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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997 Commission File No. 0-20293
UNION BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1598552
(State of Incorporation) (I.R.S. Employer
I.D. No.)
211 North Main Street
P.O. Box 446
Bowling Green, Virginia 22427
(Address of principal executive officers)
(804) 633-5031
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON
STOCK, $4 PAR VALUE
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 such 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. X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The Aggregate Market Value of the Voting Stock Held by Nonaffiliates of
the Registrant was $151,977,323 as of February 27, 1998.
As of February 27, 1998, Union Bankshares Corporation had 3,575,937 shares
of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1997 are incorporated into Part II of this Form 10-K and
portions of the Proxy Statement for the 1998 annual meeting are incorporated
into Part III.
UNION BANKSHARES CORPORATION
FORM 10-K
INDEX
-----
PART 1
Page
----
Item 1. Business.............................................. 1
Item 2. Properties............................................ 7
Item 3. Legal Proceedings..................................... 8
Item 4. Submission of Matters to a Vote of
Security Holders...................................... 8
PART II
Item 5. Market for the Common Equity and
Related Stockholder Matters..................... 9
Item 6. Selected Financial Data............................... 9
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................... 10
Item 7a. Market Risk........................................... 10
Item 8. Financial Statements and
Supplementary Data.............................. 14
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............................ 14
PART III
Item 10. Directors and Executive Officers.......................... 14
Item 11. Executive Compensation.................................... 15
Item 12. Security Ownership of Certain Beneficial
Owners and Management.......................... 15
Item 13. Certain Relationships and Related
Transactions................................... 15
PART IV
Item 14. Exhibits, Financial Statements Schedules
and Reports on Form 8-K....................... 16
PART I
Item 1. - Business
GENERAL
Union Bankshares Corporation (the "Company") is a multi-bank holding company
organized under Virginia law which is headquartered in Bowling Green Virginia.
The Company is committed to the delivery of financial services through its
affiliated community banks, Union Bank & Trust Company ("Union Bank"), Northern
Neck State Bank ("Northern Neck Bank"), King George State Bank ("King
George Bank") (Collectively, the "Subsidiary Banks") and two non-bank
financial services affiliates, Union Investment Services, Inc. ("Union
Investment") and Union Mortgage Company, LLC.
The Company was formed in connection with the July 12, 1993 merger of
Northern Neck Bankshares Corporation with and into Union Bancorp, Inc. to form
Union Bankshares Corporation. On September 1, 1996, King George State Bank also
became a wholly-owned subsidiary of the Company.
Each of the Subsidiary Banks is a full service retail commercial bank
offering a wide range of banking and related financial services, including
checking, savings, certificates of deposit and other depository services,
commercial, industrial, residential mortgage and consumer loans. The Subsidiary
Banks also issue credit cards and can deliver automated teller machine services
through the use of reciprocally shared ATMs in the MOST, CIRRUS and PLUS
networks.
Union Bank & Trust Company had assets of $392 million, deposits of $306
million and shareholders' equity of $39 million at December 31, 1997. The
bank was organized and chartered under the laws of Virginia in 1902. Union
Bank's primary trade area is Caroline County, Hanover County, King William
County, Spotsylvania County, Stafford County and the City of Fredericksburg,
Virginia. In addition to its main office located in Bowling Green, Virginia,
Union Bank operated thirteen other branches in its primary trade area at
year end. Union Bank added a fourteenth branch at Brock Road and Route 3 in
Fredericksburg in January 1998.
Northern Neck State Bank was organized and chartered under the laws of
Virginia in 1909. As of December 31, 1997, Northern Neck State Bank had assets
of $148 million, deposits of $122 million, and shareholders' equity of $19
million. Northern Neck State Bank primarily serves the Northern Neck area of the
State of Virginia, in a trade area
which encompasses the counties of Richmond, Westmoreland, Essex and
Northumberland. In addition to its main office, the Bank operated four branches
in its primary trade area at year end. In February 1998, Northern Neck Bank
established four additional branch offices in its market area in connection with
the purchase by the Company of former Signet Bank branches. See
"Acquisition Program--Branch Purchase."
King George State Bank had assets of $51 million, deposits of $44
million and shareholders' equity of $35 million on December 31, 1997. The bank
was organized and chartered under the laws of Virginia in 1973 and in 1997
operated from a single location in King George County. King George State
Bank's primary trade area is King George County and extends into
Fredericksburg, Virginia. In February 1998, King George Bank established one new
branch office in its market area in connection with the purchase by the Company
of former Signet Bank branches. See "Acquisition Program--Branch Purchase."
Union Investment has provided securities brokerage and investment advisory
services since February, 1993. It is a full service discount brokerage company
which offers a full range of investment services, and sells mutual funds, bonds
and stocks.
Union Mortgage Company, LLC, a mortgage loan brokerage company, began
operations on January 1, 1997, and provides a wide array of mortgage products to
customers in the service areas of the subsidiary banks.
ACQUISITION PROGRAM
The Company looks to expand its market area and increase its market
share through both internal growth and strategic acquisitions. In early
1998, the Company engaged in the following acquisition transactions:
Branch Purchase On February 17, 1998, Northern Neck Bank and King George Bank
acquired certain assets and assumed certain deposit and other liabilities
relating to five former branch offices of First Union National Bank (successor
by merger with Signet Bank) (the "Branch Transaction"). In the aggregate, the
affiliate banks assumed total net deposit of $60.0 million. The Branch
Transaction was consummated pursuant to a Purchase and Assumption Agreement,
dated as of October 21, 1997, by and between Signet Bank and the Company (the
"Agreement").
According to the Agreement, the Company's subsidiary banks were to
acquire certain assets and assume certain deposit and other liabilities relating
to seven (and not five) branch offices of Signet Bank. However, because of
market concentration restrictions placed on the transaction by federal
regulators, two of the branch offices (Warsaw and Montross, Virginia) that were
to be acquired by Northern Neck State Bank were sold to Bank of Lancaster,
Kilmarnock, Virginia, immediately following the closing of the Branch
Transaction pursuant to a Purchase and Assumption Agreement, dated as of
November 17, 1997, between Northern Neck and Bank of Lancaster.
Acquisition of Rappahannock Bankshares. On February 25, 1998, the Company
entered into an Agreement and Plan of Reorganization with Rappahannock
Bankshares, Inc (Rappahannock) and (the "Agreement"). According to the
Agreement, Rappahannock will merge with and into the Company and Rappahannock
National Bank will operate as a subsidiary bank of the Company. The Company
presently contemplates consummating the transaction on July 1, 1998, subject to
applicable shareholder and regulatory approvals. At December 31, 1997,
Rappahannock had $20 million in total assets.
COMPETITION
The Company experiences competition in all aspects of its business. In its
market area, the Company competes with large regional financial institutions,
savings and loans and other independent community banks, as well as credit
unions, mutual funds and life insurance companies. Competition has also
increasingly come from out-of-state banks through their acquisitions of
Virginia-based banks. Competition for deposits and loans is affected by factors
such as interest rates offered, the number and location of branches and types of
products offered, as well as the reputation of the institution.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. The following description briefly discusses certain
provisions of federal and state laws and certain regulations and proposed
regulations and the potential impact of such provisions on the Company and its
subsidiary banks, Union Bank, Northern Neck Bank and King George Bank.
Bank Holding Companies
As a bank holding company registered under the Bank Holding Company Act
of 1956 the "BHCA"), the Company is subject to regulation by the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). The
Federal Reserve Board has jurisdiction under the BHCA to approve any
bank or nonbank acquisition, merger or consolidation proposed by a bank
holding company. The BHCA generally limits the activities of a bank
holding company and its subsidiaries to that of banking, managing or
controlling banks, or any other activity which is so closely related to
banking or to managing or controlling banks as to be a proper incident thereto.
Since September 1995, the BHCA has permitted bank holding companies from
any state to acquire banks and bank holding companies located in any other
state, subject to certain condition, including nationwide and state imposed
concentration limits. Banks are also able to branch across state lines, provided
certain conditions are met, including that applicable state law must expressly
permit such interstate branching. Virginia has adopted legislation that permits
branching across state lines, provided there is reciprocity with the state in
which the out-of-state bank is based.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the Federal Deposit Insurance
Corporation (the "FDIC") insurance fund in the event the depository institution
becomes in danger of default or in default. For example, under a policy of the
Federal Reserve Board with respect to bank holding company operations, a bank
holding company is required to serve as a source of financial strength to its
subsidiary depository institutions and to commit resources to support such
institutions in circumstances where it might not do so absent such policy. In
addition, the "cross-guarantee" provisions of federal law, require insured
depository institutions under common control to reimburse the FDIC for any loss
suffered or reasonably anticipated by either the Savings Association Insurance
Fund ("SAIF") or the Bank Insurance Fund ("BIF") as a result of the default of a
commonly controlled insured depository institution in danger of default. The
FDIC may decline to enforce the cross-guarantee provisions if it determines that
a waiver is in the best interest of the SAIF or the BIF or both. The FDIC's
claim for damages is superior to claims of stockholders of the insured
depository institution or its holding company but is subordinate to claims of
depositors, secured creditors and holders of subordinated
debt (other than affiliates) of the commonly controlled insured depository
institutions.
The Federal Deposit Insurance Act ("FDIA") also provides that amounts
received from the liquidation or other resolution of any insured depository
institution by any receiver must be distributed (after payment of secured
claims) to pay the deposit liabilities of the institution prior to payment of
any other general creditor or stockholder. This provision would give depositors
a preference over general and subordinated creditors and stockholders in the
event a receiver is appointed to distribute the assets of the bank.
The Company is registered under the bank holding company laws of Virginia.
Accordingly, the Company and the Subsidiary Banks are subject to regulation and
supervision by the State Corporation Commission of Virginia (the "SCC").
Capital Requirements
The Federal Reserve Board, the Office of the Comptroller of the Currency
and the FDIC have issued substantially similar risk-based and leverage capital
guidelines applicable to United States banking organizations. In addition, those
regulatory agencies may from time to time require that a banking organization
maintain capital above the minimum levels because of its financial condition or
actual or anticipated growth. Under the risk-based capital requirements of these
federal bank regulatory agencies, the Company and each of the Subsidiary Banks
are required to maintain a minimum ratio of total capital to risk-weighted
assets of at least 8%. At least half of the total capital is required to be
"Tier 1 capital", which consists principally of common and certain qualifying
preferred shareholders' equity, less certain intangibles and other adjustments.
The remainder ("Tier 2 capital") consists of a limited amount of subordinated
and other qualifying debt (including certain hybrid capital instruments) and a
limited amount of the general loan loss allowance. The Tier 1 and total capital
to risk-weighted asset ratios of the Company as of December 31, 1997 were 15.56%
and 16.68%, respectively, exceeding the minimum requirements.
In addition, each of the federal regulatory agencies has established a
minimum leverage capital ratio (Tier 1 capital to average tangible assets).
These guidelines provide for a minimum ratio of 3% for banks and bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory examination rating and are not contemplating significant
growth or expansion. All other institutions are expected to maintain a leverage
ratio of at least 100 to 200 basis points
above the minimum. The leverage ratio of the Company as of December 31, 1997,
was 11.27%, which is above the minimum requirements. The guidelines also provide
that banking organizations experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels, without significant reliance on intangible assets.
Limits on Dividends and Other Payments
The Company is a legal entity, separate and distinct from its subsidiary
institutions. Substantially all of the revenues of the Company result from
dividends paid to it by the Subsidiary Banks. There are various legal
limitations applicable to the payment of dividends to the Company, as well as
the payment of dividends by the Company to its respective shareholders.
Under federal law, the Subsidiary Banks may not, subject to certain
limited exceptions, make loans or extensions of credit to, or investments in the
securities of, the Company or take securities of the Company as collateral for
loans to any borrower. The Subsidiary Banks are also subject to collateral
security requirements for any loans or extensions of credit permitted by such
exceptions.
The Subsidiary Banks are subject to various statutory restrictions on
their ability to pay dividends to the Company. Under the current supervisory
practices of the Subsidiary Banks' regulatory agencies, prior approval from
those agencies is required if cash dividends declared in any given year exceed
net income for that year plus retained earnings of the two proceeding years. The
payment of dividends by the Subsidiary Banks or the Company may also be limited
by other factors, such as requirements to maintain capital above regulatory
guidelines. Bank regulatory agencies have the authority to prohibit the
Subsidiary Banks or the Company from engaging in an unsafe or unsound practice
in conducting their business. The payment of dividends, depending on the
financial condition of the Subsidiary Banks, or the Company, could be deemed to
constitute such an unsafe or unsound practice.
Under the FDIA, insured depository institutions such as the Subsidiary
Banks are prohibited from making capital distributions, including the payment of
dividends, if, after making such distribution, the institution would become
"undercapitalized" (as such term is used in the statute). Based on the
Subsidiary Banks' current financial condition, the Company does not expect that
this provision will have any impact on its ability to obtain dividends from the
Subsidiary Banks.
The Subsidiary Banks
The Subsidiary Banks are supervised and regularly examined by the Federal
Reserve Board and the SCC. The various laws and regulations administered by the
regulatory agencies affect corporate practices, such as the payment of
dividends, incurring debt and acquisition of financial institutions and other
companies, and affect business practices, such as the payment of interest on
deposits, the charging of interest on loans, types of business conducted and
location of offices.
The Subsidiary Banks are also subject to the requirements of the Community
Reinvestment Act (the "CRA"). The CRA imposes on financial institutions an
affirmative and ongoing obligation to meet the credit needs of the local
communities, including low- and moderate-income neighborhoods, consistent with
the safe and sound operation of those institutions. Each financial institution's
efforts in meeting community credit needs currently are evaluated as part of the
examination process pursuant to twelve assessment factors. These factors also
are considered in evaluating mergers, acquisitions and applications to open a
branch or facility.
As an institution with deposits insured by the BIF, the Bank also is
subject to insurance assessments imposed by the FDIC. The FDIC has implemented a
risk-based assessment schedule, imposing assessments ranging from 0.0% to 0.27%
of an institution's average assessment base. The actual assessment to be paid by
each BIF member is based on the institution's assessment risk classification,
which is determined based on whether the institution is considered "well
capitalized," "adequately capitalized" or "undercapitalized," as such terms have
been defined in applicable federal regulations, and whether such institution is
considered by its supervisory agency to be financially sound or to have
supervisory concerns. In 1997, the Subsidiary Banks paid $67,000 in deposit
insurance premiums.
Other Safety and Soundness Regulations
The federal banking agencies have broad powers under current federal law
to make prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." All such terms are
defined under uniform regulations defining such capital levels issued by each
of the federal banking agencies.
Item 2. - Properties
The Company, through its subsidiaries, owns or leases buildings that are
used in the normal course of business. The main office is located at 212 N. Main
Street, Bowling Green, Virginia, in a building owned by the Company. The
Company's subsidiaries own or lease various other offices in the counties and
cities in which they operate. Northern Neck State Bank has its main office in
Warsaw, Virginia and operates four branches; Union Bank has its main office in
Bowling Green, Virginia and operates 13 branches at 1997 year end. At year end,
King George Bank operated out of a single location in King George, Virginia.
Union Investment's office is located in Bowling Green, Virginia. See Notes to
Consolidated Financial Statements for information with respect to the amounts at
which bank premises and equipment are carried and commitments under long-term
leases.
On February 17, 1998, the Company acquired five former branch offices of
Signet Bank, four of which were allocated to Northern Neck Bank and the
remaining branch to King George Bank. See "Item 1--Business--Acquisition
Program."
The properties on the following page are those owned or leased by the Company
and its subsidiaries as of December 31, 1997.
Locations
---------
Corporate Headquarters
212 North Main Street, Bowling Green, Virginia
Banking Offices - Union Bank & Trust Company
211 North Main Street, Bowling Green, Virginia
Route 1, Ladysmith, Virginia
Route 301, Port Royal, Virginia
4540 Lafayette Boulevard, Fredericksburg, Virginia
Route 1 & Ashcake Road, Ashland, Virginia
4210 Plank Road, Fredericksburg, Virginia
10415 Courthouse Road, Fredericksburg, Virginia
10469 Atlee Station Road, Ashland, Virginia
700 Kenmore Avenue, Fredericksburg, Virginia
Route 360, Manquin, Virginia
9534 Chamberlayne Road, Mechanicsville, Virginia
Cambridge & Layhill Road, Falmouth, Virginia
Massaponax Church Road & Route 1, Spotsylvania, Virginia
Brock Road and Route 3, Fredericksburg, Virginia
Banking Offices - Northern Neck State Bank
5839 Richmond Road, Warsaw, Virginia
4256 Richmond Road, Warsaw, Virginia
Route 3, Kings Highway, Montross, Virginia
Route 17 & Earl Street, Tappahannock, Virginia
1660 Tappahannock Blvd, Tappahannock, Virginia
Banking Offices - King George State Bank
10045 Kings Highway, King George, Virginia
Union Investment Services, Inc.
111 Davis Court, Bowling Green, Virginia
10469 Atlee Station Road, Ashland, Virginia
Union Mortgage Company, LLC.
211 North Main Street, Bowling Green, Virginia
Item 3. - Legal Proceedings
In the ordinary course of its operations, the Company and its subsidiaries
are parties to various legal proceedings. Based on the information presently
available, and after consultation with legal counsel, management believes that
the ultimate outcome in such proceedings, in the aggregate, will not have a
material adverse effect on the business or the financial condition or results of
operations.
Item 4. - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter.
PART II
Item 5. - Market for Common Equity and Related Shareholder Matters
This information is incorporated herein by reference from the inside back
cover of Annual Report to Shareholders for the year ended December 31, 1997.
Item 6. - Selected Financial Data
This information is incorporated herein by reference from the section
captioned "Selected Financial Data" on page 2 in the Annual Report to
Shareholders for the year ended December 31, 1997.
Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
This information is incorporated herein by reference from the section
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 9 through 21 in the Annual Report to
Shareholders for the year ended December 31, 1997.
Item 7a. - Market Risk
Market risk is the risk of loss from adverse changes in market prices and
rates. The Company's primary market risk is interest rate risk. The main
objective of interest rate risk management is to avoid large fluctuations in net
interest income from changes in interest rates on interest-sensitive assets and
interest-sensitive liabilities. The Asset/Liability Management Committee of the
Company ("ALCO") is responsible for monitoring and limiting exposure to interest
rate risk. Management uses balance sheet repositioning as a tool to manage
interest rate risk. This is accomplished through pricing of asset and liability
accounts. The expected result of pricing is the development of appropriate
maturity and repricing opportunities in those accounts to produce consistent net
interest income during changing interest rate environments. The ALCO also sets
policy guidelines and establishes strategies with respect to interest rate
exposures. The ALCO meets quarterly to review the Company's interest rate
exposure in relation to present and prospective market and business conditions,
and reviews balance sheet management strategies intended to ensure the potential
impact of changes in interest rates on earnings is within acceptable standards.
The Company uses three methods to measure interest rate risk; static gap
analysis, earnings simulation analysis and market value simulation analysis.
Static Gap Analysis
Gap analysis measures the amount of repricing risk in the balance sheet.
It does this by taking the difference between the amount of rate sensitive
assets and rate sensitive liabilities which reprice within a specified time
period. This is the least reliable measurement of interest rate risk because it
only measures rate sensitive assets minus rate sensitive liabilities at one
point in time. It does not reflect the different degrees of rate sensitivity
each asset and liability account have. An example of this: If prime rate changes
by 100 bps, the interest rate change on a money market account might be 25 bps
and that of a certificate of deposit might be 75 bps. The best information
obtained from a gap report is the amount of assets or liabilities which can be
repriced at any one point in the future, not the degree of rate sensitivity.
The following table shows the Company's Gap Report over the next five
years. To reflect anticipated prepayments, mortgage backed securities are
included in the table based on estimated rather than contractual maturity dates.
INTEREST SENSITIVITY ANALYSIS
(in thousands)
December 31, 1997
----------------------------------------------------------------------------
Within 90 90-365 1-5 Over 5
Days Days Years Years Total
-------------- ----------- ------------ ------------- -------------
Earning Assets:
Loans, net of unearned
income (2) $ 87,480 $48,468 $141,747 $115,503 $393,198
Investment securities 276 1,514 6,799 1,852 10,441
Securities available for
sale
1,683 6,659 57,111 76,655 142,108
Federal funds sold 612 - - - 612
Other short-term investments
596 - 99 - 695
-------------- ---------------- --------------- -------------- -------------
Total Earning Assets 90,647 56,641 205,756 194,010 547,054
============== ================ =============== ============== =============
Interest-Bearing Liabilities:
Interest checking (1) 17,242 553 42,215 - 60,010
Regular savings (1) 18,514 1,714 26,465 - 46,693
Money market savings 49,481 181 725 - 50,387
Certificates of deposit:
$100,000 and over 13,703 30,262 14,456 - 58,421
Under $100,000 44,709 93,919 57,042 - 195,670
Short-term borrowings 22,645 4,600 - - 27,245
Long-term borrowings - - 21,975 1,740 23,715
-------------- ---------------- --------------- -------------- -------------
Total Interest-Bearing
Liabilities 166,294 131,229 162,878 1,740 462,141
-------------- ---------------- --------------- -------------- -------------
Period Gap (75,647) (74,588) 42,878 192,270
Cumulative Gap $(75,647) $(150,235) $(107,357) $84,913 $84,913
============== ================ =============== ============== =============
Ratio of cumulative gap to
total earning assets (13.83)% (27.46)% (19.62)% 15.52%
============== ================ =============== ============== =============
(1) The Company has determined that interest-bearing checking deposits and
regular savings deposits are not sensitive to changes in related market rates
and therefore, it has placed them predominately in the "1-5 Years" column.
(2) Excludes non-accrual loans
Earnings Simulation Analysis
Management uses simulation analysis to measure the sensitivity of net
interest income to changes in interest rates. The model calculates an earnings
estimate based on current and projected balances and rates. This method is
subject to the accuracy of the assumptions that underlie the process, but it
provides a better analysis of the sensitivity of earnings to changes in interest
rates than other analysis such as the static gap analysis.
Assumptions used in the model include loan and deposit growth rates are
derived from seasonal trends and management's outlook as are the assumptions
used to project yields and rates for new loans and deposits. All maturities,
calls and prepayments in the securities portfolio are assumed to be reinvested
in like instruments. Mortgage loans and mortgage backed securities prepayment
assumptions are based on industry estimates of prepayment speeds for portfolios
with similar coupon ranges and seasoning. Different interest rate scenarios and
yield curves are used to measure the sensitivity of earnings to changing
interest rates. Interest rates on different asset and liability accounts move
differently when the prime rate changes and are accounted for in the different
rate scenarios.
The following table represents the interest rate sensitivity on net
interest income for the Company using different rate scenarios:
% Change in
Change in Prime Rate Net Interest Income
-------------------- -------------------
+200 basis points +2.17%
Flat 0
-200 basis points -3.17%
Market Value Simulation
Market value simulation is used to calculate the estimated fair value of
assets and liabilities over different interest rate environments. Market values
are calculated based on discounted cash flow analysis. The net market value is
the market value of all assets minus the market value of all liabilities. The
change in net market value over different rate environments is an indication of
the larger term repricing risk in the balance sheet. The same assumptions are
used in the market value simulation as in the earnings simulation.
The following chart reflects the change in net market value over different
rate environments:
Change in Net Market Value
Change in Prime Rate (dollars in thousands)
- -------------------- ----------------------
+200 basis points $-17,608
+100 basis points -7,995
Flat 1,212
- -100 basis points 12,598
- -200 basis points 22,208
Item 8. - Financial Statements and Supplementary Data
This information is incorporated herein by reference from the Consolidated
Financial Statements on pages 22 through 39 and the Quarterly Earnings Summary
on the inside front cover of the Annual Report to Shareholders for the year
ended December 31, 1997.
Item 9. - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There are no disagreements between the Company and its independent
accountants, KPMG Peat Marwick LLP.
PART III
Item 10. - Directors and Executive Officers
This information, as applicable to directors, is incorporated herein by
reference to the Proxy Statement for the Annual Meeting of Shareholders to be
held April 21, 1997 from the section entitled "Election of Directors" and
"Executive Compensation". Executive officers of the Company as of December 31,
1997 are listed on the following page:
Title and Principal Occupation
------------------------------
Name (Age) During Past Five Years
- ---------- ----------------------
G.William Beale (48) President and Chief Executive Officer of the
Company since its inception; President of
Union Bank & Trust since 1991.
E.Peyton Motley (53) Executive Vice President and Chief Operating
Officer of the Company since;
President of Northern Neck State Bank
since 1978.
Homer L. Hite (58) Senior Vice President of the Company since 1996;
President of King George State Bank since 1974.
D.Anthony Peay (38) Vice President and Chief Financial Officer since
December 1994; Certified Public Accountant,
Senior Manager - Deloitte & Touche (1990-94).
Information on Section 16(a) beneficial ownership reporting compliance for the
executive officers of the Company is incorporated herein by reference to the
Proxy Statement for the Annual Meeting of Shareholders to be held April 20, 1997
from the section entitled "Election of Directors--Compliance with Section 16(a)
of the Securities Exchange Act of 1934".
Item 11 - Executive Compensation
This information is incorporated herein by reference to the Proxy
Statement for the Annual Meeting of Shareholders to be held April 21, 1998 from
the section entitled "Executive Compensation" and "Election of Directors -
Directors' Fees".
Item 12 - Security Ownership of Certain Beneficial Owners and
Management
This information is incorporated herein by reference to the Proxy
Statement for the Annual Meeting of Shareholders to be held April 21, 1998 from
sections entitled "Ownership of Company Common Stock".
Item 13 - Certain Relationships and Related Transactions
This information is incorporated herein by reference to the Proxy
Statement for the Annual Meeting of Shareholders to be held April 21, 1998 from
the section entitled "Interest of Directors and Officers in Certain
Transactions".
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
The following documents are filed as part of this report:
(1) Financial Statements
The following consolidated financial statements of Union Bankshares
Corporation and subsidiaries included in the 1997 Annual Report to
Shareholders are incorporated by reference in this report:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedules
All schedules are omitted since they are not required, are not
applicable, or the required information is shown in the consolidated
financial statements or notes thereto.
(3) Exhibits
Exhibit No. Description
---------- -----------
2.0 Purchase and Assumption Agreement dated as of
October 21, 1997, by and between Signet
Bank and Union Bankshares Corporation
(incorporated by reference to Form 8-K as
filed by the Registrant on February
19, 1998).
3.1 Articles of Incorporation (incorporated by
reference to Form S-4 Registration
Statement - 33-60458)
3.2 By-Laws (incorporated by reference to
Form S-4 Registration Statement - 33-60458)
13 1997 Annual Report to Shareholders
22 Subsidiaries of the Registrant
(4) Reports on Form 8-K
No reports were filed on Form 8-K during the fourth quarter ended
December 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amended report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Union Bankshares Corporation
By: /s/ G. William Beale Date: March 31, 1998
- --------------------------- President and Chief Executive Officer
G. William Beale
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on March 31, 1998.
Signature Title
-------- ------
/s/ G. William Beale
- --------------------------- President, Chief Executive Officer and
G. William Beale Director
- --------------------------- Executive Vice President, Chief Operating
E. Peyton Motley Officer and Director
/s/ Homer L. Hite
- --------------------------- Senior Vice President
Homer L. Hite
/s/ D. Anthony Peay
- --------------------------- Vice President and Chief Financial Officer
D. Anthony Peay
/s/ Walton Mahon
- --------------------------- Chairman of the Board of Directors
Walton Mahon
- --------------------------- Vice Chairman of the Board of Directors
Charles H. Ryland
- --------------------------- Director
W. Tayloe Murphy, Jr.
/s/ Ronald L. Hicks
- --------------------------- Director
Ronald L. Hicks
/s/ M. Raymond Piland, III
- --------------------------- Director
M. Raymond Piland, III
/s/ A.D. Whittaker
- --------------------------- Director
A.D. Whittaker