UNITY BANCORP INC /NJ/ - Annual Report: 2008 (Form 10-K)
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
FOR
ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO
SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark
One)
|
x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31,
2008
OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period from ________
to
________
Commission
file number 1-12431
Unity
Bancorp, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
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New
Jersey
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22-3282551
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|
(State
or Other Jurisdiction of Incorporation or Organization)
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(I.R.S.
Employer Identification No.)
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64 Old
Highway 22,
Clinton, NJ
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08809
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code (908)
730-7630
Securities registered pursuant to
Section 12(b) of the Exchange Act:
| Common Stock, no par value |
NASDAQ
|
|
(Title
of Each Class)
|
(Name
of Exchange on Which
Registered)
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Securities registered pursuant to Section 12(g) of
the Exchange Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o
No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o
No x
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o Accelerated
filer o Non-accelerated
filer o Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2
of the Exchange Act. Yes o
No x
As of
June 30, 2008, the aggregate market value of the registrant’s Common Stock, no
par value per share, held by non-affiliates of the registrant was $37,629,253
and 5,414,281 shares of the Common Stock were outstanding to
non-affiliates. As of March 1, 2009, 7,119,438 shares of the
registrant’s Common Stock were outstanding.
Documents
incorporated by reference:
Portions
of Unity Bancorp’s Annual Report to Shareholders for the fiscal year ended
December 31, 2008 are incorporated by reference into Parts I, II and IV of this
Annual Report on Form 10-K.
Portions
of Unity Bancorp’s Proxy Statement for the Annual Meeting of Shareholders to be
filed no later than 120 days from December 31, 2008 are incorporated by
reference into Part III of this Annual Report on Form 10-K.
Index
to Form 10-K
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Page
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Part
I
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Item1.
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Business
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a) General
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2
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b) Statistical
information
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7
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Item
1A.
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Risk
Factors
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7
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Item
1B.
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Unresolved
Staff Comments
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11
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Item
2.
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Properties
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11
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Item
3.
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Legal
Proceedings
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12
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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12
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Part
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters
and
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12
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Issuer
Purchases of Equity Securities
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Item
6.
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Selected
Financial Data
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13
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Item
7.
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Management's
Discussion and Analysis of Financial Condition and
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13
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Results
of Operations
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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13
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Item
8.
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Financial
Statements and Supplementary Data
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13
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and
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14
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Financial
Disclosure
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Item
9A(T).
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Controls
and Procedures
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14
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Item
9B.
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Other
Information - None
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14
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Part
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance;
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Compliance
with Section 16(a) of the Exchange Act
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14
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Item
11.
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Executive
Compensation
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14
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management
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And
Related Stockholder Matters
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14
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Item
13.
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Certain
Relationships and Related Transactions and Director
Independence
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15
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Item
14.
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Principal
Accountant Fees and Services
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15
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Part
IV
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Item
15.
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Exhibits
and Financial Statement Schedules
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15
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Signatures
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18
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PART
I
Item
1. Business:
a) General
Unity
Bancorp, Inc., (the "Company" or "Registrant"), is a bank holding company
incorporated under the laws of the State of New Jersey to serve as a holding
company for Unity Bank (the “Bank”). The Company was
originally organized under the laws of the State of Delaware in
1994. Subsequently, in 2002, the Company effected a re-incorporation
merger to become a New Jersey corporation. The Company was organized
at the direction of the Board of Directors of the Bank for the purpose of
acquiring all of the capital stock of the Bank. Pursuant to the New
Jersey Banking Act of 1948 (the "Banking Act"), and pursuant to approval of the
shareholders of the Bank, the Company acquired the Bank and became its holding
company on December 1, 1994. The only significant activity of the
Company is ownership and supervision of the Bank. The Company also
owns 100% of the common equity of Unity (NJ) Statutory Trust II and Unity (NJ)
Statutory Trust III. The trusts have issued $10.3 million and $5.2
million of preferred securities to investors, respectively.
The Bank
opened for business on September 16, 1991. The Bank received its
charter from the New Jersey Department of Banking and Insurance on September 13,
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 fourteen New Jersey branches located in Clinton,
Colonia, Edison, Flemington, Highland Park, Linden, Middlesex, North Plainfield,
Phillipsburg, Scotch Plains, South Plainfield, Springfield, Union and
Whitehouse. In addition, the Bank has two Pennsylvania branches: one
located in Forks Township and a second branch on William Penn Highway in
Easton. The Bank's primary service area encompasses the Route
22/Route 78 corridors between the Forks Township and Easton, Pennsylvania
offices and its Linden, New Jersey branch.
The principal executive offices of the
Company are located at 64 Old Highway 22, Clinton, New Jersey 08809, and the
telephone number is (908) 730-7630. The Company’s website address is
www.unitybank.com.
Business
of the Company
The
Company's primary business is ownership and supervision of the
Bank. 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
and regular savings accounts. 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. The
Company engages in a wide range of lending activities and offers commercial,
Small Business Administration (“SBA”), consumer, mortgage, home equity and
personal loans.
Service
Areas
The
Company's primary service area is defined as the neighborhoods served by the
Bank's offices. The Bank's main office, located in Clinton, NJ, in
combination with its Flemington and Whitehouse offices, serves the greater area
of Hunterdon County. The Bank's North Plainfield office serves those
communities located in the northern, eastern and central parts of Somerset
County and the southernmost communities of Union County. The Bank's
Scotch Plains, Linden, Union, and Springfield offices serve the majority of the
communities in Union County and the southwestern communities of Essex
County. The offices in Middlesex, South Plainfield, Highland Park,
Edison, and Colonia Township extend the Company's service area into Middlesex
County. The Bank’s Phillipsburg office serves Warren
County. The Bank’s Forks Township office and William Penn office
serve Northampton County, Pennsylvania.
Competition
The
Company is located in an extremely competitive area. The Company's
service area is already serviced by major regional banks, large thrift
institutions and a variety of credit unions. In addition, since
passage of the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the
“Modernization Act”), securities firms and insurance companies have been allowed
to acquire or form financial institutions, thereby increasing competition in the
financial services market. Most of the Company's competitors have
substantially more capital; and, therefore, greater lending limits than the
Company. The Company's competitors generally have established
positions in the service area and have greater resources than the Company with
which to pay for advertising, physical facilities, personnel and interest on
deposited funds. The Company relies on the competitive pricing of its
loans, deposits and other services, as well as its ability to provide local
decision-making and personal service in order to compete with these larger
institutions.
2
Employees
At
December 31, 2008, the Company employed 163 full-time and 8 part-time
employees. None of the Company's employees are represented by any
collective bargaining units. The Company believes that its relations
with its employees are good.
Executive
Officers of Registrant
The
following table sets forth certain information as of December 31, 2008,
regarding each executive officer of the Company who is not also a
director.
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Name,
Age and Position
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Officer
Since
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Principal
Occupation During Past
Five Years
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John
Kauchak, 55,
Chief
Deposit Officer and Executive Vice President of the Company and
Bank
|
2002
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Previously,
Mr. Kauchak was the head of Deposit Operations for Unity Bank from 1996 to
2002.
|
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Michael
F. Downes, 46,
Chief
Lending Officer and Executive Vice President of the Company and
Bank
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2001
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Previously,
Mr. Downes was a Commercial Lending Officer for Unity Bank from 1996 to
2001.
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Alan
J. Bedner, 38,
Chief
Financial Officer and Executive Vice President of the Company and
Bank
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2003
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Previously,
Mr. Bedner was Controller for Unity Bank from 2001 to
2003.
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SUPERVISION
AND REGULATION
General
Supervision and Regulation
Bank
holding companies and banks are extensively regulated under both federal and
state law. These laws and regulations are intended to protect
depositors, not stockholders. To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to the particular statutory and regulatory
provisions. Any change in the applicable law or regulation may have a
material effect on the business and prospects of the Company and the
Bank. Over the past several years, a number of legislative proposals
have been debated in Congress concerning modernization of the nation's financial
system. Many of these proposals would substantially alter the current
regulatory framework, particularly as it relates to bank holding companies and
their powers. Management of the Company is unable to predict, at this
time, which, if any, of these legislative proposals may ultimately be adopted
and the impact of any such regulatory proposals on the business of the
Company.
General
Bank Holding Company Regulation
General: As
a bank holding company registered under the Bank Holding Company Act of 1956, as
amended, (the "BHCA"), the Company is subject to the regulation and supervision
of the Federal Reserve Board (the “FRB”). The Company is required to
file with the FRB annual reports and other information regarding its business
operations and those of its subsidiaries. Under the BHCA, the
Company's activities and those of its subsidiaries are limited to banking,
managing or controlling banks, furnishing services to or performing services for
its subsidiaries or engaging in any other activity which the FRB determines to
be so closely related to banking or managing or controlling banks as to be
properly incident thereto.
The BHCA
requires, among other things, the prior approval of the FRB in any case where a
bank holding company proposes to; (i) acquire all or substantially all of the
assets of any other bank; (ii) acquire direct or indirect ownership or control
of more than 5% of the outstanding voting stock of any bank (unless it owns a
majority of such bank's voting shares); or (iii) merge or consolidate with any
other bank holding company. The FRB will not approve any acquisition,
merger or consolidation that would have a substantially anti-competitive effect,
unless the anti-competitive impact of the proposed transaction is clearly
outweighed by a greater public interest in meeting the convenience and needs of
the community to be served. The FRB also considers capital adequacy
and other financial and managerial resources and future prospects of the
companies and the banks concerned, together with the convenience and needs of
the community to be served, when reviewing acquisitions or mergers.
3
The BHCA
also generally prohibits a bank holding company, with certain limited
exceptions, from; (i) acquiring or retaining direct or indirect ownership or
control of more than 5% of the outstanding voting stock of any company which is
not a bank or bank holding company; or (ii) engaging directly or indirectly in
activities other than those of banking, managing or controlling banks, or
performing services for its subsidiaries, unless such non-banking business is
determined by the FRB to be so closely related to banking or managing or
controlling banks as to be properly incident thereto. In making such
determinations, the FRB is required to weigh the expected benefits to the
public; such as, greater convenience, increased competition or gains in
efficiency, against the possible adverse effects; such as, undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices.
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. 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. Finally, the
Modernization Act imposes certain new privacy requirements on all financial
institutions and their treatment of consumer information. At this
time, the Company has elected not to become a financial holding
company.
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”)
insurance fund in the event the depository institution becomes in danger of
default. Under a policy of the FRB with respect to bank holding
company operations, 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. The FRB also has the authority under the BHCA to
require a bank holding company to terminate any activity or to relinquish
control of a non-bank subsidiary upon the FRB's determination that such activity
or control constitutes a serious risk to the financial soundness and stability
of any bank subsidiary of the bank holding company.
Capital Adequacy Guidelines
for Bank Holding Companies: The FRB has adopted risk-based
capital guidelines for bank holding companies. The risk-based capital
guidelines are designed to make regulatory capital requirements more sensitive
to differences in risk profile among banks and bank holding companies, to
account for off-balance sheet exposure and to minimize disincentives for holding
liquid assets. Under these guidelines, assets and off-balance sheet
items are assigned to broad-risk categories, each with appropriate
weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet
items.
The
risk-based guidelines apply on a consolidated basis to bank holding companies
with consolidated assets of $500 million or more. The minimum ratio
of total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least 4% of
the total capital is required to be "Tier I," consisting of common stockholders'
equity and certain preferred stock and other qualifying hybrid instruments, less
certain goodwill items and other intangible assets. The remainder,
"Tier II Capital," may consist of; (a) the allowance for loan losses of up to
1.25% of risk-weighted assets; (b) excess of qualifying preferred stock; (c)
hybrid capital instruments; (d) debt; (e) mandatory convertible securities; and
(f) qualifying subordinated debt. Total capital is the sum of Tier I
and Tier II capital, less reciprocal holdings of other banking organizations'
capital instruments, investments in unconsolidated subsidiaries and any other
deductions as determined by the FRB (determined on a case-by-case basis or as a
matter of policy after formal rule-making).
Bank
holding company assets are given risk-weights of 0%, 20%, 50% and
100%. In addition, certain off-balance sheet items are given similar
credit conversion factors to convert them to asset-equivalent amounts to which
an appropriate risk-weighting will apply. These computations result
in the total risk-weighted assets. Most loans are assigned to the
100% risk category, except for performing first-mortgage loans that are fully
secured by residential property, which carry a 50%
risk-weighting. Most investment securities (including, primarily,
general obligation claims of states or other political subdivisions of the
United States) are assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% risk-weighting, and direct obligations of the
U.S. Treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weighting. In converting off-balance
sheet items, direct credit substitutes (including general guarantees and standby
letters of credit backing financial obligations) are given a 100%
risk-weighting. Transaction-related contingencies, such as standby
letters of credit backing non-financial obligations and undrawn commitments
(including commercial credit lines with an initial maturity of more than one
year), have a 50% risk-weighting. Short-term commercial letters of
credit have a 20% risk-weighting and certain short-term unconditionally
cancelable commitments have a 0% risk-weighting.
4
In
addition to the risk-based capital guidelines, the FRB has adopted a minimum
Tier I capital (leverage) ratio, under which a bank holding company must
maintain a minimum level of Tier I capital to average total consolidated assets
of at least 3% in the case of a bank holding company that has the highest
regulatory examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain
a leverage ratio of at least 100 to 200 basis points above the stated
minimum.
The Company is currently in compliance
with these minimum Federal capital requirements.
General
Bank Regulation
As a New
Jersey-chartered commercial bank, the Bank is subject to the regulation,
supervision, and control of the New Jersey Department of Banking and Insurance
(the “Department”). As an FDIC-insured institution, the Bank is
subject to regulation, supervision and control of the FDIC, an agency of the
federal government. The regulations of the FDIC and the Department
affect virtually all activities of the Bank, including the minimum level of
capital that the Bank must maintain, the ability of the Bank to pay dividends,
the ability of the Bank to expand through new branches or acquisitions and
various other matters.
Insurance
of Deposits: During the third quarter
of 2008, Congress instituted the Emergency Economic Stabilization Act (the
"Act") to address the dysfunctional credit markets. This Act authorized
the Troubled Asset Relief Program (“TARP”) which provided capital to financial
institutions and purchased troubled mortgages from institutions. The U.S.
Department of Treasury’s Capital Purchase Program (“CPP”) authorized the
Treasury to purchase newly issued preferred stock and common stock purchase
warrants from financial institutions or their holding companies. In addition,
the Act authorized the temporary increase in the FDIC insurance limit to $250
thousand from $100 thousand per account. In addition, the FDIC implemented
a program to insure all deposits held in noninterest-bearing transactional
accounts, regardless of amount, at institutions which do not opt out of the
program and which pay an additional assessment to the FDIC. Both
increases in deposit insurance will expire on December 31, 2009, unless
extended, and the prior limits, described below, will go back into
effect. The Bank elected not to opt out of this program, and is
paying the required assessment.
Prior to
the fall of 2008, the Bank's deposits were insured up to a maximum of $100,000
per depositor ($250,000 per IRA account) under the Deposit Insurance Fund of the
FDIC. Pursuant to the Federal Deposit Insurance Corporation
Improvements Act of 1991 ("FDICIA"), the FDIC has established a risk-based
assessment system. Premium assessments under this system are based
upon; (i) the probability that the insurance fund will incur a loss with respect
to the institution; (ii) the likely amount of the loss; and (iii) the revenue
needs of the insurance fund. To effectuate this system, the FDIC has
developed a matrix that sets the assessment premium for a particular institution
in accordance with its capital level and overall rating by the primary
regulator.
The FDIC
has significantly increased deposit insurance assessment rates, commencing in
the second quarter of 2009. As increased, the adjusted base
assessment rates will range from 12 to 77.5 basis points of deposits, a
significant increase over premium rates for the past several years. In addition,
the Bank will pay a special assessment of 10 basis points of the amount of
deposits in excess of $250,000 held in non-interest bearing transactional
accounts under the enhanced insurance program discussed
above. Finally, the FDIC has proposed a special assessment equal to
twenty (20) basis points of insured deposits as of June 30, 2009, to be paid on
September 30, 2009. This proposal has not yet been finalized. The
FDIC in this proposal has also reserved the right to impose one or more
additional special assessments of ten (10) basis points if needed to
recapitalize the Deposit Insurance Fund.
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.
On
December 5, 2008, the Company completed a transaction with the U.S. Treasury
under the CPP through which the Treasury purchased $20.6 million in preferred
stock from the Company. As part of the CPP, the Company’s future ability to pay
cash dividends is limited for so long as the Treasury holds the preferred stock.
As so limited the Company may not increase its quarterly cash dividend above
$.05 per share, the quarterly rate in effect at the time the CPP
program was announced, without the prior approval of the
Treasury.
Sarbanes-Oxley Act
On July
30, 2002, the Sarbanes-Oxley Act (“SOX”) was enacted. SOX is not a
banking law, but applies to all public companies, including the
Company. The stated goals of SOX are to increase corporate
responsibility, to provide for enhanced penalties for accounting and auditing
improprieties at publicly traded companies and to protect investors by improving
the accuracy and reliability of corporate disclosures pursuant to the securities
laws. SOX is the most far-reaching U.S. securities legislation
enacted in some time. SOX generally applies to all companies, both
U.S. and non-U.S., that file or are required to file periodic reports with the
Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act
of 1934, as amended.
5
SOX includes
very specific additional disclosure requirements and new corporate governance
rules and requires the SEC and securities exchanges to adopt extensive
additional disclosure, corporate governance and other related rules and mandates
further studies of specific issues by the SEC. SOX represents
significant federal involvement in matters traditionally left to state
regulatory systems; such as, the regulation of the accounting profession, and to
state corporate law; such as, the relationship between a board of directors and
management and between a board of directors and its committees.
SOX
addresses, among other matters:
|
·
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Audit
Committees;
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|
·
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certification
of financial statements by the Chief Executive Officer and the Chief
Financial Officer;
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·
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the
forfeiture of bonuses or other incentive-based compensation and profits
from the sale of an issuer’s securities by directors and senior officers
in the twelve-month period following initial publication of any financial
statements that later require
restatement;
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·
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a
prohibition on insider trading during pension plan black-out
periods;
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·
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disclosure
of off-balance sheet transactions;
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·
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a
prohibition on personal loans to officers and directors, unless subject to
Federal Reserve Regulation O;
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|
·
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expedited
filing requirements for Form 4 statements of changes of beneficial
ownership of securities required to be filed by officers, directors and
10% shareholders;
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|
·
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disclosure
of whether or not a company has adopted a code of
ethics;
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|
·
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“real
time” filing of periodic reports;
|
|
·
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auditor
independence; and
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|
·
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various
increased criminal penalties for violations of securities
laws.
|
Complying
with the requirements of SOX as implemented by the SEC will increase our
compliance costs and could make it more difficult to attract and retain board
members.
The
American Recovery and Reinvestment Act of 2009
The
American Recovery and Reinvestment Act of 2009 (the “ARRA”) became law on
February 17, 2009. The main purpose of the ARRA is to provide fiscal stimulus to
the U.S. economy and help foster job creation and economic activity. However,
portions of the ARRA amend the Emergency Economic Stabilization Act (discussed
above) and the terms of the CPP, and impose new requirements on institutions
participating in the CPP, like the Company. Among other things, these
provisions require substantial new restrictions on executive compensation,
prohibiting severance payments regardless of the cause of an executive’s
departure. The ARRA also imposes new certification requirements on management of
an institution participating in the CPP, and new review requirements on the
compensation committee of such an institution. While management cannot yet
assess the impact of these provisions, they may make it more difficult for the
Company to attract and retain senior management.
6
b) Statistical
information
The
table below provides a cross-reference to portions of Unity Bancorp. Inc.’s
Annual Report to Shareholders for the year ended December 31, 2008 (Exhibit 13
hereto), which, to the extent indicated, is incorporated by reference
herein. Information that is not applicable is indicated by
(N/A):
|
Annual
Report
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|||||||||||||||
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Description of Financial
Data
|
Pages
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| I. |
Distribution
of Assets, Liabilities, and Stockholders' Equity; Interest
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Rates
and Interest Differential
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|||||||||||||||
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A.
|
Analysis
of Net Interest Earnings
|
9 | |||||||||||||
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B.
|
Average
Balance Sheets
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12 | |||||||||||||
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C.
|
Rate/Volume
Analysis
|
14 | |||||||||||||
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II.
|
Investment
Portfolio
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||||||||||||||
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A.
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Book
value of investment securities
|
38 | |||||||||||||
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B.
|
Investment
securities by range of maturity with corresponding average
yields
|
38 | |||||||||||||
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C.
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Securities
of issuers exceeding ten percent of stockholders' equity
|
N/A | |||||||||||||
|
III.
|
Loan
Portfolio
|
||||||||||||||
|
A.
|
Types
of loans
|
17 | |||||||||||||
|
B.
|
Maturities
and sensitivities of loans to changes in interest rates
|
18 | |||||||||||||
|
C.
|
Risk
elements
|
||||||||||||||
| 1 | ) |
Nonaccrual,
past due and restructured loans
|
19 | ||||||||||||
| 2 | ) |
Potential
problem loans
|
19 | ||||||||||||
| 3 | ) |
Foreign
outstandings
|
N/A | ||||||||||||
| 4 | ) |
Loan
concentrations
|
18 | ||||||||||||
|
D.
|
Other
interest-bearing assets
|
N/A | |||||||||||||
|
IV.
|
Summary
of Loan Loss Experience
|
||||||||||||||
|
A.
|
Analysis
of the allowance for loan losses
|
20 | |||||||||||||
|
B.
|
Allocation
of the allowance for loan losses
|
21 | |||||||||||||
| V. |
Deposits
|
||||||||||||||
|
A.
|
Average
amount and average rate paid on major categories of
deposits
|
12 | |||||||||||||
|
B.
|
Other
categories of deposits
|
N/A | |||||||||||||
|
C.
|
Deposits
by foreign depositors in domestic offices
|
N/A | |||||||||||||
|
D.
|
Time
deposits of $100,000 or more by remaining maturity
|
42 | |||||||||||||
|
E.
|
Time
deposits of $100,000 or more by foreign offices
|
N/A | |||||||||||||
|
VI.
|
Return
on Equity and Assets
|
57 | |||||||||||||
|
VII.
|
Short-term
Borrowings
|
||||||||||||||
|
A.
|
Amounts
outstanding
|
42 | |||||||||||||
|
B.
|
Maximum
amount of borrowings in each category outstanding at any
month-end
|
42 | |||||||||||||
|
C.
|
Average
amount outstanding
|
42 | |||||||||||||
Item
1A. Risk Factors:
Our business, financial condition,
results of operations and the trading prices of our securities can be materially
and adversely affected by many events and conditions including the
following:
7
Risks
affecting Our Business:
The
nationwide recession may adversely affect our business by reducing real estate
values in our trade area and stressing the ability of our customers to repay
their loans.
Our New
Jersey trade area, like the rest of the United States, is currently experiencing
economic contraction. As a result, many companies have experienced reduced
revenues and have laid off employees. These factors have stressed the ability of
both commercial and consumer customers to repay their loans, and have, and may
in the future, result in higher levels of nonaccrual loans. In
addition, real estate values have declined in our trade area. Since the majority
of our loans are secured by real estate, declines in the market value of real
estate impact the value of the collateral securing our loans, and could lead to
greater losses in the event of defaults on loans secured by real
estate.
Our
FDIC deposit insurance premiums have increased and may continue to increase,
substantially increasing our noninterest expense.
During
2008 and 2009, the FDIC has significantly increased its assessments for deposit
insurance due to the weakness in the economy and the increased number of bank
failures. In 2007, we paid $67 thousand in deposit insurance
assessments, and in 2008 this increased to $589 thousand. The FDIC has already
announced an increased assessment, to go into effect for the second quarter of
2009, which will raise insurance premiums for the healthiest banks by 7 basis
points. Banks like the Bank that have opted to remain eligible for the FDIC’s
increased insurance program for noninterest bearing deposit must also
pay an assessment of 10 basis points of the amount of noninterest bearing
deposits in excess of $250,000. Finally, the FDIC has proposed a
special assessment of 20 basis points of insured deposits as of June 30, 2009,
to be paid September 30, 2009, with the possibility of an additional 10 basis
point special assessment later in 2009. This proposal has not yet been
finalized. Had the special assessment been in effect on our deposits at December
31, 2008, we would have paid $1.4 million. These additional costs will adversely
affect our results of operations.
Our
non-performing assets have substantially increased over the past year, and this
has, and will continue, to affect our results of operations.
Over the
course of 2008, our total non-performing assets have increased to $16.8 million,
or 2.35% of our total loans, from $5.6 million, or 0.93% of our total loans. In
addition, our loans that are 90 days past due and still accruing interest have
also increased to $2.5 million from $155 thousand. The increase in
non-performing assets and loans past due 90 days and still accruing interest
reflects the general economic slowdown in our marketplace and its effect on our
borrowers, and our focus on SBA lending, which may entail greater credit risk
than other types of lending. This deterioration in credit quality has negatively
impacted our results of operations, through additional provisions for loan
losses and reduced interest income, and will continue to impact our performance
until these assets are resolved. In addition, future increases in our
non-performing assets will further negatively affect our results of operations.
We can give you no assurance that our non-performing assets will not increase
further.
We
are subject to interest rate risk and variations in interest rates may
negatively affect our financial performance; in addition dislocation and
volatility in the credit markets may negatively affect the value of our
assets.
Beginning in mid 2007, there has
been significant turmoil and volatility in global financial
markets. Nationally, we have seen economic factors such as a
recession, a rise in unemployment, and a weakened US dollar. Recent market
uncertainty regarding the financial sector has increased. In addition
to the impact on the economy, changes in interest rates, in the shape of the
yield curve, or in valuations in the debt or equity markets or disruptions in
the liquidity or other functioning of financial markets, all of which have been
seen recently, could directly impact us in one or more of the following
ways:
· Net
interest income, the difference between interest earned on our interest-earning
assets and interest paid on interest-bearing liabilities, represents a
significant portion of our earnings. Both increases and decreases in
the interest rate environment may reduce our profits. We expect
that we will continue to realize income from the spread between the interest we
earn on loans, securities and other interest-earning assets, and the interest we
pay on deposits, borrowings and other interest-bearing
liabilities. The net interest spread is affected by the differences
between the maturity and repricing characteristics of our interest-earning
assets and interest-bearing liabilities. Our interest-earning assets
may not reprice as slowly or rapidly as our interest-bearing
liabilities.
· The
market value of our securities portfolio may decline and result in
other-than-temporary charges or realized losses on the sale of
securities. The value of securities in our portfolio are
affected by factors that impact the U.S. securities market in general as
well specific financial sector factors such as the deterioration of the
credit worthiness of issuers. Further declines in these sectors may
result in future other-than-temporary impairment charges and/or realized losses
on the sale of securities.
· Asset
quality may deteriorate as borrowers become unable to repay their
loans.
8
· Lack
of liquidity within the capital markets which we use to raise funds to support
our business transactions may impact the cost of funds or our ability to raise
funds.
Due
to the current state of the yield curve, our net interest margin and net
interest spread have declined. Continued declines in our net interest
margin and net interest spread will negatively impact our results of
operations.
During 2008, the yield curve,
particularly short-term interest rates, has fallen as the Federal Open Market
Committee (“FOMC”) has intervened and lowered interest rates to encourage
economic growth. This has impacted our results of operations, as our
variable rate earning assets have repriced quicker than our funding (our
deposits).
Our
earnings may not continue to grow if we are unable to successfully attract core
deposits and lending opportunities and exploit opportunities to generate
fee-based income.
We have
experienced significant growth, and our future business strategy is to continue
to expand. Historically, the growth of our loans and deposits has
been the principal factor in our increase in net interest income. In
the event that we are unable to execute our business strategy of continued
growth in loans and deposits, our earnings could be adversely
impacted. Our ability to continue to grow depends, in part, upon our
ability to expand our market share, to successfully attract core deposits and
identify loan and investment opportunities, as well as opportunities to generate
fee-based income. Our ability to manage growth successfully will also
depend on whether we can continue to efficiently fund asset growth and maintain
asset quality and cost controls, as well as on factors beyond our control; such
as, economic conditions and interest rate trends.
Our
growth-oriented business strategy could be adversely affected if we are not able
to attract and retain skilled employees and manage our expenses.
We expect
to continue to experience growth in the scope of our operations; and,
correspondingly, in the number of our employees and customers. We may
not be able to successfully manage our business as a result of the strain on our
management and operations that may result from this growth. Our
ability to manage this growth will depend upon our ability to continue to
attract, hire and retain skilled employees. Our ability to attract
and retainer senior management may be adversely affected by the restrictions
imposed upon us under the CPP, as revised by the American Reinvestment and
Recovery Act. Our success will also depend on the ability of our
officers and key employees to continue to implement and improve our operational
and other systems, to manage multiple, concurrent customer relationships and to
hire, train and manage our employees.
Curtailment
of the Small Business Administration loan program could negatively affect the
Company; the absence of a secondary market for SBA loans could negatively affect
our operation.
The Company has historically been a
participant in various SBA lending programs, and the Company’s activity under
these programs has contributed significantly to its net
income. Proposals have been made from time to time to curtail the
Federal Government’s funding of the SBA loan programs. Any reduction
in SBA funding for its loan programs could negatively affect our results of
operations.
Historically, the Company has sold into
the secondary market substantially all of the guaranteed portion of its loans
originated under the SBA’s loan programs. However, starting in the fall of 2008,
the secondary market for SBA loans lost liquidity, and SBA loan program
participants like the Company have had difficulty selling SBA loans in the
secondary market. To address the situation, the Company must either reduce the
number of SBA loans it originates, which could negatively impact its earnings,
or keep the loans in its portfolio, increasing its asset base and stressing its
capital. Either alternative may adversely affect the Company and its results of
operations.
There
is a risk that the SBA will not honor their guarantee.
The
Company has historically been a participant in various SBA lending programs
which guarantee up to 85% of the principal on the underlying loan. There
is a risk that the SBA will not honor their guarantee if a loan is not
underwritten to SBA guidelines. The Company follows the underwriting
guidelines of the SBA, however our ability to manage this will depend on our
ability to continue to attract, hire and retain skilled employees who have
knowledge of the SBA program.
9
Risks
Related to the Banking Industry:
Changes
in local economic conditions could adversely affect our loan
portfolio.
Our success depends to a great extent
upon the general economic conditions of the local markets that we
serve. Unlike larger banks that are more geographically diversified,
we provide banking and financial services primarily to customers in the six
counties in the New Jersey market and one county in Pennsylvania in which we
have branches, so any decline in the economy of New Jersey or eastern
Pennsylvania could have an adverse impact on us.
Our loans, the ability of borrowers to
repay these loans, and the value of collateral securing these loans are impacted
by economic conditions. In addition, a large portion of our income is
generated from gains on the sale of SBA loans and the related
servicing. Our financial results, the credit quality of our existing
loan portfolio, and the ability to generate new loans with acceptable yield and
credit characteristics may be adversely affected by changes in prevailing
economic conditions, including declines in real estate values, changes in
interest rates, adverse employment conditions and the monetary and fiscal
policies of the federal government. Although economic conditions in
our primary market area are strong and have aided our recent growth, we cannot
assure you that these conditions will continue to prevail. We cannot
assure you that positive trends or developments discussed in this prospectus
will continue or that negative trends or developments will not have a
significant adverse effect on us.
There
is a risk that we may not be repaid in a timely manner, or at all, for loans we
make.
The risk
of non-payment (or deferred or delayed payment) of loans is inherent in
commercial banking. Such non-payment, or delayed or deferred payment
of loans to the Company, if they occur, may have a material adverse effect on
our earnings and overall financial condition. Additionally, in
compliance with applicable banking laws and regulations, the Company maintains
an allowance for loan losses created through charges against
earnings. As of December 31, 2008, the Company’s allowance for loan
losses was $10.3 million. The Company’s marketing focus on small to
medium size businesses may result in the assumption by the Company of certain
lending risks that are different from or greater than those which would apply to
loans made to larger companies. We seek to minimize our credit risk
exposure through credit controls, which include evaluation of potential
borrowers’ available collateral, liquidity and cash flow. However,
there can be no assurance that such procedures will actually reduce loan
losses.
Our
allowance for loan losses may not be adequate to cover actual
losses.
Like all financial institutions, we
maintain an allowance for loan losses to provide for loan defaults and
nonperformance. Our allowance for loan losses may not be adequate to
cover actual losses, and future provisions for loan losses could materially and
adversely affect the results of our operations. Risks within the loan
portfolio are analyzed on a continuous basis by management; and, periodically,
by an independent loan review function and by the Audit Committee. A
risk system, consisting of multiple-grading categories, is utilized as an
analytical tool to assess risk and the appropriate level of loss
reserves. Along with the risk system, management further evaluates
risk characteristics of the loan portfolio under current economic conditions and
considers such factors as the financial condition of the borrowers, past and
expected loan loss experience and other factors management feels deserve
recognition in establishing an adequate reserve. This risk assessment
process is performed at least quarterly; and, as adjustments become necessary,
they are realized in the periods in which they become known. The
amount of future losses is susceptible to changes in economic, operating and
other conditions, including changes in interest rates that may be beyond our
control, and these losses may exceed current estimates. State and
federal regulatory agencies, as an integral part of their examination process,
review our loans and allowance for loan losses and have in the past required an
increase in our allowance for loan losses. Although we believe that
our allowance for loan losses is adequate to cover probable and reasonably
estimated losses, we cannot assure you that we will not further increase the
allowance for loan losses or that our regulators will not require us to increase
this allowance. Either of these occurrences could adversely affect
our earnings.
We
are in competition with many other banks, including larger commercial banks
which have greater resources than us.
The banking industry within the State
of New Jersey is highly competitive. The Company’s principal market
area is also served by branch offices of large commercial banks and thrift
institutions. In addition, in 1999 the Gramm-Leach-Bliley Financial
Modernization Act of 1999 was passed into law. The Modernization Act
permits other financial entities, such as insurance companies and securities
firms, to acquire or form financial institutions, thereby further increasing
competition. A number of our competitors have substantially greater
resources than we do to expend upon advertising and marketing, and their
substantially greater capitalization enables them to make much larger
loans. Our success depends a great deal upon our judgment that large
and mid-size financial institutions do not adequately serve small businesses in
our principal market area and upon our ability to compete favorably for such
customers. In addition to competition from larger institutions, we
also face competition for individuals and small businesses from recently formed
banks seeking to compete as “hometown” institutions. Most of these
new institutions have focused their marketing efforts on the smaller end of the
small business market we serve.
10
The
laws that regulate our operations are designed for the protection of depositors
and the public, but not our stockholders.
The
federal and state laws and regulations applicable to our operations give
regulatory authorities extensive discretion in connection with their supervisory
and enforcement responsibilities and generally have been promulgated to protect
depositors and the deposit insurance funds and not for the purpose of protecting
stockholders. These laws and regulations can materially affect our
future business. Laws and regulations now affecting us may be changed
at any time, and the interpretation of such laws and regulations by bank
regulatory authorities is also subject to change. We can give no
assurance that future changes in laws and regulations or changes in their
interpretation will not adversely affect our business.
We
may be subject to higher operating costs as a result of government
regulation.
We are
subject to extensive federal and state legislation, regulation and supervision
which are intended primarily to protect depositors and the Federal Deposit
Insurance Corporation’s Bank Insurance Fund, rather than
investors. Legislative and regulatory changes may increase our costs
of doing business; or, otherwise, adversely affect us and create competitive
advantages for non-bank competitors.
We
cannot predict how changes in technology will impact our business.
The
financial services market, including banking services, is increasingly affected
by advances in technology, including developments in:
|
·
|
telecommunications;
|
|
·
|
data
processing;
|
|
·
|
automation;
|
|
·
|
Internet-based
banking;
|
|
·
|
Tele-banking;
and
|
|
·
|
debit
cards and so-called "smart cards."
|
Our
ability to compete successfully in the future will depend on whether we can
anticipate and respond to technological changes. To develop these and
other new technologies, we will likely have to make additional capital
investments. Although we continually invest in new technology, we
cannot assure you that we will have sufficient resources or access to the
necessary proprietary technology to remain competitive in the
future.
The
Company’s information systems may experience an interruption or breach in
security.
The
Company relies heavily on communications and information systems to conduct its
business. Any failure, interruption or breach in security of these
systems could result in failures or disruptions in the Company’s
customer-relationship management, general ledger, deposit, loan and other
systems. While the Company has policies and procedures designed to
prevent or limit the effect of the failure, interruption or security breach of
its information systems, there can be no assurance that any such failures,
interruptions or security breaches will not occur; or, if they do occur, that
they will be adequately addressed. The occurrence of any failures,
interruptions or security breaches of the Company’s information systems could
damage the Company’s reputation, result in a loss of customer business, subject
the Company to additional regulatory scrutiny or expose the Company to civil
litigation and possible financial liability; any of which could have a material
adverse affect on the Company’s financial condition and results of
operations.
Item
1B. Unresolved Staff
Comments:
There are no unresolved staff
comments.
Item
2. Properties:
The
Company presently conducts its business through its main office located at 64
Old Highway 22, Clinton, New Jersey, and its sixteen branch
offices.
11
The
following table sets forth certain information regarding the Company’s
properties from which it conducts business as of December 31, 2008.
|
Location
|
Leased
or Owned
|
Date
Leased or Acquired
|
Lease
Expiration
|
2008
Annual Rental Fee
|
|
Clinton,
NJ
|
Leased
|
1996
|
2009
|
535,102 |
|
Colonia,
NJ
|
Leased
|
1998
|
2009
|
37,394 |
|
Flemington,
NJ
|
Owned
|
2005
|
----- | ----- |
|
Linden,
NJ
|
Owned
|
1997
|
----- | ----- |
|
Highland
Park, NJ
|
Leased
|
1999
|
2009
|
90,609 |
|
North
Plainfield, NJ
|
Owned
|
1991
|
----- | ----- |
|
Scotch
Plains, NJ
|
Owned
|
2004
|
----- | ----- |
|
Springfield,
NJ
|
Leased
|
1995
|
2011
|
33,607 |
|
South
Plainfield, NJ
|
Leased
|
1999
|
2009
|
109,223 |
|
Union,
NJ
|
Owned
|
2002
|
----- | ----- |
|
Edison,
NJ
|
Leased
|
1999
|
2009
|
126,716 |
|
Whitehouse,
NJ
|
Owned
|
1998
|
----- | ----- |
|
Phillipsburg,
NJ
|
Leased
|
2005
|
2010
|
80,588 |
|
Middlesex,
NJ
|
Owned
|
2007
|
----- | ----- |
|
Forks
Township, PA
|
Leased
|
2006
|
2010
|
55,918 |
|
William
Penn (Easton), PA
|
Leased
|
2007
|
2010
|
68,303 |
|
Great
Neck, NY
|
Leased
|
2006
|
2009
|
9,073 |
Item
3. Legal
Proceedings:
From time to time, the Company is
subject to other legal proceedings and claims in the ordinary course of
business. The Company currently is not aware of any such legal
proceedings or claims that it believes will have, individually or in the
aggregate, a material adverse effect on the business, financial condition, or
operating results of the Company.
Item
4. Submission of Matters to a
Vote of Security Holders:
No
matters were submitted for a vote of the Company’s shareholders during the
fourth quarter of fiscal 2008.
PART
II
Item
5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Purchases of Equity
Securities:
(a) Market
Information
The Company’s Common Stock is quoted on
the NASDAQ Global National Market under the symbol “UNTY.” The
following table sets forth the high and low closing prices of the Common Stock
as reported on the NASDAQ National Market for the periods
indicated. The prices reflect the impact of the 5 percent stock
distribution paid on June 27, 2008.
|
High
|
Low
|
||||||
|
Year
Ended December 31, 2008:
4th
Quarter
|
$ | 4.85 | $ | 2.81 | |||
|
3rd
Quarter
|
6.95 | 4.00 | |||||
|
2nd
Quarter
|
8.00 | 6.48 | |||||
|
1st
Quarter
|
9.25 | 7.50 | |||||
|
Year
Ended December 31, 2007:
4th
Quarter
|
$ | 10.78 | $ | 6.95 | |||
|
3rd
Quarter
|
11.23 | 9.28 | |||||
|
2nd
Quarter
|
11.43 | 10.74 | |||||
|
1st
Quarter
|
13.85 | 10.98 | |||||
12
(b) Holders
As of March 1, 2009, there were
approximately 495 shareholders of record of the Company’s Common
Stock.
(c) Dividends
The following table sets forth the
dividends declared by the Company during 2008 and 2007. The amounts
reflect the impact of the 5 percent stock dividend paid on June 27,
2008.
|
Dividend
Declared
|
|||
|
Year Ended December 31,
2008:
|
|||
|
4th
Quarter
|
$ | .00 | |
|
3rd
Quarter
|
$ | .00 | |
|
2nd
Quarter
|
$ | .05 | |
|
1st
Quarter
|
$ | .05 | |
|
Year
Ended December 31, 2007:
|
|||
|
4th
Quarter
|
$ | .05 | |
|
3rd
Quarter
|
$ | .05 | |
|
2nd
Quarter
|
$ | .05 | |
|
1st
Quarter
|
$ | .04 | |
Under the terms of the CPP, we are
limited in our ability to pay cash dividends. Without the approval of the
Treasury, we can
not pay a quarterly cash
dividend in excess of $0.05 per share, the amount of our last quarterly cash
dividend prior to October 14, 2008. In addition, during the
third quarter of 2008, the Company revised its cash dividend payment
policy. The decision was made based upon the current economic environment
to retain capital so that the holding company can remain a source of strength to
the subsidiary bank. Previously, the Company had paid a quarterly
cash dividend at a rate set by the Board based upon a number of factors.
The Board has now established a targeted dividend payout ratio of 20 percent of
the Company’s earnings, subject to adjustment based upon factors existing at the
time of the dividend and the Company’s projected capital needs. The
Board now intends to pay a cash dividend once annually, in the next succeeding
year. The Company declared two dividends in 2008 totaling
$0.10.
Item
6. Selected Financial
Data:
The information under the caption,
“Selected Consolidated Financial Data,” on page 57 of the Company’s Annual
Report to Shareholders for the year ended December 31, 2008, is incorporated by
reference herein.
Item
7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations:
The information under the caption,
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” on pages 7 through 26 of the Company’s Annual Report to
Shareholders for the year ended December 31, 2008, is incorporated by reference
herein.
Item
7A. Quantitative and Qualitative
Disclosure About Market Risk:
The information under the caption,
“Market Risk,” on pages 22 through 23 of the Company’s Annual Report to
Shareholders for the year ended December 31, 2008, is incorporated by reference
herein.
Item
8. Financial Statements and
Supplementary Data:
The Financial Statements and Notes to
Consolidated Financial Statements on pages 33 through 57 of the Company’s Annual
Report to Shareholders for the year ended December 31, 2008, are incorporated by
reference herein.
13
Item
9. Changes in and Disagreements
with Accountants on Accounting and Financial
Disclosure:
None.
Item
9A(T). Controls and
Procedures:
(a) Evaluation
of disclosure controls and proceedings:
Based on
their evaluation, as of the end of the period covered by this Annual Report on
Form 10-K, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange
Act”)) are effective to ensure that information required to be disclosed by us
in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms.
(b) Management’s
Report on Internal Control Over Financial Reporting
The information under the caption,
“Management’s Report on Internal Control Over Financial Reporting,” on page 27
of the Company’s Annual Report to Shareholders for the year ended December 31,
2008, is incorporated by reference herein.
(c) Changes in internal
controls:
There were not any significant
changes in internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Item
9B. Other Information - None
PART
III
Item
10. Directors, Executive
Officers and
Corporate Governance; Compliance with Section 16(a) of the Exchange
Act:
The
information concerning the directors and executive officers of the Company under
the caption “Election of Directors,” and the information under the captions,
“Compliance with Section 16(a) of the Securities Exchange Act of 1934,” and,
"Governance of the Company," in the Proxy Statement for the Company’s 2009
Annual Meeting of Shareholders, is incorporated by reference
herein. It is expected that such Proxy Statement will be filed with
the Securities and Exchange Commission no later than April 30,
2009.
Also,
refer to the information under the caption, “Executive Officers of Registrant,”
in Part I of this Annual Report on Form 10-K for a description of the Company’s
executive officers, who are not also directors.
Item
11. Executive
Compensation:
The
information concerning executive compensation under the caption, “Executive
Compensation,” in the Proxy Statement for the Company’s 2009 Annual Meeting of
Shareholders, is incorporated by reference herein. It is expected
that such Proxy Statement will be filed with the Securities and Exchange
Commission no later than April 30, 2009.
Item
12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters:
The
information concerning the security ownership of certain beneficial owners and
management under the caption, “Security Ownership of Certain Beneficial Owners
and Management,” in the Proxy Statement for the Company’s 2009 Annual Meeting of
Shareholders is incorporated by reference herein. It is expected that
such Proxy Statement will be filed with the Securities and Exchange Commission
no later than April 30, 2009.
14
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table provides information with respect to the equity securities that
are authorized for issuance under the Company’s compensation plans as of
December 31, 2008.
|
EQUITY
COMPENSATION PLAN INFORMATION
|
||||||||||||
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for issuance under equity compensation
plans (excluding securities reflected in column (a))
|
||||||||||
|
Equity
compensation stock option plans approved by security
holders
|
872,274 | $ | 5.94 | 75,984 | ||||||||
|
Equity
compensation plans approved by security holders
|
50,424 | 9.76 | 44,508 | |||||||||
|
Equity
compensation plans not approved by security holders
|
- | - | - | |||||||||
|
Total
|
922,698 | $ | 6.15 | 120,492 | ||||||||
There were no share repurchases
during 2008. Pursuant to the requirements of the Treasury’s Capital
Purchase Program, the Company has suspended its stock repurchase
program.
Item
13. Certain Relationships and
Related Transactions and Director Independence:
The
information concerning certain relationships and related transactions under the
caption, “Certain Transactions with Management,” in the Proxy Statement for the
Company’s 2009 Annual Meeting of Shareholders is incorporated by reference
herein. It is expected that such Proxy Statement will be filed with
the Securities and Exchange Commission no later than April 30,
2009.
Item
14. Principal Accountant Fees
and Services:
The information concerning principal
accountant fees and services, as well as related pre-approval policies, under
the caption, “Appointment of Auditors for Fiscal 2009,” in the Proxy Statement
for the Company’s 2009 Annual Meeting of Shareholders is incorporated by
reference herein. It is expected that such Proxy Statement will be
filed with the Securities and Exchange Commission no later than April 30,
2009.
PART
IV
Item
15. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K:
(a) FINANCIAL
STATEMENTS:
The
following Consolidated Financial Statements of the Company and subsidiaries
included in the Company’s Annual Report to Shareholders for the year ended
December 31, 2008, are incorporated by reference in Part II, Item
8.
Report of
Independent Registered Public Accounting Firm (page 28)
Consolidated
Balance Sheets (page 29)
Consolidated
Statements of Income (page 30)
15
Consolidated
Statements of Changes in Shareholders’ Equity (page 31)
Consolidated
Statements of Cash Flows (page 32)
Notes to
Consolidated Financial Statements (pages 33 through 57)
(b) EXHIBITS:
|
Exhibit
|
|
|
Number
|
Description of Exhibits
|
|
3(i)
|
Certificate
of Incorporation of the Company, as amended (2)
|
|
3(ii)
|
Bylaws
of the Company (7)
|
|
4(i)
|
Form
of Stock Certificate (7)
|
|
10(i)
|
1994
Stock Option Plan for Non-Employee Directors (1)
|
|
10(ii)
|
1997
Stock Option Plan (3)
|
|
10(iii)
|
1997
Stock Bonus Plan (3)
|
|
10(iv)
|
1998
Stock Option Plan (4)
|
|
10(v)
|
1999
Stock Option Plan (5)
|
|
10(vi)
|
Employment
Agreement dated March 23, 2004 with James A. Hughes (8)
|
|
10(vii)
|
Settlement
Agreement and General Release dated December 31, 2003 with Anthony J.
Feraro (8)
|
|
10(ix)
|
Retention
Agreement dated March 23, 2004 with Michael F. Downes
(8)
|
|
10(x)
|
Retention
Agreement dated March 23, 2004 with Alan J. Bedner (8)
|
|
10(xi)
|
Retention
Agreement dated March 23, 2004 with John Kauchak (8)
|
|
10(xiii)
|
2002
Stock Option Plan (6)
|
|
10(xiv)
|
Second
Amendment dated September 19, 2003 to Lease Agreement between Unity Bank
and Clinton Unity Group (8)
|
|
10(xv)
|
Real
Estate Purchase Agreement dated October 23, 2003 between Unity Bank and
Premiere Development II, LLC (8)
|
|
10(xvi)
|
2004
Stock Bonus Plan (9)
|
|
10(xvii)
|
2006
Stock Option Plan (10)
|
|
13
|
Portion
of Unity Bancorp. Inc. 2008 Annual Report to
Shareholders
|
|
21
|
Subsidiaries
of the Registrant
|
|
23.1
|
Consent
of McGladrey & Pullen, LLP
|
|
31.1
|
Certification
of President and Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of President, Chief Executive Officer, and Chief Financial Officer
pursuant to Section 906
|
|
(1)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Registration Statement on Form S-4 (File No. 33-76392) and incorporated by
reference herein.
|
|
(2)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Current Report on Form 8-K filed on July 22, 2002 and incorporated by
reference herein.
|
|
(3)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Proxy Statement for the Annual Meeting of Shareholders filed on April 4,
1997.
|
16
|
(4)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Proxy Statement for the Annual Meeting of Shareholders filed on March 30,
1998.
|
|
(5)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Proxy Statement for the Annual Meeting of Shareholders filed on April 2,
1999.
|
|
(6)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Proxy Statement for the Annual Meeting of Shareholders filed on April 10,
2002.
|
|
(7)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Annual Report on Form 10-K filed March 26,
2003.
|
|
(8)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Annual Report on Form 10-K filed March 26,
2004.
|
|
(9)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Proxy Statement for the Annual Meeting of Shareholders filed on April 15,
2004.
|
|
(10)
|
Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Current Report on Form 8-K filed on April 27, 2006 and incorporated by
reference herein.
|
(c) Not
applicable
17
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITY BANCORP,
INC.
|
/s/
Alan
J. Bedner
|
|
Alan
J. Bedner
|
|
Executive
Vice President and Chief Financial
Officer
|
Dated: March
19, 2009
Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
NAME
|
TITLE
|
DATE
|
|
/s/
David D. Dallas
|
Chairman
of the Board and Director
|
March 19,
2009
|
|
David
D. Dallas
|
|
|
|
/s/
James
A. Hughes
|
President,
Chief Executive Officer And
Director
|
March 19,
2009
|
|
James
A. Hughes
|
|
|
|
/s/
Alan
J. Bedner
|
Chief
Financial Officer (Principal Financial
and Accounting Officer)
|
March 19,
2009
|
|
Alan
J. Bedner
|
|
|
|
/s/
Raj
Patel
|
Director
|
March 19,
2009
|
|
Raj
Patel
|
||
|
/s/
Dr.
Mark S. Brody
|
Director
|
March 19,
2009
|
|
Dr.
Mark S. Brody
|
||
|
/s/
Robert
H. Dallas, II
|
Director
|
March 19,
2009
|
|
Robert
H. Dallas, II
|
||
|
/s/
Peter
E. Maricondo
|
Director
|
March 19,
2009
|
|
Peter
E. Maricondo
|
||
|
/s/
Wayne
Courtright
|
Director
|
March 19,
2009
|
|
Wayne
Courtright
|
||
|
/s/
Charles
S. Loring
|
Director
|
March 19,
2009
|
|
Charles
S. Loring
|
||
|
/s/
Allen
Tucker
|
Director
|
March 19,
2009
|
|
Allen
Tucker
|
18