8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

October 21, 2010

Date of Report (Date of earliest event reported)

UNITY BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

New Jersey

(State or Other Jurisdiction of Incorporation)

1-12431	22-3282551
(Commission File Number)	(I.R.S. Employer Identification No.)

64 OLD HIGHWAY 22, CLINTON, NEW JERSEY, 08809

(Address of Principal Executive Office) (Zip Code)

(908) 730-7630

(Registrant's Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 r Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 r Soliciting material pursuant to Rule 14a12 under the Exchange Act (17 CFR 240.14a-12)

 r Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 r Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operation and Financial Condition

The Registrant issued a press release on October 21, 2010 announcing results for the three and nine months ended September 30, 2010, the full text of which is incorporated by reference to this Item.

Item 9.01 Financial Statements and Exhibits.

(d)		Exhibits
EXHIBIT
99.1	Press release issued by the Registrant on October 21, 2010

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	UNITY BANCORP, INC.
	(Registrant)
Date: October 21, 2010	By:	/s/     Alan J. Bedner
		Alan J. Bedner EVP and Chief Financial Officer

EXHIBIT INDEX

EXHIBIT #	DESCRIPTION
99.1	Press release issued by the Registrant on October 21, 2010

EX-99.1

                                      

Unity Bancorp, Inc.

64 Old Highway 22

Clinton, NJ 08809

800 618-BANK

www.unitybank.com

NewsNewsNewsNewsNews

For Immediate Release:  October 21, 2010

News Media & Financial Analyst Contact:

Alan J. Bedner, EVP

Chief Financial Officer

(908) 713-4308

Unity Bancorp Reports Third Quarter and Nine Month Earnings

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

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

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

·   The Company recognized a pre-tax other-than-temporary impairment (“OTTI”) charge during the second quarter of 2009 of $1.7 million, or $0.17 per diluted share, due to the deterioration of the underlying collateral of two pooled trust preferred securities.

·   The FDIC imposed a special assessment equal to 5 basis points of an insured depository institution's assets minus Tier 1 capital as of June 30, 2009. The Company recognized a charge of approximately $408 thousand, or $0.04 per diluted share, in the second quarter for this special assessment.

·   The Company recorded an additional provision for loan losses of $1.5 million in the third quarter of 2009.

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

Net Interest Income

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

·   The yield on interest-earning assets decreased 34 basis points to 5.30% from 5.64% for the same period last year. This was a result of interest-earning assets re-pricing in a low rate environment.

·   The cost of interest-bearing liabilities decreased 91 basis points to 1.89% from 2.80% a year ago. All interest-bearing deposit costs declined with the largest decline in savings deposits.

·   Net interest margin was 3.66%, a 49 basis point increase from 3.17% in the third quarter of 2009. This increase was driven by the reduced cost of funds.

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

·   The yield on earning assets decreased from 5.81% for the first nine months of 2009 to 5.35% for the first nine months of 2010. This was a result of interest-earning assets re-pricing in a low rate environment.

·   The cost of interest-bearing liabilities decreased from 2.98% for the first nine months of 2009 to 2.04% for the first nine months of 2010.  All interest-bearing deposit costs declined with the largest decline in time deposits.

·   Net interest margin for the nine months ended September 30, 2010 was 3.58%, an increase of 38 basis points from the same period last year.

Page 1 of 12

Noninterest Income

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

·   Branch fee income remained relatively flat compared to the prior year period.

·   Service and loan fee income declined $147 thousand due to a lower level of loan prepayment fees.

·   There were $269 thousand in gains on the sales of SBA loans, compared to no gains in the prior year’s quarter.

·   Gains on the sales of residential mortgage loans totaled $247 thousand, compared to $71 thousand the prior year.

·   The quarterly increase in the cash surrender value of bank owned life insurance (“BOLI”) increased $23 thousand to $79 thousand.  This was the result of the Company purchasing $2.5 million in BOLI to help offset the rising cost of employee benefits during the first quarter of 2010.

·   Gains on the sales of investment securities amounted to $35 thousand, compared to $158 thousand in the prior year period.

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

·   Branch fee income remained relatively flat compared to the prior year period.

·   Service and loan fee income decreased $241 thousand compared to the prior year period due to lower levels of prepayment fees.

·   Gains on sales on SBA loans amounted to $416 thousand, compared to $29 thousand a year ago.

·   Gains on the sales of residential mortgage loans amounted to $504 thousand, compared to $184 thousand from the prior year period.

·   The nine month increase in the cash surrender value of bank owned life insurance (“BOLI”) increased $64 thousand to $230 thousand.  This was the result of the Company purchasing $2.5 million in BOLI to help offset the rising cost of employee benefits during the first quarter of 2010.

·   Gains on the sales of investment securities amounted to $42 thousand, compared to $675 thousand in the prior year period.

Noninterest Expense

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

·   Compensation and benefits expense amounted to $3.0 million, an increase of $51 thousand or 1.8%.   This was the result of an increase in compensation, employee medical benefits costs and mortgage loan commissions, partially offset by lower incentive bonus payments.

·   Occupancy expense increased by $29 thousand or 4.9%, due to an increase in rental expense.

·   Furniture and equipment expense increased $26 thousand or 6.3%, primarily due to increased software and equipment lease expense, partially offset by a decrease in equipment depreciation expense.

·   Professional fees decreased $45 thousand, due to decreased consulting, loan review and audit costs.

·   Loan collection costs decreased $43 thousand, due to decreased collection costs on delinquent loans.

·   Other real estate owned (“OREO”) expense increased $306 thousand, due to increased maintenance and valuation related expenses on OREO properties.

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

·   Compensation and benefits expense amounted to $8.8 million, an increase of $395 thousand or 4.7%, due to increased compensation, higher employee medical benefits costs and increased residential mortgage commissions due to a larger sales volume, partially offset by lower incentive bonus payments.

·   Occupancy expense declined by $19 thousand or 1.0%, due primarily to a reduction in rental expense from a renegotiated lease.

·   Processing and communications increased $55 thousand or 3.5%, due primarily to increased data processing line costs.

·   Furniture and equipment expense decreased $70 thousand or 5.1%, primarily due to decreased depreciation expense as capital expenditures declined and decreased equipment maintenance charges.

·   Professional fees decreased $123 thousand, due to decreased consulting, loan review and audit costs.

·   OREO expense increased $476 thousand, due to increased maintenance and valuation related expenses on OREO properties.

·   FDIC insurance premiums decreased $378 thousand, due primarily to the $408 thousand second quarter 2009 special assessment.

·   Advertising expenses increased $105 thousand or 28.2%, due to increased marketing efforts.

Page 2 of 12

Financial Condition

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

·   Total loans decreased $27.5 million or 4.2%, from $657.0 million at December 31, 2009. SBA 7(a), SBA 504, commercial, residential and consumer loans decreased 8.1%, 7.9%, 3.0%, 1.2% and 5.7%, respectively.  Loan balances for the remainder of 2010 are expected to remain flat to down as the Company is no longer generating loans outside of its trade area and has decided to portfolio a limited number of fixed rate residential mortgages due to interest rate risk.  The Company continues to focus on stabilizing credit quality and preserving capital until economic conditions improve.

·   Total securities decreased $34.2 million since year-end as Unity received $37.2 million in principal payments, sold $13.4 million and had $14.8 million in bonds called during the nine month period, partially offset by $30.0 million in purchases.

·   Core deposits, excluding time deposits, increased $14.1 million during the nine month period to $480.6 million.  The increase was due primarily to a $7.7 million increase in demand deposits and a $6.0 million increase in savings deposits.  Time deposits decreased $102.2 million for the nine months ended September 30, 2010 due to planned run off of a maturing high rate promotion that was done late in 2008 to bolster liquidity.

·   Shareholders’ equity was $70.7 million at September 30, 2010, an increase of $2.9 million from year-end.

·   Book value per common share was $7.19, compared to $6.91 at year-end.

·   At September 30, 2010 the leverage, Tier I and Total Risk Based Capital ratios were 9.83%, 12.67% and 13.93%, respectively, all in excess of the ratios required to be deemed “well-capitalized”.

Credit Quality

·   Nonperforming assets totaled $33.1 million at September 30, 2010, or 5.21% of total loans and OREO, compared to $27.5 million or 4.17% of total loans and OREO a year ago.

·   The commercial, residential, SBA, SBA 504 and consumer nonaccrual loans were $9.5 million, $6.1 million, $6.3 million, $5.2 million and $235 thousand, respectively.  The majority of nonaccrual loans are secured by real estate.

·   OREO assets totaled $5.8 million at September 30, 2010, an increase of $3.0 million, compared to $2.8 million a year ago.  The increase is related to the acquisition of titles through foreclosure proceedings.

·   The allowance for loan losses totaled $14.2 million at September 30, 2010, or 2.25% of total loans. The provision for loan losses for the quarter and nine months ended September 30, 2010 was $1.5 million and $4.5 million, respectively, compared to $3.0 million and $6.0 million for the quarter and nine month periods of 2009.

·   Net charge-offs were $1.3 million for the three months ended September 30, 2010, compared to $1.2 million for the same period a year ago.  Net charge-offs were $4.2 million for the nine months ended September 30, 2010, compared to $3.9 million for the same period a year ago.

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

Unity Bancorp, Inc. is a financial service organization headquartered in Clinton, New Jersey, with approximately $846 million in assets and $670 million in deposits.  Unity Bank provides financial services to retail, corporate and small business customers through its 16 retail service centers located in Hunterdon, Middlesex, Somerset, Union and Warren Counties in New Jersey and Northampton County, Pennsylvania.  For additional information about Unity, visit our website at www.unitybank.com, or call 800- 618-BANK.

This news release contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance.  These statements may be identified by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions.  These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond the company’s control and could impede its ability to achieve these goals.  These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, our ability to manage and reduce the level of our nonperforming assets, and results of regulatory exams, among other factors.

Page 3 of 12

UNITY BANCORP, INC.
SUMMARY FINANCIAL HIGHLIGHTS
September 30, 2010
										2010.Q3 VS.
											2010.Q2			2009.Q3
Amounts in thousands, except percentages and per share amounts	9/30/2010			6/30/2010			9/30/2009			%			%
BALANCE SHEET DATA:
Total assets	$	846,385		$	869,735		$	922,689			-2.7	%		-8.3	%
Total deposits		670,158			693,232			750,665			-3.3	%		-10.7	%
Total loans		629,516			637,180			656,520			-1.2	%		-4.1	%
Total securities		134,820			143,662			171,501			-6.2	%		-21.4	%
Total shareholders' equity		70,730			69,633			67,385			1.6	%		5.0	%
Allowance for loan losses		(14,163	)		(13,946	)		(12,445	)		1.6	%		13.8	%
FINANCIAL DATA - QUARTER TO DATE:
Income (loss) before provision (benefit) for income taxes	$	968		$	893		$	(1,090	)		8.4	%		188.8	%
Provision (benefit) for income taxes		242			212			(343	)		14.2	%		170.6	%
Net income (loss)		726			681			(747	)		6.6	%		197.2	%
Preferred stock dividends & discount accretion		385			379			372			1.6	%		3.5	%
Income available (loss attributable) to common shareholders	$	341		$	302		$	(1,119	)		12.9	%		130.5	%
Net income (loss) per common share - Basic	$	0.05		$	0.04		$	(0.16	)		25.0	%		131.3	%
Net income (loss) per common share - Diluted	$	0.05		$	0.04		$	(0.16	)		25.0	%		131.3	%
Return (loss) on average assets		0.34	%		0.31	%		-0.33	%		9.7	%		203.0	%
Return (loss) on average equity		2.66	%		2.43	%		-9.14	%		9.5	%		129.1	%
Effficiency ratio		72.47	%		71.66	%		77.72	%		1.1	%		-6.8	%
FINANCIAL DATA - YEAR TO DATE:
Income (loss) before provision (benefit) for income taxes	$	2,794		$	1,826		$	(1,774	)		53.0	%		257.5	%
Provision (benefit) for income taxes		639			397			(559	)		61.0	%		214.3	%
Net income (loss)		2,155			1,429			(1,215	)		50.8	%		277.4	%
Preferred stock dividends & discount accretion		1,136			752			1,123			51.1	%		1.2	%
Income available (loss attributable) to common shareholders	$	1,019		$	677		$	(2,338	)		50.5	%		143.6	%
Net income (loss) per common share - Basic	$	0.14		$	0.09		$	(0.33	)		50.2	%		143.3	%
Net income (loss) per common share - Diluted	$	0.14		$	0.09		$	(0.33	)		49.9	%		141.8	%
Return (loss) on average assets		0.33	%		0.32	%		-0.18	%		3.1	%		283.3	%
Return (loss) on average equity		2.72	%		2.76	%		-6.38	%		-1.4	%		142.6	%
Effficiency ratio		71.72	%		71.32	%		77.12	%		0.6	%		-7.0	%
SHARE INFORMATION:
Market price per share		5.25			5.35			4.20			-1.9	%		25.0	%
Dividends paid		-			-			-			0.0	%		0.0	%
Book value per common share		7.19			7.11			6.88			1.2	%		4.6	%
Average diluted shares outstanding (QTD)		7,467			7,475			7,119			-0.1	%		4.9	%
CAPITAL RATIOS:
Total equity to total assets		8.36	%		8.01	%		7.30	%		4.4	%		14.4	%
Leverage ratio		9.83	%		9.43	%		9.08	%		4.2	%		8.2	%
Tier 1 risk-based capital ratio		12.67	%		12.39	%		11.83	%		2.2	%		7.1	%
Total risk-based capital ratio		13.93	%		13.65	%		13.09	%		2.0	%		6.4	%
CREDIT QUALITY AND RATIOS:
Nonperforming assets	$	33,077		$	29,799		$	27,461			11.0	%		20.5	%
QTD net chargeoffs (annualized) to QTD average loans		0.80	%		1.00	%		0.73	%		-19.9	%		10.0	%
Allowance for loan losses to total loans		2.25	%		2.19	%		1.90	%		2.8	%		18.7	%
Nonperforming assets to total loans and OREO		5.21	%		4.65	%		4.17	%		12.0	%		25.0	%
Nonperforming assets to total assets		3.91	%		3.43	%		2.98	%		14.1	%		31.3	%

Page 4 of 12

UNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2010
										2010.Q3 VS.
											2010.Q2			2009.Q3
Amounts in thousands, except percentages	9/30/2010			6/30/2010			9/30/2009			%			%
ASSETS
Cash and due from banks	$	16,928		$	18,016		$	17,035			-6.0	%		-0.6	%
Federal funds sold and interest-bearing deposits		30,379			37,478			48,853			-18.9	%		-37.8	%
Cash and cash equivalents		47,307			55,494			65,888			-14.8	%		-28.2	%
Securities available for sale		111,777			121,628			140,906			-8.1	%		-20.7	%
Securities held to maturity		23,043			22,034			30,595			4.6	%		-24.7	%
Total securities		134,820			143,662			171,501			-6.2	%		-21.4	%
SBA loans held for sale		19,021			22,093			21,364			-13.9	%		-11.0	%
SBA loans held to maturity		72,197			73,298			79,342			-1.5	%		-9.0	%
SBA 504 loans		65,075			65,343			71,432			-0.4	%		-8.9	%
Commercial loans		284,875			285,173			298,019			-0.1	%		-4.4	%
Residential mortgage loans		131,479			132,993			124,313			-1.1	%		5.8	%
Consumer loans		56,869			58,280			62,050			-2.4	%		-8.3	%
Total loans		629,516			637,180			656,520			-1.2	%		-4.1	%
Allowance for loan losses		(14,163	)		(13,946	)		(12,445	)		1.6	%		13.8	%
Net loans		615,353			623,234			644,075			-1.3	%		-4.5	%
Premises and equipment, net		11,137			11,348			11,911			-1.9	%		-6.5	%
Deferred tax assets		7,168			7,485			7,256			-4.2	%		-1.2	%
Bank owned life insurance (BOLI)		8,732			8,653			5,946			0.9	%		46.9	%
Prepaid FDIC insurance		3,545			3,836			-			-7.6	%		100.0	%
Federal Home Loan Bank stock		4,656			4,656			4,677			0.0	%		-0.4	%
Accrued interest receivable		3,750			3,972			4,230			-5.6	%		-11.3	%
Other real estate owned (OREO)		5,773			3,728			2,774			54.9	%		108.1	%
Goodwill and other intangibles		1,548			1,552			1,563			-0.3	%		-1.0	%
SBA servicing assets		614			660			977			-7.0	%		-37.2	%
Other assets		1,982			1,455			1,891			36.2	%		4.8	%
Total assets	$	846,385		$	869,735		$	922,689			-2.7	%		-8.3	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	87,837		$	87,908		$	83,534			-0.1	%		5.2	%
Interest-bearing demand deposits		100,350			98,316			92,401			2.1	%		8.6	%
Savings deposits		292,372			291,355			263,758			0.3	%		10.8	%
Time deposits, under $100,000		124,851			143,617			209,050			-13.1	%		-40.3	%
Time deposits, $100,000 and over		64,748			72,036			101,922			-10.1	%		-36.5	%
Total deposits		670,158			693,232			750,665			-3.3	%		-10.7	%
Borrowed funds		86,044			87,672			85,000			-1.9	%		1.2	%
Subordinated debentures		15,465			15,465			15,465			0.0	%		0.0	%
Accrued interest payable		618			661			797			-6.5	%		-22.5	%
Accrued expenses and other liabilities		3,370			3,072			3,377			9.7	%		-0.2	%
Total liabilities		775,655			800,102			855,304			-3.1	%		-9.3	%
Cumulative perpetual preferred stock		18,894			18,770			18,418			0.7	%		2.6	%
Common stock		55,798			55,592			55,351			0.4	%		0.8	%
Retained earnings (deficit)		(473	)		(815	)		(1,253	)		42.0	%		62.3	%
Treasury stock at cost		(4,169	)		(4,169	)		(4,169	)		0.0	%		0.0	%
Accumulated other comprehensive income (loss)		680			255			(962	)		166.7	%		170.7	%
Total shareholders' equity		70,730			69,633			67,385			1.6	%		5.0	%
Total liabilities and shareholders' equity	$	846,385		$	869,735		$	922,689			-2.7	%		-8.3	%
Issued common shares		7,632			7,579			7,544
Outstanding common shares		7,207			7,154			7,119
Treasury shares		425			425			425

Page 5 of 12

UNITY BANCORP, INC.
QTD CONSOLIDATED STATEMENTS OF INCOME
September 30, 2010
										2010.Q3 VS.
	For the Three Months Ended										2010.Q2				2009.Q3
Amounts in thousands, except percentages and per share amounts	9/30/2010			6/30/2010			9/30/2009						%		$			%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	21		$	29		$	32		$	(8	)	-27.6	%	$	(11	)	-34.4	%
Federal Home Loan Bank stock		65			49			101			16		32.7	%		(36	)	-35.6	%
Securities available for sale		1,071			1,054			1,482			17		1.6	%		(411	)	-27.7	%
Securities held to maturity		270			250			389			20		8.0	%		(119	)	-30.6	%
Total securities		1,341			1,304			1,871			37		2.8	%		(530	)	-28.3	%
SBA loans		1,225			1,300			1,498			(75	)	-5.8	%		(273	)	-18.2	%
SBA 504 loans		1,093			1,091			1,147			2		0.2	%		(54	)	-4.7	%
Commercial loans		4,454			4,488			4,973			(34	)	-0.8	%		(519	)	-10.4	%
Residential mortgage loans		1,808			1,959			1,772			(151	)	-7.7	%		36		2.0	%
Consumer loans		719			724			791			(5	)	-0.7	%		(72	)	-9.1	%
Total loans		9,299			9,562			10,181			(263	)	-2.8	%		(882	)	-8.7	%
Total interest income		10,726			10,944			12,185			(218	)	-2.0	%		(1,459	)	-12.0	%
INTEREST EXPENSE
Interest-bearing demand deposits		148			188			264			(40	)	-21.3	%		(116	)	-43.9	%
Savings deposits		639			728			1,032			(89	)	-12.2	%		(393	)	-38.1	%
Time deposits		1,450			1,687			2,950			(237	)	-14.0	%		(1,500	)	-50.8	%
Borrowed funds and subordinated debentures		1,077			1,078			1,081			(1	)	-0.1	%		(4	)	-0.4	%
Total interest expense		3,314			3,681			5,327			(367	)	-10.0	%		(2,013	)	-37.8	%
Net interest income		7,412			7,263			6,858			149		2.1	%		554		8.1	%
Provision for loan losses		1,500			1,500			3,000			-		0.0	%		(1,500	)	-50.0	%
Net interest income after provision for loan losses		5,912			5,763			3,858			149		2.6	%		2,054		53.2	%
NONINTEREST INCOME
Branch fee income		359			331			373			28		8.5	%		(14	)	-3.8	%
Service and loan fee income		251			245			398			6		2.4	%		(147	)	-36.9	%
Gain on sale of SBA loans held for sale, net		269			147			-			122		83.0	%		269		100.0	%
Gain on sale of mortgage loans		247			112			71			135		120.5	%		176		247.9	%
Bank owned life insurance (BOLI)		79			78			56			1		1.3	%		23		41.1	%
Other-than-temporary impairment charges		-			-			-			-		0.0	%		-		0.00	%
Net security gains		35			4			158			31		775.0	%		(123	)	-77.8	%
Other income		220			253			106			(33	)	-13.0	%		114		107.5	%
Total noninterest income (loss)		1,460			1,170			1,162		$	290		24.8	%	$	298		25.6	%
NONINTEREST EXPENSE
Compensation and benefits		2,960			2,822			2,909			138		4.9	%		51		1.8	%
Occupancy		624			608			595			16		2.6	%		29		4.9	%
Processing and communications		529			555			531			(26	)	-4.7	%		(2	)	-0.4	%
Furniture and equipment		440			447			414			(7	)	-1.6	%		26		6.3	%
Professional services		229			199			274			30		15.1	%		(45	)	-16.4	%
Loan collection costs		272			243			315			29		11.9	%		(43	)	-13.7	%
OREO expense		482			157			176			325		207.0	%		306		173.9	%
Deposit insurance		333			320			351			13		4.1	%		(18	)	-5.1	%
Advertising		130			241			147			(111	)	-46.1	%		(17	)	-11.6	%
Other expenses		405			448			398			(43	)	-9.6	%		7		1.8	%
Total noninterest expense		6,404			6,040			6,110			364		6.0	%		294		4.8	%
Income (loss) before provision (benefit) for income taxes		968			893			(1,090	)		75		8.4	%		2,058		188.8	%
Provision (benefit) for income taxes		242			212			(343	)		30		14.2	%		585		170.6	%
Net income (loss)		726			681			(747	)		45		6.6	%		1,473		197.2	%
Preferred stock dividends & discount accretion		385			379			372			6		1.6	%		13		3.5	%
Income available (loss attributable) to common shareholders	$	341		$	302		$	(1,119	)	$	39		12.9	%	$	1,460		130.5	%
Effective tax rate		25.0	%		23.7	%		31.5	%
Net income (loss) per common share - Basic	$	0.05		$	0.04		$	(0.16	)
Net income (loss) per common share - Diluted	$	0.05		$	0.04		$	(0.16	)
Weighted average common shares outstanding - Basic		7,176			7,156			7,119
Weighted average common shares outstanding - Diluted		7,467			7,475			7,119

Page 6 of 12

UNITY BANCORP, INC.
YTD CONSOLIDATED STATEMENTS OF INCOME
September 30, 2010
	Current YTD			Prior YTD			Current YTD VS. Prior YTD
Amounts in thousands, except percentages and per share amounts	9/30/2010			9/30/2009			$			%
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	76		$	78		$	(2	)	-2.6	%
Federal Home Loan Bank stock		148			219			(71	)	-32.4	%
Securities available for sale		3,405			4,670			(1,265	)	-27.1	%
Securities held to maturity		858			1,167			(309	)	-26.5	%
Total securities		4,263			5,837			(1,574	)	-27.0	%
SBA loans		3,977			4,668			(691	)	-14.8	%
SBA 504 loans		3,270			3,663			(393	)	-10.7	%
Commercial loans		13,546			15,040			(1,494	)	-9.9	%
Residential mortgage loans		5,729			5,419			310		5.7	%
Consumer loans		2,174			2,383			(209	)	-8.8	%
Total loans		28,696			31,173			(2,477	)	-7.9	%
Total interest income		33,183			37,307			(4,124	)	-11.1	%
INTEREST EXPENSE
Interest-bearing demand deposits		593			801			(208	)	-26.0	%
Savings deposits		2,268			2,588			(320	)	-12.4	%
Time deposits		4,952			10,084			(5,132	)	-50.9	%
Borrowed funds and subordinated debentures		3,232			3,344			(112	)	-3.3	%
Total interest expense		11,045			16,817			(5,772	)	-34.3	%
Net interest income		22,138			20,490			1,648		8.0	%
Provision for loan losses		4,500			6,000			(1,500	)	-25.0	%
Net interest income after provision for loan losses		17,638			14,490			3,148		21.7	%
NONINTEREST INCOME
Branch fee income		1,051			1,038			13		1.3	%
Service and loan fee income		705			946			(241	)	-25.5	%
Gain on sale of SBA loans held for sale, net		416			29			387		1334.5	%
Gain on sale of mortgage loans		504			184			320		173.9	%
Bank owned life insurance (BOLI)		230			166			64		38.6	%
Other-than-temporary impairment charges		-			(1,749	)		1,749		100.0	%
Net security gains		42			675			(633	)	-93.8	%
Other income		592			316			276		87.3	%
Total noninterest income		3,540			1,605			1,935		120.6	%
NONINTEREST EXPENSE
Compensation and benefits		8,781			8,386			395		4.7	%
Occupancy		1,910			1,929			(19	)	-1.0	%
Processing and communications		1,609			1,554			55		3.5	%
Furniture and equipment		1,311			1,381			(70	)	-5.1	%
Professional services		657			780			(123	)	-15.8	%
Loan collection costs		698			694			4		0.6	%
OREO expense		669			193			476		246.6	%
Deposit insurance		983			1,361			(378	)	-27.8	%
Advertising		478			373			105		28.2	%
Other expenses		1,288			1,218			70		5.7	%
Total noninterest expense		18,384			17,869			515		2.9	%
Income (loss) before provision (benefit) for income taxes		2,794			(1,774	)		4,568		257.5	%
Provision (benefit) for income taxes		639			(559	)		1,198		214.3	%
Net income (loss)		2,155			(1,215	)		3,370		277.4	%
Preferred stock dividends & discount accretion		1,136			1,123			13		1.2	%
Income available (loss attributable) to common shareholders	$	1,019		$	(2,338	)	$	3,357		143.6	%
Effective tax rate		22.9	%		31.5	%
Net income (loss) per common share - Basic	$	0.14		$	(0.33	)
Net income (loss) per common share - Diluted	$	0.14		$	(0.33	)
Weighted average common shares outstanding - Basic		7,161			7,119
Weighted average common shares outstanding - Diluted		7,417			7,119

Page 7 of 12

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
September 30, 2010
	For the Three Months Ended
	September 30, 2010									June 30, 2010
Amounts in thousands, except percentages	Average Balance			Interest			Rate/Yield			Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	30,939		$	21			0.27	%	$	41,695		$	29			0.28	%
Federal Home Loan Bank stock		4,656			65			5.54	%		4,656			49			4.22	%
Securities available for sale		115,876			1,085			3.75	%		120,333			1,068			3.55	%
Securities held to maturity		22,148			275			4.97	%		23,300			256			4.39	%
Total securities (A)		138,024			1,360			3.94	%		143,633			1,324			3.69	%
SBA loans		94,723			1,225			5.17	%		98,214			1,300			5.29	%
SBA 504 loans		65,506			1,093			6.62	%		66,318			1,091			6.60	%
Commercial loans		283,267			4,454			6.24	%		285,709			4,488			6.30	%
Residential mortgage loans		132,031			1,808			5.48	%		133,379			1,959			5.87	%
Consumer loans		57,315			719			4.98	%		58,718			724			4.95	%
Total loans (A), (B)		632,842			9,299			5.85	%		642,338			9,562			5.97	%
Total interest-earning assets	$	806,461		$	10,745			5.30	%	$	832,322		$	10,964			5.28	%
Noninterest-earning assets:
Cash and due from banks		20,469									21,959
Allowance for loan losses		(14,725	)								(14,678	)
Other assets		41,374									42,289
Total noninterest-earning assets		47,118									49,570
Total assets	$	853,579								$	881,892
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	95,348		$	148			0.62	%	$	100,108		$	188			0.75	%
Savings deposits		290,017			639			0.87	%		292,543			728			1.00	%
Time deposits		203,346			1,450			2.83	%		227,722			1,687			2.97	%
Total interest-bearing deposits		588,711			2,237			1.51	%		620,373			2,603			1.68	%
Borrowed funds and subordinated debentures		103,296			1,077			4.08	%		101,907			1,078			4.18	%
Total interest-bearing liabilities	$	692,007		$	3,314			1.89	%	$	722,280		$	3,681			2.04	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		87,644									86,772
Other liabilities		4,115									4,313
Total noninterest-bearing liabilities		91,759									91,085
Total shareholders' equity		69,813									68,527
Total liabilities and shareholders' equity	$	853,579								$	881,892
Net interest spread				$	7,431			3.41	%				$	7,283			3.24	%
Tax-equivalent basis adjustment					(19	)								(20	)
Net interest income				$	7,412								$	7,263
Net interest margin								3.66	%								3.51	%
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 percent and applicable state rates.
(B) The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

  Page 8 of 12

UNITY BANCORP, INC.
QUARTER TO DATE NET INTEREST MARGIN
September 30, 2010
	For the Three Months Ended
	September 30, 2010									September 30, 2009
Amounts in thousands, except percentages	Average Balance			Interest			Rate/Yield			Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	30,939		$	21			0.27	%	$	32,940		$	32			0.39	%
Federal Home Loan Bank stock		4,656			65			5.54	%		4,677			101			8.57	%
Securities available for sale		115,876			1,085			3.75	%		131,360			1,495			4.55	%
Securities held to maturity		22,148			275			4.97	%		31,418			407			5.18	%
Total securities (A)		138,024			1,360			3.94	%		162,778			1,902			4.67	%
SBA loans		94,723			1,225			5.17	%		102,691			1,498			5.83	%
SBA 504 loans		65,506			1,093			6.62	%		71,764			1,147			6.34	%
Commercial loans		283,267			4,454			6.24	%		301,010			4,973			6.55	%
Residential mortgage loans		132,031			1,808			5.48	%		123,786			1,772			5.73	%
Consumer loans		57,315			719			4.98	%		62,459			791			5.02	%
Total loans (A), (B)		632,842			9,299			5.85	%		661,710			10,181			6.12	%
Total interest-earning assets	$	806,461		$	10,745			5.30	%	$	862,105		$	12,216			5.64	%
Noninterest-earning assets:
Cash and due from banks		20,469									18,502
Allowance for loan losses		(14,725	)								(11,478	)
Other assets		41,374									34,355
Total noninterest-earning assets		47,118									41,379
Total assets	$	853,579								$	903,484
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	95,348		$	148			0.62	%	$	88,284		$	264			1.19	%
Savings deposits		290,017			639			0.87	%		239,427			1,032			1.71	%
Time deposits		203,346			1,450			2.83	%		323,484			2,950			3.62	%
Total interest-bearing deposits		588,711			2,237			1.51	%		651,195			4,246			2.59	%
Borrowed funds and subordinated debentures		103,296			1,077			4.08	%		100,465			1,081			4.21	%
Total interest-bearing liabilities	$	692,007		$	3,314			1.89	%	$	751,660		$	5,327			2.80	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		87,644									79,965
Other liabilities		4,115									4,945
Total noninterest-bearing liabilities		91,759									84,910
Total shareholders' equity		69,813									66,914
Total liabilities and shareholders' equity	$	853,579								$	903,484
Net interest spread				$	7,431			3.41	%				$	6,889			2.84	%
Tax-equivalent basis adjustment					(19	)								(31	)
Net interest income				$	7,412								$	6,858
Net interest margin								3.66	%								3.17	%
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 percent and applicable state rates.
(B) The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

Page 9 of 12

UNITY BANCORP, INC.
YEAR TO DATE NET INTEREST MARGIN
September 30, 2010
	For the Nine Months Ended
	September 30, 2010									September 30, 2009
Amounts in thousands, except percentages	Average Balance			Interest			Rate/Yield			Average Balance			Interest			Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	35,037		$	76			0.29	%	$	19,222		$	78			0.54	%
Federal Home Loan Bank stock		4,663			148			4.24	%		5,190			219			5.64	%
Securities available for sale		122,445			3,446			3.75	%		133,446			4,709			4.71	%
Securities held to maturity		24,238			885			4.87	%		33,277			1,222			4.90	%
Total securities (A)		146,683			4,331			3.94	%		166,723			5,931			4.74	%
SBA loans		97,013			3,977			5.47	%		103,321			4,668			6.02	%
SBA 504 loans		67,405			3,270			6.49	%		74,266			3,663			6.59	%
Commercial loans		286,978			13,546			6.31	%		303,234			15,040			6.63	%
Residential mortgage loans		133,331			5,729			5.73	%		125,667			5,419			5.75	%
Consumer loans		58,595			2,174			4.96	%		62,630			2,383			5.09	%
Total loans (A), (B)		643,322			28,696			5.96	%		669,118			31,173			6.22	%
Total interest-earning assets	$	829,705		$	33,251			5.35	%	$	860,253		$	37,401			5.81	%
Noninterest-earning assets:
Cash and due from banks		21,458									18,838
Allowance for loan losses		(14,662	)								(11,173	)
Other assets		41,521									33,409
Total noninterest-earning assets		48,317									41,074
Total assets	$	878,022								$	901,327
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	99,323		$	593			0.80	%	$	86,232		$	801			1.24	%
Savings deposits		290,606			2,268			1.04	%		192,559			2,588			1.80	%
Time deposits		227,438			4,952			2.91	%		357,073			10,084			3.78	%
Total interest-bearing deposits		617,367			7,813			1.69	%		635,864			13,473			2.83	%
Borrowed funds and subordinated debentures		101,911			3,232			4.18	%		116,427			3,344			3.79	%
Total interest-bearing liabilities	$	719,278		$	11,045			2.04	%	$	752,291		$	16,817			2.98	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		85,876									77,730
Other liabilities		4,166									4,297
Total noninterest-bearing liabilities		90,042									82,027
Total shareholders' equity		68,702									67,009
Total liabilities and shareholders' equity	$	878,022								$	901,327
Net interest spread				$	22,206			3.31	%				$	20,584			2.83	%
Tax-equivalent basis adjustment					(68	)								(94	)
Net interest income				$	22,138								$	20,490
Net interest margin								3.58	%								3.20	%
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 percent and applicable state rates.
(B) The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

Page 10 of 12

UNITY BANCORP, INC.
ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY SCHEDULES
September 30, 2010
Amounts in thousands, except percentages	9/30/2010			6/30/2010			3/31/2010			12/31/2009			9/30/2009
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	13,946		$	14,055		$	13,842		$	12,445		$	10,665
Provision for loan losses charged to expense		1,500			1,500			1,500			2,000			3,000
		15,446			15,555			15,342			14,445			13,665
Less: Chargeoffs
SBA loans		389			517			-			-			448
SBA 504 loans		-			-			750			500			-
Commercial loans		989			1,038			485			125			674
Residential mortgage loans		95			115			100			-			125
Consumer loans		9			2			-			5			11
Total chargeoffs		1,482			1,672			1,335			630			1,258
Add: Recoveries
SBA loans		17			53			45			23			14
SBA 504 loans		-			-			-			-			22
Commercial loans		178			10			3			3			-
Residential mortgage loans		-			-			-			-			-
Consumer loans		4			-			-			1			2
Total recoveries		199			63			48			27			38
Net chargeoffs		1,283			1,609			1,287			603			1,220
Balance, end of period	$	14,163		$	13,946		$	14,055		$	13,842		$	12,445
LOAN QUALITY INFORMATION:
Nonperforming loans	$	27,304		$	26,071		$	26,654		$	25,496		$	24,687
Other real estate owned (OREO)		5,773			3,728			3,318			1,530			2,774
Nonperforming assets		33,077			29,799			29,972			27,026			27,461
Less:  Amount guaranteed by Small Business Administration		2,094			1,436			2,205			1,931			1,759
Net nonperforming assets	$	30,983		$	28,363		$	27,767		$	25,095		$	25,702
Loans 90 days past due & still accruing	$	2,467		$	2,780		$	3,061		$	2,286		$	1,609
Allowance for loan losses to:
Total loans at quarter end		2.25	%		2.19	%		2.16	%		2.11	%		1.90	%
Nonperforming loans		51.87	%		53.49	%		52.73	%		54.29	%		50.41	%
Nonperforming assets		42.82	%		46.80	%		46.89	%		51.22	%		45.32	%
Net nonperforming assets		45.71	%		49.17	%		50.62	%		55.16	%		48.42	%
QTD net chargeoffs (annualized) to QTD average loans:
SBA loans		1.56	%		1.89	%		-0.19	%		-0.09	%		1.68	%
SBA 504 loans		0.00	%		0.00	%		4.32	%		2.78	%		-0.12	%
Commercial loans		1.14	%		1.44	%		0.67	%		0.16	%		0.89	%
Residential mortgage loans		0.29	%		0.35	%		0.30	%		0.00	%		0.40	%
Consumer loans		0.03	%		0.01	%		0.00	%		0.03	%		0.06	%
Total loans		0.80	%		1.00	%		0.80	%		0.36	%		0.73	%
Nonperforming loans to total loans		4.34	%		4.09	%		4.09	%		3.88	%		3.76	%
Nonperforming assets to total loans and OREO		5.21	%		4.65	%		4.58	%		4.10	%		4.17	%
Nonperforming assets to total assets		3.91	%		3.43	%		3.37	%		2.90	%		2.98	%

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UNITY BANCORP, INC.
QUARTERLY FINANCIAL DATA
September 30, 2010
Amounts in thousands, except percentages and per share amounts	9/30/2010			6/30/2010			3/31/2010			12/31/2009			9/30/2009
SUMMARY OF INCOME:
Total interest income	$	10,726		$	10,944		$	11,513		$	12,101		$	12,185
Total interest expense		3,314			3,681			4,049			4,766			5,327
Net interest income		7,412			7,263			7,464			7,335			6,858
Provision for loan losses		1,500			1,500			1,500			2,000			3,000
Net interest income after provision for loan losses		5,912			5,763			5,964			5,335			3,858
Total noninterest income (loss)		1,460			1,170			910			535			1,162
Total noninterest expense		6,404			6,040			5,941			6,076			6,110
Income (loss) before provision (benefit) for income taxes		968			893			933			(206	)		(1,090	)
Provision (benefit) for income taxes		242			212			185			(340	)		(343	)
Net income (loss)		726			681			748			134			(747	)
Preferred stock dividends & discount accretion		385			379			373			373			372
Income available (loss attributable) to common shareholders	$	341		$	302		$	375		$	(239	)	$	(1,119	)
Net income (loss) per common share - Basic	$	0.05		$	0.04		$	0.05		$	(0.03	)	$	(0.16	)
Net income (loss) per common share - Diluted	$	0.05		$	0.04		$	0.05		$	(0.03	)	$	(0.16	)
COMMON SHARE DATA:
Market price per share	$	5.25		$	5.35		$	5.29		$	4.02		$	4.20
Dividends paid	$	-		$	-		$	-		$	-		$	-
Book value per common share	$	7.19		$	7.11		$	7.00		$	6.90		$	6.88
QTD weighted average shares - basic		7,176			7,156			7,150			7,126			7,119
QTD weighted average shares - diluted		7,467			7,475			7,294			7,126			7,119
Outstanding common shares		7,207			7,154			7,156			7,144			7,119
OPERATING RATIOS (Annualized):
Return (loss) on average assets		0.34	%		0.31	%		0.34	%		0.06	%		-0.33	%
Return (loss) on average equity		2.66	%		2.43	%		3.09	%		-1.95	%		-9.14	%
Effficiency ratio		72.47	%		71.66	%		70.98	%		71.05	%		77.72	%
BALANCE SHEET DATA:
Total assets	$	846,385		$	869,735		$	889,927		$	930,357		$	922,689
Total deposits		670,158			693,232			714,802			758,239			750,665
Total loans		629,516			637,180			651,200			657,016			656,520
Total securities		134,820			143,662			138,442			169,022			171,501
Total shareholders' equity		70,730			69,633			68,712			67,865			67,385
Allowance for loan losses		(14,163	)		(13,946	)		(14,055	)		(13,842	)		(12,445	)
TAX EQUIVALENT YIELDS AND RATES:
Interest-earning assets		5.30	%		5.28	%		5.47	%		5.45	%		5.64	%
Interest-bearing liabilities		1.89	%		2.04	%		2.20	%		2.44	%		2.80	%
Net interest spread		3.41	%		3.24	%		3.27	%		3.01	%		2.84	%
Net interest margin		3.66	%		3.51	%		3.57	%		3.30	%		3.17	%
CREDIT QUALITY:
Nonperforming assets	$	33,077		$	29,799		$	29,972		$	27,026		$	27,461
QTD net chargeoffs (annualized) to QTD average loans		0.80	%		1.00	%		0.80	%		0.36	%		0.73	%
Allowance for loan losses to total loans		2.25	%		2.19	%		2.16	%		2.11	%		1.90	%
Nonperforming assets to total loans and OREO		5.21	%		4.65	%		4.58	%		4.10	%		4.17	%
Nonperforming assets to total assets		3.91	%		3.43	%		3.37	%		2.90	%		2.98	%
CAPITAL RATIOS AND OTHER:
Total equity to total assets		8.36	%		8.01	%		7.72	%		7.29	%		7.30	%
Leverage ratio		9.83	%		9.43	%		9.18	%		8.83	%		9.08	%
Tier 1 risk-based capital ratio		12.67	%		12.39	%		12.02	%		11.75	%		11.83	%
Total risk-based capital ratio		13.93	%		13.65	%		13.28	%		13.01	%		13.09	%
Number of banking offices		16			16			16			16			16
Number of ATMs		18			18			19			19			19
Number of employees		173			165			171			174			174

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