UNB 10-K & 10-Q changes, risk factors and insider trading
Union Bankshares Inc. · Nasdaq · State Commercial Banks · CIK 706863 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Accounting and Tax Risks”
New heading “Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may adversely impact our financial statements.”
New heading “We are exposed to losses from fraud, theft, and other financial crimes, which could adversely affect our results of operations and financial condition.”
New heading “We are piloting and selectively using artificial intelligence and machine learning technologies in limited, primarily internal functions, which exposes us to operational, regulatory, and reputational risks that could adversely affect our business.”
Removed heading “Our financial statements are based in part on assumptions and estimates, which, if wrong, could cause unexpected losses in the future.”
Largest changes
“As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the trading value of previously issued government and other fixed income securities has declined significantly. These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the securities portfolios. …”see in full comparison
“We are piloting and selectively using artificial intelligence and machine learning technologies in limited, primarily internal functions, which exposes us to operational, regulatory, and reputational risks that could adversely affect our business.”see in full comparison
“When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired determines the amount of the purchase price that is allocated to goodwill acquired. At December 31, 2025, there was no remaining unamortized identifiable intangible asset and our goodwill from the 2011 Branch Acquisition was approximately $2.2 million. …”see in full comparison
“When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired determines the amount of the purchase price that is allocated to goodwill acquired. At December 31, 2024, there was no remaining unamortized identifiable intangible asset and our goodwill from the 2011 Branch Acquisition was approximately $2.2 million. …”see in full comparison
“Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may adversely impact our financial statements.”see in full comparison
“State or federal tax authorities may interpret tax laws and regulations differently than we do and challenge tax positions that we have taken on tax returns. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have a material adverse effect on our results. …”see in full comparison
Full comparison: every changed paragraph (34)
As a lender, we are exposed to the risk that our loan customers may not repay their loans according to their terms and that the collateral or guarantees securing these loans may be insufficient to assure repayment. The underwriting and credit monitoring policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows. We maintain an allowance for credit losses to provide for loan defaults and non-performance, which also includes increases for new loan growth. While we believe that our allowance for credit losses is appropriate to cover expected losses, we cannot provide assurance that we will not increase the allowance for credit losses further or that regulators will not require us to increase the allowance for credit losseslosses, which could have a material adverse effect on our net income and financial condition.
Our consolidated earnings and financial condition are primarily dependent upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. Net interest income can be affected significantly by changes in market interest rates. In particular, changes in relative interest rates may reduce our net interest income as the difference between interest income and interest expense decreases. As a result, we have adopted asset and liability management policies to minimize the potential adverse effects of changes in interest rates on net interest income, primarily by altering the mix and maturity of loans, investments and funding sources. However, despite these measures there can be no assurance that a change in interest rates will not negatively impact our results of operations or financial condition. Because market interest rates may change by differing magnitudes and at different times, significant changes in interest rates over an extended period of time could reduce overall net interest income.
Because market interest rates may change by differing magnitudes and at different times, significant changes in interest rates over an extended period of time could reduce overall net interest income.
RisingElevated and volatile interest rates have decreasedreduced the value of the Company’s securities portfolio, and the Company wouldcould realize losses if it wereis required to sell such securities to meet liquidity needs.
The Company’s securities portfolio consists primarily of fixed income securities whose market values are sensitive to changes in interest rates. Although interest rates have declined somewhat over the past year and a half, rates remain elevated compared to historical levels; and are subject to volatility. As a result, the trading values of previously issued government and other fixed income securities continue to be lower than their historical levels, resulting in unrealized losses embedded in the Company’s securities portfolio.
While unrealized losses do not directly affect earnings unless realized, they reduce the market value of securities that may otherwise serve as a source of liquidity. The Company generally intends to hold its investment securities to maturity or recovery of amortized cost and does not currently anticipate selling such securities. However, under certain circumstances—including unanticipated deposit outflows, reduced access to wholesale funding markets, or other liquidity stress events—the Company may be required to sell securities prior to maturity.
If the Company were to sell securities in a period of elevated interest rates or adverse market conditions, it could be required to realize losses that were previously unrealized. Such realized losses could adversely affect the Company’s earnings, regulatory capital ratios, financial condition, and results of operations, and could limit financial flexibility or require the Company to raise additional capital or funding on less favorable terms.
Although the Company has taken, and continues to take, actions to manage interest rate risk and diversify its funding sources, including maintaining contingent liquidity resources and rebalancing its investment portfolio, there can be no assurance that these measures would be sufficient to prevent the need to sell securities at unfavorable prices in the event of significant or sustained liquidity stress.
As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the trading value of previously issued government and other fixed income securities has declined significantly. These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the securities portfolios. While the Company does not currently intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability. While the Company has taken actions to diversify its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
Generally, our customers may prepay the principal amount of their outstanding loans at any time. The speed at which such prepayments occur, as well as the size of such prepayments, are within our customers’ discretion.discretion and are influenced by the interest rate environment, over which we have no control. If customers prepay the principal amount of their loans, and we are unable to lend those funds to other borrowers or invest the funds at the same or higher interest rates, our interest income will be reduced. A significant reduction in interest income could have a negative impact on our results of operations and financial condition.
Current and future legal and regulatory requirements, restrictions, and regulations, including those imposed under the Dodd-Frank Act,regulations may adversely impact our profitability and may have a material and adverse effect on our business, financial condition, or results of operations; may require us to invest significant management attention and resources to evaluate and make any changes required by the legislation and related regulations; and may make it more difficult for us to attract and retain qualified executive officers and employees.
We are subject to stringent capital requirements which may adversely impact our return on equity, require additional capital raises, or limit theour ability to pay dividends or repurchase shares.
From time to time we are named as a defendant or are otherwise involved in various legal proceedings. There is no assurance that litigation with private parties will not increase in the future. Future actions against us may result in judgments, settlements, fines, penalties or other results adverse to us, which could materially adversely affect our business, financial condition or results of operations, or cause serious reputational harm to us. As a participant in the financial services industry, we are exposed to a high level of litigation related to our businessesbusiness and operations. Although we maintain insurance, the scope of this coverage may not provide us with full, or even partial, coverage in any particular case. As a result, a judgment against us in any such litigation could have a material adverse effect on our financial condition and results of operation.
Accounting and Tax Risks
Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may adversely impact our financial statements.
State or federal tax authorities may interpret tax laws and regulations differently than we do and challenge tax positions that we have taken on tax returns. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have a material adverse effect on our results. In addition, there may be future changes to tax laws, administrative rulings or court decisions that could adversely affect our financial condition, including an increased provision for income taxes and/or reduced net income. We are not able to predict the timing or impact of any changes in state or federal tax laws. The taxing authorities also regulate the information reporting requirements that Union is subject to, and which continue to increase and require resources to comply with.
When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired determines the amount of the purchase price that is allocated to goodwill acquired. At December 31, 2025, there was no remaining unamortized identifiable intangible asset and our goodwill from the 2011 Branch Acquisition was approximately $2.2 million. Under current accounting standards, if we determine that goodwill or intangible assets are impaired, we would be required to write down the value of these assets to fair value. We conduct an annual review, or more frequently if events or circumstances warrant, to determine whether goodwill is impaired. We recently completed our goodwill impairment analysis as of December 31, 2025 and concluded goodwill was not impaired. We conduct a review of our other intangible assets for impairment should events or circumstances warrant. We cannot provide assurance that we will not be required to take an impairment charge in the future. Any impairment charge would have a negative effect on our shareholders’ equity and financial results and may cause a decline in our stock price.
Our financial statements are based in part on assumptions and estimates, which, if wrong, could cause unexpected losses in the future.
Pursuant to GAAP, we are required to use certain assumptions and estimates in preparing our financial statements, including in determining credit loss reserves, the fair value of certain assets and liabilities and reserves related to litigation, among other items. If the assumptions or estimates underlying our financial statements are incorrect, we may experience material losses.
Holders of our common stock are entitled to receive dividends only when, as and if declared by our board of directors. Although we have historically declared regular quarterly cash dividends on our common stock, we are not required to do so and our board of directors may reduce or eliminate our common stock dividenddividend, or change the frequency at which dividends are paid, in the future. The FRB has the authority to prohibit a bank holding company, such as us, from paying dividends if it deems such payment to be an unsafe or unsound practice. The FDIC has the authority to use its enforcement powers to prohibit Union from paying dividends to us if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal law also prohibits the payment of dividends by a bank that will result in the bank failing to meet its applicable capital requirements on a pro forma basis. Further, our ability to pay dividends would be restricted if we do not maintain a required capital conservation buffer under applicable regulatory capital rules. A reduction or elimination of dividends could adversely affect the market price of our common stock.
Our business performance and the trading price of our common stock may be affected by many factors affecting financial institutions, including the interest rate environment, volatility in the credit, mortgage and housing markets, the markets for securities relating to mortgages or housing, and the value of debt and mortgage-backed securities and other securities that we hold in our investment portfolio. Market volatility in financial institution stocks may also result from high profile bank failures. In addition, government action and legislation may impact us and the value of our common stock. We cannot predict what impact, if any, market volatility will have on our business or share price and for these and other reasons our shares of common stock may trade at a price lower than that at which they were purchased.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting and for evaluating and reporting on our system of internal controls. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. We are required to comply with the FDICIA and other rules that govern financial institutions with total assets of $1 billion or more. In particular, we are required to provide management's report on the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting.
We are subject to FDICIA and other rules that govern financial institutions. Recent amendments to FDICIA and its implementing regulations increased the asset-size thresholds and modified certain requirements related to internal control reporting and auditor attestation. Under the revised framework, institutions that meet applicable asset thresholds are required to provide management’s assessment of the effectiveness of internal control over financial reporting, and institutions that exceed higher asset thresholds are also required to obtain an attestation report from their independent registered public accounting firm on the effectiveness of those controls. While these changes may affect the scope, timing, and cost of compliance, they do not reduce management’s responsibility to maintain effective internal controls over financial reporting or the risk that control deficiencies could arise. As we grow or as regulatory requirements evolve, we may become subject to additional or more stringent FDICIA requirements, including expanded documentation, testing, and governance expectations.
We are exposed to losses from fraud, theft, and other financial crimes, which could adversely affect our results of operations and financial condition.
We face the risk of losses arising from fraudulent or criminal activity, including unauthorized transactions, account takeovers, forged, altered, or counterfeit instruments, and other schemes targeting our customers, employees, or systems. These risks include, among others, check fraud, wire and ACH fraud, debit card fraud, mobile and remote deposit fraud, and other payment‑related misconduct. Fraudulent activity may be difficult to detect or prevent, particularly where transactions are initiated through customer channels or where applicable funds availability requirements require us to make funds available before fraudulent activity is identified. Despite the implementation of fraud detection systems, internal controls, customer authentication procedures, and employee training, such measures may not be effective in preventing all losses. Losses resulting from fraud may result in direct financial exposure, customer reimbursement obligations, litigation, regulatory scrutiny, reputational harm, or increased operational and compliance costs. In addition, evolving fraud techniques, including those that exploit remote deposit capture and other electronic delivery channels, may increase the frequency or severity of losses. Any of these factors could adversely affect our business, results of operations, and financial condition.
We are piloting and selectively using artificial intelligence and machine learning technologies in limited, primarily internal functions, which exposes us to operational, regulatory, and reputational risks that could adversely affect our business.
We have begun piloting artificial intelligence (“AI”) and machine learning tools in certain internal and support functions, such as data analysis, fraud monitoring support, compliance processes, and operational efficiency initiatives. These technologies are complex and evolving, and our experience with them remains limited. AI systems may produce inaccurate, incomplete, or misleading outputs, or behave in ways that are difficult to predict or explain. Errors or failures in these tools—whether due to data limitations, model design, third‑party technology, or employee misuse—could impair decision‑making, reduce the effectiveness of internal controls, or require us to suspend or modify pilot programs.
The legal and regulatory framework governing AI use in banking is developing and uncertain. Banking regulators have increased focus on governance, risk management, and controls related to emerging technologies, including AI. Although our current AI use is limited, our existing policies, procedures, and internal control frameworks may not fully address the risks associated with AI technologies. If regulators determine that our oversight, documentation, or controls are inadequate, we could be required to enhance governance, incur additional compliance costs, or limit future use of AI tools.
In addition, even limited AI use may create reputational risk. Internal system failures, data issues, cybersecurity incidents, or negative perceptions regarding the appropriateness of AI use in banking could adversely affect our relationships with customers, regulators, and other stakeholders. As we evaluate whether to expand AI use over time, these risks may increase and could have a material adverse effect on our business, results of operations, or financial condition.
The Company cannot assure that the opening of new branches will be accretive to earnings or that it will be accretive to earnings within a reasonable period of time.time or at all. Numerous factors contribute to the performance of a new branch, such as suitable location, qualified personnel, and an effective marketing strategy. Additionally, it takes time for a new branch to gather sufficient loans and deposits to generate income sufficient to cover its operating expenses. Difficulties we experience in opening new branches may have a material adverse effect on the our financial condition and results of operations. Additionally, we cannot assure that the closing of branches would not adversely affect earnings.
The financial services industry is constantly undergoing technological changes, with frequent introductions of new technology-driven products and services. We invest significant resources in information technology system enhancements in order to meet customer expectations and provide functionality and security at an appropriate level. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully implement and integrate future system enhancements could adversely impact theour ability to provide timely and accurate financial information in compliance with legal and regulatory requirements, which could result in sanctions from regulatory authorities. Such sanctions could include fines and suspension of trading in our stock, among others. In addition, future system enhancements could have higher than expected costs and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations.
We are dependent on our reputation within our market area, as a trusted and responsible financial service provider, for all aspects of our relationships with customers, employees, vendors, third-party service providers, and others, with whom we conduct business or potential future business. Our actual or perceived failure to (i) identify and address potential conflicts of interest, ethical issues, money-laundering, or privacy issues; (ii) meet legal and regulatory requirements applicable to Union and to the Company; (iii) maintain the privacy of customer and accompanying personal information; or (iv) maintain adequate record keeping; andor (v) identify the legal, reputational, credit, liquidity and market risks inherent in our products, could give rise to reputational risk that could harm our business prospects and adversely affect our financial condition and results of operations. If we fail to address any of these issues in an appropriate manner, we could be subject to additional legal risks, which, in turn, could increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur related costs and expenses. Our ability to attract and retain customers and employees could be adversely affected to the extent our reputation is damaged.
We operate in a highly competitive environment that includes financial and non-financial services firms, including traditional banks, online banks, financial technology companies, wealth management companies and others. These companies compete on the basis of, among other factors, size, quality and type of products and services offered, price, technology and reputation. Emerging technologies have the potential to intensify competition and accelerate disruption in the financial services industry. In recent years, non-financial services firms, such as financial technology companies, have begun to offer services traditionally provided by financial institutions. These firms attempt to use technology and mobile platforms to enhance the ability of companies and individuals to make payments, borrow money, save and invest. Our ability to compete successfully depends on a number of factors, including our ability to develop and execute strategic plans and initiatives; to develop competitive products and utilize evolving technologies; and to attract, retain and develop a highly skilled employee workforce. If we are not able to compete successfully, we could be placed at a competitive disadvantage, which could result in the loss of customers and market share, and our business, results of operations and financial condition could suffer.
When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired determines the amount of the purchase price that is allocated to goodwill acquired. At December 31, 2024, there was no remaining unamortized identifiable intangible asset and our goodwill from the 2011 Branch Acquisition was approximately $2.2 million. Under current accounting standards, if we determine that goodwill or intangible assets are impaired, we would be required to write down the value of these assets to fair value. We conduct an annual review, or more frequently if events or circumstances warrant such, to determine whether goodwill is impaired. We recently completed our goodwill impairment analysis as of December 31, 2024 and concluded goodwill was not impaired. We conduct a review of our other intangible assets for impairment should events or circumstances warrant. We cannot provide assurance that we will not be required to take an impairment charge in the future. Any impairment charge would have a negative effect on our shareholders’ equity and financial results and may cause a decline in our stock price.
Management's Discussion & Analysis (MD&A)
New heading “(5)The ratio of total capital to risk weighted assets is a regulatory capital measurement. See Note 23 to the Company's consolidated financial statements for more information.”
New heading “(5)Net interest spread is the tax equivalent average yield on average interest earning assets less the average rate paid on interest bearing liabilities.”
New heading “(6)Net interest margin is the ratio of net interest income, on a tax equivalent basis, to average interest earning assets.”
Largest changes
“Investment securities classified as AFS are marked-to-market, with any unrealized gain or loss after estimated taxes charged to the equity portion of the balance sheet through the accumulated OCI component of stockholders' equity. The unrealized losses 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 December 31, 2025 and 2024. …”see in full comparison
Net unrealized losses in the Company's AFS investment securities portfolio weresee in full comparison$43.6$33.1 million at December 31,20242025 compared to net unrealized losses of$41.0$43.6 million at December 31,2023.2024. The Company's accumulated OCI component of stockholders' equity at December 31,20242025 and20232024 reflected cumulative net unrealized losses on investment securities of$34.0$25.9 million and$32.0$34.0 million, respectively.The unrealized losses are primarily attributable to changes in long-term interest rates which are tied to the pricing indexes for the securities. No declines in valueThere weredeemednobyinvestmentmanagementsecuritiestoclassifiedbeasimpairmentHTMrelatedortoascredit lossestrading at December 31,2024 and 2023. 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 gains2025 orlosses 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.2024.
“Despite a persistently challenging operating environment in 2025, characterized by elevated interest rates for much of the year, funding cost pressures, and ongoing economic and geopolitical uncertainty, the Company delivered solid financial performance and continued to strengthen its balance sheet. While the Federal Reserve implemented a series of interest rate reductions during the second half of the year, rates remained relatively high overall, requiring continued discipline in balance sheet management and pricing strategies. …”see in full comparison
“The current macroeconomic and geopolitical environment is subject to a number of uncertainties, including geopolitical conflicts, tariffs or changes in trade policies, the impact of federal government shutdowns, 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. …”see in full comparison
“(5)The ratio of total capital to risk weighted assets is a regulatory capital measurement. See Note 23 to the Company's consolidated financial statements for more information.”see in full comparison
“(5)Net interest spread is the tax equivalent average yield on average interest earning assets less the average rate paid on interest bearing liabilities.”see in full comparison
Full comparison: every changed paragraph (105)
Despite a persistently challenging operating environment in 2025, characterized by elevated interest rates for much of the year, funding cost pressures, and ongoing economic and geopolitical uncertainty, the Company delivered solid financial performance and continued to strengthen its balance sheet. While the Federal Reserve implemented a series of interest rate reductions during the second half of the year, rates remained relatively high overall, requiring continued discipline in balance sheet management and pricing strategies. 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.
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 increased, primarily driven by increased utilization of wholesale funding and an overall increase in rates on customer deposits. The net interest spread and net interest margin both improved, reflecting the overall positive impact of these changes, despite higher funding costs.
The Company, like other financial institutions, has experienced earnings pressure due to the prolonged and steep yield curve inversion. The sharp increases in short-term rates during 2022 and 2023 have had a significant impact on the Company's funding costs due to higher rates paid on deposit accounts and increased utilization of wholesale funding at higher costs. The Company’s financial position remains strong, supported by a diverse deposit base, a strong liquidity position, excellent asset quality, and regulatory capital in excess of all required levels. The Company continues to focus on gathering deposits, optimization of the net interest margin and maintaining strong asset quality.
The Company's earnings have been impacted by the inverted yield curve, as deposit and funding costs have risen at a faster pace than assets have repriced, which has resulted in compression of the net interest margin and spread. The net interest margin was 2.93% for the year ended December 31, 2025 compared to 2.77% for the year ended December 31, 2024 compared to 2.88% for the year ended December 31, 2023,2024, while the net interest spreadsspread for the same periods were 2.30%2.47% and 2.50%,2.30%, respectively. 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.
The Company completed a balance sheet repositioning related to its investment securities portfolio during the third quarter of 2024. The sale of lower-yielding AFS debt securities with a book value of $38.5 million was executed and recorded in August of 2024, resulting in a pre-tax realized loss on the sale of $1.3 million. The proceeds from the sale of these securities were used to purchase $26.0 million of AFS debt securities at higher yields to improve income going forward, and the remainder was used to fund loan growth. The Company estimates the loss on the sale will be recouped within approximately one year.
The Company's consolidatedConsolidated net income was $8.8$11.1 million, with basic earnings per share of $1.94$2.43 for 20242025 compared to consolidated net income of $11.3$8.8 million, and basic earnings per share of $2.50$1.94 for 2023,2024, while diluted earnings per share for the same periods were $1.92$2.41 and $2.48,$1.92, respectively. The decreaseincrease in net income was due to the combined effects of the $1.3 million pre-tax realized loss on the sale of AFS debt securities discussedduring above,2024 that did not recur in 2025, increases in noninterestnet expensesinterest income of $2.7$4.7 million, or 7.5%,million and $1.4noninterest millionincome of $446 thousand, and a decrease of $156 thousand in credit loss expense, partially offset by increases of $1.1 million in noninterest income, excluding the loss on the saleexpenses of AFS$3.7 debt securities, an increase in net interest income of $521 thousand or 1.4%,million and a reduction in the provision for income taxes of $1.3$559 million, or 77.2%.thousand.
Sales of qualifying residential loans to the secondary market for the year ended December 31, 20242025 were $113.5$143.5 millionmillion, resulting in gain on sales of $1.7$2.1 million, compared to sales of $75.6$113.5 million and gain on sales of $1.2$1.7 million for the year ended December 31, 2023.2024.
As of December 31, 2024,2025, the Company had total consolidated assets of $1.53$1.62 billion, an increase of 4.0%5.8% compared to total consolidated assets of $1.47$1.53 billion at December 31, 2023.2024. Total investments decreasedincreased $13.6$76.0 million, or 5.1%,30.1%, to $328.3 million, or 20.3% of total assets at December 31, 2025 compared to $252.3 million, or 16.5% of total assets at December 31, 2024 compared to $265.9 million, or 18.1% of total assets, as of December 31, 2023.2024. Net loans and loans held for sale increased $128.9$17.1 million or 12.6%,1.5%, to $1.2$1.17 billion, or 72.5% of total assets, at December 31, 2025, compared to $1.16 billion, or 75.6% of total assets, at December 31, 2024, compared to $1.0 billion, or 69.9% of total assets, at December 31, 2023.2024. The level of federal funds sold decreased $62.6$3.0 million, or 85.4%,28.4%, to $7.6 million at December 31, 2025 compared to $10.7 million at December 31, 2024 compared to $73.2 million at December 31, 2023.2024.
Deposits decreased $136.7 million, or 10.5%, primarily due to a decrease in wholesale deposit funding. Total deposits were $1.21 billion at December 31, 2025 compared to $1.17 billion at December 31, 20242024, comparedan toincrease $1.31of billion$46.1 atmillion, Decemberor 31, 2023.3.9%. There were $103.0$10.0 million of retail brokered deposits and $50.2$248 millionthousand of purchased ICSCDARS deposits at December 31, 2023,2025 and no retail brokered deposits or purchased ICSCDARS deposits at December 31, 2024. Borrowed funds were $286.5 million at December 31, 2025 compared to $259.7 million at December 31, 2024 compared to $65.7 million at December 31, 2023.2024.
The Company's total capital increased from $65.8 million at December 31, 2023 to $66.5 million at December 31, 2024.2024 to $80.9 million at December 31, 2025. This increase primarily reflects net income of $8.8$11.1 million for 2024,2025 partiallyand offseta by an increasedecrease of $2.0$8.1 million in accumulated other comprehensive lossloss, andpartially offset by regular cash dividends paid of $6.5$6.6 million. (See Capital Resources on pages 4546 to 46.47.) These changes also resulted in an increase in the Company's book value per share to $14.65$17.53 at December 31, 20242025 from $14.56$14.65 as of December 31, 2023.2024.
The current macroeconomic and geopolitical environment is subject to a number of uncertainties, including geopolitical conflicts, tariffs or changes in trade policies, the impact of federal government shutdowns, 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 risks the Company faces, please see “Part I, Item 1A. Risk Factors".
Return on average assets is a financial metric often utilized as an indicator of a financial institution's performance. The Company's return on average assets decreased 22 bps for the year ended December 31, 2024 compared to 2023 due to an increase in average assets of $88.0 million and a decrease in net income of $2.5 million for the year ended December 31, 2024.
(5)The ratio of total capital to risk weighted assets is a regulatory capital measurement. See Note 23 to the Company's consolidated financial statements for more information.
For the year ended December 31, 2024,2025, net income was $8.8$11.1 million compared to $11.3$8.8 million for the year ended December 31, 2023.2024. The primary components of these results, which include net interest income, credit loss expense, noninterest income, noninterest expenses, and provision for income taxes, are discussed below:
Interest earnedearned, on a fully tax equivalent basis, on average earning assets for the year ended December 31, 20242025 was $68.0$76.8 million compared to $57.1$68.9 million for the year ended December 31, 2023,2024, an increase of $10.8$7.9 million, or 19.0%.11.5%. The average earning asset base increased $77.2$87.3 million between periods and the average yield on average earning assets increased 5424 bps to 5.09% for the year ended December 31, 2025 compared to 4.85% for the year ended December 31, 2024 compared to 4.31% for the year ended December 31, 2023.2024.
The average yield on federal funds sold and overnight deposits increaseddecreased 76103 bps between the twelve month comparison periods due to ana increasedecrease in the average balance maintained in Union's master account at the FRB and an increase in the average rate paid on these balances. Interest income on investment securities decreased $45 thousand between the comparison periods due to a decrease of $17.0 million in the average balance of the portfolio, partially offset by an increase of 5 bps in the average yield.
Interest income, on a fully tax equivalent basis, on investment securities increased $985 thousand between the comparison periods due to an increase of $2.0 million in the average balance of the portfolio and an increase of 32 bps in the average yield. The improvement in the average yield and interest income was attributable in part to the 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, as well as the strategic decision to position the investment portfolio for improved future cash flows and earnings with the purchase of approximately $75.0 million of investment securities AFS during the fourth quarter of 2025.
Interest incomeincome, on a fully tax equivalent basis, on loans increased $10.0$7.2 million between the twelve month comparison periods due to an increase in the average volume of loans outstanding of $83.6$90.4 million and an increase of 5719 bps in the average yield. LoanInterest demandincome hason remainedloans stableincreased $563 thousand and $445 thousand during 2024the despiteyear inflationaryended pressureDecember on31, construction materials2025 and low2024, housingrespectively, inventory.due to recoveries of interest from the payoff of loans that had previously been in nonaccrual. This resulted in a 5 bps increase in the average loan yield for the years ended December 31, 2025 and 2024.
Average interest bearing liabilities increased $95.7$89.8 million between the twelve month comparison periods due to an increaseincreases in average borrowed funds of $125.8$65.5 million partially offset by a decrease inand average interest bearing deposits of $30.1$24.2 million. The average rate paid on interest bearing liabilities increased 747 bps to 2.62% for the year ended December 31, 2025 compared to 2.55% for the year ended December 31, 2024 compareddue to 1.81%continued customer expectation of higher rates on deposit accounts along with utilization of wholesale funding at rates higher than deposit rates. Interest expense increased $3.2 million, to $32.8 million for the year ended December 31, 2023.2025 Interest expense increased $10.3 million,compared to $29.6 million for the year ended December 31, 2024 compared to $19.3 million for the year ended December 31, 2023. Higher rates paid on customer deposit accounts and utilization of higher cost funding of brokered deposits and advances from the FHLB and the FRB were drivers of the increase in interest expense.2024.
The net interest spread decreasedincreased 2017 bps to 2.30%2.47% for the year ended December 31, 2024,2025, from 2.50%2.30% for the same period last year, reflecting the net effect of the 7424 bps increase in the average yield earned on interest earning assets, partially offset by the 7 bps increase in the average rate paid on interest bearing liabilities, which was only partially offset by the 54 bps increase in the average yield earned on interest earning assetsliabilities between periods. The net interest margin decreasedincreased 1116 bps for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 as a result of the changes discussed above. Despite the decreases in the net interest spread and net interest margin, net interest income increased $521 thousand to $38.4 million for the year ended December 31, 2024 compared to $37.8 million for the year ended December 31, 2023.
Net interest income, on a fully tax equivalent basis, increased $4.8 million to $44.0 million for the year ended December 31, 2025 compared to $39.3 million for the year ended December 31, 2024.
During 2024, Union, like many other financial institutions, offered higher rate time deposit specials to attract new deposit dollars and retain existing customer deposits. Although some new money was obtained, a shift of funds from non-maturity deposits to time deposit specials occurred. Interest expense on time deposits increased $2.9 million to $11.6 million for the year ended December 31, 2024 compared to $8.7 million for the year ended December 31, 2023 due to increases in the average volume of $24.7 million and 74 bps in the average rate paid. Despite a decrease of $30.1 million in the average balance of savings/money market accounts, interest expense increased $1.4 million between the twelve month comparison periods due to an increase of 47 bps in the average rate paid on those accounts. Interest expense on interest bearing checking accounts increased $335 thousand between the twelve month comparison periods resulting from an increase of 20 bps in the average rate paid, which more than offset the decrease of $24.7 million in the average balance. The average volume of borrowed funds increased $125.8 million and the average rate paid on borrowed funds increased 39 bps between the twelve month comparison periods, resulting in a $5.6 million increase in interest expense.
(5)Net interest spread is the tax equivalent average yield on average interest earning assets less the average rate paid on interest bearing liabilities.
(6)Net interest margin is the ratio of net interest income, on a tax equivalent basis, to average interest earning assets.
Credit Loss Expense (Benefit).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 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:
•Service fees. Service fee income increaseddecreased $38$101 thousand for the year ended December 31, 20242025 compared to the same period in 20232024, primarily due to increases in loan servicing and service charge income, partially offset by decreases in ATM and debit card network fees, and merchant program fees, overdraft fees, and other loan related fees, partially offset by an increase in loan servicing fees.
•Net losses on sales of investment securities AFS. As discussed above, the Company completed a balance sheet repositioning related to its investment securities portfolio during 2024. The sale of lower-yielding AFS debt securities with a book value of $38.5 million was executed and recorded in August of 2024, resulting in a pre-tax realized loss on the sale of $1.3 million.
•Net gains on other investments. Participants in the 2020 Amended and Restated Nonqualified Excess Plan (the "2020 Deferred Compensation 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 $216 thousand and $189 thousand for the years ended December 31, 2024 and 2023, respectively.
•Income from Company-owned life insurance. Death benefit proceeds of $235$197 thousand were received in 2024,2025 whilecompared noto suchdeath benefit proceeds wereof $235 thousand received in 2023. Income also increased in 2024 due to a higher yield earned on the underlying life insurance policies.2024.
•Other income. The Company received $117 thousand in prepayment penalties from the early payoff of loans during 2024 that were not received in 2023.
Noninterest Expenses. The following table sets forth the components of noninterest expenses for the years ended December 31, 2024 and 2023:
The significant changes in noninterest expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 are described below:
•Salaries and wages. Salaries and wages increased $1.4 million due to annual salary adjustments for the 2024 fiscal year and a $380 thousand increase in the accrual amount for the annual incentive plan payments to select officers of Union for 2024 compared to 2023. In addition, $397 thousand of the increase related to a cash bonus payment to employees in December 2024 in lieu of a 401k profit sharing contribution that was included in employee benefits expense in 2023. The increase is also attributable to a separation of service agreement with an employee and the inclusion of salaries and wages for employees at our North Conway location, which became a full service branch during the fourth quarter of 2023.
•Employee benefits. Employee benefit expense increased $351 thousand due to increases of $496 thousand in premium expense for the Company's medical and dental plans, $132 thousand in payroll tax expense, and $15 thousand in employee benefits related to the Company's deferred compensation plans. These increases were partially offset by a decrease of $292 thousand in 401k contributions primarily due to no profit sharing contribution in 2024 compared to 2023 as discussed above.
•Occupancy expense, net. The increase in occupancy expense of $159 thousand is primarily due to increases in depreciation expense related to leasehold improvements to the North Conway location that became a full service branch during the fourth quarter of 2023, as well as increases in repair and maintenance expenses at other locations.
•Equipment expense. Equipment expense increased primarily due to an increase in software license and maintenance costs associated with outsourcing Union's core application processing system that was finalized during the fourth quarter of 2023.
•ATM and debit card expense. The $351 thousand increase between years primarily relates to the costs associated with outsourcing Union's core application processing system that was finalized during the fourth quarter of 2023, as well as costs associated with a change in the servicing arrangement in place for the ATM machines.
•FDIC insurance assessment. The FDIC insurance assessment increased by $169 thousand due to an increase in the assessment rate as well as overall growth in net assets.
•Vermont franchise tax. The Vermont franchise tax is determined based on a quarterly tax rate applied to the Company's average balance of Vermont customer deposit balances. The tax rate remained unchanged throughout 2024 and 2023; however, the average balances in Vermont deposit account balances decreased for the year ended December 31, 2024, resulting in a decrease in expense.
•Professional fees. Professional fees increased by $46 thousand due to annual increases in engagement fees and additional consultants that were engaged to assist with employment searches and other consulting services in 2024 that were not utilized in 2023.
•Advertising and public relations. The increase in advertising and public relations costs is primarily related to advertising campaigns and business development activities during 2024 that did not occur in 2023.
•Electronic banking expense. The increase in electronic banking expense related to software initiatives that were implemented to the online banking platform in the fourth quarter of 2024.
•Wealth management expenses. The $52 thousand increase was primarily attributable to the growth in managed fiduciary accounts and the associated data processing and professional services.
•Training and development. The cost associated with attending conferences and educational events during 2024 decreased $48 thousand compared to events attended in 2023.
•AmortizationIncome 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. AmortizationThe increase in the volume of residential loan sales discussed above resulted in new capitalized MSRs that exceeded the amortization of MSRs by $128 thousand for the year ended December 31, 2025. The amortization of MSRs exceeded the new capitalized MSRs resulting in net expense of $15 thousand and $316 thousand for the years2024 endedcomparison December 31, 2024period and 2023,the respectively.amortization is included in Other expenses in the consolidated statements of income.
•Other income. The Company received $25 thousand of prepayment penalties from the early payoff of loans during 2025 compared to $117 thousand of prepayment penalties received during 2024.
•Net gains on other investments. Participants in the 2020 Amended and Restated Nonqualified Excess Plan (the "2020 Deferred Compensation 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 $203 thousand and $216 thousand for the years ended December 31, 2025 and 2024, respectively.
•Net losses on sales of investment securities AFS. During the third quarter of 2024, the Company completed a balance sheet repositioning related to its investment securities portfolio in which the sale of lower-yielding AFS debt securities resulted in a pre-tax realized loss on the sale of $1.3 million.
Noninterest Expenses. The following table sets forth the components of noninterest expenses for the years ended December 31, 2025 and 2024:
The significant changes in noninterest expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 are described below:
•Salaries and wages. Salaries and wages increased $1.8 million primarily due to annual salary adjustments and new positions for the 2025 fiscal year, a $408 thousand increase in the accrual amount for the annual incentive plan payments to select officers of Union for 2025 compared to 2024, and a change in the paid time off (PTO) policy during 2025 resulting in an increase of $392 thousand from an accrual adjustment for the carryover of unused PTO outstanding as of December 31, 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 $13 thousand and $257 thousand for the years ended December 31, 2025 and 2024, respectively. The lower deferred loan origination cost for 2025 compared to 2024 is primarily attributable to loan origination levels. These increases were partially offset by a $397 thousand decrease related to a cash bonus payment to employees in December 2024 in lieu of a 401k profit sharing contribution that was included in employee benefits expense in 2025.
•Employee benefits. Employee benefit expense increased $763 thousand due to increases of $598 thousand in 401k plan contribution expense, $119 thousand in payroll tax expense and $81 thousand in premium expense for the Company's medical and dental plans. The increase in the 401k plan contribution expense resulted primarily from there being no profit sharing contribution in 2024 as discussed above compared to a $466 thousand profit sharing accrual in 2025.
•Occupancy expense, net. The increase in occupancy expense of $141 thousand is primarily due to utilities, repairs and maintenance, and depreciation expenses related to projects completed during 2025 compared to 2024. In addition, real estate tax expense increased $24 thousand between years due to rate increases in the towns with branch locations
•Equipment expense. Equipment expense increased between years primarily due to an increase in software license and maintenance costs.
•FDIC insurance assessment. The FDIC insurance assessment increased by $310 thousand due to an increase in the assessment rate as well as overall growth in net average assets.
•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 years primarily due to contributions made in 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.
•Electronic banking expense. Electronic banking expense increased $136 thousand primarily due to software initiatives that were implemented to the online banking platform in the fourth quarter of 2024.
•Communications. The decrease in communications expense relates primarily to contract changes taking effect during 2025 related to network and ATM communication systems.
•Wealth management expenses. The $53 thousand increase was primarily attributable to the growth in managed fiduciary accounts and the associated data processing and professional services.
What changed in the latest 10-Q
Risk Factors
There have been no material changes in the risk factors discussed in Part I-Item 1A, "Risk Factors" in the Company’s 2025 Annual Report since the date of the filing of that report.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
“Net income for the three and six months ended June 30, 2026 increased compared to the same periods in 2025, primarily due to higher net interest income resulting from growth in average earning assets and an improvement in net interest margin and spread. Noninterest income increased modestly, while noninterest expense reflected continued investments in personnel, technology, and operating infrastructure. Asset quality, liquidity, and capital levels remained strong during the period. For further discussion see Results of Operations on page 28.”see in full comparison
“The Company serviced $42.0 million of commercial and commercial real estate loans for unaffiliated third parties as of March 31, 2026. This included $40.9 million of commercial and 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.”see in full comparison
“The Company serviced $41.8 million of commercial and commercial real estate loans for unaffiliated third parties as of June 30, 2026. This included $40.6 million of commercial and 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.”see in full comparison
“The financial trends for the three months ended March 31, 2026 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, primarily related to investment securities and an increase in average loan volume. During the second half of 2025, the Federal Reserve implemented a series of interest rate reductions and the impact of this change is reflected in the interest paid on savings, money market accounts and time deposits. …”see in full comparison
“The Company capitalizes MSRs for all loans sold with servicing retained. The unamortized balance of MSRs on loans sold with servicing retained was $1.8 million at March 31, 2026, 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.”see in full comparison
“The Company capitalizes MSRs for all loans sold with servicing retained. The unamortized balance of MSRs on loans sold with servicing retained was $1.8 million at June 30, 2026, 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.”see in full comparison
Full comparison: every changed paragraph (122)
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 MarchJune 31,30, 2026 and December 31, 2025, and its results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025. 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 2025 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 MarchJune 31,30, 2026 which would materially affect the information presented.
Net income for the three and six months ended June 30, 2026 increased compared to the same periods in 2025, primarily due to higher net interest income resulting from growth in average earning assets and an improvement in net interest margin and spread. Noninterest income increased modestly, while noninterest expense reflected continued investments in personnel, technology, and operating infrastructure. Asset quality, liquidity, and capital levels remained strong during the period. For further discussion see Results of Operations on page 28.
The financial trends for the three months ended March 31, 2026 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, primarily related to investment securities and an increase in average loan volume. During the second half of 2025, the Federal Reserve implemented a series of interest rate reductions and the impact of this change is reflected in the interest paid on savings, money market accounts and time deposits. Nevertheless, interest expense increased during the first quarter of 2026, primarily driven by higher rates on interest bearing checking accounts and increased utilization of wholesale funding in borrowed funds. The net interest spread and net interest margin both improved, reflecting the overall positive impact of these changes. Noninterest income experienced modest growth in wealth management income, service fees and other income, which partially offset increases in noninterest expenses between the three month comparison periods of 2026 and 2025. For further discussion see Results of Operations on page 27.
Consolidated net income increased $503$529 thousand, or 20.1%,22.1%, to $3.0$2.9 million for the firstsecond quarter of 2026 compared to $2.5$2.4 million for the firstsecond quarter of 2025. The increase in net income was due to the combined effects of an increase in net interest income of $1.0$1.2 million, a decrease of $560$46 thousand in credit loss (benefit) expense, and an increase of $54$484 thousand in noninterest income, partially offset by increases of $958$976 thousand in noninterest expenses and $178$199 thousand in income tax expense.
Consolidated net income increased $1.0 million, or 21.1%, to $5.9 million for the six months ended June 30, 2026 compared to $4.9 million for the six months ended June 30, 2025. This increase was due to increases in net interest income of $2.2 million, and noninterest income of $538 thousand and a decrease in credit loss expense of $606 thousand, partially offset by increases in noninterest expenses of $1.9 million and income tax expense of $377 thousand.
At MarchJune 31,30, 2026, the Company had total consolidated assets of $1.63$1.56 billion, including gross loans and loans held for sale (total loans) of $1.18$1.12 billion, deposits of $1.20$1.09 billion, borrowed funds of $311.0$337.1 million, subordinated notes of $16.3 million and stockholders' equity of $80.6$90.4 million.
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 MarchJune 31,30, 2026 and 2025:
(2)The ratio of tax equivalent net interest income to average earning assets. See pagepages 2930 and 31 for more information.
(4)The difference between the average yield on earning assets and the average rate paid on interest bearing liabilities. See pagepages 2930 and 31 for more information.
(7)Cash dividends declared and paid per share divided by consolidated net income per shareshare.
Interest earned, on a fully tax equivalent basis, on average earning assets for the three months ended MarchJune 31,30, 2026 was $19.8$20.3 million compared to $18.6$19.0 million for the three months ended MarchJune 31,30, 2025, an increase of $1.2$1.3 million, or 6.6%.6.9%. The average earning asset base increased $78.4$93.6 million between periods and the average yield on average earning assets increased 63 bps to 5.12%5.13% for the three months ended MarchJune 31,30, 2026 compared to 5.06%5.10% for the three months ended MarchJune 31,30, 2025.
Interest income on federal funds sold and overnight deposits decreasedincreased $78$68 thousand between the three month comparison periods due to aan decrease of 93 bps in the average yield and a decreaseincrease in the average balance maintained in Union's master account at the FRB.FRB, partially offset by a decrease of 21 bps in the average yield.
Interest income,income on investment securities, on a fully tax equivalent basis, on investment securities increased $984$999 thousand between the three month comparison periods due to an increase in the average yield of 6673 bps and an increase in the average balance of the portfolio of $63.3$60.7 million. These increases are attributable in part to the strategic decision to position the investment portfolio for improved Union Bankshares, Inc. Page 2728 future cash flows and earnings with the purchase of approximately $75.0 million of investment securities AFS during the fourth quarter of 2025.
Interest income,income on loans, on a fully tax equivalent basis, on loans increased $307$242 thousand between the three month comparison periods primarily due to an increase of $19.5 million in the average volume of loans outstanding andof $19.5 million, partially offset by an overall increasedecrease of 1 bp in the average yield. Loan feeInterest income was reduced by $94 thousand from the recognition of the remaining loan premiums originally paid on purchased residential loans thatincreased were$140 paid offthousand during the three months ended MarchJune 31,30, 2026,2025 resultingdue to the recovery of interest from the payoff of loans that previously had been in anonaccrual reductionwhich of 4 bps inincreased the average loan yield 5 bps for the three months ended MarchJune 31,30, 2026.2025.
Interest expense increased $210$162 thousand, to $8.2$8.4 million for the three months ended MarchJune 31,30, 2026 compared to $8.0$8.3 million for the three months ended MarchJune 31,30, 2025. AverageReflecting funding to support asset growth, average interest bearing liabilities increased $78.5$94.9 million between the three month comparison periods primarily due to an increase in average borrowed funds of $45.7$69.5 million and a $29.3$38.0 million increase in average interest bearing checking deposits related primarily to municipal account balances; reflecting funding to support asset growth.balances. These increases were partially offset by lower interest expense on savings and money market accounts and time deposits, as declines in average rates and relatively stable balances mitigated overall funding cost pressures. The average rate paid on total interest bearing liabilities decreased 1014 bps to 2.55%2.53% for the firstsecond quarter of 2026 compared to 2.65%2.67% for the firstsecond quarter of 2025 primarily due to changes in the funding mix.
Net interest income was $11.5$11.9 million, on a fully tax equivalent basis, for the three months ended MarchJune 31,30, 2026 compared to $10.5$10.7 million for the three months ended MarchJune 31,30, 2025, an increase of $1.0$1.2 million, or 9.6%,10.8%, primarily attributable to higher average balances and improved yields on interest earning assets, partially offset by higher interest expense associated with increased funding balances. The net interest spread increased 1617 bps to 2.57%2.60% for the firstsecond quarter of 2026, from 2.41%2.43% for the same period last year, while the net interest margin increased 1112 bps to 2.99%3.01% from 2.88%2.89% over the same period, reflecting improved asset yields that outpaced increases in funding costs.
Net interest income was $23.4 million, on a fully tax equivalent basis, for the six months ended June 30, 2026 compared to $21.2 million for the six months ended June 30, 2025, an increase of $2.2 million, or 10.2%. The average volume of earning assets increased $86.1 million and the average yield on earning assets increased 4 bps to 5.12% compared to 5.08% for the comparison period. Average loans increased $19.5 million, or 1.7%, to $1.18 billion for the six months ended June 30, 2026. The $549 thousand increase in interest income on loans between periods resulted primarily from the increase in average loan volume. Loan fee income was reduced by $122 thousand from the recognition of the remaining loan premiums originally paid on purchased residential loans that were paid off during the six months ended June 30, 2026, resulting in a reduction of 2 bps in the average yield for the six months ended June 30, 2026.
Between the six month comparison periods, interest income on investment securities, on a fully tax equivalent basis, increased $2.0 million resulting from an increase in the average balance of the investment portfolio of $62.0 million and an increase in average investment portfolio yield of 69 bps. As noted above, these increases are attributable in part to the strategic decision to purchase approximately $75.0 million of investment securities AFS during the fourth quarter of 2025.
The average balance of interest bearing liabilities increased $86.8 million between the six month comparison periods, primarily due to an increase in borrowed funds and interest bearing deposits. The average cost of funds decreased 12 bps to 2.54% for the six months ended June 30, 2026 compared to 2.66% for the six months ended June 30, 2025 primarily due to changes in the funding mix. Interest expense increased $372 thousand, to $16.7 million for the six months ended June 30, 2026, compared to $16.3 million for the six months ended June 30, 2025.
The net interest spread increased 16 bps to 2.58% for the six months ended June 30, 2026, from 2.42% for the same period last year, reflecting the net effect of the 4 bps increase in the average yield earned on interest earning assets and the 12 bps decrease in the average rate paid on interest bearing liabilities between periods. The net interest margin increased 12 bps for the six months ended June 30, 2026 compared to the same period last year as a result of the changes discussed above.
The following tabletables showsshow 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.
Tax exempt interest income amounted to $1.6 million and $1.7 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $3.1 million and $3.5 million for the six months ended June 30, 2026 and 2025, 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 three and six month comparison periods of 2026 and 2025:
Credit Loss (Benefit) 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 on page 3538 and Commitments, Contingent Liabilities, and Off-Balance-Sheet Arrangements on page 37.41.
Credit loss expense (benefit) expense was made up of the following components for the following periods:
Noninterest Income. The following table sets forth the components of noninterest income and changes between the three and six month comparison periods of 2026 and 2025:
The significant changes in noninterest income for the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods of 2025 are described below:
•Wealth management income. Wealth management income increased as managed fiduciary accounts grew between firstJune quarter of30, 2026 and 2025, as did the value of assets within those accounts.
•Net gains on sales of loans held for sale. Residential mortgage loans sold totaled $32.8 million and $56.9 million during the three and six months ended June 30, 2026, respectively, compared to sales of $31.0 million and $56.8 million during the corresponding periods of 2025. Net gains on residential loan sales increased $10 thousand for the three months ended June 30, 2026 compared to 2025, reflecting the slightly higher volume of loans sold. For the six month comparison period, net gains on residential loan sales decreased $29 thousand, primarily due to lower market premiums on loans sold during 2026 compared to 2025.
•Service fees. Service fees increased $29 thousand for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to increases of $31 thousand in loan servicing income and $23 thousand overdraft fees, partially offset by decreases of $13 thousand in other service fees and $8 thousand in merchant program fees.
•Net gains on sales of loans held for sale. Residential mortgage loans totaling $24.1 million were sold during the three months ended March 31, 2026, compared to sales of $25.8 million during the same period in 2025. The decrease of $39 thousand in net gains on sales of loans reflects the lower sales volume and lower premiums obtained on sales in 2026.
•OtherNet income.gains Theon Companydisposals receivedof $19premises and equipment. A $381 thousand ingain prepaymentwas penaltiesrecognized fromon the early payoffsale of loanspreviously closed branch property during the firstsecond quarter of 20262026. thatNo weresimilar notgain receivedwas recognized during the same period ofin 2025.
•Other income. The Company received $19 thousand in prepayment penalties from the early payoff of loans during the first quarter of 2026 and a $15 thousand one-time payment during the second quarter of 2026 that were not received during the same periods 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 $151 thousand and $125 thousand for the three and six months ended June 30, 2026, respectively, and net gains of $119 thousand and $84 thousand for the three and six months ended June 30, 2025, respectively.
Noninterest Expenses. The following table sets forth the components of noninterest expenses and changes between the three month comparison periods of 2026 and 2025:
Noninterest Expenses. The following table sets forth the components of noninterest expenses and changes between the three and six month comparison periods of 2026 and 2025:
The significant changes in noninterest expenses for the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods in 2025 are described below:
•Salaries and wages. Salaries and wages increased $831 thousand and $1.3 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily attributable to annual salary adjustments for the fiscal year 2026 and overlap associated with succession planning for retiring employees. Also contributing to the increases were retirement related compensation costs of $362 thousand, including accelerated vesting of long-term incentive awards and a retirement bonus payment, increases of $105 thousand and $224 thousand, respectively, in the accrual related to incentive plan payments to select officers of Union, and increases of $70 thousand and $192 thousand, respectively, from the accrual for unused paid time off (PTO) outstanding as of June 30, 2026 related to a fourth quarter 2025 change in the PTO policy.
•Salaries and wages. Salaries and wages increased $486 thousand primarily due to annual salary adjustments for the 2026 fiscal year, a $121 thousand accrual adjustment for unused paid time off (PTO) outstanding as of March 31, 2026 related to a fourth quarter 2025 change in the PTO policy, and an increase of $82 thousand in the accrual related to the annual incentive plan payments to select officers of Union during the first quarter of 2026 compared to 2025.
•Employee benefits. Employee benefit expense increaseddecreased $184$74 thousand for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025 primarily duereflecting to increases of $109 thousand inlower premium expense for the Company's medical, disabilitymedical and workers'dental insurance plans, partially offset by increases in 401k plan contribution expense, payroll taxes and expense related to the Company's deferred compensation plans,plans. $44Employee benefit expenses increased $110 thousand for the six months ended June 30, 2026 compared to the same period in 2025, as increased 401k plan contribution expense, payroll taxes, $16and thousand in employee benefitsexpense related to the Company's deferred compensation plans more than offset the lower premium expense for the Company's medical and $14dental thousandinsurance in 401k plan contribution expense.plans.
•Equipment expense. Equipment expense increased betweenduring the three and six month comparison periods primarily due to increases of $32 thousand in software license and maintenance costs and $35depreciation thousand in depreciationexpense related to equipment replacement purchases.
•FDIC insurance assessment. The FDIC insurance assessment decreased by $59 thousand and $54 thousand during the three and six month comparison periods, respectively, due to a lower assessment rate, partially offset by the overall growth in net average assets.
•ATM and debit card expense. The increaseincreases of $45 thousand isand $90 thousand for the three and six month comparison periods, respectively, are primarily related to increased costs associated with debit card processing forduring the three monthsand endedsix Marchmonth 31,comparison 2026 compared to 2025.periods.
•Travel and entertainment. The increases of $24 thousand and $30 thousand during the three and six month comparison periods, respectively, relate to an increase in business related meeting costs and intercompany travel between locations.
•Advertising and public relations. Advertising and public relations costs increased $76 thousand primarily due to a continued focus on advertising campaigns and business development activities during first quarter of 2026 that did not occur in the same period of 2025.
•OtherProfessional expenses.fees. OtherProfessional expensesfees increased $79$17 thousand and $33 thousand for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the same periodperiods in 2025 due to increases in professionalengagement fees, board related expensesfees and otheradditional costsconsultants of employment primarily relatedengaged to CEOassist successionwith expenses.other Thereconsulting was also an $11 thousand increaseservices in Vermont franchise taxes during the first quarter of 2026 compared to the same period in 2025.2026.
•Advertising and public relations. Advertising and public relations costs increased $29 thousand and $105 thousand during the three and six month comparison periods, respectively, compared to the same periods in 2025 due to a continued focus on advertising campaigns and business development activities during the first half of 2026 that did not occur in the same period in 2025.
•Loan related expenses. The increases of $28 thousand and $53 thousand for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 are primarily due to higher credit report fees and real estate loan closing costs associated with loan origination activity. The six month comparison period also included a $33 thousand increase in the amortization of MSRs.
•Training and development. Training and development expense increased $26 thousand and $30 thousand for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025, reflecting increased investment in employee training and professional development initiatives.
•Electronic banking expenses. The increase in electronic banking expenses during the three and six month comparison periods is related primarily to increased costs associated with functionality improvements to the online banking platform during 2026.
•Other expenses. Other expenses increased $59 thousand and $104 thousand during the three and six month comparison periods, respectively, compared to the same periods in 2025 primarily due to increases in wealth management expenses, deposit related fee expenses, and employee related costs, largely attributable to employee relocation costs.
Provision for Income Taxes. The Company has provided for current and deferred federal income taxes for the three and six months ended MarchJune 31,30, 2026 and 2025. The Company's net provision for income taxes was $328$301 thousand and $150$629 thousand for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to $102 thousand and $252 thousand for the same periods in 2025, respectively.respectively, reflecting higher net income year over year. The Company's effective federal corporate income tax rate was 9.0% for the three and six months ended MarchJune 31,30, 2026,2026 compared to 5.7%4.5% and 5.1% for the same periodperiods in 2025.2025, respectively.
Amortization expense related to limited partnership investments is included as a component of income tax expense and amounted to $464$475 thousand and $939 thousand for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $452$457 thousand and $909 thousand for the same periodperiods in 2025.2025, 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 $509$514 thousand and $1.0 million for the three and six months ended June 30, 2026, respectively, and $483 thousand and $966 thousand for the three months ended March 31, 2026 and $483 thousand for the threesix months ended MarchJune 31,30, 2025.2025, respectively.
At MarchJune 31,30, 2026, the Company had total consolidated assets of $1.63$1.56 billion, including gross loans and loans held for sale (total loans) of $1.18$1.12 billion, investment securities AFS of $313.6$305.8 million, deposits of $1.20$1.09 billion, borrowed funds of $311.0$337.1 million, subordinated notes of $16.3 million and stockholders' equity of $80.6$90.4 million. The Company’s total assets at MarchJune 31,30, 2026 increaseddecreased $8.0$58.4 million, or 0.5%,3.6%, from $1.62 billion at December 31, 2025, and increased $100.3$78.4 million, or 6.6%,5.3%, compared to MarchJune 31,30, 2025.
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 $74.5 million in new municipal loans during the first few days of July 2026.
Federal funds sold and overnight deposits increased $17.7$16.8 million, or 231.4%,220.1%, to $25.3$24.5 million as of MarchJune 31,30, 2026, from $7.6 million at December 31, 2025.
Net loans and loans held for sale increaseddecreased $2.5$56.9 million, or 0.2%,4.9%, to $1.18$1.12 billion, representing 72.3%71.6% of total assets at MarchJune 31,30, 2026, compared to $1.17 billion, or 72.5% of total assets at December 31, 2025. (See Loans Held for Sale and Loan Portfolio below.on page 36.)
Total deposits decreased $15.2 million, or 1.2%, to $1.20 billion at March 31, 2026, from $1.21 billion at December 31, 2025. Noninterest bearing deposits decreased by $6.2 million, or 2.7%, interest bearing deposits decreased by $22.2 million, or 3.1%, while time deposits increased by $13.3 million, or 5.1%. (See Deposits on page 36.)
Borrowed funds consisted of FHLB advances of $311.0 million and $286.5 million at March 31, 2026 and December 31, 2025, respectively. (See Borrowings on page 37.)
Stockholders’ equity decreased from $80.9 million at December 31, 2025 to $80.6 million at March 31, 2026, reflecting an increase of $1.9 million in accumulated other comprehensive loss due to a decrease in the fair market value of the Company's AFS investment securities and cash dividends declared of $1.7 million during the three months ended March 31, 2026. These decreases were partially offset by net income of $3.0 million for the first three months of 2026, an increase of $201 thousand in Union Bankshares, Inc. Page 32 additional paid in capital from the vesting of stock-based compensation, and a $21 thousand increase due to the issuance of common stock under the DRIP. (See Capital Resources on page 39.)
Loans Held for Sale and Loan Portfolio. Total loans (including loans held for sale) increased $2.2 million, or 0.2%, to $1.18 billion, representing 72.7% of assets at March 31, 2026, from $1.18 billion, representing 72.9% of assets at December 31, 2025. The total loan portfolio at March 31, 2026 increased $15.9 million compared to the March 31, 2025 level of $1.17 billion, which represented 76.4% 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 87.3% of total loans at March 31, 2026 and $1.03 billion, or 87.2% of total loans at December 31, 2025. The net change in the Company's loan portfolio from December 31, 2025 (see table below) resulted primarily from an increase in the volume of commercial real estate loans, partially offset by a reduction in commercial construction loans.
UNB insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 3 Form 4 filings (2 insiders, 3 trade dates, 1,400 shares, about $33.2K) and open-market sales in 0 filings. Net open-market shares: 1,400 (purchases minus sales); net value about $33.2K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-26 | Silverman David Scott |
Open-market purchase | 1,000 | $23.76 | $23.8K |
| 2026-08-25 | Bugbee Dawn D |
Open-market purchase | 200 | $23.80 | $4.8K |
| 2026-07-27 | Bugbee Dawn D |
Open-market purchase | 200 | $23.30 | $4.7K |
| 2026-05-20 | Spitler Janet P |
Grant/award | 694 | — | — |
| 2026-05-20 | Bugbee Dawn D |
Grant/award | 694 | — | — |
| 2026-05-20 | Sargent Timothy Willis |
Grant/award | 694 | — | — |
| 2026-05-20 | Frame Walter B Iii |
Grant/award | 694 | — | — |
| 2026-05-20 | Putnam Nancy C |
Grant/award | 694 | — | — |
| 2026-05-20 | Sargent Gregory D |
Grant/award | 694 | — | — |
| 2026-05-20 | Cote Steven P |
Grant/award | 694 | — | — |
| 2026-05-20 | Parent Mary K |
Grant/award | 694 | — | — |
| 2026-05-04 | Weidley Jeffrey F |
Grant/award | 3,000 | — | — |
Well-known investors holding UNB (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 31,709 | $769.3K | 0.0% | New position |
| Renaissance Technologies | 2026-06-30 | 21,852 | $530.1K | 0.0% | Added 20% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 13,390 | $324.8K | 0.0% | New position |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 9,381 | $227.6K | 0.0% | Reduced 19% |