Unity Bancorp (UNTY) 8-K Results of Operations and Financial Condition

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800 618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

February 3, 2011

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports Year End and Fourth Quarter Results

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $719 thousand, or $0.10 per diluted share, for the year ended December 31, 2010, compared to a net loss of $2.6 million, or $0.36 per diluted share for the same period a year ago.  Return on average assets and average common equity for 2010 were 0.26% and 1.43%, respectively.

James A. Hughes, President and CEO, stated, “We are pleased to report positive financial developments this quarter.”  Mr. Hughes continued, “During the quarter, we had resolution to many problem credits.  This resulted in a 27 percent decline in nonperforming assets from the prior quarter.  We continue to remain optimistic about the opportunities ahead.  We have also seen continued expansion in our net interest margin and had a record year in residential mortgage loan transactions.”

Annual results were substantially impacted by the following items:

·   2010 earnings were impacted by a $1.1 million increase in expenses on other real estate owned (“OREO”), or $0.09 per diluted share after tax. The increase in OREO expense is attributed to the write-down and subsequent disposal of several properties that were foreclosed upon in the fourth quarter of 2010.  

·   2009 earnings were materially impacted by an impairment charge of $2.6 million, or $0.24 per diluted share after tax, related to two pooled trust preferred securities and a one-time FDIC special assessment of $408 thousand, or $0.04 per diluted share in June 2009. Excluding the impairment charges and the FDIC special assessment, net loss attributable to common shareholders would have been $584 thousand or ($0.08) per diluted share for the year ended December 31, 2009.

For the quarter ended December 31, 2010, the Company reported a net loss available to common shareholders of $299 thousand or $0.04 per diluted share, compared to a net loss of $239 thousand or $0.03 per diluted share for the fourth quarter of 2009.  Return on average assets and average common equity for the fourth quarter of 2010 were 0.04% and (2.31)%, respectively.

Fourth quarter results were substantially impacted by the following items:

·   During the fourth quarter of 2010, the Company booked an additional $750 thousand provision for loan losses and realized a $619 thousand increase in OREO expenses. Excluding these charges, net income available to common shareholders would have been $523 thousand or $0.07 per diluted share for the quarter ended December 31, 2010.  

·   During the fourth quarter of 2009, the Company recognized an impairment charge of $862 thousand, or $0.08 per diluted share after tax, due to further deterioration of the underlying collateral for two pooled trust preferred securities.  Excluding impairment charges, net income available to common shareholders would have been $330 thousand or $0.05 per diluted share for the quarter ended December 31, 2009.

Net Interest Income

Net interest income was $30.0 million, or 7.8% higher in 2010 than the $27.8 million reported for 2009.    Factors affecting net interest income include:

·   The yield on earning assets decreased from 5.71% in 2009 to 5.38% in 2010. This was a result of interest-earning assets re-pricing in a low rate environment.

·   The cost of interest-bearing liabilities decreased from 2.84% for 2009 to 1.97% for 2010.  All interest-bearing deposit costs declined with the largest decline in time deposits.

·   Net interest margin for 2010 was 3.67%, an increase of 45 basis points from the same period last year.

Noninterest Income

For the year ended December 31, 2010, noninterest income amounted to $5.1 million, an increase of $2.9 million from the prior year period.  Excluding the effect of the OTTI charge noted above and net security gains, noninterest income increased $1.1 million.  Noninterest income was affected by the following factors:

·   Branch fee income remained relatively flat compared to the prior year period.

·   Service and loan fee income decreased $235 thousand compared to the prior year period due to lower levels of prepayment fees.

·   Gains on sales on SBA loans amounted to $500 thousand, compared to $393 thousand a year ago.

·   Gains on the sales of residential mortgage loans amounted to $1.1 million, compared to $217 thousand from the prior year period due to a significant increase in the origination of mortgage loans.

·   There were no other-than-temporary impairment (“OTTI”) charges on investment securities recognized during 2010, compared to $2.6 million in the prior year period.

·   The increase in the cash surrender value of bank owned life insurance (“BOLI”) was the result of the Company purchasing $2.5 million in BOLI to help offset the rising cost of employee benefits.

·   Gains on the sales of investment securities amounted to $85 thousand, compared to $855 thousand in the prior year period.

Noninterest Expense

For the twelve months ended December 31, 2010, noninterest expenses were $25.0 million, an increase of $1.0 million or 4.4% from the same period a year ago. The following factors affected our noninterest expense:

·   Compensation and benefits expense amounted to $11.9 million, an increase of $632 thousand or 5.6%, due to higher employee medical benefits costs and increased residential mortgage commissions due to a larger sales volume, partially offset by lower incentive bonus payments.

·   Professional fees decreased $305 thousand, due to decreased legal, loan review and audit costs.

·   OREO expense increased $1.1 million, due to increased real estate carrying costs, valuation adjustments and losses on the sale of OREO properties.

·   FDIC insurance premiums decreased $406 thousand, due to the $408 thousand second quarter 2009 special assessment.

Financial Condition

At December 31, 2010, total assets were $818.4 million, a 12.0% decrease from the prior year-end.

·   Total loans decreased $41.1 million or 6.3%, from $657.0 million at December 31, 2009. The decrease occurred across all loan categories with SBA 7(a), SBA 504, commercial, residential mortgages and consumer loans decreasing 13.2%, 9.1%, 4.3%, 3.5% and 7.2%, respectively.   Loan demand has been sluggish due to the economy.  In addition, Unity has exited the national SBA program, adopting a local SBA program.

·   Total securities decreased $40.8 million since December 31, 2009, as Unity received $49.8 million in principal payments, sold $16.4 million and had $24.8 million in bonds called during 2010, partially offset by $50.5 million in purchases.

·   Core deposits, excluding time deposits, increased $7.7 million during the twelve month period to $474.2 million.  The increase was due primarily to an $11.2 million increase in noninterest-bearing demand deposits and a $5.5 million increase in interest-bearing demand deposits.  Time deposits decreased $111.2 million for the twelve months ended December 31, 2010 due to planned run off of a maturing high rate promotion that was done late in 2008 to bolster liquidity.

·   Shareholders’ equity was $70.1 million at December 31, 2010, an increase of $2.2 million from year-end 2009.

·   Book value per common share was $7.08, compared to $6.91 at year-end.

·   At December 31, 2010 the leverage, Tier I and Total Risk Based Capital ratios were 9.97%, 13.04% and 14.30%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

·   Nonperforming assets totaled $24.0 million at December 31, 2010, or 3.88% of total loans and OREO, compared to $27.0 million or 4.10% of total loans and OREO a year ago.

·   The SBA, commercial, residential mortgages, SBA 504 and consumer nonaccrual loans were $8.2 million, $5.5 million, $5.1 million, $2.7 million and $249 thousand, respectively.  The majority of nonaccrual loans are secured by real estate.

·   OREO assets totaled $2.3 million at December 31, 2010, an increase of $816 thousand, compared to $1.5 million a year ago.

·   The allowance for loan losses totaled $14.4 million at December 31, 2010, or 2.33% of total loans. The provision for loan losses for the quarter and year ended December 31, 2010 was $2.75 million and $7.25 million, respectively, compared to $2.0 million and $8.0 million for the quarter and twelve month periods of 2009.

·   Net charge-offs were $2.5 million for the three months ended December 31, 2010, compared to $603 thousand for the same period a year ago.  Net charge-offs were $6.7 million for the twelve months ended December 31, 2010, compared to $4.5 million for the same period a year ago.

Mr. Hughes added, “Unity continues to work diligently to address problem loans.  The decrease in nonperforming assets was related to the sale of many problem assets.   For the near term, the size of our loan loss provision will remain the most important single factor in our earnings.  However, we are hopeful we will see further improvement in credit quality in 2011.”

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $818 million in assets and $655 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 8 00- 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 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
December 31, 2010
										2010.Q4 VS.
										2010.Q3		2009.Q4
Amounts in thousands, except percentages and per share amounts	12/31/2010			9/30/2010			12/31/2009			%		%
BALANCE SHEET DATA:
Total assets	$	818,410		$	846,385		$	930,357		-3.3	%	-12.0	%
Total deposits		654,788			670,158			758,239		-2.3	%	-13.6	%
Total loans		615,936			629,516			657,016		-2.2	%	-6.3	%
Total securities		128,242			134,820			169,022		-4.9	%	-24.1	%
Total shareholders' equity		70,085			70,730			67,865		-0.9	%	3.3	%
Allowance for loan losses		(14,364	)		(14,163	)		(13,842	)	1.4	%	3.8	%
FINANCIAL DATA - QUARTER TO DATE:
Income (loss) before provision (benefit) for income taxes	$	36		$	968		$	(206	)	-96.3	%	117.5	%
Provision (benefit) for income taxes		(50	)		242			(340	)	-120.7	%	85.3	%
Net income (loss)		86			726			134		-88.2	%	-35.8	%
Preferred stock dividends & discount accretion		385			385			373		0.0	%	3.2	%
Income available (loss attributable) to common shareholders	$	(299	)	$	341		$	(239	)	-187.7	%	-25.1	%
Net income (loss) per common share - Basic	$	(0.04	)	$	0.05		$	(0.03	)	-180.0	%	-33.3	%
Net income (loss) per common share - Diluted	$	(0.04	)	$	0.05		$	(0.03	)	-180.0	%	-33.3	%
Return (loss) on average assets		0.04	%		0.34	%		0.06	%	-88.2	%	-33.3	%
Return (loss) on average equity		-2.31	%		2.66	%		-1.95	%	-186.8	%	-18.5	%
Effficiency ratio		70.65	%		72.47	%		71.05	%	-2.5	%	-0.6	%
FINANCIAL DATA - YEAR TO DATE:
Income (loss) before provision (benefit) for income taxes	$	2,829		$	2,794		$	(1,979	)	1.3	%	243.0	%
Provision (benefit) for income taxes		589			639			(898	)	-7.8	%	165.6	%
Net income (loss)		2,240			2,155			(1,081	)	3.9	%	307.2	%
Preferred stock dividends & discount accretion		1,521			1,136			1,496		33.9	%	1.7	%
Income available (loss attributable) to common shareholders	$	719		$	1,019		$	(2,577	)	-29.4	%	127.9	%
Net income (loss) per common share - Basic	$	0.10		$	0.14		$	(0.36	)	-29.5	%	127.7	%
Net income (loss) per common share - Diluted	$	0.10		$	0.14		$	(0.36	)	-29.6	%	126.7	%
Return (loss) on average assets		0.26	%		0.33	%		-0.12	%	-21.2	%	316.7	%
Return (loss) on average equity		1.43	%		2.72	%		-5.29	%	-47.4	%	127.0	%
Effficiency ratio		71.43	%		71.72	%		75.49	%	-0.4	%	-5.4	%
SHARE INFORMATION:
Market price per share		6.05			5.25			4.02		15.2	%	50.5	%
Dividends paid		-			-			-		0.0	%	0.0	%
Book value per common share		7.08			7.19			6.91		-1.5	%	2.4	%
Average diluted shares outstanding (QTD)		7,209			7,467			7,126		-3.5	%	1.2	%
CAPITAL RATIOS:
Total equity to total assets		8.56	%		8.36	%		7.29	%	2.5	%	17.4	%
Leverage ratio		9.97	%		9.83	%		8.83	%	1.4	%	12.8	%
Tier 1 risk-based capital ratio		13.04	%		12.67	%		11.75	%	3.0	%	11.0	%
Total risk-based capital ratio		14.30	%		13.93	%		13.01	%	2.7	%	9.9	%
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	24,008		$	33,077		$	27,026		-27.4	%	-11.2	%
QTD net chargeoffs (annualized) to QTD average loans		1.62	%		0.80	%		0.36	%	101.4	%	347.0	%
Allowance for loan losses to total loans		2.33	%		2.25	%		2.11	%	3.7	%	10.7	%
Nonperforming assets to total loans and OREO		3.88	%		5.21	%		4.10	%	-25.4	%	-5.4	%
Nonperforming assets to total assets		2.93	%		3.91	%		2.90	%	-24.9	%	1.0	%

UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2010
										2010.Q4 VS.
											2010.Q3			2009.Q4
Amounts in thousands, except percentages	12/31/2010			9/30/2010			12/31/2009			%			%
ASSETS
Cash and due from banks	$	17,637		$	16,928		$	23,517			4.2	%		-25.0	%
Federal funds sold and interest-bearing deposits		26,289			30,379			50,118			-13.5	%		-47.5	%
Cash and cash equivalents		43,926			47,307			73,635			-7.1	%		-40.3	%
Securities available for sale		107,131			111,777			140,770			-4.2	%		-23.9	%
Securities held to maturity		21,111			23,043			28,252			-8.4	%		-25.3	%
Total securities		128,242			134,820			169,022			-4.9	%		-24.1	%
SBA loans held for sale		10,397			19,021			21,406			-45.3	%		-51.4	%
SBA loans held to maturity		75,741			72,197			77,844			4.9	%		-2.7	%
SBA 504 loans		64,276			65,075			70,683			-1.2	%		-9.1	%
Commercial loans		281,205			284,875			293,739			-1.3	%		-4.3	%
Residential mortgage loans		128,400			131,479			133,059			-2.3	%		-3.5	%
Consumer loans		55,917			56,869			60,285			-1.7	%		-7.2	%
Total loans		615,936			629,516			657,016			-2.2	%		-6.3	%
Allowance for loan losses		(14,364	)		(14,163	)		(13,842	)		1.4	%		3.8	%
Net loans		601,572			615,353			643,174			-2.2	%		-6.5	%
					��
Premises and equipment, net		10,967			11,137			11,773			-1.5	%		-6.8	%
Deferred tax assets		7,550			7,168			7,308			5.3	%		3.3	%
Bank owned life insurance (BOLI)		8,812			8,732			6,002			0.9	%		46.8	%
Prepaid FDIC insurance		3,266			3,545			4,739			-7.9	%		-31.1	%
Federal Home Loan Bank stock		4,206			4,656			4,677			-9.7	%		-10.1	%
Accrued interest receivable		3,791			3,750			4,225			1.1	%		-10.3	%
Other real estate owned (OREO)		2,346			5,773			1,530			-59.4	%		53.3	%
Goodwill and other intangibles		1,544			1,548			1,559			-0.3	%		-1.0	%
Other assets		2,188			2,596			2,713			-15.7	%		-19.4	%
Total assets	$	818,410		$	846,385		$	930,357			-3.3	%		-12.0	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	91,272		$	87,837		$	80,100			3.9	%		13.9	%
Interest-bearing demand deposits		105,530			100,350			100,046			5.2	%		5.5	%
Savings deposits		277,394			292,372			286,334			-5.1	%		-3.1	%
Time deposits, under $100,000		119,478			124,851			183,377			-4.3	%		-34.8	%
Time deposits, $100,000 and over		61,114			64,748			108,382			-5.6	%		-43.6	%
Total deposits		654,788			670,158			758,239			-2.3	%		-13.6	%
Borrowed funds		75,000			86,044			85,000			-12.8	%		-11.8	%
Subordinated debentures		15,465			15,465			15,465			0.0	%		0.0	%
Accrued interest payable		556			618			710			-10.0	%		-21.7	%
Accrued expenses and other liabilities		2,516			3,370			3,078			-25.3	%		-18.3	%
Total liabilities		748,325			775,655			862,492			-3.5	%		-13.2	%
Cumulative perpetual preferred stock		19,019			18,894			18,533			0.7	%		2.6	%
Common stock		55,884			55,798			55,454			0.2	%		0.8	%
Retained earnings (deficit)		(772	)		(473	)		(1,492	)		-63.2	%		48.3	%
Treasury stock at cost		(4,169	)		(4,169	)		(4,169	)		0.0	%		0.0	%
Accumulated other comprehensive income (loss)		123			680			(461	)		-81.9	%		126.7	%
Total shareholders' equity		70,085			70,730			67,865			-0.9	%		3.3	%
Total liabilities and shareholders' equity	$	818,410		$	846,385		$	930,357			-3.3	%		-12.0	%
Issued common shares		7,636			7,632			7,569
Outstanding common shares		7,211			7,207			7,144
Treasury shares		425			425			425

UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
December 31, 2010
										2010.Q4 VS.
	For the Three Months Ended										2010.Q3				2009.Q4
Amounts in thousands, except percentages and per share amounts	12/31/2010			9/30/2010			12/31/2009				$		%		$			%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	11		$	21		$	38		$	(10	)	-47.6	%	$	(27	)	-71.1	%
Federal Home Loan Bank stock		86			65			54			21		32.3	%		32		59.3	%
Securities available for sale		881			1,071			1,469			(190	)	-17.7	%		(588	)	-40.0	%
Securities held to maturity		259			270			353			(11	)	-4.1	%		(94	)	-26.6	%
Total securities		1,140			1,341			1,822			(201	)	-15.0	%		(682	)	-37.4	%
SBA loans		1,287			1,225			1,578			62		5.1	%		(291	)	-18.4	%
SBA 504 loans		1,034			1,093			1,158			(59	)	-5.4	%		(124	)	-10.7	%
Commercial loans		4,585			4,454			4,840			131		2.9	%		(255	)	-5.3	%
Residential mortgage loans		1,955			1,808			1,834			147		8.1	%		121		6.6	%
Consumer loans		752			719			777			33		4.6	%		(25	)	-3.2	%
Total loans		9,613			9,299			10,187			314		3.4	%		(574	)	-5.6	%
Total interest income		10,850			10,726			12,101			124		1.2	%		(1,251	)	-10.3	%
INTEREST EXPENSE
Interest-bearing demand deposits		143			148			261			(5	)	-3.4	%		(118	)	-45.2	%
Savings deposits		561			639			985			(78	)	-12.2	%		(424	)	-43.0	%
Time deposits		1,222			1,450			2,442			(228	)	-15.7	%		(1,220	)	-50.0	%
Borrowed funds and subordinated debentures		1,064			1,077			1,078			(13	)	-1.2	%		(14	)	-1.3	%
Total interest expense		2,990			3,314			4,766			(324	)	-9.8	%		(1,776	)	-37.3	%
Net interest income		7,860			7,412			7,335			448		6.0	%		525		7.2	%
Provision for loan losses		2,750			1,500			2,000			1,250		83.3	%		750		37.5	%
Net interest income after provision for loan losses		5,110			5,912			5,335			(802	)	-13.6	%		(225	)	-4.2	%
NONINTEREST INCOME
Branch fee income		373			359			379			14		3.9	%		(6	)	-1.6	%
Service and loan fee income		274			251			269			23		9.2	%		5		1.9	%
Gain on sale of SBA loans held for sale, net		83			269			364			(186	)	-69.1	%		(281	)	-77.2	%
Gain on sale of mortgage loans		548			247			33			301		121.9	%		515		1560.6	%
Bank owned life insurance (BOLI)		80			79			56			1		1.3	%		24		42.9	%
Other-than-temporary impairment charges		-			-			(862	)		-		0.0	%		862		100.0	%
Net security gains		43			35			180			8		22.9	%		(137	)	-76.1	%
Other income		127			220			116			(93	)	-42.3	%		11		9.5	%
Total noninterest income (loss)		1,528			1,460			535		$	68		4.7	%	$	993		185.6	%
NONINTEREST EXPENSE
Compensation and benefits		3,094			2,960			2,857			134		4.5	%		237		8.3	%
Occupancy		612			624			623			(12	)	-1.9	%		(11	)	-1.8	%
Processing and communications		530			529			523			1		0.2	%		7		1.3	%
Furniture and equipment		444			440			448			4		0.9	%		(4	)	-0.9	%
Professional services		80			229			262			(149	)	-65.1	%		(182	)	-69.5	%
Loan collection costs		266			272			330			(6	)	-2.2	%		(64	)	-19.4	%
OREO expense		647			482			28			165		34.2	%		619		2210.7	%
Deposit insurance		317			333			346			(16	)	-4.8	%		(29	)	-8.4	%
Advertising		146			130			156			16		12.3	%		(10	)	-6.4	%
Other expenses		466			405			503			61		15.1	%		(37	)	-7.4	%
Total noninterest expense		6,602			6,404			6,076			198		3.1	%		526		8.7	%
Income (loss) before provision (benefit) for income taxes		36			968			(206	)		(932	)	-96.3	%		242		117.5	%
Provision (benefit) for income taxes		(50	)		242			(340	)		(292	)	-120.7	%		290		85.3	%
Net income (loss)		86			726			134			(640	)	-88.2	%		(48	)	-35.8	%
Preferred stock dividends & discount accretion		385			385			373			-		0.0	%		12		3.2	%
Income available (loss attributable) to common shareholders	$	(299	)	$	341		$	(239	)	$	(640	)	-187.7	%	$	(60	)	-25.1	%
Effective tax rate		-138.9	%		25.0	%		165.0	%
Net income (loss) per common share - Basic	$	(0.04	)	$	0.05		$	(0.03	)
Net income (loss) per common share - Diluted	$	(0.04	)	$	0.05		$	(0.03	)
Weighted average common shares outstanding - Basic		7,209			7,176			7,126
Weighted average common shares outstanding - Diluted		7,209			7,467			7,126

UNITY BANCORP, INC.
YTD CONSOLIDATED STATEMENTS OF INCOME
December 31, 2010
	Current YTD			Prior YTD			Current YTD VS. Prior YTD
Amounts in thousands, except percentages and per share amounts	12/31/2010			12/31/2009			$			%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	87		$	117		$	(30	)	-25.6	%
Federal Home Loan Bank stock		235			277			(42	)	-15.2	%
Securities available for sale		4,287			6,136			(1,849	)	-30.1	%
Securities held to maturity		1,117			1,520			(403	)	-26.5	%
Total securities		5,404			7,656			(2,252	)	-29.4	%
SBA loans		5,264			6,246			(982	)	-15.7	%
SBA 504 loans		4,305			4,821			(516	)	-10.7	%
Commercial loans		18,130			19,881			(1,751	)	-8.8	%
Residential mortgage loans		7,684			7,252			432		6.0	%
Consumer loans		2,926			3,160			(234	)	-7.4	%
Total loans		38,309			41,360			(3,051	)	-7.4	%
Total interest income		44,035			49,410			(5,375	)	-10.9	%
INTEREST EXPENSE
Interest-bearing demand deposits		737			1,063			(326	)	-30.7	%
Savings deposits		2,829			3,574			(745	)	-20.8	%
Time deposits		6,173			12,523			(6,350	)	-50.7	%
Borrowed funds and subordinated debentures		4,296			4,422			(126	)	-2.8	%
Total interest expense		14,035			21,582			(7,547	)	-35.0	%
Net interest income		30,000			27,828			2,172		7.8	%
Provision for loan losses		7,250			8,000			(750	)	-9.4	%
Net interest income after provision for loan losses		22,750			19,828			2,922		14.7	%
NONINTEREST INCOME
Branch fee income		1,424			1,418			6		0.4	%
Service and loan fee income		979			1,214			(235	)	-19.4	%
Gain on sale of SBA loans held for sale, net		500			393			107		27.2	%
Gain on sale of mortgage loans		1,052			217			835		384.8	%
Bank owned life insurance (BOLI)		310			222			88		39.6	%
Other-than-temporary impairment charges		-			(2,611	)		2,611		100.0	%
Net security gains		85			855			(770	)	-90.1	%
Other income		719			432			287		66.4	%
Total noninterest income		5,069			2,140			2,929		136.9	%
NONINTEREST EXPENSE
Compensation and benefits		11,875			11,243			632		5.6	%
Occupancy		2,522			2,552			(30	)	-1.2	%
Processing and communications		2,139			2,077			62		3.0	%
Furniture and equipment		1,755			1,829			(74	)	-4.0	%
Professional services		737			1,042			(305	)	-29.3	%
Loan collection costs		964			1,023			(59	)	-5.8	%
OREO expense		1,316			220			1,096		498.2	%
Deposit insurance		1,301			1,707			(406	)	-23.8	%
Advertising		624			530			94		17.7	%
Other expenses		1,757			1,724			33		1.9	%
Total noninterest expense		24,990			23,947			1,043		4.4	%
Income (loss) before provision (benefit) for income taxes		2,829			(1,979	)		4,808		243.0	%
Provision (benefit) for income taxes		589			(898	)		1,487		165.6	%
Net income (loss)		2,240			(1,081	)		3,321		307.2	%
Preferred stock dividends & discount accretion		1,521			1,496			25		1.7	%
Income available (loss attributable) to common shareholders	$	719		$	(2,577	)	$	3,296		127.9	%
Effective tax rate		20.8	%		45.4	%
Net income (loss) per common share - Basic	$	0.10		$	(0.36	)
Net income (loss) per common share - Diluted	$	0.10		$	(0.36	)
Weighted average common shares outstanding - Basic		7,173			7,121
Weighted average common shares outstanding - Diluted		7,447			7,121

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
December 31, 2010
	For the Three Months Ended
	December 31, 2010									September 30, 2010
Amounts in thousands, except percentages	Average Balance			Interest			Rate/Yield			Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	36,274		$	11			0.12	%	$	30,939		$	21			0.27	%
Federal Home Loan Bank stock		4,597			86			7.42	%		4,656			65			5.54	%
Securities available for sale		108,718			906			3.33	%		115,876			1,085			3.75	%
Securities held to maturity		21,292			264			4.96	%		22,148			275			4.97	%
Total securities (A)		130,010			1,170			3.60	%		138,024			1,360			3.94	%
SBA loans		90,426			1,287			5.69	%		94,723			1,225			5.17	%
SBA 504 loans		64,874			1,034			6.32	%		65,506			1,093			6.62	%
Commercial loans		282,184			4,585			6.45	%		283,267			4,454			6.24	%
Residential mortgage loans		129,696			1,955			6.03	%		132,031			1,808			5.48	%
Consumer loans		57,029			752			5.23	%		57,315			719			4.98	%
Total loans (A), (B)		624,209			9,613			6.13	%		632,842			9,299			5.85	%
Total interest-earning assets	$	795,090		$	10,880			5.45	%	$	806,461		$	10,745			5.30	%
Noninterest-earning assets:
Cash and due from banks		18,339									20,469
Allowance for loan losses		(14,681	)								(14,725	)
Other assets		42,696									41,374
Total noninterest-earning assets		46,354									47,118
Total assets	$	841,444								$	853,579
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	104,900		$	143			0.54	%	$	95,348		$	148			0.62	%
Savings deposits		284,853			561			0.78	%		290,017			639			0.87	%
Time deposits		183,997			1,222			2.63	%		203,346			1,450			2.83	%
Total interest-bearing deposits		573,750			1,926			1.33	%		588,711			2,237			1.51	%
Borrowed funds and subordinated debentures		100,080			1,064			4.16	%		103,296			1,077			4.08	%
Total interest-bearing liabilities	$	673,830		$	2,990			1.75	%	$	692,007		$	3,314			1.89	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		93,049									87,644
Other liabilities		4,196									4,115
Total noninterest-bearing liabilities		97,245									91,759
Total shareholders' equity		70,369									69,813
Total liabilities and shareholders' equity	$	841,444								$	853,579
Net interest spread				$	7,890			3.70	%				$	7,431			3.41	%
Tax-equivalent basis adjustment					(30	)								(19	)
Net interest income				$	7,860								$	7,412
Net interest margin								3.94	%								3.66	%
(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.
QUARTER TO DATE NET INTEREST MARGIN
December 31, 2010
	For the Three Months Ended
	December 31, 2010									December 31, 2009
Amounts in thousands, except percentages	Average Balance			Interest			Rate/Yield			Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	36,274		$	11			0.12	%	$	50,730		$	38			0.30	%
Federal Home Loan Bank stock		4,597			86			7.42	%		4,677			54			4.58	%
Securities available for sale		108,718			906			3.33	%		141,742			1,482			4.18	%
Securities held to maturity		21,292			264			4.96	%		29,369			371			5.05	%
Total securities (A)		130,010			1,170			3.60	%		171,111			1,853			4.33	%
SBA loans		90,426			1,287			5.69	%		102,170			1,578			6.18	%
SBA 504 loans		64,874			1,034			6.32	%		71,295			1,158			6.44	%
Commercial loans		282,184			4,585			6.45	%		295,718			4,840			6.49	%
Residential mortgage loans		129,696			1,955			6.03	%		128,871			1,834			5.69	%
Consumer loans		57,029			752			5.23	%		62,038			777			4.97	%
Total loans (A), (B)		624,209			9,613			6.13	%		660,092			10,187			6.14	%
Total interest-earning assets	$	795,090		$	10,880			5.45	%	$	886,610		$	12,132			5.45	%
Noninterest-earning assets:
Cash and due from banks		18,339									19,273
Allowance for loan losses		(14,681	)								(13,347	)
Other assets		42,696									35,406
Total noninterest-earning assets		46,354									41,332
Total assets	$	841,444								$	927,942
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	104,900		$	143			0.54	%	$	99,196		$	261			1.04	%
Savings deposits		284,853			561			0.78	%		278,710			985			1.40	%
Time deposits		183,997			1,222			2.63	%		294,229			2,442			3.29	%
Total interest-bearing deposits		573,750			1,926			1.33	%		672,135			3,688			2.18	%
Borrowed funds and subordinated debentures		100,080			1,064			4.16	%		100,465			1,078			4.20	%
Total interest-bearing liabilities	$	673,830		$	2,990			1.75	%	$	772,600		$	4,766			2.44	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		93,049									83,770
Other liabilities		4,196									4,358
Total noninterest-bearing liabilities		97,245									88,128
Total shareholders' equity		70,369									67,214
Total liabilities and shareholders' equity	$	841,444								$	927,942
Net interest spread				$	7,890			3.70	%				$	7,366			3.01	%
Tax-equivalent basis adjustment					(30	)								(31	)
Net interest income				$	7,860								$	7,335
Net interest margin								3.94	%								3.30	%
(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.
YEAR TO DATE NET INTEREST MARGIN
December 31, 2010
	For the Twelve Months Ended
	December 31, 2010									December 31, 2009
Amounts in thousands, except percentages	Average Balance			Interest			Rate/Yield			Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	35,349		$	87			0.25	%	$	27,163		$	117			0.43	%
Federal Home Loan Bank stock		4,646			235			5.06	%		5,061			277			5.47	%
Securities available for sale		118,984			4,353			3.66	%		135,537			6,189			4.57	%
Securities held to maturity		23,496			1,149			4.89	%		32,292			1,593			4.93	%
Total securities (A)		142,480			5,502			3.86	%		167,829			7,782			4.64	%
SBA loans		95,353			5,264			5.52	%		103,031			6,246			6.06	%
SBA 504 loans		66,767			4,305			6.45	%		73,517			4,821			6.56	%
Commercial loans		285,771			18,130			6.34	%		301,340			19,881			6.60	%
Residential mortgage loans		132,414			7,684			5.80	%		126,474			7,252			5.73	%
Consumer loans		58,200			2,926			5.03	%		62,481			3,160			5.06	%
Total loans (A), (B)		638,505			38,309			6.00	%		666,843			41,360			6.20	%
Total interest-earning assets	$	820,980		$	44,133			5.38	%	$	866,896		$	49,536			5.71	%
Noninterest-earning assets:
Cash and due from banks		20,672									18,948
Allowance for loan losses		(14,667	)								(11,721	)
Other assets		41,817									33,913
Total noninterest-earning assets		47,822									41,140
Total assets	$	868,802								$	908,036
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	100,729		$	737			0.73	%	$	89,500		$	1,063			1.19	%
Savings deposits		289,156			2,829			0.98	%		214,274			3,574			1.67	%
Time deposits		216,488			6,173			2.85	%		341,233			12,523			3.67	%
Total interest-bearing deposits		606,373			9,739			1.61	%		645,007			17,160			2.66	%
Borrowed funds and subordinated debentures		101,449			4,296			4.18	%		112,403			4,422			3.88	%
Total interest-bearing liabilities	$	707,822		$	14,035			1.97	%	$	757,410		$	21,582			2.84	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		87,684									79,252
Other liabilities		4,174									4,313
Total noninterest-bearing liabilities		91,858									83,565
Total shareholders' equity		69,122									67,061
Total liabilities and shareholders' equity	$	868,802								$	908,036
Net interest spread				$	30,098			3.41	%				$	27,954			2.87	%
Tax-equivalent basis adjustment					(98	)								(126	)
Net interest income				$	30,000								$	27,828
Net interest margin								3.67	%								3.22	%
(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.
ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES
December 31, 2010
Amounts in thousands, except percentages	12/31/2010			9/30/2010			6/30/2010			3/31/2010			12/31/2009
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	14,163		$	13,946		$	14,055		$	13,842		$	12,445
Provision for loan losses charged to expense		2,750			1,500			1,500			1,500			2,000
		16,913			15,446			15,555			15,342			14,445
Less: Chargeoffs
SBA loans		445			389			517			-			-
SBA 504 loans		798			-			-			750			500
Commercial loans		1,115			989			1,038			485			125
Residential mortgage loans		190			95			115			100			-
Consumer loans		234			9			2			-			5
Total chargeoffs		2,782			1,482			1,672			1,335			630
Add: Recoveries
SBA loans		128			17			53			45			23
SBA 504 loans		-			-			-			-			-
Commercial loans		105			178			10			3			3
Residential mortgage loans		-			-			-			-			-
Consumer loans		-			4			-			-			1
Total recoveries		233			199			63			48			27
Net chargeoffs		2,549			1,283			1,609			1,287			603
Balance, end of period	$	14,364		$	14,163		$	13,946		$	14,055		$	13,842
LOAN QUALITY INFORMATION:
Nonperforming loans	$	21,662		$	27,304		$	26,071		$	26,654		$	25,496
Other real estate owned (OREO)		2,346			5,773			3,728			3,318			1,530
Nonperforming assets		24,008			33,077			29,799			29,972			27,026
Less:  Amount guaranteed by Small Business Administration		2,706			2,094			1,436			2,205			1,931
Net nonperforming assets	$	21,302		$	30,983		$	28,363		$	27,767		$	25,095
Loans 90 days past due & still accruing	$	374		$	2,467		$	2,780		$	3,061		$	2,286
Allowance for loan losses to:
Total loans at quarter end		2.33	%		2.25	%		2.19	%		2.16	%		2.11	%
Nonperforming loans		66.31	%		51.87	%		53.49	%		52.73	%		54.29	%
Nonperforming assets		59.83	%		42.82	%		46.80	%		46.89	%		51.22	%
Net nonperforming assets		67.43	%		45.71	%		49.17	%		50.62	%		55.16	%
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		1.39	%		1.56	%		1.89	%		-0.19	%		-0.09	%
SBA 504 loans		4.88	%		0.00	%		0.00	%		4.32	%		2.78	%
Commercial loans		1.42	%		1.14	%		1.44	%		0.67	%		0.16	%
Residential mortgage loans		0.58	%		0.29	%		0.35	%		0.30	%		0.00	%
Consumer loans		1.63	%		0.03	%		0.01	%		0.00	%		0.03	%
Total loans		1.62	%		0.80	%		1.00	%		0.80	%		0.36	%
Nonperforming loans to total loans		3.52	%		4.34	%		4.09	%		4.09	%		3.88	%
Nonperforming assets to total loans and OREO		3.88	%		5.21	%		4.65	%		4.58	%		4.10	%
Nonperforming assets to total assets		2.93	%		3.91	%		3.43	%		3.37	%		2.90	%

UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
December 31, 2010
Amounts in thousands, except percentages and per share amounts	12/31/2010			9/30/2010			6/30/2010			3/31/2010			12/31/2009
SUMMARY OF INCOME:
Total interest income	$	10,850		$	10,726		$	10,944		$	11,513		$	12,101
Total interest expense		2,990			3,314			3,681			4,049			4,766
Net interest income		7,860			7,412			7,263			7,464			7,335
Provision for loan losses		2,750			1,500			1,500			1,500			2,000
Net interest income after provision for loan losses		5,110			5,912			5,763			5,964			5,335
Total noninterest income (loss)		1,528			1,460			1,170			910			535
Total noninterest expense		6,602			6,404			6,040			5,941			6,076
Income (loss) before provision (benefit) for income taxes		36			968			893			933			(206	)
Provision (benefit) for income taxes		(50	)		242			212			185			(340	)
Net income (loss)		86			726			681			748			134
Preferred stock dividends & discount accretion		385			385			379			373			373
Income available (loss attributable) to common shareholders	$	(299	)	$	341		$	302		$	375		$	(239	)
Net income (loss) per common share - Basic	$	(0.04	)	$	0.05		$	0.04		$	0.05		$	(0.03	)
Net income (loss) per common share - Diluted	$	(0.04	)	$	0.05		$	0.04		$	0.05		$	(0.03	)
COMMON SHARE DATA:
Market price per share	$	6.05		$	5.25		$	5.35		$	5.29		$	4.02
Dividends paid	$	-		$	-		$	-		$	-		$	-
Book value per common share	$	7.08		$	7.19		$	7.11		$	7.00		$	6.91
QTD weighted average shares - basic		7,209			7,176			7,156			7,150			7,126
QTD weighted average shares - diluted		7,209			7,467			7,475			7,294			7,126
Outstanding common shares		7,211			7,207			7,154			7,156			7,144
OPERATING RATIOS (Annualized):
Return (loss) on average assets		0.04	%		0.34	%		0.31	%		0.34	%		0.06	%
Return (loss) on average equity		-2.31	%		2.66	%		2.43	%		3.09	%		-1.95	%
Effficiency ratio		70.65	%		72.47	%		71.66	%		70.98	%		71.05	%
BALANCE SHEET DATA:
Total assets	$	818,410		$	846,385		$	869,735		$	889,927		$	930,357
Total deposits		654,788			670,158			693,232			714,802			758,239
Total loans		615,936			629,516			637,180			651,200			657,016
Total securities		128,242			134,820			143,662			138,442			169,022
Total shareholders' equity		70,085			70,730			69,633			68,712			67,865
Allowance for loan losses		(14,364	)		(14,163	)		(13,946	)		(14,055	)		(13,842	)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		5.45	%		5.30	%		5.28	%		5.47	%		5.45	%
Interest-bearing liabilities		1.75	%		1.89	%		2.04	%		2.20	%		2.44	%
Net interest spread		3.70	%		3.41	%		3.24	%		3.27	%		3.01	%
Net interest margin		3.94	%		3.66	%		3.51	%		3.57	%		3.30	%
CREDIT QUALITY:
Nonperforming assets	$	24,008		$	33,077		$	29,799		$	29,972		$	27,026
QTD net chargeoffs (annualized) to QTD average loans		1.62	%		0.80	%		1.00	%		0.80	%		0.36	%
Allowance for loan losses to total loans		2.33	%		2.25	%		2.19	%		2.16	%		2.11	%
Nonperforming assets to total loans and OREO		3.88	%		5.21	%		4.65	%		4.58	%		4.10	%
Nonperforming assets to total assets		2.93	%		3.91	%		3.43	%		3.37	%		2.90	%
CAPITAL RATIOS AND OTHER:
Total equity to total assets		8.56	%		8.36	%		8.01	%		7.72	%		7.29	%
Leverage ratio		9.97	%		9.83	%		9.43	%		9.18	%		8.83	%
Tier 1 risk-based capital ratio		13.04	%		12.67	%		12.39	%		12.02	%		11.75	%
Total risk-based capital ratio		14.30	%		13.93	%		13.65	%		13.28	%		13.01	%
Number of banking offices		16			16			16			16			16
Number of ATMs		18			18			18			19			19
Number of employees		172			173			165			171			174