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Unity Bancorp Reports 16.8% Increase in Net Income, Excluding Nonrecurring Gain

CLINTON, N.J., April 24, 2017 (GLOBE NEWSWIRE) -- Unity Bancorp, Inc. (NASDAQ:UNTY), parent company of Unity Bank, reported a 16.8% increase in earnings, excluding the effect of a nonrecurring gain during the prior year’s quarter. Major contributing factors included strong loan growth, increased levels of noninterest income and expense control.

Net income for the three months ended March 31, 2017 was $3.2 million, or $0.30 per diluted share. Net income, excluding a nonrecurring gain on the repurchase of subordinated debentures, was $2.7 million, or $0.29 per diluted share, for the three months ended March 31, 2016. This represented a 16.8% increase from the same period a year ago. Return on average assets and average common equity for the quarter were 1.07% and 12.02%, respectively, compared to 1.00% and 13.68% for the same period a year ago.

During the prior year’s 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. 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 for the three months ended March 31, 2017 was $3.2 million or $0.30 per diluted share, a decline of 24.1 percent compared to the prior year period net income of $4.2 million or $0.44 per diluted share which included the nonrecurring gain on the repurchase of subordinated debentures. Return on average assets and average common equity, including the nonrecurring gain, for the quarter ended March 31, 2017 was 1.07% and 12.02%, respectively compared to 1.54% and 21.05% for the prior year period.

First quarter highlights included:

  • Voted one of the best places to work in New Jersey by NJBIZ.
  • Installed a new modern teller system which will increase automation and efficiency.
  • 2.8% loan growth: 5.7% increase in residential mortgage loans, 5.0% increase in consumer loans and 2.0% increase in commercial loans. Total loans now exceed $1 billion.
  • 3.7 % deposit growth: 2.2% increase in noninterest-bearing demand deposits and 7.2% increase in savings deposits.
  • Net interest income increased 15.6% compared to the prior year’s quarter due to strong loan growth.
  • Net interest margin increased to 3.70% this quarter compared to 3.48% in the prior year’s quarter due to strong loan growth and the benefit of a rising rate environment.

“We continue to successfully implement our business plan,” stated James A. Hughes, President and CEO. “We had a strong first quarter and see 2017 as a year of continued growth and success. Our newest branches add geographic presence and situational opportunity to our growth plans and are performing well. Our balance sheet is well positioned to weather interest rate changes and to profit from them. Our ongoing success presents an excellent opportunity for me to commend our dedicated and efficient employees as Unity was named by NJBIZ as one of the "Best Places to Work" in New Jersey. ”

Net Interest Income

Net interest income, our core driver of earnings, increased $1.4 million to $10.4 million for the quarter ended March 31, 2017 compared to the prior year’s quarter and the net interest margin expanded 22 basis points to 3.70% compared to 3.48% for the prior year’s quarter.

The yield on earning assets increased 15 basis points to 4.48% for the quarter ended March 31, 2017 compared to 4.33% for the prior year’s quarter. This increase was the result of strong commercial, residential mortgage and consumer loan growth over the prior year’s period and the benefit of a rising rate environment. Quarterly average commercial loans increased $48.6 million, average residential mortgage loans have increased $33.0 million and consumer loans increased $15.9 million compared to the first quarter in 2016.
The cost of interest-bearing liabilities fell 4 basis points to 1.02% for the quarter ended March 31, 2017. While the cost of deposits increased 2 basis points to 0.83%, the cost of borrowed funds and subordinated debentures decreased 68 basis points compared to the prior year due to the modification of borrowings with the Federal Home Loan Bank (“FHLB”) and the addition of new borrowing at lower rates over the past year. The increase in the cost of deposits was primarily driven by the growth in savings deposits.

Provision for Loan Losses

The provision for loan losses was $250 thousand for the quarter ended March 31, 2017, an increase of $50 thousand, compared to the $200 thousand provision for loan losses for the quarter ended March 31, 2016. Quarterly net charge-offs declined $177 thousand to $148 thousand compared to the first quarter 2016.

Noninterest Income

Noninterest income increased $188 thousand to $2.2 million for the three months ended March 31, 2017, compared to the same period last year. Quarterly noninterest income increased due to higher service and loan fee income and gains on the sale of SBA loans. Service and loan fee income increased due to higher loan processing fees, prepayment and payoff fees. Gains on the sale of SBA loans increased due to a higher volume of loan sales this quarter compared with the prior year’s quarter. SBA loan sales totaled $6.0 million with net gains on sale of $485 thousand for the quarter ended March 31, 2017, compared to $3.5 million in sales and a net gain of $308 thousand in the prior year’s quarter. In addition, gains on the sale of mortgage loans during the quarter were $637 thousand compared to $715 thousand in the prior year’s quarter. Mortgage loan sale volume totaled $25.7 million and $25.0 million, respectively.

Noninterest Expense

Noninterest expense increased $833 thousand or 12.6% to $7.4 million for the quarter due primarily to compensation and benefits expenses and loan legal and OREO costs. Since March 31, 2016, compensation and benefit expenses have risen due to the addition of two new retail branches as well as additional lending staff. Loan legal and OREO costs increased $269 thousand compared to the prior year’s quarter due to a loss of $253 thousand on the sale of an OREO property.

Financial Condition

At March 31, 2017, total assets were $1.2 billion, an increase of $36.2 million from year-end 2016:

  • Total securities increased $11.5 million due to purchases of $15.2 million during the quarter.
  • Total loans increased $27.3 million or 2.8%, from year-end 2016 to $1.0 billion at March 31, 2017. Residential mortgage, commercial and consumer loan portfolios increased $16.5 million, $10.2 million and $4.5 million, respectively. SBA loans declined on sales of $6.0 million. Our pipeline in all categories remains strong and loan growth is expected in future quarters.
  • Total deposits increased $35.0 million or 3.7%, to $980.7 million at March 31, 2017 due to our eSavings promotion.
  • Borrowed funds decreased $1.0 million to $120.0 million at March 31, 2017 due to reduced overnight borrowings.
  • Shareholders’ equity was $109.3 million at March 31, 2017, an increase of $3.0 million from year-end 2016, due to year-to-date net income less the dividends paid to shareholders.
  • Book value per common share was $10.38 as of March 31, 2017.
  • At March 31, 2017, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 9.72%, 11.46%, 12.53% and 13.78% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

  • Nonperforming assets totaled $8.9 million at March 31, 2017, or 0.89% of total loans and OREO, compared to $8.3 million or 0.85% of total loans and OREO at year-end 2016.
  • Nonperforming loans increased 7.20% to $7.8 million at March 31, 2017 from year-end.
  • OREO totaled $1.2 million at March 31, 2017, an increase of $122 thousand from year-end.
  • The allowance for loan losses totaled $12.7 million at March 31, 2017, or 1.27% of total loans compared to $12.6 million and 1.42% at March 31, 2016.
  • Net charge-offs were $148 thousand for the three months ended March 31, 2017, compared to $325 thousand for the same period a year ago.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.2 billion in assets and $981 million in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 17 retail service centers located in Bergen, Hunterdon, Middlesex, 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 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, 2017
March 31, 2017 vs.
December 31, 2016 March 31, 2016
(In thousands, except percentages and per share amounts) March 31, 2017 December 31, 2016 March 31, 2016 % %
BALANCE SHEET DATA:
Total assets $ 1,226,168 $ 1,189,906 $ 1,120,955 3.0% 9.4%
Total deposits 980,703 945,723 926,819 3.7 5.8
Total loans 1,000,677 973,414 886,990 2.8 12.8
Total securities 73,022 61,547 66,729 18.6 9.4
Total shareholders' equity 109,305 106,291 82,276 2.8 32.9
Allowance for loan losses (12,681) (12,579) (12,634) (0.8) 0.4
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes $ 4,904 $ 4,925 $ 4,196 (0.4) 16.9
Provision for income taxes 1,712 1,765 1,464 (3.0) 16.9
Net income before gain on subordinated debenture $ 3,192 $ 3,160 $ 2,732 1.0 16.8
Gain on subordinated debenture, net of tax - - 1,473 NM NM
Net income $ 3,192 $ 3,160 $ 4,205 1.0 (24.1)
Performance ratios before gain on subordinated debenture per:
Common share - basic $ 0.30 $ 0.33 $ 0.29 (9.1) 3.4
Common share - diluted $ 0.30 $ 0.32 $ 0.29 (6.3) 3.4
Net income per:
Common share - basic $ 0.30 $ 0.33 $ 0.45 (9.1) (33.3)
Common share - diluted $ 0.30 $ 0.32 $ 0.44 (6.3) (31.8)
Performance ratios before gain on subordinated debenture per:
Return on average assets 1.07 % 1.07% 1.00% - 7.0
Return on average equity 12.02 % 13.47% 13.68% (10.8) (12.1)
Efficiency ratio 59.08 % 59.91% 60.56% (1.4) (2.4)
Performance ratios:
Return on average assets 1.07 % 1.07% 1.54% - (30.5)
Return on average equity 12.02 % 13.47% 21.05% (10.8) (42.9)
Efficiency ratio 59.08 % 59.90% 50.16% (1.4) 17.8
Net interest margin 3.70 % 3.60% 3.48% 2.8 6.3
SHARE INFORMATION:
Market price per share $ 16.95 $ 15.70 $ 10.34 8.0 63.9
Dividends paid quarterly $ 0.05 $ 0.05 $ 0.04 - 0.3
Book value per common share $ 10.38 $ 10.14 $ 8.83 2.4 17.6
Average diluted shares outstanding (QTD) 10,705 9,878 9,550 8.4 12.1
CAPITAL RATIOS:
Total equity to total assets 8.91 % 8.93% 7.34% (0.2) 21.4
Leverage ratio 9.72 % 9.73% 8.31% (0.1) 17.0
Common equity tier 1 risk-based capital ratio 11.46 % 11.49% 9.77% (0.3) 17.3
Tier 1 risk-based capital ratio 12.53 % 12.58% 10.97% (0.4) 14.2
Total risk-based capital ratio 13.78 % 13.84% 12.22% (0.4) 12.8
CREDIT QUALITY AND RATIOS:
Nonperforming assets $ 8,930 $ 8,287 $ 8,304 7.8 7.5
QTD net chargeoffs (annualized) to QTD average loans 0.06 % 0.13% 0.15% (53.8) (60.0)
Allowance for loan losses to total loans 1.27 % 1.29% 1.42% (1.6) (10.6)
Nonperforming assets to total loans
and OREO
0.89 % 0.85% 0.93% 4.7 (4.3)
Nonperforming assets to total assets 0.73 % 0.70% 0.74% 4.3% (1.4)%
All share information has been adjusted for the 10% stock dividend paid September 30, 2016


UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2017
March 31, 2017 vs.
December 31, 2016 March 31, 2016
(In thousands, except percentages) March 31, 2017 December 31, 2016 March 31, 2016 % %
ASSETS
Cash and due from banks $ 18,345 $ 22,105 $ 26,919 (17.0)% (31.9)%
Federal funds sold and interest-bearing deposits 84,859 83,790 99,554 1.3 (14.8)
Cash and cash equivalents 103,204 105,895 126,473 (2.5) (18.4)
Securities:
Securities available for sale 52,246 40,568 48,566 28.8 7.6
Securities held to maturity 20,776 20,979 18,163 (1.0) 14.4
Total securities 73,022 61,547 66,729 18.6 9.4
Loans:
SBA loans held for sale 12,163 14,773 13,224 (17.7) (8.0)
SBA loans held for investment 42,403 42,492 38,863 (0.2) 9.1
SBA 504 loans 25,111 26,344 27,482 (4.7) (8.6)
Commercial loans 519,338 509,171 467,266 2.0 11.1
Residential mortgage loans 305,578 289,093 260,957 5.7 17.1
Consumer loans 96,084 91,541 79,198 5.0 21.3
Total loans 1,000,677 973,414 886,990 2.8 12.8
Allowance for loan losses (12,681) (12,579) (12,634) (0.8) 0.4
Net loans 987,996 960,835 874,356 2.8 13.0
Premises and equipment, net 23,261 23,398 19,211 (0.6) 21.1
Bank owned life insurance ("BOLI") 13,847 13,758 13,475 0.6 2.8
Deferred tax assets 5,552 5,512 6,029 0.7 (7.9)
Federal Home Loan Bank ("FHLB") stock 5,992 6,037 4,735 (0.7) 26.5
Accrued interest receivable 4,483 4,462 3,839 0.5 16.8
Other real estate owned ("OREO") 1,172 1,050 1,417 11.6 (17.3)
Goodwill and other intangibles 1,516 1,516 1,516 - -
Other assets 6,123 5,896 3,175 3.9 92.9
Total assets $ 1,226,168 $ 1,189,906 $ 1,120,955 3.0% 9.4%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $ 220,750 $ 215,963 $ 188,026 2.2% 17.4%
Interest-bearing demand 146,091 145,654 128,774 0.3 13.4
Savings 389,802 363,462 320,982 7.2 21.4
Time, under $100,000 124,907 123,724 145,784 1.0 (14.3)
Time, $100,000 and over, under $250,000 76,835 75,567 106,419 1.7 (27.8)
Time, $250,000 and over 22,318 21,353 36,834 4.5 (39.4)
Total deposits 980,703 945,723 926,819 3.7 5.8
Borrowed funds 120,000 121,000 95,000 (0.8) 26.3
Subordinated debentures 10,310 10,310 10,310 - -
Accrued interest payable 405 430 390 (5.8) 3.8
Accrued expenses and other liabilities 5,445 6,152 6,160 (11.5) (11.6)
Total liabilities 1,116,863 1,083,615 1,038,679 3.1 7.5
Shareholders' equity:
Common stock 85,757 85,383 59,546 0.4 44.0
Retained earnings 23,414 20,748 23,431 12.8 (0.1)
Accumulated other comprehensive income 134 160 (701) NM NM
Total shareholders' equity 109,305 106,291 82,276 2.8 32.9
Total liabilities and shareholders' equity $ 1,226,168 $ 1,189,906 $ 1,120,955 3.0% 9.4%
Issued and outstanding common shares 10,535 10,477 9,315
NM=Not meaningful


UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
NON-GAAP
March 31, 2017
March 31, 2017 vs.
For the three months ended December 31, 2016 March 31, 2016
(In thousands, except percentages and per share amounts) March 31, 2017 December 31, 2016 March 31, 2016 $ % $ %
INTEREST INCOME
Federal funds sold and interest-bearing deposits $ 129 $ 79 $ 44 $ 50 63.3%$ 85 193.2%
FHLB stock 93 71 52 22 31.0 41 78.8
Securities:
Taxable 491 452 363 39 8.6 128 35.3
Tax-exempt 44 44 62 - - (18) (29.0)
Total securities 535 496 425 39 7.9 110 25.9
Loans:
SBA loans 854 850 721 4 0.5 133 18.4
SBA 504 loans 301 306 385 (5) (1.6) (84) (21.8)
Commercial loans 6,166 6,226 5,676 (60) (1.0) 490 8.6
Residential mortgage loans 3,384 3,188 2,942 196 6.1 442 15.0
Consumer loans 1,132 1,064 931 68 6.4 201 21.6
Total loans 11,837 11,634 10,655 203 1.7 1,182 11.1
Total interest income 12,594 12,280 11,176 314 2.6 1,418 12.7
INTEREST EXPENSE
Interest-bearing demand deposits 153 147 137 6 4.1 16 11.7
Savings deposits 583 537 366 46 8.6 217 59.3
Time deposits 804 845 951 (41) (4.9) (147) (15.5)
Borrowed funds and subordinated debentures 664 696 735 (32) (4.6) (71) (9.7)
Total interest expense 2,204 2,225 2,189 (21) (0.9) 15 0.7
Net interest income 10,390 10,055 8,987 335 3.3 1,403 15.6
Provision for loan losses 250 200 200 50 25.0 50 25.0
Net interest income after provision for loan losses 10,140 9,855 8,787 285 2.9 1,353 15.4
NONINTEREST INCOME
Branch fee income 331 329 333 2 0.6 (2) (0.6)
Service and loan fee income 407 224 255 183 81.7 152 59.6
Gain on sale of SBA loans held for sale, net 485 515 308 (30) (5.8) 177 57.5
Gain on sale of mortgage loans, net 637 702 715 (65) (9.3) (78) (10.9)
BOLI income 88 94 94 (6) (6.4) (6) (6.4)
Net security gains - 238 94 (238) (100.0) (94) (100.0)
Other income 256 271 217 (15) (5.5) 39 18.0
Total noninterest income 2,204 2,373 2,016 (169) (7.1) 188 9.3
NONINTEREST EXPENSE
Compensation and benefits 4,095 3,822 3,549 273 7.1 546 15.4
Occupancy 600 618 618 (18) (2.9) (18) (2.9)
Processing and communications 604 648 644 (44) (6.8) (40) (6.2)
Furniture and equipment 511 453 420 58 12.8 91 21.7
Professional services 226 266 255 (40) (15.0) (29) (11.4)
Loan collections & OREO expenses 341 387 72 (46) (11.9) 269 373.6
Other loan expenses 83 32 104 51 159.4 (21) (20.2)
Deposit insurance 76 220 160 (144) (65.5) (84) (52.5)
Advertising 236 247 241 (11) (4.5) (5) (2.1)
Director fees 197 144 135 53 36.8 62 45.9
Other expenses 471 466 409 5 1.1 62 15.2
Total noninterest expense 7,440 7,303 6,607 137 1.9 833 12.6
Income before provision for income taxes 4,904 4,925 4,196 (21) (0.4) 708 16.9
Provision for income taxes 1,712 1,765 1,464 (53) (3.0) 248 16.9
Net income before gain on subordinated debenture $ 3,192 $ 3,160 $ 2,732 $ 32 1.0%$ 460 16.8%
Gain on subordinated debenture, net of tax - - 1,473 - NM (1,473) NM
Net income $ 3,192 $ 3,160 $ 4,205 $ 32 1.0%$ (1,013) (24.1)%
Effective tax rate 34.9 % 35.8% 34.9%
Net income per:
Common share - basic $ 0.30 $ 0.33 $ 0.45
Common share - diluted $ 0.30 $ 0.32 $ 0.44
Weighted average common shares outstanding - Basic 10,509 9,700 9,304
Weighted average common shares outstanding - Diluted 10,705 9,878 9,550


UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
March 31, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
March 31, 2017 December 31, 2016
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits $77,943 $129 0.67 %$73,087 $79 0.43%
FHLB stock 5,776 93 6.53 5,773 71 4.89
Securities:
Taxable 64,148 491 3.10 58,622 452 3.07
Tax-exempt 6,443 67 4.22 6,420 67 4.15
Total securities (A) 70,591 558 3.21 65,042 519 3.17
Loans:
SBA loans 57,960 854 5.98 59,519 850 5.68
SBA 504 loans 26,050 301 4.69 25,498 306 4.77
Commercial loans 512,543 6,166 4.88 504,331 6,226 4.91
Residential mortgage loans 297,203 3,384 4.62 289,028 3,188 4.39
Consumer loans 94,217 1,132 4.87 90,549 1,064 4.67
Total loans (B) 987,973 11,837 4.86 968,925 11,634 4.78
Total interest-earning assets $1,142,283 $12,617 4.48 %$1,112,827 $12,303 4.40%
Noninterest-earning assets:
Cash and due from banks 23,578 24,851
Allowance for loan losses (12,785) (12,819)
Other assets 55,493 53,614
Total noninterest-earning assets 66,286 65,646
Total assets $1,208,569 $1,178,473
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $152,392 $153 0.41 %$142,872 $147 0.41%
Total savings deposits 378,439 583 0.62 361,379 537 0.59
Total time deposits 222,307 804 1.47 230,594 845 1.46
Total interest-bearing deposits 753,138 1,540 0.83 734,845 1,529 0.83
Borrowed funds and subordinated debentures 125,499 664 2.15 125,440 696 2.21
Total interest-bearing liabilities $878,637 $2,204 1.02 %$860,285 $2,225 1.03%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 215,405 218,216
Other liabilities 6,792 6,631
Total noninterest-bearing liabilities 222,197 224,847
Total shareholders' equity 107,735 93,341
Total liabilities and shareholders' equity $1,208,569 $1,178,473
Net interest spread $10,413 3.46 % $10,078 3.37%
Tax-equivalent basis adjustment (23) (23)
Net interest income $10,390 $10,055
Net interest margin 3.70 % 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, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
March 31, 2017 March 31, 2016
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits $77,943 $129 0.67 %$78,681 $44 0.22%
FHLB stock 5,776 93 6.53 4,549 52 4.60
Securities:
Taxable 64,148 491 3.10 59,152 363 2.47
Tax-exempt 6,443 67 4.22 9,548 94 3.96
Total securities (A) 70,591 558 3.21 68,700 457 2.68
Loans:
SBA loans 57,960 854 5.98 53,942 721 5.38
SBA 504 loans 26,050 301 4.69 29,232 385 5.30
Commercial loans 512,543 6,166 4.88 463,927 5,676 4.92
Residential mortgage loans 297,203 3,384 4.62 264,208 2,942 4.48
Consumer loans 94,217 1,132 4.87 78,328 931 4.78
Total loans (B) 987,973 11,837 4.86 889,637 10,655 4.82
Total interest-earning assets $1,142,283 $12,617 4.48 %$1,041,567 $11,208 4.33%
Noninterest-earning assets:
Cash and due from banks 23,578 27,006
Allowance for loan losses (12,785) (12,926)
Other assets 55,493 45,486
Total noninterest-earning assets 66,286 59,566
Total assets $1,208,569 $1,101,133
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $152,392 $153 0.41 %$131,339 $137 0.42%
Total savings deposits 378,439 583 0.62 310,251 366 0.47
Total time deposits 222,307 804 1.47 282,110 951 1.36
Total interest-bearing deposits 753,138 1,540 0.83 723,700 1,454 0.81
Borrowed funds and subordinated debentures 125,499 664 2.15 104,350 735 2.83
Total interest-bearing liabilities $878,637 $2,204 1.02 %$828,050 $2,189 1.06%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 215,405 187,226
Other liabilities 6,792 5,528
Total noninterest-bearing liabilities 222,197 192,754
Total shareholders' equity 107,735 80,329
Total liabilities and shareholders' equity $1,208,569 $1,101,133
Net interest spread $10,413 3.46 % $9,019 3.27%
Tax-equivalent basis adjustment (23) (32)
Net interest income $10,390 $8,987
Net interest margin 3.70 % 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.
QUARTERLY ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES
March 31, 2017
Amounts in thousands, except percentages Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016 Mar. 31, 2016
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period $12,579 $12,685 $12,758 $12,634 $12,759
Provision for loan losses charged to expense 250 200 420 400 200
12,829 12,885 13,178 13,034 12,959
Less: Chargeoffs
SBA loans 109 189 140 142 86
Commercial loans 76 19 376 152 228
Residential mortgage loans - 101 - - -
Consumer loans 66 2 - - 28
Total chargeoffs 251 311 516 294 342
Add: Recoveries
SBA loans 37 1 17 4 11
Commercial loans 53 4 6 13 6
Residential mortgage loans 12 - - - -
Consumer loans 1 - - 1 -
Total recoveries 103 5 23 18 17
Net chargeoffs (recoveries) 148 306 493 276 325
Balance, end of period $12,681 $12,579 $12,685 $12,758 $12,634
LOAN QUALITY INFORMATION:
Nonperforming loans (1) $7,758 $7,237 $6,527 $6,541 $6,887
Other real estate owned ("OREO") 1,172 1,050 1,703 1,702 1,417
Nonperforming assets 8,930 8,287 8,230 8,243 8,304
Less: Amount guaranteed by SBA 60 60 624 134 243
Net nonperforming assets $8,870 $8,227 $7,606 $8,109 $8,061
Loans 90 days past due & still accruing $ - $ - $ - $485 $ -
Performing Troubled Debt Restructurings (TDRs) $ - $ - $665 $772 $844
(1) Nonperforming TDRs included in nonperforming loans - 153 154 161 293
Total TDRs $ - $153 $819 $933 $1,137
Allowance for loan losses to:
Total loans at quarter end 1.27 % 1.29% 1.34% 1.39% 1.42%
Nonperforming loans (1) 163.46 173.82 194.35 195.05 183.45
Nonperforming assets 142.00 151.79 154.13 154.77 152.14
Net nonperforming assets 142.97 152.90 166.78 157.33 156.73
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans 0.50 % 1.26% 0.86% 0.98% 0.56%
Commercial loans 0.02 0.01 0.30 0.12 0.19
Residential mortgage loans (0.02) 0.14 - - -
Consumer loans 0.28 0.01 - - 0.14
Total loans 0.06 % 0.13% 0.21% 0.12% 0.15%
Nonperforming loans to total loans 0.78 % 0.74% 0.69% 0.71% 0.78%
Nonperforming loans and TDRs to total loans 0.78 0.74 0.76 0.80 0.87
Nonperforming assets to total loans and OREO 0.89 0.85 0.86 0.90 0.93
Nonperforming assets to total assets 0.73 0.70 0.71 0.73 0.74


UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
NON-GAAP
March 31, 2017
(In thousands, except percentages and per share amounts) Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016 Mar. 31, 2016
SUMMARY OF INCOME:
Total interest income $12,594 $12,280 $12,081 $11,487 $11,176
Total interest expense 2,204 2,225 2,208 2,145 2,189
Net interest income 10,390 10,055 9,873 9,342 8,987
Provision for loan losses 250 200 420 400 200
Net interest income after provision for loan losses 10,140 9,855 9,453 8,942 8,787
Total noninterest income 2,204 2,373 2,173 2,234 2,016
Total noninterest expense 7,440 7,303 6,993 6,728 6,607
Income before provision for income taxes and gain on subordinated debenture 4,904 4,925 4,633 4,448 4,196
Provision for income taxes 1,712 1,765 1,613 1,624 1,464
Net income before gain on subordinated debenture $3,192 $3,160 $3,020 $2,824 $2,732
Gain on subordinated debenture, net of tax - - - - 1,473
Net income $3,192 $3,160 $3,020 $2,824 $4,205
Net income per common share - Basic $ 0.30 $ 0.33 $ 0.32 $ 0.30 $ 0.45
Net income per common share - Diluted $ 0.30 $ 0.32 $ 0.32 $ 0.30 $ 0.44
COMMON SHARE DATA:
Market price per share $ 16.95 $ 15.70 $ 12.82 $ 11.56 $ 10.34
Dividends paid $ 0.05 $ 0.05 $ 0.05 $ 0.04 $ 0.04
Book value per common share $ 10.38 $ 10.14 $ 9.45 $ 9.10 $ 8.83
Weighted average common shares outstanding - Basic 10,509 9,700 9,339 9,318 9,304
Weighted average common shares outstanding - Diluted 10,705 9,878 9,496 9,468 9,550
Issued and outstanding common shares 10,535 10,477 9,331 9,336 9,315
PERFORMANCE RATIOS (Annualized):
Return on average assets 1.07 % 1.07% 1.05% 1.03% 1.54%
Return on average equity 12.02 13.47 13.90 13.59 21.05
Efficiency ratio 59.08 59.90 58.11 58.53 50.16
BALANCE SHEET DATA:
Total assets $1,226,168 $1,189,906 $1,152,896 $1,128,370 $1,120,955
Total deposits 980,703 945,723 933,320 912,198 926,819
Total loans 1,000,677 973,414 949,832 915,043 886,990
Total securities 73,022 61,547 72,360 73,994 66,729
Total shareholders' equity 109,305 106,291 88,152 84,967 82,276
Allowance for loan losses (12,681) (12,579) (12,685) (12,758) (12,634)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets 4.48 % 4.40% 4.45% 4.44% 4.33%
Interest-bearing liabilities 1.02 1.03 1.04 1.05 1.06
Net interest spread 3.46 3.37 3.41 3.39 3.27
Net interest margin 3.70 3.60 3.63 3.61 3.48
CREDIT QUALITY:
Nonperforming assets 8,930 8,287 8,230 8,243 8,304
QTD net chargeoffs (annualized) to QTD average loans 0.06 % 0.13% 0.21% 0.12% 0.15%
Allowance for loan losses to total loans 1.27 1.29 1.34 1.39 1.42
Nonperforming assets to total loans and OREO 0.89 0.85 0.86 0.90 0.93
Nonperforming assets to total assets 0.73 0.70 0.71 0.73 0.74
CAPITAL RATIOS AND OTHER:
Total equity to total assets 8.91 % 8.93% 7.65% 7.53% 7.34%
Leverage ratio 9.72 9.73 8.49 8.52 8.31
Common equity tier 1 risk-based capital ratio 11.46 11.49 9.63 9.70 9.77
Tier 1 risk-based capital ratio 12.53 12.58 10.74 10.85 10.97
Total risk-based capital ratio 13.78 13.84 11.48 12.11 12.22
Number of banking offices 17 17 15 15 15
Number of ATMs 18 18 16 16 16
Number of employees 181 184 180 172 172

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

Source:Unity Bancorp, Inc.