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

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8-K - 8-K - UNITY BANCORP INC /NJ/	unty-20141023x8k.htm

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800-618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:

October 23, 2014

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports 59.4% Increase in Quarterly Earnings and

64.6% Increase in Year to Date Earnings

Clinton, NJ - Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $1.9 million, or $0.24 per diluted share, for the three months ended September 30, 2014, a 59.4% increase compared to net income available to common shareholders of $1.2 million, or $0.15 per diluted share, for the same period a year ago. Return on average assets and average common equity for the quarter were 0.82% and 11.89%, respectively, compared to 0.62% and 8.25% for the same period a year ago.

Third quarter highlights include:

Completed common stock rights offering which was over subscribed and resulted in $6.2 million in additional capital to provide for continued growth.

Robust loan growth of 12.7% since September 30, 2013 – 22.1% growth in residential mortgage loans, 21.1% growth consumer loans and 12.3% growth in commercial loans.

Strong deposit growth of 7.5% since September 30, 2013.

Core earnings growth – 11.1% increase in net interest income compared to the prior year’s quarter due to strong commercial, residential and consumer loan portfolio growth.

Net interest margin of 3.56% this quarter compared to 3.53% in the prior year’s quarter.

Improved credit quality metrics due to a 32.7% decrease in nonperforming loans this quarter compared to the prior year’s quarter.

Increased our quarterly dividend to common shareholders from $.02 per share to $.03 per share.

“This was a record quarter and I am very pleased with our results,” reported James A. Hughes, President and CEO. “In addition to a successful capital raise of $6.2 million, which was oversubscribed by $10.0 million, we continued to have strong loan and deposit growth, which produced top line revenue growth. I look forward to reporting a very successful 2014.”

For the nine months ended September 30, 2014, net income available to common shareholders totaled $4.7 million, or $0.61 per diluted share, compared to $2.9 million or $0.36 per diluted share in the prior period. Return on average assets and average common equity for the nine month periods were 0.70% and 10.47%, respectively, compared to 0.63% and 6.67% for the same period a year ago.

Net Interest Income

Net interest income increased $761 thousand to $7.6 million for the quarter and increased $1.9 million to $22.2 million for the nine months ended September 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. Average commercial loans increased $45.6 million and average residential mortgage loans increased $38.0 million in the third quarter 2014 compared to the comparable quarter in 2013. The volume driven loan interest income increase offset the impact of a smaller investment portfolio and the increase in interest paid on deposits due to the $71.1 million increase in average time deposits.

The net interest margin increased 3 basis points to 3.56% for the quarter ended September 30, 2014 compared to 3.53% the prior year. For the nine month period, the net interest margin declined 3 basis points to 3.54%. We expect net interest income to continue to expand in future quarters due to strong loan growth as our net interest margin remains stable.

Provision for Loan Losses

The provision for loan losses was $550 thousand in the current quarter and $1.7 million for the first nine months of 2014, compared to $600 thousand and $1.6 million for the comparable prior year periods.

Noninterest Income

Noninterest income increased $203 thousand to $1.9 million for the three months ended September 30, 2014, compared to the same period last year. The increase was primarily due to a $305 thousand or $0.04 per diluted share, death benefit received on BOLI. Excluding the BOLI death benefit, noninterest income would have been $1.5 million for the quarter. Quarterly noninterest income saw declines in service and loan fee income and gains on mortgage loan sales. For the nine months ended September 30, 2014, noninterest income decreased $113 thousand to $5.0 million.

During the quarter, $16.5 million in residential mortgage loans were sold at a gain of $263 thousand, compared to $14.1 million sold at a gain of $314 thousand during the prior year’s quarter. Approximately $3.7 million of the sold loans were previously originated loans from our portfolio that were sold at par to reduce interest rate risk. For the nine month period, $45.1 million in residential mortgage loans were sold at a gain of $816 thousand, compared to $62.6 million sold at a gain of $1.3 million during the prior year’s period. All residential mortgage loans that are held in portfolio for long term investment are adjustable rate mortgages or 15 year fully amortizing mortgages.

SBA loan sales totaled $3.2 million with net gains on sale of $295 thousand for the quarter, compared to $3.1 million sold and a gain of $280 thousand in the prior year’s quarter. On a year-to-date basis, SBA loan sales totaled $6.4 million and $6.3 million with net gains on sale of $633 thousand and $607 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.

Service and loan fee income decreased for the quarter and year to date periods due to lower SBA loan servicing income as the volume of serviced loans declines, reduced late charges, payoff and prepayment penalties were partially offset by increased processing fees.

Noninterest Expense

Noninterest expense increased $306 thousand to $6.2 million for the quarter and $510 thousand to $18.6 million for the nine months ended September 30, 2014. The primary drivers of the increases during both periods were compensation, processing and communications and advertising expenses. Details of significant fluctuations are below.

Compensation and benefits expenses increased in both periods primarily due to higher salary expense as we expand our commercial lending staff and increased benefits costs such as medical insurance. For the nine month period, bonus and equity related compensation expense increased while the mortgage commissions decreased as the volume of sold loans decreased.

Processing and communications expenses continue to expand as we add products and services to remain competitive. This category includes the rising costs of providing our customers with products and services such as electronic banking, online bill payment, ATM/debit cards, international wires and foreign currency. In addition, it includes the associated rise in data processing costs of our core banking system and electronic access expenses such as communication line costs.

Advertising expenses increased in both periods due to the use of television and radio media, core deposit promotional expenses as well as seasonal involvement in various community events.

OREO expenses decreased this quarter but remain elevated for the nine month period 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.

Financial Condition

At September 30, 2014, total assets were $969.6 million, an increase of $48.5 million from the prior year-end:

Total securities decreased $20.6 million or 19.2%, from year-end to $86.9 million at September 30, 2014. During the second quarter, we strategically sold longer dated investments in order to reduce the portfolio’s average life and duration.

Total loans increased $65.7 million or 9.7%, from year-end 2013 to $744.4 million at September 30, 2014. The majority of the growth came in our residential mortgage, commercial and consumer loan portfolios which increased $29.4 million, $28.0 million and $9.0 million, respectively. Future loan growth is expected to be primarily in commercial, residential mortgage and consumer loans, while the Company plans to continue shrinking it’s out of market SBA portfolio.

Total deposits increased $43.2 million or 5.9%, to $781.9 million at September 30, 2014, due primarily to an increase in savings, time deposits and noninterest-bearing demand deposits partially offset by a decline in interest-bearing demand deposits. Savings deposits increased due to our promotion during the quarter while time deposits have increased in response to our 15 month and 5 year term promotions. The noninterest-bearing demand deposit increase consists of commercial deposit customer relationships. Partially offsetting these increases was a decline in municipal interest-bearing demand deposits.

Shareholders’ equity was $68.4 million at September 30, 2014, an increase of $11.2 million from year-end 2013, due primarily to the $6.2 million net proceeds from the rights offering which was oversubscribed and completed during the third quarter, plus year-to-date net income less the dividends paid.

Book value per common share was $8.17 as of September 30, 2014.

At September 30, 2014, the leverage, Tier I and Total Risk Based Capital ratios were 8.96%, 11.58% and 12.84% respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

Nonperforming assets totaled $12.9 million at September 30, 2014, or 1.73% of total loans and OREO, compared to $15.9 million or 2.34% of total loans and OREO at year-end 2013. During the quarter the Company transferred two loans into nonaccrual totaling $4.3 million. Both of these loans are well secured and losses, if any, are not expected to be material.

OREO increased $1.0 million to $1.7 million at September 30, 2014, due to the addition of $4.3 million (12 properties) less sale proceeds of $2.8 million (9 properties).

The allowance for loan losses totaled $12.9 million at September 30, 2014, or 1.74% of total loans compared to $13.1 million and 1.94% at year end.

Net charge-offs were $490 thousand for the three months ended September 30, 2014, compared to $1.4 million for the same period a year ago. For the nine months ended September 30, 2014, net charge-offs were $1.9 million and $2.8 million, respectively.

Troubled debt restructurings (“TDRs”) decreased $252 thousand from year-end to $7.7 million due to principal pay downs. There have been no new TDRs recognized in 2014. There was one TDR transferred to nonaccrual status during the quarter.

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $970 million in assets and $782 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

September 30, 2014



										September 30, 2014 vs.
										June 30, 2014		September 30, 2013
(In thousands, except percentages and per share amounts)	September 30, 2014			June 30, 2014			September 30, 2013			%		%
BALANCE SHEET DATA:
Total assets	$	969,593		$	932,414		$	876,101		4.0	%	10.7	%
Total deposits		781,920			728,083			727,112		7.4		7.5
Total loans		744,366			708,889			660,617		5.0		12.7
Total securities		86,879			90,470			106,906		(4.0)		(18.7)
Total shareholders' equity		68,384			60,477			55,939		13.1		22.2
Allowance for loan losses		(12,918)			(12,858)			(13,550)		0.5		(4.7)

FINANCIAL DATA - QUARTER TO DATE:
Income before provision for income taxes	$	2,694		$	2,251		$	1,986		19.7		35.6
Provision for income taxes		808			723			684		11.8		18.1
Net income		1,886			1,528			1,302		23.4		44.9
Preferred stock dividends and discount accretion		-			-			119		-		(100.0)
Income available to common shareholders	$	1,886		$	1,528		$	1,183		23.4		59.4

Net income per common share - Basic (1)	$	0.24		$	0.20		$	0.16		20.0		50.0
Net income per common share - Diluted (1)	$	0.24		$	0.20		$	0.15		20.0		60.0

Return on average assets		0.82	%		0.68	%		0.62	%	20.6		32.3
Return on average equity (2)		11.89	%		10.31	%		8.25	%	15.3		44.1
Efficiency ratio		65.80	%		70.81	%		69.93	%	(7.1)		(5.9)

FINANCIAL DATA - YEAR TO DATE:
Income before provision for income taxes	$	6,900					$	5,810				18.8
Provision for income taxes		2,193						1,962				11.8
Net income		4,707						3,848				22.3
Preferred stock dividends and discount accretion		-						988				(100.0)
Income available to common shareholders	$	4,707					$	2,860				64.6

Net income per common share - Basic (1)	$	0.61					$	0.38				60.5
Net income per common share - Diluted (1)	$	0.61					$	0.36				69.4

Return on average assets		0.70	%					0.63	%			11.1
Return on average equity (2)		10.47	%					6.67	%			57.0
Efficiency ratio		69.40	%					72.17	%			(3.8)

SHARE INFORMATION:
Market price per share	$	9.63		$	9.28		$	7.46		3.8		29.1
Dividends paid	$	0.03		$	0.02		$	0.01		0.5		2.0
Book value per common share	$	8.17		$	7.95		$	7.41		2.8		10.3
Average diluted shares outstanding (QTD)		7,946			7,690			7,822		3.3		1.6

CAPITAL RATIOS:
Total equity to total assets		7.05	%		6.49	%		6.38	%	8.6		10.5
Leverage ratio		8.96	%		8.24	%		8.33	%	8.7		7.6
Tier 1 risk-based capital ratio		11.58	%		10.86	%		10.81	%	6.6		7.1
Total risk-based capital ratio		12.84	%		12.12	%		12.07	%	5.9		6.4

CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	12,870		$	13,044		$	17,903		(1.3)		(28.1)

QTD net chargeoffs (annualized) to QTD average lons	0.27	%	0.29	%	0.84	%	(6.9)		(67.9)
Allowance for loan losses to total loans	1.74	%	1.81	%	2.05	%	(3.9)		(15.1)
Nonperforming assets to total loans and OREO	1.73	%	1.84	%	2.70	%	(6.0)		(35.9)
Nonperforming assets to total assets	1.33	%	1.40	%	2.04	%	(5.0)	%	(34.8)	%

(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

September 30, 2014



							September 30, 2014 vs.
							December 31, 2013		September 30, 2013
(In thousands, except percentages)	September 30, 2014		December 31, 2013		September 30, 2013		%		%
ASSETS
Cash and due from banks	$	29,384	$	24,272	$	27,602	21.1	%	6.5	%
Federal funds sold and interest-bearing deposits		72,205		75,132		47,124	(3.9)		53.2
Cash and cash equivalents		101,589		99,404		74,726	2.2		35.9
Securities:
Securities available for sale		66,054		81,133		80,926	(18.6)		(18.4)
Securities held to maturity		20,825		26,381		25,980	(21.1)		(19.8)
Total securities		86,879		107,514		106,906	(19.2)		(18.7)
Loans:
SBA loans held for sale		7,835		6,673		5,893	17.4		33.0
SBA loans held for investment		44,502		48,918		50,445	(9.0)		(11.8)
SBA 504 loans		34,152		31,564		37,041	8.2		(7.8)
Commercial loans		391,338		363,340		348,625	7.7		12.3
Residential mortgage loans		211,450		182,067		173,129	16.1		22.1
Consumer loans		55,089		46,139		45,484	19.4		21.1
Total loans		744,366		678,701		660,617	9.7		12.7
Allowance for loan losses		(12,918)		(13,141)		(13,550)	1.7		4.7
Net loans		731,448		665,560		647,067	9.9		13.0
Premises and equipment, net		15,420		15,672		15,671	(1.6)		(1.6)
Bank owned life insurance ("BOLI")		12,907		12,749		12,648	1.2		2.0
Deferred tax assets		6,066		6,752		6,880	(10.2)		(11.8)
Federal Home Loan Bank stock		4,907		5,392		3,952	(9.0)		24.2
Accrued interest receivable		3,422		3,272		3,131	4.6		9.3
Other real estate owned ("OREO")		1,658		633		1,249	161.9		32.7
Goodwill and other intangibles		1,516		1,516		1,516	-		-
Other assets		3,781		2,654		2,355	42.5		60.6
Total assets	$	969,593	$	921,118	$	876,101	5.3	%	10.7	%

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	149,272	$	136,035	$	163,617	9.7	%	(8.8)	%
Interest-bearing demand deposits		117,260		130,806		119,579	(10.4)		(1.9)
Savings deposits		292,108		266,503		280,892	9.6		4.0
Time deposits, under $100,000		115,143		108,258		95,990	6.4		20.0
Time deposits, $100,000 and over		108,137		97,096		67,034	11.4		61.3
Total deposits		781,920		738,698		727,112	5.9		7.5
Borrowed funds		100,000		107,000		75,000	(6.5)		33.3
Subordinated debentures		15,465		15,465		15,465	-		-
Accrued interest payable		476		454		430	4.8		10.7
Accrued expenses and other liabilities		3,348		2,328		2,155	43.8		55.4
Total liabilities		901,209		863,945		820,162	4.3		9.9
Shareholders' equity:
Common stock		58,638		52,051		51,944	12.7		12.9
Retained earnings		9,751		5,598		4,408	74.2		121.2
Accumulated other comprehensive loss		(5)		(476)		(413)	98.9		98.8
Total shareholders' equity		68,384		57,173		55,939	19.6		22.2
Total liabilities and shareholders' equity	$	969,593	$	921,118	$	876,101	5.3	%	10.7	%

Issued and outstanding common shares		8,370		7,577		7,546

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2014



							September 30, 2014 vs.
	For the three months ended						June 30, 2014					September 30, 2013
(In thousands, except percentages and per share amounts)	September 30, 2014		June 30, 2014		September 30, 2013		$		%			$		%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	12	$	10	$	9	$	2		20.0	%	$	3		33.3	%
Federal Home Loan Bank stock		40		40		40		-		-			-		-
Securities:
Taxable		461		552		591		(91)		(16.5)			(130)		(22.0)
Tax-exempt		81		90		109		(9)		(10.0)			(28)		(25.7)
Total securities		542		642		700		(100)		(15.6)			(158)		(22.6)
Loans:
SBA loans		636		643		586		(7)		(1.1)			50		8.5
SBA 504 loans		419		433		411		(14)		(3.2)			8		1.9
Commercial loans		4,926		4,738		4,387		188		4.0			539		12.3
Residential mortgage loans		2,327		2,052		1,861		275		13.4			466		25.0
Consumer loans		589		544		480		45		8.3			109		22.7
Total loans		8,897		8,410		7,725		487		5.8			1,172		15.2
Total interest income		9,491		9,102		8,474		389		4.3			1,017		12.0
INTEREST EXPENSE
Interest-bearing demand deposits		98		109		90		(11)		(10.1)			8		8.9
Savings deposits		216		188		183		28		14.9			33		18.0
Time deposits		725		693		510		32		4.6			215		42.2
Borrowed funds and subordinated debentures		820		807		820		13		1.6			-		-
Total interest expense		1,859		1,797		1,603		62		3.5			256		16.0
Net interest income		7,632		7,305		6,871		327		4.5			761		11.1
Provision for loan losses		550		550		600		-		-			(50)		(8.3)
Net interest income after provision for loan losses		7,082		6,755		6,271		327		4.8			811		12.9
NONINTEREST INCOME
Branch fee income		388		342		398		46		13.5			(10)		(2.5)
Service and loan fee income		292		285		351		7		2.5			(59)		(16.8)
Gain on sale of SBA loans held for sale, net		295		255		280		40		15.7			15		5.4
Gain on sale of mortgage loans, net		263		188		314		75		39.9			(51)		(16.2)
BOLI income		400		96		100		304		316.7			300		300.0
Net security gains		-		268		34		(268)		(100.0)			(34)		(100.0)
Other income		215		206		173		9		4.4			42		24.3
Total noninterest income		1,853		1,640		1,650		213		13.0			203		12.3
NONINTEREST EXPENSE
Compensation and benefits		3,214		3,122		2,984		92		2.9			230		7.7
Occupancy		604		619		598		(15)		(2.4)			6		1.0
Processing and communications		667		597		598		70		11.7			69		11.5
Furniture and equipment		377		379		374		(2)		(0.5)			3		0.8
Professional services		159		247		210		(88)		(35.6)			(51)		(24.3)
Loan costs		225		174		188		51		29.3			37		19.7
OREO expenses		71		95		174		(24)		(25.3)			(103)		(59.2)
Deposit insurance		166		171		165		(5)		(2.9)			1		0.6
Advertising		291		287		218		4		1.4			73		33.5
Other expenses		467		453		426		14		3.1			41		9.6
Total noninterest expense		6,241		6,144		5,935		97		1.6			306		5.2
Income before provision for income taxes		2,694		2,251		1,986		443		19.7			708		35.6
Provision for income taxes		808		723		684		85		11.8			124		18.1
Net income		1,886		1,528		1,302		358		23.4			584		44.9
Preferred stock dividends and discount accretion		-		-		119		-		-			(119)		(100.0)

Income available to common shareholders	$	1,886		$	1,528		$	1,183		$	358	23.4	%	$	703	59.4	%

Effective tax rate		30.0	%		32.1	%		34.4	%

Net income per common share - Basic (1)	$	0.24		$	0.20		$	0.16
Net income per common share - Diluted (1)	$	0.24		$	0.20		$	0.15

Weighted average common shares outstanding - Basic		7,847			7,605			7,545
Weighted average common shares outstanding - Diluted		7,946			7,690			7,822

(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

September 30, 2014



	For the nine months ended September 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	$	31		$	31		$	-		-	%
Federal Home Loan Bank stock		127			118			9		7.6
Securities:
Taxable		1,740			1,858			(118)		(6.4)
Tax-exempt		275			354			(79)		(22.3)
Total securities		2,015			2,212			(197)		(8.9)
Loans:
SBA loans		1,863			2,141			(278)		(13.0)
SBA 504 loans		1,251			1,503			(252)		(16.8)
Commercial loans		14,264			12,638			1,626		12.9
Residential mortgage loans		6,438			5,060			1,378		27.2
Consumer loans		1,628			1,485			143		9.6
Total loans		25,444			22,827			2,617		11.5
Total interest income		27,617			25,188			2,429		9.6
INTEREST EXPENSE
Interest-bearing demand deposits		318			281			37		13.2
Savings deposits		586			524			62		11.8
Time deposits		2,062			1,593			469		29.4
Borrowed funds and subordinated debentures		2,426			2,428			(2)		(0.1)
Total interest expense		5,392			4,826			566		11.7
Net interest income		22,225			20,362			1,863		9.1
Provision for loan losses		1,700			1,550			150		9.7
Net interest income after provision for loan losses		20,525			18,812			1,713		9.1
NONINTEREST INCOME
Branch fee income		1,106			1,093			13		1.2
Service and loan fee income		872			975			(103)		(10.6)
Gain on sale of SBA loans held for sale, net		633			607			26		4.3
Gain on sale of mortgage loans, net		816			1,339			(523)		(39.1)
BOLI income		593			246			347		141.1
Net security gains		378			367			11		3.0
Other income		621			505			116		23.0
Total noninterest income		5,019			5,132			(113)		(2.2)
NONINTEREST EXPENSE
Compensation and benefits		9,553			9,325			228		2.4
Occupancy		1,882			1,918			(36)		(1.9)
Processing and communications		1,847			1,720			127		7.4
Furniture and equipment		1,112			1,110			2		0.2
Professional services		617			634			(17)		(2.7)
Loan costs		569			594			(25)		(4.2)
OREO expenses		414			364			50		13.7
Deposit insurance		515			493			22		4.5
Advertising		729			519			210		40.5
Other expenses		1,406			1,457			(51)		(3.5)
Total noninterest expense		18,644			18,134			510		2.8
Income before provision for income taxes		6,900			5,810			1,090		18.8
Provision for income taxes		2,193			1,962			231		11.8
Net income		4,707			3,848			859		22.3
Preferred stock dividends and discount accretion		-			988			(988)		(100.0)
Income available to common shareholders	$	4,707		$	2,860		$	1,847		64.6	%

Effective tax rate		31.8	%		33.8	%

Net income per common share - Basic (1)	$	0.61		$	0.38
Net income per common share - Diluted (1)	$	0.61		$	0.36

Weighted average common shares outstanding - Basic		7,680			7,542
Weighted average common shares outstanding - Diluted		7,765			7,867

(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

September 30, 2014


	For the three months ended
	September 30, 2014							June 30, 2014
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	38,754	$	12		0.12	%	$	47,859	$	10		0.08	%
Federal Home Loan Bank stock		3,948		40		4.02			4,149		40		3.87
Securities:
Taxable		75,685		461		2.44			85,598		552		2.58
Tax-exempt		13,348		119		3.57			14,608		133		3.64
Total securities (A)		89,033		580		2.61			100,206		685		2.73
Loans:
SBA loans		53,400		636		4.76			53,965		643		4.77
SBA 504 loans		34,310		419		4.85			34,415		433		5.05
Commercial loans		380,983		4,926		5.13			370,345		4,738		5.13
Residential mortgage loans		201,793		2,327		4.61			185,016		2,052		4.44
Consumer loans		53,000		589		4.41			47,737		544		4.57
Total loans (B)		723,486		8,897		4.89			691,478		8,410		4.87
Total interest-earning assets	$	855,221	$	9,529		4.43	%	$	843,692	$	9,145		4.34	%

Noninterest-earning assets:
Cash and due from banks		29,873							24,368
Allowance for loan losses		(12,980)							(13,037)
Other assets		44,656							45,410
Total noninterest-earning assets		61,549							56,741
Total assets	$	916,770						$	900,433

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	116,646	$	98		0.33	%	$	128,351	$	109		0.34	%
Savings deposits		271,356		216		0.32			261,419		188		0.29
Time deposits		221,584		725		1.30			213,122		693		1.30
Total interest-bearing deposits		609,586		1,039		0.68			602,892		990		0.66
Borrowed funds and subordinated debentures		91,574		820		3.50			91,069		807		3.51
Total interest-bearing liabilities	$	701,160	$	1,859		1.05	%	$	693,961	$	1,797		1.03	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		148,724							143,720
Other liabilities		3,921							3,332
Total noninterest-bearing liabilities		152,645							147,052
Total shareholders' equity		62,965							59,420
Total liabilities and shareholders' equity	$	916,770						$	900,433

Net interest spread			$	7,670		3.38	%			$	7,348		3.31	%
Tax-equivalent basis adjustment				(38)							(43)
Net interest income			$	7,632						$	7,305
Net interest margin						3.56	%						3.49	%

(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

September 30, 2014


	For the three months ended
	September 30, 2014							September 30, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	38,754	$	12		0.12	%	$	25,841	$	9		0.14	%
Federal Home Loan Bank stock		3,948		40		4.02			4,022		40		3.95
Securities:
Taxable		75,685		461		2.44			87,694		591		2.70
Tax-exempt		13,348		119		3.57			18,474		162		3.51
Total securities (A)		89,033		580		2.61			106,168		753		2.84
Loans:
SBA loans		53,400		636		4.76			59,755		586		3.92
SBA 504 loans		34,310		419		4.85			37,971		411		4.29
Commercial loans		380,983		4,926		5.13			335,404		4,387		5.19
Residential mortgage loans		201,793		2,327		4.61			163,805		1,861		4.54
Consumer loans		53,000		589		4.41			45,709		480		4.17
Total loans (B)		723,486		8,897		4.89			642,644		7,725		4.78
Total interest-earning assets	$	855,221	$	9,529		4.43	%	$	778,675	$	8,527		4.36	%

Noninterest-earning assets:
Cash and due from banks		29,873							24,367
Allowance for loan losses		(12,980)							(14,310)
Other assets		44,656							44,184
Total noninterest-earning assets		61,549							54,241
Total assets	$	916,770						$	832,916

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	116,646	$	98		0.33	%	$	115,085	$	90		0.31	%
Savings deposits		271,356		216		0.32			277,501		183		0.26
Time deposits		221,584		725		1.30			150,533		510		1.34
Total interest-bearing deposits		609,586		1,039		0.68			543,119		783		0.57
Borrowed funds and subordinated debentures		91,574		820		3.50			92,025		820		3.49
Total interest-bearing liabilities	$	701,160	$	1,859		1.05	%	$	635,144	$	1,603		0.99	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		148,724							137,711
Other liabilities		3,921							2,918
Total noninterest-bearing liabilities		152,645							140,629
Total shareholders' equity		62,965							57,143
Total liabilities and shareholders' equity	$	916,770						$	832,916

Net interest spread			$	7,670		3.38	%			$	6,924		3.37	%
Tax-equivalent basis adjustment				(38)							(53)
Net interest income			$	7,632						$	6,871
Net interest margin						3.56	%						3.53	%

(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

September 30, 2014


	For the nine months ended
	September 30, 2014							September 30, 2013
	Average Balance		Interest		Rate/Yield			Average Balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	42,869	$	31		0.10	%	$	37,760	$	31		0.11	%
Federal Home Loan Bank stock		4,028		127		4.22			4,006		118		3.94
Securities:
Taxable		84,634		1,740		2.74			94,431		1,858		2.62
Tax-exempt		14,920		407		3.64			19,130		525		3.66
Total securities (A)		99,554		2,147		2.87			113,561		2,383		2.80
Loans:
SBA loans		54,047		1,863		4.60			62,695		2,141		4.55
SBA 504 loans		33,491		1,251		4.99			39,493		1,503		5.09
Commercial loans		371,951		14,264		5.13			318,554		12,638		5.30
Residential mortgage loans		189,365		6,438		4.53			147,944		5,060		4.56
Consumer loans		48,918		1,628		4.45			45,703		1,485		4.34
Total loans (B)		697,772		25,444		4.87			614,389		22,827		4.96
Total interest-earning assets	$	844,223	$	27,749		4.39	%	$	769,716	$	25,359		4.40	%

Noninterest-earning assets:
Cash and due from banks		25,900							22,340
Allowance for loan losses		(13,141)							(14,682)
Other assets		44,559							41,198
Total noninterest-earning assets		57,318							48,856
Total assets	$	901,541						$	818,572

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	125,341	$	318		0.34	%	$	116,709	$	281		0.32	%
Savings deposits		266,384		586		0.29			280,973		524		0.25
Time deposits		213,339		2,062		1.29			132,607		1,593		1.61
Total interest-bearing deposits		605,064		2,966		0.65			530,289		2,398		0.61
Borrowed funds and subordinated debentures		91,304		2,426		3.50			91,387		2,428		3.50
Total interest-bearing liabilities	$	696,368	$	5,392		1.02	%	$	621,676	$	4,826		1.03	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		141,598							124,539
Other liabilities		3,477							3,237
Total noninterest-bearing liabilities		145,075							127,776
Total shareholders' equity		60,098							69,120
Total liabilities and shareholders' equity	$	901,541						$	818,572

Net interest spread			$	22,357		3.37	%			$	20,533		3.37	%
Tax-equivalent basis adjustment				(132)							(171)
Net interest income			$	22,225						$	20,362
Net interest margin						3.54	%						3.57	%

(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

September 30, 2014


Amounts in thousands, except percentages	September 30, 2014			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	12,858		$	12,807		$	13,141		$	13,550		$	14,309
Provision for loan losses charged to expense		550			550			600			800			600
		13,408			13,357			13,741			14,350			14,909
Less: Chargeoffs
SBA loans		232			199			53			128			211
SBA 504 loans		-			-			92			203			590
Commercial loans		72			134			454			564			253
Residential mortgage loans		201			5			172			125			125
Consumer loans		211			203			179			300			229
Total chargeoffs		716			541			950			1,320			1,408
Add: Recoveries
SBA loans		111			10			7			93			12
SBA 504 loans		-			-			-			3			-
Commercial loans		95			31			9			14			24
Residential mortgage loans		20			-			-			-			13
Consumer loans		-			1			-			1			-
Total recoveries		226			42			16			111			49
Net chargeoffs		490			499			934			1,209			1,359
Balance, end of period	$	12,918		$	12,858		$	12,807		$	13,141		$	13,550

LOAN QUALITY INFORMATION:
Nonperforming loans (1)	$	11,212		$	11,929		$	12,046		$	15,283		$	16,654
Other real estate owned ("OREO")		1,658			1,115			2,467			633			1,249
Nonperforming assets		12,870			13,044			14,513			15,916			17,903
Less: Amount guaranteed by SBA		200			2,305			1,320			540			592
Net nonperforming assets	$	12,670		$	10,739		$	13,193		$	15,376		$	17,311

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

Performing Troubled Debt Restructurings (TDRs)	$	4,194		$	6,965		$	7,363		$	7,452		$	7,705
(1) Nonperforming TDRs included in nonperforming loans		3,473			741			448			467			1,765
Total TDRs	$	7,667		$	7,706		$	7,811		$	7,919		$	9,470

Allowance for loan losses to:
Total loans at quarter end		1.74	%		1.81	%		1.87	%		1.94	%		2.05	%
Nonperforming loans (1)		115.22			107.79			106.32			85.98			81.36
Nonperforming assets		100.37			98.57			88.25			82.56			75.69
Net nonperforming assets		101.96			119.73			97.07			85.46			78.27

QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		0.90	%		1.40	%		0.34	%		0.25	%		1.32	%
SBA 504 loans		-			-			1.18			2.39			6.16
Commercial loans		(0.02)			0.11			0.50			0.61			0.27
Residential mortgage loans		0.36			0.01			0.39			0.28			0.27
Consumer loans		1.58			1.70			1.58			2.60			1.99
Total loans		0.27	%		0.29	%		0.56	%		0.72	%		0.84	%

Nonperforming loans to total loans		1.51	%		1.68	%		1.76	%		2.25	%		2.52	%
Nonperforming loans and TDRs to total loans		2.07			2.67			2.84			3.35			3.69
Nonperforming assets to total loans and OREO		1.73			1.84			2.11			2.34			2.70
Nonperforming assets to total assets		1.33			1.40			1.51			1.73			2.04

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

September 30, 2014


(In thousands, except percentages and per share amounts)	September 30, 2014			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
SUMMARY OF INCOME:
Total interest income	$	9,491		$	9,102		$	9,023		$	8,766		$	8,474
Total interest expense		1,859			1,797			1,736			1,703			1,603
Net interest income		7,632			7,305			7,287			7,063			6,871
Provision for loan losses		550			550			600			800			600
Net interest income after provision for loan losses		7,082			6,755			6,687			6,263			6,271
Total noninterest income		1,853			1,640			1,526			1,471			1,650
Total noninterest expense		6,241			6,144			6,258			5,862			5,935
Income before provision for income taxes		2,694			2,251			1,955			1,872			1,986
Provision for income taxes		808			723			662			606			684
Net income		1,886			1,528			1,293			1,266			1,302
Preferred stock dividends and discount accretion		-			-			-			-			119
Income available to common shareholders	$	1,886		$	1,528		$	1,293		$	1,266		$	1,183

Net income per common share - Basic (1)	$	0.24		$	0.20		$	0.17		$	0.17		$	0.16
Net income per common share - Diluted (1)	$	0.24		$	0.20		$	0.17		$	0.17		$	0.15

COMMON SHARE DATA:
Market price per share	$	9.63		$	9.28		$	7.95		$	7.66		$	7.46
Dividends paid	$	0.03		$	0.02		$	0.02		$	0.01		$	0.01
Book value per common share	$	8.17		$	7.95		$	7.74		$	7.55		$	7.41
Weighted average common shares outstanding - Basic		7,847			7,605			7,586			7,560			7,545
Weighted average common shares outstanding - Diluted		7,946			7,690			7,654			7,618			7,822
Issued and outstanding common shares		8,370			7,607			7,602			7,577			7,546

OPERATING RATIOS (Annualized):
Return on average assets		0.82	%		0.68	%		0.59	%		0.57	%		0.62	%
Return on average equity (2)		11.89			10.31			9.06			8.87			8.25
Efficiency ratio		65.80			70.81			71.91			68.87			69.93

BALANCE SHEET DATA:
Total assets	$	969,593		$	932,414		$	961,168		$	921,118		$	876,101
Total deposits		781,920			728,083			767,624			738,698			727,112
Total loans		744,366			708,889			683,951			678,701			660,617
Total securities		86,879			90,470			109,459			107,514			106,906
Total shareholders' equity		68,384			60,477			58,810			57,173			55,939
Allowance for loan losses		(12,918)			(12,858)			(12,807)			(13,141)			(13,550)

TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		4.43	%		4.34	%		4.39	%		4.25	%		4.36	%
Interest-bearing liabilities		1.05			1.03			1.01			0.99			0.99
Net interest spread		3.38			3.31			3.38			3.26			3.37
Net interest margin		3.56			3.49			3.57			3.42			3.53

CREDIT QUALITY:
Nonperforming assets		12,870			13,044			14,513			15,916			17,903
QTD net chargeoffs (annualized) to QTD average loans		0.27	%		0.29	%		0.56	%		0.72	%		0.84	%
Allowance for loan losses to total loans		1.74			1.81			1.87			1.94			2.05
Nonperforming assets to total loans and OREO		1.73			1.84			2.11			2.34			2.70
Nonperforming assets to total assets		1.33			1.40			1.51			1.73			2.04

CAPITAL RATIOS AND OTHER:
Total equity to total assets		7.05	%		6.49	%		6.12	%		6.21	%		6.38	%
Leverage ratio		8.96			8.24			8.19			8.08			8.33
Tier 1 risk-based capital ratio		11.58			10.86			10.77			10.74			10.81
Total risk-based capital ratio		12.84			12.12			12.03			11.99			12.07
Number of banking offices		15			15			15			15			15
Number of ATMs		16			16			16			16			16
Number of employees		163			171			162			163			160

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 - October 23, 2014

Attached files

UNITY BANCORP INC /NJ/ Reports