Unity Bancorp Reports Continued Improvement in Earnings

           Unity Bancorp Reports Continued Improvement in Earnings

PR Newswire

CLINTON, N.J., Oct. 25, 2012

CLINTON, N.J., Oct. 25, 2012 /PRNewswire/ --Unity Bancorp, Inc. (NASDAQ:
UNTY), parent company of Unity Bank, reported net income available to common
shareholders of $799 thousand, or $0.10 per diluted share, for the three
months ended September 30, 2012, compared to $700 thousand, or $0.09 per
diluted share, for the same period a year ago. Return on average assets and
average common equity for the quarter were 0.60% and 5.74%, respectively,
compared to 0.54% and 5.27% for the same period a year ago.

For the nine months ended September 30, 2012, net income available to common
shareholders totaled $1.9 million, or $0.24 per diluted share, compared to
$786 thousand, or $0.10 per diluted share, for the same period a year ago.
Return on average assets and average common equity for the nine months were
0.51% and 4.61%, respectively, compared to 0.32% and 2.04% for the same period
a year ago.

Highlights for the quarter include:

  oNonperforming assets improved for the third consecutive quarter with a
    decline of $3.4 million to $18.8 million from $22.2 million at June 30,
    2012.
  oImproved credit quality resulted in lower loan loss provisions as well as
    reduced loan collection expenses and costs to maintain other real estate
    owned ("OREO").
  oSignificant increases in residential mortgage originations resulted in
    increased gains on sale of mortgage loans.
  oNet interest margin expanded to 3.72% this quarter from 3.68% for the
    quarter ended June 30, 2012.
  oContinued deposit product mix improvement. Growth in core demand deposits
    and savings deposits, while higher costing time deposits declined.
  oFurther improvement in our capital ratios as we remain "well-capitalized."
  oClosed our William Penn Highway, Pennsylvania branch and received
    regulatory approval for the new Somerset, New Jersey branch which is
    expected to open in November 2012.

James A. Hughes, President and CEO, stated, "This was another quarter of
increased earnings as our core fundamentals continued to improve and asset
quality strengthened. We enhanced our net interest margin over the second
quarter of 2012 through strategic deposit pricing, coupled with increasing
levels of noninterest-bearing deposits. The trends are very positive and I
remain extremely optimistic about the long-term opportunities ahead." 

Net Interest Income

Net interest income decreased $326 thousand to $7.0 million for the three
months ended September 30, 2012 compared to the prior year's quarter and
decreased $1.6 million to $20.7 million for the nine months ended September
30, 2012 compared to the prior year's period. In addition, the net interest
margin contracted 13 basis points to 3.72% for the quarter ended September 30,
2012 and contracted 23 basis points to 3.65% for the nine months ended
September 30, 2012 when compared to the prior year periods.

Our net interest income continues to be influenced by the sustained low
interest rate environment, which the Federal Open Market Committee ("FOMC")
forecasts will remain through mid-2015. This rate environment has resulted in
a tighter net interest margin as our earning assets re-price at lower rates.
The yield on earning assets fell 51 basis points to 4.70% and 58 basis points
to 4.70% for the quarter and year-to-date periods ending September 30, 2012,
respectively, when compared to the same periods in 2011. Partially
offsetting these declines are lower funding costs. The cost of
interest-bearing liabilities decreased 43 basis points to 1.19% for the three
month period and decreased 37 basis points to 1.29% for the nine month period.

Noninterest Income

Noninterest income increased $120 thousand to $1.8 million and $974 thousand
to $5.3 million for the three and nine months ended September 30, 2012,
respectively, compared to the prior year's period. These increases were driven
by record levels of residential mortgage loan originations and sales.
Additional factors affecting noninterest income were:

  oBranch fee income, which consists of deposit service charges and overdraft
    fees, increased due to higher levels of overdraft fees year-to-date
    partially offset by reduced deposit account service charges.
  oService and loan fee income increased due to late charges, servicing
    income and other processing fees. 
  oGains on sales of SBA loans decreased due to a lower volume of loans being
    sold in each period. For the three month period, $442 thousand in SBA
    loans were sold compared to $5.1 million in sales in the third quarter of
    2011. Year-to-date, $4.7 million in SBA loans were sold compared to $11.1
    million in the prior year period.
  oGains on sales of residential mortgage loans increased on a significantly
    higher volume of loan sales. For the three month period, $30.1 million
    in residential mortgage loans were sold compared to $13.3 million in the
    third quarter of 2011. Year-to-date, $71.6 million in residential
    mortgage loans were sold compared to $29.0 million in the prior year's
    period.
  oSecurity gains of $7 thousand and $514 thousand were realized during the
    quarter and year to date periods, respectively.

Noninterest Expense

Noninterest expense totaled $6.0 million and $6.1 million for the three months
ended September 30, 2012 and 2011, respectively, and $18.2 million and $18.5
million for the nine months ended September 30, 2012 and 2011, respectively.

Noninterest expense in the current and prior year periods included the impact
of our branch network restructuring. In March 2012, we opened our Washington
Township, New Jersey branch. In the third quarter of 2012, we announced we
would be closing our William Penn Highway, Pennsylvania branch and recognized
approximately $32 thousand in residual lease and fixed asset disposal
expenses. Also, during the third quarter we announced we would be opening a
new branch in Somerset, New Jersey and have subsequently begun to incur lease
and other operating expenses. For the nine months ended September 30, 2011,
we incurred $215 thousand in residual lease obligation and fixed asset
disposals related to closing two underperforming branches. Other factors
which affected noninterest expense include:

  oCompensation and benefits expense increased due to higher payroll costs,
    mortgage origination commissions, equity compensation and medical benefits
    expenses.
  oOccupancy expense increased over the third quarter of 2011 due to rental
    expense from our new Somerset branch, residual lease expenses from closing
    our William Penn branch and increased depreciation expenses due to the new
    Washington branch. For the year-to-date period, occupancy expense
    declined as the above noted increases were offset by higher snow removal
    expenses in 2011 and the branch closure related expenses in 2011 noted
    above.
  oFurniture and equipment expense decreased due primarily to the branch
    closure cost savings noted above, partially offset by expenses related to
    our new Washington branch.
  oLoan collection costs decreased due to lower loan legal, appraisal,
    insurance and other collection related expenses.
  oOREO costs, such as property valuation adjustments, property taxes and
    maintenance expenses, decreased significantly as credit quality improved.
  oDeposit insurance expense decreased year-to-date due to the new
    assets-based assessment method put into place by the FDIC on April 1,
    2011.
  oAdvertising expenses, such as promotional activities related to our new
    branches and in response to increased competition within our market place,
    combined with participation in community events and higher direct mail
    costs, increased year-to-date.

Financial Condition

At September 30, 2012, total assets were $802.7 million, a decrease of $8.2
million from the prior year-end.

  oTotal securities decreased $1.1 million since December 31, 2011, due to
    $32.8 million in security purchases, offset by sales and an increased
    level of prepayments.
  oTotal loans increased $4.3 million or 0.7% to $596.9 million at September
    30, 2012. The Company plans to continue shrinking its SBA portfolio.
    Future loan growth is expected in both the commercial and residential
    portfolios as reflected in our year-to-date performance. The net increase
    was the result of the following:

       oCommercial loans increased $23.5 million or 8.3%,
       oResidential mortgage loans increased $3.1 million or 2.3%,
       oSBA 504 loans decreased $13.3 million or 24.2%,
       oSBA 7(a) loans decreased $4.8 million or 6.7%, and
       oConsumer loans decreased $4.1 million or 8.4%. 

  oCore deposits, which exclude time deposits, increased $21.0 million during
    the year to $505.6 million, due primarily to a $10.3 million increase in
    municipal deposits. The net changes by product type include:

       oA $17.0 million increase in savings deposits, and a
       o$4.3 million increase in noninterest-bearing demand deposits,
         partially offset by a
       o$280 thousand decrease in interest-bearing demand deposits.

  oTime deposits decreased $31.9 million from year-end due to the maturity
    and planned run off of brokered deposits, as well as a high rate retail
    promotion that was completed late in 2008 to bolster liquidity.
  oShareholders' equity was $76.4 million at September 30, 2012, an increase
    of $2.9 million from year-end 2011, primarily due to the increase in net
    income.
  oBook value per common share was $7.52 as of September 30, 2012.
  oAt September 30, 2012 the leverage, Tier I and Total Risk Based Capital
    ratios were 11.20%, 14.52% and 15.78%, respectively, all in excess of the
    ratios required to be deemed "well-capitalized."

Credit Quality

"Nonperforming assets have declined $7.0 million or 27.2% to $18.8 million
since year-end 2011. This is the lowest level since 2008 and I expect this
trend to continue", said James A. Hughes. "Many of our problem commercial
and SBA relationships have been resolved and the majority of our problem
relationships are behind us."

  oNonperforming assets totaled $18.8 million at September 30, 2012 or 3.14%
    of total loans and OREO, compared to $25.8 million or 4.33% of total loans
    and OREO at year-end 2011.
  oThe allowance for loan losses totaled $15.3 million at September 30, 2012
    or 2.56% of total loans. The provision for loan losses for the quarter
    ended September 30, 2012 was $1.0 million compared to $1.4 million for the
    prior year's quarter. The provision for loan losses for the nine months
    ended September 30, 2012 was $3.2 million compared to $5.7 million for the
    prior year's period.
  oNet charge-offs were $2.0 million for the three months ended September 30,
    2012, compared to $971 thousand for the same period a year ago. For the
    nine months ended September 30, 2012, net charge-offs were $4.3 million,
    compared to $3.6 million for the prior year's period.
  oTroubled debt restructurings ("TDRs") decreased $2.2 million from year-end
    to $18.9 million due to loan payoffs. At September 30, 2012, 91.4% of our
    TDRs were performing. 

Unity Bancorp, Inc. is a financial service organization headquartered in
Clinton, New Jersey, with approximately $803 million in assets and $633
million in deposits. Unity Bank provides financial services to retail,
corporate and small business customers through its 15 retail service centers
located in Hunterdon, Middlesex, Somerset, Union and Warren Counties in New
Jersey and Northampton County, Pennsylvania. For additional information about
Unity, visit our website at www.unitybank.com, or call 800-618-BANK.

This news release contains certain forward-looking statements, either
expressed or implied, which are provided to assist the reader in understanding
anticipated future financial performance. These statements may be identified
by use of the words "believe", "expect", "intend", "anticipate", "estimate",
"project" or similar expressions. These statements involve certain risks,
uncertainties, estimates and assumptions made by management, which are subject
to factors beyond the company's control and could impede its ability to
achieve these goals. These factors include those items included in our Annual
Report on Form 10-K under the heading "Item IA-Risk Factors" as well as
general economic conditions, trends in interest rates, the ability of our
borrowers to repay their loans, our ability to manage and reduce the level of
our nonperforming assets, and results of regulatory exams, among other
factors.



UNITY BANCORP, INC.
SUMMARY FINANCIAL HIGHLIGHTS
September 30, 2012
                                                           September 30,
                                                           2012 vs.
                                                           June     September
                                                           30,      30, 2011
                                                           2012
(In thousands,
except             September      June 30,    September
percentages and    30, 2012       2012        30, 2011     %        %
per share
amounts)
BALANCE SHEET
DATA:
Total assets       $  802,675     $ 785,111   $ 820,652    2.2%     (2.2)%
Total deposits        633,126       616,443     654,171    2.7      (3.2)
Total loans           596,910       604,901     603,633    (1.3)    (1.1)
Total securities      106,437       114,846     100,752    (7.3)    5.6
Total
shareholders'         76,387        74,901      73,136     2.0      4.4
equity
Allowance for         (15,294)      (16,284)    (16,447)   6.1      7.0
loan losses
FINANCIAL DATA -
QUARTER TO DATE:
Income before
provision for      $  1,802       $ 1,494     $ 1,506      20.6     19.7
income taxes
Provision for         606           518         420        17.0     44.3
income taxes
Net income           1,196         976         1,086      22.5     10.1
Preferred stock
dividends and         397           401         386        (1.0)    2.8
discount
accretion
Income available
to common          $  799         $ 575       $ 700        39.0     14.1
shareholders
Net income per
common share -     $  0.11        $ 0.08      $ 0.09       37.5     22.2
Basic (1)
Net income per
common share -     $  0.10        $ 0.07      $ 0.09       42.9     11.1
Diluted (1)
Return on             0.60%         0.49%       0.54%      22.4     11.1
average assets
Return on
average equity        5.74%         4.25%       5.27%      35.1     8.9
(2)
Efficiency ratio      68.22%        73.72%      69.80%     (7.5)    (2.3)
FINANCIAL DATA -
YEAR TO DATE:
Income before
provision for      $  4,660                   $ 2,498               86.5
income taxes
Provision for         1,583                     548                 188.9
income taxes
Net income           3,077                     1,950               57.8
Preferred stock
dividends and         1,195                     1,164               2.7
discount
accretion
Income available
to common          $  1,882                   $ 786                 139.4
shareholders
Net income per
common share -     $  0.25                    $ 0.11                127.3
Basic (1)
Net income per
common share -     $  0.24                    $ 0.10                140.0
Diluted (1)
Return on             0.51%                     0.32%               59.4
average assets
Return on
average equity        4.61%                     2.04%               126.0
(2)
Efficiency ratio      71.20%                    70.36%              1.2
SHARE
INFORMATION:
Market price per   $  6.13        $ 6.00      $ 6.65       2.2      (7.8)
share
Dividends paid     $  -           $ -         $ -          -        -
Book value per     $  7.52        $ 7.38      $ 7.25       1.9      3.7
common share
Average diluted
shares                7,782         7,784       7,781      -        -
outstanding
(QTD)
CAPITAL RATIOS:
Total equity to       9.52%         9.54%       8.91%      (0.2)    6.8
total assets
Leverage ratio        11.20%        11.08%      10.69%     1.1      4.8
Tier 1
risk-based            14.52%        14.22%      13.88%     2.1      4.6
capital ratio
Total risk-based      15.78%        15.49%      15.14%     1.9      4.2
capital ratio
CREDIT QUALITY
AND RATIOS:
Nonperforming      $  18,790      $ 22,186    $ 24,153     (15.3)   (22.2)
assets
QTD net
chargeoffs
(annualized) to       1.32%         0.71%       0.63%      85.9     109.5
QTD average
loans
Allowance for
loan losses to        2.56%         2.69%       2.72%      (4.8)    (5.9)
total loans
Nonperforming
assets to total       3.14%         3.65%       3.98%      (14.0)   (21.1)
loans and OREO
Nonperforming
assets to total       2.34%         2.83%       2.94%      (17.3)%  (20.4)%
assets
(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, 2012
                                                          September 30, 2012
                                                          vs.
                                                          December  September
                                                          31, 2011  30, 2011
(In thousands,       September   December    September    %         %
except percentages)  30, 2012    31, 2011    30, 2011
ASSETS
Cash and due from    $ 17,027    $ 17,688    $ 15,965     (3.7)%    6.7%
banks
Federal funds sold
and                    55,536      64,886      74,125     (14.4)    (25.1)
interest-bearing
deposits
Cash and cash          72,563      82,574      90,090     (12.1)    (19.5)
equivalents
Securities:
Securities             90,852      88,765      88,083     2.4       3.1
available for sale
Securities held to     15,585      18,771      12,669     (17.0)    23.0
maturity
Total securities       106,437     107,536     100,752    (1.0)     5.6
Loans:
SBA loans held for     7,708       7,668       9,284      0.5       (17.0)
sale
SBA loans held to      59,299      64,175      66,363     (7.6)     (10.6)
maturity
SBA 504 loans          41,771      55,108      55,520     (24.2)    (24.8)
Commercial loans       306,569     283,104     284,046    8.3       7.9
Residential            137,192     134,090     136,942    2.3       0.2
mortgage loans
Consumer loans         44,371      48,447      51,478     (8.4)     (13.8)
Total loans            596,910     592,592     603,633    0.7       (1.1)
Allowance for loan     (15,294)    (16,348)    (16,447)   6.4       7.0
losses
Net loans              581,616     576,244     587,186    0.9       (0.9)
Premises and           12,016      11,350      10,648     5.9       12.8
equipment, net
Bank owned life        9,327       9,107       9,033      2.4       3.3
insurance ("BOLI")
Deferred tax assets    6,221       6,878       6,889      (9.6)     (9.7)
Federal Home Loan      3,989       4,088       4,088      (2.4)     (2.4)
Bank stock
Accrued interest       3,478       3,703       3,519      (6.1)     (1.2)
receivable
Other real estate      1,456       3,032       3,555      (52.0)    (59.0)
owned ("OREO")
Prepaid FDIC           2,079       2,545       2,653      (18.3)    (21.6)
insurance
Goodwill and other     1,518       1,530       1,533      (0.8)     (1.0)
intangibles
Other assets           1,975       2,259       706        (12.6)    179.7
Total assets         $ 802,675   $ 810,846   $ 820,652    (1.0)%    (2.2)%
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Liabilities:
Deposits:
Noninterest-bearing  $ 105,529   $ 101,193   $ 93,706     4.3%      12.6%
demand deposits
Interest-bearing       104,469     104,749     100,807    (0.3)     3.6
demand deposits
Savings deposits       295,567     278,603     296,571    6.1       (0.3)
Time deposits,         78,104      102,809     105,840    (24.0)    (26.2)
under $100,000
Time deposits,         49,457      56,617      57,247     (12.6)    (13.6)
$100,000 and over
Total deposits         633,126     643,971     654,171    (1.7)     (3.2)
Borrowed funds         75,000      75,000      75,000     -         -
Subordinated           15,465      15,465      15,465     -         -
debentures
Accrued interest       464         523         533        (11.3)    (12.9)
payable
Accrued expenses
and other              2,233       2,329       2,347      (4.1)     (4.9)
liabilities
Total liabilities      726,288     737,288     747,516    (1.5)     (2.8)
Shareholders'
equity:
Cumulative
perpetual preferred    19,968      19,545      19,409     2.2       2.9
stock
Common stock           54,176      53,746      53,663     0.8       1.0
Retained earnings      1,028       (854)       (1,056)    220.4     197.3
(deficit)
Accumulated other
comprehensive          1,215       1,121       1,120      8.4       8.5
income
Total shareholders'    76,387      73,558      73,136     3.8       4.4
equity
Total liabilities
and shareholders'    $ 802,675   $ 810,846   $ 820,652    (1.0)%    (2.2)%
equity
Preferred shares       21          21          21
Issued and
outstanding common     7,503       7,459       7,413
shares

                     UNITY BANCORP, INC.
                     QTD CONSOLIDATED STATEMENTS OF INCOME
                     September 30, 2012
                  For the three months ended    September 30, 2012 vs.
                                                  June 30, 2012     September 30, 2011
(In thousands,
except            September  June     September
percentages and   30, 2012   30,      30, 2011    $        %        $          %
per share                    2012
amounts)
INTEREST INCOME
Federal funds
sold and          $  13      $ 11     $  6        $ 2       18.2%   $ 7         116.7%
interest-bearing
deposits
Federal Home         50        44        46         6       13.6      4         8.7
Loan Bank stock
Securities:
Securities
available for        656       690       804        (34)    (4.9)     (148)     (18.4)
sale
Securities held      146       163       157        (17)    (10.4)    (11)      (7.0)
to maturity
Total securities     802       853       961        (51)    (6.0)     (159)     (16.5)
Loans:
SBA loans            881       846       1,243      35      4.1       (362)     (29.1)
SBA 504 loans        647       691       838        (44)    (6.4)     (191)     (22.8)
Commercial loans     4,313     4,216     4,417      97      2.3       (104)     (2.4)
Residential          1,631     1,582     1,825      49      3.1       (194)     (10.6)
mortgage loans
Consumer loans       534       529       616        5       0.9       (82)      (13.3)
Total loans          8,006     7,864     8,939      142     1.8       (933)     (10.4)
Total interest       8,871     8,772     9,952      99      1.1       (1,081)   (10.9)
income
INTEREST EXPENSE
Interest-bearing     108       123       137        (15)    (12.2)    (29)      (21.2)
demand deposits
Savings deposits     293       287       536        6       2.1       (243)     (45.3)
Time deposits        619       689       979        (70)    (10.2)    (360)     (36.8)
Borrowed funds
and subordinated     824       816       947        8       1.0       (123)     (13.0)
debentures
Total interest       1,844     1,915     2,599      (71)    (3.7)     (755)     (29.0)
expense
Net interest         7,027     6,857     7,353      170     2.5       (326)     (4.4)
income
Provision for        1,000     1,000     1,400      -       -         (400)     (28.6)
loan losses
Net interest
income after         6,027     5,857     5,953      170     2.9       74        1.2
provision for
loan losses
NONINTEREST
INCOME
Branch fee           383       362       374        21      5.8       9         2.4
income
Service and loan     366       287       213        79      27.5      153       71.8
fee income
Gain on sale of
SBA loans held       46        223       338        (177)   (79.4)    (292)     (86.4)
for sale, net
Gain on sale of
mortgage loans,      662       453       250        209     46.1      412       164.8
net
BOLI income          74        73        74         1       1.4       -         -
Net security         7         283       266        (276)   (97.5)    (259)     (97.4)
gains
Other income         236       160       139        76      47.5      97        69.8
Total
noninterest          1,774     1,841     1,654      (67)    (3.6)     120       7.3
income
NONINTEREST
EXPENSE
Compensation and     3,191     3,133     2,944      58      1.9       247       8.4
benefits
Occupancy            690       740       615        (50)    (6.8)     75        12.2
Processing and       544       553       549        (9)     (1.6)     (5)       (0.9)
communications
Furniture and        368       355       384        13      3.7       (16)      (4.2)
equipment
Professional         196       211       206        (15)    (7.1)     (10)      (4.9)
services
Loan collection      182       91        235        91      100.0     (53)      (22.6)
costs
OREO expenses        36        237       491        (201)   (84.8)    (455)     (92.7)
Deposit              162       168       60         (6)     (3.6)     102       170.0
insurance
Advertising          181       302       187        (121)   (40.1)    (6)       (3.2)
Other expenses       449       414       430        35      8.5       19        4.4
Total
noninterest          5,999     6,204     6,101      (205)   (3.3)     (102)     (1.7)
expense
Income before
provision for        1,802     1,494     1,506      308     20.6      296       19.7
income taxes
Provision for        606       518       420        88      17.0      186       44.3
income taxes
Net income          1,196     976       1,086      220     22.5      110       10.1
Preferred stock
dividends and        397       401       386        (4)     (1.0)     11        2.8
discount
accretion
Income available
to common         $  799     $ 575    $  700      $ 224     39.0%   $ 99        14.1%
shareholders
Effective tax        33.6%     34.7%     27.9%
rate
Net income per
common share -    $  0.11    $ 0.08   $  0.09
Basic (1)
Net income per
common share -    $  0.10    $ 0.07   $  0.09
Diluted (1)
Weighted average
common shares        7,473     7,462     7,413
outstanding -
Basic
Weighted average
common shares        7,782     7,784     7,781
outstanding -
Diluted
(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, 2012
                            For the nine months        Current YTD vs. Prior
                            ended September 30,       YTD
(In thousands, except
percentages and per share   2012            2011        $             %
amounts)
INTEREST INCOME
Federal funds sold and      $   56          $  26       $  30          115.4%
interest-bearing deposits
Federal Home Loan Bank          144            147         (3)         (2.0)
stock
Securities:
Securities available for        2,066          2,558       (492)       (19.2)
sale
Securities held to              482            625         (143)       (22.9)
maturity
Total securities                2,548          3,183       (635)       (19.9)
Loans:
SBA loans                       2,652          3,671       (1,019)     (27.8)
SBA 504 loans                   2,098          2,626       (528)       (20.1)
Commercial loans                12,707         13,304      (597)       (4.5)
Residential mortgage            4,869          5,502       (633)       (11.5)
loans
Consumer loans                  1,624          1,931       (307)       (15.9)
Total loans                     23,950         27,034      (3,084)     (11.4)
Total interest income           26,698         30,390      (3,692)     (12.1)
INTEREST EXPENSE
Interest-bearing demand         368            420         (52)        (12.4)
deposits
Savings deposits                933            1,701       (768)       (45.1)
Time deposits                   2,222          3,119       (897)       (28.8)
Borrowed funds and              2,486          2,851       (365)       (12.8)
subordinated debentures
Total interest expense          6,009          8,091       (2,082)     (25.7)
Net interest income             20,689         22,299      (1,610)     (7.2)
Provision for loan losses       3,200          5,650       (2,450)     (43.4)
Net interest income after       17,489         16,649      840         5.0
provision for loan losses
NONINTEREST INCOME
Branch fee income               1,131          1,054       77          7.3
Service and loan fee            954            840         114         13.6
income
Gain on sale of SBA loans       427            848         (421)       (49.6)
held for sale, net
Gain on sale of mortgage        1,526          506         1,020       201.6
loans, net
BOLI income                     220            221         (1)         (0.5)
Net security gains             514            353         161         45.6
Other income                    558            534         24          4.5
Total noninterest income        5,330          4,356       974         22.4
NONINTEREST EXPENSE
Compensation and benefits       9,505          8,881       624         7.0
Occupancy                       2,038          2,161       (123)       (5.7)
Processing and                  1,631          1,593       38          2.4
communications
Furniture and equipment         1,085          1,178       (93)        (7.9)
Professional services           598            599         (1)         (0.2)
Loan collection costs           453            660         (207)       (31.4)
OREO expenses                   398            936         (538)       (57.5)
Deposit insurance               502            661         (159)       (24.1)
Advertising                     630            510         120         23.5
Other expenses                  1,319          1,328       (9)         (0.7)
Total noninterest expense       18,159         18,507      (348)       (1.9)
Income before provision         4,660          2,498       2,162       86.5
for income taxes
Provision for income            1,583          548         1,035       188.9
taxes
Net income                     3,077          1,950       1,127       57.8
Preferred stock dividends       1,195          1,164       31          2.7
and discount accretion
Income available to         $   1,882       $  786      $  1,096       139.4%
common shareholders
Effective tax rate              34.0           21.9
Net income per common       $   0.25           0.11
share - Basic (1)
Net income per common       $   0.24           0.10
share - Diluted (1)
Weighted average common
shares outstanding -            7,465          7,301
Basic
Weighted average common
shares outstanding -            7,786          7,719
Diluted
(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
                       September 30, 2012
(Dollar amounts in thousands, interest amounts and interest
rates/yields on a fully tax-equivalent basis)
                     For the three months ended
                     September 30, 2012                  June 30, 2012
                     Average     Interest  Rate/Yield  Average     Interest  Rate/Yield
                     Balance                             Balance
ASSETS
Interest-earning
assets:
Federal funds sold
and                  $ 40,183    $  13         0.13%     $ 30,832    $  11         0.14%
interest-bearing
deposits
Federal Home Loan      3,989        50         4.99        3,993        44         4.43
Bank stock
Securities:
Securities             95,193       703        2.95        103,958      741        2.85
available for sale
Securities held to     16,467       152        3.69        17,499       170        3.89
maturity
Total securities       111,660      855        3.06        121,457      911        3.00
(A)
Loans:
SBA loans              66,484       881        5.30        69,273       846        4.89
SBA 504 loans          44,583       647        5.77        46,804       691        5.94
Commercial loans       307,090      4,313      5.59        303,409      4,216      5.59
Residential            136,568      1,631      4.78        133,643      1,582      4.74
mortgage loans
Consumer loans         46,116       534        4.61        45,658       529        4.66
Total loans (B)        600,841      8,006      5.31        598,787      7,864      5.28
Total
interest-earning     $ 756,673   $  8,924      4.70%     $ 755,069   $  8,830      4.70%
assets
Noninterest-earning
assets:
Cash and due from      16,211                              16,101
banks
Allowance for loan     (16,508)                            (16,980)
losses
Other assets           40,138                              39,774
Total
noninterest-earning    39,841                              38,895
assets
Total assets         $ 796,514                           $ 793,964
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
Interest-bearing     $ 103,029   $  108        0.42%     $ 110,343   $  123        0.45%
demand deposits
Savings deposits       287,054      293        0.41        270,990      287        0.43
Time deposits          131,356      619        1.87        138,554      689        2.00
Total
interest-bearing       521,439      1,020      0.78        519,887      1,099      0.85
deposits
Borrowed funds and
subordinated           90,465       824        3.56        90,465       816        3.57
debentures
Total
interest-bearing     $ 611,904   $  1,844      1.19%     $ 610,352   $  1,915      1.25%
liabilities
Noninterest-bearing
liabilities:
Noninterest-bearing    105,876                             106,043
demand deposits
Other liabilities      3,469                               3,438
Total
noninterest-bearing    109,345                             109,481
liabilities
Total shareholders'    75,265                              74,131
equity
Total liabilities
and shareholders'    $ 796,514                           $ 793,964
equity
Net interest spread              $  7,080      3.51%                 $  6,915      3.45%
Tax-equivalent                      (53)                                (58)
basis adjustment
Net interest income              $  7,027                            $  6,857
Net interest margin                            3.72%                               3.68%
(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, 2012
(Dollar amounts in thousands, interest amounts and interest
rates/yields on a fully tax-equivalent basis)
                     For the three months ended September 30,
                     2012                                2011
                     Average     Interest  Rate/Yield  Average     Interest  Rate/Yield
                     Balance                             Balance
ASSETS
Interest-earning
assets:
Federal funds sold
and                  $ 40,183    $  13         0.13%     $ 41,735    $ 6           0.06%
interest-bearing
deposits
Federal Home Loan      3,989        50         4.99        4,088       46          4.46
Bank stock
Securities:
Securities             95,193       703        2.95        93,603      852         3.64
available for sale
Securities held to     16,467       152        3.69        13,043      162         4.97
maturity
Total securities       111,660      855        3.06        106,646     1,014       3.80
(A)
Loans:
SBA loans              66,484       881        5.30        82,764      1,243       6.01
SBA 504 loans          44,583       647        5.77        55,814      838         5.96
Commercial loans       307,090      4,313      5.59        286,634     4,417       6.11
Residential            136,568      1,631      4.78        135,519     1,825       5.39
mortgage loans
Consumer loans         46,116       534        4.61        50,838      616         4.81
Total loans (B)        600,841      8,006      5.31        611,569     8,939       5.82
Total
interest-earning     $ 756,673   $  8,924      4.70%     $ 764,038   $ 10,005      5.21%
assets
Noninterest-earning
assets:
Cash and due from      16,211                              15,453
banks
Allowance for loan     (16,508)                            (16,812)
losses
Other assets           40,138                              41,739
Total
noninterest-earning    39,841                              40,380
assets
Total assets         $ 796,514                           $ 804,418
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
Interest-bearing     $ 103,029   $  108        0.42%     $ 98,942    $ 137         0.55%
demand deposits
Savings deposits       287,054      293        0.41        281,591     536         0.76
Time deposits          131,356      619        1.87        163,676     979         2.37
Total
interest-bearing       521,439      1,020      0.78        544,209     1,652       1.20
deposits
Borrowed funds and
subordinated           90,465       824        3.56        90,465      947         4.10
debentures
Total
interest-bearing     $ 611,904   $  1,844      1.19%     $ 634,674   $ 2,599       1.62%
liabilities
Noninterest-bearing
liabilities:
Noninterest-bearing    105,876                             94,811
demand deposits
Other liabilities      3,469                               2,922
Total
noninterest-bearing    109,345                             97,733
liabilities
Total shareholders'    75,265                              72,011
equity
Total liabilities
and shareholders'    $ 796,514                           $ 804,418
equity
Net interest spread              $  7,080      3.51%                 $ 7,406       3.59%
Tax-equivalent                      (53)                               (53)
basis adjustment
Net interest income              $  7,027                            $ 7,353
Net interest margin                            3.72%                               3.85%
(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, 2012
(Dollar amounts in thousands, interest amounts and
interest rates/yields on a fully tax-equivalent basis)
                     For the nine months ended September 30,
                     2012                                2011
                     Average     Interest  Rate/Yield  Average     Interest  Rate/Yield
                     Balance                             Balance
ASSETS
Interest-earning
assets:
Federal funds sold
and                  $ 45,206    $ 56          0.17%     $ 38,526    $ 26          0.09%
interest-bearing
deposits
Federal Home Loan      4,023       144         4.78        4,130       147         4.76
Bank stock
Securities:
Securities             100,398     2,225       2.95        100,752     2,701       3.57
available for sale
Securities held to     17,443      502         3.84        15,776      640         5.41
maturity
Total securities       117,841     2,727       3.08        116,528     3,341       3.82
(A)
Loans:
SBA loans              69,162      2,652       5.11        84,757      3,671       5.77
SBA 504 loans          47,687      2,098       5.88        58,914      2,626       5.96
Commercial loans       298,279     12,707      5.69        284,595     13,304      6.25
Residential            134,353     4,869       4.83        132,901     5,502       5.52
mortgage loans
Consumer loans         46,459      1,624       4.67        52,653      1,931       4.90
Total loans (B)        595,940     23,950      5.36        613,820     27,034      5.88
Total
interest-earning     $ 763,010   $ 26,877      4.70%     $ 773,004   $ 30,548      5.28%
assets
Noninterest-earning
assets:
Cash and due from      16,088                              16,478
banks
Allowance for loan     (16,758)                            (15,978)
losses
Other assets           40,068                              40,477
Total
noninterest-earning    39,398                              40,977
assets
Total assets         $ 802,408                           $ 813,981
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
Interest-bearing     $ 107,437   $ 368         0.46%     $ 102,197   $ 420         0.55%
demand deposits
Savings deposits       280,459     933         0.44        286,014     1,701       0.80
Time deposits          142,263     2,222       2.09        168,874     3,119       2.47
Total
interest-bearing       530,159     3,523       0.89        557,085     5,240       1.26
deposits
Borrowed funds and
subordinated           90,465      2,486       3.61        90,465      2,851       4.16
debentures
Total
interest-bearing     $ 620,624   $ 6,009       1.29%     $ 647,550   $ 8,091       1.66%
liabilities
Noninterest-bearing
liabilities:
Noninterest-bearing    104,145                             91,922
demand deposits
Other liabilities      3,386                               3,736
Total
noninterest-bearing    107,531                             95,658
liabilities
Total shareholders'    74,253                              70,773
equity
Total liabilities
and shareholders'    $ 802,408                           $ 813,981
equity
Net interest spread              $ 20,868      3.41%                 $ 22,457      3.62%
Tax-equivalent                     (179)                               (158)
basis adjustment
Net interest income              $ 20,689                            $ 22,299
Net interest margin                            3.65%                               3.88%
(A) Yields related to securities exempt from federal and state income taxes are stated on a
fully tax-equivalent basis. They are reduced by the nondeductible portion of interest
expense, assuming a federal tax rate of 34 percent and applicable state rates.
(B) The loan averages are stated net of unearned income, and the averages include loans on
which the accrual of interest has been discontinued.



                         UNITY BANCORP, INC.
                         QUARTERLY ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY
                         SCHEDULES
                         September 30, 2012
Amounts in            September    June 30,    March 31,  December  September
thousands, except     30, 2012     2012        2012       31, 2011  30, 2011
percentages
ALLOWANCE FOR LOAN
LOSSES:
Balance, beginning    $  16,284    $  16,339   $  16,348  $ 16,447  $  16,018
of period
Provision for loan
losses charged to        1,000        1,000       1,200     1,150      1,400
expense
                         17,284       17,339      17,548    17,597     17,418
Less: Chargeoffs
SBA loans                254          213         615       735        310
SBA 504 loans            481          100         227       200        325
Commercial loans         1,428        540         346       290        450
Residential mortgage     65           494         113       73         -
loans
Consumer loans           31           25          -         46         -
Total chargeoffs         2,259        1,372       1,301     1,344      1,085
Add: Recoveries
SBA loans                195          249         53        26         111
SBA 504 loans            15           15          28        -          -
Commercial loans         58           53          11        15         3
Residential mortgage     -            -           -         50         -
loans
Consumer loans           1            -           -         4          -
Total recoveries         269          317         92        95         114
Net chargeoffs           1,990        1,055       1,209     1,249      971
Balance, end of       $  15,294    $  16,284   $  16,339  $ 16,348  $  16,447
period
LOAN QUALITY
INFORMATION:
Nonperforming loans   $  17,334    $  19,831   $  22,206  $ 22,769  $  20,598
(1)
Other real estate        1,456        2,355       1,625     3,032      3,555
owned ("OREO")
Nonperforming assets     18,790       22,186      23,831    25,801     24,153
Less: Amount            566          526         555       939        1,339
guaranteed by SBA
Net nonperforming     $  18,224    $  21,660   $  23,276  $ 24,862  $  22,814
assets
Loans 90 days past    $  1,630     $  2,443    $  3,165   $ 2,411   $  2,191
due & still accruing
Performing Troubled
Debt Restructurings   $  17,250    $  20,541   $  20,985  $ 17,436  $  17,488
(TDRs)
(1) Nonperforming        1,628        871         2,287     3,645      3,817
TDRs included above
Total TDRs            $  18,878    $  21,412   $  23,272  $ 21,081  $  21,305
Allowance for loan
losses to:
Total loans at           2.56%        2.69%       2.80%     2.76%      2.72%
quarter end
Nonperforming loans      88.23        82.11       73.58     71.80      79.85
(1)
Nonperforming assets     81.39        73.40       68.56     63.36      68.10
Net nonperforming        83.92        75.18       70.20     65.75      72.09
assets
QTD net chargeoffs
(annualized) to QTD
average loans:
SBA loans                0.35%        (0.21)%     3.15%     3.77%      0.95%
SBA 504 loans            4.16         0.73        1.55      1.43       2.31
Commercial loans         1.77         0.65        0.47      0.39       0.62
Residential mortgage     0.19         1.49        0.34      0.07       -
loans
Consumer loans           0.26         0.22        -         0.34       -
Total loans              1.32%        0.71%       0.83%     0.83%      0.63%
Nonperforming loans      2.90%        3.28%       3.81%     3.84%      3.41%
to total loans
Nonperforming loans
and TDRs to total        5.79         6.67        7.41      6.78       6.31
loans
Nonperforming assets
to total loans and       3.14         3.65        4.08      4.33       3.98
OREO
Nonperforming assets     2.34         2.83        2.94      3.18       2.94
to total assets



                     UNITY BANCORP, INC.
                     QUARTERLY FINANCIAL DATA
                     September 30, 2012
(In thousands,
except             September   June 30,    March 31,   December    September
percentages and    30, 2012    2012        2012        31, 2011    30, 2011
per share
amounts)
SUMMARY OF
INCOME:
Total interest     $ 8,871     $ 8,772     $ 9,058     $ 9,133     $ 9,952
income
Total interest       1,844       1,915       2,250       2,460       2,599
expense
Net interest         7,027       6,857       6,808       6,673       7,353
income
Provision for        1,000       1,000       1,200       1,150       1,400
loan losses
Net interest
income after         6,027       5,857       5,608       5,523       5,953
provision for
loan lossees
Total noninterest    1,774       1,841       1,715       1,305       1,654
income
Total noninterest    5,999       6,204       5,959       6,012       6,101
expense
Income before
provision for        1,802       1,494       1,364       816         1,506
income taxes
Provision for        606         518         459         220         420
income taxes
Net income          1,196       976         905         596         1,086
Preferred stock
dividends and        397         401         396         393         386
discount
accretion
Income available
to common          $ 799       $ 575       $ 509       $ 203       $ 700
shareholders
Net income per
common share -     $ 0.11      $ 0.08      $ 0.07      $ 0.03      $ 0.09
Basic (1)
Net income per
common share -     $ 0.10      $ 0.07      $ 0.07      $ 0.03      $ 0.09
Diluted (1)
COMMON SHARE
DATA:
Market price per   $ 6.13      $ 6.00      $ 6.24      $ 6.40      $ 6.65
share
Dividends paid     $ -         $ -         $ -         $ -         $ -
Book value per     $ 7.52      $ 7.38      $ 7.28      $ 7.24      $ 7.25
common share
Weighted average
common shares        7,473       7,462       7,460       7,427       7,413
outstanding -
Basic
Weighted average
common shares        7,782       7,784       7,792       7,782       7,781
outstanding -
Diluted
Issued and
outstanding          7,503       7,461       7,463       7,459       7,413
common shares
OPERATING RATIOS
(Annualized):
Return on average    0.60%       0.49%       0.45%       0.29%       0.54%
assets
Return on average    5.74        4.25        3.81        1.51        5.27
equity (2)
Efficiency ratio     68.22       73.72       71.80       74.90       69.80
BALANCE SHEET
DATA:
Total assets       $ 802,675   $ 785,111   $ 810,198   $ 810,846   $ 820,652
Total deposits       633,126     616,443     643,101     643,971     654,171
Total loans          596,910     604,901     582,752     592,592     603,633
Total securities     106,437     114,846     128,061     107,536     100,752
Total
shareholders'        76,387      74,901      74,002      73,558      73,136
equity
Allowance for        (15,294)    (16,284)    (16,339)    (16,348)    (16,447)
loan losses
TAX EQUIVALENT
YIELDS AND RATES:
Interest-earning     4.70%       4.70%       4.71%       4.64%       5.21%
assets
Interest-bearing     1.19        1.25        1.41        1.49        1.62
liabilities
Net interest         3.51        3.45        3.30        3.15        3.59
spread
Net interest         3.72        3.68        3.56        3.39        3.85
margin
CREDIT QUALITY:
Nonperforming        18,790      22,186      23,831      25,801      24,153
assets
QTD net
chargeoffs           1.32%       0.71%       0.83%       0.83%       0.63%
(annualized) to
QTD average loans
Allowance for
loan losses to       2.56        2.69        2.80        2.76        2.72
total loans
Nonperforming
assets to total      3.14        3.65        4.08        4.33        3.98
loans and OREO
Nonperforming
assets to total      2.34        2.83        2.94        3.18        2.94
assets
CAPITAL RATIOS
AND OTHER:
Total equity to      9.52%       9.54%       9.13%       9.07%       8.91%
total assets
Leverage ratio       11.20       11.08       10.67       10.44       10.69
Tier 1 risk-based    14.52       14.22       14.44       14.33       13.88
capital ratio
Total risk-based     15.78       15.49       15.71       15.60       15.14
capital ratio
Number of banking    15          15          15          14          14
offices
Number of ATMs       16          16          16          15          15
Number of            161         169         171         171         168
employees
(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, Inc.

Website: http://www.unitybank.com
Contact: News Media & Financial Analyst: Alan J. Bedner, EVP, Chief Financial
Officer, +1-908-713-4308