Union Bankshares, Inc. — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. Union Bankshares is a Vermont one-bank holding company; its subsidiary, Union Bank, provides community banking services in northern Vermont and northwestern New Hampshire. The filing incorporates the full audited financial statements and MD&A from the 2011 Annual Report, but those details are not included in the supplied text.
Financial condition and key metrics
| Metric | Reported information |
|---|---|
| Total assets | $552.8 million at December 31, 2011, up $99.8 million (22.0%) from $453.0 million at December 31, 2010. |
| Deposits | $473.4 million, up $96.8 million (25.7%) from $376.7 million. |
| Capital | Consolidated Tier 1 risk-based ratio 11.0%, total risk-based ratio 12.2%, and leverage ratio 7.5%. The company reported that it and Union were well capitalized. |
| Capital excluding intangibles | Tangible Tier 1 leverage ratio: 8.1% at year-end. |
| Loan-to-deposit measure | Average loans to average deposits: 94.1% for 2011. |
| FDIC assessment expense | $376,000 in 2011 versus $499,000 in 2010. The company cited the change in the assessment base; growth in net assets partly offset the benefit. |
| Revenue, net income, cash flow, margins, debt and other liquidity ratios | The supplied filing text does not provide clear values. These are in incorporated financial statements and MD&A. |
Material changes versus the prior period
- On May 27, 2011, Union acquired three New Hampshire branches, including deposit relationships, performing loans, two owned branches and a leasehold interest in a third. The acquisition contributed substantially to asset and deposit growth; its individual financial contribution is not stated in the supplied text.
- Union reported 17 branch offices, a loan center and 34 ATMs at year-end. The acquired branches expanded its New Hampshire presence.
- The FDIC assessment expense declined year over year, although the company noted that asset growth partly offset the benefit.
Outlook, commentary, risks and contingencies
- For 2012, management planned to deepen business in newer markets, add commercial lending capacity in northwestern New Hampshire, expand electronic banking options and review customer products. It also expected a full-year benefit from the revised FDIC assessment base.
- Management described net interest income as the principal driver of profitability and said it manages interest-rate exposure by shortening asset terms and selling long-term fixed-rate loans.
- Key risks include credit losses, interest-rate changes, local economic conditions, competition for loans and deposits, regulatory change, and the operational demands of growth and technology. Management stated that commercial real estate lending did not exceed both regulatory concentration indicators at December 31, 2011, though it had exceeded both at September 30, 2011.
- The company said Basel III requirements were not yet adopted in the United States and that its capital ratios exceeded the anticipated minimums plus buffer at year-end; future regulatory changes could affect capital needs and growth.
- No material pending legal proceedings were reported, other than ordinary-course litigation; management believed any resulting liability would not materially affect financial position or results. No outstanding regulatory orders were reported.
- Management concluded that disclosure controls and internal control over financial reporting were effective at year-end. The auditor did not provide an internal-control attestation, consistent with the company’s smaller-reporting-company status.
Important facts for investors to verify
- Review the incorporated 2011 Annual Report for actual revenue, net income, net interest margin, provision and allowance for credit losses, cash flows, borrowings, liquidity measures, and detailed asset quality.
- Assess the acquired branches’ contribution to earnings, loan quality, deposit costs and integration expenses.
- Check the 10-K cover-page representation that the company had not filed all required reports during the preceding 12 months; confirm the reason and whether any filing-compliance issue remained outstanding.
- Review the commercial real estate portfolio and concentration monitoring, given the reported exceedance of both regulatory indicators in the third quarter.
- Consider dividend sustainability and regulatory constraints; the filing says subsidiary-bank dividends are the company’s primary source of funds for shareholder dividends.