1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-12958
UNION BANKSHARES COMPANY
(Exact name of registrant as specified in its charter)
MAINE 01-0395131
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation of organization)
66 Main Street, Ellsworth, Maine 04605
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (207) 667-2504
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock $12.50 Par Value
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES XXX
NO _______
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ( 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this form 10-K [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 4, 2000, was approximately $56,587,356.
577,848 shares of the Company's Common Stock, $12.50 par value, were
issued and outstanding on February 15, 2000.
UNION BANKSHARES COMPANY
INDEX TO FORM 10-K
PART I Page No.
Item 1: Business 3-13
Item 2: Properties 13-14
Item 3: Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
PART II
Item 5: Market for Registrant's Common Equity and Related
Stockholder Matters 15
Item 6: Selected Financial Data 16
Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 7A: Quantitative and Qualitative Disclosures About Market Risk 16-18
Item 8: Financial Statements and Supplementary Data 18
Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 18
PART III
Item 10: Directors and Executive Officers of the Registrant 18-22
Item 11: Executive Compensation 22-24
Item 12: Security Ownership of Certain Beneficial Owners and Management 24
Item 13: Certain Relationship and Related Transactions 24
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports
on Form 8-K 24-26
Signatures 27
PART I
ITEM I: Business
Union Bankshares Company is a one-bank holding company, organized under
the laws of the State of Maine. The Company's only subsidiary is Union
Trust Company, wholly owned and established in 1887. Union Bankshares'
holding company structure can be used to engage in permitted banking-
related activities, either directly, through newly formed subsidiaries,
or by acquiring companies already established in those activities.
Union Trust is a full-service, independent, community bank that is
locally owned and operated. Through its eleven offices, Union Trust
serves the financial needs of individuals, businesses, municipalities and
nonprofit organizations in eastern Maine. Union Trust offers a wide
variety of financial services with competitive interest rates, a helpful,
friendly staff, and quick, local decision-making to meet the needs of the
communities it serves. As a complement to the services offered by the
Bank, the Trust and Investment Services Department provides a broad range
of investment options to help meet the needs of our customers. Trust and
Investment Services has served generations of Maine families with estate
planning, investment management and custody, and retirement planning and
employee benefit services.
As a market driven sales and service organization, Union Trust is focused
on the needs of its customers. Our employees are listening to customers'
needs, suggesting solutions, answering their questions and making it easy
for them to purchase and use our services. It is through our team of
dedicated and knowledgeable employees that outstanding customer service
is delivered. That is why Union Trust continues to hire quality
individuals, invest in their continuing education and training, and
reward them for the significant contribution they make to the overall
success of the organization.
There is no better example of this than in our Trust and Investment
Services department. Because of their commitment to personalized service
and professional knowledge, they continue to experience over 20% growth
in revenue and assets under management from 1998 to 1999. To support
this growth, five additional staff members were added during 1999. Two
others received advanced degrees/professional designations in their areas
of expertise.
Another example of excellent customer service is that delivered by our
Relationship Managers to loan customers. Again and again, customers are
saying how extremely satisfied they are with the service they receive
from Union Trust and would recommend Union Trust to a friend or family
member. A "Mortgage Think Tank" was formed during 1999 to focus this
market segment. Their task is to discover new ways to better serve these
customers. Many of their ideas were implemented in 1999 with positive
results.
Technology continues to allow us to conduct business in new ways, never
before possible. Access channels have evolved from the branches to
ATM's, Customer Service Call Center, BankLiner telephone banking,
BankLinePCr computer banking and new for 1999, NetBankingr on the
Internet. To provide customer support for NetBankingr and future
technological initiatives, the call center staff was increased by 100%
this year. The latest in telephone technology was installed, with all
calls to the Bank now being answered through the call center to
facilitate customer service.
More than anything else, the Y2K challenge, which is now successfully
behind us, proved the strength of Union Trust and the teamwork that
exists among its employees. It also served as a testing ground of
technology as a whole, helping to instill public confidence and enhancing
the public's acceptance of this new delivery channel. This gives Union
Trust the "green light" for continued investment in the latest financial
services technology.
As customer service expectations increase, Union Trust will continue to
anticipate customers' needs and pursue the appropriate strategic
initiatives. Union Trust's service to its customers goes beyond the
walls of the Bank, out into the community. During 1999, our employees
and directors contributed over 9,000 hours of volunteer time to over 115
organizations.
The Bank competes actively with other commercial banks and other
financial institutions in its service areas. In the Bank's immediate
market area, there are two other independent community banks, one savings
and loan association, three savings bank branch offices and three
commercial banks owned outside of the state of Maine. Strong competition
exists among commercial banks in efforts to obtain new deposits, in the
scope and type of services offered, in interest rates on time deposits
and interest rates charged on loans, and in other aspects of banking. In
Maine, savings banks are major competitors of commercial banks as a
result of broadened powers granted to savings banks. In addition, the
Bank like other commercial banks, encounters substantial competition from
other financial institutions engaged in the business of either making
loans or accepting deposit accounts, such as savings and loan
associations, credit unions, insurance companies, certain mutual funds,
and certain governmental agencies. Furthermore, the large banks located
in Boston, New York and Providence are active in servicing some of the
large Maine based companies.
As of December 31, 1999, the Bank employed 127 employees of which 13
employees were part time. They are not compensated by the Company for
their service and there are no employees of the Company.
The Bank's primary regulator is the Federal Reserve Bank of Boston and as
a state chartered bank to the Bureau of Banking of the State of Maine.
Please refer to Footnote #15 on pages 32 and 33 of the 1999 Annual Report
of Union Bankshares Company, regarding compliance with capital
requirements.
Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that were not disclosed under Item III of
Industry Guide 3 do not (1) represent or result from trends or
uncertainties which management reasonably expects will materially impact
future operating results, liquidity, or capital resources or (2)
represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
The Company and Bank are not aware of any current recommendations by the
regulatory authorities which if they were to be implemented would have or
would be reasonably likely to have a material effect on the Company's
liquidity, capital resources or operations.
Loans, other than credit card loans, are placed on non accrual status
when, in the opinion of management, there are doubts as to the
collectibility of interest or principal, or when principal or interest is
past due 90 days or more, and the loan is not well secured and in the
process of collection. Interest previously accrued but not collected is
reversed and charged against interest income at the time the related loan
is placed on non-accrual status. Principal and accrued interest on
credit card loans are charged to the allowance for credit losses when 180
days past due.
Payments received on non-accrual loans are recorded as reductions of
principal if principal payment is doubtful.
Loans are considered to be restructured when the yield on the
restructured assets is reduced below the current market rates by an
agreement with the borrower. Generally this occurs when the cash flow of
the borrower is insufficient to service the loan under its original
terms.
In the Bank's market area, the banking business is somewhat seasonal due
to an influx of tourists and seasonal residents returning to the area
each spring and summer. As a result, the Bank has an annual deposit
swing, from a high point in mid October to a low point in June. The
deposit swing is predictable and does not have a material adverse effect
on the Bank and its operations.
STATISTICAL PRESENTATION
The Supplemental Financial Data presented on the following pages contains
information to facilitate analysis and comparison of sources of income
and exposure to risk.
A. AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME
The following table sets forth the information related to changes in net
interest income. For purposes of the table and the following discussion,
information is presented regarding (1) the total dollar amount of
interest income of the Company from interest earning assets and the
resulting average yields; (2) the total dollar amount of interest expense
on interest bearing liabilities and the resulting average cost; (3) net
interest income; (4) interest rate spread; and (5) net interest margin.
Information is based on average daily balances during the indicated
periods. For the purposes of the table and the following discussion, (1)
income from interest earning assets and net interest income are presented
on a tax equivalent basis and (2) non accrual loans have been included in
the appropriate average balance loan category, but unpaid interest on non
accrual loans has not been included for purposes of determining interest
income.
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME
(In Thousands)
(On a Tax Equivalent Basis)
1999 1998 1997
Avg Int Yield/ Avg Int Yield/ Avg Int Yield/
Bal Earn/Pd Rate Bal EarnPd Rate Bal Earn/Pd Rate
Assets
Interest Earning Assets:
Securities available
for sale $105,663 $ 6,913 6.54 $ 77,517 $ 5,278 6.81 $ 72,741 $ 5,182 7.12
Securities held
to maturity 4,311 333 7.72 23,968 1,510 6.30 22,689 1,437 6.33
Federal funds
sold 5,705 294 5.15 6,384 326 5.11 598 41 6.86
Loans (net) 115,825 10,237 8.83 108,057 10,241 9.47 100,208 9,660 9.64
Total interest earning
assets 231,504 $17,777 7.68 215,926 $17,355 8.04 196,236 $16,320 8.32
Other nonearning
assets 20,069 19,699 18,878
$251,573 $235,625 $215,114
Liabilities
Interest Bearing Liabilities:
Savings
deposits $ 67,766 $ 1,082 1.60 $ 69,656 $ 1,131 1.62 $ 65,432 $ 1,119 1.71
Time deposits 77,139 3,784 4.91 77,545 4,223 5.44 73,419 4,298 5.85
Money market
accounts 21,262 728 3.42 11,765 560 4.76 12,271 482 3.93
Borrowings 20,969 1,502 7.16 18,077 1,260 6.97 14,007 835 5.96
Total interest bearing
liabilities 187,136 $ 7,096 3.79 177,043 $ 7,174 4.05 165,129 $ 6,734 4.08
Other noninterest bearing
liabilities & shareholders'
equity 64,437 58,582 49,985
$251,573 $235,625 $215,114
Net interest income $10,681 $10,181 $ 9,586
Net interest rate spread 3.89 3.99 4.24
Net interest margin 4.61 4.72 4.88
The following table presents certain information regarding changes in
interest income and interest expense of the Company for the periods
indicated. For each category of interest earning assets and interest
bearing liabilities, information is provided with respect to changes
attributable to (1) changes in rate (change in rate multiplied by old
volume), (2) changes in volume (change in volume multiplied by old
rate), and (3) changes in rate/volume (change in rate multiplied by
change in volume).
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
For the years ended December 31, 1999, 1998 and 1997
(In Thousands)
Year Ended December 31, 1999 vs. 1998
Increase (Decrease)
Due to Change In
Volume Rate Rate/Volume* Total
Interest Earning Assets
Securities available for sale $1,918 $(1,787) $1,465 $1,596
Securities held to maturity (1,238) 1,044 (997) (1,191)
Federal funds sold (34) 35 (33) (32)
Loans, net 728 (674) (263) (209)
Total interest earning assets 1,374 (1,382) 172 164
Interest Bearing Liabilities
Savings deposits 33 32 (114) (49)
Time deposits (27) 23 (435) (439)
Money market accounts 452 (326) 42 168
Borrowed funds 202 (208) 248 242
Total interest bearing liabilities 660 (479) (259) (78)
Net change in net interest income $ 714 $ (903) $ 431 $ 242
Year Ended December 31, 1998 vs. 1997
Increase (Decrease)
Due to Change In
Volume Rate Rate/Volume* Total
Interest Earning Assets
Securities available for sale $ 337 $ (488) $ 83 $ (68)
Securities held to maturity 80 (37) 74 117
Federal funds sold 397 (296) 184 285
Loans, net 757 (751) 575 581
Total interest earning assets 1,571 (1,572) 916 915
Interest Bearing Liabilities
Savings deposits 72 (71) 11 12
Time deposit 238 (228) (86) (76)
Money market accounts (20) 24 74 78
Borrowed funds 242 (284) 468 426
Total interest bearing liabilities 532 (559) 467 440
Net change in net interest income $1,039 $(1,013) $ 449 $ 475
*Represents the change not solely attributable to change in rate or
change in volume but a combination of these two factors.
B. INVESTMENT PORTFOLIO
HELD TO MATURITY SECURITIES
The following table shows the book value of the Company's held to
maturity securities at the end of each of the last three years. (In
Thousands)
December 31
1999 1998 1997
U.S. Treasury Securities &
Other Government Agencies $ 0 $ 0 $25,814
Obligations of States &
Political Subdivisions 4,237 4,376 6,985
TOTAL $4,237 $4,376 $32,799
The table below shows the relative maturities of held to maturity
securities as of December 31, 1999.
Held to Maturity Securities
Maturity Distribution as of
December 31, 1999
Security Category Due 1 Yr Due 1- Due 5- Due After
or less 5 Yrs 10 yrs 10 Yrs
State and Municipal Bonds $ 422 $1,909 $ 591 $1,315
Average Weighted Yield 8.79% 7.83% 8.08% 6.83%
TOTAL $ 422 $1,909 $ 591 $1,315
Percent of Total Portfolio 10.0% 45.1% 13.9% 31.0%
NOTE: Average Weighted Yields on tax exempt obligations have been
computed on a tax equivalent basis
AVAILABLE FOR SALE SECURITIES
The following table shows the carrying value of the Company's available
for sale securities and other investment securities at the end of each
of the last three years. (In Thousands)
December 31
1999 1998 1997
Mortgage Backed Securities $34,000 $ 34,336 $ 0
US Treasury Notes and Other
Government Agencies 54,403 59,635 60,105
Obligations of State and
Political Subdivisions 8,067 8,769 0
Other Securities 3,245 631 3,160
TOTAL $99,715 $103,371 $63,265
The table below shows the relative maturities and carrying value of
available for sale debt securities as of December 31, 1999 (excludes
other securities).
Securities Available for Sale
Maturity Distribution as of
December 31, 1999
Security Category Due 1 Yr Due 1- Due 5- Due After
or less 5 Yrs 10 Yrs 10 yrs
Mortgage Backed Securities $ 0 $ 0 $ 751 $22,012
US Treasury Notes and Other
Government Agencies 3,005 24,286 32,005 17,186
TOTAL $3,005 $24,786 $32,756 $39,198
Average Weighted Yield 6.46% 6.90% 5.91% 6.49%
Percent of Total Portfolio: 3.0% 24.5% 33.0% 39.5%
The Company's net unrealized loss on available for sale securities (net of tax)
of $2,128,324 at December 31, 1999 is largely attributable to the current
interest rate environment. The unrealized loss has no effect on regulatory
capital or current earnings of the Company. The Company would sell these
securities only if it was consistent with the Bank's asset/liability
management strategies.
C. LOANS
The following table reflects the composition of the Company's
consolidated loan portfolio at the end of each of the last five years.
1999 1998 1997 1996 1995
(In Thousands)
Real Estate Loans
A. Construction & Land
Development $ 7,617 $ 6,431 $ 5,925 $ 4,073 $ 2,023
B. Secured by 1-4 Family
Residential Properties 47,988 36,944 33,528 30,457 27,402
C. Secured by Multi Family
(5 or more) Residential
Properties 0 0 0 0 2
D. Secured by Non-Farm,
Non-Residential
Properties 32,443 30,550 28,386 30,134 28,273
Commercial & Industrial
Loans 16,222 15,979 18,566 16,582 13,778
Loans to Individuals for Household,
Family & Other Consumer
Expenditures 14,508 15,327 15,806 15,133 14,335
All Other Loans 8,845 5,168 4,852 4,664 7,430
Total Gross Loans $127,623 $110,399 $107,063 $101,043 $93,243
The above data is gathered from loan classifications established by the
Federal Reserve Call Report 033.
The percentages of loans by lending classification to total loans
outstanding at December 31 was as follows:
1999 1998 1997 1996 1995
Real Estate 69.0% 67.0% 63.4% 64.0% 61.9%
Commercial & Industrial -
Including single payment
loans to individuals 12.7% 14.5% 17.3% 16.4% 14.8%
Consumer Loans 11.4% 13.9% 14.8% 15.0% 15.4%
All Other Loans 6.9% 4.6% 4.5% 4.6% 7.9%
Total Loans 100.0% 100.0% 100.0% 100.0% 100.0%
Maturities and Sensitivities of Loans
To Changes in Interest Rates
As of December 31, 1999
Due 1 Year or Less Due 1-5 Years Due 5 Years +
Real Estate $31,721 $27,671 $28,656
Commercial & Industrial 10,339 4,170 1,713
Consumer 8,101 4,169 2,238
Municipal 6,122 1,942 781
Total $56,283 $37,952 $33,388
Note:Real estate loans in the 1-5 category have $2,659,697 at a fixed
interest rate and $25,011,301 at a variable interest rate.
Commercial loans in the 1-5 year category have $3,033,700 at a
fixed interest rate and $1,136,914 at a variable interest rate.
Real estate loans in the 5+ category have $28,442,714 at a fixed
interest rate and $213,286 at a variable interest rate.
Commercial loans in the 5+ category have $1,237,628 at a fixed
interest rate and $475,372 at a variable rate.
Delinquent Loans
The following schedule is a summary of loans with principal and/or
interest payments over 30 days past due:
December 31,
1999 1998 1997 1996 1995
Amt % Amt % Amt % Amt % Amt %
Real Estate $4,367 3.4 $3,079 2.8 $3,003 2.8 $2,649 2.6 $ 867 0.9
Installment $ 65 0.1 $ 153 0.1 $ 128 0.1 $ 197 0.2 $ 95 0.1
All Others $ 192 0.2 $ 134 0.1 $ 151 0.1 $ 220 0.2 $ 35 0.0
TOTAL $4,624 3.7 $3,366 3.0 $3,282 3.0 $3,066 3.0 $ 997 1.0
It is the policy of the Company to discontinue the accrual of interest
on loans when, in the opinion of the management, the ultimate
collectibility of principal or interest becomes doubtful. The
principal amount of loans which have been placed on non-accrual status
were comprised primarily of certain installment loans. For each of
these loans, management has evaluated the collectibility of the
principal based on its best estimate of the realizable collateral value
of the loans and does not anticipate that any losses from liquidation
of these loans will have a material effect on future operations. There
were approximately $437,000, $534,000 and $503,000 as of December 31,
1999, 1998 and 1997, respectively, of loans on a non-accrual status.
LOAN CONCENTRATIONS
As of December 31, 1999 and 1998, the Company did not have any
concentration of loans in one particular industry that exceeded 10% of
its total loan portfolio.
The Bank grants residential, commercial and consumer loans to customers
principally located in Hancock and Washington Counties of the State of
Maine. Although the loan portfolio is diversified, a substantial
portion of its debtor's ability to honor their contracts is dependent
upon the economic conditions in the area, especially in the real estate
sector. There are currently no borrowers whose total indebtedness to
the Bank exceeded regulatory limits at December 31, 1999.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
Analysis of the allowance for loan losses for the past five years were
as follows:
(Dollars in thousands)
December 31,
1999 1998 1997 1996 1995
Balance at beginning
of period: $ 2,435 $ 2,213 $ 2,084 $ 1,878 $ 1,929
Charge-offs:
Commercial & Industrial Loans 3 2 5 15 44
Real Estate Loans 5 0 123 0 48
Loans to Individuals 140 111 97 73 104
148 113 225 88 196
Recoveries:
Commercial & Industrial Loans 12 11 118 138 43
Real Estate Loans 0 0 67 12 1
Loans to Individuals 130 39 49 24 71
142 50 234 174 115
Net Charge-offs (recoveries) 6 63 (9) (86) 81
Provision for loan losses 200 285 120 120 30
Balance at end of period $ 2,629 $ 2,435 $ 2,213 $ 2,084 $ 1,878
Average Loans Outstanding $118,311 $110,321 $102,321 $97,143 $88,725
Ratio of Net Charge-offs (Recoveries) to
average loans outstanding .004% .057% (.009%) (.09%) .09%
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
December 31,
1999 1998 1997 1996 1995
Amt % of Amt % Amt % Amt % Amt %
Loan Loan Loan Loan Loan
Categories Categories Categories Categories Categories
To Total To Total To Total To Total To Total
Loans Loans Loans Loans Loans
Balance At End of Period:
Applicable To:
Real
Estate $ 500 69.0% $ 374 67.0% $ 356 63.4% $ 318 64.0% $ 647 61.9%
Commercial & Indus-
trial 1,789 12.7% 1,780 14.5% 1,558 17.3% 1,405 16.4% 1,024 14.8%
Consumer 145 11.4% 153 13.9% 158 14.8% 151 15.0% 207 15.4%
Municipal 88 6.5% 58 4.2% 49 4.1% 60 4.5% 0 7.9%
Identified 57 .4% 62 .4% 67 .4% 100 .1% 0 .0%
Unallocated 50 .0% 8 .0% 25 .0% 50 .0% 0 .0%
TOTAL $2,629 100.0% $2,435 100.0% $2,213 100.0% $2,084 100.0% $1,878 100.0%
The allowance for loan losses is a general allowance established by
management to absorb possible loan losses as they may exist in the loan
portfolio. This allowance is increased by provisions charged to
operating expenses and by recoveries on loans previously charged-off.
Management determines the adequacy of the allowance from continuous
reviews of the quality of new and existing loans, from the results of
independent reviews of the loan portfolio by regulatory agency
examiners, evaluation of past and anticipated loan loss experience, the
character and size of the loan portfolio and anticipated economic
conditions.
As of December 31, 1999, the Company had impaired loans totaling
$14,978, which consisted of real estate loans. The fair value of the
loans' collateral was used to evaluate the adequacy of the Allowance
for Loans Losses allocated to these loans.
A loan is considered impaired by management when it is probable that
the creditor will be unable to collect all amounts due under the
contractual terms of the loan, including principal and interest. Loans
on a non-accrual status that are deemed collectable are not classified
as impaired. Based upon management's periodic review of loans on non-
accrual status, impairment is based on a loan by loan analysis and not
set by a defined period of delinquency before a loan is considered
impaired.
Risk Elements
1999 1998 1997 1996 1995
Loans accounted for on a
non accrual basis $437 $534 $503 $491 $614
Accruing loans contractually past
due 90 days or more $313 $ 47 $209 $196 $388
In accordance with Industry Guide 3 Item III. C (1), the gross interest
income that would have been recorded in 1999 if nonaccrual and
restructured loans had been current in accordance with their original
terms and had been outstanding throughout the period or since
origination approximates $31,000. There was approximately $31,000
included in the gross interest income on non-accrual and restructured
loans for 1999.
D. DEPOSITS
The following schedule summarizes the time remaining to maturity of
Certificates of Deposit $100,000 or greater at December 31, 1999.
Amount
(In Thousands)
3 Months or Less $ 5,089
Over 3 Through 6 $ 2,076
Over 6 Through 12 Months $ 2,080
Over One Year $ 1,369
Total $10,614
E. SHORT-TERM BORROWINGS
December 31
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Interest Amount Interest Amount Interest Amount
Rate Rate Rate
Fixed advances 6.54 $ 451,250 6.45 $ 451,250 6.52 $ 273,250
Variable advances 5.49 $18,000,000 5.29 $20,000,000 5.35 $9,000,000
Securities sold
under agreement 3.55 $13,140,423 3.70 $ 8,965,977 4.00 $5,690,975
1999 1998
Fixed Variable Securities Fixed Variable Securities
Maximum
amount $451,250 $22,863,496 $13,822,285 $451,250 $20,142,352 $9,512,901
outstanding of any
month end during
the year
Average
amount $451,250 $20,402,145 $ 9,056,088 $407,584 $18,077,448 $6,485,367
outstanding during
the year
Weighted
average 6.54% 5.36% 3.55% 6.45% 5.30% 4.05%
interest rate for
the year
1997
Fixed Variable Securities
Maximum amount outstanding $273,250 $22,903,225 $7,890,521
of any month end during the
year
Average amount outstanding $206,143 $12,569,863 $3,950,415
during the year
Weighted average interest 6.52% 5.86% 4.17%
rate for the year
Advances at December 31, 1999 mature as follows:
2005 2006 2007 2008 2009 2010 2012 2013
$55,000 $9,000,000 $84,250 $7,089,000 $2,000,000 $55,000 $79,000 $89,000
F. CAPITAL RATIOS
The following table presents, for the last three years, the Company's
average capital expressed as a percentage of average deposits, loans,
total assets, and earning assets.
*1999 *1998 *1997
Deposits 15.6% 15.1% 14.9%
Loans 25.0% 25.4% 24.6%
Total Assets 11.7% 11.6% 12.0%
Earning Assets 12.7% 12.8% 13.0%
*Excluding net unrealized gain (loss) net of deferred taxes on
available for sale securities of ($2,128,324), $1,162,032 and $437,749
at December 31, 1999, 1998 and 1997, respectively.
G. RETURN ON SHAREHOLDERS' EQUITY
The following table presents, for each of the last three years, the
Company's return on shareholders' equity, return on assets, and return
on average earning assets.
1999 1998 1997
Return on average shareholders' equity 11.7% 11.6% 10.9%
Return on average assets 1.3% 1.3% 1.3%
Return on average earning assets 1.4% 1.4% 1.4%
H. LIQUIDITY MANAGEMENT
Liquidity management is the process by which the Bank structures its
cash flow to meet the requirements of its customers as well as day to
day operating expenses.
Liquidity comes from both assets and liabilities. The asset side of
the balance sheet provides liquidity through the regular maturities on
our securities and loan portfolios, as well as interest received on
these assets. In addition, U.S. government securities may be readily
converted to cash by sale on the open market. On the liability side,
liquidity comes from deposit growth and the Bank's access to other
sources of borrowed funds. In this respect, liquidity is enhanced by a
significant amount of core demand and savings deposits from a broad
customer base.
As a part of the Bank's asset and liability management and liquidity
needs, management actively evaluates its funding resources and
strategies to manage and reduce its vulnerability to changes in
interest rates.
A principal objective of the Company is to manage and reduce its
vulnerability to changes in interest rates by managing the ratio of
interest rate sensitive assets to interest rate sensitive liabilities
within specified maturities or repricing dates.
As of December 31, 1999, the Bank's ratio of rate sensitive assets to
rate sensitive liabilities at the one year horizon was 83%, its one
year GAP (measurement of interest sensitivity of interest earning
assets and interest bearing liabilities at a given point in time) was
93%, and $84,131,000 in assets and $103,366,000 in liabilities will be
repriceable in one year. Bank earnings may be negatively affected,
should interest rates fall.
In addition to the "traditional" GAP calculation, the Company analyzes
future net interest income based on budget projections including
anticipated business activity, anticipated changes in interest rates
and other variables, which are adjusted periodically by management to
take into account current economic conditions, the current interest
rate environment, and other factors.
The following table presents, as of December 31, 1999, the Company's
interest rate GAP analysis:
Interest Rate GAP Analysis
As of December 31, 1999 (000's omitted)
0-3 4-12 1-5 Over
Months Months Years Years Total
Interest earning assets
Loans:
Real estate
Fixed rate $ 750 $ 2,191 $ 10,581 $17,618 $ 31,140
Variable rate 14,128 20,004 22,794 0 56,926
Commercial 8,168 3,044 3,297 1,713 16,222
Municipal 0 6,122 1,946 777 8,845
Consumer 11,177 782 2,541 14 14,514
Securities available for sale 5,854 7,410 68,529 12,242 94,035
Held to maturity securities 0 422 1,908 9,974 12,304
Loans held for sale 594 0 0 0 594
Other earning assets 3,485 0 113 5,620 9,218
TOTAL $44,156 $39,975 $111,709 $47,958 $243,798
Interest bearing liabilities
Deposits:
Savings $ 1,572 $ 4,716 $ 25,134 $25,429 $ 56,851
NOW 0 0 38,170 0 38,170
Money market 2,307 6,921 13,237 0 22,465
Time 25,481 39,793 10,137 0 75,411
Borrowings 6,644 15,932 9,015 0 31,591
TOTAL $36,004 $67,362 $95,693 $25,429 $224,488
Rate sensitivity GAP $ 8,152 $(27,387) $16,016 $22,529
Rate sensitivity GAP as a
percentage of total assets 3.27% (10.97%) 6.42% 9.03%
Cumulative GAP $ 8,152 $(19,235) $(3,219) $19,310
Cumulative GAP as a
percentage of total assets 3.27% 7.71% (1.29%) 7.74%
The distribution in the Interest Rate GAP Analysis is based on a
combination of maturities, call provisions, repricing frequencies,
prepayment patterns, historical data and management judgment. Variable
rate assets and liabilities are distributed based on the repricing
frequency of the investment. Management has estimated the rate
sensitivity of money market and savings deposits based on a historical
analysis of the Bank and industry data.
The status of the Bank's sources of cash to fund its operations are as
follows:
As of December 31, 1999 1998
Net cash provided from operations $ 5,420,434 $ 991,012
Net cash used by investing activities $(19,291,184) $(17,797,165)
Net cash provided from financing activities $ 5,832,171 $ 24,018,320
Net (decrease) increase in cash and
cash equivalents $ (8,038,579) $ 7,212,167
BANK'S PROPERTIES
ITEM 2: PROPERTIES
The Bank's principal office is located at 66 Main Street in Ellsworth,
Maine. The main office building consists of three floors, all of which
are utilized by the Bank for banking facilities and administrative
offices. The principal office includes a separate drive-up facility
and parking lot. In August 1981, plans were finalized for the
construction of an 8,000 square foot addition to our existing building.
Completed in November of 1982, it provided new and enlarged customer
service/teller area with street level access. During 1982 and 1983,
the existing building also received extensive renovation and
remodeling, tying it in to the new addition. The project was completed
in July of 1983. In April 1985, the Bank opened the first automated
drive-up in Downeast Maine. The automated teller machine is adjacent
to its drive-up facility located at 66 Main Street, in Ellsworth,
Maine. In 1988, the Main Office began construction of an addition to
its existing building that would house loan operations. In September
1989, construction was completed on the addition. In May 1992, the
Bank opened a trust office in Bangor (Penobscot County) to serve trust
customers in that city and surrounding areas. In May 1995, the Bank
elected not to renew its lease for its Bangor office. In 1999, the
Bank sold a parcel of land located on Route 3 in Ellsworth. In
addition, the Bank owns the following properties:
(a) The Bank's Cherryfield office located on Church Street in
Cherryfield, Maine. A major renovation was undertaken at Cherryfield
in 1983, approximately doubling its size. These alterations were
completed in January of 1984.
(b) The Bank's Jonesport office located on Main Street in Jonesport,
Maine.
(c) The Bank's Blue Hill office located on Main Street in Blue Hill,
Maine. During 1989, the branch was renovated to include an office for
the Assistant Manager.
(d) The Bank's Stonington office located on Atlantic Avenue in
Stonington, Maine. The Stonington office was renovated and
expanded in 1980.
(e) The Bank's Milbridge office located on Main Street in Milbridge,
Maine. In 1987, management decided to replace the Milbridge Branch
with a larger up to date facility, located at the same site. The new
branch has been open for business since April 1988.
(f) The Bank purchased in 1999 land and buildings located at 92 Main
Street in Ellsworth, Maine, adjacent to the Bank's principal office.
All of the Bank's offices include drive-up facilities.
In addition to the above properties, which are owned by the Bank, the
Bank leases the following properties:
(a) The Bank leases its branch office at the
Ellsworth Shopping Center, High Street, Ellsworth, Maine,
from Ellsworth Shopping Center, Inc., a Maine Corporation
with principal offices in Ellsworth, Maine. The current
lease will expire in March of 2000.
(b) The Bank leases its Machias office which is located on Dublin
Street in Machias, Maine. The premises are owned by Hannaford Bros.,
Inc. of South Portland, Maine, and are leased to Gay's Super Markets,
Inc., under a lease dated July 26, 1975. The Bank subleased the
premises from Gay's Super Markets, Inc., under a sublease which
expires in April of 2001. The Bank has the right to extend the
sublease for three additional five year terms.
(c) The Bank leases its Somesville branch office which is located on
Route 102 in Somesville, Maine. The land and premises are owned by A.
C. Fernald Sons, Inc., Mount Desert, Maine. The current lease expires
on March 24, 2005, with an option to renew for an additional 20 years.
(d) The Bank leases its Castine branch office located on Main Street
from Michael Tonry, Castine, Maine. The current lease expires on
February 1, 2003 with the right to extend the lease for an
additional 4 year term.
(e) The Bank leases its Bar Harbor branch office located on Cottage
Street from the Swan Agency, a Maine Corporation with a principal
office in Bar Harbor, Maine. The current lease will expire in
April of 2002.
All premises are considered to be in good condition and currently
adequate for the purposes for which they are utilized.
ITEM 3: LEGAL PROCEEDINGS
There are no material pending legal proceedings other than ordinary
routine litigation incidental to the business.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
A. MARKET INFORMATION
Union Bankshares stock, $12.50 par value, is not listed on any national
exchange, nor is it actively traded. Since the Company is not aware of
all trades, the market price is established by determining what a
willing buyer will pay a willing seller. Based upon the trades that
the Company had knowledge of (per quotes from local brokerages), high
and low bids for each quarter for 1999 and 1998 are listed in the
following table.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
1999 108.33 to 108.33 106.63 to 106.67 106.63 to 108.00 108.00 to 110.00
1998 100.00 to 104.16 104.16 to 113.75 105.00 to 108.33 108.33 to 108.33
B. HOLDER
As of March 1, 2000 there were approximately 725 stockholders of record.
C. DIVIDENDS
1. History
The following table shows the cash dividends per share declared by
Union Bankshares Company on its common stock, $12.50 par value:
1999 1998
1st Quarter $ .41 $ .41
2nd Quarter $ .41 $ .41
3rd Quarter $ .50 $ .41
4th Quarter $ .50 $ .41
Cash dividends declared
per common share $1.82 $1.64
Item 6: SELECTED FINANCIAL DATA (in thousands, except for per share
amounts)
Years Ended December 31,
1999 1998 1997 1996 1995
SUMMARY OF OPERATIONS
Operating Income $ 3,426 $ 3,155 $ 2,608 $ 2,207 $ 1,989
Operating Expense 8,663 8,413 8,016 7,723 7,459
Net Interest Income 10,169 9,927 9,452 9,137 8,803
Provision for Loan Losses 200 285 120 120 30
Net Income 3,355 3,090 2,700 2,452 2,418
PER COMMON SHARE DATA
Net Income $ 5.80 $ 5.34 $ 4.66 $ 4.22 $ 4.17
Cash Dividends Declared 1.82 1.64 1.52 1.39 1.30
Book Value (2) 51.50 47.69 44.13 41.14 38.30
Market Value 108.00 108.33 91.66 73.33 56.66
FINANCIAL RATIOS
Return on Average Equity (2) 11.7% 11.6% 10.9% 10.6% 11.4%
Return on Average Assets 1.3% 1.3% 1.3% 1.2% 1.3%
Return on Average
Earning Assets 1.4% 1.4% 1.4% 1.4% 1.4%
Net Interest Margin 4.61% 4.72% 4.88% 5.16% 5.37%
Dividend Payout Ratio 33.0% 31.2% 32.8% 32.9% 31.3%
Allowance for Loan
Losses/Total Loans .02 .02 .02 .02 .02
Non Performing Loans
to Total Loans .006 .005 .007 .007 .007
Non Performing Assets
to Total Assets .003 .004 .005 .008 .010
Efficiency Ratio 63.7% 64.3% 66.5% 67.2% 67.2%
Loan to Deposit Ratio 66.2% 58.7% 60.4% 60.7% 56.7%
BALANCE SHEET
Deposits $192,848 $188,029 $177,386 $166,445 $164,481
Loans 127,623 110,399 107,062 101,044 93,242
Securities (1) 107,509 111,304 96,065 81,568 76,578
Shareholders' Equity (2) 29,771 27,577 25,565 23,885 22,227
Total Assets 257,850 251,195 222,560 202,066 191,353
(1) Carrying value. Includes available for sale securities with cost
of $102,488, $101,610, $59,983, $75,095 and $70,938 at December 31,
1999, 1998, 1997, 1996 and 1995, respectively.
(2) Excluding net unrealized gain (loss) net of deferred taxes on
available for sale securities of ($2,128,324), $1,162,032, $437,749,
($171,460) and $567,810 at December 31, 1999, 1998, 1997, 1996 and
1995, respectively.
The above summary should be read in conjunction with the related
consolidated financial statements and notes thereto for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995, and with Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 1999 Annual Report is incorporated herein
by reference.
ITEM 7A: QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss in a financial instrument arising from
adverse changes in market rates/prices such as interest rates, foreign
currency exchange rates, commodity prices, and equity prices. 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). In this capacity ALCO
develops guidelines and strategies impacting the Company's
asset/liability management related activities based upon estimated
market risk sensitivity, policy limits and overall market interest rate
levels/trends.
INTEREST RATE RISK
Interest rate risk can be defined as the exposure of the Company's net
income or financial position to adverse movements in interest rates.
Changes in the level of interest rates also can affect:
The amount of loans originated/sold by an institution
The ability of the borrower to repay his/her loan
The average maturity of mortgage loans
The value of the Company's interest earning assets
The market value of available for sale securities
The Company, through management of the relationship of interest
rate sensitive assets to interest rate sensitive liabilities, reduces
the volatility of its net income.
To accomplish this, the Company has undertaken various steps to
increase the percentage of fixed rate assets and to increase the
average maturity of such assets, in particular through the loan
products offered and its investment portfolio.
Net interest income sensitivity to movements in interest rates is
measured through the use of a simulation model that analyzes resulting
net income under various interest rate scenarios established by
regulators. Projected net interest income (NII) is modeled based on
both an immediate rise or fall in interest rates ("rate shock"). 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 (embedded option). The
sensitivity analysis is compared to ALCO policy limits, which specify a
maximum tolerance level for NII exposure over a one-year horizon,
assuming no balance sheet growth, given both a 200 basis point (bp)
upward and downward shift in interest rates. A parallel and pro rata
shift in rates over a 12-month period is assumed. The following
reflects the Company's NII sensitivity analysis as of December 31, 1999
and 1998.
Estimated
Rate Change NII Sensitivity
1999 1998
+200 bp + 3.3% +4.4%
-200 bp - 6.2% -5.9%
The preceding 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 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.
Based on the information and assumptions in effect on December 31,
1999, under five rate simulations used, the Company's net interest
income and net income remain strong, with the return on assets ratio
remaining above 1% under all simulations.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(A) The financial statements required are contained in the Company's
1999 Annual Report and are incorporated herein by reference.
(See item 14 (a) )
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Previously reported in 8K filing in 1995.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following table lists, as of February 1, 2000, the number of shares
of Common Stock, including directors' qualifying shares, and the
corresponding percentage of total Common Stock beneficially owned by
each director and nominee for director, including the chief executive
officer of the Company, and by all executive officers and directors as
a group. The information set forth below is based upon director
questionnaires distributed and completed by each director and nominee,
and upon stock records maintained by the Company.
Name Common Stock Percent
Beneficially Owned of Class
Arthur J. Billings 274 *
Peter A. Blyberg 336 *
Robert S. Boit 25,596 4.43
Blake B. Brown 48 *
Richard C. Carver 1,367 *
Peter A. Clapp 258 *
Sandra H. Collier 201 *
Robert B. Fernald 730 *
Douglas A. Gott 870 *
David E. Honey 727 *
James L. Markos, Jr. 266 *
Casper G. Sargent, Jr. 2,868 *
John V. Sawyer, II 3,191 *
Stephen C. Shea 14,267 2.47
Richard W. Teele 527 *
Paul L. Tracy 639 *
Richard W. Whitney 62 *
Total ownership of all listed
Directors and other officers 53,891 9.33
*Represents ownership of less than 1%.
For purposes of the above table, beneficial ownership has been
determined in accordance with the provisions of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended, under which, in
general, a person is deemed to be the beneficial owner of a security if
he or she has or shares the power to vote or to direct the voting of
the security or has the power to dispose of, or to direct the
disposition of, the security, or if he or she has the right to acquire
beneficial ownership of the security within 60 days.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities Exchange Act of 1934 requires
executive officers, directors and persons who beneficially own more
than ten (10) percent of the stock of the Company to file initial
reports of ownership and reports of changes in ownership. Such persons
are also required by the Securities and Exchange Commission regulations
to furnish the Company with copies of these reports. Based upon copies
of Forms 3, 4 and 5 submitted to and retained by the Company, the
Company knows of no director, officer or beneficial owner of more than
ten percent (10%) of the total outstanding shares of Common Stock who
either failed to file an appropriate ownership report with the
Securities and Exchange Commission, or who filed such report other than
on a timely basis.
ELECTION OF DIRECTORS
Management recommends that the number of directors for the coming
year be set at 17. The Bylaws of the Company provide for not fewer
than 10 nor more than 25 directors, with the directors serving
"staggered terms" of three years. The Board of Directors has nominated
for re-election to three year terms at the 2000 Annual Meeting Messrs.
Billings, Carver, Fernald and Shea. Each of the nominees has consented
to be named as a nominee and to serve if elected. In the event any
nominee shall be unable to serve, discretionary authority is reserved
by management to vote for a substitute to be nominated by the Board.
There are no arrangements or understandings between any nominee,
director, executive officer or associate of any of the foregoing and
any other person pursuant to which the nominee was or is to be elected
as a director or an executive officer. There is no family relationship
among any director, officer or person nominated to become a director or
executive officer.
The following table sets forth the names, occupations, ages and
terms of service of all directors and nominees. Each director is also
presently a director of the Company's banking subsidiary, Union Trust
Company (the "Bank").
Year First
Elected As
Principal Occupation Age as ofDirector of
Now and for Past 5 years 4/15/00 the Company
Term expires in 2000:
Arthur J. Billings President, Barter Lumber Company 44 1990
Richard C. Carver Owner and Manager, Carver Oil Company
and Carver Shellfish, Inc. 67 1984
Robert B. Fernald Treasurer, A.C. Fernald Sons, Inc.
and Jordan-Fernald 66 1986
Stephen C. Shea Treasurer, E.L. Shea, Inc.;
President, Shea Leasing 52 1988
Term expires in 2001:
Blake B. Brown President and Owner, Brown's
Appliance and TV 54 1999
Douglas A. Gott Owner, Douglas A. Gott & Sons,
General Contractors 66 1986
David E. Honey Retired; Former Manager, Swans
Island Electric Cooperative 71 1984
James L. Markos, Jr. General Manager,Maine Shellfish
Company, Inc. 51 1999
Casper G. Sargent, Jr. Owner, Sargent's Real Estate
Corporation 70 1984
John V. Sawyer, II Retired, President, Worcester-
Sawyer Agency Insurance & 66 1984
Real Estate, Chairman of the
Board of the Company
and the Bank
Paul L. Tracy President and owner of Winter
Harbor Agency; Vice President 37 1995
and co-owner of Schoodic Insurance
Services; Vice President and
co-owner of MDI Insurance Agency;
Co-owner of Grindstone Financial Group LLC
Richard W. Whitney Dentist 71 1984
Term expires in 2002:
Peter A. Blyberg President and CEO of the Company
and the Bank since 56 1993
April 1, 1996; former Executive
Vice President of the Company and
the Bank; former Vice President for
Commercial Banking at Chemical Bank
Robert S. Boit Retired President and CEO of the
Company and the Bank 69 1984
Peter A. Clapp President, Blue Hill Garage 55 1995
Sandra H. Collier Attorney at Law, Sandra Hylander
Collier Law Offices 48 1992
Richard W. Teele Retired; Secretary and former
Executive Vice President and 68 1984
Treasurer of the Company and the Bank
COMMITTEES
The Bylaws of the Company provide that, at the annual meeting of
the Directors, the Board shall designate from among its members an
Executive Committee. The Executive Committee possesses all of the
powers of the Board of Directors with regard to ordinary operations of
the business of the Company when the Board is not in session, subject
to any specific vote of the Board. The Executive Committee currently
is comprised of Messrs. Blyberg, Boit, Fernald, Sargent, Sawyer, Shea
and Billings.
The Bylaws of the Company provide that the Board of Directors may
elect or appoint such other committees as it may deem necessary or
convenient to the operations of the Company. The Company does not have
a standing audit, nominating or compensation committee. No other
committees have been appointed.
Nominees for election to the Board of Directors are selected by
the full Board. The Board of Directors will consider nominees
recommended by stockholders if submitted in writing to Sally J.
Hutchins, Clerk, Union Bankshares Company, P.O. Box 479, Ellsworth,
Maine 04605 not less than three months in advance of the date of the
annual meeting.
The Board of Directors of the Company met twelve times in 1999.
Each director attended at least seventy-five percent of the total
number of meetings of the Board of Directors and of committees, of
which he or she was a member, held during that year.
EXECUTIVE OFFICERS
Each executive officer of the Company is identified in the
following table, which also sets forth the respective office, age and
period served in that office of each person listed. Executive officers
are elected annually by the Board of Directors.
Elected
Name Principal Occupation Now and for Past 5 Years Age to Office
John V. Sawyer, II Chairman of the Board of the
Bank and the Company since October 66 1984
1, 1988. Director since 1974.
Peter A. Blyberg President and CEO of the Bank
and the Company since April 1, 56 1993
1996. Formerly Executive Vice
President, COO and Treasurer
of the Bank and the Company.
Former Vice President for
Commercial Banking at
Chemical Bank.
John P. Lynch Executive Vice President of the
Company and Executive Vice President, 53 1996
Senior Banking Officer of the Bank
since December 8, 1999. Formerly Senior
Vice President of the Company and Senior Vice
President, Senior Banking Officer of the
Bank since 1996. Formerly Senior Vice
President - Loans of the Bank.
Sally J. Hutchins Senior Vice President and Clerk of
the Company and Senior Vice President, 44 1988
Treasurer, Controller and Clerk of the
Bank since December 8, 1999. Formerly
Vice President and Clerk of the Company
since 1993. Formerly Vice President,
Treasurer, Controller and Clerk of the
Bank since 1996. Formerly Vice President,
Controller and Clerk of the Bank.
Peter F. Greene Senior Vice President of the Company
and Senior Vice President, Senior Bank 40 1996
Services Officer of the Bank since
December 8, 1999. Formerly Vice President
of the Company since 1996 and Vice President,
Senior Bank Services Officer of the Bank since 1997.
Formerly Vice President - Bank Services and
Vice President - Operations.
Rebecca J. Sargent Senior Vice President, Senior Trust
Officer of the Bank and the Company since 35 1996
December 8, 1999. Formerly Vice President,
Senior Trust Officer of the Company since
1997 and Vice President, Senior
Trust Officer of the Bank since 1996. Formerly
Vice President, Trust Officer of the Company and
Assistant Vice President, Trust Officer of the Bank.
Richard W. Teele Secretary of the Company since 1988.
Retired in 1995 from the Bank. Formerly 68 1988
Executive Vice President, Treasurer and Secretary.
ITEM 11: EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth all annual compensation received
during each of the Company's last three fiscal years by Mr. Blyberg who
is the only executive officer for whom such compensation exceeded
$100,000 in any reported year. Mr. Blyberg serves in comparable
positions with both the Bank and the Company. Executive compensation
is paid by the Bank.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Other Annual
Year Salary Bonus Compensation ($)
Peter A. Blyberg 1997 $132,750 $ 5,150 $0
President and Chief 1998 $140,000 $ 8,375 $0
Executive Officer 1999 $145,725 $11,200 $0
LONG TERM COMPENSATION
AWARDS PAYOUTS
Restricted LTIP
Stock Optional SARs Payouts
Year Awards ($) (#) ($)
Peter A. Blyberg 1997 $0 0 $0
1998 $0 0 $0
1999 $0 0 $0
ALL OTHER COMPENSATION
Other
Year Compensation ($)
Peter A. Blyberg 1997 $ 5,532
1998 $ 7,653
1999 $ 4,754
Each director of the Bank who is not also an officer is paid a
directors' fee in the amount of $250 for each meeting attended,
including meetings of the Board committees of which the director is a
member. Directors' fees are paid by the Bank and are not separately
paid for attendance at meetings of the Board of Directors of the
Company. John V. Sawyer, II, who serves as Chairman of the Board,
receives a salary of $26,000 per annum from the Bank plus $50 per
meeting for attendance at Board and Committee meetings. No director
has received any other compensation for Board or committee
participation or other special assignments.
The Bank maintains a non-contributory defined benefit pension plan
funded by a trust (the "Plan"). All full time employees who are at
least 21 years of age and have completed one year of service
participate in the Plan. Compensation attributable to the Plan has not
been included in the Summary Compensation Table set forth above.
Annual contributions to the Plan are computed on an actuarial basis to
provide a normal retirement benefit of 60% of average annual salary
minus 50% of the participant's social security benefit, with a downward
adjustment if the participant, at the time of retirement, has completed
less than 25 years of service. "Average Annual Salary" is determined
by calculating the average basic compensation of the participant
exclusive of bonuses for the three highest consecutive years prior to
attaining the age of 65; provided, however, that for the purpose of
such calculation base compensation in any year may not exceed $160,000.
The Plan provides "Normal Retirement Benefits" to participants who
terminate their employment after the latter of attaining the age of 65
and after the completion of his/her fifth anniversary. The accrued
benefit of a participant who retires prior to normal retirement date is
his or her normal benefit adjusted by a fraction which represents his
or her Bank employment time divided by the Bank employment time he or
she would have had by normal retirement date. Payment options include
single life annuities and joint annuities. The Plan provides death
benefits to beneficiaries of employees who meet conditions of early
retirement (age 55 and 10 years of service) prior to termination of
employment. The amount of the benefit is equal to the accrued benefit
at date of death paid monthly over a 10 year period. In addition, the
spouse of a married employee may elect to receive his or her benefit in
the form of a single life annuity. If the employee does not meet
conditions for early retirement, a survivor annuity may be payable, if
the employee is married. The Plan does not provide a disability
benefit. Mr. Blyberg is a participant in the Plan. For purposes of
the Plan, Mr. Blyberg has five credited years of service.
The table below illustrates retirement compensation for
representative salary brackets and years of service with the Bank. The
maximum social security offset for 1999 was $16,476.
PENSION PLAN TABLE
Remuneration Years of Service
15 20 25 30 35
$120,000 $38,257 $51,010 $63,762 $63,762 $63,762
$130,000 $41,857 $55,810 $69,762 $69,762 $69,762
$140,000 $45,457 $60,610 $75,762 $75,762 $75,762
$150,000 $49,057 $65,410 $81,762 $81,762 $81,762
$160,000 $52,657 $70,210 $87,762 $87,762 $87,762
The foregoing table illustrates the value of retirement benefits
at the compensation levels indicated. Benefits are expressed in
today's dollars.
In addition to the foregoing defined benefit pension plan, the
Bank has entered into deferred compensation agreements with certain of
its executive employees, including Mr. Blyberg, pursuant to which,
subject to continued employment with the Bank and certain other
conditions, such executive employees are entitled to receive certain
retirement and disability benefits. Pursuant to his agreement with the
Bank, Mr. Blyberg is entitled to receive monthly payments in the amount
$4,152.17, for a period of ten years following the first to occur of
death or retirement after reaching the age of 65 years. Under the
terms of the agreement, Mr. Blyberg may elect to retire early after
reaching the age of 60 years, in which event he would be entitled to
receive a proportionately reduced monthly benefit. In addition to the
foregoing benefits, under the terms of the agreement, in the event that
Mr. Blyberg is permanently disabled prior to attaining the age of 64
years, he would be entitled to receive a disability benefit in the
amount of $2,000 per month from the date of his disability until he
reached the age of 65. Upon reaching age 65, he would be entitled to
receive the deferred compensation benefit described above. The
obligations of the Bank under these deferred compensation agreements is
unfunded, but the Bank has purchased insurance contracts on the lives
of all covered employees, including Mr. Blyberg, in amounts which are
estimated to be sufficient to fund all amounts payable under the
agreements.
The Bank also has entered into salary continuation agreements with
certain of its executive officers, including Mr. Blyberg, pursuant to
which should he terminate his employment, either voluntarily or
involuntarily, within three years of a change of control or other
"business combination" as defined in the salary continuation
agreements, he would be entitled to receive an amount equal to the
lesser of (i) three times the total compensation paid to him in the
last full fiscal year prior to termination of his employment, less one
dollar, or (ii) the maximum amount permitted without such payment being
deemed an "excessive parachute payment" within the meaning of Section
208-g of the Internal Revenue Code.
Neither the Bank nor the Company has a formal compensation
committee. Mr. Blyberg, in his capacity as President and Chief
Executive Officer, has made compensation recommendations to the
Executive Committee of the Board of Directors with respect to all
employees, other than himself. The recommendations were then
considered by the Board of Directors, which also formulated a
compensation recommendation with respect to Mr. Blyberg. All
compensation recommendations were then considered and voted upon by the
full Board of Directors. Mr. Blyberg is a member of the Board of
Directors and a member of the Executive Committee. He has abstained
from participating in discussions or recommendations regarding his own
compensation.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board of Directors of the Bank has no formal compensation
policy applicable to compensation decisions with respect to its
executive officers. While there are no objective criteria which
specifically relate corporate performance to compensation
determinations, in formulating its recommendation with respect to
compensation of Mr. Blyberg during the last fiscal year, the Board of
Directors considered, among other factors, the seniority and experience
of Mr. Blyberg and the relationship of his compensation to that of
other executive officers employed by the Bank and to persons holding
comparable positions at other similarly situated banks in Maine. In
reaching its determination as to the compensation of Mr. Blyberg, the
Board of Directors did not use any objective measure of the Bank's
performance but considered, in general, the performance of the Bank in
relationship to that of other similarly situated banks in Maine.
The forgoing report regarding compensation has been submitted by
the Board of Directors, including Douglas A. Gott, David E. Honey,
Casper G. Sargent, Jr., John V. Sawyer, II, Richard W. Whitney, Peter
A. Blyberg, Robert S. Boit, Peter A. Clapp, Sandra H. Collier, Richard
W. Teele, Arthur J. Billings, Richard C. Carver, Robert B. Fernald,
Stephen C. Shea, Paul L. Tracy, Blake B. Brown and James L. Markos, Jr.
PERFORMANCE GRAPH
The following graph provides a comparison of total shareholder
return on the Common Stock of the Company with that of other comparable
issuers. The following graph illustrates the estimated yearly
percentage change in the Company's cumulative total shareholder return
on its Common Stock for each of the last five years. For purposes of
comparison, the graph also illustrates comparable shareholder return of
NASDAQ banks as a group as measured by the NASDAQ Banks Stock Index.
The graph assumes a $100 investment on December 31, 1995 in the common
stock of the Company and NASDAQ banks as a group and measures the
amount by which the market value of each, assuming reinvestment of
dividends, has increased as of December 31 of each calendar year since
the base measurement point of December 31, 1995.
Insert 5 year line graph Peer Comparison
Common Stock of the Company is not actively traded on any market,
and therefore, no market index is available for the purpose of
determining the market price of such common stock as of any particular
date. The foregoing graph is based upon a good faith determination of
approximate market value for each year indicated based on anecdotal
information available to the Company as to the value at which its
common stock has traded in isolated transactions from time to time.
Therefore, although the graph represents a good faith estimate of
shareholder return as reflected by market value, the valuations
utilized are, of necessity, estimates and may not accurately reflect
the actual value at which common stock has traded in particular
transactions as of any of the dates indicated.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
See Item 10.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has had and expects to have in the future, banking transactions in the
ordinary course of its business with directors, officers, principal shareholders
and their associates. These transactions comprise of substantially the same
terms, including interest rates and collateral on the loans as those prevailing
at the same time for comparable transactions with others. Such loans have not
and will not involve more than normal risk of collectability or present other
unfavorable features.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) Financial Statements and Exhibits
(1) The financial statements listed below are filed as part of this
report; such financial statements (including report thereon
and notes thereto) are included in the registrant's Annual
Report to Shareholders for its fiscal year ended December 31,
1999 (a copy of which is being filed as Exhibit 13 hereto), and
are incorporated herein by reference.
Consolidated Balance Sheets
December 31, 1999 and 1998 22
Consolidated Statements of Income
For the years ended December 31, 1999, 1998 and 1997 23
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1999, 1998 and 1997 24
Consolidated Statements of Cash Flow
For the years ended December 31, 1999, 1998 and 1997 25-26
Notes to Consolidated Financial Statements 27
Independent Auditors Opinion 45
(2) Financial statement schedules are omitted as they are not
required or included in the Annual Report to Shareholders.
(3) Exhibits required by Item 601 - see Item 14(c)
(b) Reports on Form 8-K
During the registrant's fiscal quarter ended December 31, 1999,
the registrant was not required to and did not file any reports
on Form 8-K.
(c) Exhibits
* 3 Articles of Incorporation and By-laws of
Union Bankshares Company
* 10.1 Employee Benefit Plan for the employees
of Union Trust Company
Pension Plan for the employees of Union
Trust Company
401 (k) Profit Sharing Plan for the
employees of Union Trust Company
Stock Purchase Plan for the employees of
Union Trust Company
11 Computation of earnings per share, is
incorporated herein by reference to
Note 1 to the Consolidated Financial
Statements on page
27 of the 1999 Annual Report to
Shareholders' attached hereto as
Exhibit 13.
13 The registrant's Annual Report to
Shareholders' for its fiscal year
ended December 31, 1999.
This exhibit, except for those portions
thereof expressly incorporated by
reference into the Form 10 K annual
report, is furnished for the
information of the Commission only
and is not to be "filed" as part of
the report.
*21 Subsidiary information is incorporated
herein by reference to "Part I, Item 1 -
Business".
27 Financial Data Schedule
99.1 Report of Berry, Dunn, McNeil & Parker.
*Incorporated herein by reference into this document from the Exhibits
to Form S-1, Registration Statement, initially filed on June 15, 1984,
Registration No. 2-90679.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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 UNION BANKSHARES COMPANY
By: ___________________________ By:____________________________
Peter A. Blyberg, President Sally J. Hutchins
and Chief Executive Officer Senior Vice President,
Treasurer and Controller
Date:
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated.
Arthur J. Billings, Director
Peter A. Blyberg, Director
Robert S. Boit, Director
Blake B. Brown, Director
Richard C. Carver, Director
Peter A. Clapp, Director
Sandra H. Collier, Director
Robert B. Fernald, Director
Douglas A. Gott, Director
David E. Honey, Director
James L. Markos, Jr., Director
Casper G. Sargent, Director
John V. Sawyer, II, Director
Stephen C. Shea, Director
Richard W. Teele, Director
Paul L. Tracy, Director
Richard W. Whitney, Director