UNITY BANCORP INC NJ
For the period ended Mar 31, 2025. Filed May 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
UNTY$57.22-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0000920427-24-000083
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0000920427-25-000042
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 107 previous paragraphs and 106 current paragraphs.
51 unchanged; 41 reworded; 11 added; 12 removed; 3 previous and 3 current paragraphs rearranged.
Tables are not compared: 43 previous and 43 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
First quarter highlights include:
Current report
The following table provides a 5 quarter look back at yield on interest-earning assets, cost of interest-bearing liabilities, and net interest margin.
Current report
There was no provision for credit losses on AFS debt securities for the quarter ended March 31, 2025, as well as in the same period in 2024.
Current report
AFS debt securities totaled $90.4 million at March 31, 2025, a decrease of $3.5 million or 3.7 percent, compared to $93.9 million at December 31, 2024. This net decrease was the result of:
Current report
There was no provision for credit losses on AFS debt securities for the quarter ended March 31, 2025, as compared to a provision of $0.9 million for the quarter ended December 31, 2024. During the quarter ended March 31, 2025, Unity entered into a modification agreement with the issuer of the troubled AFS debt security. Prior to the modification, Unity held the $5.0 million par of the original senior debt security. As a component of the modification agreement, $2.1 million par of senior debt was converted to common equity of the issuer. The common equity was held as restricted equity as of March 31, 2025. The remaining $2.9 million senior debt also had modified terms, including an extension of the maturity date, an increase in the bond’s coupon, agreement to paid-in-kind interest, early call-rights by the issuer and certain convertible rights. The net carrying value of the aggregate position was $2.0 million as of March 31, 2025.
Current report
HTM debt securities were $40.9 million at March 31, 2025, a decrease of $0.4 million or 0.8 percent, compared to $41.3 million at December 31, 2024. The decrease was due to:
Current report
Total loans increased $84.5 million or 3.7 percent to $2.3 billion at March 31, 2025, compared to year end 2024. Commercial, residential mortgage, consumer and loans held for sale increased by $75.2 million, $23.3 million, $1.9 million and $1.8 million, respectively. This was offset by decreases of $17.5 million, $0.2 million and $0.1 million in residential construction, SBA held for investment and SBA PPP, respectively.
Current report
The following table set forth an aging analysis of past due and nonaccrual loans as of March 31, 2025 based off of geographical location:
Current report
Potential problem loans totaled $15.3 million at March 31, 2025, an increase of $0.7 million from $14.6 million at December 31, 2024.
Current report
During the quarter ended March 31, 2025, Unity entered into a modification agreement with the issuer of the troubled AFS debt security. Prior to the modification, Unity held the $5.0 million par of the original senior debt security. As a component of the modification agreement, $2.1 million par of senior debt was converted to common equity of the issuer. The common equity was held as restricted equity as of March 31, 2025. The remaining $2.9 million senior debt also had modified terms, including an extension of the maturity date, an increase in the bond’s coupon, agreement to paid-in-kind interest, early call-rights by the issuer, and certain convertible rights. The net carrying value of the aggregate position was $2.0 million as of March 31, 2025.
Current report
At March 31, 2025, the Company had $276.9 million of additional credit available at the FHLB, $225.3 million of additional credit available at the FRB and $20.0 million of additional credit available from other sources. Pledging additional collateral in the form of 1 to 4 family residential mortgages, commercial loans and investment securities can increase the lines with the FHLB and FRB.
Removed paragraphs (12)
Previous report
Third quarter highlights include:
Previous report
During the nine months ended September 30, 2024, tax-equivalent interest income was $115.5 million, an increase of $9.7 million or 9.2 percent when compared to the same period in the prior year. This increase was mainly driven by the increase in the rates on loans, securities, FHLB stock and interest-bearing deposits, partially offset by a decrease in the average balance of FHLB stock.
Previous report
Total interest expense was $43.4 million for the nine months ended September 30, 2024, an increase of $8.6 million or 24.7 percent compared to the same period in 2023. This increase reflects increased volume and rates on interest-bearing demand deposits and time deposits and the rates of savings and brokered deposits, offset by decreased volume and rates on borrowed funds and subordinated debentures compared to a year ago.
Previous report
The provision for credit losses for AFS debt security impairment was none and $0.6 million for the three and nine months ended September 30, 2024, compared to none for the prior year’s periods. The impairment was entirely attributable to one senior corporate debt security in the AFS portfolio. The Company owns $5 million in par value of this position and moved the position into non-accrual status during the quarter ended June 30, 2024.
Previous report
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Previous report
Noninterest Expense and Other Matters
Previous report
Subsequent to quarter end, on November 5, 2024, a contractor (or a subcontractor thereof) working for the Bank damaged certain off-premises utility equipment, causing a power outage that effected the Bank and a number of adjacent businesses. Power was restored to the adjacent businesses within a few hours. The Bank is unaware of the amount of losses, if any, which any effected business may have incurred. No claims have been filed against the Bank, nor against the contractor, to the Bank’s knowledge. Nonetheless, the Bank is in possession of the contractor’s Certificate of Liability Insurance, however the scope of coverage has not yet been determined, and it is unclear whether the contractor will have the financial wherewithal to satisfy any claims arising from this matter. The Bank is continuing to investigate this matter.
Previous report
HTM debt securities were $36.2 million at September 30, 2024, an increase of $0.1 million or 0.3 percent, compared to $36.1 million at December 31, 2023.
Previous report
Equity securities totaled $9.8 million at September 30, 2024, an increase of $2.0 million or 26.1 percent, compared to $7.8 million at December 31, 2023.
Previous report
Nonperforming securities were $2.9 million at September 30, 2024, a $2.9 million increase from none at December 31, 2023 and September 30, 2023. The Company owns $5 million in par of this position and moved the position into non-accrual status during the three months ending June 30, 2024. This security is currently paying and all payments received since have been applied to principal.
Previous report
At September 30, 2024, the Company held $194.5 million of cash and cash equivalents. Further, the Company maintained approximately $569.4 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 report
For further detail on cash flow activity, refer to the Consolidated Statements of Cash Flows.
Reworded paragraphs (41)
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 health or other emergencies 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 2024 consolidated audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024. 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, tariffs, 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
Unity Bancorp, Inc. (the “Parent Company”) 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, Unity Bank (the “Bank” or, when consolidated with the Parent Company, the “Company”) is chartered by the New Jersey Department of Banking and Insurance and commenced operations on September 13, 1991. The Bank provides a full range of commercial and retail banking services through online banking platforms and its robust branch network located throughout Bergen, Hunterdon, Middlesex, Morris, Ocean, 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. The Bank has multiple subsidiaries used to hold part of its investment and loan portfolios and to hold other rela estate owned if the Bank takes title to property securing loans.
Current wording
Unity Bancorp, Inc. (the “Parent Company”) 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, Unity Bank (the “Bank” or, when consolidated with the Parent Company, the “Company”) is chartered by the New Jersey Department of Banking and Insurance and commenced operations on September 13, 1991. The Bank provides a full range of commercial and retail banking services through online banking platforms and its robust branch network located throughout Bergen, Hunterdon, Middlesex, Morris, Ocean, 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. The Bank has multiple subsidiaries used to hold part of its investment and loan portfolios and to hold other real estate owned if the Bank takes title to property securing loans.
Previous wording
Net income totaled $10.9 million, or $1.07 per diluted share for the quarter ended September 30, 2024, compared to $9.9 million, or $0.97 per diluted share for the same period in 2023. Return on average assets and return on average common equity for the quarter were 1.76 percent and 15.55 percent, respectively, compared to 1.61 percent and 15.84 percent for the same period in 2023.
Current wording
Net income totaled $11.6 million, or $1.13 per diluted share for the three months ended March 31, 2025, compared to $9.6 million, or $0.93 per diluted share for the same period in 2024. Return on average assets and return on average common equity for the quarter were 1.83 percent and 15.56 percent, respectively, compared to 1.58 percent and 14.49 percent for the same period in 2024.
Previous wording
During the quarter ended September 30, 2024, tax-equivalent net interest income amounted to $24.9 million, an increase of $1.3 million or 5.6 percent when compared to the same period in 2023. The net interest margin increased 20 basis points to 4.16 percent for the three months ended September 30, 2024, compared to 3.96 percent for the same period in 2023.
Current wording
During the three months ended March 31, 2025, tax-equivalent net interest income amounted to $27.3 million, an increase of $3.4 million or 14.3 percent when compared to the same period in 2024. The net interest margin increased 37 basis points to 4.46 percent for the three months ended March 31, 2025, compared to 4.09 percent for the same period in 2024.
Previous wording
During the three months ended September 30, 2024, tax-equivalent interest income was $39.6 million, an increase of $2.6 million or 6.9 percent when compared to the same period in 2023. This increase was mainly driven by the increases in the yield on loans and the balance of average interest-bearing deposits and securities, partially offset by a decrease in the yield on securities, a decrease in the average volume of loans and the average balance and yield of FHLB stock.
Current wording
During the three months ended March 31, 2025, tax-equivalent interest income was $40.8 million, an increase of $2.9 million or 7.5 percent when compared to the same period in 2024. This increase was mainly driven by increases in the yield of loans and the balance of average loans.
Previous wording
Total interest expense was $14.7 million for the three months ended September 30, 2024, an increase of $1.2 million or 9.2 percent compared to the same period in 2023. This increase was driven by the increased rates and volume of time deposits, savings deposits and demand deposits and increased rates on brokered deposits, partially offset by a decline in the volume of brokered deposits and decreased rates and volume of borrowed funds and subordinated debentures.
Current wording
Total interest expense was $13.6 million for the three months ended March 31, 2025, a decrease of $0.5 million or 3.9 percent compared to the same period in 2024. This decrease was driven by the decrease in rate paid on and the average balance of borrowed funds and subordinated debentrues, which was partially offset by an increase in the volume of time deposits.
Previous wording
The provision for credit losses for loans was $1.0 million and $1.9 million during the three and nine months ended September 30, 2024, respectively, compared to $0.5 million and $1.4 million for the same periods in 2023. The increase in the quarterly period was primarily driven by increases in the general reserve calculation due to loan growth.
Current wording
The provision for credit losses for loans was $1.4 million during the three months ended March 31, 2025, compared to $0.6 million for the same period in 2024. The increase was primarily driven by increases in the general reserve calculation due to loan growth.
Previous wording
The provision for credit losses for off-balance sheet exposures totaled $51 thousand and $66 thousand for the three and nine months ended September 30, 2024, respectively, compared to $22 thousand and a release of $62 thousand for the same periods in 2023.
Current wording
The provision for credit losses for off-balance sheet exposures totaled a release of $41 thousand for the three months ended March 31, 2025, compared to a $2 thousand provision for the same period in 2024.
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
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 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.
Previous wording
For the quarter ended September 30, 2024, the Company reported income tax expense of $3.7 million for an effective tax rate of 25.1 percent, compared to income tax expense of $3.1 million and an effective tax rate of 23.7 percent for the prior year’s quarter. For the nine months ended September 30, 2024, the Company reported income tax expense of $10.0 million for an effective tax rate of 25.0 percent, compared to an income tax expense of $10.0 million and an effective tax rate of 25.1 percent for the nine months ended September 30, 2023.
Current wording
For the quarter ended March 31, 2025, the Company reported income tax expense of $3.8 million for an effective tax rate of 24.8 percent, compared to income tax expense of $3.2 million and an effective tax rate of 25.0 percent for the prior year’s quarter.
Previous wording
Total assets increased $56.8 million or 2.2 percent, to $2.6 billion at September 30, 2024, when compared to year end 2023. This increase was primarily due to increases of $45.3 million in gross loans, $8.0 million in securities and $7.8 million in prepaid expenses and other assets and $2.0 million in deferred tax assets, partially offset by a decrease of $3.9 million in FHLB stock.
Current wording
Total assets increased $113.9 million or 4.3 percent, to $2.8 billion at March 31, 2025, when compared toyear end 2024. This increase was primarily due to increases of $84.5 million in gross loans, $31.2 millions in cash and cash equivalents and $1.1 million in FHLB stock, partially offset by a decrease of $2.9 million in securities.
Previous wording
Total shareholders’ equity increased $22.8 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 nine months ended September 30, 2024.
Current wording
Total shareholders’ equity increased $10.6 million, when compared to year end 2024, primarily due to earnings and common stock issuance, partially offset by dividends paid on common stock during the three months ended March 31, 2025.
Previous wording
AFS debt 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 debt securities consist primarily of obligations of U.S. Government, state and political subdivisions, mortgage-backed securities and corporate and other securities.
Current wording
AFS debt 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 debt securities consist primarily of obligations of U.S. Government, state and political subdivisions, mortgage-backed securities, asset backed securities and corporate and other securities.
Previous wording
The weighted average life of AFS debt securities, adjusted for prepayments, amounted to 5.0 years and 5.6 years at September 30, 2024 and December 31, 2023, respectively. The effective duration of AFS debt securities amounted to 1.4 and 1.7 years at September 30, 2024 and December 31, 2023.
Current wording
The weighted average life of AFS debt securities, adjusted for prepayments, amounted to 4.8 years and 4.9 years at March 31, 2025 and December 31, 2024, respectively. The effective duration of AFS debt securities amounted to 1.5 and 1.4 years at March 31, 2025 and December 31, 2024.
Previous wording
The weighted average life of HTM securities, adjusted for prepayments, amounted to 16.1 years and 17.1 years at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, the fair value of HTM securities was $30.5 million and $29.7 million, respectively. The effective duration of HTM securities amounted to 10.1 years and 10.9 years at September 30, 2024 and December 31, 2023, respectively.
Current wording
The weighted average life of HTM securities, adjusted for prepayments, amounted to 14.0 years and 14.3 years at March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 and December 31, 2024, the fair value of HTM securities was $34.5 million and $33.8 million, respectively. The effective duration of HTM securities amounted to 9.2 years and 9.0 years at March 31, 2025 and December 31, 2024, respectively.
Previous wording
AFS debt securities totaled $97.7 million at September 30, 2024, an increase of $5.9 million or 6.4 percent, compared to $91.8 million at December 31, 2023. This net increase was the result of:
Current wording
Equity securities totaled $10.7 million at March 31, 2025, an increase of $0.8 million or 8.7 percent, compared to $9.9 million at December 31, 2024. This net increase was the result of:
Previous wording
Securities with a carrying value of $11.8 million and $9.7 million at September 30, 2024 and December 31, 2023, respectively, were held at the FHLB or FRB and were pledged for borrowing purposes; however, all securities were unencumbered by borrowings at September 30, 2024 and December 31, 2023.
Current wording
Securities with a carrying value of $14.6 million and $11.5 million at March 31, 2025 and December 31, 2024, respectively, were held at the FHLB or FRB and were pledged for borrowing purposes; however, all securities were unencumbered by borrowings at March 31, 2025 and December 31, 2024.
Previous wording
Approximately 61 percent of the total debt security investment portfolio had a fixed rate of interest at September 30, 2024.
Current wording
Approximately 65 percent of the total debt security investment portfolio had a fixed rate of interest at March 31, 2025.
Previous wording
Total loans increased $45.3 million or 2.1 percent to $2.2 billion at September 30, 2024, compared to year end 2023. Commercial loans increased $91.3 million, offset by decreases of $32.6 million, $8.0 million, $3.6 million, $0.7 million, $0.7 million and $0.4 million in residential construction, residential mortgage, SBA held for sale, SBA PPP, SBA held for investment and consumer loans, respectively. Below is a table of the geographic loan allocation of the Bank’s Commercial loan portfolio at September 30, 2024:
Current wording
Below is a table of the geographic loan allocation of the Bank’s Commercial loan portfolio as of March 31, 2025:
Previous wording
Average loans increased $20.6 million or 1.0 percent to $2.2 billion the nine months ended September 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 residential construction, SBA, consumer and SBA PPP loans. The yield on the overall loan portfolio increased 52 basis points to 6.53 percent for the nine months ended September 30, 2024 when compared to the same period in the prior year.
Current wording
Average loans increased $128.6 million or 5.9 percent to $2.3 billion the three months ended March 31, 2025 from $2.2 billion for the same period in 2024. The increase in average loans was due to increases in average commercial, residential mortgages and consumer loans, partially offset by decreases in average residential construction, SBA and SBA PPP loans. The yield on the overall loan portfolio increased 24 basis points to 6.70 percent for the three months ended March 31, 2025 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 $14.6 million at September 30, 2024, a decrease of $3.6 million from $18.2 million at December 31, 2023. SBA 7(a) loans held for investment amounted to $37.9 million at September 30, 2024, a decrease of $0.7 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 9.05 percent for the nine months ended September 30, 2024, compared to 8.89 percent for the same period in the prior year. The Company sold $0.9 million of SBA loans during the three months ended ended September 30, 2024.
Current wording
SBA loans held for sale, carried at the lower of cost or market, amounted to $11.1 million at March 31, 2025, a decrease of $1.1 million from $12.2 million at December 31, 2024. SBA 7(a) loans held for investment amounted to $36.7 million at March 31, 2025, a decrease of $0.2 million from $36.9 million at December 31, 2024. The yield on SBA loans, which are generally floating and adjust quarterly to the Prime rate, was 7.70 percent for the three months ended March 31, 2025 compared to 9.17 percent for the same period in the prior year. The Company sold $1.2 million of SBA loans during the three months ended March 31, 2025.
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 $74.2 million and $75.6 million in SBA loans were sold but serviced by the Company at September 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.
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 $70.6 million and $72.6 million in SBA loans were sold but serviced by the Bank at March 31, 2025 and December 31, 2024, 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 $1.4 billion at September 30, 2024, an increase of $91.3 million from year end 2023. The yield on commercial loans was 6.49 percent for the nine months ended September 30, 2024, compared to 6.03 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 September 30, 2024, Commercial Mortgage – Owner Occupied, Commercial Mortgage – Nonowner Occupied, and Commercial Construction represent 25.2 percent, 18.6 percent and 6.0 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.
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 $1.5 billion at March 31, 2025, an increase of $75.2 million from year end 2024. The yield on commercial loans was 6.71 percent for the three months ended March 31, 2025, compared to 6.43 percent for the same period in 2024. 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 March 31, 2025, Commercial Mortgage – Owner Occupied, Commercial Mortgage – Nonowner Occupied and Commercial Construction represent 26.0 percent, 19.7 percent and 5.5 percent of the Company’s loan portfolio, respectively. The Company will generally not exceed a
Previous wording
Residential mortgage loans consist of loans secured by 1 to 4 family residential properties. These loans amounted to $623.5 million at September 30, 2024, a decrease of $8.0 million from year end 2023. Sales of conforming mortgage loans totaled $48.7 million for the nine months ended September 30, 2024, compared to sales of $44.8 million in the prior year period. The yield on residential mortgages was 6.00 percent for the nine months ended September 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 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 $654.3 million at March 31, 2025, an increase of $23.3 million from year end 2024. Sales of conforming mortgage loans totaled $7.5 million for the three months ended March 31, 2025, compared to sales of $12.2 million in the prior year period. The yield on residential mortgages was 6.22 percent for the three months ended March 31, 2025, compared to 5.90 percent for the same period in 2024. 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.
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 at September 30, 2024, a decrease of $0.4 million from year end 2023. The yield on consumer loans was 7.90 percent for the nine months ended September 30, 2024, compared to 7.51 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 $78.6 million at March 31, 2025, an increase of $1.9 million from year end 2024. The yield on consumer loans was 7.16 percent for the three months ended March 31, 2025, compared to 7.90 percent for the same period in 2024.
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 $98.7 million at September 30, 2024, a decrease of $32.6 million from year end 2023. The yield on residential construction loans was 8.38 percent for the nine months ended September 30, 2024, compared to 6.79 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 $73.4 million at March 31, 2025, a decrease of $17.5 million from year end 2024. The yield on residential construction loans was 9.46 percent for the three months ended March 31, 2025, compared to 7.86 percent for the same period in 2024.
Previous wording
Nonperforming loans were $13.0 million at September 30, 2024, a $6.2 million decrease from $19.2 million at December 31, 2023 and a $5.1 million decrease from $18.1 million at September 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 no loans past due 90 days or more and still accruing interest at September 30, 2024, compared to $0.9 million of these loans at December 31, 2023 and $0.3 of these loans million at September 30, 2023. Further, there was no other real estate owned at September 30, 2024 and at December 31, 2023, compared to $0.3 million of other real estate owned at September 30, 2023.
Current wording
Nonaccrual loans were $16.8 million at March 31, 2025, a $3.7 million increase from $13.1 million at December 31, 2024 and a $0.1 million decrease from $16.9 million at March 31, 2024, respectively. Since year end 2024, nonaccrual loans in the commercial and residential mortgage segments increased, offset by a decrease in nonaccrual loans in the SBA and residential construction segments. In addition, there was $1.1 million in loans past due 90 days or more and still accruing interest at March 31, 2025, compared to $0.8 million at December 31, 2024 and $0.1 million at March 31, 2024.
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 $14.8 million at September 30, 2024, a decrease of $0.3 million from $15.1 million at December 31, 2023.
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.
Previous wording
The allowance for credit losses totaled $27.0 million at September 30, 2024, compared to $25.9 million at December 31, 2023 and at September 30, 2023, with a resulting allowance to total loan ratio of 1.22 percent at September 30, 2024 and 1.19 percent at both December 31, 2023 and September 30, 2023. Net charge-offs amounted to $0.8 million for the nine months ended September 30, 2024, compared to net charge-offs of $1.5 million for the same period in 2023.
Current wording
The allowance for credit losses totaled $27.7 million at March 31, 2025, compared to $26.8 million at December 31, 2024 and $26.1 million at March 31, 2024, with a resulting allowance to total loan ratio of 1.18 percent at both March 31, 2025 and December 31,2024 and 1.20 percent at March 31, 2024. Net charge-offs amounted to $0.5 million for the three months ended March 31, 2025, compared to net charge-offs of $0.4 million for the same period in 2024.
Previous wording
The Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated expected losses. Adjustments to the reserve are made through provision for credit losses and applied to the reserve which is classified in Other liabilities. At September 30, 2024, the commitment reserve totaled $0.7 million, compared to $0.6 million at December 31, 2023.
Current wording
The Company maintains a reserve for unfunded loan commitments at a level that Management believes is adequate to absorb estimated expected losses. Adjustments to the reserve are made through provision for credit losses and applied to the reserve which is classified in Other liabilities. At March 31, 2025 and December 31, 2024, the commitment reserve totaled $0.6 million.
Previous wording
Total deposits increased $122.0 million to $2.0 billion at September 30, 2024 from year-end 2023. This increase was due to increases of $131.2 million in time deposits, $27.1 million in savings deposits, $13.1 million in interest bearing demand deposits and $4.3 million in noninterest-bearing demand deposits, partially offset by a decrease of $53.7 million in brokered deposits. The change in the composition of the portfolio from December 31, 2023 reflects a 30.8 percent increase in time deposits, 5.5 percent increase in savings deposits, 4.2 percent increase in interest bearing demand deposits and a 1.0 percent increase in noninterest-bearing demand deposits, partially offset by a 20.0 percent decrease in brokered deposits.
Current wording
Total deposits increased $75.1 million to $2.2 billion at March 31, 2025 from year end 2024. This increase was due to increases of $47.1 million in time deposits, $29.7 million in interest-bearing demand deposits, $13.6 million in noninterest-bearing demand deposits and $0.3 million in savings deposits, partially offset by a decrease of $15.6 million in brokered deposits. The change in the composition of the portfolio from December 31, 2024 reflects a 7.5 percent increase in time deposits, 9.2 percent increase in interest-bearing demand deposits, 3.1 percent increase in noninterest-bearing demand deposits and a 0.1 percent increase in savings deposits, partially offset by a 7.2 percent decrease in brokered deposits.
Previous wording
As of September 30, 2024, 19.1 percent of total deposits were uninsured or uncollateralized. The Company’s deposit composition as of September 30, 2024, consisted of 20.7 percent in noninterest-bearing demand deposits, 15.9 percent in interest-bearing demand deposits, 27.4 percent in savings deposits and 36.0 percent in time deposits.
Current wording
As of March 31, 2025, 20.0 percent of total deposits were uninsured or uncollateralized. The Company’s deposit composition as of March 31, 2025, consisted of 20.9 percent in noninterest-bearing demand deposits, 17.4 percent in interest-bearing demand deposits, 22.7 percent in savings deposits and 39.0 percent in time deposits.
Previous wording
Borrowed funds and subordinated debentures totaled $277.1 million and $366.7 million at September 30, 2024 and December 31, 2023, respectively, and are broken down in the following table:
Current wording
Borrowed funds and subordinated debentures totaled $253.6 million and $230.8 million at March 31, 2025 and December 31, 2024, respectively, and are broken down in the following table:
Previous wording
In September 2024, the FHLB issued a $175.0 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.
Current wording
In March 2025, the FHLB issued a $220.0 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
For the nine months ended September 30, 2024, average FHLB Borrowings were $140 million with a weighted average cost of 3.77%.
Current wording
For the three months ended March 31, 2025, average FHLB Borrowings were $108.8 million with a weighted average cost of 3.64%.
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 6.605 percent at September 30, 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 6.155 percent at March 31, 2025 and 6.189 percent at December 31, 2024.
Previous wording
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 the 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 and 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.
Current wording
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 Asset and Liability Management Committee (“ALCO”) manages this risk. The principal objectives of ALCO 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 and capital and liquidity requirements and actively manage risk within Board-approved guidelines. ALCO reviews the maturities and repricing of loans, investments, deposits and borrowings, cash flow needs, current market conditions and interest rate levels.
Previous wording
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. Our liquidity is monitored by management and the Board of Directors, which reviews historical funding requirements, our 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. Our goal is to maintain sufficient asset-based liquidity to cover potential funding requirements in order to minimize our dependence on volatile and potentially unstable funding markets.
Current wording
reviews historical funding requirements, our 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. Our goal is to maintain sufficient asset-based liquidity to cover potential funding requirements in order to minimize our dependence on volatile and potentially unstable funding markets.
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 September 30, 2024, the balance of cash and cash equivalents was $194.5 million, a decrease of $0.3 million from December 31, 2023. A discussion of on- and off-balance sheet liquidity 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 March 31, 2025, the balance of cash and cash equivalents was $211.6 million, an increase of $31.2 million from December 31, 2024. A discussion of on- and off-balance sheet liquidity follows.
Previous wording
Consistent with our goal to operate as a sound and profitable financial organization, Unity Bancorp, Inc. and Unity Bank actively seek to maintain our well capitalized status in accordance with regulatory standards. As of Septemeber 30, 2024, Unity Bank exceeded all capital requirements of the federal banking regulators and was considered well capitalized.
Current wording
Consistent with our goal to operate as a sound and profitable financial organization, Unity Bancorp, Inc. and Unity Bank actively seek to maintain our well capitalized status in accordance with regulatory standards. As of March 31, 2025, Unity Bank exceeded all capital requirements of the federal banking regulators and was considered well capitalized.
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Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
ITEM 2Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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. Our liquidity is monitored by Management and the Board of Directors, which
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
(A) Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis, assuming a federal tax rate of 21 percent.
Previous report — wording carried elsewhere
(B) The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.
Previous report — wording carried elsewhere
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.