Union Bankshares(US:UNB)2020-03-13 20:56Financial Performance - The net income for the year ended December 31, 2019, was $10,648 thousand, compared to $7,072 thousand in 2018, reflecting an increase of 50.6%[141]. - The Company's net income for 2019 was $10.6 million, or $2.38 per share, representing an increase of 49.3% compared to $7.1 million, or $1.58 per share in 2018[168]. - The return on average assets improved to 1.30% in 2019 from 0.94% in 2018, showing a significant enhancement in asset efficiency[141]. - The efficiency ratio improved to 66.65% in 2019 from 76.22% in 2018, indicating better cost management[141]. - Noninterest income rose to $10.323 million in 2019, up from $9.473 million in 2018, marking an increase of 9.0%[184]. - Total noninterest expense decreased to $27.456 million in 2019 from $29.277 million in 2018, a reduction of 6.2%[186]. - The effective tax rate decreased to 14.7% in 2019 from 15.3% in 2018, attributed to increases in tax-exempt income and federal income tax credits[188]. Loan and Deposit Growth - The company's loans and loans held for sale reached $677,686 thousand in 2019, up from $645,360 thousand in 2018, indicating a growth of 5.1%[141]. - Customer deposits increased by $37.3 million, or 5.3%, to $744.0 million at December 31, 2019, supported by branch network expansion and enhanced products[172]. - Net loans and loans held for sale rose by $32.0 million, or 5.0%, to $672.6 million, accounting for 77.1% of total assets[171]. - The Company sold $158.0 million of qualified residential real estate loans in 2019, compared to $116.7 million in 2018, to mitigate long-term interest rate risk[195]. - The Company’s gross loan portfolio increased by $32.3 million, or 5.0%, to $677.7 million, representing 77.6% of total assets at year-end 2019[194]. Capital and Regulatory Compliance - Union's Tier I and Total Risk Based Capital Ratios were 11.9% and 13.0% respectively as of December 31, 2019, indicating it is considered well capitalized[55]. - The capital conservation buffer requirement of 2.5% became fully effective for the Company and Union on January 1, 2019[48]. - The FRB requires a minimum common equity Tier 1 capital ratio of 4.5% and a minimum Tier 1 risk-based ratio of 6.0%[48]. - The Company and Union are subject to various federal and state consumer protection laws, which mandate compliance and can lead to enforcement actions if violated[59]. - The company is subject to the Gramm-Leach-Bliley Act (GLBA), which mandates the implementation of policies to protect nonpublic personal information and requires a comprehensive written information security program[62]. Risk Management - The company has adopted asset and liability management policies to mitigate the adverse effects of interest rate changes on net interest income, which is crucial for profitability[85]. - The company is required to maintain an allowance for loan losses, which is reviewed quarterly by the Board of Directors, to cover potential losses in the loan portfolio[82]. - The provision for loan losses increased by $325 thousand, or 72.2%, reflecting a cautious approach to credit quality[168]. - The allowance for loan losses (ALL) to nonperforming loans ratio decreased from 293.40% in 2018 to 174.81% in 2019, indicating a reduction in coverage for nonperforming loans[207]. - The Company has implemented risk management strategies to mitigate exposure to the tourism industry, which is a significant segment of its loan portfolio[203]. Operational and Competitive Environment - The Company faces increased competitive pressures from tax-advantaged credit unions and other financial service providers in its market area[15]. - The Company competes for loans primarily through interest rates, loan fees, and the quality of services provided[26]. - The Company emphasizes personal service and local autonomy to compete with larger financial institutions[24]. - Competition in the banking industry may limit the company's ability to attract and retain customers, negatively affecting loan growth and overall financial performance[101]. - The company relies heavily on third-party vendors for key components of its infrastructure, which poses operational and information security risks[109]. Asset Quality and Nonperforming Loans - The Company reported a total of $3.502 million in nonperforming loans as of December 31, 2019, an increase of $1.546 million, or 79.0%, from the previous year[207]. - The nonperforming loans to total loans ratio increased from 0.30% in 2018 to 0.52% in 2019, reflecting a deterioration in asset quality[207]. - The total nonperforming assets, including nonaccrual loans and loans past due 90 days or more, amounted to $3.502 million as of December 31, 2019[207]. - The Company does not engage in interest-only loans or loans with teaser rates, maintaining a conservative lending approach[202]. Employment and Operations - As of December 31, 2019, Union employed 201 full-time equivalent employees[19]. - The Company operates 20 banking offices and two loan centers across northern Vermont and northern New Hampshire[17]. - As of December 31, 2019, the company operated 15 community banking locations and several ATMs in Vermont and New Hampshire[129]. - The Company has expanded its banking operations into New Hampshire, including the acquisition of three branches in May 2011 and the opening of a full-service branch in Lincoln in 2014[68].