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Unity Bancorp Reports 41% Increase in Net Income, Excluding Nonrecurring Gain

CLINTON, N.J., April 25, 2016 (GLOBE NEWSWIRE) -- Unity Bancorp, Inc. (NASDAQ:UNTY), parent company of Unity Bank, reported a 41% increase in earnings, excluding the effect of a nonrecurring gain during the quarter. Major contributing factors included strong loan growth, increased levels of noninterest income, improved credit quality and expense control.

Net income, excluding a nonrecurring gain on the repurchase of subordinated debentures, was $2.7 million, or $0.31 per diluted share, for the three months ended March 31, 2016, a 41% increase compared to net income of $1.9 million, or $0.23 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter, excluding the nonrecurring gain, were 1.00% and 13.67%, respectively, compared to 0.82% and 11.08% for the same period a year ago.

During the quarter, the Company repurchased $5.0 million of its outstanding subordinated “capital qualifying” debentures at a price of $0.5475 per dollar, thus reducing its outstanding subordinated debt to $10.3 million. The repurchase resulted in a nonrecurring pre-tax gain of approximately $2.26 million. James A. Hughes, President and CEO stated, “Although the securities were an inexpensive form of Tier I capital, the discount opportunity was too large to pass up.” Management believes excluding the nonrecurring gain from net income and reporting it in a format which is not in compliance with generally accepted accounting principles (“non-GAAP”) is beneficial to the reader and provides better comparability of the Company’s performance over both periods.

Net income, including the nonrecurring gain on the repurchase of subordinated debentures, was $4.2 million, or $0.48 per diluted share, for the three months ended March 31, 2016, compared to net income of $1.9 million, or $0.23 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 1.54% and 21.05%, respectively, compared to 0.82% and 11.08% for the same period a year ago.

First quarter highlights also included:

  • Announced plans to open a 16th branch location in Somerville, New Jersey.
  • Purchased our Clinton, Corporate headquarters for $4.1 million.
  • Noninterest-bearing demand deposits rose 1.5% and total deposits increased 3.6% since year-end 2015.
  • Net interest income increased 12.1% compared to the prior year’s quarter due to strong loan growth.
  • Net interest margin declined to 3.48% this quarter compared to 3.64% in the prior year’s quarter due to a larger Fed Funds balance.
  • Credit quality continued to improve. Loan charge-offs declined and nonperforming loans fell 24.7%.

Mr. Hughes commented on this quarter’s performance, stating, “I am a firm believer that it is our culture of service that gives us the competitive edge. Our strategy is simple; to reach out to every small business in our footprint and sell our personalized banking services. It is our focus on our mission that drives us. It is our culture of respect and service that brings our results. We have a team of highly engaged bankers that make Unity a great place to work and bank.”

Net Interest Income

Net interest income, our core driver of earnings, increased $967 thousand to $9.0 million for the quarter ended March 31, 2016 compared to the prior year’s period. This increase was the result of strong commercial, residential mortgage and consumer loan growth over the past year. Quarterly average commercial loans increased $57.8 million, average residential mortgage loans have increased $38.1 million and consumer loans increased $16.0 million compared to the first quarter in 2015.

The cost of interest-bearing liabilities equaled 1.06% and 1.05% respectively. While the cost of deposits rose 13 basis points to 0.81%, the cost of borrowed funds and subordinated debentures decreased 74 basis points compared to the prior year due to the modification of borrowings with the Federal Home Loan Bank (“FHLB”) over the past year. The increase in the cost of deposits was primarily driven by the intentional growth of five year time deposits.

The net interest margin decreased 16 basis points to 3.48% for the quarter ended March 31, 2016 compared to 3.64% for the prior year’s quarter. This decrease may be attributed to a larger balance of Fed Funds and an increase in interest paid on deposits.

Provision for Loan Losses

The provision for loan losses was stable at $200 thousand for the quarters ended March 31, 2016 and 2015. Quarterly net charge-offs declined $245 thousand to $325 thousand compared to the first quarter 2015 and nonperforming loans have declined 25% to $6.9 million.

Noninterest Income

Noninterest income increased $375 thousand to $2.0 million for the three months ended March 31, 2016, compared to the same period last year. Quarterly noninterest income increased due to higher gains on the sale of residential mortgage loans.

During the quarter, $25.0 million in residential mortgage loans were sold at a gain of $715 thousand, compared to $15.0 million in loans sold at a gain of $344 thousand during the prior year’s quarter. Our mortgage pipeline remains strong and we expect a good year in mortgage originations. Since 2014, all residential mortgage loans that are held for investment are adjustable rate mortgages or fixed rate mortgages with a term of 15 years or less.

In addition to the increase in noninterest income related to gains on mortgage sales noted above, other notable items included:

  • Branch fee income declined in the quarterly period due to lower levels of overdraft fees, partially offset by increased fees from our commercial analysis checking accounts.
  • Service and loan fee income declined in the quarterly period due to reduced loan late charges and payoff fees, combined with lower SBA servicing fees as our serviced loan portfolio declined compared to the same quarter a year ago.
  • SBA loan sales totaled $3.5 million during each quarter with net gains on sale of $308 thousand and $363 thousand, respectively. Lower net gains on sale were realized during the first quarter 2016 due to the sale of shorter-term loans with lower premiums on sale compared to the prior year’s quarter.
  • Security gains totaled $94 thousand for the quarter. There were no gains on the sale of securities in the quarter-ended March 31, 2015.

Noninterest Expense

Noninterest expense increased $105 thousand or 1.6% to $6.6 million for the quarter. The increases were due to higher employee benefit expenses such as medical insurance, retirement and 401(k) plan benefits, higher network and software related maintenance costs to upgrade our technology, and advertising expenses. Occupancy expenses fell due to lower seasonal snow removal expense and property rental expense due to the purchase of our headquarters. In addition, loan and OREO expenses have declined as credit quality improves.

Financial Condition

At March 31, 2016, total assets were $1.1 billion, an increase of $36.1 million from year-end 2015:

  • Total loans decreased $2.0 million or 0.2%, from year-end 2015 to $887.0 million at March 31, 2016. Consumer and commercial loan portfolios increased $2.1 million and $1.7 million, respectively. Residential mortgage loans decreased $3.6 million while SBA loans remained flat after $3.5 million in sales. The decline in total loans was due to slightly lower production levels, large prepayments and the sale of residential portfolio loans. Our pipeline in all categories remains strong and loan growth is expected in future quarters.
  • Other assets increased due to the purchase of the Company’s Clinton, New Jersey headquarters for $4.12 million.
  • Total deposits increased $32.3 million or 3.6%, to $926.8 million at March 31, 2016 due to our eSavings promotion and $10.0 million in brokered time deposits.
  • Borrowed funds increased $3.0 million to $95.0 million at March 31, 2016, due to reduced overnight borrowings of $7.0 million compared to year-end 2015 and the addition of a $10.0 million adjustable rate borrowing. Also, during the quarter, $10.0 million in Federal Home Loan Bank borrowings at an average cost of 4.27% were extended to 2020 at an average rate of 2.10%.
  • Subordinated debentures decreased from year-end due to the repurchase of $5.0 million at a discount of $0.5475 per dollar.
  • Shareholders’ equity was $82.3 million at March 31, 2016, an increase of $3.8 million from year-end 2015, due to year-to-date net income less the dividends paid to shareholders.
  • Book value per common share was $9.72 as of March 31, 2016.
  • At March 31, 2016, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 8.31%, 9.77%, 10.97% and 12.22% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

  • Nonperforming assets totaled $8.3 million at March 31, 2016, or 0.93% of total loans and OREO, compared to $8.9 million or 0.99% of total loans and OREO at year-end 2015.
  • Nonperforming loans decreased 5.14% to $6.9 million at March 31, 2016 from year-end.
  • OREO decreased $174 thousand to $1.4 million at March 31, 2016 from year-end.
  • The allowance for loan losses totaled $12.6 million at March 31, 2016, or 1.42% of total loans compared to $12.2 million and 1.55% at March 31, 2015.
  • Net charge-offs were $325 thousand for the three months ended March 31, 2016, compared to $570 thousand for the same period a year ago.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.1 billion in assets and $927 million in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 15 retail service centers located in Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County, Pennsylvania. For additional information about Unity, visit our website at www.unitybank.com, or call 800-618-BANK.

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements may be identified by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond the company’s control and could impede its ability to achieve these goals. These factors include those items included in our Annual Report on Form 10-K under the heading “Item IA-Risk Factors” as well as general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, our ability to manage and reduce the level of our nonperforming assets, and results of regulatory exams, among other factors.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.


UNITY BANCORP, INC.
SUMMARY FINANCIAL HIGHLIGHTS
NON-GAAP
March 31, 2016
Mar. 31, 2016 vs.
Dec. 31, 2015 Mar. 31, 2015
(In thousands, except percentages and per share amounts) Mar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015 % %
BALANCE SHEET DATA:
Total assets $ 1,120,955 $ 1,084,866 $ 1,035,404 3.3 % 8.3 %
Total deposits 926,819 894,493 789,441 3.6 17.4
Total loans 886,990 888,958 784,642 (0.2) 13.0
Total securities 66,729 71,336 77,308 (6.5) (13.7)
Total shareholders' equity 82,276 78,470 71,987 4.9 14.3
Allowance for loan losses (12,634) (12,759) (12,181) 1.0 3.7
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes and gain on subordinated debenture $ 4,196 $ 3,954 $ 2,959 6.1 41.8
Provision for income taxes 1,464 1,315 1,020 11.3 43.5
Net income before gain on subordinated debenture $ 2,732 $ 2,639 $ 1,939 3.5 40.9
Gain on subordinated debenture, net of tax 1,473 - - NM NM
Net income $ 4,205 $ 2,639 $ 1,939 59.3 116.9
Net income before gain on subordinated debenture per:
Common share - basic $ 0.32 $ 0.31 $ 0.23 3.2 39.1
Common share - diluted $ 0.31 $ 0.31 $ 0.23 - 34.8
Net income per:
Common share - basic $ 0.50 $ 0.31 $ 0.23 61.3 117.4
Common share - diluted $ 0.48 $ 0.31 $ 0.23 54.8 108.7
Net income before gain on subordinated debenture ratios:
Return on average assets 1.00 % 1.00 % 0.82 % - 22.0
Return on average equity 13.67 % 13.59 % 11.08 % 0.6 23.4
Efficiency ratio 60.05 % 62.81 % 67.30 % (4.4) (10.8)
Net income ratios:
Return on average assets 1.54 % 1.00 % 0.82 % 54.0 87.8
Return on average equity 21.05 % 13.59 % 11.08 % 54.9 90.0
Efficiency ratio 50.16 % 62.81 % 67.30 % (20.1) (25.5)
Net interest margin 3.48 % 3.60 % 3.64 % (3.3) (4.4)
SHARE INFORMATION:
Market price per share $ 11.37 $ 12.47 $ 9.08 (8.8) 25.2
Dividends paid $ 0.04 $ 0.04 $ 0.03 - 0.3
Book value per common share $ 9.72 $ 9.30 $ 8.55 4.5 13.7
Average diluted shares outstanding (QTD) 8,682 8,547 8,514 1.6 2.0
CAPITAL RATIOS:
Total equity to total assets 7.34 % 7.23 % 6.95 % 1.5 5.6
Leverage ratio 8.31 % 8.82 % 8.94 % (5.8) (7.0)
Common equity tier 1 risk-based capital ratio 9.77 % 9.37 % 9.25 % n/a n/a
Tier 1 risk-based capital ratio 10.97 % 11.18 % 11.22 % (1.9) (2.2)
Total risk-based capital ratio 12.22 % 12.43 % 12.48 % (1.7) (2.1)
CREDIT QUALITY AND RATIOS:
Nonperforming assets $ 8,304 $ 8,851 $ 11,116 (6.2) (25.3)
QTD net chargeoffs (annualized) to QTD average loans 0.15 % (0.11)% 0.30 % 236.4 (50.0)
Allowance for loan losses to total loans 1.42 % 1.44 % 1.55 % (1.4) (8.4)
Nonperforming assets to total loans
and OREO
0.93 % 0.99 % 1.41 % (6.1) (34.0)
Nonperforming assets to total assets 0.74 % 0.82 % 1.07 % (9.8)% (30.8)%


UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2016
Mar. 31, 2016 vs.
Dec. 31, 2015 Mar. 31, 2015
(In thousands, except percentages) Mar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015 % %
ASSETS
Cash and due from banks $ 26,919 $ 22,681 $ 25,282 18.7 % 6.5 %
Federal funds sold and interest-bearing deposits 99,554 65,476 108,563 52.0 (8.3)
Cash and cash equivalents 126,473 88,157 133,845 43.5 (5.5)
Securities:
Securities available for sale 48,566 52,865 57,875 (8.1) (16.1)
Securities held to maturity 18,163 18,471 19,433 (1.7) (6.5)
Total securities 66,729 71,336 77,308 (6.5) (13.7)
Loans:
SBA loans held for sale 13,224 13,114 6,929 0.8 90.9
SBA loans held for investment 38,863 39,393 39,155 (1.3) (0.7)
SBA 504 loans 27,482 29,353 29,893 (6.4) (8.1)
Commercial loans 467,266 465,518 410,742 0.4 13.8
Residential mortgage loans 260,957 264,523 235,371 (1.3) 10.9
Consumer loans 79,198 77,057 62,552 2.8 26.6
Total loans 886,990 888,958 784,642 (0.2) 13.0
Allowance for loan losses (12,634) (12,759) (12,181) 1.0 3.7
Net loans 874,356 876,199 772,461 (0.2) 13.2
Premises and equipment, net 19,211 15,171 15,465 26.6 24.2
Bank owned life insurance ("BOLI") 13,475 13,381 13,095 0.7 2.9
Deferred tax assets 6,029 5,968 5,743 1.0 5.0
Federal Home Loan Bank ("FHLB") stock 4,735 4,600 7,382 2.9 (35.9)
Accrued interest receivable 3,839 3,884 3,637 (1.2) 5.6
Other real estate owned ("OREO") 1,417 1,591 1,975 (10.9) (28.3)
Goodwill and other intangibles 1,516 1,516 1,516 - -
Other assets 3,175 3,063 2,977 3.7 6.7
Total assets $ 1,120,955 $ 1,084,866 $ 1,035,404 3.3 % 8.3 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $ 188,026 $ 185,267 $ 163,535 1.5 % 15.0 %
Interest-bearing demand 128,774 130,605 124,110 (1.4) 3.8
Savings 320,982 301,447 290,843 6.5 10.4
Time, under $100,000 145,784 134,468 112,671 8.4 29.4
Time, $100,000 and over, under $250,000 106,419 104,106 78,411 2.2 35.7
Time, $250,000 and over 36,834 38,600 19,871 (4.6) 85.4
Total deposits 926,819 894,493 789,441 3.6 17.4
Borrowed funds 95,000 92,000 155,000 3.3 (38.7)
Subordinated debentures 10,310 15,465 15,465 (33.3) (33.3)
Accrued interest payable 390 461 478 (15.4) (18.4)
Accrued expenses and other liabilities 6,160 3,977 3,033 54.9 103.1
Total liabilities 1,038,679 1,006,396 963,417 3.2 7.8
Shareholders' equity:
Common stock 59,546 59,371 58,927 0.3 1.1
Retained earnings 23,431 19,566 12,880 19.8 81.9
Accumulated other comprehensive (loss) income (701) (467) 180 NM NM
Total shareholders' equity 82,276 78,470 71,987 4.9 14.3
Total liabilities and shareholders' equity $ 1,120,955 $ 1,084,866 $ 1,035,404 3.3 % 8.3 %
Issued and outstanding common shares 8,468 8,436 8,423


UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
NON-GAAP
March 31, 2016
Mar. 31, 2016 vs.
For the three months ended Dec. 31, 2015 Mar. 31, 2015
(In thousands, except percentages and per share amounts) Mar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015 $ % $ %
INTEREST INCOME ��
Federal funds sold and interest-bearing deposits $ 44 $13 $9 $ 31 238.5 %$ 35 388.9 %
FHLB stock 52 37 44 15 40.5 8 18.2
Securities:
Taxable 363 360 387 3 0.8 (24) (6.2)
Tax-exempt 62 70 72 (8) (11.4) (10) (13.9)
Total securities 425 430 459 (5) (1.2) (34) (7.4)
Loans:
SBA loans 721 713 679 8 1.1 42 6.2
SBA 504 loans 385 346 346 39 11.3 39 11.3
Commercial loans 5,676 5,637 5,066 39 0.7 610 12.0
Residential mortgage loans 2,942 2,939 2,582 3 0.1 360 13.9
Consumer loans 931 880 699 51 5.8 232 33.2
Total loans 10,655 10,515 9,372 140 1.3 1,283 13.7
Total interest income 11,176 10,995 9,884 181 1.6 1,292 13.1
INTEREST EXPENSE
Interest-bearing demand deposits 137 121 106 16 13.2 31 29.2
Savings deposits 366 298 264 68 22.8 102 38.6
Time deposits 951 910 686 41 4.5 265 38.6
Borrowed funds and subordinated debentures 735 686 808 49 7.1 (73) (9.0)
Total interest expense 2,189 2,015 1,864 174 8.6 325 17.4
Net interest income 8,987 8,980 8,020 7 0.1 967 12.1
Provision for loan losses 200 100 200 100 100.0 - -
Net interest income after provision for loan losses 8,787 8,880 7,820 (93) (1.0) 967 12.4
NONINTEREST INCOME
Branch fee income 333 402 346 (69) (17.2) (13) (3.8)
Service and loan fee income 255 266 296 (11) (4.1) (41) (13.9)
Gain on sale of SBA loans held for sale, net 308 533 363 (225) (42.2) (55) (15.2)
Gain on sale of mortgage loans, net 715 379 344 336 88.7 371 107.8
BOLI income 94 96 94 (2) (2.1) - -
Net security gains 94 - - 94 100.0 94 100.0
Other income 217 244 198 (27) (11.1) 19 9.6
Total noninterest income 2,016 1,920 1,641 96 5.0 375 22.9
NONINTEREST EXPENSE
Compensation and benefits 3,549 3,528 3,472 21 0.6 77 2.2
Occupancy 618 644 672 (26) (4.0) (54) (8.0)
Processing and communications 598 620 596 (22) (3.5) 2 0.3
Furniture and equipment 420 455 373 (35) (7.7) 47 12.6
Professional services 255 213 236 42 19.7 19 8.1
Loan costs 198 113 221 85 75.2 (23) (10.4)
OREO expenses 24 265 35 (241) (90.9) (11) (31.4)
Deposit insurance 160 173 183 (13) (7.5) (23) (12.6)
Advertising 241 302 182 (61) (20.2) 59 32.4
Other expenses 544 533 532 11 2.1 12 2.3
Total noninterest expense 6,607 6,846 6,502 (239) (3.5) 105 1.6
Income before provision for income taxes and gain on subordinated debenture 4,196 3,954 2,959 242 6.1 1,237 41.8
Provision for income taxes 1,464 1,315 1,020 149 11.3 444 43.5
Net income before gain on subordinated debenture $ 2,732 $2,639 $1,939 $ 93 3.5 %$ 793 40.9 %
Gain on subordinated debenture, net of tax 1,473 - - 1,473 NM 1,473 NM
Net income $ 4,205 $2,639 $1,939 $ 1,566 59.3 %$ 2,266 116.9 %
Effective tax rate 34.9 % 33.3% 34.5%
Net income before gain on subordinated debenture per:
Common share - basic $ 0.32 $0.31 $0.23
Common share - diluted$ 0.31 $0.31 $0.23
Net income per:
Common share - basic $ 0.50 $0.31 $0.23
Common share - diluted$ 0.48 $0.31 $0.23
Weighted average common shares outstanding - Basic 8,459 8,430 8,417
Weighted average common shares outstanding - Diluted 8,682 8,547 8,514

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
March 31, 2016
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
March 31, 2016 December 31, 2015
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits$ 78,681 $ 44 0.22 %$ 47,421 $ 13 0.11%
FHLB stock 4,549 52 4.60 3,700 37 3.97
Securities:
Taxable 59,152 363 2.47 59,425 360 2.40
Tax-exempt 9,548 94 3.96 11,564 104 3.57
Total securities (A) 68,700 457 2.68 70,989 464 2.59
Loans:
SBA loans 53,942 721 5.38 54,912 713 5.15
SBA 504 loans 29,232 385 5.30 29,319 346 4.68
Commercial loans 463,927 5,676 4.92 452,494 5,637 4.94
Residential mortgage loans 264,208 2,942 4.48 259,938 2,939 4.49
Consumer loans 78,328 931 4.78 75,789 880 4.61
Total loans (B) 889,637 10,655 4.82 872,452 10,515 4.78
Total interest-earning assets $ 1,041,567 $ 11,208 4.33 %$ 994,562 $ 11,029 4.40%
Noninterest-earning assets:
Cash and due from banks 27,006 24,214
Allowance for loan losses (12,926) (12,801)
Other assets 45,486 44,055
Total noninterest-earning assets 59,566 55,468
Total assets $ 1,101,133 $ 1,050,030
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits$ 131,339 $ 137 0.42 %$ 131,800 $ 121 0.36%
Total savings deposits 310,251 366 0.47 295,013 298 0.40
Total time deposits
282,110 951 1.36 271,647 910 1.33
Total interest-bearing deposits 723,700 1,454 0.81 698,460 1,329 0.75
Borrowed funds and subordinated debentures 104,350 735 2.83 87,465 686 3.11
Total interest-bearing liabilities $ 828,050 $ 2,189 1.06 %$ 785,925 $ 2,015 1.02%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 187,226 182,024
Other liabilities 5,528 5,056
Total noninterest-bearing liabilities 192,754 187,080
Total shareholders' equity 80,329 77,025
Total liabilities and shareholders' equity $ 1,101,133 $ 1,050,030
Net interest spread $ 9,019 3.27 % $ 9,014 3.38%
Tax-equivalent basis adjustment (32) (34)
Net interest income $ 8,987 $ 8,980
Net interest margin 3.48 % 3.60%
(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 35 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, 2016
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
March 31, 2016 March 31, 2015
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits $ 78,681 $ 44 0.22 %$ 37,280 $ 9 0.10%
FHLB stock 4,549 52 4.60 3,847 44 4.64
Securities:
Taxable 59,152 363 2.47 67,046 387 2.34
Tax-exempt 9,548 94 3.96 11,984 106 3.59
Total securities (A) 68,700 457 2.68 79,030 493 2.53
Loans:
SBA loans 53,942 721 5.38 48,405 679 5.69
SBA 504 loans 29,232 385 5.30 33,397 346 4.20
Commercial loans 463,927 5,676 4.92 406,095 5,066 5.06
Residential mortgage loans 264,208 2,942 4.48 226,125 2,582 4.63
Consumer loans 78,328 931 4.78 62,355 699 4.55
Total loans (B) 889,637 10,655 4.82 776,377 9,372 4.90
Total interest-earning assets $ 1,041,567 $ 11,208 4.33 %$ 896,534 $ 9,918 4.49%
Noninterest-earning assets:
Cash and due from banks 27,006 29,908
Allowance for loan losses (12,926) (12,701)
Other assets 45,486 43,206
Total noninterest-earning assets 59,566 60,413
Total assets $ 1,101,133 $ 956,947
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits$ 131,339 $ 137 0.42 %$ 126,593 $ 106 0.34%
Total savings deposits 310,251 366 0.47 290,006 264 0.37
Total time deposits 282,110 951 1.36 211,425 686 1.32
Total interest-bearing deposits 723,700 1,454 0.81 628,024 1,056 0.68
Borrowed funds and subordinated debentures 104,350 735 2.83 91,909 808 3.57
Total interest-bearing liabilities $ 828,050 $ 2,189 1.06 %$ 719,933 $ 1,864 1.05%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 187,226 161,729
Other liabilities 5,528 4,307
Total noninterest-bearing liabilities 192,754 166,036
Total shareholders' equity 80,329 70,978
Total liabilities and shareholders' equity $ 1,101,133 $ 956,947
Net interest spread $ 9,019 3.27 % $ 8,054 3.44%
Tax-equivalent basis adjustment (32) (34)
Net interest income $ 8,987 $ 8,020
Net interest margin 3.48 % 3.64%
(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 35 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, 2016
Amounts in thousands, except percentages Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015 Mar. 31, 2015
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period$12,759 $ 12,421 $12,404 $ 12,181 $ 12,551
Provision for loan losses charged to expense 200 100 200 - 200
12,959 12,521 12,604 12,181 12,751
Less: Chargeoffs
SBA loans 86 151 86 6 128
SBA 504 loans - - - - 589
Commercial loans 228 52 10 147 100
Residential mortgage loans - - 50 - -
Consumer loans 28 41 52 7 30
Total chargeoffs 342 244 198 160 847
Add: Recoveries
SBA loans 11 6 10 2 37
SBA 504 loans - - - - -
Commercial loans 6 476 5 370 201
Residential mortgage loans - - - 10 39
Consumer loans - - - 1 -
Total recoveries 17 482 15 383 277
Net chargeoffs (recoveries) 325 (238) 183 (223) 570
Balance, end of period $12,634 $ 12,759 $12,421 $ 12,404 $ 12,181
LOAN QUALITY INFORMATION:
Nonperforming loans (1)$6,887 $ 7,260 $10,742 $ 8,837 $ 9,141
Other real estate owned ("OREO") 1,417 1,591 1,759 2,265 1,975
Nonperforming assets 8,304 8,851 12,501 11,102 11,116
Less: Amount guaranteed by SBA 243 288 225 267 270
Net nonperforming assets $8,061 $ 8,563 $12,276 $ 10,835 $ 10,846
Loans 90 days past due & still accruing$ - $ - $272 $ 273 $ 5
Performing Troubled Debt Restructurings (TDRs)$844 $ 3,015 $3,268 $ 3,360 $ 3,458
(1) Nonperforming TDRs included in nonperforming loans 293 293 2,808 2,843 2,911
Total TDRs $1,137 $ 3,308 $6,076 $ 6,203 $ 6,369
Allowance for loan losses to:
Total loans at quarter end 1.42 % 1.44 % 1.45% 1.51 % 1.55 %
Nonperforming loans (1) 183.45 175.74 115.63 140.36 133.26
Nonperforming assets 152.14 144.15 99.36 111.73 109.58
Net nonperforming assets 156.73 149.00 101.18 114.48 112.31
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans 0.56 % 1.05 % 0.57% 0.03 % 0.76 %
SBA 504 loans - - - - 7.15
Commercial loans 0.19 (0.37) - (0.21) (0.10)
Residential mortgage loans - - 0.08 (0.02) (0.07)
Consumer loans 0.14 0.21 0.28 0.04 0.20
Total loans 0.15 % (0.11)% 0.09% (0.11)% 0.30 %
Nonperforming loans to total loans 0.78 % 0.82 % 1.26% 1.08 % 1.16 %
Nonperforming loans and TDRs to total loans 0.87 1.16 1.64 1.48 1.61
Nonperforming assets to total loans and OREO 0.93 0.99 1.46 1.35 1.41
Nonperforming assets to total assets 0.74 0.82 1.19 1.08 1.07


UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
NON-GAAP
March 31, 2016
(In thousands, except percentages and per share amounts) Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015 Mar. 31, 2015
SUMMARY OF INCOME:
Total interest income $ 11,176 $ 10,995 $ 10,554 $ 10,218 $ 9,884
Total interest expense 2,189 2,015 1,932 1,849 1,864
Net interest income 8,987 8,980 8,622 8,369 8,020
Provision for loan losses 200 100 200 - 200
Net interest income after provision for loan losses 8,787 8,880 8,422 8,369 7,820
Total noninterest income 2,016 1,920 2,275 1,893 1,641
Total noninterest expense 6,607 6,846 6,852 6,652 6,502
Income before provision for income taxes and gain on subordinated debenture 4,196 3,954 3,845 3,610 2,959
Provision for income taxes 1,464 1,315 1,294 1,182 1,020
Net income before gain on subordinated debenture $ 2,732 $ 2,639 $ 2,551 $ 2,428 $ 1,939
Gain on subordinated debenture, net of tax 1,473 - - - -
Net income $ 4,205 $ 2,639 $ 2,551 $ 2,428 $ 1,939
Net income per common share - Basic $ 0.50 $ 0.31 $ 0.30 $ 0.29 $ 0.23
Net income per common share - Diluted $ 0.48 $ 0.31 $ 0.30 $ 0.28 $ 0.23
COMMON SHARE DATA:
Market price per share$ 11.37 $ 12.47 $ 9.77 $ 9.79 $ 9.08
Dividends paid$ 0.04 $ 0.04 $ 0.04 $ 0.03 $ 0.03
Book value per common share$ 9.72 $ 9.30 $ 9.02 $ 8.75 $ 8.55
Weighted average common shares outstanding - Basic 8,459 8,430 8,427 8,425 8,417
Weighted average common shares outstanding - Diluted 8,682 8,547 8,536 8,524 8,514
Issued and outstanding common shares 8,468 8,436 8,429 8,425 8,423
OPERATING RATIOS (Annualized):
Return on average assets 1.54 % 1.00 % 1.00 % 1.01 % 0.82 %
Return on average equity 21.05 13.59 13.54 13.35 11.08
Efficiency ratio 50.16 62.81 62.88 64.99 67.30
BALANCE SHEET DATA:
Total assets $ 1,120,955 $ 1,084,866 $ 1,052,711 $ 1,024,303 $ 1,035,404
Total deposits 926,819 894,493 866,247 815,427 789,441
Total loans 886,990 888,958 855,560 821,696 784,642
Total securities 66,729 71,336 71,492 74,375 77,308
Total shareholders' equity 82,276 78,470 76,065 73,690 71,987
Allowance for loan losses (12,634) (12,759) (12,421) (12,404) (12,181)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets 4.33 % 4.40 % 4.41 % 4.52 % 4.49 %
Interest-bearing liabilities 1.06 1.02 1.01 1.03 1.05
Net interest spread 3.27 3.38 3.40 3.49 3.44
Net interest margin 3.48 3.60 3.60 3.70 3.64
CREDIT QUALITY:
Nonperforming assets 8,304 8,851 12,501 11,102 11,116
QTD net chargeoffs (annualized) to QTD average loans 0.15 % (0.11)% 0.09 % (0.11)% 0.30 %
Allowance for loan losses to total loans 1.42 1.44 1.45 1.51 1.55
Nonperforming assets to total loans and OREO 0.93 0.99 1.46 1.35 1.41
Nonperforming assets to total assets 0.74 0.82 1.19 1.08 1.07
CAPITAL RATIOS AND OTHER:
Total equity to total assets 7.34 % 7.23 % 7.23 % 7.19 % 6.95 %
Leverage ratio 8.31 8.82 8.92 9.09 8.94
Common equity tier 1 risk-based capital ratio 9.77 9.37 9.37 9.39 9.25
Tier 1 risk-based capital ratio 10.97 11.18 11.25 11.33 11.22
Total risk-based capital ratio 12.22 12.43 12.50 12.59 12.48
Number of banking offices 15 15 15 15 15
Number of ATMs 16 16 16 16 16
Number of employees 164 162 163 177 166


News Media & Financial Analyst Contact: Alan J. Bedner, EVP Chief Financial Officer (908) 713-4308

Source:Unity Bancorp, Inc.