Unity Bancorp(US:UNTY)2025-05-07 20:44PART I - CONSOLIDATED FINANCIAL INFORMATION Consolidated Financial Statements (Unaudited) This section presents Unity Bancorp, Inc.'s unaudited consolidated financial statements for Q1 2025, highlighting an increase in total assets to $2.8 billion, a rise in net income to $11.6 million, and growth in loans and deposits Consolidated Balance Sheets Total assets grew to $2.77 billion as of March 31, 2025, up from $2.65 billion at year-end 2024, driven primarily by an increase in net loans Consolidated Balance Sheet Highlights (In thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,767,943 | $2,654,017 | | Cash and cash equivalents | $211,593 | $180,438 | | Net loans | $2,317,479 | $2,233,869 | | Total securities | $142,092 | $145,028 | | Total Liabilities | $2,461,801 | $2,358,434 | | Total deposits | $2,175,398 | $2,100,313 | | Borrowed funds | $243,292 | $220,504 | | Total Shareholders' Equity | $306,142 | $295,583 | Consolidated Statements of Income For Q1 2025, net income increased to $11.6 million from $9.6 million in the prior-year period, driven by a 14.3% increase in net interest income to $27.3 million Quarterly Income Statement Highlights (In thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $27,251 | $23,841 | | Provision for credit losses, loans | $1,358 | $641 | | Noninterest Income | $2,101 | $1,718 | | Noninterest Expense | $12,611 | $12,132 | | Net Income | $11,598 | $9,586 | | Diluted EPS | $1.13 | $0.93 | Consolidated Statements of Comprehensive Income Total comprehensive income for Q1 2025 was $11.9 million, compared to $9.5 million in Q1 2024, primarily due to higher net income and a smaller other comprehensive loss Quarterly Comprehensive Income (In thousands) | Component | Q1 2025 (Net of tax) | Q1 2024 (Net of tax) | | :--- | :--- | :--- | | Net Income | $11,598 | $9,586 | | Other Comprehensive Income (Loss) | $275 | $(115) | | Total Comprehensive Income | $11,873 | $9,471 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased from $295.6 million at year-end 2024 to $306.1 million at March 31, 2025, driven by net income and positive other comprehensive income - Key drivers for the change in shareholders' equity in Q1 2025 were net income of $11.6 million and other comprehensive income of $275 thousand, offset by dividends of $1.4 million13 - In Q1 2024, the company repurchased 150,000 shares of treasury stock for $4.1 million, with no shares repurchased in Q1 202513 Consolidated Statements of Cash Flows For Q1 2025, cash and cash equivalents increased by $31.2 million, with net cash provided by operating activities at $17.9 million and financing activities at $96.1 million Quarterly Cash Flow Summary (In thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,854 | $15,762 | | Net cash used in investing activities | $(82,766) | $(3,025) | | Net cash provided by (used in) financing activities | $96,067 | $(24,527) | | Increase (decrease) in cash and cash equivalents | $31,155 | $(11,790) | Notes to the Consolidated Financial Statements This section provides detailed disclosures on accounting policies, fair value measurements, and portfolio composition, identifying the allowance for credit losses as a significant estimate - The company identifies the allowance for credit losses as a significant estimate, which may be affected by future changes in economic conditions and loan portfolio credit quality19 - The company acknowledges risks from macro-economic trends, including interest rate environments and inflation, and notes increased competition for liquidity2122 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q1 2025 financial performance, highlighting a 14.3% increase in net interest income and a rise in net income to $11.6 million, alongside asset quality, liquidity, and capital adequacy Earnings Summary Net income for Q1 2025 was $11.6 million ($1.13 per diluted share), a significant increase from $9.6 million ($0.93 per diluted share) in Q1 2024 Q1 2025 Performance Highlights vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $11.6 million | $9.6 million | | Diluted EPS | $1.13 | $0.93 | | Return on Average Assets | 1.83% | 1.58% | | Return on Average Equity | 15.56% | 14.49% | | Net Interest Margin | 4.46% | 4.09% | - Net interest income grew 14.3% year-over-year, primarily due to increased yield and volume on loans123 - Noninterest income increased 22.3% year-over-year, mainly from higher service, loan, and branch fees123 Net Interest Income Tax-equivalent net interest income increased by 14.3% to $27.3 million in Q1 2025, with the net interest margin expanding by 37 basis points to 4.46% - The increase in net interest income was driven by a $1.2 million contribution from higher yields on earning assets and a $1.7 million contribution from increased average volume of interest-earning assets131 - The average volume of interest-earning assets grew by $132.5 million, primarily due to a $128.6 million increase in average loans131 - Total interest expense decreased by $0.5 million (3.9%) compared to Q1 2024, mainly due to a lower rate and balance on borrowed funds133 Provision for Credit Losses The provision for credit losses on loans was $1.4 million for Q1 2025, more than double the $0.6 million provision in Q1 2024, primarily attributed to loan growth - The provision for credit losses for loans increased to $1.4 million in Q1 2025 from $0.6 million in Q1 2024, mainly due to loan growth141 - The provision for off-balance sheet exposures was a release of $41 thousand in Q1 2025, compared to a $2 thousand provision in Q1 2024141 Financial Condition As of March 31, 2025, total assets grew by 4.3% to $2.8 billion from year-end 2024, primarily fueled by an $84.5 million increase in gross loans - Total assets increased by $113.9 million (4.3%) to $2.8 billion at March 31, 2025, compared to year-end 2024145 - The asset growth was primarily driven by an $84.5 million increase in gross loans and a $31.2 million increase in cash and cash equivalents145 - Total shareholders' equity increased by $10.6 million since year-end 2024, mainly due to retained earnings146 Asset Quality Nonaccrual loans increased to $16.8 million from $13.1 million at year-end 2024, driven by increases in commercial and residential mortgage segments, while potential problem loans also rose slightly - Nonaccrual loans stood at $16.8 million at March 31, 2025, an increase of $3.7 million from December 31, 2024, but a slight decrease from $16.9 million at March 31, 2024174 - Potential problem loans, defined as performing but with non-passing risk ratings, totaled $15.3 million, up from $14.6 million at year-end 2024177 Allowance for Credit Losses and Reserve for Unfunded Loan Commitments The allowance for credit losses increased to $27.7 million at March 31, 2025, from $26.8 million at year-end 2024, with the allowance as a percentage of total loans remaining stable at 1.18% Allowance for Credit Losses Summary | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Allowance for Credit Losses | $27.7 million | $26.8 million | | Allowance to Total Loans | 1.18% | 1.18% | | Net Charge-offs (Q1) | $0.5 million | N/A | - The reserve for unfunded loan commitments remained stable at $0.6 million at March 31, 2025181 Market Risk The company's primary market risk is interest rate risk, with sensitivity analysis showing a 12.26% decrease in Economic Value of Equity (EVE) and a 4.33% decrease in Net Interest Income (NII) in a +200 basis point shock scenario Interest Rate Sensitivity Analysis at March 31, 2025 | Rate Shock (bps) | Change in EVE (%) | Change in NII (%) (12 mo.) | | :--- | :--- | :--- | | +300 | (18.69)% | (6.61)% | | +200 | (12.26)% | (4.33)% | | +100 | (5.71)% | (2.22)% | | -100 | 0.51% | 0.31% | Liquidity The company maintains a strong liquidity position with cash and cash equivalents of $211.6 million at March 31, 2025, and significant additional borrowing capacity from FHLB and FRB - Cash and cash equivalents increased by $31.2 million during the quarter to $211.6 million198 - The company had significant additional borrowing capacity: $276.9 million from FHLB, $225.3 million from the FRB, and $20.0 million from other sources188200 - Total available funding plus cash on hand was 168.8% of uninsured or uncollateralized deposits as of March 31, 2025200 Regulatory Capital Unity Bank continues to exceed all regulatory capital requirements, considered 'well capitalized', with a Total risk-based capital ratio of 15.23% and a Common Equity Tier 1 (CET1) ratio of 13.98% as of March 31, 2025 Unity Bank Capital Ratios at March 31, 2025 | Ratio | Actual | Well Capitalized Requirement | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 13.98% | 6.50% | | Tier 1 Risk-Based Capital | 13.98% | 8.00% | | Total Risk-Based Capital | 15.23% | 10.00% | | Tier 1 Leverage | 12.05% | 5.00% | Shareholders' Equity No shares were repurchased during Q1 2025, leaving 685 thousand shares available for repurchase under current authorizations, contrasting with 150 thousand shares repurchased in Q1 2024 - No shares were repurchased in Q1 2025, leaving 684,645 shares available for repurchase under the authorized plan as of March 31, 2025202203 Quantitative and Qualitative Disclosures about Market Risk There were no significant changes in the company's market risk assessment from its 2024 Form 10-K, with interest rate risk remaining the primary market risk - There were no significant changes in the Company's market risk assessment during Q1 2025206 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no significant changes in internal control over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025206 - No significant changes to internal controls over financial reporting occurred during the quarter206 PART II - OTHER INFORMATION Legal Proceedings The company is subject to ordinary course legal proceedings but is not aware of any that would have a material adverse effect on its business, financial condition, or results of operations - The Company is not aware of any pending legal proceedings that would materially affect its financial position or results208 Risk Factors No new risk factors are presented in this report, with the company referring to the 'Risk Factors' section within its 2024 Form 10-K - The report refers to the Risk Factors section of the 2024 Form 10-K for information on this item209 Unregistered Sales of Equity Securities and Use of Proceeds This section refers to the discussion of the company's share repurchase plan under the MD&A section, noting no shares were repurchased during Q1 2025 - No shares were repurchased during the first quarter of 2025202210 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906211213