Unity Bancorp Reports Quarterly Earnings of $16.5 Million
Clinton, NJ -- Unity Bancorp, Inc. (NASDAQ: UNTY), parent company of Unity Bank, reported net income of $16.5 million, or $1.61 per diluted share, for the quarter ended June 30, 2025, compared to net income of $11.6 million, or $1.13 per diluted share for the quarter ended March 31, 2025. For the six months ended June 30, 2025, Unity Bancorp reported net income of $28.1 million, or $2.74 per diluted share, compared to net income of $19.0 million, or $1.86 per diluted share, for the six months ended June 30, 2024. The increase in net income for 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 $2.0 million release for credit losses on securities, each related to securities of Patriot National Bancorp, Inc. held by the Company.
James A. Hughes, President & CEO, commented on the financial results:
“We are pleased to announce another record-breaking quarter for Unity Bancorp, Inc., with net income of $16.5 million, or $1.61 per diluted share. This performance reflects 2.51% ROA and 21.15% ROE.
This quarter’s results were positively impacted by one-time realized gains and provision release related to the previously disclosed non-performing $5 million par investment security. This investment, issued by Patriot National Bancorp Inc., benefited from a successful series of capital raises. We are pleased with the capital raise and Management’s new trajectory.
Excluding this one-time event, on a non-GAAP basis, we earned $12.2 million in net income, or $1.20 per diluted share, representing 1.86% ROA and 15.70% ROE. Net interest margin expanded 3 basis points to 4.49% in the second quarter.
Both Commercial and Residential lending teams continue to demonstrate exceptional origination capabilities. Loan balances grew by $37.5 million in the second quarter, representing a 1.6% increase from March 31, 2025 and a 5.4% increase from year-end. Our loan pipeline remains robust heading into the second half of the year, supported by highquality credits and disciplined pricing. Credit quality remains stable, with nonaccrual assets as a percentage of total assets declining 11 basis points to 0.54%, from the prior quarter. Additionally, total deposits have grown $12.0 million, or 0.6% from March 31, 2025, and 4.1% since year-end. We are excited to have announced our second Morris County, NJ location and we remain committed to growing loans and deposits in tandem.
We are very optimistic about Unity Bank’s future. Loan demand continues to be strong due to robust economic growth in our footprint. Recent inflation data indicates that prices have stabilized after several years of price increases, and as a result, the market is anticipating additional rate cuts this year. If those rate cuts occur, we might expect to see even stronger economic growth through the remainder of the year.”
Second Quarter Earnings Highlights
Net interest income, the primary driver of earnings, was $28.6 million for the quarter ended June 30, 2025, an
increase of $1.3 million, as compared to $27.3 million for the quarter ended March 31, 2025. Net interest margin
(“NIM”) increased 3 basis points to 4.49% for the quarter ended June 30, 2025, compared to the quarter ended
March 31, 2025. The increase was due to the yield on interest-earning assets increasing.
The provision for credit losses on loans was $1.7 million for the quarter ended June 30, 2025, compared to $1.4
million for the quarter ended March 31, 2025. The provision in the current quarter was primarily driven by loan
growth.
During the quarter ended June 30, 2025, with respect to the debt securities held by the Company issued by Patriot National Bancorp, Inc., the Company elected to convert a portion of the principal and past due interest into shares of Patriot National Bancorp, Inc. common stock, bringing the Company’s total holdings to 4.4 million shares. The Company sold all 4.4 million shares, resulting in $6.5 million in net proceeds and a realized gain of $3.5 million. The Company was also able to release $2.0 million from reserve for credit losses on securities. As of June 30, 2025, the Company holds $2.0 million in par of the modified senior debt position in the AFS portfolio with a carrying value of $1.0 million.
Noninterest income was $5.8 million for the quarter ended June 30, 2025, compared to $2.1 million for the quarter ended March 31, 2025. The $3.7 million increase was primarily due to the one-time realized gain of $3.5 million discussed above. The increase was complemented by increases of gains on sale of mortgage loans and partially offset by lower service & loan fee income.
Noninterest expense was $13.0 million for the quarter ended June 30, 2025, compared to $12.6 million for the
quarter ended March 31, 2025. Increases were predominately recognized in the compensation and benefits and
loan related expense categories. The increase was partially offset by one-time director fees recognized during the quarter ended March 31, 2025.
The effective tax rate was 23.4% for the quarter ended June 30, 2025, compared to 24.8% for the quarter ended March 31, 2025.
Balance Sheet Highlights:
Total gross loans increased $121.9 million, or 5.4%, from December 31, 2024, primarily due to increases in the commercial and residential mortgage loan categories. This was partially offset by decreases in the residential construction loan category.
As of June 30, 2025, the allowance for credit losses as a percentage of gross loans was 1.22%.
Total deposits increased $87.1 million, or 4.1%, from December 31, 2024. As of June 30, 2025, 19.5% of total
deposits were uninsured or uncollateralized. The Company’s deposit composition as of June 30, 2025, consisted of 21.2% in noninterest bearing demand deposits, 16.2% in interest-bearing demand deposits, 23.2% in savings deposits and 39.4% in time deposits.
As of June 30, 2025, investments comprised 4.8% of total assets. Available for sale debt securities (“AFS”) were $92.5 million or 3.2% of total assets. Held to maturity (“HTM”) debt securities were $36.4 million or 1.2% of total assets. As of June 30, 2025, pre-tax net unrealized losses on AFS and HTM were $2.8 million and $6.8 million, respectively. These pre-tax unrealized losses represent approximately 2.9% of the Company’s Tier 1 capital. Equity securities were $10.4 million or 0.4% of total assets as of June 30, 2025.
Borrowed funds increased $156.6 million from December 31, 2024. Borrowed funds were entirely comprised of borrowings from the FHLB.
Shareholders’ equity was $319.8 million as of June 30, 2025, compared to $295.6 million as of December 31, 2024. The $24.2 million increase was primarily driven by 2025 earnings, partially offset by dividend payments and share repurchase activity. Unity Bancorp repurchased 50,000 shares for a weighted average cost of $38.78 for the three and six months ended June 30, 2025.
Book value per common share was $31.88 as of June 30, 2025, compared to $29.48 as of December 31, 2024. This increase primarily reflects retained earnings offset partially by share repurchases.
Below is a summary of Unity Bancorp’s regulatory capital ratios:
o The Leverage Ratio increased 28 basis points to 12.50% at June 30, 2025, compared to 12.22% at
December 31, 2024.
o The Common Equity Tier 1 Capital Ratio increased 6 basis points to 13.96% at June 30, 2025, compared to
13.90% at December 31, 2024.
o The Tier 1 Capital Ratio increased 2 basis points to 14.39% at June 30, 2025, compared to 14.37% at
December 31, 2024.
o The Total Capital Ratio increased 3 basis points, to 15.65% at June 30, 2025, compared to 15.62% at
December 31, 2024.
At June 30, 2025, the Company held $293.7 million of cash and cash equivalents. The Company also maintained approximately $457.8 million of funding available from various sources, including the FHLB, FRB Discount Window and other lines of credit. Total available funding plus cash on hand represented 176.3% of uninsured or uncollateralized deposits.
As of June 30, 2025, nonaccrual assets were $15.8 million, compared to $17.9 million as of March 31, 2025. The ratio of nonaccrual loans to total loans was 0.66% as of June 30, 2025. The ratio of nonaccrual assets to total assets was 0.54% as of June 30, 2025. Other Highlights
Unity Bank announced its intention to open a new branch in Madison, New Jersey. This branch will increase the total number of branches to 22, and is expected to open in the Fall of 2025. This location will continue Unity Bank’s growth trajectory and strengthens our Morris County presence.
In April 2025, Unity Bancorp, Inc. was included in the Hovde Groups annual high-performer list. This list highlights the Company’s sustained excellence in financial management and customer service.