Unity Bancorp (UNTY) 8-K Unity Bancorp Reports Third Quarter and Nine Month Earnings

Exhibit 99.1

Unity Bancorp Reports Third Quarter and Nine Month Earnings

          CLINTON, N.J., Oct. 19 /PRNewswire-FirstCall/ -- Unity Bancorp, Inc. (Nasdaq: UNTY), parent company of Unity Bank, reported net income of $1.6 million, or $0.23 per diluted share, for the quarter ended September 30, 2006, compared to net income of $1.6 million, or $0.24 per diluted share, for the quarter ended September 30, 2005.  Return on average assets and average common equity for the third quarter of 2006 were 0.95% and 15.00%, respectively, as compared to 1.09% and 16.36%, respectively, for the third quarter of 2005.

          For the nine months ended September 30, 2006, net income was $4.9 million or $0.71 per diluted share, a 10.4% increase from the $4.5 million, or $0.66 per diluted share for the same period a year ago.  Return on average assets and average common equity for the nine months ended September 30, 2006, were 1.02% and 15.54%, respectively, as compared to 1.08% and 15.82%, respectively, for the prior year’s comparable period.

          ”Considering the challenging rate environment, we are pleased with operating results for the third quarter and continue to remain optimistic about future earnings trends,” said Unity President and Chief Executive Officer, James A. Hughes.  “The Company continues to execute its long-term plan by growing its customer base and expanding market share.”

          Net interest income was $5.9 million for the third quarter of 2006, a 3.6% increase compared to a year ago.  The increase in net interest income was due primarily to an increase in net interest-earning assets, partially offset by a decrease in net interest spread.  Net interest margin was 3.79% for the third quarter of 2006, compared to 4.12% for the third quarter of 2005.  The Federal Reserve Board has raised rates 17 times, or 425 basis points, since 2004. These increases have resulted in an inverted yield curve, substantially increasing the Company’s cost of funds. Despite this environment, the Company was able to grow net interest income.  The effect of the yield curve may cause the net interest margin to further contract during the remainder of 2006.

          The provision for loan losses for the third quarter of 2006 was $400 thousand, compared to $675 thousand for the quarter ended September 30, 2005. Net loan charge-offs for the quarter ended September 30, 2006 were $177 thousand, compared to net-charge offs of $356 thousand for the quarter ended September 30, 2005.

          Total non-interest income for the third quarter of 2006 was $2.2 million, up 5.2% from the same period a year ago.  Service charges on deposits for the third quarter decreased 14.6% compared to the third quarter of 2005 due to lower levels of overdraft fees.  Service and loan fees for the third quarter of 2006 increased 3.8% from a year ago, due to an increase in prepayment fees on commercial loans and loan processing fees.  Gains on sales of SBA loans amounted to $927 thousand for the third quarter of 2006, compared to $877 thousand for the quarter ended September 30, 2005.

          Total non-interest expenses for the third quarter of 2006 were $5.3 million, an increase of 16.0% from the prior year’s comparable quarter. Compensation and benefits increased 18.7%, due to increased head count, merit increases and rising health insurance costs.  Processing and communications increased 2.6%, due to increased transactional volume.  Furniture and equipment and occupancy costs increased 11.0% and 13.7% respectively. Increased expenses were due, in part, to the addition of a new branch in the fourth quarter of 2005 and the refurbishment of the existing branch network. Professional service fees increased due to increased internal and external audit, loan review and supervisory costs.  Loan servicing costs increased 66.7%, due to higher collection expenses on delinquent loans.

          Total assets at September 30, 2006 were $671.3 million, a 10.1% increase from September 30, 2005.  The increase in assets from the prior year was primarily due to growth in the Company’s loan portfolio.  Total loans at September 30, 2006 were $498.8 million, a 14.7% increase from September 30, 2005.  The growth in the loan portfolio occurred primarily in commercial lending.  Commercial loans increased $65.9 million, or 27.2%; SBA loans were flat from the prior year; residential mortgage loans decreased 2.7% from the prior year; and consumer loans were flat from a year ago.

          “In 2007, the Company anticipates expanding its SBA program,” said Mr. Hughes.  “We have targeted growth areas on the East coast where we believe we can increase our position as a national SBA lender.”

          At September 30, 2006, the allowance for loan losses was $7.5 million, or 1.50% of total loans, compared to 1.51% at September 30, 2005.  Non-performing assets at September 30, 2006 were $6.5 million, or 1.30% of total loans and OREO, as compared to $5.7 million or 1.32% of total loans and OREO from a year ago.  There were $658 thousand of loans past due greater than 90 days and still accruing as of September 30, 2006. The increase in non-accrual loans is primarily due to the addition of several large commercial credits that are well collateralized.

          Total deposits at September 30, 2006, were $557.5 million, a 7.5% increase from September 30, 2005.  This increase was primarily the result of growth in savings accounts and time deposits, partially offset by the decline in interest bearing checking accounts and demand deposit accounts.  Savings accounts increased $41.4 million, or 26.8% from September 30, 2005, due to a high-yield savings product.  Time deposits increased $29.8 million, or 20.7%, from September 30, 2005. Non-interest bearing demand deposit accounts decreased $4.1 million, or 5.0% from September 30, 2005.

          Total shareholders’ equity was $45.6 million at September 30, 2006, a 15.5% increase from September 30, 2005.  The increase in shareholders’ equity was primarily due to retained profits, partially offset by the payment of cash dividends and a decline in other comprehensive income.

          As of September 30, 2006, the Company’s Tier I leverage ratio was 9.12%, Tier I risk-based capital ratio was 10.92%, and total risk-based capital ratio was 12.91%.  All regulatory capital ratios exceeded the well-capitalized, federal capital adequacy requirements as of September 30, 2006.

          Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $671 million in assets and $557 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.  For additional information about Unity visit our website at http://www.unitybank.com or call 800 618-BANK.

          This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance.  These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond the company’s control and could impede its ability to achieve these goals.  These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors.

Unity Bancorp, Inc.
Consolidated Financial Highlights
 (Dollars in thousands, except per share data)

	Sep. 30, 2006			Jun. 30, 2006			Sep. 30,  2005			Sep. 06  vs.
										Jun. 06			Sep. 05
BALANCE SHEET DATA:
Assets	$	671,311		$	670,870		$	609,916			0.1	%		10.1	%
Deposits		557,451			576,376			518,696			(3.3	)		7.5
Loans		498,842			484,622			434,749			2.9			14.7
Securities		112,817			108,979			103,012			3.5			9.5
Shareholders’ equity		45,643			43,446			39,526			5.1			15.5
Allowance for loan losses		7,480			7,257			6,558			3.1			14.1
FINANCIAL DATA - QUARTER TO DATE:
Net income before taxes	$	2,471		$	2,429		$	2,612			1.7	%		(5.4	)%
Federal and state  income tax provision		844			792			993			6.6			(15.0	)
Net income		1,627			1,637			1,619			(0.6	)		0.5
Per share-basic		0.25			0.25			0.25			—			—
Per share-diluted		0.23			0.24			0.24			(4.2	)		(4.2	)
Return on average assets		0.95	%		1.03	%		1.09	%		(7.8	)		(12.8	)
Return on average common equity		15.00			15.39			16.36			(2.5	)		(8.3	)
Efficiency ratio		65.48			65.12			58.17			0.6			12.6
FINANCIAL DATA - YEAR TO DATE:
Net income before taxes	$	7,399			—		$	7,188			—			2.9	%
Federal and state income tax provision		2,478			—			2,732			—			(9.3	)
Net income		4,921			—			4,456			—			10.4
Per share-basic		0.75			—			0.70			—			7.1
Per share-diluted		0.71			—			0.66			—			7.6
Return on average assets		1.02	%		—			1.08	%		—			(5.6	)
Return on average common equity		15.54			—			15.82			—			(1.8	)
Efficiency ratio		65.29			—			62.16			—			5.0
SHARE INFORMATION:
Closing price per share	$	15.28		$	15.49		$	12.47			(1.4	)%		22.6	%
Cash dividends declared		0.05			0.05			0.05			—			—
Book value per share		6.92			6.60			6.16			4.8			12.3
Average diluted shares outstanding  (QTD)		6,925			6,905			6,747			0.3			2.6
CAPITAL RATIOS:
Total equity to total assets		6.80	%		6.48	%		6.48	%		4.9	%		4.9	%
Tier I capital to average assets  (leverage)		9.12			8.22			8.55			10.9			6.7
Tier I capital to risk-adjusted assets		10.92			9.85			10.40			10.9			5.0
Total risk-based capital		12.91			11.10			11.65			16.3			10.8
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	6,473		$	2,552		$	5,733			153.6	%		12.9	%
Net charge offs to average loans (QTD)		0.14	%		0.10	%		0.33	%		40.0			(57.6	)
Allowance for loan losses to total loans		1.50			1.50			1.51			—			(0.7	)
Nonperforming assets to total loans and OREO		1.30			0.53			1.32			145.3			(1.5	)

Unity Bancorp, Inc.
Consolidated Balance Sheets
(In thousands)

	Sep. 30, 2006			Jun. 30,  2006			Sep. 30, 2005			Sep. 06  vs.
										Jun. 06			Sep. 05
ASSETS:
Cash and due from banks	$	15,899		$	13,709		$	11,675			16.0	%		36.2	%
Federal funds sold and interest bearing deposits		22,383			42,631			41,947			(47.5	)		(46.6	)
Securities:
Available for sale		68,907			68,104			69,248			1.2			(0.5	)
Held to maturity		43,910			40,875			33,764			7.4			30.0
Total securities		112,817			108,979			103,012			3.5			9.5
Loans:
SBA - Held for sale		18,474			24,384			14,832			(24.2	)		24.6
SBA - Held to Maturity		61,885			59,111			65,858			4.7			(6.0	)
Commercial		308,646			297,826			242,728			3.6			27.2
Residential mortgage		61,787			55,966			63,474			10.4			(2.7	)
Consumer		48,050			47,335			47,857			1.5			0.4
Total loans		498,842			484,622			434,749			2.9			14.7
Less: Allowance for loan losses		7,480			7,257			6,558			3.1			14.1
Net loans		491,362			477,365			428,191			2.9			14.8
Goodwill and other intangibles		1,607			1,611			—			(0.2	)		—
Premises and equipment, net		11,123			10,954			10,555			1.5			5.4
Accrued interest receivable		3,724			3,460			2,932			7.6			27.0
Loan servicing asset		2,307			2,424			2,288			(4.8	)		0.8
Bank Owned Life Insurance		5,325			5,279			5,140			0.9			3.6
Other assets		4,764			4,458			4,176			6.9			14.1
Total Assets	$	671,311		$	670,870		$	609,916			0.1	%		10.1	%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand deposits	$	77,057		$	81,721		$	81,114			(5.7	)%		(5.0	)%
Interest-bearing deposits:
Interest bearing checking		111,142			116,497			139,544			(4.6	)		(20.4	)
Savings		195,626			187,841			154,224			4.1			26.8
Time, under $100,000		115,082			124,652			93,565			(7.7	)		23.0
Time, $100,000 and over		58,544			65,665			50,249			(10.8	)		16.5
Total deposits		557,451			576,376			518,696			(3.3	)		7.5
Borrowed funds and subordinated debentures		66,589			49,279			49,279			35.1			35.1
Accrued interest payable		360			313			249			15.0			44.6
Accrued expenses and other liabilities		1,268			1,456			2,166			(12.9	)		(41.5	)
Total liabilities		625,668			627,424			570,390			(0.3	)		9.7
Commitments and Contingencies		—			—			—
Shareholders’ equity:
Common stock, no par value, 12,500 shares authorized		44,118			43,866			38,078			0.6			15.9
Retained earnings		2,851			1,555			2,454			83.3			16.2
Treasury stock at cost		(242	)		(242	)		(242	)		—			—
Accumulated other comprehensive loss, net of tax		(1,084	)		(1,733	)		(764	)		N/M			N/M
Total shareholders’ equity		45,643			43,446			39,526			5.1			15.5
Total Liabilities and Shareholders’
Equity	$	671,311		$	670,870		$	609,916			0.1	%		10.1	%
COMMON SHARES AT PERIOD END:
Issued		6,623			6,602			6,443
Outstanding		6,600			6,579			6,420
Treasury		23			23			23

N/M= Not meaningful

Unity Bancorp, Inc.
Consolidated Statements of Income
(In thousands, except per share data)

	Sep. 30, 2006		Jun. 30, 2006		Sep. 30, 2005			Sep. 06  vs.
								Jun. 06			Sep. 05
FOR THE THREE MONTHS ENDED:
INTEREST INCOME
Fed funds sold and interest on deposits	$	270	$	354	$	108			(23.7	)%		150.0	%
Securities:
Available for sale		846		709		782			19.3			8.2
Held to maturity		548		467		411			17.3			33.3
Total securities		1,394		1,176		1,193			18.5			16.8
Loans:
SBA		2,175		2,179		1,784			(0.2	)		21.9
Commercial		5,779		5,368		4,215			7.7			37.1
Residential mortgage		810		788		895			2.8			(9.5	)
Consumer		830		779		690			6.5			20.3
Total loan interest income		9,594		9,114		7,584			5.3			26.5
Total interest income		11,258		10,644		8,885			5.8			26.7
INTEREST EXPENSE
Interest bearing demand deposits		637		653		655			(2.5	)		(2.7	)
Savings deposits		1,971		1,704		971			15.7			103.0
Time deposits		1,968		1,671		982			17.8			100.4
Borrowed funds and subordinated debentures		738		583		540			26.6			36.7
Total interest expense		5,314		4,611		3,148			15.2			68.8
Net interest income		5,944		6,033		5,737			(1.5	)		3.6
Provision for loan losses		400		250		675			60.0			(40.7	)
Net interest income after provision for loan losses		5,544		5,783		5,062			(4.1	)		9.5
NONINTEREST INCOME
Service charges on deposit accounts		386		409		452			(5.6	)		(14.6	)
Service and loan fee income		491		406		473			20.9			3.8
Gain on SBA loan sales		927		558		877			66.1			5.7
Gain on Mortgage loan sales		119		110		133			8.2			(10.5	)
Gain on sales of other loans		—		—		—			—			—
Bank owned life insurance		47		46		47			2.2			—
Net securities gains		69		—		(8	)		—			(962.5	)
Other income		204		118		158			72.9			29.1
Total noninterest income		2,243		1,647		2,132			36.2			5.2
NONINTEREST EXPENSES
Compensation and benefits		2,809		2,664		2,367			5.4			18.7
Processing and communications		555		553		541			0.4			2.6
Occupancy, net		631		646		555			(2.3	)		13.7
Furniture and equipment		372		381		335			(2.4	)		11.0
Professional fees		222		151		138			47.0			60.9
Loan servicing costs		175		55		105			218.2			66.7
Advertising		101		148		176			(31.8	)		(42.6	)
Deposit insurance		17		16		15			6.3			13.3
Other		434		387		350			12.1			24.0
Total noninterest expenses		5,316		5,001		4,582			6.3			16.0
Income before taxes		2,471		2,429		2,612			1.7			(5.4	)
Federal and state income tax provision		844		792		993			6.6			(15.0	)
Net Income	$	1,627	$	1,637	$	1,619			(0.6	)%		0.5	%
Net Income Per Common Share-Basic	$	0.25	$	0.25	$	0.25			—	%		—	%
Net Income Per Common Share-Diluted	$	0.23	$	0.24	$	0.24			(4.2	)%		(4.2	)%
AVERAGE COMMON SHARES OUTSTANDING:
Basic		6,591		6,574		6,418
Diluted		6,925		6,905		6,747

Unity Bancorp, Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)

	Sep. 30, 2006		Sep. 30, 2005		Sep. 06 vs. Sep. 05
YEAR TO DATE
INTEREST INCOME
Fed funds sold and interest on deposits	$	831	$	287		189.5	%
Securities:
Available for sale		2,263		2,387		(5.2	)
Held to maturity		1,491		1,033		44.3
Total securities		3,754		3,420		9.8
Loans:
SBA		6,507		4,591		41.7
Commercial		16,039		11,617		38.1
Residential mortgage		2,418		2,502		(3.4	)
Consumer		2,353		1,934		21.7
Total loan interest income		27,317		20,644		32.3
Total interest income		31,902		24,351		31.0
INTEREST EXPENSE
Interest bearing demand deposits		1,984		1,901		4.4
Savings deposits		4,867		2,212		120.0
Time deposits		5,138		2,509		104.8
Borrowed funds and subordinated debentures		1,883		1,462		28.8
Total interest expense		13,872		8,084		71.6
Net interest income		18,030		16,267		10.8
Provision for loan losses		950		1,325		(28.3	)
Net interest income after provision for loan losses		17,080		14,942		14.3
NONINTEREST INCOME
Service charges on deposit accounts		1,228		1,321		(7.0	)
Service and loan fee income		1,292		1,639		(21.2	)
Gain on SBA loan sales		2,185		2,078		5.1
Gain on Mortgage loan sales		291		279		4.3
Gains on sales of other loans		82		—		—
Bank owned life insurance		140		140		0.0
Net securities gains		69		69		0.0
Other income		605		592		2.2
Total noninterest income		5,892		6,118		(3.7	)
NONINTEREST EXPENSES
Compensation and benefits		8,198		7,078		15.8
Processing and communications		1,635		1,496		9.3
Occupancy, net		1,925		1,649		16.7
Furniture and equipment		1,146		991		15.6
Professional fees		505		441		14.5
Loan servicing costs		331		451		(26.6	)
Advertising		419		548		(23.5	)
Deposit insurance		50		45		11.1
Other		1,364		1,173		16.3
Total noninterest expenses		15,573		13,872		12.3
Income before taxes		7,399		7,188		2.9
Federal and state income tax provision		2,478		2,732		(9.3	)
Net Income	$	4,921	$	4,456		10.4	%
Net Income Per Common Share-Basic	$	0.75	$	0.70		7.1	%
Net Income Per Common Share-Diluted	$	0.71	$	0.66		7.6	%
Average common shares outstanding:
Basic		6,574		6,405
Diluted		6,909		6,745

Unity Bancorp, Inc.
Consolidated Average Balance Sheets with Resultant Interest and Rates
(Tax-equivalent basis, dollars in thousands)

	Three Months Ended
	September 30, 2006									June 30, 2006
	Balance			Interest			Rate			Balance			Interest			Rate
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits with banks	$	20,698		$	270			5.18	%	$	30,005		$	354			4.73	%
Securities:
Available for sale		70,911			859			4.85			62,831			722			4.60
Held to maturity		43,514			558			5.13			38,283			467			4.88
Total securities		114,425			1,417			4.95			101,114			1,189			4.70
Loans, net of unearned discount:
SBA		83,021			2,175			10.48			83,708			2,179			10.41
Commercial		305,862			5,779			7.50			286,943			5,368			7.50
Residential mortgage		57,569			810			5.63			58,135			788			5.42
Consumer		47,792			830			6.89			46,690			779			6.69
Total loans		494,244			9,594			7.72			475,476			9,114			7.68
Total interest-earning assets		629,367			11,281			7.13			606,595			10,657			7.04
Noninterest-earning assets:
Cash and due from banks		13,000									12,535
Allowance for loan losses		(7,569	)								(7,478	)
Other assets		45,273									28,355
Total noninterest-earning assets		50,704									33,412
Total Assets	$	680,071								$	640,007
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	116,043			637			2.18		$	116,303			653			2.25
Savings deposits		192,835			1,971			4.06			184,168			1,704			3.71
Time deposits		178,442			1,968			4.38			167,245			1,671			4.01
Total interest-bearing deposits		487,320			4,576			3.73			467,716			4,028			3.45
Borrowed funds and subordinated debentures		57,160			738			5.12			49,279			583			4.75
Total interest-bearing liabilities		544,480			5,314			3.87			516,995			4,611			3.58
Noninterest-bearing liabilities:
Demand deposits		77,897									78,764
Other liabilities		14,657									1,589
Total noninterest-bearing liabilities		92,554									80,353
Shareholders’ equity		43,037									42,659
Total Liabilities and Shareholders’ Equity	$	680,071								$	640,007
Net interest spread					5,967			3.26	%					6,046			3.46	%
Tax-equivalent basis adjustment					(23	)								(13	)
Net interest income				$	5,944								$	6,033
Net interest margin								3.79	%								3.99	%

Unity Bancorp, Inc.
Consolidated Average Balance Sheets with Resultant Interest and Rates
(Tax-equivalent basis, dollars in thousands)

	Three Months Ended
	September 30, 2006									September 30, 2005
	Balance			Interest			Rate			Balance			Interest			Rate
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits with banks	$	20,698		$	270			5.18	%	$	14,465		$	108			2.96	%
Securities:
Available for sale		70,911			859			4.85			74,803			795			4.25
Held to maturity		43,514			558			5.13			35,274			411			4.66
Total securities		114,425			1,417			4.95			110,077			1,206			4.38
Loans, net of unearned discount:
SBA		83,021			2,175			10.48			79,540			1,784			8.97
Commercial		305,862			5,779			7.50			240,382			4,215			6.96
Residential mortgage		57,569			810			5.63			65,048			895			5.50
Consumer		47,792			830			6.89			48,305			690			5.67
Total loans		494,244			9,594			7.72			433,275			7,584			6.97
Total interest-earning assets		629,367			11,281			7.13			557,817			8,898			6.35
Noninterest-earning assets:
Cash and due from banks		13,000									13,623
Allowance for loan losses		(7,569	)								(6,575	)
Other assets		45,273									25,701
Total noninterest-earning assets		50,704									32,749
Total Assets	$	680,071								$	590,566
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	116,043			637			2.18		$	147,124			655			1.77
Savings deposits		192,835			1,971			4.06			153,640			971			2.51
Time deposits		178,442			1,968			4.38			117,185			982			3.32
Total interest-bearing deposits		487,320			4,576			3.73			417,949			2,608			2.48
Borrowed funds and subordinated debentures		57,160			738			5.12			50,862			540			4.21
Total interest-bearing liabilities		544,480			5,314			3.87			468,811			3,148			2.66
Noninterest-bearing liabilities:
Demand deposits		77,897									78,833
Other liabilities		14,657									3,663
Total noninterest-bearing liabilities		92,554									82,496
Shareholders’ equity		43,037									39,259
Total Liabilities and Shareholders’ Equity	$	680,071								$	590,566
Net interest spread					5,967			3.26	%					5,750			3.69	%
Tax-equivalent basis adjustment					(23	)								(13	)
Net interest income				$	5,944								$	5,737
Net interest margin								3.79	%								4.12	%

Unity Bancorp, Inc.
Consolidated Average Balance Sheets with Resultant Interest and Rates
(Tax-equivalent basis, dollars in thousands)

	Year to Date
	September 30, 2006									September 30, 2005
	Balance			Interest			Rate			Balance			Interest			Rate
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits with banks	$	23,403		$	831			4.75	%	$	13,788		$	287			2.78	%
Securities:
Available for sale		66,207			2,302			4.64			76,572			2,426			4.22
Held to maturity		40,378			1,501			4.96			29,207			1,033			4.72
Total securities		106,585			3,803			4.76			105,779			3,459			4.36
Loans, net of unearned discount:
SBA		84,209			6,507			10.30			71,853			4,591			8.52
Commercial		288,169			16,039			7.44			223,982			11,617			6.93
Residential mortgage		58,930			2,418			5.47			62,030			2,502			5.38
Consumer		46,999			2,353			6.69			45,425			1,934			5.69
Total loans		478,307			27,317			7.63			403,290			20,644			6.84
Total interest-earning assets		608,295			31,951			7.02			522,857			24,390			6.23
Noninterest-earning assets:
Cash and due from banks		12,416									13,098
Allowance for loan losses		(7,402	)								(6,266	)
Other assets		33,559									24,034
Total noninterest-earning assets		38,573									30,866
Total Assets	$	646,868								$	553,723
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	120,121			1,984			2.21		$	153,396			1,901			1.66
Savings deposits		178,481			4,867			3.65			126,246			2,212			2.34
Time deposits		169,465			5,138			4.05			109,224			2,509			3.07
Total interest-bearing deposits		468,067			11,989			3.42			388,866			6,622			2.28
Borrowed funds and subordinated debentures		51,935			1,883			4.85			45,884			1,462			4.26
Total interest-bearing liabilities		520,002			13,872			3.57			434,750			8,084			2.49
Noninterest-bearing liabilities:
Demand deposits		78,279									78,593
Other liabilities		6,239									2,713
Total noninterest-bearing liabilities		84,518									81,306
Shareholders’ equity		42,348									37,667
Total Liabilities and Shareholders’ Equity	$	646,868								$	553,723
Net interest spread					18,079			3.45	%					16,306			3.74	%
Tax-equivalent basis adjustment					(49	)								(39	)
Net interest income				$	18,030								$	16,267
Net interest margin								3.96	%								4.16	%

Unity Bancorp, Inc.
Allowance for Loan Losses and Loan Quality Schedules
(Dollars in thousands)

	9/30/2006			6/30/2006			3/31/2006			12/31/2005			9/30/2005
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning	$	7,257		$	7,120		$	6,892		$	6,558		$	6,239
Provision charged to expense		400			250			300			525			675
		7,657			7,370			7,192			7,083			6,914
Less:  Charge offs
SBA		141			66			46			91			(9	)
Commercial		50			48			4			18			87
Residential mortgage		—			—			—			—			25
Consumer		3			14			35			249			262
Total Charge Offs		194			128			85			358			365
Add:  Recoveries
SBA		—			—			—			130			—
Commercial		12			2			11			24			8
Residential mortgage		—			—			—			—			—
Consumer		5			13			2			13			1
Total Recoveries		17			15			13			167			9
Net Charge Offs		177			113			72			191			356
Balance, ending	$	7,480		$	7,257		$	7,120		$	6,892		$	6,558
LOAN QUALITY INFORMATION:
Nonperforming loans	$	6,473		$	2,552		$	3,605		$	4,361		$	5,555
Other real estate owned, net		—			—			176			178			178
Nonperforming assets	$	6,473		$	2,552		$	3,781		$	4,539		$	5,733
Loans 90 days past due and still accruing	$	658		$	—		$	326		$	—		$	—
Allowance for loan losses to:
Total loans at period end		1.50	%		1.50	%		1.52	%		1.54	%		1.51	%
Nonperforming loans		115.56			284.37			197.50			158.04			118.06
Nonperforming assets		115.56			284.37			188.31			151.84			114.39
Net charge offs to average loans (QTD)		0.14			0.10			0.06			0.17			0.33
Net charge offs to average loans (YTD)		0.10			0.08			0.06			0.20			0.21
Nonperforming loans to total loans		1.30			0.53			0.77			0.97			1.28
Nonperforming assets to total loans and OREO		1.30			0.53			0.81			1.01			1.32

Unity Bancorp, Inc.
Quarterly Financial Data

	09/30/06			06/30/06			03/31/06			12/31/05			09/30/05
SUMMARY OF INCOME (in thousands):
Interest income	$	11,258		$	10,644		$	10,000		$	9,486		$	8,885
Interest expense		5,314			4,611			3,947			3,519			3,148
Net interest income		5,944			6,033			6,053			5,967			5,737
Provision for loan losses		400			250			300			525			675
Net interest income after provision		5,544			5,783			5,753			5,442			5,062
Noninterest income		2,243			1,647			2,002			2,072			2,132
Noninterest expense		5,316			5,001			5,256			4,804			4,582
Income before income taxes		2,471			2,429			2,499			2,710			2,612
Federal and state income tax provision		844			792			842			956			993
Net Income		1,627			1,637			1,657			1,754			1,619
Net Income per Common Share:
Basic	$	0.25		$	0.25		$	0.25		$	0.27		$	0.25
Diluted		0.23			0.24			0.24			0.26			0.24
COMMON SHARE DATA:
Cash dividends declared	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05
Book value at quarter end		6.92			6.60			6.47			6.26			6.16
Market value at quarter end		15.28			15.49			15.29			13.33			12.47
Average common shares outstanding: (000’s)
Basic		6,591			6,574			6,556			6,491			6,418
Diluted		6,925			6,905			6,896			6,807			6,747
Common shares outstanding at period end (000’s)		6,600			6,579			6,566			6,536			6,420
OPERATING RATIOS:
Return on average assets		0.95	%		1.03	%		1.08	%		1.16	%		1.09	%
Return on average common equity		15.00			15.39			16.26			17.62			16.36
Efficiency ratio		65.48			65.12			65.25			59.76			58.17
BALANCE SHEET DATA (in thousands):
Assets	$	671,311		$	670,870		$	628,055		$	614,172		$	609,916
Deposits		557,451			576,376			534,437			521,860			518,696
Loans		498,842			484,622			467,963			448,567			434,749
Shareholders’ equity		45,643			43,446			42,477			40,929			39,526
Allowance for loan losses		7,480			7,257			7,120			6,892			6,558
TAX-EQUIVALENT YIELDS AND RATES:
Interest-earning assets		7.13	%		7.04	%		6.86	%		6.63	%		6.35	%
Interest-bearing liabilities		3.87			3.58			3.21			2.91			2.66
Net interest spread		3.26			3.46			3.65			3.72			3.69
Net interest margin		3.79			3.99			4.12			4.20			4.12
CREDIT QUALITY:
Nonperforming assets (in thousands)	$	6,473		$	2,552		$	3,781		$	4,539		$	5,733
Allowance for loan losses to period-end loans		1.50	%		1.50	%		1.52	%		1.54	%		1.51	%
Net charge offs to average loans		0.14			0.10			0.06			0.17			0.33
Nonperforming assets to loans and OREO		1.30			0.53			0.81			1.01			1.32
CAPITAL AND OTHER:
Total equity to assets		6.80	%		6.48	%		6.76	%		6.66	%		6.48	%
Tier I capital to average assets (leverage)		9.12			8.22			8.26			8.48			8.55
Tier I capital to risk-adjusted assets		10.92			9.85			9.93			10.26			10.40
Total capital to risk-adjusted assets		12.91			11.10			11.18			11.51			11.65
Number of banking offices		14			14			14			14			13
Number of ATMs		16			16			16			16			15
Number of employees		205			191			190			190			185

SOURCE  Unity Bancorp, Inc.
          -0-                                                  10/19/2006
          /CONTACT:  News Media & Financial Analyst Contact: Alan Bedner, EVP, Chief Financial Officer of Unity Bancorp, +1-908-713-4308/
          /Web site:  http://www.unitybank.com /