8-K

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

April 17, 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

(Commission File Number)

22-3282551

(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))

Item 2.02     Results of Operation and Financial Condition

The Registrant issued a press release on April 17, 2020 announcing results for the threeMarch 31, 2020, the full text of which is incorporated by reference to this Item.

Item 9.01    Financial Statements and Exhibits

(d) Exhibits

Exhibit 99.1Press release issued by the Registrant on April 17, 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: April 20, 2020

By: /s/ James A. Hughes

James A. Hughes

President and Chief Executive Officer

EXHIBIT INDEX

EXHIBIT #DESCRIPTION

99.1        Press release issued by the Registrant on April 17, 2020

EX-99.1

For Immediate Release	News Media & Financial Analyst Contact:
Unity Bancorp, Inc. (NSDQ: UNTY)	James A. Hughes, President and CEO
April 17, 2020	(908) 713-4306

Unity Bancorp Reports

Quarterly Earnings of $5.4 Million

Clinton, NJ, April 17, 2020 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $5.4 million, or $0.49 per diluted share, for the quarter ended March 31, 2020, a 6.5% decrease compared to the $5.7 million, or $0.52 per diluted share reported for the prior year’s first quarter, primarily due to an increase of $1.0 million in our provision for loan losses, necessitated by impacts on the loan portfolio caused by COVID-19.

COVID-19 Impact

Due to the COVID-19 epidemic, results of operations for the first quarter of 2020 do not track with the Company’s historical performance. The impact of COVID-19 is evolving rapidly and its future effects are uncertain at this moment in time. The actual impact will depend on many factors beyond our Company’s control. However, the Company has and is taking every step to protect the health and safety of its employees and customers and to work with its customers experiencing economic hardship resulting from the epidemic. The Company has the majority of non-branch personnel working remotely. Branch lobbies are now closed, and the Company is servicing clients through its drive through facilities, ATM’s or by appointment. The Company has also opted to host our Annual Shareholders Meeting online, in light of government restrictions on group gatherings.

The Bank is working closely with its loan customers to educate and guide them on their options for financial assistance, including disaster loans, the Paycheck Protection Program (PPP) and payment relief through deferrals and waived fees. The Company will continue to provide a fast and flexible response to the quickly changing circumstances and is confident it will navigate successfully through these trying times.

First Quarter Earnings Highlights

• Net interest income, our primary driver of earnings, increased $1.0 million to $15.2 million for the quarter ended March 31, 2020, compared to the prior year’s quarter, due to strong loan growth.

• Net interest margin (NIM) decreased to 3.92% for the quarter ended March 31, 2020, compared to 4.06% for the prior year’s quarter and increased 4 basis points from 3.88% in the prior sequential quarter ended December 31, 2019. Due to the recent significant interest rate cuts by the Federal Reserve Board in response to COVID-19, modest NIM contractions are expected during the remainder of 2020.

• The provision for loan losses was $1.5 million for the quarter ended March 31, 2020 an increase of $1.0 million from the prior year’s quarter due to the increased risk of loan defaults as a result of COVID-19. Many of the Company’s customers have been required to close pursuant to governmental restrictions on non-essential businesses, and we expect they will suffer significant cash flow issues. Due to the uncertainty of COVID-19, the Company anticipates an elevated provision until businesses have reopened and deferral periods have expired.

• Noninterest income increased $523 thousand to $2.5 million compared to the prior year’s quarter and increased $149 thousand compared to the prior sequential quarter. The increases were primarily due to increased gains on mortgage loan sales, partially offset by amortization on our equity securities.

• Noninterest expense increased $845 thousand to $9.3 million compared to the prior year’s quarter and increased $604 thousand compared to the prior sequential quarter. The increases were primarily due to increased compensation accruals, severance payouts and increased consulting expenses in connection with BSA/AML remediation.

• The effective tax rate was 22.9% compared to 20.9% in the prior year's quarter.

Balance Sheet Highlights

• Total loans increased $14.1 million, or 1.0%, from year-end 2019 to $1.4 billion at March 31, 2020. Commercial and consumer loan portfolios increased $21.0 million and $6.2 million, respectively, partially offset by a decline of $11.6 million in residential mortgage loans and $1.5 million in SBA loans. Loan growth was impacted by payoffs and a $10.0 million sale of portfolio mortgage loans. The Company anticipates slow loan growth through at least the second quarter due to COVID-19.

• Total deposits increased $128.5 million, or 10.3%, from year-end 2019 to $1.4 billion at March 31, 2020 primarily due to increased noninterest-bearing demand deposits, resulting from a temporary nonrecurring deposit, and a strategic increase in brokered deposits.

• Borrowed funds decreased $114.0 million to $169.0 million at March 31, 2020.

• Shareholders’ equity was $164.3 million at March 31, 2020, an increase of $3.6 million from year-end 2019, due to retained net income. On July 16, 2019, the Company authorized the repurchase of up to 5.0% of its outstanding common stock. However, the Company has currently suspended its stock buybacks during the COVID-19 epidemic.

• Book value per common share was $15.10 as of March 31, 2020.

• At March 31, 2020, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 10.55%, 11.72%, 12.44% and 13.21% respectively, all in excess of the ratios required to be deemed “well-capitalized.”

• Nonperforming assets were $11.2 million, which consisted primarily of $8.4 million of well-secured residential assets. The allowance to total loans ratio was 1.21% at March 31, 2020. Net charge-offs were $519 thousand for the quarter.

Other Highlights

• Unity Bank has been named one of the 2020 Best Places to Work in New Jersey by NJBiz - the only bank in New Jersey to make this prestigious list. It is the fourth year in a row that Unity has been honored by the survey and awards program, which identifies, recognizes and honors the top places of employment in New Jersey that benefit the state's economy, workforce and businesses.

• Employees of Unity Bank have been completely focused on helping our customers cope with the impacts of COVID-19 by, among other things, participating in SBA sponsored relief programs to assist small businesses.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.7 billion in assets and $1.4 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

March 31, 2020

													Mar 31, 2020 vs.
													Dec 31, 2019		Mar 31, 2019
(In thousands, except percentages and per share amounts)	Mar 31, 2020				Dec 31, 2019				Mar 31, 2019				%		%
BALANCE SHEET DATA:
Total assets	$	1,740,076			$	1,718,942			$	1,590,046			1.2	%	9.4	%
Total deposits	1,378,618				1,250,114				1,226,586				10.3		12.4
Total loans	1,439,645				1,425,558				1,312,994				1.0		9.6
Total securities	58,002				66,564				62,962				(12.9	)	(7.9	)
Total shareholders' equity	164,305				160,709				143,717				2.2		14.3
Allowance for loan losses	(17,376		)		(16,395		)		(15,684		)		6.0		10.8
FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	6,966			$	7,940			$	7,260			(12.3	)	(4.0	)
Provision for income taxes	1,598				1,820				1,520				(12.2	)	5.1
Net income	$	5,368			$	6,120			$	5,740			(12.3	)	(6.5	)
Net income per common share - Basic	$	0.49			$	0.56			$	0.53			(12.5	)	(7.5	)
Net income per common share - Diluted	$	0.49			$	0.55			$	0.52			(10.9	)	(5.8	)
Performance ratios:
Return on average assets	1.32			%	1.53			%	1.55			%
Return on average equity	13.23			%	15.41			%	16.52			%
Efficiency ratio	51.92			%	51.29			%	52.53			%
Net interest margin	3.92			%	3.88			%	4.06			%
Noninterest expense to average assets	2.29			%	2.17			%	2.29			%
SHARE INFORMATION:
Market price per share	$	11.70			$	22.57			$	18.88			(48.2	)	(38.0	)
Dividends paid	$	0.08			$	0.08			$	0.07			—		14.3
Book value per common share	$	15.10			$	14.77			$	13.28			2.2		13.7
Average diluted shares outstanding (QTD)	11,037				11,057				10,955				(0.2	)	0.7
CAPITAL RATIOS:
Total equity to total assets	9.44			%	9.35			%	9.04			%
Leverage ratio	10.56			%	10.59			%	10.09			%
Common equity tier 1 risk-based capital ratio	11.71			%	11.59			%	11.78			%
Tier 1 risk-based capital ratio	12.43			%	12.32			%	12.62			%
Total risk-based capital ratio	13.19			%	13.06			%	13.87			%
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	11,178			$	7,372			$	7,547			51.6		48.1
QTD net chargeoffs (annualized) to QTD average loans	0.15			%	0.03			%	0.09			%
Allowance for loan losses to total loans	1.21			%	1.15			%	1.19			%
Nonperforming assets to total loans	0.67			%	0.40			%	0.55			%
Nonperforming assets to total assets	0.64			%	0.43			%	0.47			%

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

March 31, 2020

										Mar 31, 2020 vs.
										Dec 31, 2019		Mar 31, 2019
(In thousands, except percentages)	Mar 31, 2020			Dec 31, 2019			Mar 31, 2019			%		%
ASSETS
Cash and due from banks	$	20,377		$	21,106		$	20,737		(3.5	) %	(1.7	) %
Federal funds sold, interest-bearing deposits and repos	158,618			136,910			128,400			15.9		23.5
Cash and cash equivalents	178,995			158,016			149,137			13.3		20.0
Securities:
Securities available for sale	56,290			64,275			45,934			(12.4	)	22.5
Securities held to maturity	—			—			14,780			—		(100.0	)
Equity securities	1,712			2,289			2,248			(25.2	)	(23.8	)
Total securities	58,002			66,564			62,962			(12.9	)	(7.9	)
Loans:
SBA loans held for sale	16,104			13,529			8,010			19.0		101.0
SBA loans held for investment	31,697			35,767			38,815			(11.4	)	(18.3	)
Commercial loans	786,077			765,032			702,235			2.8		11.9
Residential mortgage loans	456,072			467,706			438,431			(2.5	)	4.0
Consumer loans	149,695			143,524			125,503			4.3		19.3
Total loans	1,439,645			1,425,558			1,312,994			1.0		9.6
Allowance for loan losses	(17,376		)	(16,395		)	(15,684		)	6.0		10.8
Net loans	1,422,269			1,409,163			1,297,310			0.9		9.6
Premises and equipment, net	21,046			21,315			23,059			(1.3	)	(8.7	)
Bank owned life insurance ("BOLI")	26,379			26,323			24,861			0.2		6.1
Deferred tax assets	6,305			5,559			5,320			13.4		18.5
Federal Home Loan Bank ("FHLB") stock	9,054			14,184			10,120			(36.2	)	(10.5	)
Accrued interest receivable	7,396			6,984			6,926			5.9		6.8
Other real estate owned ("OREO")	1,523			1,723			273			(11.6	)	457.9
Goodwill	1,516			1,516			1,516			—		—
Other assets	7,591			7,595			8,562			(0.1	)	(11.3	)
Total assets	$	1,740,076		$	1,718,942		$	1,590,046		1.2	%	9.4	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	334,731		$	279,793		$	259,114		19.6	%	29.2	%
Interest-bearing demand	166,990			176,335			166,409			(5.3	)	0.3
Savings	388,213			389,795			399,006			(0.4	)	(2.7	)
Time Deposits	488,684			404,191			402,057			20.9		21.5
Total deposits	1,378,618			1,250,114			1,226,586			10.3		12.4
Borrowed funds	169,000			283,000			195,000			(40.3	)	(13.3	)
Subordinated debentures	10,310			10,310			10,310			—		—
Accrued interest payable	237			455			419			(47.9	)	(43.4	)
Accrued expenses and other liabilities	17,606			14,354			14,014			22.7		25.6
Total liabilities	1,575,771			1,558,233			1,446,329			1.1		8.9
Shareholders' equity:
Common stock	90,370			90,113			88,779			0.3		1.8
Retained earnings	74,939			70,442			55,145			6.4		35.9
Treasury stock, at cost	(172		)	—			—			(100.0)		(100.0)
Accumulated other comprehensive (loss) income	(832		)	154			(207		)	NM		NM
Total shareholders' equity	164,305			160,709			143,717			2.2		14.3
Total liabilities and shareholders' equity	$	1,740,076		$	1,718,942		$	1,590,046		1.2	%	9.4	%
COMMON SHARES AT PERIOD END:
Shares issued	10,894			10,881			10,822
Shares oustanding	10,883			10,881			10,822
Treasury shares	11			—			—

NM=Not meaningful

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

March 31, 2020

								Mar 31, 2020 vs.
	For the three months ended							Dec 31, 2019					Mar 31, 2019
(In thousands, except percentages and per share amounts)	Mar 31, 2020			Dec 31, 2019		Mar 31, 2019		$			%		$			%
INTEREST INCOME
Federal funds sold, interest-bearing deposits and repos	$	188		$	182	$	221	$	6		3.3	%	$	(33	)	(14.9	)%
FHLB stock	109			110		116		(1		)	(0.9	)	(7		)	(6.0	)
Securities:
Taxable	511			527		475		(16		)	(3.0	)	36			7.6
Tax-exempt	22			22		29		—			—		(7		)	(24.1	)
Total securities	533			549		504		(16		)	(2.9	)	29			5.8
Loans:
SBA loans	985			900		995		85			9.4		(10		)	(1.0	)
Commercial loans	9,933			9,684		9,069		249			2.6		864			9.5
Residential mortgage loans	5,770			5,782		5,560		(12		)	(0.2	)	210			3.8
Consumer loans	2,067			2,105		2,035		(38		)	(1.8	)	32			1.6
Total loans	18,755			18,471		17,659		284			1.5		1,096			6.2
Total interest income	19,585			19,312		18,500		273			1.4		1,085			5.9
INTEREST EXPENSE
Interest-bearing demand deposits	478			506		409		(28		)	(5.5	)	69			16.9
Savings deposits	851			996		1,119		(145		)	(14.6	)	(268		)	(23.9	)
Time deposits	2,447			2,439		2,007		8			0.3		440			21.9
Borrowed funds and subordinated debentures	565			608		749		(43		)	(7.1	)	(184		)	(24.6	)
Total interest expense	4,341			4,549		4,284		(208		)	(4.6	)	57			1.3
Net interest income	15,244			14,763		14,216		481			3.3		1,028			7.2
Provision for loan losses	1,500			500		500		1,000			200.0		1,000			200.0
Net interest income after provision for loan losses	13,744			14,263		13,716		(519		)	(3.6	)	28			0.2
NONINTEREST INCOME
Branch fee income	317			383		368		(66		)	(17.2	)	(51		)	(13.9	)
Service and loan fee income	376			432		442		(56		)	(13.0	)	(66		)	(14.9	)
Gain on sale of SBA loans held for sale, net	473			355		316		118			33.2		157			49.7
Gain on sale of mortgage loans, net	1,051			565		350		486			86.0		701			200.3
BOLI income	173			152		151		21			13.8		22			14.6
Net security (losses) gains	(170		)	157		100		(327		)	(208.3	)	(270		)	(270.0	)
Other income	325			352		295		(27		)	(7.7	)	30			10.2
Total noninterest income	2,545			2,396		2,022		149			6.2		523			25.9
NONINTEREST EXPENSE
Compensation and benefits	5,439			5,282		4,845		157			3.0		594			12.3
Occupancy	624			652		694		(28		)	(4.3	)	(70		)	(10.1	)
Processing and communications	708			711		716		(3		)	(0.4	)	(8		)	(1.1	)
Furniture and equipment	655			806		659		(151		)	(18.7	)	(4		)	(0.6	)
Professional services	332			222		288		110			49.5		44			15.3
Loan collection & OREO expenses	186			33		66		153			463.6		120			181.8
Other loan expenses	89			70		46		19			27.1		43			93.5
Deposit insurance	88			—		167		88			NM		(79		)	(47.3	)
Advertising	290			302		348		(12		)	(4.0	)	(58		)	(16.7	)
Director fees	200			175		163		25			14.3		37			22.7
Other expenses	712			466		486		246			52.8		226			46.5
Total noninterest expense	9,323			8,719		8,478		604			6.9		845			10.0
Income before provision for income taxes	6,966			7,940		7,260		(974		)	(12.3	)	(294		)	(4.0	)
Provision for income taxes	1,598			1,820		1,520		(222		)	(12.2	)	78			5.1
Net income	$	5,368		$	6,120	$	5,740	$	(752	)	(12.3	)%	$	(372	)	(6.5	)%

Effective tax rate	22.9		%	22.9		%	20.9		%
Net income per common share - Basic	$	0.49		$	0.56		$	0.53
Net income per common share - Diluted	$	0.49		$	0.55		$	0.52
Weighted average common shares outstanding - Basic	10,883			10,872			10,801
Weighted average common shares outstanding - Diluted	11,037			11,057			10,955

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

March 31, 2020

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	March 31, 2020								March 31, 2019
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	69,196		$	188		1.09	%	$	38,066		$	221		2.35	%
FHLB stock	6,883			109			6.37		6,951			116			6.77
Securities:
Taxable	60,243			511			3.41		58,735			475			3.28
Tax-exempt	3,783			31			3.30		4,588			36			3.18
Total securities (A)	64,026			542			3.40		63,323			511			3.27
Loans:
SBA loans	50,528			985			7.84		50,015			995			8.07
Commercial loans	769,497			9,933			5.19		697,856			9,069			5.27
Residential mortgage loans	462,748			5,770			5.02		439,904			5,560			5.13
Consumer loans	142,284			2,067			5.84		125,987			2,035			6.55
Total loans (B)	1,425,057			18,755			5.29		1,313,762			17,659			5.45
Total interest-earning assets	$	1,565,162		$	19,594		5.04	%	$	1,422,102		$	18,507		5.28	%
Noninterest-earning assets:
Cash and due from banks	21,942								26,105
Allowance for loan losses	(16,698		)						(15,753		)
Other assets	70,381								70,586
Total noninterest-earning assets	75,625								80,938
Total assets	$	1,640,787							$	1,503,040
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	193,016		$	478		1.00	%	$	182,080		$	409		0.91	%
Total savings deposits	394,082			851			0.87		397,209			1,119			1.14
Total time deposits	435,705			2,447			2.26		370,990			2,007			2.19
Total interest-bearing deposits	1,022,803			3,776			1.48		950,279			3,535			1.51
Borrowed funds and subordinated debentures	131,057			565			1.73		134,877			749			2.25
Total interest-bearing liabilities	$	1,153,860		$	4,341		1.51	%	$	1,085,156		$	4,284		1.60	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	307,683								262,664
Other liabilities	16,101								14,327
Total noninterest-bearing liabilities	323,784								276,991
Total shareholders' equity	163,143								140,893
Total liabilities and shareholders' equity	$	1,640,787							$	1,503,040
Net interest spread				$	15,253		3.53	%				$	14,223		3.68	%
Tax-equivalent basis adjustment				(9		)						(7		)
Net interest income				$	15,244							$	14,216
Net interest margin							3.92	%							4.06	%

(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

March 31, 2020

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	March 31, 2020								December 31, 2019
	Average Balance			Interest			Rate/Yield		Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold, interest-bearing deposits and repos	$	69,196		$	188		1.09	%	$	44,346		$	182		1.63	%
FHLB stock	6,883			109			6.37		6,949			110			6.28
Securities:
Taxable	60,243			511			3.41		62,787			527			3.33
Tax-exempt	3,783			31			3.30		4,106			27			2.61
Total securities (A)	64,026			542			3.40		66,893			554			3.29
Loans:
SBA loans	50,528			985			7.84		50,016			900			7.14
Commercial loans	769,497			9,933			5.19		742,071			9,684			5.18
Residential mortgage loans	462,748			5,770			5.02		460,450			5,782			4.98
Consumer loans	142,284			2,067			5.84		140,458			2,105			5.95
Total loans (B)	1,425,057			18,755			5.29		1,392,995			18,471			5.26
Total interest-earning assets	$	1,565,162		$	19,594		5.04	%	$	1,511,183		$	19,317		5.07	%
Noninterest-earning assets:
Cash and due from banks	21,942								27,964
Allowance for loan losses	(16,698		)						(16,293		)
Other assets	70,381								69,226
Total noninterest-earning assets	75,625								80,897
Total assets	$	1,640,787							$	1,592,080
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	193,016		$	478		1.00	%	$	196,638		$	506		1.02	%
Total savings deposits	394,082			851			0.87		397,401			996			0.99
Total time deposits	435,705			2,447			2.26		411,445			2,439			2.35
Total interest-bearing deposits	1,022,803			3,776			1.48		1,005,484			3,941			1.55
Borrowed funds and subordinated debentures	131,057			565			1.73		132,533			608			1.82
Total interest-bearing liabilities	$	1,153,860		$	4,341		1.51	%	$	1,138,017		$	4,549		1.59	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits	307,683								279,925
Other liabilities	16,101								16,611
Total noninterest-bearing liabilities	323,784								296,536
Total shareholders' equity	163,143								157,527
Total liabilities and shareholders' equity	$	1,640,787							$	1,592,080
Net interest spread				$	15,253		3.53	%				$	14,768		3.48	%
Tax-equivalent basis adjustment				(9		)						(5		)
Net interest income				$	15,244							$	14,763
Net interest margin							3.92	%							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.

QUARTERLY ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES

March 31, 2020

Amounts in thousands, except percentages	Mar 31, 2020			Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	16,395		$	16,002		$	15,965		$	15,684		$	15,488
Provision for loan losses charged to expense	1,500			500			750			350			500
	17,895			16,502			16,715			16,034			15,988
Less: Chargeoffs
SBA loans	25			43			98			85			308
Commercial loans	300			—			500			—			1
Residential mortgage loans	200			75			130			—			—
Consumer loans	—			—			—			—			1
Total chargeoffs	525			118			728			85			310
Add: Recoveries
SBA loans	5			7			12			2			1
Commercial loans	1			4			3			4			5
Residential mortgage loans	—			—			—			—			—
Consumer loans	—			—			—			10			—
Total recoveries	6			11			15			16			6
Net chargeoffs	519			107			713			69			304
Balance, end of period	$	17,376		$	16,395		$	16,002		$	15,965		$	15,684
LOAN QUALITY INFORMATION:
Nonperforming loans:
SBA loans	$	1,627		$	1,164		$	503		$	437		$	814
Commercial loans	613			529			629			54			1,046
Residential mortgage loans	6,910			3,936			4,427			3,924			5,243
Consumer loans	505			20			23			—			171
Total nonperforming loans (1)	9,655			5,649			5,582			4,415			7,274
Other real estate owned ("OREO")	1,523			1,723			1,723			921			273
Nonperforming assets	11,178			7,372			7,305			5,336			7,547
Less: Amount guaranteed by SBA	427			59			63			68			68
Net nonperforming assets	$	10,751		$	7,313		$	7,242		$	5,268		$	7,479
Loans 90 days past due & still accruing	$	—		$	930		$	140		$	—		$	39
Performing Troubled Debt Restructurings (TDRs)	$	694		$	705		$	718		$	728		$	738
Allowance for loan losses to:
Total loans at quarter end	1.21		%	1.15		%	1.17		%	1.19		%	1.19		%
Nonperforming loans (1)	179.97			290.43			286.67			361.61			215.62
Nonperforming assets	155.45			222.40			219.06			299.19			207.82
Net nonperforming assets	161.62			224.19			220.96			303.06			209.71
QTD net chargeoffs (recoveries) (annualized) to QTD average loans:
SBA loans	0.16		%	0.29		%	0.72		%	0.70		%	2.49		%
Commercial loans	0.16			—			0.28			—			—
Residential mortgage loans	0.17			0.06			0.11			—			—
Consumer loans	—			—			—			(0.03		)	—
Total loans	0.15		%	0.03		%	0.21		%	0.02		%	0.09		%
Nonperforming loans to total loans	0.67		%	0.40		%	0.41		%	0.33		%	0.55		%
Nonperforming assets to total assets	0.64			0.43			0.44			0.33			0.47

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

March 31, 2020

(In thousands, except percentages and per share amounts)	Mar 31, 2020			Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019
SUMMARY OF INCOME:
Total interest income	$	19,585		$	19,312		$	19,055		$	18,781		$	18,500
Total interest expense	4,341			4,549			4,651			4,571			4,284
Net interest income	15,244			14,763			14,404			14,210			14,216
Provision for loan losses	1,500			500			750			350			500
Net interest income after provision for loan losses	13,744			14,263			13,654			13,860			13,716
Total noninterest income	2,545			2,396			2,710			2,411			2,022
Total noninterest expense	9,323			8,719			8,729			8,791			8,478
Income before provision for income taxes	6,966			7,940			7,635			7,480			7,260
Provision for income taxes	1,598			1,820			1,676			1,646			1,520
Net income	$	5,368		$	6,120		$	5,959		$	5,834		$	5,740
Net income per common share - Basic	$	0.49		$	0.56		$	0.55		$	0.54		$	0.53
Net income per common share - Diluted	$	0.49		$	0.55		$	0.54		$	0.53		$	0.52
COMMON SHARE DATA:
Market price per share	$	11.70		$	22.57		$	22.15		$	22.70		$	18.88
Dividends paid	$	0.08		$	0.08		$	0.08		$	0.08		$	0.07
Book value per common share	$	15.10		$	14.77		$	14.25		$	13.76		$	13.28
Weighted average common shares outstanding - Basic	10,883			10,872			10,863			10,843			10,801
Weighted average common shares outstanding - Diluted	11,037			11,057			11,036			11,026			10,955
Issued common shares	10,894			10,881			10,869			10,856			10,822
Outstanding common shares	10,883			10,881			10,869			10,856			10,822
Treasury shares	11			—			—			—			—
PERFORMANCE RATIOS (Annualized):
Return on average assets	1.32		%	1.53		%	1.53		%	1.54		%	1.55		%
Return on average equity	13.23			15.41			15.57			16.01			16.52
Efficiency ratio	51.92			51.29			51.06			53.20			52.53
Noninterest expense to average assets	2.29			2.17			2.24			2.32			2.29
BALANCE SHEET DATA:
Total assets	1,740,076			1,718,942			1,664,308			1,626,737			1,590,046
Total deposits	1,378,618			1,250,114			1,273,362			1,264,353			1,226,586
Total loans	1,439,645			1,425,558			1,368,474			1,344,757			1,312,994
Total securities	58,002			66,564			63,991			62,122			62,962
Total shareholders' equity	164,305			160,709			154,884			149,383			143,717
Allowance for loan losses	(17,376		)	(16,395		)	(16,002		)	(15,965		)	(15,684		)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets	5.04		%	5.07		%	5.16		%	5.24		%	5.28		%
Interest-bearing liabilities	1.51			1.59			1.68			1.69			1.60
Net interest spread	3.53			3.48			3.48			3.55			3.68
Net interest margin	3.92			3.88			3.90			3.96			4.06
CREDIT QUALITY:
Nonperforming assets	11,178			7,372			7,305			5,336			7,547
QTD net chargeoffs (annualized) to QTD average loans	0.15		%	0.03		%	0.21		%	0.02		%	0.09		%
Allowance for loan losses to total loans	1.21			1.15			1.17			1.19			1.19
Nonperforming assets to total loans	0.67			0.40			0.41			0.33			0.55
Nonperforming assets to total assets	0.64			0.43			0.44			0.33			0.47

(In thousands, except percentages and per share amounts)	Mar 31, 2020		Dec 31, 2019		Sep 30, 2019		Jun 30, 2019		Mar 31, 2019
CAPITAL RATIOS AND OTHER:
Total equity to total assets	9.44	%	9.35	%	9.31	%	9.18	%	9.04	%
Leverage ratio	10.56		10.59		10.54		10.36		10.09
Common equity tier 1 risk-based capital ratio	11.71		11.59		12.24		11.99		11.78
Tier 1 risk-based capital ratio	12.43		12.32		13.04		12.81		12.62
Total risk-based capital ratio	13.19		13.06		14.28		14.06		13.87
Number of banking offices	19		19		19		19		19
Number of ATMs	20		20		20		20		20
Number of employees	205		203		194		185		190