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Three Undervalued and Overlooked Banks

Neither company applied to participate in TARP.

United Financial

United Financial has a pending agreement to acquire CNB Financial (CFNA) of Worcester, Mass., for $25 million in cash and stock, which CNB's shareholders approved Thursday. CNB Financial had $287 million in total assets as of June 30.

CFO Mark Roberts told that the CNB acquisition, expected to be completed this quarter, was attractively priced and would allow it to enter the contiguous Worcester market. (Worcester is 45 miles west of Boston.) He also said United Financial's senior management was familiar with CNB's market and had conducted a rigorous review of CNB's loan portfolio with the help of an outside group.

United Financial is strongly capitalized, with a 17.35% ratio of equity to assets as of Sept. 30. Other regulatory capital ratios weren't available for the third quarter.

Asset quality has remained strong through the crisis, with nonperforming assets comprising 0.92% of total assets as of Sept. 30, which compares with the industry's average of 2.77% at the end of the second quarter. The annualized ratio of net charge-offs to average loans was a very low 0.12% for the third quarter, and has remained below 0.25% over the past year. In comparison, the industry aggregate for the second quarter was 2.55%, according to the FDIC.

Roberts said the Springfield area hadn't seen the pattern of speculative growth that fed the real estate crisis in southern states. (Springfield is 90 miles west of Boston and 45 miles west of Worcester.) He also stressed the experience of United Financial's commercial lenders in previous down markets and long-term customer relationships.

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