What changed in this filing

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Item 1. Business

2025-03-07 compared with 2024-03-07 · 25 added, 50 removed, 200 unchanged (27% of the section changed)

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Factors that might cause such a difference include, but are not limited to:

(1) the potential impact of pandemics, such as COVID-19, and other health emergencies and the government’s response thereto on our operations as well as those of our clients and on the economy generally and in our market area specifically;

(1) the potential impact of pandemics and other health emergencies and the government’s response thereto on our operations as well as those of our clients and on the economy generally and in our market area specifically;

(2) competitive pressures among depository institutions may increase significantly;

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(8) changes and trends in the securities markets may adversely impact Unity Bancorp, Inc.;

(9) a delayed or incomplete resolution of regulatory issues could adversely impact our planning;

(9) a delayed or incomplete resolution of regulatory issues could adversely impact us;

(10) difficulties in integrating any businesses that we may acquire, which may increase our expenses and delay the achievement of any benefits that we may expect from such acquisitions;

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The trust has issued $10.3 million of preferred securities to investors.

The Bank received its charter from the New Jersey Department of Banking and Insurance on September 13, 1991 and opened for business on September 16, 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 twenty branches primarily along the Route 22/Route 78 corridors with branches in Bergen, Hunterdon, Middlesex, Morris, Ocean, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania.

Through its banking locations and on-line services, the Bank is able to support clients throughout the New York City metropolitan areas.

The Company’s goal is to continue to expand as needed to support clients as their businesses grow.

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.

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The Company and the Bank derive a majority of their revenue from net interest income (i.e., the difference between the interest received on loans and securities and the interest paid on deposits and borrowings).

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, savings accounts, credit cards, debit cards, wire transfers, safe deposit boxes, access to automated teller services and internet and mobile banking, typical of a community banking business.

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, savings accounts, credit cards, debit cards, wire transfers, safe deposit boxes, access to automated teller services and internet and mobile banking, typical of a community banking business.

The Bank also offers retirement accounts, Automated Clearing House (“ACH”) origination and Remote Deposit Capture (“RDC”).

CDARS/ICS Reciprocal deposits are offered based on the Bank’s participation in the IntraFi Network LLC network and enables Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive customers to have coverage for large dollar deposits.

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.

CDARS/ICS reciprocal deposits are offered based on the Bank’s participation in the IntraFi Network LLC network which enable Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive customers to have FDIC coverage for large dollar deposits.

The Company structures its specific services and charges in a manner designed to attract the business of the small and medium sized business, professional community and state and local municipalities, as well as that of individuals residing, working and shopping in its service area.

Deposits serve as the primary source of funding for interest-earning assets, but also generate noninterest income through stop payment fees, wire transfer fees, insufficient fund fees, debit card income, foreign ATM fees, interchange and other miscellaneous fees.

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The Company engages in a wide range of lending activities and offers commercial, SBA, consumer, mortgage, home equity and personal loans.

Commercial lending primarily comprises of owner-occupied and non-owner occupied commercial mortgages and is supplemented by commercial and industrial lending activities, secured by business assets including receivables, inventory and equipment.

Commercial lending is primarily comprised of owner-occupied and non-owner occupied commercial mortgages and is supplemented by commercial and industrial lending activities, secured by business assets including receivables, inventory and equipment.

Additionally, the Company engages in commercial and residential construction lending activities.

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The Company’s primary service area is defined as the neighborhoods served by the Bank’s offices.

The Bank’s main office is located in Clinton, New Jersey and the Bank operates twenty additional branches primarily along the Route 22/Route 78 corridors with branches in Bergen, Hunterdon, Middlesex, Morris, Ocean, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania.

Through its banking locations and on-line services, the Bank is able to support clients throughout the New York City metropolitan areas.

The Bank’s main office is located in Clinton, New Jersey and the Bank operates twenty-one branches primarily along the Route 22/Route 78 corridors with branches in Bergen, Hunterdon, Middlesex, Morris, Ocean, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania.

Through its banking locations and online services, the Bank is able to support clients throughout the New York City metropolitan area.

The Company’s goal is to continue to expand as needed to support clients as their businesses grow.

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Employees and Human Capital

At December 31, 2023, the Company employed 227 full-time and 10 part-time employees.

As of December 31, 2024, the Company employed 220 full-time and 8 part-time employees.

None of the Company’s employees are represented by any collective bargaining units.

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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.

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.

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See "Financial Holding Company Status" below.

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”) Deposit Insurance Fund in the event the depository institution becomes in danger of default.

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.

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In December 2010 and January 2011, the Basel Committee on Banking Supervision (the “Basel Committee”) published the final reforms on capital and liquidity generally referred to as “Basel III.” In July 2013, the FRB, the FDIC and the Comptroller of the Currency adopted final rules (the “New Rules”), which implement certain provisions of Basel III and the Dodd-Frank Act.

The New Rules replaced the existing general risk-based capital rules of the various banking agencies with a single, integrated regulatory capital framework.

The New Rules require higher capital cushions and more stringent criteria for what qualifies as regulatory capital.

The New Rules were effective for the Bank and the Company on January 1, 2015.

Under the New Rules, a bank holding company or bank, not eligible for or electing to use the Community Banking Leverage Ratio (discussed below), is required to maintain the following minimum capital ratios, expressed as a percentage of risk-weighted assets:

Under the New Rules, the Bank is required to maintain the following minimum capital ratios, expressed as a percentage of risk-weighted assets:

● Common Equity Tier 1 Capital Ratio of 4.5% (the “CET1”);

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● Total Capital Ratio (Tier 1 capital plus Tier 2 capital) of 8.0%.

In addition, such a bank holding company or bank is also subject to a leverage ratio of 4% (calculated as Tier 1 capital to average consolidated assets as reported on the consolidated financial statements).

The New Rules also require a “capital conservation buffer.” A bank holding company or bank is required to maintain a 2.5% capital conservation buffer, which is composed entirely of CET1, on top of the minimum risk-weighted asset ratios described above, resulting in the following minimum capital ratios:

In addition, the Bank is also subject to a leverage ratio of 4% (calculated as Tier 1 capital to average consolidated assets as reported on the consolidated financial statements).

The New Rules also require a “capital conservation buffer.” The Bank is required to maintain a 2.5% capital conservation buffer, which is composed entirely of CET1, on top of the minimum risk-weighted asset ratios described above, resulting in the following minimum capital ratios:

● CET1 of 7%;

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The New Rules provide for several deductions from and adjustments to CET1.

For example, mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in common equity issued by

nonconsolidated financial entities must be deducted from CET1 to the extent that any one of those categories exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.

Under the New Rules, banking organizations may make a one-time permanent election regarding the treatment of accumulated other comprehensive income items in determining regulatory capital ratios.

For example, mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in common equity issued by nonconsolidated financial entities must be deducted from CET1 to the extent that any one of those categories exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.

Under the New Rules, banking organizations, such as the Company and the Bank, may make a one-time permanent election regarding the treatment of accumulated other comprehensive income items in determining regulatory capital ratios.

Effective as of January 1, 2015, the Company and the Bank elected to exclude accumulated other comprehensive income items for purposes of determining regulatory capital.

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The denominator of the CBLR is the QCBO’s average assets, calculated in accordance with the QCBO’s Call Report instructions and less assets deducted from Tier 1 capital.

Commencing with the first quarter of 2020, the Bank elected to comply with the CBLR, rather than the capital requirements specified in the New Rules.

However, although the Bank continued to meet all of the requirements of CBLR, the Bank elected to opt out of CBLR and comply with the Basel III requirements effective December 31, 2023.

Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), each federal banking agency has promulgated regulations, specifying the levels at which an insured depository institution such as the Bank would be considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized,” and providing for certain mandatory and discretionary supervisory actions based on the

capital level of the institution.

To qualify to engage in financial activities under the Gramm-Leach-Bliley Act, all depository institutions must be “well capitalized.”

The New Rules also revised the regulations implementing these provisions of FDICIA, to change the capital levels applicable to each designation.

Under the New Rules, an institution will be classified as “well capitalized” if it (i) has a total risk-based capital ratio of at least 10.0 percent, (ii) has a Tier 1 risk-based capital ratio of at least 8.0 percent, (iii) has a Tier 1 leverage ratio of at least 5.0 percent, (iv) has a common equity Tier 1 capital ratio of at least 6.5 percent and (v) meets certain other requirements.

An institution will be classified as “adequately capitalized” if it (i) has a total risk-based capital ratio of at least 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of at least 6.0 percent, (iii) has a Tier 1 leverage ratio of at least 4.0 percent, (iv) has a common equity Tier 1 capital ratio of at least 4.5 percent and (v) does not meet the definition of “well capitalized.” An institution will be classified as “undercapitalized” if it (i) has a total risk-based capital ratio of less than 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 6.0 percent, (iii) has a Tier 1 leverage ratio of less than 4.0 percent or (iv) has a common equity Tier 1 capital ratio of less than 4.5 percent.

An institution will be classified as “significantly undercapitalized” if it (i) has a total risk-based capital ratio of less than 6.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 4.0 percent, (iii) has a Tier 1 leverage ratio of less than 3.0 percent or (iv) has a common equity Tier 1 capital ratio of less 3.0 percent.

An institution will be classified as “critically undercapitalized” if it has a tangible equity to total assets ratio that is equal to or less than 2.0 percent.

An insured depository institution may be deemed to be in a lower capitalization category if it receives an unsatisfactory examination rating.

The Company and the Bank have elected to opt out of the CBLR.

General Bank Regulation

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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.

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.

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.

Frank Act requires various federal agencies to adopt a broad range of new rules and regulations.

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:

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● created a financial stability oversight council that will recommend to the FRB 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.

The Dodd-Frank Act also imposed 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.

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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.

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 the Company, including any regulations promulgated by the CFPB.

Financial reform legislation and rules could have adverse implications on the financial industry, the competitive environment and the Company’s 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 the Company’s costs of operations and adversely impact its earnings.

Regulation W codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions.

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The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) gives the federal government powers to address terrorist threats through domestic security measures, surveillance powers, information sharing and anti-money laundering requirements.

By way of amendments to the Bank Secrecy Act, the USA PATRIOT Act encourages information-sharing among bank regulatory agencies and law enforcement bodies.

amendments to the Bank Secrecy Act, the USA PATRIOT Act encourages information-sharing among bank regulatory agencies and law enforcement bodies.

Further, certain provisions of the USA PATRIOT Act impose affirmative obligations on a broad range of financial institutions, including banks, thrift institutions, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.

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If any subsidiary bank of a financial holding company receives a rating under the CRA of less than "satisfactory", then the financial holding company is prohibited from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations until the rating is raised to "satisfactory" or better.

Federal Securities Laws

The Company’s common stock is registered with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Company is therefore subject to the information, proxy solicitation, insider trading and other requirements and restrictions under the Exchange Act.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business