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

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8-K - 8-K - UNITY BANCORP INC /NJ/	unty-20130725x8k.htm

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

July 25, 2013

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports 53.4% Increase in Quarterly Earnings and

Increased Six Month Earnings

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $882 thousand, or $0.11 per diluted share, for the three months ended June 30, 2013, a 53.4% increase compared to $575 thousand, or $0.07 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.67% and 6.11%, respectively, compared to 0.49% and 4.25% for the same period a year ago.

Second quarter highlights included:

·	Repurchased $10.3 million of preferred stock issued in connection with Unity’s participation in the Treasury’s Capital Purchase Program (“CPP”) during the quarter with the remaining $10.3 million repurchased July 3, 2013.

·	Paid our first cash dividend to shareholders since prior to entering into the CPP program in December 2008.

·	Total loans increased 6.0% from year-end 2012, driven by strong loan demand.

·	Noninterest-bearing deposits reached a record high of $128.0 million, an 11.9% increase from year-end, and now represent 20.4% of total deposits.

·	Continued asset quality improvement as evidenced by: a 36.4% decrease in nonperforming assets from a year ago and a 68.2% decrease in net charge-offs.

·	Net interest margin continued to remain strong versus prior periods.

·	Increased gains on the sales of mortgage loans resulting from record residential mortgage loan originations.

·	Total noninterest expense continued to be stable compared to the prior year period.

·	Remained well-capitalized in excess of regulatory requirements after the CPP repurchase and dividend payment.

·	Launched the Unity Bank Facebook page on June 10, 2013.

·	Closed on the purchase of three of our previously leased branch locations which will result in future cost savings.

·	Opened a residential mortgage loan production office in Elmwood Park, New Jersey.

“This was a milestone quarter for Unity,” reported James A. Hughes, President and CEO. “Due to significantly improved fundamentals of the Company, we were able to repay $20.6 million in high cost capital. In addition, loan demand has improved significantly, which should bolster revenue and enhance our future performance.”

For the six months ended June 30, 2013, net income available to common shareholders totaled $1.7 million, or $0.21 per diluted share, compared to $1.1 million or $0.14 per diluted share. Return on average assets and average common equity for the six month periods were 0.63% and 5.88%, respectively, compared to 0.47% and 4.03% for the same period a year ago.

Net Interest Income

Compared to a year ago, net interest income decreased $55 thousand and $172 thousand for the three and six month periods, respectively. The net interest margin was 3.66% and 3.59% in the quarter and year-to-date periods, respectively. While slightly lower than the prior year, the net interest margin has stabilized and increased compared to the quarter ending March 31, 2013, as the increased loan volume offset lower yields on our securities and loan portfolios.

Provision for Loan Losses

The provision for loan losses for the quarter ended June 30, 2013 was $300 thousand compared to $1.0 million for the prior year’s quarter, and for the six month period ended June 30, 2013, the provision declined to $950 thousand from $2.2 million in the first six months of 2012. The reduced provision reflects a lower level of net charge-offs for the quarter and year-to-date periods as well as a lower level of nonperforming assets.

Noninterest Income

Noninterest income decreased $183 thousand to $1.7 million for the three months and $74 thousand to $3.5 million for the six months ended June 30, 2013, compared to the same periods last year. The decreases were driven by lower levels of security gains being recognized, a lower volume of SBA loans being sold during the periods and recognition of lower gains on sales, and decreased fees on overdrawn accounts during the periods. Partially offsetting these decreases were increased gains on the sale of residential mortgage loans due to a higher volume of loans sold. We do not anticipate a material reduction in mortgage loan volume due to the recent increase in interest rates.

Noninterest Expense

Noninterest expense decreased $130 thousand to $6.1 million for the three months ended June 30, 2013, while year-to-date expense increased $38 thousand to $12.2 million. During both of these periods, occupancy, other real estate owned (“OREO”) and advertising expenses decreased. Occupancy expense decreased as a result of cost savings realized from the purchase of three of our previously leased locations in April 2013. OREO expenses fell during each period as the number of properties and subsequent property taxes, maintenance and insurance costs declined compared to the prior year’s periods. Advertising expenses varied based on the timing of retail branch related promotions such as the opening of the new branch in Washington Township, New Jersey in 2012. Loan collection costs remain elevated in both periods due to higher loan legal, insurance and other collection costs. Other expenses increased due to higher employee recruiting, increased director fees and an increase to the reserve for unfunded loan commitments.

Financial Condition

At June 30, 2013, total assets were $824.6 million, an increase of $4.8 million from the prior year end:

Total loans increased $35.3 million or 6.0%, to $622.3 million at June 30, 2013. This growth came from our residential mortgage and commercial loan portfolios. Future loan growth is expected in both the commercial and residential portfolios. The Company plans to continue shrinking its out of market SBA portfolio.

Total deposits decreased $20.4 million to $628.4 million at June 30, 2013. Noninterest-bearing demand deposits have increased 11.9% since year-end and represent 20.4% of total deposits. Time deposits remain relatively flat at $126.0 million while savings and interest-bearing demand deposits decreased due to a reduction in municipal deposits.

·	Shareholders’ equity was $68.3 million at June 30, 2013, a decrease of $9.2 million from year-end 2012, due primarily to the repurchase of $10.3 million in preferred stock issued in connection with the CPP during the second quarter. The remaining preferred stock was repurchased on July 3^rd.

·	Book value per common share was $7.70 as of June 30, 2013.

At June 30, 2013 the leverage, Tier I and Total Risk Based Capital ratios were 10.23%, 13.36% and 14.63% respectively, all in excess of the ratios required to be deemed “well-capitalized”. If the remaining $10.3 million in preferred stock which was repurchased on July 3, 2013 had been repurchased prior to quarter-end, the leverage, Tier I and Total Risk Based Capital ratios would have been 9.05%, 11.71% and 12.98% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

·	Nonperforming assets totaled $14.1 million at June 30, 2013 or 2.26% of total loans and OREO, compared to $19.3 million or 3.28% of total loans and OREO at year-end 2012.

·	OREO decreased $1.1 million to $752 thousand at June 30, 2013 due to the sale of 5 properties.

·	The allowance for loan losses totaled $14.3 million at June 30, 2013 or 2.30% of total loans. The provision for loan losses for the quarter ended June 30, 2013 was $300 thousand compared to $1.0 million for the prior year’s quarter.

·	Net charge-offs were $336 thousand for the three months ended June 30, 2013, compared to $1.1 million for the same period a year ago. For the six months ended June 30, 2013, net charge-offs were $1.4 million compared to $2.3 million for the prior year period.

·	Troubled debt restructurings (“TDRs”) decreased $2.4 million from year-end to $12.3 million. At June 30, 2013, 86.5% of our TDRs were performing.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $825 million in assets and $628 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, 2013



										June 30, 2013 vs.
										March 31, 2013		June 30, 2012
(In thousands, except percentages and per share amounts)	June 30, 2013			March 31, 2013			June 30, 2012			%		%
BALANCE SHEET DATA:
Total assets	$	824,575		$	827,182		$	785,111		(0.3)	%	5.0	%
Total deposits		628,369			652,117			616,443		(3.6)		1.9
Total loans		622,316			596,571			604,901		4.3		2.9
Total securities		111,269			119,334			114,846		(6.8)		(3.1)
Total shareholders' equity		68,287			78,157			74,901		(12.6)		(8.8)
Allowance for loan losses		(14,309)			(14,345)			(16,284)		0.3		12.1

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	2,086		$	1,738		$	1,494		20.0		39.6
Provision for income taxes		739			538			518		37.4		42.7
Net income		1,347			1,200			976		12.3		38.0
Preferred stock dividends and discount accretion		465			404			401		15.1		16.0
Income available to common shareholders	$	882		$	796		$	575		10.8		53.4

Net income per common share - Basic (1)	$	0.12		$	0.11		$	0.08		9.1		50.0
Net income per common share - Diluted (1)	$	0.11		$	0.10		$	0.07		10.0		57.1

Return on average assets		0.67	%		0.59	%		0.49	%	13.6		36.7
Return on average equity (2)		6.11	%		5.65	%		4.25	%	8.1		43.8
Efficiency ratio		72.72	%		73.91	%		73.72	%	(1.6)		(1.4)

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes	$	3,824					$	2,858				33.8
Provision for income taxes		1,278						977				30.8
Net income		2,546						1,881				35.4
Preferred stock dividends and discount accretion		869						797				9.0
Income available to common shareholders	$	1,677					$	1,084				54.7

Net income per common share - Basic (1)	$	0.22					$	0.15				46.7
Net income per common share - Diluted (1)	$	0.21					$	0.14				50.0

Return on average assets		0.63	%					0.47	%			34.0
Return on average equity (2)		5.88	%					4.03	%			45.9
Efficiency ratio		73.31	%					72.76	%			0.8

SHARE INFORMATION:
Market price per share	$	7.10		$	6.51		$	6.00		9.1		18.3
Dividends paid	$	0.01		$	-		$	-		100.0		100.0
Book value per common share	$	7.70		$	7.67		$	7.38		0.4		4.3
Average diluted shares outstanding (QTD)		7,911			7,845			7,784		0.8		1.6

CAPITAL RATIOS:
Total equity to total assets		8.28	%		9.45	%		9.54	%	(12.4)		(13.2)
Leverage ratio		10.23	%		11.12	%		11.08	%	(8.0)		(7.7)
Tier 1 risk-based capital ratio		13.36	%		14.54	%		14.22	%	(8.1)		(6.0)
Total risk-based capital ratio		14.63	%		15.80	%		15.49	%	(7.4)		(5.6)

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	14,109		$	15,956		$	22,186		(11.6)		(36.4)
QTD net charge-offs (annualized) to QTD average loans		0.22	%		0.73	%		0.71	%	(69.9)		(69.0)
Allowance for loan losses to total loans		2.30	%		2.40	%		2.69	%	(4.2)		(14.5)
Nonperforming assets to total loans and OREO		2.26	%		2.67	%		3.65	%	(15.4)		(38.1)
Nonperforming assets to total assets		1.71	%		1.93	%		2.83	%	(11.4)	%	(39.6)	%

(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, 2013



							June 30, 2013 vs.
							December 31, 2012		June 30, 2012
(In thousands, except percentages)	June 30, 2013		December 31, 2012		June 30, 2012		%		%
ASSETS
Cash and due from banks	$	21,860	$	23,705	$	18,600	(7.8)	%	17.5	%
Federal funds sold and interest-bearing deposits		34,450		70,487		19,235	(51.1)		79.1
Cash and cash equivalents		56,310		94,192		37,835	(40.2)		48.8
Securities:
Securities available for sale		84,212		89,538		97,965	(5.9)		(14.0)
Securities held to maturity		27,057		21,515		16,881	25.8		60.3
Total securities		111,269		111,053		114,846	0.2		(3.1)
Loans:
SBA loans held for sale		7,772		6,937		6,087	12.0		27.7
SBA loans held to maturity		52,279		58,593		60,382	(10.8)		(13.4)
SBA 504 loans		39,070		41,438		45,247	(5.7)		(13.7)
Commercial loans		323,476		301,564		310,331	7.3		4.2
Residential mortgage loans		154,716		132,094		136,514	17.1		13.3
Consumer loans		45,003		46,410		46,340	(3.0)		(2.9)
Total loans		622,316		587,036		604,901	6.0		2.9
Allowance for loan losses		(14,309)		(14,758)		(16,284)	3.0		12.1
Net loans		608,007		572,278		588,617	6.2		3.3
Premises and equipment, net		15,823		12,062		12,146	31.2		30.3
Bank owned life insurance ("BOLI")		12,548		9,402		9,253	33.5		35.6
Deferred tax assets		6,658		5,954		6,977	11.8		(4.6)
Federal Home Loan Bank stock		5,527		3,989		3,989	38.6		38.6
Accrued interest receivable		3,353		3,298		3,415	1.7		(1.8)
Other real estate owned ("OREO")		752		1,826		2,355	(58.8)		(68.1)
Prepaid FDIC insurance		-		1,929		2,230	(100.0)		(100.0)
Goodwill and other intangibles		1,516		1,516		1,522	-		(0.4)
Other assets		2,812		2,231		1,926	26.0		46.0
Total assets	$	824,575	$	819,730	$	785,111	0.6	%	5.0	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	128,045	$	114,424	$	107,497	11.9	%	19.1	%
Interest-bearing demand deposits		108,176		114,838		101,420	(5.8)		6.7
Savings deposits		266,168		294,533		273,395	(9.6)		(2.6)
Time deposits, under $100,000		74,950		76,994		83,138	(2.7)		(9.8)
Time deposits, $100,000 and over		51,030		47,971		50,993	6.4		0.1
Total deposits		628,369		648,760		616,443	(3.1)		1.9
Borrowed funds		110,000		75,000		75,000	46.7		46.7
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		443		434		470	2.1		(5.7)
Accrued expenses and other liabilities		2,011		2,561		2,832	(21.5)		(29.0)
Total liabilities		756,288		742,220		710,210	1.9		6.5
Shareholders' equity:
Cumulative perpetual preferred stock		10,209		20,115		19,824	(49.2)		(48.5)
Common stock		54,461		54,274		53,917	0.3		1.0
Retained earnings		3,390		1,788		231	89.6		1,367.5
Accumulated other comprehensive income		227		1,333		929	(83.0)		(75.6)
Total shareholders' equity		68,287		77,510		74,901	(11.9)		(8.8)
Total liabilities and shareholders' equity	$	824,575	$	819,730	$	785,111	0.6	%	5.0	%

Preferred shares		10		21		21
Issued and outstanding common shares		7,544		7,534		7,461

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

June 30, 2013



										June 30, 2013 vs.
	For the three months ended									March 31, 2013					June 30, 2012
(In thousands, except percentages and per share amounts)	June 30, 2013			March 31, 2013			June 30, 2012			$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	7		$	14		$	11		$	(7)		(50.0)	%	$	(4)		(36.4)	%
Federal Home Loan Bank stock		35			44			44			(9)		(20.5)			(9)		(20.5)
Securities:
Taxable		620			647			733			(27)		(4.2)			(113)		(15.4)
Tax-exempt		125			120			120			5		4.2			5		4.2
Total securities		745			767			853			(22)		(2.9)			(108)		(12.7)
Loans:
SBA loans		778			777			846			1		0.1			(68)		(8.0)
SBA 504 loans		441			651			691			(210)		(32.3)			(250)		(36.2)
Commercial loans		4,250			4,001			4,216			249		6.2			34		0.8
Residential mortgage loans		1,649			1,550			1,582			99		6.4			67		4.2
Consumer loans		496			509			529			(13)		(2.6)			(33)		(6.2)
Total loans		7,614			7,488			7,864			126		1.7			(250)		(3.2)
Total interest income		8,401			8,313			8,772			88		1.1			(371)		(4.2)
INTEREST EXPENSE
Interest-bearing demand deposits		90			101			123			(11)		(10.9)			(33)		(26.8)
Savings deposits		164			177			287			(13)		(7.3)			(123)		(42.9)
Time deposits		537			546			689			(9)		(1.6)			(152)		(22.1)
Borrowed funds and subordinated debentures		808			800			816			8		1.0			(8)		(1.0)
Total interest expense		1,599			1,624			1,915			(25)		(1.5)			(316)		(16.5)
Net interest income		6,802			6,689			6,857			113		1.7			(55)		(0.8)
Provision for loan losses		300			650			1,000			(350)		(53.8)			(700)		(70.0)
Net interest income after provision for loan losses		6,502			6,039			5,857			463		7.7			645		11.0
NONINTEREST INCOME
Branch fee income		348			347			362			1		0.3			(14)		(3.9)
Service and loan fee income		319			304			287			15		4.9			32		11.1
Gain on sale of SBA loans held for sale, net		86			241			223			(155)		(64.3)			(137)		(61.4)
Gain on sale of mortgage loans, net		547			477			453			70		14.7			94		20.8
BOLI income		75			70			73			5		7.1			2		2.7
Net security gains		108			226			283			(118)		(52.2)			(175)		(61.8)
Other income		175			160			160			15		9.4			15		9.4
Total noninterest income		1,658			1,825			1,841			(167)		(9.2)			(183)		(9.9)
NONINTEREST EXPENSE
Compensation and benefits		3,166			3,176			3,133			(10)		(0.3)			33		1.1
Occupancy		627			694			740			(67)		(9.7)			(113)		(15.3)
Processing and communications		562			561			553			1		0.2			9		1.6
Furniture and equipment		371			365			355			6		1.6			16		4.5
Professional services		234			190			211			44		23.2			23		10.9
Loan collection costs		228			177			91			51		28.8			137		150.5
OREO expenses		63			127			237			(64)		(50.4)			(174)		(73.4)
Deposit insurance		179			149			168			30		20.1			11		6.5
Advertising		181			120			302			61		50.8			(121)		(40.1)
Other expenses		463			567			414			(104)		(18.3)			49		11.8
Total noninterest expense		6,074			6,126			6,204			(52)		(0.8)			(130)		(2.1)
Income before provision for income taxes		2,086			1,738			1,494			348		20.0			592		39.6
Provision for income taxes		739			538			518			201		37.4			221		42.7
Net income		1,347			1,200			976			147		12.3			371		38.0
Preferred stock dividends and discount accretion		465			404			401			61		15.1			64		16.0
Income available to common shareholders	$	882		$	796		$	575		$	86		10.8	%	$	307		53.4	%

Effective tax rate		35.4	%		31.0	%		34.7	%

Net income per common share - Basic (1)	$	0.12		$	0.11		$	0.08
Net income per common share - Diluted (1)	$	0.11		$	0.10		$	0.07

Weighted average common shares outstanding - Basic		7,544			7,538			7,462
Weighted average common shares outstanding - Diluted		7,911			7,845			7,784

(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, 2013



	For the six months ended June 30,				Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2013		2012		$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	22	$	43	$	(21)		(48.8)	%
Federal Home Loan Bank stock		78		95		(17)		(17.9)
Securities:
Taxable		1,267		1,483		(216)		(14.6)
Tax-exempt		245		263		(18)		(6.8)
Total securities		1,512		1,746		(234)		(13.4)
Loans:
SBA loans		1,555		1,770		(215)		(12.1)
SBA 504 loans		1,092		1,451		(359)		(24.7)
Commercial loans		8,251		8,397		(146)		(1.7)
Residential mortgage loans		3,199		3,237		(38)		(1.2)
Consumer loans		1,005		1,089		(84)		(7.7)
Total loans		15,102		15,944		(842)		(5.3)
Total interest income		16,714		17,828		(1,114)		(6.2)
INTEREST EXPENSE
Interest-bearing demand deposits		191		259		(68)		(26.3)
Savings deposits		340		641		(301)		(47.0)
Time deposits		1,083		1,603		(520)		(32.4)
Borrowed funds and subordinated debentures		1,609		1,662		(53)		(3.2)
Total interest expense		3,223		4,165		(942)		(22.6)
Net interest income		13,491		13,663		(172)		(1.3)
Provision for loan losses		950		2,200		(1,250)		(56.8)
Net interest income after provision for loan losses		12,541		11,463		1,078		9.4
NONINTEREST INCOME
Branch fee income		695		748		(53)		(7.1)
Service and loan fee income		623		588		35		6.0
Gain on sale of SBA loans held for sale, net		327		381		(54)		(14.2)
Gain on sale of mortgage loans, net		1,025		864		161		18.6
BOLI income		146		146		-		-
Net security gains		334		507		(173)		(34.1)
Other income		332		322		10		3.1
Total noninterest income		3,482		3,556		(74)		(2.1)
NONINTEREST EXPENSE
Compensation and benefits		6,341		6,315		26		0.4
Occupancy		1,321		1,348		(27)		(2.0)
Processing and communications		1,123		1,087		36		3.3
Furniture and equipment		736		717		19		2.6
Professional services		424		402		22		5.5
Loan collection costs		406		271		135		49.8
OREO expenses		190		362		(172)		(47.5)
Deposit insurance		328		339		(11)		(3.2)
Advertising		301		448		(147)		(32.8)
Other expenses		1,029		872		157		18.0
Total noninterest expense		12,199		12,161		38		0.3
Income before provision for income taxes		3,824		2,858		966		33.8
Provision for income taxes		1,278		977		301		30.8
Net income		2,546		1,881		665		35.4
Preferred stock dividends and discount accretion		869		797		72		9.0
Income available to common shareholders	$	1,677	$	1,084	$	593		54.7	%

Effective tax rate		33.4		34.2

Net income per common share - Basic (1)	$	0.22		0.15
Net income per common share - Diluted (1)	$	0.21		0.14

Weighted average common shares outstanding - Basic		7,541		7,461
Weighted average common shares outstanding - Diluted		7,881		7,788

UNITY BANCORP, INC.

QTD NET INTEREST MARGIN

June 30, 2013


	For the three months ended
	June 30, 2013							March 31, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	25,312	$	7		0.11	%	$	62,530	$	14		0.09	%
Federal Home Loan Bank stock		4,007		35		3.50			3,989		44		4.47
Securities:
Taxable		95,675		620		2.59			100,062		647		2.59
Tax-exempt		20,440		186		3.64			18,475		178		3.85
Total securities (A)		116,115		806		2.77			118,537		825		2.79
Loans:
SBA loans		63,007		778		4.94			65,386		777		4.75
SBA 504 loans		39,408		441		4.49			41,135		651		6.42
Commercial loans		315,128		4,250		5.41			304,790		4,001		5.32
Residential mortgage loans		143,835		1,649		4.59			135,886		1,550		4.56
Consumer loans		45,295		496		4.39			46,111		509		4.48
Total loans (B)		606,673		7,614		5.03			593,308		7,488		5.09
Total interest-earning assets	$	752,107	$	8,462		4.51	%	$	778,364	$	8,371		4.33	%

Noninterest-earning assets:
Cash and due from banks		22,866							19,737
Allowance for loan losses		(14,747)							(14,998)
Other assets		41,435							37,905
Total noninterest-earning assets		49,554							42,644
Total assets	$	801,661						$	821,008

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	116,414	$	90		0.31	%	$	118,668	$	101		0.35	%
Savings deposits		270,097		164		0.24			295,520		177		0.24
Time deposits		124,285		537		1.73			122,695		546		1.80
Total interest-bearing deposits		510,796		791		0.62			536,883		824		0.62
Borrowed funds and subordinated debentures		91,653		808		3.49			90,465		800		3.54
Total interest-bearing liabilities	$	602,449	$	1,599		1.06	%	$	627,348	$	1,624		1.04	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		122,635							113,000
Other liabilities		3,554							3,242
Total noninterest-bearing liabilities		126,189							116,242
Total shareholders' equity		73,023							77,418
Total liabilities and shareholders' equity	$	801,661						$	821,008

Net interest spread			$	6,863		3.45	%			$	6,747		3.29	%
Tax-equivalent basis adjustment				(61)							(58)
Net interest income			$	6,802						$	6,689
Net interest margin						3.66	%						3.52	%

(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, 2013


	For the three months ended
	June 30, 2013							June 30, 2012
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	25,312	$	7		0.11	%	$	30,832	$	11		0.14	%
Federal Home Loan Bank stock		4,007		35		3.50			3,993		44		4.43
Securities:
Taxable		95,675		620		2.59			105,903		733		2.77
Tax-exempt		20,440		186		3.64			15,554		178		4.58
Total securities (A)		116,115		806		2.77			121,457		911		3.00
Loans:
SBA loans		63,007		778		4.94			69,273		846		4.89
SBA 504 loans		39,408		441		4.49			46,804		691		5.94
Commercial loans		315,128		4,250		5.41			303,409		4,216		5.59
Residential mortgage loans		143,835		1,649		4.59			133,643		1,582		4.74
Consumer loans		45,295		496		4.39			45,658		529		4.66
Total loans (B)		606,673		7,614		5.03			598,787		7,864		5.28
Total interest-earning assets	$	752,107	$	8,462		4.51	%	$	755,069	$	8,830		4.70	%

Noninterest-earning assets:
Cash and due from banks		22,866							16,101
Allowance for loan losses		(14,747)							(16,980)
Other assets		41,435							39,774
Total noninterest-earning assets		49,554							38,895
Total assets	$	801,661						$	793,964

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	116,414	$	90		0.31	%	$	110,343	$	123		0.45	%
Savings deposits		270,097		164		0.24			270,990		287		0.43
Time deposits		124,285		537		1.73			138,554		689		2.00
Total interest-bearing deposits		510,796		791		0.62			519,887		1,099		0.85
Borrowed funds and subordinated debentures		91,653		808		3.49			90,465		816		3.57
Total interest-bearing liabilities	$	602,449	$	1,599		1.06	%	$	610,352	$	1,915		1.25	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		122,635							106,043
Other liabilities		3,554							3,438
Total noninterest-bearing liabilities		126,189							109,481
Total shareholders' equity		73,023							74,131
Total liabilities and shareholders' equity	$	801,661						$	793,964

Net interest spread			$	6,863		3.45	%			$	6,915		3.45	%
Tax-equivalent basis adjustment				(61)							(58)
Net interest income			$	6,802						$	6,857
Net interest margin						3.66	%						3.68	%

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

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

UNITY BANCORP, INC.

YEAR TO DATE NET INTEREST MARGIN

June 30, 2013


	For the six months ended
	June 30, 2013							June 30, 2012
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	43,818	$	22		0.10	%	$	47,746	$	43		0.18	%
Federal Home Loan Bank stock		3,998		78		3.93			4,041		95		4.73
Securities:
Taxable		97,856		1,267		2.59			104,263		1,483		2.84
Tax-exempt		19,463		363		3.73			16,703		389		4.66
Total securities (A)		117,319		1,630		2.78			120,966		1,872		3.10
Loans:
SBA loans		64,190		1,555		4.84			70,516		1,770		5.02
SBA 504 loans		40,266		1,092		5.47			49,257		1,451		5.92
Commercial loans		309,990		8,251		5.37			293,823		8,397		5.75
Residential mortgage loans		139,882		3,199		4.57			133,234		3,237		4.86
Consumer loans		45,700		1,005		4.43			46,633		1,089		4.70
Total loans (B)		600,028		15,102		5.06			593,463		15,944		5.40
Total interest-earning assets	$	765,163	$	16,832		4.42	%	$	766,216	$	17,954		4.71	%

Noninterest-earning assets:
Cash and due from banks		21,310							16,025
Allowance for loan losses		(14,872)							(16,884)
Other assets		39,680							40,030
Total noninterest-earning assets		46,118							39,171
Total assets	$	811,281						$	805,387

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	117,535	$	191		0.33	%	$	109,665	$	259		0.47	%
Savings deposits		282,738		340		0.24			277,125		641		0.47
Time deposits		123,495		1,083		1.77			147,778		1,603		2.18
Total interest-bearing deposits		523,768		1,614		0.62			534,568		2,503		0.94
Borrowed funds and subordinated debentures		91,063		1,609		3.51			90,465		1,662		3.63
Total interest-bearing liabilities	$	614,831	$	3,223		1.05	%	$	625,033	$	4,165		1.33	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		117,844							103,269
Other liabilities		3,398							3,344
Total noninterest-bearing liabilities		121,242							106,613
Total shareholders' equity		75,208							73,741
Total liabilities and shareholders' equity	$	811,281						$	805,387

Net interest spread			$	13,609		3.37	%			$	13,789		3.38	%
Tax-equivalent basis adjustment				(118)							(126)
Net interest income			$	13,491						$	13,663
Net interest margin						3.59	%						3.62	%

(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, 2013


Amounts in thousands, except percentages	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	14,345		$	14,758		$	15,294		$	16,284		$	16,339
Provision for loan losses charged to expense		300			650			800			1,000			1,000
		14,645			15,408			16,094			17,284			17,339
Less: Chargeoffs
SBA loans		167			570			251			254			213
SBA 504 loans		200			200			-			481			100
Commercial loans		200			375			1,190			1,428			540
Residential mortgage loans		-			125			152			65			494
Consumer loans		-			59			-			31			25
Total chargeoffs		567			1,329			1,593			2,259			1,372
Add: Recoveries
SBA loans		8			137			22			195			249
SBA 504 loans		154			25			50			15			15
Commercial loans		65			101			184			58			53
Residential mortgage loans		2			2			-			-			-
Consumer loans		2			1			1			1			-
Total recoveries		231			266			257			269			317
Net chargeoffs		336			1,063			1,336			1,990			1,055
Balance, end of period	$	14,309		$	14,345		$	14,758		$	15,294		$	16,284

LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	13,357		$	14,904		$	17,468		$	17,334		$	19,831
Other real estate owned ("OREO")		752			1,052			1,826			1,456			2,355
Nonperforming assets		14,109			15,956			19,294			18,790			22,186
Less: Amount guaranteed by SBA		736			1,863			1,849			566			526
Net nonperforming assets	$	13,373		$	14,093		$	17,445		$	18,224		$	21,660

Loans 90 days past due & still accruing	$	429		$	632		$	109		$	1,630		$	2,443

Performing Troubled Debt Restructurings (TDRs)	$	10,649		$	15,068		$	13,576		$	17,250		$	20,541
(1) Nonperforming TDRs included above		1,658			1,084			1,087			1,628			871
Total TDRs	$	12,307		$	16,152		$	14,663		$	18,878		$	21,412

Allowance for loan losses to:
Total loans at quarter end		2.30	%		2.40	%		2.51	%		2.56	%		2.69	%
Nonperforming loans (1)		107.13			96.25			84.49			88.23			82.11
Nonperforming assets		101.42			89.90			76.49			81.39			73.40
Net nonperforming assets		107.00			101.79			84.60			83.92			75.18

QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		1.01	%		2.69	%		1.37	%		0.35	%		(0.21)	%
SBA 504 loans		0.47			1.73			(0.48)			4.16			0.73
Commercial loans		0.17			0.36			1.31			1.77			0.65
Residential mortgage loans		(0.01)			0.37			0.45			0.19			1.49
Consumer loans		(0.02)			0.51			(0.01)			0.26			0.22
Total loans		0.22	%		0.73	%		0.90	%		1.32	%		0.71	%

Nonperforming loans to total loans		2.15	%		2.50	%		2.98	%		2.90	%		3.28	%
Nonperforming loans and TDRs to total loans		3.86			5.02			5.29			5.79			6.67
Nonperforming assets to total loans and OREO		2.26			2.67			3.28			3.14			3.65
Nonperforming assets to total assets		1.71			1.93			2.35			2.34			2.83

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

June 30, 2013


(In thousands, except percentages and per share amounts)	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
SUMMARY OF INCOME:
Total interest income	$	8,401		$	8,313		$	8,502		$	8,871		$	8,772
Total interest expense		1,599			1,624			1,765			1,844			1,915
Net interest income		6,802			6,689			6,737			7,027			6,857
Provision for loan losses		300			650			800			1,000			1,000
Net interest income after provision for loan losses		6,502			6,039			5,937			6,027			5,857
Total noninterest income		1,658			1,825			2,008			1,774			1,841
Total noninterest expense		6,074			6,126			6,135			5,999			6,204
Income before provision for income taxes		2,086			1,738			1,810			1,802			1,494
Provision for income taxes		739			538			643			606			518
Net income		1,347			1,200			1,167			1,196			976
Preferred stock dividends and discount accretion		465			404			408			397			401
Income available to common shareholders	$	882		$	796		$	759		$	799		$	575

Net income per common share - Basic (1)	$	0.12		$	0.11		$	0.10		$	0.11		$	0.08
Net income per common share - Diluted (1)	$	0.11		$	0.10		$	0.10		$	0.10		$	0.07

COMMON SHARE DATA:
Market price per share	$	7.10		$	6.51		$	6.24		$	6.13		$	6.00
Dividends paid	$	0.01		$	-		$	-		$	-		$	-
Book value per common share	$	7.70		$	7.67		$	7.62		$	7.52		$	7.38
Weighted average common shares outstanding - Basic		7,544			7,538			7,514			7,473			7,462
Weighted average common shares outstanding - Diluted		7,911			7,845			7,818			7,782			7,784
Issued and outstanding common shares		7,544			7,548			7,534			7,503			7,461

OPERATING RATIOS (Annualized):
Return on average assets		0.67	%		0.59	%		0.57	%		0.60	%		0.49	%
Return on average equity (2)		6.11			5.65			5.34			5.74			4.25
Efficiency ratio		72.72			73.91			70.66			68.22			73.72

BALANCE SHEET DATA:
Total assets	$	824,575		$	827,182		$	819,730		$	802,675		$	785,111
Total deposits		628,369			652,117			648,760			633,126			616,443
Total loans		622,316			596,571			587,036			596,910			604,901
Total securities		111,269			119,334			111,053			106,437			114,846
Total shareholders' equity		68,287			78,157			77,510			76,387			74,901
Allowance for loan losses		(14,309)			(14,345)			(14,758)			(15,294)			(16,284)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.51	%		4.33	%		4.44	%		4.70	%		4.70	%
Interest-bearing liabilities		1.06			1.04			1.14			1.19			1.25
Net interest spread		3.45			3.29			3.30			3.51			3.45
Net interest margin		3.66			3.52			3.51			3.72			3.68

CREDIT QUALITY:
Nonperforming assets		14,109			15,956			19,294			18,790			22,186
QTD net chargeoffs (annualized) to QTD average loans		0.22	%		0.73	%		0.90	%		1.32	%		0.71	%
Allowance for loan losses to total loans		2.30			2.40			2.51			2.56			2.69
Nonperforming assets to total loans and OREO		2.26			2.67			3.28			3.14			3.65
Nonperforming assets to total assets		1.71			1.93			2.35			2.34			2.83

CAPITAL RATIOS AND OTHER:
Total equity to total assets		8.28	%		9.45	%		9.46	%		9.52	%		9.54	%
Leverage ratio		10.23			11.12			11.14			11.20			11.08
Tier 1 risk-based capital ratio		13.36			14.54			14.85			14.52			14.22
Total risk-based capital ratio		14.63			15.80			16.12			15.78			15.49
Number of banking offices		15			15			15			15			15
Number of ATMs		16			16			16			16			16
Number of employees		153			166			165			161			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, 2013

Attached files

UNITY BANCORP INC /NJ/ Reports