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

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8-K/A - 8-K/A - UNITY BANCORP INC /NJ/	unty-20140423x8ka.htm

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

April 23, 2014

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports 62.4% Increase in Quarterly Earnings

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $1.3 million, or $0.17 per diluted share, for the three months ended March 31, 2014, a 62.4% increase compared to net income available to common shareholders of $796 thousand, or $0.10 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.59% and 9.06%, respectively, compared to 0.59% and 5.65% for the same period a year ago.

First quarter highlights include:

Loan growth of 14.6% since March 31, 2013 – 18.8% growth in commercial and 32.1% growth in residential mortgage loans.

Deposit growth of 17.7% since March 31, 2013 – 45.6% growth in noninterest bearing deposits. Excluding, a short-term $30 million noninterest-bearing demand deposit, deposit growth was 13.2%.

Core earnings growth - Net interest income increased 8.9% compared to the prior year’s quarter due to strong commercial and residential loan portfolio growth.

A wider net interest margin of 3.57% compared to 3.52% in the prior year’s quarter.

Improved credit quality metrics due to decreased nonperforming loans and lower net charge-offs this quarter compared to the prior year’s quarter.

Increased dividend to common shareholders.

“All things continue to remain very positive at Unity Bank,” reported James A. Hughes, President and CEO. “Loan and deposit growth continue to be strong, asset quality is improving and our margin is stable. I look forward to reporting our continued progress as 2014 unfolds.”

Net Interest Income

Net interest income increased $598 thousand to $7.3 million for the quarter ended March 31, 2014 compared to the prior year’s quarter. This increase was the result of momentum from the strong growth in commercial and residential mortgage loan volume over the past year, as average commercial loans increased $59.6 million and average residential mortgage loans increased $45.2 million. The volume driven interest income increase offset the impact of lower rates on earning assets and the increase in interest paid on deposits due to the $82.4 million increase in average time deposits. The net interest margin increased 5 basis points to 3.57% for the quarter ended March 31, 2014 compared to 3.52% the prior year. We expect net interest income to continue to expand in future quarters due to strong loan growth and our net interest margin to remain stable.

Provision for Loan Losses

The provision for loan losses for the quarters ended March 31, 2014 and March 31, 2013 was $600 thousand and $650 thousand respectively. The reduced provision, year over year, reflects an improvement in credit quality and a lower level of net charge-offs.

Noninterest Income

Noninterest income decreased $299 thousand to $1.5 million for the three months ended March 31, 2014, compared to the same period last year. The decrease was driven by a reduced volume of residential mortgage loan sales, SBA loan sales and lower levels of security gains realized.

During the quarter, $17.4 million in residential mortgage loans were sold at a gain of $365 thousand, compared to $22.6 million sold at a gain of $477 thousand during the prior year’s quarter. Approximately, $7.5 million of the sold loans were from our portfolio, with the remainder consisting of new production. We do not anticipate the recent rise in mortgage interest rates to have a material impact on our residential mortgage origination volume.

SBA loan sales totaled $928 thousand with net gains on sale of $83 thousand for the quarter, compared to $2.3 million sold and a gain of $241 thousand in the prior year’s quarter. We anticipate an increase in the volume of originations and sales in 2014, due to the addition of SBA business development officers.

Noninterest Expense

Noninterest expense increased $132 thousand to $6.3 million for the three months ended March 31, 2014 compared to the prior year’s first quarter. The increase was due primarily to expenses related to OREO properties. Other fluctuations include:

An increase in compensation and benefits expense due to merit increases, bonus accruals and benefits expenses, partially offset by decreased mortgage commissions.

Occupancy expense decreased 35 thousand due to the reduction in lease and leasehold depreciation expense related to the three branch sites that were purchased a year ago. These savings were partially offset by the increase in seasonal weather related expenses.

OREO expenses remain elevated as we work through the collection process and incur expenses such as maintenance expenses, delinquent taxes and losses on sale.

Other expenses decreased due to lower employee recruiter fees, director fees, printing and office supplies and provision for loan commitments.

Financial Condition

At March 31, 2014, total assets were $961.2 million, an increase of $40.1 million from the prior year-end:

Total loans increased $5.3 million or 0.8%, from year-end 2013 to $684.0 million at March 31, 2014. This growth came in our commercial and SBA 504 loan portfolios which increased $5.6 million and $2.0 million, respectively. Residential mortgage loans declined due to $7.5 million of loans being sold from portfolio. Future loan growth is expected to be primarily in commercial loans, while the Company plans to continue shrinking it’s out of market SBA portfolio.

Total deposits increased $29.0 million or 3.9%, to $767.6 million at March 31, 2014, due primarily to one customer’s large short-term noninterest-bearing demand deposit at quarter-end. Savings deposits have decreased $13.4 million from year-end, due to the reduction in municipal deposits.

Shareholders’ equity was $58.8 million at March 31, 2014, an increase of $1.6 million from year-end 2013, due primarily to quarterly net income less the quarterly dividend accrual.

Book value per common share was $7.74 as of March 31, 2014.

At March 31, 2014, the leverage, Tier I and Total Risk Based Capital ratios were 8.19%, 10.77% and 12.03% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

“In mid-2014, we plan to raise a limited amount of capital through a common stock rights offering. This capital will allow for continued loan and asset growth and will allow our existing shareholders to increase their investment in Unity," said James A. Hughes, President and CEO.

Credit Quality

Nonperforming assets totaled $14.5 million at March 31, 2014, or 2.11% of total loans and OREO, compared to $15.9 million or 2.34% of total loans and OREO at year-end 2013.

OREO increased $1.8 million to $2.5 million at March 31, 2014, due to the addition of 4 properties.

The allowance for loan losses totaled $12.8 million at March 31, 2014, or 1.87% of total loans.

Net charge-offs were $934 thousand for the three months ended March 31, 2014, compared to $1.1 million for the same period a year ago.

Troubled debt restructurings (“TDRs”) decreased $108 thousand from year-end to $7.8 million due to principal pay downs. At March 31, 2014, 94.3% of our TDRs were performing.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $961 million in assets and $768 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.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

UNITY BANCORP, INC.

SUMMARY FINANCIAL HIGHLIGHTS

March 31, 2014



										March 31, 2014 vs.
										December 31, 2013		March 31, 2013
(In thousands, except percentages and per share amounts)	March 31, 2014			December 31, 2013			March 31, 2013			%		%
BALANCE SHEET DATA:
Total assets	$	961,168		$	921,118		$	827,182		4.3	%	16.2	%
Total deposits		767,624			738,698			652,117		3.9		17.7
Total loans		683,951			678,701			596,571		0.8		14.6
Total securities		109,459			107,514			119,334		1.8		(8.3)
Total shareholders' equity		58,810			57,173			78,157		2.9		(24.8)
Allowance for loan losses		(12,807)			(13,141)			(14,345)		(2.5)		(10.7)

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	1,955		$	1,872		$	1,738		4.4		12.5
Provision for income taxes		662			606			538		9.2		23.0
Net income		1,293			1,266			1,200		2.1		7.8
Preferred stock dividends and discount accretion		-			-			404		-		(100.0)
Income available to common shareholders	$	1,293		$	1,266		$	796		2.1		62.4

Net income per common share - Basic (1)	$	0.17		$	0.17		$	0.11		-		54.5
Net income per common share - Diluted (1)	$	0.17		$	0.17		$	0.10		-		70.0

Return on average assets		0.59	%		0.57	%		0.59	%	3.5		-
Return on average equity (2)		9.06	%		8.87	%		5.65	%	2.1		60.4
Efficiency ratio		71.91	%		68.87	%		73.91	%	4.4		(2.7)

SHARE INFORMATION:
Market price per share	$	7.95		$	7.66		$	6.51		3.8		22.1
Dividends paid	$	0.02		$	0.01		$	-		1.0		100.0
Book value per common share	$	7.74		$	7.55		$	7.67		2.5		0.9
Average diluted shares outstanding (QTD)		7,654			7,618			7,845		0.5		(2.4)

CAPITAL RATIOS:
Total equity to total assets		6.12	%		6.21	%		9.45	%	(1.4)		(35.2)
Leverage ratio		8.19	%		8.08	%		11.12	%	1.4		(26.3)
Tier 1 risk-based capital ratio		10.77	%		10.74	%		14.54	%	0.3		(25.9)
Total risk-based capital ratio		12.03	%		11.99	%		15.80	%	0.3		(23.9)

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	14,513		$	15,916		$	15,956		(8.8)		(9.0)
QTD net chargeoffs (annualized) to QTD average loans		0.56	%		0.72	%		0.73	%	(22.2)		(23.3)
Allowance for loan losses to total loans		1.87	%		1.94	%		2.40	%	(3.6)		(22.1)
Nonperforming assets to total loans and OREO		2.11	%		2.34	%		2.67	%	(9.8)		(21.0)
Nonperforming assets to total assets		1.51	%		1.73	%		1.93	%	(12.7)	%	(21.8)	%

(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

March 31, 2014



							March 31, 2014 vs.
							December 31, 2013		March 31, 2013
(In thousands, except percentages)	March 31, 2014		December 31, 2013		March 31, 2013		%		%
ASSETS
Cash and due from banks	$	30,025	$	24,272	$	18,392	23.7	%	63.3	%
Federal funds sold and interest-bearing deposits		98,188		75,132		61,584	30.7		59.4
Cash and cash equivalents		128,213		99,404		79,976	29.0		60.3
Securities:
Securities available for sale		86,154		81,133		91,067	6.2		(5.4)
Securities held to maturity		23,305		26,381		28,267	(11.7)		(17.6)
Total securities		109,459		107,514		119,334	1.8		(8.3)
Loans:
SBA loans held for sale		6,517		6,673		6,556	(2.3)		(0.6)
SBA loans held for investment		47,737		48,918		56,868	(2.4)		(16.1)
SBA 504 loans		33,550		31,564		39,784	6.3		(15.7)
Commercial loans		368,909		363,340		310,649	1.5		18.8
Residential mortgage loans		180,129		182,067		136,345	(1.1)		32.1
Consumer loans		47,109		46,139		46,369	2.1		1.6
Total loans		683,951		678,701		596,571	0.8		14.6
Allowance for loan losses		(12,807)		(13,141)		(14,345)	2.5		10.7
Net loans		671,144		665,560		582,226	0.8		15.3
Premises and equipment, net		15,474		15,672		15,747	(1.3)		(1.7)
Bank owned life insurance ("BOLI")		12,845		12,749		9,472	0.8		35.6
Deferred tax assets		6,308		6,752		6,241	(6.6)		1.1
Federal Home Loan Bank stock		5,752		5,392		3,989	6.7		44.2
Accrued interest receivable		3,212		3,272		3,362	(1.8)		(4.5)
Other real estate owned ("OREO")		2,467		633		1,052	289.7		134.5
Prepaid FDIC insurance		-		-		1,788	-		(100.0)
Goodwill and other intangibles		1,516		1,516		1,516	-		-
Other assets		4,778		2,654		2,479	80.0		92.7
Total assets	$	961,168	$	921,118	$	827,182	4.3	%	16.2	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	172,010	$	136,035	$	118,166	26.4	%	45.6	%
Interest-bearing demand deposits		134,321		130,806		115,374	2.7		16.4
Savings deposits		253,109		266,503		295,335	(5.0)		(14.3)
Time deposits, under $100,000		112,150		108,258		75,374	3.6		48.8
Time deposits, $100,000 and over		96,034		97,096		47,868	(1.1)		100.6
Total deposits		767,624		738,698		652,117	3.9		17.7
Borrowed funds		115,000		107,000		75,000	7.5		53.3
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		455		454		438	0.2		3.9
Accrued expenses and other liabilities		3,814		2,328		6,005	63.8		(36.5)
Total liabilities		902,358		863,945		749,025	4.4		20.5
Shareholders' equity:
Cumulative perpetual preferred stock		-		-		20,263	-		(100.0)
Common stock		52,237		52,051		54,357	0.4		(3.9)
Retained earnings		6,739		5,598		2,584	20.4		160.8
Accumulated other comprehensive income (loss)		(166)		(476)		953	65.1		(117.4)
Total shareholders' equity		58,810		57,173		78,157	2.9		(24.8)
Total liabilities and shareholders' equity	$	961,168	$	921,118	$	827,182	4.3	%	16.2	%

Preferred shares		-		-		21
Issued and outstanding common shares		7,602		7,577		7,548

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

March 31, 2014



										March 31, 2014 vs.
	For the three months ended									December 31, 2013					March 31, 2013
(In thousands, except percentages and per share amounts)	March 31, 2014			December 31, 2013			March 31, 2013			$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	9		$	9		$	14		$	-		-	%	$	(5)		(35.7)	%
Federal Home Loan Bank stock		47			40			44			7		17.5			3		6.8
Securities:
Taxable		726			585			647			141		24.1			79		12.2
Tax-exempt		105			106			120			(1)		(0.9)			(15)		(12.5)
Total securities		831			691			767			140		20.3			64		8.3
Loans:
SBA loans		583			519			777			64		12.3			(194)		(25.0)
SBA 504 loans		399			408			651			(9)		(2.2)			(252)		(38.7)
Commercial loans		4,601			4,684			4,001			(83)		(1.8)			600		15.0
Residential mortgage loans		2,058			1,953			1,550			105		5.4			508		32.8
Consumer loans		495			462			509			33		7.1			(14)		(2.8)
Total loans		8,136			8,026			7,488			110		1.4			648		8.7
Total interest income		9,023			8,766			8,313			257		2.9			710		8.5
INTEREST EXPENSE
Interest-bearing demand deposits		111			102			101			9		8.8			10		9.9
Savings deposits		182			186			177			(4)		(2.2)			5		2.8
Time deposits		644			598			546			46		7.7			98		17.9
Borrowed funds and subordinated debentures		799			817			800			(18)		(2.2)			(1)		(0.1)
Total interest expense		1,736			1,703			1,624			33		1.9			112		6.9
Net interest income		7,287			7,063			6,689			224		3.2			598		8.9
Provision for loan losses		600			800			650			(200)		(25.0)			(50)		(7.7)
Net interest income after provision for loan losses		6,687			6,263			6,039			424		6.8			648		10.7
NONINTEREST INCOME
Branch fee income		377			412			347			(35)		(8.5)			30		8.6
Service and loan fee income		295			396			304			(101)		(25.5)			(9)		(3.0)
Gain on sale of SBA loans held for sale, net		83			21			241			62		295.2			(158)		(65.6)
Gain on sale of mortgage loans, net		365			312			477			53		17.0			(112)		(23.5)
BOLI income		96			102			70			(6)		(5.9)			26		37.1
Net security gains		110			22			226			88		400.0			(116)		(51.3)
Other income		200			206			160			(6)		(2.9)			40		25.0
Total noninterest income		1,526			1,471			1,825			55		3.7			(299)		(16.4)
NONINTEREST EXPENSE
Compensation and benefits		3,217			2,925			3,176			292		10.0			41		1.3
Occupancy		659			652			694			7		1.1			(35)		(5.0)
Processing and communications		582			588			561			(6)		(1.0)			21		3.7
Furniture and equipment		357			368			365			(11)		(3.0)			(8)		(2.2)
Professional services		211			194			190			17		8.8			21		11.1
Loan costs		170			229			177			(59)		(25.8)			(7)		(4.0)
OREO expenses		247			94			127			153		162.8			120		94.5
Deposit insurance		178			173			149			5		2.9			29		19.5
Advertising		151			228			120			(77)		(33.8)			31		25.8
Other expenses		486			411			567			75		18.2			(81)		(14.3)
Total noninterest expense		6,258			5,862			6,126			396		6.8			132		2.2
Income before provision for income taxes		1,955			1,872			1,738			83		4.4			217		12.5
Provision for income taxes		662			606			538			56		9.2			124		23.0
Net income		1,293			1,266			1,200			27		2.1			93		7.8
Preferred stock dividends and discount accretion		-			-			404			-		-			(404)		(100.0)
Income available to common shareholders	$	1,293		$	1,266		$	796		$	27		2.1	%	$	497		62.4	%

Effective tax rate		33.9	%		32.4	%		31.0	%

Net income per common share - Basic (1)	$	0.17		$	0.17		$	0.11
Net income per common share - Diluted (1)	$	0.17		$	0.17		$	0.10

Weighted average common shares outstanding - Basic		7,586			7,560			7,538
Weighted average common shares outstanding - Diluted		7,654			7,618			7,845

(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

March 31, 2014



	For the three months ended March 31,						Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2014			2013			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	9		$	14		$	(5)		(35.7)	%
Federal Home Loan Bank stock		47			44			3		6.8
Securities:
Taxable		726			647			79		12.2
Tax-exempt		105			120			(15)		(12.5)
Total securities		831			767			64		8.3
Loans:
SBA loans		583			777			(194)		(25.0)
SBA 504 loans		399			651			(252)		(38.7)
Commercial loans		4,601			4,001			600		15.0
Residential mortgage loans		2,058			1,550			508		32.8
Consumer loans		495			509			(14)		(2.8)
Total loans		8,136			7,488			648		8.7
Total interest income		9,023			8,313			710		8.5
INTEREST EXPENSE
Interest-bearing demand deposits		111			101			10		9.9
Savings deposits		182			177			5		2.8
Time deposits		644			546			98		17.9
Borrowed funds and subordinated debentures		799			800			(1)		(0.1)
Total interest expense		1,736			1,624			112		6.9
Net interest income		7,287			6,689			598		8.9
Provision for loan losses		600			650			(50)		(7.7)
Net interest income after provision for loan losses		6,687			6,039			648		10.7
NONINTEREST INCOME
Branch fee income		377			347			30		8.6
Service and loan fee income		295			304			(9)		(3.0)
Gain on sale of SBA loans held for sale, net		83			241			(158)		(65.6)
Gain on sale of mortgage loans, net		365			477			(112)		(23.5)
BOLI income		96			70			26		37.1
Net security gains		110			226			(116)		(51.3)
Other income		200			160			40		25.0
Total noninterest income		1,526			1,825			(299)		(16.4)
NONINTEREST EXPENSE
Compensation and benefits		3,217			3,176			41		1.3
Occupancy		659			694			(35)		(5.0)
Processing and communications		582			561			21		3.7
Furniture and equipment		357			365			(8)		(2.2)
Professional services		211			190			21		11.1
Loan costs		170			177			(7)		(4.0)
OREO expenses		247			127			120		94.5
Deposit insurance		178			149			29		19.5
Advertising		151			120			31		25.8
Other expenses		486			567			(81)		(14.3)
Total noninterest expense		6,258			6,126			132		2.2
Income before provision for income taxes		1,955			1,738			217		12.5
Provision for income taxes		662			538			124		23.0
Net income		1,293			1,200			93		7.8
Preferred stock dividends and discount accretion					404			(404)		(100.0)
Income available to common shareholders	$	1,293		$	796		$	497		62.4	%

Effective tax rate		33.9	%		31.0	%

Net income per common share - Basic (1)	$	0.17		$	0.11
Net income per common share - Diluted (1)	$	0.17		$	0.10

Weighted average common shares outstanding - Basic		7,586			7,538
Weighted average common shares outstanding - Diluted		7,654			7,845

(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

March 31, 2014


	For the three months ended
	March 31, 2014							December 31, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	42,029	$	9		0.09	%	$	46,533	$	9		0.08	%
Federal Home Loan Bank stock		3,988		47		4.78			4,009		40		3.96
Securities:
Taxable		92,808		726		3.13			89,275		585		2.62
Tax-exempt		16,841		155		3.68			16,975		157		3.70
Total securities (A)		109,649		881		3.21			106,250		742		2.79
Loans:
SBA loans		54,790		583		4.26			55,536		519		3.74
SBA 504 loans		31,719		399		5.10			33,253		408		4.87
Commercial loans		364,343		4,601		5.12			356,939		4,684		5.21
Residential mortgage loans		181,058		2,058		4.55			176,880		1,953		4.42
Consumer loans		45,939		495		4.37			45,708		462		4.01
Total loans (B)		677,849		8,136		4.85			668,316		8,026		4.78
Total interest-earning assets	$	833,515	$	9,073		4.39	%	$	825,108	$	8,817		4.25	%

Noninterest-earning assets:
Cash and due from banks		23,389							23,877
Allowance for loan losses		(13,410)							(13,653)
Other assets		43,599							43,147
Total noninterest-earning assets		53,578							53,371
Total assets	$	887,093						$	878,479

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	131,187	$	111		0.34	%	$	122,977	$	102		0.33	%
Savings deposits		266,321		182		0.28			268,745		186		0.27
Time deposits		205,130		644		1.27			186,200		598		1.27
Total interest-bearing deposits		602,638		937		0.63			577,922		886		0.60
Borrowed funds and subordinated debentures		91,265		799		3.50			91,738		817		3.48
Total interest-bearing liabilities	$	693,903	$	1,736		1.01	%	$	669,660	$	1,703		0.99	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		132,167							149,252
Other liabilities		3,169							2,946
Total noninterest-bearing liabilities		135,336							152,198
Total shareholders' equity		57,854							56,621
Total liabilities and shareholders' equity	$	887,093						$	878,479

Net interest spread			$	7,337		3.38	%			$	7,114		3.26	%
Tax-equivalent basis adjustment				(50)							(51)
Net interest income			$	7,287						$	7,063
Net interest margin						3.57	%						3.42	%

(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

March 31, 2014


	For the three months ended
	March 31, 2014							March 31, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	42,029	$	9		0.09	%	$	62,530	$	14		0.09	%
Federal Home Loan Bank stock		3,988		47		4.78			3,989		44		4.47
Securities:
Taxable		92,808		726		3.13			100,062		647		2.59
Tax-exempt		16,841		155		3.68			18,475		178		3.85
Total securities (A)		109,649		881		3.21			118,537		825		2.79
Loans:
SBA loans		54,790		583		4.26			65,386		777		4.75
SBA 504 loans		31,719		399		5.10			41,135		651		6.42
Commercial loans		364,343		4,601		5.12			304,790		4,001		5.32
Residential mortgage loans		181,058		2,058		4.55			135,886		1,550		4.56
Consumer loans		45,939		495		4.37			46,111		509		4.48
Total loans (B)		677,849		8,136		4.85			593,308		7,488		5.09
Total interest-earning assets	$	833,515	$	9,073		4.39	%	$	778,364	$	8,371		4.33	%

Noninterest-earning assets:
Cash and due from banks		23,389							19,737
Allowance for loan losses		(13,410)							(14,998)
Other assets		43,599							37,905
Total noninterest-earning assets		53,578							42,644
Total assets	$	887,093						$	821,008

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	131,187	$	111		0.34	%	$	118,668	$	101		0.35	%
Savings deposits		266,321		182		0.28			295,520		177		0.24
Time deposits		205,130		644		1.27			122,695		546		1.80
Total interest-bearing deposits		602,638		937		0.63			536,883		824		0.62
Borrowed funds and subordinated debentures		91,265		799		3.50			90,465		800		3.54
Total interest-bearing liabilities	$	693,903	$	1,736		1.01	%	$	627,348	$	1,624		1.04	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		132,167							113,000
Other liabilities		3,169							3,242
Total noninterest-bearing liabilities		135,336							116,242
Total shareholders' equity		57,854							77,418
Total liabilities and shareholders' equity	$	887,093						$	821,008

Net interest spread			$	7,337		3.38	%			$	6,747		3.29	%
Tax-equivalent basis adjustment				(50)							(58)
Net interest income			$	7,287						$	6,689
Net interest margin						3.57	%						3.52	%

(A)

(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

March 31, 2014


	For the three months ended
	March 31, 2014							March 31, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	42,029	$	9		0.09	%	$	62,530	$	14		0.09	%
Federal Home Loan Bank stock		3,988		47		4.78			3,989		44		4.47
Securities:
Taxable		92,808		726		3.13			100,062		647		2.59
Tax-exempt		16,841		155		3.68			18,475		178		3.85
Total securities (A)		109,649		881		3.21			118,537		825		2.79
Loans:
SBA loans		54,791		583		4.26			65,386		777		4.75
SBA 504 loans		31,719		399		5.10			41,135		651		6.42
Commercial loans		364,342		4,601		5.12			304,790		4,001		5.32
Residential mortgage loans		181,058		2,058		4.55			135,886		1,550		4.56
Consumer loans		45,939		495		4.37			46,111		509		4.48
Total loans (B)		677,849		8,136		4.85			593,308		7,488		5.09
Total interest-earning assets	$	833,515	$	9,073		4.39	%	$	778,364	$	8,371		4.33	%

Noninterest-earning assets:
Cash and due from banks		23,389							19,737
Allowance for loan losses		(13,410)							(14,998)
Other assets		43,599							37,905
Total noninterest-earning assets		53,578							42,644
Total assets	$	887,093						$	821,008

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	131,187	$	111		0.34	%	$	118,668	$	101		0.35	%
Savings deposits		266,321		182		0.28			295,520		177		0.24
Time deposits		205,130		644		1.27			122,695		546		1.80
Total interest-bearing deposits		602,638		937		0.63			536,883		824		0.62
Borrowed funds and subordinated debentures		91,265		799		3.50			90,465		800		3.54
Total interest-bearing liabilities	$	693,903	$	1,736		1.01	%	$	627,348	$	1,624		1.04	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		132,167							113,000
Other liabilities		3,169							3,242
Total noninterest-bearing liabilities		135,336							116,242
Total shareholders' equity		57,854							77,418
Total liabilities and shareholders' equity	$	887,093						$	821,008

Net interest spread			$	7,337		3.38	%			$	6,747		3.29	%
Tax-equivalent basis adjustment				(50)							(58)
Net interest income			$	7,287						$	6,689
Net interest margin						3.57	%						3.52	%

(A)

(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

March 31, 2014


Amounts in thousands, except percentages	March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013			March 31, 2013
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	13,141		$	13,550		$	14,309		$	14,345		$	14,758
Provision for loan losses charged to expense		600			800			600			300			650
		13,741			14,350			14,909			14,645			15,408
Less: Chargeoffs
SBA loans		54			128			211			167			570
SBA 504 loans		92			203			590			200			200
Commercial loans		454			564			253			200			375
Residential mortgage loans		172			125			125			-			125
Consumer loans		179			300			229			-			59
Total chargeoffs		951			1,320			1,408			567			1,329
Add: Recoveries
SBA loans		8			93			12			8			137
SBA 504 loans		-			3			-			154			25
Commercial loans		9			14			24			65			101
Residential mortgage loans		-			-			13			2			2
Consumer loans		-			1			-			2			1
Total recoveries		17			111			49			231			266
Net chargeoffs		934			1,209			1,359			336			1,063
Balance, end of period	$	12,807		$	13,141		$	13,550		$	14,309		$	14,345

LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	12,046		$	15,283		$	16,654		$	13,357		$	14,904
Other real estate owned ("OREO")		2,467			633			1,249			752			1,052
Nonperforming assets		14,513			15,916			17,903			14,109			15,956
Less: Amount guaranteed by SBA		1,320			540			592			736			1,863
Net nonperforming assets	$	13,193		$	15,376		$	17,311		$	13,373		$	14,093

Loans 90 days past due & still accruing	$	5		$	19		$	861		$	429		$	632

Performing Troubled Debt Restructurings (TDRs)	$	7,363		$	7,452		$	7,705		$	10,649		$	15,068
(1) Nonperforming TDRs included in nonperforming loans		448			467			1,765			1,658			1,084
Total TDRs	$	7,811		$	7,919		$	9,470		$	12,307		$	16,152

Allowance for loan losses to:
Total loans at quarter end		1.87	%		1.94	%		2.05	%		2.30	%		2.40	%
Nonperforming loans (1)		106.32			85.98			81.36			107.13			96.25
Nonperforming assets		88.25			82.56			75.69			101.42			89.90
Net nonperforming assets		97.07			85.46			78.27			107.00			101.79

QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		0.34	%		0.25	%		1.32	%		1.01	%		2.69	%
SBA 504 loans		1.18			2.39			6.16			0.47			1.73
Commercial loans		0.50			0.61			0.27			0.17			0.36
Residential mortgage loans		0.39			0.28			0.27			(0.01)			0.37
Consumer loans		1.58			2.60			1.99			(0.02)			0.51
Total loans		0.56	%		0.72	%		0.84	%		0.22	%		0.73	%

Nonperforming loans to total loans		1.76	%		2.25	%		2.52	%		2.15	%		2.50	%
Nonperforming loans and TDRs to total loans		2.84			3.35			3.69			3.86			5.02
Nonperforming assets to total loans and OREO		2.11			2.34			2.70			2.26			2.67
Nonperforming assets to total assets		1.51			1.73			2.04			1.71			1.93

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

March 31, 2014


(In thousands, except percentages and per share amounts)	March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013			March 31, 2013
SUMMARY OF INCOME:
Total interest income	$	9,023		$	8,766		$	8,474		$	8,401		$	8,313
Total interest expense		1,736			1,703			1,603			1,599			1,624
Net interest income		7,287			7,063			6,871			6,802			6,689
Provision for loan losses		600			800			600			300			650
Net interest income after provision for loan losses		6,687			6,263			6,271			6,502			6,039
Total noninterest income		1,526			1,471			1,650			1,658			1,825
Total noninterest expense		6,258			5,862			5,935			6,074			6,126
Income before provision for income taxes		1,955			1,872			1,986			2,086			1,738
Provision for income taxes		662			606			684			739			538
Net income		1,293			1,266			1,302			1,347			1,200
Preferred stock dividends and discount accretion		-			-			119			465			404
Income available to common shareholders	$	1,293		$	1,266		$	1,183		$	882		$	796

Net income per common share - Basic (1)	$	0.17		$	0.17		$	0.16		$	0.12		$	0.11
Net income per common share - Diluted (1)	$	0.17		$	0.17		$	0.15		$	0.11		$	0.10

COMMON SHARE DATA:
Market price per share	$	7.95		$	7.66		$	7.46		$	7.10		$	6.51
Dividends paid	$	0.02		$	0.01		$	0.01		$	0.01		$	-
Book value per common share	$	7.74		$	7.55		$	7.41		$	7.70		$	7.67
Weighted average common shares outstanding - Basic		7,586			7,560			7,545			7,544			7,538
Weighted average common shares outstanding - Diluted		7,654			7,618			7,822			7,911			7,845
Issued and outstanding common shares		7,602			7,577			7,546			7,544			7,548

OPERATING RATIOS (Annualized):
Return on average assets		0.59	%		0.57	%		0.62	%		0.67	%		0.59	%
Return on average equity (2)		9.06			8.87			8.25			6.11			5.65
Efficiency ratio		71.91			68.87			69.93			72.72			73.91

BALANCE SHEET DATA:
Total assets	$	961,168		$	921,118		$	876,101		$	824,575		$	827,182
Total deposits		767,624			738,698			727,112			628,369			652,117
Total loans		683,951			678,701			660,617			622,316			596,571
Total securities		109,459			107,514			106,906			111,269			119,334
Total shareholders' equity		58,810			57,173			55,939			68,287			78,157
Allowance for loan losses		(12,807)			(13,141)			(13,550)			(14,309)			(14,345)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.39	%		4.25	%		4.36	%		4.51	%		4.33	%
Interest-bearing liabilities		1.01			0.99			0.99			1.06			1.04
Net interest spread		3.38			3.26			3.37			3.45			3.29
Net interest margin		3.57			3.42			3.53			3.66			3.52

CREDIT QUALITY:
Nonperforming assets		14,513			15,916			17,903			14,109			15,956
QTD net chargeoffs (annualized) to QTD average loans		0.56	%		0.72	%		0.84	%		0.22	%		0.73	%
Allowance for loan losses to total loans		1.87			1.94			2.05			2.30			2.40
Nonperforming assets to total loans and OREO		2.11			2.34			2.70			2.26			2.67
Nonperforming assets to total assets		1.51			1.73			2.04			1.71			1.93

CAPITAL RATIOS AND OTHER:
Total equity to total assets		6.12	%		6.21	%		6.38	%		8.28	%		9.45	%
Leverage ratio		8.19			8.08			8.33			10.23			11.12
Tier 1 risk-based capital ratio		10.77			10.74			10.81			13.36			14.54
Total risk-based capital ratio		12.03			11.99			12.07			14.63			15.80
Number of banking offices		15			15			15			15			15
Number of ATMs		16			16			16			16			16
Number of employees		162			163			160			153			166

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

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/A - EX-99.1 - April 23, 2014

Attached files

UNITY BANCORP INC /NJ/ Reports