Unity Bancorp (NASDAQ: UNTY) outlines real estate, SBA and AI risks
Rhea-AI Filing Summary
Unity Bancorp, Inc. filed its annual report describing a community-focused commercial banking business centered on New Jersey and eastern Pennsylvania, with most revenue from net interest income. The bank emphasizes small and mid-sized business customers and relies heavily on real estate lending and core deposits for funding.
As of December 31, 2025, about 96% of loans were secured by real estate and commercial real estate, including construction, represented 56.6% of the loan portfolio. The allowance for credit losses was $32.3 million, or 1.27% of total loans and 108.40% of nonaccrual loans. Time deposits totaled $882.9 million, 38.0% of deposits, with 21.7% of deposits uninsured or uncollateralized.
The report highlights extensive regulatory oversight, capital rules under Basel III, and concentration risk in commercial real estate and SBA lending. It also outlines risks from interest rates, liquidity, competition (including fintech, stablecoins and potential public banking), cybersecurity, climate events, pandemics, artificial intelligence, and evolving laws and regulations.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
For the fiscal year ended
OR
For the transition period from to ________
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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 ☐
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 ☐
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company |
Emerging Growth Company |
If an emerging growth company, indicate by checkmark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared its audit report.
Yes
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes
As of June 30, 2025, the aggregate market value of the registrant’s Common Stock, no par value per share, held by non-affiliates of the registrant was $
Documents incorporated by reference:
| ● | Portions of Unity Bancorp’s Proxy Statement for the Annual Meeting of Shareholders to be filed no later than 120 days from December 31, 2025 are incorporated by reference into Part III of this Annual Report on Form 10-K. |
Table of Contents
Index to Form 10-K
| Page | ||
Part I | |||
Item 1. | Business | ||
a) General | 3 | ||
Item 1A. | Risk Factors | 11 | |
Item 1B. | Unresolved Staff Comments | 24 | |
Item 1C. | Cybersecurity Disclosures | 24 | |
Item 2. | Properties | 26 | |
Item 3. | Legal Proceedings | 26 | |
Item 4. | Mine Safety Disclosures | 26 | |
Item 4A. | Executive Officers of the Registrant | 26 | |
Part II | |||
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 26 | |
Item 6. | Selected Financial Data | 27 | |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 | |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 52 | |
Item 8. | Financial Statements, Report of Independent Auditor (PCAOB ID: | 53 | |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 110 | |
Item 9A. | Controls and Procedures | 111 | |
Item 9B. | Other Information – None | 111 | |
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 111 | |
Part III | |||
Item 10. | Directors, Executive Officers and Corporate Governance; Compliance with Section 16(a) of the Exchange Act | 111 | |
Item 11. | Executive Compensation | 112 | |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 113 | |
Item 13. | Certain Relationships and Related Transactions and Director Independence | 113 | |
Item 14. | Principal Accountant Fees and Services | 113 | |
Part IV | |||
Item 15. | Exhibits and Financial Statement Schedules | 115 | |
Item 16. | Form 10-K Summary | 116 | |
Signatures | 117 |
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PART I
Item 1. Business:
Forward Looking Statements
This report, in Item 1, Item 7 and elsewhere, includes forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that involve inherent risks and uncertainties. These forward-looking statements concern the financial condition, results of operations, plans, objectives, future performance and business of Unity Bancorp, Inc. and its subsidiaries, including statements preceded by, followed by or that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain,” “pattern” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) the potential impact of pandemics and other health emergencies and the government’s response thereto on our operations as well as those of our clients and on the economy generally and in our market area specifically; (2) competitive and technological pressures among financial institutions may increase significantly; (3) changes in the interest rate environment may reduce interest margins; (4) prepayment speeds, loan origination and sale volumes, charge-offs and credit loss provisions may vary substantially from period to period; (5) general economic conditions may be less favorable than expected; (6) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (7) legislative or regulatory changes or actions may adversely affect the businesses in which Unity Bancorp, Inc. is engaged; (8) changes and trends in the securities markets may adversely impact Unity Bancorp, Inc.; (9) a delayed or incomplete resolution of regulatory issues could adversely impact us; (10) difficulties in integrating any businesses that we may acquire, which may increase our expenses and delay the achievement of any benefits that we may expect from such acquisitions; (11) the impact of reputation risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity could be significant; and (12) the outcome of any future regulatory and legal investigations and proceedings may not be anticipated; and (13) risks associated with generative artificial intelligence technology. Further information on other factors that could affect the financial results of Unity Bancorp, Inc. are included in Item 1A of this Annual Report on Form 10-K and in Unity Bancorp, Inc.’s other filings with the Securities and Exchange Commission. These documents are available free of charge at the Commission’s website at http://www.sec.gov and/or from Unity Bancorp, Inc. Unity Bancorp, Inc. assumes no obligation to update forward-looking statements at any time.
| a) | General |
Unity Bancorp, Inc., ("we", "us", "our", 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 has also elected to become a financial holding company pursuant to regulations of the Board of Governors of the Federal Reserve system (the "FRB"). The Company was organized at the direction of the Board of Directors of the Bank for the purpose of acquiring all 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 primary activity of the Company is ownership and supervision of the Bank. The Company also owns 100 percent of the common equity of Unity (NJ) Statutory Trust II. The trust has issued $10.3 million of preferred securities to investors.
The principal executive offices of the Company are located at 64 Old Highway 22, Clinton, New Jersey 08809 and the telephone number is (800) 618-2265. 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 and the Bank derive a majority of their revenue from net interest income (i.e., the difference between the interest received on loans and securities and the interest paid on deposits and borrowings). The Company, through the Bank, conducts a traditional and community-
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oriented commercial banking business and offers services, including personal and business checking accounts, time deposits, money market accounts, savings accounts, credit cards, debit cards, wire transfers, safe deposit boxes, access to automated teller services and internet and mobile banking, typical of a community banking business. The Bank also offers retirement accounts, Automated Clearing House (“ACH”) origination and Remote Deposit Capture (“RDC”). CDARS/ICS reciprocal deposits are offered based on the Bank’s participation in the IntraFi Network LLC network which enable Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive customers to have FDIC coverage for large dollar deposits. The Company structures its specific services and charges in a manner designed to attract the business of the small and medium sized business, professional community and state and local municipalities, as well as that of individuals residing, working and shopping in its service area.
Deposits serve as the primary source of funding for interest-earning assets, but also generate noninterest income through treasury solution fees, merchant fees, stop payment fees, wire transfer fees, insufficient fund fees, debit/credit card income, foreign ATM fees, interchange and other miscellaneous fees. In addition, the Bank generates additional noninterest income through residential, commercial and Small Business Administration (“SBA”) loan originations, servicing and sales.
The Company engages in a wide range of lending activities and offers commercial, SBA, consumer, mortgage, home equity and personal loans. Commercial lending is primarily comprised of owner-occupied and non-owner occupied commercial mortgages and is supplemented by commercial and industrial lending activities, secured by business assets including real estate, receivables, inventory and equipment. Additionally, the Company engages in commercial and residential construction lending activities. A significant majority of the Company’s loans are real-estate secured.
Service Areas
The Company’s primary service area is defined as the neighborhoods served by the Bank’s offices. The Bank’s main office is located in Clinton, New Jersey and the Bank operates twenty-two branches primarily along the Route 22/Route 78 corridors with branches in Bergen, Hunterdon, Middlesex, Morris, Ocean, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania. Through its banking locations and online services, the Bank is able to support clients throughout the New York City metropolitan area. The Company’s goal is to continue to expand as needed to support clients as their businesses grow.
Competition
The banking business is highly competitive. The Company is located in an extremely competitive area. The Company’s service area is also serviced by national banks, major regional banks, large thrift institutions, financial technology companies 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, technologies, 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.
Employees and Human Capital
As of December 31, 2025, the Company employed 239 full‑time and 6 part‑time employees. None of the Company’s employees are represented by collective bargaining units. The Company believes its relations with employees are good and that its ability to attract and retain talent is critical to its success. To support this objective, the Company strives to offer competitive salaries and comprehensive employee benefits and regularly monitors compensation levels within its market areas. The Company provides medical benefits through a self‑insured health plan. In addition, the principal purposes of the Company’s equity incentive plans are to attract, retain, and motivate selected employees, consultants, and directors through the granting of stock‑based compensation awards.
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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 and these laws are subject to change. As an example, in the summer of 2010, Congress passed, and the President signed, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) (discussed below). 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. Management of the Company is unable to predict, at this time, the impact of future changes to laws and regulations.
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 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, activities of a holding company 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. However, as a financial holding company, the Company may engage in a broader scope of activities. See "Financial Holding Company Status".
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 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, as well as other financial and management resources, and future prospects of the companies and banks concerned, along with the convenience and needs of the community to be served.
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 privacy requirements on all financial institutions and their treatment of consumer information. The Company has elected to become a financial holding company. See "Financial Holding Company Status" below.
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”) Deposit Insurance Fund in the event the
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depository institution becomes in danger of default. Under regulations of the FRB, 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
In December 2010 and January 2011, the Basel Committee on Banking Supervision (the “Basel Committee”) published the final reforms on capital and liquidity generally referred to as “Basel III.” In July 2013, the FRB, the FDIC and the Comptroller of the Currency adopted final rules (the “New Rules”), which implement certain provisions of Basel III and the Dodd-Frank Act.
Under the New Rules, the Bank is required to maintain the following minimum capital ratios, expressed as a percentage of risk-weighted assets:
| ● | Common Equity Tier 1 Capital Ratio of 4.5% (the “CET1”); |
| ● | Tier 1 Capital Ratio (CET1 capital plus “Additional Tier 1 capital”) of 6.0%; |
| ● | Total Capital Ratio (Tier 1 capital plus Tier 2 capital) of 8.0%. |
In addition, the Bank is also subject to a leverage ratio of 4% (calculated as Tier 1 capital to average consolidated assets as reported on the consolidated financial statements).
The New Rules also require a “capital conservation buffer.” The Bank is required to maintain a 2.5% capital conservation buffer, which is composed entirely of CET1, on top of the minimum risk-weighted asset ratios described above, resulting in the following minimum capital ratios:
| ● | CET1 of 7%; |
| ● | Tier 1 Capital Ratio of 8.5%; |
| ● | Total Capital Ratio of 10.5%. |
The purpose of the capital conservation buffer is to absorb losses during periods of economic stress. Banking institutions with a CET1, Tier 1 Capital Ratio and Total Capital Ratio above the minimum set forth above but below the capital conservation buffer will face constraints on their ability to pay dividends, repurchase equity and pay discretionary bonuses to executive officers, based on the amount of the shortfall.
The New Rules provide for several deductions from and adjustments to CET1. For example, mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in common equity issued by nonconsolidated financial entities must be deducted from CET1 to the extent that any one of those categories exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.
Under the New Rules, banking organizations, such as the Company and the Bank, may make a one-time permanent election regarding the treatment of accumulated other comprehensive income items in determining regulatory capital ratios. Effective as of January 1, 2015, the Company and the Bank elected to exclude accumulated other comprehensive income items for purposes of determining regulatory capital.
While the New Rules generally require the phase-out of non-qualifying capital instruments such as trust preferred securities and cumulative perpetual preferred stock, holding companies with less than $15 billion in total consolidated assets as of December 31, 2009, such as the Company, may permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in Additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.
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The New Rules prescribe a standardized approach for calculating risk-weighted assets. Depending on the nature of the assets, the risk categories generally range from 0% for U.S. Government and agency securities to 600% for certain equity exposures and result in higher risk weights for a variety of asset categories. In addition, the New Rules provide more advantageous risk weights for derivatives and repurchase-style transactions cleared through a qualifying central counterparty and increase the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation.
Consistent with the Dodd-Frank Act, the New Rules adopt alternatives to credit ratings for calculating the risk-weighting for certain assets.
On September 17, 2019, the federal banking agencies issued a final rule providing simplified capital requirements for certain community banking organizations (banks and holding companies) with less than $10 billion in total consolidated assets, implementing provisions of The Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”). Under the rule, a qualifying community banking organization would be eligible to elect the community bank leverage ratio framework, or continue to measure capital under the existing Basel III requirements set forth in the New Rules. The community bank capital rule took effect January 1, 2020 and qualifying community banking organizations may elect to opt into the new community bank leverage ratio (“CBLR”) in their call report for the first quarter of 2020 or any quarter thereafter.
A qualifying community banking organization (“QCBO”) is defined as a bank, a savings association, a bank holding company or a savings and loan holding company with:
| ● | a leverage capital ratio of greater than 9.0%; |
| ● | total consolidated assets of less than $10.0 billion; |
| ● | total off-balance sheet exposures (excluding derivatives other than credit derivatives and unconditionally cancelable commitments) of 25% or less of total consolidated assets; |
| ● | total trading assets and trading liabilities of 5% or less of total consolidated assets. |
A QCBO opting into the CBLR must maintain a CBLR of 9.0%, subject to a two quarter grace period to come back into compliance, provided that the QCBO maintains a leverage ratio of more than 8.0% during the grace period. A QCBO failing to satisfy these requirements must comply with the Basel III requirements as implemented by the New Rules. The numerator of the CBLR is Tier 1 capital, as calculated under the New Rules. The denominator of the CBLR is the QCBO’s average assets, calculated in accordance with the QCBO’s Call Report instructions and less assets deducted from Tier 1 capital. The Company and the Bank have elected to opt out of the CBLR.
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 Bank's minimum capital level, the Bank's ability to pay dividends, expand through new branches or acquisitions and various other matters.
Insurance of Deposits: The Dodd-Frank Act has caused significant changes in the FDIC’s insurance of deposit accounts. Among other things, the Dodd-Frank Act permanently increased the FDIC deposit insurance limit to $250 thousand per depositor.
On February 7, 2011, the FDIC announced the approval of the assessment system mandated by the Dodd-Frank Act. Dodd-Frank required that the base on which deposit insurance assessments are charged be revised from one based on domestic deposits to one based on assets. The FDIC’s rule to base the assessment on average total consolidated assets minus average tangible equity instead of domestic deposits lowered assessments for many community banks with less than $10 billion in assets and reduced the Company’s costs.
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
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stock or the payment of the dividend will not reduce the bank’s surplus. Unless and until the Company develops other lines of business, payments of dividends from the Bank will remain the Company’s primary source of income and the primary source of funds for dividend payments to the shareholders of the Company.
Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Act, enacted on July 21, 2010, significantly changed the bank regulatory landscape and has impacted and will continue to impact the lending, deposit, investment, trading and operating activities of insured depository institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations. The Dodd-Frank Act, among other things:
| ● | capped debit card interchange fees for institutions with $10 billion in assets or more at $0.21 plus 5 basis points times the transaction amount, a substantially lower rate than the average rate in effect prior to adoption of the Dodd-Frank Act; |
| ● | provided for an increase in the FDIC assessment for depository institutions with assets of $10 billion or more, increases in the minimum reserve ratio for the Deposit Insurance Fund ("DIF") from 1.15% to 1.35% and changes the basis for determining FDIC premiums from deposits to assets; |
| ● | permanently increased the deposit insurance coverage to $250 thousand and allowed depository institutions to pay interest on checking accounts; |
| ● | created a new Consumer Financial Protection Bureau (“CFPB”) that has rulemaking authority for a wide range of consumer financial protection laws that apply to all banks and has broad authority to enforce these laws; |
| ● | provided for new disclosure and other requirements relating to executive compensation and corporate governance; |
| ● | changed standards for Federal preemption of state laws related to federally-chartered institutions and their subsidiaries; |
| ● | provided mortgage reform provisions regarding a customer’s ability to repay, restricting variable rate lending by requiring the ability to repay to be determined for variable rate loans by using the maximum rate that will apply during the first five years of a variable rate loan term, and making more loans subject to provisions for higher cost loans, new disclosures and certain other revisions; |
| ● | created a financial stability oversight council that will recommend to the FRB increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity. |
The Dodd-Frank Act also imposed new obligations on originators of residential mortgage loans, such as the Bank. Among other things, the Dodd-Frank Act requires originators to make a reasonable and good faith determination based on documented information that a borrower has a reasonable ability to repay a particular mortgage loan over the long term. If the originator cannot meet this standard, the mortgage may be unenforceable. The Dodd-Frank Act contains an exception from this ability-to-repay rule for “Qualified Mortgages”. The CFPB has established specific underwriting criteria for a loan to qualify as a Qualified Mortgage. The criteria generally exclude loans that (1) are interest-only, (2) have excessive upfront points or fees or (3) have negative amortization features, balloon payments or terms in excess of 30 years. The underwriting criteria also impose a maximum debt to income ratio of 43%, based upon documented and verifiable information. If a loan meets these criteria and is not a “higher priced loan” as defined in FRB regulations, the CFPB rule establishes a safe harbor preventing a consumer from asserting the failure of the originator to establish the consumer’s ability to repay. However, a consumer may assert the lender’s failure to comply with the ability-to-repay rule for all residential mortgage loans other than Qualified Mortgages, and may challenge whether a loan in fact qualified as a Qualified Mortgage.
Regulation W
Regulation W codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions. Affiliates of a bank include, among other entities, the bank’s holding company and companies that are under common control with the bank. The Company is considered to be an affiliate of the Bank. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to engage in covered transactions with affiliates:
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| • | to an amount equal to 10% of the Bank’s capital and surplus, in the case of covered transactions with any one affiliate; and |
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| • | to an amount equal to 20% of the Bank’s capital and surplus, in the case of covered transactions with all affiliates. |
In addition, a bank and its subsidiaries may engage in covered transactions and other specified transactions only on terms and under circumstances that are substantially the same, or at least as favorable to the bank or its subsidiary, as those prevailing at the time for comparable transactions with nonaffiliated companies. A covered transaction includes:
| • | a loan or extension of credit to an affiliate; |
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| • | a purchase of, or an investment in, securities issued by an affiliate; |
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| • | a purchase of assets from an affiliate, with some exceptions; |
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| • | the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; and |
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| • | the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. |
Further, under Regulation W:
| • | a bank and its subsidiaries may not purchase a low-quality asset from an affiliate; |
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| • | covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and |
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| • | with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by certain types of collateral with a market value ranging from 100% to 130% of the loan value, depending on the type of collateral, of the amount of the loan or extension of credit. |
Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the FRB decides to treat these subsidiaries as affiliates.
Loans to Related Parties
The Company’s authority to extend credit to its directors and executive officers, as well as to entities controlled by such persons, is currently governed by the requirements of the Sarbanes-Oxley Act of 2002 and Regulation O promulgated by the FRB. Among other things, these provisions require that extensions of credit to insiders (i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features and (ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital. In addition, the Bank’s Board of Directors must approve all extensions of credit to insiders.
USA PATRIOT Act
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) gives the federal government powers to address terrorist threats through domestic security measures, surveillance powers, information sharing and anti-money laundering requirements. By way of
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amendments to the Bank Secrecy Act, the USA PATRIOT Act encourages information-sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of the USA PATRIOT Act impose affirmative obligations on a broad range of financial institutions, including banks, thrift institutions, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.
Among other requirements, the USA PATRIOT Act imposes the following requirements with respect to financial institutions:
| ● | All financial institutions must establish anti-money laundering programs that include, at a minimum: (i) internal policies, procedures and controls; (ii) specific designation of an anti-money laundering compliance officer; (iii) ongoing employee training programs; and (iv) an independent audit function to test the anti-money laundering program. |
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| ● | The Secretary of the Department of Treasury, in conjunction with other bank regulators, is authorized to issue regulations that provide for minimum standards with respect to client identification at the time new accounts are opened. |
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| ● | Financial institutions that establish, maintain, administer, or manage private banking accounts or correspondent accounts in the United States for non-United States persons or their representatives (including foreign individuals visiting the United States) are required to establish appropriate, specific and, where necessary, enhanced due diligence policies, procedures, and controls designed to detect and report money laundering. |
| ● | Financial institutions are prohibited from establishing, maintaining, administering or managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country), and will be subject to certain record keeping obligations with respect to correspondent accounts of foreign banks. |
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| ● | Bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when ruling on Federal Reserve Act and Bank Merger Act applications. |
The United States Treasury Department has issued a number of implementing regulations which address various requirements of the USA PATRIOT Act and are applicable to financial institutions such as the Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their clients.
Financial Holding Company Status
The Company has elected to become a financial holding company. Financial holding companies may engage in a broader scope of activities than a bank holding company. In addition, financial holding companies may undertake certain activities without prior FRB approval.
A financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. "Financial in nature" activities include:
| ● | securities underwriting, dealing and market making; |
| ● | sponsoring, mutual funds and investment companies; |
| ● | insurance underwriting and insurance agency activities; |
| ● | merchant banking; |
| ● | activities that the FRB determines to be financial in nature or incidental to a financial activity or which are complementary to a financial activity and do not pose a safety and soundness risk. |
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A financial holding company that desires to engage in activities that are financial in nature or incidental to a financial activity but not previously authorized by the FRB must obtain approval from the FRB before engaging in such activity. Also, a financial holding company may seek FRB approval to engage in an activity that is complementary to a financial activity, if it shows, among other things, that the activity does not pose a substantial risk to the safety and soundness of its insured depository institutions or the financial system.
A financial holding company generally may acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature without prior approval from the FRB. Prior FRB approval is required, however, before the financial holding company may acquire control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association. In addition, under the FRB’s merchant banking regulations, a financial holding company is authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the duration of the investment, does not manage the company on a day-to-day basis and the company does not cross-market its products or services with any of the financial holding company’s controlled depository institutions.
If any subsidiary bank of a financial holding company ceases to be "well capitalized" or "well managed" and fails to correct its condition within the time period that the FRB specifies, the FRB has authority to order the financial holding company to divest its subsidiary banks. Alternatively, the financial holding company may elect to limit its activities and the activities of its subsidiaries to those permissible for a bank holding company that is not a financial holding company. If any subsidiary bank of a financial holding company receives a rating under the CRA of less than "satisfactory", then the financial holding company is prohibited from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations until the rating is raised to "satisfactory" or better.
Artificial Intelligence. State and federal regulatory agencies have begun adopting rules and guidelines regarding the use of artificial intelligence (“AI”) technologies in connection with the provision of financial services. For example, the CFPB and other federal bank regulatory agencies have provided guidance that creditors may be subject to adverse action notice requirements under the Equal Credit Opportunity Act even if they rely on algorithmic underwriting models. The New York State Department of Financial Services issued an industry letter on combating cybersecurity risks associated with AI. Additionally, on January 23, 2025, President Trump issued an executive order aimed at reducing barriers to AI innovation in the U.S. economy. The executive order requires relevant persons and bodies within the federal government to develop an AI action plan to carry out this objective and revokes an AI-related executive order issued in 2023 by President Biden, as well as all corresponding policies, regulations, orders, directives, and other actions taken in response to such order.
Item 1A. Risk Factors:
The Company’s business, financial condition, results of operations and the trading price of its securities can be materially and adversely affected by many events and conditions including the following:
The Company has been and may continue to be affected by national financial markets and economic conditions, as well as local conditions.
The Company’s business and results of operations are affected by the financial markets and general economic conditions in the United States, including factors such as the level and volatility of interest rates, inflation, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, investor confidence and the strength of the U.S. economy. The deterioration of any of these conditions can adversely affect the Company’s securities and loan portfolios, level of charge-offs and provision for credit losses, capital levels, liquidity and results of operations.
In addition, the Company is affected by the economic conditions within its New Jersey and Pennsylvania primary trade areas. Unlike larger banks that are more geographically diversified, the Company provides banking and financial services primarily to customers in the New Jersey market and one county in Pennsylvania in which it has branches, so any decline in the economy of New Jersey or eastern Pennsylvania could have an adverse impact. Additionally, certain aspects of these primary trade areas may be adversely impacted by the economic wellbeing of the New York City metro region.
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The Company’s loans, the ability of borrowers to repay these loans and the value of collateral securing these loans are impacted by economic conditions. The Company’s financial results, the credit quality of its 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. The Company cannot assure that any positive trends or developments discussed in this annual report will continue or that negative trends or developments will not arise.
A significant portion of the Company’s loan portfolio is secured by real estate and events that negatively impact the real estate market in the Company’s trade area could hurt its business.
A significant portion of the Company’s loan portfolio is secured by real estate. As of December 31, 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 profitability, 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 and events that negatively impact the commercial real estate market could adversely affect our asset quality and profitability for those loans secured by real property and increase the number of defaults and the level of losses within our loan portfolio.
A significant portion of the Company’s loan portfolio is secured by commercial real estate. As of December 31, 2025, total commercial real estate loans, including construction loans, represented 56.6 percent of our loan portfolio. Included in this portfolio are loans to industries including hotel/motel, food/beverage services, educational facilities, retail, warehouse, office, religious facilities, automotive, healthcare facilities, gas station and educational 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 due to 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, 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 and capital.
A downturn in the real estate market in our 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 our profitability and asset quality. If we are required to liquidate the collateral securing a loan to satisfy
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the debt during a period of reduced real estate values, our earnings and shareholders’ equity could be adversely affected. Any weakening of the commercial real estate market may increase the likelihood of default on these loans, which could negatively impact our loan portfolio’s performance and asset quality. For example, any declines in commercial real estate prices in the New Jersey, New York and Pennsylvania markets we primarily serve, along with the unpredictable long-term path of the economy, may result in increases in delinquencies and losses in our loan portfolios. Unexpected decreases in commercial real estate prices coupled with slow economic growth and elevated levels of unemployment could drive losses beyond those which are provided for in our allowance for credit losses. We also may incur losses on commercial real estate loans due to declines in occupancy rates and rental rates, which may decrease property values and may decrease the likelihood that a borrower may find permanent financing alternatives. Any of these events could increase our costs, require Management's time and attention, and materially and adversely affect us.
Small Business Administration lending is an important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.
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.
The SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. Typically, we sell the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales result in premium income for us at the time of sale and create a stream of future servicing income, as we retain the servicing rights to these loans. For the reasons described above, we may not be able to continue originating these loans or selling them in the secondary market. Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors. When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us. Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition or results of operations.
The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.
The non-guaranteed portion of SBA loans that we retain on our balance sheet as well as the guaranteed portion of SBA loans that we sell could expose us to various credit and default risks.
We have historically originated a significant number of SBA loans, and sold a significant portion of the guaranteed portions of these loans on the secondary market. We generally retain the non-guaranteed portions of the SBA loans that we originate. Consequently, as of December 31, 2025, we held $34.3 million of SBA loans on our balance sheet, $5.4 million of which primarily consisted of the non-guaranteed portion of SBA loans. The non-guaranteed portion of SBA loans have a higher degree of credit risk and risk of loss as compared to the guaranteed portion of such loans. We generally retain the
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non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations would be adversely impacted.
When we sell the guaranteed portion of SBA loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the SBA loans and the manner in which they were originated. Under these agreements, we may be required to repurchase the guaranteed portion of the SBA loan if we have breached any of these representations or warranties, in which case we may record a loss. In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected.
Imposition of limits by bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.
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 was $868.9 million at December 31, 2025 and commercial real estate loans represented 231.92% of the Bank’s risk-based capital at December 31, 2025, a decrease from 235.05% at December 31, 2024.
In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending, or the “2015 Statement.” In the 2015 Statement, the Agencies, among other things, indicated the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward. If the FDIC, our primary federal regulator, were to impose restrictions on the amount of such loans we can hold in our portfolio or require us to implement additional compliance measures, for reasons noted above or otherwise, our earnings could be adversely affected as would our earnings per share.
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 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, 2025, the Company’s allowance for credit losses was $32.3 million, or 1.27 percent of its total loan portfolio and 108.40 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, liquidity, cash flow and debt 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. 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.
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The Company’s allowance for credit losses may not be adequate to cover actual 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 as 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.
The Company is subject to interest rate risk and variations in interest rates may negatively affect its financial performance.
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 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.
The banking business is subject to significant government regulations.
The Company is subject to extensive governmental supervision, regulation and control. These laws and regulations are subject to change and may require substantial modifications to the Company’s operations or may cause it to incur substantial additional compliance costs. These laws and regulations are designed to protect depositors and the public, but not the Company’s shareholders. In addition, future legislation and government policy could adversely affect the commercial banking industry and the Company’s operations. Such governing laws can be anticipated to continue to be the subject of future modification. The Company’s Management cannot predict what effect any such future modifications will have on the Company’s operations. In addition, the primary focus of federal and state banking regulation is the protection of depositors and not the shareholders of the regulated institutions.
For example, the Dodd-Frank Act has resulted in substantial compliance costs and may restrict certain sources of revenue. The Dodd-Frank Act was signed into law on July 21, 2011. Generally, the Act is effective the day after it is signed into law, but different effective dates apply to specific sections of this law, many of which will not become effective until various Federal regulatory agencies have promulgated rules implementing the statutory provisions. In addition, subsequent
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legislation and regulatory action has, and future legislation and regulatory action may, amend or revise various provisions of the Dodd-Frank Act.
Uncertainty remains as to the ultimate impact of the Dodd-Frank Act and the implementing regulations thereunder, which could have a material adverse impact either on the financial services industry as a whole, or on the Company’s business, results of operations and financial condition. It is difficult to predict at this time what specific impact certain provisions and yet-to-be-finalized rules and regulations will have on the Company, including any regulations promulgated by the CFPB. Financial reform legislation and rules could have adverse implications on the financial industry, the competitive environment and the Company’s ability to conduct business. Management will have to apply resources to ensure compliance with all applicable provisions of regulatory reforms, including the Dodd-Frank Act and any implementing rules, which may increase the Company’s costs of operations and adversely impact its earnings.
The provisions of the Dodd-Frank Act, as well as any other aspects of current or proposed regulatory or legislative changes to laws or regulations applicable to the financial industry, may impact the profitability of business activities and may change certain business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads, and could expose the Company to additional costs, including increased compliance costs. These changes also may require the Company to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect business, financial condition and results of operations.
The Company is subject to changes in accounting policies or accounting standards.
Understanding the Company’s accounting policies is fundamental to understanding its financial results. Some of these policies require the use of estimates and assumptions that may affect the value of assets or liabilities and financial results. The Company has identified its accounting policies regarding the allowance for credit losses to be critical because they require Management to make difficult, subjective and complex judgments about matters that are inherently uncertain. Under these policies, it is possible that materially different amounts would be reported under different conditions, using different assumptions, or as new information becomes available.
From time to time, the Financial Accounting Standards Board (“FASB”) and the U.S. Securities and Exchange Commission (“SEC”) change their guidance governing the form and content of the Company’s external financial statements. In addition, accounting standard setters and those who interpret U.S. GAAP, such as the FASB, SEC, banking regulators and the Company’s outside auditors, may change or even reverse their previous interpretations or positions on how these standards should be applied. Such changes are expected to continue. Changes in U.S. GAAP and changes in current interpretations are beyond the Company’s control, can be hard to predict and could materially impact how it reports financial results and condition. In certain cases, the Company could be required to apply a new or revised guidance retroactively or apply existing guidance differently, which may result in restating prior period financial statements for material amounts. Additionally, significant changes to U.S. GAAP may require costly technology changes, additional training and personnel and other expenses that would negatively impact results of operations.
We are dependent on the use of data and modeling in our management’s decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.
The use of statistical and quantitative models, and other quantitative and qualitative analyses, is necessary for bank decision-making, and the employment of such analyses is becoming increasingly widespread in our operations.
Liquidity stress testing, interest rate sensitivity analysis, the identification of possible violations of anti-money laundering regulations and the estimation of credit losses are all examples of areas in which we are dependent on models and the data that underlies them. The use of statistical and quantitative models is also becoming more prevalent in regulatory compliance. While we are not currently subject to annual Dodd-Frank stress testing and the Comprehensive Capital Analysis and Review submissions, we anticipate that model-derived testing may become more extensively implemented by regulators in the future.
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We anticipate data-based modeling will penetrate further into bank decision-making, particularly risk management efforts, as the capacities developed to meet rigorous stress testing requirements are able to be employed more widely and in differing applications. While we believe these quantitative techniques and approaches improve our decision-making, they also create the possibility that faulty data or flawed quantitative approaches could negatively impact our decision-making ability or, if we become subject to regulatory stress-testing in the future, adverse regulatory scrutiny. Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making.
There is the risk that the Company will be insufficiently liquid to meet its obligations as they come due.
Liquidity risk is the potential that the Company will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances.
Liquidity is required to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures.
Liquidity is derived primarily from deposit growth and retention; principal and interest payments on loans; principal and interest payments on investment securities; sale, maturity and prepayment of investment securities; net cash provided from operations and access to other funding sources. Customer account balances can decrease when customers perceive alternative investments, such as fixed income securities or money market funds, as providing a better risk/return trade off or if customers are concerned about the safety of their deposits. If customers move money out of bank deposits and into other investments, or if customers perceive a risk in leaving their deposits with the Bank and transfer the deposits to larger institutions seen as less risky, the Company could lose a low-cost source of funds, increasing its funding costs and reducing the Company’s net interest income and net income.
As of December 31, 2025, the Company had $882.9 million in time deposits, comprising 38.0% of total deposits. Time deposits maturing within one 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, 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 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 Company maintains elevated wholesale funding balances, including brokered deposits, FHLB advances and other borrowing and deposit sources. These types of wholesale funding typically result in higher funding costs compared to other sources and reduce the Company’s net interest income and net income. Additionally, these sources typically are only available to the Company if the Bank maintains certain capital levels. The Company’s management team monitors wholesale funding as a composition of its Consolidated Balance Sheet via the risk management process; however, wholesale deposits may be more prone to liquidity risk.
The Company’s access to funding sources in amounts adequate to finance its activities could be impaired by factors that affect the Company specifically or the financial services industry in general. Factors that could detrimentally impact access to liquidity sources include a decrease in the level of business activity due to persistent weakness, or downturn, in the economy or adverse regulatory action against the Company. The Company’s ability to borrow could also be impaired by factors that are not necessarily specific to it, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.
There are current proposals from the Federal Housing Finance Agency (“FHFA”), the regulatory of the Federal Home Loan Bank (“FHLB”) system, to refocus on the FHLB’s housing mission. This proposal would require many banks to hold at least 10% of their assets in residential mortgages in order to maintain access to FHLB funding. If these proposals change
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or progress, this could impact the Company’s ability to borrow from the FHLB and require it to find other sources of credit, including borrowing directly from the FRB.
The Company is in competition with many other banks, including larger commercial banks which have greater resources, as well as “fintech” companies for loan and deposit customers.
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, the Modernization Act permits other financial entities, such as insurance companies and securities firms, to acquire or form financial institutions, thereby further increasing competition. In addition, financial technology companies, either directly or in partnership with other insured depository institutions, compete for loan and deposit customers. Similarly, larger legacy non-financial companies, such as Apple, Alphabet and Amazon, are further increasing competition to compete for loans, deposits and payments. A number of the Company’s competitors have substantially greater resources than it does to expend upon advertising and marketing, and their substantially greater capitalization enables them to make much larger loans. Additionally, many of these competitors have less regulation than the Company as they are not financial institutions. The Company’s success depends a great deal upon its judgment that large and mid-size financial institutions do not adequately serve small businesses in its principal market area and upon the Company’s ability to compete favorably for such customers. In addition to competition from larger institutions, the Company also faces competition for individuals and small businesses from small community banks seeking to compete as “hometown” institutions. Most of these smaller institutions have focused their marketing efforts on the smaller end of the small business market the Company serves.
In January 2022, the Federal Reserve issued “Money Payments: The U.S. Dollar in the Age of Digital Transformation” which discusses a U.S. central bank digital currency (“CBDC”). While this is in the earliest of stages, if this CBDC is implemented by the Federal Reserve, it could change banking on a larger scale as Americans would be able to transact directly with the Federal Reserve and may not need Banks to serve as intermediaries.
The Company has also been active in competing for New Jersey governmental and municipal deposits. At December 31, 2025, the Company held approximately $444.9 million in governmental and municipal deposits. The governor of New Jersey has proposed that the state form and own a bank in which governmental and municipal entities would deposit their excess funds, with the state owned bank then financing small businesses and municipal projects in New Jersey. While no legislation has been introduced in the state legislature, the New Jersey Public Bank Implementation Board has provided its final recommendations to the governor, including that the public bank entity should not be a depository institution but should seek funding from a diverse range of investors and non-depository investment vehicles. However, should this proposal be adopted and a state owned bank formed, it could impede the Company’s ability to attract and retain governmental and municipal deposits, thereby impairing the Company’s liquidity.
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.
The nature and growth rate of our loan portfolio may expose us to increased lending risks.
Given the significant growth in our loan portfolio, many of our loans are unseasoned, meaning that they were originated relatively recently. Approximately 42.1% of our loan portfolio has been originated in the past three years. As a result, it may be difficult to predict the future performance of our loan portfolio. These loans may have delinquency or charge-off levels above our expectations, which could negatively affect our performance.
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Additionally, although the majority of residential mortgages historically originated by the Bank would be considered Qualified Mortgages, the Bank has and may continue to make residential mortgage loans that would not qualify. As a result, the Bank might experience increased compliance costs, loan losses, litigation related expenses and delays in taking title to real estate collateral, if these loans do not perform and borrowers challenge whether the Bank satisfied the ability-to-repay rule upon originating the loan.
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 minimums, or if the Company seeks to pursue growth opportunities such as acquisitions, the Company or the Bank may be required to raise additional capital through offerings of common stock, preferred stock, subordinated debt, senior debt, or other capital instruments. 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 cannot predict how changes in technology will impact its business.
The financial services market, including banking services, is increasingly affected by advances in technology, including developments in:
| ● | telecommunications; |
| ● | data processing; |
| ● | artificial intelligence, (“AI”); |
| ● | automation; |
| ● | Internet-based banking; |
| ● | Stablecoins and other crypto currencies; |
| ● | Tele-banking; |
| ● | debit cards/smart cards |
The Company’s ability to compete successfully in the future will depend on whether it can anticipate and respond to technological changes. Due to the rise of AI, technological advances are occurring in the industry at an unprecedented pace. To develop these and other new technologies and protect against cyber security threats, the Company will likely have to make additional capital investments. Although the Company continually invests in new technology, it cannot assure that it 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.
The Company is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees) and to the risk that the Company’s (or its vendors’) business continuity and data security systems prove to be inadequate. The Company maintains a system of comprehensive policies and a control framework designed to monitor vendor risks including, among other things, (i) changes in the vendor’s organizational structure or internal controls; (ii) changes in the vendor’s financial condition; (iii) changes in the vendor’s support for existing products and services and (iv) changes in the vendor’s strategic focus. In addition, the Company maintains cyber liability insurance to mitigate against certain losses it may incur.
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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. Further cyber risk exposure will likely remain elevated in the future as a result of the Company’s expansion of internet and mobile banking tools and new product roll out. 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 effect on the Company’s financial condition and results of operations.
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.
For further information, please refer to Item 1C in this document.
The Company’s business strategy could be adversely affected if it is not able to attract and retain skilled employees and manage expenses.
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.
Pandemic or other health related events may have a material adverse effect on operations and financial condition.
The outbreak of disease or other health related events on a regional, national or global level and the government’s reaction to such events, may have a material adverse effect on commerce, which may, in turn impact the Company’s lines of business as well as the businesses of its customers.
Climate change, hurricanes, flooding, earthquakes, terrorism or other adverse events could negatively affect local economies or disrupt operations, which would have an adverse effect on the Company’s business or results of operations.
There is an increasing concern over the risks of climate change and related environmental sustainability matters. Climate change presents (i) physical risks from the direct impacts of changing climate patterns and acute weather events and (ii) transition risks from changes in regulations, disruptive technologies, and shifting market dynamics towards a lower carbon economy. The physical risks of climate change include discrete events such as hurricanes, flooding, earthquakes that can disrupt the Company’s operations, result in damage to its properties and negatively affect the local economies in which it operates. Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. Climate change could also present incremental risks to the execution of the Company’s long-term strategy. Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.
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In addition, our reputation and client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our clients’ involvement, in certain industries or projects, in the absence of mitigation and/or transition measures, associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change. As climate risk is interconnected with all key risk types, the Company continues to embed climate risk considerations into risk management strategies.
Furthermore, these weather events may result in a decline in value or destruction of properties securing loans and an increase in delinquencies, foreclosures and credit losses. The Company does maintain property insurance policies to cover certain costs associated with these events; however, it is possible that the expenses may exceed coverage, may not be covered at all or may ultimately increase costs associated with future insurance premiums.
Additionally, New York City and New Jersey remain central targets for potential acts of terrorism against the United States. Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses. The occurrence of any such event in the future could have material adverse effect on the business, which in turn, could have a materially adverse impact on the financial condition and results of operations of the Company.
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 be adversely affected by changes in U.S. federal tax laws and state and local tax laws.
The Company’s business may be adversely affected by changes in tax laws if there are any increases in its federal income tax rates. Further, the Company’s business may be adversely affected by changes in tax laws if there are any increases in its state and local tax rates in markets where it has locations.
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The Company’s financial results and condition may be adversely impacted by banking failures or future similar events.
Certain events impacting the banking industry, including the bank failures in March and April 2023, resulted in significant disruption and volatility in the capital markets, reduced valuation of bank securities, and decreased confidence in banks among certain depositors and counterparties. While the U.S. Department of Treasury, the Federal Reserve, and the FDIC took steps to ensure the depositors of the failed banks in early 2023 would have access to their insured and uninsured deposits, there is no assurance that these or similar actions will restore customer confidence in the baking system, and the Company may be further impacted by concerns regarding the soundness, real or perceived, of other financial institutions or other future bank failures or disruptions. Any loss in client deposits or changes in the Company’s perception could increase the cost of funding, limit access to capital markets or negatively impact the Company’s overall liquidity or capitalization. Further, the cost of resolving the bank failures also prompted the FDIC to issue a special assessment to recover costs to the DIF. The special assessment did not impact the Company; however, the FDIC maintains the ability to impose additional shortfall special assessments, which may adversely impact the Company, in the future.
Claims and litigation could result in significant expenses, losses and damage to the Company’s reputation.
From time to time, as a part of the Company’s normal course of business, customers, bankruptcy trustees, former customers, contractual counterparties, third parties and current and former employees may make claims and take legal action against the Company based on the actions or inactions of the Company. If such claims and legal actions are undertaken and are not resolved in a manner favorable to the Company, they may result in financial liability and/or adversely affect the market perception of the Company. Any financial liability could have a material impact on the Company’s financial condition and results of operations. Any reputational damages could have a material adverse effect on the Company’s business.
Failure to successfully implement the Company’s growth strategies could cause it to incur substantial costs, which may not be recouped and adversely affect its future profitability.
From time to time, the Company may implement new lines of business, open new branches or offer new products and services. There are substantial risks and uncertainties associated with these efforts. The Company may invest significant time and resources, which may not be fully recouped if profitability targets are not proven feasible. External factors such as compliance with regulations, competitive alternatives and shifting customer preferences may also impact successful implementation. Failure to successfully manage these risks may have a material adverse impact on the Company’s business, results of operations and financial condition.
Further, in order to continue growth, the Company may need to seek additional capital. The Company will be required to maintain its regulatory capital levels at levels higher than the minimum set by its regulators. If the Company were required to raise capital to implement growth strategies, the Company can offer no assurances that it will be able to raise capital in the future or that the terms of the capital will be beneficial to its existing shareholders. In the event that the Company is unable to raise capital in the future, the Company may not be able to continue its growth strategy.
A component of the Company’s growth strategies may include merger & acquisition opportunities. Attractive merger and acquisition opportunities may not be available to the Company in the future as other banking and financial service companies, many of which have greater resources, will compete with the Company in acquiring potential target companies. This competition could increase prices of potential acquisitions that may be attractive. Additionally mergers and acquisitions are subject to various regulatory approvals. If regulatory approvals are not obtained, the Company would not be able to consummate a merger or acquisition that may be in the Company’s best interests. Lastly, the Company has limited merger and acquisition experience, which may minimize the deals available or the ability to appropriately analyze and operationally execute a merger or acquisition. This may adversely impact the operating results.
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The Company may not be able to detect money laundering and other illegal or improper activities fully, or on a timely basis, which could expose the company to additional liability and could have a material adverse effect.
The Company is required to comply with anti-money laundering, anti-terrorism and other laws and regulations in the United States. These laws and regulations require the Company to adopt and enforce “know-your-customer” policies and procedures and to report suspicious and larger transactions to applicable regulatory authorities. These laws and regulations have become increasingly complex and detailed, require improved systems, sophisticated monitoring and compliance personnel and have become the subject of enhanced government supervision.
Although the Company has policies and procedures aimed at detecting and preventing the use of its banking network for money laundering and related activities, those policies and procedures may not eliminate instances in which the Company may be used by customers to engage in illegal or improper activities. To the extent that the Company fails to fully comply with the applicable laws and regulations, banking agencies may have the authority to impose fines, other penalties and sanctions on the Company.
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.
The Company’s ability to maintain its reputation is critical to the success of the business and the failure to do so may adversely impact its performance.
The Company’s reputation is one of the most valuable components of its business. As such, the Company strives to conduct its business in a manner that maintains its reputation. If the Company’s reputation is negatively impacted by the actions of an employee, certain litigations, regulatory actions, or certain financial concerns, the business and therefore the operating results may be adversely impacted.
In addition, stakeholder expectations regarding environmental, social, and governance matters continue to evolve and are not uniform. We have established, and may continue to establish, various goals and initiatives on these matters. We cannot guarantee that we will achieve these goals and initiatives. Any failure, or perceived failure, by us to achieve these goals and initiatives could adversely affect our reputation and results of operations.
The Company’s controls and procedures may fail or be circumvented, which may result in a material adverse effect on its business, results of operations and financial condition.
The Company’s Management periodically reviews and updates its internal controls, policies and procedures. Any system of controls is in part based on certain assumptions and can only provide reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company and its results of operations and financial condition.
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Anti-takeover provisions in corporate documents and in New Jersey corporate law may make it difficult and expensive to remove current management.
Anti-takeover provisions in corporate documents and in New Jersey law may render the removal of the existing Board of Directors and management more difficult. Consequently, it may be difficult and expensive for the shareholders to remove current management, even if current management is not performing adequately.
Item 1B. Unresolved Staff Comments: None
Item 1C. Cybersecurity Disclosures
Risk Management and Governance
Cybersecurity is a material part of Unity Bank’s business. As a technology forward financial institution offering products through multiple digital delivery channels, cybersecurity incidents could have a material effect on the Company, its results of operations and its reputation. To date, the Company
Cybersecurity risk is initially overseen by the management
Over his 18-year career, the Company’s Chief Information Officer has served in multiple Information Technology and Cybersecurity roles, such as Senior Engineer, responsible for implementing hardened infrastructure for both physical and cloud applications; Solutions Architect, designing infrastructures for highly regulated industries including Financial Services, Local/State Government and Healthcare; Director of Service Delivery, overseeing engineering, solutions architecture and maintaining the System and Organization Controls (SOC) program prior to joining Unity Bank. During his tenure at Unity Bank, he is a member of various Risk and Cybersecurity Committees of the New Jersey Bankers Association, is a member of FS-ISAC, The Independent Community Bankers of America and our primary banking vendors advisory and risk management committees.
The Company’s Chief Compliance Officer was appointed as the Company’s Information Security Officer in 2016.
The Virtual Information Security Officer (vISO), an outsourced consultant, has an over 20-year career in Information Technology, Cybersecurity and both Internal/External Audit experience. He presently holds a position of Partner of Cherry Bekaert, formerly Herbein & Company, Inc., COA Advisor & Audit, where he’s held multiple positions within Information Technology and Cybersecurity.
The Company’s Information Technology Manager has an over 27-year career in Information Technology, the prior 14-years of which have been in Information Technology, Security and Cybersecurity, working primarily in regulated industries.
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The Company’s cybersecurity risk mitigation program involves a combination of internal resources and the use of third parties. The Company’s internal IT team performs monthly vulnerability scanning and performs an annual risk assessment based on the National Institute of Standards and Technology Cybersecurity Framework. The results are reported to the ITSC, which is then reported to the Board of Directors. The Company’s IT and compliance staff also
In addition to these internal resources, the Company
The Company also maintains cyber liability insurance which may provide coverage for expenses and certain losses incurred in connection with a cybersecurity incident.
Cybersecurity Incident Response Planning
The Company has established a comprehensive cybersecurity incident response plan to ensure the swift and effective handling of any potential security breaches. This plan includes detailed procedures for identifying, assessing, and mitigating cybersecurity threats, as well as protocols for communication and coordination with relevant stakeholders. Regular training and simulations are conducted to keep the Company’s response team prepared for various scenarios, ensuring minimal disruption to its operations and safeguarding the Company’s customers’ data.
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Item 2. Properties:
The Company presently conducts its business through its main office located at 64 Old Highway 22, Clinton, New Jersey and its twenty-two branch offices. The Company is currently leasing additional back office space in Clinton, New Jersey, in a building adjacent to its main office. The Company’s facilities are adequate to meet its needs.
The following table sets forth certain information regarding the Company’s properties from which it conducts business as of December 31, 2025.
Location | | Leased or Owned | | Date Leased or Acquired | | Lease Expiration |
North Plainfield, NJ |
| Owned |
| 1991 |
| — |
Linden, NJ |
| Owned |
| 1997 |
| — |
Whitehouse, NJ |
| Owned |
| 1998 |
| — |
Union, NJ |
| Leased |
| 2021 |
| 2036 |
Scotch Plains, NJ |
| Owned |
| 2004 |
| — |
Flemington, NJ |
| Owned |
| 2005 |
| — |
Forks Township, PA |
| Leased |
| 2006 |
| 2036 |
Middlesex, NJ |
| Owned |
| 2007 |
| — |
Somerset, NJ |
| Leased |
| 2012 |
| 2027 |
Washington, NJ |
| Owned |
| 2012 |
| — |
Highland Park, NJ |
| Owned |
| 2013 |
| — |
South Plainfield, NJ |
| Owned |
| 2013 |
| — |
Edison, NJ |
| Owned |
| 2013 |
| — |
Clinton, NJ* |
| Owned |
| 2016 |
| — |
Somerville, NJ |
| Owned |
| 2016 |
| — |
Emerson, NJ |
| Owned |
| 2016 |
| — |
Phillipsburg, NJ |
| Leased |
| 2017 |
| 2027 |
Clinton, NJ** |
| Leased |
| 2018 |
| 2036 |
Bethlehem, PA |
| Leased |
| 2018 |
| 2028 |
Parsippany, NJ | Owned | 2023 | — | |||
Lakewood, NJ |
| Leased |
| 2022 |
| 2037 |
Fort Lee, NJ | Leased | 2022 | 2037 | |||
Madison, NJ |
| Leased |
| 2025 |
| 2035 |
*Headquarters Space | ||||||
**Back Office Space | ||||||
Item 3. Legal Proceedings:
From time to time, the Company is subject to 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. Mine Safety Disclosures: N/A
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities:
| (a) | Market Information |
The Company’s Common Stock is quoted on the NASDAQ Global Market under the symbol “UNTY.” The Company declared cash dividends of $0.14 per share for the first and second quarters of 2025, and subsequently increased the
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dividend to $0.15 per share for the third and fourth quarters of the year. The declaration and payment of future dividends to holders of the Company’s common stock is at the discretion of our Board and depends upon many factors, including our financial condition, earnings, capital requirements, legal requirements, regulatory constraints and other factors that our Board deems relevant. As of December 31, 2025, approximately 281 holders of record held shares of our common stock.
| (b) | Repurchase Plan |
On August 1, 2024 the Board authorized a repurchase plan permitting the repurchase of up to 500 thousand shares, or approximately 5.0% of the Company’s outstanding common stock, in addition to the previously approved repurchase plan authorizing the repurchase of up to 500 thousand shares of common stock. A total of 116 thousand shares were repurchased at an average price of $43.21 during 2025, all of which were repurchased under the prior repurchase plan, leaving 568 thousand shares available for repurchase as of December 31, 2025. A total of 229 thousand shares were repurchased at an average price of $27.05 during 2024, leaving 685 thousand shares available for repurchase as of December 31, 2024. The timing and amount of additional purchases, if any, will depend upon several factors including the Company’s capital needs, the Company’s liquidity position, the performance of its loan portfolio, the need for additional provisions for credit losses and the market price of the Company’s stock.
Maximum | |||||||||
Total Number of | Number of | ||||||||
Total | Shares Purchased | Shares that May | |||||||
Number of | Weighted | as Part of Publicly | Yet be Purchased | ||||||
Shares | Average Price | Announced Plans | Under the Plans | ||||||
Period | Purchased | Paid per Share | or Programs | or Programs | |||||
January 1, 2025 through January 31, 2025 | - | $ | - | - | 684,645 | ||||
February 1, 2025 through February 29, 2025 | - | - | - | 684,645 | |||||
March 1, 2025 through March 31, 2025 | - | - | - | 684,645 | |||||
April 1, 2025 through April 30, 2025 | 50,000 | 38.78 | 50,000 | 634,645 | |||||
May 1, 2025 through May 31, 2025 | - | - | - | 634,645 | |||||
June 1, 2025 through June 30, 2025 | - | - | - | 634,645 | |||||
July 1, 2025 through July 31, 2025 | - | - | - | 634,645 | |||||
August 1, 2025 through August 31, 2025 | - | - | - | 634,645 | |||||
September 1, 2025 through September 30, 2025 | - | - | - | 634,645 | |||||
October 1, 2025 through October 31, 2025 | 5,402 | 45.32 | 5,402 | 629,243 | |||||
November 1, 2025 through November 30, 2025 | 60,894 | 46.66 | 60,894 | 568,349 | |||||
December 1, 2025 through December 31, 2025 | - | - | - | 568,349 | |||||
The above table excludes stock repurchase excise taxes accrued or paid.
Item 6. Reserved: N/A
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations:
The purpose of this analysis is to provide the reader with information relevant to understanding and assessing the Company’s results of operations and financial condition for each of the past two years. In order to fully appreciate this analysis, the reader is encouraged to review the consolidated financial statements and accompanying notes thereto appearing under Item 8 of this report and statistical data presented in this document.
Overview
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,
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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-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 below table reflects a 5-year trend of the Company’s net income and return on average equity, (“ROE”):
Results of Operations
Net income totaled $58.0 million, or $5.67 per diluted share for the year ended December 31, 2025, compared to $41.5 million, or $4.06 per diluted share for the year ended December 31, 2024.
Highlights for the year include:
| ● | Net income increased 39.8 percent to $58.0 million from $41.5 million in the prior year. |
| ● | Net income per diluted share increased 39.7 percent to $5.67 per share from $4.06 per share in the prior year. |
| ● | Net interest income increased $18.4 million, or 18.7 percent, to $117.0 million from $98.6 million in the prior year, primarily due to increased volume and rate of interest-earning assets and decrease in rate of interest-bearing liabilities, partially offset by increases in the volume of interest-bearing liabilities. |
| ● | Net interest margin for the year ending December 31, 2025 increased 36 basis points to 4.52 percent compared to 4.16 percent in the prior year. |
| ● | Noninterest income was $14.8 million, a 74.5 percent increase compared to $8.5 million in the prior year, primarily due to increased net securities gains, service and loan fee and branch fee income. The increased net |
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| 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 $52.4 million, an increase of $3.7 million when compared to $48.7 million in the prior year. The increase was primarily due to increased compensation and benefits, processing and communications, director fees and occupancy expenses, partially offset by a decrease in loan related expenses. |
| ● | Net income before provision for income taxes increased 38.8 percent to $75.5 million from $54.4 million in the prior year. |
| ● | The effective tax rate decreased to 23.3 percent compared to 23.8 percent in the prior year. |
| ● | Total securities decreased $21.0 million, or 14.5 percent from the prior year. The decrease was driven by a decrease in debt securities available for sale and held to maturity, primarily resulting from principal paydowns, calls and maturities, partially offset by purchases and mark to market gains of debt securities available for sale. |
| ● | Total gross loans increased $284.1 million, or 12.6 percent from the prior year. The increase was primarily driven by a 18.5 percent increase in commercial loans, 13.1 percent increase in commercial construction and 7.3 percent increase in residential mortgage loans, partially offset by a 19.4 percent decrease in residential construction loans. |
| ● | Total deposits increased $223.7 million, or 10.7 percent from the prior year. The increase was primarily driven by increases in brokered deposits, time deposits, interest-bearing demand deposits, savings deposits and noninterest-bearing demand deposits. |
| ● | Total borrowed funds increased $35.3 million, or 16.0 percent from the prior year. |
The Company’s performance ratios for the past two years are listed in the following table:
For the years ended December 31, | |||||||
| 2025 | | 2024 | | |||
Net income per common share - Basic (1) | $ | 5.78 | $ | 4.13 | |||
Net income per common share - Diluted (2) | $ | 5.67 | $ | 4.06 | |||
Return on average assets |
| 2.17 | % |
| 1.68 | % | |
Return on average equity (3) |
| 18.07 | % |
| 14.99 | % | |
Dividend payout ratio (4) | 10.23 | % | 12.81 | % | |||
Average equity to average assets (5) | 11.99 | % | 11.24 | % | |||
| (1) | Defined as net income divided by weighted average shares outstanding. |
| (2) | Defined as net income divided by the sum of weighted average shares and the potential dilutive impact of the exercise of outstanding options. |
| (3) | Defined as 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. |
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The below table provides net income for 2024 and the component reconciliation to net income for 2025:
The table below an annualized non-GAAP reconciliation of adjustments called out in the chart above:
For the 12 months ended | ||||||
(In thousands, except percentages and per share amounts) | December 31, 2025 | December 31, 2024 | ||||
Adjusted net income: | ||||||
Net income (GAAP) | $ | 57,951 | $ | 41,450 | ||
Adjustments: | ||||||
Less: Release of credit losses, securities | (2,823) | - | ||||
Less: Net securities gains, pertaining to one-time sales | (3,509) | - | ||||
Less: Net securities gains, unrealized | (1,693) | - | ||||
Add: Adjusted release of income taxes | 1,893 | - | ||||
Adjusted net income (non-GAAP) | $ | 51,819 | $ | 41,450 | ||
Net Interest Income
The primary source of the Company’s operating income is net interest income, which is the difference between interest and dividends earned on interest-earning assets and net deferred fees earned on loans, versus interest paid on interest-bearing liabilities. Interest-earning assets include loans to consumers and businesses, investment securities, Federal Home Loan Bank (“FHLB”) stock, and interest-earning deposits. Interest-bearing liabilities include interest-bearing demand, savings, brokered and time deposits, borrowed funds and subordinated debentures.
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2025 compared to 2024
During 2025, tax-equivalent net interest income amounted to $117.0 million, an increase of $18.4 million, or 18.7 percent, when compared to the same period in 2024. The net interest margin increased 36 basis points to 4.52 percent for the year ended December 31, 2025, compared to 4.16 percent for the same period in 2024. The net interest spread was 3.69 percent for 2025, a 40 basis point increase compared to 3.29 for the same period in 2024.
During 2025, tax-equivalent interest income was $173.6 million, an increase of $17.9 million, or 11.5 percent, when compared to the same period in the prior year. This increase was mainly driven by the increase in the average balance of loans and in the yield on loans.
| ● | Of the $17.9 million increase in interest income on a tax-equivalent basis, $12.9 million was due to the increased average volume of interest-earning assets and $5.0 million was due to increased yields on average interest-earning assets. |
| ● | The average volume of interest-earning assets increased $216.5 million to $2.6 billion for 2025 compared to $2.4 billion for 2024. This was primarily due to a $214.0 million increase in average loans, with growth in commercial and residential mortgage loans. The increase was complemented by a $7.4 million increase in average interest-bearing deposits, partially offset by a $3.8 million and $1.1 million decrease in average investment securities and FHLB stock, respectively. |
| ● | The yield on total interest-earning assets increased 14 basis points to 6.71 percent for the year ended December 31, 2025 when compared to 2024. The yield on the loan portfolio increased 20 basis points to 6.76 percent. |
Total interest expense was $56.6 million in 2025, a decrease of $0.5 million or 0.9 percent compared to 2024. This decrease was primarily driven by the decrease in the cost of deposits and the decreased average balance of borrowed funds and subordinated debentures, which was partially offset by an increase in the volume of time deposits and interest-bearing demand deposits.
| ● | Of the $0.5 million decrease in interest expense, $4.9 million was due to decreased rates on average interest-bearing deposits, while $1.0 million and $0.3 million was due to the decreased volume and rate of borrowed funds and subordinated debentures, respectively, which was partially offset by an increase of $5.7 million related to volume of average interest-bearing deposits. |
| ● | The average cost of interest-bearing liabilities decreased 26 basis points to 3.02 percent in 2025 when compared to 2024. The cost of interest-bearing deposits decreased 25 basis points in 2025. The cost of borrowed funds and subordinated debentures decreased 24 basis points in 2025. |
| ● | Interest-bearing liabilities averaged $1.9 billion in 2025, an increase of $132.9 million, compared to 2024. The increase in interest-bearing liabilities was primarily due to increases in time deposits and interest-bearing demand deposits, partially offset by increases in borrowed funds and subordinated debentures and brokered deposits. |
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The following table provides a 5 year look back at yield on interest-earning assets, cost of interest-bearing liabilities and net interest margin.
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Consolidated Average Balance Sheets
The following table reflects the components of net interest income, setting forth for the periods presented herein: (1) average assets, liabilities and shareholders’ equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) net interest spread and (5) net interest income/margin on average interest-earning assets. Rates/yields are computed on a fully tax-equivalent basis, assuming a federal income tax rate of 21 percent.
(Dollar amounts in thousands, interest amounts and interest rates/yields on a fully tax-equivalent basis)
For the years ended December 31, | 2025 | 2024 |
| ||||||||||||||
| Average | | | | Average | | | | |||||||||
balance | Interest | Rate/Yield | balance | Interest | Rate/Yield |
| |||||||||||
ASSETS | |||||||||||||||||
Interest-earning assets: | |||||||||||||||||
Interest-bearing deposits | $ | 45,865 | $ | 1,964 | 4.28 | % | $ | 38,491 | $ | 2,033 | 5.28 | % | |||||
Federal Home Loan Bank ("FHLB") stock |
| 7,382 | 565 | 7.66 |
| 8,440 | 789 | 9.34 | |||||||||
Securities: | |||||||||||||||||
Taxable |
| 136,129 | 6,818 | 5.01 |
| 139,800 | 7,312 | 5.23 | |||||||||
Tax-exempt |
| 1,499 | 83 | 5.55 |
| 1,599 | 72 | 4.49 | |||||||||
Total securities (A) |
| 137,628 | 6,901 | 5.01 |
| 141,399 | 7,384 | 5.22 | |||||||||
Loans: | |||||||||||||||||
SBA loans |
| 47,478 | 3,790 | 7.87 |
| 56,307 | 4,887 | 8.56 | |||||||||
Commercial loans |
| 1,405,106 | 95,144 | 6.68 |
| 1,186,277 | 75,699 | 6.28 | |||||||||
Commercial construction loans | 124,234 | 10,340 | 8.21 | 134,806 | 12,074 | 8.81 | |||||||||||
Residential mortgage loans |
| 663,372 | 41,925 | 6.32 |
| 625,365 | 37,770 | 6.04 | |||||||||
Consumer loans |
| 81,177 | 5,830 | 7.08 |
| 71,010 | 5,607 | 7.77 | |||||||||
Residential construction loans | 74,933 | 7,181 | 9.45 | 108,558 | 9,497 | 8.61 | |||||||||||
Total loans (B) |
| 2,396,300 | 164,210 | 6.76 |
| 2,182,323 | 145,534 | 6.56 | |||||||||
Total interest-earning assets | $ | 2,587,175 | $ | 173,640 | 6.71 | % | $ | 2,370,653 | $ | 155,740 | 6.57 | % | |||||
Noninterest-earning assets: | |||||||||||||||||
Cash and due from banks |
| 22,798 |
| 23,396 | |||||||||||||
Allowance for credit losses |
| (28,999) |
| (26,492) | |||||||||||||
Other assets |
| 94,422 |
| 92,687 | |||||||||||||
Total noninterest-earning assets |
| 88,221 |
| 89,591 | |||||||||||||
Total assets | $ | 2,675,396 | $ | 2,460,244 | |||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||
Interest-bearing demand deposits | $ | 362,811 | $ | 7,528 | 2.07 | % | $ | 326,943 | $ | 7,176 | 2.19 | % | |||||
Savings deposits |
| 509,892 | 11,652 | 2.29 |
| 512,405 | 13,006 | 2.54 | |||||||||
Brokered deposits | 220,910 | 7,608 | 3.44 | 227,070 | 8,412 | 3.70 | |||||||||||
Time deposits |
| 668,405 | 25,571 | 3.83 |
| 535,297 | 22,918 | 4.28 | |||||||||
Total interest-bearing deposits |
| 1,762,018 | 52,359 | 2.97 |
| 1,601,715 | 51,512 | 3.22 | |||||||||
Borrowed funds and subordinated debentures |
| 114,047 | 4,236 | 3.66 |
| 141,489 | 5,615 | 3.90 | |||||||||
Total interest-bearing liabilities | $ | 1,876,065 | $ | 56,595 | 3.02 | % | $ | 1,743,204 | $ | 57,127 | 3.28 | % | |||||
Noninterest-bearing liabilities: | |||||||||||||||||
Noninterest-bearing demand deposits |
| 446,081 |
| 411,148 | |||||||||||||
Other liabilities |
| 32,524 |
| 29,421 | |||||||||||||
Total noninterest-bearing liabilities |
| 478,605 |
| 440,569 | |||||||||||||
Total shareholders' equity |
| 320,726 |
| 276,471 | |||||||||||||
Total liabilities and shareholders' equity | $ | 2,675,396 | $ | 2,460,244 | |||||||||||||
Net interest spread | $ | 117,045 | 3.69 | % | $ | 98,613 | 3.29 | % | |||||||||
Tax-equivalent basis adjustment |
| (12) |
| (2) | |||||||||||||
Net interest income |
| $ | 117,033 |
| $ | 98,611 | |||||||||||
Net interest margin |
| 4.52 | % |
| 4.16 | % | |||||||||||
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| (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 in 2025 and 2024. |
| (B) | The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued. |
| (C) |
The rate volume table below presents an analysis of the impact on interest income and expense resulting from changes in average volume and rates over the periods presented. Changes that are not solely due to volume or rate variances have been allocated proportionally to both, based on their relative absolute values. Amounts have been computed on a tax-equivalent basis, assuming a federal income tax rate of 21 percent.
For the years ended December 31, | |||||||||
2025 versus 2024 | |||||||||
Increase (decrease) due to change in: | |||||||||
(In thousands on a tax-equivalent basis) | | Volume | | Rate | | Net | |||
Interest income: | |||||||||
Interest-bearing deposits | $ | 352 | $ | (421) | $ | (69) | |||
FHLB stock |
| (92) |
| (132) |
| (224) | |||
Securities |
| (194) |
| (289) |
| (483) | |||
Loans |
| 12,813 |
| 5,863 |
| 18,676 | |||
Total interest income | $ | 12,879 | $ | 5,021 | $ | 17,900 | |||
Interest expense: |
| |
| |
| | |||
Demand deposits | $ | 758 | $ | (406) | $ | 352 | |||
Savings deposits |
| (64) |
| (1,290) |
| (1,354) | |||
Brokered deposits | (224) | (580) | (804) | ||||||
Time deposits |
| 5,251 |
| (2,598) |
| 2,653 | |||
Total interest-bearing deposits |
| 5,721 |
| (4,874) |
| 847 | |||
Borrowed funds and subordinated debentures |
| (1,046) |
| (333) |
| (1,379) | |||
Total interest expense |
| 4,675 |
| (5,207) |
| (532) | |||
Net interest income - fully tax-equivalent | $ | 8,204 | $ | 10,228 | $ | 18,432 | |||
Decrease in tax-equivalent adjustment |
| (10) | |||||||
Net interest income | $ | 18,422 | |||||||
Provision for Credit Losses
The provision for credit losses for loans totaled $6.7 million for 2025, compared to $2.4 million in 2024. The provision for credit losses for loans increased $4.3 million for the year ended 2025 primarily due to loan growth, with additional increases in qualitative adjustments due to increased nonaccrual assets.
The provision for credit losses for off-balance sheet exposures totaled to $66 thousand for the year ended December 31, 2025, compared to $1 thousand at December 31, 2024.
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.
Each period’s credit loss provision is the result of Management’s analysis of the loan portfolio and reflects changes in the size and composition of the portfolio, the level of net charge-offs, delinquencies, current and expected economic conditions and other internal and external factors impacting the risk within the loan portfolio. Additional information may be found under the captions “Financial Condition - Asset Quality” and “Financial Condition - Allowance for Credit Losses and Reserve for Unfunded Loan Commitments.”
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Noninterest Income
The following table shows the components of noninterest income for the past two years:
For the years ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
Branch fee income | $ | 1,836 | $ | 1,391 | ||
Service and loan fee income |
| 2,712 |
| 2,165 | ||
Gain on sale of SBA loans held for sale, net |
| 705 |
| 660 | ||
Gain on sale of mortgage loans, net |
| 1,527 |
| 1,488 | ||
BOLI income |
| 774 |
| 544 | ||
Net securities gains |
| 5,596 |
| 586 | ||
Other income |
| 1,629 |
| 1,635 | ||
Total noninterest income | $ | 14,779 | $ | 8,469 | ||
Noninterest income was $14.8 million for 2025, a $6.3 million increase compared to $8.5 million for 2024. This increase was primarily due to increased net gains on securities, service and loan fee income, branch fee income 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
The following table shows the components of noninterest expense for the past two years:
For the years ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
Compensation and benefits | $ | 32,186 | $ | 29,749 | ||
Processing and communications |
| 4,193 |
| 3,473 | ||
Occupancy |
| 3,407 |
| 3,184 | ||
Furniture and equipment |
| 3,224 |
| 3,140 | ||
Professional services |
| 1,758 |
| 1,683 | ||
Advertising |
| 1,682 |
| 1,611 | ||
Loan related expenses | 888 | 1,138 | ||||
Deposit insurance |
| 1,174 |
| 1,100 | ||
Director fees | 1,293 | 956 | ||||
Other expenses | 2,554 | 2,707 | ||||
Total noninterest expense | $ | 52,359 | $ | 48,741 | ||
Noninterest expense totaled $52.4 million for the year ended December 31, 2025, an increase of $3.7 million when compared to $48.7 million in 2024. The majority of this increase is attributable to increased compensation and benefits, processing and communications, director fee and occupancy expenses, partially offset by decreased loan related expense.
Income Tax Expense
For 2025, the Company reported income tax expense of $17.6 million for an effective tax rate of 23.3%, compared to an income tax expense of $12.9 million and an effective tax rate of 23.8% in 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.
For additional information on income taxes, see Note 11 to the Consolidated Financial Statements.
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Financial Condition
Total assets increased $312.6 million, or 11.8 percent, to $3.0 billion at December 31, 2025, when compared to year end 2024. This increase was primarily due to an increase of $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, $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 $36.1 million in total cash and cash equivalents, partially offset by a decrease of $21.0 million in securities.
Total deposits increased $223.7 million, or 10.7 percent, to $2.3 billion at December 31, 2025. This increase was primarily due to increases of $56.3 million in brokered deposits, $51.4 million in time deposits, $47.3 million in interest-bearing demand deposits, $43.9 million in savings deposits and $24.8 million in noninterest-bearing demand deposits. Borrowed funds increased $35.3 million to $255.8 million at December 31, 2025.
Total shareholders’ equity increased $50.0 million when compared to December 31, 2024, due to earnings and an increase in common stock, offset by dividends paid and share repurchases.
These fluctuations are discussed in further detail in the sections that follow.
Securities
The Company’s securities portfolio consists of available for sale (“AFS”) debt securities, held to maturity (“HTM”) debt securities and equity investments. Management determines the appropriate security classification of AFS and HTM at the time of purchase. The investment securities portfolio is maintained for asset-liability management purposes, as well as for liquidity and earnings purposes.
The following table provides the major components of AFS debt securities, HTM debt securities and equity investments at their carrying value as of December 31, 2025 and December 31, 2024:
(In thousands) | December 31, 2025 | December 31, 2024 | ||||
Available for sale, at fair value: | ||||||
U.S. Government sponsored entities | $ | 4,969 | $ | 14,759 | ||
State and political subdivisions | 159 | 333 | ||||
Residential mortgage-backed securities | 11,752 | 12,286 | ||||
Asset backed securities | 22,000 | 39,393 | ||||
Corporate and other securities | 31,990 | 27,113 | ||||
Total securities available for sale | $ | 70,870 | $ | 93,884 | ||
Held to maturity, at amortized cost: | ||||||
U.S. Government sponsored entities | $ | 28,000 | $ | 28,000 | ||
State and political subdivisions | 1,299 | 1,234 | ||||
Residential mortgage-backed securities | 7,277 | 12,060 | ||||
Total securities held to maturity | $ | 36,576 | $ | 41,294 | ||
Equity Securities, at fair value: | ||||||
Total Equity Securities | $ | 16,569 | $ | 9,850 |
AFS debt securities are investments carried at fair value that may be sold in response to changing market and interest rate conditions, liquidity management purposes, or for other business purposes. Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk, to take advantage of market conditions that create economically attractive returns and as an additional source of earnings. AFS debt securities consist primarily of obligations of U.S. Government sponsored entities, state and political subdivisions, residential mortgage-backed securities, asset backed securities and corporate and other securities.
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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. This net decrease was the result of:
| ● | $37.2 million in principal payments, maturities and called bonds, |
| ● | $2.0 million transfer of senior debt security modification to equity (net of valuation allowance), |
| ● | $1.0 million in proceeds from sales, |
| ● | $0.2 million in unrealized losses recognized through earnings, |
| ● | Partially offset by purchases of $15.5 million; and |
| ● | $1.9 million of appreciation in the market value of the portfolio. At December 31, 2025, the portfolio had a net unrealized loss of $1.6 million compared to a net unrealized loss of $3.5 million at December 31, 2024. These net unrealized losses are reflected net of tax in shareholders’ equity as accumulated other comprehensive loss. |
For the year ended December 31, 2025, there was a release in credit losses on AFS debt securities of $2.8 million compared to a provision of $1.5 million for year ended December 31, 2024. The change in provision was entirely attributable to Patriot National Bancorp for which a partial valuation allowance was recognized in the second quarter of 2024 and the fourth quarter of 2023. During the year ended December 31, 2025, Unity released all valuation allowances related to the debt position and converted the position to equity.
The weighted average life of AFS debt securities, adjusted for prepayments, amounted to 5.1 years and 4.9 years at December 31, 2025 and 2024, respectively. The effective duration of AFS debt securities amounted to 1.9 and 1.4 years at December 31, 2025 and 2024, respectively.
HTM debt securities, which are carried at amortized cost, are investments for which there is the positive intent and ability to hold to maturity. The portfolio is comprised of obligations of U.S. Government sponsored entities, state and political subdivisions and residential mortgage-backed securities.
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:
| ● | $4.8 million in principal paydowns; and |
| ● | Partially offset by $0.1 million in net accretion |
The weighted average life of HTM debt securities, adjusted for prepayments, amounted to 14.8 years and 14.3 years at December 31, 2025 and 2024, respectively. As of December 31, 2025, the fair value of HTM debt securities was $30.4 million, compared to $33.8 million at December 31, 2024. The effective duration of HTM debt securities amounted to 10.7 and 9.0 years at December 31, 2025 and 2024, respectively.
Equity securities are investments carried at fair value that may be sold in response to changing market and interest rate conditions or for other business purposes. Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk, to take advantage of market conditions that create economically attractive returns and as an additional source of earnings. Additionally, equity securities consist of Community Reinvestment Act ("CRA") investments and the equity holdings of financial institutions.
Equity securities totaled $16.6 million at December 31, 2025, an increase of $6.7 million, or 68.2 percent, compared to $9.9 million at December 31, 2024. This net increase was the result of:
| ● | $3.5 million of realized gains, |
| ● | $2.1 million of unrealized gains, |
| ● | Conversion of senior debt to common equity $5.0 million, |
| ● | Purchases of $2.7 million; and |
| ● | Partially offset by $6.6 million in sales |
The following table provides the remaining contractual maturities and average yields, calculated on a yield-to-maturity basis, within the investment portfolios. The carrying value of securities at December 31, 2025 is distributed by contractual
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maturity. Residential mortgage-backed securities and other securities, which may have principal prepayment provisions, are distributed based on contractual maturity. Expected maturities will differ materially from contractual maturities as a result of early prepayments and calls.
Within one year | After one through five years | After five through ten years | After ten years | Total carrying value | ||||||||||||||||||||||||||
Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | |||||||||||||||||||||
(In thousands, except percentages) | | |||||||||||||||||||||||||||||
Available for sale, at fair value: |
| |||||||||||||||||||||||||||||
U.S. Government sponsored entities | $ | — | - | % | $ | 4,969 | 3.15 | % | $ | — | - | % | $ | — | - | % | $ | 4,969 | 3.15 | % | ||||||||||
State and political subdivisions | — | - | — | - | — | - | 159 | 2.76 | 159 | 2.76 | ||||||||||||||||||||
Residential mortgage-backed securities | 21 | 2.41 | 133 | 2.69 | 497 | 3.34 | 11,101 | 3.41 | 11,752 | 3.40 | ||||||||||||||||||||
Asset backed securities | — | - | — | - | 11,999 | 5.90 | 10,001 | 5.55 | 22,000 | 5.74 | ||||||||||||||||||||
Corporate and other securities | 1,951 | 6.25 | 10,977 | 7.26 | 19,062 | 7.10 | — | - | 31,990 | 7.10 | ||||||||||||||||||||
Total debt securities available for sale | $ | 1,972 | 6.21 | % | $ | 16,079 | 5.95 | % | $ | 31,558 | 6.58 | % | $ | 21,261 | 4.41 | % | $ | 70,870 | 5.78 | % | ||||||||||
Held to maturity, at cost: |
| |||||||||||||||||||||||||||||
U.S. Government sponsored entities | $ | — | - | % | $ | 3,000 | 4.00 | % | $ | — | - | % | $ | 25,000 | 3.48 | % | $ | 28,000 | 3.54 | % | ||||||||||
State and political subdivisions | — | - | — | - | — | - | 1,299 | 5.19 | 1,299 | 5.19 | ||||||||||||||||||||
Residential mortgage-backed securities | — | - | — | - | — | - | 7,277 | 3.03 | 7,277 | 3.03 | ||||||||||||||||||||
Total debt securities held for maturity | $ | — | - | % | $ | 3,000 | 4.00 | % | $ | — | - | % | $ | 33,576 | 3.45 | % | $ | 36,576 | 3.50 | % | ||||||||||
Securities with a carrying value of $69.2 million and $11.5 million at December 31, 2025 and December 31, 2024, respectively, were pledged to secure other borrowings and for other purposes required or permitted by law. There were no securities encumbered at December 31, 2025 and December 31, 2024.
Approximately 57 and 63 percent of the total investment portfolio had a fixed rate of interest at December 31, 2025 and December 31, 2024, respectively.
For additional information on securities, see Note 2 to the Consolidated Financial Statements.
Loans
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.
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Total loans were $2.5 billion at December 31, 2025, an increase of $284.1 million or 12.6 percent when compared to year end 2024. Commercial, residential mortgage, commercial construction and consumer loans increased $236.6 million, $46.3 million, $17.0 million and $8.5 million, respectively, partially offset by decreases in residential construction, SBA loans held for investment and loans held for sale of $17.6 million, $4.0 million and $2.7 million, respectively. The Company’s loan portfolio had an average outstanding principal balance of $0.7 million per loan as of December 31, 2025.
The following table sets forth the classification of loans by loan type, including unearned fees and deferred costs and excluding the allowance for credit losses as of December 31, 2025 and December 31, 2024:
In thousands, except percentages | December 31, 2025 | % | December 31, 2024 | % | ||||||
Loans held for sale | $ | 9,490 | 0.4% | $ | 12,163 | 0.5% | ||||
SBA loans | 34,259 | 1.3% | 38,309 | 1.7% | ||||||
Commercial loans | ||||||||||
SBA 504 | 43,802 | 1.7% | 48,479 | 2.1% | ||||||
Commercial & industrial | 183,163 | 7.2% | 147,186 | 6.5% | ||||||
Commercial mortgage - owner occupied | 660,427 | 26.0% | 577,541 | 25.6% | ||||||
Commercial mortgage - nonowner occupied | 531,954 | 20.9% | 428,600 | 19.0% | ||||||
Other | 98,686 | 3.9% | 79,630 | 3.5% | ||||||
Total commercial loans | 1,518,032 | 59.7% | 1,281,436 | 56.7% | ||||||
Commercial construction loans | 147,215 | 5.8% | 130,193 | 5.8% | ||||||
Residential mortgage loans | ||||||||||
Primary residence | 472,482 | 18.6% | 427,738 | 18.9% | ||||||
Secondary residence | 71,656 | 2.8% | 65,063 | 2.9% | ||||||
Investor property | 133,083 | 5.2% | 138,126 | 6.1% | ||||||
Total residential mortgage loans | 677,221 | 26.6% | 630,927 | 27.9% | ||||||
Consumer loans | ||||||||||
Home equity | 82,488 | 3.2% | 73,223 | 3.2% | ||||||
Consumer other | 2,731 | 0.1% | 3,488 | 0.2% | ||||||
Total consumer loans | 85,219 | 3.3% | 76,711 | 3.4% | ||||||
Residential construction loans | 73,277 | 2.9% | 90,918 | 4.0% | ||||||
Total gross loans | $ | 2,544,713 | 100.0% | $ | 2,260,657 | 100.0% | ||||
Below is a table of the geographic loan allocation of the Bank’s Commercial loan portfolio at December 31, 2025:
New Jersey | New York | Pennsylvania | Other | ||||||
Commercial loans | |||||||||
SBA 504 | 73.5 | 1.5 | 24.8 | 0.2 | |||||
Commercial & industrial | 89.6 | 2.0 | 4.8 | 3.6 | |||||
Commercial mortgage - owner occupied | 87.1 | 6.0 | 4.1 | 2.8 | |||||
Commercial mortgage - nonowner occupied | 83.8 | 7.2 | 4.6 | 4.4 | |||||
Other | 73.0 | 26.7 | 0.3 | — | |||||
Commercial construction loans | 90.3 | % | 3.3 | % | 6.4 | % | — | % | |
Total | 85.4 | % | 6.8 | % | 4.9 | % | 2.9 | % |
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The following table presents the estimated weighted average loan-to-value ratio for the commercial mortgage portfolio as of December 31, 2025:
2025 | ||||||
| | | ||||
(In thousands, except percentages) | Amount | Loan-to-Value* | ||||
Commercial loans | ||||||
Commercial mortgage - owner occupied | $ | 660,427 |
| 53.8 | % | |
Commercial mortgage - nonowner occupied |
| 531,954 |
| 56.9 | ||
Total commercial mortgage loans | $ | 1,192,381 |
| 55.2 | % | |
* The above includes last known appraised value on real estate collateral only.
The table below shows the breakdown of industry of the commercial mortgage – owner occupied portfolio as of December 31, 2025:
(In thousands) | Commercial mortgage - owner occupied | ||
Industry type: | |||
Mixed-use | $ | 94,574 | |
Hotel/Motel |
| 93,766 | |
Food/Beverage services | 63,217 | ||
Educational facilities | 53,437 | ||
Retail | 49,296 | ||
Warehouse | 42,606 | ||
Office | 39,987 | ||
Religious facilities | 38,757 | ||
Automotive | 37,938 | ||
Healthcare facilities | 36,206 | ||
Gas Station | 19,130 | ||
Other | 91,513 | ||
Total as of December 31, 2025 | $ | 660,427 | |
The Other category above is predominantly comprised of land, airports and multi-family loans.
The table below shows the breakdown of industry of the commercial mortgage – nonowner occupied portfolio as of December 31, 2025:
(In thousands) | Commercial mortgage - nonowner occupied | ||
Industry type: | |||
Mixed-use | $ | 120,018 | |
Retail |
| 119,416 | |
Office | 91,923 | ||
Warehouse | 67,038 | ||
Healthcare facilities | 15,937 | ||
Educational facilities | 15,690 | ||
Other | 101,932 | ||
Total as of December 31, 2025 | $ | 531,954 | |
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The Other category above is predominantly comprised of multi-family, land, hotels and automotive loans.
SBA 7(a) loans, on which the SBA historically has provided guarantees of up to 90 percent of the principal balance, are considered a higher risk loan product for the Company than its other loan products. These loans are made to small businesses for the purposes of providing working capital and for financing the purchase of equipment, inventory or commercial real estate. Generally, an SBA 7(a) loan has a lower quality credit profile that would not allow the borrower to qualify for a traditional commercial loan, which is why the SBA provides the guarantee. These loans may have a higher loan to value (“LTV”) ratio, lower debt service coverage (“DSC”) ratio and/or weak personal financial guarantees. In addition, many SBA 7(a) loans are for startup businesses where there is no historical financial information. Finally, many SBA borrowers do not have an ongoing and continuous banking relationship with the Bank and work with the Bank on a single transaction. The guaranteed portion of the Company’s SBA loans may be sold in the secondary market.
SBA 7(a) loans held for sale, carried at the lower of cost or market, amounted to $8.0 million at December 31, 2025, a decrease of $4.2 million from $12.2 million at December 31, 2024. SBA 7(a) loans held for investment amounted to $34.3 million at December 31, 2025, a decrease of $4.0 million from $38.3 million at December 31, 2024. The yield on SBA 7(a) loans, which is generally floating and adjusts quarterly to the Prime Rate, was 7.87 percent for the year ended December 31, 2025, compared to 8.56 percent in the prior year.
The guarantee rates on SBA 7(a) loans range from 75 percent to 90 percent, with the majority of the portfolio having a guarantee rate of 75 percent at origination. The guarantee rates are determined by the SBA and can vary from year to year depending on government funding and the goals of the SBA program. Approximately $49.2 million and $72.6 million in SBA 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. There is no direct relationship or correlation between the guarantee percentages and the level of charge-offs and recoveries on the Company’s SBA 7(a) loans. SBA loans are underwritten to the same credit standards irrespective of the guarantee percentage.
Commercial loans are generally made in the Company’s marketplace for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes. These loans amounted to $1.5 billion at December 31, 2025, an increase of $236.6 million from year end 2024. The yield on commercial loans was 6.68 percent for 2025, compared to 6.28 percent for the same period in 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 mortgages.
Commercial construction loans amounted to $147.2 million for 2025, an increase of $17.0 million from the $130.2 million at 2024. The yield on commercial construction loans was 8.21 percent for 2025, compared to 8.81 percent for 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.
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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.
There are no concentrations of loans to any borrowers or group of borrowers exceeding 10 percent of the total loan portfolio.
In the normal course of business, the Company may originate loan products whose terms could give rise to additional credit risk. Interest-only loans, loans with high LTV ratios, construction loans with payments made from interest reserves and multiple loans supported by the same collateral (e.g. home equity loans) are examples of such products. However, these products are not material to the Company’s financial position and are closely managed via credit controls that mitigate their additional inherent risk. Management does not believe that these products create a concentration of credit risk in the Company’s loan portfolio. The Company does not have any option adjustable rate mortgage loans.
The majority of the Company’s loans are secured by real estate. Declines in the market values of real estate in the Company’s trade area impact the value of the collateral securing its loans. This could lead to greater losses in the event of defaults on loans secured by real estate. At December 31, 2025 and 2024, approximately 96 percent of the Company’s loan portfolio was secured by real estate.
The table below shows the balances of loans serviced for others as of December 31, 2025 and 2024:
| | |||||
(In thousands) | 2025 | 2024 | ||||
Ending balance: | ||||||
SBA loans held for investment | $ | 49,194 |
| $ | 72,619 | |
Residential mortgage |
| 66,264 |
| 75,417 | ||
Commercial | 28,354 | 30,984 | ||||
Total loans serviced for others | $ | 143,812 |
| $ | 179,020 | |
The following table presents the maturity distribution of the loan portfolio at December 31, 2025:
December 31, 2025 |
| |||||||||||||||
(In thousands) | | One year or less | | One to five years | | Five to fifteen years | Over fifteen years | Total |
| |||||||
Loans held for sale | $ | 1,492 | $ | — | $ | 5,210 | $ | 2,788 | $ | 9,490 | ||||||
SBA loans | 78 | 2,132 | 6,534 | 25,515 | 34,259 | |||||||||||
Commercial loans |
|
| | |||||||||||||
SBA 504 loans |
| 321 | — | 2,885 | 40,596 |
| 43,802 | |||||||||
Commercial & industrial |
| 51,064 | 32,725 | 44,442 | 54,932 |
| 183,163 | |||||||||
Commercial real estate |
| 41,443 | 81,853 | 235,563 | 932,208 |
| 1,291,067 | |||||||||
Commercial construction |
| 30,518 | 16,013 | 2,996 | 97,688 |
| 147,215 | |||||||||
Residential mortgage loans | 1,095 | 10,362 | 54,701 | 611,063 | 677,221 | |||||||||||
Consumer loans | ||||||||||||||||
Home equity | 3,724 | 2,902 | 12,638 | 63,224 | 82,488 | |||||||||||
Consumer other | 1,087 | 1,150 | 428 | 66 | 2,731 | |||||||||||
Residential construction loans | 67,590 | 5,687 | — | — | 73,277 | |||||||||||
Total | $ | 198,412 | $ | 152,824 | $ | 365,397 | $ | 1,828,080 | $ | 2,544,713 | ||||||
Total (as a percentage of total loans) | 7.8 | % | 6.0 | % | 14.4 | % | 71.8 | % | 100.0 | % | ||||||
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The following table presents the contractual maturities after one year for fixed and adjustable rate loans within each loan category at December 31, 2025:
(In thousands) | Loans Maturing After One Year | ||||||||
Loan Type | Fixed Rate | Adjustable Rate | Total | ||||||
Loans held for sale | $ | - | $ | 7,998 | $ | 7,998 | |||
SBA loans | 677 | 33,504 | 34,181 | ||||||
Commercial loans | |||||||||
SBA 504 | - | 43,481 | 43,481 | ||||||
Commercial & industrial | 60,992 | 71,107 | 132,099 | ||||||
Commercial real estate | 146,089 | 1,103,535 | 1,249,624 | ||||||
Commercial construction loans | 1,330 | 115,367 | 116,697 | ||||||
Residential mortgage loans | 297,088 | 379,038 | 676,126 | ||||||
Consumer loans | |||||||||
Home equity | 17,576 | 61,188 | 78,764 | ||||||
Consumer other | 1,226 | 418 | 1,644 | ||||||
Residential construction loans | 5,687 | - | 5,687 | ||||||
Total | $ | 530,665 | $ | 1,815,636 | $ | 2,346,301 | |||
For additional information on loans, see Note 3 to the Consolidated Financial Statements.
Asset Quality
The following table sets forth information concerning nonperforming assets and loans past due 90 days or more and still accruing interest at December 31, 2025 and December 31, 2024:
(In thousands, except percentages) | | 2025 | | 2024 | | ||
Nonaccrual by category: |
| |
| |
| ||
SBA loans held for investment | $ | 1,751 | $ | 3,850 | |||
Commercial loans |
| 18,473 |
| 2,974 | |||
Residential mortgage loans |
| 8,173 |
| 5,711 | |||
Consumer loans | 1,268 |
| — | ||||
Residential construction loans |
| 171 |
| 547 | |||
Total nonaccrual loans | $ | 29,836 | $ | 13,082 | |||
Debt securities available for sale, net of valuation allowance |
| — |
| 1,964 | |||
OREO | 1,472 | — | |||||
Total nonaccrual assets | $ | 31,308 | $ | 15,046 | |||
Past due 90 days or more and still accruing interest: |
| |
| | |||
Residential mortgage loans |
| — |
| 760 | |||
Total past due 90 days or more and still accruing interest | $ | — | $ | 760 | |||
Nonaccrual loans to total loans |
| 1.17 | % |
| 0.58 | % | |
Nonaccrual assets to total assets |
| 1.06 |
| 0.57 | |||
Nonaccrual loans were $29.8 million at December 31, 2025, a $16.7 million increase from $13.1 million at year end 2024. Since year-end 2024, nonaccrual loans in the commercial, residential mortgage and consumer loan segments increased, partially offset by a decrease in nonaccrual SBA held for investment and residential construction. The increase primarily reflects one $15.5 million well-secured commercial real estate relationship that migrated to nonaccrual status during the
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quarter. In addition, there were no loans past due 90 days or more and still accruing interest at December 31, 2025, compared to $0.8 million at December 31, 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.
For additional information on asset quality, see Note 3 to the Consolidated Financial Statements.
Allowance for Credit Losses and Reserve for Unfunded Loan Commitments
The allowance for credit losses totaled $32.3 million at December 31, 2025, compared to $26.8 million at December 31, 2024, with resulting allowance to total loan ratios of 1.27 percent and 1.18 percent, respectively. Net charge-offs amounted to $1.1 million for 2025, compared to $1.5 million for 2024.
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The following table is a summary of the changes to the allowance for credit losses for December 31, 2025 and 2024, including net charge-offs to average loan ratios for each major loan category:
(In thousands, except percentages) | | 2025 | | 2024 | | ||
Balance, beginning of period | $ | 26,788 | $ | 25,854 | |||
Provision for credit losses for loans charged to expense |
| 6,699 |
| 2,407 | |||
Less: Charge-offs |
| |
| | |||
SBA loans held for investment |
| (930) |
| (370) | |||
Commercial loans |
| (102) |
| (633) | |||
Residential mortgage loans | (543) | (150) | |||||
Consumer loans |
| (112) |
| (361) | |||
Residential construction loans | — | (277) | |||||
Total charge-offs |
| (1,687) |
| (1,791) | |||
Add: Recoveries |
| |
| | |||
SBA loans held for investment |
| 61 |
| 47 | |||
Commercial loans |
| 395 |
| 204 | |||
Residential mortgage loans |
| — |
| — | |||
Consumer loans |
| 86 |
| 67 | |||
Residential construction loans | — | — | |||||
Total recoveries |
| 542 |
| 318 | |||
Net charge-offs |
| (1,145) |
| (1,473) | |||
Balance, end of period | $ | 32,342 | $ | 26,788 | |||
Selected loan quality ratios: |
| |
| | |||
Net charge-offs (recoveries) to average loan segment: |
| |
| | |||
SBA loans held for investment |
| 1.83 | % |
| 0.85 | % | |
Commercial loans |
| (0.02) |
| 0.03 | |||
Residential mortgage loans |
| 0.08 |
| 0.02 | |||
Consumer loans |
| 0.03 |
| 0.41 | |||
Residential construction loans | — | 0.26 | |||||
Total loans | 0.05 | 0.07 | |||||
Allowance to total loans |
| 1.27 |
| 1.18 | |||
Allowance to nonaccrual loans |
| 108.40 | % |
| 204.77 | % | |
The following table sets forth, for each of the major lending categories, the amount of reserve allocated to nonaccrual loans of each category and the amount of the allowance for credit losses allocated to each category and the percentage of total loans represented by such category as of December 31, 2025 and 2024. The allocated allowance is the total of identified specific and general reserves by loan category. The allocation is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any segment of the portfolio.
2025 | 2024 | ||||||||||||||||
| | % of | | | % of | | | % of | | | % of | | |||||
reserve to | loans | reserve to | loans | ||||||||||||||
Reserve | nonaccrual | to total | Reserve | nonaccrual | to total | ||||||||||||
(In thousands, except percentages) | amount | loans | loans | amount | loans | loans | |||||||||||
Balance applicable to: |
| |
| |
|
| |
| |
| |
|
| |
| ||
SBA loans | $ | 785 |
| 44.8 | % |
| 1.7 | % | $ | 1,535 |
| 39.9 | % |
| 2.2 | % | |
Commercial loans |
| 22,148 |
| 119.9 |
| 65.5 |
| 17,361 |
| 583.8 |
| 62.5 | |||||
Residential mortgage loans |
| 7,695 |
| 94.2 |
| 26.6 |
| 6,254 |
| 109.5 |
| 27.9 | |||||
Consumer loans |
| 995 |
| 78.5 |
| 3.3 |
| 775 |
| NM |
| 3.4 | |||||
Residential construction loans |
| 719 |
| 420.5 |
| 2.9 |
| 863 |
| 157.8 |
| 4.0 | |||||
Total loans | $ | 32,342 |
| 108.4 | % |
| 100.0 | % | $ | 26,788 |
| 204.8 | % |
| 100.0 | % | |
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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, 2025, a $0.7 million commitment reserve was reported, compared to a $0.6 million reserve at December 31, 2024.
See Note 4 to the accompanying Consolidated Financial Statements for more information regarding the Allowance for Credit Losses and Reserve for Unfunded Loan Commitments.
Deposits
Deposits, which include noninterest-bearing demand deposits, interest-bearing demand deposits, savings deposits, brokered deposits and time deposits, are the primary source of the Company’s funds. The Company offers a variety of products designed to attract and retain customers, with primary focus on building and expanding relationships. The Company continues to focus on establishing a comprehensive relationship with business borrowers, seeking deposits, as well as, lending relationships.
The following table shows year-end deposits and the concentration of each category of deposits for the past two years:
2025 | 2024 | ||||||||||
(In thousands, except percentages) | | Amount | | % of total | | Amount | | % of total | | ||
Ending balance: |
| |
| |
| |
| |
| ||
Noninterest-bearing demand deposits | $ | 465,596 |
| 20.0 | % | $ | 440,803 |
| 21.0 | % | |
Interest-bearing demand deposits |
| 369,131 |
| 15.9 |
| 321,780 |
| 15.3 | |||
Savings deposits |
| 535,044 |
| 23.0 |
| 491,175 |
| 23.4 | |||
Brokered deposits | 274,203 | 11.8 | 217,931 | 10.4 | |||||||
Time deposits |
| 680,087 |
| 29.3 |
| 628,624 |
| 29.9 | |||
Total deposits | $ | 2,324,061 |
| 100.0 | % | $ | 2,100,313 |
| 100.0 | % | |
The following table details the maturity distribution of time deposits, inclusive of brokered time deposits, as of December 31, 2025 and 2024.
| | More than | | More than | | | |||||||||
|
| three |
| six months |
| ||||||||||
| Three |
| months |
| through |
| More than | ||||||||
months or |
| through six |
| twelve | twelve | ||||||||||
(In thousands) | less |
| months |
| months | months | Total | ||||||||
At December 31, 2025: |
| |
| |
| |
| |
| | |||||
Less than $250,000 | $ | 189,659 | $ | 160,457 | $ | 243,879 | $ | 37,593 | $ | 631,588 | |||||
$250,000 or more |
| 88,319 | 63,174 | 96,871 | 2,929 | 251,293 | |||||||||
Total by maturity | $ | 277,978 | $ | 223,631 | $ | 340,750 | $ | 40,522 | $ | 882,881 | |||||
At December 31, 2024: |
| |
| |
| |
| |
| | |||||
Less than $250,000 | $ | 197,392 | $ | 186,828 | $ | 150,942 | $ | 41,260 | $ | 576,422 | |||||
$250,000 or more |
| 85,296 | 100,173 | 47,951 | 5,261 | 238,681 | |||||||||
Total by maturity | $ | 282,688 | $ | 287,001 | $ | 198,893 | $ | 46,521 | $ | 815,103 | |||||
Total deposits increased $223.7 million to $2.3 billion at December 31, 2025. This increase in deposits was due to increases of $56.3 million in brokered deposits, $51.4 million in time deposits, $47.3 million in interest-bearing demand deposits, $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, 2024 reflects a 25.8 percent increase in brokered deposits, 14.7 percent increase in interest-bearing demand deposits, 8.9 percent increase 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
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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 following table shows average deposits and the concentration of each category of deposits for the past two years:
For the years ended December 31, | |||||||||||
2025 | 2024 | ||||||||||
(In thousands, except percentages) | | Amount | | % of total | | Amount | | % of total | | ||
Average balance: |
| |
| |
| |
| | | ||
Noninterest-bearing demand deposits | $ | 446,081 |
| 20.2 | % | $ | 411,148 |
| 20.4 | % | |
Interest-bearing demand deposits |
| 362,811 |
| 16.4 |
| 326,943 |
| 16.2 | |||
Savings deposits |
| 509,892 |
| 23.1 |
| 512,405 |
| 25.5 | |||
Brokered deposits | 220,910 | 10.0 | 227,070 | 11.3 | |||||||
Time deposits |
| 668,405 |
| 30.3 |
| 535,297 |
| 26.6 | |||
Total deposits | $ | 2,208,099 |
| 100.0 | % | $ | 2,012,863 |
| 100.0 | % | |
As of December 31, 2025, the Company's municipal deposits consisted of $415.2 million from New Jersey and $29.7 million from Pennsylvania which are collateralized by Municipal Letter of Credits (“MULOCs”) issued by the FHLB.
The following table represents uninsured/uncollateralized deposits broken out between consumer, business and municipal customers (excluding brokered deposits) as of December 31, 2025:
(In thousands) | Consumer | Business | Municipal | Brokered | ||||||||
At December 31, 2025: | ||||||||||||
Total deposits | $ | 969,747 | $ | 635,249 | $ | 444,862 | $ | 274,203 | ||||
Uninsured/uncollateralized deposits | 255,580 | 247,945 | — | — | ||||||||
As of December 31, 2025 and December 31, 2024, uninsured and uncollateralized deposits amounted to $503.5 million and $412.2 million respectively. This represented 21.7 percent of total deposits as of December, 31 2025 and 19.6 percent as of December 31, 2024.
The following table represents uninsured/uncollateralized time deposits by maturity date as of December 31, 2025:
| | More than | | More than | | | |||||||||
|
| three |
| six months |
| ||||||||||
| Three |
| months |
| through |
| More than | ||||||||
months or |
| through six |
| twelve | twelve | ||||||||||
(In thousands) | less |
| months |
| months | months | Total | ||||||||
At December 31, 2025: |
| |
| |
| |
| |
| | |||||
Uninsured/uncollateralized time deposits | $ | 96,862 | $ | 35,170 | $ | 60,794 | $ | 3,373 | $ | 196,199 | |||||
For additional information on deposits, see Note 6 to the Consolidated Financial Statements.
Borrowed Funds and Subordinated Debentures
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, commercial real estate loans and debt securities collateralize these borrowings.
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Borrowed funds and subordinated debentures totaled $266.1 million and $230.8 million at December 31, 2025 and December 31, 2024, respectively, and are broken down in the following table:
(In thousands) | | December 31, 2025 | | December 31, 2024 | ||
FHLB borrowings: | ||||||
Non-overnight, fixed rate advances | $ | 15,774 | $ | 20,504 | ||
Overnight advances |
| 170,000 |
| 140,000 | ||
Puttable advances |
| 70,000 |
| 60,000 | ||
Subordinated debentures |
| 10,310 |
| 10,310 | ||
Total borrowed funds and subordinated debentures | $ | 266,084 | $ | 230,814 | ||
In December 2025, the FHLB issued a $240.0 million municipal deposits letter of credit in the name of Unity Bank naming the New Jersey Department of Banking and Insurance as beneficiary, to secure municipal deposits as required under New Jersey law, compared to a letter of credit with a balance of $180.0 million as of December 31, 2024. In December 2025, FHLB issued an additional $33.0 million municipal deposits letter of credit in the name of Unity Bank naming certain townships in Pennsylvania as beneficiary, to secure municipal deposits as required under Pennsylvania law, compared to a letter of credit with a balance of $28.0 million as of December 31, 2024.
At December 31, 2025, the Company had $247.0 million of additional credit available at the FHLB and the Company had $232.2 million of additional credit available at the 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.
For the year ending December 31, 2025, average FHLB borrowings were $103.7 million with a weighted average cost of 3.44%. The maximum borrowing during the year was $387.4 million.
Subordinated Debentures
On July 24, 2006, Unity (NJ) Statutory Trust II, a statutory business trust and wholly-owned subsidiary of Unity Bancorp, Inc., issued $10.0 million of floating rate capital trust pass through securities to investors due on July 24, 2036. The subordinated debentures are redeemable in whole or part. For 2024 and 2025, the floating interest rate on the subordinated debentures is the three-month CME term Secured Overnight Financing Rate (“SOFR”) plus 262 basis points and reprices quarterly. The floating interest rate was 5.537% at December 31, 2025 and 6.189% at December 31, 2024.
Market Risk
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 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. ALCO reviews the maturities and repricing of loans, investments, deposits and borrowings, cash flow needs, current market conditions and interest rate levels.
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The following table presents the Company’s EVE and NII sensitivity exposure related to an instantaneous and sustained parallel shift in market interest rate of 100, 200 and 300 bps, which were all in compliance with Board approved tolerances at December 31, 2025 and December 31, 2024:
| Estimated (Decrease)/Increase in EVE | | Estimated 12 mo. (Decrease)/Increase in NII | | ||||||||||||||
(In thousands, except percentages) | EVE | Amount | Percent | NII | Amount | Percent |
| |||||||||||
December 31, 2025 | ||||||||||||||||||
+300 | $ | 340,214 | $ | (64,815) |
| (16.00) | % | $ | 117,482 | $ | (8,261) |
| (6.57) | % | ||||
+200 | 363,539 | (41,490) |
| (10.24) | 120,592 | (5,151) |
| (4.10) | ||||||||||
+100 |
| 386,622 |
| (18,407) |
| (4.54) |
| 123,439 |
| (2,304) |
| (1.83) | ||||||
0 | 405,029 | — | — | 125,743 | — | — | ||||||||||||
-100 |
| 408,925 |
| 3,896 |
| 0.96 |
| 125,933 |
| 190 |
| 0.15 | ||||||
-200 |
| 411,585 |
| 6,556 |
| 1.62 |
| 125,257 |
| (486) |
| (0.39) | ||||||
-300 |
| 417,084 |
| 12,055 |
| 2.98 |
| 124,600 |
| (1,143) |
| (0.92) | ||||||
December 31, 2024 | ||||||||||||||||||
+300 | $ | 275,851 | $ | (68,710) |
| (19.94) | % | $ | 104,992 | $ | (7,328) |
| (6.52) | % | ||||
+200 | 299,233 | (45,328) |
| (13.16) | 107,470 | (4,850) |
| (4.32) | ||||||||||
+100 |
| 322,622 |
| (21,939) |
| (6.37) |
| 109,726 |
| (2,594) |
| (2.31) | ||||||
0 |
| 344,561 | — | — | 112,320 | — | — | |||||||||||
-100 |
| 344,853 |
| 292 |
| 0.08 |
| 113,029 |
| 709 |
| 0.63 | ||||||
-200 | 351,231 |
| 6,670 |
| 1.94 |
| 112,133 |
| (187) |
| (0.17) | |||||||
-300 |
| 340,076 |
| (4,485) |
| (1.30) |
| 111,365 |
| (955) |
| (0.85) | ||||||
Liquidity
Liquidity measures the ability to satisfy current and future cash flow needs as they become due. A bank’s liquidity reflects its ability to meet loan demand, to accommodate possible outflows in deposits and borrowings and to take advantage of interest rate opportunities in the marketplace. The Company’s liquidity is monitored by Management and the Board of Directors which reviews historical funding requirements, the current liquidity position, sources and stability of funding, marketability of assets, options for attracting additional funds and anticipated future funding needs, including the level of unfunded commitments. The goal is to maintain sufficient asset-based liquidity to cover potential funding requirements in order to minimize dependence on volatile and potentially unstable funding markets.
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, 2025, the balance of cash and cash equivalents was $216.5 million, an increase of $36.1 million from December 31, 2024. A discussion of the cash provided by and used in operating, investing and financing activities follows.
Operating activities provided $44.9 million and $47.9 million in net cash for the years ended December 31, 2025 and 2024, respectively. 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.
Investing activities used $256.8 million and $92.8 million in net cash for the years ended December 31, 2025 and 2024, respectively. Cash was primarily used to originate loans and purchase securities, partially offset by cash inflows from investment securities and loans.
| ● | Securities. The Company’s available for sale investment portfolio amounted to $70.9 million and $93.9 million at December 31, 2025 and December 31, 2024, respectively. |
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| ● | Loans. The loans held for sale portfolio amounted to $9.5 million and $12.2 million at December 31, 2025 and December 31, 2024, respectively. Sales of these loans provide an additional source of liquidity for the Company. |
| ● | Outstanding Commitments and Lines of Credit. The Company was committed to advance approximately $508.5 million to its borrowers as of December 31, 2025, compared to $322.3 million at December 31, 2024. At December 31, 2025, $270.3 million of these commitments expire within one year, compared to $167.1 million at December 31, 2024. The Company had $5.9 million and $5.5 million in standby letters of credit at December 31, 2025 and December 31, 2024, respectively, which are included in the commitments amount noted above. The estimated fair value of these guarantees is not significant. The Company believes it has the necessary liquidity to honor all commitments. Many of these commitments will expire and never be funded. |
Financing activities provided $248.0 million and $30.5 million in net cash for the years ended December 31, 2025 and 2024, respectively, primarily due to an increase in the Company’s deposits and borrowed funds.
| ● | Deposits. As of December 31, 2025, deposits included $444.9 million of Government deposits, as compared to $400.6 million at year end 2024. 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 $8.2 million as of December 31, 2025. |
| ● | Borrowed Funds. Total FHLB borrowings amounted to $255.8 million and $220.5 million as of December 31, 2025 and 2024, respectively. As a member of the Federal Home Loan Bank of New York, the Company can borrow additional funds based on the market value of collateral pledged. At December 31, 2025, pledging provided an additional $247.0 million in borrowing potential from the FHLB, $232.2 million from the FRB and $20.0 million from other sources. In addition, the Company can pledge additional collateral in the form of 1 to 4 family residential mortgages, consumer loans, commercial loans or investment securities to increase these lines with the FHLB and FRB. As of December 31, 2025, total available funding plus cash on hand represented 142.1% of uninsured or uncollateralized deposits. |
Off-Balance-Sheet Arrangements and Contractual Obligations
The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These transactions may involve elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheet. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on Management’s credit evaluation of the borrower. As of December 31, 2025, the Bank had $363.5 million in unused lines of credit and $139.1 million in outstanding commitments to borrowers. As of December 31, 2024, the Bank had $239.3 million in unused lines of credit and $77.5 million in outstanding commitments to borrowers.
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The following table shows the amounts and expected maturities or payment periods of off-balance-sheet arrangements and contractual obligations as of December 31, 2025:
| One year | | One to | | Three to | | Over five | | |||||||
(In thousands) | or less | three years | five years | years | Total | ||||||||||
Off-balance sheet arrangements: | |||||||||||||||
Standby letters of credit | $ | 2,407 | $ | 1,088 | $ | 117 | $ | 2,284 | $ | 5,896 | |||||
Contractual obligations: |
| |
| |
| |
| |
| | |||||
Time deposits |
| 842,359 |
| 39,444 |
| 971 |
| 107 |
| 882,881 | |||||
Borrowed funds and subordinated debentures |
| 175,774 |
| 30,000 |
| 50,000 |
| 10,310 |
| 266,084 | |||||
Operating Leases | 807 | 1,292 | 1,051 | 2,481 | 5,631 | ||||||||||
Total off-balance-sheet arrangements and contractual obligations | $ | 1,021,347 | $ | 71,824 | $ | 52,139 | $ | 15,182 | $ | 1,160,492 | |||||
Standby letters of credit represent guarantees of payment issued by the Bank on behalf of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with a third party.
Time deposits have stated maturity dates. For additional information on time deposits, see Note 6 to the Consolidated Financial Statements.
Borrowed funds and subordinated debentures include fixed rate borrowings from the Federal Home Loan Bank and subordinated debentures. The borrowings have defined terms and under certain circumstances are callable at the option of the lender. For additional information on borrowed funds and subordinated debentures, see Note 7 to the Consolidated Financial Statements.
Capital Adequacy
A significant measure of the strength of a financial institution is its capital base. Shareholders’ equity increased $50.0 million to $345.6 million at December 31, 2025, compared to $295.6 million at December 31, 2024, primarily due to net income of $58.0 million. Other increases were due to $1.0 million in other comprehensive income and $1.7 million from the issuance of common stock under employee benefit plans, net of tax. These increases were partially offset by $5.0 million in treasury stock purchased at cost and $5.6 million in dividends paid on common stock.
For additional information on shareholders’ equity, see Note 10 to the Consolidated Financial Statements.
Consistent with our goal to operate as a sound and profitable financial organization, Unity Bancorp and Unity Bank actively seek to maintain our well capitalized status in accordance with regulatory standards. As of December 31, 2025, Unity Bank exceeded all capital requirements of the federal banking regulators and was considered well capitalized.
For additional information on regulatory capital, see Note 13 to the Consolidated Financial Statements.
Forward-Looking Statements
This report contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader in understanding anticipated future financial performance. These statements involve certain risks, uncertainties, estimates and assumptions by Management.
Factors that may cause actual results to differ from those results expressed or implied, include, but are not limited to those listed under “Item 1A - Risk Factors” in this Annual Report; the overall economy and the interest rate environment; the ability of customers to repay their obligations; the adequacy of the allowance for credit losses; competition; significant changes in tax, accounting or regulatory practices and requirements; and technological changes. Although Management
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has taken certain steps to mitigate the negative effect of the aforementioned items, significant unfavorable changes could severely impact the assumptions used and have an adverse effect on future profitability.
Critical Accounting Policies and Estimates
New Authoritative Accounting Guidance
See Note 1 of the Consolidated Financial Statements for a description of recent accounting pronouncements, including the dates of adoption and the anticipated effect on our results of operations and financial condition.
Allowance for Credit Losses on Loans and Valuation Allowance on AFS Debt Securities
Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” amends the accounting guidance on the impairment of financial instruments. The Financial Accounting Standards Board (“FASB”) issued an amendment to replace the incurred loss impairment methodology under prior accounting guidance with a new current expected credit loss (“CECL”) model. Under the guidance, the Company is required to measure expected credit losses by utilizing forward-looking information to assess its allowance for credit losses. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The measurement of expected credit losses under CECL methodology is applicable to financial assets measured at amortized cost, including loans and held to maturity debt securities. CECL also applies to certain off-balance sheet exposures.
For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and a valuation allowance is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through a valuation allowance is recognized in other comprehensive income, net of tax.
The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies for available for sale and held to maturity debt securities. These securities are either explicitly or implicitly guaranteed by the U.S. Government, are highly rated by major agencies and have a long history of no credit losses.
For additional information on the valuation allowance on AFS debt securities, see Note 2 to the Consolidated Financial Statements. For additional information on the allowance for credit losses, see Note 4 to the Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk:
For information regarding Quantitative and Qualitative Disclosures about Market Risk, see Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk."
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Item 8. Financial Statements and Supplementary Data:
Consolidated Balance Sheets
(In thousands) | | December 31, 2025 | | December 31, 2024 | ||
ASSETS | ||||||
Cash and due from banks | $ | | $ | | ||
Interest-bearing deposits |
| |
| | ||
Cash and cash equivalents |
| |
| | ||
Securities: | ||||||
Debt securities available for sale (net of valuation allowance of $ |
| |
| | ||
Debt securities held to maturity |
| |
| | ||
Equity securities with readily determinable fair values |
| |
| | ||
Total securities |
| |
| | ||
Loans: |
| |
| | ||
Loans held for sale |
| |
| | ||
SBA loans held for investment | | | ||||
Commercial loans |
| |
| | ||
Commercial construction loans | | | ||||
Residential mortgage loans |
| |
| | ||
Consumer loans |
| |
| | ||
Residential construction loans | | | ||||
Total loans |
| |
| | ||
Allowance for credit losses |
| ( |
| ( | ||
Net loans |
| |
| | ||
Premises and equipment, net |
| |
| | ||
Bank owned life insurance ("BOLI") |
| |
| | ||
Deferred tax assets |
| |
| | ||
Federal Home Loan Bank ("FHLB") stock |
| |
| | ||
Accrued interest receivable |
| |
| | ||
Goodwill |
| |
| | ||
Other real estate owned ("OREO") | | — | ||||
Prepaid expenses and other assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| |
| | ||
Liabilities: |
| |
| | ||
Deposits: |
| |
| | ||
Noninterest-bearing demand | $ | | $ | | ||
Interest-bearing demand |
| |
| | ||
Savings |
| |
| | ||
Brokered deposits | | | ||||
Time deposits |
| |
| | ||
Total deposits |
| |
| | ||
Borrowed funds |
| |
| | ||
Subordinated debentures |
| |
| | ||
Accrued interest payable |
| |
| | ||
Accrued expenses and other liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Shareholders’ equity: |
| |
| | ||
Preferred stock, | ||||||
Common stock, |
| |
| | ||
Retained earnings |
| |
| | ||
Treasury stock, at cost ( | ( | ( | ||||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total shareholders’ equity |
| |
| | ||
Total liabilities and shareholders’ equity | $ | | $ | | ||
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
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Consolidated Statements of Income
For the years ended December 31, | ||||||
(In thousands, except per share amounts) | 2025 | | 2024 | |||
INTEREST INCOME | |
| | |||
Interest-bearing deposits | $ | | $ | | ||
FHLB stock |
| |
| | ||
Securities: |
|
| | |||
Taxable |
| |
| | ||
Tax-exempt |
| |
| | ||
Total securities |
| |
| | ||
Loans: |
| |
| | ||
SBA loans |
| |
| | ||
Commercial loans |
| |
| | ||
Commercial construction loans | | | ||||
Residential mortgage loans |
| |
| | ||
Consumer loans |
| |
| | ||
Residential construction loans | | | ||||
Total loans |
| |
| | ||
Total interest income |
| |
| | ||
INTEREST EXPENSE |
| |
| | ||
Interest-bearing demand deposits |
| |
| | ||
Savings deposits |
| |
| | ||
Brokered deposits |
| |
| | ||
Time deposits |
| |
| | ||
Borrowed funds and subordinated debentures |
| |
| | ||
Total interest expense |
| |
| | ||
Net interest income |
| |
| | ||
Provision for credit losses, loans | | | ||||
Provision for credit losses, off-balance sheet | | | ||||
(Release) provision for credit losses, securities |
| ( |
| | ||
Net interest income after provision for credit losses |
| |
| | ||
NONINTEREST INCOME |
| |
| | ||
Branch fee income |
| |
| | ||
Service and loan fee income |
| |
| | ||
Gain on sale of SBA loans held for sale, net |
| |
| | ||
Gain on sale of mortgage loans, net |
| |
| | ||
BOLI income |
| |
| | ||
Net securities gains |
| |
| | ||
Other income |
| |
| | ||
Total noninterest income |
| |
| | ||
NONINTEREST EXPENSE |
| |
| | ||
Compensation and benefits |
| |
| | ||
Processing and communications | | | ||||
Occupancy | | | ||||
Furniture and equipment |
| |
| | ||
Professional services |
| |
| | ||
Advertising |
| |
| | ||
Loan related expenses | | | ||||
Deposit insurance | | | ||||
Director fees | | | ||||
Other expenses |
| |
| | ||
Total noninterest expense |
| |
| | ||
Income before provision for income taxes |
| |
| | ||
Provision for income taxes |
| |
| | ||
Net income | $ | | $ | | ||
Net income per common share - Basic | $ | | $ | | ||
Net income per common share - Diluted | $ | | $ | | ||
Weighted average common shares outstanding – Basic |
| |
| | ||
Weighted average common shares outstanding – Diluted |
| |
| | ||
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
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Consolidated Statements of Comprehensive Income
For the year ended December 31, 2025 | |||||||||
| | Income tax | | ||||||
Before tax | expense | Net of tax | |||||||
(In thousands) | amount | (benefit) | amount | ||||||
Net income | $ | | $ | | $ | | |||
Other comprehensive income | |||||||||
Debt securities available for sale: |
| ||||||||
Unrealized holding gains on securities arising during the period |
| | | | |||||
Less: reclassification for losses on securities included in net income |
| ( | ( | ( | |||||
Total unrealized gains on securities available for sale |
| | | | |||||
Net unrealized losses from cash flow hedges: |
| |
| |
| | |||
Unrealized holding losses on cash flow hedges arising during the period |
| ( | ( | ( | |||||
Less: reclassification adjustment for losses on cash flow hedges included in net income | ( | ( | ( | ||||||
Total unrealized losses on cash flow hedges |
| ( |
| ( |
| ( | |||
Total other comprehensive income |
| |
| |
| | |||
Total comprehensive income | $ | | $ | | $ | | |||
For the year ended December 31, 2024 | |||||||||
| Income tax | | |||||||
Before tax | expense | Net of tax | |||||||
(In thousands) | amount | (benefit) | amount | ||||||
Net income | $ | | $ | | $ | | |||
Other comprehensive income | |||||||||
Debt securities available for sale: |
| ||||||||
Unrealized holding gains on securities arising during the period |
| | | | |||||
Less: reclassification adjustment for losses on securities included in net income |
| — | — | — | |||||
Total unrealized gains on securities available for sale |
| | | | |||||
Net unrealized losses from cash flow hedges: | |
| |
| | ||||
Unrealized holding losses on cash flow hedges arising during the period |
| ( | ( | ( | |||||
Less: reclassification adjustment for losses on cash flow hedges included in net income | ( | ( | ( | ||||||
Total unrealized losses on cash flow hedges |
| ( |
| ( |
| ( | |||
Total other comprehensive income |
| |
| |
| | |||
Total comprehensive income | $ | | $ | | $ | | |||
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
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Consolidated Statements of Changes in Shareholders’ Equity
| | | Accumulated | | |||||||||||||
other | Total | ||||||||||||||||
Common stock | Retained | comprehensive | Treasury | Shareholders’ | |||||||||||||
(In thousands, except per share amounts) | | Shares | | Amount | | earnings | | (loss) income | stock | | equity | ||||||
Balance, December 31, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Net income |
| — | — | | — | — |
| | |||||||||
Other comprehensive income, net of tax |
| — | — | — | | — |
| | |||||||||
Dividends on common stock ($ |
| | | ( | — | — |
| ( | |||||||||
Share-based compensation (1) | | | — | — | — |
| | ||||||||||
Treasury stock purchased, at cost |
| ( | — | — | — | ( | ( | ||||||||||
Balance, December 31, 2024 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Net income |
| — | — | | — | — |
| | |||||||||
Other comprehensive income, net of tax |
| — | — | — | | — |
| | |||||||||
Dividends on common stock ($ |
| | | ( | — | — |
| ( | |||||||||
Share-based compensation (1) |
| | | — | — | — |
| | |||||||||
Treasury stock purchased, at cost | ( | — | — | — | ( | ( | |||||||||||
Treasury stock retirement | — | — | ( | — | | — | |||||||||||
Balance, December 31, 2025 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
| (1) | Includes the issuance of common stock under employee benefit plans, which includes nonqualified stock options and restricted stock expense related entries, employee option exercises and the tax benefit of options exercised. |
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
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Consolidated Statements of Cash Flows
For the twelve months ended December 31, | |||||||
(In thousands) | 2025 | | 2024 | | |||
OPERATING ACTIVITIES: | |
| |
| |||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
| |||||
Provision for credit losses, loans |
| |
| | |||
(Release) Provision for credit losses, AFS securities | ( | | |||||
Net accretion of purchase premiums and discounts on securities |
| ( |
| ( | |||
Depreciation and amortization, net |
| |
| | |||
Deferred income tax benefit |
| ( |
| ( | |||
Net securities gains |
| ( |
| ( | |||
Stock compensation expense |
| |
| | |||
Gain on sale of mortgage loans, net |
| ( |
| ( | |||
Gain on sale of SBA loans held for sale, net |
| ( |
| ( | |||
BOLI income |
| ( |
| ( | |||
Net change in other assets and liabilities |
| ( |
| | |||
Net cash provided by operating activities |
| |
| | |||
INVESTING ACTIVITIES: |
| |
| | |||
Purchases of securities held to maturity |
| — |
| ( | |||
Purchase of equity securities |
| ( |
| ( | |||
Purchases of securities available for sale |
| ( |
| ( | |||
(Purchases) redemption from sale of FHLB stock, at cost |
| ( |
| | |||
Maturities and principal payments on debt securities held to maturity |
| |
| | |||
Maturities and principal payments on debt securities available for sale |
| |
| | |||
Proceeds from sales of securities available for sale |
| |
| — | |||
Proceeds from sales of equity securities |
| |
| | |||
Net increase in loans |
| ( |
| ( | |||
Purchases of premises and equipment, net |
| ( |
| ( | |||
Net cash used in investing activities |
| ( |
| ( | |||
FINANCING ACTIVITIES: |
| |
| | |||
Net increase in deposits |
| |
| | |||
Proceeds (repayments) of short-term borrowings, net |
| |
| ( | |||
Proceeds from long-term borrowings, net | | | |||||
Proceeds from exercise of stock options, net of withheld taxes |
| ( |
| | |||
Cash dividends on common stock |
| ( |
| ( | |||
Purchase of treasury stock | ( | ( | |||||
Net cash provided by financing activities |
| |
| | |||
Increase (decrease) in cash and cash equivalents |
| |
| ( | |||
Cash and cash equivalents, beginning of period |
| |
| | |||
Cash and cash equivalents, end of period | $ | | $ | | |||
SUPPLEMENTAL DISCLOSURES |
| |
| | |||
Cash: |
| |
| | |||
Interest paid | $ | | $ | | |||
Income taxes paid |
| |
| | |||
Noncash investing activities: |
| |
| | |||
Establishment of lease liability and right-of-use asset, net of terminations |
| |
| — | |||
Capitalization of servicing rights |
| |
| | |||
Transfer of loans to OREO |
| |
| — | |||
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
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Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Overview
The accompanying Consolidated Financial Statements include the accounts of Unity Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiary, Unity Bank (the “Bank” or when consolidated with the Parent Company, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.
Unity Bancorp, Inc. 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, the Bank, is chartered by the New Jersey Department of Banking and Insurance. The Bank provides a full range of commercial and retail banking services through
Unity Investment Services, Inc. is a wholly-owned subsidiary of Unity Bank and is used to hold and administer part of the Bank’s investment portfolio. Unity Investment Services, Inc. has one subsidiary, Unity Delaware Investment 2, Inc., which has three subsidiaries. Unity Strategic Investment I, Inc. and Unity Strategic Investment II, Inc. and Unity NJ REIT, Inc., which was formed in 2013 to hold real estate related loans.
The Company has a wholly-owned subsidiary: Unity (NJ) Statutory Trust II. For additional information on Unity (NJ) Statutory Trust II, see Note 7 to the Consolidated Financial Statements.
Use of Estimates in the Preparation of Financial Statements
In preparing the consolidated financial statements in conformity with U.S. GAAP, Management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Balance Sheet and Statement of Income for the periods indicated. Amounts requiring the use of significant estimates include the allowance for credit losses. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts due from banks and interest-bearing deposits.
Restrictions on Cash
In addition, the Company’s contract with its current electronic funds transfer provider requires a predetermined balance be maintained in a settlement account controlled by the provider equal to the Company’s average daily net settlement position multiplied by four days. The required balance was $
Securities
The Company classifies its securities into three categories, debt securities available for sale (“AFS”), debt securities held to maturity (“HTM”) and equity securities held at fair value ("equity securities").
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Debt securities that are classified as available for sale are stated at fair value. Unrealized gains and losses on debt securities available for sale are excluded from results of operations and are reported in other comprehensive income, a separate component of shareholders’ equity, net of taxes. Debt securities classified as available for sale include debt securities that may be sold in response to changes in interest rates, changes in prepayment risks, for asset/liability management purposes or liquidity needs. The cost of debt securities sold is determined on a specific identification basis. Gains and losses on sales of debt securities are recognized in the Consolidated Statements of Income on a trade date basis.
Debt securities are classified as held to maturity based on Management’s intent and ability to hold them to maturity. Such debt securities are stated at cost, adjusted for unamortized purchase premiums and discounts.
For debt securities, purchase discounts are accreted using the interest method over the stated terms of the securities; whereas purchase premiums are amortized through the earliest call date.
Equity securities are investments carried at fair value that may be sold in response to changing market and interest rate conditions or for other business purposes. Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk, to take advantage of market conditions that create economically attractive returns and as an additional source of earnings. Periodic net gains and losses on equity investments are recognized in the Consolidated Statements of Income as realized gains and losses carried at fair value with changes recognized in net income.
For additional information on securities, see Note 2 to the Consolidated Financial Statements.
Valuation Allowance – Debt Securities
The Company has a process in place to identify debt securities that could potentially incur credit impairment. This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues. Management evaluates debt securities for impairment at least on a quarterly basis and more frequently when economic or market concern warrants such evaluation. This evaluation considers relevant facts and circumstances in evaluating whether there is credit or interest rate-related impairment of a security.
The CECL standard requires credit losses on both HTM and AFS debt securities to be recognized through a valuation allowance instead of as a direct write-down to the amortized cost basis of the security. Management assesses its intent to sell and whether it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered impaired where Management has no intent to sell and the Company has no requirement to sell prior to recovery of its amortized cost basis, the amount of the impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings as provision expense and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security’s fair value and the present value of future expected cash flows due to factors that are not credit related is recognized in other comprehensive income. For debt securities where Management has the intent to sell, the amount of the impairment is reflected in earnings as realized losses.
The present value of expected future cash flows is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies for available for sale and held to maturity securities. These securities are either explicitly or implicitly guaranteed by the U.S. Government, are highly rated by major agencies and have a long history of no credit losses.
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The Company considers a debt security to be past due in terms of payment based on its contractual terms. A debt security may be placed on nonaccrual, with interest no longer recognized, when collectability of principal or interest is doubtful.
A security may be partially or fully charged-off against the allowance if it is determined to be uncollectible. Recoveries of previously charged-off available for sale securities are recognized when received, while recoveries on held to maturity securities are recognized when expected.
For additional information on the allowance for credit losses, see Note 4 to the Consolidated Financial Statements.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company; (ii) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (iii) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
During the normal course of business, the Company may transfer a portion of a financial asset, for example, a participation in a loan or the government guaranteed portion of a loan. In order to be eligible for sales treatment, the transfer of the portion of the loan must meet the criteria of a participating interest. If it does not meet the criteria of a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet the criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties and no loan holder has the right to pledge or exchange the entire loan.
Loans
Loans Held for Sale
Loans held for sale represent the guaranteed portion of certain SBA loans and Mortgage loans, that the Company has elected to hold for sale and are reflected at the lower of aggregate cost or market value. The Company originates loans to customers under an SBA program that historically has provided for SBA guarantees of up to 90 percent of each loan. The Company may sell the guaranteed portion of its SBA loans to a third party and retains the servicing, holding the nonguaranteed portion in its portfolio. The net amount of loan origination fees on loans sold is included in the carrying value and in the gain or loss on the sale. When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets are recognized in income. All criteria for sale accounting must be met in order for the loan sales to occur; see details under the “Transfers of Financial Assets” heading above.
Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Any impairment, if temporary, would generally be reported as a valuation allowance.
Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets. Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets.
For additional information on servicing assets, see Note 3 to the Consolidated Financial Statements.
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Loans Held for Investment
Loans held for investment are stated at the unpaid principal balance, net of unearned discounts, deferred loan origination fees and costs and net charge-offs. In accordance with the level yield method, loan origination fees, net of direct loan origination costs, are deferred and recognized over the estimated life of the related loans as an adjustment to the loan yield. Interest is credited to operations primarily based upon the principal balance outstanding.
Loans are reported as past due when either interest or principal is unpaid in the following circumstances: fixed payment loans when (i) the borrower is in arrears for two or more monthly payments; (ii) open end credit for two or more billing cycles or (iii) single payment notes if interest or principal remains unpaid for 30 days or more.
Nonaccrual loans consist of loans that are not accruing interest as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt (nonaccrual loans). When a loan is classified as nonaccrual, interest accruals are discontinued and all past due interest previously recognized as income is reversed and charged against current period earnings. Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as Management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income. Loans may be returned to an accrual status when the ability to collect is reasonably assured or when the loan is brought current as to principal and interest.
Loans are charged-off when collection is in doubt and when the Company can no longer justify maintaining the loan as an asset on the Consolidated Balance Sheet. Loans qualify for charge-off when, after thorough analysis, all possible sources of repayment are insufficient. These include: (i) potential future cash flows; (ii) value of collateral and/or (iii) strength of co-makers and guarantors. Additionally, all loans classified as a loss or that portion of the loan classified as a loss is charged-off, subject to government guarantee. All loan charge-offs are approved by Executive Management.
For additional information on loans, see Note 3 to the Consolidated Financial Statements.
Allowance for Credit Losses for Loans and Reserve for Unfunded Loan Commitments
The allowance for credit losses represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the Balance Sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by Management because of the high degree of judgment involved, the subjectivity of the assumptions used and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses.
The allowance for credit losses is reported separately as a contra-asset on the Consolidated Balance Sheet. The expected credit losses for unfunded lending commitments and unfunded loan commitments is reported on the Consolidated Balance Sheet in Accrued expenses and other liabilities.
The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company generally considers those loans for individual evaluation to be those on nonaccrual. Loans are charged off against the allowance for credit losses when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off or expected to be charged-off.
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The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include SBA, Commercial, Residential mortgage, Consumer and Residential construction. The Commercial segment is further sub-segmented into SBA 504, Commercial & industrial, Commercial real estate and Commercial construction. The Consumer segment is further bifurcated into Home equity and Consumer other. For most segments the Company calculates estimated credit losses using a weighted average remaining maturity methodology.
The Company estimates the allowance for credit losses on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, after four quarters, on a straight-line basis over the following four quarters, to the historical average economic variables. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.
Also included in the allowance for credit losses on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations and the volume and severity of past due loans and nonaccrual loans.
On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will record a provision for the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.
The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment.
There were no changes to the Company’s methodology for credit loss estimates during the year ended December 31, 2025.
For additional information on the allowance for credit losses and reserve for unfunded loan commitments, see Note 4 to the Consolidated Financial Statements.
Premises and Equipment, net
Land is carried at cost. All other fixed assets are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of buildings is not to exceed
For additional information on premises and equipment, see Note 5 to the Consolidated Financial Statements.
Bank Owned Life Insurance
The Company purchased life insurance policies on certain members of Management. Bank owned life insurance is recorded at its cash surrender value or the amount that can be realized and the appreciation and death benefits from Bank owned life insurance are not subject to income tax.
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Federal Home Loan Bank (“FHLB”) Stock
Federal law requires a member institution of the Federal Home Loan Bank system to hold stock of its district FHLB according to a predetermined formula. The stock is carried at cost. Management reviews the stock for impairment based on the ultimate recoverability of the cost basis in the stock. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. Management considers such criteria as the significance of the decline in net assets, if any, of the FHLB, the length of time this situation has persisted, commitments by the FHLB to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLB and the liquidity position of the FHLB.
Accrued Interest Receivable
Accrued interest receivable consists of amounts earned on investments and loans. The Company recognizes accrued interest receivable as it is earned. The Company is using the
Other Real Estate Owned
Other real estate owned (“OREO”) is recorded at the fair value, less estimated costs to sell at the date of acquisition, with a charge to the allowance for credit losses for any excess of the loan carrying value over such amount. Subsequently, OREO is carried at the lower of cost or fair value, as determined by current appraisals. Certain costs that increase the value or extend the useful life in preparing properties for sale are capitalized to the extent that the appraisal amount exceeds the carrying value and expenses of holding foreclosed properties are charged to operations as incurred.
Goodwill
The Company accounts for goodwill and other intangible assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 350, “Intangibles – Goodwill and Other,” which allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. Based on a qualitative assessment, Management determined that the Company’s recorded goodwill totaling $
Reclassification
Certain reclassifications have been made in the Consolidated Financial Statements to conform to the current year presentation. Such reclassifications had no impact on net income or stockholders’ equity as previously reported.
Appraisals
All appraisals must be performed in accordance with the Uniform Standards of Professional Appraisal Practice (“USPAP”). Appraisals are certified to the Company and performed by appraisers on the Company’s approved list of appraisers. Evaluations are completed by a person independent of Company Management. The content of the appraisal depends on the complexity and location of the property.
Derivative Instruments and Hedging Activities
The Company utilizes derivative instruments in the form of interest rate swaps to hedge its exposure to interest rate risk in conjunction with its overall asset and liability risk management process. In accordance with accounting requirements, the Company formally designates all of its hedging relationships as either fair value hedges or cash flow hedges. The Company’s derivative instruments currently consist of cash flow hedges.
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The Company recognizes all derivative instruments at fair value in either Prepaid expense and other assets or Accrued expenses and other liabilities on the Consolidated Balance Sheet and the related cash flows in the Operating Activities section of the Consolidated Statement of Cash Flows.
For derivatives designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows), the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings.
Those derivative financial instruments that do not meet the hedging criteria would be classified as undesignated derivatives and would be recorded at fair value with changes in fair value recorded in income.
The Company discontinues hedge accounting when (a) it determines that a derivative is no longer effective in offsetting changes in cash flows of a hedged item; (b) the derivative expires or is sold, terminated or exercised; (c) probability exists that the forecasted transaction will no longer occur or (d) Management determines that designating the derivative as a hedging instrument is no longer appropriate. In all cases in which hedge accounting is discontinued and a derivative remains outstanding, the Company will carry the derivative at fair value in the Consolidated Financial Statements, recognizing changes in fair value in current period income in the Consolidated Statement of Income.
For additional information on derivative instruments and hedging activities, see Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, Management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
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.
Interest and penalties associated with unrecognized tax benefits are recognized in income tax expense on the Consolidated Statements of Income.
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For additional information on income taxes, see Note 11 to the Consolidated Financial Statements.
Net Income Per Share
Basic net income per common share is calculated as net income available to common shareholders divided by the weighted average common shares outstanding during the reporting period.
Diluted net income per common share is computed similarly to that of basic net income per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, principally stock options, were issued during the reporting period utilizing the treasury stock method; however, when a net loss rather than net income is recognized, diluted earnings per share equals basic earnings per share.
For additional information on net income per share, see Note 12 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation,” which requires recognition of compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award. Compensation expense is equal to the fair value of the award, net of estimated forfeitures, and is recognized over the vesting period of such awards.
For additional information on the Company’s stock-based compensation, see Note 14 to the Consolidated Financial Statements.
Fair Value
The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which provides a framework for measuring fair value under generally accepted accounting principles.
For additional information on the fair value of the Company’s financial instruments, see Note 15 to the Consolidated Financial Statements.
Other Comprehensive Income (Loss)
Other comprehensive income (loss) consists of the change in unrealized gains (losses) on securities available for sale and derivative related items that were reported as a component of shareholders’ equity, net of tax.
For additional information on other comprehensive income (loss), see Note 9 to the Consolidated Financial Statements.
Dividend Restrictions
Banking regulations require maintaining certain capital levels that may limit the dividends paid by the Bank to the holding company or by the holding company to the shareholders.
Operating Segments
While Management, whom includes the Chief Executive Officer and acts as the Chief Operating Decision Maker (“CODM”), monitors the revenue streams of its various products and services, operating results and financial performance are evaluated on a company-wide basis. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM uses net income reporting in the Company’s Consolidated Statements of Income to make operating and strategic decisions. Accordingly, there is only
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Revenue Recognition
FASB ASC 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as well as revenue related to mortgage servicing activities, as these activities are subject to other U.S. GAAP discussed elsewhere within the Company’s disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606, which are presented in its income statements as components of non-interest income are as follows:
| ● | Branch fee income - these represent general service fees for monthly account maintenance and activity or transaction based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payments for such performance obligations are generally received at the time the performance obligations are satisfied. |
| ● | Other non-interest income primarily includes items such as loan-related fees, investment gains/losses, bank owned life insurance income, dividends on FHLB and FRB stock and other general operating income, none of which are subject to the requirements of ASC 606. |
Recent Accounting Pronouncements
Accounting Standard Update (“ASU”) | Required Adoption Date | Brief Description | Effect on the Company’s Financial Statements |
ASU 2024-03, Income Statement – Reporting comprehensive income – Expense Disaggregation Disclosures (Subtopic 220-40) | Fiscal years beginning after December 15, 2026 | Improve transparency of specific expense categories, which is generally not presented in the financial statements today. | |
ASU 2025-08, Financial Instruments – Credit Losses (Topic 326): Purchased Loans | Fiscal years beginning after December 15, 2026 | Expands the “gross-up” method to more types of purchased loans and reduce day-1 credit loss expense volatility on purchased credit-deteriorated (“PCD”) assets. | No significant impact |
ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements | Fiscal years beginning after December 15, 2026 | To more closely align hedge accounting with the economics of an entity’s risk management activities. | No significant impact |
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2. Securities
This table provides the major components of debt securities AFS, HTM and equity securities at amortized cost and estimated fair value at December 31, 2025 and December 31, 2024:
December 31, 2025 | ||||||||||||
| | Gross | | Gross | | |||||||
Amortized | unrealized | unrealized | Estimated | |||||||||
(In thousands) | cost | gains | losses | fair value | ||||||||
Available for sale: |
| |
| |
| |
| | ||||
U.S. Government sponsored entities | $ | | $ | — | $ | ( | $ | | ||||
State and political subdivisions |
| |
| — |
| ( |
| | ||||
Residential mortgage-backed securities |
| |
| |
| ( |
| | ||||
Asset backed securities | | | ( | | ||||||||
Corporate and other securities |
| |
| |
| ( |
| | ||||
Total debt securities available for sale | $ | | $ | | $ | ( | $ | | ||||
Held to maturity: |
|
|
|
|
|
|
|
| ||||
U.S. Government sponsored entities | $ | | $ | — | $ | ( | $ | | ||||
State and political subdivisions |
| |
| |
| — |
| | ||||
Residential mortgage-backed securities |
| |
| — |
| ( |
| | ||||
Total debt securities held to maturity | $ | | $ | | $ | ( | $ | | ||||
Equity securities: |
|
|
|
|
|
|
| |||||
Total equity securities | $ | | $ | | $ | ( | $ | | ||||
December 31, 2024 | |||||||||||||||
| Gross | | Gross | | |||||||||||
Amortized | unrealized | unrealized | Valuation | Estimated | |||||||||||
(In thousands) | cost | gains | losses | allowance | fair value | ||||||||||
Available for sale: | |
| |
| | |
| | |||||||
U.S. Government sponsored entities | $ | | $ | — | $ | ( | $ | — | $ | | |||||
State and political subdivisions |
| |
| — |
| ( |
| — |
| | |||||
Residential mortgage-backed securities |
| |
| |
| ( |
| — |
| | |||||
Asset backed securities | | | ( | — | | ||||||||||
Corporate and other securities |
| |
| |
| ( |
| ( |
| | |||||
Total debt securities available for sale | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Held to maturity: |
|
|
|
|
|
|
|
|
|
| |||||
U.S. Government sponsored entities | $ | | $ | — | $ | ( | $ | — | $ | | |||||
State and political subdivisions |
| |
| |
| — |
| — |
| | |||||
Residential mortgage-backed securities |
| |
| — |
| ( |
| — |
| | |||||
Total debt securities held to maturity | $ | | $ | | $ | ( | $ | — | $ | | |||||
Equity securities: |
|
|
|
|
|
|
|
| |||||||
Total equity securities | $ | | $ | | $ | ( | $ | — | $ | | |||||
For the year ended December 31, 2025, there was a release in credit losses on AFS debt securities of $
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The following table summarizes the amortized cost of HTM debt securities by external credit rating at December 31, 2025 and 2024:
Non-investment | |||||||||||||||
(In thousands) | AAA/AA/A rated | BBB rated | grade rated | Non-rated | Total | ||||||||||
December 31, 2025 |
| |
| |
| |
| |
| | |||||
U.S. Government sponsored entities | $ | | $ | — | $ | — | $ | — | $ | | |||||
State and political subdivisions |
| |
| — |
| — |
| — |
| | |||||
Residential mortgage-backed securities |
| |
| — |
| — |
| — |
| | |||||
Total | $ | | $ | — | $ | — | $ | — | $ | | |||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
| |||||
U.S. Government sponsored entities | $ | | $ | — | $ | — | $ | — | $ | | |||||
State and political subdivisions |
| |
| — |
| — |
| — |
| | |||||
Residential mortgage-backed securities |
| |
| — |
| — |
| — |
| | |||||
Total | $ | | $ | — | $ | — | $ | — | $ | | |||||
This table provides the remaining contractual maturities within the investment portfolios. The carrying value of securities at December 31, 2025 is distributed by contractual maturity. Securities, which may have principal prepayment provisions, are distributed based on contractual maturity. Expected maturities will differ materially from contractual maturities as a result of early prepayments and calls.
Amortized | Fair | ||||
(In thousands) | cost | value | |||
Available for sale, at fair value: | |||||
Due in one year | $ | |
| $ | |
Due after one year through five years | | | |||
Due after five years through ten years | | | |||
Due after ten years | | | |||
Residential mortgage-backed securities | | | |||
Total | $ | | $ | | |
Held to maturity, at amortized cost: | |||||
Due in one year | $ | — | $ | — | |
Due after one year through five years | | | |||
Due after five years through ten years | — | — | |||
Due after ten years | | | |||
Residential mortgage-backed securities | | | |||
Total | $ | | $ | |
The number of securities in an unrealized loss position as of December 31, 2025 totaled
As of December 31, 2025, the company had accrued interest receivable of $
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year ended December 31, 2025, there were
At the year-end 2025 and 2024, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than
The fair value of securities with unrealized losses by length of time where the individual securities have been in a continuous unrealized loss position at December 31, 2025 and December 31, 2024 are as follows:
December 31, 2025 | |||||||||||||||||||
Less than 12 months | 12 months and greater | Total | |||||||||||||||||
| | | | | | | |||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | ||||||||||||||
(In thousands) | fair value | (loss) | fair value | (loss) | fair value | (loss) | |||||||||||||
Available for sale: |
|
| |
| |
| |
| |
| |
| | ||||||
U.S. Government sponsored entities |
| $ | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||
State and political subdivisions |
| | | | ( | | ( | ||||||||||||
Residential mortgage-backed securities |
| | | | ( | | ( | ||||||||||||
Asset backed securities | | ( | — | — | | ( | |||||||||||||
Corporate and other securities |
|
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Total temporarily impaired AFS securities |
| $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
Held to maturity: |
|
| |
| |
| |
| |
| |
| |||||||
U.S. Government sponsored entities |
| $ | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||
Residential mortgage-backed securities |
|
| |
| |
| |
| ( |
| |
| ( | ||||||
Total temporarily impaired HTM securities |
| $ | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||
December 31, 2024 | |||||||||||||||||||
Less than 12 months | 12 months and greater | Total | |||||||||||||||||
| | | | | | | |||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | ||||||||||||||
(In thousands) | fair value | (loss) | fair value | (loss) | fair value | (loss) | |||||||||||||
Available for sale: |
|
| |
| |
| |
| |
| |
| | ||||||
U.S. Government sponsored entities |
| $ | — | $ | — | $ | | $ | ( | $ | | $ | ( | ||||||
State and political subdivisions |
| — | — | | ( | | ( | ||||||||||||
Residential mortgage-backed securities |
| | ( | | ( | | ( | ||||||||||||
Asset backed securities | | ( | | ( | | ( | |||||||||||||
Corporate and other securities |
|
| — |
| — |
| |
| ( |
| |
| ( | ||||||
Total temporarily impaired AFS securities |
| $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
Held to maturity: |
|
| |
| |
| |
| |
| |
| |||||||
U.S. Government sponsored entities |
| $ | — | $ | — | $ | | $ | ( | $ | | $ | ( | ||||||
Residential mortgage-backed securities |
|
| — |
| — |
| |
| ( |
| |
| ( | ||||||
Total temporarily impaired HTM securities |
| $ | — | $ | — | $ | | $ | ( | $ | | $ | ( | ||||||
Unrealized losses in each of the categories presented in the tables above were primarily driven by market interest rate fluctuations.
Realized Gains and Losses
There was an $
Pledged Securities
Securities with a carrying value of $
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Equity Securities
Included in this category are Community Reinvestment Act ("CRA") investments and the Company’s current other equity holdings of financial institutions. Equity securities are defined to include (a) preferred, common and other ownership interests in entities including partnerships, joint ventures and limited liability companies and (b) rights to acquire or dispose of ownership interests in entities at fixed or determinable prices.
The following is a summary of the gains and losses recognized in net income on equity securities for the past two years:
For the year ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
Net unrealized gains (losses) recognized during the period on equity securities | $ | | $ | | ||
Net gains recognized during the period on equity securities sold during the period |
| |
| | ||
Gains recognized during the reporting period on equity securities | $ | | $ | | ||
3. Loans
The following table sets forth the classification of loans by class, including unearned fees, deferred costs and excluding the allowance for credit losses for the past two years:
(In thousands) | | December 31, 2025 | | December 31, 2024 | ||
SBA loans held for investment | $ | | $ | | ||
Commercial loans |
| |
| | ||
SBA 504 loans |
| |
| | ||
Commercial & industrial |
| |
| | ||
Commercial real estate (1) |
| |
| | ||
Commercial construction loans |
| |
| | ||
Residential mortgage loans |
| |
| | ||
Consumer loans |
|
| ||||
Home equity |
| |
| | ||
Consumer other |
| |
| | ||
Residential construction loans | | | ||||
Total loans held for investment | $ | | $ | | ||
Loans held for sale |
| |
| | ||
Total loans | $ | | $ | | ||
| (1) | Commercial real estate includes Commercial Mortgage – Owner Occupied, Commercial Mortgage – Nonowner Occupied and Commercial Mortgage – Other. Commercial Mortgage – Other primarily includes multifamily and land loans. |
Loans are made to individuals and commercial entities. Specific loan terms vary as to interest rate, repayment and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower. Credit risk tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by the Bank. Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type. A description of the Company’s different loan segments follows:
Loans Held for Sale: Loans held for sale represent the guaranteed portion of SBA loans and qualified residential mortgage loans. These loans are reflected at the lower of aggregate cost or market value. When sales of loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets are recognized in income. All criteria for sale accounting must be met in order for the loan sales to occur.
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Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.
Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets. Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets, in the accompanying Consolidated Statements of Income.
SBA Loans: SBA 7(a) loans, on which the SBA has historically provided guarantees of up to 90 percent of the principal balance, are considered a higher risk loan product for the Company than its other loan products. The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the nonguaranteed portion held in the portfolio as a loan held for investment. SBA loans are for the purpose of providing working capital, business acquisitions, financing the purchase of equipment, inventory or commercial real estate and for other business purposes. Loans are guaranteed by the businesses’ major owners. SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.
Commercial Loans: Commercial credit is extended primarily to middle market and small business customers. Commercial loans are generally made in the Company’s market place for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes. The SBA 504 program consists of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property. Loans are generally guaranteed in full or for a meaningful amount by the businesses’ major owners. Commercial loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.
Residential Mortgage, Consumer and Residential Construction Loans: The Company originates mortgage and consumer loans including principally residential real estate, home equity lines and loans and residential construction lines. Each loan type is evaluated on debt to income, type of collateral, loan to collateral value, credit history and Company relationship with the borrower. Risks in these loan categories are dependent on overall economic conditions and the housing market.
Inherent in the lending function is credit risk, which is the possibility a borrower may not perform in accordance with the contractual terms of their loan. A borrower’s inability to pay their obligations according to the contractual terms can create the risk of past due loans and, ultimately, credit losses, especially on collateral deficient loans. The Company minimizes its credit risk by loan diversification and adhering to credit administration policies and procedures. Due diligence on loans begins when the Company initiates contact regarding a loan with a borrower. Documentation, including a borrower’s credit history, materials establishing the value and liquidity of potential collateral, the purpose of the loan, the source of funds for repayment of the loan and other factors, are analyzed before a loan is submitted for approval. The loan portfolio is then subject to on-going internal reviews for credit quality, as well as independent credit reviews by an outside firm.
The Company’s extension of credit is governed by the Credit Risk Policy which was established to control the quality of the Company’s loans. These policies and procedures are reviewed and approved by the Board of Directors on a regular basis.
Credit Ratings
The Company places all SBA, commercial, commercial construction and residential construction loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.
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The Company uses the following regulatory definitions for criticized and classified risk ratings:
Pass: Risk ratings of 1 through 6 are used for loans that are performing, as they meet, and are expected to continue to meet, all of the terms and conditions set forth in the original loan documentation, and are generally current on principal and interest payments. These performing loans are termed “Pass”.
Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.
Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as Substandard have a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution may sustain some loss if the deficiencies are not corrected.
Doubtful: These loans have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values. Once a borrower is deemed incapable of repayment of unsecured debt, the loan is termed a “Loss” and charged off immediately, subject to government guarantee.
Loss: These loans are considered uncollectible and hold minute value that their continuance as bankable loans is no longer warranted. This classification does not imply zero possible recovery or salvage value; rather, it is neither practical nor desirable to postpone writing off the asset despite some partial recovery occurring later.
For residential mortgage and consumer loans, Management uses performing versus nonperforming as the best indicator of credit quality. Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt. These credit quality indicators are updated on an ongoing basis, as a loan is placed on nonaccrual status as soon as Management believes there is sufficient doubt as to the ultimate ability to collect interest on a loan.
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The following table shows the internal loan classification risk by loan portfolio classification by origination year and gross writeoffs as of December 31, 2025:
Term Loans | |||||||||||||||||||||||
Amortized Cost Basis by Origination Year | |||||||||||||||||||||||
(In thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 and Earlier | Revolving Loans Amortized Cost Basis | Total | |||||||||||||||
SBA loans held for investment | |||||||||||||||||||||||
Risk Rating: | |||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | |||||||
Special Mention | - | - | | | | | - | | |||||||||||||||
Substandard | - | - | | | - | - | - | | |||||||||||||||
Total SBA loans held for investment | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | |||||||
SBA loans held for investment | |||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | | $ | | $ | | $ | | $ | - | $ | | |||||||
Commercial loans | |||||||||||||||||||||||
Risk Rating: | |||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Special Mention | - | - | | | | | - | | |||||||||||||||
Substandard | - | | | - | | | - | | |||||||||||||||
Total commercial loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Commercial loans | |||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | - | $ | - | $ | | $ | | $ | - | $ | | |||||||
Commercial Construction loans | |||||||||||||||||||||||
Risk Rating: | |||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | - | $ | | $ | | $ | | |||||||
Total commercial construction loans | $ | | $ | | $ | | $ | | $ | - | $ | | $ | | $ | | |||||||
Commercial Construction loans | |||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||
Residential mortgage loans | |||||||||||||||||||||||
Risk Rating: | |||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | |||||||
Nonperforming | - | | - | | | | - | | |||||||||||||||
Total residential mortgage loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | |||||||
Residential mortgage loans | |||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | - | $ | - | $ | | $ | | $ | - | $ | | |||||||
Consumer loans | |||||||||||||||||||||||
Risk Rating: | |||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Nonperforming | - | | - | - | - | | - | | |||||||||||||||
Total consumer loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Consumer loans | |||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | - | $ | | $ | | $ | | $ | - | $ | | |||||||
Residential construction | |||||||||||||||||||||||
Risk Rating: | |||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | - | $ | | $ | | $ | - | $ | | |||||||
Substandard | - | - | - | - | - | | - | | |||||||||||||||
Total residential construction loans | $ | | $ | | $ | | $ | - | $ | | $ | | $ | - | $ | | |||||||
Residential construction | |||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||
Total loans held for investment | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
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The following table shows the internal loan classification risk by loan portfolio classification by origination year and gross writeoffs as of December 31, 2024:
Term Loans | ||||||||||||||||||||||||
Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||
(In thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 and Earlier | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||
SBA loans held for investment | ||||||||||||||||||||||||
Risk Rating: | ||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | ||||||||
Special Mention | - | | | | | | - | | ||||||||||||||||
Substandard | - | - | | | | | - | | ||||||||||||||||
Total SBA loans held for investment | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | ||||||||
SBA loans held for investment | ||||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | | $ | | $ | - | $ | - | $ | - | $ | | ||||||||
Commercial loans | ||||||||||||||||||||||||
Risk Rating: | ||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Special Mention | - | - | | | - | | | | ||||||||||||||||
Substandard | - | - | - | | | | | | ||||||||||||||||
Total commercial loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Commercial loans | ||||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Residential mortgage loans | ||||||||||||||||||||||||
Risk Rating: | ||||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | ||||||||
Nonperforming | - | | | | - | | - | | ||||||||||||||||
Total residential mortgage loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | ||||||||
Residential mortgage loans | ||||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | - | $ | | $ | - | $ | - | $ | - | $ | | ||||||||
Consumer loans | ||||||||||||||||||||||||
Risk Rating: | ||||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Total consumer loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Consumer loans | ||||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | | $ | | $ | - | $ | | $ | - | $ | | ||||||||
Residential construction loans | ||||||||||||||||||||||||
Risk Rating: | ||||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | ||||||||
Nonperforming | - | - | - | - | | - | - | | ||||||||||||||||
Total residential construction loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | - | $ | | ||||||||
Residential construction | ||||||||||||||||||||||||
Current-period gross writeoffs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | | $ | - | $ | | ||||||||
Total loans held for investment | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
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Nonaccrual and Past Due Loans
Nonaccrual loans consist of loans that are not accruing interest as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt. When a loan is classified as nonaccrual, interest accruals are discontinued and all past due interest previously recognized as income is reversed and charged against current period earnings. Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as Management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income. Loans may be returned to an accrual status when the ability to collect is reasonably assured or when the loan is brought current as to principal and interest. The risk of loss is difficult to quantify and is subject to fluctuations in collateral values, general economic conditions and other factors. The Company values its collateral through the use of appraisals, broker price opinions and knowledge of its local market.
The Bank’s nonaccrual policy requires stopping interest accrual and amortization of fees and costs on any loan that shows serious doubt about collectability, such as loans in default for 90 days or more, loans not expected to be repaid in full, or loans maintained on a cash basis due to borrower deterioration. A loan may return to accrual status only when repayment is reasonably assured, or it becomes well secured and in process of collection, supported by documented borrower performance and a current credit evaluation.
The following tables set forth an aging analysis of past due and nonaccrual loans as of December 31, 2025 and December 31, 2024:
December 31, 2025 | |||||||||||||||||||||
| | | 90+ days | | | | | ||||||||||||||
30‑59 days | 60‑89 days | and still | Total past | ||||||||||||||||||
(In thousands) | past due | past due | accruing | Nonaccrual | due | Current | Total loans | ||||||||||||||
SBA loans held for investment | $ | | $ | | $ | — | $ | | $ | | $ | | $ | | |||||||
Commercial loans |
| |
| |
| |
| |
| |
|
| | ||||||||
SBA 504 loans |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Commercial & industrial |
| |
| — |
| — |
| |
| |
| |
| | |||||||
Commercial real estate |
| |
| |
| — |
| |
| |
| |
| | |||||||
Commercial other | — | — | — | — | — | | | ||||||||||||||
Commercial construction loans |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Residential mortgage loans |
| |
| |
| — |
| |
| |
| |
| | |||||||
Consumer loans |
|
|
|
|
| |
|
| |||||||||||||
Home equity |
| |
| |
| — |
| |
| |
| |
| | |||||||
Consumer other |
| |
| — |
| — |
| — |
| |
| |
| | |||||||
Residential construction loans | — | — | — | | | | | ||||||||||||||
Total loans held for investment | | | — | | | | | ||||||||||||||
Loans held for sale |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Total loans | $ | | $ | | $ | — | $ | | $ | | $ | | $ | | |||||||
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December 31, 2024 | |||||||||||||||||||||
| | | 90+ days | | | | | ||||||||||||||
30‑59 days | 60‑89 days | and still | Total past | ||||||||||||||||||
(In thousands) | past due | past due | accruing | Nonaccrual | due | Current | Total loans | ||||||||||||||
SBA loans held for investment | $ | | $ | | $ | — | $ | | $ | | $ | | $ | | |||||||
Commercial loans |
| |
| |
| |
| |
| |
|
| | ||||||||
SBA 504 loans |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Commercial & industrial |
| |
| — |
| — |
| |
| |
| |
| | |||||||
Commercial real estate |
| |
| |
| — |
| |
| |
| |
| | |||||||
Commercial construction loans |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Residential mortgage loans |
| |
| |
| |
| |
| |
| |
| | |||||||
Consumer loans |
|
|
|
|
| |
|
| |||||||||||||
Home equity |
| |
| |
| — |
| — |
| |
| |
| | |||||||
Consumer other |
| |
| |
| — |
| — |
| |
| |
| | |||||||
Residential construction loans | — | — | — | | | | | ||||||||||||||
Total loans held for investment | | | | | | | | ||||||||||||||
Loans held for sale |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Total loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
As of December 31, 2025 and 2024, the Company had accrued interest receivable of $
Individually Evaluated Loans
The Company has defined individually evaluated loans to be all nonperforming loans. Management individually evaluates a loan when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract.
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The following tables provide detail on the Company’s loans individually evaluated in the Company’s CECL evaluation with the associated allowance amount, if applicable, as of December 31, 2025 and December 31, 2024:
| December 31, 2025 | ||||||||
| Unpaid | | | Allowance for | |||||
principal | Recorded | Credit Losses | |||||||
(In thousands) | balance | investment | Allocated | ||||||
With no related allowance: | |
| |
| | ||||
SBA loans held for investment | $ | | $ | | $ | — | |||
Commercial loans |
| |
| |
| | |||
Commercial & industrial | | | — | ||||||
Commercial real estate |
| |
| |
| — | |||
Total commercial loans |
| |
| |
| — | |||
Residential mortgage loans | | | — | ||||||
Consumer loans | |||||||||
Home equity | | | — | ||||||
Total consumer loans | | | — | ||||||
Total individually evaluated loans with no related allowance |
| |
| |
| — | |||
With an allowance: |
| |
| |
| | |||
SBA loans held for investment |
| |
| |
| | |||
Commercial loans |
| |
| |
| ||||
Commercial & industrial |
| |
| |
| | |||
Total commercial loans |
| |
| |
| | |||
Residential mortgage loans | | | | ||||||
Residential construction loans | | | | ||||||
Total individually evaluated loans with a related allowance |
| |
| |
| | |||
Total individually evaluated loans: |
| |
| |
| ||||
SBA loans held for investment |
| |
| |
| | |||
Commercial loans |
| |
| |
| ||||
Commercial & industrial |
| |
| |
| | |||
Commercial real estate |
| |
| |
| — | |||
Total commercial loans |
| |
| |
| | |||
Residential mortgage loans | | | | ||||||
Consumer loans | |||||||||
Home equity | | | — | ||||||
Total consumer loans | | | — | ||||||
Residential construction loans | | | | ||||||
Total individually evaluated loans | $ | | $ | | $ | | |||
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| December 31, 2024 | ||||||||
| Unpaid | | | Allowance for | |||||
principal | Recorded | Credit Losses | |||||||
(In thousands) | balance | investment | Allocated | ||||||
With no related allowance: | |
| |
| | ||||
SBA loans held for investment | $ | | $ | | $ | — | |||
Commercial loans |
| |
| |
| | |||
Commercial & industrial | | | — | ||||||
Commercial real estate |
| | | — | |||||
Total commercial loans |
| |
| |
| — | |||
Residential mortgage loans | | | — | ||||||
Total individually evaluated loans with no related allowance |
| |
| |
| — | |||
| |
| |
| | ||||
With an allowance: |
| ||||||||
SBA loans held for investment |
| |
| |
| | |||
Commercial loans |
| ||||||||
Commercial & industrial |
| |
| |
| | |||
Total commercial loans | | | | ||||||
Residential mortgage loans | | | | ||||||
Residential construction loans |
| | | | |||||
Total individually evaluated loans with a related allowance | |
| |
| | ||||
| |||||||||
Total individually evaluated loans: |
| |
| |
| ||||
SBA loans held for investment |
| |
| |
| | |||
Commercial loans |
| |
| |
| ||||
Commercial & industrial |
| |
| |
| | |||
Commercial real estate |
| |
| |
| — | |||
Total commercial loans | |
| |
| | ||||
Residential mortgage loans | | | | ||||||
Residential construction loans | | | | ||||||
Total individually evaluated loans | $ | | $ | | $ | | |||
The Company did
Other Loan Information
Servicing Assets:
Loans sold to others and serviced by the Company are not included in the accompanying Consolidated Balance Sheets. The total amount of such loans serviced, but owned by third party investors, amounted to approximately $
| For the years ended December 31, | |||||
(In thousands) | | 2025 | | 2024 | ||
Balance, beginning of year | $ | | $ | | ||
Servicing assets capitalized |
| |
| | ||
Amortization of expense, net |
| ( |
| ( | ||
Balance, end of year | $ | | $ | | ||
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In addition, the Company had $
As of December 31, 2025 and 2024, the Company held $
Officer and Director Loans:
In the ordinary course of business, the Company may extend credit to officers, directors or their associates. These loans are subject to the Company’s normal lending policy, and are done on an arms-length basis. An analysis of such loans, all of which are current as to principal and interest payments, is as follows:
(In thousands) | | December 31, 2025 | | December 31, 2024 | ||
Balance, beginning of year | $ | | $ | | ||
New loans and advances |
| |
| | ||
Loan repayments |
| ( |
| ( | ||
Balance, end of year | $ | | $ | | ||
Loan Portfolio Collateral:
The majority of the Company’s loans are secured by real estate. Declines in the market values of real estate in the Company’s trade area impact the value of the collateral securing its loans. This could lead to greater losses in the event of defaults on loans secured by real estate. At December 31, 2025 and December 31, 2024, approximately
Modifications
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a weighted-average remaining maturity model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.
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The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of gross loans and type of concession granted during the twelve months ended December 31, 2025 and December 31, 2024:
Payment Delay | Term Extension | Interest Rate Reduction | ||||||||||||||||
Principal | Percentage | Principal | Percentage | Principal | Percentage | |||||||||||||
(In thousands) | Balance | of Loan Class | Balance | of Loan Class | Balance | of Loan Class | ||||||||||||
Commercial loans: | ||||||||||||||||||
Commercial real estate | | | | | | | ||||||||||||
Commercial & industrial | — | — | | | — | — | ||||||||||||
Residential mortgage loans | | | — | — | — | — | ||||||||||||
Balance, December 31, 2025 | $ | | | % | $ | | | % | $ | | | % | ||||||
Payment Delay | Term Extension | |||||||||||
Principal | Percentage | Principal | Percentage | |||||||||
(In thousands) | Balance | of Loan Class | Balance | of Loan Class | ||||||||
SBA loans held for investment | $ | | | % | $ | — | — | % | ||||
Commercial loans: | ||||||||||||
Commercial real estate | | | — | — | ||||||||
Commercial & industrial | — | — | | | ||||||||
Residential mortgage loans | — | — | | | ||||||||
Consumer loans: | ||||||||||||
Home equity | — | — | | | ||||||||
Balance, December 31, 2024 | $ | | | % | $ | | | % | ||||
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. Two loans, a $
4. Allowance for Credit Losses and Reserve for Unfunded Loan Commitments
Allowance for Credit Losses
The Company has an established methodology to determine the adequacy of the allowance for credit losses that assesses the risks and losses inherent in the loan portfolio. At a minimum, the adequacy of the allowance for credit losses is reviewed by Management on a quarterly basis. The allowance is increased by provisions charged to expense and is reduced by net charge-offs.
The standardized methodology used to assess the adequacy of the allowance includes the allocation of specific and general reserves. The same standard methodology is used, regardless of loan type. Specific reserves are evaluated for individually evaluated loans. The general reserve is set based upon a representative average historical net charge-off rate adjusted for the following environmental factors: delinquency and impairment trends, charge-off and recovery trends, volume and loan term trends, changes in risk and underwriting policy trends, staffing and experience changes, national and local economic trends, industry conditions and credit concentration changes. These environmental factors include reasonable and supportable forecasts. Within the historical net charge-off rate, the Company weights the data dating back 10 years on a straight line basis and projects the losses on a weighted average remaining maturity basis for each segment. All of the environmental factors are ranked and assigned a basis points value based on the following scale: low, low moderate,
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moderate, high moderate and high risk. Each environmental factor is evaluated separately for each class of loans and risk weighted based on its individual characteristics.
According to the Company’s policy, a loss (“charge-off”) is to be recognized and charged to the allowance for credit losses as soon as a loan is recognized as uncollectable. All credits which are 90 days past due must be analyzed for the Company’s ability to collect on the credit. Once a loss is known to exist, the charge-off approval process is immediately expedited. This charge-off policy is followed for all loan types.
The allocated allowance is the total of identified specific and general reserves by loan category. The allocation is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any segment of the portfolio.
The following tables detail the activity in the allowance for credit losses by portfolio segment held for investment for the past two years:
For the year ended December 31, 2025 | ||||||||||||||||||
Residential | ||||||||||||||||||
(In thousands) | SBA | Commercial | Residential | Consumer | Construction | Total | ||||||||||||
Balance, beginning of period | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Charge-offs |
| ( |
| ( |
| ( |
| ( |
| — |
| ( | ||||||
Recoveries |
| |
| |
| |
| |
| — |
| | ||||||
Net charge-offs |
| ( |
| |
| ( |
| ( |
| — |
| ( | ||||||
Provision for (credit to) credit losses charged to expense |
| |
| |
| |
| |
| ( |
| | ||||||
Balance, end of period | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
For the year ended December 31, 2024 | ||||||||||||||||||
Residential | ||||||||||||||||||
(In thousands) | SBA | Commercial | Residential | Consumer | Construction | Total | ||||||||||||
Balance, beginning of period | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Charge-offs |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | ||||||
Recoveries |
| |
| |
| |
| |
| — |
| | ||||||
Net charge-offs |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | ||||||
Provision for (credit to) credit losses charged to expense |
| |
| |
| ( |
| |
| ( |
| | ||||||
Balance, end of period | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
The change in the allowance for credit losses for the year-ended December 31, 2025 was mainly due to loan growth and an increase in nonperforming assets, partially offset by charge-offs.
Reserve for Unfunded Loan Commitments
The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. As noted above, the allowance for credit losses on unfunded loan commitments is included in Other liabilities on the Consolidated Balance Sheet. At December 31, 2025, a $
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Valuation Allowance: Debt Security Available for Sale
The Company maintains a valuation allowance on AFS debt securities. Adjustments to the reserve are made through provision for credit losses and applied to the reserve which is classified in “Debt securities available for sale” on the Consolidated Balance Sheet. At December 31, 2025, there was
The Company maintains a valuation allowance on HTM debt securities at a level that Management believes is adequate to absorb estimated probable losses. At December 31, 2025 and December 31, 2024,
5. Premises and Equipment
The detail of premises and equipment as of December 31st for the past two years is as follows:
(In thousands) | December 31, 2025 | December 31, 2024 | ||||
Land and buildings | | $ | | | $ | |
Furniture, fixtures and equipment |
| |
| | ||
Leasehold improvements |
| |
| | ||
Gross premises and equipment |
| |
| | ||
Less: Accumulated depreciation |
| ( |
| ( | ||
Net premises and equipment | $ | | $ | | ||
Amounts charged to noninterest expense for depreciation of premises and equipment amounted to $
6. Deposits
The following table details the maturity distribution of time deposits as of December 31st for the past two years:
| | More than | | More than | | | |||||||||
|
| three |
| six months |
| ||||||||||
| Three |
| months |
| through |
| More than | ||||||||
months or |
| through six |
| twelve | twelve | ||||||||||
(In thousands) | less |
| months |
| months | months | Total | ||||||||
At December 31, 2025: |
| |
| |
| |
| |
| | |||||
Less than $250,000 | $ | | $ | | $ | | $ | | $ | | |||||
$250,000 or more |
| | | | | | |||||||||
Total by maturity | $ | | $ | | $ | | $ | | $ | | |||||
At December 31, 2024: |
| |
| |
| |
| |
| | |||||
Less than $250,000 | $ | | $ | | $ | | $ | | $ | | |||||
$250,000 or more |
| | | | | | |||||||||
Total by maturity | $ | | $ | | $ | | $ | | $ | | |||||
The following table presents the expected maturities of time deposits over the next five years:
(In thousands) | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | Thereafter | | Total | |||||||
Balance maturing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Time deposits with balances of $250 thousand or more totaled $
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Deposits from principal officers, directors, and their affiliates at year-end 2025 and 2024 were $
7. Borrowed Funds, Subordinated Debentures and Derivatives
The following table presents the period-end and weighted average rate for borrowed funds and subordinated debentures as of the two most recent fiscal year end-dates:
2025 | 2024 | ||||||||||
(In thousands) |
| Amount |
| Rate |
| Amount |
| Rate |
| ||
FHLB borrowings: | | | | | | | | | | ||
Non-overnight, fixed rate advances | $ | |
| | % | $ | |
| | % | |
Overnight advances |
| |
| |
| |
| | |||
Puttable advances |
| |
| |
| |
| | |||
Subordinated debentures: | $ | |
| | % | $ | |
| | % | |
The following table presents borrowed funds and subordinated debentures by maturity over the next five years:
(In thousands) | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | Thereafter | | Total | |||||||
FHLB borrowings: | |||||||||||||||||||||
Non-overnight, fixed rate advances | $ | | $ | $ | | $ | — | $ | — | $ | — | $ | | ||||||||
Overnight advances | | — | — | — | — | — | | ||||||||||||||
Puttable advances | — | — | | | | — | | ||||||||||||||
Subordinated debentures: |
| |
| |
| |
| |
| |
| |
| | |||||||
Total borrowings | $ | | $ | — | $ | | $ | | $ | | $ | | $ | | |||||||
Subordinated Debentures
At December 31, 2025 and 2024, the Company was a party in the following subordinated debenture transactions:
| ● | On |
| ● | In connection with the formation of the statutory business trust, the trust also issued $ |
The capital securities in the above transaction have preference over the common securities with respect to liquidation and other distributions and qualify as Tier 1 capital. Under the terms of the Dodd-Frank Wall Street Reform and Consumer Protection Act, these securities will continue to qualify as Tier 1 capital as the Company has less than $15 billion in assets. In accordance with FASB ASC Topic 810, “Consolidation,” the Company does not consolidate the accounts and related activity of Unity (NJ) Statutory Trust II because it is not the primary beneficiary. The additional capital from this transaction was used to bolster the Company’s capital ratios and for general corporate purposes, including among other things, capital contributions to the Bank.
The Company has the ability to defer interest payments on the subordinated debentures for up to
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Derivative Financial Instruments and Hedging Activities
Derivative Financial Instruments
The Company has derivative financial instruments in the form of interest rate swap agreements, which derive their value from underlying interest rates. These transactions involve both credit and market risk. The notional amounts are amounts on which calculations, payments and the value of the derivatives are based. Notional amounts do not represent direct credit exposures. Direct credit exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Such difference, which represents the fair value of the derivative instrument, is reflected on the Company’s Consolidated Balance Sheet as Prepaid expenses and other assets or Accrued expenses and other liabilities.
The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to any derivative agreement. The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and does not expect any counterparties to fail their obligations. The Company deals only with primary dealers.
Derivative instruments are generally either negotiated over the counter (“OTC”) contracts or standardized contracts executed on a recognized exchange. Negotiated OTC derivative contracts are generally entered into between two counterparties that negotiate specific agreement terms, including the underlying instrument, amount, exercise prices and maturity.
Risk Management Policies – Hedging Instruments
The primary focus of the Company’s asset/liability management program is to monitor the sensitivity of the Company’s net portfolio value and net income under varying interest rate scenarios to take steps to control its risks. On a quarterly basis, the Company evaluates the effectiveness of entering into any derivative agreement by measuring the cost of such an agreement in relation to the reduction in net portfolio value and net income volatility within an assumed range of interest rates.
Interest Rate Risk Management – Cash Flow Hedging Instruments
The Company has variable rate debt as a source of funds for use in the Company’s lending and investment activities and for other general business purposes. These debt obligations expose the Company to variability in interest payments due to changes in interest rates. If interest rates increase, interest expense increases. Conversely, if interest rates decrease, interest expense decreases. Management believes it is prudent to limit the variability of a portion of its interest payments and, therefore hedges its variable interest rate payments. To meet this objective, Management enters into interest rate swap agreements whereby the Company receives variable interest rate payments and makes fixed interest rate payments during the contract period.
At December 31, 2025, and 2024 the Company had
(Dollars in thousands) | | December 31, 2025 | | December 31, 2024 |
| ||
Notional amount | $ | | $ | | |||
Fair value | $ | | $ | | |||
Weighted average pay rate |
| | % |
| | % | |
Weighted average receive rate |
| | % |
| | % | |
Weighted average maturity in years |
|
| |||||
Number of contracts |
| |
| | |||
In the third quarter of 2024, to hedge floating rate liability exposure, the Company entered into a forward starting pay-fix, receive-float interest rate swap which commenced in the first quarter of 2025 and matures in the first quarter of 2028. The interest rate swap, which qualifies for hedge accounting, is tied to the Secured Overnight Financing Rate (SOFR) for a
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notional amount of $
During the twelve months ended December 31, 2025 the Company received variable rate SOFR payments from and paid fixed rates in accordance with its interest rate swap agreements. The unrealized gains relating to interest rate swaps are recorded as a derivative asset and are included in Prepaid expenses and other assets in the Company’s Consolidated Balance Sheet. The unrealized losses are recorded as a derivative liability and are included in Accrued expenses and other liabilities. Changes in the fair value of interest rate swaps designated as hedging instruments of the variability of cash flows associated with long-term debt are reported in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.
The following table presents the net losses recorded in other comprehensive income and the Consolidated Financial Statements relating to the cash flow derivative instruments at December 31, 2025 and 2024, respectively:
For the years ended December 31, | ||||||
(In thousands) |
| 2025 |
| 2024 | ||
Loss recognized in OCI | | | ||||
Gross of tax | $ | ( | $ | ( | ||
Net of tax | ( | ( | ||||
Loss reclassified from AOCI into net income | ||||||
Gross of tax | ( | ( | ||||
Net of tax | | ( | | ( | ||
8. Leases and Commitments
Leases
Operating leases in which the Company is the lessee and the term is greater than 12 months, are recorded as right of use ("ROU") assets and lease liabilities, and are included in Prepaid expenses and other assets and Accrued expenses and other liabilities, respectively, on the Company’s Consolidated Balance Sheets. The Company does not currently have any finance leases in which it is the lessee.
Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate. The borrowing rate for each lease is unique based on the lease term. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in Occupancy expense in the Consolidated Statements of Income.
The Company’s leases relate primarily to the Company’s bank branches and office space with remaining lease terms of generally
Certain real estate leases have lease payments that adjust based on annual changes in the Consumer Price Index ("CPI"). The leases that are dependent upon CPI are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability.
Operating lease ROU assets totaled $
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The table below summarizes the Company’s net lease cost:
| For the years ended December 31, | |||||
(In thousands) | 2025 | 2024 | ||||
Operating lease cost | $ | | $ | | ||
Net lease cost | $ | | $ | | ||
The table below summarizes the cash and non-cash activities associated with the Company’s leases:
| For the years ended December 31, | |||||
(In thousands) | 2025 | 2024 | ||||
Cash paid for amounts included in the measurement of lease liabilities: |
| | | |||
Operating cash flows for operating leases | $ | | $ | | ||
As of December 31, 2025 and December 31, 2024, the Company had
The table below summarizes other information related to the Company’s operating leases:
| December 31, 2025 | | December 31, 2024 |
| |||
Weighted average remaining lease term in years |
| ||||||
Weighted average discount rate |
| | % | | % | ||
The table below summarizes the maturity of remaining lease liabilities:
(In thousands) | | December 31, 2025 | |
2026 | $ | | |
2027 |
| | |
2028 |
| | |
2029 |
| | |
2030 |
| | |
2031 and thereafter |
| | |
Total lease payments | $ | | |
Less: Interest |
| ( | |
$ | | ||
As of December 31, 2025, the Company had not entered into any material leases that have not yet commenced.
Commitments to Borrowers
Commitments to extend credit are legally binding loan commitments with set expiration dates. They are intended to be disbursed, subject to certain conditions, upon the request of the borrower. The Company was committed to advance approximately $
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Litigation
The Company may, in the ordinary course of business, become a party to litigation involving collection matters, contract claims and other legal proceedings relating to the conduct of its business. In the best judgment of Management, based upon consultation with counsel, the consolidated financial position and results of operations of the Company will not be affected materially by the final outcome of any pending legal proceedings or other contingent liabilities and commitments.
9. Accumulated Other Comprehensive (Loss) Income
The following tables shows the changes in other comprehensive (loss), net of tax income for the past two years:
For the year ended December 31, 2025 | |||||||||
| Net unrealized |
| Net unrealized |
| Accumulated | ||||
| (losses) gains on |
| gains (losses) from |
| other | ||||
| securities |
| cash flow hedges |
| comprehensive | ||||
(In thousands) | net of tax |
| net of tax |
| (loss) income | ||||
Balance, beginning of period | | $ | ( | $ | | | $ | ( | |
Other comprehensive income (loss) before reclassifications |
| | ( |
| | ||||
Less amounts reclassified from accumulated other comprehensive loss |
| — | ( |
| ( | ||||
Period change |
| |
| ( |
| | |||
Balance, end of period | $ | ( | $ | | $ | ( | |||
For the year ended December 31, 2024 | |||||||||
| Net unrealized |
| Net unrealized |
| Accumulated | ||||
| (losses) gains on |
| gains (losses) from |
| other | ||||
| securities |
| cash flow hedges |
| comprehensive | ||||
(In thousands) | net of tax |
| net of tax |
| (loss) income | ||||
Balance, beginning of period | | $ | ( | $ | | | $ | ( | |
Other comprehensive income (loss) before reclassifications |
| | ( |
| ( | ||||
Less amounts reclassified from accumulated other comprehensive loss |
| — | ( |
| ( | ||||
Period change |
| |
| ( |
| | |||
Balance, end of period | $ | ( | $ | | $ | ( | |||
10. Shareholders’ Equity
Repurchase Plan
On August 1, 2024 the Board authorized a repurchase plan permitting the repurchase of up to
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11. Income Taxes
Income taxes paid for the past two years are as follows:
For the years ended December 31, | ||||||
(In thousands) | 2025 | 2024 | ||||
Federal | $ | | $ | | ||
State | ||||||
New Jersey | | | ||||
Other | | | ||||
Total | $ | | $ | | ||
The components of the provision for income taxes for the past two years are as follows:
For the years ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
Federal - current provision | $ | | $ | | ||
Federal - deferred benefit |
| ( |
| ( | ||
Total federal provision |
| |
| | ||
State - current provision |
| |
| | ||
State - deferred benefit |
| ( |
| ( | ||
Total state provision |
| |
| | ||
$ | | $ | | |||
Reconciliation between the reported income tax provision and the amount computed by multiplying income before taxes by the statutory Federal income tax rate for the past two years is as follows:
For the years ended December 31, | ||||||||||||
(In thousands, except percentages) | | 2025 | | 2024 | ||||||||
% of Pretax | % of Pretax | |||||||||||
Amount | Income | Amount | Income | |||||||||
Federal income tax provision at statutory rate of 21% | $ | | | % | $ | | | % | ||||
State and Local Income Taxes, Net of Federal Income Tax Effect* | | | | | ||||||||
Nontaxable or Nondeductible Items** |
|
| ||||||||||
Tax-exempt income |
| ( | ( |
| ( | ( | ||||||
Bank owned life insurance |
| ( | ( |
| ( | ( | ||||||
Stock option and restricted stock |
| ( | ( |
| ( | ( | ||||||
Meals and entertainment |
| | |
| | | ||||||
Non-deductible compensation | | | | | ||||||||
Other adjustments |
| ( | ( |
| | | ||||||
Provision for income taxes | $ | | | % | $ | | | % | ||||
*State taxes in New Jersey made up the majority (greater than 50%) of the tax effect in this category.
** The nontaxable or nondeductible items category includes items such as other non-deductible expenses. None of those items individually or in the aggregate exceeded the 5% quantitative threshold for separate disaggregation in the current year.
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Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The components of the net deferred tax asset at December 31, 2025 and 2024 are as follows:
(In thousands) | | December 31, 2025 | | December 31, 2024 | ||
Deferred tax assets: |
| |
| | ||
Allowance for credit losses | $ | | $ | | ||
SERP |
| |
| | ||
Stock-based compensation |
| |
| | ||
Deferred compensation |
| |
| | ||
Depreciation |
| |
| | ||
Deferred loan fees and costs, net | | | ||||
Net unrealized securities losses |
| |
| | ||
Net other deferred tax assets |
| |
| | ||
Gross deferred tax assets |
| |
| | ||
Deferred tax liabilities: |
|
| ||||
Goodwill |
| |
| | ||
REIT deferral | | | ||||
Interest rate swaps | | | ||||
Net other deferred tax liabilities |
| |
| | ||
Gross deferred tax liabilities |
| |
| | ||
Net deferred tax asset | $ | | $ | | ||
The Company computes deferred income taxes under the asset and liability method. Deferred income taxes are recognized for tax consequences of “temporary differences” by applying enacted statutory tax rates to differences between the financial reporting and the tax basis of existing assets and liabilities. A deferred tax liability is recognized for all temporary differences that will result in future taxable income. A deferred tax asset is recognized for all temporary differences that will result in future tax deductions subject to reduction of the asset by a valuation allowance.
Included as a component of deferred tax assets is an income tax expense (benefit) related to unrealized gains (losses) on AFS debt securities and interest rate swaps. The after-tax component of each of these is included in other comprehensive income (loss) in shareholders’ equity. The after-tax component related to AFS debt securities was an unrealized loss of $
The Company
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12. Net Income per Share
The following is a reconciliation of the calculation of basic and diluted net income per share for the past two years:
For the years ended December 31, | ||||||
(In thousands, except per share amounts) | | 2025 | | 2024 | ||
Net income | $ | | $ | | ||
Weighted average common shares outstanding - Basic |
| |
| | ||
Plus: Potential dilutive common stock equivalents |
| |
| | ||
Weighted average common shares outstanding - Diluted |
| |
| | ||
Net income per common share - Basic | $ | | $ | | ||
Net income per common share - Diluted |
| |
| | ||
Stock options and common stock excluded from the income per share calculation as their effect would have been anti-dilutive |
| |
| | ||
13. Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.
The minimum capital level requirements include: (i) a Tier 1 leverage ratio of 4% (ii) common equity Tier 1 capital ratio of 4.5%; (iii) a Tier 1 capital ratio of 6%; and (iv) a total capital ratio of 8% for all institutions. The Bank is also required to maintain a “capital conservation buffer” of
The following table shows information regarding the Company’s and the Bank’s regulatory capital levels at December 31, 2025 and at December 31, 2024, as if the Company were subject to consolidated capital requirements. As of December 31, 2024, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, common equity Tier 1 risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events since the notification that Management believes have changed the Bank’s category. Management believes that the Company and the Bank meet all capital adequacy requirements to which they are subject. Due to a Federal Reserve policy applicable to bank holding companies with less than $3 billion in consolidated assets, the Company is not subject to consolidated capital requirements:
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Actual | Required for Capital | To be Well Capitalized | ||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||
(Dollars in thousands) | ||||||||||||||||||
As of December 31, 2025 | ||||||||||||||||||
Total risk-based capital (to risk-weighted assets) | ||||||||||||||||||
Company Consolidated | $ | | | % | $ | | | % | $ | | | % | ||||||
Bank | | | | | | | ||||||||||||
Common equity tier 1 (to risk-weighted assets) | ||||||||||||||||||
Company Consolidated | | | | | | | ||||||||||||
Bank | | | | | | | ||||||||||||
Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||
Company Consolidated | | | | | | | ||||||||||||
Bank | | | | | | | ||||||||||||
Tier 1 capital (to average total assets) | ||||||||||||||||||
Company Consolidated | | | | | | | ||||||||||||
Bank | | | | | | | ||||||||||||
As of December 31, 2024 | ||||||||||||||||||
Total risk-based capital (to risk-weighted assets) | ||||||||||||||||||
Company Consolidated | $ | | | % | $ | | | % | $ | | | % | ||||||
Bank | | | | | | | ||||||||||||
Common equity tier 1 (to risk-weighted assets) | ||||||||||||||||||
Company Consolidated | | | | | | | ||||||||||||
Bank | | | | | | | ||||||||||||
Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||
Company Consolidated | | | | | | | ||||||||||||
Bank | | | | | | | ||||||||||||
Tier 1 capital (to average total assets) | ||||||||||||||||||
Company Consolidated | | | | | | | ||||||||||||
Bank | | | | | | | ||||||||||||
* Prompt Corrective Action requirements only apply to the Bank
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14. Employee Benefit Plans
Stock Option Plans
The Company has maintained option plans and maintains an equity incentive plan, which allow for the grant of options to officers, employees and members of the Board of Directors. Grants of options under the Company’s plans generally vest over
| | | Weighted | | ||||||
Weighted | average | |||||||||
average | remaining | Aggregate | ||||||||
exercise | contractual | intrinsic | ||||||||
Shares | price | life in years | value | |||||||
Outstanding at December 31, 2023 |
| | $ | |
| $ | | |||
Options granted |
| |
| — |
|
| ||||
Options exercised |
| ( |
| |
|
| ||||
Options forfeited |
| |
| — |
|
| ||||
Options expired |
| |
| — |
|
| ||||
Outstanding at December 31, 2024 |
| | $ | |
| $ | | |||
Options granted |
| |
| — |
|
| ||||
Options exercised |
| ( |
| |
|
| ||||
Options forfeited |
| |
| — |
|
| ||||
Options expired |
| |
| — |
|
| ||||
Outstanding at December 31, 2025 |
| | $ | |
| $ | | |||
Exercisable at December 31, 2025 | | $ | |
| $ | | ||||
On May 5, 2023, the Company adopted the 2023 Equity Compensation Plan providing for grants of up to
There were
Upon exercise, the Company issues shares from its authorized but unissued common stock to satisfy the options. The following table presents information about options exercised during 2025 and 2024:
For the years ended December 31, | ||||||
| 2025 | | 2024 | |||
Number of options exercised |
| |
| | ||
Total intrinsic value of options exercised | $ | | $ | | ||
Cash received from options exercised | | | ||||
Tax deduction realized from options | | | ||||
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The following table summarizes information about stock options outstanding at December 31, 2025:
Options outstanding | Options exercisable | ||||||||||||
| Weighted average | | Weighted | | | Weighted | |||||||
Range of | Options | remaining contractual | average | Options | average | ||||||||
exercise prices | outstanding | life (in years) | exercise price | exercisable | exercise price | ||||||||
$ |
| | $ | |
| $ | |||||||
| |
| |
|
| ||||||||
| |
| |
|
| ||||||||
| |
| |
|
| ||||||||
Total |
| | $ | | |
| $ | | |||||
FASB ASC Topic 718, “Compensation - Stock Compensation,” requires an entity to recognize the fair value of equity awards as compensation expense over the period during which an employee is required to provide service in exchange for such an award (vesting period). Compensation expense related to stock options and the related income tax benefit for the years ended December 31, 2025 and 2024 are detailed in the following table:
For the years ended December 31, | ||||||
| 2025 | | 2024 | |||
Compensation expense | $ | — | $ | | ||
Income tax benefit | — | | ||||
As of December 31, 2025, there was
Restricted Stock Awards
Restricted stock is issued under the Company’s active Equity Compensation plans to reward employees and directors and to retain them by distributing stock over a period of time. Restricted stock awards granted to date vest over a period of
| | Average grant | |||
Shares | date fair value | ||||
Nonvested restricted stock at December 31, 2024 |
| | | ||
Granted |
| | | ||
Cancelled |
| ( | | ||
Vested |
| ( | | ||
Nonvested restricted stock at December 31, 2025 |
| | | ||
Restricted stock awards granted during the years ended December 31, 2025 and 2024 were as follows:
For the years ended December 31, | ||||||
| 2025 | | 2024 | |||
Number of shares granted |
| |
| | ||
Average grant date fair value | $ | | $ | | ||
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Compensation expense related to the restricted stock for the years ended December 31, 2025 and 2024, is detailed in the following table:
For the years ended December 31, | ||||||
| 2025 | | 2024 | |||
Compensation expense | $ | | $ | | ||
Income tax benefit | | | ||||
As of December 31, 2025, there was approximately $
401(k) Savings Plan
The Bank has a 401(k) savings plan covering substantially all employees. The Bank makes a Safe Harbor Matching Contribution to the 401(k) plan. The Bank contributed $
Deferred Compensation Plan
The Company has a deferred compensation plan for Directors and eligible Management. Directors of the Company have the option to elect to defer up to
Benefit Plans
In addition to the 401(k) savings plan which covers substantially all employees, in 2015 the Company established an supplemental defined benefit plan to provide additional retirement benefits for the President and Chief Executive Officer (“CEO”) and unfunded, non-qualified deferred retirement plans for certain other key executives.
On June 4, 2015, the Company approved the Supplemental Executive Retirement Plan (“SERP”) pursuant to which the President and CEO is entitled to receive certain supplemental retirement benefits. The retirement benefit under the SERP is an amount equal to sixty percent (
The President and CEO commenced vesting in this retirement benefit on January 1, 2014, and fully vested on January 1, 2024.
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For the years ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
Service cost | $ | ( | $ | | ||
| |
| | |||
Net periodic benefit cost | $ | | $ | | ||
For the years ended December 31, 2025 and 2024, service cost and interest cost were included in Compensation and benefits expense on the Consolidated Statements of Income.
The following table summarizes the changes in benefit obligations of the defined benefit plan recognized during the years ended December 31, 2025 and 2024:
For the years ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
Benefit obligation, beginning of year | $ | | $ | | ||
Service cost |
| ( |
| | ||
Interest cost |
| |
| | ||
Benefit obligation, end of period | $ | | $ | | ||
On October 22, 2015, the Company entered into an Executive Incentive Retirement Plan (the “EIRP”) with key executive officers other than the President and CEO. The EIRP has an effective date of January 1, 2015.
The EIRP is an , deferred compensation plan. For any EIRP Year, a guaranteed annual Deferral Award, equal to seven and one half percent (
As of December 31, 2025, the Company had total expenses related to the EIRP of $
Certain members of Management are also enrolled in a split-dollar life insurance plan with a post-retirement death benefit of $
15. Fair Value
Fair Value Measurement
The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which requires additional disclosures about the Company’s assets and liabilities that are measured at fair value. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company utilizes techniques that maximize the
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use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed as follows:
Level 1 Inputs
| ● | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| ● | Generally, this includes debt and equity securities and derivative contracts that are traded in an active exchange market (i.e. New York Stock Exchange). |
Level 2 Inputs
| ● | Quoted prices for similar assets or liabilities in active markets. |
| ● | Quoted prices for identical or similar assets or liabilities in inactive markets. |
| ● | Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (i.e., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.” |
| ● | Generally, this includes U.S. Government sponsored mortgage-backed securities, asset backed securities, corporate debt securities and derivative contracts. |
Level 3 Inputs
| ● | Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities. |
| ● | These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
Fair Value on a Recurring Basis
The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis:
Debt Securities Available for Sale
The fair value of available for sale ("AFS") debt securities is the market value based on quoted market prices, when available, or market prices provided by recognized broker dealers (Level 1). If listed prices or quotes are not available, fair value is based upon quoted market prices for similar or identical assets or other observable inputs (Level 2) or models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).
Most of the Company’s AFS debt securities were classified as Level 2 assets at December 31, 2025. The valuation of AFS debt securities using Level 2 inputs was primarily determined using the market approach, which uses quoted prices for similar assets or liabilities in active markets and all other relevant information. It includes model pricing, defined as valuing securities based upon their relationship with other benchmark securities.
Included in the Company’s AFS debt securities are select corporate bonds which are classified as Level 3 assets at December 31, 2025. The valuation of these corporate bonds is determined using broker quotes, third-party vendor prices, or other valuation techniques, such as discounted cash flow techniques. Market inputs used in the other valuation techniques or underlying third-party vendor prices or broker quotes include benchmark and government bond yield curves, credit spreads and trade execution data.
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Equity Securities with Readily Determinable Fair Values
The fair value of equity securities is the market value based on quoted market prices, when available, or market prices provided by recognized broker dealers (Level 1). If listed prices or quotes are not available, fair value is based upon quoted market prices for similar or identical assets or other observable inputs (Level 2) or developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).
Included in the Company’s equity securities is restricted stock which is classified as a Level 3 asset at December 31, 2025. The valuation of this restricted stock is determined using observable prices for the restricted and unrestricted stock and models, including Discount for Lack of Marketability.
As of December 31, 2025, the fair value of the Company’s equity securities portfolio was $
Most of the Company’s equity securities were classified as Level 1 assets at December 31, 2025 and 2024. The valuation of securities using Level 1 inputs was primarily determined by active markets with readily determinable fair value using quoted market prices.
Included in the Company’s equity securities is restricted stock which are classified as Level 3 assets at December 31, 2025. The valuation of this restricted stock was determined using broker quotes, third-party vendor prices, or other valuation techniques, such as discounted cash flow techniques. Market inputs used in the other valuation techniques or underlying third-party vendor prices or broker quotes include benchmark and government bond yield curves, credit spreads and trade execution data.
The following table presents a reconciliation of the Level 3 securities measured at fair value on a recurring basis for the years ended December 31, 2025 and 2024:
Debt and Equity Securities | ||||||||||||
2025 | 2024 | |||||||||||
(In thousands) | | Corporate Debt | Restricted Stock | | Corporate Debt | Restricted Stock | ||||||
Balance of Recurring Level 3 assets at January 1 |
| $ | | $ | |
| $ | | $ | — | ||
Activity | ||||||||||||
Transfers from Corporate debt to Restricted stock, net | ( | | — | — | ||||||||
Reversal of valuation allowance | | | — | — | ||||||||
Transfers from Restricted Stock to Unrestricted Stock | — | ( | — | — | ||||||||
Unrealized holding gains included in other comprehensive income | | — | | — | ||||||||
Transfers into Level 3 | | — | — | — | ||||||||
Principal Payments | — | — | ( | — | ||||||||
Unrealized holding gains (losses) included in net income |
| — | |
| ( | — | ||||||
Balance of recurring Level 3 assets at December 31 | $ | | $ | | $ | | $ | — | ||||
Interest Rate Swap Agreements
The fair value of interest rate swap agreements is the market value based on quoted market prices, when available, or market prices provided by recognized broker dealers (Level 1). If listed prices or quotes are not available, fair value is based upon quoted market prices for similar or identical assets or other observable inputs (Level 2) or externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).
The Company’s derivative instruments are classified as Level 2 assets, as the readily observable market inputs to these models are validated to external sources, such as industry pricing services, or are corroborated through recent trades, dealer quotes, yield curves, implied volatility or other market-related data.
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The tables below present the balances of assets measured at fair value on a recurring basis as of December 31st for the past two years:
Fair Value Measurements at December 31, 2025 Using | ||||||||||||
Quoted Prices in | ||||||||||||
Assets/Liabilities | Active Markets | Significant Other | Significant | |||||||||
Measured at Fair | for Identical | Observable | Unobservable | |||||||||
(In thousands) | | Value | | Assets (Level 1) | | Inputs (Level 2) | | Inputs (Level 3) | ||||
Measured on a recurring basis: |
| |
| |
| |
| | ||||
Assets: |
| |
| |
| |
| | ||||
Debt securities available for sale: |
| |
| |
| |
| | ||||
U.S. Government sponsored entities | $ | | $ | — | $ | | $ | — | ||||
State and political subdivisions |
| |
| — |
| |
| — | ||||
Residential mortgage-backed securities |
| |
| — |
| |
| — | ||||
Asset backed securities | | — | | — | ||||||||
Corporate and other securities |
| |
| — |
| |
| | ||||
Total debt securities available for sale | $ | | $ | — | $ | | $ | | ||||
Equity securities, at fair value | $ | | $ | | $ | — | $ | | ||||
Total equity securities | $ | | $ | | $ | — | $ | | ||||
Interest rate swap agreements | $ | | $ | — | $ | | $ | — | ||||
Total swap agreements | $ | | $ | — | $ | | $ | — | ||||
Fair value Measurements at December 31, 2024 Using | ||||||||||||
Quoted Prices in | ||||||||||||
Assets/Liabilities | Active Markets | Significant Other | Significant | |||||||||
Measured at Fair | for Identical | Observable | Unobservable | |||||||||
(In thousands) | | Value | | Assets (Level 1) | | Inputs (Level 2) | | Inputs (Level 3) | ||||
Measured on a recurring basis: |
| |
| |
| |
| | ||||
Assets: |
| |
| |
| |
| | ||||
Debt securities available for sale: |
| |
| |
| |
| | ||||
U.S. Government sponsored entities | $ | | $ | — | $ | | $ | — | ||||
State and political subdivisions |
| |
| — |
| |
| — | ||||
Residential mortgage-backed securities |
| |
| — |
| |
| — | ||||
Asset backed securities | | — | | — | ||||||||
Corporate and other securities |
| |
| — |
| |
| | ||||
Total debt securities available for sale | $ | | $ | — | $ | | $ | | ||||
Equity securities, at fair value | $ | | $ | | $ | — | $ | — | ||||
Total equity securities | $ | | $ | | $ | — | $ | — | ||||
Interest rate swap agreements | $ | | $ | — | $ | | $ | — | ||||
Total swap agreements | $ | | $ | — | $ | | $ | — | ||||
There were
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Fair Value on a Nonrecurring Basis
Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following is a description of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis:
Collateral-Dependent Loans
Fair value is determined based on the fair value of the collateral. Partially charged-off loans are measured for impairment based upon a third-party appraisal for collateral-dependent loans. When an updated appraisal is received for a nonperforming loan, the value on the appraisal may be discounted. If there is a deficiency in the value after the Company applies these discounts, Management applies a specific reserve and the loan remains in nonaccrual status. The receipt of an updated appraisal would not qualify as a reason to put a loan back into accruing status. The Company removes loans from nonaccrual status generally when the ability to collect is reasonably assured and when the loan is brought current as to principal and interest. Charge-offs are determined based upon the loss that Management believes the Company will incur after evaluating collateral for impairment based upon the valuation methods described above and the ability of the borrower to pay any deficiency.
The valuation allowance for individually evaluated loans is included in the allowance for credit losses in the Consolidated Balance Sheets. The valuation allowance for individually evaluated loans was $
The following tables present the assets and liabilities subject to fair value adjustments on a non-recurring basis carried on the balance sheet by caption and by level within the hierarchy (as described above):
Fair Value Measurements at December 31, 2025 Using | ||||||||||||
Quoted Prices | Significant | |||||||||||
in Active | Other | Significant | ||||||||||
Assets/Liabilities | Markets for | Observable | Unobservable | |||||||||
Measured at Fair | Identical Assets | Inputs | Inputs | |||||||||
(In thousands) | | Value | | (Level 1) | | (Level 2) | | (Level 3) | ||||
Measured on a non-recurring basis: |
| |
| |
| |
| | ||||
Financial assets: |
| |
| |
| |
| | ||||
Collateral-dependent loans | $ | | $ | — | $ | — | $ | | ||||
Fair Value Measurements at December 31, 2024 Using | ||||||||||||
Quoted Prices | Significant | |||||||||||
in Active | Other | Significant | ||||||||||
Assets/Liabilities | Markets for | Observable | Unobservable | |||||||||
Measured at Fair | Identical Assets | Inputs | Inputs | |||||||||
(In thousands) | | Value | | (Level 1) | | (Level 2) | | (Level 3) | ||||
Measured on a non-recurring basis: |
| |
| |
| |
| | ||||
Financial assets: |
| |
| |
| |
| | ||||
Collateral-dependent loans | $ | | $ | — | $ | — | $ | | ||||
Fair Value of Financial Instruments
FASB ASC Topic 825, “Financial Instruments,” requires the disclosure of the estimated fair value of certain financial instruments, including those financial instruments for which the Company did not elect the fair value option. These estimated fair values as of December 31, 2025 and December 31, 2024 have been determined using available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop estimates of fair value. The estimates presented are not necessarily indicative of amounts the Company could realize in a current market exchange. The use of alternative market assumptions and estimation methodologies could have had a material effect on these estimates of fair value. The methodology for estimating the fair value of financial assets and liabilities that are measured on a recurring or nonrecurring basis are discussed above.
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The following methods and assumptions were used to estimate the fair value of other financial instruments for which it is practicable to estimate that value:
Securities
The fair value of securities is based upon quoted market prices for similar or identical assets or other observable inputs (Level 2) or externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).
Loans Held for Sale
The fair value of loans held for sale is estimated by using a market approach that includes significant other observable inputs.
Loans
The fair value of loans is estimated by discounting the future cash flows using current market rates that reflect the interest rate risk inherent in the loan, except for previously discussed individually evaluated loans.
Deposit Liabilities
The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date (i.e. carrying value). The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using current market rates.
Borrowed Funds and Subordinated Debentures
The fair value of borrowings is estimated by discounting the projected future cash flows using current market rates.
The table below presents the carrying amount and estimated fair values of the Company’s financial instruments (not presented previously) presented as of December 31st for the past two years:
December 31, 2025 | |||||||||||
Carrying | |||||||||||
(In thousands) | amount | | Level 1 | | Level 2 | | Level 3 | ||||
Financial assets: | |
| |
| |
| | ||||
Debt securities held to maturity | $ | | $ | — | $ | | $ | — | |||
Loans held for sale |
| |
| — |
| |
| — | |||
Loans, net of allowance for credit losses |
| |
| — |
| |
| | |||
Financial liabilities: |
|
|
|
| |||||||
Deposits |
| |
| — |
| |
| — | |||
Borrowed funds and subordinated debentures |
| |
| — |
| |
| — | |||
December 31, 2024 | |||||||||||
Carrying | |||||||||||
(In thousands) | amount | | Level 1 | | Level 2 | | Level 3 | ||||
Financial assets: | |
| |
| |
| | ||||
Debt securities held to maturity | $ | | $ | — | $ | | $ | — | |||
Loans held for sale |
| |
| — |
| |
| — | |||
Loans, net of allowance for credit losses |
| |
| — |
| |
| | |||
Financial liabilities: |
|
|
|
| |||||||
Deposits |
| |
| — |
| |
| — | |||
Borrowed funds and subordinated debentures |
| |
| — |
| |
| — | |||
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Limitations
Fair value estimates are made at a point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-statement of condition financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the effect of fair value estimates have not been considered in the above estimates.
16. Condensed Financial Statements of Unity Bancorp, Inc.
(Parent Company Only)
Balance Sheets
December 31, | December 31, | |||||
(In thousands) | | 2025 | | 2024 | ||
ASSETS |
| |
| | ||
Cash and cash equivalents | $ | | $ | | ||
Equity securities |
| |
| | ||
Investment in subsidiaries |
| |
| | ||
Premises and equipment, net |
| |
| | ||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| |
| | ||
Other liabilities |
| |
| | ||
Subordinated debentures |
| |
| | ||
Shareholders’ equity |
| |
| | ||
Total liabilities and shareholders’ equity | $ | | $ | | ||
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Statements of Income
For the year ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
Dividend from Bank | $ | | $ | | ||
Gain on sales of securities |
| |
| | ||
Market value appreciation on equity securities | | | ||||
Release of credit losses securities | | — | ||||
Other income |
| |
| | ||
Total income |
| |
| | ||
Interest expenses |
| |
| | ||
Other expenses |
| |
| | ||
Total expenses |
| |
| | ||
Income before provision for income taxes and equity in undistributed net income of subsidiary |
| |
| | ||
Income tax expense |
| |
| | ||
Income before equity in undistributed net income of subsidiary |
| |
| | ||
Equity in undistributed net income of subsidiaries |
| |
| | ||
Net income | $ | | $ | | ||
Statements of Cash Flows
For the year ended December 31, | ||||||
(In thousands) | | 2025 | | 2024 | ||
OPERATING ACTIVITIES |
| |
| | ||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
| | |||
Equity in undistributed net income of subsidiaries |
| ( |
| ( | ||
Release of credit losses securities | ( | — | ||||
Gain on sales of securities |
| ( |
| ( | ||
Net accretion of purchase premiums and discounts on securities |
| — |
| ( | ||
Net change in other assets and other liabilities |
| ( |
| | ||
Net cash provided by operating activities |
| |
| | ||
INVESTING ACTIVITIES |
| |
| | ||
Purchases of equity securities |
| ( |
| ( | ||
Maturities and principal payments on securities available for sale | — | | ||||
Purchases of premises and equipment | ( | ( | ||||
Proceeds from sales of securities |
| |
| | ||
Net cash provided by investing activities |
| |
| | ||
FINANCING ACTIVITIES |
| |
| | ||
(Payments) proceeds from exercise of stock based compensation, net of taxes |
| ( |
| | ||
Purchase of treasury stock | ( | ( | ||||
Cash dividends paid on common stock |
| ( |
| ( | ||
Net cash used in financing activities |
| ( |
| ( | ||
Increase (decrease) in cash and cash equivalents |
| |
| ( | ||
Cash and cash equivalents, beginning of period |
| |
| | ||
Cash and cash equivalents, end of period | $ | | $ | | ||
SUPPLEMENTAL DISCLOSURES |
| |
| | ||
Interest paid | $ | | $ | | ||
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17. Subsequent Events
In February 2026, subsequent to the Company’s fiscal year end of December 31, 2025, the contractual restriction on Patriot Bancorp, Inc.’s equity position, previously converted from a debt instrument, expired. Prior to the lifting of this restriction, the shares were classified as restricted securities and presented at fair value in the accompanying consolidated financial statements.
Upon expiration of the restriction, the shares became freely tradable. To the extent that shares remain held by the Company, Management will continue to mark this position to market.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors
Unity Bancorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Unity Bancorp, Inc. and its subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2025, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 4, 2026 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses – Collectively Evaluated Loans
As described in Notes 1, 3 and 4 to the financial statements, the Company has recorded an allowance for credit losses (ACL) in the amount of $32.3 million as of December 31, 2025, representing management’s estimate of credit losses over the remaining expected life of the Company’s loan portfolio as of that date. Management determined these amounts, and corresponding provision for credit loss expense, pursuant to the application of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses.
The Company’s methodology to determine its allowance for credit losses incorporates quantitative and qualitative assessments of its historical losses, current loan portfolio and economic conditions, the application of forecasted economic conditions, and related modeling. We determined that performing procedures relating to the qualitative and forecasted components of the Company’s methodology are a critical audit matter.
The principal considerations for our determination are (i) the application of significant judgment and estimation on the part of management, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence obtained, and (ii) significant audit effort was necessary in evaluating management’s methodology, significant assumptions and calculations.
How the Critical Audit Matter was addressed in the Audit
Following are some of the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collectively evaluated ACL, including controls over the following:
| ● | Validation of the model validation for appropriateness of model usage along with recalculation of model results. |
| ● | Completeness and accuracy of loan data. |
| ● | Mathematical accuracy of the calculation. |
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| ● | Development of qualitative adjustments to model results. |
| ● | Evaluation of the reasonableness and relevance of management’s assumptions including general qualitative factors and economic forecasts. |
In addition to the test of controls, addressing the matters above involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures also included, among others, reviewing the Company’s model oversight ensuring appropriate recalculation of the model used along with management’s review of model validation results, testing significant assumptions used in the calculation, testing management’s process for determining the qualitative reserve component, evaluating the appropriateness of management’s methodology relating to the qualitative reserve component and testing the completeness and accuracy of data utilized by management.
/s/
March 4, 2026
We have served as the Company's auditor since 2023.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors
Unity Bancorp, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Unity Bancorp, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the COSO in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated March 4, 2026 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
March 4, 2026
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Supplementary Data (Unaudited)
Quarterly Financial Information
The following quarterly financial information for the years ended December 31, 2025 and 2024 is unaudited. However, in the opinion of Management, all adjustments, which include normal recurring adjustments necessary to present fairly the results of operations for the periods, are reflected.
2025 | ||||||||||||
(In thousands, except per share data) | | December 31 | | September 30 | | June 30 | | March 31 | ||||
Total interest income | $ | | $ | | $ | | $ | | ||||
Total interest expense |
| |
| |
| |
| | ||||
Net interest income |
| |
| |
| |
| | ||||
Provision (release) for credit losses |
| |
| |
| ( |
| | ||||
Net interest income after provision for credit losses |
| |
| |
| |
| | ||||
Total noninterest income |
| |
| |
| |
| | ||||
Total noninterest expense |
| |
| |
| |
| | ||||
Income before provision for income taxes |
| |
| |
| |
| | ||||
Provision for income taxes |
| |
| |
| |
| | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Net income per common share - Basic | $ | | $ | | $ | | $ | | ||||
Net income per common share - Diluted |
| |
| |
| |
| | ||||
2024 | ||||||||||||
(In thousands, except per share data) | | December 31 | | September 30 | | June 30 | | March 31 | ||||
Total interest income | $ | | $ | | $ | | $ | | ||||
Total interest expense |
| |
| |
| |
| | ||||
Net interest income |
| |
| |
| |
| | ||||
Provision for credit losses |
| |
| |
| |
| | ||||
Net interest income after provision for credit losses |
| |
| |
| |
| | ||||
Total noninterest income |
| |
| |
| |
| | ||||
Total noninterest expense |
| |
| |
| |
| | ||||
Income before provision for income taxes |
| |
| |
| |
| | ||||
Provision for income taxes |
| |
| |
| |
| | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Net income per common share - Basic | $ | | $ | | $ | | $ | | ||||
Net income per common share - Diluted |
| |
| |
| |
| | ||||
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Supplementary Data (Unaudited)
At or for the years ended December 31, | |||||||
(In thousands, except percentages and per share data) | | 2025 | | 2024 | | ||
Selected Results of Operations |
| |
| |
| ||
Interest income | $ | 173,628 | $ | 155,738 | |||
Interest expense |
| 56,595 |
| 57,127 | |||
Net interest income |
| 117,033 |
| 98,611 | |||
Provision for credit losses |
| 3,941 |
| 3,949 | |||
Noninterest income |
| 14,779 |
| 8,469 | |||
Noninterest expense |
| 52,359 |
| 48,741 | |||
Provision for income taxes |
| 17,561 |
| 12,940 | |||
Net income |
| 57,951 |
| 41,450 | |||
Per Share Data |
| |
| | |||
Net income per common share - Basic | $ | 5.78 | $ | 4.13 | |||
Net income per common share - Diluted |
| 5.67 |
| 4.06 | |||
Book value per common share |
| 34.63 |
| 29.48 | |||
Market value per common share |
| 51.72 |
| 43.61 | |||
Cash dividends declared on common shares |
| 0.58 |
| 0.52 | |||
Selected Balance Sheet Data |
| |
| | |||
Assets | $ | 2,966,652 | $ | 2,654,017 | |||
Loans |
| 2,544,713 |
| 2,260,657 | |||
Allowance for credit losses |
| (32,342) |
| (26,788) | |||
Securities |
| 124,015 |
| 145,028 | |||
Deposits |
| 2,324,061 |
| 2,100,313 | |||
Borrowed funds and subordinated debentures |
| 266,084 |
| 230,814 | |||
Shareholders’ equity |
| 345,631 |
| 295,583 | |||
Common shares outstanding |
| 9,982 |
| 10,026 | |||
Performance Ratios |
| |
| | |||
Return on average assets |
| 2.17 | % |
| 1.68 | % | |
Return on average equity |
| 18.07 |
| 14.99 | |||
Net interest spread |
| 3.69 |
| 3.29 | |||
Net interest margin |
| 4.52 |
| 4.16 | |||
Asset Quality Ratios |
| |
| | |||
Allowance for credit losses to loans |
| 1.27 | % |
| 1.18 | ||
Allowance for credit losses to nonaccrual loans |
| 108.40 |
| 204.77 | % | ||
Nonaccrual loans to total loans |
| 1.17 |
| 0.58 | |||
Nonaccrual assets to total assets |
| 1.06 |
| 0.57 | |||
Net charge-offs to average loans |
| 0.06 |
| 0.07 | |||
Capital Ratios - Company |
|
| |||||
Leverage Ratio |
| 12.72 |
| 12.22 | |||
Common Equity Tier 1 risk-based capital ratio |
| 14.45 |
| 13.90 | |||
Tier 1 risk-based capital ratio |
| 14.87 |
| 14.37 | |||
Total risk-based capital ratio |
| 16.12 |
| 15.62 | |||
Capital Ratios - Bank |
| |
| | |||
Leverage Ratio |
| 12.39 |
| 11.95 | |||
Common Equity Tier 1 risk-based capital ratio |
| 14.45 |
| 14.12 | |||
Tier 1 risk-based capital ratio |
| 14.45 |
| 14.12 | |||
Total risk-based capital ratio |
| 15.70 |
| 15.37 | |||
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure:
None.
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Item 9A. Controls and Procedures:
| (a) | Evaluation of disclosure controls and procedures: |
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: |
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of the principal executive officer and the principal financial officer, management conducted an evaluation of the effectiveness of our control over financial reporting based on the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under the framework, Management has concluded that our internal controls over financial reporting were effective as of December 31, 2025.
Wolf & Company, P.C., the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K, has issued an audit report on the Company’s internal control over financial reporting as of December 31, 2025. The report is included in this item under the heading “Report of Independent Registered Public Accounting Firm.”
| (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:
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections:
None
PART III
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 2025 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 23, 2026.
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The following table sets forth certain information as of December 31, 2025, regarding each executive officer of the Company who is not also a director.
Name, Age and Position | | Officer Since | | Principal Occupation During Past Five Years |
| (1) | Effective as January 1, 2026, Mr. Boyan was promoted President of the Company and the Bank and has been elected as a Director of both the Bank and the Company.. Mr. James Hughes, who previously served as both President and Chief Executive Officer, continues in his role as Chief Executive Officer. |
| (2) | Effective as January 1, 2026, Mr. Davies was promoted First Senior Vice President and Chief Financial Officer of the Company and the Bank. Mr. George Boyan, who previously served as Chief Financial Officer, was simultaneously promoted to President. |
Item 11. Executive Compensation:
The information concerning executive compensation under the caption, “Executive Compensation,” in the Proxy Statement for the Company’s 2026 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 28, 2026.
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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 2026 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 28, 2026.
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 equity compensation plans as of December 31, 2025.
Equity Compensation Plan Information | |||||||
Number of securities | |||||||
Number of securities | remaining available | ||||||
to be issued upon | Weighted-average | for issuance under | |||||
exercise of | exercise price of | equity compensation | |||||
outstanding options, | outstanding options, | plans (excluding | |||||
warrants and rights | warrants and rights | securities reflected in | |||||
| (A) | | (B) | | column (A)) (C) (1) | ||
Equity compensation plans approved by security holders (stock options) |
| 305,266 | $ | 19.63 |
| 350,960 | |
Equity compensation plans approved by security holders (restricted stock) |
| 158,856 |
| — |
| — | |
Equity compensation plans not approved by security holders |
| N/A |
| N/A |
| N/A | |
Total |
| 464,122 | $ | 19.63 |
| 350,960 | |
| (1) | Represents securities available for issuance under the Company’s active Equity Compensation Plans to be allocated between incentive and non-qualified stock options, restricted stock awards, performance units and deferred stock. |
Item 13. Certain Relationships and Related Transactions and Director Independence:
The information concerning certain relationships and related transactions under the caption, “Interest of Management and Others in Certain Transactions; Review, Approval or Ratification of Transactions with Related Persons,” in the Proxy Statement for the Company’s 2026 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 28, 2026.
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, “Independent Registered Public Accounting Firm,” in the Proxy Statement for the Company’s 2026 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 28, 2026.
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PART IV
Item 15. Exhibits and Financial Statement Schedules:
| a) | DOCUMENTS: |
| 1. | The following Consolidated Financial Statements and Supplementary Data of the Company and subsidiaries are filed as part of this annual report: |
| ● | Consolidated Balance Sheets as of December 31, 2025 and 2024 |
| ● | Consolidated Statements of Income for the years ended December 31, 2025 and 2024 |
| ● | Consolidated Statements of Comprehensive Income for the years ended December 31, 2025 and 2024 |
| ● | Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2025 and 2024 |
| ● | Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 |
| ● | Notes to Consolidated Financial Statements |
| ● | Report of Independent Registered Public Accounting Firm |
| 2. | All Financial Statement Schedules are omitted as the required information is inapplicable or the information is presented in the Consolidated Financial Statements or related notes. |
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| b) | EXHIBITS: |
Exhibit | Description of Exhibits | |
3(i) | Certificate of Incorporation of the Company, as amended (1) | |
3(ii) | Bylaws of the Company (2) | |
4(i) | Form of Stock Certificate (2) | |
4(vi) | Description of the Registrant’s Securities | |
10(i) | Amended and Restated Employment Agreement dated June 4, 2015 with James A. Hughes (7), as amended by Amendment Agreement dates February, 6 2020 (12) | |
10(vi) | 2015 Stock Option Plan (6) | |
10(vii) | Supplemental Executive Retirement Plan dated January 1, 2014 with James A. Hughes (17), as amended Supplemental Executive Retirement Plan dated October 25, 2018 with James A. Hughes (10) | |
10(viii) | Executive Incentive Retirement Plan dated October 22, 2015 (8) | |
10(ix) | 2017 Stock Option Plan (9) | |
10(x) | 2019 Equity Compensation Plan (11) | |
10(xi) | Form of Indemnification Agreement entered into on January 23, 2020 by and among the Registrant, Unity Bank and each of their respective Directors (13) | |
10(xii) | Joinder Agreement with Executive Vice President and Chief Financial Officer George Boyan dated February 24, 2022 (14), as amended by Amendment Agreement dated November 10, 2022 (15) | |
10(xiii) | Change in Control Agreement for FSVP, Chief Lending Officer James Donovan (16) | |
10(xiv) | Change in Control Agreement for FSVP, Chief Financial Officer James Davies | |
10(xv) | Change in Control Agreement for SVP, Chief Retail Officer, Daniel Sharabba | |
10(xvi) | 2023 Equity Compensation Plan (18) | |
10(xvii) | Deferred Compensation Plan for James A. Hughes, David Bove, George Boyan, James Davies, Minsu Kim and Daniel Sharabba, as amended Deferred Compensation Plan dated December 18, 2025 (19) | |
10(xviii) | Change in Control Agreement for FSVP, Director of Mortgage Lending Vincent Geraci | |
10(xix) | Change in Control Agreement for SVP, Chief Credit Officer Minsu Kim | |
10(xx) | Change in Control Agreement for SVP, Chief Information Officer David Bove | |
19 | Insider Trading Policy | |
21 | Subsidiaries of the Registrant | |
23.1 | Consent of Wolf & Company, PC | |
31.1 | Certification of 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 | |
31.3 | Certification of President 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 | |
97 | Compensation Recoupment Policy | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained as Exhibit 101) |
| (1) | 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. |
| (2) | Previously filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K filed February 24, 2017. |
| (3) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on May 26, 2011 and incorporated by reference herein. |
| (4) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on July 12, 2013 and incorporated by reference herein. |
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| (5) | Previously filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K filed October 10, 2017. |
| (6) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on May 22, 2015 and incorporated by reference herein. |
| (7) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on June 5, 2015 and incorporated by reference herein. |
| (8) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on October 27, 2015 and incorporated by reference herein. |
| (9) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on May 22, 2017 and incorporated by reference herein. |
| (10) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on October 30, 2018 and incorporated by reference herein. |
| (11) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on June 4, 2019 and incorporated by reference herein. |
| (12) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on February 6, 2020 and incorporated by reference herein. |
| (13) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on January 28, 2020 and incorporated by reference herein. |
| (14) | Incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed February 24, 2022. |
| (15) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on November 10, 2022 and incorporated herein. |
| (16) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on August 7, 2024 and incorporated herein. |
| (17) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on June 5, 2015 and incorporated herein. |
| (18) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-8 filed on May 3, 2023 and incorporated herein. |
| (19) | Previously filed with the Securities and Exchange Commission as an Exhibit to Form 8-K filed on December 18, 2025 and incorporated herein. |
| c) | Not applicable |
Item 16. Form 10-K Summary:
None.
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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.
By: | /s/ James Davies |
James Davies | |
First Senior Vice President and Chief Financial Officer | |
Date: | March 4, 2026 |
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 4, 2026 | ||
David D. Dallas | ||||
/s/ James A. Hughes | Executive Vice President, Chief Executive Officer and Director | March 4, 2026 | ||
James A. Hughes | ||||
/s/ George Boyan | President and Director | March 4, 2026 | ||
George Boyan | ||||
/s/ Aaron Tucker | Vice Chairman of the Board and Director | March 4, 2026 | ||
Aaron Tucker | ||||
/s/ Dr. Mark S. Brody | Director | March 4, 2026 | ||
Dr. Mark S. Brody | ||||
/s/ Wayne Courtright | Director | March 4, 2026 | ||
Wayne Courtright | ||||
/s/ Robert H. Dallas, II | Director | March 4, 2026 | ||
Robert H. Dallas, II | ||||
/s/ Dr. Mary E. Gross | Director | March 4, 2026 | ||
Dr. Mary E. Gross | ||||
/s/ Peter E. Maricondo | Director | March 4, 2026 | ||
Peter E. Maricondo | ||||
/s/ Raj Patel | Director | March 4, 2026 | ||
Raj Patel | ||||
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FAQ
What is Unity Bancorp (UNTY) and its primary business focus?
How concentrated is Unity Bancorp’s loan portfolio in real estate?
What credit loss protection does Unity Bancorp report?
How does Unity Bancorp (UNTY) fund its operations and manage liquidity?
What are key risks highlighted in Unity Bancorp’s 10-K filing?
How significant is SBA lending to Unity Bancorp’s business?
What workforce does Unity Bancorp report at year-end 2025?
