UNB

Union Bankshares is a small Vermont commercial bank trading at a genuinely undemanding 10x FY2025 diluted EPS of $2.41, ~1.38x its $17.53 book value, while throwing off a ~6% dividend yield ($1.44/share) that is comfortably covered by a 59.3% payout ratio. The fundamental story is recovery: FY2025 net income of $11.1M rose 26.5% off the 2024 trough of $8.76M, diluted EPS climbed 25.5%, and the MD&A credits a deliberate balance-sheet repositioning — the Q3-2024 sale of low-yielding AFS securities at a loss redeployed into higher-yielding paper and loans, plus ~$75M of AFS purchases in Q4-2025. That, with $90.4M of average loan growth and a 19bps higher loan yield, lifted tax-equivalent interest income 11.5% and pushed net interest margin to 2.93% from 2.77% and ROAE to 15.29% from 13.38%. Operating cash flow grew 41.8% to $17.2M and book value per share compounded ~19.7% (from $14.65 to $17.53). For an income-oriented holder, this is a cheap, improving small bank.

The reasons it is a hold rather than a buy are concrete and sit in the filing. Nonperforming assets to total assets jumped to 0.85% from 0.12% — a near 7x deterioration in a single year, the clearest crack in an otherwise improving picture and exactly the kind of credit signal CECL volatility can amplify. The franchise is structurally low-return: NIM of 2.93% is thin and the 75.14% efficiency ratio (only modestly improved from 77.62%) means a lot of revenue is consumed by costs. Capital is light — equity/assets of 5.00% (up from 4.35%) and liabilities/equity of 19x leave a slim buffer, though total capital to risk-weighted assets of 12.80% clears regulatory thresholds. Cash fell 22.3% to $12.3M, and FY2025 net income ($11.1M) is still below the FY2021 level ($13.2M), so this is a recovery, not a new high. The stock is also a ~4.6M-share micro-cap — illiquid and easy to mis-mark.