Unity Bancorp : Earnings Release

For Immediate Release	News Media & Financial Analyst Contact:
Unity Bancorp, Inc. (NSDQ: UNTY)	Alan J. Bedner, EVP and CFO
January 23, 2019	[phone]

Unity Bancorp Reports Quarterly Earnings of $5.8 Million

James A. Hughes, President and CEO, commented on the financial results:On behalf of the entire Unity Bancorp team, I am pleased to report another quarter of record profitability. During the quarter we gained considerable traction in growing our premiere franchise.

Our fourth quarter performance is a reflection of our commitment to our clients, communities, employees and shareholders. I am very optimistic about our future and look forward to providing superior returns in 2019.

(1) Core Net Income is a Non-GAAP financial measure consisting of net income and excluding the impact of the Tax Cuts and Jobs Act. See the reconcilement of GAAP and Non-GAAP financials.

Clinton, NJ, January 23, 2019 - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported record net income of $5.8 million, or $0.53 per diluted share, for the quarter ended December 31, 2018, compared to $2.5 million, or $0.23 per diluted share, for the prior year's quarter. Approximately $912 thousand, or $0.08 per diluted share, of this increase is attributed to the lower effective tax rate due to the Tax Cuts and Jobs Act (the "Tax Act.")

For the year ended December 31, 2018, Unity reported net income of $21.9 million, or $2.01 per diluted share, compared to $12.9 million, or $1.20 per diluted share for the prior year's period. Approximately $3.2 million, or $0.29 per diluted share, of this increase is attributed to the lower effective tax rate due to the Tax Act.

Net income for the fourth quarter and year-ended December 31, 2017, includes an additional $1.7 million in income tax expense as a result of the Company adjusting its deferred income tax balances in response to the Tax Act which was signed into law on December 22, 2017.

Fourth Quarter Earnings Highlights

• • Net interest income, our primary driver of earnings, increased $1.7 million to $14.2 million for the quarter ended December 31, 2018, compared to the prior year's quarter, due to strong loan growth and an increased net interest margin.

• • Net interest margin expanded 10 basis points to 4.01%, compared to 3.91% for the prior year's quarter and increased 9 basis points from 3.92% in the prior sequential quarter ended September 30, 2018. The net interest margin is expected to remain stable.

• • The provision for loan losses was $500 thousand for the quarters ended December 31, 2018 and 2017. Asset quality remains favorable.

• • Noninterest income decreased $83 thousand to $2.0 million compared to the prior year's quarter and $525 thousand compared to the prior sequential quarter. The quarter included $193 thousand in write-downs on equity securities.

• • Noninterest expense increased $639 thousand to $8.3 million compared to the prior year's quarter and decreased $533 thousand compared to the prior sequential quarter. The year-over-year increase was the result of expansion costs from two additional branches and increased headcount which resulted in higher compensation, benefits, occupancy and equipment expenses. The decline over the quarter ended September 30, 2018 was due to the two nonrecurring transactions last quarter: an $850 thousand supplemental executive retirement ("SERP") benefit expense, partially offset by a $317 thousand recovery related to an OREO property.

• • The effective tax rate declined to 21.0% for the quarter compared to 61.0% in the prior year's quarter, as a result of the Tax Act, which was enacted December 22, 2017, and lowered the federal corporate tax rate. In addition, the prior year's quarter included a $1.7 million adjustment to our deferred tax asset as a result of the Tax Act.

Balance Sheet Highlights

• • Total loans increased $133.9 million, or 11.4%, from year-end 2017 to $1.3 billion at December 31, 2018. Residential mortgage, commercial and consumer loan portfolios increased $70.9 million, $65.2 million, and $14.0 million, respectively, partially offset by a decline of $16.3 million in SBA loans. Our pipeline remains strong. Mortgage originations for the year totaled $225.0 million and reached a record level.

• • Total deposits increased $164.6 million, or 15.8%, from year-end 2017 to $1.2 billion at December 31, 2018. Growth in noninterest-bearing demand deposits was 5.5% from year-end 2017.

• • Borrowed funds decreased $65.0 million to $210.0 million at December 31, 2018, due to decreased overnight borrowings, the maturity of a repo and FHLB advances being called.

• • Shareholders' equity was $138.5 million at December 31, 2018, an increase of $20.4 million from year-end 2017, due to retained net income offset in part by declines in other comprehensive income resulting from unrealized losses on securities and the payment of dividends.

• • Book value per common share was $12.85 as of December 31, 2018.

• • At December 31, 2018, the leverage, common equity Tier I, Tier I and Total Risk Based Capital ratios were 9.90%, 11.40%, 12.24% and 13.49% respectively, all in excess of the ratios required to be deemed "well-capitalized."

• • Credit quality remains strong with nonperforming assets to total assets of 0.44% at December 31, 2018.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $1.6 billion in assets and $1.2 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 atwww.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.

(In thousands, except percentages and per share amounts)

BALANCE SHEET DATA:

Total assets

Total deposits Total loans Total securities

Total shareholders' equity Allowance for loan lossesFINANCIAL DATA - QUARTER TO DATE: Income before provision for income taxes Provision for income taxes

Impact of Tax Reform Bill Net income

Net income per common share - Basic Net income per common share - DilutedPerformance ratios:

Return on average assets Return on average equity Efficiency ratio

Net interest margin

Noninterest expense to average assetsFINANCIAL DATA - YEAR TO DATE: Income before provision for income taxes Provision for income taxes

Impact of Tax Reform Bill Net income

Net income per common share - Basic Net income per common share - Diluted

Performance ratios:

SUMMARY FINANCIAL HIGHLIGHTS

UNITY BANCORP, INC.

December 31, 2018

December 31, 2018

$

1,579,157

1,207,687

1,304,566

63,732

138,488

(15,488)

$

7,350 1,547 -

$ $ $

5,803

September 30, 2018

December 31, 2017

$

1,553,152 $ 1,455,496

1,219,473 1,043,137

1,283,304 1,170,674

63,399 69,800

133,067 118,105

(14,988) (13,556)

$

6,745 $ 6,408

1,255 2,175

- 1,733

$ $ $

5,490

$

2,500

0.54 0.53

0.51 $ 0.24

0.50 $ 0.23

1.56

% % % % %

1.50 % 0.74

17.00

16.64 % 8.54

50.69

54.86 % 52.45

4.01

3.92 % 3.91

2.22

2.41 % 2.25

$

27,307 $ 22,433

5,388 7,807

- 1,733

$ $ $

21,919

$

12,893

2.04 $ 1.22 2.01 $ 1.20

Return on average assets 1.53 % 1.02

Return on average equity 17.10 % 11.47

Efficiency ratio 53.07 % 55.57

Net interest margin 3.97 % 3.83

Noninterest expense to average assets 2.34 % 2.37

SHARE INFORMATION:

Market price per share Dividends paid

Book value per common share

Average diluted shares outstanding (QTD)CAPITAL RATIOS: Total equity to total assets Leverage ratio

Common equity tier 1 risk-based capital ratio Tier 1 risk-based capital ratio

Total risk-based capital ratio

CREDIT QUALITY AND RATIOS: Nonperforming assets

QTD net chargeoffs (annualized) to QTD average loans Allowance for loan losses to total loans Nonperforming assets to total loans and OREO

Nonperforming assets to total assets

$ $ $

20.76 0.07 12.85 10,935

8.77

9.90

11.40

12.24

13.49

$

6,929 -

1.19 %

0.53 % 0.44 %

$ $ $

22.90 $ 19.75 0.07 $ 0.06 12.37 $ 11.13 10,936 10,794

% % % % %

8.57 % 8.11

9.74 % 9.37

11.15 % 10.81

12.00 % 11.75

13.25 % 12.87

%

$

6,251 $ 3,420 0.05 % 0.02 1.17 % 1.16

0.49 % 0.29 0.40 % 0.23

% % % % %

% % % % %

% % % % %

% % % %

UNITY BANCORP, INC. CONSOLIDATED BALANCE SHEETS

December 31, 2018

December 31, 2018 vs.

September 30, 2018

(In thousands, except percentages)

ASSETS

Cash and due from banks

Fed funds, interest-bearing deposits and repos

Cash and cash equivalents

Securities:

Securities available for sale Securities held to maturity Equity securities

Total securities

Loans:

SBA loans held for sale

SBA loans held for investment Commercial loans

Residential mortgage loans Consumer loans

Total loans

Allowance for loan losses

Net loans

Premises and equipment, net

Bank owned life insurance ("BOLI") Deferred tax assets

Federal Home Loan Bank ("FHLB") stock Accrued interest receivable

Other real estate owned ("OREO") Goodwill

Other assets Total assets

LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities:

Deposits:

Noninterest-bearing demand Interest-bearing demand Savings

Time deposits

Total deposits

Borrowed funds Subordinated debentures Accrued interest payable

Accrued expenses and other liabilities

Total liabilities

Shareholders' equity:

Common stock Retained earnings

Accumulated other comprehensive (loss) income

Total shareholders' equity

Total liabilities and shareholders' equity

Issued and outstanding common shares

NM=Not meaningful

December 31, 2018

$

20,028 125,487 145,515 46,713 14,875 2,144 63,732

11,171

39,333

694,102

436,056

123,904

1,304,566

(15,488)

1,289,078

23,371

24,710

5,350

10,795

6,399

56

1,516

8,635

$

1,579,157

$

270,152

185,792

394,727

357,016

1,207,687

210,000

10,310

406

12,266

1,440,669

88,484

50,161

(157)

138,488

$

1,579,157

10,780

September 30, 2018

December 31, 2017

$

23,217 $ 23,701

121,339 126,553

144,556 150,254

46,874 52,287

15,325 16,307

1,200 1,206

63,399 69,800

13,029 22,810

41,051 43,999

697,075 628,865

413,652 365,145

118,497 109,855

1,283,304

(14,988)

1,170,674

(13,556)

1,268,316 1,157,118

23,416 23,470

24,544 24,227

5,310 4,017

9,445 12,863

6,412 5,447

56 426

1,516 1,516

6,182 6,358

$

1,553,152

$

1,455,496

$

271,321 $ 256,119

180,189 164,997

408,927 396,557

359,036 225,464

1,219,473

1,043,137

180,000 275,000

10,310 10,310

506 436

9,796 8,508

1,420,085 1,337,391

88,149 86,782

45,121 31,117

(203) 206

$

133,067 1,553,152

10,756

$

118,105 1,455,496

10,615

%December 31, 2017

%

(13.7) % (15.5)

3.4 (0.8)

0.7 (3.2)

(0.3) (10.7)

(2.9) (8.8)

78.7 77.8

0.5 (8.7)

(14.3) (51.0)

(4.2) (10.6)

(0.4) 10.4

5.4 19.4

4.6 12.8

1.7 11.4

3.3 14.3

1.6 11.4

(0.2) (0.4)

0.7 2.0

0.8 33.2

14.3 (16.1)

(0.2) 17.5

- (86.9)

- 39.7

1.7 %

- 35.8

8.5 %

(0.4)

% 5.5

3.1 12.6

(3.5) (0.5)

(0.6) 58.3

(1.0) 15.8

16.7 (23.6)

- (19.8) 25.2

- (6.9) 44.2

1.4 7.7

0.4 2.0

11.2 61.2

NM

NM

4.1 17.3

1.7

% 8.5

%

%

%