Shareholder Communication

Shareholders may communicate with all or any member of the Board of Directors by addressing correspondence to the “Board of Directors” or to the individual director and addressing such communication to Janis Orfe, Corporate Secretary, Union Bankshares Corporation, P.O.P. O. Box 446, Bowling Green, Virginia 22427.22427-0446. All communications so addressed will be forwarded to the Chairman of the Board of Directors (in the case of correspondence addressed to the “Board of Directors”) or to the individual director without exception. All of the directors attended the Annual Meeting of Shareholders held in 2005.2006. Consistent with the Company’s corporate governance policy,guidelines, directors are expected to attend the 20062007 Annual Meeting and each should be available to shareholders to discuss Company matters. A copy of the corporate governance policyguidelines is available on the Company’s website:www.ubsh.com.

Directors’ Fees

As compensation for their services, each member of the Board of Directors of the Company receives $750 for each meeting of the Board attended. In addition, standing committee members receive $450 for each committee meeting attended. Additionally, each director who attends a minimum of 75% of all Board and committee meetings since the last Annual Meeting of Shareholders (or since the appointment of a new director in the case of a new director’s first year of service) receives a $20,000 annual retainer (or pro-rated portion thereof in the case of a new director) paid in shares of the Company’s common stock based on the average closing price on the five consecutive trading days ending on December 1 of each year. Mr. Hicks receives an additional $3,000 annual stock retainer for serving as board chair. Mr. Tillett receives an additional annual stock retainer of $3,000 to serve as chair of the audit committee. Mr. Beale does not receive any additional compensation above his regular salary for service as a director or for attending any Board or committee meeting.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee’s Report to the Shareholders, which follows, was approved and adopted by the committee on March 7, 2006.February 28, 2007.

The Board of the Company has a standing Audit Committee that consists of the independent directors whose names appear at the end of this report.

While management has the primary responsibility for the financial statements and the reporting process, including the Company’s system of internal controls, the Audit Committee monitors and reviews the Company’s financial reporting process on behalf of the Board of Directors. The role and responsibilities of the Audit Committee are set forth in a written charter adopted by the Board. The Committee reviews and reassesses its charter periodically and recommends any changes to the Board for approval. Under applicable law, the selection of the Company’s independent auditors is the sole responsibility of the Audit Committee.

The Company’s independent registered auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United States generally accepted accounting principlesof America and to issue a report thereon. The Audit Committee

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monitors these processes. However, the Audit Committee does not complete its monitoring prior to the Company’s public announcements of financial results and, necessarily, in its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of the independent registered auditors, who, in their report, express an opinion on the conformity of the Company’s consolidated annual financial statements to accounting principles generally accepted in the United States.States of America.

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In this context, the Audit Committee met and held discussions with management and the Company’s independent auditors,registered public accounting firm, Yount, Hyde & Barbour, P.C.P. C. (“YHB”), with respect to the Company’s financial statements for the fiscal year ended December 31, 2005.2006. Management represented to the Audit Committee that the consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States generally accepted accounting principles,of America, and the Audit Committee reviewed and discussed the consolidated financial statements with management and the independent registered auditors. The Audit Committee also discussed with the independent registered auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees).

In addition, the Audit Committee discussed with the independent registered auditors the auditors’ independence from the Company and its management, and the independent registered auditors provided to the Audit Committee the written disclosures and letter required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees).

The Audit Committee also discussed with the Company’s internal and independent registered auditors the overall scope and plans for their respective audits. The Audit Committee met with the internal and independent registered auditors, with and without management present,management’s presence, to discuss the results of their examinations, the evaluations of the internal controls of the Company, and the overall quality of the financial reporting of the Company.

Principal Accounting Fees

External auditors billed the following fees for services provided to the Company during 20052006 and 2004:2005:

(footnotes continued on next page)

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The Audit Committee has considered the provision by YHB of the above non-audit services to the Company and has determined that the provision of these services by YHB is compatible with maintaining the firm’s independence from the Company. During the year, each engagement beyond the

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scope of the annual audit engagement iswas pre-approved withby the Committee’s approval at the direction of the Company’s chief financial officer.Audit Committee.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board of Directors has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005,2006, for filing with the Securities and Exchange Commission.

Members of the Audit Committee

Ronald L. Tillett, Chairman

Patrick J. McCann

Hullihen W. Moore

R. Hunter Morin

EXECUTIVE OFFICERS

The executive officers of the Company, who are sometimes referred to in this Proxy Statement as the “Executive Group,” are listed below:

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OWNERSHIP OF COMPANY COMMON STOCK

The following table sets forth, as of February 24, 2006March 2, 2007, certain information with respect to the beneficial ownership of the Company’s common stock held by each director and director-nominee of the Company, each executive officer named in the Summary Compensation Table below, and by all the directors and executive officers as a group. As of February 24, 2006,March 2, 2007, no shareholder of the Company beneficially owned 5% or more of the Company’s common stock.

Mr. Beale, 5,900 shares; Mr. Neal, 11,170 shares;COMPENSATION DISCUSSION AND ANALYSIS

This section provides an overview and Mr. Peay, 7,300 shares.explanation of the material information relevant to understanding the objectives, policies and philosophy underlying the Company’s compensation programs for executives. To assist you in understanding certain disclosures that we are required to provide in this section, which we sometimes call the “CD&A”, we include a series of questions followed by narrative answers. Following the CD&A, we also provide information relating to executive and director compensation in a series of tables and accompanying narrative, some of which follow the Q&A format of this section.

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Q. Does the Company have an overall executive compensation philosophy?

Yes. The “total compensation philosophy” of the Company is to compensate fairly our executives in a manner that is consistent with our identified industry peers and reward them for achieving the Company’s operational and financial goals and providing a growing return to our shareholders. Our compensation programs support management’s goals of hiring, retaining, and rewarding qualified executives who are critical to the successful execution of our short-term and long-term business strategies. Our compensation programs are strategy-focused, competitive, and, where appropriate, performance based.

Q. How does the industry-specific peer group fit into the Company’s executive compensation philosophy and strategy?

We use the peer group, and, where appropriate, standardized financial services data, to determine “compensation comparability” and we consider, among other organizational criteria, asset size, earnings, location, organizational structure, number of employees, market capitalization, and service offerings. We also use the same financial industry peer group to assess total compensation, and, when appropriate, short and long-term performance based awards.

Q. What are the elements of compensation for the executives/officers?

For 2006, the principal components of compensation for the Executive Officers were:

These components of compensation, along with certain other elements of compensation, are set forth in the Summary Compensation Table following this CD&A.

Q. How does the Company set the amount or formula for each element and how does each element fit into pay strategy?

When it sets compensation amounts, the Company takes into account specific items of corporate performance for each member of the Executive Group. Compensation for the Chief Executive Officer of the Company (Mr. Beale), the Chief Financial Officer of the Company (Mr. Peay), and the Chief Banking Officer of the Company (Mr. Neal) is determined by the Board of Directors, excluding Mr. Beale, based on the recommendation of the Compensation Committee of the Board. The Compensation Committee annually reviews and approves corporate goals and objectives relevant to each of the foregoing executive’s compensation, evaluates each executive’s performance in light of these goals and objectives, and recommends to the Board the compensation levels for the three members of the Executive Group based on these evaluations. In determining the long-term incentive component of the executive compensation, the Committee considers the Company’s performance and relative shareholder return, the value of similar incentive awards to executives with similar titles and attendant responsibilities at comparable companies, and the awards given to such persons in past years.

The Compensation Committee has retained Wachovia Employer Solutions Group (formerly part of Palmer & Cay Inc.) (“Wachovia”) to serve as the Committee’s independent executive compensation advisor. In April 2006, the Committee and Wachovia transitioned from a per-project fee arrangement to a retainer arrangement for ongoing advisory services to the Company.

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The Board and the Compensation Committee establish overall compensation using both objective and subjective criteria based on the factors noted above. With respect to the objective portion of the performance evaluation, the Compensation Committee specifically considers the growth in earnings per share and the relative level of return on equity in its deliberations. The subjective component focuses on the Committee’s perception of the performance by the executive officer of his individual responsibilities as defined by the Committee and in comparison to the compensation paid to persons in comparable positions within the industry. The Company’s executive compensation program considers base salary its primary component, followed by short-term incentive compensation and long-term incentive compensation.

The targeted mix of cash and equity-based compensation for executives is on average 60% for base salary, 20% for annual incentives, and 20% for long-term equity. Incentive compensation for an individual executive may become a larger percentage of that person’s total direct compensation when he/she assumes significant responsibilities and has a significant impact on the financial and/or operational success of the Company.

Q. What are the objectives of the Company’s incentive compensation programs?

The overall objectives of the Company’s incentive compensation programs are straightforward – to attract, reward, and retain key executives for creating long-term value for shareholders of the Company. Each eligible executive can accomplish these objectives by maximizing Company and individual or division performance goals.

The Company’s “short-term” cash incentive compensation program is provided under the Management Incentive Plan (the “MIP”). The Company’s “long-term” incentive compensation program is provided through the grant of equity awards (e.g., stock options and restricted stock grants) under the Company’s 2003 Stock Incentive Plan (the “2003 SIP”).

Q. What exactly is the MIP and how long is the MIP in effect?

The MIP is an annual plan and there is a new MIP that begins each January 1^st, which is the first day of the Company’s fiscal year. The Company adopted and approved the 2006 MIP on February 23, 2006. The Summary Compensation Table reflects payments earned in 2006 under the 2006 MIP by each member of the Executive Group, which payments were made on or about March 15, 2007.

Q. What specifically is the MIP designed to reward and how does the Company set the amounts of any “target awards”?

We recognize that the MIP can only reward the Company’s key executives who create value by looking at specific factors shortly after the end of the MIP fiscal year. Earlier in the MIP fiscal year, the MIP requires us to assign to each executive an incentive award target; this target number is calculated as a percentage of the executive’s year-end base salary. Generally, the target award of compensation is made to the executive if both the Company and the executive achieve certain targeted performance goals; however, the target award can be increased when performance exceeds expectations, or decreased if performance is below expectations.

For each eligible executive, the specific target award is weighted between the Company’s earnings per share (“EPS”) growth relative to its select peer group and cash basis return on equity (“CROE”) combined with individual/divisional goals. The Company’s MIP describes CROE as:Net Income plus Amortization of Intangibles divided by Average Tangible Equity. The specific individual/divisional goals are established and measured by the Chief Executive Officer who presents

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those goals to the Compensation Committee for its review and approval. The Compensation Committee also reviews and approves annually the select peer group that will be used for EPS growth comparative purposes.

Q. What exactly is the 2003 SIP?

The 2003 SIP is a long-term incentive plan, which makes available 525,000 shares for awards or “grants” to eligible employees of the Company and its subsidiaries in the form of stock options, stock appreciation rights, and restricted stock.

The 2003 SIP is administered by the Compensation Committee. The Compensation Committee determines which employees will be granted stock options and restricted stock grants and the terms and conditions, including any vesting schedule, for each award.

On December 30, 2005, the Company accelerated the vesting of stock options in order to eliminate the recognition of compensation expense associated with the affected options under SFAS No. 123R, which became effective beginning in the first quarter of 2006. We disclose here that for personal reasons, each member of the Executive Group decided not to accept the acceleration of the vesting of his respective stock options.

Q. What peer group does the Committee use as a guide?

In making compensation decisions, the Committee compares the principal elements of total compensation against a peer group of publicly-traded financial service companies. The companies comprising the peer group (excluding the Company) are:

Q. How does the Committee benchmark against the peer group?

Generally, base compensation and targeted short and long-term variable compensation is established at the 50^th percentile of the Company’s peer group.

Q. Are there other plans or agreements that relate to executive compensation?

Yes, there are certain employment agreements, and certain “change in control” or what we call Management Continuity Agreements. We describe these agreements in more detail below.

The Employment Agreements

G. William Beale. On July 25, 2006, the Company entered into an employment agreement (the “Agreement”) with G. William Beale, effective as of May 1, 2006, pursuant to which the Company will continue to employ Mr. Beale as President and Chief Executive Officer. The Agreement supersedes and replaces the employment agreement between the Company and Mr. Beale that was entered into in 1999 providing for his employment as President and Chief Executive Officer of the Company.

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The Agreement, which has an initial term of three years, provides that beginning on the commencement of the employment period under the Agreement and on each day thereafter the term of the Agreement will automatically be extended an additional day, unless the Company gives notice that the employment term will not thereafter be extended.

Under the Agreement, Mr. Beale’s initial annual base salary will be $320,000, which will be reviewed annually by the Board of Directors. Mr. Beale will be entitled to annual cash bonuses and stock-based awards in such amounts as may be determined in accordance with the terms and conditions of the applicable management incentive plan adopted on an annual basis by the Board of Directors.

The Company may terminate Mr. Beale’s employment at any time for “Cause” (as defined in the Agreement) without incurring any additional obligations to him. If the Company terminates Mr. Beale’s employment for any reason other than for “Cause” or if Mr. Beale terminates his employment for “Good Reason” (as defined in the Agreement), the Company will generally be obligated to continue to provide the compensation and benefits specified in the Agreement for two years following the date of termination. Upon the termination of his employment, Mr. Beale will be subject to certain noncompetition and nonsolicitation restrictions.

If Mr. Beale dies while employed by the Company, the Company will continue to pay Mr. Beale’s designated beneficiary, or his estate, as applicable, an amount equal to Mr. Beale’s then current Base Salary for six months after Mr. Beale’s death. If Mr. Beale is terminated as a result of his disability as determined pursuant to the Agreement, then certain restrictions imposed by the Agreement shall not apply after he ceases to be employed by the Company.

The Agreement will terminate in the event that there is a change in control of the Company, at which time the Management Continuity Agreement, dated as of November 21, 2000, between the Company and Mr. Beale, will become effective and any termination benefits will be determined and paid solely pursuant to the Management Continuity Agreement.

John C. Neal and D. Anthony Peay.The Company has also entered into employment agreements with Messrs. Neal and Peay that contain substantially similar terms and which are modeled after Mr. Beale’s agreement. These agreements each have an initial term of two years, and, similar to Mr. Beale’s agreement, are renewed for an additional day during the term unless the Company gives notice that the employment term will not be extended.

Similar to Mr. Beale’s agreement, each employment agreement will terminate in the event that there is a change in control of the Company, at which time a Management Continuity Agreement for each executive officer will become effective and any termination benefits will be determined and paid solely pursuant to the Management Continuity Agreements.

The Executive Group/Potential Post-employment Payments. Estimated potential payments to members of the Executive Group upon the termination of their employment, including a termination following a change in control, are set forth in the table on page 20.

The Management Continuity Agreements

As stated above in the section describing their employment agreements, the Company has separate agreements with Messrs. Beale, Neal, and Peay that become effective upon a change in control of the

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Company. Under the terms of each of these agreements, each of which is called a “Management Continuity Agreement,” the Company or its successor agrees to continue each of the Executive Group members in its employ for a term of three years after the date of a change in control (as defined in the Management Continuity Agreements). According to certain provisions of the Management Continuity Agreements, the Executive Group members will retain commensurate authority and responsibilities and compensation benefits. They will receive base salaries at least equal to those paid in the immediate prior year and bonuses at least equal to the annual bonuses paid prior to the change in control. If the employment of any of the Executive Group members is terminated during the three years other than for cause or disability (as defined in the Management Continuity Agreements), or if any of them should terminate employment because a material term of his agreement is breached by the Company, such terminating member will be entitled to a lump sum payment, in cash, not later than the 45^th day after the date of termination. For Mr. Beale, this lump sum will be equal to 2.99 times the sum of Mr. Beale’s base salary, annual bonus and equivalent benefits; for each of Messrs. Neal and Peay, the lump sum cash payment will be equal to 2.0 times the sum of his respective base salary, annual bonus and equivalent benefits.

Q. Does the Company have any other plans or agreements, not already discussed above, that relate to any other form of compensation for the executives listed in the Summary Compensation Table?

Yes. The Company and members of the Executive Group are parties to certain separate agreements, each of which is known as a “Split Dollar Life Insurance Agreement.” We sometimes refer to these agreements as “BOLI” agreements. The acronym “BOLI” means “bank owned life insurance.” Generally, under each BOLI agreement, the Company agrees to apply to a reputable insurance company for an insurance policy on the executive’s life. The Company is the owner of the insurance policies and pays the insurance premiums for the policies. The insured executive is requested to designate his beneficiary upon death. A death benefit will be paid to the executive’s designated beneficiary, or to his estate, as may be applicable, under the provisions of the BOLI agreement, and a death benefit will also be paid to the Company.

The Company’s BOLI agreements with the members of the Executive Group, and the respective death benefit for each such executive’s designated beneficiary or estate, include a benefit equal to three times their respective annual compensation as of the date of termination. Messrs Beale, Neal, and Peay each have an additional BOLI agreement with a death benefit of $100,000.

Q. Does the Company have any Split Dollar Life Insurance Agreements with any employees other than the Executive Group?

Yes. The Company has other “Split Dollar Life Insurance Agreements” with certain other employees. Generally, these BOLI agreements are substantially similar to either or both of the BOLI agreements that the Company has with the Executive Group.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed with management the CD&A that appears above in this Proxy Statement. Based on such review and discussions, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement.

Members of the Compensation Committee

Ronald L. Hicks, Chairman

Douglas E. Caton

Ronald L. Tillett

A. D. Whittaker

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following tableSummary Compensation Table provides information on the compensation accrued or paid by the Company or its subsidiaries during the calendar years 2005, 2004 and 2003year 2006, pursuant to the SEC’s executive compensation disclosure requirements, for the chief executive officer, the chief financial officer, and the twochief banking officer (the “Executive Group”). There were no other executive officers (the “named executive officers”) who received total annual salary and bonus in excess of $100,000 in 2005.a policy making position for the Company during 2006.

Summary Compensation TableSUMMARY COMPENSATION TABLE

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2006 ALL OTHER COMPENSATION TABLE

Stock Option Grants and Stock Awards in 2006 under the 2006 MIP and the 2003 SIP

As described above, the Company’s 2003 Stock Incentive Plan provides for “grants” of stock options, stock appreciation rights and restricted stock to executive officers and key employees of the Company and its subsidiaries. The table below provides estimates for both non-equity and equity incentive plan awards, if any. The non-equity component relates to the cash, or short-term portion, of the 2006 MIP and the equity component relates to the award, or long-term portion, of the 2003 SIP.

The estimated future payouts under non-equity incentive plan awards (the short-term cash portion) are shown below. For each eligible executive, the specific target award is weighted between the Company’s earnings per share (“EPS”) growth relative to its select peer group and cash basis return on equity combined with individual/divisional goals. The Company and individual/divisional percentage payouts are based on a percentage of annual base salary which generally ranges from 15% to 45%. Under the terms of the 2003 MIP, the maximum aggregate annual cash award payout for all participants in the 2003 MIP may not exceed 3% of net income.

Q. Did the Company make any awards of either stock options or stock to the executives identified in the Summary Compensation Table in 2006?

The Company did not make any stock option awards during 2006 to the executives identified in the Summary Compensation Table, as shown in the table that follows below. However, the Company did award stock to each of the listed executives as part of its overall compensation and retention strategy. The amount of each stock award was determined as a percentage of annual salary and generally ranged from 30% to 50% of the executive’s respective annual base salary. This equity component of compensation is divided between restricted (time-based) stock grants and performance-based stock grants. The restricted shares vest 50% on each of the third and fourth anniversaries of the date of the grant. The performance-based shares are subject to vesting on the fourth anniversary of the date of the grant based on the performance of the Company’s stock price.

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Q. How does the Company determine the awards for performance-based shares of the Company’s common stock?

The Company’s Board of Directors awarded the right to earn performance-based shares of Company common stock to the executive officers for the 2006-2009 performance period under the 2003 SIP. These awards are determined according to each participant’s salary level, based on survey data and do not vary based on individual performance. The actual payouts of these performance-based shares, if any, will be determined by a non-discretionary formula, which measures the Company’s performance over a four-year period using total shareholder return (including reinvestment of dividends) measured over the performance period relative to the Company’s select peer group. During 2006, each participant received an additional 20% of his/her targeted grant value in restricted stock and performance stock. This additional 20% award is only made if the Company achieves at or above the 75^th percentile of its select peer group for total shareholder return performance for the previous year. The value of the restricted stock awards is calculated by multiplying the fair market value of the Company’s common stock on grant date (February 1, 2006) of $29.93 by the number of shares awarded. Executives have the right to vote the shares and to receive cash or stock dividends, if any, except for the shares under the performance-based component.

GRANTS OF PLAN-BASED AWARDS IN 2006

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Stock Option Grants in 2005

The Company’s 2003 Stock Incentive Plan provides for the granting of incentive stock options, non-statutory stock options, and restricted stock awards to executive officers and key employees of the Company and its subsidiaries. There were no stock options granted during 2005 to the named executive officers.

Stock Option Exercises in 2005 andOutstanding Equity Awards Value at Year-End Option Values

The following table shows certain information with respect to the number of shares acquired on exercise of options in 2005 and the number and value of unexercised options atand stock awards year-end for the named executive officers.

Employee and Director Benefit Plans

Stock Incentive Plan. The Company maintains a stock incentive plan that is designed to attract and retain qualified personnel in key positions, provide employees with a proprietary interest in the Company as an incentive to contribute to the successmembers of the CompanyExecutive Group. This table discloses outstanding awards whose ultimate value is unknown and reward employeeshas not been realized (i.e., dependent on future results of certain measures). We include information regarding outstanding awards for outstanding performance and the attainment of targeted goals. The Company’s 2003 Stock Incentive Plan replaced the 1993 Stock Incentive Plan, and became effective on July 1, 2003, after shareholders approved the plan at the Annual Meeting of Shareholders held in 2003. The stock incentive plan makes available 350,000 shares, which may be awarded to employees of the Company and its subsidiaries in the form of incentive stock options intended to comply with the requirements of Section 422 of the Internal Revenue Code of 1986 (“incentive stock options”), non-statutory stock options and non-vested stock (includes restricted stock.and performance stock).

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2006

Yes, there is a type of deferred compensation plan for some directors. By way of background, in 1985, Union Bank and Trust Company (“Union Bank”) offered its directors the option to participate in a deferred supplemental compensation program. ParticipatingCertain directors have entered into agreements with Union Bank to participate in thethis program. To

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participate in this plan,program, a director must have elected to forego the director’s fees that would otherwise be payable to him by Union Bank for a period of twelve12 consecutive months beginning immediately after his election to participate.

While its obligation under each supplemental compensation agreement represents an unsecured, general obligation of Union Bank, a substantial portion of the benefits payable under the agreements is funded by key-person life insurance owned by Union Bank on each director. The fees deferred by each participating director in 1985 were applied towards the first year’s premium expense of a life insurance policy and thereafter Union Bank has paid the premiums. Similarly, in 1991, a sum equivalent to one year of director compensation was applied towards the first year’s premium expense of a life insurance policy on the life of Mr. Beale. Subsequently,Beale; subsequently, Union Bank has paid the premium necessary to carry suchcontinue the subject life insurance policy thereafter. in effect.

Each supplemental compensation agreement provides that the director will receive from Union Bank a designated fixed amount, payable in equal monthly installments over a period of ten10 years beginning upon his retirement atthe director’s “Normal Retirement Date,” which is defined in the agreements to be the last day of the month in which the director reaches age 65. No interest is paid on the installments. The amount of each director’s monthly benefit is actuarially determined based on, among other factors, the age and health condition of each director at the time he elects to participate in the program. In the event a director retires but dies before receiving all the installments due under the agreement, Union Bank has the option of making one lump sum payment (based on the discounted present value of the remaining installment obligation) to the director’s designated beneficiary or his estate or continuing the balance of the installment payments in accordance with the original payment plan. Each agreement further provides that a reduced fixed amount is payable in the event of a director’s death prior to reaching retirement age.the Normal Retirement Date.

The supplemental compensation agreement with Mr. Beale calls for Union Bank to pay him $26,500 per year for ten years upon his retirement at age 65.Normal Retirement Date. The Company’s other participating directors receive or will receive from Union Bank an annual installment in the respective following amounts upon their retirement (as defined below) fromreaching the Board of Directors of the Company,Normal Retirement Date(s) as follows: Mr. Hicks, $55,364, and Mr. Whittaker, $16,345. As of December 31, 2005,2006, Union Bank had accrued approximately $1,103,675$1,081,865 to cover its obligations under all theseof the supplemental compensation agreements with current and former directors who participatedparticipate in the director deferred compensation plan.

While the insurance policies were purchased as a means of funding the deferred compensation liability created under this plan, there exists no obligation to use any insurance funds from policy loans or death proceeds to curtail the deferred compensation liability. Under the terms

Q. Does any member of the directors’ benefitExecutive Group participate in a nonqualified deferred compensation plan?

Yes, and the following table and narrative summarize the nonqualified deferred compensation for two members of the Executive Group.

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NONQUALIFIED DEFERRED COMPENSATION

Messrs. Beale and Neal have elected to participate in the Company’s non-qualified deferred compensation plan administered by the Virginia Bankers Association Benefits Corporation. Contributions reflected above have been reported in the Summary Compensation Table. Earnings reflected above have not been reported in the Summary Compensation Table.

The Virginia Bankers Association’s (“VBA”) nonqualified deferred compensation plan is a participant, or his beneficiary, will receive upon retirementdefined contribution plan under which contributions are posted to the participant’s account and the account is credited with earnings commensurate with the elected investments. These investments are held in a monthly retirement payment for life, payable for a minimum of 15 years. A participant’s retirement date is considered“rabbi trust” administered by the VBA Benefits Corporation. The funds are to be held in the laterrabbi trust until such time as the executive or director is entitled to receive a distribution.

Post-employment Compensation

Q. Are any of the date a participant turns age 65 or completes 10 years of plan participation. The plan also provides for a reduced payment to a participant’s beneficiaryexecutives listed in the event that the participant dies priorSummary Compensation Table entitled to retirement, payable for a period of 15 yearsreceive any payments from the date of death.

Employment Contracts and Termination and Change in Control Arrangements

The Company and Mr. Beale entered into anif their employment agreement effective April 1, 1999. The agreement had a two-year initial term and is extended for successive one-year terms unless the Company elects not to extend the term of the agreement by providing at least twelve months prior notice, which it has not done. The initial employment agreement provided for an annual base salary of $170,000, which has been adjusted annually at the discretion of the Board, and annual cash bonuses in such amounts as determined by the Board. The Company may terminate Mr. Beale’s employment at any time for “Cause” (as defined in the agreement) without incurring any additional obligations to him. If the Company terminates Mr. Beale’s employment for any reason other than for “Cause”ceases or if Mr. Beale terminates his employment for “Good Reason” (as defined in the agreement), the Company will be obligated to continue to provide the compensation and benefits specified in the agreement until the expiration of its term. The employment agreement will terminate in the event that there is a change in control of the Company, at which time the change in control agreement described below between the Company and Mr. Beale willcontrol? If so, how much could each be paid?

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become effective and any termination benefits will be determined and paid solely pursuant to the change in control agreement.

The Company also has separate agreements with Messrs. Beale, Neal, and Peay (the “Executive Group”) that become effective upon a change in control of the Company. Under the terms of these agreements, the Company or its successor agrees to continue the Executive Group members in its employ for a term of three years after the date of a change in control. During the terms of the agreements, the Executive Group members will retain commensurate authority and responsibilities and compensation benefits. They will receive base salaries at least equal to those paidYes, as discussed in the immediate prior year and bonuses at least equal to the annual bonuses paid prior to the change in control. If the employment of anyCD&A above, each member of the Executive Group, members is terminated during the three years other than for causea party to his respective employment agreement and his respective “change in control” or disability (as definedManagement Continuity Agreement. We disclose in the agreements),following table the estimated potential payments, including any related tax gross-ups, which would be due to each of the executives under two different scenarios, if either had occurred as of December 31, 2006: termination under the executive’s employment agreement, or ifa pay out under his Management Continuity Agreement.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Q. Does the Company have a defined benefit plan or a defined contribution plan?

No, the Company does not participate in a defined benefit plan; however, the Company does have a defined contribution plan for all eligible employees, including members of the Executive Group. This plan is known formally as the Union Bankshares Corporation 401(k) Profit Sharing Plan, or informally as the 401(k) Plan. All members of the Executive Group participate in the 401(k) Plan. Each employee participant is fully vested in his/her own contributions to the 401(k) Plan. The Company provides discretionary matching contributions to plan participants, which matching contributions are fully vested after 6 years.

Q. Does the Company have a pension plan or some kind of similar plan for any of them should terminate employment because a material term of his contractthe executives listed that is breached by the Company, such terminating member will be entitledtied to a lump sum payment, in cash, within thirty days after the date of termination. This lump sum will be equal to 2.9 times the sum of Mr. Beale’s base salary, annual bonus and equivalent benefits, and 2.0 times the sum of the base salary, annual bonus and equivalent benefits of Messrs. Neal and Peay, respectively.

Compensation Committee Report on Executive Compensationretirement age?

Compensation forYes, as we have stated above, certain directors have supplemental compensation agreements that are tied to a “Normal Retirement Age”, which is defined to be age 65. Because Mr. Beale serves as a director and is the President and Chief Executive Officer of the Company, we provide the following tabular information relating to his entitlement to the supplemental compensation, including the present value of the accumulated benefit for him.

20

PENSION BENEFITS

Name		Plan Name		Number of Years Credited Service (#)		Present Value of Accumulated Benefit ($)			Payments During Last Fiscal Year ($)
G. William Beale		Deferred Supplemental Compensation Program		18		$	72,761		$	—
D. Anthony Peay		—		—		$	—		$	—
John C. Neal		—		—		$	—		$	—

Mr. Beale has been credited with 18 years of service and is determined bycurrently eligible to receive benefits at his Normal Retirement Date. Age 65 has been used for purposes of calculating the present value of accumulated benefit.

DIRECTOR COMPENSATION

Q. Are the directors of the Company paid for their services, and if so, how are they paid?

Yes, as compensation for their services, each member of the Board of Directors excludingof the PresidentCompany receives $1,000 for each meeting of the Board attended and Chief Executive Officer,$500 for each committee meeting attended. Additionally, each director who attends a minimum of 75% of all Board and committee meetings since the last Annual Meeting of Shareholders (or since the appointment of a new director in the case of a new director’s first year of service) receives a $25,000 annual retainer (or pro-rated portion thereof in the case of a new director) paid in shares of the Company’s common stock based on the recommendationaverage closing price on the five consecutive trading days ending on December 1st of each year. Mr. Hicks receives an additional $3,500 annual stock retainer for serving as Board chair. Mr. Tillett receives an additional annual stock retainer of $3,500 for serving as chair of the Audit Committee. Mr. Beale does not receive any additional compensation above his regular salary for his service as a director or for attending any Board or committee meetings; thus, Mr. Beale is not listed in the Director Compensation Committee oftable that follows.

The following table summarizes the Board. The Compensation Committee annually reviews and approves corporate goals and objectives relevant to CEOdirector compensation evaluates the CEO’s performance in light of these goals and objectives, and recommends to the Board the CEO’s compensation levels based on this evaluation. In determining the long-term incentive component of CEO compensation, the Committee considers the Company’s performance and relative shareholder return, the value of similar incentive awards to CEOs at comparable companies, and the awards given to the CEO in past years.

Compensation for named executive officers other than the President and Chief Executive Officer is determinedpaid by the Board of Directors basedCompany during 2006.

DIRECTOR COMPENSATION

Name		Fees Earned Or Paid in Cash ($)			Stock Awards1 ($)			All Other Compensation2 ($)			Total ($)
Douglas E. Caton		$	9,425		$	25,000		$	—		$	34,425
Ronald L. Hicks			10,175			28,500			2,520			41,195
Patrick J. McCann			12,175			25,000			—			37,175
Hullihen W. Moore			12,050			25,000			—			37,050
R. Hunter Morin3			10,850			25,000			—			35,850
W. Tayloe Murphy, Jr.			8,125			25,000			—			33,125
Ronald L. Tillett			13,550			28,500			—			42,050
A. D. Whittaker			8,025			25,000			18,865			51,890

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(1)	Represents the value of stock awards on the date of grant to each director. Messrs. Hicks and Tillett each receive an additional $3,500 in stock awards as a result of chairing the Board and Audit

(footnotes continued on the recommendation of the Compensation Committee, with the input of the President and Chief Executive Officer. Compensation levels for named executive officers are determined based on the performance of the Company, performance judgments as to the past and future contributions of the individual officers, and compensation paid to executives in similar positions in the industry.

The Board and the Compensation Committee establish overall compensation using both objective and subjective criteria based on the factors noted above. With respect to the objective portion of the performance evaluation, the Compensation Committee specifically considers the growth in earnings per share and the relative level of return on equity in its deliberations. The subjective component focuses on the Committee’s perception of the performance by the executive officer of his/her individual responsibilities as defined by the Committee and in comparison to the compensation paid to persons in comparable positions within the industry. The Company’s executive compensation program considers base salary its primary component, followed by short-term incentive compensation and long-term incentive compensation.

Members of the Compensation Committeenext page)

Ronald L. Hicks, Chairman

Douglas E. Caton

Ronald L. Tillett

A. D. Whittaker

 

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Compensation Committee, Interlocks and Insider Participation

During 2005 and up to the present time, there were transactions between Union Bank and Northern Neck State Bank and certain membersrespectively. The equivalent number of the Compensation Committee, or their associates, all consisting of extensions of credit by either bank in the ordinary course of its business. Each transaction was made on substantiallystock awards outstanding at 12/31/06 represented the same terms, including interest rates, collateral and repayment terms, as those prevailing atnumber of stock awards granted during the time for comparable transactions withyear. The stock was awarded after the general public. Inex-dividend date during the opinion4th quarter of management, none of the transactions involves more than the normal risk of collectibility or presents other unfavorable features.2006.

(2)

Messrs. Hicks and Whittaker each have life insurance premiums paid on their behalf of $2,520. The policies provide for certain proceeds to be paid to the Company upon the death of either Mr. Hicks or Mr. Whittaker. Mr. Whittaker received payments of $16,345 from the deferred supplemental compensation plan during the year 2006.

(3)	Mr. Morin has elected to defer both cash and stock awards into the Virginia Bankers Association’s non-qualified deferred compensation plan for the Company.

INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS

Certain directors and officers of the Company and its subsidiaries and members of their immediate families, and corporations, partnerships and other entities with which such persons are associated, are customers of Union Bank and Trust Company, Northern Neck State Bank, Rappahannock National Bank, Bay Community Bank (formerly Bank of Williamsburg,Williamsburg), Prosperity Bank & Trust Company, Union Investment Services, Inc., and Union Mortgage Group, Inc. (formerly Mortgage Capital Investors, Inc.). As such, these persons engaged in transactions with the Company and its subsidiaries in the ordinary course of business during 2005,2006, and will have additional transactions with these companies in the future. All loans extended and commitments to lend by the banks to such persons are made in the ordinary course of business upon substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated persons and do not involve more than the normal risk of collection or present other unfavorable features.

INDEPENDENT AUDITORS — PROPOSAL TWO

The Audit Committee has appointed Yount, Hyde & Barbour, P.C.P. C. as the Company’s independent public accountants for the year ending December 31, 2006, and the Board has directed that such selection of independent public accountants be ratified by the shareholders at the Annual Meeting.2007. Yount, Hyde & Barbour, P.C.P. C. has been serving the Company since 1999. Representatives of Yount, Hyde & Barbour, P.C.P. C. are expected to be present at the Annual Meeting and will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

The Board of Directors recommends that you vote FOR the ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent auditors for the fiscal year ending December 31, 2006.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, directors and executive officers of the Company are required to file reports with the Securities and Exchange Commission indicating their holdings of and transactions in the Company’s common stock. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company, insiders of the Company complied with all filing requirements during 2005,2006, with the exception of Mr. Caton for whom, on one occasion with respect to one transaction, a report was not timely filed, and Mr. Morin for whom, on seven occasions with respect to seven separate transactionscertain SEC Form 4s (“Statement of Changes in his direct stock purchase/dividend reinvestment plan account,Beneficial Ownership”), which reports were not timely filed due to administrative timing issues.

14

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SHAREHOLDER RETURN

The Regarding the late filed Form 4s, the Company is subjectdecided to make its stock awards for each director’s annual service (other than Mr. Beale) in mid-December 2006 and the rulesCompany filed the Form 4s relating to those awards the following week. There were 12 late Form 4 filings for Mr. Caton, all attributable to his “automatic” monthly transactions, which were not posted to his statements until the end of the Securities and Exchange Commission that require all public companies to present a graph of total investment return in their annual proxy statements. The graph below compares the yearly percentage change in the Company’s cumulative total shareholder return with the cumulative total return of the NASDAQ Stock Market Index and of the NASDAQ National Market (“NASDAQ/NM”) Bank Index, assuming that investments of $100 were made on December 31, 2000, and that dividends were reinvested.each month.

		2000			2001			2002			2003			2004			2005
Union Bankshares Performance Index		$	100		$	160.56		$	268.83		$	304.98		$	385.82		$	436.90
The NASDAQ Stock Market Index		$	100			79.32			54.84			81.99			89.22			91.12
The NASDAQ/NM Bank Stocks Index		$	100			108.27			110.84			142.58			163.17			159.40

OTHER MATTERS

As of the date of this Proxy Statement, the Board of Directors of the Company has no knowledge of any matters to be presented for consideration at the Annual Meeting other than those referred to above. If any other matters properly come before the Annual Meeting, the persons named in the accompanying proxy intend to vote such proxy, to the extent entitled, in accordance with the recommendation of the Board of Directors.

22

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SHAREHOLDER PROPOSALS

In order for a shareholder proposal to be considered for possible inclusion in the 20072008 Proxy Statement, it must be received by the Company’s Corporate Secretary, Janis Orfe, Union Bankshares Corporation, 212 N. Main Street, P.O.P. O. Box 446, Bowling Green, Virginia 2242722427-0446 on or before November 10, 2006.17, 2007.

15

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ADDITIONAL INFORMATION

“Householding” of Proxy Materials. The Securities and Exchange Commission has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies. The Company and some brokers household proxy materials, delivering a single proxy statement to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker or the Company that they or the Company will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, please notify your broker if your shares are held in a brokerage account or the Company if you hold registered shares. You can notify us by sending a written request to Union Bankshares Corporation,the Company’s Corporate Secretary, Janis Orfe, at Union Bankshares Corporation, 212 N. Main Street, P.O.P. O. Box 446, Bowling Green, Virginia 22427.22427-0446.

Annual Report on Form 10-K. Accompanying this Proxy Statement is a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.2006. The Company encourages its shareholders to read the Form 10-K as it contains information on the Company and its subsidiaries, as well as the Company’s audited financial statements.

 

1623

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DIRECTIONS TO ANNUAL MEETING SITE

HOLIDAY INN SELECT

2801 PLANK ROAD

FREDERICKSBURG, VIRGINIA 22401THE COMPANY’S NEW OPERATIONS CENTER

Union Bankshares Corporation

Operations Center

24010 Partnership Boulevard

Ruther Glen, VA 22546

From the East:

301 South to Bowling Green

Bypass Bowling Green onto 207 West (Rogers Clark Blvd)

207 West to Route 1 North

Turn Right at either Lorraine Drive or Integrity Way

Follow signs to UBSH Operations Center

From the South:

Interstate 85 North, 95 North or 64 West to 295 North (Bypass)

295 North to Interstate 95 North

Follow 95 North to Carmel Church (Exit 104)

Bear Left off Exit onto 207 West (Rogers Clark Blvd)

207 West to Route 1 North

Turn Right at either Lorraine Drive or Integrity Way

Follow signs to UBSH Operations Center

From the West:

Interstate 81 to Interstate 64 East

Interstate 64 East to 295 South (Bypass)

295 South to Interstate 95 North

Follow 95 North to Carmel Church (Exit 104)

Bear Left off Exit onto 207 West (Rogers Clark Blvd)

207 West to Route 1 North

Turn Right at either Lorraine Drive or Integrity Way

Follow signs to UBSH Operations Center

From the North: Follow

Interstate 95 South to Carmel Church (Exit 104)

Bear Right off Exit 130B (Stateonto 207 West (Rogers Clark Blvd)

207 West to Route 3 West). Make the first right1 North

Turn Right at the traffic light onto the Carl D. Silver Parkway. Make the very next right onto Commerce Street. The Holiday Inn Select is on the left.either Lorraine Drive or Integrity Way

From the South:Follow Interstate 95 Northsigns to Exit 130B (State Route 3 West). Follow Route 3 over the interstate (approximate ¹/4 mile) and take the right at the first traffic light onto Carl D. Silver Parkway. Make the very next right onto Commerce Street. The Holiday Inn Select is on the left.UBSH Operations Center

From the West: Follow Route 3 East. As you pass Spotsylvania Mall on your right, get into the left lane and turn left at the next traffic light onto Carl D. Silver Parkway. (If you cross Interstate 95 you have gone too far). Make the very next right onto Commerce Street. The Holiday Inn Select is on the left.

From the East: Follow Route 3 West. After you cross over Interstate 95, take a right at the first traffic light onto Carl D. Silver Parkway. Make the very next right onto Commerce Street. The Holiday Inn Select is on the left.24

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x		PLEASE MARK VOTES		REVOCABLE PROXY
		AS IN THIS EXAMPLE		UNION BANKSHARES CORPORATION

REVOCABLE PROXY

UNION BANKSHARES CORPORATION

ANNUAL MEETING OF SHAREHOLDERS

APRIL 18, 200617, 2007

The undersigned hereby appoints G. William Beale and D. Anthony Peay,Janis Orfe, jointly and severally, proxies, with full power to act alone and with full power of substitution, to represent the undersigned and vote all shares of the Company standing in the name of the undersigned at the Annual Meeting of Shareholders of Union Bankshares Corporation to be held on Tuesday, April 18, 2006,17, 2007, at 3:00 p.m. at the Holiday Inn Select Conference Center, 2801 Plank Road, Fredricksburg,24010 Partnership Boulevard, Ruther Glen, Virginia 22546, or any adjournment thereof, on each of the following matters:

For

With- hold

With- hold

For All Except Except

1.    To elect three Class III directors to serve until the Annual Meeting of Shareholders in 2009.2010. (except as marked to the contrary below):

¨

¨

¨

Douglas E. Caton, R. Hunter Morin, Ronald L. TillettHicks, W. Taylor Murphy, Jr., and A.D. Whittaker

INSTRUCTION: To withhold authority to vote for any individual nominee, mark “For All Except” and write that nominee’s name in the space provided below.

For

Against

Abstain

2. To ratify the appointment of Yount, Hyde, Barbour, P.C. as independent auditors for the Company for 2006.

3.    The transaction of any other business which may properly come before the Annual Meeting. Management at present knows of no other business to be presented at the Annual Meeting.

The meeting will be followed by a reception. Please check this box if you plan to attend.

è

This proxy, when properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction is made, this proxy will be voted “FOR” each proposal.

¨

This proxy, when properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction is made, this proxy will be voted “FOR” each proposal.

 

Please be sure to sign and date this Proxy in the box below.		Date
Shareholder sign above         Co-holder (if any) sign above

+				+

Shareholder sign above             Co-holder (if any) sign above

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é    Detach above card, sign, date and mail in postage paid envelope provided.    éprovided    

UNION BANKSHARES CORPORATION

 

When signing as attorney, executor, administrator, trustee or guardian, please give full title. If more than one fiduciary, all should sign. All joint owners MUST sign

PLEASE ACT PROMPTLY

SIGN, DATE & MAIL YOUR PROXY CARD TODAY

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

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x		PLEASE MARK VOTES		REVOCABLE PROXY
		AS IN THIS EXAMPLE		UNION BANKSHARES CORPORATION

ANNUAL MEETING OF SHAREHOLDERS

APRIL 17, 2007

The undersigned hereby appoints G. William Beale and Janis Orfe, jointly and severally, proxies, with full power to act alone and with full power of substitution, to represent the undersigned and vote all shares of the Company standing in the name of the undersigned at the Annual Meeting of Shareholders of Union Bankshares Corporation to be held on Tuesday, April 17, 2007, at 3:00 p.m. at 24010 Partnership Boulevard, Ruther Glen, Virginia 22546, or any adjournment thereof, on each of the following matters:

ESOP

		For		With- hold		For All Except
1.    To elect three Class II directors to serve until the Annual Meeting of Shareholders in 2010. (except as marked to the contrary below):		¨		¨		¨
Ronald L. Hicks, W. Taylor Murphy, Jr., and A.D. Whittaker
INSTRUCTION: To withhold authority to vote for any individual nominee, mark “For All Except” and write that nominee’s name in the space provided below.
2.    The transaction of any other business which may properly come before the Annual Meeting. Management at present knows of no other business to be presented at the Annual Meeting.
The meeting will be followed by a reception. Please check this box if you plan to attend.						¨

This proxy, when properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction is made, this proxy will be voted “FOR” each proposal.

Please be sure to sign and date   this Proxy in the box below.		Date
Shareholder sign above         Co-holder (if any) sign above

+				+

    Detach above card, sign, date and mail in postage paid envelope provided.    

UNION BANKSHARES CORPORATION

When signing as attorney, executor, administrator, trustee or guardian, please give full title. If more than one fiduciary, all should sign. All joint owners MUST sign

PLEASE ACT PROMPTLY

SIGN, DATE & MAIL YOUR PROXY CARD TODAY

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.