Unity Bancorp Reports Third Quarter and Nine Month Earnings

Oct 21, 2010, 15:00 ET from Unity Bancorp

CLINTON, N.J., Oct. 21 /PRNewswire-FirstCall/ -- Unity Bancorp, Inc. (Nasdaq: UNTY), parent company of Unity Bank, reported net income available to common shareholders of $341 thousand or $0.05 per diluted share for the quarter ended September 30, 2010, compared to a net loss of $1.1 million or $0.16 per diluted share for the third quarter of 2009.  Return on average assets and average common equity for the third quarter of 2010 were 0.34% and 2.66%, respectively.

For the nine months ended September 30, 2010, the Company reported net income available to common shareholders of $1.0 million or $0.14 per diluted share, compared to a net loss of $2.3 million or $0.33 per diluted share for the same period a year ago.  Return on average assets and average common equity for the nine month period were 0.33% and 2.72%, respectively.

Nine month results in 2009 were substantially impacted by the following items, which were not present during the first nine months of 2010:  

  • The Company recognized a pre-tax other-than-temporary impairment ("OTTI") charge during the second quarter of 2009 of $1.7 million, or $0.17 per diluted share, due to the deterioration of the underlying collateral of two pooled trust preferred securities.  
  • The FDIC imposed a special assessment equal to 5 basis points of an insured depository institution's assets minus Tier 1 capital as of June 30, 2009. The Company recognized a charge of approximately $408 thousand, or $0.04 per diluted share, in the second quarter for this special assessment.
  • The Company recorded an additional provision for loan losses of $1.5 million in the third quarter of 2009.

James A. Hughes, President and CEO, stated, "We are pleased to report positive financial developments despite the impact the recession has had on many of our borrowers."  Mr. Hughes continued, "Net income growth was driven by improving margins and the lower cost of interest-bearing deposits. We continue to remain optimistic about the opportunities ahead.  Despite the increase in nonperforming assets, resolution of many of our problem credits appears certain."

Net Interest Income

For the quarter ended September 30, 2010, net interest income was $7.4 million, an increase of $554 thousand or 8.1% from the quarter ended September 30, 2009.  Factors affecting third quarter net interest income include:

  • The yield on interest-earning assets decreased 34 basis points to 5.30% from 5.64% for the same period last year. This was a result of interest-earning assets re-pricing in a low rate environment.
  • The cost of interest-bearing liabilities decreased 91 basis points to 1.89% from 2.80% a year ago. All interest-bearing deposit costs declined with the largest decline in savings deposits.
  • Net interest margin was 3.66%, a 49 basis point increase from 3.17% in the third quarter of 2009. This increase was driven by the reduced cost of funds.

Year-to-date, net interest income was $22.1 million, or 8.0% higher than the $20.5 million reported for the first nine months of 2009.  Factors affecting the nine month net interest income include:

  • The yield on earning assets decreased from 5.81% for the first nine months of 2009 to 5.35% for the first nine months of 2010. This was a result of interest-earning assets re-pricing in a low rate environment.
  • The cost of interest-bearing liabilities decreased from 2.98% for the first nine months of 2009 to 2.04% for the first nine months of 2010.  All interest-bearing deposit costs declined with the largest decline in time deposits.
  • Net interest margin for the nine months ended September 30, 2010 was 3.58%, an increase of 38 basis points from the same period last year.  

Noninterest Income

For the quarter ended September 30, 2010, noninterest income totaled $1.5 million, an increase of $298 thousand from the quarter ended September 30, 2009.  The following factors impacted the quarter's noninterest income:

  • Branch fee income remained relatively flat compared to the prior year period.
  • Service and loan fee income declined $147 thousand due to a lower level of loan prepayment fees.
  • There were $269 thousand in gains on the sales of SBA loans, compared to no gains in the prior year's quarter.
  • Gains on the sales of residential mortgage loans totaled $247 thousand, compared to $71 thousand the prior year.
  • The quarterly increase in the cash surrender value of bank owned life insurance ("BOLI") increased $23 thousand to $79 thousand.  This was the result of the Company purchasing $2.5 million in BOLI to help offset the rising cost of employee benefits during the first quarter of 2010.
  • Gains on the sales of investment securities amounted to $35 thousand, compared to $158 thousand in the prior year period.

For the nine months ended September 30, 2010, noninterest income amounted to $3.5 million, an increase of $1.9 million from the nine months ended September 30, 2009.  Excluding the effect of the OTTI charge noted above, noninterest income increased $186 thousand.  Noninterest income was affected by the following factors:

  • Branch fee income remained relatively flat compared to the prior year period.
  • Service and loan fee income decreased $241 thousand compared to the prior year period due to lower levels of prepayment fees.
  • Gains on sales on SBA loans amounted to $416 thousand, compared to $29 thousand a year ago.
  • Gains on the sales of residential mortgage loans amounted to $504 thousand, compared to $184 thousand from the prior year period.
  • The nine month increase in the cash surrender value of bank owned life insurance ("BOLI") increased $64 thousand to $230 thousand.  This was the result of the Company purchasing $2.5 million in BOLI to help offset the rising cost of employee benefits during the first quarter of 2010.
  • Gains on the sales of investment securities amounted to $42 thousand, compared to $675 thousand in the prior year period.

Noninterest Expense

For the quarter ended September 30, 2010, noninterest expenses were $6.4 million, an increase of $294 thousand or 4.8% from the quarter ended September 30, 2009. The following factors affected our noninterest expense:

  • Compensation and benefits expense amounted to $3.0 million, an increase of $51 thousand or 1.8%.   This was the result of an increase in compensation, employee medical benefits costs and mortgage loan commissions, partially offset by lower incentive bonus payments.
  • Occupancy expense increased by $29 thousand or 4.9%, due to an increase in rental expense.  
  • Furniture and equipment expense increased $26 thousand or 6.3%, primarily due to increased software and equipment lease expense, partially offset by a decrease in equipment depreciation expense.  
  • Professional fees decreased $45 thousand, due to decreased consulting, loan review and audit costs.  
  • Loan collection costs decreased $43 thousand, due to decreased collection costs on delinquent loans.
  • Other real estate owned ("OREO") expense increased $306 thousand, due to increased maintenance and valuation related expenses on OREO properties.

For the nine months ended September 30, 2010, noninterest expenses were $18.4 million, an increase of $515 thousand or 2.9% from the same period a year ago. The following factors affected our noninterest expense:

  • Compensation and benefits expense amounted to $8.8 million, an increase of $395 thousand or 4.7%, due to increased compensation, 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 declined by $19 thousand or 1.0%, due primarily to a reduction in rental expense from a renegotiated lease.  
  • Processing and communications increased $55 thousand or 3.5%, due primarily to increased data processing line costs.
  • Furniture and equipment expense decreased $70 thousand or 5.1%, primarily due to decreased depreciation expense as capital expenditures declined and decreased equipment maintenance charges.  
  • Professional fees decreased $123 thousand, due to decreased consulting, loan review and audit costs.  
  • OREO expense increased $476 thousand, due to increased maintenance and valuation related expenses on OREO properties.
  • FDIC insurance premiums decreased $378 thousand, due primarily to the $408 thousand second quarter 2009 special assessment.
  • Advertising expenses increased $105 thousand or 28.2%, due to increased marketing efforts.

Financial Condition

At September 30, 2010, total assets were $846.4 million, a 9.0% decrease from year-end.

  • Total loans decreased $27.5 million or 4.2%, from $657.0 million at December 31, 2009. SBA 7(a), SBA 504, commercial, residential and consumer loans decreased 8.1%, 7.9%, 3.0%, 1.2% and 5.7%, respectively.  Loan balances for the remainder of 2010 are expected to remain flat to down as the Company is no longer generating loans outside of its trade area and has decided to portfolio a limited number of fixed rate residential mortgages due to interest rate risk.  The Company continues to focus on stabilizing credit quality and preserving capital until economic conditions improve.
  • Total securities decreased $34.2 million since year-end as Unity received $37.2 million in principal payments, sold $13.4 million and had $14.8 million in bonds called during the nine month period, partially offset by $30.0 million in purchases.  
  • Core deposits, excluding time deposits, increased $14.1 million during the nine month period to $480.6 million.  The increase was due primarily to a $7.7 million increase in demand deposits and a $6.0 million increase in savings deposits.  Time deposits decreased $102.2 million for the nine months ended September 30, 2010 due to planned run off of a maturing high rate promotion that was done late in 2008 to bolster liquidity.    
  • Shareholders' equity was $70.7 million at September 30, 2010, an increase of $2.9 million from year-end.
  • Book value per common share was $7.19, compared to $6.91 at year-end.
  • At September 30, 2010 the leverage, Tier I and Total Risk Based Capital ratios were 9.83%, 12.67% and 13.93%, respectively, all in excess of the ratios required to be deemed "well-capitalized".

Credit Quality

  • Nonperforming assets totaled $33.1 million at September 30, 2010, or 5.21% of total loans and OREO, compared to $27.5 million or 4.17% of total loans and OREO a year ago.
  • The commercial, residential, SBA, SBA 504 and consumer nonaccrual loans were $9.5 million, $6.1 million, $6.3 million, $5.2 million and $235 thousand, respectively.  The majority of nonaccrual loans are secured by real estate.  
  • OREO assets totaled $5.8 million at September 30, 2010, an increase of $3.0 million, compared to $2.8 million a year ago.  The increase is related to the acquisition of titles through foreclosure proceedings.
  • The allowance for loan losses totaled $14.2 million at September 30, 2010, or 2.25% of total loans. The provision for loan losses for the quarter and nine months ended September 30, 2010 was $1.5 million and $4.5 million, respectively, compared to $3.0 million and $6.0 million for the quarter and nine month periods of 2009.  
  • Net charge-offs were $1.3 million for the three months ended September 30, 2010, compared to $1.2 million for the same period a year ago.  Net charge-offs were $4.2 million for the nine months ended September 30, 2010, compared to $3.9 million for the same period a year ago.  

Mr. Hughes added, "Unity continues to work diligently to assertively address problem loans, however, the backlog in the courts has significantly slowed the collection process.  The increase in nonperforming assets was due to the delay in the sale of many problem assets and further deterioration of substantial credits.   For the near term, the size of our loan loss provision will remain the most important single factor in our earnings.  However, we believe that with stabilization of our credit quality and a rebound in overall economic activity, we are well positioned for future growth."

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $846 million in assets and $670 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

September 30, 2010

2010.Q3 VS.

2010.Q2

2009.Q3

Amounts in thousands, except percentages and per share amounts

9/30/2010

6/30/2010

9/30/2009

%

%

BALANCE SHEET DATA:

Total assets

$ 846,385

$ 869,735

$ 922,689

-2.7%

-8.3%

Total deposits

670,158

693,232

750,665

-3.3%

-10.7%

Total loans

629,516

637,180

656,520

-1.2%

-4.1%

Total securities

134,820

143,662

171,501

-6.2%

-21.4%

Total shareholders' equity

70,730

69,633

67,385

1.6%

5.0%

Allowance for loan losses

(14,163)

(13,946)

(12,445)

1.6%

13.8%

FINANCIAL DATA - QUARTER TO DATE:

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

$        968

$        893

$   (1,090)

8.4%

188.8%

Provision (benefit) for income taxes

242

212

(343)

14.2%

170.6%

Net income (loss)

726

681

(747)

6.6%

197.2%

Preferred stock dividends & discount accretion

385

379

372

1.6%

3.5%

Income available (loss attributable) to common shareholders

$        341

$        302

$   (1,119)

12.9%

130.5%

Net income (loss) per common share - Basic

$       0.05

$       0.04

$     (0.16)

25.0%

131.3%

Net income (loss) per common share - Diluted

$       0.05

$       0.04

$     (0.16)

25.0%

131.3%

Return (loss) on average assets

0.34%

0.31%

-0.33%

9.7%

203.0%

Return (loss) on average equity

2.66%

2.43%

-9.14%

9.5%

129.1%

Efficiency ratio

72.47%

71.66%

77.72%

1.1%

-6.8%

FINANCIAL DATA - YEAR TO DATE:

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

$     2,794

$     1,826

$   (1,774)

53.0%

257.5%

Provision (benefit) for income taxes

639

397

(559)

61.0%

214.3%

Net income (loss)

2,155

1,429

(1,215)

50.8%

277.4%

Preferred stock dividends & discount accretion

1,136

752

1,123

51.1%

1.2%

Income available (loss attributable) to common shareholders

$     1,019

$        677

$   (2,338)

50.5%

143.6%

Net income (loss) per common share - Basic

$       0.14

$       0.09

$     (0.33)

50.2%

143.3%

Net income (loss) per common share - Diluted

$       0.14

$       0.09

$     (0.33)

49.9%

141.8%

Return (loss) on average assets

0.33%

0.32%

-0.18%

3.1%

283.3%

Return (loss) on average equity

2.72%

2.76%

-6.38%

-1.4%

142.6%

Efficiency ratio

71.72%

71.32%

77.12%

0.6%

-7.0%

SHARE INFORMATION:

Market price per share

5.25

5.35

4.20

-1.9%

25.0%

Dividends paid

-

-

-

0.0%

0.0%

Book value per common share

7.19

7.11

6.88

1.2%

4.6%

Average diluted shares outstanding (QTD)

7,467

7,475

7,119

-0.1%

4.9%

CAPITAL RATIOS:

Total equity to total assets

8.36%

8.01%

7.30%

4.4%

14.4%

Leverage ratio

9.83%

9.43%

9.08%

4.2%

8.2%

Tier 1 risk-based capital ratio

12.67%

12.39%

11.83%

2.2%

7.1%

Total risk-based capital ratio

13.93%

13.65%

13.09%

2.0%

6.4%

CREDIT QUALITY AND RATIOS:

Nonperforming assets

$   33,077

$   29,799

$   27,461

11.0%

20.5%

QTD net chargeoffs (annualized) to QTD average loans

0.80%

1.00%

0.73%

-19.9%

10.0%

Allowance for loan losses to total loans

2.25%

2.19%

1.90%

2.8%

18.7%

Nonperforming assets to total loans and OREO

5.21%

4.65%

4.17%

12.0%

25.0%

Nonperforming assets to total assets

3.91%

3.43%

2.98%

14.1%

31.3%

UNITY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2010

2010.Q3 VS.

2010.Q2

2009.Q3

Amounts in thousands, except percentages

9/30/2010

6/30/2010

9/30/2009

%

%

ASSETS

Cash and due from banks

$   16,928

$   18,016

$   17,035

-6.0%

-0.6%

Federal funds sold and interest-bearing deposits

30,379

37,478

48,853

-18.9%

-37.8%

Cash and cash equivalents

47,307

55,494

65,888

-14.8%

-28.2%

Securities available for sale

111,777

121,628

140,906

-8.1%

-20.7%

Securities held to maturity

23,043

22,034

30,595

4.6%

-24.7%

Total securities

134,820

143,662

171,501

-6.2%

-21.4%

SBA loans held for sale

19,021

22,093

21,364

-13.9%

-11.0%

SBA loans held to maturity

72,197

73,298

79,342

-1.5%

-9.0%

SBA 504 loans

65,075

65,343

71,432

-0.4%

-8.9%

Commercial loans

284,875

285,173

298,019

-0.1%

-4.4%

Residential mortgage loans

131,479

132,993

124,313

-1.1%

5.8%

Consumer loans

56,869

58,280

62,050

-2.4%

-8.3%

Total loans

629,516

637,180

656,520

-1.2%

-4.1%

Allowance for loan losses

(14,163)

(13,946)

(12,445)

1.6%

13.8%

Net loans

615,353

623,234

644,075

-1.3%

-4.5%

Premises and equipment, net

11,137

11,348

11,911

-1.9%

-6.5%

Deferred tax assets

7,168

7,485

7,256

-4.2%

-1.2%

Bank owned life insurance (BOLI)

8,732

8,653

5,946

0.9%

46.9%

Prepaid FDIC insurance

3,545

3,836

-

-7.6%

100.0%

Federal Home Loan Bank stock

4,656

4,656

4,677

0.0%

-0.4%

Accrued interest receivable

3,750

3,972

4,230

-5.6%

-11.3%

Other real estate owned (OREO)

5,773

3,728

2,774

54.9%

108.1%

Goodwill and other intangibles

1,548

1,552

1,563

-0.3%

-1.0%

SBA servicing assets

614

660

977

-7.0%

-37.2%

Other assets

1,982

1,455

1,891

36.2%

4.8%

Total assets

$ 846,385

$ 869,735

$ 922,689

-2.7%

-8.3%

LIABILITIES AND SHAREHOLDERS' EQUITY

Noninterest-bearing demand deposits

$   87,837

$   87,908

$   83,534

-0.1%

5.2%

Interest-bearing demand deposits

100,350

98,316

92,401

2.1%

8.6%

Savings deposits

292,372

291,355

263,758

0.3%

10.8%

Time deposits, under $100,000

124,851

143,617

209,050

-13.1%

-40.3%

Time deposits, $100,000 and over

64,748

72,036

101,922

-10.1%

-36.5%

Total deposits

670,158

693,232

750,665

-3.3%

-10.7%

Borrowed funds

86,044

87,672

85,000

-1.9%

1.2%

Subordinated debentures

15,465

15,465

15,465

0.0%

0.0%

Accrued interest payable

618

661

797

-6.5%

-22.5%

Accrued expenses and other liabilities

3,370

3,072

3,377

9.7%

-0.2%

Total liabilities

775,655

800,102

855,304

-3.1%

-9.3%

Cumulative perpetual preferred stock

18,894

18,770

18,418

0.7%

2.6%

Common stock

55,798

55,592

55,351

0.4%

0.8%

Retained earnings (deficit)

(473)

(815)

(1,253)

42.0%

62.3%

Treasury stock at cost

(4,169)

(4,169)

(4,169)

0.0%

0.0%

Accumulated other comprehensive income (loss)

680

255

(962)

166.7%

170.7%

Total shareholders' equity

70,730

69,633

67,385

1.6%

5.0%

Total liabilities and shareholders' equity

$ 846,385

$ 869,735

$ 922,689

-2.7%

-8.3%

Issued common shares

7,632

7,579

7,544

Outstanding common shares

7,207

7,154

7,119

Treasury shares

425

425

425

UNITY BANCORP, INC.

QTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2010

2010.Q3 VS.

For the Three Months Ended

2010.Q2

2009.Q3

Amounts in thousands, except percentages and per share amounts

9/30/2010

6/30/2010

9/30/2009

$

%

$

%

INTEREST INCOME

Federal funds sold and interest-bearing deposits

$     21

$     29

$     32

$ (8)

-27.6%

$ (11)

-34.4%

Federal Home Loan Bank stock

65

49

101

16

32.7%

(36)

-35.6%

Securities available for sale

1,071

1,054

1,482

17

1.6%

(411)

-27.7%

Securities held to maturity

270

250

389

20

8.0%

(119)

-30.6%

Total securities

1,341

1,304

1,871

37

2.8%

(530)

-28.3%

SBA loans

1,225

1,300

1,498

(75)

-5.8%

(273)

-18.2%

SBA 504 loans

1,093

1,091

1,147

2

0.2%

(54)

-4.7%

Commercial loans

4,454

4,488

4,973

(34)

-0.8%

(519)

-10.4%

Residential mortgage loans

1,808

1,959

1,772

(151)

-7.7%

36

2.0%

Consumer loans

719

724

791

(5)

-0.7%

(72)

-9.1%

Total loans

9,299

9,562

10,181

(263)

-2.8%

(882)

-8.7%

Total interest income

10,726

10,944

12,185

(218)

-2.0%

(1,459)

-12.0%

INTEREST EXPENSE

Interest-bearing demand deposits

148

188

264

(40)

-21.3%

(116)

-43.9%

Savings deposits

639

728

1,032

(89)

-12.2%

(393)

-38.1%

Time deposits

1,450

1,687

2,950

(237)

-14.0%

(1,500)

-50.8%

Borrowed funds and subordinated debentures

1,077

1,078

1,081

(1)

-0.1%

(4)

-0.4%

Total interest expense

3,314

3,681

5,327

(367)

-10.0%

(2,013)

-37.8%

Net interest income

7,412

7,263

6,858

149

2.1%

554

8.1%

Provision for loan losses

1,500

1,500

3,000

-

0.0%

(1,500)

-50.0%

Net interest income after provision for loan losses

5,912

5,763

3,858

149

2.6%

2,054

53.2%

NONINTEREST INCOME

Branch fee income

359

331

373

28

8.5%

(14)

-3.8%

Service and loan fee income

251

245

398

6

2.4%

(147)

-36.9%

Gain on sale of SBA loans held for sale, net

269

147

-

122

83.0%

269

100.0%

Gain on sale of mortgage loans

247

112

71

135

120.5%

176

247.9%

Bank owned life insurance (BOLI)

79

78

56

1

1.3%

23

41.1%

Other-than-temporary impairment charges

-

-

-

-

0.0%

-

0.00%

Net security gains

35

4

158

31

775.0%

(123)

-77.8%

Other income

220

253

106

(33)

-13.0%

114

107.5%

Total noninterest income (loss)

1,460

1,170

1,162

$ 290

24.8%

$    298

25.6%

NONINTEREST EXPENSE

Compensation and benefits

2,960

2,822

2,909

138

4.9%

51

1.8%

Occupancy

624

608

595

16

2.6%

29

4.9%

Processing and communications

529

555

531

(26)

-4.7%

(2)

-0.4%

Furniture and equipment

440

447

414

(7)

-1.6%

26

6.3%

Professional services

229

199

274

30

15.1%

(45)

-16.4%

Loan collection costs

272

243

315

29

11.9%

(43)

-13.7%

OREO expense

482

157

176

325

207.0%

306

173.9%

Deposit insurance

333

320

351

13

4.1%

(18)

-5.1%

Advertising

130

241

147

(111)

-46.1%

(17)

-11.6%

Other expenses

405

448

398

(43)

-9.6%

7

1.8%

Total noninterest expense

6,404

6,040

6,110

364

6.0%

294

4.8%

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

968

893

(1,090)

75

8.4%

2,058

188.8%

Provision (benefit) for income taxes

242

212

(343)

30

14.2%

585

170.6%

Net income (loss)

726

681

(747)

45

6.6%

1,473

197.2%

Preferred stock dividends & discount accretion

385

379

372

6

1.6%

13

3.5%

Income available (loss attributable) to common shareholders

$   341

$   302

$ (1,119)

$ 39

12.9%

$ 1,460

130.5%

Effective tax rate

25.0%

23.7%

31.5%

Net income (loss) per common share - Basic

$  0.05

$  0.04

$ (0.16)

Net income (loss) per common share - Diluted

$  0.05

$  0.04

$ (0.16)

Weighted average common shares outstanding - Basic

7,176

7,156

7,119

Weighted average common shares outstanding - Diluted

7,467

7,475

7,119

UNITY BANCORP, INC.

YTD CONSOLIDATED STATEMENTS OF INCOME

September 30, 2010

CURRENT YTD

PRIOR YTD

CURRENT YTD VS. PRIOR YTD

Amounts in thousands, except percentages and per share amounts

9/30/2010

9/30/2009

$

%

INTEREST INCOME

Federal funds sold and interest-bearing deposits

$                  76

$            78

$      (2)

-2.6%

Federal Home Loan Bank stock

148

219

(71)

-32.4%

Securities available for sale

3,405

4,670

(1,265)

-27.1%

Securities held to maturity

858

1,167

(309)

-26.5%

Total securities

4,263

5,837

(1,574)

-27.0%

SBA loans

3,977

4,668

(691)

-14.8%

SBA 504 loans

3,270

3,663

(393)

-10.7%

Commercial loans

13,546

15,040

(1,494)

-9.9%

Residential mortgage loans

5,729

5,419

310

5.7%

Consumer loans

2,174

2,383

(209)

-8.8%

Total loans

28,696

31,173

(2,477)

-7.9%

Total interest income

33,183

37,307

(4,124)

-11.1%

INTEREST EXPENSE

Interest-bearing demand deposits

593

801

(208)

-26.0%

Savings deposits

2,268

2,588

(320)

-12.4%

Time deposits

4,952

10,084

(5,132)

-50.9%

Borrowed funds and subordinated debentures

3,232

3,344

(112)

-3.3%

Total interest expense

11,045

16,817

(5,772)

-34.3%

Net interest income

22,138

20,490

1,648

8.0%

Provision for loan losses

4,500

6,000

(1,500)

-25.0%

Net interest income after provision for loan losses

17,638

14,490

3,148

21.7%

NONINTEREST INCOME

Branch fee income

1,051

1,038

13

1.3%

Service and loan fee income

705

946

(241)

-25.5%

Gain on sale of SBA loans held for sale, net

416

29

387

1334.5%

Gain on sale of mortgage loans

504

184

320

173.9%

Bank owned life insurance (BOLI)

230

166

64

38.6%

Other-than-temporary impairment charges

-

(1,749)

1,749

100.0%

Net security gains

42

675

(633)

-93.8%

Other income

592

316

276

87.3%

Total noninterest income

3,540

1,605

1,935

120.6%

NONINTEREST EXPENSE

Compensation and benefits

8,781

8,386

395

4.7%

Occupancy

1,910

1,929

(19)

-1.0%

Processing and communications

1,609

1,554

55

3.5%

Furniture and equipment

1,311

1,381

(70)

-5.1%

Professional services

657

780

(123)

-15.8%

Loan collection costs

698

694

4

0.6%

OREO expense

669

193

476

246.6%

Deposit insurance

983

1,361

(378)

-27.8%

Advertising

478

373

105

28.2%

Other expenses

1,288

1,218

70

5.7%

Total noninterest expense

18,384

17,869

515

2.9%

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

2,794

(1,774)

4,568

257.5%

Provision (benefit) for income taxes

639

(559)

1,198

214.3%

Net income (loss)

2,155

(1,215)

3,370

277.4%

Preferred stock dividends & discount accretion

1,136

1,123

13

1.2%

Income available (loss attributable) to common shareholders

$             1,019

$     (2,338)

$ 3,357

143.6%

Effective tax rate

22.9%

31.5%

Net income (loss) per common share - Basic

$               0.14

$       (0.33)

Net income (loss) per common share - Diluted

$               0.14

$       (0.33)

Weighted average common shares outstanding - Basic

7,161

7,119

Weighted average common shares outstanding - Diluted

7,417

7,119

UNITY BANCORP, INC.

QUARTER TO DATE NET INTEREST MARGIN

September 30, 2010

For the Three Months Ended

September 30, 2010

June 30, 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

$                 30,939

$        21

0.27%

$                 41,695

$        29

0.28%

Federal Home Loan Bank stock

4,656

65

5.54%

4,656

49

4.22%

Securities available for sale

115,876

1,085

3.75%

120,333

1,068

3.55%

Securities held to maturity

22,148

275

4.97%

23,300

256

4.39%

Total securities (A)

138,024

1,360

3.94%

143,633

1,324

3.69%

SBA loans

94,723

1,225

5.17%

98,214

1,300

5.29%

SBA 504 loans

65,506

1,093

6.62%

66,318

1,091

6.60%

Commercial loans

283,267

4,454

6.24%

285,709

4,488

6.30%

Residential mortgage loans

132,031

1,808

5.48%

133,379

1,959

5.87%

Consumer loans

57,315

719

4.98%

58,718

724

4.95%

Total loans (A), (B)

632,842

9,299

5.85%

642,338

9,562

5.97%

Total interest-earning assets

$               806,461

$ 10,745

5.30%

$               832,322

$ 10,964

5.28%

Noninterest-earning assets:

Cash and due from banks

20,469

21,959

Allowance for loan losses

(14,725)

(14,678)

Other assets

41,374

42,289

Total noninterest-earning assets

47,118

49,570

Total assets

$               853,579

$               881,892

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits

$                 95,348

$      148

0.62%

$               100,108

$      188

0.75%

Savings deposits

290,017

639

0.87%

292,543

728

1.00%

Time deposits

203,346

1,450

2.83%

227,722

1,687

2.97%

Total interest-bearing deposits

588,711

2,237

1.51%

620,373

2,603

1.68%

Borrowed funds and subordinated debentures

103,296

1,077

4.08%

101,907

1,078

4.18%

Total interest-bearing liabilities

$               692,007

$   3,314

1.89%

$               722,280

$   3,681

2.04%

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits

87,644

86,772

Other liabilities

4,115

4,313

Total noninterest-bearing liabilities

91,759

91,085

Total shareholders' equity

69,813

68,527

Total liabilities and shareholders' equity

$               853,579

$               881,892

Net interest spread

$   7,431

3.41%

$   7,283

3.24%

Tax-equivalent basis adjustment

(19)

(20)

Net interest income

$   7,412

$   7,263

Net interest margin

3.66%

3.51%

(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

September 30, 2010

For the Three Months Ended

September 30, 2010

September 30, 2009

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

$                 30,939

$        21

0.27%

$                 32,940

$        32

0.39%

Federal Home Loan Bank stock

4,656

65

5.54%

4,677

101

8.57%

Securities available for sale

115,876

1,085

3.75%

131,360

1,495

4.55%

Securities held to maturity

22,148

275

4.97%

31,418

407

5.18%

Total securities (A)

138,024

1,360

3.94%

162,778

1,902

4.67%

SBA loans

94,723

1,225

5.17%

102,691

1,498

5.83%

SBA 504 loans

65,506

1,093

6.62%

71,764

1,147

6.34%

Commercial loans

283,267

4,454

6.24%

301,010

4,973

6.55%

Residential mortgage loans

132,031

1,808

5.48%

123,786

1,772

5.73%

Consumer loans

57,315

719

4.98%

62,459

791

5.02%

Total loans (A), (B)

632,842

9,299

5.85%

661,710

10,181

6.12%

Total interest-earning assets

$               806,461

$ 10,745

5.30%

$               862,105

$ 12,216

5.64%

Noninterest-earning assets:

Cash and due from banks

20,469

18,502

Allowance for loan losses

(14,725)

(11,478)

Other assets

41,374

34,355

Total noninterest-earning assets

47,118

41,379

Total assets

$               853,579

$               903,484

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits

$                 95,348

$      148

0.62%

$                 88,284

$      264

1.19%

Savings deposits

290,017

639

0.87%

239,427

1,032

1.71%

Time deposits

203,346

1,450

2.83%

323,484

2,950

3.62%

Total interest-bearing deposits

588,711

2,237

1.51%

651,195

4,246

2.59%

Borrowed funds and subordinated debentures

103,296

1,077

4.08%

100,465

1,081

4.21%

Total interest-bearing liabilities

$               692,007

$   3,314

1.89%

$               751,660

$   5,327

2.80%

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits

87,644

79,965

Other liabilities

4,115

4,945

Total noninterest-bearing liabilities

91,759

84,910

Total shareholders' equity

69,813

66,914

Total liabilities and shareholders' equity

$               853,579

$               903,484

Net interest spread

$   7,431

3.41%

$   6,889

2.84%

Tax-equivalent basis adjustment

(19)

(31)

Net interest income

$   7,412

$   6,858

Net interest margin

3.66%

3.17%

(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.

YEAR TO DATE NET INTEREST MARGIN

September 30, 2010

For the Nine Months Ended

September 30, 2010

September 30, 2009

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

$       35,037

$        76

0.29%

$       19,222

$        78

0.54%

Federal Home Loan Bank stock

4,663

148

4.24%

5,190

219

5.64%

Securities available for sale

122,445

3,446

3.75%

133,446

4,709

4.71%

Securities held to maturity

24,238

885

4.87%

33,277

1,222

4.90%

Total securities (A)

146,683

4,331

3.94%

166,723

5,931

4.74%

SBA loans

97,013

3,977

5.47%

103,321

4,668

6.02%

SBA 504 loans

67,405

3,270

6.49%

74,266

3,663

6.59%

Commercial loans

286,978

13,546

6.31%

303,234

15,040

6.63%

Residential mortgage loans

133,331

5,729

5.73%

125,667

5,419

5.75%

Consumer loans

58,595

2,174

4.96%

62,630

2,383

5.09%

Total loans (A), (B)

643,322

28,696

5.96%

669,118

31,173

6.22%

Total interest-earning assets

$     829,705

$ 33,251

5.35%

$     860,253

$ 37,401

5.81%

Noninterest-earning assets:

Cash and due from banks

21,458

18,838

Allowance for loan losses

(14,662)

(11,173)

Other assets

41,521

33,409

Total noninterest-earning assets

48,317

41,074

Total assets

$     878,022

$     901,327

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits

$        99,323

$      593

0.80%

$       86,232

$      801

1.24%

Savings deposits

290,606

2,268

1.04%

192,559

2,588

1.80%

Time deposits

227,438

4,952

2.91%

357,073

10,084

3.78%

Total interest-bearing deposits

617,367

7,813

1.69%

635,864

13,473

2.83%

Borrowed funds and subordinated debentures

101,911

3,232

4.18%

116,427

3,344

3.79%

Total interest-bearing liabilities

$     719,278

$ 11,045

2.04%

$     752,291

$ 16,817

2.98%

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits

85,876

77,730

Other liabilities

4,166

4,297

Total noninterest-bearing liabilities

90,042

82,027

Total shareholders' equity

68,702

67,009

Total liabilities and shareholders' equity

$    878,022

$    901,327

Net interest spread

$ 22,206

3.31%

$ 20,584

2.83%

Tax-equivalent basis adjustment

(68)

(94)

Net interest income

$ 22,138

$ 20,490

Net interest margin

3.58%

3.20%

(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

September 30, 2010

Amounts in thousands, except percentages

9/30/2010

6/30/2010

3/31/2010

12/31/2009

9/30/2009

ALLOWANCE FOR LOAN LOSSES:

Balance, beginning of period

$ 13,946

$ 14,055

$ 13,842

$   12,445

$ 10,665

Provision for loan losses charged to expense

1,500

1,500

1,500

2,000

3,000

15,446

15,555

15,342

14,445

13,665

Less: Chargeoffs

SBA loans

389

517

-

-

448

SBA 504 loans

-

-

750

500

-

Commercial loans

989

1,038

485

125

674

Residential mortgage loans

95

115

100

-

125

Consumer loans

9

2

-

5

11

Total chargeoffs

1,482

1,672

1,335

630

1,258

Add: Recoveries

SBA loans

17

53

45

23

14

SBA 504 loans

-

-

-

-

22

Commercial loans

178

10

3

3

-

Residential mortgage loans

-

-

-

-

-

Consumer loans

4

-

-

1

2

Total recoveries

199

63

48

27

38

Net chargeoffs

1,283

1,609

1,287

603

1,220

Balance, end of period

$ 14,163

$ 13,946

$ 14,055

$   13,842

$ 12,445

LOAN QUALITY INFORMATION:

Nonperforming loans

$ 27,304

$ 26,071

$ 26,654

$   25,496

$ 24,687

Other real estate owned (OREO)

5,773

3,728

3,318

1,530

2,774

Nonperforming assets

33,077

29,799

29,972

27,026

27,461

Less:  Amount guaranteed by Small Business Administration

2,094

1,436

2,205

1,931

1,759

Net nonperforming assets

$ 30,983

$ 28,363

$ 27,767

$   25,095

$ 25,702

Loans 90 days past due & still accruing

$   2,467

$   2,780

$   3,061

$     2,286

$   1,609

Allowance for loan losses to:

Total loans at quarter end

2.25%

2.19%

2.16%

2.11%

1.90%

Nonperforming loans

51.87%

53.49%

52.73%

54.29%

50.41%

Nonperforming assets

42.82%

46.80%

46.89%

51.22%

45.32%

Net nonperforming assets

45.71%

49.17%

50.62%

55.16%

48.42%

QTD net chargeoffs (annualized) to QTD average loans:

SBA loans

1.56%

1.89%

-0.19%

-0.09%

1.68%

SBA 504 loans

0.00%

0.00%

4.32%

2.78%

-0.12%

Commercial loans

1.14%

1.44%

0.67%

0.16%

0.89%

Residential mortgage loans

0.29%

0.35%

0.30%

0.00%

0.40%

Consumer loans

0.03%

0.01%

0.00%

0.03%

0.06%

Total loans

0.80%

1.00%

0.80%

0.36%

0.73%

Nonperforming loans to total loans

4.34%

4.09%

4.09%

3.88%

3.76%

Nonperforming assets to total loans and OREO

5.21%

4.65%

4.58%

4.10%

4.17%

Nonperforming assets to total assets

3.91%

3.43%

3.37%

2.90%

2.98%

UNITY BANCORP, INC.

QUARTERLY FINANCIAL DATA

September 30, 2010

Amounts in thousands, except percentages and per share amounts

9/30/2010

6/30/2010

3/31/2010

12/31/2009

9/30/2009

SUMMARY OF INCOME:

Total interest income

$   10,726

$   10,944

$   11,513

$   12,101

$   12,185

Total interest expense

3,314

3,681

4,049

4,766

5,327

Net interest income

7,412

7,263

7,464

7,335

6,858

Provision for loan losses

1,500

1,500

1,500

2,000

3,000

Net interest income after provision for loan losses

5,912

5,763

5,964

5,335

3,858

Total noninterest income (loss)

1,460

1,170

910

535

1,162

Total noninterest expense

6,404

6,040

5,941

6,076

6,110

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

968

893

933

(206)

(1,090)

Provision (benefit) for income taxes

242

212

185

(340)

(343)

Net income (loss)

726

681

748

134

(747)

Preferred stock dividends & discount accretion

385

379

373

373

372

Income available (loss attributable) to common shareholders

$        341

$        302

$        375

$       (239)

$   (1,119)

Net income (loss) per common share - Basic

$       0.05

$       0.04

$       0.05

$      (0.03)

$     (0.16)

Net income (loss) per common share - Diluted

$       0.05

$       0.04

$       0.05

$      (0.03)

$     (0.16)

COMMON SHARE DATA:

Market price per share

$       5.25

$       5.35

$       5.29

$       4.02

$       4.20

Dividends paid

$           -

$           -

$           -

$           -

$           -

Book value per common share

$       7.19

$       7.11

$       7.00

$       6.90

$       6.88

QTD weighted average shares - basic

7,176

7,156

7,150

7,126

7,119

QTD weighted average shares - diluted

7,467

7,475

7,294

7,126

7,119

Outstanding common shares

7,207

7,154

7,156

7,144

7,119

OPERATING RATIOS (Annualized):

Return (loss) on average assets

0.34%

0.31%

0.34%

0.06%

-0.33%

Return (loss) on average equity

2.66%

2.43%

3.09%

-1.95%

-9.14%

Efficiency ratio

72.47%

71.66%

70.98%

71.05%

77.72%

BALANCE SHEET DATA:

Total assets

$ 846,385

$ 869,735

$ 889,927

$ 930,357

$ 922,689

Total deposits

670,158

693,232

714,802

758,239

750,665

Total loans

629,516

637,180

651,200

657,016

656,520

Total securities

134,820

143,662

138,442

169,022

171,501

Total shareholders' equity

70,730

69,633

68,712

67,865

67,385

Allowance for loan losses

(14,163)

(13,946)

(14,055)

(13,842)

(12,445)

TAX EQUIVALENT YIELDS AND RATES:

Interest-earning assets

5.30%

5.28%

5.47%

5.45%

5.64%

Interest-bearing liabilities

1.89%

2.04%

2.20%

2.44%

2.80%

Net interest spread

3.41%

3.24%

3.27%

3.01%

2.84%

Net interest margin

3.66%

3.51%

3.57%

3.30%

3.17%

CREDIT QUALITY:

Nonperforming assets

$   33,077

$   29,799

$   29,972

$   27,026

$   27,461

QTD net chargeoffs (annualized) to QTD average loans

0.80%

1.00%

0.80%

0.36%

0.73%

Allowance for loan losses to total loans

2.25%

2.19%

2.16%

2.11%

1.90%

Nonperforming assets to total loans and OREO

5.21%

4.65%

4.58%

4.10%

4.17%

Nonperforming assets to total assets

3.91%

3.43%

3.37%

2.90%

2.98%

CAPITAL RATIOS AND OTHER:

Total equity to total assets

8.36%

8.01%

7.72%

7.29%

7.30%

Leverage ratio

9.83%

9.43%

9.18%

8.83%

9.08%

Tier 1 risk-based capital ratio

12.67%

12.39%

12.02%

11.75%

11.83%

Total risk-based capital ratio

13.93%

13.65%

13.28%

13.01%

13.09%

Number of banking offices

16

16

16

16

16

Number of ATMs

18

18

19

19

19

Number of employees

173

165

171

174

174

SOURCE Unity Bancorp



RELATED LINKS

http://www.unitybank.com