	%		1.85	%		1.83	%		1.80	%
Return on average equity		17.14			16.82			17.39			17.32			17.64
Efficiency ratio		44.56			43.24			39.59			42.84			45.86
Noninterest expense to average assets		1.91			1.96			1.87			2.08			2.06
BALANCE SHEET DATA:
Total assets	$	2,475,851		$	2,444,948		$	2,339,537		$	2,117,156		$	2,067,692
Total securities		138,264			140,946			136,871			139,835			116,254
Total loans		2,130,919			2,106,559			1,942,414			1,801,593			1,701,384
Allowance for credit losses		26,201			25,196			23,861			22,858			22,168
Total deposits		1,823,921			1,787,528			1,796,597			1,697,967			1,771,168
Total shareholders' equity		240,459			239,227			230,234			220,789			214,928
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		5.84	%		5.48	%		5.09	%		4.66	%		4.36	%
Interest-bearing liabilities		2.27			1.44			0.72			0.41			0.38
Net interest spread		3.57			4.04			4.37			4.25			3.98
Net interest margin		4.19			4.47			4.61			4.39			4.11
CREDIT QUALITY:
Nonperforming assets	$	14,683		$	9,065		$	8,033		$	7,680		$	9,301
QTD annualized net (chargeoffs)/recoveries to QTD average loans		0.01	%		(0.06)	%		(0.11)	%		(0.11)	%		0.01	%
Allowance for credit losses to total loans		1.23			1.20			1.23			1.27			1.30
Nonperforming loans to total loans		0.69			0.43			0.41			0.43			0.55
Nonperforming assets to total assets		0.59			0.37			0.34			0.36			0.45
CAPITAL RATIOS AND OTHER:
Total equity to total assets		9.71	%		9.78	%		9.84	%		10.43	%		10.39	%
Community bank leverage ratio		10.38			10.88			10.85			11.20			10.87
Number of banking offices		20			19			18			19			19
Number of employees		228			231			222			213			209