President's Message

Message from James A. Hughes
Unity Bank President

Despite today's economic challenges, 2009 was a year with many successes. This year we have continued to build on our sales and marketing efforts and we had record growth in both core deposits and customer relationships. While the larger banks are continuing to alienate their small business customers, there is a tremendous opportunity for local community banks to increase market share. We are committed to taking advantage of these opportunities by increasing our sales efforts and building on our existing relationships.

Needless to say, 2009 was a year of significant turmoil for this country. As we are all painfully aware, this has been the worst recession ever experienced by most Americans. After years of excessive real estate appreciation and rampant consumer spending, the pendulum has finally swung back, leaving unemployment at record highs, real estate values in significant decline, and National, State and Local Municipal deficits at all time highs. Despite the severity and duration of the recession, many experts now believe that the economy is starting to recover. However, all are in agreement that this recovery will be slow and protracted and that it may take years for real growth. One thing is for certain, things will not return to the way they were. At Unity, we are ready for the new tomorrow.

There is an old expression in the financial services industry, "as the economy goes, so does the banking industry." This year, Unity's operating results were significantly impacted by the recession. For the year ended December 31, 2009, the Company reported a net loss to common shareholders of $2.6 million. Earnings for the year were materially impacted by a $2.6 million impairment charge on two pooled trust preferred securities and a $408 thousand one-time FDIC special assessment. Excluding these items, we would have reported a net loss to common shareholders of approximately $584 thousand.

We are extremely confident that there will be no future impairments in our investment portfolio, however the level of loan loss provisions and FDIC premiums will continue to be elevated until there is substantial improvement in the economy. Despite the short term uncertainty, we remain extremely positive and anticipate a return to profitability in 2010. We refocused our SBA program in the fourth quarter of 2008 from being a national lender to one serving the small businesses in our footprint. Nonetheless, the portfolio of SBA loans is our primary area of stress. Virtually all of our SBA loans are to small retail businesses that have been impacted by the economy. While most of these credits have real estate collateral and the substantial guarantee of the SBA, default rates continue to be high and the collection efforts are significant. We continue to be aggressive in working with our borrowers to mitigate our losses and have doubled our resources in the collection of past due loans. While the process is slow and deliberate, we believe that working through these credits is the best way to maximize recoveries, rather than taking steep discounts on the sale of non-performing notes.

Last year we significantly upgraded our operating system and all transactions are now processed electronically. In addition, item and check processing is now done in-house at a tremendous savings for our shareholders. This year, we will be implementing electronic statements and mobile banking, as well as continuing to upgrade our remote deposit technology. While we continue to grow the number of relationships and products, our transaction expenses have decreased. We are committed to our ongoing investment in technology for our customers while maintaining expense control for our shareholders.

You may have noticed that many of the larger banks are now closing or consolidating many of their retail branch locations. While it is extremely expensive to open new branch locations, we will be increasing our efforts to look for opportunities in our markets. Real estate values are becoming much more affordable and we are hopeful that we can once again start to expand our franchise. We are planning to break ground on our 17th branch in Washington, NJ this spring.

We recognize that to be successful in this highly competitive business, it is critical that our employees are aligned with our principles. Hiring the best employees, training them well, and keeping them highly motivated remains a top priority. With great employees providing the highest level of service for our customers, we will continue to grab market share from the big banks. Banking is a commodity business, the only way to grow is to provide excellent service on a consistent basis.

Our vision and strategy for Unity have 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 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.

Very truly yours,

James A. Hughes
President/CEO

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.