Union Bankshares Inc.
11/09/2026 | Press release | Distributed by Public on 11/09/2026 15:47
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis focuses on those factors that, in management's view, had a material effect on the financial position of the Company as of September 30, 2026 and December 31, 2025, and its results of operations for the three and nine months ended September 30, 2026 and 2025. This discussion is being presented to provide a narrative explanation of the consolidated financial statements and should be read in conjunction with the consolidated financial statements and related notes and with other financial data appearing elsewhere in this filing and with the Company's 2025 Annual Report. In the opinion of the Company's management, the interim unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments and disclosures necessary to fairly present the Company's consolidated financial position and results of operations for the interim periods presented. Management is not aware of the occurrence of any events after September 30, 2026 which would materially affect the information presented.
Please refer to Note 1 in the Company's unaudited interim consolidated financial statements at Part I, Item 1 of this Report for definitions of acronyms, abbreviations and capitalized terms used throughout the following discussion and analysis.
CAUTIONARY ADVICE ABOUT FORWARD LOOKING STATEMENTS
The Company, "we," "us," "our," may from time to time make written or oral statements that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include financial projections, statements of plans and objectives for future operations, estimates of future economic performance or conditions and assumptions relating thereto. The Company may include forward-looking statements in its filings with the SEC, in its reports to stockholders, including this quarterly report, in press releases, other written materials, and in statements made by senior management to analysts, rating agencies, institutional investors, representatives of the media and others.
Forward-looking statements are based on the current assumptions underlying the statements and other information with respect to the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and the financial condition, results of operations, future performance and business are only expectations of future results. Although the Company believes that the expectations reflected in the Company's forward-looking statements are reasonable when made, the Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates; competitive pressures from other financial institutions; general economic conditions on a national basis or in the local markets in which the Company operates; downgrades of U.S. government securities; eroding public confidence in the banking system; changes in consumer behavior due to changing political, business and economic conditions, including the impact of inflation, federal tariff and trade policies, legislative or regulatory initiatives and the impact of the federal government shutdown; changes in the value of securities and other assets in the Company's investment portfolio; increases in loan and lease default and charge-off rates; the adequacy of the ACL; decreases in deposit levels that necessitate increases in borrowing to fund loans and investments; operational risks to the Company and our vendors, including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation, war, terrorism, civil unrest; changes in economic assumptions and adverse economic developments; the risk that goodwill and intangibles recorded in the Company's financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company's 2025 Annual Report.
When evaluating forward-looking statements to make decisions about the Company and our stock, investors and others are cautioned to consider these and other risks and uncertainties, and are reminded not to place undue reliance on such statements. Investors should not consider the factors referred to above or described in the Company's 2025 Annual Report to be a complete list of the risks or uncertainties that may affect the Company. Forward-looking statements speak only as of the date they are made and the Company undertakes no obligation to update them to reflect new or changed information or events, except as may be required by federal securities laws.
Non-GAAP Financial Measures
Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of the company's reasons for utilizing the non-GAAP financial measure. The SEC has exempted from the definition of non-GAAP financial measures certain commonly used financial measures that are not based on GAAP. However, two non-GAAP financial measures commonly used by financial institutions, namely tax equivalent net interest income and tax equivalent net interest
Union Bankshares, Inc. Page 26
margin (as presented in the tables in the section labeled Yields Earned and Rates Paid), have not been specifically exempted by the SEC, and may therefore constitute non-GAAP financial measures under Regulation G. We are unable to state with certainty whether the SEC would regard those measures as subject to Regulation G. Management believes that these non-GAAP financial measures are useful in evaluating the Company's financial performance and facilitate comparisons with the performance of other financial institutions. However, that information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP.
CRITICAL ACCOUNTING POLICIES
The Company has established various accounting policies which govern the application of GAAP in the preparation of the Company's consolidated financial statements. Certain accounting policies involve significant judgments and assumptions by management which have a material impact on the reported amount of assets, liabilities, capital, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require management to make its most difficult and subjective judgments, often as a result of the need to make estimates on matters that are inherently uncertain. Based on this definition, management has identified the accounting policies and judgments most critical to the Company. They include establishing the amount of ACL and valuing our intangible assets. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from estimates and have a material impact on the carrying value of assets, liabilities, or capital, and/or the results of operations of the Company.
Please refer to the Company's 2025 Annual Report on Form 10-K for a more in-depth discussion of the Company's critical accounting policies. There have been no changes to the Company's critical accounting policies since the filing of that report.
OVERVIEW
Economic conditions during the third quarter of 2026 continued to reflect generally solid economic activity, a stable labor market and elevated inflation. The Federal Open Market Committee ("FOMC") increased the target range for the federal funds rate by 25 bps in September 2026 to 3.75% to 4.00%. At its October 28, 2026 meeting, the FOMC maintained the target range at 3.75% to 4.00%, noting that economic activity was expanding at a "strong pace," domestic spending remained resilient, productivity growth was strong, capital investment was robust and inflation remains elevated. The FOMC also indicated that additional information would help determine the appropriate policy stance to support a timely return of inflation to its 2% objective.
The current macroeconomic and geopolitical environment remains subject to uncertainty, including geopolitical conflicts, tariffs and changes in trade policies, federal government shutdowns, capital markets volatility, and inflation. These and other factors could adversely affect economic conditions, our customers and the Company's financial condition and results of operations. Despite these uncertainties, the Company experienced continued loan and deposit growth, improved net interest margin and higher net income during 2026, while maintaining regulatory capital ratios above applicable requirements. For additional information regarding risks affecting the Company, see "Part I, Item 1A. Risk Factors" in the Company's 2025 Annual Report.
Changes in the level and shape of the yield curve continued to affect the Company's earning-asset yields, funding costs, deposit pricing and mix and the fair value of its investment securities. Net interest income, on a fully tax-equivalent basis, increased $988 thousand, or 8.7%, to $12.4 million for the third quarter of 2026 compared to the same period in 2025, as growth in average earning assets and improved earning-asset yields more than offset increased average funding volumes. The net interest margin increased 11 bps to 3.14% for the quarter, due to improved asset yields and lower funding costs. For further discussion see Results of Operations on page 28.
Total assets increased $19.3 million, or 1.2%, from December 31, 2025 to $1.64 billion at September 30, 2026. Total loans, including loans held for sale, increased $53.0 million, or 4.5%, to $1.23 billion, while total deposits increased $36.5 million, or 3.0%, to $1.25 billion. Credit quality remained generally stable, although nonperforming assets increased modestly to 0.91% of total assets at September 30, 2026 compared to 0.85% at December 31, 2025.
Net unrealized losses on AFS investment securities increased to $52.4 million at September 30, 2026 from $33.1 million at December 31, 2025, primarily reflecting the impact of higher long-term market interest rates on the fair value of fixed-rate securities. Despite the resulting increase in accumulated other comprehensive loss and decrease in stockholders' equity, accumulated other comprehensive loss does not affect the calculation of the Company's or Union's regulatory capital ratios, and both entities continue to meet all applicable regulatory capital requirements, with Union remaining above the regulatory thresholds required to be considered well capitalized.
Consolidated net income was $3.8 million for the third quarter of 2026 compared to $3.4 million for the same period in 2025, and $9.7 million for the nine months ended September 30, 2026 compared to $8.3 million for the nine months ended September
Union Bankshares, Inc. Page 27
30, 2025. Results for the 2026 periods reflect higher net interest income and lower credit loss expense, partially offset by higher noninterest expenses and, for the third quarter, lower noninterest income.
The following unaudited per share information and key ratios depict several measurements of performance or financial condition at or for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended or At September 30, | Nine Months Ended or At September 30, | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||
| Return on average assets (1) | 0.93 | % | 0.89 | % | 0.79 | % | 0.72 | % | ||||||
| Return on average equity (1) | 17.21 | % | 19.11 | % | 15.17 | % | 15.86 | % | ||||||
| Net interest margin (1)(2) | 3.14 | % | 3.03 | % | 3.05 | % | 2.93 | % | ||||||
| Efficiency ratio (3) | 69.70 | % | 70.15 | % | 74.05 | % | 74.43 | % | ||||||
| Net interest spread (4) | 2.71 | % | 2.58 | % | 2.63 | % | 2.47 | % | ||||||
| Loan to deposit ratio | 98.44 | % | 99.09 | % | 98.44 | % | 99.09 | % | ||||||
| Net loan charge-offs to average loans not held for sale | - | % | 0.01 | % | - | % | - | % | ||||||
| ACL on loans to loans not held for sale | 0.70 | % | 0.72 | % | 0.70 | % | 0.72 | % | ||||||
| Nonperforming assets to total assets (5) | 0.91 | % | 0.86 | % | 0.91 | % | 0.86 | % | ||||||
| Equity to assets | 4.82 | % | 4.94 | % | 4.82 | % | 4.94 | % | ||||||
| Total capital to risk weighted assets (6) | 13.56 | % | 12.99 | % | 13.56 | % | 12.99 | % | ||||||
| Book value per share | $ | 15.94 | $ | 16.95 | $ | 15.94 | $ | 16.95 | ||||||
| Basic earnings per share | $ | 0.77 | $ | 0.75 | $ | 2.03 | $ | 1.83 | ||||||
| Diluted earnings per share | $ | 0.76 | $ | 0.75 | $ | 2.01 | $ | 1.82 | ||||||
| Dividends paid per share | $ | 0.36 | $ | 0.36 | $ | 1.08 | $ | 1.08 | ||||||
| Dividend payout ratio (7) | 46.75 | % | 48.00 | % | 53.20 | % | 59.02 | % | ||||||
__________________
(1)Annualized.
(2)The ratio of tax equivalent net interest income to average earning assets. See pages 30 and 31 for more information.
(3)The ratio of noninterest expenses to tax equivalent net interest income and noninterest income, excluding securities gains (losses).
(4)The difference between the average yield on earning assets and the average rate paid on interest bearing liabilities. See pages 30 and 31 for more information.
(5)Nonperforming assets are loans or investment securities that are in nonaccrual or 90 or more days past due as well as OREO or OAO.
(6)The ratio of total capital to risk weighted assets is a regulatory capital measurement. See page 43 for more information.
(7)Cash dividends declared and paid per share divided by consolidated net income per share.
RESULTS OF OPERATIONS
Net Interest Income. The largest component of the Company's operating income is net interest income, which represents the difference between interest and dividend income earned on interest earning assets and interest expense incurred on interest bearing liabilities. Net interest income is affected by various factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies, funding strategies, the volume and mix of interest earning assets and interest bearing liabilities, and the level of nonperforming assets. Net interest margin is calculated as the net interest income on a fully tax equivalent basis as a percentage of average interest earning assets.
Interest income, on a fully tax equivalent basis, was $20.6 million for the three months ended September 30, 2026, compared to $19.4 million for the three months ended September 30, 2025, an increase of $1.2 million, or 5.9%. Average interest earning assets increased $74.3 million between periods and the average yield on average earning assets increased 5 bps to 5.20% for the three months ended September 30, 2026 compared to 5.15% for the three months ended September 30, 2025. The increase in interest income was primarily attributable to higher average balances and yields on investment securities and growth in average loans.
Interest income on investment securities, on a fully tax equivalent basis, increased $905 thousand between the three month comparison periods due to an increase in the average yield of 66 bps and an increase in the average balance of the portfolio of
Union Bankshares, Inc. Page 28
$55.2 million. These increases were attributable, in part, to the Company's strategic purchase of approximately $75.0 million of investment securities AFS during the fourth quarter of 2025 to enhance future cash flows and earnings.
Interest income on loans, on a fully tax equivalent basis, increased $392 thousand between the three month comparison periods due to an increase in the average volume of loans outstanding of $36.2 million, partially offset by a decrease of 4 bps in the average yield. Interest income on loans increased $421 thousand during the three months ended September 30, 2025 due to the recovery of interest from the payoff of loans that previously had been in nonaccrual, which increased the average loan yield 14 bps for the three months ended September 30, 2025.
Interest income on federal funds sold and overnight deposits decreased $161 thousand between the three month comparison periods due to a decrease in the average balance maintained in Union's master account at the FRB and a decrease of 147 bps in the average yield.
Interest expense increased $168 thousand, to $8.2 million for the three months ended September 30, 2026 compared to $8.1 million for the three months ended September 30, 2025, due to higher average funding volumes despite lower average rates paid. Average interest bearing liabilities increased $65.6 million between the three month comparison periods primarily due to increases in average interest bearing deposits and average borrowed funds to support balance sheet growth. Average balance increases were $27.8 million in borrowed funds, $25.8 million in interest bearing checking deposits and $14.1 million in time deposits. These increases were substantially mitigated by decreases of 39 bps in the average rate paid on time deposits and 16 bps in the average rate paid on borrowed funds. Despite the increase in funding volumes, the average rate paid on total interest bearing liabilities decreased 8 bps to 2.49% for the third quarter of 2026 compared to 2.57% for the third quarter of 2025.
Net interest income was $12.4 million, on a fully tax equivalent basis, for the three months ended September 30, 2026 compared to $11.4 million for the three months ended September 30, 2025, an increase of $988 thousand, or 8.7%, primarily attributable to higher average balances and improved yields on interest earning assets, partially offset by higher interest expense associated with increased funding balances. The net interest spread increased 13 bps to 2.71% for the third quarter of 2026, from 2.58% for the same period last year, while the net interest margin increased 11 bps to 3.14% from 3.03% over the same period, reflecting higher average earning asset balances and improved asset yields that outpaced increases in funding costs.
Net interest income was $35.8 million, on a fully tax equivalent basis, for the nine months ended September 30, 2026 compared to $32.6 million for the nine months ended September 30, 2025, an increase of $3.2 million, or 9.7%. The average volume of earning assets increased $82.1 million while the average yield on earning assets increased 5 bps to 5.15% compared to 5.10% for the comparison period. Average loans increased $25.1 million, or 2.2%, to $1.19 billion for the nine months ended September 30, 2026. The $941 thousand increase in interest income on loans between periods resulted from the increase in average loan volume despite a 1 bp decrease in average yield. Interest income on loans increased $563 thousand during the nine months ended September 30, 2025 due to the recovery of interest from the payoff of loans that previously had been in nonaccrual, which increased the average loan yield 6 bps for the nine months ended September 30, 2025.
Between the nine month comparison periods, interest income on investment securities, on a fully tax equivalent basis, increased $2.9 million resulting from an increase in the average balance of the investment portfolio of $59.7 million and an increase in average investment portfolio yield of 69 bps. As noted above, these increases are attributable in part to the strategic decision to purchase approximately $75.0 million of investment securities AFS during the fourth quarter of 2025.
The average balance of interest bearing liabilities increased $79.6 million between the nine month comparison periods, primarily due to increases in average borrowed funds and average interest bearing deposits. Interest expense increased $540 thousand, to $24.9 million for the nine months ended September 30, 2026, compared to $24.4 million for the nine months ended September 30, 2025. The increase in expense resulting from higher funding balances was partially offset by lower average rates paid on savings and money market accounts, time deposits and borrowed funds. The average rate paid on total interest bearing liabilities decreased 11 bps to 2.52% for the nine months ended September 30, 2026 compared to 2.63% for the nine months ended September 30, 2025.
The net interest spread increased 16 bps to 2.63% for the nine months ended September 30, 2026, from 2.47% for the same period last year, reflecting the net effect of the 5 bps increase in the average yield earned on interest earning assets and the 11 bps decrease in the average rate paid on interest bearing liabilities between periods. The net interest margin increased 12 bps to 3.05% for the nine months ended September 30, 2026 compared to 2.93% for the same period in 2025 as a result of the changes discussed above.
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The following tables show for the periods indicated the total amount of tax equivalent interest income recorded from average interest earning assets, the related average tax equivalent yields, the tax equivalent interest expense associated with average interest bearing liabilities, the related tax equivalent average rates paid, and the resulting tax equivalent net interest spread and margin.
| Three Months Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
|
Average Balance (1) |
Interest Earned/ Paid |
Average Yield/ Rate |
Average Balance (1) |
Interest Earned/ Paid |
Average Yield/ Rate |
|||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Average Assets: | ||||||||||||||||||||
| Federal funds sold and overnight deposits | $ | 9,373 | $ | 31 | 1.31 | % | $ | 26,893 | $ | 192 | 2.78 | % | ||||||||
| Interest bearing deposits in banks | 7,568 | 75 | 3.90 | % | 7,320 | 77 | 4.18 | % | ||||||||||||
| Investment securities (2), (3) | 337,006 | 2,679 | 3.18 | % | 281,795 | 1,774 | 2.52 | % | ||||||||||||
| Loans, net (2), (4) | 1,205,819 | 17,591 | 5.79 | % | 1,169,626 | 17,199 | 5.83 | % | ||||||||||||
| Nonmarketable equity securities | 12,476 | 225 | 7.19 | % | 12,275 | 203 | 6.54 | % | ||||||||||||
| Total interest earning assets (2) | 1,572,242 | 20,601 | 5.20 | % | 1,497,909 | 19,445 | 5.15 | % | ||||||||||||
| Cash and due from banks | 5,533 | 4,582 | ||||||||||||||||||
| Premises and equipment | 20,413 | 20,159 | ||||||||||||||||||
| Other assets | 25,692 | 24,400 | ||||||||||||||||||
| Total assets | $ | 1,623,880 | $ | 1,547,050 | ||||||||||||||||
| Average Liabilities and Stockholders' Equity: | ||||||||||||||||||||
| Interest bearing checking accounts | $ | 319,396 | $ | 1,084 | 1.35 | % | $ | 293,598 | $ | 943 | 1.27 | % | ||||||||
| Savings/money market accounts | 335,736 | 1,009 | 1.19 | % | 337,912 | 1,008 | 1.18 | % | ||||||||||||
| Time deposits | 326,612 | 2,937 | 3.57 | % | 312,503 | 3,119 | 3.96 | % | ||||||||||||
| Borrowed funds and other liabilities | 303,519 | 3,003 | 3.87 | % | 275,712 | 2,838 | 4.03 | % | ||||||||||||
| Subordinated notes | 16,327 | 186 | 4.51 | % | 16,293 | 143 | 3.47 | % | ||||||||||||
| Total interest bearing liabilities | 1,301,590 | 8,219 | 2.49 | % | 1,236,018 | 8,051 | 2.57 | % | ||||||||||||
| Noninterest bearing deposits | 214,838 | 219,788 | ||||||||||||||||||
| Other liabilities | 19,868 | 19,329 | ||||||||||||||||||
| Total liabilities | 1,536,296 | 1,475,135 | ||||||||||||||||||
| Stockholders' equity | 87,584 | 71,915 | ||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 1,623,880 | $ | 1,547,050 | ||||||||||||||||
| Net interest income | $ | 12,382 | $ | 11,394 | ||||||||||||||||
| Net interest spread (2) (5) | 2.71 | % | 2.58 | % | ||||||||||||||||
| Net interest margin (2) (6) | 3.14 | % | 3.03 | % | ||||||||||||||||
Union Bankshares, Inc. Page 30
| Nine Months Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
|
Average Balance (1) |
Interest Earned/ Paid |
Average Yield/ Rate |
Average Balance (1) |
Interest Earned/ Paid |
Average Yield/ Rate |
|||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Average Assets: | ||||||||||||||||||||
| Federal funds sold and overnight deposits | $ | 18,116 | $ | 351 | 2.55 | % | $ | 22,623 | $ | 522 | 3.04 | % | ||||||||
| Interest bearing deposits in banks | 8,090 | 236 | 3.89 | % | 7,767 | 248 | 4.27 | % | ||||||||||||
| Investment securities (2), (3) | 345,807 | 8,234 | 3.18 | % | 286,087 | 5,346 | 2.49 | % | ||||||||||||
| Loans, net (2), (4) | 1,189,204 | 51,205 | 5.76 | % | 1,164,102 | 50,264 | 5.77 | % | ||||||||||||
| Nonmarketable equity securities | 12,940 | 655 | 6.77 | % | 11,466 | 605 | 7.05 | % | ||||||||||||
| Total interest earning assets (2) | 1,574,157 | 60,681 | 5.15 | % | 1,492,045 | 56,985 | 5.10 | % | ||||||||||||
| Cash and due from banks | 4,975 | 4,693 | ||||||||||||||||||
| Premises and equipment | 19,972 | 20,198 | ||||||||||||||||||
| Other assets | 29,705 | 24,676 | ||||||||||||||||||
| Total assets | $ | 1,628,809 | $ | 1,541,612 | ||||||||||||||||
| Average Liabilities and Stockholders' Equity: | ||||||||||||||||||||
| Interest bearing checking accounts | $ | 331,749 | $ | 3,686 | 1.49 | % | $ | 300,729 | $ | 3,087 | 1.37 | % | ||||||||
| Savings/money market accounts | 369,124 | 3,963 | 1.44 | % | 373,040 | 4,511 | 1.62 | % | ||||||||||||
| Time deposits | 291,905 | 7,746 | 3.55 | % | 287,004 | 8,489 | 3.95 | % | ||||||||||||
| Borrowed funds and other liabilities | 303,598 | 9,025 | 3.92 | % | 256,017 | 7,836 | 4.04 | % | ||||||||||||
| Subordinated notes | 16,319 | 471 | 3.86 | % | 16,285 | 428 | 3.51 | % | ||||||||||||
| Total interest bearing liabilities | 1,312,695 | 24,891 | 2.52 | % | 1,233,075 | 24,351 | 2.63 | % | ||||||||||||
| Noninterest bearing deposits | 211,936 | 220,085 | ||||||||||||||||||
| Other liabilities | 18,946 | 18,383 | ||||||||||||||||||
| Total liabilities | 1,543,577 | 1,471,543 | ||||||||||||||||||
| Stockholders' equity | 85,232 | 70,069 | ||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 1,628,809 | $ | 1,541,612 | ||||||||||||||||
| Net interest income | $ | 35,790 | $ | 32,634 | ||||||||||||||||
| Net interest spread (2) (5) | 2.63 | % | 2.47 | % | ||||||||||||||||
| Net interest margin (2) (6) | 3.05 | % | 2.93 | % | ||||||||||||||||
_________________
(1)Average balances are calculated based on a daily averaging method.
(2)Average yields reported on a tax equivalent basis using a marginal federal corporate income tax rate of 21%.
(3)Average balances of investment securities are calculated on the amortized cost basis and include nonaccrual securities, if applicable.
(4)Includes loans held for sale as well as nonaccrual loans, unamortized costs and unamortized premiums and is net of the ACL on loans.
(5)Net interest spread is the tax equivalent average yield on average interest earning assets less the average rate paid on interest bearing liabilities.
(6)Net interest margin is the ratio of net interest income, on a tax equivalent basis, to average interest earning assets.
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Tax exempt interest income amounted to $1.5 million and $1.6 million for the three months ended September 30, 2026 and 2025, respectively, and $4.7 million and $5.0 million for the nine months ended September 30, 2026 and 2025, respectively. The following table presents the effect of tax exempt income on the calculation of net interest income, using a marginal federal corporate income tax rate of 21% for the three and nine month comparison periods of 2026 and 2025:
| For The Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||
| (Dollars in thousands) | ||||||||||||||
| Net interest income, as presented | $ | 12,144 | $ | 11,156 | $ | 35,059 | $ | 31,872 | ||||||
| Effect of tax-exempt interest | ||||||||||||||
| Investment securities | 43 | 35 | 130 | 104 | ||||||||||
| Loans | 195 | 203 | 601 | 658 | ||||||||||
| Net interest income, tax equivalent | $ | 12,382 | $ | 11,394 | $ | 35,790 | $ | 32,634 | ||||||
Rate/Volume Analysis. The following table describes the extent to which changes in average interest rates earned and paid (on a fully tax equivalent basis) and changes in volume of average interest earning assets and interest bearing liabilities have affected the Company's interest income and interest expense during the periods indicated. For each category of interest earning assets and interest bearing liabilities, information is provided on changes attributable to:
•changes in volume (change in volume multiplied by prior rate);
•changes in rate (change in rate multiplied by prior volume); and
•total change in rate and volume.
Changes attributable to both rate and volume have been allocated proportionately to the change due to volume and the change due to rate.
|
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025 Increase/(Decrease) Due to Change In |
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025 Increase/(Decrease) Due to Change In |
|||||||||||||||||||
| Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||
| Interest earning assets: | (Dollars in thousands) | |||||||||||||||||||
| Federal funds sold and overnight deposits | $ | (89) | $ | (72) | $ | (161) | $ | (95) | $ | (76) | $ | (171) | ||||||||
| Interest bearing deposits in banks | 3 | (5) | (2) | 11 | (23) | (12) | ||||||||||||||
| Investment securities | 386 | 519 | 905 | 1,246 | 1,642 | 2,888 | ||||||||||||||
| Loans, net | 530 | (138) | 392 | 1,081 | (140) | 941 | ||||||||||||||
| Nonmarketable equity securities | 3 | 19 | 22 | 75 | (25) | 50 | ||||||||||||||
| Total interest earning assets | 833 | 323 | 1,156 | 2,318 | 1,378 | 3,696 | ||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||
| Interest bearing checking accounts | 86 | 55 | $ | 141 | $ | 333 | $ | 266 | $ | 599 | ||||||||||
| Savings/money market accounts | (7) | 8 | 1 | (47) | (501) | (548) | ||||||||||||||
| Time deposits | 137 | (319) | (182) | 143 | (886) | (743) | ||||||||||||||
| Borrowed funds | 279 | (114) | 165 | 1,421 | (232) | 1,189 | ||||||||||||||
| Subordinated notes | - | 43 | 43 | - | 43 | 43 | ||||||||||||||
| Total interest bearing liabilities | 495 | (327) | 168 | 1,850 | (1,310) | 540 | ||||||||||||||
| Net change in net interest income | $ | 338 | $ | 650 | $ | 988 | $ | 468 | $ | 2,688 | $ | 3,156 | ||||||||
Credit Loss Expense. Credit loss expense or benefit is made up of credit loss expense on loans and credit loss expense on off-balance sheet credit exposures. Credit loss expense on loans results from net charge-offs, changes to the projected loss drivers, prepayment speeds, curtailments and time to recovery that the Company forecasted over the reasonable and supportable forecast periods and changes in the volume and mix of the loan portfolio. Credit loss expense on off-balance sheet credit exposures results from changes in outstanding commitments and changes in funding rates and assumed loss rates period over period. For
Union Bankshares, Inc. Page 32
further details, see FINANCIAL CONDITION - Allowance for Credit Losses on Loans on page 38 and Commitments, Contingent Liabilities, and Off-Balance-Sheet Arrangements on page 41.
Credit loss expense (benefit) was made up of the following components for the following periods:
| For The Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||
| (Dollars in thousands) | ||||||||||||||
| Credit loss expense for loans | $ | 207 | $ | 127 | $ | 182 | $ | 748 | ||||||
| Credit loss (benefit) expense for off-balance sheet credit exposures | (173) | 186 | (298) | 21 | ||||||||||
| Credit loss expense (benefit), net | $ | 34 | $ | 313 | $ | (116) | $ | 769 | ||||||
Noninterest Income. The following table sets forth the components of noninterest income and changes between the three and nine month comparison periods of 2026 and 2025:
| For The Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | $ Variance | % Variance | 2026 | 2025 | $ Variance | % Variance | |||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||
| Wealth management income | $ | 327 | $ | 297 | $ | 30 | 10.1 | $ | 960 | $ | 868 | $ | 92 | 10.6 | ||||||||||||
| Service fees | 1,828 | 1,793 | 35 | 2.0 | 5,234 | 5,165 | 69 | 1.3 | ||||||||||||||||||
| Net gains on sales of loans held for sale | 553 | 700 | (147) | (21.0) | 1,393 | 1,569 | (176) | (11.2) | ||||||||||||||||||
| Income from Company-owned life insurance | 132 | 328 | (196) | (59.8) | 379 | 569 | (190) | (33.4) | ||||||||||||||||||
| Income from MSRs, net | - | 83 | (83) | (100.0) | - | 83 | (83) | (100.0) | ||||||||||||||||||
| Net gains on disposals of premises and equipment | - | - | - | - | 381 | - | 381 | 100.0 | ||||||||||||||||||
| Other income | 27 | 55 | (28) | (50.9) | 132 | 117 | 15 | 12.8 | ||||||||||||||||||
| Net (losses) gains on other investments | (24) | 94 | (118) | (125.5) | 101 | 178 | (77) | (43.3) | ||||||||||||||||||
| Total noninterest income | $ | 2,843 | $ | 3,350 | $ | (507) | (15.1) | $ | 8,580 | $ | 8,549 | $ | 31 | 0.4 | ||||||||||||
The significant changes in noninterest income for the three and nine months ended September 30, 2026 compared to the same periods of 2025 are described below:
•Wealth management income. Wealth management income increased as managed fiduciary accounts grew between September 30, 2026 and 2025, as did the value of assets within those accounts.
•Service fees. Service fees increased $35 thousand and $69 thousand during the three and nine months ended September 30, 2026, respectively, primarily due to increases in loan servicing income and overdraft fees, partially offset by a decrease in merchant program fees.
•Net gains on sales of loans held for sale. Residential mortgage loans sold totaled $38.0 million and $94.9 million during the three and nine months ended September 30, 2026, respectively, compared to sales of $46.0 million and $102.8 million during the corresponding periods of 2025. Net gains on residential loan sales decreased $147 thousand and $176 thousand for the three and nine months ended September 30, 2026, respectively compared to 2025, reflecting the lower volume and lower market premiums on loans sold during 2026 compared to 2025.
•Income from Company-owned life insurance. The Company received $197 thousand of death benefit proceeds during the three and nine months ended September 30, 2025, while no death benefit was received during the same periods in 2026.
•Income from MSRs, net. Income from MSRs is derived from servicing rights acquired through the sale of loans on which servicing is retained. Capitalized servicing rights are initially recorded at fair value and amortized in proportion to, and over the period of, the estimated future servicing period of the underlying loans. The amortization of MSRs exceeded the new capitalized MSRs for the three and nine month 2026 comparison periods, with the amortization expense included in Other expenses in the consolidated statements of income. The higher volume of residential loan sales during the 2025 comparison periods discussed above resulted in new capitalized MSRs that exceeded amortization of MSRs by $83 thousand for the three and nine months ended September 30, 2025.
Union Bankshares, Inc. Page 33
•Net gains on disposals of premises and equipment. A $381 thousand gain was recognized on the sale of a previously closed branch property during the second quarter of 2026. No similar gain was recognized during the first nine months of 2025.
•Other income. The Company received $19 thousand of prepayment penalties from the early payoff of loans during the first quarter of 2026 compared to $24 thousand of prepayment penalties received during the three and nine months ended September 30, 2025. In addition, a $15 thousand one-time payment was received during the nine months ended September 30, 2026 that was not received during the same period in 2025.
•Net (losses) gains on other investments. Participants in the 2020 Amended and Restated Nonqualified Excess Plan elect to defer receipt of current compensation from the Company or its subsidiary and select designated reference investments consisting of investment funds. The performance of those funds, over which the Company has no control, resulted in net losses of $24 thousand and net gains of $101 thousand for the three and nine months ended September 30, 2026, respectively, and net gains of $94 thousand and $178 thousand for the three and nine months ended September 30, 2025, respectively.
Noninterest Expenses. The following table sets forth the components of noninterest expenses and changes between the three and nine month comparison periods of 2026 and 2025:
| For The Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | $ Variance | % Variance | 2026 | 2025 | $ Variance | % Variance | |||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||
| Salaries and wages | $ | 4,388 | $ | 4,436 | $ | (48) | (1.1) | $ | 13,701 | $ | 12,432 | $ | 1,269 | 10.2 | ||||||||||||
| Employee benefits | 1,611 | 1,406 | 205 | 14.6 | 5,273 | 4,958 | 315 | 6.4 | ||||||||||||||||||
| Occupancy expense, net | 555 | 537 | 18 | 3.4 | 1,749 | 1,736 | 13 | 0.7 | ||||||||||||||||||
| Equipment expense | 1,176 | 1,095 | 81 | 7.4 | 3,421 | 3,244 | 177 | 5.5 | ||||||||||||||||||
| FDIC insurance assessment | 337 | 409 | (72) | (17.6) | 1,025 | 1,151 | (126) | (10.9) | ||||||||||||||||||
| ATM and debit card expense | 371 | 344 | 27 | 7.8 | 1,031 | 914 | 117 | 12.8 | ||||||||||||||||||
| Travel & entertainment | 91 | 70 | 21 | 30.0 | 195 | 144 | 51 | 35.4 | ||||||||||||||||||
| Wealth management expenses | 148 | 131 | 17 | 13.0 | 430 | 393 | 37 | 9.4 | ||||||||||||||||||
| Advertising and public relations | 220 | 258 | (38) | (14.7) | 651 | 584 | 67 | 11.5 | ||||||||||||||||||
| Loan related expenses | 112 | 126 | (14) | (11.1) | 441 | 402 | 39 | 9.7 | ||||||||||||||||||
| Training and development | 50 | 48 | 2 | 4.2 | 184 | 152 | 32 | 21.1 | ||||||||||||||||||
| Electronic banking expense | 180 | 164 | 16 | 9.8 | 519 | 478 | 41 | 8.6 | ||||||||||||||||||
| Other expenses | 1,373 | 1,319 | 54 | 4.1 | 4,237 | 4,066 | 171 | 4.2 | ||||||||||||||||||
| Total noninterest expense | $ | 10,612 | $ | 10,343 | $ | 269 | 2.6 | $ | 32,857 | $ | 30,654 | $ | 2,203 | 7.2 | ||||||||||||
The significant changes in noninterest expenses for the three and nine months ended September 30, 2026 compared to the same periods in 2025 are described below:
•Salaries and wages. Salaries and wages increased $1.3 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase was primarily attributable to annual salary adjustments for the fiscal year 2026 and overlap associated with succession planning for retiring employees. Also contributing to the increase was retirement related compensation costs of $362 thousand, including accelerated vesting of long-term incentive awards and a retirement bonus payment, an increase of $130 thousand in the accrual related to incentive plan payments to select officers of Union, and an increase of $145 thousand from the accrual for unused paid time off (PTO) outstanding as of September 30, 2026 related to a fourth quarter 2025 change in the PTO policy. The decrease in salaries and wages for the three months ended September 30, 2026 compared to the same period in 2025 primarily relates to a decrease of $94 thousand in the accrual related to incentive plan payments, a decrease of $47 thousand from the accrual for unused PTO, and a decrease of $9 thousand in commissions, partially offset by annual salary adjustments during the comparison periods.
•Employee benefits. Employee benefit expense increased $205 thousand and $315 thousand during the three and nine month comparison periods, respectively, primarily due to increases in premium expense for the Company's medical and dental insurance plans and 401k plan contribution expense, partially offset by a decrease in the employee benefit expense related to the Company's deferred compensation plans.
Union Bankshares, Inc. Page 34
•Equipment expense. Equipment expense increased during the three and nine month comparison periods primarily due to increases in software license and maintenance costs, accruals for computer operation support and depreciation expense related to equipment replacement purchases.
•FDIC insurance assessment. The FDIC insurance assessment decreased by $72 thousand and $126 thousand during the three and nine month comparison periods, respectively, due to a lower assessment rate, partially offset by the overall growth in net average assets.
•ATM and debit card expense. The increases of $27 thousand and $117 thousand for the three and nine month comparison periods, respectively, are primarily related to increased costs associated with debit card processing compared to the same periods last year.
•Travel and entertainment. The increases of $21 thousand and $51 thousand during the three and nine month comparison periods, respectively, relate to an increase in business related meeting costs and intercompany travel between locations.
•Wealth management expenses. The increases of $17 thousand and $37 thousand during the three and nine month comparison periods, respectively, were primarily attributable to the growth in managed fiduciary accounts and the associated data processing and professional services.
•Advertising and public relations. Advertising and public relations costs increased $67 thousand during the nine months ended September 30, 2026 compared to the same period in 2025 due to a continued focus on additional advertising campaigns and business development activities during 2026 compared to 2025. The decrease in advertising and public relations costs of $38 thousand for the three months ended September 30, 2026 compared to the same period in 2025 primarily relates to the timing of advertising campaigns and business development activities during 2026 compared to 2025.
•Loan related expenses. The changes in loan related expenses for the three and nine month comparison periods relate primarily to loan origination volume and the credit report fees and real estate loan closing costs associated with loan origination activity. The nine month period ended September 30, 2026 also included a $20 thousand increase in the amortization of MSRs.
•Training and development. The increase in training and development expense reflects increased investment in employee training and professional development initiatives during 2026 compared to 2025.
•Electronic banking expenses. The increase in electronic banking expenses during the three and nine month comparison periods is related primarily to increased costs associated with functionality improvements to the online banking platform during 2026.
•Other expenses. Other expenses increased $54 thousand and $171 thousand during the three and nine month comparison periods, respectively, compared to the same periods in 2025 primarily due to increases in deposit related fee expenses, Vermont franchise tax expense, and employee related costs, largely attributable to employee relocation costs.
Provision for Income Taxes. The Company has provided for current and deferred federal income taxes for the three and nine months ended September 30, 2026 and 2025. The Company's net provision for income taxes was $573 thousand and $1.2 million for the three and nine months ended September 30, 2026, respectively, compared to $414 thousand and $666 thousand for the same periods in 2025, respectively, reflecting higher net income year over year. The effective federal corporate income tax rate was 12.2% and 10.3% for the three and nine months ended September 30, 2026, respectively, compared to 9.9% and 7.2% for the same periods in 2025, respectively.
Amortization expense related to limited partnership investments is included as a component of income tax expense and amounted to $475 thousand and $1.4 million for the three and nine months ended September 30, 2026, respectively, compared to $457 thousand and $1.4 million for the same periods in 2025, respectively. These investments provide tax benefits, including tax credits. Low income housing and rehabilitation tax credits with respect to limited partnership investments are also included as a component of income tax expense and amounted to $514 thousand and $1.5 million for the three and nine months ended September 30, 2026, respectively, and $484 thousand and $1.5 million for the three and nine months ended September 30, 2025, respectively.
FINANCIAL CONDITION
At September 30, 2026, the Company had total consolidated assets of $1.64 billion, including gross loans and loans held for sale (total loans) of $1.23 billion, investment securities AFS of $279.9 million, deposits of $1.25 billion, borrowed funds of $271.1 million, subordinated notes of $16.3 million and stockholders' equity of $78.8 million. The Company's total assets at September 30, 2026 increased $19.3 million, or 1.2%, from $1.62 billion at December 31, 2025, and increased $62.6 million, or 4.0%, compared to September 30, 2025.
Union Bankshares, Inc. Page 35
Federal funds sold and overnight deposits increased $10.4 million, or 136.4%, to $18.1 million as of September 30, 2026, from $7.6 million at December 31, 2025.
Net loans and loans held for sale increased $52.9 million, or 4.5%, to $1.23 billion, representing 74.9% of total assets at September 30, 2026, compared to $1.17 billion, or 72.5% of total assets at December 31, 2025. (See Loans Held for Sale and Loan Portfolio on page 36.)
Total deposits increased $36.5 million, or 3.0%, to $1.25 billion at September 30, 2026, from $1.21 billion at December 31, 2025. Noninterest bearing deposits increased by $1.5 million, or 0.6%, interest bearing deposits decreased by $61.6 million, or 8.5%, while time deposits increased by $96.6 million, or 36.9%. (See Deposits on page 40.)
Borrowed funds at September 30, 2026 were $271.1 million and consisted of $241.1 million of FHLB advances and $30.0 million of borrowings from the FRB. Borrowed funds consisted of $286.5 million of FHLB advances at December 31, 2025. (See Borrowings on page 41.)
Stockholders' equity decreased from $80.9 million at December 31, 2025 to $78.8 million at September 30, 2026, reflecting an increase of $14.8 million in accumulated other comprehensive loss due to a decrease in the fair market value of the Company's AFS investment securities and cash dividends declared of $5.1 million during the nine months ended September 30, 2026. These decreases were partially offset by net income of $9.7 million for the first nine months of 2026, an increase of $7.4 million due to net proceeds from the issuance of common stock under the Company's at-the-market offering, an increase of $681 thousand from the vesting of stock-based compensation, and a $62 thousand increase due to the issuance of common stock under the DRIP. (See Capital Resources on page 43.)
Loans Held for Sale and Loan Portfolio. Total loans (including loans held for sale) increased $53.0 million, or 4.5%, to $1.23 billion, representing 75.3% of assets at September 30, 2026, from $1.18 billion, representing 72.9% of assets at December 31, 2025. The total loan portfolio at September 30, 2026 increased $53.1 million compared to the September 30, 2025 level of $1.18 billion, which represented 74.9% of assets. The Company's loans consist primarily of adjustable-rate and fixed-rate mortgage loans secured by 1-to-4 family, multi-family residential or commercial real estate. Real estate secured loans represented $1.07 billion, or 87.1% of total loans at September 30, 2026 and $1.03 billion, or 87.2% of total loans at December 31, 2025. The net change in the Company's loan portfolio from December 31, 2025 (see table below) resulted primarily from an increase in the volume of residential, commercial real estate and municipal loans.
The composition of the Company's loan portfolio, including loans held for sale, as of September 30, 2026 and December 31, 2025 was as follows:
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Loan Class | Amount | Percent | Amount | Percent | ||||||||||
| Residential real estate | (Dollars in thousands) | |||||||||||||
| Non-revolving residential real estate | $ | 469,634 | 38.1 | $ | 445,199 | 37.8 | ||||||||
| Revolving residential real estate | 33,917 | 2.8 | 29,075 | 2.5 | ||||||||||
| Construction real estate | ||||||||||||||
| Commercial construction real estate | 46,674 | 3.8 | 51,347 | 4.4 | ||||||||||
| Residential construction real estate | 51,051 | 4.1 | 52,478 | 4.5 | ||||||||||
| Commercial real estate | ||||||||||||||
| Non-residential commercial real estate | 367,339 | 29.9 | 345,900 | 29.3 | ||||||||||
| Multi-family residential real estate | 98,652 | 8.0 | 99,269 | 8.4 | ||||||||||
| Commercial | 30,385 | 2.5 | 31,159 | 2.6 | ||||||||||
| Consumer | 2,101 | 0.1 | 2,414 | 0.1 | ||||||||||
| Municipal | 126,993 | 10.3 | 117,893 | 10.0 | ||||||||||
| Loans held for sale | 5,169 | 0.4 | 4,172 | 0.4 | ||||||||||
| Total loans | 1,231,915 | 100.0 | 1,178,906 | 100.0 | ||||||||||
| ACL on loans | (8,601) | (8,407) | ||||||||||||
| Unamortized net loan costs | 2,137 | 2,066 | ||||||||||||
| Net loans and loans held for sale | $ | 1,225,451 | $ | 1,172,565 | ||||||||||
The Company originates and sells qualified residential mortgage loans in various secondary market avenues to mitigate long-term interest rate risk and generate fee income, with a majority of sales made to the FHLMC/Freddie Mac, generally with
Union Bankshares, Inc. Page 36
servicing rights retained. At September 30, 2026, the Company serviced a $1.26 billion residential real estate mortgage portfolio, of which $5.2 million was held for sale and approximately $751.0 million of which was serviced for unaffiliated third parties. The Company sold $94.9 million of qualified residential real estate loans to the secondary market during the first nine months of 2026 compared to sales of $102.8 million during the first nine months of 2025.
The Company also originates commercial real estate and commercial loans under various SBA, USDA and State sponsored programs which provide a government agency guaranty for a portion of the loan amount. There was $1.5 million guaranteed under these various programs at September 30, 2026 on an aggregate balance of $2.0 million in subject loans.
The Company serviced $41.5 million of commercial and commercial real estate loans for unaffiliated third parties as of September 30, 2026. This included $40.4 million of commercial and commercial real estate loans the Company originated and participated out to other financial institutions. These loans were participated in the ordinary course of business on a nonrecourse basis, for liquidity or credit concentration management purposes.
The Company capitalizes MSRs for all loans sold with servicing retained. The unamortized balance of MSRs on loans sold with servicing retained was $1.8 million at September 30, 2026, with an estimated market value in excess of the carrying value as of such date. Management periodically evaluates and measures the servicing assets for impairment.
Qualifying residential first lien mortgage loans and certain commercial real estate loans with a combined carrying value of $434.1 million were pledged as collateral for borrowings from the FHLB under a blanket lien at September 30, 2026.
Asset Quality. The Company, like all financial institutions, is exposed to certain credit risks, including those related to the value of the collateral that secures its loans and the ability of borrowers to repay their loans. Consistent application of the Company's conservative loan policies has helped to mitigate these risks and has been prudent for both the Company and its customers. Management closely monitors the Company's loan and investment portfolios, OREO and OAO for potential problems and reports to the Company's and Union's Board at regularly scheduled meetings. Board approved policies set forth portfolio diversification levels to mitigate concentration risk and the Company sells participations in larger credits to other financial institutions to further mitigate that risk.
Repossessed assets, nonaccrual loans, and loans that are 90 days or more past due are considered to be nonperforming assets. The following table details the composition of the Company's nonperforming assets and amounts utilized to calculate certain asset quality ratios monitored by the Company's management as of the balance sheet dates and September 30, 2025:
|
September 30, 2026 |
December 31, 2025 |
September 30, 2025 |
|||||||||
| (Dollars in thousands) | |||||||||||
| Nonaccrual loans | $ | 14,697 | $ | 13,562 | $ | 12,987 | |||||
| Loans past due 90 days or more and still accruing interest | 173 | 241 | 470 | ||||||||
| Total nonperforming assets | $ | 14,870 | $ | 13,803 | $ | 13,457 | |||||
| Guarantees of U.S. or state government agencies on the above nonperforming loans | $ | - | $ | - | $ | 269 | |||||
| ACL on loans | $ | 8,601 | $ | 8,407 | $ | 8,397 | |||||
| Net (recoveries) charge-offs | $ | (12) | $ | 28 | $ | 31 | |||||
| Total loans and loans held for sale outstanding | $ | 1,231,915 | $ | 1,178,906 | $ | 1,178,802 | |||||
| Total average loans outstanding | $ | 1,189,204 | $ | 1,167,901 | $ | 1,164,102 | |||||
Union Bankshares, Inc. Page 37
The following table shows trends in certain asset quality ratios monitored by the Company's management as of the balance sheet dates and September 30, 2025:
|
September 30, 2026 |
December 31, 2025 |
September 30, 2025 |
|||||||||
| (Dollars in thousands) | |||||||||||
| ACL on loans to total loans outstanding | 0.70 | % | 0.71 | % | 0.71 | % | |||||
| ACL on loans to nonperforming loans | 57.84 | % | 60.91 | % | 62.40 | % | |||||
| ACL on loans to nonaccrual loans | 58.52 | % | 61.99 | % | 64.66 | % | |||||
| Nonperforming loans to total loans | 1.21 | % | 1.17 | % | 1.14 | % | |||||
| Nonperforming assets to total assets | 0.91 | % | 0.85 | % | 0.86 | % | |||||
| Nonaccrual loans to total loans | 1.19 | % | 1.15 | % | 1.10 | % | |||||
| Delinquent loans (30 days to nonaccruing) to total loans | 1.33 | % | 1.49 | % | 1.15 | % | |||||
| Net (recoveries) charge-offs to total average loans | - | % | - | % | - | % | |||||
| Residential real estate | - | % | - | % | - | % | |||||
| Net recoveries | $ | (10) | $ | (16) | $ | (12) | |||||
| Total average loans | $ | 487,402 | $ | 473,743 | $ | 471,290 | |||||
| Commercial | (0.01) | % | 0.12 | % | 0.11 | % | |||||
| Net (recoveries) charge-offs | $ | (2) | $ | 39 | $ | 39 | |||||
| Total average loans | $ | 30,631 | $ | 33,246 | $ | 33,929 | |||||
| Consumer | - | % | 0.19 | % | 0.15 | % | |||||
| Net charge-offs | $ | - | $ | 5 | $ | 4 | |||||
| Total average loans | $ | 2,243 | $ | 2,676 | $ | 2,707 | |||||
All other loan categories did not have charge-offs or recoveries for any of the periods presented above.
There were no loans in process of foreclosure at September 30, 2026 or December 31, 2025. The aggregate interest income not recognized on nonaccrual loans approximated $1.5 million and $791 thousand as of September 30, 2026 and December 31, 2025, respectively.
The Company had loans rated substandard that were on performing status totaling $336 thousand and $531 thousand at September 30, 2026 and December 31, 2025, respectively. In management's view, substandard loans represent a higher degree of risk of becoming nonperforming loans in the future.
Allowance for Credit Losses on Loans. Some of the Company's loan customers ultimately do not make all of their contractually scheduled payments, requiring the Company to charge off a portion or all of the remaining principal balance due. The Company maintains an ACL to absorb such losses. The level of the ACL on loans at September 30, 2026 represents management's estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company's policy and methodologies for establishing the ACL on loans, described in the Company's 2025 Annual Report, did not change during the first nine months of 2026. The Company's ACL on loans was $8.6 million and $8.4 million at September 30, 2026 and December 31, 2025, respectively.
The following table reflects activity in the ACL on loans for the three and nine months ended September 30, 2026 and 2025:
| For The Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||
| (Dollars in thousands) | ||||||||||||||
| Balance at beginning of period | $ | 8,390 | $ | 8,307 | $ | 8,407 | $ | 7,680 | ||||||
| Charge-offs | - | (42) | - | (46) | ||||||||||
| Recoveries | 4 | 5 | 12 | 15 | ||||||||||
| Net recoveries (charge-offs) | 4 | (37) | 12 | (31) | ||||||||||
| Credit loss expense | 207 | 127 | 182 | 748 | ||||||||||
| Balance at end of period | $ | 8,601 | $ | 8,397 | $ | 8,601 | $ | 8,397 | ||||||
Union Bankshares, Inc. Page 38
The following table shows the internal breakdown by risk component of the Company's ACL on loans and the percentage of loans in each category to total loans (net of loans held for sale) at the dates indicated:
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||
| Residential real estate | (Dollars in thousands) | |||||||||||||
| Non-revolving residential real estate | $ | 2,900 | 38.3 | $ | 2,913 | 37.9 | ||||||||
| Revolving residential real estate | 297 | 2.8 | 263 | 2.5 | ||||||||||
| Construction real estate | ||||||||||||||
| Commercial construction real estate | 615 | 3.8 | 654 | 4.4 | ||||||||||
| Residential construction real estate | 115 | 4.2 | 186 | 4.5 | ||||||||||
| Commercial real estate | ||||||||||||||
| Non-residential commercial real estate | 4,074 | 29.9 | 3,755 | 29.4 | ||||||||||
| Multi-family residential real estate | 254 | 8.0 | 239 | 8.4 | ||||||||||
| Commercial | 238 | 2.5 | 292 | 2.7 | ||||||||||
| Consumer | 2 | 0.2 | 5 | 0.2 | ||||||||||
| Municipal | 106 | 10.3 | 100 | 10.0 | ||||||||||
| Total | $ | 8,601 | 100.0 | $ | 8,407 | 100.0 | ||||||||
Notwithstanding the categories shown in the table above or any specific allocation under the Company's ACL methodology, all funds in the ACL on loans are available to absorb loan losses in the portfolio, regardless of loan category or specific allocation.
Management believes, in its best estimate, that the ACL on loans at September 30, 2026 is appropriate to cover expected credit losses over the expected life of the Company's loan portfolio as of such date. However, there can be no assurance that the Company will not sustain losses in future periods which could be greater than the size of the ACL on loans at September 30, 2026. In addition, our banking regulators, as an integral part of their examination process, periodically review our ACL. Such agencies may require us to recognize adjustments to the ACL based on their judgments about information available to them at the time of their examination. A large adjustment to the ACL on loans for losses in future periods could require increased credit loss expense to replenish the ACL on loans, which could negatively affect earnings.
Investment Activities. The Company's investment securities classified as AFS, which are carried at fair value, decreased $46.4 million to $279.9 million, comprising 17.1% of total assets at September 30, 2026, compared to $326.3 million, or 20.2% of total assets at December 31, 2025. The decrease between periods is due to returns of principal of $27.1 million and an increase in net unrealized losses of $19.2 million.
Net unrealized losses in the Company's AFS investment securities portfolio were $52.4 million as of September 30, 2026, compared to net unrealized losses of $33.1 million as of December 31, 2025. The Company's Accumulated OCI component of stockholders' equity at September 30, 2026 reflected cumulative net unrealized losses on investment securities of $40.7 million. There were no securities classified as HTM at September 30, 2026 or December 31, 2025. The unrealized losses in the Company's AFS investment securities portfolio are primarily attributable to changes in long-term interest rates which are tied to the pricing indexes for the securities. No declines in value were deemed by management to constitute impairment related to credit losses at September 30, 2026. Deterioration in credit quality and/or imbalances in liquidity that may result from changes in financial market conditions might adversely affect the fair values of the Company's investment portfolio and the amount of gains or losses ultimately realized on the sale of such securities and may also increase the potential that credit losses may be identified in future periods, resulting in credit loss expense recorded in earnings.
Investment securities AFS with a fair value of $83.7 million and $87.8 million were pledged as collateral for FHLB borrowings and other credit subject to collateralization, public unit deposits or for other purposes as required or permitted by law at September 30, 2026 and December 31, 2025, respectively. Investment securities AFS pledged as collateral for borrowings at the discount window at the FRB consisted of mortgage-backed securities with a fair value of $55.7 million and $9.4 million at September 30, 2026 and December 31, 2025, respectively.
Union Bankshares, Inc. Page 39
Deposits. The following table shows information concerning the Company's average deposits by account type and weighted average nominal rates at which interest was paid on such deposits for the nine months ended September 30, 2026 and 2025:
|
Nine Months Ended September 30, 2026 |
Nine Months Ended September 30, 2025 |
|||||||||||||||||||
|
Average Balance |
Percent of Total Deposits |
Average Rate Paid |
Average Balance |
Percent of Total Deposits |
Average Rate Paid |
|||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Nontime deposits: | ||||||||||||||||||||
| Noninterest bearing deposits | $ | 211,936 | 17.6 | - | % | $ | 220,085 | 18.6 | - | % | ||||||||||
| Interest bearing checking accounts | 331,749 | 27.5 | 1.49 | % | 300,729 | 25.5 | 1.37 | % | ||||||||||||
| Money market accounts | 221,430 | 18.4 | 2.37 | % | 229,297 | 19.4 | 2.60 | % | ||||||||||||
| Savings accounts | 147,694 | 12.3 | 0.04 | % | 143,743 | 12.2 | 0.04 | % | ||||||||||||
| Total nontime deposits | 912,809 | 75.8 | 1.12 | % | 893,854 | 75.7 | 1.14 | % | ||||||||||||
| Total time deposits | 291,905 | 24.2 | 3.55 | % | 287,004 | 24.3 | 3.95 | % | ||||||||||||
| Total deposits | $ | 1,204,714 | 100.0 | 1.71 | % | $ | 1,180,858 | 100.0 | 1.82 | % | ||||||||||
During the first nine months of 2026, average total deposits increased by $23.9 million, or 2.0%, compared to the nine months ended September 30, 2025. The deposit mix has remained consistent between periods. The average balance of total nontime deposits increased $19.0 million between periods primarily due to municipal customers retaining deposit funds for longer periods in the first nine months of 2026 compared to the first nine months of 2025, resulting in increases of $31.0 million in interest bearing checking accounts and $4.0 million in savings accounts, partially offset by decreases of $8.1 million in noninterest bearing deposits and $7.9 million in money market accounts. Average total time deposits increased $4.9 million between periods resulting from a $5.9 million increase in average customer time deposits, partially offset by decreases of $815 thousand in average purchased CDARS deposits and $178 thousand in average retail brokered deposits.
The Company participates in CDARS, which permits it to offer full deposit insurance coverage to its customers by exchanging deposit balances with other CDARS participants. CDARS also provides the Company with an additional source of funding and liquidity through the purchase of deposits. There were $17.1 million and $248 thousand of purchased CDARS deposits at September 30, 2026 and December 31, 2025, respectively. There were $12.6 million and $11.3 million of customer time deposits of $250,000 or less on the balance sheet at September 30, 2026 and December 31, 2025, respectively, which were exchanged with other CDARS participants.
The Company also participates in the ICS program, a service through which it can offer its customers demand or savings deposit products with access to unlimited FDIC insurance, while receiving reciprocal deposits from other FDIC-insured banks. Like the exchange of certificate of deposit accounts through CDARS, exchange of demand or savings deposits through ICS provides a depositor with full deposit insurance coverage of excess balances, thereby helping the Company retain the full amount of the deposit on its balance sheet. As with the CDARS program, in addition to reciprocal deposits, participating banks may also purchase one-way ICS deposits. There were no purchased ICS deposits at September 30, 2026 or December 31, 2025. There were $217.0 million and $270.5 million in exchanged ICS demand and money market deposits on the balance sheet at September 30, 2026 and December 31, 2025, respectively.
At September 30, 2026 there were $93.7 million of retail brokered deposits at a weighted average rate of 4.15% issued under a master certificate of deposit program with a deposit broker for twelve month terms, which provided a supplemental source of funding and liquidity. There were $10.0 million of retail brokered deposits at a weighted average rate of 3.85% issued at December 31, 2025.
Uninsured deposits have been estimated to include deposits with balances greater than the FDIC insurance coverage limit of $250 thousand. This estimate by management is based on the same methodologies and assumptions used for regulatory reporting requirements. At September 30, 2026, the Company had total estimated uninsured deposit accounts totaling $439.9 million, or 35.2% of total deposits. Uninsured deposits include $19.5 million of municipal deposits that were collateralized under applicable state regulations by letters of credit issued by the FHLB at September 30, 2026, as described under Borrowings on page 41.
Union Bankshares, Inc. Page 40
The following table provides a maturity distribution of the Company's time deposits in amounts in excess of the $250 thousand FDIC insurance limit at September 30, 2026 and December 31, 2025:
| September 30, 2026 | December 31, 2025 | |||||||
| (Dollars in thousands) | ||||||||
| Within 3 months | $ | 28,277 | $ | 29,593 | ||||
| 3 to 6 months | 24,325 | 17,267 | ||||||
| 6 to 12 months | 10,960 | 21,713 | ||||||
| Over 12 months | 6,179 | 523 | ||||||
| $ | 69,741 | $ | 69,096 | |||||
Borrowings. Advances from the FHLB are another key source of funds to support earning assets. These funds are also used to manage the Bank's interest rate and liquidity risk exposures. Borrowed funds included FHLB advances of $241.1 million with a weighted average rate of 3.94% at September 30, 2026 and $286.5 million with a weighted average rate of 4.05% at December 31, 2025. Union is required to invest in $100 par value stock of the FHLB in an amount to satisfy unpaid principal balances on qualifying loans, plus an amount to satisfy an activity based requirement. The stock is nonmarketable, and is redeemable by the FHLB at par value. With the decrease in FHLB advances outstanding at September 30, 2026, the investment in FHLB Class B common stock decreased to $10.9 million at September 30, 2026 compared to $12.2 million at December 31, 2025. Union's investment in FHLB stock is carried at cost in Other assets on the consolidated balance sheets.
The Company has the authority, up to its available borrowing capacity with the FHLB, to collateralize public unit deposits with letters of credit issued by the FHLB. FHLB letters of credit in the amount of $45.6 million and $42.9 million were utilized as collateral for these deposits at September 30, 2026 and December 31, 2025, respectively. The Company's reimbursement obligations to the FHLB relating to these letters of credit are secured by pledged collateral, which reduces the Company's available borrowing capacity with the FHLB. Total fees paid by the Company in connection with the issuance of these letters of credit were $11 thousand and $32 thousand for the three and nine months ended September 30, 2026, respectively, and $12 thousand and $40 thousand for the three and nine months ended September 30, 2025, respectively.
At September 30, 2026, borrowed funds also included a $30.0 million overnight advance from the discount window at the FRB at a weighted average rate of 4.00%. Advances under this program are secured by mortgage-backed securities AFS that have been pledged as collateral at the FRB. There were no outstanding advances from the FRB at December 31, 2025.
In August 2021, the Company completed the private placement of $16.5 million in aggregate principal amount of fixed-to-floating rate subordinated notes due in 2031 to certain qualified institutional buyers and accredited investors. The Notes initially bore interest, payable semi-annually, at the rate of 3.25% per annum, until September 1, 2026. From and including September 1, 2026, the Notes outstanding principal balance bears interest at a floating rate that will reset quarterly to the then current three-month SOFR plus 263 basis points. The Notes are presented in the consolidated balance sheets net of unamortized issuance costs of $167 thousand and $193 thousand at September 30, 2026 and December 31, 2025, respectively.
Commitments, Contingent Liabilities, and Off-Balance-Sheet Arrangements. The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers, to reduce its own exposure to fluctuations in interest rates and to implement its strategic objectives. These financial instruments include commitments to extend credit, standby letters of credit, interest rate caps and floors written on adjustable-rate loans, commitments to participate in or sell loans, commitments to buy or sell securities, certificates of deposit or ot
her investment instruments and risk-sharing commitments or guarantees on certain sold loans. Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the balance sheet. The contractual or notional amounts of these instruments reflect the extent of involvement the Company has in a particular class of financial instruments.
The Company's maximum exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. For interest rate caps and floors written on adjustable-rate loans, the contractual or notional amounts do not represent the Company's exposure to credit loss. The Company controls the risk of interest rate cap agreements through credit approvals, borrowing limits, and monitoring procedures. The Company generally requires collateral or other security to support financial instruments with credit risk.
Union Bankshares, Inc. Page 41
The following table details the contractual or notional amount of financial instruments that represented credit risk at the balance sheet dates:
| September 30, 2026 | December 31, 2025 | |||||||
| 2026 | 2025 | |||||||
| (Dollars in thousands) | ||||||||
| Commitments to originate loans | $ | 28,816 | $ | 65,558 | ||||
| Unused lines of credit | 179,842 | 174,031 | ||||||
| Standby and commercial letters of credit | 1,747 | 1,573 | ||||||
| Credit card arrangements | 99 | 125 | ||||||
| FHLB Mortgage Partnership Finance credit enhancement obligation, net | 1,535 | 1,233 | ||||||
| Commitment to purchase investment in a real estate limited partnership | - | 1,000 | ||||||
| Total | $ | 212,039 | $ | 243,520 | ||||
Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Loan commitments generally have a fixed expiration date or other termination clause and may require payment of a fee. Since many of the loan commitments are expected to expire without being drawn upon and not all credit lines will be utilized, the total commitment amounts do not necessarily represent future cash requirements. Lines of credit incur seasonal volume fluctuations due to the nature of some customers' businesses, such as tourism. The decrease in commitments to originate loans at September 30, 2026 from December 31, 2025 is primarily attributable to a decrease in commercial real estate construction loan commitments.
The Company did not hold any derivative or hedging instruments at September 30, 2026 or December 31, 2025.
In addition to commitments with credit risk arising from the Company's financial instruments, in the normal course of business the Company enters into other types of contractual arrangements from time to time that represent off-balance sheet commitments such as contracts for the purchase or lease of property, including real property for its banking premises.
The Company records an ACL on off-balance sheet credit exposures through a charge or credit to Credit loss expense (benefit) on the consolidated statements of income to account for the change in the ACL on off-balance sheet exposures between reporting periods. The ACL on off-balance sheet credit exposures totaled $792 thousand and $1.1 million at September 30, 2026 and December 31, 2025, respectively, and was included in Accrued interest and other liabilities on the consolidated balance sheets. There was $173 thousand and $298 thousand of credit loss benefit recorded on off-balance sheet credit exposures for the three and nine months ended September 30, 2026, respectively, and $186 thousand and $21 thousand of credit loss expense recorded for the three and nine months ended September 30, 2025, respectively.
Liquidity. Liquidity is a measurement of the Company's ability to meet potential cash requirements, including ongoing commitments to fund deposit withdrawals, repay borrowings, fund investment and lending activities, purchase and lease commitments, and for other general business purposes. The primary objective of liquidity management is to maintain a balance between sources and uses of funds to meet our cash flow needs in the most economical and expedient manner. The Company's principal sources of funds are deposits; wholesale funding options including purchased deposits, amortization, prepayment and maturity of loans, investment securities, interest bearing deposits and other short-term investments; sales of AFS securities and loans held for sale; earnings; and funds provided from operations. Contractual principal repayments on loans have been a relatively predictable source of funds. Deposit flows and loan and investment prepayments are less predictable and can be significantly influenced by market interest rates, economic conditions, and rates offered by our competitors. Managing liquidity risk is essential to maintaining both depositor confidence and earnings stability.
As of September 30, 2026, Union, as a member of FHLB, had access to unused lines of credit up to $47.4 million over and above the $289.5 million in combined outstanding FHLB borrowings and other credit subject to collateralization, subject to the purchase of required FHLB Class B common stock and evaluation by the FHLB of the underlying collateral available. This line of credit can be used for either short-term or long-term liquidity or other funding needs.
Union also maintains an IDEAL Way Line of Credit with the FHLB. The total line available was $551 thousand at September 30, 2026. There were no borrowings against this line of credit as of such date. Interest on this line is chargeable at a rate determined by the FHLB and payable monthly. Should Union utilize this line of credit, qualified portions of the loan and investment portfolios would collateralize these borrowings.
In addition to its borrowing arrangements with the FHLB, Union maintains a pre-approved federal funds line of credit totaling $15.0 million with an upstream correspondent bank, a master brokered deposit agreement with a brokerage firm, and one-way buy options with CDARS and ICS. At September 30, 2026, there were $93.7 million in retail brokered deposits issued under a
Union Bankshares, Inc. Page 42
master certificate of deposit program with a broker, and $17.1 million in purchased CDARS deposits. There were no purchased ICS deposits or outstanding advances on the correspondent line at September 30, 2026.
Union's investment and residential loan portfolios also provide a significant amount of contingent liquidity that could be accessed in a reasonable time period through sales of those portfolios. Additional contingent liquidity sources are available with further access to the brokered deposit market and the FRB discount window. As of September 30, 2026, there was a $30.0 million advance outstanding from the FRB discount window, which was utilized based on prevailing pricing and liquidity considerations. These sources are incorporated into our contingent liquidity planning. Management believes the Company has sufficient liquidity to meet all reasonable borrower, depositor, and creditor needs in the present economic environment. However, any projections of future cash needs and flows are subject to substantial uncertainty, including factors outside the Company's control.
Capital Resources. Capital management is designed to maintain an optimum level of capital in a cost-effective structure that meets target regulatory ratios, supports management's internal assessment of economic capital, funds the Company's business strategies and builds long-term stockholder value. Dividends are generally in line with long-term trends in earnings per share and conservative earnings projections, while sufficient profits are retained to support anticipated business growth, fund strategic investments, maintain required regulatory capital levels and provide continued support for deposits. The Company continues to evaluate growth opportunities both through internal growth or potential acquisitions.
On May 20, 2025, the Company and Union entered into an Equity Distribution Agreement with Piper Sandler & Co., as sales agent, pursuant to which the Company may sell from time to time shares of the Company's common stock, par value $2.00, having an aggregate gross sale price of up to $40,000,000. Sales of common stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be "at-the-market offerings" as defined in Rule 415(a)(4) under the Securities Act, or subject to the Company's consent, in privately negotiated transactions. The shares offered and sold in the offering have been registered by the Company under the Securities Act. There were no shares issued during the three months ended September 30, 2026. During the nine months ended September 30, 2026, the Company issued 327,806 shares for aggregate gross sale proceeds of $7.7 million, at an average gross sales price of $23.51 per share, which yielded net proceeds to the Company of $7.4 million, after issuance costs, including sales commissions equal to 3% of gross sales proceeds. From the inception of the Equity Distribution Agreement through September 30, 2026, 384,066 shares of the Company's common stock were issued under the offering. As of September 30, 2026, approximately $30.8 million remains available for issuance under the offering.
In August 2021, the Company completed the private placement of $16.5 million in aggregate principal amount of fixed-to-floating rate subordinated notes due in 2031 to certain qualified institutional buyers and accredited investors. The Notes were structured to qualify as Tier 2 capital for the Company under regulatory capital guidelines for bank holding companies during the first five years after issuance. Effective September 1, 2026, Tier 2 capital treatment will decline by 20% per year. Proceeds from the sale of the Notes were utilized primarily to provide additional Tier 1 capital to Union to support its growth and for other general corporate purposes.
Stockholders' equity decreased from $80.9 million at December 31, 2025 to $78.8 million at September 30, 2026, reflecting an increase of $14.8 million in accumulated other comprehensive loss due to a decrease in the fair value of the Company's AFS investment securities and cash dividends declared of $5.1 million during the nine months ended September 30, 2026. These decreases were partially offset by net income of $9.7 million for the first nine months of 2026, an increase of $7.4 million due to net proceeds from the issuance of common stock under the Company's at-the-market offering, an increase of $681 thousand from the vesting of stock-based compensation, and a $62 thousand increase due to the issuance of common stock under the DRIP. The components of other comprehensive income are illustrated in Note 10 of the unaudited consolidated financial statements.
The Company has 7,500,000 shares of $2.00 par value common stock authorized. As of September 30, 2026, the Company had 5,415,605 shares issued, of which 4,946,715 were outstanding and 468,890 were held in treasury.
In December 2024, the Company's Board reauthorized for 2025 and 2026 a limited stock repurchase plan that was initially established in May of 2010. The limited stock repurchase plan allows the repurchase of up to a fixed number of shares of the Company's common stock each calendar quarter in open market purchases or privately negotiated transactions, as management deems advisable and as market conditions may warrant. The repurchase authorization for a calendar quarter (currently 2,500 shares) expires at the end of that quarter to the extent it has not been exercised, and is not carried forward into future quarters. The quarterly repurchase authorization expires on December 31, 2026, unless reauthorized. The Company had no repurchases under this program during the first nine months of 2026.
The Company maintains a DRIP whereby registered stockholders may elect to reinvest cash dividends and make optional cash contributions to purchase additional shares of the Company's common stock. The Company has reserved 200,000 shares of its
Union Bankshares, Inc. Page 43
common stock for issuance and sale under the DRIP. As of September 30, 2026, 18,359 shares of stock had been issued from treasury stock under the DRIP.
The Company (on a consolidated basis) and Union are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's and Union's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Union must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's and Union's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Under the standard regulatory capital guidelines, banking organizations must have a minimum total risk-based capital ratio of 8.0%, a minimum Tier I risk-based capital ratio of 6.0%, a minimum common equity Tier I risk-based capital ratio of 4.5%, and a minimum leverage ratio of 4.0% in order to be "adequately capitalized." In addition to these requirements, banking organizations must maintain a 2.5% capital conservation buffer consisting of common Tier I equity, increasing the minimum required total risk-based capital, Tier I risk-based and common equity Tier I capital to risk-weighted assets they must maintain to avoid limits on capital distributions and certain bonus payments to executive officers and similar employees.
As shown in the table below, as of September 30, 2026, both the Company and Union met all capital adequacy requirements to which they are subject and Union exceeded the requirements for a "well capitalized" bank under the FDIC's Prompt Corrective Action framework. There were no conditions or events between September 30, 2026 and the date of this report that management believes have changed either company's regulatory capital category.
| Actual |
For Capital Adequacy Purposes |
To Be Well Capitalized Under Prompt Corrective Action Provisions |
||||||||||||||||||
| As of September 30, 2026 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||
| Company: | (Dollars in thousands) | |||||||||||||||||||
| Total capital to risk weighted assets | $ | 139,758 | 13.56 | % | $ | 82,453 | 8.00 | % | N/A | N/A | ||||||||||
| Tier 1 capital to risk weighted assets | 117,298 | 11.38 | % | 61,844 | 6.00 | % | N/A | N/A | ||||||||||||
| Common Equity Tier 1 to risk weighted assets | 117,298 | 11.38 | % | 46,383 | 4.50 | % | N/A | N/A | ||||||||||||
| Tier 1 capital to average assets | 117,298 | 7.06 | % | 66,458 | 4.00 | % | N/A | N/A | ||||||||||||
| Union: | ||||||||||||||||||||
| Total capital to risk weighted assets | $ | 142,354 | 13.82 | % | $ | 82,405 | 8.00 | % | $ | 103,006 | 10.00 | % | ||||||||
| Tier 1 capital to risk weighted assets | 132,960 | 12.91 | % | 61,794 | 6.00 | % | 82,392 | 8.00 | % | |||||||||||
| Common Equity Tier 1 to risk weighted assets | 132,960 | 12.91 | % | 46,345 | 4.50 | % | 66,943 | 6.50 | % | |||||||||||
| Tier 1 capital to average assets | 132,960 | 8.01 | % | 66,397 | 4.00 | % | 82,996 | 5.00 | % | |||||||||||
Dividends paid by Union are the primary source of funds available to the Company for payment of dividends to its stockholders. Union is subject to certain requirements imposed by federal banking laws and regulations, which among other things, establish minimum levels of capital and restrict the amount of dividends that may be distributed by Union to the Company.
Quarterly cash dividends of $0.36 per share were paid during the third quarter of 2026 and were declared in October for the fourth quarter, payable on November 5, 2026 to stockholders of record on October 31, 2026.
Union Bankshares Inc. published this content on November 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 09, 2026 at 21:47 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]