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:

January 31, 2012

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports Fourth Quarter and Year End Earnings

 Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $203 thousand, or $0.03 per diluted share, for the quarter ended December 31, 2011, compared to a net loss attributable to common shareholders of $298 thousand, or $0.04 per diluted share, for the same period a year ago.  Return on average assets and average common equity for the quarter were 0.29% and 1.51%, respectively, compared to 0.04% and (2.31)% for the same period a year ago.

 For the year ended December 31, 2011, Unity reported net income available to common shareholders of $988 thousand, or $0.13 per diluted share, compared to net income available to common shareholders of $720 thousand, or $0.10 per diluted share, for the same period a year ago.  Return on average assets and average common equity for the year were 0.31% and 1.90%, respectively, compared to 0.26% and 1.43% for the same period a year ago.

 James A. Hughes, President and CEO, stated, “I am encouraged that we have been able to report positive earnings. Our efforts to strengthen our mortgage and other business lines have been effective in a healthy repositioning of our balance sheet.  I am optimistic that as credit quality improves, as a result of an effective and prudent workout process, the impact of elevated loan losses resulting from our exited National SBA program will diminish.  We are excited about the opening of our fifteenth branch in Washington Township, New Jersey in the first quarter of 2012.  The organization has been strengthened from meeting the challenges of the past few years and we head into 2012, a more efficient and stronger company.”

Net Interest Income

 Our net interest income has been adversely impacted by the sustained low interest rate environment, which the Federal Reserve Board forecasts will continue into 2014.  This rate environment has resulted in our earning assets continuing to re-price at lower rates, as well as the reinvestment of cash flow in lower earning products. Partially offsetting these declines are lower funding costs, which are the benefit of this rate environment.

 Net interest income decreased $1.2 million to $6.7 million for the three months ended December 31, 2011. Factors affecting net interest income for the quarterly periods included:

·   The yield on earning assets fell 81 basis points to 4.64% for the quarter ended December 31, 2011 compared to the same period a year ago.

·   The cost of interest-bearing liabilities decreased 26 basis points to 1.49% for the quarter.

·   Average interest earning assets fell $6.5 million compared to the fourth quarter of 2010.

·   Net interest margin contracted 55 basis points to 3.39% for the quarter ended December 31, 2011.

 Net interest income decreased $1.0 million to $29.0 million for the year ended December 31, 2011.  Factors affecting net interest income in 2011 included:

·   For the twelve month period, the yield on earning assets fell 26 basis points to 5.12%.

·   The cost of interest-bearing liabilities decreased 35 basis points to 1.62%.

·   Average interest earning assets fell $44.0 million during the twelve month period.

·   Net interest margin expanded 9 basis points to 3.76% for the year ended December 31, 2011.

Noninterest Income

 Our noninterest income consists primarily of branch and loan fee income, gains on the sale of SBA and mortgage loans and BOLI income.  For the three months ended December 31, 2011, noninterest income amounted to $1.3 million, a decrease of $224 thousand from the prior year period.  Noninterest income was affected by the following factors:

·   Branch fee income, which consists of deposit service charges and overdraft fees, increased $17 thousand or 4.6 percent compared to the prior year’s quarter, as increased overdraft activity offset reduced deposit account service charges.

·   Service and loan fee income decreased $80 thousand compared to the prior year’s period due to lower servicing fee income, late charges and prepayment penalties.

·   Gains on sales of SBA loans amounted to $114 thousand on $2.2 million in sales, compared to $84 thousand on $952 thousand in sales in the prior year period.

·   Gains on sales of residential mortgage loans amounted to $445 thousand, compared to $548 thousand in the prior year period.

 For the year ended December 31, 2011, noninterest income amounted to $5.7 million, an increase of $592 thousand from the prior year.  Noninterest income was affected by the following factors:

·   Branch fee income remained flat at $1.4 million, as reduced deposit service charge levels were offset by increased overdraft and uncollected fees.

·   Service and loan fee income remained flat at $1.0 million with higher levels of payoff and other processing related fees, partially offset by lower servicing income.

·   Gains on sales of SBA loans amounted to $962 thousand on $13.3 million in sales, compared to $500 thousand on $4.8 million in sales in the prior year.

·   Gains on sales of residential mortgages were $951 thousand, a decrease of $101 thousand from the prior year.

·   Gains on the sales of investment securities amounted to $303 thousand, compared to $85 thousand in the prior year.

Noninterest Expense

 For the three months ended December 31, 2011, noninterest expenses were $6.0 million, a decrease of $593 thousand or 9.0% from the same period a year ago.  Factors which affected noninterest expense include:

·   Compensation and benefits expense decreased $194 thousand or 6.3%, due to lower payroll expenses and other compensation related costs.

·   Furniture and equipment expense decreased $95 thousand or 21.4%, due to reduced depreciation expenses as a result of lower capital expenditures, partially offset by losses on disposed equipment.

·   Professional services costs increased $137 thousand, due to increased loan review, accounting, tax, legal and audit costs, partially offset by decreased consultant expenses.

·   OREO expenses fell $354 thousand or 54.7%, due to lower property valuation adjustments and maintenance related expenses.

·   Deposit insurance expense decreased $204 thousand to $114 thousand for the quarter.  Effective April 1, 2011, the FDIC modified its assessment calculation method from a deposits-based method to an assets-based method.  This resulted in a significantly lower assessment for the Company.

 For the twelve months ended December 31, 2011, noninterest expenses were $24.5 million, a decrease of $472 thousand or 1.9% from the same period a year ago.   This included $215 thousand in residual lease obligations and fixed asset disposal expenses realized during the second quarter of 2011 from our decision to close two underperforming branches.  It also includes the impact of the FDIC assessment methodology change noted above.  Other factors that affected noninterest expense over the twelve month period include:

·   Compensation and benefits expense amounted to $11.8 million, a decrease of $94 thousand or 0.8%, due to lower payroll and other sales related commission expenses, partially offset by higher employee medical benefits costs and increased residential mortgage commissions.

·   Occupancy expense increased $259 thousand or 10.3%, due to branch closure related expenses.

·   Furniture and equipment expense decreased $228 thousand or 13.0%, due to reduced depreciation expenses as a result of lower capital expenditures and lower equipment lease expenses, partially offset by branch closure related expenses.

·   Professional services costs increased $80 thousand or 10.9%, due to higher accounting, tax and loan review costs, partially offset by decreased consultant and legal expenses.

·   OREO expense decreased $87 thousand, due to reduced valuation adjustments, partially offset by increased property tax expense.

·   Deposit insurance expense decreased $526 thousand due to the modified assessment calculation method discussed above.

·   Advertising expense increased $103 thousand over the prior year due to our increased web presence and search engine marketing, promotion of our mortgage division and expanded involvement within the community through small business events and sponsorships.

Financial Condition

 At December 31, 2011, total assets were $810.8 million, a 0.9% decrease from the prior year-end.

·   Total securities decreased $20.7 million since December 31, 2010, due to security sales and an increased level of prepayments.

·   Total loans decreased $23.3 million or 3.8%, from $615.9 million at December 31, 2010 to $592.6 million at December 31, 2011. Loan demand continues to be sluggish due to the weak economy.  The net decrease was the result of the following loan activity:

o   SBA 7(a) loans decreased $14.3 million or 16.6%,

o   SBA 504 loans decreased $9.2 million or 14.3%,

o   Commercial loans increased $1.9 million or 0.7%,

o   Residential mortgage loans increased $5.7 million or 4.4%, and

o   Consumer loans decreased $7.5 million or 13.4%.

·   Core deposits, which exclude time deposits, increased $10.3 million during the year to $484.5 million.  The increase was primarily due to a:

o   $9.9 million or 10.9% increase in noninterest-bearing demand deposits, and a

o   $1.2 million increase in savings deposits, partially offset by a

o   $781 thousand decrease in interest-bearing demand deposits.

·   Time deposits decreased $21.2 million during the year due to planned run off of a maturing high rate promotion that was completed late in 2008 to bolster liquidity.

·   Shareholders’ equity was $73.6 million at December 31, 2011, an increase of $3.5 million from year-end 2010, primarily due to the increase in other comprehensive income and net income.

·   Book value per common share was $7.24 as of December 31, 2011.

·   At December 31, 2011 the leverage, Tier I and Total Risk Based Capital ratios were 10.44%, 14.33% and 15.60%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

 “Nonperforming assets were materially impacted in the fourth quarter of 2011 by the transfer of two large real estate secured relationships totaling $5.4 million into nonaccrual status”, said James A. Hughes.   “Although nonperforming assets are basically flat from a year ago, there has been a significant reduction in our problem accounts from the prior year, and I expect this trend to continue.   We are now well into the litigation process with our workout credits, and as a result, I expect that we will begin to see a predictable reduction in nonperforming assets in the future.”

·   Nonperforming assets totaled $25.8 million at December 31, 2011, or 4.33% of total loans and OREO, compared to $24.0 million or 3.88% of total loans and OREO a year ago.

·   At December 31, 2011, nonperforming loans totaled $22.8 million, an increase of $1.1 million over the prior year-end.  Nonperforming loans, the majority of which are secured by real estate, consisted of:

o   $5.9 million in SBA loans,

o   $2.1 million in SBA 504 loans,

o   $8.5 million in commercial loans,

o   $6.0 million in residential mortgage loans and

o   $268 thousand in consumer nonaccrual loans.

·   OREO assets totaled $3.0 million at December 31, 2011, an increase of $686 thousand, compared to $2.3 million a year ago.

·   The allowance for loan losses totaled $16.3 million at December 31, 2011, or 2.76% of total loans. The provision for loan losses for the quarter ended December 31, 2011 was $1.2 million compared to $2.8 million for the prior year’s quarter.  The provision for loan losses for the year ended December 31, 2011 was $6.8 million compared to $7.3 million for the prior year.

·   Net charge-offs were $1.2 million for the three months ended December 31, 2011, compared to $2.5 million for the same period a year ago.  Net charge-offs were $4.8 million for the year ended December 31, 2011, compared to $6.7 million for the same period a year ago.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $811 million in assets and $644 million in deposits.  Unity Bank provides financial services to retail, corporate and small business customers through its 14 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.

UNITY BANCORP, INC.
SUMMARY FINANCIAL HIGHLIGHTS
December 31, 2011
										December 31, 2011 vs.
										September 30, 2011			December 31, 2010
Amounts in thousands, except percentages and per share amounts	December 31, 2011			September 30, 2011			December 31, 2010			%			%
BALANCE SHEET DATA:
Total assets	$	810,846		$	820,652		$	818,410			-1.2	%		-0.9	%
Total deposits		643,971			654,171			654,788			-1.6	%		-1.7	%
Total loans		592,592			603,633			615,936			-1.8	%		-3.8	%
Total securities		107,536			100,752			128,242			6.7	%		-16.1	%
Total shareholders' equity		73,558			73,136			70,085			0.6	%		5.0	%
Allowance for loan losses		(16,348	)		(16,447	)		(14,364	)		-0.6	%		13.8	%
FINANCIAL DATA - QUARTER TO DATE:
Income before provision (benefit) for income taxes	$	816		$	1,506		$	35			-45.8	%		2231.4	%
Provision (benefit) for income taxes		220			420			(50	)		-47.6	%		540.0	%
Net income		596			1,086			85			-45.1	%		601.2	%
Preferred stock dividends & discount accretion		393			386			383			1.8	%		2.6	%
Income available (loss attributable) to common shareholders	$	203		$	700		$	(298	)		-71.0	%		168.1	%
Net income (loss) per common share - Basic (1)	$	0.03		$	0.09		$	(0.04	)		-66.7	%		175.0	%
Net income (loss) per common share - Diluted (1)	$	0.03		$	0.09		$	(0.04	)		-66.7	%		175.0	%
Return on average assets		0.29	%		0.54	%		0.04	%		-46.3	%		625.0	%
Return (loss) on average equity (2)		1.51	%		5.27	%		-2.31	%		-71.3	%		165.4	%
Efficiency ratio		74.90	%		69.80	%		70.66	%		7.3	%		6.0	%
FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes	$	3,315					$	2,829			-			17.2	%
Provision for income taxes		769						589			-			30.6	%
Net income		2,546						2,240			-			13.7	%
Preferred stock dividends & discount accretion		1,558						1,520			-			2.5	%
Income available to common shareholders	$	988					$	720			-			37.2	%
Net income per common share - Basic (1)	$	0.13					$	0.10			-			34.5	%
Net income per common share - Diluted (1)	$	0.13					$	0.10			-			32.3	%
Return on average assets		0.31	%					0.26	%		-			19.2	%
Return on average equity (2)		1.90	%					1.43	%		-			32.9	%
Efficiency ratio		71.42	%					71.43	%		-			0.0	%
SHARE INFORMATION:
Market price per share		6.40			6.65			6.05			-3.8	%		5.8	%
Dividends paid		-			-			-			0.0	%		0.0	%
Book value per common share		7.24			7.25			7.08			-0.1	%		2.3	%
Average diluted shares outstanding (QTD)		7,782			7,781			7,209			0.0	%		7.9	%
CAPITAL RATIOS:
Total equity to total assets		9.07	%		8.91	%		8.56	%		1.8	%		5.9	%
Leverage ratio		10.44	%		10.69	%		9.97	%		-2.4	%		4.8	%
Tier 1 risk-based capital ratio		14.33	%		13.88	%		13.04	%		3.3	%		9.9	%
Total risk-based capital ratio		15.60	%		15.14	%		14.30	%		3.0	%		9.1	%
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	25,801		$	24,153		$	24,008			6.8	%		7.5	%
QTD net chargeoffs (annualized) to QTD average loans		0.83	%		0.63	%		1.62	%		31.7	%		-48.8	%
Allowance for loan losses to total loans		2.76	%		2.72	%		2.33	%		1.5	%		18.5	%
Nonperforming assets to total loans and OREO		4.33	%		3.98	%		3.88	%		8.8	%		11.6	%
Nonperforming assets to total assets		3.18	%		2.94	%		2.93	%		8.2	%		8.5	%
(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.
(2) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by average shareholders' equity (excluding preferred stock).

UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2011
										December 31, 2011 vs.
										September 30, 2011			December 31, 2010
Amounts in thousands, except percentages	December 31, 2011			September 30, 2011			December 31, 2010			%			%
ASSETS
Cash and due from banks	$	17,688		$	15,965		$	17,637			10.8	%		0.3	%
Federal funds sold and interest-bearing deposits		64,886			74,125			26,289			-12.5	%		146.8	%
Cash and cash equivalents		82,574			90,090			43,926			-8.3	%		88.0	%
Securities available for sale		88,765			88,083			107,131			0.8	%		-17.1	%
Securities held to maturity		18,771			12,669			21,111			48.2	%		-11.1	%
Total securities		107,536			100,752			128,242			6.7	%		-16.1	%
SBA loans held for sale		7,668			9,284			10,397			-17.4	%		-26.2	%
SBA loans held to maturity		64,175			66,363			75,741			-3.3	%		-15.3	%
SBA 504 loans		55,108			55,520			64,276			-0.7	%		-14.3	%
Commercial loans		283,104			284,046			281,205			-0.3	%		0.7	%
Residential mortgage loans		134,090			136,942			128,400			-2.1	%		4.4	%
Consumer loans		48,447			51,478			55,917			-5.9	%		-13.4	%
Total loans		592,592			603,633			615,936			-1.8	%		-3.8	%
Allowance for loan losses		(16,348	)		(16,447	)		(14,364	)		-0.6	%		13.8	%
Net loans		576,244			587,186			601,572			-1.9	%		-4.2	%
Premises and equipment, net		11,350			10,648			10,967			6.6	%		3.5	%
Bank owned life insurance (BOLI)		9,107			9,033			8,812			0.8	%		3.3	%
Deferred tax assets		6,878			6,889			7,550			-0.2	%		-8.9	%
Federal Home Loan Bank stock		4,088			4,088			4,206			0.0	%		-2.8	%
Accrued interest receivable		3,703			3,519			3,791			5.2	%		-2.3	%
Other real estate owned (OREO)		3,032			3,555			2,346			-14.7	%		29.2	%
Prepaid FDIC insurance		2,545			2,653			3,266			-4.1	%		-22.1	%
Goodwill and other intangibles		1,530			1,533			1,544			-0.2	%		-0.9	%
Other assets		2,259			706			2,188			220.0	%		3.2	%
Total assets	$	810,846		$	820,652		$	818,410			-1.2	%		-0.9	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	101,193		$	93,706		$	91,272			8.0	%		10.9	%
Interest-bearing demand deposits		104,749			100,807			105,530			3.9	%		-0.7	%
Savings deposits		278,603			296,571			277,394			-6.1	%		0.4	%
Time deposits, under $100,000		102,809			105,840			119,478			-2.9	%		-14.0	%
Time deposits, $100,000 and over		56,617			57,247			61,114			-1.1	%		-7.4	%
Total deposits		643,971			654,171			654,788			-1.6	%		-1.7	%
Borrowed funds		75,000			75,000			75,000			0.0	%		0.0	%
Subordinated debentures		15,465			15,465			15,465			0.0	%		0.0	%
Accrued interest payable		523			533			556			-1.9	%		-5.9	%
Accrued expenses and other liabilities		2,329			2,347			2,516			-0.8	%		-7.4	%
Total liabilities		737,288			747,516			748,325			-1.4	%		-1.5	%
Cumulative perpetual preferred stock		19,545			19,409			19,019			0.7	%		2.8	%
Common stock		53,746			53,663			55,884			0.2	%		-3.8	%
Accumulated deficit		(854	)		(1,056	)		(772	)		19.1	%		-10.6	%
Treasury stock, at cost		-			-			(4,169	)		0.0	%		100.0	%
Accumulated other comprehensive income		1,121			1,120			123			0.1	%		811.4	%
Total shareholders' equity		73,558			73,136			70,085			0.6	%		5.0	%
Total liabilities and shareholders' equity	$	810,846		$	820,652		$	818,410			-1.2	%		-0.9	%
Issued common shares		7,459			7,413			7,636
Outstanding common shares		7,459			7,413			7,211
Treasury shares		-			-			425

UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
December 31, 2011
										December 31, 2011 vs.
	For the Three Months Ended									September 30, 2011					December 31, 2010
Amounts in thousands, except percentages and per share amounts	December 31, 2011			September 30, 2011			December 31, 2010			$			%		$			%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	35		$	6		$	11		$	29		483.3	%	$	24		218.2	%
Federal Home Loan Bank stock		36			46			87			(10	)	-21.7	%		(51	)	-58.6	%
Securities available for sale		645			804			882			(159	)	-19.8	%		(237	)	-26.9	%
Securities held to maturity		163			157			259			6		3.8	%		(96	)	-37.1	%
Total securities		808			961			1,141			(153	)	-15.9	%		(333	)	-29.2	%
SBA loans		995			1,243			1,287			(248	)	-20.0	%		(292	)	-22.7	%
SBA 504 loans		855			838			1,035			17		2.0	%		(180	)	-17.4	%
Commercial loans		4,188			4,417			4,584			(229	)	-5.2	%		(396	)	-8.6	%
Residential mortgage loans		1,605			1,825			1,955			(220	)	-12.1	%		(350	)	-17.9	%
Consumer loans		611			616			752			(5	)	-0.8	%		(141	)	-18.8	%
Total loans		8,254			8,939			9,613			(685	)	-7.7	%		(1,359	)	-14.1	%
Total interest income		9,133			9,952			10,852			(819	)	-8.2	%		(1,719	)	-15.8	%
INTEREST EXPENSE
Interest-bearing demand deposits		152			137			144			15		10.9	%		8		5.6	%
Savings deposits		501			536			561			(35	)	-6.5	%		(60	)	-10.7	%
Time deposits		946			979			1,222			(33	)	-3.4	%		(276	)	-22.6	%
Borrowed funds and subordinated debentures		861			947			1,064			(86	)	-9.1	%		(203	)	-19.1	%
Total interest expense		2,460			2,599			2,991			(139	)	-5.3	%		(531	)	-17.8	%
Net interest income		6,673			7,353			7,861			(680	)	-9.2	%		(1,188	)	-15.1	%
Provision for loan losses		1,150			1,400			2,750			(250	)	-17.9	%		(1,600	)	-58.2	%
Net interest income after provision for loan losses		5,523			5,953			5,111			(430	)	-7.2	%		412		8.1	%
NONINTEREST INCOME
Branch fee income		390			374			373			16		4.3	%		17		4.6	%
Service and loan fee income		194			213			274			(19	)	-8.9	%		(80	)	-29.2	%
Gain on sale of SBA loans held for sale, net		114			338			84			(224	)	-66.3	%		30		35.7	%
Gain on sale of mortgage loans		445			250			548			195		78.0	%		(103	)	-18.8	%
Bank owned life insurance (BOLI)		74			74			80			-		0.0	%		(6	)	-7.5	%
Net security gains (losses)		(49	)		266			43			(315	)	-118.4	%		(92	)	-214.0	%
Other income		137			139			127			(2	)	-1.4	%		10		7.9	%
Total noninterest income		1,305			1,654			1,529			(349	)	-21.1	%		(224	)	-14.7	%
NONINTEREST EXPENSE
Compensation and benefits		2,900			2,944			3,094			(44	)	-1.5	%		(194	)	-6.3	%
Occupancy		619			615			612			4		0.7	%		7		1.1	%
Processing and communications		511			549			530			(38	)	-6.9	%		(19	)	-3.6	%
Furniture and equipment		349			384			444			(35	)	-9.1	%		(95	)	-21.4	%
Professional services		217			206			80			11		5.3	%		137		171.3	%
Loan collection costs		319			235			266			84		35.7	%		53		19.9	%
OREO expense		293			491			647			(198	)	-40.3	%		(354	)	-54.7	%
Deposit insurance		114			60			318			54		90.0	%		(204	)	-64.2	%
Advertising		217			187			146			30		16.0	%		71		48.6	%
Other expenses		473			430			468			43		10.0	%		5		1.1	%
Total noninterest expense		6,012			6,101			6,605			(89	)	-1.5	%		(593	)	-9.0	%
Income before provision (benefit) for income taxes		816			1,506			35			(690	)	-45.8	%		781		2231.4	%
Provision (benefit) for income taxes		220			420			(50	)		(200	)	-47.6	%		270		540.0	%
Net income		596			1,086			85			(490	)	-45.1	%		511		601.2	%
Preferred stock dividends & discount accretion		393			386			383			7		1.8	%		10		2.6	%
Income available (loss attributable) to common shareholders	$	203		$	700		$	(298	)	$	(497	)	-71.0	%	$	501		168.1	%
Effective tax rate		27.0	%		27.9	%		-142.9	%
Net income (loss) per common share - Basic (1)	$	0.03		$	0.09		$	(0.04	)
Net income (loss) per common share - Diluted (1)	$	0.03		$	0.09		$	(0.04	)
Weighted average common shares outstanding - Basic		7,427			7,413			7,209
Weighted average common shares outstanding - Diluted		7,782			7,781			7,209
(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

UNITY BANCORP, INC.
YTD CONSOLIDATED STATEMENTS OF INCOME
December 31, 2011
	Current YTD			Prior YTD			Current YTD VS. Prior YTD
Amounts in thousands, except percentages and per share amounts	December 31, 2011			December 31, 2010			$			%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	61		$	87		$	(26	)	-29.9	%
Federal Home Loan Bank stock		183			235			(52	)	-22.1	%
Securities available for sale		3,204			4,287			(1,083	)	-25.3	%
Securities held to maturity		787			1,117			(330	)	-29.5	%
Total securities		3,991			5,404			(1,413	)	-26.1	%
SBA loans		4,665			5,264			(599	)	-11.4	%
SBA 504 loans		3,482			4,305			(823	)	-19.1	%
Commercial loans		17,492			18,130			(638	)	-3.5	%
Residential mortgage loans		7,107			7,684			(577	)	-7.5	%
Consumer loans		2,542			2,926			(384	)	-13.1	%
Total loans		35,288			38,309			(3,021	)	-7.9	%
Total interest income		39,523			44,035			(4,512	)	-10.2	%
INTEREST EXPENSE
Interest-bearing demand deposits		571			737			(166	)	-22.5	%
Savings deposits		2,202			2,829			(627	)	-22.2	%
Time deposits		4,067			6,173			(2,106	)	-34.1	%
Borrowed funds and subordinated debentures		3,711			4,296			(585	)	-13.6	%
Total interest expense		10,551			14,035			(3,484	)	-24.8	%
Net interest income		28,972			30,000			(1,028	)	-3.4	%
Provision for loan losses		6,800			7,250			(450	)	-6.2	%
Net interest income after provision for loan losses		22,172			22,750			(578	)	-2.5	%
NONINTEREST INCOME
Branch fee income		1,445			1,424			21		1.5	%
Service and loan fee income		1,034			979			55		5.6	%
Gain on sale of SBA loans held for sale, net		962			500			462		92.4	%
Gain on sale of mortgage loans		951			1,052			(101	)	-9.6	%
Bank owned life insurance (BOLI)		295			310			(15	)	-4.8	%
Net security gains		303			85			218		256.5	%
Other income		671			719			(48	)	-6.7	%
Total noninterest income		5,661			5,069			592		11.7	%
NONINTEREST EXPENSE
Compensation and benefits		11,781			11,875			(94	)	-0.8	%
Occupancy		2,781			2,522			259		10.3	%
Processing and communications		2,104			2,139			(35	)	-1.6	%
Furniture and equipment		1,527			1,755			(228	)	-13.0	%
Professional services		817			737			80		10.9	%
Loan collection costs		979			964			15		1.6	%
OREO expense		1,229			1,316			(87	)	-6.6	%
Deposit insurance		775			1,301			(526	)	-40.4	%
Advertising		727			624			103		16.5	%
Other expenses		1,798			1,757			41		2.3	%
Total noninterest expense		24,518			24,990			(472	)	-1.9	%
Income before provision for income taxes		3,315			2,829			486		17.2	%
Provision for income taxes		769			589			180		30.6	%
Net income		2,546			2,240			306		13.7	%
Preferred stock dividends & discount accretion		1,558			1,520			38		2.5	%
Income available to common shareholders	$	988		$	720		$	268		37.2	%
Effective tax rate		23.2	%		20.8	%
Net income per common share - Basic (1)	$	0.13		$	0.10
Net income per common share - Diluted (1)	$	0.13		$	0.10
Weighted average common shares outstanding - Basic		7,333			7,173
Weighted average common shares outstanding - Diluted		7,735			7,447
(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
December 31, 2011
	For the Three Months Ended
	December 31, 2011									September 30, 2011
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	$	86,323		$	35			0.16	%	$	41,735		$	6			0.06	%
Federal Home Loan Bank stock		4,088			36			3.49	%		4,088			46			4.46	%
Securities available for sale		87,096			700			3.21	%		93,603			852			3.64	%
Securities held to maturity		13,747			168			4.89	%		13,043			162			4.97	%
Total securities (A)		100,843			868			3.44	%		106,646			1,014			3.80	%
SBA loans		74,523			995			5.34	%		82,764			1,243			6.01	%
SBA 504 loans		55,326			855			6.13	%		55,814			838			5.96	%
Commercial loans		282,963			4,188			5.87	%		286,634			4,417			6.11	%
Residential mortgage loans		135,186			1,605			4.75	%		135,519			1,825			5.39	%
Consumer loans		49,386			611			4.91	%		50,838			616			4.81	%
Total loans (B)		597,384			8,254			5.50	%		611,569			8,939			5.82	%
Total interest-earning assets	$	788,638		$	9,193			4.64	%	$	764,038		$	10,005			5.21	%
Noninterest-earning assets:
Cash and due from banks		15,000									15,453
Allowance for loan losses		(16,851	)								(16,812	)
Other assets		40,686									41,739
Total noninterest-earning assets		38,835									40,380
Total assets	$	827,473								$	804,418
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	107,662		$	152			0.56	%	$	98,942		$	137			0.55	%
Savings deposits		292,976			501			0.68	%		281,591			536			0.76	%
Time deposits		160,784			946			2.33	%		163,676			979			2.37	%
Total interest-bearing deposits		561,422			1,599			1.13	%		544,209			1,652			1.20	%
Borrowed funds and subordinated debentures		90,465			861			3.72	%		90,465			947			4.10	%
Total interest-bearing liabilities	$	651,887		$	2,460			1.49	%	$	634,674		$	2,599			1.62	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		99,672									94,811
Other liabilities		3,228									2,922
Total noninterest-bearing liabilities		102,900									97,733
Total shareholders' equity		72,686									72,011
Total liabilities and shareholders' equity	$	827,473								$	804,418
Net interest spread				$	6,733			3.15	%				$	7,406			3.59	%
Tax-equivalent basis adjustment					(60	)								(53	)
Net interest income				$	6,673								$	7,353
Net interest margin								3.39	%								3.85	%
(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, 2011
	For the Three Months Ended
	December 31, 2011									December 31, 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	$	86,323		$	35			0.16	%	$	36,274		$	11			0.12	%
Federal Home Loan Bank stock		4,088			36			3.49	%		4,597			87			7.51	%
Securities available for sale		87,096			700			3.21	%		108,718			907			3.34	%
Securities held to maturity		13,747			168			4.89	%		21,292			264			4.96	%
Total securities (A)		100,843			868			3.44	%		130,010			1,171			3.60	%
SBA loans		74,523			995			5.34	%		90,426			1,287			5.69	%
SBA 504 loans		55,326			855			6.13	%		64,874			1,035			6.33	%
Commercial loans		282,963			4,188			5.87	%		282,184			4,584			6.44	%
Residential mortgage loans		135,186			1,605			4.75	%		129,696			1,955			6.03	%
Consumer loans		49,386			611			4.91	%		57,029			752			5.23	%
Total loans (B)		597,384			8,254			5.50	%		624,209			9,613			6.13	%
Total interest-earning assets	$	788,638		$	9,193			4.64	%	$	795,090		$	10,882			5.45	%
Noninterest-earning assets:
Cash and due from banks		15,000									18,339
Allowance for loan losses		(16,851	)								(14,681	)
Other assets		40,686									42,696
Total noninterest-earning assets		38,835									46,354
Total assets	$	827,473								$	841,444
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	107,662		$	152			0.56	%	$	104,900		$	144			0.54	%
Savings deposits		292,976			501			0.68	%		284,853			561			0.78	%
Time deposits		160,784			946			2.33	%		183,997			1,222			2.63	%
Total interest-bearing deposits		561,422			1,599			1.13	%		573,750			1,927			1.33	%
Borrowed funds and subordinated debentures		90,465			861			3.72	%		100,080			1,064			4.16	%
Total interest-bearing liabilities	$	651,887		$	2,460			1.49	%	$	673,830		$	2,991			1.75	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		99,672									93,049
Other liabilities		3,228									4,196
Total noninterest-bearing liabilities		102,900									97,245
Total shareholders' equity		72,686									70,369
Total liabilities and shareholders' equity	$	827,473								$	841,444
Net interest spread				$	6,733			3.15	%				$	7,891			3.70	%
Tax-equivalent basis adjustment					(60	)								(30	)
Net interest income				$	6,673								$	7,861
Net interest margin								3.39	%								3.94	%
(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, 2011
	For the Twelve Months Ended
		December 31, 2011									December 31, 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		$	50,574		$	61			0.12	%	$	35,349		$	87			0.25	%
Federal Home Loan Bank stock			4,120			183			4.44	%		4,646			235			5.06	%
Securities available for sale			97,310			3,403			3.50	%		118,984			4,353			3.66	%
Securities held to maturity			15,265			806			5.28	%		23,496			1,149			4.89	%
Total securities (A)			112,575			4,209			3.74	%		142,480			5,502			3.86	%
SBA loans			82,177			4,665			5.68	%		95,353			5,264			5.52	%
SBA 504 loans			58,010			3,482			6.00	%		66,767			4,305			6.45	%
Commercial loans			284,183			17,492			6.16	%		285,771			18,130			6.34	%
Residential mortgage loans			133,477			7,107			5.32	%		132,414			7,684			5.80	%
Consumer loans			51,830			2,542			4.90	%		58,200			2,926			5.03	%
Total loans (B)			609,677			35,288			5.79	%		638,505			38,309			6.00	%
Total interest-earning assets		$	776,946		$	39,741			5.12	%	$	820,980		$	44,133			5.38	%
Noninterest-earning assets:
Cash and due from banks			16,105									20,672
Allowance for loan losses			(16,198	)								(14,667	)
Other assets			40,528									41,817
Total noninterest-earning assets			40,435									47,822
Total assets		$	817,381								$	868,802
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	103,574		$	571			0.55	%	$	100,729		$	737			0.73	%
Savings deposits			287,769			2,202			0.77	%		289,156			2,829			0.98	%
Time deposits			166,836			4,067			2.44	%		216,488			6,173			2.85	%
Total interest-bearing deposits			558,179			6,840			1.23	%		606,373			9,739			1.61	%
Borrowed funds and subordinated debentures			90,465			3,711			4.05	%		101,449			4,296			4.18	%
Total interest-bearing liabilities		$	648,644		$	10,551			1.62	%	$	707,822		$	14,035			1.97	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			93,875									87,684
Other liabilities			3,607									4,174
Total noninterest-bearing liabilities			97,482									91,858
Total shareholders' equity			71,255									69,122
Total liabilities and shareholders' equity		$	817,381								$	868,802
Net interest spread					$	29,190			3.50	%				$	30,098			3.41	%
Tax-equivalent basis adjustment						(218	)								(98	)
Net interest income					$	28,972								$	30,000
Net interest margin									3.76	%								3.67	%
(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.
QUARTERLY ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES
December 31, 2011
Amounts in thousands, except percentages	12/31/2011			9/30/2011			6/30/2011			3/31/2011			12/31/2010
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	16,447		$	16,018		$	15,275		$	14,364		$	14,163
Provision for loan losses charged to expense		1,150			1,400			1,750			2,500			2,750
		17,597			17,418			17,025			16,864			16,913
Less: Chargeoffs
SBA loans		735			310			592			711			445
SBA 504 loans		200			325			125			300			798
Commercial loans		290			450			521			548			1,115
Residential mortgage loans		73			-			-			142			190
Consumer loans		46			-			131			-			234
Total chargeoffs		1,344			1,085			1,369			1,701			2,782
Add: Recoveries
SBA loans		26			111			71			8			128
SBA 504 loans		-			-			77			-			-
Commercial loans		15			3			214			98			105
Residential mortgage loans		50			-			-			4			-
Consumer loans		4			-			-			2			-
Total recoveries		95			114			362			112			233
Net chargeoffs		1,249			971			1,007			1,589			2,549
Balance, end of period	$	16,348		$	16,447		$	16,018		$	15,275		$	14,364
LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	22,769		$	20,598		$	25,099		$	23,923		$	21,662
Other real estate owned (OREO)		3,032			3,555			2,722			2,602			2,346
Nonperforming assets		25,801			24,153			27,821			26,525			24,008
Less:  Amount guaranteed by Small Business Administration		939			1,339			2,857			3,355			2,706
Net nonperforming assets	$	24,862		$	22,814		$	24,964		$	23,170		$	21,302
Loans 90 days past due & still accruing	$	2,411		$	2,191		$	2,858		$	4,248		$	374
(1) Nonperforming Troubled Debt Restructurings (TDRs) included above	$	3,645		$	3,817		$	3,065		$	2,917		$	-
Allowance for loan losses to:
Total loans at quarter end		2.76	%		2.72	%		2.60	%		2.49	%		2.33	%
Nonperforming loans (1)		71.80	%		79.85	%		63.82	%		63.85	%		66.31	%
Nonperforming assets		63.36	%		68.10	%		57.58	%		57.59	%		59.83	%
Net nonperforming assets		65.75	%		72.09	%		64.16	%		65.93	%		67.43	%
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		3.77	%		0.95	%		2.44	%		3.32	%		1.39	%
SBA 504 loans		1.43	%		2.31	%		0.33	%		1.96	%		4.88	%
Commercial loans		0.39	%		0.62	%		0.43	%		0.65	%		1.42	%
Residential mortgage loans		0.07	%		0.00	%		0.00	%		0.43	%		0.58	%
Consumer loans		0.34	%		0.00	%		1.00	%		-0.01	%		1.63	%
Total loans		0.83	%		0.63	%		0.66	%		1.05	%		1.62	%
Nonperforming loans to total loans inclusive of TDRs		3.84	%		3.41	%		4.08	%		3.89	%		3.52	%
Nonperforming loans to total loans exclusive of TDRs		3.23	%		2.78	%		3.58	%		3.42	%		3.52	%
Nonperforming assets to total loans and OREO		4.33	%		3.98	%		4.50	%		4.30	%		3.88	%
Nonperforming assets to total assets		3.18	%		2.94	%		3.45	%		3.23	%		2.93	%

UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
December 31, 2011
Amounts in thousands, except percentages and per share amounts	12/31/2011			9/30/2011			6/30/2011			3/31/2011			12/31/2010
SUMMARY OF INCOME:
Total interest income	$	9,133		$	9,952		$	10,196		$	10,242		$	10,852
Total interest expense		2,460			2,599			2,725			2,767			2,991
Net interest income		6,673			7,353			7,471			7,475			7,861
Provision for loan losses		1,150			1,400			1,750			2,500			2,750
Net interest income after provision for loan losses		5,523			5,953			5,721			4,975			5,111
Total noninterest income		1,305			1,654			1,447			1,255			1,529
Total noninterest expense		6,012			6,101			6,247			6,158			6,605
Income before provision (benefit) for income taxes		816			1,506			921			72			35
Provision (benefit) for income taxes		220			420			277			(148	)		(50	)
Net income		596			1,086			644			220			85
Preferred stock dividends & discount accretion		393			386			395			384			383
Income available (loss attributable) to common shareholders	$	203		$	700		$	249		$	(164	)	$	(298	)
Net income (loss) per common share - Basic (1)	$	0.03		$	0.09		$	0.03		$	(0.02	)	$	(0.04	)
Net income (loss) per common share - Diluted (1)	$	0.03		$	0.09		$	0.03		$	(0.02	)	$	(0.04	)
COMMON SHARE DATA:
Market price per share	$	6.40		$	6.65		$	6.79		$	6.95		$	6.05
Dividends paid	$	-		$	-		$	-		$	-		$	-
Book value per common share	$	7.24		$	7.25		$	7.14		$	7.09		$	7.08
QTD weighted average shares - basic		7,427			7,413			7,271			7,219			7,209
QTD weighted average shares - diluted		7,782			7,781			7,710			7,219			7,209
Outstanding common shares		7,459			7,413			7,412			7,222			7,211
OPERATING RATIOS (Annualized):
Return on average assets		0.29	%		0.54	%		0.32	%		0.11	%		0.04	%
Return (loss) on average equity (2)		1.51	%		5.27	%		1.95	%		-1.31	%		-2.31	%
Efficiency ratio		74.90	%		69.80	%		69.74	%		71.56	%		70.66	%
BALANCE SHEET DATA:
Total assets	$	810,846		$	820,652		$	806,163		$	820,833		$	818,410
Total deposits		643,971			654,171			641,167			656,776			654,788
Total loans		592,592			603,633			615,105			614,522			615,936
Total securities		107,536			100,752			115,188			120,815			128,242
Total shareholders' equity		73,558			73,136			72,207			70,381			70,085
Allowance for loan losses		(16,348	)		(16,447	)		(16,018	)		(15,275	)		(14,364	)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.64	%		5.21	%		5.28	%		5.34	%		5.45	%
Interest-bearing liabilities		1.49	%		1.62	%		1.67	%		1.70	%		1.75	%
Net interest spread		3.15	%		3.59	%		3.61	%		3.64	%		3.70	%
Net interest margin		3.39	%		3.85	%		3.88	%		3.92	%		3.94	%
CREDIT QUALITY:
Nonperforming assets	$	25,801		$	24,153		$	27,821		$	26,525		$	24,008
QTD net chargeoffs (annualized) to QTD average loans		0.83	%		0.63	%		0.66	%		1.05	%		1.62	%
Allowance for loan losses to total loans		2.76	%		2.72	%		2.60	%		2.49	%		2.33	%
Nonperforming assets to total loans and OREO		4.33	%		3.98	%		4.50	%		4.30	%		3.88	%
Nonperforming assets to total assets		3.18	%		2.94	%		3.45	%		3.23	%		2.93	%
CAPITAL RATIOS AND OTHER:
Total equity to total assets		9.07	%		8.91	%		8.96	%		8.57	%		8.56	%
Leverage ratio		10.44	%		10.69	%		10.40	%		10.15	%		9.97	%
Tier 1 risk-based capital ratio		14.33	%		13.88	%		13.41	%		13.04	%		13.04	%
Total risk-based capital ratio		15.60	%		15.14	%		14.67	%		14.30	%		14.30	%
Number of banking offices		14			14			16			16			16
Number of ATMs		15			15			17			18			18
Number of employees		171			168			169			170			172
(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.
(2) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by average shareholders' equity (excluding preferred stock).