Union Bankshares(US:UNB)2023-03-24 20:28Financial Performance - The Company's consolidated net income for 2022 was $12.6 million, a decrease from $13.2 million in 2021, with basic earnings per share of $2.81 compared to $2.94 in 2021[162]. - Total consolidated assets increased by 10.9% to $1.3 billion as of December 31, 2022, while net loans and loans held for sale rose by 20.1% to $952.3 million[164]. - Customer deposits grew by $106.8 million, or 9.8%, reaching $1.2 billion at December 31, 2022[165]. - The Company's total capital decreased from $84.3 million in 2021 to $55.2 million in 2022, resulting in a decline in book value per share to $12.25 from $18.77[166]. - Net interest income for 2022 was $39.4 million, an increase of 10.4% from $35.7 million in 2021, while the net interest margin decreased to 3.28% from 3.38%[171]. - Noninterest income decreased by 30.7% to $8.987 million in 2022, primarily due to a $3.952 million drop in net gains on sales of loans held for sale[181]. - Total noninterest expenses increased slightly by 0.9% to $33.164 million in 2022, with notable increases in employee benefits and advertising expenses[183]. - The provision for income taxes remained stable at $2.6 million for both 2022 and 2021, with an effective tax rate of 16.3% in 2022[185]. Loan and Deposit Information - The Company's average loans to average deposits ratio for the year ended December 31, 2022, was 75.6%[22]. - As of December 31, 2022, approximately $762.7 million, or 63.46% of the company's deposits, consisted of interest-bearing demand deposits, savings, and money market accounts[83]. - The gross loan portfolio increased by $158.5 million, or 19.8%, to $959.3 million at December 31, 2022, representing 71.8% of total assets[190]. - Real estate secured loans represented $828.2 million, or 86.3% of total loans, at December 31, 2022, compared to $670.6 million, or 83.7% of total loans, at December 31, 2021[189]. - Total loans outstanding rose to $959.335 million in 2022, up from $800.879 million in 2021, indicating a growth of approximately 19.7%[203]. Regulatory and Compliance - The Company is subject to regulation and supervision by the FRB, FDIC, and Vermont Department of Financial Regulation[29]. - The Dodd-Frank Act has introduced several regulatory changes affecting the Company's operations, including new capital standards and consumer protection measures[33]. - The Company must comply with various federal and state consumer protection laws, which can lead to enforcement actions and penalties for non-compliance[57]. - The Dodd-Frank Act prohibits mortgage originators from receiving compensation based on the terms of residential mortgage loans, ensuring fair lending practices[58]. - The Company is required to comply with FDICIA regulations due to having total assets of over $1 billion, which includes providing management's report on the effectiveness of internal controls over financial reporting[108]. Risk Management - The Company is subject to various risks including market, liquidity, credit, operational, legal, compliance, reputational, and strategic risks that could materially affect its financial condition[74]. - The allowance for loan losses is reviewed quarterly by the Board of Directors, and if assumptions about collectability are incorrect, it may lead to increased provisions and charges to income[76]. - The company may incur significant losses due to ineffective risk management processes, which could affect financial performance[120]. - Cybersecurity threats pose significant risks, including potential financial losses and damage to reputation due to breaches of information systems[112]. - The economic qualitative reserve factor for various loan portfolios was decreased by 15 basis points in 2022, returning to pre-pandemic levels, reflecting improving economic conditions[213]. Employee and Community Engagement - As of December 31, 2022, Union employed 188 full-time employees, emphasizing a supportive workplace culture[20]. - Union Bank focuses on community banking, providing services through 18 banking offices and several ATMs in northern Vermont and New Hampshire[18]. - Union has received an "Outstanding" rating from its most recent Community Reinvestment Act compliance examination by the FDIC[44]. Market Conditions - The rapid increase in interest rates initiated by the Fed in 2022 and 2023 has led to higher deposit rates, increasing competitive pressures for deposits[25]. - Inflationary pressures are expected to remain elevated throughout 2023, potentially impacting the ability of business customers to repay loans and adversely affecting the company's financial condition[124]. - General market and economic conditions, including interest rates and inflation, continue to impact the company's operations and may lead to increased loan delinquencies[125]. Capital and Investment - As of December 31, 2022, Union's Tier I and Total Risk Based Capital Ratios were 12.9% and 14.0% respectively, with a Leverage Capital Ratio of 7.8%, indicating it is well capitalized[52]. - The Company has not elected to become a financial holding company, limiting its activities to banking and related services[37]. - The Company may need to raise additional capital in the future, which may not be available on acceptable terms, potentially leading to operational restrictions[105]. Accounting Policies - The Company has established critical accounting policies that significantly affect the reported amounts of assets, liabilities, revenues, and expenses[152]. - The allowance for loan losses (ALL) is a critical accounting policy requiring significant judgments and estimates based on the collectability of the loan portfolio[153]. - The company anticipates that the adoption of the CECL model will have an immaterial impact on its consolidated financial statements and regulatory capital ratios as of January 1, 2023[155].