Union Bankshares Announces Earnings for the three and six months ended June 30, 2024 and Declares Quarterly Dividend

Rhea-AI Summary

Union Bankshares (NASDAQ: UNB) reported Q2 2024 earnings with consolidated net income of $2.0 million, or $0.45 per share, down from $2.7 million, or $0.60 per share, in Q2 2023. For the six months ended June 30, 2024, net income was $4.4 million, or $0.98 per share, compared to $5.7 million, or $1.26 per share, in the same period of 2023.

Key highlights:

• Total assets increased 4.8% to $1.40 billion
• Total loans grew to $1.01 billion, including $6.2 million in loans held for sale
• Deposits were $1.05 billion, including $65.0 million in brokered deposits
• Book value per share improved to $14.16
• The Board declared a quarterly cash dividend of $0.36 per share

Positive

• Total assets increased by 4.8% to $1.40 billion
• Loan growth reached $1.01 billion, up from $940.2 million in the previous year
• Asset quality remains strong with minimal past due loans and net recoveries of $10,000
• Book value per share improved to $14.16 from $13.10 in the previous year
• Quarterly cash dividend of $0.36 per share declared

Negative

• Consolidated net income decreased by 25.2% to $2.0 million in Q2 2024 compared to $2.7 million in Q2 2023
• Net interest income decreased by 1.4% to $9.5 million in Q2 2024
• Interest expense increased by $2.9 million to $7.1 million in Q2 2024
• Credit loss expense of $388,000 recorded in Q2 2024 compared to a benefit of $96,000 in Q2 2023
• Noninterest expenses increased by 7.9% to $9.8 million in Q2 2024

Insights

Financial Analyst

The earnings report from Union Bankshares shows a decrease in net income for both the three and six months ended June 30, 2024, compared to the same periods in the previous year. This is primarily due to increased interest expense and higher noninterest expenses. The net income for Q2 2024 was $2.0 million, down from $2.7 million in Q2 2023, a significant 25.2% decline. For the six months, net income was $4.4 million, down from $5.7 million in 2023.

One critical factor is the rise in interest expense, which increased by $2.9 million—an increase of 69% from the same period last year. This reflects higher costs tied to wholesale funding and customer deposits, which could be a concern if the trend continues. On a positive note, interest income grew by 19.9%, aided by a larger asset base and higher loan interest rates.

Loan growth is another notable aspect. Total loans grew from $940.2 million in June 2023 to $1.01 billion in June 2024, showing robust growth in their loan portfolio. However, the increase in credit loss expense suggests some caution in the quality or risk profile of these loans.

The balance sheet shows an increase in total assets to $1.40 billion from $1.33 billion, driven largely by loan growth. This is a positive sign, but it's dampened by growing liabilities, particularly from Federal Home Loan Bank advances.

The reduction in the dividend payout ratio to 36 cents per share also indicates a commitment to returning value to shareholders, but it raises questions about future earnings potential if current trends persist. Investors should watch closely for further increases in expenses and interest rates.

Market Research Analyst

The announcement of Union Bankshares' quarterly earnings gives several insights into the company's performance and market position. While the decrease in net income might raise concerns, the growth in total assets and loan portfolio offers a more mixed picture. The company's total assets increased by $63.7 million year-over-year, indicating expansion, fueled primarily by loan growth. However, the increase in credit loss expense and noninterest expenses suggests operational challenges that need attention.

A significant factor to consider is the rise in Federal Home Loan Bank advances and the use of brokered deposits, which are higher-cost funding sources. This indicates that Union Bankshares is leveraging external funding to support its growth, which could be viewed positively if managed well, but it introduces additional risk if interest rates continue to rise.

The market environment, characterized by higher interest rates, has also led to unrealized losses in their investment portfolio. These losses, amounting to $45.1 million, are due to the interest rate environment where current rates stay above the coupon rates of the securities held. For investors, this could signify potential future volatility in the company's financials.

Lastly, the quarterly dividend of $0.36 per share reflects stability and a commitment to shareholder returns, which might appeal to income-focused investors. However, the lower net income and higher expenses might impact the sustainability of such dividends in the long run.

Overall, while there are growth indicators, the rising expenses and funding costs need careful monitoring by investors.

MORRISVILLE, Vt., July 17, 2024 (GLOBE NEWSWIRE) -- Union Bankshares, Inc. (NASDAQ - UNB) today announced results for the three and six months ended June 30, 2024 and declared a regular quarterly cash dividend. Consolidated net income for the three months ended June 30, 2024 was $2.0 million, or $0.45 per share, compared to $2.7 million, or $0.60 per share, for the same period in 2023, and $4.4 million, or $0.98 per share, for the six months ended June 30, 2024, compared to $5.7 million, or $1.26 per share for the same period in 2023.

Balance Sheet

Total assets were $1.40 billion as of June 30, 2024 compared to $1.33 billion as of June 30, 2023, an increase of $63.7 million, or 4.8%. Loan growth was the primary driver of the increase in total assets with total loans reaching $1.01 billion as of June 30, 2024 including $6.2 million in loans held for sale, compared to $940.2 million as of June 30, 2023, with $3.1 million in loans held for sale. Asset quality remains strong with minimal past due loans and net recoveries of $10 thousand for the three and six months ended June 30, 2024.

Investment securities were $254.2 million at June 30, 2024 compared to $268.9 million at June 30, 2023. The Company classifies its investment portfolio as available-for-sale and is required to report balances at their fair market value. As a result of the fair market value adjustment, unrealized losses in the investment portfolio were $45.1 million as of June 30, 2024. The unrealized losses in the portfolio are due to the interest rate environment as current rates remain above the coupon rates on these securities resulting in fair market values less than current book values. The offset to recording the unrealized losses is an increase in deferred taxes included in other assets and accumulated other comprehensive losses included in total equity as discussed below.

Total deposits were $1.05 billion as of June 30, 2024 and include $65.0 million of purchased brokered deposits compared to deposits of $1.12 billion as of June 30, 2023 with $138.0 million of purchased deposits. Federal Home Loan Bank advances of $212.1 million were outstanding as of June 30, 2024 compared to $120.5 million outstanding as of June 30, 2023. In addition to borrowings from the Federal Home Loan Bank, $35.0 million in advances from the Federal Reserve's Bank Term Funding Program were outstanding as of June 30, 2024.

The Company had total equity capital of $64.0 million and a book value per share of $14.16 as of June 30, 2024 compared to $59.1 million and a book value of $13.10 per share as of June 30, 2023. Total equity capital is reduced by accumulated other comprehensive loss as it relates to the fair market value adjustment for investment securities. Accumulated other comprehensive loss as of June 30, 2024 was $35.2 million compared to $36.3 million as of June 30, 2023.

Income Statement

Consolidated net income was $2.0 million for the second quarter of 2024 compared to $2.7 million for the second quarter of 2023, a decrease of $680 thousand, or 25.2%. The decrease in net income was comprised of a decrease in net interest income of $134 thousand and increases of $484 thousand in credit loss expense and $718 thousand in noninterest expenses, partially offset by an increase in noninterest income of $282 thousand, and a decrease of $374 thousand in income tax expense.

Net interest income was $9.5 million for the three months ended June 30, 2024 compared to $9.6 million for the three months ended June 30, 2023, a decrease of $134 thousand, or 1.4%. Interest income was $16.6 million for the three months ended June 30, 2024 compared to $13.8 million for the same period in 2023, an increase of $2.7 million, or 19.9%, due to the larger earning asset base and higher interest rates on new loan volume. Interest expense increased $2.9 million to $7.1 million for the three months ended June 30, 2024 compared to $4.2 million for the same period in 2023, due to utilization of higher cost wholesale funding, such as Federal Home Loan Bank advances and brokered deposits, and customers seeking higher returns on their deposits.

Credit loss expense of $388 thousand was recorded for the second quarter of 2024 compared to a benefit of $96 thousand recorded for the second quarter of 2023. Credit loss expense is determined quarterly based on the growth and mix of the loan portfolio along with management's risk assessment of each portfolio segment.

Noninterest income was $2.8 million for the three months ended June 30, 2024 compared to $2.5 million for the same period in 2023. Sales of qualifying residential loans to the secondary market for the second quarter of 2024 were $19.3 million resulting in net gains of $341 thousand, compared to sales of $17.8 million and net gains on sales of $306 thousand for the same period in 2023. Noninterest expenses increased $718 thousand, or 7.9%, to $9.8 million for the three months ended June 30, 2024 compared to $9.1 million for the same period in 2023. The increase during the comparison period was due to increases of $101 thousand in salaries and wages, $160 thousand in employee benefits, $62 thousand in occupancy expenses, $135 thousand in equipment expenses, and $260 thousand in other expenses.

Income tax expense was $61 thousand for the three months ended June 30, 2024 a decrease of $374 thousand, or 86.1% compared to $435 thousand for the same period in 2023. The decrease is attributable to a decrease in net income before tax, and increases in tax exempt income and low income housing tax credits related to investments in limited partnerships for low to moderate income housing projects.

Dividend Declared

The Board of Directors declared a cash dividend of $0.36 per share for the quarter payable August 1, 2024 to shareholders of record as of July 27, 2024.

About Union Bankshares, Inc.

Union Bankshares, Inc., headquartered in Morrisville, Vermont, is the bank holding company parent of Union Bank, which provides commercial, retail, and municipal banking services, as well as wealth management services throughout northern Vermont and New Hampshire. Union Bank operates 19 banking offices, three loan centers, and multiple ATMs throughout its geographical footprint.

Since 1891, Union Bank has helped people achieve their dreams of owning a home, saving for retirement, starting or expanding a business and assisting municipalities to improve their communities. Union Bank has earned an exceptional reputation for residential lending programs and has been recognized by the US Department of Agriculture, Rural Development for the positive impact made in lives of low to moderate home buyers. Union Bank is consistently one of the top Vermont Housing Finance Agency mortgage originators and has also been designated as an SBA Preferred lender for its participation in small business lending. Union Bank's employees contribute to the communities where they work and reside, serving on non-profit boards, raising funds for worthwhile causes, and giving countless hours in serving our fellow residents. All of these efforts have resulted in Union receiving and "Outstanding" rating for its compliance with the Community Reinvestment Act ("CRA") in its most recent examination. Union Bank is proud to be one of the few independent community banks serving Vermont and New Hampshire and we maintain a strong commitment to our core traditional values of keeping deposits safe, giving customers convenient financial choices and making loans to help people in our local communities buy homes, grow businesses, and create jobs. These values--combined with financial expertise, quality products and the latest technology--make Union Bank the premier choice for your banking services, both personal and business. Member FDIC. Equal Housing Lender.

Forward-Looking Statements

Statements made in this press release that are not historical facts are forward-looking statements. Investors are cautioned that all forward-looking statements necessarily involve risks and uncertainties, and many factors could cause actual results and events to differ materially from those contemplated in the forward-looking statements. When we use any of the words “believes,” “expects,” “anticipates” or similar expressions, we are making forward-looking statements. The following factors, among others, could cause actual results and events to differ from those contemplated in the forward-looking statements: uncertainties associated with general economic conditions; changes in the interest rate environment; inflation; political, legislative or regulatory developments; acts of war or terrorism; the markets' acceptance of and demand for the Company's products and services; technological changes, including the impact of the internet on the Company's business and on the financial services market place generally; the impact of competitive products and pricing; and dependence on third party suppliers. For further information, please refer to the Company's reports filed with the Securities and Exchange Commission at www.sec.gov or on our investor page at www.ublocal.com.

Contact: David S. Silverman
(802) 888-6600

FAQ

What was Union Bankshares' (UNB) net income for Q2 2024?

Union Bankshares (UNB) reported a consolidated net income of $2.0 million, or $0.45 per share, for Q2 2024.

How did Union Bankshares' (UNB) Q2 2024 earnings compare to Q2 2023?

Union Bankshares' Q2 2024 earnings of $2.0 million decreased by 25.2% compared to $2.7 million in Q2 2023.

What was Union Bankshares' (UNB) total loan balance as of June 30, 2024?

Union Bankshares' total loans reached $1.01 billion as of June 30, 2024, including $6.2 million in loans held for sale.

What dividend did Union Bankshares (UNB) declare for Q2 2024?

Union Bankshares declared a quarterly cash dividend of $0.36 per share, payable on August 1, 2024, to shareholders of record as of July 27, 2024.

How did Union Bankshares' (UNB) book value per share change from June 30, 2023 to June 30, 2024?

Union Bankshares' book value per share increased from $13.10 as of June 30, 2023, to $14.16 as of June 30, 2024.