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

Exhibit 99.1

Clinton, NJ -- Clinton, NJ -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $9.8 million, or $0.96 per diluted share, for the quarter ended December 31, 2023, compared to net income of $9.9 million, or $0.97 per diluted share for the quarter ended September 30, 2023. This represents a 1.8% decrease in net income and a 1.0% decrease in net income per diluted share.  For the twelve months ended December 31, 2023, the Company reported net income of $39.7 million or $3.84 per diluted share, compared to net income of $38.5 million or $3.59 per diluted share for the twelve months ended December 31, 2022. This represents a 3.3% increase in net income and a 7.0% increase in net income per diluted share.

Fourth Quarter Earnings Highlights

● Net interest income, the primary driver of earnings, was $24.0 million for the quarter ended December 31, 2023, an increase of $0.5 million, as compared to $23.5 million for the quarter ended September 30, 2023. Net interest margin (“NIM”) increased 10 basis points to 4.06% for the quarter ended December 31, 2023, compared to the quarter ended September 30, 2023. The increase was primarily due to assets repricing and the mix shift of interest-bearing liabilities.

● The provision for credit losses on loans was $0.4 million for the quarter ended December 31, 2023, compared to $0.5 million for the quarter ended September 30, 2023.  The decrease was primarily driven by slower loan growth in the fourth quarter of 2023. The provision for off-balance sheet credit losses was $0.1 million for the quarter ended December 31, 2023, compared to $22 thousand for the quarter ended September 30, 2023.  

● Provision for Available For Sale (“AFS”) debt security impairment was $1.3 million for the quarter ended December 31, 2023, as compared to no provision for the prior quarter. The impairment was entirely attributable to one corporate senior debt security in the AFS portfolio. The Company owns $5 million in par of this position and the issuing company recently restated earnings and was unprofitable during the first three quarters of 2023.

● Noninterest income was $2.6 million for the quarter ended December 31, 2023, compared to $2.0 million for the quarter ended September 30, 2023. The $0.6 million increase was primarily due to increased SBA gains on sale and mark-to-market increases in the Company’s equity portfolio, which is primarily compromised of bank common and preferred shares. These increases were partially offset by decreased BOLI income, which contained one-time claim events in the prior quarter.

● Noninterest expense was $11.7 million for the quarter ended December 31, 2023, compared to $12.0 million for the quarter ended September 30, 2023.  The decrease was primarily driven by lower compensation expenses and other expenses. These decreases were partially offset by higher professional services, loan collection, processing and communications, and furniture and equipment related expenses.  

● The effective tax rate was 25.1% for the quarter ended December 31, 2023, compared to 23.7% for the quarter ending September 30, 2023. The increase in the current quarter, is primarily due to the aforementioned BOLI payouts in the prior quarter. As it pertains to other tax matters, Unity Bancorp decided to exit its captive insurance subsidiary in Q4 2023 as a result of recently issued proposed regulations from the US Treasury Department.  The captive insurance subsidiary saved an estimated $0.3 million to $0.4 million of federal tax expenses per year.

Balance Sheet Highlights

● Total gross loans increased $65.5 million, or 3.1%, from December 31, 2022, primarily due to increases in commercial and residential mortgage loans. These increases were partially offset by decreases in the residential construction, consumer and SBA loans.

● As of December 31, 2023, the allowance for credit losses as a percentage of gross loans was 1.19%.

● Total deposits increased $136.6 million, or 7.6%, from December 31, 2022.  As of December 31, 2023, 17.2% of total deposits were uninsured or uncollateralized. Further, the Company’s deposit base was 46.1% retail, 25.5% business, 18.0% municipal, and 10.4% Brokered CDs. The Company’s deposit composition as of December 31, 2023, consisted of 29.4% in savings deposits, 21.8% in noninterest bearing demand deposits, 32.5% time deposits and 16.3% in interest-bearing demand deposits.

● As of December 31, 2023, the loan to deposit ratio was approximately 112.9%, 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, the Company is intentionally reducing non-owner occupied CRE lending volumes and continues to execute upon its retail banking deposit gathering strategies.

● As of December 31, 2023, investments comprised 5.3% of total assets. Available for sale debt securities (“AFS”) were $91.8 million or 3.6% of total assets. Held to maturity (“HTM”) debt securities were $36.1 million or 1.4% of total assets. As of December 31, 2023, pre-tax net unrealized losses on AFS and HTM were $4.5 million and $6.5 million, respectively. These pre-tax unrealized losses represent approximately 4.0% of the Bancorp’s Tier 1 capital. Equity securities were $7.8 million or 0.3% of total assets as of December 31, 2023.

● Borrowed funds decreased $26.6 million from December 31, 2022. Borrowed funds were entirely comprised of borrowings from the FHLB.

● Shareholders’ equity was $261.4 million as of December 31, 2023, compared to $239.2 million as of December 31, 2022. The $22.2 million increase was primarily driven by 2023 earnings, partially offset by share repurchase and dividend payments. In the fourth quarter of 2023, Unity Bancorp repurchased 64,860 shares for approximately $1.5 million, or a weighted average price of $23.46 per share.  For the full year 2023, Unity Bancorp repurchased 656,397 shares for approximately $15.5 million, or a weighted average price of $23.69 per share.

● Book value per common share was $25.98 as of December 31, 2023, compared to $22.60 as of December 31, 2022 primarily as a result of earnings.

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

o Leverage Ratio: 11.14% at December 31, 2023, compared to 10.88% at December 31, 2022.

o Common Equity Tier 1 Capital Ratio: 12.70% at December 31, 2023, compared to 11.76% at December 31, 2022.

o Tier 1 Capital Ratio: 13.18% at December 31, 2023, compared to 12.25% at December 31, 2022.

o Total Capital Ratio: 14.43% at December 31, 2023, compared to 13.48% at December 31, 2022.

● The Company and the Bank are electing to opt out of the Community Bank Leverage ratio, effective December 31, 2023.

● At December 31, 2023, the Company held $194.8 million of cash and cash equivalents. Further, the Company maintained approximately $537.4 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 221.5% of uninsured or uncollateralized deposits.

● As of December 31, 2023, nonperforming assets were $19.2 million, compared to $9.1 million of nonperforming assets as of December 31, 2022. As of December 31, 2023, over 50% of nonperforming loans consisted of residential mortgage loans, which are well-secured. The Company diligently reviews nonperforming assets and potential problem credits, taking proactive measures to promptly address and resolve any issues. Nonperforming loans to total loans was 0.88% as of December 31, 2023. Nonperforming assets to total assets was 0.74% as of December 31, 2023.  

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

December 31, 2023

										December 31, 2023 vs.
										September 30, 2023		December 31, 2022
(In thousands, except percentages and per share amounts)	December 31, 2023			September 30, 2023			December 31, 2022			%		%
BALANCE SHEET DATA
Total assets	$	2,578,507		$	2,563,006		$	2,444,948		0.6	%	5.5	%
Total deposits		1,924,140			1,884,910			1,787,528		2.1		7.6
Total gross loans		2,172,063			2,173,189			2,106,559		(0.1)		3.1
Total securities		135,689			136,091			140,946		(0.3)		(3.7)
Total shareholders' equity		261,430			252,384			239,227		3.6		9.3
Allowance for credit losses		25,854			25,918			25,196		(0.2)		2.6
FINANCIAL DATA - QUARTER TO DATE
Income before provision for income taxes	$	13,048		$	13,047		$	13,634		-		(4.3)
Provision for income taxes		3,278			3,097			3,678		5.8		(10.9)
Net income	$	9,770		$	9,950		$	9,956		(1.8)		(1.9)
Net income per common share - Basic	$	0.97		$	0.98		$	0.94		(1.0)		3.2
Net income per common share - Diluted		0.96			0.97			0.93		(1.0)		3.2
PERFORMANCE RATIOS - QUARTER TO DATE (annualized)
Return on average assets		1.59	%		1.61	%		1.72	%
Return on average equity		15.12			15.84			16.82
Efficiency ratio **		43.06			46.59			43.16
Net interest margin		4.06			3.96			4.47
FINANCIAL DATA - YEAR TO DATE
Income before provision for income taxes	$	52,995					$	51,421				3.1
Provision for income taxes		13,288						12,964				2.5
Net income	$	39,707					$	38,457				3.3
Net income per common share - Basic	$	3.89					$	3.66				6.3
Net income per common share - Diluted		3.84						3.59				7.0
PERFORMANCE RATIOS - YEAR TO DATE
Return on average assets		1.63	%					1.80	%
Return on average equity		16.05						17.28
Efficiency ratio **		44.99						42.69
Net interest margin		4.06						4.37
SHARE INFORMATION
Market price per share	$	29.59		$	23.43		$	27.33		26.3		8.3
Dividends paid		0.12			0.12			0.11		-		9.1
Book value per common share		25.98			24.95			22.60		4.1		15.0
Average diluted shares outstanding (QTD)		10,209			10,258			10,740		(0.5)		(4.9)
CAPITAL RATIOS***
Total equity to total assets		10.14	%		9.85	%		9.78	%
Leverage ratio		11.14			10.76			10.88
Common Equity Tier 1 Capital Ratio		12.70			12.16			11.76
Risk-based Tier 1 Capital Ratio		13.18			12.64			12.25
Risk-based Total Capital Ratio		14.43			13.88			13.48
CREDIT QUALITY AND RATIOS
Nonperforming assets	$	19,186		$	18,307		$	9,065		4.8		111.6
QTD annualized net (chargeoffs)/recoveries to QTD average loans		(0.09)	%		(0.11)	%		(0.06)	%
Allowance for credit losses to total loans		1.19			1.19			1.20
Nonperforming loans to total loans		0.88			0.84			0.43
Nonperforming assets to total assets		0.74			0.71			0.37

** 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 and provision for impairment losses, AFS securities.

*** Represents Bancorp consolidated capital ratios.

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2023

								December 31, 2023 vs.
								September 30, 2023		December 31, 2022
(In thousands, except percentages)	December 31, 2023			September 30, 2023		December 31, 2022		%		%
ASSETS
Cash and due from banks	$	20,668		$	26,224	$	19,699	(21.2)	%	4.9	%
Interest-bearing deposits		174,108			135,223		95,094	28.8		83.1
Cash and cash equivalents		194,776			161,447		114,793	20.6		69.7
Securities:
Debt securities available for sale, at market value		91,765			92,122		95,393	(0.4)		(3.8)
Debt securities held to maturity, at book value		36,122			35,956		35,760	0.5		1.0
Equity securities, at market value		7,802			8,013		9,793	(2.6)		(20.3)
Total securities		135,689			136,091		140,946	(0.3)		(3.7)
Loans:
SBA loans held for sale		18,242			19,387		27,928	(5.9)		(34.7)
SBA loans held for investment		38,584			40,873		38,468	(5.6)		0.3
SBA PPP loans		2,318			2,507		5,908	(7.5)		(60.8)
Commercial loans		1,277,460			1,276,156		1,187,543	0.1		7.6
Residential mortgage loans		631,506			628,628		605,091	0.5		4.4
Consumer loans		72,676			72,189		78,164	0.7		(7.0)
Residential construction loans		131,277			133,450		163,457	(1.6)		(19.7)
Total loans		2,172,063			2,173,189		2,106,559	(0.1)		3.1
Allowance for credit losses		(25,854)			(25,918)		(25,196)	(0.2)		2.6
Net loans		2,146,209			2,147,272		2,081,363	-		3.1
Premises and equipment, net		19,567	���		19,783		20,002	(1.1)		(2.2)
Bank owned life insurance ("BOLI")		25,230			25,223		26,776	-		(5.8)
Deferred tax assets		12,552			13,249		12,345	(5.3)		1.7
Federal Home Loan Bank ("FHLB") stock		18,435			19,882		19,064	(7.3)		(3.3)
Accrued interest receivable		13,582			16,101		13,403	(15.6)		1.3
Goodwill		1,516			1,516		1,516	-		-
Prepaid expenses and other assets		10,951			22,442		14,740	(51.2)		(25.7)
Total assets	$	2,578,507		$	2,563,006	$	2,444,948	0.6	%	5.5	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	419,636		$	425,436	$	494,184	(1.4)	%	(15.1)	%
Interest-bearing demand		313,352			297,705		276,218	5.3		13.4
Savings		565,088			548,325		591,826	3.1		(4.5)
Brokered time deposits		199,667			197,636		154,563	1.0		29.2
Time deposits		426,397			415,808		270,737	2.5		57.5
Total deposits		1,924,140			1,884,910		1,787,528	2.1		7.6
Borrowed funds		356,438			388,610		383,000	(8.3)		(6.9)
Subordinated debentures		10,310			10,310		10,310	-		-
Accrued interest payable		1,924			1,412		691	36.3		178.4
Accrued expenses and other liabilities		24,265			25,380		24,192	(4.4)		0.3
Total liabilities		2,317,077			2,310,622		2,205,721	0.3		5.0
Shareholders' equity:
Common stock		100,426			99,741		97,204	0.7		3.3
Retained earnings		191,108			182,557		156,958	4.7		21.8
Treasury stock, at cost		(27,367)			(25,954)		(11,675)	5.4		134.4
Accumulated other comprehensive loss		(2,737)			(3,960)		(3,260)	(30.9)		(16.0)
Total shareholders' equity		261,430			252,384		239,227	3.6		9.3
Total liabilities and shareholders' equity	$	2,578,507		$	2,563,006	$	2,444,948	0.6	%	5.5	%
Shares issued		11,424			11,411		11,289
Shares outstanding		10,063			10,115		10,584
Treasury shares		1,361			1,296		705
*NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2023

										December 31, 2023 vs.
	For the three months ended									September 30, 2023					December 31, 2022
(In thousands, except percentages and per share amounts)	December 31, 2023			September 30, 2023			December 31, 2022			$		%			$		%
INTEREST INCOME
Interest-bearing deposits	$	466		$	483		$	319		$	(17)		(3.5)	%	$	147		46.1	%
FHLB stock		331			364			220			(33)		(9.1)			111		50.5
Securities:
Taxable		1,886			1,848			1,589			38		2.1			297		18.7
Tax-exempt		17			17			19			-		-			(2)		(10.5)
Total securities		1,903			1,865			1,608			38		2.0			295		18.3
Loans:
SBA loans		1,303			1,379			1,370			(76)		(5.5)			(67)		(4.9)
SBA PPP loans		8			25			50			(17)		(68.0)			(42)		(84.0)
Commercial loans		20,646			20,299			15,894			347		1.7			4,752		29.9
Residential mortgage loans		9,091			8,462			7,111			629		7.4			1,980		27.8
Consumer loans		1,391			1,525			1,217			(134)		(8.8)			174		14.3
Residential construction loans		2,619			2,588			2,536			31		1.2			83		3.3
Total loans		35,058			34,278			28,178			780		2.3			6,880		24.4
Total interest income		37,758			36,990			30,325			768		2.1			7,433		24.5
INTEREST EXPENSE
Interest-bearing demand deposits		1,546			1,429			703			117		8.2			843		119.9
Savings deposits		3,607			3,178			1,475			429		13.5			2,132		144.5
Time deposits		5,703			5,033			1,258			670		13.3			4,445		353.3
Borrowed funds and subordinated debentures		2,871			3,817			2,180			(946)		(24.8)			691		31.7
Total interest expense		13,727			13,457			5,616			270		2.0			8,111		144.4
Net interest income		24,031			23,533			24,709			498		2.1			(678)		(2.7)
Provision for credit losses, loans		413			534			1,632			(121)		(22.7)			(1,219)		(74.7)
Provision for credit losses, off-balance sheet		115			22			20			93		422.7			95		475.0
Provision for impairment losses, AFS securities		1,283			-			-			1,283		*NM			1,283		*NM
Net interest income after provision for credit losses		22,220			22,977			23,057			(757)		(3.3)			(837)		(3.6)
NONINTEREST INCOME
Branch fee income		256			278			224			(22)		(7.9)			32		14.3
Service and loan fee income		550			385			618			165		42.9			(68)		(11.0)
Gain on sale of SBA loans held for sale, net		403			-			103			403		*NM			300		291.3
Gain on sale of mortgage loans, net		351			488			167			(137)		(28.1)			184		110.2
BOLI income		9			679			142			(670)		(98.7)			(133)		(93.7)
Net securities gains (losses)		617			(123)			319			740		*NM			298		93.4
Other income		382			336			373			46		13.7			9		2.4
Total noninterest income		2,568			2,043			1,946			525		25.7			622		32.0
NONINTEREST EXPENSE
Compensation and benefits		7,250			7,440			7,160			(190)		(2.6)			90		1.3
Processing and communications		822			705			682			117		16.6			140		20.5
Occupancy		775			763			758			12		1.6			17		2.2
Furniture and equipment		756			645			683			111		17.2			73		10.7
Professional services		492			348			341			144		41.4			151		44.3
Advertising		328			405			339			(77)		(19.0)			(11)		(3.2)
Loan related expenses		398			215			141			183		85.1			257		*NM
Deposit insurance		353			397			270			(44)		(11.1)			83		30.7
Director fees		218			209			218			9		4.3			-		-
Other expenses		348			846			777			(498)		(58.9)			(429)		(55.2)
Total noninterest expense		11,740			11,973			11,369			(233)		(1.9)			371		3.3
Income before provision for income taxes		13,048			13,047			13,634			1		-			(586)		(4.3)
Provision for income taxes		3,278			3,097			3,678			181		5.8			(400)		(10.9)
Net income	$	9,770		$	9,950		$	9,956		$	(180)		(1.8)	%	$	(186)		(1.9)	%
Effective tax rate		25.1	%		23.7	%		27.0	%
Net income per common share - Basic	$	0.97		$	0.98		$	0.94
Net income per common share - Diluted		0.96			0.97			0.93
Weighted average common shares outstanding - Basic		10,066			10,128			10,557
Weighted average common shares outstanding - Diluted		10,209			10,258			10,740
*NM=Not meaningful

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2023

	For the years ended December 31,						Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2023			2022			$		%
INTEREST INCOME
Interest-bearing deposits	$	1,724		$	735		$	989		134.6	%
FHLB stock		1,369			396			973		245.7
Securities:
Taxable		7,271			4,754			2,517		52.9
Tax-exempt		72			53			19		35.8
Total securities		7,343			4,807			2,536		52.8
Loans:
SBA loans		5,489			4,303			1,186		27.6
SBA PPP loans		137			1,596			(1,459)		(91.4)
Commercial loans		76,966			53,820			23,146		43.0
Residential mortgage loans		34,194			22,395			11,799		52.7
Consumer loans		5,742			4,132			1,610		39.0
Residential construction loans		10,530			8,555			1,975		23.1
Total loans		133,058			94,801			38,257		40.4
Total interest income		143,494			100,739			42,755		42.4
INTEREST EXPENSE
Interest-bearing demand deposits		5,306			1,384			3,922		283.4
Savings deposits		11,239			3,110			8,129		261.4
Time deposits		17,340			2,757			14,583		528.9
Borrowed funds and subordinated debentures		14,612			3,380			11,232		332.3
Total interest expense		48,497			10,631			37,866		356.2
Net interest income		94,997			90,108			4,889		5.4
Provision for credit losses, loans		1,832			4,159			(2,327)		(56.0)
Provision for credit losses, off-balance sheet		53			115			(62)		(53.9)
Provision for impairment losses, AFS securities		1,283			-			1,283		*NM
Net interest income after provision for credit losses		91,829			85,834			5,995		7.0
NONINTEREST INCOME
Branch fee income		997			1,117			(120)		(10.7)
Service and loan fee income		1,928			2,433			(505)		(20.8)
Gain on sale of SBA loans held for sale, net		1,299			954			345		36.2
Gain on sale of mortgage loans, net		1,546			1,399			147		10.5
BOLI income		852			636			216		34.0
Net securities gains (losses)		7			(1,313)			1,320		100.5
Other income		1,513			2,819			(1,306)		(46.3)
Total noninterest income		8,142			8,045			97		1.2
NONINTEREST EXPENSE
Compensation and benefits		29,051			26,949			2,102		7.8
Processing and communications		2,994			2,848			146		5.1
Occupancy		3,087			2,963			124		4.2
Furniture and equipment		2,780			2,493			287		11.5
Professional services		1,563			1,401			162		11.6
Advertising		1,436			1,212			224		18.5
Loan related expenses		918			518			400		77.2
Deposit insurance		1,715			1,022			693		67.8
Director fees		847			916			(69)		(7.5)
Other expenses		2,585			2,136			449		21.0
Total noninterest expense		46,976			42,458			4,518		10.6
Income before provision for income taxes		52,995			51,421			1,574		3.1
Provision for income taxes		13,288			12,964			324		2.5
Net income	$	39,707		$	38,457		$	1,250		3.3	%
Effective tax rate		25.1	%		25.2	%
Net income per common share - Basic	$	3.89		$	3.66
Net income per common share - Diluted		3.84			3.59
Weighted average common shares outstanding - Basic		10,207			10,508
Weighted average common shares outstanding - Diluted		10,338			10,705
*NM=Not meaningful

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

December 31, 2023

	For the three months ended
(Dollar amounts in thousands, interest amounts and	December 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	$	34,725	$	466		5.33	%	$	37,640	$	319		3.37	%
FHLB stock		12,563		331		10.46			11,785		220		7.39
Securities:
Taxable		133,827		1,886		5.64			134,661		1,589		4.72
Tax-exempt		1,583		18		4.13			1,741		20		4.47
Total securities (A)		135,410		1,904		5.62			136,402		1,609		4.72
Loans:
SBA loans		58,962		1,303		8.84			67,448		1,370		8.13
SBA PPP loans		2,376		8		1.36			6,355		50		3.17
Commercial loans		1,270,550		20,646		6.36			1,134,102		15,894		5.48
Residential mortgage loans		630,598		9,091		5.77			569,698		7,111		4.99
Consumer loans		71,026		1,391		7.66			75,229		1,217		6.33
Residential construction loans		133,485		2,619		7.68			156,282		2,536		6.35
Total loans (B)		2,166,997		35,058		6.33			2,009,114		28,178		5.49
Total interest-earning assets	$	2,349,695	$	37,759		6.38	%	$	2,194,941	$	30,326		5.48	%
Noninterest-earning assets:
Cash and due from banks		22,367							20,352
Allowance for credit losses		(26,064)							(24,301)
Other assets		94,253							109,515
Total noninterest-earning assets		90,556							105,566
Total assets	$	2,440,251						$	2,300,507
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	322,739	$	1,546		1.90	%	$	289,524	$	703		0.96	%
Total savings deposits		549,237		3,607		2.61			636,230		1,475		0.92
Total time deposits		625,409		5,703		3.62			385,423		1,258		1.29
Total interest-bearing deposits		1,497,385		10,856		2.88			1,311,177		3,436		1.04
Borrowed funds and subordinated debentures		236,278		2,871		4.75			231,720		2,180		3.68
Total interest-bearing liabilities	$	1,733,663	$	13,727		3.14	%	$	1,542,897	$	5,616		1.44	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		421,229							496,993
Other liabilities		29,047							25,820
Total noninterest-bearing liabilities		450,276							522,813
Total shareholders' equity		256,312							234,797
Total liabilities and shareholders' equity	$	2,440,251						$	2,300,507
Net interest spread			$	24,032		3.24	%			$	24,710		4.04	%
Tax-equivalent basis adjustment				(1)							(1)
Net interest income			$	24,031						$	24,709
Net interest margin						4.06	%						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 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

December 31, 2023

	For the three months ended
(Dollar amounts in thousands, interest amounts and	December 31, 2023							September 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	$	34,725	$	466		5.33	%	$	34,597	$	483		5.54	%
FHLB stock		12,563		331		10.46			15,485		364		9.32
Securities:
Taxable		133,827		1,886		5.64			135,132		1,848		5.47
Tax-exempt		1,583		18		4.13			1,692		18		4.27
Total securities (A)		135,410		1,904		5.62			136,824		1,866		5.45
Loans:
SBA loans		58,962		1,303		8.84			60,108		1,379		9.18
SBA PPP loans		2,376		8		1.36			2,523		25		3.94
Commercial loans		1,270,550		20,646		6.36			1,266,185		20,299		6.27
Residential mortgage loans		630,598		9,091		5.77			628,544		8,462		5.39
Consumer loans		71,026		1,391		7.66			75,246		1,525		7.93
Residential construction loans		133,485		2,619		7.68			139,045		2,588		7.28
Total loans (B)		2,166,997		35,058		6.33			2,171,651		34,278		6.18
Total interest-earning assets	$	2,349,695	$	37,759		6.38	%	$	2,358,557	$	36,991		6.22	%
Noninterest-earning assets:
Cash and due from banks		22,367							22,841
Allowance for credit losses		(26,064)							(26,478)
Other assets		94,253							100,428
Total noninterest-earning assets		90,556							96,791
Total assets	$	2,440,251						$	2,455,348
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	322,739	$	1,546		1.90	%	$	304,287	$	1,429		1.86	%
Total savings deposits		549,237		3,607		2.61			547,000		3,178		2.30
Total time deposits		625,409		5,703		3.62			597,664		5,033		3.34
Total interest-bearing deposits		1,497,385		10,856		2.88			1,448,951		9,640		2.64
Borrowed funds and subordinated debentures		236,278		2,871		4.75			300,608		3,817		4.97
Total interest-bearing liabilities	$	1,733,663	$	13,727		3.14	%	$	1,749,559	$	13,457		3.05	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		421,229							429,321
Other liabilities		29,047							27,192
Total noninterest-bearing liabilities		450,276							456,513
Total shareholders' equity		256,312							249,276
Total liabilities and shareholders' equity	$	2,440,251						$	2,455,348
Net interest spread			$	24,032		3.24	%			$	23,534		3.17	%
Tax-equivalent basis adjustment				(1)							(1)
Net interest income			$	24,031						$	23,533
Net interest margin						4.06	%						3.96	%

(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the 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

December 31, 2023

	For the years ended
(Dollar amounts in thousands, interest amounts and	December 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	$	34,233	$	1,724		5.04	%	$	95,427	$	735		0.77	%
FHLB stock		15,508		1,369		8.83			6,405		396		6.18
Securities:
Taxable		135,806		7,271		5.35			121,314		4,754		3.92
Tax-exempt		1,698		76		4.48			1,461		58		3.99
Total securities (A)		137,504		7,347		5.34			122,775		4,812		3.92
Loans:
SBA loans		61,834		5,489		8.88			65,197		4,303		6.60
SBA PPP loans		2,919		137		4.69			19,095		1,596		8.36
Commercial loans		1,240,783		76,966		6.20			1,040,624		53,820		5.10
Residential mortgage loans		624,146		34,194		5.48			484,923		22,395		4.62
Consumer loans		75,018		5,742		7.65			77,382		4,132		5.27
Residential construction loans		148,520		10,530		7.09			136,778		8,555		6.17
Total loans (B)		2,153,220		133,058		6.18			1,823,999		94,801		5.13
Total interest-earning assets	$	2,340,465	$	143,498		6.13	%	$	2,048,606	$	100,744		4.92	%
Noninterest-earning assets:
Cash and due from banks		22,478							23,100
Allowance for credit losses		(26,149)							(22,920)
Other assets		102,204							87,930
Total noninterest-earning assets		98,533							88,110
Total assets	$	2,438,998						$	2,136,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	306,820	$	5,306		1.73	%	$	269,789	$	1,384		0.51	%
Total savings deposits		552,864		11,239		2.03			674,335		3,110		0.46
Total time deposits		561,075		17,340		3.09			315,910		2,757		0.87
Total interest-bearing deposits		1,420,759		33,885		2.38			1,260,034		7,251		0.58
Borrowed funds and subordinated debentures		304,419		14,612		4.80			112,799		3,380		2.96
Total interest-bearing liabilities	$	1,725,178	$	48,497		2.81	%	$	1,372,833	$	10,631		0.77	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		439,653							518,244
Other liabilities		26,780							23,104
Total noninterest-bearing liabilities		466,433							541,348
Total shareholders' equity		247,387							222,535
Total liabilities and shareholders' equity	$	2,438,998						$	2,136,716
Net interest spread			$	95,001		3.32	%			$	90,113		4.15	%
Tax-equivalent basis adjustment				(4)							(5)
Net interest income			$	94,997						$	90,108
Net interest margin						4.06	%						4.40	%

(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

December 31, 2023

Amounts in thousands, except percentages	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022
ALLOWANCE FOR CREDIT LOSSES:
Balance, beginning of period	$	25,918		$	25,988		$	26,201		$	25,196		$	23,861
Impact of the adoption of ASU 2016-13 ("CECL")		-			-			-			847			-
Provision for credit losses on loans charged to expense		413			534			777			108			1,632
		26,331			26,522			26,978			26,151			25,493
Less: Chargeoffs
SBA loans		-			100			-			113			59
Commercial loans		252			500			-			-			-
Residential mortgage loans		93			-			-			-			-
Consumer loans		181			52			225			120			300
Residential construction loans		100			-			900			-			-
Total chargeoffs		626			652			1,125			233			359
Add: Recoveries
SBA loans		4			1			15			-			-
Commercial loans		23			10			96			271			26
Residential mortgage loans		-			-			-			-			2
Consumer loans		11			37			24			12			34
Residential construction loans		111			-			-			-			-
Total recoveries		149			48			135			283			62
Net (chargeoffs)/recoveries		(477)			(604)			(990)			50			(297)
Balance, end of period	$	25,854		$	25,918		$	25,988		$	26,201		$	25,196
LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans	$	3,444		$	3,445		$	3,591		$	4,325		$	690
Commercial loans		1,948			750			835			1,144			1,582
Residential mortgage loans		11,272			10,530			8,607			5,565			3,361
Consumer loans		381			130			-			-			-
Residential construction loans		2,141			3,201			3,182			3,473			3,432
Total nonperforming loans		19,186			18,056			16,215			14,507			9,065
OREO		-			251			251			176			-
Nonperforming assets		19,186			18,307			16,466			14,683			9,065
Loans 90 days past due & still accruing	$	946		$	265		$	-		$	-		$	-
Nonperforming loans to total loans		0.88	%		0.84			0.76			0.68			0.43
Nonperforming assets to total assets		0.74			0.71			0.65			0.59			0.37
Allowance for loan losses to:
Total loans at quarter end		1.19	%		1.19	%		1.20	%		1.23	%		1.20
Total nonperforming loans		134.75			141.57			157.83			178.44			277.95

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

December 31, 2023

(In thousands, except %'s, employee, office and per share amounts)	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2023
SUMMARY OF INCOME:
Total interest income	$	37,758		$	36,990		$	35,392		$	33,354		$	30,325
Total interest expense		13,727			13,457			11,870			9,443			5,616
Net interest income		24,031			23,533			23,522			23,911			24,709
Provision for credit losses		1,811			556			693			108			1,652
Net interest income after provision for credit losses		22,220			22,977			22,829			23,803			23,057
Total noninterest income		2,568			2,043			2,115			1,416			1,946
Total noninterest expense		11,740			11,973			11,835			11,428			11,369
Income before provision for income taxes		13,048			13,047			13,109			13,791			13,634
Provision for income taxes		3,278			3,097			3,409			3,504			3,678
Net income	$	9,770		$	9,950		$	9,700		$	10,287		$	9,956
Net income per common share - Basic	$	0.97		$	0.98		$	0.96		$	0.98		$	0.94
Net income per common share - Diluted		0.96			0.97			0.95			0.96			0.93
COMMON SHARE DATA:
Market price per share	$	29.59		$	23.43		$	23.59		$	22.81		$	27.33
Dividends paid		0.12			0.12			0.12			0.12			0.11
Book value per common share		25.98			24.95			24.12			23.34			22.60
Weighted average common shares outstanding - Basic		10,066			10,128			10,103			10,538			10,557
Weighted average common shares outstanding - Diluted		10,209			10,258			10,203			10,686			10,740
Issued common shares		11,424			11,411			11,387			11,335			11,289
Outstanding common shares		10,063			10,115			10,119			10,292			10,584
Treasury shares		1,361			1,296			1,268			1,043			705
PERFORMANCE RATIOS (Annualized):
Return on average assets		1.59	%		1.61	%		1.60	%		1.72	%		1.72	%
Return on average equity		15.12			15.84			16.19			17.14			16.82
Efficiency ratio**		43.06			46.59			45.54			44.56			43.16
BALANCE SHEET DATA:
Total assets	$	2,578,507		$	2,563,006		$	2,552,301		$	2,475,851		$	2,444,948
Total securities		135,689			136,091			137,061			138,264			140,946
Total loans		2,172,063			2,173,190			2,167,367			2,130,919			2,106,559
Allowance for credit losses		25,854			25,918			25,988			26,201			25,196
Total deposits		1,924,140			1,884,910			1,849,528			1,823,921			1,787,528
Total shareholders' equity		261,430			252,384			244,073			240,459			239,227
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		6.38	%		6.22	%		6.07	%		5.84	%		5.48	%
Interest-bearing liabilities		3.14			3.05			2.75			2.27			1.44
Net interest spread		3.24			3.17			3.32			3.57			4.04
Net interest margin		4.06			3.96			4.04			4.19			4.49
CREDIT QUALITY:
Nonperforming assets	$	19,186		$	18,307		$	16,466		$	14,683		$	9,065
QTD annualized net (chargeoffs)/recoveries to QTD average loans		(0.09)	%		(0.11)	%		(0.18)	%		0.01	%		(0.06)	%
Allowance for credit losses to total loans		1.19			1.19			1.20			1.23			1.20
Nonperforming loans to total loans		0.88			0.84			0.76			0.68			0.43
Nonperforming assets to total assets		0.74			0.71			0.65			0.59			0.37
CAPITAL RATIOS*** AND OTHER:
Total equity to total assets		10.14	%		9.85	%		9.56	%		9.71	%		9.78	%
Leverage ratio		11.14			10.76			10.49			10.38			10.88
Common Equity Tier 1 Capital Ratio		12.70			12.16			11.74			11.76			11.76
Risk-based Tier 1 Capital Ratio		13.18			12.64			12.21			12.25			12.25
Risk-based Total Capital Ratio		14.43			13.88			13.45			13.50			13.48
Number of banking offices		21			21			20			20			19
Number of employees		237			232			230			228			231

** 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 and provision for impairment losses, AFS securities.

'*** Represents Bancorp consolidated capital ratios.