U

10-Q 1 q09031.htm FORM 10-Q U

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 333-45979

Unity Holdings, Inc. (Exact name of registrant as specified in its charter)
Georgia (State or other jurisdiction of incorporation or organization)		58-2350609 (IRS Employer Identification No.)
950 Joe Frank Harris Parkway, S.E., Cartersville, Georgia 30121 (Address of principal executive offices)

(770) 606-0555 (Issuer's telephone number)

N/A (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company," in Rule 12b‑2 of the Exchange Act. (Check one):

Large accelerated filer		Accelerated filer
Smaller reporting company	X	Non-accelerated filer
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No X

State the number of shares outstanding of each of the issuer's classes of common equity, as of May 1, 2009:

1,148,513; $0.01 par value.

UNITY HOLDINGS, INC. AND SUBSIDIARY

INDEX
				Page No.
PART I.	FINANCIAL INFORMATION
	Item 1 - Financial Statements
		Consolidated Balance Sheets		3
		Consolidated Statements of Income (Loss)		4
		Consolidated Statements of Comprehensive Income (Loss)		5
		Consolidated Statements of Cash Flows		6
		Notes to Consolidated Financial Statements		7

	Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations			9

	Item 3 - Quantitative and Qualitative Disclosures about Market Risk			16

	Item 4T - Controls and Procedures			16

PART II.	OTHER INFORMATION

			Item 6 - Exhibits	17

			signatures	18


UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

	3/31/2009			12/31/2008
ASSETS	(Unaudited)
Cash and due from banks	$	15,520,303		$	4,196,837
Interest-bearing deposits in banks	6,328			905,830
Federal funds sold	-			11,172,000
Securities available for sale	15,037,021			18,265,634
Restricted equity securities, at cost	2,443,400			2,881,678
Loans	233,014,743			249,636,747
Less allowance for loan losses	4,128,359			5,388,430
Loans, net	228,886,384			244,248,317
Premises and equipment	10,850,832			10,989,657
Foreclosed assets	15,413,280			9,136,196
Other assets	11,725,334			11,234,044
TOTAL ASSETS	$		299,882,882	$		313,030,193

LIABILITIES
Deposits
Noninterest-bearing	$	15,060,411		$	13,329,798
Interest-bearing	228,887,487			235,752,907
Total deposits	243,947,898			249,082,705
Other borrowings	32,900,000			38,900,000
Guaranteed subordinated debentures	3,093,000			3,093,000
Other liabilities	1,009,250			1,669,278
Total liabilities	280,950,148			292,744,983

Commitments and contingencies
Redeemable common stock held by KSOP	551,512			551,512

STOCKHOLDERS' EQUITY
Preferred stock, par value $.01; 10,000,000 shares authorized; none issued	-			-
Common stock, par value $.01; 10,000,000 shares authorized;
1,148,513 issued and outstanding.	11,485			11,485
Capital surplus	11,788,339			11,785,163
Retained earnings	6,622,582			7,876,572
Accumulated other comprehensive income (loss)	(41,184)			60,478
Total stockholders' equity	18,381,222			19,733,698
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$		299,882,882	$		313,030,193

See Notes to Consolidated Financial Statements.


UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)

	Three Months Ended
	March 31,
	2009		2008
Interest income
Loans	$	3,716,856	$	4,752,845
Taxable securities	151,305		285,185
Nontaxable securities	55,897		64,024
Federal funds sold	2,362		9,002
Deposits in banks	235		3,197
Total interest income	3,926,655		5,114,253
Interest expense
Deposits	1,744,659		2,363,307
Other borrowings	380,764		425,260
Total interest expense	2,125,423		2,788,567
Net interest income	1,801,232		2,325,686
Provision for loan losses	1,510,000		308,000
Net interest income after
provision for loan losses	291,232		2,017,686

Other income
Service charges on deposit accounts	211,356		263,697
Mortgage Loan Fees	128,915		60,568
Other operating income	73,224		133,667
Total other income	413,495		457,932
Other expenses
Salaries and employee benefits	1,016,926		1,220,567
Equipment and occupancy expenses	278,112		302,759
Loss on sale of foreclosed assets	521,996		-
Other operating expenses	910,069		708,740
Total other expenses	2,727,103		2,232,066

Income (loss) before income taxes (benefits)	(2,022,376)		243,552
Income tax expense (benefit)	(768,386)		83,264
Net income (loss)	$	(1,253,990)	$	160,288

Basic earnings (loss) per share	$	(1.09)	$	0.16
Diluted earnings (loss) per share	$	(1.09)	$	0.14
Cash dividends per share	$	-	$	-

See Notes to Consolidated Financial Statements.


UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	Three Months Ended
	March 31,
	2009	2008

Net Income (loss)	($1,253,990)	$	160,288

Other comprehensive income (loss):
Unrealized gains (losses) on securities
available-for-sale arising during period,
net of tax	(101,662)	73,806

Comprehensive income (loss)	($1,355,652)	$	234,094

See Notes to Consolidated Financial Statements.

UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended
	March 31,
	2009		2008
OPERATING ACTIVITIES
Net income (loss)	$	(1,253,990)	$	160,288
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation	138,825		147,346
Provision for loan losses	1,510,000		308,000
Loss on Silverton Financial Services stock	123,178		-
Loss on disposal of equipment	-		427
Loss on sale of other real estate	505,636		5,113
Decrease in interest receivable	46,204		164,352
(Decrease) increase in interest payable	(70,319)		12,460
Decrease in taxes payable	(1,041,440)		(36,221)
Stock compensation expense	3,176		3,176
Net other operating activities	(30,241)		165,699
Net cash provided by (used in) operating activities	(68,971)		930,640

INVESTING ACTIVITIES
(Increase) decrease in interest-bearing deposits in banks	899,502		(76,626)
Purchases of securities available-for-sale	-		(5,995,969)
Proceeds from maturities of securities available-for-sale	3,071,429		7,034,112
(Purchase) redemption of restricted equity securities	315,100		(617,500)
Decrease (increase) in federal funds sold	11,172,000		(771,000)
Decrease (increase) in loans	5,438,747		(14,260,233)
Capital improvements on other real estate owned	(22,627)		-
Proceeds from sale of other real estate	1,653,093		255,613
Purchase of premises and equipment	-		(48,045)
Net cash provided by (used in) investing activities	22,527,244		(14,479,648)

FINANCING ACTIVITIES
Decrease in deposits	(5,134,807)		(943,322)
Proceeds from other borrowings	-		20,250,000
Repayments of other borrowings	(6,000,000)		(7,700,000)
Net cash provided by (used in) financing activities	(11,134,807)		11,606,678

Net increase (decrease) in cash and due from banks	11,323,466		(1,942,330)
Cash and due from banks at beginning of period	4,196,837		6,311,833
Cash and due from banks at end of period	$	15,520,303	$	4,369,503

SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the period for:
Interest	$	2,195,742	$	2,776,107
Income taxes	$	(342,000)	$	313,737

NONCASH TRANSACTIONS
Financed sale of premises and equipment	$	-	$	64,280
Loans transferred to other real estate owned	$	8,413,186	$	2,260,796

See Notes to Consolidated Financial Statements.

UNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The consolidated financial information for Unity Holdings, Inc. (the "Company") included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods.

The results of operations for the three month period ended March 31, 2009 are not necessarily indicative of the results to be expected for the full year.

NOTE 2. EARNINGS (LOSSES) PER SHARE

Presented below is a summary of the components used to calculate basic and diluted earnings (losses) per common share. The dilutive effect is calculated as the net effect of the assumed exercise of stock options based on the treasury stock method using average market prices for the year.


	Three Months Ended
	March 31,
	2009		2008
Basic Earnings (Losses) Per Share:
Weighted average common shares outstanding	1,148,513		987,557

Net income (loss)	$	(1,253,990)	$	160,288
Basic earnings (losses) per share	$	(1.09)	$	0.16

Diluted Earnings (Losses) Per Share:
Weighted average common shares outstanding	1,148,513		987,557
Dilutive Effect	-		132,037
Weighted average common shares outstanding-after dilutive effect	1,148,513		1,119,594

Net income (loss)	$	(1,253,990)	$	160,288
Diluted earnings (losses) per share	$	(1.09)	$	0.14

NOTE 3. FAIR VALUE DISCLOSURES

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities.

Level 3 - Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

Assets Measured at Fair Value on a Recurring Basis

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available for Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Currently, all of the Company's securities are considered to be Level 2 securities.

Assets Measured at Fair Value on a Nonrecurring Basis

Following is a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans

Loan impairment is reported when full payment under the loan terms is not expected. Impaired loans are carried at the present value of estimated future cash flows using the loan's existing rate, or the fair value of collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require increase, such increase is reported as a component of the provision for loan losses. Loan losses are charged against the allowance when Management believes the uncollectability of a loan is confirmed. Certain impaired loans were partially charged-off or re-evaluated for impairment resulting in a remaining balance for these loans, net of specific allowances, of $17,752,000 as of March 31, 2009. This valuation would be considered Level 3, consisting of appraisals of underlying collateral and discounted cash flow analysis.

Foreclosed Assets

Foreclosed assets are market to fair value at the time of foreclosure based on appraisal of the underlying collateral value. Any initial write-down of the loan upon foreclosure is charged to the allowance for loan losses. At March 31, 2009, the carrying value of foreclosed assets was $15,413,280. This valuation would be considered Level 3, due to the valuation being based on independent third party appraisals.

In February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115. SFAS 159 allows companies to report selected financial assets and liabilities at fair value. The changes in fair value are recognized in earnings and the assets and liabilities measured under this methodology are required to be displayed separately in the balance sheet. While SFAS 159 is effective for the Company beginning January 1, 2008, the Company has not elected the fair value option that is offered by this statement.

NOTE 4. SUBSEQUENT EVENT

At March 31, 2009 the company held stock with an original purchase price of $123,178 in Silverton Financial Services, Inc., the holding company of Silverton Bank. On Friday, May 1, 2009, Silverton Bank was closed by the office of the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance Corporation ("FDIC") was named Receiver. We do not expect to recover our original investment in the stock, and therefore have charged off the entire balance as of March 31, 2009.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of certain significant factors which have affected the financial position and operating results of Unity Holdings, Inc. and its subsidiary, Unity National Bank, during the periods included in the accompanying consolidated financial statements.

Forward Looking Statements

Certain statements made herein under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") are forward-looking statements for purposes of the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"), and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward looking statements include statements using the words such as "may," "will," "anticipate," "should," "would," "believe," "contemplate," "expect," "estimate," "continue," "may," or "intend," or other similar words and expressions of the future. Our actual results may differ significantly from the results we discuss in these forward-looking statements.

These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, without limitation: the effects of future economic conditions; governmental monetary and fiscal policies, as well as legislative and regulatory changes; the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities, and other interest-sensitive assets and liabilities; interest rate risks; the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally, and internationally, together with such competitors offering banking products and services by mail, telephone, computer, and the Internet.

Critical Accounting Policies

We have adopted various accounting policies which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to the consolidated financial statements at December 31, 2008 as filed on our annual report on Form 10-K.

Certain accounting policies involve significant judgments and assumptions by us which have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

We believe the allowance for loan losses and the valuation of foreclosed assets are critical accounting policies that require the most significant judgments and estimates used in preparation of our consolidated financial statements. Refer to the portion of this discussion that addresses our allowance for loan losses for a description of our processes and methodology for determining our allowance for loan losses. Refer to Note 3 in the notes to the consolidated financial statements for a discussion on the policies regarding the valuation of foreclosed assets.

Liquidity and Capital Resources

During the three month period ended March 31, 2009, earning assets decreased $32.4 million. The loan portfolio decreased $16.6 million in an effort to reduce the asset size of the bank, improve liquidity, and preserve capital. Of this decrease, $8.4 million in loans was transferred to foreclosed assets, which increased $6.3 million during the quarter net of sales. Federal funds sold decreased $11.2 million, as these funds were converted to non-interest bearing deposits due to the virtual shutdown of the federal funds market between banks. However, an earnings credit is applied by our primary correspondent bank on the cash balances to offset expenses associated with the account. Securities available for sale decreased $3.2 million due to calls being exercised by the issuers of the securities. None of the called bonds were replaced. Deposits decreased $5.1 million, and other borrowings decreased $6.0 million. In total, liabilities decreased $11.8 million in the first quarter, while total assets decreased $13.1 million. As of March 31, 2009, our liquidity position, as determined under guidelines established by regulatory authorities, remained satisfactory. We will continue to monitor liquidity and make adjustments as deemed necessary.

We consider our liquidity strategy to be adequate to meet operating and loan funding requirements without incurring excessive risk. Wholesale CD balances as of March 31, 2009 were approximately $34.6 million, compared to $23.0 million as of March 31, 2008. Wholesale CD's are useful for obtaining deposit funds for specific maturities, often at a lower rate than local deposits. At March 31, 2009, Federal Home Loan Bank ("FHLB") borrowings amounted to $31.4 million, compared to $34.8 million reported for March 31, 2008. FHLB borrowings have been favorably priced for short and long borrowing terms, so the Company used this funding source to achieve better margins and mitigate interest rate risk. Additionally, we have net subordinated debentures of $3.0 million for use in maintaining capital levels at our bank subsidiary during periods of rapid growth or expansion. We also have a line of credit with a correspondent bank for $6.0 million at the parent level to use in capital replenishment. As of March 31, 2009, we had $1.5 million outstanding on the line of credit which has been used to strengthen the capital position of the Bank. We closely monitor our external funding sources to ensure we have adequate funding capacity should a liquidity crisis occur.

At March 31, 2009, the Company was "well capitalized" based on regulatory minimum capital requirements. During the three month period ended March 31, 2009, the Company transferred $950,000 to the Bank for future capital needs. The minimum capital requirements and the actual capital ratios on a consolidated and bank-only basis are as follows:

		Consolidated	Minimum Regulatory Requirement	To Be Considered "Well Capitalized"

Risk-Based Capital to Risk Weighted Assets
	Consolidated	9.76 %	N/A	N/A
	Bank	10.00 %	8.00 %	10.00 %

Tier 1 Capital to Risk Weighted Assets
	Consolidated	8.50 %	N/A	N/A
	Bank	8.74 %	4.00 %	6.00 %

Tier 1 Capital to Average Assets
	Consolidated	6.98 %	N/A	N/A
	Bank	7.20 %	4.00 %	5.00 %

In compliance with the written agreement with the Office of the Comptroller of the Currency ("OCC") dated February 3, 2009, the Company is currently engaging in negotiations with potential investors in an effort to raise additional capital for future needs. A capital infusion from outside investors will be accompanied by a future rights offering to current shareholders to reduce the dilution of the additional capital.

Off-Balance Sheet Arrangements

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance sheets.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. A summary of our commitments as of March 31, 2009 is as follows:

Commitments to extend credit	$	15,688,000
Letters of credit	983,000
	$	16,671,000

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which we deem necessary.

At March 31, 2009, we had arrangements with two commercial banks for short-term unsecured advances of $4.5 million each. Also in place with a correspondent commercial bank is a security repurchase agreement utilizing securities available for sale as the underlying collateral with a line of secured credit of approximately $4.5 million. We maintain a line of credit with the FHLB as an external funding source. According to our pledged collateral for the line, we can borrow up to approximately $31.4 million on this line. At March 31, 2009, we had $31.4 million outstanding on this line.

In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material effect on the Company's financial statements.

Financial Condition

Total assets decreased $13.1 million for the three month period ended March 31, 2009. Net loans decreased approximately $15.4 million. Investments decreased $3.7 million due to issuer calls for the period and a $124,000 write off of stock held in a correspondent bank that was seized by regulators in May, 2009. Fed funds sold decreased $11.2 million, and the balances were largely transferred to cash and due from banks and interest-bearing deposits, which increased $10.4 million. Other real estate owned increased approximately $6.3 million. Fixed assets decreased $139,000 due to depreciation. Deposits decreased approximately $5.1 million and other borrowings decreased $6.0 million. The decreases on the funding side of the balance sheet approximately offset the decreases on the asset side of the balance sheet. A net loss of approximately $1,254,000, a decrease in market value of the investments of approximately $101,000, and a credit of $3,000 for option expense resulted in a net decrease of $1,352,000 in capital.

Results of Operations For The Three Months Ended March 31, 2009 and 2008.

The Company had a net loss of approximately $1,254,000 for the three months ended March 31, 2009 compared to a profit of $160,000 during the first quarter of 2008. The primary component of the loss was a substantial increase in the provision for loan loss reserves. The Company made a provision of $1.5 million dollars to the reserve for loan losses during the quarter

ended March 31, 2009, compared to $308,000 for the same quarter in the previous year. The additional provision was

necessary to cover potential losses in the loan portfolio. Another significant factor in the net loss is the decrease in the net interest margin due to a decrease in loan yields coupled with an increase in non-performing assets. Non-interest income decreased $44,000 during the first quarter of 2009 compared to the first quarter of 2008. Total other expenses decreased slightly compared to the three months ended March 31, 2008 with the exception of losses on sales of foreclosed assets, which increased $522,000.

Interest income decreased approximately $1,188,000 for the period ended March 31, 2009 when compared to the period ended March 31, 2008. Loan interest and fee income decreased $1,036,000 for the first quarter in 2009 when compared to the first quarter of 2008. This decrease was primarily due to the increase in non-performing loans during this period, which reduces the interest and fee income of the loan portfolio. The decrease was also partially rate driven, as market rates have dropped significantly between the two periods. Investment income decreased $142,000 during the period due to lower balances and yields. The portfolio is being allowed to decrease, either through maturities or through sales when needed. Therefore, investment income will more than likely continue to decrease through the remainder of 2009. Because of the substantially low rate environment brought on by the weak economy and the increase in non-performing assets, management expects interest income to continue to be lower than 2008 levels.

Interest expense for the first quarter of 2009 saw a decrease of $663,000 over the first quarter of 2008, with deposit expense decreasing approximately $619,000 for the quarter. Interest paid on money market accounts decreased $543,000 as the Company repriced the accounts to be in line with the market. The money market products priced as a percentage of the Prime Rate decreased as this index rate was lowered over the last year. Rates on time deposits and other borrowings also trended lower due to lower interest rates. Interest on other borrowings decreased $44,000 for the year-to-date period ended March 31, 2009 when compared to the same period in 2008, primarily due to lower outstanding balances on the borrowings.

The net interest margin for the year to date period ended March 31, 2009 was 2.82%, a 59 basis point drop from the 3.41% posted for the same period in 2008. Loan interest income and loan fees decreased $1,036,000. Loan yields for the quarter ended March 31, 2009 were 6.18%, compared to 7.21% for the same period in 2008. This decrease of 103 basis points is attributable to the quick repricing nature of our loan portfolio as rates drop. The cost of funds has decreased 92 basis points, posting a 3.01% cost for year to date 2009 versus 3.93% for year to date 2008. Net interest income decreased approximately $524,000 for the first quarter of 2009 when compared to the first quarter of 2008.

The provision for loan losses during the quarter ended March 31, 2009 was $1,510,000, compared to $308,000 for the quarter ended March 31, 2008. Net charge offs for the first quarter of 2009 were $2,770,000, compared to $307,000 for the first quarter of 2008, as the economy further deteriorated. Management has thoroughly reviewed the loan portfolio and continues its review on an ongoing basis. Impairment testing is done periodically to identify loans that require additional reserves. Management is working to quickly identify and minimize potential losses.

Other income decreased $44,000 for the first quarter of 2009 when compared to the first quarter of 2008. The decrease is primarily due to a $124,000 write off of correspondent bank stock, an increase of $68,000 in mortgage loan fees, an increase of $30,000 in bank-owned life insurance income, and a decrease of $52,000 in service charges on deposits.

Other expenses, excluding losses on sales of foreclosed assets, decreased $27,000 for the quarter ended March 31, 2009 when compared to the quarter ended March 31, 2008. Salaries and employee benefits decreased $204,000 due to staffing and salary reductions at the end of 2008 and the beginning of 2009. As additional cost-cutting measures, there were no bonus accruals or payouts in the first quarter of 2009, and the Bank's 401k match has been suspended. These steps should lower salaries and benefits expense through the remainder of 2009. Equipment and occupancy decreased $25,000 in the first quarter of 2009 compared to the first quarter of 2008, primarily due to lower maintenance and depreciation expenses. Other operating expenses increased $201,000 during the same period, mostly due to an increase of $187,000 in expenses related to foreclosed assets and an increase in loan related legal fees of $10,000. These expense categories are expected to stay elevated during 2009 due to the number of foreclosed assets the Bank is carrying. Losses on the sale of foreclosed assets were $522,000 for the first quarter of 2009 vs. none for the first quarter of 2008. Foreclosed assets are disposed of as quickly as possible to minimize carrying costs. However, some types of assets, such as raw land, land lots, and commercial property usually take longer to sell due to the economic climate. Each foreclosed asset is evaluated and the cost-benefits of a short vs. longer-term holding period are considered regarding the disposal of the asset.

There was a tax benefit of 38% and a tax expense at an effective rate of 34% for the three months ended March 31, 2009 and March 31, 2008, respectively.

Allowance for Loan Losses

Management continually evaluates its loan loss reserve for adequacy. Our evaluation considers significant factors relative to the credit risk and loss exposure in the loan portfolio, including past due and classified loans, historical experience, underlying collateral values, and current economic conditions that may affect the borrower's ability to repay. The allowance for loan losses is evaluated by allocating a reserve based on the average of historical charge offs. This reserve is applied by loan type, excluding highly graded loans and those for which a specific reserve is maintained. Classified and impaired loans may require a specific reserve based on the facts surrounding the loan, including but not limited to inadequate collateral coverage, insufficient cash flow or other credit quality issues. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant change. A general reserve is established for the entire loan portfolio based on the current economic environment, loan portfolio volumes and concentrations, industry standards, and recent credit quality experience. The general reserve allows for conditions that may arise that do not occur frequently or for which a specific reserve is not present.

In addition to the analysis procedures above, the credit administration department has continually monitored the performance of the loan portfolio. Some additional provisions to the reserve were made on rated assets that may be more likely to cause losses given the current environment. The current reserve as a percentage of the loan portfolio is 1.77% compared to 2.16% at December 31, 2008. The current reserve reflects the potential of losses in the portfolio at March 31, 2009 given more aggressive impairment testing and after some identified losses have occurred. Losses may vary from current estimates and future additions to the allowance may be necessary. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses as estimated at any point in time. Management believes the loan loss reserve is adequate at this time.

Information regarding the effects of charge offs and recoveries on the allowance for loan loss data is as follows:


	March 31,
	2009		2008
(in $000s)
Average amount of loans outstanding	$	240,458	$	249,401

Balance of allowance for loan losses
at beginning of period	5,388		3,280

Loans charged off
Commercial and financial	22		215
Real estate mortgage	2,675		79
Installment	87		31
Total charge offs	2,784		325

Loans recovered
Commercial and financial	-		6
Real estate mortgage	3		2
Installment	11		10
Total recoveries	14		18

Net charge-offs	2,770		307
Additions to allowance charged
to operating expense during period	1,510		308

Balance of allowance for loan losses
at end of period	$	4,128	$	3,281

Ratio of net loans charged off during
the period to average loans outstanding	1.15 %		0.12 %

Nonperforming Loans

It is our policy to discontinue the accrual of interest income when, in the opinion of management, collection of interest becomes doubtful due to factors such as (1) a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected, and (2) the principal or interest is more than ninety days past due, unless the loan is both well-secured and in the process of collection.

Nonaccrual loans at March 31, 2009 were $11,450,000, compared to $19,980,000 at December 31, 2008 and $4,861,000 at March 31, 2008. During the first quarter of 2009, approximately $8.4 million of non-accrual loans were transferred to other real estate owned. Credit quality has continued to deteriorate concurrently with the economic environment. The Bank works diligently with its past due customers to assist them in solutions to their credit problems, many of which are the result of a slow-down in the customers' business activities. These loans are spread out among various lending types. The Bank does not carry heavy concentrations in construction lending. After identification of problem loans in the portfolio, construction and development loans comprised only 17.9% of the total portfolio at March 31, 2009, compared to 19.2% at December 31, 2008 and 17.61% at March 31, 2008.

The Bank has a larger than normal inventory of other real estate that is currently working through the balance sheet. We have assigned an experienced banker to manage the foreclosed real estate portfolio, assess potential losses and gains, and market the property for a quick sale at an acceptable loss if necessary. Management considers its approach to the problem assets on the balance sheet as aggressive and will continue to be aggressive as circumstances dictate.

Loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been included in the table below do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity or capital resources. These classified loans do not represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.

NONPERFORMING ASSETS

		March 31,			December 31,
		2009		2008	2008

Nonperforming assets:
Nonaccrual loans		$	11,450	4,861	19,980
Restructured loans		-		433	-
Other real estate owned		15,348		4,354	9,135
Total nonperforming assets		$	26,798	9,648	29,115

Potential problem loans:
Loans 90 days or more past due and still accruing		1,017		915	1,499
Total nonperforming and potential problem loans		27,815		10,563	30,614

Nonperforming assets and potential problem loans to total loans and other real estate		11.20 %		4.08 %	11.83 %
Reserve for loan losses to nonperforming assets and potential problem loans		14.84 %		31.06 %	17.60 %

Interest at contracted rates (a)		$	324	114	418
Interest recorded as income		-		-	-
Reduction of Interest Income for period		$	324	114	418

(a)	Interest income on nonaccruals that would have been recorded, if the loans remained
	current and in accordance with original terms.

The Company has responded to the written agreement with the OCC dated February 3, 2009, which requested written plans of action and documentation regarding the Bank's plan to minimize losses from non-performing assets. Management believes that it is in substantial compliance with the requirements of the agreement, which primarily addresses the monitoring of non-performing assets and liquidity needs.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed only to U. S. dollar interest rate changes, and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company currently does not engage in any hedging activities. Finally, the Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks.

Interest rates are the primary component of net income for a financial institution. Interest rate risk is inherent in banking and comprised of two major components; the repricing frequency of interest earning assets and interest bearing liabilities. Management of interest rate risk is done by matching as closely as possible the repricing of assets and liabilities so that fluctuations in interest rates are absorbed on both sides of the balance sheet. The Company has set up policy parameters for various measurements of repricing risk to govern exposure in this area.

The Company must also manage the risk of different levels of rate change among various banking products. The Bank conducts income simulation studies to measure the impact of increasing or decreasing rate scenarios for all the interest sensitive components of the balance sheet. By measuring this exposure over a 12 month period, Management can adjust rate sensitivity and pricing to mitigate this risk. Policy parameters also manage acceptable levels of exposure in this rate category.

With the current economic conditions affecting our customers, credit risk has been brought to the forefront of the Bank's risk analysis profile. Problem loans affect several areas of the bank, including net interest margin, liquidity, and capital adequacy. The Company is proactive in dealing with credit issues. We quickly identify problem loans and begin working with customers early in the process. Our goal is to mitigate loss on loans by adequately reserving for loss based on detailed impairment testing. We are devoting significant resources to the resolution of problem assets in a timely manner.

Item 4T. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and the Chief Financial Officer, of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal controls or in other factors that could affect internal controls subsequent to the date of this evaluation.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

(a) Exhibits

31.1	Certification of the Chief Executive Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange act of 1934, as amended.

31.2	Certification of the Chief Financial Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

32	Certification of the Chief Executive Officer and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITY HOLDINGS, INC.
(Registrant)

DATE: May 14, 2009

/s/ MICHAEL L. McPHERSON
Michael L. McPherson, President and C.E.O.
(Principal Executive Officer)

DATE: May 14, 2009

/s/ JEFF L. SANDERS
Jeff L. Sanders, Senior Vice President and C.F.O.
(Principal Financial and Accounting Officer)

EXHIBIT 31.1

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Michael L. McPherson, Chief Executive Officer, certify that:

1.	I have reviewed this Form 10-Q of Unity Holdings, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


May 14, 2009		/s/ Michael L. McPherson
		MICHAEL L.McPHERSON
		Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Jeff L. Sanders, Chief Financial and Accounting Officer, certify that:

1.	I have reviewed this Form 10-Q of Unity Holdings, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


May 14, 2009		/s/ Jeff L. Sanders
		JEFF L. SANDERS
		Chief Financial and Accounting Officer

Exhibit 32

CERTIFICATION OF CEO AND CFO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Unity Holdings, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Michael L. McPherson, Chief Executive Officer of the Company, and Jeff L. Sanders, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his/her knowledge that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

/s/MICHAEL L. MCPHERSON
MICHAEL L. McPHERSON

Chief Executive Officer

May 14, 2009

/s/JEFF L. SANDERS
JEFF L. SANDERS

Chief Financial and Accounting Officer

May 14, 2009

This certification accompanies this Report pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of section 18 of the Securities Exchange Act of 1934, as amended.