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 $9.9 million, or $0.97 per diluted share, for the quarter ended September 30, 2023, compared to net income of $9.7 million, or $0.95 per diluted share for the quarter ended June 30, 2023. This represents a 2.6% increase in net income and a 2.1% increase in net income per diluted share.  For the nine months ended September 30, 2023, Unity reported net income of $29.9 million or $2.88 per diluted share, compared to net income of $28.5 million or $2.67 per diluted share for the nine months ended September 30, 2022. This represents a 5.0% increase in net income and a 7.9% increase in net income per diluted share.

Third Quarter Earnings Highlights

● Net interest income, our primary driver of earnings, was $23.5 million for each of the quarters ended September 30, 2023 and June 30, 2023. Net interest margin (“NIM”) decreased 8 basis points to 3.96% for the quarter ended September 30, 2023, compared to the quarter ended June 30, 2023. The decrease was primarily due to the cost of interest-bearing liabilities increasing faster than the yield of interest-earning assets.

● The provision for credit losses was $0.5 million for the quarter ended September 30, 2023, compared to $0.8 million for the quarter ended June 30, 2023.  The decrease was primarily driven by slower loan growth for the comparative periods.

● Non interest income was $2.0 million for the quarter ended September 30, 2023, compared to $2.1 million for the quarter ended June 30, 2023. The $0.1 million decrease was primarily due to no gains on SBA loan sales and lower service and loan fee income. The decrease was partially offset by increased BOLI income, which was largely driven by $0.6 million in non-taxable realized gains associated with two separate claims.  

● Non interest expense was $12.0 million for the quarter ended September 30, 2023, compared to $11.8 million for the quarter ended June 30, 2023.  The increase was primarily driven by higher compensation and other expenses and was partially offset by normalized FDIC insurance cost.  

● The effective tax rate was 23.7% for the quarter ended September 30, 2023, compared to 26.0% for the quarter ending June 30, 2023. The reduction in the current quarter is primarily due to the aforementioned BOLI payouts. Further, Unity Bancorp maintains a captive insurance subsidiary, Unity Risk Management Inc. Treasury recently issued proposed regulations which, if adopted in their current form, may adversely impact the ability of the Company to achieve tax benefits under this arrangement. Management is closely monitoring these developments and is anticipating regulatory resolution in Q4 2023. The captive insurance subsidiary currently saves between an estimated $0.3 million to $0.4 million of federal tax expenses per year.

Balance Sheet Highlights

● Total gross loans modestly increased $66.6 million, or 3.2%, from December 31, 2022, primarily due to increases in commercial loans and residential mortgage loans. These increases were partially offset by decreases in the residential construction loan category.

● As of September 30, 2023, the allowance for credit losses as a percentage of gross loans was 1.19%.

● Total deposits increased $97.4 million, or 5.4%, from December 31, 2022.  As of September 30, 2023, 17.3% of total deposits were uninsured or uncollateralized. Further, the Company’s deposit base was 45.4% retail, 26.1% business, 18.0% municipal, and 10.5% Brokered CDs. The Company’s deposit composition as of September 30, 2023, consisted of 29.1% in savings deposits, 22.6% in noninterest bearing demand deposits, 32.5% time deposits and 15.8% in interest-bearing demand deposits.

● As of September 30, 2023, the loan to deposit ratio was approximately 115.3%, which is above the Company’s target threshold of 110%. Consistent with the prior quarter and to bring the ratio in line with the Company’s target, Unity is intentionally reducing non-owner occupied CRE lending volumes and continues to execute upon its retail banking deposit gathering strategies.

● As of September 30, 2023, investments comprised 5.3% of total assets. Available for sale debt securities (“AFS”) were $92.1 million or 3.6% of total assets. Held to maturity (“HTM”) debt securities were $36.0 million or 1.4% of total assets. As of September 30, 2023, pre-tax net unrealized losses on AFS and HTM were $6.5 million and $8.8 million, respectively. These pre-tax unrealized losses represent approximately 5.8% of the Bancorp’s Tier 1 capital. Equity securities were $8.0 million or 0.3% of total assets as of September 30, 2023.

● Borrowed funds increased $5.6 million from December 31, 2022. Borrowed funds were entirely comprised of borrowings from the FHLB.

● Shareholders’ equity was $252.4 million as of September 30, 2023, compared to $239.2 million as of December 31, 2022. The $13.2 million increase was primarily driven by 2023 earnings, partially offset by share repurchase and dividend payments. In the third quarter of 2023, Unity Bancorp repurchased 43,384 shares for approximately $1.0 million, or a weighted average price of $23.85 per share.  

● Book value per common share was $24.95 as of September 30, 2023, compared to $22.60 as of December 31, 2022.

● Below is a summary of the Company’s regulatory capital ratios:

o Community Bank Leverage Ratio: 10.76% at September 30, 2023, compared to 10.49% at June 30, 2023 and 10.88% at December 31, 2022.

o Common Equity Tier 1 Capital Ratio: 12.16% at September 30, 2023.

o Tier 1 Capital Ratio: 12.64% at September 30, 2023.

o Total Capital Ratio: 13.88% at September 30, 2023.

● At September 30, 2023, the Company held $161.4 million of cash and cash equivalents. Further, the Company maintained approximately $548.5 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 217.8% of uninsured or uncollateralized deposits.

● As of September 30, 2023, nonperforming assets were $18.2 million, compared to $9.1 million of nonperforming assets as of December 31, 2022. As of September 30, 2023, over 70% of nonperforming loans consisted of residential mortgage loans and residential construction loans, which are well reserved. The Company diligently reviews nonperforming assets and potential problem credits, taking proactive measures to promptly address and resolve any issues.  

Other Highlights

❖ In September 2023, Unity Bank opened a new full-service branch in Parsippany, the first location in Morris County, New Jersey and the third new retail banking site since December 2022.

❖ In July 2023, Unity Bancorp was selected for the national Top 25 ranking published by Bank Director magazine for the second consecutive year. Unity Bancorp was 13^th nationally on the ranking of the largest 300 publicly traded banks and 7^th nationally for banks in the $1 billion to $5 billion asset category.  

❖ In September 2023, Unity Bancorp was selected for the Piper Sandler 2023Bank & Thrift Sm-All Star List. The list identifies top performing small-cap banks and thrifts across the country and recognizes companies exceeding certain growth, profitability, credit quality and capital thresholds. Unity Bancorp was rated 30^th on the listing and was last recognized on the list in 2019.

Unity Bancorp, Inc. is a financial services organization headquartered in Clinton, New Jersey, with approximately $2.6 billion in assets and $1.9 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, Morris, 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

September 30, 2023

										September 30, 2023 vs.
										June 30, 2023		September 30, 2022
(In thousands, except percentages and per share amounts)	September 30, 2023			June 30, 2023			September 30, 2022			%		%
BALANCE SHEET DATA
Total assets	$	2,563,006		$	2,552,301		$	2,339,537		0.4	%	9.6	%
Total deposits		1,884,910			1,849,528			1,796,597		1.9		4.9
Total gross loans		2,173,190			2,167,367			1,942,414		0.3		11.9
Total securities		136,091			137,061			136,871		(0.7)		(0.6)
Total shareholders' equity		252,384			244,073			230,234		3.4		9.6
Allowance for credit losses		25,918			25,988			23,861		(0.3)		8.6
FINANCIAL DATA - QUARTER TO DATE
Income before provision for income taxes	$	13,047		$	13,109		$	13,267		(0.5)		(1.7)
Provision for income taxes		3,097			3,409			3,325		(9.2)		(6.9)
Net income	$	9,950		$	9,700		$	9,942		2.6		0.1
Net income per common share - Basic	$	0.98		$	0.96		$	0.94		2.1		4.3
Net income per common share - Diluted		0.97			0.95			0.93		2.1		4.3
PERFORMANCE RATIOS - QUARTER TO DATE
Return on average assets		1.61	%		1.60	%		1.85	%
Return on average equity		15.84			16.19			17.39
Efficiency ratio **		46.68			45.54			39.59
Net interest margin		3.96			4.04			4.61
Noninterest expense to average assets		1.94			1.93			1.87
FINANCIAL DATA - YEAR TO DATE
Income before provision for income taxes	$	39,946					$	37,786				5.7
Provision for income taxes		10,009						9,285				7.8
Net income	$	29,937					$	28,501				5.0
Net income per common share - Basic	$	2.92					$	2.72				7.4
Net income per common share - Diluted		2.88						2.67				7.9
PERFORMANCE RATIOS - YEAR TO DATE
Return on average assets		1.64	%					1.83	%
Return on average equity		16.38						17.45
Efficiency ratio **		45.59						42.64
Net interest margin		4.06						4.37
Noninterest expense to average assets		1.93						2.00
SHARE INFORMATION
Market price per share	$	23.43		$	23.59		$	25.11		(0.7)		(6.7)
Dividends paid		0.12			0.12			0.11		-		9.1
Book value per common share		24.95			24.12			21.86		3.4		14.1
Average diluted shares outstanding (QTD)		10,258			10,203			10,714		0.5		(4.3)
CAPITAL RATIOS
Total equity to total assets		9.85	%		9.56	%		9.84	%
Community bank leverage ratio		10.76			10.49			10.85
CREDIT QUALITY AND RATIOS
Nonperforming assets	$	18,307		$	16,466		$	8,033		11.2		127.9
QTD annualized net (chargeoffs)/recoveries to QTD average loans		(0.11)	%		(0.18)	%		(0.11)	%
Allowance for credit losses to total loans		1.19			1.20			1.23
Nonperforming loans (gross SBA guarantee) to total loans		0.84			0.76			0.41
Nonperforming assets (gross SBA guarantee) to total assets		0.71			0.65			0.34

**The efficiency ratio is a non-GAAP measure, calculated based on the noninterest expense divided by the sum of net interest income plus non interest income, excluding net gains and losses on securities.

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2023

							September 30, 2023 vs.
							December 31, 2022		September 30, 2022
(In thousands, except percentages)	September 30, 2023		December 31, 2022		September 30, 2022		%		%
ASSETS
Cash and due from banks	$	26,224	$	19,699	$	24,959	33.1	%	5.1	%
Interest-bearing deposits		135,223		95,094		138,421	42.2		(2.3)
Cash and cash equivalents		161,447		114,793		163,380	40.6		(1.2)
Securities:
Debt securities available for sale, at market value		92,122		95,393		92,500	(3.4)		(0.4)
Debt securities held to maturity, at book value		35,956		35,760		35,897	0.5		0.2
Equity securities, at market value		8,013		9,793		8,474	(18.2)		(5.4)
Total securities		136,091		140,946		136,871	(3.4)		(0.6)
Loans:
SBA loans held for sale		19,387		27,928		36,338	(30.6)		(46.6)
SBA loans held for investment		40,873		38,468		30,747	6.3		32.9
SBA PPP loans		2,507		5,908		6,706	(57.6)		(62.6)
Commercial loans		1,276,156		1,187,543		1,106,059	7.5		15.4
Residential mortgage loans		628,628		605,091		533,737	3.9		17.8
Consumer loans		72,189		78,164		79,662	(7.6)		(9.4)
Residential construction loans		133,450		163,457		149,165	(18.4)		(10.5)
Total loans		2,173,190		2,106,559		1,942,414	3.2		11.9
Allowance for credit losses		(25,918)		(25,196)		(23,861)	2.9		8.6
Net loans		2,147,272		2,081,363		1,918,553	3.2		11.9
Premises and equipment, net		19,783		20,002		19,094	(1.1)		3.6
Bank owned life insurance ("BOLI")		25,223		26,776		26,634	(5.8)		(5.3)
Deferred tax assets		13,249		12,345		12,910	7.3		2.6
Federal Home Loan Bank ("FHLB") stock		19,882		19,064		14,398	4.3		38.1
Accrued interest receivable		16,101		13,403		11,385	20.1		41.4
Goodwill		1,516		1,516		1,516	-		-
Prepaid expenses and other assets		22,442		14,740		34,796	52.3		(35.5)
Total assets	$	2,563,006	$	2,444,948	$	2,339,537	4.8	%	9.6	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	425,436	$	494,184	$	497,752	(13.9)	%	(14.5)	%
Interest-bearing demand		297,705		276,218		267,558	7.8		11.3
Savings		548,325		591,826		682,756	(7.4)		(19.7)
Brokered time deposits		197,636		189,644		154,563	4.2		27.9
Time deposits		415,808		235,656		193,968	76.4		114.4
Total deposits		1,884,910		1,787,528		1,796,597	5.4		4.9
Borrowed funds		388,610		383,000		280,000	1.5		38.8
Subordinated debentures		10,310		10,310		10,310	-		-
Accrued interest payable		1,412		691		294	104.3		380.3
Accrued expenses and other liabilities		25,380		24,192		22,102	4.9		14.8
Total liabilities		2,310,622		2,205,721		2,109,303	4.8		9.5
Shareholders' equity:
Common stock		99,741		97,204		96,493	2.6		3.4
Retained earnings		182,557		156,958		148,174	16.3		23.2
Treasury stock, at cost		(25,954)		(11,675)		(11,633)	122.3		123.1
Accumulated other comprehensive loss		(3,960)		(3,260)		(2,800)	21.5		41.4
Total shareholders' equity		252,384		239,227		230,234	5.5		9.6
Total liabilities and shareholders' equity	$	2,563,006	$	2,444,948	$	2,339,537	4.8	%	9.6	%
Shares issued		11,411		11,289		11,236
Shares outstanding		10,115		10,584		10,533
Treasury shares		1,296		705		703
*NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2023

										September 30, 2023 vs.
	For the three months ended									June 30, 2023					September 30, 2022
(In thousands, except percentages and per share amounts)	September 30, 2023			June 30, 2023			September 30, 2022			$		%			$		%
INTEREST INCOME
Interest-bearing deposits	$	483		$	441		$	168		$	42		9.5	%	$	315		187.5	%
FHLB stock		364			343			93			21		6.1			271		291.4
Securities:
Taxable		1,848			1,798			1,397			50		2.8			451		32.3
Tax-exempt		17			19			18			(2)		(10.5)			(1)		(5.6)
Total securities		1,865			1,817			1,415			48		2.6			450		31.8
Loans:
SBA loans		1,379			1,403			1,083			(24)		(1.7)			296		27.3
SBA PPP loans		25			27			277			(2)		(7.4)			(252)		(91.0)
Commercial loans		20,299			18,621			14,017			1,678		9.0			6,282		44.8
Residential mortgage loans		8,462			8,532			5,912			(70)		(0.8)			2,550		43.1
Consumer loans		1,525			1,471			1,075			54		3.7			450		41.9
Residential construction loans		2,588			2,737			2,184			(149)		(5.4)			404		18.5
Total loans		34,278			32,791			24,548			1,487		4.5			9,730		39.6
Total interest income		36,990			35,392			26,224			1,598		4.5			10,766		41.1
INTEREST EXPENSE
Interest-bearing demand deposits		1,429			1,349			320			80		5.9			1,109		346.6
Savings deposits		3,178			2,501			878			677		27.1			2,300		262.0
Time deposits		5,033			3,895			600			1,138		29.2			4,433		738.8
Borrowed funds and subordinated debentures		3,817			4,125			688			(308)		(7.5)			3,129		454.8
Total interest expense		13,457			11,870			2,486			1,587		13.4			10,971		441.3
Net interest income		23,533			23,522			23,738			11		-			(205)		(0.9)
Provision for credit losses		534			777			1,517			(243)		(31.3)			(983)		(64.8)
Net interest income after provision for credit losses		22,999			22,745			22,221			254		1.1			778		3.5
NONINTEREST INCOME
Branch fee income		278			228			336			50		21.9			(58)		(17.3)
Service and loan fee income		385			491			543			(106)		(21.6)			(158)		(29.1)
Gain on sale of SBA loans held for sale, net		-			586			-			(586)		(100.0)			-		-
Gain on sale of mortgage loans, net		488			463			280			25		5.4			208		74.3
BOLI income		679			84			170			595		708.3			509		299.4
Net securities losses		(123)			(164)			(576)			41		25.0			453		78.6
Other income		336			427			357			(91)		(21.3)			(21)		(5.9)
Total noninterest income		2,043			2,115			1,110			(72)		(3.4)			933		84.1
NONINTEREST EXPENSE
Compensation and benefits		7,440			7,271			6,471			169		2.3			969		15.0
Processing and communications		705			663			708			42		6.3			(3)		(0.4)
Occupancy		763			779			702			(16)		(2.1)			61		8.7
Furniture and equipment		645			690			617			(45)		(6.5)			28		4.5
Professional services		348			296			221			52		17.6			127		57.5
Advertising		405			443			307			(38)		(8.6)			98		31.9
Other loan expenses		125			45			109			80		177.8			16		14.7
Deposit insurance		397			617			233			(220)		(35.7)			164		70.4
Director fees		209			203			240			6		3.0			(31)		(12.9)
Loan collection expenses		90			85			45			5		5.9			45		100.0
Other expenses		868			659			411			209		31.7			457		111.2
Total noninterest expense		11,995			11,751			10,064			244		2.1			1,931		19.2
Income before provision for income taxes		13,047			13,109			13,267			(62)		(0.5)			(220)		(1.7)
Provision for income taxes		3,097			3,409			3,325			(312)		(9.2)			(228)		(6.9)
Net income	$	9,950		$	9,700		$	9,942		$	250		2.6	%	$	8		0.1	%
Effective tax rate		23.7	%		26.0	%		25.1	%
Net income per common share - Basic	$	0.98		$	0.96		$	0.94
Net income per common share - Diluted		0.97			0.95			0.93
Weighted average common shares outstanding - Basic		10,128			10,103			10,522
Weighted average common shares outstanding - Diluted		10,258			10,203			10,714
*NM=Not meaningful

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2023

	For the nine months ended September 30,						Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2023			2022			$		%
INTEREST INCOME
Interest-bearing deposits	$	1,257		$	416		$	841		202.2	%
FHLB stock		1,037			176			861		489.2
Securities:
Taxable		5,385			3,164			2,221		70.2
Tax-exempt		55			34			21		61.8
Total securities		5,440			3,198			2,242		70.1
Loans:
SBA loans		4,186			2,933			1,253		42.7
SBA PPP loans		129			1,546			(1,417)		(91.7)
Commercial loans		56,320			37,928			18,392		48.5
Residential mortgage loans		25,103			15,284			9,819		64.2
Consumer loans		4,351			2,914			1,437		49.3
Residential construction loans		7,911			6,018			1,893		31.5
Total loans		98,000			66,623			31,377		47.1
Total interest income		105,734			70,413			35,321		50.2
INTEREST EXPENSE
Interest-bearing demand deposits		3,761			682			3,079		451.5
Savings deposits		7,632			1,635			5,997		366.8
Time deposits		11,637			1,499			10,138		676.3
Borrowed funds and subordinated debentures		11,740			1,199			10,541		879.1
Total interest expense		34,770			5,015			29,755		593.3
Net interest income		70,964			65,398			5,566		8.5
Provision for credit losses		1,419			2,526			(1,107)		(43.8)
Net interest income after provision for credit losses		69,545			62,872			6,673		10.6
NONINTEREST INCOME
Branch fee income		741			892			(151)		(16.9)
Service and loan fee income		1,379			1,815			(436)		(24.0)
Gain on sale of SBA loans held for sale, net		896			852			44		5.2
Gain on sale of mortgage loans, net		1,195			1,231			(36)		(2.9)
BOLI income		843			494			349		70.6
Net securities losses		(610)			(1,631)			1,021		62.6
Other income		1,131			2,446			(1,315)		(53.8)
Total noninterest income		5,575			6,099			(524)		(8.6)
NONINTEREST EXPENSE
Compensation and benefits		21,801			19,790			2,011		10.2
Processing and communications		2,172			2,166			6		0.3
Occupancy		2,312			2,205			107		4.9
Furniture and equipment		2,024			1,811			213		11.8
Professional services		1,071			1,060			11		1.0
Advertising		1,108			873			235		26.9
Other loan expenses		298			238			60		25.2
Deposit insurance		1,362			752			610		81.1
Director fees		629			698			(69)		(9.9)
Loan collection expenses		222			138			84		60.9
Other expenses		2,175			1,454			721		49.6
Total noninterest expense		35,174			31,185			3,989		12.8
Income before provision for income taxes		39,946			37,786			2,160		5.7
Provision for income taxes		10,009			9,285			724		7.8
Net income	$	29,937		$	28,501		$	1,436		5.0	%
Effective tax rate		25.1	%		24.6	%
Net income per common share - Basic	$	2.92		$	2.72
Net income per common share - Diluted		2.88			2.67
Weighted average common shares outstanding - Basic		10,255			10,491
Weighted average common shares outstanding - Diluted		10,381			10,694
*NM=Not meaningful

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

September 30, 2023

	For the three months ended
(Dollar amounts in thousands, interest amounts and	September 30, 2023							September 30, 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	$	34,597	$	483		5.54	%	$	34,605	$	168		1.92	%
FHLB stock		15,485		364		9.32			6,200		93		5.96
Securities:
Taxable		135,132		1,848		5.47			137,590		1,397		4.03
Tax-exempt		1,692		18		4.27			1,841		20		4.27
Total securities (A)		136,824		1,866		5.45			139,431		1,417		4.03
Loans:
SBA loans		60,108		1,379		9.18			65,941		1,083		6.52
SBA PPP loans		2,523		25		3.94			9,576		277		11.47
Commercial loans		1,266,185		20,299		6.27			1,069,917		14,017		5.20
Residential mortgage loans		628,544		8,462		5.39			504,787		5,912		4.65
Consumer loans		75,246		1,525		7.93			76,957		1,075		5.54
Residential construction loans		139,045		2,588		7.28			137,681		2,184		6.29
Total loans (B)		2,171,651		34,278		6.18			1,864,859		24,548		5.22
Total interest-earning assets	$	2,358,557	$	36,991		6.22	%	$	2,045,095	$	26,226		5.09	%
Noninterest-earning assets:
Cash and due from banks		22,841							24,350
Allowance for credit losses		(26,478)							(22,848)
Other assets		100,428							83,168
Total noninterest-earning assets		96,791							84,670
Total assets	$	2,455,348						$	2,129,765
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	304,287	$	1,429		1.86	%	$	269,486	$	320		0.47	%
Total savings deposits		547,000		3,178		2.30			674,486		878		0.52
Total time deposits		597,664		5,033		3.34			310,842		600		0.77
Total interest-bearing deposits		1,448,951		9,640		2.64			1,254,814		1,798		0.57
Borrowed funds and subordinated debentures		300,608		3,817		4.97			108,135		688		2.53
Total interest-bearing liabilities	$	1,749,559	$	13,457		3.05	%	$	1,362,949	$	2,486		0.72	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		429,321							516,898
Other liabilities		27,192							23,130
Total noninterest-bearing liabilities		456,513							540,028
Total shareholders' equity		249,276							226,788
Total liabilities and shareholders' equity	$	2,455,348						$	2,129,765
Net interest spread			$	23,534		3.17	%			$	23,740		4.37	%
Tax-equivalent basis adjustment				(1)							(2)
Net interest income			$	23,533						$	23,738
Net interest margin						3.96	%						4.61	%

(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 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, 2023

	For the three months ended
(Dollar amounts in thousands, interest amounts and	September 30, 2023							June 30, 2023
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	$	34,597	$	483		5.54	%	$	34,808	$	441		5.09	%
FHLB stock		15,485		364		9.32			17,252		343		7.97
Securities:
Taxable		135,132		1,848		5.47			135,943		1,798		5.29
Tax-exempt		1,692		18		4.27			1,766		20		4.59
Total securities (A)		136,824		1,866		5.45			137,709		1,818		5.28
Loans:
SBA loans		60,108		1,379		9.18			61,744		1,403		9.09
SBA PPP loans		2,523		25		3.94			2,561		27		4.20
Commercial loans		1,266,185		20,299		6.27			1,225,761		18,621		6.01
Residential mortgage loans		628,544		8,462		5.39			622,283		8,532		5.48
Consumer loans		75,246		1,525		7.93			76,741		1,471		7.59
Residential construction loans		139,045		2,588		7.28			158,165		2,737		6.85
Total loans (B)		2,171,651		34,278		6.18			2,147,255		32,791		6.04
Total interest-earning assets	$	2,358,557	$	36,991		6.22	%	$	2,337,024	$	35,393		6.07	%
Noninterest-earning assets:
Cash and due from banks		22,841							21,967
Allowance for credit losses		(26,478)							(26,270)
Other assets		100,428							103,234
Total noninterest-earning assets		96,791							98,931
Total assets	$	2,455,348						$	2,435,955
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	304,287	$	1,429		1.86	%	$	312,149	$	1,349		1.73	%
Total savings deposits		547,000		3,178		2.30			543,690		2,501		1.85
Total time deposits		597,664		5,033		3.34			533,612		3,895		2.93
Total interest-bearing deposits		1,448,951		9,640		2.64			1,389,451		7,745		2.24
Borrowed funds and subordinated debentures		300,608		3,817		4.97			339,599		4,125		4.81
Total interest-bearing liabilities	$	1,749,559	$	13,457		3.05	%	$	1,729,050	$	11,870		2.75	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		429,321							440,289
Other liabilities		27,192							26,275
Total noninterest-bearing liabilities		456,513							466,564
Total shareholders' equity		249,276							240,341
Total liabilities and shareholders' equity	$	2,455,348						$	2,435,955
Net interest spread			$	23,534		3.17	%			$	23,523		3.32	%
Tax-equivalent basis adjustment				(1)							(1)
Net interest income			$	23,533						$	23,522
Net interest margin						3.96	%						4.04	%

(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 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, 2023

	For the nine months ended
(Dollar amounts in thousands, interest amounts and	September 30, 2023							September 30, 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	$	34,068	$	1,257		4.93	%	$	114,901	$	416		0.48	%
FHLB stock		16,500		1,037		8.41			4,592		176		5.13
Securities:
Taxable		136,473		5,385		5.26			116,816		3,164		3.62
Tax-exempt		1,737		58		4.46			1,366		39		3.80
Total securities (A)		138,210		5,443		5.25			118,182		3,203		3.62
Loans:
SBA loans		62,802		4,186		8.89			64,438		2,933		6.08
SBA PPP loans		3,103		129		5.53			23,388		1,546		8.84
Commercial loans		1,230,752		56,320		6.03			1,009,122		37,928		5.03
Residential mortgage loans		621,971		25,103		5.38			456,354		15,284		4.48
Consumer loans		76,363		4,351		7.51			78,108		2,914		4.99
Residential construction loans		153,587		7,911		6.79			130,205		6,018		6.18
Total loans (B)		2,148,578		98,000		6.01			1,761,615		66,623		5.06
Total interest-earning assets	$	2,337,356	$	105,737		6.05	%	$	1,999,290	$	70,418		4.71	%
Noninterest-earning assets:
Cash and due from banks		22,516							24,026
Allowance for credit losses		(26,178)							(22,454)
Other assets		104,883							80,656
Total noninterest-earning assets		101,221							82,228
Total assets	$	2,438,577						$	2,081,518
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	301,456	$	3,761		1.67	%	$	263,139	$	682		0.35	%
Total savings deposits		554,087		7,632		1.84			687,177		1,635		0.32
Total time deposits		539,395		11,637		2.88			292,484		1,499		0.69
Total interest-bearing deposits		1,394,938		23,030		2.21			1,242,800		3,816		0.41
Borrowed funds and subordinated debentures		327,382		11,740		4.73			72,724		1,199		2.21
Total interest-bearing liabilities	$	1,722,320	$	34,770		2.70	%	$	1,315,524	$	5,015		0.51	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		445,862							525,405
Other liabilities		26,016							22,186
Total noninterest-bearing liabilities		471,878							547,591
Total shareholders' equity		244,379							218,403
Total liabilities and shareholders' equity	$	2,438,577						$	2,081,518
Net interest spread			$	70,967		3.35	%			$	65,403		4.20	%
Tax-equivalent basis adjustment				(3)							(5)
Net interest income			$	70,964						$	65,398
Net interest margin						4.06	%						4.37	%

(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 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 CREDIT LOSSES AND LOAN QUALITY SCHEDULES

September 30, 2023

Amounts in thousands, except percentages	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
ALLOWANCE FOR CREDIT LOSSES:
Balance, beginning of period	$	25,988		$	26,201		$	25,196		$	23,861		$	22,858
Impact of the adoption of ASU 2016-13 ("CECL")		-			-			847			-			-
Provision for credit losses charged to expense		534			777			108			1,632			1,517
		26,522			26,978			26,151			25,493			24,375
Less: Chargeoffs
SBA loans		100			-			113			59			-
Commercial loans		500			-			-			-			501
Residential mortgage loans		-			-			-			-			-
Consumer loans		52			225			120			300			50
Residential construction loans		-			900			-			-			-
Total chargeoffs		652			1,125			233			359			551
Add: Recoveries
SBA loans		1			15			-			-			5
Commercial loans		10			96			271			26			23
Residential mortgage loans		-			-			-			2			-
Consumer loans		37			24			12			34			9
Residential construction loans		-			-			-			-			-
Total recoveries		48			135			283			62			37
Net (chargeoffs)/recoveries		(604)			(990)			50			(297)			(514)
Balance, end of period	$	25,918		$	25,988		$	26,201		$	25,196		$	23,861
LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans	$	3,445		$	3,591		$	4,325		$	690		$	1,491
Commercial loans		750			835			1,144			1,582			1,147
Residential mortgage loans		10,530			8,607			5,565			3,361			3,404
Consumer loans		130			-			-			-			-
Residential construction loans		3,201			3,182			3,473			3,432			1,991
Total nonperforming loans		18,056			16,215			14,507			9,065			8,033
OREO		251			251			176			-			-
Nonperforming assets		18,307			16,466			14,683			9,065			8,033
Less: Amount guaranteed by Small Business Administration		3,098			3,201			3,625			-			-
Nonperforming assets, net of SBA guarantee		15,209			13,265			11,058			9,065			8,033
Loans 90 days past due & still accruing	$	265		$	-		$	-		$	-		$	75
Allowance for loan losses to:
Total loans at quarter end		1.19	%		1.20	%		1.23	%		1.20	%		1.23
Total nonperforming loans		141.57			157.83			178.44			277.95			297.04
Total nonperforming assets, net of SBA guarantee		170.41			195.91			236.94			277.95			297.04

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

September 30, 2023

(In thousands, except %'s, employee, office and per share amounts)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
SUMMARY OF INCOME:
Total interest income	$	36,990		$	35,392		$	33,353		$	30,325		$	26,224
Total interest expense		13,457			11,870			9,443			5,616			2,486
Net interest income		23,533			23,522			23,910			24,709			23,738
Provision for credit losses		534			777			108			1,632			1,517
Net interest income after provision for credit losses		22,999			22,745			23,802			23,077			22,221
Total noninterest income		2,043			2,115			1,417			1,946			1,110
Total noninterest expense		11,995			11,751			11,428			11,389			10,064
Income before provision for income taxes		13,047			13,109			13,791			13,634			13,267
Provision for income taxes		3,097			3,409			3,504			3,678			3,325
Net income	$	9,950		$	9,700		$	10,287		$	9,956		$	9,942
Net income per common share - Basic	$	0.98		$	0.96		$	0.98		$	0.94		$	0.94
Net income per common share - Diluted		0.97			0.95			0.96			0.93			0.93
COMMON SHARE DATA:
Market price per share	$	23.43		$	23.59		$	22.81		$	27.33		$	25.11
Dividends paid		0.12			0.12			0.12			0.11			0.11
Book value per common share		24.95			24.12			23.34			22.60			21.86
Weighted average common shares outstanding - Basic		10,128			10,103			10,538			10,557			10,522
Weighted average common shares outstanding - Diluted		10,258			10,203			10,686			10,740			10,714
Issued common shares		11,411			11,387			11,335			11,289			11,236
Outstanding common shares		10,115			10,119			10,292			10,584			10,533
Treasury shares		1,296			1,268			1,043			705			703
PERFORMANCE RATIOS (Annualized):
Return on average assets		1.61	%		1.60	%		1.72	%		1.72	%		1.85	%
Return on average equity		15.84			16.19			17.14			16.82			17.39
Efficiency ratio**		46.68			45.54			44.56			43.24			39.59
Noninterest expense to average assets		1.94			1.93			1.91			1.96			1.87
BALANCE SHEET DATA:
Total assets	$	2,563,006		$	2,552,301		$	2,475,851		$	2,444,948		$	2,339,537
Total securities		136,091			137,061			138,264			140,946			136,871
Total loans		2,173,190			2,167,367			2,130,919			2,106,559			1,942,414
Allowance for credit losses		25,918			25,988			26,201			25,196			23,861
Total deposits		1,884,910			1,849,528			1,823,921			1,787,528			1,796,597
Total shareholders' equity		252,384			244,073			240,459			239,227			230,234
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		6.22	%		6.07	%		5.84	%		5.48	%		5.09	%
Interest-bearing liabilities		3.05			2.75			2.27			1.44			0.72
Net interest spread		3.17			3.32			3.57			4.04			4.37
Net interest margin		3.96			4.04			4.19			4.47			4.61
CREDIT QUALITY:
Nonperforming assets	$	18,307		$	16,466		$	14,683		$	9,065		$	8,033
QTD annualized net (chargeoffs)/recoveries to QTD average loans		(0.11)	%		(0.18)	%		0.01	%		(0.06)	%		(0.11)	%
Allowance for credit losses to total loans		1.19			1.20			1.23			1.20			1.23
Nonperforming loans to total loans		0.84			0.76			0.68			0.43			0.41
Nonperforming assets to total assets		0.71			0.65			0.59			0.37			0.34
CAPITAL RATIOS AND OTHER:
Total equity to total assets		9.85	%		9.56	%		9.71	%		9.78	%		9.84	%
Community bank leverage ratio, bancorp		10.76			10.49			10.38			10.88			10.85
Number of banking offices		21			20			20			19			18
Number of employees		232			230			228			231			222

** The efficiency ratio is a non-GAAP measure, calculated based on the noninterest expense divided by the sum of net interest income plus non interest income, excluding net gains and losses on securities.