Union Bankshares' Q3 2025 Dividend: A Deep Dive into Financial Strength and Long-Term Sustainability

Union Bankshares (UNB) has long been a staple for income-focused investors, but its Q3 2025 financial results and dividend declaration of $0.36 per share demand a closer look at both its current performance and long-term sustainability. With net income surging to $3.4 million in the third quarter-up from $1.3 million in Q3 2024-the bank's ability to maintain its dividend appears robust in the short term. However, deeper scrutiny of its balance sheet, expense trends, and historical payout patterns reveals a more nuanced picture.

Financial Performance and Dividend Payout Ratio

The bank's Q3 2025 net income growth was driven by a 5.1% increase in loans to $1.18 billion and disciplined interest income management, according to the Q3 2025 results. Despite this, the 74% payout ratio for the $0.36 dividend raises questions about long-term sustainability. While this ratio is higher than the Financial Services sector average of 42.7%, according to payout ratio data, it remains within historical bounds for Union Bankshares. For context, the trailing twelve-month (TTM) payout ratio based on earnings was 50.17%, and based on cash flow, 41.64%, per TTM payout ratios. The discrepancy reflects varying methodologies but underscores that the dividend is currently well-supported by earnings.

However, the bank's reliance on borrowed funds-up to $270.8 million from the Federal Home Loan Bank-signals a potential vulnerability. While this financing has fueled asset growth (total assets now $1.57 billion), it also exposes the bank to interest rate risk, as noted in the QuiverQuant release. Additionally, noninterest expenses rose 9.9% year-over-year, which could erode future profitability if not offset by revenue growth, QuiverQuant's release shows.

Historical Dividend Trends and Risks

Union Bankshares has a commendable track record of dividend growth, having increased its payout for nine consecutive years, according to its 23-year dividend history. Over the past five years, its annualized dividend growth rate averaged 2.38%, though this dropped to 0% in the last fiscal year, according to StockInvest. The current annualized dividend of $1.44 per share yields 5.76%, a compelling figure for income investors, per FullRatio. Yet, the bank's earnings per share (EPS) have declined by 3.2% annually over the past five years, StockInvest data indicate, and its high concentration in real estate loans (a significant portion of its $1.18 billion loan portfolio) introduces sector-specific risks, particularly in a tightening credit environment, as noted in a MarketMinute article.

Analysts have also noted a low Dividend Sustainability Score (DSS) and limited Dividend Growth Potential Score (DGPS) for the bank, per StockInvest's metrics. These metrics highlight concerns about maintaining current payout levels amid potential earnings volatility. While the 74% payout ratio for Q3 2025 is sustainable given the strong earnings report, it leaves little room for error if future quarters underperform.

Conclusion: A Cautionary Optimism

Union Bankshares' Q3 2025 dividend appears secure in the near term, supported by a 74% payout ratio and a 5.76% yield that outperforms many peers, per the Q3 2025 results and FullRatio data. Its historical commitment to shareholder returns-nine consecutive years of dividend increases-further bolsters confidence. However, the bank's reliance on borrowed funds, rising expenses, and sector-specific risks necessitate a cautious outlook. Investors should monitor its ability to manage noninterest costs, diversify its loan portfolio, and navigate interest rate fluctuations. For now, the dividend is sustainable, but long-term growth may hinge on addressing these structural challenges.