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President's Message


Message from James A. Hughes
Unity Bank President

March 2014, 2013 year end message

This was a pivotal year for Unity. Our fourth year of continued earnings growth, we continue to build on our brand promise of growing the communities and small businesses we serve. With our marked increase in earnings and our continued improvement in asset quality, we repaid our investment in the CPP Program (TARP) underlying the positive metrics of Unity.

This was a year filled with many accomplishments. It was a year of record loan and deposit growth. Our sales strategy of going local with a focus on exceptional service is now paying dividends. We have grown noninterest bearing deposits by almost 19% and they now represent over 18% of our total deposits. We have continued to reduce our cost of funds and we are confident our net interest income will expand in 2014.

While the Federal Open Market Committee has predicted that short term interest rates will remain at historically low levels for the foreseeable future, the reality is that market conditions have improved and longer term rates have risen substantially. The increase in rates will likely translate into a slowdown in residential loan demand and migration from a refinance market to a purchase market. In response, we have expanded our network of referring realtors and are confident that we will continue to increase market share. Loan demand continues to be strong and we suspect we are approaching an environment where banks will be aggressively competing for deposits.

In 2013, the company reported earnings of $4.1 million to common stockholders, a 56% increase over the prior year. Although our earnings continue to be reduced by elevated provisions for credit losses and costs associated with the collection of nonperforming loans, we are forecasting that these expenses will continue to diminish as the number of problem loans continues to decline. In addition, we expect top line revenue growth due to the increase in earning assets and a stabilized net interest margin.

We have continued to grow our residential mortgage division, which has enabled us to build our institution as a full service community bank. We are committed to expanding this business line as it enables us to cross sell other Unity products. Residential loan production for 2013 increased 15% as we closed over $150 million of mortgages. With the increase in interest rates, we anticipate a slight decline in volume for 2014, however, we are confident that the mortgage division will continue to be accretive to our bottom line.

We have grown our commercial loan portfolio in excess of 20% in 2013. All the loans are to local businesses predominately secured by real estate. Our pipeline remains strong as we are committed to providing access to credit to small businesses that are underserved by the larger financial institutions. We have continued to improve the quality of the loan portfolio as we shrink the portfolio of SBA loans outside of Unity's market. Our focus is on growing the commercial loan portfolio in our footprint.

This year we purchased three of our branches: Edison, Highland Park and South Plainfield. This acquisition gives us more control over our facilities and immediately reduced our occupancy expenses. We now own 11 of our 15 locations. We also opened up a residential loan production office in Bergen County, which has also proven to generate commercial loan volume. While we are not actively looking to expand our branch network, if the right opportunity becomes available, we will evaluate future opportunities.

The Unity Commandments define our Corporate Culture. We recognize that to be successful in this highly competitive business, it is critical that our employees are aligned to our Commandments and that we continually reinforce our principles. We believe these commandments speak for themselves. Hire the best employees, train them well, and keep them highly motivated. With great employees providing the highest level of service for our customers, increased profits of the bank are sure to follow.

We have much work ahead of us as we transition from a capital preservation organization to one that will maximize long term returns for our shareholders. We look forward to reporting on our continued successes in the future.

Our vision and strategy for Unity has not changed, we are committed to exceptional customer service, personal attention, local decision-making and concern for the financial well-being of our customers and shareholders. We and the employees of Unity are committed to achieving our financial goals and look forward to the challenges ahead.

The Board of Directors, management and staff thank you and we continue to appreciate your loyalty and support.

James A. Hughes

This news release contains certain forward-looking statements, either expressed or implied, which anticipates future financial performance. These statements involve certain risks, uncertainties, estimates and assumptions made by management, which are subject to factors beyond the company's control and could impede its ability to achieve these goals. These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and results of regulatory exams, among other factors.

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