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Unity Bancorp Reports 16% Increase in Quarterly Net Income

CLINTON, N.J., July 25, 2016 (GLOBE NEWSWIRE) -- Unity Bancorp, Inc. (NASDAQ:UNTY), parent company of Unity Bank, reported increased quarterly and year-to-date earnings. Major contributing factors included strong loan growth, expanded net interest margin, increased levels of noninterest income and expense control.

Net income was $2.8 million, or $0.33 per diluted share, for the three months ended June 30, 2016, a 16.3% increase compared to net income of $2.4 million, or $0.28 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 1.03% and 13.59%, respectively, compared to 1.01% and 13.35% for the same period a year ago.

Year-to-date net income was $7.0 million, or $0.82 per diluted share, for the six months ended June 30, 2016, a 61.0% increase compared to net income of $4.4 million, or $0.51 per diluted share, for the same period a year ago. Return on average assets and average common equity for the period were 1.28% and 17.25%, respectively, compared to 0.92% and 12.23% for the same period a year ago.

During the first quarter, the Company repurchased $5.2 million of its outstanding subordinated 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. Net income, excluding the nonrecurring gain on the repurchased subordinated debentures, was $5.6 million, or $0.65 per diluted share, for the six months ended June 30, 2016, compared to net income of $4.4 million, or $0.51 per diluted share, for the same period a year ago. Return on average assets and average common equity for the six months ended June 30, 2016 would have been 1.01% and 13.63%, respectively, compared to 0.92% and 12.23% for the same period a year ago.

Management believes excluding the nonrecurring gain from year-to-date 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.

Second quarter highlights also included:

  • Announced plans to open our 17th branch location in Emerson, New Jersey.
  • Total loans increased 11.4% compared to June 30, 2015.
  • Total deposits increased 11.9% and noninterest-bearing demand deposits grew 19.8% since June 30, 2015.
  • Net interest income increased 11.6% compared to the prior year’s quarter due to strong loan growth.
  • Net interest margin increased to 3.61% this quarter compared to 3.48% in the prior quarter due to a reduced Fed Funds balance.
  • Credit quality continues to improve. Nonperforming loans fell 26.0% from June 30, 2015.

Mr. James A. Hughes, President and CEO, commented on this quarter’s performance, stating “During the second quarter we continued to execute on our plan and delivered another quarter of strong financial results. We continue to build a platform for future growth and profitability. That platform consists of high quality professionals that reach out to every small business in our footprint and sell our personalized banking services. It is our culture of service that brings results.”

Net Interest Income

Net interest income, our core driver of earnings, increased $973 thousand to $9.3 million for the quarter ended June 30, 2016 compared to the prior year’s period, while year-to-date, net interest income increased $1.9 million to $18.3 million. This increase was the result of strong commercial, residential mortgage and consumer loan growth over the past year. Quarterly average commercial loans increased $52.2 million, average residential mortgage loans have increased $20.8 million and consumer loans increased $14.9 million compared to the second quarter in 2015.

The cost of interest-bearing liabilities equaled 1.05% for the quarterly and year-to-date periods. While the quarterly cost of deposits increased 12 basis points to 0.82%, the cost of borrowed funds and subordinated debentures decreased 82 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 and a promotional savings product.

The net interest margin was 3.61% for the quarter-ended June 30, 2016, an increase of 13 basis points from the quarter-ended March 31, 2016. The increase in the net interest margin for the quarter was due to lower yielding fed funds being deployed in the loan portfolio and the restructuring of our FHLB borrowing.

Provision for Loan Losses

The provision for loan losses was $400 thousand for the three months ended June 30, 2016 and $600 thousand for the six months ended June 30, 2016. In the prior year’s periods, there was no loan loss provision during the quarter ended June 30, 2015 and a $200 thousand loan loss provision for the six months ended June 30, 2015. The increase in the quarterly and year-to-date provision for 2016 versus 2015 was due to higher net charge-offs in each period. Net charge-offs were $276 thousand for the quarter and $601 thousand year-to-date at June 30, 2016, compared to net recoveries of $223 thousand and net charge-offs of $347 thousand for the quarter and year-to-date periods ended June 30, 2015.

Noninterest Income

Noninterest income increased $341 thousand to $2.2 million for the three months ended June 30, 2016, compared to the same period last year. Quarterly noninterest income increased due to gains on the sale of Small Business Administration (SBA) loans. Year-to-date, noninterest income increased $716 thousand to $4.3 million due to SBA and mortgage loan gains on sale along with security gains.

SBA loan sales during the second quarter of 2016 totaled $7.2 million with a net gain of $637 thousand. There were no sales during the prior year’s quarter. Year-to-date, SBA loan sales totaled $10.6 million in 2016 and $3.5 million in 2015 with net gains on sale of $945 thousand and $363 thousand, respectively.

During the quarter, $26.0 million in residential mortgage loans were sold at a gain of $593 thousand, compared to $27.1 million in loans sold at a gain of $687 thousand during the prior year’s quarter. Our mortgage pipeline remains strong and we expect a good year in mortgage originations.

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

  • Branch fee income declined in the quarterly and year-to-date periods due to lower levels of overdraft fees, partially offset by increased fees from commercial checking accounts.
  • Service and loan fee income declined in the quarterly and year-to-date periods due to reduced loan payoff fees.
  • Security gains totaled $81 thousand and $28 thousand for the quarters ended June 30, 2016 and 2015, respectively. Year-to-date, security gains were $175 thousand and $28 thousand.

Noninterest Expense

Noninterest expenses increased $76 thousand or 1.1% to $6.7 million for the quarter and $184 thousand or 1.4% for the six months ended June 30, 2016. The increases in both periods were due to higher compensation and employee benefit expenses such as medical insurance, retirement and 401(k) plan benefits and other expense items such as director fees and employee training and education expenses. These increases were partially offset by reduced occupancy expenses.

Financial Condition

At June 30, 2016, total assets were $1.1 billion, an increase of $43.5 million from year-end 2015:

  • Total loans increased $26.1 million or 2.9%, from year-end 2015 to $915.0 million at June 30, 2016. Commercial, consumer and residential mortgage loan portfolios increased $16.2 million, $7.2 million and $4.3 million, respectively.
  • Other assets increased due to the purchase of the Company’s Clinton, New Jersey headquarters for $4.12 million.
  • Total deposits increased $17.7 million or 2.0%, to $912.2 million at June 30, 2016. Noninterest-bearing demand deposits increased $24.8 million and savings deposits grew $16.7 million, while interest-bearing demand and time deposits declined $13.4 million and $10.4 million, respectively. The declines were due to reduced levels of municipal deposits from year-end and a roll-off of institutional certificates of deposit.
  • Borrowed funds increased $22.0 million to $114.0 million at June 30, 2016, due to increased overnight borrowings of $12.0 million compared to year-end 2015 and the addition of a $10.0 million Federal Home Loan Bank (FHLB) borrowing. Also, during the six month period, $10.0 million in FHLB 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 $85.0 million at June 30, 2016, an increase of $6.5 million from year-end 2015, due to year-to-date net income less the dividends paid to shareholders and a decrease in accumulated other comprehensive income due to the fluctuation in interest rates.
  • Book value per common share was $10.01 as of June 30, 2016.
  • At June 30, 2016, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 8.52%, 9.70%, 10.85% and 12.11% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

  • Nonperforming assets totaled $8.2 million at June 30, 2016, or 0.90% 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 9.9% to $6.5 million at June 30, 2016 from year-end.
  • OREO increased $111 thousand to $1.7 million at June 30, 2016 from year-end.
  • The allowance for loan losses totaled $12.8 million at June 30, 2016, or 1.39% of total loans compared to $12.4 million and 1.51% at June 30, 2015.
  • Net charge-offs were $276 thousand for the three months ended June 30, 2016, compared to net recoveries of $223 thousand for the same period a year ago. Net charge-offs were $601 thousand for six months ended June 30, 2016, compared to $347 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 $912 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
June 30, 2016
Jun. 30, 2016 vs.
Mar. 31, 2016 Jun. 30, 2015
(In thousands, except percentages and per share amounts) Jun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015 % %
BALANCE SHEET DATA:
Total assets $ 1,128,370 $ 1,120,955 $ 1,024,303 0.7 % 10.2 %
Total deposits 912,198 926,819 815,427 (1.6) 11.9
Total loans 915,043 886,990 821,696 3.2 11.4
Total securities 73,994 66,729 74,375 10.9 (0.5)
Total shareholders' equity 84,967 82,276 73,690 3.3 15.3
Allowance for loan losses (12,758) (12,634) (12,404) (1.0) 2.9
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes and gain on subordinated debenture $ 4,448 $ 4,196 $ 3,610 6.0 23.2
Provision for income taxes 1,624 1,464 1,182 10.9 37.4
Net income before gain on subordinated debenture $ 2,824 $ 2,732 $ 2,428 3.4 16.3
Gain on subordinated debenture, net of tax - 1,473 - NM NM
Net income $ 2,824 $ 4,205 $ 2,428 (32.8) 16.3
Net income before gain on subordinated debenture per:
Common share - basic $ 0.33 $ 0.32 $ 0.29 3.1 13.8
Common share - diluted $ 0.33 $ 0.31 $ 0.28 6.5 17.9
Net income per:
Common share - basic $ 0.33 $ 0.50 $ 0.29 (34.0) 13.8
Common share - diluted $ 0.33 $ 0.48 $ 0.28 (31.3) 17.9
Net income before gain on subordinated debenture ratios:
Return on average assets 1.03 % 1.00 % 1.01 % 3.0 2.0
Return on average equity 13.59 % 13.67 % 13.35 % (0.6) 1.8
Efficiency ratio 58.53 % 60.56 % 64.99 % (3.4) (9.9)
Net income ratios:
Return on average assets 1.03 % 1.54 % 1.01 % (33.1) 2.0
Return on average equity 13.59 % 21.05 % 13.35 % (35.4) 1.8
Efficiency ratio 58.53 % 50.16 % 64.99 % 16.7 (9.9)
Net interest margin 3.61 % 3.48 % 3.70 % 3.7 (2.4)
FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes and gain on subordinated debenture $ 8,643 $ 6,569 31.6
Provision for income taxes 3,087 2,202 40.2
Net income before gain on subordinated debenture $ 5,556 $ 4,367 27.2
Gain on subordinated debenture, net of tax 1,473 - NM
Net income $ 7,029 $ 4,367 61.0
Net income before gain on subordinated debenture per:
Common share - basic $ 0.66 $ 0.52 26.9
Common share - diluted $ 0.65 $ 0.51 27.5
Net income per:
Common share - basic $ 0.83 $ 0.52 59.6
Common share - diluted $ 0.82 $ 0.51 60.8
Net income before gain on subordinated debenture ratios:
Return on average assets 1.01 % 0.92 % 9.8
Return on average equity 13.63 % 12.23 % 11.4
Efficiency ratio 59.53 % 66.12 % (10.0)
Net income ratios:
Return on average assets 1.28 % 0.92 % 39.1
Return on average equity 17.25 % 12.23 % 41.0
Efficiency ratio 54.06 % 66.12 % (18.2)
Net interest margin 3.55 % 3.67 % (3.3)
SHARE INFORMATION:
Market price per share $ 12.71 $ 11.37 $ 9.79 11.8 29.8
Dividends paid $ 0.04 $ 0.04 $ 0.03 - 0.3
Book value per common share $ 10.01 $ 9.72 $ 8.75 3.0 14.4
Average diluted shares outstanding (QTD) 8,608 8,682 8,524 (0.9) 1.0
CAPITAL RATIOS:
Total equity to total assets 7.53 % 7.34 % 7.19 % 2.6 4.7
Leverage ratio 8.52 % 8.31 % 9.09 % 2.5 (6.3)
Common equity tier 1 risk-based capital ratio 9.70 % 9.77 % 9.39 % n/a n/a
Tier 1 risk-based capital ratio 10.85 % 10.97 % 11.33 % (1.1) (4.2)
Total risk-based capital ratio 12.11 % 12.22 % 12.59 % (0.9) (3.8)
CREDIT QUALITY AND RATIOS:
Nonperforming assets $ 8,243 $ 8,304 $ 11,102 (0.7) (25.8)
QTD net chargeoffs (annualized) to QTD average loans 0.12 % 0.15 % (0.11)% (20.0) 209.1
Allowance for loan losses to total loans 1.39 % 1.42 % 1.51 % (2.1) (7.9)
Nonperforming assets to total loans and OREO 0.90 % 0.93 % 1.35 % (3.2) (33.3)
Nonperforming assets to total assets 0.73 % 0.74 % 1.08 % (1.4)% (32.4)%


UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2016
Jun. 30, 2016 vs.
December 31, 2015 Jun. 30, 2015
(In thousands, except percentages) Jun. 30, 2016 December 31, 2015 Jun. 30, 2015 % %
ASSETS
Cash and due from banks $ 20,169 $ 22,681 $ 28,240 (11.1)% (28.6)%
Federal funds sold and interest-bearing deposits 75,908 65,476 62,202 15.9 22.0
Cash and cash equivalents 96,077 88,157 90,442 9.0 6.2
Securities:
Securities available for sale 45,266 52,865 55,766 (14.4) (18.8)
Securities held to maturity 28,728 18,471 18,609 55.5 54.4
Total securities 73,994 71,336 74,375 3.7 (0.5)
Loans:
SBA loans held for sale 13,245 13,114 11,368 1.0 16.5
SBA loans held for investment 40,006 39,393 39,663 1.6 0.9
SBA 504 loans 27,038 29,353 29,125 (7.9) (7.2)
Commercial loans 481,713 465,518 428,371 3.5 12.5
Residential mortgage loans 268,774 264,523 243,259 1.6 10.5
Consumer loans 84,267 77,057 69,910 9.4 20.5
Total loans 915,043 888,958 821,696 2.9 11.4
Allowance for loan losses (12,758) (12,759) (12,404) - 2.9
Net loans 902,285 876,199 809,292 3.0 11.5
Premises and equipment, net 20,397 15,171 15,385 34.4 32.6
Bank owned life insurance ("BOLI") 13,568 13,381 13,190 1.4 2.9
Deferred tax assets 6,223 5,968 5,928 4.3 5.0
Federal Home Loan Bank ("FHLB") stock 5,092 4,600 5,635 10.7 (9.6)
Accrued interest receivable 3,953 3,884 3,690 1.8 7.1
Other real estate owned ("OREO") 1,702 1,591 2,265 7.0 (24.9)
Goodwill and other intangibles 1,516 1,516 1,516 - -
Other assets 3,563 3,063 2,585 16.3 37.8
Total assets $ 1,128,370 $ 1,084,866 $ 1,024,303 4.0 % 10.2 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $ 210,024 $ 185,267 $ 175,287 13.4 % 19.8 %
Interest-bearing demand 117,189 130,605 117,988 (10.3) (0.7)
Savings 318,184 301,447 284,369 5.6 11.9
Time, under $100,000 144,394 134,468 113,846 7.4 26.8
Time, $100,000 and over, under $250,000 91,770 104,106 100,039 (11.8) (8.3)
Time, $250,000 and over 30,637 38,600 23,898 (20.6) 28.2
Total deposits 912,198 894,493 815,427 2.0 11.9
Borrowed funds 114,000 92,000 115,000 23.9 (0.9)
Subordinated debentures 10,310 15,465 15,465 (33.3) (33.3)
Accrued interest payable 368 461 418 (20.2) (12.0)
Accrued expenses and other liabilities 6,527 3,977 4,303 64.1 51.7
Total liabilities 1,043,403 1,006,396 950,613 3.7 9.8
Shareholders' equity:
Common stock 59,844 59,371 59,067 0.8 1.3
Retained earnings 25,916 19,566 15,055 32.5 72.1
Accumulated other comprehensive loss (793) (467) (432) NM NM
Total shareholders' equity 84,967 78,470 73,690 8.3 15.3
Total liabilities and shareholders' equity $ 1,128,370 $ 1,084,866 $ 1,024,303 4.0 % 10.2 %
Issued and outstanding common shares 8,487 8,436 8,425

UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
NON-GAAP
June 30, 2016
Jun. 30, 2016 vs.
For the three months ended Mar. 31, 2016 Jun. 30, 2015
(In thousands, except percentages and per share amounts) Jun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015 $ % $ %
INTEREST INCOME
Federal funds sold and interest-bearing deposits $ 41 $ 44 $ 6 $ (3) (6.8 )%$ 35 583.3 %
FHLB stock 55 52 38 3 5.8 17 44.7
Securities:
Taxable 427 363 363 64 17.6 64 17.6
Tax-exempt 55 62 71 (7) (11.3 ) (16) (22.5)
Total securities 482 425 434 57 13.4 48 11.1
Loans:
SBA loans 788 721 605 67 9.3 183 30.2
SBA 504 loans 344 385 369 (41) (10.6 ) (25) (6.8)
Commercial loans 5,860 5,676 5,276 184 3.2 584 11.1
Residential mortgage loans 2,937 2,942 2,716 (5) (0.2 ) 221 8.1
Consumer loans 980 931 774 49 5.3 206 26.6
Total loans 10,909 10,655 9,740 254 2.4 1,169 12.0
Total interest income 11,487 11,176 10,218 311 2.8 1,269 12.4
INTEREST EXPENSE
Interest-bearing demand deposits 124 137 103 (13) (9.5 ) 21 20.4
Savings deposits 381 366 271 15 4.1 110 40.6
Time deposits 954 951 725 3 0.3 229 31.6
Borrowed funds and subordinated debentures 686 735 750 (49) (6.7 ) (64) (8.5)
Total interest expense 2,145 2,189 1,849 (44) (2.0 ) 296 16.0
Net interest income 9,342 8,987 8,369 355 4.0 973 11.6
Provision for loan losses 400 200 - 200 100.0 400 100.0
Net interest income after provision for loan losses 8,942 8,787 8,369 155 1.8 573 6.8
NONINTEREST INCOME
Branch fee income 286 333 373 (47) (14.1 ) (87) (23.3)
Service and loan fee income 267 255 466 12 4.7 (199) (42.7)
Gain on sale of SBA loans held for sale, net 637 308 - 329 106.8 637 100.0
Gain on sale of mortgage loans, net 593 715 687 (122) (17.1 ) (94) (13.7)
BOLI income 93 94 95 (1) (1.1 ) (2) (2.1)
Net security gains 81 94 28 (13) (13.8) 53 189.3
Other income 277 217 244 60 27.6 33 13.5
Total noninterest income 2,234 2,016 1,893 218 10.8 341 18.0
NONINTEREST EXPENSE
Compensation and benefits 3,709 3,549 3,481 160 4.5 228 6.5
Occupancy 513 618 601 (105) (17.0 ) (88) (14.6)
Processing and communications 600 598 614 2 0.3 (14) (2.3)
Furniture and equipment 395 420 422 (25) (6.0 ) (27) (6.4)
Professional services 239 255 242 (16) (6.3 ) (3) (1.2)
Loan costs 59 198 160 (139) (70.2 ) (101) (63.1)
OREO expenses 82 24 67 58 241.7 15 22.4
Deposit insurance 165 160 150 5 3.1 15 10.0
Advertising 303 241 343 62 25.7 (40) (11.7)
Other expenses 663 544 572 119 21.9 91 15.9
Total noninterest expense 6,728 6,607 6,652 121 1.8 76 1.1
Income before provision for income taxes and gain on subordinated debenture 4,448 4,196 3,610 252 6.0 838 23.2
Provision for income taxes 1,624 1,464 1,182 160 10.9 442 37.4
Net income before gain on subordinated debenture $ 2,824 $ 2,732 $ 2,428 $ 92 3.4 %$ 396 16.3 %
Gain on subordinated debenture, net of tax - 1,473 - (1,473) NM - NM
Net income $ 2,824 $ 4,205 $ 2,428 $ (1,381) (32.8 )%$ 396 16.3 %
Effective tax rate 36.5 % 34.9% 32.7%
Net income before gain on subordinated debenture per:
Common share - basic $ 0.33 $ 0.32 $ 0.29
Common share - diluted $ 0.33 $ 0.31 $ 0.28
Net income per:
Common share - basic $ 0.33 $ 0.50 $ 0.29
Common share - diluted $ 0.33 $ 0.48 $ 0.28
Weighted average common shares outstanding - Basic 8,471 8,459 8,425
Weighted average common shares outstanding - Diluted 8,608 8,682 8,524

UNITY BANCORP, INC.
YTD CONSOLIDATED STATEMENTS OF INCOME
June 30, 2016
For the six months ended June 30, Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts) 2016 2015 $ %
INTEREST INCOME
Federal funds sold and interest-bearing deposits $ 85 $ 16 $ 69 431.3 %
FHLB stock 107 81 26 32.1
Securities:
Taxable 791 750 41 5.5
Tax-exempt 117 143 (26) (18.2)
Total securities 908 893 15 1.7
Loans:
SBA loans 1,509 1,284 225 17.5
SBA 504 loans 729 715 14 2.0
Commercial loans 11,538 10,342 1,196 11.6
Residential mortgage loans 5,878 5,298 580 10.9
Consumer loans 1,911 1,473 438 29.7
Total loans 21,565 19,112 2,453 12.8
Total interest income 22,665 20,102 2,563 12.7
INTEREST EXPENSE
Interest-bearing demand deposits 261 209 52 24.9
Savings deposits 748 535 213 39.8
Time deposits 1,904 1,411 493 34.9
Borrowed funds and subordinated debentures 1,421 1,558 (137) (8.8)
Total interest expense 4,334 3,713 621 16.7
Net interest income 18,331 16,389 1,942 11.8
Provision for loan losses 600 200 400 200.0
Net interest income after provision for loan losses 17,731 16,189 1,542 9.5
NONINTEREST INCOME
Branch fee income 619 719 (100) (13.9)
Service and loan fee income 522 762 (240) (31.5)
Gain on sale of SBA loans held for sale, net 945 363 582 160.3
Gain on sale of mortgage loans, net 1,308 1,031 277 26.9
BOLI income 187 189 (2) (1.1)
Net security gains 175 28 147 525.0
Other income 494 442 52 11.8
Total noninterest income 4,250 3,534 716 20.3
NONINTEREST EXPENSE
Compensation and benefits 7,258 6,952 306 4.4
Occupancy 1,131 1,273 (142) (11.2)
Processing and communications 1,198 1,210 (12) (1.0)
Furniture and equipment 815 795 20 2.5
Professional services 494 478 16 3.3
Loan costs 257 382 (125) (32.7)
OREO expenses 105 103 2 1.9
Deposit insurance 326 333 (7) (2.1)
Advertising 544 525 19 3.6
Other expenses 1,210 1,103 107 9.7
Total noninterest expense 13,338 13,154 184 1.4
Income before provision for income taxes and gain on subordinated debenture 8,643 6,569 2,074 31.6
Provision for income taxes 3,087 2,202 885 40.2
Net income before gain on subordinated debenture $ 5,556 $ 4,367 $ 1,189 27.2 %
Gain on subordinated debenture, net of tax 1,473 - 1,473 100.0
Net income $ 7,029 $ 4,367 $ 2,662 61.0 %
Effective tax rate 35.6 % 33.5%
Net income before gain on subordinated debenture per:
Common share - basic 0.66 0.52
Common share - diluted 0.65 0.51
Net income per:
Common share - basic 0.83 0.52
Common share - diluted 0.82 0.51
Weighted average common shares outstanding - Basic 8,465 8,421
Weighted average common shares outstanding - Diluted 8,597 8,519

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
June 30, 2016
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
June 30, 2016 March 31, 2016
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits $ 62,652 $ 41 0.26 %$ 78,681 $ 44 0.22%
FHLB stock 4,904 55 4.51 4,549 52 4.60
Securities:
Taxable 62,561 427 2.75 59,152 363 2.47
Tax-exempt 8,177 83 4.08 9,548 94 3.96
Total securities (A) 70,738 510 2.90 68,700 457 2.68
Loans:
SBA loans 56,719 788 5.59 53,942 721 5.38
SBA 504 loans 27,273 344 5.07 29,232 385 5.30
Commercial loans 474,573 5,860 4.97 463,927 5,676 4.92
Residential mortgage loans 264,599 2,937 4.46 264,208 2,942 4.48
Consumer loans 82,295 980 4.79 78,328 931 4.78
Total loans (B) 905,459 10,909 4.85 889,637 10,655 4.82
Total interest-earning assets $ 1,043,753 $ 11,515 4.44 %$ 1,041,567 $ 11,208 4.33%
Noninterest-earning assets:
Cash and due from banks 25,993 27,006
Allowance for loan losses (12,850) (12,926)
Other assets 49,250 45,486
Total noninterest-earning assets 62,393 59,566
Total assets $ 1,106,146 $ 1,101,133
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $ 129,263 $ 124 0.39 %$ 131,339 $ 137 0.42%
Total savings deposits 310,329 381 0.49 310,251 366 0.47
Total time deposits 275,700 954 1.39 282,110 951 1.36
Total interest-bearing deposits 715,292 1,459 0.82 723,700 1,454 0.81
Borrowed funds and subordinated debentures 106,277 686 2.60 104,350 735 2.83
Total interest-bearing liabilities $ 821,569 $ 2,145 1.05 %$ 828,050 $ 2,189 1.06%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 194,649 187,226
Other liabilities 6,370 5,528
Total noninterest-bearing liabilities 201,019 192,754
Total shareholders' equity 83,558 80,329
Total liabilities and shareholders' equity $ 1,106,146 $ 1,101,133
Net interest spread $ 9,370 3.39 % $ 9,019 3.27%
Tax-equivalent basis adjustment (28) (32)
Net interest income $ 9,342 $ 8,987
Net interest margin 3.61 % 3.48%
(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
June 30, 2016
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
June 30, 2016 June 30, 2015
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits $ 62,652 $ 41 0.26 %$ 20,259 $ 6 0.12%
FHLB stock 4,904 55 4.51 3,720 38 4.10
Securities:
Taxable 62,561 427 2.75 63,834 363 2.28
Tax-exempt 8,177 83 4.08 11,803 105 3.57
Total securities (A) 70,738 510 2.90 75,637 468 2.48
Loans:
SBA loans 56,719 788 5.59 47,249 605 5.14
SBA 504 loans 27,273 344 5.07 29,539 369 5.01
Commercial loans 474,573 5,860 4.97 422,371 5,276 5.01
Residential mortgage loans 264,599 2,937 4.46 243,821 2,716 4.47
Consumer loans 82,295 980 4.79 67,353 774 4.61
Total loans (B) 905,459 10,909 4.85 810,333 9,740 4.82
Total interest-earning assets $ 1,043,753 $ 11,515 4.44 %$ 909,949 $ 10,252 4.52%
Noninterest-earning assets:
Cash and due from banks 25,993 24,768
Allowance for loan losses (12,850) (12,430)
Other assets 49,250 43,596
Total noninterest-earning assets 62,393 55,934
Total assets $ 1,106,146 $ 965,883
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $ 129,263 $ 124 0.39 %$ 123,663 $ 103 0.33%
Total savings deposits 310,329 381 0.49 287,911 271 0.38
Total time deposits 275,700 954 1.39 220,403 725 1.32
Total interest-bearing deposits 715,292 1,459 0.82 631,977 1,099 0.70
Borrowed funds and subordinated debentures 106,277 686 2.60 87,944 750 3.42
Total interest-bearing liabilities $ 821,569 $ 2,145 1.05 %$ 719,921 $ 1,849 1.03%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 194,649 168,585
Other liabilities 6,370 4,413
Total noninterest-bearing liabilities 201,019 172,998
Total shareholders' equity 83,558 72,964
Total liabilities and shareholders' equity $ 1,106,146 $ 965,883
Net interest spread $ 9,370 3.39 % $ 8,403 3.49%
Tax-equivalent basis adjustment (28) (34)
Net interest income $ 9,342 $ 8,369
Net interest margin 3.61 % 3.70%
(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.
YEAR TO DATE NET INTEREST MARGIN
June 30, 2016
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the six months ended
June 30, 2016 June 30, 2015
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits $ 70,666 $ 85 0.24 %$ 28,722 $ 16 0.11%
FHLB stock 4,726 107 4.55 3,783 81 4.32
Securities:
Taxable 60,856 791 2.61 65,431 750 2.31
Tax-exempt 8,863 176 3.99 11,893 212 3.59
Total securities (A) 69,719 967 2.79 77,324 962 2.51
Loans:
SBA loans 55,331 1,509 5.48 47,824 1,284 5.41
SBA 504 loans 28,253 729 5.19 31,457 715 4.58
Commercial loans 469,248 11,538 4.94 414,278 10,342 5.03
Residential mortgage loans 264,403 5,878 4.47 235,022 5,298 4.55
Consumer loans 80,312 1,911 4.79 64,868 1,473 4.58
Total loans (B) 897,547 21,565 4.83 793,449 19,112 4.86
Total interest-earning assets $ 1,042,658 $ 22,724 4.38 %$ 903,278 $ 20,171 4.50%
Noninterest-earning assets:
Cash and due from banks 26,500 27,324
Allowance for loan losses (12,888) (12,565)
Other assets 47,369 43,403
Total noninterest-earning assets 60,981 58,162
Total assets $ 1,103,639 $ 961,440
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $ 130,301 $ 261 0.40 %$ 125,120 $ 209 0.34%
Total savings deposits 310,290 748 0.48 288,953 535 0.37
Total time deposits 278,904 1,904 1.37 215,939 1,411 1.32
Total interest-bearing deposits 719,495 2,913 0.81 630,012 2,155 0.69
Borrowed funds and subordinated debentures 105,314 1,421 2.71 89,916 1,558 3.49
Total interest-bearing liabilities $ 824,809 $ 4,334 1.05 %$ 719,928 $ 3,713 1.04%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 190,938 165,176
Other liabilities 5,948 4,359
Total noninterest-bearing liabilities 196,886 169,535
Total shareholders' equity 81,944 71,977
Total liabilities and shareholders' equity $ 1,103,639 $ 961,440
Net interest spread $ 18,390 3.33 % $ 16,458 3.46%
Tax-equivalent basis adjustment (59) (69)
Net interest income $ 18,331 $ 16,389
Net interest margin 3.55 % 3.67%
(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
June 30, 2016
Amounts in thousands, except percentages Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period $12,634 $12,759 $ 12,421 $12,404 $ 12,181
Provision for loan losses charged to expense 400 200 100 200 -
13,034 12,959 12,521 12,604 12,181
Less: Chargeoffs
SBA loans 142 86 151 86 6
SBA 504 loans - - - - -
Commercial loans 152 228 52 10 147
Residential mortgage loans - - - 50 -
Consumer loans - 28 41 52 7
Total chargeoffs 294 342 244 198 160
Add: Recoveries
SBA loans 4 11 6 10 2
SBA 504 loans - - - - -
Commercial loans 13 6 476 5 370
Residential mortgage loans - - - - 10
Consumer loans 1 - - - 1
Total recoveries 18 17 482 15 383
Net chargeoffs (recoveries) 276 325 (238) 183 (223)
Balance, end of period $12,758 $12,634 $ 12,759 $12,421 $ 12,404
LOAN QUALITY INFORMATION:
Nonperforming loans (1) $6,541 $6,887 $ 7,260 $10,742 $ 8,837
Other real estate owned ("OREO") 1,702 1,417 1,591 1,759 2,265
Nonperforming assets 8,243 8,304 8,851 12,501 11,102
Less: Amount guaranteed by SBA 134 243 288 225 267
Net nonperforming assets $8,109 $8,061 $ 8,563 $12,276 $ 10,835
Loans 90 days past due & still accruing $485 $ - $ - $272 $ 273
Performing Troubled Debt Restructurings (TDRs) $772 $844 $ 3,015 $3,268 $ 3,360
(1) Nonperforming TDRs included in nonperforming loans 161 293 293 2,808 2,843
Total TDRs $933 $1,137 $ 3,308 $6,076 $ 6,203
Allowance for loan losses to:
Total loans at quarter end 1.39 % 1.42% 1.44 % 1.45% 1.51 %
Nonperforming loans (1) 195.05 183.45 175.74 115.63 140.36
Nonperforming assets 154.77 152.14 144.15 99.36 111.73
Net nonperforming assets 157.33 156.73 149.00 101.18 114.48
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans 0.98 % 0.56% 1.05 % 0.57% 0.03 %
SBA 504 loans - - - - -
Commercial loans 0.12 0.19 (0.37) - (0.21)
Residential mortgage loans - - - 0.08 (0.02)
Consumer loans - 0.14 0.21 0.28 0.04
Total loans 0.12 % 0.15% (0.11)% 0.09% (0.11)%
Nonperforming loans to total loans 0.71 % 0.78% 0.82 % 1.26% 1.08 %
Nonperforming loans and TDRs to total loans 0.80 0.87 1.16 1.64 1.48
Nonperforming assets to total loans and OREO 0.90 0.93 0.99 1.46 1.35
Nonperforming assets to total assets 0.73 0.74 0.82 1.19 1.08

UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
NON-GAAP
June 30, 2016
(In thousands, except percentages and per share amounts) Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
SUMMARY OF INCOME:
Total interest income $ 11,487 $ 11,176 $ 10,995 $ 10,554 $ 10,218
Total interest expense 2,145 2,189 2,015 1,932 1,849
Net interest income 9,342 8,987 8,980 8,622 8,369
Provision for loan losses 400 200 100 200 -
Net interest income after provision for loan losses 8,942 8,787 8,880 8,422 8,369
Total noninterest income 2,234 2,016 1,920 2,275 1,893
Total noninterest expense 6,728 6,607 6,846 6,852 6,652
Income before provision for income taxes and gain on subordinated debenture 4,448 4,196 3,954 3,845 3,610
Provision for income taxes 1,624 1,464 1,315 1,294 1,182
Net income before gain on subordinated debenture $ 2,824 $ 2,732 $ 2,639 $ 2,551 $ 2,428
Gain on subordinated debenture, net of tax - 1,473 - - -
Net income $ 2,824 $ 4,205 $ 2,639 $ 2,551 $ 2,428
Net income per common share - Basic $ 0.33 $ 0.50 $ 0.31 $ 0.30 $ 0.29
Net income per common share - Diluted $ 0.33 $ 0.48 $ 0.31 $ 0.30 $ 0.28
COMMON SHARE DATA:
Market price per share $ 12.71 $ 11.37 $ 12.47 $ 9.77 $ 9.79
Dividends paid $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.03
Book value per common share $ 10.01 $ 9.72 $ 9.30 $ 9.02 $ 8.75
Weighted average common shares outstanding - Basic 8,471 8,459 8,430 8,427 8,425
Weighted average common shares outstanding - Diluted 8,608 ` 8,682 8,547 8,536 8,524
Issued and outstanding common shares 8,487 8,468 8,436 8,429 8,425
OPERATING RATIOS (Annualized):
Return on average assets 1.03 % 1.54 % 1.00 % 1.00 % 1.01 %
Return on average equity 13.59 21.05 13.59 13.54 13.35
Efficiency ratio 58.53 50.16 62.81 62.88 64.99
BALANCE SHEET DATA:
Total assets $ 1,128,370 $ 1,120,955 $ 1,084,866 $ 1,052,711 $ 1,024,303
Total deposits 912,198 926,819 894,493 866,247 815,427
Total loans 915,043 886,990 888,958 855,560 821,696
Total securities 73,994 66,729 71,336 71,492 74,375
Total shareholders' equity 84,967 82,276 78,470 76,065 73,690
Allowance for loan losses (12,758) (12,634) (12,759) (12,421) (12,404)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets 4.44 % 4.33 % 4.40 % 4.41 % 4.52 %
Interest-bearing liabilities 1.05 1.06 1.02 1.01 1.03
Net interest spread 3.39 3.27 3.38 3.40 3.49
Net interest margin 3.61 3.48 3.60 3.60 3.70
CREDIT QUALITY:
Nonperforming assets 8,243 8,304 8,851 12,501 11,102
QTD net chargeoffs (annualized) to QTD average loans 0.12 % 0.15 % (0.11)% 0.09 % (0.11)%
Allowance for loan losses to total loans 1.39 1.42 1.44 1.45 1.51
Nonperforming assets to total loans and OREO 0.90 0.93 0.99 1.46 1.35
Nonperforming assets to total assets 0.73 0.74 0.82 1.19 1.08
CAPITAL RATIOS AND OTHER:
Total equity to total assets 7.53 % 7.34 % 7.23 % 7.23 % 7.19 %
Leverage ratio 8.52 8.31 8.82 8.92 9.09
Common equity tier 1 risk-based capital ratio 9.70 9.77 9.37 9.37 9.39
Tier 1 risk-based capital ratio 10.85 10.97 11.18 11.25 11.33
Total risk-based capital ratio 12.11 12.22 12.43 12.50 12.59
Number of banking offices 15 15 15 15 15
Number of ATMs 16 16 16 16 16
Number of employees 172 172 162 163 177

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

Source:Unity Bancorp, Inc.