Union Bankshares Inc. (UNB) 2025 Annual Report Summary
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 2025. Union Bankshares, Inc. is a one-bank holding company headquartered in Morrisville, Vermont, with its sole subsidiary, Union Bank, operating 18 branch locations and three loan centers across northern Vermont and northern New Hampshire. The Company is classified as a "smaller reporting company" and a "non-accelerated filer."
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Total Assets | $1.62 billion | $1.53 billion |
| Net Income | $11.1 million | $8.8 million |
| Diluted EPS | $2.41 | $1.92 |
| Net Interest Margin (Tax-Equivalent) | 2.93% | 2.77% |
| Return on Average Assets | 0.71% | 0.60% |
| Return on Average Equity | 15.29% | 13.38% |
| Efficiency Ratio | 75.14% | 77.62% |
| Total Deposits | $1.21 billion | $1.17 billion |
| Stockholders' Equity | $80.9 million | $66.5 million |
| Book Value Per Share | $17.53 | $14.65 |
Material Changes vs. Prior Period
- Profitability Growth: Net income increased 26.1% to $11.1 million, driven by a $4.7 million increase in net interest income and the absence of a $1.3 million pre-tax realized loss on the sale of investment securities that occurred in 2024.
- Asset Expansion: Total assets grew 5.8% to $1.62 billion. Investment securities increased significantly by 30.1% ($76.0 million) due to strategic purchases of approximately $75.0 million in Q4 2025 to improve future cash flows.
- Loan Portfolio: Net loans increased 1.5% to $1.17 billion. The loan-to-deposit ratio decreased to 97.03% from 99.32%.
- Asset Quality Deterioration: Nonperforming assets (NPA) rose sharply to 0.85% of total assets (from 0.12% in 2024), primarily due to a commercial real estate loan relationship placed in nonaccrual status in Q1 2025. Nonaccrual loans increased to $13.6 million from $1.7 million.
- Capital Strength: Stockholders' equity increased 21.6% to $80.9 million, bolstered by net income and a reduction in accumulated other comprehensive loss (due to improved fair value of AFS securities). The Company remains "well capitalized" under regulatory guidelines.
Guidance, Outlook, and Risks
- Management Commentary: Management highlighted resilience in a challenging environment characterized by elevated interest rates and geopolitical uncertainty. They successfully expanded net interest margin despite higher funding costs by utilizing wholesale funding and disciplined pricing.
- Outlook: Management projects some relief in the cost of funds for 2026 as interest rates on customer deposits decline, following the cumulative 75 bps decrease in the Federal Funds target range during 2025.
- Key Risks:
- Credit Risk: Concentration in commercial and commercial real estate loans (approx. 41% of portfolio) and exposure to the local Vermont/New Hampshire economy.
- Interest Rate Risk: Elevated rates have reduced the fair value of the investment securities portfolio, resulting in net unrealized losses of $33.1 million. While the Company intends to hold securities to maturity, liquidity stress could force sales at a loss.
- Liquidity: Reliance on wholesale funding (FHLB advances and brokered deposits) has increased to support loan growth, which carries higher costs than core deposits.
Investor Verification Checklist
- Nonperforming Asset Concentration: Verify the specific details and collateral coverage of the $13.6 million in nonaccrual loans, particularly the commercial real estate relationship driving the increase.
- Investment Portfolio Valuation: Review the $33.1 million in net unrealized losses on Available-for-Sale (AFS) securities and the Company's liquidity contingency plans should forced sales become necessary.
- Funding Mix: Assess the sustainability of the increased reliance on wholesale funding (FHLB advances of $286.5 million and $10.0 million in retail brokered deposits) versus core deposit growth.
- Expense Management: Monitor noninterest expenses, which rose 9.7% to $41.7 million, driven by salary adjustments and increased FDIC assessments.
- Capital Ratios: Confirm that the "well capitalized" status is maintained as the Company navigates the higher allowance for credit losses required by the new nonaccrual assets.