UNION BANKSHARES INC
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
UNB$22.96+0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0000706863-24-000038
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0000706863-24-000064
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 154 previous paragraphs and 163 current paragraphs.
58 unchanged; 87 reworded; 14 added; 4 removed; 5 previous and 4 current paragraphs rearranged.
Tables are not compared: 16 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
The State of Vermont suffered a second historical flood from July 10-11, 2024 on the anniversary of the flood that occurred in 2023, followed by another on July 30, 2024. Although the impact in 2024 is less widespread than 2023, many of the towns most severely impacted are located in the communities served by Union Bank. This flooding has devastated many businesses, individuals, and municipalities primarily in the Northeast Kingdom of Vermont. While clean up and recovery have begun and progress is being made, it will take time before many of the affected homes, businesses, and infrastructure are repaired. Union has proactively reached out to customers affected by the flooding to assess the impact to borrowers and provide necessary resources where needed. The Company has not sustained damages to its properties from the 2024 flooding.
Current report
Consolidated net income decreased $1.2 million, or 21.8%, to $4.4 million for the six months ended June 30, 2024 compared to $5.7 million for the six months ended June 30, 2023 due to the combined effects of a decrease in net interest income of $1.1 million and increases in noninterest expenses of $1.2 million and credit loss expense of $180 thousand, partially offset by an increase in noninterest income of $564 thousand and a reduction in income tax expense of $668 thousand.
Current report
Interest income on loans increased $2.7 million between the three month comparison periods due to an increase in the average volume of loans outstanding of $67.9 million and an increase of 74 bps in the average yield. There was a $445 thousand recovery of interest income on loans during the three and six months ended June 30, 2024 related to the payoff of a loan that had previously been in nonaccrual. This accounted for 17 bps of the increase in the average loan yield between the three month comparison periods.
Current report
Net interest income was $18.5 million, on a fully tax equivalent basis for the six months ended June 30, 2024 compared to $19.6 million for the six months ended June 30, 2023, a decrease of $1.1 million, or 5.6%. The average volume of earning assets increased $67.3 million and the average yield on earning assets increased 57 bps to 4.72% compared to 4.15% for the comparison period. Average loans increased $64.4 million, or 6.6%, to $1.0 billion for the six months ended June 30, 2024. The increase in average loan volume and the increase of 65 bps in the average loan yield resulted in a $4.8 million increase in interest income on loans between periods. The $445 thousand recovery of interest income on loans from a loan payoff that had previously been in nonaccrual, discussed above, accounted for 9 bps of the increase in the average loan yield between the six month comparison periods.
Current report
The average balance of the investment portfolio decreased $11.2 million while the average yield on the portfolio remained unchanged, resulting in a decrease in interest income on investment securities of $60 thousand between the six month comparison periods.
Current report
The average cost of funds increased 100 bps to 2.43% for the six months ended June 30, 2024 compared to 1.43% for the six months ended June 30, 2023. Interest expense increased $6.4 million, to $13.7 million for the six months ended June 30, 2024 compared to $7.3 million for the six months ended June 30, 2023. The increases in the average cost of funds and in interest expense were due to an increase of $102.3 million in the average balance of interest bearing liabilities and increases in average rates paid in all liability categories between periods, with the exception of the Company's subordinated notes.
Current report
•Vermont franchise tax. The decrease in expense between the three and six month comparison periods was due to the decrease in average deposit balances for customer accounts allocated to Vermont.
Current report
•Other loan related expenses. Other loan related expenses consist of other costs incurred for originating and servicing loans such as insurance and property tax tracking expenses, credit report fees, and other real estate closing costs. These expenses increased for the three and six month comparison periods due to higher loan volume and an increase in real estate closing costs during the first six months of 2024.
Current report
June 30th marks the end of the fiscal year for the majority of the Company's municipal customers, including school districts, and several customers are required to reduce their outstanding short term debts to zero for at least one day during their fiscal year. The one day requirement traditionally occurs annually on June 30th and as a result the Company experiences a decrease in outstanding loan balances. In many cases monies are transferred from corresponding deposit accounts to pay off these debts so the Company experiences a corresponding decrease in deposit balances as well. These cyclical decreases are short term in nature as the loans and deposits for the next municipal fiscal year are recorded within the first few days of July. The Company recorded $48.7 million in new municipal loans during the first few days of July 2024.
Current report
Union Bankshares, Inc. Page 36
Current report
Union Bankshares, Inc. Page 37
Current report
Union Bankshares, Inc. Page 38
Current report
Union Bankshares, Inc. Page 41
Current report
Union Bankshares, Inc. Page 42
Removed paragraphs (4)
Previous report
Interest income on loans increased $2.2 million between the three month comparison periods due to an increase in the average volume of loans outstanding of $60.9 million and an overall increase of 56 bps in the average yield. Loan fee income was reduced $53 thousand from the recognition of the remaining loan premiums originally paid on purchased residential loans that
Previous report
Union Bankshares, Inc. Page 26 were paid off during the three months ended March 31, 2024. This resulted in a 2 bps reduction of the average loan yield for the three months ended March 31, 2024.
Previous report
•Training and development. The increase between the three month comparison periods relates to employee participation at more conferences and educational events during 2024 compared to 2023.
Previous report
Union Bankshares, Inc. Page 34 during the first three months of 2024. The Company's ACL on loans was $6.6 million at March 31, 2024 and December 31, 2023.
Reworded paragraphs (87)
Previous wording
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 March 31, 2024 and December 31, 2023, and its results of operations for the three months ended March 31, 2024 and 2023. 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 2023 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 March 31, 2024 which would materially affect the information presented.
Current wording
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 June 30, 2024 and December 31, 2023, and its results of operations for the three and six months ended June 30, 2024 and 2023. 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 2023 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 June 30, 2024 which would materially affect the information presented.
Previous wording
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 concerns about inflation, or legislative or regulatory initiatives; 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 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 2023 Annual Report.
Current wording
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 concerns about inflation, or legislative or regulatory initiatives; 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 2023 Annual Report.
Previous wording
In addition to the uncertainties detailed in the Company's 2023 Annual Report the banking industry continues to be faced with deposit runoff, unrealized securities losses, and increased interest expense.
Current wording
In addition to the uncertainties detailed in the Company's 2023 Annual Report the banking industry continues to be faced with an inverted yield curve, unrealized securities losses, and higher funding costs.
Previous wording
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
Current wording
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
Previous wording
Union Bankshares, Inc. Page 24 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.
Current wording
Union Bankshares, Inc. Page 26 measures commonly used by financial institutions, namely tax-equivalent net interest income and tax-equivalent net interest 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.
Previous wording
The Company, like others, has experienced earnings pressure due to the prolonged and steep yield curve inversion. The sharp increases in short-term rates have had a significant impact on the Company's funding costs due to higher rates paid on deposit accounts and increased utilization of wholesale funding at higher costs. The Company’s financial position remains strong, supported by a diverse deposit base, a strong liquidity position, excellent asset quality, and regulatory capital in excess of all required levels. The Company continues to focus on gathering deposits, optimization of the net interest margin and maintaining strong asset quality.
Current wording
The Company, like other financial institutions, has experienced earnings pressure due to the prolonged and steep yield curve inversion. The sharp increases in short-term rates during 2022 and 2023 have had a significant impact on the Company's funding costs due to higher rates paid on deposit accounts and increased utilization of wholesale funding at higher costs. Despite these challenges, the Company’s financial position remains strong, supported by a diverse deposit base, a strong liquidity position, excellent asset quality, and regulatory capital in excess of all required levels. The Company continues to focus on gathering deposits, optimization of the net interest margin and maintaining strong asset quality.
Previous wording
The Company's earnings have been impacted by the inverted yield curve, as deposit and funding costs have risen at a faster pace than assets have repriced, which has resulted in compression of the net interest margin and spread. The net interest margin was 2.68% for the three months ended March 31, 2024 compared to 3.14% for the three months ended March 31, 2023, while the net interest spreads for the same periods were 2.23% and 2.84%, respectively. We continue to manage the net interest margin and spread, by remaining disciplined on loan and deposit pricing, utilizing brokered and retail CDs when appropriate to reduce our exposure to high short-term interest rates, and maximizing our balance sheet collateral (i.e. loans and investment securities) to obtain wholesale funding in a cost effective way to fund loan growth.
Current wording
The Company's earnings have been impacted by the inverted yield curve, as deposit and funding costs have risen at a faster pace than assets have repriced, which has resulted in compression of the net interest margin and spread. The net interest margin was 2.74% for the six months ended June 30, 2024 compared to 3.05% for the six months ended June 30, 2023, while the net interest spreads for the same periods were 2.29% and 2.72%, respectively. We continue to manage the net interest margin and spread by remaining disciplined on loan and deposit pricing, utilizing FHLB advances and brokered CDs when appropriate to reduce our exposure to high short-term interest rates, and maximizing our balance sheet collateral (i.e. loans and investment securities) to obtain wholesale funding in a cost effective way to fund loan growth.
Previous wording
Consolidated net income decreased $560 thousand, or 18.8%, to $2.4 million for the first quarter of 2024 compared to $3.0 million for the first quarter of 2023 due to the combined effects of a decrease of $967 thousand in net interest income and an increase of $473 thousand in noninterest expenses, partially offset by an increase of $282 thousand in noninterest income, and decreases of $304 thousand in credit loss expense and $294 thousand in income tax expense.
Current wording
Consolidated net income decreased $680 thousand, or 25.2%, to $2.0 million for the second quarter of 2024 compared to $2.7 million for the second quarter of 2023 due to the combined effects of a decrease of $134 thousand in net interest income and increases of $718 thousand in noninterest expenses and $484 thousand in credit loss expense, partially offset by an increase of $282 thousand in noninterest income and a decrease of $374 thousand in income tax expense.
Previous wording
At March 31, 2024, the Company had total consolidated assets of $1.42 billion, including gross loans and loans held for sale (total loans) of $1.04 billion, deposits of $1.17 billion, borrowed funds of $150.7 million, subordinated notes of $16.2 million and stockholders' equity of $63.8 million.
Current wording
At June 30, 2024, the Company had total consolidated assets of $1.40 billion, including gross loans and loans held for sale (total loans) of $1.01 billion, deposits of $1.05 billion, borrowed funds of $247.1 million, subordinated notes of $16.3 million and stockholders' equity of $64.0 million.
Previous wording
The Company's total capital decreased to $63.8 million at March 31, 2024 from $65.8 million at December 31, 2023. This decrease primarily reflects an increase of $2.9 million in accumulated other comprehensive loss due to a decrease in the fair market value of the Company's AFS investment securities, regular cash dividends declared of $1.6 million, partially offset by net income of $2.4 million for the first three months of 2024. (See Capital Resources on page 39.) These changes also resulted in a decrease in the Company's book value per share to $14.12 at March 31, 2024 from $14.56 as of December 31, 2023.
Current wording
The Company's total capital decreased to $64.0 million at June 30, 2024 from $65.8 million at December 31, 2023. This decrease primarily reflects an increase of $3.3 million in accumulated other comprehensive loss due to a decrease in the fair market value of the Company's AFS investment securities and regular cash dividends declared of $3.3 million, partially offset by net income of $4.4 million for the first six months of 2024. (See Capital Resources on page 43.) These changes also resulted in a decrease in the Company's book value per share to $14.16 at June 30, 2024 from $14.56 at December 31, 2023.
Previous wording
The following unaudited per share information and key ratios depict several measurements of performance or financial condition at or for the three months ended March 31, 2024 and 2023, respectively:
Current wording
The following unaudited per share information and key ratios depict several measurements of performance or financial condition at or for the three and six months ended June 30, 2024 and 2023:
Previous wording
(2)The ratio of tax equivalent net interest income to average earning assets. See page 28 for more information.
Current wording
(2)The ratio of tax equivalent net interest income to average earning assets. See pages 30 and 31 for more information.
Previous wording
(4)The difference between the average yield on earning assets and the average rate paid on interest bearing liabilities. See page 28 for more information.
Current wording
(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.
Previous wording
Interest earned on average earning assets for the three months ended March 31, 2024 was $15.6 million compared to $13.0 million for the three months ended March 31, 2023, an increase of $2.6 million, or 19.8%. The average earning asset base increased $74.0 million between periods and the average yield on average earning assets increased 51 bps to 4.60% for the three months ended March 31, 2024 compared to 4.09% for the three months ended March 31, 2023.
Current wording
Interest earned on average earning assets for the three months ended June 30, 2024 was $16.6 million compared to $13.8 million for the three months ended June 30, 2023, an increase of $2.7 million, or 19.9%. The average earning asset base increased $60.6 million between periods and the average yield on average earning assets increased 63 bps to 4.84% for the three months ended June 30, 2024 compared to 4.21% for the three months ended June 30, 2023.
Previous wording
The average yield on federal funds sold and overnight deposits increased 224 bps, and interest income increased $339 thousand between the three month comparison periods due to increases in the interest rate paid and the average balance maintained in Union's master account at the FRB. Interest income on investment securities increased $24 thousand between the comparison periods, due to an increase in the average yield of 4 bps despite a decrease in the average balance of the portfolio of $6.4 million.
Current wording
The average yield on federal funds sold and overnight deposits increased 34 bps, and interest income increased $84 thousand between the three month comparison periods due to increases in the interest rate paid and the average balance maintained in Union's master account at the FRB. Interest income on investment securities decreased $84 thousand between comparison periods due to a $15.9 million decrease in the average balance of the portfolio and a decrease in the average yield of 5 bps.
Previous wording
Average interest bearing liabilities increased $120.8 million between the three month comparison periods due to growth in customer time deposit balances, utilization of brokered deposits included in time deposits, and an increase in borrowed funds. The average rate paid on interest bearing liabilities increased 112 bps to 2.37% for the first quarter of 2024 compared to 1.25% for the first quarter of 2023. Interest expense increased $3.5 million, to $6.6 million for the three months ended March 31, 2024 compared to $3.1 million for the three months ended March 31, 2023. Higher rates paid on customer deposit accounts and utilization of higher cost funding of brokered deposits and advances from the FHLB and the FRB were drivers of the increase in interest expense.
Current wording
Average interest bearing liabilities increased $84.1 million between the three month comparison periods due to growth in customer time deposit balances, utilization of brokered deposits included in time deposits, and an increase in borrowed funds. The average rate paid on interest bearing liabilities increased 90 bps to 2.49% for the second quarter of 2024 compared to 1.59% for the second quarter of 2023. Interest expense increased $2.9 million, to $7.1 million for the three months ended June 30, 2024 compared to $4.2 million for the three months ended June 30, 2023. Higher rates paid on customer deposit accounts and utilization of higher cost funding of brokered deposits and advances from the FHLB and the FRB were drivers of the increase in interest expense.
Previous wording
The net interest spread decreased 61 bps to 2.23% for the first quarter of 2024, from 2.84% for the same period last year, reflecting the net effect of the 112 bps increase in the average rate paid on interest bearing liabilities, which was only partially offset by the 51 bps increase in the average yield earned on interest earning assets between periods. The net interest margin decreased 46 bps during the first quarter of 2024 compared to the same period last year as a result of the changes discussed above.
Current wording
The net interest spread decreased 27 bps to 2.35% for the second quarter of 2024, from 2.62% for the same period last year, reflecting the net effect of the 90 bps increase in the average rate paid on interest bearing liabilities, which was only partially offset by the 63 bps increase in the average yield earned on interest earning assets between periods. The net interest margin decreased 15 bps during the second quarter of 2024 compared to the same period last year as a result of the changes discussed above.
Previous wording
During the first three months of 2024, Union, like many other financial institutions, continued to offer higher rate paying time deposit specials to attract new deposit dollars and retain existing customer deposits. Although some new money was obtained, a shift of funds from non-maturity deposits to time deposit specials occurred. Interest expense on time deposits increased $1.3 million to $2.5 million for the three months ended March 31, 2024 compared to $1.2 million for the three months ended March 31, 2023 due to increases of $67.9 million in the average volume and 132 bps in the average rate paid. Despite a decrease of $22.0 million in the average balance of savings/money market accounts, interest expense increased $957 thousand between the three month comparison periods due to an increase of 98 bps in the average rate paid. The average volume of borrowed funds increased $76.8 million while the average rate paid on borrowed funds decreased 54 bps between the three month comparison periods as borrowed funds outstanding were advanced at lower rates than the comparison period.
Current wording
During the first six months of 2024, Union, like many other financial institutions, continued to offer higher rate paying time deposit specials to attract new deposit dollars and retain existing customer deposits. Although some new money was obtained, a shift of funds in the Company's deposit base from non-maturity deposits to time deposit specials occurred. Interest expense on time deposits increased $2.1 million to $5.5 million for the six months ended June 30, 2024 compared to $3.4 million for the six months ended June 30, 2023 due to increases of $48.5 million in the average volume and 103 bps in the average rate paid. Despite a decrease of $23.9 million in the average balance of savings/money market accounts, interest expense increased $1.5 million between the six month comparison periods due to an increase of 85 bps in the average rate paid. Interest expense on interest bearing checking accounts increased $706 thousand between the six month comparison periods resulting from an increase of 51 bps in the average yield, which more than offset the decrease of $15.7 million in the average balance. The average volume of borrowed funds increased $93.4 million and the average rate paid on borrowed funds increased 15 bps between the six month comparison periods, resulting in a $2.0 million increase in interest expense.
Previous wording
The following table shows 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.
Current wording
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.
Previous wording
Tax exempt interest income amounted to $1.3 million and $832 thousand for the three months ended March 31, 2024 and 2023, 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 2024 and 2023 three month comparison periods:
Current wording
Tax exempt interest income amounted to $1.3 million and $966 thousand for the three months ended June 30, 2024 and 2023, 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 2024 and 2023 three and six month comparison periods:
Previous wording
Credit Loss (Benefit) 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 further details, see FINANCIAL CONDITION -Allowance for Credit Losses on Loans and Commitments, Contingent Liabilities, and Off-Balance-Sheet Arrangements below.
Current wording
Credit Loss Expense (Benefit). 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 further details, see FINANCIAL CONDITION -Allowance for Credit Losses on Loans and Commitments, Contingent Liabilities, and Off-Balance-Sheet Arrangements below.
Previous wording
Credit loss (benefit) expense was made up of the following components for the following periods:
Current wording
Credit loss expense (benefit) was made up of the following components for the following periods:
Previous wording
Noninterest Income. The following table sets forth the components of noninterest income and changes between the three month comparison periods of 2024 and 2023:
Current wording
Noninterest Income. The following table sets forth the components of noninterest income and changes between the three and six month comparison periods of 2024 and 2023:
Previous wording
The significant changes in noninterest income for the three months ended March 31, 2024 compared to the same period of 2023 are described below:
Current wording
The significant changes in noninterest income for the three and six months ended June 30, 2024 compared to the same periods of 2023 are described below:
Previous wording
•Service fees. Service fees decreased $32 thousand for the three months ended March 31, 2024, compared to the same period in 2023 primarily due to decreases in loan servicing fees, merchant program fees and ATM and debit card network fees, partially offset by an increase in overdraft fee income.
Current wording
•Service fees. Service fees decreased $37 thousand for the six months ended June 30, 2024, compared to the same period in 2023 primarily due to decreases in loan servicing fees, merchant program fees and ATM and debit card network fees, partially offset by increases in overdraft fee income and service charge income.
Previous wording
•Net gains on sales of loans held for sale. Residential mortgage loans totaling $21.7 million were sold during the three months ended March 31, 2024, compared to sales of $11.8 million during the same periods in 2023. The increase of $93 thousand in net gains on sales of loans held for sale for the three months ended March 31, 2024 compared to the same period in 2023 reflects the higher sales volume and higher premiums obtained on sales during the three months ended March 31, 2024.
Current wording
•Net gains on sales of loans held for sale. Residential mortgage loans totaling $19.3 million and $41.0 million were sold during the three and six months ended June 30, 2024, respectively, compared to sales of $17.8 million and $29.6 million during the same periods in 2023, respectively. The increases of $35 thousand and $128 thousand in net gains on sales of loans held for the three and six month comparison periods, respectively, reflect the higher sales volume and higher premiums obtained on sales in 2024.
Previous wording
•Income from Company-owned life insurance. The increase in income for the three months ended March 31, 2024, compared to the same period of 2023 reflects a higher yield earned on the underlying life insurance policies.
Current wording
•Income from Company-owned life insurance. Death benefit proceeds of $235 thousand were received in the second quarter of 2024 that were not received during the same period in 2023. Income also increased during the three and six month comparison periods due to a higher yield earned on the underlying life insurance policies.
Previous wording
•Other income. The Company received $117 thousand in prepayment penalties from the early payoff of loans during the three months ended March 31, 2024 that were not received during the same period of 2023.
Current wording
•Other income. The Company received $117 thousand in prepayment penalties from the early payoff of loans during the first quarter of 2024 that were not received during the same period of 2023.
Previous wording
•Net 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 gains of $95 thousand and $46 thousand for the three months ended March 31, 2024 and 2023, respectively.
Current wording
•Net 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 gains of $33 thousand and $128 thousand for the three and six months ended June 30, 2024, respectively, and net gains of $56 thousand and $102 thousand for the three and six months ended June 30, 2023, respectively.
Previous wording
Noninterest Expenses. The following table sets forth the components of noninterest expenses and changes between the three month comparison periods ended March 31, 2024 and 2023:
Current wording
Noninterest Expenses. The following table sets forth the components of noninterest expenses and changes between the three and six month comparison periods ended June 30, 2024 and 2023:
Previous wording
The significant changes in noninterest expenses for the three months ended March 31, 2024 compared to the same period in 2023 are described below:
Current wording
The significant changes in noninterest expenses for the three and six months ended June 30, 2024 compared to the same periods in 2023 are described below:
Previous wording
•Salaries and wages. Salaries and wages increased $51 thousand for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to annual salary adjustments for the 2024 fiscal year, partially offset by the $72 thousand accrual adjustment related to the annual incentive plan payments to select officers of Union recorded in the first three months of 2024. The increase during comparison periods is also attributable to the inclusion of salaries and wages for employees at our North Conway location, which became a full service branch during the fourth quarter of 2023.
Current wording
•Salaries and wages. Salaries and wages increased $101 thousand and $152 thousand for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 primarily due to annual salary adjustments for the 2024 fiscal year. The increases are also attributable to the inclusion of salaries and wages for employees at our North Conway location, which became a full service branch during the fourth quarter of 2023. The increase for the six month comparison period was partially offset by a $72 thousand accrual adjustment related to the annual incentive plan payments to select officers of Union recorded in the first quarter of 2024.
Previous wording
•Employee benefits. Employee benefit expense increased $112 thousand for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to increases of $108 thousand in premium expense for the Company's medical and dental plans and $44 thousand in employee benefits related to the Company's deferred compensation plans. These increases were partially offset by a $42 thousand decrease in 401k contributions expense related to forfeitures received during the first quarter of 2024.
Current wording
•Employee benefits. Employee benefit expense increased $160 thousand for the three months ended June 30, 2024 compared to the same period in 2023 primarily due to increases of $129 thousand in premium expense for the Company's medical and dental plans and a $49 thousand increase in 401k contribution expense related to forfeiture adjustments recorded in the second quarter of 2024, partially offset by a decrease of $24 thousand in employee benefits related to the Company's deferred compensation plans. The increase of $272 thousand for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to increases of $237 thousand in premium expense for the Company's medical and dental plans and $19 thousand in employee benefits related to the Company's deferred compensation plans.
Previous wording
•Occupancy expense, net. The decrease in occupancy expense between the three month comparison periods is primarily due to decreases in utilities and repair and maintenance expenses.
Current wording
•Occupancy expense, net. The increase in occupancy expense between the three and six month comparison periods is primarily due to increases in depreciation expense related to leasehold improvements to the North Conway location that became a full service branch during the fourth quarter of 2023 as well as increases in repair and maintenance expenses at other locations.
Previous wording
•Equipment expense. Equipment expense increased between periods primarily due to an increase in software license and maintenance costs associated with outsourcing Union's core application processing system that was finalized during the fourth quarter of 2023.
Current wording
•Equipment expense. Equipment expense increased between the three and six month comparison periods primarily due to an increase in software license and maintenance costs associated with outsourcing Union's core application processing system that was finalized during the fourth quarter of 2023.
Previous wording
•Professional fees. Professional fees increased $30 thousand for the three months ended March 31, 2024 compared to the same period in 2023 due to annual increases in engagement fees and other consulting services engagements occurring in 2024 that were not utilized in 2023.
Current wording
•Professional fees. Professional fees increased $55 thousand and $85 thousand for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 resulted from annual increases in engagement fees and additional consultants that were engaged to assist with employment searches and other consulting services in 2024 that were not utilized in 2023.
Previous wording
•FDIC insurance assessment. The FDIC insurance assessment increased by $58 thousand between periods due to an increase in the assessment rate as well as overall growth in net assets.
Current wording
•FDIC insurance assessment. The FDIC insurance assessment increased by $6 thousand and $64 thousand during the three and six month comparison periods, respectively, due to an increase in the assessment rate as well as overall growth in net assets.
Previous wording
•Advertising and public relations. The $35 thousand increase primarily relates to an increase in advertising campaigns and business development activities during the three months ended March 31, 2024 compared to the same period in 2023.
Current wording
•Advertising and public relations. The increase in advertising and public relations costs is primarily related to advertising campaigns and business development activities during the three and six months ended June 30, 2024 that did not occur in 2023.
Previous wording
•Amortization of MSRs, net. Income from MSRs is derived from servicing rights acquired through the sale of loans where servicing is retained. Capitalized servicing rights are initially recorded at fair value and amortized in proportion to, and
Current wording
•Amortization of 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 new capitalized MSRs during both comparison periods, which resulted in net expense of $62 thousand and $102 thousand for the three and six months ended June 30, 2024, respectively, and $77 thousand and $201 thousand for the three and six months ended June 30, 2023, respectively.
Previous wording
•ATM and debit card expense. The increase between the three month comparison periods is primarily related to the costs associated with outsourcing Union's core application processing system that was finalized during the fourth quarter of 2023.
Current wording
•ATM and debit card expense. The increase between the three and six month comparison periods is primarily related to the costs associated with outsourcing Union's core application processing system that was finalized during the fourth quarter of 2023. There was also additional costs incurred during the second quarter of 2024 associated with a change in the servicing arrangement in place for the ATM machines.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
The net interest spread decreased 43 bps to 2.29% for the six months ended June 30, 2024, from 2.72% for the same period last year, reflecting the net effect of the 100 bps increase in the average rate paid on interest bearing liabilities, which was only partially offset by the 57 bps increase in the average yield earned on interest earning assets between periods. The net interest margin decreased 31 bps for the six months ended June 30, 2024 compared to the same period last year as a result of the changes discussed above.
Current report — wording carried from elsewhere
Net unrealized losses in the Company’s AFS investment securities portfolio were $45.1 million as of June 30, 2024, compared to net unrealized losses of $41.0 million as of December 31, 2023. The Company’s Accumulated OCI component of stockholders’ equity at June 30, 2024 reflected cumulative net unrealized losses on investment securities of $35.2 million. There were no securities classified as HTM at June 30, 2024 or December 31, 2023. The increase in unrealized losses is primarily attributable to increases in long term interest rates which are tied to the pricing indexes for the securities. No declines
Current report — wording carried from elsewhere
Union Bankshares, Inc. Page 40 funding and liquidity. There were $103.0 million of retail brokered deposits at December 31, 2023 at a weighted average rate of 5.07%.
Current report — wording carried from elsewhere
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
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Union Bankshares, Inc. Page 31 over the period of, the estimated future servicing period of the underlying loans. The amortization of MSRs exceeded new capitalized MSRs during both comparison periods, which resulted in net expense of $40 thousand and $124 thousand for the three months ended March 31, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Net unrealized losses in the Company’s AFS investment securities portfolio were $44.7 million as of March 31, 2024, compared to net unrealized losses of $41.0 million as of December 31, 2023. The Company’s accumulated OCI component of
Previous report — wording carried elsewhere
Union Bankshares, Inc. Page 37 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.
Previous report — wording carried elsewhere
CDARS deposits, $100.0 million in retail brokered deposits issued under a master certificate of deposit program with a broker, and no outstanding advances on the Union or Company correspondent lines.
Previous report — wording carried elsewhere
Union Bankshares, Inc. Page 39 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.