Unity's Net Interest Margin Expansion Accelerates
Net interest income rose to $34.3 million as the margin widened 11 bps to 4.67%, after a 3 bps gain in the prior quarter.
Unity Bancorp (UNTY), a New Jersey–headquartered bank with about $3.3 billion in assets, expanded its net interest margin 11 bps to 4.67% in the quarter ended September 30, 2026, a faster widening than the 3 bps gain in the prior quarter.
Net interest income, the primary earnings driver, rose $2.5 million to $34.3 million. The increase was primarily driven by higher earning-asset yields from strong loan originations and the repricing of existing loans, while recovery efforts reduced nonaccrual balances and lifted recoveries. A year earlier, net interest income was $29.9 million.
Total loans grew 3.6% sequentially to $2.78 billion. Commercial loans were $1.72 billion, up 13.1% from December 31, 2025, and residential construction loans were $108.1 million, up 47.6% from year-end. Total deposits grew 3.9% to $2.56 billion. Noninterest-bearing demand deposits were 19.3% of the mix. Borrowed funds, entirely FHLB, were $251.1 million.
The provision for credit losses on loans was $0.9 million, down from $1.0 million in the second quarter, still attributed primarily to loan growth. Nonaccrual assets including OREO fell 30.2% to $24.1 million. Nonaccrual loans to total loans declined to 0.81% from 1.23%. In the third quarter, the company entered a transaction on a $15.5 million commercial real estate relationship that had gone nonaccrual in December 2025, provided financing for about 80% of the transaction, and reduced reported nonaccrual loans by $3.1 million of cash received. The isolated relationship accounts for nearly half of nonaccrual assets.
Noninterest income was $2.4 million. The $0.5 million increase was primarily due to a decrease in recognized unrealized losses; net securities losses narrowed to $248 thousand from $643 thousand. Noninterest expense was $15.6 million, including a $769 thousand one-time pre-tax expense from a Supplemental Executive Retirement Plan amendment, a $405 thousand probable broker fee tied to the CRE transaction, and $133 thousand of accelerated director stock vesting. The efficiency ratio was 42.28%.
The effective tax rate was 13.1%. Unity purchased $27.6 million of transferable federal investment tax credits and $0.6 million of state credits, producing $2.6 million of tax savings and a $2.5 million earnings benefit. Net income was $17.4 million, or $1.70 a share.
Shareholders’ equity was $388.5 million. Book value per common share was $38.59. The Common Equity Tier 1 ratio was 14.46% and the leverage ratio was 13.22%. Cash and cash equivalents were $230.1 million. In August, the company raised its cash dividend 6% to $0.17 a share, after an 8% increase in the first quarter.
CEO James A. Hughes is scheduled to retire effective March 31, 2027, with President George Boyan succeeding him as chief executive on April 1, 2027.