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