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:

April 26, 2012

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports First Quarter Earnings of $0.07 per Share

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $509 thousand, or $0.07 per diluted share, for the quarter ended March 31, 2012, compared to a net loss attributable to common shareholders of $164 thousand, or $0.02 per diluted share, for the same period a year ago.  Return on average assets and average common equity for the quarter were 0.45% and 3.81%, respectively, compared to 0.11% and (1.31)% for the same period a year ago.

James A. Hughes, President and CEO, stated, “The continued improvement in our operating results is the result of our strategic initiatives.  We have reduced the portfolio of loans outside our footprint, expanded our in-market business relationships and further reduced our cost of funds.  I am extremely optimistic that the repositioning of the Company’s balance sheet will allow us to further increase our profitability.”  He added, “We successfully opened our fifteenth branch in Washington Township (Warren County), New Jersey in March of this year.”

Net Interest Income

Our net interest income has been impacted by the sustained low interest rate environment, which the Federal Open Market Committee (“FOMC”) forecasts will continue into 2014.  This rate environment has resulted in a tighter net interest margin as our earning assets continue to re-price at lower rates.  Partially offsetting these declines are lower funding costs. However, as the Bank has been steadily reducing rates on its deposit products, the reduction in yield on earning assets is anticipated to exceed the benefits of further declines in the cost of funds.

Net interest income decreased $667 thousand to $6.8 million for the three months ended March 31, 2012 compared to the prior year’s quarter.  Factors affecting net interest income for the quarterly periods included:

·   The yield on earning assets fell 63 basis points to 4.71%.

·   Quarter over quarter, our mix of earning assets shifted as average loans decreased $27.9 million and federal funds sold increased $31.4 million.

·   The cost of interest-bearing liabilities decreased 29 basis points to 1.41% for the quarter.

·   Net interest margin contracted 36 basis points to 3.56% for the quarter ended March 31, 2012.

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 March 31, 2012, noninterest income amounted to $1.7 million, an increase of $460 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 $42 thousand or 12.2 percent compared to the prior year’s quarter, as increased overdraft activity offset reduced deposit account service charges.

·   Service and loan fee income increased $59 thousand compared to the prior year’s period due to higher servicing fee income, partially offset by reduced payoff charges and other processing fees.

·   Gains on sales of SBA loans amounted to $157 thousand on $1.9 million in sales, compared to $111 thousand on $1.2 million in sales in the prior year period.

·   Gains on sales of residential mortgage loans amounted to $411 thousand, compared to $169 thousand in the prior year period due to a significant increase in the volume of mortgage loans originated and sold.

·   Security gains of $224 thousand were realized during the quarter, compared to $125 thousand in the prior year.

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Noninterest Expense

For the three months ended March 31, 2012, noninterest expenses were $6.0 million, a decrease of $199 thousand or 3.2% from the same period a year ago.  Factors which affected noninterest expense include:

·   Compensation and benefits expense increased $125 thousand or 4.1%, due to higher payroll expenses, mortgage origination commissions and equity compensation and related costs.

·   Occupancy expense decreased $111 thousand or 15.4%, as the mild winter resulted in lower snow removal costs and prior year branch closures resulted in lower rental and leasehold depreciation expenses.

·   Loan collection costs decreased $44 thousand or 19.6%, due to lower loan legal, forced placed insurance and other collection related expenses.

·   OREO expenses fell $98 thousand or 44.1%, due to lower maintenance, utility and legal related expenses, partially offset by losses on the sale of OREO properties.

·   Deposit insurance expense decreased $148 thousand to $171 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.

Financial Condition

At March 31, 2012, total assets were $810.2 million, flat from the prior year-end.

·   Total securities increased $20.5 million since December 31, 2011, due to $32.1 million in security purchases, partially offset by sales and an increased level of prepayments.

·   Total loans decreased $9.8 million or 1.7%, from $592.6 million at December 31, 2011 to $582.8 million at March 31, 2012. The Company plans to continue to shrink the SBA portfolio.  Future loan growth is expected in both the commercial and residential portfolios.  The net decrease was the result of the following:

-   SBA 7(a) loans decreased $1.6 million or 2.2%,

-   SBA 504 loans decreased $7.5 million or 13.5%,

-   Commercial loans increased $1.8 million or 0.6%,

-   Residential mortgage loans decreased $1.9 million or 1.4%, and

-   Consumer loans decreased $665 thousand or 1.4%.

·   Core deposits, which exclude time deposits, increased $8.6 million during the year to $493.2 million.  The increase was primarily due to a:

-   $7.4 million or 7.3% increase in noninterest-bearing demand deposits, and a

-   $2.9 million increase in savings deposits, partially offset by a

-   $1.7 million decrease in interest-bearing demand deposits.

·   Time deposits decreased $9.5 million from year-end due to planned run off of a maturing high rate promotion that was completed late in 2008 to bolster liquidity.

·   Shareholders’ equity was $74.0 million at March 31, 2012, an increase of $444 thousand from year-end 2011, primarily due to the increase in net income.

·   Book value per common share was $7.28 as of March 31, 2012.

·   At March 31, 2012 the leverage, Tier I and Total Risk Based Capital ratios were 10.67%, 14.44% and 15.71%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.

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Credit Quality

“Nonperforming assets declined from the prior year as the Company was successful in liquidating Bank owned properties”, said James A. Hughes.   “Nonperforming assets are down 10.2 percent from a year ago and there has been a 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 $23.8 million at March 31, 2012, or 4.08% of total loans and OREO, compared to $25.8 million or 4.33% of total loans and OREO at year-end 2011.

·   At March 31, 2012, nonperforming loans totaled $22.2 million, a decrease of $563 thousand over the prior year-end.

·   OREO assets totaled $1.6 million at March 31, 2012, a decrease of $1.4 million, compared to $3.0 million at year-end 2011.

·   The allowance for loan losses totaled $16.3 million at March 31, 2012, or 2.80% of total loans. The provision for loan losses for the quarter ended March 31, 2012 was $1.2 million compared to $2.5 million for the prior year’s quarter.  .

·   Net charge-offs were $1.2 million for the three months ended March 31, 2012, compared to $1.6 million for the same period a year ago.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $810 million in assets and $643 million in deposits.  Unity Bank provides financial services to retail, corporate and small business customers through its 15 retail service centers located in Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County, Pennsylvania.  For additional information about Unity, visit our website at www.unitybank.com, or call 800- 618-BANK.

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

Page 6

UNITY BANCORP, INC.
SUMMARY FINANCIAL HIGHLIGHTS
March 31, 2012
										March 31, 2012 vs.
										December 31, 2011			March 31, 2011
Amounts in thousands, except percentages and per share amounts	March 31, 2012			December 31, 2011			March 31, 2011			%			%
BALANCE SHEET DATA:
Total assets	$	810,198		$	810,846		$	820,833			-0.1	%		-1.3	%
Total deposits		643,101			643,971			656,776			-0.1	%		-2.1	%
Total loans		582,752			592,592			614,522			-1.7	%		-5.2	%
Total securities		128,061			107,536			120,815			19.1	%		6.0	%
Total shareholders' equity		74,002			73,558			70,381			0.6	%		5.1	%
Allowance for loan losses		(16,339	)		(16,348	)		(15,275	)		-0.1	%		7.0	%
FINANCIAL DATA - QUARTER TO DATE:
Income before provision (benefit) for income taxes	$	1,364		$	816		$	72			67.2	%		1794.4	%
Provision (benefit) for income taxes		459			220			(148	)		108.6	%		410.1	%
Net income		905			596			220			51.8	%		311.4	%
Preferred stock dividends & discount accretion		396			393			384			0.8	%		3.1	%
Income available (loss attributable) to common shareholders	$	509		$	203		$	(164	)		150.7	%		410.4	%
Net income (loss) per common share - Basic (1)	$	0.07		$	0.03		$	(0.02	)		133.3	%		450.0	%
Net income (loss) per common share - Diluted (1)	$	0.07		$	0.03		$	(0.02	)		133.3	%		450.0	%
Return on average assets		0.45	%		0.29	%		0.11	%		55.2	%		309.1	%
Return (loss) on average equity (2)		3.81	%		1.51	%		-1.31	%		152.3	%		390.8	%
Efficiency ratio		71.80	%		74.90	%		71.56	%		-4.1	%		0.3	%
SHARE INFORMATION:
Market price per share	$	6.24		$	6.40		$	6.95			-2.5	%		-10.2	%
Dividends paid	$	-		$	-		$	-			0.0	%		0.0	%
Book value per common share	$	7.28		$	7.24		$	7.09			0.5	%		2.6	%
Average diluted shares outstanding (QTD)		7,792			7,782			7,219			0.1	%		7.9	%
CAPITAL RATIOS:
Total equity to total assets		9.13	%		9.07	%		8.57	%		0.7	%		6.5	%
Leverage ratio		10.67	%		10.44	%		10.15	%		2.2	%		5.2	%
Tier 1 risk-based capital ratio		14.44	%		14.33	%		13.04	%		0.8	%		10.8	%
Total risk-based capital ratio		15.71	%		15.60	%		14.30	%		0.7	%		9.9	%
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	23,831		$	25,801		$	26,525			-7.6	%		-10.2	%
QTD net chargeoffs (annualized) to QTD average loans		0.83	%		0.83	%		1.05	%		0.0	%		-21.0	%
Allowance for loan losses to total loans		2.80	%		2.76	%		2.49	%		1.4	%		12.4	%
Nonperforming assets to total loans and OREO		4.08	%		4.33	%		4.30	%		-5.8	%		-5.1	%
Nonperforming assets to total assets		2.94	%		3.18	%		3.23	%		-7.5	%		-9.0	%
(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).

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UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2012
										March 31, 2012 vs.
										December 31, 2011			March 31, 2011
Amounts in thousands, except percentages	March 31, 2012			December 31, 2011			March 31, 2011			%			%
ASSETS
Cash and due from banks	$	17,986		$	17,688		$	15,478			1.7	%		16.2	%
Federal funds sold and interest-bearing deposits		53,831			64,886			39,880			-17.0	%		35.0	%
Cash and cash equivalents		71,817			82,574			55,358			-13.0	%		29.7	%
Securities available for sale		110,181			88,765			103,238			24.1	%		6.7	%
Securities held to maturity		17,880			18,771			17,577			-4.7	%		1.7	%
Total securities		128,061			107,536			120,815			19.1	%		6.0	%
SBA loans held for sale		8,015			7,668			9,933			4.5	%		-19.3	%
SBA loans held to maturity		62,251			64,175			74,657			-3.0	%		-16.6	%
SBA 504 loans		47,651			55,108			60,092			-13.5	%		-20.7	%
Commercial loans		284,861			283,104			283,135			0.6	%		0.6	%
Residential mortgage loans		132,192			134,090			132,512			-1.4	%		-0.2	%
Consumer loans		47,782			48,447			54,193			-1.4	%		-11.8	%
Total loans		582,752			592,592			614,522			-1.7	%		-5.2	%
Allowance for loan losses		(16,339	)		(16,348	)		(15,275	)		-0.1	%		7.0	%
Net loans		566,413			576,244			599,247			-1.7	%		-5.5	%
Premises and equipment, net		12,321			11,350			10,782			8.6	%		14.3	%
Bank owned life insurance (BOLI)		9,179			9,107			8,885			0.8	%		3.3	%
Deferred tax assets		7,115			6,878			7,833			3.4	%		-9.2	%
Federal Home Loan Bank stock		4,088			4,088			4,206			0.0	%		-2.8	%
Accrued interest receivable		3,672			3,703			3,725			-0.8	%		-1.4	%
Other real estate owned (OREO)		1,625			3,032			2,602			-46.4	%		-37.5	%
Prepaid FDIC insurance		2,386			2,545			2,994			-6.2	%		-20.3	%
Goodwill and other intangibles		1,526			1,530			1,541			-0.3	%		-1.0	%
Other assets		1,995			2,259			2,845			-11.7	%		-29.9	%
Total assets	$	810,198		$	810,846		$	820,833			-0.1	%		-1.3	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	108,618		$	101,193		$	91,247			7.3	%		19.0	%
Interest-bearing demand deposits		103,018			104,749			101,878			-1.7	%		1.1	%
Savings deposits		281,535			278,603			293,750			1.1	%		-4.2	%
Time deposits, under $100,000		94,513			102,809			110,050			-8.1	%		-14.1	%
Time deposits, $100,000 and over		55,417			56,617			59,851			-2.1	%		-7.4	%
Total deposits		643,101			643,971			656,776			-0.1	%		-2.1	%
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		498			523			569			-4.8	%		-12.5	%
Accrued expenses and other liabilities		2,132			2,329			2,642			-8.5	%		-19.3	%
Total liabilities		736,196			737,288			750,452			-0.1	%		-1.9	%
Cumulative perpetual preferred stock		19,683			19,545			19,146			0.7	%		2.8	%
Common stock		53,846			53,746			52,842			0.2	%		1.9	%
Accumulated deficit		(345	)		(854	)		(2,006	)		59.6	%		82.8	%
Accumulated other comprehensive income		818			1,121			399			-27.0	%		105.0	%
Total shareholders' equity		74,002			73,558			70,381			0.6	%		5.1	%
Total liabilities and shareholders' equity	$	810,198		$	810,846		$	820,833			-0.1	%		-1.3	%
Issued common shares		7,463			7,459			7,222
Outstanding common shares		7,463			7,459			7,222

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UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
March 31, 2012
										March 31, 2012 vs.
	For the Three Months Ended									December 31, 2011					March 31, 2011
Amounts in thousands, except percentages and per share amounts	March 31, 2012			December 31, 2011			March 31, 2011			$			%		$			%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	32		$	35		$	11		$	(3	)	-8.6	%	$	21			190.9	%
Federal Home Loan Bank stock		51			36			66			15		41.7	%		(15	)		-22.7	%
Securities available for sale		721			645			864			76		11.8	%		(143	)		-16.6	%
Securities held to maturity		173			163			287			10		6.1	%		(114	)		-39.7	%
Total securities		894			808			1,151			86		10.6	%		(257	)		-22.3	%
SBA loans		924			995			1,236			(71	)	-7.1	%		(312	)		-25.2	%
SBA 504 loans		759			855			955			(96	)	-11.2	%		(196	)		-20.5	%
Commercial loans		4,183			4,188			4,306			(5	)	-0.1	%		(123	)		-2.9	%
Residential mortgage loans		1,655			1,605			1,831			50		3.1	%		(176	)		-9.6	%
Consumer loans		560			611			686			(51	)	-8.3	%		(126	)		-18.4	%
Total loans		8,081			8,254			9,014			(173	)	-2.1	%		(933	)		-10.4	%
Total interest income		9,058			9,133			10,242			(75	)	-0.8	%		(1,184	)		-11.6	%
INTEREST EXPENSE
Interest-bearing demand deposits		136			152			139			(16	)	-10.5	%		(3	)		-2.2	%
Savings deposits		354			501			581			(147	)	-29.3	%		(227	)		-39.1	%
Time deposits		913			946			1,097			(33	)	-3.5	%		(184	)		-16.8	%
Borrowed funds and subordinated debentures		847			861			950			(14	)	-1.6	%		(103	)		-10.8	%
Total interest expense		2,250			2,460			2,767			(210	)	-8.5	%		(517	)		-18.7	%
Net interest income		6,808			6,673			7,475			135		2.0	%		(667	)		-8.9	%
Provision for loan losses		1,200			1,150			2,500			50		4.3	%		(1,300	)		-52.0	%
Net interest income after provision for loan losses		5,608			5,523			4,975			85		1.5	%		633			12.7	%
NONINTEREST INCOME
Branch fee income		386			390			344			(4	)	-1.0	%		42			12.2	%
Service and loan fee income		302			194			243			108		55.7	%		59			24.3	%
Gain on sale of SBA loans held for sale, net		157			114			111			43		37.7	%		46			41.4	%
Gain on sale of mortgage loans		411			445			169			(34	)	-7.6	%		242			143.2	%
BOLI income		73			74			73			(1	)	-1.4	%		-			0.0	%
Net security gains (losses)		224			(49	)		125			273		-557.1	%		99			79.2	%
Other income		162			137			190			25		18.2	%		(28	)		-14.7	%
Total noninterest income		1,715			1,305			1,255			410		31.4	%		460			36.7	%
NONINTEREST EXPENSE
Compensation and benefits		3,182			2,900			3,057			282		9.7	%		125			4.1	%
Occupancy		609			619			720			(10	)	-1.6	%		(111	)		-15.4	%
Processing and communications		534			511			507			23		4.5	%		27			5.3	%
Furniture and equipment		362			349			384			13		3.7	%		(22	)		-5.7	%
Professional services		190			217			202			(27	)	-12.4	%		(12	)		-5.9	%
Loan collection costs		180			319			224			(139	)	-43.6	%		(44	)		-19.6	%
OREO expenses		124			293			222			(169	)	-57.7	%		(98	)		-44.1	%
Deposit insurance		171			114			319			57		50.0	%		(148	)		-46.4	%
Advertising		146			217			118			(71	)	-32.7	%		28			23.7	%
Other expenses		461			473			405			(12	)	-2.5	%		56			13.8	%
Total noninterest expense		5,959			6,012			6,158			(53	)	-0.9	%		(199	)		-3.2	%
Income before provision (benefit) for income taxes		1,364			816			72			548		67.2	%		1,292			1794.4	%
Provision (benefit) for income taxes		459			220			(148	)		239		108.6	%		607			410.1	%
Net income		905			596			220			309		51.8	%		685			311.4	%
Preferred stock dividends & discount accretion		396			393			384			3		0.8	%		12			3.1	%
Income available (loss attributable) to common shareholders	$	509		$	203		$	(164	)	$	306		150.7	%	$	673			410.4	%
Effective tax rate		33.7	%		27.0	%		-205.6	%
Net income (loss) per common share - Basic (1)	$	0.07		$	0.03		$	(0.02	)
Net income (loss) per common share - Diluted (1)	$	0.07		$	0.03		$	(0.02	)
Weighted average common shares outstanding - Basic		7,460			7,427			7,219
Weighted average common shares outstanding - Diluted		7,792			7,782			7,219
(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

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UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
March 31, 2012
	For the Three Months Ended
	March 31, 2012									December 31, 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	$	64,660		$	32			0.20	%	$	86,323		$	35			0.16	%
Federal Home Loan Bank stock		4,088			51			5.02	%		4,088			36			3.49	%
Securities available for sale		102,101			782			3.06	%		87,096			700			3.21	%
Securities held to maturity		18,374			180			3.92	%		13,747			168			4.89	%
Total securities (A)		120,475			962			3.19	%		100,843			868			3.44	%
SBA loans		71,760			924			5.15	%		74,523			995			5.34	%
SBA 504 loans		51,710			759			5.90	%		55,326			855			6.13	%
Commercial loans		284,237			4,183			5.92	%		282,963			4,188			5.87	%
Residential mortgage loans		132,824			1,655			4.98	%		135,186			1,605			4.75	%
Consumer loans		47,608			560			4.73	%		49,386			611			4.91	%
Total loans (B)		588,139			8,081			5.52	%		597,384			8,254			5.50	%
Total interest-earning assets	$	777,362		$	9,126			4.71	%	$	788,638		$	9,193			4.64	%
Noninterest-earning assets:
Cash and due from banks		15,949									15,000
Allowance for loan losses		(16,788	)								(16,851	)
Other assets		40,287									40,686
Total noninterest-earning assets		39,448									38,835
Total assets	$	816,810								$	827,473
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	108,988		$	136			0.50	%	$	107,662		$	152			0.56	%
Savings deposits		283,261			354			0.50	%		292,976			501			0.68	%
Time deposits		156,999			913			2.34	%		160,784			946			2.33	%
Total interest-bearing deposits		549,248			1,403			1.03	%		561,422			1,599			1.13	%
Borrowed funds and subordinated debentures		90,465			847			3.70	%		90,465			861			3.72	%
Total interest-bearing liabilities	$	639,713		$	2,250			1.41	%	$	651,887		$	2,460			1.49	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		100,496									99,672
Other liabilities		3,249									3,228
Total noninterest-bearing liabilities		103,745									102,900
Total shareholders' equity		73,352									72,686
Total liabilities and shareholders' equity	$	816,810								$	827,473
Net interest spread				$	6,876			3.30	%				$	6,733			3.15	%
Tax-equivalent basis adjustment					(68	)								(60	)
Net interest income				$	6,808								$	6,673
Net interest margin								3.56	%								3.39	%
(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.

Page 10

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
March 31, 2012
	For the Three Months Ended
	March 31, 2012									March 31, 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	$	64,660		$	32			0.20	%	$	33,252		$	11			0.13	%
Federal Home Loan Bank stock		4,088			51			5.02	%		4,206			66			6.36	%
Securities available for sale		102,101			782			3.06	%		105,027			912			3.47	%
Securities held to maturity		18,374			180			3.92	%		19,516			292			5.98	%
Total securities (A)		120,475			962			3.19	%		124,543			1,204			3.87	%
SBA loans		71,760			924			5.15	%		85,861			1,236			5.76	%
SBA 504 loans		51,710			759			5.90	%		61,998			955			6.25	%
Commercial loans		284,237			4,183			5.92	%		282,605			4,306			6.18	%
Residential mortgage loans		132,824			1,655			4.98	%		130,745			1,831			5.60	%
Consumer loans		47,608			560			4.73	%		54,849			686			5.07	%
Total loans (B)		588,139			8,081			5.52	%		616,058			9,014			5.91	%
Total interest-earning assets	$	777,362		$	9,126			4.71	%	$	778,059		$	10,295			5.34	%
Noninterest-earning assets:
Cash and due from banks		15,949									17,764
Allowance for loan losses		(16,788	)								(15,054	)
Other assets		40,287									39,767
Total noninterest-earning assets		39,448									42,477
Total assets	$	816,810								$	820,536
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	108,988		$	136			0.50	%	$	103,550		$	139			0.54	%
Savings deposits		283,261			354			0.50	%		289,805			581			0.81	%
Time deposits		156,999			913			2.34	%		174,620			1,097			2.55	%
Total interest-bearing deposits		549,248			1,403			1.03	%		567,975			1,817			1.30	%
Borrowed funds and subordinated debentures		90,465			847			3.70	%		90,465			950			4.20	%
Total interest-bearing liabilities	$	639,713		$	2,250			1.41	%	$	658,440		$	2,767			1.70	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		100,496									88,797
Other liabilities		3,249									3,530
Total noninterest-bearing liabilities		103,745									92,327
Total shareholders' equity		73,352									69,769
Total liabilities and shareholders' equity	$	816,810								$	820,536
Net interest spread				$	6,876			3.30	%				$	7,528			3.64	%
Tax-equivalent basis adjustment					(68	)								(53	)
Net interest income				$	6,808								$	7,475
Net interest margin								3.56	%								3.92	%
(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.

Page 11

UNITY BANCORP, INC.
QUARTERLY ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES
March 31, 2012
Amounts in thousands, except percentages	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	16,348		$	16,447		$	16,018		$	15,275		$	14,364
Provision for loan losses charged to expense		1,200			1,150			1,400			1,750			2,500
		17,548			17,597			17,418			17,025			16,864
Less: Chargeoffs
SBA loans		615			735			310			592			711
SBA 504 loans		227			200			325			125			300
Commercial loans		346			290			450			521			548
Residential mortgage loans		113			73			-			-			142
Consumer loans		-			46			-			131			-
Total chargeoffs		1,301			1,344			1,085			1,369			1,701
Add: Recoveries
SBA loans		53			26			111			71			8
SBA 504 loans		28			-			-			77			-
Commercial loans		11			15			3			214			98
Residential mortgage loans		-			50			-			-			4
Consumer loans		-			4			-			-			2
Total recoveries		92			95			114			362			112
Net chargeoffs		1,209			1,249			971			1,007			1,589
Balance, end of period	$	16,339		$	16,348		$	16,447		$	16,018		$	15,275
LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	22,206		$	22,769		$	20,598		$	25,099		$	23,923
Other real estate owned (OREO)		1,625			3,032			3,555			2,722			2,602
Nonperforming assets		23,831			25,801			24,153			27,821			26,525
Less:  Amount guaranteed by Small Business Administration		555			939			1,339			2,857			3,355
Net nonperforming assets	$	23,276		$	24,862		$	22,814		$	24,964		$	23,170
Loans 90 days past due & still accruing	$	3,165		$	2,411		$	2,191		$	2,858		$	4,248
Performing troubled debt restructurings (TDRs)		20,985			17,436			17,488			17,509			17,169
(1) Nonperforming TDRs included above		2,287			3,645			3,817			3,065			2,917
Total TDRs		23,272			21,081			21,305			20,574			20,086
Allowance for loan losses to:
Total loans at quarter end		2.80	%		2.76	%		2.72	%		2.60	%		2.49	%
Nonperforming loans (1)		73.58	%		71.80	%		79.85	%		63.82	%		63.85	%
Nonperforming assets		68.56	%		63.36	%		68.10	%		57.58	%		57.59	%
Net nonperforming assets		70.20	%		65.75	%		72.09	%		64.16	%		65.93	%
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		3.15	%		3.77	%		0.95	%		2.44	%		3.32	%
SBA 504 loans		1.55	%		1.43	%		2.31	%		0.33	%		1.96	%
Commercial loans		0.47	%		0.39	%		0.62	%		0.43	%		0.65	%
Residential mortgage loans		0.34	%		0.07	%		0.00	%		0.00	%		0.43	%
Consumer loans		0.00	%		0.34	%		0.00	%		1.00	%		-0.01	%
Total loans		0.83	%		0.83	%		0.63	%		0.66	%		1.05	%
Nonperforming loans to total loans		3.81	%		3.84	%		3.41	%		4.08	%		3.89	%
Nonperforming loans and TDRs to total loans		7.41	%		6.78	%		6.31	%		6.93	%		6.69	%
Nonperforming assets to total loans and OREO		4.08	%		4.33	%		3.98	%		4.50	%		4.30	%
Nonperforming assets to total assets		2.94	%		3.18	%		2.94	%		3.45	%		3.23	%

Page 12

UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
March 31, 2012
Amounts in thousands, except percentages and per share amounts	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
SUMMARY OF INCOME:
Total interest income	$	9,058		$	9,133		$	9,952		$	10,196		$	10,242
Total interest expense		2,250			2,460			2,599			2,725			2,767
Net interest income		6,808			6,673			7,353			7,471			7,475
Provision for loan losses		1,200			1,150			1,400			1,750			2,500
Net interest income after provision for loan losses		5,608			5,523			5,953			5,721			4,975
Total noninterest income		1,715			1,305			1,654			1,447			1,255
Total noninterest expense		5,959			6,012			6,101			6,247			6,158
Income before provision (benefit) for income taxes		1,364			816			1,506			921			72
Provision (benefit) for income taxes		459			220			420			277			(148	)
Net income		905			596			1,086			644			220
Preferred stock dividends & discount accretion		396			393			386			395			384
Income available (loss attributable) to common shareholders	$	509		$	203		$	700		$	249		$	(164	)
Net income (loss) per common share - Basic (1)	$	0.07		$	0.03		$	0.09		$	0.03		$	(0.02	)
Net income (loss) per common share - Diluted (1)	$	0.07		$	0.03		$	0.09		$	0.03		$	(0.02	)
COMMON SHARE DATA:
Market price per share	$	6.24		$	6.40		$	6.65		$	6.79		$	6.95
Dividends paid	$	-		$	-		$	-		$	-		$	-
Book value per common share	$	7.28		$	7.24		$	7.25		$	7.14		$	7.09
QTD weighted average shares - basic		7,460			7,427			7,413			7,271			7,219
QTD weighted average shares - diluted		7,792			7,782			7,781			7,710			7,219
Outstanding common shares		7,463			7,459			7,413			7,412			7,222
OPERATING RATIOS (Annualized):
Return on average assets		0.45	%		0.29	%		0.54	%		0.32	%		0.11	%
Return (loss) on average equity (2)		3.81	%		1.51	%		5.27	%		1.95	%		-1.31	%
Efficiency ratio		71.80	%		74.90	%		69.80	%		69.74	%		71.56	%
BALANCE SHEET DATA:
Total assets	$	810,198		$	810,846		$	820,652		$	806,163		$	820,833
Total deposits		643,101			643,971			654,171			641,167			656,776
Total loans		582,752			592,592			603,633			615,105			614,522
Total securities		128,061			107,536			100,752			115,188			120,815
Total shareholders' equity		74,002			73,558			73,136			72,207			70,381
Allowance for loan losses		(16,339	)		(16,348	)		(16,447	)		(16,018	)		(15,275	)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.71	%		4.64	%		5.21	%		5.28	%		5.34	%
Interest-bearing liabilities		1.41	%		1.49	%		1.62	%		1.67	%		1.70	%
Net interest spread		3.30	%		3.15	%		3.59	%		3.61	%		3.64	%
Net interest margin		3.56	%		3.39	%		3.85	%		3.88	%		3.92	%
CREDIT QUALITY:
Nonperforming assets	$	23,831		$	25,801		$	24,153		$	27,821		$	26,525
QTD net chargeoffs (annualized) to QTD average loans		0.83	%		0.83	%		0.63	%		0.66	%		1.05	%
Allowance for loan losses to total loans		2.80	%		2.76	%		2.72	%		2.60	%		2.49	%
Nonperforming assets to total loans and OREO		4.08	%		4.33	%		3.98	%		4.50	%		4.30	%
Nonperforming assets to total assets		2.94	%		3.18	%		2.94	%		3.45	%		3.23	%
CAPITAL RATIOS AND OTHER:
Total equity to total assets		9.13	%		9.07	%		8.91	%		8.96	%		8.57	%
Leverage ratio		10.67	%		10.44	%		10.69	%		10.40	%		10.15	%
Tier 1 risk-based capital ratio		14.44	%		14.33	%		13.88	%		13.41	%		13.04	%
Total risk-based capital ratio		15.71	%		15.60	%		15.14	%		14.67	%		14.30	%
Number of banking offices		15			14			14			16			16
Number of ATMs		16			15			15			17			18
Number of employees		171			171			168			169			170
(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).

Page 13