Union Bankshares: The Unknown Bank Continues To Deliver

| About: Union Bankshares, (UNB)


It has been a while since I last checked in with the still unknown Union Bankshares.

Despite a dangerous market UNB is holding up well.

With Q4 earnings out is the bank still a buy here?

It has been a while since I last checked in with the still unknown Union Bankshares, Inc. (NASDAQ:UNB). I like this name because it is a slow growing, under-appreciated regional bank that yields 4%. I am also pleased that the stock itself has slowly risen since my coverage began two years ago. Combined with the dividend, those few who actually have read about this name and took my buying advice have had solid returns. Not dramatic returns, but solid respectable returns. Are you out there? This stock is so under-followed but should not be. Let me know in the comments below how you've done in the name. Today, I am revisiting the name to see if I should keep that buy rating on the name.

I understand that everyone wants to be in the big names, but you should realize it's the smaller regionals that can really move. Recognizing growth potential is perhaps the best way to gauge when one of these smaller regional banks has a chance to move significantly higher. I think investors need to give these banks a chance. Small regional banks should be able to increase loan profits once rates rise, and they are on the way given that the Fed finally raised rates for the first time in a decade. I like to see top and bottom line growth, but also a growing deposit in loan record. So how is the bank doing? Well it just announced that for the year 2015 net income was $7.9 million, or $1.77 per share. This is again slow and steady improvement from compared to net income of $7.7 million, or $1.73 per share, for 2014, which is an increase of 2.4%.

What went into this? Well there were year-over-year increases in interest income of $292 thousand, or 1.2% as well as a nice jump in noninterest income of $883 thousand, or 9.9%. Further the company saw a decline in interest expense of $130 thousand, or 6.0%. It was not all good news though. There were increases in the provision for loan losses of $205 thousand, or 59.4%, noninterest expenses of $710 thousand, or 3.3%, and the provision for income taxes of $206 thousand, or 10.4%. I want to point out that noninterest expenses jumped because of a $601 thousand, or 6.7%, increase in employee wages and another $252 thousand, or 9.2% in pension and employee benefits. The company did manage to reduce so-called 'other expenses' of $424 thousand, or 6.0%, offsetting the rise.

But here is where the company really shows its slow and steady growth; loans and deposits. Total assets grew to $628.5 million compared to 2014's $624.1 million, steady growth of $4.5 million. Total loans outpaced total asset growth as a result of utilization of excess liquidity to fund the strong loan demand. Total loans increased 3.2% to $506.7 million to end 2015, up from $491.1 million at the end of 2014. Total deposits grew to $560.4 million compared to the prior year of $552.1 million, or growth of $8.3 million, or 1.5%. Finally the company also grew total capital and book value. The bank had total capital of $54.3 million with a book value per share of $12.18 to end 2015, compared to $51.4 million and $11.54 per share to end 2014.

At the end of the day the bank continues to do just what I said it would do in 2013. It will continue its slow expansion and be a stable name. It has been paying a nice dividend, which is at $0.27 quarterly, or 4% annually based on the current share price of $26.91. I see no reason to lift my buy rating in light of the Fed finally raising rates. The markets have been getting slammed this year and Union Bankshares is largely immune to the chaos, in part because it is so undercovered. For those few of you actually reading this piece, let me know, do you find it valuable? Have you done well in the name? If you are on the sidelines are you considering a buy?

Note from the author: Christopher F. Davis has been a leading contributor with Seeking Alpha since early 2012. If you like his material and want to see more, scroll to the top of the article and hit "follow." He also writes a lot of "breaking" articles that are time sensitive. If you would like to be among the first to be updated, be sure to check the box for "Real-time alerts on this author" under "Follow."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.