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Unity Bancorp Reports First Quarter Results


News provided by

Unity Bancorp

Apr 28, 2011, 06:00 ET

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CLINTON, N.J., April 28, 2011 /PRNewswire/ -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported a net loss attributable to common shareholders of $164 thousand, or $0.02 per diluted share, for the quarter ended March 31, 2011, compared to net income available to common shareholders of $375 thousand, or $0.05 per diluted share for the same period a year ago.  Return on average assets and average common equity for the quarter were 0.11% and (1.31)%, respectively.  Quarterly results were substantially impacted by the additional $1 million loan loss provision as well as increased other real estate owned (“OREO”) and loan collection costs.

James A. Hughes, President and CEO, stated, “Our borrowers continue to face the challenges of a difficult economic environment resulting in elevated loan loss provisions.”  Mr. Hughes continued, “On a positive note, during the quarter, we reported an improving margin and growth in core deposits.”

Net Interest Income

Net interest income was stable at $7.5 million for the three months ended March 31, 2011 and 2010, as average interest earning assets decreased $72.8 million.  Factors affecting net interest income include:

  • The yield on earning assets decreased from 5.47% in 2010 to 5.34% in 2011.
  • The cost of interest-bearing liabilities decreased 50 basis points from 2.20% for 2010 to 1.70% for 2011.
  • Net interest margin expanded 35 basis points to 3.92%.  

Noninterest Income

For the three months ended March 31, 2011, noninterest income amounted to $1.3 million, an increase of $345 thousand from the prior year’s period.  Noninterest income was affected by the following factors:

  • Branch fee income of $344 thousand, which consists of deposit service charge and overdraft fees, decreased 5 percent compared to the prior year’s quarter, due to lower overdraft activity.
  • Service and loan fee income increased $34 thousand compared to the prior year’s period due to higher levels of late charge fees.
  • Gains on sales on SBA loans amounted to $111 thousand on $1.1 million in sales.  There were no gains recognized during the first quarter of 2010.
  • Gains on the sales of residential mortgage loans amounted to $169 thousand, compared to $145 thousand from the prior year period due to an increased volume of mortgage loans originated.
  • Gains on the sales of investment securities amounted to $125 thousand, compared to $4 thousand in the prior year period.

Noninterest Expense

For the three months ended March 31, 2011, noninterest expenses were $6.2 million, an increase of $217 thousand or 3.7% from the same period a year ago. The following factors affected our noninterest expense:

  • Compensation and benefits expense amounted to $3.1 million, an increase of $58 thousand or 1.9%, due to higher employee medical benefits costs and increased residential mortgage commissions due to a larger sales volume, partially offset by lower incentive bonus payments.
  • Occupancy expense increased $43 thousand or 6.4% due primarily to seasonal snow removal expenses.
  • Loan collection costs increased $40 thousand due to increased legal and appraisal costs.
  • OREO expense increased $192 thousand, due to increased real estate carrying costs and valuation adjustments on OREO properties.
  • The provision for income taxes includes the reversal of $150 thousand of a valuation reserve for deferred taxes related to the net operating loss carry-forward deferred tax asset.

Financial Condition

At March 31, 2011, total assets were $820.8 million, a 0.3% increase from the prior year-end.

  • Total loans decreased $1.4 million or 0.2%, from $615.9 million at December 31, 2010 to $614.5 million at March 31, 2011. The decrease occurred across the following loan categories with SBA 7(a), SBA 504 and consumer loans decreasing 1.8%, 6.5%, and 3.1%, respectively.  Commercial loans increased 0.7% while residential mortgage loans increased 3.2%.   Loan demand has been weak due to the economy.
  • Total securities decreased $7.4 million since December 31, 2010, due to sales and prepayments.  
  • Core deposits, excluding time deposits, increased $12.7 million during the three month period to $486.9 million.  The increase was due primarily to a $16.4 million increase in savings deposits, partially offset by a $3.7 million decrease in interest-bearing demand deposits.  Time deposits decreased $10.7 million for the three months ended March 31, 2011 due to planned run off of a maturing high rate promotion that was done late in 2008 to bolster liquidity.    
  • Shareholders’ equity was $70.4 million at March 31, 2011, an increase of $296 thousand from year-end 2010.
  • Book value per common share was $7.09 as of March 31, 2011.
  • At March 31, 2011 the leverage, Tier I and Total Risk Based Capital ratios were 10.21%, 13.12% and 14.39%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

  • Nonperforming assets totaled $26.5 million at March 31, 2011, or 4.30% of total loans and OREO, compared to $30.0 million or 4.58% of total loans and OREO a year ago.
  • The SBA, commercial, residential mortgages, SBA 504 and consumer nonaccrual loans were $9.1 million, $5.8 million, $4.4 million, $4.3 million and $406 thousand, respectively.  The majority of nonaccrual loans are secured by real estate.  
  • OREO assets totaled $2.6 million at March 31, 2011, a decrease of $716 thousand, compared to $3.3 million a year ago.  
  • The allowance for loan losses totaled $15.3 million at March 31, 2011, or 2.49% of total loans. The provision for loan losses for the quarter ended March 31, 2011 was $2.5 million compared to $1.5 million for the prior year’s quarter.  
  • Net charge-offs were $1.6 million for the three months ended March 31, 2011, compared to $1.3 million for the same period a year ago.  

Mr. Hughes added, “Unity continues to work diligently to address problem loans.  For the near term, the size of our loan loss provision will remain the most important single factor in our earnings.  However, we are hopeful we will see further improvement in credit quality in 2011.”

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $821 million in assets and $657 million in deposits.  Unity Bank provides financial services to retail, corporate and small business customers through its 16 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 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

March 31, 2011





















March 31, 2011 vs.








December 31, 2010

March 31, 2010

Amounts in thousands, except percentages and per share amounts

March 31, 2011


December 31, 2010


March 31, 2010


%

%










BALANCE SHEET DATA:









Total assets

$          820,833


$                  818,410


$          889,927


0.3%

-7.8%

Total deposits

656,776


654,788


714,802


0.3%

-8.1%

Total loans

614,522


615,936


651,200


-0.2%

-5.6%

Total securities

120,815


128,242


138,442


-5.8%

-12.7%

Total shareholders' equity

70,381


70,085


68,712


0.4%

2.4%

Allowance for loan losses

(15,275)


(14,364)


(14,055)


6.3%

8.7%










FINANCIAL DATA - QUARTER TO DATE:









Income (loss) before provision (benefit) for income taxes

$                   72


$                           36


$                 933


100.0%

-92.3%

Provision (benefit) for income taxes

(148)


(50)


185


-196.0%

-180.0%

Net income (loss)

220


86


748


155.8%

-70.6%

Preferred stock dividends & discount accretion

384


385


373


-0.3%

2.9%

Income available (loss attributable) to common shareholders

$               (164)


$                       (299)


$                 375


45.2%

-143.7%










Net income (loss) per common share - Basic (1)

$              (0.02)


$                      (0.04)


$                0.05


50.0%

-140.0%

Net income (loss) per common share - Diluted (1)

$              (0.02)


$                      (0.04)


$                0.05


50.0%

-140.0%










Return (loss) on average assets

0.11%


0.04%


0.34%


175.0%

-67.6%

Return (loss) on average equity (2)

-1.31%


-2.31%


3.09%


43.3%

-142.4%

Efficiency ratio

71.56%


70.65%


70.98%


1.3%

0.8%










SHARE INFORMATION:









Market price per share

6.95


6.05


5.29


14.9%

31.4%

Dividends paid

-


-


-


0.0%

0.0%

Book value per common share

7.09


7.08


7.00


0.2%

1.4%

Average diluted shares outstanding (QTD)

7,219


7,209


7,294


0.1%

-1.0%










CAPITAL RATIOS:









Total equity to total assets

8.57%


8.56%


7.72%


0.1%

11.1%

Leverage ratio

10.21%


9.97%


9.18%


2.4%

11.2%

Tier 1 risk-based capital ratio

13.12%


13.04%


12.02%


0.6%

9.2%

Total risk-based capital ratio

14.39%


14.30%


13.28%


0.6%

8.4%










CREDIT QUALITY AND RATIOS:









Nonperforming assets

$            26,525


$                    24,008


$            29,972


10.5%

-11.5%

QTD net chargeoffs (annualized) to QTD average loans

1.05%


1.62%


0.80%


-35.4%

31.3%

Allowance for loan losses to total loans

2.49%


2.33%


2.16%


6.6%

15.2%

Nonperforming assets to total loans and OREO

4.30%


3.88%


4.58%


10.7%

-6.1%

Nonperforming assets to total assets

3.23%


2.93%


3.37%


10.2%

-4.1%


(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

March 31, 2011





















March 31, 2011 vs.








December 31, 2010

March 31, 2010

Amounts in thousands, except percentages

March 31, 2011


December 31, 2010


March 31, 2010


%

%










ASSETS









Cash and due from banks

$            15,478


$                    17,637


$            22,654


-12.2%

-31.7%

Federal funds sold and interest-bearing deposits

39,880


26,289


43,734


51.7%

-8.8%

Cash and cash equivalents

55,358


43,926


66,388


26.0%

-16.6%










Securities available for sale

103,238


107,131


113,465


-3.6%

-9.0%

Securities held to maturity

17,577


21,111


24,977


-16.7%

-29.6%

Total securities

120,815


128,242


138,442


-5.8%

-12.7%










SBA loans held for sale

9,933


10,397


22,617


-4.5%

-56.1%

SBA loans held to maturity

74,657


75,741


75,191


-1.4%

-0.7%

SBA 504 loans

60,092


64,276


67,000


-6.5%

-10.3%

Commercial loans

283,135


281,205


292,557


0.7%

-3.2%

Residential mortgage loans

132,512


128,400


135,596


3.2%

-2.3%

Consumer loans

54,193


55,917


58,239


-3.1%

-6.9%

Total loans

614,522


615,936


651,200


-0.2%

-5.6%

Allowance for loan losses

(15,275)


(14,364)


(14,055)


6.3%

8.7%

Net loans

599,247


601,572


637,145


-0.4%

-5.9%










Premises and equipment, net

10,782


10,967


11,525


-1.7%

-6.4%

Bank owned life insurance (BOLI)

8,885


8,812


8,574


0.8%

3.6%

Deferred tax assets

7,833


7,550


7,856


3.7%

-0.3%

Federal Home Loan Bank stock

4,206


4,206


4,677


0.0%

-10.1%

Accrued interest receivable

3,725


3,791


4,009


-1.7%

-7.1%

Prepaid FDIC insurance

2,994


3,266


4,136


-8.3%

-27.6%

Other real estate owned (OREO)

2,602


2,346


3,318


10.9%

-21.6%

Goodwill and other intangibles

1,541


1,544


1,555


-0.2%

-0.9%

Other assets

2,845


2,188


2,302


30.0%

23.6%










Total assets

$          820,833


$                  818,410


$          889,927


0.3%

-7.8%










LIABILITIES AND SHAREHOLDERS' EQUITY









Noninterest-bearing demand deposits

$            91,247


$                    91,272


$            84,858


0.0%

7.5%

Interest-bearing demand deposits

101,878


105,530


102,846


-3.5%

-0.9%

Savings deposits

293,750


277,394


291,870


5.9%

0.6%

Time deposits, under $100,000

110,050


119,478


149,934


-7.9%

-26.6%

Time deposits, $100,000 and over

59,851


61,114


85,294


-2.1%

-29.8%

Total deposits

656,776


654,788


714,802


0.3%

-8.1%










Borrowed funds

75,000


75,000


86,554


0.0%

-13.3%

Subordinated debentures

15,465


15,465


15,465


0.0%

0.0%

Accrued interest payable

569


556


706


2.3%

-19.4%

Accrued expenses and other liabilities

2,642


2,516


3,688


5.0%

-28.4%

Total liabilities

750,452


748,325


821,215


0.3%

-8.6%










Cumulative perpetual preferred stock

19,146


19,019


18,650


0.7%

2.7%

Common stock

52,842


55,884


55,536


-5.4%

-4.9%

Retained earnings (deficit)

(2,006)


(772)


(1,117)


-159.8%

-79.6%

Treasury stock, at cost

-


(4,169)


(4,169)


100.0%

100.0%

Accumulated other comprehensive income (loss)

399


123


(188)


224.4%

312.2%

Total shareholders' equity

70,381


70,085


68,712


0.4%

2.4%










Total liabilities and shareholders' equity

$          820,833


$                  818,410


$          889,927


0.3%

-7.8%










Issued common shares

7,222


7,636


7,581




Outstanding common shares

7,222


7,211


7,156




Treasury shares

-


425


425




UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

March 31, 2011

















March 31, 2011 vs.


For the Three Months Ended


December 31, 2010

March 31, 2010

Amounts in thousands, except percentages and per share amounts

March 31, 2011


December 31, 2010


March 31, 2010


$

%

$

%












INTEREST INCOME











Federal funds sold and interest-bearing deposits

$                   11


$                           11


$                   26


$          -

0.0%

$    (15)

-57.7%

Federal Home Loan Bank stock

66


86


34


(20)

-23.3%

32

94.1%












Securities available for sale

864


881


1,280


(17)

-1.9%

(416)

-32.5%

Securities held to maturity

287


259


338


28

10.8%

(51)

-15.1%

Total securities

1,151


1,140


1,618


11

1.0%

(467)

-28.9%












SBA loans

1,236


1,287


1,452


(51)

-4.0%

(216)

-14.9%

SBA 504 loans

955


1,034


1,087


(79)

-7.6%

(132)

-12.1%

Commercial loans

4,306


4,585


4,604


(279)

-6.1%

(298)

-6.5%

Residential mortgage loans

1,831


1,955


1,961


(124)

-6.3%

(130)

-6.6%

Consumer loans

686


752


731


(66)

-8.8%

(45)

-6.2%

Total loans

9,014


9,613


9,835


(599)

-6.2%

(821)

-8.3%












Total interest income

10,242


10,850


11,513


(608)

-5.6%

(1,271)

-11.0%












INTEREST EXPENSE











Interest-bearing demand deposits

139


143


258


(4)

-2.8%

(119)

-46.1%

Savings deposits

581


561


901


20

3.6%

(320)

-35.5%

Time deposits

1,097


1,222


1,813


(125)

-10.2%

(716)

-39.5%

Borrowed funds and subordinated debentures

950


1,064


1,077


(114)

-10.7%

(127)

-11.8%

Total interest expense

2,767


2,990


4,049


(223)

-7.5%

(1,282)

-31.7%












Net interest income

7,475


7,860


7,464


(385)

-4.9%

11

0.1%

Provision for loan losses

2,500


2,750


1,500


(250)

-9.1%

1,000

66.7%

Net interest income after provision for loan losses

4,975


5,110


5,964


(135)

-2.6%

(989)

-16.6%












NONINTEREST INCOME











Branch fee income

344


373


362


(29)

-7.8%

(18)

-5.0%

Service and loan fee income

243


274


209


(31)

-11.3%

34

16.3%

Gain on sale of SBA loans held for sale, net

111


83


-


28

33.7%

111

100.0%

Gain on sale of mortgage loans

169


548


145


(379)

-69.2%

24

16.6%

Bank owned life insurance (BOLI)

73


80


73


(7)

-8.8%

-

0.0%

Net security gains

125


43


4


82

190.7%

121

3025.0%

Other income

190


127


117


63

49.6%

73

62.4%

Total noninterest income

1,255


1,528


910


$      (273)

-17.9%

$   345

37.9%












NONINTEREST EXPENSE











Compensation and benefits

3,057


3,094


2,999


(37)

-1.2%

58

1.9%

Occupancy

720


612


677


108

17.6%

43

6.4%

Processing and communications

507


530


524


(23)

-4.3%

(17)

-3.2%

Furniture and equipment

384


444


423


(60)

-13.5%

(39)

-9.2%

Professional services

202


80


229


122

152.5%

(27)

-11.8%

Loan collection costs

224


266


184


(42)

-15.8%

40

21.7%

OREO expense

222


647


30


(425)

-65.7%

192

640.0%

Deposit insurance

319


317


330


2

0.6%

(11)

-3.3%

Advertising

118


146


106


(28)

-19.2%

12

11.3%

Other expenses

405


466


439


(61)

-13.1%

(34)

-7.7%

Total noninterest expense

6,158


6,602


5,941


(444)

-6.7%

217

3.7%












Income (loss) before provision (benefit) for income taxes

72


36


933


36

100.0%

(861)

-92.3%

Provision (benefit) for income taxes

(148)


(50)


185


(98)

-196.0%

(333)

-180.0%

Net income (loss)

220


86


748


134

155.8%

(528)

-70.6%

Preferred stock dividends & discount accretion

384


385


373


(1)

-0.3%

11

2.9%

Income available (loss attributable) to common shareholders

$               (164)


$                       (299)


$                 375


$       135

45.2%

$  (539)

-143.7%












Effective tax rate

-205.6%


-138.9%


19.8%

















Net income (loss) per common share - Basic

$              (0.02)


$                      (0.04)


$                0.05






Net income (loss) per common share - Diluted

$              (0.02)


$                      (0.04)


$                0.05

















Weighted average common shares outstanding - Basic (1)

7,219


7,209


7,150






Weighted average common shares outstanding - Diluted (1)

7,219


7,209


7,294







(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.

QUARTER TO DATE NET INTEREST MARGIN

March 31, 2011




For the Three Months Ended



March 31, 2011


December 31, 2010

Amounts in thousands, except percentages


Average Balance

Interest

Rate/Yield


Average Balance

Interest

Rate/Yield










ASSETS









Interest-earning assets:









Federal funds sold and interest-bearing deposits


$                 33,252

$        11

0.13%


$                 36,274

$        11

0.12%

Federal Home Loan Bank stock


4,206

66

6.36%


4,597

86

7.42%










Securities available for sale


105,027

912

3.47%


108,718

906

3.33%

Securities held to maturity


19,516

292

5.98%


21,292

264

4.96%

Total securities (A)


124,543

1,204

3.87%


130,010

1,170

3.60%










SBA loans


85,861

1,236

5.76%


90,426

1,287

5.69%

SBA 504 loans


61,998

955

6.25%


64,874

1,034

6.32%

Commercial loans


282,605

4,306

6.18%


282,184

4,585

6.45%

Residential mortgage loans


130,745

1,831

5.60%


129,696

1,955

6.03%

Consumer loans


54,849

686

5.07%


57,029

752

5.23%

Total loans (A), (B)


616,058

9,014

5.91%


624,209

9,613

6.13%










Total interest-earning assets


$               778,059

$ 10,295

5.34%


$               795,090

$ 10,880

5.45%










Noninterest-earning assets:









Cash and due from banks


17,764




18,339



Allowance for loan losses


(15,054)




(14,681)



Other assets


39,767




42,696



Total noninterest-earning assets


42,477




46,354












Total assets


$               820,536




$               841,444












LIABILITIES AND SHAREHOLDERS' EQUITY









Interest-bearing liabilities:









Interest-bearing demand deposits


$               103,550

$      139

0.54%


$               104,900

$      143

0.54%

Savings deposits


289,805

581

0.81%


284,853

561

0.78%

Time deposits


174,620

1,097

2.55%


183,997

1,222

2.63%

Total interest-bearing deposits


567,975

1,817

1.30%


573,750

1,926

1.33%

Borrowed funds and subordinated debentures


90,465

950

4.20%


100,080

1,064

4.16%










Total interest-bearing liabilities


$               658,440

$   2,767

1.70%


$               673,830

$   2,990

1.75%










Noninterest-bearing liabilities:









Noninterest-bearing demand deposits


88,797




93,049



Other liabilities


3,530




4,196



Total noninterest-bearing liabilities


92,327




97,245












Total shareholders' equity


69,769




70,369












Total liabilities and shareholders' equity


$               820,536




$               841,444












Net interest spread



$   7,528

3.64%



$   7,890

3.70%

Tax-equivalent basis adjustment



(53)




(30)


Net interest income



$   7,475




$   7,860


Net interest margin




3.92%




3.94%










(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.

QUARTER TO DATE NET INTEREST MARGIN

March 31, 2011




For the Three Months Ended



March 31, 2011


March 31, 2010

Amounts in thousands, except percentages


Average Balance

Interest

Rate/Yield


Average Balance

Interest

Rate/Yield










ASSETS









Interest-earning assets:









Federal funds sold and interest-bearing deposits


$                 33,252

$        11

0.13%


$                 32,493

$        26

0.32%

Federal Home Loan Bank stock


4,206

66

6.36%


4,677

34

2.95%










Securities available for sale


105,027

912

3.47%


131,295

1,294

3.94%

Securities held to maturity


19,516

292

5.98%


27,323

354

5.18%

Total securities (A)


124,543

1,204

3.87%


158,618

1,648

4.16%










SBA loans


85,861

1,236

5.76%


98,140

1,452

5.92%

SBA 504 loans


61,998

955

6.25%


70,444

1,087

6.26%

Commercial loans


282,605

4,306

6.18%


292,055

4,604

6.39%

Residential mortgage loans


130,745

1,831

5.60%


134,611

1,961

5.83%

Consumer loans


54,849

686

5.07%


59,779

731

4.96%

Total loans (A), (B)


616,058

9,014

5.91%


655,029

9,835

6.06%










Total interest-earning assets


$               778,059

$ 10,295

5.34%


$               850,817

$ 11,543

5.47%










Noninterest-earning assets:









Cash and due from banks


17,764




21,962



Allowance for loan losses


(15,054)




(14,581)



Other assets


39,767




40,896



Total noninterest-earning assets


42,477




48,277












Total assets


$               820,536




$               899,094












LIABILITIES AND SHAREHOLDERS' EQUITY









Interest-bearing liabilities:









Interest-bearing demand deposits


$               103,550

$      139

0.54%


$               102,593

$      258

1.02%

Savings deposits


289,805

581

0.81%


289,251

901

1.26%

Time deposits


174,620

1,097

2.55%


251,774

1,813

2.92%

Total interest-bearing deposits


567,975

1,817

1.30%


643,618

2,972

1.87%

Borrowed funds and subordinated debentures


90,465

950

4.20%


100,500

1,077

4.29%










Total interest-bearing liabilities


$               658,440

$   2,767

1.70%


$               744,118

$   4,049

2.20%










Noninterest-bearing liabilities:









Noninterest-bearing demand deposits


88,797




83,164



Other liabilities


3,530




4,069



Total noninterest-bearing liabilities


92,327




87,233












Total shareholders' equity


69,769




67,743












Total liabilities and shareholders' equity


$               820,536




$               899,094












Net interest spread



$   7,528

3.64%



$   7,494

3.27%

Tax-equivalent basis adjustment



(53)




(30)


Net interest income



$   7,475




$   7,464


Net interest margin




3.92%




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.

ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES

March 31, 2011




Amounts in thousands, except percentages

3/31/2011

12/31/2010

9/30/2010

6/30/2010

3/31/2010







ALLOWANCE FOR LOAN LOSSES:






Balance, beginning of period

$ 14,364

$   14,163

$ 13,946

$ 14,055

$ 13,842

Provision for loan losses charged to expense

2,500

2,750

1,500

1,500

1,500


16,864

16,913

15,446

15,555

15,342

Less: Chargeoffs






SBA loans

761

445

389

517

-

SBA 504 loans

-

798

-

-

750

Commercial loans

848

1,115

989

1,038

485

Residential mortgage loans

92

190

95

115

100

Consumer loans

-

234

9

2

-

Total chargeoffs

1,701

2,782

1,482

1,672

1,335

Add: Recoveries






SBA loans

8

128

17

53

45

SBA 504 loans

-

-

-

-

-

Commercial loans

98

105

178

10

3

Residential mortgage loans

4

-

-

-

-

Consumer loans

2

-

4

-

-

Total recoveries

112

233

199

63

48

Net chargeoffs

1,589

2,549

1,283

1,609

1,287

Balance, end of period

$ 15,275

$   14,364

$ 14,163

$ 13,946

$ 14,055







LOAN QUALITY INFORMATION:






Nonperforming loans

$ 23,923

$   21,662

$ 27,304

$ 26,071

$ 26,654

Other real estate owned (OREO)

2,602

2,346

5,773

3,728

3,318

Nonperforming assets

26,525

24,008

33,077

29,799

29,972

Less:  Amount guaranteed by Small Business Administration

3,355

2,706

2,094

1,436

2,205

Net nonperforming assets

$ 23,170

$   21,302

$ 30,983

$ 28,363

$ 27,767







Loans 90 days past due & still accruing

$   4,248

$        374

$   2,467

$   2,780

$   3,061







Allowance for loan losses to:






Total loans at quarter end

2.49%

2.33%

2.25%

2.19%

2.16%

Nonperforming loans

63.85%

66.31%

51.87%

53.49%

52.73%

Nonperforming assets

57.59%

59.83%

42.82%

46.80%

46.89%

Net nonperforming assets

65.93%

67.43%

45.71%

49.17%

50.62%







QTD net chargeoffs (annualized) to QTD average loans:






SBA loans

3.56%

1.39%

1.56%

1.89%

-0.19%

SBA 504 loans

0.00%

4.88%

0.00%

0.00%

4.32%

Commercial loans

1.08%

1.42%

1.14%

1.44%

0.67%

Residential mortgage loans

0.27%

0.58%

0.29%

0.35%

0.30%

Consumer loans

-0.01%

1.63%

0.03%

0.01%

0.00%

Total loans

1.05%

1.62%

0.80%

1.00%

0.80%







Nonperforming loans to total loans

3.89%

3.52%

4.34%

4.09%

4.09%

Nonperforming assets to total loans and OREO

4.30%

3.88%

5.21%

4.65%

4.58%

Nonperforming assets to total assets

3.23%

2.93%

3.91%

3.43%

3.37%

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

March 31, 2011




Amounts in thousands, except percentages and per share amounts

3/31/2011

12/31/2010

9/30/2010

6/30/2010

3/31/2010







SUMMARY OF INCOME:






Total interest income

$   10,242

$   10,850

$   10,726

$   10,944

$   11,513

Total interest expense

2,767

2,990

3,314

3,681

4,049

Net interest income

7,475

7,860

7,412

7,263

7,464

Provision for loan losses

2,500

2,750

1,500

1,500

1,500

Net interest income after provision for loan losses

4,975

5,110

5,912

5,763

5,964

Total noninterest income (loss)

1,255

1,528

1,460

1,170

910

Total noninterest expense

6,158

6,602

6,404

6,040

5,941

Income (loss) before provision (benefit) for income taxes

72

36

968

893

933

Provision (benefit) for income taxes

(148)

(50)

242

212

185

Net income (loss)

220

86

726

681

748

Preferred stock dividends & discount accretion

384

385

385

379

373

Income available (loss attributable) to common shareholders

$      (164)

$       (299)

$        341

$        302

$        375







Net income (loss) per common share - Basic

$     (0.02)

$      (0.04)

$       0.05

$       0.04

$       0.05

Net income (loss) per common share - Diluted

$     (0.02)

$      (0.04)

$       0.05

$       0.04

$       0.05







COMMON SHARE DATA:






Market price per share

$       6.95

$       6.05

$       5.25

$       5.35

$       5.29

Dividends paid

$           -

$           -

$           -

$           -

$           -

Book value per common share

$       7.09

$       7.08

$       7.19

$       7.11

$       7.00

QTD weighted average shares - basic (1)

7,219

7,209

7,176

7,156

7,150

QTD weighted average shares - diluted (1)

7,219

7,209

7,467

7,475

7,294

Outstanding common shares

7,222

7,211

7,207

7,154

7,156







OPERATING RATIOS (Annualized):






Return (loss) on average assets

0.11%

0.04%

0.34%

0.31%

0.34%

Return (loss) on average equity (2)

-1.31%

-2.31%

2.66%

2.43%

3.09%

Efficiency ratio

71.56%

70.65%

72.47%

71.66%

70.98%







BALANCE SHEET DATA:






Total assets

$ 820,833

$ 818,410

$ 846,385

$ 869,735

$ 889,927

Total deposits

656,776

654,788

670,158

693,232

714,802

Total loans

614,522

615,936

629,516

637,180

651,200

Total securities

120,815

128,242

134,820

143,662

138,442

Total shareholders' equity

70,381

70,085

70,730

69,633

68,712

Allowance for loan losses

(15,275)

(14,364)

(14,163)

(13,946)

(14,055)







TAX EQUIVALENT YIELDS AND RATES:






Interest-earning assets

5.34%

5.45%

5.30%

5.28%

5.47%

Interest-bearing liabilities

1.70%

1.75%

1.89%

2.04%

2.20%

Net interest spread

3.64%

3.70%

3.41%

3.24%

3.27%

Net interest margin

3.92%

3.94%

3.66%

3.51%

3.57%







CREDIT QUALITY:






Nonperforming assets

$   26,525

$   24,008

$   33,077

$   29,799

$   29,972

QTD net chargeoffs (annualized) to QTD average loans

1.05%

1.62%

0.80%

1.00%

0.80%

Allowance for loan losses to total loans

2.49%

2.33%

2.25%

2.19%

2.16%

Nonperforming assets to total loans and OREO

4.30%

3.88%

5.21%

4.65%

4.58%

Nonperforming assets to total assets

3.23%

2.93%

3.91%

3.43%

3.37%







CAPITAL RATIOS AND OTHER:






Total equity to total assets

8.57%

8.56%

8.36%

8.01%

7.72%

Leverage ratio

10.21%

9.97%

9.83%

9.43%

9.18%

Tier 1 risk-based capital ratio

13.12%

13.04%

12.67%

12.39%

12.02%

Total risk-based capital ratio

14.39%

14.30%

13.93%

13.65%

13.28%

Number of banking offices

16

16

16

16

16

Number of ATMs

18

18

18

18

19

Number of employees

170

172

173

165

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.)

SOURCE Unity Bancorp

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