UNITY BANCORP INC NJ

Previous wording

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the 2023 consolidated audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. When necessary, reclassifications have been made to prior period data throughout the following discussion and analysis for purposes of comparability. This Quarterly Report on Form 10-Q contains certain “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated” and “potential”. Examples of forward looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Unity Bancorp, Inc. that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, in addition to those items contained in the Company’s Annual Report on Form 10-K under Item IA-Risk Factors, as updated by our subsequent filings with the Securities and Exchange Commission, the following: changes in general, economic and market conditions, including the impact of inflation, legislative and regulatory conditions and the development of an interest rate environment that adversely affects Unity Bancorp, Inc.’s interest rate spread or other income anticipated from operations and investments and the impact of the COVID-19 pandemic on our employees, operations and customers.

Current wording

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the 2023 consolidated audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. When necessary, reclassifications have been made to prior period data throughout the following discussion and analysis for purposes of comparability. This Quarterly Report on Form 10-Q contains certain “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated” and “potential”. Examples of forward looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Unity Bancorp, Inc. that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, in addition to those items contained in the Company’s Annual Report on Form 10-K under Item IA-Risk Factors, as updated by our subsequent filings with the Securities and Exchange Commission, the following: changes in general, economic and market conditions, including the impact of inflation, legislative and regulatory conditions and the development of an interest rate environment that adversely affects Unity Bancorp, Inc.’s interest rate spread or other income anticipated from operations and investments and the impact of health or other emergencies on our employees, operations and customers.

Previous wording

Net income totaled $9.6 million, or $0.93 per diluted share for the quarter ended March 31, 2024, compared to $10.3 million, or $0.96 per diluted share for the same period in 2023. Return on average assets and average common equity for the quarter were 1.58 percent and 14.49 percent, respectively, compared to 1.72 percent and 17.14 percent for the same period in 2023.

Current wording

Net income totaled $9.5 million, or $0.93 per diluted share for the quarter ended June 30, 2024, compared to $9.7 million, or $0.95 per diluted share for the same period in 2023. Return on average assets and return on average common equity for the quarter were 1.56 percent and 14.07 percent, respectively, compared to 1.60 percent and 16.19 percent for the same period in 2023.

Previous wording

The primary source of the Company’s operating income is net interest income, which is the difference between interest and dividends earned on interest-earning assets and fees earned on loans, versus interest paid on interest-bearing liabilities. Interest-earning assets include loans to individuals and businesses, investment securities and interest-earning deposits. Interest-bearing liabilities include interest-bearing demand, savings, brokered and time deposits, FHLB advances and other borrowings.

Current wording

The primary source of the Company’s operating income is net interest income, which is the difference between interest and dividends earned on interest-earning assets and fees earned on loans, versus interest paid on interest-bearing liabilities. Interest-earning assets include loans to individuals and businesses, investment securities and interest-earning

Previous wording

During the quarter ended March 31, 2024, tax-equivalent net interest income amounted to $23.8 million, a decrease of $0.1 million or 0.3 percent when compared to the same period in 2023. The net interest margin decreased 10 basis points to 4.09 percent for the three months ended March 31, 2024, compared to 4.19 percent for the same period in 2023.

Current wording

During the quarter ended June 30, 2024, tax-equivalent net interest income amounted to $23.4 million, a decrease of $0.1 million or 0.4 percent when compared to the same period in 2023. The net interest margin decreased 3 basis points to 4.01 percent for the three months ended June 30, 2024, compared to 4.04 percent for the same period in 2023.

Previous wording

During the three months ended March 31, 2024, tax-equivalent interest income was $38.0 million, an increase of $4.6 million or 13.7 percent when compared to the same period in 2023. This increase was mainly driven by the increases in the yield on securities, the balance of average loans and the yield on loans.

Current wording

During the three months ended June 30, 2024, tax-equivalent interest income was $38.0 million, an increase of $2.6 million or 7.3 percent when compared to the same period in 2023. This increase was mainly driven by the increases in the balance of average securities, the balance of average loans and the yield on loans, partially offset by a decrease in the yield on securities and the balance of average FHLB stock.

Previous wording

Total interest expense was $14.1 million for the three months ended March 31, 2024, an increase of $4.7 million or 49.3 percent compared to the same period in 2023. This increase was driven by the increased rates and volume of time deposits, increased rates on savings deposits, increased rates and volume for demand deposits and increased rates and volume of brokered deposits, partially offset by a decline in volume of savings deposits and decreased rates and volume of borrowed funds and subordinated debentures.

Current wording

Total interest expense was $14.6 million for the three months ended June 30, 2024, an increase of $2.7 million or 22.7 percent compared to the same period in 2023. This increase was driven by the increased rates and volume of time deposits, increased rates and volume on savings deposits, increased rates and volume for demand deposits and increased rates on brokered deposits, partially offset by a decline in volume of brokered deposits and decreased rates and volume of borrowed funds and subordinated debentures.

Previous wording

The provision for credit losses for loans was $0.6 million during the three months ended March 31, 2024, compared to $0.1 million for the same period in 2023. The increase of $0.5 million was primarily driven by increases in the general and specific reserve calculations.

Current wording

The provision for credit losses for loans was $0.3 million and $0.9 million during the three and six months ended June 30, 2024, respectively, compared to $0.8 million and $0.9 million for the same periods in 2023. The decrease in the quarterly period was primarily driven by decreases in the general and specific reserve calculations.

Previous wording

The provision for credit losses for off-balance sheet exposures totaled $2.0 thousand for the three months ended March 31, 2024, compared to none for the same period in 2023.

Current wording

The provision for credit losses for off-balance sheet exposures totaled $13 thousand and $15 thousand for the three and six months ended June 30, 2024, respectively, compared to a release of $84 thousand for the same periods in 2023.

Previous wording

Each period’s credit 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 and expected 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 Credit Losses and Reserve for Unfunded Loan Commitments.” The current provision is considered appropriate under management’s assessment of the adequacy of the allowance for credit losses.

Current wording

Each period’s credit 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 and expected economic conditions and other internal and external factors impacting the risk within the loan portfolio. Additional information

Previous wording

For the quarter ended March 31, 2024, the Company reported income tax expense of $3.2 million for an effective tax rate of 25.0 percent, compared to income tax expense of $3.5 million and an effective tax rate of 25.4 percent for the prior year’s quarter.

Current wording

For the quarter ended June 30, 2024, the Company reported income tax expense of $3.1 million for an effective tax rate of 24.7 percent, compared to income tax expense of $3.4 million and an effective tax rate of 26.0 percent for the prior year’s quarter. For the six months ended June 30, 2024, the Company reported income tax expense of $6.3 million for an effective tax rate of 24.9 percent, compared to an income tax expense of $6.9 million and an effective tax rate of 25.7 percent for the six months ended June 30, 2023.

Previous wording

Total assets decreased $10.4 million or 0.4 percent, to $2.6 billion at March 31, 2024, when compared to year end 2023. This decrease was primarily due to decreases of $11.8 million in cash and cash equivalents and $2.5 million in FHLB stock, partially offset by increases of $3.0 million in securities and $2.4 million in gross loans, driven by commercial loan growth.

Current wording

Total assets increased $19.2 million or 0.7 percent, to $2.6 billion at June 30, 2024, when compared to year end 2023. This increase was primarily due to increases of $2.6 million in cash and cash equivalents, $9.5 million in securities and $12.1 million in prepaid expenses and other assets, partially offset by a decrease of $3.5 million in FHLB stock and $1.8 million in net loans.

Previous wording

Total shareholders’ equity increased $5.3 million, when compared to year end 2023, due to earnings and an increase in common stock, partially offset by the repurchase of shares and dividends paid during the three months ended March 31, 2024.

Current wording

Total shareholders’ equity increased $12.0 million, when compared to year end 2023, primarily due to earnings and an increase in common stock, partially offset by the repurchase of shares and dividends paid during the six months ended June 30, 2024.

Previous wording

AFS debt securities totaled $94.7 million at March 31, 2024, an increase of $2.9 million or 3.2 percent, compared to $91.8 million at December 31, 2023. This net increase was the result of:

Current wording

AFS debt securities totaled $99.1 million at June 30, 2024, an increase of $7.3 million or 8.0 percent, compared to $91.8 million at December 31, 2023. This net increase was the result of:

Previous wording

The weighted average life of AFS debt securities, adjusted for prepayments, amounted to 5.4 years and 5.6 years at March 31, 2024 and December 31, 2023, respectively. The effective duration of AFS debt securities amounted to 1.7 years at March 31, 2024 and December 31, 2023.

Current wording

The weighted average life of AFS debt securities, adjusted for prepayments, amounted to 5.3 years and 5.6 years at June 30, 2024 and December 31, 2023, respectively. The effective duration of AFS debt securities amounted to 1.7 years at June 30, 2024 and December 31, 2023.

Previous wording

HTM debt securities were $36.1 million at March 31, 2024, a decrease of $33 thousand or 0.1 percent, compared to $36.1 million at December 31, 2023.

Current wording

HTM debt securities were $36.2 million at June 30, 2024, an increase of $35 thousand or 0.1 percent, compared to $36.1 million at December 31, 2023.

Previous wording

The weighted average life of HTM securities, adjusted for prepayments, amounted to 16.9 years and 17.1 years at March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, the fair value of HTM securities was $29.1 million and $29.7 million, respectively. The effective duration of HTM securities amounted to 10.6 years and 10.9 years at March 31, 2024 and December 31, 2023, respectively.

Current wording

The weighted average life of HTM securities, adjusted for prepayments, amounted to 16.7 years and 17.1 years at June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, the fair value of HTM securities was $29.0 million and $29.7 million, respectively. The effective duration of HTM securities amounted to 10.5 years and 10.9 years at June 30, 2024 and December 31, 2023, respectively.

Previous wording

Equity securities totaled $7.9 million at March 31, 2024, an increase of $0.1 million or 1.7 percent, compared to $7.8 million at December 31, 2023.

Current wording

Equity securities totaled $9.9 million at June 30, 2024, an increase of $2.1 million or 27.5 percent, compared to $7.8 million at December 31, 2023. This net increase was the result of:

Previous wording

Approximately 65 percent of the total debt security investment portfolio had a fixed rate of interest at March 31, 2024.

Current wording

Approximately 62 percent of the total debt security investment portfolio had a fixed rate of interest at June 30, 2024.

Previous wording

Total loans increased $2.4 million or 0.1 percent to $2.2 billion at March 31, 2024, compared toyear end 2023. Commercial and SBA held for investment loans increased $13.9 million and $0.4 million, respectively, partially offset by decreases of $7.5 million, $4.0 million, $0.4 million and $0.2 million in residential construction, residential mortgage, consumer and SBA PPP loans, respectively.

Current wording

Total loans decreased $1.5 million or 0.1 percent to $2.2 billion at June 30, 2024, compared to year end 2023. Commercial loans increased $40.7 million, offset by decreases of $28.1 million, $6.6 million, $3.4 million, $0.6 million and $0.6 million in residential construction, residential mortgage, consumer, SBA held for investment and SBA PPP loans, respectively. Below is a table of the geographic loan allocation of the Bank’s portfolio at June 30, 2024:

Previous wording

Average loans increased $41.0 million or 1.9 percent to $2.2 billion the three months ended March 31, 2024 from $2.1 billion for the same period in 2023. The increase in average loans was due to increases in average commercial and residential mortgage, partially offset by decreases in average SBA, SBA PPP, consumer and residential construction loans. The yield on the overall loan portfolio increased 64 basis points to 6.46 percent for the three months ended March 31, 2024 when compared to the same period in the prior year.

Current wording

Average loans increased $29.7 million or 1.4 percent to $2.2 billion the six months ended June 30, 2024 from $2.1 billion for the same period in 2023. The increase in average loans was due to increases in average commercial and residential mortgage loans, partially offset by decreases in average SBA, SBA PPP, consumer and residential construction loans. The yield on the overall loan portfolio increased 55 basis points to 6.48 percent for the six months ended June 30, 2024 when compared to the same period in the prior year.

Previous wording

SBA 7(a) loans held for sale, carried at the lower of cost or market, amounted to $18.4 million at March 31, 2024, an increase of $0.2 million from $18.2 million at December 31, 2023. SBA 7(a) loans held for investment amounted to $39.0 million at March 31, 2024, an increase of $0.4 million from $38.6 million at December 31, 2023. The yield on SBA loans, which are generally floating and adjust quarterly to the Prime rate, was 9.17 percent for the three months ended March 31, 2024, compared to 8.43 percent for the same period in the prior year. The Company sold $2.4 million of SBA loans during the three months ended March 31, 2024.

Current wording

SBA 7(a) loans held for sale, carried at the lower of cost or market, amounted to $15.2 million at June 30, 2024, a decrease of $3.1 million from $18.2 million at December 31, 2023. SBA 7(a) loans held for investment amounted to $38.0 million at June 30, 2024, a decrease of $0.6 million from $38.6 million at December 31, 2023. The yield on SBA loans, which are generally floating and adjust quarterly to the Prime rate, was 9.15 percent for the six months ended June 30, 2024, compared to 8.75 percent for the same period in the prior year. The Company sold $3.9 million of SBA loans during the three months ended ended June 30, 2024.

Previous wording

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. Approximately $77.2 million and $75.6 million in SBA loans were sold but serviced by the Company at March 31, 2024 and December 31, 2023, respectively, and are not included on the Company’s balance sheet. There is no 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.

Current wording

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. Approximately $73.5 million and $75.6 million in SBA loans were sold but serviced by the Company at June 30, 2024 and December 31, 2023, respectively, and are not included on the Company’s balance sheet. There is no 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.

Previous wording

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 $1.3 billion at March 31, 2024, an increase of $13.9 million from year end 2023. The yield on commercial loans was 6.43 percent for the three months ended March 31, 2024, compared to 5.80 percent for the same period in 2023. SBA 504 program loans, which consist of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property, are included in the Commercial loan portfolio. The commercial real estate sub-category includes both owner occupied and non-owner occupied commercial real estate related loans.

Current wording

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 $1.3 billion at June 30, 2024, an increase of $40.7 million from year end 2023. The yield on commercial loans was 6.43 percent for the six months ended June 30, 2024, compared to 5.91 percent for the same period in 2023. In most cases, these loans are secured by underlying real estate collateral. SBA 504 program loans, which consist of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property, are included in the Commercial loan portfolio. At June 30, 2024 Commercial Mortgage – Owner Occupied, Commercial Mortgage – Nonowner Occupied, and Commercial Construction represent 24.3 percent, 19.0 percent and 5.8 percent of the Company’s loan portfolio, respectively. The Company will generally not exceed a combined loan-to-value ratio of 75 percent at origination. Unity continually evaluates and monitors its credit risk policies and procedures. Further, Unity continuously monitors loan portfolio concentrations across key credit characteristics (e.g., state and local geographies, industries, etc.). Loans are subject to periodic loan review procedures in accordance with the Company’s Loan Policy. A portion of the loan reviews are performed by an independent and external loan review function.

Previous wording

Residential mortgage loans consist of loans secured by 1 to 4 family residential properties. These loans amounted to $627.5 million at March 31, 2024, a decrease of $4.0 million from year end 2023. Sales of conforming mortgage loans totaled $12.2 million for the three months ended March 31, 2024, compared to sales of $16.1 million in the prior year period. The yield on residential mortgages was 5.90 percent for the three months ended March 31, 2024, compared to 5.27 percent for the same period in 2023. Residential mortgage loans maintained in portfolio are generally to individuals that do not qualify for conventional financing. In extending credit to this category of borrowers, the Bank considers other mitigating factors such as credit history, equity and liquid reserves of the borrower. As a result, the residential mortgage loan portfolio of the Bank includes adjustable rate mortgages with rates that exceed the rates on conventional fixed-rate mortgage loan products but which are not considered high priced mortgages.

Current wording

Residential mortgage loans consist of loans secured by 1 to 4 family residential properties. These loans amounted to $624.9 million at June 30, 2024, a decrease of $6.6 million from year end 2023. Sales of conforming mortgage loans totaled $24.7 million for the six months ended June 30, 2024, compared to sales of $26.9 million in the prior year period. The yield on residential mortgages was 5.93 percent for the six months ended June 30, 2024, compared to 5.38 percent for the same period in 2023. Residential mortgage loans maintained in portfolio are generally to individuals that do not qualify for conventional financing. In extending credit to this category of borrowers, the Bank considers other mitigating factors such as credit history, equity and liquid reserves of the borrower. As a result, the residential mortgage loan

Previous wording

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 1 to 4 family residences. These loans amounted to $72.3 million, a decrease of $0.4 million from year end 2023. The yield on consumer loans was 7.90 percent for the three months ended March 31, 2024, compared to 7.02 percent for the same period in 2023.

Current wording

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 1 to 4 family residences. These loans amounted to $69.3 million at June 30, 2024, a decrease of $3.4 million from year end 2023. The yield on consumer loans was 7.88 percent for the six months ended June 30, 2024, compared to 7.30 percent for the same period in 2023.

Previous wording

Residential construction loans consist of short-term loans for the purpose of funding the costs of building a home. These loans amounted to $123.8 million at March 31, 2024, a decrease of $7.5 million from year end 2023. The yield on residential construction loans was 7.86 percent for the three months ended March 31, 2024, compared to 6.31 percent for the same period in 2023.

Current wording

Residential construction loans consist of short-term loans for the purpose of funding the costs of building a home. These loans amounted to $103.2 million at June 30, 2024, a decrease of $28.1 million from year end 2023. The yield on residential construction loans was 8.22 percent for the six months ended June 30, 2024, compared to 6.58 percent for the same period in 2023.

Previous wording

Nonperforming loans, including loans more than 90 days delinquent and still accruing, were $17.0 million at March 31, 2024, a $2.2 million decrease from $19.2 million at December 31, 2023 and a $2.5 million increase from $14.5 million at March 31, 2023, respectively. Since year end 2023, nonperforming loans in the residential mortgage and consumer segment decreased, offset by an increase in nonperforming SBA, commercial and residential construction loans. In addition, there were $138 thousand in loans past due 90 days or more and still accruing interest at March 31, 2024, compared to $946 thousand at December 31, 2023 and none at March 31, 2023. Further, there was no other real estate owned at March 31, 2024 or December 31, 2023 and $176 thousand in other real estate owned at March 31, 2023.

Current wording

Nonperforming loans were $12.1 million at June 30, 2024, a $7.1 million decrease from $19.2 million at December 31, 2023 and a $4.1 million decrease from $16.2 million at June 30, 2023, respectively. Since year end 2023, nonperforming loans in the residential mortgage, consumer and residential construction segments decreased, offset by an increase in nonperforming loans in the SBA and commercial segments. In addition, there were $0.4 million in loans past due 90 days or more and still accruing interest at June 30, 2024, compared to $0.9 million at December 31, 2023 and none at June 30, 2023. Further, there was no other real estate owned at June 30, 2024 or December 31, 2023 and $0.3 million of other real estate owned at June 30, 2023.

Previous wording

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 categorized by their non-passing risk rating and performing loan status. Potential problem loans totaled $12.8 million at March 31, 2024.

Current wording

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 categorized by their non-passing risk rating and performing loan status. Potential problem loans totaled $14.4 million at June 30, 2024, a decrease of $0.7 million from $15.1 million at December 31, 2023.

Previous wording

The allowance for credit losses totaled $26.1 million at March 31, 2024, compared to $25.9 million at December 31, 2023 and $26.2 million at March 31, 2023, with a resulting allowance to total loan ratio of 1.20 percent at March 31, 2024, 1.19 percent at December 31, 2023 and 1.23 at March 31, 2023. Net charge-offs amounted to $415 thousand for the three months ended March 31, 2024, compared to net recoveries of $50 thousand for the same period in 2023.

Current wording

The allowance for credit losses totaled $26.1 million at June 30, 2024, compared to $25.9 million at December 31, 2023 and $26.0 million at June 30, 2023, with a resulting allowance to total loan ratio of 1.20 percent at June 30, 2024, 1.19 percent at December 31, 2023 and 1.20 at June 30, 2023. Net charge-offs amounted to $0.7 million for the six months ended June 30, 2024, compared to net charge-offs of $0.9 million for the same period in 2023.

Previous wording

Total deposits increased $37.1 million to $2.0 billion at March 31, 2024 from year-end 2023. This increase was due to increases of $74.2 million in time deposits, $13.0 million in interest-bearing demand deposits and $6.7 million in savings deposits, partially offset by a decrease of $32.7 million in brokered deposits and $24.1 million in noninterest-bearing demand deposits. The change in the composition of the portfolio from December 31, 2023 reflects a 17.4 percent increase in time deposits, 4.2 percent increase in interest-bearing demand deposits, and a 1.4 percent increase in savings deposits, partially offset by a 12.2 percent decrease in brokered deposits and a 5.7 percent decrease in noninterest-bearing demand deposits.

Current wording

Total deposits increased $86.7 million to $2.0 billion at June 30, 2024 from year-end 2023. This increase was due to increases of $133.4 million in time deposits, $8.1 million in savings deposits and $2.3 million in noninterest-bearing demand deposits, partially offset by a decrease of $46.4 million in brokered deposits and $10.7 million in interest bearing demand deposits. The change in the composition of the portfolio from December 31, 2023 reflects a 31.3 percent increase in time deposits, 1.6 percent increase in savings deposits and a 0.6 percent increase in noninterest-bearing demand deposits, partially offset by a 17.3 percent decrease in brokered deposits and a 3.4 percent decrease in interest bearing demand deposits.

Previous wording

As of March 31, 2024, 17.2 percent of total deposits were uninsured or uncollateralized. The Company’s deposit composition as of March 31, 2024, consisted of 20.2 percent in noninterest-bearing demand deposits, 16.6 percent in interest-bearing demand deposits, 28.8 percent in savings deposits and 34.4 percent in time deposits.

Current wording

As of June 30, 2024, 18.3 percent of total deposits were uninsured or uncollateralized. The Company’s deposit composition as of June 30, 2024, consisted of 21.0 percent in noninterest-bearing demand deposits, 15.0 percent in interest-bearing demand deposits, 27.5 percent in savings deposits and 36.5 percent in time deposits.

Previous wording

Borrowed funds and subordinated debentures totaled $309.7 million and $366.7 million at March 31, 2024 and December 31, 2023, respectively, and are broken down in the following table:

Current wording

Borrowed funds and subordinated debentures totaled $285.1 million and $366.7 million at June 30, 2024 and December 31, 2023, respectively, and are broken down in the following table:

Previous wording

In March 2024, the FHLB issued a $165.0 million municipal deposit letter of credit in the name of Unity Bank naming the New Jersey Department of Banking and Insurance as beneficiary, to secure municipal deposits as required under New Jersey law. The FHLB issued an additional $25.0 million municipal deposit letter of credit in the name of Unity Bank naming certain townships in Pennsylvania as beneficiary, to secure municipal deposits as required under Pennsylvania law.

Current wording

In June 2024, the FHLB issued a $185.0 million municipal deposit letter of credit in the name of Unity Bank naming the New Jersey Department of Banking and Insurance as beneficiary, to secure municipal deposits as required under New Jersey law. The FHLB issued an additional $28.0 million municipal deposit letter of credit in the name of Unity Bank naming certain townships in Pennsylvania as beneficiary, to secure municipal deposits as required under Pennsylvania law.

Previous wording

At March 31, 2024, the Company held $183.0 million of cash and cash equivalents. Further, the Company maintained approximately $546.0 million of funding available from various funding sources, including the FHLB, FRB Discount Window and other lines of credit. Additionally, the Company can pledge securities for further borrowing capacity. Total available funding plus cash on hand represented 215.6% of uninsured or uncollateralized deposits.

Current wording

At June 30, 2024, the Company held $197.4 million of cash and cash equivalents. Further, the Company maintained approximately $610.5 million of funding available from various funding sources, including the FHLB, FRB Discount Window and other lines of credit. Additionally, the Company can pledge securities for further borrowing capacity.

Previous wording

For the three months ended March 31, 2024, average FHLB Borrowings were $191.0 million with a weighted average cost of 4.35%.

Current wording

For the six months ended June 30, 2024, average FHLB Borrowings were $155.2 million with a weighted average cost of 3.98%.

Previous wording

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. The floating interest rate on the subordinated debentures is the daily compounded SOFR rate with a 0.262 percent spread. The floating interest rate was 7.172 percent at March 31, 2024 and 7.212 percent at December 31, 2023.

Current wording

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. The floating interest rate on the subordinated debentures is the daily compounded SOFR rate with a 0.262 percent spread. The floating interest rate was 7.199 percent at June 30, 2024 and 7.212 percent at December 31, 2023.

Previous wording

Liquidity, Off Balance Sheet Arrangements and Contractual Obligations

Current wording

Off Balance Sheet Arrangements and Contractual Obligations

Previous wording

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. At March 31, 2024, the balance of cash and cash equivalents was $183.0 million, a decrease of $11.8 million from December 31, 2023. A discussion of the cash provided by and used in operating, investing and financing activities follows.

Current wording

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. At June 30, 2024, the balance of cash and cash equivalents was $197.4 million, an increase of $2.6 million from December 31, 2023. A discussion of on- and off-balance sheet liquidity follows.

Previous wording

On April 27, 2023, the Board authorized a new repurchase plan of up to 500 thousand shares, or approximately 5.0% of the Company’s outstanding common stock. A total 149,997 shares were repurchased at a weighted average price of $27.14 during the three months ended March 31, 2024. As of March 31, 2024, 264 thousand shares are available for repurchase. The timing and amount of additional purchases, if any, will depend upon a number of factors including the Company’s capital needs, the performance of its loan portfolio, the need for additional provisions for credit losses and the market price of the Company’s stock.

Current wording

On April 27, 2023, the Board authorized a new repurchase plan of up to 500 thousand shares, or approximately 5.0% of the Company’s outstanding common stock. A total 68,771 shares were repurchased at a weighted average price of $26.77 during the three months ended June 30, 2024. As of June 30, 2024, 195 thousand shares are available for repurchase. The timing and amount of additional purchases, if any, will depend upon a number of factors including the Company’s capital needs, the performance of its loan portfolio, the need for additional provisions for credit losses and the market price of the Company’s stock.