Union Bankshares 10-Q 2005 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
Commission File Number 2-90679
UNION BANKSHARES COMPANY
(Exact name of registrant as specified in its charter)
Maine	01-0395131
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation of organization)
66 Main Street, Ellsworth, Maine 04605
(Address of principal executive offices) (Zip Code)
(207) 667-2504
(Registrant's telephone number, including area code)
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.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)
Yes [ ] No [X]
As of August 8, 2005, there were 1,105,425 shares of the registrant's common stock, $12.50 par value, issued and outstanding.

UNION BANKSHARES COMPANY
INDEX TO FORM 10-Q
Part I. Financial Information			Page #
	Item 1.	Financial Statements (Unaudited)
		Report of Independent Registered Public Accounting Firm	1
		Consolidated Balance Sheets -
		June 30, 2005 and 2004 and December 31, 2004	2
		Consolidated Statements of Income -
		Three and six months ended June 30, 2005 and 2004	3
		Consolidated Statements of Changes in Shareholders' Equity -
		Six months ended June 30, 2005 and 2004	4
		Consolidated Statements of Cash Flows -
		Six months ended June 30, 2005 and 2004	5
		Condensed Notes to Consolidated Financial Statements - June 30, 2005	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	9
	Item3.	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 4.	Controls and Procedures	17
Part II. Other Information
	Item 1:	Legal Proceedings	18
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	18
	Item 3:	Defaults Upon Senior Securities	18
	Item 4:	Submission of Matters to a Vote of Security Holders	18
	Item 5:	Other Information	19
	Item 6:	Exhibits	20
	Signatures		21
i

Part I. Financial Information

Item 1. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Union Bankshares Company:

We have reviewed the accompanying interim consolidated financial information of Union Bankshares Company as of June 30, 2005 and 2004, and for the three and six-month periods then ended. These financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is to express an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

/s/ BERRY, DUNN, MCNEIL & PARKER

Portland, Maine

August 3, 2005

1

UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except number of shares and per share data)
	June 30,	June 30,	December 31,
	2005	2004	2004
	(Unaudited)	(Unaudited)	(Audited)
ASSETS
Cash and cash equivalents	$    9,380	$  10,879	$  10,112
Securities, available for sale, at market	135,600	130,162	134,157
Securities, held to maturity, at cost (market value $2,342, $2,944,
and $2,384 at June 30, 2005, June 30, 2004 and December
31, 2004, respectively)	2,251	2,864	2,255
Other investment securities, at cost which approximates
market value	9,758	7,670	7,727
Loans held for sale	267	69	246
Loans	342,197	297,515	309,951
Less: allowance for loan losses	4,245	4,471	4,504
Net loans	337,952	293,044	305,447
Premises, furniture and equipment, net	6,088	5,840	5,672
Goodwill	6,305	6,305	6,305
Bank owned life insurance	8,555	8,216	8,413
Other assets	8,705	8,889	8,021
Total assets	$524,861	$473,938	$488,355
LIABILITIES
Demand deposits	$  46,921	$  39,972	$  46,314
NOW deposits	59,975	62,000	66,913
Money market accounts	24,879	34,463	30,858
Savings deposits	65,141	53,956	70,921
Certificates of deposit	109,706	94,021	89,976
Total deposits	306,622	284,412	304,982
Borrowings from Federal Home Loan Bank	159,022	134,663	120,160
Other borrowed funds	9,300	8,275	14,254
Other liabilities	8,606	6,693	7,867
Total liabilities	483,550	434,043	447,263
SHAREHOLDERS' EQUITY
Common stock, $12.50 par value. Authorized 10,000,000 shares,
issued 1,115,267 shares at June 30, 2005. Authorized
1,200,000 shares, issued 1,141,774 shares at June 30, 2004,
and 1,114,938 shares at December 31, 2004.	13,941	14,272	13,937
Surplus	2,975	3,977	2,973
Retained earnings	25,734	22,532	24,152
Accumulated other comprehensive income (loss):
Net unrealized gain (loss) on securities available for sale, net
of deferred tax assets of $228 at June 30, 2005, $457 at June 30,
2004 and deferred tax liability of $235 at December 31, 2004.	(443)	(886)	457
Minimum pension liability adjustment, net of deferred tax
asset of $461 at June 30, 2005, $0 at June 30, 2004 and
$220 at December 31, 2004.	(896)	-	(427)
Total shareholders' equity	41,311	39,895	41,092
Total liabilities and shareholders' equity	$524,861	$473,938	$488,355
Share and per share data have been adjusted to reflect the 2-for-1 stock split in the form of a 100% stock dividend paid on March 21, 2005 to shareholders of record on February 18, 2005.
See Report of Independent Registered Public Accounting Firm.The accompanying notes are an integral part of these consolidated financial statements.
2

UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except number of shares and per share data)
	Three months ended		Six months ended
	June 30,		June 30,
	2005	2004	2005	2004
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$4,759	$3,990	$  9,162	$  8,058
Interest and dividends on investments	1,579	1,360	3,142	2,655
Total interest and dividend income	6,338	5,350	12,304	10,713
INTEREST EXPENSE
Interest on deposit	872	651	1,698	1,325
Interest on borrowed funds	1,461	808	2,583	1,534
Total interest expense	2,333	1,459	4,281	2,859
Net interest income	4,005	3,891	8,023	7,854
Provision for (recovery of) loan losses	-	90	(215)	159
Net interest income after provision for
(recovery of) loan losses	4,005	3,801	8,238	7,695
NON-INTEREST INCOME
Net gain on sale of securities	-	83	4	238
Financial services fees and commissions	569	515	1,178	954
Service charges and fees on deposit accounts	500	490	950	807
Bankcard fees	74	49	135	91
Loan fees	241	245	401	471
Income from cash surrender value of life insurance	73	65	143	176
Other income	48	5	1	259
Total non-interest income	1,505	1,452	2,812	2,996
NON-INTEREST EXPENSE
Salaries and employee benefits	2,223	2,201	4,447	4,432
Net occupancy	381	393	789	761
Equipment and data processing	342	322	664	591
Other expense	808	675	1,625	1,363
Total non-interest expense	3,754	3,591	7,525	7,147
Income before income taxes	1,756	1,662	3,525	3,544
Income taxes	504	468	1,049	1,073
Net income	$1,252	$1,194	$  2,476	$2,471
Net income per common share	$1.12	$1.04	$2.22	$2.16
Cash dividends declared per common share	$0.400	$0.325	$0.800	$0.625
Weighted average common shares outstanding	1,116,159	1,143,718	1,116,203	1,144,349
Share and per share data have been adjusted to reflect the 2-for-1 stock split in the form of a 100% stock dividend paid on March 21, 2005 to shareholders of record on February 18, 2005.
See Report of Independent Registered Public Accounting Firm. The accompanying notes are an integral part of these consolidated financial statements.
3

UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Dollars in thousands, except number of shares and per share data)
	Common Stock	Surplus	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total Shareholders' Equity
Balance at December 31, 2003	$14,560	$4,056	$(803)	$21,396	$ 1,543	$40,752
Net income, six months ended June 30, 2004	-	-	-	2,471	-	2,471
Change in net unrealized gain on available
for sale securities, net of tax of $(1,251)	-	-	-	-	(2,429)	(2,429)
Total comprehensive income	-	-	-	2,471	(2,429)	42
Sale of 4,158 shares of treasury stock	-	1	185	-	-	186
Repurchase of 7,946 shares of treasury stock	-	-	(366)	-	-	(366)
Retirement of treasury stock	(288)	(80)	984	(616)	-	-
Cash dividend declared	-	-	-	(719)	-	(719)
Balance at June 30, 2004	$14,272	$3,977	$      -	$22,532	$   (886)	$39,895
Balance at December 31, 2004	$13,937	$2,973	$      -	$24,152	$30	$41,092
Net income, six months ended June 30, 2005	-	-	-	2,476	-	2,476
Change in net unrealized gain on available
for sale securities, net of tax of $(464)	-	-	-	-	(900)	(900)
Minimum pension liability adjustment
net of tax of $(241)	-	-	-	-	(469)	(469)
Total comprehensive income (loss)	-	-	-	2,476	(1,369)	1,107
Sale of 3,429 shares of common stock	43	186	-	-	-	229
Repurchase of 3,100 shares of common stock	(39)	(184)	-	-	-	(223)
Cash dividends declared	-	-	-	(894)	-	(894)
Balance at June 30, 2005	$13,941	$2,975	$      -	$25,734	$(1,339)	$41,311
Share and per share data have been adjusted to reflect the 2-for-1 stock split in the form of a 100% stock dividend paid on March 21, 2005 to shareholders of record on February 18, 2005.
See Report of Independent Registered Public Accounting Firm. The accompanying notes are an integral part of these consolidated financial statements.
4

UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except number of shares and per share data)
	Six months ended June 30,
	2005	2004
	(Unaudited)	(Unaudited)
Net cash flows provided by operating activities:
Net Income	$   2,476	$   2,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	361	334
Provision for (recovery of) loan losses	(215)	159
Net securities gains	(4)	(238)
Net increase in other assets	(707)	(671)
Net increase in other liabilities	735	685
Net amortization of premium on investments	222	280
Net increase in deferred loan origination fees	(45)	(59)
Origination of loans held for sale	(3,292)	(5,451)
Proceeds from loans held for sale	3,271	6,319
Net cash provided by operating activities	2,802	3,829
Cash flows from investing activities:
Purchase of securities available for sale	(20,949)	(36,629)
Proceeds from sales of securities available for sale	2,313	19,857
Proceeds from calls or maturities of securities available for sale	15,615	12,321
Increase in other investments	(2,031)	(1,812)
Net increase in loans to customers	(32,245)	(11,150)
Capital expenditures	(755)	(332)
Net increase in cash surrender value of life insurance	(142)	(175)
Net cash used in investing activities	(38,194)	(17,920)
Cash flows from financing activities:
Net decrease in other borrowed funds	(4,954)	(4,427)
Proceeds from long-term borrowings	25,000	14,000
Repayment of long-term borrowings	(8,138)	(3,314)
Net change in short-term borrowings	22,000	18,950
Net increase (decrease) in deposits	1,640	(14,042)
Purchase of common stock	(223)	(366)
Proceeds from stock issuance	229	186
Dividends paid	(894)	(719)
Net cash provided by financing activities	34,660	10,268
Net decrease in cash and cash equivalents	(732)	(3,823)
Cash and cash equivalents at beginning of year	10,112	14,702
Cash and cash equivalents at end of period	$   9,380	$ 10,879
Supplemental schedule of cash flow information
Interest paid	$   4,470	$   2,859
Income taxes paid	829	977
Supplemental schedule of noncash investing and financing activities
Changes in other comprehensive income:
Net decrease required by Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investment in Debt and
Equity Securities"	$  (1,364)	$  (3,680)
Deferred income tax asset thereon	464	1,251
Decrease required by Statement of Financial Accounting
Standards No. 87 "Employers' Accounting for Pensions"	(710)	-
Deferred income tax asset thereon	241	-
See Report of Independent Registered Public Accounting Firm. The accompanying notes are an integral part of these consolidated financial statements.
5

Condensed Notes to Consolidated Financial Statements

Note 1. Basis of Presentation

      The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America from interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. All significant intercompany transactions and balances are eliminated in consolidation. Operating results for the quarter ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005 or other interim periods. For further information, refer to the consolidated financial state ments and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission.

Note 2. Common Stock

      On February 9, 2005, the Company's Board of Directors declared a two-for-one stock split of the Company's common stock payable in the form of a 100% stock dividend to shareholders of record on February 18, 2005, with a payment date of March 21, 2005. All share and per share data included in the consolidated financial statements and elsewhere in this report have been restated to reflect the stock split.

Note 3. Earnings Per Share

      Earnings per common share ("EPS") is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period.

      Earnings per share data and weighted average shares outstanding have been adjusted to reflect the two-for-one stock split in the form of a 100% stock dividend paid on March 21, 2005, to shareholders of record on February 18, 2005.

Note 4. Treasury Stock

      A revision to the Maine Business Corporation Act requires that stock reacquired by a corporation be classified as "authorized but unissued," effectively eliminating a corporation's ability to hold stock in treasury. In order to recognize the effect of the revision, the Company retired its treasury stock as of June 30, 2004, which reduced the common stock portion of Shareholders' Equity by $288,000, surplus by $80,000 and retained earnings by $616,000.

Note 5. Stock Repurchase Plan

      On April 14, 2002, the Board of Directors voted to authorize the Company to purchase up to 57,700 shares or approximately 5% of its outstanding common stock. On October 27, 2004, the Bank's stock repurchase plan was amended to allow the Company to purchase up to 86,550 shares or approximately 7.5% of its outstanding common stock. The authority may be exercised from time to time and in such amounts as market conditions warrant. As of June 30, 2005, a total of 59,432 shares have been repurchased since the plan's inception on April 14, 2002. The Company repurchased 2,500 shares as part of this plan at an average price of $74.40 during the second quarter of 2005.

Note 6. Mortgage Servicing Rights

      Capitalized mortgage servicing rights are recognized in accordance with SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", as separate assets when the Company continues to service residential real estate loans that have been sold in the secondary market. Capitalized servicing rights are included in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

      Management uses, on a quarterly basis, an independent firm which specializes in the valuation of mortgage servicing rights to determine the fair value which is recorded on the balance sheet. This includes an evaluation for impairment based upon the fair value of the rights, which can vary depending upon current interest rates and prepayment expectations, as compared to amortized cost. When the book value exceeds the fair value, a valuation allowance is recorded against these servicing assets.

6

The following summarizes mortgage servicing rights capitalized and amortized, along with the activity in the related valuation allowance:
	Six months ended June 30,
	2005	2004
	(Dollars in thousands)
Balance of loans serviced for others at June 30,	$105,006	$110,726
Mortgage Servicing Rights:
Balance at beginning of year	$       806	$       590
Mortgage servicing rights capitalized	56	337
Amortization charged against mortgage servicing income	(148)	(197)
Change in valuation allowance	6	66
Balance at end of period	$       720	$       796
Valuation Allowance:
Balance at beginning of year	$         13	$       200
Increase in impairment reserve	8	4
Reduction of impairment reserve	(14)	(70)
Balance at end of period	$           7	$       134
Note 7. Core Deposit Intangible
On August 31, 2000, the Company acquired the outstanding stock of Mid-Coast Bancorp, Inc. and its subsidiary, The Waldoboro Bank, FSB. The acquisition was accounted for under the purchase method of accounting for business combinations. The Company has an intangible asset subject to amortization related to the acquisition. The core deposit intangible is being amortized on a straight-line basis over 7 years, and reviewed for possible impairment when it is determined that events or changed circumstances may affect the underlying basis of the asset. The carrying amount is as follows:

	June 30,	June 30,	December 31,
	2005	2004	2004
	(Dollars in thousands)
Core deposit intangible, cost	$323	$323	$323
Accumulated amortization	226	179	202
Core deposit intangible, net	$  97	$144	$121
Amortization expense related to the core deposit intangible amounted to $23,000 for the six months ended June 30, 2005 and June 30, 2004. The expected amortization expense is estimated to be $47,000 each year through December 31, 2006 and $27,000 in 2007.
Note 8. Employee Benefits
The Company's subsidiary sponsors a noncontributory defined benefit pension plan covering substantially all permanent full-time employees who are at least 21 years of age and have completed one year of service. Plan benefits generally are based on years of service and average compensation.
The defined benefit pension plan was frozen as of May 15, 2005. As a result, all affected employees retain any benefits accumulated to the effective date, but are no longer eligible to increase their benefit. The Company made no pension plan contributions during the three and six month periods ended June 30, 2005. The expected pension contribution for the Company for all of 2005 is $0.
The Company also sponsors a postretirement benefit program that provides medical coverage and life insurance benefits to certain employees and directors who meet minimum age and service requirements. Active employees and directors accrue benefits over a 25-year period.
7

Net periodic benefit cost of these plans includes the following components:
	Three months ended June 30,
	2005		2004
	Pension	Other	Pension	Other
	Benefits	Benefits	Benefits	Benefits
	(Dollars in thousands)
Service cost	$     -	$ 19	$117	$ 18
Interest cost	111	21	114	24
Expected return on plan assets	(111)	-	(115)	-
Recognized net actuarial (gain) loss	21	(3)	26	-
Amortization of unrecognized transition obligation	-	12	-	12
Amortization of prior service cost	-	-	(1)	-
Net periodic benefit cost	$   21	$ 49	$141	$ 54
	Six months ended June 30,
	2005		2004
	Pension	Other	Pension	Other
	Benefits	Benefits	Benefits	Benefits
	(Dollars in thousands)
Service cost	$     -	$ 38	$234	$  36
Interest cost	236	42	228	49
Expected return on plan assets	(229)	-	(231)	-
Recognized net actuarial (gain) loss	47	(6)	52	(1)
Amortization of unrecognized transition obligation	(1)	24	-	23
Amortization of prior service cost	-	-	(1)	-
Net periodic benefit cost	$  53	$ 98	$282	$107
Note 9. Reclassification
Certain items from the prior year were reclassified in the financial statements to conform with the current year presentation. The reclassifications do not have a material impact on the balance sheet and income statement presentation.
8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis reviews the consolidated financial condition of Union Bankshares Company (the "Company") at June 30, 2005 and 2004 and December 31, 2004, and the consolidated results of operations for the three and six months ended June 30, 2005 and 2004. This discussion should be read in conjunction with the consolidated financial statements, notes and tables included in the Company's Annual Report on Form 10-K for the fiscal year ending December 31, 2004, filed with the Securities and Exchange Commission.
Certain information discussed below is presented on a fully taxable equivalent basis. Management believes the disclosure of tax-equivalent net interest income information improves the clarity of financial analysis, and is particularly useful to investors in understanding and evaluating the changes and trends in the Company's results of operations.
Forward Looking Statements
This Form 10-Q contains "forward-looking statements" which may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated" and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to:
	*	The strength of the United States economy in general and the strength of the local economies in which we operate;
	*	Changes in deposit flows, demand for mortgages and other loans, real estate values, and competition;
	*	Changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
	*	Changes in accounting principles, policies, or guidelines; and
	*	Other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services.
This list of important factors is not exclusive. The Company and its wholly-owned subsidiary, Union Trust Company (the "Bank"), disclaim any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on their behalf.
Critical Accounting Policies
Management's discussion and analysis of the Company's financial condition are based on the consolidated financial statements which are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to the allowance for loan losses and the evaluation of mortgage servicing rights. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets that are not readily apparent from other sources. Actual results could differ from the amo unt derived from management's estimates and assumptions under different assumptions or conditions.
Allowance for Loan Losses. Management believes the allowance for loan losses is a critical accounting policy that requires estimates and assumptions in the preparation of the consolidated financial statements. The allowance for loan losses is based on management's evaluation of the level of the allowance required in relation to the estimated loss exposure in the loan portfolio. Management believes the allowance for loan losses is a significant estimate and therefore regularly evaluates it for adequacy by taking into consideration factors such as prior loan loss experience, the character and size of the loan portfolio, business and economic conditions and management's estimation of probable losses. The use of different estimates or assumptions could produce different provisions for loan losses.
Mortgage Servicing Rights. The valuation of mortgage servicing rights is also a critical accounting policy which requires significant estimates and assumptions. Servicing assets are recognized as separate assets when servicing rights are acquired through the sale of residential mortgage loans. Capitalized servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Management uses, on a quarterly basis, an independent firm which specializes in the valuation of mortgage servicing rights to determine the fair value which is recorded on the balance sheet. This includes an evaluation for impairment based upon the fair value of the rights, which can vary depending upon current interest rates and prepayment expectations, as compared to amortized cost. When the book value exceeds the fair value, a valuation allo wance is recorded against these servicing assets.
9

Executive Overview
Net income increased $58,000, or 5%, for the quarter ended June 30, 2005 compared to the second quarter last year. The following were significant factors contributing to the results for the second quarter of 2005:
	*	Net interest income after the provision for loan losses increased $204,000, or 5%, primarily resulting from continued growth in earning assets and improved asset quality.
	*	Non-interest income increased $53,000, or 4%, primarily due to continued growth in financial services fees and commissions and increases in deposit account and bankcard fees, partially offset by a decrease in mortgage origination and servicing income as a result of a reduction in mortgage activity and sales volume of residential mortgage loans and a decrease in gain on sale of securities.
	*	Non-interest expense increased $163,000, or 5%, due primarily to expenses related to upgrading equipment and facilities, additional legal, corporate, other professional fees, credit card program expenses, and the reversal of reserves in 2004 related to the valuation of mortgage servicing rights.
	*	Total loans increased by $44.7 million, or 15%, at June 30, 2005 compared to June 30, 2004.
	*	Total deposits increased 8%, or $22.2 million, at June 30, 2005 compared to June 30, 2004. Demand deposits and savings balances increased by 17% and 21%, respectively. Certificates of deposit also increased by 17%.
Results of Operations
Net Income. Net income for the six months ended June 30, 2005 was $2.5 million, an increase of $5,000 over the same period in 2004. Earnings per share were $2.22 and $2.16 for the six months ended June 30, 2005 and June 30, 2004, respectively. Annualized return on average equity ("ROE") and return on average assets ("ROA") for the first six months of the year were 12.11% and .97%, respectively. Annualized ROE and ROA were 11.95% and 1.09%, respectively, for the same period in 2004.
Net income for the three months ended June 30, 2005 increased $58,000 or 5% compared with the same period last year and earnings per share increased to $1.12 compared to $1.04 for the same period. Annualized ROE and ROA were 12.37% and .96%, respectively for the second quarter of 2005 compared to 11.56% and 1.03% for the same period in 2004.
Net Interest Income.The amount of net interest income is affected by changes in interest rates and by the volume and mix of interest earning assets and interest bearing liabilities. Net interest income for the six months ended June 30, 2005 totaled $8.0 million, an increase of $169,000 or 2% over net interest income for the first six months of 2004. On a fully tax-equivalent basis, net interest income increased by $287,000 to $8.4 million in comparison to the same period last year. The increase in net interest income was primarily due to continued growth in average earning assets partially offset by a 35 basis point decline in the net interest margin. The Company's net interest margin declined to 3.51% for the six months ended June 30, 2005 compared to 3.86% for the same period a year ago as the cost of funds continued to reprice upward at a faster pace than yields on earning assets.
The yield on interest-earning assets was 5.32% for the first six months in 2005, compared to 5.23% for the same period in 2004. The average balance of securities increased by $17.4 million or 13% compared with the same period in the prior year. The average balance of loans also increased $38.9 million or 14%. The yield on loans remained consistent between periods while the yield on investments increased by 27 basis points to 4.52% for the six months ended June 30, 2005.
The cost of interest-bearing liabilities, or cost of funds, increased to 2.06% during the six months ended June 30, 2005, an increase of 50 basis points over the six months ended June 30, 2004. The increase in cost of funds is primarily attributable to a 61 basis points increase in the cost of borrowings during the first six months of 2005 compared to the same quarter in 2004. A 42 basis points increase in the cost of funds for time deposits also contributed to an increase in the total cost of interest bearing liabilities during the current period.
10

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income of the Bank from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average costs; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin. For purposes of this table and the following discussion, income from interest earning assets and net interest income are presented on a fully taxable equivalent basis and nonaccrual loans have been included in average balances only.
Average Balance Sheets and Analysis of Net Interest Income
(On a Tax-Equivalent Basis)
		Six months ended June 30,
		2005			2004
		Average		Yield/	Average		Yield/
		Balance	Interest	Rate	Balance	Interest	Rate
		(Dollars in thousands)
Assets
Interest Earning Assets:
Investment securities (1)		$151,893	$  3,409	4.52%	$134,485	$  2,844	4.25%
Loans, gross (excludes loans held for sale ) (1)		324,796	9,233	5.69%	285,850	8,089	5.69%
Total interest earning assets		476,689	$12,642	5.32%	420,335	$10,933	5.23%
Other assets:
Cash and due from banks		9,535			10,105
Other assets		17,918			18,004
		$504,142			$448,444
Liabilities
Interest Bearing Liabilities:
NOW deposits		$  62,105	$     105	0.34%	$  61,368	$       64	0.20%
Money market accounts		28,378	127	0.90%	34,422	140	0.82%
Savings deposits		68,626	295	0.87%	52,906	100	0.38%
Time deposits		92,682	1,171	2.55%	96,471	1,021	2.13%
Borrowings		167,365	2,583	3.11%	123,232	1,534	2.50%
Total interest bearing liabilities		419,156	$  4,281	2.06%	368,399	$  2,859	1.56%
Non-Interest Bearing Liabilities
& Shareholders' Equity:
Demand deposits		43,261			38,355
Other liabilities		7,132			6,987
Shareholders' equity		34,593			34,703
		$504,142			$448,444
Net interest income (1)			$  8,361			$  8,074
Net interest rate spread (2)				3.26%			3.67%
Net interest margin (2)				3.51%			3.86%
(1)	The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $338,000 and $220,000 for the six months ended June 30, 2005 and 2004, respectively.
(2)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average costs of interest-bearing liabilities. Net interest margin represents net interest income as a percent of average interest-earning assets.
11

The following table presents certain information on a fully tax-equivalent basis regarding changes in interest income and interest expense of the Bank for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (i) changes in volume (change in volume multiplied by prior year rate), (ii) changes in rate (change in rate multiplied by prior year volume), and (iii) changes in rate/volume (change in rate multiplied by change in volume).
Analysis of Changes in Interest Income and Expense
		Six months ended June 30, 2005 vs. 2004
				Rate/
		Volume	Rate	Volume	Total
		(Dollars in thousands)
Interest Earning Assets
Investment securities (1)		$   368	$ 172	$   25	$   565
Loans, gross (excludes loans held for sale ) (1) (2)		1,169	(22)	(3)	1,144
Total interest earning assets		$1,537	$ 150	$   22	$1,709
Interest Bearing Liabilities
NOW deposits		$       1	$   42	$    (2)	$     41
Money market accounts		(25)	13	(1)	(13)
Savings deposits		30	128	37	195
Time deposits		(40)	198	(8)	150
Borrowings		549	369	131	1,049
Total interest bearing liabilities		$   515	$ 750	$ 157	$1,422
Net change in net interest income		$1,022	$(600)	$(135)	$   287
(1)	The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $338,000 and $220,000 for the six months ended June 30, 2005 and 2004, respectively.
(2)	Loans include portfolio loans and nonaccrual loans, but unpaid interest on nonperforming loans has not been included for purposes of determining interest income.
Provision for Loan Losses.The provision for loan losses represents the charge to expense that is required to maintain an adequate level of allowance for loan losses. The process of evaluating the adequacy of the allowance for loan losses involves a high degree of management judgment, based in part on systematic methods. These methods, which are generally quantitative measures, are employed to help ensure that all relevant matters affecting loan collectibility will be consistently identified. Such methods include a loan-by-loan analysis of all impaired loans and loans under close monitoring by management for potential problems, a risk rating analysis for all commercial and commercial real estate loans and a quantitative analysis of residential real estate and consumer loans. Other factors included in the evaluation of the adequacy of the allowance for loan losses involve overall loan growth; the character and mix of the loan portfolio; current trends in nonperforming loans, delinquent loans and net charge-offs; new loan origination; local economic conditions; regulatory changes and other qualitative considerations.
During the first six months of 2005, the Company recorded a reduction in the allowance for loan losses resulting in a net provision benefit of $215,000 as compared to provision expense of $159,000 for the first six months of 2004. Asset quality remains sound with nonperforming assets of $2.2 million, or .43% of total assets, at June 30, 2005 compared to .30% of total assets at December 31, 2004. Total net charge offs as a percent of total loans was .01% for the six months ended June 30, 2005 and June 30, 2004. Due to continuing strong asset quality, no provision for loan losses was recorded in the second quarter of 2005 compared to $90,000 during the second quarter of 2004.
Management believes that the level of allowance for loan losses at June 30, 2005, of $4.2 million, or 1.24%, of total loans outstanding, is adequate. As a percentage of total loans outstanding, the allowance for loan losses, of $4.5 million was 1.50% as of June 30, 2004.
Non-Interest Income.Non-interest income declined by $184,000, or 6%, to $2.8 million for the six months ended June 30, 2005 compared to the same period last year. Mortgage origination activity continued to slow down during the six months ended June 30, 2005, resulting in a 15% or $70,000 decline in loan fees compared to the same period last year. Other income decreased by $258,000 for the first six months of 2005 compared to the same period in 2004, primarily due to a considerable reduction in sales volume of

12

residential mortgage loans and the amortization of mortgage servicing rights. Security gains also decreased $234,000 during the first half of 2005 compared to the same period a year ago. Partially offsetting these declines was a $224,000, or 23%, increase in financial services fees and commissions, largely due to an increase in assets under management, an increase in market values of these assets during the latter part of 2004 and the first quarter of 2005, and an increase in trust fees during the first quarter of 2005. Service charges and fees on deposit accounts increased $143,000, or 18%, principally due to the successful launch of a new overdraft privilege product during the first quarter of 2004.
Total non-interest income increased $53,000, or 4%, during the second quarter of 2005 compared to the second quarter of 2004. Income from financial services fees and commissions increased $54,000, or 10%, resulting from an increase in assets under management and an increase in trust fees. Service charges and fees on deposit accounts increased $10,000, or 2%, for the second quarter of 2005 compared to 2004 and bankcard income increased 51% or $25,000 during the three months ended June 30, 2005 compared to the same period last year. Security gains decreased $83,000 during the second quarter of 2005 compared to the second quarter of 2004.
Non-Interest Expense. Total non-interest expense, which consists primarily of employee compensation and benefits, occupancy costs, equipment and data processing costs and other operating expense increased $378,000, or 5%, to $7.5 million for the six months ended June 30, 2005 compared to $7.1 million for the six months ended June 30, 2004. This increase was primarily attributable to additional expenses related to the upgrade of equipment and facilities, additional legal costs, increases in corporate and other professional fees and increases in bankcard expense. Also contributing to the increase in expense from 2004 is the reversal of reserves related to the valuation of mortgage servicing rights which reduced Other Expenses in 2004.
Non-interest expense was $3.8 million in the second quarter of 2005 compared to $3.6 million for the second quarter of 2004, an increase of $163,000 or 5%. The increase was mainly the result of increases in supplies, legal and professional fees and other corporate expenses related to annual regulatory requirements.
Financial Condition
The Company's total assets increased to $524.9 million at June 30, 2005, an increase of $36.5 million, or 7%, over December 31, 2004. The increase in total assets was primarily attributable to continued growth in total loans.
Loan Portfolio.Total loans increased by $32.2 million, or 10%, during the six months ended June 30, 2005 as compared to December 31, 2004. The increases were mainly in municipal, residential real estate and commercial real estate which increased $9.9 million, $9.9 million and $4.0 million, respectively. Consumer loans also increased by $5.1 million during the first six months of 2005, primarily due to a continued increase in home equity lines of credit.
Between June 30, 2004 and June 30, 2005, the loan portfolio increased $44.7 million or 15%, a direct result of continued strong origination and customer demand throughout our market areas.
The following table summarizes the composition of the Bank's loan portfolio by type of loan at the dates indicated.
Loan Portfolio Composition
	June 30, 2005		June 30, 2004		December 31, 2004
		Percent of		Percent of		Percent of
		Loans in		Loans in		Loans in
		Category to		Category to		Category to
	Amount	Total Loans	Amount	Total Loans	Amount	Total Loans
	(Dollars in thousands)
Real estate:
Residential	$211,615	61.9%	$189,585	63.7%	$201,669	65.0%
Commercial	62,883	18.4%	58,879	19.8%	58,834	19.0%
Commercial and industrial	25,112	7.3%	19,910	6.7%	21,906	7.1%
Consumer	28,465	8.3%	21,630	7.3%	23,340	7.5%
Municipal	14,122	4.1%	7,511	2.5%	4,202	1.4%
Total	$342,197	100.0%	$297,515	100.0%	$309,951	100.0%
Asset Quality.As of June 30, 2005, nonperforming assets totaled $2.2 million, an increase of $1.0 million over the same date last year and an increase of $771,000 from December 31, 2004. As a percentage of total assets, nonperforming assets at June 30, 2005 were .43% compared to .26% at June 30, 2004.
13

      The following table sets forth information regarding nonperforming assets at the dates indicated.

Nonperforming Assets

	June 30,	June 30,	December 31,
	2005	2004	2004
	(Dollars in thousands)
Loans accounted for on a nonaccrual basis	$1,883	$1,090	$1,145
Accruing loans contractually past due 90 days or more	351	145	318
Total nonperforming loans	2,234	1,235	1,463
Other real estate owned	-	-	-
Nonperforming securities	-	-	-
Total nonperforming assets	$2,234	$1,235	$1,463
Ratio of nonperforming assets to total assets	0.43%	0.26%	0.30%
Ratio of nonperforming loans to total loans	0.65%	0.42%	0.47%
Allowance for Loan Losses.At June 30, 2005, the allowance for loan losses totaled $4.2 million, or 1.24% of total loans as compared to $4.5 million, or 1.50% of total loans at June 30, 2004. Net charge-off activity totaled $44,000 for the first six months of 2005 compared to $27,000 for the same period one year ago.
The following table sets forth the breakdown of the allowance for loan losses for the periods indicated.
Analysis of Allowance for Loan Losses

	June 30,
	2005	2004
	(Dollars in thousands)
Total loans outstanding at the end of the period (1)	$342,197	$297,515
Average loans outstanding during the period (1)	$324,768	$285,659
Allowance for loan losses, beginning of the period	$    4,504	$    4,339
Provision for (recovery of) loan losses	(215)	159
Balance before loan charge-offs	4,289	4,498
Loans charged-off	129	164
Less recoveries on loans charged-off	85	137
Net loan charge-offs	44	27
Allowance for loan losses, end of the period	$    4,245	$    4,471
Ratios:
Net charge-offs to average loans outstanding	0.01%	0.01%
Net charge-offs to loans, end of period	0.01%	0.01%
Allowance for loan losses to average loans outstanding	1.31%	1.57%
Allowance for loan losses to total loans, end of period	1.24%	1.50%
Allowance for loan losses to nonperforming loans	190.02%	362.02%

(1)	Excludes loans held for sale.
Investments. Total investments increased $3.5 million, or 2%, to $147.6 million at June 30, 2005 from December 31, 2004, with purchases primarily consisting of state and county municipal securities. At June 30, 2005, the Company's available for sale portfolio had a net unrealized loss, net of taxes, of $443,000, compared to a net unrealized gain, net of taxes, of $457,000 at December 31, 2004. Management feels that the change in the net unrealized position is primarily due to a change in market rates during the period.
14

      The following table sets forth the Company's securities at the dates indicated.

	June 30, 2005		June 30, 2004		December 31, 2004
	Amortized	Fair	Amortized	Fair	Amortized	Fair
	Cost	Value	Cost	Value	Cost	Value
	(Dollars in thousands)
Securities available for sale:
Mortgage-backed securities	$  82,857	$  82,067	$  84,703	$  82,778	$  87,131	$  87,037
U.S. Treasury notes and other U.S.
Government agencies	26,612	26,496	27,745	27,965	28,689	28,870
Obligations of states and political subdivisions	21,963	22,311	11,765	12,186	11,758	12,406
Other securities	4,839	4,726	7,292	7,233	5,887	5,844
Total	$136,271	$135,600	$131,505	$130,162	$133,465	$134,157
Securities held to maturity:
Obligations of states and political subdivisions	$    2,251	$    2,342	$    2,864	$    2,944	$    2,255	$    2,384

      Deposits.Deposits continue to represent the Company's primary source of funds for lending and investment activities. At June 30, 2005, deposits of $306.6 million were $1.6 million higher than December 31, 2004. The increase is primarily due to an increase in certificates of deposit of $19.7 million, or 22%, during the first six months of 2005. The increase in certificates of deposit was largely the result of the Company utilizing brokered certificates of deposit as a funding source when the market for these funds was favorable compared to other funding alternatives.

      Between June 30, 2004 and June 30, 2005, total deposits increased $22.2 million or 8%. Transaction accounts, consisting of demand deposits and NOW accounts, increased $4.9 million, savings accounts increased $11.2 million, certificates of deposit increased $15.7 million and money market accounts decreased $9.6 million.

      Borrowings.The Bank's borrowings amounted to $168.3 million at June 30, 2005, an increase of $33.9 million or 25% from December 31, 2004 and were used to supplement deposits as a source of liquidity and to provide funding for continued growth in earning assets. At June 30, 2005, the Bank's borrowings consisted primarily of Federal Home Loan Bank of Boston ("FHLB") borrowings totaling $159.0 million, an increase of $38.9 million over balances as of December 31, 2004. The remaining borrowings consisted primarily of assets sold under repurchase agreements. These borrowings totaled $9.3 million at June 30, 2005, a decrease of $5.0 million from year end 2004.

Liquidity and Capital Resources

      Liquidity.Liquidity, as it pertains to the Company, is the ability to generate adequate amounts of cash to meet current and future financial obligations. The Company's primary sources of fundsconsist of deposits, borrowings, and the amortization, prepayment and maturities of loans and securities. While scheduled repayment of loans and maturities of securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by the general level of interest rates, seasonality, economic conditions and competitive factors.

      The Company actively manages its liquidity position under the direction of the Asset/Liability Management Committee. Periodic review under prescribed policies and procedures is intended to ensure that the Company will maintain adequate levels of available funds. At June 30, 2005, the Company's liquidity position was well within policy guidelines. Management believes that the Company has adequate liquidity available to respond to current and future funding requirements.

      Capital Resources.The Federal Reserve Board ("FRB"), the Federal Deposit Insurance Corporation ("FDIC"), and other regulatory agencies have established capital guidelines for banks and bank holding companies. Risk-based capital guidelines issued by the federal regulatory agencies require banks to meet a minimum Tier 1 leverage capital ratio of 4.0%, a Tier 1 risk-based capital ratio of 4.0% and a total risk-based capital ratio of 8.0%. At June 30, 2005, the Company and the Bank exceeded all of their regulatory capital requirements.

Off-Balance Sheet Risks and Commitments

      As of June 30, 2005 and 2004, the total of approved loan commitments outstanding, commitments under unused lines of credit and unadvanced portions of loans amounted to $68.4 million and $57.2 million, respectively.

15

Contractual Obligations

      The following table is a summary of the Company's contractual obligations as of June 30, 2005 consisting of operating lease obligations and FHLB borrowings by contractual maturity date for the next five years.

Contractual Obligations by Maturity

				Payment due by period
					Less
					than 1		1 - 3		4 - 5	After 5
				Total	Year		Years		Years	Years
Contractual Obligations				(Dollars in thousands)
Operating lease obligations				$    1,359	$     209		$     230		$   181	$   739
FHLB borrowings				159,022	89,055		58,748		5,781	5,438
Total				$160,381	$89,264		$58,978		$5,962	$6,177
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the sensitivity of income to changes in interest rates, foreign exchange rates, commodity prices, equity prices and other market-driven rates or prices. The Company has no trading operations, and therefore is only exposed to non-trading market risk. The Company's primary market risk exposure is interest rate risk. The ongoing monitoring and management of this risk is an important component of the Company's asset/liability management process, which is governed by policies established by its Board of Directors that are reviewed and approved annually. The Board of Directors delegates responsibility for carrying out the asset/liability management policies to the Asset/Liability Committee ("ALCO"), whose members are comprised of the Bank's senior management. In this capacity ALCO develops guidelines and strategies, consistent with policies established by the Board of Directors, which monitor and coordinate the Bank's interest rate sensitivity and the sources, uses and pricing of funds.
Net interest income sensitivity to movements in interest rates is measured through the use of a simulation model that analyzes resulting net interest income under various interest rate scenarios established by regulators. Projected net interest income (NII) is modeled, based on a gradual shift in market interest rates ("ramped") over a 12-month period. The model is based on the actual maturity and repricing characteristics of interest rate sensitive assets and liabilities and factors in projections for activity levels by product lines of the Company. Assumptions are made as to the changing relationship between different interest rates as interest rates increase/decrease (basis risk) and the customer's ability to prepay loans and withdraw deposit balances or transfer them to a higher yielding account (option risk). The sensitivity analysis is compared to ALCO policy limits, which specify a maximum tolerance level for NII exposure over a one-year horizon, ass uming no balance sheet growth, given both a 200 basis point (bp) upward and a 200 basis point downward shift in interest rates.
The following table sets forth the estimated effects on the Company's net interest income for the periods indicated and reflects such change as a percentage of projected net interest income for the subsequent 12-month period.
Interest Rate Sensitivity
			200 Basis Point			200 Basis Point
			Rate Increase			Rate Decrease
		June 30, 2005	(3.29%)			1.23%
		June 30, 2004	(.56%)			.13%		(1)
The results implied in the above table indicate estimated changes in simulated net interest income for the subsequent 12 months assuming a gradual shift in market rates up or down of 200 basis points across the entire yield curve. This sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of interest rate levels including yield curve shape; prepayments on loans and securities; deposit decay rates; pricing decisions on loans and deposits; reinvestment/replacement of asset and liability cash flows, and others. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences might change.
Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed; the potential effect of changing debt service levels on customers
(1)	The June 30, 2004 period represents a gradual downward shift in market rates of 100 basis points.
16

with adjustable rate loans; depositor early withdrawals and product preference changes, and other internal/external variables. Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates.

Item 4. Controls and Procedures

      Management of the Company, including the Company's President and Chief Executive Officer and the Company's Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Company's President and Chief Executive Officer and the Company's Senior Vice President and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is (i) recorded, processed, summarized and reported as and when required, and (ii) accumulated and communicated to the Company's management, including the Company's President and Chief Executive Officer and the Company's Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

      There have been no changes in the Company's internal control over financial reporting identified in connection with the evaluation that occurred during the Company's last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, the Company's internal control over financial reporting.

17

Part II. Other Information

Item 1. Legal Proceedings

      None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      During the three months ended June 30, 2005, the Company repurchased 2,500 shares of its common stock.

			Total Number of	Maximum Number
	Total	Average	Shares Purchased	of Shares that May
	Number of	Price	as Part of Publicly	Yet Be Purchased
	Shares	Paid per	Announced Plans	Under the Plans or
Period	Purchased	Share	or Programs	Programs
April 1 - 30, 2005	-	-	-	29,618
May 1 - 31, 2005	2,300	$74	2,300	27,318
June 1 - 30, 2005	200	74	200	27,118
TOTAL	2,500	$74	2,500	27,118

Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on May 19, 2005 (the "Meeting") and adjourned until June 10, 2005. All of the proposals submitted to the shareholders at the Meeting were approved. The proposals submitted to shareholders and the tabulation of votes for each proposal in whole shares is a follows:
	1.	Election of five directors of the Company.

										Broker
			Nominee			For		Withheld		Non-Votes
			Peter A. Blyberg			924,579		132,341		0
			Peter A. Clapp			925,592		131,328		0
			Sandra H. Collier			925,592		131,328		0
			Harry E. Mikkelsen			925,592		131,328		0
			Karen W. Stanley			920,206		136,714		0
		The following directors' terms continued after the meeting: Arthur J. Billings, Blake B. Brown, Samuel G. Cohen, Robert B. Fernald, Douglas A. Gott, James L. Markos, Jr., John V. Sawyer, II, Stephen C. Shea, Robert W. Spear, and Paul L Tracy.
	2.	Ratification of the appointment of Berry, Dunn, McNeil & Parker as the Company's independent public accountants for the fiscal year ending December 31, 2005.
									Broker
				For	Against		Abstain		Non-Votes
				987,928	15,886		65,438		0
	3.	Approval of an amendment to the Company's Articles of Incorporation increasing the number of authorized shares of common stock from 1,200,000 to 10,000,000 shares.
									Broker
				For	Against		Abstain		Non-Votes
				879,553	184,032		5,666		0
	4.	Approval of an amendment to the Company's Articles of Incorporation providing for staggered terms of the Board of Directors.
									Broker
				For	Against		Abstain		Non-Votes
				829,796	147,720		4,154		0
18

	5.	Approval of an amendment to the Company's Articles of Incorporation providing for the removal of directors with cause.
						Broker
			For	Against	Abstain	Non-Votes
			791,580	183,190	6,900	0
	6.	Approval of an amendment to the Company's Articles of Incorporation setting forth the vote required to approve certain business combinations.
						Broker
			For	Against	Abstain	Non-Votes
			763,067	209,373	9,230	0
Item 5. Other Information
None
19

Item 6. Exhibits
	Exhibit No.	Description
	** 3.1	Amended and Restated Articles of Incorporation of Union Bankshares Company
	***3.2	Amended and Restated Bylaws of Union Bankshares Company
	*10.1	Stock Purchase Plan for the employees of Union Trust Company
	*10.2	Deferred Compensation Agreements for the Executive Officers of Union Trust Company
	*10.3	Salary Continuation Agreements for the Executive Officers of Union Trust Company
	31	Rule 13a-14(a)/15d-14(a) Certifications
	32	Section 1350 Certifications
	*	Incorporated by reference to the Company's Registration Statement on Form S-1, filed with the SEC on June 15, 1984, Registration No. 2-90679.
	**	Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed with the SEC on November 15, 2004.
	***	Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed with the SEC on May 16, 2005.
20

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
	UNION BANKSHARES COMPANY
August 15, 2005	/s/ Peter A. Blyberg
Date	Peter A. Blyberg, President and Chief Executive Officer
August 15, 2005	/s/ Timothy R. Maynard
Date	Timothy R. Maynard, Senior Vice President and Chief Financial Officer
21

Exhibit Index
	Exhibit No.	Description
	** 3.1	Amended and Restated Articles of Incorporation of Union Bankshares Company
	***3.2	Amended and Restated Bylaws of Union Bankshares Company
	*10.1	Stock Purchase Plan for the employees of Union Trust Company
	*10.2	Deferred Compensation Agreements for the Executive Officers of Union Trust Company
	*10.3	Salary Continuation Agreements for the Executive Officers of Union Trust Company
	31	Rule 13a-14(a)/15d-14(a) Certifications
	32	Section 1350 Certifications
	*	Incorporated by reference to the Company's Registration Statement on Form S-1, filed with the SEC on June 15, 1984, Registration No. 2-90679.
	**	Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed with the SEC on November 15, 2004.
	***	Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed with the SEC on May 16, 2005.
22