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Unity Bancorp Reports 22.0% Increase in Quarterly Net Income

CLINTON, N.J., July 25, 2017 (GLOBE NEWSWIRE) -- Unity Bancorp, Inc. (NASDAQ:UNTY), parent company of Unity Bank, reported a 22.0% increase in quarterly earnings and a 19.4% increase in year-to-date earnings. The year-to-date results exclude the effect of a nonrecurring gain during the prior year’s period. Contributing factors included strong loan and deposit growth, increased net interest income and expanded net interest margins.

Net income for the three months ended June 30, 2017 was $3.4 million, or $0.32 per diluted share, a 22.0 percent increase compared to net income of $2.8 million, or $0.30 per diluted share, for the three months ended June 30, 2016. Return on average assets and average common equity for the quarter were 1.11% and 12.47%, respectively, compared to 1.03% and 13.59% for the same period a year ago.

Year-to-date net income was $6.6 million, or $0.62 per diluted share, for the six months ended June 30, 2017. Year-to-date net income, excluding the nonrecurring gain on the repurchase of subordinated debentures, was $5.6 million, or $0.59 per diluted share, for the same period a year ago. Current year-to-date net income represents a 19.4% increase over the prior year’s year-to-date net income excluding the nonrecurring gain. Return on average assets and average common equity for the period were 1.09% and 12.25%, respectively, compared to 1.01% and 13.63% for the same period a year ago.

In February 2016, 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 six months ended June 30, 2017 declined 5.6% compared to the prior year period net income, which included the nonrecurring gain on the repurchase of subordinated debentures, of $7.0 million or $0.74 per diluted share. Return on average assets and average common equity for the six months ended June 30, 2017 was 1.09% and 12.25%, respectively compared to 1.28% and 17.25% for the prior year period, including the nonrecurring gain.

Second quarter highlights included:

  • 7.5% loan growth from year-end: 15.4% increase in consumer loans, 9.1% increase in residential mortgage loans and 7.1% increase in commercial loans.
  • 6.2% deposit growth: 11.1% increase in savings deposits and 7.7% increase in noninterest-bearing demand deposits.
  • Net interest income increased 19.4% to $11.2 million compared to the prior year’s quarter due to earning asset growth and improved margins.
  • Net interest margin increased to 3.79% this quarter compared to 3.61% in the prior year’s quarter due to strong loan growth and the benefit of a rising rate environment.
  • Credit quality continues to improve. Nonperforming loans fell 21.5% to $5.7 million.

“We had another quarter of record earnings,” stated James A. Hughes, President and CEO. “Loan and deposit growth remains extremely robust and I expect that to continue for the remainder of this year. Our newest branches add geographic presence and situational opportunity to our growth plans and are ahead of our projections. We are actively looking for new branch opportunities, and we feel confident that we can continue to expand our franchise while we grow our profitability. Our balance sheet is well positioned and has benefited from the increase in interest rates.”

Net Interest Income

Net interest income, our core driver of earnings, increased $1.8 million to $11.2 million for the quarter ended June 30, 2017 compared to the prior year’s quarter. In addition, the net interest margin expanded 18 basis points to 3.79%, compared to 3.61% for the prior year’s quarter. For the six months ended June 30, 2017, net interest income increased $3.2 million to $21.5 million, and the net interest margin expanded 20 basis points to 3.75%. Each period benefited from strong loan growth and the rising interest rate environment. We expect continued improvement in our net interest margin due to rising rates.

The yield on earning assets increased 14 basis points to 4.58% for the quarter ended June 30, 2017 compared to 4.44% 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 $58.1 million, average residential mortgage loans have increased $47.1 million and consumer loans increased $18.6 million compared to the second quarter in 2016. Our loan growth was somewhat mitigated by unusually high levels of payoffs.

The cost of interest-bearing liabilities fell 2 basis points to 1.03% for the quarter ended June 30, 2017. While the cost of deposits increased 3 basis points to 0.85%, the cost of borrowed funds and subordinated debentures decreased 46 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 $400 thousand for each of the quarters ended June 30, 2017 and June 30, 2016. Year-to-date the provision for loan losses increased $50 thousand to $650 thousand for the six months ended June 30, 2017. Quarterly net charge-offs were flat at $281 thousand and $276 thousand for each quarter, respectively. Year-to-date charge-offs declined $172 thousand to $429 thousand for the six months ended June 30, 2017.

Noninterest Income

Noninterest income decreased $213 thousand to $2.0 million for the three months ended June 30, 2017, compared to the same period last year due to a lower volume of sales of both mortgage and SBA loans. Year-to-date noninterest income remained relatively flat at $4.2 million for the six month period.

Quarterly gains on the sale of mortgage loans declined $329 thousand and year-to-date gains dropped $512 thousand due to lower sales volumes in each period. The decline in sales was a result of management electing to hold more residential loans in portfolio for long term investment. Mortgage loan sale volume totaled $16.7 million for the three months ended June 30, 2017 compared to $26.0 million in sales in the prior year’s period. Year-to-date, mortgage loan sales volume totaled $42.3 million and $51.1 million for the periods ended June 30, 2017 and 2016, respectively.

Gains on the sale of SBA loans decreased due to a lower volume of loan sales this quarter compared with the prior year’s quarter. SBA loan sales totaled $5.3 million with net gains on sale of $479 thousand for the quarter ended June 30, 2017, compared to $7.2 million in sales and a net gain of $637 thousand in the prior year’s quarter. Year-to-date, gains on the sale of $11.3 million in SBA loans were $963 thousand compared to $945 thousand on $10.6 million sold in the prior year-to-date period.

Other notable items included branch fee income and service and loan income. Branch fee income increased in the quarterly and year-to-date periods due to increased fees from commercial checking accounts and overdraft fees. Service and loan fee income increased $245 thousand and $502 thousand in the quarterly and year-to-date periods, respectively due to loan payoff fees and processing fees.

Noninterest Expense

Noninterest expense increased $693 thousand, or 10.3%, to $7.4 million for the quarter and increased $1.5 million, or 11.4%, to $14.9 million for the six month period ended June 30, 2017. These increases are attributed to costs of expanding our retail and lending network, such as compensation and occupancy expenses. Notable items for the periods include:

  • Compensation and benefits expense increased $590 thousand to $4.3 million for the three months ended June 30, 2017 and increased $1.1 million to $8.4 million for the six months ended June 30, 2017. Compensation and benefit expenses have risen in each of these periods due to the addition of two new retail branches, additional lending and operational staff.
  • Occupancy expenses increased $77 thousand for the quarter and $59 thousand year-to-date due to the addition of two new retail branches.
  • Furniture and equipment expense increased $118 thousand and $209 thousand for the quarter and year-to-date periods, respectively due to continued investment in technology in the form of equipment, network maintenance and software.
  • Year-to-date, loan collection and OREO expenses increased as the result of a $253 thousand loss on the sale of an OREO property in the first quarter of 2017.
  • Deposit insurance expense declined for the quarter and year-to-date period as our assessment rate dropped as a result of the capital raise in December 2016.

Financial Condition

At June 30, 2017, total assets were $1.3 billion, an increase of $85.6 million from year-end 2016:

  • Total securities increased $13.5 million due to purchases of $25.7 million during the period.
  • Total loans increased $73.4 million or 7.5%, from year-end 2016 to $1.0 billion at June 30, 2017. Commercial, residential mortgage and consumer loan portfolios increased $36.1 million, $26.3 million and $14.1 million, respectively. SBA loans declined on sales of $11.3 million. Our pipeline in all categories remains strong and loan growth is expected in future quarters.
  • Total deposits increased $58.2 million or 6.2%, to $1.0 billion at June 30, 2017. Savings deposits and noninterest-bearing demand deposits have increased $40.3 million and $16.6 million, respectively.
  • Borrowed funds increased $21.0 million to $142.0 million at June 30, 2017 due to increased overnight borrowings.
  • Shareholders’ equity was $112.4 million at June 30, 2017, an increase of $6.2 million from year-end 2016, due to retained net income.
  • Book value per common share was $10.64 as of June 30, 2017.
  • At June 30, 2017, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 9.66%, 11.32%, 12.34% and 13.59% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

  • Nonperforming assets totaled $6.3 million at June 30, 2017, or 0.60% of total loans and OREO, compared to $8.3 million or 0.85% of total loans and OREO at year-end 2016.
  • The allowance for loan losses totaled $12.8 million at June 30, 2017, or 1.22% of total loans compared to $12.8 million and 1.39% at June 30, 2016.
  • Net charge-offs were $281 thousand for the three months ended June 30, 2017, compared to $276 thousand for the same period a year ago. Year-to-date net charge-offs were $429 thousand compared to $601 thousand for the prior year’s period.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.3 billion in assets and $1.0 billion 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
June 30, 2017
June 30, 2017 vs.
March 31, 2017 June 30, 2016
(In thousands, except percentages and per share amounts) June 30, 2017 March 31, 2017 June 30, 2016 % %
BALANCE SHEET DATA:
Total assets $ 1,275,517 $1,226,168 $1,128,370 4.0 %13.0 %
Total deposits 1,003,967 980,703 912,198 2.4 10.1
Total loans 1,046,804 1,000,677 915,043 4.6 14.4
Total securities 75,066 73,022 73,994 2.8 1.4
Total shareholders' equity 112,447 109,305 84,967 2.9 32.3
Allowance for loan losses (12,800) (12,681) (12,758) (0.9) 0.3
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes $ 5,350 $4,904 $4,448 9.1 20.3
Provision for income taxes 1,906 1,712 1,624 11.3 17.4
Net income before gain on subordinated debenture $ 3,444 $3,192 $2,824 7.9 22.0
Net income per:
Common share - basic $ 0.33 $0.30 $0.30 10.0 10.0
Common share - diluted $ 0.32 $0.30 $0.30 6.7 6.7
Performance ratios:
Return on average assets 1.11 % 1.07 % 1.03 % 3.7 7.8
Return on average equity 12.47 % 12.02 % 13.59 % 3.7 (8.2)
Efficiency ratio 56.41 % 59.08 % 58.53 % (4.5) (3.6)
Net interest margin 3.79 % 3.70 % 3.61 % 2.4 5.0
FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes and gain on subordinated debenture $ 10,254 $8,643 18.6
Provision for income taxes 3,618 3,087 17.2
Net income before gain on subordinated debenture $ 6,636 $5,556 19.4
Gain on subordinated debenture, net of tax - 1,473 NM
Net income $ 6,636 $7,029 (5.6)
Net income before gain on subordinated debenture per:
Common share - basic $ 0.63 $0.60 5.0
Common share - diluted $ 0.62 $0.59 5.1
Net income per:
Common share - basic $ 0.63 $0.75 (16.0)
Common share - diluted $ 0.62 $0.74 (16.2)
Net income before gain on subordinated debenture performance ratios:
Return on average assets 1.09 % 1.01 % (14.8)
Return on average equity 12.25 % 13.63 % (29.0)
Efficiency ratio 57.71 % 59.53 % 6.8
Performance ratios:
Return on average assets 1.09 % 1.28 % (14.8)
Return on average equity 12.25 % 17.25 % (29.0)
Efficiency ratio 57.71 % 54.06 % 6.8
Net interest margin 3.75 % 3.55 % 5.6
SHARE INFORMATION:
Market price per share $ 17.20 $16.95 $11.56 1.5 48.8
Dividends paid quarterly $ 0.06 $0.05 $0.04 0.2 0.5
Book value per common share $ 10.64 $10.38 $9.10 2.5 16.9
Average diluted shares outstanding (QTD) 10,735 10,705 9,468 0.3 13.4
CAPITAL RATIOS:
Total equity to total assets 8.82 % 8.91 % 7.53 % (1.0) 17.1
Leverage ratio 9.66 % 9.72 % 8.52 % (0.6) 13.4
Common equity tier 1 risk-based capital ratio 11.32 % 11.46 % 9.70 % (1.2) 16.7
Tier 1 risk-based capital ratio 12.34 % 12.53 % 10.85 % (1.5) 13.7
Total risk-based capital ratio 13.59 % 13.78 % 12.11 % (1.4) 12.2
CREDIT QUALITY AND RATIOS:
Nonperforming assets $ 6,262 $8,930 $8,243 (29.9) (24.0)
QTD net chargeoffs (annualized) to QTD average loans 0.11 % 0.06 % 0.12 % 83.3 (8.3)
Allowance for loan losses to total loans 1.22 % 1.27 % 1.39 % (3.9) (12.2)
Nonperforming assets to total loans and OREO 0.60 % 0.89 % 0.90 % (32.6) (33.3)
Nonperforming assets to total assets 0.49 % 0.73 % 0.73 % (32.9)%(32.9)%
All share information has been adjusted for the 10% stock dividend paid September 30, 2016


UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2017
June 30, 2017 vs.
December 31, 2016 June 30, 2016
(In thousands, except percentages) June 30, 2017 December 31, 2016 June 30, 2016 % %
ASSETS
Cash and due from banks $ 21,745 $22,105 $20,169 (1.6)%7.8 %
Fed funds, interest bearing deposits and repos 83,070 83,790 75,908 (0.9) 9.4
Cash and cash equivalents 104,815 105,895 96,077 (1.0) 9.1
Securities:
Securities available for sale 54,825 40,568 45,266 35.1 21.1
Securities held to maturity 20,241 20,979 28,728 (3.5) (29.5)
Total securities 75,066 61,547 73,994 22.0 1.4
Loans:
SBA loans held for sale 13,950 14,773 13,245 (5.6) 5.3
SBA loans held for investment 43,329 42,492 40,006 2.0 8.3
SBA 504 loans 23,153 26,344 27,038 (12.1) (14.4)
Commercial loans 545,308 509,171 481,713 7.1 13.2
Residential mortgage loans 315,396 289,093 268,774 9.1 17.3
Consumer loans 105,668 91,541 84,267 15.4 25.4
Total loans 1,046,804 973,414 915,043 7.5 14.4
Allowance for loan losses (12,800) (12,579) (12,758) 1.8 0.3
Net loans 1,034,004 960,835 902,285 7.6 14.6
Premises and equipment, net 23,134 23,398 20,397 (1.1) 13.4
Bank owned life insurance ("BOLI") 13,936 13,758 13,568 1.3 2.7
Deferred tax assets 5,617 5,512 6,223 1.9 (9.7)
Federal Home Loan Bank ("FHLB") stock 7,101 6,037 5,092 17.6 39.5
Accrued interest receivable 4,669 4,462 3,953 4.6 18.1
Other real estate owned ("OREO") 581 1,050 1,702 (44.7) (65.9)
Goodwill and other intangibles 1,516 1,516 1,516 - -
Other assets 5,078 5,896 3,563 (13.9) 42.5
Total assets $ 1,275,517 $1,189,906 $1,128,370 7.2 %13.0 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $ 232,545 $215,963 $210,024 7.7 %10.7 %
Interest-bearing demand 149,703 145,654 117,189 2.8 27.7
Savings 403,722 363,462 318,184 11.1 26.9
Time, under $100,000 123,225 123,724 144,394 (0.4) (14.7)
Time, $100,000 and over, under $250,000 72,926 75,567 91,770 (3.5) (20.5)
Time, $250,000 and over 21,846 21,353 30,637 2.3 (28.7)
Total deposits 1,003,967 945,723 912,198 6.2 10.1
Borrowed funds 142,000 121,000 114,000 17.4 24.6
Subordinated debentures 10,310 10,310 10,310 - -
Accrued interest payable 410 430 368 (4.7) 11.4
Accrued expenses and other liabilities 6,383 6,152 6,527 3.8 (2.2)
Total liabilities 1,163,070 1,083,615 1,043,403 7.3 11.5
Shareholders' equity:
Common stock 86,112 85,383 59,844 0.9 43.9
Retained earnings 26,137 20,748 25,916 26.0 0.9
Accumulated other comprehensive income (loss) 198 160 (793) NM NM
Total shareholders' equity 112,447 106,291 84,967 5.8 32.3
Total liabilities and shareholders' equity $ 1,275,517 $1,189,906 $1,128,370 7.2 %13.0 %
Issued and outstanding common shares 10,567 10,477 9,336
NM=Not meaningful


UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
June 30, 2017
June 30, 2017 vs.
For the three months ended March 31, 2017 June 30, 2016
(In thousands, except percentages and per share amounts) June 30, 2017 March 31, 2017 June 30, 2016 $ % $ %
INTEREST INCOME
Fed funds, interest bearing deposits and repos $ 203 $129 $41 $74 57.4 %$162 395.1 %
FHLB stock 73 93 55 (20) (21.5) 18 32.7
Securities:
Taxable 538 491 427 47 9.6 111 26.0
Tax-exempt 44 44 55 - - (11) (20.0)
Total securities 582 535 482 47 8.8 100 20.7
Loans:
SBA loans 886 854 788 32 3.7 98 12.4
SBA 504 loans 309 301 344 8 2.7 (35) (10.2)
Commercial loans 6,573 6,166 5,860 407 6.6 713 12.2
Residential mortgage loans 3,584 3,384 2,937 200 5.9 647 22.0
Consumer loans 1,267 1,132 980 135 11.9 287 29.3
Total loans 12,619 11,837 10,909 782 6.6 1,710 15.7
Total interest income 13,477 12,594 11,487 883 7.0 1,990 17.3
INTEREST EXPENSE
Interest-bearing demand deposits 161 153 124 8 5.2 37 29.8
Savings deposits 678 583 381 95 16.3 297 78.0
Time deposits 814 804 954 10 1.2 (140) (14.7)
Borrowed funds and subordinated debentures 674 664 686 10 1.5 (12) (1.7)
Total interest expense 2,327 2,204 2,145 123 5.6 182 8.5
Net interest income 11,150 10,390 9,342 760 7.3 1,808 19.4
Provision for loan losses 400 250 400 150 60.0 - -
Net interest income after provision for loan losses 10,750 10,140 8,942 610 6.0 1,808 20.2
NONINTEREST INCOME
Branch fee income 344 331 286 13 3.9 58 20.3
Service and loan fee income 512 512 267 - - 245 91.8
Gain on sale of SBA loans held for sale, net 479 485 637 (6) (1.2) (158) (24.8)
Gain on sale of mortgage loans, net 264 531 593 (267) (50.3) (329) (55.5)
BOLI income 89 88 93 1 1.1 (4) (4.3)
Net security gains 16 - 81 16 100.0 (65) (80.2)
Other income 317 257 277 60 23.3 40 14.4
Total noninterest income 2,021 2,204 2,234 (183) (8.3) (213) (9.5)
NONINTEREST EXPENSE
Compensation and benefits 4,299 4,095 3,709 204 5.0 590 15.9
Occupancy 590 600 513 (10) (1.7) 77 15.0
Processing and communications 632 604 643 28 4.6 (11) (1.7)
Furniture and equipment 513 511 395 2 0.4 118 29.9
Professional services 251 226 239 25 11.1 12 5.0
Loan collection & OREO expenses 38 341 100 (303) (88.9) (62) (62.0)
Other loan expenses 18 83 (2) (65) (78.3) 20 1,000.0
Deposit insurance 144 76 165 68 89.5 (21) (12.7)
Advertising 323 236 303 87 36.9 20 6.6
Director fees 149 197 139 (48) (24.4) 10 7.2
Other expenses 464 471 524 (7) (1.5) (60) (11.5)
Total noninterest expense 7,421 7,440 6,728 (19) (0.3) 693 10.3
Income before provision for income taxes 5,350 4,904 4,448 446 9.1 902 20.3
Provision for income taxes 1,906 1,712 1,624 194 11.3 282 17.4
Net income $ 3,444 $3,192 $2,824 $252 7.9 %$620 22.0 %
Effective tax rate 35.6 %34.9% 36.5 %
Net income per common share - Basic $ 0.33 $0.30 $0.30
Net income per common share - Diluted $ 0.32 $0.30 $0.30
Weighted average common shares outstanding - Basic 10,546 10,509 9,318
Weighted average common shares outstanding - Diluted 10,735 10,705 9,468

UNITY BANCORP, INC.
YTD CONSOLIDATED STATEMENTS OF INCOME
NON-GAAP
June 30, 2017
For the six months ended June 30, Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts) 2017 2016 $ %
INTEREST INCOME
Fed funds, interest bearing deposits and repos $ 332 $85 $247 290.6 %
FHLB stock 166 107 59 55.1
Securities:
Taxable 1,030 791 239 30.2
Tax-exempt 88 117 (29) (24.8)
Total securities 1,118 908 210 23.1
Loans:
SBA loans 1,739 1,509 230 15.2
SBA 504 loans 610 729 (119) (16.3)
Commercial loans 12,740 11,538 1,202 10.4
Residential mortgage loans 6,967 5,878 1,089 18.5
Consumer loans 2,400 1,911 489 25.6
Total loans 24,456 21,565 2,891 13.4
Total interest income 26,072 22,665 3,407 15.0
INTEREST EXPENSE
Interest-bearing demand deposits 314 261 53 20.3
Savings deposits 1,261 748 513 68.6
Time deposits 1,618 1,904 (286) (15.0)
Borrowed funds and subordinated debentures 1,338 1,421 (83) (5.8)
Total interest expense 4,531 4,334 197 4.5
Net interest income 21,541 18,331 3,210 17.5
Provision for loan losses 650 600 50 8.3
Net interest income after provision for loan losses 20,891 17,731 3,160 17.8
NONINTEREST INCOME
Branch fee income 675 619 56 9.0
Service and loan fee income 1,024 522 502 96.2
Gain on sale of SBA loans held for sale, net 963 945 18 1.9
Gain on sale of mortgage loans, net 796 1,308 (512) (39.1)
BOLI income 178 187 (9) (4.8)
Net security gains 16 175 (159) (90.9)
Other income 573 494 79 16.0
Total noninterest income 4,225 4,250 (25) (0.6)
NONINTEREST EXPENSE
Compensation and benefits 8,394 7,258 1,136 15.7
Occupancy 1,190 1,131 59 5.2
Processing and communications 1,236 1,287 (51) (4.0)
Furniture and equipment 1,024 815 209 25.6
Professional services 477 494 (17) (3.4)
Loan collection & OREO expenses 379 172 207 120.3
Other loan expenses 102 101 1 1.0
Deposit insurance 220 326 (106) (32.5)
Advertising 560 544 16 2.9
Director fees 346 274 72 26.3
Other expenses 934 936 (2) (0.2)
Total noninterest expense 14,862 13,338 1,524 11.4
Income before provision for income taxes and gain on subordinated debenture 10,254 8,643 1,611 18.6
Provision for income taxes 3,618 3,087 531 17.2
Net income before gain on subordinated debenture 6,636 5,556 1,080 19.4
Gain on subordinated debenture, net of tax - 1,473 (1,473) (100.0)
Net income $ 6,636 $7,029 $(393) (5.6)%
Effective tax rate 35.3 % 35.6%
Net income before gain on subordinated debenture per:
Common share - basic $0.63 $0.60
Common share - diluted $0.62 $0.59
Net income per:
Common share - basic $0.63 $0.75
Common share - diluted $0.62 $0.74
Weighted average common shares outstanding - Basic 10,528 9,311
Weighted average common shares outstanding - Diluted 10,720 9,456

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
June 30, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
June 30, 2017 March 31, 2017
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Fed funds, interest bearing deposits and repos $76,656 $203 1.06 %$77,943 $129 0.67%
FHLB stock 5,912 73 4.95 5,776 93 6.53
Securities:
Taxable 67,102 538 3.22 64,148 491 3.10
Tax-exempt 6,764 67 3.97 6,443 67 4.22
Total securities (A) 73,866 605 3.29 70,591 558 3.21
Loans:
SBA loans 55,650 886 6.39 57,960 854 5.98
SBA 504 loans 23,986 309 5.17 26,050 301 4.69
Commercial loans 532,659 6,573 4.95 512,543 6,166 4.88
Residential mortgage loans 311,730 3,584 4.61 297,203 3,384 4.62
Consumer loans 100,889 1,267 5.04 94,217 1,132 4.87
Total loans (B) 1,024,914 12,619 4.94 987,973 11,837 4.86
Total interest-earning assets $1,181,348 $13,500 4.58 %$1,142,283 $12,617 4.48%
Noninterest-earning assets:
Cash and due from banks 23,055 23,578
Allowance for loan losses (12,916) (12,785)
Other assets 55,367 55,493
Total noninterest-earning assets 65,506 66,286
Total assets $1,246,854 $1,208,569
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $157,896 $161 0.41 %$152,392 $153 0.41%
Total savings deposits 397,813 678 0.68 378,439 583 0.62
Total time deposits 221,636 814 1.47 222,307 804 1.47
Total interest-bearing deposits 777,345 1,653 0.85 753,138 1,540 0.83
Borrowed funds and subordinated debentures 126,057 674 2.14 125,499 664 2.15
Total interest-bearing liabilities $903,402 $2,327 1.03 %$878,637 $2,204 1.02%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 225,909 215,405
Other liabilities 6,752 6,792
Total noninterest-bearing liabilities 232,661 222,197
Total shareholders' equity 110,791 107,735
Total liabilities and shareholders' equity $1,246,854 $1,208,569
Net interest spread $11,173 3.55 % $10,413 3.46%
Tax-equivalent basis adjustment (23) (23)
Net interest income $11,150 $10,390
Net interest margin 3.79 % 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.
QUARTER TO DATE NET INTEREST MARGIN
June 30, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
June 30, 2017 June 30, 2016
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Fed funds, interest bearing deposits and repos $76,656 $203 1.06 %$62,652 $41 0.26%
FHLB stock 5,912 73 4.95 4,904 55 4.51
Securities:
Taxable 67,102 538 3.22 62,561 427 2.75
Tax-exempt 6,764 67 3.97 8,177 83 4.08
Total securities (A) 73,866 605 3.29 70,738 510 2.90
Loans:
SBA loans 55,650 886 6.39 56,719 788 5.59
SBA 504 loans 23,986 309 5.17 27,273 344 5.07
Commercial loans 532,659 6,573 4.95 474,573 5,860 4.97
Residential mortgage loans 311,730 3,584 4.61 264,599 2,937 4.46
Consumer loans 100,889 1,267 5.04 82,295 980 4.79
Total loans (B) 1,024,914 12,619 4.94 905,459 10,909 4.85
Total interest-earning assets $1,181,348 $13,500 4.58 %$1,043,753 $11,515 4.44%
Noninterest-earning assets:
Cash and due from banks 23,055 25,993
Allowance for loan losses (12,916) (12,850)
Other assets 55,367 49,250
Total noninterest-earning assets 65,506 62,393
Total assets $1,246,854 $1,106,146
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $157,896 $161 0.41 %$129,263 $124 0.39%
Total savings deposits 397,813 678 0.68 310,329 381 0.49
Total time deposits 221,636 814 1.47 275,700 954 1.39
Total interest-bearing deposits 777,345 1,653 0.85 715,292 1,459 0.82
Borrowed funds and subordinated debentures 126,057 674 2.14 106,277 686 2.60
Total interest-bearing liabilities $903,402 $2,327 1.03 %$821,569 $2,145 1.05%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 225,909 194,649
Other liabilities 6,752 6,370
Total noninterest-bearing liabilities 232,661 201,019
Total shareholders' equity 110,791 83,558
Total liabilities and shareholders' equity $1,246,854 $1,106,146
Net interest spread $11,173 3.55 % $9,370 3.39%
Tax-equivalent basis adjustment (23) (28)
Net interest income $11,150 $9,342
Net interest margin 3.79 % 3.61%
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 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, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the six months ended
June 30, 2017 June 30, 2016
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Fed funds, interest bearing deposits and repos $77,297 $332 0.87 %$70,666 $85 0.24%
FHLB stock 5,844 166 5.73 4,726 107 4.55
Securities:
Taxable 65,635 1,030 3.16 60,856 791 2.61
Tax-exempt 6,603 132 4.03 8,863 176 3.99
Total securities (A) 72,238 1,162 3.24 69,719 967 2.79
Loans:
SBA loans 56,798 1,739 6.17 55,331 1,509 5.48
SBA 504 loans 25,012 610 4.92 28,253 729 5.19
Commercial loans 522,658 12,740 4.92 469,248 11,538 4.94
Residential mortgage loans 304,507 6,967 4.61 264,403 5,878 4.47
Consumer loans 97,571 2,400 4.96 80,312 1,911 4.79
Total loans (B) 1,006,546 24,456 4.90 897,547 21,565 4.83
Total interest-earning assets $1,161,925 $26,116 4.53 %$1,042,658 $22,724 4.38%
Noninterest-earning assets:
Cash and due from banks 23,315 26,500
Allowance for loan losses (12,851) (12,888)
Other assets 55,428 47,369
Total noninterest-earning assets 65,892 60,981
Total assets $1,227,817 $1,103,639
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $155,159 $314 0.41 %$130,301 $261 0.40%
Total savings deposits 388,179 1,261 0.66 310,290 748 0.48
Total time deposits 221,970 1,618 1.47 278,904 1,904 1.37
Total interest-bearing deposits 765,308 3,193 0.84 719,495 2,913 0.81
Borrowed funds and subordinated debentures 125,780 1,338 2.15 105,314 1,421 2.71
Total interest-bearing liabilities $891,088 $4,531 1.02 %$824,809 $4,334 1.05%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 220,686 190,938
Other liabilities 6,771 5,948
Total noninterest-bearing liabilities 227,457 196,886
Total shareholders' equity 109,272 81,944
Total liabilities and shareholders' equity $1,227,817 $1,103,639
Net interest spread $21,585 3.51 % $18,390 3.33%
Tax-equivalent basis adjustment (44) (59)
Net interest income $21,541 $18,331
Net interest margin 3.75 % 3.55%
(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, 2017
Amounts in thousands, except percentages Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period $12,681 $12,579 $12,685 $12,758 $12,634
Provision for loan losses charged to expense 400 250 200 420 400
13,081 12,829 12,885 13,178 13,034
Less: Chargeoffs
SBA loans 150 109 189 140 142
Commercial loans 120 76 19 376 152
Residential mortgage loans - - 101 - -
Consumer loans 17 66 2 - -
Total chargeoffs 287 251 311 516 294
Add: Recoveries
SBA loans 3 37 1 17 4
Commercial loans 3 53 4 6 13
Residential mortgage loans - 12 - - -
Consumer loans - 1 - - 1
Total recoveries 6 103 5 23 18
Net chargeoffs (recoveries) 281 148 306 493 276
Balance, end of period $12,800 $12,681 $12,579 $12,685 $12,758
LOAN QUALITY INFORMATION:
Nonperforming loans (1) $5,681 $7,758 $7,237 $6,527 $6,541
Other real estate owned ("OREO") 581 1,172 1,050 1,703 1,702
Nonperforming assets 6,262 8,930 8,287 8,230 8,243
Less: Amount guaranteed by SBA 41 60 60 624 134
Net nonperforming assets $6,221 $8,870 $8,227 $7,606 $8,109
Loans 90 days past due & still accruing $230 $- $- $- $485
Performing Troubled Debt Restructurings (TDRs) $ - $- $- $665 $772
(1) Nonperforming TDRs included in nonperforming loans - - 153 154 161
Total TDRs $ - $- $153 $819 $933
Allowance for loan losses to:
Total loans at quarter end 1.22 % 1.27 % 1.29% 1.34% 1.39%
Nonperforming loans (1) 225.31 163.46 173.82 194.35 195.05
Nonperforming assets 204.41 142.00 151.79 154.13 154.77
Net nonperforming assets 205.75 142.97 152.90 166.78 157.33
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans 1.06 % 0.50 % 1.26% 0.86% 0.98%
Commercial loans 0.09 0.02 0.01 0.30 0.12
Residential mortgage loans - (0.02) 0.14 - -
Consumer loans 0.07 0.28 0.01 - -
Total loans 0.11 % 0.06 % 0.13% 0.21% 0.12%
Nonperforming loans to total loans 0.54 % 0.78 % 0.74% 0.69% 0.71%
Nonperforming loans and TDRs to total loans 0.54 0.78 0.74 0.76 0.80
Nonperforming assets to total loans and OREO 0.60 0.89 0.85 0.86 0.90
Nonperforming assets to total assets 0.49 0.73 0.70 0.71 0.73


UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
June 30, 2017
(In thousands, except percentages and per share amounts) Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 Jun. 30, 2016
SUMMARY OF INCOME:
Total interest income $13,477 $12,594 $12,280 $12,081 $11,487
Total interest expense 2,327 2,204 2,225 2,208 2,145
Net interest income 11,150 10,390 10,055 9,873 9,342
Provision for loan losses 400 250 200 420 400
Net interest income after provision for loan losses 10,750 10,140 9,855 9,453 8,942
Total noninterest income 2,021 2,204 2,373 2,173 2,234
Total noninterest expense 7,421 7,440 7,303 6,993 6,728
Income before provision for income taxes 5,350 4,904 4,925 4,633 4,448
Provision for income taxes 1,906 1,712 1,765 1,613 1,624
Net income $3,444 $3,192 $3,160 $3,020 $2,824
Net income per common share - Basic $ 0.33 $0.30 $0.33 $0.32 $0.30
Net income per common share - Diluted $ 0.32 $0.30 $0.32 $0.32 $0.30
COMMON SHARE DATA:
Market price per share $ 17.20 $16.95 $15.70 $12.82 $11.56
Dividends paid $ 0.06 $0.05 $0.05 $0.05 $0.04
Book value per common share $ 10.64 $10.38 $10.14 $9.45 $9.10
Weighted average common shares outstanding - Basic 10,546 10,509 9,700 9,339 9,318
Weighted average common shares outstanding - Diluted 10,735 10,705 9,878 9,496 9,468
Issued and outstanding common shares 10,567 10,535 10,477 9,331 9,336
PERFORMANCE RATIOS (Annualized):
Return on average assets 1.11 %1.07 % 1.07 % 1.05 % 1.03 %
Return on average equity 12.47 12.02 13.47 13.90 13.59
Efficiency ratio 56.41 59.08 59.90 58.11 58.53
BALANCE SHEET DATA:
Total assets $1,275,517 $1,226,168 $1,189,906 $1,152,896 $1,128,370
Total deposits 1,003,967 980,703 945,723 933,320 912,198
Total loans 1,046,804 1,000,677 973,414 949,832 915,043
Total securities 75,066 73,022 61,547 72,360 73,994
Total shareholders' equity 112,447 109,305 106,291 88,152 84,967
Allowance for loan losses (12,800) (12,681) (12,579) (12,685) (12,758)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets 4.58 %4.48 % 4.40 % 4.45 % 4.44 %
Interest-bearing liabilities 1.03 1.02 1.03 1.04 1.05
Net interest spread 3.55 3.46 3.37 3.41 3.39
Net interest margin 3.79 3.70 3.60 3.63 3.61
CREDIT QUALITY:
Nonperforming assets $6,262 $8,930 $8,287 $8,230 $8,243
QTD net chargeoffs (annualized) to QTD average loans 0.11 %0.06 % 0.13 % 0.21 % 0.12 %
Allowance for loan losses to total loans 1.22 1.27 1.29 1.34 1.39
Nonperforming assets to total loans and OREO 0.60 0.89 0.85 0.86 0.90
Nonperforming assets to total assets 0.49 0.73 0.70 0.71 0.73
CAPITAL RATIOS AND OTHER:
Total equity to total assets 8.82 %8.91 % 8.93 % 7.65 % 7.53 %
Leverage ratio 9.66 9.72 9.73 8.49 8.52
Common equity tier 1 risk-based capital ratio 11.32 11.46 11.49 9.63 9.70
Tier 1 risk-based capital ratio 12.34 12.53 12.58 10.74 10.85
Total risk-based capital ratio 13.59 13.78 13.84 11.48 12.11
Number of banking offices 17 17 17 15 15
Number of ATMs 18 18 18 16 16
Number of employees 186 181 184 180 172


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

Source:Unity Bancorp, Inc.