10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-K

FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year endedDecember 31, 2014

OR

(  )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 1-12431

Unity Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

New Jersey	22-3282551
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
64 Old Highway 22, Clinton, NJ	08809
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (908) 730-7630

Securities registered pursuant to Section 12(b) of the Exchange Act:

Common Stock, no par valueNASDAQ

(Title of Each Class)                                                                           (Name of Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Exchange Act: None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes    No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes    No ☒

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 of 1934 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 ☒   No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒   No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer                                                       Accelerated filer 

Non-accelerated filer                                                         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 ☒

As of June 30, 2014, the aggregate market value of the registrant’s Common Stock, no par value per share, held by non-affiliates of the registrant was $46,445,324 and 5,004,884 shares of the Common Stock were outstanding to non-affiliates.  As of March 16, 2015, 8,416,965 shares of the registrant’s Common Stock were outstanding.

Documents incorporated by reference:

· Portions of Unity Bancorp’s Annual Report to Shareholders for the fiscal year ended December 31, 2014 are incorporated by reference into Parts I, II and IV of this Annual Report on Form 10-K.

· Portions of Unity Bancorp’s Proxy Statement for the Annual Meeting of Shareholders to be filed no later than 120 days from December 31, 2014 are incorporated by reference into Part III of this Annual Report on Form 10-K.

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Index to Form 10-K

Description of Financial Data		Page
Part I
Item 1.	Business
	a)  General	4
	b)  Statistical Information	9
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	18
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 8.	Financial Statements and Supplementary Data	18
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	18
Item 9A.	Controls and Procedures	18
Item 9B.	Other Information – None	18
Part III
Item 10.	Directors, Executive Officers and Corporate Governance; Compliance with Section 16(a) of the Exchange Act	19
Item 11.	Executive Compensation	19
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	19
Item 13.	Certain Relationships and Related Transactions and Director Independence	20
Item 14.	Principal Accountant Fees and Services	20
Part IV
Item 15.	Exhibits and Financial Statement Schedules	20
	Signatures	23

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PART I

Item 1.  Business:

a) General

Unity Bancorp, Inc., (the "Company" or "Registrant"), is a bank holding company incorporated under the laws of the State of New Jersey to serve as a holding company for Unity Bank  (the “Bank”).  The Company was organized at the direction of the Board of Directors of the Bank for the purpose of acquiring all of the capital stock of the Bank.  Pursuant to the New Jersey Banking Act of 1948 (the "Banking Act"), and pursuant to approval of the shareholders of the Bank, the Company acquired the Bank and became its holding company on December 1, 1994.  The only significant activity of the Company is ownership and supervision of the Bank.  The Company also owns 100% of the common equity of Unity (NJ) Statutory Trust II and Unity (NJ) Statutory Trust III.  The trusts have issued $10.3 million and $5.2 million of preferred securities to investors, respectively.

The Bank opened for business on September 16, 1991.  The Bank received its charter from the New Jersey Department of Banking and Insurance on September 13, 1991.  The Bank is a full-service commercial bank, providing a wide range of business and consumer financial services through its main office in Clinton, New Jersey and fourteen New Jersey branches located in Clinton, Edison, Flemington, Highland Park, Linden, Middlesex, North Plainfield, Phillipsburg, Scotch Plains, Somerset, South Plainfield, Union, Washington and Whitehouse.  In addition, the Bank has one Pennsylvania branch located in Forks Township.  The Bank's primary service area encompasses the Route 22/Route 78 corridors between the Forks Township, Pennsylvania office and its Linden, New Jersey branch.

The principal executive offices of the Company are located at 64 Old Highway 22, Clinton, New Jersey 08809, and the telephone number is (800) 618-2265.  The Company’s website address is www.unitybank.com.

Business of the Company

The Company's primary business is ownership and supervision of the Bank.  The Company, through the Bank, conducts a traditional and community-oriented commercial banking business and offers services, including personal and business checking accounts, time deposits, money market accounts and regular savings accounts.  The Company structures its specific services and charges in a manner designed to attract the business of the small and medium sized business and professional community, as well as that of individuals residing, working and shopping in its service area.  The Company engages in a wide range of lending activities and offers commercial, Small Business Administration (“SBA”), consumer, mortgage, home equity and personal loans.

Service Areas

The Company's primary service area is defined as the neighborhoods served by the Bank's offices.  The Bank's main office, located in Clinton, NJ, in combination with its Flemington and Whitehouse offices, serves the greater area of Hunterdon County.  The Bank's North Plainfield and Somerset offices serve those communities located in the northern, eastern and central parts of Somerset County and the southernmost communities of Union County.  The Bank's Scotch Plains, Linden, and Union offices serve the majority of the communities in Union County and the southwestern communities of Essex County.  The offices in Middlesex, South Plainfield, Highland Park, and Edison extend the Company's service area into Middlesex County.  The Bank’s Phillipsburg and Washington offices serve Warren County.  The Bank’s Forks Township office serves Northampton County, Pennsylvania.

Competition

The Company is located in an extremely competitive area.  The Company's service area is also serviced by national banks, major regional banks, large thrift institutions and a variety of credit unions.  In addition, since passage of the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “Modernization Act”), securities firms and insurance companies have been allowed to acquire or form financial institutions, thereby increasing competition in the financial services market.  Most of the Company's competitors have substantially more capital, and therefore greater lending limits than the Company.  The Company's competitors generally have established positions in the service area and have greater resources than the Company with which to pay for advertising, physical facilities, personnel and interest on deposited funds.  The Company relies on the competitive pricing of its loans, deposits and other services, as well as its ability to provide local decision-making and personal service in order to compete with these larger institutions.

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Employees

At December 31, 2014, the Company employed 154 full-time and 29 part-time employees.  None of the Company's employees are represented by any collective bargaining units.  The Company believes that its relations with its employees are good.

Executive Officers of Registrant

The following table sets forth certain information as of December 31, 2014, regarding each executive officer of the Company who is not also a director.

Name, Age and Position	Officer Since	Principal Occupation During Past Five Years
John Kauchak, 61, Chief Operating Officer and Executive Vice President of the Company and Bank	2002	Previously, Mr. Kauchak was the head of Deposit Operations for Unity Bank from 1996 to 2002.
Alan J. Bedner, 44, Chief Financial Officer and Executive Vice President of the Company and Bank	2003	Previously, Mr. Bedner was Controller for Unity Bank from 2001 to 2003.
Janice Bolomey, 46, Chief Administrative Officer and Executive Vice President of the Company and Bank	2013	Previously, Ms. Bolomey was Director of Sales for Unity Bank from 2002 to 2013.

SUPERVISION AND REGULATION

General Supervision and Regulation

Bank holding companies and banks are extensively regulated under both federal and state law, and these laws are subject to change.  As an example, in the summer of 2010, Congress passed, and the President signed, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) (discussed below).  These laws and regulations are intended to protect depositors, not stockholders.  To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions.  Any change in the applicable law or regulation may have a material effect on the business and prospects of the Company and the Bank.  Management of the Company is unable to predict, at this time, the impact of future changes to laws and regulations.

General Bank Holding Company Regulation

General:  As a bank holding company registered under the Bank Holding Company Act of 1956, as amended, (the "BHCA"), the Company is subject to the regulation and supervision of the Federal Reserve Board (the “FRB”).  The Company is required to file with the FRB annual reports and other information regarding its business operations and those of its subsidiaries.  Under the BHCA, the Company's activities and those of its subsidiaries are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries or engaging in any other activity which the FRB determines to be so closely related to banking or managing or controlling banks as to be properly incident thereto.

The BHCA requires, among other things, the prior approval of the FRB in any case where a bank holding company proposes to; (i) acquire all or substantially all of the assets of any other bank; (ii) acquire direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank (unless it owns a majority of such bank's voting shares); or (iii) merge or consolidate with any other bank holding company.  The FRB will not approve any acquisition, merger or consolidation that would have a substantially anti-competitive effect, unless the anti-competitive impact of the proposed transaction is clearly outweighed by a greater public interest in meeting the convenience and needs of the community to be served.  The FRB also considers capital adequacy and other financial and managerial resources and future prospects of the companies and the banks concerned, together with the convenience and needs of the community to be served, when reviewing acquisitions or mergers.

The BHCA also generally prohibits a bank holding company, with certain limited exceptions, from; (i) acquiring or retaining direct or indirect ownership or control of more than 5% of the outstanding voting stock of any company which is not a bank or bank holding company; or (ii) engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or performing services for its subsidiaries, unless such non-banking business is determined by the FRB to be so closely related to banking or managing or controlling banks as to be properly incident thereto.  In making such determinations, the FRB is required to weigh the expected benefits to the public such as greater convenience, increased competition or gains in efficiency, against the possible adverse effects such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.

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The BHCA was substantially amended through the Modernization Act.  The Modernization Act permits bank holding companies and banks, which meet certain capital, management and Community Reinvestment Act standards, to engage in a broader range of non-banking activities.  In addition, bank holding companies, which elect to become financial holding companies, may engage in certain banking and non-banking activities without prior FRB approval.  Finally, the Modernization Act imposes certain privacy requirements on all financial institutions and their treatment of consumer information.  At this time, the Company has elected not to become a financial holding company.

There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the Federal Deposit Insurance Corporation (the “FDIC”) insurance fund in the event the depository institution becomes in danger of default.  Under regulations of the FRB, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such policy.  The FRB also has the authority under the BHCA to require a bank holding company to terminate any activity or to relinquish control of a non-bank subsidiary upon the FRB's determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.

Capital Adequacy Guidelines for Bank Holding Companies:  The FRB has adopted risk-based capital guidelines for bank holding companies.  The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets.  Under these guidelines, assets and off-balance sheet items are assigned to broad-risk categories, each with appropriate weights.  The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The risk-based guidelines currently apply on a consolidated basis to bank holding companies with consolidated assets of $500 million or more, although Congress recently adopted legislation directing the FASB to amend its small bank holding company policy so that it applies to bank holding companies with assets of $1 billion or less.  The minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%.  At least 4% of the total capital is required to be "Tier I," consisting of common stockholders' equity and certain preferred stock and other qualifying hybrid instruments, less certain goodwill items and other intangible assets.  The remainder, "Tier II Capital," may consist of the allowance for loan losses of up to 1.25% of risk-weighted assets and certain other securities which do not qualify as Tier I capital.  Total capital is the sum of Tier I and Tier II capital, less reciprocal holdings of other banking organizations' capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the FRB (determined on a case-by-case basis or as a matter of policy after formal rule-making).

Bank holding company assets are given risk-weights of 0%, 20%, 50% and 100%.  In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset-equivalent amounts to which an appropriate risk-weighting will apply.  These computations result in the total risk-weighted assets.  Most loans are assigned to the 100% risk category, except for performing first-mortgage loans that are fully secured by residential property, which carry a 50% risk-weighting.  Most investment securities (including, primarily, general obligation claims of states or other political subdivisions of the United States) are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weighting, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S. Government, which have a 0% risk-weighting.  In converting off-balance sheet items, direct credit substitutes (including general guarantees and standby letters of credit backing financial obligations) are given a 100% risk-weighting.  Transaction-related contingencies, such as standby letters of credit backing non-financial obligations and undrawn commitments (including commercial credit lines with an initial maturity of more than one year), have a 50% risk-weighting.  Short-term commercial letters of credit have a 20% risk-weighting and certain short-term unconditionally cancelable commitments have a 0% risk-weighting.

In addition to the risk-based capital guidelines, the FRB has adopted a minimum Tier I capital (leverage) ratio, under which a bank holding company must maintain a minimum level of Tier I capital to average total consolidated assets of at least 3% in the case of a bank holding company that has the highest regulatory examination rating and is not contemplating significant growth or expansion.  All other bank holding companies are expected to maintain a leverage ratio of at least 100 to 200 basis points above the stated minimum.

As of December 31, 2014, the Company is in compliance with these minimum Federal capital requirements. However, recently adopted regulations will change the Company’s capital requirements in the future.

The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, adopted Basel III in September 2010, which constitutes a set of capital reform measures designed to strengthen the regulation, supervision and risk management of banking organizations worldwide. In order to implement Basel III and certain additional capital changes required by the Dodd-Frank Act, on July 9, 2013, the FRB approved, as an interim final rule, the regulatory capital requirements for U.S. bank holding companies, such as us, substantially similar to final rules issued by the FDIC and the Office of the Comptroller of the Currency. 

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The interim final rule includes new risk-based capital and leverage ratios that will be phased-in from 2015 to 2019. The rule includes a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets, which is in addition to the Tier 1 and Total risk-based capital requirements. The interim final rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and requires a minimum leverage ratio of 4.0%. The required minimum ratio of total capital to risk-weighted assets will remain 8.0%. The new risk-based capital requirements (except for the capital conservation buffer) are effective January 1, 2015. The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.

The following chart compares the risk-based capital required under existing rules to those prescribed under the interim final rule under the phase-in period described above:

	Current Treatment		Treatment in Final Rule
Leverage ratio	4.00	%	4.00	%
Common equity tier 1 capital (CET1) ratio	N/A		4.50	%
Additional tier 1	N/A		1.50	%
Tier 1 capital ratio	4.00	%	6.00	%
Tier 2	4.00	%	2.00	%
Total capital ratio	8.00	%	8.00	%
Capital conservation buffer	N/A		2.50	%

The interim final rule also implements revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses and instruments that will no longer qualify as Tier 1 capital. The interim final rule also sets forth certain changes for the calculation of risk-weighted assets that are required to be implemented beginning January 1, 2015. Management has evaluated the provisions of the interim final rule and its expected impact. Based on our current capital composition and levels, management does not presently anticipate that the interim final rule presents a material risk to our financial condition or results of operations.

General Bank Regulation

As a New Jersey-chartered commercial bank, the Bank is subject to the regulation, supervision, and control of the New Jersey Department of Banking and Insurance (the “Department”).  As an FDIC-insured institution, the Bank is subject to regulation, supervision and control of the FDIC, an agency of the federal government.  The regulations of the FDIC and the Department affect virtually all activities of the Bank, including the minimum level of capital that the Bank must maintain, the ability of the Bank to pay dividends, the ability of the Bank to expand through new branches or acquisitions and various other matters.

Insurance of Deposits:  The Dodd-Frank Act has caused significant changes in the FDIC’s insurance of deposit accounts. Among other things, the Dodd-Frank Act permanently increased the FDIC deposit insurance limit to $250 thousand per depositor.

On February 7, 2011 the FDIC announced the approval of the assessment system mandated by the Dodd-Frank Act.  Dodd-Frank required that the base on which deposit insurance assessments are charged be revised from one based on domestic deposits to one based on assets.  The FDIC’s rule to base the assessment base on average total consolidated assets minus average tangible equity instead of domestic deposits lowered assessments for many community banks with less than $10 billion in assets and reduced the Company’s costs.

Dividend Rights:  Under the Banking Act, a bank may declare and pay dividends only if, after payment of the dividend, the capital stock of the bank will be unimpaired and either the bank will have a surplus of not less than 50% of its capital stock or the payment of the dividend will not reduce the bank's surplus. Unless and until the Company develops other lines of business, payments of dividends from the Bank will remain the Company’s primary source of income and the primary source of funds for dividend payments to the shareholders of the Company. 

Capital Requirements: The FDIC imposes on the Bank minimum regulatory requirements that are substantially the same as those applicable to the Company under FRB regulations discussed above.

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Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted on July 21, 2010, significantly changed the bank regulatory landscape and has impacted and will continue to impact the lending, deposit, investment, trading and operating activities of insured depository institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations.  The Dodd-Frank Act, among other things:

× capped debit card interchange fees for institutions with $10 billion in assets or more at $0.21 plus 5 basis points times the transaction amount, a substantially lower rate than the average rate in effect prior to adoption of the Dodd-Frank Act;

× provided for an increase in the FDIC assessment for depository institutions with assets of $10 billion or more, increases in the minimum reserve ratio for the DIF from 1.15% to 1.35% and changes the basis for determining FDIC premiums from deposits to assets;

× permanently increased the deposit insurance coverage to $250 thousand and allowed depository institutions to pay interest on checking accounts;

× created a new Consumer Financial Protection Bureau (“CFPB”) that has rulemaking authority for a wide range of consumer financial protection laws that apply to all banks and has broad authority to enforce these laws;

× provided for new disclosure and other requirements relating to executive compensation and corporate governance;

× changed standards for Federal preemption of state laws related to federally-chartered institutions and their subsidiaries;

× provided mortgage reform provisions regarding a customer’s ability to repay, restricting variable rate lending by requiring the ability to repay to be determined for variable rate loans by using the maximum rate that will apply during the first five years of a variable rate loan term, and making more loans subject to provisions for higher cost loans, new disclosures, and certain other revisions; and

× created a financial stability oversight council that will recommend to the Federal Reserve increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity.

The Dodd-Frank Act also imposes new obligations on originators of residential mortgage loans, such as the Bank. Among other things, the Dodd-Frank Act requires originators to make a reasonable and good faith determination based on documented information that a borrower has a reasonable ability to repay a particular mortgage loan over the long term. If the originator cannot meet this standard, the loan may be unenforceable. The Dodd-Frank Act contains an exception from this ability-to-repay rule for “Qualified Mortgages”. A rule issued by the CFPB in January 2013, and effective January 10, 2014, sets forth specific underwriting criteria for a loan to qualify as a Qualified Mortgage. The criteria generally exclude loans that (1) are interest-only, (2) have excessive upfront points or fees, or (3) have negative amortization features, balloon payments, or terms in excess of 30 years. The underwriting criteria also impose a maximum debt to income ratio of 43%, based upon documented and verifiable information. If a loan meets these criteria and is not a “higher priced loan” as defined in FRB regulations, the CFPB rule establishes a safe harbor preventing a consumer from asserting the failure of the originator to establish the consumer’s ability to repay. However, a consumer may assert the lender’s failure to comply with the ability-to-repay rule for all residential mortgage loans other than Qualified Mortgages, and may challenge whether a loan in fact qualified as a Qualified Mortgage.

Although the majority of residential mortgages historically originated by the Bank would be considered Qualified Mortgages, the Bank has and may continue to make residential mortgage loans that would not qualify. The Bank is still evaluating the impact of the recently issued Qualified Mortgage definition and related ability-to-repay rules, as well as other rules recently issued by the by the CFPB related to mortgage origination and servicing, to determine if such rules will have any long-term impact on its mortgage loan origination and servicing activities. As a result of such rules, the Bank might experience increased compliance costs, loan losses, litigation related expenses and delays in taking title to real estate collateral, if these loans do not perform and borrowers challenge whether the Bank satisfied the ability-to-repay rule upon originating the loan.

The requirements of the Dodd-Frank Act and other regulatory reforms continue to be implemented.  It is difficult to predict at this time what specific impact certain provisions and yet-to-be-finalized rules and regulations will have on us, including any regulations promulgated by the CFPB. Financial reform legislation and rules could have adverse implications on the financial industry, the competitive environment, and our ability to conduct business. Management will have to apply resources to ensure compliance with all applicable provisions of regulatory reforms, including the Dodd-Frank Act and any implementing rules, which may increase our costs of operations and adversely impact our earnings.

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b) Statistical Information

The table below provides a cross-reference to portions of Unity Bancorp. Inc.’s Annual Report to Shareholders for the year ended December 31, 2014 (Exhibit 13 hereto), which, to the extent indicated, is incorporated by reference herein.  Information that is not applicable is indicated by (N/A):

Description of Financial Data	Exhibit 13 Pages
I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential
A. Analysis of Net Interest Earnings	25
B. Average Balance Sheets	26
C. Rate/Volume Analysis	28
II. Investment Portfolio
A. Book value of investment securities	59
B. Investment securities by range of maturity with corresponding average yields	59
C. Securities of issuers exceeding ten percent of stockholders' equity	N/A
III. Loan Portfolio
A. Types of loans	31
B. Maturities and sensitivities of loans to changes in interest rates	33
C. Risk elements
1) Nonaccrual, past due and restructured loans	35
2) Potential problem loans	35
3) Foreign outstandings	N/A
4) Loan concentrations	31
D. Other interest-bearing assets	N/A
IV. Summary of Loan Loss Experience
A. Analysis of the allowance for loan losses	36
B. Allocation of the allowance for loan losses	37
V. Deposits
A. Average amount and average rate paid on major categories of deposits	26
B. Other categories of deposits	N/A
C. Deposits by foreign depositors in domestic offices	N/A
D. Time deposits of $100,000 or more by remaining maturity	73
E. Time deposits of $100,000 or more by foreign offices	N/A
VI. Return on Equity and Assets	24
VII. Short-term Borrowings
A. Amounts outstanding	74
B. Maximum amount of borrowings in each category outstanding at any month-end	74
C. Average amount outstanding	74

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Item 1A.        Risk Factors:

Our business, financial condition, results of operations and the trading price of our securities can be materially and adversely affected by many events and conditions including the following:

We have been and may continue to be adversely affected by national financial markets and economic conditions, as well as local conditions.

Our business and results of operations are affected by the financial markets and general economic conditions in the United States, including factors such as the level and volatility of interest rates, inflation, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, investor confidence and the strength of the U.S. economy. The deterioration of any of these conditions can adversely affect our securities and loan portfolios, our level of charge-offs and provision for credit losses, our capital levels, liquidity and our results of operations.

In addition, we are affected by the economic conditions within our New Jersey and Pennsylvania trade areas.  Though there have been signs of improvement, economic growth in these areas has been slow to recover.  Unlike larger banks that are more geographically diversified, we provide banking and financial services primarily to customers in the six counties in the New Jersey market and one county in Pennsylvania in which we have branches, so any decline in the economy of New Jersey or eastern Pennsylvania could have an adverse impact on us.

Our loans, the ability of borrowers to repay these loans, and the value of collateral securing these loans are impacted by economic conditions.   Our financial results, the credit quality of our existing loan portfolio, and the ability to generate new loans with acceptable yield and credit characteristics may be adversely affected by changes in prevailing economic conditions, including declines in real estate values, changes in interest rates, adverse employment conditions and the monetary and fiscal policies of the federal government.  Although economic conditions in our primary market have fared better than other areas of the United States, we cannot assure you that these conditions will continue to prevail.  We cannot assure you that positive trends or developments discussed in this annual report will continue or that negative trends or developments will not have a significant adverse effect on us.

A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business.

A significant portion of our loan portfolio is secured by real estate. As of December 31, 2014, approximately 96 percent of our loans had real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. Continued weakness of the real estate market in our primary market areas could result in an increase in the number of borrowers who default on their loans and a reduction in the value of the collateral securing their loans, which in turn could have an adverse effect on our profitability and asset quality. Any future declines in home prices in the New Jersey and Pennsylvania markets we serve also may result in increases in delinquencies and losses in our loan portfolios. Stress in the real estate market, combined with weak economic conditions and continued elevated unemployment levels could drive losses beyond that which is provided for in our allowance for loan losses. In that event, our earnings could be adversely affected.

Our offering of alternative credit products may expose us to increased lending risks.

The Dodd-Frank Act imposes new obligations on originators of residential mortgage loans. Among other things, the Dodd-Frank Act requires originators to make a reasonable and good faith determination based on documented information that a borrower has a reasonable ability to repay a particular mortgage loan over the long term. If the originator cannot meet this standard, the loan may be unenforceable. The Dodd-Frank Act contains an exception from this ability-to-repay rule for “Qualified Mortgages”. A rule issued by the CFPB in January 2013, and effective January 10, 2014, sets forth specific underwriting criteria for a loan to qualify as a Qualified Mortgage. The criteria generally exclude loans that (1) are interest-only, (2) have excessive upfront points or fees, or (3) have negative amortization features, balloon payments, or terms in excess of 30 years. The underwriting criteria also impose a maximum debt to income ratio of 43%, based upon documented and verifiable information. If a loan meets these criteria and is not a “higher priced loan” as defined in Federal Reserve regulations, the CFPB rule establishes a safe harbor preventing a consumer from asserting the failure of the originator to establish the consumer’s ability to repay. However, a consumer may assert the lender’s failure to comply with the ability-to-repay rule for all residential mortgage loans other than Qualified Mortgages.

10

Although the majority of residential mortgages historically originated by the Bank would be considered Qualified Mortgages, the Bank has and may continue to make residential mortgage loans that would not qualify. The Bank has evaluated the impact of the recently issued Qualified Mortgage definition and related ability-to-repay rules, as well as other rules recently issued by the by the CFPB related to mortgage origination and servicing, and does not believe it will have any long-term impact on its mortgage loan origination and servicing activities. As a result of such rules, the Bank might experience increased compliance costs, loan losses, litigation related expenses and delays in taking title to real estate collateral, if these loans do not perform and borrowers challenge whether the Bank satisfied the ability-to-repay rule upon originating the loan.

There is a risk that the SBA will not honor their guarantee.

The Company has historically been a participant in various SBA lending programs which guarantee up to 90% of the principal on the underlying loan. There is a risk that the SBA will not honor their guarantee if a loan is not underwritten and administered to SBA guidelines. The Company follows the underwriting guidelines of the SBA; however our ability to manage this will depend on our ability to continue to attract, hire and retain skilled employees who have knowledge of the SBA program.

There is a risk that we may not be repaid in a timely manner, or at all, for loans we make.

The risk of nonpayment (or deferred or delayed payment) of loans is inherent in commercial banking.  Such nonpayment, or delayed or deferred payment of loans to the Company, if they occur, may have a material adverse effect on our earnings and overall financial condition.  Additionally, in compliance with applicable banking laws and regulations, the Company maintains an allowance for loan losses created through charges against earnings.  As of December 31, 2014, the Company’s allowance for loan losses was $12.5 million, or 1.65 percent of our total loan portfolio and 110.41 percent of our nonperforming loans.  The Company’s marketing focus on small to medium size businesses may result in the assumption by the Company of certain lending risks that are different from or greater than those which would apply to loans made to larger companies.  We seek to minimize our credit risk exposure through credit controls, which include evaluation of potential borrowers’ available collateral, liquidity and cash flow.  However, there can be no assurance that such procedures will actually reduce loan losses.

We have an elevated level of nonperforming assets, and this has, and will continue, to affect our results of operations.

At December 31, 2014, our total nonperforming assets equaled $12.5 million or 1.64 percent of total loans and OREO.  This is an elevated level of nonperforming assets compared to our peer group institutions.  Our level of nonperforming assets reflects the general economic slowdown in our marketplace and its effect on our borrowers, and our focus on SBA lending, which may entail greater credit risk than other types of lending. Our elevated level of nonperforming assets has negatively impacted our results of operations, through additional provisions for loan losses and reduced interest income, and will continue to impact our performance until these assets are resolved. In addition, future increases in our nonperforming assets will further negatively affect our results of operations. We can give you no assurance that our nonperforming assets will not increase further.   

Our allowance for loan losses may not be adequate to cover actual losses.

Like all financial institutions, we maintain an allowance for loan losses to provide for loan defaults and nonperformance.  Our allowance for loan losses may not be adequate to cover actual losses, and future provisions for loan losses could materially and adversely affect the results of our operations.  Risks within the loan portfolio are analyzed on a continuous basis by management; and, periodically, by an independent loan review function and by the Audit Committee.  A risk system, consisting of multiple-grading categories, is utilized as an analytical tool to assess risk and the appropriate level of loss reserves.  Along with the risk system, management further evaluates risk characteristics of the loan portfolio under current economic conditions and considers such factors as the financial condition of the borrowers, past and expected loan loss experience and other factors management feels deserve recognition in establishing an adequate reserve.  This risk assessment process is performed at least quarterly and, as adjustments become necessary, they are realized in the periods in which they become known.  The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates.  State and federal regulatory agencies, as an integral part of their examination process, review our loans and allowance for loan losses and have in the past required an increase in our allowance for loan losses.  Although we believe that our allowance for loan losses is adequate to cover probable and reasonably estimated losses, we cannot assure you that we will not further increase the allowance for loan losses or that our regulators will not require us to increase this allowance.  Either of these occurrences could adversely affect our earnings.

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We are subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

Net interest income, the difference between interest earned on our interest-earning assets and interest paid on interest-bearing liabilities, represents a significant portion of our earnings.  Both increases and decreases in the interest rate environment may reduce our profits.   Interest rates are subject to factors which are beyond our control, including general economic conditions, competition and policies of various governmental and regulatory agencies, such as the Federal Reserve Board.  Changes in monetary policy, including changes in interest rates, could influence not only the interest Unity receives on loans and investment securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect (i) Unity’s ability to originate loans and obtain deposits, (ii) the fair value of Unity’s financial assets and liabilities, including the held to maturity and available for sale securities portfolios, and (iii) the average duration of Unity’s interest-earning assets. This also includes the risk that interest-earning assets may be more responsive to changes in interest rates than interest-bearing liabilities, or vice versa (repricing risk), the risk that the individual interest rates or rate indices underlying various interest-earning assets and interest-bearing liabilities may not change in the same degree over a given time period (basis risk), and the risk of changing interest rate relationships across the spectrum of interest-earning asset and interest-bearing liability maturities (yield curve risk).

The banking business is subject to significant government regulations.

We are subject to extensive governmental supervision, regulation and control. These laws and regulations are subject to change, and may require substantial modifications to our operations or may cause us to incur substantial additional compliance costs. These laws and regulations are designed to protect depositors and the public, but not our shareholders.  In addition, future legislation and government policy could adversely affect the commercial banking industry and our operations.  Such governing laws can be anticipated to continue to be the subject of future modification.  Our management cannot predict what effect any such future modifications will have on our operations.  In addition, the primary focus of Federal and state banking regulation is the protection of depositors and not the shareholders of the regulated institutions.

For example, the recently adopted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has resulted in substantial new compliance costs, and may restrict certain sources of revenue. The Dodd-Frank Act was signed into law on July 21, 2011.  Generally, the Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the law, many of which will not become effective until various Federal regulatory agencies have promulgated rules implementing the statutory provisions.  Uncertainty remains as to the ultimate impact of the Dodd-Frank Act, which could have a material adverse impact either on the financial services industry as a whole, or on our business, results of operations and financial condition.  The Dodd-Frank Act, among other things:

× capped debit card interchange fees for institutions with $10 billion in assets or more at $0.21 plus 5 basis points times the transaction amount, a substantially lower rate than the average rate in effect prior to adoption of the Dodd-Frank Act;

× provided for an increase in the FDIC assessment for depository institutions with assets of $10 billion or more, increases in the minimum reserve ratio for the DIF from 1.15% to 1.35% and changes the basis for determining FDIC premiums from deposits to assets;

× permanently increased the deposit insurance coverage to $250 thousand and allowed depository institutions to pay interest on checking accounts;

× created a new Consumer Financial Protection Bureau (“CFPB”) that has rulemaking authority for a wide range of consumer financial protection laws that apply to all banks and has broad authority to enforce these laws;

× provided for new disclosure and other requirements relating to executive compensation and corporate governance;

× changed standards for Federal preemption of state laws related to federally-chartered institutions and their subsidiaries;

× provided mortgage reform provisions regarding a customer’s ability to repay, restricting variable rate lending by requiring the ability to repay to be determined for variable rate loans by using the maximum rate that will apply during the first five years of a variable rate loan term, and making more loans subject to provisions for higher cost loans, new disclosures, and certain other revisions; and

× created a financial stability oversight council that will recommend to the Federal Reserve increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity.

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In addition, in order to implement Basel III and certain additional capital changes required by the Dodd-Frank Act, on July 9, 2013, the FRB approved, as an interim final rule, the regulatory capital requirements for U.S. bank holding companies, such as us, substantially similar to final rules issued by the FDIC and the Office of the Comptroller of the Currency.  These new requirements are likely to increase our capital requirements in future periods. See “Supervisions and Regulation – General Bank Holding Company Regulation.”

These provisions, as well as any other aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, may impact the profitability of our business activities and may change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect our business, financial condition and results of operations.

Our management is actively reviewing the provisions of the Dodd-Frank Act and Basel III, many of which are to be phased-in over the next several months and years, and assessing the probable impact on our operations. However, the ultimate effect of these changes on the financial services industry in general, and us in particular, is uncertain at this time.

We are subject to changes in accounting policies or accounting standards.

Understanding Unity’s accounting policies is fundamental to understanding our financial results. Some of these policies require the use of estimates and assumptions that may affect the value of assets or liabilities and financial results. Unity has identified its accounting policies regarding the allowance for loan losses, security valuations and impairments, goodwill and income taxes to be critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain. Under each of these policies, it is possible that materially different amounts would be reported under different conditions, using different assumptions, or as new information becomes available.

From time to time, the FASB and the SEC change their guidance governing the form and content of Unity’s external financial statements. In addition, accounting standard setters and those who interpret U.S. generally accepted accounting principles (“GAAP”), such as the FASB, SEC, banking regulators and Unity’s outside auditors, may change or even reverse their previous interpretations or positions on how these standards should be applied. Such changes are expected to continue, and may accelerate based on the FASB and International Accounting Standards Board commitments to achieving convergence between U.S. GAAP and International Financial Reporting Standards. Changes in U.S. GAAP and changes in current interpretations are beyond Unity’s control, can be hard to predict and could materially impact how Unity reports its financial results and condition. In certain cases, Unity could be required to apply a new or revised guidance retroactively or apply existing guidance differently (also retroactively) which may result in Unity restating prior period financial statements for material amounts. Additionally, significant changes to U.S. GAAP may require costly technology changes, additional training and personnel, and other expenses that will negatively impact our results of operations.

Declines in value may adversely impact the investment portfolio.

As of December 31, 2014, we had approximately $60.0 million and $20.0 million in available for sale and held to maturity investment securities, respectively. We may be required to record impairment charges in earnings related to credit losses on our investment securities if they suffer a decline in value that is considered other-than-temporary. Additionally, (a) if we intend to sell a security or (b) it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis, we will be required to recognize an other-than-temporary impairment charge in the statement of income equal to the full amount of the decline in fair value below amortized cost. Factors, including lack of liquidity, absence of reliable pricing information, adverse actions by regulators, or unanticipated changes in the competitive environment could have a negative effect on our investment portfolio and may result in other-than-temporary impairment on our investment securities in future periods.

Liquidity risk.

Liquidity risk is the potential that Unity will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding in a timely basis, at a reasonable cost and within acceptable risk tolerances.

Liquidity is required to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures.

Liquidity is derived primarily from retail deposit growth and retention; principal and interest payments on loans; principal and interest payments on investment securities; sale, maturity and prepayment of investment securities; net cash provided from operations and access to other funding sources.

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Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to persistent weakness, or downturn, in the economy or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not necessarily specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.

We are in competition with many other banks, including larger commercial banks which have greater resources than us.

The banking industry within the State of New Jersey is highly competitive.  The Company’s principal market area is also served by branch offices of large commercial banks and thrift institutions.  In addition, in 1999 the Gramm-Leach-Bliley Financial Modernization Act permits other financial entities, such as insurance companies and securities firms, to acquire or form financial institutions, thereby further increasing competition.  A number of our competitors have substantially greater resources than we do to expend upon advertising and marketing, and their substantially greater capitalization enables them to make much larger loans.  Our success depends a great deal upon our judgment that large and mid-size financial institutions do not adequately serve small businesses in our principal market area and upon our ability to compete favorably for such customers.  In addition to competition from larger institutions, we also face competition for individuals and small businesses from recently formed banks seeking to compete as “hometown” institutions.  Most of these new institutions have focused their marketing efforts on the smaller end of the small business market we serve.

Future offerings of common stock may adversely affect the market price of our stock.

In the future, if our or the Bank’s capital ratios fall below the prevailing regulatory required minimums, we or the Bank could be forced to raise additional capital by making additional offerings of common stock or preferred stock. Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both.

We cannot predict how changes in technology will impact our business.

The financial services market, including banking services, is increasingly affected by advances in technology, including developments in:

· telecommunications;

· data processing;

· automation;

· Internet-based banking;

· Tele-banking; and

· debit cards/smart cards

Our ability to compete successfully in the future will depend on whether we can anticipate and respond to technological changes.  To develop these and other new technologies, we will likely have to make additional capital investments.  Although we continually invest in new technology, we cannot assure you that we will have sufficient resources or access to the necessary proprietary technology to remain competitive in the future.

The Company’s information systems may experience an interruption or breach in security.

The Company relies heavily on communications and information systems to conduct its business.  Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s customer-relationship management, general ledger, deposit, loan and other systems.  

We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as us) and to the risk that our (or our vendors’) business continuity and data security systems prove to be inadequate. We maintain a system of comprehensive policies and a control framework designed to monitor vendor risks including, among other things, (i) changes in the vendor’s organizational structure or internal controls, (ii) changes in the vendor’s financial condition, (iii) changes in the vendor’s support for existing products and services and (iv) changes in the vendor’s strategic focus.  In addition we maintain cyber liability insurance to mitigate against any loss incurred.

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While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur; or, if they do occur, that they will be adequately addressed.  The occurrence of any failures, interruptions or security breaches of the Company’s information systems could damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny or expose the Company to civil litigation and possible financial liability; any of which could have a material adverse effect on the Company’s financial condition and results of operations.

Our business strategy could be adversely affected if we are not able to attract and retain skilled employees and manage our expenses.

We expect to continue to experience growth in the scope of our operations and, correspondingly, in the number of our employees and customers.  We may not be able to successfully manage our business as a result of the strain on our management and operations that may result from this growth.  Our ability to manage this growth will depend upon our ability to continue to attract, hire and retain skilled employees.    Our success will also depend on the ability of our officers and key employees to continue to implement and improve our operational and other systems, to manage multiple, concurrent customer relationships and to hire, train and manage our employees.

Hurricanes or other adverse weather events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations.

Hurricanes and other weather events can disrupt our operations, result in damage to our properties and negatively affect the local economies in which we operate.  In addition, these weather events may result in a decline in value or destruction of properties securing our loans and an increase in delinquencies, foreclosures and loan losses.

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Item 1B.  Unresolved Staff Comments:  None

Item 2.  Properties:

The Company presently conducts its business through its main office located at 64 Old Highway 22, Clinton, New Jersey, and its fourteen branch offices.  The Company’s facilities are adequate to meet their needs.

The following table sets forth certain information regarding the Company’s properties from which it conducts business as of December 31, 2014.

Location	Leased or Owned	Date Leased or Acquired	Lease Expiration	2014 Annual Rental Fee
North Plainfield, NJ	Owned	1991	-	-
Clinton, NJ	Leased	1996	2018	400,000
Linden, NJ	Owned	1997	-	-
Whitehouse, NJ	Owned	1998	-	-
Union, NJ	Owned	2002	-	-
Scotch Plains, NJ	Owned	2004	-	-
Flemington, NJ	Owned	2005	-	-
Phillipsburg, NJ	Leased	2005	2018	101,799
Forks Township, PA	Leased	2006	2015	57,528
Middlesex, NJ	Owned	2007	-	-
Somerset, NJ	Leased	2012	2017	113,924
Washington, NJ	Owned	2012	-	-
Highland Park, NJ	Owned	2013	-	-
South Plainfield, NJ	Owned	2013	-	-
Edison, NJ	Owned	2013	-	-

Item 3.  Legal Proceedings:

From time to time, the Company is subject to other legal proceedings and claims in the ordinary course of business.  The Company currently is not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the business, financial condition, or operating results of the Company.

Item 4.  Mine Safety Disclosures:  N/A

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities:

(a)         Market Information

The Company’s Common Stock is quoted on the NASDAQ Global Market under the symbol “UNTY.”  The following table sets forth the high and low sales prices of the Common Stock as reported on the NASDAQ Global Market for the periods indicated.

For the year ended December 31, 2014:	High		Low		Cash Dividend Paid
4th Quarter	$	12.63	$	8.21	$	0.03
3rd Quarter		9.81		8.36		0.03
2nd Quarter		9.38		7.91		0.02
1st Quarter		8.26		7.22		0.02
For the year ended December 31, 2013:	High		Low		Cash Dividend Paid
4th Quarter	$	7.98	$	7.10	$	0.01
3rd Quarter		8.13		6.74		0.01
2nd Quarter		7.55		6.22		0.01
1st Quarter		6.74		5.85		-

(b)         Holders

As of February 1, 2015, there were approximately 390 shareholders of record of the Company’s Common Stock.

(c)         Dividends

See table in Item 5(a) above.

(d)    Repurchase Plan

On October 21, 2002, the Company authorized the repurchase of up to 10 percent of its outstanding common stock.  The amount and timing of purchases is dependent upon a number of factors, including the price and availability of the Company’s shares, general market conditions and competing alternate uses of funds.  As of December 31, 2014, the Company had repurchased a total of 556 thousand shares, of which 131 thousand shares have been retired, leaving 153 thousand shares remaining to be repurchased under the plan.  There were no shares repurchased during 2014 or 2013.  The Company currently has no plans on repurchasing its common stock.

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Item 6.  Selected Financial Data:

The information under the caption, “Selected Consolidated Financial Data,” in the Company’s Annual Report to Shareholders for the year ended December 31, 2014, is incorporated by reference herein.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations:

The information under the caption, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report to Shareholders for the year ended December 31, 2014, is incorporated by reference herein.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk:

The information under the caption, “Market Risk,” in the Company’s Annual Report to Shareholders for the year ended December 31, 2014, is incorporated by reference herein.

Item 8.  Financial Statements and Supplementary Data:

The Financial Statements and Notes to Consolidated Financial Statements in the Company’s Annual Report to Shareholders for the year ended December 31, 2014, are incorporated by reference herein.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure:  None

Item 9A.  Controls and Procedures:

(a)         Evaluation of disclosure controls and procedures:

Based on their evaluation, as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)         Management’s Report on Internal Control Over Financial Reporting:

The information under the caption, “Management’s Report on Internal Control Over Financial Reporting,” in the Company’s Annual Report to Shareholders for the year ended December 31, 2014, is incorporated by reference herein.

(c)         Changes in internal controls:

There were not any significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 9B.  Other Information: 

None

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PART III

Item 10.  Directors, Executive Officers and Corporate Governance; Compliance with Section 16(a) of the Exchange Act:

The information concerning the directors and executive officers of the Company under the caption “Election of Directors,” and the information under the captions, “Compliance with Section 16(a) of the Securities Exchange Act of 1934,” and, "Governance of the Company," in the Proxy Statement for the Company’s 2015 Annual Meeting of Shareholders, is incorporated by reference herein.  It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2015.

Also, refer to the information under the caption, “Executive Officers of Registrant,” in Part I of this Annual Report on Form 10-K for a description of the Company’s executive officers, who are not also directors.

Item 11.  Executive Compensation:

The information concerning executive compensation under the caption, “Executive Compensation,” in the Proxy Statement for the Company’s 2015 Annual Meeting of Shareholders, is incorporated by reference herein.  It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2015.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters:

The information concerning the security ownership of certain beneficial owners and management under the caption, “Security Ownership of Certain Beneficial Owners and Management,” in the Proxy Statement for the Company’s 2015 Annual Meeting of Shareholders is incorporated by reference herein.  It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2015.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information with respect to the equity securities that are authorized for issuance under the Company’s compensation plans as of December 31, 2014.

Equity Compensation Plan Information
	Number of securities to be issued upon exercise of outstanding options, warrants and rights (A)		Weighted-average exercise price of outstanding options, warrants and rights (B)		Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (A)) (C)
Equity compensation stock option plans approved by security holders		418,921	$	6.76		49,192
Equity compensation plans approved by security holders (Restricted stock plan)		77,750		-		214,500
Equity compensation plans not approved by security holders		N/A		N/A		N/A
Total		496,671	$	5.70		263,692

There were no share repurchases during 2014 or 2013.  

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Item 13.  Certain Relationships and Related Transactions and Director Independence:

The information concerning certain relationships and related transactions under the caption, “Interest of Management and Others in Certain Transactions; Review, Approval or Ratification of Transactions with Related Persons,” in the Proxy Statement for the Company’s 2015 Annual Meeting of Shareholders is incorporated by reference herein.  It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2015.

Item 14.  Principal Accountant Fees and Services:

The information concerning principal accountant fees and services, as well as related pre-approval policies, under the caption, “Independent Registered Public Accounting Firm,” in the Proxy Statement for the Company’s 2015 Annual Meeting of Shareholders is incorporated by reference herein.  It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2015.

PART IV

Item 15.  Exhibits and Financial Statement Schedules:

a) FINANCIAL STATEMENTS:

The following Consolidated Financial Statements of the Company and subsidiaries included in the Company’s Annual Report to Shareholders for the year ended December 31, 2014, are incorporated by reference in Part II, Item 8.

· Report of Independent Registered Public Accounting Firm

· Consolidated Balance Sheets

· Consolidated Statements of Income

· Consolidated Statements of Comprehensive Income

· Consolidated Statements of Changes in Shareholders’ Equity

· Consolidated Statements of Cash Flows

· Notes to Consolidated Financial Statements

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a) EXHIBITS:

Exhibit Number	Description of Exhibits
3(i)	Certificate of Incorporation of the Company, as amended (2)
3(ii)	Bylaws of the Company (7)
4(i)	Form of Stock Certificate (7)
10(i)	1994 Stock Option Plan (1)
10(ii)	1997 Stock Option Plan (3)
10(iii)	1998 Stock Option Plan (4)
10(iv)	1999 Stock Option Plan (5)
10(v)	Employment Agreement dated March 23, 2004 with James A. Hughes (8)
10(vi)	Retention Agreement dated September 18, 2014 with Alan J. Bedner (15)
10(vii)	Retention Agreement dated September 18, 2014 with John Kauchak (15)
10(viii)	Retention Agreement dated September 18, 2014 with Janice Bolomey (15)
10(ix)	2002 Stock Option Plan (6)
10(x)	Second Amendment dated September 19, 2003 to Lease Agreement between Unity Bank and Clinton Unity Group (8)
10(xi)	Real Estate Purchase Agreement dated October 23, 2003 between Unity Bank and Premiere Development II, LLC   (8)
10(xii)	2004 Stock Bonus Plan (9)
10(xiii)	2006 Stock Option Plan (10)
10(xiv)	Third Amendment to Lease by and between Clinton Unity Group, LLC and Unity Bank dated July 31, 2009 (11)
10(xv)	2011 Stock Option Plan and 2011 Stock Bonus Plan (12)
10(xvi)	2013 Stock Bonus Plan (13)
10(xvii)	Fourth Amendment to Lease by and between Clinton Unity Group, LLC and Unity Bank dated January 30, 2014 (14)
13	Portion of Unity Bancorp. Inc. 2014 Annual Report to Shareholders
21	Subsidiaries of the Registrant
23.1	Consent of McGladrey LLP
31.1	Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of President, Chief Executive Officer, and Chief Financial Officer pursuant to Section 906
99.1	Certification of President and Chief Executive Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008
99.2	Certification of Chief Financial Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document

(1)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Registration Statement on Form S-4 (File No. 33-76392) and incorporated by reference herein.
(2)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K filed on July 22, 2002 and incorporated by reference herein.
(3)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Proxy Statement for the Annual Meeting of Shareholders filed on April 4, 1997.
(4)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Proxy Statement for the Annual Meeting of Shareholders filed on March 30, 1998.
(5)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Proxy Statement for the Annual Meeting of Shareholders filed on April 2, 1999.
(6)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Proxy Statement for the Annual Meeting of Shareholders filed on April 10, 2002.
(7)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Annual Report on Form 10-K filed March 26, 2003.

21

(8)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Annual Report on Form 10-K filed March 26, 2004.
(9)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Proxy Statement for the Annual Meeting of Shareholders filed on April 15, 2004.
(10)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Proxy Statement for the Annual Meeting of Shareholders filed on May 4, 2006.
(11)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K filed on August 4, 2009 and incorporated by reference herein.
(12)	Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on May 26, 2011 and incorporated by reference herein.
(13)	Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on July 12, 2013 and incorporated by reference herein.
(14)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K filed on February 4, 2014 and incorporated by reference herein.
(15)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Annual Report on Form 10-K filed September 18, 2014

b) Not applicable

22

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITY BANCORP, INC.

By:	/s/   Alan J. Bedner , Jr.
	Alan J. Bedner, Jr.
	Executive Vice President
	Chief Financial Officer
Date:	March 16, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ David D. Dallas	Chairman of the Board and Director	March 16, 2015
David D. Dallas
/s/ James A. Hughes	President, Chief Executive Officer and Director	March 16, 2015
James A. Hughes
/s/ Alan J. Bedner, Jr.	Chief Financial Officer	March 16, 2015
Alan J. Bedner, Jr.	(Principal Financial and Accounting Officer)
/s/ Dr. Mark S. Brody	Director	March 16, 2015
Dr. Mark S. Brody
/s/ Wayne Courtright	Director	March 16, 2015
Wayne Courtright
/s/ Robert H. Dallas, II	Director	March 16, 2015
Robert H. Dallas, II
/s/ Mary E. Gross	Director	March 16, 2015
Mary E. Gross
/s/ Dr. Austin H. Kutscher, Jr.	Director	March 16, 2015
Dr. Austin S. Kutcher
/s/ Peter E. Maricondo	Director	March 16, 2015
Peter E. Maricondo
/s/ Raj Patel	Director	March 16, 2015
Raj Patel
/s/ Donald E. Souders, Jr.	Director	March 16, 2015
Donald E. Souders, Jr.
/s/ Allen Tucker	Director	March 16, 2015
Allen Tucker

23

EX-13

EXHIBIT 13

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and Notes relating thereto included herein.  When necessary, reclassifications have been made to prior period data for purposes of comparability with current period presentation without impacting earnings.  

Overview

Unity Bancorp, Inc. (the “Parent Company”) is a bank holding company incorporated in New Jersey and is registered under the Bank Holding Company Act of 1956, as amended.  Its wholly-owned subsidiary, Unity Bank (the “Bank” or, when consolidated with the Parent Company, the “Company”) is chartered by the New Jersey Department of Banking and Insurance.  The Bank provides a full range of commercial and retail banking services through the Internet and its fifteen branch offices located in Hunterdon, Somerset, Middlesex, Union and Warren counties in New Jersey, and Northampton County in Pennsylvania.  These services include the acceptance of demand, savings, and time deposits and the extension of consumer, real estate, Small Business Administration (“SBA”) and other commercial credits.

Results of Operations

Net income available to common shareholders totaled $6.4 million, or $0.81 per diluted share for the year ended December 31, 2014, compared to $4.1 million, or $0.53 per diluted share for the year ended December 31, 2013.  The 55.3 percent increase in net income available to common shareholders was the product of strategic initiatives, which include expansion of in-market loan and retail deposit relationships, improving credit quality and core earnings growth.  In addition, during 2013 the Company redeemed the $20.6 million in preferred stock and repurchasedthe warrant to purchase 764,778 common shares issued in connection with participation in the Treasury’s Capital Purchase Program (“CPP”).  The redemption of the preferred stock eliminated the related dividend expense and discount accretion.

Highlights for the year include:

· 12.2 percent increase in total loans driven by a 28.1 percent increase in consumer loans, 21.3 percent increase in residential mortgage loans and a 10.6 percent increase in commercial loans.

· 7.5 percent increase in total deposits with a 12.7 percent increase in savings deposits and a 12.3 percent increase in noninterest-bearing demand deposits.

· Core earnings growth with a 9.8 percent increase in net interest income due to strong growth in commercial, residential mortgage and consumer loan volume. 

· Stable net interest margin of 3.53 percent for 2014 and 2013.

· Continued expense management in 2014.  Expense increases included promotional advertising, product enhancements and expansion of the commercial loan staff.

· Credit quality improved primarily due to a 25.6 percent decrease in nonperforming loans.

· Completed common stock rights offering which was oversubscribed and resulted in $6.1 million in additional capital to provide for continued growth.

The Company's performance ratios for the past two years are listed in the following table:

	For the years ended December 31,
	2014			2013
Net income per common share - Basic (1)	$	0.82		$	0.55
Net income per common share - Diluted (1)	$	0.81		$	0.53
Return on average assets		0.70	%		0.61	%
Return on average equity (2)		10.28	%		7.22	%
Efficiency ratio (3)		67.90	%		71.34	%

(1) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by weighted average shares outstanding.

(2) Defined as net income adjusted for dividends accrued and accretion of discount on perpetual preferred stock divided by average shareholders' equity (excluding preferred stock).

(3) Defined as noninterest expense divided by the sum of net interest income plus noninterest income less any gains or losses on securities.

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Net Interest Income

The primary source of the Company’s operating income is net interest income, which is the difference between interest and dividends earned on earning assets and fees earned on loans, and interest paid on interest-bearing liabilities.  Earning assets include loans to individuals and businesses, investment securities, interest-earning deposits and federal funds sold.  Interest-bearing liabilities include interest-bearing checking, savings and time deposits, Federal Home Loan Bank advances and other borrowings.  Net interest income is determined by the difference between the yields earned on earning assets and the rates paid on interest-bearing liabilities (“net interest spread”) and the relative amounts of earning assets and interest-bearing liabilities.  The Company’s net interest spread is affected by regulatory, economic and competitive factors that influence interest rates, loan demand, deposit flows and general levels of nonperforming assets.

Tax-equivalent net interest income amounted to $30.3 million in 2014, an increase of $2.7 million from $27.6 million in 2013.  The Company’s net interest margin remained flat at 3.53 percent in 2014 when compared to 2013.  The net interest spread was 3.35 percent, an increase of 1 basis point from 3.34 percent in 2013.

During 2014, tax-equivalent interest income was $37.6 million, an increase of $3.4 million or 10.0 percent when compared to 2013.  This increase was driven primarily by the increase in the average volume of loans:

· Of the $3.4 million increase in interest income on a tax-equivalent basis, $3.7 million of the increase was due primarily to the increased volume of average loans, partially offset by a $298 thousand decrease in yields on average interest-earning assets.

· The yield on interest-earning assets remained relatively flat at 4.38 percent in 2014 when compared to 2013. 

· The average volume of interest-earning assets increased $74.9 million to $858.5 million in 2014 compared to $783.7 million in 2013.  This was due primarily to an $85.9 million increase in average loans, primarily commercial and residential mortgage loans, and a $4.9 million increase in federal funds sold and interest-bearing deposits, partially offset by a $15.9 million decrease in average investment securities.

Total interest expense was $7.3 million in 2014, an increase of $777 thousand or 11.9 percent compared to 2013.  This increase was driven by the increased average volume of interest-bearing liabilities, partially offset by the continued low overall interest rate environment:

· Of the $777 thousand increase in interest expense, $938 thousand of the increase was due to an increase in the volume of average interest-bearing liabilities, primarily time deposits.

· The average cost of interest-bearing liabilities remained flat at 1.03 percent in 2014 when compared to 2013.  The cost of interest-bearing deposits increased 5 basis points to 0.66 percent and the cost of borrowed funds and subordinated debentures remained flat at 3.55 percent in 2014.

· Interest-bearing liabilities averaged $706.3 million in 2014, an increase of $72.5 million or 11.4 percent, compared to 2013.  The increase in interest-bearing liabilities was a result of an increase in average time deposits and interest-bearing demand deposits, partially offset by a decrease in average savings deposits.

Net interest income continues to be impacted by the sustained low interest rate environment.  The Federal Open Market Committee (“FOMC”) of the Federal Reserve Board forecasts the overnight federal funds rate will continue to remain at 25 basis points through late 2015.  This rate environment has resulted in a tighter net interest margin as earning assets continue to re-price at lower rates.  Partially offsetting these declines are lower funding costs; however, the reduction in yield on earning assets is anticipated to exceed the benefits of further declines in the cost of funds from already low levels.

The following table reflects the components of net interest income, setting forth for the periods presented herein: (1) average assets, liabilities and shareholders’ equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) net interest spread, and (5) net interest income/margin on average earning assets.  Rates/yields are computed on a fully tax-equivalent basis, assuming a federal income tax rate of 34 percent.

25

Consolidated Average Balance Sheets

(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)

For the years ended December 31,	2014							2013
	Average balance		Interest		Rate/Yield			Average balance		Interest		Rate/Yield
ASSETS
Interest-earning assets:
Federal funds sold and interest-bearing deposits	$	44,900	$	44		0.10	%	$	39,971	$	39		0.10	%
Federal Home Loan Bank stock		3,972		165		4.15			4,007		159		3.97
Securities:
Taxable		81,334		2,183		2.68			93,132		2,443		2.62
Tax-exempt		14,493		526		3.63			18,587		681		3.66
Total securities (A)		95,827		2,709		2.83			111,719		3,124		2.79
Loans, net of unearned discount:
SBA loans		53,232		2,467		4.63			60,891		2,660		4.37
SBA 504 loans		33,754		1,676		4.97			37,920		1,911		5.04
Commercial loans		379,327		19,329		5.10			328,229		17,322		5.28
Residential mortgage loans		196,333		8,898		4.53			155,237		7,013		4.52
Consumer loans		51,188		2,301		4.50			45,705		1,947		4.26
Total loans (B)		713,834		34,671		4.86			627,982		30,853		4.92
Total interest-earning assets	$	858,533	$	37,589		4.38	%	$	783,679	$	34,175		4.37	%
Noninterest-earning assets:
Cash and due from banks		27,021							22,728
Allowance for loan losses		(13,124)							(14,423)
Other assets		44,312							41,688
Total noninterest-earning assets		58,209							49,993
Total assets	$	916,742						$	833,672
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	125,706	$	430		0.34	%	$	118,289	$	383		0.32	%
Savings deposits		274,395		856		0.31			277,891		710		0.26
Time deposits		214,984		2,777		1.29			146,115		2,191		1.50
Total interest-bearing deposits		615,085		4,063		0.66			542,295		3,284		0.61
Borrowed funds and subordinated debentures		91,230		3,243		3.55			91,475		3,245		3.55
Total interest-bearing liabilities	$	706,315	$	7,306		1.03	%	$	633,770	$	6,529		1.03	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		144,310							130,768
Other liabilities		3,764							3,164
Total noninterest-bearing liabilities		148,074							133,932
Total shareholders' equity		62,353							65,970
Total liabilities and shareholders' equity	$	916,742						$	833,672
Net interest spread			$	30,283		3.35	%			$	27,646		3.34	%
Tax-equivalent basis adjustment				(171)							(221)
Net interest income			$	30,112						$	27,425
Net interest margin						3.53	%						3.53	%

(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.

26

2012							2011							2010
Average balance		Interest		Rate/Yield			Average balance		Interest		Rate/Yield			Average balance		Interest		Rate/Yield
$	49,355	$	72		0.15	%	$	50,574	$	61		0.12	%	$	35,349	$	87		0.25	%
	4,015		189		4.71			4,120		183		4.44			4,646		235		5.06
	100,365		2,823		2.81			99,825		3,537		3.54			137,475		5,205		3.79
	15,455		701		4.54			12,750		672		5.27			5,005		297		5.93
	115,820		3,524		3.04			112,575		4,209		3.74			142,480		5,502		3.86
	68,536		3,430		5.00			82,177		4,665		5.68			95,353		5,264		5.52
	46,153		2,645		5.73			58,010		3,482		6.00			66,767		4,305		6.45
	299,820		16,982		5.66			284,183		17,492		6.16			285,771		18,130		6.34
	134,214		6,445		4.80			133,477		7,107		5.32			132,414		7,684		5.80
	46,487		2,144		4.61			51,830		2,542		4.90			58,200		2,926		5.03
	595,210		31,646		5.31			609,677		35,288		5.79			638,505		38,309		6.00
$	764,400	$	35,431		4.63	%	$	776,946	$	39,741		5.12	%	$	820,980	$	44,133		5.38	%
	16,665							16,105							20,672
	(16,458)							(16,198)							(14,667)
	39,625							40,528							41,817
	39,832							40,435							47,822
$	804,232						$	817,381						$	868,802
$	108,825	$	486		0.45	%	$	103,574	$	571		0.55	%	$	100,729	$	737		0.73	%
	282,115		1,185		0.42			287,769		2,202		0.77			289,156		2,829		0.98
	138,233		2,796		2.02			166,836		4,067		2.44			216,488		6,173		2.85
	529,173		4,467		0.84			558,179		6,840		1.23			606,373		9,739		1.61
	90,473		3,307		3.66			90,465		3,711		4.10			101,449		4,296		4.23
$	619,646	$	7,774		1.25	%	$	648,644	$	10,551		1.63	%	$	707,822	$	14,035		1.98	%
	106,412							93,875							87,684
	3,335							3,607							4,174
	109,747							97,482							91,858
	74,839							71,255							69,122
$	804,232						$	817,381						$	868,802
		$	27,657		3.38	%			$	29,190		3.49	%			$	30,098		3.40	%
			(228)							(218)							(98)
		$	27,429						$	28,972						$	30,000
					3.62	%						3.76	%						3.67	%

27

The rate volume table below presents an analysis of the impact on interest income and expense resulting from changes in average volume and rates over the periods presented.  Changes that are not solely due to volume or rate variances have been allocated proportionally to both, based on their relative absolute values.  Amounts have been computed on a tax-equivalent basis, assuming a federal income tax rate of 34 percent.

	For the years ended December 31,
	2014 versus 2013						2013 versus 2012
	Increase (decrease) due to change in:						Increase (decrease) due to change in:
(In thousands on a tax-equivalent basis)	Volume		Rate		Net		Volume		Rate		Net
Interest income:
Federal funds sold and interest-bearing deposits	$	5	$	-	$	5	$	(12)	$	(21)	$	(33)
Federal Home Loan Bank stock		(1)		7		6		-		(30)		(30)
Securities		(464)		49		(415)		(67)		(333)		(400)
Net loans		4,172		(354)		3,818		1,658		(2,451)		(793)
Total interest income	$	3,712	$	(298)	$	3,414	$	1,579	$	(2,835)	$	(1,256)
Interest expense:
Interest-bearing demand deposits	$	23	$	24	$	47	$	42	$	(145)	$	(103)
Savings deposits		(8)		154		146		(18)		(457)		(475)
Time deposits		925		(339)		586		151		(756)		(605)
Total interest-bearing deposits		940		(161)		779		175		(1,358)		(1,183)
Borrowed funds and subordinated debentures		(2)		-		(2)		38		(100)		(62)
Total interest expense		938		(161)		777		213		(1,458)		(1,245)
Net interest income - fully tax-equivalent	$	2,774	$	(137)	$	2,637	$	1,366	$	(1,377)	$	(11)
Decrease in tax-equivalent adjustment						50						7
Net interest income					$	2,687					$	(4)

Provision for Loan Losses

The provision for loan losses totaled $2.6 million for 2014, an increase of $200 thousand  compared to $2.4 million for 2013.  Each period’s loan loss provision is the result of management’s analysis of the loan portfolio and reflects changes in the size and composition of the portfolio, the level of net charge-offs, delinquencies, current economic conditions and other internal and external factors impacting the risk within the loan portfolio.  Additional information may be found under the captions “Financial Condition - Asset Quality” and “Financial Condition - Allowance for Loan Losses and Unfunded Loan Commitments.”  The current provision is considered appropriate based upon management’s assessment of the adequacy of the allowance for loan losses.

Noninterest Income

The following table shows the components of noninterest income for the past two years:

	For the years ended December 31,
(In thousands)	2014		2013
Branch fee income	$	1,469	$	1,505
Service and loan fee income		1,260		1,370
Gain on sale of SBA loans held for sale, net		975		628
Gain on sale of mortgage loans, net		1,139		1,650
Bank owned life insurance ("BOLI") income		559		347
Net security gains		433		390
Other income		844		714
Total noninterest income	$	6,679	$	6,604

Noninterest income was $6.7 million for 2014, a $75thousand increase compared to $6.6 million for 2013.  This increase was driven primarily by higher levels of gains on the sale of SBA loans and increased BOLI income due to a death benefit, partially offset by lowerlevels of gains on the sale of residential mortgage loans. 

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Changes in noninterest income reflect:

· Branch fee income, which consists of deposit service charges and overdraft fees, decreased $36 thousand from the prior year, primarily due to a lower volume of overdraft fees.

· Service and loan fee income decreased $110 thousand in 2014, due to lower SBA loan servicing income as the volume of serviced loans declined, reduced late charges, payoff and prepayment penalties, partially offset by increased processing fees. 

· Net gains on the sale of SBA loans increased $347 thousand to $975 thousand in 2014 due to a higher volume of loan sales.  In 2014, $10.4 million in SBA loans were sold compared to $6.3 million in the prior year.

· Net gains on sales of residential mortgage loans decreased $511 thousand in 2014 due to a lower volume of loan sales.  In 2014, $59.2 million in residential mortgage loans were sold compared to $78.4 million in 2013.

· BOLI income increased $212 thousand to $559 thousand in 2014 compared to $347 thousand in 2013.  This increase was a result of proceeds received due to a death benefit.

· Net gains on the sale of securities totaled $433 thousand and $390 thousand in 2014 and 2013, respectively.  For additional information on securities, see Note 3 to the Consolidated Financial Statements.

· Other income totaled $844 thousand and $714 thousand in 2014 and 2013, respectively, which includes check card related income and miscellaneous service charges, primarily due to increases in Visa check card interchange fees and OREO rental income.

Noninterest Expense

The following table presents a breakdown of noninterest expense for the past two years:

	For the years ended December 31,
(In thousands)	2014		2013
Compensation and benefits	$	12,750	$	12,251
Occupancy		2,478		2,571
Processing and communications		2,461		2,309
Furniture and equipment		1,510		1,478
Professional services		748		828
Loan costs		780		822
Other real estate owned ("OREO")		485		458
Deposit insurance		677		666
Advertising		998		747
Other expenses		1,801		1,867
Total noninterest expense	$	24,688	$	23,997

Noninterest expense totaled $24.7 million for the year ended December 31, 2014, an increase of $691 thousand when compared to $24.0 million in 2013.   

Changes in noninterest expense reflect:

· Compensation and benefits expense, the largest component of noninterest expense, increased $499 thousand for the year ended December 31, 2014, when compared to the same period in 2013.  The increase was primarily due to higher salary expense as the Company expanded the commercial lending staffand realized increased benefits costs such as medical insurance.

· Occupancy expense decreased $93 thousand in 2014, when compared to 2013 due to lower rental expense and leasehold improvement depreciation as a result of purchasing three previously leased locations.  Partially offsetting these reductions were increased landscaping, snow removal, building depreciation, and property tax expenses.

· Processing and communications expenses increased $152 thousand in 2014 as the Company continued to add and enhance products and services, such as electronic banking, online bill payment, and ATM/debit cards to remain competitive.  In addition, it includes the associated rise in data processing costs of the core banking system and electronic access expenses such as communication line costs.

· Furniture and equipment expense increased $32 thousand in 2014, due to rising costs of technology such as computer network and software maintenance costs, partially offset by lower depreciation expense on capital investments such as equipment and furniture.

· Professional service fees decreased $80 thousand in 2014.  This expense includes costs such as consulting, legal expense, audit and tax preparation expense.

· Loan costs decreased $42 thousand in 2014, primarily due to lower forced place insurance, appraisal expenses and loan legal collections expenses, partially offset by increased mortgage servicing expense due to a higher volume of loans. 

· OREO costs, such as losses on sales, property taxes, and maintenance expenses, increased $27 thousand in 2014 when compared to 2013.

· Deposit insurance expense remained relatively flat with expenses of $677 thousand and $666 thousand in 2014 and 2013, respectively.

29

· Advertising expenses, such as promotional activities and events, increased $251 thousand for the year ended December 31, 2014 due to the use of television and radio media, core deposit promotional expenses as well as seasonal involvement in various community events.

· Other expenses decreased $66 thousand in 2014, primarily due to lower recruiting expense and printing expense, partially offset by higher retail losses.

Income Tax Expense

For 2014, the Company reported income tax expense of $3.1 million for an effective tax rate of 32.9 percent, compared to an income tax expense of $2.6 million and an effective tax rate of 33.4 percent in 2013.  The effective tax rate declined due to state tax planning.  For additional information on income taxes, see Note 15 to the Consolidated Financial Statements.

Financial Condition

Total assets increased $87.7 million or 9.5 percent, to $1.0billion at December 31, 2014, compared to $921.1 million at December 31, 2013. This increase was primarily due to increases of $83.1 million in loans and $30.4 million in cash and cash equivalents, partially offset bya $27.4 million decrease in securities.

Total deposits increased $55.6 million, due to increases of $33.8 million in savings deposits, $16.8 million in noninterest-bearing demand deposits, and $7.0 million intime deposits, partially offset by a decrease of $1.9 million in interest-bearing demand deposits. Borrowed funds and subordinated debentures increased $18.0 million due to an overnight borrowing at December 31, 2014 of $50.0 million compared to $32.0 million in 2013.  

Total shareholders’ equity increased $13.0 million from year-end 2013, primarily due to net income from operations and $6.1 million in proceeds from a common stockrights offering. Net income was $6.4 million for the year ended December 31, 2014, an increase of $2.3 million from the prior year.  Other changes in shareholders’ equity included an increase in other comprehensive income net of tax of $619 thousand and stock-based transactions of $537 thousand, partially offset by common stock dividends paid in 2014 of $757 thousand.

These fluctuations are discussed in further detail in the sections that follow. 

Securities

The Company’s securities portfolio consists of available for sale (“AFS”) and held to maturity (“HTM”) investments.  Management determines the appropriate security classification of available for sale or held to maturity at the time of purchase.  The investment securities portfolio is maintained for asset-liability management purposes, as well as for liquidity and earnings purposes.

AFS securities are investments carried at fair value that may be sold in response to changing market and interest rate conditions or for other business purposes.  Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk, to take advantage of market conditions that create economically attractive returns and as an additional source of earnings.  AFS securities consist primarily of obligations of U.S. Government sponsored entities, obligations of state and political subdivisions, mortgage-backed securities, and corporate and other securities.

AFS securities totaled $60.1 million at December 31, 2014, a decrease of $21.1 million or 26.0 percent, compared to $81.1 million at December 31, 2013.  This net decrease was the result of:

· $21.7 million in sales, net of realized gains, which consisted of municipal securities, mortgage-backed securities, agency securities, corporate bonds, and asset-backed securities,

· $9.9 million in principal payments, maturities and called bonds, and

· $461 thousand in net amortization of premiums, partially offset by

· $1.0 million of appreciation in the market value of the portfolio.  At December 31, 2014, the portfolio had net unrealized gains of $235 thousand compared to net unrealized losses of $778 thousand at December 31, 2013.  These net unrealized gains (losses) are reflected net of tax in shareholders’ equity as accumulated other comprehensive income, and

· $9.9 million in purchases, primarily of mortgage-backed securities, one agency security, and one corporate bond.

The weighted average life of AFS securities, adjusted for prepayments, amounted to 4.0 years and 5.4 years at December 31, 2014 and 2013, respectively.   

HTM securities, which are carried at amortized cost, are investments for which there is the positive intent and ability to hold to maturity.  The portfolio is comprised of obligations of U.S. Government sponsored entities, obligations of state and political subdivisions, mortgage-backed securities, and corporate and other securities.

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HTM securities were $20.0 million at December 31, 2014, a decrease of $6.4 million or 24.2 percent, from year-end 2013.  This net decrease was the result of:

· $6.6 million in principal payments and maturities and

· $91 thousand in net amortization of premiums, partially offset by

· $308 thousand in the purchase of one municipal security.

The weighted average life of HTM securities, adjusted for prepayments, amounted to 6.4 years and 8.5 years at December 31, 2014 and 2013, respectively.  As of December 31, 2014 and December 31, 2013, the fair value of HTM securities was $20.3 million and $25.5 million, respectively. 

The average balance of taxable securities amounted to $81.3 million in 2014 compared to $93.1 million in 2013.  The average yield earned on taxable securities increased 6 basis points to 2.68 percent in 2014, from 2.62 percent in 2013.  The average balance of tax-exempt securities amounted to $14.5 million in 2014 compared to $18.6 million in 2013.  The average yield earned on tax-exempt securities decreased 3 basis points to 3.63 percent in 2014, from 3.66 percent in 2013. 

Securities with a carrying value of $50.4 million and $74.5 million at December 31, 2014 and December 31, 2013, respectively, were pledged to secure Government deposits, secure other borrowings and for other purposes required or permitted by law.

Approximately 88 percent of the total investment portfolio had a fixed rate of interest at December 31, 2014 and 2013.

For additional information on securities, see Note 3 to the Consolidated Financial Statements.

Loans

The loan portfolio, which represents the Company’s largest asset group, is a significant source of both interest and fee income.  The portfolio consists of SBA, SBA 504, commercial, residential mortgage and consumer loans.  Each of these segments is subject to differing levels of credit and interest rate risk.

Total loans increased $83.1 million or 12.2 percent to $761.8 million at December 31, 2014, compared to $678.7 million at year-end 2013.  Residential mortgages, commercial loans, consumer loans, and SBA 504 increased $38.8 million, $38.6 million, $13.0 million and $2.8 million, respectively, partially offset by a decline of $10.0 million in SBA loans.

The following table sets forth the classification of loans by major category, including unearned fees, deferred costs and excluding the allowance for loan losses at December 31st for the past five years:

	2014					2013					2012					2011					2010
(In thousands, except percentages)	Amount		% of total			Amount		% of total			Amount		% of total			Amount		% of total			Amount		% of total
Ending balance:
SBA loans held for investment	$	40,401		5.3	%	$	48,918		7.2	%	$	58,593		10.0	%	$	64,175		10.8	%	$	75,741		12.3	%
SBA 504 loans		34,322		4.5			31,564		4.7			41,438		7.1			55,108		9.3			64,276		10.4
Commercial loans		401,949		52.7			363,340		53.5			301,564		51.3			283,104		47.8			281,205		45.7
Residential mortgage loans		220,878		29.0			182,067		26.8			132,094		22.5			134,090		22.6			128,400		20.8
Consumer loans		59,096		7.8			46,139		6.8			46,410		7.9			48,447		8.2			55,917		9.1
Total loans held for investment		756,646		99.3			672,028		99.0			580,099		98.8			584,924		98.7			605,539		98.3
SBA loans held for sale		5,179		0.7			6,673		1.0			6,937		1.2			7,668		1.3			10,397		1.7
Total loans	$	761,825		100.0	%	$	678,701		100.0	%	$	587,036		100.0	%	$	592,592		100.0	%	$	615,936		100.0	%

Average loans increased $85.9 million or13.7 percent from $628.0 million in 2013, to $713.8 million in 2014.  The increase in average loans was due to increases incommercial loans, residential mortgages, and consumer loans partially offset by a decrease in SBA and SBA 504 loans.  The yield on the overall loan portfolio fell 6 basis points to 4.86 percent for the year ended December 31, 2014, compared to 4.92 percent for the prior year.

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SBA 7(a) loans, on which the SBA historically has provided guarantees of up to 90 percent of the principal balance, are considered a higher risk loan product for the Company than its other loan products.  These loans are made for the purposes of providing working capital, financing the purchase of equipment, inventory or commercial real estate.  Generally, an SBA 7(a) loan has a deficiency in its credit profile that would not allow the borrower to qualify for a traditional commercial loan, which is why the SBA provides the guarantee.  The deficiency may be a higher loan to value (“LTV”) ratio, lower debt service coverage (“DSC”) ratio or weak personal financial guarantees.  In addition, many SBA 7(a) loans are for start up businesses where there is no historical financial information.  Finally, many SBA borrowers do not have an ongoing and continuous banking relationship with the Bank, but merely work with the Bank on a single transaction.  The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the nonguaranteed portion held in the portfolio as a loan held for investment.  

SBA 7(a) loans held for sale, carried at the lower of cost or market, amounted to $5.2 million at December 31, 2014, a decrease of $1.5 million from December 31, 2013.  SBA 7(a) loans held for investment amounted to $40.4 million at December 31, 2014, a decrease of $8.5 million from $48.9 million at December 31, 2013.  The yield on SBA loans, which are generally floating and adjust quarterly to the Prime Rate, was 4.63 percent for the year ended December 31, 2014, compared to 4.37 percent in the prior year.

The guarantee rates on SBA 7(a) loans range from 50 percent to 90 percent, with the majority of the portfolio having a guarantee rate of 75 percent at origination.  The guarantee rates are determined by the SBA and can vary from year to year depending on government funding and the goals of the SBA program.  The carrying value of SBA loans held for sale represents the guaranteed portion to be sold into the secondary market.  The carrying value of SBA loans held for investment represents the unguaranteed portion, which is the Company's portion of SBA loans originated, reduced by the guaranteed portion that is sold into the secondary market.  Approximately $92.2 million and $96.4 million in SBA loans were sold but serviced by the Company at December 31, 2014 and December 31, 2013, respectively, and are not included on the Company’s balance sheet.  There is no direct relationship or correlation between the guarantee percentages and the level of charge-offs and recoveries on the Company’s SBA 7(a) loans.  Charge-offs taken on SBA 7(a) loans effect the unguaranteed portion of the loan.  SBA loans are underwritten to the same credit standards irrespective of the guarantee percentage.  

The SBA 504 program consists of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property.  Generally, the Company has a 50 percent LTV ratio on SBA 504 program loans at origination.  At December 31, 2014, SBA 504 loans totaled $34.3 million, an increase of $2.8 million from $31.6 million at December 31, 2013.  The yield on SBA 504 loans was 4.97 percent for the year ended December 31, 2014, compared to 5.04 percent in 2013.

Commercial loans are generally made in the Company’s marketplace for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes.  These loans amounted to $401.9 million at December 31, 2014, an increase of $38.6 million from year-end 2013.  The yield on commercial loans was 5.10 percent for 2014, compared to 5.28 percent in 2013 due to the low rate environment.

Residential mortgage loans consist of loans secured by 1 to 4 family residential properties.  These loans amounted to $220.9 million at December 31, 2014, an increase of $38.8 million from year-end 2013.  Sales of mortgage loans totaled $59.2 million for 2014.  The yield on residential mortgages was 4.53 percent for 2014, compared to 4.52 percent for 2013.

Consumer loans consist of home equity loans and loans for the purpose of financing the purchase of consumer goods, home improvements, and other personal needs, and are generally secured by the personal property being purchased.  These loans amounted to $59.1 million at December 31, 2014, an increase of $13.0 million from December 31, 2013.  This increase was generated primarily by consumer construction loans, a new product the Company offered in 2014.  The yield on consumer loans was 4.50 percent for 2014, compared to 4.26 percent for 2013.

There are no concentrations of loans to any borrowers or group of borrowers exceeding 10 percent of the total loan portfolio and no foreign loans in the portfolio.  As a preferred SBA lender, a portion of the SBA portfolio is to borrowers outside the Company’s lending area.  During late 2008, the Company withdrew from SBA lending outside of its primary trade area, but continues to offer SBA loan products as an additional credit product within its primary trade area.

In the normal course of business, the Company may originate loan products whose terms could give rise to additional credit risk.  Interest-only loans, loans with high LTV ratios, construction loans with payments made from interest reserves and multiple loans supported by the same collateral (e.g. home equity loans) are examples of such products.  However, these products are not material to the Company’s financial position and are closely managed via credit controls that mitigate their additional inherent risk.  Management does not believe that these products create a concentration of credit risk in the Company’s loan portfolio.

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The following table shows the maturity distribution or repricing of the loan portfolio and the allocation of fixed and floating interest rates at December 31, 2014:

-
	December 31, 2014
(In thousands)	One year or less		One to five years		Over five years		Total
SBA loans	$	37,187	$	4,922	$	3,471	$	45,580
SBA 504 loans		5,270		27,548		1,504		34,322
Commercial loans
Commercial other		6,487		10,380		23,740		40,607
Commercial real estate		22,564		213,671		103,458		339,693
Commercial real estate construction		3,551		6,207		11,891		21,649
Total	$	75,059	$	262,728	$	144,064	$	481,851
Amount of loans with maturities or repricing dates greater than one year:
Fixed interest rates							$	127,239
Floating or adjustable interest rates								279,553
Total							$	406,792

For additional information on loans, see Note 4 to the Consolidated Financial Statements.

Troubled Debt Restructurings

Troubled debt restructurings (“TDRs”) occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider.  These concessions typically include reductions in interest rate, extending the maturity of a loan, other modifications of payment terms, or a combination of modifications.  When the Company modifies a loan, management evaluates the loan for any possible impairment using either the discounted cash flows method, where the value of the modified loan is based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or by using the fair value of the collateral less selling costs.  If management determines that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or charge-off to the allowance.  This process is used, regardless of loan type, and for loans modified as TDRs that subsequently default on their modified terms.

At December 31, 2014, there were nine loans totaling $6.5 million that were classified as TDRs by the Company and are deemed impaired, compared to ten loans totaling $7.9 million at December 31, 2013.  Nonperforming loans included $3.0 million of TDRs as of December 31, 2014, compared to $467 thousand at December 31, 2013.  Restructured loans that are placed in nonaccrual status may be removed after six months of contractual payments and evidence of the ability to service the debt going forward.  The remaining TDRs are in accrual status since they are performing in accordance with the restructured terms.  There are no commitments to lend additional funds on these loans.  The following table presents a breakdown of performing and nonperforming TDRs by class as of December 31st for the past two years:

	December 31, 2014						December 31, 2013
(In thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs		Performing TDRs		Nonperforming TDRs		Total TDRs
SBA loans held for investment	$	441	$	295	$	736	$	534	$	467	$	1,001
SBA 504 loans		1,769		-		1,769		1,827		-		1,827
Commercial real estate		1,338		2,665		4,003		5,091		-		5,091
Total	$	3,548	$	2,960	$	6,508	$	7,452	$	467	$	7,919

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Through December 31, 2014, TDRs consisted of interest rate reductions, interest or principal only periods and maturity extensions.  There has been no principal forgiveness.  The following table shows the types of modifications done to date by class through December 31, 2014 for loans still in the portfolio:

	December 31, 2014
(In thousands)	SBA held for investment		SBA 504		Commercial real estate		Total
Type of modification:
Principal only	$	14	$	-	$	-	$	14
Interest only with reduced interest rate		-		-		2,664		2,664
Interest only with nominal principal		24		-		-		24
Interest with extra principal		-		-		1,094		1,094
Previously modified back to original terms		698		1,769		245		2,712
Total TDRs	$	736	$	1,769	$	4,003	$	6,508

For additional information on TDRs, see Note 4 to the Consolidated Financial Statements.

Asset Quality

Inherent in the lending function is credit risk, which is the possibility a borrower may not perform in accordance with the contractual terms of their loan.  A borrower’s inability to pay their obligations according to the contractual terms can create the risk of past due loans and, ultimately, credit losses, especially on collateral deficient loans.  The Company minimizes its credit risk by loan diversification and adhering to strict credit administration policies and procedures.  Due diligence on loans begins when contact is initiated regarding a loan with a borrower.  Documentation, including a borrower’s credit history, materials establishing the value and liquidity of potential collateral, the purpose of the loan, the source of funds for repayment of the loan, and other factors, are analyzed before a loan is submitted for approval.  The loan portfolio is then subject to on-going internal reviews for credit quality, as well as independent credit reviews by an outside firm. 

The risk of loss is difficult to quantify and is subject to fluctuations in collateral values, general economic conditions and other factors.  In some cases, these factors have also resulted in significant impairment to the value of loan collateral.  The Company values its collateral through the use of appraisals, broker price opinions, and knowledge of its local market.

Nonperforming assets consist of nonperforming loans and OREO.  Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt.  When a loan is classified as nonaccrual, interest accruals discontinue and all past due interest previously recognized as income is reversed and charged against current period income.  Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal, until such time as management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income.  Loans past due 90 days or more and still accruing interest are not included in nonperforming loans.  Loans past due 90 days or more and still accruing generally represent loans that are well collateralized and in a continuing process that are expected to result in repayment or restoration to current status.

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The following table sets forth information concerning nonperforming assets and loans past due 90 days or more and still accruing interest at December 31st for the past five years:

(In thousands, except percentages)	2014			2013			2012			2011			2010
Nonperforming by category:
SBA loans held for investment (1)	$	3,348		$	2,746		$	4,633		$	5,859		$	8,162
SBA 504 loans		2,109			1,101			2,562			2,086			2,714
Commercial loans		4,721			4,029			4,445			8,519			5,452
Residential mortgage loans		645			5,727			5,511			6,037			5,085
Consumer loans		545			1,680			317			268			249
Total nonperforming loans (2)	$	11,368		$	15,283		$	17,468		$	22,769		$	21,662
OREO		1,162			633			1,826			3,032			2,346
Total nonperforming assets	$	12,530		$	15,916		$	19,294		$	25,801		$	24,008
Past due 90 days or more and still accruing interest:
SBA loans held for investment	$	161		$	-		$	-		$	246		$	374
SBA 504 loans		-			-			-			-			-
Commercial loans		7			14			109			1,141			-
Residential mortgage loans		722			5			-			36			-
Consumer loans		-			-			-			988			-
Total past due 90 days or more and still accruing interest	$	890		$	19		$	109		$	2,411		$	374
Nonperforming loans to total loans		1.49	%		2.25	%		2.98	%		3.84	%		3.52	%
Nonperforming loans and TDRs to total loans (3)		1.96			3.35			5.29			6.78			5.80
Nonperforming assets to total loans and OREO		1.64			2.34			3.28			4.33			3.88
Nonperforming assets to total assets		1.24			1.73			2.35			3.18			2.93
(1) Guaranteed SBA loans included above	$	1,569		$	540		$	1,849		$	939		$	2,706
(2) Nonperforming TDRs included above		2,960			467			1,087			3,645			-
(3) Performing TDRs		3,548			7,452			13,576			17,436			14,081

Nonperforming loans were $11.4 million at December 31, 2014, a $3.9 million decrease from $15.3 million at year-end 2013.  Since year-end 2013, nonperforming loans in the residential mortgage and consumer loan segments decreased, partially offset by an increase in nonperforming loans in the SBA, SBA 504 and commercial loan segments.  Included in nonperforming loans at December 31, 2014 are approximately $1.6 million of loans guaranteed by the SBA, compared to $540 thousand at December 31, 2013.  In addition, there were $890 thousand in loans past due 90 days or more and still accruing interest at December 31, 2014, compared to $19 thousand at December 31, 2013.

OREO properties totaled $1.2 million at December 31, 2014, anincrease of $529 thousand from $633 thousand at year-end 2013.  During 2014, the Company took title to thirteen properties totaling $4.3 million and recorded valuation adjustments of $295 thousand on two existing OREO properties.  The Company sold ten OREO properties, resulting in a net loss of $282 thousand on the sales.

The Company also monitors potential problem loans.  Potential problem loans are those loans where information about possible credit problems of borrowers causes management to have doubts as to the ability of such borrowers to comply with loan repayment terms.  These loans are not included in nonperforming loans as they continue to perform.  Potential problem loans totaled $3.5 million at December 31, 2014, adecrease of $2.2 million from $5.7 million at December 31, 2013.  The decrease is due to the removal of ten loans totaling $7.9 million during the year, partially offset by the addition of nine loans totaling $5.7 million.

For additional information on asset quality, see Note 4 to the Consolidated Financial Statements.

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Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

Management reviews the level of the allowance for loan losses on a quarterly basis.  The standardized methodology used to assess the adequacy of the allowance includes the allocation of specific and general reserves.  Specific reserves are made to individual impaired loans, which have been defined to include all nonperforming loans and TDRs.  The general reserve is set based upon a representative average historical net charge-off rate adjusted for certain environmental factors such as: delinquency and impairment trends, charge-off and recovery trends, volume and loan term trends, risk and underwriting policy trends, staffing and experience changes, national and local economic trends, industry conditions and credit concentration changes. 

When calculating the five-year historical net charge-off rate, the Company weights the past three years more heavily as it believes they are more indicative of future charge-offs.  All of the environmental factors are ranked and assigned a basis points value based on the following scale: low, low moderate, moderate, high moderate, and high risk.  The factors are evaluated separately for each type of loan.  For example, commercial loans are broken down further into commercial and industrial loans, commercial mortgages, construction loans, etc.  Each type of loan is risk weighted for each environmental factor based on its individual characteristics. 

According to the Company’s policy, a loss (“charge-off”) is to be recognized and charged to the allowance for loan losses as soon as a loan is recognized as uncollectable.  All credits which are 90 days past due must be analyzed for the Company's ability to collect on the credit.  Once a loss is known to exist, the charge-off approval process is immediately expedited.

The allowance for loan losses totaled $12.6 million at December 31, 2014, compared to $13.1 million at December 31, 2013, with resulting allowance to total loan ratios of 1.65 percent and 1.94 percent, respectively.  Net charge-offs amounted to $3.1 million for 2014, compared to $4.0 million for 2013.  The following table is a summary of the changes to the allowance for loan losses for the past five years, including net charge-offs to average loan ratios for each major loan category:

	For the years ended December 31,
(In thousands, except percentages)	2014			2013			2012			2011			2010
Balance, beginning of year	$	13,141		$	14,758		$	16,348		$	14,364		$	13,842
Provision charged to expense		2,550			2,350			4,000			6,800			7,250
Charge-offs:
SBA loans held for investment		1,053			1,076			1,332			2,348			1,351
SBA 504 loans		92			1,193			808			950			1,548
Commercial loans		1,037			1,392			3,504			1,809			3,627
Residential mortgage loans		740			375			824			215			500
Consumer loans		593			588			56			177			245
Total charge-offs		3,515			4,624			6,524			5,499			7,271
Recoveries:
SBA loans held for investment		140			250			518			216			243
SBA 504 loans		-			182			108			77			-
Commercial loans		166			204			306			330			296
Residential mortgage loans		60			17			-			54			-
Consumer loans		9			4			2			6			4
Total recoveries		375			657			934			683			543
Total net charge-offs		3,140			3,967			5,590			4,816			6,728
Balance, end of year	$	12,551		$	13,141		$	14,758		$	16,348		$	14,364
Selected loan quality ratios:
Net charge-offs to average loans:
SBA loans held for investment		1.72	%		1.36	%		1.19	%		2.59	%		1.16	%
SBA 504 loans		0.27			2.67			1.52			1.50			2.32
Commercial loans		0.23			0.36			1.07			0.52			1.17
Residential mortgage loans		0.35			0.23			0.61			0.12			0.38
Consumer loans		1.14			1.28			0.12			0.33			0.41
Total loans		0.44			0.63			0.94			0.79			1.05
Allowance to total loans		1.65			1.94			2.51			2.76			2.33
Allowance to nonperforming loans		110.41			85.98			84.49			71.80			66.31

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The following table sets forth, for each of the major lending categories, the amount of the allowance for loan losses allocated to each category and the percentage of total loans represented by such category, as of December 31st of the past five years.  The allocated allowance is the total of identified specific and general reserves by loan category.  The allocation is not necessarily indicative of the categories in which future losses may occur.  The total allowance is available to absorb losses from any segment of the portfolio.

	2014				2013				2012				2011				2010
(In thousands, except percentages)	Reserve amount		% of loans to total loans		Reserve amount		% of loans to total loans		Reserve amount		% of loans to total loans		Reserve amount		% of loans to total loans		Reserve amount		% of loans to total loans
Balance applicable to:
SBA loans held for investment	$	1,883	5.3	%	$	2,587	7.2	%	$	3,378	10.0	%	$	4,088	10.8	%	$	4,198	12.3	%
SBA 504 loans		1,337	4.5			957	4.7			1,312	7.1			1,423	9.3			1,551	10.4
Commercial loans		6,270	52.7			6,840	53.5			7,091	51.3			8,129	47.8			6,011	45.7
Residential mortgage loans		2,289	29.0			2,132	26.8			1,769	22.5			1,703	22.6			1,679	20.8
Consumer loans		667	7.8			573	6.8			524	7.9			536	8.2			586	9.1
Unallocated		105	-			52	-			684	-			469	-			339	-
Total loans held for investment		12,551	99.3			13,141	99.0			14,758	98.8			16,348	98.7			14,364	98.3
SBA loans held for sale		-	0.7			-	1.0			-	1.2			-	1.3			-	1.7
Total loans	$	12,551	100.0	%	$	13,141	100.0	%	$	14,758	100.0	%	$	16,348	100.0	%	$	14,364	100.0	%

In addition to the allowance for loan losses, the Company maintains a reserve for unfunded loan commitments that is maintained at a level that management believes is adequate to absorb estimated probable losses.  Adjustments to the reserve are made through other expense and applied to the reserve which is maintained in other liabilities.  At December 31, 2014, a $151 thousand commitment reserve was reported on the balance sheet as an “other liability”, compared to a $103 thousand commitment reserve at December 31, 2013.

For additional information on the allowance for loan losses and reserve for unfunded loan commitments, see Note 5 to the Consolidated Financial Statements.

Deposits

Deposits, which include noninterest-bearing demand deposits, interest-bearing demand deposits, savings deposits and time deposits, are the primary source of the Company’s funds.  The Company offers a variety of products designed to attract and retain customers, with primary focus on building and expanding relationships.  The Company continues to focus on establishing a comprehensive relationship with business borrowers, seeking deposits as well as lending relationships.

The following table shows period-end deposits and the concentration of each category of deposits for the past three years:

	2014					2013					2012
(In thousands, except percentages)	Amount		% of total			Amount		% of total			Amount		% of total
Ending balance:
Noninterest-bearing demand deposits	$	152,785		19.2	%	$	136,035		18.4	%	$	114,424		17.6	%
Interest-bearing demand deposits		128,875		16.2			130,806		17.7			114,838		17.7
Savings deposits		300,348		37.9			266,503		36.1			294,533		45.4
Time deposits		212,333		26.7			205,354		27.8			124,965		19.3
Total deposits	$	794,341		100.0	%	$	738,698		100.0	%	$	648,760		100.0	%

Total deposits increased $55.6 million to $794.3 million at December 31, 2014, from $738.7 million at December 31, 2013.  This increase in deposits was due to increases of $33.8 million, $16.8 million and $7.0 million in savings deposits, noninterest-bearing demand deposits and time deposits, respectively, partially offset by a decrease of $1.9 million in interest-bearing demand deposits.

The Company’s deposit composition at December 31, 2014, consisted of 37.9 percent savings deposits, 26.7 percent time deposits, 19.2 percent noninterest-bearing demand deposits and 16.2 percent interest-bearing demand deposits.  This shift in deposit mix from December 31, 2013 reflects a 1.8 percent increase in savings deposits, a 0.8 percent increase in noninterest-bearing demand deposits, offset by a 1.1 percent decrease in time deposits, and a 1.5 decrease in interest-bearing deposits.

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Savings deposits increased due to the Company’s promotion during the third and fourth quarters of 2014 while time deposits have increased in response to the 15 month and 5 year term promotions. The noninterest-bearing demand deposits increase consists of commercial deposit customer relationships.  Total municipal deposits increased $7.3 million from prior year-end, with municipal interest-bearing demand deposits, savings and time deposits increasing.

The following table shows average deposits and the concentration of each category of deposits for the past three years:

	For the years ended December 31,
	2014					2013					2012
(In thousands, except percentages)	Amount		% of total			Amount		% of total			Amount		% of total
Average balance:
Noninterest-bearing demand deposits	$	144,310		19.0	%	$	130,768		19.4	%	$	106,412		16.7	%
Interest-bearing demand deposits		125,706		16.6			118,289		17.6			108,825		17.1
Savings deposits		274,395		36.1			277,891		41.3			282,115		44.5
Time deposits		214,984		28.3			146,115		21.7			138,233		21.7
Total deposits	$	759,395		100.0	%	$	673,063		100.0	%	$	635,585		100.0	%

For additional information on deposits, see Note 8 to the Consolidated Financial Statements.

Borrowed Funds and Subordinated Debentures

Borrowed funds consist primarily of fixed rate advances from the Federal Home Loan Bank (“FHLB”) of New York and repurchase agreements.  These borrowings are used as a source of liquidity or to fund asset growth not supported by deposit generation.  Residential mortgages collateralize the borrowings from the FHLB, while investment securities are pledged against the repurchase agreements.

Borrowed funds and subordinated debentures totaled $140.5 million and $122.5  million at December 31, 2014 and December 31, 2013, respectively, and are broken down in the following table:

(In thousands)	December 31, 2014		December 31, 2013
FHLB borrowings:
Fixed rate advances	$	60,000	$	30,000
Overnight advances		50,000		32,000
Repurchase agreements		-		30,000
Other repurchase agreements		15,000		15,000
Subordinated debentures		15,465		15,465
Total borrowed funds and subordinated debentures	$	140,465	$	122,465

At December 31, 2014, the Company had $36.7 million of additional credit available at the FHLB.  Pledging additional collateral in the form of 1 to 4 family residential mortgages or investment securities can increase the line with the FHLB.

For additional information on borrowed funds and subordinated debentures, see Note 9 to the Consolidated Financial Statements.

Market Risk

Based on the Company’s business, the two largest risks facing the Company are market risk and credit risk.  Market risk for the Company is primarily limited to interest rate risk, which is the impact that changes in interest rates would have on future earnings.  The Company’s Risk Management Committee (“RMC”) manages this risk.  The principal objectives of RMC are to establish prudent risk management guidelines, evaluate and control the level of interest rate risk in balance sheet accounts, determine the level of appropriate risk given the business focus, operating environment, capital, and liquidity requirements, and actively manage risk within Board-approved guidelines.  The RMC reviews the maturities and repricing of loans, investments, deposits and borrowings, cash flow needs, current market conditions, and interest rate levels.

The Company uses various techniques to evaluate risk levels on both a short and long-term basis.  One of the monitoring tools is the “gap” ratio.  A gap ratio, as a percentage of assets, is calculated to determine the maturity and repricing mismatch between interest rate-sensitive assets and interest rate-sensitive liabilities.  A gap is considered positive when the amount of interest rate-sensitive assets repricing exceeds the amount of interest rate-sensitive liabilities repricing in a designated time period.  A positive gap should result in higher net interest income with rising interest rates, as the amount of the assets repricing exceeds the amount of liabilities repricing.  Conversely, a gap is considered negative when the amount of interest rate-sensitive liabilities exceeds interest rate-sensitive assets, and lower rates should result in higher net interest income.

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Repricing of mortgage-related securities are shown by contractual amortization and estimated prepayments based on the most recent 3-month constant prepayment rate.  Callable agency securities are shown based upon their option-adjusted spread modified duration date (“OAS”), rather than the next call date or maturity date.  The OAS date considers the coupon on the security, the time to the next call date, the maturity date, market volatility and current rate levels.  Fixed rate loans are allocated based on expected amortization.

The following table sets forth the gap ratio at December 31, 2014.  Assumptions regarding the repricing characteristics of certain assets and liabilities are critical in determining the projected level of rate sensitivity.  Certain savings and interest checking accounts are less sensitive to market interest rate changes than other interest-bearing sources of funds.  Core deposits such as interest-bearing demand, savings and money market deposits are allocated based on their expected repricing in relation to changes in market interest rates.

				Six			More than			More than			More than			More than
	Under			months			one year			three years			five years			ten years
	six			through			through			through			through			and not
(In thousands, except percentages)	months			one year			three years			five years			ten years			repricing			Total
Assets:
Cash and due from banks	$	-		$	-		$	-		$	-		$	-		$	29,351		$	29,351
Federal funds sold and interest-bearing deposits		100,470			-			-			-			-			-			100,470
Federal Home Loan Bank stock		-			-			-			-			-			6,032			6,032
Securities		16,824			6,164			17,688			13,664			16,642			9,100			80,082
Loans		146,205			63,669			217,669			176,672			129,488			28,122			761,825
Other assets		-			-			-			-			-			31,028			31,028
Total assets	$	263,499		$	69,833		$	235,357		$	190,336		$	146,130		$	103,633		$	1,008,788
Liabilities and shareholders' equity:
Noninterest-bearing demand deposits	$	-		$	-		$	-		$	-		$	-		$	152,785		$	152,785
Savings and interest-bearing demand deposits		205,054			597			87,579			88,474			47,519			-			429,223
Time deposits		38,559			34,082			56,524			83,052			116			-			212,333
Borrowed funds and subordinated debentures		75,000			-			50,000			15,000			-			465			140,465
Other liabilities		-			-			-			-			-			3,859			3,859
Shareholders' equity		-			-			-			-			-			70,123			70,123
Total liabilities and shareholders' equity	$	318,613		$	34,679		$	194,103		$	186,526		$	47,635		$	227,232		$	1,008,788
Gap		(55,114)			35,154			41,254			3,810			98,495			(123,599)
Cumulative gap		(55,114)			(19,960)			21,294			25,104			123,599			-
Cumulative gap to total assets		(5.5)	%		(2.0)	%		2.1	%		2.5	%		12.3	%		-	%

At December 31, 2014, there was a six-month liability-sensitive gap of $55.1 million and a one-year liability-sensitive gap of $20.0 million, as compared to liability-sensitive gaps of $47.7 million and $18.6 million at December 31, 2013.  The six-month and one-year cumulative gap to total assets ratios were within the Board-approved guidelines of +/- 20 percent.

Other models are also used in conjunction with the static gap table, which is not able to capture the risk of changing spread relationships over time, the effects of projected growth in the balance sheet or dynamic decisions such as the modification of investment maturities as a rate environment unfolds.  For these reasons, a simulation model is used, where numerous interest rate scenarios and balance sheets are combined to produce a range of potential income results.  Net interest income is managed within guideline ranges for interest rates rising or falling by 200 basis points.  Results outside of guidelines require action by the RMC to correct the imbalance.  Simulations are typically created over a 12 to 24 month time horizon.  At December 31, 2014, these simulations show that with a 200 basis point rate increase over a 12 month period, net interest income would increase by approximately $240 thousand, or 0.8 percent.  A 200 basis point rate decline over a 12 month period would decrease net interest income by approximately $1.5 million or 4.8 percent.  These variances in net interest income are within the Board-approved guidelines of +/- 10 percent.

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Finally, to measure the impact of longer-term asset and liability mismatches beyond two years, the Company utilizes Modified Duration of Equity and Economic Value of Portfolio Equity (“EVPE”) models.  The modified duration of equity measures the potential price risk of equity to changes in interest rates.  A longer modified duration of equity indicates a greater degree of risk to rising interest rates.  Because of balance sheet optionality, an EVPE analysis is also used to dynamically model the present value of asset and liability cash flows, with rate shocks of 200 basis points.  The economic value of equity is likely to be different as interest rates change.  Results falling outside prescribed ranges require action by the RMC.  The Company’s variance in the economic value of equity with rate shocks of 200 basis points is a decline of 7.4 percent in a rising rate environment and a decrease of 10.5 percent in a falling rate environment at December 31, 2014.  At December 31, 2013, the Company’s variance in the economic value of equity with rate shocks of 200 basis points is a decline of 15.1 percent in a rising rate environment and anincrease of 6.2 percent in a falling rate environment.  The variance in the EVPE at December 31, 2014 and 2013were within the Board-approved guidelines in place at the time of +/- 20 percent and +/-25 percent, respectively.

Liquidity

Consolidated Bank Liquidity

Liquidity measures the ability to satisfy current and future cash flow needs as they become due.  A bank’s liquidity reflects its ability to meet loan demand, to accommodate possible outflows in deposits and to take advantage of interest rate opportunities in the marketplace.  The Company’s liquidity is monitored by management and the Board of Directors through a Risk Management Committee (“RMC”), which reviews historical funding requirements, the current liquidity position, sources and stability of funding, marketability of assets, options for attracting additional funds, and anticipated future funding needs, including the level of unfunded commitments.  The goal is to maintain sufficient asset-based liquidity to cover potential funding requirements in order to minimize dependence on volatile and potentially unstable funding markets.

The principal sources of funds at the Bank are deposits, scheduled amortization and prepayments of investment and loan principal, sales and maturities of investment securities, additional borrowings and funds provided by operations.  While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit inflows and outflows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.  The Consolidated Statement of Cash Flows provides detail on the Company’s sources and uses of cash, as well as an indication of the Company’s ability to maintain an adequate level of liquidity.  As the Consolidated Bank comprises the majority of the assets of the Company, this Consolidated Statement of Cash Flows is indicative of the Consolidated Bank’s activity.  At December 31, 2014, the balance of cash and cash equivalents was $129.8 million, an increase of $30.4 million from December 31, 2013.  A discussion of the cash provided by and used in operating, investing and financing activities follows. 

Operating activities provided $11.7 million and $11.4 million in net cash for the years ended December 31, 2014 and 2013.  The primary sources of funds were net income from operations and adjustments to net income, such as the provision for loan losses, depreciation and amortization, and proceeds from the sale of mortgage and SBA loans held for sale, partially offset by originations of mortgage and SBA loans held for sale.

Investing activities used $60.4 million and $104.0 million in net cash for the years ended December 31, 2014 and 2013, respectively.  Cash was primarily used to purchase securities, equipment and BOLI, and fund new loans, partially offset by cash inflows from maturities and pay downs on securities and proceeds from the sale of securities and OREO.    

× Securities.  The Consolidated Bank’s available for sale investment portfolio amounted to $59.9 million and $81.0 million at December 31, 2014 and December 31, 2013, respectively.  This excludes the Parent Company’s securities discussed under the heading “Parent Company Liquidity” below.  Projected cash flows from securities over the next twelve months are $14.2 million.

× Loans.  The SBA loans held for sale portfolio amounted to $5.2 million and $6.7 million at December 31, 2014 and December 31, 2013, respectively.  Sales of these loans provide an additional source of liquidity for the Company. 

× Outstanding Commitments.  The Company was committed to advance approximately $150.9 million to its borrowers as of December 31, 2014, compared to $103.2 million at December 31, 2013.  At December 31, 2014, $74.1 million of these commitments expire within one year, compared to $45.6 million at December 31, 2013.  The Company had $1.5 million and $1.4 million in standby letters of credit at December 31, 2014 and December 31, 2013, respectively, which are included in the commitments amount noted above.  The estimated fair value of these guarantees is not significant.  The Company believes it has the necessary liquidity to honor all commitments.  Many of these commitments will expire and never be funded.

Financing activities provided $79.1 million and $97.8 million in net cash for the years ended December 31, 2014 and 2013, respectively, primarily due to an increase in the Company’s deposits and borrowings, partially offset by the Company’s repayment of borrowings.

× Deposits.  As of December 31, 2014, deposits included $89.8 million of Government deposits, as compared to $82.5 million at year-end 2013. These deposits are generally short in duration and are very sensitive to price competition.  The Company believes that the current level of these types of deposits is appropriate.  Included in the portfolio were $85.1 million of deposits from eleven municipalities.  The withdrawal of these deposits, in whole or in part, would not create a liquidity shortfall for the Company.

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× Borrowed Funds.  Total FHLB borrowings amounted to $110.0 million and $92.0 million as of December 31, 2014 and 2013, respectively.  Third party repurchase agreements totaled $15.0 million as of both December 31, 2014 and December 31, 2013.  As a member of the Federal Home Loan Bank of New York (“FHLB”), the Company can borrow additional funds based on the market value of collateral pledged.  At December 31, 2014, pledging provided an additional $36.7 million in borrowing potential from the FHLB.  In addition, the Company can pledge additional collateral in the form of 1 to 4 family residential mortgages or investment securities to increase this line with the FHLB. 

Parent Company Liquidity

The Parent Company’s cash needs are funded by dividends paid by the Bank.  Other than its investment in the Bank and Unity Statutory Trusts II and III, the Parent Company does not actively engage in other transactions or business.  Only expenses specifically for the benefit of the Parent Company are paid using its cash, which typically includes the payment of operating expenses and, prior to the redemption of the preferred stock issued as part of the CPP, cash dividends on the preferred stock issued to the U.S. Treasury.

At December 31, 2014, the Parent Company had $198 thousand in cash and cash equivalents and $197 thousand in investment securities valued at fair market value, compared to $724 thousand in cash and cash equivalents and $167 thousand in investment securities at December 31, 2013.  The decrease in cash and cash equivalents at the Parent Company was primarily due to cash dividends paid on common stock.

Off-Balance Sheet Arrangements and Contractual Obligations

The following table shows the amounts and expected maturities or payment periods of off-balance sheet arrangements and contractual obligations as of December 31, 2014:

	One year		One to		Three to		Over
(In thousands)	or less		three years		five years		five years		Total
Off-balance sheet arrangements:
Standby letters of credit	$	1,415	$	121	$	-	$	-	$	1,536
Contractual obligations:
Time deposits		72,641		56,524		83,052		116		212,333
Borrowed funds and subordinated debentures		60,000		50,000		15,000		15,465		140,465
Operating lease obligations		662		1,240		438		-		2,340
Purchase obligations		1,272		1,378		-		-		2,650
Total off-balance sheet arrangements and contractual obligations	$	135,990	$	109,263	$	98,490	$	15,581	$	359,324

Standby letters of credit represent guarantees of payment issued by the Bank on behalf of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with a third party.  Standby letters of credit are typically short-term in duration, maturing in one year or less.

Time deposits have stated maturity dates.  For additional information on time deposits, see Note 8 to the Consolidated Financial Statements.

Borrowed funds and subordinated debentures include fixed term borrowings from the Federal Home Loan Bank, repurchase agreements and subordinated debentures.  The borrowings have defined terms and under certain circumstances are callable at the option of the lender. For additional information on borrowed funds and subordinated debentures, see Note 9 to the Consolidated Financial Statements.

Operating leases represent obligations entered into by the Company for the use of land and premises.  The leases generally have escalation terms based upon certain defined indexes.  For additional information on the Company’s operating leases, see Note 10 to the Consolidated Financial Statements.

Purchase obligations represent legally binding and enforceable agreements to purchase goods and services from third parties and consist primarily of contractual obligations under data processing and ATM service agreements.

Capital Adequacy

A significant measure of the strength of a financial institution is its capital base. Shareholders’ equity increased $13.0 million to $70.1 million at December 31, 2014 compared to $57.2 million at December 31, 2013,  primarily due to $6.1 million in additional capital as a result of the completion of the common stock rights offering and net income of $6.4 million.  Other items impacting shareholders’ equity included $757 thousand in dividends accrued on common stock, $619 thousand in unrealized gains net of tax on available for sale securities and $537 thousand from the issuance of common stock under employee benefit plans.The issuance of common stock under employee benefit plans includes nonqualified stock options and restricted stock expense related entries, employee option exercises and the tax benefit of options exercised.

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For additional information on shareholders’ equity, see Note 12 to the Consolidated Financial Statements.

Federal regulators have classified and defined capital into the following components: (1) tier 1 capital, which includes tangible shareholders’ equity for common stock, qualifying preferred stock and other qualifying hybrid instruments, and (2) tier 2 capital, which includes a portion of the allowance for loan losses, certain qualifying long-term debt and preferred stock which does not qualify as tier 1 capital.  Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require a bank to maintain certain capital as a percent of assets and certain off-balance sheet items adjusted for predefined credit risk factors (risk-weighted assets).  A bank is required to maintain, at a minimum, tier 1 capital as a percentage of risk-weighted assets of 4 percent and combined tier 1 and tier 2 capital as a percentage of risk-weighted assets of 8 percent.  In addition, banks are required to meet a leverage capital requirement, which measures tier 1 capital against average assets.  Banks which are highly rated and not experiencing significant growth are required to maintain a leverage ratio of 3 percent while all other banks are expected to maintain a leverage ratio 1 to 2 percentage points higher.  The Company is subject to similar requirements on a consolidated basis.

During 2013, the Company repurchased the $20.6 million in preferred stock issued in connection with the CPP, and completed the $2.7 million repurchase of the warrant to purchase 764,778 shares of the Company’s common stock issued to the U.S. Department of the Treasury as a part of the CPP. The following table summarizes the Company’s and the Bank’s risk-based capital and leverage ratios at December 31, 2014 and 2013, as well as the minimum regulatory capital ratios required for the Bank to be deemed “well-capitalized.”  The Company’s capital amounts and ratios reflect the capital decreases described above.

							Adequately			Well-
							capitalized			capitalized
Company	December 31, 2014			December 31, 2013			requirements			requirements
Leverage ratio		8.71	%		8.08	%		4.00	%		N/A
Tier I risk-based capital ratio		11.57			10.74			4.00			N/A
Total risk-based capital ratio		12.83			11.99			8.00			N/A

							Adequately			Well-
							capitalized			capitalized
Bank	December 31, 2014			December 31, 2013			requirements			requirements
Leverage ratio		7.80	%		7.02	%		4.00	%		5.00	%
Tier I risk-based capital ratio		10.37			9.33			4.00			6.00
Total risk-based capital ratio		12.80			11.88			8.00			10.00

For additional information on regulatory capital, see Note 17 to the Consolidated Financial Statements.

Under regulations adopted in 2013 by the Board of Governors of the Federal Reserve System implementing Basel III, the Company and the Bank will face higher capital requirements in the future.  See Item 1. Business – Supervision and Regulation in the Company’s Annual Report on Form 10-K.

Forward-Looking Statements

This report contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance.  These statements involve certain risks, uncertainties, estimates and assumptions by management.

Factors that may cause actual results to differ from those results expressed or implied, include, but are not limited to those listed under “Item 1A - Risk Factors” in the Company’s Annual Report on Form 10-K; the overall economy and the interest rate environment; the ability of customers to repay their obligations; the adequacy of the allowance for loan losses; competition; significant changes in tax, accounting or regulatory practices and requirements; and technological changes.  Although management has taken certain steps to mitigate the negative effect of the aforementioned items, significant unfavorable changes could severely impact the assumptions used and have an adverse effect on future profitability.

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Critical Accounting Policies and Estimates

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).  The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.  Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2014, contains a summary of the Company’s significant accounting policies.  Management believes the Company’s policies with respect to the methodology for the determination of the other-than-temporary impairment on securities, servicing assets, allowance for loan losses, and income taxes involve a higher degree of complexity and require management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters.  Changes in these judgments, assumptions or estimates could materially impact results of operations.  These critical policies are periodically reviewed with the Audit Committee and the Board of Directors.

Other-Than-Temporary Impairment

The Company has a process in place to identify debt securities that could potentially incur credit impairment that is other-than-temporary. This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation. This evaluation considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other-than-temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, the intent to sell a security or whether it is more likely than not the security will be required to be sold before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, the ability and intent to hold the security for a forecasted period of time that allows for the recovery in value.

Management assesses its intent to sell or whether it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered other-than-temporarily impaired with no intent to sell and no requirement to sell prior to recovery of its amortized cost basis, the amount of the impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income. For debt securities where management has the intent to sell, the amount of the impairment is reflected in earnings as realized losses.

The present value of expected future cash flows is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity.

For additional information on other-than-temporary impairment, see Note 3 to the Consolidated Financial Statements.

Servicing Assets

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues.  Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term.  Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.  Any impairment, if temporary, would be reported as a valuation allowance.

For additional information on servicing assets, see Note 4 to the Consolidated Financial Statements.

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Allowance for Loan Losses and Unfunded Loan Commitments

The allowance for loan losses is maintained at a level management considers adequate to provide for probable loan losses as of the balance sheet date. The allowance is increased by provisions charged to expense and is reduced by net charge-offs.

The level of the allowance is based on management’s evaluation of probable losses in the loan portfolio, after consideration of prevailing economic conditions in the Company’s market area, the volume and composition of the loan portfolio, and historical loan loss experience.  The allowance for loan losses consists of specific reserves for individually impaired credits and TDRs and reserves for nonimpaired loans based on historical loss factors and reserves based on general economic factors and other qualitative risk factors such as changes in delinquency trends, industry concentrations or local/national economic trends. This risk assessment process is performed at least quarterly, and, as adjustments become necessary, they are realized in the periods in which they become known.

Although management attempts to maintain the allowance at a level deemed adequate to provide for probable losses, future additions to the allowance may be necessary based upon certain factors including changes in market conditions and underlying collateral values. In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses. These agencies may require the Company to make additional provisions based on judgments about information available at the time of the examination.

The Company maintains an allowance for unfunded loan commitments that is maintained at a level that management believes is adequate to absorb estimated probable losses. Adjustments to the allowance are made through other expenses and applied to the allowance which is maintained in other liabilities.

For additional information on the allowance for loan losses and unfunded loan commitments, see Note 5 to the Consolidated Financial Statements.

Income Taxes

The Company accounts for income taxes according to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Valuation reserves are established against certain deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. Increases or decreases in the valuation reserve are charged or credited to the income tax provision.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits would be recognized in income tax expense on the income statement.

For additional information on income taxes, see Note 15 to the Consolidated Financial Statements.

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Management’s Report on Internal Control

Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the Securities Exchange Act of 1934.  Under the supervision and with the participation of the principal executive officer and the principal financial officer, management conducted an evaluation of the effectiveness of our control over financial reporting based on the 1992 framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on our evaluation under the framework, management has concluded that our internal control over financial reporting was effective as of December 31, 2014.

Pursuant to the rules of the Securities and Exchange Commission, management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2014 has not been attested to by McGladrey LLP, the independent registered public accounting firm that audited the Company’s Consolidated Financial Statements for the year ended December 31, 2014, as stated in their report which is included herein.

/s/ James A. Hughes           

James A. Hughes

President and Chief Executive Officer

/s/ Alan J. Bedner              

Alan J. Bedner

Executive Vice President and Chief Financial Officer

45

Report of Independent Registered Public

Accounting Firm

To the Board of Directors and Shareholders

Unity Bancorp, Inc.

We have audited the accompanying Consolidated Balance Sheets of Unity Bancorp, Inc. and subsidiaries (“the Company”) as of December 31, 2014 and 2013, and the related Consolidated Statements of Income, Comprehensive Income, Changes in Shareholders’ Equity and Cash Flows for the years then ended.  These Consolidated Financial Statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the financial position of Unity Bancorp, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ McGladrey LLP             

McGladrey LLP

Blue Bell, Pennsylvania

March 16, 2015

46

Consolidated Balance Sheets

(In thousands)	December 31, 2014		December 31, 2013
ASSETS
Cash and due from banks	$	29,351	$	24,272
Federal funds sold and interest-bearing deposits		100,470		75,132
Cash and cash equivalents		129,821		99,404
Securities:
Securities available for sale		60,073		81,133
Securities held to maturity (fair value of $20,281 and $25,549 in 2014 and 2013, respectively)		20,009		26,381
Total securities		80,082		107,514
Loans:
SBA loans held for sale		5,179		6,673
SBA loans held for investment		40,401		48,918
SBA 504 loans		34,322		31,564
Commercial loans		401,949		363,340
Residential mortgage loans		220,878		182,067
Consumer loans		59,096		46,139
Total loans		761,825		678,701
Allowance for loan losses		(12,551)		(13,141)
Net loans		749,274		665,560
Premises and equipment, net		15,231		15,672
Bank owned life insurance ("BOLI")		13,001		12,749
Deferred tax assets		5,860		6,752
Federal Home Loan Bank stock		6,032		5,392
Accrued interest receivable		3,518		3,272
Other real estate owned ("OREO")		1,162		633
Goodwill and other intangibles		1,516		1,516
Other assets		3,291		2,654
Total assets	$	1,008,788	$	921,118
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	152,785	$	136,035
Interest-bearing demand deposits		128,875		130,806
Savings deposits		300,348		266,503
Time deposits, under $100,000		113,119		108,258
Time deposits, $100,000 and over		99,214		97,096
Total deposits		794,341		738,698
Borrowed funds		125,000		107,000
Subordinated debentures		15,465		15,465
Accrued interest payable		474		454
Accrued expenses and other liabilities		3,385		2,328
Total liabilities		938,665		863,945
Commitments and contingencies (Note 10)		-		-
Shareholders' equity:
Common stock, no par value, 12,500 shares authorized, 8,388 shares issued and outstanding in 2014; 7,577 shares issued and outstanding in 2013		58,785		52,051
Retained earnings		11,195		5,598
Accumulated other comprehensive income (loss)		143		(476)
Total shareholders' equity		70,123		57,173
Total liabilities and shareholders' equity	$	1,008,788	$	921,118
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

47

Consolidated Statements of Income

	For the years ended December 31,
(In thousands, except per share amounts)	2014		2013
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$	44	$	39
Federal Home Loan Bank stock		165		159
Securities:
Taxable		2,183		2,443
Tax-exempt		355		460
Total securities		2,538		2,903
Loans:
SBA loans		2,467		2,660
SBA 504 loans		1,676		1,911
Commercial loans		19,329		17,322
Residential mortgage loans		8,898		7,013
Consumer loans		2,301		1,947
Total loans		34,671		30,853
Total interest income		37,418		33,954
INTEREST EXPENSE
Interest-bearing demand deposits		430		383
Savings deposits		856		710
Time deposits		2,777		2,191
Borrowed funds and subordinated debentures		3,243		3,245
Total interest expense		7,306		6,529
Net interest income		30,112		27,425
Provision for loan losses		2,550		2,350
Net interest income after provision for loan losses		27,562		25,075
NONINTEREST INCOME
Branch fee income		1,469		1,505
Service and loan fee income		1,260		1,370
Gain on sale of SBA loans held for sale, net		975		628
Gain on sale of mortgage loans, net		1,139		1,650
BOLI income		559		347
Net security gains		433		390
Other income		844		714
Total noninterest income		6,679		6,604
NONINTEREST EXPENSE
Compensation and benefits		12,750		12,251
Occupancy		2,478		2,571
Processing and communications		2,461		2,309
Furniture and equipment		1,510		1,478
Professional services		748		828
Loan costs		780		822
OREO expenses		485		458
Deposit insurance		677		666
Advertising		998		747
Other expenses		1,801		1,867
Total noninterest expense		24,688		23,997
Income before provision for income taxes		9,553		7,682
Provision for income taxes		3,145		2,567
Net income		6,408		5,115
Preferred stock dividends and discount accretion		-		988
Income available to common shareholders	$	6,408	$	4,127
Net income per common share - Basic	$	0.82	$	0.55
Net income per common share - Diluted	$	0.81	$	0.53
Weighted average common shares outstanding - Basic		7,856		7,547
Weighted average common shares outstanding - Diluted		7,945		7,810
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

48

Consolidated Statements of Comprehensive Income

	For the years ended December 31,
(In thousands)	2014		2013
Net income	$	6,408	$	5,115
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities arising during period		909		(1,550)
Less: Reclassification adjustment for gains on securities included in net income		290		259
Total other comprehensive income (loss)		619		(1,809)
Total comprehensive income	$	7,027	$	3,306
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

49

Consolidated Statements of Changes in Shareholders’ Equity

									Accumulated
									other		Total
	Preferred		Common stock				Retained		comprehensive		shareholders'
(In thousands)	stock		Shares		Amount		earnings		income (loss)		equity
Balance, December 31, 2012	$	20,115		7,534	$	54,274	$	1,788	$	1,333	$	77,510
Net income								5,115				5,115
Other comprehensive loss, net of tax										(1,809)		(1,809)
Redemption of perpetual preferred stock from U.S. Treasury		(20,649)										(20,649)
Repurchase of warrants from U.S. Treasury						(2,617)		(90)				(2,707)
Accretion of discount on preferred stock		534						(534)				-
Dividends on preferred stock (5% annually)								(454)				(454)
Dividends on common stock ($0.03 per share)						39		(227)				(188)
Common stock issued and related tax effects (1)				43		355						355
Balance, December 31, 2013	$	-		7,577	$	52,051	$	5,598	$	(476)	$	57,173
Net income								6,408				6,408
Other comprehensive income, net of tax										619		619
Dividends on common stock ($0.10 per share)						54		(811)				(757)
Common stock issued and related tax effects (1)				50		537						537
Proceeds from rights offering				761		6,143						6,143
Balance, December 31, 2014	$	-		8,388	$	58,785	$	11,195	$	143	$	70,123
(1) Includes the issuance of common stock under employee benefit plans, which includes nonqualified stock options and restricted stock expense related entries, employee option exercises and the tax benefit of options exercised.
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

50

Consolidated Statements of Cash Flows

	For the years ended December 31,
(In thousands)	2014		2013
OPERATING ACTIVITIES:
Net income	$	6,408	$	5,115
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		2,550		2,350
Net amortization of purchase premiums and discounts on securities		552		713
Depreciation and amortization		1,385		1,267
Deferred income tax expense		498		389
Net security gains		(433)		(390)
Stock compensation expense		398		340
BOLI income		(559)		(347)
Loss on sale of OREO		138		52
Valuation writedowns on OREO		12		255
Gain on sale of mortgage loans held for sale, net		(923)		(1,650)
Gain on sale of SBA loans held for sale, net		(975)		(628)
Origination of mortgage loans held for sale		(59,194)		(78,432)
Origination of SBA loans held for sale		(9,994)		(6,103)
Proceeds from sale of mortgage loans held for sale, net		60,117		80,082
Proceeds from sale of SBA loans held for sale, net		11,345		6,962
Net change in other assets and liabilities		392		1,470
Net cash provided by operating activities		11,717		11,445
INVESTING ACTIVITIES
Purchases of securities held to maturity		(308)		(9,871)
Purchases of securities available for sale		(9,947)		(29,136)
Purchases of Federal Home Loan Bank stock, at cost		(8,570)		(6,504)
Maturities and principal payments on securities held to maturity		6,589		4,841
Maturities and principal payments on securities available for sale		9,863		22,210
Proceeds from sales of securities available for sale		22,129		12,178
Proceeds from redemption of Federal Home Loan Bank stock		7,930		5,101
Proceeds from sale of OREO		3,344		2,119
Net increase in loans		(91,139)		(97,191)
Proceeds from BOLI		307		-
Purchase of BOLI		-		(3,000)
Purchases of premises and equipment		(597)		(4,789)
Net cash used in investing activities		(60,399)		(104,042)
FINANCING ACTIVITIES
Net increase in deposits		55,643		89,938
Proceeds from new borrowings		50,000		32,000
Repayments of borrowings		(32,000)		-
Redemption of perpetual preferred stock from U.S. Treasury		-		(20,649)
Repurchase of warrant from U.S. Treasury		-		(2,707)
Proceeds from exercise of stock options		70		-
Dividends on preferred stock		-		(585)
Dividends on common stock		(757)		(188)
Proceeds from rights offering		6,143		-
Net cash provided by financing activities		79,099		97,809
Increase in cash and cash equivalents		30,417		5,212
Cash and cash equivalents, beginning of period		99,404		94,192
Cash and cash equivalents, end of period	$	129,821	$	99,404

51

Consolidated Statements of Cash Flows (Continued)

	For the years ended December 31,
(In thousands)	2014		2013
SUPPLEMENTAL DISCLOSURES
Cash:
Interest paid	$	7,285	$	6,509
Income taxes paid		2,244		2,527
Noncash investing activities:
Capitalization of servicing rights		483		187
Transfer of SBA loans held for sale to held to maturity		138		33
Transfer of loans to OREO		4,318		1,233
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

.

52

Notes to Consolidated Financial Statements

1.  Summary of Significant Accounting Policies

Overview

The accompanying Consolidated Financial Statements include the accounts of Unity Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiary, Unity Bank (the “Bank” or when consolidated with the Parent Company, the “Company”).  All significant intercompany balances and transactions have been eliminated in consolidation.

Unity Bancorp, Inc. is a bank holding company incorporated in New Jersey and registered under the Bank Holding Company Act of 1956, as amended.  Its wholly-owned subsidiary, the Bank, is chartered by the New Jersey Department of Banking and Insurance.  The Bank provides a full range of commercial and retail banking services through fifteen branch offices located in Hunterdon, Middlesex, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania.  These services include the acceptance of demand, savings, and time deposits and the extension of consumer, real estate, Small Business Administration (“SBA”) and other commercial credits.

Unity Bank has nine wholly-owned subsidiaries: Unity Investment Services, Inc., AJB Residential Realty Enterprises, Inc., AJB Commercial Realty, Inc., MKCD Commercial, Inc., JAH Commercial, Inc., UB Commercial LLC, ASBC Holdings LLC, Unity Property Holdings 1, Inc., and Unity Property Holdings 2, Inc.  Unity Investment Services, Inc. is used to hold and administer part of the Bank’s investment portfolio.  The other subsidiaries hold, administer and maintain the Bank’s other real estate owned (“OREO”) properties. Unity Investment Services, Inc. has one subsidiary, Unity Delaware Investment 2, Inc., which has one subsidiary, Unity NJ REIT, Inc.  Unity NJ REIT, Inc. was added in 2013 to hold loans.

The Company has two unconsolidated, wholly-owned statutory trust subsidiaries.  For additional information, see Note 9 to the Consolidated Financial Statements.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Amounts requiring the use of significant estimates include the allowance for loan losses, valuation of deferred tax and servicing assets, the carrying value of loans held for sale and other real estate owned, the valuation of securities and the determination of other-than-temporary impairment for securities and fair value disclosures.  Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the prior year to conform to the current year presentation, with no impact on prior year earnings or shareholders’ equity.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and interest-bearing deposits.

Securities

The Company classifies its securities into two categories, available for sale and held to maturity.

Securities that are classified as available for sale are stated at fair value.  Unrealized gains and losses on securities available for sale are generally excluded from results of operations and are reported as other comprehensive income, a separate component of shareholders’ equity, net of taxes.  Securities classified as available for sale include securities that may be sold in response to changes in interest rates, changes in prepayment risks or for asset/liability management purposes.  The cost of securities sold is determined on a specific identification basis.  Gains and losses on sales of securities are recognized in the Consolidated Statements of Income on the date of sale.

Securities are classified as held to maturity based on management’s intent and ability to hold them to maturity.  Such securities are stated at cost, adjusted for unamortized purchase premiums and discounts using the level yield method.

53

If transfers between the available for sale and held to maturity portfolios occur, they are accounted for at fair value and unrealized holding gains and losses are accounted for at the date of transfer.  For securities transferred to available for sale from held to maturity, unrealized gains or losses as of the date of the transfer are recognized in other comprehensive income (loss), a separate component of shareholders’ equity.  For securities transferred into the held to maturity portfolio from the available for sale portfolio, unrealized gains or losses as of the date of transfer continue to be reported in other comprehensive income (loss), and are amortized over the remaining life of the security as an adjustment to its yield, consistent with amortization of the premium or accretion of the discount.

For additional information on securities, see Note 3 to the Consolidated Financial Statements.

Other-Than-Temporary Impairment

The Company has a process in place to identify debt securities that could potentially incur credit impairment that is other-than-temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation.  This evaluation considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other-than-temporary.  Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, the intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity.

For debt securities that are considered other-than-temporarily impaired where management has no intent to sell and the Company has no requirement to sell prior to recovery of its amortized cost basis, the amount of the impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows.  The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income.  For debt securities where management has the intent to sell, the amount of the impairment is reflected in earnings as realized losses.

The present value of expected future cash flows is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security.  The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security.  The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees.  The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Loans

Loans Held for Sale

Loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value.  The Company originates loans to customers under an SBA program that historically has provided for SBA guarantees of up to 90 percent of each loan.  The Company generally sells the guaranteed portion of its SBA loans to a third party and retains the servicing, holding the nonguaranteed portion in its portfolio.  The net amount of loan origination fees on loans sold is included in the carrying value and in the gain or loss on the sale.  When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets are recognized in income.  All criteria for sale accounting must be met in order for the loan sales to occur; see details under the “Transfers of Financial Assets” heading above.

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold.  Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues.  Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term.  Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.  Any impairment, if temporary, would generally be reported as a valuation allowance.

54

Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets.  Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets.

For additional information on servicing assets, see Note 4 to the Consolidated Financial Statements.

Loans Held for Investment

Loans held for investment are stated at the unpaid principal balance, net of unearned discounts and deferred loan origination fees and costs.  In accordance with the level yield method, loan origination fees, net of direct loan origination costs, are deferred and recognized over the estimated life of the related loans as an adjustment to the loan yield.  Interest is credited to operations primarily based upon the principal balance outstanding.  

Loans are reported as past due when either interest or principal is unpaid in the following circumstances: fixed payment loans when the borrower is in arrears for two or more monthly payments; open end credit for two or more billing cycles; and single payment notes if interest or principal remains unpaid for 30 days or more.

Nonperforming loans consist of loans that are not accruing interest as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt (nonaccrual loans).  When a loan is classified as nonaccrual, interest accruals are discontinued and all past due interest previously recognized as income is reversed and charged against current period earnings.  Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income.  Loans may be returned to an accrual status when the ability to collect is reasonably assured and when the loan is brought current as to principal and interest.

Loans are charged off when collection is sufficiently questionable and when the Company can no longer justify maintaining the loan as an asset on the balance sheet.  Loans qualify for charge-off when, after thorough analysis, all possible sources of repayment are insufficient.  These include: 1) potential future cash flows, 2) value of collateral, and/or 3) strength of co-makers and guarantors.  All unsecured loans are charged off upon the establishment of the loan’s nonaccrual status.  Additionally, all loans classified as a loss or that portion of the loan classified as a loss is charged off.  All loan charge-offs are approved by the Board of Directors.

Troubled debt restructurings ("TDRs") occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider.  These concessions typically include reductions in interest rate, extending the maturity of a loan, or a combination of both. Interest income on accruing TDRs is credited to operations primarily based upon the principal amount outstanding, as stated in the paragraphs above. 

The Company evaluates its loans for impairment.  A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The Company has defined impaired loans to be all TDRs and nonperforming loans.  Impairment is evaluated in total for smaller-balance loans of a similar nature (consumer and residential mortgage loans), and on an individual basis for all other loans.  Impairment of a loan is measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or as a practical expedient, based on a loan’s observable market price or the fair value of collateral, net of estimated costs to sell, if the loan is collateral-dependent.  If the value of the impaired loan is less than the recorded investment in the loan, the Company establishes a valuation allowance, or adjusts existing valuation allowances, with a corresponding charge to the provision for loan losses.

For additional information on loans, see Note 4 to the Consolidated Financial Statements.

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

The allowance for loan losses is maintained at a level management considers adequate to provide for probable loan losses as of the balance sheet date.  The allowance is increased by provisions charged to expense and is reduced by net charge-offs.  

The level of the allowance is based on management’s evaluation of probable losses in the loan portfolio, after consideration of prevailing economic conditions in the Company’s market area, the volume and composition of the loan portfolio, and historical loan loss experience.  The allowance for loan losses consists of specific reserves for individually impaired credits and TDRs, reserves for nonimpaired loans based on historical loss factors adjusted for general economic factors and other qualitative risk factors such as changes in delinquency trends, industry concentrations or local/national economic trends.  This risk assessment process is performed at least quarterly, and, as adjustments become necessary, they are realized in the periods in which they become known.   

55

Although management attempts to maintain the allowance at a level deemed adequate to provide for probable losses, future additions to the allowance may be necessary based upon certain factors including changes in market conditions and underlying collateral values.  In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses.  These agencies may require the Company to make additional provisions based on judgments about information available at the time of the examination.

The Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated probable losses.  Adjustments to the reserve are made through other expenses and applied to the reserve which is classified as other liabilities.

For additional information on the allowance for loan losses and reserve for unfunded loan commitments, see Note 5 to the Consolidated Financial Statements.

Premises and Equipment

Land is carried at cost.  All other fixed assets are carried at cost less accumulated depreciation.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets.  The useful life of buildings is not to exceed 30 years; furniture and fixtures is generally 10 years or less, and equipment is 3 to 5 years.  Leasehold improvements are depreciated over the life of the underlying lease. 

For additional information on premises and equipment, see Note 6 to the Consolidated Financial Statements.

Bank Owned Life Insurance

The Company purchased life insurance policies on certain members of management.  Bank owned life insurance (“BOLI”) is recorded at its cash surrender value or the amount that can be realized.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula.  The stock is carried at cost.  Management reviews the stock for impairment based on the ultimate recoverability of the cost basis in the stock.  The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines.  Management considers such criteria as the significance of the decline in net assets, if any, of the FHLB, the length of time this situation has persisted, commitments by the FHLB to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLB and the liquidity position of the FHLB.

Other Real Estate Owned

Other real estate owned (“OREO”) is recorded at the fair value, less estimated costs to sell at the date of acquisition, with a charge to the allowance for loan losses for any excess of the loan carrying value over such amount.  Subsequently, OREO is carried at the lower of cost or fair value, as determined by current appraisals.  Certain costs that increase the value or extend the useful life in preparing properties for sale are capitalized to the extent that the appraisal amount exceeds the carry value, and expenses of holding foreclosed properties are charged to operations as incurred.

Appraisals

The Company requires current real estate appraisals on all loans that become OREO or in-substance foreclosure, loans that are classified substandard, doubtful or loss, or loans that are over $100,000 and nonperforming.  Prior to each balance sheet date, the Company values impaired collateral-dependent loans and OREO based upon a third party appraisal, broker's price opinion, drive by appraisal, automated valuation model, updated market evaluation, or a combination of these methods.  The amount is discounted for the decline in market real estate values (for original appraisals), for any known damage or repair costs, and for selling and closing costs.  The amount of the discount is dependent upon the method used to determine the original value.  The original appraisal is generally used when a loan is first determined to be impaired.  When applying the discount, the Company takes into consideration when the appraisal was performed, the collateral’s location, the type of collateral, any known damage to the property and the type of business.  Subsequent to entering impaired status and the Company determining that there is a collateral shortfall, the Company will generally, depending on the type of collateral, order a third party appraisal, broker's price opinion, automated valuation model or updated market evaluation.  Subsequent to receiving the third party results, the Company will discount the value 6 to 10 percent for selling and closing costs.

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Income Taxes

The Company follows Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") Topic 740, “Income Taxes,” which prescribes a threshold for the financial statement recognition of income taxes and provides criteria for the measurement of tax positions taken or expected to be taken in a tax return.  ASC 740 also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition of income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Deferred tax assets and liabilities are measured using the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Valuation reserves are established against certain deferred tax assets when it is more likely than not that the deferred tax assets will not be realized.  Increases or decreases in the valuation reserve are charged or credited to the income tax provision.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions.  Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.  The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits are recognized in income tax expense on the income statement.

For additional information on income taxes, see Note 15 to the Consolidated Financial Statements.

Net Income Per Share

Basic net income per common share is calculated as net income available to common shareholders divided by the weighted average common shares outstanding during the reporting period.  Net income available to common shareholders is calculated as net income less accrued dividends and discount accretion related to preferred stock.

Diluted net income per common share is computed similarly to that of basic net income per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, principally stock options, were issued during the reporting period utilizing the Treasury stock method.  However, when a net loss rather than net income is recognized, diluted earnings per share equals basic earnings per share.

For additional information on net income per share, see Note 16 to the Consolidated Financial Statements.

Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation,” which requires recognition of compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award.  Compensation expense is equal to the fair value of the award, net of estimated forfeitures, and is recognized over the vesting period of such awards.

For additional information on the Company’s stock-based compensation, see Note 18 to the Consolidated Financial Statements.

Fair Value

The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which provides a framework for measuring fair value under generally accepted accounting principles.

For additional information on the fair value of the Company’s financial instruments, see Note 19 to the Consolidated Financial Statements.

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Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of the change in unrealized gains (losses) on securities available for sale that were reported as a component of shareholders’ equity, net of tax.

For additional information on other comprehensive income, see Note 11 to the Consolidated Financial Statements.

Advertising

The Company expenses the costs of advertising in the period incurred.

Dividend Restrictions

Banking regulations require maintaining certain capital levels that may limit the dividends paid by the Bank to the holding company or by the holding company to the shareholders.

Operating Segments

While management monitors the revenue streams of its various products and services, operating results and financial performance are evaluated on a company-wide basis.  The Company’s management uses consolidated results to make operating and strategic decisions.  Accordingly, there is only one reportable segment.

Recent Accounting Pronouncements

ASU No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40):  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.”  ASU 2014-04 clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.  Additionally, ASU 2014-04 requires interim and annual disclosure of both (a) the amount of foreclosed residential real estate property held by the creditor and (b) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.  The amendments in ASU 2014-04 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  An entity can elect to adopt the amendments using either a modified retrospective transition method or prospective transition method.  Early adoption is permitted.  The Company is currently evaluating the impact of these amendments.

ASU 2014-11, “Transfers and Servicing (Topic 860):  Repurchase to Maturity Transactions, Repurchase Financings, and Disclosures.”  ASU 2014-11,  requires two accounting changes:  1) repurchase-to-maturity transactions to secured borrowing accounting and 2) repurchase financing arrangements, amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, will result in secured borrowing accounting for the repurchase agreement.   ASU 2014-11 also requires additional disclosures for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings.  The accounting changes in this update are effective for public business entities for the first interim or annual period beginning after December 15, 2014.  Early application is prohibited.  The Company is currently evaluating the impact of the standard.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”  This ASU has three sections:

Section A – Summary and amendments that creates revenue from contracts with customers (Topic 606) and Other Assets and Deferred Costs – Contracts with Customers (Subtopic 340-40);

Section B – Conforming amendments to other topics and subtopics in the codification and status tables;

Section C – Background information and basis for conclusions.

The accounting changes in this update are effective for public business entities for the first interim or annual period beginning after December 15, 2016.  Early application is prohibited.  The Company is currently evaluating the impact of the standard.

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with FASB ASC Topic 350, “Intangibles – Goodwill and Other,” which allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.  Based on a qualitative assessment, management determined that the Company’s recorded goodwill totaling $1.5 million, which resulted from the 2005 acquisition of its Phillipsburg, New Jersey branch, is not impaired as of December 31, 2014. 

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2.  Restrictions on Cash

Federal law requires depository institutions to hold reserves in the form of vault cash or, if vault cash is insufficient, in the form of a deposit maintained with a Federal Reserve Bank (“FRB”).  The dollar amount of a depository institution's reserve requirement is determined by applying the reserve ratios specified in the FRB’s Regulation D to an institution's reservable liabilities.  As of December 31, 2014 and 2013 the Company had sufficient vault cash to meet its reserve requirements and no additional reserves were required.

In addition, the Company’s contract with its current electronic funds transfer (“EFT”) provider requires a predetermined balance be maintained in a settlement account controlled by the provider equal to the Company’s average daily net settlement position multiplied by four days.  The required balance was $179 thousand as of December 31, 2014 and 2013.  This balance can be adjusted periodically to reflect actual transaction volume and seasonal factors.

The Governmental Unit Deposit Protection Act ("GUDPA") is a supplemental insurance program set forth by the New Jersey Legislature to protect the deposits of municipalities and local government agencies, administered by the Commissioner of the New Jersey Department of Banking and Insurance.  At December 31, 2014, the Company had $6.0 million in cash as eligible collateral pledged to the State of New Jersey Department of Banking and Insurance to secure its municipal deposits, compared to $18.0 million at December 31, 2013.

3.  Securities

This table provides the major components of securities available for sale (“AFS”) and held to maturity (“HTM”) at amortized cost and estimated fair value at December 31, 2014 and December 31, 2013:

	December 31, 2014								December 31, 2013
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available for sale:
U.S. Government sponsored entities	$	4,711	$	-	$	(93)	$	4,618	$	6,723	$	27	$	(332)	$	6,418
State and political subdivisions		11,055		112		(35)		11,132		16,960		192		(554)		16,598
Residential mortgage-backed securities		33,884		646		(147)		34,383		44,168		696		(475)		44,389
Commercial mortgage-backed securities		-		-		-		-		887		2		(1)		888
Corporate and other securities		10,188		63		(311)		9,940		13,173		67		(400)		12,840
Total securities available for sale	$	59,838	$	821	$	(586)	$	60,073	$	81,911	$	984	$	(1,762)	$	81,133
Held to maturity:
U.S. Government sponsored entities	$	4,440	$	-	$	(124)	$	4,316	$	5,814	$	-	$	(460)	$	5,354
State and political subdivisions		2,417		277		-		2,694		2,441		121		(17)		2,545
Residential mortgage-backed securities		8,164		211		(29)		8,346		10,395		145		(198)		10,342
Commercial mortgage-backed securities		4,005		13		(53)		3,965		6,750		87		(437)		6,400
Corporate and other securities		983		-		(23)		960		981		-		(73)		908
Total securities held to maturity	$	20,009	$	501	$	(229)	$	20,281	$	26,381	$	353	$	(1,185)	$	25,549

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This table provides the remaining contractual maturities and yields of securities within the investment portfolios. The carrying value of securities at December 31, 2014 is distributed by contractual maturity. Mortgage-backed securities and other securities, which may have principal prepayment provisions, are distributed based on contractual maturity. Expected maturities will differ materially from contractual maturities as a result of early prepayments and calls.

	Within one year				After one through five years				After five through ten years				After ten years				Total carrying value
(In thousands, except percentages)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Available for sale at fair value:
U.S. Government sponsored entities	$	-	-	%	$	1,014	1.00	%	$	956	2.06	%	$	2,648	2.04	%	$	4,618	1.82	%
State and political subdivisions		40	6.49			1,165	2.23			6,189	2.37			3,738	2.60			11,132	2.45
Residential mortgage-backed securities		-	-			1,718	1.70			2,335	1.94			30,330	2.81			34,383	2.70
Corporate and other securities		-	-			2,406	1.00			1,500	1.19			6,034	1.43			9,940	1.29
Total securities available for sale	$	40	6.49	%	$	6,303	1.42	%	$	10,980	2.09	%	$	42,750	2.55	%	$	60,073	2.35	%
Held to maturity at cost:
U.S. Government sponsored entities	$	-	-	%	$	-	-	%	$	-	-	%	$	4,440	1.97	%	$	4,440	1.97	%
State and political subdivisions		309	0.75			-	-			-	-			2,108	4.72			2,417	4.21
Residential mortgage-backed securities		-	-			468	4.87			272	5.19			7,424	3.01			8,164	3.19
Commercial mortgage-backed securities		-	-			-	-			-	-			4,005	2.76			4,005	2.76
Corporate and other securities		-	-			-	-			983	2.95			-	-			983	2.95
Total securities held to maturity	$	309	0.75	%	$	468	4.87	%	$	1,255	3.44	%	$	17,977	2.90	%	$	20,009	2.94	%

The fair value of securities with unrealized losses by length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2014 and December 31, 2013 are as follows:

	December 31, 2014
			Less than 12 months				12 months and greater				Total
(In thousands, except number in a loss position)	Total number in a loss position		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss
Available for sale:
U.S. Government sponsored entities		4	$	-	$	-	$	4,590	$	(93)	$	4,590	$	(93)
State and political subdivisions		7		-		-		4,103		(35)		4,103		(35)
Residential mortgage-backed securities		9		6,579		(16)		5,889		(131)		12,468		(147)
Commercial mortgage-backed securities		-		-		-		-		-		-		-
Corporate and other securities		7		1,053		(46)		3,736		(265)		4,789		(311)
Total temporarily impaired securities		27	$	7,632	$	(62)	$	18,318	$	(524)	$	25,950	$	(586)
Held to maturity:
U.S. Government sponsored entities		2	$	-	$	-	$	4,316	$	(124)	$	4,316	$	(124)
Residential mortgage-backed securities		3		-		-		2,586		(29)		2,586		(29)
Commercial mortgage-backed securities		1		-		-		1,822		(53)		1,822		(53)
Corporate and other securities		1		-		-		960		(23)		960		(23)
Total temporarily impaired securities		7	$	-	$	-	$	9,684	$	(229)	$	9,684	$	(229)

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	December 31, 2013
			Less than 12 months				12 months and greater				Total
(In thousands, except number in a loss position)	Total number in a loss position		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss
Available for sale:
U.S. Government sponsored entities		5	$	5,591	$	(332)	$	-	$	-	$	5,591	$	(332)
State and political subdivisions		19		8,575		(453)		934		(101)		9,509		(554)
Residential mortgage-backed securities		13		13,226		(398)		1,474		(77)		14,700		(475)
Commercial mortgage-backed securities		3		368		(1)		-		-		368		(1)
Corporate and other securities		9		3,994		(105)		3,088		(295)		7,082		(400)
Total temporarily impaired securities		49	$	31,754	$	(1,289)	$	5,496	$	(473)	$	37,250	$	(1,762)
Held to maturity:
U.S. Government sponsored entities		3	$	5,354	$	(460)	$	-	$	-	$	5,354	$	(460)
State and political subdivisions		2		986		(17)		-		-		986		(17)
Residential mortgage-backed securities		7		6,333		(193)		114		(5)		6,447		(198)
Commercial mortgage-backed securities		2		3,668		(437)		-		-		3,668		(437)
Corporate and other securities		1		908		(73)		-		-		908		(73)
Total temporarily impaired securities		15	$	17,249	$	(1,180)	$	114	$	(5)	$	17,363	$	(1,185)

Unrealized Losses

The unrealized losses in each of the categories presented in the tables above are discussed in the paragraphs that follow:

U.S. government sponsored entities and state and political subdivision securities: The unrealized losses on investments in these types of securities were caused by the increase in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than temporarily impaired as of December 31, 2014.  There was no other-than-temporary impairment on these securities at December 31, 2013.

Residential and commercial mortgage-backed securities:  The unrealized losses on investments in mortgage-backed securities were caused by increases in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The majority of contractual cash flows of these securities are guaranteed by the Federal National Mortgage Association (FNMA), the Government National Mortgage Association (GNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).  It is expected that the securities would not be settled at a price significantly less than the par value of the investment.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of December 31, 2014 or December 31, 2013.

Corporate and other securities: Included in this category are corporate debt securities, Community Reinvestment Act (“CRA”) investments, asset-backed securities, and one trust preferred security.  The unrealized losses on corporate debt securities were due to widening credit spreads or the increase in interest rates at the long end of the Treasury curve and the unrealized losses on CRA investments were caused by decreases in the market prices of the shares.  The Company evaluated the prospects of the issuers and forecasted a recovery period; and as a result determined it did not consider these investments to be other-than-temporarily impaired as of December 31, 2014 or December 31, 2013.  The unrealized loss on the trust preferred security was caused by an inactive trading market and changes in market credit spreads.  At December 31, 2014 and December 31, 2013, this category consisted of one single-issuer trust preferred security.  The contractual terms do not allow the security to be settled at a price less than the par value.  Because the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, which may be at maturity, the Company did not consider this security to be other-than-temporarily impaired as of December 31, 2014 or December 31, 2013.

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Realized Gains and Losses

Gross realized gains and losses on securities for the past two years are detailed in the table below:

	For the years ended December 31,
(In thousands)	2014		2013
Available for sale:
Realized gains	$	440	$	394
Realized losses		(7)		(4)
Total securities available for sale		433		390
Held to maturity:
Realized gains		-		-
Realized losses		-		-
Total securities held to maturity		-		-
Net gains on sales of securities	$	433	$	390

The net realized gains are included in noninterest income in the Consolidated Statements of Income as net security gains.  For 2014 and 2013, gross realized gains on sales of securities amounted to $440 thousand and $394 thousand, respectively, and gross realized losses were $7 thousand and $4 thousand, respectively. 

· The net gains during 2014 are attributed to the sale of seventeen municipal securities with a total book value of $5.7 million and resulting gains of $213 thousand, the sale of four mortgage-backed securities with a total book value of $8.6 million and resulting gains of $143 thousand, the sale of two agency securities with a book value of $2.6 million and resulting gains of $68 thousand, the sale of one corporate bond with a book value of $2.0 million resulting in a gain of $3 thousand, and the sale of one asset-backed security with a book value of $858 thousand resulting in a gain of $13 thousand, offset by the sale of one corporate bond with a book value of $2.0 million resulting in a loss of $3 thousand and the partial call of one municipal security resulting in a loss of $4 thousand.

· The net gains during 2013 are attributed to the sale of five asset-backed securities with a total book value of $6.4 million and resulting net gains of $195 thousand, the sale of four corporate bonds with a total book value of $4.8 million and resulting gains of $186 thousand, the sale of two mortgage-backed securities with a book value of $517 thousand for a gain of $9 thousand, and the sale of one equity security with a book value of $60 thousand for a gain of $4 thousand, offset by the partial call of one municipal security resulting in a loss of $4 thousand.

Pledged Securities

Securities with a carrying value of $50.4 million and $74.5 million at December 31, 2014 and December 31, 2013, respectively, were pledged to secure Government deposits, secure other borrowings and for other purposes required or permitted by law.  Included in these figures was $32.1 million and $19.9 million pledged against Government deposits at December 31, 2014 and December 31, 2013, respectively.

4.  Loans

The following table sets forth the classification of loans by class, including unearned fees, deferred costs and excluding the allowance for loan losses for the past two years:

(In thousands)	December 31, 2014		December 31, 2013
SBA loans held for investment	$	40,401	$	48,918
SBA 504 loans		34,322		31,564
Commercial loans
Commercial other		40,607		37,611
Commercial real estate		339,693		317,471
Commercial real estate construction		21,649		8,258
Residential mortgage loans		220,878		182,067
Consumer loans
Home equity		41,451		43,704
Consumer other		17,645		2,435
Total loans held for investment	$	756,646	$	672,028
SBA loans held for sale		5,179		6,673
Total loans	$	761,825	$	678,701

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Loans are made to individuals as well as commercial entities.  Specific loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower.  Credit risk, excluding SBA loans, tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by the Bank.  As a preferred SBA lender, a portion of the SBA portfolio is to borrowers outside the Company’s lending area.  However, during late 2008, the Company withdrew from SBA lending outside of its primary trade area, but continues to offer SBA loan products as an additional credit product within its primary trade area.  Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type.  A description of the Company's different loan segments follows:

SBA Loans:  SBA 7(a) loans, on which the SBA has historically provided guarantees of up to 90 percent of the principal balance, are considered a higher risk loan product for the Company than its other loan products.  The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the nonguaranteed portion held in the portfolio as a loan held for investment.  SBA loans are for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes.  Loans are guaranteed by the businesses' major owners.  SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.

SBA 504 Loans:  The SBA 504 program consists of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property.  SBA 504 loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.  Generally, the Company has a 50 percent loan to value ratio on SBA 504 program loans at origination.

Commercial Loans:  Commercial credit is extended primarily to middle market and small business customers.  Commercial loans are generally made in the Company’s market place for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes.  Loans will generally be guaranteed in full or for a meaningful amount by the businesses' major owners.  Commercial loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.

ResidentialMortgage and Consumer Loans:  The Company originates mortgage and consumer loans including principally residential real estate, home equity lines and loans and consumer construction lines.  Each loan type is evaluated on debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower.

Inherent in the lending function is credit risk, which is the possibility a borrower may not perform in accordance with the contractual terms of their loan.  A borrower’s inability to pay their obligations according to the contractual terms can create the risk of past due loans and, ultimately, credit losses, especially on collateral deficient loans.  The Company minimizes its credit risk by loan diversification and adhering to credit administration policies and procedures.  Due diligence on loans begins when the Company initiates contact regarding a loan with a borrower.  Documentation, including a borrower’s credit history, materials establishing the value and liquidity of potential collateral, the purpose of the loan, the source of funds for repayment of the loan, and other factors, are analyzed before a loan is submitted for approval.  The loan portfolio is then subject to on-going internal reviews for credit quality, as well as independent credit reviews by an outside firm.

The Company's extension of credit is governed by the Credit Risk Policy which was established to control the quality of the Company's loans.  These policies and procedures are reviewed and approved by the Board of Directors on a regular basis.

Credit Ratings

For SBA 7(a), SBA 504 and commercial loans, management uses internally assigned risk ratings as the best indicator of credit quality.  A loan’s internal risk rating is updated at least annually and more frequently if circumstances warrant a change in risk rating.  The Company uses a 1 through 10 loan grading system that follows regulatory accepted definitions.

Pass:  Risk ratings of 1 through 6 are used for loans that are performing, as they meet, and are expected to continue to meet, all of the terms and conditions set forth in the original loan documentation, and are generally current on principal and interest payments.  These performing loans are termed “Pass”.

Special Mention:  Criticized loans are assigned a risk rating of 7 and termed “Special Mention”, as the borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention.  If not checked or corrected, these trends will weaken the Bank’s collateral and position.  While potentially weak, these borrowers are currently marginally acceptable and no loss of interest or principal is anticipated.  As a result, special mention assets do not expose an institution to sufficient risk to warrant adverse classification.  Included in “Special Mention” could be turnaround situations, such as borrowers with deteriorating trends beyond one year, borrowers in start up or deteriorating industries, or borrowers with a poor market share in an average industry.  "Special Mention" loans may include an element of asset quality, financial flexibility, or below average management.  Management and ownership may have limited depth or experience.  Regulatory agencies have agreed on a consistent definition of “Special Mention” as an asset with potential weaknesses which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.  This definition is intended to ensure that the “Special Mention” category is not used to identify assets that have as their sole weakness credit data exceptions or collateral documentation exceptions that are not material to the repayment of the asset.

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Substandard:  Classified loans are assigned a risk rating of an 8 or 9, depending upon the prospect for collection, and deemed “Substandard”.  A risk rating of 8 is used for borrowers with well-defined weaknesses that jeopardize the orderly liquidation of debt.  The loan is inadequately protected by the current paying capacity of the obligor or by the collateral pledged, if any.  Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned.  There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected.  Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified “Substandard”.  

A risk rating of 9 is used for borrowers that have all the weaknesses inherent in a loan with a risk rating of 8, with the added characteristic that the weaknesses make collection of debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  Serious problems exist to the point where partial loss of principal is likely.  The possibility of loss is extremely high, but because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined.  Pending factors include proposed merger, acquisition, or liquidation procedures; capital injection; perfecting liens on additional collateral; and refinancing plans.  Partial charge-offs are likely.

Loss:  Once a borrower is deemed incapable of repayment of unsecured debt, the risk rating becomes a 10, the loan is termed a “Loss”, and charged-off immediately.  Loans to such borrowers are considered uncollectible and of such little value that continuance as active assets of the Bank is not warranted.  This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off these basically worthless assets even though partial recovery may be affected in the future.

For residential mortgage and consumer loans, management uses performing versus nonperforming as the best indicator of credit quality.  Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt.  These credit quality indicators are updated on an ongoing basis, as a loan is placed on nonaccrual status as soon as management believes there is sufficient doubt as to the ultimate ability to collect interest on a loan.

The tables below detail the Company’s loan portfolio by class according to their credit quality indicators discussed in the paragraphs above as of December 31, 2014:

	December 31, 2014
	SBA, SBA 504 & Commercial loans - Internal risk ratings
(In thousands)	Pass		Special mention		Substandard		Total
SBA loans held for investment	$	35,827	$	2,250	$	2,324	$	40,401
SBA 504 loans		24,415		5,967		3,940		34,322
Commercial loans
Commercial other		38,054		1,270		1,283		40,607
Commercial real estate		315,015		20,555		4,123		339,693
Commercial real estate construction		21,649		-		-		21,649
Total commercial loans		374,718		21,825		5,406		401,949
Total SBA, SBA 504 and commercial loans	$	434,960	$	30,042	$	11,670	$	476,672
	Residential mortgage & Consumer loans - Performing/Nonperforming
(In thousands)			Performing		Nonperforming		Total
Residential mortgage loans			$	220,233	$	645	$	220,878
Consumer loans
Home equity				40,908		543		41,451
Consumer other				17,643		2		17,645
Total consumer loans				58,551		545		59,096
Total residential mortgage and consumer loans			$	278,784	$	1,190	$	279,974

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The tables below detail the Company’s loan portfolio by class according to their credit quality indicators discussed in the paragraphs above as of December 31, 2013: 

	December 31, 2013
	SBA, SBA 504 & Commercial loans - Internal risk ratings
(In thousands)	Pass		Special mention		Substandard		Total
SBA loans held for investment	$	43,778	$	2,035	$	3,105	$	48,918
SBA 504 loans		20,641		9,595		1,328		31,564
Commercial loans
Commercial other		34,946		1,499		1,166		37,611
Commercial real estate		289,220		21,137		7,114		317,471
Commercial real estate construction		8,081		-		177		8,258
Total commercial loans		332,247		22,636		8,457		363,340
Total SBA, SBA 504 and commercial loans	$	396,666	$	34,266	$	12,890	$	443,822
	Residential mortgage & Consumer loans - Performing/Nonperforming
(In thousands)			Performing		Nonperforming		Total
Residential mortgage loans			$	176,340	$	5,727	$	182,067
Consumer loans
Home equity				42,029		1,675		43,704
Consumer other				2,430		5		2,435
Total consumer loans				44,459		1,680		46,139
Total residential mortgage and consumer loans			$	220,799	$	7,407	$	228,206

Nonperforming and Past Due Loans

Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt.  Loans past due 90 days or more and still accruing interest are not included in nonperforming loans and generally represent loans that are well collateralized and in a continuing process expected to result in repayment or restoration to current status.  The risk of loss is difficult to quantify and is subject to fluctuations in collateral values, general economic conditions and other factors.  The improved state of the economy has resulted in a substantial reduction in nonperforming loans and loan delinquencies.  The Company values its collateral through the use of appraisals, broker price opinions, and knowledge of its local market.  In response to the credit risk in its portfolio, the Company has increased staffing in its credit monitoring department and increased efforts in the collection and analysis of borrowers’ financial statements and tax returns. 

The following tables set forth an aging analysis of past due and nonaccrual loans as of December 31, 2014 and December 31, 2013:

	December 31, 2014
(In thousands)	30-59 days past due		60-89 days past due		90+ days and still accruing		Nonaccrual (1)		Total past due		Current		Total loans
SBA loans held for investment	$	1,093	$	147	$	161	$	3,348	$	4,749	$	35,652	$	40,401
SBA 504 loans		1,639		-		-		2,109		3,748		30,574		34,322
Commercial loans
Commercial other		-		-		-		1,129		1,129		39,478		40,607
Commercial real estate		2,812		-		7		3,592		6,411		333,282		339,693
Commercial real estate construction		-		-		-		-		-		21,649		21,649
Residential mortgage loans		2,887		658		722		645		4,912		215,966		220,878
Consumer loans
Home equity		639		213		-		543		1,395		40,056		41,451
Consumer other		-		6		-		2		8		17,637		17,645
Total loans held for investment	$	9,070	$	1,024	$	890	$	11,368	$	22,352	$	734,294	$	756,646
SBA loans held for sale		-		-		-		-		-		5,179		5,179
Total loans	$	9,070	$	1,024	$	890	$	11,368	$	22,352	$	739,473	$	761,825

(1) At December 31, 2014, nonaccrual loans included $3.0million of TDRs and $1.6 million of loans guaranteed by the SBA.  The remaining $3.5million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

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	December 31, 2013
(In thousands)	30-59 days past due		60-89 days past due		90+ days and still accruing		Nonaccrual (1)		Total past due		Current		Total loans
SBA loans held for investment	$	4,314	$	264	$	-	$	2,746	$	7,324	$	41,594	$	48,918
SBA 504 loans		-		-		-		1,101		1,101		30,463		31,564
Commercial loans
Commercial other		123		-		-		67		190		37,421		37,611
Commercial real estate		347		190		14		3,785		4,336		313,135		317,471
Commercial real estate construction		-		-		-		177		177		8,081		8,258
Residential mortgage loans		3,050		-		5		5,727		8,782		173,285		182,067
Consumer loans
Home equity		142		69		-		1,675		1,886		41,818		43,704
Consumer other		9		1		-		5		15		2,420		2,435
Total loans held for investment	$	7,985	$	524	$	19	$	15,283	$	23,811	$	648,217	$	672,028
SBA loans held for sale		65		-		-		-		65		6,608		6,673
Total loans	$	8,050	$	524	$	19	$	15,283	$	23,876	$	654,825	$	678,701

(1) At December 31, 2013, nonaccrual loans included $467thousand of TDRs and $540thousand of loans guaranteed by the SBA.  The remaining $7.5million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

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Impaired Loans

The Company has defined impaired loans to be all nonperforming loans and troubled debt restructurings.  Management considers a loan impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract.

The following tables provide detail on the Company’s loans individually evaluated for impairment with the associated allowance amount, if applicable, as of December 31, 2014 and December 31, 2013: 

	December 31, 2014
(In thousands)	Unpaid principal balance		Recorded investment		Specific reserves
With no related allowance:
SBA loans held for investment (1)	$	1,719	$	1,093	$	-
SBA 504 loans		2,202		2,202		-
Commercial loans
Commercial other		878		877		-
Commercial real estate		2,017		1,927		-
Total commercial loans		2,895		2,804		-
Total impaired loans with no related allowance		6,816		6,099		-
With an allowance:
SBA loans held for investment (1)		1,521		1,127		502
SBA 504 loans		1,676		1,676		510
Commercial loans
Commercial other		364		252		41
Commercial real estate		3,003		3,003		108
Total commercial loans		3,367		3,255		149
Total impaired loans with a related allowance		6,564		6,058		1,161
Total individually evaluated impaired loans:
SBA loans held for investment (1)		3,240		2,220		502
SBA 504 loans		3,878		3,878		510
Commercial loans
Commercial other		1,242		1,129		41
Commercial real estate		5,020		4,930		108
Total commercial loans		6,262		6,059		149
Total individually evaluated impaired loans	$	13,380	$	12,157	$	1,161

(1) Balances are reduced by amount guaranteed by the SBA of $1.6million at December 31, 2014.

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	December 31, 2013
(In thousands)	Unpaid principal balance		Recorded investment		Specific reserves
With no related allowance:
SBA loans held for investment (1)	$	1,123	$	835	$	-
SBA 504 loans		2,251		2,251		-
Commercial loans
Commercial other		56		55		-
Commercial real estate		6,116		5,969		-
Total commercial loans		6,172		6,024		-
Total impaired loans with no related allowance		9,546		9,110		-
With an allowance:
SBA loans held for investment (1)		2,282		1,905		831
SBA 504 loans		1,277		677		29
Commercial loans
Commercial other		24		12		12
Commercial real estate		3,557		2,907		230
Commercial real estate construction		202		177		36
Total commercial loans		3,783		3,096		278
Total impaired loans with a related allowance		7,342		5,678		1,138
Total individually evaluated impaired loans:
SBA loans held for investment (1)		3,405		2,740		831
SBA 504 loans		3,528		2,928		29
Commercial loans
Commercial other		80		67		12
Commercial real estate		9,673		8,876		230
Commercial real estate construction		202		177		36
Total commercial loans		9,955		9,120		278
Total individually evaluated impaired loans	$	16,888	$	14,788	$	1,138

(1) Balances are reduced by amount guaranteed by the SBA of $540thousand at December 31, 2013.

The following table presents the average recorded investments in impaired loans and the related amount of interest recognized during the time period in which the loans were impaired for the years ended December 31, 2014 and 2013.  The average balances are calculated based on the month-end balances of impaired loans.  When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal under the cost recovery method, therefore no interest income is recognized.  The interest recognized on impaired loans noted below represents accruing troubled debt restructurings only and nominal amounts of income recognized on a cash basis for well-collateralized impaired loans.

	For the years ended December 31,
	2014				2013
(In thousands)	Average recorded investment		Interest income recognized on impaired loans		Average recorded investment		Interest income recognized on impaired loans
SBA loans held for investment (1)	$	3,028	$	256	$	3,244	$	197
SBA 504 loans		3,042		109		5,066		173
Commercial loans
Commercial other		323		2		1,461		100
Commercial real estate		6,336		231		9,751		324
Commercial real estate construction		73		23		171		-
Total	$	12,802	$	621	$	19,693	$	794

(1) Balances are reduced by the average amount guaranteed by the SBA of $1.2million and $953thousand for years ended December 31, 2014 and 2013, respectively.

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Troubled Debt Restructurings

The Company's loan portfolio includes certain loans that have been modified in a troubled debt restructuring (“TDR”).  TDRs occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider, unless it results in a delay in payment that is insignificant.  These concessions typically include reductions in interest rate, extending the maturity of a loan, other modifications of payment terms, or a combination of modifications.  When the Company modifies a loan, management evaluates for any possible impairment using either the discounted cash flows method, where the value of the modified loan is based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or by using the fair value of the collateral less selling costs if the loan is collateral-dependent.  If management determines that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or charge-off to the allowance.  This process is used, regardless of loan type, and for loans modified as TDRs that subsequently default on their modified terms.

TDRs of $6.5million and $7.9million are included in the impaired loan numbers as of December 31, 2014 and December 31, 2013, respectively.  The decrease was due to payoffs, note sales and principal pay downs.  At December 31, 2014, there were specific reserves of $223thousand on TDRs, $24thousand on performing TDRs and $199thousand on nonperforming TDRs.  At December 31, 2013, there were specific reserves of $410thousand on TDRS, $363thousand on performing TDRs and $47thousand on nonperforming TDRs.  At December 31, 2014, $3.0million of TDRs were in nonaccrual status, compared to $467thousand at December 31, 2013.  The increase during the twelve month period was due to the transfer of 3 loans, one of which had a principal amount of $2.7million, into nonaccrual status.  The remaining TDRs are in accrual status since they continue to perform in accordance with their restructured terms.  There are no commitments to lend additional funds on these loans. 

The following table details loans modified during the years ended December 31, 2014 and 2013, including the number of modifications, the recorded investment at the time of the modification and the year-to-date impact to interest income as a result of the modification.  

	For the years ended December 31,
	2014						2013
(In thousands, except number of contracts)	Number of contracts		Recorded investment at time of modification		Impact of interest rate change on income		Number of contracts		Recorded investment at time of modification		Impact of interest rate change on income
SBA loans held for investment		-	$	-	$	-		1	$	65	$	-
Commercial real estate		-		-		-		1		2,684		50
Total		-	$	-	$	-		2	$	2,749	$	50

In addition, there was one SBA loan with no outstanding principal balance modified as a TDR within the previous 12 months where a concession was made and the loan subsequently defaulted during the year ended December 31, 2014. In this case, subsequent default is defined as 90 days past due or transferred to nonaccrual status. There were no qualifying subsequent defaults to TDRs in 2013.

To date, the Company’s TDRs consisted of interest rate reductions, interest only periods and maturity extensions.  There has been no principal forgiveness.  There were no TDRs modified in 2014.  The following table shows the types of modifications done during the year ended December 31, 2013, with the respective loan balances as of the period end:

	For the year ended December 31, 2013
(In thousands)	SBA held for investment		Commercial real estate		Total
Type of modification:
Interest only with reduced interest rate	$	-	$	2,684	$	2,684
Interest only with nominal principal		65		-		65
Total TDRs	$	65	$	2,684	$	2,749

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Other Loan Information

Servicing Assets:

Loans sold to others and serviced by the Company are not included in the accompanying Consolidated Balance Sheets.  The total amount of such loans serviced, but owned by outside investors, amounted to approximately $113.2million and $101.9million at December 31, 2014 and 2013, respectively.  At December 31, 2014 and 2013, the carrying value, which approximates fair value, of servicing assets was $753thousand and $437thousand, respectively, and is included in Other Assets.  The fair value of SBA servicing assets was determined using a discount rate of 15percent, constant prepayment speeds ranging from 15to 18,  and interest strip multiples ranging from 2.08to 3.80, depending on each individual credit.  The fair value of mortgage servicing assets was determined using a discount rate of 12 percent and the present value of excess servicing over seven years.  A summary of the changes in the related servicing assets for the past two years follows:

	For the years ended December 31,
(In thousands)	2014		2013
Balance, beginning of year	$	437	$	396
Servicing assets capitalized		483		187
Amortization of expense		(167)		(146)
Provision for loss in fair value		-		-
Balance, end of year	$	753	$	437

In addition, the Company had a $657thousand and $502 thousand discount related to the retained portion of the unsold SBA loans at December 31, 2014 and 2013, respectively.

Officer and Director Loans:

In the ordinary course of business, the Company may extend credit to officers, directors or their associates.  These loans are subject to the Company’s normal lending policy.  An analysis of such loans, all of which are current as to principal and interest payments, is as follows:

(In thousands)	December 31, 2014
Balance, beginning of year	$	18,327
New loans and advances		9,254
Loan repayments		(1,129)
Balance, end of year	$	26,452

Loan Portfolio Collateral:

The majority of the Company’s loans are secured by real estate.  Declines in the market values of real estate in the Company’s trade area impact the value of the collateral securing its loans.  This could lead to greater losses in the event of defaults on loans secured by real estate.  At both December 31, 2014 and 2013, approximately 96percent of the Company’s loan portfolio was secured by real estate.

5. Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

Allowance for Loan Losses

The Company has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio.  At a minimum, the adequacy of the allowance for loan losses is reviewed by management on a quarterly basis.  For purposes of determining the allowance for loan losses, the Company has segmented the loans in its portfolio by loan type.  Loans are segmented into the following pools: SBA 7(a), SBA 504, commercial, residential mortgages, and consumer loans.  Certain portfolio segments are further broken down into classes based on the associated risks within those segments and the type of collateral underlying each loan.  Commercial loans are divided into the following three classes: commercial real estate, commercial real estate construction and commercial other.  Consumer loans are divided into two classes as follows:  Home equity and other.

The standardized methodology used to assess the adequacy of the allowance includes the allocation of specific and general reserves.  The same standard methodology is used, regardless of loan type.  Specific reserves are made to individual impaired loans and troubled debt restructurings (see Note 1 for additional information on this term).  The general reserve is set based upon a representative average historical net charge-off rate adjusted for the following environmental factors: delinquency and impairment trends, charge-off and recovery trends, changes in the volume of restructured loans, volume and loan term trends, changes in risk and underwriting policy trends, staffing and experience changes, national and local economic trends, industry conditions and credit concentration changes.  Within the five-year historical net charge-off rate, the Company weights the past three years more because it believes they are more indicative of future losses.  All of the environmental factors are ranked and assigned a basis points value based on the following scale: low, low moderate, moderate, high moderate and high risk.  Each environmental factor is evaluated separately for each class of loans and risk weighted based on its individual characteristics. 

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· For SBA 7(a), SBA 504 and commercial loans, the estimate of loss based on pools of loans with similar characteristics is made through the use of a standardized loan grading system that is applied on an individual loan level and updated on a continuous basis.  The loan grading system incorporates reviews of the financial performance of the borrower, including cash flow, debt-service coverage ratio, earnings power, debt level and equity position, in conjunction with an assessment of the borrower's industry and future prospects.  It also incorporates analysis of the type of collateral and the relative loan to value ratio.

· For residential mortgage and consumer loans, the estimate of loss is based on pools of loans with similar characteristics.  Factors such as credit score, delinquency status and type of collateral are evaluated.  Factors are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the reserve factors are made as needed. 

According to the Company’s policy, a loss (“charge-off”) is to be recognized and charged to the allowance for loan losses as soon as a loan is recognized as uncollectable.  All credits which are 90 days past due must be analyzed for the Company’s ability to collect on the credit.  Once a loss is known to exist, the charge-off approval process is immediately expedited.  This charge-off policy is followed for all loan types.

The allocated allowance is the total of identified specific and general reserves by loan category.  The allocation is not necessarily indicative of the categories in which future losses may occur.  The total allowance is available to absorb losses from any segment of the portfolio.An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in methodologies for estimating allocated and general reserves in the portfolio.  The unallocated portion of the allowance increased for the year ended December 31, 2014 due to changes in environmental factors such as charge-off and recovery trends, improvements in local and national economic conditions, and improved industry conditions, partially offset by growth in the loan portfolio.

The following tables detail the activity in the allowance for loan losses by portfolio segment for the past two years:

	For the years ended December 31, 2014
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Balance, beginning of period	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141
Charge-offs		(1,053)		(92)		(1,037)		(740)		(593)		-		(3,515)
Recoveries		140		-		166		60		9		-		375
Net charge-offs		(913)		(92)		(871)		(680)		(584)		-		(3,140)
Provision for loan losses charged to expense		209		472		301		837		678		53		2,550
Balance, end of period	$	1,883	$	1,337	$	6,270	$	2,289	$	667	$	105	$	12,551

	For the years ended December 31, 2013
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Balance, beginning of period	$	3,378	$	1,312	$	7,091	$	1,769	$	524	$	684	$	14,758
Charge-offs		(1,076)		(1,193)		(1,392)		(375)		(588)		-		(4,624)
Recoveries		250		182		204		17		4		-		657
Net charge-offs		(826)		(1,011)		(1,188)		(358)		(584)		-		(3,967)
Provision for loan losses charged to expense		35		656		937		721		633		(632)		2,350
Balance, end of period	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141

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The following tables present loans and their related allowance for loan losses, by portfolio segment, as of December 31st for the past two years:

	December 31, 2014
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	502	$	510	$	149	$	-	$	-	$	-	$	1,161
Collectively evaluated for impairment		1,381		827		6,121		2,289		667		105		11,390
Total	$	1,883	$	1,337	$	6,270	$	2,289	$	667	$	105	$	12,551
Loan ending balances:
Individually evaluated for impairment	$	2,220	$	3,878	$	6,059	$	-	$	-	$	-	$	12,157
Collectively evaluated for impairment		38,181		30,444		395,890		220,878		59,096		-		744,489
Total	$	40,401	$	34,322	$	401,949	$	220,878	$	59,096	$	-	$	756,646

	December 31, 2013
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	831	$	29	$	278	$	-	$	-	$	-	$	1,138
Collectively evaluated for impairment		1,756		928		6,562		2,132		573		52		12,003
Total	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141
Loan ending balances:
Individually evaluated for impairment	$	2,740	$	2,928	$	9,120	$	-	$	-	$	-	$	14,788
Collectively evaluated for impairment		46,178		28,636		354,220		182,067		46,139		-		657,240
Total	$	48,918	$	31,564	$	363,340	$	182,067	$	46,139	$	-	$	672,028

Changes in Methodology:

The Company did not make any changes to its allowance for loan losses methodology in the current period.

Reserve for Unfunded Loan Commitments

In addition to the allowance for loan losses, the Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated probable losses.  Adjustments to the reserve are made through other expense and applied to the reserve which is classified as other liabilities.  At December 31, 2014, a $151thousand commitment reserve was reported on the balance sheet as an “other liability”, compared to a $103thousand commitment reserve at December 31, 2013.  There were nolosses on unfunded loan commitments during 2014 or 2013.

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6.  Premises and Equipment

The detail of premises and equipment as of December 31st for the past two years is as follows:

(In thousands)	December 31, 2014		December 31, 2013
Land and buildings	$	17,136	$	17,022
Furniture, fixtures and equipment		7,032		6,603
Leasehold improvements		1,709		1,656
Gross premises and equipment		25,877		25,281
Less: Accumulated depreciation		(10,646)		(9,609)
Net premises and equipment	$	15,231	$	15,672

Amounts charged to noninterest expense for depreciation of premises and equipment amounted to $1.0 million and $1.2 million in 2014 and 2013, respectively.

7.  Other Assets

The detail of other assets as of December 31st for the past two years is as follows:

(In thousands)	December 31, 2014		December 31, 2013
Prepaid expenses	$	399	$	481
Servicing assets		753		437
Net receivable due from SBA		318		429
Other		1,821		1,307
Total other assets	$	3,291	$	2,654

8.  Deposits

The following table details the maturity distribution of time deposits as of December 31st for the past two years:

	Three		More than three		More than six		More than
	months		months through		months through		twelve
(In thousands)	or less		six months		twelve months		months		Total
At December 31, 2014:
$100,000 or more	$	11,444	$	8,290	$	19,570	$	59,910	$	99,214
Less than $100,000		10,988		7,837		14,512		79,782		113,119
At December 31, 2013:
$100,000 or more	$	14,588	$	7,965	$	18,582	$	55,961	$	97,096
Less than $100,000		8,058		7,754		19,522		72,924		108,258

The following table presents the expected maturities of time deposits over the next five years:

(In thousands)	2015		2016		2017		2018		2019		Thereafter		Total
Balance maturing	$	72,641	$	48,759	$	7,765	$	58,407	$	24,645	$	116	$	212,333

Time deposits with balances of $250 thousand or more totaled $20.2 million and $16.4 million at December 31, 2014 and 2013, respectively.

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9.  Borrowed Funds and Subordinated Debentures

The following table presents the period-end and average balances of borrowed funds and subordinated debentures for the past three years with resultant rates:

	2014					2013					2012
(In thousands)	Amount		Rate			Amount		Rate			Amount		Rate
FHLB borrowings and repurchase agreements:
At December 31,	$	110,000		2.31	%	$	92,000		2.58	%	$	60,000		3.94	%
Year-to-date average		60,765		3.96			61,010		3.88			60,008		3.94
Maximum outstanding		140,000					95,000					61,000
Repurchase agreements:
At December 31,	$	15,000		3.67	%	$	15,000		3.67	%	$	15,000		3.67	%
Year-to-date average		15,000		3.67			15,000		3.67			15,000		3.67
Maximum outstanding		15,000					15,000					15,000
Subordinated debentures:
At December 31,	$	15,465		1.82	%	$	15,465		1.80	%	$	15,465		1.89	%
Year-to-date average		15,465		1.81			15,465		1.83			15,465		2.19
Maximum outstanding		15,465					15,465					15,465

The following table presents the expected maturities of borrowed funds and subordinated debentures over the next five years:

(In thousands)	2015		2016		2017		2018		2019		Thereafter		Total
FHLB borrowings and repurchase agreements	$	60,000	$	20,000	$	30,000	$	-	$	-	$	-	$	110,000
Other repurchase agreements		-		-		-		-		15,000		-		15,000
Subordinated debentures		-		-		-		-		-		15,465		15,465
Total borrowings	$	60,000	$	20,000	$	30,000	$	-	$	15,000	$	15,465	$	140,465

FHLB Borrowings

FHLB borrowings at December 31, 2014 included a $50.0 million overnight line of credit advance, versus $32.0 million at December 31, 2013.  FHLB borrowings at December 31, 2014 also consisted of six  $10.0 million advances, three of which are callable quarterly.  Comparatively, FHLB borrowings at December 31, 2013 consisted of three$10.0 million advances and three$10.0 million repurchase agreements. The terms of these transactions at year end 2014 are as follows:

· The $50.0 million FHLB overnight line of credit advance issued on December 31, 2014 was at a rate of 0.32 percent and was repaid on January 2, 2015.

· The FHLB advance that was issued on April 27, 2005 has a fixed rate of 3.70 percent, matures on April 27, 2015 and is callable quarterly on the 27th of July, October, January and April.

· The FHLB advance that was issued on November 2, 2006 has a fixed rate of 4.03 percent, matures on November 2, 2016 and is callable quarterly on the 2nd of February, May, August and November.

· The FHLB advance that was issued on August 10, 2007 has a fixed rate of 4.23 percent, matures on August 10, 2017 and is callable quarterly on the 10th of November, February, May and August.

· The FHLB advance that was issued on May 6, 2014 has a fixed rate of 4.19 percent, matures on December 15, 2016.

· The FHLB advance that was issued on July 17, 2014 has a fixed rate of 4.27 percent, matures on April 5, 2017.  

· The FHLB advance that was issued on July 17, 2014 has a fixed rate of 3.40 percent, matures on December 20, 2017.

Due to the call provisions on three of these advances, the expected maturity could differ from the contractual maturity.

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Repurchase Agreements

At December 31, 2014 and 2013, the Company was a party to a $15.0 million repurchase agreement that was entered into in February 2008, has a term of 10 years expiring on February 28, 2018, and a rate of 3.67 percent.  The borrowing was callable by the issuer on the repurchase date of May 29, 2008 and quarterly thereafter. 

Due to the call provisions of this advance, the expected maturity could differ from the contractual maturity.

Subordinated Debentures

At December 31, 2014 and 2013, the Company was a party in the following subordinated debenture transactions:

· On July 24, 2006, Unity (NJ) Statutory Trust II, a statutory business trust and wholly-owned subsidiary of Unity Bancorp, Inc., issued $10.0 million of floating rate capital trust pass through securities to investors due on July 24, 2036.  The subordinated debentures are redeemable in whole or part, prior to maturity but after July 24, 2011.  The floating interest rate on the subordinated debentures is the three-month LIBOR plus 159 basis points and reprices quarterly.  The floating interest rate was 1.84 percent at December 31, 2014 and 2013.

· On December 19, 2006, Unity (NJ) Statutory Trust III, a statutory business trust and wholly-owned subsidiary of Unity Bancorp, Inc., issued $5.0 million of floating rate capital trust pass through securities to investors due on December 19, 2036.  The subordinated debentures are redeemable in whole or part, prior to maturity but after December 19, 2011.  The floating interest rate on the subordinated debentures is the three-month LIBOR plus 165 basis points and reprices quarterly.  The floating interest rate was 1.89 percent at December 31, 2014 and 2013.

· In connection with the formation of the statutory business trusts, the trusts also issued $465 thousand of common equity securities to the Company, which together with the proceeds stated above were used to purchase the subordinated debentures, under the same terms and conditions. 

The capital securities in each of the above transactions have preference over the common securities with respect to liquidation and other distributions and qualify as Tier I capital.  Under the terms of the Dodd-Frank Wall Street Reform and Consumer Protection Act, these securities will continue to qualify as Tier 1 capital as the Company has less than $10 billion in assets.  In accordance with FASB ASC Topic 810, “Consolidation,” the Company does not consolidate the accounts and related activity of Unity (NJ) Statutory Trust II and Unity (NJ) Statutory Trust III because it is not the primary beneficiary.  The additional capital from each of these transactions was used to bolster the Company’s capital ratios and for general corporate purposes, including among other things, capital contributions to the Bank.

The Company has the ability to defer interest payments on the subordinated debentures for up to five years without being in default.  Due to the redemption provisions of these securities, the expected maturity could differ from the contractual maturity.

10.  Commitments and Contingencies

Facility Lease Obligations

The Company operates fifteen branches, four branches are under operating leases, including its headquarters, and eleven branches are owned.  The contractual expiration range on the remaining four leases is between the years 2014 and 2018. 

The following table summarizes the contractual rent payments expected in future years:

(In thousands)	2015		2016		2017		2018		Thereafter		Total
Operating lease rental payments	$	662	$	638	$	602	$	438	$	-	$	2,340

Rent expense totaled $718 thousand for 2014 and $856 thousand for 2013.  The Company currently accounts for all of its leases as operating leases.  In addition, the Company has one lease with a related party.  The Company leases its Clinton, New Jersey headquarters from a partnership in which two Board members, Messrs. D. Dallas and R. Dallas are partners.  Under the lease for the facility, the Company paid aggregate rental payments of $400 thousand in 2014 and $437 thousand in 2013.  Rental payments reflect market rents and the lease reflects terms that are comparable to those which could have been obtained in a lease with an unaffiliated third party.  When this lease expired at the end of 2013, it was renewed for another five-year term expiring at the end of 2018.  The annual rent is increased each year beginning January 1, 2016 by the increase in the Consumer Price Index (“CPI”) for the New York Metropolitan area (not to exceed 1.5 percent).

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Litigation

The Company may, in the ordinary course of business, become a party to litigation involving collection matters, contract claims and other legal proceedings relating to the conduct of its business.  In the best judgment of management, based upon consultation with counsel, the consolidated financial position and results of operations of the Company will not be affected materially by the final outcome of any pending legal proceedings or other contingent liabilities and commitments.

Commitments to Borrowers

Commitments to extend credit are legally binding loan commitments with set expiration dates.  They are intended to be disbursed, subject to certain conditions, upon the request of the borrower.  The Company was committed to advance approximately $150.9 million to its borrowers as of December 31, 2014, compared to $103.2 million at December 31, 2013.  At December 31, 2014, $74.1 million of these commitments expire within one year, compared to $45.6 million a year earlier.  At December 31, 2014, the Company had $1.5 million in standby letters of credit compared to $1.4 million at December 31, 2013.  The estimated fair value of these guarantees is not significant.  The Company believes it has the necessary liquidity to honor all commitments.

11.  Accumulated Other Comprehensive Income (Loss)

The following table shows the changes in other comprehensive income (loss) for the past two years:

	For the twelve months ended December 31,
	2014						2013
(In thousands)	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Balance, beginning of period					$	(476)					$	1,333
Unrealized holding gains (losses) on securities arising during the period	$	1,446	$	537		909	$	(2,606)	$	(1,056)		(1,550)
Less: Reclassification adjustment for gains on securities included in net income		433		143		290		390		131		259
Net unrealized gains (losses) on securities arising during the period	$	1,013	$	394	$	619	$	(2,996)	$	(1,187)	$	(1,809)
Balance, end of period					$	143					$	(476)

12.  Shareholders’ Equity

Shareholders’ equity increased $13.0 million to $70.1 million at December 31, 2014 compared to $57.2 million at December 31, 2013, due primarily to $6.1 million in additional capital as a result of the completion of the common stock rights offering and net income of $6.4 million.  Other items impacting shareholders’ equity included $757 thousand in dividends accrued on common stock, $619 thousand in unrealized gains net of tax on available for sale securities and $537 thousand from the issuance of common stock under employee benefit plans.  The issuance of common stock under employee benefit plans includes nonqualified stock options and restricted stock expense related entries, employee option exercises and the tax benefit of options exercised.

Preferred Stock

On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of 2008 (“EESA”), which provided the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to the U.S. markets.  One of the programs resulting from the EESA was the Treasury’s Capital Purchase Program (“CPP”) which provided direct equity investment of perpetual preferred stock by the U.S. Treasury in qualified financial institutions.  This program was voluntary and required an institution to comply with several restrictions and provisions, including limits on executive compensation, stock redemptions, and declaration of dividends.  The perpetual preferred stock had a dividend rate of 5 percent per year until the fifth anniversary of the Treasury investment and a dividend rate of 9 percent thereafter.  The Company received an investment in perpetual preferred stock of $20.6 million on December 5, 2008.  These proceeds were allocated between the preferred stock and warrants based on relative fair value in accordance with FASB ASC Topic 470, “Debt.”  The allocation of proceeds resulted in a discount on the preferred stock to be accreted over five years.  The Company issued a warrant to purchase 764,778 shares of common stock to the U.S. Treasury and $2.6 million of the proceeds were allocated to the warrant.  The warrant was accounted for as an equity security with a contractual life of ten years and an exercise price of $4.05.

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On May 9, 2013, the Company announced that it received approval of its application from the U.S. Department of Treasury to redeem half of the 20,649 shares of preferred stock issued in connection with the Company’s participation in the Treasury’s CPP.  On May 15, 2013, the Company paid $10.3 million to the Treasury to repurchase 10,324 shares of the preferred stock, including accrued and unpaid dividends for the shares.  On July 1, 2013, the Company announced that it received approval to redeem the remaining 10,325 shares of preferred stock.  On July 3, 2013, the Company paid $10.4 million to the Treasury to repurchase the remaining shares of the preferred stock, including accrued and unpaid dividends for the shares.  On August 28, 2013, the Company completed the $2.7 million repurchase of the warrant to purchase 764,778 shares of the Company’s common stock issued to the U.S. Department of the Treasury as part of the Company’s participation in the Treasury’s CPP.

Repurchase Plan

On October 21, 2002, the Company authorized the repurchase of up to 10 percent of its outstanding common stock.  The amount and timing of purchases is dependent upon a number of factors, including the price and availability of the Company’s shares, general market conditions and competing alternate uses of funds.  As of December 31, 2014, the Company had repurchased a total of 556 thousand shares, of which 131 thousand shares have been retired, leaving 153 thousand shares remaining to be repurchased under the plan.  There were no shares repurchased during 2014 or 2013.  The Company currently has no plans on repurchasing its common stock.

13. Other Income

The components of other income for the past two years are as follows:

	For the years ended December 31,
(In thousands)	2014		2013
ATM and check card fees	$	534	$	487
Wire transfer fees		95		88
Safe deposit box fees		68		59
Other		147		80
Total other income	$	844	$	714

14. Other Expenses

The components of other expenses for the past two years are as follows:

	For the years ended December 31,
(In thousands)	2014		2013
Travel, entertainment, training and recruiting	$	584	$	608
Director fees		359		367
Insurance		335		335
Stationery and supplies		250		271
Retail losses		56		4
Other		217		282
Total other expenses	$	1,801	$	1,867

15.  Income Taxes

The components of the provision for income taxes for the past two years are as follows:

	For the years ended December 31,
(In thousands)	2014		2013
Federal - current provision	$	2,380	$	1,579
Federal - deferred provision		381		491
Total federal provision		2,761		2,070
State - current provision		267		599
State - deferred provision (benefit)		117		(102)
Total state provision		384		497
Total provision for income taxes	$	3,145	$	2,567

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Reconciliation between the reported income tax provision and the amount computed by multiplying income before taxes by the statutory Federal income tax rate for the past two years is as follows:

	For the years ended December 31,
(In thousands, except percentages)	2014			2013
Federal income tax provision at statutory rate	$	3,248		$	2,612
Increases (decreases) resulting from:
Bank owned life insurance		(190)			(118)
Tax-exempt interest		(121)			(156)
Meals and entertainment		18			14
State income taxes, net of federal income tax effect		253			328
Other, net		(63)			(113)
Provision for income taxes	$	3,145		$	2,567
Effective tax rate		32.9	%		33.4	%

Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities.  The components of the net deferred tax asset at December 31, 2014 and 2013 are as follows:

(In thousands)	December 31, 2014		December 31, 2013
Deferred tax assets:
Allowance for loan losses	$	5,013	$	5,249
Depreciation		489		418
Stock-based compensation		463		427
Lost interest on nonaccrual loans		354		802
Deferred compensation		231		190
State net operating loss		132		138
Disallowed write-down on OREO properties		46		-
Net unrealized security losses		-		302
Other		39		96
Gross deferred tax assets		6,767		7,622
Valuation allowance		(132)		(113)
Total deferred tax assets		6,635		7,509
Deferred tax liabilities:
Goodwill		367		326
Deferred loan costs		216		318
Bond accretion		100		113
Net unrealized security gains		92		-
Total deferred tax liabilities		775		757
Net deferred tax asset	$	5,860	$	6,752

The Company computes deferred income taxes under the asset and liability method.  Deferred income taxes are recognized for tax consequences of “temporary differences” by applying enacted statutory tax rates to differences between the financial reporting and the tax basis of existing assets and liabilities.  A deferred tax liability is recognized for all temporary differences that will result in future taxable income.  A deferred tax asset is recognized for all temporary differences that will result in future tax deductions subject to reduction of the asset by a valuation allowance.

The Company had a $132 thousand and $113 thousand valuation allowance for deferred tax assets related to its state net operating loss carry-forward deferred tax asset, the balance of which was $132 thousand and $138 at December 31, 2014 and 2013, respectively.  The Company’s state net operating loss carry-forwards totaled approximately $2.2 million at December 31, 2014 and expire between 2030 and 2034.

Included as a component of deferred tax assets is an income tax expense (benefit) related to unrealized gains (losses) on securities available for sale.  The after-tax component was an unrealized gain of $143 thousand for 2014 and an unrealized loss of $476 thousand for 2013, and is included in other comprehensive income (loss) in shareholders’ equity.

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The Company follows FASB ASC Topic 740, “Income Taxes,” which prescribes a threshold for the financial statement recognition of income taxes and provides criteria for the measurement of tax positions taken or expected to be taken in a tax return.  ASC 740 also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition of income taxes.  The Company did not recognize or accrue any interest or penalties related to income taxes during the years ended December 31, 2014 and 2013.  The Company does not have an accrual for uncertain tax positions as of December 31, 2014 or 2013, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law.  Tax returns for all years 2010 and thereafter are subject to future examination by tax authorities.

16.  Net Income per Share

The following is a reconciliation of the calculation of basic and diluted net income per share for the past two years:  

	For the years ended December 31,
(In thousands, except per share amounts)	2014		2013
Net income	$	6,408	$	5,115
Less: Preferred stock dividends and discount accretion		-		988
Income available to common shareholders	$	6,408	$	4,127
Weighted average common shares outstanding - Basic		7,856		7,547
Plus: Potential dilutive common stock equivalents		89		263
Weighted average common shares outstanding - Diluted		7,945		7,810
Net income per common share - Basic	$	0.82	$	0.55
Net income per common share - Diluted		0.81		0.53
Stock options and common stock excluded from the income per share calculation as their effect would have been anti-dilutive		114		377

The "potential dilutive common stock equivalents" shown in the table above for December 31, 2013 includes the impact of the warrant to purchase 764,778 shares of common stock issued to the U.S. Department of Treasury under the Capital Purchase Program in December 2008, utilizing the Treasury stock method.  The warrant was repurchased on August 28, 2013 for a price of $2.7 million utilizing the Treasury Stock Method for the period outstanding.

17.  Regulatory Capital

A significant measure of the strength of a financial institution is its capital base.  Federal regulators have classified and defined capital into the following components: (1) tier 1 capital, which includes tangible shareholders’ equity for common stock, qualifying preferred stock and certain qualifying hybrid instruments, and (2) tier 2 capital, which includes a portion of the allowance for loan losses, subject to limitations, certain qualifying long-term debt, preferred stock and hybrid instruments, which do not qualify for tier 1 capital.  The parent company and its subsidiary bank are subject to various regulatory capital requirements administered by banking regulators.  Quantitative measures of capital adequacy include the leverage ratio (tier 1 capital as a percentage of tangible assets), tier 1 risk-based capital ratio (tier 1 capital as a percent of risk-weighted assets) and total risk-based capital ratio (total risk-based capital as a percent of total risk-weighted assets).

Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require the Company and the Bank to maintain certain capital as a percentage of assets and certain off-balance sheet items adjusted for predefined credit risk factors (risk-weighted assets).  Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines.  However, prompt corrective action provisions are not applicable to bank holding companies.  At a minimum, tier 1 capital as a percentage of risk-weighted assets of 4 percent and combined tier 1 and tier 2 capital as a percentage of risk-weighted assets of 8 percent must be maintained.  

In addition to the risk-based guidelines, regulators require that a bank or holding company, which meets the regulator’s highest performance and operation standards, maintain a minimum leverage ratio of 3 percent.  For those institutions with higher levels of risk or that are experiencing or anticipating significant growth, the minimum leverage ratio will be proportionately increased.  Minimum leverage ratios for each institution are evaluated through the ongoing regulatory examination process.

During 2014, the Company completed the sale of 760,713 common shares in its rights offering. The common shares in the offering were sold at a price of $8.30 per share, representing gross proceeds to the Company of $6.3 million and net proceeds of $6.1 million. The offering was significantly oversubscribed as $16.0 million was collected. The excess was returned to shareholders as directed by the Board of Directors.  The Company intends to use the proceeds for general corporate purposes, which may include, among other things, funding expansion plans, working capital and pursuing strategic opportunities which may be presented from time to time.

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The Company’s capital amounts and ratios are presented in the following table:

											To be well-capitalized
						For capital					under prompt corrective
	Actual					adequacy purposes					action provisions
(In thousands, except percentages)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Leverage ratio	$	83,615		8.71	%	≥ $	38,405		4.00	%		N/A		N/A
Tier I risk-based capital ratio		83,615		11.57			28,900		4.00			N/A		N/A
Total risk-based capital ratio		92,691		12.83			57,799		8.00			N/A		N/A
As of December 31, 2013
Leverage ratio	$	70,852		8.08	%	≥ $	35,084		4.00	%		N/A		N/A
Tier I risk-based capital ratio		70,852		10.74			26,400		4.00			N/A		N/A
Total risk-based capital ratio		79,164		11.99			52,800		8.00			N/A		N/A

The Bank’s capital amounts and ratios are presented in the following table:

											To be well-capitalized
						For capital					under prompt corrective
	Actual					adequacy purposes					action provisions
(In thousands, except percentages)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Leverage ratio	$	74,819		7.80	%	≥ $	38,381		4.00	%	≥ $	47,976		5.00	%
Tier I risk-based capital ratio		74,819		10.37			28,874		4.00			43,310		6.00
Total risk-based capital ratio		92,388		12.80			57,747		8.00			72,184		10.00
As of December 31, 2013
Leverage ratio	$	61,493		7.02	%	≥ $	35,058		4.00	%	≥ $	43,823		5.00	%
Tier I risk-based capital ratio		61,493		9.33			26,373		4.00			39,560		6.00
Total risk-based capital ratio		78,296		11.88			52,747		8.00			65,933		10.00

The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, adopted Basel III in September 2010, which constitutes a set of capital reform measures designed to strengthen the regulation, supervision and risk management of banking organizations worldwide.  In order to implement Basel III and certain additional capital changes required by the Dodd-Frank Act, on July 9, 2013, the FDIC approved, as an interim final rule, the regulatory capital requirements for U.S. state nonmember banks, such as the Bank, substantially similar to final rules issued by the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Office of the Comptroller of the Currency.

The interim final rule includes new risk-based capital and leverage ratios that will be phased-in from 2015 to 2019 for most state nonmember banks, including the Bank.  The rule includes a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets, which is in addition to the Tier 1 and Total risk-based capital requirements.  The interim final rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and requires a minimum leverage ratio of 4.0%.  The required minimum ratio of total capital to risk-weighted assets will remain 8.0%.  The new risk-based capital requirements (except for the capital conservation buffer) will become effective for the Bank on January 1, 2015.  The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter.  Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.

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The following chart compares the risk-based capital required under existing rules to those prescribed under the interim final rule under the phase-in period described above:

	Current Treatment		Treatment in Final Rule
Leverage ratio	4.00	%	4.00	%
Common equity tier 1 capital (CET1) ratio	N/A		4.50	%
Additional tier 1	N/A		1.50	%
Tier 1 capital ratio	4.00	%	6.00	%
Tier 2	4.00	%	2.00	%
Total capital ratio	8.00	%	8.00	%
Capital conservation buffer	N/A		2.50	%

The interim final rule also implements revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses and instruments that will no longer qualify as Tier 1 capital.  The interim final rule also sets forth certain changes for the calculation of risk-weighted assets that the Bank will be required to implement beginning January 1, 2015.  Management is currently evaluating the provisions of the interim final rule and its expected impact.  Based on current capital composition and levels, management does not presently anticipate that the interim final rule presents a material risk to the financial condition or results of operations.

18.  Employee Benefit Plans

The Bank has a 401(k) savings plan covering substantially all employees.  Under the Plan, an employee can contribute up to 80 percent of their salary on a tax deferred basis.  The Bank may also make discretionary contributions to the Plan.  The Bank contributed $258 thousand and $240 thousand to the Plan in 2014 and 2013, respectively.

The Company has a deferred fee plan for Directors and executive management.  Directors of the Company have the option to elect to defer up to 100 percent of their respective retainer and Board of Director fees, and each member of executive management has the option to elect to defer 100 percent of their year-end cash bonuses.  Director and executive deferred fees totaled $79 thousand in 2014 and $44 thousand in 2013, and the interest paid on deferred balances totaled $23 thousand in 2014 and $19 thousand in 2013. No fees were distributed in 2014. In 2013, $22 thousand in deferred fees were distributed. 

Certain members of management are also enrolled in a split-dollar life insurance plan with a post retirement death benefit of $250 thousand.  Total expenses related to this plan were $5 thousand in 2014 and $4 thousand in 2013.

Stock Transactions

Stock Option Plans

The Company has incentive and nonqualified option plans, which allow for the grant of options to officers, employees and members of the Board of Directors.  Transactions under the Company’s stock option plans for 2014 and 2013 are summarized in the following table:

	Shares		Weighted average exercise price		Weighted average remaining contractual life in years		Aggregate intrinsic value
Outstanding at December 31, 2012		516,332	$	7.06		5.4	$	327,725
Options granted		37,500		6.58
Options exercised		(11,667)		6.62
Options forfeited		(8,333)		6.56
Options expired		(84,857)		8.84
Outstanding at December 31, 2013		448,975	$	6.70		5.6	$	739,951
Options granted		46,000		8.16
Options exercised		(36,950)		4.33
Options forfeited		(9,119)		9.73
Options expired		(29,985)		10.16
Outstanding at December 31, 2014		418,921	$	6.76		5.5	$	1,257,968
Exercisable at December 31, 2014		340,423	$	6.60		4.7	$	1,098,108

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Grants under the Company’s incentive and nonqualified option plans generally vest over 3 years and must be exercised within 10 years of the date of grant.  The exercise price of each option is the market price on the date of grant.  As of December 31, 2014, 1,720,529 shares have been reserved for issuance upon the exercise of options, 418,921 option grants are outstanding, and 1,252,416 option grants have been exercised, forfeited or expired, leaving 49,192 shares available for grant.

The fair values of the options granted during 2014 and 2013 were estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	For the years ended December 31,
	2014			2013
Number of options granted		46,000			37,500
Weighted average exercise price	$	8.16		$	6.58
Weighted average fair value of options	$	3.21		$	3.19
Expected life in years (1)		5.54			5.75
Expected volatility (2)		45.32	%		51.40	%
Risk-free interest rate (3)		1.57	%		1.24	%
Dividend yield (4)		1.01	%		0.17	%

(1) The expected life of the options was estimated based on historical employee behavior and represents the period of time that options granted are expected to be outstanding.

(2) The expected volatility of the Company’s stock price was based on the historical volatility over the period commensurate with the expected life of the options. 

(3) The risk-free interest rate is the U.S Treasury rate commensurate with the expected life of the options on the date of grant.

(4) The expected dividend yield is the projected annual yield based on the grant date stock price.

Upon exercise, the Company issues shares from its authorized but unissued common stock to satisfy the options.  The following table presents information about options exercised during 2014 and 2013:

	For the years ended December 31,
	2014		2013
Number of options exercised		36,950		11,667
Total intrinsic value of options exercised	$	157,406	$	15,367
Cash received from options exercised		70,405		-
Tax deduction realized from options exercised		62,868		6,138

The following table summarizes information about stock options outstanding and exercisable at December 31, 2014:

		Options outstanding						Options exercisable
Range of exercise prices		Options outstanding		Weighted average remaining contractual life (in years)		Weighted average exercise price		Options exercisable		Weighted average exercise price
$	0.00 - 4.00		89,000		4.2	$	3.85		89,000	$	3.85
	4.01 - 8.00		282,475		6.4		6.73		208,977		6.55
	8.01 - 12.00		5,551		9.2		10.39		551		11.25
	12.01 - 16.00		41,895		2.1		12.62		41,895		12.62
	Total		418,921		5.5	$	6.76		340,423	$	6.60

FASB ASC Topic 718, “Compensation - Stock Compensation,” requires an entity to recognize the fair value of equity awards as compensation expense over the period during which an employee is required to provide service in exchange for such an award (vesting period).  Compensation expense related to stock options and the related income tax benefit for the years ended December 31, 2014 and 2013 are detailed in the following table:

	For the years ended December 31,
	2014		2013
Compensation expense	$	152,349	$	140,873
Income tax benefit		60,848		56,265

As of December 31, 2014, unrecognized compensation costs related to nonvested share-based compensation arrangements granted under the Company’s stock option plans totaled approximately $189 thousand.  That cost is expected to be recognized over a weighted average period of 2.0 years.

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Restricted Stock Awards

Restricted stock is issued under the stock bonus program to reward employees and directors and to retain them by distributing stock over a period of time.  The following table summarizes nonvested restricted stock activity for the year ended December 31, 2014:

	Shares		Average grant date fair value
Nonvested restricted stock at December 31, 2013		95,625	$	6.67
Granted		17,500		8.88
Vested		(35,375)		6.51
Nonvested restricted stock at December 31, 2014		77,750	$	7.24

Restricted stock awards granted to date vest over a period of 4 years and are recognized as compensation to the recipient over the vesting period.  Unless the recipient makes an election to recognize all compensation on the grant date, the awards are recorded at fair market value at the time of grant and amortized into salary expense on a straight line basis over the vesting period.  As of December 31, 2014, 471,551 shares of restricted stock were reserved for issuance, of which 214,500 shares are available for grant.

Restricted stock awards granted during the years ended December 31, 2014 and 2013 were as follows:

	For the years ended December 31,
	2014		2013
Number of shares granted		17,500		42,500
Average grant date fair value	$	8.88	$	7.12

Compensation expense related to the restricted stock for the years ended December 31, 2014 and 2013 is detailed in the following table:

	For the years ended December 31,
	2014		2013
Compensation expense	$	245,428	$	198,682
Income tax benefit		98,024		79,354

As of December 31, 2014, there was approximately $491 thousand of unrecognized compensation cost related to nonvested restricted stock awards granted under the Company’s stock incentive plans.  That cost is expected to be recognized over a weighted average period of 2.6 years. 

19.  Fair Value

Fair Value Measurement

The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which requires additional disclosures about the Company’s assets and liabilities that are measured at fair value.  Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on 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 techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  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 as follows:

Level 1 Inputs

· Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

· Generally, this includes debt and equity securities and derivative contracts that are traded in an active exchange market (i.e. New York Stock Exchange), as well as certain U.S. Treasury, U.S. Government and sponsored entity agency mortgage-backed securities that are highly liquid and are actively traded in over-the-counter markets.

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Level 2 Inputs

· Quoted prices for similar assets or liabilities in active markets.

· Quoted prices for identical or similar assets or liabilities in inactive markets.

· Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (i.e., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”

· Generally, this includes U.S. Government and sponsored entity mortgage-backed securities, corporate debt securities and derivative contracts.

Level 3 Inputs

· Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.

· These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Fair Value on a Recurring Basis

The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis:

Securities Available for Sale

As of December 31, 2014, the fair value of the Company's AFS securities portfolio was $60.1 million.  Approximately 57 percent of the portfolio was made up of residential mortgage-backed securities, which had a fair value of $34.4 million at December 31, 2014.  Approximately $33.3 million of the residential mortgage-backed securities are guaranteed by the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC").  The underlying loans for these securities are residential mortgages that are geographically dispersed throughout the United States. 

All of the Company’s AFS securitieswere classified as Level 2 assets at December 31, 2014.  The valuation of AFS securities using Level 2 inputs was primarily determined using the market approach, which uses quoted prices for similar assets or liabilities in active markets and all other relevant information.  It includes model pricing, defined as valuing securities based upon their relationship with other benchmark securities. 

At December 31, 2013, the Company’s AFS securities included commercial mortgage-backed securities which were classified as Level 3 assets.  For commercial mortgage-backedsecurities, the inputs used by either dealer market participants or an independent pricing service, may be derived from unobservable market information (Level 3 inputs).  In these instances, management evaluates the appropriateness and quality of the assumptions and the resulting prices.  In addition, management reviews the volume and level of activity for all AFS securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume.  For securities meeting these criteria, the quoted prices received from either market participants or an independent pricing service may be adjusted, as necessary, to estimate fair value and this results in fair values based on Level 3 inputs.  In determining fair value, the Company utilizes unobservable inputs which reflect its own assumptions about the inputs that market participants would use in pricing each security.  In developing its assertion of market participant assumptions, the Company utilizes the best information that is both reasonable and available without undue cost and effort.

In calculating the fair value for AFS securities under Level 3, management prepared present value cash flow models for certain private label commercial mortgage-backed securities.Private label commercial mortgage-backed securities owned by the Bank are A1 and A2 tranche sequential structures and are currently paying principal.  The cash flows for the commercial mortgage-backed securities incorporated the expected cash flow of each security adjusted for default rates, loss severities and prepayments of the individual loans collateralizing the security.  The following table presents quantitative information about Level 3 inputs used to measure the fair value of commercial mortgage-backed securities at December 31, 2013:  

Valuation Technique	Unobservable Input	Range		Weighted Average
Discounted Cash Flow	Prepayment rate	8 through 15	%	10.0	%
	Default rate	10 through 15	%	12.5	%
	Loss severity	10 through 25	%	18.0	%

Significant increases or decreases in any of the unobservable inputs in the table above in isolation would result in a significantly lower or higher fair value measurement of the securities.  Generally, a change in the assumption used for the default rate is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

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For the Level 3 available for sale private label commercial mortgage-backed securities, cash flow assumptions incorporate independent third party market participant data based on vintage year for each security.  The discount rate utilized in determining the present value of cash flows for the commercial mortgage-backed securities was arrived at by combining the yield on orderly transactions for similar maturity government sponsored mortgage-backed securities with (i) the historical average risk premium of similar structured private label securities, (ii) a risk premium reflecting current market conditions, including liquidity risk and (iii) if applicable, a forecasted loss premium derived from the expected cash flows of each security.  The estimated cash flows for each private label commercial mortgage-backed security are then discounted at the aforementioned effective rate to determine the fair value.  The quoted prices received from either market participants or independent pricing services are weighted with the internal price estimate to determine the fair value of each instrument.

There were no changes in the inputs or methodologies used to determine fair value during the year ended December 31, 2014, as compared to the year ended December 31, 2013.  

The tables below present the balances of assets measured at fair value on a recurring basis as of December 31stfor the past two years:

	December 31, 2014
(In thousands)	Level 1		Level 2		Level 3		Total
Securities available for sale:
U.S. Government sponsored entities	$	-	$	4,618	$	-	$	4,618
State and political subdivisions		-		11,132		-		11,132
Residential mortgage-backed securities		-		34,383		-		34,383
Corporate and other securities		-		9,940		-		9,940
Total securities available for sale	$	-	$	60,073	$	-	$	60,073
	December 31, 2013
(In thousands)	Level 1		Level 2		Level 3		Total
Securities available for sale:
U.S. Government sponsored entities	$	-	$	6,418	$	-	$	6,418
State and political subdivisions		-		16,598		-		16,598
Residential mortgage-backed securities		-		44,389		-		44,389
Commercial mortgage-backed securities		-		-		888		888
Corporate and other securities		-		12,840		-		12,840
Total securities available for sale	$	-	$	80,245	$	888	$	81,133

The following table summarizes changes in Level 3 assets during 2014 and 2013, consisting of commercial mortgage-backed available for sale securities, measured at fair value on a recurring basis. 

	For the years ended December 31,
(In thousands)	2014		2013
Commercial mortgage-backed securities:
Balance, beginning of period	$	888	$	4,463
Payoffs		(714)		(815)
Principal paydowns		(173)		(2,722)
Total net losses included in:
Other comprehensive income		(1)		(38)
Balance, end of period	$	-	$	888

There were no gains or losses (realized or unrealized) including in earnings for assets and liabilities held at December 31, 2014 or 2013.

Fair Value on a Nonrecurring Basis

Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  The following is a description of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis:

Appraisal Policy

All appraisals must be performed in accordance with the Uniform Standards of Professional Appraisal Practice (“USPAP”).  Appraisals are certified to the Company and performed by appraisers on the Company’s approved list of appraisers.  Evaluations are completed by a person independent of Company management.  The content of the appraisal depends on the complexity of the property.  Appraisals are completed on a “retail value” and an “as is value”.

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The Company requires current real estate appraisals on all loans that become OREO or in-substance foreclosure, loans that are classified substandard, doubtful or loss, or loans that are over $100,000 and nonperforming.  Prior to each balance sheet date, the Company values impaired collateral-dependent loans and OREO based upon a third party appraisal, broker's price opinion, drive by appraisal, automated valuation model, updated market evaluation, or a combination of these methods.  The amount is discounted for the decline in market real estate values (for original appraisals), for any known damage or repair costs, and for selling and closing costs.  The amount of the discount ranges from 10 to 15 percent and is dependent upon the method used to determine the original value.  The original appraisal is generally used when a loan is first determined to be impaired.  When applying the discount, the Company takes into consideration when the appraisal was performed, the collateral’s location, the type of collateral, any known damage to the property and the type of business.  Subsequent to entering impaired status and the Company determining that there is a collateral shortfall, the Company will generally, depending on the type of collateral, order a third party appraisal, broker's price opinion, automated valuation model or updated market evaluation.  Subsequent to receiving the third party results, the Company will discount the value 8 to 10 percent for selling and closing costs.

OREO

The fair value was determined using appraisals, which may be discounted based on management’s review and changes in market conditions (Level 3 Inputs).  

Impaired Collateral-Dependent Loans

The fair value of impaired collateral-dependent loans is derived in accordance with FASB ASC Topic 310, “Receivables.”  Fair value is determined based on the loan’s observable market price or the fair value of the collateral.  Partially charged-off loans are measured for impairment based upon an appraisal for collateral-dependent loans.  When an updated appraisal is received for a nonperforming loan, the value on the appraisal is discounted in the manner discussed above.  If there is a deficiency in the value after the Company applies these discounts, management applies a specific reserve and the loan remains in nonaccrual status.  The receipt of an updated appraisal would not qualify as a reason to put a loan back into accruing status.  The Company removes loans from nonaccrual status when the borrower makes six months of contractual payments and demonstrates the ability to service the debt going forward.  Charge-offs are determined based upon the loss that management believes the Company will incur after evaluating collateral for impairment based upon the valuation methods described above and the ability of the borrower to pay any deficiency.

The valuation allowance for impaired loans is included in the allowance for loan losses in the consolidated balance sheets.  At December 31, 2014, the valuation allowance for impaired loans was $1.2 million, a decrease of $23 thousand from  $1.1 million at December 31, 2013. 

The following tables present the assets and liabilities carried on the balance sheet by caption and by level within the hierarchy (as described above) as of December 31, 2014 and 2013 and the fair value gains (losses) recognized during the years ended December 31, 2014 and 2013:

	Fair value at December 31, 2014								Losses from fair value changes for the year ended
(In thousands)	Level 1		Level 2		Level 3		Total		December 31, 2014
Financial assets:
OREO	$	-	$	-	$	1,162	$	1,162	$	(965)
Impaired collateral-dependent loans		-		-		4,897		4,897		(23)
	Fair value at December 31, 2013								Gains (losses) from fair value changes for the year ended
(In thousands)	Level 1		Level 2		Level 3		Total		December 31, 2013
Financial assets:
OREO	$	-	$	-	$	633	$	633	$	(769)
Impaired collateral-dependent loans		-		-		4,540		4,540		863

Fair Value of Financial Instruments

FASB ASC Topic 825, “Financial Instruments,” requires the disclosure of the estimated fair value of certain financial instruments, including those financial instruments for which the Company did not elect the fair value option.  These estimated fair values as of December 31, 2014 and December 31, 2013 have been determined using available market information and appropriate valuation methodologies.  Considerable judgment is required to interpret market data to develop estimates of fair value.  The estimates presented are not necessarily indicative of amounts the Company could realize in a current market exchange.  The use of alternative market assumptions and estimation methodologies could have had a material effect on these estimates of fair value.  The methodology for estimating the fair value of financial assets and liabilities that are measured on a recurring or nonrecurring basis are discussed above.  

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The following methods and assumptions were used to estimate the fair value of other financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents

For these short-term instruments, the carrying value is a reasonable estimate of fair value.

Securities Held to Maturity

The fair value of held to maturity ("HTM") securities is based upon quoted market prices for similar or identical assets or other observable inputs (Level 2) or externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).

SBA Loans Held for Sale

The fair value of SBA loans held for sale is estimated by using a market approach that includes significant other observable inputs.

Loans

The fair value of loans is estimated by discounting the future cash flows using current market rates that reflect the interest rate risk inherent in the loan, except for previously discussed impaired loans.

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is carried at cost.  Carrying value approximates fair value based on the redemption provisions of the issues.

Servicing Assets

Servicing assets do not trade in an active, open market with readily observable prices.  The Company estimates the fair value of servicing assets using discounted cash flow models incorporating numerous assumptions from the perspective of a market participant including market discount rates and prepayment speeds.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Deposit Liabilities

The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date (i.e. carrying value).  The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using current market rates.

Borrowed Funds and Subordinated Debentures

The fair value of borrowings is estimated by discounting the projected future cash flows using current market rates.

Standby Letters of Credit

At December 31, 2014, the Bank had standby letters of credit outstanding of $1.5 million, as compared to $1.4 million at December 31, 2013.  The fair value of these commitments is nominal.

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The table below presents the carrying amount and estimated fair values of the Company’s financial instruments not previously presented as of December 31st for the past two years:

			December 31, 2014				December 31, 2013
(In thousands)	Fair value level		Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Financial assets:
Cash and cash equivalents		Level 1	$	129,821	$	129,821	$	99,404	$	99,404
Securities held to maturity (1)		Level 2		20,009		20,281		26,381		25,549
SBA loans held for sale		Level 2		5,179		5,655		6,673		7,267
Loans, net of allowance for loan losses (2)		Level 2		744,095		748,093		658,887		645,582
Federal Home Loan Bank stock		Level 2		6,032		6,032		5,392		5,392
Servicing assets		Level 3		753		753		437		437
Accrued interest receivable		Level 2		3,518		3,518		3,272		3,272
Financial liabilities:
Deposits		Level 2		794,341		794,436		738,698		738,337
Borrowed funds and subordinated debentures		Level 2		140,465		145,333		122,465		129,732
Accrued interest payable		Level 2		474		474		454		454

(1) Includes held to maturity commercial mortgage-backed securities that are considered Level 3.  These securities had book values of $4.0 million and $6.8 million at December 31, 2014 and 2013, respectively, and market values of $4.0 million and $6.4 million at December 31, 2014 and 2013, respectively.

(2) Includes impaired loans that are considered Level 3 and reported separately in the tables under the “Fair Value on a Nonrecurring Basis” heading.  Impaired loans, included in the fair value non-recurring table, net of specific reserves totaled $4.9 million and $4.5 million at December 31, 2014 and 2013, respectively.

20.  Condensed Financial Statements of Unity Bancorp, Inc.

(Parent Company Only)

Balance Sheets
(In thousands)	December 31, 2014		December 31, 2013
ASSETS
Cash and cash equivalents	$	198	$	724
Securities available for sale		197		167
Capital note due from Bank		8,500		8,500
Investment in subsidiaries		76,323		62,814
Other assets		447		492
Total assets	$	85,665	$	72,697
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities	$	78	$	59
Subordinated debentures		15,465		15,465
Shareholders' equity		70,122		57,173
Total liabilities and shareholders' equity	$	85,665	$	72,697

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Statements of Income	For the years ended December 31,
(In thousands)	2014		2013
Total interest income	$	748	$	761
Total interest expense		281		287
Net interest income		467		474
Gains on sales of securities		-		3
Other expenses		32		22
Income before provision for income taxes and equity in undistributed net income of subsidiary		435		455
Provision for income taxes		209		116
Income before equity in undistributed net income of subsidiary		226		339
Equity in undistributed net income of subsidiary		6,182		4,776
Net income		6,408		5,115
Preferred stock dividends and discount accretion		-		988
Income available to common shareholders	$	6,408	$	4,127

Statements of Cash Flows	For the years ended December 31,
(In thousands)	2014		2013
OPERATING ACTIVITIES
Net income	$	6,408	$	5,115
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiary		(6,182)		(4,776)
Gains on sales of securities		-		(3)
Net change in other assets and other liabilities		53		(22)
Net cash provided by operating activities		279		314
INVESTING ACTIVITIES
Purchases of securities		-		(100)
Proceeds from sales of securities		-		63
Net cash used in investing activities		-		(37)
FINANCING ACTIVITIES
Redemption of perpetual preferred stock from U.S. Treasury		-		(20,649)
Repurchase of warrant from U.S. Treasury		-		(2,707)
Proceeds from exercise of stock options		70		-
Proceeds from rights offering		6,143		-
Investment in Bank		(6,500)		-
Cash dividends paid on preferred stock		-		(585)
Cash dividends paid on common stock		(753)		(188)
Dividend from Bank		235		12,707
Net cash provided by (used in) financing activities		(805)		(11,422)
Increase in cash and cash equivalents		(526)		(11,145)
Cash and cash equivalents, beginning of period		724		11,869
Cash and cash equivalents, end of period	$	198	$	724
SUPPLEMENTAL DISCLOSURES
Interest paid	$	281	$	287

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Quarterly Financial Information (Unaudited)

The following quarterly financial information for the years ended December 31, 2014 and 2013 is unaudited.  However, in the opinion of management, all adjustments, which include normal recurring adjustments necessary to present fairly the results of operations for the periods, are reflected.

	2014
(In thousands, except per share data)	March 31		June 30		September 30		December 31
Total interest income	$	9,023	$	9,102	$	9,491	$	9,802
Total interest expense		1,736		1,797		1,859		1,914
Net interest income		7,287		7,305		7,632		7,888
Provision for loan losses		600		550		550		850
Net interest income after provision for loan losses		6,687		6,755		7,082		7,038
Total noninterest income		1,526		1,640		1,853		1,660
Total noninterest expense		6,258		6,144		6,241		6,045
Income before provision for income taxes		1,955		2,251		2,694		2,653
Provision for income taxes		662		723		808		952
Net income		1,293		1,528		1,886		1,701
Preferred stock dividends and discount accretion		-		-		-		-
Income available to common shareholders	$	1,293	$	1,528	$	1,886	$	1,701
Net income per common share - Basic	$	0.17	$	0.20	$	0.24	$	0.21
Net income per common share - Diluted		0.17		0.20		0.24		0.20
	2013
(In thousands, except per share data)	March 31		June 30		September 30		December 31
Total interest income	$	8,313	$	8,401	$	8,474	$	8,766
Total interest expense		1,624		1,599		1,603		1,703
Net interest income		6,689		6,802		6,871		7,063
Provision for loan losses		650		300		600		800
Net interest income after provision for loan losses		6,039		6,502		6,271		6,263
Total noninterest income		1,825		1,658		1,650		1,471
Total noninterest expense		6,126		6,074		5,935		5,862
Income before provision for income taxes		1,738		2,086		1,986		1,872
Provision for income taxes		538		739		684		606
Net income		1,200		1,347		1,302		1,266
Preferred stock dividends and discount accretion		404		465		119		-
Income available to common shareholders	$	796	$	882	$	1,183	$	1,266
Net income per common share - Basic	$	0.11	$	0.12	$	0.15	$	0.17
Net income per common share - Diluted		0.10		0.11		0.15		0.17

90

Selected Consolidated Financial Data

	At or for the years ended December 31,
(In thousands, except percentages)	2014			2013			2012			2011			2010
Selected Results of Operations
Interest income	$	37,418		$	33,954		$	35,203		$	39,523		$	44,035
Interest expense		7,306			6,529			7,774			10,551			14,035
Net interest income		30,112			27,425			27,429			28,972			30,000
Provision for loan losses		2,550			2,350			4,000			6,800			7,250
Noninterest income		6,679			6,604			7,338			5,661			5,069
Noninterest expense		24,688			23,997			24,297			24,518			24,990
Provision for income taxes		3,145			2,567			2,226			769			589
Net income		6,408			5,115			4,244			2,546			2,240
Preferred stock dividends and discount accretion		-			988			1,602			1,558			1,520
Income available to common shareholders		6,408			4,127			2,642			988			720
Per Share Data
Net income per common share - Basic	$	0.82		$	0.55		$	0.35		$	0.13		$	0.10
Net income per common share - Diluted		0.81			0.53			0.34			0.13			0.10
Book value per common share		8.36			7.55			7.62			7.24			7.08
Market value per common share		9.43			7.66			6.24			6.40			6.05
Cash dividends declared on common shares		0.10			0.03			-			-			-
Selected Balance Sheet Data
Assets	$	1,008,788		$	921,118		$	819,730		$	810,846		$	818,410
Loans		761,825			678,701			587,036			592,592			615,936
Allowance for loan losses		(12,551)			(13,141)			(14,758)			(16,348)			(14,364)
Securities		80,082			107,514			111,053			107,536			128,242
Deposits		794,341			738,698			648,760			643,971			654,788
Borrowed funds and subordinated debentures		140,465			122,465			90,465			90,465			90,465
Shareholders' equity		70,123			57,173			77,510			73,558			70,085
Common shares outstanding		8,388			7,577			7,534			7,459			7,211
Performance Ratios
Return on average assets		0.70	%		0.61	%		0.53	%		0.31	%		0.26	%
Return on average equity		10.28			7.22			4.80			1.90			1.43
Average equity to average assets		6.80			7.91			9.31			8.72			7.96
Efficiency ratio		67.90			71.34			71.06			71.42			71.43
Dividend payout		12.35			5.66			-			-			-
Net interest spread		3.35			3.34			3.38			3.49			3.40
Net interest margin		3.53			3.53			3.62			3.76			3.67
Asset Quality Ratios
Allowance for loan losses to loans		1.65	%		1.94	%		2.51	%		2.76	%		2.33	%
Allowance for loan losses to nonperforming loans		110.41			85.98			84.49			71.80			66.31
Nonperforming loans to total loans		1.49			2.25			2.98			3.84			3.52
Nonperforming assets to total loans and OREO		1.64			2.34			3.28			4.33			3.88
Nonperforming assets to total assets		1.24			1.73			2.35			3.18			2.93
Net charge-offs to average loans		0.44			0.63			0.94			0.79			1.05
Capital Ratios - Company
Leverage Ratio		8.71	%		8.08	%		11.14	%		10.44	%		9.97	%
Tier 1 risk-based capital ratio		11.57			10.74			14.85			14.33			13.04
Total risk-based capital ratio		12.83			11.99			16.12			15.60			14.30
Capital Ratios - Bank
Leverage Ratio		7.80	%		7.02	%		8.63	%		9.01	%		8.48	%
Tier 1 risk-based capital ratio		10.37			9.33			11.51			12.36			11.10
Total risk-based capital ratio		12.80			11.88			14.18			15.05			13.69

91

92

EX-21

EXHIBIT 21

SUBSIDIARIES OF REGISTRANT

The Registrant has three subsidiaries, Unity Bank, Unity (NJ) Statutory Trust II and Unity (NJ) Statutory Trust III. Unity Bank has nine subsidiaries, Unity Investment Services, Inc., AJB Residential Realty Enterprises, Inc., AJB Commercial Realty, Inc., MKCD Commercial, Inc., JAH Commercial, Inc., UB Commercial LLC, ASBC Holdings LLC, Unity Property Holdings 1, Inc. and Unity Property Holdings 2, Inc.  Unity Investment Services, Inc. has one subsidiary, Unity Delaware Investment 2, Inc., which has one subsidiary, Unity NJ REIT, Inc.

92

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to incorporation by reference in the registration statement Nos. 333-20687, 333-64612, 333-64614, 333-105045, 333-121409, 333-134360, 333-174521 and 333-189913 on Form S-8 of Unity Bancorp, Inc., of our report dated March 16, 2015, relating to our audit of the 2014 Consolidated Financial Statements of Unity Bancorp, Inc., which appears in the Annual Report on Form 10-K of Unity Bancorp, Inc. for the year ended December 31, 2014.

/s/ McGladrey LLP

McGladrey LLP

Blue Bell, Pennsylvania

March 16, 2015

93

EX-31.1

EXHIBIT 31.1

I, James A. Hughes, certify that:

1. I have reviewed this Annual Report on Form 10-K of Unity Bancorp, 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;

4. The registrant's other certifying officer(s) 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.

5. The registrant's other certifying officer(s) 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 the 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.

Dated:	March 16, 2015	/s/ James A. Hughes
		James A. Hughes
		President and Chief Executive Officer

94

EX-31.2

EXHIBIT 31.2

I, Alan J. Bedner, certify that:

1. I have reviewed this Annual Report on Form 10-K of Unity Bancorp, 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;

4. The registrant's other certifying officer(s) 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.

5. The registrant's other certifying officer(s) 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 the 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.

Dated:	March 16, 2015	/s/ Alan J. Bedner
		Alan J. Bedner
		Executive Vice President and Chief Financial Officer

95

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Unity Bancorp, Inc. (the “Company”), certifies that, to the best of their knowledge:

1. The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

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

Dated:	March 16, 2015	/s/ James A. Hughes
		James A. Hughes
		President and Chief Executive Officer
Dated:	March 16, 2015	/s/ Alan J. Bedner, Jr.
		Alan J. Bedner, Jr.
		Executive Vice President and Chief Financial Officer

This certification is made solely for the purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

XML

Accumulated Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2014

Accumulated Other Comprehensive Income (Loss) [Abstract]

Changes In Other Comprehensive Income (Loss)

	For the twelve months ended December 31,
	2014						2013
(In thousands)	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Balance, beginning of period					$	(476)					$	1,333
Unrealized holding gains (losses) on securities arising during the period	$	1,446	$	537		909	$	(2,606)	$	(1,056)		(1,550)
Less: Reclassification adjustment for gains on securities included in net income		433		143		290		390		131		259
Net unrealized gains (losses) on securities arising during the period	$	1,013	$	394	$	619	$	(2,996)	$	(1,187)	$	(1,809)
Balance, end of period					$	143					$	(476)

XML

Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only) (Condensed Statements of Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Condensed Financial Statements, Captions [Line Items]
Total interest income	$ 9,802	$ 9,491	$ 9,102	$ 9,023	$ 8,766	$ 8,474	$ 8,401	$ 8,313	$ 37,418	$ 33,954
Total interest expense	1,914	1,859	1,797	1,736	1,703	1,603	1,599	1,624	7,306	6,529
Net interest income (expense)	7,888	7,632	7,305	7,287	7,063	6,871	6,802	6,689	30,112	27,425
Other expenses									1,801	1,867
Provision for income taxes	952	808	723	662	606	684	739	538
Net income	1,701	1,886	1,528	1,293	1,266	1,302	1,347	1,200	6,408	5,115
Preferred stock dividends and discount accretion						119	465	404		988
Income available to common shareholders	1,701	1,886	1,528	1,293	1,266	1,183	882	796	6,408	4,127
Parent Company Only [Member]
Condensed Financial Statements, Captions [Line Items]
Total interest income									748	761
Total interest expense									281	287
Net interest income (expense)									467	474
Gains on sales of securities										3
Other expenses									32	22
Income (loss) before provision (benefit) for income taxes and equity in undistributed net income of subsidiary									435	455
Provision for income taxes									209	116
Income (loss) before equity in undistributed net income of subsidiary									226	339
Equity in undistributed net income of subsidiary									6,182	4,776
Net income									6,408	5,115
Preferred stock dividends and discount accretion										988
Income available to common shareholders									$ 6,408	$ 4,127

XML

Securities (Schedule Of Marketable Securities By Contractual Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Schedule of Investments [Line Items]
Available for sale at fair value, Within one year	$ 40
Available for sale at fair value yield, Within one year	6.49%
Available for sale at fair value, After one through five years	6,303
Available for sale at fair value yield, After one through five years	1.42%
Available for sale at fair value, After five through ten years	10,980
Available for sale at fair value yield, After five through ten years	2.09%
Available for sale at fair value, After ten years	42,750
Available for sale at fair value yield, After ten years	2.55%
Available-for-sale Securities	60,073	81,133
Available for sale at fair value yield	2.35%
Held to maturity at cost, Within one year	309
Held to maturity at cost yield, Within one year	0.75%
Held to maturity at cost, After one through five years	468
Held to maturity at cost yield, After one through five years	4.87%
Held to maturity at cost, After five through ten years	1,255
Held to maturity at cost yield, After five through ten years	3.44%
Held to maturity at cost, After ten years	17,977
Held to maturity at cost yield, After ten years	2.90%
Held to maturity Securities	20,009	26,381
Held to maturity at cost yield,	2.94%
US Government Agencies Debt Securities [Member]
Schedule of Investments [Line Items]
Available for sale at fair value, After one through five years	1,014
Available for sale at fair value yield, After one through five years	1.00%
Available for sale at fair value, After five through ten years	956
Available for sale at fair value yield, After five through ten years	2.06%
Available for sale at fair value, After ten years	2,648
Available for sale at fair value yield, After ten years	2.04%
Available-for-sale Securities	4,618	6,418
Available for sale at fair value yield	1.82%
Held to maturity at cost, After ten years	4,440
Held to maturity at cost yield, After ten years	1.97%
Held to maturity Securities	4,440	5,814
Held to maturity at cost yield,	1.97%
US States and Political Subdivisions Debt Securities [Member]
Schedule of Investments [Line Items]
Available for sale at fair value, Within one year	40
Available for sale at fair value yield, Within one year	6.49%
Available for sale at fair value, After one through five years	1,165
Available for sale at fair value yield, After one through five years	2.23%
Available for sale at fair value, After five through ten years	6,189
Available for sale at fair value yield, After five through ten years	2.37%
Available for sale at fair value, After ten years	3,738
Available for sale at fair value yield, After ten years	2.60%
Available-for-sale Securities	11,132	16,598
Available for sale at fair value yield	2.45%
Held to maturity at cost, Within one year	309
Held to maturity at cost yield, Within one year	0.75%
Held to maturity at cost, After ten years	2,108
Held to maturity at cost yield, After ten years	4.72%
Held to maturity Securities	2,417	2,441
Held to maturity at cost yield,	4.21%
Residential Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available for sale at fair value, After one through five years	1,718
Available for sale at fair value yield, After one through five years	1.70%
Available for sale at fair value, After five through ten years	2,335
Available for sale at fair value yield, After five through ten years	1.94%
Available for sale at fair value, After ten years	30,330
Available for sale at fair value yield, After ten years	2.81%
Available-for-sale Securities	34,383	44,389
Available for sale at fair value yield	2.70%
Held to maturity at cost, After one through five years	468
Held to maturity at cost yield, After one through five years	4.87%
Held to maturity at cost, After five through ten years	272
Held to maturity at cost yield, After five through ten years	5.19%
Held to maturity at cost, After ten years	7,424
Held to maturity at cost yield, After ten years	3.01%
Held to maturity Securities	8,164	10,395
Held to maturity at cost yield,	3.19%
Commercial Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities		888
Held to maturity at cost, After ten years	4,005
Held to maturity at cost yield, After ten years	2.76%
Held to maturity Securities	4,005	6,750
Held to maturity at cost yield,	2.76%
Corporate and Other Securities [Member]
Schedule of Investments [Line Items]
Available for sale at fair value, After one through five years	2,406
Available for sale at fair value yield, After one through five years	1.00%
Available for sale at fair value, After five through ten years	1,500
Available for sale at fair value yield, After five through ten years	1.19%
Available for sale at fair value, After ten years	6,034
Available for sale at fair value yield, After ten years	1.43%
Available-for-sale Securities	9,940	12,840
Available for sale at fair value yield	1.29%
Held to maturity at cost, After five through ten years	983
Held to maturity at cost yield, After five through ten years	2.95%
Held to maturity Securities	983	981
Held to maturity at cost yield,	2.95%
Parent Company Only [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities	$ 197	$ 167

XML

Quarterly Financial Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information (Unaudited) [Abstract]

Schedule of Quarterly Financial Information

	2014
(In thousands, except per share data)	March 31		June 30		September 30		December 31
Total interest income	$	9,023	$	9,102	$	9,491	$	9,802
Total interest expense		1,736		1,797		1,859		1,914
Net interest income		7,287		7,305		7,632		7,888
Provision for loan losses		600		550		550		850
Net interest income after provision for loan losses		6,687		6,755		7,082		7,038
Total noninterest income		1,526		1,640		1,853		1,660
Total noninterest expense		6,258		6,144		6,241		6,045
Income before provision for income taxes		1,955		2,251		2,694		2,653
Provision for income taxes		662		723		808		952
Net income		1,293		1,528		1,886		1,701
Preferred stock dividends and discount accretion		-		-		-		-
Income available to common shareholders	$	1,293	$	1,528	$	1,886	$	1,701
Net income per common share - Basic	$	0.17	$	0.20	$	0.24	$	0.21
Net income per common share - Diluted		0.17		0.20		0.24		0.20
	2013
(In thousands, except per share data)	March 31		June 30		September 30		December 31
Total interest income	$	8,313	$	8,401	$	8,474	$	8,766
Total interest expense		1,624		1,599		1,603		1,703
Net interest income		6,689		6,802		6,871		7,063
Provision for loan losses		650		300		600		800
Net interest income after provision for loan losses		6,039		6,502		6,271		6,263
Total noninterest income		1,825		1,658		1,650		1,471
Total noninterest expense		6,126		6,074		5,935		5,862
Income before provision for income taxes		1,738		2,086		1,986		1,872
Provision for income taxes		538		739		684		606
Net income		1,200		1,347		1,302		1,266
Preferred stock dividends and discount accretion		404		465		119		-
Income available to common shareholders	$	796	$	882	$	1,183	$	1,266
Net income per common share - Basic	$	0.11	$	0.12	$	0.15	$	0.17
Net income per common share - Diluted		0.10		0.11		0.15		0.17

XML

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments (Loans And Their Related Allowance For Loan Losses, By Portfolio Segment) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Allowance, Total	$ 12,551	$ 13,141	$ 14,758
Total loans	756,646	672,028
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	502	831
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	1,381	1,756
Loans and Leases Receivable, Allowance, Total	1,883	2,587	3,378
Financing Receivable, Individually Evaluated for Impairment	2,220	2,740
Financing Receivable, Collectively Evaluated for Impairment	38,181	46,178
Total loans	40,401	48,918
Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	510	29
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	827	928
Loans and Leases Receivable, Allowance, Total	1,337	957	1,312
Financing Receivable, Individually Evaluated for Impairment	3,878	2,928
Financing Receivable, Collectively Evaluated for Impairment	30,444	28,636
Total loans	34,322	31,564
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	149	278
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	6,121	6,562
Loans and Leases Receivable, Allowance, Total	6,270	6,840	7,091
Financing Receivable, Individually Evaluated for Impairment	6,059	9,120
Financing Receivable, Collectively Evaluated for Impairment	395,890	354,220
Total loans	401,949	363,340
Commercial Other Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	40,607	37,611
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	339,693	317,471
Commercial Real Estate Construction Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	21,649	8,258
Residential Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	2,289	2,132
Loans and Leases Receivable, Allowance, Total	2,289	2,132	1,769
Financing Receivable, Collectively Evaluated for Impairment	220,878	182,067
Total loans	220,878	182,067
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	667	573
Loans and Leases Receivable, Allowance, Total	667	573	524
Financing Receivable, Collectively Evaluated for Impairment	59,096	46,139
Total loans	59,096	46,139
Consumer Home Equity Line Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	41,451	43,704
Consumer Other Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	17,645	2,435
Unallocated Financing Receivables [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	105	52
Loans and Leases Receivable, Allowance, Total	105	52	684
Loans Held for Investment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	1,161	1,138
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	11,390	12,003
Loans and Leases Receivable, Allowance, Total	12,551	13,141
Financing Receivable, Individually Evaluated for Impairment	12,157	14,788
Financing Receivable, Collectively Evaluated for Impairment	744,489	657,240
Total loans	$ 756,646	$ 672,028

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Securities (Schedule Of Marketable Securities In Unrealized Loss Position ) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014 security	Dec. 31, 2013 security
Schedule of Investments [Line Items]
Available for sale, Total number in a loss position	27	49
Available for sale, Less than 12 months Estimated fair value	$ 7,632	$ 31,754
Available for sale, Less than 12 months Unrealized loss	(62)	(1,289)
Available for sale, 12 months and greater, Estimated fair value	18,318	5,496
Available for sale, 12 months and greater, Unrealized loss	(524)	(473)
Available for sale, Total Estimated fair value	25,950	37,250
Available for sale, Total Unrealized loss	(586)	(1,762)
Held to maturity, Total number in a loss position	7	15
Held to maturity, Less than 12 months Estimated fair value		17,249
Held to maturity, Less than 12 months Unrealized loss		(1,180)
Held to maturity, 12 months and greater, Estimated fair value	9,684	114
Held to maturity, 12 months and greater, Unrealized loss	(229)	(5)
Held to maturity, Total Estimated fair value	9,684	17,363
Held to maturity, Total Unrealized loss	(229)	(1,185)
US Government Agencies Debt Securities [Member]
Schedule of Investments [Line Items]
Available for sale, Total number in a loss position	4	5
Available for sale, Less than 12 months Estimated fair value		5,591
Available for sale, Less than 12 months Unrealized loss		(332)
Available for sale, 12 months and greater, Estimated fair value	4,590
Available for sale, 12 months and greater, Unrealized loss	(93)
Available for sale, Total Estimated fair value	4,590	5,591
Available for sale, Total Unrealized loss	(93)	(332)
Held to maturity, Total number in a loss position	2	3
Held to maturity, Less than 12 months Estimated fair value		5,354
Held to maturity, Less than 12 months Unrealized loss		(460)
Held to maturity, 12 months and greater, Estimated fair value	4,316
Held to maturity, 12 months and greater, Unrealized loss	(124)
Held to maturity, Total Estimated fair value	4,316	5,354
Held to maturity, Total Unrealized loss	(124)	(460)
US States and Political Subdivisions Debt Securities [Member]
Schedule of Investments [Line Items]
Available for sale, Total number in a loss position	7	19
Available for sale, Less than 12 months Estimated fair value		8,575
Available for sale, Less than 12 months Unrealized loss		(453)
Available for sale, 12 months and greater, Estimated fair value	4,103	934
Available for sale, 12 months and greater, Unrealized loss	(35)	(101)
Available for sale, Total Estimated fair value	4,103	9,509
Available for sale, Total Unrealized loss	(35)	(554)
Held to maturity, Total number in a loss position		2
Held to maturity, Less than 12 months Estimated fair value		986
Held to maturity, Less than 12 months Unrealized loss		(17)
Held to maturity, Total Estimated fair value		986
Held to maturity, Total Unrealized loss		(17)
Residential Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available for sale, Total number in a loss position	9	13
Available for sale, Less than 12 months Estimated fair value	6,579	13,226
Available for sale, Less than 12 months Unrealized loss	(16)	(398)
Available for sale, 12 months and greater, Estimated fair value	5,889	1,474
Available for sale, 12 months and greater, Unrealized loss	(131)	(77)
Available for sale, Total Estimated fair value	12,468	14,700
Available for sale, Total Unrealized loss	(147)	(475)
Held to maturity, Total number in a loss position	3	7
Held to maturity, Less than 12 months Estimated fair value		6,333
Held to maturity, Less than 12 months Unrealized loss		(193)
Held to maturity, 12 months and greater, Estimated fair value	2,586	114
Held to maturity, 12 months and greater, Unrealized loss	(29)	(5)
Held to maturity, Total Estimated fair value	2,586	6,447
Held to maturity, Total Unrealized loss	(29)	(198)
Commercial Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available for sale, Total number in a loss position		3
Available for sale, Less than 12 months Estimated fair value		368
Available for sale, Less than 12 months Unrealized loss		(1)
Available for sale, Total Estimated fair value		368
Available for sale, Total Unrealized loss		(1)
Held to maturity, Total number in a loss position	1	2
Held to maturity, Less than 12 months Estimated fair value		3,668
Held to maturity, Less than 12 months Unrealized loss		(437)
Held to maturity, 12 months and greater, Estimated fair value	1,822
Held to maturity, 12 months and greater, Unrealized loss	(53)
Held to maturity, Total Estimated fair value	1,822	3,668
Held to maturity, Total Unrealized loss	(53)	(437)
Corporate and Other Securities [Member]
Schedule of Investments [Line Items]
Available for sale, Total number in a loss position	7	9
Available for sale, Less than 12 months Estimated fair value	1,053	3,994
Available for sale, Less than 12 months Unrealized loss	(46)	(105)
Available for sale, 12 months and greater, Estimated fair value	3,736	3,088
Available for sale, 12 months and greater, Unrealized loss	(265)	(295)
Available for sale, Total Estimated fair value	4,789	7,082
Available for sale, Total Unrealized loss	(311)	(400)
Held to maturity, Total number in a loss position	1	1
Held to maturity, Less than 12 months Estimated fair value		908
Held to maturity, Less than 12 months Unrealized loss		(73)
Held to maturity, 12 months and greater, Estimated fair value	960
Held to maturity, 12 months and greater, Unrealized loss	(23)
Held to maturity, Total Estimated fair value	960	908
Held to maturity, Total Unrealized loss	$ (23)	$ (73)

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Borrowed Funds and Subordinated Debentures (Narrative) (Details) (USD $)	24 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Subordinated debentures	$ 15,465,000	$ 15,465,000	$ 15,465,000
Marketable Securities, Equity Securities	465,000	465,000	465,000
FHLB Advances [Member]
Debt Instrument [Line Items]
Number of FHLB Advances	6	6	3
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Amount of Advances	10,000,000	10,000,000	10,000,000
Repurchase Agreements [Member]
Debt Instrument [Line Items]
Number of FHLB Repurchase Agreements			3
Secured Debt, Repurchase Agreements			10,000,000
Subordinated Debenture July 24, 2006 [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date	Jul. 24, 2036
Subordinated debentures	10,000,000	10,000,000
Debt Instrument, Interest Rate at Period End	1.84%	1.84%	1.84%
Debt Instrument, Basis Spread on Variable Rate	1.59%
Subordinated Debenture December 19, 2006 [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date		Dec. 19, 2036
Subordinated debentures	5,000,000	5,000,000
Debt Instrument, Interest Rate at Period End	1.89%	1.89%	1.89%
Debt Instrument, Basis Spread on Variable Rate		1.65%
Securities Sold under Agreements to Repurchase [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	3.67%	3.67%
Debt Instrument, Maturity Date	Feb. 28, 2018
Debt Instrument, Term	10 years
Debt Instrument, Interest Rate at Period End	3.67%	3.67%	3.67%	3.67%
Secured Debt, Repurchase Agreements	15,000,000	15,000,000
Subordinated Debentures Subject to Mandatory Redemption [Member]
Debt Instrument [Line Items]
Maximum period to defer interest payment without default		5 years
Parent Company Only [Member]
Debt Instrument [Line Items]
Subordinated debentures	15,465,000	15,465,000	15,465,000
FHLB advance April 27, 2015 [Member]
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	3.70%	3.70%
Debt Instrument, Maturity Date		Apr. 27, 2015
FHLB advance November 2, 2016 [Member]
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	4.03%	4.03%
Debt Instrument, Maturity Date		Nov. 02, 2016
FHLB advance August 10, 2017 [Member]
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	4.23%	4.23%
Debt Instrument, Maturity Date		Aug. 10, 2017
FHLB advance December 15, 2016 [Member]
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	4.19%	4.19%
Debt Instrument, Maturity Date		Dec. 15, 2016
FHLB advance April 5, 2017 [Member]
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	4.27%	4.27%
Debt Instrument, Maturity Date		Apr. 05, 2017
FHLB advance December 20, 2017 [Member]
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	3.40%	3.40%
Debt Instrument, Maturity Date		Dec. 20, 2017
FHLB Overnight Line of Credit [Member]
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available	$ 50,000,000	$ 50,000,000	$ 32,000,000
Debt Instrument, Interest Rate, Stated Percentage	0.32%	0.32%

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Fair Value (Quantitative Information About Level 3 Inputs) (Details) (Commercial Mortgage Backed Securities [Member])	12 Months Ended
	Dec. 31, 2014
Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Prepayment rate	8.00%
Default rate	10.00%
Loss severity	10.00%
Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Prepayment rate	15.00%
Default rate	15.00%
Loss severity	25.00%
Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Prepayment rate	10.00%
Default rate	12.50%
Loss severity	18.00%

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2014

Fair Value [Abstract]

Quantitative Information About Level 3 Inputs

Valuation Technique	Unobservable Input	Range		Weighted Average
Discounted Cash Flow	Prepayment rate	8 through 15	%	10.0	%
	Default rate	10 through 15	%	12.5	%
	Loss severity	10 through 25	%	18.0	%

Balances Of Assets And Liabilities Measured At Fair Value On A Recurring Basis

	December 31, 2014
(In thousands)	Level 1		Level 2		Level 3		Total
Securities available for sale:
U.S. Government sponsored entities	$	-	$	4,618	$	-	$	4,618
State and political subdivisions		-		11,132		-		11,132
Residential mortgage-backed securities		-		34,383		-		34,383
Corporate and other securities		-		9,940		-		9,940
Total securities available for sale	$	-	$	60,073	$	-	$	60,073
	December 31, 2013
(In thousands)	Level 1		Level 2		Level 3		Total
Securities available for sale:
U.S. Government sponsored entities	$	-	$	6,418	$	-	$	6,418
State and political subdivisions		-		16,598		-		16,598
Residential mortgage-backed securities		-		44,389		-		44,389
Commercial mortgage-backed securities		-		-		888		888
Corporate and other securities		-		12,840		-		12,840
Total securities available for sale	$	-	$	80,245	$	888	$	81,133

Schedule Of Fair Value Changes In Level 3

	For the years ended December 31,
(In thousands)	2014		2013
Commercial mortgage-backed securities:
Balance, beginning of period	$	888	$	4,463
Payoffs		(714)		(815)
Principal paydowns		(173)		(2,722)
Total net losses included in:
Other comprehensive income		(1)		(38)
Balance, end of period	$	-	$	888

Assets And Liabilities Carried On The Balance Sheet By Caption And By Level Within The Hierarchy

	Fair value at December 31, 2014								Losses from fair value changes for the year ended
(In thousands)	Level 1		Level 2		Level 3		Total		December 31, 2014
Financial assets:
OREO	$	-	$	-	$	1,162	$	1,162	$	(965)
Impaired collateral-dependent loans		-		-		4,897		4,897		(23)
	Fair value at December 31, 2013								Gains (losses) from fair value changes for the year ended
(In thousands)	Level 1		Level 2		Level 3		Total		December 31, 2013
Financial assets:
OREO	$	-	$	-	$	633	$	633	$	(769)
Impaired collateral-dependent loans		-		-		4,540		4,540		863

Carrying Amount And Estimated Fair Values Of The Company's Financial Instruments Not Previously Presented

			December 31, 2014				December 31, 2013
(In thousands)	Fair value level		Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Financial assets:
Cash and cash equivalents		Level 1	$	129,821	$	129,821	$	99,404	$	99,404
Securities held to maturity (1)		Level 2		20,009		20,281		26,381		25,549
SBA loans held for sale		Level 2		5,179		5,655		6,673		7,267
Loans, net of allowance for loan losses (2)		Level 2		744,095		748,093		658,887		645,582
Federal Home Loan Bank stock		Level 2		6,032		6,032		5,392		5,392
Servicing assets		Level 3		753		753		437		437
Accrued interest receivable		Level 2		3,518		3,518		3,272		3,272
Financial liabilities:
Deposits		Level 2		794,341		794,436		738,698		738,337
Borrowed funds and subordinated debentures		Level 2		140,465		145,333		122,465		129,732
Accrued interest payable		Level 2		474		474		454		454

(1) Includes held to maturity commercial mortgage-backed securities that are considered Level 3.  These securities had book values of $4.0 million and $6.8 million at December 31, 2014 and 2013, respectively, and market values of $4.0 million and $6.4 million at December 31, 2014 and 2013, respectively.

(2) Includes impaired loans that are considered Level 3 and reported separately in the tables under the “Fair Value on a Nonrecurring Basis” heading.  Impaired loans, included in the fair value non-recurring table, net of specific reserves totaled $4.9 million and $4.5 million at December 31, 2014 and 2013, respectively.

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Allowance for Loan Losses and Reserve for Unfunded Loan Commitments (Tables)

12 Months Ended

Dec. 31, 2014

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments [Abstract]

Activity In The Allowance For Loan Losses By Portfolio Segment

	For the years ended December 31, 2014
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Balance, beginning of period	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141
Charge-offs		(1,053)		(92)		(1,037)		(740)		(593)		-		(3,515)
Recoveries		140		-		166		60		9		-		375
Net charge-offs		(913)		(92)		(871)		(680)		(584)		-		(3,140)
Provision for loan losses charged to expense		209		472		301		837		678		53		2,550
Balance, end of period	$	1,883	$	1,337	$	6,270	$	2,289	$	667	$	105	$	12,551

	For the years ended December 31, 2013
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Balance, beginning of period	$	3,378	$	1,312	$	7,091	$	1,769	$	524	$	684	$	14,758
Charge-offs		(1,076)		(1,193)		(1,392)		(375)		(588)		-		(4,624)
Recoveries		250		182		204		17		4		-		657
Net charge-offs		(826)		(1,011)		(1,188)		(358)		(584)		-		(3,967)
Provision for loan losses charged to expense		35		656		937		721		633		(632)		2,350
Balance, end of period	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141

Allowance for Credit Losses on Financing Receivables

	December 31, 2014
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	502	$	510	$	149	$	-	$	-	$	-	$	1,161
Collectively evaluated for impairment		1,381		827		6,121		2,289		667		105		11,390
Total	$	1,883	$	1,337	$	6,270	$	2,289	$	667	$	105	$	12,551
Loan ending balances:
Individually evaluated for impairment	$	2,220	$	3,878	$	6,059	$	-	$	-	$	-	$	12,157
Collectively evaluated for impairment		38,181		30,444		395,890		220,878		59,096		-		744,489
Total	$	40,401	$	34,322	$	401,949	$	220,878	$	59,096	$	-	$	756,646

	December 31, 2013
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	831	$	29	$	278	$	-	$	-	$	-	$	1,138
Collectively evaluated for impairment		1,756		928		6,562		2,132		573		52		12,003
Total	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141
Loan ending balances:
Individually evaluated for impairment	$	2,740	$	2,928	$	9,120	$	-	$	-	$	-	$	14,788
Collectively evaluated for impairment		46,178		28,636		354,220		182,067		46,139		-		657,240
Total	$	48,918	$	31,564	$	363,340	$	182,067	$	46,139	$	-	$	672,028

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Borrowed Funds and Subordinated Debentures (Schedule of Debt) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Long-term Debt	$ 140,465
FHLB borrowings and repurchase agreements [Member]
Debt Instrument [Line Items]
Long and Short-term Debt	110,000	92,000	60,000
Long-term Debt	110,000
Year-to-date average	60,765	61,010	60,008
Maximum outstanding	140,000	95,000	61,000
Interest rate, at the end of the period	2.31%	2.58%	3.94%
Interest rate, Year-to-date average	3.96%	3.88%	3.94%
Securities Sold under Agreements to Repurchase [Member]
Debt Instrument [Line Items]
Long-term Debt	15,000	15,000	15,000
Year-to-date average	15,000	15,000	15,000
Maximum outstanding	15,000	15,000	15,000
Interest rate, at the end of the period	3.67%	3.67%	3.67%
Interest rate, Year-to-date average	3.67%	3.67%	3.67%
Subordinated Debt [Member]
Debt Instrument [Line Items]
Long-term Debt	15,465	15,465	15,465
Year-to-date average	15,465	15,465	15,465
Maximum outstanding	$ 15,465	$ 15,465	$ 15,465
Interest rate, at the end of the period	1.82%	1.80%	1.89%
Interest rate, Year-to-date average	1.81%	1.83%	2.19%

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Premises and Equipment (Summary of Premises and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 25,877	$ 25,281
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	(10,646)	(9,609)
Property, Plant and Equipment, Net	15,231	15,672
Land and Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	17,136	17,022
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	7,032	6,603
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 1,709	$ 1,656

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Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Income Taxes [Abstract]
Federal income tax provision at statutory rate	$ 3,248	$ 2,612
Bank owned life insurance	(190)	(118)
Tax-exempt interest	(121)	(156)
Meals and entertainment	18	14
State income taxes, net of federal income tax effect	253	328
Other, net	(63)	(113)
Provision for income taxes	$ 3,145	$ 2,567
Effective tax rate	32.90%	33.40%

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Securities (Unrealized Losses Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Gains	$ 440,000	$ 394,000
Available-for-sale Securities, Gross Realized Losses	7,000	4,000
Available-for-sale Securities, Gross Realized Gain (Loss)	433,000	390,000
Available-for-sale Securities Pledged as Collateral	50,400,000	74,500,000
Available For Sale Securities Pledged As Collateral Against Government Deposits	32,100,000	19,900,000
Equity Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Gains		4,000
Available-for-sale Securities, book value		60,000
Number of securities sold		1
Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Gains	143,000	9,000
Available-for-sale Securities, book value	8,600,000	517,000
Number of securities sold	4	2
Agency Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Gains	68,000
Available-for-sale Securities, book value	2,600,000
Number of securities sold	2
Corporate Bond Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Gains	3,000	186,000
Available-for-sale Securities, book value	2,000,000	4,800,000
Number of securities sold	1	4
Corporate Bond Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Losses	3,000
Available-for-sale Securities, book value	2,000,000
Number of securities sold	1
Asset-Backed Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Gains	13,000	195,000
Available-for-sale Securities, book value	858,000	6,400,000
Number of securities sold	1	5
Municipal Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale Securities, Gross Realized Gains	213,000
Available-for-sale Securities, Gross Realized Losses	4,000	4,000
Available-for-sale Securities, book value	$ 5,700,000
Number of securities sold	17
Number of securities called	1	1

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Fair Value (Fair Value On A Nonrecurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
OREO	$ 1,162	$ 633
Impaired collateral-dependent loans	4,897	4,540
Change During Period, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
OREO	(965)	(769)
Impaired collateral-dependent loans	(23)	863
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
OREO	1,162	633
Impaired collateral-dependent loans	$ 4,897	$ 4,540

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Deposits (Schedule of Certificates of Deposits by Year of Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014
Deposits [Abstract]
Time Deposit Maturities, Next Twelve Months	$ 72,641
Time Deposit Maturities, Year Two	48,759
Time Deposit Maturities, Year Three	7,765
Time Deposit Maturities, Year Four	58,407
Time Deposit Maturities, Year Five	24,645
Time Deposit Maturities, after Year Five	116
Time Deposits, Total	$ 212,333

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Other Expenses (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Other Expenses [Abstract]
Travel, entertainment, training and recruiting	$ 584	$ 608
Director fees	359	367
Insurance	335	335
Stationery and supplies	250	271
Retail losses	56	4
Other	217	282
Total other expenses	$ 1,801	$ 1,867

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Commitments and Contingencies (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014 item store	Dec. 31, 2013
Other Commitments [Line Items]
Number of Stores	15
Number of board members that are partners in leased property	2
Operating Leases, Rent Expense, Net	$ 718,000	$ 856,000
Owned Properties [Member]
Other Commitments [Line Items]
Number of Stores	11
Director [Member]
Other Commitments [Line Items]
Operating Leases, Rent Expense, Net	400,000	437,000
Lessee Leasing Arrangements, Operating Leases, Term of Contract	5 years
Lessee Leasing Arrangements, Operating Leases, Annual increase, Percentage	1.50%
Commitments to Extend Credit [Member]
Other Commitments [Line Items]
Other Commitment	150,900,000	103,200,000
Other Commitment, Due in Next Twelve Months	74,100,000	45,600,000
Standby Letters of Credit [Member]
Other Commitments [Line Items]
Other Commitment	$ 1,500,000	$ 1,400,000
Operating Leases [Member]
Other Commitments [Line Items]
Number of Stores	4

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Income Taxes (Narrative) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Tax Contingency [Line Items]
Valuation Allowance	$ 132,000	$ 113,000
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	132,000	138,000
Accumulated Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax	143,000	(476,000)	1,333,000
State and Local Jurisdiction [Member]
Income Tax Contingency [Line Items]
Operating Loss Carryforwards	$ 2,200,000

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Deposits (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Deposits [Abstract]
Time Deposits, $250,000 or More	$ 20.2	$ 16.4

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Allowance for Loan Losses and Reserve for Unfunded Loan Commitments (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Allowance for Loan Losses and Reserve for Unfunded Loan Commitments [Abstract]
Reserve for unfunded loan commitments	$ 151,000	$ 103,000
Losses on unfunded loan commitments	$ 0	$ 0

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Regulatory Capital

12 Months Ended

Dec. 31, 2014

Regulatory Capital [Abstract]

Regulatory Capital

17.  Regulatory Capital

A significant measure of the strength of a financial institution is its capital base.  Federal regulators have classified and defined capital into the following components: (1) tier 1 capital, which includes tangible shareholders’ equity for common stock, qualifying preferred stock and certain qualifying hybrid instruments, and (2) tier 2 capital, which includes a portion of the allowance for loan losses, subject to limitations, certain qualifying long-term debt, preferred stock and hybrid instruments, which do not qualify for tier 1 capital.  The parent company and its subsidiary bank are subject to various regulatory capital requirements administered by banking regulators.  Quantitative measures of capital adequacy include the leverage ratio (tier 1 capital as a percentage of tangible assets), tier 1 risk-based capital ratio (tier 1 capital as a percent of risk-weighted assets) and total risk-based capital ratio (total risk-based capital as a percent of total risk-weighted assets).

Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require the Company and the Bank to maintain certain capital as a percentage of assets and certain off-balance sheet items adjusted for predefined credit risk factors (risk-weighted assets).  Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines.  However, prompt corrective action provisions are not applicable to bank holding companies.  At a minimum, tier 1 capital as a percentage of risk-weighted assets of 4 percent and combined tier 1 and tier 2 capital as a percentage of risk-weighted assets of 8 percent must be maintained.  

In addition to the risk-based guidelines, regulators require that a bank or holding company, which meets the regulator’s highest performance and operation standards, maintain a minimum leverage ratio of 3 percent.  For those institutions with higher levels of risk or that are experiencing or anticipating significant growth, the minimum leverage ratio will be proportionately increased.  Minimum leverage ratios for each institution are evaluated through the ongoing regulatory examination process.

During 2014, the Company completed the sale of 760,713 common shares in its rights offering. The common shares in the offering were sold at a price of $8.30 per share, representing gross proceeds to the Company of $6.3 million and net proceeds of $6.1 million. The offering was significantly oversubscribed as $16.0 million was collected. The excess was returned to shareholders as directed by the Board of Directors.  The Company intends to use the proceeds for general corporate purposes, which may include, among other things, funding expansion plans, working capital and pursuing strategic opportunities which may be presented from time to time.

The Company’s capital amounts and ratios are presented in the following table:

											To be well-capitalized
						For capital					under prompt corrective
	Actual					adequacy purposes					action provisions
(In thousands, except percentages)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Leverage ratio	$	83,615		8.71	%	≥ $	38,405		4.00	%		N/A		N/A
Tier I risk-based capital ratio		83,615		11.57			28,900		4.00			N/A		N/A
Total risk-based capital ratio		92,691		12.83			57,799		8.00			N/A		N/A
As of December 31, 2013
Leverage ratio	$	70,852		8.08	%	≥ $	35,084		4.00	%		N/A		N/A
Tier I risk-based capital ratio		70,852		10.74			26,400		4.00			N/A		N/A
Total risk-based capital ratio		79,164		11.99			52,800		8.00			N/A		N/A

The Bank’s capital amounts and ratios are presented in the following table:

											To be well-capitalized
						For capital					under prompt corrective
	Actual					adequacy purposes					action provisions
(In thousands, except percentages)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Leverage ratio	$	74,819		7.80	%	≥ $	38,381		4.00	%	≥ $	47,976		5.00	%
Tier I risk-based capital ratio		74,819		10.37			28,874		4.00			43,310		6.00
Total risk-based capital ratio		92,388		12.80			57,747		8.00			72,184		10.00
As of December 31, 2013
Leverage ratio	$	61,493		7.02	%	≥ $	35,058		4.00	%	≥ $	43,823		5.00	%
Tier I risk-based capital ratio		61,493		9.33			26,373		4.00			39,560		6.00
Total risk-based capital ratio		78,296		11.88			52,747		8.00			65,933		10.00

The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, adopted Basel III in September 2010, which constitutes a set of capital reform measures designed to strengthen the regulation, supervision and risk management of banking organizations worldwide.  In order to implement Basel III and certain additional capital changes required by the Dodd-Frank Act, on July 9, 2013, the FDIC approved, as an interim final rule, the regulatory capital requirements for U.S. state nonmember banks, such as the Bank, substantially similar to final rules issued by the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Office of the Comptroller of the Currency.

The interim final rule includes new risk-based capital and leverage ratios that will be phased-in from 2015 to 2019 for most state nonmember banks, including the Bank.  The rule includes a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets, which is in addition to the Tier 1 and Total risk-based capital requirements.  The interim final rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and requires a minimum leverage ratio of 4.0%.  The required minimum ratio of total capital to risk-weighted assets will remain 8.0%.  The new risk-based capital requirements (except for the capital conservation buffer) will become effective for the Bank on January 1, 2015.  The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter.  Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.

The following chart compares the risk-based capital required under existing rules to those prescribed under the interim final rule under the phase-in period described above:

	Current Treatment		Treatment in Final Rule
Leverage ratio	4.00	%	4.00	%
Common equity tier 1 capital (CET1) ratio	N/A		4.50	%
Additional tier 1	N/A		1.50	%
Tier 1 capital ratio	4.00	%	6.00	%
Tier 2	4.00	%	2.00	%
Total capital ratio	8.00	%	8.00	%
Capital conservation buffer	N/A		2.50	%

The interim final rule also implements revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses and instruments that will no longer qualify as Tier 1 capital.  The interim final rule also sets forth certain changes for the calculation of risk-weighted assets that the Bank will be required to implement beginning January 1, 2015.  Management is currently evaluating the provisions of the interim final rule and its expected impact.  Based on current capital composition and levels, management does not presently anticipate that the interim final rule presents a material risk to the financial condition or results of operations.

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Summary of Significant Accounting Policies (Useful Lives of Premises and Equipment Narrative) (Details)	12 Months Ended
	Dec. 31, 2014
Maximum [Member] | Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	30 years
Maximum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Maximum [Member] | Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Minimum [Member] | Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Taxes [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

	For the years ended December 31,
(In thousands)	2014		2013
Federal - current provision	$	2,380	$	1,579
Federal - deferred provision		381		491
Total federal provision		2,761		2,070
State - current provision		267		599
State - deferred provision (benefit)		117		(102)
Total state provision		384		497
Total provision for income taxes	$	3,145	$	2,567

Schedule of Effective Income Tax Rate Reconciliation

	For the years ended December 31,
(In thousands, except percentages)	2014			2013
Federal income tax provision at statutory rate	$	3,248		$	2,612
Increases (decreases) resulting from:
Bank owned life insurance		(190)			(118)
Tax-exempt interest		(121)			(156)
Meals and entertainment		18			14
State income taxes, net of federal income tax effect		253			328
Other, net		(63)			(113)
Provision for income taxes	$	3,145		$	2,567
Effective tax rate		32.9	%		33.4	%

Schedule of Deferred Tax Assets and Liabilities

(In thousands)	December 31, 2014		December 31, 2013
Deferred tax assets:
Allowance for loan losses	$	5,013	$	5,249
Depreciation		489		418
Stock-based compensation		463		427
Lost interest on nonaccrual loans		354		802
Deferred compensation		231		190
State net operating loss		132		138
Disallowed write-down on OREO properties		46		-
Net unrealized security losses		-		302
Other		39		96
Gross deferred tax assets		6,767		7,622
Valuation allowance		(132)		(113)
Total deferred tax assets		6,635		7,509
Deferred tax liabilities:
Goodwill		367		326
Deferred loan costs		216		318
Bond accretion		100		113
Net unrealized security gains		92		-
Total deferred tax liabilities		775		757
Net deferred tax asset	$	5,860	$	6,752

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Deposits (Schedule of Deposits by Time Remaining on Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Deposits [Abstract]
Contractual Maturities, Time Deposits, $100,000 or More, Three Months or Less	$ 11,444	$ 14,588
Contractual Maturities, Time Deposits, $100,000 or More, Three Months Through Six Months	8,290	7,965
Contractual Maturities, Time Deposits, $100,000 or More, Six Months Through 12 Months	19,570	18,582
Contractual Maturities, Time Deposits, $100,000 or More, after 12 Months	59,910	55,961
Time Deposits, $100,000 or More, Total	99,214	97,096
Contractual Maturities, Time Deposits, Less than $100,000, Three Months or Less	10,988	8,058
Contractual Maturities, Time Deposits, Less than $100,000, Three Months Through Six Months	7,837	7,754
Contractual Maturities, Time Deposits, Less than $100,000, Six Months Through 12 Months	14,512	19,522
Contractual Maturities, Time Deposits, Less than $100,000, after 12 Months	79,782	72,924
Deposits: Time deposits, under $100,000	$ 113,119	$ 108,258

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Employee Benefit Plans (Transactions Under the Company's Stock Option Plans) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Employee Benefit Plans [Abstract]
Options Outstanding, shares	448,975	516,332
Options granted, shares	46,000	37,500
Options exercised, shares	(36,950)	(11,667)
Options forfeited, shares	(9,119)	(8,333)
Options expired, shares	(29,985)	(84,857)
Options Outstanding, shares	418,921	448,975	516,332
Options Exercisable: Shares Exercisable	340,423
Weighted Average exercise Price: Options Outstanding	$ 6.70	$ 7.06
Weighted Average Exercise Price: Options granted	$ 8.16	$ 6.58
Weighted Average Exercise Price: Options exercised	$ 4.33	$ 6.62
Weighted Average Exercise Price: Options forfeited	$ 9.73	$ 6.56
Weighted Average Exercise Price: Options expired	$ 10.16	$ 8.84
Weighted Average exercise Price: Options Outstanding	$ 6.76	$ 6.70	$ 7.06
Weighted Average Exercise Price: Options Exercisable	$ 6.60
Weighted Average Remaining Contractual Life (in years): Options Outstanding	5 years 6 months	5 years 7 months 6 days	5 years 4 months 24 days
Weighted Average Remaining Contractual Life (in years): Options Exercisable	4 years 8 months 12 days
Aggregate Intrinsic Value: Options Outstanding	$ 1,257,968	$ 739,951	$ 327,725
Aggregate Intrinsic Value: Options Exercisable	$ 1,098,108

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Borrowed Funds and Subordinated Debentures (Tables)

12 Months Ended

Dec. 31, 2014

Borrowed Funds and Subordinated Debentures [Abstract]

Schedule of Debt

	2014					2013					2012
(In thousands)	Amount		Rate			Amount		Rate			Amount		Rate
FHLB borrowings and repurchase agreements:
At December 31,	$	110,000		2.31	%	$	92,000		2.58	%	$	60,000		3.94	%
Year-to-date average		60,765		3.96			61,010		3.88			60,008		3.94
Maximum outstanding		140,000					95,000					61,000
Repurchase agreements:
At December 31,	$	15,000		3.67	%	$	15,000		3.67	%	$	15,000		3.67	%
Year-to-date average		15,000		3.67			15,000		3.67			15,000		3.67
Maximum outstanding		15,000					15,000					15,000
Subordinated debentures:
At December 31,	$	15,465		1.82	%	$	15,465		1.80	%	$	15,465		1.89	%
Year-to-date average		15,465		1.81			15,465		1.83			15,465		2.19
Maximum outstanding		15,465					15,465					15,465

Schedule of Maturities of Term Debt

(In thousands)	2015		2016		2017		2018		2019		Thereafter		Total
FHLB borrowings and repurchase agreements	$	60,000	$	20,000	$	30,000	$	-	$	-	$	-	$	110,000
Other repurchase agreements		-		-		-		-		15,000		-		15,000
Subordinated debentures		-		-		-		-		-		15,465		15,465
Total borrowings	$	60,000	$	20,000	$	30,000	$	-	$	15,000	$	15,465	$	140,465

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Restrictions on Cash (Narrative) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Restricted Cash and Cash Equivalents Items [Line Items]
Deposit Liabilities, Collateral Issued, Financial Instruments	$ 6,000,000	$ 18,000,000
Electronic Funds Transfer [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted Cash and Cash Equivalents	$ 179,000	$ 179,000

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Loans (Servicing Assets Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Loans sold and serviced but owned by outside investors	$ 113,200,000	$ 101,900,000
Servicing Asset	753,000	437,000
Discount related to retained portion of unsold SBA loans	$ 657,000	$ 502,000
SBA Servicing Assets [Member]
Discount rate used to determine fair Value	15.00%
SBA Servicing Assets [Member] | Minimum [Member]
Interest strip multiples range used to determine fair value	2.08%
Constant prepayment speeds range used to determine fair value	15.00%
SBA Servicing Assets [Member] | Maximum [Member]
Interest strip multiples range used to determine fair value	3.80%
Constant prepayment speeds range used to determine fair value	18.00%
Mortgage Servicing Assets [Member]
Discount rate used to determine fair Value	12.00%

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Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only) (Condensed Balance Sheets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	$ 129,821	$ 99,404	$ 94,192
Securities available for sale	60,073	81,133
Other assets	3,291	2,654
Total assets	1,008,788	921,118
Other liabilities	3,385	2,328
Subordinated debentures	15,465	15,465
Shareholders' equity	70,123	57,173	77,510
Total liabilities and shareholders' equity	1,008,788	921,118
Parent Company Only [Member]
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	198	724
Securities available for sale	197	167
Capital note due from Bank	8,500	8,500
Investment in subsidiaries	76,323	62,814
Other assets	447	492
Total assets	85,665	72,697
Other liabilities	78	59
Subordinated debentures	15,465	15,465
Shareholders' equity	70,122	57,173
Total liabilities and shareholders' equity	$ 85,665	$ 72,697

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Loans (Impaired Loans With Associated Allowance Amount) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014		Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	$ 6,816		$ 9,546
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	6,564		7,342
Impaired Financing Receivable, Unpaid Principal Balance, Total	13,380		16,888
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	6,099		9,110
Impaired Financing Receivable, with Related Allowance, Recorded Investment	6,058		5,678
Impaired Financing Receivable, Recorded Investment, Total	12,157		14,788
Impaired Financing Receivable, Related Allowance	1,161		1,138
Impaired financing receivable unpaid principle balance, guaranteed by Small Business Administration	1,600		540
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	1,719	[1]	1,123	[2]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	1,521	[1]	2,282	[2]
Impaired Financing Receivable, Unpaid Principal Balance, Total	3,240	[1]	3,405	[2]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,093	[1]	835	[2]
Impaired Financing Receivable, with Related Allowance, Recorded Investment	1,127	[1]	1,905	[2]
Impaired Financing Receivable, Recorded Investment, Total	2,220	[1]	2,740	[2]
Impaired Financing Receivable, Related Allowance	502	[1]	831	[2]
Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	2,202		2,251
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	1,676		1,277
Impaired Financing Receivable, Unpaid Principal Balance, Total	3,878		3,528
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,202		2,251
Impaired Financing Receivable, with Related Allowance, Recorded Investment	1,676		677
Impaired Financing Receivable, Recorded Investment, Total	3,878		2,928
Impaired Financing Receivable, Related Allowance	510		29
Commercial Other Receivable [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	878		56
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	364		24
Impaired Financing Receivable, Unpaid Principal Balance, Total	1,242		80
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	877		55
Impaired Financing Receivable, with Related Allowance, Recorded Investment	252		12
Impaired Financing Receivable, Recorded Investment, Total	1,129		67
Impaired Financing Receivable, Related Allowance	41		12
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	2,017		6,116
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	3,003		3,557
Impaired Financing Receivable, Unpaid Principal Balance, Total	5,020		9,673
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,927		5,969
Impaired Financing Receivable, with Related Allowance, Recorded Investment	3,003		2,907
Impaired Financing Receivable, Recorded Investment, Total	4,930		8,876
Impaired Financing Receivable, Related Allowance	108		230
Commercial Real Estate Construction Financing Receivable [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance			202
Impaired Financing Receivable, Unpaid Principal Balance, Total			202
Impaired Financing Receivable, with Related Allowance, Recorded Investment			177
Impaired Financing Receivable, Recorded Investment, Total			177
Impaired Financing Receivable, Related Allowance			36
Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	2,895		6,172
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	3,367		3,783
Impaired Financing Receivable, Unpaid Principal Balance, Total	6,262		9,955
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,804		6,024
Impaired Financing Receivable, with Related Allowance, Recorded Investment	3,255		3,096
Impaired Financing Receivable, Recorded Investment, Total	6,059		9,120
Impaired Financing Receivable, Related Allowance	$ 149		$ 278

[1] Balances are reduced by amount guaranteed by the SBA of $1.6 million at December 31, 2014.

[2] Balances are reduced by amount guaranteed by the SBA of $540 thousand at December 31, 2013.

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Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only) (Tables)

12 Months Ended

Dec. 31, 2014

Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only) [Abstract]

Condensed Balance Sheets

Balance Sheets
(In thousands)	December 31, 2014		December 31, 2013
ASSETS
Cash and cash equivalents	$	198	$	724
Securities available for sale		197		167
Capital note due from Bank		8,500		8,500
Investment in subsidiaries		76,323		62,814
Other assets		447		492
Total assets	$	85,665	$	72,697
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities	$	78	$	59
Subordinated debentures		15,465		15,465
Shareholders' equity		70,122		57,173
Total liabilities and shareholders' equity	$	85,665	$	72,697

Condensed Statements of Income

Statements of Income	For the years ended December 31,
(In thousands)	2014		2013
Total interest income	$	748	$	761
Total interest expense		281		287
Net interest income		467		474
Gains on sales of securities		-		3
Other expenses		32		22
Income before provision for income taxes and equity in undistributed net income of subsidiary		435		455
Provision for income taxes		209		116
Income before equity in undistributed net income of subsidiary		226		339
Equity in undistributed net income of subsidiary		6,182		4,776
Net income		6,408		5,115
Preferred stock dividends and discount accretion		-		988
Income available to common shareholders	$	6,408	$	4,127

Condensed Statements of Cash Flows

Statements of Cash Flows	For the years ended December 31,
(In thousands)	2014		2013
OPERATING ACTIVITIES
Net income	$	6,408	$	5,115
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiary		(6,182)		(4,776)
Gains on sales of securities		-		(3)
Net change in other assets and other liabilities		53		(22)
Net cash provided by operating activities		279		314
INVESTING ACTIVITIES
Purchases of securities		-		(100)
Proceeds from sales of securities		-		63
Net cash used in investing activities		-		(37)
FINANCING ACTIVITIES
Redemption of perpetual preferred stock from U.S. Treasury		-		(20,649)
Repurchase of warrant from U.S. Treasury		-		(2,707)
Proceeds from exercise of stock options		70		-
Proceeds from rights offering		6,143		-
Investment in Bank		(6,500)		-
Cash dividends paid on preferred stock		-		(585)
Cash dividends paid on common stock		(753)		(188)
Dividend from Bank		235		12,707
Net cash provided by (used in) financing activities		(805)		(11,422)
Increase in cash and cash equivalents		(526)		(11,145)
Cash and cash equivalents, beginning of period		724		11,869
Cash and cash equivalents, end of period	$	198	$	724
SUPPLEMENTAL DISCLOSURES
Interest paid	$	281	$	287

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Significant Accounting Policies [Abstract]

Significant Accounting Policies

Notes to Consolidated Financial Statements

1.  Summary of Significant Accounting Policies

Overview

The accompanying Consolidated Financial Statements include the accounts of Unity Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiary, Unity Bank (the “Bank” or when consolidated with the Parent Company, the “Company”).  All significant intercompany balances and transactions have been eliminated in consolidation.

Unity Bancorp, Inc. is a bank holding company incorporated in New Jersey and registered under the Bank Holding Company Act of 1956, as amended.  Its wholly-owned subsidiary, the Bank, is chartered by the New Jersey Department of Banking and Insurance.  The Bank provides a full range of commercial and retail banking services through fifteen branch offices located in Hunterdon, Middlesex, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania.  These services include the acceptance of demand, savings, and time deposits and the extension of consumer, real estate, Small Business Administration (“SBA”) and other commercial credits.

Unity Bank has nine wholly-owned subsidiaries: Unity Investment Services, Inc., AJB Residential Realty Enterprises, Inc., AJB Commercial Realty, Inc., MKCD Commercial, Inc., JAH Commercial, Inc., UB Commercial LLC, ASBC Holdings LLC, Unity Property Holdings 1, Inc., and Unity Property Holdings 2, Inc.  Unity Investment Services, Inc. is used to hold and administer part of the Bank’s investment portfolio.  The other subsidiaries hold, administer and maintain the Bank’s other real estate owned (“OREO”) properties. Unity Investment Services, Inc. has one subsidiary, Unity Delaware Investment 2, Inc., which has one subsidiary, Unity NJ REIT, Inc.  Unity NJ REIT, Inc. was added in 2013 to hold loans.

The Company has two unconsolidated, wholly-owned statutory trust subsidiaries.  For additional information, see Note 9 to the Consolidated Financial Statements.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Amounts requiring the use of significant estimates include the allowance for loan losses, valuation of deferred tax and servicing assets, the carrying value of loans held for sale and other real estate owned, the valuation of securities and the determination of other-than-temporary impairment for securities and fair value disclosures.  Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the prior year to conform to the current year presentation, with no impact on prior year earnings or shareholders’ equity.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and interest-bearing deposits.

Securities

The Company classifies its securities into two categories, available for sale and held to maturity.

Securities that are classified as available for sale are stated at fair value.  Unrealized gains and losses on securities available for sale are generally excluded from results of operations and are reported as other comprehensive income, a separate component of shareholders’ equity, net of taxes.  Securities classified as available for sale include securities that may be sold in response to changes in interest rates, changes in prepayment risks or for asset/liability management purposes.  The cost of securities sold is determined on a specific identification basis.  Gains and losses on sales of securities are recognized in the Consolidated Statements of Income on the date of sale.

Securities are classified as held to maturity based on management’s intent and ability to hold them to maturity.  Such securities are stated at cost, adjusted for unamortized purchase premiums and discounts using the level yield method.

If transfers between the available for sale and held to maturity portfolios occur, they are accounted for at fair value and unrealized holding gains and losses are accounted for at the date of transfer.  For securities transferred to available for sale from held to maturity, unrealized gains or losses as of the date of the transfer are recognized in other comprehensive income (loss), a separate component of shareholders’ equity.  For securities transferred into the held to maturity portfolio from the available for sale portfolio, unrealized gains or losses as of the date of transfer continue to be reported in other comprehensive income (loss), and are amortized over the remaining life of the security as an adjustment to its yield, consistent with amortization of the premium or accretion of the discount.

For additional information on securities, see Note 3 to the Consolidated Financial Statements.

Other-Than-Temporary Impairment

The Company has a process in place to identify debt securities that could potentially incur credit impairment that is other-than-temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation.  This evaluation considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other-than-temporary.  Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, the intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity.

For debt securities that are considered other-than-temporarily impaired where management has no intent to sell and the Company has no requirement to sell prior to recovery of its amortized cost basis, the amount of the impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows.  The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income.  For debt securities where management has the intent to sell, the amount of the impairment is reflected in earnings as realized losses.

The present value of expected future cash flows is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security.  The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security.  The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees.  The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Loans

Loans Held for Sale

Loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value.  The Company originates loans to customers under an SBA program that historically has provided for SBA guarantees of up to 90 percent of each loan.  The Company generally sells the guaranteed portion of its SBA loans to a third party and retains the servicing, holding the nonguaranteed portion in its portfolio.  The net amount of loan origination fees on loans sold is included in the carrying value and in the gain or loss on the sale.  When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets are recognized in income.  All criteria for sale accounting must be met in order for the loan sales to occur; see details under the “Transfers of Financial Assets” heading above.

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold.  Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues.  Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term.  Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.  Any impairment, if temporary, would generally be reported as a valuation allowance.

Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets.  Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets.

For additional information on servicing assets, see Note 4 to the Consolidated Financial Statements.

Loans Held for Investment

Loans held for investment are stated at the unpaid principal balance, net of unearned discounts and deferred loan origination fees and costs.  In accordance with the level yield method, loan origination fees, net of direct loan origination costs, are deferred and recognized over the estimated life of the related loans as an adjustment to the loan yield.  Interest is credited to operations primarily based upon the principal balance outstanding.  

Loans are reported as past due when either interest or principal is unpaid in the following circumstances: fixed payment loans when the borrower is in arrears for two or more monthly payments; open end credit for two or more billing cycles; and single payment notes if interest or principal remains unpaid for 30 days or more.

Nonperforming loans consist of loans that are not accruing interest as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt (nonaccrual loans).  When a loan is classified as nonaccrual, interest accruals are discontinued and all past due interest previously recognized as income is reversed and charged against current period earnings.  Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income.  Loans may be returned to an accrual status when the ability to collect is reasonably assured and when the loan is brought current as to principal and interest.

Loans are charged off when collection is sufficiently questionable and when the Company can no longer justify maintaining the loan as an asset on the balance sheet.  Loans qualify for charge-off when, after thorough analysis, all possible sources of repayment are insufficient.  These include: 1) potential future cash flows, 2) value of collateral, and/or 3) strength of co-makers and guarantors.  All unsecured loans are charged off upon the establishment of the loan’s nonaccrual status.  Additionally, all loans classified as a loss or that portion of the loan classified as a loss is charged off.  All loan charge-offs are approved by the Board of Directors.

Troubled debt restructurings ("TDRs") occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider.  These concessions typically include reductions in interest rate, extending the maturity of a loan, or a combination of both. Interest income on accruing TDRs is credited to operations primarily based upon the principal amount outstanding, as stated in the paragraphs above. 

The Company evaluates its loans for impairment.  A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The Company has defined impaired loans to be all TDRs and nonperforming loans.  Impairment is evaluated in total for smaller-balance loans of a similar nature (consumer and residential mortgage loans), and on an individual basis for all other loans.  Impairment of a loan is measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or as a practical expedient, based on a loan’s observable market price or the fair value of collateral, net of estimated costs to sell, if the loan is collateral-dependent.  If the value of the impaired loan is less than the recorded investment in the loan, the Company establishes a valuation allowance, or adjusts existing valuation allowances, with a corresponding charge to the provision for loan losses.

For additional information on loans, see Note 4 to the Consolidated Financial Statements.

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

The allowance for loan losses is maintained at a level management considers adequate to provide for probable loan losses as of the balance sheet date.  The allowance is increased by provisions charged to expense and is reduced by net charge-offs.  

The level of the allowance is based on management’s evaluation of probable losses in the loan portfolio, after consideration of prevailing economic conditions in the Company’s market area, the volume and composition of the loan portfolio, and historical loan loss experience.  The allowance for loan losses consists of specific reserves for individually impaired credits and TDRs, reserves for nonimpaired loans based on historical loss factors adjusted for general economic factors and other qualitative risk factors such as changes in delinquency trends, industry concentrations or local/national economic trends.  This risk assessment process is performed at least quarterly, and, as adjustments become necessary, they are realized in the periods in which they become known.   

Although management attempts to maintain the allowance at a level deemed adequate to provide for probable losses, future additions to the allowance may be necessary based upon certain factors including changes in market conditions and underlying collateral values.  In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses.  These agencies may require the Company to make additional provisions based on judgments about information available at the time of the examination.

The Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated probable losses.  Adjustments to the reserve are made through other expenses and applied to the reserve which is classified as other liabilities.

For additional information on the allowance for loan losses and reserve for unfunded loan commitments, see Note 5 to the Consolidated Financial Statements.

Premises and Equipment

Land is carried at cost.  All other fixed assets are carried at cost less accumulated depreciation.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets.  The useful life of buildings is not to exceed 30 years; furniture and fixtures is generally 10 years or less, and equipment is 3 to 5 years.  Leasehold improvements are depreciated over the life of the underlying lease. 

For additional information on premises and equipment, see Note 6 to the Consolidated Financial Statements.

Bank Owned Life Insurance

The Company purchased life insurance policies on certain members of management.  Bank owned life insurance (“BOLI”) is recorded at its cash surrender value or the amount that can be realized.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula.  The stock is carried at cost.  Management reviews the stock for impairment based on the ultimate recoverability of the cost basis in the stock.  The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines.  Management considers such criteria as the significance of the decline in net assets, if any, of the FHLB, the length of time this situation has persisted, commitments by the FHLB to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLB and the liquidity position of the FHLB.

Other Real Estate Owned

Other real estate owned (“OREO”) is recorded at the fair value, less estimated costs to sell at the date of acquisition, with a charge to the allowance for loan losses for any excess of the loan carrying value over such amount.  Subsequently, OREO is carried at the lower of cost or fair value, as determined by current appraisals.  Certain costs that increase the value or extend the useful life in preparing properties for sale are capitalized to the extent that the appraisal amount exceeds the carry value, and expenses of holding foreclosed properties are charged to operations as incurred.

Appraisals

The Company requires current real estate appraisals on all loans that become OREO or in-substance foreclosure, loans that are classified substandard, doubtful or loss, or loans that are over $100,000 and nonperforming.  Prior to each balance sheet date, the Company values impaired collateral-dependent loans and OREO based upon a third party appraisal, broker's price opinion, drive by appraisal, automated valuation model, updated market evaluation, or a combination of these methods.  The amount is discounted for the decline in market real estate values (for original appraisals), for any known damage or repair costs, and for selling and closing costs.  The amount of the discount is dependent upon the method used to determine the original value.  The original appraisal is generally used when a loan is first determined to be impaired.  When applying the discount, the Company takes into consideration when the appraisal was performed, the collateral’s location, the type of collateral, any known damage to the property and the type of business.  Subsequent to entering impaired status and the Company determining that there is a collateral shortfall, the Company will generally, depending on the type of collateral, order a third party appraisal, broker's price opinion, automated valuation model or updated market evaluation.  Subsequent to receiving the third party results, the Company will discount the value 6 to 10 percent for selling and closing costs.

Income Taxes

The Company follows Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") Topic 740, “Income Taxes,” which prescribes a threshold for the financial statement recognition of income taxes and provides criteria for the measurement of tax positions taken or expected to be taken in a tax return.  ASC 740 also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition of income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Deferred tax assets and liabilities are measured using the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Valuation reserves are established against certain deferred tax assets when it is more likely than not that the deferred tax assets will not be realized.  Increases or decreases in the valuation reserve are charged or credited to the income tax provision.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions.  Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.  The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits are recognized in income tax expense on the income statement.

For additional information on income taxes, see Note 15 to the Consolidated Financial Statements.

Net Income Per Share

Basic net income per common share is calculated as net income available to common shareholders divided by the weighted average common shares outstanding during the reporting period.  Net income available to common shareholders is calculated as net income less accrued dividends and discount accretion related to preferred stock.

Diluted net income per common share is computed similarly to that of basic net income per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, principally stock options, were issued during the reporting period utilizing the Treasury stock method.  However, when a net loss rather than net income is recognized, diluted earnings per share equals basic earnings per share.

For additional information on net income per share, see Note 16 to the Consolidated Financial Statements.

Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation,” which requires recognition of compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award.  Compensation expense is equal to the fair value of the award, net of estimated forfeitures, and is recognized over the vesting period of such awards.

For additional information on the Company’s stock-based compensation, see Note 18 to the Consolidated Financial Statements.

Fair Value

The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which provides a framework for measuring fair value under generally accepted accounting principles.

For additional information on the fair value of the Company’s financial instruments, see Note 19 to the Consolidated Financial Statements.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of the change in unrealized gains (losses) on securities available for sale that were reported as a component of shareholders’ equity, net of tax.

For additional information on other comprehensive income, see Note 11 to the Consolidated Financial Statements.

Advertising

The Company expenses the costs of advertising in the period incurred.

Dividend Restrictions

Banking regulations require maintaining certain capital levels that may limit the dividends paid by the Bank to the holding company or by the holding company to the shareholders.

Operating Segments

While management monitors the revenue streams of its various products and services, operating results and financial performance are evaluated on a company-wide basis.  The Company’s management uses consolidated results to make operating and strategic decisions.  Accordingly, there is only one reportable segment.

Recent Accounting Pronouncements

ASU No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40):  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.”  ASU 2014-04 clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.  Additionally, ASU 2014-04 requires interim and annual disclosure of both (a) the amount of foreclosed residential real estate property held by the creditor and (b) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.  The amendments in ASU 2014-04 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  An entity can elect to adopt the amendments using either a modified retrospective transition method or prospective transition method.  Early adoption is permitted.  The Company is currently evaluating the impact of these amendments.

ASU 2014-11, “Transfers and Servicing (Topic 860):  Repurchase to Maturity Transactions, Repurchase Financings, and Disclosures.”  ASU 2014-11,  requires two accounting changes:  1) repurchase-to-maturity transactions to secured borrowing accounting and 2) repurchase financing arrangements, amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, will result in secured borrowing accounting for the repurchase agreement.   ASU 2014-11 also requires additional disclosures for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings.  The accounting changes in this update are effective for public business entities for the first interim or annual period beginning after December 15, 2014.  Early application is prohibited.  The Company is currently evaluating the impact of the standard.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”  This ASU has three sections:

Section A – Summary and amendments that creates revenue from contracts with customers (Topic 606) and Other Assets and Deferred Costs – Contracts with Customers (Subtopic 340-40);

Section B – Conforming amendments to other topics and subtopics in the codification and status tables;

Section C – Background information and basis for conclusions.

The accounting changes in this update are effective for public business entities for the first interim or annual period beginning after December 15, 2016.  Early application is prohibited.  The Company is currently evaluating the impact of the standard.

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with FASB ASC Topic 350, “Intangibles – Goodwill and Other,” which allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.  Based on a qualitative assessment, management determined that the Company’s recorded goodwill totaling $1.5 million, which resulted from the 2005 acquisition of its Phillipsburg, New Jersey branch, is not impaired as of December 31, 2014.

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Loans (Average Recorded Investments In Impaired Loans And Related Amount Of Interest Recognized) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	$ 12,802		$ 19,693
Impaired Financing Receivable, Interest Income, Accrual Method	621		794
Impaired financing receivable average recorded investment, guaranteed by Small Business Administration	1,200		953
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	3,028	[1]	3,244	[1]
Impaired Financing Receivable, Interest Income, Accrual Method	256	[1]	197	[1]
Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	3,042		5,066
Impaired Financing Receivable, Interest Income, Accrual Method	109		173
Commercial Other Receivable [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	323		1,461
Impaired Financing Receivable, Interest Income, Accrual Method	2		100
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	6,336		9,751
Impaired Financing Receivable, Interest Income, Accrual Method	231		324
Commercial Real Estate Construction Financing Receivable [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	73		171
Impaired Financing Receivable, Interest Income, Accrual Method	$ 23

[1] Balances are reduced by the average amount guaranteed by the SBA of $1.2 million and $953 thousand for years ended December 31, 2014 and 2013, respectively.

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Net Income per Share (Tables)

12 Months Ended

Dec. 31, 2014

Net Income per Share [Abstract]

Reconciliation Of The Calculation Of Basic And Diluted Income Per Share

	For the years ended December 31,
(In thousands, except per share amounts)	2014		2013
Net income	$	6,408	$	5,115
Less: Preferred stock dividends and discount accretion		-		988
Income available to common shareholders	$	6,408	$	4,127
Weighted average common shares outstanding - Basic		7,856		7,547
Plus: Potential dilutive common stock equivalents		89		263
Weighted average common shares outstanding - Diluted		7,945		7,810
Net income per common share - Basic	$	0.82	$	0.55
Net income per common share - Diluted		0.81		0.53
Stock options and common stock excluded from the income per share calculation as their effect would have been anti-dilutive		114		377

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Quarterly Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information (Unaudited) [Abstract]

Quarterly Financial Information (Unaudited)

Quarterly Financial Information (Unaudited)

The following quarterly financial information for the years ended December 31, 2014 and 2013 is unaudited.  However, in the opinion of management, all adjustments, which include normal recurring adjustments necessary to present fairly the results of operations for the periods, are reflected.

	2014
(In thousands, except per share data)	March 31		June 30		September 30		December 31
Total interest income	$	9,023	$	9,102	$	9,491	$	9,802
Total interest expense		1,736		1,797		1,859		1,914
Net interest income		7,287		7,305		7,632		7,888
Provision for loan losses		600		550		550		850
Net interest income after provision for loan losses		6,687		6,755		7,082		7,038
Total noninterest income		1,526		1,640		1,853		1,660
Total noninterest expense		6,258		6,144		6,241		6,045
Income before provision for income taxes		1,955		2,251		2,694		2,653
Provision for income taxes		662		723		808		952
Net income		1,293		1,528		1,886		1,701
Preferred stock dividends and discount accretion		-		-		-		-
Income available to common shareholders	$	1,293	$	1,528	$	1,886	$	1,701
Net income per common share - Basic	$	0.17	$	0.20	$	0.24	$	0.21
Net income per common share - Diluted		0.17		0.20		0.24		0.20
	2013
(In thousands, except per share data)	March 31		June 30		September 30		December 31
Total interest income	$	8,313	$	8,401	$	8,474	$	8,766
Total interest expense		1,624		1,599		1,603		1,703
Net interest income		6,689		6,802		6,871		7,063
Provision for loan losses		650		300		600		800
Net interest income after provision for loan losses		6,039		6,502		6,271		6,263
Total noninterest income		1,825		1,658		1,650		1,471
Total noninterest expense		6,126		6,074		5,935		5,862
Income before provision for income taxes		1,738		2,086		1,986		1,872
Provision for income taxes		538		739		684		606
Net income		1,200		1,347		1,302		1,266
Preferred stock dividends and discount accretion		404		465		119		-
Income available to common shareholders	$	796	$	882	$	1,183	$	1,266
Net income per common share - Basic	$	0.11	$	0.12	$	0.15	$	0.17
Net income per common share - Diluted		0.10		0.11		0.15		0.17

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Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only)

12 Months Ended

Dec. 31, 2014

Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only) [Abstract]

Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only)

20.  Condensed Financial Statements of Unity Bancorp, Inc.

(Parent Company Only)

Balance Sheets
(In thousands)	December 31, 2014		December 31, 2013
ASSETS
Cash and cash equivalents	$	198	$	724
Securities available for sale		197		167
Capital note due from Bank		8,500		8,500
Investment in subsidiaries		76,323		62,814
Other assets		447		492
Total assets	$	85,665	$	72,697
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities	$	78	$	59
Subordinated debentures		15,465		15,465
Shareholders' equity		70,122		57,173
Total liabilities and shareholders' equity	$	85,665	$	72,697

Statements of Income	For the years ended December 31,
(In thousands)	2014		2013
Total interest income	$	748	$	761
Total interest expense		281		287
Net interest income		467		474
Gains on sales of securities		-		3
Other expenses		32		22
Income before provision for income taxes and equity in undistributed net income of subsidiary		435		455
Provision for income taxes		209		116
Income before equity in undistributed net income of subsidiary		226		339
Equity in undistributed net income of subsidiary		6,182		4,776
Net income		6,408		5,115
Preferred stock dividends and discount accretion		-		988
Income available to common shareholders	$	6,408	$	4,127

Statements of Cash Flows	For the years ended December 31,
(In thousands)	2014		2013
OPERATING ACTIVITIES
Net income	$	6,408	$	5,115
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiary		(6,182)		(4,776)
Gains on sales of securities		-		(3)
Net change in other assets and other liabilities		53		(22)
Net cash provided by operating activities		279		314
INVESTING ACTIVITIES
Purchases of securities		-		(100)
Proceeds from sales of securities		-		63
Net cash used in investing activities		-		(37)
FINANCING ACTIVITIES
Redemption of perpetual preferred stock from U.S. Treasury		-		(20,649)
Repurchase of warrant from U.S. Treasury		-		(2,707)
Proceeds from exercise of stock options		70		-
Proceeds from rights offering		6,143		-
Investment in Bank		(6,500)		-
Cash dividends paid on preferred stock		-		(585)
Cash dividends paid on common stock		(753)		(188)
Dividend from Bank		235		12,707
Net cash provided by (used in) financing activities		(805)		(11,422)
Increase in cash and cash equivalents		(526)		(11,145)
Cash and cash equivalents, beginning of period		724		11,869
Cash and cash equivalents, end of period	$	198	$	724
SUPPLEMENTAL DISCLOSURES
Interest paid	$	281	$	287

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Employee Benefit Plans (Schedule of Stock Options, by Exercise Price Range) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding: Shares Outstanding	418,921
Options Outstanding: Weighted Average Remaining Contractual Life (in years)	5 years 6 months
Options Outstanding: Weighted Average Exercise Price	$ 6.76
Options Exercisable: Shares Exercisable	340,423
Options Exercisable: Weighted Average Exercise Price	$ 6.60
Range Of Option Exercise Prices 0.00-4.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower	$ 0.00
Range of exercise prices, upper	$ 4.00
Options Outstanding: Shares Outstanding	89,000
Options Outstanding: Weighted Average Remaining Contractual Life (in years)	4 years 2 months 12 days
Options Outstanding: Weighted Average Exercise Price	$ 3.85
Options Exercisable: Shares Exercisable	89,000
Options Exercisable: Weighted Average Exercise Price	$ 3.85
Range Of Option Exercise Prices 4.01-8.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower	$ 4.01
Range of exercise prices, upper	$ 8.00
Options Outstanding: Shares Outstanding	282,475
Options Outstanding: Weighted Average Remaining Contractual Life (in years)	6 years 4 months 24 days
Options Outstanding: Weighted Average Exercise Price	$ 6.73
Options Exercisable: Shares Exercisable	208,977
Options Exercisable: Weighted Average Exercise Price	$ 6.55
Range Of Option Exercise Prices 8.01-12.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower	$ 8.01
Range of exercise prices, upper	$ 12.00
Options Outstanding: Shares Outstanding	5,551
Options Outstanding: Weighted Average Remaining Contractual Life (in years)	9 years 2 months 12 days
Options Outstanding: Weighted Average Exercise Price	$ 10.39
Options Exercisable: Shares Exercisable	551
Options Exercisable: Weighted Average Exercise Price	$ 11.25
Range Of Option Exercise Prices 12.01-16.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower	$ 12.01
Range of exercise prices, upper	$ 16.00
Options Outstanding: Shares Outstanding	41,895
Options Outstanding: Weighted Average Remaining Contractual Life (in years)	2 years 1 month 6 days
Options Outstanding: Weighted Average Exercise Price	$ 12.62
Options Exercisable: Shares Exercisable	41,895
Options Exercisable: Weighted Average Exercise Price	$ 12.62

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Securities (Schedule Of Realized Gains (Losses) For Marketable Securities ) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Securities [Abstract]
Available-for-sale Securities, Gross Realized Gains	$ 440	$ 394
Available-for-sale Securities, Gross Realized Losses	(7)	(4)
Available-for-sale Securities, Gross Realized Gain (Loss), Total	433	390
Net gains on sales of securities	$ 433	$ 390

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Regulatory Capital (Tables)

12 Months Ended

Dec. 31, 2014

Regulatory Capital [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

											To be well-capitalized
						For capital					under prompt corrective
	Actual					adequacy purposes					action provisions
(In thousands, except percentages)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Leverage ratio	$	83,615		8.71	%	≥ $	38,405		4.00	%		N/A		N/A
Tier I risk-based capital ratio		83,615		11.57			28,900		4.00			N/A		N/A
Total risk-based capital ratio		92,691		12.83			57,799		8.00			N/A		N/A
As of December 31, 2013
Leverage ratio	$	70,852		8.08	%	≥ $	35,084		4.00	%		N/A		N/A
Tier I risk-based capital ratio		70,852		10.74			26,400		4.00			N/A		N/A
Total risk-based capital ratio		79,164		11.99			52,800		8.00			N/A		N/A

The Bank’s capital amounts and ratios are presented in the following table:

											To be well-capitalized
						For capital					under prompt corrective
	Actual					adequacy purposes					action provisions
(In thousands, except percentages)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Leverage ratio	$	74,819		7.80	%	≥ $	38,381		4.00	%	≥ $	47,976		5.00	%
Tier I risk-based capital ratio		74,819		10.37			28,874		4.00			43,310		6.00
Total risk-based capital ratio		92,388		12.80			57,747		8.00			72,184		10.00
As of December 31, 2013
Leverage ratio	$	61,493		7.02	%	≥ $	35,058		4.00	%	≥ $	43,823		5.00	%
Tier I risk-based capital ratio		61,493		9.33			26,373		4.00			39,560		6.00
Total risk-based capital ratio		78,296		11.88			52,747		8.00			65,933		10.00

Schedule of Future Basel Capital Requirements

	Current Treatment		Treatment in Final Rule
Leverage ratio	4.00	%	4.00	%
Common equity tier 1 capital (CET1) ratio	N/A		4.50	%
Additional tier 1	N/A		1.50	%
Tier 1 capital ratio	4.00	%	6.00	%
Tier 2	4.00	%	2.00	%
Total capital ratio	8.00	%	8.00	%
Capital conservation buffer	N/A		2.50	%

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Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2014

Significant Accounting Policies [Abstract]

Overview

Overview

The accompanying Consolidated Financial Statements include the accounts of Unity Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiary, Unity Bank (the “Bank” or when consolidated with the Parent Company, the “Company”).  All significant intercompany balances and transactions have been eliminated in consolidation.

Unity Bancorp, Inc. is a bank holding company incorporated in New Jersey and registered under the Bank Holding Company Act of 1956, as amended.  Its wholly-owned subsidiary, the Bank, is chartered by the New Jersey Department of Banking and Insurance.  The Bank provides a full range of commercial and retail banking services through fifteen branch offices located in Hunterdon, Middlesex, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania.  These services include the acceptance of demand, savings, and time deposits and the extension of consumer, real estate, Small Business Administration (“SBA”) and other commercial credits.

Unity Bank has nine wholly-owned subsidiaries: Unity Investment Services, Inc., AJB Residential Realty Enterprises, Inc., AJB Commercial Realty, Inc., MKCD Commercial, Inc., JAH Commercial, Inc., UB Commercial LLC, ASBC Holdings LLC, Unity Property Holdings 1, Inc., and Unity Property Holdings 2, Inc.  Unity Investment Services, Inc. is used to hold and administer part of the Bank’s investment portfolio.  The other subsidiaries hold, administer and maintain the Bank’s other real estate owned (“OREO”) properties. Unity Investment Services, Inc. has one subsidiary, Unity Delaware Investment 2, Inc., which has one subsidiary, Unity NJ REIT, Inc.  Unity NJ REIT, Inc. was added in 2013 to hold loans.

The Company has two unconsolidated, wholly-owned statutory trust subsidiaries.  For additional information, see Note 9 to the Consolidated Financial Statements.

Use Of Estimates in the Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Amounts requiring the use of significant estimates include the allowance for loan losses, valuation of deferred tax and servicing assets, the carrying value of loans held for sale and other real estate owned, the valuation of securities and the determination of other-than-temporary impairment for securities and fair value disclosures.  Actual results could differ from those estimates.

Reclassifications

Reclassifications

Certain reclassifications have been made to the prior year to conform to the current year presentation, with no impact on prior year earnings or shareholders’ equity.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and interest-bearing deposits.

Securities

Securities

The Company classifies its securities into two categories, available for sale and held to maturity.

Securities that are classified as available for sale are stated at fair value.  Unrealized gains and losses on securities available for sale are generally excluded from results of operations and are reported as other comprehensive income, a separate component of shareholders’ equity, net of taxes.  Securities classified as available for sale include securities that may be sold in response to changes in interest rates, changes in prepayment risks or for asset/liability management purposes.  The cost of securities sold is determined on a specific identification basis.  Gains and losses on sales of securities are recognized in the Consolidated Statements of Income on the date of sale.

Securities are classified as held to maturity based on management’s intent and ability to hold them to maturity.  Such securities are stated at cost, adjusted for unamortized purchase premiums and discounts using the level yield method.

If transfers between the available for sale and held to maturity portfolios occur, they are accounted for at fair value and unrealized holding gains and losses are accounted for at the date of transfer.  For securities transferred to available for sale from held to maturity, unrealized gains or losses as of the date of the transfer are recognized in other comprehensive income (loss), a separate component of shareholders’ equity.  For securities transferred into the held to maturity portfolio from the available for sale portfolio, unrealized gains or losses as of the date of transfer continue to be reported in other comprehensive income (loss), and are amortized over the remaining life of the security as an adjustment to its yield, consistent with amortization of the premium or accretion of the discount.

For additional information on securities, see Note 3 to the Consolidated Financial Statements.

Other-Than-Temporary Impairment

The Company has a process in place to identify debt securities that could potentially incur credit impairment that is other-than-temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation.  This evaluation considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other-than-temporary.  Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, the intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity.

For debt securities that are considered other-than-temporarily impaired where management has no intent to sell and the Company has no requirement to sell prior to recovery of its amortized cost basis, the amount of the impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows.  The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income.  For debt securities where management has the intent to sell, the amount of the impairment is reflected in earnings as realized losses.

The present value of expected future cash flows is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security.  The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security.  The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees.  The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Loans

Loans

Loans Held for Sale

Loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value.  The Company originates loans to customers under an SBA program that historically has provided for SBA guarantees of up to 90 percent of each loan.  The Company generally sells the guaranteed portion of its SBA loans to a third party and retains the servicing, holding the nonguaranteed portion in its portfolio.  The net amount of loan origination fees on loans sold is included in the carrying value and in the gain or loss on the sale.  When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets are recognized in income.  All criteria for sale accounting must be met in order for the loan sales to occur; see details under the “Transfers of Financial Assets” heading above.

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold.  Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues.  Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term.  Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.  Any impairment, if temporary, would generally be reported as a valuation allowance.

Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets.  Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets.

For additional information on servicing assets, see Note 4 to the Consolidated Financial Statements.

Loans Held for Investment

Loans held for investment are stated at the unpaid principal balance, net of unearned discounts and deferred loan origination fees and costs.  In accordance with the level yield method, loan origination fees, net of direct loan origination costs, are deferred and recognized over the estimated life of the related loans as an adjustment to the loan yield.  Interest is credited to operations primarily based upon the principal balance outstanding.  

Loans are reported as past due when either interest or principal is unpaid in the following circumstances: fixed payment loans when the borrower is in arrears for two or more monthly payments; open end credit for two or more billing cycles; and single payment notes if interest or principal remains unpaid for 30 days or more.

Nonperforming loans consist of loans that are not accruing interest as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt (nonaccrual loans).  When a loan is classified as nonaccrual, interest accruals are discontinued and all past due interest previously recognized as income is reversed and charged against current period earnings.  Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income.  Loans may be returned to an accrual status when the ability to collect is reasonably assured and when the loan is brought current as to principal and interest.

Loans are charged off when collection is sufficiently questionable and when the Company can no longer justify maintaining the loan as an asset on the balance sheet.  Loans qualify for charge-off when, after thorough analysis, all possible sources of repayment are insufficient.  These include: 1) potential future cash flows, 2) value of collateral, and/or 3) strength of co-makers and guarantors.  All unsecured loans are charged off upon the establishment of the loan’s nonaccrual status.  Additionally, all loans classified as a loss or that portion of the loan classified as a loss is charged off.  All loan charge-offs are approved by the Board of Directors.

Troubled debt restructurings ("TDRs") occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider.  These concessions typically include reductions in interest rate, extending the maturity of a loan, or a combination of both. Interest income on accruing TDRs is credited to operations primarily based upon the principal amount outstanding, as stated in the paragraphs above. 

The Company evaluates its loans for impairment.  A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The Company has defined impaired loans to be all TDRs and nonperforming loans.  Impairment is evaluated in total for smaller-balance loans of a similar nature (consumer and residential mortgage loans), and on an individual basis for all other loans.  Impairment of a loan is measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or as a practical expedient, based on a loan’s observable market price or the fair value of collateral, net of estimated costs to sell, if the loan is collateral-dependent.  If the value of the impaired loan is less than the recorded investment in the loan, the Company establishes a valuation allowance, or adjusts existing valuation allowances, with a corresponding charge to the provision for loan losses.

For additional information on loans, see Note 4 to the Consolidated Financial Statements.

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

The allowance for loan losses is maintained at a level management considers adequate to provide for probable loan losses as of the balance sheet date.  The allowance is increased by provisions charged to expense and is reduced by net charge-offs.  

The level of the allowance is based on management’s evaluation of probable losses in the loan portfolio, after consideration of prevailing economic conditions in the Company’s market area, the volume and composition of the loan portfolio, and historical loan loss experience.  The allowance for loan losses consists of specific reserves for individually impaired credits and TDRs, reserves for nonimpaired loans based on historical loss factors adjusted for general economic factors and other qualitative risk factors such as changes in delinquency trends, industry concentrations or local/national economic trends.  This risk assessment process is performed at least quarterly, and, as adjustments become necessary, they are realized in the periods in which they become known.   

Although management attempts to maintain the allowance at a level deemed adequate to provide for probable losses, future additions to the allowance may be necessary based upon certain factors including changes in market conditions and underlying collateral values.  In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses.  These agencies may require the Company to make additional provisions based on judgments about information available at the time of the examination.

The Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated probable losses.  Adjustments to the reserve are made through other expenses and applied to the reserve which is classified as other liabilities.

For additional information on the allowance for loan losses and reserve for unfunded loan commitments, see Note 5 to the Consolidated Financial Statements.

Premises and Equipment

Premises and Equipment

Land is carried at cost.  All other fixed assets are carried at cost less accumulated depreciation.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets.  The useful life of buildings is not to exceed 30 years; furniture and fixtures is generally 10 years or less, and equipment is 3 to 5 years.  Leasehold improvements are depreciated over the life of the underlying lease. 

For additional information on premises and equipment, see Note 6 to the Consolidated Financial Statements.

Bank Owned Life Insurance

Bank Owned Life Insurance

The Company purchased life insurance policies on certain members of management.  Bank owned life insurance (“BOLI”) is recorded at its cash surrender value or the amount that can be realized.

Federal Home Loan Bank Stock

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula.  The stock is carried at cost.  Management reviews the stock for impairment based on the ultimate recoverability of the cost basis in the stock.  The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines.  Management considers such criteria as the significance of the decline in net assets, if any, of the FHLB, the length of time this situation has persisted, commitments by the FHLB to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLB and the liquidity position of the FHLB.

Other Real Estate Owned

Other Real Estate Owned

Other real estate owned (“OREO”) is recorded at the fair value, less estimated costs to sell at the date of acquisition, with a charge to the allowance for loan losses for any excess of the loan carrying value over such amount.  Subsequently, OREO is carried at the lower of cost or fair value, as determined by current appraisals.  Certain costs that increase the value or extend the useful life in preparing properties for sale are capitalized to the extent that the appraisal amount exceeds the carry value, and expenses of holding foreclosed properties are charged to operations as incurred.

Appraisals

The Company requires current real estate appraisals on all loans that become OREO or in-substance foreclosure, loans that are classified substandard, doubtful or loss, or loans that are over $100,000 and nonperforming.  Prior to each balance sheet date, the Company values impaired collateral-dependent loans and OREO based upon a third party appraisal, broker's price opinion, drive by appraisal, automated valuation model, updated market evaluation, or a combination of these methods.  The amount is discounted for the decline in market real estate values (for original appraisals), for any known damage or repair costs, and for selling and closing costs.  The amount of the discount is dependent upon the method used to determine the original value.  The original appraisal is generally used when a loan is first determined to be impaired.  When applying the discount, the Company takes into consideration when the appraisal was performed, the collateral’s location, the type of collateral, any known damage to the property and the type of business.  Subsequent to entering impaired status and the Company determining that there is a collateral shortfall, the Company will generally, depending on the type of collateral, order a third party appraisal, broker's price opinion, automated valuation model or updated market evaluation.  Subsequent to receiving the third party results, the Company will discount the value 6 to 10 percent for selling and closing costs.

Income Taxes

Income Taxes

The Company follows Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") Topic 740, “Income Taxes,” which prescribes a threshold for the financial statement recognition of income taxes and provides criteria for the measurement of tax positions taken or expected to be taken in a tax return.  ASC 740 also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition of income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Deferred tax assets and liabilities are measured using the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Valuation reserves are established against certain deferred tax assets when it is more likely than not that the deferred tax assets will not be realized.  Increases or decreases in the valuation reserve are charged or credited to the income tax provision.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions.  Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.  The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits are recognized in income tax expense on the income statement.

For additional information on income taxes, see Note 15 to the Consolidated Financial Statements.

Net Income Per Share

Net Income Per Share

Basic net income per common share is calculated as net income available to common shareholders divided by the weighted average common shares outstanding during the reporting period.  Net income available to common shareholders is calculated as net income less accrued dividends and discount accretion related to preferred stock.

Diluted net income per common share is computed similarly to that of basic net income per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, principally stock options, were issued during the reporting period utilizing the Treasury stock method.  However, when a net loss rather than net income is recognized, diluted earnings per share equals basic earnings per share.

For additional information on net income per share, see Note 16 to the Consolidated Financial Statements.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation,” which requires recognition of compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award.  Compensation expense is equal to the fair value of the award, net of estimated forfeitures, and is recognized over the vesting period of such awards.

For additional information on the Company’s stock-based compensation, see Note 18 to the Consolidated Financial Statements.

Fair Value

Fair Value

The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which provides a framework for measuring fair value under generally accepted accounting principles.

For additional information on the fair value of the Company’s financial instruments, see Note 19 to the Consolidated Financial Statements.

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of the change in unrealized gains (losses) on securities available for sale that were reported as a component of shareholders’ equity, net of tax.

For additional information on other comprehensive income, see Note 11 to the Consolidated Financial Statements.

Advertising

Advertising

The Company expenses the costs of advertising in the period incurred.

Dividend Restrictions

Dividend Restrictions

Banking regulations require maintaining certain capital levels that may limit the dividends paid by the Bank to the holding company or by the holding company to the shareholders.

Operating Segments

Operating Segments

While management monitors the revenue streams of its various products and services, operating results and financial performance are evaluated on a company-wide basis.  The Company’s management uses consolidated results to make operating and strategic decisions.  Accordingly, there is only one reportable segment.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

ASU No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40):  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.”  ASU 2014-04 clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.  Additionally, ASU 2014-04 requires interim and annual disclosure of both (a) the amount of foreclosed residential real estate property held by the creditor and (b) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.  The amendments in ASU 2014-04 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  An entity can elect to adopt the amendments using either a modified retrospective transition method or prospective transition method.  Early adoption is permitted.  The Company is currently evaluating the impact of these amendments.

ASU 2014-11, “Transfers and Servicing (Topic 860):  Repurchase to Maturity Transactions, Repurchase Financings, and Disclosures.”  ASU 2014-11,  requires two accounting changes:  1) repurchase-to-maturity transactions to secured borrowing accounting and 2) repurchase financing arrangements, amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, will result in secured borrowing accounting for the repurchase agreement.   ASU 2014-11 also requires additional disclosures for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings.  The accounting changes in this update are effective for public business entities for the first interim or annual period beginning after December 15, 2014.  Early application is prohibited.  The Company is currently evaluating the impact of the standard.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”  This ASU has three sections:

Section A – Summary and amendments that creates revenue from contracts with customers (Topic 606) and Other Assets and Deferred Costs – Contracts with Customers (Subtopic 340-40);

Section B – Conforming amendments to other topics and subtopics in the codification and status tables;

Section C – Background information and basis for conclusions.

The accounting changes in this update are effective for public business entities for the first interim or annual period beginning after December 15, 2016.  Early application is prohibited.  The Company is currently evaluating the impact of the standard.

Goodwill

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with FASB ASC Topic 350, “Intangibles – Goodwill and Other,” which allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.  Based on a qualitative assessment, management determined that the Company’s recorded goodwill totaling $1.5 million, which resulted from the 2005 acquisition of its Phillipsburg, New Jersey branch, is not impaired as of December 31, 2014.

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Securities (Tables)

12 Months Ended

Dec. 31, 2014

Securities [Abstract]

Reconciliation From Amortized Cost To Estimated Fair Value Of Marketable Securities

	December 31, 2014								December 31, 2013
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available for sale:
U.S. Government sponsored entities	$	4,711	$	-	$	(93)	$	4,618	$	6,723	$	27	$	(332)	$	6,418
State and political subdivisions		11,055		112		(35)		11,132		16,960		192		(554)		16,598
Residential mortgage-backed securities		33,884		646		(147)		34,383		44,168		696		(475)		44,389
Commercial mortgage-backed securities		-		-		-		-		887		2		(1)		888
Corporate and other securities		10,188		63		(311)		9,940		13,173		67		(400)		12,840
Total securities available for sale	$	59,838	$	821	$	(586)	$	60,073	$	81,911	$	984	$	(1,762)	$	81,133
Held to maturity:
U.S. Government sponsored entities	$	4,440	$	-	$	(124)	$	4,316	$	5,814	$	-	$	(460)	$	5,354
State and political subdivisions		2,417		277		-		2,694		2,441		121		(17)		2,545
Residential mortgage-backed securities		8,164		211		(29)		8,346		10,395		145		(198)		10,342
Commercial mortgage-backed securities		4,005		13		(53)		3,965		6,750		87		(437)		6,400
Corporate and other securities		983		-		(23)		960		981		-		(73)		908
Total securities held to maturity	$	20,009	$	501	$	(229)	$	20,281	$	26,381	$	353	$	(1,185)	$	25,549

Schedule Of Marketable Securities By Contractual Maturity

	Within one year				After one through five years				After five through ten years				After ten years				Total carrying value
(In thousands, except percentages)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Available for sale at fair value:
U.S. Government sponsored entities	$	-	-	%	$	1,014	1.00	%	$	956	2.06	%	$	2,648	2.04	%	$	4,618	1.82	%
State and political subdivisions		40	6.49			1,165	2.23			6,189	2.37			3,738	2.60			11,132	2.45
Residential mortgage-backed securities		-	-			1,718	1.70			2,335	1.94			30,330	2.81			34,383	2.70
Corporate and other securities		-	-			2,406	1.00			1,500	1.19			6,034	1.43			9,940	1.29
Total securities available for sale	$	40	6.49	%	$	6,303	1.42	%	$	10,980	2.09	%	$	42,750	2.55	%	$	60,073	2.35	%
Held to maturity at cost:
U.S. Government sponsored entities	$	-	-	%	$	-	-	%	$	-	-	%	$	4,440	1.97	%	$	4,440	1.97	%
State and political subdivisions		309	0.75			-	-			-	-			2,108	4.72			2,417	4.21
Residential mortgage-backed securities		-	-			468	4.87			272	5.19			7,424	3.01			8,164	3.19
Commercial mortgage-backed securities		-	-			-	-			-	-			4,005	2.76			4,005	2.76
Corporate and other securities		-	-			-	-			983	2.95			-	-			983	2.95
Total securities held to maturity	$	309	0.75	%	$	468	4.87	%	$	1,255	3.44	%	$	17,977	2.90	%	$	20,009	2.94	%

Schedule Of Marketable Securities In Unrealized Loss Position

	December 31, 2014
			Less than 12 months				12 months and greater				Total
(In thousands, except number in a loss position)	Total number in a loss position		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss
Available for sale:
U.S. Government sponsored entities		4	$	-	$	-	$	4,590	$	(93)	$	4,590	$	(93)
State and political subdivisions		7		-		-		4,103		(35)		4,103		(35)
Residential mortgage-backed securities		9		6,579		(16)		5,889		(131)		12,468		(147)
Commercial mortgage-backed securities		-		-		-		-		-		-		-
Corporate and other securities		7		1,053		(46)		3,736		(265)		4,789		(311)
Total temporarily impaired securities		27	$	7,632	$	(62)	$	18,318	$	(524)	$	25,950	$	(586)
Held to maturity:
U.S. Government sponsored entities		2	$	-	$	-	$	4,316	$	(124)	$	4,316	$	(124)
Residential mortgage-backed securities		3		-		-		2,586		(29)		2,586		(29)
Commercial mortgage-backed securities		1		-		-		1,822		(53)		1,822		(53)
Corporate and other securities		1		-		-		960		(23)		960		(23)
Total temporarily impaired securities		7	$	-	$	-	$	9,684	$	(229)	$	9,684	$	(229)

	December 31, 2013
			Less than 12 months				12 months and greater				Total
(In thousands, except number in a loss position)	Total number in a loss position		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss
Available for sale:
U.S. Government sponsored entities		5	$	5,591	$	(332)	$	-	$	-	$	5,591	$	(332)
State and political subdivisions		19		8,575		(453)		934		(101)		9,509		(554)
Residential mortgage-backed securities		13		13,226		(398)		1,474		(77)		14,700		(475)
Commercial mortgage-backed securities		3		368		(1)		-		-		368		(1)
Corporate and other securities		9		3,994		(105)		3,088		(295)		7,082		(400)
Total temporarily impaired securities		49	$	31,754	$	(1,289)	$	5,496	$	(473)	$	37,250	$	(1,762)
Held to maturity:
U.S. Government sponsored entities		3	$	5,354	$	(460)	$	-	$	-	$	5,354	$	(460)
State and political subdivisions		2		986		(17)		-		-		986		(17)
Residential mortgage-backed securities		7		6,333		(193)		114		(5)		6,447		(198)
Commercial mortgage-backed securities		2		3,668		(437)		-		-		3,668		(437)
Corporate and other securities		1		908		(73)		-		-		908		(73)
Total temporarily impaired securities		15	$	17,249	$	(1,180)	$	114	$	(5)	$	17,363	$	(1,185)

Schedule Of Realized Gains (Losses) For Marketable Securities

	For the years ended December 31,
(In thousands)	2014		2013
Available for sale:
Realized gains	$	440	$	394
Realized losses		(7)		(4)
Total securities available for sale		433		390
Held to maturity:
Realized gains		-		-
Realized losses		-		-
Total securities held to maturity		-		-
Net gains on sales of securities	$	433	$	390

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
OPERATING ACTIVITIES:
Net income	$ 6,408	$ 5,115
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	2,550	2,350
Net amortization of purchase premiums and discounts on securities	552	713
Depreciation and amortization	1,385	1,267
Deferred income tax expense	498	389
Net security gains	(433)	(390)
Stock compensation expense	398	340
BOLI income	(559)	(347)
Loss on sale of OREO	138	52
Valuation writedowns on OREO	12	255
Gain on sale of mortgage loans held for sale, net	(923)	(1,650)
Gain on sale of SBA loans held for sale, net	(975)	(628)
Origination of mortgage loans held for sale	(59,194)	(78,432)
Origination of SBA loans held for sale	(9,994)	(6,103)
Proceeds from sale of mortgage loans held for sale, net	60,117	80,082
Proceeds from sale of SBA loans held for sale, net	11,345	6,962
Net change in other assets and liabilities	392	1,470
Net cash provided by operating activities	11,717	11,445
INVESTING ACTIVITIES:
Purchases of securities held to maturity	(308)	(9,871)
Purchases of securities available for sale	(9,947)	(29,136)
Purchases of Federal Home Loan Bank stock, at cost	(8,570)	(6,504)
Maturities and principal payments on securities held to maturity	6,589	4,841
Maturities and principal payments on securities available for sale	9,863	22,210
Proceeds from sale of securities available for sale	22,129	12,178
Proceeds from redemption of Federal Home Loan Bank stock	7,930	5,101
Proceeds from sale of OREO	3,344	2,119
Net increase in loans	(91,139)	(97,191)
Proceeds from BOLI	307
Purchase of BOLI		(3,000)
Purchases of premises and equipment	(597)	(4,789)
Net cash used in investing activities	(60,399)	(104,042)
FINANCING ACTIVITIES:
Net increase in deposits	55,643	89,938
Proceeds from new borrowings	50,000	32,000
Repayments of borrowings	(32,000)
Redemption of perpetual preferred stock from U.S. Treasury		(20,649)
Repurchase of warrant from U.S. Treasury		(2,707)
Proceeds from exercise of stock options	70
Dividends on preferred stock		(585)
Dividends on common stock	(757)	(188)
Proceeds from rights offering	6,143
Net cash provided by financing activities	79,099	97,809
Increase in cash and cash equivalents	30,417	5,212
Cash and cash equivalents, beginning of period	99,404	94,192
Cash and cash equivalents, end of period	129,821	99,404
SUPPLEMENTAL DISCLOSURES:
Cash: Interest paid	7,285	6,509
Cash: Income taxes paid	2,244	2,527
Noncash investing activities:
Capitalization of servicing rights	483	187
Transfer of SBA loans held for sale to held to maturity	138	33
Transfer of loans to OREO	$ 4,318	$ 1,233

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Loans (Tables)

12 Months Ended

Dec. 31, 2014

Loans [Abstract]

Classification Of Loans By Class

(In thousands)	December 31, 2014		December 31, 2013
SBA loans held for investment	$	40,401	$	48,918
SBA 504 loans		34,322		31,564
Commercial loans
Commercial other		40,607		37,611
Commercial real estate		339,693		317,471
Commercial real estate construction		21,649		8,258
Residential mortgage loans		220,878		182,067
Consumer loans
Home equity		41,451		43,704
Consumer other		17,645		2,435
Total loans held for investment	$	756,646	$	672,028
SBA loans held for sale		5,179		6,673
Total loans	$	761,825	$	678,701

Loan Portfolio By Class According To Their Credit Quality Indicators

The tables below detail the Company’s loan portfolio by class according to their credit quality indicators discussed in the paragraphs above as of December 31, 2014:

	December 31, 2014
	SBA, SBA 504 & Commercial loans - Internal risk ratings
(In thousands)	Pass		Special mention		Substandard		Total
SBA loans held for investment	$	35,827	$	2,250	$	2,324	$	40,401
SBA 504 loans		24,415		5,967		3,940		34,322
Commercial loans
Commercial other		38,054		1,270		1,283		40,607
Commercial real estate		315,015		20,555		4,123		339,693
Commercial real estate construction		21,649		-		-		21,649
Total commercial loans		374,718		21,825		5,406		401,949
Total SBA, SBA 504 and commercial loans	$	434,960	$	30,042	$	11,670	$	476,672
	Residential mortgage & Consumer loans - Performing/Nonperforming
(In thousands)			Performing		Nonperforming		Total
Residential mortgage loans			$	220,233	$	645	$	220,878
Consumer loans
Home equity				40,908		543		41,451
Consumer other				17,643		2		17,645
Total consumer loans				58,551		545		59,096
Total residential mortgage and consumer loans			$	278,784	$	1,190	$	279,974

The tables below detail the Company’s loan portfolio by class according to their credit quality indicators discussed in the paragraphs above as of December 31, 2013: 

	December 31, 2013
	SBA, SBA 504 & Commercial loans - Internal risk ratings
(In thousands)	Pass		Special mention		Substandard		Total
SBA loans held for investment	$	43,778	$	2,035	$	3,105	$	48,918
SBA 504 loans		20,641		9,595		1,328		31,564
Commercial loans
Commercial other		34,946		1,499		1,166		37,611
Commercial real estate		289,220		21,137		7,114		317,471
Commercial real estate construction		8,081		-		177		8,258
Total commercial loans		332,247		22,636		8,457		363,340
Total SBA, SBA 504 and commercial loans	$	396,666	$	34,266	$	12,890	$	443,822
	Residential mortgage & Consumer loans - Performing/Nonperforming
(In thousands)			Performing		Nonperforming		Total
Residential mortgage loans			$	176,340	$	5,727	$	182,067
Consumer loans
Home equity				42,029		1,675		43,704
Consumer other				2,430		5		2,435
Total consumer loans				44,459		1,680		46,139
Total residential mortgage and consumer loans			$	220,799	$	7,407	$	228,206

Aging Analysis Of Past Due And Nonaccrual Loans By Loan Class

	December 31, 2014
(In thousands)	30-59 days past due		60-89 days past due		90+ days and still accruing		Nonaccrual (1)		Total past due		Current		Total loans
SBA loans held for investment	$	1,093	$	147	$	161	$	3,348	$	4,749	$	35,652	$	40,401
SBA 504 loans		1,639		-		-		2,109		3,748		30,574		34,322
Commercial loans
Commercial other		-		-		-		1,129		1,129		39,478		40,607
Commercial real estate		2,812		-		7		3,592		6,411		333,282		339,693
Commercial real estate construction		-		-		-		-		-		21,649		21,649
Residential mortgage loans		2,887		658		722		645		4,912		215,966		220,878
Consumer loans
Home equity		639		213		-		543		1,395		40,056		41,451
Consumer other		-		6		-		2		8		17,637		17,645
Total loans held for investment	$	9,070	$	1,024	$	890	$	11,368	$	22,352	$	734,294	$	756,646
SBA loans held for sale		-		-		-		-		-		5,179		5,179
Total loans	$	9,070	$	1,024	$	890	$	11,368	$	22,352	$	739,473	$	761,825

(1) At December 31, 2014, nonaccrual loans included $3.0million of TDRs and $1.6 million of loans guaranteed by the SBA.  The remaining $3.5million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

	December 31, 2013
(In thousands)	30-59 days past due		60-89 days past due		90+ days and still accruing		Nonaccrual (1)		Total past due		Current		Total loans
SBA loans held for investment	$	4,314	$	264	$	-	$	2,746	$	7,324	$	41,594	$	48,918
SBA 504 loans		-		-		-		1,101		1,101		30,463		31,564
Commercial loans
Commercial other		123		-		-		67		190		37,421		37,611
Commercial real estate		347		190		14		3,785		4,336		313,135		317,471
Commercial real estate construction		-		-		-		177		177		8,081		8,258
Residential mortgage loans		3,050		-		5		5,727		8,782		173,285		182,067
Consumer loans
Home equity		142		69		-		1,675		1,886		41,818		43,704
Consumer other		9		1		-		5		15		2,420		2,435
Total loans held for investment	$	7,985	$	524	$	19	$	15,283	$	23,811	$	648,217	$	672,028
SBA loans held for sale		65		-		-		-		65		6,608		6,673
Total loans	$	8,050	$	524	$	19	$	15,283	$	23,876	$	654,825	$	678,701

(1) At December 31, 2013, nonaccrual loans included $467thousand of TDRs and $540thousand of loans guaranteed by the SBA.  The remaining $7.5million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

Impaired Loans With The Associated Allowance Amount

	December 31, 2014
(In thousands)	Unpaid principal balance		Recorded investment		Specific reserves
With no related allowance:
SBA loans held for investment (1)	$	1,719	$	1,093	$	-
SBA 504 loans		2,202		2,202		-
Commercial loans
Commercial other		878		877		-
Commercial real estate		2,017		1,927		-
Total commercial loans		2,895		2,804		-
Total impaired loans with no related allowance		6,816		6,099		-
With an allowance:
SBA loans held for investment (1)		1,521		1,127		502
SBA 504 loans		1,676		1,676		510
Commercial loans
Commercial other		364		252		41
Commercial real estate		3,003		3,003		108
Total commercial loans		3,367		3,255		149
Total impaired loans with a related allowance		6,564		6,058		1,161
Total individually evaluated impaired loans:
SBA loans held for investment (1)		3,240		2,220		502
SBA 504 loans		3,878		3,878		510
Commercial loans
Commercial other		1,242		1,129		41
Commercial real estate		5,020		4,930		108
Total commercial loans		6,262		6,059		149
Total individually evaluated impaired loans	$	13,380	$	12,157	$	1,161

(1) Balances are reduced by amount guaranteed by the SBA of $1.6million at December 31, 2014.

	December 31, 2013
(In thousands)	Unpaid principal balance		Recorded investment		Specific reserves
With no related allowance:
SBA loans held for investment (1)	$	1,123	$	835	$	-
SBA 504 loans		2,251		2,251		-
Commercial loans
Commercial other		56		55		-
Commercial real estate		6,116		5,969		-
Total commercial loans		6,172		6,024		-
Total impaired loans with no related allowance		9,546		9,110		-
With an allowance:
SBA loans held for investment (1)		2,282		1,905		831
SBA 504 loans		1,277		677		29
Commercial loans
Commercial other		24		12		12
Commercial real estate		3,557		2,907		230
Commercial real estate construction		202		177		36
Total commercial loans		3,783		3,096		278
Total impaired loans with a related allowance		7,342		5,678		1,138
Total individually evaluated impaired loans:
SBA loans held for investment (1)		3,405		2,740		831
SBA 504 loans		3,528		2,928		29
Commercial loans
Commercial other		80		67		12
Commercial real estate		9,673		8,876		230
Commercial real estate construction		202		177		36
Total commercial loans		9,955		9,120		278
Total individually evaluated impaired loans	$	16,888	$	14,788	$	1,138

Balances are reduced by amount guaranteed by the SBA of $540thousand at December 31, 2013.

Average Recorded Investments in Impaired Loans and the Related Amount of Interest Recognized

	For the years ended December 31,
	2014				2013
(In thousands)	Average recorded investment		Interest income recognized on impaired loans		Average recorded investment		Interest income recognized on impaired loans
SBA loans held for investment (1)	$	3,028	$	256	$	3,244	$	197
SBA 504 loans		3,042		109		5,066		173
Commercial loans
Commercial other		323		2		1,461		100
Commercial real estate		6,336		231		9,751		324
Commercial real estate construction		73		23		171		-
Total	$	12,802	$	621	$	19,693	$	794

(1) Balances are reduced by the average amount guaranteed by the SBA of $1.2million and $953thousand for years ended December 31, 2014 and 2013, respectively.

Troubled Debt Restructurings Loans Modified

	For the years ended December 31,
	2014						2013
(In thousands, except number of contracts)	Number of contracts		Recorded investment at time of modification		Impact of interest rate change on income		Number of contracts		Recorded investment at time of modification		Impact of interest rate change on income
SBA loans held for investment		-	$	-	$	-		1	$	65	$	-
Commercial real estate		-		-		-		1		2,684		50
Total		-	$	-	$	-		2	$	2,749	$	50

Troubled Debt Restructurings Types of Modifications

	For the year ended December 31, 2013
(In thousands)	SBA held for investment		Commercial real estate		Total
Type of modification:
Interest only with reduced interest rate	$	-	$	2,684	$	2,684
Interest only with nominal principal		65		-		65
Total TDRs	$	65	$	2,684	$	2,749

Schedule of Servicing Assets

	For the years ended December 31,
(In thousands)	2014		2013
Balance, beginning of year	$	437	$	396
Servicing assets capitalized		483		187
Amortization of expense		(167)		(146)
Provision for loss in fair value		-		-
Balance, end of year	$	753	$	437

Schedule of Related Party Transactions

(In thousands)	December 31, 2014
Balance, beginning of year	$	18,327
New loans and advances		9,254
Loan repayments		(1,129)
Balance, end of year	$	26,452

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Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Accumulated Other Comprehensive Income (Loss) [Abstract]
Unrealized holding gains (losses) on securities arising, Pre-tax	$ 1,446	$ (2,606)
Less: Reclassification adjustment for gains on securities included in net income, Pre-tax	433	390
Net unrealized gains (losses) on securities arising during the period, Pre-tax	1,013	(2,996)
Unrealized holding gains (losses) on securities arising, Tax	537	(1,056)
Less: Reclassification adjustment for gains on securities included in net income, Tax	143	131
Net unrealized gains (losses) on securities arising during the period, Tax	394	(1,187)
Balance, beginning of period	(476)	1,333
Unrealized holding gains (losses) on securities arising during period	909	(1,550)
Less: Reclassification adjustment for gains on securities included in net income	290	259
Net unrealized gains (losses) on securities arising during the period, After-tax	619	(1,809)
Balance, end of period	$ 143	$ (476)

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Quarterly Financial Information (Schedule of Quarterly Financial Information) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Interest income	$ 9,802	$ 9,491	$ 9,102	$ 9,023	$ 8,766	$ 8,474	$ 8,401	$ 8,313	$ 37,418	$ 33,954
Interest and Dividend Income, Operating	9,802	9,491	9,102	9,023	8,766	8,474	8,401	8,313	37,418	33,954
Interest expense	1,914	1,859	1,797	1,736	1,703	1,603	1,599	1,624	7,306	6,529
Net interest income	7,888	7,632	7,305	7,287	7,063	6,871	6,802	6,689	30,112	27,425
Provision for loan losses	850	550	550	600	800	600	300	650	2,550	2,350
Net interest income after provision for loan losses	7,038	7,082	6,755	6,687	6,263	6,271	6,502	6,039	27,562	25,075
Noninterest income	1,660	1,853	1,640	1,526	1,471	1,650	1,658	1,825	6,679	6,604
Noninterest expense	6,045	6,241	6,144	6,258	5,862	5,935	6,074	6,126	24,688	23,997
Income before provision for income taxes	2,653	2,694	2,251	1,955	1,872	1,986	2,086	1,738	9,553	7,682
Provision for income taxes	952	808	723	662	606	684	739	538
Net income	1,701	1,886	1,528	1,293	1,266	1,302	1,347	1,200	6,408	5,115
Preferred stock dividends and discount accretion						119	465	404		988
Income available to common shareholders	1,701	1,886	1,528	1,293	1,266	1,183	882	796	6,408	4,127
Net income per common share - Basic	$ 0.21	$ 0.24	$ 0.20	$ 0.17	$ 0.17	$ 0.15	$ 0.12	$ 0.11	$ 0.82	$ 0.55
Net income per common share - Diluted	$ 0.20	$ 0.24	$ 0.20	$ 0.17	$ 0.17	$ 0.15	$ 0.11	$ 0.10	$ 0.81	$ 0.53
Parent Company Only [Member]
Interest income									748	761
Interest and Dividend Income, Operating									748	761
Interest expense									281	287
Net interest income									467	474
Provision for income taxes									209	116
Net income									6,408	5,115
Preferred stock dividends and discount accretion										988
Income available to common shareholders									$ 6,408	$ 4,127

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Other Income (Tables)

12 Months Ended

Dec. 31, 2014

Other Income [Abstract]

Components of Other Income

The components of other income for the past two years are as follows:

	For the years ended December 31,
(In thousands)	2014		2013
ATM and check card fees	$	534	$	487
Wire transfer fees		95		88
Safe deposit box fees		68		59
Other		147		80
Total other income	$	844	$	714

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Securities (Reconciliation From Amortized Cost To Estimated Fair Value Of Marketable Securities) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Schedule of Investments [Line Items]
Available-for-sale securities, Amortized Cost	$ 59,838	$ 81,911
Available-for-sale Securities, Gross Unrealized Gains	821	984
Available-for-sale Securities, Gross Unrealized Losses	(586)	(1,762)
Available-for-sale securities, Estimated Fair Value	60,073	81,133
Securities held to maturity, Amortized cost	20,009	26,381
Securities held-to-maturity, Unrecognized Holding Gain	501	353
Securities held-to-maturity, Unrecognized Holding Losses	(229)	(1,185)
Securities held-to-maturity, Estimated Fair Value	20,281	25,549
US Government Agencies Debt Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, Amortized Cost	4,711	6,723
Available-for-sale Securities, Gross Unrealized Gains		27
Available-for-sale Securities, Gross Unrealized Losses	(93)	(332)
Available-for-sale securities, Estimated Fair Value	4,618	6,418
Securities held to maturity, Amortized cost	4,440	5,814
Securities held-to-maturity, Unrecognized Holding Losses	(124)	(460)
Securities held-to-maturity, Estimated Fair Value	4,316	5,354
US States and Political Subdivisions Debt Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, Amortized Cost	11,055	16,960
Available-for-sale Securities, Gross Unrealized Gains	112	192
Available-for-sale Securities, Gross Unrealized Losses	(35)	(554)
Available-for-sale securities, Estimated Fair Value	11,132	16,598
Securities held to maturity, Amortized cost	2,417	2,441
Securities held-to-maturity, Unrecognized Holding Gain	277	121
Securities held-to-maturity, Unrecognized Holding Losses		(17)
Securities held-to-maturity, Estimated Fair Value	2,694	2,545
Residential Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, Amortized Cost	33,884	44,168
Available-for-sale Securities, Gross Unrealized Gains	646	696
Available-for-sale Securities, Gross Unrealized Losses	(147)	(475)
Available-for-sale securities, Estimated Fair Value	34,383	44,389
Securities held to maturity, Amortized cost	8,164	10,395
Securities held-to-maturity, Unrecognized Holding Gain	211	145
Securities held-to-maturity, Unrecognized Holding Losses	(29)	(198)
Securities held-to-maturity, Estimated Fair Value	8,346	10,342
Commercial Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, Amortized Cost		887
Available-for-sale Securities, Gross Unrealized Gains		2
Available-for-sale Securities, Gross Unrealized Losses		(1)
Available-for-sale securities, Estimated Fair Value		888
Securities held to maturity, Amortized cost	4,005	6,750
Securities held-to-maturity, Unrecognized Holding Gain	13	87
Securities held-to-maturity, Unrecognized Holding Losses	(53)	(437)
Securities held-to-maturity, Estimated Fair Value	3,965	6,400
Corporate and Other Securities [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, Amortized Cost	10,188	13,173
Available-for-sale Securities, Gross Unrealized Gains	63	67
Available-for-sale Securities, Gross Unrealized Losses	(311)	(400)
Available-for-sale securities, Estimated Fair Value	9,940	12,840
Securities held to maturity, Amortized cost	983	981
Securities held-to-maturity, Unrecognized Holding Losses	(23)	(73)
Securities held-to-maturity, Estimated Fair Value	960	908
Parent Company Only [Member]
Schedule of Investments [Line Items]
Available-for-sale securities, Estimated Fair Value	$ 197	$ 167

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Premises and Equipment (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Premises and Equipment [Abstract]
Depreciation	$ 1.0	$ 1.2

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
ASSETS
Cash and due from banks	$ 29,351	$ 24,272
Federal funds sold and interest-bearing deposits	100,470	75,132
Cash and cash equivalents	129,821	99,404
Securities:
Securities available for sale	60,073	81,133
Securities held to maturity (fair value of $20,281 and $25,549 in 2014 and 2013, respectively)	20,009	26,381
Total securities	80,082	107,514
Loans:
SBA loans held for sale	5,179	6,673
SBA loans held for investment	40,401	48,918
SBA 504 loans	34,322	31,564
Commercial loans	401,949	363,340
Residential mortgage loans	220,878	182,067
Consumer loans	59,096	46,139
Total loans	761,825	678,701
Allowance for loan losses	(12,551)	(13,141)
Net loans	749,274	665,560
Premises and equipment, net	15,231	15,672
Bank owned life insurance ("BOLI")	13,001	12,749
Deferred tax assets	5,860	6,752
Federal Home Loan Bank stock	6,032	5,392
Accrued interest receivable	3,518	3,272
Other real estate owned ("OREO")	1,162	633
Goodwill and other intangibles	1,516	1,516
Other assets	3,291	2,654
Total assets	1,008,788	921,118
Liabilities:
Deposits: Noninterest-bearing demand deposits	152,785	136,035
Deposits: Interest-bearing demand deposits	128,875	130,806
Deposits: Savings deposits	300,348	266,503
Deposits: Time deposits, under $100,000	113,119	108,258
Deposits: Time deposits, $100,000 and over	99,214	97,096
Total deposits	794,341	738,698
Borrowed funds	125,000	107,000
Subordinated debentures	15,465	15,465
Accrued interest payable	474	454
Accrued expenses and other liabilities	3,385	2,328
Total liabilities	938,665	863,945
Commitments and contingencies (Note 10)
Shareholders' equity:
Common stock, no par value, 12,500 shares authorized, 8,388 shares issued and outstanding in 2014; 7,577 shares issued and outstanding in 2013	58,785	52,051
Retained earnings	11,195	5,598
Accumulated other comprehensive income (loss)	143	(476)
Total shareholders' equity	70,123	57,173
Total liabilities and shareholders' equity	$ 1,008,788	$ 921,118

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2014

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Transactions under the Company’s stock option plans

	Shares		Weighted average exercise price		Weighted average remaining contractual life in years		Aggregate intrinsic value
Outstanding at December 31, 2012		516,332	$	7.06		5.4	$	327,725
Options granted		37,500		6.58
Options exercised		(11,667)		6.62
Options forfeited		(8,333)		6.56
Options expired		(84,857)		8.84
Outstanding at December 31, 2013		448,975	$	6.70		5.6	$	739,951
Options granted		46,000		8.16
Options exercised		(36,950)		4.33
Options forfeited		(9,119)		9.73
Options expired		(29,985)		10.16
Outstanding at December 31, 2014		418,921	$	6.76		5.5	$	1,257,968
Exercisable at December 31, 2014		340,423	$	6.60		4.7	$	1,098,108

Stock Options, Valuation Assumptions

	For the years ended December 31,
	2014			2013
Number of options granted		46,000			37,500
Weighted average exercise price	$	8.16		$	6.58
Weighted average fair value of options	$	3.21		$	3.19
Expected life in years (1)		5.54			5.75
Expected volatility (2)		45.32	%		51.40	%
Risk-free interest rate (3)		1.57	%		1.24	%
Dividend yield (4)		1.01	%		0.17	%

(1) The expected life of the options was estimated based on historical employee behavior and represents the period of time that options granted are expected to be outstanding.

(2) The expected volatility of the Company’s stock price was based on the historical volatility over the period commensurate with the expected life of the options.

(3) The risk-free interest rate is the U.S Treasury rate commensurate with the expected life of the options on the date of grant.

(4) The expected dividend yield is the projected annual yield based on the grant date stock price.

Schedule of Information About Options Exercised

	For the years ended December 31,
	2014		2013
Number of options exercised		36,950		11,667
Total intrinsic value of options exercised	$	157,406	$	15,367
Cash received from options exercised		70,405		-
Tax deduction realized from options exercised		62,868		6,138

Schedule of Stock Options, by Exercise Price Range

		Options outstanding						Options exercisable
Range of exercise prices		Options outstanding		Weighted average remaining contractual life (in years)		Weighted average exercise price		Options exercisable		Weighted average exercise price
$	0.00 - 4.00		89,000		4.2	$	3.85		89,000	$	3.85
	4.01 - 8.00		282,475		6.4		6.73		208,977		6.55
	8.01 - 12.00		5,551		9.2		10.39		551		11.25
	12.01 - 16.00		41,895		2.1		12.62		41,895		12.62
	Total		418,921		5.5	$	6.76		340,423	$	6.60

Schedule of Nonvested Share Activity

	Shares		Average grant date fair value
Nonvested restricted stock at December 31, 2013		95,625	$	6.67
Granted		17,500		8.88
Vested		(35,375)		6.51
Nonvested restricted stock at December 31, 2014		77,750	$	7.24

Restricted Stock Awards Activity

	For the years ended December 31,
	2014		2013
Number of shares granted		17,500		42,500
Average grant date fair value	$	8.88	$	7.12

Stock Options [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Allocation of Share-based Compensation Costs

	For the years ended December 31,
	2014		2013
Compensation expense	$	152,349	$	140,873
Income tax benefit		60,848		56,265

Restricted Stock [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Allocation of Share-based Compensation Costs

	For the years ended December 31,
	2014		2013
Compensation expense	$	245,428	$	198,682
Income tax benefit		98,024		79,354

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Employee Benefit Plans (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Defined contribution plan, maximum annual contributions per employee, percent	80.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount	$ 258	$ 240
Deferred fees	79	44
Interest paid on deferred fees	23	19
Deferred compensation arrangement with individual, distributions paid	0	22
Life Settlement Contracts, Fair Value Method, Face Value	250
Life Settlement Contracts, Period Expense	5	4
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based compensation arrangement by Share-based payment Award, Options, Award Expiration Period	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,720,529
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	418,921	448,975	516,332
Share-based compensation arrangement by Share-based payment Award, Options, Exercised Forfeited Or Expired Number	1,252,416
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	49,192
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	189
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	2 years
Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Deferred compensation arrangement, option to elect to defer fees and bonuses, percentage	100.00%
Executive Management [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Deferred compensation arrangement, option to elect to defer fees and bonuses, percentage	100.00%
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	471,551
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	214,500
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 491
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	2 years 7 months 6 days

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Condensed Financial Statements of Unity Bancorp, Inc. (Parent Company Only) (Condensed Statements of Cash Flows) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Condensed Financial Statements, Captions [Line Items]
Net income	$ 6,408	$ 5,115
Net cash provided by operating activities	11,717	11,445
Purchases of securities available for sale	(9,947)	(29,136)
Proceeds from sale of securities available for sale	22,129	12,178
Net cash used in investing activities	(60,399)	(104,042)
Redemption of perpetual preferred stock from U.S. Treasury		(20,649)
Repurchase of warrant from U.S. Treasury		(2,707)
Proceeds from exercise of stock options	70
Proceeds from rights offering	6,143
Dividends on preferred stock		(585)
Dividends on common stock	(757)	(188)
Net cash provided by (used in) financing activities	79,099	97,809
Increase (decrease) in cash and cash equivalents	30,417	5,212
Cash: Interest paid	7,285	6,509
Parent Company Only [Member]
Condensed Financial Statements, Captions [Line Items]
Net income	6,408	5,115
Equity in undistributed net income of subsidiary	(6,182)	(4,776)
Gains on sales of securities		(3)
Net change in other assets and other liabilities	53	(22)
Net cash provided by operating activities	279	314
Purchases of securities available for sale		(100)
Proceeds from sale of securities available for sale		63
Net cash used in investing activities		(37)
Redemption of perpetual preferred stock from U.S. Treasury		(20,649)
Repurchase of warrant from U.S. Treasury		(2,707)
Proceeds from exercise of stock options	70
Proceeds from rights offering	6,143
Investment in Bank	(6,500)
Dividends on preferred stock		(585)
Dividends on common stock	(753)	(188)
Dividend from Bank	235	12,707
Net cash provided by (used in) financing activities	(805)	(11,422)
Increase (decrease) in cash and cash equivalents	(526)	(11,145)
Cash and cash equivalents, beginning of period	724	11,869
Cash and cash equivalents, end of period	198	724
Cash: Interest paid	$ 281	$ 287

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Consolidated Statements of Changes in Shareholder's Equity (USD $) In Thousands, except Share data		Preferred Stock Including Additional Paid in Capital [Member]	Common Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Total
Shareholders' equity at Dec. 31, 2012		$ 20,115	$ 54,274	$ 1,788	$ 1,333	$ 77,510
Common Stock, Shares, Beginning Balance at Dec. 31, 2012			7,534,000
Net income				5,115		5,115
Other comprehensive income (loss), net of tax					(1,809)	(1,809)
Redemption of perpetual preferred stock from U.S. Treasury		(20,649)				(20,649)
Repurchase of warrants from U.S. Treasury			(2,617)	(90)		(2,707)
Accretion of discount on preferred stock		534		(534)
Dividends on preferred stock				(454)		(454)
Dividends on common stock			39	(227)		(188)
Common stock issued and related tax effects	[1]		355			355
Common stock issued and related tax effects, shares	[1]		43,000
Shareholders' equity at Dec. 31, 2013			52,051	5,598	(476)	57,173
Common Stock, Shares, Ending Balance at Dec. 31, 2013			7,577,000			7,577,000
Net income				6,408		6,408
Other comprehensive income (loss), net of tax					619	619
Dividends on common stock			54	(811)		(757)
Common stock issued and related tax effects	[1]		537			537
Common stock issued and related tax effects, shares	[1]		50,000
Proceeds from rights offering			6,143			6,143
Proceeds from rights offering, shares			761,000			760,713
Shareholders' equity at Dec. 31, 2014			$ 58,785	$ 11,195	$ 143	$ 70,123
Common Stock, Shares, Ending Balance at Dec. 31, 2014			8,388,000			8,388,000

[1] Includes the issuance of common stock under employee benefit plans, which includes nonqualified stock options and restricted stock expense related entries, employee option exercises and the tax benefit of options exercised.

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Regulatory Capital (Schedule Regulatory Capital Requirements) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio: Actual Amount	$ 83,615	$ 70,852
Tier I risk-based capital ratio: Actual Amount	83,615	70,852
Total risk-based capital ratio: Actual Amount	92,691	79,164
Leverage ratio: Actual Ratio	8.71%	8.08%
Tier I risk-based capital ratio: Actual Ratio	11.57%	10.74%
Total risk--based capital ratio: Actual Ratio	12.83%	11.99%
Leverage ratio: For Capital Adequacy Purposes Amount	38,405	35,084
Tier I risk-based capital ratio: For Capital Adequacy Purposes Amount	28,900	26,400
Total risk-based capital ratio: For Capital Adequacy Purposes Amount	57,799	52,800
Leverage ratio: For Capital Adequacy Purposes Ratio	4.00%	4.00%
Tier I risk-based capital ratio: For Capital Adequacy Purposes Ratio	4.00%	4.00%
Total risk-based capital ratio: For Capital Adequacy Purposes Ratio	8.00%	8.00%
Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio: Actual Amount	74,819	61,493
Tier I risk-based capital ratio: Actual Amount	74,819	61,493
Total risk-based capital ratio: Actual Amount	92,388	78,296
Leverage ratio: Actual Ratio	7.80%	7.02%
Tier I risk-based capital ratio: Actual Ratio	10.37%	9.33%
Total risk--based capital ratio: Actual Ratio	12.80%	11.88%
Leverage ratio: For Capital Adequacy Purposes Amount	38,381	35,058
Tier I risk-based capital ratio: For Capital Adequacy Purposes Amount	28,874	26,373
Total risk-based capital ratio: For Capital Adequacy Purposes Amount	57,747	52,747
Leverage ratio: For Capital Adequacy Purposes Ratio	4.00%	4.00%
Tier I risk-based capital ratio: For Capital Adequacy Purposes Ratio	4.00%	4.00%
Total risk-based capital ratio: For Capital Adequacy Purposes Ratio	8.00%	8.00%
Tier I risk-based capital ratio: To Be Well-Capitalized Under Prompt Corrective Action Provisions Amount	47,976	43,823
Leverage ratio: To Be Well-Capitalized Under Prompt Corrective Action Provisions Amount	43,310	39,560
Total risk-based capital ratio: To Be Well-Capitalized Under Prompt Corrective Action Provisions Amount	$ 72,184	$ 65,933
Leverage ratio: To Be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	5.00%	5.00%
Tier I risk-based capital ratio: To Be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	6.00%	6.00%
Total risk-based capital ratio: To Be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	10.00%	10.00%

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Loans (Loan Portfolio By Class According To Credit Quality Indicators) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	$ 756,646	$ 672,028
SBA, SBA 504, and Commercial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	476,672	443,822
Residential and Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	279,974	228,206
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	40,401	48,918
Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	34,322	31,564
Commercial Other Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	40,607	37,611
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	339,693	317,471
Commercial Real Estate Construction Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	21,649	8,258
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	401,949	363,340
Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	220,878	182,067
Consumer Home Equity Line Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	41,451	43,704
Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	17,645	2,435
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	59,096	46,139
Pass [Member] | SBA, SBA 504, and Commercial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	434,960	396,666
Pass [Member] | Small Business Administration Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	35,827	43,778
Pass [Member] | Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	24,415	20,641
Pass [Member] | Commercial Other Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	38,054	34,946
Pass [Member] | Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	315,015	289,220
Pass [Member] | Commercial Real Estate Construction Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	21,649	8,081
Pass [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	374,718	332,247
Special Mention [Member] | SBA, SBA 504, and Commercial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	30,042	34,266
Special Mention [Member] | Small Business Administration Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	2,250	2,035
Special Mention [Member] | Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	5,967	9,595
Special Mention [Member] | Commercial Other Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	1,270	1,499
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	20,555	21,137
Special Mention [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	21,825	22,636
Substandard [Member] | SBA, SBA 504, and Commercial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	11,670	12,890
Substandard [Member] | Small Business Administration Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	2,324	3,105
Substandard [Member] | Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	3,940	1,328
Substandard [Member] | Commercial Other Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	1,283	1,166
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	4,123	7,114
Substandard [Member] | Commercial Real Estate Construction Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment		177
Substandard [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	5,406	8,457
Performing Financing Receivable [Member] | Residential and Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	278,784	220,799
Performing Financing Receivable [Member] | Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	220,233	176,340
Performing Financing Receivable [Member] | Consumer Home Equity Line Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	40,908	42,029
Performing Financing Receivable [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	17,643	2,430
Performing Financing Receivable [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	58,551	44,459
Nonperforming Financing Receivable [Member] | Residential and Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	1,190	7,407
Nonperforming Financing Receivable [Member] | Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	645	5,727
Nonperforming Financing Receivable [Member] | Consumer Home Equity Line Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	543	1,675
Nonperforming Financing Receivable [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	2	5
Nonperforming Financing Receivable [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans held for investment	$ 545	$ 1,680

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Employee Benefit Plans (Schedule of Information About Options Exercised) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Employee Benefit Plans [Abstract]
Number of options exercised	36,950	11,667
Total intrinsic value of options exercised	$ 157,406	$ 15,367
Cash received from options exercised	70,405
Tax deduction realized from options exercised	$ 62,868	$ 6,138

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Other Assets (Tables)

12 Months Ended

Dec. 31, 2014

Other Assets [Abstract]

Schedule of Other Assets

(In thousands)	December 31, 2014		December 31, 2013
Prepaid expenses	$	399	$	481
Servicing assets		753		437
Net receivable due from SBA		318		429
Other		1,821		1,307
Total other assets	$	3,291	$	2,654

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Loans (Troubled Debt Restructurings Types Of Modifications) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Post-Modification Recorded Investment, Duration	$ 2,749
Interest Only, With Nominal Principal [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Post-Modification Recorded Investment, Duration	65
Interest only with reduced interest [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Post-Modification Recorded Investment, Duration	2,684
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Post-Modification Recorded Investment, Duration	65
Small Business Administration Portfolio Segment [Member] | Interest Only, With Nominal Principal [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Post-Modification Recorded Investment, Duration	65
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Post-Modification Recorded Investment, Duration	2,684
Commercial Real Estate Portfolio Segment [Member] | Interest only with reduced interest [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Post-Modification Recorded Investment, Duration	$ 2,684

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Other Expenses

12 Months Ended

Dec. 31, 2014

Other Expenses [Abstract]

Other Expenses

14. Other Expenses

The components of other expenses for the past two years are as follows:

	For the years ended December 31,
(In thousands)	2014		2013
Travel, entertainment, training and recruiting	$	584	$	608
Director fees		359		367
Insurance		335		335
Stationery and supplies		250		271
Retail losses		56		4
Other		217		282
Total other expenses	$	1,801	$	1,867

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Deposits (Tables)

12 Months Ended

Dec. 31, 2014

Deposits [Abstract]

Schedule of Deposits by Time Remaining on Maturity

	Three		More than three		More than six		More than
	months		months through		months through		twelve
(In thousands)	or less		six months		twelve months		months		Total
At December 31, 2014:
$100,000 or more	$	11,444	$	8,290	$	19,570	$	59,910	$	99,214
Less than $100,000		10,988		7,837		14,512		79,782		113,119
At December 31, 2013:
$100,000 or more	$	14,588	$	7,965	$	18,582	$	55,961	$	97,096
Less than $100,000		8,058		7,754		19,522		72,924		108,258

Schedule of Certificates of Deposits by Year of Maturity

(In thousands)	2015		2016		2017		2018		2019		Thereafter		Total
Balance maturing	$	72,641	$	48,759	$	7,765	$	58,407	$	24,645	$	116	$	212,333

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Employee Benefit Plans (Fair Value Assumptions) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	46,000		37,500
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 8.16		$ 6.58
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	46,000		37,500
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 8.16		$ 6.58
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 3.21		$ 3.19
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	5 years 6 months 15 days	[1]	5 years 9 months	[1]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	45.32%	[2]	51.40%	[2]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	1.57%	[3]	1.24%	[3]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	1.01%	[4]	0.17%	[4]

[1] For the years ended December 31, 20142013Number of options granted 46,000 37,500Weighted average exercise price$ 8.16$ 6.58Weighted average fair value of options$ 3.21$ 3.19Expected life in years (1) 5.54 5.75Expected volatility (2) 45.32% 51.40%Risk-free interest rate (3) 1.57% 1.24%Dividend yield (4) 1.01% 0.17%The expected life of the options was estimated based on historical employee behavior and represents the period of time that options granted are expected to be outstanding.

[2] The expected volatility of the Company’s stock price was based on the historical volatility over the period commensurate with the expected life of the options.

[3] The risk-free interest rate is the U.S Treasury rate commensurate with the expected life of the options on the date of grant.

[4] The expected dividend yield is the projected annual yield based on the grant date stock price.

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Net Income per Share

12 Months Ended

Dec. 31, 2014

Net Income per Share [Abstract]

Net Income per Share

16.  Net Income per Share

The following is a reconciliation of the calculation of basic and diluted net income per share for the past two years:  

	For the years ended December 31,
(In thousands, except per share amounts)	2014		2013
Net income	$	6,408	$	5,115
Less: Preferred stock dividends and discount accretion		-		988
Income available to common shareholders	$	6,408	$	4,127
Weighted average common shares outstanding - Basic		7,856		7,547
Plus: Potential dilutive common stock equivalents		89		263
Weighted average common shares outstanding - Diluted		7,945		7,810
Net income per common share - Basic	$	0.82	$	0.55
Net income per common share - Diluted		0.81		0.53
Stock options and common stock excluded from the income per share calculation as their effect would have been anti-dilutive		114		377

The "potential dilutive common stock equivalents" shown in the table above for December 31, 2013 includes the impact of the warrant to purchase 764,778 shares of common stock issued to the U.S. Department of Treasury under the Capital Purchase Program in December 2008, utilizing the Treasury stock method.  The warrant was repurchased on August 28, 2013 for a price of $2.7 million utilizing the Treasury Stock Method for the period outstanding.

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Loans (Officer and Director Loans) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014
Loans [Abstract]
Balance, beginning of year	$ 18,327
New loans	9,254
Loan repayments	(1,129)
Balance, end of year	$ 26,452

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Fair Value (Fair Value On A Nonrecurring Basis) (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Related Allowance	$ 1,161,000	$ 1,138,000
Impaired Financing Receivable Related Allowance, Increase (Decrease)	23,000
Standby letter of credit	1,500,000	1,400,000
Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	6.00%
Value for real estate appraisal for OREO or substance foreclosure	$ 100,000
Minimum [Member] | Market Approach Valuation Technique [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	10.00%
Minimum [Member] | Third Party Appraisal [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	8.00%
Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	10.00%
Maximum [Member] | Market Approach Valuation Technique [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	15.00%
Maximum [Member] | Third Party Appraisal [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	10.00%

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Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Consolidated Statements of Changes in Shareholders' Equity [Abstract]
Preferred Stock, Dividend Rate, Percentage	5.00%	5.00%
Common Stock, Dividends, Per Share, Cash Paid	$ 0.10	$ 0.03

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Consolidated Balance Sheets [Abstract]
Held to maturity securities, fair value	$ 20,281	$ 25,549
Common Stock, No Par Value	$ 0	$ 0
Common Stock, Shares Authorized	12,500,000	12,500,000
Issued common shares	8,388,000	7,577,000
Outstanding common shares	8,388,000	7,577,000

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Borrowed Funds and Subordinated Debentures

12 Months Ended

Dec. 31, 2014

Borrowed Funds and Subordinated Debentures [Abstract]

Borrowed Funds and Subordinated Debentures

9.  Borrowed Funds and Subordinated Debentures

The following table presents the period-end and average balances of borrowed funds and subordinated debentures for the past three years with resultant rates:

	2014					2013					2012
(In thousands)	Amount		Rate			Amount		Rate			Amount		Rate
FHLB borrowings and repurchase agreements:
At December 31,	$	110,000		2.31	%	$	92,000		2.58	%	$	60,000		3.94	%
Year-to-date average		60,765		3.96			61,010		3.88			60,008		3.94
Maximum outstanding		140,000					95,000					61,000
Repurchase agreements:
At December 31,	$	15,000		3.67	%	$	15,000		3.67	%	$	15,000		3.67	%
Year-to-date average		15,000		3.67			15,000		3.67			15,000		3.67
Maximum outstanding		15,000					15,000					15,000
Subordinated debentures:
At December 31,	$	15,465		1.82	%	$	15,465		1.80	%	$	15,465		1.89	%
Year-to-date average		15,465		1.81			15,465		1.83			15,465		2.19
Maximum outstanding		15,465					15,465					15,465

The following table presents the expected maturities of borrowed funds and subordinated debentures over the next five years:

(In thousands)	2015		2016		2017		2018		2019		Thereafter		Total
FHLB borrowings and repurchase agreements	$	60,000	$	20,000	$	30,000	$	-	$	-	$	-	$	110,000
Other repurchase agreements		-		-		-		-		15,000		-		15,000
Subordinated debentures		-		-		-		-		-		15,465		15,465
Total borrowings	$	60,000	$	20,000	$	30,000	$	-	$	15,000	$	15,465	$	140,465

FHLB Borrowings

FHLB borrowings at December 31, 2014 included a $50.0 million overnight line of credit advance, versus $32.0 million at December 31, 2013.  FHLB borrowings at December 31, 2014 also consisted of six  $10.0 million advances, three of which are callable quarterly.  Comparatively, FHLB borrowings at December 31, 2013 consisted of three$10.0 million advances and three$10.0 million repurchase agreements. The terms of these transactions at year end 2014 are as follows:

· The $50.0 million FHLB overnight line of credit advance issued on December 31, 2014 was at a rate of 0.32 percent and was repaid on January 2, 2015.

· The FHLB advance that was issued on April 27, 2005 has a fixed rate of 3.70 percent, matures on April 27, 2015 and is callable quarterly on the 27th of July, October, January and April.

· The FHLB advance that was issued on November 2, 2006 has a fixed rate of 4.03 percent, matures on November 2, 2016 and is callable quarterly on the 2nd of February, May, August and November.

· The FHLB advance that was issued on August 10, 2007 has a fixed rate of 4.23 percent, matures on August 10, 2017 and is callable quarterly on the 10th of November, February, May and August.

· The FHLB advance that was issued on May 6, 2014 has a fixed rate of 4.19 percent, matures on December 15, 2016.

· The FHLB advance that was issued on July 17, 2014 has a fixed rate of 4.27 percent, matures on April 5, 2017.  

· The FHLB advance that was issued on July 17, 2014 has a fixed rate of 3.40 percent, matures on December 20, 2017.

Due to the call provisions on three of these advances, the expected maturity could differ from the contractual maturity.

Repurchase Agreements

At December 31, 2014 and 2013, the Company was a party to a $15.0 million repurchase agreement that was entered into in February 2008, has a term of 10 years expiring on February 28, 2018, and a rate of 3.67 percent.  The borrowing was callable by the issuer on the repurchase date of May 29, 2008 and quarterly thereafter. 

Due to the call provisions of this advance, the expected maturity could differ from the contractual maturity.

Subordinated Debentures

At December 31, 2014 and 2013, the Company was a party in the following subordinated debenture transactions:

· On July 24, 2006, Unity (NJ) Statutory Trust II, a statutory business trust and wholly-owned subsidiary of Unity Bancorp, Inc., issued $10.0 million of floating rate capital trust pass through securities to investors due on July 24, 2036.  The subordinated debentures are redeemable in whole or part, prior to maturity but after July 24, 2011.  The floating interest rate on the subordinated debentures is the three-month LIBOR plus 159 basis points and reprices quarterly.  The floating interest rate was 1.84 percent at December 31, 2014 and 2013.

· On December 19, 2006, Unity (NJ) Statutory Trust III, a statutory business trust and wholly-owned subsidiary of Unity Bancorp, Inc., issued $5.0 million of floating rate capital trust pass through securities to investors due on December 19, 2036.  The subordinated debentures are redeemable in whole or part, prior to maturity but after December 19, 2011.  The floating interest rate on the subordinated debentures is the three-month LIBOR plus 165 basis points and reprices quarterly.  The floating interest rate was 1.89 percent at December 31, 2014 and 2013.

· In connection with the formation of the statutory business trusts, the trusts also issued $465 thousand of common equity securities to the Company, which together with the proceeds stated above were used to purchase the subordinated debentures, under the same terms and conditions. 

The capital securities in each of the above transactions have preference over the common securities with respect to liquidation and other distributions and qualify as Tier I capital.  Under the terms of the Dodd-Frank Wall Street Reform and Consumer Protection Act, these securities will continue to qualify as Tier 1 capital as the Company has less than $10 billion in assets.  In accordance with FASB ASC Topic 810, “Consolidation,” the Company does not consolidate the accounts and related activity of Unity (NJ) Statutory Trust II and Unity (NJ) Statutory Trust III because it is not the primary beneficiary.  The additional capital from each of these transactions was used to bolster the Company’s capital ratios and for general corporate purposes, including among other things, capital contributions to the Bank.

The Company has the ability to defer interest payments on the subordinated debentures for up to five years without being in default.  Due to the redemption provisions of these securities, the expected maturity could differ from the contractual maturity.

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Employee Benefit Plans (Restricted Stock Awards Activity) (Details) (Restricted Stock [Member], USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted	17,500	42,500
Average grant date fair value	$ 8.88	$ 7.12

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Regulatory Capital (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2013
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common stock shares sold in rights offering	760,713
Common stock shares sold, price per share	$ 8.30
Gross proceeds from issuance of common stock	$ 6,300,000
Proceeds from rights offering, net	6,143,000
Amount collected from oversubscribed offering	$ 16,000,000
Leverage Ratio	3.00%
Leverage ratio: For Capital Adequacy Purposes Ratio	4.00%		4.00%
Total capital ratio	8.00%		8.00%
Tier 1 capital to risk-weighted assets ratio	11.57%		10.74%
Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio: For Capital Adequacy Purposes Ratio	4.00%		4.00%
Total capital ratio	8.00%		8.00%
Tier 1 capital to risk-weighted assets ratio	10.37%		9.33%
Scenario, Forecast [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage Ratio		6.00%
Tier 1 capital to risk-weighted assets ratio		4.50%
Capital Conservation Buffer		2.50%
Scenario Forecast, Year One [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital Conservation Buffer	0.625%
Scenario Forecast, Year Two [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital Conservation Buffer	1.25%
Scenario Forecast, Year Three [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital Conservation Buffer	1.875%
Scenario Forecast, Final [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio: For Capital Adequacy Purposes Ratio	4.00%
Total capital ratio	8.00%
Capital Conservation Buffer	2.50%
Minimum [Member] | Scenario, Forecast [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio: For Capital Adequacy Purposes Ratio		4.00%
Total capital ratio		8.00%

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Net Income per Share (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Net Income per Share [Abstract]
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants	764,778
Payments for Repurchase of Warrants	$ 2,707

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2014	Mar. 16, 2015	Jun. 30, 2014
Document and Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Entity Registrant Name	UNITY BANCORP INC /NJ/
Entity Central Index Key	0000920427
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		8,416,965
Trading Symbol	unty
Entity Public Float			$ 46,445,324
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	No

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies [Abstract]

Litigation

10.  Commitments and Contingencies

Facility Lease Obligations

The Company operates fifteen branches, four branches are under operating leases, including its headquarters, and eleven branches are owned.  The contractual expiration range on the remaining four leases is between the years 2014 and 2018. 

The following table summarizes the contractual rent payments expected in future years:

(In thousands)	2015		2016		2017		2018		Thereafter		Total
Operating lease rental payments	$	662	$	638	$	602	$	438	$	-	$	2,340

Rent expense totaled $718 thousand for 2014 and $856 thousand for 2013.  The Company currently accounts for all of its leases as operating leases.  In addition, the Company has one lease with a related party.  The Company leases its Clinton, New Jersey headquarters from a partnership in which two Board members, Messrs. D. Dallas and R. Dallas are partners.  Under the lease for the facility, the Company paid aggregate rental payments of $400 thousand in 2014 and $437 thousand in 2013.  Rental payments reflect market rents and the lease reflects terms that are comparable to those which could have been obtained in a lease with an unaffiliated third party.  When this lease expired at the end of 2013, it was renewed for another five-year term expiring at the end of 2018.  The annual rent is increased each year beginning January 1, 2016 by the increase in the Consumer Price Index (“CPI”) for the New York Metropolitan area (not to exceed 1.5 percent).

Litigation

The Company may, in the ordinary course of business, become a party to litigation involving collection matters, contract claims and other legal proceedings relating to the conduct of its business.  In the best judgment of management, based upon consultation with counsel, the consolidated financial position and results of operations of the Company will not be affected materially by the final outcome of any pending legal proceedings or other contingent liabilities and commitments.

Commitments to Borrowers

Commitments to extend credit are legally binding loan commitments with set expiration dates.  They are intended to be disbursed, subject to certain conditions, upon the request of the borrower.  The Company was committed to advance approximately $150.9 million to its borrowers as of December 31, 2014, compared to $103.2 million at December 31, 2013.  At December 31, 2014, $74.1 million of these commitments expire within one year, compared to $45.6 million a year earlier.  At December 31, 2014, the Company had $1.5 million in standby letters of credit compared to $1.4 million at December 31, 2013.  The estimated fair value of these guarantees is not significant.  The Company believes it has the necessary liquidity to honor all commitments.

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Borrowed Funds and Subordinated Debentures (Scheduled Maturities of Term Borrowings) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
2015	$ 60,000
2016	20,000
2017	30,000
2019	15,000
Thereafter	15,465
Total	140,465
FHLB borrowings and repurchase agreements [Member]
Debt Instrument [Line Items]
2015	60,000
2016	20,000
2017	30,000
Total	110,000
Securities Sold under Agreements to Repurchase [Member]
Debt Instrument [Line Items]
2019	15,000
Total	15,000	15,000	15,000
Subordinated Debt [Member]
Debt Instrument [Line Items]
Thereafter	15,465
Total	$ 15,465	$ 15,465	$ 15,465

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Income Taxes (Schedule of Deferred Tax Assets and Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Deferred tax assets:
Allowance for loan losses	$ 5,013	$ 5,249
Depreciation	489	418
Stock-based compensation	463	427
Lost interest on nonaccrual loans	354	802
Deferred compensation	231	190
State net operating loss	132	138
Disallowed writedowns on OREO properties	46
Net unrealized security losses		302
Other	39	96
Total deferred tax assets	6,767	7,622
Valuation Allowance	(132)	(113)
Net deferred tax assets	6,635	7,509
Deferred tax liabilities:
Goodwill	367	326
Deferred loan costs	216	318
Bond accretion	100	113
Net unrealized security gains	92
Total deferred tax liabilities	775	757
Net deferred tax asset	$ 5,860	$ 6,752

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
INTEREST INCOME
Federal funds sold and interest-bearing deposits	$ 44	$ 39
Federal Home Loan Bank stock	165	159
Securities:
Taxable	2,183	2,443
Tax-exempt	355	460
Total securities	2,538	2,903
Loans:
SBA loans	2,467	2,660
SBA 504 loans	1,676	1,911
Commercial loans	19,329	17,322
Residential mortgage loans	8,898	7,013
Consumer loans	2,301	1,947
Total loans	34,671	30,853
Total interest income	37,418	33,954
INTEREST EXPENSE
Interest-bearing demand deposits	430	383
Savings deposits	856	710
Time deposits	2,777	2,191
Borrowed funds and subordinated debentures	3,243	3,245
Total interest expense	7,306	6,529
Net interest income	30,112	27,425
Provision for loan losses	2,550	2,350
Net interest income after provision for loan losses	27,562	25,075
NONINTEREST INCOME
Branch fee income	1,469	1,505
Service and loan fee income	1,260	1,370
Gain on sale of SBA loans held for sale, net	975	628
Gain on sale of mortgage loans, net	1,139	1,650
BOLI income	559	347
Net security gains	433	390
Other income	844	714
Total noninterest income	6,679	6,604
NONINTEREST EXPENSE
Compensation and benefits	12,750	12,251
Occupancy	2,478	2,571
Processing and communications	2,461	2,309
Furniture and equipment	1,510	1,478
Professional services	748	828
Loan costs	780	822
OREO expenses	485	458
Deposit insurance	677	666
Advertising	998	747
Other expenses	1,801	1,867
Total noninterest expense	24,688	23,997
Income before provision for income taxes	9,553	7,682
Provision for income taxes	3,145	2,567
Net income	6,408	5,115
Preferred stock dividends and discount accretion		988
Income available to common shareholders	$ 6,408	$ 4,127
Net income per common share - Basic	$ 0.82	$ 0.55
Net income per common share - Diluted	$ 0.81	$ 0.53
Weighted average common shares outstanding - Basic	7,856	7,547
Weighted average common shares outstanding - Diluted	7,945	7,810

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Loans

12 Months Ended

Dec. 31, 2014

Loans [Abstract]

Loans

4.  Loans

The following table sets forth the classification of loans by class, including unearned fees, deferred costs and excluding the allowance for loan losses for the past two years:

(In thousands)	December 31, 2014		December 31, 2013
SBA loans held for investment	$	40,401	$	48,918
SBA 504 loans		34,322		31,564
Commercial loans
Commercial other		40,607		37,611
Commercial real estate		339,693		317,471
Commercial real estate construction		21,649		8,258
Residential mortgage loans		220,878		182,067
Consumer loans
Home equity		41,451		43,704
Consumer other		17,645		2,435
Total loans held for investment	$	756,646	$	672,028
SBA loans held for sale		5,179		6,673
Total loans	$	761,825	$	678,701

Loans are made to individuals as well as commercial entities.  Specific loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower.  Credit risk, excluding SBA loans, tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by the Bank.  As a preferred SBA lender, a portion of the SBA portfolio is to borrowers outside the Company’s lending area.  However, during late 2008, the Company withdrew from SBA lending outside of its primary trade area, but continues to offer SBA loan products as an additional credit product within its primary trade area.  Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type.  A description of the Company's different loan segments follows:

SBA Loans:  SBA 7(a) loans, on which the SBA has historically provided guarantees of up to 90 percent of the principal balance, are considered a higher risk loan product for the Company than its other loan products.  The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the nonguaranteed portion held in the portfolio as a loan held for investment.  SBA loans are for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes.  Loans are guaranteed by the businesses' major owners.  SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.

SBA 504 Loans:  The SBA 504 program consists of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property.  SBA 504 loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.  Generally, the Company has a 50 percent loan to value ratio on SBA 504 program loans at origination.

Commercial Loans:  Commercial credit is extended primarily to middle market and small business customers.  Commercial loans are generally made in the Company’s market place for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes.  Loans will generally be guaranteed in full or for a meaningful amount by the businesses' major owners.  Commercial loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.

ResidentialMortgage and Consumer Loans:  The Company originates mortgage and consumer loans including principally residential real estate, home equity lines and loans and consumer construction lines.  Each loan type is evaluated on debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower.

Inherent in the lending function is credit risk, which is the possibility a borrower may not perform in accordance with the contractual terms of their loan.  A borrower’s inability to pay their obligations according to the contractual terms can create the risk of past due loans and, ultimately, credit losses, especially on collateral deficient loans.  The Company minimizes its credit risk by loan diversification and adhering to credit administration policies and procedures.  Due diligence on loans begins when the Company initiates contact regarding a loan with a borrower.  Documentation, including a borrower’s credit history, materials establishing the value and liquidity of potential collateral, the purpose of the loan, the source of funds for repayment of the loan, and other factors, are analyzed before a loan is submitted for approval.  The loan portfolio is then subject to on-going internal reviews for credit quality, as well as independent credit reviews by an outside firm.

The Company's extension of credit is governed by the Credit Risk Policy which was established to control the quality of the Company's loans.  These policies and procedures are reviewed and approved by the Board of Directors on a regular basis.

Credit Ratings

For SBA 7(a), SBA 504 and commercial loans, management uses internally assigned risk ratings as the best indicator of credit quality.  A loan’s internal risk rating is updated at least annually and more frequently if circumstances warrant a change in risk rating.  The Company uses a 1 through 10 loan grading system that follows regulatory accepted definitions.

Pass:  Risk ratings of 1 through 6 are used for loans that are performing, as they meet, and are expected to continue to meet, all of the terms and conditions set forth in the original loan documentation, and are generally current on principal and interest payments.  These performing loans are termed “Pass”.

Special Mention:  Criticized loans are assigned a risk rating of 7 and termed “Special Mention”, as the borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention.  If not checked or corrected, these trends will weaken the Bank’s collateral and position.  While potentially weak, these borrowers are currently marginally acceptable and no loss of interest or principal is anticipated.  As a result, special mention assets do not expose an institution to sufficient risk to warrant adverse classification.  Included in “Special Mention” could be turnaround situations, such as borrowers with deteriorating trends beyond one year, borrowers in start up or deteriorating industries, or borrowers with a poor market share in an average industry.  "Special Mention" loans may include an element of asset quality, financial flexibility, or below average management.  Management and ownership may have limited depth or experience.  Regulatory agencies have agreed on a consistent definition of “Special Mention” as an asset with potential weaknesses which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.  This definition is intended to ensure that the “Special Mention” category is not used to identify assets that have as their sole weakness credit data exceptions or collateral documentation exceptions that are not material to the repayment of the asset.

Substandard:  Classified loans are assigned a risk rating of an 8 or 9, depending upon the prospect for collection, and deemed “Substandard”.  A risk rating of 8 is used for borrowers with well-defined weaknesses that jeopardize the orderly liquidation of debt.  The loan is inadequately protected by the current paying capacity of the obligor or by the collateral pledged, if any.  Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned.  There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected.  Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified “Substandard”.  

A risk rating of 9 is used for borrowers that have all the weaknesses inherent in a loan with a risk rating of 8, with the added characteristic that the weaknesses make collection of debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  Serious problems exist to the point where partial loss of principal is likely.  The possibility of loss is extremely high, but because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined.  Pending factors include proposed merger, acquisition, or liquidation procedures; capital injection; perfecting liens on additional collateral; and refinancing plans.  Partial charge-offs are likely.

Loss:  Once a borrower is deemed incapable of repayment of unsecured debt, the risk rating becomes a 10, the loan is termed a “Loss”, and charged-off immediately.  Loans to such borrowers are considered uncollectible and of such little value that continuance as active assets of the Bank is not warranted.  This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off these basically worthless assets even though partial recovery may be affected in the future.

For residential mortgage and consumer loans, management uses performing versus nonperforming as the best indicator of credit quality.  Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt.  These credit quality indicators are updated on an ongoing basis, as a loan is placed on nonaccrual status as soon as management believes there is sufficient doubt as to the ultimate ability to collect interest on a loan.

The tables below detail the Company’s loan portfolio by class according to their credit quality indicators discussed in the paragraphs above as of December 31, 2014:

	December 31, 2014
	SBA, SBA 504 & Commercial loans - Internal risk ratings
(In thousands)	Pass		Special mention		Substandard		Total
SBA loans held for investment	$	35,827	$	2,250	$	2,324	$	40,401
SBA 504 loans		24,415		5,967		3,940		34,322
Commercial loans
Commercial other		38,054		1,270		1,283		40,607
Commercial real estate		315,015		20,555		4,123		339,693
Commercial real estate construction		21,649		-		-		21,649
Total commercial loans		374,718		21,825		5,406		401,949
Total SBA, SBA 504 and commercial loans	$	434,960	$	30,042	$	11,670	$	476,672
	Residential mortgage & Consumer loans - Performing/Nonperforming
(In thousands)			Performing		Nonperforming		Total
Residential mortgage loans			$	220,233	$	645	$	220,878
Consumer loans
Home equity				40,908		543		41,451
Consumer other				17,643		2		17,645
Total consumer loans				58,551		545		59,096
Total residential mortgage and consumer loans			$	278,784	$	1,190	$	279,974

The tables below detail the Company’s loan portfolio by class according to their credit quality indicators discussed in the paragraphs above as of December 31, 2013: 

	December 31, 2013
	SBA, SBA 504 & Commercial loans - Internal risk ratings
(In thousands)	Pass		Special mention		Substandard		Total
SBA loans held for investment	$	43,778	$	2,035	$	3,105	$	48,918
SBA 504 loans		20,641		9,595		1,328		31,564
Commercial loans
Commercial other		34,946		1,499		1,166		37,611
Commercial real estate		289,220		21,137		7,114		317,471
Commercial real estate construction		8,081		-		177		8,258
Total commercial loans		332,247		22,636		8,457		363,340
Total SBA, SBA 504 and commercial loans	$	396,666	$	34,266	$	12,890	$	443,822
	Residential mortgage & Consumer loans - Performing/Nonperforming
(In thousands)			Performing		Nonperforming		Total
Residential mortgage loans			$	176,340	$	5,727	$	182,067
Consumer loans
Home equity				42,029		1,675		43,704
Consumer other				2,430		5		2,435
Total consumer loans				44,459		1,680		46,139
Total residential mortgage and consumer loans			$	220,799	$	7,407	$	228,206

Nonperforming and Past Due Loans

Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt.  Loans past due 90 days or more and still accruing interest are not included in nonperforming loans and generally represent loans that are well collateralized and in a continuing process expected to result in repayment or restoration to current status.  The risk of loss is difficult to quantify and is subject to fluctuations in collateral values, general economic conditions and other factors.  The improved state of the economy has resulted in a substantial reduction in nonperforming loans and loan delinquencies.  The Company values its collateral through the use of appraisals, broker price opinions, and knowledge of its local market.  In response to the credit risk in its portfolio, the Company has increased staffing in its credit monitoring department and increased efforts in the collection and analysis of borrowers’ financial statements and tax returns. 

The following tables set forth an aging analysis of past due and nonaccrual loans as of December 31, 2014 and December 31, 2013:

	December 31, 2014
(In thousands)	30-59 days past due		60-89 days past due		90+ days and still accruing		Nonaccrual (1)		Total past due		Current		Total loans
SBA loans held for investment	$	1,093	$	147	$	161	$	3,348	$	4,749	$	35,652	$	40,401
SBA 504 loans		1,639		-		-		2,109		3,748		30,574		34,322
Commercial loans
Commercial other		-		-		-		1,129		1,129		39,478		40,607
Commercial real estate		2,812		-		7		3,592		6,411		333,282		339,693
Commercial real estate construction		-		-		-		-		-		21,649		21,649
Residential mortgage loans		2,887		658		722		645		4,912		215,966		220,878
Consumer loans
Home equity		639		213		-		543		1,395		40,056		41,451
Consumer other		-		6		-		2		8		17,637		17,645
Total loans held for investment	$	9,070	$	1,024	$	890	$	11,368	$	22,352	$	734,294	$	756,646
SBA loans held for sale		-		-		-		-		-		5,179		5,179
Total loans	$	9,070	$	1,024	$	890	$	11,368	$	22,352	$	739,473	$	761,825

(1) At December 31, 2014, nonaccrual loans included $3.0million of TDRs and $1.6 million of loans guaranteed by the SBA.  The remaining $3.5million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

	December 31, 2013
(In thousands)	30-59 days past due		60-89 days past due		90+ days and still accruing		Nonaccrual (1)		Total past due		Current		Total loans
SBA loans held for investment	$	4,314	$	264	$	-	$	2,746	$	7,324	$	41,594	$	48,918
SBA 504 loans		-		-		-		1,101		1,101		30,463		31,564
Commercial loans
Commercial other		123		-		-		67		190		37,421		37,611
Commercial real estate		347		190		14		3,785		4,336		313,135		317,471
Commercial real estate construction		-		-		-		177		177		8,081		8,258
Residential mortgage loans		3,050		-		5		5,727		8,782		173,285		182,067
Consumer loans
Home equity		142		69		-		1,675		1,886		41,818		43,704
Consumer other		9		1		-		5		15		2,420		2,435
Total loans held for investment	$	7,985	$	524	$	19	$	15,283	$	23,811	$	648,217	$	672,028
SBA loans held for sale		65		-		-		-		65		6,608		6,673
Total loans	$	8,050	$	524	$	19	$	15,283	$	23,876	$	654,825	$	678,701

(1) At December 31, 2013, nonaccrual loans included $467thousand of TDRs and $540thousand of loans guaranteed by the SBA.  The remaining $7.5million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

Impaired Loans

The Company has defined impaired loans to be all nonperforming loans and troubled debt restructurings.  Management considers a loan impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract.

The following tables provide detail on the Company’s loans individually evaluated for impairment with the associated allowance amount, if applicable, as of December 31, 2014 and December 31, 2013: 

	December 31, 2014
(In thousands)	Unpaid principal balance		Recorded investment		Specific reserves
With no related allowance:
SBA loans held for investment (1)	$	1,719	$	1,093	$	-
SBA 504 loans		2,202		2,202		-
Commercial loans
Commercial other		878		877		-
Commercial real estate		2,017		1,927		-
Total commercial loans		2,895		2,804		-
Total impaired loans with no related allowance		6,816		6,099		-
With an allowance:
SBA loans held for investment (1)		1,521		1,127		502
SBA 504 loans		1,676		1,676		510
Commercial loans
Commercial other		364		252		41
Commercial real estate		3,003		3,003		108
Total commercial loans		3,367		3,255		149
Total impaired loans with a related allowance		6,564		6,058		1,161
Total individually evaluated impaired loans:
SBA loans held for investment (1)		3,240		2,220		502
SBA 504 loans		3,878		3,878		510
Commercial loans
Commercial other		1,242		1,129		41
Commercial real estate		5,020		4,930		108
Total commercial loans		6,262		6,059		149
Total individually evaluated impaired loans	$	13,380	$	12,157	$	1,161

(1) Balances are reduced by amount guaranteed by the SBA of $1.6million at December 31, 2014.

	December 31, 2013
(In thousands)	Unpaid principal balance		Recorded investment		Specific reserves
With no related allowance:
SBA loans held for investment (1)	$	1,123	$	835	$	-
SBA 504 loans		2,251		2,251		-
Commercial loans
Commercial other		56		55		-
Commercial real estate		6,116		5,969		-
Total commercial loans		6,172		6,024		-
Total impaired loans with no related allowance		9,546		9,110		-
With an allowance:
SBA loans held for investment (1)		2,282		1,905		831
SBA 504 loans		1,277		677		29
Commercial loans
Commercial other		24		12		12
Commercial real estate		3,557		2,907		230
Commercial real estate construction		202		177		36
Total commercial loans		3,783		3,096		278
Total impaired loans with a related allowance		7,342		5,678		1,138
Total individually evaluated impaired loans:
SBA loans held for investment (1)		3,405		2,740		831
SBA 504 loans		3,528		2,928		29
Commercial loans
Commercial other		80		67		12
Commercial real estate		9,673		8,876		230
Commercial real estate construction		202		177		36
Total commercial loans		9,955		9,120		278
Total individually evaluated impaired loans	$	16,888	$	14,788	$	1,138

(1) Balances are reduced by amount guaranteed by the SBA of $540thousand at December 31, 2013.

The following table presents the average recorded investments in impaired loans and the related amount of interest recognized during the time period in which the loans were impaired for the years ended December 31, 2014 and 2013.  The average balances are calculated based on the month-end balances of impaired loans.  When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal under the cost recovery method, therefore no interest income is recognized.  The interest recognized on impaired loans noted below represents accruing troubled debt restructurings only and nominal amounts of income recognized on a cash basis for well-collateralized impaired loans.

	For the years ended December 31,
	2014				2013
(In thousands)	Average recorded investment		Interest income recognized on impaired loans		Average recorded investment		Interest income recognized on impaired loans
SBA loans held for investment (1)	$	3,028	$	256	$	3,244	$	197
SBA 504 loans		3,042		109		5,066		173
Commercial loans
Commercial other		323		2		1,461		100
Commercial real estate		6,336		231		9,751		324
Commercial real estate construction		73		23		171		-
Total	$	12,802	$	621	$	19,693	$	794

(1) Balances are reduced by the average amount guaranteed by the SBA of $1.2million and $953thousand for years ended December 31, 2014 and 2013, respectively.

Troubled Debt Restructurings

The Company's loan portfolio includes certain loans that have been modified in a troubled debt restructuring (“TDR”).  TDRs occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider, unless it results in a delay in payment that is insignificant.  These concessions typically include reductions in interest rate, extending the maturity of a loan, other modifications of payment terms, or a combination of modifications.  When the Company modifies a loan, management evaluates for any possible impairment using either the discounted cash flows method, where the value of the modified loan is based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or by using the fair value of the collateral less selling costs if the loan is collateral-dependent.  If management determines that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or charge-off to the allowance.  This process is used, regardless of loan type, and for loans modified as TDRs that subsequently default on their modified terms.

TDRs of $6.5million and $7.9million are included in the impaired loan numbers as of December 31, 2014 and December 31, 2013, respectively.  The decrease was due to payoffs, note sales and principal pay downs.  At December 31, 2014, there were specific reserves of $223thousand on TDRs, $24thousand on performing TDRs and $199thousand on nonperforming TDRs.  At December 31, 2013, there were specific reserves of $410thousand on TDRS, $363thousand on performing TDRs and $47thousand on nonperforming TDRs.  At December 31, 2014, $3.0million of TDRs were in nonaccrual status, compared to $467thousand at December 31, 2013.  The increase during the twelve month period was due to the transfer of 3 loans, one of which had a principal amount of $2.7million, into nonaccrual status.  The remaining TDRs are in accrual status since they continue to perform in accordance with their restructured terms.  There are no commitments to lend additional funds on these loans. 

The following table details loans modified during the years ended December 31, 2014 and 2013, including the number of modifications, the recorded investment at the time of the modification and the year-to-date impact to interest income as a result of the modification.  

	For the years ended December 31,
	2014						2013
(In thousands, except number of contracts)	Number of contracts		Recorded investment at time of modification		Impact of interest rate change on income		Number of contracts		Recorded investment at time of modification		Impact of interest rate change on income
SBA loans held for investment		-	$	-	$	-		1	$	65	$	-
Commercial real estate		-		-		-		1		2,684		50
Total		-	$	-	$	-		2	$	2,749	$	50

In addition, there was one SBA loan with no outstanding principal balance modified as a TDR within the previous 12 months where a concession was made and the loan subsequently defaulted during the year ended December 31, 2014. In this case, subsequent default is defined as 90 days past due or transferred to nonaccrual status. There were no qualifying subsequent defaults to TDRs in 2013.

To date, the Company’s TDRs consisted of interest rate reductions, interest only periods and maturity extensions.  There has been no principal forgiveness.  There were no TDRs modified in 2014.  The following table shows the types of modifications done during the year ended December 31, 2013, with the respective loan balances as of the period end:

	For the year ended December 31, 2013
(In thousands)	SBA held for investment		Commercial real estate		Total
Type of modification:
Interest only with reduced interest rate	$	-	$	2,684	$	2,684
Interest only with nominal principal		65		-		65
Total TDRs	$	65	$	2,684	$	2,749

Other Loan Information

Servicing Assets:

Loans sold to others and serviced by the Company are not included in the accompanying Consolidated Balance Sheets.  The total amount of such loans serviced, but owned by outside investors, amounted to approximately $113.2million and $101.9million at December 31, 2014 and 2013, respectively.  At December 31, 2014 and 2013, the carrying value, which approximates fair value, of servicing assets was $753thousand and $437thousand, respectively, and is included in Other Assets.  The fair value of SBA servicing assets was determined using a discount rate of 15percent, constant prepayment speeds ranging from 15to 18,  and interest strip multiples ranging from 2.08to 3.80, depending on each individual credit.  The fair value of mortgage servicing assets was determined using a discount rate of 12 percent and the present value of excess servicing over seven years.  A summary of the changes in the related servicing assets for the past two years follows:

	For the years ended December 31,
(In thousands)	2014		2013
Balance, beginning of year	$	437	$	396
Servicing assets capitalized		483		187
Amortization of expense		(167)		(146)
Provision for loss in fair value		-		-
Balance, end of year	$	753	$	437

In addition, the Company had a $657thousand and $502thousand discount related to the retained portion of the unsold SBA loans at December 31, 2014 and 2013, respectively.

Officer and Director Loans:

In the ordinary course of business, the Company may extend credit to officers, directors or their associates.  These loans are subject to the Company’s normal lending policy.  An analysis of such loans, all of which are current as to principal and interest payments, is as follows:

(In thousands)	December 31, 2014
Balance, beginning of year	$	18,327
New loans and advances		9,254
Loan repayments		(1,129)
Balance, end of year	$	26,452

Loan Portfolio Collateral:

The majority of the Company’s loans are secured by real estate.  Declines in the market values of real estate in the Company’s trade area impact the value of the collateral securing its loans.  This could lead to greater losses in the event of defaults on loans secured by real estate.  At both December 31, 2014 and 2013, approximately 96percent of the Company’s loan portfolio was secured by real estate.

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Securities

12 Months Ended

Dec. 31, 2014

Securities [Abstract]

Securities

3.  Securities

This table provides the major components of securities available for sale (“AFS”) and held to maturity (“HTM”) at amortized cost and estimated fair value at December 31, 2014 and December 31, 2013:

	December 31, 2014								December 31, 2013
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available for sale:
U.S. Government sponsored entities	$	4,711	$	-	$	(93)	$	4,618	$	6,723	$	27	$	(332)	$	6,418
State and political subdivisions		11,055		112		(35)		11,132		16,960		192		(554)		16,598
Residential mortgage-backed securities		33,884		646		(147)		34,383		44,168		696		(475)		44,389
Commercial mortgage-backed securities		-		-		-		-		887		2		(1)		888
Corporate and other securities		10,188		63		(311)		9,940		13,173		67		(400)		12,840
Total securities available for sale	$	59,838	$	821	$	(586)	$	60,073	$	81,911	$	984	$	(1,762)	$	81,133
Held to maturity:
U.S. Government sponsored entities	$	4,440	$	-	$	(124)	$	4,316	$	5,814	$	-	$	(460)	$	5,354
State and political subdivisions		2,417		277		-		2,694		2,441		121		(17)		2,545
Residential mortgage-backed securities		8,164		211		(29)		8,346		10,395		145		(198)		10,342
Commercial mortgage-backed securities		4,005		13		(53)		3,965		6,750		87		(437)		6,400
Corporate and other securities		983		-		(23)		960		981		-		(73)		908
Total securities held to maturity	$	20,009	$	501	$	(229)	$	20,281	$	26,381	$	353	$	(1,185)	$	25,549

This table provides the remaining contractual maturities and yields of securities within the investment portfolios. The carrying value of securities at December 31, 2014 is distributed by contractual maturity. Mortgage-backed securities and other securities, which may have principal prepayment provisions, are distributed based on contractual maturity. Expected maturities will differ materially from contractual maturities as a result of early prepayments and calls.

	Within one year				After one through five years				After five through ten years				After ten years				Total carrying value
(In thousands, except percentages)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Available for sale at fair value:
U.S. Government sponsored entities	$	-	-	%	$	1,014	1.00	%	$	956	2.06	%	$	2,648	2.04	%	$	4,618	1.82	%
State and political subdivisions		40	6.49			1,165	2.23			6,189	2.37			3,738	2.60			11,132	2.45
Residential mortgage-backed securities		-	-			1,718	1.70			2,335	1.94			30,330	2.81			34,383	2.70
Corporate and other securities		-	-			2,406	1.00			1,500	1.19			6,034	1.43			9,940	1.29
Total securities available for sale	$	40	6.49	%	$	6,303	1.42	%	$	10,980	2.09	%	$	42,750	2.55	%	$	60,073	2.35	%
Held to maturity at cost:
U.S. Government sponsored entities	$	-	-	%	$	-	-	%	$	-	-	%	$	4,440	1.97	%	$	4,440	1.97	%
State and political subdivisions		309	0.75			-	-			-	-			2,108	4.72			2,417	4.21
Residential mortgage-backed securities		-	-			468	4.87			272	5.19			7,424	3.01			8,164	3.19
Commercial mortgage-backed securities		-	-			-	-			-	-			4,005	2.76			4,005	2.76
Corporate and other securities		-	-			-	-			983	2.95			-	-			983	2.95
Total securities held to maturity	$	309	0.75	%	$	468	4.87	%	$	1,255	3.44	%	$	17,977	2.90	%	$	20,009	2.94	%

The fair value of securities with unrealized losses by length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2014 and December 31, 2013 are as follows:

	December 31, 2014
			Less than 12 months				12 months and greater				Total
(In thousands, except number in a loss position)	Total number in a loss position		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss
Available for sale:
U.S. Government sponsored entities		4	$	-	$	-	$	4,590	$	(93)	$	4,590	$	(93)
State and political subdivisions		7		-		-		4,103		(35)		4,103		(35)
Residential mortgage-backed securities		9		6,579		(16)		5,889		(131)		12,468		(147)
Commercial mortgage-backed securities		-		-		-		-		-		-		-
Corporate and other securities		7		1,053		(46)		3,736		(265)		4,789		(311)
Total temporarily impaired securities		27	$	7,632	$	(62)	$	18,318	$	(524)	$	25,950	$	(586)
Held to maturity:
U.S. Government sponsored entities		2	$	-	$	-	$	4,316	$	(124)	$	4,316	$	(124)
Residential mortgage-backed securities		3		-		-		2,586		(29)		2,586		(29)
Commercial mortgage-backed securities		1		-		-		1,822		(53)		1,822		(53)
Corporate and other securities		1		-		-		960		(23)		960		(23)
Total temporarily impaired securities		7	$	-	$	-	$	9,684	$	(229)	$	9,684	$	(229)

	December 31, 2013
			Less than 12 months				12 months and greater				Total
(In thousands, except number in a loss position)	Total number in a loss position		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss		Estimated fair value		Unrealized loss
Available for sale:
U.S. Government sponsored entities		5	$	5,591	$	(332)	$	-	$	-	$	5,591	$	(332)
State and political subdivisions		19		8,575		(453)		934		(101)		9,509		(554)
Residential mortgage-backed securities		13		13,226		(398)		1,474		(77)		14,700		(475)
Commercial mortgage-backed securities		3		368		(1)		-		-		368		(1)
Corporate and other securities		9		3,994		(105)		3,088		(295)		7,082		(400)
Total temporarily impaired securities		49	$	31,754	$	(1,289)	$	5,496	$	(473)	$	37,250	$	(1,762)
Held to maturity:
U.S. Government sponsored entities		3	$	5,354	$	(460)	$	-	$	-	$	5,354	$	(460)
State and political subdivisions		2		986		(17)		-		-		986		(17)
Residential mortgage-backed securities		7		6,333		(193)		114		(5)		6,447		(198)
Commercial mortgage-backed securities		2		3,668		(437)		-		-		3,668		(437)
Corporate and other securities		1		908		(73)		-		-		908		(73)
Total temporarily impaired securities		15	$	17,249	$	(1,180)	$	114	$	(5)	$	17,363	$	(1,185)

Unrealized Losses

The unrealized losses in each of the categories presented in the tables above are discussed in the paragraphs that follow:

U.S. government sponsored entities and state and political subdivision securities: The unrealized losses on investments in these types of securities were caused by the increase in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than temporarily impaired as of December 31, 2014.  There was no other-than-temporary impairment on these securities at December 31, 2013.

Residential and commercial mortgage-backed securities:  The unrealized losses on investments in mortgage-backed securities were caused by increases in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The majority of contractual cash flows of these securities are guaranteed by the Federal National Mortgage Association (FNMA), the Government National Mortgage Association (GNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).  It is expected that the securities would not be settled at a price significantly less than the par value of the investment.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of December 31, 2014 or December 31, 2013.

Corporate and other securities: Included in this category are corporate debt securities, Community Reinvestment Act (“CRA”) investments, asset-backed securities, and one trust preferred security.  The unrealized losses on corporate debt securities were due to widening credit spreads or the increase in interest rates at the long end of the Treasury curve and the unrealized losses on CRA investments were caused by decreases in the market prices of the shares.  The Company evaluated the prospects of the issuers and forecasted a recovery period; and as a result determined it did not consider these investments to be other-than-temporarily impaired as of December 31, 2014 or December 31, 2013.  The unrealized loss on the trust preferred security was caused by an inactive trading market and changes in market credit spreads.  At December 31, 2014 and December 31, 2013, this category consisted of one single-issuer trust preferred security.  The contractual terms do not allow the security to be settled at a price less than the par value.  Because the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, which may be at maturity, the Company did not consider this security to be other-than-temporarily impaired as of December 31, 2014 or December 31, 2013.

Realized Gains and Losses

Gross realized gains and losses on securities for the past two years are detailed in the table below:

	For the years ended December 31,
(In thousands)	2014		2013
Available for sale:
Realized gains	$	440	$	394
Realized losses		(7)		(4)
Total securities available for sale		433		390
Held to maturity:
Realized gains		-		-
Realized losses		-		-
Total securities held to maturity		-		-
Net gains on sales of securities	$	433	$	390

The net realized gains are included in noninterest income in the Consolidated Statements of Income as net security gains.  For 2014 and 2013, gross realized gains on sales of securities amounted to $440 thousand and $394 thousand, respectively, and gross realized losses were $7 thousand and $4 thousand, respectively. 

· The net gains during 2014 are attributed to the sale of seventeen municipal securities with a total book value of $5.7 million and resulting gains of $213 thousand, the sale of four mortgage-backed securities with a total book value of $8.6 million and resulting gains of $143 thousand, the sale of two agency securities with a book value of $2.6 million and resulting gains of $68 thousand, the sale of one corporate bond with a book value of $2.0 million resulting in a gain of $3 thousand, and the sale of one asset-backed security with a book value of $858 thousand resulting in a gain of $13 thousand, offset by the sale of one corporate bond with a book value of $2.0 million resulting in a loss of $3 thousand and the partial call of one municipal security resulting in a loss of $4 thousand.

· The net gains during 2013 are attributed to the sale of five asset-backed securities with a total book value of $6.4 million and resulting net gains of $195 thousand, the sale of four corporate bonds with a total book value of $4.8 million and resulting gains of $186 thousand, the sale of two mortgage-backed securities with a book value of $517 thousand for a gain of $9 thousand, and the sale of one equity security with a book value of $60 thousand for a gain of $4 thousand, offset by the partial call of one municipal security resulting in a loss of $4 thousand.

Pledged Securities

Securities with a carrying value of $50.4million and $74.5 million at December 31, 2014 and December 31, 2013, respectively, were pledged to secure Government deposits, secure other borrowings and for other purposes required or permitted by law.  Included in these figures was $32.1 million and $19.9 million pledged against Government deposits at December 31, 2014 and December 31, 2013, respectively.

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Income Taxes

12 Months Ended

Dec. 31, 2014

Income Taxes [Abstract]

Income Taxes

15.  Income Taxes

The components of the provision for income taxes for the past two years are as follows:

	For the years ended December 31,
(In thousands)	2014		2013
Federal - current provision	$	2,380	$	1,579
Federal - deferred provision		381		491
Total federal provision		2,761		2,070
State - current provision		267		599
State - deferred provision (benefit)		117		(102)
Total state provision		384		497
Total provision for income taxes	$	3,145	$	2,567

Reconciliation between the reported income tax provision and the amount computed by multiplying income before taxes by the statutory Federal income tax rate for the past two years is as follows:

	For the years ended December 31,
(In thousands, except percentages)	2014			2013
Federal income tax provision at statutory rate	$	3,248		$	2,612
Increases (decreases) resulting from:
Bank owned life insurance		(190)			(118)
Tax-exempt interest		(121)			(156)
Meals and entertainment		18			14
State income taxes, net of federal income tax effect		253			328
Other, net		(63)			(113)
Provision for income taxes	$	3,145		$	2,567
Effective tax rate		32.9	%		33.4	%

Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities.  The components of the net deferred tax asset at December 31, 2014 and 2013 are as follows:

(In thousands)	December 31, 2014		December 31, 2013
Deferred tax assets:
Allowance for loan losses	$	5,013	$	5,249
Depreciation		489		418
Stock-based compensation		463		427
Lost interest on nonaccrual loans		354		802
Deferred compensation		231		190
State net operating loss		132		138
Disallowed write-down on OREO properties		46		-
Net unrealized security losses		-		302
Other		39		96
Gross deferred tax assets		6,767		7,622
Valuation allowance		(132)		(113)
Total deferred tax assets		6,635		7,509
Deferred tax liabilities:
Goodwill		367		326
Deferred loan costs		216		318
Bond accretion		100		113
Net unrealized security gains		92		-
Total deferred tax liabilities		775		757
Net deferred tax asset	$	5,860	$	6,752

The Company computes deferred income taxes under the asset and liability method.  Deferred income taxes are recognized for tax consequences of “temporary differences” by applying enacted statutory tax rates to differences between the financial reporting and the tax basis of existing assets and liabilities.  A deferred tax liability is recognized for all temporary differences that will result in future taxable income.  A deferred tax asset is recognized for all temporary differences that will result in future tax deductions subject to reduction of the asset by a valuation allowance.

The Company had a $132 thousand and $113 thousand valuation allowance for deferred tax assets related to its state net operating loss carry-forward deferred tax asset, the balance of which was $132 thousand and $138 at December 31, 2014 and 2013, respectively.  The Company’s state net operating loss carry-forwards totaled approximately $2.2 million at December 31, 2014 and expire between 2030 and 2034.

Included as a component of deferred tax assets is an income tax expense (benefit) related to unrealized gains (losses) on securities available for sale.  The after-tax component was an unrealized gain of $143 thousand for 2014 and an unrealized loss of $476 thousand for 2013, and is included in other comprehensive income (loss) in shareholders’ equity.

The Company follows FASB ASC Topic 740, “Income Taxes,” which prescribes a threshold for the financial statement recognition of income taxes and provides criteria for the measurement of tax positions taken or expected to be taken in a tax return.  ASC 740 also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition of income taxes.  The Company did not recognize or accrue any interest or penalties related to income taxes during the years ended December 31, 2014 and 2013.  The Company does not have an accrual for uncertain tax positions as of December 31, 2014 or 2013, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law.  Tax returns for all years 2010 and thereafter are subject to future examination by tax authorities.

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Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2014

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

11.  Accumulated Other Comprehensive Income (Loss)

The following table shows the changes in other comprehensive income (loss) for the past two years:

	For the twelve months ended December 31,
	2014						2013
(In thousands)	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Balance, beginning of period					$	(476)					$	1,333
Unrealized holding gains (losses) on securities arising during the period	$	1,446	$	537		909	$	(2,606)	$	(1,056)		(1,550)
Less: Reclassification adjustment for gains on securities included in net income		433		143		290		390		131		259
Net unrealized gains (losses) on securities arising during the period	$	1,013	$	394	$	619	$	(2,996)	$	(1,187)	$	(1,809)
Balance, end of period					$	143					$	(476)

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Shareholders' Equity (Details) (USD $)	0 Months Ended			3 Months Ended								12 Months Ended
	Jul. 03, 2013	Jul. 01, 2013	May 15, 2013	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2008	Dec. 31, 2014	Aug. 28, 2013	Oct. 21, 2002
Shareholders’ Equity [Abstract]
Shareholders' equity							$ 57,173,000				$ 77,510,000	$ 57,173,000		$ 77,510,000			$ 70,123,000
Net income				1,701,000	1,886,000	1,528,000	1,293,000	1,266,000	1,302,000	1,347,000	1,200,000	6,408,000		5,115,000
Proceeds from rights offering												6,143,000
Dividends on common stock												757,000		188,000
Common stock issued and related tax effects												537,000	[1]	355,000	[1]
Net unrealized gains (losses) on securities arising during the period, after-tax												619,000		(1,809,000)
Proceeds from issuance of redeemable preferred stock																20,600,000
Preferred stock accretion period																5 years
Proceeds from issuance of warrants																2,600,000
Stock Repurchase Program, Number of Shares Authorized to be Repurchased				556,000								556,000
Stockholders' Equity, Period Increase (Decrease)												13,000,000
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased				153,000								153,000
Stock Redeemed or Called During Period, Value	10,400,000		10,300,000											20,649,000
Stock Redeemed or Called During Period, Shares		10,325	10,324
Payments for Repurchase of Warrants														$ 2,707,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																764,778		764,778
Maximum percentage of outstanding common stock authorized for repurchase																			10.00%
Treasury Stock, Shares, Retired												131,000
Contractual life of Warrant																10 years
Class of Warrant or Right, Exercise Price of Warrants or Rights																4.05
Shares repurchased												0		0
Preferred stock dividend rate												5.00%		5.00%
Preferred stock dividend rate after 5 years												9.00%

[1] Includes the issuance of common stock under employee benefit plans, which includes nonqualified stock options and restricted stock expense related entries, employee option exercises and the tax benefit of options exercised.

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Other Assets

12 Months Ended

Dec. 31, 2014

Other Assets [Abstract]

Other Assets

7.  Other Assets

The detail of other assets as of December 31st for the past two years is as follows:

(In thousands)	December 31, 2014		December 31, 2013
Prepaid expenses	$	399	$	481
Servicing assets		753		437
Net receivable due from SBA		318		429
Other		1,821		1,307
Total other assets	$	3,291	$	2,654

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Loans (Aging Analysis Of Past Due And Nonaccrual Loans By Class) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014		Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	$ 9,070		$ 8,050
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	1,024		524
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	890		19
Financing Receivable, Recorded Investment, Nonaccrual Status	11,368	[1]	15,283	[2]
Financing Receivable, Recorded Investment, Past Due	22,352		23,876
Financing Receivable, Recorded Investment, Current	739,473		654,825
Total loans	756,646		672,028
SBA loans held for sale	5,179		6,673
Total loans	761,825		678,701
Troubled Debt Restructuring (TDR) [Member] | Non Accrual [Member]
Financing Receivable, Recorded Investment [Line Items]
Performing troubled debt restructurings	3,000		467
Troubled Debt Restructuring (TDR) [Member] | Accrual [Member]
Financing Receivable, Recorded Investment [Line Items]
Performing troubled debt restructurings	3,500		7,500
SBA, SBA 504, and Commercial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	476,672		443,822
Residential and Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	279,974		228,206
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	1,093		4,314
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	147		264
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	161
Financing Receivable, Recorded Investment, Nonaccrual Status	3,348	[1]	2,746	[2]
Financing Receivable, Recorded Investment, Past Due	4,749		7,324
Financing Receivable, Recorded Investment, Current	35,652		41,594
Total loans	40,401		48,918
Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	1,639
Financing Receivable, Recorded Investment, Nonaccrual Status	2,109	[1]	1,101	[2]
Financing Receivable, Recorded Investment, Past Due	3,748		1,101
Financing Receivable, Recorded Investment, Current	30,574		30,463
Total loans	34,322		31,564
Commercial Other Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due			123
Financing Receivable, Recorded Investment, Nonaccrual Status	1,129	[1]	67	[2]
Financing Receivable, Recorded Investment, Past Due	1,129		190
Financing Receivable, Recorded Investment, Current	39,478		37,421
Total loans	40,607		37,611
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	2,812		347
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due			190
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	7		14
Financing Receivable, Recorded Investment, Nonaccrual Status	3,592	[1]	3,785	[2]
Financing Receivable, Recorded Investment, Past Due	6,411		4,336
Financing Receivable, Recorded Investment, Current	333,282		313,135
Total loans	339,693		317,471
Commercial Real Estate Construction Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status			177	[2]
Financing Receivable, Recorded Investment, Past Due			177
Financing Receivable, Recorded Investment, Current	21,649		8,081
Total loans	21,649		8,258
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	401,949		363,340
Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	2,887		3,050
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	658
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	722		5
Financing Receivable, Recorded Investment, Nonaccrual Status	645	[1]	5,727	[2]
Financing Receivable, Recorded Investment, Past Due	4,912		8,782
Financing Receivable, Recorded Investment, Current	215,966		173,285
Total loans	220,878		182,067
Consumer Home Equity Line Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	639		142
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	213		69
Financing Receivable, Recorded Investment, Nonaccrual Status	543	[1]	1,675	[2]
Financing Receivable, Recorded Investment, Past Due	1,395		1,886
Financing Receivable, Recorded Investment, Current	40,056		41,818
Total loans	41,451		43,704
Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due			9
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	6		1
Financing Receivable, Recorded Investment, Nonaccrual Status	2	[1]	5	[2]
Financing Receivable, Recorded Investment, Past Due	8		15
Financing Receivable, Recorded Investment, Current	17,637		2,420
Total loans	17,645		2,435
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	59,096		46,139
Loans Held for Investment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	9,070		7,985
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	1,024		524
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	890		19
Financing Receivable, Recorded Investment, Nonaccrual Status	11,368	[1]	15,283	[2]
Financing Receivable, Recorded Investment, Past Due	22,352		23,811
Financing Receivable, Recorded Investment, Current	734,294		648,217
Total loans	756,646		672,028
SBA Loans Held For Sale [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due			65
Financing Receivable, Recorded Investment, Past Due			65
Financing Receivable, Recorded Investment, Current	5,179		6,608
SBA loans held for sale	5,179		6,673
Loans Guaranteed By Small Business Administration [Member] | Troubled Debt Restructuring (TDR) [Member]
Financing Receivable, Recorded Investment [Line Items]
Performing troubled debt restructurings	$ 1,600		$ 540

[1] At December 31, 2014, nonaccrual loans included $3.0 million of TDRs and $1.6 million of loans guaranteed by the SBA.  The remaining $3.5 million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

[2] At December 31, 2013, nonaccrual loans included $467 thousand of TDRs and $540 thousand of loans guaranteed by the SBA.  The remaining $7.5 million of TDRs are in accrual status because they are performing in accordance with their restructured terms, and have been for at least six months.

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Fair Value (Fair Value Of Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity, Estimated Fair Value	$ 20,281		$ 25,549
SBA servicing assets	753		437		396
Accrued interest receivable	3,518		3,272
Accrued interest payable	474		454
Impaired Financing Receivable, Recorded Investment	12,157		14,788
Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash And Cash Equivalents, Estimated fair value	129,821		99,404
Securities held-to-maturity, Estimated Fair Value	20,009	[1]	26,381	[1]
SBA Loans Held For Sale, Estimated fair value	5,179		6,673
Loans, Net Of Allowance For Loan Losses, Estimated fair value	744,095	[2]	658,887	[2]
Federal Home Loan Bank Stock, Estimated fair value	6,032		5,392
SBA servicing assets	753		437
Accrued interest receivable	3,518		3,272
Deposits, Estimated fair value	794,341		738,698
Borrowed Funds And Subordinated Debentures, Estimated fair value	140,465		122,465
Accrued interest payable	474		454
Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash And Cash Equivalents, Estimated fair value	129,821		99,404
Securities held-to-maturity, Estimated Fair Value	20,281	[1]	25,549	[1]
SBA Loans Held For Sale, Estimated fair value	5,655		7,267
Loans, Net Of Allowance For Loan Losses, Estimated fair value	748,093	[2]	645,582	[2]
Federal Home Loan Bank Stock, Estimated fair value	6,032		5,392
SBA servicing assets	753		437
Accrued interest receivable	3,518		3,272
Deposits, Estimated fair value	794,436		738,337
Borrowed Funds And Subordinated Debentures, Estimated fair value	145,333		129,732
Accrued interest payable	474		454
Impaired Financing Receivable, Recorded Investment	4,900		4,500
Commercial Mortgage Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity, Estimated Fair Value	3,965		6,400
Commercial Mortgage Backed Securities [Member] | Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity, Estimated Fair Value	4,000		6,800
Commercial Mortgage Backed Securities [Member] | Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity, Estimated Fair Value	$ 4,000		$ 6,400

[1] Includes held to maturity commercial mortgage-backed securities that are considered Level 3. These securities had book values of $4.0 million and $6.8 million at December 31, 2014 and 2013, respectively, and market values of $4.0 million and $6.4 million at December 31, 2014 and 2013, respectively.

[2] Includes impaired loans that are considered Level 3 and reported separately in the tables under the “Fair Value on a Nonrecurring Basis” heading. Impaired loans, included in the fair value non-recurring table, net of specific reserves totaled $4.9 million and $4.5 million at December 31, 2014 and 2013, respectively.

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Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

12 Months Ended

Dec. 31, 2014

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments [Abstract]

Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

5. Allowance for Loan Losses and Reserve for Unfunded Loan Commitments

Allowance for Loan Losses

The Company has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio.  At a minimum, the adequacy of the allowance for loan losses is reviewed by management on a quarterly basis.  For purposes of determining the allowance for loan losses, the Company has segmented the loans in its portfolio by loan type.  Loans are segmented into the following pools: SBA 7(a), SBA 504, commercial, residential mortgages, and consumer loans.  Certain portfolio segments are further broken down into classes based on the associated risks within those segments and the type of collateral underlying each loan.  Commercial loans are divided into the following three classes: commercial real estate, commercial real estate construction and commercial other.  Consumer loans are divided into two classes as follows:  Home equity and other.

The standardized methodology used to assess the adequacy of the allowance includes the allocation of specific and general reserves.  The same standard methodology is used, regardless of loan type.  Specific reserves are made to individual impaired loans and troubled debt restructurings (see Note 1 for additional information on this term).  The general reserve is set based upon a representative average historical net charge-off rate adjusted for the following environmental factors: delinquency and impairment trends, charge-off and recovery trends, changes in the volume of restructured loans, volume and loan term trends, changes in risk and underwriting policy trends, staffing and experience changes, national and local economic trends, industry conditions and credit concentration changes.  Within the five-year historical net charge-off rate, the Company weights the past three years more because it believes they are more indicative of future losses.  All of the environmental factors are ranked and assigned a basis points value based on the following scale: low, low moderate, moderate, high moderate and high risk.  Each environmental factor is evaluated separately for each class of loans and risk weighted based on its individual characteristics. 

· For SBA 7(a), SBA 504 and commercial loans, the estimate of loss based on pools of loans with similar characteristics is made through the use of a standardized loan grading system that is applied on an individual loan level and updated on a continuous basis.  The loan grading system incorporates reviews of the financial performance of the borrower, including cash flow, debt-service coverage ratio, earnings power, debt level and equity position, in conjunction with an assessment of the borrower's industry and future prospects.  It also incorporates analysis of the type of collateral and the relative loan to value ratio.

· For residential mortgage and consumer loans, the estimate of loss is based on pools of loans with similar characteristics.  Factors such as credit score, delinquency status and type of collateral are evaluated.  Factors are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the reserve factors are made as needed. 

According to the Company’s policy, a loss (“charge-off”) is to be recognized and charged to the allowance for loan losses as soon as a loan is recognized as uncollectable.  All credits which are 90 days past due must be analyzed for the Company’s ability to collect on the credit.  Once a loss is known to exist, the charge-off approval process is immediately expedited.  This charge-off policy is followed for all loan types.

The allocated allowance is the total of identified specific and general reserves by loan category.  The allocation is not necessarily indicative of the categories in which future losses may occur.  The total allowance is available to absorb losses from any segment of the portfolio.An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in methodologies for estimating allocated and general reserves in the portfolio.  The unallocated portion of the allowance increased for the year ended December 31, 2014 due to changes in environmental factors such as charge-off and recovery trends, improvements in local and national economic conditions, and improved industry conditions, partially offset by growth in the loan portfolio.

The following tables detail the activity in the allowance for loan losses by portfolio segment for the past two years:

	For the years ended December 31, 2014
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Balance, beginning of period	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141
Charge-offs		(1,053)		(92)		(1,037)		(740)		(593)		-		(3,515)
Recoveries		140		-		166		60		9		-		375
Net charge-offs		(913)		(92)		(871)		(680)		(584)		-		(3,140)
Provision for loan losses charged to expense		209		472		301		837		678		53		2,550
Balance, end of period	$	1,883	$	1,337	$	6,270	$	2,289	$	667	$	105	$	12,551

	For the years ended December 31, 2013
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Balance, beginning of period	$	3,378	$	1,312	$	7,091	$	1,769	$	524	$	684	$	14,758
Charge-offs		(1,076)		(1,193)		(1,392)		(375)		(588)		-		(4,624)
Recoveries		250		182		204		17		4		-		657
Net charge-offs		(826)		(1,011)		(1,188)		(358)		(584)		-		(3,967)
Provision for loan losses charged to expense		35		656		937		721		633		(632)		2,350
Balance, end of period	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141

The following tables present loans and their related allowance for loan losses, by portfolio segment, as of December 31st for the past two years:

	December 31, 2014
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	502	$	510	$	149	$	-	$	-	$	-	$	1,161
Collectively evaluated for impairment		1,381		827		6,121		2,289		667		105		11,390
Total	$	1,883	$	1,337	$	6,270	$	2,289	$	667	$	105	$	12,551
Loan ending balances:
Individually evaluated for impairment	$	2,220	$	3,878	$	6,059	$	-	$	-	$	-	$	12,157
Collectively evaluated for impairment		38,181		30,444		395,890		220,878		59,096		-		744,489
Total	$	40,401	$	34,322	$	401,949	$	220,878	$	59,096	$	-	$	756,646

	December 31, 2013
(In thousands)	SBA held for investment		SBA 504		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	831	$	29	$	278	$	-	$	-	$	-	$	1,138
Collectively evaluated for impairment		1,756		928		6,562		2,132		573		52		12,003
Total	$	2,587	$	957	$	6,840	$	2,132	$	573	$	52	$	13,141
Loan ending balances:
Individually evaluated for impairment	$	2,740	$	2,928	$	9,120	$	-	$	-	$	-	$	14,788
Collectively evaluated for impairment		46,178		28,636		354,220		182,067		46,139		-		657,240
Total	$	48,918	$	31,564	$	363,340	$	182,067	$	46,139	$	-	$	672,028

Changes in Methodology:

The Company did not make any changes to its allowance for loan losses methodology in the current period.

Reserve for Unfunded Loan Commitments

In addition to the allowance for loan losses, the Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated probable losses.  Adjustments to the reserve are made through other expense and applied to the reserve which is classified as other liabilities.  At December 31, 2014, a $151thousand commitment reserve was reported on the balance sheet as an “other liability”, compared to a $103thousand commitment reserve at December 31, 2013.  There were nolosses on unfunded loan commitments during 2014 or 2013.

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Premises and Equipment

12 Months Ended

Dec. 31, 2014

Premises and Equipment [Abstract]

Premises and Equipment

6.  Premises and Equipment

The detail of premises and equipment as of December 31st for the past two years is as follows:

(In thousands)	December 31, 2014		December 31, 2013
Land and buildings	$	17,136	$	17,022
Furniture, fixtures and equipment		7,032		6,603
Leasehold improvements		1,709		1,656
Gross premises and equipment		25,877		25,281
Less: Accumulated depreciation		(10,646)		(9,609)
Net premises and equipment	$	15,231	$	15,672

Amounts charged to noninterest expense for depreciation of premises and equipment amounted to $1.0 million and $1.2 million in 2014 and 2013, respectively.

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Deposits

12 Months Ended

Dec. 31, 2014

Deposits [Abstract]

Deposits

8.  Deposits

The following table details the maturity distribution of time deposits as of December 31st for the past two years:

	Three		More than three		More than six		More than
	months		months through		months through		twelve
(In thousands)	or less		six months		twelve months		months		Total
At December 31, 2014:
$100,000 or more	$	11,444	$	8,290	$	19,570	$	59,910	$	99,214
Less than $100,000		10,988		7,837		14,512		79,782		113,119
At December 31, 2013:
$100,000 or more	$	14,588	$	7,965	$	18,582	$	55,961	$	97,096
Less than $100,000		8,058		7,754		19,522		72,924		108,258

The following table presents the expected maturities of time deposits over the next five years:

(In thousands)	2015		2016		2017		2018		2019		Thereafter		Total
Balance maturing	$	72,641	$	48,759	$	7,765	$	58,407	$	24,645	$	116	$	212,333

Time deposits with balances of $250 thousand or more totaled $20.2 million and $16.4 million at December 31, 2014 and 2013, respectively.

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Loans (Troubled Debt Restructurings Loans Modified) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 loan
Financing Receivable, Impaired [Line Items]
Financing Receivable, Number of Contracts, Duration	2
Financing Receivable, Modifications, Pre-Modification Recorded Investment, Duration	$ 2,749
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	50
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Number of Contracts, Duration	1
Financing Receivable, Modifications, Pre-Modification Recorded Investment, Duration	65
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing Receivable, Number of Contracts, Duration	1
Financing Receivable, Modifications, Pre-Modification Recorded Investment, Duration	2,684
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	$ 50

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Other Income (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Other Income [Abstract]
Atm and check card fees	$ 534	$ 487
Wire transfer fees	95	88
Safe deposit box fees	68	59
Other	147	80
Total other income	$ 844	$ 714

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Loans (Servicing Assets) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Loans [Abstract]
Balance, beginning of year	$ 437	$ 396
SBA servicing assets capitalized	483	187
Amortization of expense	(167)	(146)
Balance, end of year	$ 753	$ 437

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Employee Benefit Plans (Transactions Under the Restricted Stock Plan) (Details) (Restricted Stock [Member], USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested restricted stock: shares	95,625
Granted: shares	17,500	42,500
Vested: shares	(35,375)
Nonvested restricted stock: shares	77,750	95,625
Nonvested restricted stock: Average Grant Date Fair Value	$ 6.67
Granted: Average Grant Date Fair Value	$ 8.88	$ 7.12
Vested: Average Grant Date Fair Value	$ 6.51
Nonvested restricted stock: Average Grant Date Fair Value	$ 7.24	$ 6.67

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Loans (Troubled Debt Restructurings Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	$ 12,802	$ 19,693
Impaired Financing Receivable, Related Allowance	1,161	1,138
Percentage of loan portfolio secured by real estate	96.00%	96.00%
Transferred Loans [Member]
Financing Receivable, Impaired [Line Items]
Loans in nonaccrual status	2,700
Financing receivable, impaired, number	3
Troubled Debt Restructuring (TDR) [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	6,500	7,900
Impaired Financing Receivable, Related Allowance	223	410
Loans in nonaccrual status	3,000	467
Troubled Debt Restructuring (TDR) [Member] | Nonperforming Financing Receivable [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Related Allowance	199	47
Troubled Debt Restructuring (TDR) [Member] | Performing Financing Receivable [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Related Allowance	$ 24	$ 363

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Net Income per Share (Calculation of Basic and Diluted EPS) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Net Income per Share [Abstract]
Net income	$ 1,701	$ 1,886	$ 1,528	$ 1,293	$ 1,266	$ 1,302	$ 1,347	$ 1,200	$ 6,408	$ 5,115
Less: Preferred stock dividends and discount accretion						119	465	404		988
Income available to common shareholders	$ 1,701	$ 1,886	$ 1,528	$ 1,293	$ 1,266	$ 1,183	$ 882	$ 796	$ 6,408	$ 4,127
Weighted average common shares outstanding - Basic									7,856	7,547
Plus: Potential dilutive common stock equivalents									89	263
Weighted average common shares outstanding - Diluted									7,945	7,810
Net income per common share - Basic	$ 0.21	$ 0.24	$ 0.20	$ 0.17	$ 0.17	$ 0.15	$ 0.12	$ 0.11	$ 0.82	$ 0.55
Net income per common share - Diluted	$ 0.20	$ 0.24	$ 0.20	$ 0.17	$ 0.17	$ 0.15	$ 0.11	$ 0.10	$ 0.81	$ 0.53
Stock options and common stock excluded from the income per share computation as their effect would have been anti-dilutive									114	377

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2014

Premises and Equipment [Abstract]

Premises and Equipment

(In thousands)	December 31, 2014		December 31, 2013
Land and buildings	$	17,136	$	17,022
Furniture, fixtures and equipment		7,032		6,603
Leasehold improvements		1,709		1,656
Gross premises and equipment		25,877		25,281
Less: Accumulated depreciation		(10,646)		(9,609)
Net premises and equipment	$	15,231	$	15,672

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Significant Accounting Policies (Goodwill Narrative) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2014
Goodwill [Abstract]
Goodwill	$ 1.5

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Other Income

12 Months Ended

Dec. 31, 2014

Other Income [Abstract]

Other Income

13. Other Income

The components of other income for the past two years are as follows:

	For the years ended December 31,
(In thousands)	2014		2013
ATM and check card fees	$	534	$	487
Wire transfer fees		95		88
Safe deposit box fees		68		59
Other		147		80
Total other income	$	844	$	714

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2014

Employee Benefit Plans [Abstract]

Employee Benefit Plans

18.  Employee Benefit Plans

The Bank has a 401(k) savings plan covering substantially all employees.  Under the Plan, an employee can contribute up to 80 percent of their salary on a tax deferred basis.  The Bank may also make discretionary contributions to the Plan.  The Bank contributed $258 thousand and $240 thousand to the Plan in 2014 and 2013, respectively.

The Company has a deferred fee plan for Directors and executive management.  Directors of the Company have the option to elect to defer up to 100 percent of their respective retainer and Board of Director fees, and each member of executive management has the option to elect to defer 100 percent of their year-end cash bonuses.  Director and executive deferred fees totaled $79 thousand in 2014 and $44 thousand in 2013, and the interest paid on deferred balances totaled $23 thousand in 2014 and $19 thousand in 2013. No fees were distributed in 2014. In 2013, $22 thousand in deferred fees were distributed. 

Certain members of management are also enrolled in a split-dollar life insurance plan with a post retirement death benefit of $250 thousand.  Total expenses related to this plan were $5 thousand in 2014 and $4 thousand in 2013.

Stock Transactions

Stock Option Plans

The Company has incentive and nonqualified option plans, which allow for the grant of options to officers, employees and members of the Board of Directors.  Transactions under the Company’s stock option plans for 2014 and 2013 are summarized in the following table:

	Shares		Weighted average exercise price		Weighted average remaining contractual life in years		Aggregate intrinsic value
Outstanding at December 31, 2012		516,332	$	7.06		5.4	$	327,725
Options granted		37,500		6.58
Options exercised		(11,667)		6.62
Options forfeited		(8,333)		6.56
Options expired		(84,857)		8.84
Outstanding at December 31, 2013		448,975	$	6.70		5.6	$	739,951
Options granted		46,000		8.16
Options exercised		(36,950)		4.33
Options forfeited		(9,119)		9.73
Options expired		(29,985)		10.16
Outstanding at December 31, 2014		418,921	$	6.76		5.5	$	1,257,968
Exercisable at December 31, 2014		340,423	$	6.60		4.7	$	1,098,108

Grants under the Company’s incentive and nonqualified option plans generally vest over 3 years and must be exercised within 10 years of the date of grant.  The exercise price of each option is the market price on the date of grant.  As of December 31, 2014, 1,720,529 shares have been reserved for issuance upon the exercise of options, 418,921 option grants are outstanding, and 1,252,416 option grants have been exercised, forfeited or expired, leaving 49,192 shares available for grant.

The fair values of the options granted during 2014 and 2013 were estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	For the years ended December 31,
	2014			2013
Number of options granted		46,000			37,500
Weighted average exercise price	$	8.16		$	6.58
Weighted average fair value of options	$	3.21		$	3.19
Expected life in years (1)		5.54			5.75
Expected volatility (2)		45.32	%		51.40	%
Risk-free interest rate (3)		1.57	%		1.24	%
Dividend yield (4)		1.01	%		0.17	%

(1) The expected life of the options was estimated based on historical employee behavior and represents the period of time that options granted are expected to be outstanding.

(2) The expected volatility of the Company’s stock price was based on the historical volatility over the period commensurate with the expected life of the options.

(3) The risk-free interest rate is the U.S Treasury rate commensurate with the expected life of the options on the date of grant.

(4) The expected dividend yield is the projected annual yield based on the grant date stock price.

Upon exercise, the Company issues shares from its authorized but unissued common stock to satisfy the options.  The following table presents information about options exercised during 2014 and 2013:

	For the years ended December 31,
	2014		2013
Number of options exercised		36,950		11,667
Total intrinsic value of options exercised	$	157,406	$	15,367
Cash received from options exercised		70,405		-
Tax deduction realized from options exercised		62,868		6,138

The following table summarizes information about stock options outstanding and exercisable at December 31, 2014:

		Options outstanding						Options exercisable
Range of exercise prices		Options outstanding		Weighted average remaining contractual life (in years)		Weighted average exercise price		Options exercisable		Weighted average exercise price
$	0.00 - 4.00		89,000		4.2	$	3.85		89,000	$	3.85
	4.01 - 8.00		282,475		6.4		6.73		208,977		6.55
	8.01 - 12.00		5,551		9.2		10.39		551		11.25
	12.01 - 16.00		41,895		2.1		12.62		41,895		12.62
	Total		418,921		5.5	$	6.76		340,423	$	6.60

FASB ASC Topic 718, “Compensation - Stock Compensation,” requires an entity to recognize the fair value of equity awards as compensation expense over the period during which an employee is required to provide service in exchange for such an award (vesting period).  Compensation expense related to stock options and the related income tax benefit for the years ended December 31, 2014 and 2013 are detailed in the following table:

	For the years ended December 31,
	2014		2013
Compensation expense	$	152,349	$	140,873
Income tax benefit		60,848		56,265

As of December 31, 2014, unrecognized compensation costs related to nonvested share-based compensation arrangements granted under the Company’s stock option plans totaled approximately $189 thousand.  That cost is expected to be recognized over a weighted average period of 2.0 years.

Restricted Stock Awards

Restricted stock is issued under the stock bonus program to reward employees and directors and to retain them by distributing stock over a period of time.  The following table summarizes nonvested restricted stock activity for the year ended December 31, 2014:

	Shares		Average grant date fair value
Nonvested restricted stock at December 31, 2013		95,625	$	6.67
Granted		17,500		8.88
Vested		(35,375)		6.51
Nonvested restricted stock at December 31, 2014		77,750	$	7.24

Restricted stock awards granted to date vest over a period of 4 years and are recognized as compensation to the recipient over the vesting period.  Unless the recipient makes an election to recognize all compensation on the grant date, the awards are recorded at fair market value at the time of grant and amortized into salary expense on a straight line basis over the vesting period.  As of December 31, 2014, 471,551 shares of restricted stock were reserved for issuance, of which 214,500 shares are available for grant.

Restricted stock awards granted during the years ended December 31, 2014 and 2013 were as follows:

	For the years ended December 31,
	2014		2013
Number of shares granted		17,500		42,500
Average grant date fair value	$	8.88	$	7.12

Compensation expense related to the restricted stock for the years ended December 31, 2014 and 2013 is detailed in the following table:

	For the years ended December 31,
	2014		2013
Compensation expense	$	245,428	$	198,682
Income tax benefit		98,024		79,354

As of December 31, 2014, there was approximately $491 thousand of unrecognized compensation cost related to nonvested restricted stock awards granted under the Company’s stock incentive plans.  That cost is expected to be recognized over a weighted average period of 2.6years. 

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Regulatory Capital (Schedule of Future Basel III Capital Requirements) (Details)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio	4.00%	4.00%
Tier 1 capital ratio	4.00%	4.00%
Tier 2	4.00%
Total capital ratio	8.00%	8.00%
Scenario Forecast, Final [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio	4.00%
Common equity tier 1 capital (CET1) ratio	4.50%
Additional tier 1	1.50%
Tier 1 capital ratio	6.00%
Tier 2	2.00%
Total capital ratio	8.00%

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Summary of Significant Accounting Policies (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014 store
Number of Branches	15
Number of wholly-owned subsidiaries	9
Number of wholly-owned statutory trust subsidiaries	2
Percentage of guaranteed by SBA	90.00%
Minimum [Member]
Value for real estate appraisal for OREO or substance foreclosure	100,000
Discount rate used to determine fair value	6.00%
Maximum [Member]
Discount rate used to determine fair value	10.00%

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Fair Value (Fair Value On A Recurring Basis) (Narrative) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Percentage Of Portfolio In Residential Mortgage Backed Securities	57.00%
Residential Mortgage Backed Securities Guaranteed By Government National Mortgage Association Or Federal National Mortgage Association Or Federal Home Loan Mortgage Corporation	$ 33,300,000
Available-for-sale Securities	60,073,000	81,133,000
Parent Company Only [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	197,000	167,000
Residential Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 34,383,000	$ 44,389,000

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Other Expenses (Tables)

12 Months Ended

Dec. 31, 2014

Other Expenses [Abstract]

Schedule of Other Nonoperating Expense, by Component [Table Text Block]

	For the years ended December 31,
(In thousands)	2014		2013
Travel, entertainment, training and recruiting	$	584	$	608
Director fees		359		367
Insurance		335		335
Stationery and supplies		250		271
Retail losses		56		4
Other		217		282
Total other expenses	$	1,801	$	1,867

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Fair Value (Schedule Of Fair Value Changes In Level 3) (Details) (Commercial Mortgage Backed Securities [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Commercial Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning Balance	$ 888	$ 4,463
Payoffs	(714)	(815)
Principal paydowns	(173)	(2,722)
Total net gains included in: Other comprehensive income	(1)	(38)
Ending Balance		$ 888

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 6,408	$ 5,115
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities arising during period	909	(1,550)
Less: Reclassification adjustment for gains on securities included in net income	290	259
Total other comprehensive income (loss)	619	(1,809)
Total comprehensive income	$ 7,027	$ 3,306

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Income Taxes (Schedule of Components of Income Tax Expense (Benefit)) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Income Taxes [Abstract]
Federal - current provision	$ 2,380	$ 1,579
Federal - deferred provision (benefit)	381	491
Total Federal provision	2,761	2,070
State - current provision)	267	599
State - deferred provision (benefit)	117	(102)
Total state provision	384	497
Provision for income taxes	$ 3,145	$ 2,567

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Restrictions on Cash

12 Months Ended

Dec. 31, 2014

Restrictions on Cash [Abstract]

Restrictions on Cash

2.  Restrictions on Cash

Federal law requires depository institutions to hold reserves in the form of vault cash or, if vault cash is insufficient, in the form of a deposit maintained with a Federal Reserve Bank (“FRB”).  The dollar amount of a depository institution's reserve requirement is determined by applying the reserve ratios specified in the FRB’s Regulation D to an institution's reservable liabilities.  As of December 31, 2014 and 2013 the Company had sufficient vault cash to meet its reserve requirements and no additional reserves were required.

In addition, the Company’s contract with its current electronic funds transfer (“EFT”) provider requires a predetermined balance be maintained in a settlement account controlled by the provider equal to the Company’s average daily net settlement position multiplied by four days.  The required balance was $179 thousand as of December 31, 2014 and 2013.  This balance can be adjusted periodically to reflect actual transaction volume and seasonal factors.

The Governmental Unit Deposit Protection Act ("GUDPA") is a supplemental insurance program set forth by the New Jersey Legislature to protect the deposits of municipalities and local government agencies, administered by the Commissioner of the New Jersey Department of Banking and Insurance.  At December 31, 2014, the Company had $6.0 million in cash as eligible collateral pledged to the State of New Jersey Department of Banking and Insurance to secure its municipal deposits, compared to $18.0 million at December 31, 2013.

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Loans (Classification of Loans By Class) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	$ 756,646	$ 672,028
SBA loans held for sale	5,179	6,673
Total loans	761,825	678,701
Small Business Administration Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	40,401	48,918
Small Business Administration, 504 Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	34,322	31,564
Commercial Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	40,607	37,611
Commercial Real Estate Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	339,693	317,471
Commercial Real Estate Construction Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	21,649	8,258
Residential Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	220,878	182,067
Consumer Home Equity Line Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	41,451	43,704
Consumer Other Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans held for investment	$ 17,645	$ 2,435

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Commitments and Contingencies (Operating Leases of Lessee Disclosure) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014
Commitments and Contingencies [Abstract]
Operating Lease Rental Payments, Current	$ 662
Operating Leases, Future Minimum Payments, Due in Two Years	638
Operating Leases, Future Minimum Payments, Due in Three Years	602
Operating Leases, Future Minimum Payments, Due in Four Years	438
Operating Leases, Future Minimum Payments Due, Total	$ 2,340

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Fair Value (Fair Value On A Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 60,073	$ 81,133
US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	4,618	6,418
US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	11,132	16,598
Residential Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	34,383	44,389
Commercial Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		888
Corporate and Other Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	9,940	12,840
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	60,073	80,245
Fair Value, Inputs, Level 2 [Member] | US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	4,618	6,418
Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	11,132	16,598
Fair Value, Inputs, Level 2 [Member] | Residential Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	34,383	44,389
Fair Value, Inputs, Level 2 [Member] | Corporate and Other Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	9,940	12,840
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		888
Fair Value, Inputs, Level 3 [Member] | Commercial Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		$ 888

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Allowance for Loan Losses and Reserve for Unfunded Loan Commitments (Activity In The Allowance For Loan Losses By Portfolio Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				$ 13,141				$ 14,758	$ 13,141	$ 14,758
Charge-offs									(3,515)	(4,624)
Recoveries									375	657
Net charge-offs									(3,140)	(3,967)
Provision for loan losses charged to expense	850	550	550	600	800	600	300	650	2,550	2,350
Ending Balance	12,551				13,141				12,551	13,141
Small Business Administration Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				2,587				3,378	2,587	3,378
Charge-offs									(1,053)	(1,076)
Recoveries									140	250
Net charge-offs									(913)	(826)
Provision for loan losses charged to expense									209	35
Ending Balance	1,883				2,587				1,883	2,587
Small Business Administration, 504 Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				957				1,312	957	1,312
Charge-offs									(92)	(1,193)
Recoveries										182
Net charge-offs									(92)	(1,011)
Provision for loan losses charged to expense									472	656
Ending Balance	1,337				957				1,337	957
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				6,840				7,091	6,840	7,091
Charge-offs									(1,037)	(1,392)
Recoveries									166	204
Net charge-offs									(871)	(1,188)
Provision for loan losses charged to expense									301	937
Ending Balance	6,270				6,840				6,270	6,840
Residential Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				2,132				1,769	2,132	1,769
Charge-offs									(740)	(375)
Recoveries									60	17
Net charge-offs									(680)	(358)
Provision for loan losses charged to expense									837	721
Ending Balance	2,289				2,132				2,289	2,132
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				573				524	573	524
Charge-offs									(593)	(588)
Recoveries									9	4
Net charge-offs									(584)	(584)
Provision for loan losses charged to expense									678	633
Ending Balance	667				573				667	573
Unallocated Financing Receivables [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				52				684	52	684
Provision for loan losses charged to expense									53	(632)
Ending Balance	$ 105				$ 52				$ 105	$ 52

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Fair Value

12 Months Ended

Dec. 31, 2014

Fair Value [Abstract]

Fair Value

19.  Fair Value

Fair Value Measurement

The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which requires additional disclosures about the Company’s assets and liabilities that are measured at fair value.  Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on 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 techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  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 as follows:

Level 1 Inputs

· Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

· Generally, this includes debt and equity securities and derivative contracts that are traded in an active exchange market (i.e. New York Stock Exchange), as well as certain U.S. Treasury, U.S. Government and sponsored entity agency mortgage-backed securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2 Inputs

· Quoted prices for similar assets or liabilities in active markets.

· Quoted prices for identical or similar assets or liabilities in inactive markets.

· Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (i.e., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”

· Generally, this includes U.S. Government and sponsored entity mortgage-backed securities, corporate debt securities and derivative contracts.

Level 3 Inputs

· Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.

· These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Fair Value on a Recurring Basis

The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis:

Securities Available for Sale

As of December 31, 2014, the fair value of the Company's AFS securities portfolio was $60.1 million.  Approximately 57 percent of the portfolio was made up of residential mortgage-backed securities, which had a fair value of $34.4 million at December 31, 2014.  Approximately $33.3 million of the residential mortgage-backed securities are guaranteed by the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC").  The underlying loans for these securities are residential mortgages that are geographically dispersed throughout the United States. 

All of the Company’s AFS securitieswere classified as Level 2 assets at December 31, 2014.  The valuation of AFS securities using Level 2 inputs was primarily determined using the market approach, which uses quoted prices for similar assets or liabilities in active markets and all other relevant information.  It includes model pricing, defined as valuing securities based upon their relationship with other benchmark securities. 

At December 31, 2013, the Company’s AFS securities included commercial mortgage-backed securities which were classified as Level 3 assets.  For commercial mortgage-backedsecurities, the inputs used by either dealer market participants or an independent pricing service, may be derived from unobservable market information (Level 3 inputs).  In these instances, management evaluates the appropriateness and quality of the assumptions and the resulting prices.  In addition, management reviews the volume and level of activity for all AFS securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume.  For securities meeting these criteria, the quoted prices received from either market participants or an independent pricing service may be adjusted, as necessary, to estimate fair value and this results in fair values based on Level 3 inputs.  In determining fair value, the Company utilizes unobservable inputs which reflect its own assumptions about the inputs that market participants would use in pricing each security.  In developing its assertion of market participant assumptions, the Company utilizes the best information that is both reasonable and available without undue cost and effort.

In calculating the fair value for AFS securities under Level 3, management prepared present value cash flow models for certain private label commercial mortgage-backed securities.Private label commercial mortgage-backed securities owned by the Bank are A1 and A2 tranche sequential structures and are currently paying principal.  The cash flows for the commercial mortgage-backed securities incorporated the expected cash flow of each security adjusted for default rates, loss severities and prepayments of the individual loans collateralizing the security.  The following table presents quantitative information about Level 3 inputs used to measure the fair value of commercial mortgage-backed securities at December 31, 2013:  

Valuation Technique	Unobservable Input	Range		Weighted Average
Discounted Cash Flow	Prepayment rate	8 through 15	%	10.0	%
	Default rate	10 through 15	%	12.5	%
	Loss severity	10 through 25	%	18.0	%

Significant increases or decreases in any of the unobservable inputs in the table above in isolation would result in a significantly lower or higher fair value measurement of the securities.  Generally, a change in the assumption used for the default rate is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

For the Level 3 available for sale private label commercial mortgage-backed securities, cash flow assumptions incorporate independent third party market participant data based on vintage year for each security.  The discount rate utilized in determining the present value of cash flows for the commercial mortgage-backed securities was arrived at by combining the yield on orderly transactions for similar maturity government sponsored mortgage-backed securities with (i) the historical average risk premium of similar structured private label securities, (ii) a risk premium reflecting current market conditions, including liquidity risk and (iii) if applicable, a forecasted loss premium derived from the expected cash flows of each security.  The estimated cash flows for each private label commercial mortgage-backed security are then discounted at the aforementioned effective rate to determine the fair value.  The quoted prices received from either market participants or independent pricing services are weighted with the internal price estimate to determine the fair value of each instrument.

There were no changes in the inputs or methodologies used to determine fair value during the year ended December 31, 2014, as compared to the year ended December 31, 2013.  

The tables below present the balances of assets measured at fair value on a recurring basis as of December 31stfor the past two years:

	December 31, 2014
(In thousands)	Level 1		Level 2		Level 3		Total
Securities available for sale:
U.S. Government sponsored entities	$	-	$	4,618	$	-	$	4,618
State and political subdivisions		-		11,132		-		11,132
Residential mortgage-backed securities		-		34,383		-		34,383
Corporate and other securities		-		9,940		-		9,940
Total securities available for sale	$	-	$	60,073	$	-	$	60,073
	December 31, 2013
(In thousands)	Level 1		Level 2		Level 3		Total
Securities available for sale:
U.S. Government sponsored entities	$	-	$	6,418	$	-	$	6,418
State and political subdivisions		-		16,598		-		16,598
Residential mortgage-backed securities		-		44,389		-		44,389
Commercial mortgage-backed securities		-		-		888		888
Corporate and other securities		-		12,840		-		12,840
Total securities available for sale	$	-	$	80,245	$	888	$	81,133

The following table summarizes changes in Level 3 assets during 2014 and 2013, consisting of commercial mortgage-backed available for sale securities, measured at fair value on a recurring basis. 

	For the years ended December 31,
(In thousands)	2014		2013
Commercial mortgage-backed securities:
Balance, beginning of period	$	888	$	4,463
Payoffs		(714)		(815)
Principal paydowns		(173)		(2,722)
Total net losses included in:
Other comprehensive income		(1)		(38)
Balance, end of period	$	-	$	888

There were no gains or losses (realized or unrealized) including in earnings for assets and liabilities held at December 31, 2014 or 2013.

Fair Value on a Nonrecurring Basis

Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  The following is a description of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis:

Appraisal Policy

All appraisals must be performed in accordance with the Uniform Standards of Professional Appraisal Practice (“USPAP”).  Appraisals are certified to the Company and performed by appraisers on the Company’s approved list of appraisers.  Evaluations are completed by a person independent of Company management.  The content of the appraisal depends on the complexity of the property.  Appraisals are completed on a “retail value” and an “as is value”.

The Company requires current real estate appraisals on all loans that become OREO or in-substance foreclosure, loans that are classified substandard, doubtful or loss, or loans that are over $100,000 and nonperforming.  Prior to each balance sheet date, the Company values impaired collateral-dependent loans and OREO based upon a third party appraisal, broker's price opinion, drive by appraisal, automated valuation model, updated market evaluation, or a combination of these methods.  The amount is discounted for the decline in market real estate values (for original appraisals), for any known damage or repair costs, and for selling and closing costs.  The amount of the discount ranges from 10 to 15 percent and is dependent upon the method used to determine the original value.  The original appraisal is generally used when a loan is first determined to be impaired.  When applying the discount, the Company takes into consideration when the appraisal was performed, the collateral’s location, the type of collateral, any known damage to the property and the type of business.  Subsequent to entering impaired status and the Company determining that there is a collateral shortfall, the Company will generally, depending on the type of collateral, order a third party appraisal, broker's price opinion, automated valuation model or updated market evaluation.  Subsequent to receiving the third party results, the Company will discount the value 8 to 10 percent for selling and closing costs.

OREO

The fair value was determined using appraisals, which may be discounted based on management’s review and changes in market conditions (Level 3 Inputs).  

Impaired Collateral-Dependent Loans

The fair value of impaired collateral-dependent loans is derived in accordance with FASB ASC Topic 310, “Receivables.”  Fair value is determined based on the loan’s observable market price or the fair value of the collateral.  Partially charged-off loans are measured for impairment based upon an appraisal for collateral-dependent loans.  When an updated appraisal is received for a nonperforming loan, the value on the appraisal is discounted in the manner discussed above.  If there is a deficiency in the value after the Company applies these discounts, management applies a specific reserve and the loan remains in nonaccrual status.  The receipt of an updated appraisal would not qualify as a reason to put a loan back into accruing status.  The Company removes loans from nonaccrual status when the borrower makes six months of contractual payments and demonstrates the ability to service the debt going forward.  Charge-offs are determined based upon the loss that management believes the Company will incur after evaluating collateral for impairment based upon the valuation methods described above and the ability of the borrower to pay any deficiency.

The valuation allowance for impaired loans is included in the allowance for loan losses in the consolidated balance sheets.  At December 31, 2014, the valuation allowance for impaired loans was $1.2 million, a decrease of $23 thousand from  $1.1 million at December 31, 2013. 

The following tables present the assets and liabilities carried on the balance sheet by caption and by level within the hierarchy (as described above) as of December 31, 2014 and 2013 and the fair value gains (losses) recognized during the years ended December 31, 2014 and 2013:

	Fair value at December 31, 2014								Losses from fair value changes for the year ended
(In thousands)	Level 1		Level 2		Level 3		Total		December 31, 2014
Financial assets:
OREO	$	-	$	-	$	1,162	$	1,162	$	(965)
Impaired collateral-dependent loans		-		-		4,897		4,897		(23)
	Fair value at December 31, 2013								Gains (losses) from fair value changes for the year ended
(In thousands)	Level 1		Level 2		Level 3		Total		December 31, 2013
Financial assets:
OREO	$	-	$	-	$	633	$	633	$	(769)
Impaired collateral-dependent loans		-		-		4,540		4,540		863

Fair Value of Financial Instruments

FASB ASC Topic 825, “Financial Instruments,” requires the disclosure of the estimated fair value of certain financial instruments, including those financial instruments for which the Company did not elect the fair value option.  These estimated fair values as of December 31, 2014 and December 31, 2013 have been determined using available market information and appropriate valuation methodologies.  Considerable judgment is required to interpret market data to develop estimates of fair value.  The estimates presented are not necessarily indicative of amounts the Company could realize in a current market exchange.  The use of alternative market assumptions and estimation methodologies could have had a material effect on these estimates of fair value.  The methodology for estimating the fair value of financial assets and liabilities that are measured on a recurring or nonrecurring basis are discussed above.  

The following methods and assumptions were used to estimate the fair value of other financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents

For these short-term instruments, the carrying value is a reasonable estimate of fair value.

Securities Held to Maturity

The fair value of held to maturity ("HTM") securities is based upon quoted market prices for similar or identical assets or other observable inputs (Level 2) or externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).

SBA Loans Held for Sale

The fair value of SBA loans held for sale is estimated by using a market approach that includes significant other observable inputs.

Loans

The fair value of loans is estimated by discounting the future cash flows using current market rates that reflect the interest rate risk inherent in the loan, except for previously discussed impaired loans.

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is carried at cost.  Carrying value approximates fair value based on the redemption provisions of the issues.

Servicing Assets

Servicing assets do not trade in an active, open market with readily observable prices.  The Company estimates the fair value of servicing assets using discounted cash flow models incorporating numerous assumptions from the perspective of a market participant including market discount rates and prepayment speeds.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Deposit Liabilities

The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date (i.e. carrying value).  The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using current market rates.

Borrowed Funds and Subordinated Debentures

The fair value of borrowings is estimated by discounting the projected future cash flows using current market rates.

Standby Letters of Credit

At December 31, 2014, the Bank had standby letters of credit outstanding of $1.5 million, as compared to $1.4 million at December 31, 2013.  The fair value of these commitments is nominal.

The table below presents the carrying amount and estimated fair values of the Company’s financial instruments not previously presented as of December 31st for the past two years:

			December 31, 2014				December 31, 2013
(In thousands)	Fair value level		Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Financial assets:
Cash and cash equivalents		Level 1	$	129,821	$	129,821	$	99,404	$	99,404
Securities held to maturity (1)		Level 2		20,009		20,281		26,381		25,549
SBA loans held for sale		Level 2		5,179		5,655		6,673		7,267
Loans, net of allowance for loan losses (2)		Level 2		744,095		748,093		658,887		645,582
Federal Home Loan Bank stock		Level 2		6,032		6,032		5,392		5,392
Servicing assets		Level 3		753		753		437		437
Accrued interest receivable		Level 2		3,518		3,518		3,272		3,272
Financial liabilities:
Deposits		Level 2		794,341		794,436		738,698		738,337
Borrowed funds and subordinated debentures		Level 2		140,465		145,333		122,465		129,732
Accrued interest payable		Level 2		474		474		454		454

(1) Includes held to maturity commercial mortgage-backed securities that are considered Level 3.  These securities had book values of $4.0 million and $6.8 million at December 31, 2014 and 2013, respectively, and market values of $4.0 million and $6.4 million at December 31, 2014 and 2013, respectively.

(2) Includes impaired loans that are considered Level 3 and reported separately in the tables under the “Fair Value on a Nonrecurring Basis” heading.  Impaired loans, included in the fair value non-recurring table, net of specific reserves totaled $4.9 million and $4.5 million at December 31, 2014 and 2013, respectively.

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Other Assets (Other Assets Table) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Other Assets [Abstract]
Prepaid expenses	$ 399	$ 481
SBA servicing assets	753	437
Net receivable due from SBA	318	429
Other assets	1,821	1,307
Total other assets	$ 3,291	$ 2,654

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies [Abstract]

Operating Leases of Lessee Disclosure

(In thousands)	2015		2016		2017		2018		Thereafter		Total
Operating lease rental payments	$	662	$	638	$	602	$	438	$	-	$	2,340

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Shareholders' Equity

12 Months Ended

Dec. 31, 2014

Shareholders’ Equity [Abstract]

Shareholders’ Equity

12.  Shareholders’ Equity

Shareholders’ equity increased $13.0 million to $70.1 million at December 31, 2014 compared to $57.2 million at December 31, 2013, due primarily to $6.1 million in additional capital as a result of the completion of the common stock rights offering and net income of $6.4 million.  Other items impacting shareholders’ equity included $757 thousand in dividends accrued on common stock, $619 thousand in unrealized gains net of tax on available for sale securities and $537 thousand from the issuance of common stock under employee benefit plans.  The issuance of common stock under employee benefit plans includes nonqualified stock options and restricted stock expense related entries, employee option exercises and the tax benefit of options exercised.

Preferred Stock

On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of 2008 (“EESA”), which provided the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to the U.S. markets.  One of the programs resulting from the EESA was the Treasury’s Capital Purchase Program (“CPP”) which provided direct equity investment of perpetual preferred stock by the U.S. Treasury in qualified financial institutions.  This program was voluntary and required an institution to comply with several restrictions and provisions, including limits on executive compensation, stock redemptions, and declaration of dividends.  The perpetual preferred stock had a dividend rate of 5 percent per year until the fifth anniversary of the Treasury investment and a dividend rate of 9 percent thereafter.  The Company received an investment in perpetual preferred stock of $20.6 million on December 5, 2008.  These proceeds were allocated between the preferred stock and warrants based on relative fair value in accordance with FASB ASC Topic 470, “Debt.”  The allocation of proceeds resulted in a discount on the preferred stock to be accreted over five years.  The Company issued a warrant to purchase 764,778 shares of common stock to the U.S. Treasury and $2.6 million of the proceeds were allocated to the warrant.  The warrant was accounted for as an equity security with a contractual life of ten years and an exercise price of $4.05.

On May 9, 2013, the Company announced that it received approval of its application from the U.S. Department of Treasury to redeem half of the 20,649 shares of preferred stock issued in connection with the Company’s participation in the Treasury’s CPP.  On May 15, 2013, the Company paid $10.3 million to the Treasury to repurchase 10,324 shares of the preferred stock, including accrued and unpaid dividends for the shares.  On July 1, 2013, the Company announced that it received approval to redeem the remaining 10,325 shares of preferred stock.  On July 3, 2013, the Company paid $10.4 million to the Treasury to repurchase the remaining shares of the preferred stock, including accrued and unpaid dividends for the shares.  On August 28, 2013, the Company completed the $2.7 million repurchase of the warrant to purchase 764,778 shares of the Company’s common stock issued to the U.S. Department of the Treasury as part of the Company’s participation in the Treasury’s CPP.

Repurchase Plan

On October 21, 2002, the Company authorized the repurchase of up to 10 percent of its outstanding common stock.  The amount and timing of purchases is dependent upon a number of factors, including the price and availability of the Company’s shares, general market conditions and competing alternate uses of funds.  As of December 31, 2014, the Company had repurchased a total of 556 thousand shares, of which 131 thousand shares have been retired, leaving 153 thousand shares remaining to be repurchased under the plan.  There were no shares repurchased during 2014 or 2013.  The Company currently has no plans on repurchasing its common stock.

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Employee Benefit Plans (Allocation of Share-based Compensation Costs) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 245,428	$ 198,682
Income tax benefit	98,024	79,354
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	152,349	140,873
Income tax benefit	$ 60,848	$ 56,265