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UNITY BANCORP INC /NJ/ (UNTY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered strong reported results with GAAP diluted EPS of $1.61 and net income of $16.5M, aided by one-time securities gains and a release of credit loss reserves related to Patriot National Bancorp; on a non-GAAP basis, EPS was $1.20 and net income $12.2M .
  • Net interest margin expanded to 4.49% (+3 bps q/q), with net interest income rising to $28.6M on higher asset yields; noninterest income spiked to $5.8M on the $3.5M realized securities gain .
  • Versus S&P Global consensus, Q2 EPS and revenue were material beats: EPS $1.61 vs $1.18*, revenue $34.55M vs $30.30M*; the magnitude of the beat was driven largely by the one-time Patriot-related items (gain and reserve release) *.
  • Credit quality remained stable-to-improving: nonaccrual assets fell to $15.8M, nonaccrual loans/total loans improved to 0.66%; ACL/loans rose to 1.22% .
  • Strategic updates: resumed buybacks (50,000 shares at $38.78), announced new Madison, NJ branch (22nd), and maintained the quarterly dividend at $0.14 .

What Went Well and What Went Wrong

  • What Went Well

    • “Record-breaking quarter” with ROA 2.51% and ROE 21.15%; loan balances grew $37.5M sequentially and deposits increased $12.0M q/q; NIM expanded to 4.49% (management cites strong origination and disciplined pricing) .
    • Resolution of Patriot National Bancorp position: $3.5M realized gain, $2.0M release of securities reserve; equity holdings sold for $6.5M net proceeds, leaving a modified $2.0M par senior debt at $1.0M carrying value .
    • Liquidity and capital healthy: cash and equivalents $293.7M, total available funding plus cash equal to 176.3% of uninsured/uncollateralized deposits; CET1 13.96% and leverage ratio 12.50% .

  • What Went Wrong

    • Underlying earnings weaker without one-time items: non-GAAP diluted EPS $1.20 vs GAAP $1.61; adjusted ROA 1.86% and adjusted ROE 15.70% .
    • FHLB borrowings rose meaningfully (+$156.6M since year-end) and borrowed funds totaled $377.1M at quarter-end, reflecting balance sheet funding needs as loan growth outpaced deposit growth .
    • Provision for credit losses on loans increased to $1.7M (from $1.4M in Q1) due to loan growth; service & loan fee income was lower q/q, partially offset by gains on sale of mortgage loans .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Diluted EPS ($)$1.13 $1.13 $1.61
Net Income ($USD Millions)$11.505 $11.598 $16.491
Net Interest Income ($USD Millions)$26.490 $27.251 $28.557
Noninterest Income ($USD Millions)$1.916 $2.101 $5.815
Net Interest Margin (%)4.37% 4.46% 4.49%
Efficiency Ratio (%)44.44% 42.89% 42.31%

Q2 2025 vs Wall Street Consensus (S&P Global):

MetricEstimateActualSurprise
Revenue ($USD Millions)$30.298*$34.547*+$4.249 (+14.0%)*
EPS ($)$1.18*$1.61+$0.43 (+36.9%)*

Values retrieved from S&P Global.*

Segment (Loan Portfolio) Composition

Category12/31/2024 Balance ($MM)% of Loans6/30/2025 Balance ($MM)% of Loans
Commercial – Owner Occupied$577.541 25.6% $631.441 26.5%
Commercial – Nonowner Occupied$428.600 19.0% $474.499 19.9%
Commercial & Industrial$147.186 6.5% $164.176 6.9%
Commercial Construction$130.193 5.8% $101.990 4.3%
SBA 504$48.479 2.1% $49.947 2.1%
SBA (Held for Investment)$36.859 1.6% $38.059 1.6%
Residential Mortgage$630.927 27.9% $666.560 28.0%
Consumer (Home Equity + Other)$76.711 3.4% $82.564 3.4%
Residential Construction$90.918 4.0% $70.930 3.0%
Total Gross Loans$2,260.657 100.0% $2,382.594 100.0%

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Total Assets ($USD Millions)$2,654.017 $2,767.943 $2,928.523
Total Deposits ($USD Millions)$2,100.313 $2,175.398 $2,187.366
Borrowed Funds ($USD Millions)$220.504 $243.292 $377.107
Nonaccrual Assets ($USD Millions)$15.046 $17.990 $15.840
Nonaccrual Loans / Total Loans (%)0.58% 0.72% 0.66%
ACL / Loans (%)1.18% 1.18% 1.22%
CET1 Ratio (%)13.90% 13.87% 13.96%
Leverage Ratio (%)12.22% 12.32% 12.50%
Funding + Cash / Uninsured Deposits (%)182.5% 168.8% 176.3%
Dividend per Share (QTD) ($)$0.13 $0.14 $0.14

Non-GAAP Adjustments (Q2 2025)

MetricGAAPAdjustmentsNon-GAAP
Net Income ($USD Millions)$16.491 -$2.036 (securities reserve release), -$3.509 (net securities gains), +$1.301 tax adj $12.247
Diluted EPS ($)$1.61 Net of above adjustments $1.20
ROA (%)2.51% 1.86%
ROE (%)21.15% 15.70%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per Share (Quarterly)Q2 2025$0.14 (Q1 2025) $0.14 (declared May 22, 2025) Maintained
Branch NetworkFall 202521 branches (Q1/Q4) Opening Madison, NJ (22nd branch) Raised (expansion)
Formal Financial Guidance2025None disclosed None disclosed; qualitative optimism re potential rate cuts Maintained (no numeric guidance)

Earnings Call Themes & Trends

Note: No earnings call transcript was available for Q2 2025 in our document repository.

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Macro/Rates & NIMCost of funds decreased; NIM 4.37% (Q4); NIM rose to 4.46% (Q1) NIM 4.49%; management notes market anticipating additional rate cuts Improving NIM; potential tailwind from rate cuts
Credit QualityNonaccrual assets 0.57% of assets (Q4); rose to 0.65% (Q1) Nonaccrual assets down to 0.54% of assets; nonaccrual loans/loans 0.66% Stabilizing to improving
Patriot National PositionQ4: $0.9M AFS impairment; Q1: modification and partial conversion to equity Sold 4.4M shares; $3.5M realized gain; $2.0M reserve release Resolved; positive one-time
Growth & FootprintQ4/Q1: steady growth; no new branches announced New Madison branch announced (22nd) Expansion
Capital ActionsQ4: buybacks paused; FY24 repurchases; Q1: no repurchases Repurchased 50,000 shares (avg. $38.78) Resumed buybacks

Management Commentary

  • “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.” — James A. Hughes, President & CEO .
  • “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… 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… Net interest margin expanded 3 basis points to 4.49% in the second quarter.” .
  • “Loan demand continues to be strong due to robust economic growth in our footprint… the market is anticipating additional rate cuts this year.” .

Q&A Highlights

  • No published earnings call transcript or Q&A was available for Q2 2025 from our sources.

Estimates Context

  • Q2 2025 beat on EPS and revenue versus S&P Global consensus: EPS $1.61 vs $1.18*, revenue $34.55M vs $30.30M*, primarily due to the $3.5M realized securities gain and $2.0M securities reserve release tied to Patriot National Bancorp *.
  • Underlying non-GAAP diluted EPS was $1.20; analysts may adjust models to normalize one-time items while acknowledging NIM expansion and steady credit *.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Headline beat driven by one-time Patriot-related gains; underlying non-GAAP EPS of $1.20 provides a cleaner run-rate baseline for forward modeling .
  • Core trends favorable: NIM expanded to 4.49% and net interest income rose sequentially; asset yields continued to improve .
  • Credit quality steady/improving: nonaccrual ratios improved and ACL coverage increased; annualized net charge-offs remained low (-0.06% of average loans) .
  • Funding profile warrants monitoring: FHLB borrowings increased to $377.1M; however, liquidity coverage of uninsured deposits remained robust at 176.3% .
  • Loan growth broadened in commercial and residential mortgages while residential construction declined; pipeline described as “robust” heading into H2 .
  • Capital returns resumed (50k shares repurchased) and dividend maintained at $0.14; capital ratios remain comfortably above well-capitalized levels .
  • Near-term trading implication: stock may have reacted to headline EPS/revenue beats; medium-term thesis should focus on sustainability of NIM, organic loan growth, deposit mix/cost, and any further Patriot-related effects on non-GAAP normalization .