NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO THE SHAREHOLDERS OF UNITY BANCORP, INC.,
You are cordially invited to attend the Annual Meeting of Shareholders of Unity Bancorp, Inc.
| | | |
| DATE & TIME Thursday April 25, 2024 8:30 AM E.D.T. | 
| LOCATION virtual meeting at meetnow.global/M52SR5Z |
ITEMS OF BUSINESS
| 1. | The election of the three (3) nominees listed in the attached proxy statement to serve on the Board of Directors for the terms set forth therein for each nominee. |
| 2. | The ratification of the selection of Wolf & Company P.C. as the Company’s independent external auditors for the year ending December 31, 2024. |
| 3. | To approve, on an advisory basis, the executive compensation of the Company's named executive officers, as described in this proxy statement. |
| 4. | Such other business as may properly come before the Annual Meeting and at any adjournments thereof, including whether or not to adjourn the Annual Meeting. |
Your cooperation is appreciated since a majority of the outstanding shares of Common Stock of the Company must be represented, either in person or by proxy, to constitute a quorum for the conduct of business.
Shareholders of record at the close of business on March 1, 2024, are entitled to notice of, and to vote at, the Annual Meeting. All shareholders are cordially invited to participate in the Annual Meeting which will be broadcast at meetnow.global/M52SR5Z.
We are distributing our proxy materials to our shareholders via the U.S. Securities and Exchange Commission "Notice and Access" rules. We believe this approach allows us to provide shareholders with a timely and convenient way to receive proxy materials and vote, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. A Notice of Internet Availability of Proxy Materials (the "Notice of Internet Availability") will be mailed beginning on or about March 13, 2024, rather than paper copies of the Proxy Statement, the proxy card and our 2023 Annual Report, which includes our annual report on Form 10-K for the fiscal year ended December 31, 2023. The Notice of Internet Availability contains instructions on how to access the proxy materials, vote and obtain, if desired, a paper copy of the proxy materials.
It is important that your shares be represented and voted at the Annual Meeting. Whether or not you expect to participate in the Annual Meeting virtually, after receiving the Notice of Internet Availability, please vote as promptly as possible to ensure your representation and the presence of a quorum at the Annual Meeting. You may vote via the Internet, by telephone, or by signing, dating and returning the proxy card that is mailed to those that request paper copies of the Proxy Statement and the other proxy materials. If you plan on participating in the Annual Meeting virtually, please retain the control number provided on your proxy card. You will need it to access the Annual Meeting as a registered shareholder.
You may revoke your proxy at any time prior to the exercise of the proxy by following the voting instructions included in the Notice of Internet Availability. The latest vote cast will control.
64 Old Highway 22
Clinton, New Jersey 08809
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 2024
We are providing these proxy materials in connection with the solicitation by the Board of Directors of Unity Bancorp, Inc. (the “Company”) of proxies to be voted at the Company’s 2024 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on April 25, 2024, and at any postponement or adjournment of the Annual Meeting.
You are cordially invited to attend the Annual Meeting, which will begin at 8:30 A.M. E.D.T. The Annual Meeting will be broadcast at meetnow.global/M52SR5Z.
This proxy statement will first be available online on or about March 11, 2024.
PROXIES AND VOTING PROCEDURES
Who Can Vote?
You are entitled to vote at the Annual Meeting all shares of the Company’s Common Stock, no par value per share (the “Common Stock”), that you held as of the close of business on the record date. Each share of Common Stock is entitled to one vote with respect to each matter properly brought before the Annual Meeting.
On the record date, March 1, 2024, there were 10,141,047 shares of Common Stock outstanding. In accordance with New Jersey law, a list of shareholders entitled to vote at the meeting will be made available upon request.
Who Is a Record Holder?
You may own Common Stock either (1) directly in your name, in which case you are the record holder of such shares, or (2) indirectly through a broker, bank or other nominee, in which case such nominee is the record holder.
If your shares of Common Stock are registered directly in your name, the Company is sending the Notice of Internet Availability directly to you. If the record holder of your shares of Common Stock is a nominee, you will receive proxy materials from such record holder.
How Do I Vote?
Record Holders:
Online. Please follow the instructions included in the Notice of Internet Availability.
By Participating in the Annual Meeting. If you participate in the Annual Meeting virtually, you can vote your shares of Common Stock by following the instructions available on the meeting website during the meeting. You will be required to sign into the meeting with the control number provided on your proxy card.
Completed Proxy Card. If you requested paper copies of the proxy materials, you may complete, date, sign and return the proxy card that is mailed to you.
Stock Held by Brokers, Banks and Nominees:
If your Common Stock is held by a broker, bank or other nominee, you will receive instructions from them that you must follow in order to have your shares voted.
If you plan to participate in the Annual Meeting virtually, you will need to contact the broker, bank or other nominee to obtain evidence of your ownership of Common Stock on March 1, 2024. Once received, request for registration should be labeled as “Legal Proxy” and directed to:
Computershare
Unity Bancorp, Inc. Legal Proxy
P.O Box 43001
Providence, RI 02940-3001
Requests should be submitted no later than April 15, 2024 by 5:00 p.m. E.D.T.
The method by which you vote will in no way limit your right to vote at the Annual Meeting if you later decide to register and participate in the meeting virtually.
How Many Votes Are Required?
A quorum is required to transact business at the Annual Meeting. The Company will have a quorum and be able to conduct the business of the Annual Meeting if the holders of a majority of the shares of Common Stock entitled to vote are present at the Annual Meeting, either in person or by proxy.
If a quorum is present, Directors will be elected by a plurality of votes cast at the Annual Meeting. Thus, a Director may be elected even if the Director receives the vote of less than a majority of the shares of Common Stock represented at the Annual Meeting. Approval of the ratification of the selection of Wolf & Company P.C. and the approval of the Company’s Executive compensation requires the vote of a majority of those shares voting at the Annual Meeting.
How Are Votes Counted?
All shares that have been properly voted, and not revoked, will be voted at the Annual Meeting in accordance with the instructions given. If you sign and return your proxy card, but do not specify how you wish your shares to be voted, your shares represented by that proxy will be voted “FOR” each of the proposals listed in the notice of meeting and as recommended by the Board of Directors on any other business to be conducted at the Annual Meeting. The Board is not aware of any other business to be conducted at the Annual Meeting.
Proxies marked as abstaining, and any proxies returned by brokers as “non-votes” on behalf of shares held in street name because beneficial owners’ discretion has been withheld as to one or more matters to be acted upon at the Annual Meeting, will be treated as present for purposes of determining whether a quorum is present at the Annual Meeting. However, any shares not voted as a result of a marked abstention or a broker non-vote will not be counted as votes for or against a particular matter. Accordingly, marked abstentions and broker non-votes will have no effect on the outcome of a vote.
How Does the Board Recommend that I Vote My Shares?
Unless you give other instructions on your proxy card, the persons named as proxies on the card will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendation is set forth together with the description of each item in this Proxy Statement. In summary, the Board recommends a vote:
FOR the election of nominees for Director to serve on the Board of Directors; and
FOR the ratification of Wolf & Company P.C. as the Company’s independent external auditors; and
FOR the approval of the Company's Executive compensation.
How Can I Revoke My Proxy or Change My Vote?
You can revoke your proxy at any time before it is exercised by following the voting instructions included in the Notice of Internet Availability. You may also participate in the virtual shareholders’ meeting and vote online during the meeting. You may also submit a completed and executed proxy card. The latest vote cast will control.
Who Will Pay the Expenses of Proxy Distribution?
The Company will pay the expenses of the preparation of proxy materials and the solicitation of proxies. Proxies may be solicited on behalf of the Company by directors, officers or employees of the Company, who will receive no additional compensation for soliciting, in person or by telephone, e-mail, facsimile or other electronic means. In accordance with the regulations of the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”), the Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of Common Stock.
PROPOSAL 1 - ELECTION OF DIRECTORS
In accordance with the Certificate of Incorporation and the Bylaws of the Company, the Board of Directors must consist of not less than one (1) and not more than sixteen (16) Directors. The Board of Directors of the Company currently has ten (10) members. The Board of Directors is divided into three classes.
Three (3) Directors will be elected at this Annual Meeting to serve for three-year terms expiring at the Company’s Annual Meeting in 2027 and until their successors are duly elected and qualified. All nominees are current members of the Company’s Board of Directors.
The following tables set forth, as of the record date, the names of the nominees and the names of those Directors whose terms continue beyond the Annual Meeting, their ages, a brief description of their recent business experience, including present occupations and employment, certain Directorships held by each, the year in which each became a Director of the Company and the year in which their terms (or in the case of the nominees, their proposed terms) as a Director of the Company expire.
The persons named as proxy will vote your proxy “FOR” the election of each of the nominees named below unless you indicate that your vote should be withheld. If elected, each nominee will continue in office until their successor has been duly elected and qualified, or until the earliest of death, resignation, retirement or removal. Each of the nominees has indicated to the Company that he or she will serve if elected. The Company does not anticipate that any of the nominees will be unable to stand for election, but if that happens, your proxy will be voted in favor of another person nominated by the Board.
The Board of Directors has nominated and recommends a vote “FOR” the election of Dr. Mark S. Brody, Raj Patel, and Donald E. Souders, Jr.
Wayne Courtright: Wayne Courtright has been a Director of the Company and the Bank since 2004. Mr. Courtright is a retired banker, who has served in the capacity of Executive Vice President, Chief Lending and Chief Credit Officer and as a Director at several institutions. Mr. Courtright is considered to be an Audit Committee financial expert as such term is defined by SEC regulations. Mr. Courtright is a prominent businessman in NJ and has many contacts to generate new business for the Company.
David D. Dallas: David D. Dallas is a founding member of the Bank and currently serves as Chairman of the Company and Bank. Mr. Dallas is the CEO of The Dallas Group of America. Inc., a specialty chemical manufacturing business headquartered in Whitehouse, NJ, which serves a global industrial and foodservice customer base. Mr. Dallas has over 40 years of extensive experience in real estate through investing and developing commercial and residential properties throughout the NJ and PA markets served by the Company. Mr. Dallas is an active member of the Franklin Township Land Use Board, having served for more than 15 years, and currently serves as a trustee of Kinnelon Heritage Conservation Society, Inc. located in Kinnelon, NJ and Centenary University located in Hackettstown, NJ. Mr. Dallas has served as a Director of the Bank since 1991 and the Company since it was formed.
Robert H. Dallas, II: Robert H. Dallas, II is a founding member of the Bank and has served as a Director of the Bank since 1991 and the Company since it was formed. Mr. Dallas is the President of The Dallas Group of America Inc., a specialty chemical manufacturing business headquartered in Whitehouse, NJ, which serves a global industrial and foodservice customer base. Mr. Dallas has over 40 years of extensive experience in real estate through investing and developing commercial and residential properties throughout the NJ and PA markets served by the Company.
Dr. Mary E. Gross: Dr. Mary E. Gross has been a Director of the Bank since 2009 and a Director of the Company since 2011. Dr. Gross is the founder of Human Edge Resources, LLC. Dr. Gross holds a PsyD in Organizational Psychology from Rutgers, an MBA with honors from The Wharton School of the University of Pennsylvania and a BS in Accounting from the University of Maryland. Dr. Gross is considered to be an Audit Committee financial expert as such term is defined by SEC regulations. Her experience in human resources and financial services assists the Board in its oversight of the Company’s operations.
James A. Hughes: James A. Hughes has been a Director of the Company and the Bank since 2002. Mr. Hughes has a Bachelor’s degree in Accounting from Mount St. Mary’s College, a Master’s degree in Business Administration from Seton Hall University and is a Certified Public Accountant. The Board believes that it is important that Mr. Hughes, as the senior managing officer of the Company and the Bank, participate in all Board deliberations and decisions.
Peter E. Maricondo: Peter E. Maricondo has been a Director of the Company and the Bank since 2004. Mr. Maricondo is a retired financial consultant. Prior to this, Mr. Maricondo served as the Vice President/Corporate Controller at GPU, Inc. and the Vice President/Corporate Controller at NUI Corporation. He also worked in public accounting as a Certified Public Accountant with an international accounting firm. Mr. Maricondo holds an Master’s degree in Accounting from Seton Hall University and is considered to be an Audit Committee financial expert as such term is defined by SEC regulations.
Raj Patel: Raj Patel has been a Director of the Company since 2008 and a Director of the Bank since 2007. Mr. Patel is currently serving as CEO of Millennium Hotel Group (Hotel), CEO of 2602 Deerfield LLC (Real Estate), and partial owner of the Bergen County Medical Adult Day Care Center (Healthcare). Mr. Patel holds a Bachelor’s degree in Engineering from SP University in India. Mr. Patel is a licensed NJ Realtor and prominent businessman in NJ and has many contacts to generate new business for the Company.
Donald E. Souders, Jr.: Donald E. Souders, Jr., has been a Director of the Bank since 2007 and of the Company since 2014. Mr. Souders is a practicing attorney and partner in the law firm of Florio Perrucci Steinhardt Cappelli Tipton & Taylor LLC, with offices in NJ and PA. Mr. Souders is a prominent attorney practicing in NJ and PA and has many contacts to generate new business for the Company. In addition, his experience as an attorney provides the Board with a critical point of view on many issues considered by the Board.
Aaron Tucker: Aaron Tucker has been a Director of the Bank since 2014 and the Company since 2015 and is the current Vice Chairman. Mr. Tucker holds a Bachelor of Science degree in Business Administration from Northeastern University. Mr. Tucker is the President and CEO of Tucker Enterprises and has extensive experience as a Real Estate Developer. He has been a NJ State Licensed Builder since 1987. Mr. Tucker is a former member of the Millburn Township Zoning Board of Adjustment. Mr. Tucker is a prominent businessman in NJ and has many contacts to generate new business for the Company.
GOVERNANCE OF THE COMPANY
Meetings of the Board of Directors and Committee Meetings
During the fiscal year ended December 31, 2023, the Board of Directors of the Company held thirteen (13) meetings, and no Director attended fewer than 75% of the aggregate of (i) the meetings of the Board of Directors, and (ii) meetings of the Committees of the Board of Directors on which such Director served. The Company’s policy is to require all Directors to attend Annual Meetings of Shareholders absent extenuating circumstances. All of the Company’s Directors participated in the Company’s 2023 Annual Meeting of Shareholders.
The Board of Directors has the following five (5) standing committees: Audit, Human Resources (“HR”)/Compensation, Executive Loan, Corporate Governance and Nominating, and Risk Management. The following table represents the membership on each committee as of the date of this Proxy statement:
| | | | | |
| | | | | |
| | Human | | Corporate | |
| | Resources/ | Executive | Governance and | Risk |
Name | Audit | Compensation | Loan | Nominating | Management |
Dr. Mark S. Brody | Member | Chair | | | Member |
Wayne Courtright | Member | | Chair | | Member |
David D. Dallas | Member | | Member | | Chair |
Robert H. Dallas, II | | | Member | Member | Member |
Dr. Mary E. Gross | Member | | | Chair | Member |
Peter E. Maricondo | Chair | Member | | | Member |
Raj Patel | | Member | Member | | Member |
Donald E. Souders, Jr. | | Member | | Member | Member |
Aaron Tucker | | | Member | Member | Member |
James A. Hughes | | | Member | | Member |
Diversity
Diversity in knowledge, skills and experience is considered by the Board of Directors when evaluating nominees. From time to time, the Corporate Governance and Nominating Committee may develop specific additional selection criteria for Board membership, taking into consideration current Board composition and ensuring that the appropriate knowledge, skills and experience are represented.
The following table represents the self-identified gender and ethnicity of the Board as of the date of this Proxy statement. For reoccurring directors, no changes were made since last reported as of March 10, 2023:
| | | | |
BOARD DIVERSITY MATRIX AS OF 3/11/2024 |
Board Size | |
Total Number of Directors | 10 |
| | | | |
Part I: Gender Identity | Female | Male | Non-Binary | Undisclosed |
| 1 | 9 | - | - |
| | | | |
Part II: Demographic Background | | | | |
African American or Black | - | - | - | - |
Alaskan Native or Native American | - | - | - | - |
Asian | - | 1 | - | - |
Hispanic or Latinx | - | - | - | - |
Native Hawaiian or Pacific Islander | - | - | - | - |
White | 1 | 8 | - | - |
Two or More Races or Ethnicities | - | - | - | - |
LGBTQ+ | - | - | - | - |
Undisclosed | - | - | - | - |
Board Leadership
Historically, the Company has separated the positions of CEO and Board Chairman, with the Board Chairman’s position being filled by a non-employee member of the Board. The Board believes that this structure has been the most appropriate for the Company because it provides the Board with an additional diversity of views on managing the Company and provides the Board with greater independent leadership.
Director Independence
The Board of Directors has determined that all Directors of the Company were “independent” within the meaning of the NASDAQ’s listing standards during 2023, other than Mr. Hughes who is the President and CEO of the Company. In addition, members of the Audit and HR/Compensation committees meet the heightened independence standards applicable to those committees under SEC regulations. In reviewing the independence of these Directors, the Board considered that all Directors engaged in ordinary course banking transactions with the Bank, including loans, if any, that were made in accordance with Federal Reserve Regulation O.
No Director of the Company is also a Director of any other company registered pursuant to Sections 12 or 15(d) of the Securities Exchange Act of 1934 or any company registered as an investment company under the Investment Company Act of 1940.
Risk Oversight
Risk is an inherent part of the business of banking. Risks faced by the Bank include but are not limited to, credit risk relating to its loans, investments, and certain off-balance sheet commitments; interest rate risk related to its entire balance sheet, and liquidity risk. The Board of Directors oversees these risks through the adoption of policies and by delegating oversight to certain Board committees, including the Executive Loan and Risk Management Committees.
Audit Committee
The Company maintains an Audit Committee of the Board of Directors, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, which consisted of Chairman Peter E. Maricondo, and Directors Dr. Mark S. Brody, Wayne Courtright, David D. Dallas, and Dr. Mary E. Gross during the fiscal year ended December 31, 2023. The Audit Committee met six (6) times in 2023. All Directors who serve on the Audit Committee are “independent” under the heightened NASDAQ listing standards and the SEC’s rules applicable to audit committees. The Board has determined that Chairman Peter E. Maricondo, and Directors Dr. Mark S. Brody, Wayne Courtright and Dr. Mary E. Gross are considered “Audit Committee financial experts” as defined in Item 401(h) of the SEC’s Regulation S-K.
The Audit Committee is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities. The Board has adopted a written charter setting forth the functions of the Audit Committee. The functions of the Audit Committee are to: (i) monitor the integrity of the Company's financial reporting process and systems of internal controls regarding finance, accounting and compliance with legal and regulatory requirements; (ii) monitor the independence and performance of the Company's external financial auditor (external auditor) and internal auditor; (iii) provide an avenue of communication among the external and internal auditors and the Board; and (iv) review and monitor compliance with the Company's policies, procedures and practices. The Audit Committee reviews this charter annually in order to assure compliance with current SEC and NASDAQ rule-making and to assure that the Audit Committee’s functions and procedures are appropriately defined and implemented. A copy of the Company’s Audit Committee charter is available on its website at www.unitybank.com.
The Audit Committee also reviews and evaluates the recommendations of the Company’s independent certified public accountant, receives all reports of examination of the Company and the Bank by regulatory agencies, analyzes such regulatory reports, and informs the Board of the results of their analysis of the regulatory reports. In addition, the Audit Committee receives reports directly from the Company’s internal auditors and recommends any action to be taken in connection therewith.
Human Resources (“HR”)/Compensation Committee
The HR/Compensation Committee consisted of Chairman Dr. Mark S. Brody and Directors Peter E. Maricondo, Raj Patel, and Donald E. Souders, Jr. during the fiscal year ended December 31, 2023. The HR/Compensation Committee met three (3) times in 2023. As of the date hereof, each member is considered to be “independent” for purposes of NASDAQ Compensation Committee standards.
The HR/Compensation Committee is appointed by the Board of Directors to assist the Board in fulfilling its responsibilities with respect to human resources issues, policies relating to human resources and compensation of employees, including executive compensation. The HR/Compensation Committee performs functions that include monitoring human resources and compensation issues and practices, both internally and in the marketplace, conducting surveys and studies as to these issues, keeping abreast of current developments in the relevant fields, developing compensation ranges/grades, human resources policies, and employment manual updates. Based on the results of its activities, the HR/Compensation Committee sets the compensation for executive officers and for the members of the Company’s Board. The HR/Compensation Committee does not delegate its authority regarding compensation. Currently, no consultants are engaged or used by the HR/Compensation Committee for purposes of determining or recommending compensation levels.
The Board of Directors has adopted a written charter for the HR/Compensation Committee which is available on the Company’s website at www.unitybank.com.
HR/Compensation Committee Interlocks and Insider Participation
There are no HR/Compensation Committee “interlocks”, as defined in applicable SEC regulations. This means that no executive officer of the Company or the Bank served as a director or member of the Compensation Committee of another entity where one of their executive officers served as a member of the Company’s HR/Compensation Committee.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee consisted of Chair Dr. Mary E. Gross and Directors Robert H. Dallas, II, Donald E. Souders, Jr., and Aaron Tucker during the fiscal year ended December 31, 2023. The Corporate Governance and Nominating Committee met two (2) times in 2023. In accordance with the marketplace rules of the Nasdaq Global Market, the Corporate Governance and Nominating Committee is currently, and was during 2023, composed entirely of independent non-management members of the Board of Directors. The committee operates under a written charter approved by the Board. A copy of the charter is available on the Company’s website at www.unitybank.com.
The Corporate Governance and Nominating Committee’s responsibilities include:
| ● | Developing and recommending to the Board a set of corporate governance principles applicable to the Company and fulfilling the duties of the Committee as specified in such governance principles. These guidelines are available on the Company’s website at www.unitybank.com; |
| ● | Assisting the Board in determining the size and composition of the Board of Directors and its Committees; |
| ● | Assisting the Board in identifying qualified individuals to be considered for nomination by the Board for election as directors at any meeting of shareholders, including considering proposals made by shareholders and others to nominate specific individuals to the Board of Directors; |
| ● | Overseeing the annual evaluation of the Board. |
The Corporate Governance and Nominating Committee carefully considers all candidates for Director that are recommended by the Company’s shareholders and will not evaluate such candidate recommendations any differently from the way it evaluates candidates recommended by the Corporate Governance and Nominating Committee. In its evaluation of each proposed candidate, the Corporate Governance and Nominating Committee considers many factors including, without limitation, the individual’s experience, character, demonstrations of judgment and ability, and financial and other special expertise. The Corporate Governance and Nominating Committee is also authorized to obtain the assistance of an independent third party to complete the process of finding, evaluating and selecting suitable candidates for Director. Please see the “Other Matters” section of this document for details regarding shareholder recommendation and proposal requirements.
Communications with the Board of Directors
The Company encourages shareholder communications with the Board of Directors. All such communications should be directed to the Chief Financial Officer or Chief Executive Officer of the Company, who will circulate them to the other members of the Board. The Board does not screen shareholder communications through management.
Code of Ethics
The Company has adopted a Code of Ethics in accordance with SEC regulations, which applies to the Company’s Chief Executive Officer, Chief Financial Officer, all other officers, employees, and the Board of Directors. The Code of Ethics addresses responsibilities regarding recognizing and avoiding situations which may be in conflict with or prejudicial to the interest of the Company or appear to cause a conflict of interest. Our Code of Ethics is available in the Investor Relations section of the Company’s website located at www.unitybank.com.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Company’s independent registered public accounting firm for the fiscal year ended December 31, 2023, was Wolf & Company P.C.. Representatives of Wolf & Company P.C. are expected to participate in the Annual Meeting and will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. The Company’s independent registered public accounting firm for the fiscal year ended December 31, 2022 was RSM US LLP.
Fees Paid to the Company’s Independent Registered Public Accounting Firm for the Fiscal Years 2023 and 2022
| | | | | | |
| | | | |
| Wolf & Co. P.C. | RSM US LLP |
| 2023 | 2023 | 2022 |
Audit fees (1) | $ | 331,048 | $ | - | $ | 387,000 |
Non Audit related fees (2) | | 39,680 | | - | | 33,500 |
Consent fees (3) | | - | | 96,600 | | - |
Total | $ | 345,728 | $ | 96,600 | $ | 420,500 |
| (1) | Includes those fees required for reporting on the Company’s consolidated financial statements. |
| (2) | Includes fees related to data security tools, certain IT services and audit procedures relating to the U.S. Department of Housing and Urban Development (HUD) reporting requirements. |
| (3) | Includes fees related to the 2023 10-K consent, auditor transition, and S-8 procedures. |
Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee generally pre-approves all audit and permissible non-audit services provided by the independent external auditors. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent external auditors. Under the policy, pre-approval is generally provided for up to one year, and any pre-approval is limited as to the particular service or category of services and is subject to a specific budget. For each proposed service, the independent auditor is required to provide detailed back-up documentation at the time of approval. The Audit Committee has approved an exception to this pre-approval policy, allowing Management to engage the Company’s independent auditor to provide permissible non-audit services, provided that the total cost of such services, in aggregate, does not exceed $10,000 in any year. Management will then report the engagement to the Audit Committee at its next meeting. All audit services provided by Wolf & Company P.C. and RSM US LLP to the Company for the fiscal years ended 2023 and 2022 were approved by the Audit Committee. For 2023, permissible non-audit services included software provided by Wolf & Company P.C. relating to cybersecurity monitoring protocols. There were no additional permissible non-audit services provided by Wolf & Company P.C. and RSM US LLP for the fiscal years ended 2023 and 2022.
Report of the Audit Committee
The Audit Committee meets at least four (4) times per year to consider the adequacy of the Company’s financial controls and the objectivity of its financial reporting. The Audit Committee meets periodically with Management, Wolf & Company P.C., the Company’s independent registered public accounting firm, and the Company’s internal auditors, who have unrestricted access to the Audit Committee.
Management of the Company has primary responsibility for the Company’s financial statements and the overall reporting process, including the Company’s system of internal controls. The independent registered public accounting firm audits internal controls and the financial statements prepared by Management, expresses an opinion as to whether those financial statements fairly represent the financial position, results of operations and cash flows of the Company in conformity with generally accepted accounting principles and discusses with the Audit Committee any issues they believe should be raised with the Committee.
| | | | | | |
| | | | | | |
| Fiscal Year Ending |
| 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/31/2022 | 12/31/2023 |
Unity Bancorp, Inc. | 100.00 | 110.30 | 87.68 | 133.19 | 140.85 | 155.46 |
KBW NASDAQ Bank Index | 100.00 | 136.12 | 122.09 | 168.9 | 132.76 | 131.58 |
KBW NASDAQ Regional Banking Index | 100.00 | 123.87 | 113.11 | 154.57 | 143.87 | 143.30 |
S&P 500 Index | 100.00 | 131.47 | 155.65 | 200.29 | 163.98 | 207.04 |
The KBW NASDAQ Bank Index is designed to track the performance of large U.S. banks and thrifts. The KBW NASDAQ Regional Banking Index seeks to reflect regional banking performance.
Business Results
The Company increased diluted earnings per share by 7.0% from $3.59 per diluted share in 2022 to $3.84 per diluted share in 2023. We achieved this by growing interest earning assets and deposits while maintaining a strong interest margin and disciplined credit and expense management. Amidst persistent inflation and an inverted yield curve, we reduced our loan to deposit ratio to approximately 113% compared to 118% at the end of 2022, while increasing net income 3.3 percent to $39.7 million from $38.5 million in the prior year. We continue to remain well positioned for increased long-term growth and profitability. During 2023, we accomplished the following:
| ● | Net interest income increased $4.9 million or 5.4 percent to $95.0 million from $90.1 million in the prior year. |
| ● | Total gross loans increased $65.5 million, or 3.1 percent from the prior year. |
| ● | Total deposits increased $136.6 million, or 7.6 percent from the prior year. |
Our Compensation Approach
Our long range mission is to produce value for our shareholders by providing outstanding service and responsiveness to the markets and customers we serve. These goals are reflected in the Company’s compensation programs for its executive officers by:
| ● | Ensuring that our NEOs maintain and hold a significant equity interest in the Company by making stock option and restricted stock grants a significant part of the total compensation mix, thereby further aligning management interests with those of our shareholders; |
| ● | Creating balanced incentives that do not encourage NEOs to expose the Company to inappropriate risks by providing excessive compensation that could lead to material loss; |
| ● | Providing a market competitive overall compensation package so that the Company may attract, retain and reward highly qualified, motivated and productive executives; and |
| ● | Rewarding individuals of greatest responsibility and achievement within a framework that is internally equitable. |
Performance-Based Compensation
Pay-for-performance is a key objective of our executive compensation program. A significant portion of our compensation program focuses on performance-based pay that rewards our achievements on an annual basis and our ability to deliver long-term value to our stockholders. We have a balanced approach to total compensation that includes a mix of base/fixed pay and variable/performance-based pay.
Compensation Design Principles and Governance Best Practices
The design principles of our executive compensation programs are intended to protect and promote the interests of our shareholders. Below we summarize certain practices we have implemented to drive performance and those we have not implemented because we do not believe they would serve our stockholder’s long-term interests.
Setting Annual Compensation
Roles & Responsibilities
Compensation Committee
The Human Resources/Compensation Committee of the Board of Directors is responsible for discharging the Board’s duties in executive compensation matters and for administering the Company’s incentive and equity-based plans. This includes oversight of the total compensation programs for the Company’s CEO and other executive officers, including all Named Executive Officers. The Committee is comprised solely of independent directors. The Committee receives input and data from the CEO, Finance, and Human Resource functions. The Committee does not currently utilize an outside compensation consultant.
The Committee reviews all compensation components for the Company’s Chief Executive Officer and other executive officers, including base salary, annual incentive, equity awards, and other benefits and perquisites. The Committee reviews performance annually and makes decisions regarding the Named Executive Officers’ compensation, including base salary, incentives, and equity grants based on this review. The Compensation Committee reviews its decisions with the full Board of Directors.
The Committee has the sole authority and resources to obtain advice and assistance from internal or external legal, human resources, accounting or other advisors, or consultants as it deems desirable or appropriate.
Management
Although the Committee makes independent determinations on all matters related to compensation of the NEOs, certain members of management may be requested to attend or provide input to the Committee. Input may be sought from the Chief Executive Officer, Chief Financial Officer, or others to ensure the Committee has the information and perspective it needs to carry out its duties.
In particular, the Committee seeks input from the Chief Executive Officer on matters relating to strategic objectives, Company performance goals, and input on his assessment of the NEOs, including the contribution and individual performance of each of his direct reports. The Chief Executive Officer and the Chief Financial Officer often assist the Committee on matters of design, administration, and operation of the Company’s compensation programs.
Although executives may provide insight, suggestions, or recommendations regarding executive compensation, they are not present during the Committee’s deliberations or vote. Only Committee members vote on decisions regarding executive compensation. The Committee regularly meets in executive session without management present. While the Chief Executive Officer makes recommendations on other NEOs, the Committee is ultimately responsible for approving compensation for all NEOs. The Chief Executive Officer’s compensation is discussed in executive session without members of management, including the Chief Executive Officer, present.
At the end of the year, the Committee determined a payout based on an assessment of the Company’s performance under the quantitative financial measure set forth above (determined formulaically) as well as an assessment of each executive’s performance and contribution toward strategic goals. The corporate results were as follows:
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Performance Measure | 2023 Performance | Result | Payout Factor |
Pre-Provision Net Revenue (PPNR) ROAA vs. Peers (1) | 174.50% | Cap | 150.00% |
Pre-Provision Net Revenue (PPNR) ROAE vs. Peers (1) | 157.50% | Cap | 150.00% |
| (1) | The Company’s peer group consists of Pennsylvania and New Jersey Community Banks with assets from $500 million to $14.1 billion, excluding Subchapter S institutions. |
In determining the performance on the individual portion of the annual incentive, the Committee considered its assessment of the Chief Executive Officer’s performance and the Chief Executive Officer’s evaluation of the NEO’s performance. In light of strong performance on operational, strategic, financial shareholder metrics, and in consideration of the significant individual and collective achievements of the executive team during 2023, the Committee approved individual payouts based upon factors such as regulatory compliance, board interaction, strategic goals, and leadership.
Following is a summary of the incentive awards paid to executives:
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Executive | 2023 Target Annual Incentive Award | 2023 Actual Annual Incentive Award | 2023 Actual as % of Target |
James A. Hughes | $ | 514,500 | $ | 586,530 | 114.00% |
George Boyan | | 195,000 | | 222,300 | 114.00% |
Equity-Based Awards
Equity awards were granted based on the Committee’s assessment of business environment, affordability, and corporate and individual performance. The Committee believes that equity grants, subject to multi-year vesting requirements, are an important component of the total compensation mix and an important retention tool for senior management. Once granted, restricted stock vests ratably over a four-year period.
Below is a summary of the grants awarded in 2023:
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| Restricted Stock |
Executive | # Shares | | Grant Value ($) |
James A. Hughes | 18,000 | $ | 371,520 |
George Boyan | 11,000 | | 227,040 |
John Kauchak (1) | 8,500 | | 175,440 |
| (1) | Mr. Kauchak’s restricted stock grant will continue to vest over four years. |
Benefits and Other Compensation
Retirement Benefits and Perquisites
Executives participate in the Unity Bank 401(k) Retirement Plan which is offered to all Bank employees. Under the plan, the Bank matches 100% of employee contributions, up to 4.0% of an employee’s compensation and 50.0% of employee contributions in an amount greater than 4.0% of compensation, up to 6.0% of compensation. This match is available for all employees.
The Company and the Bank entered into a Supplemental Executive Retirement Plan (the "SERP") with Mr. Hughes on June 4, 2015. The SERP will provide Mr. Hughes with certain supplemental non-qualified retirement benefits, and is described elsewhere in this proxy statement. The Committee believes the SERP is an important component of Mr. Hughes’ long term compensation.
Mr. Boyan is, and Ms. Bolomey and Mr. Kauchak were, participants in an Executive Incentive Retirement Plan (“EIRP”) which is described elsewhere in this proxy statement.
Mr. Boyan and Mr. Hughes are participants in the Bank’s Deferred Compensation Plan which is described elsewhere in this proxy statement.
The Committee believes it is important to provide some retirement benefits to senior management, including Mr. Hughes, as the Company does not offer a traditional defined benefit pension plan, and the NEO’s contributions to the Company’s 401(k) plan are capped due to the level of their compensation.
Post-Termination Benefits for Company Executives
The Company is party to an employment agreement with Mr. Hughes and a retention agreement with Mr. Boyan. Both agreements include Change in Control provisions. The Company further maintains Change in Control Agreements with Mr. Geraci, Mr. Donovan, and Mr. Davies. These agreements are described elsewhere in this Proxy Statement under the heading “Potential Payments Upon Termination or Change in Control”.
Additional Information about our Compensation Practices
As a matter of sound governance, we follow certain practices with respect to our compensation program. We regularly review and evaluate our compensation practices in light of regulatory developments, market standards, and other considerations.
Policy on Incentive Compensation Clawback
The Company has adopted a clawback policy requiring the return of incentive compensation in the event of a financial restatement.
Risk Assessment Review
The Committee reviews the structure and components of our compensation arrangements, the material potential sources of risk in our business lines and compensation arrangements, and various policies and practices of the Company that mitigate this risk. Within this framework, the Committee discusses the parameters of acceptable and excessive risk-taking and the general business goals and concerns of the Company. In particular, the Committee focuses on the risks associated with the design of each plan, the mitigation factors that exist for each plan, additional factors that could be considered, and an overall risk assessment with respect to the plans. All of our plans have links to corporate or business line results that allow for funding to be adjusted downward, awards are capped, and our governance procedures ensure awards are reviewed for appropriateness before they are distributed.
We have determined that risks arising from our employee compensation plans are not reasonably likely to have a material adverse effect on the Company. Further, it is both the Committee’s and management’s intent to continue to evolve our processes going forward by monitoring regulations and best practices for sound incentive compensation.
Option Exercises and Stock Vested
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| Option Awards | Stock Awards |
| Number of shares | Value Realized | Number of shares | Value Realized |
Name | acquired on exercise (#) | on exercise ($) | acquired on vesting (#) | on exercise ($) |
James A. Hughes | 5,010 | 82,415 | 14,875 | 351,689 |
George Boyan | - | - | 5,500 | 125,315 |
Janice Bolomey | 14,889 | 71,748 | 5,125 | 119,688 |
John J. Kauchak | - | - | 5,125 | 119,688 |
Vincent Geraci | 22,700 | 141,367 | 2,312 | 64,235 |
James Donovan | - | - | 750 | 19,358 |
James Davies | - | - | 500 | 13,203 |
Employment Agreement
The Company and the Bank are parties to an Amended and Restated Employment Agreement with Mr. Hughes.
Under this Amended and Restated Employment Agreement, Mr. Hughes will receive an annual base salary, subject to annual review and, in the discretion of the HR/Compensation Committee of the Board of Directors of the Company (“Committee”), adjustments based on factors deemed appropriate by the Committee. Mr. Hughes may also receive such additional cash bonuses as the Committee may authorize in its discretion. Mr. Hughes is entitled to participate in such benefit programs as are made available to employees of the Company, and to participate in such stock option or stock bonus plans as the Committee may, in its discretion, determine. Mr. Hughes’ agreement contains provisions for the payment of severance and payments upon a change in control. See “Potential Payments upon Termination or Change in Control.”
Non-qualified Deferred Compensation - Supplemental Executive Retirement Plan
The Company and the Bank entered into a Supplemental Executive Retirement Plan (the "SERP") with Mr. Hughes on June 4, 2015, which was amended on September 27, 2018. The SERP will provide Mr. Hughes with certain supplemental non-qualified retirement benefits.
Upon separation from service after age 66, Mr. Hughes will be entitled to an annual benefit in an amount equal to sixty (60) percent of the average of his base salary for the thirty-six months immediately preceding his separation from service for reasons other than Cause. The retirement benefit shall be adjusted annually thereafter by a percentage equal to the Consumer Price Index as reported by the U.S. Bureau of Labor Statistics for All Urban Consumers (CPI-U). The maximum number of annual payments to Mr. Hughes shall be fifteen (15).
The following table sets forth certain information regarding non-qualified deferred compensation benefits during the Company’s fiscal year ended December 31, 2023:
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| | Executive | Registrant | Aggregate | Aggregate | |
| | Contributions in | Contributions in | Earnings in | Withdrawals/ | Aggregate balance |
Name | Plan | Last FY ($) | Last FY ($) | Last FY ($) | Distributions ($) | at last FYE ($) |
James A. Hughes | SERP | - | 426,675 | - | - | 5,284,052 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Employment Agreement
Mr. Hughes’ employment may be terminated at any time for “cause” as defined in the Employment Agreement, or without “cause.” In the event that Mr. Hughes is terminated without “cause” or resigns for “good cause” (as defined under the Employment Agreement and discussed below), he is entitled to receive a severance amount equal to 18 months of his then current base salary. Such amount shall be paid in equal installments in the same manner in which Mr. Hughes’ compensation was paid through the date of termination. Mr. Hughes will also continue to receive hospital, health, medical, and life insurance and such other benefits to which he had been entitled at the date of termination for such 18-month period, unless and until Mr. Hughes obtains new employment during such period and such new employment provides for such benefits to be provided to Mr. Hughes. “Good Cause” under the Employment Agreement includes a material reduction in Mr. Hughes’ duties and responsibilities or any reduction in his base salary.
In addition, if Mr. Hughes’ employment with the Company or any successor terminates within 18 months after a “change in control” of the Company, as defined under the Employment Agreement (regardless of the reason for such termination), Mr. Hughes will be entitled to receive an amount equal to 18 months of his then current base salary plus any cash bonus received by Mr. Hughes during the preceding fiscal year. Such amount shall be paid in installments in the same manner in which Mr. Hughes’ compensation was paid through the date of termination. The Company, or its successor, will be required to maintain Mr. Hughes’ hospital, health, medical, and life insurance coverage during the 18 month period following his termination, unless and until Mr. Hughes obtains new employment during such period and such new employment provides for such benefits to be provided to Mr. Hughes. All unvested stock options and stock awards previously granted to Mr. Hughes shall accelerate and immediately vest upon the occurrence of a change in control.
Mr. Hughes’ employment agreement defines a change in control as including: any event requiring the filing of a Current report on Form 8-K to announce a change in control; any person acquiring 35% or more of the Company’s voting power; if persons who serve on the Board at the beginning of the period fail to make up a majority of the Board at the end of the period; if the Company fails to satisfy the listing criteria for any exchange on which its shares are traded due to the number of shareholders or the number of round lot holders; or if the Board of the Company approves any transaction after which the shareholders of the Company fail to control 51% of the voting power of the resulting entity.
Furthermore, if Mr. Hughes’ employment with the Company terminates within 18 months after the Company consummates a “Significant Acquisition,” as defined under the Employment Agreement (regardless of the reason for such termination), Mr. Hughes will be entitled to receive an amount equal to 18 months of his then current base salary plus any cash bonus received by Mr. Hughes during the preceding fiscal year. Such amount shall be paid in installments in the same manner in which Mr. Hughes’ compensation was paid through the date of termination. In the event Mr. Hughes becomes entitled to the foregoing amounts due to this termination within 18 months of a Significant Acquisition, all unvested stock options and stock awards previously granted to Mr. Hughes shall accelerate and immediately vest upon such termination.
“Significant Acquisition” under the Employment Agreement means an acquisition by the Company pursuant to which, as all or part of the consideration for such acquisition, the Company issues to the shareholders of the acquired entity such number of voting securities as shall equal 25% or more of the then outstanding voting securities of the Company.
Following a Change in Control Mr. Hughes is also subject to a non-compete covenant and a non-solicitation covenant with respect to officers and employees of the Company and the Bank, in each case for a period of 18 months following termination of Mr. Hughes’ employment. Mr. Hughes would be entitled to 18 months of his then current base salary plus any cash bonus received by Mr. Hughes during the preceding fiscal year in exchange for agreeing to the non-compete and non-solicitation covenants.
Mr. Hughes’ Employment Agreement has a term of three (3) years; however, for each day elapsed during the term, a day will be added at the end of the term so that the term will be extended on a rolling basis to be three (3) years at any point in time, unless either party shall have provided written notice to the other of its desire to cease such extensions. In
addition, the term of Mr. Hughes’ Employment Agreement shall terminate immediately upon the occurrence of any of the following, unless the Board of Directors of the Company and the Bank waive such termination: (i) the Company’s entering into a Memorandum of Understanding with the FDIC or the New Jersey Department of Banking and Insurance; (ii) a cease-and-desist order being issued with respect to the Company by the FDIC or the New Jersey Department of Banking and Insurance; or (iii) the receipt by the Company of any notice under a federal or state law which (in any way) restricts the payment of any amounts or benefits which may become due under Mr. Hughes’ Employment Agreement.
The following table summarizes the potential payments to Mr. Hughes if a triggering event occurred on December 31, 2023.
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Payments and Benefits | Termination without cause | Termination following a change in control |
Cash Compensation - Change in Control | $ | 1,102,500 | $ | 1,689,030 |
Cash Compensation - Non-compete | | - | | 1,689,030 |
Health Benefits | | 14,490 | | 14,490 |
Accelerated Option Vesting | | - | | 75,247 |
Accelerated Restricted Stock Vesting | | - | | 1,242,780 |
Total | $ | 1,116,990 | $ | 4,710,577 |
Retention Agreements
The Company also entered into a Retention Agreement with Mr. Boyan. The Retention Agreement provides that Mr. Boyan may be terminated at any time for “cause” as defined in the applicable Retention Agreement or without “cause.” In the event that Mr. Boyan is terminated without “cause” or resigns for “good cause” (as defined under the applicable Retention Agreement and discussed below), Mr. Boyan is entitled to receive a severance amount equal to 12 months of his then current base salary. Such amount shall be paid in a lump sum payment (within 30 days of the termination of Mr. Boyan). In addition, Mr. Boyan will continue to receive medical, life insurance, and other benefits to which he had been entitled at the date of termination for 12 months, unless and until Mr. Boyan obtains new employment during such period and such new employment provides for such benefits to be provided to Mr. Boyan. “Good Cause” under the Retention Agreement includes a material reduction in Mr. Boyan’s duties and responsibilities or any reduction in his base salary.
In addition, if Mr. Boyan’s employment with the Company or any successor terminates within 18 months after a “change in control” of the Company, as defined under the Retention Agreement (regardless of the reason for such termination), Mr. Boyan will be entitled to receive an amount equal to twice his annual base salary and cash bonus at the date of termination. Such amount shall be paid in one lump sum payment (within 30 days of Mr. Boyan’s termination subsequent to a “change in control”). The Company or its successor will be required to maintain Mr. Boyan’s hospital, health, medical, and life insurance coverage for such 24-month period. All unvested stock options and stock option grants previously granted to him shall accelerate and immediately vest upon the occurrence of a change in control.
Furthermore, if Mr. Boyan’s employment with the Company terminates within 18 months after the Company consummates a “Significant Acquisition,” as defined under the Retention Agreement (regardless of the reason for such termination), Mr. Boyan will be entitled to receive an amount equal to twice the amount of his annual base salary and cash bonus at the date of termination. Such amount shall be paid in one lump sum payment (within 30 days of the termination of Mr. Boyan subsequent to a “Significant Acquisition.”) The Company is also required to maintain Mr. Boyan’s hospital, health, medical, and life insurance benefits coverage during such 24-month period, unless and until Mr. Boyan obtains new employment during such period and such new employment provides for such benefits to be provided to him. In the event Mr. Boyan becomes entitled to the foregoing amounts due to termination within 18 months of a Significant Acquisition, all unvested stock options and stock awards previously granted to him shall accelerate and immediately vest upon such termination. “Significant Acquisition” under the Retention Agreement means an acquisition by the Company pursuant to which, as all or part of the consideration for such acquisition, the Company issues to the shareholders of the acquired entity such number of voting securities as shall equal 25% or more of the then outstanding voting securities of the Company. The Retention Agreement has a term of three years; however, in the event that the term of the Retention Agreement would terminate at any time after the Company has engaged in substantive
negotiations regarding a transaction that would lead to a change in control, the Retention Agreement shall continue to remain in full force and effect until the earlier to occur of (i) the effectuation of the transaction leading to the change in control, or (ii) the termination of the negotiations for the proposed transaction, which would have resulted in the change in control. In addition, the term of each Retention Agreement shall terminate immediately upon the occurrence of any of the following, unless the Board of Directors of the Company and the Bank waive such termination: (i) the Company’s entering into a Memorandum of Understanding with the FDIC or the New Jersey Department of Banking and Insurance; (ii) a cease-and-desist order being issued with respect to the Company by the FDIC or the New Jersey Department of Banking and Insurance; or (iii) the receipt by the Company of any notice under a federal or state law which in any way restricts the payment of an award or benefits under the Retention Agreement.
The following table summarizes the potential payments to Mr. Boyan if a triggering event occurred on December 31, 2023.
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| | | | |
Payments and Benefits | Termination without cause | Termination following a change in control |
Cash Compensation - Change in Control | $ | 390,000 | $ | 1,224,600 |
Health Benefits | | 9,384 | | 18,767 |
Accelerated Vesting of Restricted Stock | | - | | 739,750 |
Total | $ | 399,384 | $ | 1,983,117 |
Change in Control Agreements
The Company also entered into Change in Control Agreements with Mr. Geraci, Mr. Donovan, and Mr. Davies. If Mr. Geraci’s employment with the Company or any successor terminates within six (6) months after a “change in control” of the Company, as defined under the Change in Control Agreements (regardless of the reason for such termination), then Mr. Geraci will be entitled to receive an amount equal to 12 months of his annual base salary at the date of termination, plus the aggregate amount of any cash bonuses paid to him during the preceding fiscal year. If Mr. Donovan’s or Mr. Davies’ employment with the Company or any successor terminates within nine (9) months after a “change in control” of the Company, as defined under the Change in Control Agreements (regardless of the reason for such termination), then they will be entitled to receive an amount equal to 9 months of their annual base salary at the date of termination, plus the aggregate amount of any cash bonuses paid to Mr. Donovan during the preceding fiscal year, and (9/12) the aggregate amount of any cash bonuses paid to Mr. Davies during the preceding fiscal year. Such amounts shall be paid in one lump sum payment (within 22 days of the executive’s termination subsequent to a “change in control”). The Company or its successor will be required to maintain the executive’s hospital, health, medical, and life insurance coverage for such 12-month period. All unvested stock options and stock option grants previously granted to the executive shall accelerate and immediately vest upon the occurrence of a change in control.
The following table shows the payout which would be made to Mr. Geraci, Mr. Donovan, and Mr. Davies in the event employment is terminated following a change in control or significant acquisition on December 31, 2023:
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Payments and Benefits | Vincent Geraci | James Donovan | James Davies |
Cash Compensation - Change in Control | $ | 563,576 | $ | 250,125 | $ | 221,250 |
Health Benefits | | 12,112 | | 11,998 | | 7,549 |
Accelerated Vesting of Restricted Stock | | 125,758 | | 66,578 | | 44,385 |
Total | $ | 701,446 | $ | 328,701 | $ | 273,184 |
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The following table set forth below describes the change in NEO “Actual” Compensation Paid vs. the change in (Pre Provision Net Revenue) Return on Average Assets:
DIRECTOR COMPENSATION
Each Director listed below is a current Director of the Company and the Bank. Directors of the Company do not receive per meeting fees for their service on the Company’s Board of Directors. Compensation for service on the Bank’s Board of Directors for 2023 was in the form of cash compensation consisting of an annual retainer, meeting and committee fees, as well as, equity compensation in the form of restricted stock.
Members of the Bank’s Board of Directors received a $27,000 retainer for service on the Board of Directors in 2023 which was paid in 2024. The Chairman of each Board Committee received an additional $3,000 retainer, while the Chairman of the Board received an additional $6,000.
Non-Executive Directors also receive $900 for attendance at each Bank Board of Directors’ meeting, and between $500 and $900 for attendance at each Bank Committee meeting. The Chairman of the Board and the Chairman of each individual Committee receive an additional $200 per meeting.
The Directors are eligible to participate in the Company’s stock bonus and stock option plans. On January 3, 2023, the Company’s non-employee Directors were each granted restricted stock for their service in 2022. The shares were granted at a fair value of $27.33 per share, which vests annually in 25% increments over four (4) years commencing January 3, 2024.
For details on deferred compensation and interest received for Directors and Executives in 2023 see below.
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Name | Deferred Compensation | Interest Received | Total |
Dr. Mark S. Brody | $ | 45,200 | $ | 62,632 | $ | 107,832 |
David D. Dallas | | 60,000 | | 29,133 | | 89,133 |
Robert H. Dallas, II | | 23,100 | | 12,917 | | 36,017 |
Peter E. Maricondo | | 48,700 | | 25,544 | | 74,244 |
Donald E. Souders, Jr. | | 14,200 | | 7,387 | | 21,587 |
Aaron Tucker | | 26,930 | | 11,020 | | 37,950 |
Dr. Mary E. Gross | | 41,700 | | 2,821 | | 44,521 |
James A. Hughes | | 578,140 | | 205,361 | | 783,501 |
John J. Kauchak | | 136,800 | | 55,480 | | 192,280 |
George Boyan | | 56,780 | | 3,334 | | 60,114 |
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS; REVIEW, APPROVAL OR
RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
The Bank has made in the past and, assuming continued satisfaction of generally applicable credit standards, expects to continue to make loans to Directors, executive officers, and their associates (i.e., corporations or organizations for which they serve as officers or Directors, or in which they have beneficial ownership interest of ten percent or more). These loans have all been made in the ordinary course of the Bank’s business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons not related to the Bank and do not involve more than the normal risk of collectability or represent other unfavorable features.
Other than the ordinary course lending transactions described above, which must be approved by the Bank’s Board under bank regulatory requirements, and typical bank deposit relationships, all related party transactions are reviewed and approved by our Audit Committee. This authority is provided to our Audit Committee under its written charter. In reviewing these transactions, our Audit Committee seeks to ensure that the transaction is no less favorable to the Company than a transaction with an unaffiliated third party. During 2023 and 2022, there were no transactions with related parties which were not required to be approved by our Audit Committee, and there were no related party transactions not approved by our Audit Committee.
Required Vote
DIRECTORS WILL BE ELECTED BY A PLURALITY OF THE VOTES CAST AT THE ANNUAL MEETING WHETHER IN PERSON OR BY PROXY.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE NOMINEES SET FORTH ABOVE.
PROPOSAL 2 – THE RATIFICATION OF THE SELECTION OF WOLF & COMPANY P.C. AS THE COMPANY’S INDEPENDENT EXTERNAL AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2024
The Audit Committee has appointed the firm of Wolf & Company P.C. to act as our independent registered public accounting firm and to audit our Consolidated Financial Statements for the fiscal year ending December 31, 2024. This appointment will continue at the pleasure of the Audit Committee and is presented to the shareholders for ratification as a matter of good governance. In the event that this appointment is not ratified by our shareholders, the Audit Committee will consider that fact when it selects the independent auditors for the following fiscal year.
Required Vote
THE SELECTION OF WOLF & COMPANY P.C. WILL BE RATIFIED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST AT THE ANNUAL MEETING WHETHER IN PERSON OR BY PROXY.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS RATIFY THE COMPANY’S SELECTION OF WOLF & COMPANY P.C.
PROPOSAL 3 - ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, companies with securities registered with the Securities and Exchange Commission are required to provide shareholders the opportunity to vote on a non-binding advisory proposal, commonly known as Say-on-Pay, to approve the compensation of executives. The Company has determined to implement this requirement by providing shareholders a simple vote that indicates their position (by a yes or no vote) with respect to our executive compensation.
Our Board of Directors annually reviews and approves corporate and/or individual goals and objectives relevant to the compensation of our executive officers, evaluates performance in light of those goals and objectives, and determines compensation levels based on this evaluation. In determining any long-term incentive component of compensation, the Board will consider all such factors as it deems relevant, such as performance and relative shareholder return, the value of similar incentive awards at comparable companies and the awards granted in previous years. We also believe that both the Company and shareholders benefit from these compensation policies.
The Board recommends that shareholders approve, in an advisory vote, the following resolution:
“Resolved, that the shareholders approve the executive compensation of the Company, as described in this proxy statement, including the tabular disclosure regarding executive officers in this Proxy Statement.”
Because your vote is advisory, it will not be binding upon the Board. However, the Board will take into account the outcome of the vote when considering future executive compensation arrangements.
Recommendation
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ADVISORY PROPOSAL SET FORTH ABOVE.
OTHER MATTERS
The Board of Directors is not aware of any matters other than those set forth in this proxy statement that will be presented for action at the Annual Meeting. However, if any other matter should properly come before the Annual Meeting, the persons authorized by the accompanying proxy will vote and act with respect thereto in what, according to their judgment, is in the interests of the Company and its shareholders.
INCORPORATION BY REFERENCE
To the extent that this proxy statement has been or will be specifically incorporated by reference into any other filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, the section of this proxy statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC), shall not be deemed to be so incorporated, unless specifically otherwise provided in such filing.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s executive officers and Directors and persons who own more than 10% of the Company’s Common Stock (who are referred to as “Reporting Persons”) to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely on the Company’s review of the copies of such forms received or written representations from Reporting Persons, the Company believes that, with respect to the fiscal year ended December 31, 2023, all Reporting Persons timely complied with all applicable filing requirements, except for a Form 4 Statement of Changes in Beneficial Ownership filed on behalf of James A. Hughes on December 15, 2023, for transactions occurring on December 11, 2023 due to a clerical error.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR THE 2025 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 2024 Annual Meeting of Shareholders must ensure that the proposal is received by the Corporate Secretary at Unity Bancorp, Inc., 64 Old Highway 22, Clinton, New Jersey, 08809, no later than December 31, 2024, if the proposal is submitted for inclusion in the Company’s proxy materials for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. Also, under SEC rules, generally, a shareholder may not submit more than one proposal, and the proposal, including any accompanying support may not exceed 500 words. In order to submit a proposal, a shareholder must have continuously held at least $2,000 in market value of Unity common stock for at least one year before the dated the proposal is submitted. Confirmation of ownership should be attached with the proposal and the stock must be held through the date of the Annual meeting.
ANNUAL REPORT ON FORM 10-K
At your request, the Company will provide by mail, without charge, a copy of its Annual Report on Form 10-K. Please direct all inquiries to the Company’s Chief Financial Officer at (908) 713-4565.
Pay vs Performance Disclosure
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Dec. 31, 2023
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Dec. 31, 2022
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Dec. 31, 2021
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Dec. 31, 2020
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| Pay vs Performance Disclosure, Table |
| | | | | | | | | | | | | | | | | | | Summary | | Average Summary | Average | Value of Initial Fixed | | Bank | | Compensation | Compensation | Compensation Table | Compensation | $100 Investment Based On: | | Pre Provision | | Table Total For | Actually Paid to | Total for Non-PEO | Actually Paid to | Total Shareholder | Peer Group Total | Net Income | Net Revenue | Year | PEO ($) | PEO ($) | NEOs ($) | Non-PEO NEOs ($) | Return ($) | Shareholder Return ($) | (in millions) | (PPNR) ROAA | | (1) | (1) | (2) | (2) | | (3) | | | 2023 | 2,360,462 | 2,503,103 | 544,748 | 575,735 | 139.49 | 104.92 | 39.7 | 2.32 | 2022 | 2,207,257 | 2,323,003 | 797,723 | 827,847 | 126.86 | 112.59 | 38.5 | 2.55 | 2021 | 2,373,879 | 2,733,535 | 613,293 | 772,845 | 120 | 112.83 | 36.1 | 2.50 | 2020 | 1,460,367 | 980,793 | 463,866 | 350,912 | 79.35 | 80.77 | 23.6 | 2.18 |
| 1) | The Company’s Principal Executive Officer “PEO” is James A. Hughes. |
| 2) | The Company’s current Non-PEO NEOs consist of George Boyan, Janice Bolomey, John J. Kauchak, Vincent Geraci, James Donovan, and James Davies. Prior periods include Laureen Cook who resigned as Senior Vice President and Chief Accounting Officer on April 8, 2022, Anthony Cossetti who resigned as Executive Vice President and Chief Financial Officer on September 25, 2020, and Alan Bedner who resigned as Executive Vice President and Chief Financial Officer on January 24, 2020. |
| 3) | For the years in which public shareholder return data was available, the Company’s peer group total shareholder consists of data compiled on the following banks: American Bank, BCB Community Bank, Blue Foundry Bank, ConnectOne Bank, Embassy Bank for the Lehigh Valley, ESSA Bank & Trust, First Bank, First Commerce Bank, Kearny Bank, Lakeland Bank, Magyar Bank, Parke Bank, Peapack-Gladstone Bank, Provident Bank, QNB Bank, The Bank of Princeton, and Univest Bank and Trust Co. |
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| Company Selected Measure Name |
Bank Pre Provision Net Revenue (PPNR) ROAA
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| Named Executive Officers, Footnote |
| 1) | The Company’s Principal Executive Officer “PEO” is James A. Hughes. |
| 2) | The Company’s current Non-PEO NEOs consist of George Boyan, Janice Bolomey, John J. Kauchak, Vincent Geraci, James Donovan, and James Davies. Prior periods include Laureen Cook who resigned as Senior Vice President and Chief Accounting Officer on April 8, 2022, Anthony Cossetti who resigned as Executive Vice President and Chief Financial Officer on September 25, 2020, and Alan Bedner who resigned as Executive Vice President and Chief Financial Officer on January 24, 2020. |
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| Peer Group Issuers, Footnote |
| 3) | For the years in which public shareholder return data was available, the Company’s peer group total shareholder consists of data compiled on the following banks: American Bank, BCB Community Bank, Blue Foundry Bank, ConnectOne Bank, Embassy Bank for the Lehigh Valley, ESSA Bank & Trust, First Bank, First Commerce Bank, Kearny Bank, Lakeland Bank, Magyar Bank, Parke Bank, Peapack-Gladstone Bank, Provident Bank, QNB Bank, The Bank of Princeton, and Univest Bank and Trust Co. |
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| PEO Total Compensation Amount |
$ 2,360,462
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$ 2,207,257
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$ 2,373,879
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$ 1,460,367
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| PEO Actually Paid Compensation Amount |
$ 2,503,103
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2,323,003
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2,733,535
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980,793
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| Adjustment To PEO Compensation, Footnote |
Below is a summary of the adjustments used to determine compensation “actually paid” for the Company’s PEO and Non-PEO NEOs: | | | | | | | | | | | | | 2023 | 2022 | 2021 | 2020 | Deduction for Amounts Reported under the "Stock Awards" Column | $ | (774,000) | (1,378,660) | (923,512) | (274,380) | Deduction for Amounts Reported under "Option Awards" Column | | — | — | (416,967) | (220,812) | Increase for Fair Value of Awards Granted during year that Remain Unvested as of Year-End | | 1,109,625 | 1,339,170 | 1,385,248 | 321,840 | Increase for Fair Value of Awards Granted during year that Vest during year | | — | — | — | — | Increase for Change in Fair Value from Prior-Year End to Current Year-End of Awards Granted Prior to year that were Outstanding and Unvested as of Year-End | | 182,683 | 98,841 | 795,659 | (486,498) | Decrease (increase) for Change in Fair Value from Prior Year-End to Vesting Date of Awards Granted Prior to year that Vested during year | | (240,298) | 138,592 | 293,855 | (513,913) | Deduction of Fair Value of Awards Granted Prior to Year that were Forfeited during year | | — | — | — | — | Increase based upon Incremental Fair Value of Awards Modified during year | | — | — | — | — | Increase based on Dividends or Other Earnings Paid during year prior to Vesting Date of Award | | 50,556 | 38,300 | 23,135 | 16,468 |
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| Non-PEO NEO Average Total Compensation Amount |
$ 544,748
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797,723
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613,293
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463,866
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| Non-PEO NEO Average Compensation Actually Paid Amount |
$ 575,735
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827,847
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772,845
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350,912
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| Adjustment to Non-PEO NEO Compensation Footnote |
Below is a summary of the adjustments used to determine compensation “actually paid” for the Company’s PEO and Non-PEO NEOs: | | | | | | | | | | | | | 2023 | 2022 | 2021 | 2020 | Deduction for Amounts Reported under the "Stock Awards" Column | $ | (774,000) | (1,378,660) | (923,512) | (274,380) | Deduction for Amounts Reported under "Option Awards" Column | | — | — | (416,967) | (220,812) | Increase for Fair Value of Awards Granted during year that Remain Unvested as of Year-End | | 1,109,625 | 1,339,170 | 1,385,248 | 321,840 | Increase for Fair Value of Awards Granted during year that Vest during year | | — | — | — | — | Increase for Change in Fair Value from Prior-Year End to Current Year-End of Awards Granted Prior to year that were Outstanding and Unvested as of Year-End | | 182,683 | 98,841 | 795,659 | (486,498) | Decrease (increase) for Change in Fair Value from Prior Year-End to Vesting Date of Awards Granted Prior to year that Vested during year | | (240,298) | 138,592 | 293,855 | (513,913) | Deduction of Fair Value of Awards Granted Prior to Year that were Forfeited during year | | — | — | — | — | Increase based upon Incremental Fair Value of Awards Modified during year | | — | — | — | — | Increase based on Dividends or Other Earnings Paid during year prior to Vesting Date of Award | | 50,556 | 38,300 | 23,135 | 16,468 |
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| Compensation Actually Paid vs. Total Shareholder Return |
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| Compensation Actually Paid vs. Net Income |
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| Compensation Actually Paid vs. Company Selected Measure |
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| Total Shareholder Return Vs Peer Group |
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| Tabular List, Table |
| | | | Financial Measure | Description | Pre-Provision Net Revenue (PPNR) ROAA | Pre-provision Net Revenue("PPNR") is a Non-GAAP measure and is defined as the Bank's income before provision for income taxes, less provision for loan losses divided by average total assets. Information obtained from Call Report data. | Pre-Provision Net Revenue (PPNR) ROAE | Pre-provision Net Revenue("PPNR") ROAE is a Non-GAAP measure and is defined as the Bank's income before provision for income taxes, less provision for loan losses divided by average total equity. Information provided from Call Report data. |
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| Total Shareholder Return Amount |
$ 139.49
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126.86
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120
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79.35
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| Peer Group Total Shareholder Return Amount |
104.92
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112.59
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112.83
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80.77
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| Net Income (Loss) |
$ 39,700,000
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$ 38,500,000
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$ 36,100,000
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$ 23,600,000
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| Company Selected Measure Amount |
2.32
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2.55
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2.50
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2.18
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| PEO Name |
James A. Hughes.
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| Measure:: 1 |
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| Pay vs Performance Disclosure |
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| Name |
Pre-Provision Net Revenue (PPNR) ROAA
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| Measure:: 2 |
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| Pay vs Performance Disclosure |
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| Name |
Pre-Provision Net Revenue (PPNR) ROAE
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| Deduction for Amounts Reported under the "Stock Awards" Column |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
$ (774,000)
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$ (1,378,660)
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$ (923,512)
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$ (274,380)
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| Deduction for Amounts Reported under "Option Awards" Column |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
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(416,967)
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(220,812)
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| Increase for Fair Value of Awards Granted during year that Remain Unvested as of Year-End |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
1,109,625
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1,339,170
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1,385,248
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321,840
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| Increase for Change in Fair Value from Prior-Year End to Current Year-End of Awards Granted Prior to year that were Outstanding and Unvested as of Year-End |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
182,683
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98,841
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795,659
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(486,498)
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| Decrease (increase) for Change in Fair Value from Prior Year-End to Vesting Date of Awards Granted Prior to year that Vested during year |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
(240,298)
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138,592
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293,855
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(513,913)
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| Increase based on Dividends or Other Earnings Paid during year prior to Vesting Date of Award |
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| Pay vs Performance Disclosure |
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| Adjustment to Compensation, Amount |
$ 50,556
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$ 38,300
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$ 23,135
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$ 16,468
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