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Unity Bancorp Reports 24.4% Increase in Quarterly Net Income

CLINTON, N.J., Oct. 19, 2017 (GLOBE NEWSWIRE) -- Unity Bancorp, Inc. (NASDAQ:UNTY), parent company of Unity Bank, reported a 24.4% increase in quarterly earnings and a 21.2% 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 September 30, 2017 was $3.8 million, or $0.35 per diluted share, a 24.4 percent increase compared to net income of $3.0 million, or $0.32 per diluted share, for the three months ended September 30, 2016. Return on average assets and average common equity for the quarter were 1.17% and 13.00%, respectively, compared to 1.05% and 13.90% for the same period a year ago.

Year-to-date net income was $10.4 million, or $0.97 per diluted share, for the nine months ended September 30, 2017. Year-to-date net income, excluding the nonrecurring gain on the repurchase of subordinated debentures, was $8.6 million, or $0.91 per diluted share, for the same period a year ago. Current year-to-date net income represents a 21.2% 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 nine months ended September 30, 2017 were 1.12% and 12.51%, respectively, compared to 1.03% and 13.73% for the same period a year ago, excluding the nonrecurring gain described below.

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 nine months ended September 30, 2017 increased 3.4% compared to the prior year period net income, which included the nonrecurring gain on the repurchase of subordinated debentures, of $10.0 million or $1.06 per diluted share. Return on average assets and average common equity for the nine months ended September 30, 2017 was 1.12% and 12.51%, respectively compared to 1.20% and 16.09% for the prior year period, including the 2016 nonrecurring gain.

Third quarter highlights included:

  • Announcing two new branches – Bethlehem, PA and Ramsey, NJ which will open later this year. Also, the Phillipsburg branch will be relocated.
  • Loans grew 12.3% from year-end: 19.5% increase in consumer loans, 14.4% increase in residential mortgage loans and 11.7% increase in commercial loans.
  • Deposits increased 10.4%: 19.7% increase in noninterest-bearing demand deposits, 14.3% increase in interest-bearing deposits and an 11.1% increase in savings deposits.
  • Net interest income increased 19.7% to $11.8 million compared to the prior year’s quarter due to earning asset growth and improved margins.
  • Net interest margin increased to 3.88% this quarter compared to 3.63% 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 48.3% from year-end to $3.7 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 and into 2018. We recently announced the opening of 2 branches in Bethlehem, PA and Ramsey, NJ which will add to our geographic presence in the Lehigh Valley and Bergen County markets. 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. I look forward to reporting on our future successes.”

Net Interest Income

Net interest income, our core driver of earnings, increased $1.9 million to $11.8 million for the quarter ended September 30, 2017 compared to the prior year’s quarter. In addition, the net interest margin expanded 25 basis points to 3.88%, compared to 3.63% for the prior year’s quarter. For the nine months ended September 30, 2017, net interest income increased $5.2 million to $33.4 million, and the net interest margin expanded 19 basis points to 3.79%. Each period benefited from strong loan growth and the rising interest rate environment.

The yield on earning assets increased 21 basis points to 4.66% for the quarter ended September 30, 2017 compared to 4.45% 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 $62.7 million, average residential mortgage loans have increased $45.8 million and consumer loans increased $21.3 million compared to the third quarter in 2016.

The cost of interest-bearing liabilities remained consistent at 1.04% for the quarter ended September 30, 2017. While the cost of deposits increased 3 basis points to 0.87%, the cost of borrowed funds and subordinated debentures decreased 17 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 borrowings 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 increased during the quarter and nine month periods ended September 30, 2017 despite reduced net charge-offs due to the growth in the loan portfolio. The provision for loan losses was $500 thousand and $420 thousand for each of the quarters ended September 30, 2017 and September 30, 2016, respectively. Year-to-date the provision for loan losses increased $130 thousand to $1.2 million for the nine months ended September 30, 2017 compared to the prior year period. Quarterly net charge-offs declined $306 thousand to $187 thousand from $493 thousand in the prior year’s quarter. Year-to-date charge-offs declined $478 thousand over the prior year period to $616 thousand for the nine months ended September 30, 2017.

Noninterest Income

Noninterest income decreased $165 thousand to $2.0 million for the three months ended September 30, 2017 and declined $189 thousand to $6.2 million for the nine month period ended September 30, 2017, compared to the same period last year due to a lower volume of sales of both mortgage and SBA loans.

Quarterly gains on the sale of mortgage loans declined $217 thousand and year-to-date gains declined $729 thousand compared to the prior year periods due to lower sales volumes in each period. During 2017, management elected to hold more of the residential loans it originates in portfolio for long term investment rather than sell the loans. In the nine months ended September 30, 2017, $151.5 million in mortgage loans were originated with $66.2 million being sold for a net gain of $1.2 million. By comparison, $135.1 million in mortgage loans were originated in the nine months ended September 30, 2016, of which $76.7 million were sold for a gain of $1.9 million. Mortgage loan sale volume totaled $23.8 million for the three months ended September 30, 2017 compared to $25.6 million in sales in the prior year’s period.

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 $4.3 million with net gains on sale of $385 thousand for the quarter ended September 30, 2017, compared to $7.8 million in sales and a net gain of $639 thousand in the prior year’s quarter. Year-to-date, gains on the sale of $15.7 million in SBA loans were $1.3 million compared to $1.6 million on $18.4 million in sales in the prior year-to-date period.

Other notable items included service and loan fee income which increased $174 thousand and $676 thousand in the quarterly and year-to-date periods, respectively due to loan application, servicing and payoff fees.

Noninterest Expense

Noninterest expense increased $561 thousand, or 8.0%, to $7.6 million for the quarter and increased $2.1 million, or 10.3%, to $22.4 million for the nine months ended September 30, 2017 over the prior year periods. These increases are attributed to costs of expanding our retail branch and lending networks which resulted in higher compensation and occupancy expenses. Notable items for the periods include:

  • Compensation and benefits expense increased $396 thousand to $4.3 million for the three months ended September 30, 2017 and increased $1.5 million to $12.7 million for the nine months ended September 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.
  • Furniture and equipment expense increased $81 thousand and $290 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 and $151 thousand in valuation adjustments on two OREO properties.
  • 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 September 30, 2017, total assets were $1.3 billion, an increase of $139.9 million from year-end 2016:

  • Total securities increased $10.6 million due to purchases of $26.0 million during the period.
  • Total loans increased $119.5 million or 12.3%, from year-end 2016 to $1.0 billion at September 30, 2017. Commercial, residential mortgage, consumer and SBA loan portfolios increased $59.6 million, $41.7 million, $17.8 million and $4.5 million, respectively. Our pipeline in all categories remains strong and loan growth is expected to continue in future quarters.
  • Total deposits increased $97.9 million or 10.4%, to $1.0 billion at September 30, 2017. Noninterest-bearing demand deposits, savings deposits and interest-bearing demand deposits have increased $42.6 million, $40.4 million and $20.9 million, respectively.
  • Borrowed funds increased $31.0 million to $152.0 million at September 30, 2017 due to increased overnight borrowings.
  • Shareholders’ equity was $115.8 million at September 30, 2017, an increase of $9.5 million from year-end 2016, due to retained net income.
  • Book value per common share was $10.94 as of September 30, 2017 compared to $10.14 at December 31, 2016.
  • At September 30, 2017, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 9.70%, 11.27%, 12.26% and 13.30% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

  • Nonperforming assets totaled $4.4 million at September 30, 2017, or 0.41% of total loans and OREO, compared to $8.3 million or 0.85% of total loans and OREO at year-end 2016.
  • Nonperforming loans totaled $3.7 million at September 30, 2017. Included in this balance is a $2.0 million consumer loan that is under contract at par value and is expected to settle in the fourth quarter.
  • The allowance for loan losses totaled $13.1 million at September 30, 2017, or 1.20% of total loans compared to $12.7 million and 1.34% at September 30, 2016.
  • Net charge-offs were $187 thousand for the three months ended September 30, 2017, compared to $493 thousand for the same period a year ago. Year-to-date net charge-offs were $616 thousand compared to $1.1 million 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
September 30, 2017
September 30, 2017 vs.
June 30, 2017 September 30, 2016
(In thousands, except percentages and per share amounts) September 30, 2017 June 30, 2017 September 30, 2016 % %
BALANCE SHEET DATA:
Total assets $1,329,834 $1,275,517 $1,152,896 4.3 %15.3 %
Total deposits 1,043,632 1,003,967 933,320 4.0 11.8
Total loans 1,092,873 1,046,804 949,832 4.4 15.1
Total securities 72,105 75,066 72,360 (3.9) (0.4)
Total shareholders' equity 115,814 112,447 88,152 3.0 31.4
Allowance for loan losses (13,113) (12,800) (12,685) (2.4) 3.4
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes $5,771 $5,350 $4,633 7.9 24.6
Provision for income taxes 2,014 1,906 1,613 5.7 24.9
Net income $3,757 $3,444 $3,020 9.1 24.4
Net income per:
Common share - basic $0.36 $0.33 $0.32 9.1 12.5
Common share - diluted $0.35 $0.32 $0.32 9.4 9.4
Performance ratios:
Return on average assets 1.17 % 1.11 % 1.05 % 5.4 11.4
Return on average equity 13.00 % 12.47 % 13.90 % 4.3 (6.5)
Efficiency ratio 54.86 % 56.41 % 58.11 % (2.7) (5.6)
Net interest margin 3.88 % 3.79 % 3.63 % 2.4 6.9
Noninterest expense to average assets 2.35 % 2.39 % 2.44 % (1.7) (3.7)
FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes and gain on subordinated debenture $16,025 $13,276 20.7
Provision for income taxes 5,632 4,700 19.8
Net income before gain on subordinated debenture $10,393 $8,576 21.2
Gain on subordinated debenture, net of tax - 1,473 NM
Net income $10,393 $10,049 3.4
Net income before gain on subordinated debenture per:
Common share - basic $0.99 $0.92 7.6
Common share - diluted $0.97 $0.91 6.6
Net income per:
Common share - basic $0.99 $1.08 (8.3)
Common share - diluted $0.97 $1.06 (8.5)
Net income before gain on subordinated debenture performance ratios:
Return on average assets 1.12 % 1.03 % (6.7)
Return on average equity 12.51 % 13.73 % (22.2)
Efficiency ratio 56.72 % 59.03 % 2.4
Performance ratios:
Return on average assets 1.12 % 1.20 % (6.7)
Return on average equity 12.51 % 16.09 % (22.2)
Efficiency ratio 56.72 % 55.39 % 2.4
Net interest margin 3.79 % 3.58 % 5.9
Noninterest expense to average assets 2.35 % 2.38 % (1.3)
SHARE INFORMATION:
Market price per share $19.80 $17.20 $12.82 15.1 54.4
Dividends paid quarterly $0.06 $0.06 $0.05 - 0.2
Book value per common share $10.94 $10.64 $9.45 2.8 15.8
Average diluted shares outstanding (QTD) 10,761 10,735 9,496 0.2 13.3
CAPITAL RATIOS:
Total equity to total assets 8.71 % 8.82 % 7.65 % (1.2) 13.9
Leverage ratio 9.70 % 9.66 % 8.49 % 0.3 14.1
Common equity tier 1 risk-based capital ratio 11.27 % 11.32 % 9.63 % (0.3) 17.2
Tier 1 risk-based capital ratio 12.26 % 12.34 % 10.74 % (0.6) 14.2
Total risk-based capital ratio 13.30 % 13.59 % 11.48 % (2.1) 15.9
CREDIT QUALITY AND RATIOS:
Nonperforming assets $4,449 $6,262 $8,230 (29.0) (45.9)
QTD net chargeoffs (annualized) to QTD average loans 0.07 % 0.11 % 0.21 % (36.4) (66.7)
Allowance for loan losses to total loans 1.20 % 1.22 % 1.34 % (1.6) (10.4)
Nonperforming assets to total loans
and OREO
0.41 % 0.60 % 0.86 % (31.7) (52.3)
Nonperforming assets to total assets 0.33 % 0.49 % 0.71 % (32.7)%(53.5)%


UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2017
September 30, 2017 vs.
December 31, 2016 September 30, 2016
(In thousands, except percentages) September 30, 2017 December 31, 2016 September 30, 2016 % %
ASSETS
Cash and due from banks $20,318 $22,105 $23,811 (8.1)%(14.7)%
Fed funds, interest-bearing deposits and repos 84,512 83,790 60,859 0.9 38.9
Cash and cash equivalents 104,830 105,895 84,670 (1.0) 23.8
Securities:
Securities available for sale 52,750 40,568 44,186 30.0 19.4
Securities held to maturity 19,355 20,979 28,174 (7.7) (31.3)
Total securities 72,105 61,547 72,360 17.2 (0.4)
Loans:
SBA loans held for sale 17,724 14,773 15,611 20.0 13.5
SBA loans held for investment 44,001 42,492 41,795 3.6 5.3
SBA 504 loans 22,239 26,344 26,067 (15.6) (14.7)
Commercial loans 568,766 509,171 496,008 11.7 14.7
Residential mortgage loans 330,787 289,093 282,317 14.4 17.2
Consumer loans 109,356 91,541 88,034 19.5 24.2
Total loans 1,092,873 973,414 949,832 12.3 15.1
Allowance for loan losses (13,113) (12,579) (12,685) 4.2 3.4
Net loans 1,079,760 960,835 937,147 12.4 15.2
Premises and equipment, net 23,080 23,398 22,302 (1.4) 3.5
Bank owned life insurance ("BOLI") 24,047 13,758 13,664 74.8 76.0
Deferred tax assets 5,842 5,512 6,008 6.0 (2.8)
Federal Home Loan Bank ("FHLB") stock 7,328 6,037 5,767 21.4 27.1
Accrued interest receivable 5,222 4,462 4,165 17.0 25.4
Other real estate owned ("OREO") 707 1,050 1,703 (32.7) (58.5)
Goodwill 1,516 1,516 1,516 - -
Other assets 5,397 5,896 3,594 (8.5) 50.2
Total assets $1,329,834 $1,189,906 $1,152,896 11.8 %15.3 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $258,519 $215,963 $209,122 19.7 %23.6 %
Interest-bearing demand 166,529 145,654 127,845 14.3 30.3
Savings 403,871 363,462 344,772 11.1 17.1
Time, under $100,000 122,410 123,724 134,448 (1.1) (9.0)
Time, $100,000 and over, under $250,000 71,155 75,567 86,366 (5.8) (17.6)
Time, $250,000 and over 21,148 21,353 30,767 (1.0) (31.3)
Total deposits 1,043,632 945,723 933,320 10.4 11.8
Borrowed funds 152,000 121,000 115,000 25.6 32.2
Subordinated debentures 10,310 10,310 10,310 - -
Accrued interest payable 400 430 446 (7.0) (10.3)
Accrued expenses and other liabilities 7,678 6,152 5,668 24.8 35.5
Total liabilities 1,214,020 1,083,615 1,064,744 12.0 14.0
Shareholders' equity:
Common stock 86,423 85,383 70,450 1.2 22.7
Retained earnings 29,260 20,748 18,117 41.0 61.5
Accumulated other comprehensive income (loss) 131 160 (415) NM NM
Total shareholders' equity 115,814 106,291 88,152 9.0 31.4
Total liabilities and shareholders' equity $1,329,834 $1,189,906 $1,152,896 11.8 %15.3 %
Issued and outstanding common shares 10,586 10,477 9,331
NM=Not meaningful


UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
NON-GAAP
September 30, 2017
September 30, 2017 vs.
For the three months ended June 30, 2017 September 30, 2016
(In thousands, except percentages and per share amounts) September 30, 2017 June 30, 2017 September 30, 2016 $ % $ %
INTEREST INCOME
Fed funds, interest-bearing deposits and repos $262 $203 $50 $59 29.1 %$212 424.0 %
FHLB stock 85 73 67 12 16.4 18 26.9
Securities:
Taxable 512 538 456 (26) (4.8) 56 12.3
Tax-exempt 40 44 43 (4) (9.1) (3) (7.0)
Total securities 552 582 499 (30) (5.2) 53 10.6
Loans:
SBA loans 1,042 886 822 156 17.6 220 26.8
SBA 504 loans 287 309 321 (22) (7.1) (34) (10.6)
Commercial loans 6,924 6,573 6,138 351 5.3 786 12.8
Residential mortgage loans 3,636 3,584 3,138 52 1.5 498 15.9
Consumer loans 1,407 1,267 1,046 140 11.0 361 34.5
Total loans 13,296 12,619 11,465 677 5.4 1,831 16.0
Total interest income 14,195 13,477 12,081 718 5.3 2,114 17.5
INTEREST EXPENSE
Interest-bearing demand deposits 168 161 129 7 4.3 39 30.2
Savings deposits 733 678 458 55 8.1 275 60.0
Time deposits 823 814 920 9 1.1 (97) (10.5)
Borrowed funds and subordinated debentures 654 674 701 (20) (3.0) (47) (6.7)
Total interest expense 2,378 2,327 2,208 51 2.2 170 7.7
Net interest income 11,817 11,150 9,873 667 6.0 1,944 19.7
Provision for loan losses 500 400 420 100 25.0 80 19.0
Net interest income after provision for loan losses 11,317 10,750 9,453 567 5.3 1,864 19.7
NONINTEREST INCOME
Branch fee income 355 344 321 11 3.2 34 10.6
Service and loan fee income 448 512 274 (64) (12.5) 174 63.5
Gain on sale of SBA loans held for sale, net 385 479 639 (94) (19.6) (254) (39.7)
Gain on sale of mortgage loans, net 392 264 609 128 48.5 (217) (35.6)
BOLI income 111 89 97 22 24.7 14 14.4
Net security gains 53 16 11 37 231.3 42 381.8
Other income 264 317 222 (53) (16.7) 42 18.9
Total noninterest income 2,008 2,021 2,173 (13) (0.6) (165) (7.6)
NONINTEREST EXPENSE
Compensation and benefits 4,268 4,299 3,872 (31) (0.7) 396 10.2
Occupancy 600 590 611 10 1.7 (11) (1.8)
Processing and communications 656 632 693
24 3.8 (37
)
(5.3
)
Furniture and equipment 513 513 432 - - 81 18.8
Professional services 247 251 216 (4) (1.6) 31 14.4
Loan collection & OREO expenses 114 38 95
76 200.0 19
20.0
Other loan expenses 47 18 19 29 161.1 28 147.4
Deposit insurance 156 144 168 12 8.3 (12) (7.1)
Advertising 299 323 304 (24) (7.4) (5) (1.6)
Director fees 150 149 141 1 0.7 9 6.4
Other expenses 504 464 442 40 8.6 62 14.0
Total noninterest expense 7,554 7,421 6,993 133 1.8 561 8.0
Income before provision for income taxes 5,771 5,350 4,633 421 7.9 1,138 24.6
Provision for income taxes 2,014 1,906 1,613 108 5.7 401 24.9
Net income $3,757 $3,444 $3,020 $313 9.1 %$737 24.4 %
Effective tax rate 34.9% 35.6% 34.8%
Net income per:
Common share - basic $0.36 $0.33 $0.32
Common share - diluted $0.35 $0.32 $0.32
Weighted average common shares outstanding - Basic 10,572 10,546 9,339
Weighted average common shares outstanding - Diluted 10,761 10,735 9,496


UNITY BANCORP, INC.
YTD CONSOLIDATED STATEMENTS OF INCOME
NON-GAAP
September 30, 2017
For the nine months ended September 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 $595 $135 $460 340.7 %
FHLB stock 252 173 79 45.7
Securities:
Taxable 1,543 1,246 297 23.8
Tax-exempt 127 160 (33) (20.6)
Total securities 1,670 1,406 264 18.8
Loans:
SBA loans 2,781 2,331 450 19.3
SBA 504 loans 896 1,050 (154) (14.7)
Commercial loans 19,666 17,676 1,990 11.3
Residential mortgage loans 10,603 9,017 1,586 17.6
Consumer loans 3,806 2,956 850 28.8
Total loans 37,752 33,030 4,722 14.3
Total interest income 40,269 34,744 5,525 15.9
INTEREST EXPENSE
Interest-bearing demand deposits 482 390 92 23.6
Savings deposits 1,994 1,206 788 65.3
Time deposits 2,441 2,824 (383) (13.6)
Borrowed funds and subordinated debentures 1,992 2,122 (130) (6.1)
Total interest expense 6,909 6,542 367 5.6
Net interest income 33,360 28,202 5,158 18.3
Provision for loan losses 1,150 1,020 130 12.7
Net interest income after provision for loan losses 32,210 27,182 5,028 18.5
NONINTEREST INCOME
Branch fee income 1,029 940 89 9.5
Service and loan fee income 1,472 796 676 84.9
Gain on sale of SBA loans held for sale, net 1,348 1,584 (236) (14.9)
Gain on sale of mortgage loans, net 1,188 1,917 (729) (38.0)
BOLI income 289 283 6 2.1
Net security gains 69 186 (117) (62.9)
Other income 838 716 122 17.0
Total noninterest income 6,233 6,422 (189) (2.9)
NONINTEREST EXPENSE
Compensation and benefits 12,662 11,130 1,532 13.8
Occupancy 1,791 1,742 49 2.8
Processing and communications 1,892 1,980 (88
) (4.4
)
Furniture and equipment 1,537 1,247 290 23.3
Professional services 724 710 14 2.0
Loan collection & OREO expenses 493 268
225
84.0
Other loan expenses 149 120 29 24.2
Deposit insurance 376 494 (118) (23.9)
Advertising 859 848 11 1.3
Director fees 496 415 81 19.5
Other expenses 1,439 1,374 65 4.7
Total noninterest expense 22,418 20,328 2,090 10.3
Income before provision for income taxes and gain on subordinated debenture 16,025 13,276 2,749 20.7
Provision for income taxes 5,632 4,700 932 19.8
Net income before gain on subordinated debenture 10,393 8,576 1,817 21.2
Gain on subordinated debenture, net of tax - 1,473 (1,473) (100.0)
Net income $10,393 $10,049 $344 3.4 %
Effective tax rate 35.1% 35.3%
Net income per:
Common share - basic $0.99 $1.08
Common share - diluted $0.97 $1.06
Weighted average common shares outstanding - Basic 10,543 9,320
Weighted average common shares outstanding - Diluted 10,734 9,468


UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
September 30, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
September 30, 2017 September 30, 2016
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Fed funds, interest-bearing deposits and repos $64,579 $262 1.61%$70,628 $50 0.28%
FHLB stock 5,697 85 5.92 5,728 67 4.65
Securities:
Taxable 67,178 512 3.02 63,871 456 2.84
Tax-exempt 6,234 60 3.82 6,478 66 4.05
Total securities (A) 73,412 572 3.09 70,349 522 2.95
Loans:
SBA loans 60,221 1,042 6.86 57,122 822 5.72
SBA 504 loans 22,596 287 5.04 26,562 321 4.81
Commercial loans 553,443 6,924 4.96 490,776 6,138 4.98
Residential mortgage loans 322,172 3,636 4.48 276,413 3,138 4.52
Consumer loans 106,976 1,407 5.22 85,632 1,046 4.86
Total loans (B) 1,065,408 13,296 4.95 936,505 11,465 4.87
Total interest-earning assets $1,209,096 $14,215 4.66%$1,083,210 $12,104 4.45%
Noninterest-earning assets:
Cash and due from banks 23,407 19,831
Allowance for loan losses (13,053) (12,769)
Other assets 57,179 52,000
Total noninterest-earning assets 67,533 59,062
Total assets $1,276,629 $1,142,272
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $160,184 $168 0.42%$129,310 $129 0.40%
Total savings deposits 406,064 733 0.72 331,588 458 0.55
Total time deposits 215,501 823 1.52 256,884 920 1.42
Total interest-bearing deposits 781,749 1,724 0.87 717,782 1,507 0.84
Borrowed funds and subordinated debentures 124,369 654 2.09 123,136 701 2.26
Total interest-bearing liabilities $906,118 $2,378 1.04%$840,918 $2,208 1.04%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 248,259 197,937
Other liabilities 7,598 16,990
Total noninterest-bearing liabilities 255,857 214,927
Total shareholders' equity 114,654 86,427
Total liabilities and shareholders' equity $1,276,629 $1,142,272
Net interest spread $11,837 3.62% $9,896 3.41%
Tax-equivalent basis adjustment (20) (23)
Net interest income $11,817 $9,873
Net interest margin 3.88% 3.63%
(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
September 30, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the three months ended
September 30, 2017 June 30, 2017
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Fed funds, interest-bearing deposits and repos $64,579 $262 1.61%$76,656 $203 1.06%
FHLB stock 5,697 85 5.92 5,912 73 4.95
Securities:
Taxable 67,178 512 3.02 67,102 538 3.22
Tax-exempt 6,234 60 3.82 6,764 67 3.97
Total securities (A) 73,412 572 3.09 73,866 605 3.29
Loans:
SBA loans 60,221 1,042 6.86 55,650 886 6.39
SBA 504 loans 22,596 287 5.04 23,986 309 5.17
Commercial loans 553,443 6,924 4.96 532,659 6,573 4.95
Residential mortgage loans 322,172 3,636 4.48 311,730 3,584 4.61
Consumer loans 106,976 1,407 5.22 100,889 1,267 5.04
Total loans (B) 1,065,408 13,296 4.95 1,024,914 12,619 4.94
Total interest-earning assets $1,209,096 $14,215 4.66%$1,181,348 $13,500 4.58%
Noninterest-earning assets:
Cash and due from banks 23,407 23,055
Allowance for loan losses (13,053) (12,916)
Other assets 57,179 55,367
Total noninterest-earning assets 67,533 65,506
Total assets $1,276,629 $1,246,854
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $160,184 $168 0.42%$157,896 $161 0.41%
Total savings deposits 406,064 733 0.72 397,813 678 0.68
Total time deposits 215,501 823 1.52 221,636 814 1.47
Total interest-bearing deposits 781,749 1,724 0.87 777,345 1,653 0.85
Borrowed funds and subordinated debentures 124,369 654 2.09 126,057 674 2.14
Total interest-bearing liabilities $906,118 $2,378 1.04%$903,402 $2,327 1.03%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 248,259 225,909
Other liabilities 7,598 6,752
Total noninterest-bearing liabilities 255,857 232,661
Total shareholders' equity 114,654 110,791
Total liabilities and shareholders' equity $1,276,629 $1,246,854
Net interest spread $11,837 3.62% $11,173 3.55%
Tax-equivalent basis adjustment (20) (23)
Net interest income $11,817 $11,150
Net interest margin 3.88% 3.79%
(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
September 30, 2017
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the nine months ended
September 30, 2017 September 30, 2016
Average Balance Interest Rate/Yield Average Balance Interest Rate/Yield
ASSETS
Interest-earning assets:
Fed funds, interest-bearing deposits and repos $73,011 $595 1.09%$70,654 $135 0.26%
FHLB stock 5,795 252 5.81 5,063 173 4.56
Securities:
Taxable 66,155 1,543 3.12 61,869 1,246 2.69
Tax-exempt 6,479 192 3.96 8,062 241 3.99
Total securities (A) 72,634 1,735 3.19 69,931 1,487 2.84
Loans:
SBA loans 57,951 2,781 6.42 55,932 2,331 5.57
SBA 504 loans 24,198 896 4.95 27,685 1,050 5.07
Commercial loans 533,033 19,666 4.93 476,477 17,676 4.96
Residential mortgage loans 310,460 10,603 4.57 268,436 9,017 4.49
Consumer loans 100,740 3,806 5.05 82,098 2,956 4.81
Total loans (B) 1,026,382 37,752 4.92 910,628 33,030 4.85
Total interest-earning assets $1,177,822 $40,334 4.58%$1,056,276 $34,825 4.40%
Noninterest-earning assets:
Cash and due from banks 23,346 24,261
Allowance for loan losses (12,919) (12,848)
Other assets 56,018 48,922
Total noninterest-earning assets 66,445 60,335
Total assets $1,244,267 $1,116,611
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits $156,853 $482 0.41%$129,968 $390 0.40%
Total savings deposits 394,206 1,994 0.68 317,441 1,206 0.51
Total time deposits 219,790 2,441 1.48 271,511 2,824 1.39
Total interest-bearing deposits 770,849 4,917 0.85 718,920 4,420 0.82
Borrowed funds and subordinated debentures 125,304 1,992 2.13 111,298 2,122 2.55
Total interest-bearing liabilities $896,153 $6,909 1.03%$830,218 $6,542 1.05%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 229,978 193,288
Other liabilities 7,050 9,656
Total noninterest-bearing liabilities 237,028 202,944
Total shareholders' equity 111,086 83,449
Total liabilities and shareholders' equity $1,244,267 $1,116,611
Net interest spread $33,425 3.55% $28,283 3.35%
Tax-equivalent basis adjustment (65) (81)
Net interest income $33,360 $28,202
Net interest margin 3.79% 3.58%
(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
September 30, 2017
Amounts in thousands, except percentages Sept. 30, 2017 Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period $12,800 $12,681 $12,579 $12,685 $12,758
Provision for loan losses charged to expense 500 400 250 200 420
13,300 13,081 12,829 12,885 13,178
Less: Chargeoffs
SBA loans 34 150 109 189 140
Commercial loans 31 120 76 19 376
Residential mortgage loans 5 - - 101 -
Consumer loans 170 17 66 2 -
Total chargeoffs 240 287 251 311 516
Add: Recoveries
SBA loans 36 3 37 1 17
SBA 504 loans 2 - - - -
Commercial loans 13 3 53 4 6
Residential mortgage loans - - 12 - -
Consumer loans 2 - 1 - -
Total recoveries 53 6 103 5 23
Net chargeoffs 187 281 148 306 493
Balance, end of period $13,113 $12,800 $12,681 $12,579 $12,685
LOAN QUALITY INFORMATION:
Nonperforming loans (1) $3,742 $5,681 $7,758 $7,237 $6,527
Other real estate owned ("OREO") 707 581 1,172 1,050 1,703
Nonperforming assets 4,449 6,262 8,930 8,287 8,230
Less: Amount guaranteed by SBA 27 41 60 60 624
Net nonperforming assets $4,422 $6,221 $8,870 $8,227 $7,606
Loans 90 days past due & still accruing $2,216 $230 $- $- $-
Performing Troubled Debt Restructurings (TDRs) $- $- $- $- $665
(1) Nonperforming TDRs included in nonperforming loans - - - 153 154
Total TDRs $- $- $- $153 $819
Allowance for loan losses to:
Total loans at quarter end 1.20 % 1.22% 1.27 % 1.29% 1.34%
Nonperforming loans (1) 350.43 225.31 163.46 173.82 194.35
Nonperforming assets 294.74 204.41 142.00 151.79 154.13
Net nonperforming assets 296.54 205.75 142.97 152.90 166.78
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans (0.01)% 1.06% 0.50 % 1.26% 0.86%
SBA 504 loans (0.04) - - - -
Commercial loans 0.01 0.09 0.02 0.01 0.30
Residential mortgage loans 0.01 - (0.02) 0.14 -
Consumer loans 0.62 0.07 0.28 0.01 -
Total loans 0.07 % 0.11% 0.06 % 0.13% 0.21%
Nonperforming loans to total loans 0.34 % 0.54% 0.78 % 0.74% 0.69%
Nonperforming loans and TDRs to total loans 0.34 0.54 0.78 0.74 0.76
Nonperforming assets to total loans and OREO 0.41 0.60 0.89 0.85 0.86
Nonperforming assets to total assets 0.33 % 0.49% 0.73 % 0.70% 0.71%


UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
NON-GAAP
September 30, 2017
(In thousands, except percentages and per share amounts) Sept. 30, 2017 Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
SUMMARY OF INCOME:
Total interest income $14,195 $13,477 $12,594 $12,280 $12,081
Total interest expense 2,378 2,327 2,204 2,225 2,208
Net interest income 11,817 11,150 10,390 10,055 9,873
Provision for loan losses 500 400 250 200 420
Net interest income after provision for loan losses 11,317 10,750 10,140 9,855 9,453
Total noninterest income 2,008 2,021 2,204 2,373 2,173
Total noninterest expense 7,554 7,421 7,440 7,303 6,993
Income before provision for income taxes 5,771 5,350 4,904 4,925 4,633
Provision for income taxes 2,014 1,906 1,712 1,765 1,613
Net income $3,757 $3,444 $3,192 $3,160 $3,020
Net income per common share - Basic $ 0.36 $0.33 $0.30 $0.33 $0.32
Net income per common share - Diluted $ 0.35 $0.32 $0.30 $0.32 $0.32
COMMON SHARE DATA:
Market price per share $ 19.80 $17.20 $16.95 $15.70 $12.82
Dividends paid $ 0.06 $0.06 $0.05 $0.05 $0.05
Book value per common share $ 10.94 $10.64 $10.38 $10.14 $9.45
Weighted average common shares outstanding - Basic 10,572 10,546 10,509 9,700 9,339
Weighted average common shares outstanding - Diluted 10,761 10,735 10,705 9,878 9,496
Issued and outstanding common shares 10,586 10,567 10,535 10,477 9,331
PERFORMANCE RATIOS (Annualized):
Return on average assets 1.17 % 1.11 % 1.07 % 1.07 % 1.05 %
Return on average equity 13.00 12.47 12.02 13.47 13.90
Efficiency ratio 54.86 56.41 59.08 59.90 58.11
Noninterest expense to average assets 2.35 2.39 2.50 2.47 2.44
BALANCE SHEET DATA:
Total assets $1,329,834 $1,275,517 $1,226,168 $1,189,906 $1,152,896
Total deposits 1,043,632 1,003,967 980,703 945,723 933,320
Total loans 1,092,873 1,046,804 1,000,677 973,414 949,832
Total securities 72,105 75,066 73,022 61,547 72,360
Total shareholders' equity 115,814 112,447 109,305 106,291 88,152
Allowance for loan losses (13,113) (12,800) (12,681) (12,579) (12,685)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets 4.66 %4.58 % 4.48 % 4.40 % 4.45 %
Interest-bearing liabilities 1.04 1.03 1.02 1.03 1.04
Net interest spread 3.62 3.55 3.46 3.37 3.41
Net interest margin 3.88 3.79 3.70 3.60 3.63
CREDIT QUALITY:
Nonperforming assets 4,449 6,262 8,930 8,287 8,230
QTD net chargeoffs (annualized) to QTD average loans 0.07 %0.11 % 0.06 % 0.13 % 0.21 %
Allowance for loan losses to total loans 1.20 1.22 1.27 1.29 1.34
Nonperforming assets to total loans and OREO 0.41 0.60 0.89 0.85 0.86
Nonperforming assets to total assets 0.33 0.49 0.73 0.70 0.71
CAPITAL RATIOS AND OTHER:
Total equity to total assets 8.71 %8.82 % 8.91 % 8.93 % 7.65 %
Leverage ratio 9.70 9.66 9.72 9.73 8.49
Common equity tier 1 risk-based capital ratio 11.27 11.32 11.46 11.49 9.63
Tier 1 risk-based capital ratio 12.26 12.34 12.53 12.58 10.74
Total risk-based capital ratio 13.30 13.59 13.78 13.84 11.48
Number of banking offices 17 17 17 17 15
Number of ATMs 18 18 18 18 16
Number of employees 166 186 181 184 180

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

Source:Unity Bancorp, Inc.