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PROSPECTUS
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UNITY BANCORP INC.
UP TO 25,000 SHARES OF COMMON STOCK
We are a New Jersey based bank holding company. Our bank, First Community
Bank, is headquartered in Clinton, New Jersey. These shares of common stock are
owned by and are being sold by First Colonial Securities Group, Inc.
The common stock is listed on the NASDAQ National Market under the symbol
"UNTY".
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BEFORE PURCHASING THE COMMON STOCK, YOU SHOULD READ THE RISK FACTORS BEGINNING
ON PAGE 1.
Neither the SEC nor any state securities commission has approved the common
stock or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
The shares of common stock are not bank deposits and are not insured or
guaranteed by the federal deposit insurance corporation or any other government
agency.
FIRST COLONIAL SECURITIES GROUP, INC.
The date of this Prospectus is January 15, 1999.
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TABLE OF CONTENTS
PAGE
Information Incorporated by
Reference ........................ 1
Risk Factors ........................ 1
The Company ......................... 3
Selected Financial Data ............. 3
Recent Developments ................. 5
Use of Proceeds ..................... 5
Plan of Distribution ................ 5
Warrant and Transfer Agent .......... 6
Legal Matters ....................... 6
Experts ............................. 6
Where You Can Find Additional
Information ....................... 7
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INFORMATION INCORPORATED BY REFERENCE
We have incorporated by reference into this Prospectus the following
documents we filed with the Commission under the Securities Exchange Act of
1934:
o (i) the Annual Report on Form l0-KSB for the fiscal year ended
December 31, 1997
o (ii) the Proxy Statement for the 1998 Annual Meeting of
Shareholders,
o (iii) the Quarterly Reports on Form 10-QSB for the quarters
ended March 31, June 30, and September 30, 1998
o (iv) Current Reports on Form 8-K filed on July 28, September
15 and September 24, 1998 and
o (v) the description of the common stock contained in our
Registration Statement on Form 8-A filed under Section 12 of
the Exchange Act, including any amendment thereto or report
filed under the Exchange Act for the purpose of updating such
description.
In addition, any documents which we file with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to termination of this offering are also incorporated by reference
into this Prospectus.
To the extent that any information in this Prospectus modifies or
supersedes information in a document incorporated by reference, the incorporated
document will be deemed to be modified or superseded for purposes of this
Prospectus, and the incorporated document will not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
You may obtain without charge, upon written or oral request, a copy of any
of the documents incorporated by reference herein, except for the exhibits,
unless such exhibits are specifically incorporated by reference herein. Your
request should be sent to Kevin Killian, Chief Financial Officer, Unity Bancorp,
Inc., 64 Old Highway 22, Clinton, New Jersey 08809.
RISK FACTORS
Prospective investors should consider the following risk factors, in
addition to other information contained or incorporated by reference herein, in
connection with a decision to purchase our common stock.
RISKS ASSOCIATED WITH THE COMPANY:
POSSIBLE EARNINGS DILUTION DUE TO THE ISSUANCE OF COMMON STOCK UPON THE EXERCISE
OF WARRANTS
We issued 558,789 shares of Common Stock upon the exercise of our
outstanding common stock purchase warrants. We had 3,097,332 shares of common
stock outstanding at September 30, 1998. Depending upon our ability to invest
the additional capital received upon the issuance of these shares, these
additional shares could cause dilution to our future per share earnings.
OUR AGGRESSIVE GROWTH STRATEGY COULD LOWER OUR SHORT TERM PROFITS
Because we are incurring expenses to fund our aggressive growth before our
investments have begun to generate significant income, our short term profits
will likely be lower than they would have been otherwise.
ABILITY TO SUSTAIN GROWTH
Our business plan calls for our continued aggressive growth. For a variety
of reasons, we may not be able to sustain that growth. In the event that we are
unable to sustain our historic growth rate, we will be required to adopt a new
business strategy which may not be as successful as our current strategy has
been. Our ability to continue to rapidly grow depends upon our ability to locate
new branch locations and successfully attract deposits to those locations,
locate sound loan and investment opportunities, and identify and successfully
negotiate with potential acquisition candidates.
SOURCES OF DIVIDENDS ON COMMON STOCK
Our ability to pay dividends on our common stock is dependent upon the
payment of dividends to us by the bank. The ability of the bank to pay dividends
to us is governed by regulations imposed by the New Jersey Department of Banking
and Insurance and the FDIC, the bank's primary regulators. These regulations
impose a variety of restrictions on the bank's payment of dividends to us. At
December 31, 1998, the bank would have been able to dividend up to $1.7 million
to us under these regulations.
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YEAR 2000 AND IMPACT ON OUR COMPUTERS AND OUR OPERATIONS.
Our operations and financial results are highly dependent upon our ability
to rapidly and accurately process data through our internal and external
computer systems and processors. Our future performance may be adversely
affected by the ability of computer systems we own and use to read entries for
the Year 2000. Many computer systems currently in use are unable to distinguish
between the Year 2000 and the Year 1900, causing a variety of processing
difficulties. We use a third party to process our data. Because of this, it may
be difficult for us to ensure that all data processing functions we use can read
entries for the Year 2000. Although we are in the process of making sure our
computers and those of our service bureau can correctly process entries for the
Year 2000, we can give you no assurances that we will be fully successful. The
failure of our computers to fully process entries for the year 2000 could
adversely affect our future results of operations, impeding our ability to
calculate payments, interest due, service loans and perform other necessary
functions.
RISKS ASSOCIATED WITH THE BANKING INDUSTRY:
COMPETITION
The banking industry within the state of New Jersey is highly competitive.
The bank's principal market area is served by branch offices of large commercial
banks and thrift institutions. A number of these institutions have substantially
greater resources than we do to expend upon advertising and marketing, and their
substantially greater capitalization enables them to make much larger loans. Our
success depends a great deal upon our judgment that large and mid-size financial
institutions do not adequately serve small businesses in principal market area
and our ability to compete favorably for such customers. In addition to
competition from larger institutions, we also face competition for individuals
and small businesses from recently formed banks seeking to compete as "hometown"
institutions. Most of these new institutions have focused their marketing
efforts on the smaller end of the small business market we serve.
LENDING RISKS
The risk of nonpayment (or deferred or delayed payment) of loans is
inherent in commercial banking. Such non payment, or delayed or deferred payment
of loans to the bank, if they occur, may have a material adverse effect on our
earnings and overall financial condition. Additionally, in compliance with
applicable banking laws and regulations, the bank maintains an allowance for
loan losses created through charges against earnings. As of September 30, 1998,
the bank's allowance for loan losses was $1.6 million. The bank's marketing
focus on small to medium-size businesses may result in the assumption by the
Bank of certain lending risks that are different from or greater than those
which would apply to loans made to larger companies. We seek to minimize our
credit risk exposure through credit controls which include evaluation of
potential borrowers, available collateral, liquidity and cash flow. However,
there can be no assurance that such procedures will actually reduce loan losses.
SUPERVISION AND REGULATION
The federal and state laws and regulations applicable to our operations
give regulatory authorities extensive discretion in connection with their
supervisory and enforcement responsibilities, and generally have been
promulgated to protect depositors and the deposit insurance funds and not for
the purpose of protecting stockholders. These laws and regulations can
materially affect our future business. Laws and regulations now affecting us may
be changed at any time, and the interpretation of such laws and regulations by
bank regulatory authorities is also subject to change. We can give no assurance
that future changes in laws and regulations or changes in their interpretation
will not adversely effect our the business.
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UNITY BANCORP, INC.
Unity Bancorp, Inc. is a New Jersey business corporation and a holding
company for First Community Bank, which engages in a commercial banking business
in Hunterdon, Middlesex, Morris, Somerset and Union counties, New Jersey. We
direct the policies and coordinate the financial resources of the Bank. At
September 30, 1998, we had consolidated total assets of $238.5 million and
shareholders' equity of $21.7 million.
The Bank is a New Jersey state-chartered bank which commenced business in
1991. The Bank currently operates from its main office in Clinton, New Jersey
and from six branch offices located in Flemington, North Plainfield,
Springfield, Scotch Plains, Union and Linden, New Jersey. The deposits of the
Bank are insured by the Bank Insurance Fund of the FDIC up to applicable limits.
The operations of the Bank are subject to the supervision and regulation of the
New Jersey Department of Banking and Insurance and the FDIC.
We lend funds to individuals and businesses for personal and commercial
purposes. We emphasize the origination of loans with adjustable rates of
interest tied to our Prime Rate. The interest rates on our adjustable rate loans
are repriced from time-to-time to reflect changes, up or down, in our cost of
funds. In order to be competitive with other established banking institutions in
our trade area, we charge rates which are generally comparable to those charged
by other lenders.
In addition, we have been very active in providing loans to small
businesses through the United States Small Business Administration guaranteed
loan program. Under the SBA program, loans are available to small businesses
which meet certain criteria. Up to 90% of the principal of a loan to a qualified
business may be guaranteed by the United States Government. We sell the
guaranteed portion of our SBA loans into the secondary market and derive premium
income. Our ability to offer SBA loans on an ongoing basis is dependent upon,
among other factors, appropriation of funds by the federal government to the SBA
program. We have been designated a "preferred lender" for the states of New
Jersey, Delaware, New York and Pennsylvania by the SBA. This means that we may
originate SBA guaranteed loans without prior SBA approval, although the
guaranteed portion of this loan will be 80% for loans up to $100,000 and 75% for
loans over $100,000 and up to $1,000,000.
Our commercial loans are generally secured by business assets, personal
guarantees of the principals of closely-held businesses and often by the
personal assets of such principals. The loans are made to small and mid-sized
businesses in our trade area. Federal and state law and regulations restrict how
much any bank may lend to a single customer with the restrictions stated as a
percentage of the bank's primary capital. We believe that we can attract
commercial borrowers by providing competitive rates, superior services, local
decision-making and flexibility in loan structure. The Board of Directors
believes that small and mid-sized businesses are not always of primary
importance to larger banking institutions for commercial lending purposes,
whereas such businesses represent the main portion of our commercial loan
business.
We grant both secured and unsecured personal loans to finance the purchase
of automobiles, durable goods and other consumer goods. The Board of Directors
believes that our competitive interest rates and superior service (which
includes, among other things, convenience, personal attention and prompt local
decision-making) are important competitive factors in attracting personal loans
from credit-worthy consumers.
We also make residential and commercial real estate loans and, on a limited
basis, construction loans.
Our principal executive offices are located at 64 Old Route 22, Clinton,
New Jersey 08809, and our telephone number is (908) 730-7630.
SELECTED FINANCIAL DATA
On April 24, 1998 the Board of Directors of the Company declared a three
for two stock split payable June 1, 1998 to shareholders of record as of May 15,
1998. On November 23, 1998, the Board of Directors declared a 5% stock dividend
payable January 8, 1999 to shareholders of record on December 21, 1998. To give
effect for this stock split and the stock dividend, previously reported share
and per share information included in the Company's Annual Report on Form 10-KSB
incorporated by reference in this Registration Statement are adjusted as shown
in the following table:
AS REPORTED AS ADJUSTED
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YEAR ENDED
DECEMBER 31, 1997:
Basic earnings per share............... $1.02 $0.65
Diluted earnings per share............. 1.01 0.64
Weighted average number of
shares outstanding, basic............. 1,977,604 3,114,726
Weighted average number of
shares outstanding, diluted........... 1,999,180 3,148,709
Outstanding shares at December 31...... 1,985,485 3,127,139
YEAR ENDED
DECEMBER 31, 1996:
Basic earnings per share............... 0.74 0.47
Diluted earnings per share............. 0.73 0.46
Weighted average number of
shares outstanding, basic............. 1,419,855 2,236,272
Weighted average number of
shares outstanding, diluted........... 1,429,262 2,251,088
Outstanding shares at December 3....... 1,964,113 3,093,478
YEAR ENDED
DECEMBER 31, 1995
Basic earnings per share............... 0.83 0.53
Diluted earnings per share............. 0.83 0.53
Weighted average number of
shares outstanding, basic............. 1,203,774 1,895,944
Weighted average number of
shares outstanding, diluted........... 1,203,774 1,895,944
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In addition, to give effect to the 5% stock dividend previously reported,
share and per share information included in our Quarterly Report on Form 10-QSB
incorporated by reference in this Registration Statement are adjusted as shown
in the following table:
AS REPORTED AS ADJUSTED
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NINE MONTHS ENDED
SEPTEMBER 30, 1998:
Basic earnings per share............... $0.54 $0.51
Diluted earnings per share............. $0.50 $0.48
Weighted average number of
shares, basic......................... 3,016,593 3,156,008
Outstanding shares..................... 3,097,332 3,252,199
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NINE MONTHS ENDED
SEPTEMBER 30, 1997:
Basic earnings per share............... $0.42 $0.40
Diluted earnings per share............. $0.41 $0.39
Weighted average number of
shares, basic......................... 2,962,338 3,110,455
Outstanding shares...................... 1,985,275 3,216,808
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THREE MONTHS ENDED
SEPTEMBER 30, 1998
Basic earnings per share............... $0.22 $0.21
Diluted earnings per share............. $0.21 $0.20
Weighted average number of
shares, basic......................... 3,058,941 3,178,086
Outstanding shares...................... 3,097,332 3,252,199
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THREE MONTHS ENDED
SEPTEMBER 30, 1997
Basic earnings per share
Basic earnings per share............... $0.29 $0.18
Diluted earnings per share............. $0.28 $0.18
Weighted average number of
shares, basic......................... 2,966,414 3,114,735
Outstanding shares...................... 1,985,275 3,216,808
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RECENT DEVELOPMENTS
We recently executed long-term leases for eight (8) new branch locations in
Cranford, Kenilworth, Berkeley Heights and Springfield in Union County and New
Brunswick, North Brunswick, South Plainfield and Edison, Middlesex County, New
Jersey. All of these facilities are existing bank branches, which are being
acquired without deposits or loans. The Union County branches are in our
existing trade area, while the Middlesex County branches are an extension of our
trade area. In addition, we have executed a lease for a new branch in Woodbridge
Township, Middlesex County, New Jersey and we are in the process of building a
new branch in Whitehouse, Hunterdon County, New Jersey. We anticipate that these
10 new branches will open in stages from January through July, 1999, increasing
our branch network to 18 offices. The order of the New Jersey Commissioner of
Banking and Insurance approving these branches requires First Community Bank to
maintain a ratio of tier 1 capital to average assets of at least 6% during the
next five (5) years. At September 30, the Bank's tier 1 capital to average asset
ratio was 7.15%. We also anticipate that we will incur a significant increase in
non-interest expense as these branches commence operation.
Effective September 21, 1998, our common stock began trading on the NASDAQ
National Market under the symbol "UNTY". From January 1997 to September 18,
1998, our common stock traded on the American Stock Exchange under the symbol
"UBI". Our warrants are traded on the American Stock Exchange under the symbol
"UBI.WS", and will continue to trade on the American Stock Exchange through
their expiration on December 15, 1998.
We have signed a definitive agreement to acquire Certified Mortgage
Associates, Inc., a Marlboro, New Jersey based mortgage banker. Under the terms
of the Letter of Intent, we are to pay a purchase price of $2.8 million in
shares of our common stock. The actual number of shares of common stock to be
issued will be determined at the close of the transaction, based upon the
average of the bid and asked price of our common stock in the first 20 trading
days in the 30 trading days prior to the closing. Under the terms of the
agreement, the principles of CMA, Mr. Barry Habib, Mr. Craig Frankel and Mr.
Norman Hunter, are to enter into Employment Agreements with us. If the
transaction had closed on October 30, 1998, we would have issued 242,424 shares
of our common stock to the principals of CMA. For the six months ended September
30, 1998, CMA had total revenues of $1.9 million. Consummation of this
transaction is subject to our executing a definitive acquisition agreement and
receipt of all necessary regulatory approvals.
On November 23, we announced that our Board had declared a 5% stock
dividend, payable January 8, 1999to shareholders of record on December 21,
1998.
On December 15, 1998, our common stock purchase warrants expired.
Approximately, 95% of our outstanding warrants were exercised, we issued 558,789
shares of our common stock, and we received approximately %5.9 million in new
capital.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by First
Colonial although we incurred fixed expenses of approximately $50,000 in
connection with the exercise of the warrants, and we have paid First Colonial a
total fee of $150,000. We intend to use the proceeds of the warrant conversion
for general corporate purposes and to support our continued growth and expansion
both through internal expansion through our newly acquired branches and the
possible acquisition of other financial institutions, although we do not
currently have any agreements or commitments for specific acquisitions.
PLAN OF DISTRIBUTION
The common stock offered hereby is being sold by First Colonial Securities
Group, Inc. The common stock was acquired by First Colonial upon the exercise of
our common stock purchase warrants. We have paid First Colonial a fee of
$150,000 for their efforts in facilitating the conversion of our stock purchase
warrants. First Colonial will receive the net proceeds of the sale of common
stock.
We have agreed with First Colonial that we will indemnify each other
against certain liabilities, including certain liabilities under the Securities
Act, and to contribute to payments that each may be required to make in respect
thereof.
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WARRANT AND TRANSFER AGENT
Our warrant and transfer agent for the warrants and our common stock is
FCTC Transfer Services, LLP, with an office at 111 Wood Avenue South, Suite 206,
Iselin, New Jersey.
LEGAL MATTERS
The validity of the common stock being offered has been passed upon for us
by Jamieson, Moore, Peskin & Spicer, Morristown, New Jersey. Certain legal
matters will be passed upon for First Colonial by Klehr, Harrison, Harvey,
Branzberg & Ellers, LLP, Philadelphia, Pennsylvania.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997, incorporated by
reference into our Annual Report on Form 10-KSB for the year ended December 31,
1997, which is incorporated by reference into this Registration Statement on
Form S-3, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto. The financial
statements are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange Act and
must file reports and other information with the SEC.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933, as amended, with respect to the common stock offered in
this document. As permitted by the rules and regulations of the SEC, this
document does not contain all the information set forth in the registration
statement. Such information, as well as the information filed under the Exchange
Act, can be examined without charge at the public reference facilities of the
SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
such material can be obtained from the SEC at prescribed rates. The SEC also
maintains an Internet address ("Web site") that contains reports, proxy and
information statements and other information regarding registrants, including
us, that file electronically with the SEC. The address for this Web site is
"http://www.sec.gov." The statements contained in this document as to the
contents of any contract or other document filed as an exhibit to the Form S-3
are, of necessity, brief descriptions and are not necessarily complete; each
such statement is qualified by reference to such contract or document.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR DOCUMENTS
TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. THE AFFAIRS OF UNITY BANCORP, INC. OR FIRST COMMUNITY BANK
MAY CHANGE AFTER THE DATE OF THIS PROSPECTUS. DELIVERY OF THIS DOCUMENT AND THE
SALES OF SHARES MADE HEREUNDER DOES NOT MEAN OTHERWISE.
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UNTIL THE LATER OF FEBRUARY 9, 1999 OR 25 DAYS AFTER COMMENCEMENT OF THE
OFFERING, ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITES AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
UNITY BANCORP, INC.
COMMON STOCK
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PROSPECTUS
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FIRST COLONIAL
SECURITIES GROUP, INC.
JANUARY 15, 1999
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