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

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8-K - 8-K - UNITY BANCORP INC /NJ/	unty-20130131x8k.htm

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

January 31, 2013

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports Increased Earnings

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $759 thousand, or $0.10 per diluted share, for the three months ended December 31, 2012, compared to $203 thousand, or $0.03 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.57% and 5.34%, respectively, compared to 0.29% and 1.51% for the same period a year ago.

For the year ended December 31, 2012, net income available to common shareholders totaled $2.6 million, or $0.34 per diluted share, compared to $988 thousand, or $0.13 per diluted share, for the same period a year ago. Return on average assets and average common equity for the year were 0.53% and 4.80%, respectively, compared to 0.31% and 1.90% for the same period a year ago.

Quarterly highlights include:

×	Improved credit quality since December 31, 2011 resulted in lower loan loss provisions as well as reduced loan collection expenses and costs to maintain other real estate owned (“OREO”).

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

×	Continued deposit product mix improvement due to growth in core demand deposits and savings deposits, while higher costing time deposits declined.

×	Further improvement in our capital ratios as we remain “well-capitalized”.

×	Opened a branch in Somerset, New Jersey on November 16, 2012.

×	Launched our mobile banking product.

James A. Hughes, President and CEO, stated, “This was a year of increased earnings as our core fundamentals continued to improve and asset quality strengthened. We had a record year of mortgage production, opened two new branches and continued to grow our noninterest-bearing deposits thereby reducing our cost of funds. The trends are very positive and I remain extremely optimistic about the long-term opportunities ahead.”

Net Interest Income

Net interest income increased $64 thousand to $6.7 million for the three months ended December 31, 2012, compared to the prior year’s quarter and decreased $1.5 million to $27.4 million for the year ended December 31, 2012 compared to the prior year. In addition, the net interest margin expanded 12 basis points to 3.51% for the quarter ended December 31, 2012, and contracted 14 basis points to 3.62% for the year ended December 31, 2012, when compared to the prior year periods.

Our net interest income continues to be influenced by the sustained low interest rate environment, which the Federal Open Market Committee (“FOMC”) of the Federal Reserve Board forecasts will remain through mid-2015. This rate environment has resulted in a tighter net interest margin as our earning assets re-price at lower rates. The yield on earning assets fell 20 basis points to 4.44% and 49 basis points to 4.63% for the quarter and year ending December 31, 2012, respectively, when compared to the same periods in 2011. Partially offsetting these declines are lower funding costs. The cost of interest-bearing liabilities decreased 35 basis points to 1.14% for the three month period and decreased 38 basis points to 1.24% for the twelve month period.

Noninterest Income

Noninterest income increased $703 thousand to $2.0 million and $1.7 million to $7.3 million for the three and twelve months ended December 31, 2012, respectively, compared to the same periods last year. These increases were driven by record levels of residential mortgage loan originations and sales. Additional factors affecting noninterest income were:

Branch fee income, which consists of deposit service charges and overdraft fees, increased $7 thousand and $83 thousand for the quarterly and annual periods, respectively. For the year ended December 31, 2012, increased overdraft fees and commercial analysis fees offset other reduced deposit account service charges.

×	Service and loan fee income increased $103 thousand and $218 thousand for the quarterly and annual periods, respectively, due to late charges, servicing income, mortgage application fees and other processing fees.

Gains on sales of SBA loans increased $148 thousand for the quarter due to higher premiums on the sale of $2.1 million in loans during the period. For the twelve month period ended December 31, 2012, SBA gains on sale decreased $274 thousand, due primarily to a lower volume of loans sold in 2012. For the year ended December 31, 2012, $6.8 million was sold compared to $13.3 million in the prior year.

Gains on sales of residential mortgage loans increased on a significantly higher volume of loan sales. For the three month period, $32.4 million in residential mortgage loans were sold compared to $26.8 million in the fourth quarter of 2011. Year-to-date, $104.0 million in residential mortgage loans were sold compared to $55.8 million in the prior year.

×	Security gains of $59 thousand and $573 thousand were realized during the quarter and full year periods, respectively.

Noninterest Expense

Noninterest expense totaled $6.1 million and $6.0 million for the three months ended December 31, 2012, and 2011, respectively. Noninterest expense decreased $221 thousand to $24.3 million for the year ended December 31, 2012, compared to $24.5 million in 2011.

Noninterest expense in the current and prior year periods included the impact of our branch network restructuring, as well as the benefit of lower loan and OREO related expenses as credit quality improved. In 2012, we opened two new branches and closed an underperforming branch. In 2011, we closed two underperforming branches. Other noteworthy expenses include:

×	Compensation and benefits expense increased $154 thousand and $779 thousand for the quarter and annual periods, respectively, due primarily to annual merit-based and replacement cost increases in compensation, increased mortgage commissions, bonuses and equity compensation.

×	Loan collection costs decreased $90 thousand and $297 thousand for the quarter and annual periods, respectively, due to lower loan legal, credit reports, and insurance and other collection related expenses.

×	OREO costs, such as losses on sales, property taxes, maintenance and legal expenses, decreased $207 thousand and $746 thousand during the quarter and annual periods, respectively as our foreclosed inventory levels declined and properties were sold at favorable prices.

×	Deposit insurance expense for the year ended December 31, 2012, decreased due to the assets-based assessment method put into place by the FDIC on April 1, 2011.

×	Advertising expenses, such as promotional activities related to our new branches and in response to increased competition within our market place, combined with participation in community events and higher direct mail costs, increased $112 thousand for the year ended December 31, 2012.

×	Other expenses increased $101 thousand and $100 thousand for the quarter and annual periods, respectively, due to higher retail losses and office supply expenses.

Financial Condition

At December 31, 2012, total assets were $819.7 million, an increase of $8.9 million from the prior year end.

×	Total securities increased $3.5 million since December 31, 2011, due to $47.0 million in security purchases, partially offset by sales and prepayments.

×	Total loans decreased $5.6 million or 0.9%, to $587.0 million at December 31, 2012. The Company plans to continue shrinking it’s out of market SBA portfolio. Future loan growth is expected in both the commercial and residential portfolios. The net decrease was the result of the following:

o	Commercial loans increased $18.5 million or 6.5%,

o	SBA 504 loans decreased $13.7 million or 24.8%,

o	SBA 7(a) loans decreased $6.3 million or 8.8%,

o	Residential mortgage loans decreased $2.0 million or 1.5%, and

o	Consumer loans decreased $2.0 million or 4.2%.

×	Core deposits, which exclude time deposits, increased $39.3 million during the year to $523.8 million, due primarily to a $19.3 million increase in municipal deposits. The net changes by product type include:

o	A $15.9 million increase in savings deposits,

o	A $13.2 million increase in noninterest-bearing demand deposits, and a

o	$10.1 million increase in interest-bearing demand deposits.

o	Time deposits decreased $34.5 million from year-end due to the maturity and planned run off of brokered deposits, as well as a high rate retail promotion that was completed late in 2008 to bolster liquidity.

×	Shareholders’ equity was $77.5 million at December 31, 2012, an increase of $4.0 million from year-end 2011, primarily due to the increase in net income.

×	Book value per common share was $7.62 as of December 31, 2012.

×	At December 31, 2012 the leverage, Tier I and Total Risk Based Capital ratios were 11.14%, 14.85% and 16.12%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

“Nonperforming assets have declined $6.5 million or 25.2% to $19.3 million since year-end 2011. Although the economy is still under stress, we expect to have continued success in resolving problem credits in 2013,” said James A. Hughes. “Many of our problem commercial and SBA relationships have been resolved and the majority of our larger problem relationships are behind us.”

×	Nonperforming assets totaled $19.3 million at December 31, 2012 or 3.28% of total loans and OREO, compared to $25.8 million or 4.33% of total loans and OREO at year-end 2011.

The allowance for loan losses totaled $14.8 million at December 31, 2012 or 2.51% of total loans. The provision for loan losses for the quarter ended December 31, 2012 was $800 thousand compared to $1.2 million for the prior year’s quarter. The provision for loan losses for the twelve months ended December 31, 2012 was $4.0 million compared to $6.8 million for the prior year.

×	Net charge-offs were $1.3 million for the three months ended December 31, 2012, compared to $1.2 million for the same period a year ago. For the twelve months ended December 31, 2012, net charge-offs were $5.6 million, compared to $4.8 million for the prior year.

×	Troubled debt restructurings (“TDRs”) decreased $6.4 million from year-end to $14.7 million due to loan payoffs. At December 31, 2012, 92.6% of our TDRs were performing.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $820 million in assets and $649 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

December 31, 2012



										December 31, 2012 vs.
										September 30, 2012		December 31, 2011
(In thousands, except percentages and per share amounts)	December 31, 2012			September 30, 2012			December 31, 2011			%		%
BALANCE SHEET DATA:
Total assets	$	819,730		$	802,675		$	810,846		2.1	%	1.1	%
Total deposits		648,760			633,126			643,971		2.5		0.7
Total loans		587,036			596,910			592,592		(1.7)		(0.9)
Total securities		111,053			106,437			107,536		4.3		3.3
Total shareholders' equity		77,510			76,387			73,558		1.5		5.4
Allowance for loan losses		(14,758)			(15,294)			(16,348)		3.5		9.7

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	1,810		$	1,802		$	816		0.4		121.8
Provision for income taxes		643			606			220		6.1		192.3
Net income		1,167			1,196			596		(2.4)		95.8
Preferred stock dividends and discount accretion		408			397			393		2.8		3.8
Income available to common shareholders	$	759		$	799		$	203		(5.0)		273.9

Net income per common share - Basic (1)	$	0.10		$	0.11		$	0.03		(9.1)		233.3
Net income per common share - Diluted (1)	$	0.10		$	0.10		$	0.03		-		233.3

Return on average assets		0.57	%		0.60	%		0.29	%	(5.0)		96.6
Return on average equity (2)		5.34	%		5.74	%		1.51	%	(7.0)		253.6
Efficiency ratio		70.66	%		68.22	%		74.90	%	3.6		(5.7)

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes	$	6,470					$	3,315				95.2
Provision for income taxes		2,226						769				189.5
Net income		4,244						2,546				66.7
Preferred stock dividends and discount accretion		1,602						1,558				2.8
Income available to common shareholders	$	2,642					$	988				167.4

Net income per common share - Basic (1)	$	0.35					$	0.13				169.2
Net income per common share - Diluted (1)	$	0.34					$	0.13				161.5

Return on average assets		0.53	%					0.31	%			71.0
Return on average equity (2)		4.80	%					1.90	%			152.6
Efficiency ratio		71.06	%					71.42	%			(0.5)

SHARE INFORMATION:
Market price per share	$	6.24		$	6.13		$	6.40		1.8		(2.5)
Dividends paid	$	-		$	-		$	-		-		-
Book value per common share	$	7.62		$	7.52		$	7.24		1.3		5.2
Average diluted shares outstanding (QTD)		7,818			7,782			7,782		0.5		0.5

CAPITAL RATIOS:
Total equity to total assets		9.46	%		9.52	%		9.07	%	(0.6)		4.3
Leverage ratio		11.14	%		11.20	%		10.44	%	(0.5)		6.7
Tier 1 risk-based capital ratio		14.85	%		14.52	%		14.33	%	2.3		3.6
Total risk-based capital ratio		16.12	%		15.78	%		15.60	%	2.2		3.3

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	19,294		$	18,790		$	25,801		2.7		(25.2)
QTD net chargeoffs (annualized) to QTD average loans		0.90	%		1.32	%		0.83	%	(31.8)		8.4
Allowance for loan losses to total loans		2.51	%		2.56	%		2.76	%	(2.0)		(9.1)
Nonperforming assets to total loans and OREO		3.28	%		3.14	%		4.33	%	4.5		(24.2)
Nonperforming assets to total assets		2.35	%		2.34	%		3.18	%	0.4	%	(26.1)	%

(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

December 31, 2012



							December 31, 2012 vs.
							September 30, 2012		December 31, 2011
(In thousands, except percentages)	December 31, 2012		September 30, 2012		December 31, 2011		%		%
ASSETS
Cash and due from banks	$	23,705	$	17,027	$	17,688	39.2	%	34.0	%
Federal funds sold and interest-bearing deposits		70,487		55,536		64,886	26.9		8.6
Cash and cash equivalents		94,192		72,563		82,574	29.8		14.1
Securities:
Securities available for sale		89,538		90,852		88,765	(1.4)		0.9
Securities held to maturity		21,515		15,585		18,771	38.0		14.6
Total securities		111,053		106,437		107,536	4.3		3.3
Loans:
SBA loans held for sale		6,937		7,708		7,668	(10.0)		(9.5)
SBA loans held to maturity		58,593		59,299		64,175	(1.2)		(8.7)
SBA 504 loans		41,438		41,771		55,108	(0.8)		(24.8)
Commercial loans		301,564		306,569		283,104	(1.6)		6.5
Residential mortgage loans		132,094		137,192		134,090	(3.7)		(1.5)
Consumer loans		46,410		44,371		48,447	4.6		(4.2)
Total loans		587,036		596,910		592,592	(1.7)		(0.9)
Allowance for loan losses		(14,758)		(15,294)		(16,348)	3.5		9.7
Net loans		572,278		581,616		576,244	(1.6)		(0.7)

Premises and equipment, net		12,062		12,016		11,350	0.4		6.3
Bank owned life insurance ("BOLI")		9,402		9,327		9,107	0.8		3.2
Deferred tax assets		5,954		6,221		6,878	(4.3)		(13.4)
Federal Home Loan Bank stock		3,989		3,989		4,088	-		(2.4)
Accrued interest receivable		3,298		3,478		3,703	(5.2)		(10.9)
Other real estate owned ("OREO")		1,826		1,456		3,032	25.4		(39.8)
Prepaid FDIC insurance		1,929		2,079		2,545	(7.2)		(24.2)
Goodwill and other intangibles		1,516		1,518		1,530	(0.1)		(0.9)
Other assets		2,231		1,975		2,259	13.0		(1.2)

Total assets	$	819,730	$	802,675	$	810,846	2.1	%	1.1	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	114,424	$	105,529	$	101,193	8.4	%	13.1	%
Interest-bearing demand deposits		114,838		104,469		104,749	9.9		9.6
Savings deposits		294,533		295,567		278,603	(0.3)		5.7
Time deposits, under $100,000		76,994		78,104		102,809	(1.4)		(25.1)
Time deposits, $100,000 and over		47,971		49,457		56,617	(3.0)		(15.3)
Total deposits		648,760		633,126		643,971	2.5		0.7

Borrowed funds		75,000		75,000		75,000	-		-
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		434		464		523	(6.5)		(17.0)
Accrued expenses and other liabilities		2,561		2,233		2,329	14.7		10.0
Total liabilities		742,220		726,288		737,288	2.2		0.7

Shareholders' equity:
Cumulative perpetual preferred stock		20,115		19,968		19,545	0.7		2.9
Common stock		54,274		54,176		53,746	0.2		1.0
Retained earnings (deficit)		1,788		1,028		(854)	73.9		309.4
Accumulated other comprehensive income		1,333		1,215		1,121	9.7		18.9
Total shareholders' equity		77,510		76,387		73,558	1.5		5.4

Total liabilities and shareholders' equity	$	819,730	$	802,675	$	810,846	2.1	%	1.1	%

Preferred shares		21		21		21
Issued and outstanding common shares		7,534		7,503		7,459

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

December 31, 2012



										December 31, 2012 vs.
	For the three months ended									September 30, 2012					December 31, 2011
(In thousands, except percentages and per share amounts)	December 31, 2012			September 30, 2012			December 31, 2011			$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	16		$	13		$	35		$	3		23.1	%	$	(19)		(54.3)	%
Federal Home Loan Bank stock		44			50			36			(6)		(12.0)			8		22.2
Securities:
Securities available for sale		604			656			645			(52)		(7.9)			(41)		(6.4)
Securities held to maturity		143			146			163			(3)		(2.1)			(20)		(12.3)
Total securities		747			802			808			(55)		(6.9)			(61)		(7.5)
Loans:
SBA loans		779			881			995			(102)		(11.6)			(216)		(21.7)
SBA 504 loans		548			647			855			(99)		(15.3)			(307)		(35.9)
Commercial loans		4,270			4,313			4,188			(43)		(1.0)			82		2.0
Residential mortgage loans		1,577			1,631			1,605			(54)		(3.3)			(28)		(1.7)
Consumer loans		521			534			611			(13)		(2.4)			(90)		(14.7)
Total loans		7,695			8,006			8,254			(311)		(3.9)			(559)		(6.8)
Total interest income		8,502			8,871			9,133			(369)		(4.2)			(631)		(6.9)
INTEREST EXPENSE
Interest-bearing demand deposits		119			108			152			11		10.2			(33)		(21.7)
Savings deposits		251			293			501			(42)		(14.3)			(250)		(49.9)
Time deposits		575			619			946			(44)		(7.1)			(371)		(39.2)
Borrowed funds and subordinated debentures		820			824			861			(4)		(0.5)			(41)		(4.8)
Total interest expense		1,765			1,844			2,460			(79)		(4.3)			(695)		(28.3)
Net interest income		6,737			7,027			6,673			(290)		(4.1)			64		1.0
Provision for loan losses		800			1,000			1,150			(200)		(20.0)			(350)		(30.4)
Net interest income after provision for loan losses		5,937			6,027			5,523			(90)		(1.5)			414		7.5
NONINTEREST INCOME
Branch fee income		397			383			390			14		3.7			7		1.8
Service and loan fee income		297			366			194			(69)		(18.9)			103		53.1
Gain on sale of SBA loans held for sale, net		262			46			114			216		469.6			148		129.8
Gain on sale of mortgage loans, net		748			662			445			86		13.0			303		68.1
BOLI income		76			74			74			2		2.7			2		2.7
Net security gains (losses)		59			7			(49)			52		742.9			108		220.4
Other income		169			236			137			(67)		(28.4)			32		23.4
Total noninterest income		2,008			1,774			1,305			234		13.2			703		53.9
NONINTEREST EXPENSE
Compensation and benefits		3,054			3,191			2,900			(137)		(4.3)			154		5.3
Occupancy		683			690			619			(7)		(1.0)			64		10.3
Processing and communications		549			544			511			5		0.9			38		7.4
Furniture and equipment		395			368			349			27		7.3			46		13.2
Professional services		192			196			217			(4)		(2.0)			(25)		(11.5)
Loan collection costs		229			182			319			47		25.8			(90)		(28.2)
OREO expenses		86			36			293			50		138.9			(207)		(70.6)
Deposit insurance		163			162			114			1		0.6			49		43.0
Advertising		210			181			217			29		16.0			(7)		(3.2)
Other expenses		574			449			473			125		27.8			101		21.4
Total noninterest expense		6,135			5,999			6,012			136		2.3			123		2.0
Income before provision for income taxes		1,810			1,802			816			8		0.4			994		121.8
Provision for income taxes		643			606			220			37		6.1			423		192.3
Net income		1,167			1,196			596			(29)		(2.4)			571		95.8
Preferred stock dividends and discount accretion		408			397			393			11		2.8			15		3.8
Income available to common shareholders	$	759		$	799		$	203		$	(40)		(5.0)	%	$	556		273.9	%

Effective tax rate		35.5	%		33.6	%		27.0	%

Net income per common share - Basic (1)	$	0.10		$	0.11		$	0.03
Net income per common share - Diluted (1)	$	0.10		$	0.10		$	0.03

Weighted average common shares outstanding - Basic		7,514			7,473			7,427
Weighted average common shares outstanding - Diluted		7,818			7,782			7,782

(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

December 31, 2012



	For the twelve months ended December 31,				Current YTD vs. Prior YTD
(In thousands, except percentages and per share amounts)	2012		2011		$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	72	$	61	$	11		18.0	%
Federal Home Loan Bank stock		189		183		6		3.3
Securities:
Securities available for sale		2,671		3,204		(533)		(16.6)
Securities held to maturity		625		787		(162)		(20.6)
Total securities		3,296		3,991		(695)		(17.4)
Loans:
SBA loans		3,430		4,665		(1,235)		(26.5)
SBA 504 loans		2,645		3,482		(837)		(24.0)
Commercial loans		16,982		17,492		(510)		(2.9)
Residential mortgage loans		6,445		7,107		(662)		(9.3)
Consumer loans		2,144		2,542		(398)		(15.7)
Total loans		31,646		35,288		(3,642)		(10.3)
Total interest income		35,203		39,523		(4,320)		(10.9)
INTEREST EXPENSE
Interest-bearing demand deposits		486		571		(85)		(14.9)
Savings deposits		1,185		2,202		(1,017)		(46.2)
Time deposits		2,796		4,067		(1,271)		(31.3)
Borrowed funds and subordinated debentures		3,307		3,711		(404)		(10.9)
Total interest expense		7,774		10,551		(2,777)		(26.3)
Net interest income		27,429		28,972		(1,543)		(5.3)
Provision for loan losses		4,000		6,800		(2,800)		(41.2)
Net interest income after provision for loan losses		23,429		22,172		1,257		5.7
NONINTEREST INCOME
Branch fee income		1,528		1,445		83		5.7
Service and loan fee income		1,252		1,034		218		21.1
Gain on sale of SBA loans held for sale, net		688		962		(274)		(28.5)
Gain on sale of mortgage loans, net		2,274		951		1,323		139.1
BOLI income		296		295		1		0.3
Net security gains		573		303		270		89.1
Other income		727		671		56		8.3
Total noninterest income		7,338		5,661		1,677		29.6
NONINTEREST EXPENSE
Compensation and benefits		12,560		11,781		779		6.6
Occupancy		2,722		2,781		(59)		(2.1)
Processing and communications		2,180		2,104		76		3.6
Furniture and equipment		1,480		1,527		(47)		(3.1)
Professional services		789		817		(28)		(3.4)
Loan collection costs		682		979		(297)		(30.3)
OREO expenses		483		1,229		(746)		(60.7)
Deposit insurance		664		775		(111)		(14.3)
Advertising		839		727		112		15.4
Other expenses		1,898		1,798		100		5.6
Total noninterest expense		24,297		24,518		(221)		(0.9)
Income before provision for income taxes		6,470		3,315		3,155		95.2
Provision for income taxes		2,226		769		1,457		189.5
Net income		4,244		2,546		1,698		66.7
Preferred stock dividends and discount accretion		1,602		1,558		44		2.8
Income available to common shareholders	$	2,642	$	988	$	1,654		167.4	%

Effective tax rate		34.4		23.2

Net income per common share - Basic (1)	$	0.35		0.13
Net income per common share - Diluted (1)	$	0.34		0.13

Weighted average common shares outstanding - Basic		7,477		7,333
Weighted average common shares outstanding - Diluted		7,794		7,735

(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

December 31, 2012


	For the three months ended
	December 31, 2012							September 30, 2012
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	61,710	$	16		0.10	%	$	40,183	$	13		0.13	%
Federal Home Loan Bank stock		3,990		44		4.39			3,989		50		4.99
Securities:
Securities available for sale		90,566		651		2.88			95,193		703		2.95
Securities held to maturity		19,232		146		3.04			16,467		152		3.69
Total securities (A)		109,798		797		2.91			111,660		855		3.06
Loans:
SBA loans		66,669		779		4.67			66,484		881		5.30
SBA 504 loans		41,584		548		5.24			44,583		647		5.77
Commercial loans		304,413		4,270		5.58			307,090		4,313		5.59
Residential mortgage loans		133,799		1,577		4.71			136,568		1,631		4.78
Consumer loans		46,571		521		4.45			46,116		534		4.61
Total loans (B)		593,036		7,695		5.17			600,841		8,006		5.31
Total interest-earning assets	$	768,534	$	8,552		4.44	%	$	756,673	$	8,924		4.70	%

Noninterest-earning assets:
Cash and due from banks		18,386							16,211
Allowance for loan losses		(15,566)							(16,508)
Other assets		38,312							40,138
Total noninterest-earning assets		41,132							39,841
Total assets	$	809,666						$	796,514

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	112,958	$	119		0.42	%	$	103,029	$	108		0.42	%
Savings deposits		287,047		251		0.35			287,054		293		0.41
Time deposits		126,233		575		1.81			131,356		619		1.87
Total interest-bearing deposits		526,238		945		0.72			521,439		1,020		0.78
Borrowed funds and subordinated debentures		90,498		820		3.55			90,465		824		3.56
Total interest-bearing liabilities	$	616,736	$	1,765		1.14	%	$	611,904	$	1,844		1.19	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		113,164							105,876
Other liabilities		3,181							3,469
Total noninterest-bearing liabilities		116,345							109,345
Total shareholders' equity		76,585							75,265
Total liabilities and shareholders' equity	$	809,666						$	796,514

Net interest spread			$	6,787		3.30	%			$	7,080		3.51	%
Tax-equivalent basis adjustment				(50)							(53)
Net interest income			$	6,737						$	7,027
Net interest margin						3.51	%						3.72	%

(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

December 31, 2012


	For the three months ended
	December 31, 2012							December 31, 2011
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	61,710	$	16		0.10	%	$	86,323	$	35		0.16	%
Federal Home Loan Bank stock		3,990		44		4.39			4,088		36		3.49
Securities:
Securities available for sale		90,566		651		2.88			87,096		700		3.21
Securities held to maturity		19,232		146		3.04			13,747		168		4.89
Total securities (A)		109,798		797		2.91			100,843		868		3.44
Loans:
SBA loans		66,669		779		4.67			74,523		995		5.34
SBA 504 loans		41,584		548		5.24			55,326		855		6.13
Commercial loans		304,413		4,270		5.58			282,963		4,188		5.87
Residential mortgage loans		133,799		1,577		4.71			135,186		1,605		4.75
Consumer loans		46,571		521		4.45			49,386		611		4.91
Total loans (B)		593,036		7,695		5.17			597,384		8,254		5.50
Total interest-earning assets	$	768,534	$	8,552		4.44	%	$	788,638	$	9,193		4.64	%

Noninterest-earning assets:
Cash and due from banks		18,386							15,000
Allowance for loan losses		(15,566)							(16,851)
Other assets		38,312							40,686
Total noninterest-earning assets		41,132							38,835
Total assets	$	809,666						$	827,473

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	112,958	$	119		0.42	%	$	107,662	$	152		0.56	%
Savings deposits		287,047		251		0.35			292,976		501		0.68
Time deposits		126,233		575		1.81			160,784		946		2.33
Total interest-bearing deposits		526,238		945		0.72			561,422		1,599		1.13
Borrowed funds and subordinated debentures		90,498		820		3.55			90,465		861		3.72
Total interest-bearing liabilities	$	616,736	$	1,765		1.14	%	$	651,887	$	2,460		1.49	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		113,164							99,672
Other liabilities		3,181							3,228
Total noninterest-bearing liabilities		116,345							102,900
Total shareholders' equity		76,585							72,686
Total liabilities and shareholders' equity	$	809,666						$	827,473

Net interest spread			$	6,787		3.30	%			$	6,733		3.15	%
Tax-equivalent basis adjustment				(50)							(60)
Net interest income			$	6,737						$	6,673
Net interest margin						3.51	%						3.39	%

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

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

UNITY BANCORP, INC.

YTD NET INTEREST MARGIN

December 31, 2012


	For the twelve months ended
	December 31, 2012							December 31, 2011
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	49,355	$	72		0.15	%	$	50,574	$	61		0.12	%
Federal Home Loan Bank stock		4,015		189		4.71			4,120		183		4.44
Securities:
Securities available for sale		97,927		2,877		2.94			97,310		3,403		3.50
Securities held to maturity		17,893		647		3.62			15,265		806		5.28
Total securities (A)		115,820		3,524		3.05			112,575		4,209		3.74
Loans:
SBA loans		68,536		3,430		5.00			82,177		4,665		5.68
SBA 504 loans		46,153		2,645		5.73			58,010		3,482		6.00
Commercial loans		299,820		16,982		5.66			284,183		17,492		6.16
Residential mortgage loans		134,214		6,445		4.80			133,477		7,107		5.32
Consumer loans		46,487		2,144		4.61			51,830		2,542		4.90
Total loans (B)		595,210		31,646		5.31			609,677		35,288		5.79
Total interest-earning assets	$	764,400	$	35,431		4.63	%	$	776,946	$	39,741		5.12	%

Noninterest-earning assets:
Cash and due from banks		16,665							16,105
Allowance for loan losses		(16,458)							(16,198)
Other assets		39,625							40,528
Total noninterest-earning assets		39,832							40,435
Total assets	$	804,232						$	817,381

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	108,825	$	486		0.45	%	$	103,574	$	571		0.55	%
Savings deposits		282,115		1,185		0.42			287,769		2,202		0.77
Time deposits		138,233		2,796		2.02			166,836		4,067		2.44
Total interest-bearing deposits		529,173		4,467		0.84			558,179		6,840		1.23
Borrowed funds and subordinated debentures		90,473		3,307		3.60			90,465		3,711		4.05
Total interest-bearing liabilities	$	619,646	$	7,774		1.24	%	$	648,644	$	10,551		1.62	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		106,412							93,875
Other liabilities		3,335							3,607
Total noninterest-bearing liabilities		109,747							97,482
Total shareholders' equity		74,839							71,255
Total liabilities and shareholders' equity	$	804,232						$	817,381

Net interest spread			$	27,657		3.39	%			$	29,190		3.50	%
Tax-equivalent basis adjustment				(228)							(218)
Net interest income			$	27,429						$	28,972
Net interest margin						3.62	%						3.76	%

(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

December 31, 2012


Amounts in thousands, except percentages	December 31, 2012			September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	15,294		$	16,284		$	16,339		$	16,348		$	16,447
Provision for loan losses charged to expense		800			1,000			1,000			1,200			1,150
		16,094			17,284			17,339			17,548			17,597
Less: Chargeoffs
SBA loans		251			254			213			615			735
SBA 504 loans		-			481			100			227			200
Commercial loans		1,190			1,428			540			346			290
Residential mortgage loans		152			65			494			113			73
Consumer loans		-			31			25			-			46
Total chargeoffs		1,593			2,259			1,372			1,301			1,344
Add: Recoveries
SBA loans		22			195			249			53			26
SBA 504 loans		50			15			15			28			-
Commercial loans		184			58			53			11			15
Residential mortgage loans		-			-			-			-			50
Consumer loans		1			1			-			-			4
Total recoveries		257			269			317			92			95
Net chargeoffs		1,336			1,990			1,055			1,209			1,249
Balance, end of period	$	14,758		$	15,294		$	16,284		$	16,339		$	16,348

LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	17,468		$	17,334		$	19,831		$	22,206		$	22,769
Other real estate owned ("OREO")		1,826			1,456			2,355			1,625			3,032
Nonperforming assets		19,294			18,790			22,186			23,831			25,801
Less: Amount guaranteed by SBA		1,849			566			526			555			939
Net nonperforming assets	$	17,445		$	18,224		$	21,660		$	23,276		$	24,862

Loans 90 days past due & still accruing	$	109		$	1,630		$	2,443		$	3,165		$	2,411

Performing Troubled Debt Restructurings (TDRs)	$	13,576		$	17,250		$	20,541		$	20,985		$	17,436
(1) Nonperforming TDRs included above		1,087			1,628			871			2,287			3,645
Total TDRs	$	14,663		$	18,878		$	21,412		$	23,272		$	21,081

Allowance for loan losses to:
Total loans at quarter end		2.51	%		2.56	%		2.69	%		2.80	%		2.76	%
Nonperforming loans (1)		84.49			88.23			82.11			73.58			71.80
Nonperforming assets		76.49			81.39			73.40			68.56			63.36
Net nonperforming assets		84.60			83.92			75.18			70.20			65.75

QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		1.37	%		0.35	%		(0.21)	%		3.15	%		3.77	%
SBA 504 loans		(0.48)			4.16			0.73			1.55			1.43
Commercial loans		1.31			1.77			0.65			0.47			0.39
Residential mortgage loans		0.45			0.19			1.49			0.34			0.07
Consumer loans		(0.01)			0.26			0.22			-			0.34
Total loans		0.90	%		1.32	%		0.71	%		0.83	%		0.83	%

Nonperforming loans to total loans		2.98	%		2.90	%		3.28	%		3.81	%		3.84	%
Nonperforming loans and TDRs to total loans		5.29			5.79			6.67			7.41			6.78
Nonperforming assets to total loans and OREO		3.28			3.14			3.65			4.08			4.33
Nonperforming assets to total assets		2.35			2.34			2.83			2.94			3.18

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

December 31, 2012


(In thousands, except percentages and per share amounts)	December 31, 2012			September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011
SUMMARY OF INCOME:
Total interest income	$	8,502		$	8,871		$	8,772		$	9,058		$	9,133
Total interest expense		1,765			1,844			1,915			2,250			2,460
Net interest income		6,737			7,027			6,857			6,808			6,673
Provision for loan losses		800			1,000			1,000			1,200			1,150
Net interest income after provision for loan losses		5,937			6,027			5,857			5,608			5,523
Total noninterest income		2,008			1,774			1,841			1,715			1,305
Total noninterest expense		6,135			5,999			6,204			5,959			6,012
Income before provision for income taxes		1,810			1,802			1,494			1,364			816
Provision for income taxes		643			606			518			459			220
Net income		1,167			1,196			976			905			596
Preferred stock dividends and discount accretion		408			397			401			396			393
Income available to common shareholders	$	759		$	799		$	575		$	509		$	203

Net income per common share - Basic (1)	$	0.10		$	0.11		$	0.08		$	0.07		$	0.03
Net income per common share - Diluted (1)	$	0.10		$	0.10		$	0.07		$	0.07		$	0.03

COMMON SHARE DATA:
Market price per share	$	6.24		$	6.13		$	6.00		$	6.24		$	6.40
Dividends paid	$	-		$	-		$	-		$	-		$	-
Book value per common share	$	7.62		$	7.52		$	7.38		$	7.28		$	7.24
Weighted average common shares outstanding - Basic		7,514			7,473			7,462			7,460			7,427
Weighted average common shares outstanding - Diluted		7,818			7,782			7,784			7,792			7,782
Issued and outstanding common shares		7,534			7,503			7,461			7,463			7,459

OPERATING RATIOS (Annualized):
Return on average assets		0.57	%		0.60	%		0.49	%		0.45	%		0.29	%
Return on average equity (2)		5.34			5.74			4.25			3.81			1.51
Efficiency ratio		70.66			68.22			73.72			71.80			74.90

BALANCE SHEET DATA:
Total assets	$	819,730		$	802,675		$	785,111		$	810,198		$	810,846
Total deposits		648,760			633,126			616,443			643,101			643,971
Total loans		587,036			596,910			604,901			582,752			592,592
Total securities		111,053			106,437			114,846			128,061			107,536
Total shareholders' equity		77,510			76,387			74,901			74,002			73,558
Allowance for loan losses		(14,758)			(15,294)			(16,284)			(16,339)			(16,348)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.44	%		4.70	%		4.70	%		4.71	%		4.64	%
Interest-bearing liabilities		1.14			1.19			1.25			1.41			1.49
Net interest spread		3.30			3.51			3.45			3.30			3.15
Net interest margin		3.51			3.72			3.68			3.56			3.39

CREDIT QUALITY:
Nonperforming assets		19,294			18,790			22,186			23,831			25,801
QTD net chargeoffs (annualized) to QTD average loans		0.90	%		1.32	%		0.71	%		0.83	%		0.83	%
Allowance for loan losses to total loans		2.51			2.56			2.69			2.80			2.76
Nonperforming assets to total loans and OREO		3.28			3.14			3.65			4.08			4.33
Nonperforming assets to total assets		2.35			2.34			2.83			2.94			3.18

CAPITAL RATIOS AND OTHER:
Total equity to total assets		9.46	%		9.52	%		9.54	%		9.13	%		9.07	%
Leverage ratio		11.14			11.20			11.08			10.67			10.44
Tier 1 risk-based capital ratio		14.85			14.52			14.22			14.44			14.33
Total risk-based capital ratio		16.12			15.78			15.49			15.71			15.60
Number of banking offices		15			15			15			15			14
Number of ATMs		16			16			16			16			15
Number of employees		165			161			169			171			171

(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).

Attached files

UNITY BANCORP INC /NJ/ Reports

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