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Hometrust Bancshares Inc2020 ANNUAL REPORT UNITY BANCORP, INC. (Nasdaq: UNTY) is the holding company for Unity Bank, a commercial bank insured by the FDIC, headquartered in Clinton, New Jersey. The Bank offers complete deposit and lending solutions to businesses and consumers. Small Business is BIG here is a mantra the Bank lives and breathes. Unity delivers a holistic approach to business clients leveraging seasoned Commercial and SBA lending expertise with deposit products and services with the latest technology advantages. The Bank’s brand promise of Growing with You is applied to all Unity stakeholders. The Bank is dedicated to the growth of our communities, customers, employees and shareholders. THE BAN K’S BR AND PROMI SE O F growing with you! IS APPLIED TO ALL UNITY STAKEHOLDERS. E S I M O R P D N A R B R U O FI NAN C IAL HIGHLIGHTS Amounts in thousands, except per share data and performance ratios Year ended December 31, 2020 2019 2018 Selected Results of Operations Interest income $ 78,915 $ 75,648 $ 67,263 Interest expense Net interest income Provision for loan losses Noninterest income Noninterest expense Provision for income taxes Net income Per Share Data Net income per common share - Basic Net income per common share - Diluted Book value per common share Market value per common share Cash dividends declared on common shares Selected Balance Sheet Data Assets Loans Allowance for loan losses Securities Deposits Borrowed funds and subordinated debentures Shareholders’ equity Common shares outstanding Performance Ratios Return on average assets Return on average equity Efficiency ratio Net interest margin 14,480 64,435 7,000 12,946 39,262 7,475 18,055 57,593 2,100 9,539 34,717 6,662 13,516 53,747 2,050 9,031 33,421 5,388 23,644 $ 23,653 $ 21,919 $ 2.21 2.19 16.63 17.55 0.32 $ 2.18 2.14 14.77 22.57 0.31 2.04 2.01 12.85 20.76 0.27 $ $ $ 1,958,914 $ 1,718,942 $ 1,579,157 1,627,817 1,425,558 1,304,566 (23,105) 47,571 (16,395) 66,564 (15,488) 63,732 1,557,959 1,250,114 1,207,687 210,310 173,911 10,456 293,310 160,709 10,881 220,310 138,488 10,780 1.35 % 1.54 % 1.53 % 14.20 50.80 3.85 15.86 52.00 3.95 17.10 53.07 3.97 S R E D L O H E R A H S R U O O T Compounding crisis began a new decade that will not fade quickly from our memories. During such unprecedented times it is easy to be pessimistic and feel helpless. It is during these times that our commitment to small business and our community guides us. In 2020 we saw our duty to mobilize and help our customers tested. Although we had to pivot how we work, we continued to serve our customers and keep employees safe. Covid-19 protocols were put in place. Customers received timely communications. In addition, training and support was provided on all the options at their disposal to ensure service was not disrupted. ALTHOU GH WE HAD TO PI VOT H OW WE WOR K , WE CONTIN UE D TO SERVE OUR CUSTOMERS AND KEEP EMPLOYEES SAFE. We embraced the federal Paycheck Protection Program (PPP) and actively communicated with our customers to help them navigate the application process and provide needed support during this highly stressful time. We helped customers secure over 1,200 PPP loans totaling in excess of $140 million to provide their businesses with desperately needed funds. Staff members responded to the call and worked long hours from home to meet the program’s fast-paced deadlines. In addition, the bank has prudently worked with borrowers that were impacted hardest by Covid-19 and having difficulty meeting their contractual obligations. We are happy to report that the number of loans on payment deferrals have significantly declined during the fourth quarter. Despite the challenges, the commercial lending division still grew 10% for the year. Our Residential Mortgage Program achieved a record $450 million in mortgage originations, representing a 177% increase over the previous year. While experiencing a refinance boom, we continued to build relationships producing new purchase volume of 51% of total volume, almost 10% higher than industry average; evidence that we gained market share on the purchase money mortgage side. Over $300 million of production was sold into the secondary market representing a significant increase over 2019. We are well positioned for continued growth in this division. We also reached out to our communities. We stepped in early to provide funds for a free- standing Respiratory Illness Center to triage patients at Hunterdon Medical Center in March to meet surging demand. Many of the non-profits we support struggled with increasing needs and traditional funding events cancelled. We stepped in to support organizations in alternate ways and donations. We provided additional support to America’s Grow-A-Row, a non- profit organization that grows and gleans fresh, healthy fruits and vegetables that are donated to those facing hunger throughout New Jersey. We recognize this increased need will not disappear as quickly as it arose. We have made an on-going pledge for additional assistance through 2021 to help those most vulnerable. Our continued investment in technology allowed us to meet demands for electronic banking quickly and efficiently. Our well-established personal and business mobile banking apps continue to serve more customers. Our call center supported fast learning curves and an influx of help requests from customers utilizing these services more than ever before. We pivoted quickly to support employees working from home and implemented Teams for enhanced virtual collaboration. Amid the volatile environment we delivered strong results. Our net interest margin stood up, one of the strongest in the state, at 3.85%. Record mortgage performance and expense control contributed significantly to a year-end ROA of 1.35%. Despite the challenges, we were able to keep non-performing assets to under 1%. In 2020 Unity ranked 15th nationally on the American Banker magazine list of the Top 200 Publicly Traded Community Banks with less than $2 billion in assets. Unity was the top ranked New Jersey community bank on this respected industry list. Nationally 511 institutions fit the category for the list. Unity Bank has been on the list for five consecutive years. In addition, Unity Bank was named one of the best places to work in NJ for the fourth consecutive year by NJBiz. The unity of our employees provided tremendous strength and we are deeply thankful for their dedication. We appreciate the continued support of our customers, Board of Directors and shareholders. We share great hope for 2021 and are committed to supporting all our communities as we heal and grow. David D. Dallas Chairman of the Board James A. Hughes President & CEO DILUTED EARNINGS PER SHARE DIVIDENDS PER SHARE $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $20.00 $15.00 $10.00 $ 5.00 $ 0.00 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 BOOK VALUE MARKET PRICE $25.00 $20.00 $15.00 $10.00 $ 5.00 $ 0.00 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 neighborhoods is what a community bank does…it is what Unity Bank does. We continued to strengthen and position our residential and commercial lending teams and processes in 2020 to enable us to better serve our customers in 2021 and beyond. S Supporting local people, their businesses and S E C C U S Under challenging market conditions, to say the least, our residential lending team excelled. We achieved core commercial loan and deposit growth, where others contracted, and maintained solid credit quality backed by a top tier industry capital position to be able to weather additional or continued market turbulence should the need arise. As always, we continue to focus on our customers, core products, existing territories, and to build and maintain deep relationships with strategic referral partners. G N I D N E L LENDING PORTFOLIO 51% Commercial Loans 35% 98.08% SBA Loans PPP Loans Consumer Loans 3% 8% 9% Performing 30-59 Days Delinquent .96% Seriously Delinquent .96% 29% Residential Mortgage Investment 65% Owner Occupied 5 YEAR LOAN GROWTH S E G A G T R O M L A I T N E D S E R I S N A O L I L A C R E M M O C 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 0 $100 $200 $300 $400 $500 $700 $800 $900 in Millions RESIDENTIAL MORTGAGE DISTRIBUTION RESIDENTIAL MORTGAGE PERFORMANCE Investment SBA Loans PPP Loans Consumer Loans 3% 8% 9% 29% Residential Mortgage 51% Commercial Loans 35% 98.08% 65% Owner Occupied Performing 30-59 Days Delinquent .96% Seriously Delinquent .96% banking easier and safer for our customers. E We continue to invest in technology that makes C N E We introduced Zelle®, providing our customers with a fast, safe and easy way to send and receive personal payments in October 2020. In the first three months, new users are outpacing previous person-to-person payment system enrollments significantly. This solution puts our offering on par with leading large commercial banks. I R E P X E G N I K N A B R U O Over 3,500 new customers signed up for Mobile Banking; Unity customers now have over 20,000 enabled devices using personal and business mobile banking. Adoption of eco-friendly eStatements continued in 2020. TECHNOLOGY INFRASTRUCTURE INVESTMENTS PROVIDED NEW TOOLS AND ENHANCEMENTS FOR EMPLOYEES TO SERVE OUR CUSTOMERS. Our business online banking application was upgraded with an improved user interface. Strong adoption continues for Card Control, which offers fraud protection and real-time alerts. This product has seen over 3,000 new enrollments in the first year, validating our customers approval of added security offerings. Mobile Deposit usage has doubled in the past 24 months and temporary replacement debit cards were made available at all branches. Empowering employees with the secure technology needed to succeed. We have taken extensive actions to enhance our BSA (Bank Secrecy Act) department. We added additional human resources, automation and risk mitigations by upgrading our current software. We continue to upgrade our policy and procedures in the BSA and RISK area to strengthen the banks BSA program. We engaged consultants to help us ensure that the project is completed in an effective manner. Technology infrastructure investments provided new tools and enhancements for employees to serve our customers. Microsoft Teams was adopted, providing a virtual collaboration platform facilitating real-time collaboration for both onsite and remote workforces. In order to better support remote work abilities for our Unity Bank employees, investments in virtual collaboration hardware were implemented. Abrigo, our loan origination system launched in 2019, continues to show agility in adapting to the SBA Paycheck Protection Program guidelines to offer our small business customers a streamlined approach for application through forgiveness. The pandemic brought substantial increase to an already high cyber threat environment. Investments were made to systems in order to enhance cyber security mitigations. Unity Bank continues to monitor all industry cyber security alerts, trends including Cybersecurity and Infrastructure Security Agency (CISA) and Information Systems Audit and Control Association (ISACA) guidance. Recent events in the news, related to cyber security and “Supply Chain Attacks” involving SolarWinds were carefully monitored and reviewed. Unity Bank does not utilize SolarWinds products internally. Unity Bank is committed to its technology investments in order to provide sound information security practices and an excellent customer experience. Y T I N U M M O C E H T N I Y T I N U 2020 challenged the bank to support the community in new, innovative ways. The pandemic stifled community fundraising events and created a greater need for necessities, like financial stability, food and shelter, throughout our footprint. THIS YEAR’S ANNUAL SERVICE PROJECT REACHED MORE LIVES THAN EVER As the pandemic gained momentum, a donation was made to the Hunterdon Healthcare Foundation to create a free-standing Respiratory Illness Center to triage patients with Coronavirus. Unity continued its commitment throughout the year donating over $165,000 to local non-profits and community events. Efforts included donating meals to frontline healthcare workers and supporting Hunterdon Strong, a telethon designed to raise funding for local non-profits serving our community. Unity Bank switched gears to host its Annual Charity Car Show virtually. The car show raised funds for the Family Promise of Hunterdon and Warren Counties, organizations that help homeless community members find sustainable independence. $34,200 2020 $28,500 2019 $22,800 $22,100 2018 2017 $18,700 2016 In 2020, the Bank strengthened their relationship with America’s Grow-A-Row, a nonprofit organization that fights food insecurity in New Jersey and Eastern Pennsylvania. Through the season, Unity sent volunteers to plant and harvest produce in the fields and increased its financial contribution to the organization as the need for food grew across the community. The Bank also pledged $25,000 of support and monthly volunteers during the 2021 season. This year’s annual service project reached more lives than ever before. Every year, Unity employees donate to the local Food Banks through voluntary payroll deductions and Unity matches the total donation at the end of the year. Over the past 5 years, the donations have almost doubled. In 2020, $34,200 was disbursed between 19 local food banks. The bank will continue in its commitment to uplift the community it serves in the years to come. Small Business is BIG here is our mantra. In 2020, the bank recognized an increased need to support local businesses. Our marketing efforts shifted to help our business customers and we embraced the federal Paycheck Protection Program (PPP). We processed over 1,200 PPP loans in the first round and are working on another 900 in round 2. Supporting Small Businesses Makes a BIG Difference Our fall billboard campaign featured messaging of “Supporting Small Businesses Makes a BIG Difference” and “Small Businesses need BIG Support.” We partnered with NJ Advanced Media to offer free advertisement for our customers in the business industries hit hardest by the pandemic. Ads appeared in local newspapers and digital properties. This program was designed to help draw customers back into businesses and to connect personally with our business customers to let them know we are there to support them and see them through these uncertain times. We are dedicated to the economic recovery of small businesses within our footprint and will continue our efforts in 2021 and beyond. support SMALL BUSINESSES CLINTON, NJ 908-735-0402 unitybank.com EQUAL HOUSING LENDER | MEMBER FDIC Executive & Senior Management James Hughes President Chief Executive Officer Luisa Franco First Vice President BSA/AML/OFAC Officer Janice Bolomey Executive Vice President Chief Administrative Officer/ Director of Sales Vincent Geraci First Senior Vice President Director of Mortgage Lending John Kauchak Executive Vice President Chief Operating Officer David Bove Senior Vice President Chief Technology Officer Christopher Burke First Vice President Senior Portfolio Manager Laureen Cook Senior Vice President Chief Accounting Officer Michelle Kirmser First Vice President General Counsel Rebecca Kugelman First Vice President Deposit Operations Manager Adam Kuras First Senior Vice President Chief Lending Officer Kenneth Plinio First Vice President Mortgage Loan Operations Manager Rosemary Fellner Senior Vice President Chief Marketing Officer Stephen Rooney Senior Vice President Chief Credit Officer Christopher Fenimore First Vice President Chief Compliance Officer Bridget Walsh First Vice President Human Resources Director N O I T A M R O F N I E T A R O P R O C Board of Directors David Dallas Chairman of the Board CEO, Dallas Group of America, Inc. Allen Tucker Vice Chairman of the Board Chairman, Tucker Enterprises Dr. Mark Brody Director Managing Member, Financial Planning Analysts, LLC Wayne Courtright Director Retired, Former Banker James Hughes Director President/CEO, Unity Bank Peter Maricondo Director Retired Financial Consultant Raj Patel Director President/CEO, Raja Group Donald Souders, Jr. Director Attorney/Partner, Florio Perrucci Steinhardt Cappelli Tipton & Taylor Robert Dallas, II Director President, Dallas Group of America, Inc. Aaron Tucker Director President, Tucker Enterprises Dr. Mary Gross Director Founder, Human Edge Resources, LLC Shareholder Information Annual Meeting Shareholders of Unity Bancorp, Inc. are cordially invited to the Annual Meeting of Shareholders. The meeting will be held virtually and available at a meeting link. Please see 2021 Unity Bancorp Proxy for date and time. Stock Listing NASDAQ Symbol: UNTY Transfer Agent and Registrar Computershare, Inc. PO Box 30170 College Station, Texas 77842-3170 800.368.5948 Computershare.com Investor Inquiries James Hughes 908.713.4306 | James.Hughes@unitybank.com Independent Registered Public Accounting Firm RSM US LLP New York, New York Legal Counsel Windels Marx Lane & Mittendorf, LLP New Brunswick, New Jersey LOCATI ONS New Jersey Bergen County: 4 Emerson Plaza West Emerson, NJ 07630 475 Franklin Turnpike Ramsey, NJ 07446 Hunterdon County: 64 Old Highway 22 Clinton, NJ 08809 157 Main St. Flemington, NJ 08822 370 Route 22 W. Whitehouse Station, NJ 08889 Middlesex County: 1746 Oak Tree Rd. Edison, NJ 08820 (pictured on cover) 104 Raritan Ave. Highland Park, NJ 08904 1230 Bound Brook Rd. Middlesex, NJ 08846 2426 Plainfield Ave. South Plainfield, NJ 07080 Somerset County: 450 Somerset St. North Plainfield, NJ 07060 120 Cedar Grove Ln. Somerset, NJ 08873 12 Mountain Ave. Somerville, NJ 08876 Union County: 628 North Wood Ave. Linden, NJ 07036 2222 South Ave. Scotch Plains, NJ 07076 952 Stuyvesant Ave. Union, NJ 07083 Warren County: 1225 Route 22 W. Phillipsburg, NJ 08865 5 E. Asbury Anderson Rd. Washington, NJ 07882 Pennsylvania Northampton County: 2850 Easton Ave. Bethlehem, PA 18017 1700 Sullivan Trail Forks, PA 18040 UN ITY BAN COR P, INC 64 Old Highway 22 Clinton, NJ 08809 unitybank.com 800.618.2265
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