Breaking Down Union Bankshares, Inc. (UNB) Financial Health: Key Insights for Investors

You're looking at Union Bankshares, Inc. (UNB) and wondering if the recent volatility masks a solid community bank story-and the Q3 2025 numbers defintely say it does. The company delivered a sharp profitability rebound, reporting a consolidated net income of $8.33 million for the first nine months of 2025, with the third quarter alone hitting $3.4 million, a significant jump from the prior year. This isn't just a fluke; it's driven by a balance sheet that's holding up, with total assets reaching $1.57 billion as of September 30, 2025. We need to see if this growth is sustainable, especially considering the 5.1% year-over-year loan growth to $1.18 billion is great, but funding costs are still elevated, so your investment decision hinges on understanding how they're managing that cost of deposits and sustaining the $0.75 diluted earnings per share.

Revenue Analysis

You need to know where the money is coming from at Union Bankshares, Inc. (UNB) to assess the quality of its earnings. The direct takeaway for the first nine months of 2025 is that the bank's revenue is heavily concentrated in its core lending business, with Net Interest Income (NII) driving a substantial 14.15% year-over-year growth in this area.

For the nine months ended September 30, 2025, the total operating revenue-which is your top-line measure of Net Interest Income plus Noninterest Income-was approximately $39.79 million. This tells you the company is fundamentally a traditional community bank, not a fee-driven wealth manager. That's a good thing for stability, but it means interest rate policy is defintely the biggest swing factor.

Primary Revenue Sources and Contribution

Union Bankshares' revenue structure is straightforward, split into two main streams. The vast majority of its income is Net Interest Income (NII), which is the difference between what the bank earns from its interest-bearing assets (like loans) and what it pays out on its interest-bearing liabilities (like deposits and wholesale borrowings). The second stream is Noninterest Income, which covers fees and other services.

Here's the quick math on the nine-month contribution:

• Net Interest Income (NII): $31.88 million, contributing about 80.1% of total operating revenue.
• Noninterest Income: Approximately $7.91 million, accounting for the remaining 19.9%.

The bank is a community bank operating across northern Vermont and New Hampshire, offering commercial, retail, and municipal banking services, plus wealth management. This local focus means their loan growth, which reached $1.18 billion by Q3 2025, is the engine of that NII.

Year-over-Year Revenue Growth

The growth story for 2025 is strong NII expansion. For the nine months ended September 30, 2025, NII grew to $31.87 million from $27.92 million in the comparable 2024 period, a solid 14.15% increase. This trend accelerated in the third quarter, with NII rising 18.3% year-over-year to $11.16 million.

This growth is happening because asset yields are improving-the bank is originating new loans at current, higher market rates. But, to be fair, the cost of funding is also up, with interest expense increasing 21.3% in Q1 2025 due to higher rates on deposits and wholesale funding, which tempers the NII growth.

Shifts in Noninterest Income Quality

The Noninterest Income segment, though smaller, is showing an important change in quality. The Q3 2025 Noninterest Income of $3.05 million was a significant contributor to the overall net income increase. This growth was driven by increases in wealth management income and net gains on sales of loans held for sale. This is a better quality of revenue than the prior year.

What this estimate hides is the one-time event from 2024. The massive 159.5% increase in net income for Q3 2025 was largely due to the non-recurrence of a $1.3 million loss on the sale of available-for-sale debt securities that was recorded in Q3 2024. So, while the core revenue growth is strong, the net income jump is a recovery from a prior strategic repositioning loss. For a deeper dive into the bank's strategy, you can read the Mission Statement, Vision, & Core Values of Union Bankshares, Inc. (UNB).

Profitability Metrics

Union Bankshares, Inc. (UNB) has shown a clear recovery in profitability through the first three quarters of 2025, largely driven by strengthening net interest income. The direct takeaway is that UNB's net profit margin of 11.17% for Q3 2025 is a significant improvement year-over-year, but still trails some larger regional bank peers, signaling room for operational gains.

For a bank, the traditional Gross Profit (Revenue minus Cost of Goods Sold) is best viewed through its Net Interest Income (NII) and the resulting margins. UNB's total operating revenue (NII plus noninterest income) for the third quarter of 2025 was approximately $14.21 million. This strong top-line performance is what's fueling the bottom line.

Here is a quick breakdown of the core profitability metrics for Q3 2025:

• Net Profit Margin: 11.17%
• Net Income (Net Profit): $3.4 million
• Operating Profit (Pre-Tax, Pre-Provision Proxy): $3.87 million

Here's the quick math: Operating Profit, which is total revenue minus noninterest expenses (our proxy for core operating costs), came in at approximately $3.87 million for Q3 2025 ($14.21 million in revenue minus $10.34 million in noninterest expenses). This translates to an Operating Profit Margin of about 27.23%. This margin shows the bank's core earnings power before taxes and credit loss provisions.

Profitability Trends and Industry Comparison

The trend in UNB's profitability is defintely positive. Consolidated net income for the nine months ended September 30, 2025, reached $8.3 million, compared to $5.8 million for the same period in 2024. This acceleration is crucial, especially when you look at the sequential quarterly improvement:

• Q1 2025 Net Income: $2.5 million
• Q3 2025 Net Income: $3.4 million

The Q3 2024 net income was depressed by a one-time $1.3 million loss on the sale of investment securities, so the current recovery is partly a normalization, but also a sign of strengthening core operations.

When you compare UNB to the broader regional bank industry, a few things stand out. While UNB's Q3 2025 Net Profit Margin of 11.17% is solid, it's generally lower than what you see at larger, more diversified regional banks. For example, a peer like Regions Financial Corp. (RF) reported a pre-tax profit margin of 40.5% in Q3 2025. This difference highlights the scale advantage and fee income streams of larger players. Still, UNB's Return on Equity (ROE) of 13.14% in Q3 2025 is robust and above the broader regional bank industry's Q3 2024 ROE of 11%.

Operational Efficiency and Cost Management

Operational efficiency is the swing variable here. For banks, we look at the efficiency ratio-noninterest expense as a percentage of total revenue. A lower number is better, typically aiming for below 60%. UNB's noninterest expenses rose 9.9% year-over-year to $10.34 million in Q3 2025, driven by increases in salaries, benefits, and occupancy costs.

This cost pressure means UNB's Q3 2025 efficiency ratio is approximately 72.77% ($10.34 million / $14.21 million). That's high, and it's where the bank needs to focus its cost management efforts to truly boost its net margin closer to peer averages. The bank's strategy is to improve its Net Interest Margin (NIM) by repricing assets and shifting its funding mix away from expensive wholesale funding, which should increase the revenue side of the efficiency ratio calculation.

The key to improving this ratio is growing the revenue faster than the noninterest expenses, especially by reducing reliance on expensive funding sources like Federal Home Loan Bank (FHLB) advances, which stood at $270.8 million in Q3 2025.

If you want to dive deeper into who is driving the stock price, check out Exploring Union Bankshares, Inc. (UNB) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You need to know how Union Bankshares, Inc. (UNB) funds its operations, and the short answer is that like most banks, it relies heavily on liabilities, but its debt-to-equity ratio is high even for the sector. As of the third quarter of 2025, the company's financial leverage, measured by the Debt-to-Equity (D/E) ratio, stood at approximately 3.70.

This ratio tells you that for every dollar of shareholder equity, Union Bankshares, Inc. has $3.70 in debt (or total liabilities, excluding deposits which are the bank's core funding). This is a critical number because the industry average for US Regional Banks is much lower, sitting around 0.5 as of November 2025. A D/E ratio this high suggests a more aggressive reliance on borrowed funds, which increases risk if the economy stumbles.

Here's the quick math on the key components as of September 30, 2025:

• Total Stockholders' Equity: $77.679 million
• Total Assets: $1.57 billion
• Key Borrowed Funds (Short-term/Long-term Debt): $270.8 million in Federal Home Loan Bank (FHLB) advances

What this estimate hides is the nature of bank liabilities. A bank's balance sheet is different from a manufacturer's; its core funding comes from customer deposits, which are technically liabilities but are a stable, operational funding source. Still, the reliance on non-deposit borrowings is clear.

Union Bankshares, Inc. manages its debt financing primarily through institutional borrowing, which is common for regional banks. The most significant component of their formal debt is the $270.8 million in Federal Home Loan Bank (FHLB) advances as of September 30, 2025. FHLB advances are essentially secured loans used to manage liquidity and fund lending. This is a key near-term risk: higher interest rates make these advances more expensive, squeezing the net interest margin (the difference between interest earned on loans and interest paid on funding).

The company's capital structure shows a clear preference for debt financing over equity funding to drive asset growth, specifically loan growth. In the third quarter of 2025, total loans increased by 5.1% to $1.18 billion. This loan growth is directly supported by the liabilities side of the balance sheet, including the FHLB advances. To be fair, the company has also strengthened its equity, with stockholders' equity improving to $77.679 million from $66.480 million in the prior year. This helps to buffer the high leverage.

For a deeper dive into the bank's overall performance, you should check out the full post: Breaking Down Union Bankshares, Inc. (UNB) Financial Health: Key Insights for Investors.

Your next step should be to monitor the cost of these FHLB advances and the trend in the D/E ratio in the upcoming Q4 2025 filing. If that ratio continues to rise, it's defintely a red flag on financial risk.

Liquidity and Solvency

You're looking at Union Bankshares, Inc. (UNB) to understand its immediate financial strength, and that means diving into liquidity-the ability to meet short-term obligations. For a bank, liquidity is less about the traditional Current Ratio and more about managing its core assets (loans) and liabilities (deposits). Honestly, a bank's balance sheet is a different animal.

As of September 30, 2025, Union Bankshares reported total assets of approximately $1.57 billion. The traditional Current Ratio (current assets divided by current liabilities) is often low for a bank because customer deposits are technically a current liability, while the bank's main asset-loans-are long-term. A third-party quarterly ratio is around 0.27, [cite: 7 from previous step] which is typical for a financial institution but would be a red flag for a manufacturing company. You need to look deeper than that single number.

Working Capital and Core Funding Analysis

The real measure of Union Bankshares' working capital management is how it funds its loan portfolio. The bank's core liquidity strength comes from its deposit base and access to wholesale funding. Loan growth is strong, but it must be funded efficiently.

• Loans increased 5.1% to $1.18 billion as of September 30, 2025, compared to the prior year.
• Total deposits grew to $1.19 billion, which is the primary source of funding.
• Borrowed funds, primarily Federal Home Loan Bank (FHLB) advances, increased to $270.8 million, indicating a reliance on non-deposit funding to support asset growth.

The good news is that asset quality remains strong, which reduces the risk of loan losses draining liquidity. The Allowance for Credit Losses on loans actually increased by 14.0%, reflecting proactive risk management and provisioning to support the loan growth, not necessarily a deterioration in the portfolio.

Cash Flow Statement Overview (YTD Q3 2025)

A look at the cash flow statement for the nine months ended September 30, 2025, shows the dynamic nature of a bank's operations. Since lending is their business, cash flows from investing are often negative, reflecting the cash outflow of making new loans. The key is that operating cash flow is positive and can fund these activities.

Here is a breakdown of the cash flow trends, anchored by the net income of $8.3 million for the nine months ended September 30, 2025:

The decline of 28.6% in federal funds sold and overnight deposits is a strategic move, reflecting management's decision to deploy excess cash into higher-yielding assets like loans and investment securities. This is defintely a trade-off between immediate cash on hand and greater profitability.

Near-Term Liquidity Strengths and Risks

The main strength is the core deposit base of $1.19 billion, which provides stable, low-cost funding. Still, the increase in FHLB borrowings is a near-term risk. It's more expensive, wholesale funding, and you want to see that reliance decrease over time, which management is aiming for through a company-wide deposit growth initiative. The bank's capital position is also strengthening, with book value per share rising 6.1% to $16.95 as of September 30, 2025, providing a solid buffer against unexpected losses. This capital strength supports their long-term solvency. You can review the strategic direction in the Mission Statement, Vision, & Core Values of Union Bankshares, Inc. (UNB).

Next Step: Portfolio Managers should model the impact of a 50-basis-point increase in FHLB rates on the $270.8 million in borrowings by the end of the quarter.

Valuation Analysis

Is Union Bankshares, Inc. (UNB) overvalued or undervalued? The short answer is that the market consensus is a Hold, but a deeper look at the financials suggests the stock is currently undervalued. Based on a discounted cash flow (DCF) model, some analyses peg the fair value significantly higher, around $29.66, which makes the current price of $23.20 (as of November 21, 2025) appear to be a discount of roughly 27.5%.

You're looking for a clear signal, and honestly, the mixed picture is typical for a regional bank in this environment. The market is nervous, but the underlying valuation metrics tell a different story. The analyst community, which is generally conservative, maintains a consensus Hold rating, meaning they aren't advising a strong buy or sell right now.

Key Valuation Multiples

When assessing a bank like Union Bankshares, Inc., we lean heavily on the Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios. Here's the quick math on where the stock sits relative to its earnings and its tangible assets as of late 2025:

A P/E ratio in the 8.7x to 10.64x range is defintely on the lower end, signaling that investors are paying less for each dollar of Union Bankshares, Inc.'s earnings compared to the broader sector.

Stock Price Volatility and Trend

The stock has seen significant volatility over the last year, which maps directly to market anxiety around regional bank stability and interest rate policy. The 52-week trading range shows a high of $37.70 and a low of $20.65. This is a huge swing.

For the calendar year 2025 through November, the stock price has decreased by approximately 20.94%, following a modest drop of 1.57% in 2024 and a strong gain of 29.99% in 2023. The recent trend is bearish, with the stock trading below its 200-day moving average of $27.22 as of mid-November 2025. This downward pressure is a near-term risk you need to factor into your entry point.

Dividend Strength and Payout

One clear opportunity here is the dividend. Union Bankshares, Inc. is a strong income play, offering a compelling yield that is well-covered by earnings. The annual dividend is currently set at $1.44 per share, paid quarterly.

• Current Dividend Yield: Approximately 6.6%, which is substantially higher than the US market average.
• Payout Ratio: The ratio is a healthy and sustainable 57.60% of earnings, meaning the bank is retaining nearly half its profits for growth or balance sheet stability.

A high, well-covered dividend like this acts as a floor for the stock price and is a strong signal of management's confidence in future cash flow. You can review the bank's long-term strategy in its Mission Statement, Vision, & Core Values of Union Bankshares, Inc. (UNB).

The key action here is to perform your own sensitivity analysis on the DCF, but the current valuation metrics suggest the market is overly discounting Union Bankshares, Inc.'s earnings power and book value. Finance: Check the Q4 2025 earnings guidance for any changes to the dividend policy by the end of the year.

Risk Factors

You're looking for the clear risks in Union Bankshares, Inc. (UNB)'s financial picture, and the core issue is the cost of money-specifically, elevated funding costs and balance sheet exposure to rising rates. While the bank is showing strong loan growth, the cost to fund that growth is squeezing profitability, and its regional focus creates a concentration risk you need to watch.

Operational and Financial Headwinds

The most immediate financial risk is the pressure on the net interest margin (NIM) from rising interest expenses. In the first quarter of 2025, interest expense increased to a substantial $8.0 million, a 21.3% jump year-over-year, driven by higher rates paid on deposits and wholesale funding. This is a direct hit to profitability, even as interest income rises.

Another key challenge is operational efficiency. Noninterest expenses grew by 7.2% in the second quarter of 2025 and 9.9% in the third quarter, which includes substantial rises in salaries and employee benefits. A bank's efficiency ratio (noninterest expense to revenue) is defintely under pressure when operating costs rise faster than revenue, signaling a need for tighter expense management.

• Funding costs are high, squeezing the margin.
• Unrealized losses on bonds are a capital risk.

The balance sheet also carries a risk from its investment portfolio, specifically the Accumulated Other Comprehensive Loss (AOCI). As of September 30, 2025, this unrealized loss related to investment securities was $27.5 million, a non-cash hit to equity capital that reflects the lower fair value of its bond holdings in a higher-rate environment.

Here's a quick look at the funding mix, which shows a reliance on more expensive sources:

External and Strategic Exposure

Union Bankshares, Inc. operates primarily in Vermont and New Hampshire, which creates a geographic concentration risk. While asset quality remains strong (with net recoveries reported in Q1 2025), any significant downturn in the regional economy-especially in commercial or residential real estate, where the loan portfolio is heavily concentrated-would directly impact asset quality and loan performance.

The company also faces the structural challenge of being a smaller regional bank competing with larger institutions and the growing presence of financial technology (FinTech) companies. This competition can erode margins and make customer acquisition more expensive. You should also note the management change in November 2025, where the company dismissed its previous accounting firm and appointed a new one, which is a key event for investor confidence and regulatory scrutiny.

Mitigation and Actionable Steps

Management is taking clear steps to mitigate these risks. To address the high loan-to-deposit ratio of around 98.6% and reduce reliance on expensive wholesale funding, the bank has launched a company-wide deposit growth initiative in 2025. This is a direct action to improve the funding mix and lower the overall cost of funds.

On the credit side, the bank is being proactive. The Allowance for Credit Losses (ACL) on loans was increased by 14.0% in the third quarter of 2025, reflecting a disciplined approach to risk management in line with loan portfolio growth. This increase in reserves is a positive signal of strong risk management practices, even amid general economic uncertainties. For a deeper dive into the market's perception of these moves, you can check out Exploring Union Bankshares, Inc. (UNB) Investor Profile: Who's Buying and Why?

Growth Opportunities

You're looking past the current quarter, and that's smart. The direct takeaway is that Union Bankshares, Inc. (UNB) is focused on core banking fundamentals-disciplined loan growth and a strategic shift in funding-which is translating to meaningful earnings expansion in 2025.

The company's consolidated net income for the first nine months of 2025 hit $8.3 million, a significant jump from the prior year, largely driven by an increase in net interest income (NII). This isn't just a one-time event; it's the result of a clear strategy to maximize asset yields in the current rate environment.

Key Growth Drivers and Strategic Focus

The primary engine for Union Bankshares, Inc.'s near-term growth is its loan portfolio. As of September 30, 2025, total loans reached $1.18 billion, reflecting a strong 5.1% year-over-year growth. This expansion is being fueled by a company-wide deposit growth initiative, which is crucial because it reduces reliance on more expensive wholesale funding (like brokered deposits).

Here's the quick math on their asset strategy:

• Loan Origination: New loans are being originated at current, higher market rates.
• Yield Improvement: This is expected to continue improving the yield on earning assets, supporting margin resilience.
• Funding Shift: Brokered deposits fell sharply in Q1 2025, a clear sign the deposit initiative is working to secure lower-cost core funding.

Plus, they are seeing growth in noninterest income, specifically from their wealth management services and net gains on sales of loans held for sale, which hit $3.4 million in Q3 2025 alone. That's a defintely a diversified revenue stream.

Future Revenue Trajectory and Earnings Estimates

While Union Bankshares, Inc. does not provide formal quantitative guidance, we can map the trajectory based on the 2025 performance. For the third quarter of 2025, the company reported a basic earnings per share (EPS) of $0.75. The main driver of this profitability is the net interest income (NII), which rose to $11.2 million in Q3 2025, up from $9.4 million in the same period last year. This 19.1% NII increase is a powerful indicator of future revenue health.

The focus remains on disciplined asset growth, meaning they prioritize quality over sheer volume, which is a prudent approach in an uncertain economic climate. The strategic initiatives that will drive future earnings are:

• Local Lending: Leveraging their community banking expertise across northern Vermont and New Hampshire for commercial, retail, and municipal services.
• Digital Investment: Acknowledging the need to continuously innovate and strategically invest in technology to enhance their digital offerings and compete with larger institutions.
• Risk Management: A proactive increase in the allowance for credit losses by 14.0% year-over-year to support loan growth, demonstrating strong risk management.

Competitive Advantages and Actionable Insights

Union Bankshares, Inc.'s competitive edge is rooted in its model as a resilient regional bank. They offer local access and personalized service, which is a significant advantage over national banks for small and middle-market businesses in their operating areas.

Their balance sheet strength is also a key advantage. The book value per share rose 6.1% to $16.95 as of September 30, 2025. This strengthened equity, combined with a consistent quarterly cash dividend of $0.36 per share, positions the company as a stable, income-generating option for value-oriented investors.

What this estimate hides, however, is the risk of rising noninterest expenses, which increased to $10.3 million in Q3 2025, primarily due to higher salaries and employee benefits. Management must keep a tight lid on operational costs to protect the NII gains.

For a deeper dive into who is betting on this strategy, you should be Exploring Union Bankshares, Inc. (UNB) Investor Profile: Who's Buying and Why?

Next Step: Portfolio Manager: Model a 12-month earnings forecast that uses a conservative 4.0% loan growth rate and factors in the Q3 2025 run-rate for noninterest expense by next Tuesday.