UNITY BANCORP INC /NJ/ - FORM 8-K - EX-99.1

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8-K - 8-K - UNITY BANCORP INC /NJ/	unty-20120724x8k.htm

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

July 24, 2012

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports Continued Improvement in Earnings

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $575 thousand, or $0.07 per diluted share, for the quarter ended June 30, 2012, compared to $249 thousand, or $0.03 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.49% and 4.25%, respectively, compared to 0.32% and 1.95% for the same period a year ago.

Highlights for the quarter include:

×	Continued reductions in loan loss provisions due to improvement in asset quality.

×	Significant increases in residential mortgage originations resulting in increases in gains on sale of mortgage loans.

×	Significant increase in commercial loan growth.

×	Planned reduction in SBA loans outstanding from our National Program, now discontinued.

×	Continued growth in noninterest-bearing demand deposits to 17.4% of total deposits.

×	Continued reduction in higher costing time deposits. Time deposits now represent only 22% of total deposits.

×	Improvement in our net interest margin from the first quarter of 2012, from 3.56% for the three months ending March 31, 2012 to 3.68% for the three months ending June 30, 2012.

×	Further improvement in our equity to asset ratio.

For the six months ended June 30, 2012, net income available to common shareholders totaled $1.1 million or $0.14 per diluted share, compared to $85 thousand or $0.01 per diluted share, for the same period a year ago. Return on average assets and average common equity for the six months were 0.47% and 4.03%, respectively, compared to 0.21% and 0.34% for the same period a year ago.

James A. Hughes, President and CEO, stated, “This was another quarter of increased earnings as our core fundamentals continued to improve. We have enhanced our net interest margin with a strong quarter of loan growth coupled with increasing levels of noninterest-bearing demand deposits. The trends are positive and I am extremely optimistic about the long-term opportunities ahead.”

Mr. Hughes added, “We are excited to announce our plans to open a new branch subject to regulatory approval in Somerset, New Jersey in October. This continues our strategy of adding branches in areas which complement our existing branch network. In addition, we are closing our William Penn Highway branch in Pennsylvania in the fourth quarter. After five years in the market, we determined that the long-term growth potential of the market was limited.”

Net Interest Income

Net interest income decreased $614 thousand to $6.9 million for the three months ended June 30, 2012 compared to the prior year’s quarter and decreased $1.3 million to $13.7 million for the six months ended June 30, 2012 compared to the prior year’s period. In addition, the net interest margin contracted 20 basis points to 3.68% for the quarter ended June 30, 2012 and contracted 28 basis points to 3.62% for the six months ended June 30, 2012 when compared to the prior year periods.

Our net interest income continues to be influenced by the sustained low interest rate environment, which the Federal Open Market Committee (“FOMC”) forecasts will remain through 2014. This rate environment has resulted in a tighter net interest margin as our earning assets re-price at lower rates. The yield on earning assets fell 58 basis points to 4.70% and 60 basis points to 4.71% for the quarter and year-to-date periods ending June 30, 2012, when compared to the same periods in 2011. Partially offsetting these declines are lower funding costs. The cost of interest-bearing liabilities decreased 42 basis points to 1.25% for the three month period and decreased 36 basis points to 1.33% for the six month period.

Noninterest Income

For the three months ended June 30, 2012, noninterest income amounted to $1.8 million, an increase of $394 thousand from the prior year period. For the six months ended June 30, 2012, noninterest income increased $854 thousand to $3.6 million. These increases are attributed to record levels of origination and sale of residential mortgage loans and gains on the sale of securities. Noninterest income was affected by the following factors:

×	Branch fee income, which consists of deposit service charges and overdraft fees, increased due to higher levels of overdraft fees partially offset by reduced deposit account service charges.

×	Service and loan fee income decreased due to reduced late charges, payoff charges and other processing fees.

Gains on sales of SBA loans decreased due to a lower volume of loans being sold in each period. For the three month period, $2.3 million in SBA loans were sold compared to $4.9 million in sales in 2011. Year-to-date, $4.2 million in SBA loans were sold compared to $6.0 million in the prior year’s period.

Gains on sales of residential mortgage loans increased on a significantly higher volume of loan sales. For the three month period, $20.3 million in residential mortgage loans were sold compared to $6.0 million in 2011. Year-to-date, $41.5 million in residential mortgage loans were sold compared to $15.7 million in the prior year’s period.

×	Security gains of $283 thousand and $507 thousand were realized during the quarter and year to date periods, respectively.

Noninterest Expense

Noninterest expense totaled $6.2 million for the three months ended June 30, 2012 and 2011, and $12.2 million and $12.4 million for the six months ended June 30, 2012 and 2011, respectively. Current year figures include expenses related to opening our fifteenth branch in Washington Township, New Jersey in March 2012. Prior period figures include the recognition of $215 thousand in residual lease obligation and fixed asset disposals related to closing two underperforming branches in 2011. Other factors which affected noninterest expense include:

×	Compensation and benefits expense increased due to higher payroll costs, mortgage origination commissions, equity compensation and medical benefits expenses.

×	Occupancy expense decreased due primarily to the branch closure cost savings noted above, partially offset by expenses related to our new Washington branch. Year-to-date, savings were realized in snow removal due to a milder winter.

×	Furniture and equipment expense decreased due primarily to the branch closure cost savings noted above, partially offset by expenses related to our new Washington branch.

×	Loan collection costs decreased due to lower loan legal, appraisal and other collection related expenses.

×	Deposit insurance expense decreased due to the new assets-based assessment method which the FDIC put into place April 1, 2011.

×	Advertising expenses increased in response to promotional activities related to the new branch, increased participation in community events and direct mail costs.

Financial Condition

At June 30, 2012, total assets were $785.1 million, a decrease of $25.7 million from the prior year-end.

×	Total securities increased $7.3 million since December 31, 2011, due to $32.8 million in security purchases, partially offset by sales and an increased level of prepayments.

Total loans increased $12.3 million or 2.1% to $604.9 million at June 30, 2012. The Company plans to continue shrinking its SBA portfolio. Future loan growth is expected in both the commercial and residential portfolios as reflected in our year-to-date performance. The net increase was the result of the following:

×	Commercial loans increased $27.2 million or 9.6%,

×	Residential mortgage loans increased $2.4 million or 1.8%,

×	SBA 504 loans decreased $9.9 million or 17.9%,

×	SBA 7(a) loans decreased $5.4 million or 7.5%, and

×	Consumer loans decreased $2.1 million or 4.3%.

×	Core deposits, which exclude time deposits, decreased $2.2 million during the year to $482.3 million. This decrease was due to a $15.4 million reduction in municipal deposits, partially offset by $13.2 million in retail core deposit growth. The net changes by product type include:

×	A $5.2 million decrease in savings deposits, and a

×	$3.3 million decrease in interest-bearing demand deposits, partially offset by a

×	$6.3 million increase in noninterest-bearing demand deposits.

×	Time deposits decreased $25.3 million from year-end due to the maturity and planned run off of brokered deposits, as well as a high rate retail promotion that was completed late in 2008 to bolster liquidity.

×	Shareholders’ equity was $74.9 million at June 30, 2012, an increase of $1.3 million from year-end 2011, primarily due to the increase in net income.

×	Book value per common share was $7.38 as of June 30, 2012.

×	At June 30, 2012 the leverage, Tier I and Total Risk Based Capital ratios were 11.08%, 14.22% and 15.49%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

“Nonperforming assets to total assets are at the lowest level since 2008, and I expect further reductions in the quarters to follow”, said James A. Hughes. “Many of our problem commercial and SBA relationships have been resolved. In addition, a quarter of our remaining nonperforming assets are residential loans which often take years to resolve.”

×	Nonperforming assets totaled $22.2 million at June 30, 2012 or 3.65% of total loans and OREO, compared to $25.8 million or 4.33% of total loans and OREO at year-end 2011.

×	Nonperforming loans totaled $19.8 million at June 30, 2012, a decrease of $2.9 million over the prior year-end and a decrease of $5.3 million from June 30, 2011.

×	OREO assets totaled $2.4 million at June 30, 2012, a decrease of $677 thousand, compared to $3.0 million at year-end 2011 due to sales of $2.2 million and $490 thousand in valuation writedowns, partially offset by $2.0 million in additions.

The allowance for loan losses totaled $16.3 million at June 30, 2012, or 2.69% of total loans. The provision for loan losses for the quarter ended June 30, 2012 was $1.0 million compared to $1.8 million for the prior year’s quarter. The provision for loan losses for the six months ended June 30, 2012 was $2.2 million compared to $4.3 million for the prior year’s period.

×	Net charge-offs were $1.1 million for the three months ended June 30, 2012, compared to $1.0 million for the same period a year ago. For the six months ended June 30, 2012, net charge-offs were $2.3 million, compared to $2.6 million for the prior year’s period.

×	Troubled debt restructurings (“TDRs”) increased $331 thousand from year-end to $21.4 million; however the level of nonperforming TDRs decreased significantly. At June 30, 2012, 96% of our TDRs were performing.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $785 million in assets and $616 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.

UNITY BANCORP, INC.

SUMMARY FINANCIAL HIGHLIGHTS

June 30, 2012




										June 30, 2012 vs.
										March 31, 2012		June 30, 2011
(In thousands, except percentages and per share amounts)	June 30, 2012			March 31, 2012			June 30, 2011			%		%
BALANCE SHEET DATA:
Total assets	$	785,111		$	810,198		$	806,163		(3.1)	%	(2.6)	%
Total deposits		616,443			643,101			641,167		(4.1)		(3.9)
Total loans		604,901			582,752			615,105		3.8		(1.7)
Total securities		114,846			128,061			115,188		(10.3)		(0.3)
Total shareholders' equity		74,901			74,002			72,207		1.2		3.7
Allowance for loan losses		(16,284)			(16,339)			(16,018)		0.3		(1.7)

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	1,494		$	1,364		$	921		9.5		62.2
Provision for income taxes		518			459			277		12.9		87.0
Net income		976			905			644		7.8		51.6
Preferred stock dividends and discount accretion		401			396			395		1.3		1.5
Income available to common shareholders	$	575		$	509		$	249		13.0		130.9

Net income per common share - Basic (1)	$	0.08		$	0.07		$	0.03		14.3		166.7
Net income per common share - Diluted (1)	$	0.07		$	0.07		$	0.03		-		133.3

Return on average assets		0.49	%		0.45	%		0.32	%	8.9		53.1
Return on average equity (2)		4.25	%		3.81	%		1.95	%	11.5		117.9
Efficiency ratio		73.72	%		71.80	%		69.74	%	2.7		5.7

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes		2,858						992				188.1
Provision for income taxes		977						129				657.4
Net income		1,881						863				118.0
Preferred stock dividends and discount accretion		797						778				2.4
Income available to common shareholders		1,084						85				1,175.3

Net income per common share - Basic (1)	$	0.15						0.01				1,400.0
Net income per common share - Diluted (1)	$	0.14						0.01				1,300.0

Return on average assets		0.47	%					0.21	%			123.8
Return on average equity (2)		4.03	%					0.34	%			1,085.3
Efficiency ratio		72.76	%					70.64	%			3.0

SHARE INFORMATION:
Market price per share	$	6.00		$	6.24		$	6.79		(3.8)		(11.6)
Dividends paid	$	-		$	-		$	-		-		-
Book value per common share	$	7.38		$	7.28		$	7.14		1.4		3.4
Average diluted shares outstanding (QTD)		7,784			7,792			7,710		(0.1)		1.0

CAPITAL RATIOS:
Total equity to total assets		9.54	%		9.13	%		8.96	%	4.5		6.5
Leverage ratio		11.08	%		10.67	%		10.40	%	3.8		6.5
Tier 1 risk-based capital ratio		14.22	%		14.44	%		13.41	%	(1.5)		6.0
Total risk-based capital ratio		15.49	%		15.71	%		14.67	%	(1.4)		5.6

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	22,186		$	23,831		$	27,821		(6.9)		(20.3)
QTD net chargeoffs (annualized) to QTD average loans		0.71	%		0.83	%		0.66	%	(14.5)		7.6
Allowance for loan losses to total loans		2.69	%		2.80	%		2.60	%	(3.9)		3.5
Nonperforming assets to total loans and OREO		3.65	%		4.08	%		4.50	%	(10.5)		(18.9)
Nonperforming assets to total assets		2.83	%		2.94	%		3.45	%	(3.7)	%	(18.0)	%

(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).

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

June 30, 2012




							June 30, 2012 vs.
							December 31, 2011		June 30, 2011
(In thousands, except percentages)	June 30, 2012		December 31, 2011		June 30, 2011		%		%
ASSETS
Cash and due from banks	$	18,600	$	17,688	$	12,915	5.2	%	44.0	%
Federal funds sold and interest-bearing deposits		19,235		64,886		33,367	(70.4)		(42.4)
Cash and cash equivalents		37,835		82,574		46,282	(54.2)		(18.3)
Securities:
Securities available for sale		97,965		88,765		101,872	10.4		(3.8)
Securities held to maturity		16,881		18,771		13,316	(10.1)		26.8
Total securities		114,846		107,536		115,188	6.8		(0.3)
Loans:
SBA loans held for sale		6,087		7,668		13,753	(20.6)		(55.7)
SBA loans held to maturity		60,382		64,175		71,429	(5.9)		(15.5)
SBA 504 loans		45,247		55,108		55,810	(17.9)		(18.9)
Commercial loans		310,331		283,104		287,785	9.6		7.8
Residential mortgage loans		136,514		134,090		134,782	1.8		1.3
Consumer loans		46,340		48,447		51,546	(4.3)		(10.1)
Total loans		604,901		592,592		615,105	2.1		(1.7)
Allowance for loan losses		(16,284)		(16,348)		(16,018)	0.4		(1.7)
Net loans		588,617		576,244		599,087	2.1		(1.7)

Premises and equipment, net		12,146		11,350		10,650	7.0		14.0
Bank owned life insurance ("BOLI")		9,253		9,107		8,959	1.6		3.3
Deferred tax assets		6,977		6,878		6,756	1.4		3.3
Federal Home Loan Bank stock		3,989		4,088		4,088	(2.4)		(2.4)
Accrued interest receivable		3,415		3,703		3,692	(7.8)		(7.5)
Other real estate owned ("OREO")		2,355		3,032		2,722	(22.3)		(13.5)
Prepaid FDIC Insurance		2,230		2,545		2,720	(12.4)		(18.0)
Goodwill and other intangibles		1,522		1,530		1,537	(0.5)		(1.0)
Other assets		1,926		2,259		4,482	(14.7)		(57.0)

Total assets	$	785,111	$	810,846	$	806,163	(3.2)	%	(2.6)	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	107,497	$	101,193	$	94,547	6.2	%	13.7	%
Interest-bearing demand deposits		101,420		104,749		93,730	(3.2)		8.2
Savings deposits		273,395		278,603		285,651	(1.9)		(4.3)
Time deposits, under $100,000		83,138		102,809		106,880	(19.1)		(22.2)
Time deposits, $100,000 and over		50,993		56,617		60,359	(9.9)		(15.5)
Total deposits		616,443		643,971		641,167	(4.3)		(3.9)

Borrowed funds		75,000		75,000		75,000	-		-
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		470		523		570	(10.1)		(17.5)
Accrued expenses and other liabilities		2,832		2,329		1,754	21.6		61.5
Total liabilities		710,210		737,288		733,956	(3.7)		(3.2)

Shareholders' equity:
Cumulative perpetual preferred stock		19,824		19,545		19,278	1.4		2.8
Common stock		53,917		53,746		53,590	0.3		0.6
Retained earnings (deficit)		231		(854)		(1,757)	127.0		113.1
Accumulated other comprehensive income		929		1,121		1,096	(17.1)		(15.2)
Total shareholders' equity		74,901		73,558		72,207	1.8		3.7

Total liabilities and shareholders' equity	$	785,111	$	810,846	$	806,163	(3.2)	%	(2.6)	%

Preferred shares		21		21		21
Issued common shares		7,461		7,459		7,412
Outstanding common shares		7,461		7,459		7,412

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

June 30, 2012




	For the three months ended									June 30, 2012 vs.
										March 31, 2012					June 30, 2011
(In thousands, except percentages and per share amounts)	June 30, 2012			March 31, 2012			June 30, 2011			$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	11		$	32		$	9		$	(21)		(65.6)	%	$	2	$	22.2	%
Federal Home Loan Bank stock		44			51			35			(7)		(13.7)			9		25.7
Securities:
Securities available for sale		690			721			891			(31)		(4.3)			(201)		(22.6)
Securities held to maturity		163			173			180			(10)		(5.8)			(17)		(9.4)
Total securities		853			894			1,071			(41)		(4.6)			(218)		(20.4)
Loans:
SBA loans		846			924			1,191			(78)		(8.4)			(345)		(29.0)
SBA 504 loans		691			759			834			(68)		(9.0)			(143)		(17.1)
Commercial loans		4,216			4,183			4,581			33		0.8			(365)		(8.0)
Residential mortgage loans		1,582			1,655			1,846			(73)		(4.4)			(264)		(14.3)
Consumer loans		529			560			629			(31)		(5.5)			(100)		(15.9)
Total loans		7,864			8,081			9,081			(217)		(2.7)			(1,217)		(13.4)
Total interest income		8,772			9,058			10,196			(286)		(3.2)			(1,424)		(14.0)
INTEREST EXPENSE
Interest-bearing demand deposits		123			136			143			(13)		(9.6)			(20)		(14.0)
Savings deposits		287			354			584			(67)		(18.9)			(297)		(50.9)
Time deposits		689			913			1,045			(224)		(24.5)			(356)		(34.1)
Borrowed funds and subordinated debentures		816			847			953			(31)		(3.7)			(137)		(14.4)
Total interest expense		1,915			2,250			2,725			(335)		(14.9)			(810)		(29.7)
Net interest income		6,857			6,808			7,471			49		0.7			(614)		(8.2)
Provision for loan losses		1,000			1,200			1,750			(200)		(16.7)			(750)		(42.9)
Net interest income after provision for loan losses		5,857			5,608			5,721			249		4.4			136		2.4
NONINTEREST INCOME
Branch fee income		362			386			337			(24)		(6.2)			25		7.4
Service and loan fee income		287			302			384			(15)		(5.0)			(97)		(25.3)
Gain on sale of SBA loans held for sale, net		223			157			399			66		42.0			(176)		(44.1)
Gain on sale of mortgage loans, net		453			411			87			42		10.2			366		420.7
BOLI income		73			73			74			-		-			(1)		(1.4)
Net security gains (losses)		283			224			(39)			59		26.3			322		825.6
Other income		160			162			205			(2)		(1.2)			(45)		(22.0)
Total noninterest income		1,841			1,715			1,447			126		7.3			394		27.2
NONINTEREST EXPENSE
Compensation and benefits		3,133			3,182			2,880			(49)		(1.5)			253		8.8
Occupancy		740			609			827			131		21.5			(87)		(10.5)
Processing and communications		553			534			537			19		3.6			16		3.0
Furniture and equipment		355			362			410			(7)		(1.9)			(55)		(13.4)
Professional services		211			190			192			21		11.1			19		9.9
Loan collection costs		91			180			201			(89)		(49.4)			(110)		(54.7)
OREO expenses		237			124			223			113		91.1			14		6.3
Deposit insurance		168			171			282			(3)		(1.8)			(114)		(40.4)
Advertising		302			146			205			156		106.8			97		47.3
Other expenses		414			461			490			(47)		(10.2)			(76)		(15.5)
Total noninterest expense		6,204			5,959			6,247			245		4.1			(43)		(0.7)
Income before provision for income taxes		1,494			1,364			921			130		9.5			573		62.2
Provision for income taxes		518			459			277			59		12.9			241		87.0
Net income		976			905			644			71		7.8			332		51.6
Preferred stock dividends and discount accretion		401			396			395			5		1.3			6		1.5
Income available to common shareholders	$	575		$	509		$	249		$	66		13.0	%	$	326	$	130.9	%

Effective tax rate		34.7	%		33.7	%		30.1	%

Net income per common share - Basic (1)	$	0.08		$	0.07		$	0.03
Net income per common share - Diluted (1)	$	0.07		$	0.07		$	0.03

Weighted average common shares outstanding - Basic		7,462			7,460			7,271
Weighted average common shares outstanding - Diluted		7,784			7,792			7,710

(1)	Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

June 30, 2012




	For the six months ended June 30,				Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2012		2011		$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	43	$	20	$	23		115.0	%
Federal Home Loan Bank stock		95		101		(6)		(5.9)
Securities:
Securities available for sale		1,410		1,754		(344)		(19.6)
Securities held to maturity		336		468		(132)		(28.2)
Total securities		1,746		2,222		(476)		(21.4)
Loans:
SBA loans		1,770		2,427		(657)		(27.1)
SBA 504 loans		1,451		1,789		(338)		(18.9)
Commercial loans		8,397		8,887		(490)		(5.5)
Residential mortgage loans		3,237		3,677		(440)		(12.0)
Consumer loans		1,089		1,315		(226)		(17.2)
Total loans		15,944		18,095		(2,151)		(11.9)
Total interest income		17,828		20,438		(2,610)		(12.8)
INTEREST EXPENSE
Interest-bearing demand deposits		259		283		(24)		(8.5)
Savings deposits		641		1,165		(524)		(45.0)
Time deposits		1,603		2,140		(537)		(25.1)
Borrowed funds and subordinated debentures		1,662		1,904		(242)		(12.7)
Total interest expense		4,165		5,492		(1,327)		(24.2)
Net interest income		13,663		14,946		(1,283)		(8.6)
Provision for loan losses		2,200		4,250		(2,050)		(48.2)
Net interest income after provision for loan losses		11,463		10,696		767		7.2
NONINTEREST INCOME
Branch fee income		748		680		68		10.0
Service and loan fee income		588		627		(39)		(6.2)
Gain on sale of SBA loans held for sale, net		381		510		(129)		(25.3)
Gain on sale of mortgage loans, net		864		256		608		237.5
BOLI income		146		147		(1)		(0.7)
Net security gains		507		87		420		482.8
Other income		322		395		(73)		(18.5)
Total noninterest income		3,556		2,702		854		31.6
NONINTEREST EXPENSE
Compensation and benefits		6,315		5,937		378		6.4
Occupancy		1,348		1,546		(198)		(12.8)
Processing and communications		1,087		1,044		43		4.1
Furniture and equipment		717		794		(77)		(9.7)
Professional services		402		394		8		2.0
Loan collection costs		271		425		(154)		(36.2)
OREO expenses		362		445		(83)		(18.7)
Deposit insurance		339		601		(262)		(43.6)
Advertising		448		323		125		38.7
Other expenses		872		897		(25)		(2.8)
Total noninterest expense		12,161		12,406		(245)		(2.0)
Income before provision for income taxes		2,858		992		1,866		188.1
Provision for income taxes		977		129		848		657.4
Net income		1,881		863		1,018		118.0
Preferred stock dividends and discount accretion		797		778		19		2.4
Income available to common shareholders	$	1,084	$	85	$	999		1,175.3	%

Effective tax rate		34.2		13.0

Net income per common share - Basic (1)	$	0.15		0.01
Net income per common share - Diluted (1)	$	0.14		0.01

Weighted average common shares outstanding - Basic		7,461		7,245
Weighted average common shares outstanding - Diluted		7,788		7,688

(1)	Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

UNITY BANCORP, INC.

QTD NET INTEREST MARGIN

June 30, 2012


	For the three months ended
	June 30, 2012							March 31, 2012
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	30,832	$	11		0.14	%	$	64,660	$	32		0.20	%
Federal Home Loan Bank stock		3,993		44		4.43			4,088		51		5.02
Securities:
Securities available for sale		103,958		741		2.85			102,101		782		3.06
Securities held to maturity		17,499		170		3.89			18,374		180		3.92
Total securities (A)		121,457		911		3.00			120,475		962		3.19
Loans:
SBA loans		69,273		846		4.89			71,760		924		5.15
SBA 504 loans		46,804		691		5.94			51,710		759		5.90
Commercial loans		303,409		4,216		5.59			284,237		4,183		5.92
Residential mortgage loans		133,643		1,582		4.74			132,824		1,655		4.98
Consumer loans		45,658		529		4.66			47,608		560		4.73
Total loans (B)		598,787		7,864		5.28			588,139		8,081		5.52
Total interest-earning assets	$	755,069	$	8,830		4.70	%	$	777,362	$	9,126		4.71	%

Noninterest-earning assets:
Cash and due from banks		16,103							15,949
Allowance for loan losses		(16,980)							(16,788)
Other assets		39,774							40,287
Total noninterest-earning assets		38,897							39,448
Total assets	$	793,966						$	816,810

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	110,343	$	123		0.45	%	$	108,988	$	136		0.50	%
Savings deposits		270,990		287		0.43			283,261		354		0.50
Time deposits		138,554		689		2.00			156,999		913		2.34
Total interest-bearing deposits		519,887		1,099		0.85			549,248		1,403		1.03
Borrowed funds and subordinated debentures		90,465		816		3.57			90,465		847		3.70
Total interest-bearing liabilities	$	610,352	$	1,915		1.25	%	$	639,713	$	2,250		1.41	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		106,043							100,496
Other liabilities		3,440							3,249
Total noninterest-bearing liabilities		109,483							103,745
Total shareholders' equity		74,131							73,352
Total liabilities and shareholders' equity	$	793,966						$	816,810

Net interest spread			$	6,915		3.45	%			$	6,876		3.30	%
Tax-equivalent basis adjustment				(58)							(68)
Net interest income			$	6,857						$	6,808
Net interest margin						3.68	%						3.56	%

(A)	Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 percent and applicable state rates.

(B)	The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

UNITY BANCORP, INC.

QTD NET INTEREST MARGIN

June 30, 2012


	For the three months ended June 30,
	2012							2011
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	30,832	$	11		0.14	%	$	40,499	$	9		0.09	%
Federal Home Loan Bank stock		3,993		44		4.43			4,097		35		3.43
Securities:
Securities available for sale		103,958		741		2.85			103,750		939		3.62
Securities held to maturity		17,499		170		3.89			14,841		185		4.99
Total securities (A)		121,457		911		3.00			118,591		1,124		3.79
Loans:
SBA loans		69,273		846		4.89			85,678		1,191		5.56
SBA 504 loans		46,804		691		5.94			58,999		834		5.67
Commercial loans		303,409		4,216		5.59			284,503		4,581		6.46
Residential mortgage loans		133,643		1,582		4.74			132,386		1,846		5.58
Consumer loans		45,658		529		4.66			52,316		629		4.82
Total loans (B)		598,787		7,864		5.28			613,882		9,081		5.93
Total interest-earning assets	$	755,069	$	8,830		4.70	%	$	777,069	$	10,249		5.28	%

Noninterest-earning assets:
Cash and due from banks		16,103							16,243
Allowance for loan losses		(16,980)							(16,050)
Other assets		39,774							39,903
Total noninterest-earning assets		38,897							40,096
Total assets	$	793,966						$	817,165

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	110,343	$	123		0.45	%	$	104,149	$	143		0.55	%
Savings deposits		270,990		287		0.43			286,738		584		0.82
Time deposits		138,554		689		2.00			168,448		1,045		2.49
Total interest-bearing deposits		519,887		1,099		0.85			559,335		1,772		1.27
Borrowed funds and subordinated debentures		90,465		816		3.57			90,465		953		4.17
Total interest-bearing liabilities	$	610,352	$	1,915		1.25	%	$	649,800	$	2,725		1.67	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		106,043							92,090
Other liabilities		3,440							4,760
Total noninterest-bearing liabilities		109,483							96,850
Total shareholders' equity		74,131							70,515
Total liabilities and shareholders' equity	$	793,966						$	817,165

Net interest spread			$	6,915		3.45	%			$	7,524		3.61	%
Tax-equivalent basis adjustment				(58)							(53)
Net interest income			$	6,857						$	7,471
Net interest margin						3.68	%						3.88	%

(A)	Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 percent and applicable state rates.

(B)	The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

UNITY BANCORP, INC.

YTD NET INTEREST MARGIN

June 30, 2012


	For the six months ended June 30,
	2012							2011
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	47,746	$	43		0.18	%	$	36,896	$	20		0.11	%
Federal Home Loan Bank stock		4,041		95		4.73			4,151		101		4.91
Securities:
Securities available for sale		103,030		1,523		2.96			104,385		1,849		3.54
Securities held to maturity		17,936		349		3.89			17,166		478		5.57
Total securities (A)		120,966		1,872		3.10			121,551		2,327		3.83
Loans:
SBA loans		70,516		1,770		5.02			85,769		2,427		5.66
SBA 504 loans		49,257		1,451		5.92			60,490		1,789		5.96
Commercial loans		293,823		8,397		5.75			283,559		8,887		6.32
Residential mortgage loans		133,234		3,237		4.86			131,570		3,677		5.59
Consumer loans		46,633		1,089		4.70			53,576		1,315		4.95
Total loans (B)		593,463		15,944		5.40			614,964		18,095		5.92
Total interest-earning assets	$	766,216	$	17,954		4.71	%	$	777,562	$	20,543		5.31	%

Noninterest-earning assets:
Cash and due from banks		16,026							16,999
Allowance for loan losses		(16,884)							(15,555)
Other assets		40,030							39,835
Total noninterest-earning assets		39,172							41,279
Total assets	$	805,388						$	818,841

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	109,665	$	259		0.47	%	$	103,851	$	283		0.55	%
Savings deposits		277,125		641		0.47			288,263		1,165		0.81
Time deposits		147,778		1,603		2.18			171,517		2,140		2.52
Total interest-bearing deposits		534,568		2,503		0.94			563,631		3,588		1.28
Borrowed funds and subordinated debentures		90,465		1,662		3.63			90,465		1,904		4.19
Total interest-bearing liabilities	$	625,033	$	4,165		1.33	%	$	654,096	$	5,492		1.69	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		103,269							90,453
Other liabilities		3,345							4,148
Total noninterest-bearing liabilities		106,614							94,601
Total shareholders' equity		73,741							70,144
Total liabilities and shareholders' equity	$	805,388						$	818,841

Net interest spread			$	13,789		3.38	%			$	15,051		3.62	%
Tax-equivalent basis adjustment				(126)							(105)
Net interest income			$	13,663						$	14,946
Net interest margin						3.62	%						3.90	%

(A)	Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 percent and applicable state rates.

(B)	The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

UNITY BANCORP, INC.

QUARTERLY ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES

June 30, 2012



Amounts in thousands, except percentages	June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011			June 30, 2011
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	16,339		$	16,348		$	16,447		$	16,018		$	15,275
Provision for loan losses charged to expense		1,000			1,200			1,150			1,400			1,750
		17,339			17,548			17,597			17,418			17,025
Less: Chargeoffs
SBA loans		213			615			735			310			592
SBA 504 loans		100			227			200			325			125
Commercial loans		540			346			290			450			521
Residential mortgage loans		494			113			73			-			-
Consumer loans		25			-			46			-			131
Total chargeoffs		1,372			1,301			1,344			1,085			1,369
Add: Recoveries
SBA loans		249			53			26			111			71
SBA 504 loans		15			28			-			-			77
Commercial loans		53			11			15			3			214
Residential mortgage loans		-			-			50			-			-
Consumer loans		-			-			4			-			-
Total recoveries		317			92			95			114			362
Net chargeoffs		1,055			1,209			1,249			971			1,007
Balance, end of period	$	16,284		$	16,339		$	16,348		$	16,447		$	16,018

LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	19,831		$	22,206		$	22,769		$	20,598		$	25,099
Other real estate owned ("OREO")		2,355			1,625			3,032			3,555			2,722
Nonperforming assets		22,186			23,831			25,801			24,153			27,821
Less: Amount guaranteed by SBA		526			555			939			1,339			2,857
Net nonperforming assets	$	21,660		$	23,276		$	24,862		$	22,814		$	24,964

Loans 90 days past due & still accruing	$	2,443		$	3,165		$	2,411		$	2,191		$	2,858

Performing Troubled Debt Restructurings (TDRs)	$	20,541		$	20,985		$	17,436		$	17,488		$	17,509
(1) Nonperforming TDRs included above		871			2,287			3,645			3,817			3,065
Total TDRs	$	21,412		$	23,272		$	21,081		$	21,305		$	20,574

Allowance for loan losses to:
Total loans at quarter end		2.69	%		2.80	%		2.76	%		2.72	%		2.60	%
Nonperforming loans (1)		82.11			73.58			71.80			79.85			63.82
Nonperforming assets		73.40			68.56			63.36			68.10			57.58
Net nonperforming assets		75.18			70.20			65.75			72.09			64.16

QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		(0.21)	%		3.15	%		3.77	%		0.95	%		2.44	%
SBA 504 loans		0.73			1.55			1.43			2.31			0.33
Commercial loans		0.65			0.47			0.39			0.62			0.43
Residential mortgage loans		1.49			0.34			0.07			-			-
Consumer loans		0.22			-			0.34			-			1.00
Total loans		0.71	%		0.83	%		0.83	%		0.63	%		0.66	%

Nonperforming loans to total loans		3.28	%		3.81	%		3.84	%		3.41	%		4.08	%
Nonperforming loans and TDRs to total loans		6.67			7.41			6.78			6.31			6.93
Nonperforming assets to total loans and OREO		3.65			4.08			4.33			3.98			4.50
Nonperforming assets to total assets		2.83			2.94			3.18			2.94			3.45

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

June 30, 2012



(In thousands, except percentages and per share amounts)	June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011			June 30, 2011
SUMMARY OF INCOME:
Total interest income	$	8,772		$	9,058		$	9,133		$	9,952		$	10,196
Total interest expense		1,915			2,250			2,460			2,599			2,725
Net interest income		6,857			6,808			6,673			7,353			7,471
Provision for loan losses		1,000			1,200			1,150			1,400			1,750
Net interest income after provision for loan losses		5,857			5,608			5,523			5,953			5,721
Total noninterest income		1,841			1,715			1,305			1,654			1,447
Total noninterest expense		6,204			5,959			6,012			6,101			6,247
Income before provision for income taxes		1,494			1,364			816			1,506			921
Provision for income taxes		518			459			220			420			277
Net income		976			905			596			1,086			644
Preferred stock dividends and discount accretion		401			396			393			386			395
Income available to common shareholders	$	575		$	509		$	203		$	700		$	249

Net income per common share - Basic (1)	$	0.08		$	0.07		$	0.03		$	0.09		$	0.03
Net income per common share - Diluted (1)	$	0.07		$	0.07		$	0.03		$	0.09		$	0.03

COMMON SHARE DATA:
Market price per share	$	6.00		$	6.24		$	6.40		$	6.65		$	6.79
Dividends paid	$	-		$	-		$	-		$	-		$	-
Book value per common share	$	7.38		$	7.28		$	7.24		$	7.25		$	7.14
Weighted average common shares outstanding - Basic		7,462			7,460			7,427			7,413			7,271
Weighted average common shares outstanding - Diluted		7,784			7,792			7,782			7,781			7,710
Outstanding common shares		7,461			7,463			7,459			7,413			7,412

OPERATING RATIOS (Annualized):
Return on average assets		0.49	%		0.45	%		0.29	%		0.54	%		0.32	%
Return on average equity (2)		4.25			3.81	%		1.51	%		5.27	%		1.95
Efficiency ratio		73.72			71.80	%		74.90	%		69.80	%		69.74

BALANCE SHEET DATA:
Total assets	$	785,111		$	810,198		$	810,846		$	820,652		$	806,163
Total deposits		616,443			643,101			643,971			654,171			641,167
Total loans		604,901			582,752			592,592			603,633			615,105
Total securities		114,846			128,061			107,536			100,752			115,188
Total shareholders' equity		74,901			74,002			73,558			73,136			72,207
Allowance for loan losses		(16,284)			(16,339)			(16,348)			(16,447)			(16,018)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.70	%		4.71	%		4.64	%		5.21	%		5.28	%
Interest-bearing liabilities		1.25			1.41			1.49			1.62			1.67
Net interest spread		3.45			3.30			3.15			3.59			3.61
Net interest margin		3.68			3.56			3.39			3.85			3.88

CREDIT QUALITY:
Nonperforming assets		22,186			23,831			25,801			24,153			27,821
QTD net chargeoffs (annualized) to QTD average loans		0.71	%		0.83	%		0.83	%		0.63	%		0.66	%
Allowance for loan losses to total loans		2.69			2.80			2.76			2.72			2.60
Nonperforming assets to total loans and OREO		3.65			4.08			4.33			3.98			4.50
Nonperforming assets to total assets		2.83			2.94			3.18			2.94			3.45

CAPITAL RATIOS AND OTHER:
Total equity to total assets		9.54	%		9.13	%		9.07	%		8.91	%		8.96	%
Leverage ratio		11.08			10.67			10.44			10.69			10.40
Tier 1 risk-based capital ratio		14.22			14.44			14.33			13.88			13.41
Total risk-based capital ratio		15.49			15.71			15.60			15.14			14.67
Number of banking offices		15			15			14			14			16
Number of ATMs		16			16			15			15			17
Number of employees		169			171			171			168			169

(1)	Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

(2)	Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by average shareholders' equity (excluding preferred stock).

UNITY BANCORP INC /NJ/ - FORM 8-K - EX-99.1 - July 25, 2012

Attached files

UNITY BANCORP INC /NJ/ Reports