Union Bankshares, Inc Annual Report 2013

Plain-text annual report

‘13 Y E A R I N R E V I E W APRIL 15, 2014 Market for Union Bankshares Common Stock On March 17, 2014, there were 4,458,262 shares of common stock outstanding held by 592 stockholders of record. The number of stockholders does not reﬂ ect the number of beneﬁ cial owners, including persons or entities who may hold the stock in nominee or “street name.” Union Bankshares’ common stock is listed on the NASDAQ Global Market trading under the symbol UNB. For shareholder assistance please contact us at 802-888-6600 or our Transfer Agent, Registrar and Transfer Company, at 800-368-5948. Union Bankshares Again Recognized for High Performance In 2013, for the second year in a row, Union Bankshares was recognized as one of the top performing small-cap banks and thrifts in the United States by investment ﬁ rm Sandler O’Neill. The ranking methodology evaluated publicly traded banks and thrifts with market capitalizations between $25 million and $2.5 billion. Assessment focused on growth, proﬁ tability, credit quality and capital strength. In order to qualify as a Sm-All Star, Union Bank needed to achieve results at or above their peer median for all of the metrics listed in the chart below. In addition, Union Bank was again recognized by investment ﬁ rm, Raymond James in its Community Bankers Cup awards for being in the top 10% of community banks (with assets of $500 million to $10 Billion) based on various proﬁ tability, operational effi ciency and balance sheet metrics. Union Bank was the only bank in the country with assets under $1 Billion to earn this distinction. Performance Metrics: 2013 Sm-All Stars vs. Industry Medians Last Twelve Months Union Bankshares Sm-All Stars All Banks and Thrifts EPS Growth Loan Growth Deposit Growth ROAE NPAs1 / Loans and OREO NCOs / Avg. Loans Reserves / NPAs1 32.1% 5.6% 3.2% 17.5% 0.6% 0.06% 174% 16.6% 11.8% 9.0% 11.3% 1.0% 0.16% 129% 5.6% 4.2% 2.4% 7.4% 1.8% 0.36% 68% UNION BANKSHARES COMMON STOCK 2013 HIGH LOW DIVIDENDS First Quarter $22.15 $19.25 $0.25 Second Quarter $22.00 $20.21 $0.25 Third Quarter $22.08 $20.73 $0.25 Fourth Quarter $23.00 $21.03 $0.26 2012 HIGH LOW DIVIDENDS First Quarter $20.00 $18.56 $0.25 Second Quarter $19.90 $18.75 $0.25 Third Quarter $21.00 $18.80 $0.25 Fourth Quarter 1 Accruing TDRs are excluded from NPAs. Source: SNL Financial and Sandler O’Neill $20.09 $19.26 $0.25 2013 Year In Review 1 APRIL 15 , 201 4 to our S H A R E H O L D E R S Kenneth D. Gibbons CHAIRMAN UNION BANKSHARES, INC. AND UNION BANK David S. Silverman PRESIDENT & CEO UNION BANKSHARES, INC. AND UNION BANK We are pleased to report the ﬁ nancial results for your company for the year ended December 31, 2013. Net Income was $7.1 million compared to Net Income for the year ended December 31, 2012 of $6.8 million. Results for 2013 reﬂ ect a year to year increase in net interest income of $345 thousand, a decrease in noninterest expenses of $1.8 million, and a decrease in noninterest income of $2.0 million. The decrease in noninterest income was primarily due to a reduction in gain on sale of real estate loans of $1.2 million and a decrease in gain on sale of securities of $673 thousand compared to 2012. Total assets grew to $585.4 million as of December 31, 2013 compared to $577.3 million as of December 31, 2012. Total loans increased $9.8 million to $465.1 million, as of December 31, 2013 compared to $455.3 million, as of December 31, 2012. The 2013 loan growth was net of $123.1 million of residential mortgage loans sold to the secondary market during the year to manage long-term interest rate risk, compared to sales of $125.7 million in 2012. Total deposits reached $518.4 million compared to the prior year of $510.0 million, an increase of $8.4 million. The company had total capital of $49.8 million with a book value per share of $11.17 as of December 31, 2013 compared to $45.0 million with a book value of $10.11 as of December 31, 2012. 2013 was a year of modest growth in loans, deposits, and assets. Inﬂ ation has been very low and the local economy has been tepid, though slowly improving. We would like to grow our assets at a brisker pace to allow us to spread regulatory and compliance costs over a larger base, but we resist “growth for growth’s sake.” There are several items of note that occurred in 2013. After careful analysis we chose to close our Green Mountain Mall branch offi ce in St. Johnsbury. This was done to make our branch delivery system more effi cient and without material attrition in customer accounts. We continue to evaluate our entire organization seeking areas where we can be more effi cient. Final Basel III Capital Standard Regulations were issued in July of 2013 with a January 1, 2015 eff ective date for the Company. We have since tested our balance sheet under the new Capital Standards and found ourselves compliant with the new regulations in the initial year through full implementation in 2019. Considering our compliance with Basel III and our earnings, the Board of Directors voted to increase the dividend 4% on an annual basis beginning in the third quarter. Of course, future dividends are dependent on future ﬁ nancial performance. During the autumn of 2013 we had a team from the FDIC perform an examination of our compliance with the Community Reinvestment Act (CRA). The CRA measures a bank’s respon- siveness in meeting the credit needs of the communities it serves. We again received the top CRA rating of Outstanding. According to FDIC data less than 5% of the banks examined in the past three years have received the “Outstanding” designation. Finally, we wish to recognize two long time staff members who have recently retired and who have been important factors in our success for many years. JoAnn Tallman has served the bank for almost 28 years holding several positions before becoming the President’s Executive Secretary and Board Meeting Recorder. JoAnn’s calm, quiet demeanor has been a welcome counterpoint to two Presidents and 19 diff erent Board Members. Marsha Mongeon has served as the bank’s Chief Financial Offi cer for 24 years. Marsha will be remembered for her knowledge, professionalism, and dedication to the bank. Both of these ﬁ ne individuals will be missed both personally and professionally. We are happy for both to enjoy well deserved retirement years. Sincerely, Kenneth D. Gibbons Chairman David S. Silverman President & Chief Executive Offi cer 2 2013 Year In Review FINANCIAL HIGHLIGHTS RETURN ON AVERAGE EQUITY SOURCE: SNL FINANCIAL LC SNL BANK $500M - $1B 20% 15% 10% 5% 0% -5% 2008 2009 2010 2011 2012 2013 Year Ending December 31, RETURN ON AVERAGE ASSETS SOURCE: SNL FINANCIAL LC 1.5% SNL BANK $500M - $1B Balance Sheet Data Total assets Investment securities Loans, net of unearned income Allowance for loan losses Deposits Borrowed funds Stockholders’ equity1 Income Statement Data Total interest and dividend income Total interest expense Net interest and dividend income Provision for loan losses Noninterest income Noninterest expenses Income before provision for income taxes AT OR FOR THE YEARS ENDED DECEMBER 31 2013 2012 2011 2010 2009 (Dollars in thousands, except per share data) $585,443 45,492 $577,256 26,126 $552,751 46,954 $452,995 24,280 $447,522 24,649 465,123 455,298 429,384 382,071 358,167 (4,647) 518,354 13,216 49,820 (4,657) 509,993 15,747 45,046 (4,226) 473,439 29,015 40,339 (3,755) 376,660 28,986 41,725 (3,493) 368,827 30,993 41,180 $24,481 (2,459) 22,022 (305) 8,501 (21,221) 8,997 $25,028 (3,351) $23,669 (3,908) $22,907 (4,117) $23,217 (5,294) 21,677 19,761 18,790 17,923 (660) 10,525 (23,035) (775) 7,125 (19,773) 8,507 (1,663) 6,338 (1,119) (520) 5,649 (16,630) 7,289 (1,702) (400) 5,521 (16,397) 6,647 (1,420) Provision for income taxes (1,862) 1.0% .5% 0% -.5% -1% 2013 Year In Review 3 2008 2009 2010 2011 2012 2013 Year Ending December 31, Net income $7,135 $6,844 $5,219 $5,587 $5,227 Per Common Share Data Net income2 Cash dividends paid Book value1 Weighted average number of shares outstanding Number of shares outstanding $1.60 1.01 11.17 $1.54 1.00 10.11 $1.17 1.00 9.05 $1.25 1.00 9.36 $1.17 1.00 9.23 4,457,261 4,457,029 4,456,842 4,458,193 4,466,760 4,458,359 4,456,081 4,457,204 4,455,704 4,461,208 1Stockholders’ equity includes unrealized gains or losses, net of applicable income taxes, on investment securities classiﬁ ed as “available-for-sale” and includes the unfunded liability for pension beneﬁ ts, net of taxes for the deﬁ ned beneﬁ t pension plan. 2Computed using the weighted average number of shares outstanding for the period. AT OR FOR THE YEARS ENDED DECEMBER 31 BUSINESS HIGHLIGHTS Union Bank is fortunate to have a varied set of successful business lines that helped contribute to the bank’s strong performance and position the organization to meet customer needs in the coming years. A sampling of the services provided can be found here > Commercial Services Over many decades, Union Bank has earned a reputation as a reliable, experienced and responsive commercial lender. With seasoned staff and in-market lending decisions, we are able to provide borrowers with a more rapid and personalized loan process than is customary from large banks. Union Bank provides prospective borrowers with an excellent blend of attractive services, knowledgeable lenders and a formidable lending capacity with a singular focus on serving clients in our local market areas. As a Preferred Lender with the US Small Business Administration, Union Bank off ers a variety of loan options to prospective applicants. These positive attributes and welcome referrals from existing commercial customers helped Union Bank achieve record levels in our commercial loan portfolio during 2013. this market with both our traditional branch network and our very successful Mortgage Loan Center in South Burlington, VT. Our lenders are knowledgeable and versatile enough to serve a range of customers from those needing customized jumbo mortgages or BUILD construction loans to those seeking to buy a ﬁ rst home with the assistance of an aff ordable housing program. The positive impact that Union Bank has made in the lives of such ﬁ rst time home buyers has been recognized by the FDIC with a rating of Outstanding for our Community Reinvestment activities. Additionally, in 2013 Union Bank has been recognized by the US Department of Agriculture as its Rural Development Home Loan Lender of the Year for Vermont. Union Bank is extremely proud of these distinctions and believes our varied business eff orts have a direct beneﬁ t for our customers, our communities, our staff and our shareholders. Municipal Services Much of the same can be said of our service to towns, villages, school districts and other municipal entities. Union Bank is extremely well positioned to serve local municipal and non-proﬁ t clients who value both the ﬁ nancial services which the bank off ers and the readily-accessible personal service. Our staff regularly advises customers in determining the optimal deposit, lending and electronic banking products to meet their particular needs. The Bank is proud to serve the towns, school districts, hospitals, nursing homes, medical practices, social service agencies and other non-proﬁ ts that are such an important part of the fabric of our communities. Mortgage Lending 2013 marked a banner year for Union Bank’s vibrant residential lending business despite the increase in long term interest rates slowing the reﬁ nance market. Repeat customers, client referrals, attractive products and outstanding service also characterize our mortgage business line. While the increase in rates began to impact the reﬁ nance market in the last quarter of the year, we attained excellent results lending to families looking to buy or build a new residence throughout the entire year. Union Bank is well positioned to serve Consumer Banking Gathering deposits to fund our lending activities is a core function of the bank. During 2013 we introduced Advantage Banking, a package of banking services to reward customers who maintain higher deposit balances with Union Bank. We view deposits as a sign of commitment to the bank and this is our eff ort to reward and retain these important depositors who contribute substantially to our overall success. Advantage Banking has proven to be extremely popular with hundreds of customers signing up in just the ﬁ rst few months. These participating customers gain enhanced value through the special pricing off ered on popular bank services. Advantage Checking and Advantage Checking Plus are our ﬂ agship checking accounts and reward individuals who maintain de- posit relationships of $25,000 or more with enhanced value and discounts on popular bank services. From complementary checks and ATM fee waivers to no-cost services and higher rates on CD’s, Advantage Banking provides special pricing, allowing these customers to take full advantage of their banking relationship with Union Bank. The qualifying deposit relationship is a combination of all personal deposit accounts held individually or jointly by the primary account holder on the Advantage Checking Account. This includes checking accounts, CD’s, IRAs, Savings and Money Market accounts. 4 2013 Year In Review Asset Management Group Union Bank’s Asset Management Group off ers a full range of investment management and trust services to individual investors, corporations and non-proﬁ t organizations. Our team has the expertise to oversee fully managed investment accounts as well as advisory and custodial relationships. In addition to counseling clients in or approaching retirement, we are experts at advising organizations on eff ective asset management strategies. For those looking to control the distribution of their estate, we have the expertise to guide clients through the intricacies of personal trust and estate planning. We also serve as advisor to individuals who have assumed the important roles of trustee and executor. We are pleased to announce that Lura Jacques has been named Managing Trust Offi cer for the Asset Management Group. Lura has been with Union Bank for the past 6 years in the capacity of Trust Offi cer in the Western Region. Overall, she has a total of 25 years’ asset management experience. In addition; we have expanded our Asset Management services into our Eastern Region with the hiring of Joseph (JJ) Ilacqua. JJ brings over 17 years of investment management experience to the position. Our network of offi ce locations allows us to off er local, personalized services to our clients and conduct regular investment and life reviews to assist in evaluating a client’s investing and asset management strategies. These person- alized reviews consider each investor’s risk tolerance, time horizon, tax circumstances and income needs. There has never been a more important time for clients to have access to objective, insightful and personalized investment advice. Union Bank off ers the broad expertise, long term perspective and focused customer service to provide our customers with an investment strategy that best meets their needs. Lura Jacques MANAGING TRUST OFFICER Joseph (JJ) Ilacqua TRUST OFFICER 2013 Year In Review 5 DIRECTORS Kenneth D. Gibbons - Chairman Cynthia D. Borck Steven J. Bourgeois Timothy W. Sargent David S. Silverman John H. Steel Schuyler W. Sweet Neil J. Van Dyke OFFICERS Kenneth D. Gibbons - Chairman David S. Silverman - President & CEO Marsha A. Mongeon - Vice President/Treasurer/CFO John H. Steel - Secretary JoAnn A. Tallman - Assistant Secretary Jeff rey G. Coslett - Vice President DIRECTORS Kenneth D. Gibbons - Chairman Cynthia D. Borck Steven J. Bourgeois John M. Goodrich Timothy W. Sargent David S. Silverman John H. Steel Schuyler W. Sweet Neil J. Van Dyke REGIONAL ADVISORY BOARD MEMBERS Michael R. Barrett – St. Johnsbury Joel S. Bourassa - Northern New Hampshire Steven J. Bourgeois - St. Albans Dwight A. Davis - St. Johnsbury Stanley T. Fillion - Northern New Hampshire Rosemary H. Gingue - St. Johnsbury Coleen K. Kohaut - St. Albans Justin P. Lavely - St. Johnsbury Daniel J. Luneau - St. Albans Alexandra S. MacLean – St. Johnsbury Mary K. Parent – St. Johnsbury Samuel H. Ruggiano - St. Albans David S. Silverman - All Schuyler W. Sweet - Northern New Hampshire Norrine A. Williams - Northern New Hampshire TOP TO BOTTOM Cynthia D. Borck OWNER CONSULTING SERVICES INFORMATION Steven J. Bourgeois CEO STRATEGIC INITIATIVES FOR BUSINESS LLC Kenneth D. Gibbons CHAIRMAN UNION BANKSHARES, INC. AND UNION BANK David S. Silverman PRESIDENT & CEO UNION BANKSHARES, INC. AND UNION BANK John H. Steel FOUNDER STEEL CONSTRUCTION Timothy W. Sargent ATTORNEY/OWNER SARGENT LAW OFFICE Schuyler W. Sweet OWNER STONY RIVER PROPERTIES, LLC Neil J. Van Dyke PRESIDENT GOLDEN EAGLE RESORT OFFICERS Tracy Pierce Ash - Assistant Treasurer Diana M. Ashley - Assistant Treasurer Rhonda L. Bennett - Vice President Sherrie A. Bull - Vice President Stacey L. B. Chase - Assistant Vice President Barbara J. Churchill - Assistant Treasurer Everett C. Comstock - Assistant Treasurer Jeff rey G. Coslett - Senior Vice President Michael C. Curtis - Vice President Jennifer M. Degree - Assistant Treasurer Ronald C. Dion - Assistant Treasurer Jessica M. Eastman - Assistant Vice President Kenneth D. Gibbons - Chairman Don D. Goodhue - Vice President Melissa A. Greene - Vice President Paul E. Grogan - Facilities Offi cer Karyn J. Hale - Vice President Claire A. Hindes - Vice President Robert D. Hofmann - Senior Vice President Patricia N. Hogan - Senior Vice President Tracey D. Holbrook - Regional Vice President Joseph J. Ilacqua - Assistant Vice President Lura L. Jacques - Assistant Vice President Lynne P. Jewett - Vice President Stephen H. Kendall - Senior Vice President Susan F. Lassiter - Vice President Christine S. Latulip - Regional Vice President R. Ryan Leap - Senior Vice President Edward L. Levite - Senior Loan Originator Carrie R. Locklin - Assistant Vice President Bonnie J. Losty - Vice President John L. Malm - Vice President Robyn A. Masi - Vice President Marsha A. Mongeon - Senior Vice President & CFO Samantha A. Norrie - Assistant Treasurer Karen Calson Noyes - Vice President Barbara A. Olden - Vice President Deborah J. Partlow - Assistant Vice President Bradley S. Prior - Assistant Vice President Craig S. Provost - Vice President Robert J. Richardson - Vice President David S. Silverman - President & CEO Judy R. Smith - Vice President Karen Blanchard Smith - Assistant Treasurer John H. Steel - Secretary Curtis C. Swan - Assistant Vice President JoAnn A. Tallman - Assistant Secretary Melyssa S. Whitcomb - Assistant Treasurer Martha J. Wilkins - Assistant Treasurer Lorraine G. Willett - Assistant Vice President Littleton Fairfax Morrisville Morrisville Morrisville Morrisville Morrisville Morrisville St. Albans Morrisville Morrisville S. Burlington Morrisville Morrisville Hardwick Morrisville Morrisville Morrisville Morrisville Morrisville St. Johnsbury Littleton St. Albans Morrisville Morrisville Jeff ersonville Littleton Morrisville S. Burlington Morrisville Morrisville Littleton Stowe Morrisville Littleton Morrisville St. Johnsbury Morrisville Morrisville Stowe Morrisville Morrisville St. Albans Morrisville Morrisville St. Albans Morrisville Lyndonville St. Johnsbury Morrisville 6 2013 Year In Review Market for Union Bank share’s Common Stock On March 18, 2013, there were 4,455,406 shares of common stock outstanding held by 616 stockholders of record. The number of stockholders does not reﬂ ect the number of beneﬁ cial owners, including persons or entities who may hold the stock in nominee or “street name.” Union Bankshares’ common stock is listed on the NASDAQ Global Market trading under the symbol UNB. On January 16, 2013, the Company declared a regular dividend of $0.25 per share to stockholders of record as of Jan uary 26, 2013 payable February 7, 2013. Union Bank shares Awarded Sm-All Star Status by Sandler O’Neill In 2012, for the second time, Sandler O’Neill recognized Union Bankshares as one of the top performing small-cap banks and thrifts in the United States. The ﬁ rst VERMONT time was in 2009. Ranking methodology begins with a list of publicly traded banks and thrifts with market caps between $25 million and $2 billion. Further evaluation 421 Route 2 East 802-684-2211 Danville focused on growth, proﬁ tability, credit quality and capital strength. Eight ﬁ nancial Jct. Routes 104 & 128 802-849-2600 Fairfax variables were evaluated to determine performance as well as growth trends that 103 VT Route 15 West Hardwick 802-472-8100 measure momentum. In order to qualify, the banks and thrifts needed to be at or 44 Main Street Jeff ersonville 802-644-6600 above the peer median for these seven metrics: growth in earnings per share, loans 198 Lower Main Street 802-635-6600 Johnson and deposits; and in the following ratios —return on average equity; nonperforming 183 Depot Street Lyndonville 802-626-3100 assets to loans plus OREO (Other Real Estate Owned) ratio; net charge-off ratio and 20 Lower Main Street 802-888-6600 Morrisville reserve to nonperforming assets ratio; plus be Well Capitalized per the Tier 1 risk- 65 Northgate Plaza 802-888-6860 based capital ratio. St. Albans 15 Mapleville Depot 802-524-9000 St. Johnsbury 364 Railroad Street 802-748-3131 Performance Metrics: 2012 Sm-All Stars vs. Industry Medians 30 Kimball Avenue Stowe 47 Park Street S. Burlington Loan Center 325 Portland Street 802-748-3121 802-865-1000 802-253-6600 NEW HAMPSHIRE Groveton Littleton 3 State Street 263 Dells Road 76 Main Street N. Woodstock 155 Main Street 603-636-1611 603-444-7136 603-444-5321 603-745-2488 WWW.UNIONBANKVT.COM WWW.UNIONBANKNH.COM 1-866-862-1891 (toll free)

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