Unity Bancorp(UNTY) - 2025 Q2 - Quarterly Results

Executive Summary of Financial Results Unity Bancorp reported significant increases in net income and diluted EPS for Q2 2025 and YTD, driven by one-time gains, alongside growth in loans, deposits, and improved capital ratios Overall Financial Performance Unity Bancorp reported significant increases in net income and diluted EPS for Q2 2025 and the six months ended June 30, 2025, primarily driven by pre-tax one-time gains from securities sales and a release for credit losses on securities Net Income and Diluted EPS (in millions) | Period | Net Income | Diluted EPS | | :----- | :--------- | :---------- | | Q2 2025 | $16.5 | $1.61 | | Q1 2025 | $11.6 | $1.13 | | YTD June 30, 2025 | $28.1 | $2.74 | | YTD June 30, 2024 | $19.0 | $1.86 | - The increase in net income for both the three and six months ended June 30, 2025, was partially attributable to pre-tax one-time gains of $3.5 million realized on the sale of securities and a $2.0 million release for credit losses on securities, related to Patriot National Bancorp, Inc. securities[3] Second Quarter Earnings Highlights Net interest income increased by $1.3 million, and Net Interest Margin (NIM) rose to 4.49% in Q2 2025. Noninterest income surged due to a one-time gain from securities sales, while noninterest expenses saw increases in compensation and loan-related categories Key Earnings Metrics (Q2 2025 vs. Q1 2025) (in millions, except for percentages) | Metric | Q2 2025 | Q1 2025 | Change | | :---------------------- | :---------- | :---------- | :------- | | Net interest income | $28.6 | $27.3 | +$1.3 | | Net interest margin (NIM) | 4.49% | 4.46% | +3 bps | | Provision for credit losses on loans | $1.7 | $1.4 | +$0.3 | | Noninterest income | $5.8 | $2.1 | +$3.7 | | Noninterest expense | $13.0 | $12.6 | +$0.4 | | Effective tax rate | 23.4% | 24.8% | -1.4% | | Realized gain on sale of securities | $3.5 | - | +$3.5 | | Release for credit losses on securities | $2.0 | - | +$2.0 | - The increase in net interest income was due to the yield on interest-earning assets increasing[6] - The $3.7 million increase in noninterest income was primarily due to a one-time realized gain of $3.5 million from the sale of Patriot National Bancorp, Inc. common stock[6] Balance Sheet Highlights Total gross loans and deposits experienced growth from December 31, 2024, with commercial and residential mortgage loans being key drivers. Shareholders' equity increased, contributing to a higher book value per common share, while borrowed funds also saw a significant rise Key Balance Sheet Metrics (June 30, 2025 vs. December 31, 2024) (in millions, except for percentages) | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total gross loans | $2,382.6 | $2,260.7 | +$121.9 | +5.4% | | Total deposits | $2,187.4 | $2,100.3 | +$87.1 | +4.1% | | Borrowed funds | $377.1 | $220.5 | +$156.6 | +71.0% | | Shareholders' equity | $319.8 | $295.6 | +$24.2 | +8.2% | | Book value per common share | $31.88 | $29.48 | +$2.40 | +8.1% | - Loan growth was primarily due to increases in commercial and residential mortgage loan categories, partially offset by decreases in residential construction loans[6] - As of June 30, 2025, 19.5% of total deposits were uninsured or uncollateralized. Borrowed funds were entirely comprised of borrowings from the FHLB[6] Other Key Highlights Unity Bancorp, with approximately $2.9 billion in assets, demonstrated improved regulatory capital ratios and strong liquidity. The company plans to expand its branch network and was recognized on the Hovde Group's annual high-performer list - Unity Bancorp, Inc. is headquartered in Clinton, New Jersey, with approximately $2.9 billion in assets and $2.2 billion in deposits[7] Regulatory Capital Ratios (June 30, 2025 vs. December 31, 2024) | Ratio | June 30, 2025 | December 31, 2024 | Change (bps) | | :-------------------------- | :------------ | :---------------- | :----------- | | Leverage Ratio | 12.50% | 12.22% | +28 | | Common Equity Tier 1 Capital Ratio | 13.96% | 13.90% | +6 | | Tier 1 Capital Ratio | 14.39% | 14.37% | +2 | | Total Capital Ratio | 15.65% | 15.62% | +3 | - The Company held $293.7 million of cash and cash equivalents and maintained approximately $457.8 million of funding available, representing 176.3% of uninsured or uncollateralized deposits[9] - Nonaccrual assets decreased to $15.8 million (0.54% of total assets) from $17.9 million (0.65% of total assets) in the prior quarter. Unity Bank announced its intention to open a new branch in Madison, New Jersey, in Fall 2025, increasing total branches to 22. The company was included in the Hovde Group's annual high-performer list in April 2025[9] Detailed Financial Statements and Data This section provides a comprehensive overview of Unity Bancorp's financial position and performance through detailed balance sheets, income statements, net interest margin analysis, asset quality, and historical trends Summary Financial Highlights This section provides a condensed overview of Unity Bancorp's key financial metrics, including balance sheet data, income statement figures, performance ratios, share information, capital ratios, and credit quality indicators for various periods, highlighting significant quarter-over-quarter and year-over-year changes Balance Sheet Data (in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | QTD % Change | YoY % Change | | :------------------------ | :------------ | :------------- | :------------ | :----------- | :----------- | | Total assets | $2,928,523 | $2,767,943 | $2,597,707 | 5.8% | 12.7% | | Total deposits | $2,187,366 | $2,175,398 | $2,010,831 | 0.6% | 8.8% | | Total gross loans | $2,382,594 | $2,345,130 | $2,170,535 | 1.6% | 9.8% | | Total shareholders' equity | $319,840 | $306,142 | $273,395 | 4.5% | 17.0% | Financial Data - Quarter to Date (in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | QTD % Change | YoY % Change | | :-------------------------- | :------------ | :------------- | :------------ | :----------- | :----------- | | Net income | $16,491 | $11,598 | $9,454 | 42.2% | 74.4% | | Net income per common share - Diluted | $1.61 | $1.13 | $0.93 | 42.5% | 73.1% | Performance Ratios - Quarter to Date (annualized) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------ | :------------ | :------------- | :------------ | | Return on average assets | 2.51% | 1.83% | 1.56% | | Return on average equity | 21.15% | 15.56% | 14.07% | | Net interest margin | 4.49% | 4.46% | 4.01% | | Efficiency ratio** | 42.31% | 42.89% | 44.44% | 44.23% | 47.10% | Consolidated Balance Sheets The consolidated balance sheet shows a 10.3% increase in total assets from December 31, 2024, reaching $2.93 billion, driven by significant growth in cash and cash equivalents, loans, and FHLB stock. Total liabilities also increased by 10.6%, primarily due to higher borrowed funds and deposits Consolidated Balance Sheet (in thousands) | Metric | June 30, 2025 | December 31, 2024 | June 30, 2024 | Change from Dec 31, 2024 (%) | Change from Jun 30, 2024 (%) | | :-------------------------------- | :------------ | :---------------- | :------------ | :--------------------------- | :--------------------------- | | Total assets | $2,928,523 | $2,654,017 | $2,597,707 | 10.3% | 12.7% | | Cash and cash equivalents | $293,733 | $180,438 | $197,418 | 62.8% | 48.8% | | Total loans | $2,382,594 | $2,260,657 | $2,170,535 | 5.4% | 9.8% | | Total deposits | $2,187,366 | $2,100,313 | $2,010,831 | 4.1% | 8.8% | | Borrowed funds | $377,107 | $220,504 | $274,798 | 71.0% | 37.2% | | Total liabilities | $2,608,683 | $2,358,434 | $2,324,312 | 10.6% | 12.2% | | Total shareholders' equity | $319,840 | $295,583 | $273,395 | 8.2% | 17.0% | - Prepaid expenses and other assets increased significantly from $9,311 thousand at December 31, 2024, to $48,750 thousand at June 30, 2025[14] - Noninterest-bearing demand deposits increased by 5.4% from December 31, 2024, and 10.1% from June 30, 2024[14] Consolidated Statements of Income This section presents Unity Bancorp's income statements for both the quarter and six months ended June 30, 2025, detailing interest income and expense, provisions for credit losses, noninterest income and expense, and ultimately net income and EPS, with comparative figures QTD Consolidated Statements of Income For the three months ended June 30, 2025, net income significantly increased by 42.2% QoQ and 74.4% YoY, reaching $16.5 million. This growth was primarily driven by a substantial increase in noninterest income due to net securities gains and a strong rise in net interest income, despite higher provisions for credit losses on loans QTD Consolidated Statements of Income (in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | QTD Change ($) | QTD Change (%) | YoY Change ($) | YoY Change (%) | | :---------------------------------------- | :------------ | :------------- | :------------ | :------------- | :------------- | :------------- | :------------- | | Total interest income | $42,600 | $40,801 | $37,987 | $1,799 | 4.4% | $4,613 | 12.1% | | Total interest expense | $14,043 | $13,550 | $14,563 | $493 | 3.6% | $(520) | (3.6)% | | Net interest income | $28,557 | $27,251 | $23,424 | $1,306 | 4.8% | $5,133 | 21.9% | | Provision for credit losses, loans | $1,725 | $1,358 | $266 | $367 | 27.0% | $1,459 | 548.5% | | (Release) Provision for credit losses, securities | $(2,036) | - | $646 | $(2,036) | *NM | $(2,682) | *NM | | Total noninterest income | $5,815 | $2,101 | $2,033 | $3,714 | 176.8% | $3,782 | 186.0% | | Net securities gains (losses) | $3,600 | $(49) | $20 | $3,649 | *NM | $3,580 | *NM | | Total noninterest expense | $13,019 | $12,611 | $11,980 | $408 | 3.2% | $1,039 | 8.7% | | Net income | $16,491 | $11,598 | $9,454 | $4,893 | 42.2% | $7,037 | 74.4% | | Net income per common share - Diluted | $1.61 | $1.13 | $0.93 | | | | | YTD Consolidated Statements of Income For the six months ended June 30, 2025, net income increased by 47.5% YoY to $28.1 million. This was driven by an 18.1% increase in net interest income and a substantial 111.0% rise in total noninterest income, largely due to net securities gains, despite a significant increase in the provision for credit losses on loans YTD Consolidated Statements of Income (in thousands) | Metric | June 30, 2025 | June 30, 2024 | YoY Change ($) | YoY Change (%) | | :---------------------------------------- | :------------ | :------------ | :------------- | :------------- | | Total interest income | $83,401 | $75,924 | $7,477 | 9.8% | | Total interest expense | $27,593 | $28,659 | $(1,066) | (3.7)% | | Net interest income | $55,808 | $47,265 | $8,543 | 18.1% | | Provision for credit losses, loans | $3,083 | $907 | $2,176 | 239.9% | | (Release) Provision for credit losses, securities | $(2,036) | $646 | $(2,682) | NM | | Total noninterest income | $7,916 | $3,751 | $4,165 | 111.0% | | Net securities gains | $3,551 | $74 | $3,477 | NM | | Total noninterest expense | $25,630 | $24,112 | $1,518 | 6.3% | | Net income | $28,089 | $19,040 | $9,049 | 47.5% | | Net income per common share - Diluted | $2.74 | $1.86 | | | Net Interest Margin Analysis This section provides a detailed analysis of Unity Bancorp's net interest margin, comparing average balances, interest income/expense, and rates/yields for interest-earning assets and interest-bearing liabilities across different periods (QTD and YTD) QTD Net Interest Margin (June 30, 2025 vs. June 30, 2024) For Q2 2025, the net interest margin improved to 4.49% from 4.01% in Q2 2024, driven by a higher yield on interest-earning assets (6.70% vs. 6.51%) and a lower cost of interest-bearing liabilities (3.05% vs. 3.37%) QTD Net Interest Margin (June 30, 2025 vs. June 30, 2024) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Yield on interest-earning assets | 6.70% | 6.51% | | Cost of interest-bearing liabilities | 3.05% | 3.37% | | Net interest spread | 3.66% | 3.13% | | Net interest income | $28,557 | $23,424 | | Net interest margin | 4.49% | 4.01% | QTD Net Interest Margin (June 30, 2025 vs. March 31, 2025) The net interest margin slightly increased to 4.49% in Q2 2025 from 4.46% in Q1 2025. This was supported by a marginal increase in the yield on interest-earning assets (6.70% vs. 6.68%) and a slight rise in the cost of interest-bearing liabilities (3.05% vs. 3.04%) QTD Net Interest Margin (June 30, 2025 vs. March 31, 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Yield on interest-earning assets | 6.70% | 6.68% | | Cost of interest-bearing liabilities | 3.05% | 3.04% | | Net interest spread | 3.66% | 3.64% | | Net interest income | $28,557 | $27,251 | | Net interest margin | 4.49% | 4.46% | YTD Net Interest Margin (June 30, 2025 vs. June 30, 2024) For the six months ended June 30, 2025, the net interest margin improved to 4.48% from 4.05% in the prior year period. This was driven by an increase in the yield on interest-earning assets (6.69% vs. 6.51%) and a decrease in the cost of interest-bearing liabilities (3.04% vs. 3.32%) YTD Net Interest Margin (June 30, 2025 vs. June 30, 2024) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Yield on interest-earning assets | 6.69% | 6.51% | | Cost of interest-bearing liabilities | 3.04% | 3.32% | | Net interest spread | 3.65% | 3.19% | | Net interest income | $55,808 | $47,265 | | Net interest margin | 4.48% | 4.05% | Allowance for Credit Losses and Asset Quality Schedules This section details the allowance for credit losses, including provisions, chargeoffs, and recoveries, and provides key asset quality metrics such as nonaccrual loans and assets, showing trends over several quarters Allowance for Credit Losses (in thousands) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Balance, beginning of period | $27,651 | $26,788 | $27,002 | $26,107 | $26,080 | | Provision for credit losses on loans | $1,725 | $1,358 | $470 | $1,029 | $266 | | Net chargeoffs | $(364) | $(495) | $(684) | $(134) | $(239) | | Balance, end of period | $29,012 | $27,651 | $26,788 | $27,002 | $26,107 | Asset Quality Information | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :---------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Nonaccrual assets | $15,840 | $17,990 | $15,046 | $15,879 | $15,193 | | Nonaccrual loans to total loans | 0.66% | 0.72% | 0.58% | 0.59% | 0.56% | | Allowance for credit losses to total loans at quarter end | 1.22% | 1.18% | 1.18% | 1.22% | 1.20% | | Allowance for credit losses to total nonaccrual loans | 183.16% | 164.15% | 204.77% | 207.39% | 215.37% | Quarterly Financial Data (Historical Trend) This section provides a comprehensive historical view of Unity Bancorp's financial performance and position over the past five quarters, covering income, share data, performance ratios, balance sheet items, interest rates, credit quality, and capital ratios Summary of Income (in thousands) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :---------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Net interest income | $28,557 | $27,251 | $26,490 | $24,856 | $23,424 | | Net income | $16,491 | $11,598 | $11,505 | $10,905 | $9,454 | | Net income per common share - Diluted | $1.61 | $1.13 | $1.13 | $1.07 | $0.92 | Performance Ratios (Annualized) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Return on average assets | 2.51% | 1.83% | 1.83% | 1.76% | 1.56% | | Return on average equity | 21.15% | 15.56% | 15.77% | 15.55% | 14.07% | | Net interest margin | 4.49% | 4.46% | 4.37% | 4.16% | 4.01% | | Efficiency ratio | 42.31% | 42.89% | 44.44% | 44.23% | 47.10% | Balance Sheet Data (in thousands) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Total assets | $2,928,523 | $2,767,943 | $2,654,017 | $2,635,319 | $2,597,707 | | Total loans | $2,382,594 | $2,345,130 | $2,260,657 | $2,217,393 | $2,170,535 | | Total deposits | $2,187,366 | $2,175,398 | $2,100,313 | $2,046,137 | $2,010,831 | | Total shareholders' equity | $319,840 | $306,142 | $295,583 | $284,257 | $273,395 | Loan Portfolio Composition This section details the composition of Unity Bancorp's loan portfolio as of June 30, 2025, and December 31, 2024, highlighting the distribution across various loan categories, with commercial loans representing the largest segment Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2025 | June 30, 2025 (%) | December 31, 2024 | December 31, 2024 (%) | | :------------------------------ | :------------ | :---------------- | :---------------- | :-------------------- | | Loans Held for Sale | $13,352 | 0.6% | $12,163 | 0.5% | | SBA Loans | $38,059 | 1.6% | $38,309 | 1.7% | | Total Commercial Loans | $1,511,129 | 63.4% | $1,411,629 | 62.5% | | Residential Mortgage Loans | $666,560 | 28.0% | $630,927 | 27.9% | | Total Consumer Loans | $82,564 | 3.4% | $76,711 | 3.4% | | Residential Construction Loans | $70,930 | 3.0% | $90,918 | 4.0% | | Total Gross Loans | $2,382,594 | 100.0% | $2,260,657 | 100.0% | - Commercial mortgage - owner occupied loans represent the largest single category within the commercial loan portfolio, accounting for 26.5% of total gross loans at June 30, 2025[31] - Residential construction loans decreased from 4.0% of total gross loans at December 31, 2024, to 3.0% at June 30, 2025[31] Quarterly Non-GAAP Reconciliation This section provides a reconciliation of GAAP net income and related performance metrics to adjusted non-GAAP figures for the quarter ended June 30, 2025, by excluding the impact of one-time securities sales and related credit loss releases Adjusted Net Income (non-GAAP, in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------------- | :------------ | :------------- | :------------ | | Net income (GAAP) | $16,491 | $11,598 | $9,454 | | Less: Release of credit losses, securities | $(2,036) | - | - | | Less: Net securities gains pertaining to one-time sales | $(3,509) | - | - | | Add: Adjusted (provision) for income taxes | $1,301 | - | - | | Adjusted net income (non-GAAP) | $12,247 | $11,598 | $9,454 | Adjusted Performance Ratios (non-GAAP) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------------- | :------------ | :------------- | :------------ | | Adjusted net income per common share - Diluted (non-GAAP) | $1.20 | | | | Adjusted return on average assets (non-GAAP) | 1.86% | | | | Adjusted return on average equity (non-GAAP) | 15.70% | | | Forward-Looking Statements This section serves as a cautionary statement regarding forward-looking information, indicating that such statements involve risks, uncertainties, estimates, and assumptions beyond the company's control, which could impact future financial performance - The news release contains forward-looking statements, identified by words such as "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions[8] - These statements involve certain risks, uncertainties, estimates, and assumptions made by management, which are subject to factors beyond the Company's control that could impede its ability to achieve these goals[8] - Factors include those items in the Annual Report on Form 10-K under "Item IA-Risk Factors", general economic conditions, trends in interest rates, borrower repayment ability, nonperforming asset management, regulatory exams, and the impact of health crises or national disasters[8]