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

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8-K - 8-K - UNITY BANCORP INC /NJ/	unty-20140724x8k.htm

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

July 24, 2014

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports 73.2% Increase in Quarterly Earnings and

68.2% Increase in Six Month Earnings

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $1.5 million, or $0.20 per diluted share, for the three months ended June 30, 2014, a 73.2% increase compared to net income available to common shareholders of $882 thousand, or $0.11 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.68% and 10.31%, respectively, compared to 0.67% and 6.11% for the same period a year ago.

Second quarter highlights include:

Loan growth of 13.9% since June 30, 2013 – 16.2% growth in commercial loans and 26.8% growth in residential mortgage loans.

Deposit growth of 15.9% since June 30, 2013 – 13.1% growth in noninterest bearing deposits.

Core earnings growth - 7.4% increase in net interest income compared to the prior year’s quarter due to strong commercial and residential loan portfolio growth.

Improved efficiency as operating expenses remain flat at $6.1 million for each quarter.

Improved credit quality metrics due to decreased nonperforming loans this quarter compared to the prior year’s quarter.

Announced common stock rights offering to provide capital for continued growth.

“I am very pleased with our second quarter results,” reported James A. Hughes, President and CEO. “We continue to have strong loan and deposit growth, our expenses are stable, and asset quality continues to improve. I look forward to reporting our continued progress as 2014 unfolds.”

For the six months ended June 30, 2014, net income available to common shareholders totaled $2.8 million, or $0.37 per diluted share, compared to $1.7 million or $0.21 per diluted share in the prior period. Return on average assets and average common equity for the six month periods were 0.64% and 9.70%, respectively, compared to 0.63% and 5.88% for the same period a year ago.

Net Interest Income

Net interest income increased $503 thousand to $7.3 million for the quarter and increased $1.1 million to $14.6 million for the six months ended June 30, 2014 compared to the prior year’s periods. The increases in each period were the result of momentum from the strong growth in commercial and residential mortgage loan volume. For example, average commercial loans increased $55.2 million and average residential mortgage loans increased $41.2 million in the second quarter 2014

compared to 2013. 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 $88.8 million increase in average time deposits.

The net interest margin decreased 17 basis points to 3.49% for the quarter ended June 30, 2014 compared to 3.66% the prior year. For the six month period, the net interest margin declined 6 basis points to 3.53%. 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 was $550 thousand in the current quarter and $1.2 million for the first six months of 2014, compared to $300 thousand and $1.0 million for the comparable prior year periods.

Noninterest Income

Noninterest income remained flat at $1.6 million for the three months ended June 30, 2014, compared to the same period last year. There was a reduced volume of residential mortgage loan sales, partially offset by increased SBA loan sales and security gains compared to the prior period. For the six months ended June 30, 2014, noninterest income decreased $316 thousand to $3.2 million due primarily to the lower volume of residential mortgage loan sales.

During the quarter, $11.1 million in residential mortgage loans were sold at a gain of $188 thousand, compared to $25.9 million sold at a gain of $547 thousand during the prior year’s quarter. Approximately, $2.6 million of the sold loans were previously originated loans from our portfolio, with the remainder consisting of new production. For the six month period, $28.6 million in residential mortgage loans were sold at a gain of $553 thousand, compared to $48.5 million sold at a gain of $1.0 million during the prior year’s period. Approximately, $10.1 million of the sold loans were previously originated loans 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 $2.3 million with net gains on sale of $255 thousand for the quarter, compared to $900 thousand sold and a gain of $86 thousand in the prior year’s quarter. On a year-to-date basis, SBA loan sales totaled $3.2 million in both periods, with net gains on sale of $337 thousand and $327 thousand in 2014 and 2013, respectively. 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 remained stable and totaled $6.1 million for each of the quarterly periods. For the six months ended June 30, 2014, noninterest expense increased $204 thousand to $12.4 million compared to the prior year period. During both periods, advertising, OREO and processing and communications expenses increased while loan costs decreases. Details of fluctuations are below.

Advertising expenses increased in both periods due to the expanded use of print, direct mail and bill board media, plus seasonal involvement in various community events.

Processing and communications expenses, which include volume driven expenses such as items processing, merchant services and postage increased as well as electronic access expenses such as data processing lines and internet access.

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

Loan legal and appraisal costs have decreased while mortgage servicing related costs have increased due to a larger portfolio.

Compensation and benefits expense decreased during the second quarter as lower compensation and mortgage commission expense offset an increase in bonus accruals and benefits expenses. Year to date compensation and benefits expense remained flat.

Occupancy expense decreased for the six month period 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. Quarter over quarter, occupancy expense remained flat.

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

Financial Condition

At June 30, 2014, total assets were $932.4 million, an increase of $11.3 million from the prior year-end:

Total securities decreased $17.0 million or 15.9%, from year-end to $90.5 million at June 30, 2014. During the quarter, we strategically sold longer dated investments in order to reduce the portfolio’s average life and duration.

Total loans increased $30.2 million or 4.4%, from year-end 2013 to $708.9 million at June 30, 2014. The majority of the growth came in our residential mortgage and commercial loan portfolios which increased $14.1 million and $12.6 million, respectively. Future loan growth is expected to be primarily in commercial and residential mortgage loans, while the Company plans to continue shrinking it’s out of market SBA portfolio.

Total deposits decreased $10.6 million or 1.4%, to $728.1 million at June 30, 2014, due primarily to a seasonal reduction in municipal interest-bearing demand and savings deposits. These decreases were partially offset by an $8.8 million increase in noninterest-bearing demand deposits and a $10.3 million increase in time deposits. The noninterest-bearing demand deposit increase consisted of commercial deposit customers. The time deposit increase was the result of our 5 year and 15 month promotion.

Shareholders’ equity was $60.5 million at June 30, 2014, an increase of $3.3 million from year-end 2013, due primarily to year-to-date net income less the dividends paid.

Book value per common share was $7.95 as of June 30, 2014.

At June 30, 2014, the leverage, Tier I and Total Risk Based Capital ratios were 8.24%, 10.86% and 12.12% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

“On July 7, 2014, we commenced our rights offering and will be raising a limited amount of capital. 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 $13.0 million at June 30, 2014, or 1.84% of total loans and OREO, compared to $15.9 million or 2.34% of total loans and OREO at year-end 2013.

OREO increased $482 thousand to $1.1 million at June 30, 2014, due to the addition of $2.9 million (7 properties) less sale proceeds of $2.4 million (5 properties).

The allowance for loan losses totaled $12.9 million at June 30, 2014, or 1.81% of total loans compared to $13.1 million and 1.94% at year end.

Net charge-offs were $499 thousand for the three months ended June 30, 2014, compared to $336 thousand for the same period a year ago. For the six months ended June 30, 2014, net charge-offs were $1.4 million in both periods.

Troubled debt restructurings (“TDRs”) decreased $213 thousand from year-end to $7.7 million due to principal pay downs. There have been no new TDRs recognized in 2014. At June 30, 2014, 90.4% of our TDRs were performing.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $932 million in assets and $728 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

June 30, 2014



										June 30, 2014 vs.
										March 31, 2014		June 30, 2013
(In thousands, except percentages and per share amounts)	June 30, 2014			March 31, 2014			June 30, 2013			%		%
BALANCE SHEET DATA:
Total assets	$	932,414		$	961,168		$	824,575		(3.0)	%	13.1	%
Total deposits		728,083			767,624			628,369		(5.2)		15.9
Total loans		708,889			683,951			622,316		3.6		13.9
Total securities		90,470			109,459			111,269		(17.3)		(18.7)
Total shareholders' equity		60,477			58,810			68,287		2.8		(11.4)
Allowance for loan losses		(12,858)			(12,807)			(14,309)		0.4		(10.1)

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	2,251		$	1,955		$	2,086		15.1		7.9
Provision for income taxes		723			662			739		9.2		(2.2)
Net income		1,528			1,293			1,347		18.2		13.4
Preferred stock dividends and discount accretion		-			-			465		-		(100.0)
Income available to common shareholders	$	1,528		$	1,293		$	882		18.2		73.2

Net income per common share - Basic (1)	$	0.20		$	0.17		$	0.12		17.6		66.7
Net income per common share - Diluted (1)	$	0.20		$	0.17		$	0.11		17.6		81.8

Return on average assets		0.68	%		0.59	%		0.67	%	15.3		1.5
Return on average equity (2)		10.31	%		9.06	%		6.11	%	13.8		68.7
Efficiency ratio		70.81	%		71.91	%		72.72	%	(1.5)		(2.6)

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes	$	4,206					$	3,824				10.0
Provision for income taxes		1,385						1,278				8.4
Net income		2,821						2,546				10.8
Preferred stock dividends and discount accretion		-						869				(100.0)
Income available to common shareholders	$	2,821					$	1,677				68.2

Net income per common share - Basic (1)	$	0.37					$	0.22				68.2
Net income per common share - Diluted (1)	$	0.37					$	0.21				76.2

Return on average assets		0.64	%					0.63	%			1.6
Return on average equity (2)		9.70	%					5.88	%			65.0
Efficiency ratio		71.36	%					73.31	%			(2.7)

SHARE INFORMATION:
Market price per share	$	9.28		$	7.95		$	7.10		16.7		30.7
Dividends paid	$	0.02		$	0.02		$	0.01		-		1.0
Book value per common share	$	7.95		$	7.74		$	7.70		2.7		3.2
Average diluted shares outstanding (QTD)		7,690			7,654			7,911		0.5		(2.8)

CAPITAL RATIOS:
Total equity to total assets		6.49	%		6.12	%		8.28	%	6.0		(21.6)
Leverage ratio		8.24	%		8.19	%		10.23	%	0.6		(19.5)
Tier 1 risk-based capital ratio		10.86	%		10.77	%		13.36	%	0.8		(18.7)
Total risk-based capital ratio		12.12	%		12.03	%		14.63	%	0.7		(17.2)

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	13,044		$	14,513		$	14,109		(10.1)		(7.5)
QTD net chargeoffs (annualized) to QTD average loans		0.29	%		0.56	%		0.22	%	(48.2)		31.8
Allowance for loan losses to total loans		1.81	%		1.87	%		2.30	%	(3.2)		(21.3)
Nonperforming assets to total loans and OREO		1.84	%		2.11	%		2.26	%	(12.8)		(18.6)
Nonperforming assets to total assets		1.40	%		1.51	%		1.71	%	(7.3)	%	(18.1)	%

(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, 2014



							June 30, 2014 vs.
							December 31, 2013		June 30, 2013
(In thousands, except percentages)	June 30, 2014		December 31, 2013		June 30, 2013		%		%
ASSETS
Cash and due from banks	$	35,197	$	24,272	$	21,860	45.0	%	61.0	%
Federal funds sold and interest-bearing deposits		60,141		75,132		34,450	(20.0)		74.6
Cash and cash equivalents		95,338		99,404		56,310	(4.1)		69.3
Securities:
Securities available for sale		68,734		81,133		84,212	(15.3)		(18.4)
Securities held to maturity		21,736		26,381		27,057	(17.6)		(19.7)
Total securities		90,470		107,514		111,269	(15.9)		(18.7)
Loans:
SBA loans held for sale		6,444		6,673		7,772	(3.4)		(17.1)
SBA loans held for investment		46,890		48,918		52,279	(4.1)		(10.3)
SBA 504 loans		34,452		31,564		39,070	9.1		(11.8)
Commercial loans		375,976		363,340		323,476	3.5		16.2
Residential mortgage loans		196,184		182,067		154,716	7.8		26.8
Consumer loans		48,943		46,139		45,003	6.1		8.8
Total loans		708,889		678,701		622,316	4.4		13.9
Allowance for loan losses		(12,858)		(13,141)		(14,309)	2.2		10.1
Net loans		696,031		665,560		608,007	4.6		14.5
Premises and equipment, net		15,469		15,672		15,823	(1.3)		(2.2)
Bank owned life insurance ("BOLI")		12,941		12,749		12,548	1.5		3.1
Deferred tax assets		6,149		6,752		6,658	(8.9)		(7.6)
Federal Home Loan Bank stock		6,378		5,392		5,527	18.3		15.4
Accrued interest receivable		3,283		3,272		3,353	0.3		(2.1)
Other real estate owned ("OREO")		1,115		633		752	76.1		48.3
Goodwill and other intangibles		1,516		1,516		1,516	-		-
Other assets		3,724		2,654		2,812	40.3		32.4
Total assets	$	932,414	$	921,118	$	824,575	1.2	%	13.1	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	144,848	$	136,035	$	128,045	6.5	%	13.1	%
Interest-bearing demand deposits		110,590		130,806		108,176	(15.5)		2.2
Savings deposits		256,991		266,503		266,168	(3.6)		(3.4)
Time deposits, under $100,000		114,605		108,258		74,950	5.9		52.9
Time deposits, $100,000 and over		101,049		97,096		51,030	4.1		98.0
Total deposits		728,083		738,698		628,369	(1.4)		15.9
Borrowed funds		125,000		107,000		110,000	16.8		13.6
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		466		454		443	2.6		5.2
Accrued expenses and other liabilities		2,923		2,328		2,011	25.6		45.4
Total liabilities		871,937		863,945		756,288	0.9		15.3
Shareholders' equity:
Cumulative perpetual preferred stock		-		-		10,209	-		(100.0)
Common stock		52,356		52,051		54,461	0.6		(3.9)
Retained earnings		8,114		5,598		3,390	44.9		139.4
Accumulated other comprehensive income (loss)		7		(476)		227	101.5		(96.9)
Total shareholders' equity		60,477		57,173		68,287	5.8		(11.4)
Total liabilities and shareholders' equity	$	932,414	$	921,118	$	824,575	1.2	%	13.1	%

Preferred shares		-		-		10
Issued and outstanding common shares		7,607		7,577		7,544

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

June 30, 2014



										June 30, 2014 vs.
	For the three months ended									March 31, 2014					June 30, 2013
(In thousands, except percentages and per share amounts)	June 30, 2014			March 31, 2014			June 30, 2013			$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	10		$	9		$	7		$	1		11.1	%	$	3		42.9	%
Federal Home Loan Bank stock		40			47			35			(7)		(14.9)			5		14.3
Securities:
Taxable		552			726			620			(174)		(24.0)			(68)		(11.0)
Tax-exempt		90			105			125			(15)		(14.3)			(35)		(28.0)
Total securities		642			831			745			(189)		(22.7)			(103)		(13.8)
Loans:
SBA loans		643			583			778			60		10.3			(135)		(17.4)
SBA 504 loans		433			399			441			34		8.5			(8)		(1.8)
Commercial loans		4,738			4,601			4,250			137		3.0			488		11.5
Residential mortgage loans		2,052			2,058			1,649			(6)		(0.3)			403		24.4
Consumer loans		544			495			496			49		9.9			48		9.7
Total loans		8,410			8,136			7,614			274		3.4			796		10.5
Total interest income		9,102			9,023			8,401			79		0.9			701		8.3
INTEREST EXPENSE
Interest-bearing demand deposits		109			111			90			(2)		(1.8)			19		21.1
Savings deposits		188			182			164			6		3.3			24		14.6
Time deposits		693			644			537			49		7.6			156		29.1
Borrowed funds and subordinated debentures		807			799			808			8		1.0			(1)		(0.1)
Total interest expense		1,797			1,736			1,599			61		3.5			198		12.4
Net interest income		7,305			7,287			6,802			18		0.2			503		7.4
Provision for loan losses		550			600			300			(50)		(8.3)			250		83.3
Net interest income after provision for loan losses		6,755			6,687			6,502			68		1.0			253		3.9
NONINTEREST INCOME
Branch fee income		342			377			348			(35)		(9.3)			(6)		(1.7)
Service and loan fee income		285			295			319			(10)		(3.4)			(34)		(10.7)
Gain on sale of SBA loans held for sale, net		255			83			86			172		207.2			169		196.5
Gain on sale of mortgage loans, net		188			365			547			(177)		(48.5)			(359)		(65.6)
BOLI income		96			96			75			-		-			21		28.0
Net security gains		268			110			108			158		143.6			160		148.1
Other income		206			200			175			6		3.0			31		17.7
Total noninterest income		1,640			1,526			1,658			114		7.5			(18)		(1.1)
NONINTEREST EXPENSE
Compensation and benefits		3,122			3,217			3,166			(95)		(3.0)			(44)		(1.4)
Occupancy		619			659			627			(40)		(6.1)			(8)		(1.3)
Processing and communications		597			582			562			15		2.6			35		6.2
Furniture and equipment		379			357			371			22		6.2			8		2.2
Professional services		247			211			234			36		17.1			13		5.6
Loan costs		174			170			228			4		2.4			(54)		(23.7)
OREO expenses		95			247			63			(152)		(61.5)			32		50.8
Deposit insurance		171			178			179			(7)		(3.9)			(8)		(4.5)
Advertising		287			151			181			136		90.1			106		58.6
Other expenses		453			486			463			(33)		(6.8)			(10)		(2.2)
Total noninterest expense		6,144			6,258			6,074			(114)		(1.8)			70		1.2
Income before provision for income taxes		2,251			1,955			2,086			296		15.1			165		7.9
Provision for income taxes		723			662			739			61		9.2			(16)		(2.2)
Net income		1,528			1,293			1,347			235		18.2			181		13.4
Preferred stock dividends and discount accretion		-			-			465			-		-			(465)		(100.0)
Income available to common shareholders	$	1,528		$	1,293		$	882		$	235		18.2	%	$	646		73.2	%

Effective tax rate		32.1	%		33.9	%		35.4	%

Net income per common share - Basic (1)	$	0.20		$	0.17		$	0.12
Net income per common share - Diluted (1)	$	0.20		$	0.17		$	0.11

Weighted average common shares outstanding - Basic		7,605			7,586			7,544
Weighted average common shares outstanding - Diluted		7,690			7,654			7,911

(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, 2014



	For the six months ended June 30,						Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2014			2013			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	19		$	22		$	(3)		(13.6)	%
Federal Home Loan Bank stock		87			78			9		11.5
Securities:
Taxable		1,278			1,267			11		0.9
Tax-exempt		195			245			(50)		(20.4)
Total securities		1,473			1,512			(39)		(2.6)
Loans:
SBA loans		1,226			1,555			(329)		(21.2)
SBA 504 loans		832			1,092			(260)		(23.8)
Commercial loans		9,340			8,251			1,089		13.2
Residential mortgage loans		4,110			3,199			911		28.5
Consumer loans		1,039			1,005			34		3.4
Total loans		16,547			15,102			1,445		9.6
Total interest income		18,126			16,714			1,412		8.4
INTEREST EXPENSE
Interest-bearing demand deposits		220			191			29		15.2
Savings deposits		370			340			30		8.8
Time deposits		1,337			1,083			254		23.5
Borrowed funds and subordinated debentures		1,606			1,609			(3)		(0.2)
Total interest expense		3,533			3,223			310		9.6
Net interest income		14,593			13,491			1,102		8.2
Provision for loan losses		1,150			950			200		21.1
Net interest income after provision for loan losses		13,443			12,541			902		7.2
NONINTEREST INCOME
Branch fee income		718			695			23		3.3
Service and loan fee income		580			623			(43)		(6.9)
Gain on sale of SBA loans held for sale, net		337			327			10		3.1
Gain on sale of mortgage loans, net		553			1,025			(472)		(46.0)
BOLI income		192			146			46		31.5
Net security gains		378			334			44		13.2
Other income		408			332			76		22.9
Total noninterest income		3,166			3,482			(316)		(9.1)
NONINTEREST EXPENSE
Compensation and benefits		6,340			6,341			(1)		-
Occupancy		1,279			1,321			(42)		(3.2)
Processing and communications		1,179			1,123			56		5.0
Furniture and equipment		735			736			(1)		(0.1)
Professional services		458			424			34		8.0
Loan costs		344			406			(62)		(15.3)
OREO expenses		342			190			152		80.0
Deposit insurance		349			328			21		6.4
Advertising		438			301			137		45.5
Other expenses		939			1,029			(90)		(8.7)
Total noninterest expense		12,403			12,199			204		1.7
Income before provision for income taxes		4,206			3,824			382		10.0
Provision for income taxes		1,385			1,278			107		8.4
Net income		2,821			2,546			275		10.8
Preferred stock dividends and discount accretion		-			869			(869)		(100.0)
Income available to common shareholders	$	2,821		$	1,677		$	1,144		68.2	%

Effective tax rate		32.9	%		33.4	%

Net income per common share - Basic (1)	$	0.37		$	0.22
Net income per common share - Diluted (1)	$	0.37		$	0.21

Weighted average common shares outstanding - Basic		7,596			7,541
Weighted average common shares outstanding - Diluted		7,672			7,881

(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, 2014


	For the three months ended
	June 30, 2014							March 31, 2014
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	47,859	$	10		0.08	%	$	42,029	$	9		0.09	%
Federal Home Loan Bank stock		4,149		40		3.87			3,988		47		4.78
Securities:
Taxable		85,598		552		2.58			92,808		726		3.13
Tax-exempt		14,608		133		3.64			16,841		155		3.68
Total securities (A)		100,206		685		2.73			109,649		881		3.21
Loans:
SBA loans		53,965		643		4.77			54,790		583		4.26
SBA 504 loans		34,415		433		5.05			31,719		399		5.10
Commercial loans		370,345		4,738		5.13			364,343		4,601		5.12
Residential mortgage loans		185,016		2,052		4.44			181,058		2,058		4.55
Consumer loans		47,737		544		4.57			45,939		495		4.37
Total loans (B)		691,478		8,410		4.87			677,849		8,136		4.85
Total interest-earning assets	$	843,692	$	9,145		4.34	%	$	833,515	$	9,073		4.39	%

Noninterest-earning assets:
Cash and due from banks		24,368							23,389
Allowance for loan losses		(13,037)							(13,410)
Other assets		45,410							43,599
Total noninterest-earning assets		56,741							53,578
Total assets	$	900,433						$	887,093

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	128,351	$	109		0.34	%	$	131,187	$	111		0.34	%
Savings deposits		261,419		188		0.29			266,321		182		0.28
Time deposits		213,122		693		1.30			205,130		644		1.27
Total interest-bearing deposits		602,892		990		0.66			602,638		937		0.63
Borrowed funds and subordinated debentures		91,069		807		3.51			91,265		799		3.50
Total interest-bearing liabilities	$	693,961	$	1,797		1.03	%	$	693,903	$	1,736		1.01	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		143,720							132,167
Other liabilities		3,332							3,169
Total noninterest-bearing liabilities		147,052							135,336
Total shareholders' equity		59,420							57,854
Total liabilities and shareholders' equity	$	900,433						$	887,093

Net interest spread			$	7,348		3.31	%			$	7,337		3.38	%
Tax-equivalent basis adjustment				(43)							(50)
Net interest income			$	7,305						$	7,287
Net interest margin						3.49	%						3.57	%

(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, 2014


	For the three months ended
	June 30, 2014							June 30, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	47,859	$	10		0.08	%	$	25,312	$	7		0.11	%
Federal Home Loan Bank stock		4,149		40		3.87			4,007		35		3.50
Securities:
Taxable		85,598		552		2.58			95,675		620		2.59
Tax-exempt		14,608		133		3.64			20,440		186		3.64
Total securities (A)		100,206		685		2.73			116,115		806		2.77
Loans:
SBA loans		53,965		643		4.77			63,007		778		4.94
SBA 504 loans		34,415		433		5.05			39,408		441		4.49
Commercial loans		370,345		4,738		5.13			315,128		4,250		5.41
Residential mortgage loans		185,016		2,052		4.44			143,835		1,649		4.59
Consumer loans		47,737		544		4.57			45,295		496		4.39
Total loans (B)		691,478		8,410		4.87			606,673		7,614		5.03
Total interest-earning assets	$	843,692	$	9,145		4.34	%	$	752,107	$	8,462		4.51	%

Noninterest-earning assets:
Cash and due from banks		24,368							22,866
Allowance for loan losses		(13,037)							(14,747)
Other assets		45,410							41,435
Total noninterest-earning assets		56,741							49,554
Total assets	$	900,433						$	801,661

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	128,351	$	109		0.34	%	$	116,414	$	90		0.31	%
Savings deposits		261,419		188		0.29			270,097		164		0.24
Time deposits		213,122		693		1.30			124,285		537		1.73
Total interest-bearing deposits		602,892		990		0.66			510,796		791		0.62
Borrowed funds and subordinated debentures		91,069		807		3.51			91,653		808		3.49
Total interest-bearing liabilities	$	693,961	$	1,797		1.03	%	$	602,449	$	1,599		1.06	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		143,720							122,635
Other liabilities		3,332							3,554
Total noninterest-bearing liabilities		147,052							126,189
Total shareholders' equity		59,420							73,023
Total liabilities and shareholders' equity	$	900,433						$	801,661

Net interest spread			$	7,348		3.31	%			$	6,863		3.45	%
Tax-equivalent basis adjustment				(43)							(61)
Net interest income			$	7,305						$	6,802
Net interest margin						3.49	%						3.66	%

(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

June 30, 2014


	For the six months ended
	June 30, 2014							June 30, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	44,960	$	19		0.09	%	$	43,818	$	22		0.10	%
Federal Home Loan Bank stock		4,069		87		4.31			3,998		78		3.93
Securities:
Taxable		89,183		1,278		2.87			97,856		1,267		2.59
Tax-exempt		15,718		289		3.68			19,463		363		3.73
Total securities (A)		104,901		1,567		2.99			117,319		1,630		2.78
Loans:
SBA loans		54,375		1,226		4.51			64,190		1,555		4.84
SBA 504 loans		33,075		832		5.07			40,266		1,092		5.47
Commercial loans		367,360		9,340		5.13			309,990		8,251		5.37
Residential mortgage loans		183,048		4,110		4.49			139,882		3,199		4.57
Consumer loans		46,843		1,039		4.47			45,700		1,005		4.43
Total loans (B)		684,701		16,547		4.86			600,028		15,102		5.06
Total interest-earning assets	$	838,631	$	18,220		4.37	%	$	765,163	$	16,832		4.42	%

Noninterest-earning assets:
Cash and due from banks		23,881							21,310
Allowance for loan losses		(13,222)							(14,872)
Other assets		44,510							39,680
Total noninterest-earning assets		55,169							46,118
Total assets	$	893,800						$	811,281

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	129,761	$	220		0.34	%	$	117,535	$	191		0.33	%
Savings deposits		263,856		370		0.28			282,738		340		0.24
Time deposits		209,148		1,337		1.29			123,495		1,083		1.77
Total interest-bearing deposits		602,765		1,927		0.64			523,768		1,614		0.62
Borrowed funds and subordinated debentures		91,167		1,606		3.50			91,063		1,609		3.51
Total interest-bearing liabilities	$	693,932	$	3,533		1.02	%	$	614,831	$	3,223		1.05	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		137,976							117,844
Other liabilities		3,251							3,398
Total noninterest-bearing liabilities		141,227							121,242
Total shareholders' equity		58,641							75,208
Total liabilities and shareholders' equity	$	893,800						$	811,281

Net interest spread			$	14,687		3.35	%			$	13,609		3.37	%
Tax-equivalent basis adjustment				(94)							(118)
Net interest income			$	14,593						$	13,491
Net interest margin						3.53	%						3.59	%

(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

June 30, 2014


Amounts in thousands, except percentages	June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	12,807		$	13,141		$	13,550		$	14,309		$	14,345
Provision for loan losses charged to expense		550			600			800			600			300
		13,357			13,741			14,350			14,909			14,645
Less: Chargeoffs
SBA loans		199			54			128			211			167
SBA 504 loans		-			92			203			590			200
Commercial loans		134			454			564			253			200
Residential mortgage loans		5			172			125			125			-
Consumer loans		203			179			300			229			-
Total chargeoffs		541			951			1,320			1,408			567
Add: Recoveries
SBA loans		10			8			93			12			8
SBA 504 loans		-			-			3			-			154
Commercial loans		31			9			14			24			65
Residential mortgage loans		-			-			-			13			2
Consumer loans		1			-			1			-			2
Total recoveries		42			17			111			49			231
Net chargeoffs		499			934			1,209			1,359			336
Balance, end of period	$	12,858		$	12,807		$	13,141		$	13,550		$	14,309

LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	11,929		$	12,046		$	15,283		$	16,654		$	13,357
Other real estate owned ("OREO")		1,115			2,467			633			1,249			752
Nonperforming assets		13,044			14,513			15,916			17,903			14,109
Less: Amount guaranteed by SBA		2,305			1,320			540			592			736
Net nonperforming assets	$	10,739		$	13,193		$	15,376		$	17,311		$	13,373

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

Performing Troubled Debt Restructurings (TDRs)	$	6,965		$	7,363		$	7,452		$	7,705		$	10,649
(1) Nonperforming TDRs included in nonperforming loans		741			448			467			1,765			1,658
Total TDRs	$	7,706		$	7,811		$	7,919		$	9,470		$	12,307

Allowance for loan losses to:
Total loans at quarter end		1.81	%		1.87	%		1.94	%		2.05	%		2.30	%
Nonperforming loans (1)		107.79			106.32			85.98			81.36			107.13
Nonperforming assets		98.57			88.25			82.56			75.69			101.42
Net nonperforming assets		119.73			97.07			85.46			78.27			107.00

QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		1.40	%		0.34	%		0.25	%		1.32	%		1.01	%
SBA 504 loans		-			1.18			2.39			6.16			0.47
Commercial loans		0.11			0.50			0.61			0.27			0.17
Residential mortgage loans		0.01			0.39			0.28			0.27			(0.01)
Consumer loans		1.70			1.58			2.60			1.99			(0.02)
Total loans		0.29	%		0.56	%		0.72	%		0.84	%		0.22	%

Nonperforming loans to total loans		1.68	%		1.76	%		2.25	%		2.52	%		2.15	%
Nonperforming loans and TDRs to total loans		2.67			2.84			3.35			3.69			3.86
Nonperforming assets to total loans and OREO		1.84			2.11			2.34			2.70			2.26
Nonperforming assets to total assets		1.40			1.51			1.73			2.04			1.71

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

June 30, 2014


(In thousands, except percentages and per share amounts)	June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013
SUMMARY OF INCOME:
Total interest income	$	9,102		$	9,023		$	8,766		$	8,474		$	8,401
Total interest expense		1,797			1,736			1,703			1,603			1,599
Net interest income		7,305			7,287			7,063			6,871			6,802
Provision for loan losses		550			600			800			600			300
Net interest income after provision for loan losses		6,755			6,687			6,263			6,271			6,502
Total noninterest income		1,640			1,526			1,471			1,650			1,658
Total noninterest expense		6,144			6,258			5,862			5,935			6,074
Income before provision for income taxes		2,251			1,955			1,872			1,986			2,086
Provision for income taxes		723			662			606			684			739
Net income		1,528			1,293			1,266			1,302			1,347
Preferred stock dividends and discount accretion		-			-			-			119			465
Income available to common shareholders	$	1,528		$	1,293		$	1,266		$	1,183		$	882

Net income per common share - Basic (1)	$	0.20		$	0.17		$	0.17		$	0.16		$	0.12
Net income per common share - Diluted (1)	$	0.20		$	0.17		$	0.17		$	0.15		$	0.11

COMMON SHARE DATA:
Market price per share	$	9.28		$	7.95		$	7.66		$	7.46		$	7.10
Dividends paid	$	0.02		$	0.02		$	0.01		$	0.01		$	0.01
Book value per common share	$	7.95		$	7.74		$	7.55		$	7.41		$	7.70
Weighted average common shares outstanding - Basic		7,605			7,586			7,560			7,545			7,544
Weighted average common shares outstanding - Diluted		7,690			7,654			7,618			7,822			7,911
Issued and outstanding common shares		7,607			7,602			7,577			7,546			7,544

OPERATING RATIOS (Annualized):
Return on average assets		0.68	%		0.59	%		0.57	%		0.62	%		0.67	%
Return on average equity (2)		10.31			9.06			8.87			8.25			6.11
Efficiency ratio		70.81			71.91			68.87			69.93			72.72

BALANCE SHEET DATA:
Total assets	$	932,414		$	961,168		$	921,118		$	876,101		$	824,575
Total deposits		728,083			767,624			738,698			727,112			628,369
Total loans		708,889			683,951			678,701			660,617			622,316
Total securities		90,470			109,459			107,514			106,906			111,269
Total shareholders' equity		60,477			58,810			57,173			55,939			68,287
Allowance for loan losses		(12,858)			(12,807)			(13,141)			(13,550)			(14,309)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.34	%		4.39	%		4.25	%		4.36	%		4.51	%
Interest-bearing liabilities		1.03			1.01			0.99			0.99			1.06
Net interest spread		3.31			3.38			3.26			3.37			3.45
Net interest margin		3.49			3.57			3.42			3.53			3.66

CREDIT QUALITY:
Nonperforming assets		13,044			14,513			15,916			17,903			14,109
QTD net chargeoffs (annualized) to QTD average loans		0.29	%		0.56	%		0.72	%		0.84	%		0.22	%
Allowance for loan losses to total loans		1.81			1.87			1.94			2.05			2.30
Nonperforming assets to total loans and OREO		1.84			2.11			2.34			2.70			2.26
Nonperforming assets to total assets		1.40			1.51			1.73			2.04			1.71

CAPITAL RATIOS AND OTHER:
Total equity to total assets		6.49	%		6.12	%		6.21	%		6.38	%		8.28	%
Leverage ratio		8.24			8.19			8.08			8.33			10.23
Tier 1 risk-based capital ratio		10.86			10.77			10.74			10.81			13.36
Total risk-based capital ratio		12.12			12.03			11.99			12.07			14.63
Number of banking offices		15			15			15			15			15
Number of ATMs		16			16			16			16			16
Number of employees		171			162			163			160			153

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 - EX-99.1 - July 24, 2014

Attached files

UNITY BANCORP INC /NJ/ Reports