Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 2-90679
UNION BANKSHARES COMPANY
------------------------
(Exact name of registrant as specified in its charter)
MAINE 01-0395131
----- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation of organization) Identification No.)
66 Main Street, Ellsworth, Maine
--------------------------------
(Address of Principal Executive Offices)
(Zip Code)
04605
-----
Registrant's telephone number, including area code
(207) 667-2504
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 9, 2002
----- -----------------------------
(Common stock, $12.50 Par Value) 575,882
1
UNION BANKSHARES COMPANY
INDEX TO FORM 10-Q
PART I Financial Information Page No.
- ------ --------------------- --------
Item l: Financial Statements (Unaudited)
Independent Accountants' Report 3
Consolidated Balance Sheets - 4
June 30, 2002, June 30, 2001, December 31, 2001
Consolidated Statements of Income - 5-6
six months ended June 30, 2002 and June 30, 2001
three months ended June 30, 2002 and June 30, 2001
Consolidated Statements of Cash Flows - 7
six months ended June 30, 2002 and June 30, 2001
Consolidated Statements of Changes in Shareholders' 8
Equity six months ended June 30, 2002 and 2001
Notes to Consolidated Financial Statements 9-11
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-20
Item 3: Quantitative and Qualitative Disclosures About
Market Risk 20
PART II Other Information
Item 1: Legal Proceedings 20
Item 2: Changes in Securities 20
Item 3: Defaults Upon Senior Securities 20
Item 4: Submission of Matters to a Vote of Security Holders 20
Item 5: Other Information 20
Item 6: Exhibits and Reports on Form 8-K 20
2
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Shareholders
Union Bankshares Company
We have reviewed the accompanying interim consolidated financial
information of Union Bankshares Company and Subsidiary as of June 30, 2002
and 2001, and for the three- and six-month periods then ended. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit in accordance with U. S. generally accepted auditing
standards, the objective of which is to express an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with U. S. generally accepted accounting principles.
Berry Dunn McNeil & Parker
Portland, Maine
July 19, 2002
3
UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30 June 30 December 31
2002 2001 2001
(Unaudited) (Unaudited) (Audited)*
----------- ----------- -----------
ASSETS
Cash and due from banks $ 10,666,633 $ 11,085,947 $ 12,940,420
Federal funds sold 146,778 62,267 8,925,312
------------ ------------ ------------
Cash and cash equivalents 10,813,411 11,148,214 21,865,732
Available for sale securities 104,965,521 85,190,037 97,177,461
Held to maturity securities, at cost 3,622,674 3,845,075 3,526,626
Other investment securities, at cost 5,039,950 5,039,950 5,039,950
Loans (net of deferred fees) 222,867,023 213,989,385 211,567,990
Less: Allowance for loan losses 3,607,114 3,457,812 3,453,245
------------ ------------ ------------
Net Loans $219,259,909 $210,531,573 $208,114,745
------------ ------------ ------------
Premises, furniture & equip, net 6,210,732 6,710,750 6,372,705
CSV life insurance 7,608,361 6,722,353 7,442,278
Core deposit intangible 237,606 284,348 260,977
Goodwill 6,305,130 6,531,332 6,305,130
Other assets 6,061,683 5,876,549 5,897,452
------------ ------------ ------------
Total Assets $370,124,977 $341,880,181 $362,003,056
============ ============ ============
LIABILITIES
Deposits:
Demand $ 30,291,032 $ 28,329,572 $ 35,218,551
Savings and money market 127,241,127 109,851,533 128,075,134
Time 96,920,162 106,624,757 104,613,441
------------ ------------ ------------
Total Deposits 254,452,321 244,805,862 267,907,126
------------ ------------ ------------
Borrowed funds 61,698,642 51,680,250 41,957,641
Sweep repurchase 10,905,255 6,913,518 12,135,398
Accrued expenses & other liabilities 6,737,928 5,511,973 5,866,536
------------ ------------ ------------
Total Liabilities $333,794,146 $308,911,603 $327,866,701
Commitments (Note E)
SHAREHOLDERS' EQUITY
Common Stock, $12.50 par value.
Authorized 1,200,000 shares, issued
582,394 shares in 2002 and 2001 $ 7,279,925 $ 7,279,925 $ 7,279,925
Surplus 3,963,116 3,963,116 3,963,116
Retained Earnings 24,214,675 21,436,912 22,695,422
Accumulated Other Comprehensive Income
Net Unrealized Gain on Securities
Available for Sale 1,306,146 621,022 530,290
Less: Treasury Stock (6,338 shares as
of June 30, 2002, 4,899 shares as of
June 30, 2001 and 4,899 shares as of
December 31, 2001) 433,031 332,397 332,398
------------ ------------ ------------
Total Shareholders' Equity $ 36,330,831 $ 32,968,578 $ 34,136,355
------------ ------------ ------------
Total Liabilities & Shareholders' Equity $370,124,977 $341,880,181 $362,003,056
============ ============ ============
* Condensed from audited financial statements
See Independent Accountants' review report. The accompanying notes are an
integral part of these consolidated financial statements.
4
UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended - June 30,
---------------------------
2002 2001
---- ----
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans $ 7,981,970 $ 8,584,842
Interest and Fees on Municipal Loans and Bonds 514,684 559,980
Interest and Dividends on Securities 2,464,201 2,775,835
Interest on Federal Funds Sold 29,023 84,212
Amortization & Accretion - Net (306,325) 96,665
----------- -----------
Total Interest and Dividend Income 10,683,553 12,101,534
INTEREST EXPENSE
Interest on Deposits 2,383,166 4,181,811
Interest on Funds Purchased/Borrowed 1,223,839 1,670,498
----------- -----------
Total Interest Expense 3,607,005 5,852,309
NET INTEREST INCOME 7,076,548 6,249,225
Provision for Loan Losses 180,000 150,000
----------- -----------
NET INTEREST INCOME AFTER LOAN LOSS PROVISION 6,896,548 6,099,225
NONINTEREST INCOME
Exchange, Commission & Fees 648,617 651,204
Trust Department 748,817 633,209
Safe Deposit Box Rental Fees 48,581 41,739
Other Income 1,220,694 891,278
----------- -----------
Total Noninterest Income 2,666,709 2,217,430
----------- -----------
NONINTEREST EXPENSE
Salaries and Employee Benefits 3,497,095 3,184,443
Building Maintenance & Operations 444,764 439,073
FDIC Insurance 34,554 35,164
Net Securities Losses 6,444 0
Other Expenses 2,475,646 2,783,556
----------- -----------
Total Noninterest Expense 6,458,503 6,442,236
----------- -----------
INCOME BEFORE TAXES 3,104,754 1,874,419
Income Taxes 950,000 542,000
----------- -----------
NET INCOME $ 2,154,754 $ 1,332,419
=========== ===========
Weighted Average Shares 576,911 577,528
Per Share Data:
Net Income $ 3.74 $ 2.31
Dividends Declared $ 1.10 $ 1.00
See Independent Accountants' review report. The accompanying notes are an
integral part of these consolidated financial statements.
5
UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended - June 30,
-----------------------------
2002 2001
---- ----
INTEREST AND DIVIDEND INCOME
Interest and Fees on Loans $ 3,982,991 $ 4,256,216
Interest and Fees on Municipal Loans and Bonds 263,854 301,020
Interest and Dividends on Securities 1,236,623 1,294,268
Interest on Federal Funds Sold 6,344 52,724
Amortization & Accretion - Net (140,584) 10,305
----------- -----------
Total Interest and Dividend Income 5,349,228 5,914,533
INTEREST EXPENSE
Interest on Deposits 1,154,434 2,036,576
Interest on Funds Purchased/Borrowed 636,558 758,832
----------- -----------
Total Interest Expense 1,790,992 2,795,408
NET INTEREST INCOME 3,558,236 3,119,125
Provision for Loan Losses 90,000 75,000
----------- -----------
NET INTEREST INCOME AFTER LOAN LOSS PROVISION 3,468,236 3,044,125
NONINTEREST INCOME
Exchange, Commission & Fees 354,652 342,018
Trust Department 400,465 308,924
Safe Deposit Box Rental Fees 26,383 19,670
Other Income 630,911 473,074
----------- -----------
Total Noninterest Income 1,412,411 1,143,686
----------- -----------
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,875,810 1,731,301
Building Maintenance & Operations 217,233 210,081
FDIC Insurance 10,777 11,246
Net Securities Losses 6,444 0
Other Expenses 1,267,935 1,420,554
----------- -----------
Total Noninterest Expense 3,378,199 3,373,182
----------- -----------
INCOME BEFORE TAXES 1,502,448 814,629
Income Taxes 460,000 242,000
----------- -----------
NET INCOME $ 1,042,448 $ 572,629
=========== ===========
Weighted Average Shares 575,938 578,413
Per Share Data:
Net Income $ 1.81 $ .99
Dividends Declared $ .55 $ .50
See Independent Accountants' review report. The accompanying notes are an
integral part of these consolidated financial statements.
6
UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
---- ----
Net Cash Flows Provided by Operating Activities:
Net Income $ 2,154,754 $ 1,332,419
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 411,877 671,654
Provision for loan losses 180,000 150,000
Gain on sale of equipment (953) (684)
Net securities losses (6,444) 0
Net change in other assets (723,553) 20,903
Net change in other liabilities 871,393 (474,735)
Net amortization of premium (accretion of
discount) on investments 306,325 (96,665)
Net change in deferred loan origination fees (33,795) 6,235
Origination of loans held for sale (17,402,713) (8,936,942)
Proceeds from loans held for sale 18,944,736 8,343,744
------------ ------------
Total adjustments 2,546,873 (316,490)
------------ ------------
Net cash provided by operating activities 4,701,627 1,015,929
Cash Flows From Investing Activities:
Purchase of securities available for sale (24,448,059) (4,447,277)
Purchase of securities held to maturity (102,004) 0
Proceeds from sales of securities available for sale 4,084,234 0
Proceeds from sales of equipment 1,000 8,000
Proceeds from maturities of securities available
for sale 11,908,912 23,099,571
Net change in loans to customers (11,291,369) (9,133,114)
Increase in other assets 0 (24,144)
Capital expenditures (226,581) (769,521)
------------ ------------
Net cash provided by (used in) investing activities (20,073,867) 8,733,515
Cash Flows From Financing Activities:
Net decrease in other borrowed funds (1,230,143) (11,608,794)
Net increase in advances from FHLB 19,741,001 4,000,000
Net increase/(decrease) in demand, savings and money
market accounts (5,761,526) 66,210
Net decrease in time deposits (7,693,279) (841,065)
Purchase of treasury stock (183,942) (40,906)
Proceeds from sale of treasury stock 83,309 47,500
Dividends paid (635,501) (577,653)
------------ ------------
Net cash provided by (used in) financing activities 4,319,919 (8,954,708)
------------ ------------
Net increase (decrease) in cash and cash equivalents (11,052,321) 794,736
Cash and cash equivalents at beginning of year 21,865,732 10,353,478
------------ ------------
Cash and cash equivalents at end of period $ 10,813,411 $ 11,148,214
============ ============
Supplemental Schedule of Non-Cash Investing and Financing Activities
2002 2001
---- ----
Net change as a result of adopting Statement
of Financial Accounting Standards No. 115
Available for sale securities $ 1,175,540 $ 1,647,794
Deferred income tax liability (399,684) (560,250)
------------ ------------
Net unrealized gain on available for sale securities $ 775,856 $ 1,087,544
In 2002, the Company converted construction in process costs totaling
$42,172 to premises of the same amount.
In 2001, the Company converted construction in process costs totaling
$421,340 to premises of the same amount. In addition, the Company disposed
of assets with a cost of $77,662 and accumulated depreciation of $77,662.
See Independent Accountants' review report. The accompanying notes are an
integral part of these consolidated financial statements.
7
UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended June 30, 2002 and 2001
(Unaudited)
ACCUMULATED
OTHER
COMPREHENSIVE SHARE-
COMMON TREASURY RETAINED INCOME HOLDERS'
STOCK SURPLUS STOCK EARNINGS (LOSS) EQUITY
------ ------- -------- -------- ------------- ---------
Balance at December 31, 2000 $7,279,925 $3,963,472 $(339,347) $20,682,146 $ (466,522) $31,119,674
Net income, six months ended June 30, 2001 0 0 0 1,332,419 0 1,332,419
Change in net unrealized gain (loss) on
available for sale securities, net of
tax of $(560,250) 0 0 0 0 1,087,544 1,087,544
---------- ---------- --------- ----------- ---------- ------------
Total comprehensive income 0 0 0 1,332,419 1,087,544 2,419,963
Sale of 563 shares Treasury stock 0 (356) 47,856 0 0 47,500
Repurchase of 562 shares Treasury stock 0 0 (40,906) 0 0 (40,906)
Cash dividends declared 0 0 0 (577,653) 0 (577,653)
---------- ---------- --------- ----------- ---------- ------------
Balance at June 30, 2001 $7,279,925 $3,963,116 $(332,397) $21,436,912 $ 621,022 $32,968,578
---------- ---------- --------- ----------- ---------- ------------
Balance at December 31, 2001 $7,279,925 $3,963,116 $(332,398) $22,695,422 $ 530,290 $34,136,355
Net income, six months ended June 30, 2002 0 0 0 2,154,754 0 2,154,754
Change in net unrealized gain on available
for sale securities, net of tax of $399,684 0 0 0 0 775,856 775,856
---------- ---------- --------- ----------- ---------- ------------
Total comprehensive income 0 0 0 2,154,754 775,856 2,930,610
Sale of 1,722 shares Treasury stock 0 0 83,309 0 0 83,309
Repurchase of 2,317 shares Treasury stock 0 0 (183,942) 0 0 (183,942)
Cash dividends declared 0 0 0 (635,501) 0 (635,501)
---------- ---------- --------- ----------- ---------- ------------
Balance at June 30, 2002 $7,279,925 $3,963,116 $(433,031) $24,214,675 $1,306,146 $36,330,831
========== ========== ========= =========== ========== ===========
See Independent Accountants' review report. The accompanying notes are an
integral part of these consolidated financial statements.
8
Notes to Consolidated Financial Statements
------------------------------------------
Unaudited
---------
(A) Basis of Presentation
---------------------
The accompanying consolidated financial statements of Union Bankshares
Company (the "Company") and its subsidiary, Union Trust Company (the
"Bank"), as of June 30, 2002 and 2001 and for the three- and six month
periods then ended are unaudited. However, in the opinion of the Company,
all adjustments consisting of normal, recurring accruals necessary for a
fair presentation have been reflected therein. Interim results are not
necessarily indicative of results to be expected for the entire year.
Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting
principles, but which is not required for interim reporting purposes, has
been omitted. The accompanying consolidated financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the fiscal year
ended December 31, 2001.
(B) Earnings Per Share
------------------
Earnings per common share are computed by dividing the net income available
for common stock by the weighted average number of common shares
outstanding during this period.
(C) Intangible Assets
-----------------
The Company has goodwill with a carrying amount of $6,305,130 and
$6,531,332 as of June 30, 2002 and 2001, respectively and $6,305,130 as of
December 31, 2001. Upon adoption of Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets", on
January 1, 2002, amortization of goodwill was discontinued and the goodwill
is evaluated for impairment at least annually. Prior to the adoption of
SFAS No. 142, goodwill was amortized on a straight-line basis over 15
years.
Following is the effect on net income and earnings per share had
amortization of goodwill not been recorded in each period presented.
For the six months ended For the three months ended
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
------------- ------------- ------------- -------------
Reported net income $2,154,754 $1,332,419 $1,042,448 $572,629
Add: Goodwill amortization 0 225,464 0 113,101
---------- ---------- ---------- --------
Adjusted net income $2,154,754 $1,557,883 $1,042,448 $685,730
Earnings per share:
Reported $ 3.74 $ 2.31 $ 1.81 $ 0.99
Add: Goodwill amortization .00 .39 .00 .20
---------- ---------- ---------- --------
Adjusted $ 3.74 $ 2.70 $ 1.81 $ 1.19
The Company has an intangible asset subject to amortization related to the
acquisition of a bank in 2000. The core deposit intangible is being
amortized on a straight-line basis over 7 years, and reviewed for possible
impairment when it is determined that events or changed circumstances may
affect the underlying basis of the asset. The carrying amount is as
follows:
9
June 30, 2002 June 30, 2001 December 31, 2001
------------- ------------- -----------------
Core deposit intangible, cost $323,000 $323,000 $323,000
Accumulated amortization 85,394 38,652 62,023
-------- -------- --------
Core deposit intangible, net $237,606 $284,348 $260,977
Amortization expense related to the core deposit intangible for the six
months ended June 30, 2002 and 2001 amounted to $23,371 and $23,271,
respectively. Amortization expense for the three month period ended June
30, 2002 and 2001 amounted to $11,686 and $124,786, respectively. The
expected amortization expense for each year in the five-year period ending
December 31, 2006 is estimated to be $46,744.
(D) Comprehensive Income
--------------------
Total comprehensive income was $2,120,656 and $474,527 for the three months
ended June 30, 2002 and 2001, respectively, and $2,930,610 and $2,419,963
for the six months ended June 30, 2002 and 2001, respectively.
(E) Off-Balance Sheet Items
-----------------------
In the normal course of business, the Bank is a party to financial
instruments with off-balance sheet risk to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and letters of credit. The instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the balance
sheet. The contract amounts of these instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.
At June 30, 2002, and June 30, 2001, the following financial instruments,
whose contract amounts represent credit risk, were outstanding.
June 30
(000's omitted)
2002 2001
---- ----
1. Unused Commitments:
-------------------
A. Revolving, open-end lines secured by
1-4 family residential properties,
e.g., Home Equity lines $ 9,270 $ 6,917
B. Credit card lines 6,251 6,372
C. Secured real estate loans 17,442 12,333
D. Other 20,700 17,170
2. Financial Standby Letters of Credit: 217 86
------------------------------------
(F) Regulatory Agencies
-------------------
The Bank's primary regulators are the Federal Reserve Bank of Boston and,
as a state chartered bank, the Bureau of Financial Institutions of the
State of Maine.
(G) Classified Loans
----------------
Any loans classified for regulatory purposes as loss, doubtful, substandard
or special mention that were not disclosed under Item III of Securities and
Exchange Commission Industry Guide 3 do not (1) represent or result from
trends or uncertainties which management reasonably expects will materially
impact future operating results, liquidity or capital resources or (2)
represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
10
(H) Impact of Inflation and Changing Prices
---------------------------------------
The Consolidated Financial Statements have been prepared in accordance with
generally accepted accounting principles which require the measurement of
financial position and operating results in terms of historical dollars
without considering changes in the relative purchasing power of money over
time due to inflation.
Unlike many industrial companies, substantially all of the assets and
liabilities of the Company are financial in nature. As a result, interest
rates have a more significant impact on the Company's performance than the
general level of inflation. Over short periods of time, interest rates may
not necessarily move in the same direction or in the same magnitude as
inflation.
(I) Recent Accounting Developments
------------------------------
Statement of Position (SOP) 01-6, "Accounting by Certain Entities
(Including Entities with Trade Receivables) That Lend to or Finance the
Activities of Others" was issued in December 2001. The SOP is effective
for financial statements issued for fiscal years beginning after December
15, 2001. The SOP reconciles and conforms the accounting and financial
reporting provisions established by various Audit and Accounting Industry
Guides. The adoption of this statement did not affect the Company's
consolidated financial condition and results of operations.
(J) Stock Repurchase Plan
---------------------
On April 10, 2002, the Board of Directors voted to authorize the Company to
purchase up to 28,850 shares or approximately 5% of its outstanding common
stock. The authority may be exercised from time to time and in such
amounts as market condition warrants. Any purchases are intended to make
appropriate adjustments to the Company's capital structure, including
meeting share requirements related to employee stock purchase plans and for
general corporate purposes. The Company repurchased 1,532 shares as part
of this plan during the second quarter of 2002 at an average price of
$69.00.
(K) Reclassification
----------------
Certain items from the prior year were reclassified on the balance sheet to
conform with the current year presentation. The reclassification does not
have a material impact to the balance sheet presentation.
11
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
- ---------------------------------------------------------------------------
Forward Looking Statements
- --------------------------
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. The Company intends
such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995 and is including this statement for purposes
of these safe harbor provisions. Forward-looking statements, which are
based on certain assumptions and describe future plans, strategies, and
expectations of the Company, are generally identifiable by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project," or
similar expressions.
The Company's ability to predict results or the actual effect of future
plans or strategies is inherently uncertain. Important factors which could
cause actual events to differ from the Company's expectations include, but
are not limited to, fluctuations in interest rates and loan and deposit
pricing, which could reduce the Company's net interest margins, asset
valuations and expense expectations; a deterioration in the economy or
business conditions, either nationally or in the Company's market areas,
that could increase credit-related losses and expenses; increases in
defaults by borrowers and other loan delinquencies resulting in increases
in the Company's provision for loan losses and related expenses; higher
than anticipated costs related to the Company's new banking centers or
slower than expected earning assets growth which could extend anticipated
breakeven periods at these locations; significant increases in competition;
legislative or regulatory changes applicable to bank holding companies or
the Company's banking subsidiary; and possible changes in tax rates, tax
laws, or tax law interpretation. The Company and the Bank disclaim any
obligation to publicly announce future events or developments which may
affect the forward-looking statements contained herewith.
Critical Accounting Policies
- ----------------------------
Management's discussion and analysis of the Company's financial condition
are based on the consolidated financial statements which are prepared in
accordance with accounting principles generally accepted in the United
States. The preparation of such financial statements requires management
to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an ongoing basis, management
evaluates its estimates, including those related to the allowance for loan
losses. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis in making judgments
about the carrying values of assets that are not readily apparent from
other sources. Actual results could differ from the amount derived from
management's estimates and assumptions under different assumptions or
conditions.
Management believes the allowance for loan losses is a critical accounting
policy that requires the most significant estimates and assumptions used in
the preparation of the consolidated financial statements. The allowance
for loan losses is based on management's evaluation of the level of the
allowance required in relation to the estimated loss exposure in the loan
portfolio. Management believes the allowance for loan losses is a
significant estimate and therefore regularly evaluates it for adequacy by
taking into consideration factors such as prior loan loss experience, the
character and size of the loan portfolio, business and economic conditions
and management's estimation of potential losses. The use of different
estimates or assumptions could produce different provisions for loan
losses.
12
Earnings and Performance Overview
- ---------------------------------
The following discussion compares the financial condition of Union
Bankshares Company (the "Company") and its wholly owned subsidiary, Union
Trust Company (the "Bank"), at June 30, 2002 to December 31, 2001, and the
results of operations for the three- and six months ended June 30, 2002,
compared to the same periods in 2001. This discussion and analysis should
be read in conjunction with the unaudited consolidated financial statements
and related notes thereto included within this report.
Results of Operations
- ---------------------
The operating results of the Company depend primarily on its net interest
income, which is the difference between interest income on earning assets
(primarily loans and investments) and interest expense (primarily deposits
and borrowings). The Company's results are also affected by the provision
for loan losses; noninterest income, including gains and losses on the
sales of loans and securities; noninterest expenses and income tax expense.
Each of these major components of the Company's operating results is
highlighted below.
Net Income. Net income for the first two quarters of 2002 was $2,154,754,
or $3.74 per share, a 61.7% increase compared to $1,332,419, or $2.31 per
share for the first two quarters of 2001. The increase was primarily a
result of an increase in net interest income of $827,323, an increase in
noninterest income of $449,279 and a decrease in goodwill amortization
expense offset by a slight increase in noninterest expense and an increase
in the provision for income taxes of $408,000. Upon adoption of SFAS No.
142, "Goodwill and Other Intangible Assets," on January 1, 2002,
amortization of goodwill was discontinued. As a result, amortization
charged to operations for the six months ended June 30, 2002 was $23,371,
as compared to $248,735 for the six months ended June 30, 2001. The Bank
expects this trend to continue throughout 2002. Net income for the second
quarter of 2002 was $1,042,448, or $1.81 per share, an 82.0% increase
compared to $572,629 or $1.00 per share for the second quarter of 2001.
The increase was primarily a result of increases in all categories of
noninterest income, an increase in noninterest expenses of only $5,017 and
a decrease in interest expense of $1,004,416 or 35.9%.
The following table summarizes the status of the Company's earnings and
performance for the periods stated:
Six months ended
June 30,
2002 2001
---- ----
Earnings Per Share $3.74 $2.31
Return on Average Shareholders' Equity 6.28%A 4.16%B
Return on Average Assets 0.59%A 0.38%B
Return on Average Earning Assets 0.64%A 0.42%B
A=annualized returns are: 12.56%, 1.18%, and 1.28%, respectively.
B=annualized returns are: 8.32%, 0.76%, and 0.84%, respectively.
Interest and Dividend Income. Total interest and dividend income decreased
by $1.4 million or 11.7% to $10.7 million for the six month period ended
June 30, 2002 from $12.1 million for the six month period ended June 30,
2001 and decreased by $565,305 or 9.6% to $5.3 million for the three month
period ended June 30, 2002 from $5.9 million for the three month period
ended June 30, 2001. The decrease in interest income for the first two
quarters and for the second quarter was primarily the result of lower
yields on earning assets, offset in part by a higher level of loans and
investments. The average balance of net loans for the period ended June 30,
2002 was $214.4 million compared to $204.2 million for the period ended
June 30, 2001. The average yield on loans was 7.4% for the period ended
June 30, 2002 compared to 8.6% for the period ended June 30, 2001. The
average balance of investments for the period ended June 30, 2002 was
$108.3 million
13
compared to $100.2 million for the period ended June 30, 2001. The average
yield on investments was 5.3% for the period ended June 30, 2002 compared
to 6.8% for the period ended June 30, 2001.
Interest Expense. Total interest expense decreased by $2.2 million or
38.4% to $3.6 million for the six month period ended June 30, 2002 from
$5.9 million for the six month period ended June 30, 2001 and decreased by
$1.0 million or 35.9% to $1.8 million for the three month period ended June
30, 2002 from $2.8 million for the three month period ended June 30, 2001.
The decrease in interest expense for the first two quarters and for the
second quarter was primarily the result of lower cost on deposits and
borrowings, offset in part by a higher level of deposits and borrowings.
Average interest-bearing deposits increased by $10.1 million or 4.1% to
$256.0 million for the period ended June 30, 2002. Average borrowings of
$56.9 million for the period ended June 30, 2002 were up $7.1 million or
14.3% from June 30, 2001 levels. The average rate on interest-bearing
deposits decreased 154 basis points to 1.86% for the period ended June 30,
2002 from 3.40% for the period ended June 30, 2001, while the average rate
on borrowed funds decreased 290 basis points to 3.76% from 6.66% during the
same period.
Net Interest Income. Net interest income for the six month period ended
June 30, 2002 was $7.1 million compared to $6.2 million for the six month
period ended June 30, 2001 and for the three months ended June 30, 2002 was
$3.6 million compared to $3.1 million for the three months ended June 30,
2001. The $827,323 or 13.2% increase for the first two quarters is
attributed to the $2.2 million decrease in interest expense on deposits and
borrowings offset in part by the $1.4 million decrease in interest and
dividend income. The increase for the three months ended June 30, 2002 is
attributed to the $1.0 million decrease in interest expense on deposits and
borrowings offset in part by the $565,305 decrease in interest and dividend
income. The average yield on interest earning assets decreased 134 basis
points to 6.68% for the period ended June 30, 2002 from 8.02% for the
period ended June 30, 2001, while the average cost on interest-bearing
liabilities decreased by 174 basis points to 2.21% for the period ended
June 30, 2002 from 3.95% for the period ended June 30, 2001. The interest
rate spread increased due to interest bearing liabilities repricing faster
than interest earning assets in a period of falling interest rates.
The net interest margin calculation for the six month periods ended June
30, 2002 and 2001 is shown below (interest income and average rate on non-
taxable securities and loans are reflected on a tax equivalent basis,
assuming a 34% federal income tax rate for 2002 and 2001).
14
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME
(Dollars In Thousands)
(On a Tax Equivalent Basis)
June 30
2002 2001
---------------------------------- -----------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Earned/Paid Rate Balance Earned/Paid Rate
------- ----------- ------ ------- ----------- ------
(annualized) (annualized)
Assets
Interest Earning Assets:
Securities available for sale $104,685 $ 5,378 5.14 $ 96,415 $ 6,535 6.78
Securities held to maturity 3,595 271 7.54 3,849 308 8.00
Federal funds sold 982 15 1.53 2,352 118 5.02
Loans (net) (1) 214,431 15,958 7.44 204,233 17,645 8.64
-------- ------- ---- -------- ------- ----
Total interest earning assets 323,693 $21,622 6.68 306,849 $24,606 8.02
Other nonearning assets 38,874 37,631
-------- --------
$362,567 $344,480
======== ========
Liabilities
Interest Bearing Liabilities:
Savings deposits $138,141 $ 1,828 1.32 $121,202 $ 2,694 2.22
Time deposits 100,166 2,555 2.55 111,747 5,252 4.70
Money market accounts 17,711 383 2.16 13,013 418 3.21
Borrowings 56,933 2,140 3.76 49,832 3,318 6.66
-------- ------- ---- -------- ------- ----
Total interest bearing liabilities 312,951 $ 6,906 2.21 295,794 $11,682 3.95
Other noninterest bearing liabilities
& shareholders' equity 49,616 48,686
-------- --------
$362,567 $344,480
======== ========
Net interest income $14,716 $12,924
Net interest rate spread 4.47 4.07
Net interest margin 4.55 4.21
(1) Nonaccrual loans are included in the average balance, however, these
loans are not earning any interest.
Provision For Loan Losses. The provision for loan losses for the six month
period ended June 30, 2002, increased $30,000 to $180,000 from the same
period last year, resulting from management's ongoing evaluation of the
allowance for loan losses. The provision for loan losses for the three
month period ended June 30, 2002, increased $15,000 to $90,000 from the
same period last year. The allowance for loan losses was $3.6 million or
1.6% of total loans as of June 30, 2002 and 1.6% at June 30, 2001. The
increase in the provision for loan loss is primarily due to the increase in
the loan portfolio and general economic conditions. The Company
establishes provisions for loan losses, which are charged to operations, in
order to maintain the allowance for loan losses at a level which is deemed
to be appropriate based upon an assessment of a number of factors. Please
refer to page 18 "Allowance for Loan Losses" for further details.
The Bank has a Loan Review Program whereby an independent loan review
service firm conducts a periodic review of the commercial loan portfolio.
The review includes updates to comments on all criticized and classified
assets over $100,000, all loans delinquent over 30 days and over $100,000,
non accrual loans over $100,000, new (closed) and renewed loans over
$100,000 as well as the adequacy of the loan loss reserve.
15
Although management utilizes its best judgment in providing for possible
losses, there can be no assurance that the Company will not have to
increase its provision for possible loan losses in the future as a result
of increased loan demand in the Company's primary market areas, future
increases in non-performing assets or other factors, both within and
outside of management's control.
Operating Income. Operating income was $2.7 million for the six month
period ended June 30, 2002 compared to $2.2 million for the six month
period ended June 30, 2001. Operating income was $1.4
million for the three month period ended June 30, 2002 compared to $1.1
million for the three month period ended June 30, 2001. The $449,279 or
20.3% increase for the six month period was the result of an increase in
loan fees, trust income, mortgage servicing income and an increase in the
cash surrender value of life insurance. The $268,725 or 23.5% increase for
the three month period was the result of an increase in loan fees, trust
income, Visa income, mortgage servicing income and an increase in the cash
surrender value of life insurance. The other income to average assets
ratio was 0.33% for the three months ended June 30, 2002 compared to 0.25%
for the same period in 2001.
Loan fees increased $204,925 or 52.7% during the first two quarters of 2002
from the comparable period in 2001 and $301,019 or 1.0% during the second
quarter of 2002 from the comparable period in 2001. The increase is due
primarily to the decline in mortgage loan interest rates and the
corresponding increased new loan and refinancing activity. Related
mortgage servicing income increased $85,062 during the six month period.
Trust income increased by 18.3% or $115,608 to $748,817 for the six months
ended June 30, 2002 and 29.6% or $91,541 to $400,465 for the three months
ended June 30, 2002 compared to $633,209 and $308,924 for the similar
periods in 2001. Trust fees are derived from the market value of trust
assets under management and transactional charges. Trust assets under
management were $203.3 million as of June 30, 2002. Trust income is also
derived from financial planning and investment brokerage commissions.
Operating Expenses. Operating expenses increased slightly by $16,267 or
..3% to $6.5 million for the six month period ended June 30, 2002 over the
same period in 2001 and increased by $5,017 or 0.1% to $3.4 million for the
three month period ended June 30, 2002 over the same period in 2001.
Salaries and employee benefits increased $144,509 and $312,652 for the
three and six month periods due primarily to additional staff in the
financial services area. Other operating expenses for the six month
period ended June 30, 2002 decreased $307,910 or 11.1% due primarily to the
decrease in goodwill amortization expense. Upon adoption of SFAS No. 142,
on January 1, 2002, amortization of goodwill was discontinued. As a
result, amortization charged to other expenses for the six months ended
June 30, 2002 was $23,371 as compared to $248,735 for the six months ended
June 30, 2001. The Bank expects this trend to continue throughout 2002.
Income Taxes. Income taxes are provided in accordance with the
comprehensive income tax allocation method which recognizes the tax effects
of all income and expense transactions in each year's statement of income,
regardless of the year the transactions are reported for tax purposes.
Deferred income taxes are recognized in the consolidated balance sheets for
income and expense items that are reported in different years for financial
reporting purposes and income tax purposes using the tax rate applicable
for the year of the calculation.
The status of the Company's income tax expense is as follows:
Tax Expense Effective Rate
---------------------- ----------------
2002 2001 2002 2001
---- ---- ---- ----
Six Months Ended June 30, $950,000 $542,000 30.6% 28.9%
16
Liquidity and Capital Resources. The Company's primary sources of funds
consist of deposits, borrowings, repayments and prepayments of loans, sales
and participation of loans, maturities of securities and interest-bearing
deposits and funds provided from operations. While scheduled repayments of
loans and maturities of securities are predictable sources of funds,
deposit flows and loan prepayments are greatly influenced by the general
level of interest rates, economic conditions and competition. The Company
uses its liquidity resources primarily to fund existing and future loan
commitments, to fund net deposit outflows, to invest in other interest-
earning assets, to maintain liquidity and to meet operating expenses.
The Company is required to maintain adequate levels of liquid assets. This
guideline, which may be varied depending upon economic conditions and
deposit flows, is measured by the core basic surplus. As of June 30, 2002
the Company's basic surplus was $58.1 million or 15.8% of total assets.
Total basic surplus (basic surplus plus funding available by using
qualifying loans to secure Federal Home Loan Bank ("FHLB") advances) was
$79.4 million, or 21.6% of total assets. This provides the Bank with
meaningful capacity and flexibility to fund new loan and investment
opportunities, and provide protection for unanticipated deposit
fluctuations.
A major portion of the Company's liquidity consists of cash and cash
equivalents, short-term U.S. Government and federal agency obligations and
corporate bonds. The level of these assets is dependent upon the Company's
operating, investing, lending and financing activities during any given
period.
Liquidity management is both a daily and long-term function of management.
If the Company requires funds beyond its ability to generate them
internally, the Bank has the ability to borrow additional funds from the
FHLB. At June 30, 2002, the Bank had borrowings of $61.7 million from the
FHLB. The Company anticipates that it will continue to have sufficient
funds, through repayments, deposits and borrowings, to meet its current
commitments.
The Federal Reserve Board guidelines for risk-based approach to measuring
the capital adequacy of bank holding companies and state-chartered banks
that are members of the Federal Reserve System generally call for an 8%
total capital ratio of which 4% must be comprised of Tier I capital. Risk-
based capital ratios are calculated by weighing assets and off-balance
sheet instruments according to their relative credit risks. At June 30,
2002, the Company and the Bank had exceeded all the minimum capital ratios.
The Bank's capital position at June 30, 2002 was as follows:
Minimum Regulatory
June 30, 2002 Requirements
------------- ------------------
Leverage Capital Ratio 7.73% 4.0%
Risk Based Ratio 14.54% 8.0%
Tier 1 Ratio 13.29% 4.0%
Financial Condition
- -------------------
The Company's total assets amounted to $370.1 million at June 30, 2002
compared to $362.0 million at December 31, 2001, an increase of $8.1
million or 2.2%. The increase in total assets is primarily attributable to
a decrease in cash and cash equivalents offset in part by an increase in
net loans. Year on year, total assets increased $28.2 million or 8.3%.
The increase in total assets from June 30, 2001 to June 30, 2002 is
primarily attributable to an increase in net loans of $8.7 million or 4.1%
and investment securities of $19.6 million or 20.8%.
Cash and Cash Equivalents. Cash and cash equivalents were $10.8 million at
June 30, 2002 compared to $21.9 million at December 31, 2001. Cash and
cash equivalents decreased primarily due to a decrease in federal funds
sold of $8.8 million to $146,778 at June 30, 2002 from $8.9 million at
December 31, 2001. As of June 30, 2002, cash and cash equivalents
decreased $334,803 or 3.0%
17
from $11.1 million as of June 30, 2001. The decrease in federal funds sold
was caused by a decrease in deposits resulting from normal seasonal deposit
outflows and to fund new loan growth.
Securities. The Bank manages its securities portfolio to provide a source
of both liquidity and earnings. The Bank's asset/liability committee
develops an investment policy based upon the Bank's operating need and
market circumstances. The investment policy is reviewed and approved
annually by the Board of Directors in terms of its objectives, investment
guidelines and consistency with overall Bank performance and risk
management goals. The asset/liability committee is responsible for
reporting and monitoring compliance with the investment policy. Reports
are provided to the board of directors on a regular basis.
Securities are classified as available for sale and they may be sold as
part of the Bank's asset/liability management strategy in response to
changes in interest rates, liquidity needs or significant prepayment risk.
Securities available for sale are carried at fair value, with related
unrealized net gains or losses, net of deferred income taxes, recorded as
an adjustment to shareholders' equity. At June 30, 2002, unrealized gains,
net of taxes on securities available for sale were $1,306,146 compared to
unrealized gains of $530,290 at December 31, 2001. The increase in net
unrealized gains on securities available for sale resulted in a $775,856
increase in shareholders' equity.
Securities available for sale increased $7.8 million or 8.0% to $105.0
million at June 30, 2002 compared to $97.2 million at December 31, 2001.
Securities available for sale increased $19.8 million or 23.2% to $105.0
million at June 30, 2002 from $85.2 million at June 30, 2001. Securities
held to maturity increased $96,048 or 2.7%, from $3.5 million at December
31, 2001 to $3.6 million at June 30, 2002. Securities held to maturity
decreased $222,401 or 5.8%, from $3.8 million at June 30, 2001 to $3.6
million at June 30, 2002.
Net Loans. Net loans increased by $11.1 million or 5.4% to $219.3 million
or 59.2% of total assets at June 30, 2002 as compared to $208.1 million or
57.5% of total assets at December 31, 2001. Year on year, net loans
increased by $8.7 million or 4.1% as of June 30, 2002, from $210.5 million
or 61.6% of total assets at June 30, 2001. This increase in loans is due
to the Bank's efforts to develop new lending relationships and expand
existing borrowing relationships. The Bank has also added individuals to
its lending personnel.
Residential real estate loans increased $7.7 million, or 6.3%, to $130.4
million at June 30, 2002 from $122.7 million at December 31, 2001. Year on
year, residential real estate loans increased $17.5 million, or 15.5% to
$130.4 million at June 30, 2002 from $113.0 million as of June 30, 2001.
Residential real estate loans consist of loans secured by one to four
family residences. The Bank generally retains adjustable rate mortgages in
its portfolio but will, from time to time, retain fixed rate mortgages in
its portfolio. The Bank has also sold and serviced $87.5 million of real
estate loans and $1.1 million of commercial mortgages and has $1.2 million
of loans held for sale at June 30, 2002.
Commercial loans at June 30, 2002 decreased by $314,278 or 0.5% to $58.6
million from $58.9 million at December 31, 2001. Year on year, commercial
loans decreased by $1.3 million or 2.2%. Commercial loans consist of loans
secured by various corporate assets, as well as loans to provide working
capital in the form of lines of credit, which may be secured or unsecured.
The Bank focuses on lending to what it believes a wide array of financially
sound, small to medium-sized businesses within its service area.
Consumer loans increased at June 30, 2002 by $121,781 or 0.5% to $22.6
million at June 30, 2002 from $22.5 million at December 31, 2001. Year on
year, consumer loans decreased by $1.7 million or 7.0% from $24.3 million
as of June 30, 2001. Consumer loans are originated by the Bank for a wide
variety of purposes to meet our customers' needs, and include personal
notes, reserve checking, installment and VISA loans.
18
Allowance for Loan Losses. The allowance for loan losses is a general
allowance established by management to absorb possible loan losses as they
may exist in the loan portfolio. This allowance is increased by provisions
charged to operating expenses and by recoveries on loans previously
charged-off. Management determines the adequacy of the allowance from
independent reviews of the quality of new and existing loans, from the
results of reviews of the loan portfolio by regulatory agency examiners,
evaluation of past loan loss experience, the character and size of the loan
portfolio, current economic conditions and other observable data.
The process of evaluating the adequacy of the allowance for loan losses
involves a high degree of management judgment, based in part on systematic
methods. Actual losses could vary from these estimates. A detailed
analysis of the allowance for loan losses is reviewed quarterly, at which
time necessary increases or decreases are made to the allowance for loan
losses, with a related adjustment to the provision for loan losses. The
Bank's board of directors reviews and approves the analysis of the adequacy
of the allowance for loan losses quarterly.
The allocated portion of the allowance for loan losses is comprised of
general reserves for specific loan types and specific reserves for impaired
loans. The general reserve categories consist of reserve checking,
personal and commercial installments, commercial notes and mortgages,
residential mortgages and Visa loans. A general reserve has also been
established for contingent liabilities such as lines of credit, letters of
credit and residential and commercial construction lines.
A reserve percentage is assigned to each general reserve category. The
factors used in determining the reserve percentage for each category starts
with the five year historical average of loan losses to loans and makes
adjustments for factors such as loan volumes, trends in non-performing
loans, economic and industrial conditions, credit concentrations and
changes in lending policies, procedures and practices.
The specific allocation for impaired loans is determined based on a loan by
loan review of impaired loans and specific loans under close monitoring by
management for potential problems.
As of June 30, 2002, the Bank had impaired loans (consisting of real estate
loans) totaling $1,298,786, down $523,818 or 28.7% from $1,822,604 as of
December 31, 2001. The fair value of the collateral was used to evaluate
the adequacy of the allowance for loan losses allocated to these loans.
A loan is considered impaired by management when it is probable that the
creditor will be unable to collect all amounts due under the contractual
terms of the loan, including principal and interest. Based upon
management's periodic review of loans on nonaccrual status, impairment is
based on a loan by loan analysis and not set by a defined period of
delinquency before a loan is considered impaired.
The unallocated component of the allowance for loan losses represents
management's view that, given the complexities of the loan portfolio, there
are estimated losses that have been incurred within the portfolio but not
yet specifically identified. Management has provided for these probable
losses in the allowance for loan losses accordingly.
The allowance for loan losses was $3.6 million or 1.6% of total loans as of
June 30, 2002 compared to $3.5 million or 1.6% of total loans at December
31, 2001.
Deposits. Total deposits decreased $13.5 million or 5.0% to $254.5 million
at June 30, 2002 from $267.9 million at December 31, 2001. The decrease
occurred primarily in the certificate of deposit and NOW account
categories. Savings deposits increased to $46.2 million at June 30, 2002
from $45.0 million at December 31, 2001, an increase of $1.2 million or
2.7%. NOW deposits decreased to $48.9 million at June 30, 2002 from $54.3
million at December 31, 2001, a decrease of $5.4 million or 9.9%. Money
market deposits increased to $18.8 million at June 30, 2002 from $17.7
million at December 31, 2001, an increase of $1.1 million or 6.2%.
Prestige investment accounts increased to $13.3 million at June 30, 2002
from $11.0 million at December 31, 2001, an increase of $2.3 million or
21.1%. Demand
19
deposits increased to $30.2 million at June 30, 2002 from $28.3 million at
June 30, 2001, an increase of $1.9 million or 6.7%. Certificates of
deposit decreased to $96.2 million at June 30, 2002 from $104.6 million at
December 31, 2001, a decrease of $8.4 million or 8.0%.
Borrowings. Total advances from the FHLB as of June 30, 2002 increased by
$19.7 million to $61.7 million from $42.0 million at December 31, 2001.
The continued use of borrowed funds reflects additional funding needed to
support its growth in net loans.
Shareholders' Equity. Shareholders' equity increased by $2.2 million or
6.5% from $34.1 million at December 31, 2001 to $36.3 million at June 30,
2002. The increase was due to cumulative earnings exceeding dividends
declared and a $775,856 increase in accumulated other comprehensive income.
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
In Management's opinion, there have been no material changes in the
reported market risks since December 31, 2001 as reported in Item 7A of the
Annual Report on Form 10K.
PART II
-------
Item 1: N/A
Item 2: N/A
Item 3: N/A
Item 4: Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 16, 2002 (the
"Meeting"). All of the proposals submitted to the shareholders at the
Meeting were approved. The proposals submitted to shareholders and the
tabulation of votes for each proposal is as follows:
1. Adopt the proposal to set the number of board of directors to 18.
The number of votes cast with respect to this matter was as follows:
For Against Abstain Broker Non-Votes
430,195 2,786 2,867 0
2. Election of five directors of the Company. The number of votes cast
with respect to this matter was as follows:
Nominee For Withheld Broker Non-Votes
Peter A. Blyberg 434,982 0 0
Robert S. Boit 434,981 0 0
Peter A. Clapp 434,982 0 0
Sandra H. Collier 434,577 0 0
Richard W. Teele 434,982 0 0
3. Adoption of the proposal to elect Sally J. Hutchins as Clerk of the
Company for the year ended December 31, 2002.
For Against Abstain Broker Non-Votes
435,705 0 143 0
20
4. Ratification of the appointment of Berry, Dunn, McNeil & Parker as
the Company's independent public accountants for the fiscal year
ending December 31, 2002.
For Against Abstain Broker Non-Votes
432,599 1,785 1,464 0
5. Adoption of the proposal to transact such other business as may
properly come before the meeting or any adjournment thereof.
For Against Abstain Broker Non-Votes
435,848 0 0 0
Item 5: Other Information
The Company's Principal Executive Officer and Principal Financial Officer
have furnished statements relating to its Form 10-Q for the quarter ended
June 30, 2002 pursuant to 18 U.S.C. section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002. The statements are attached
hereto as Exhibit 99.1.
Item 6: Exhibits and Reports on Form 8-K
A. Exhibit 99.1 Certification of CEO and Treasurer
B. Reports on Form 8-K
During the Registrant's fiscal quarter ended June 30, 2002, the Registrant
did not file any reports on Form 8-K.
22
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934 , the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION BANKSHARES COMPANY
/s/ Peter A. Blyberg
------------------------------------
Peter A. Blyberg, President and Chief
Executive Officer
August 9, 2002
--------------
Date /s/ Sally J. Hutchins
------------------------------------
Sally J. Hutchins, Sr. Vice President
/Treasurer
22