Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2017
Commission file number: 001-15985
UNION BANKSHARES, INC.
P.O. BOX 667
20 LOWER MAIN STREET
MORRISVILLE, VT 05661
Registrant’s telephone number: 802-888-6600
Former name, former address and former fiscal year, if changed since last report: Not applicable
Securities registered pursuant to section 12(b) of the Act:
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| | | | |
| Common Stock, $2.00 par value | | Nasdaq Stock Market | |
| (Title of class) | | (Exchanges registered on) | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” ”accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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| |
Large accelerated filer [ ] | Accelerated filer [ X ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [ ] |
| Emerging growth company [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of May 1, 2017.
|
| | | | | |
| Common Stock, $2 par value | | 4,462,031 |
| shares |
UNION BANKSHARES, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
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PART II OTHER INFORMATION | |
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Item 1A. Risk Factors. | |
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS |
| | | | | | |
| March 31, 2017 | December 31, 2016 |
| (Unaudited) | |
Assets | (Dollars in thousands) |
Cash and due from banks | $ | 3,710 |
| $ | 4,272 |
|
Federal funds sold and overnight deposits | 21,257 |
| 35,003 |
|
Cash and cash equivalents | 24,967 |
| 39,275 |
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Interest bearing deposits in banks | 8,508 |
| 9,504 |
|
Investment securities available-for-sale | 67,639 |
| 65,556 |
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Investment securities held-to-maturity (fair value $998 thousand and $999 thousand at March 31, 2017 and December 31, 2016, respectively) | 999 |
| 999 |
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Loans held for sale | 2,847 |
| 7,803 |
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Loans | 537,527 |
| 533,290 |
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Allowance for loan losses | (5,192 | ) | (5,247 | ) |
Net deferred loan costs | 644 |
| 649 |
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Net loans | 532,979 |
| 528,692 |
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Accrued interest receivable | 2,042 |
| 2,259 |
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Premises and equipment, net | 13,272 |
| 13,525 |
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Core deposit intangible | 711 |
| 754 |
|
Goodwill | 2,223 |
| 2,223 |
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Investment in real estate limited partnerships | 2,786 |
| 2,783 |
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Company-owned life insurance | 8,677 |
| 8,617 |
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Other assets | 8,801 |
| 9,391 |
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Total assets | $ | 676,451 |
| $ | 691,381 |
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Liabilities and Stockholders’ Equity | | |
Liabilities | | |
Deposits | | |
Noninterest bearing | $ | 110,087 |
| $ | 112,384 |
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Interest bearing | 369,451 |
| 382,083 |
|
Time | 102,527 |
| 103,193 |
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Total deposits | 582,065 |
| 597,660 |
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Borrowed funds | 31,727 |
| 31,595 |
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Accrued interest and other liabilities | 5,489 |
| 5,847 |
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Total liabilities | 619,281 |
| 635,102 |
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Commitments and Contingencies |
|
|
Stockholders’ Equity | | |
Common stock, $2.00 par value; 7,500,000 shares authorized; 4,936,652 shares issued at March 31, 2017 and December 31, 2016. | 9,874 |
| 9,874 |
|
Additional paid-in capital | 658 |
| 620 |
|
Retained earnings | 53,722 |
| 53,086 |
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Treasury stock at cost; 474,625 shares at March 31, 2017 and 474,517 shares at December 31, 2016 | (4,030 | ) | (4,022 | ) |
Accumulated other comprehensive loss | (3,054 | ) | (3,279 | ) |
Total stockholders' equity | 57,170 |
| 56,279 |
|
Total liabilities and stockholders' equity | $ | 676,451 |
| $ | 691,381 |
|
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 March 31, |
| 2017 | 2016 |
| (Dollars in thousands, except per share data) |
Interest and dividend income | | |
Interest and fees on loans | $ | 6,322 |
| $ | 5,995 |
|
Interest on debt securities: | | |
Taxable | 242 |
| 249 |
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Tax exempt | 165 |
| 137 |
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Dividends | 45 |
| 17 |
|
Interest on federal funds sold and overnight deposits | 30 |
| 5 |
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Interest on interest bearing deposits in banks | 35 |
| 45 |
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Total interest and dividend income | 6,839 |
| 6,448 |
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Interest expense | | |
Interest on deposits | 422 |
| 425 |
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Interest on borrowed funds | 115 |
| 88 |
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Total interest expense | 537 |
| 513 |
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Net interest income | 6,302 |
| 5,935 |
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Provision for loan losses | — |
| 75 |
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Net interest income after provision for loan losses | 6,302 |
| 5,860 |
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Noninterest income | | |
Trust income | 178 |
| 172 |
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Service fees | 1,440 |
| 1,412 |
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Net gains on sales of loans held for sale | 508 |
| 500 |
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Other income | 107 |
| 102 |
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Total noninterest income | 2,233 |
| 2,186 |
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Noninterest expenses | | |
Salaries and wages | 2,568 |
| 2,458 |
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Pension and employee benefits | 879 |
| 943 |
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Occupancy expense, net | 390 |
| 317 |
|
Equipment expense | 534 |
| 509 |
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Other expenses | 1,570 |
| 1,476 |
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Total noninterest expenses | 5,941 |
| 5,703 |
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Income before provision for income taxes | 2,594 |
| 2,343 |
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Provision for income taxes | 664 |
| 584 |
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Net income | $ | 1,930 |
| $ | 1,759 |
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Earnings per common share | $ | 0.43 |
| $ | 0.39 |
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Weighted average number of common shares outstanding | 4,462,057 |
| 4,458,165 |
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Dividends per common share | $ | 0.29 |
| $ | 0.27 |
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See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 2
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
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| Three Months Ended March 31, |
| 2017 | 2016 |
| (Dollars in thousands) |
Net income | $ | 1,930 |
| $ | 1,759 |
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Other comprehensive income, net of tax: | | |
Investment securities available-for-sale: | | |
Net unrealized holding gains arising during the period on investment securities available-for-sale | 225 |
| 512 |
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Total other comprehensive income | 225 |
| 512 |
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Total comprehensive income | $ | 2,155 |
| $ | 2,271 |
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See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2017 and 2016 (Unaudited)
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| Common Stock | | | | | |
| Shares, net of treasury | Amount | Additional paid-in capital | Retained earnings | Treasury stock | Accumulated other comprehensive loss | Total stockholders’ equity |
| (Dollars in thousands, except per share data) |
Balances December 31, 2016 | 4,462,135 |
| $ | 9,874 |
| $ | 620 |
| $ | 53,086 |
| $ | (4,022 | ) | $ | (3,279 | ) | $ | 56,279 |
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Net income | — |
| — |
| — |
| 1,930 |
| — |
| — |
| 1,930 |
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Other comprehensive income | — |
| — |
| — |
| — |
| — |
| 225 |
| 225 |
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Dividend reinvestment plan | 117 |
| — |
| 4 |
| — |
| 1 |
| — |
| 5 |
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Cash dividends declared ($0.29 per share) | — |
| — |
| — |
| (1,294 | ) | — |
| — |
| (1,294 | ) |
Stock based compensation expense | — |
| — |
| 34 |
| — |
| — |
| — |
| 34 |
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Purchase of treasury stock | (225 | ) | — |
| — |
| — |
| (9 | ) | — |
| (9 | ) |
Balances March 31, 2017 | 4,462,027 |
| $ | 9,874 |
| $ | 658 |
| $ | 53,722 |
| $ | (4,030 | ) | $ | (3,054 | ) | $ | 57,170 |
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Balances, December 31, 2015 | 4,457,177 |
| $ | 9,864 |
| $ | 501 |
| $ | 49,524 |
| $ | (4,019 | ) | $ | (2,302 | ) | $ | 53,568 |
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Net income | — |
| — |
| — |
| 1,759 |
| — |
| — |
| 1,759 |
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Other comprehensive income | — |
| — |
| — |
| — |
| — |
| 512 |
| 512 |
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Cash dividends declared ($0.27 per share) | — |
| — |
| — |
| (1,203 | ) | — |
| — |
| (1,203 | ) |
Stock based compensation expense | — |
| — |
| 16 |
| — |
| — |
| — |
| 16 |
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Exercise of stock options | 1,340 |
| 2 |
| 25 |
| — |
| — |
| — |
| 27 |
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Purchase of treasury stock | (145 | ) | — |
| — |
| — |
| (4 | ) | — |
| (4 | ) |
Balances, March 31, 2016 | 4,458,372 |
| $ | 9,866 |
| $ | 542 |
| $ | 50,080 |
| $ | (4,023 | ) | $ | (1,790 | ) | $ | 54,675 |
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See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 4
UNION BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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| Three Months Ended March 31, |
| 2017 | 2016 |
| (Dollars in thousands) |
Cash Flows From Operating Activities | | |
Net income | $ | 1,930 |
| $ | 1,759 |
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Adjustments to reconcile net income to net cash provided by operating activities: | | |
Depreciation | 307 |
| 320 |
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Provision for loan losses | — |
| 75 |
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Deferred income tax provision | 333 |
| 307 |
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Net amortization of investment securities | 113 |
| 84 |
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Equity in losses of limited partnerships | 157 |
| 118 |
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Stock based compensation expense | 34 |
| 16 |
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Net decrease (increase) in unamortized loan costs | 5 |
| (31 | ) |
Proceeds from sales of loans held for sale | 29,041 |
| 23,383 |
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Origination of loans held for sale | (23,577 | ) | (23,973 | ) |
Net gains on sales of loans held for sale | (508 | ) | (500 | ) |
Net loss on disposals of premises and equipment | 13 |
| — |
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Decrease (increase) in accrued interest receivable | 217 |
| (246 | ) |
Amortization of core deposit intangible | 43 |
| 43 |
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Decrease in other assets | 80 |
| 52 |
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Contribution to defined benefit pension plan | (750 | ) | (750 | ) |
Increase in other liabilities | 419 |
| 668 |
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Net cash provided by operating activities | 7,857 |
| 1,325 |
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Cash Flows From Investing Activities | | |
Interest bearing deposits in banks | | |
Proceeds from maturities and redemptions | 2,988 |
| 896 |
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Purchases | (1,992 | ) | (497 | ) |
Investment securities available-for-sale | | |
Proceeds from maturities, calls and paydowns | 1,696 |
| 3,950 |
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Purchases | (3,551 | ) | (6,664 | ) |
Purchase of nonmarketable stock | — |
| (488 | ) |
Redemption of nonmarketable stock | — |
| 323 |
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Net increase in loans | (4,298 | ) | (12,227 | ) |
Recoveries of loans charged off | 6 |
| 5 |
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Purchases of premises and equipment | (67 | ) | (302 | ) |
Investments in limited partnerships | (186 | ) | — |
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Net cash used in investing activities | (5,404 | ) | (15,004 | ) |
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Union Bankshares, Inc. Page 5
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Cash Flows From Financing Activities | | |
Advances on long-term borrowings | — |
| 5,000 |
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Repayment of long-term debt | (70 | ) | (76 | ) |
Net increase in short-term borrowings outstanding | 202 |
| 7,395 |
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Net (decrease) increase in noninterest bearing deposits | (2,297 | ) | 2,117 |
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Net (decrease) increase in interest bearing deposits | (12,632 | ) | 1,453 |
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Net decrease in time deposits | (666 | ) | (4,974 | ) |
Issuance of common stock | — |
| 27 |
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Purchase of treasury stock | (9 | ) | (4 | ) |
Dividends paid | (1,289 | ) | (1,203 | ) |
Net cash (used in) provided by financing activities | (16,761 | ) | 9,735 |
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Net decrease in cash and cash equivalents | (14,308 | ) | (3,944 | ) |
Cash and cash equivalents | | |
Beginning of period | 39,275 |
| 17,961 |
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End of period | $ | 24,967 |
| $ | 14,017 |
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Supplemental Disclosures of Cash Flow Information | | |
Interest paid | $ | 540 |
| $ | 368 |
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Income taxes paid | $ | — |
| $ | 225 |
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Dividends paid on Common Stock: | | |
Dividends declared | $ | 1,294 |
| $ | 1,203 |
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Dividends reinvested | (5 | ) | — |
|
| $ | 1,289 |
| $ | 1,203 |
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See accompanying notes to unaudited interim consolidated financial statements.
Union Bankshares, Inc. Page 6
UNION BANKSHARES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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Note 1. | Basis of Presentation |
The accompanying unaudited interim consolidated financial statements of Union Bankshares, Inc. and Subsidiary (together, the Company) as of March 31, 2017, and for the three months ended March 31, 2017 and 2016, have been prepared in conformity with GAAP for interim financial information, general practices within the banking industry, and the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The Company's sole subsidiary is Union Bank. In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments and disclosures necessary for a fair presentation of the information contained herein, have been made. This information should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2017, or any interim period.
Certain amounts in the 2016 consolidated financial statements have been reclassified to conform to the 2017 presentation.
The acronyms, abbreviations and capitalized terms identified below are used throughout this Form 10-Q, including Part I. "Financial Information" and Part II. "Other Information". The following is provided to aid the reader and provide a reference page when reviewing this Form 10-Q.
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AFS: | Available-for-sale | IRS: | Internal Revenue Service |
ALCO: | Asset Liability Committee | MBS: | Mortgage-backed security |
ALL: | Allowance for loan losses | MSRs: | Mortgage servicing rights |
ASC: | Accounting Standards Codification | OAO: | Other assets owned |
ASU: | Accounting Standards Update | OCI: | Other comprehensive income (loss) |
Board: | Board of Directors | OFAC: | U.S. Office of Foreign Assets Control |
bp or bps: | Basis point(s) | OREO: | Other real estate owned |
Branch Acquisition: | The acquisition of three New Hampshire branches in May 2011 | OTTI: | Other-than-temporary impairment |
CDARS: | Certificate of Deposit Accounts Registry Service of the Promontory Interfinancial Network | OTT: | Other-than-temporary |
Company: | Union Bankshares, Inc. and Subsidiary | Plan: | The Union Bank Pension Plan |
DRIP: | Dividend Reinvestment Plan | RD: | USDA Rural Development |
FASB: | Financial Accounting Standards Board | RSU: | Restricted Stock Unit |
FDIC: | Federal Deposit Insurance Corporation | SBA: | U.S. Small Business Administration |
FHA: | U.S. Federal Housing Administration | SEC: | U.S. Securities and Exchange Commission |
FHLB: | Federal Home Loan Bank of Boston | TDR: | Troubled-debt restructuring |
FRB: | Federal Reserve Board | Union: | Union Bank, the sole subsidiary of Union Bankshares, Inc |
FHLMC/Freddie Mac: | Federal Home Loan Mortgage Corporation | USDA: | U.S. Department of Agriculture |
GAAP: | Generally Accepted Accounting Principles in the United States | VA: | U.S. Veterans Administration |
HTM: | Held-to-maturity | 2008 ISO Plan: | 2008 Incentive Stock Option Plan of the Company |
HUD: | U.S. Department of Housing and Urban Development | 2014 Equity Plan: | 2014 Equity Incentive Plan |
ICS: | Insured Cash Sweeps of the Promontory Interfinancial Network | | |
Union Bankshares, Inc. Page 7
Note 2. Legal Contingencies
In the normal course of business, the Company is involved in various legal and other proceedings. In the opinion of management, any liability resulting from such proceedings is not expected to have a material adverse effect on the Company’s consolidated financial condition or results of operations.
Note 3. Per Share Information
Earnings per common share are computed based on the weighted average number of shares of common stock outstanding during the period and reduced for shares held in treasury. The assumed exercise of outstanding exercisable stock options and vesting of restricted stock units does not result in material dilution and is not included in the calculation.
Note 4. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU was issued to increase transparency and comparability among organizations by recognizing lease assets and liabilities (including operating leases) on the balance sheet and disclosing key information about leasing arrangements. Previous lease accounting did not require the inclusion of operating leases in the balance sheet. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is evaluating the potential impact of the ASU on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Under the new guidance, which will replace the existing incurred loss model for recognizing credit losses, banks and other lending institutions will be required to recognize the full amount of expected credit losses. The new guidance, which is referred to as the current expected credit loss model ("CECL"), requires that expected credit losses for financial assets held at the reporting date that are accounted for at amortized cost be measured and recognized based on historical experience and current and reasonably supportable forecasted conditions to reflect the full amount of expected credit losses. A modified version of these requirements also applies to debt securities classified as available for sale. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within such years. The Company has established a CECL implementation team and developed a transition project plan. Team members have been assigned specific tasks to begin the implementation process and evaluation of the potential impact of the ASU on the Company's consolidated financial statements.
Note 5. Goodwill and Other Intangible Assets
As a result of the 2011 Branch Acquisition, the Company recorded goodwill amounting to $2.2 million. The goodwill is not amortizable. Goodwill is evaluated for impairment annually, in accordance with current authoritative accounting guidance. Management assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the Company, in total, is less than its carrying amount. Management is not aware of any such events or circumstances that would cause it to conclude that the fair value of the Company is less than its carrying amount.
The Company also initially recorded $1.7 million of acquired identifiable intangible assets in connection with the 2011 Branch Acquisition, representing the core deposit intangible which is subject to straight-line amortization over the estimated 10 year average life of the core deposit base, absent any future impairment. Management will evaluate the core deposit intangible for impairment if conditions warrant.
Amortization expense for the core deposit intangible was $43 thousand for the three months ended March 31, 2017 and 2016. The amortization expense is included in other expenses on the consolidated statement of income and is deductible for tax purposes. As of March 31, 2017, the remaining amortization expense related to the core deposit intangible, absent any future impairment, is expected to be as follows:
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| (Dollars in thousands) |
2017 | $ | 128 |
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2018 | 171 |
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2019 | 171 |
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2020 | 171 |
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2021 | 70 |
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Total | $ | 711 |
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Union Bankshares, Inc. Page 8
Note 6. Investment Securities
Investment securities as of the balance sheet dates consisted of the following:
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March 31, 2017 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| (Dollars in thousands) |
Available-for-sale | | | | |
Debt securities: | | | | |
U.S. Government-sponsored enterprises | $ | 9,996 |
| $ | 14 |
| $ | (188 | ) | $ | 9,822 |
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Agency mortgage-backed | 20,148 |
| 24 |
| (225 | ) | 19,947 |
|
State and political subdivisions | 27,490 |
| 203 |
| (500 | ) | 27,193 |
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Corporate | 10,241 |
| 104 |
| (97 | ) | 10,248 |
|
Total debt securities | 67,875 |
| 345 |
| (1,010 | ) | 67,210 |
|
Mutual funds | 429 |
| — |
| — |
| 429 |
|
Total | $ | 68,304 |
| $ | 345 |
| $ | (1,010 | ) | $ | 67,639 |
|
Held-to-maturity | | | | |
U.S. Government-sponsored enterprises | $ | 999 |
| $ | — |
| $ | (1 | ) | $ | 998 |
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December 31, 2016 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| (Dollars in thousands) |
Available-for-sale | | | | |
Debt securities: | | | | |
U.S. Government-sponsored enterprises | $ | 10,221 |
| $ | 15 |
| $ | (196 | ) | $ | 10,040 |
|
Agency mortgage-backed | 18,283 |
| 27 |
| (269 | ) | 18,041 |
|
State and political subdivisions | 27,909 |
| 113 |
| (650 | ) | 27,372 |
|
Corporate | 9,745 |
| 84 |
| (129 | ) | 9,700 |
|
Total debt securities | 66,158 |
| 239 |
| (1,244 | ) | 65,153 |
|
Mutual funds | 403 |
| — |
| — |
| 403 |
|
Total | $ | 66,561 |
| $ | 239 |
| $ | (1,244 | ) | $ | 65,556 |
|
Held-to-maturity | | | | |
U.S. Government-sponsored enterprises | $ | 999 |
| $ | — |
| $ | — |
| $ | 999 |
|
Investment securities with a carrying amount of $14.2 million and $8.4 million at March 31, 2017 and December 31, 2016, respectively, were pledged as collateral for public deposits and for other purposes as required or permitted by law.
There were no sales of AFS securities for the three months ended March 31, 2017 and March 31, 2016. The specific identification method is used to determine realized gains and losses on sales of securities AFS.
Union Bankshares, Inc. Page 9
The amortized cost and estimated fair value of debt securities by contractual scheduled maturity as of March 31, 2017 were as follows:
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| | | | | | |
| Amortized Cost | Fair Value |
| (Dollars in thousands) |
Available-for-sale | | |
Due in one year or less | $ | 626 |
| $ | 628 |
|
Due from one to five years | 5,829 |
| 5,910 |
|
Due from five to ten years | 24,241 |
| 24,110 |
|
Due after ten years | 17,031 |
| 16,615 |
|
| 47,727 |
| 47,263 |
|
Agency mortgage-backed | 20,148 |
| 19,947 |
|
Total debt securities available-for-sale | $ | 67,875 |
| $ | 67,210 |
|
Held-to-maturity | | |
Due in one year or less | $ | 999 |
| $ | 998 |
|
Total debt securities held-to-maturity | $ | 999 |
| $ | 998 |
|
Actual maturities may differ for certain debt securities that may be called by the issuer prior to the contractual maturity. Actual maturities usually differ from contractual maturities on agency MBS because the mortgages underlying the securities may be prepaid, usually without any penalties. Therefore, these agency MBS are shown separately and are not included in the contractual maturity categories in the above maturity summary.
Information pertaining to all investment securities with gross unrealized losses as of the balance sheet dates, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
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| | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2017 | Less Than 12 Months | 12 Months and over | Total |
| Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses |
| | (Dollars in thousands) |
Debt securities: | | | | | | | | | |
U.S. Government- sponsored enterprises | 13 |
| $ | 8,280 |
| $ | (170 | ) | 3 |
| $ | 1,084 |
| $ | (19 | ) | 16 |
| $ | 9,364 |
| $ | (189 | ) |
Agency mortgage-backed | 23 |
| 15,439 |
| (218 | ) | 1 |
| 323 |
| (7 | ) | 24 |
| 15,762 |
| (225 | ) |
State and political subdivisions | 33 |
| 14,049 |
| (479 | ) | 1 |
| 449 |
| (21 | ) | 34 |
| 14,498 |
| (500 | ) |
Corporate | 6 |
| 2,971 |
| (43 | ) | 4 |
| 1,646 |
| (54 | ) | 10 |
| 4,617 |
| (97 | ) |
Total | 75 |
| $ | 40,739 |
| $ | (910 | ) | 9 |
| $ | 3,502 |
| $ | (101 | ) | 84 |
| $ | 44,241 |
| $ | (1,011 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2016 | Less Than 12 Months | 12 Months and over | Total |
| Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses |
| | (Dollars in thousands) |
Debt securities: | | | | | | | | | |
U.S. Government- sponsored enterprises | 13 |
| $ | 8,351 |
| $ | (180 | ) | 3 |
| $ | 1,172 |
| $ | (16 | ) | 16 |
| $ | 9,523 |
| $ | (196 | ) |
Agency mortgage-backed | 22 |
| 15,141 |
| (261 | ) | 1 |
| 344 |
| (8 | ) | 23 |
| 15,485 |
| (269 | ) |
State and political subdivisions | 40 |
| 16,481 |
| (650 | ) | — |
| — |
| — |
| 40 |
| 16,481 |
| (650 | ) |
Corporate | 8 |
| 3,973 |
| (56 | ) | 4 |
| 1,627 |
| (73 | ) | 12 |
| 5,600 |
| (129 | ) |
Total | 83 |
| $ | 43,946 |
| $ | (1,147 | ) | 8 |
| $ | 3,143 |
| $ | (97 | ) | 91 |
| $ | 47,089 |
| $ | (1,244 | ) |
Union Bankshares, Inc. Page 10
The Company evaluates all investment securities on a quarterly basis, and more frequently when economic conditions warrant, to determine if an OTTI exists. A security is considered impaired if the fair value is lower than its amortized cost basis at the report date. If impaired, management then assesses whether the unrealized loss is OTT.
An unrealized loss on a debt security is generally deemed to be OTT and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. The credit loss component of OTTI write-down is recorded, net of tax effect, through net income as a component of net OTTI losses in the consolidated statement of income, while the remaining portion of the impairment loss is recognized in OCI, provided the Company does not intend to sell the underlying debt security and it is "more likely than not" that the Company will not have to sell the debt security prior to recovery. Declines in the fair values of individual equity securities that are deemed by management to be OTT are reflected in noninterest income when identified.
Management considers the following factors in determining whether OTTI exists and the period over which the security is expected to recover:
| |
• | The length of time, and extent to which, the fair value has been less than the amortized cost; |
| |
• | Adverse conditions specifically related to the security, industry, or geographic area; |
| |
• | The historical and implied volatility of the fair value of the security; |
| |
• | The payment structure of the debt security and the likelihood of the issuer being able to make payments that may increase in the future; |
| |
• | Failure of the issuer of the security to make scheduled interest or principal payments; |
| |
• | Any changes to the rating of the security by a rating agency; |
| |
• | Recoveries or additional declines in fair value subsequent to the balance sheet date; and |
| |
• | The nature of the issuer, including whether it is a private company, public entity or government-sponsored enterprise, and the existence or likelihood of any government or third party guaranty. |
The Company has the ability to hold the investment securities that had unrealized losses at March 31, 2017 for the foreseeable future and no declines were deemed by management to be OTT.
Note 7. Loans
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their unpaid principal balances, adjusted for any charge-offs, the ALL, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.
Loan interest income is accrued daily on outstanding balances. The following accounting policies, related to accrual and nonaccrual loans, apply to all portfolio segments and loan classes, which the Company considers to be the same. The accrual of interest is normally discontinued when a loan is specifically determined to be impaired and/or management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is doubtful. Generally, any unpaid interest previously accrued on those loans is reversed against current period interest income. A loan may be restored to accrual status when its financial status has significantly improved and there is no principal or interest past due. A loan may also be restored to accrual status if the borrower makes six consecutive monthly payments or the lump sum equivalent. Income on nonaccrual loans is generally not recognized unless a loan is returned to accrual status or after all principal has been collected. Interest income generally is not recognized on impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are generally applied as a reduction of the loan principal balance. Delinquency status is determined based on contractual terms for all portfolio segments and loan classes. Loans past due 30 days or more are considered delinquent. Loans are considered in process of foreclosure when a judgment of foreclosure has been issued by the court.
Loan origination fees and direct loan origination costs are deferred and amortized as an adjustment of the related loan's yield using methods that approximate the interest method. The Company generally amortizes these amounts over the estimated average life of the related loans.
Union Bankshares, Inc. Page 11
The composition of Net loans as of the balance sheet dates were as follows:
|
| | | | | | |
| March 31, 2017 | December 31, 2016 |
| (Dollars in thousands) |
Residential real estate | $ | 172,440 |
| $ | 172,727 |
|
Construction real estate | 37,437 |
| 34,189 |
|
Commercial real estate | 247,087 |
| 249,063 |
|
Commercial | 43,868 |
| 41,999 |
|
Consumer | 3,574 |
| 3,962 |
|
Municipal | 33,121 |
| 31,350 |
|
Gross loans | 537,527 |
| 533,290 |
|
Allowance for loan losses | (5,192 | ) | (5,247 | ) |
Net deferred loan costs | 644 |
| 649 |
|
Net loans | $ | 532,979 |
| $ | 528,692 |
|
There were no loans pledged as collateral on deposits of municipalities at March 31, 2017 and December 31, 2016. Qualifying residential first mortgage loans and certain commercial real estate loans held by Union may be pledged as collateral for borrowings from the FHLB under a blanket lien.
A summary of current, past due and nonaccrual loans as of the balance sheet dates follows:
|
| | | | | | | | | | | | | | | | | | |
March 31, 2017 | Current | 30-59 Days | 60-89 Days | 90 Days and Over and Accruing | Nonaccrual | Total |
| (Dollars in thousands) |
Residential real estate | $ | 167,539 |
| $ | 2,733 |
| $ | 274 |
| $ | 90 |
| $ | 1,804 |
| $ | 172,440 |
|
Construction real estate | 37,049 |
| 320 |
| — |
| — |
| 68 |
| 37,437 |
|
Commercial real estate | 243,804 |
| 1,929 |
| — |
| 157 |
| 1,197 |
| 247,087 |
|
Commercial | 43,590 |
| 240 |
| 14 |
| 10 |
| 14 |
| 43,868 |
|
Consumer | 3,566 |
| 8 |
| — |
| — |
| — |
| 3,574 |
|
Municipal | 33,121 |
| — |
| — |
| — |
| — |
| 33,121 |
|
Total | $ | 528,669 |
| $ | 5,230 |
| $ | 288 |
| $ | 257 |
| $ | 3,083 |
| $ | 537,527 |
|
|
| | | | | | | | | | | | | | | | | | |
December 31, 2016 | Current | 30-59 Days | 60-89 Days | 90 Days and Over and Accruing | Nonaccrual | Total |
| (Dollars in thousands) |
Residential real estate | $ | 168,125 |
| $ | 1,661 |
| $ | 472 |
| $ | 672 |
| $ | 1,797 |
| $ | 172,727 |
|
Construction real estate | 34,148 |
| 17 |
| — |
| — |
| 24 |
| 34,189 |
|
Commercial real estate | 245,402 |
| 1,642 |
| 153 |
| 157 |
| 1,709 |
| 249,063 |
|
Commercial | 41,920 |
| 12 |
| 42 |
| 10 |
| 15 |
| 41,999 |
|
Consumer | 3,946 |
| 12 |
| 3 |
| 1 |
| — |
| 3,962 |
|
Municipal | 31,350 |
| — |
| — |
| — |
| — |
| 31,350 |
|
Total | $ | 524,891 |
| $ | 3,344 |
| $ | 670 |
| $ | 840 |
| $ | 3,545 |
| $ | 533,290 |
|
There was one residential real estate loan totaling $11 thousand in process of foreclosure at March 31, 2017. Aggregate interest on nonaccrual loans not recognized was $1.3 million and $1.2 million as of March 31, 2017 and 2016, respectively, and $1.3 million as of December 31, 2016.
Union Bankshares, Inc. Page 12
Note 8. Allowance for Loan Losses and Credit Quality
The ALL is established for estimated losses in the loan portfolio through a provision for loan losses charged to earnings. For all loan classes, loan losses are charged against the ALL when management believes the loan balance is uncollectible or in accordance with federal guidelines. Subsequent recoveries, if any, are credited to the ALL.
The ALL is maintained at a level believed by management to be appropriate to absorb probable credit losses inherent in the loan portfolio as of the balance sheet date. The amount of the ALL is based on management's periodic evaluation of the collectability of the loan portfolio, including the nature, volume and risk characteristics of the portfolio, credit concentrations, trends in historical loss experience, estimated value of any underlying collateral, specific impaired loans and economic conditions. There has been no change to the methodology used to estimate the ALL during the first quarter of 2017. While management uses available information to recognize losses on loans, future additions to the ALL may be necessary based on changes in economic conditions or other relevant factors.
In addition, various regulatory agencies, as an integral part of their examination process, regularly review the Company's ALL. Such agencies may require the Company to recognize additions to the ALL, with a corresponding charge to earnings, based on their judgments about information available to them at the time of their examination, which may not be currently available to management.
The ALL consists of specific, general and unallocated components. The specific component relates to the loans that are classified as impaired. Loans are evaluated for impairment and may be classified as impaired when management believes it is probable that the Company will not collect all the contractual interest and principal payments as scheduled in the loan agreement. Impaired loans may also include troubled loans that are restructured. A TDR occurs when the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that would otherwise not be granted. A TDR classification may result from the transfer of assets to the Company in partial satisfaction of a troubled loan, a modification of a loan's terms (such as reduction of stated interest rates below market rates, extension of maturity that does not conform to the Company's policies, reduction of the face amount of the loan, reduction of accrued interest, or reduction or deferment of loan payments), or a combination. A specific reserve amount is allocated to the ALL for individual loans that have been classified as impaired based on management's estimate of the fair value of the collateral for collateral dependent loans, an observable market price, or the present value of anticipated future cash flows. The Company accounts for the change in present value attributable to the passage of time in the loan loss reserve. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer, real estate or small balance commercial loans for impairment evaluation, unless such loans are subject to a restructuring agreement or have been identified as impaired as part of a larger customer relationship. Management has established the threshold for individual impairment evaluation for commercial loans with balances greater than $500 thousand, based on an evaluation of the Company's historical loss experience on substandard commercial loans.
The general component represents the level of ALL allocable to each loan portfolio segment with similar risk characteristics and is determined based on historical loss experience, adjusted for qualitative factors, for each class of loan. Management deems a five year average to be an appropriate time frame on which to base historical losses for each portfolio segment. Qualitative factors considered include underwriting, economic and market conditions, portfolio composition, collateral values, delinquencies, lender experience and legal issues. The qualitative factors are determined based on the various risk characteristics of each portfolio segment. Risk characteristics relevant to each portfolio segment are as follows:
| |
• | Residential real estate - Loans in this segment are collateralized by owner-occupied 1-4 family residential real estate, second and vacation homes, 1-4 family investment properties, home equity and second mortgage loans. Repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, could have an effect on the credit quality of this segment. |
| |
• | Construction real estate - Loans in this segment include residential and commercial construction properties, commercial real estate development loans (while in the construction phase of the projects), land and land development loans. Repayment is dependent on the credit quality of the individual borrower and/or the underlying cash flows generated by the properties being constructed. The overall health of the economy, including unemployment rates, housing prices, vacancy rates and material costs, could have an effect on the credit quality of this segment. |
| |
• | Commercial real estate - Loans in this segment are primarily properties occupied by businesses or income-producing properties. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by a general slowdown in business or increased vacancy rates which, in turn, could have an effect on the credit quality of this segment. Management requests business financial statements at least annually and monitors the cash flows of these loans. |
Union Bankshares, Inc. Page 13
| |
• | Commercial - Loans in this segment are made to businesses and are generally secured by non-real estate assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer or business spending, could have an effect on the credit quality of this segment. |
| |
• | Consumer - Loans in this segment are made to individuals for personal expenditures, such as an automobile purchase, and include unsecured loans. Repayment is primarily dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment, could have an effect on the credit quality of this segment. |
| |
• | Municipal - Loans in this segment are made to municipalities located within the Company's service area. Repayment is primarily dependent on taxes or other funds collected by the municipalities. Management considers there to be minimal risk surrounding the credit quality of this segment. |
An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the ALL reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
All evaluations are inherently subjective as they require estimates that are susceptible to significant revision as more information becomes available or as changes occur in economic conditions or other relevant factors. Despite the allocation shown in the tables below, the ALL is general in nature and is available to absorb losses from any class of loan.
Changes in the ALL, by class of loans, for the three months ended March 31, 2017 and 2016 were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
For The Three Months Ended March 31, 2017 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Unallocated | Total |
| (Dollars in thousands) |
Balance, December 31, 2016 | $ | 1,399 |
| $ | 391 |
| $ | 2,687 |
| $ | 342 |
| $ | 26 |
| $ | 40 |
| $ | 362 |
| $ | 5,247 |
|
Provision (credit) for loan losses | 29 |
| 48 |
| (26 | ) | 4 |
| — |
| 2 |
| (57 | ) | — |
|
Recoveries of amounts charged off | 2 |
| 3 |
| — |
| — |
| 1 |
| — |
| — |
| 6 |
|
| 1,430 |
| 442 |
| 2,661 |
| 346 |
| 27 |
| 42 |
| 305 |
| 5,253 |
|
Amounts charged off | (58 | ) | — |
| — |
| — |
| (3 | ) | — |
| — |
| (61 | ) |
Balance, March 31, 2017 | $ | 1,372 |
| $ | 442 |
| $ | 2,661 |
| $ | 346 |
| $ | 24 |
| $ | 42 |
| $ | 305 |
| $ | 5,192 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
For The Three Months Ended March 31, 2016 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Unallocated | Total |
| (Dollars in thousands) |
Balance, December 31, 2015 | $ | 1,419 |
| $ | 514 |
| $ | 2,792 |
| $ | 209 |
| $ | 28 |
| $ | 38 |
| $ | 201 |
| $ | 5,201 |
|
Provision (credit) for loan losses | 87 |
| (51 | ) | (63 | ) | 41 |
| (1 | ) | 9 |
| 53 |
| 75 |
|
Recoveries of amounts charged off | — |
| 3 |
| — |
| 1 |
| 1 |
| — |
| — |
| 5 |
|
| 1,506 |
| 466 |
| 2,729 |
| 251 |
| 28 |
| 47 |
| 254 |
| 5,281 |
|
Amounts charged off | (120 | ) | — |
| — |
| (33 | ) | (3 | ) | — |
| — |
| (156 | ) |
Balance, March 31, 2016 | $ | 1,386 |
| $ | 466 |
| $ | 2,729 |
| $ | 218 |
| $ | 25 |
| $ | 47 |
| $ | 254 |
| $ | 5,125 |
|
Union Bankshares, Inc. Page 14
The allocation of the ALL, summarized on the basis of the Company's impairment methodology by class of loan, as of the balance sheet dates were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2017 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Unallocated | Total |
| (Dollars in thousands) |
Individually evaluated for impairment | $ | 61 |
| $ | — |
| $ | 21 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 82 |
|
Collectively evaluated for impairment | 1,311 |
| 442 |
| 2,640 |
| 346 |
| 24 |
| 42 |
| 305 |
| 5,110 |
|
Total allocated | $ | 1,372 |
| $ | 442 |
| $ | 2,661 |
| $ | 346 |
| $ | 24 |
| $ | 42 |
| $ | 305 |
| $ | 5,192 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2016 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Unallocated | Total |
| (Dollars in thousands) |
Individually evaluated for impairment | $ | 63 |
| $ | — |
| $ | 40 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 103 |
|
Collectively evaluated for impairment | 1,336 |
| 391 |
| 2,647 |
| 342 |
| 26 |
| 40 |
| 362 |
| 5,144 |
|
Total allocated | $ | 1,399 |
| $ | 391 |
| $ | 2,687 |
| $ | 342 |
| $ | 26 |
| $ | 40 |
| $ | 362 |
| $ | 5,247 |
|
The recorded investment in loans, summarized on the basis of the Company's impairment methodology by class of loan, as of the balance sheet dates were as follows:
|
| | | | | | | | | | | | | | | | | | | | | |
March 31, 2017 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
| (Dollars in thousands) |
Individually evaluated for impairment | $ | 1,579 |
| $ | 87 |
| $ | 2,220 |
| $ | 417 |
| $ | — |
| $ | — |
| $ | 4,303 |
|
Collectively evaluated for impairment | 170,861 |
| 37,350 |
| 244,867 |
| 43,451 |
| 3,574 |
| 33,121 |
| 533,224 |
|
Total | $ | 172,440 |
| $ | 37,437 |
| $ | 247,087 |
| $ | 43,868 |
| $ | 3,574 |
| $ | 33,121 |
| $ | 537,527 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
December 31, 2016 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
| (Dollars in thousands) |
Individually evaluated for impairment | $ | 1,448 |
| $ | 88 |
| $ | 3,328 |
| $ | 432 |
| $ | — |
| $ | — |
| $ | 5,296 |
|
Collectively evaluated for impairment | 171,279 |
| 34,101 |
| 245,735 |
| 41,567 |
| 3,962 |
| 31,350 |
| 527,994 |
|
Total | $ | 172,727 |
| $ | 34,189 |
| $ | 249,063 |
| $ | 41,999 |
| $ | 3,962 |
| $ | 31,350 |
| $ | 533,290 |
|
Risk and collateral ratings are assigned to loans and are subject to ongoing monitoring by lending and credit personnel with such ratings updated annually or more frequently if warranted. The following is an overview of the Company's loan rating system:
1-3 Rating - Pass
Risk-rating grades "1" through "3" comprise those loans ranging from those with lower than average credit risk, defined as borrowers with high liquidity, excellent financial condition, strong management, favorable industry trends or loans secured by highly liquid assets, through those with marginal credit risk, defined as borrowers that, while creditworthy, exhibit some characteristics requiring special attention by the account officer.
4/M Rating - Satisfactory/Monitor
Borrowers exhibit potential credit weaknesses or downward trends warranting management's attention. While potentially weak, these borrowers are currently marginally acceptable; no loss of principal or interest is envisioned. When warranted, these credits may be monitored on the watch list.
Union Bankshares, Inc. Page 15
5-7 Rating - Substandard
Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. The loan may be inadequately protected by the net worth and paying capacity of the obligor and/or the underlying collateral is inadequate.
The following tables summarize the loan ratings applied to the Company's loans by class as of the balance sheet dates:
|
| | | | | | | | | | | | | | | | | | | | | |
March 31, 2017 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
| (Dollars in thousands) |
Pass | $ | 158,122 |
| $ | 30,870 |
| $ | 178,399 |
| $ | 39,151 |
| $ | 3,524 |
| $ | 33,121 |
| $ | 443,187 |
|
Satisfactory/Monitor | 10,763 |
| 6,413 |
| 65,304 |
| 4,002 |
| 50 |
| — |
| 86,532 |
|
Substandard | 3,555 |
| 154 |
| 3,384 |
| 715 |
| — |
| — |
| 7,808 |
|
Total | $ | 172,440 |
| $ | 37,437 |
| $ | 247,087 |
| $ | 43,868 |
| $ | 3,574 |
| $ | 33,121 |
| $ | 537,527 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
December 31, 2016 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
| (Dollars in thousands) |
Pass | $ | 158,140 |
| $ | 29,248 |
| $ | 182,247 |
| $ | 38,219 |
| $ | 3,928 |
| $ | 31,350 |
| $ | 443,132 |
|
Satisfactory/Monitor | 10,641 |
| 4,830 |
| 62,193 |
| 3,109 |
| 34 |
| — |
| 80,807 |
|
Substandard | 3,946 |
| 111 |
| 4,623 |
| 671 |
| — |
| — |
| 9,351 |
|
Total | $ | 172,727 |
| $ | 34,189 |
| $ | 249,063 |
| $ | 41,999 |
| $ | 3,962 |
| $ | 31,350 |
| $ | 533,290 |
|
The following table provides information with respect to impaired loans by class of loan as of and for the three months ended March 31, 2017:
|
| | | | | | | | | | | | | | | |
| As of March 31, 2017 | For The Three Months Ended March 31, 2017 |
| Recorded Investment (1) | Principal Balance (1) | Related Allowance | Average Recorded Investment | Interest Income Recognized |
| (Dollars in thousands) |
Residential real estate | $ | 305 |
| $ | 314 |
| $ | 61 |
| | |
Commercial real estate | 252 |
| 252 |
| 21 |
| | |
With an allowance recorded | 557 |
| 566 |
| 82 |
| | |
| | | | | |
Residential real estate | 1,274 |
| 1,773 |
| — |
| | |
Construction real estate | 87 |
| 87 |
| — |
| | |
Commercial real estate | 1,968 |
| 2,039 |
| — |
| | |
Commercial | 417 |
| 417 |
| — |
| | |
With no allowance recorded | 3,746 |
| 4,316 |
| — |
| | |
| | | | | |
Residential real estate | 1,579 |
| 2,087 |
| 61 |
| $ | 1,514 |
| $ | 11 |
|
Construction real estate | 87 |
| 87 |
| — |
| 87 |
| 1 |
|
Commercial real estate | 2,220 |
| 2,291 |
| 21 |
| 2,774 |
| 32 |
|
Commercial | 417 |
| 417 |
| — |
| 424 |
| 7 |
|
Total | $ | 4,303 |
| $ | 4,882 |
| $ | 82 |
| $ | 4,799 |
| $ | 51 |
|
____________________
| |
(1) | Does not reflect government guaranties on impaired loans as of March 31, 2017 totaling $623 thousand. |
Union Bankshares, Inc. Page 16
The following table provides information with respect to impaired loans by class of loan as of and for the three months ended March 31, 2016:
|
| | | | | | | | | | | | | | | |
| As of March 31, 2016 | For The Three Months Ended March 31, 2016 |
| Recorded Investment (1) | Principal Balance (1) | Related Allowance | Average Recorded Investment | Interest Income Recognized |
| (Dollars in thousands) |
Residential real estate | $ | 1,176 |
| $ | 1,422 |
| $ | 76 |
| $ | 1,186 |
| $ | 11 |
|
Construction real estate | 91 |
| 91 |
| — |
| 92 |
| 1 |
|
Commercial real estate | 3,107 |
| 3,195 |
| 86 |
| 3,100 |
| 14 |
|
Commercial | 475 |
| 475 |
| 20 |
| 484 |
| — |
|
Total | $ | 4,849 |
| $ | 5,183 |
| $ | 182 |
| $ | 4,862 |
| $ | 26 |
|
____________________
| |
(1) | Does not reflect government guaranties on impaired loans as of March 31, 2016 totaling $590 thousand. |
The following table provides information with respect to impaired loans as of December 31, 2016:
|
| | | | | | | | | | | |
| December 31, 2016 | | |
| Recorded Investment (1) | Principal Balance (1) | Related Allowance | | |
| (Dollars in thousands) | | |
Residential real estate | $ | 308 |
| $ | 317 |
| $ | 63 |
| | |
Commercial real estate | 488 |
| 520 |
| 40 |
| | |
With an allowance recorded | 796 |
| 837 |
| 103 |
| | |
| | | | | |
Residential real estate | 1,140 |
| 1,561 |
| — |
| | |
Construction real estate | 88 |
| 88 |
| — |
| | |
Commercial real estate | 2,840 |
| 2,910 |
| — |
| | |
Commercial | 432 |
| 432 |
| — |
| | |
With no allowance recorded | 4,500 |
| 4,991 |
| — |
| | |
| | | | | |
Residential real estate | 1,448 |
| 1,878 |
| 63 |
| | |
Construction real estate | 88 |
| 88 |
| — |
| | |
Commercial real estate | 3,328 |
| 3,430 |
| 40 |
| | |
Commercial | 432 |
| 432 |
| — |
| | |
Total | $ | 5,296 |
| $ | 5,828 |
| $ | 103 |
| | |
____________________
| |
(1) | Does not reflect government guaranties on impaired loans as of December 31, 2016 totaling $637 thousand. |
Union Bankshares, Inc. Page 17
The following is a summary of TDR loans by class of loan as of the balance sheet dates:
|
| | | | | | | | | | |
| March 31, 2017 | December 31, 2016 |
| Number of Loans | Principal Balance | Number of Loans | Principal Balance |
| (Dollars in thousands) |
Residential real estate | 23 |
| $ | 1,579 |
| 20 |
| $ | 1,448 |
|
Construction real estate | 1 |
| 87 |
| 1 |
| 88 |
|
Commercial real estate | 9 |
| 1,207 |
| 10 |
| 1,452 |
|
Commercial | 2 |
| 417 |
| 2 |
| 431 |
|
Total | 35 |
| $ | 3,290 |
| 33 |
| $ | 3,419 |
|
The TDR loans above represent loan modifications in which a concession was provided to the borrower, including due date extensions, maturity date extensions, interest rate reductions or the forgiveness of accrued interest. Troubled loans, that are restructured and meet established thresholds, are classified as impaired and a specific reserve amount is allocated to the ALL on the basis of the fair value of the collateral for collateral dependent loans, an observable market price, or the present value of anticipated future cash flows.
The following table provides new TDR activity for the three months ended March 31, 2017 and 2016:
|
| | | | | | | | | | | | | | | | |
| New TDRs During the | New TDRs During the |
| Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 |
| Number of Loans | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment | Number of Loans | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment |
| (Dollars in thousands) |
Residential real estate | 3 |
| $ | 140 |
| $ | 149 |
| 1 |
| $ | 57 |
| $ | 57 |
|
There were no TDR loans modified within the previous twelve months that had subsequently defaulted during the three month periods ended March 31, 2017 or March 31, 2016. TDR loans are considered defaulted at 90 days past due.
At March 31, 2017 and December 31, 2016, the Company was not committed to lend any additional funds to borrowers whose loans were nonperforming, impaired or restructured.
Note 9. Defined Benefit Pension Plan
Union sponsors a noncontributory defined benefit pension plan covering all eligible employees employed prior to October 5, 2012. On October 5, 2012, the Company closed the Plan to new participants and froze the accrual of retirement benefits for current participants. It is Union's current intent to continue to maintain the frozen Plan and related Trust account and to distribute benefits to participants at such time and in such manner as provided under the terms of the Plan. The Company will continue to recognize the pension benefit and cash funding obligations for the remaining life of the associated liability for the frozen benefits under the Plan. The Plan provides defined benefits based on years of service and final average salary prior to October 5, 2012.
The Company's defined pension benefit obligation and net periodic benefit cost are actuarially determined based on assumptions regarding the appropriate discount rate, current and expected future return on Plan assets, and anticipated mortality rates. Weighted average assumptions used to determine the net periodic pension benefit for the three months ended March 31, 2017 and 2016 have remained consistent with assumptions disclosed in the Company's annual report on Form 10-K. However, the expected rate of return on plan assets for 2017 has been reduced to 6.00% compared to 6.75% as disclosed in the annual report on Form 10-K. This reduction results in an estimated net periodic pension benefit for the year ended December 31, 2017 of $80 thousand.
Union Bankshares, Inc. Page 18
Net periodic pension benefit for the three months ended March 31 consisted of the following components:
|
| | | | | | |
| Three Months Ended March 31, |
| 2017 | 2016 |
| (Dollars in thousands) |
Interest cost on projected benefit obligation | $ | 172 |
| $ | 175 |
|
Expected return on plan assets | (243 | ) | (259 | ) |
Amortization of net loss | 51 |
| 41 |
|
Net periodic benefit | $ | (20 | ) | $ | (43 | ) |
Note 10. Stock Based Compensation
The Company's current stock-based compensation plan is the Union Bankshares, Inc. 2014 Equity Incentive Plan. Under the 2014 Equity Plan, 50,000 shares of the Company’s common stock are available for equity awards of incentive stock options, nonqualified stock options, restricted stock and RSUs to eligible officers and (except for awards of incentive stock options) nonemployee directors. Shares available for issuance of awards under the 2014 Equity Plan consist of unissued shares of the Company’s common stock and/or shares held in treasury. As of March 31, 2017, there were outstanding grants under the plan of RSUs and incentive stock options.
RSUs. Each RSU represents the right to receive one share of the Company's common stock upon satisfaction of applicable vesting conditions. The general terms of the awards are described in the Company's annual report on Form 10-K. Prior to vesting, the RSUs do not earn dividends or dividend equivalents, nor do they bear any voting rights.
The following table presents a summary of the unvested RSUs from the 2015 and 2016 Award Plan Summaries as of March 31, 2017:
|
| | | | | | |
| | Number of Unvested RSUs | Weighted-Average Grant Date Fair Value |
2015 Award | | 3,089 |
| $ | 27.91 |
|
2016 Award | | 3,569 |
| 45.45 |
|
Total | | 6,658 | $ | 37.31 |
|
Unrecognized compensation expense related to the unvested RSUs as of March 31, 2017 and March 31, 2016 was $186 thousand and $138 thousand, respectively.
During the three months ended March 31, 2017, a total of 3,308 contingent RSUs were provisionally granted. The estimated number of contingent RSUs provisionally granted was based on target performance-based payout amounts detailed in the 2017 Award Plan Summary approved by the Board of Directors and on the closing market price of the Company's stock on the March 15, 2017 grant date ($41.20 per share). As with the 2015 and 2016 grants, one half is in the form of Time-Based RSUs and one-half is in the form of Performance-Based RSUs. The actual number of RSUs granted (if any) will be determined as of the earned date of December 31, 2017. The contingent RSUs were granted on substantially the same terms and conditions as the RSUs granted under the 2016 Award Plan Summary. As of March 31, 2017, the estimated unrecognized compensation expense related to the provisionally granted RSUs, based on the closing market price of the Company's stock on the grant date of March 15, 2017 was $136 thousand.
Stock options. As of March 31, 2017, 4,500 incentive stock options granted in December 2014 under the 2014 Equity Plan remained outstanding and exercisable and will expire in December 2021. There was no unrecognized compensation cost related to these options as of March 31, 2017. The intrinsic value of these options was $85 thousand as of March 31, 2017.
As of March 31, 2017, 34,986 shares remained available for future equity awards under the 2014 Equity Plan.
As of March 31, 2017, 4,000 incentive stock options granted under the 2008 ISO Plan remained outstanding and exercisable, with the last of such options expiring in December 2020. There was no unrecognized compensation cost related to these options as of March 31, 2017. The intrinsic value of these options was $86 thousand as of March 31, 2017.
Union Bankshares, Inc. Page 19
Note 11. Other Comprehensive Income (Loss)
Accounting principles generally require recognized revenue, expenses, gains and losses be included in net income or loss. Certain changes in assets and liabilities, such as the after tax effect of unrealized gains and losses on investment securities AFS that are not OTTI and the unfunded liability for the defined benefit pension plan, are not reflected in the consolidated statements of income. The cumulative effect of such items, net of tax effect, is reported as a separate component of the equity section of the consolidated balance sheet (Accumulated OCI). OCI, along with net income, comprises the Company's total comprehensive income or loss.
As of the balance sheet dates, the components of Accumulated OCI, net of tax, were:
|
| | | | | | |
| March 31, 2017 | December 31, 2016 |
| (Dollars in thousands) |
Net unrealized loss on investment securities available-for-sale | $ | (439 | ) | $ | (664 | ) |
Defined benefit pension plan net unrealized actuarial loss | (2,615 | ) | (2,615 | ) |
Total | $ | (3,054 | ) | $ | (3,279 | ) |
The following tables disclose the tax effects allocated to each component of OCI for the three months ended March 31:
|
| | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2017 | March 31, 2016 |
| Before-Tax Amount | Tax Expense | Net-of-Tax Amount | Before-Tax Amount | Tax Expense | Net-of-Tax Amount |
| (Dollars in thousands) |
Investment securities available-for-sale: | | | | | | |
Net unrealized holding gains arising during the period on investment securities available-for-sale | $ | 341 |
| $ | (116 | ) | $ | 225 |
| $ | 776 |
| $ | (264 | ) | $ | 512 |
|
Total other comprehensive income | $ | 341 |
| $ | (116 | ) | $ | 225 |
| $ | 776 |
| $ | (264 | ) | $ | 512 |
|
There were no reclassification adjustments from OCI for the three months ended March 31, 2017 and 2016. Note 12. Fair Value Measurement
The Company utilizes FASB ASC Topic 820, Fair Value Measurement, as guidance for accounting for assets and liabilities carried at fair value. This standard defines fair value as the price that would be received, without adjustment for transaction costs, to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The guidance in FASB ASC Topic 820 establishes a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The three levels of the fair value hierarchy are:
| |
• | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
| |
• | Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; |
| |
• | Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). |
The following is a description of the valuation methodologies used for the Company’s assets that are measured on a recurring basis at estimated fair value:
Investment securities AFS: Marketable equity securities and mutual funds have been valued using unadjusted quoted prices from active markets and therefore have been classified as Level 1. However, the majority of the Company’s AFS securities have been valued utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include market
Union Bankshares, Inc. Page 20
maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.
Assets measured at fair value on a recurring basis at March 31, 2017 and December 31, 2016, segregated by fair value hierarchy level, are summarized below:
|
| | | | | | | | | | | | |
| Fair Value Measurements |
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
March 31, 2017: | (Dollars in thousands) |
Investment securities available-for-sale (market approach) | | | | |
Debt securities: | | | | |
U.S. Government-sponsored enterprises | $ | 9,822 |
| $ | — |
| $ | 9,822 |
| $ | — |
|
Agency mortgage-backed | 19,947 |
| — |
| 19,947 |
| — |
|
State and political subdivisions | 27,193 |
| — |
| 27,193 |
| — |
|
Corporate | 10,248 |
| — |
| 10,248 |
| — |
|
Total debt securities | 67,210 |
| — |
| 67,210 |
| — |
|
Mutual funds | 429 |
| 429 |
| — |
| — |
|
Total | $ | 67,639 |
| $ | 429 |
| $ | 67,210 |
| $ | — |
|
| | | | |
December 31, 2016: | | | | |
Investment securities available-for-sale (market approach) | | | | |
Debt securities: | | | | |
U.S. Government-sponsored enterprises | $ | 10,040 |
| $ | — |
| $ | 10,040 |
| $ | — |
|
Agency mortgage-backed | 18,041 |
| — |
| 18,041 |
| — |
|
State and political subdivisions | 27,372 |
| — |
| 27,372 |
| — |
|
Corporate | 9,700 |
| — |
| 9,700 |
| — |
|
Total debt securities | 65,153 |
| — |
| 65,153 |
| — |
|
Mutual funds | 403 |
| 403 |
| — |
| — |
|
Total | $ | 65,556 |
| $ | 403 |
| $ | 65,153 |
| $ | — |
|
There were no significant transfers in or out of Levels 1 and 2 during the three months ended March 31, 2017, nor were there any Level 3 assets at any time during the period. Certain other assets and liabilities are measured at fair value on a nonrecurring basis, that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Assets and liabilities measured at fair value on a nonrecurring basis in periods after initial recognition, such as impaired loans, HTM securities, MSRs and OREO, were not considered material at March 31, 2017 or December 31, 2016. The Company has not elected to apply the fair value method to any financial assets or liabilities other than those situations where other accounting pronouncements require fair value measurements.
FASB ASC Topic 825, Financial Instruments, requires disclosure of the estimated fair value of financial instruments. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Management’s estimates and assumptions are inherently subjective and involve uncertainties and matters of significant judgment. Changes in assumptions could dramatically affect the estimated fair values.
Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments may be excluded from disclosure requirements. Thus, the aggregate fair value amounts presented may not necessarily represent the actual underlying fair value of such instruments of the Company.
Union Bankshares, Inc. Page 21
The following methods and assumptions were used by the Company in estimating the fair value of its significant financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets' fair values and are classified as Level 1.
Interest bearing deposits in banks: Fair values for interest bearing deposits in banks are based on discounted present values of cash flows and are classified as Level 2.
Investment securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair value measurements consider observable data which may include market maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows. Investment securities are classified as Level 1 or Level 2 depending on availability of recent trade information.
Loans held for sale: The fair value of loans held for sale is estimated based on quotes from third party vendors, resulting in a Level 2 classification.
Loans: The fair values of loans are estimated for portfolios of loans with similar financial characteristics and segregated by loan class or segment. For variable-rate loan categories that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts adjusted for credit risk. The fair values for other loans (for example, fixed-rate residential, commercial real estate, and rental property mortgage loans as well as commercial and industrial loans) are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future cash flows, future expected loss experience and risk characteristics. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values, where applicable. The fair value methods and assumptions that utilize unobservable inputs as defined by current accounting standards are classified as Level 3.
Accrued interest receivable and payable: The carrying amounts of accrued interest approximate their fair values and are classified as Level 1, 2, or 3 in accordance with the classification of the related principal's valuation.
Nonmarketable equity securities: It is not practical to determine the fair value of the nonmarketable securities, such as FHLB stock, due to restrictions placed on their transferability.
Deposits: The fair values disclosed for noninterest bearing deposits and other interest bearing nontime deposits are, by definition, equal to the amount payable on demand at the reporting date, resulting in a Level 1 classification. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on similar deposits to a schedule of aggregated expected maturities on such deposits, resulting in a Level 2 classification.
Borrowed funds: The fair values of the Company’s long-term debt are estimated using discounted cash flow analysis based on interest rates currently being offered on similar debt instruments, resulting in a Level 2 classification. The fair values of the Company’s short-term debt approximate the carrying amounts reported in the balance sheet, resulting in a Level 1 classification.
Off-balance-sheet financial instruments: Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The only commitments to extend credit that are normally longer than one year in duration are the home equity lines whose interest rates are variable quarterly. The only fees collected for commitments are an annual fee on credit card arrangements and often a flat fee on commercial lines of credit and standby letters of credit. The fair value of off-balance-sheet financial instruments as of the balance sheet dates was not significant.
Union Bankshares, Inc. Page 22
As of the balance sheet dates, the estimated fair values and related carrying amounts of the Company's significant financial instruments were as follows:
|
| | | | | | | | | | | | | | | |
| March 31, 2017 |
| Fair Value Measurements |
| Carrying Amount | Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
| (Dollars in thousands) |
Financial assets | | | | | |
Cash and cash equivalents | $ | 24,967 |
| $ | 24,967 |
| $ | 24,967 |
| $ | — |
| $ | — |
|
Interest bearing deposits in banks | 8,508 |
| 8,518 |
| — |
| 8,518 |
| — |
|
Investment securities | 68,638 |
| 67,637 |
| 429 |
| 67,208 |
| — |
|
Loans held for sale | 2,847 |
| 2,905 |
| — |
| 2,905 |
| — |
|
Loans, net | | | | | |
Residential real estate | 171,275 |
| 172,799 |
| — |
| — |
| 172,799 |
|
Construction real estate | 37,040 |
| 36,859 |
| — |
| — |
| 36,859 |
|
Commercial real estate | 244,417 |
| 243,129 |
| — |
| — |
| 243,129 |
|
Commercial | 43,574 |
| 43,088 |
| — |
| — |
| 43,088 |
|
Consumer | 3,554 |
| 3,619 |
| — |
| — |
| 3,619 |
|
Municipal | 33,119 |
| 33,519 |
| — |
| — |
| 33,519 |
|
Accrued interest receivable | 2,042 |
| 2,042 |
| — |
| 446 |
| 1,596 |
|
Nonmarketable equity securities | 2,354 |
| N/A |
| N/A |
| N/A |
| N/A |
|
Financial liabilities | | | | | |
Deposits | | | | | |
Noninterest bearing | $ | 110,087 |
| $ | 110,087 |
| $ | 110,087 |
| $ | — |
| $ | — |
|
Interest bearing | 369,451 |
| 369,451 |
| 369,451 |
| — |
| — |
|
Time | 102,527 |
| 101,878 |
| — |
| 101,878 |
| — |
|
Borrowed funds | | | | | |
Short-term | 1,301 |
| 1,301 |
| 1,301 |
| — |
| — |
|
Long-term | 30,426 |
| 30,359 |
| — |
| 30,359 |
| — |
|
Accrued interest payable | 89 |
| 89 |
| — |
| 89 |
| — |
|
Union Bankshares, Inc. Page 23
|
| | | | | | | | | | | | | | | |
| December 31, 2016 |
| Fair Value Measurements |
| Carrying Amount | Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
| (Dollars in thousands) |
Financial assets | | | | | |
Cash and cash equivalents | $ | 39,275 |
| $ | 39,275 |
| $ | 39,275 |
| $ | — |
| $ | — |
|
Interest bearing deposits in banks | 9,504 |
| 9,528 |
| — |
| 9,528 |
| — |
|
Investment securities | 66,555 |
| 66,555 |
| 403 |
| 66,152 |
| — |
|
Loans held for sale | 7,803 |
| 7,958 |
| — |
| 7,958 |
| — |
|
Loans, net | | | | | |
Residential real estate | 171,538 |
| 173,024 |
| — |
| — |
| 173,024 |
|
Construction real estate | 33,840 |
| 33,963 |
| — |
| — |
| 33,963 |
|
Commercial real estate | 246,317 |
| 245,979 |
| — |
| — |
| 245,979 |
|
Commercial | 41,708 |
| 41,491 |
| — |
| — |
| 41,491 |
|
Consumer | 3,941 |
| 4,014 |
| — |
| — |
| 4,014 |
|
Municipal | 31,348 |
| 31,749 |
| — |
| — |
| 31,749 |
|
Accrued interest receivable | 2,259 |
| 2,259 |
| — |
| 414 |
| 1,845 |
|
Nonmarketable equity securities | 2,354 |
| N/A |
| N/A |
| N/A |
| N/A |
|
Financial liabilities | | | | | |
Deposits | | | | | |
Noninterest bearing | $ | 112,384 |
| $ | 112,384 |
| $ | 112,384 |
| $ | — |
| $ | — |
|
Interest bearing | 382,083 |
| 382,083 |
| 382,083 |
| — |
| — |
|
Time | 103,193 |
| 102,594 |
| — |
| 102,594 |
| — |
|
Borrowed funds | | | | | |
Short-term | 1,099 |
| 1,099 |
| 1,099 |
| — |
| — |
|
Long-term | 30,496 |
| 30,423 |
| — |
| 30,423 |
| — |
|
Accrued interest payable | 92 |
| 92 |
| — |
| 92 |
| — |
|
The carrying amounts in the preceding tables are included in the consolidated balance sheets under the applicable captions.
Note 13. Subsequent Events
Subsequent events represent events or transactions occurring after the balance sheet date but before the financial statements are issued. Financial statements are considered “issued” when they are widely distributed to shareholders and others for general use and reliance in a form and format that complies with GAAP. Events occurring subsequent to March 31, 2017 have been evaluated as to their potential impact to the consolidated financial statements.
On April 19, 2017, the Company declared a regular quarterly cash dividend of $0.29 per share, payable May 10, 2017, to stockholders of record on April 29, 2017.
Union Bankshares, Inc. Page 24
Item 2. 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 March 31, 2017 and December 31, 2016, and its results of operations for the three months ended March 31, 2017 and 2016. 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 Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of the Company's management, the interim unaudited data reflects all adjustments, consisting only of normal recurring adjustments and disclosures necessary to fairly present the Company's consolidated financial