UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
11-K
(X)
ANNUAL REPORT UNDER SECTION l5(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
fiscal year ended: December 31, 2007.
OR
(
) TRANSITIONAL REPORT PURSUANT TO SECTION l5(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
transition period from
Commission
File Number: 1-12431
A. Full
title of plan and the address of the plan, if different from that of the issuer
named below:
UNITY
BANK EMPLOYEES’ SAVINGS
AND
PROFIT SHARING PLAN AND TRUST
B. Name
of issuer of the securities held pursuant to the plan and the address of its
principal executive office:
UNITY
BANCORP, INC.
64 OLD
HIGHWAY 22 CLINTON, NJ 08809
UNITY
BANK
Employees’
Savings and Profit Sharing Plan and Trust
REQUIRED
INFORMATION
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Financial
Statements
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UNITY
BANK
Employees’
Savings and Profit Sharing Plan and Trust
Index
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Report
of Independent Registered
Public
Accounting Firm
To
the Board of Trustees
Unity
Bank Employees’ Savings and Profit Sharing Plan and Trust:
We
have audited the accompanying statements of net assets available for benefits of
the Unity Bank Employees’ Savings and Profit Sharing Plan and Trust (the Plan)
as of December 31, 2007 and 2006, and the related statements of changes in net
assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all
material respects, the net assets available for benefits of the Unity Bank
Employees’ Savings and Profit Sharing Plan and Trust as of December 31, 2007 and
2006, and the changes in net assets available for benefits for the years then
ended in conformity with U.S. generally accepted accounting
principles.
Our
audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2007 is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the United States
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
As
discussed in Note 1 to the financial statements, the Plan adopted Financial
Accounting Standards (FASB) Staff Position, FSP AAG INV-1 and SOP 94-4-1, “Reporting
of Fully Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and Defined-Contribution
Health and Welfare and Pension Plans” in 2006. Therefore, the
presentation of the 2007 and 2006 financial statement amounts include the
presentation of fair value with an adjustment to contract value for such
investments.
McGladrey
& Pullen
June
26, 2008
Blue
Bell, Pennsylvania
Page 1 of
9
Employees’
Savings and Profit Sharing Plan and Trust
Statements
of Net Assets Available for Benefits
December
31, 2007 and 2006
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Assets:
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2007
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2006
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||||||
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Investments
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$ | 3,462,807 | $ | 3,360,138 | ||||
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Participant
loans
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121,017 | 160,827 | ||||||
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Net
assets available for benefits at fair value
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3,583,824 | 3,520,965 | ||||||
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Adjustment
from fair value to contract value for fully benefit-responsive investment
contracts
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4,857 | - | ||||||
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Net
assets available for benefits
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$ | 3,588,681 | $ | 3,520,965 | ||||
See
accompanying notes to financial statements.
Page 2 of
9
Employees’
Savings and Profit Sharing Plan and Trust
Statements
of Changes in Net Assets Available for Benefits
Years
ended December 31, 2007 and 2006
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2007
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2006
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|||||||
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Additions
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||||||||
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Contributions
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||||||||
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Employee
contributions
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$ | 446,901 | $ | 464,606 | ||||
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Employer
contributions, net of forfeitures
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185,267 | 195,168 | ||||||
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Total
contributions
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632,168 | 659,774 | ||||||
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Investment
income
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||||||||
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Net
appreciation (depreciation) in fair value of investments
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(248,117 | ) | 312,343 | |||||
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Interest
and dividends
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35,575 | 31,635 | ||||||
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Net
investment income (loss)
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(212,542 | ) | 343,978 | |||||
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Total
additions
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419,626 | 1,003,752 | ||||||
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Deductions
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||||||||
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Benefits
paid to participants
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(327,603 | ) | (188,473 | ) | ||||
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Expenses
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(24,307 | ) | (19,951 | ) | ||||
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Total
deductions
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(351,910 | ) | (208,424 | ) | ||||
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Net
increase
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67,716 | 795,328 | ||||||
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Net
assets available for benefits
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||||||||
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Beginning
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3,520,965 | 2,725,637 | ||||||
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Ending
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$ | 3,588,681 | $ | 3,520,965 | ||||
See accompanying notes to financial statements.
Page 3 of
9
UNITY BANK
Employees’
Savings and Profit Sharing Plan and Trust
Notes
to Financial Statements
December
31, 2007 and 2006
(1) Summary
of Significant Accounting Policies
Basis
of Presentation
The
accompanying financial statements of the Unity Bank Employees’ Savings and
Profit Sharing Plan and Trust (the Plan) for employees of Unity Bank (the Bank)
have been prepared on an accrual basis and present the net assets available for
benefits and the changes in those net assets.
Administrative
Expenses
Administrative
expenses are paid by the Bank.
Investment
Valuation and Income Recognition
The
investments of the Plan are stated at fair value. Shares of mutual funds are
valued at quoted market prices, which represent the net asset value of shares
held by the Plan at year end. The stock of Unity Bancorp, Inc. ("UNTY"),
the parent corporation of the Bank, is valued
at its quoted market price. Participant loans are valued at their outstanding
balances, which approximate fair value. The Plan’s interest in the
collective trust is valued based on information reported by the investment
advisor using the audited financial statements of the collective trust at year
end.
As
described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1
and SOP 94-4-1, Reporting
of Fully Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and Defined-Contribution
Health and Welfare and Pension Plans (the FSP), investment contracts held
by a defined-contribution plan are required to be reported at fair value.
However, contract value is the relevant measurement attribute for that portion
of the net assets available for benefits of a defined-contribution plan
attributable to fully benefit-responsive investment contracts because contract
value is the amount participants would receive if they were to initiate
permitted transactions under the terms of the plan. The plan invests in
investment contracts through a collective trust. As required by the FSP, the
Statement of Net Assets Available for Benefits presents the fair value of the
investment in the collective trust as well as the adjustment of the investment
in the collective trust from fair value to contract value relating to the
investment contracts. The Statement of Changes in Net Assets Available for
Benefits is prepared on a contract value basis.
Purchases
and sales of securities are recorded on a trade-date basis. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend
date.
Payment
of Benefits
Benefits
are recorded when paid.
Risks
and Uncertainties
The
assets of the Plan are primarily financial instruments, which are monetary in
nature. Accordingly, interest rates have a more significant impact on the Plan's
performance than do the effects of general levels of inflation. Interest rates
generally do not move in the same direction or with the same magnitude as prices
of goods and services as measured by the consumer price index. Investments in
funds are subject to risk conditions of the individual funds' objectives, stock
market performance, interest rates, economic conditions, and world
affairs. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could
materially affect participants’ account balances and the amounts reported in the
statement of net assets available for benefits.
Page 4 of
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Use
of Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of additions and deductions during the
reporting period. Actual results could differ from those estimates.
Related-Party
Transactions
Certain
Plan investments are managed by The Bank of New York (BNY). BNY is
the trustee as defined by the Plan and therefore, these transactions qualify as
party-in-interest transactions.
(2) Description
of Plan
The
following description of the Plan provides only general information.
Participants should refer to the plan agreement for a more complete description
of the Plan's provisions.
General
The
Plan is a participant-directed, Federal income tax deferred defined contribution
plan that was initiated in August of 2003 and is administered by the Bank. The
Plan is subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA).
Investment
Options
The
participant contributions and Employer matching contributions may be allocated
to various investment funds, and/or the Unity Bank Stock Fund at the discretion
of the participant, provided that all directed allocations be in whole
percentages.
Benefits
and Contributions
Eligible
participants, as defined, include employees of the Bank who have attained the
age of 21, are not resident aliens or collectively bargained employees. Eligible
participants can begin making contributions after six months of employment.
Participants are eligible to receive employer matching and discretionary
contributions when they have completed six months of service, as defined.
Benefits are determined based on accumulated participants' and employer's
contributions and related investment earnings or losses on those contributions.
The participant can contribute up to 75% of base compensation, as defined,
subject to legal limitations. The employer’s contributions are equal to 100% of
the participants' contributions, up to 3% of base compensation and 50% of the
participant’s contributions for the next 2% of base compensation, as defined.
The Bank may also make discretionary contributions. Each year the Bank's board
of directors will determine if a discretionary contribution will be made to the
Plan. Each participant's share of this contribution is based on the relationship
his or her compensation bears to the total compensation of employees
participating in the Plan. At the plan administrator's discretion, employees are
entitled to contribute rollovers from other qualified plans. Any forfeited
amounts reduce the employer's contributions to the Plan. At December 31, 2007,
forfeited non-vested accounts amounted to $1,493. For the year ended December
31, 2007, $18,247 in forfeited non-vested accounts reduced the employer’s
contributions to the Plan.
Vesting
All
participants are fully vested in their voluntary contributions and related
investment earnings or losses. Beginning on January 1, 2006 Unity Bank’s 401(k)
plan became a “Safe Harbor Plan” which means employer matching contributions
made from that date forward are automatically vested. Employer
matching contributions made prior to January 1, 2006 are 100% vested after
completing six years of service.
Page 5 of
9
Participant
Accounts
Each
participant’s account is credited with the participant’s contribution and an
allocation of (a)
the Company’s contribution and (b)
Plan earnings. Allocations are based on participant earnings or
account balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant’s vested
account.
Funding
Employee
contributions are funded through biweekly payroll deductions, and employer
matching is funded each pay period.
Payment
of Benefits
Upon
normal retirement at age 65 or termination of employment, a participant may
elect to receive a lump-sum amount equal to his or her vested account balance at
termination date, various annuity options, or, by agreement with the plan
administrator, a lump-sum payment at any date prior to the April 1 following the
taxable year he or she attains, or would have attained, age 59-1/2. The benefit
to which a participant is entitled is the benefit which can be provided from the
participant's vested account balance.
(3) Loan
Policy
Employees
participating in the Plan are eligible to receive loans from the Plan. Loans
that are granted to the participant are subject to the following
conditions:
The
minimum amount of any loan shall have a minimum term of 12 months. The maximum
loan amount is determined under federal tax and pension laws. Borrowings are
from the vested portion of accounts in any amount between $1,000 and $50,000,
reduced by the highest outstanding loan balance within the prior 12
months.
The
interest rates on loans are at reasonable rates of interest based on interest
rates that institutions in the business of making loans would charge under
similar circumstances. The loans are secured by the balance in the
participant’s account. Loans are repaid (principal and interest) and
added back to the participant account balances generally through regular
after-tax payroll deductions.
(4) Plan
Termination
Although
it has not expressed any intent to do so, the employer has the right under the
Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of plan termination,
participants will fully vest and receive the value of their accounts as a
lump-sum distribution.
(5) Tax
Status
The
Plan adopted a volume submitter plan in August 2003, intended to meet the form
requirements of Internal Revenue Code Section 401(a). The employer
has not applied for a determination letter. Plan management believes
that that the Plan is currently designed and being operated in compliance with
the applicable provisions of the Internal Revenue Code. Therefore, no
provision for income taxes has been included in the Plan's financial
statements.
Page 6 of 9
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(6)
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Investments
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For
the years ended December 31, 2007 and 2006, the Plan’s investments (including
realized gains and losses on investments bought and sold, as well as held during
the year) appreciated in value as follows:
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2007
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2006
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Mutual
funds
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$ | 132,586 | $ | 212,838 | ||||
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Common
stock
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(380,703 | ) | 99,505 | |||||
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Total
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$ | (248,117 | ) | $ | 312,343 | |||
The
following table represents the fair value of individual investments, which
exceed 5% of the Plan’s net assets as of December 31, 2007 and
2006:
|
2007
|
2006
|
|||||||
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Unity
Bancorp, Inc. Stock Fund
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$ | 627,158 | $ | 1,017,336 | ||||
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SSA-Midcap
400
|
450,668 | 362,345 | ||||||
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SSA-Equity
Index/S&P 500
|
445,693 | 405,870 | ||||||
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SSA-S&P
500 Growth
|
282,145 | 242,434 | ||||||
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SSA-S&P
500/Value
|
224,369 | 178,078 | ||||||
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SSA-Moderate
Strategic Balanced
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222,229 | 207,835 |
|
|||||
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SSA-Government
Money Market
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210,430 | - | ||||||
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SSA-Russell
2000
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199,760 | 181,113 | ||||||
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SSA-EAFE
Index Fund
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190,140 | - | ||||||
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(7)
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New
Accounting Pronouncements
|
In
September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (“SFAS 157”), was issued and is effective for fiscal
years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact, if
any the adoption of SFAS 157 will have on the financial statements.
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(8)
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Reconciliation
of Financial Statements to Form
5500
|
The
following is a reconciliation of net assets available for benefits from the
Plan’s financial statements to the Form 5500:
|
|
As of December 31, | |||||||
|
2007
|
2006
|
|||||||
|
Net
assets available for benefits per the financial statements
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$ | 3,588,681 | $ |
3,520,965
|
||||
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Less:
Adjustment from contract value to fair value
|
(4,857) | - | ||||||
|
Net assets available for benefits per Form 5500
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$ | 3,583,824 | $ | 3,520,965 | ||||
Page 7 of 9
UNITY BANK
Employees’
Savings and Profit Sharing Plan and Trust
Schedule
H, Line 4(i) - Schedule of Assets
(Held
at End of Year)
December
31, 2007
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Shares
|
Current
Value
|
|||
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Unity
Bancorp, Inc. Stock Fund *
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74,510
|
$
|
627,158
|
|
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SSA-Midcap
400
|
14,809
|
450,668
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SSA-Equity
Index/S&P 500
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1,571
|
445,693
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SSA-S&P
500 Growth
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22,664
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282,145
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SSA-S&P
500/Value
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17,741
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224,369
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SSA-Moderate
Strategic Balanced
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15,226
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222,229
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SSA-Government
Money Market
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210,430
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210,430
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SSA-Russell
2000
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7,918
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199,760
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SSA-EAFE
Index Fund
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8,046
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190,140
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Pentegra
Stable Value Fund
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12,982
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142,836
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SSA-Aggressive
Strategic Balanced
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10,542
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139,414
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SSA-Passive
Long Treasury Fund
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11,656
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135,659
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SSA-NASDAQ
100 Index Fund
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4,542
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58,623
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SSA-Conservative
Strategic Balanced
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3,673
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57,908
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SSA-US
Real Estate Investment Fund
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1,507
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40,668
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SSGA
Aggregate Bond
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594
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10,953
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Loans
to Participants (Range of interest rates charged 5.00% to
9.25%)*
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121,017
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121,017
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Collective
Short Term Investment Funds
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24,005
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24,005
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$
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3,583,824
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*
A party-in-interest as defined by ERISA
Page 8 of
9
SIGNATURE
OF PLAN ADMINISTRATOR
Pursuant
to the requirements of the Securities Exchange Act of 1934, the trustees (or
other persons who administer the employee benefit plan) have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
Unity
Bank
Dated:
June 26, 2008
By:
Alan
Bedner
--------------------------
Alan
Bedner
Plan
Administrator
EVP
and CFO
Page 9 of
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