UNITY BANCORP INC /NJ/ - FORM 8-K - EX-99.1

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8-K - 8-K - UNITY BANCORP INC /NJ/	unty-20160127x8k.htm

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

January 27, 2016

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports Quarterly Net Income Increased 55%

and Annual Earnings Increased 49%

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported increased fourth quarter and year-to-date earnings. Major contributing factors included strong loan growth, increased deposits and improved credit quality. Commercial, residential mortgage and consumer lending were up; with over 16% annual growth in total loans.

“The performance this year is a reflection of the power of an organization that focuses on culture” reported James A Hughes, President and CEO. “Our employees are joined together to provide an exceptional banking experience for the benefit of all our stakeholders. As a result of their efforts, we had an exceptional year, and I have never felt more invigorated about 2016 and beyond.”

Net income was $2.6 million, or $0.31 per diluted share, for the three months ended December 31, 2015, a 55% increase compared to net income of $1.7 million, or $0.20 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 1.00% and 13.59%, respectively, compared to 0.70% and 9.78% for the same period a year ago.

Highlights include:

16.7% loan growth since year-end 2014 – 30.4% growth in consumer loans, 19.8% growth in residential mortgage loans, and 15.8% growth in commercial loans.

21.3% increase in noninterest-bearing demand deposits since year-end 2014.

13.8% increase in net interest income compared to the prior year’s quarter due to strong loan growth.

Net interest margin of 3.60% this quarter compared to 3.49% in the prior year’s quarter.

Improved credit quality metrics and reduced loan loss provision due to a significant reduction in loan charge-offs and a 36.1% decrease in nonperforming loans.

“In 2016, we will continue on our journey of growth and increased profitability” said James A Hughes, President and CEO. “Strategically, we will set our sights on growing our branches, improving our array of products and continuing our investment in technology to maintain our relevance to our customer base.”

For the twelve months ended December 31, 2015, net income totaled $9.6 million, or $1.12 per diluted share, compared to $6.4 million or $0.81 per diluted share in the prior year. Return on average assets and average common equity for the year ended December 31, 2015 were 0.96% and 12.92%, respectively, compared to 0.70% and 10.28% for the prior year.

Net Interest Income

Our core source of earnings, net interest income, increased $1.1 million to $9.0 million for the quarter ended December 31, 2015 compared to the prior year’s period. This increase was the result of the strong loan growth in residential mortgage, commercial and consumer loans. Quarterly average commercial loans increased $51.3 million, average residential mortgage loans have increased $42.9 million and consumer loans increased $17.9 million compared to the comparable quarter in 2014. Partially offsetting this increase was the lower level of interest income from our reduced investment portfolio and a slight increase in deposit interest expense.

The net interest margin increased 11 basis points to 3.60% for the quarter ended December 31, 2015 compared to 3.49% for the prior year’s quarter. The expansion in the net interest margin was due to strong loan growth and the increase in noninterest-bearing demand deposits, partially offset by lower balances of investment securities.

Provision for Loan Losses

The provision for loan losses totaled $100 thousand for the quarter ended December 31, 2015, compared to $850 thousand for the prior year period. For the twelve months ended December 31, 2015, the provision for loan losses was $500 thousand compared to $2.6 million for the same period last year. The decrease was the result of significantly lower levels of net charge-offs and reduced nonperforming assets. Quarterly net charge-offs declined $1.5 million compared to the fourth quarter 2014, while annual net charge-offs decreased $2.8 million.

Noninterest Income

Noninterest income increased $260 thousand to $1.9 million for the three months ended December 31, 2015, compared to the same period last year. For the year ended December 31, 2015, noninterest income increased $1.1 million to $7.7 million, compared to the same period a year ago. Quarterly and year-to-date noninterest income increased due to higher gains on the sale of residential mortgage and SBA loans.

During the quarter, $36.3 million in residential mortgage loans were originated, of which $16.3 million were sold at a gain of $379 thousand, compared to $31.1 million originated and $14.1 million sold at a gain of $323 thousand during the prior year’s quarter. For the twelve month period, $181.0 million in residential mortgage loans were originated, of which $94.3 million were sold at a gain of $2.3 million, compared to $129.8 million originated and $59.2 million sold at a gain of $1.1 million in the prior year. All residential mortgage loans originated in 2015 that are held in portfolio for investment are adjustable rate mortgages or fixed rate mortgages with a term of 15 years or less.

SBA loan sales totaled $7.2 million with net gains on sale of $533 thousand for the quarter. There were $4.0 million in SBA loan sales with net gains of $342 thousand in the prior year’s quarter. For the year, SBA loan sales totaled $14.1 million with net gains of $1.2 million in 2015 and $10.4 million with net gains of $975 thousand in 2014. The increased sale volume is directly related to the increase in the origination of SBA loans within our lending area.

In addition to the noninterest income increases noted above, other notable items included:

Branch fee income rose in both the quarterly and year over year periods due to increased fees as our volume of commercial checking account customers has risen.

Service and loan fee income declined in the quarterly period due to reduced loan late charges and payoff fees, combined with lower SBA servicing fees as our serviced loan portfolio declined compared to the same quarter a year ago. For the year, increased loan volume drove loan processing and mortgage application fees higher, offsetting the decline in SBA servicing income.

BOLI income declined for the year as the prior year’s period included a death benefit.

Noninterest Expense

Noninterest expense increased $801 thousand to $6.8 million for the quarter and increased $2.2 million to $26.9 million for the year ended December 31, 2015, respectively. The majority of the increase was due to higher compensation and benefits expenses of $331 thousand for the quarter and $1.5 million for the year. Compensation and benefits expenses have increased over the past twelve months due to increased head count in loan origination and support staff, and a lower overall vacancy rate when compared to the prior year. In addition, mortgage commission expense increased due to the larger volume of mortgages originated. Benefits expense also increased due to the adoption of supplemental executive retirement plans.

Other expense fluctuations included: higher software maintenance and network monitoring expense, increased audit expenses related to Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) testing and director fees. As credit quality improved this year, our loan and OREO expenses have decreased despite an OREO expense increase quarter over quarter due to a $263 thousand loss on a sale in the fourth quarter.

Financial Condition

At December 31, 2015, total assets were $1.1 billion, an increase of $76.1 million from year-end 2014:

Total loans increased $127.1 million or 16.7%, from year-end 2014 to $889.0 million at December 31, 2015. The majority of the growth came in our commercial, residential mortgage and consumer loan portfolios which increased $63.6 million, $43.6 million and $18.0 million, respectively.

Total deposits increased $100.2 million or 12.6%, to $894.5 million at December 31, 2015, due primarily to increased time deposits and noninterest-bearing demand deposits.

Borrowed funds decreased $33.0 million to $92.0 million at December 31, 2015, due to reduced overnight borrowings of $7.0 million compared to $50.0 million at year-end 2014. In addition, during the quarter, $20.0 million in Federal Home Loan Bank borrowings at an average cost of 4.11% were extended to 2020 at an average rate of 2.08%.

Shareholders’ equity was $78.5 million at December 31, 2015, an increase of $8.3 million from year-end 2014, due to year-to-date net income less the dividends paid to shareholders.

Book value per common share was $9.30 as of December 31, 2015.

At December 31, 2015, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 8.82%, 9.37%, 11.18% and 12.43% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

Nonperforming assets totaled $8.9 million at December 31, 2015, or 0.99% of total loans and OREO, compared to $12.5 million or 1.64% of total loans and OREO at year-end 2014.

Nonperforming loans decreased 36.1% to $7.3 million at December 31, 2015 from year-end.

OREO increased $429 thousand to $1.6 million at December 31, 2015 from year-end.

The allowance for loan losses totaled $12.8 million at December 31, 2015, or 1.44% of total loans compared to $12.6 million and 1.65% at December 31, 2014.

Net recoveries were $238 thousand for the three months ended December 31, 2015, compared to net charge-offs of $1.2 million for the same period a year ago. For the year ended December 31, 2015, net charge-offs were $292 thousand, a decrease of $2.8 million compared to the prior year’s period.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.1 billion in assets and $894 million in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 15 retail service centers located in Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County, Pennsylvania. For additional information about Unity, visit our website at www.unitybank.com , or call 800- 618-BANK.

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements may be identified by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond the company’s control and could impede its ability to achieve these goals. These factors include those items included in our Annual Report on Form 10-K under the heading “Item IA-Risk Factors” as well as general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, our ability to manage and reduce the level of our nonperforming assets, and results of regulatory exams, among other factors.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

UNITY BANCORP, INC.

SUMMARY FINANCIAL HIGHLIGHTS

December 31, 2015



										Dec. 31, 2015 vs.
										Sept. 30, 2015		Dec. 31, 2014
(In thousands, except percentages and per share amounts)	Dec. 31, 2015			Sept. 30, 2015			Dec. 31, 2014			%		%
BALANCE SHEET DATA:
Total assets	$	1,084,866		$	1,052,711		$	1,008,788		3.1	%	7.5	%
Total deposits		894,493			866,247			794,341		3.3		12.6
Total loans		888,958			855,560			761,825		3.9		16.7
Total securities		71,336			71,492			80,082		(0.2)		(10.9)
Total shareholders' equity		78,470			76,065			70,123		3.2		11.9
Allowance for loan losses		(12,759)			(12,421)			(12,551)		2.7		1.7

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	3,954		$	3,845		$	2,653		2.8		49.0
Provision for income taxes		1,315			1,294			952		1.6		38.1
Net income	$	2,639		$	2,551		$	1,701		3.4		55.1

Net income per common share - Basic	$	0.31		$	0.30		$	0.21		3.3		47.6
Net income per common share - Diluted	$	0.31		$	0.30		$	0.20		3.3		55.0

Return on average assets		1.00	%		1.00	%		0.70	%	-		42.9
Return on average equity		13.59	%		13.54	%		9.78	%	0.4		39.0
Efficiency ratio		62.81	%		62.88	%		63.68	%	(0.1)		(1.4)
Net interest margin		3.60	%		3.60	%		3.49	%	-		3.2

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes	$	14,368					$	9,553				50.4
Provision for income taxes		4,811						3,145				53.0
Net income	$	9,557					$	6,408				49.1

Net income per common share - Basic	$	1.13					$	0.82				37.8
Net income per common share - Diluted	$	1.12					$	0.81				38.3

Return on average assets		0.96	%					0.70	%			37.1
Return on average equity		12.92	%					10.28	%			25.7
Efficiency ratio		64.41	%					67.90	%			(5.1)
Net interest margin		3.63	%					3.53	%			2.8

SHARE INFORMATION:
Market price per share	$	12.47		$	9.77		$	9.43		27.6		32.2
Dividends paid	$	0.04		$	0.04		$	0.03		-		0.3
Book value per common share	$	9.30		$	9.02		$	8.36		3.1		11.2
Average diluted shares outstanding (QTD)		8,547			8,536			8,478		0.1		0.8

CAPITAL RATIOS:
Total equity to total assets		7.23	%		7.23	%		6.95	%	-		4.0
Leverage ratio		8.82	%		8.92	%		8.71	%	(1.1)		1.3
Common equity tier 1 risk-based capital ratio		9.37	%		9.37	%		n/a		n/a		n/a
Tier 1 risk-based capital ratio		11.18	%		11.25	%		11.57	%	(0.6)		(3.4)
Total risk-based capital ratio		12.43	%		12.50	%		12.83	%	(0.6)		(3.1)

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	8,851		$	12,501		$	12,530		(29.2)		(29.4)
QTD net chargeoffs (annualized) to QTD average loans		(0.11)	%		0.09	%		0.63	%	(222.2)		(117.5)
Allowance for loan losses to total loans		1.44	%		1.45	%		1.65	%	(0.7)		(12.7)
Nonperforming assets to total loans and OREO		0.99	%		1.46	%		1.64	%	(32.2)		(39.6)
Nonperforming assets to total assets		0.82	%		1.19	%		1.24	%	(31.1)	%	(33.9)	%

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2015



							Dec. 31, 2015 vs.
							Sept. 30, 2015		Dec. 31, 2014
(In thousands, except percentages)	Dec. 31, 2015		Sept. 30, 2015		Dec. 31, 2014		%		%
ASSETS
Cash and due from banks	$	22,681	$	21,863	$	29,351	3.7	%	(22.7)	%
Federal funds sold and interest-bearing deposits		65,476		66,994		100,470	(2.3)		(34.8)
Cash and cash equivalents		88,157		88,857		129,821	(0.8)		(32.1)
Securities:
Securities available for sale		52,865		53,470		60,073	(1.1)		(12.0)
Securities held to maturity		18,471		18,022		20,009	2.5		(7.7)
Total securities		71,336		71,492		80,082	(0.2)		(10.9)
Loans:
SBA loans held for sale		13,114		13,937		5,179	(5.9)		153.2
SBA loans held for investment		39,393		39,728		40,401	(0.8)		(2.5)
SBA 504 loans		29,353		29,221		34,322	0.5		(14.5)
Commercial loans		465,518		442,970		401,949	5.1		15.8
Residential mortgage loans		264,523		255,447		220,878	3.6		19.8
Consumer loans		77,057		74,257		59,096	3.8		30.4
Total loans		888,958		855,560		761,825	3.9		16.7
Allowance for loan losses		(12,759)		(12,421)		(12,551)	(2.7)		1.7
Net loans		876,199		843,139		749,274	3.9		16.9
Premises and equipment, net		15,171		15,297		15,231	(0.8)		(0.4)
Bank owned life insurance ("BOLI")		13,381		13,285		13,001	0.7		2.9
Deferred tax assets		5,968		6,107		5,860	(2.3)		1.8
Federal Home Loan Bank ("FHLB") stock		4,600		4,510		6,032	2.0		(23.7)
Accrued interest receivable		3,884		3,704		3,518	4.9		10.4
Other real estate owned ("OREO")		1,591		1,759		1,162	(9.6)		36.9
Goodwill and other intangibles		1,516		1,516		1,516	-		-
Other assets		3,063		3,045		3,291	0.6		(6.9)
Total assets	$	1,084,866	$	1,052,711	$	1,008,788	3.1	%	7.5	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	185,267	$	175,298	$	152,785	5.7	%	21.3	%
Interest-bearing demand		130,605		123,984		128,875	5.3		1.3
Savings		301,447		299,017		300,348	0.8		0.4
Time, under $100,000		134,468		124,348		113,119	8.1		18.9
Time, $100,000 and over, under $250,000		104,106		115,912		81,532	(10.2)		27.7
Time, $250,000 and over		38,600		27,688		17,682	39.4		118.3
Total deposits		894,493		866,247		794,341	3.3		12.6
Borrowed funds		92,000		90,000		125,000	2.2		(26.4)
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		461		460		474	0.2		(2.7)
Accrued expenses and other liabilities		3,977		4,474		3,385	(11.1)		17.5
Total liabilities		1,006,396		976,646		938,665	3.0		7.2
Shareholders' equity:
Common stock		59,371		59,205		58,785	0.3		1.0
Retained earnings		19,566		17,270		11,195	13.3		74.8
Accumulated other comprehensive (loss) income		(467)		(410)		143	NM		NM
Total shareholders' equity		78,470		76,065		70,123	3.2		11.9
Total liabilities and shareholders' equity	$	1,084,866	$	1,052,711	$	1,008,788	3.1	%	7.5	%

Issued and outstanding common shares

8,436

8,429

8,388

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2015



										Dec. 31, 2015 vs.
	For the three months ended									Sept. 30, 2015					Dec. 31, 2014
(In thousands, except percentages and per share amounts)	Dec. 31, 2015			Sept. 30, 2015			Dec. 31, 2014			$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	13		$	11		$	13		$	2		18.2	%	$	-		-	%
FHLB stock		37			36			38			1		2.8			(1)		(2.6)
Securities:
Taxable		360			349			444			11		3.2			(84)		(18.9)
Tax-exempt		70			71			79			(1)		(1.4)			(9)		(11.4)
Total securities		430			420			523			10		2.4			(93)		(17.8)
Loans:
SBA loans		713			696			605			17		2.4			108		17.9
SBA 504 loans		346			353			425			(7)		(2.0)			(79)		(18.6)
Commercial loans		5,637			5,378			5,064			259		4.8			573		11.3
Residential mortgage loans		2,939			2,811			2,461			128		4.6			478		19.4
Consumer loans		880			849			673			31		3.7			207		30.8
Total loans		10,515			10,087			9,228			428		4.2			1,287		13.9
Total interest income		10,995			10,554			9,802			441		4.2			1,193		12.2
INTEREST EXPENSE
Interest-bearing demand deposits		121			108			112			13		12.0			9		8.0
Savings deposits		298			255			270			43		16.9			28		10.4
Time deposits		910			839			715			71		8.5			195		27.3
Borrowed funds and subordinated debentures		686			730			817			(44)		(6.0)			(131)		(16.0)
Total interest expense		2,015			1,932			1,914			83		4.3			101		5.3
Net interest income		8,980			8,622			7,888			358		4.2			1,092		13.8
Provision for loan losses		100			200			850			(100)		100.0			(750)		(88.2)
Net interest income after provision for loan losses		8,880			8,422			7,038			458		5.4			1,842		26.2
NONINTEREST INCOME
Branch fee income		402			399			362			3		0.8			40		11.0
Service and loan fee income		266			306			388			(40)		(13.1)			(122)		(31.4)
Gain on sale of SBA loans held for sale, net		533			308			342			225		100.0			191		55.8
Gain on sale of mortgage loans, net		379			926			323			(547)		(59.1)			56		17.3
Net security gains		-			-			55			-		-			(55)		(100.0)
Other income		340			336			190			4		1.2			150		78.9
Total noninterest income		1,920			2,275			1,660			(355)		(15.6)			260		15.7
NONINTEREST EXPENSE
Compensation and benefits		3,528			3,814			3,197			(286)		(7.5)			331		10.4
Occupancy		644			598			596			46		7.7			48		8.1
Processing and communications		620			631			615			(11)		(1.7)			5		0.8
Furniture and equipment		455			393			397			62		15.8			58		14.6
Professional services		213			251			131			(38)		(15.1)			82		62.6
Loan costs		113			265			211			(152)		(57.4)			(98)		(46.4)
OREO expenses		265			15			72			250		1,666.7			193		268.1
Deposit insurance		173			163			162			10		6.1			11		6.8
Advertising		302			203			269			99		48.8			33		12.3
Other expenses		533			519			395			14		2.7			138		34.9
Total noninterest expense		6,846			6,852			6,045			(6)		(0.1)			801		13.3
Income before provision for income taxes		3,954			3,845			2,653			109		2.8			1,301		49.0
Provision for income taxes		1,315			1,294			952			21		1.6			363		38.1
Net income	$	2,639		$	2,551		$	1,701		$	88		3.4	%	$	938		55.1	%

Effective tax rate		33.3	%		33.7	%		35.9	%

Net income per common share - Basic	$	0.31		$	0.30		$	0.21

Net income per common share - Diluted	$	0.31	$	0.30	$	0.20

Weighted average common shares outstanding - Basic		8,430		8,427		8,378
Weighted average common shares outstanding - Diluted		8,547		8,536		8,478

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2015



	For the twelve months ended December 31,						Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2015			2014			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	39		$	44		$	(5)		(11.4)	%
FHLB stock		155			165			(10)		(6.1)
Securities:
Taxable		1,459			2,183			(724)		(33.2)
Tax-exempt		284			355			(71)		(20.0)
Total securities		1,743			2,538			(795)		(31.3)
Loans:
SBA loans		2,693			2,467			226		9.2
SBA 504 loans		1,414			1,676			(262)		(15.6)
Commercial loans		21,357			19,329			2,028		10.5
Residential mortgage loans		11,048			8,898			2,150		24.2
Consumer loans		3,202			2,301			901		39.2
Total loans		39,714			34,671			5,043		14.5
Total interest income		41,651			37,418			4,233		11.3
INTEREST EXPENSE
Interest-bearing demand deposits		438			430			8		1.9
Savings deposits		1,088			856			232		27.1
Time deposits		3,160			2,777			383		13.8
Borrowed funds and subordinated debentures		2,974			3,243			(269)		(8.3)
Total interest expense		7,660			7,306			354		4.8
Net interest income		33,991			30,112			3,879		12.9
Provision for loan losses		500			2,550			(2,050)		(80.4)
Net interest income after provision for loan losses		33,491			27,562			5,929		21.5
NONINTEREST INCOME
Branch fee income		1,520			1,469			51		3.5
Service and loan fee income		1,334			1,260			74		5.9
Gain on sale of SBA loans held for sale, net		1,204			975			229		23.5
Gain on sale of mortgage loans, net		2,336			1,139			1,197		105.1
BOLI income		380			559			(179)		(32.0)
Net security gains		28			433			(405)		(93.5)
Other income		927			844			83		9.8
Total noninterest income		7,729			6,679			1,050		15.7
NONINTEREST EXPENSE
Compensation and benefits		14,295			12,750			1,545		12.1
Occupancy		2,515			2,478			37		1.5
Processing and communications		2,461			2,461			-		-
Furniture and equipment		1,643			1,510			133		8.8
Professional services		942			748			194		25.9
Loan costs		759			780			(21)		(2.7)
OREO expenses		382			485			(103)		(21.2)
Deposit insurance		669			677			(8)		(1.2)
Advertising		1,030			998			32		3.2
Other expenses		2,156			1,801			355		19.7
Total noninterest expense		26,852			24,688			2,164		8.8
Income before provision for income taxes		14,368			9,553			4,815		50.4
Provision for income taxes		4,811			3,145			1,666		53.0
Net income	$	9,557		$	6,408		$	3,149		49.1	%

Effective tax rate		33.5	%		32.9	%

Net income per common share - Basic	$	1.13		$	0.82
Net income per common share - Diluted	$	1.12		$	0.81


Weighted average common shares outstanding - Basic	8,425	7,856
Weighted average common shares outstanding - Diluted	8,529	7,945

UNITY BANCORP, INC.

QTD NET INTEREST MARGIN

December 31, 2015


(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	December 31, 2015							September 30, 2015
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	47,421	$	13		0.11	%	$	34,465	$	11		0.13	%
FHLB stock		3,700		37		3.97			3,517		36		4.06
Securities:
Taxable		59,425		360		2.40			61,542		349		2.25
Tax-exempt		11,564		104		3.57			11,612		105		3.59
Total securities (A)		70,989		464		2.59			73,154		454		2.46
Loans:
SBA loans		54,912		713		5.15			53,325		696		5.18
SBA 504 loans		29,319		346		4.68			29,268		353		4.79
Commercial loans		452,494		5,637		4.94			433,285		5,378		4.92
Residential mortgage loans		259,938		2,939		4.49			254,765		2,811		4.38
Consumer loans		75,789		880		4.61			72,641		849		4.64
Total loans (B)		872,452		10,515		4.78			843,284		10,087		4.75
Total interest-earning assets	$	994,562	$	11,029		4.40	%	$	954,420	$	10,588		4.41	%

Noninterest-earning assets:
Cash and due from banks		24,214							24,990
Allowance for loan losses		(12,801)							(12,619)
Other assets		44,055							44,098
Total noninterest-earning assets		55,468							56,469
Total assets	$	1,050,030						$	1,010,889

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	131,800	$	121		0.36	%	$	125,405	$	108		0.34	%
Total savings deposits		295,013		298		0.40			290,413		255		0.35
Total time deposits		271,647		910		1.33			256,216		839		1.30
Total interest-bearing deposits		698,460		1,329		0.75			672,034		1,202		0.71
Borrowed funds and subordinated debentures		87,465		686		3.11			83,383		730		3.47
Total interest-bearing liabilities	$	785,925	$	2,015		1.02	%	$	755,417	$	1,932		1.01	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		182,024							176,085
Other liabilities		5,056							4,663
Total noninterest-bearing liabilities		187,080							180,748
Total shareholders' equity		77,025							74,724
Total liabilities and shareholders' equity	$	1,050,030						$	1,010,889

Net interest spread			$	9,014		3.38	%			$	8,656		3.40	%
Tax-equivalent basis adjustment				(34)							(34)
Net interest income			$	8,980						$	8,622
Net interest margin						3.60	%						3.60	%

(A)

Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 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.

QTD NET INTEREST MARGIN

December 31, 2015


(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the three months ended
	December 31, 2015							December 31, 2014
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	47,421	$	13		0.11	%	$	50,929	$	13		0.10	%
FHLB stock		3,700		37		3.97			3,807		38		3.96
Securities:
Taxable		59,425		360		2.40			71,542		444		2.48
Tax-exempt		11,564		104		3.57			13,226		117		3.54
Total securities (A)		70,989		464		2.59			84,768		561		2.65
Loans:
SBA loans		54,912		713		5.15			50,816		605		4.76
SBA 504 loans		29,319		346		4.68			34,533		425		4.88
Commercial loans		452,494		5,637		4.94			401,215		5,064		5.01
Residential mortgage loans		259,938		2,939		4.49			217,008		2,461		4.54
Consumer loans		75,789		880		4.61			57,923		673		4.61
Total loans (B)		872,452		10,515		4.78			761,495		9,228		4.82
Total interest-earning assets	$	994,562	$	11,029		4.40	%	$	900,999	$	9,840		4.35	%

Noninterest-earning assets:
Cash and due from banks		24,214							30,346
Allowance for loan losses		(12,801)							(13,074)
Other assets		44,055							43,577
Total noninterest-earning assets		55,468							60,849
Total assets	$	1,050,030						$	961,848

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	131,800	$	121		0.36	%	$	126,788	$	112		0.35	%
Total savings deposits		295,013		298		0.40			298,166		270		0.36
Total time deposits		271,647		910		1.33			219,866		715		1.29
Total interest-bearing deposits		698,460		1,329		0.75			644,820		1,097		0.68
Borrowed funds and subordinated debentures		87,465		686		3.11			91,009		817		3.51
Total interest-bearing liabilities	$	785,925	$	2,015		1.02	%	$	735,829	$	1,914		1.03	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		182,024							152,359
Other liabilities		5,056							4,616
Total noninterest-bearing liabilities		187,080							156,975
Total shareholders' equity		77,025							69,044
Total liabilities and shareholders' equity	$	1,050,030						$	961,848

Net interest spread			$	9,014		3.38	%			$	7,926		3.32	%
Tax-equivalent basis adjustment				(34)							(38)
Net interest income			$	8,980						$	7,888
Net interest margin						3.60	%						3.49	%

(A)

(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, 2015


(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
	For the twelve months ended
	December 31, 2015							December 31, 2014
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	34,883	$	39		0.11	%	$	44,900	$	44		0.10	%
FHLB stock		3,695		155		4.19			3,972		165		4.15
Securities:
Taxable		62,937		1,459		2.32			81,334		2,183		2.68
Tax-exempt		11,739		421		3.59			14,493		526		3.63
Total securities (A)		74,676		1,880		2.52			95,827		2,709		2.83
Loans:
SBA loans		50,997		2,693		5.28			53,232		2,467		4.63
SBA 504 loans		30,366		1,414		4.66			33,754		1,676		4.97
Commercial loans		428,702		21,357		4.98			379,327		19,329		5.10
Residential mortgage loans		246,278		11,048		4.49			196,333		8,898		4.53
Consumer loans		69,580		3,202		4.60			51,188		2,301		4.50
Total loans (B)		825,923		39,714		4.81			713,834		34,671		4.86
Total interest-earning assets	$	939,177	$	41,788		4.45	%	$	858,533	$	37,589		4.38	%

Noninterest-earning assets:
Cash and due from banks		25,952							27,021
Allowance for loan losses		(12,638)							(13,124)
Other assets		43,742							44,312
Total noninterest-earning assets		57,056							58,209
Total assets	$	996,233						$	916,742

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Total interest-bearing demand deposits	$	126,876	$	438		0.35	%	$	125,706	$	430		0.34	%
Total savings deposits		290,848		1,088		0.37			274,395		856		0.31
Total time deposits		240,132		3,160		1.32			214,984		2,777		1.29
Total interest-bearing deposits		657,856		4,686		0.71			615,085		4,063		0.66
Borrowed funds and subordinated debentures		87,652		2,974		3.39			91,230		3,243		3.55
Total interest-bearing liabilities	$	745,508	$	7,660		1.03	%	$	706,315	$	7,306		1.03	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		172,172							144,310
Other liabilities		4,611							3,764
Total noninterest-bearing liabilities		176,783							148,074
Total shareholders' equity		73,942							62,353
Total liabilities and shareholders' equity	$	996,233						$	916,742

Net interest spread			$	34,128		3.42	%			$	30,283		3.35	%
Tax-equivalent basis adjustment				(137)							(171)
Net interest income			$	33,991						$	30,112
Net interest margin						3.63	%						3.53	%

(A)

(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, 2015


Amounts in thousands, except percentages	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	12,421		$	12,404		$	12,181		$	12,551		$	12,918
Provision for loan losses charged to expense		100			200			-			200			850
		12,521			12,604			12,181			12,751			13,768
Less: Chargeoffs
SBA loans		151			86			6			128			569
SBA 504 loans		-			-			-			589			-
Commercial loans		52			10			147			100			377
Residential mortgage loans		-			50			-			-			362
Consumer loans		41			52			7			30			-
Total chargeoffs		244			198			160			847			1,308
Add: Recoveries
SBA loans		6			10			2			37			12
SBA 504 loans		-			-			-			-			-
Commercial loans		476			5			370			201			31
Residential mortgage loans		-			-			10			39			40
Consumer loans		-			-			1			-			8
Total recoveries		482			15			383			277			91
Net chargeoffs (recoveries)		(238)			183			(223)			570			1,217
Balance, end of period	$	12,759		$	12,421		$	12,404		$	12,181		$	12,551

LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	7,260		$	10,742		$	8,837		$	9,141		$	11,368
Other real estate owned ("OREO")		1,591			1,759			2,265			1,975			1,162
Nonperforming assets		8,851			12,501			11,102			11,116			12,530
Less: Amount guaranteed by SBA		288			225			267			270			1,569
Net nonperforming assets	$	8,563		$	12,276		$	10,835		$	10,846		$	10,961

Loans 90 days past due & still accruing	$	-		$	272		$	273		$	5			890

Performing Troubled Debt Restructurings (TDRs)	$	2,995		$	3,268		$	3,360		$	3,458		$	3,548
(1) Nonperforming TDRs included in nonperforming loans		162			2,808			2,843			2,911			2,960
Total TDRs	$	3,157		$	6,076		$	6,203		$	6,369		$	6,508

Allowance for loan losses to:
Total loans at quarter end		1.44	%		1.45	%		1.51	%		1.55	%		1.65	%
Nonperforming loans (1)		175.74			115.63			140.36			133.26			110.41
Nonperforming assets		144.15			99.36			111.73			109.58			100.17
Net nonperforming assets		149.00			101.18			114.48			112.31			114.51

QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		1.05	%		0.57	%		0.03	%		0.76	%		4.35	%
SBA 504 loans		-			-			-			7.15			-
Commercial loans		(0.37)			-			(0.21)			(0.10)			0.34
Residential mortgage loans		-			0.08			(0.02)			(0.07)			0.59
Consumer loans		0.21			0.28			0.04			0.20			(0.05)
Total loans		(0.11)	%		0.09	%		(0.11)	%		0.30	%		0.63	%

Nonperforming loans to total loans		0.82	%		1.26	%		1.08	%		1.16	%		1.49	%
Nonperforming loans and TDRs to total loans		1.15			1.64			1.48			1.61			1.96
Nonperforming assets to total loans and OREO		0.99			1.46			1.35			1.41			1.64
Nonperforming assets to total assets		0.82			1.19			1.08			1.07			1.24

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

December 31, 2015


(In thousands, except percentages and per share amounts)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
SUMMARY OF INCOME:
Total interest income	$	10,995		$	10,554		$	10,218		$	9,884		$	9,802
Total interest expense		2,015			1,932			1,849			1,864			1,914
Net interest income		8,980			8,622			8,369			8,020			7,888
Provision for loan losses		100			200			-			200			850
Net interest income after provision for loan losses		8,880			8,422			8,369			7,820			7,038
Total noninterest income		1,920			2,275			1,893			1,641			1,660
Total noninterest expense		6,846			6,852			6,652			6,502			6,045
Income before provision for income taxes		3,954			3,845			3,610			2,959			2,653
Provision for income taxes		1,315			1,294			1,182			1,020			952
Net income	$	2,639		$	2,551		$	2,428		$	1,939		$	1,701

Net income per common share - Basic	$	0.31		$	0.30		$	0.29		$	0.23		$	0.21
Net income per common share - Diluted	$	0.31		$	0.30		$	0.28		$	0.23		$	0.20

COMMON SHARE DATA:
Market price per share	$	12.47		$	9.77		$	9.79		$	9.08		$	9.43
Dividends paid	$	0.04		$	0.04		$	0.03		$	0.03		$	0.03
Book value per common share	$	9.30		$	9.02		$	8.75		$	8.55		$	8.36
Weighted average common shares outstanding - Basic		8,430			8,427			8,425			8,417			8,378
Weighted average common shares outstanding - Diluted		8,547	`		8,536			8,524			8,514			8,478
Issued and outstanding common shares		8,436			8,429			8,425			8,423			8,388

OPERATING RATIOS (Annualized):
Return on average assets		1.00	%		1.00	%		1.01	%		0.82	%		0.70	%
Return on average equity		13.59			13.54			13.35			11.08			9.78
Efficiency ratio		62.81			62.88			64.99			67.30			63.68

BALANCE SHEET DATA:
Total assets	$	1,084,866		$	1,052,711		$	1,024,303		$	1,035,404		$	1,008,788
Total deposits		894,493			866,247			815,427			789,441			794,341
Total loans		888,958			855,560			821,696			784,642			761,825
Total securities		71,336			71,492			74,375			77,308			80,082
Total shareholders' equity		78,470			76,065			73,690			71,987			70,123
Allowance for loan losses		(12,759)			(12,421)			(12,404)			(12,181)			(12,551)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.40	%		4.41	%		4.52	%		4.49	%		4.35	%
Interest-bearing liabilities		1.02			1.01			1.03			1.05			1.03
Net interest spread		3.38			3.40			3.49			3.44			3.32
Net interest margin		3.60			3.60			3.70			3.64			3.49

CREDIT QUALITY:
Nonperforming assets		8,851			12,501			11,102			11,116			12,530
QTD net chargeoffs (annualized) to QTD average loans		(0.11)	%		0.09	%		(0.11)	%		0.30	%		0.63	%
Allowance for loan losses to total loans		1.44			1.45			1.51			1.55			1.65
Nonperforming assets to total loans and OREO		0.99			1.46			1.35			1.41			1.64
Nonperforming assets to total assets		0.82			1.19			1.08			1.07			1.24

CAPITAL RATIOS AND OTHER:
Total equity to total assets		7.23	%		7.23	%		7.19	%		6.95	%		6.95	%
Leverage ratio		8.82			8.92			9.09			8.94			8.71
Common equity tier 1 risk-based capital ratio		9.37			9.37			9.39			9.25			n/a
Tier 1 risk-based capital ratio		11.18			11.25			11.33			11.22			11.57

Total risk-based capital ratio	12.43	12.50	12.59	12.48	12.83
Number of banking offices	15	15	15	15	15
Number of ATMs	16	16	16	16	16
Number of employees	162	163	177	166	169

UNITY BANCORP INC /NJ/ - FORM 8-K - EX-99.1 - January 27, 2016

Attached files

UNITY BANCORP INC /NJ/ Reports