Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____. Commission File Number 1-12431 Unity Bancorp, Inc. (Exact name of registrant as specified in its charter) New Jersey 22-3282551 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____. Commission File Number 1-12431 Unity Bancorp, Inc. (Exact name of registrant as specified in its charter) New Jersey 22-328255 ...

Table of Contents SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ________ Commission file number 1-12431 Unity Ban ...

Table of Contents Commission File Number 1-12431 Unity Bancorp, Inc. (Exact name of registrant as specified in its charter) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____. New Jersey 22-32 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____. Commission File Number 1-12431 Unity Bancorp, Inc. (Exact name of registrant as specified in its charter) New Jersey 22-3282551 ...

```markdown [**PART I CONSOLIDATED FINANCIAL INFORMATION**](index=3&type=section&id=PART%20I%20CONSOLIDATED%20FINANCIAL%20INFORMATION) [**ITEM 1 Consolidated Financial Statements (Unaudited)**](index=3&type=section&id=ITEM%201%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents unaudited consolidated financial statements for Q1 2021 and Q4 2020, with detailed notes on accounting policies and financial position [**Consolidated Balance Sheets at March 31, 2021 and December 31, 2020**](index=5&type=section&id=Consolidated%20Balance%20Sheets%20at%20March%2031%2C%202021%20and%20December%2031%2C%202020) Provides a snapshot of the Company's financial position, detailing assets, liabilities, and shareholders' equity at quarter-end Consolidated Balance Sheets (in thousands) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Assets | $2,004,818 | $1,958,914 | | Cash and cash equivalents | $239,577 | $219,311 | | Net Loans | $1,645,483 | $1,604,712 | | Total Liabilities | $1,823,632 | $1,785,003 | | Total Deposits | $1,628,393 | $1,557,959 | | Total Shareholders' Equity | $181,186 | $173,911 | [**Consolidated Statements of Income for the three months ended March 31, 2021 and 2020**](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20three%20months%20ended%20March%2031%2C%202021%20and%202020) Details the Company's financial performance, including interest income, expenses, and net income for the first quarter of 2021 and 2020 Consolidated Statements of Income (in thousands) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :------------- | | Total Interest Income | $20,576 | $19,585 | $991 | 5.1% | | Total Interest Expense | $2,558 | $4,341 | $(1,783) | -41.1% | | Net Interest Income | $18,018 | $15,244 | $2,774 | 18.2% | | Provision for Loan Losses | $500 | $1,500 | $(1,000) | -66.7% | | Total Noninterest Income | $3,726 | $2,545 | $1,181 | 46.4% | | Total Noninterest Expense | $9,802 | $9,323 | $479 | 5.1% | | Net Income | $8,496 | $5,368 | $3,128 | 58.3% | | Net Income per Common Share - Basic | $0.81 | $0.49 | $0.32 | 65.3% | | Net Income per Common Share - Diluted | $0.80 | $0.49 | $0.31 | 63.3% | [**Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020**](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20three%20months%20ended%20March%2031%2C%202021%20and%202020) Presents net income and other comprehensive income components, reflecting the total change in equity from non-owner sources Consolidated Statements of Comprehensive Income (in thousands) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Net income | $8,496 | $5,368 | | Total other comprehensive income (loss) | $655 | $(986) | | Total comprehensive income | $9,151 | $4,382 | [**Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2021 and 2020**](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202021%20and%202020) Outlines the changes in shareholders' equity, including net income, other comprehensive income, dividends, and stock repurchases Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Balance, beginning of period | $173,911 | $160,709 (Dec 31, 2019) | | Net income | $8,496 | $5,368 | | Other comprehensive income, net of tax | $655 | $(986) | | Dividends on common stock | $(804) | $(841) | | Treasury stock purchased | $(1,349) | $(172) | | Balance, end of period | $181,186 | $164,305 (March 31, 2020) | [**Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020**](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202021%20and%202020) Summarizes cash inflows and outflows from operating, investing, and financing activities for the first quarter Consolidated Statements of Cash Flows (in thousands) | Activity | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Net cash provided by operating activities | $11,649 | $11,484 | | Net cash used in investing activities | $(29,567) | $(3,858) | | Net cash provided by financing activities | $38,184 | $13,353 | | Increase in cash and cash equivalents | $20,266 | $20,979 | | Cash and cash equivalents, end of period | $239,577 | $178,995 | [**Notes to the Consolidated Financial Statements**](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the consolidated financial statements, including accounting policies and specific financial instrument information [**NOTE 1. Significant Accounting Policies**](index=10&type=section&id=NOTE%201.%20Significant%20Accounting%20Policies) Outlines the key accounting principles and methods used in preparing the financial statements, including estimates and assumptions - The financial statements are unaudited and prepared in accordance with **U.S. GAAP** and **SEC rules**, with management making estimates and assumptions that could differ from actual results[21](index=21&type=chunk)[22](index=22&type=chunk) - The **COVID-19** pandemic has significantly impacted the Company's markets and may materially and adversely affect future financial condition and results of operations[23](index=23&type=chunk)[24](index=24&type=chunk) [**NOTE 2. Litigation**](index=18&type=section&id=NOTE%202.%20Litigation) Discusses ongoing legal proceedings and management's assessment of their potential impact on the Company's financial position - Management believes current litigation will not materially affect the Company's financial position or results of operations[52](index=52&type=chunk) [**NOTE 3. Net Income per Share**](index=18&type=section&id=NOTE%203.%20Net%20Income%20per%20Share) Presents the calculation of basic and diluted net income per common share for the reporting periods Net Income per Share | Metric | Q1 2021 | Q1 2020 | | :-------------------------------- | :------ | :------ | | Net income | $8,496 | $5,368 | | Weighted average common shares outstanding - Basic | 10,437 | 10,883 | | Weighted average common shares outstanding - Diluted | 10,565 | 11,037 | | Net income per common share - Basic | $0.81 | $0.49 | | Net income per common share - Diluted | $0.80 | $0.49 | [**NOTE 4. Income Taxes**](index=19&type=section&id=NOTE%204.%20Income%20Taxes) Details the Company's income tax expense and effective tax rates, including the impact of specific tax regulations Income Tax Expense (in thousands) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :-------------------- | :--------------------- | :--------------------- | | Income tax expense | $2,946 | $1,598 | | Effective tax rate | 25.7% | 22.9% | - New Jersey's corporate income surtax of **2.5%** was retroactively extended until December 31, 2023, impacting the Company's tax rate[58](index=58&type=chunk) [**NOTE 5. Other Comprehensive (Loss) Income**](index=19&type=section&id=NOTE%205.%20Other%20Comprehensive%20(Loss)%20Income) Reports components of comprehensive income beyond net income, such as unrealized gains or losses on available-for-sale securities Other Comprehensive (Loss) Income (in thousands) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Period change in other comprehensive income (loss) | $655 | $(986) | | Balance, end of period (Accumulated other comprehensive (loss) income) | $(499) | $(797) | [**NOTE 6. Fair Value**](index=20&type=section&id=NOTE%206.%20Fair%20Value) Describes the methodologies and categorization of fair value measurements for financial instruments - Fair value measurements are categorized into Level **1** (quoted prices in active markets), Level **2** (observable inputs other than quoted prices), and Level **3** (unobservable inputs)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[70](index=70&type=chunk) Fair Value Measurements (in thousands) | Asset/Liability (in thousands) | March 31, 2021 (Fair Value) | Level 1 | Level 2 | Level 3 | | :----------------------------- | :-------------------------- | :------ | :------ | :------ | | Debt securities available for sale | $32,330 | — | $27,792 | $4,538 | | Equity securities | $2,221 | — | $2,221 | — | | Loans held for sale | $10,392 | — | $10,392 | — | | Interest rate swap agreements | $(219) | — | $(219) | — | | Impaired collateral-dependent loans (non-recurring) | $12,591 | — | — | $12,591 | [**NOTE 7. Securities**](index=32&type=section&id=NOTE%207.%20Securities) Provides details on the Company's debt and equity securities portfolios, including fair values and unrealized gains or losses Securities Portfolio (in thousands) | Security Type (in thousands) | March 31, 2021 (Fair Value) | December 31, 2020 (Fair Value) | | :--------------------------- | :-------------------------- | :----------------------------- | | Total debt securities available for sale | $32,330 | $45,617 | | Total equity securities | $2,221 | $1,954 | - Unrealized losses on debt securities are primarily due to increases in interest rate spreads or interest rates, and are not considered other-than-temporarily impaired as the Company does not intend to sell them before recovery of amortized cost[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) Net Security Gains (Losses) (in thousands) | Metric (in thousands) | Q1 2021 | Q1 2020 | | :-------------------- | :------ | :------ | | Net security gains (losses) | $310 | $(170) | [**NOTE 8. Loans**](index=38&type=section&id=NOTE%208.%20Loans) Details the composition of the loan portfolio by type and provides information on internal risk rating systems Loan Portfolio by Type (in thousands) | Loan Type (in thousands) | March 31, 2021 | December 31, 2020 | | :----------------------- | :------------- | :---------------- | | SBA loans held for investment | $38,296 | $39,587 | | SBA PPP loans | $169,117 | $118,257 | | Commercial loans | $853,078 | $839,788 | | Residential mortgage loans | $448,149 | $467,586 | | Consumer loans | $60,502 | $66,100 | | Consumer construction loans | $90,497 | $87,164 | | Total loans | $1,668,448 | $1,627,817 | - The Company uses a **1-10 internal risk rating system** for SBA 7(a), SBA 504, and commercial loans, categorizing them as Pass (**1-6**), Special Mention (**7**), Substandard (**8-9**), or Loss (**10**)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - Residential mortgage and consumer loans are categorized as performing or nonperforming[124](index=124&type=chunk) Loan Categories by Risk Rating (in thousands) | Loan Category (in thousands) | March 31, 2021 (Total) | December 31, 2020 (Total) | | :--------------------------- | :--------------------- | :------------------------ | | SBA & Commercial loans - Pass | $1,022,055 | $959,487 | | SBA & Commercial loans - Special mention | $28,464 | $31,264 | | SBA & Commercial loans - Substandard | $9,972 | $6,881 | | Residential mortgage & Consumer loans - Performing | $589,872 | $612,588 | | Residential mortgage & Consumer loans - Nonperforming | $9,276 | $8,262 | [**NOTE 9. Allowance for Loan Losses and Reserve for Unfunded Loan Commitments**](index=50&type=section&id=NOTE%209.%20Allowance%20for%20Loan%20Losses%20and%20Reserve%20for%20Unfunded%20Loan%20Commitments) Explains the methodology for calculating the allowance for loan losses and the reserve for unfunded loan commitments Allowance for Loan Losses (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :-------------------- | :------------- | :---------------- | :------------- | | Allowance for loan losses | $22,965 | $23,105 | $17,376 | | Allowance to total loans | 1.38% | 1.42% | 1.21% | | Net charge-offs (Q1) | $640 | N/A | $519 | - The allowance for loan losses methodology includes specific reserves for individually impaired loans and **TDRs**, and general reserves based on a weighted five-year historical net charge-off rate adjusted for environmental factors[148](index=148&type=chunk)[149](index=149&type=chunk)[295](index=295&type=chunk) Reserve for Unfunded Loan Commitments (in thousands) | Reserve (in thousands) | March 31, 2021 | December 31, 2020 | | :--------------------- | :------------- | :---------------- | | Reserve for unfunded loan commitments | $310 | $288 | [**NOTE 10. New Accounting Pronouncements**](index=54&type=section&id=NOTE%2010.%20New%20Accounting%20Pronouncements) Discusses recently adopted and pending accounting standards and their impact on the Company's financial statements - The Company adopted **ASU 2019-12 (Income Taxes)** and **ASU 2020-01 (Equity Securities)** as of January 1, 2021, with no material impact on its consolidated financial statements[161](index=161&type=chunk)[162](index=162&type=chunk) - The Company is currently evaluating the impact of **ASU 2016-13 (Credit Losses)**, **ASU 2020-03 (Financial Instruments)**, **ASU 2020-04 (Reference Rate Reform)**, and **ASU 2020-06 (Convertible Instruments)** on its financial statements[159](index=159&type=chunk)[163](index=163&type=chunk)[166](index=166&type=chunk) [**NOTE 11. Derivative Financial Instruments and Hedging Activities**](index=58&type=section&id=NOTE%2011.%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) Describes the Company's use of derivative instruments, primarily interest rate swaps, for hedging purposes and their fair value - The Company uses interest rate swap agreements to hedge variable-rate debt, receiving variable interest and paying fixed interest to limit interest payment variability[175](index=175&type=chunk) Derivative Financial Instruments (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :---------------------- | :------------- | :---------------- | | Notional amount (in thousands) | $70,000 | $80,000 | | Number of contracts | 4 | 5 | | Fair value (in thousands) | $(219) | $(1,026) | | Gain (loss) recognized in OCI (Q1) (in thousands) | $807 | $(1,410) | [**NOTE 12. Employee Benefit Plans**](index=62&type=section&id=NOTE%2012.%20Employee%20Benefit%20Plans) Provides information on the Company's employee compensation plans, including stock options, restricted stock, 401(k) contributions, and executive retirement plans Employee Benefit Plan Expenses (in thousands) | Metric (in thousands) | Q1 2021 | Q1 2020 | | :-------------------- | :------ | :------ | | Stock option compensation expense | $207,602 | $192,489 | | Restricted stock compensation expense | $166,349 | $172,904 | | 401(k) contributions | $261 | $185 | - The President and CEO's Supplemental Executive Retirement Plan (SERP) provides supplemental nonqualified retirement benefits, with vesting commencing January 1, 2014, and full vesting by January 1, 2024[187](index=187&type=chunk)[188](index=188&type=chunk) [**NOTE 13. Regulatory Capital**](index=69&type=section&id=NOTE%2013.%20Regulatory%20Capital) Details the Company's and Bank's regulatory capital ratios, including the election to use the Community Bank Leverage Ratio framework - The Bank has opted into the **Community Bank Leverage Ratio (CBLR)** framework, which applies to qualifying community banking organizations with less than **$10 billion** in total consolidated assets[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) Community Bank Leverage Ratio | Entity | March 31, 2021 | December 31, 2020 | | :----- | :------------- | :---------------- | | Company CBLR | 10.19% | 10.09% | | Bank CBLR | 9.85% | 9.80% | [**NOTE 14. Leases**](index=69&type=section&id=NOTE%2014.%20Leases) Outlines the Company's accounting for operating leases, including the recognition of right-of-use assets and lease liabilities - The Company recognizes ROU assets and lease liabilities for operating leases with terms greater than **12 months**, in accordance with **ASU 2016-02**[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) Operating Lease Information (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Operating lease ROU assets | $2,247 | $2,365 | | Operating lease liabilities | $2,302 | $2,400 (approx) | | Operating lease cost (Q1) | $149 | $148 | [**ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations**](index=73&type=section&id=ITEM%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes Unity Bancorp, Inc.'s Q1 2021 financial condition and results, covering earnings, balance sheet, COVID-19 impact, and regulatory matters [**Overview**](index=73&type=section&id=Overview) Introduces Unity Bancorp, Inc., its banking services, branch network, and corporate structure - Unity Bancorp, Inc. operates Unity Bank, offering commercial and retail banking services through **19 branches** in New Jersey and Pennsylvania, and online[210](index=210&type=chunk) - The Company's structure includes Unity (NJ) Statutory Trust II (issuing subordinated debentures treated as Tier I Capital) and Unity Risk Management, Inc. (a captive insurance company)[211](index=211&type=chunk) [**COVID-19**](index=73&type=section&id=COVID-19) Discusses the adverse economic impact of the COVID-19 pandemic and the Company's response through customer support - The **COVID-19** pandemic has adversely affected the economy, leading the Company to provide short-term payment deferrals and fee waivers to customers[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) - The full impact of the pandemic is uncertain, with potential for increased nonperforming assets and negative effects on loan demand and services due to reduced commercial activity and consumer spending[215](index=215&type=chunk)[216](index=216&type=chunk) [**CARES Act**](index=75&type=section&id=CARES%20Act) Explains the **Paycheck Protection Program (PPP)** established by the **CARES Act** to support small businesses - The **CARES Act** established the **Paycheck Protection Program (PPP)** to assist small businesses with payroll costs, offering potentially forgivable loans[217](index=217&type=chunk)[218](index=218&type=chunk) Paycheck Protection Program (PPP) Summary | Metric | Year Ended Dec 31, 2020 | As of March 31, 2021 | | :-------------------------------- | :---------------------- | :------------------- | | PPP applications approved | 1,224 | N/A | | PPP fundings (approx.) | $143.0 million | N/A | | PPP loans remaining on balance sheet | N/A | $83.5 million | [**Economic Aid Act**](index=75&type=section&id=Economic%20Aid%20Act) Details the reopening of the **PPP** program under the **Economic Aid Act**, including Second Draw **PPP Loans** - The **Economic Aid Act** reopened the **PPP** program, allowing for Second Draw **PPP Loans** for eligible small businesses with significant revenue losses[220](index=220&type=chunk)[221](index=221&type=chunk) Economic Aid Act PPP Loan Fundings | Metric | As of March 31, 2021 | | :-------------------------------- | :------------------- | | PPP loans funded under Economic Aid Act | 723 | | Total fundings under Economic Aid Act | $85.6 million | [**Deferrals**](index=77&type=section&id=Deferrals) Discusses loan payment deferrals granted due to **COVID-19** and their classification regarding **Troubled Debt Restructurings** - Loan payment deferrals granted due to **COVID-19** are not considered **Troubled Debt Restructurings (TDRs)** if borrowers were current as of December 31, 2019, or prior to deferral[223](index=223&type=chunk)[145](index=145&type=chunk) Loan Payment Deferrals (in thousands) | Loan Type (in thousands) | Unpaid principal balance of deferrals (March 31, 2021) | % total deferrals to total loans | | :----------------------- | :----------------------------------------------------- | :------------------------------- | | SBA loans held for investment | $342 | 0.89% | | Commercial loans | $18,421 | 2.16% | | Residential mortgage loans | $1,400 | 0.31% | | Total loans | $20,163 | 1.21% | [**Consent Order**](index=77&type=section&id=Consent%20Order) Addresses the Consent Order from regulatory bodies requiring Unity Bank to enhance its **BSA/AML** compliance program - Unity Bank is subject to a Consent Order from the **FDIC and NJDOBI**, requiring it to strengthen its **BSA/AML program**[225](index=225&type=chunk) - Compliance expenses related to **BSA/AML remediation** totaled **$168 thousand** for Q1 2021, up from **$63 thousand** in Q1 2020[248](index=248&type=chunk) [**Earnings Summary**](index=79&type=section&id=Earnings%20Summary) Provides an overview of the Company's financial performance, including net income, EPS, and key profitability ratios Earnings Summary | Metric | Q1 2021 | Q1 2020 | Change | | :-------------------------------- | :------ | :------ | :----- | | Net income (in millions) | $8.5 | $5.4 | $3.1 | | Net income per diluted share | $0.80 | $0.49 | $0.31 | | Return on average assets | 1.85% | 1.32% | 0.53% | | Return on average equity | 19.51% | 13.23% | 6.28% | | Efficiency ratio | 45.74% | 51.92% | -6.18% | - Key drivers for the improved earnings include an **18.2% increase** in net interest income, a **46.4% increase** in noninterest income, and a **$1.0 million decrease** in the provision for loan losses[232](index=232&type=chunk) [**Net Interest Income**](index=79&type=section&id=Net%20Interest%20Income) Analyzes the components of net interest income, including the impact of changes in earning assets and interest-bearing liabilities Net Interest Income and Margin | Metric | Q1 2021 | Q1 2020 | | :-------------------- | :------ | :------ | | Net interest income (tax-equivalent) | $18.0 million | $15.2 million | | Net interest margin | 4.09% | 3.92% | | Net interest spread | 3.82% | 3.54% | - The increase in net interest income was driven by a **$2.5 million increase** from higher average earning assets (primarily SBA **PPP**, commercial, and consumer construction loans) and a **$1.8 million decrease** in interest expense due to lower rates on interest-bearing liabilities[238](index=238&type=chunk) Net Interest Income Volume and Rate Analysis (in thousands) | Component (in thousands) | Change due to Volume | Change due to Rate | Net Change | | :----------------------- | :------------------- | :----------------- | :--------- | | Total interest income | $2,519 | $(1,535) | $984 | | Total interest expense | $33 | $(1,816) | $(1,783) | | Net interest income | $2,486 | $281 | $2,767 | [**Provision for Loan Losses**](index=83&type=section&id=Provision%20for%20Loan%20Losses) Discusses the provision for loan losses, highlighting the factors influencing its change between periods Provision for Loan Losses (in thousands) | Metric (in thousands) | Q1 2021 | Q1 2020 | | :-------------------- | :------ | :------ | | Provision for loan losses | $500 | $1,500 | - The decrease in provision for loan losses was primarily due to an improved outlook on credit quality, contrasting with increased provisions in 2020 driven by **COVID-19** related loan default risks[242](index=242&type=chunk) [**Noninterest Income**](index=84&type=section&id=Noninterest%20Income) Examines the various sources of noninterest income and their contributions to overall revenue Noninterest Income (in thousands) | Component (in thousands) | Q1 2021 | Q1 2020 | | :----------------------- | :------ | :------ | | Branch fee income | $295 | $317 | | Service and loan fee income | $625 | $376 | | Gain on sale of SBA loans held for sale, net | $245 | $473 | | Gain on sale of mortgage loans, net | $1,750 | $1,051 | | BOLI income | $129 | $173 | | Net security gains (losses) | $310 | $(170) | | Other income | $372 | $325 | | Total noninterest income | $3,726 | $2,545 | - Increased gains on mortgage loan sales (**$699 thousand increase**) and a positive swing in net security gains (**$480 thousand increase**) were the primary drivers of noninterest income growth[246](index=246&type=chunk) [**Noninterest Expense**](index=85&type=section&id=Noninterest%20Expense) Analyzes the components of noninterest expense, including compensation, processing, occupancy, and professional services Noninterest Expense (in thousands) | Component (in thousands) | Q1 2021 | Q1 2020 | | :----------------------- | :------ | :------ | | Compensation and benefits | $6,063 | $5,439 | | Processing and communications | $807 | $708 | | Occupancy | $706 | $624 | | Professional services | $380 | $269 | | Deposit insurance | $214 | $88 | | BSA expenses | $168 | $63 | | Loan collection & OREO (recoveries) expenses | $(49) | $186 | | Other expenses | $245 | $712 | | Total noninterest expense | $9,802 | $9,323 | - The increase in compensation and benefits was primarily due to higher mortgage commissions on increased origination volume[248](index=248&type=chunk) [**Income Tax Expense**](index=86&type=section&id=Income%20Tax%20Expense) Details the Company's income tax expense and effective tax rate, noting the impact of state tax regulations Income Tax Expense (in thousands) | Metric (in thousands) | Q1 2021 | Q1 2020 | | :-------------------- | :------ | :------ | | Income tax expense | $2,946 | $1,598 | | Effective tax rate | 25.7% | 22.9% | - New Jersey's **2.5% corporate income surtax** was retroactively extended until December 31, 2023, contributing to the higher effective tax rate[251](index=251&type=chunk) [**Financial Condition at March 31, 2021**](index=86&type=section&id=Financial%20Condition%20at%20March%2031%2C%202021) Provides an in-depth analysis of the Company's balance sheet components, including securities, loans, asset quality, and funding [**Securities Portfolio**](index=86&type=section&id=Securities%20Portfolio) Details the composition and changes in the Company's available-for-sale debt and equity securities portfolios Securities Portfolio (in thousands) | Security Type (in thousands) | March 31, 2021 | December 31, 2020 | | :--------------------------- | :------------- | :---------------- | | AFS debt securities | $32,330 | $45,617 | | Equity securities | $2,221 | $1,954 | | Total securities portfolio | $34,551 | $47,571 | - The decrease in AFS debt securities was primarily due to **$7.0 million** from sales of corporate securities and **$6.3 million** from principal payments, maturities, and called bonds[259](index=259&type=chunk) [**Loan Portfolio**](index=88&type=section&id=Loan%20Portfolio) Presents the breakdown of the loan portfolio by type and highlights the proportion secured by real estate Loan Portfolio by Type (in thousands) | Loan Type (in thousands) | March 31, 2021 | December 31, 2020 | | :----------------------- | :------------- | :---------------- | | SBA PPP loans | $169,117 | $118,257 | | Commercial loans | $853,078 | $839,788 | | Residential mortgage loans | $448,149 | $467,586 | | Consumer loans | $60,502 | $66,100 | | Total loans | $1,668,448 | $1,627,817 | - Approximately **84%** of the Company's loan portfolio was secured by real estate at March 31, 2021, down from **87%** at December 31, 2020[281](index=281&type=chunk) [**TDRs**](index=93&type=section&id=TDRs) Discusses **Troubled Debt Restructurings (TDRs)**, their valuation methods, and the absence of specific reserves for performing **TDRs** Troubled Debt Restructurings (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Total TDRs | $1,079 | $663 | | Number of TDRs | 3 | 1 | - **TDRs** are evaluated for impairment using discounted cash flows or collateral fair value, but no specific reserves were held for the current **TDRs** as they are performing[283](index=283&type=chunk)[146](index=146&type=chunk) [**Asset Quality**](index=95&type=section&id=Asset%20Quality) Reports on the Company's asset quality, including nonperforming loans, nonperforming assets, and potential problem loans Asset Quality Metrics (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :-------------------- | :------------- | :---------------- | :------------- | | Total nonperforming loans | $11,788 | $12,060 | $9,655 | | Total nonperforming assets | $11,788 | $12,060 | $11,178 | | Nonperforming assets to total assets | 0.59% | 0.62% | 0.64% | | Loans past due 90 days or more and still accruing interest | $2,540 | $449 | $0 | - Potential problem loans, categorized by non-passing risk ratings and performing status, totaled **$37.5 million** at March 31, 2021, an increase of **$791 thousand** from year-end[291](index=291&type=chunk)[293](index=293&type=chunk) [**Allowance for Loan Losses and Reserve for Unfunded Loan Commitments**](index=97&type=section&id=Allowance%20for%20Loan%20Losses%20and%20Reserve%20for%20Unfunded%20Loan%20Commitments) Details the methodology and balances for the allowance for loan losses and the reserve for unfunded loan commitments Allowance for Loan Losses and Reserve (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Allowance for loan losses | $22,965 | $23,105 | | Allowance to total loans | 1.38% | 1.42% | | Net charge-offs (Q1) | $640 | N/A | | Reserve for unfunded loan commitments | $310 | $288 | - The allowance for loan losses is determined quarterly based on specific and general reserves, considering loan portfolio risks, historical charge-off rates, and environmental factors[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk) [**Deposits**](index=98&type=section&id=Deposits) Provides a breakdown of the Company's deposit base by type, highlighting the composition of funding sources Deposit Composition (in thousands) | Deposit Type (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Total deposits | $1,628,393 | $1,557,959 | | Savings deposits | $502,300 | $455,449 | | Interest-bearing demand | $217,714 | $204,236 | | Noninterest-bearing demand | $465,511 | $459,677 | | Time deposits | $442,868 | $438,597 | - Deposit composition at March 31, 2021: **30.8% savings**, **28.6% noninterest-bearing demand**, **27.2% time**, and **13.4% interest-bearing demand**[305](index=305&type=chunk) [**Borrowed Funds and Subordinated Debentures**](index=100&type=section&id=Borrowed%20Funds%20and%20Subordinated%20Debentures) Details the Company's borrowed funds, including FHLB advances and subordinated debentures, and their use in managing interest rate risk Borrowed Funds and Subordinated Debentures (in thousands) | Borrowing Type (in thousands) | March 31, 2021 | December 31, 2020 | | :---------------------------- | :------------- | :---------------- | | FHLB fixed rate advances | $40,000 | $40,000 | | FHLB adjustable rate advances | $20,000 | $30,000 | | FHLB overnight advances | $110,000 | $130,000 | | Subordinated debentures | $10,310 | $10,310 | | Total borrowed funds and subordinated debentures | $180,310 | $210,310 | - The Company uses swap instruments to modify FHLB adjustable rate advances to fixed rates, managing interest rate uncertainty[308](index=308&type=chunk)[310](index=310&type=chunk) [**Interest Rate Sensitivity**](index=102&type=section&id=Interest%20Rate%20Sensitivity) Explains how the Company measures and manages the impact of interest rate changes on its equity and financial performance - The Company uses **Modified Duration of Equity** and **Economic Value of Portfolio Equity (EVPE)** models to measure the impact of interest rate changes on equity[312](index=312&type=chunk) Economic Value of Portfolio Equity (EVPE) Sensitivity | Metric (EVPE with 200 bps rate shock) | March 31, 2021 | December 31, 2020 | | :------------------------------------ | :------------- | :---------------- | | Increase in rising-rate environment | 4.2% | 4.1% | | Decrease in falling-rate environment | 10.7% | 7.5% | - All **EVPE** variances at March 31, 2021, were within the Board-approved guidelines of **+/- 20.0%**[312](index=312&type=chunk) [**Liquidity**](index=102&type=section&id=Liquidity) Describes the Company's liquidity management strategy and primary sources of funds to meet operational needs - The Company's liquidity is managed to meet loan demand, deposit outflows, and interest rate opportunities, with primary sources including deposits, loan payments, security sales, and borrowings[313](index=313&type=chunk)[314](index=314&type=chunk) Cash and Cash Equivalents (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $239,577 | $219,311 | - Operating activities provided **$11.6 million** in net cash, investing activities used **$29.6 million** (primarily for SBA **PPP loans**), and financing activities provided **$38.2 million** (due to deposit growth and new borrowings) in Q1 2021[316](index=316&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk) [**Regulatory Capital**](index=104&type=section&id=Regulatory%20Capital) Details the Company's and Bank's regulatory capital ratios and their adherence to the **Community Bank Leverage Ratio** framework - The Bank has elected to use the **Community Bank Leverage Ratio (CBLR)** framework, which simplifies capital requirements for qualifying community banking organizations with less than **$10 billion** in total consolidated assets[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) Regulatory Capital Ratios | Entity | March 31, 2021 | December 31, 2020 | | :----- | :------------- | :---------------- | | Company CBLR | 10.19% | 10.09% | | Bank CBLR | 9.85% | 9.80% | [**Shareholders' Equity**](index=106&type=section&id=Shareholders%27%20Equity) Explains the changes in total shareholders' equity, driven by net income, comprehensive income, and share repurchases Total Shareholders' Equity (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Total shareholders' equity | $181,186 | $173,911 | - The increase was primarily due to **$8.5 million** in net income and **$655 thousand** in accumulated other comprehensive income, partially offset by **$1.3 million** in treasury stock purchases and **$804 thousand** in dividends paid[327](index=327&type=chunk) [**Repurchase Plan**](index=106&type=section&id=Repurchase%20Plan) Describes the Company's common stock repurchase plan, including authorized shares and shares repurchased - On February 4, 2021, the Company authorized a new plan to repurchase up to **750 thousand shares** of common stock[328](index=328&type=chunk) Share Repurchase Activity | Metric | Q1 2021 | | :-------------------------------- | :------ | | Shares repurchased | 70,000 | | Average price paid per share | $19.29 | | Shares available for repurchase | 701,000 | [**Impact of Inflation and Changing Prices**](index=108&type=section&id=Impact%20of%20Inflation%20and%20Changing%20Prices) Assesses the relative impact of interest rates versus general inflation on the Company's financial performance - Interest rates have a greater impact on the Company's performance than general inflation due to the monetary nature of its assets and liabilities[332](index=332&type=chunk) [**ITEM 3 Quantitative and Qualitative Disclosures about Market Risk**](index=108&type=section&id=ITEM%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Reports no significant changes in the Company's market risk assessment for Q1 2021 compared to the prior annual report - No significant changes in market risk assessment were reported for Q1 2021[333](index=333&type=chunk) [**ITEM 4 Controls and Procedures**](index=108&type=section&id=ITEM%204%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and no significant changes in internal control over financial reporting for Q1 2021 - The Company's disclosure controls and procedures were deemed effective as of March 31, 2021[334](index=334&type=chunk) - No significant change in the Company's internal control over financial reporting occurred during the quarterly period[334](index=334&type=chunk) [**PART II OTHER INFORMATION**](index=108&type=section&id=PART%20II%20OTHER%20INFORMATION) [**ITEM 1 Legal Proceedings**](index=108&type=section&id=ITEM%201%20Legal%20Proceedings) The Company does not expect material adverse effects from ordinary course legal proceedings on its business or financial condition - The Company does not expect any pending legal proceedings to have a material adverse effect on its business or financial condition[334](index=334&type=chunk) [**ITEM 1A Risk Factors**](index=110&type=section&id=ITEM%201A%20Risk%20Factors) Risk factors for Q1 2021 are consistent with those reported in the Company's **Form 10-K** for the year ended December 31, 2020 - Risk factors for Q1 2021 are consistent with those reported in the Company's **Form 10-K** for the year ended December 31, 2020[335](index=335&type=chunk) [**ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds**](index=110&type=section&id=ITEM%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details on unregistered sales of equity securities and use of proceeds are provided in the Management's Discussion and Analysis - Information on unregistered sales of equity securities and use of proceeds is detailed under the "Shareholders Equity - Repurchase Plan" section in Item **2**[336](index=336&type=chunk) [**ITEM 3 Defaults upon Senior Securities**](index=110&type=section&id=ITEM%203%20Defaults%20upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities[336](index=336&type=chunk) [**ITEM 4 Mine Safety Disclosures**](index=110&type=section&id=ITEM%204%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable[337](index=337&type=chunk) [**ITEM 5 Other Information**](index=110&type=section&id=ITEM%205%20Other%20Information) No other information was reported for the period - No other information[337](index=337&type=chunk) [**ITEM 6 Exhibits**](index=111&type=section&id=ITEM%206%20Exhibits) Lists exhibits filed with the **Form 10-Q**, including **CEO and CFO** certifications and **Inline XBRL documents** - The report includes certifications by the **CEO and CFO** (Exhibits **31.1**, **31.2**, **32.1**) as required by the **Sarbanes-Oxley Act of 2002**[338](index=338&type=chunk)[340](index=340&type=chunk) - **Inline XBRL documents** (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File) are included as exhibits[340](index=340&type=chunk) [**EXHIBIT INDEX**](index=112&type=section&id=EXHIBIT%20INDEX) Provides a comprehensive list of all exhibits accompanying the **Form 10-Q** filing [**SIGNATURES**](index=113&type=section&id=SIGNATURES) - The report was signed by **George Boyan**, **Executive Vice President and Chief Financial Officer**, on May 5, 2021[343](index=343&type=chunk) ```

Table of Contents Commission file number 1-12431 Unity Bancorp, Inc. (Exact Name of Registrant as Specified in Its Charter) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIE ...

PART I CONSOLIDATED FINANCIAL INFORMATION [Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited consolidated financial statements present Unity Bancorp's financial position, operations, and cash flows, reflecting COVID-19 impacts, PPP loan growth, and a net income decrease from higher loan loss provisions [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$1,930,836** | **$1,718,942** | | Cash and cash equivalents | $201,395 | $158,016 | | Net loans | $1,591,054 | $1,409,163 | | - SBA PPP loans | $138,895 | $0 | | Total securities | $50,387 | $66,564 | | **Total Liabilities** | **$1,761,602** | **$1,558,233** | | Total deposits | $1,493,440 | $1,250,114 | | Borrowed funds | $240,000 | $283,000 | | **Total Shareholders' Equity** | **$169,234** | **$160,709** | - Total assets grew by **12.3%** to **$1.93 billion** at September 30, 2020, from **$1.72 billion** at year-end 2019, primarily driven by a **$181.9 million** increase in net loans, which includes **$138.9 million** in SBA PPP loans[10](index=10&type=chunk)[260](index=260&type=chunk) - Total deposits increased by **19.5%** to **$1.49 billion**, largely due to a significant rise in noninterest-bearing demand deposits, which grew from **$279.8 million** to **$412.9 million**[10](index=10&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $16,327 | $14,404 | $47,099 | $42,829 | | Provision for Loan Losses | $2,000 | $750 | $6,000 | $1,600 | | Noninterest Income | $3,336 | $2,710 | $8,692 | $7,143 | | Noninterest Expense | $10,037 | $8,729 | $28,540 | $25,997 | | **Net Income** | **$5,760** | **$5,959** | **$16,299** | **$17,533** | | **Diluted EPS** | **$0.54** | **$0.54** | **$1.50** | **$1.59** | - For the nine months ended September 30, 2020, the provision for loan losses increased significantly to **$6.0 million** from **$1.6 million** in the prior-year period, reflecting increased risk due to the COVID-19 pandemic[12](index=12&type=chunk)[248](index=248&type=chunk) - Net interest income for Q3 2020 rose to **$16.3 million** from **$14.4 million** in Q3 2019, driven by loan growth, including **$1.0 million** in interest income from SBA PPP loans[12](index=12&type=chunk) - Noninterest income for Q3 2020 was boosted by a **$1.7 million** gain on the sale of mortgage loans, a substantial increase from the **$545 thousand** gain in Q3 2019[12](index=12&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) - For the nine months ended September 30, 2020, the company reported a total other comprehensive loss of **$1.4 million**, net of tax, compared to other comprehensive income of **$89 thousand** in the same period of 2019[17](index=17&type=chunk) - The comprehensive loss in 2020 was primarily driven by unrealized losses on cash flow hedges amounting to **$1.1 million** and unrealized losses on securities available for sale of **$383 thousand**[17](index=17&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) - Shareholders' equity increased from **$160.7 million** at December 31, 2019, to **$169.2 million** at September 30, 2020[19](index=19&type=chunk) - Key changes in shareholders' equity during the first nine months of 2020 included net income of **$16.3 million**, offset by the acquisition of treasury stock for **$5.1 million** and payment of common stock dividends totaling **$2.5 million**[19](index=19&type=chunk)[24](index=24&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $32,813 | $25,028 | | Net cash used in investing activities | ($182,354) | ($67,475) | | Net cash provided by financing activities | $192,920 | $63,692 | | **Increase in cash and cash equivalents** | **$43,379** | **$21,245** | - Investing activities in 2020 were dominated by the origination of **$142.8 million** in SBA PPP Loans and a net increase in other loans of **$57.3 million**[24](index=24&type=chunk) - Financing activities were a significant source of cash, driven by a **$243.3 million** net increase in deposits, which more than offset the net repayment of borrowings and the purchase of treasury stock[24](index=24&type=chunk) [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) - The company adopted the Community Bank Leverage Ratio (CBLR) framework effective January 1, 2020. As of September 30, 2020, the Bank's CBLR was **9.62%** and the Company's was **9.95%**, both exceeding the **8.00%** requirement[197](index=197&type=chunk)[192](index=192&type=chunk) - The company has not yet adopted ASU 2016-13 regarding credit losses (CECL), with the effective date deferred for smaller reporting companies to fiscal years beginning after December 15, 2022[156](index=156&type=chunk)[157](index=157&type=chunk) - The company has interest rate swaps with a notional amount of **$100.0 million** as of September 30, 2020, designated as cash flow hedges against variable rate debt[175](index=175&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=ITEM%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses COVID-19's impact, including PPP loans, higher loan loss provisions, and BSA/AML consent order expenses, with total assets growing and net income flat - Net income was **$5.8 million** for Q3 2020, compared to **$6.0 million** for Q3 2019. Diluted EPS was flat at **$0.54** for both periods[222](index=222&type=chunk) - The company is addressing a Consent Order from the FDIC issued in July 2020 to strengthen its Bank Secrecy Act (BSA)/anti-money laundering (AML) program, which resulted in **$626 thousand** of BSA expenses in Q3 2020[221](index=221&type=chunk)[252](index=252&type=chunk) - As of September 30, 2020, the company had approved **1,224** PPP loan applications totaling **$143.0 million**, earning gross origination fees of **$5.5 million**[215](index=215&type=chunk) Loan Deferrals as of September 30, 2020 (in thousands) | Loan Type | Total Portfolio Balance | Unpaid Principal on Deferral | % Deferrals to Total Loans | | :--- | :--- | :--- | :--- | | Commercial loans | $799,573 | $36,387 | 4.55% | | Residential mortgage loans | $473,420 | $24,255 | 5.12% | | **Total** | **$1,613,291** | **$60,643** | **3.76%** | [Net Interest Income](index=48&type=section&id=Net%20Interest%20Income) - For Q3 2020, tax-equivalent net interest income increased **13.3%** to **$16.3 million** compared to Q3 2019. This was driven by a **$250.2 million** increase in average earning assets, primarily from PPP and commercial loans[230](index=230&type=chunk)[238](index=238&type=chunk) - Net interest margin (NIM) decreased by **12** basis points to **3.78%** in Q3 2020 from **3.90%** in Q3 2019, primarily due to lower yields on assets following interest rate cuts by the Federal Reserve[224](index=224&type=chunk)[230](index=230&type=chunk) - The average cost of total interest-bearing liabilities decreased significantly by **53** basis points to **1.15%** in Q3 2020, helping to mitigate the decline in asset yields[238](index=238&type=chunk) [Provision for Loan Losses](index=54&type=section&id=Provision%20for%20Loan%20Losses) - The provision for loan losses was **$2.0 million** for Q3 2020, a significant increase from **$750 thousand** in Q3 2019[248](index=248&type=chunk) - For the first nine months of 2020, the provision totaled **$6.0 million**, compared to **$1.6 million** for the same period in 2019. The increase is attributed to the heightened risk of loan defaults resulting from the COVID-19 pandemic[248](index=248&type=chunk) [Noninterest Income](index=55&type=section&id=Noninterest%20Income) - Noninterest income increased **23.1%** to **$3.3 million** in Q3 2020, primarily driven by a substantial increase in gains on the sale of mortgage loans, which rose to **$1.7 million** from **$545 thousand** in Q3 2019[231](index=231&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - Gain on sale of SBA loans was **$534 thousand** in Q3 2020, compared to zero in the prior year's quarter when the company elected not to sell SBA loans[251](index=251&type=chunk) [Noninterest Expense](index=56&type=section&id=Noninterest%20Expense) - Noninterest expense increased **15.0%** to **$10.0 million** in Q3 2020 from **$8.7 million** in Q3 2019[231](index=231&type=chunk)[252](index=252&type=chunk) - The increase was primarily driven by **$626 thousand** in BSA expenses related to the FDIC consent order and a **$408 thousand** increase in compensation and benefits, mainly from higher mortgage commissions[252](index=252&type=chunk)[253](index=253&type=chunk) [Financial Condition](index=57&type=section&id=Financial%20Condition) - Total assets increased by **$211.9 million** (**12.3%**) to **$1.9 billion** at September 30, 2020, compared to year-end 2019, largely due to the funding of **$138.9 million** in SBA PPP loans[260](index=260&type=chunk) - Total loans increased by **$187.7 million** (**13.2%**) to **$1.6 billion**, while the securities portfolio decreased by **$16.2 million** to **$50.4 million**[260](index=260&type=chunk)[272](index=272&type=chunk) - Total deposits grew by **$243.3 million**, with noninterest-bearing demand deposits increasing by **$133.1 million**[261](index=261&type=chunk) - Nonperforming loans increased to **$9.0 million** (**0.56%** of total loans) at September 30, 2020, up from **$5.6 million** (**0.40%** of total loans) at year-end 2019[297](index=297&type=chunk) - The allowance for loan losses increased to **$22.2 million**, representing **1.38%** of total loans, up from **1.15%** at year-end 2019, reflecting the increased provision due to COVID-19[305](index=305&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=69&type=section&id=ITEM%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reported no significant changes in its assessment of market risk during the nine months ended September 30, 2020, from what was disclosed in its 2019 Annual Report on Form 10-K - There have been no significant changes in the Company's assessment of market risk during the first nine months of 2020 compared to the disclosures in the 2019 Form 10-K[341](index=341&type=chunk) [Controls and Procedures](index=69&type=section&id=ITEM%204%20Controls%20and%20Procedures) Management, including the CEO and Interim CFO, evaluated the company's disclosure controls and procedures as of September 30, 2020, and concluded they were effective - The CEO and Interim CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[345](index=345&type=chunk) - No significant changes in internal control over financial reporting occurred during the third quarter of 2020[345](index=345&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=69&type=section&id=ITEM%201%20Legal%20Proceedings) The company is subject to ordinary course legal proceedings but is not aware of any that would have a material adverse effect on its business, financial condition, or results of operations - The Company is not aware of any pending legal proceedings that would materially affect its financial position or results of operations[342](index=342&type=chunk) [Risk Factors](index=69&type=section&id=ITEM%201A%20Risk%20Factors) The company highlights significant new risks arising from the COVID-19 pandemic and a regulatory Consent Order, impacting operations, loan quality, and financial condition - A significant new risk factor is the COVID-19 pandemic, which could materially adversely affect the company's operations, customer businesses, loan portfolio quality, and overall financial condition due to economic disruptions[343](index=343&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk) - The company is subject to a Consent Order from the FDIC and NJDOBI related to deficiencies in its BSA/AML program. Compliance is expected to cost approximately **$1.8 million** and may involve operational restrictions[354](index=354&type=chunk)[356](index=356&type=chunk) - Potential impacts from the pandemic include decreased demand for products, increased loan delinquencies, higher allowance for loan losses, and reduced net interest margin[352](index=352&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=ITEM%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a share repurchase plan authorized on July 16, 2019, for up to **525,000** shares, with **161,554** shares repurchased in Q3 2020 Share Repurchases in Q3 2020 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2020 | 50,000 | $13.56 | | August 2020 | 111,554 | $13.07 | | September 2020 | - | - | - During the nine months ended September 30, 2020, a total of **373,000** shares were repurchased at an average price of **$13.72**. As of the end of the quarter, **152,000** shares were still available for repurchase under the current plan[339](index=339&type=chunk) [Exhibits](index=73&type=section&id=ITEM%206%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and Interim CFO, and documents related to a change in control agreement and the FDIC Consent Order - Exhibits filed include CEO and CFO certifications (**31.1**, **31.2**, **32.1**) and documents related to the FDIC Consent Order (**10.2**, **10.3**), which were incorporated by reference from prior Form 8-K filings[361](index=361&type=chunk)[363](index=363&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____. Commission File Number 1-12431 Unity Bancorp, Inc. (Exact name of registrant as specified in its charter) New Jersey 22-3282551 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____. Commission File Number 1-12431 | New Jersey | 22-3282551 | | --- | --- | | (State or other jurisdiction of incorporation or organization) | ...