Union Bankshares(UNB) - 2021 Q4 - Annual Report

Financial Performance - The Company's consolidated net income for 2021 was $13.2 million, an increase of 3.1% from $12.8 million in 2020, with basic earnings per share rising to $2.94 from $2.86[159]. - Net interest income increased by $4.1 million, or 13.0%, to $35.7 million in 2021, while the net interest margin decreased to 3.38% from 3.57%[171]. - Noninterest income decreased by $3.0 million, or 19.0%, impacting overall profitability despite the increase in net interest income[159]. - The return on average assets decreased to 1.16% in 2021 from 1.33% in 2020, while the return on average equity decreased to 15.92% from 16.87%[165]. - The effective federal corporate income tax rate was 16.1% for 2021, up from 15.5% in 2020[183]. Asset and Deposit Growth - Total consolidated assets grew by 10.2% to $1.2 billion as of December 31, 2021, with total investments increasing by 151.8% to $269.0 million[161]. - Customer deposits rose by $100.8 million, or 10.1%, reaching $1.1 billion, reducing reliance on wholesale funding[162]. - Total consolidated assets grew by $111.8 million, or 10.2%, reaching $1.2 billion at December 31, 2021[186]. - Total deposits increased by $100.8 million, or 10.1%, to $1.1 billion at December 31, 2021[187]. Loan Portfolio and Credit Quality - Approximately 50% of the loan portfolio is comprised of commercial and commercial real estate loans, which historically pose greater credit risks[81]. - Nonperforming loans increased by $1.8 million, or 62.5%, from 2020 to 2021, rising from 0.27% to 0.39% of total assets[206]. - Total nonperforming assets reached $4.748 million in 2021, compared to $2.971 million in 2020[205]. - The allowance for loan losses (ALL) to total loans outstanding was 1.04% in 2021, slightly up from 1.03% in 2020[206]. - The ALL to nonperforming loans ratio decreased from 283.16% in 2020 to 175.57% in 2021[206]. Regulatory Compliance and Capital Management - The Company is subject to regulation and supervision by the FRB, FDIC, and DFR, ensuring compliance with banking laws and regulations[29]. - Union's Tier I and Total Risk Based Capital Ratios were 14.1% and 15.3% respectively, with a Leverage Capital Ratio of 8.4%, indicating it is well capitalized under regulatory guidelines[54]. - The Company is subject to capital standards established by the FDIC and the FRB, which include a minimum common equity Tier 1 capital ratio of 4.5% and a minimum Tier 1 risk-based ratio of 6.0%[49]. - The FRB has the authority to prohibit dividends by bank holding companies if their actions constitute unsafe or unsound practices, emphasizing the importance of maintaining adequate capital[43]. Economic and Market Conditions - Economic conditions, including interest rates and inflation, have adversely affected the company's financial condition and may continue to do so[120]. - The ongoing COVID-19 pandemic has resulted in significant economic contraction, with a dramatic increase in national unemployment in 2020[124]. - Financial losses may arise from credit losses due to financial stress experienced by borrowers, particularly in the hospitality, healthcare, retail, and restaurant industries[125]. - The lingering impacts of COVID-19 may continue to adversely affect the company's business, including capital, liquidity, and asset valuations, even after the outbreak subsides[126]. Operational Risks and Challenges - The company faces operational risks from potential failures in its systems or those of third-party vendors, which could lead to financial losses and reputational damage[107]. - Cybersecurity threats, including data breaches and attacks, pose significant risks to the company's operations and customer data integrity[108]. - The effectiveness of the company's risk management processes may not fully anticipate economic outcomes, leading to potential financial losses[117]. - The company relies on third-party vendors for critical infrastructure, and any issues with these vendors could disrupt business operations[115]. Employee and Workplace Culture - The Company employs 194 full-time employees as of December 31, 2021, emphasizing a supportive workplace culture and competitive employee benefits[20]. - Salaries and wages increased by $1.2 million, or 9.3%, to $14.4 million in 2021 compared to 2020[181]. Community Engagement and Services - The Company offers a variety of services including commercial loans, residential mortgages, and online cash management services, catering to both individual and business clients[21]. - The Company aims to capitalize on local community relationships to grow its customer base and enhance service delivery[23]. - Union has received an "Outstanding" rating from its most recent CRA compliance examination by the FDIC, demonstrating its commitment to serving low and moderate-income residents[47].