Unity Bancorp(UNTY) - 2025 Q3 - Quarterly Results

Company Overview & Executive Summary Company Profile Unity Bancorp, Inc. is a New Jersey-based financial institution with $2.9B assets, operating Unity Bank across NJ and PA - Unity Bancorp, Inc. is a financial services institution headquartered in Clinton, New Jersey, with approximately $2.9 billion in assets and $2.3 billion in deposits[9] - Unity Bank, a wholly-owned subsidiary, provides financial services through its branch network in New Jersey and Pennsylvania[9] Q3 2025 & YTD 2025 Financial Performance Overview Q3 2025 net income was $14.4M ($1.41 EPS), down QoQ, but YTD net income reached $42.5M ($4.15 EPS), up YoY Net Income and Diluted EPS | Metric | Quarter Ended September 30, 2025 | Quarter Ended June 30, 2025 | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | | :------------------- | :------------------------------- | :-------------------------- | :----------------------------------- | :----------------------------------- | | Net Income (Millions USD) | 14.4 | 16.5 | 42.5 | 29.9 | | Diluted EPS (USD) | 1.41 | 1.61 | 4.15 | 2.94 | - The company opened its 22nd branch in Madison, NJ, to strengthen community service and deepen relationships in New Jersey[4] - Recent Federal Reserve interest rate cuts aim to stimulate economic activity, with Unity Bancorp prepared to strengthen customer relationships and expand lending[4] Third Quarter 2025 Performance Analysis Earnings Highlights Q3 2025 net interest income rose to $29.9M, NIM increased to 4.54%, non-interest income decreased due to a Q2 one-time gain Q3 2025 Key Earnings Metrics | Metric | Quarter Ended September 30, 2025 | Quarter Ended June 30, 2025 | Change (Millions USD) | Change (%) | | :-------------------------- | :------------------------------- | :-------------------------- | :-------------------- | :--------- | | Net Interest Income (Millions USD) | 29.9 | 28.6 | 1.3 | 4.5 | | Net Interest Margin (%) | 4.54 | 4.49 | +0.05 pp | - | | Provision for Credit Losses (Millions USD) | 1.4 | 1.7 | (0.3) | (17.6) | | Non-Interest Income (Millions USD) | 3.0 | 5.8 | (2.8) | (48.3) | | Non-Interest Expense (Millions USD) | 13.4 | 13.0 | 0.4 | 3.1 | | Effective Tax Rate (%) | 23.7 | 23.4 | +0.3 pp | - | - Net interest income growth was primarily driven by an increase in the yield on interest-earning assets[7] - The decrease in non-interest income was mainly due to a $3.5 million one-time gain realized in Q2, partially offset by increased gains on mortgage loan sales, SBA loan sales, and service and loan fees[7] Balance Sheet Highlights Total loans grew 9.2% and deposits 8.0% from YE2024; non-performing loans were 0.83% of total loans Q3 2025 Key Balance Sheet Metrics | Metric | September 30, 2025 | December 31, 2024 | Change (%) | | :--------------------------------- | :----------------- | :---------------- | :--------- | | Total Loans (Millions USD) | 2,468.5 | 2,260.7 | 9.2 | | Total Deposits (Millions USD) | 2,267.5 | 2,100.3 | 8.0 | | Allowance for Loan Losses to Total Loans (%) | 1.23 | 1.18 | - | | Non-Performing Loans to Total Loans (%) | 0.83 | 0.58 | - | | Non-Performing Assets to Total Assets (%) | 0.71 | 0.57 | - | - Total loan growth was primarily driven by increases in commercial and residential mortgage loan categories, partially offset by a decrease in residential construction loans[7] - Deposit composition included 19.7% non-interest-bearing demand deposits, 17.4% interest-bearing demand deposits, 23.7% savings deposits, and 39.2% time deposits[7] - As of September 30, 2025, investments accounted for 4.6% of total assets, with pre-tax unrealized losses of $1.9 million on available-for-sale debt securities and $6.5 million on held-to-maturity debt securities[7] Other Key Developments Shareholders' equity rose to $334M, regulatory capital ratios improved, liquidity remained strong, and quarterly dividend increased Q3 2025 Other Key Metrics | Metric | September 30, 2025 | December 31, 2024 | Change (%) | | :--------------------------------- | :----------------- | :---------------- | :--------- | | Shareholders' Equity (Millions USD) | 334.0 | 295.6 | 13.0 | | Book Value Per Share (USD) | 33.26 | 29.48 | 12.8 | | Leverage Ratio (%) | 12.71 | 12.22 | +0.49 pp | | Common Equity Tier 1 Capital Ratio (%) | 14.45 | 13.90 | +0.55 pp | | Tier 1 Capital Ratio (%) | 14.88 | 14.37 | +0.51 pp | | Total Capital Ratio (%) | 16.13 | 15.62 | +0.51 pp | | Cash and Cash Equivalents (Millions USD) | 203.5 | 180.4 | 12.8 | | Available Funds (Millions USD) | 548.2 | - | - | | Quarterly Dividend (USD/Share) | 0.15 | 0.13 | 15.4 | - Shareholders' equity increased primarily due to 2025 earnings, partially offset by dividend payments and share repurchase activities[11] - The company opened a new branch in Madison, New Jersey, in September 2025, bringing the total number of branches to 22[11] - In August 2025, Unity Bancorp Inc. announced a 7% increase in its Q3 cash dividend to $0.15 per share[11] - Unity Bancorp Inc. ranked 14th among publicly traded banks in the U.S. in Bank Director's 2025 RankingBanking report[11] Consolidated Financial Statements Summary Financial Highlights This section summarizes Unity Bancorp's key financial data, including balance sheet, income, performance ratios, and capital ratios Q3 2025 Financial Summary | Metric | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--------------------------------- | :----------------- | :---------------- | :----------------- | | Balance Sheet Data (Thousands USD): | | | | | Total Assets | 2,876,365 | 2,928,523 | 2,635,319 | | Total Deposits | 2,267,484 | 2,187,366 | 2,046,137 | | Total Loans | 2,468,527 | 2,382,594 | 2,217,393 | | Shareholders' Equity | 334,023 | 319,840 | 284,257 | | Quarterly Financial Data (Thousands USD): | | | | | Net Income | 14,390 | 16,491 | 10,905 | | Diluted EPS (USD) | 1.41 | 1.61 | 1.07 | | Quarterly Performance Ratios (Annualized): | | | | | Return on Average Assets (%) | 2.11 | 2.51 | 1.76 | | Return on Average Equity (%) | 17.41 | 21.15 | 15.55 | | Net Interest Margin (%) | 4.54 | 4.49 | 4.16 | | Year-to-Date Financial Data (Thousands USD): | | | | | Net Income | 42,484 | - | 29,945 | | Diluted EPS (USD) | 4.15 | - | 2.94 | | Capital Ratios (%): | | | | | Leverage Ratio | 12.71 | 12.50 | 11.94 | | Common Equity Tier 1 Capital Ratio | 14.45 | 13.96 | 13.50 | Consolidated Balance Sheets Total assets reached $2.876B, up 8.4% from YE2024, with loans up 9.2%, deposits up 8.0%, and equity up 13.0% Consolidated Balance Sheets (Thousands USD) | Metric | September 30, 2025 | December 31, 2024 | September 30, 2024 | September 30, 2025 vs. December 31, 2024 (%) | | :--------------------------------- | :----------------- | :---------------- | :----------------- | :------------------------------------------- | | Assets: | | | | | | Cash and Cash Equivalents | 203,486 | 180,438 | 194,501 | 12.8 | | Total Securities | 131,252 | 145,028 | 143,712 | (9.5) | | Total Loans | 2,468,527 | 2,260,657 | 2,217,393 | 9.2 | | Allowance for Loan Losses | (30,245) | (26,788) | (27,002) | 12.9 | | Net Loans | 2,438,282 | 2,233,869 | 2,190,391 | 9.2 | | Total Assets | 2,876,365 | 2,654,017 | 2,635,319 | 8.4 | | Liabilities: | | | | | | Total Deposits | 2,267,484 | 2,100,313 | 2,046,137 | 8.0 | | Borrowed Funds | 231,707 | 220,504 | 266,798 | 5.1 | | Total Liabilities | 2,542,342 | 2,358,434 | 2,351,062 | 7.8 | | Shareholders' Equity: | | | | | | Total Shareholders' Equity | 334,023 | 295,583 | 284,257 | 13.0 | - Commercial loans and residential mortgage loans were the primary drivers of total loan growth, increasing by 12.1% and 7.3%, respectively[15] - Time deposits grew by 9.3%, being the main contributor to deposit growth[15] Consolidated Statements of Income (Quarter-to-Date) Q3 2025 net interest income grew 4.5% QoQ to $29.86M; net income was $14.39M ($1.41 EPS), down QoQ but up YoY Consolidated Statements of Income (Quarter-to-Date, Thousands USD) | Metric | Quarter Ended September 30, 2025 | Quarter Ended June 30, 2025 | Quarter Ended September 30, 2024 | Sep 30, 2025 vs. Jun 30, 2025 (%) | Sep 30, 2025 vs. Sep 30, 2024 (%) | | :--------------------------------- | :------------------------------- | :-------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Total Interest Income | 44,361 | 42,600 | 39,550 | 4.1 | 12.2 | | Total Interest Expense | 14,505 | 14,043 | 14,694 | 3.3 | (1.3) | | Net Interest Income | 29,856 | 28,557 | 24,856 | 4.5 | 20.1 | | Provision for Loan Losses | 1,409 | 1,725 | 1,029 | (18.3) | 36.9 | | Release of Allowance for Credit Losses on Securities | (787) | (2,036) | - | 61.3 | *NM | | Non-Interest Income | 2,967 | 5,815 | 2,803 | (49.0) | 5.9 | | Non-Interest Expense | 13,415 | 13,019 | 12,012 | 3.0 | 11.7 | | Net Income | 14,390 | 16,491 | 10,905 | (12.7) | 32.0 | | Diluted EPS (USD) | 1.41 | 1.61 | 1.07 | (12.4) | 31.8 | - Commercial loan interest income increased by 22.1% year-over-year, and residential mortgage loan interest income increased by 11.3% year-over-year[17] - The decrease in non-interest income was primarily due to a reduction in one-time securities gains from the second quarter[17] Consolidated Statements of Income (Year-to-Date) YTD net interest income rose 18.8% to $85.66M; net income was $42.48M ($4.15 EPS), up 41.9% YoY, driven by securities gains Consolidated Statements of Income (Year-to-Date, Thousands USD) | Metric | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | Change (%) | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :--------- | | Total Interest Income | 127,761 | 115,474 | 10.6 | | Total Interest Expense | 42,097 | 43,353 | (2.9) | | Net Interest Income | 85,664 | 72,121 | 18.8 | | Provision for Loan Losses | 4,491 | 1,937 | 131.9 | | Release of Allowance for Credit Losses on Securities | (2,824) | 646 | (537.2) | | Non-Interest Income | 10,883 | 6,553 | 66.1 | | Non-Interest Expense | 39,041 | 36,124 | 8.1 | | Net Income | 42,484 | 29,945 | 41.9 | | Diluted EPS (USD) | 4.15 | 2.94 | 41.2 | - Commercial loan interest income increased by 20.1% year-over-year, and residential mortgage loan interest income increased by 10.3% year-over-year[19] - The significant increase in non-interest income was primarily attributable to a substantial rise in net securities gains[19] Net Interest Margin Analysis QTD Net Interest Margin (Q3 2025 vs Q3 2024) Q3 2025 NIM improved to 4.54% from 4.16% in Q3 2024, driven by higher asset yields and lower liability costs Quarterly Net Interest Margin Comparison (Thousands USD) | Metric | Quarter Ended September 30, 2025 | Quarter Ended September 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Average Interest-Earning Assets | 2,609,862 | 2,375,250 | | Interest Income on Interest-Earning Assets | 44,367 | 39,551 | | Yield on Interest-Earning Assets (%) | 6.74 | 6.62 | | Average Interest-Bearing Liabilities | 1,888,738 | 1,749,425 | | Interest Expense on Interest-Bearing Liabilities | 14,505 | 14,694 | | Cost of Interest-Bearing Liabilities (%) | 3.05 | 3.34 | | Net Interest Spread (%) | 3.69 | 3.28 | | Net Interest Margin (%) | 4.54 | 4.16 | - Commercial loan yield increased from 6.60% to 6.86%, and residential mortgage loan yield increased from 6.15% to 6.38%[21] - Savings deposit cost decreased from 2.70% to 2.47%, and time deposit cost decreased from 4.39% to 3.72%[21] QTD Net Interest Margin (Q3 2025 vs Q2 2025) Q3 2025 NIM slightly increased to 4.54% from 4.49% QoQ, with asset yield marginally up and liability cost stable Quarterly Net Interest Margin Comparison (Thousands USD) | Metric | Quarter Ended September 30, 2025 | Quarter Ended June 30, 2025 | | :--------------------------------- | :------------------------------- | :-------------------------- | | Average Interest-Earning Assets | 2,609,862 | 2,550,061 | | Interest Income on Interest-Earning Assets | 44,367 | 42,603 | | Yield on Interest-Earning Assets (%) | 6.74 | 6.70 | | Average Interest-Bearing Liabilities | 1,888,738 | 1,849,380 | | Interest Expense on Interest-Bearing Liabilities | 14,505 | 14,043 | | Cost of Interest-Bearing Liabilities (%) | 3.05 | 3.05 | | Net Interest Spread (%) | 3.69 | 3.66 | | Net Interest Margin (%) | 4.54 | 4.49 | - Commercial loan yield slightly increased from 6.80% to 6.86%, and SBA loan yield significantly increased from 7.04% to 8.38%[24] - Savings deposit cost increased from 2.24% to 2.47%, while time deposit cost decreased from 3.86% to 3.72%[24] YTD Net Interest Margin (YTD 2025 vs YTD 2024) YTD NIM improved to 4.50% from 4.09% YoY, driven by increased asset yields and decreased interest-bearing liability costs Year-to-Date Net Interest Margin Comparison (Thousands USD) | Metric | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Average Interest-Earning Assets | 2,546,493 | 2,356,351 | | Interest Income on Interest-Earning Assets | 127,770 | 115,477 | | Yield on Interest-Earning Assets (%) | 6.71 | 6.55 | | Average Interest-Bearing Liabilities | 1,848,879 | 1,741,101 | | Interest Expense on Interest-Bearing Liabilities | 42,097 | 43,353 | | Cost of Interest-Bearing Liabilities (%) | 3.04 | 3.33 | | Net Interest Spread (%) | 3.67 | 3.22 | | Net Interest Margin (%) | 4.50 | 4.09 | - Commercial loan yield increased from 6.49% to 6.79%, and residential mortgage loan yield increased from 6.00% to 6.30%[27] - Savings deposit cost decreased from 2.63% to 2.28%, and borrowed funds and subordinated debt cost decreased from 3.93% to 3.66%[27] Asset Quality and Loan Portfolio Allowance for Credit Losses and Asset Quality Allowance for credit losses reached $30.245M; non-performing loans were $20.514M (0.83% of total loans), driven by residential mortgages Allowance for Credit Losses and Asset Quality (Thousands USD) | Metric | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--------------------------------- | :----------------- | :---------------- | :----------------- | | Allowance for Credit Losses Balance | 30,245 | 29,012 | 27,002 | | Provision for Loan Losses | 1,409 | 1,725 | 1,029 | | Net Charge-offs | (176) | (364) | (134) | | Total Non-Performing Loans | 20,514 | 15,840 | 13,020 | | Total Non-Performing Assets | 20,514 | 15,840 | 15,879 | | Non-Performing Loans to Total Loans (%) | 0.83 | 0.66 | 0.59 | | Non-Performing Assets to Total Assets (%) | 0.71 | 0.54 | 0.60 | | Allowance for Loan Losses to Total Loans (%) | 1.23 | 1.22 | 1.22 | - The increase in non-performing loans primarily reflects an increase in non-performing 1-4 family residential mortgage loans, which are well-collateralized[11][29] - The allowance for credit losses coverage of non-performing loans was 147.44%, a decrease from the previous quarter[29] Loan Portfolio Composition Total loan portfolio was $2.4685B, with commercial loans at 64.1% and residential mortgages at 27.4% Loan Portfolio Composition (Thousands USD) | Loan Category | September 30, 2025 | % of Total | December 31, 2024 | % of Total | | :-------------------------- | :----------------- | :--------- | :---------------- | :--------- | | Loans Held for Sale | 15,421 | 0.6 | 12,163 | 0.5 | | SBA Loans | 37,537 | 1.5 | 38,309 | 1.7 | | Commercial Loans | 1,582,608 | 64.1 | 1,411,629 | 62.5 | | Residential Mortgage Loans | 676,862 | 27.4 | 630,927 | 27.9 | | Consumer Loans | 82,857 | 3.4 | 76,711 | 3.4 | | Residential Construction Loans | 73,242 | 3.0 | 90,918 | 4.0 | | Total Loans | 2,468,527 | 100.0 | 2,260,657 | 100.0 | - Within commercial loans, owner-occupied commercial mortgages and non-owner-occupied commercial mortgages accounted for 26.0% and 21.3% of total loans, respectively[34] - Residential construction loans decreased from 4.0% of total loans on December 31, 2024, to 3.0% on September 30, 2025[34] Supplementary Financial Data Quarterly Financial Data This section details Unity Bancorp's quarterly financial data, including income, stock, performance, balance sheet, and credit quality Summary of Quarterly Financial Data (Thousands USD) | Metric | September 30, 2025 | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | | :--------------------------------- | :----------------- | :---------------- | :----------------- | :---------------- | :----------------- | | Net Income | 14,390 | 16,491 | 11,598 | 11,505 | 10,905 | | Diluted EPS (USD) | 1.41 | 1.61 | 1.13 | 1.13 | 1.07 | | Book Value Per Share (USD) | 33.26 | 31.88 | 30.38 | 29.48 | 28.48 | | Return on Average Assets (%) | 2.11 | 2.51 | 1.83 | 1.83 | 1.76 | | Return on Average Equity (%) | 17.41 | 21.15 | 15.56 | 15.77 | 15.55 | | Efficiency Ratio (%) | 41.47 | 42.31 | 42.89 | 44.44 | 44.23 | | Net Interest Margin (%) | 4.54 | 4.49 | 4.46 | 4.37 | 4.16 | | Non-Performing Assets (Thousands USD) | 20,514 | 15,840 | 17,990 | 15,046 | 15,879 | | Leverage Ratio (%) | 12.71 | 12.50 | 12.32 | 12.22 | 11.94 | - The company added one banking office in Q3 2025, increasing full-time equivalent employees to 238[31] Quarterly Non-GAAP Reconciliation This section reconciles non-GAAP financial measures for Q3 2025, Q2 2025, and Q3 2024, excluding non-recurring transaction impacts Quarterly Non-GAAP Reconciliation (Thousands USD) | Metric | Quarter Ended September 30, 2025 | Quarter Ended June 30, 2025 | Quarter Ended September 30, 2024 | | :--------------------------------- | :------------------------------- | :-------------------------- | :------------------------------- | | Net Income (GAAP) | 14,390 | 16,491 | 10,905 | | Less: Release of Allowance for Credit Losses on Securities | (787) | (2,036) | - | | Less: One-time Net Securities Gains | - | (3,509) | - | | Less: Unrealized Net Securities Gains | (218) | - | - | | Add: Adjusted Income Tax Provision | 238 | 1,301 | - | | Adjusted Net Income (Non-GAAP) | 13,623 | 12,247 | 10,905 | | Adjusted Diluted EPS (Non-GAAP) | 1.33 | 1.20 | - | | Adjusted Return on Average Assets (Non-GAAP) | 2.00 % | 1.86 % | - | | Adjusted Return on Average Equity (Non-GAAP) | 16.49 % | 15.70 % | - | - Non-GAAP adjustments primarily exclude the impact of the release of allowance for credit losses on securities, one-time net securities gains, and unrealized net securities gains[36] Forward-Looking Statements This section contains forward-looking statements regarding future financial performance, subject to risks, uncertainties, and assumptions beyond control - Forward-looking statements are identified by words such as "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions[10] - Risks and uncertainties involved in these statements include economic conditions, interest rate trends, borrower repayment ability, ability to manage non-performing asset levels, outcomes of regulatory examinations, and the impact of health crises or national disasters[10]