UNTY 10-K & 10-Q changes, risk factors and insider trading
Unity Bancorp Inc. · Nasdaq · State Commercial Banks · CIK 920427 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “There is the risk that the Company will be insufficiently liquid to meet its obligations as they come due.”
New heading “The emergence of U.S. dollar–denominated stablecoins and the evolving legislative and regulatory landscape governing them—including recently proposed and enacted federal frameworks such as the GENIUS Act and other stablecoin specific bills—may adversely affect our deposit base, liquidity profile, and competitive position.”
New heading “Our use of artificial intelligence, including generative artificial intelligence, may expose us to operational, regulatory, legal, and reputational risks that could adversely affect our business, financial condition, and results of operations.”
New heading “The Company may not be able to detect fraudulent activities fully, or on a timely basis, which could expose the Company to financial losses, reputational harm and regulatory scrutiny.”
Removed heading “Liquidity risk.”
Largest changes
“The regulatory and supervisory framework governing the use of artificial intelligence in the banking industry is developing and remains uncertain. Banking regulators have increased scrutiny of AI-related practices, including governance, model risk management, explainability, data usage, and third-party oversight. …”see in full comparison
“Although the Company has implemented policies, procedures, and technological safeguards intended to identify and mitigate fraudulent behavior, these measures may not prevent all instances of fraud. Fraudulent activities may be sophisticated, coordinated, or intentionally concealed, and may involve identity theft, account takeover, unauthorized transactions, misappropriation of funds, or manipulation of internal processes. …”see in full comparison
“The emergence of U.S. dollar–denominated stablecoins and the evolving legislative and regulatory landscape governing them—including recently proposed and enacted federal frameworks such as the GENIUS Act and other stablecoin specific bills—may adversely affect our deposit base, liquidity profile, and competitive position.”see in full comparison
“Our use of artificial intelligence, including generative artificial intelligence, may expose us to operational, regulatory, legal, and reputational risks that could adversely affect our business, financial condition, and results of operations.”see in full comparison
“The use of AI, including generative AI, may also increase cybersecurity, data privacy, and information security risks. AI systems may require access to sensitive customer or proprietary information, and any failure to adequately safeguard such data, prevent misuse, or comply with applicable privacy and data protection laws could result in regulatory enforcement actions, litigation, financial losses, and reputational harm.”see in full comparison
“We use, and expect to continue to expand our use of, artificial intelligence and machine learning technologies, including generative artificial intelligence models, in our operations and through third-party vendors. These technologies are complex, rapidly evolving, and may not perform as intended. AI systems may produce inaccurate, biased, or unpredictable results, which could lead to flawed business decisions, customer harm, control failures, or violations of law or regulation, including consumer protection and fair lending requirements.”see in full comparison
Full comparison: every changed paragraph (29)
A significant portion of the Company’s loan portfolio is secured by real estate. As of December 31, 2024,2025, approximately 96 percent of its loans had real estate as a primary and/or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. Weakness in the real estate market in the Company’s primary market areas could result in an increase in the number of borrowers who default on their loans and a reduction in the value of the collateral securing their loans, which in turn could have an adverse effect on the Company’s profitabilityprofitability, capital and asset quality. Any future declines in real estate values in the New Jersey, New York and Pennsylvania markets that the Company serves also may result in increases in delinquencies and losses in its loan portfolios. Further, such declines in real estate values could impact values in the Company’s debt securities investment portfolio, ultimately resulting in an adverse effect on the Company’s profitability, capital and asset quality. Stress in the real estate market, combined with any weakness in economic conditions could drive losses beyond that which is provided for in the Company’s allowance for credit losses. In that event, the Company’s earnings and capital could be adversely affected.
Furthermore, stress in the real estate market could severely impact the Company’s ability to sell residential mortgage loans and SBA 7a loans on the secondary market. The inability to sell such loans would adversely impact the Company’s noninterest revenue and hence negatively impact earnings and capital.
A significant portion of the Company’s loan portfolio is secured by commercial real estate. As of December 31, 2024,2025, total commercial real estate loans, including construction loans, represented 53.856.6 percent of our loan portfolio. Included in this portfolio are loans to industries including hotel/motel, retail,food/beverage services, educational facilities, officeretail, space,warehouse, warehouses,office, food/beveragereligious servicesfacilities, automotive, healthcare facilities, gas station and religiouseducational facilities. Additionally, mixed-use loans, in their hybrid nature, may include these industries, as well as others not denoted above. These types of loans generally expose a lender to a higher degree of credit risk of non-payment and loss than residential mortgage loans dodue forto several factors, including dependence on the successful operation of a business or a project for repayment. Further, the Company facilitates construction-to-permanent financing, which may come with heightened credit risks. In addition, commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential mortgage loans. The value of the real estate collateral that provides an alternate source of repayment in the event of default by the borrower could deteriorate during the time the credit is extended. Underwriting andUnderwriting, portfolio management activities and other credit administration functions, cannot completely eliminate all risks related to these loans. Any significant failure to pay on time by our clients or a significant default by our clients would materially and adversely affect us.
Concentrations in commercial real estate are closely monitored by regulatory agencies and subject to especially heightened scrutiny both on a public and confidential basis. Any formal or informal action by our supervisors may require us to increase our reserves on these loans and adversely impact our earnings.earnings and capital.
Our SBA lending program is dependent upon the U.S. federal government. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions. Any changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to ongoing SBA servicing related expenses, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress or funding for the SBA program may also have a material adverse effect on our business. In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could materially and adversely affect our business, results of operations and financial condition.
In 2006, the OCC, the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure will receive increased supervisory scrutiny where total nonowner occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months. Using regulatory guidance definitions, the Bank’s commercial real estate loan balance decreasedwas 1.55%$868.9 formillion the year endedat December 31, 20242025 and commercial real estate loans represented 235.05%231.92% of the Bank’s risk-based capital at December 31, 2024,2025, a decrease from 269.98%235.05% at December 31, 2023.2024.
There is a risk that the Company may not be repaid in a timely manner, or at all, for loans it makes or securities it purchases.holds.
The risk of nonpayment (or deferred or delayed payment) of loans is inherent in banking. Such nonpayment, or delayed or deferred payment, of loans to the Company may have a material adverse effect on its earnings and overall financial condition, such as increased provision for credit losses, asset recovery costs and lower interest income. Additionally, in compliance with applicable banking laws and regulations and U.S. Generally Accepted Accounting Principles (“ U.S. GAAP”), the Company maintains an allowance for credit losses created through charges against earnings. As of December 31, 2024,2025, the Company’s allowance for credit losses was $26.8$32.3 million, or 1.181.27 percent of its total loan portfolio and 204.77108.40 percent of its nonaccrual loans. 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. The Company seeks to minimize its credit risk exposure through credit controls, which include evaluation of potential borrowers’ available collateral, liquidityliquidity, cash flow and cashdebt flow.service coverage (both individually and globally). However, there can be no assurance that such procedures will actually reduce credit losses.
The risk of nonpayment (or deferred or delayed payment) on securities is also inherent in banking. Such nonpayment, or delayed or deferred payment on securities held by the Company, if they occur may have a material adverse effect on the Company’s earnings and overall financial condition. As of December 31, 2024, the Company maintained a valuation reserve on a single available for sale security of $2.8 million. The Company seeks to minimize its credit risk exposure on securities through ongoing monitoring and credit controls, which evaluate the financial condition of the issuer of the securities. However, there can be no assurance that such procedures will actually reduce credit losses.
Like all financial institutions, the Company maintains an allowance for credit losses to provide for loan defaults and nonperformance. Its allowance for credit losses may not be adequate to cover actual losses and future provisions for credit losses could materially and adversely affect the results of operations. Risks within the loan portfolio are analyzed on a continuous basis by Management and, periodically, by an independent loan review function andas overseen 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 credit 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 credit loss experience, historical trends and other factors that 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 the Company’s control, and these losses may exceed current estimates. State and federal regulatory agencies, as an integral part of their examination process, review the Company’s loans and allowance for credit losses and may require an increase in its allowance for credit losses. Although the Company believes that its allowance for credit losses is adequate to cover probable and reasonably estimated losses, there can be no assurance that the Company will not further increase the allowance for credit losses or that its regulators will not require an increase to this allowance. Either of these occurrences could adversely affect the Company’s earnings.
Net interest income, the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities, represents a significant portion of the Company’s earnings. Both increases and decreases in the interest rate environment may reduce the Company’s profits. Interest rates are subject to factors which are beyond the Company’s control, including general economic conditions, competition and policies of various governmental and regulatory agencies, such as the FRB. Changes in monetary policy, including changes in interest rates,rates and/or quantitative easing or tightening protocols, could influence not only the interest the Company receives on loans and investment securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect (i) the ability to originate loans and obtain deposits, (ii) the fair value of financial assets and liabilities, including the held to maturity and available for sale securities portfolios and (iii) the average duration of interest-earning assets. This also includes the risk that interest-earning assets may be more responsive to changes in interest rates than interest-bearing liabilities, or vice versa (repricing risk), the risk that the individual interest rates or rate indexes underlying various interest-earning assets and interest-bearing liabilities may not change in the same degree over a given time period (basis risk) and the risk of changing interest rate relationships across the spectrum of interest-earning asset and interest-bearing liability maturities (yield curve risk). The Company monitors interest rate risk through its asset liability management process; however, there are no assurances that this process will reduce interest rate risk exposures.
There is the risk that the Company will be insufficiently liquid to meet its obligations as they come due.
Liquidity risk.
As of December 31, 2024, $815.1 million, or 38.8%, of2025, the Company’sCompany depositshad were$882.9 timemillion deposits with $768.6 million, or 94.3% of thosein time deposits, comprising 38.0% of total deposits. Time deposits maturing within one year.year were $842.4 million, or 95.4% of time deposits and 36.2% of total deposits. Additionally, as of December 31, 2025, uninsured or uncollateralized deposits represented 21.7% of total deposits. The Company’s liquidity position could be impacted by these deposits if its customers decide to withdraw funds at maturity and invest in non-deposit products, including but not limited to U.S. Treasuries.Treasuries, money market funds and other alternative sources. Additionally, the Company’s earnings could be impacted if interest rates increase and the Company needs to increase the rates offered on time deposits to retain these funds. The Company’s management and Board of Directors monitors the deposit composition of its Consolidated Balance Sheet through various Board and Management reporting on a regular basis.
The emergence of U.S. dollar–denominated stablecoins and the evolving legislative and regulatory landscape governing them—including recently proposed and enacted federal frameworks such as the GENIUS Act and other stablecoin specific bills—may adversely affect our deposit base, liquidity profile, and competitive position.
As stablecoins become more widely adopted for payments and value storage, customers may shift funds from traditional bank deposits into digital assets, potentially reducing our low cost funding sources and increasing our reliance on more expensive or volatile funding alternatives. New legislation could also impose operational, compliance, cybersecurity, or reporting requirements on financial institutions that interact with stablecoin issuers, custodians, or users. The pace and direction of regulatory change remain uncertain, and future rules could materially impact our ability to compete, our cost structure, or the behavior of our customers. Any of these developments could adversely affect our business, financial condition, and results of operations.
Future offerings of common stock or debt securities may adversely affect the market price of the Company’s stock.
In the future, if the Company’s or the Bank’s capital ratios fall below the prevailing regulatory required minimums, or shouldif the Company seekseeks to expandpursue throughgrowth opportunities such as acquisitions, the Company or the Bank couldmay be forcedrequired to raise additional capital by making additionalthrough offerings of common stockstock, preferred stock, subordinated debt, senior debt, or preferredother stock.capital Additionalinstruments. Any such equity offerings may dilute the holdings of existing shareholders or reduce the market price of the Company’s common stock, or both. Debt offerings could increase the Company’s interest expense, impose restrictive covenants, or otherwise adversely affect the Company’s financial condition. There can be no assurance that any such capital could be raised on acceptable terms, or at all. Future offerings of common stock may adversely affect the market price of the Company’s stock.
The Company maintains an incident response and business continuity framework, which is periodically tested through tabletop exercises involving executive management, senior leadership and other critical business functions. These exercises are intended to support effective decision making, communication and coordination during cybersecurity or operational incidents; however, there can be no assurance that such measures will be effective in all circumstances.
The Company expects to continue to experience growth in the scope of its operations and, correspondingly, in the number of its employees and customers. The Company may not be able to successfully manage its business as a result of the strain on Management and operations that may result from this growth. The Company’s ability to manage this growth will depend upon its ability to continue to attract, hire and retain skilled employees. The Company’s success will also depend on the ability of its officers and key employees to continue to implement and improve operational and other systems, to manage multiple, concurrent customer relationships and to hire, train and manage employees. Further, given the rise of “remote” and “hybrid” working models, the Company is in competition with more companies and industries for employee retention. The Company’s potential inability to retain key employees could have a material adverse effect on its financial condition and results of operations. As a community banking organization, the Company is highly reliant on key employees, including its Chief Executive Officer, President, Chief Financial Officer, heads of key operational areas, area managers, business development officers and loan officers. The loss of these employees could have an adverse impact on the Company’s operating capacities and the ability to implement growth strategies and adversely impact the financial performance.
Our use of artificial intelligence, including generative artificial intelligence, may expose us to operational, regulatory, legal, and reputational risks that could adversely affect our business, financial condition, and results of operations.
We use, and expect to continue to expand our use of, artificial intelligence and machine learning technologies, including generative artificial intelligence models, in our operations and through third-party vendors. These technologies are complex, rapidly evolving, and may not perform as intended. AI systems may produce inaccurate, biased, or unpredictable results, which could lead to flawed business decisions, customer harm, control failures, or violations of law or regulation, including consumer protection and fair lending requirements.
The regulatory and supervisory framework governing the use of artificial intelligence in the banking industry is developing and remains uncertain. Banking regulators have increased scrutiny of AI-related practices, including governance, model risk management, explainability, data usage, and third-party oversight. New laws, regulations, or supervisory expectations could limit our ability to deploy AI technologies, require significant changes to our systems or processes, increase compliance costs, or result in supervisory actions, fines, or penalties if our use of AI is deemed noncompliant or unsafe.
The use of AI, including generative AI, may also increase cybersecurity, data privacy, and information security risks. AI systems may require access to sensitive customer or proprietary information, and any failure to adequately safeguard such data, prevent misuse, or comply with applicable privacy and data protection laws could result in regulatory enforcement actions, litigation, financial losses, and reputational harm.
We also face risks from reliance on third-party vendors that develop or utilize AI technologies. These vendors may use proprietary or opaque models, limit our ability to validate or monitor AI-driven outcomes, or fail to maintain adequate controls. Disruptions, deficiencies, or misconduct by such vendors could adversely affect our operations, compliance posture, or customer relationships.
If we are unable to effectively manage the risks associated with artificial intelligence and emerging technologies, or if these technologies fail to operate as intended, our business, financial condition, and results of operations could be materially adversely affected.
The Company may not be able to detect fraudulent activities fully, or on a timely basis, which could expose the Company to financial losses, reputational harm and regulatory scrutiny.
The Company is required to maintain robust internal controls, monitoring systems, and reporting mechanisms designed to prevent, detect, and address fraud committed by customers, employees, vendors, or other third parties. Fraud related risks have become increasingly complex as digital channels expand, criminal schemes evolve, and expectations from regulators and industry stakeholders continue to rise.
Although the Company has implemented policies, procedures, and technological safeguards intended to identify and mitigate fraudulent behavior, these measures may not prevent all instances of fraud. Fraudulent activities may be sophisticated, coordinated, or intentionally concealed, and may involve identity theft, account takeover, unauthorized transactions, misappropriation of funds, or manipulation of internal processes. To the extent the Company fails to detect or prevent fraudulent activity, it may suffer financial losses, incur increased operational costs, face customer disputes, or experience reputational damage. In addition, regulators may impose fines, penalties, or other sanctions if the Company’s fraud prevention controls are deemed inadequate or if the Company fails to comply with applicable laws, regulations, or supervisory expectations.
Management's Discussion & Analysis (MD&A)
Largest changes
“The provision for credit losses for AFS debt securities was $1.5 million for the year ended December 31, 2024, compared to $1.3 million for the prior year. The impairment was entirely attributable to one corporate senior debt security in the AFS portfolio. The Company owns $5 million in par value of this position and maintains it in nonaccrual status. The net carrying value of the position was $2.0 million as of December 31, 2024.”see in full comparison
“Residential mortgage loans consist of loans secured by 1 to 4 family residential properties. These loans amounted to $630.9 million at December 31, 2024, a decrease of $0.6 million from year end 2023. Sales of mortgage loans totaled $65.3 million and $71.7 million for 2024 and 2023, respectively. Approximately $75.4 million and $79.0 million in residential loans were sold but serviced by the Company at December 31, 2024 and December 31, 2023, respectively, and are not included on the Company’s Balance Sheet. …”see in full comparison
“Residential mortgage loans consist of loans secured by 1 to 4 family residential properties. These loans amounted to $677.2 million at December 31, 2025, an increase of $46.3 million from year end 2024. Sales of mortgage loans totaled $67.3 million and $65.3 million for 2025 and 2024, respectively. Approximately $66.3 million and $75.5 million in residential loans were sold but serviced by the Company at December 31, 2025 and December 31, 2024, respectively, and are not included on the Company’s Balance Sheet. …”see in full comparison
Total deposits increasedsee in full comparison$176.2$223.7 million to$2.1$2.3 billion at December 31,2024.2025. This increase in deposits was due to increases of$202.2$56.3 million in brokered deposits, $51.4 million in time deposits,$21.2 million in noninterest-bearing demand deposits, $18.3 million in brokered deposits and $8.4$47.3 million in interest-bearing demand deposits,partially offset by a decrease of $73.9$43.9 million in savings deposits, and $24.8 million in noninterest-bearing demand deposits. The change in the composition of the portfolio from December 31,20232024 reflects a47.4 percent increase in time deposits, 9.125.8 percent increase in brokeredtimedeposits,5.0 percent increase in noninterest-bearing demand deposits and a 2.714.7 percent increase in interest-bearing demand deposits,partially offset by a 13.18.9 percentdecreaseincrease in savings deposits, 8.2 percent increase in time deposits and 5.6 percent increase in noninterest-bearing demand deposits. The Company’s brokered deposit portfolio contains time deposit type products, savings type products and interest-bearing demand deposit type products. The Company’s deposit composition as of December 31, 2025, consisted of 20.0% in noninterest bearing demand deposits, 17.5% in interest-bearing demand deposits, 24.4% in savings deposits and 38.1% in time deposits.
“The Company adopted ASU 2016-13 on January 1, 2023, using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The Company established a governance structure to implement the CECL accounting guidance and has developed a methodology and set of models to be used upon adoption. At adoption, the Company recorded an $0.8 million increase to its allowance for credit losses, related to loans. Further, the Company increased its reserve for unfunded credit commitments by $0.1 million. …”see in full comparison
Total assets increasedsee in full comparison$75.5$312.6 million, or2.911.8 percent, to$2.7$3.0 billion at December 31,2024,2025, when compared to year end2023.2024. This increase was primarily due to an increase of$88.6$284.1 million in gross loans, mostly due to increases of $236.7 million in commercial loan growth, $46.3 million in residential mortgages, $17.0 million in commercial construction loans and $8.5 million in consumer loans partially offset by decreases of $17.6 in residentialconstruction.construction, $4.1 million in SBA loans held for investment and $2.7 million in loans held for sale. Total assets also included an increase of$9.3 million in securities, offset by a decrease of $14.3$36.1 million in total cash and cashequivalents.equivalents, partially offset by a decrease of $21.0 million in securities.
Full comparison: every changed paragraph (48)
Unity Bancorp, Inc. (the “Parent Company”) is a financial holding company incorporated in New Jersey and registered under the Bank Holding Company Act of 1956, as amended. Its wholly-owned subsidiary, Unity Bank (the “Bank” or, when consolidated with the Parent Company, the “Company”) is chartered by the New Jersey Department of Banking and Insurance and commenced operations on September 13, 1991. The Bank provides a full range of commercial and retail banking services through online banking platforms and its twenty-onetwenty-two branch offices located in Bergen, Hunterdon, Middlesex, Morris, Ocean, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania. These services include the acceptance of demand, savings and time deposits and the extension of consumer, real estate, SBA and other commercial credits. The Bank has multiple subsidiaries used to hold part of its investment, other real estate owned and loan portfolios.
The table below an annualized non-GAAP reconciliation of adjustments called out in the chart above:
During 2024,2025, tax-equivalent net interest income amounted to $98.6$117.0 million, an increase of $3.6$18.4 million, or 3.818.7 percent, when compared to the same period in 2023.2024. The net interest margin increased 1036 basis points to 4.164.52 percent for the year ended December 31, 2024,2025, compared to 4.064.16 percent for the same period in 2023.2024. The net interest spread was 3.293.69 percent for 2024,2025, a 340 basis point decreaseincrease compared to 3.323.29 for the same period in 2023.2024.
During 2024,2025, tax-equivalent interest income was $155.7$173.6 million, an increase of $12.2$17.9 million, or 8.511.5 percent, when compared to the same period in the prior year. This increase was mainly driven by increasesthe increase in the average balance of loans and in the yield on loans and the balance of average loans.
Total interest expense was $57.1$56.6 million in 2024,2025, ana increasedecrease of $8.6$0.5 million or 17.80.9 percent compared to 2023.2024. This increasedecrease was primarily driven by the increasesdecrease in the ratecost on time deposits, interest-bearing demand deposits and savingsof deposits and the increased balance of average time deposits, which were partially offset by a decrease in the rate paid on and thedecreased average balance of borrowed funds and subordinated debentures.debentures, which was partially offset by an increase in the volume of time deposits and interest-bearing demand deposits.
The provision for credit losses for loans totaled $2.4$6.7 million for 2024,2025, compared to $1.8$2.4 million in 2023.2024. The provision for credit losses for loans increased $0.6$4.3 million for the year ended 20242025 primarily due to loan growth.growth, with additional increases in qualitative adjustments due to increased nonaccrual assets.
For the year ending December 31, 2025, there was a release in credit losses for debt securities of $2.8 million compared to a provision for credit losses for debt securities of $1.5 million for the prior year. The $2.8 million of release relates to the Patriot National Bancorp, Inc. position that was converted to restricted stock in 2025. There were no nonaccrual securities at December 31, 2025, compared to $2.0 million at December 31, 2024.
The provision for credit losses for AFS debt securities was $1.5 million for the year ended December 31, 2024, compared to $1.3 million for the prior year. The impairment was entirely attributable to one corporate senior debt security in the AFS portfolio. The Company owns $5 million in par value of this position and maintains it in nonaccrual status. The net carrying value of the position was $2.0 million as of December 31, 2024.
Noninterest income was $8.5$14.8 million for 2024,2025, a $0.4$6.3 million increase compared to $8.1$8.5 million for 2023.2024. This increase was primarily due to increased net unrealized gains on securities, branch fee income and service and loan fee income, partiallybranch offsetfee by a decrease in gain on sale of SBA loansincome and BOLI income. The increased net gains on securities was primarily driven by $1.7 million in unrealized gains and $3.5 million in realized gains on the Patriot National Bancorp, Inc. position.
Noninterest expense totaled $48.7$52.4 million for the year ended December 31, 2024,2025, an increase of $1.7$3.7 million when compared to $47.0$48.7 million in 2023.2024. The majority of this increase is attributable to increased compensation and benefits, processing and communicationscommunications, director fee and furniture and equipmentoccupancy expenses, partially offset by decreased depositloan insurancerelated expense.
For 2024,2025, the Company reported income tax expense of $12.9$17.6 million for an effective tax rate of 23.8%,23.3%, compared to an income tax expense of $13.3$12.9 million and an effective tax rate of 25.1%23.8% in 2023.2024. During the fourth quarter of 2025, Unity purchased $8.0 million of federal tax credits for $7.5 million, resulting in $0.5 million of tax savings. The Company intends to evaluate other tax credit opportunities on an ongoing basis, subject to market availability and regulatory considerations.
Total assets increased $75.5$312.6 million, or 2.911.8 percent, to $2.7$3.0 billion at December 31, 2024,2025, when compared to year end 2023.2024. This increase was primarily due to an increase of $88.6$284.1 million in gross loans, mostly due to increases of $236.7 million in commercial loan growth, $46.3 million in residential mortgages, $17.0 million in commercial construction loans and $8.5 million in consumer loans partially offset by decreases of $17.6 in residential construction.construction, $4.1 million in SBA loans held for investment and $2.7 million in loans held for sale. Total assets also included an increase of $9.3 million in securities, offset by a decrease of $14.3$36.1 million in total cash and cash equivalents.equivalents, partially offset by a decrease of $21.0 million in securities.
Total deposits increased $176.2$223.7 million, or 9.210.7 percent, to $2.1$2.3 billion at December 31, 2024.2025. This increase was primarily due to increases of $202.2$56.3 million in brokered deposits, $51.4 million in time deposits, $21.2 million in noninterest-bearing demand deposits, $18.3 million in brokered deposits and $8.4$47.3 million in interest-bearing demand deposits, offset by a decrease of $73.9$43.9 million in savings deposits and $24.8 million in noninterest-bearing demand deposits. Borrowed funds decreasedincreased $135.9$35.3 million to $220.5$255.8 million at December 31, 2024.2025.
AFS debt securities totaled $70.9 million at December 31, 2025, a decrease of $23.0 million or 24.5 percent, compared to $93.9 million at December 31, 2024, an increase of $2.1 million or 2.3 percent, compared to $91.8 million at December 31, 2023.2024. This net increasedecrease was the result of:
TheFor provisionthe foryear ended December 31, 2025, there was a release in credit losses on AFS debt securities wasof $2.8 million compared to a provision of $1.5 million atfor year ended December 31, 2024. The change in provision was entirely attributable to thePatriot sameNational corporate debt securityBancorp for which a partial provisionvaluation allowance was takenrecognized in the second quarter of 2024 and the fourth quarter of 2023. TheDuring companythe ownsyear $5ended millionDecember in31, par2025, ofUnity thisreleased all valuation allowances related to the debt position and maintainsconverted itthe inposition nonaccrualto status.equity.
HTM debt securities totaled $36.6 million at December 31, 2025, a decrease of $4.7 million, or 11.4 percent, compared to $41.3 million at December 31, 2024. The decrease was due to:
HTM debt securities totaled $41.3 million at December 31, 2024, an increase of $5.2 million, or 14.3 percent, compared to $36.1 million at December 31, 2023. The increase was due to:
Approximately 63 percent57 and 6663 percent of the total investment portfolio had a fixed rate of interest at December 31, 20242025 and December 31, 2023,2024, respectively.
The loan portfolio, which represents the Company’s largest asset group, is a significant source of both interest and fee income. The portfolio consists of SBA, commercial, commercial construction, residential mortgage, consumer and residential construction loans. Each of these segments is subject to differing levels of credit and interest rate risk.
Total loans were $2.3$2.5 billion at December 31, 2024,2025, an increase of $88.6$284.1 million or 4.112.6 percent when compared to year end 2023.2024. CommercialCommercial, residential mortgage, commercial construction and consumer loans increased $134.2$236.6 million, $46.3 million, $17.0 million and $4.0$8.5 million, respectively, partially offset by decreases in residential construction, SBA loans held for investment, SBA PPPinvestment and residentialloans mortgageheld loansfor sale of $40.4$17.6 million, $1.7 million, $0.9$4.0 million and $0.6$2.7 million, respectively. The Company’s loan portfolio had an average outstanding principal balance forof the entire portfolio is $0.6$0.7 million per loan as of December 31, 2024.2025.
The table below shows the breakdown of industry of the commercial mortgage – owner occupied portfolio as of December 31, 2024.2025:
The Other category above is predominantly comprised of land, airports, automotiveairports and gas stationmulti-family loans.
The table below shows the breakdown of industry of the commercial mortgage – nonowner occupied portfolio as of December 31, 2024.2025:
The Other category above is predominantly comprised of multi-family, landland, hotels and automotive loans.
Commercial loans are generally made in the Company’s marketplace for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes. These loans amounted to $1.4$1.5 billion at December 31, 2024,2025, an increase of $134.2$236.6 million from year end 2023.2024. The yield on commercial loans was 6.546.68 percent for 2024,2025, compared to 6.126.28 percent for the same period in 2023.2024. The SBA 504 program, which consists of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property, is included in the Commercial loan portfolio. The Commercial Real Estate sub-category includes both owner occupied and non-owner occupied commercial real estate related loans.mortgages.
Residential mortgage loans consist of loans secured by 1 to 4 family residential properties. These loans amounted to $630.9 million at December 31, 2024, a decrease of $0.6 million from year end 2023. Sales of mortgage loans totaled $65.3 million and $71.7 million for 2024 and 2023, respectively. Approximately $75.4 million and $79.0 million in residential loans were sold but serviced by the Company at December 31, 2024 and December 31, 2023, respectively, and are not included on the Company’s Balance Sheet. The yield on residential mortgages was 6.04 percent for 2024, compared to 5.48 percent for 2023. Residential mortgage loans maintained in portfolio are generally to individuals that do not qualify for conventional financing. In extending credit to this category of borrowers, the Bank considers other mitigating factors such as credit history, equity and liquid reserves of the borrower. As a result, the residential mortgage loan portfolio of the Bank includes fixed and adjustable rate mortgages with rates that exceed the rates on conventional fixed-rate mortgage loan products but are typically not considered high priced mortgages.
Consumer loans consist of home equity loans and loans for the purpose of financing the purchase of consumer goods, home improvements and other personal needs, and are generally secured by 1 to 4 residential properties. These loans amounted to $76.7 million at December 31, 2024, an increase of $4.0 million from December 31, 2023. The yield on consumer loans was 7.77 percent for 2024, compared to 7.55 percent for 2023.
ResidentialCommercial construction loans consist of short-term loans for the purpose of funding the costs of building a home. These loans amounted to $90.9$147.2 million for 2025, an increase of $17.0 million from the $130.2 million at December 31, 2024, a decrease of $40.4 million from December 31, 2023.2024. The yield on residentialcommercial construction loans was 8.618.21 percent for 2024,2025, compared to 6.998.81 percent for 2023.the same period in 2024.
Residential mortgage loans consist of loans secured by 1 to 4 family residential properties. These loans amounted to $677.2 million at December 31, 2025, an increase of $46.3 million from year end 2024. Sales of mortgage loans totaled $67.3 million and $65.3 million for 2025 and 2024, respectively. Approximately $66.3 million and $75.5 million in residential loans were sold but serviced by the Company at December 31, 2025 and December 31, 2024, respectively, and are not included on the Company’s Balance Sheet. The yield on residential mortgages was 6.32 percent for 2025, compared to 6.04 percent for 2024. Residential mortgage loans maintained in portfolio are generally to individuals that do not qualify for conventional financing. In extending credit to this category of borrowers, the Bank considers other mitigating factors such as credit history, equity and liquid reserves of the borrower. As a result, the residential mortgage loan portfolio of the Bank includes fixed and adjustable rate mortgages with rates that exceed the rates on conventional fixed-rate mortgage loan products but are typically not considered high priced mortgages.
Consumer loans consist of home equity loans and loans for the purpose of financing the purchase of consumer goods, home improvements and other personal needs, and are generally secured by 1 to 4 residential properties. These loans amounted to $85.2 million at December 31, 2025, an increase of $8.5 million from December 31, 2024. The yield on consumer loans was 7.08 percent for 2025, compared to 7.77 percent for 2024.
Residential construction loans consist of short-term loans for the purpose of funding the costs of building a home. These loans amounted to $73.3 million at December 31, 2025, a decrease of $17.6 million from December 31, 2024. The yield on residential construction loans was 9.45 percent for 2025, compared to 8.61 percent for 2024.
Nonaccrual loans were $13.1$29.8 million at December 31, 2024,2025, a $5.1$16.7 million decreaseincrease from $18.2$13.1 million at year end 2023.2024. Since year-end 2023,2024, nonaccrual loans in the commercialcommercial, residential mortgage and SBA held for investmentconsumer loan segments increased, partially offset by a decrease in nonaccrual residentialSBA mortgage,held for investment and residential constructionconstruction. andThe consumerincrease loans.primarily reflects one $15.5 million well-secured commercial real estate relationship that migrated to nonaccrual status during the quarter. In addition, there waswere $0.8 million inno loans past due 90 days or more and still accruing interest at December 31, 2024,2025, compared to $0.9$0.8 million at December 31, 2023.2024.
The Company also monitors potential problem loans. Potential problem loans are those loans where information about possible credit problems of borrowers causes Management to have doubts as to the ability of such borrowers to comply with loan repayment terms. These loans are categorized by their non-passing risk rating and performing loan status. Potential problem loans totaled $11.5 million at December 31, 2025, a decrease of $3.1 million from $14.6 million at December 31, 2024.
There were no nonaccrual securities at December 31, 2025, compared to $2.0 million at December 31, 2024.
Potential problem loans totaled $14.6 million at December 31, 2024, a decrease of $0.5 million from $15.1 million at December 31, 2023.
Nonaccrual securities were $2.0 million at December 31, 2024, compared to none at December 31, 2023. The Company owns $5 million in par of this position and moved the position into nonaccrual status during the third quarter of 2024.
The Company maintains a reserve for unfunded loan commitments at a level that Management believes is adequate to absorb estimated expected losses. Adjustments to the reserve are made through provision for credit losses and applied to the reserve which is classified as Accrued expenses and other liabilities. At December 31, 2024 and December 31, 2023,2025, a $0.6$0.7 million commitment reserve was reported.reported, compared to a $0.6 million reserve at December 31, 2024.
The following table details the maturity distribution of time depositsdeposits, inclusive of brokered time deposits, as of December 31, 20242025 and 2023.2024.
Total deposits increased $176.2$223.7 million to $2.1$2.3 billion at December 31, 2024.2025. This increase in deposits was due to increases of $202.2$56.3 million in brokered deposits, $51.4 million in time deposits, $21.2 million in noninterest-bearing demand deposits, $18.3 million in brokered deposits and $8.4$47.3 million in interest-bearing demand deposits, partially offset by a decrease of $73.9$43.9 million in savings deposits, and $24.8 million in noninterest-bearing demand deposits. The change in the composition of the portfolio from December 31, 20232024 reflects a 47.4 percent increase in time deposits, 9.125.8 percent increase in brokered time deposits, 5.0 percent increase in noninterest-bearing demand deposits and a 2.714.7 percent increase in interest-bearing demand deposits, partially offset by a 13.18.9 percent decreaseincrease in savings deposits, 8.2 percent increase in time deposits and 5.6 percent increase in noninterest-bearing demand deposits. The Company’s brokered deposit portfolio contains time deposit type products, savings type products and interest-bearing demand deposit type products. The Company’s deposit composition as of December 31, 2025, consisted of 20.0% in noninterest bearing demand deposits, 17.5% in interest-bearing demand deposits, 24.4% in savings deposits and 38.1% in time deposits.
The Company’s brokered deposit portfolio contains time deposit type products, savings type products and interest-bearing demand deposit type products. The Company’s deposit composition by deposit product type at December 31, 2024, consisted of 21.0 percent noninterest-bearing demand deposits, 16.8 percent interest-bearing demand deposits, 23.4 percent savings deposits and 38.8 percent time deposits.
As part of the Company’s overall funding and liquidity management program, from time to time the Company borrows from the Federal Home Loan Bank of New York. Residential mortgages andmortgages, commercial real estate loans and debt securities collateralize these borrowings.
At December 31, 2024,2025, the Company had $292.2$247.0 million of additional credit available at the FHLB and the Company had $245.9$232.2 million of additional credit available at the FRB.FRB and $20 million from other sources. Pledging additional collateral in the form of 1 to 4 family residential mortgages, commercial loans and investment securities can increase the lines with the FHLB and FRB.
Market risk for the Company is primarily limited to interest rate risk, which is the impact that changes in interest rates would have on future earnings. The Company’s Asset Liability Committee (“ALCO”) manages this risk. The principal objectives of the ALCO are to establish prudent risk management guidelines, evaluate and control the level of interest rate risk in balance sheet accounts, determine the level of appropriate risk given the business focus, operating environment, capital and liquidity requirements and actively manage risk within Board-approved guidelines. The ALCO reviews the maturities and repricing of loans, investments, deposits and borrowings, cash flow needs, current market conditions and interest rate levels.
The principal sources of funds at the Bank are deposits, scheduled amortization and prepayments of investment and loan interest principal, sales and maturities of investment securities, additional borrowings and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit inflows and outflows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. The Consolidated Statement of Cash Flows provides detail on the Company’s sources and uses of cash, as well as an indication of the Company’s ability to maintain an adequate level of liquidity. As the Consolidated Bank comprises the majority of the assets of the Company, the Consolidated Statement of Cash Flows is indicative of the Consolidated Bank’s activity. At December 31, 2024,2025, the balance of cash and cash equivalents was $180.4$216.5 million, aan decreaseincrease of $14.3$36.1 million from December 31, 2023.2024. A discussion of the cash provided by and used in operating, investing and financing activities follows.
Operating activities provided $47.9$44.9 million and $46.9$47.9 million in net cash for the years ended December 31, 20242025 and 2023,2024, respectivelyrespectively. The primary sources of funds were net income from operations and adjustments to net income, such as the provision for credit losses and depreciation and amortization.
Financing activities provided $30.5$248.0 million and $90.9$30.5 million in net cash for the years ended December 31, 20242025 and 2023,2024, respectively, primarily due to an increase in the Company’s deposits,deposits partially offset by a decrease in the Company’sand borrowed funds.
The Company adopted ASU 2016-13 on January 1, 2023, using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The Company established a governance structure to implement the CECL accounting guidance and has developed a methodology and set of models to be used upon adoption. At adoption, the Company recorded an $0.8 million increase to its allowance for credit losses, related to loans. Further, the Company increased its reserve for unfunded credit commitments by $0.1 million. The reserve for unfunded credit commitments is recorded in Accrued expenses and other liabilities on the Consolidated Balance Sheet. These increases in reserves were recorded through retained earnings and were $0.6 million, net of tax.
For other assets within the scope of the new CECL accounting guidance, such as other held to maturity debt securities and other receivables, management noted the impact from adoption to be inconsequential. Additionally, the Company noted the adoption of CECL had no significant impact on regulatory capital ratios of the Company and/or the Bank.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risks inherent in our business from those described under the heading “Risk Factors” within the Company’s Form 10-K for the year ended December 31, 2025.
Largest changes
see in full comparisonInformationThereregardinghavethisbeenitemnoasmaterialofchangesMarchto31,the2026risksappearsinherent in our business from those described under theheading,heading “Risk Factors” within the Company’s Form 10-K for the year ended December 31, 2025.
Full comparison: every changed paragraph (1)
InformationThere regardinghave thisbeen itemno asmaterial ofchanges Marchto 31,the 2026risks appearsinherent in our business from those described under the heading,heading “Risk Factors” within the Company’s Form 10-K for the year ended December 31, 2025.
Management's Discussion & Analysis (MD&A)
Removed heading “Allowance for Credit Losses and Reserve for Unfunded Loan Commitments”
Largest changes
“Allowance for Credit Losses and Reserve for Unfunded Loan Commitments”see in full comparison
“Commitments. The Company was committed to advance approximately $458.0 million to its borrowers as of June 30, 2026, compared to $508.5 million at December 31, 2025. At June 30, 2026, $206.0 million of these commitments expire within one year, compared to $270.3 million at December 31, 2025. The Company had $6.3 million and $5.9 million in standby letters of credit at June 30, 2026 and December 31, 2025, respectively, which are included in the commitments amount noted above. The estimated fair value of these guarantees is not significant. …”see in full comparison
“Loans. Loans held for sale portfolio amounted to $9.5 million at June 30, 2026 and December 31, 2025. Sales of these loans provide an additional source of liquidity for the Company.”see in full comparison
“Deposits. As of June 30, 2026, deposits included $443.6 million of government deposits, as compared to $444.9 million at year end 2025. These deposits are generally short in duration and are very sensitive to price competition. The Company believes that the current level of these types of deposits is appropriate. Within this portfolio the average deposit size was $7.6 million as of June 30, 2026.”see in full comparison
“Defined as net income divided by the sum of the weighted average shares and the potential dilutive impact of the exercise of outstanding options.”see in full comparison
“Defined as dividends declared per share divided by diluted net income per share.”see in full comparison
Full comparison: every changed paragraph (101)
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the 2025 consolidated audited financial statements and notes thereto included in our Annual Report on Form 10-K10‑K for the year ended December 31, 2025. When necessary, reclassifications have been made to prior period data throughout the following discussion and analysis for purposes of comparability. This Quarterly Report on Form 10-Q10‑Q contains certain “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated” and “potential”. Examples of forward looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Unity Bancorp, Inc. that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, in addition to those items contained in the Company’s Annual Report on Form 10-K10‑K under Item IA-Risk Factors, as updated by our subsequent filings with the Securities and Exchange Commission, the following: changes in general, economic and market conditions, including the impact of inflation, tariffs, legislative and regulatory conditions and the development of an interest rate environment that adversely affects Unity Bancorp, Inc.’s interest rate spread or other income anticipated from operations and investments and the impact of health or other emergencies on our employees, operations and customers.
Net income totaled $14.3$14.5 million, or $1.40$1.42 per diluted share for the three months ended MarchJune 31,30, 2026, compared to $11.6$16.5 million, or $1.13$1.61 per diluted share for the same period in 2025. Return on average assets and return on average common equity for the quarter were 2.042.01 percent and 16.3815.86 percent, respectively, compared to 1.832.51 percent and 15.5621.15 percent for the same period in 2025.
Net interest income increased 11.5 percent compared to the prior year’s quarter, primarily due to the increased volume on loans and decreased cost of time deposits and decreased volume on borrowed funds and subordinated debentures, partially offset by increases in the volume of interest-bearing deposits.
Net interest margin equaled 4.56 percent this quarter compared to 4.49 percent in the prior year’s quarter. The increase was primarily due to the increased yield on FHLB stock complemented by decrease in cost of interest-bearing liabilities.
The provision for credit losses on loans and off-balance sheet items was $1.2 million for the three months ended June 30, 2026, compared to $1.9 million in provision for credit losses on loans and off-balance sheet items for the prior year’s quarter. The decrease was primarily due to qualitative adjustments.
Noninterest income decreased 67.0 percent compared to the prior year’s quarter, primarily because the quarter ended June 30, 2025 included $3.5 million in one-time realized gains from the sale of Patriot National Bancorp, Inc. common stock.
Noninterest expense increased 7.0 percent compared to the prior year’s quarter, primarily due to increases in compensation and benefits and processing and communications.
The effective tax rate was 22.4 percent compared to 23.4 percent in the prior year’s quarter.
(1)
Defined as net income divided by weighted average shares outstanding.
(2)
Defined as net income divided by the sum of the weighted average shares and the potential dilutive impact of the exercise of outstanding options.
(3)
Defined as annualized net income divided by average shareholders’ equity.
(4)
Defined as dividends declared per share divided by diluted net income per share.
(5)
Defined as average equity divided by average total assets.
During the three months ended MarchJune 31,30, 2026, tax-equivalent net interest income amounted to $30.7$31.8 million, an increase of $3.5$3.3 million or 12.811.5 percent when compared to the same period in 2025. The net interest margin increased 7 basis points to 4.534.56 percent for the three months ended MarchJune 31,30, 2026, compared to 4.464.49 percent for the same period in 2025.
During the three months ended MarchJune 31,30, 2026, tax-equivalent interest income was $45.2$46.6 million, an increase of $4.4$4.0 million or 10.7 percent9.5% when compared to the same period in 2025. ThisThe increase was mainly driven by increases in the average balance of loans, partially offset by a decrease in yield ofon loans and volume of interest-bearing deposits.loans.
Of the $4.0 million increase in interest income on a tax-equivalent basis, $4.5 million is due to an increase in volume of interest earning assets, partially offset by a decrease of $0.5 million due to decreases in yield on interest earning assets The average volume of interest-earning assets increased $248.7 million to $2.8 billion for the second quarter of 2026 compared to $2.6 billion in 2025. This was due primarily to a $265.2 million increase in average loans and $5.4 million increase in interest-bearing deposits, partially offset by $21.3 million and $0.6 million in securities and FHLB stock, respectively.
The yield on total interest-earning assets decreased 2 basis points to 6.68 percent for the three months ended June 30, 2026, when compared to the same period in 2025.The yield on the loan portfolio decreased 2 basis points to 6.73 percent.
Total interest expense was $14.4$14.8 million for the three months ended MarchJune 31,30, 2026, an increase of $0.9$0.8 million or 6.65.4 percent when compared to the same period in 2025. ThisThe increase was driven by thean increasedincrease averagein volume of interest-bearing deposits, partially offset by decreaseda costdecrease in yield on interest-bearing deposits and volume of timeborrowed deposits.funds.
The $0.8 increase in interest expense resulted from a $1.4 million increase in volume of average interest-bearing deposits, partially offset by a $0.4 million and $0.2 million decrease in rate paid on interest-bearing deposits and volume of borrowed funds, respectively.
The average cost of interest-bearing liabilities decreased 13 basis points to 2.92 percent for the three months ended June 30, 2026 compared to 2025. The cost of interest-bearing deposits decreased 12 basis points to 2.88 percent.
Interest-bearing liabilities averaged $2.0 billion during the three months ended June 30, 2026, an increase of $182.0 million compared to the same period in 2025. The increase in interest-bearing liabilities was primarily due to an increase in savings deposits, brokered deposits, interest-bearing demand deposits and time deposits, partially offset by a decrease in borrowed funds.
During the six months ended June 30, 2026, tax-equivalent interest income was $91.8 million, an increase of $8.4 million or 10.1 percent when compared to the same period in 2025. This increase was mainly driven by increases in the average balance of loans offset by a decrease in average balance of securities and yield on loans and securities.
Of the $8.4 million increase in interest income on a tax-equivalent basis, $8.9 million was due to the increased average volume of interest-earning assets, offset by $0.5 million due to decreased rate on interest earning assets.
The average volume of interest-earning assets increased $261.9 million to $2.8 billion for the second quarter of 2026 compared to $2.5 billion in 2025. This was due primarily to a $267.0 million increase in average loans and $18.2 million increase in interest-bearing deposits. The increase was offset by a $22.9 and $0.4 million decrease in average investments and FHLB stock respectively.
The yield on total interest-earning assets decreased 2 basis points to 6.67 percent for the six months ended June 30, 2026, when compared to the same period in 2025. The yield on the loan portfolio decreased 1 basis point to 6.72 percent.
Total interest expense was $29.3 million for the six months ended June 30, 2026, an increase of $1.7 million or 6.0 percent compared to the same period in 2025. This increase was driven by the increased average volume of interest-bearing deposits, partially offset by decreased cost of time deposits and volume of borrowed funds.
The $1.7 million increase in interest expense resulted from an increase of $2.9 million in the average volume of interest-bearing deposits, partially offset by a $0.9 million decrease in rate on average interest-bearing liabilities and a $0.3 million decrease in volume of borrowed funds.
The average cost of interest-bearing liabilities decreased 12 basis points to 2.92 percent for the six months ended June 30, 2026 compared to 2025. The average cost of interest-bearing deposits decreased 11 basis points to 2.88.
Interest-bearing liabilities averaged $2.0 billion during the six months ended June 30, 2026, an increase of $191.2 million, compared to the same period in 2025. The increase in interest-bearing liabilities was primarily due to an increase in savings deposits, brokered deposits, interest-bearing demand deposits and time deposits, partially offset by a decrease in borrowed funds.
(A)
Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis, assuming a federal tax rate of 21 percent.
(B)
The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.
The provision for credit losses for loans was $1.0 million and $2.1 million during the three and six months ended MarchJune 31,30, 2026, compared to $1.4$1.7 million and $3.1 million for the same periodperiods in 2025.
The provision for credit losses for off-balance sheet exposures was $5$0.1 thousandmillion for the three and six months ended MarchJune 31,30, 2026,2026 compared to a release of $41 thousand for the same period inand 2025.
There was no provision for credit losses on securities for the three and six months ended MarchJune 31,30, 20262026, andcompared to a release of $2.0 million for the same periods in 2025.
For the quarter ended MarchJune 31,30, 2026, the Company reported income tax expense of $4.2 million for an effective tax rate of 22.722.4 percent, compared to income tax expense of $3.8$5.0 million and an effective tax rate of 24.823.4 percent for the prior year’s quarter. For the six months ended June 30, 2026, the Company reported income tax expense of $8.4 million for an effective tax rate of 22.6 percent, compared to an income tax expense of $8.9 million and an effective tax rate of 24.0 percent for the six months ended June 30, 2025. During the first quarter of 2026, Unity purchased $5.1 million ofin federal tax credits, resulting in $0.4 million of tax savings. Furthermore, during the second quarter of 2026, Unity purchased an additional $2.6 million of state tax credits, resulting in $0.2 million of tax savings.
The Company participates in federal and state income tax credit programs. Tax credits are accounted for within the scope of ASC 740 and are reflected as a reduction of income tax expense when the related tax benefit is realized or realizable. Tax credits are recognized in the period when the Company concludes that it has met the more-likely-than-not recognition threshold under ASC 740.
Financial Condition at MarchJune 31,30, 2026
Total assets increased $60.7$227.7 million or 2.07.7 percent, to $3.0$3.2 billion at MarchJune 31,30, 2026, when compared to year end 2025. This increase was primarily due to increases of $56.9$137.8 million in gross loans, $12.6$58.2 million in prepaid expenses and other assets, $33.8 million in cash and cash equivalents,equivalents and $0.4$3.1 million in accruedFHLB interest receivable,stock, partially offset by a decrease of $8.7$4.7 million in securities. For the quarter ended June 30, 2026, the increase in prepaid expenses and other assets was primarily driven by $65 million of originated Brokered CDs pending settlements compared to $10 million of originated Brokered CDs pending settlements at year end 2025.
Total shareholders’ equity increased $12.5$26.2 million, when compared to year end 2025, primarily due to earnings and an increase in common stock,earnings, partially offset by dividends paid on common stock and the repurchase of shares during the threesix months ended MarchJune 31,30, 2026.
AFS debt securities totaled $63.3$67.2 million at MarchJune 31,30, 2026, a decrease of $7.6$3.7 million or 10.75.1 percent, compared to $70.9 million at December 31, 2025. This net decrease was the result of:
$9.5 million in principal payments, calls and maturities; and $0.2 million in unrealized losses recognized through earnings;
Partially offset by $6.0 million in purchases
At June 30, 2026, the portfolio had a net unrealized loss of $1.6 million compared to a net unrealized loss of $1.6 million at December 31, 2025. These net unrealized losses are reflected net of tax in shareholder’s equity as accumulated other comprehensive loss.
The weighted average life of AFS debt securities, adjusted for prepayments, amounted to 4.9 years and 5.1 years at MarchJune 31,30, 2026 and December 31, 2025, respectively. The effective duration of AFS debt securities amounted to 2.01.8 and 1.9 years at MarchJune 31,30, 2026 and December 31, 2025, respectively.
HTM debt securities were $37.7 million at June 30, 2026, an increase of $1.1 or 3.1 percent, compared to $36.6 million at December 31, 2025. This net increase was the result of:
$1.0 million in purchases; and
$0.1 million in net accretion
HTM debt securities were $36.6 million at March 31, 2026 and December 31, 2025.
The weighted average life of HTM securities, adjusted for prepayments, amounted to 12.914.1 years and 14.8 years at MarchJune 31,30, 2026 and December 31, 2025, respectively. As of MarchJune 31,30, 2026 and December 31, 2025, the fair value of HTM securities was $31.4 million and $30.4 million.million respectively. The effective duration of HTM securities amounted to 10.39.6 years and 10.7 years at MarchJune 31,30, 2026 and December 31, 2025, respectively.
Equity securities totaled $15.3$14.4 million at MarchJune 31,30, 2026, a decrease of $1.3$2.2 million or 7.513.3 percent, compared to $16.6 million at December 31, 2025. This net decrease was the result of:
$2.2 million in sales;
$1.3 million in unrealized losses;
Partially offset by $0.8 million in realized gains; and
UNTY insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 3 filings (3 insiders, 4 trade dates, 11,024 shares, about $639.3K). Net open-market shares: -11,024 (purchases minus sales); net value about -$639.3K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-03 | Boyan George |
Open-market sale | 6,504 | $59.16 | $384.8K |
| 2026-09-02 | Boyan George |
Open-market sale | 845 | $59.11 | $49.9K |
| 2026-08-16 | Davies James R |
Shares withheld for tax | 91 | $61.82 | $5.6K |
| 2026-06-12 | Sharabba Daniel C |
Shares withheld for tax | 90 | $55.45 | $5.0K |
| 2026-05-27 | Brody Mark S |
Option exercise | 1,600 | $15.70 | $25.1K |
| 2026-05-27 | Brody Mark S |
Open-market sale | 1,600 | $55.24 | $88.4K |
| 2026-05-18 | Donovan James Joseph |
Shares withheld for tax | 69 | $52.43 | $3.6K |
| 2026-04-17 | Gross Mary E. |
Open-market sale | 2,075 | $56.01 | $116.2K |
Well-known investors holding UNTY (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Two Sigma Investments | 2026-06-30 | 69,866 | $4.1M | 0.0% | Added 66% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 49,750 | $2.9M | 0.0% | Added 182% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 42,879 | $2.5M | 0.0% | Added 444% |
| Renaissance Technologies | 2026-06-30 | 38,900 | $2.3M | 0.0% | Added 148% |
| Millennium Management (Israel Englander) | 2026-06-30 | 38,601 | $2.3M | 0.0% | Added 42% |
| D. E. Shaw & Co. | 2026-06-30 | 16,555 | $971.6K | 0.0% | New position |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 5,303 | $311.2K | 0.0% | Reduced 24% |