UNB 10-Q
Union Bankshares Inc (UNB)
10-Q
2025-08-13
For: 2025-06-30
View Original
Added on
April 09, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2025
Commission file number: 001-15985
Registrant’s telephone number: 802 -888-6600
Former name, former address and former fiscal year, if changed since last report: Not applicable
Securities registered pursuant to section 12(b) of the Act:
| (Title of class) | (Trading Symbol) | (Exchanges registered on) | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☒ | Smaller reporting company | ||||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of July 25, 2025.
| Common Stock, $2 par value | shares | |||||||||||||
UNION BANKSHARES, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
| PART II OTHER INFORMATION | |||||
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| June 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| Assets | (Dollars in thousands) | |||||||
| Cash and due from banks | $ | $ | ||||||
| Federal funds sold and overnight deposits | ||||||||
| Cash and cash equivalents | ||||||||
| Interest bearing deposits in banks | ||||||||
| Investment securities available-for-sale | ||||||||
| Other investments | ||||||||
| Total investments | ||||||||
| Loans held for sale | ||||||||
| Loans | ||||||||
| Allowance for credit losses on loans | ( | ( | ||||||
| Net deferred loan costs | ||||||||
| Net loans | ||||||||
| Premises and equipment, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities | ||||||||
| Deposits | ||||||||
| Noninterest bearing | $ | $ | ||||||
| Interest bearing | ||||||||
| Time | ||||||||
| Total deposits | ||||||||
| Borrowed funds | ||||||||
| Subordinated notes | ||||||||
| Accrued interest and other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
Common stock, $ issued at June 30, 2025 and | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
Treasury stock at cost; and | ( | ( | ||||||
| Accumulated other comprehensive loss | ( | ( | ||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 1
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| Interest and dividend income | (Dollars in thousands, except per share data) | |||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | ||||||||||
| Interest on debt securities: | ||||||||||||||
| Taxable | ||||||||||||||
| Tax exempt | ||||||||||||||
| Dividends | ||||||||||||||
| Interest on federal funds sold and overnight deposits | ||||||||||||||
| Interest on interest bearing deposits in banks | ||||||||||||||
| Total interest and dividend income | ||||||||||||||
| Interest expense | ||||||||||||||
| Interest on deposits | ||||||||||||||
| Interest on borrowed funds | ||||||||||||||
| Interest on subordinated notes | ||||||||||||||
| Total interest expense | ||||||||||||||
| Net interest income | ||||||||||||||
| Credit loss expense | ||||||||||||||
| Net interest income after credit loss expense | ||||||||||||||
| Noninterest income | ||||||||||||||
| Wealth management income | ||||||||||||||
| Service fees | ||||||||||||||
| Net gains on sales of loans held for sale | ||||||||||||||
| Net gains on other investments | ||||||||||||||
| Other income | ||||||||||||||
| Total noninterest income | ||||||||||||||
| Noninterest expenses | ||||||||||||||
| Salaries and wages | ||||||||||||||
| Employee benefits | ||||||||||||||
| Occupancy expense, net | ||||||||||||||
| Equipment expense | ||||||||||||||
| Other expenses | ||||||||||||||
| Total noninterest expenses | ||||||||||||||
| Income before provision for income taxes | ||||||||||||||
Provision for income taxes | ||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||
| Basic earnings per common share | $ | $ | $ | $ | ||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | ||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||
| Weighted average common and potential common shares for diluted EPS | ||||||||||||||
| Dividends per common share | $ | $ | $ | $ | ||||||||||
See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 2
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (Dollars in thousands) | ||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||
| Net unrealized holding gains (losses) arising during the period on investment securities available-for-sale | ( | ( | ||||||||||||
| Total other comprehensive income (loss) | ( | ( | ||||||||||||
| Total comprehensive income | $ | $ | $ | $ | ||||||||||
See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 3
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
| Three Month Periods Ended June 30, 2025 and 2024 | |||||||||||||||||||||||
| Common Stock | Accumulated other comprehensive loss | ||||||||||||||||||||||
| Shares, net of treasury | Amount | Additional paid-in capital | Retained earnings | Treasury stock | Total stockholders’ equity | ||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| Balances March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||
| Dividend reinvestment plan | — | — | — | ||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||
| Stock based compensation expense | — | — | — | ||||||||||||||||||||
| Common stock issued, net of issuance costs | — | — | — | ||||||||||||||||||||
| Balances, June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
| Balances March 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | ( | ||||||||||||||||
| Dividend reinvestment plan | — | — | — | ||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||
| Stock based compensation expense | — | — | — | ||||||||||||||||||||
| Balances, June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
| Six Month Periods Ended June 30, 2025 and 2024 | |||||||||||||||||||||||
| Common Stock | Accumulated other comprehensive loss | ||||||||||||||||||||||
| Shares, net of treasury | Amount | Additional paid-in capital | Retained earnings | Treasury stock | Total stockholders’ equity | ||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| Balances, December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||
| Dividend reinvestment plan | — | — | — | ||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||
| Stock based compensation expense | — | — | — | ||||||||||||||||||||
| Common stock issued, net of issuance costs | |||||||||||||||||||||||
| Balances, June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | ( | ||||||||||||||||
| Dividend reinvestment plan | — | — | — | ||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||
| Stock based compensation expense | — | — | — | ||||||||||||||||||||
| Balances, June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||
See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 4
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows From Operating Activities | (Dollars in thousands) | |||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Credit loss expense | ||||||||
| Deferred income tax provision | ||||||||
| Net amortization of premiums on investment securities | ||||||||
| Equity in losses of limited partnerships | ||||||||
| Stock based compensation expense | ||||||||
| Net decrease (increase) in unamortized loan costs | ( | |||||||
| Proceeds from sales of loans held for sale | ||||||||
| Origination of loans held for sale | ( | ( | ||||||
| Net gains on sales of loans held for sale | ( | ( | ||||||
| Net gains on disposals of premises and equipment | ( | |||||||
| Net gains on other investments | ( | ( | ||||||
| Decrease in accrued interest receivable | ||||||||
| Amortization of debt issuance costs | ||||||||
| Increase in other assets | ( | ( | ||||||
| Increase in other liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash Flows From Investing Activities | ||||||||
| Interest bearing deposits in banks | ||||||||
| Proceeds from maturities and redemptions | ||||||||
| Purchases | ( | ( | ||||||
| Investment securities available-for-sale | ||||||||
| Proceeds from maturities, calls and paydowns | ||||||||
| Purchases | ( | |||||||
| Net purchases of other investments | ( | ( | ||||||
| Net increase in nonmarketable stock | ( | ( | ||||||
| Net decrease in loans | ||||||||
| Recoveries of loans charged off | ||||||||
| Net purchases of premises and equipment | ( | ( | ||||||
| Proceeds from Company-owned life insurance death benefit | ||||||||
| Investments in limited partnerships | ( | ( | ||||||
| Proceeds from sales of premises and equipment | ||||||||
| Net cash provided in investing activities | ||||||||
Union Bankshares, Inc. Page 5
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows From Financing Activities | (Dollars in thousands) | |||||||
| Advances on long-term borrowings | ||||||||
| Repayment of long-term borrowings | ( | ( | ||||||
| Net increase in short-term borrowings outstanding | ||||||||
| Net decrease in noninterest bearing deposits | ( | ( | ||||||
| Net decrease in interest bearing deposits | ( | ( | ||||||
| Net increase (decrease) in time deposits | ( | |||||||
| Proceeds from issuance of common stock, net of issuance costs | ||||||||
| Dividends paid | ( | ( | ||||||
| Net cash used by financing activities | ( | ( | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | |||||||
| Cash and cash equivalents | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Supplemental Schedule of Noncash Investing Activities | ||||||||
| Investment in limited partnerships acquired by capital contributions payable | $ | $ | ||||||
| Dividends paid on Common Stock: | ||||||||
| Dividends declared | $ | $ | ||||||
| Dividends reinvested | ( | ( | ||||||
| $ | $ | |||||||
See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 6
UNION BANKSHARES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Union Bankshares, Inc. and Subsidiary (together, the Company) as of June 30, 2025, and for the three and six months ended June 30, 2025 and 2024, have been prepared in conformity with GAAP for interim financial information, general practices within the banking industry, and the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Annual Report). The Company's sole subsidiary is Union Bank. In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments and disclosures necessary for a fair presentation of the information contained herein, have been made. This information should be read in conjunction with the Company’s 2024 Annual Report. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2025, or any future interim period.
The Company is a “smaller reporting company” and as permitted under the rules and regulations of the SEC, has elected to provide its consolidated statements of income, comprehensive income, cash flows and changes in stockholders’ equity for a two year, rather than three year, period. The Company has also elected to provide certain other scaled disclosures in this report, as permitted for smaller reporting companies. Certain amounts in the 2024 consolidated financial statements have been reclassified to conform to the current year presentation.
In addition to the definitions set forth elsewhere in this report, the acronyms, abbreviations and capitalized terms identified below are used throughout this Form 10-Q, including Part I. "Financial Information" and Part II. "Other Information". The following is provided to aid the reader and provide a reference page when reviewing this Form 10-Q.
| ACL: | Allowance for credit losses | FHLMC/Freddie Mac: | Federal Home Loan Mortgage Corporation | ||||||||
| AFS: | Available-for-sale | GAAP: | Generally accepted accounting principles in the United States | ||||||||
| ASC: | Accounting Standards Codification | HTM: | Held-to-maturity | ||||||||
| ASU: | Accounting Standards Update | ICS: | Insured Cash Sweeps of the IntraFi Network | ||||||||
| Board: | Board of Directors | MBS: | Mortgage-backed security | ||||||||
| bp or bps: | Basis point(s) | MSRs: | Mortgage servicing rights | ||||||||
| CDARS: | Certificate of Deposit Accounts Registry Service of the IntraFi Network | OAO: | Other assets owned | ||||||||
| CECL: | Current expected credit loss | OCI: | Other comprehensive income | ||||||||
| Company: | Union Bankshares, Inc. and Subsidiary | OREO: | Other real estate owned | ||||||||
DCF: | Discounted cash flow | RSU: | Restricted stock unit | ||||||||
| DRIP: | Dividend Reinvestment and Stock Purchase Plan | SBA: | U.S. Small Business Administration | ||||||||
| EPS: | Earnings per share | SEC: | U.S. Securities and Exchange Commission | ||||||||
| FASB: | Financial Accounting Standards Board | Union: | Union Bank, the sole subsidiary of Union Bankshares, Inc | ||||||||
| FDIC: | Federal Deposit Insurance Corporation | USDA: | U.S. Department of Agriculture | ||||||||
| FDICIA: | The Federal Deposit Insurance Corporation Improvement Act of 1991 | 2014 Equity Plan: | 2014 Equity Incentive Plan, as amended | ||||||||
| FHLB: | Federal Home Loan Bank of Boston | 2024 Equity Plan: | 2024 Equity Incentive Plan | ||||||||
| FRB | Federal Reserve Bank of Boston | 2024 Annual Report: | Annual Report on Form 10-K for the year ended December 31, 2024 | ||||||||
Note 2. Legal Contingencies
In the normal course of business, the Company is involved in various legal and other proceedings. In the opinion of management, any liability resulting from such proceedings is not expected to have a material adverse effect on the Company’s consolidated financial condition or results of operations.
Union Bankshares, Inc. Page 7
Note 3. Per Share Information
The following table presents the reconciliation between the calculation of basic EPS and diluted EPS for the three and six months ended June 30, 2025 and 2024:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||
| Weighted average common shares outstanding for basic EPS | ||||||||||||||
| Dilutive effect of stock-based awards (1) | ||||||||||||||
| Weighted average common and potential common shares for diluted EPS | ||||||||||||||
| Earnings per common share: | ||||||||||||||
| Basic EPS | $ | $ | $ | $ | ||||||||||
| Diluted EPS | $ | $ | $ | $ | ||||||||||
(1)Dilutive effect of stock based awards represents the effect of assumed vesting of all outstanding equity compensation awards, which currently consist solely of restricted stock units to be settled in common stock. Unvested awards do not have dividend or dividend equivalent rights.
Note 4. Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. This ASU requires public entities, such as the Company, to provide enhanced disclosures on the amount of income taxes paid, disaggregated by type and jurisdiction. The ASU is effective for the Company for 2025 and subsequent annual periods, including interim periods within those annual periods, and is not expected to have a material impact on the Company's consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Under ASU No. 2024-03, public business entities, such as the Company, will be required to disclose in the notes to their financial statements disaggregated information about certain costs and expenses in both annual and interim filings. ASU 2024-03 is effective for the Company for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods, and is not expected to have a material impact on the Company's consolidated financial statements.
Note 5. Investment Securities
Debt securities AFS as of the balance sheet dates consisted of the following:
| June 30, 2025 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||
| (Dollars in thousands) | ||||||||||||||
| U.S. Government-sponsored enterprises | $ | $ | $ | ( | $ | |||||||||
| Agency mortgage-backed | ( | |||||||||||||
| State and political subdivisions | ( | |||||||||||||
| Corporate | ( | |||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||
Union Bankshares, Inc. Page 8
| December 31, 2024 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||
| (Dollars in thousands) | ||||||||||||||
| U.S. Government-sponsored enterprises | $ | $ | $ | ( | $ | |||||||||
| Agency mortgage-backed | ( | |||||||||||||
| State and political subdivisions | ( | |||||||||||||
| Corporate | ( | |||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||
There were no 91.9 million and $96.0 million, respectively, were pledged as collateral for FHLB borrowings and other credit subject to collateralization, public unit deposits or for other purposes as required or permitted by law. Investment securities AFS pledged as collateral for discount window borrowings at the FRB consisted of U.S. government-sponsored enterprises and Agency MBS with a fair value of $9.5 million and $9.7 million at June 30, 2025 and December 31, 2024, respectively.
The amortized cost and estimated fair value of debt securities by contractual scheduled maturity as of June 30, 2025 were as follows:
| Amortized Cost | Fair Value | |||||||
| Available-for-sale | (Dollars in thousands) | |||||||
| Due in one year or less | $ | $ | ||||||
| Due from one to five years | ||||||||
| Due from five to ten years | ||||||||
| Due after ten years | ||||||||
| Agency mortgage-backed | ||||||||
| Total debt securities available-for-sale | $ | $ | ||||||
Actual maturities may differ for certain debt securities that may be called by the issuer prior to the contractual maturity. Actual maturities usually differ from contractual maturities on agency MBS because the mortgages underlying the securities may be prepaid, usually without any penalties. Therefore, these agency MBS are shown separately and are not included in the contractual maturity categories in the above maturity summary.
Information pertaining to all AFS debt securities with gross unrealized losses, for which an ACL has not been recorded, as of the balance sheet dates, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
| June 30, 2025 | Less Than 12 Months | 12 Months and over | Total | ||||||||||||||||||||||||||
| Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| U.S. Government- sponsored enterprises | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
| Agency mortgage-backed | ( | ( | ( | ||||||||||||||||||||||||||
| State and political subdivisions | ( | ( | ( | ||||||||||||||||||||||||||
| Corporate | ( | ( | ( | ||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Union Bankshares, Inc. Page 9
| December 31, 2024 | Less Than 12 Months | 12 Months and over | Total | ||||||||||||||||||||||||||
| Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| U.S. Government- sponsored enterprises | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
| Agency mortgage-backed | ( | ( | ( | ||||||||||||||||||||||||||
| State and political subdivisions | ( | ( | ( | ||||||||||||||||||||||||||
| Corporate | ( | ( | ( | ||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For AFS debt securities in an unrealized loss position, management first assesses whether it intends to sell, or it is more likely than not that the Company will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For AFS debt securities that do not meet the above criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, management compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an ACL is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. For AFS debt securities, any decline in fair value that has not been recorded through an ACL is recognized in other comprehensive income (loss), net of applicable taxes.
There were no
Note 6. Loans
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their unpaid principal balances, adjusted for any charge-offs, the ACL, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.
Loan interest income is accrued daily on outstanding balances. The following accounting policies, related to accrual and nonaccrual loans, apply to all portfolio segments and loan classes, which the Company considers to be the same. The accrual of interest is normally discontinued when a loan is specifically determined to be impaired and/or management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is doubtful. In general, loans that are 90 days or more past due are placed in nonaccrual, unless there are circumstances that cause management to believe the collection of interest is not doubtful. Generally, any unpaid interest previously accrued on those loans is reversed against current period interest income. A loan may be restored to accrual status when its financial status has significantly improved and there is no principal or interest past due. A loan may also be restored to accrual status if the borrower makes six consecutive monthly payments or the lump sum equivalent. Income on nonaccrual loans is generally not recognized unless a loan is returned to accrual status or after all principal has been collected. Interest payments received on such loans are generally applied as a reduction of the loan principal balance. Delinquency status is determined based on contractual terms for all portfolio segments and loan classes. Loans past due 30 days or more are considered delinquent. Loans are considered in process of foreclosure when a judgment of foreclosure has been issued by the court.
Loan origination fees and direct loan origination costs are deferred and amortized as an adjustment of the related loan's yield using methods that approximate the interest method. The Company generally amortizes these amounts over the estimated average life of the related loans.
The Company evaluates the risk characteristics of its loans based on regulatory call report code with segmentation based on the underlying collateral or purpose for certain loan types.
Union Bankshares, Inc. Page 10
The composition of Net loans as of the balance sheet dates, by regulatory call report code segmentation based on underlying collateral or purpose for certain loan types, was as follows:
| June 30, 2025 | December 31, 2024 | |||||||
| Residential real estate | (Dollars in thousands) | |||||||
| Non-revolving residential real estate | $ | $ | ||||||
| Revolving residential real estate | ||||||||
| Construction real estate | ||||||||
| Commercial construction real estate | ||||||||
| Residential construction real estate | ||||||||
| Commercial real estate | ||||||||
| Non-residential commercial real estate | ||||||||
| Multi-family residential real estate | ||||||||
| Commercial | ||||||||
| Consumer | ||||||||
| Municipal | ||||||||
| Gross loans | ||||||||
| ACL on loans | ( | ( | ||||||
| Net deferred loan costs | ||||||||
| Net loans | $ | $ | ||||||
Qualifying residential first mortgage loans and certain commercial real estate loans with an aggregate carrying value of $488.3 million and $394.5 million were pledged as collateral for borrowings from the FHLB under a blanket lien at June 30, 2025 and December 31, 2024, respectively.
Accrued interest receivable on loans totaled $4.3 million and $5.2 million at June 30, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses described in Note 7.
Note 7. Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures
The level of the ACL on loans represents management's estimate of expected credit losses over the expected life of the loans at the balance sheet date. For all loan segments, loan losses are charged against the ACL on loans when management believes the loan balance is uncollectible or in accordance with federal guidelines. Subsequent recoveries, if any, are credited to the ACL on loans.
The ACL on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. The ACL on loans is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis, generally larger non-accruing commercial loans.
The Company uses the DCF method to estimate expected credit losses for all loan pools. For each of the loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, and loss rates. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical benchmark data.
The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime loss rates. This analysis also determines how expected loss rates will react to forecasted levels of the loss drivers. For all loan pools utilizing the DCF method, management utilizes and forecasts national unemployment as a loss driver.
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four -quarter forecast period.
The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level that represents the sum of expected losses to determine the estimated ACL on loans.
Union Bankshares, Inc. Page 11
The ACL on loans evaluation also considers various qualitative factors, including changes in policy and/or underwriting standards, actual or expected changes in economic trends and conditions, changes in the nature and volume of the portfolio, changes in credit and lending staff/administration, problem loan trends, credit risk concentrations, loan review results, changes in the value of underlying collateral for loans, and changes in the regulatory and business environment.
Certain loans are individually evaluated for estimated credit losses, including those greater than $500 thousand that are classified as substandard or doubtful and are on nonaccrual or that have other unique characteristics differing from the segment. Specific reserves are established when appropriate for such loans based on the present value of expected future cash flows of the loan or the estimated realizable value of the collateral, if any.
Risk characteristics relevant to each portfolio segment are as follows:
•Residential real estate - Loans in this segment are collateralized by owner-occupied 1-4 family residential real estate, second and vacation homes, 1-4 family investment properties, home equity and second mortgage loans. Repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, could have an effect on the credit quality of this segment.
•Construction real estate - Loans in this segment include residential and commercial construction properties, commercial real estate development loans (while in the construction phase of the projects), land and land development loans. Repayment is dependent on the credit quality of the individual borrower and/or the underlying cash flows generated by the properties being constructed. The overall health of the economy, including unemployment rates, housing prices, vacancy rates and material costs, could have an effect on the credit quality of this segment.
•Commercial real estate - Loans in this segment are primarily properties occupied by businesses or income-producing properties. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by a general slowdown in business or increased vacancy rates which, in turn, could have an effect on the credit quality of this segment. Management requests business financial statements at least annually and monitors the cash flows of these loans.
•Commercial - Loans in this segment are made to businesses and are generally secured by non-real estate assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer or business spending, could have an effect on the credit quality of this segment.
•Consumer - Loans in this segment are made to individuals for personal expenditures, such as automobile purchases, and include unsecured loans. Repayment is primarily dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment, could have an effect on the credit quality of this segment.
•Municipal - Loans in this segment are made to municipalities located within the Company's service area. Repayment is primarily dependent on taxes or other funds collected by the municipalities. Management considers there to be minimal risk surrounding the credit quality of this segment.
Union Bankshares, Inc. Page 12
Changes in the ACL on loans, by loan segment, for the three and six months ended June 30, 2025 and 2024 were as follows:
| For The Three Months Ended June 30, 2025 | Balance, March 31, 2025 | Charge-Offs | Recoveries | Credit Loss Expense (Benefit) | Balance, June 30, 2025 | ||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Non-revolving residential real estate | $ | $ | $ | $ | $ | ||||||||||||
| Revolving residential real estate | |||||||||||||||||
| Residential real estate | |||||||||||||||||
| Commercial construction real estate | |||||||||||||||||
| Residential construction real estate | |||||||||||||||||
| Construction real estate | |||||||||||||||||
| Non-residential commercial real estate | ( | ||||||||||||||||
| Multi-family residential real estate | |||||||||||||||||
| Commercial real estate | ( | ||||||||||||||||
| Commercial | |||||||||||||||||
| Consumer | ( | ||||||||||||||||
| Municipal | ( | ||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||
| For The Six Months Ended June 30, 2025 | Balance, December 31, 2024 | Charge-Offs | Recoveries | Credit Loss Expense (Benefit) | Balance, June 30, 2025 | ||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Non-revolving residential real estate | $ | $ | $ | $ | ( | $ | |||||||||||
| Revolving residential real estate | ( | ||||||||||||||||
| Residential real estate | ( | ||||||||||||||||
| Commercial construction real estate | |||||||||||||||||
| Residential construction real estate | |||||||||||||||||
| Construction real estate | |||||||||||||||||
| Non-residential commercial real estate | |||||||||||||||||
| Multi-family residential real estate | |||||||||||||||||
| Commercial real estate | |||||||||||||||||
| Commercial | |||||||||||||||||
| Consumer | ( | ||||||||||||||||
| Municipal | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | |||||||||||
Union Bankshares, Inc. Page 13
| For The Three Months Ended June 30, 2024 | Balance, March 31, 2024 | Charge-Offs | Recoveries | Credit Loss Expense (Benefit) | Balance, June 30, 2024 | ||||||||||||
(Dollars in thousands) | |||||||||||||||||
| Non-revolving residential real estate | $ | $ | $ | $ | $ | ||||||||||||
| Revolving residential real estate | |||||||||||||||||
| Residential real estate | |||||||||||||||||
| Commercial construction real estate | |||||||||||||||||
| Residential construction real estate | ( | ||||||||||||||||
| Construction real estate | |||||||||||||||||
| Non-residential commercial real estate | |||||||||||||||||
| Multi-family residential real estate | ( | ||||||||||||||||
| Commercial real estate | |||||||||||||||||
| Commercial | |||||||||||||||||
| Consumer | ( | ||||||||||||||||
| Municipal | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | |||||||||||
| For The Six Months Ended June 30, 2024 | Balance, December 31, 2023 | Charge-Offs | Recoveries | Credit Loss Expense (Benefit) | Balance, June 30, 2024 | ||||||||||||
(Dollars in thousands) | |||||||||||||||||
| Non-revolving residential real estate | $ | $ | $ | $ | $ | ||||||||||||
| Revolving residential real estate | |||||||||||||||||
| Residential real estate | |||||||||||||||||
| Commercial construction real estate | ( | ||||||||||||||||
| Residential construction real estate | ( | ||||||||||||||||
| Construction real estate | ( | ||||||||||||||||
| Non-residential commercial real estate | |||||||||||||||||
| Multi-family residential real estate | ( | ||||||||||||||||
| Commercial real estate | |||||||||||||||||
| Commercial | ( | ||||||||||||||||
| Consumer | ( | ||||||||||||||||
| Municipal | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | |||||||||||
Union Bankshares, Inc. Page 14
The Company's ACL on off-balance sheet credit exposures is recognized as a liability within Accrued interest and other liabilities on the consolidated balance sheets, with adjustments to the ACL recognized in Credit loss expense (benefit) in the consolidated statements of income. The activity in the ACL on off-balance sheet credit exposures for the three and six months ended June 30, 2025 and 2024 was as follows:
| For The Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| ACL on Off-Balance Sheet Credit Exposures | (Dollars in thousands) | |||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | ||||||||||
| Credit loss expense (benefit) | ( | ( | ||||||||||||
| Balance at end of period | $ | $ | $ | $ | ||||||||||
Risk and collateral ratings are assigned to loans and are subject to ongoing monitoring by lending and credit personnel, with such ratings updated annually or more frequently if warranted. The following is an overview of the Company's loan rating system:
1-3 Rating - Pass
Risk-rating grades "1" through "3" comprise those loans ranging from those with lower than average credit risk, defined as borrowers with high liquidity, excellent financial condition, strong management, favorable industry trends or loans secured by highly liquid assets, through those with marginal credit risk, defined as borrowers that, while creditworthy, exhibit some characteristics requiring special attention by the account officer.
4-4.5 Rating - Satisfactory/Monitor
Borrowers exhibit potential credit weaknesses or downward trends warranting management's attention. While potentially weak, these borrowers are currently marginally acceptable; no loss of principal or interest is envisioned. When warranted, these credits may be monitored on the watch list.
5-7 Rating - Substandard
Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. The loan may be inadequately protected by the net worth and paying capacity of the obligor and/or the underlying collateral is inadequate.
Union Bankshares, Inc. Page 15
The following tables summarize the Company's loans by year of origination and by loan ratings applied by management to the Company's loans by segment as of June 30, 2025 and December 31, 2024:
| June 30, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving | Total | ||||||||||||||||||
| Residential Real Estate | (Dollars in thousands) | |||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-revolving residential real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Revolving residential real estate | ||||||||||||||||||||||||||
| Construction Real Estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Commercial construction real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Residential construction real estate | ||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-residential commercial real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Multi-family residential real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Municipal | ||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Union Bankshares, Inc. Page 16
| December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving | Total | ||||||||||||||||||
| Residential Real Estate | (Dollars in thousands) | |||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-revolving residential real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Revolving residential real estate | ||||||||||||||||||||||||||
| Construction Real Estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Commercial construction real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Residential construction real estate | ||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-residential commercial real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Multi-family residential real estate | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Satisfactory/Monitor | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Municipal | ||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
There were no gross charge-offs for the three months ended June 30, 2025. Gross charge-offs for the six months ended June 30, 2025 consisted of two consumer loans totaling $4 thousand that were originated in 2023. Gross charge-offs for the three and six months ended June 30, 2024 consisted of one 1
Union Bankshares, Inc. Page 17
A summary of current and past due loans as of June 30, 2025 and December 31, 2024 follows:
| June 30, 2025 | 30-59 Days | 60-89 Days | 90 Days and Over | Total Past Due | Current | Total | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Residential real estate | ||||||||||||||||||||
| Non-revolving residential real estate | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Revolving residential real estate | ||||||||||||||||||||
| Construction real estate | ||||||||||||||||||||
| Commercial construction real estate | ||||||||||||||||||||
| Residential construction real estate | ||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||
| Non-residential commercial real estate | ||||||||||||||||||||
| Multi-family residential real estate | ||||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Municipal | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||
| December 31, 2024 | 30-59 Days | 60-89 Days | 90 Days and Over | Total Past Due | Current | Total | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Residential real estate | ||||||||||||||||||||
| Non-revolving residential real estate | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Revolving residential real estate | ||||||||||||||||||||
| Construction real estate | ||||||||||||||||||||
| Commercial construction real estate | ||||||||||||||||||||
| Residential construction real estate | ||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||
| Non-residential commercial real estate | ||||||||||||||||||||
| Multi-family residential real estate | ||||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Municipal | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||
A summary of nonaccrual loans as of June 30, 2025 and December 31, 2024 follows:
| June 30, 2025 | Nonaccrual | Nonaccrual With No Allowance for Credit Losses | 90 Days and Over and Accruing | ||||||||
| Residential real estate | (Dollars in thousands) | ||||||||||
| Non-revolving residential real estate | $ | $ | $ | ||||||||
| Revolving residential real estate | |||||||||||
| Construction real estate | |||||||||||
| Commercial construction real estate | |||||||||||
| Commercial real estate | |||||||||||
| Non-residential commercial real estate | |||||||||||
| Commercial | |||||||||||
| Total | $ | $ | $ | ||||||||
Union Bankshares, Inc. Page 18
| December 31, 2024 | Nonaccrual | Nonaccrual With No Allowance for Credit Losses | 90 Days and Over and Accruing | ||||||||
| Residential real estate | (Dollars in thousands) | ||||||||||
| Non-revolving residential real estate | $ | $ | $ | ||||||||
| Commercial real estate | |||||||||||
| Non-residential commercial real estate | |||||||||||
| Total | $ | $ | $ | ||||||||
There were no loans in process of foreclosure at June 30, 2025 and one residential real estate loan totaling $8 thousand in process of foreclosure at December 31, 2024. Aggregate interest on nonaccrual loans not recognized was $645 thousand as of June 30, 2025 and $235 thousand as of December 31, 2024.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans that are individually evaluated and collateral dependent represent loans that the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the sale of the collateral. For these loans, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan at the measurement date.
The following table presents collateral dependent loans to borrowers experiencing financial difficulty by loan class and collateral type as of the balance sheet dates:
| June 30, 2025 | December 31, 2024 | |||||||
| (Dollars in thousands) | ||||||||
| Commercial construction real estate | $ | $ | ||||||
| Non-residential commercial real estate | ||||||||
| Commercial | ||||||||
| Total | $ | $ | ||||||
Collateral dependent loans are loans for which the repayment is expected to be provided substantially by the underlying collateral and there are no other available and reliable sources of repayment.
Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing interest rate reductions, term extensions, payment deferrals or principal forgiveness. When principal forgiveness is provided, the amount of forgiveness is charged off against the ACL on loans. The following tables summarize loan modifications to borrowers experiencing financial difficulty by loan class, type of modification and the financial effect of the modifications as of and for the three and six months ended June 30, 2025 and 2024.
| Payment Delay | |||||||||||||||||
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | ||||||||||||||||
| Amortized Cost Basis | % of Loan Class | Amortized Cost Basis | % of Loan Class | Financial Effect | |||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Commercial construction real estate | $ | % | $ | % | Modification extended loan draw period | ||||||||||||
Union Bankshares, Inc. Page 19
| Payment Delay | |||||||||||||||||
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | ||||||||||||||||
| Amortized Cost Basis | % of Loan Class | Amortized Cost Basis | % of Loan Class | Financial Effect | |||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Non-revolving residential real estate | $ | % | $ | % | Modification deferred | ||||||||||||
| Non-residential commercial real estate | % | % | Modification deferred | ||||||||||||||
| Commercial | % | % | Modification deferred | ||||||||||||||
The following tables present the performance of loans as of June 30, 2025 and December 31, 2024 that had been modified in the previous twelve months:
| June 30, 2025 | Current | Past Due 30-89 Days | Past Due 90 Days and Over | ||||||||
| (Dollars in thousands) | |||||||||||
| Commercial construction real estate | $ | $ | $ | ||||||||
| Total | $ | $ | $ | ||||||||
| December 31, 2024 | Current | Past Due 30-89 Days | Past Due 90 Days and Over | ||||||||
| (Dollars in thousands) | |||||||||||
| Non-revolving residential real estate | $ | $ | $ | ||||||||
| Non-residential commercial real estate | |||||||||||
| Commercial | |||||||||||
| Total | $ | $ | $ | ||||||||
There were no
At June 30, 2025 and December 31, 2024, the Company was not committed to lend any additional funds to borrowers experiencing financial difficulty for which the Company modified the terms of the loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension.
Note 8. Stock Based Compensation
Under the Union Bankshares, Inc. 2024 Equity Plan, a total of 250,000 shares of the Company’s common stock have been reserved for equity awards of incentive stock options, nonqualified stock options, restricted stock and RSUs to eligible officers and (except for awards of incentive stock options) nonemployee directors. Shares available for issuance of awards under the 2024 Equity Plan consist of unissued shares of the Company’s common stock and/or shares held in treasury. The 2024 Equity Plan replaces, and is substantially similar to, the Company’s 2014 Equity Plan.
RSUs. Each outstanding RSU represents the right to receive one share of the Company's common stock upon satisfaction of applicable vesting conditions. The general terms of the awards are described in the Company's 2024 Annual Report. Prior to vesting, the RSUs do not earn dividends or dividend equivalents, nor do they bear any voting rights.
Union Bankshares, Inc. Page 20
The following table summarizes the RSUs awarded to Company executives in 2025 under the 2024 Equity Plan, and the number of such RSUs remaining unvested as of June 30, 2025:
| Number of RSUs Granted | Weighted Average Grant Date Fair Value | Number of Unvested RSUs | |||||||||
| 2025 Award | $ | ||||||||||
| Total | |||||||||||
The following table summarizes the RSUs awarded to Company executives in 2023 and 2024 under the 2014 Equity Plan, and the number of such RSUs remaining unvested as of June 30, 2025:
| Number of RSUs Granted | Weighted Average Grant Date Fair Value | Number of Unvested RSUs | |||||||||
| 2023 Award | $ | ||||||||||
| 2024 Award | $ | ||||||||||
| Total | |||||||||||
No new grants will be made under the 2014 Equity Plan.
Unrecognized compensation expense related to the unvested RSUs under both plans as of June 30, 2025 and 2024 was $493 thousand and $554 thousand, respectively, and $393 thousand as of December 31, 2024.
On May 21, 2025, the Company's board of directors, as a component of total director compensation, granted an aggregate of 3,616 RSUs to the Company's non-employee directors under the 2024 Equity Plan. Each RSU represents the right to receive one share of the Company's common stock upon satisfaction of applicable vesting conditions. The RSUs will vest in May 2026, subject to continued board service through the vesting date, other than in the case of the director's death or disability. Prior to vesting, the RSUs do not earn dividends or dividend equivalents, nor do they bear any voting rights. Unrecognized director compensation expense related to the unvested RSUs as of June 30, 2025 was $103 thousand.
Note 9. Subordinated Notes
In August 2021, the Company completed the private placement of $16.5 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2031 (the "Notes") to certain qualified institutional buyers and accredited investors. The Notes initially bear interest, payable semi-annually, at the rate of 3.25 % per annum, until September 1, 2026. From and including September 1, 2026, the interest rate applicable to the outstanding principal amount due will reset quarterly to the then current three-month secured overnight financing rate (SOFR) plus 263 basis points. At its option, the Company may redeem the Notes, in whole or in part, beginning with the interest payment date of September 1, 2026 but not generally prior thereto, and on any scheduled interest payment date thereafter. The Notes qualify as Tier 2 capital instruments for the Company under bank holding company regulatory capital guidelines.
The Company used the proceeds primarily to provide additional Tier 1 capital to the Company's wholly-owned subsidiary, Union Bank, to support its growth and for other general corporate purposes.
The unamortized issuance costs of the Notes were $210 thousand and $227 thousand at June 30, 2025 and December 31, 2024, respectively. The Company recorded $9 17
Note 10. Other Comprehensive Income (Loss)
Accounting principles generally require recognized revenue, expenses, gains and losses be included in net income or loss. Certain changes in assets and liabilities, such as the after tax effect of unrealized gains and losses on investment securities AFS that have not been recorded through an ACL are not reflected in the consolidated statements of income. The cumulative effect of such items, net of tax effect, is reported as a separate component of the equity section of the consolidated balance sheets (Accumulated OCI). OCI, along with net income, comprises the Company's total comprehensive income or loss.
Union Bankshares, Inc. Page 21
As of the balance sheet dates, the components of Accumulated OCI, net of tax, were:
| June 30, 2025 | December 31, 2024 | |||||||
| (Dollars in thousands) | ||||||||
| Net unrealized losses on investment securities AFS | $ | ( | $ | ( | ||||
The following tables disclose the tax effects allocated to each component of OCI for the three and six months ended June 30:
| Three Months Ended | ||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | |||||||||||||||||||
| Before-Tax Amount | Tax Expense | Net-of-Tax Amount | Before-Tax Amount | Tax Benefit | Net-of-Tax Amount | |||||||||||||||
| Investment securities AFS: | (Dollars in thousands) | |||||||||||||||||||
| Net unrealized holding gains (losses) arising during the period on investment securities AFS | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||
| Total other comprehensive income (loss) | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||
| Six Months Ended | ||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | |||||||||||||||||||
| Before-Tax Amount | Tax Expense | Net-of-Tax Amount | Before-Tax Amount | Tax Benefit | Net-of-Tax Amount | |||||||||||||||
| Investment securities AFS: | (Dollars in thousands) | |||||||||||||||||||
| Net unrealized holding gains (losses) arising during the period on investment securities AFS | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||
| Total other comprehensive income (loss) | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||
There were no
Note 11. Fair Value Measurement
The Company utilizes FASB ASC Topic 820, Fair Value Measurement, as guidance for accounting for assets and liabilities carried at fair value. This standard defines fair value as the price that would be received, without adjustment for transaction costs, to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The guidance in FASB ASC Topic 820 establishes a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The three levels of the fair value hierarchy are:
•Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
•Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following is a description of the valuation methodologies used for the Company’s assets that are measured on a recurring basis at estimated fair value:
Investment securities AFS: Certain U.S. Treasury notes have been valued using unadjusted quoted prices from active markets and therefore have been classified as Level 1. However, the majority of the Company’s AFS securities have been valued utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include market maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.
Union Bankshares, Inc. Page 22
Mutual funds: Mutual funds have been valued using unadjusted quoted prices from active markets and therefore have been classified as Level 1.
Assets measured at fair value on a recurring basis at June 30, 2025 and December 31, 2024, segregated by fair value hierarchy level, are summarized below:
| Fair Value Measurements | ||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| June 30, 2025: | (Dollars in thousands) | |||||||||||||
| Debt securities AFS: | ||||||||||||||
| U.S. Government-sponsored enterprises | $ | $ | $ | $ | ||||||||||
| Agency mortgage-backed | ||||||||||||||
| State and political subdivisions | ||||||||||||||
| Corporate | ||||||||||||||
| Total debt securities | $ | $ | $ | $ | ||||||||||
| Other investments: | ||||||||||||||
| Mutual funds | $ | $ | $ | $ | ||||||||||
| December 31, 2024: | ||||||||||||||
| Debt securities AFS: | ||||||||||||||
| U.S. Government-sponsored enterprises | $ | $ | $ | $ | ||||||||||
| Agency mortgage-backed | ||||||||||||||
| State and political subdivisions | ||||||||||||||
| Corporate | ||||||||||||||
| Total debt securities | $ | $ | $ | $ | ||||||||||
| Other investments: | ||||||||||||||
| Mutual funds | $ | $ | $ | $ | ||||||||||
There were no transfers in or out of Levels 1 and 2 during the three and six months ended June 30, 2025 or the year ended December 31, 2024, nor were there any Level 3 assets at any time during these periods. Certain other assets and liabilities are measured at fair value on a nonrecurring basis, that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Assets and liabilities measured at fair value on a nonrecurring basis in periods after initial recognition, such as collateral dependent individually evaluated loans, MSRs and OREO, were not considered material at June 30, 2025 or December 31, 2024. The Company has not elected to apply the fair value method to any financial assets or liabilities other than those situations where other accounting pronouncements require fair value measurements.
FASB ASC Topic 825, Financial Instruments, requires disclosure of the estimated fair value of financial instruments. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Management’s estimates and assumptions are inherently subjective and involve uncertainties and matters of significant judgment. Changes in assumptions could dramatically affect the estimated fair values.
Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments may be excluded from disclosure requirements. Thus, the aggregate fair value amounts presented may not necessarily represent the actual underlying fair value of such instruments of the Company.
Union Bankshares, Inc. Page 23
As of the balance sheet dates, the estimated fair values and related carrying amounts of the Company's significant financial instruments were as follows:
| June 30, 2025 | |||||||||||||||||
| Fair Value Measurements | |||||||||||||||||
| Carrying Amount | Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Financial assets | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||
| Interest bearing deposits in banks | |||||||||||||||||
| Investment securities | |||||||||||||||||
| Loans held for sale | |||||||||||||||||
| Loans, net | |||||||||||||||||
| Residential real estate | |||||||||||||||||
| Construction real estate | |||||||||||||||||
| Commercial real estate | |||||||||||||||||
| Commercial | |||||||||||||||||
| Consumer | |||||||||||||||||
| Municipal | |||||||||||||||||
| Accrued interest receivable | |||||||||||||||||
| Nonmarketable equity securities | N/A | N/A | N/A | N/A | |||||||||||||
| Financial liabilities | |||||||||||||||||
| Deposits | |||||||||||||||||
| Noninterest bearing | $ | $ | $ | $ | $ | ||||||||||||
| Interest bearing | |||||||||||||||||
| Time | |||||||||||||||||
| Borrowed funds | |||||||||||||||||
| Short-term | |||||||||||||||||
| Long-term | |||||||||||||||||
| Subordinated notes | |||||||||||||||||
| Accrued interest payable | |||||||||||||||||
Union Bankshares, Inc. Page 24
| December 31, 2024 | |||||||||||||||||
| Fair Value Measurements | |||||||||||||||||
| Carrying Amount | Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Financial assets | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||
| Interest bearing deposits in banks | |||||||||||||||||
| Investment securities | |||||||||||||||||
| Loans held for sale | |||||||||||||||||
| Loans, net | |||||||||||||||||
| Residential real estate | |||||||||||||||||
| Construction real estate | |||||||||||||||||
| Commercial real estate | |||||||||||||||||
| Commercial | |||||||||||||||||
| Consumer | |||||||||||||||||
| Municipal | |||||||||||||||||
| Accrued interest receivable | |||||||||||||||||
| Nonmarketable equity securities | N/A | N/A | N/A | N/A | |||||||||||||
| Financial liabilities | |||||||||||||||||
| Deposits | |||||||||||||||||
| Noninterest bearing | $ | $ | $ | $ | $ | ||||||||||||
| Interest bearing | |||||||||||||||||
| Time | |||||||||||||||||
| Borrowed funds | |||||||||||||||||
| Short-term | |||||||||||||||||
| Long-term | |||||||||||||||||
| Subordinated notes | |||||||||||||||||
| Accrued interest payable | |||||||||||||||||
The carrying amounts in the preceding tables are included in the consolidated balance sheets under the applicable captions. Accrued interest receivable and nonmarketable equity securities are included in Other assets in the consolidated balance sheets.
Note 12. Subsequent Events
Subsequent events represent events or transactions occurring after the balance sheet date but before the financial statements are issued. Financial statements are considered “issued” when they are widely distributed to shareholders and others for general use and reliance in a form and format that complies with GAAP. Events occurring subsequent to June 30, 2025 have been evaluated as to their potential impact to the consolidated financial statements.
On July 16, 2025, the Company declared a regular quarterly cash dividend of $0.36 per share, payable August 7, 2025, to stockholders of record on July 26, 2025.
Union Bankshares, Inc. Page 25
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis focuses on those factors that, in management's view, had a material effect on the financial position of the Company as of June 30, 2025 and December 31, 2024, and its results of operations for the three and six months ended June 30, 2025 and 2024. This discussion is being presented to provide a narrative explanation of the consolidated financial statements and should be read in conjunction with the consolidated financial statements and related notes and with other financial data appearing elsewhere in this filing and with the Company's 2024 Annual Report. In the opinion of the Company's management, the interim unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments and disclosures necessary to fairly present the Company's consolidated financial position and results of operations for the interim periods presented. Management is not aware of the occurrence of any events after June 30, 2025 which would materially affect the information presented.
Please refer to Note 1 in the Company's unaudited interim consolidated financial statements at Part I, Item 1 of this Report for definitions of acronyms, abbreviations and capitalized terms used throughout the following discussion and analysis.
CAUTIONARY ADVICE ABOUT FORWARD LOOKING STATEMENTS
The Company, "we," "us," "our," may from time to time make written or oral statements that are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include financial projections, statements of plans and objectives for future operations, estimates of future economic performance or conditions and assumptions relating thereto. The Company may include forward-looking statements in its filings with the SEC, in its reports to stockholders, including this quarterly report, in press releases, other written materials, and in statements made by senior management to analysts, rating agencies, institutional investors, representatives of the media and others.
Forward-looking statements are based on the current assumptions underlying the statements and other information with respect to the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and the financial condition, results of operations, future performance and business are only expectations of future results. Although the Company believes that the expectations reflected in the Company’s forward-looking statements are reasonable when made, the Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates; competitive pressures from other financial institutions; general economic conditions on a national basis or in the local markets in which the Company operates; downgrades of U.S. government securities; eroding public confidence in the banking system; changes in consumer behavior due to changing political, business and economic conditions, including the impact of inflation, federal tariff and trade policies and legislative or regulatory initiatives; changes in the value of securities and other assets in the Company’s investment portfolio; increases in loan and lease default and charge-off rates; the adequacy of the ACL; decreases in deposit levels that necessitate increases in borrowing to fund loans and investments; operational risks to the Company and our vendors, including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation, war, terrorism, civil unrest; changes in economic assumptions and adverse economic developments; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s 2024 Annual Report.
In addition to the uncertainties detailed above and in the Company's 2024 Annual Report, the banking industry continues to be faced with an inverted yield curve, unrealized securities losses, and higher funding costs.
When evaluating forward-looking statements to make decisions about the Company and our stock, investors and others are cautioned to consider these and other risks and uncertainties, and are reminded not to place undue reliance on such statements. Investors should not consider the factors referred to above or described in the Company's 2024 Annual Report to be a complete list of the risks or uncertainties that may affect the Company. Forward-looking statements speak only as of the date they are made and the Company undertakes no obligation to update them to reflect new or changed information or events, except as may be required by federal securities laws.
Non-GAAP Financial Measures
Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of
Union Bankshares, Inc. Page 26
the company’s reasons for utilizing the non-GAAP financial measure. The SEC has exempted from the definition of non-GAAP financial measures certain commonly used financial measures that are not based on GAAP. However, two non-GAAP financial measures commonly used by financial institutions, namely tax-equivalent net interest income and tax-equivalent net interest margin (as presented in the tables in the section labeled Yields Earned and Rates Paid), have not been specifically exempted by the SEC, and may therefore constitute non-GAAP financial measures under Regulation G. We are unable to state with certainty whether the SEC would regard those measures as subject to Regulation G. Management believes that these non-GAAP financial measures are useful in evaluating the Company’s financial performance and facilitate comparisons with the performance of other financial institutions. However, that information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP.
CRITICAL ACCOUNTING POLICIES
The Company has established various accounting policies which govern the application of GAAP in the preparation of the Company's consolidated financial statements. Certain accounting policies involve significant judgments and assumptions by management which have a material impact on the reported amount of assets, liabilities, capital, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require management to make its most difficult and subjective judgments, often as a result of the need to make estimates on matters that are inherently uncertain. Based on this definition, management has identified the accounting policies and judgments most critical to the Company. They include establishing the amount of ACL and valuing our intangible assets. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from estimates and have a material impact on the carrying value of assets, liabilities, or capital, and/or the results of operations of the Company.
Please refer to the Company's 2024 Annual Report on Form 10-K for a more in-depth discussion of the Company's critical accounting policies. There have been no changes to the Company's critical accounting policies since the filing of that report.
OVERVIEW
The financial trends for the three and six months ended June 30, 2025 indicate a positive trajectory for the Company. Net interest income, the largest component of net income, saw an increase due to higher interest earned on average earning assets and an increase in average loan volume. Interest expense also rose, primarily driven by higher rates on customer deposits and increased utilization of wholesale funding. The net interest spread and net interest margin both improved, reflecting the overall positive impact of these changes. Additionally, noninterest income experienced growth in wealth management income and net gains on sales of loans held for sale, although this was partially offset by decreases in service fees and income from company-owned life insurance. Noninterest expenses increased, particularly in salaries, wages, and employee benefits, due to annual salary adjustments and higher medical and dental plan premiums. Overall, the Company's financial performance showed robust growth and improved profitability. For further discussion see Results of Operations on page 28.
Consolidated net income increased $376 thousand, or 18.6%, to $2.4 million for the second quarter of 2025 compared to $2.0 million for the second quarter of 2024. The increase in net income was due to the combined effects of a $962 thousand increase in net interest income and a decrease of $167 thousand in credit loss expense, partially offset by increases of $706 thousand in noninterest expenses and $41 thousand in income tax expense, and a decrease of $6 thousand in noninterest income.
Consolidated net income increased $460 thousand, or 10.4%, to $4.9 million for the six months ended June 30, 2025 compared to $4.4 million for the six months ended June 30, 2024. This increase was due to an increase in net interest income of $2.2 million, partially offset by increases in noninterest expenses of $1.3 million, credit loss expense of $298 thousand and income tax expense of $26 thousand, and a decrease of $133 thousand in noninterest income.
At June 30, 2025, the Company had total consolidated assets of $1.48 billion, including gross loans and loans held for sale (total loans) of $1.11 billion, deposits of $1.10 billion, borrowed funds of $270.7 million, subordinated notes of $16.3 million and stockholders' equity of $71.3 million.
On May 20, 2025, the Company and Union entered into an Equity Distribution Agreement with Piper Sandler & Co., as sales agent, pursuant to which the Company may sell from time to time shares of the Company's common stock, par value $2.00, having an aggregate gross sale price of up to $40,000,000. Sales of common stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be "at-the-market offerings" as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended (the "Securities Act") or, subject to the Company's consent, in privately negotiated transactions. The shares offered and sold in the offering have been registered by the Company under the Securities Act. During the three and six months ended June 30, 2025, the Company issued 8,437 shares for aggregate gross sale proceeds of $280
Union Bankshares, Inc. Page 27
thousand, at an average gross sale price of $33.14 per share, which yielded net proceeds to the Company of $52 thousand, after issuance costs, including sales commissions equal to 3% of gross sale proceeds. As of June 30, 2025, approximately $39.7 million remains available for issuance under the offering.
The current macroeconomic and geopolitical environment is subject to a number of uncertainties, including geopolitical conflicts, tariffs or changes in trade policies, capital markets volatility, and inflation. These and other factors may contribute to slower or negative economic growth and a challenging business environment for our customers. While we remain confident in the resilience and strength of our business and financial model, the current macroeconomic and geopolitical environment could negatively impact our financial condition and results of operations. For more information about these risks, please see “Part I, Item 1A. Risk Factors” in our 2024 Annual Report.
The following unaudited per share information and key ratios depict several measurements of performance or financial condition at or for the three and six months ended June 30, 2025 and 2024:
| Three Months Ended or At June 30, | Six Months Ended or At June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| Return on average assets (1) | 0.62 | % | 0.56 | % | 0.64 | % | 0.62 | % | ||||||
| Return on average equity (1) | 13.73 | % | 13.29 | % | 14.16 | % | 14.21 | % | ||||||
| Net interest margin (1)(2) | 2.89 | % | 2.81 | % | 2.88 | % | 2.74 | % | ||||||
| Efficiency ratio (3) | 77.85 | % | 78.55 | % | 76.82 | % | 78.46 | % | ||||||
| Net interest spread (4) | 2.43 | % | 2.35 | % | 2.42 | % | 2.29 | % | ||||||
| Loan to deposit ratio | 100.76 | % | 96.10 | % | 100.76 | % | 96.10 | % | ||||||
Net loan charge-offs to average loans not held for sale | — | % | — | % | — | % | — | % | ||||||
| ACL on loans to loans not held for sale | 0.75 | % | 0.69 | % | 0.75 | % | 0.69 | % | ||||||
| Nonperforming assets to total assets (5) | 1.03 | % | 0.14 | % | 1.03 | % | 0.14 | % | ||||||
| Equity to assets | 4.81 | % | 4.58 | % | 4.81 | % | 4.58 | % | ||||||
| Total capital to risk weighted assets | 12.71 | % | 13.15 | % | 12.71 | % | 13.15 | % | ||||||
| Book value per share | $ | 15.66 | $ | 14.16 | $ | 15.66 | $ | 14.16 | ||||||
| Basic earnings per share | $ | 0.53 | $ | 0.45 | $ | 1.08 | $ | 0.98 | ||||||
| Diluted earnings per share | $ | 0.52 | $ | 0.45 | $ | 1.07 | $ | 0.98 | ||||||
| Dividends paid per share | $ | 0.36 | $ | 0.36 | $ | 0.72 | $ | 0.72 | ||||||
| Dividend payout ratio (6) | 67.92 | % | 80.00 | % | 66.67 | % | 73.47 | % | ||||||
__________________
(1)Annualized.
(2)The ratio of tax equivalent net interest income to average earning assets. See pages 30 and 31 for more information.
(3)The ratio of noninterest expenses to tax equivalent net interest income and noninterest income, excluding securities gains (losses).
(4)The difference between the average yield on earning assets and the average rate paid on interest bearing liabilities. See pages 30 and 31 for more information.
(5)Nonperforming assets are loans or investment securities that are in nonaccrual or 90 or more days past due as well as OREO or OAO.
(6)Cash dividends declared and paid per share divided by consolidated net income per share.
RESULTS OF OPERATIONS
Net Interest Income. The largest component of the Company’s operating income is net interest income, which is the difference between interest and dividend income received from earning assets and interest expense paid on interest bearing liabilities. Net interest income is affected by various factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies, funding strategies, the volume and mix of interest earning assets and interest bearing liabilities, and the level of nonperforming assets. Net interest margin is calculated as the net interest income on a fully tax equivalent basis as a percentage of average earning assets.
Interest earned on average earning assets for the three months ended June 30, 2025 was $18.7 million compared to $16.6 million for the three months ended June 30, 2024, an increase of $2.2 million, or 13.1%. The average earning asset base
Union Bankshares, Inc. Page 28
increased $100.7 million between periods and the average yield on average earning assets increased 26 bps to 5.10% for the three months ended June 30, 2025 compared to 4.84% for the three months ended June 30, 2024.
The average yield on federal funds sold and overnight deposits decreased 62 bps and its related interest income also decreased by $16 thousand between the three month comparison periods due to a decrease in the average rate paid on the balances maintained in Union's master account at the FRB. Interest income on investment securities increased $119 thousand between comparison periods due to an increase in the average yield of 26 bps, despite a decrease in the average balance of the portfolio of $15.8 million. The improvement in the average yield and interest income resulted from a balance sheet repositioning completed in the third quarter of 2024, in which the Company sold lower-yielding AFS debt securities at a loss and used the proceeds to purchase higher yielding AFS debt securities and fund loans.
Interest income on loans increased $2.0 million between the three month comparison periods due to an increase in the average volume of loans outstanding of $117.7 million and an increase of 14 bps in the average yield. Interest income on loans increased $140 thousand and $445 thousand during the three months ended June 30, 2025 and 2024, respectively, due to recovery of interest from the payoff of loans that previously had been in nonaccrual. This accounted for 5 bps and 17 bps of the increase in the average loan yield for the three months ended June 30, 2025 and 2024, respectively.
Average interest bearing liabilities increased $102.4 million between the three month comparison periods primarily due to increases in average deposits and borrowed funds. The average rate paid on interest bearing liabilities increased 18 bps to 2.67% for the second quarter of 2025 compared to 2.49% for the second quarter of 2024. Interest expense increased $1.2 million, to $8.3 million for the three months ended June 30, 2025 compared to $7.1 million for the three months ended June 30, 2024. Interest expense on borrowed funds increased $482 thousand, or 23.6%, between periods due to an increase of $59.6 million in the average volume, despite a decrease of 27 bps in the average rate paid.
The net interest spread increased 8 bps to 2.43% for the second quarter of 2025, from 2.35% for the same period last year, reflecting the net effect of the 26 bps increase in the average yield earned on interest earning assets, which was partially offset by the 18 bps increase in the average rate paid on interest bearing liabilities between periods. The net interest margin increased 8 bps during the second quarter of 2025 compared to the same period last year as a result of the changes discussed above.
Net interest income was $20.7 million, on a fully tax equivalent basis for the six months ended June 30, 2025 compared to $18.5 million for the six months ended June 30, 2024, an increase of $2.2 million, or 12.0%. The average volume of earning assets increased $102.6 million and the average yield on earning assets increased 36 bps to 5.08% compared to 4.72% for the comparison period. Average loans increased $124.7 million, or 12.0%, to $1.2 billion for the six months ended June 30, 2025. The increase in average loan volume and the increase of 27 bps in the average loan yield resulted in a $4.7 million increase in interest income on loans between periods.
The average balance of the investment portfolio decreased $14.0 million while the average yield on the portfolio increased by 29 bps, resulting in an increase in interest income on investment securities of $308 thousand between the six month comparison periods. As noted above, the increases in the average yield and interest income were a direct result of the balance sheet repositioning completed in the third quarter of 2024.
The average balance of interest bearing liabilities increased $105.2 million between the six months comparison periods, primarily due to an increase in borrowed funds and interest bearing nonmaturity deposits. The average cost of funds increased 23 bps to 2.66% for the six months ended June 30, 2025 compared to 2.43% for the six months ended June 30, 2024 due to continued customer expectation of higher rates on deposit accounts along with utilization of wholesale funding at rates higher than deposit rates. Interest expense increased $2.6 million, to $16.3 million for the six months ended June 30, 2025, compared to $13.7 million for the six months ended June 30, 2024.
The net interest spread increased 13 bps to 2.42% for the six months ended June 30, 2025, from 2.29% for the same period last year, reflecting the net effect of the 36 bps increase in the average yield earned on interest earning assets, which was only partially offset by the 23 bps increase in the average rate paid on interest bearing liabilities between periods. The net interest margin increased 14 bps for the six months ended June 30, 2025 compared to the same period last year as a result of the changes discussed above.
Union Bankshares, Inc. Page 29
The following tables show for the periods indicated the total amount of tax equivalent interest income recorded from average interest earning assets, the related average tax equivalent yields, the tax equivalent interest expense associated with average interest bearing liabilities, the related tax equivalent average rates paid, and the resulting tax equivalent net interest spread and margin.
| Three Months Ended June 30, | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Average Balance (1) | Interest Earned/ Paid | Average Yield/ Rate | Average Balance (1) | Interest Earned/ Paid | Average Yield/ Rate | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Average Assets: | ||||||||||||||||||||
| Federal funds sold and overnight deposits | $ | 21,477 | $ | 178 | 3.28 | % | $ | 19,664 | $ | 194 | 3.90 | % | ||||||||
| Interest bearing deposits in banks | 7,198 | 78 | 4.34 | % | 14,217 | 130 | 3.68 | % | ||||||||||||
| Investment securities (2), (3) | 284,840 | 1,703 | 2.44 | % | 300,676 | 1,584 | 2.18 | % | ||||||||||||
| Loans, net (2), (4) | 1,167,505 | 16,563 | 5.77 | % | 1,049,788 | 14,540 | 5.63 | % | ||||||||||||
| Nonmarketable equity securities | 11,112 | 199 | 7.19 | % | 7,104 | 104 | 5.89 | % | ||||||||||||
| Total interest earning assets (2) | 1,492,132 | 18,721 | 5.10 | % | 1,391,449 | 16,552 | 4.84 | % | ||||||||||||
| Cash and due from banks | 4,875 | 4,407 | ||||||||||||||||||
| Premises and equipment | 20,298 | 20,772 | ||||||||||||||||||
| Other assets | 26,359 | 14,935 | ||||||||||||||||||
| Total assets | $ | 1,543,664 | $ | 1,431,563 | ||||||||||||||||
| Average Liabilities and Stockholders' Equity: | ||||||||||||||||||||
| Interest bearing checking accounts | $ | 304,077 | 1,124 | 1.48 | % | $ | 286,935 | 738 | 1.03 | % | ||||||||||
| Savings/money market accounts | 377,037 | 1,612 | 1.72 | % | 359,801 | 1,200 | 1.34 | % | ||||||||||||
| Time deposits | 293,012 | 2,871 | 3.93 | % | 284,594 | 2,944 | 4.16 | % | ||||||||||||
| Borrowed funds and other liabilities | 247,771 | 2,526 | 4.03 | % | 188,194 | 2,044 | 4.30 | % | ||||||||||||
| Subordinated notes | 16,284 | 142 | 3.51 | % | 16,251 | 142 | 3.53 | % | ||||||||||||
| Total interest bearing liabilities | 1,238,181 | 8,275 | 2.67 | % | 1,135,775 | 7,068 | 2.49 | % | ||||||||||||
| Noninterest bearing deposits | 217,060 | 219,978 | ||||||||||||||||||
| Other liabilities | 18,672 | 15,032 | ||||||||||||||||||
| Total liabilities | 1,473,913 | 1,370,785 | ||||||||||||||||||
| Stockholders' equity | 69,751 | 60,778 | ||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 1,543,664 | $ | 1,431,563 | ||||||||||||||||
| Net interest income | $ | 10,446 | $ | 9,484 | ||||||||||||||||
| Net interest spread (2) | 2.43 | % | 2.35 | % | ||||||||||||||||
| Net interest margin (2) | 2.89 | % | 2.81 | % | ||||||||||||||||
Union Bankshares, Inc. Page 30
| Six Months Ended June 30, | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Average Balance (1) | Interest Earned/ Paid | Average Yield/ Rate | Average Balance (1) | Interest Earned/ Paid | Average Yield/ Rate | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Average Assets: | ||||||||||||||||||||
| Federal funds sold and overnight deposits | $ | 20,452 | $ | 330 | 3.21 | % | $ | 27,277 | $ | 637 | 4.62 | % | ||||||||
| Interest bearing deposits in banks | 7,995 | 171 | 4.31 | % | 14,232 | 245 | 3.47 | % | ||||||||||||
| Investment securities (2), (3) | 288,269 | 3,503 | 2.48 | % | 302,282 | 3,195 | 2.19 | % | ||||||||||||
| Loans, net (2), (4) | 1,161,294 | 32,610 | 5.74 | % | 1,036,631 | 27,912 | 5.47 | % | ||||||||||||
| Nonmarketable equity securities | 11,054 | 402 | 7.34 | % | 6,081 | 184 | 6.09 | % | ||||||||||||
| Total interest earning assets (2) | 1,489,064 | 37,016 | 5.08 | % | 1,386,503 | 32,173 | 4.72 | % | ||||||||||||
| Cash and due from banks | 4,750 | 4,432 | ||||||||||||||||||
| Premises and equipment | 20,218 | 20,839 | ||||||||||||||||||
| Other assets | 24,816 | 16,863 | ||||||||||||||||||
| Total assets | $ | 1,538,848 | $ | 1,428,637 | ||||||||||||||||
| Average Liabilities and Stockholders' Equity: | ||||||||||||||||||||
| Interest bearing checking accounts | $ | 304,353 | 2,144 | 1.42 | % | $ | 299,635 | 1,776 | 1.19 | % | ||||||||||
| Savings/money market accounts | 390,895 | 3,503 | 1.81 | % | 383,096 | 2,852 | 1.50 | % | ||||||||||||
| Time deposits | 274,044 | 5,370 | 3.95 | % | 274,130 | 5,493 | 4.03 | % | ||||||||||||
| Borrowed funds and other liabilities | 246,006 | 4,998 | 4.04 | % | 153,245 | 3,275 | 4.23 | % | ||||||||||||
| Subordinated notes | 16,280 | 285 | 3.53 | % | 16,246 | 285 | 3.53 | % | ||||||||||||
| Total interest bearing liabilities | 1,231,578 | 16,300 | 2.66 | % | 1,126,352 | 13,681 | 2.43 | % | ||||||||||||
| Noninterest bearing deposits | 220,237 | 223,922 | ||||||||||||||||||
| Other liabilities | 17,902 | 15,913 | ||||||||||||||||||
| Total liabilities | 1,469,717 | 1,366,187 | ||||||||||||||||||
| Stockholders' equity | 69,131 | 62,450 | ||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 1,538,848 | $ | 1,428,637 | ||||||||||||||||
| Net interest income | $ | 20,716 | $ | 18,492 | ||||||||||||||||
| Net interest spread (2) | 2.42 | % | 2.29 | % | ||||||||||||||||
| Net interest margin (2) | 2.88 | % | 2.74 | % | ||||||||||||||||
__________________
(1)Average balances are calculated based on a daily averaging method.
(2)Average yields reported on a tax equivalent basis using a marginal federal corporate income tax rate of 21%.
(3)Average balances of investment securities are calculated on the amortized cost basis and include nonaccrual securities, if applicable.
(4)Includes loans held for sale as well as nonaccrual loans, unamortized costs and unamortized premiums and is net of the ACL on loans.
Union Bankshares, Inc. Page 31
Tax exempt interest income amounted to $1.7 million and $1.3 million for the three months ended June 30, 2025 and 2024, respectively, and $3.5 million and $2.6 million for the six months ended June 30, 2025 and 2024, respectively. The following table presents the effect of tax exempt income on the calculation of net interest income, using a marginal federal corporate income tax rate of 21% for the 2025 and 2024 three and six month comparison periods:
| For The Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (Dollars in thousands) | ||||||||||||||
| Net interest income, as presented | $ | 10,446 | $ | 9,484 | $ | 20,716 | $ | 18,492 | ||||||
| Effect of tax-exempt interest | ||||||||||||||
| Investment securities | 34 | 58 | 69 | 114 | ||||||||||
| Loans | 230 | 146 | 455 | 283 | ||||||||||
| Net interest income, tax equivalent | $ | 10,710 | $ | 9,688 | $ | 21,240 | $ | 18,889 | ||||||
Rate/Volume Analysis. The following table describes the extent to which changes in average interest rates earned and paid (on a fully tax-equivalent basis) and changes in volume of average interest earning assets and interest bearing liabilities have affected the Company's interest income and interest expense during the periods indicated. For each category of interest earning assets and interest bearing liabilities, information is provided on changes attributable to:
•changes in volume (change in volume multiplied by prior rate);
•changes in rate (change in rate multiplied by prior volume); and
•total change in rate and volume.
Changes attributable to both rate and volume have been allocated proportionately to the change due to volume and the change due to rate.
| Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 Increase/(Decrease) Due to Change In | Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Increase/(Decrease) Due to Change In | |||||||||||||||||||
| Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||
| Federal funds sold and overnight deposits | $ | 17 | $ | (33) | $ | (16) | $ | (139) | $ | (168) | $ | (307) | ||||||||
| Interest bearing deposits in banks | (73) | 21 | (52) | (124) | 50 | (74) | ||||||||||||||
| Investment securities | (79) | 198 | 119 | (138) | 446 | 308 | ||||||||||||||
| Loans, net | 1,663 | 360 | 2,023 | 3,376 | 1,322 | 4,698 | ||||||||||||||
| Nonmarketable equity securities | 68 | 27 | 95 | 174 | 44 | 218 | ||||||||||||||
| Total interest earning assets | 1,596 | 573 | 2,169 | 3,149 | 1,694 | 4,843 | ||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||
| Interest bearing checking accounts | 47 | 339 | 386 | 25 | 343 | 368 | ||||||||||||||
| Savings/money market accounts | 61 | 351 | 412 | 55 | 596 | 651 | ||||||||||||||
| Time deposits | 89 | (162) | (73) | (9) | (114) | (123) | ||||||||||||||
| Borrowed funds | 610 | (128) | 482 | 1,868 | (145) | 1,723 | ||||||||||||||
| Subordinated notes | — | — | — | — | — | — | ||||||||||||||
| Total interest bearing liabilities | 807 | 400 | 1,207 | 1,939 | 680 | 2,619 | ||||||||||||||
| Net change in net interest income | $ | 789 | $ | 173 | $ | 962 | $ | 1,210 | $ | 1,014 | $ | 2,224 | ||||||||
Credit Loss Expense. Credit loss expense or benefit is made up of credit loss expense on loans and credit loss expense on off-balance sheet credit exposures. Credit loss expense on loans results from net charge-offs, changes to the projected loss drivers, prepayment speeds, curtailments and time to recovery that the Company forecasted over the reasonable and supportable forecast periods and changes in the volume and mix of the loan portfolio. Credit loss expense on off-balance sheet credit exposures results from changes in outstanding commitments and changes in funding rates and assumed loss rates period over period. For
Union Bankshares, Inc. Page 32
further details, see FINANCIAL CONDITION - Allowance for Credit Losses on Loans and Commitments, Contingent Liabilities, and Off-Balance-Sheet Arrangements below.
Credit loss expense (benefit) was made up of the following components for the following periods:
| For The Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (Dollars in thousands) | ||||||||||||||
| Credit loss expense for loans | $ | 192 | $ | 238 | $ | 621 | $ | 316 | ||||||
| Credit loss expense (benefit) for off-balance sheet credit exposures | 29 | 150 | (165) | (158) | ||||||||||
| Credit loss expense, net | $ | 221 | $ | 388 | $ | 456 | $ | 158 | ||||||
Noninterest Income. The following table sets forth the components of noninterest income and changes between the three and six month comparison periods of 2025 and 2024:
| For The Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| 2025 | 2024 | $ Variance | % Variance | 2025 | 2024 | $ Variance | % Variance | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||
| Wealth management income | $ | 295 | $ | 273 | $ | 22 | 8.1 | $ | 571 | $ | 528 | $ | 43 | 8.1 | ||||||||||||
| Service fees | 1,715 | 1,735 | (20) | (1.2) | 3,372 | 3,397 | (25) | (0.7) | ||||||||||||||||||
| Net gains on sales of loans held for sale | 480 | 341 | 139 | 40.8 | 869 | 628 | 241 | 38.4 | ||||||||||||||||||
| Income from Company-owned life insurance | 122 | 353 | (231) | (65.4) | 241 | 470 | (229) | (48.7) | ||||||||||||||||||
| Other income | 28 | 30 | (2) | (6.7) | 62 | 181 | (119) | (65.7) | ||||||||||||||||||
| Net gains on other investments | 119 | 33 | 86 | 260.6 | 84 | 128 | (44) | (34.4) | ||||||||||||||||||
| Total noninterest income | $ | 2,759 | $ | 2,765 | $ | (6) | (0.2) | $ | 5,199 | $ | 5,332 | $ | (133) | (2.5) | ||||||||||||
The significant changes in noninterest income for the three and six months ended June 30, 2025 compared to the same periods of 2024 are described below:
•Wealth management income. Wealth management income increased as managed fiduciary accounts grew between June 30, 2025 and 2024, as did the value of assets within those accounts.
•Service fees. Service fees decreased $20 thousand and $25 thousand for the three and six months ended June 30, 2025, respectively, primarily due to decreases in merchant program fees, ATM and debit card network fees, and overdraft fees, partially offset by an increase in loan servicing fees.
•Net gains on sales of loans held for sale. Residential mortgage loans totaling $31.0 million and $56.8 million were sold during the three and six months ended June 30, 2025, respectively, compared to sales of $19.3 million and $41.0 million during the same periods in 2024, respectively. The increases of $139 thousand and $241 thousand in net gains on sales of loans for the three and six month comparison periods, respectively, reflect the higher sales volume and higher premiums obtained on sales in 2025.
•Income from Company-owned life insurance. Death benefit proceeds of $235 thousand were received in the second quarter of 2024 that were not received during the same period in 2025.
•Other income. The Company received $117 thousand in prepayment penalties from the early payoff of loans during the first quarter of 2024 that were not received during the same period of 2025.
•Net gains on other investments. Participants in the 2020 Amended and Restated Nonqualified Excess Plan elect to defer receipt of current compensation from the Company or its subsidiary and select designated reference investments consisting of investment funds. The performance of those funds, over which the Company has no control, resulted in net gains of $119 thousand and $84 thousand for the three and six months ended June 30, 2025, respectively, and net gains of $33 thousand and $128 thousand for the three and six months ended June 30, 2024, respectively.
Union Bankshares, Inc. Page 33
Noninterest Expenses. The following table sets forth the components of noninterest expenses and changes between the three and six month comparison periods of 2025 and 2024:
| For The Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| 2025 | 2024 | $ Variance | % Variance | 2025 | 2024 | $ Variance | % Variance | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||
| Salaries and wages | $ | 4,085 | $ | 3,774 | $ | 311 | 8.2 | $ | 7,996 | $ | 7,327 | $ | 669 | 9.1 | ||||||||||||
| Employee benefits | 1,971 | 1,631 | 340 | 20.8 | 3,552 | 3,120 | 432 | 13.8 | ||||||||||||||||||
| Occupancy expense, net | 547 | 544 | 3 | 0.6 | 1,199 | 1,113 | 86 | 7.7 | ||||||||||||||||||
| Equipment expense | 1,100 | 1,017 | 83 | 8.2 | 2,149 | 1,960 | 189 | 9.6 | ||||||||||||||||||
| FDIC insurance assessment | 404 | 289 | 115 | 39.8 | 742 | 531 | 211 | 39.7 | ||||||||||||||||||
| ATM and debit card expense | 295 | 389 | (94) | (24.2) | 570 | 691 | (121) | (17.5) | ||||||||||||||||||
| Electronic banking expenses | 157 | 111 | 46 | 41.4 | 314 | 217 | 97 | 44.7 | ||||||||||||||||||
| Advertising and public relations | 177 | 213 | (36) | (16.9) | 326 | 391 | (65) | (16.6) | ||||||||||||||||||
Donations | 75 | 65 | 10 | 15.4 | 119 | 234 | (115) | (49.1) | ||||||||||||||||||
| Amortization of MSRs, net | 7 | 62 | (55) | (88.7) | 23 | 102 | (79) | (77.5) | ||||||||||||||||||
| Other expenses | 1,669 | 1,686 | (17) | (1.0) | 3,321 | 3,318 | 3 | 0.1 | ||||||||||||||||||
Total noninterest expenses | $ | 10,487 | $ | 9,781 | $ | 706 | 7.2 | $ | 20,311 | $ | 19,004 | $ | 1,307 | 6.9 | ||||||||||||
The significant changes in noninterest expenses for the three and six months ended June 30, 2025 compared to the same periods in 2024 are described below:
•Salaries and wages. Salaries and wages increased $311 thousand and $669 thousand for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024 primarily due to annual salary adjustments for the 2025 fiscal year, increases in adjustments and accruals for annual incentive plan payments, and the deferral of loan origination costs. In addition, the number of full time equivalent employees increased from 184 at June 30, 2024 to 193 as of June 30, 2025. Salaries and wages are reduced by deferred loan origination costs at the time of origination. Deferred loan origination costs reduced salaries and wages by $41 thousand for the three and six months ended June 30, 2025, compared to reductions of $105 thousand and $136 thousand for the three and six months ended June 30, 2024, respectively. The lower deferred loan origination costs for 2025 compared to 2024 is primarily attributable to loan origination levels.
•Employee benefits. Employee benefit expense increased $340 thousand for the three months ended June 30, 2025 compared to the same period in 2024 primarily due to increases of $230 thousand in premium expense for the Company's medical and dental plans, $24 thousand in payroll taxes and $86 thousand in employee benefits related to the Company's deferred compensation plans. The increase of $432 thousand for the six months ended June 30, 2025 compared to the same period in 2024 was primarily due to increases of $343 thousand in premium expense for the Company's medical and dental plans, $61 thousand in payroll taxes and $79 thousand in 401k plan contribution expense. These increases were partially offset by a decrease of $51 thousand in employee benefit expense related to the Company's deferred compensation plans.
•Occupancy expense, net. The increase in occupancy expense for the six months ended June 30, 2025 is primarily due to increases in utilities and repair and maintenance expenses as a result of the winter conditions experienced during the first quarter of 2025 compared to 2024. In addition, real restate tax expense increased $30 thousand between the six month comparison periods due to rate increases in the towns with branch locations.
•Equipment expense. Equipment expense increased between the three and six month comparison periods primarily due to an increase in software license and maintenance costs.
•FDIC insurance assessment. The FDIC insurance assessment increased by $115 thousand and $211 thousand during the three and six month comparison periods, respectively, due to an increase in the assessment rate as well as overall growth in net average assets.
•ATM and debit card expense. During the first six months of 2025, debit card contract incentive credits were received resulting in a decrease in expense for the three and six months ended June 30, 2025 compared to 2024.
•Electronic banking expenses. The increase in electronic banking expenses during the three and six month periods of 2025 related primarily to software initiatives that were implemented to the online banking platform in the fourth quarter of 2024.
Union Bankshares, Inc. Page 34
•Advertising and public relations. The decrease in advertising and public relations costs is primarily related to advertising campaigns and business development activities during the first half of 2024 that did not recur in 2025.
•Donations. Charitable donations are made as part of the Company's on-going commitment to enhancing the economic vitality and social welfare of our communities. Donations decreased between the six month comparison periods primarily due to contributions made during the first quarter of 2024 related to a state tax credit program to assist a local affordable housing project and local non-profit rehabilitation projects that did not recur in 2025.
•Amortization of MSRs, net. Income from MSRs is derived from servicing rights acquired through the sale of loans on which servicing is retained. Capitalized servicing rights are initially recorded at fair value and amortized in proportion to, and over the period of, the estimated future servicing period of the underlying loans. The amortization of MSRs exceeded new capitalized MSRs during both comparison periods, which resulted in net expense $7 thousand and $23 thousand for the three and six months ended June 30, 2025, respectively, and $62 thousand and $102 thousand for the three and six months ended June 30, 2024, respectively.
Provision for Income Taxes. The Company has provided for current and deferred federal income taxes for the three and six months ended June 30, 2025 and 2024. The Company's net provision for income taxes was $102 thousand and $252 thousand for the three and six months ended June 30, 2025 respectively, compared to $61 thousand and $226 thousand for the same periods in 2024, respectively. The Company's effective federal corporate income tax rate was 4.4% and 4.6% for the three and six months ended June 30, 2025, respectively, compared to 2.9% and 6.2% for the same period in 2024, respectively.
Amortization expense related to limited partnership investments is included as a component of income tax expense and amounted to $457 thousand and $909 thousand for the three and six months ended June 30, 2025, respectively, compared to $412 thousand and $824 thousand for the same periods in 2024, respectively. These investments provide tax benefits, including tax credits. Low income housing and rehabilitation tax credits with respect to limited partnership investments are also included as a component of income tax expense and amounted to $483 thousand and $966 thousand for the three and six months ended June 30, 2025, respectively, and $450 thousand and $900 thousand for the three and six months ended June 30, 2024, respectively.
FINANCIAL CONDITION
At June 30, 2025, the Company had total consolidated assets of $1.48 billion, including gross loans and loans held for sale (total loans) of $1.11 billion, investment securities AFS of $240.5 million, deposits of $1.10 billion, borrowed funds of $270.7 million, subordinated notes of $16.3 million and stockholders' equity of $71.3 million. The Company’s total assets at June 30, 2025 decreased $48.0 million, or 3.1%, from $1.53 billion at December 31, 2024, and increased $81.9 million, or 5.9%, compared to June 30, 2024.
June 30th marks the end of the fiscal year for the majority of the Company's municipal customers, including school districts, and several customers are required to reduce their outstanding short term debts to zero for at least one day during their fiscal year. The one day requirement traditionally occurs annually on June 30th and as a result the Company experiences a decrease in outstanding municipal loan balances. In many cases monies are transferred from corresponding deposit accounts to pay off these debts so the Company experiences a corresponding decrease in deposit balances as well. These cyclical decreases are short term in nature as the loans and deposits for the next municipal fiscal year are recorded within the first few days of July. The Company recorded $66.4 million in new municipal loans during the first few days of July 2025.
Federal funds sold and overnight deposits increased $13.9 million, or 130.0%, to $24.5 million as of June 30, 2025, from $10.7 million at December 31, 2024.
Net loans and loans held for sale decreased $49.8 million, or 4.3%, to $1.11 billion, representing 74.7% of total assets at June 30, 2025, compared to $1.16 billion, or 75.6% of total assets at December 31, 2024. (See Loans Held for Sale and Loan Portfolio on page 36.)
Total deposits decreased $65.5 million, or 5.6%, to $1.10 billion at June 30, 2025, from $1.17 billion at December 31, 2024. Noninterest bearing deposits decreased by $8.7 million, or 3.9%, interest bearing deposits decreased by $136.5 million, or 19.1%, and time deposits increased by $79.6 million, or 34.9%. (See Deposits on page 40.)
Borrowed funds consisted of FHLB advances of $270.7 million and $259.7 million at June 30, 2025 and December 31, 2024, respectively. (See Borrowings on page 41.)
Stockholders’ equity increased from $66.5 million at December 31, 2024 to $71.3 million at June 30, 2025, reflecting a decrease of $2.8 million in accumulated other comprehensive loss due to an increase in the fair market value of the Company's AFS investment securities, net income of $4.9 million for the first six months of 2025, an increase of $296 thousand from the vesting of stock based compensation, an increase of $52 thousand due to net proceeds from the issuance of common stock
Union Bankshares, Inc. Page 35
under the Company's at-the-market offering, and a $36 thousand increase due to the issuance of common stock under the DRIP, partially offset by cash dividends declared of $3.3 million. (See Capital Resources on page 43.)
Loans Held for Sale and Loan Portfolio. Total loans (including loans held for sale) decreased $49.2 million, or 4.2%, to $1.11 billion, representing 75.1% of assets at June 30, 2025, from $1.16 billion, representing 76.0% of assets at December 31, 2024. The total loan portfolio at June 30, 2025 increased $99.5 million compared to the June 30, 2024 level of $1.01 billion, which represented 72.4% of assets. The Company’s loans consist primarily of adjustable-rate and fixed-rate mortgage loans secured by 1-to-4 family, multi-family residential or commercial real estate. Real estate secured loans represented $1.03 billion, or 93.0% of total loans at June 30, 2025 and $1.01 billion, or 87.3% of total loans at December 31, 2024. The net change in the Company's loan portfolio from December 31, 2024 (see table below) resulted primarily from the seasonal decrease in the municipal portfolio discussed above, partially offset by an increase in the volume of commercial and residential construction real estate loans.
The composition of the Company's loan portfolio, including loans held for sale, as of June 30, 2025 and December 31, 2024 was as follows:
| June 30, 2025 | December 31, 2024 | |||||||||||||
| Loan Class | Amount | Percent | Amount | Percent | ||||||||||
| Residential real estate | (Dollars in thousands) | |||||||||||||
| Non-revolving residential real estate | $ | 444,231 | 40.0 | $ | 445,425 | 38.4 | ||||||||
| Revolving residential real estate | 25,455 | 2.3 | 21,884 | 1.9 | ||||||||||
| Construction real estate | ||||||||||||||
| Commercial construction real estate | 57,381 | 5.2 | 54,985 | 4.7 | ||||||||||
| Residential construction real estate | 62,193 | 5.6 | 51,202 | 4.4 | ||||||||||
| Commercial real estate | ||||||||||||||
| Non-residential commercial real estate | 329,414 | 29.6 | 330,010 | 28.4 | ||||||||||
| Multi-family residential real estate | 106,113 | 9.5 | 104,328 | 9.0 | ||||||||||
| Commercial | 34,116 | 3.1 | 35,175 | 3.0 | ||||||||||
| Consumer | 2,468 | 0.2 | 2,523 | 0.3 | ||||||||||
| Municipal | 41,395 | 3.7 | 110,204 | 9.5 | ||||||||||
| Loans held for sale | 8,992 | 0.8 | 5,204 | 0.4 | ||||||||||
| Total loans | 1,111,758 | 100.0 | 1,160,940 | 100.0 | ||||||||||
| ACL on loans | (8,307) | (7,680) | ||||||||||||
| Unamortized net loan costs | 2,156 | 2,162 | ||||||||||||
| Net loans and loans held for sale | $ | 1,105,607 | $ | 1,155,422 | ||||||||||
The Company originates and sells qualified residential mortgage loans in various secondary market avenues to mitigate long-term interest rate risk and generate fee income, with a majority of sales made to the FHLMC/Freddie Mac, generally with servicing rights retained. At June 30, 2025, the Company serviced a $1.18 billion residential real estate mortgage portfolio, of which $9.0 million was held for sale and approximately $705.0 million of which was serviced for unaffiliated third parties.
The Company sold $56.8 million of qualified residential real estate loans to the secondary market during the first six months of 2025 compared to sales of $41.0 million during the first six months of 2024. Residential mortgage loan origination activity was strong during the first half of 2025. Despite low housing inventory and higher interest rates, purchase activity in the Company's markets is stable, with continued construction loan activity.
The Company also originates commercial real estate and commercial loans under various SBA, USDA and State sponsored programs which provide a government agency guaranty for a portion of the loan amount. There was $2.0 million guaranteed under these various programs at June 30, 2025 on an aggregate balance of $2.6 million in subject loans.
The Company serviced $36.6 million of commercial and commercial real estate loans for unaffiliated third parties as of June 30, 2025. This included $35.6 million of commercial or commercial real estate loans the Company originated and participated out to other financial institutions. These loans were participated in the ordinary course of business on a nonrecourse basis, for liquidity or credit concentration management purposes.
Union Bankshares, Inc. Page 36
The Company capitalizes MSRs for all loans sold with servicing retained. The unamortized balance of MSRs on loans sold with servicing retained was $1.7 million at June 30, 2025, with an estimated market value in excess of the carrying value as of such date. Management periodically evaluates and measures the servicing assets for impairment.
Qualifying residential first lien mortgage loans and certain commercial real estate loans with a combined carrying value of $488.3 million were pledged as collateral for borrowings from the FHLB under a blanket lien at June 30, 2025.
Asset Quality. The Company, like all financial institutions, is exposed to certain credit risks, including those related to the value of the collateral that secures its loans and the ability of borrowers to repay their loans. Consistent application of the Company’s conservative loan policies has helped to mitigate this risk and has been prudent for both the Company and its customers. Management closely monitors the Company’s loan and investment portfolios, OREO and OAO for potential problems and reports to the Company’s and Union’s Board at regularly scheduled meetings. Board approved policies set forth portfolio diversification levels to mitigate concentration risk and the Company participates large credits out to other financial institutions to further mitigate that risk.
Repossessed assets, nonaccrual loans, and loans that are 90 days or more past due are considered to be nonperforming assets. The following table details the composition of the Company's nonperforming assets and amounts utilized to calculate certain asset quality ratios monitored by the Company's management as of the balance sheet dates and June 30, 2024:
| June 30, 2025 | December 31, 2024 | June 30, 2024 | |||||||||
| (Dollars in thousands) | |||||||||||
| Nonaccrual loans | $ | 15,189 | $ | 1,652 | $ | 1,771 | |||||
| Loans past due 90 days or more and still accruing interest | 72 | 241 | 157 | ||||||||
| Total nonperforming assets | $ | 15,261 | $ | 1,893 | $ | 1,928 | |||||
| Guarantees of U.S. or state government agencies on the above nonperforming loans | $ | — | $ | — | $ | 72 | |||||
| ACL on loans | $ | 8,307 | $ | 7,680 | $ | 6,893 | |||||
| Net recoveries | $ | (6) | $ | (22) | $ | (11) | |||||
| Total loans outstanding | $ | 1,111,758 | $ | 1,160,940 | $ | 1,012,213 | |||||
| Total average loans outstanding | $ | 1,161,294 | $ | 1,077,543 | $ | 1,036,631 | |||||
The increase in nonaccrual loans at June 30, 2025 primarily relates to a commercial construction loan that was placed in nonaccrual during the first quarter of 2025.
Union Bankshares, Inc. Page 37
The following table shows trends in certain asset quality ratios monitored by the Company's management as of the balance sheet dates and June 30, 2024:
| June 30, 2025 | December 31, 2024 | June 30, 2024 | |||||||||
| (Dollars in thousands) | |||||||||||
| ACL on loans to total loans outstanding | 0.75 | % | 0.66 | % | 0.68 | % | |||||
| ACL on loans to nonperforming loans | 54.43 | % | 405.71 | % | 357.52 | % | |||||
| ACL on loans to nonaccrual loans | 54.69 | % | 464.89 | % | 389.22 | % | |||||
| Nonperforming loans to total loans | 1.37 | % | 0.16 | % | 0.19 | % | |||||
| Nonperforming assets to total assets | 1.03 | % | 0.12 | % | 0.14 | % | |||||
| Nonaccrual loans to total loans | 1.37 | % | 0.14 | % | 0.17 | % | |||||
| Delinquent loans (30 days to nonaccruing) to total loans | 1.49 | % | 0.43 | % | 0.25 | % | |||||
| Net charge-offs (recoveries) to total average loans | — | % | — | % | — | % | |||||
| Residential real estate | — | % | (0.01) | % | — | % | |||||
Net recoveries | $ | (9) | $ | (24) | $ | (11) | |||||
| Total average loans | $ | 469,518 | $ | 441,561 | $ | 425,561 | |||||
| Commercial | — | % | — | % | — | % | |||||
| Net recoveries | $ | — | $ | (1) | $ | (1) | |||||
| Total average loans | $ | 34,340 | $ | 38,949 | $ | 40,250 | |||||
| Consumer | 0.11 | % | 0.12 | % | 0.04 | % | |||||
Net charge-offs | $ | 3 | $ | 3 | $ | 1 | |||||
| Total average loans | $ | 2,732 | $ | 2,499 | $ | 2,527 | |||||
All other loan categories did not have charge-offs or recoveries for any of the periods presented above.
There were no loans in process of foreclosure at June 30, 2025 and one residential real estate loan totaling $8 thousand in process of foreclosure at December 31, 2024. The aggregate interest income not recognized on nonaccrual loans approximated $645 thousand and $235 thousand as of June 30, 2025 and December 31, 2024, respectively.
The Company had loans rated substandard that were on performing status totaling $557 thousand and $768 thousand at June 30, 2025 and December 31, 2024, respectively. In management's view, substandard loans represent a higher degree of risk of becoming nonperforming loans in the future.
Allowance for Credit Losses on Loans. Some of the Company’s loan customers ultimately do not make all of their contractually scheduled payments, requiring the Company to charge off a portion or all of the remaining principal balance due. The Company maintains an ACL to absorb such losses. The level of the ACL on loans at June 30, 2025 represents management's estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company's policy and methodologies for establishing the ACL on loans, described in the Company's 2024 Annual Report, did not change during the first six months of 2025. The Company's ACL on loans was $8.3 million and $7.7 million at June 30, 2025 and December 31, 2024, respectively.
The following table reflects activity in the ACL on loans for the three and six months ended June 30, 2025 and 2024:
| For The Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (Dollars in thousands) | ||||||||||||||
| Balance at beginning of period | $ | 8,110 | $ | 6,645 | $ | 7,680 | $ | 6,566 | ||||||
| Charge-offs | — | (1) | (4) | (1) | ||||||||||
| Recoveries | 5 | 11 | 10 | 12 | ||||||||||
| Net recoveries | 5 | 10 | 6 | 11 | ||||||||||
Credit loss expense | 192 | 238 | 621 | 316 | ||||||||||
| Balance at end of period | $ | 8,307 | $ | 6,893 | $ | 8,307 | $ | 6,893 | ||||||
Union Bankshares, Inc. Page 38
The following table (net of loans held for sale) shows the internal breakdown by risk component of the Company's ACL on loans and the percentage of loans in each category to total loans in the respective portfolios at the dates indicated:
| June 30, 2025 | December 31, 2024 | |||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||
| Residential real estate | (Dollars in thousands) | |||||||||||||
| Non-revolving residential real estate | $ | 2,905 | 40.3 | $ | 3,212 | 38.5 | ||||||||
| Revolving residential real estate | 230 | 2.3 | 280 | 1.9 | ||||||||||
| Construction real estate | ||||||||||||||
| Commercial construction real estate | 1,019 | 5.2 | 651 | 4.8 | ||||||||||
| Residential construction real estate | 219 | 5.6 | 102 | 4.4 | ||||||||||
| Commercial real estate | ||||||||||||||
| Non-residential commercial real estate | 3,200 | 29.9 | 2,766 | 28.6 | ||||||||||
| Multi-family residential real estate | 258 | 9.6 | 212 | 9.0 | ||||||||||
| Commercial | 439 | 3.1 | 377 | 3.0 | ||||||||||
| Consumer | 6 | 0.2 | 6 | 0.2 | ||||||||||
| Municipal | 31 | 3.8 | 74 | 9.6 | ||||||||||
| Total | $ | 8,307 | 100.0 | $ | 7,680 | 100.0 | ||||||||
Notwithstanding the categories shown in the table above or any specific allocation under the Company's ACL methodology, all funds in the ACL on loans are available to absorb loan losses in the portfolio, regardless of loan category or specific allocation.
Management believes, in its best estimate, that the ACL on loans at June 30, 2025 is appropriate to cover expected credit losses over the expected life of the Company’s loan portfolio as of such date. However, there can be no assurance that the Company will not sustain losses in future periods which could be greater than the size of the ACL on loans at June 30, 2025. In addition, our banking regulators, as an integral part of their examination process, periodically review our ACL. Such agencies may require us to recognize adjustments to the ACL based on their judgments about information available to them at the time of their examination. A large adjustment to the ACL on loans for losses in future periods could require increased credit loss expense to replenish the ACL on loans, which could negatively affect earnings.
Investment Activities. The Company's investment securities classified as AFS, which are carried at fair value, decreased $10.0 million to $240.5 million, comprising 16.2% of total assets, compared to $250.5 million, or 16.4% of total assets, at December 31, 2024. The decrease between periods is due to returns of principal of $13.2 million, partially offset by a decrease in unrealized losses of $3.6 million.
Net unrealized losses in the Company’s AFS investment securities portfolio were $40.0 million as of June 30, 2025, compared to net unrealized losses of $43.6 million as of December 31, 2024. The Company’s Accumulated OCI component of stockholders’ equity at June 30, 2025 reflected cumulative net unrealized losses on investment securities of $31.2 million. There were no securities classified as HTM at June 30, 2025 or December 31, 2024. The unrealized losses in the Company's AFS investment securities portfolio are primarily attributable to changes in long-term interest rates which are tied to the pricing indexes for the securities. No declines in value were deemed by management to be impairment related to credit losses at June 30, 2025. Deterioration in credit quality and/or imbalances in liquidity that may result from changes in financial market conditions might adversely affect the fair values of the Company’s investment portfolio and the amount of gains or losses ultimately realized on the sale of such securities and may also increase the potential that credit losses may be identified in future periods, resulting in credit loss expense recorded in earnings.
Investment securities AFS with a fair value of $91.9 million and $96.0 million were pledged as collateral for FHLB borrowings and other credit subject to collateralization, public unit deposits or for other purposes as required or permitted by law, at June 30, 2025 and December 31, 2024, respectively. Investment securities AFS pledged as collateral for discount window borrowings at the FRB consisted of U.S. Government-sponsored enterprises and Agency MBS with a fair value of $9.5 million and $9.7 million at June 30, 2025 and December 31, 2024, respectively.
Union Bankshares, Inc. Page 39
Deposits. The following table shows information concerning the Company's average deposits by account type and weighted average nominal rates at which interest was paid on such deposits for the six months ended June 30, 2025 and 2024:
| Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |||||||||||||||||||
| Average Amount | Percent of Total Deposits | Average Rate | Average Amount | Percent of Total Deposits | Average Rate | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Nontime deposits: | ||||||||||||||||||||
| Noninterest bearing deposits | $ | 220,237 | 18.5 | — | $ | 223,922 | 19.0 | — | ||||||||||||
| Interest bearing checking accounts | 304,353 | 25.6 | 1.42 | % | 299,635 | 25.4 | 1.19 | % | ||||||||||||
| Money market accounts | 246,639 | 20.7 | 2.84 | % | 237,987 | 20.2 | 2.38 | % | ||||||||||||
| Savings accounts | 144,256 | 12.1 | 0.04 | % | 145,109 | 12.3 | 0.04 | % | ||||||||||||
| Total nontime deposits | 915,485 | 76.9 | 1.24 | % | 906,653 | 76.9 | 1.03 | % | ||||||||||||
| Total time deposits | 274,044 | 23.1 | 3.95 | % | 274,130 | 23.1 | 4.03 | % | ||||||||||||
| Total deposits | $ | 1,189,529 | 100.0 | 1.87 | % | $ | 1,180,783 | 100.0 | 1.72 | % | ||||||||||
During the first six months of 2025, average total deposits increased by $8.7 million, or 0.7%, compared to the six months ended June 30, 2024 and the deposit mix has remained consistent between periods. The average balance of total nontime deposits increased $8.8 million between periods primarily due to increases of $4.7 million in interest bearing checking accounts, and $8.7 million in money market accounts, partially offset by decreases of $3.7 million in noninterest bearing deposits and $853 thousand in savings accounts. The average balance in total time deposits decreased $86 thousand between periods due to a $46.2 million decrease in average retail brokered deposits, partially offset by increases of $7.2 million in average purchased CDARS deposits and $39.0 million in average customer time deposit accounts as customers took advantage of higher rate paying CDs.
The Company participates in CDARS, which permits it to offer full deposit insurance coverage to its customers by exchanging deposit balances with other CDARS participants. CDARS also provides the Company with an additional source of funding and liquidity through the purchase of deposits. There were $25.1 million in purchased CDARS deposits at June 30, 2025 and none at December 31, 2024. There were $7.8 million and $13.3 million of time deposits of $250,000 or less on the balance sheet at June 30, 2025 and December 31, 2024, respectively, which were exchanged with other CDARS participants.
The Company also participates in the ICS program, a service through which it can offer its customers demand or savings deposit products with access to unlimited FDIC insurance, while receiving reciprocal deposits from other FDIC-insured banks. Like the exchange of certificate of deposit accounts through CDARS, exchange of demand or savings deposits through ICS provides a depositor with full deposit insurance coverage of excess balances, thereby helping the Company retain the full amount of the deposit on its balance sheet. As with the CDARS program, in addition to reciprocal deposits, participating banks may also purchase one-way ICS deposits. There were no purchased ICS deposits at June 30, 2025 or at December 31, 2024. There were $111.1 million and $256.5 million in exchanged ICS demand and money market deposits on the balance sheet at June 30, 2025 and December 31, 2024, respectively.
At June 30, 2025 there were $40.3 million of retail brokered deposits at a weighted average rate of 4.28% issued under a master certificate of deposit program with a deposit broker for twelve month terms for the purpose of providing a supplemental source of funding and liquidity. There were no retail brokered deposits at December 31, 2024.
Uninsured deposits have been estimated to include deposits with balances greater than the FDIC insurance coverage limit of $250 thousand. This estimate by management is based on the same methodologies and assumptions used for regulatory reporting requirements. At June 30, 2025, the Company had total estimated uninsured deposit accounts totaling $451.4 million, or 40.9% of total deposits. Uninsured deposits include $24.0 million of municipal deposits that were collateralized under applicable state regulations by letters of credit issued by the FHLB at June 30, 2025, as described on page 41 under Borrowings.
Union Bankshares, Inc. Page 40
The following table provides a maturity distribution of the Company’s time deposits in amounts in excess of the $250 thousand FDIC insurance limit at June 30, 2025 and December 31, 2024:
| June 30, 2025 | December 31, 2024 | |||||||
| (Dollars in thousands) | ||||||||
| Within 3 months | $ | 24,752 | $ | 24,544 | ||||
| 3 to 6 months | 30,838 | 16,004 | ||||||
| 6 to 12 months | 8,127 | 20,257 | ||||||
| Over 12 months | 1,122 | 918 | ||||||
| $ | 64,839 | $ | 61,723 | |||||
Borrowings. Advances from the FHLB are another key source of funds to support earning assets. These funds are also used to manage the Bank's interest rate and liquidity risk exposures. Borrowed funds included FHLB advances of $270.7 million with a weighted average rate of 4.07% at June 30, 2025 and $259.7 million with a weighted average rate of 4.17% at December 31, 2024. Union is required to invest in $100 par value stock of the FHLB in an amount to satisfy unpaid principal balances on qualifying loans, plus an amount to satisfy an activity based requirement. The stock is nonmarketable, and is redeemable by the FHLB at par value. With the increase in FHLB advances outstanding at June 30, 2025, the investment in FHLB Class B common stock has increased to $11.5 million at June 30, 2025 compared to $11.2 million at December 31, 2024. Union's investment in FHLB stock is carried at cost in Other assets on the consolidated balance sheets.
The Company has the authority, up to its available borrowing capacity with the FHLB, to collateralize public unit deposits with letters of credit issued by the FHLB. FHLB letters of credit in the amount of $42.7 million and $47.3 million were utilized as collateral for these deposits at June 30, 2025 and December 31, 2024, respectively. The Company's reimbursement obligations to the FHLB relating to these letters of credit are secured by pledged collateral, which reduces the Company's available borrowing capacity with the FHLB. Total fees paid by the Company in connection with the issuance of these letters of credit were $16 thousand and $28 thousand for the three and six months ended June 30, 2025, respectively, and $11 thousand and $22 thousand for the three and six months ended June 30, 2024, respectively.
In August 2021, the Company completed the private placement of $16.5 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2031 to certain qualified institutional buyers and accredited investors. The Notes initially bear interest, payable semi-annually, at the rate of 3.25% per annum, until September 1, 2026. From and including September 1, 2026, the interest rate applicable to the outstanding principal amount due will reset quarterly to the then current three-month secured overnight financing rate (SOFR) plus 263 basis points. The Notes are presented in the consolidated balance sheets net of unamortized issuance costs of $210 thousand and $227 thousand at June 30, 2025 and December 31, 2024, respectively.
Commitments, Contingent Liabilities, and Off-Balance-Sheet Arrangements. The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers, to reduce its own exposure to fluctuations in interest rates and to implement its strategic objectives. These financial instruments include commitments to extend credit, standby letters of credit, interest rate caps and floors written on adjustable-rate loans, commitments to participate in or sell loans, commitments to buy or sell securities, certificates of deposit or other investment instruments and risk-sharing commitments or guarantees on certain sold loans. Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the balance sheet. The contractual or notional amounts of these instruments reflect the extent of involvement the Company has in a particular class of financial instruments.
The Company's maximum exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. For interest rate caps and floors written on adjustable-rate loans, the contractual or notional amounts do not represent the Company’s exposure to credit loss. The Company controls the risk of interest rate cap agreements through credit approvals, borrowing limits, and monitoring procedures. The Company generally requires collateral or other security to support financial instruments with credit risk.
Union Bankshares, Inc. Page 41
The following table details the contractual or notional amount of financial instruments that represented credit risk at the balance sheet dates:
| June 30, 2025 | December 31, 2024 | |||||||
| (Dollars in thousands) | ||||||||
| Commitments to originate loans | $ | 102,238 | $ | 47,696 | ||||
| Unused lines of credit | 187,703 | 191,392 | ||||||
| Standby and commercial letters of credit | 1,632 | 1,640 | ||||||
| Credit card arrangements | 78 | 154 | ||||||
| FHLB Mortgage Partnership Finance credit enhancement obligation, net | 1,072 | 865 | ||||||
| Commitment to purchase investment in a real estate limited partnership | — | 2,000 | ||||||
| Total | $ | 292,723 | $ | 243,747 | ||||
Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Loan commitments generally have a fixed expiration date or other termination clause and may require payment of a fee. Since many of the loan commitments are expected to expire without being drawn upon and not all credit lines will be utilized, the total commitment amounts do not necessarily represent future cash requirements. Lines of credit incur seasonal volume fluctuations due to the nature of some customers' businesses, such as tourism. The increase in commitments to originate loans at June 30, 2025 from December 31, 2024 is primarily the result of the fiscal cycle of local municipalities and school districts, with $66.4 million committed to them on June 30, 2025 for their fiscal year beginning July 1, 2025.
The Company did not hold any derivative or hedging instruments at June 30, 2025 or December 31, 2024.
In addition to commitments with credit risks arising from the Company’s financial instruments, in the normal course of business the Company enters into other types of contractual arrangements from time to time that represent off-balance sheet commitments such as contracts for the purchase or lease of property, including real property for its banking premises.
The Company records an ACL on off-balance sheet credit exposures through a charge or credit to Credit loss expense (benefit) on the consolidated statements of income to account for the change in the ACL on off-balance sheet exposures between reporting periods. The ACL on off-balance sheet credit exposures totaled $906 thousand and $1.1 million at June 30, 2025 and December 31, 2024, respectively, and was included in Accrued interest and other liabilities on the consolidated balance sheets. There was $29 thousand of credit loss expense and $165 thousand of credit loss benefit for off-balance sheet credit exposures recorded for the three and six months ended June 30, 2025, respectively and $150 thousand of credit loss expense and $158 thousand of credit loss benefit recorded for the three and six months ended June 30, 2024, respectively.
Liquidity. Liquidity is a measurement of the Company’s ability to meet potential cash requirements, including ongoing commitments to fund deposit withdrawals, repay borrowings, fund investment and lending activities, purchase and lease commitments, and for other general business purposes. The primary objective of liquidity management is to maintain a balance between sources and uses of funds to meet our cash flow needs in the most economical and expedient manner. The Company’s principal sources of funds are deposits; whole-sale funding options including purchased deposits, amortization, prepayment and maturity of loans, investment securities, interest bearing deposits and other short-term investments; sales of securities and loans AFS; earnings; and funds provided from operations. Contractual principal repayments on loans have been a relatively predictable source of funds. Deposit flows and loan and investment prepayments are less predictable and can be significantly influenced by market interest rates, economic conditions, and rates offered by our competitors. Managing liquidity risk is essential to maintaining both depositor confidence and earnings stability.
As of June 30, 2025, Union, as a member of FHLB, had access to unused lines of credit up to $59.5 million over and above the $315.9 million in combined outstanding FHLB borrowings and other credit, subject to collateralization and to the purchase of required FHLB Class B common stock and evaluation by the FHLB of the underlying collateral available. This line of credit can be used for either short-term or long-term liquidity or other funding needs.
Union also maintains an IDEAL Way Line of Credit with the FHLB. The total line available was $551 thousand at June 30, 2025. There were no borrowings against this line of credit as of such date. Interest on this line is chargeable at a rate determined by the FHLB and payable monthly. Should Union utilize this line of credit, qualified portions of the loan and investment portfolios would collateralize these borrowings.
In addition to its borrowing arrangements with the FHLB, Union maintains a pre-approved federal funds line of credit totaling $15.0 million with an upstream correspondent bank, a master brokered deposit agreement with a brokerage firm, and one-way buy options with CDARS and ICS. At June 30, 2025, there were $40.3 million in retail brokered deposits issued under a master
Union Bankshares, Inc. Page 42
certificate of deposit program with a broker, $25.1 million in purchased CDARS deposits, and no purchased ICS deposits or outstanding advances on the correspondent line.
Union's investment and residential loan portfolios also provide a significant amount of contingent liquidity that could be accessed in a reasonable time period through sales of those portfolios. Additional contingent liquidity sources are available with further access to the brokered deposit market and through the discount window at the FRB. These sources are considered as liquidity alternatives in our contingent liquidity plan. Management believes the Company has sufficient liquidity to meet all reasonable borrower, depositor, and creditor needs in the present economic environment. However, any projections of future cash needs and flows are subject to substantial uncertainty, including factors outside the Company's control.
Capital Resources. Capital management is designed to maintain an optimum level of capital in a cost-effective structure that meets target regulatory ratios, supports management’s internal assessment of economic capital, funds the Company’s business strategies and builds long-term stockholder value. Dividends are generally in line with long-term trends in earnings per share and conservative earnings projections, while sufficient profits are retained to support anticipated business growth, fund strategic investments, maintain required regulatory capital levels and provide continued support for deposits. The Company continues to evaluate growth opportunities both through internal growth or potential acquisitions.
On May 20, 2025, the Company and Union entered into an Equity Distribution Agreement with Piper Sandler & Co., as sales agent, pursuant to which the Company may sell from time to time shares of the Company's common stock, par value $2.00, having an aggregate gross sale price of up to $40,000,000. Sales of common stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be "at-the-market offerings" as defined in Rule 415(a)(4) under the Securities Act, or subject to the Company's consent, in privately negotiated transactions. The shares offered and sold in the offering have been registered by the Company under the Securities Act. During the three and six months ended June 30, 2025, the Company issued 8,437 shares for aggregate gross sale proceeds of $280 thousand, at an average gross sale price of $33.14 per share, which yielded net proceeds to the Company of $52 thousand, after issuance costs, including sales commissions equal to 3% of gross sale proceeds. As of June 30, 2025, approximately $39.7 million remains available for issuance under the offering.
In August 2021, the Company completed the private placement of $16.5 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2031 to certain qualified institutional buyers and accredited investors. The Notes are structured to qualify as Tier 2 capital for the Company under regulatory capital guidelines for bank holding companies. Proceeds from the sale of the Notes were utilized primarily to provide additional Tier 1 capital to Union to support its growth and for other general corporate purposes.
Stockholders’ equity increased from $66.5 million at December 31, 2024 to $71.3 million at June 30, 2025, reflecting a decrease of $2.8 million in accumulated other comprehensive loss due to an increase in the fair market value of the Company's AFS investment securities, net income of $4.9 million for the first six months of 2025, an increase of $296 thousand in additional paid in capital from the vesting of stock-based compensation, an increase of $52 thousand due to net proceeds from the issuance of common stock under the Company's at-the-market offering, and a $36 thousand increase due to the issuance of common stock under the DRIP. These increases were partially offset by cash dividends declared of $3.3 million during the six months ended June 30, 2025. The components of other comprehensive loss are illustrated in Note 10 of the unaudited consolidated financial statements.
The Company has 7,500,000 shares of $2.00 par value common stock authorized. As of June 30, 2025, the Company had 5,024,257 shares issued, of which 4,551,335 were outstanding and 472,922 were held in treasury.
In December 2024, the Company's Board reauthorized for 2025 and 2026 a limited stock repurchase plan that was initially established in May of 2010. The limited stock repurchase plan allows the repurchase of up to a fixed number of shares of the Company's common stock each calendar quarter in open market purchases or privately negotiated transactions, as management deems advisable and as market conditions may warrant. The repurchase authorization for a calendar quarter (currently 2,500 shares) expires at the end of that quarter to the extent it has not been exercised, and is not carried forward into future quarters. The quarterly repurchase authorization expires on December 31, 2026, unless reauthorized. The Company had no repurchases under this program during the first six months of 2025.
The Company maintains a DRIP whereby registered stockholders may elect to reinvest cash dividends and make optional cash contributions to purchase additional shares of the Company's common stock. The Company has reserved 200,000 shares of its common stock for issuance and sale under the DRIP. As of June 30, 2025, 14,327 shares of stock had been issued from treasury stock under the DRIP.
The Company (on a consolidated basis) and Union are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's and Union's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the
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Company and Union must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's and Union's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Under the standard regulatory capital guidelines, banking organizations must have a minimum total risk-based capital ratio of 8.0%, a minimum Tier I risk-based capital ratio of 6.0%, a minimum common equity Tier I risk-based capital ratio of 4.5%, and a minimum leverage ratio of 4.0% in order to be "adequately capitalized." In addition to these requirements, banking organizations must maintain a 2.5% capital conservation buffer consisting of common Tier I equity, increasing the minimum required total risk-based capital, Tier I risk-based and common equity Tier I capital to risk-weighted assets they must maintain to avoid limits on capital distributions and certain bonus payments to executive officers and similar employees.
As shown in the table below, as of June 30, 2025, both the Company and Union met all capital adequacy requirements to which they are subject and Union exceeded the requirements for a "well capitalized" bank under the FDIC's Prompt Corrective Action framework. There were no conditions or events between June 30, 2025 and the date of this report that management believes have changed either company’s regulatory capital category.
| Actual | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||
| As of June 30, 2025 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Company: | ||||||||||||||||||||
| Total capital to risk weighted assets | $ | 125,770 | 12.71 | % | $ | 79,163 | 8.00 | % | N/A | N/A | ||||||||||
| Tier I capital to risk weighted assets | 100,266 | 10.14 | % | 59,329 | 6.00 | % | N/A | N/A | ||||||||||||
| Common Equity Tier 1 to risk weighted assets | 100,266 | 10.14 | % | 44,497 | 4.50 | % | N/A | N/A | ||||||||||||
| Tier I capital to average assets | 100,266 | 6.34 | % | 63,259 | 4.00 | % | N/A | N/A | ||||||||||||
| Union: | ||||||||||||||||||||
| Total capital to risk weighted assets | $ | 124,743 | 12.62 | % | $ | 79,076 | 8.00 | % | $ | 98,845 | 10.00 | % | ||||||||
| Tier I capital to risk weighted assets | 115,529 | 11.69 | % | 59,296 | 6.00 | % | 79,062 | 8.00 | % | |||||||||||
| Common Equity Tier 1 to risk weighted assets | 115,529 | 11.69 | % | 44,472 | 4.50 | % | 64,238 | 6.50 | % | |||||||||||
| Tier I capital to average assets | 115,529 | 7.30 | % | 63,304 | 4.00 | % | 79,129 | 5.00 | % | |||||||||||
Dividends paid by Union are the primary source of funds available to the Company for payment of dividends to its stockholders. Union is subject to certain requirements imposed by federal banking laws and regulations, which among other things, establish minimum levels of capital and restrict the amount of dividends that may be distributed by Union to the Company.
Quarterly cash dividends of $0.36 per share were paid during the second quarter of 2025 and were declared in July for the third quarter, payable on August 7, 2025 to stockholders of record on July 26, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Omitted, in accordance with the regulatory relief available to smaller reporting companies in SEC Release Nos. 33-10513 (effective September 10, 2018).
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer, with the assistance of the Disclosure Control Committee, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2025. Based on this evaluation they concluded that those disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files with the Commission is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required information.
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Changes in Internal Controls over Financial Reporting. There was no change in the Company's internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act, during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, the Company is involved in various legal and other proceedings. In the opinion of management, any liability resulting from such proceedings is not expected to have a material adverse effect on the Company’s consolidated financial condition or results of operations.
Item 1A. Risk Factors
There have been no material changes in the risk factors discussed in Part I-Item 1A, "Risk Factors" in the Company’s 2024 Annual Report since the date of the filing of that report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no repurchases of the Company's equity securities, nor any sales of unregistered securities, during the quarter ended June 30, 2025.
Item 6. Exhibits.
| 31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||
| 31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||
| 32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | ||||
| 32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | ||||
| 101 | The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the unaudited consolidated balance sheets, (ii) the unaudited consolidated statements of income for the three and six months ended June 30, 2025 and 2024, (iii) the unaudited consolidated statements of comprehensive income for the three and six months ended June 30, 2025 and 2024, (iv) the unaudited consolidated statements of changes in stockholders' equity, (iv) the unaudited consolidated statements of cash flows and (v) related notes. | ||||
| 104 | Cover page interactive data file (embedded within exhibit 101). | ||||
____________________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| Union Bankshares, Inc. | ||||||||
| August 13, 2025 | /s/ David S. Silverman | |||||||
| David S. Silverman | ||||||||
| Director, President and Chief Executive Officer | ||||||||
| August 13, 2025 | /s/ Karyn J. Hale | |||||||
| Karyn J. Hale | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
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EXHIBIT INDEX
| Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
| Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
| Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |||||
| Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |||||
| 101 | The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the unaudited consolidated balance sheets, (ii) the unaudited consolidated statements of income for the three and six months ended June 30, 2025 and 2024, (iii) the unaudited consolidated statements of comprehensive income for the three and six months ended June 30, 2025 and 2024, (iv) the unaudited consolidated statements of changes in stockholders' equity, (iv) the unaudited consolidated statements of cash flows and (v) related notes. | ||||
| 104 | Cover page interactive data file (embedded within exhibit 101). | ||||
____________________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
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