Union Bankshares Announces Earnings for the three months and year ended December 31, 2023 and Declares Quarterly Dividend

Rhea-AI Summary

Union Bankshares, Inc. (NASDAQ - UNB) announced a decrease in net income for the three months and year ended December 31, 2023, compared to the same periods in 2022. Total assets increased to $1.5 billion, representing a 9.9% growth. However, the company reported unrealized losses of $41.0 million in its investment portfolio due to the interest rate environment. The company also declared a regular quarterly cash dividend of $0.36 per share.

Insights

Financial Analyst

The reported decrease in Union Bankshares, Inc.'s quarterly and annual net income indicates a contraction in profitability, which is a pivotal metric for investors. The decline is primarily attributed to a decrease in net interest income and an increase in noninterest expenses. The dip in net interest income is a result of higher interest expense, which has surged due to customers seeking better returns and the use of more expensive wholesale funds. This scenario is reflective of the broader interest rate environment where central banks have increased rates, impacting the cost of funds for financial institutions.

While the increase in interest income due to a larger asset base and higher rates on new loans adds a positive note, the disproportionate rise in interest expense overshadows this growth. The bank's asset quality remains robust, with minimal net charge-offs, which is a reassuring sign for stability. However, the significant unrealized losses in the investment portfolio due to market value adjustments in response to the current interest rate environment could be a concern for potential equity volatility.

Market Research Analyst

The growth in total assets and loans at Union Bankshares, Inc. signals an expansionary phase for the bank, with a 9.9% increase in assets year-over-year. The loan growth contributes positively to the earning asset base, potentially enhancing future interest income. However, the competitive landscape in the banking sector, coupled with the current economic conditions, might put pressure on the bank's margins.

The reliance on purchased brokered deposits has increased substantially, which could indicate a strategic move to bolster deposits rapidly, but it also reflects on the cost of liquidity for the bank. The increase in total equity and book value per share is a positive sign for shareholders, as it may suggest a stronger balance sheet and improved net worth of the company.

Economist

The financial results of Union Bankshares, Inc. are indicative of the broader macroeconomic trends, such as rising interest rates and inflationary pressures. The bank's performance, particularly the sharp increase in interest expense, mirrors the impact of monetary policy tightening by the Federal Reserve. The increased cost of customer deposit accounts and wholesale funding is a direct consequence of such economic policies.

The bank's strategic moves, such as the growth in loan portfolios and investment in securities, must be assessed in the context of the economic outlook, including potential recessionary pressures and the trajectory of interest rates. The management's ability to navigate the changing economic landscape will be critical for the bank's performance moving forward.

MORRISVILLE, Vt., Jan. 17, 2024 (GLOBE NEWSWIRE) -- Union Bankshares, Inc. (NASDAQ - UNB) today announced results for the three months and year ended December 31, 2023 and declared a regular quarterly cash dividend. Consolidated net income for the three months ended December 31, 2023 was $3.0 million, or $0.68 per share, compared to $3.4 million, or $0.77 cents per share, for the same period in 2022, and $11.3 million, or $2.50 per share, for the year ended December 31, 2023, compared to $12.6 million, or $2.81 per share for the year ended December 31, 2022

Balance Sheet

Total assets were $1.5 billion as of December 31, 2023 compared to $1.3 billion as of December 31, 2022, an increase of $132.4 million, or 9.9%. Asset growth was driven by loan growth and increases in investment securities and overnight deposits. Total loans outstanding as of December 31, 2023 were $1.0 billion and included $3.1 million in loans held for sale, compared to $961.7 million as of December 31, 2022, with $1.2 million in loans held for sale. Asset quality remains strong as total net charge-offs for the year ended December 31, 2023 were $4 thousand compared to net recoveries of $3 thousand for the year ended December 31, 2022.

Investment securities were $265.9 million at December 31, 2023 compared to $251.5 million at December 31, 2022. 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 $41.0 million as of December 31, 2023. 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 $1.31 billion as of December 31, 2023 and include $153.0 million of purchased brokered deposits compared to deposits of $1.20 billion as of December 31, 2022 with $32.0 million of purchased deposits. Borrowed funds, including advances from the Federal Home Loan Bank and the Federal Reserve’s Bank Term Funding Program, of $65.7 million were outstanding as of December 31, 2023 compared to $50.0 million outstanding as of December 31, 2022.

The Company had total equity capital of $65.8 million and a book value per share of $14.56 as of December 31, 2023 compared to $55.2 million and a book value of $12.25 per share as of December 31, 2022. The increase in total capital was attributable to net income of $11.3 million for 2023 and a decrease in the accumulated other comprehensive loss of $5.5 million as it relates to unrealized losses in the investment portfolio discussed above, partially offset by $6.5 million in dividends paid to shareholders.

Income Statement

Consolidated net income was $3.0 million for the fourth quarter of 2023 compared to $3.4 million for the fourth quarter of 2022, a decrease of $395 thousand, or 11.5%. The decrease in net income was comprised of a decrease in net interest income of $1.2 million and an increase in noninterest expenses of $137 thousand, partially offset by an increase in noninterest income of $265 thousand, and decreases of $338 thousand in credit loss expense and $387 thousand in income tax expense.

Net interest income was $9.1 million for the three months ended December 31, 2023 compared to $10.4 million for the three months ended December 31, 2022, a decrease of $1.2 million, or 12.1%. Interest income was $15.4 million for the three months ended December 31, 2023 compared to $12.4 million for the same period in 2022, an increase of $3.1 million, or 24.8%, due to the larger earning asset base and higher interest rates on new loan volume. Interest expense increased $4.3 million to $6.3 million for the three months ended December 31, 2023 compared to $2.0 million for the same period in 2022 due to customers seeking higher returns on their savings and utilization of wholesale funds which often are at higher rates.

Consolidated net income decreased $1.4 million, or 10.8%, to $11.3 million for the year ended December 31, 2023 compared $12.6 million for the year ended December 31, 2022 due to a decrease in net interest income of $1.6 million and an increase in noninterest expenses of $1.7 million, partially offset by an increase of $451 thousand in noninterest income, a reduction in credit loss expense of $499 thousand, and a decrease of $1.0 million in income tax expense.

Interest income was $57.1 million for the year ended December 31, 2023 compared to $43.9 million for the comparable period in 2022, an increase of $13.2 million, or 30.0%, due to a larger earning asset base and higher average yields. Interest expense was $19.3 million for the year ended December 31, 2023 compared to $4.5 million for the same period in 2022, an increase of $14.7 million, or 325.9%. Rates paid on customer deposit accounts increased rapidly in the latter half of 2022. The customer rate increases coupled with utilization of wholesale funding at higher rates resulted in the significant increase in interest expense.

Noninterest income was $9.9 million for the year ended December 31, 2023 compared to $9.5 million for the year ended December 31, 2022, an increase of $451 thousand, or 4.8%. Sales of qualifying residential loans to the secondary market for 2023 were $75.6 million resulting in net gains of $1.2 million, compared to sales of $78.0 million and net gains on sales of $1.0 million for the same period in 2022. Noninterest expenses increased $1.7 million, or 5.2%, during the comparison periods due to increases of $164 thousand in salaries and wages, $331 thousand in employee benefits, $122 thousand in occupancy expenses, $30 thousand in equipment expenses, and $1.1 million in other expenses. Income tax expense decreased $1.0 million.

Dividend Declared

The Board of Directors declared a cash dividend of $0.36 per share for the quarter payable February 1, 2024 to shareholders of record as of January 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, two 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 an "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) 888-660

FAQ

What is the ticker symbol for Union Bankshares, Inc.?

The ticker symbol for Union Bankshares, Inc. is UNB.

What were the consolidated net income figures for the three months and year ended December 31, 2023?

The consolidated net income for the three months ended December 31, 2023, was $3.0 million, or $0.68 per share. For the year ended December 31, 2023, it was $11.3 million, or $2.50 per share.

What was the total asset growth as of December 31, 2023?

Total assets were $1.5 billion as of December 31, 2023, compared to $1.3 billion as of December 31, 2022, representing a 9.9% increase.

What were the unrealized losses in the investment portfolio as of December 31, 2023?

The company reported unrealized losses of $41.0 million in its investment portfolio as of December 31, 2023, due to the interest rate environment.

What was the cash dividend declared for the quarter?

The Board of Directors declared a cash dividend of $0.36 per share for the quarter payable February 1, 2024.