UNB's Q2 Net Income Jumps 18.6% Amidst Deposit Outflows

TL;DR

**UNB's net income is up, but the shrinking deposit base and loan portfolio are red flags for future growth and profitability.**

AI Summary

UNION BANKSHARES INC (UNB) reported a net income of $2.395 million for the three months ended June 30, 2025, a 18.6% increase from $2.019 million in the same period of 2024. For the six months ended June 30, 2025, net income rose 10.4% to $4.896 million from $4.436 million year-over-year. Total interest and dividend income increased to $18.721 million for the three months ended June 30, 2025, up from $16.552 million in 2024, driven by a significant rise in interest and fees on loans to $16.563 million from $14.540 million. However, total deposits decreased to $1.103 billion at June 30, 2025, from $1.169 billion at December 31, 2024, primarily due to a $136.451 million net decrease in interest-bearing deposits. Loans also declined to $1.103 billion from $1.156 billion over the same period. The company saw an increase in borrowed funds to $270.674 million from $259.696 million, indicating a shift in funding strategy. Investment securities available-for-sale decreased to $240.537 million from $250.504 million, with significant gross unrealized losses of $40.191 million at June 30, 2025. The allowance for credit losses on loans increased to $8.307 million from $7.680 million, reflecting a more cautious lending environment.

Why It Matters

UNB's increased net income and EPS are positive signals for investors, demonstrating operational efficiency despite a challenging deposit environment. The significant decline in total deposits and loans, coupled with increased borrowed funds, suggests a strategic shift in funding and lending, potentially impacting future growth and profitability. This could signal tighter credit conditions for customers and increased competition for deposits in the broader market. Competitively, UNB's ability to grow net income while managing deposit outflows highlights its resilience, but sustained deposit erosion could pressure its cost of funds and market share against larger institutions.

Risk Assessment

Risk Level: medium — The company faces medium risk due to a significant decrease in total deposits by $65.548 million (5.6%) from $1.169 billion at December 31, 2024, to $1.103 billion at June 30, 2025, and a decline in loans by $52.970 million (4.6%) from $1.156 billion to $1.103 billion. This deposit outflow and loan contraction could pressure net interest margin and future growth, despite an increase in net income. Additionally, gross unrealized losses on available-for-sale securities totaled $40.191 million at June 30, 2025, indicating market value sensitivity.

Analyst Insight

Investors should closely monitor UNB's deposit retention strategies and loan growth in upcoming quarters. While net income is up, the shrinking balance sheet suggests potential headwinds; consider if the current valuation adequately reflects the risks associated with deposit outflows and a contracting loan portfolio.

Financial Highlights

debt To Equity

19.78

revenue

$37,016,000

operating Margin

N/A

total Assets

$1,480,364,000

total Debt

$286,964,000

net Income

$4,896,000

eps

$0.52

gross Margin

N/A

cash Position

$29,267,000

revenue Growth

+15.1%

Revenue Breakdown

Key Numbers

• $2.395M — Net Income (Q2 2025) (Increased 18.6% from $2.019M in Q2 2024)
• $4.896M — Net Income (YTD Q2 2025) (Increased 10.4% from $4.436M in YTD Q2 2024)
• $1.103B — Total Deposits (June 30, 2025) (Decreased from $1.169B at Dec 31, 2024)
• $1.103B — Loans (June 30, 2025) (Decreased from $1.156B at Dec 31, 2024)
• $270.674M — Borrowed Funds (June 30, 2025) (Increased from $259.696M at Dec 31, 2024)
• $40.191M — Gross Unrealized Losses on AFS Securities (June 30, 2025) (Indicates market value sensitivity)
• $0.53 — Basic EPS (Q2 2025) (Increased from $0.45 in Q2 2024)
• $0.52 — Diluted EPS (Q2 2025) (Increased from $0.45 in Q2 2024)
• $8.307M — Allowance for Credit Losses on Loans (June 30, 2025) (Increased from $7.680M at Dec 31, 2024)
• $16.563M — Interest and Fees on Loans (Q2 2025) (Increased from $14.540M in Q2 2024)

Key Players & Entities

• UNION BANKSHARES INC (company) — Registrant
• UNB (company) — Ticker symbol
• U.S. Securities and Exchange Commission (regulator) — Regulatory body
• $2.395 million (dollar_amount) — Net income for Q2 2025
• $2.019 million (dollar_amount) — Net income for Q2 2024
• $4.896 million (dollar_amount) — Net income for six months ended June 30, 2025
• $4.436 million (dollar_amount) — Net income for six months ended June 30, 2024
• $1.103 billion (dollar_amount) — Total deposits at June 30, 2025
• $1.169 billion (dollar_amount) — Total deposits at December 31, 2024
• $40.191 million (dollar_amount) — Gross unrealized losses on AFS securities at June 30, 2025

FAQ

Risk Factors

• Interest Rate Sensitivity and Unrealized Losses [high — financial]: The company holds $240.537 million in investment securities available-for-sale, which experienced gross unrealized losses of $40.191 million as of June 30, 2025. This indicates significant market value sensitivity and potential for realized losses if these securities need to be sold.
• Deposit Outflows and Funding Mix Shift [medium — financial]: Total deposits decreased by $65.55 million from December 31, 2024, to June 30, 2025, primarily due to a $136.451 million net decrease in interest-bearing deposits. Concurrently, borrowed funds increased by $11 million, suggesting a reliance on more expensive wholesale funding.
• Loan Portfolio Contraction [medium — financial]: Loans held for sale and net loans decreased by $3.787 million and $53.618 million respectively, from December 31, 2024, to June 30, 2025. This contraction in the core lending business may impact future revenue generation.
• Increased Allowance for Credit Losses [medium — financial]: The allowance for credit losses on loans increased to $8.307 million from $7.680 million. This reflects a more cautious outlook on the credit quality of the loan portfolio, potentially anticipating economic headwinds.
• Regulatory Compliance and Capital Requirements [high — regulatory]: As a financial institution, UNB is subject to stringent regulatory oversight and capital adequacy requirements. Changes in regulations or failure to meet capital standards could impact operations and profitability.

Industry Context

The banking industry is currently navigating a complex environment characterized by fluctuating interest rates, evolving deposit dynamics, and ongoing credit risk management. Banks are increasingly focused on optimizing their balance sheets, managing liquidity, and adapting to changing customer preferences for deposit products and loan demand.

Regulatory Implications

Union Bankshares, Inc. operates under a strict regulatory framework. Changes in capital requirements, liquidity rules, or consumer protection regulations could necessitate adjustments to business strategies and impact profitability. The current environment also demands robust risk management to comply with stress testing and asset quality oversight.

What Investors Should Do

1. Monitor loan growth and credit quality trends.
2. Analyze the impact of unrealized losses on investment securities.
3. Evaluate the sustainability of net interest income growth.
4. Assess the bank's strategy for deposit retention and funding.

Key Dates

• 2025-06-30: End of Q2 2025 — Reporting period for the latest financial results, showing increased net income but decreased deposits and loans.
• 2024-06-30: End of Q2 2024 — Prior year comparable period for Q2 2025 results, showing lower net income and different balance sheet composition.
• 2024-12-31: End of Fiscal Year 2024 — Prior year-end balance sheet figures used for comparison of asset and liability changes.

Glossary

Investment securities available-for-sale

Securities that are not classified as held-to-maturity or trading securities. Their fair value changes are reported in other comprehensive income (loss). (Significant unrealized losses in this category ($40.191 million) highlight market risk exposure.)

Allowance for credit losses on loans

A contra-asset account that reduces the carrying amount of loans to their estimated net realizable value. (An increase to $8.307 million suggests a more conservative stance on loan portfolio quality.)

Borrowed funds

Funds obtained by the bank through borrowing, such as from the Federal Home Loan Bank or other financial institutions. (An increase to $270.674 million indicates a shift in funding strategy, potentially to cover deposit outflows.)

Interest-bearing deposits

Customer deposits that earn interest, such as savings accounts, money market accounts, and certificates of deposit. (A significant decrease in these deposits ($136.451 million) is a primary driver of the overall deposit decline.)

Net interest income

The difference between interest income generated by assets and interest expense paid on liabilities. (Increased to $10.446 million for Q2 2025, showing improved profitability from core lending and investment activities.)

Gross unrealized losses

The total amount by which the market value of a security or portfolio of securities is below its cost or book value, before any adjustments. (A substantial $40.191 million in unrealized losses on available-for-sale securities indicates significant market value depreciation.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, Union Bankshares, Inc. has demonstrated improved profitability with net income rising 18.6% to $2.395 million for Q2 2025 and a 10.4% increase year-to-date. However, the balance sheet shows a notable shift: total deposits have decreased by $65.55 million since year-end 2024, while borrowed funds have increased by $11 million, indicating a change in funding structure. Loan balances have also declined, and the bank is holding a larger allowance for credit losses, suggesting a more cautious approach to lending despite overall income growth.

Key Financial Figures

• $2.00 — ction 12(b) of the Act: Common Stock, $2.00 par value UNB Nasdaq Stock Market (Tit
• $2 — ck as of July 25, 2025. Common Stock, $2 par value 4,551,337 shares UNION BANK

Filing Documents

• unb-20250630.htm (10-Q) — 2323KB
• a63025exhibit311.htm (EX-31.1) — 9KB
• a63025exhibit312.htm (EX-31.2) — 8KB
• a63025exhibit321.htm (EX-32.1) — 4KB
• a63025exhibit322.htm (EX-32.2) — 4KB
• 0000706863-25-000094.txt ( ) — 10877KB
• unb-20250630.xsd (EX-101.SCH) — 42KB
• unb-20250630_cal.xml (EX-101.CAL) — 97KB
• unb-20250630_def.xml (EX-101.DEF) — 257KB
• unb-20250630_lab.xml (EX-101.LAB) — 618KB
• unb-20250630_pre.xml (EX-101.PRE) — 486KB
• unb-20250630_htm.xml (XML) — 2506KB

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. Unaudited Interim Consolidated Financial Statements of Union Bankshares, Inc. and Subsidiary Consolidated Balance Sheets 1 Consolidated Statements of Income 2 Consolidated Statements of Comprehensive Income 3 Consolidated Statements of Changes in Stockholders' Equity 4 Consolidated Statements of Cash Flows 5 Notes to Unaudited Interim Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 26

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk. 44

Controls and Procedures

Item 4. Controls and Procedures. 44

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings. 45

Risk Factors

Item 1A. Risk Factors. 45

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 45

Exhibits

Item 6. Exhibits. 45

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements UNIO N B ANKSHARES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS June 30, 2025 December 31, 2024 (Unaudited) Assets (Dollars in thousands) Cash and due from banks $ 4,731 $ 5,168 Federal funds sold and overnight deposits 24,536 10,670 Cash and cash equivalents 29,267 15,838 Interest bearing deposits in banks 6,963 9,462 Investment securities available-for-sale 240,537 250,504 Other investments 1,886 1,754 Total investments 242,423 252,258 Loans held for sale 8,992 5,204 Loans 1,102,766 1,155,736 Allowance for credit losses on loans ( 8,307 ) ( 7,680 ) Net deferred loan costs 2,156 2,162 Net loans 1,096,615 1,150,218 Premises and equipment, net 20,251 20,225 Other assets 75,853 75,153 Total assets $ 1,480,364 $ 1,528,358 Liabilities and Stockholders' Equity Liabilities Deposits Noninterest bearing $ 217,317 $ 226,048 Interest bearing 578,411 714,862 Time 307,618 227,984 Total deposits 1,103,346 1,168,894 Borrowed funds 270,674 259,696 Subordinated notes 16,290 16,273 Accrued interest and other liabilities 18,796 17,015 Total liabilities 1,409,106 1,461,878 Commitments and Contingencies Stockholders' Equity Common stock, $ 2.00 par value; 7,500,000 shares authorized; 5,024,257 shares issued at June 30, 2025 and 5,012,084 shares issued at December 31, 2024 10,049 10,024 Additional paid-in capital 3,380 3,031 Retained earnings 93,350 91,722 Treasury stock at cost; 472,922 shares at June 30, 2025 and 474,075 shares at December 31, 2024 ( 4,290 ) ( 4,300 ) Accumulated other comprehensive loss ( 31,231 ) ( 33,997 ) Total stockholders' equity 71,258 66,480 Total liabilities and stockholders' equity $ 1,480,364 $ 1,528,358 See accompanying notes to unaudited interim consolidated financial statements. Union Bankshares, Inc. Page 1 UNION BANKSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024

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