8-K - UNTY - Equibles

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

January 22, 2021

Date of Report (Date of earliest event reported)

UNITY BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

New Jersey

(State or Other Jurisdiction of Incorporation)


1-12431	22-3282551
(Commission File Number)	(IRS Employer Identification No.)

64 Old Highway 22

Clinton , NJ **** 08809

(Address of Principal Executive Office)

( 908 ) 730-7630

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	UNTY	NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operation and Financial Condition

The Registrant issued a press release on January 22, 2021 announcing results for the three and twelve months ended December 31, 2020, the full text of which is incorporated by reference to this Item.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit 99.1 Press release issued by the Registrant on January 22, 2021.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.


	UNITY BANCORP, INC.
	(Registrant)

Date: January 22, 2021
	By:	/s/ James A. Hughes
		James A. Hughes
		President and Chief Executive Officer

EXHIBIT INDEX

EXHIBIT #DESCRIPTION

99.1Press release issued by the Registrant on January 22, 2021

Exhibit 99.1

For Immediate Release	News Media & Financial Analyst Contact:
Unity Bancorp, Inc. (NSDQ: UNTY)	James A. Hughes, President and CEO
January 22, 2021	(908) 713-4306

Unity Bancorp Reports

Quarterly Earnings of $7.3 Million

Clinton, NJ, January 22, 2021 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $7.3 million, or $0.69 per diluted share, for the quarter ended December 31, 2020, a 20.0 percent increase compared to net income of $6.1 million, or $0.55 per diluted share for the prior year’s fourth quarter. For the year ended December 31, 2020, Unity reported net income of $23.6 million, or $2.19 per diluted share, compared to net income of $23.7 million, or $2.14 per diluted share for the year ended December 31, 2019. Overall earnings were impacted primarily due to an increased provision for loan losses, necessitated by the COVID-19 pandemic, partially offset by revenue generated by the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”).

Fourth Quarter Earnings Highlights

●	Net interest income, our primary driver of earnings, increased $2.6 million to $17.3 million for the quarter ended December 31, 2020, compared to the prior year’s quarter, due to SBA PPP loans, commercial loan growth and a reduction in the cost of funds.
●	Net interest margin (NIM) increased to 3.97% for the quarter ended December 31, 2020, compared to 3.88% for the prior year’s quarter and increased 19 basis points from 3.78% in the prior sequential quarter ended September 30, 2020.
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●	The provision for loan losses was $1.0 million for the quarter ended December 31, 2020, an increase of $500 thousand from the prior year’s quarter due to the increased risk of loan defaults as a result of COVID-19.
---	---
●	Noninterest income increased $1.9 million to $4.3 million compared to the prior year’s quarter and increased $918 thousand compared to the prior sequential quarter. The increases were primarily due to increased gains on mortgage loan sales. Mortgage banking has been strong and market conditions continue to be favorable. For the quarter ended December 31, 2020, quarterly residential mortgage loan sales were $99.1 million, compared to $42.0 million for the quarter ended December 31, 2019.
---	---
●	Noninterest expense increased $2.0 million to $10.7 million compared to the prior year’s quarter, primarily due to increased consulting expenses incurred in connection with compliance with our Consent Order with the FDIC and NJDOBI and increased compensation due to increased mortgage commissions. Expenses related to compliance with the Consent Order are expected to decline in 2021.
---	---
●	The effective tax rate was 25.6% compared to 22.9% in the prior year’s quarter.
---	---

Balance Sheet Highlights

●	Total loans increased $202.3 million, or 14.2%, from year-end 2019 to $1.6 billion at December 31, 2020. The increase was primarily due to SBA PPP and commercial loan originations.
●	Total deposits increased $307.8 million, or 24.6%, from year-end 2019 to $1.6 billion at December 31, 2020, primarily due to increased noninterest-bearing demand deposits, related to PPP loan originations, and an increase in brokered time deposits in the first quarter.
---	---
●	Borrowed funds decreased $83.0 million to $200.0 million at December 31, 2020, due to decreased FHLB advances.
---	---
●	Shareholders’ equity was $173.9 million at December 31, 2020, an increase of $13.2 million from year-end 2019, due primarily to retained net income. During the fourth quarter, the Company repurchased 131,622 shares of common stock for a total cost of $2.3 million.
---	---
●	Book value per common share was $16.63 as of December 31, 2020.
---	---
●	At December 31, 2020, the Community Bank Leverage Ratio was 10.09%.
---	---
●	Nonperforming assets were $12.1 million at December 31, 2020, compared to $7.4 million at December 31, 2019. Most of the nonperforming assets are residential loans, the resolution of which has been impacted by foreclosure restrictions due to COVID-19. The allowance to total loans ratio was 1.42% at December 31, 2020.
---	---

Paycheck Protection Program Loans

As of December 31, 2020, the Company funded 1,224 SBA PPP loans, totaling $143.0 million. Under the PPP, established by the U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Company was able to assist numerous small businesses in continuing to pay expenses, including payroll to retain their staff. PPP loans booked have an annual interest rate of 1% and are 100% guaranteed by the SBA. Most of these loans have a two-year term, to the extent the principal amount is not forgiven under the terms of the program. Gross origination fees of $5.5 million were earned on PPP loans and will be recognized over the life of the loans or when the loan is forgiven.

Unity has recently began accepting applications for the new Paycheck Protection Program, provided for under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was signed into law December 27, 2020.

Loan Deferrals

The Bank has prudently worked with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. As shown in the table below, loans which have been granted deferrals have significantly declined during the fourth quarter to $32.5 million, from $60.0 million at September 30, 2020.

The table below summarizes loan deferrals as of December 31, 2020.


(In thousands)	Total Loan Portfolio balance		Full Deferrals		Principal Only Deferrals		Total Loans in Deferral		% Deferrals to Total Loans
SBA loans held for sale	$	9,335	$	—	$	—	$	—	0%
SBA loans held for investment		39,587		562		2,461		3,023	8%
SBA PPP loans		118,257		—		—		—	0%
Commercial loans		839,788		4,921		22,647		27,568	3%
Residential mortgage loans		467,586		1,952		—		1,952	0%
Consumer loans		153,264		—		—		—	0%
Total loans	$	1,627,817	$	7,435	$	25,108	$	32,543	2%

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $2.0 billion in assets and $1.6 billion in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 19 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 amended or supplemented by our subsequent filings with the SEC, 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, results of regulatory exams, and the impact of COVID-19 on the Bank, its employees and customers, among other factors.

UNITY BANCORP, INC.

SUMMARY FINANCIAL HIGHLIGHTS

December 31, 2020


												Dec. 31, 2020 vs.
												Sept. 30, 2020		Dec. 31, 2019
(In thousands, except percentages and per share amounts)	****	Dec. 31, 2020		****	Sept. 30, 2020		****	Dec. 31, 2019		****	****	%		%
BALANCE SHEET DATA:
Total assets		$	1,958,914		$	1,930,836		$	1,718,942			1.5	%	14.0	%
Total deposits	****		1,557,959			1,493,440			1,250,114			4.3		24.6
Total loans	****		1,627,817			1,613,291			1,425,558			0.9		14.2
Total securities	****		47,571			50,387			66,564			(5.6)		(28.5)
Total shareholders' equity	****		173,911			169,234			160,709			2.8		8.2
Allowance for loan losses	****		(23,105)			(22,237)			(16,395)			3.9		40.9

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes		$	9,868		$	7,626		$	7,940			29.4		24.3
Provision for income taxes		****	2,523			1,866			1,820			35.2		38.6
Net income		$	7,345		$	5,760		$	6,120			27.5		20.0

Net income per common share - Basic		$	0.70		$	0.54		$	0.56			29.6		25.0
Net income per common share - Diluted		$	0.69		$	0.54		$	0.55			27.8		25.5

Performance ratios:
Return on average assets		****	1.61	%	****	1.28	%		1.53	%
Return on average equity		****	17.07	%	****	13.76	%		15.41	%
Efficiency ratio		****	50.31	%	****	50.80	%		51.29	%
Net interest margin		****	3.97	%	****	3.78	%		3.88	%
Noninterest expense to average assets		****	2.35	%	****	2.23	%		2.17	%

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes		$	31,119					$	30,315					2.7
Provision for income taxes		****	7,475						6,662					12.2
Net income		$	23,644					$	23,653					—

Net income per common share - Basic		$	2.21					$	2.18					1.4
Net income per common share - Diluted		$	2.19					$	2.14					2.3

Performance ratios:
Return on average assets		****	1.35	%					1.54	%				(12.3)
Return on average equity		****	14.20	%					15.86	%				(10.5)
Efficiency ratio		****	50.80	%					52.00	%				(2.3)
Net interest margin		****	3.85	%					3.95	%				(2.5)
Noninterest expense to average assets		****	2.24	%					2.25	%				(0.4)

SHARE INFORMATION:
Market price per share		$	17.55		$	11.58		$	22.57			51.6		(22.2)
Dividends paid		$	0.08		$	0.08		$	0.08			—		—
Book value per common share		$	16.63		$	16.01		$	14.77			3.9		12.6
Average diluted shares outstanding (QTD)		****	10,629			10,706			11,057			(0.7)		(3.9)

CAPITAL RATIOS:
Total equity to total assets		****	8.88	%	****	8.76	%		9.35	%
Community bank leverage ratio		****	10.09	%	****	9.95	%		10.59	%

CREDIT QUALITY AND RATIOS:
Nonperforming assets		$	12,060		$	9,699,000		$	7,372			24.3		63.6
QTD net (recoveries) chargeoffs to QTD average loans		0.03	%	—	%	0.03	%
---	---	---	---	---	---	---	---	---	---	---	---
Allowance for loan losses to total loans		1.42	%	1.38	%	1.15	%
Nonperforming assets to total loans		0.74	%	0.56	%	0.40	%
Nonperforming assets to total assets		0.62	%	0.50	%	0.43	%

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2020


	****										December 31, 2020 vs.
											September 30,		December 31,
		December 31,			September 30,			December 31,			2020		2019
(In thousands, except percentages)	****	2020		****	2020		****	2019		****	%		%
ASSETS
Cash and due from banks		$	22,750		$	21,601		$	21,106		5.3	%	7.8	%
Federal funds sold and interest-bearing deposits	****		196,561			179,794			136,910		9.3		43.6
Cash and cash equivalents	****		219,311			201,395			158,016		8.9		38.8
Securities:
Securities available for sale	****		45,617			48,713			64,275		(6.4)		(29.0)
Equity securities	****		1,954			1,674			2,289		16.7		(14.6)
Total securities	****		47,571			50,387			66,564		(5.6)		(28.5)
Loans:
SBA loans held for sale	****		9,335			6,192			13,529		50.8		(31.0)
SBA loans held for investment	****		39,587			47,125			35,767		(16.0)		10.7
SBA PPP loans			118,257			138,895			—		(14.9)		100.0
Commercial loans	****		839,788			799,573			765,032		5.0		9.8
Residential mortgage loans	****		467,586			473,420			467,706		(1.2)		—
Consumer loans	****		153,264			148,086			143,524		3.5		6.8
Total loans	****		1,627,817			1,613,291			1,425,558		0.9		14.2
Allowance for loan losses	****		(23,105)			(22,237)			(16,395)		3.9		40.9
Net loans	****		1,604,712			1,591,054			1,409,163		0.9		13.9
Premises and equipment, net	****		20,226			20,507			21,315		(1.4)		(5.1)
Bank owned life insurance ("BOLI")	****		26,514			26,482			26,323		0.1		0.7
Deferred tax assets	****		9,183			8,433			5,559		8.9		65.2
Federal Home Loan Bank ("FHLB") stock	****		10,594			12,394			14,184		(14.5)		(25.3)
Accrued interest receivable	****		10,429			10,169			6,984		1.3		49.3
Other real estate owned ("OREO")	****		—			711			1,723		(100.0)		(100.0)
Goodwill	****		1,516			1,516			1,516		—		—
Other assets	****		8,858			7,788			7,595		15.6		16.6
Total assets		$	1,958,914		$	1,930,836		$	1,718,942		1.5	%	14.0	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand		$	459,677		$	412,863		$	279,793		11.3	%	64.3	%
Interest-bearing demand		****	204,236			186,587			159,175		9.5		28.3
Savings		****	455,449			472,689			406,954		(3.6)		11.9
Time Deposits		****	438,597			421,301			404,192		4.1		8.5
Total deposits		****	1,557,959			1,493,440			1,250,114		4.3		24.6
Borrowed funds		****	200,000			240,000			283,000		(16.7)		(29.3)
Subordinated debentures		****	10,310			10,310			10,310		—		—
Accrued interest payable		****	248			283			455		(12.4)		(45.5)
Accrued expenses and other liabilities		****	16,486			17,569			14,354		(6.2)		14.9
Total liabilities		****	1,785,003			1,761,602			1,558,233		1.3		14.6
Shareholders' equity:
Common stock		****	91,873			91,474			90,113		0.4		2.0
Retained earnings		****	90,669			84,168			70,442		7.7		28.7
Treasury stock, at cost		****	(7,442)			(5,135)			—		(44.9)		(100.0)
Accumulated other comprehensive (loss) income		****	(1,189)			(1,273)			154		NM*		NM*
Total shareholders' equity		****	173,911			169,234			160,709		2.8		8.2
Total liabilities and shareholders' equity		$	1,958,914		$	1,930,836		$	1,718,942		1.5	%	14.0	%


COMMON SHARES AT PERIOD END:
Shares issued		****	10,961			10,943			10,881
Shares oustanding		****	10,456			10,570			10,881
Treasury shares		****	505			373			-

NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2020


												Dec. 31, 2020 vs.
		For the three months ended										Sept. 30, 2020		****	Dec. 31, 2019
(In thousands, except percentages and per share amounts)	****	Dec. 31, 2020		****	Sept. 30, 2020		****	Dec. 31, 2019		****	****		%	****		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits		$	23		$	24		$	182				(4.2)	%		(87.4)	%
FHLB stock		****	64			79			110				(19.0)			(41.8)
Securities:
Taxable		****	364			383			527				(5.0)			(30.9)
Tax-exempt		****	11			11			22				-			(50.0)
Total securities		****	375			394			549				(4.8)			(31.7)
Loans:
SBA loans		****	819			631			900				29.8			(9.0)
SBA PPP loans			1,361			1,036			—				31.4			100.0
Commercial loans		****	10,155			10,099			9,684				0.6			4.9
Residential mortgage loans		****	5,441			5,490			5,782				(0.9)			(5.9)
Consumer loans		****	2,050			2,011			2,105				1.9			(2.6)
Total loans		****	19,826			19,267			18,471				2.9			7.3
Total interest income		****	20,288			19,764			19,312				2.7			5.1
INTEREST EXPENSE
Interest-bearing demand deposits		****	319			347			395				0.3			(19.2)
Savings deposits		****	463			473			1,109				(7.8)			(58.3)
Time deposits		****	1,726			2,157			2,437				(20.0)			(29.2)
Borrowed funds and subordinated debentures		****	441			460			608				(4.1)			(27.5)
Total interest expense		****	2,949			3,437			4,549				(14.2)			(35.2)
Net interest income		****	17,339			16,327			14,763				6.2			17.4
Provision for loan losses		****	1,000			2,000			500				(50.0)			100.0
Net interest income after provision for loan losses		****	16,339			14,327			14,263				14.0			14.6
NONINTEREST INCOME
Branch fee income		****	285			237			383				20.3			(25.6)
Service and loan fee income		****	557			419			432				32.9			28.9
Gain on sale of SBA loans held for sale, net		****	543			534			355				1.7			53.0
Gain on sale of mortgage loans, net		****	2,027			1,713			565				18.3			258.8
BOLI income		****	139			147			152				(5.4)			(8.6)
Net security (losses) gains		****	280			(96)			157				391.7			78.3
Other income		****	423			382			352				10.7			20.2
Total noninterest income		****	4,254			3,336			2,396				27.5			77.5
NONINTEREST EXPENSE
Compensation and benefits		****	6,371			5,761			5,282				10.6			20.6
Processing and communications		****	956			722			711				32.4			34.5
Furniture and equipment		****	673			637			806				5.7			(16.5)
Occupancy		****	650			639			652				1.7			(0.3)
BSA expenses		****	623			626			—				(0.5)			100.0
Professional services			340			274			222				24.1			53.2
Advertising		****	218			191			302				14.1			(27.8)
Other loan expenses		****	149			216			70				(31.0)			112.9
Deposit insurance		****	230			197			—				17			100.0
Director fees		****	202			191			175				5.8			15.4
Loan collection & OREO (recoveries) expenses		****	(5)			33			33				(115.2)			(115.2)
Other expenses		****	318			550			466				(42.2)			(31.8)
Total noninterest expense		****	10,725			10,037			8,719				6.9			23.0
Income before provision for income taxes		****	9,868			7,626			7,940				29.4			24.3
Provision for income taxes		****	2,523			1,866			1,820				35.2			38.6
Net income		$	7,345		$	5,760		$	6,120				27.5	%		20.0	%

Effective tax rate			25.6	%		24.5	%		22.9	%
Net income per common share - Basic		$	0.70		$	0.54		$	0.56
Net income per common share - Diluted		$	0.69		$	0.54		$	0.55
Weighted average common shares outstanding - Basic			10,532			10,630			10,872
Weighted average common shares outstanding - Diluted			10,629			10,706			11,057

All values are in US Dollars.

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2020


		For the year ended December 31,							Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	****	2020		****	2019		****	****		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits		$	258		$	906				(71.5)	%
FHLB stock		****	331			385				(14.0)
Securities:
Taxable		****	1,695			1,926				(12.0)
Tax-exempt		****	61			104				(41.3)
Total securities		****	1,756			2,030				(13.5)
Loans:
SBA loans		****	3,144			3,780				(16.8)
SBA PPP loans			3,120			—				100.0
Commercial loans		****	40,002			37,577				6.5
Residential mortgage loans		****	22,255			22,483				(1.0)
Consumer loans		****	8,049			8,487				(5.2)
Total loans		****	76,570			72,327				5.9
Total interest income		****	78,915			75,648				4.3
INTEREST EXPENSE
Interest-bearing demand deposits		****	1,344			1,386				(3.0)
Savings deposits		****	2,463			4,907				(49.8)
Time deposits		****	8,784			9,459				(7.1)
Borrowed funds and subordinated debentures		****	1,889			2,303				(18.0)
Total interest expense		****	14,480			18,055				(19.8)
Net interest income		****	64,435			57,593				11.9
Provision for loan losses		****	7,000			2,100				233.3
Net interest income after provision for loan losses		****	57,435			55,493				3.5
NONINTEREST INCOME
Branch fee income		****	1,046			1,502				(30.4)
Service and loan fee income		****	1,742			1,965				(11.3)
Gain on sale of SBA loans held for sale, net		****	1,642			909				80.6
Gain on sale of mortgage loans, net		****	6,344			2,090				203.5
BOLI income		****	613			588				4.3
Net security gains		****	93			373				(75.1)
Gain on sale of premises and equipment			—			766				(100.0)
Other income		****	1,466			1,346				8.9
Total noninterest income		****	12,946			9,539				35.7
NONINTEREST EXPENSE
Compensation and benefits		****	23,124			20,666				11.9
Processing and communications		****	3,155			2,924				7.9
Furniture and equipment		****	2,606			2,894				(10.0)
Occupancy		****	2,543			2,650				(4.0)
BSA expenses		****	1,800			—				100.0
Professional services			1,144			1,061				7.8
Advertising		****	906			1,358				(33.3)
Director fees		****	774			673				15.0
Other loan expenses		****	622			272				128.7
Deposit insurance		****	674			301				123.9
Loan collection & OREO expenses		****	215			41				424.4
Other expenses		****	1,699			1,877				(9.5)
Total noninterest expense		****	39,262			34,717				13.1
Income before provision for income taxes		****	31,119			30,315				2.7
Provision for income taxes		****	7,475			6,662				12.2
Net income		$	23,644		$	23,653				(0.0)	%

Effective tax rate			24.0	%		22.0	%
Net income per common share - Basic		$	2.21		$	2.18
Net income per common share - Diluted		$	2.19		$	2.14
Weighted average common shares outstanding - Basic			10,709			10,845
Weighted average common shares outstanding - Diluted			10,814			11,029

All values are in US Dollars.

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

December 31, 2020

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)


	For the three months ended
	December 31, 2020							December 31, 2019
	Average							Average
	Balance		Interest		Rate/Yield			Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	64,359	$	23		0.14	%	$	44,147	$	182	1.64	%
FHLB stock	****	5,732		64		4.44			6,949		110	6.28
Securities:
Taxable	****	46,873		364		3.09			62,986		527	3.32
Tax-exempt	****	2,491		13		2.08			4,106		27	2.61
Total securities (A)	****	49,364		377		3.04			67,092		554	3.28
Loans:
SBA loans	****	53,383		819		6.10			50,016		900	7.14
SBA PPP loans		134,946		1,361		4.01			—		—	—
Commercial loans	****	814,366		10,155		4.96			742,071		9,684	5.18
Residential mortgage loans	****	465,117		5,441		4.65			460,450		5,782	4.98
Consumer loans	****	151,076		2,050		5.40			140,458		2,105	5.95
Total loans (B)	****	1,618,888		19,826		4.87			1,392,995		18,471	5.26
Total interest-earning assets	$	1,738,343	$	20,290		4.64	%	$	1,511,183	$	19,317	5.07	%

Noninterest-earning assets:
Cash and due from banks	****	24,128							27,964
Allowance for loan losses	****	(22,907)							(16,293)
Other assets	****	75,489							69,226
Total noninterest-earning assets	****	76,710							80,897
Total assets	$	1,815,053						$	1,592,080

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	205,049	$	319		0.62	%	$	164,700	$	395	0.95	%
Total savings deposits	****	461,345		463		0.40			429,340		1,109	1.02
Total time deposits	****	427,208		1,726		1.61			411,444		2,437	2.35
Total interest-bearing deposits	****	1,093,602		2,508		0.91			1,005,484		3,941	1.56
Borrowed funds and subordinated debentures	****	102,256		441		1.72			132,533		608	1.82
Total interest-bearing liabilities	$	1,195,858	$	2,949		0.98	%	$	1,138,017	$	4,549	1.59	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	****	431,030							279,925
Other liabilities	****	17,025							16,611
Total noninterest-bearing liabilities	****	448,055							296,536
Total shareholders' equity	****	171,140							157,527
Total liabilities and shareholders' equity	$	1,815,053						$	1,592,080

Net interest spread			$	17,341		3.66	%			$	14,768	3.48	%
Tax-equivalent basis adjustment				(3)							(5)
Net interest income			$	17,338						$	14,763
Net interest margin						3.97	%					3.88	%

(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 nondeductable portion of interest expense, assuming a federal tax rate of 21 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

December 31, 2020

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)


	For the three months ended
	December 31, 2020							September 30, 2020
	Average							Average
	Balance		Interest		Rate/Yield			Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	64,359	$	23		0.14	%	$	66,759	$	24	0.14	%
FHLB stock	****	5,732		64		4.44			5,996		79	5.24
Securities:
Taxable	****	46,873		364		3.09			50,118		383	3.04
Tax-exempt	****	2,491		13		2.08			2,678		13	1.93
Total securities (A)	****	49,364		377		3.04			52,796		396	2.98
Loans:
SBA loans	****	53,383		819		6.10			49,751		631	5.05
SBA PPP loans		134,946		1,361		4.01			138,221		1,036	2.98
Commercial loans	****	814,366		10,155		4.96			792,255		10,099	5.07
Residential mortgage loans	****	465,117		5,441		4.65			463,575		5,490	4.71
Consumer loans	****	151,076		2,050		5.40			147,567		2,011	5.42
Total loans (B)	****	1,618,888		19,826		4.87			1,591,369		19,267	4.82
Total interest-earning assets	$	1,738,343	$	20,290		4.64	%	$	1,716,920	$	19,766	4.58	%

Noninterest-earning assets:
Cash and due from banks	****	24,128							23,487
Allowance for loan losses	****	(22,907)							(21,680)
Other assets	****	75,489							75,807
Total noninterest-earning assets	****	76,710							77,614
Total assets	$	1,815,053						$	1,794,534

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	205,049	$	319		0.62	%	$	182,170	$	318	0.69	%
Total savings deposits	****	461,345		463		0.40			447,745		502	0.45
Total time deposits	****	427,208		1,726		1.61			449,333		2,157	1.91
Total interest-bearing deposits	****	1,093,602		2,508		0.91			1,079,248		2,977	1.10
Borrowed funds and subordinated debentures	****	102,256		441		1.72			108,137		460	1.69
Total interest-bearing liabilities	$	1,195,858	$	2,949		0.98	%	$	1,187,385	$	3,437	1.15	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	****	431,030							422,759
Other liabilities	****	17,025							17,838
Total noninterest-bearing liabilities	****	448,055							440,597
Total shareholders' equity	****	171,140							166,552
Total liabilities and shareholders' equity	$	1,815,053						$	1,794,534

Net interest spread			$	17,341		3.66	%			$	16,329	3.43	%
Tax-equivalent basis adjustment				(3)							(2)
Net interest income			$	17,338						$	16,327
Net interest margin						3.97	%					3.78	%

(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 nondeductable portion of interest expense, assuming a federal tax rate of 21 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

December 31, 2020

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)


	For the year ended
	December 31, 2020							December 31, 2019
	Average							Average					****
	Balance		Interest		Rate/Yield			Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	68,507	$	258		0.38	%	$	43,305	$	906	2.09	%
FHLB stock	****	6,145		331		5.39			6,066		385	6.35
Securities:
Taxable	****	52,714		1,695		3.22			59,459		1,926	3.24
Tax-exempt	****	3,118		76		2.44			4,394		129	2.94
Total securities (A)	****	55,832		1,771		3.17			63,853		2,055	3.22
Loans:
SBA loans	****	50,354		3,144		6.24			48,686		3,780	7.76
SBA PPP loans		93,733		3,120		3.33			—		—	—
Commercial loans	****	790,093		40,002		5.06			715,301		37,577	5.25
Residential mortgage loans	****	463,155		22,255		4.81			449,003		22,483	5.01
Consumer loans	****	146,738		8,049		5.49			133,918		8,487	6.34
Total loans (B)	****	1,544,073		76,570		4.96			1,346,908		72,327	5.37
Total interest-earning assets	$	1,674,557	$	78,930		4.71	%	$	1,460,132	$	75,673	5.18	%

Noninterest-earning assets:
Cash and due from banks	****	22,571							25,761
Allowance for loan losses	****	(19,812)							(16,058)
Other assets	****	73,948							69,987
Total noninterest-earning assets	****	76,707							79,690
Total assets	$	1,751,264						$	1,539,822

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	178,358	$	1,344		0.75	%	$	155,177	$	1,386	0.89	%
Total savings deposits	****	438,996		2,463		0.56			424,486		4,907	1.16
Total time deposits	****	448,688		8,784		1.96			409,405		9,459	2.31
Total interest-bearing deposits	****	1,066,042		12,591		1.18			989,068		15,752	1.59
Borrowed funds and subordinated debentures	****	112,264		1,889		1.68			113,511		2,303	2.03
Total interest-bearing liabilities	$	1,178,306	$	14,480		1.23	%	$	1,102,579	$	18,055	1.64	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	****	389,255							273,338
Other liabilities	****	17,163							14,755
Total noninterest-bearing liabilities	****	406,418							288,093
Total shareholders' equity	****	166,540							149,150
Total liabilities and shareholders' equity	$	1,751,264						$	1,539,822

Net interest spread			$	64,450		3.48	%			$	57,618	3.54	%
Tax-equivalent basis adjustment				(15)							(25)
Net interest income			$	64,435						$	57,593
Net interest margin						3.85	%					3.95	%

(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 nondeductable portion of interest expense, assuming a federal tax rate of 21 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

December 31, 2020


Amounts in thousands, except percentages	****	Dec. 31, 2020		****	Sept. 30, 2020		****	Jun. 30, 2020		****	Mar. 31, 2020		****	Dec. 31, 2019		****
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period		$	22,237		$	20,234		$	17,376		$	16,395		$	16,002
Provision for loan losses charged to expense		****	1,000			2,000			2,500			1,500			500
		****	23,237			22,234			19,876			17,895			16,502
Less: Chargeoffs
SBA loans		****	—			1			—			25			43
Commercial loans		****	150			—			219			300			—
Residential mortgage loans		****	—			—			—			200			75
Consumer loans		****	—			—			—			—			—
Total chargeoffs		****	150			1			219			525			118
Add: Recoveries
SBA loans		****	—			3			75			5			7
Commercial loans		****	18			1			502			1			4
Residential mortgage loans		****	—			—			—			—			—
Consumer loans		****	—			—			—			—			—
Total recoveries		****	18			4			577			6			11
Net chargeoffs (recoveries)		****	132			(3)			(358)			519			107
Balance, end of period		$	23,105		$	22,237		$	20,234		$	17,376		$	16,395

LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans		$	2,473		$	3,446		$	2,363		$	1,627		$	1,164
Commercial loans		****	1,325			527			413			613			529
Residential mortgage loans		****	5,217			3,722			6,192			6,910			3,936
Consumer loans		****	3,045			1,293			505			505			20
Total nonperforming loans		****	12,060			8,988			9,473			9,655			5,649
Other real estate owned ("OREO")		****	—			711			711			1,523			1,723
Nonperforming assets		****	12,060			9,699			10,184			11,178			7,372
Less: Amount guaranteed by SBA		****	371			812			307			427			59
Net nonperforming assets		$	11,689		$	8,887		$	9,877		$	10,751		$	7,313

Loans 90 days past due & still accruing		$	449		$	—		$	—		$	—		$	930

Performing Troubled Debt Restructurings (TDRs)		$	663		$	673		$	684		$	694		$	705

Allowance for loan losses to:
Total loans at quarter end		****	1.42	%		1.38	%		1.27	%		1.21	%		1.15	%
Total nonperforming loans		****	191.58			247.41			213.60			179.97			290.23
Nonperforming assets		****	191.58			229.27			198.68			155.45			222.40
Net nonperforming assets		****	197.66			250.22			204.86			161.62			224.19

QTD net chargeoffs (recoveries) (annualized) to QTD average loans:
SBA loans		****	—	%		—	%		(0.20)	%		0.16	%		0.29	%
Commercial loans		****	0.06			—			(0.15)			0.16			—
Residential mortgage loans		****	—			—			—			0.17			0.06
Consumer loans		****	—			—			—			—			—
Total loans		****	0.03	%		—	%		(0.09)	%		0.15	%		0.03	%

Nonperforming loans to total loans		****	0.74	%		0.56	%		0.59	%		0.67	%		0.40	%
Nonperforming assets to total assets		****	0.62			0.50			0.54			0.64			0.43

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

December 31, 2020


(In thousands, except percentages and per share amounts)	****	Dec. 31, 2020		****	Sept. 30, 2020		****	Jun. 30, 2020		****	Mar. 31, 2020		****	Dec. 31, 2019		****
SUMMARY OF INCOME:
Total interest income		$	20,288		$	19,764		$	19,278		$	19,585		$	19,312
Total interest expense		****	2,949			3,437			3,753			4,341			4,549
Net interest income		****	17,339			16,327			15,525			15,244			14,763
Provision for loan losses		****	1,000			2,000			2,500			1,500			500
Net interest income after provision for loan losses		****	16,339			14,327			13,025			13,744			14,263
Total noninterest income		****	4,254			3,336			2,811			2,545			2,396
Total noninterest expense		****	10,725			10,037			9,177			9,323			8,719
Income before provision for income taxes		****	9,868			7,626			6,659			6,966			7,940
Provision for income taxes		****	2,523			1,866			1,488			1,598			1,820
Net income		$	7,345		$	5,760		$	5,171		$	5,368		$	6,120

Net income per common share - Basic		$	0.70		$	0.54		$	0.48		$	0.49		$	0.56
Net income per common share - Diluted		$	0.69		$	0.54		$	0.47		$	0.49		$	0.55

COMMON SHARE DATA:
Market price per share		$	17.55		$	11.58		$	14.30		$	11.70		$	22.57
Dividends paid		$	0.08		$	0.08		$	0.08		$	0.08		$	0.08
Book value per common share		$	16.63		$	16.01		$	15.53		$	15.10		$	14.77

Weighted average common shares outstanding - Basic		****	10,532			10,630			10,792			10,883			10,872
Weighted average common shares outstanding - Diluted		****	10,629			10,706			10,888			11,037			11,057
Issued common shares		****	10,961			10,943			10,939			10,894			10,881
Outstanding common shares		****	10,456			10,570			10,728			10,883			10,881
Treasury shares		****	505			373			211			11			-

PERFORMANCE RATIOS (Annualized):
Return on average assets		****	1.61	%		1.28	%		1.19	%		1.32	%		1.53	%
Return on average equity		****	17.07			13.76			12.59			13.23			15.41
Efficiency ratio		****	50.31			50.80			50.27			51.92			51.29
Noninterest expense to average assets		****	2.35			2.23			2.10			2.29			2.17

BALANCE SHEET DATA:
Total assets		$	1,958,914		$	1,930,836		$	1,900,774		$	1,740,076		$	1,718,942
Total deposits		****	1,557,959			1,493,440			1,483,457			1,378,618			1,250,114
Total loans		****	1,627,817			1,613,291			1,592,507			1,439,645			1,425,558
Total securities		****	47,571			50,387			54,888			58,002			66,564
Total shareholders' equity		****	173,911			169,234			166,607			164,305			160,709
Allowance for loan losses		****	(23,105)			(22,237)			(20,234)			(17,376)			(16,395)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		****	4.64	%		4.58	%		4.63	%		5.04	%		5.07	%
Interest-bearing liabilities		****	0.98			1.15			1.28			1.51			1.59
Net interest spread		****	3.66			3.43			3.35			3.53			3.48
Net interest margin		****	3.97			3.78			3.73			3.92			3.88

CREDIT QUALITY:
Nonperforming assets		$	12,060		$	9,699		$	10,184		$	11,178		$	7,372
QTD net chargeoffs (annualized) to QTD average loans		****	0.03	%		—	%		(0.09)	%		0.15	%		0.03	%
Allowance for loan losses to total loans		****	1.42			1.38			1.27			1.21			1.15
Nonperforming assets to total loans		****	0.74			0.56			0.59			0.67			0.40
Nonperforming assets to total assets		****	0.62			0.50			0.54			0.64			0.43

CAPITAL RATIOS AND OTHER:
Total equity to total assets		****	8.88	%		8.76	%		8.77	%		9.44	%		9.35	%
Community bank leverage ratio		****	10.09			9.95			10.01			10.56			10.59

Number of banking offices		****	19			19			19			19			19
Number of ATMs		****	20			20			20			20			20
Number of employees		****	206			196			191			205			203