Union Bankshares Inc. (UNB) - Q3 2025 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended September 30, 2025. Union Bankshares, Inc. is a smaller reporting company and non-accelerated filer, operating primarily through its subsidiary, Union Bank. The company is headquartered in Morrisville, Vermont, and focuses on commercial, commercial real estate, and residential lending within its service area.
Key Financial Metrics
| Metric | Q3 2025 (3 Months) | Q3 2024 (3 Months) | YTD 2025 (9 Months) | YTD 2024 (9 Months) |
|---|---|---|---|---|
| Net Income | $3.44 million | $1.32 million | $8.33 million | $5.76 million |
| Diluted EPS | $0.75 | $0.29 | $1.82 | $1.27 |
| Net Interest Income | $11.16 million | $9.43 million | $31.87 million | $27.92 million |
| Net Interest Margin (Tax-Equiv) | 3.03% | 2.71% | 2.93% | 2.73% |
| Total Assets | $1.57 billion | $1.53 billion (Dec 2024) | $1.57 billion | $1.53 billion (Dec 2024) |
| Total Loans (Gross) | $1.17 billion | $1.16 billion (Dec 2024) | $1.17 billion | $1.16 billion (Dec 2024) |
| Total Deposits | $1.19 billion | $1.17 billion (Dec 2024) | $1.19 billion | $1.17 billion (Dec 2024) |
| Stockholders' Equity | $77.68 million | $66.48 million (Dec 2024) | $77.68 million | $66.48 million (Dec 2024) |
| Cash & Equivalents | $35.47 million | $15.84 million (Dec 2024) | $35.47 million | $15.84 million (Dec 2024) |
| Return on Average Assets | 0.89% | 0.36% | 0.72% | 0.53% |
| Return on Average Equity | 19.11% | 7.90% | 15.86% | 12.00% |
Material Changes vs. Prior Period
- Profitability Surge: Net income for Q3 2025 increased 159.5% compared to Q3 2024. This was primarily driven by the non-recurrence of a $1.3 million pre-tax loss on the sale of investment securities in Q3 2024, alongside a $1.7 million increase in net interest income.
- Net Interest Income Growth: Net interest income rose due to a 30 basis point increase in the average yield on earning assets (to 5.15%) and a $78.3 million increase in average loan volume. The net interest margin improved to 3.03%.
- Asset Quality Deterioration: Nonaccrual loans increased significantly from $1.65 million at year-end 2024 to $13.0 million at September 30, 2025. This increase is attributed primarily to a single commercial construction loan placed on nonaccrual in Q1 2025. Consequently, nonperforming assets to total assets rose to 0.86% from 0.12%.
- Deposit Mix Shift: Time deposits increased by $83.1 million (36.5%) year-over-year, while interest-bearing transaction accounts decreased by $63.6 million. The company utilized wholesale funding (FHLB advances) which increased to $270.8 million.
- Investment Portfolio: Unrealized losses on available-for-sale (AFS) securities improved (decreased) by $8.3 million to $35.3 million, contributing to a $6.5 million reduction in accumulated other comprehensive loss.
Guidance, Outlook, and Risks
- Capital Management: The company maintains an "at-the-market" equity distribution agreement with Piper Sandler, with approximately $38.9 million remaining available for issuance. No stock repurchases were made in the first nine months of 2025.
- Dividends: A quarterly cash dividend of $0.36 per share was declared on October 15, 2025, payable November 6, 2025. The dividend payout ratio for the nine months ended September 30, 2025, was 59.02%.
- Regulatory Capital: Both the Company and Union Bank exceeded "well-capitalized" standards under the Prompt Corrective Action framework as of September 30, 2025. Total capital to risk-weighted assets was 12.99% for the Company.
- Risk Factors: Management highlights risks related to an inverted yield curve, unrealized securities losses, higher funding costs, and the specific concentration risk in the commercial construction loan portfolio. Macroeconomic uncertainties, including geopolitical conflicts and potential government shutdowns, are also noted.
- Outlook: Management expresses confidence in the resilience of the business model despite a challenging macroeconomic environment. Loan origination activity remains strong, particularly in residential mortgages and construction.
Investor Verification Checklist
- Commercial Construction Exposure: Verify the specific details and collateral coverage of the $13.0 million nonaccrual commercial construction loan driving the increase in nonperforming assets.
- Wholesale Funding Reliance: Assess the sustainability of the $270.8 million in FHLB borrowings and the impact of rising wholesale funding costs on future net interest margins.
- Investment Portfolio Valuation: Review the composition of the $35.3 million in unrealized losses on AFS securities and the company's strategy for managing these positions in a changing rate environment.
- Deposit Stability: Analyze the shift toward time deposits and the reliance on brokered deposits ($40.3 million) and CDARS ($25.2 million) to fund loan growth.
- Equity Issuance: Monitor the utilization of the remaining $38.9 million under the equity distribution agreement and its potential dilutive effect on earnings per share.