Unity Bancorp, Inc.64 Old Highway 22
Clinton, NJ 08809
800 618-BANK
www.unitybank.com
NewsNewsNewsNewsNews
For Immediate Release:
July 29, 2008
News Media & Financial Analyst Contact:
Alan J. Bedner, EVP
Chief Financial Officer
(908) 713-4308
Unity Bancorp Reports Second Quarter and Six Month Results
Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $1.1 million, or $0.15 per diluted share, for the quarter ended June 30, 2008, compared to $1.5 million, or $0.20 per diluted share, for the quarter ended June 30, 2007. Return on average assets and average common equity for the second quarter of 2008 were 0.56% and 9.29%, respectively, compared to 0.89% and 13.14%, respectively, for the second quarter of 2007.
For the six months ended June 30, 2008, net income was $2.3 million, or $0.32 per diluted share, compared to $3.0 million, or $0.39 per diluted share for the same period a year ago. Return on average assets and average common equity for the six months ended June 30, 2007, were 0.60% and 9.87%, respectively, as compared to 0.88% and 12.94%, respectively, for the prior year’s comparable period.
Earnings for the quarter and six months ended were impacted by an other-than-temporary impairment charge of $222 thousand before taxes, or $0.02 per diluted share, related to Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”) perpetual callable preferred securities. The other-than-temporary impairment charge was recorded on three perpetual preferred stock issues classified as available for sale investment securities. Unity decided to recognize the other-than-temporary impairment charge as of June 30, 2008 due to the recent volatility and decline in market value, and the uncertainty that the securities will recover to book value. The book value of the securities, including the impairment charge, is approximately $1.9 million. The securities continue to perform according to their contractual terms and all dividend payments are current.
Total assets at June 30, 2008, were $832.3 million, a 13.6% increase from June 30, 2007. The increase in assets from the prior year was due to growth in the Company’s earning assets. Total loans at June 30, 2008, were $643.0 million, an 18.8% increase from June 30, 2007. The growth in the loan portfolio occurred in all product lines. The SBA portfolio grew $26.0 million, or 34.5% from a year ago, in part due to the Company’s previously announced strategy to hold more SBA loans for long-term investment.
"Although I am disappointed with the impairment charge on the Freddie Mac securities as well as the continued reduced premiums we are receiving on the sale of SBA loans; I am extremely pleased with our core loan and deposit growth for the quarter," said Unity President and Chief Executive Officer, James A. Hughes. "Despite the challenging economic environment, the fundamentals of our Company continue to be sound."
At June 30, 2008, the allowance for loan losses was $8.9 million, or 1.39% of total loans, compared to 1.48% of total loans at June 30, 2007. Nonperforming assets at June 30, 2008, were $6.9 million, or 1.07% of total loans and other real estate owned (OREO), an increase of $1.9 million, compared to nonperforming assets of $5.0 million or 0.92% of total loans and OREO at June 30, 2007. The increase in nonperforming assets was primarily related to a $2.0 million commercial loan.
Total deposits at June 30, 2008, were $671.9 million, a 12.7% increase from June 30, 2007. This increase was primarily the result of growth in time deposit, demand deposit, and interest-bearing checking accounts, partially offset by the decline in savings. Demand deposits grew $6.5 million, or 8.8% from June 30, 2007. Time deposits increased $102.4 million, or 46.8% from June 30, 2007.
Total shareholders’ equity was $48.0 million at June 30, 2008, consistent with June 30, 2007, due to an increase in retained profits of the Company, offset by the purchase of 316 thousand shares of common stock during the third and fourth quarters of 2007. The Company does not anticipate additional purchases of shares for the foreseeable future, as retained profits will be used for future growth.
Net interest income was $6.8 million for the second quarter of 2008, an increase of 12.3%, compared to the same period a year ago. Net interest income was primarily benefited by an increase in interest-earning assets and a stable net interest margin. Net interest margin was 3.66% for the second quarter of 2008, compared to 3.71% for the second quarter of 2007. Due to the decline in short-term interest rates, the Company expects that the net interest margin will expand during the remainder of 2008.
Net interest income was $13.5 million for the six months ended June 30, 2008, an increase of 11.3% compared to $12.1 million a year ago. Net interest income was benefited by an increase in interest-earning assets, partially offset by an 8 basis point decrease in net interest margin. Net interest margin was 3.65% for the six months ended June 30, 2008, compared to 3.73% for the same period a year ago.
Page 1 of 11
The provision for loan losses for the second quarter of 2008 was $650 thousand, compared to $350 thousand for the second quarter of 2007. Net loan charge-offs for the quarter ended June 30, 2008, were $355 thousand, compared to net loan charge-offs of $110 thousand for the quarter ended June 30, 2007. The provision for loan losses was $1.1 million for the six months ended June 30, 2008, an increase of $550 thousand from the six months ended June 30, 2007. Net loan charge-offs for the six months ended June 30, 2008, were $538 thousand, compared to $177 thousand for the same period a year ago.
Total noninterest income for the second quarter of 2008 was $1.0 million. Gains on sales of SBA loans amounted to $417 thousand for the second quarter of 2008, compared to $824 thousand for the quarter ended June 30, 2007, reflecting a lower volume of loans sold in accordance with the Company’s decision to retain more of these loans in its portfolio and lower premiums on loans sold, due to current market conditions. Service charges on deposits for the second quarter of 2008 were $341 thousand, consistent to the second quarter of 2007. Service and loan fees were $302 thousand for the second quarter of 2008, a decrease of $78 thousand from a year ago.
Total noninterest income for the six months ended June 30, 2008, was $2.5 million. Gains on sales of SBA loans amounted to $993 thousand for the six months ended June 30, 2008, compared to $1.5 million for the six months ended June 30, 2007, reflecting a lower volume of loans sold and lower premiums on loans sold, due to the factors discussed above. Service charges on deposits for the six months ended June 30, 2008 were $661 thousand, consistent with 2007. Service and loan fees were $602 thousand for the six months ended June 30, 2008, a decrease of $144 thousand from a year ago.
Total noninterest expenses for the second quarter of 2008 were $5.6 million, an increase of 6.6% from the prior year’s comparable quarter. Compensation and benefits expense increased 9.4%, due to the increased staffing associated with expansion of the national SBA program and annual cost of living increases. Occupancy and furniture and equipment expenses increased 10.7% and 4.8% respectively, due to branch expansion.
Total noninterest expenses for the six months ended June 30, 2008 were $11.4 million, an increase of 6.6% compared to a year ago. Compensation and benefits expense increased 9.2%, due to the increased staffing associated with expansion of the national SBA program and annual cost of living increases. Occupancy and furniture and equipment expenses increased 7.4% and 0.9% respectively, due to branch expansion.
As of June 30, 2008, the Company’s Tier I leverage capital ratio was 8.01%, Tier I risk-based capital ratio was 9.42% and total risk-based capital ratio was 10.67%. All regulatory capital ratios exceeded the well-capitalized, federal capital adequacy requirements as of June 30, 2008.
Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $832 million in assets and $672 million in deposits. Unity Bank provides financial services to retail, corporate and small business customers through its 16 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 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 general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors.
Page 2 of 11
| Unity Bancorp, Inc. | ||||||||||||||
| Consolidated Financial Highlights | ||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||
| Jun. 08 | vs. | |||||||||||||
| BALANCE SHEET DATA: | Jun. 30, 2008 | Mar. 31, 2008 | Jun. 30, 2007 | Mar. 08 | Jun. 07 | |||||||||
| Assets | $ | 832,315 | $ | 807,874 | $ | 732,403 | 3.0 | % | 13.6 | % | ||||
| Deposits | 671,881 | 642,282 | 596,093 | 4.6 | 12.7 | |||||||||
| Loans | 643,039 | 602,943 | 541,385 | 6.7 | 18.8 | |||||||||
| Securities | 106,972 | 114,348 | 99,460 | (6.5) | 7.6 | |||||||||
| Shareholders' equity | 47,951 | 47,896 | 48,242 | 0.1 | (0.6) | |||||||||
| Allowance for loan losses | 8,945 | 8,650 | 7,997 | 3.4 | 11.9 | |||||||||
FINANCIAL DATA - QUARTER TO DATE: | ||||||||||||||
| Net income before taxes | $ | 1,599 | $ | 1,870 | $ | 2,218 | (14.5) | % | (27.9) | % | ||||
| Federal and state income tax provision | 495 | 626 | 676 | (20.9) | (26.8) | |||||||||
| Net income | 1,104 | 1,244 | 1,542 | (11.3) | (28.4) | |||||||||
| Per share-basic | 0.16 | 0.18 | 0.21 | (9.0) | (23.9) | |||||||||
| Per share-diluted | 0.15 | 0.17 | 0.20 | (12.3) | (25.5) | |||||||||
| Return on average assets | 0.56 | % | 0.65 | % | 0.89 | % | (13.8) | (37.1) | ||||||
| Return on average common equity | 9.29 | 10.50 | 13.14 | (11.5) | (29.3) | |||||||||
| Efficiency ratio | 69.59 | 71.95 | 67.22 | (3.3) | 3.5 | |||||||||
| FINANCIAL DATA - YEAR TO DATE: | ||||||||||||||
| Net income before taxes | $ | 3,469 | - | $ | 4,299 | - | (19.3) | % | ||||||
| Federal and state income tax provision | 1,121 | - | 1,306 | - | (14.2) | |||||||||
| Net income | 2,348 | - | 2,993 | - | (21.6) | |||||||||
| Per share-basic | 0.33 | - | 0.41 | - | (19.5) | |||||||||
| Per share-diluted | 0.32 | - | 0.39 | - | (17.9) | |||||||||
| Return on average assets | 0.60 | % | - | 0.88 | % | - | (31.8) | % | ||||||
| Return on average common equity | 9.87 | - | 12.94 | - | (23.7) | |||||||||
| Efficiency ratio | 70.76 | - | 68.83 | - | 2.8 | |||||||||
| SHARE INFORMATION: | ||||||||||||||
| Closing price per share | $ | 6.95 | $ | 7.48 | $ | 10.90 | (7.0) | % | (36.3) | % | ||||
| Cash dividends declared | 0.05 | 0.05 | 0.05 | - | - | |||||||||
| Book value per share | 6.76 | 6.76 | 6.54 | - | 3.3 | |||||||||
| Average diluted shares outstanding (QTD) | 7,275 | 7,271 | 7,660 | 0.1 | (5.0) | |||||||||
| CAPITAL RATIOS: | ||||||||||||||
| Total equity to total assets | 5.76 | % | 5.93 | % | 6.59 | % | (2.9) | % | (12.6) | % | ||||
| Tier I capital to average assets (leverage) | 8.01 | 8.06 | 9.21 | (0.7) | (13.0) | |||||||||
| Tier I capital to risk-adjusted assets | 9.42 | 9.66 | 11.07 | (2.5) | (14.9) | |||||||||
| Total risk-based capital | 10.67 | 10.91 | 13.72 | (2.2) | (22.2) | |||||||||
| CREDIT QUALITY AND RATIOS: | ||||||||||||||
| Nonperforming assets | $ | 6,887 | $ | 4,408 | $ | 4,977 | 56.2 | % | 38.4 | % | ||||
| Net charge offs to average loans (QTD) | 0.23 | % | 0.12 | % | 0.08 | % | 91.7 | 187.5 | ||||||
| Allowance for loan losses to total loans | 1.39 | 1.43 | 1.48 | (2.8) | (6.1) | |||||||||
| Nonperforming assets to total loans and OREO | 1.07 | 0.73 | 0.92 | 46.6 | 16.3 | |||||||||
Page 3 of 11
| Unity Bancorp, Inc. | ||||||||||||||
| Consolidated Balance Sheets | ||||||||||||||
| (In thousands) | Jun. 08 | vs. | ||||||||||||
| Jun. 30, 2008 | Mar. 31, 2008 | Jun. 30, 2007 | Mar. 08 | Jun. 07 | ||||||||||
| ASSETS | ||||||||||||||
| Cash and due from banks | $ | 20,368 | $ | 19,698 | $ | 14,696 | 3.4 | % | 38.6 | % | ||||
| Federal funds sold and interest bearing deposits | 33,678 | 44,042 | 51,063 | (23.5) | (34.0) | |||||||||
| Securities: | ||||||||||||||
| Available for sale | 77,110 | 79,726 | 62,929 | (3.3) | 22.5 | |||||||||
| Held to maturity | 29,862 | 34,622 | 36,531 | (13.7) | (18.3) | |||||||||
| Total securities | 106,972 | 114,348 | 99,460 | (6.5) | 7.6 | |||||||||
| Loans: | ||||||||||||||
| SBA - Held for sale | 25,605 | 23,632 | 8,914 | 8.3 | 187.2 | |||||||||
| SBA - Held to Maturity | 75,988 | 71,798 | 66,634 | 5.8 | 14.0 | |||||||||
| Commercial | 387,302 | 372,695 | 342,328 | 3.9 | 13.1 | |||||||||
| Residential mortgage | 95,100 | 76,734 | 69,417 | 23.9 | 37.0 | |||||||||
| Consumer | 59,044 | 58,084 | 54,092 | ��1.7 | 9.2 | |||||||||
| Total loans | 643,039 | 602,943 | 541,385 | 6.7 | 18.8 | |||||||||
| Less: Allowance for loan losses | 8,945 | 8,650 | 7,997 | 3.4 | 11.9 | |||||||||
| Net loans | 634,094 | 594,293 | 533,388 | 6.7 | 18.9 | |||||||||
| Goodwill and other intangibles | 1,581 | 1,585 | 1,596 | (0.3) | (0.9) | |||||||||
| Premises and equipment, net | 12,372 | 12,067 | 11,614 | 2.5 | 6.5 | |||||||||
| Accrued interest receivable | 4,095 | 4,131 | 3,687 | (0.9) | 11.1 | |||||||||
| Loan servicing asset | 1,877 | 1,990 | 2,289 | (5.7) | (18.0) | |||||||||
| Bank Owned Life Insurance | 5,674 | 5,622 | 5,467 | 0.9 | 3.8 | |||||||||
| FHLB/ACBB Stock | 4,407 | 4,170 | 3,270 | 5.7 | 34.8 | |||||||||
| Other assets | 7,197 | 5,928 | 5,873 | 21.4 | 22.5 | |||||||||
| Total Assets | $ | 832,315 | $ | 807,874 | $ | 732,403 | 3.0 | % | 13.6 | % | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing demand deposits | $ | 81,273 | $ | 80,960 | $ | 74,731 | 0.4 | % | 8.8 | % | ||||
| Interest-bearing deposits: | ||||||||||||||
| Interest bearing checking | 88,551 | 76,256 | 84,107 | 16.1 | 5.3 | |||||||||
| Savings | 180,665 | 188,628 | 218,273 | (4.2) | (17.2) | |||||||||
| Time, under $100,000 | 236,241 | 211,739 | 138,440 | 11.6 | 70.6 | |||||||||
| Time, $100,000 and over | 85,151 | 84,699 | 80,542 | 0.5 | 5.7 | |||||||||
| Total deposits | 671,881 | 642,282 | 596,093 | 4.6 | 12.7 | |||||||||
| Borrowed funds and subordinated debentures | 110,465 | 110,465 | 84,744 | - | 30.4 | |||||||||
| Accrued interest payable | 779 | 794 | 595 | (1.9) | 30.9 | |||||||||
| Accrued expenses and other liabilities | 1,239 | 6,437 | 2,729 | (80.8) | (54.6) | |||||||||
| Total liabilities | 784,364 | 759,978 | 684,161 | 3.2 | 14.6 | |||||||||
| Commitments and Contingencies | - | - | - | |||||||||||
| Shareholders' equity: | ||||||||||||||
| Common stock, no par value, 12,500 shares authorized | 52,281 | 49,600 | 49,087 | 5.4 | 6.5 | |||||||||
| Retained earnings | 1,593 | 3,379 | 1,435 | (52.9) | 11.0 | |||||||||
| Treasury stock at cost | (4,169) | (4,169) | (1,121) | - | 271.9 | |||||||||
| Accumulated other comprehensive loss, net of tax | (1,754) | (914) | (1,159) | 91.9 | 51.3 | |||||||||
| Total shareholders' equity | 47,951 | 47,896 | 48,242 | 0.1 | (0.6) | |||||||||
| Total Liabilities and Shareholders' Equity | $ | 832,315 | $ | 807,874 | $ | 732,403 | 3.0 | % | 13.6 | % | ||||
| COMMON SHARES AT PERIOD END: | ||||||||||||||
| Issued | 7,520 | 7,509 | 7,478 | |||||||||||
| Outstanding | 7,095 | 7,084 | 7,371 | |||||||||||
| Treasury | 425 | 425 | 107 | |||||||||||
| N/M= Not meaningful | ||||||||||||||
Page 4 of 11
| Unity Bancorp, Inc. | ||||||||||||||
| Consolidated Statements of Income | ||||||||||||||
| (In thousands, except per share data) | ||||||||||||||
| Jun. 08 | vs. | |||||||||||||
| FOR THE THREE MONTHS ENDED: | Jun. 30, 2008 | Mar. 31, 2008 | Jun. 30, 2007 | Mar. 08 | Jun. 07 | |||||||||
| INTEREST INCOME | ||||||||||||||
| Fed funds sold and interest on deposits | $ | 111 | $ | 180 | $ | 221 | (38.3) | % | (49.8) | % | ||||
| FHLB/ACBB Stock | �� 76 | 100 | 56 | (24.0) | (35.7) | |||||||||
| Securities: | ||||||||||||||
| Available for sale | 932 | 875 | 722 | 6.5 | 29.1 | |||||||||
| Held to maturity | 398 | 437 | 478 | (8.9) | (16.7) | |||||||||
| Total securities | 1,330 | 1,312 | 1,200 | 1.4 | 10.8 | |||||||||
| Loans: | ||||||||||||||
| SBA | 2,028 | 2,328 | 2,202 | (12.9) | (7.9) | |||||||||
| Commercial | 6,667 | 6,735 | 6,378 | (1.0) | 4.5 | |||||||||
| Residential mortgage | 1,209 | 1,079 | 967 | 12.0 | 25.0 | |||||||||
| Consumer | 846 | 901 | 951 | (6.1) | (11.0) | |||||||||
| Total loan interest income | 10,750 | 11,043 | 10,498 | (2.7) | 2.4 | |||||||||
| Total interest income | 12,267 | 12,635 | 11,975 | (2.9) | 2.4 | |||||||||
| INTEREST EXPENSE | ||||||||||||||
| Interest bearing demand deposits | 350 | 366 | 477 | (4.4) | (26.6) | |||||||||
| Savings deposits | 918 | 1,349 | 2,122 | (31.9) | (56.7) | |||||||||
| Time deposits | 3,006 | 3,220 | 2,153 | (6.6) | 39.6 | |||||||||
| Borrowed funds and subordinated debentures | 1,155 | 1,065 | 1,136 | 8.5 | 1.7 | |||||||||
| Total interest expense | 5,429 | 6,000 | 5,888 | (9.5) | (7.8) | |||||||||
| Net interest income | 6,838 | 6,635 | 6,087 | 3.1 | 12.3 | |||||||||
| Provision for loan losses | 650 | 450 | 350 | 44.4 | 85.7 | |||||||||
| Net interest income after provision for loan losses | 6,188 | 6,185 | 5,737 | - | 7.9 | |||||||||
| NONINTEREST INCOME | ||||||||||||||
| Service charges on deposit accounts | 341 | 320 | 339 | 6.6 | 0.6 | |||||||||
| Service and loan fee income | 302 | 300 | 380 | 0.7 | (20.5) | |||||||||
| Gain on SBA loan sales | 417 | 576 | 824 | (27.6) | (49.4) | |||||||||
| Bank owned life insurance | 53 | 51 | 46 | 3.9 | 15.2 | |||||||||
| Net securities (loss) gains | (206) | 70 | - | NM | NM | |||||||||
| Other income | 121 | 138 | 159 | (12.3) | (23.9) | |||||||||
| Total noninterest income | 1,028 | 1,455 | 1,748 | (29.3) | (41.2) | |||||||||
| NONINTEREST EXPENSES | ||||||||||||||
| Compensation and benefits | 2,980 | 3,220 | 2,723 | (7.5) | 9.4 | |||||||||
| Processing and communications | 544 | 570 | 563 | (4.6) | (3.4) | |||||||||
| Occupancy, net | 713 | 701 | 644 | 1.7 | 10.7 | |||||||||
| Furniture and equipment | 413 | 388 | 394 | 6.4 | 4.8 | |||||||||
| Professional fees | 143 | 198 | 162 | (27.8) | (11.7) | |||||||||
| Loan servicing costs | 138 | 102 | 169 | 35.3 | (18.3) | |||||||||
| Advertising | 79 | 62 | 105 | 27.4 | (24.8) | |||||||||
| Other | 607 | 529 | 507 | 14.7 | 19.7 | |||||||||
| Total noninterest expenses | 5,617 | 5,770 | 5,267 | (2.7) | 6.6 | |||||||||
| Income before taxes | 1,599 | 1,870 | 2,218 | (14.5) | (27.9) | |||||||||
| Federal and state income tax provision | 495 | 626 | 676 | (20.9) | (26.8) | |||||||||
| Net Income | $ | 1,104 | $ | 1,244 | $ | 1,542 | (11.3) | % | (28.4) | % | ||||
| Net Income Per Common Share-Basic | $ | �� 0.16 | $ | 0.18 | $ | 0.21 | (9.0) | % | (23.9) | % | ||||
| Net Income Per Common Share-Diluted | $ | 0.15 | $ | 0.17 | $ | 0.20 | (12.3) | % | (25.5) | % | ||||
| AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||
| Basic | 7,092 | 7,075 | 7,334 | |||||||||||
| Diluted | 7,275 | 7,271 | 7,660 | |||||||||||
| NM= Not Meaningful | ||||||||||||||
Page 5 of 11
| Unity Bancorp, Inc. | |||||||||
| Consolidated Statements of Income | |||||||||
| (Dollars in thousands, except per share data) | |||||||||
Jun. 08 vs. | |||||||||
| YEAR TO DATE | Jun. 30, 2008 | Jun. 30, 2007 | Jun. 07 | ||||||
| INTEREST INCOME | |||||||||
| Fed funds sold and interest on deposits | $ | 291 | $ | 483 | (39.8) | % | |||
| FHLB/ACBB Stock | 176 | 114 | 54.4 | ||||||
| Securities: | |||||||||
| Available for sale | 1,807 | 1,444 | 25.1 | ||||||
| Held to maturity | 835 | 1,018 | (18.0) | ||||||
| Total securities | 2,642 | 2,462 | 7.3 | ||||||
| Loans: | |||||||||
| SBA | 4,356 | 4,542 | (4.1) | ||||||
| Commercial | 13,402 | 12,366 | 8.4 | ||||||
| Residential mortgage | 2,288 | 1,855 | 23.3 | ||||||
| Consumer | 1,747 | 1,855 | (5.8) | ||||||
| Total loan interest income | 21,793 | 20,618 | 5.7 | ||||||
| Total interest income | 24,902 | 23,677 | 5.2 | ||||||
| INTEREST EXPENSE | |||||||||
| Interest bearing demand deposits | 716 | 1,029 | (30.4) | ||||||
| Savings deposits | 2,267 | 4,293 | (47.2) | ||||||
| Time deposits | 6,226 | 4,123 | 51.0 | ||||||
| Borrowed funds and subordinated debentures | 2,220 | 2,126 | 4.4 | ||||||
| Total interest expense | 11,429 | 11,571 | (1.2) | ||||||
| Net interest income | 13,473 | 12,106 | 11.3 | ||||||
| Provision for loan losses | 1,100 | 550 | 100.0 | ||||||
| Net interest income after provision for loan losses | 12,373 | 11,556 | 7.1 | ||||||
| NONINTEREST INCOME | |||||||||
| Service charges on deposit accounts | 661 | 688 | (3.9) | ||||||
| Service and loan fee income | 602 | 746 | (19.3) | ||||||
| Gain on SBA loan sales | 993 | 1,503 | (33.9) | ||||||
| Bank owned life insurance | 104 | 95 | 9.5 | ||||||
| Net securities (loss) gains | (136) | 10 | NM | ||||||
| Other income | 259 | 385 | (32.7) | ||||||
| Total noninterest income | 2,483 | 3,427 | (27.5) | ||||||
| NONINTEREST EXPENSES | |||||||||
| Compensation and benefits | 6,200 | 5,678 | 9.2 | ||||||
| Processing and communications | 1,114 | 1,113 | 0.1 | ||||||
| Occupancy, net | 1,414 | 1,317 | 7.4 | ||||||
| Furniture and equipment | 801 | 794 | 0.9 | ||||||
| Professional fees | 341 | 298 | 14.4 | ||||||
| Loan servicing costs | 240 | 259 | (7.3) | ||||||
| Advertising | 141 | 199 | (29.1) | ||||||
| Other | 1,136 | 1,026 | 10.7 | ||||||
| Total noninterest expenses | 11,387 | 10,684 | 6.6 | ||||||
| Income before taxes | 3,469 | 4,299 | (19.3) | ||||||
| Federal and state income tax provision | 1,121 | 1,306 | (14.2) | ||||||
| Net Income | $ | 2,348 | $ | 2,993 | (21.6) | % | |||
| Net Income Per Common Share-Basic | $ | 0.33 | $ | 0.41 | (19.5) | % | |||
| Net Income Per Common Share-Diluted | $ | 0.32 | $ | 0.39 | (17.9) | % | |||
| Average common shares outstanding: | |||||||||
| Basic | 7,084 | 7,330 | |||||||
| Diluted | 7,274 | 7,663 | |||||||
| NM = Not Meaningful | |||||||||
Page 6 of 11
| Unity Bancorp, Inc. | ||||||||||||||
| Consolidated Average Balance Sheets | ||||||||||||||
| with Resultant Interest and Rates | ||||||||||||||
| (Tax-equivalent basis, dollars in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, 2008 | March 31, 2008 | |||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | |||||||||
| ASSETS | ||||||||||||||
| Interest-earning assets: | ||||||||||||||
| Federal funds sold and interest-bearing deposits with banks | $ | 22,351 | $ | 111 | 2.00 | % | $ | 22,925 | $ | 180 | 3.16 | % | ||
| FHLB/ACBB Stock | 4,400 | 76 | 6.95 | 4,174 | 100 | 9.64 | ||||||||
| Securities: | ||||||||||||||
| Available for sale | 76,613 | 961 | 5.02 | 70,757 | 908 | 5.13 | ||||||||
| Held to maturity | 31,547 | 416 | 5.27 | 34,147 | 455 | 5.33 | ||||||||
| Total securities | 108,160 | 1,377 | 5.09 | 104,904 | 1,363 | 5.20 | ||||||||
| Loans, net of unearned discount: | ||||||||||||||
| SBA | 101,006 | 2,028 | 8.03 | 98,614 | 2,328 | 9.44 | ||||||||
| Commercial | 378,389 | 6,667 | 7.09 | 372,343 | 6,735 | 7.28 | ||||||||
| Residential mortgage | 79,985 | 1,209 | 6.05 | 74,341 | 1,079 | 5.81 | ||||||||
| Consumer | 58,608 | 846 | 5.81 | 57,482 | 901 | 6.30 | ||||||||
| Total loans | 617,988 | 10,750 | 6.99 | 602,780 | 11,043 | 7.36 | ||||||||
| Total interest-earning assets | 752,899 | 12,314 | 6.57 | 734,783 | 12,686 | 6.93 | ||||||||
| Noninterest-earning assets: | ||||||||||||||
| Cash and due from banks | 14,377 | 14,991 | ||||||||||||
| Allowance for loan losses | (8,814) | (8,690) | ||||||||||||
| Other assets | 31,262 | 30,304 | ||||||||||||
| Total noninterest-earning assets | 36,825 | 36,605 | ||||||||||||
| Total Assets | $ | 789,724 | $ | 771,388 | ||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 82,195 | $ | 350 | 1.71 | $ | 78,999 | $ | 366 | 1.86 | ||||
| Savings deposits | 185,674 | 918 | 1.99 | 190,574 | 1,349 | 2.85 | ||||||||
| Time deposits | 282,182 | 3,006 | 4.28 | 276,426 | 3,220 | 4.69 | ||||||||
| Total interest-bearing deposits | 550,051 | 4,274 | 3.13 | 545,999 | 4,935 | 3.64 | ||||||||
| Borrowed funds and subordinated debentures | 110,464 | 1,155 | 4.21 | 100,850 | 1,065 | 4.25 | ||||||||
| Total interest-bearing liabilities | 660,515 | 5,429 | 3.31 | 646,849 | 6,000 | 3.73 | ||||||||
| Noninterest-bearing liabilities: | ||||||||||||||
| Demand deposits | 78,879 | 74,709 | ||||||||||||
| Other liabilities | 2,553 | 2,191 | ||||||||||||
| Total noninterest-bearing liabilities | 81,432 | 76,900 | ||||||||||||
| Shareholders' equity | 47,777 | 47,639 | ||||||||||||
| Total Liabilities and Shareholders' Equity | $ | 789,724 | $ | 771,388 | ||||||||||
| Net interest spread | 6,885 | 3.26 | % | 6,686 | 3.20 | % | ||||||||
| Tax-equivalent basis adjustment | (47) | (51) | ||||||||||||
| Net interest income | $ | 6,838 | $ | 6,635 | ||||||||||
| Net interest margin | 3.66 | % | 3.64 | % | ||||||||||
Page 7 of 11
| Unity Bancorp, Inc. | ||||||||||||||
| Consolidated Average Balance Sheets | ||||||||||||||
| with Resultant Interest and Rates | ||||||||||||||
| (Tax-equivalent basis, dollars in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, 2008 | June 30, 2007 | |||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | |||||||||
| ASSETS | ||||||||||||||
| Interest-earning assets: | ||||||||||||||
| Federal funds sold and interest-bearing deposits with banks | $ | 22,351 | $ | 111 | 2.00 | % | $ | 19,029 | $ | 221 | 4.66 | % | ||
| FHLB/ACBB Stock | 4,400 | 76 | 6.95 | 3,289 | 56 | 6.83 | ||||||||
| Securities: | ||||||||||||||
| Available for sale | 76,613 | 961 | 5.02 | 61,843 | 734 | 4.75 | ||||||||
| Held to maturity | 31,547 | 416 | 5.27 | 37,501 | 496 | 5.29 | ||||||||
| Total securities | 108,160 | 1,377 | 5.09 | 99,344 | 1,230 | 4.95 | ||||||||
| Loans, net of unearned discount: | ||||||||||||||
| SBA | 101,006 | 2,028 | 8.03 | 83,080 | 2,202 | 10.60 | ||||||||
| Commercial | 378,389 | 6,667 | 7.09 | 335,081 | 6,378 | 7.63 | ||||||||
| Residential mortgage | 79,985 | 1,209 | 6.05 | 65,256 | 967 | 5.93 | ||||||||
| Consumer | 58,608 | 846 | 5.81 | 55,227 | 951 | 6.91 | ||||||||
| Total loans | 617,988 | 10,750 | 6.99 | 538,644 | 10,498 | 7.81 | ||||||||
| Total interest-earning assets | 752,899 | 12,314 | 6.57 | 660,306 | 12,005 | 7.28 | ||||||||
| Noninterest-earning assets: | ||||||||||||||
| Cash and due from banks | 14,377 | 12,170 | ||||||||||||
| Allowance for loan losses | (8,814) | (8,022) | ||||||||||||
| Other assets | 31,262 | 29,092 | ||||||||||||
| Total noninterest-earning assets | 36,825 | 33,240 | ||||||||||||
| Total Assets | $ | 789,724 | $ | 693,546 | ||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 82,195 | $ | 350 | 1.71 | $ | 84,729 | $ | 477 | 2.26 | ||||
| Savings deposits | 185,674 | 918 | 1.99 | 211,478 | 2,122 | 4.02 | ||||||||
| Time deposits | 282,182 | 3,006 | 4.28 | 184,727 | 2,153 | 4.67 | ||||||||
| Total interest-bearing deposits | 550,051 | 4,274 | 3.13 | 480,934 | 4,752 | 3.96 | ||||||||
| Borrowed funds and subordinated debentures | 110,464 | 1,155 | 4.21 | 87,815 | 1,136 | 5.19 | ||||||||
| Total interest-bearing liabilities | 660,515 | 5,429 | 3.31 | 568,749 | 5,888 | 4.15 | ||||||||
| Noninterest-bearing liabilities: | ||||||||||||||
| Demand deposits | 78,879 | 75,469 | ||||||||||||
| Other liabilities | 2,553 | 2,262 | ||||||||||||
| Total noninterest-bearing liabilities | 81,432 | 77,731 | ||||||||||||
| Shareholders' equity | 47,777 | 47,066 | ||||||||||||
| Total Liabilities and Shareholders' Equity | $ | 789,724 | $ | 693,546 | ||||||||||
| Net interest spread | 6,885 | 3.26 | % | 6,117 | 3.13 | % | ||||||||
| Tax-equivalent basis adjustment | (47) | (30) | ||||||||||||
| Net interest income | $ | 6,838 | $ | 6,087 | ||||||||||
| Net interest margin | 3.66 | % | 3.71 | % | ||||||||||
Page 8 of 11
| Unity Bancorp, Inc. | ||||||||||||||
| Consolidated Average Balance Sheets | ||||||||||||||
| with Resultant Interest and Rates | ||||||||||||||
| (Tax-equivalent basis, dollars in thousands) | ||||||||||||||
| Year to Date | ||||||||||||||
| June 30, 2008 | June 30, 2007 | |||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | |||||||||
| ASSETS | ||||||||||||||
| Interest-earning assets: | ||||||||||||||
| Federal funds sold and interest-bearing deposits with banks | $ | 22,638 | $ | 291 | 2.59 | % | $ | 19,835 | $ | 483 | 4.91 | % | ||
| FHLB/ACBB Stock | 4,287 | 176 | 8.26 | 3,020 | 114 | 7.61 | ||||||||
| Securities: | ||||||||||||||
| Available for sale | 73,685 | 1,869 | 5.07 | 61,999 | 1,468 | 4.74 | ||||||||
| Held to maturity | 32,847 | 871 | 5.30 | 39,881 | 1,054 | 5.29 | ||||||||
| Total securities | 106,532 | 2,740 | 5.14 | 101,880 | 2,522 | 4.95 | ||||||||
| Loans, net of unearned discount: | ||||||||||||||
| SBA | 99,810 | 4,356 | 8.73 | 82,435 | 4,542 | 11.02 | ||||||||
| Commercial | 375,366 | 13,402 | 7.18 | 326,905 | 12,366 | 7.63 | ||||||||
| Residential mortgage | 77,163 | 2,288 | 5.93 | 64,086 | 1,855 | 5.79 | ||||||||
| Consumer | 58,045 | 1,747 | 6.05 | 54,328 | 1,855 | 6.89 | ||||||||
| Total loans | 610,384 | 21,793 | 7.17 | 527,754 | 20,618 | 7.86 | ||||||||
| Total interest-earning assets | 743,841 | 25,000 | 6.75 | 652,489 | 23,737 | 7.31 | ||||||||
| Noninterest-earning assets: | ||||||||||||||
| Cash and due from banks | 14,684 | 12,199 | ||||||||||||
| Allowance for loan losses | (8,752) | (7,950) | ||||||||||||
| Other assets | 30,783 | 29,292 | ||||||||||||
| Total noninterest-earning assets | 36,715 | 33,541 | ||||||||||||
| Total Assets | $ | 780,556 | $ | 686,030 | ||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 80,597 | $ | 716 | 1.79 | $ | 91,114 | $ | 1,029 | 2.28 | ||||
| Savings deposits | 188,124 | 2,267 | 2.42 | 211,180 | 4,293 | 4.10 | ||||||||
| Time deposits | 279,304 | 6,226 | 4.48 | 177,657 | 4,123 | 4.68 | ||||||||
| Total interest-bearing deposits | 548,025 | 9,209 | 3.38 | 479,951 | 9,445 | 3.97 | ||||||||
| Borrowed funds and subordinated debentures | 105,657 | 2,220 | 4.23 | 81,509 | 2,126 | 5.26 | ||||||||
| Total interest-bearing liabilities | 653,682 | 11,429 | 3.52 | 561,460 | 11,571 | 4.16 | ||||||||
| Noninterest-bearing liabilities: | ||||||||||||||
| Demand deposits | 76,794 | 75,346 | ||||||||||||
| Other liabilities | 2,372 | 2,593 | ||||||||||||
| Total noninterest-bearing liabilities | 79,166 | 77,939 | ||||||||||||
| Shareholders' equity | 47,708 | 46,631 | ||||||||||||
| Total Liabilities and Shareholders' Equity | $ | 780,556 | $ | 686,030 | ||||||||||
| Net interest spread | 13,571 | 3.23 | % | 12,166 | 3.15 | % | ||||||||
| Tax-equivalent basis adjustment | (98) | (60) | ||||||||||||
| Net interest income | $ | 13,473 | $ | 12,106 | ||||||||||
| Net interest margin | 3.65 | % | 3.73 | % | ||||||||||
Page 9 of 11
| Unity Bancorp, Inc. | ||||||||||||
| Allowance for Loan Losses and Loan Quality Schedules | ||||||||||||
| (Dollars in thousands) | ||||||||||||
| 6/30/2008 | 3/31/2008 | 12/31/2007 | 9/30/2007 | 6/30/2007 | ||||||||
| ALLOWANCE FOR LOAN LOSSES: | ||||||||||||
| Balance, beginning of quarter | $ | 8,650 | $ | 8,383 | $ | 8,183 | $ | 7,997 | $ | 7,757 | ||
| Provision charged to expense | 650 | 450 | 550 | 450 | 350 | |||||||
| 9,300 | 8,833 | 8,733 | 8,447 | 8,107 | ||||||||
| Less: Charge offs | ||||||||||||
| SBA | 249 | 264 | 260 | 270 | 124 | |||||||
| Commercial | 60 | - | 126 | 24 | 5 | |||||||
| Residential mortgage | - | 25 | - | - | - | |||||||
| Consumer | 56 | 6 | 20 | 28 | - | |||||||
| Total Charge Offs | 365 | 295 | 406 | 322 | 129 | |||||||
| Add: Recoveries | ||||||||||||
| SBA | 5 | 60 | 53 | 41 | 12 | |||||||
| Commercial | 4 | 2 | 3 | 7 | 2 | |||||||
| Residential mortgage | - | - | - | - | - | |||||||
| Consumer | 1 | 50 | - | 10 | 5 | |||||||
| Total Recoveries | 10 | 112 | 56 | 58 | 19 | |||||||
| Net Charge Offs | 355 | 183 | 350 | 264 | 110 | |||||||
| Balance, end of quarter | $ | 8,945 | $ | 8,650 | $ | 8,383 | $ | 8,183 | $ | 7,997 | ||
| - | ||||||||||||
| LOAN QUALITY INFORMATION: | ||||||||||||
| Nonperforming loans | $ | 6,621 | $ | 4,142 | $ | 5,461 | $ | 4,185 | $ | 4,611 | ||
| Other real estate owned, net | 266 | 266 | 106 | 134 | 366 | |||||||
| Nonperforming assets | $ | 6,887 | $ | 4,408 | $ | 5,567 | $ | 4,319 | $ | 4,977 | ||
| Loans 90 days past due and still accruing | $ | 76 | $ | 546 | $ | 155 | $ | 340 | $ | 167 | ||
| Allowance for loan losses to: | ||||||||||||
| Total loans at period end | 1.39 | % | 1.43 | % | 1.42 | % | 1.44 | % | 1.48 | % | ||
| Nonperforming loans | 135.10 | 208.84 | 153.49 | 195.53 | 173.43 | |||||||
| Nonperforming assets | 129.88 | 196.23 | 150.58 | 189.47 | 160.68 | |||||||
| Net charge offs to average loans (QTD) | 0.23 | 0.12 | 0.24 | 0.19 | 0.08 | |||||||
| Net charge offs to average loans (YTD) | 0.18 | 0.12 | 0.14 | 0.11 | 0.07 | |||||||
| Nonperforming loans to total loans | 1.03 | 0.69 | 0.93 | 0.74 | 0.85 | |||||||
| Nonperforming assets to total loans and OREO | 1.07 | 0.73 | 0.94 | 0.76 | 0.92 | |||||||
Page 10 of 11
| Unity Bancorp, Inc. | |||||||||||
| Quarterly Financial Data | |||||||||||
| 06/30/08 | 03/31/08 | 12/31/07 | 09/30/07 | 06/30/07 | |||||||
| SUMMARY OF INCOME (in thousands) : | |||||||||||
| Interest income | $ | 12,267 | $ | 12,635 | $ | 12,657 | $ | 12,566 | $ | 11,975 | |
| Interest expense | 5,429 | 6,000 | 6,310 | 6,593 | 5,888 | ||||||
| Net interest income | 6,838 | 6,635 | 6,347 | 5,973 | 6,087 | ||||||
| Provision for loan losses | 650 | 450 | 550 | 450 | 350 | ||||||
| Net interest income after provision | 6,188 | 6,185 | 5,797 | 5,523 | 5,737 | ||||||
| Noninterest income | 1,028 | 1,455 | 1,053 | 1,460 | 1,748 | ||||||
| Noninterest expense | 5,617 | 5,770 | 5,928 | 5,501 | 5,267 | ||||||
| Income before income taxes | 1,599 | 1,870 | 922 | 1,482 | 2,218 | ||||||
| Federal and state income tax provision | 495 | 626 | 242 | 430 | 676 | ||||||
| Net Income | 1,104 | 1,244 | 680 | 1,052 | 1,542 | ||||||
| Net Income per Common Share: | |||||||||||
| Basic | $ | 0.16 | $ | 0.18 | $ | 0.10 | $ | 0.15 | $ | 0.21 | |
| Diluted | 0.15 | 0.17 | 0.09 | 0.14 | 0.20 | ||||||
| COMMON SHARE DATA: | |||||||||||
| Cash dividends declared | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | |
| Book value at quarter end | 6.76 | 6.76 | 6.70 | 6.61 | 6.54 | ||||||
| Market value at quarter end | 6.95 | 7.48 | 8.10 | 10.55 | 10.90 | ||||||
| Average common shares outstanding: (000's) | |||||||||||
| Basic | 7,092 | 7,075 | 7,107 | 7,215 | 7,334 | ||||||
| Diluted | 7,275 | 7,271 | 7,328 | 7,462 | 7,660 | ||||||
| Common shares outstanding at period end (000's) | 7,095 | 7,084 | 7,063 | 7,154 | 7,371 | ||||||
| OPERATING RATIOS: | |||||||||||
| Return on average assets | 0.56 | % | 0.65 | % | 0.36 | % | 0.57 | % | 0.89 | % | |
| Return on average common equity | 9.29 | 10.50 | 5.78 | 8.89 | 13.14 | ||||||
| Efficiency ratio | 69.59 | 71.95 | 74.07 | 74.23 | 67.22 | ||||||
| BALANCE SHEET DATA (in thousands): | |||||||||||
| Assets | $ | 832,315 | $ | 807,874 | $ | 752,196 | $ | 746,821 | $ | 732,403 | |
| Deposits | 671,881 | 642,282 | 601,268 | 612,215 | 596,093 | ||||||
| Loans | 643,039 | 602,943 | 590,132 | 567,597 | 541,385 | ||||||
| Shareholders' equity | 47,951 | 47,896 | 47,260 | 47,261 | 48,242 | ||||||
| Allowance for loan losses | 8,945 | 8,650 | 8,383 | 8,183 | 7,997 | ||||||
| TAX-EQUIVALENT YIELDS AND RATES: | |||||||||||
| Interest-earning assets | 6.57 | % | 6.93 | % | 7.15 | % | 7.16 | % | 7.28 | % | |
| Interest-bearing liabilities | 3.31 | 3.73 | 4.05 | 4.27 | 4.15 | ||||||
| Net interest spread | 3.26 | 3.20 | 3.10 | 2.89 | 3.13 | ||||||
| Net interest margin | 3.66 | 3.64 | 3.62 | 3.44 | 3.71 | ||||||
| CREDIT QUALITY: | |||||||||||
| Nonperforming assets (in thousands) | $ | 6,887 | $ | 4,408 | $ | 5,567 | $ | 4,319 | $ | 4,977 | |
| Allowance for loan losses to period-end loans | 1.39 | % | 1.43 | % | 1.42 | % | 1.44 | % | 1.48 | % | |
| Net charge offs to average loans | 0.23 | 0.12 | 0.24 | 0.19 | 0.08 | ||||||
| Nonperforming assets to loans and OREO | 1.07 | 0.73 | 0.94 | 0.76 | 0.92 | ||||||
| CAPITAL AND OTHER: | |||||||||||
| Total equity to assets | 5.76 | % | 5.93 | % | 6.28 | % | 6.33 | % | 6.59 | % | |
| Tier I capital to average assets (leverage) | 8.01 | 8.06 | 8.25 | 8.37 | 9.21 | ||||||
| Tier I capital to risk-adjusted assets | 9.42 | 9.66 | 9.81 | 10.51 | 11.07 | ||||||
| Total capital to risk-adjusted assets | 10.67 | 10.91 | 11.06 | 11.76 | 13.72 | ||||||
| Number of banking offices | 16 | 17 | 17 | 16 | 15 | ||||||
| Number of ATMs | 19 | 20 | 20 | 19 | 18 | ||||||
| Number of employees | 191 | 188 | 201 | 197 | 195 | ||||||
| Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with $832 million in assets and $672 million in deposits. Unity | |||||||||||
| Bank provides financial services to retail, corporate & small business customers through its 16 retail service centers located in 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 letter contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated | |||||||||||
| future financial performance. 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 general economic conditions, trends in | |||||||||||
| interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors. | |||||||||||
Page 11 of 11