Unity Bancorp (UNTY) 8-K Unity Bancorp Reports Fourth Quarter and Full Year Earnings

Exhibit 99.1

Unity Bancorp Reports Fourth Quarter and Full Year Earnings

          CLINTON, N.J., Jan. 30 /PRNewswire-FirstCall/ -- Unity Bancorp, Inc. (Nasdaq: UNTY), parent company of Unity Bank, reported net income of $924 thousand, or $0.13 per diluted share, for the quarter ended December 31, 2006, compared to net income of $1.8 million, or $0.26 per diluted share, for the quarter ended December 31, 2005.  Return on average assets and average common equity for the fourth quarter of 2006 were 0.55% and 8.05%, respectively, as compared to 1.16% and 17.62%, respectively, for the fourth quarter of 2005.

          For the year ended December 31, 2006, net income was $5.8 million or $0.85 per diluted share, a 5.9% decrease from the $6.2 million, or $0.92 per diluted share for the same period a year ago.  Return on average assets and average common equity for the year ended 2006, were 0.90% and 13.56%, respectively, as compared to 1.10% and 16.29%, respectively, for the prior year’s comparable period.

          “Although we are pleased with the growth in our balance sheet and our customer base, the impact of the interest rate environment has significantly reduced our net interest margin as well as increased our level of past due loans,” said Unity President and Chief Executive Officer, James A. Hughes. “Although the rate environment is a short term challenge, we are confident we can continue to grow our asset base which will have a favorable effect on future earnings.”

          Net interest income was $5.7 million for the fourth quarter of 2006, a 4.2% decrease compared to a year ago.  The decrease in net interest income was due primarily to a decrease in net interest margin partially offset by an increase in interest-earning assets.  Net interest margin was 3.60% for the fourth quarter of 2006, compared to 4.20% for the fourth quarter of 2005.

          Net interest income was $23.7 million for the year ended December 31, 2006, a 6.8% increase compared to a year ago.  The increase in net interest income for the year ended December 31, 2006 was primarily due to an increase in interest earning assets partially offset by a decrease in net interest margin.  Net interest margin was 3.87% for the year ended 2006 compared to 4.17% from a year ago.  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.  The sustained effect of the yield curve may cause the net interest margin to further contract during 2007.

          The provision for loan losses for the fourth quarter of 2006 was $600 thousand, compared to $525 thousand for the quarter ended December 31, 2005. Net loan charge-offs for the quarter ended December 31, 2006 were $456 thousand, compared to net-charge offs of $191 thousand for the quarter ended December 31, 2005.

          The provision for loan losses for the year ended December 31, 2006 was $1.6 million, compared to $1.9 million for the same period a year ago.  Net loan charge offs for the year ended December 31, 2006, was $818 thousand, compared to $814 thousand for the same period a year ago.

          Total non-interest income for the fourth quarter of 2006 was $1.7 million, down 15.7% from the same period a year ago.  Service charges on deposits for the fourth quarter decreased 16.0% compared to the fourth quarter of 2005, primarily due to lower uncollected and overdraft fees on deposit accounts. Service and loan fees for the fourth quarter of 2006 decreased 26.9% from a year ago due to a decline in SBA servicing income and prepayment fees on commercial loans due to a higher rate environment.  Gains on sales of SBA loans amounted to $787 thousand for the fourth quarter of 2006, compared to $878 thousand for the quarter ended December 31, 2005, primarily due to a lower level of loans sold and reduced premiums.

          Total non-interest income for the year ended December 31, 2006 was $7.6 million, a decline of 6.7% compared to the same period a year ago.  Service charges on deposits for the year ended December 31, 2006 decreased 9.3% compared to the same period a year ago, primarily due to lower uncollected and overdraft fees on deposit accounts.  Service and loan fees for the year ended December 31, 2006 decreased 22.5% from a year ago due to a decline in SBA servicing income and prepayment fees on commercial loans due to a higher rate environment.  Gains on sales of SBA loans amounted to $3.0 million for the year ended December 31, 2006, flat from the same period a year ago.    

          Total non-interest expenses for the fourth quarter of 2006 were $5.5 million, an increase of 13.9% from the prior year’s comparable quarter. Compensation and benefits increased 10.5%, due to increased head count, merit increases and rising health insurance costs.  Processing and communications increased 13.8%, due to increased transactional volume.  Furniture and equipment and occupancy costs increased 9.2% and 7.9% respectively, primarily due to branch expansion and refurbishment of our existing branch network. Loan servicing costs increased $180 thousand due to higher collection expenses on delinquent loans.

          Total non-interest expenses for the year ended December 31, 2006 were $21.0 million, an increase of 12.7% from the prior year.  Compensation and benefits increased 14.4%, due to increased head count associated primarily with branch expansion and expansion in sales staff, merit increases and rising health insurance costs.  Processing and communications increased 10.4%, due to increased transactional volume.  Furniture and equipment and occupancy costs increased 13.9% and 14.4% respectively, primarily due to branch expansion and refurbishment of our existing branch network.  Professional fees increased 16.3%, due to an increased need for these types of services.  Loan servicing costs increased $60.0 thousand or 12.4% due to higher collection expenses on delinquent loans.

          Total assets at December 31, 2006 were $694.1 million, a 13.0% increase from December 31, 2005.  The increase in assets from the prior year was primarily due to growth in the Company’s loan portfolio.  Total loans at December 31, 2006 were $507.7 million, a 13.2% increase from December 31, 2005.  The growth in the loan portfolio occurred primarily in commercial lending.

          At December 31, 2006 the allowance for loan losses was $7.6 million, or 1.50% of total loans, compared to 1.54% at December 31, 2005.  Non-performing assets at December 31, 2006 were $9.1 million, or 1.80% of total loans and OREO, as compared to $4.5 million or 1.01% of total loans and OREO from a year ago.  Due to the increase in interest rates certain SBA borrowers have experienced problems meeting their contractual loan obligations.  As such, the SBA portfolio continues to see higher default rates.

          The primary reason for the increase in non performing assets for the quarter ended December 31, 2006, was the addition of two real estate loans totaling $3.4 million.  Both loans are well collateralized.  The collateral underlying one of the loans, totaling $2.4 million is currently under contract for sale however, we are currently unable to estimate a closing date and as a result this loan was placed on non performing status.  Included in non- performing assets at December 31, 2006 are approximately $3.0 million of loans guaranteed by the SBA. In addition, non performing assets include a $780 thousand loan in which the note was sold to a third party with out recourse, however has not been recognized as a sale for accounting purposes.

          “Although our default rates in our SBA portfolio are in line with the SBA peer group averages,” said Mr. Hughes.  “We will continue to aggressively manage our credit risk to minimize credit losses.”

          Total deposits at December 31, 2006 were $566.5 million, an 8.5% increase from December 31, 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.  Savings accounts increased $64.0 million, or 45.1% from December 31, 2005, due to a high-yield savings product.  Time deposits increased $14.1 million, or 8.7%, from December 31, 2005. Interest bearing demand deposit accounts decreased $33.7 million, or 24.2% from December 31, 2005.

          Total shareholders’ equity was $46.2 million at December 31, 2006, a 12.9% increase from December 31, 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 December 31, 2006, the Company’s Tier I leverage ratio was 9.13%, Tier I risk-based capital ratio was 10.92%, and total risk-based capital ratio was 13.72%.  All regulatory capital ratios exceeded the well-capitalized, federal capital adequacy requirements as of December 31, 2006.

          Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $694 million in assets and $566 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 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)

	Dec. 31, 2006			Sep. 30, 2006			Dec. 31, 2005			Dec. 06 vs.
										Sep. 06			Dec. 05
BALANCE SHEET DATA:
Assets	$	694,106		$	671,811		$	614,172			3.3	%		13.0	%
Deposits		566,465			557,451			521,860			1.6			8.5
Loans		507,690			498,842			448,567			1.8			13.2
Securities		108,410			112,817			106,331			(3.9	)		2.0
Shareholders’ equity		46,228			45,643			40,929			1.3			12.9
Allowance for loan losses		7,624			7,480			6,892			1.9			10.6
FINANCIAL DATA - QUARTER TO DATE:
Net income before taxes	$	1,389		$	2,471		$	2,710			(43.8	)%		(48.7	)%
Federal and state income tax provision		465			844			956			(44.9	)		(51.4	)
Net income		924			1,627			1,754			(43.2	)		(47.3	)
Per share-basic		0.14			0.25			0.27			(44.0	)		(48.1	)
Per share-diluted		0.13			0.23			0.26			(43.5	)		(50.0	)
Return on average assets		0.55	%		1.00	%		1.16%			(45.0	)		(52.6	)
Return on average common equity		8.05			15.26			17.62			(47.2	)		(54.3	)
Efficiency ratio		73.34			65.48			59.76			12.0			22.7
FINANCIAL DATA - YEAR TO DATE:
Net income before taxes	$	8,788			—		$	9,898			—			(11.2	)%
Federal and state income tax provision		2,943			—			3,688			—			(20.2	)
Net income		5,845			—			6,210			—			(5.9	)
Per share-basic		0.89			—			0.97			—			(8.2	)
Per share-diluted		0.85			—			0.92			—			(7.6	)
Return on average assets		0.90	%		—			1.10	%		—			(18.2	)
Return on average common equity		13.56			—			16.29			—			(16.8	)
Efficiency ratio		67.21			—			61.53			—			9.2
SHARE INFORMATION:
Closing price per share	$	14.71		$	15.28		$	13.33			(3.7	)%		10.3	%
Cash dividends declared		0.05			0.05			0.05			—			—
Book value per share		6.99			6.92			6.26			1.0			11.7
Average diluted shares outstanding (QTD)		6,917			6,925			6,807			(0.1	)		1.6
CAPITAL RATIOS:
Total equity to total assets		6.66	%		6.79	%		6.66	%		(1.9	)%		—	%
Tier I capital to average assets (leverage)		9.13			9.12			8.48			0.1			7.7
Tier I capital to risk-adjusted assets		10.92			10.92			10.26			—			6.4
Total risk-based capital		13.72			12.91			11.51			6.3			19.2
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	9,120		$	6,473		$	4,539			40.9	%		100.9	%
Net charge offs to average loans (QTD)		0.35	%		0.14	%		0.17	%		150.0			105.9
Allowance for loan losses to total loans		1.50			1.50			1.54			—			(2.6	)
Nonperforming assets to total loans and OREO		1.80			1.30			1.01			38.5			78.2

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

	Dec. 31, 2006			Sep. 30, 2006			Dec. 31, 2005			Dec. 06 vs.
										Sep. 06			Dec. 05
ASSETS
Cash and due from banks	$	14,727		$	16,399		$	11,945			(10.2	)%		23.3	%
Federal funds sold and interest bearing deposits		40,709			22,383			26,814			81.9			51.8
Securities:
Available for sale		65,595			68,907			65,583			(4.8	)		—
Held to maturity		42,815			43,910			40,748			(2.5	)		5.1
Total securities		108,410			112,817			106,331			(3.9	)		2.0
Loans:
SBA - Held for sale		12,273			18,474			14,001			(33.6	)		(12.3	)
SBA - Held to Maturity		66,802			61,885			64,660			7.9			3.3
Commercial		312,195			308,646			260,581			1.1			19.8
Residential mortgage		63,493			61,787			62,039			2.8			2.3
Consumer		52,927			48,050			47,286			10.1			11.9
Total loans		507,690			498,842			448,567			1.8			13.2
Less: Allowance for loan losses		7,624			7,480			6,892			1.9			10.6
Net loans		500,066			491,362			441,675			1.8			13.2
Goodwill and other intangibles		1,603			1,607			1,618			(0.2	)		(0.9	)
Premises and equipment, net		11,610			11,123			10,593			4.4			9.6
Accrued interest receivable		3,926			3,724			3,167			5.4			24.0
Loan servicing asset		2,294			2,307			2,438			(0.6	)		(5.9	)
Bank Owned Life Insurance		5,372			5,325			5,185			0.9			3.6
Other assets		5,389			4,764			4,406			13.1			22.3
Total Assets	$	694,106		$	671,811		$	614,172			3.3	%		13.0	%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand deposits	$	79,772		$	77,057		$	79,547			3.5	%		0.3	%
Interest-bearing deposits:
Interest bearing checking		105,382			111,142			139,076			(5.2	)		(24.2	)
Savings		205,919			195,626			141,935			5.3			45.1
Time, under $100,000		111,070			115,082			108,353			(3.5	)		2.5
Time, $100,000 and over		64,322			58,544			52,949			9.9			21.5
Total deposits		566,465			557,451			521,860			1.6			8.5
Borrowed funds and subordinated debentures		79,744			67,089			49,279			18.9			61.8
Accrued interest payable		475			360			274			31.9			73.4
Accrued expenses and other liabilities		1,194			1,268			1,830			(5.8	)		(34.8	)
Total liabilities		647,878			626,168			573,243			3.5			13.0
Commitments and Contingencies		—			—			—
Shareholders’ equity:
Common stock, no par value, 12,500 shares authorized		44,343			44,118			38,423			0.5			15.4
Retained earnings		2,951			2,851			3,897			3.5			(24.3	)
Treasury stock at cost		(242	)		(242	)		(242	)		—			—
Accumulated other comprehensive loss, net of tax		(824	)		(1,084	)		(1,149	)		N/M			N/M
Total shareholders’ equity		46,228			45,643			40,929			1.3			12.9
Total Liabilities and Shareholders’ Equity	$	694,106		$	671,811		$	614,172			3.3	%		13.0	%
COMMON SHARES AT PERIOD END:
Issued		6,641			6,623			6,559
Outstanding		6,618			6,600			6,536
Treasury		23			23			23
N/M= Not meaningful

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

	Dec. 31, 2006		Sep. 30, 2006		Dec. 31, 2005		Dec. 06 vs.
							Sep. 06			Dec. 05
FOR THE THREE MONTHS ENDED:
INTEREST INCOME
Fed funds sold and interest on deposits	$	211	$	270	$	285		(21.9	)%		(26.0	)%
Securities:
Available for sale		788		846		713		(6.9	)		10.5
Held to maturity		551		548		444		0.5			24.1
Total securities		1,339		1,394		1,157		(3.9	)		15.7
Loans:
SBA		2,108		2,175		1,967		(3.1	)		7.2
Commercial		5,875		5,779		4,547		1.7			29.2
Residential mortgage		887		810		816		9.5			8.7
Consumer		855		830		714		3.0			19.7
Total loan interest income		9,725		9,594		8,044		1.4			20.9
Total interest income		11,275		11,258		9,486		0.2			18.9
INTEREST EXPENSE
Interest bearing demand deposits		664		637		704		4.2			(5.7	)
Savings deposits		2,081		1,971		952		5.6			118.6
Time deposits		1,963		1,968		1,311		(0.3	)		49.7
Borrowed funds and subordinated debentures		852		738		552		15.4			54.3
Total interest expense		5,560		5,314		3,519		4.6			58.0
Net interest income		5,715		5,944		5,967		(3.9	)		(4.2	)
Provision for loan losses		600		400		525		50.0			14.3
Net interest income after provision for loan losses		5,115		5,544		5,442		(7.7	)		(6.0	)
NONINTEREST INCOME
Service charges on deposit accounts		374		386		445		(3.1	)		(16.0	)
Service and loan fee income		345		491		472		(29.7	)		(26.9	)
Gain on SBA loan sales		787		927		878		(15.1	)		(10.4	)
Gain on Mortgage loan sales		72		119		103		(39.5	)		(30.1	)
Gain on sales of other loans		—		—		—		—			—
Bank owned life insurance		47		47		45		—			4.4
Net securities gains		—		69		—		—			—
Other income		121		204		129		(40.7	)		(6.2	)
Total noninterest income		1,746		2,243		2,072		(22.2	)		(15.7	)
NONINTEREST EXPENSES
Compensation and benefits		2,830		2,809		2,561		0.7			10.5
Processing and communications		585		555		514		5.4			13.8
Occupancy, net		655		631		607		3.8			7.9
Furniture and equipment		392		372		359		5.4			9.2
Professional fees		131		222		106		(41.0	)		23.6
Loan servicing costs		211		175		31		20.6			580.6
Advertising		156		101		149		54.5			4.7
Deposit insurance		17		17		16		—			6.3
Other		495		434		461		14.1			7.4
Total noninterest expenses		5,472		5,316		4,804		2.9			13.9
Income before taxes		1,389		2,471		2,710		(43.8	)		(48.7	)
Federal and state income tax provision		465		844		956		(44.9	)		(51.4	)
Net Income	$	924	$	1,627	$	1,754		(43.2	)%		(47.3	)%
Net Income Per Common Share- Basic	$	0.14	$	0.25	$	0.27		(44.0	)%		(48.1	)%
Net Income Per Common Share- Diluted	$	0.13	$	0.23	$	0.26		(43.5	)%		(50.0	)%
AVERAGE COMMON SHARES OUTSTANDING:
Basic		6,610		6,591		6,491
Diluted		6,917		6,925		6,807

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

	Dec. 31, 2006		Dec. 31, 2005		Dec. 06 vs. Dec. 05
YEAR TO DATE
INTEREST INCOME
Fed funds sold and interest on deposits	$	1,042	$	572		82.2	%
Securities:
Available for sale		3,051		3,100		(1.6	)
Held to maturity		2,042		1,477		38.3
Total securities		5,093		4,577		11.3
Loans:
SBA		8,615		6,558		31.4
Commercial		21,914		16,164		35.6
Residential mortgage		3,305		3,318		(0.4	)
Consumer		3,208		2,648		21.1
Total loan interest income		37,042		28,688		29.1
Total interest income		43,177		33,837		27.6
INTEREST EXPENSE
Interest bearing demand deposits		2,648		2,605		1.7
Savings deposits		6,948		3,164		119.6
Time deposits		7,101		3,820		85.9
Borrowed funds and subordinated debentures		2,735		2,014		35.8
Total interest expense		19,432		11,603		67.5
Net interest income		23,745		22,234		6.8
Provision for loan losses		1,550		1,850		(16.2	)
Net interest income after provision for loan losses		22,195		20,384		8.9
NONINTEREST INCOME
Service charges on deposit accounts		1,602		1,766		(9.3	)
Service and loan fee income		1,637		2,111		(22.5	)
Gain on SBA loan sales		2,972		2,956		0.5
Gain on Mortgage loan sales		363		382		(5.0	)
Gains on sales of other loans		82		—		—
Bank owned life insurance		187		185		1.1
Net securities gains		69		69		0.0
Other income		726		721		0.7
Total noninterest income		7,638		8,190		(6.7	)
NONINTEREST EXPENSES
Compensation and benefits		11,028		9,639		14.4
Processing and communications		2,220		2,010		10.4
Occupancy, net		2,580		2,256		14.4
Furniture and equipment		1,538		1,350		13.9
Professional fees		636		547		16.3
Loan servicing costs		542		482		12.4
Advertising		575		697		(17.5	)
Deposit insurance		67		61		9.8
Other		1,859		1,634		13.8
Total noninterest expenses		21,045		18,676		12.7
Income before taxes		8,788		9,898		(11.2	)
Federal and state income tax provision		2,943		3,688		(20.2	)
Net Income	$	5,845	$	6,210		(5.9	)%
Net Income Per Common Share-Basic	$	0.89	$	0.97		(8.2	)%
Net Income Per Common Share-Diluted	$	0.85	$	0.92		(7.6	)%
Average common shares outstanding:
Basic		6,583		6,427
Diluted		6,911		6,761

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

	Three Months Ended
	December 31, 2006									September 30, 2006
	Balance			Interest			Rate			Balance			Interest			Rate
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits with banks	$	16,274		$	211			5.14	%	$	20,698		$	270			5.18	%
Securities:
Available for sale		67,266			801			4.76			70,911			859			4.85
Held to maturity		43,465			568			5.23			43,514			558			5.13
Total securities		110,731			1,369			4.95			114,425			1,417			4.95
Loans, net of unearned discount:
SBA		83,828			2,108			10.06			83,021			2,175			10.48
Commercial		314,370			5,875			7.41			305,862			5,779			7.50
Residential mortgage		62,909			887			5.64			57,569			810			5.63
Consumer		49,590			855			6.84			47,792			830			6.89
Total loans		510,697			9,725			7.57			494,244			9,594			7.72
Total interest- earning assets		637,702			11,305			7.05			629,367			11,281			7.13
Noninterest-earning assets:
Cash and due from banks		12,495									13,012
Allowance for loan losses		(7,763	)								(7,569	)
Other assets		28,780									33,163
Total noninterest- earning assets		33,512									38,606
Total Assets	$	671,214								$	667,973
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	110,635			664			2.38		$	116,043			637			2.18
Savings deposits		199,643			2,081			4.14			192,835			1,971			4.06
Time deposits		169,889			1,963			4.58			178,442			1,968			4.38
Total interest- bearing deposits		480,167			4,708			3.89			487,320			4,576			3.73
Borrowed funds and subordinated debentures		67,083			852			5.04			57,172			738			5.12
Total interest- bearing liabilities		547,250			5,560			4.03			544,492			5,314			3.87
Noninterest-bearing liabilities:
Demand deposits		76,168									77,897
Other liabilities		2,244									2,702
Total noninterest- bearing liabilities		78,412									80,599
Shareholders’ equity		45,552									42,882
Total Liabilities and Shareholders’ Equity	$	671,214								$	667,973
Net interest spread					5,745			3.02	%					5,967			3.26	%
Tax-equivalent basis adjustment					(30	)								(23	)
Net interest income				$	5,715								$	5,944
Net interest margin								3.60	%								3.79	%

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

	Three Months Ended
	December 31, 2006									December 31, 2005
	Balance			Interest			Rate			Balance			Interest			Rate
ASSETS
Interest-earning assets:
Federal funds sold and interest- bearing deposits with banks	$	16,274		$	211			5.14	%	$	27,166		$	285			4.16	%
Securities:
Available for sale		67,266			801			4.76			67,193			726			4.32
Held to maturity		43,465			568			5.23			36,872			444			4.82
Total securities		110,731			1,369			4.95			104,065			1,170			4.50
Loans, net of unearned discount:
SBA		83,828			2,108			10.06			81,835			1,967			9.61
Commercial		314,370			5,875			7.41			248,012			4,547			7.27
Residential mortgage		62,909			887			5.64			62,320			816			5.24
Consumer		49,590			855			6.84			46,544			714			6.09
Total loans		510,697			9,725			7.57			438,711			8,044			7.29
Total interest- earning assets		637,702			11,305			7.05			569,942			9,499			6.63
Noninterest-earning assets:
Cash and due from banks		12,495									11,364
Allowance for loan losses		(7,763	)								(6,790	)
Other assets		28,780									25,483
Total noninterest- earning assets		33,512									30,057
Total Assets	$	671,214								$	599,999
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	110,635			664			2.38		$	141,589			704			1.97
Savings deposits		199,643			2,081			4.14			144,754			952			2.61
Time deposits		169,889			1,963			4.58			144,732			1,311			3.59
Total interest- bearing deposits		480,167			4,708			3.89			431,075			2,967			2.73
Borrowed funds and subordinated debentures		67,083			852			5.04			48,741			552			4.49
Total interest- bearing liabilities		547,250			5,560			4.03			479,816			3,519			2.91
Noninterest-bearing liabilities:
Demand deposits		76,168									78,299
Other liabilities		2,244									2,400
Total noninterest- bearing liabilities		78,412									80,699
Shareholders’ equity		45,552									39,484
Total Liabilities and Shareholders’ Equity	$	671,214								$	599,999
Net interest spread					5,745			3.02	%					5,980			3.72	%
Tax-equivalent basis adjustment					(30	)								(13	)
Net interest income				$	5,715								$	5,967
Net interest margin								3.60	%								4.20	%

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

	Year to Date
	December 31, 2006									December 31, 2005
	Balance			Interest			Rate			Balance			Interest			Rate
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits with banks	$	21,606		$	1,042			4.82	%	$	17,160		$	572			3.33	%
Securities:
Available for sale		66,474			3,103			4.67			74,208			3,152			4.25
Held to maturity		41,156			2,069			5.03			31,139			1,477			4.74
Total securities		107,630			5,172			4.81			105,347			4,629			4.39
Loans, net of unearned discount:
SBA		84,113			8,615			10.24			74,369			6,558			8.82
Commercial		294,773			21,914			7.43			230,039			16,164			7.03
Residential mortgage		59,933			3,305			5.51			62,103			3,318			5.34
Consumer		47,652			3,208			6.73			45,707			2,648			5.79
Total loans		486,471			37,042			7.61			412,218			28,688			6.96
Total interest- earning assets		615,707			43,256			7.02			534,725			33,889			6.34
Noninterest-earning assets:
Cash and due from banks		12,439									12,661
Allowance for loan losses		(7,493	)								(6,398	)
Other assets		29,302									24,399
Total noninterest- earning assets		34,248									30,662
Total Assets	$	649,955								$	565,387
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	117,730			2,648			2.25		$	150,420			2,605			1.73
Savings deposits		183,815			6,948			3.78			130,911			3,164			2.42
Time deposits		169,572			7,101			4.19			118,174			3,820			3.23
Total interest- bearing deposits		471,117			16,697			3.54			399,505			9,589			2.40
Borrowed funds and subordinated debentures		55,756			2,735			4.91			46,604			2,014			4.32
Total interest- bearing liabilities		526,873			19,432			3.69			446,109			11,603			2.60
Noninterest-bearing liabilities:
Demand deposits		77,747									78,519
Other liabilities		2,218									2,634
Total noninterest- bearing liabilities		79,965									81,153
Shareholders’ equity		43,117									38,125
Total Liabilities and Shareholders’ Equity	$	649,955								$	565,387
Net interest spread					23,824			3.33	%					22,286			3.74	%
Tax-equivalent basis
adjustment					(79	)								(52	)
Net interest income				$	23,745								$	22,234
Net interest margin								3.87	%								4.17	%

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

	12/31/2006			9/30/2006			6/30/2006			3/31/2006			12/31/2005
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning	$	7,480		$	7,257		$	7,120		$	6,892		$	6,558
Provision charged to expense		600			400			250			300			525
		8,080			7,657			7,370			7,192			7,083
Less: Charge offs
SBA		320			141			66			46			91
Commercial		196			50			48			4			18
Residential mortgage		—			—			—			—			—
Consumer		10			3			14			35			249
Total Charge Offs		526			194			128			85			358
Add:  Recoveries
SBA		20			—			—			—			130
Commercial		50			12			2			11			24
Residential mortgage		—			—			—			—			—
Consumer		—			5			13			2			13
Total Recoveries		70			17			15			13			167
Net Charge Offs		456			177			113			72			191
Balance, ending	$	7,624		$	7,480		$	7,257		$	7,120		$	6,892
LOAN QUALITY INFORMATION:
Nonperforming loans	$	8,909		$	6,473		$	2,552		$	3,605		$	4,361
Other real estate owned, net		211			—			—			176			178
Nonperforming assets	$	9,120		$	6,473		$	2,552		$	3,781		$	4,539
Loans 90 days past due and still accruing	$	78		$	658		$	—		$	326		$	—
Allowance for loan losses to:
Total loans at period end		1.50	%		1.50	%		1.50	%		1.52	%		1.54	%
Nonperforming loans		85.58			115.56			284.37			197.50			158.04
Nonperforming assets		83.60			115.56			284.37			188.31			151.84
Net charge offs to average loans (QTD)		0.35			0.14			0.10			0.06			0.17
Net charge offs to average loans (YTD)		0.17			0.10			0.08			0.06			0.20
Nonperforming loans to total loans		1.75			1.30			0.53			0.77			0.97
Nonperforming assets to total loans and OREO		1.80			1.30			0.53			0.81			1.01

Unity Bancorp, Inc.
Quarterly Financial Data

	12/31/06			9/30/06			6/30/06			3/31/06			12/31/05
SUMMARY OF INCOME (in thousands):
Interest income	$	11,275		$	11,258		$	10,644		$	10,000		$	9,486
Interest expense		5,560			5,314			4,611			3,947			3,519
Net interest income		5,715			5,944			6,033			6,053			5,967
Provision for loan losses		600			400			250			300			525
Net interest income after provision		5,115			5,544			5,783			5,753			5,442
Noninterest income		1,746			2,243			1,647			2,002			2,072
Noninterest expense		5,472			5,316			5,001			5,256			4,804
Income before income taxes		1,389			2,471			2,429			2,499			2,710
Federal and state income tax provision		465			844			792			842			956
Net Income		924			1,627			1,637			1,657			1,754
Net Income per Common Share:
Basic	$	0.14		$	0.25		$	0.25		$	0.25		$	0.27
Diluted		0.13			0.23			0.24			0.24			0.26
COMMON SHARE DATA:
Cash dividends declared	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05
Book value at quarter end		6.99			6.92			6.60			6.47			6.26
Market value at quarter end		14.71			15.28			15.49			15.29			13.33
Average common shares outstanding: (000’s)
Basic		6,610			6,591			6,574			6,556			6,491
Diluted		6,917			6,925			6,905			6,896			6,807
Common shares outstanding at period end (000’s)		6,618			6,600			6,579			6,566			6,536
OPERATING RATIOS:
Return on average assets		0.55	%		1.00	%		1.03	%		1.08	%		1.16	%
Return on average common equity		8.05			15.26			15.39			16.26			17.62
Efficiency ratio		73.34			65.48			65.12			65.25			59.76
BALANCE SHEET DATA (in thousands):
Assets	$	694,106		$	671,811		$	670,870		$	628,055		$	614,172
Deposits		566,465			557,451			576,376			534,437			521,860
Loans		507,690			498,842			484,622			467,963			448,567
Shareholders’ equity		46,228			45,643			43,446			42,477			40,929
Allowance for loan losses		7,624			7,480			7,257			7,120			6,892
TAX-EQUIVALENT YIELDS AND RATES:
Interest-earning assets		7.05	%		7.13	%		7.04	%		6.86	%		6.63	%
Interest-bearing liabilities		4.03			3.87			3.58			3.21			2.91
Net interest spread		3.02			3.26			3.46			3.65			3.72
Net interest margin		3.60			3.79			3.99			4.12			4.20
CREDIT QUALITY:
Nonperforming assets (in thousands)	$	9,120		$	6,473		$	2,552		$	3,781		$	4,539
Allowance for loan losses to period-end loans		1.50	%		1.50	%		1.50	%		1.52	%		1.54	%
Net charge offs to average loans		0.35			0.14			0.10			0.06			0.17
Nonperforming assets to loans and OREO		1.80			1.30			0.53			0.81			1.01
CAPITAL AND OTHER:
Total equity to assets		6.66	%		6.79	%		6.48	%		6.76	%		6.66	%
Tier I capital to average assets (leverage)		9.13			9.12			8.22			8.26			8.48
Tier I capital to risk-adjusted assets		10.92			10.92			9.85			9.93			10.26
Total capital to risk-adjusted assets		13.72			12.91			11.10			11.18			11.51
Number of banking offices		15			14			14			14			14
Number of ATMs		16			16			16			16			16
Number of employees		185			205			191			190			190

SOURCE  Unity Bancorp, Inc.
          -0-                                                  01/30/2007
          /CONTACT:  News Media & Financial Analyst: Alan Bedner, EVP Chief Financial Officer, +1-908-713-4308 /
          /Web site:  http://www.unitybank.com /
          (UNTY)