DEF 14A 1 unty-20210330xdef14a.htm DEF 14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. )
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UNITY BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Unity Bancorp, Inc.

2021 PROXY

UNITY BANCORP, INC.

64 Old Highway 22

Clinton, New Jersey 08809

April 1, 2021

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders (the “Annual Meeting”) of Unity Bancorp, Inc. (the “Company”) to be held virtually on May 13, 2021 at 9:30 a.m. At the Annual Meeting, shareholders will be asked to consider and vote upon:

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.

The ratification of the selection of RSM US LLP as the Company’s independent external auditors for the year ending December 31, 2021.

An advisory vote on executive compensation.

An advisory vote on how often the Company will conduct an advisory vote on executive compensation.

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.

We are distributing our proxy materials to our registered shareholders via the U.S. Securities and Exchange Commission "Notice and Access" rules. A Notice of Internet Availability of Proxy Materials (the "Notice of Internet Availability") will be mailed beginning on or about April 1, 2021, rather than paper copies of the Proxy Statement, the proxy card and our 2020 Annual Report, which includes our annual report on Form 10-K for the fiscal year ended December 31, 2020. 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. If you are not a registered shareholder and hold shares through a broker, bank, or nominee, you will receive proxy materials from your broker, bank, or nominee and you must follow the voting instructions they provide.

It is important that your shares be represented and voted at the Annual Meeting. Whether or not you expect to attend 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.

On behalf of the Board of Directors and all of the employees of the Company, I thank you for your continued interest and support.

Sincerely yours,


/s/ David D. Dallas

David D. Dallas
Chairman of the Board

UNITY BANCORP, INC.

64 Old Highway 22

Clinton, New Jersey 08809

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 13, 2021

Notice is hereby given that the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) of Unity Bancorp, Inc. (the “Company”) will be held virtually on May 13, 2021 at 9:30 a.m. for the purpose of considering and voting upon the following matters:

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.

The ratification of the selection of RSM US LLP as the Company’s independent external auditors for the year ending December 31, 2021.

An advisory vote on executive compensation.

An advisory vote on how often the Company will conduct an advisory vote on executive compensation.

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.

Shareholders of record at the close of business on March 19, 2021, 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 www.meetingcenter.io/256600652. The password for the meeting is – UNTY2021.

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.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS’ MEETING TO BE HELD ON MAY 13, 2021:

You may access the Annual Report, Proxy Statement and Proxy Card at the following website:

https://www.investorvote.com/UNTY

By Order of the Board of Directors,


/s/ David D. Dallas
David D. Dallas
Chairman of the Board
April 1, 2021
Clinton, New Jersey

UNITY BANCORP, INC.

64 Old Highway 22

Clinton, New Jersey 08809

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 13, 2021

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 2021 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on May 13, 2021, and at any postponement or adjournment of the Annual Meeting.

You are cordially invited to attend the Annual Meeting, which will begin at 9:30 a.m. local time. The Annual Meeting will be broadcast at www.meetingcenter.io/256600652. The password for the meeting is – UNTY2021.

This proxy statement will first be available online on or about April 1, 2021, to shareholders.

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 19, 2021, there were 10,401,809 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 19, 2021. 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 May 3, 2021 by 5:00 p.m. Eastern Time.

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 less than a majority of the shares of Common Stock represented at the Annual Meeting. Approval of each of the other proposals 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 ratification of RSM US LLP as the Company’s independent external auditors; and

FOR approval of the Company’s executive compensation; and

FOR the Company holding an advisory vote on executive compensation once every three years.

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. 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 2024 and until his or her 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 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 his/her 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.

Nominees for 2021 Annual Meeting


Name, Age and Position		Director	Term
with Company (1)	Principal Occupation During Past Five Years	Since (2)	Expires
Dr. Mark S. Brody, 68	Managing Member Financial Planning Analysts, LLC;	2002	2024
Director	Vice President of Planned Financial Programs, Inc.
Raj Patel, 66	CEO of Millennium Hotel Group (Hotel);	2007	2024
Director	CEO of 2602 Deerfield LLC (Real Estate)
Donald E. Souders, Jr., 55	Attorney/Partner Florio Perrucci Steinhardt &	2007	2024
Director	Cappelli LLC

(1)

Each Director of the Company is also a Director of the Bank.

(2)

Includes prior service on the Board of Directors of the Bank.

Directors of the Company Whose Terms Continued Beyond this Annual Meeting


Name, Age and Position		Director	Term
with Company (1)	Principal Occupation During Past Five Years	Since (2)	Expires
Dr. Mary E. Gross, 60 Director	Founder, Human Edge Resources, LLC (Human Resource Consulting)	2009	2022
James A. Hughes, 62 President, CEO and Director	President and CEO of the Company and the Bank	2002	2022
Aaron Tucker (3), 58 Director	President, Tucker Enterprises; Real Estate Builder and Investor	2014	2022
Allen Tucker (3), 94 Vice Chairman	Chairman, Tucker Enterprises; Real Estate Builder and Investor	1995	2022
Wayne Courtright, 73 Director	Retired, Former Bank Executive Officer and Consultant	2004	2023
David D. Dallas (4), 66 Chairman	Chairman of the Company and the Bank; Chief Executive Officer of Dallas Group of America, Inc. (Chemicals)	1991	2023
Robert H. Dallas, II (4), 74 Director	President of Dallas Group of America, Inc. (Chemicals)	1991	2023
Peter E. Maricondo, 74 Director	Retired, Former Financial Consultant	2004	2023

(1)

Each Director of the Company is also a Director of the Bank.

(2)

Includes prior service on the Board of Directors of the Bank.

(3)

Allen Tucker and Aaron Tucker are father and son.

(4)

David D. Dallas and Robert H. Dallas, II are brothers.

Director Qualifications

Dr. Mark S. Brody: Dr. Mark S. Brody has been a Director of the Company and the Bank since 2002. Dr. Brody is also the Vice President of Planned Financial Programs, Inc. and Managing Member, Financial Planning Analysts, LLC. Dr. Brody has extensive experience in the financial markets and is considered to be an Audit Committee financial expert as such term is defined by SEC regulations. Dr. Brody is a prominent businessman in NJ and NY and has many contacts to generate new business for the Company.

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. For over 40 years, Mr. Dallas has 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 10 years and currently serves as a trustee of 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. For over 40 years, Mr. Dallas has 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 Watchung Borough Zoning Board of Adjustment, having served for more than 20 years.

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, a Master’s degree in Business Administration from Seton Hall University and is a Certified Public Accountant. Prior to Unity Bank, Mr. Hughes was a Senior Vice President at Summit Bancorp and also worked in public accounting for KPMG. 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 MBA 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 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. Mr. Tucker holds a Bachelor of Science degree in Business Administration from Northeastern University. Mr. Tucker is the 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.

Allen Tucker: Allen Tucker has been a Director of the Company and the Bank since 1995 and is the current Vice Chairman. Mr. Tucker is also the founder and Chairman of Tucker Enterprises. Mr. Tucker has extensive experience as a developer/builder of real estate and has extensive knowledge of the NJ markets served by the Company. 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, 2020, the Board of Directors of the Company held fourteen (14) 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 2020 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/		Governance and
Name	Audit	Compensation	Executive Loan	Nominating	Risk Management
Dr. Mark S. Brody		Chairman	Member		Member
Wayne Courtright	Member		Vice Chairman		Member
David D. Dallas	Member		Member		Chairman
Robert H. Dallas, II			Member	Member	Member
Dr. Mary E. Gross	Member			Chairman	Member
Peter E. Maricondo	Chairman	Member			Member
Raj Patel		Member	Member		Member
Donald E. Souders, Jr.		Member		Member	Member
Aaron Tucker	Member		Member	Member	Member
Allen Tucker			Chairman		Vice Chairman

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.

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 2020, other than Mr. Hughes who is the President and CEO of the Company. In addition, all current members of the Audit, HR/Compensation and Corporate Governance and Nominating Committees are "independent" for purposes of NASDAQ’s listing standards, and 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 credit risk relating to its loans and interest rate risk related to its entire balance sheet. 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 Mark S. Brody, Wayne Courtright, David D. Dallas, Mary E. Gross and Aaron Tucker during the fiscal year ended December 31, 2020. The Audit Committee met six (6) times in 2020, and also held two (2) meetings with the Company’s external auditors. 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 Wayne Courtright and 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; (ii) monitor the independence and performance of the Company’s external audit and internal auditing functions and determine the engagement of the external and internal auditors; (iii) provide avenues of communication among the external and internal auditors and the Board of Directors; (iv) review and monitor compliance with the Company’s Bank Secrecy Act (“BSA”) policy, procedures and practices; and (v) 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 our Audit Committee charter is available on our 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 Mark S. Brody and Directors Mary E. Gross, Peter E. Maricondo, Raj Patel and Donald E. Souders, Jr. during the fiscal year ended December 31, 2020. The HR/Compensation Committee met three (3) times in 2020. 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 our executive officers and for the members of our 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 our 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 our HR/Compensation Committee.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee consisted of Chairman Mary E. Gross and Directors Robert H. Dallas, II, Peter E. Maricondo, Donald E. Souders, Jr. and Aaron Tucker during the fiscal year ended December 31, 2020. The Corporate Governance and Nominating Committee met two (2) times in 2020. In accordance with the marketplace rules of the Nasdaq Global Market, the Corporate Governance and Nominating Committee is currently, and was during 2020, 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;

●

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. There is no minimum or maximum age requirement to be considered a director nominee; however, the Corporate Governance and Nominating Committee must verify the candidate satisfies all legal requirements applicable to members of the Board and furthermore, upon election, the candidate is required to own Unity Bancorp stock valued at $25,000. Any shareholder, who wishes to recommend an individual as a nominee for election to the Board of Directors, should submit such recommendation in writing to the Corporate Secretary of the Company, together with information regarding the experience, education and general background of the individual and a statement as to why the shareholder believes such individual to be an appropriate candidate for Director of the Company. Such recommendation should be provided to the Company no later than the deadline for submission of shareholder proposals with respect to the annual meeting at which such candidate, if recommended by the Corporate Governance and Nominating Committee to the Board of Directors and approved by the Board of Directors, would be proposed for election.

Communications with the Board of Directors

The Company encourages shareholder communications with the Board of Directors, but does not have a formal process. All such communications should be directed to the 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 and to 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 our 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, 2020, was RSM US LLP. Representatives of RSM US LLP 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.

Fees Paid to the Company’s Independent Registered Public Accounting Firm during Fiscal Years 2020 and 2019


	2020		2019
Audit fees (1)	$	246,600	$	255,850
Audit related fees (2)		22,575		5,000
Total	$	269,175	$	260,850

(1)

Includes those fees required for reporting on the Company’s consolidated financial statements and employee benefit plans (S8).

(2)

Includes fees related to BSA Audit and audit procedures relating to the U.S. Department of Housing and Urban Development (HUD) reporting requirements.

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 the 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 and permissible non-audit services provided by RSM US LLP to the Company for the fiscal years ended 2020 and 2019 were approved by the Audit Committee.

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 with RSM US LLP, 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.

In connection with this year’s financial statements, the Audit Committee has reviewed and discussed the Company’s audited financial statements with the Company’s officers and RSM US LLP, the Company’s independent registered public accounting firm. The Audit Committee has discussed with RSM US LLP the matters required to be discussed by PCAOB Auditing Standards No. 16, Communications with Audit Committees. The Audit Committee also received the written disclosures and letters from RSM US LLP that are required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committee Concerning Independence and have discussed such independence with representatives of RSM US LLP.

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for filing with the U.S. Securities and Exchange Commission.

Peter E. Maricondo, Chairman

Wayne Courtright

David D. Dallas

Dr. Mary E. Gross

Aaron Tucker

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 19, 2021, certain information concerning the ownership of shares of Common Stock by (i) each person who is known by the Company to own beneficially more than five percent (5%) of the issued and outstanding Common Stock, (ii) each director and nominee for director of the Company, (iii) each named executive officer described in this Proxy Statement under the caption “Executive Compensation,” and (iv) all Directors and Executive Officers of the Company as a group.


	Number of Shares
Name and Position with Company (1)	Beneficially Owned (2)		Percent of Class
Dr. Mark S. Brody, Director	399,925	(3)	3.84	%
Wayne Courtright, Director	124,711	(4)	1.20	%
David D. Dallas, Chairman	1,772,865	(5)	17.03	%
Robert H. Dallas, II, Director	1,772,064	(6)	17.02	%
Dr. Mary E. Gross, Director	25,476	(7)	0.24	%
Peter E. Maricondo, Director	51,473	(8)	0.49	%
Raj Patel, Director	49,088	(9)	0.47	%
Donald E. Souders, Jr., Director	28,387	(10)	0.27	%
Aaron Tucker, Director	66,094	(11)	0.63	%
Allen Tucker, Vice Chairman	376,095	(12)	3.61	%
James A. Hughes, President and Director	205,991	(13)	1.97	%
Janice Bolomey, Exec. V.P. and Chief Administrative Officer	116,290	(14)	1.11	%
John J. Kauchak, Exec. V.P. and Chief Operating Officer	136,884	(15)	1.31	%
Laureen S. Cook, S.V.P and Chief Accounting Officer	44,743	(16)	0.43	%
Vincent Geraci, 1st SVP and Director of Mortgage Lending	22,291	(17)	0.21	%
Directors and Executive Officers of the Company as a Group (15 persons)	3,451,492	(18)	31.97	%
5% Shareholders:
Banc Funds Company LLC	695,915	(19)	6.60	%
Endicott Management Company	660,635	(20)	6.35	%
Wellington Management Group LLP	541,361	(21)	5.13	%

(1)

The address for Banc Funds Company LLC is 20 North Wacker Drive, Suite 3300, Chicago, IL 60606-3105. The address for Endicott Management Company is 570 Lexington Avenue, 37th Floor, New York, NY 10022. The address for Wellington Management Group LLP is 280 Congress Street, Boston, Massachusetts, 02210. The address for all other listed persons is c/o Unity Bank, 64 Old Highway 22, Clinton, New Jersey, 08809.

(2)

Beneficially owned shares include shares over which the named person exercises either sole or shared voting power or sole or shared investment power. It also includes shares owned (i) by a spouse, minor children or relatives sharing the same home, (ii) by entities owned or controlled by the named person, and (iii) by other persons if the named person has the right to acquire such shares within sixty (60) days by the exercise of any right or option. Unless otherwise noted, all shares are owned of record and beneficially by the named person.

(3)

Includes 48,400 shares held jointly with his spouse, and 13,400 shares issuable upon the exercise of immediately exercisable options. Also includes 40,102 shares registered to Financial Planning Analysts and owned by Dr. Brody; 21,059 shares in Dr. Brody’s own name; 13,000 shares in an SEP-IRA account in his own name; and 262,289 shares held in a master account at Financial Planning Analysts over which Dr. Brody has no voting authority, but has dispositive power. Also includes a total of 1,675 shares of Restricted Stock (see number 22 below for grant details).

(4)	Includes 64,436 shares in Mr. Courtright’s own name, 45,000 shares in an IRA in his own name and 13,400 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 1,875 shares of Restricted Stock (see number 23 below for grant details).

(5)

Includes 21,575 shares in Mr. David Dallas’ own name and 7,933 shares issuable upon the exercise of immediately exercisable options. Shares also disclosed as beneficially owned by Mr. Dallas are 1,740,884 shares held by Dallas Financial Holdings, LLC., which are also disclosed as beneficially owned by Mr. Robert H. Dallas II. Also includes a total of 1,875 shares of Restricted Stock (see number 23 below for grant details) and 598 shares issued through its Dividend Reinvestment Plan.

(6)

Includes 21,136 shares in Mr. Robert Dallas’ own name and 7,900 shares issuable upon the exercise of immediately exercisable options. Shares also disclosed as beneficially owned by Mr. Dallas are 1,740,884 shares held by Dallas Financial Holdings, LLC., which are also disclosed as beneficially owned by Mr. David D. Dallas. Also includes a total of 1,563 shares of Restricted Stock (see number 24 below for grant details) and 581 shares issued through its Dividend Reinvestment Plan.

(7)	Includes 14,601 shares in Dr. Gross’ own name and 9,000 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 1,875 shares of Restricted Stock (see number 23 below for grant details).

(8)	Includes 36,198 shares in Mr. Maricondo’s own name and 13,400 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 1,875 shares of Restricted Stock (see number 23 below for grant details).

(9)	Includes 34,225 shares in Mr. Patel’s own name and 13,300 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 1,563 shares of Restricted Stock (see number 24 below for grant details).

(10)	Includes 13,324 shares in Mr. Souders’ own name and 13,300 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 1,763 shares of Restricted Stock (see number 25 below for grant details).

(11)	Includes 51,231 shares in Mr. Aaron Tuckers’ own name and 13,300 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 1,563 shares of Restricted Stock (see number 24 below for grant details).

(12)	Includes 360,422 shares in Mr. Allen Tucker’s own name and 13,400 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 1,675 shares of Restricted Stock (see number 22 below for grant details) and 598 shares issued through a Dividend Reinvestment Plan.

(13)

Includes 104,609 shares in Mr. Hughes’ own name, 9,432 shares held in his 401(k), and 74,001 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 17,125 shares of Restricted Stock (see number 26 below for grant details) and 824 shares issued through a Dividend Reinvestment Plan.

(14)	Includes 25,289 shares in Ms. Bolomey’s own name and 85,001 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 6,000 shares of Restricted Stock (see number 27 below for grant details).

(15)	Includes 56,883 shares in Mr. Kauchak’s own name and 74,001 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 6,000 shares of Restricted Stock (see number 27 below for grant details).

(16)

Includes 8,356 shares in Ms. Cook’s own name, 2,604 shares held in her 401(k), 5,615 shares jointly held with her spouse, and 25,668 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 2,500 shares of Restricted Stock (see number 28 below for grant details).

(17)	Includes 1,841 shares in Mr. Geraci’s own name and 16,700 shares issuable upon the exercise of immediately exercisable options. Also includes a total of 3,750 shares of Restricted Stock (see number 29 below for grant details).

(18)	Includes shares issuable upon the exercise of immediately exercisable options.

(19)	All information regarding the number of shares beneficially owned and the percent of ownership by Banc Funds Company LLC, was obtained from the 13G filed with the U.S. Securities and Exchange Commission on February 9, 2021.

(20)	All information regarding the number of shares beneficially owned and the percent of ownership by Endicott Management Company was obtained from Bloomberg on February 26, 2020.

(21)	All information regarding the number of shares beneficially owned and the percent of ownership by Wellington Management Group LLP was obtained from the 13G filed with the U.S. Securities and Exchange Commission on February 4, 2021.

(22)	The details of the restricted stock grants for all Directors holding 1,675 shares of Restricted Stock as of March 19, 2021 are as follows:

●

225 shares remaining unvested of an original grant of 900 shares granted on January 2, 2018, which vest in 225 share increments over four (4) years commencing January 2, 2019; and

●

450 shares remaining unvested of an original grant of 900 shares granted on January 2, 2019, which vest in 225 share increments over four (4) years commencing January 2, 2020; and

●

1,000 shares granted on January 4, 2021 which vest in 250 share increments over four (4) years commencing January 4, 2022.

(23)	The details of the restricted stock grants for all Directors holding 1,875 shares of Restricted Stock as of March 19, 2021 are as follows:

●

225 shares remaining unvested of an original grant of 900 shares granted on January 2, 2018, which vest in 225 share increments over four (4) years commencing January 2, 2019; and

●

450 shares remaining unvested of an original grant of 900 shares granted on January 2, 2019, which vest in 225 share increments over four (4) years commencing January 2, 2020; and

●

1,200 shares granted on January 4, 2021 which vest in 300 share increments over four (4) years commencing January 4, 2022.

(24)	The details of the restricted stock grants for all Directors holding 1,563 shares of Restricted Stock as of March 19, 2021 are as follows:

●

188 shares remaining unvested of an original grant of 750 shares granted on January 2, 2018, which vest in 188 share increments over four (4) years commencing January 2, 2019; and

●

375 shares remaining unvested of an original grant of 750 shares granted on January 2, 2019, which vest in 188 share increments over four (4) years commencing January 2, 2020; and

●

1,000 shares granted on January 4, 2021 which vest in 250 share increments over four (4) years commencing January 4, 2022.

(25)	The details of the restricted stock grants for all Directors holding 1,763 shares of Restricted Stock as of March 19, 2021 are as follows:

●

188 shares remaining unvested of an original grant of 750 shares granted on January 2, 2018, which vest in 188 share increments over four (4) years commencing January 2, 2019; and

●

375 shares remaining unvested of an original grant of 750 shares granted on January 2, 2019, which vest in 188 share increments over four (4) years commencing January 2, 2020; and

●

1,200 shares granted on January 4, 2021 which vest in 300 share increments over four (4) years commencing January 4, 2022.

(26)	The details of the restricted stock grants for all Executives holding 17,125 shares of Restricted Stock as of March 19, 2021 are as follows:

●

2,000 shares remaining unvested of an original grant of 8,000 shares granted on March 9, 2018, which vest in 2,000 share increments over four (4) years commencing March 9, 2019; and

●

5,000 shares remaining unvested of an original grant of 10,000 shares granted on March 12, 2019, which vest in 2,500 share increments over four (4) years commencing March 12, 2020; and

●

5,625 shares remaining unvested of an original grant of 7,500 shares granted on August 22, 2019, which vest in 1,875 share increments over four (4) years commencing August 22, 2020; and

●

4,500 shares granted on March 16, 2020 which vest in 1,500 share increments over four (4) years commencing March 16, 2021.

(27)	The details of the restricted stock grants for all Directors holding 6,000 shares of Restricted Stock as of March 19, 2021 are as follows:

●

1,000 shares remaining unvested of an original grant of 4,000 shares granted on March 9, 2018, which vest in 1,000 share increments over four (4) years commencing March 9, 2019; and

●

2,000 shares remaining unvested of an original grant of 4,000 shares granted on March 12, 2019, which vest in 1,000 share increments over four (4) years commencing March 12, 2020; and

●

3,000 shares granted on March 16, 2020 which vest in 1,000 share increments over four (4) years commencing March 16, 2021.

(28)	The details of the restricted stock grants for all Executives holding 2,500 shares of Restricted Stock as of March 19, 2021 are as follows:

●

250 shares remaining unvested of an original grant of 1,000 shares granted on January 2, 2018, which vest in 250 share increments over four (4) years commencing January 2, 2019; and

●

500 shares remaining unvested of an original grant of 1,000 shares granted on December 10, 2018, which vest in 250 share increments over four (4) years commencing December 10, 2019; and

●

750 shares remaining unvested of an original grant of 1,000 shares granted on December 6, 2019, which vest in 250 share increments over four (4) years commencing December 6, 2020; and

●

1,000 shares granted on December 11, 2020 which vest in 250 share increments over four (4) years commencing December 11, 2021.

(29)	The details of the restricted stock grants for all Executives holding 3,750 shares of Restricted Stock as of March 19, 2021 are as follows:

●

375 shares remaining unvested of an original grant of 1,500 shares granted on January 2, 2018, which vest in 375 share increments over four (4) years commencing January 2, 2019; and

●

750 shares remaining unvested of an original grant of 1,500 shares granted on December 10, 2018, which vest in 375 share increments over four (4) years commencing December 10, 2019; and

●

1,125 shares remaining unvested of an original grant of 1,500 shares granted on December 6, 2019, which vest in 375 share increments over four (4) years commencing December 6, 2020; and

●

1,500 shares granted on December 11, 2020 which vest in 375 share increments over four (4) years commencing December 11, 2021.

None of the shares disclosed on the table above are pledged as security for any extension of credit.

EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS

The Human Resources/Compensation Committee (the “Committee”) and the Company are both committed to a pay-for-performance philosophy. This Compensation Discussion & Analysis (CD&A) provides information about the strategies and policies developed to ensure that executive compensation is strongly correlated with the Company’s overall performance and the individual performance of our executives.

Our Named Executive Officers (NEO’s) for 2020 were:


Name	Title
James A. Hughes	President & Chief Executive Officer
Alan J. Bedner (1)	Executive Vice President & Chief Financial Officer
Anthony Cossetti (2)	Executive Vice President & Chief Financial Officer
Janice Bolomey	Executive Vice President & Chief Administrative Officer
John J. Kauchak	Executive Vice President & Chief Operating Officer
Laureen S. Cook (3)	Senior Vice President & Chief Accounting Officer
Vincent Geraci (3)	First Senior Vice President & Director of Mortgage Lending

Mr. Bedner resigned as Executive Vice President and Chief Financial Officer on January 24, 2020.

Mr. Cossetti resigned as Executive Vice President and Chief Financial Officer on September 25, 2020.

Ms. Cook & Mr. Geraci are considered NEOs as defined under SEC rules; however, their compensation is not structured as discussed in the following CD&A. Ms. Cook’s & Mr. Geraci’s cash bonus is discretionary.

Executive Summary

Business Results

On March 13, 2020, the Coronavirus Disease (“COVID-19”) pandemic was declared a national emergency by the President of the United States. As the country worked diligently to cope with this virus, there was an unprecedented impact on the US and global economy. In light of this uncertainty, the Company continued to grow and improve performance, however markets saw high levels of volatility resulting in decreased shareholder returns of -20.46%. The company outperformed the KBW NASDAQ Bank Index for the five (5) year period ending December 31, 2020.


	Fiscal Year Ending
	12/31/2015	12/31/2016	12/31/2017	12/31/2018	12/31/2019	12/31/2020
Unity Bancorp, Inc.	100.00	140.46	178.99	190.43	210.05	166.98
KBW NASDAQ Bank Index	100.00	128.51	152.41	125.42	170.72	153.12
NASDAQ Composite Index	100.00	108.97	141.36	137.39	187.87	272.51

Fiscal year 2020 represented another successful year for the Company. We grew our loan and deposit portfolios, and increased our net interest income. Our capital ratios remained strong as we remain well positioned for increased long-term growth and profitability. During 2020, we accomplished the following:

●

Net income totaled $23.6 million, or $2.19 per diluted share for the year ended December 31, 2020, compared to $23.7 million, or $2.14 per diluted share for the year ended December 31, 2019.

●

Net income before tax increased 2.7 percent to $31.1 million from $30.3 million in the prior year.

●

Net interest income increased $6.8 million or 11.9 percent to $64.4 million from $57.6 million in the prior year, due to SBA PPP loans, commercial loan growth and a reduction in the cost of funds.

●

Noninterest income was $12.9 million, a $3.4 million increase compared to $9.5 million in the prior year, primarily due to increased gains on mortgage loan sales.

●

A 14.2 percent increase in total loans driven by a 79.7 percent increase in SBA loans, which reflects $118.3 million from the funding of SBA PPP loans, a 9.8 percent increase in commercial loans and a 6.8 percent increase in consumer loans.

●

A 24.6 percent increase in total deposits with a 64.3 percent increase in noninterest-bearing demand deposits and a 28.3 percent increase in interest-bearing demand deposits.

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 NEO’s maintain and hold a significant equity interest in the Company by making option and restricted stock grants a significant part of the total compensation mix, thereby further aligning management interests with those of the 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.

Due to the continued impact of the Covid-19 pandemic, the Company considered it necessary to re-evaluate its established performance metrics for the year ending December 31, 2020. This is detailed further in the Annual Cash Incentive component of the Executive Compensation Program.

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 stockholders. 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.

What We Do:

●

Pay for Performance - We provide a significant portion of pay based on performance.

●

Sound Risk Management - We discourage excessive risk taking and have designed our incentive plans with appropriate risk-mitigating features.

●

Claw back - We have adopted a claw back policy requiring the return of incentive compensation in the event of a financial restatement.

●

Double-Trigger Change-in-Control (CIC) - CIC benefits pursuant to employment or change in control agreements are only paid upon a termination event following a CIC.

●

Pay in Arrears - Our Directors' and Executives' incentive compensation is paid in arrears. For example, incentive compensation earned for fiscal year 2019 was paid in 2020.

What We Don’t Do:

●

Tax Gross-Ups - We do not provide excise tax gross-ups on benefits or in change-in-control agreements.

●

Stock Option Repricing - Our equity plan does not permit repricing of stock options that are out-of-the-money.

Executive Compensation Objectives and Policies

We use our executive compensation programs to align the interests of executive officers with our shareholders. Our programs are designed to attract, retain and motivate leadership to support our growth and sustain our competitive advantage. Our compensation opportunities are aligned with the competitive market with actual cash compensation that is designed to vary dependent on performance. We utilize a balance of fixed and variable pay components and cash and equity to determine our pay. Our compensation program is designed to support our business strategies, align pay with our performance and reinforce sound compensation governance to mitigate excessive risk taking. The table below gives an overview of the compensation components used in our program and matches each with one or more of the objectives described above.


Compensation Component	Purpose/Objective
Base Salary	● Provides a competitive level of fixed income based on role, experience and individual performance
Annual Incentive Plan	● Motivates and rewards executives for performance on key financial, operational and individual objectives in support of our annual business plan and broader corporate strategies ● Rewards vary based on performance
Equity Awards	● Aligns executives’ interests with those of shareholders through equity-based compensation ● Rewards executives’ for long-term shareholders value creation ● Encourages retention through multiple year vesting
Other Benefits	● Provides a base level of competitive compensation for executive talent
Employment Agreements/ Severance & CIC Agreements	● Provides employment security to key executives ● Focuses executives on company performance and transactions that are in the best interests of shareholders, regardless of the impact such transactions may have on the executive’s employment
Retirement Benefits	● The Supplemental Executive Retirement Plan (the “SERP”) provides long term compensation for our CEO while its vesting provisions ensure that the Company will continue to receive the benefit of his service ● The Executive Incentive Retirement Plan (the “EIRP”) provides long term compensation for our other key executives

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 Resources 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 the Chief Executive Officer’s 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 Named Executive Officers, 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 Named Executive Officers, 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 Named Executive Officers, the Committee is ultimately responsible for approving compensation for all Named Executive Officers. The Chief Executive Officer’s compensation is discussed in executive session without members of management, including the Chief Executive Officer, present.

2020 Executive Compensation Program and Pay Decisions

Base Salary

The Committee determined that an increase in the base salary for each of the Named Executive Officers was appropriate based on a review of market data, performance assessments and in consideration of the Company’s continued growth, strong performance and improved credit quality. The table below summarizes the salaries effective as of January 1, 2020.


Executive	2019 Base Salary	2020 Base Salary	Increase
James A. Hughes	$ 550,673	$ 567,194	3.00%
Alan J. Bedner	218,105	218,105	0.00%
Anthony Cossetti	-	225,000	NM
Janice Bolomey	208,000	220,000	5.77%
John J. Kauchak	208,575	217,000	4.04%
Laureen S. Cook	151,000	171,000	13.25%
Vincent Geraci	124,800	129,000	3.37%

Annual Cash Incentive

An important element of our compensation program is our Executive Bonus Program which provides cash incentives. Awards under the Program are based on attaining pre-established corporate goals (40% of the total award) and Committee review of individual performance based on subjective goals (60% of the total award). Each participant has a total target incentive opportunity expressed as a percentage of base salary. The 2020 incentive targets are summarized below:


Executive	Target Aggregate Incentive Opportunity
James A. Hughes	60.00%
Janice Bolomey	37.50%
John J. Kauchak	37.50%

Ms. Cook and Mr. Geraci do not participate in the Executive Bonus Program and are awarded a discretionary cash bonus.

The Committee establishes performance measures on an annual basis for the portion of the awards based on corporate goals that are tied specifically to the Company’s financial performance. Initially, the Committee used growth in net income vs. prior year, return on average assets vs. peer and return on average equity vs. peer as the performance measures utilized to determine bonus eligibility. However, in light of the expected impact of the COVID-19 pandemic, the Committee adjusted this metric to pre-provision net revenue vs. peer. The Committee decided that due to the increased provisions for loan losses resulting from COVID-19, pre-provision net revenue would better reflect core income/performance while maintaining a reasonable and competitive potential payout, and that the significant additional provisions for loan losses required due to the pandemic were an industry-wide issue, and not one related solely to Unity and on which management should be judged. The weight and performance goal, as revised for 2020 is set forth in the following table:


Performance Measure	Weight	Threshold	Target	Cap
Pre-Provision Net Revenue (PPNR) ROAA vs. Peers (1)	40.00%	50.00%	100.00%	150.00%

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:


Performance Measure	2020 Performance	Result	Payout Factor
Pre-Provision Net Revenue (PPNR) ROAA vs. Peers (1)	137.80%	Target	137.80%

(1)

The Company’s peer group consists of Pennsylvania and New Jersey Community Banks with assets from $1 billion to $5.5 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 Named Executive Officers’ 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 2020, 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:


Executive	2020 Target Annual Incentive Award	2020 Actual Annual Incentive Award	2020 Actual as % of Target
James A. Hughes	$ 340,316	$ 371,303	109%
Janice Bolomey	$ 82,500	$ 87,537	106%
John J. Kauchak	$ 81,375	$ 88,784	109%

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, while stock options vest ratably over a three-year period.

Below is a summary of the 2019 grants awarded in 2020:


	Option Awards		Restricted Stock
Executive	# Shares	Grant Value ($)	# Shares	Grant Value ($)
James A. Hughes	15,000	58,848	6,000	97,620
Janice Bolomey	10,000	39,232	4,000	65,080
John J. Kauchak	10,000	39,232	4,000	65,080

Benefits and Other Compensation

Retirement Benefits and Prerequisites

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, and believes that the vesting provisions of the SERP help ensure that the Company will continue to receive the benefit of Mr. Hughes’ service.

On October 22, 2015, the Company entered into an Executive Incentive Retirement Plan (“EIRP”) with Messrs. Bedner and Kauchak and Ms. Bolomey, 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 retention agreements with each of Mr. Kauchak and Ms. Bolomey. 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.

Stock Ownership Guidelines

The Compensation Committee has concluded that Board members should own a significant amount of the Company’s stock. Specific guidelines are:

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Upon election as a director, the director must own Company stock valued at $25,000.

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By the end of a director’s third year of board service, he/she must own Company stock valued at $50,000. Board members must continue to maintain this minimum level of stock ownership throughout their tenure as a director.

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This requirement may be satisfied through the exercise of stock options, participation in distributions undertaken by the Company, or open market purchases.

Risk Assessment Review

SEC Form DEF 14A filed by Unity Bancorp, Inc.