Union Bankshares Inc. (UNB)

Here is some information about a nice little banking operation in northern New England. After watching UNB for a while I have reluctantly decided that it is too small and thinly traded to suit my taste. It has market cap of only 95M and it doesn’t have a following on Wall Street. There is a strong dividend history. The cash dividend has been steadily increased from $.65 in 2000 to $1.12 at present and there was a 3-for-2 stock split in 2003. The stock currently yields 5.33%.

Union Bank provides retail and commercial banking services from 13 branches in the Vermont counties of Franklin, Lamoille and Caledonia, and the Grafton County region in New Hampshire. These counties are contiguous. The bank’s service area includes a substantial portion of Northern Vermont and Northwestern New Hampshire. I suspect UNB has a near-monopoly banking presence in the communities they serve, but before investing, I would want to visit the area and confirm that for myself. The economy in this area is slow, steady and rural, but it is one of the nicest places to live in the U.S. It is clean and quiet with a low crime rate. The winter weather is harsh and that helps to keep the population down. Union Bank has been serving the financial needs of these communities since 1891.

Although it is much less volatile than the S&P 500, with a beta of only 0.07, CNB has outperformed the S&P. And although UNB’s share price has been weak recently, as earnings have been in a bit of a slump relative to the previous growth pace, it should be noted that UNB rose steadily from 2001 to 2003. This is a stock that can go up while the S&P is going down.

The shares recorded an all-time high price of 30 in October 2003 and they have gently declined from there to the current price near 21, which is not far from the 52-week low at 19.988. Company insiders have been buying stock in the current price range.


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