10-K: Union Bankshares Reports Strong 2025 Earnings Growth

Union Bankshares, Inc. reported a significant increase in net income for 2025, driven by higher net interest income and strategic balance sheet repositioning, despite a challenging interest rate environment.

Summary

• Net income increased to $11.1 million in 2025 from $8.8 million in 2024, representing a 26.4% year-over-year growth.
• Basic earnings per share rose to $2.43 in 2025 from $1.94 in 2024, and diluted earnings per share increased to $2.41 from $1.92.
• Net interest margin improved to 2.93% for the year ended December 31, 2025, compared to 2.77% for 2024.
• Total consolidated assets grew by 5.8% to $1.62 billion at December 31, 2025, from $1.53 billion at December 31, 2024.
• Total investments increased by 30.1% to $328.3 million, including a strategic purchase of approximately $75.0 million in higher-yielding AFS securities during the fourth quarter of 2025.
• Net loans and loans held for sale increased by 1.5% to $1.17 billion at December 31, 2025.
• Total deposits increased by 3.9% to $1.21 billion at December 31, 2025.
• Book value per share increased to $17.53 at December 31, 2025, from $14.65 as of December 31, 2024.
• Nonperforming assets to total assets significantly increased to 0.85% in 2025 from 0.12% in 2024, primarily due to a commercial real estate loan relationship placed in nonaccrual status.
• Credit loss expense decreased to $774 thousand in 2025 from $930 thousand in 2024.
• Unrealized losses in the AFS investment securities portfolio improved to $33.1 million at December 31, 2025, from $43.6 million at December 31, 2024.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a strong performance, with significant growth in net income and key profitability metrics, despite an increase in nonperforming assets which appears to be an isolated incident. The strategic capital raise and investment portfolio repositioning are positive forward-looking actions.

Positives

• Net income increased by 26.4% year-over-year to $11.1 million.
• Basic earnings per share increased to $2.43 from $1.94.
• Net interest margin expanded to 2.93% from 2.77%.
• Return on average assets improved to 0.71% from 0.60%.
• Return on average equity significantly increased to 15.29% from 13.38%.
• Efficiency ratio improved to 75.14% from 77.62%, indicating better cost management.
• Total consolidated assets grew by 5.8% to $1.62 billion.
• Total investments increased by 30.1% to $328.3 million, including a strategic purchase of $75.0 million in higher-yielding AFS securities in Q4 2025.
• Net unrealized losses on AFS investment securities decreased by $10.5 million.
• Book value per share increased by 19.7% to $17.53.
• Union Bank maintained a 'well capitalized' status under applicable regulatory guidelines.
• Union received an 'Outstanding' CRA rating from its most recent FDIC compliance examination.
• Strong residential mortgage loan origination activity, with $143.5 million sold to the secondary market in 2025, generating $2.1 million in gains.
• Wealth management income increased by 11.2% to $1.187 million.
• The company successfully issued 56,260 shares of common stock under its at-the-market offering, raising $1.2 million net proceeds.

Negatives

• Nonperforming assets to total assets significantly increased to 0.85% in 2025 from 0.12% in 2024, primarily due to a single commercial real estate loan relationship.
• Nonaccrual loans increased substantially to $13.562 million in 2025 from $1.652 million in 2024.
• ACL on loans to nonperforming loans decreased significantly to 60.91% in 2025 from 405.71% in 2024, indicating reduced coverage for the increased nonperforming loans.
• Service fee income decreased by $101 thousand (1.4%) in 2025.
• Other income decreased by $119 thousand (42.5%) in 2025, mainly due to lower prepayment penalties.
• Salaries and wages increased by $1.8 million, partly due to a paid time off (PTO) policy change and an increase in the annual incentive plan accrual.
• Employee benefits expense increased by $763 thousand, primarily due to a 401k profit sharing accrual in 2025 compared to no contribution in 2024.
• FDIC insurance assessment increased by $310 thousand (26.6%) due to higher assessment rates and overall asset growth.
• Donations decreased by $133 thousand (38.7%) due to non-recurring contributions in 2024.
• Electronic banking expense increased by $136 thousand (27.0%) due to software initiatives implemented in late 2024.
• Advertising and public relations costs increased by $156 thousand (22.2%).
• The company continues to rely on more expensive wholesale funding (FHLB advances and brokered deposits) to support loan growth, which are not preferred funding sources.

Risks

• Loans are concentrated in northern Vermont and New Hampshire, making operations vulnerable to adverse local economic conditions and real estate market fluctuations.
• The allowance for credit losses may not be sufficient to cover actual loan losses, potentially requiring increases that could decrease earnings.
• Commercial, commercial real estate, and construction loan portfolios expose the company to increased credit risks due to dependence on borrower business conditions and collateral values.
• Changes in interest rates and interest rate volatility may reduce profitability and net interest income.
• The fair value of investment securities can fluctuate due to factors outside of control, and impairment could require charges to earnings.
• A lack of liquidity could adversely affect the company's financial condition and results of operations and result in regulatory restrictions.
• Elevated and volatile interest rates have reduced the value of the company's securities portfolio, and the company could realize losses if it is required to sell such securities to meet liquidity needs.
• Potential deterioration in the performance or financial position of the Federal Home Loan Bank ('FHLB') of Boston might restrict funding needs and adversely impact financial condition and results of operations.
• Prepayments of loans may negatively impact the business if funds cannot be re-lent or reinvested at the same or higher interest rates.
• Environmental liability associated with lending activities could result in losses if foreclosed properties have material environmental violations.
• Operating in a highly regulated environment, the company may be adversely affected by changes in laws, regulations, and monetary policy.
• Additional requirements imposed by the Dodd-Frank Act could adversely affect profitability, limit the ability to make certain loans, or increase costs.
• Stringent capital requirements may adversely impact return on equity, require additional capital raises, or limit the ability to pay dividends or repurchase shares.
• The company may incur fines, penalties, and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations.
• Significant legal risks exist from regulatory investigations and proceedings, as well as from private actions brought against the company.
• Changes in accounting standards can be difficult to predict and can materially impact how financial condition and results of operations are recorded and reported.
• Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may adversely impact financial statements.
• The company may be required to write down goodwill and other identifiable intangible assets if they are impaired.
• The accuracy of financial statements and related disclosures could be affected if the judgments, assumptions, or estimates used in critical accounting policies are inaccurate.
• If the company does not maintain net income growth, the market price of its common stock could be adversely affected.
• As a holding company, the company depends on Union Bank for dividends, distributions, and other payments.
• Stockholders may not receive dividends on common stock, as declaration is discretionary and subject to regulatory restrictions.
• The company may need to raise additional capital in the future, and such capital may not be available when needed or on acceptable terms.
• Market volatility, including from high-profile bank failures, may impact the business and the value of common stock.
• Certain provisions of the articles of incorporation may have an anti-takeover effect.
• If the company identifies any material weakness in its internal controls over financial reporting and fails to correct it, or otherwise fails to maintain effective internal controls, it may not be able to report financial results accurately and timely.
• Environmental, social, and governance (ESG) oversight may influence the company's stock price and increase compliance costs.
• The company is exposed to losses from fraud, theft, and other financial crimes, which could adversely affect results of operations and financial condition.
• A failure in or breach of operational systems, information systems, or infrastructure, or those of third-party vendors and other service providers, may result in financial losses, loss of customers, or damage to reputation.
• An interruption or breach in security of information systems or those related to merchants and third-party vendors, including as a result of cyber attacks, could disrupt business, result in data disclosure/misuse, damage reputation, or result in financial losses.
• The company relies on other companies to provide key components of its business infrastructure.
• Piloting and selectively using artificial intelligence and machine learning technologies in limited, primarily internal functions, exposes the company to operational, regulatory, and reputational risks.
• Competition in the local banking industry may impair the ability to attract and retain customers at current levels.
• The company may incur significant losses as a result of ineffective risk management processes and strategies.
• Expansion or contraction of the branch network may adversely affect financial results.
• The company must adapt to information technology changes in the financial services industry, which could present operational issues, require significant capital spending, or impact reputation.
• External economic factors, such as changes in monetary policy and inflation and deflation, may have an adverse effect on business, financial condition, and results of operations.
• Financial condition and results of operations have been adversely affected, and may continue to be adversely affected, by general market and economic conditions.
• Business and financial results may also be affected by changes in government policies following the 2024 U.S. election and the new administration.
• The company may be unable to attract and retain key personnel.
• The company is subject to reputational risk, which could harm business prospects and adversely affect financial condition and results of operations.
• The company faces significant and increasing competition in the financial services industry, including from financial technology companies.

Future Outlook

Management projects some relief in the cost of funds for 2026 due to the cumulative 75 basis points decrease in the Federal Funds target range during 2025. However, the macroeconomic and geopolitical environment remains subject to uncertainties, including geopolitical conflicts, tariffs, federal government shutdowns, capital markets volatility, and inflation, which could lead to slower or negative economic growth and a challenging business environment.

Management Comments

• "Through prudent execution and a sustained focus on core relationship banking, the Company achieved meaningful growth in net income, expanded net interest margin, and improved key profitability and capital metrics year over year."
• "These results underscore the resilience of the Company's business model and its ability to adapt effectively to evolving monetary policy and market conditions while maintaining strong capital and liquidity positions."
• "We continue to manage the net interest margin and spread by remaining disciplined on loan and deposit pricing, utilizing FHLB advances and brokered CDs when appropriate to reduce our exposure to high short-term interest rates, and maximizing our balance sheet collateral (i.e. loans and investment securities) to obtain wholesale funding in a cost effective way to fund loan growth."
• "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."
• "Management believes the Company has sufficient liquidity to meet all reasonable borrower, depositor, and creditor needs in the present economic environment."
• "Management is projecting some relief in the cost of funds for 2026 as interest rates on customer deposits decline in 2026 due to the cumulative 75 bps decrease in the Federal Funds target range during 2025."

Industry Context

StockSavvy.ai notes that Union Bankshares' performance reflects a broader trend among community banks that successfully navigate volatile interest rate environments through disciplined balance sheet management and a focus on core relationship banking. The increase in nonperforming assets, while notable, appears to be an isolated incident rather than a systemic issue, which is crucial in a sector sensitive to credit quality. The strategic repositioning of the investment portfolio to higher-yielding assets aligns with industry efforts to optimize net interest income amidst changing monetary policies.

Comparison to Industry Standards

• Union Bank's Return on Average Equity (15.29% in 2025) significantly outperforms the S&P U.S. SmallCap Banks Index, which showed a cumulative total shareholder return of 160.37% from 2019-2025, suggesting strong internal profitability relative to its peer group.
• The improvement in the efficiency ratio to 75.14% in 2025 from 77.62% in 2024 indicates better cost management, which is a positive trend compared to many regional banks facing rising operational costs.
• The increase in nonperforming assets to 0.85% in 2025, primarily due to a single commercial real estate loan, warrants close monitoring as it deviates from the generally low nonperforming asset ratios seen in well-managed community banks.
• The company's 'Outstanding' CRA rating from the FDIC positions it favorably against competitors, demonstrating strong community engagement and compliance, which can be a competitive advantage in local markets.

Management Changes

Corporate Governance

Legal Proceedings

• No known pending legal proceedings to which the Company or its subsidiary is a party, or to which any of their properties is subject, other than ordinary litigation arising in the normal course of business activities. Management believes any such liability would not have a material effect on the consolidated financial position or results of operations.

Related Party Transactions

• Banking transactions with principal stockholders, directors, principal officers, their immediate families, and affiliated companies are conducted in the ordinary course of business on the same terms as with unrelated parties.
• Aggregate loan transactions with related parties increased to $16.620 million at December 31, 2025, from $127 thousand at December 31, 2024. This increase includes $16.5 million in existing loans associated with a new director appointed to the Union board of directors during the fourth quarter of 2025.
• Deposit accounts of related parties were $8.8 million at December 31, 2025, compared to $1.5 million at December 31, 2024.
• No loans to related parties were past due, in nonaccrual status, restructured due to financial deterioration, or considered classified at December 31, 2025 or 2024.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, EPS, book value per share, and stable dividends. Potential for further value creation through the at-the-market offering and stock repurchase plan. Risk of stock price volatility due to market conditions and increased nonperforming assets.
• Employees: Continued competitive compensation, comprehensive benefits (medical, dental, 401k), and training/development opportunities. New executive leadership transition.
• Customers: Continued focus on community banking niche, superior customer service, and diverse financial products (retail, commercial, wealth management). Expansion into New Hampshire.
• Communities: Ongoing commitment to economic vitality and social welfare through charitable donations and programs like 'Save for Success.' Compliance with CRA requirements (Outstanding rating).
• Creditors: Strong capital and liquidity positions, with Union Bank categorized as 'well capitalized,' providing assurance. Subordinated notes provide Tier 2 capital.

Next Steps

• Jeffrey F. Weidley to assume the additional title and duties of CEO of the Company and the Bank effective July 3, 2026.
• Jeffrey F. Weidley to be nominated for election to the Board of Directors of the Company at the 2026 annual meeting of shareholders.
• The next say-on-pay and say-on-frequency advisory votes are scheduled to occur at the 2028 annual meeting.
• Management projects some relief in the cost of funds for 2026 as interest rates on customer deposits decline.
• The quarterly stock repurchase authorization expires on December 31, 2026, unless reauthorized.
• The company is currently assessing the updated guidance from ASU No. 2025-06 (Intangibles—Goodwill and Other—Internal-Use Software).

Key Dates

Recommendation

Union Bankshares demonstrated strong financial performance in 2025 with significant net income and EPS growth, improved net interest margin, and increased book value per share. The strategic repositioning of its investment portfolio and ongoing capital management efforts are positive. However, the notable increase in nonperforming assets, even if attributed to a single commercial real estate loan, warrants close monitoring. The transition in executive leadership also introduces a degree of uncertainty. While the company shows resilience and strategic acumen, the increased credit risk metrics suggest a 'hold' recommendation until the impact of the nonperforming assets is fully assessed and the new leadership's strategic direction is clearer.

Keywords

Community Banking, Financial Services, Vermont, New Hampshire, SEC Filing, 10-K, Union Bankshares, UNB, Net Income, EPS, Net Interest Margin, Loan Growth, Deposit Growth, Asset Quality, Nonperforming Assets, Regulatory Capital, Wealth Management, Mortgage Lending, Cybersecurity, Interest Rate Risk, Credit Risk, Capital Raise, Stock Repurchase, Corporate Governance, AI, Machine Learning