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

October 21, 2020

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 October 21, 2020 announcing results for the three and nine months ended September 30, 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 October 21, 2020.

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: October 21, 2020
	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 October 21, 2020

Exhibit 99.1

For Immediate Release	News Media & Financial Analyst Contact:
Unity Bancorp, Inc. (NSDQ: UNTY)	James A. Hughes, President and CEO
October 21, 2020	(908) 713-4306

Unity Bancorp Reports

Quarterly Earnings of $5.8 Million

Clinton, NJ, October 21, 2020 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $5.8 million, or $0.54 per diluted share, for the quarter ended September 30, 2020, a 3.3 percent decrease compared to net income of $6.0 million, or $0.54 per diluted share for the prior year’s third quarter. For the nine months ended September 30, 2020, Unity reported net income of $16.3 million, or $1.50 per diluted share, a 7.0 percent decrease compared to net income of $17.5 million or $1.59 per diluted share for the prior year’s period. The decreases in earnings were primarily due to an increased provision for loan losses, necessitated by the COVID-19 pandemic.

Third Quarter Earnings Highlights

●	Net interest income, our primary driver of earnings, increased $1.9 million to $16.3 million for the quarter ended September 30, 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) decreased to 3.78% for the quarter ended September 30, 2020, compared to 3.90% for the prior year’s quarter and increased 5 basis points from 3.73% in the prior sequential quarter ended June 30, 2020. The year-over-year decrease was a direct result of interest rate cuts by the Board of Governors of the Federal Reserve.
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●	The provision for loan losses was $2.0 million for the quarter ended September 30, 2020, an increase of $1.3 million from the prior year’s quarter due to the increased risk of loan defaults as a result of COVID-19.
---	---
●	Noninterest income increased $626 thousand to $3.3 million compared to the prior year’s quarter and increased $525 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 September 30, 2020, quarterly residential mortgage loan sales were $85.8 million, compared to $35.2 million for the quarter ended September 30, 2019.
---	---
●	Noninterest expense increased $1.3 million to $10.0 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.
---	---
●	The effective tax rate was 24.5% compared to 22.0% in the prior year’s quarter.
---	---

Balance Sheet Highlights

●	Total loans increased $187.7 million, or 13.2%, from year-end 2019 to $1.6 billion at September 30, 2020. The increase was primarily due to $138.9 million in SBA PPP loan originations.
●	Total deposits increased $243.3 million, or 19.5%, from year-end 2019 to $1.5 billion at September 30, 2020, primarily due to increased noninterest-bearing demand deposits, resulting from the distribution of PPP funds and a strategic increase in brokered time deposits in the first quarter.
---	---
●	Borrowed funds decreased $43.0 million to $240.0 million at September 30, 2020, due to decreased FHLB overnight advances.
---	---
●	Shareholders’ equity was $169.2 million at September 30, 2020, an increase of $8.5 million from year-end 2019, due primarily to retained net income. During the third quarter, the Company repurchased 161,554 shares of common stock for a total cost of $2.1 million.
---	---
●	Book value per common share was $16.01 as of September 30, 2020.
---	---
●	At September 30, 2020, the Community Bank Leverage Ratio was 9.95%.
---	---
●	Nonperforming assets were $9.7 million at September 30, 2020, compared to $7.4 million at December 31, 2019. The allowance to total loans ratio was 1.4% at September 30, 2020.
---	---

Paycheck Protection Program Loans

As of September 30, 2020, the Company funded 1,224 Small Business Administration (“SBA”) Paycheck Protection Program (“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 principle 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.

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. All deferrals mature no later than December 31, 2020. As shown in the tables below, loans granted deferrals have significantly declined during the third quarter. The Company anticipates there will be some future deferrals granted on SBA loans, since all SBA loans were being paid by the CARES Act through September 30, 2020.

The table below summarizes loan deferrals as of September 30, 2020.


(In thousands)	Total Loan Portfolio balance		Full Deferrals		Interest Only Deferrals *		Total Loans in Deferral		% Deferrals to Total Loans
SBA loans held for sale	$	6,192	$	—	$	—	$	—	0%
SBA loans held for investment		47,125		—		—		—	0%
SBA PPP loans		138,895		—		—		—	0%
Commercial loans		799,573		14,068		22,319		36,387	5%
Residential mortgage loans (1)		473,420		24,255		—		24,255	5%
Consumer loans		148,086		—		—		—	0%
Total loans	$	1,613,291	$	38,323	$	22,319	$	60,642	4%

* The borrower pays the contractual interest, but no amortization of principal. These borrowers are deemed well secured and are not expected to default.

The table below summarizes loan deferrals as of June 30, 2020.


(In thousands)	Total Loan Portfolio balance		Total Loans in Deferral		% Deferrals to Total Loans
SBA loans held for sale	$	10,602	$	—	0%
SBA loans held for investment		36,966		—	0%
SBA PPP loans		136,039		—	0%
Commercial loans		792,752		277,323	35%
Residential mortgage loans (1)		469,987		68,142	14%
Consumer loans		146,161		9,144	6%
Total loans	$	1,592,507	$	354,609	22%

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.9 billion in assets and $1.5 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 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.

UNITY BANCORP, INC.

SUMMARY FINANCIAL HIGHLIGHTS

September 30, 2020


												Sept. 30, 2020 vs.
												Jun. 30, 2020		Sept. 30, 2019
(In thousands, except percentages and per share amounts)	****	Sept. 30, 2020		****	Jun. 30, 2020		****	Sept. 30, 2019		****	****	%		%
BALANCE SHEET DATA:
Total assets		$	1,930,836		$	1,900,774		$	1,664,308			1.6	%	16.0	%
Total deposits	****		1,493,440			1,483,457			1,273,362			0.7		17.3
Total loans	****		1,613,291			1,592,507			1,368,474			1.3		17.9
Total securities	****		50,387			54,888			63,991			(8.2)		(21.3)
Total shareholders' equity	****		169,234			166,607			154,884			1.6		9.3
Allowance for loan losses	****		(22,237)			(20,234)			(16,002)			9.9		39.0

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes		$	7,626		$	6,659		$	7,635			14.5		(0.1)
Provision for income taxes		****	1,866			1,488			1,676			25.4		11.3
Net income		$	5,760		$	5,171		$	5,959			11.4		(3.3)

Net income per common share - Basic		$	0.54		$	0.48		$	0.55			12.5		(1.8)
Net income per common share - Diluted		$	0.54		$	0.47		$	0.54			14.9		-

Performance ratios:
Return on average assets		****	1.28	%	****	1.19	%		1.53	%
Return on average equity		****	13.76	%	****	12.59	%		15.57	%
Efficiency ratio		****	50.80	%	****	50.27	%		51.06	%
Net interest margin		****	3.78	%	****	3.73	%		3.90	%
Noninterest expense to average assets		****	2.23	%	****	2.10	%		2.24	%

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes		$	21,251					$	22,375					(5.0)
Provision for income taxes		****	4,952						4,842					2.3
Net income		$	16,299					$	17,533					(7.0)

Net income per common share - Basic		$	1.51					$	1.62					(6.8)
Net income per common share - Diluted		$	1.50					$	1.59					(5.7)

Performance ratios:
Return on average assets		****	1.26	%					1.54	%				(18.2)
Return on average equity		****	13.20	%					16.02	%				(17.6)
Efficiency ratio		****	50.98	%					52.25	%				(2.4)
Net interest margin		****	3.81	%					3.97	%				(4.0)
Noninterest expense to average assets		****	2.20	%					2.28	%				(3.5)

SHARE INFORMATION:
Market price per share		$	11.58		$	14.30		$	22.15			(19.0)		(47.7)
Dividends paid		$	0.08		$	0.08		$	0.08			-		-
Book value per common share		$	16.01		$	15.53		$	14.25			3.1		12.4
Average diluted shares outstanding (QTD)		****	10,706			10,888			11,036			(1.7)		(3.0)

CAPITAL RATIOS:
Total equity to total assets		****	8.76	%	****	8.77	%		9.31	%
Community bank leverage ratio		****	9.95	%	****	10.01	%		10.54	%

CREDIT QUALITY AND RATIOS:
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Nonperforming assets		$	9,699		$	10,184		$	7,305			(4.8)		32.8
QTD net (recoveries) chargeoffs to QTD average loans		****	-	%	****	(0.09)	%		0.21	%
Allowance for loan losses to total loans		****	1.38	%	****	1.27	%		1.17	%
Nonperforming assets to total loans		****	0.56	%	****	0.59	%		0.41	%
Nonperforming assets to total assets		****	0.50	%	****	0.54	%		0.44	%

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2020


	****										September 30, 2020 vs.
											December 31,		September 30,
		September 30,			December 31,			September 30,			2019		2019
(In thousands, except percentages)	****	2020		****	2019		****	2019		****	%		%
ASSETS
Cash and due from banks		$	21,601		$	21,106		$	29,426		2.3	%	(26.6)	%
Federal funds sold and interest-bearing deposits	****		179,794			136,910			137,334		31.3		30.9
Cash and cash equivalents	****		201,395			158,016			166,760		27.5		20.8
Securities:
Securities available for sale	****		48,713			64,275			47,295		(24.2)		3.0
Securities held to maturity	****		-			-			14,332		-		(100.0)
Equity securities	****		1,674			2,289			2,364		(26.9)		(29.2)
Total securities	****		50,387			66,564			63,991		(24.3)		(21.3)
Loans:
SBA loans held for sale	****		6,192			13,529			13,053		(54.2)		(52.6)
SBA loans held for investment	****		47,125			35,767			36,380		31.8		29.5
SBA PPP loans			138,895			-			-		100.0		100.0
Commercial loans	****		799,573			765,032			723,249		4.5		10.6
Residential mortgage loans	****		473,420			467,706			456,963		1.2		3.6
Consumer loans	****		148,086			143,524			138,829		3.2		6.7
Total loans	****		1,613,291			1,425,558			1,368,474		13.2		17.9
Allowance for loan losses	****		(22,237)			(16,395)			(16,002)		35.6		39.0
Net loans	****		1,591,054			1,409,163			1,352,472		12.9		17.6
Premises and equipment, net	****		20,507			21,315			21,700		(3.8)		(5.5)
Bank owned life insurance ("BOLI")	****		26,482			26,323			25,302		0.6		4.7
Deferred tax assets	****		8,433			5,559			5,768		51.7		46.2
Federal Home Loan Bank ("FHLB") stock	****		12,394			14,184			10,899		(12.6)		13.7
Accrued interest receivable	****		10,169			6,984			6,858		45.6		48.3
Other real estate owned ("OREO")	****		711			1,723			1,723		(58.7)		(58.7)
Goodwill	****		1,516			1,516			1,516		-		-
Other assets	****		7,788			7,595			7,319		2.5		6.4
Total assets		$	1,930,836		$	1,718,942		$	1,664,308		12.3	%	16.0	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand		$	412,863		$	279,793		$	279,238		47.6	%	47.9	%
Interest-bearing demand		****	205,475			176,335			179,661		16.5		14.4
Savings		****	453,801			389,795			394,333		16.4		15.1
Time Deposits		****	421,301			404,191			420,130		4.2		0.3
Total deposits		****	1,493,440			1,250,114			1,273,362		19.5		17.3
Borrowed funds		****	240,000			283,000			210,000		(15.2)		14.3
Subordinated debentures		****	10,310			10,310			10,310		-		-
Accrued interest payable		****	283			455			420		(37.8)		(32.6)
Accrued expenses and other liabilities		****	17,569			14,354			15,332		22.4		14.6
Total liabilities		****	1,761,602			1,558,233			1,509,424		13.1		16.7
Shareholders' equity:
Common stock		****	91,474			90,113			89,753		1.5		1.9
Retained earnings		****	84,168			70,442			65,199		19.5		29.1
Treasury stock, at cost		****	(5,135)			-			-		(100.0)		(100.0)
Accumulated other comprehensive (loss) income		****	(1,273)			154			(68)		NM*		NM*
Total shareholders' equity		****	169,234			160,709			154,884		5.3		9.3
Total liabilities and shareholders' equity		$	1,930,836		$	1,718,942		$	1,664,308		12.3	%	16.0	%


COMMON SHARES AT PERIOD END:
Shares issued		****	10,943			10,881			10,869
Shares oustanding		****	10,570			10,881			10,869
Treasury shares		****	373			-			-

NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2020


												Sept. 30, 2020 vs.
		For the three months ended										Jun. 30, 2020		****	Sept. 30, 2019
(In thousands, except percentages and per share amounts)	****	Sept. 30, 2020		****	Jun. 30, 2020		****	Sept. 30, 2019		****	****		%	****		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits		$	24		$	23		$	271				4.3	%		(91.1)	%
FHLB stock		****	79			79			82				-			(3.7)
Securities:
Taxable		****	383			437			463				(12.4)			(17.3)
Tax-exempt		****	11			17			26				(35)			(57.7)
Total securities		****	394			454			489				(13.2)			(19.4)
Loans:
SBA loans		****	631			709			943				(11.0)			(33.1)
SBA PPP loans			1,036			723			-				43.3			100.0
Commercial loans		****	10,099			9,815			9,467				2.9			6.7
Residential mortgage loans		****	5,490			5,554			5,606				(1.2)			(2.1)
Consumer loans		****	2,011			1,921			2,197				4.7			(8.5)
Total loans		****	19,267			18,722			18,213				2.9			5.8
Total interest income		****	19,764			19,278			19,055				2.5			3.7
INTEREST EXPENSE
Interest-bearing demand deposits		****	347			364			438				(5.5)			16.9
Savings deposits		****	473			512			1,194				(14.6)			(23.9)
Time deposits		****	2,157			2,454			2,577				0.3			21.9
Borrowed funds and subordinated debentures		****	460			423			442				(7.1)			(24.6)
Total interest expense		****	3,437			3,753			4,651				(4.6)			1.3
Net interest income		****	16,327			15,525			14,404				3.3			7.2
Provision for loan losses		****	2,000			2,500			750				200.0			200.0
Net interest income after provision for loan losses		****	14,327			13,025			13,654				(3.6)			0.2
NONINTEREST INCOME
Branch fee income		****	237			207			373				14.5			(36.5)
Service and loan fee income		****	419			390			522				7.4			(19.7)
Gain on sale of SBA loans held for sale, net		****	534			92			-				480.4			10,000.0
Gain on sale of mortgage loans, net		****	1,713			1,553			545				10.3			214.3
BOLI income		****	147			154			138				(4.5)			6.5
Net security (losses) gains		****	(96)			79			18				(221.5)			(633.3)
Gain on sale of premises and equipment			-			-			764				-			(100.0)
Other income		****	382			336			350				13.7			9.1
Total noninterest income		****	3,336			2,811			2,710				18.7			23.1
NONINTEREST EXPENSE
Compensation and benefits		****	5,761			5,553			5,353				3.7			7.6
Processing and communications		****	722			769			749				(6.1)			(3.6)
Furniture and equipment		****	637			641			711				(0.6)			(10.4)
Occupancy		****	639			630			651				1.4			(1.8)
BSA expenses		****	626			488			-				28.3			100.0
Professional services			274			261			274				5.0			-
Advertising		****	191			207			334				(7.7)			(42.8)
Other loan expenses		****	216			168			89				28.6			142.7
Deposit insurance		****	197			159			-				24			100.0
Director fees		****	191			181			171				5.5			11.7
Loan collection & OREO expenses (income)		****	33			1			(48)				3,200.0			168.8
Other expenses		****	550			119			445				362.2			23.6
Total noninterest expense		****	10,037			9,177			8,729				9.4			15.0
Income before provision for income taxes		****	7,626			6,659			7,635				14.5			(0.1)
Provision for income taxes		****	1,866			1,488			1,676				25.4			11.3
Net income		$	5,760		$	5,171		$	5,959				11.4	%		(3.3)	%

Effective tax rate			24.5	%		22.3	%		22.0	%
Net income per common share - Basic		$	0.54		$	0.48		$	0.55
Net income per common share - Diluted		$	0.54		$	0.47		$	0.54
Weighted average common shares outstanding - Basic			10,630			10,792			10,863
Weighted average common shares outstanding - Diluted			10,706			10,888			11,036

All values are in US Dollars.

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2020


		For the nine months ended							Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	****	September 30, 2020		****	September 30, 2019		****	****		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits		$	236		$	724				(67.4)	%
FHLB stock		****	268			275				(2.5)
Securities:
Taxable		****	1,331			1,400				(4.9)
Tax-exempt		****	50			81				(38.3)
Total securities		****	1,381			1,481				(6.8)
Loans:
SBA loans		****	2,323			2,880				(19.3)
SBA PPP loans			1,760			-				100.0
Commercial loans		****	29,848			27,892				7.0
Residential mortgage loans		****	16,814			16,702				0.7
Consumer loans		****	5,999			6,382				(6.0)
Total loans		****	56,744			53,856				5.4
Total interest income		****	58,629			56,336				4.1
INTEREST EXPENSE
Interest-bearing demand deposits		****	1,189			1,289				(7.8)
Savings deposits		****	1,836			3,500				(47.5)
Time deposits		****	7,056			7,023				0.5
Borrowed funds and subordinated debentures		****	1,449			1,695				(14.5)
Total interest expense		****	11,530			13,507				(14.6)
Net interest income		****	47,099			42,829				10.0
Provision for loan losses		****	6,000			1,600				275.0
Net interest income after provision for loan losses		****	41,099			41,229				(0.3)
NONINTEREST INCOME
Branch fee income		****	761			1,120				(32.1)
Service and loan fee income		****	1,185			1,533				(22.7)
Gain on sale of SBA loans held for sale, net		****	1,099			554				98.4
Gain on sale of mortgage loans, net		****	4,317			1,525				183.1
BOLI income		****	474			435				9.0
Net security (losses) gains		****	(187)			216				(186.6)
Other income		****	1,043			1,760				(40.7)
Total noninterest income		****	8,692			7,143				21.7
NONINTEREST EXPENSE
Compensation and benefits		****	16,752			15,384				8.9
Processing and communications		****	2,199			2,213				(0.6)
Furniture and equipment		****	1,933			2,088				(7.4)
Occupancy		****	1,892			1,997				(5.3)
BSA expenses		****	1,176			-				100.0
Professional services			805			839				(4.1)
Advertising		****	688			1,056				(34.8)
Other loan expenses		****	572			499				14.6
Deposit insurance		****	473			202				134.2
Director fees		****	444			301				47.5
Loan collection & OREO expenses (income)		****	220			9				2,344.4
Other expenses		****	1,386			1,409				(1.6)
Total noninterest expense		****	28,540			25,997				9.8
Income before provision for income taxes		****	21,251			22,375				(5.0)
Provision for income taxes		****	4,952			4,842				2.3
Net income		$	16,299		$	17,533				(7.0)	%

Effective tax rate			23.3	%		21.6	%
Net income per common share - Basic		$	1.51		$	1.62
Net income per common share - Diluted		$	1.50		$	1.59
Weighted average common shares outstanding - Basic			10,768			10,836
Weighted average common shares outstanding - Diluted			10,875			11,019

All values are in US Dollars.

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

September 30, 2020

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


	For the three months ended
	September 30, 2020							September 30, 2019
	Average							Average
	Balance		Interest		Rate/Yield			Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	66,759	$	24		0.14	%	$	51,744	$	271	2.08	%
FHLB stock	****	5,996		79		5.24			5,138		82	6.33
Securities:
Taxable	****	50,118		383		3.04			58,144		463	3.16
Tax-exempt	****	2,678		15		2.23			4,418		32	2.87
Total securities (A)	****	52,796		398		3.00			62,562		495	3.14
Loans:
SBA loans	****	49,751		631		5.05			47,187		943	7.93
SBA PPP loans		138,221		1,036		2.98			-		-	-
Commercial loans	****	792,255		10,099		5.07			713,785		9,467	5.26
Residential mortgage loans	****	463,575		5,490		4.71			450,105		5,606	4.94
Consumer loans	****	147,567		2,011		5.42			136,239		2,197	6.40
Total loans (B)	****	1,591,369		19,267		4.82			1,347,316		18,213	5.36
Total interest-earning assets	$	1,716,920	$	19,768		4.58	%	$	1,466,760	$	19,061	5.16	%

Noninterest-earning assets:
Cash and due from banks	****	23,487							24,345
Allowance for loan losses	****	(21,680)							(16,224)
Other assets	****	75,807							70,484
Total noninterest-earning assets	****	77,614							78,605
Total assets	$	1,794,534						$	1,545,365

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	201,176	$	347		0.69	%	$	176,953	$	438	0.98	%
Total savings deposits	****	428,739		473		0.44			398,676		1,194	1.19
Total time deposits	****	449,333		2,157		1.91			432,035		2,577	2.37
Total interest-bearing deposits	****	1,079,248		2,977		1.10			1,007,664		4,209	1.66
Borrowed funds and subordinated debentures	****	108,137		460		1.69			92,326		442	1.90
Total interest-bearing liabilities	$	1,187,385	$	3,437		1.15	%	$	1,099,990	$	4,651	1.68	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	****	422,759							279,150
Other liabilities	****	17,838							14,364
Total noninterest-bearing liabilities	****	440,597							293,514
Total shareholders' equity	****	166,552							151,861
Total liabilities and shareholders' equity	$	1,794,534						$	1,545,365

Net interest spread			$	16,331		3.43	%			$	14,410	3.48	%
Tax-equivalent basis adjustment				(4)							(6)
Net interest income			$	16,327						$	14,404
Net interest margin						3.78	%					3.90	%

(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

September 30, 2020

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


	For the three months ended
	September 30, 2020							June 30, 2020
	Average							Average
	Balance		Interest		Rate/Yield			Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	66,759	$	24		0.14	%	$	73,899	$	23	0.13	%
FHLB stock	****	5,996		79		5.24			5,976		79	5.32
Securities:
Taxable	****	50,118		383		3.04			53,592		437	3.28
Tax-exempt	****	2,678		15		2.23			3,534		21	2.39
Total securities (A)	****	52,796		398		3.00			57,126		458	3.22
Loans:
SBA loans	****	49,751		631		5.05			47,964		709	5.95
SBA PPP loans		138,221		1,036		2.98			100,586		723	2.89
Commercial loans	****	792,255		10,099		5.07			783,962		9,815	5.04
Residential mortgage loans	****	463,575		5,490		4.71			461,156		5,554	4.84
Consumer loans	****	147,567		2,011		5.42			145,970		1,921	5.29
Total loans (B)	****	1,591,369		19,267		4.82			1,539,638		18,722	4.89
Total interest-earning assets	$	1,716,920	$	19,768		4.58	%	$	1,676,639	$	19,282	4.63	%

Noninterest-earning assets:
Cash and due from banks	****	23,487							20,698
Allowance for loan losses	****	(21,680)							(17,909)
Other assets	****	75,807							74,076
Total noninterest-earning assets	****	77,614							76,865
Total assets	$	1,794,534						$	1,753,504

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	201,176	$	347		0.69	%	$	181,943	$	364	0.80	%
Total savings deposits	****	428,739		473		0.44			403,389		512	0.51
Total time deposits	****	449,333		2,157		1.91			482,734		2,454	2.04
Total interest-bearing deposits	****	1,079,248		2,977		1.10			1,068,066		3,330	1.25
Borrowed funds and subordinated debentures	****	108,137		460		1.69			107,761		423	1.58
Total interest-bearing liabilities	$	1,187,385	$	3,437		1.15	%	$	1,175,827	$	3,753	1.28	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	****	422,759							394,723
Other liabilities	****	17,838							17,682
Total noninterest-bearing liabilities	****	440,597							412,405
Total shareholders' equity	****	166,552							165,272
Total liabilities and shareholders' equity	$	1,794,534						$	1,753,504

Net interest spread			$	16,331		3.43	%			$	15,529	3.35	%
Tax-equivalent basis adjustment				(4)							(4)
Net interest income			$	16,327						$	15,525
Net interest margin						3.78	%					3.73	%

(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

September 30, 2020

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


	For the nine months ended
	September 30, 2020							September 30, 2019
	Average							Average					****
	Balance		Interest		Rate/Yield			Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	69,940	$	236		0.45	%	$	43,021	$	724	2.25	%
FHLB stock	****	6,284		268		5.70			5,768		275	6.37
Securities:
Taxable	****	54,635		1,331		3.25			58,271		1,400	3.21
Tax-exempt	****	3,329		62		2.49			4,491		101	3.01
Total securities (A)	****	57,964		1,393		3.21			62,762		1,501	3.20
Loans:
SBA loans	****	49,337		2,323		6.29			48,238		2,880	7.98
SBA PPP loans		79,895		1,760		2.94			-		-	-
Commercial loans	****	781,942		29,848		5.10			706,280		27,892	5.28
Residential mortgage loans	****	462,497		16,814		4.86			445,145		16,702	5.02
Consumer loans	****	145,282		5,999		5.52			131,714		6,382	6.48
Total loans (B)	****	1,518,953		56,744		4.99			1,331,377		53,856	5.41
Total interest-earning assets	$	1,653,141	$	58,641		4.74	%	$	1,442,928	$	56,356	5.22	%

Noninterest-earning assets:
Cash and due from banks	****	22,048							25,019
Allowance for loan losses	****	(18,773)							(15,979)
Other assets	****	73,429							70,243
Total noninterest-earning assets	****	76,704							79,283
Total assets	$	1,729,845						$	1,522,211

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	192,078	$	1,189		0.83	%	$	177,789	$	1,289	0.97	%
Total savings deposits	****	408,810		1,836		0.60			397,029		3,500	1.18
Total time deposits	****	455,900		7,056		2.07			408,718		7,023	2.30
Total interest-bearing deposits	****	1,056,788		10,081		1.28			983,536		11,812	1.61
Borrowed funds and subordinated debentures	****	115,624		1,449		1.67			107,101		1,695	2.12
Total interest-bearing liabilities	$	1,172,412	$	11,530		1.32	%	$	1,090,637	$	13,507	1.66	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	****	375,229							271,118
Other liabilities	****	17,209							14,129
Total noninterest-bearing liabilities	****	392,438							285,247
Total shareholders' equity	****	164,995							146,327
Total liabilities and shareholders' equity	$	1,729,845						$	1,522,211

Net interest spread			$	47,111		3.42	%			$	42,849	3.56	%
Tax-equivalent basis adjustment				(12)							(20)
Net interest income			$	47,099						$	42,829
Net interest margin						3.81	%					3.97	%

(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

September 30, 2020


Amounts in thousands, except percentages	****	Sept. 30, 2020		****	Jun. 30, 2020		****	Mar. 31, 2020		****	Dec. 31, 2019		****	Sept. 30, 2019		****
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period		$	20,234		$	17,376		$	16,395		$	16,002		$	15,965
Provision for loan losses charged to expense		****	2,000			2,500			1,500			500			750
		****	22,234			19,876			17,895			16,502			16,715
Less: Chargeoffs
SBA loans		****	1			-			25			43			99
Commercial loans		****	-			219			300			-			500
Residential mortgage loans		****	-			-			200			75			130
Consumer loans		****	-			-			-			-			-
Total chargeoffs		****	1			219			525			118			729
Add: Recoveries
SBA loans		****	3			75			5			7			13
Commercial loans		****	1			502			1			4			3
Residential mortgage loans		****	-			-			-			-			-
Consumer loans		****	-			-			-			-			-
Total recoveries		****	4			577			6			11			16
Net (recoveries) chargeoffs		****	(3)			(358)			519			107			713
Balance, end of period		$	22,237		$	20,234		$	17,376		$	16,395		$	16,002

LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans		$	3,446		$	2,363		$	1,627		$	1,164		$	503
Commercial loans		****	527			413			613			529			629
Residential mortgage loans		****	3,722			6,192			6,910			3,936			4,427
Consumer loans		****	1,293			505			505			20			23
Total nonperforming loans (1)		****	8,988			9,473			9,655			5,649			5,582
Other real estate owned ("OREO")		****	711			711			1,523			1,723			1,723
Nonperforming assets		****	9,699			10,184			11,178			7,372			7,305
Less: Amount guaranteed by SBA		****	812			307			427			59			63
Net nonperforming assets		$	8,887		$	9,877		$	10,751		$	7,313		$	7,242

Loans 90 days past due & still accruing		$	—		$	—		$	—		$	930		$	140

Performing Troubled Debt Restructurings (TDRs)		$	673		$	684		$	694		$	705		$	718

Allowance for loan losses to:
Total loans at quarter end		****	1.38	%		1.27	%		1.21	%		1.15	%		1.17	%
Total nonperforming loans		****	247.41			213.60			179.97			290.23			286.67
Nonperforming assets		****	229.27			198.68			155.45			222.40			219.06
Net nonperforming assets		****	250.22			204.86			161.62			224.19			220.96

QTD net chargeoffs (recoveries) (annualized) to QTD average loans:
SBA loans		****	-	%		(0.20)	%		0.16	%		0.29	%		0.72	%
Commercial loans		****	-			(0.15)			0.16			-			0.28
Residential mortgage loans		****	-			-			0.17			0.06			0.11
Consumer loans		****	-			-			-			-			-
Total loans		****	-	%		(0.09)	%		0.15	%		0.03	%		0.21	%

Nonperforming loans to total loans		****	0.56	%		0.59	%		0.67	%		0.40	%		0.41	%
Nonperforming assets to total assets		****	0.50			0.54			0.64			0.43			0.44

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

September 30, 2020


(In thousands, except percentages and per share amounts)	****	Sept. 30, 2020		****	Jun. 30, 2020		****	Mar. 31, 2020		****	Dec. 31, 2019		****	Sept. 30, 2019		****
SUMMARY OF INCOME:
Total interest income		$	19,764		$	19,278		$	19,585		$	19,312		$	19,055
Total interest expense		****	3,437			3,753			4,341			4,549			4,651
Net interest income		****	16,327			15,525			15,244			14,763			14,404
Provision for loan losses		****	2,000			2,500			1,500			500			750
Net interest income after provision for loan losses		****	14,327			13,025			13,744			14,263			13,654
Total noninterest income		****	3,336			2,811			2,545			2,396			2,710
Total noninterest expense		****	10,037			9,177			9,323			8,719			8,729
Income before provision for income taxes		****	7,626			6,659			6,966			7,940			7,635
Provision for income taxes		****	1,866			1,488			1,598			1,820			1,676
Net income		$	5,760		$	5,171		$	5,368		$	6,120		$	5,959

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

COMMON SHARE DATA:
Market price per share		$	11.58		$	14.30		$	11.70		$	22.57		$	22.15
Dividends paid		$	0.08		$	0.08		$	0.08		$	0.08		$	0.08
Book value per common share		$	16.01		$	15.53		$	15.10		$	14.77		$	14.25

Weighted average common shares outstanding - Basic		****	10,630			10,792			10,883			10,872			10,863
Weighted average common shares outstanding - Diluted		****	10,706			10,888			11,037			11,057			11,036
Issued common shares		****	10,943			10,939			10,894			10,881			10,869
Outstanding common shares		****	10,570			10,728			10,883			10,881			10,869
Treasury shares		****	373			211			11			-			-

PERFORMANCE RATIOS (Annualized):
Return on average assets		****	1.28	%		1.19	%		1.32	%		1.53	%		1.53	%
Return on average equity		****	13.76			12.59			13.23			15.41			15.57
Efficiency ratio		****	50.80			50.27			51.92			51.29			51.06
Noninterest expense to average assets		****	2.23			2.10			2.29			2.17			2.24

BALANCE SHEET DATA:
Total assets		****	1,930,836		$	1,900,774		$	1,740,076		$	1,718,942		$	1,664,308
Total deposits		****	1,493,440			1,483,457			1,378,618			1,250,114			1,273,362
Total loans		****	1,613,291			1,592,507			1,439,645			1,425,558			1,368,474
Total securities		****	50,387			54,888			58,002			66,564			63,991
Total shareholders' equity		****	169,234			166,607			164,305			160,709			154,884
Allowance for loan losses		****	(22,237)			(20,234)			(17,376)			(16,395)			(16,002)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		****	4.58	%		4.63	%		5.04	%		5.07	%		5.16	%
Interest-bearing liabilities		****	1.15			1.28			1.51			1.59			1.68
Net interest spread		****	3.43			3.35			3.53			3.48			3.48
Net interest margin		****	3.78			3.73			3.92			3.88			3.90

CREDIT QUALITY:
Nonperforming assets		****	9,699		$	10,184		$	11,178		$	7,372		$	7,305
QTD net chargeoffs (annualized) to QTD average loans		****	-	%		(0.09)	%		0.15	%		0.03	%		0.21	%
Allowance for loan losses to total loans		****	1.38			1.27			1.21			1.15			1.17
Nonperforming assets to total loans		****	0.56			0.59			0.67			0.40			0.41
Nonperforming assets to total assets		****	0.50			0.54			0.64			0.43			0.44

CAPITAL RATIOS AND OTHER:
Total equity to total assets		****	8.76	%		8.77	%		9.44	%		9.35	%		9.31	%
Community bank leverage ratio		****	9.95			10.01			10.56			10.59			10.54

Number of banking offices		****	19			19			19			19			19
Number of ATMs		****	20			20			20			20			20
Number of employees		****	196			191			205			203			194