8-K: Union Bankshares Announces Q4 and Full Year 2024 Earnings, Declares Quarterly Dividend

Union Bankshares reported a slight decrease in Q4 net income and a more significant decrease for the full year 2024, impacted by strategic balance sheet repositioning, while also declaring a regular quarterly cash dividend.

Summary

• Union Bankshares, Inc. announced its earnings for the three months and year ended December 31, 2024.
• The company declared a regular quarterly cash dividend of $0.36 per share.
• Net income for Q4 2024 was $3.00 million, or $0.67 per share, compared to $3.05 million, or $0.68 per share, for Q4 2023.
• Net income for the year ended December 31, 2024, was $8.8 million, or $1.94 per share, compared to $11.3 million, or $2.50 per share, for the same period in 2023.
• The decrease in earnings was impacted by a strategic balance sheet repositioning executed during the third quarter of 2024, involving the sale of $38.8 million in lower-yielding available-for-sale debt securities for a pre-tax realized loss of $1.3 million.
• Total assets increased to $1.53 billion as of December 31, 2024, from $1.47 billion as of December 31, 2023, representing a 4.0% increase.
• Loan demand was robust, increasing by $130.0 million, or 12.6%, to reach $1.16 billion as of December 31, 2024.
• Total deposits were $1.17 billion as of December 31, 2024, compared to $1.31 billion as of December 31, 2023, which included $153.0 million of purchased brokered deposits.
• Federal Home Loan Bank advances were $259.7 million as of December 31, 2024, compared to $55.7 million as of December 31, 2023.
• Total equity capital was $66.5 million, and the book value per share was $14.65 as of December 31, 2024, compared to $65.8 million and $14.56 per share as of December 31, 2023.
• Interest income increased by $10.8 million, or 19.0%, to $68.0 million for the year ended December 31, 2024.
• Interest expense increased by $10.3 million, or 53.6%, to $29.6 million for the year ended December 31, 2024.
• Credit loss expense was $930 thousand for the year ended December 31, 2024, compared to a benefit of $499 thousand in 2023.
• Noninterest expenses increased by $2.7 million, or 7.5%, to $38.0 million for the year ended December 31, 2024.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While there's loan growth and a dividend declaration, the decrease in net income and strategic repositioning with associated losses temper the positive aspects.

Positives

• Total assets increased by $59.5 million, or 4.0%, to $1.53 billion.
• Loan demand was robust, resulting in an increase of $130.0 million, or 12.6%, to reach $1.16 billion.
• Asset quality remains strong with minimal past due loans and net recoveries of $7 thousand and $22 thousand for the three months and year ended December 31, 2024, respectively.
• Interest income increased by $10.8 million, or 19.0%, to $68.0 million for the year ended December 31, 2024.
• Noninterest income, excluding the loss on the bond sale, was $11.0 million for the year ended December 31, 2024 compared to $9.9 million for the same period in 2023.
• The Board of Directors declared a cash dividend of $0.36 per share for the quarter.

Negatives

• Net income for the year ended December 31, 2024, decreased by $2.5 million, or 22.2%, compared to the same period in 2023.
• The company executed the sale of $38.8 million in book value of its lower-yielding available-for-sale debt securities for a pre-tax realized loss of $1.3 million.
• Total deposits decreased to $1.17 billion as of December 31, 2024, compared to deposits of $1.31 billion as of December 31, 2023.
• Interest expense increased $10.3 million, or 53.6%, to $29.6 million for the year ended December 31, 2024.
• Credit loss expense of $930 thousand was recorded for the year ended December 31, 2024 compared to a benefit of $499 thousand recorded for the year ended December 31, 2023.
• Noninterest expenses increased $2.7 million, or 7.5%, to $38.0 million for the year ended December 31, 2024.

Risks

• Uncertainties associated with general economic conditions could impact future performance.
• Changes in the interest rate environment may affect profitability.
• Inflation could increase operating expenses.
• Political, legislative, or regulatory developments could create challenges.
• Acts of war or terrorism could disrupt business operations.
• The markets' acceptance of and demand for the Company's products and services could fluctuate.
• Technological changes, including the impact of the internet, could affect the Company's business.
• Competitive products and pricing could impact market share.
• Dependence on third-party suppliers poses a risk to operations.

Future Outlook

The company expects the strategic balance sheet repositioning to improve earnings in future periods.

Management Comments

• Management continues to assess the adequacy of the Allowance for Credit Losses quarterly.
• 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.

Industry Context

Community banks are facing increased competition and regulatory scrutiny, requiring them to adapt their balance sheets and manage expenses effectively. Union Bankshares' strategic repositioning reflects an effort to navigate these challenges and improve future profitability.

Comparison to Industry Standards

• Comparing Union Bankshares to similar-sized community banks in the Northeast, such as Northfield Bancorp (NFBK) or OceanFirst Financial Corp. (OCFC), reveals that UNB's loan growth of 12.6% is relatively strong.
• However, the decrease in net income of 22.2% is a concern, and its performance should be benchmarked against peers to assess whether this is an isolated incident or indicative of broader challenges.
• The increase in interest expense of 53.6% is significant and should be compared to the industry average to determine if UNB is facing unique pressures on deposit costs.
• The company's efficiency ratio (noninterest expense as a percentage of revenue) should also be compared to peers to assess its operational efficiency.

Stakeholder Impact

• Shareholders will receive a quarterly dividend of $0.36 per share.
• Employees may be affected by the company's efforts to manage expenses.
• Customers will continue to have access to commercial, retail, and municipal banking services.
• The company's commitment to community development will continue to benefit local communities.

Key Dates