1
UNION BANKSHARES COMPANY
2000 ANNUAL REPORT
Dedication
In Memory Of:
Carroll V. Gay
Director for 14 Years
In Recognition of:
David E. Honey, Sr.
Director for 18 Years
C. Foster Mathews
Employee for 36 Years
Letter to Shareholders
January 2001
The year 2000 was a very challenging time for your Bank. We
undertook several significant initiatives in order to position the Bank
for improved earnings opportunities in the years ahead. These by
necessity had a negative impact on the bottom line for the year.
First and foremost was the acquisition of The Waldoboro Bank, FSB.
This move doubled the potential population base to which we can market
our services and positioned us in a strong economy in the mid-coast
region. We feel that this move gives us more opportunity for future
growth than simply maintaining the status quo in Hancock and Washington
Counties.
Secondly we have expanded our physical facilities at the main office
in Ellsworth. We added to our current space by purchasing the building
next door which will provide space for staff who will offer a broader
array of financial services than we currently provide. We already have
two financial planners on staff and will be expanding into brokerage and
insurance in the near future. Our investment and trust services have
been growing at about 25 percent a year for several years now, and we're
pressed for space so we have enlarged the third floor to accommodate more
people so that we can maintain the quality of our service levels.
From a technology perspective we moved to check imaging in the
second quarter. Our old equipment had gone well beyond its service life
and we felt the time was right to make the move. It even allowed us to
provide check images to our NetBankingr customers. We enhanced the
teller systems to bring them online and upgraded BankLiner, our telephone
voice response system.
Earnings for the year came in at $3,000,493, a 10.6 percent decline
from the prior year. This was due to the unusually large increase in non
interest expense which rose $1.7 million. A majority of this was
associated with the acquisition of The Waldoboro Bank, FSB. The positive
side of the equation shows net interest income up $1 million or 9.9
percent and non interest income up $212,000 or 6.2 percent. We also
chose to boost our provision for loan losses by an added $171,000 to
reflect the larger combined loan portfolio.
We welcomed the following individuals to our team in 2000; many of
whom joined us from The Waldoboro Bank, FSB.
Debra Ehrlenbach, Senior Auditor
Andrea Leonard, VP/Relationship Manager
Bonnie Poland, Loan Operations Officer
Annette Russell, Financial Planner
Scott Shields, Financial Planner
Antoinette Buzzard, Electronic Services Clerk
Elizabeth Chatto, Teller
Jody Tripp, Teller
Nancy Worster, Deposit Services Clerk
Jane Dagley, AVP/Relationship Manager
Monica Grady, Relationship Manager
Meaghan Clark, Teller
Theresa Clark, Teller
Rachael Davis, Accounting Clerk
Sharon Davis, Teller
Tammy Kaspala, Teller
Lucinda Sargent, Teller
Jessica Strout, Teller
Kelly Sprowl, Trust Administrative Assistant
Brandi Kimball, Teller
Pamela Dalfonso, Relationship Manager
Dianne Lawrence, AVP/Branch Manager
April Murray, Branch Manager
Robert Carter, Senior Vice President/Branch Administration
Tabatha Allen, Teller
Sylvia Colson, Teller
Gretta Libby, Teller
Sandra Otis-Anderson, Branch Supervisor
Jessica Storer, Teller
Sherry Emery, Teller
Gayle Hustus, Teller
Michelle Philbrook, Teller
Alana Starr, Teller
Christina Torres-York, AVP/Relationship Manager
Candice Abruzese, Teller
Rebecca Anderson, Teller
Joni Howlett, Teller
Kathe Marion-Gallant, Mortgage Underwriter
Valerie Shields, Credit Analyst
Kimberly Tyler, Teller
Faye Hauck, Receptionist
Gloria Membry, Teller
Annette Spear, Teller
Aaron Jacobs, Operations Clerk
We thank you, our shareholders, directors, officers and employees
for your interest and support.
Sincerely, Sincerely,
John V. Sawyer, II Peter A. Blyberg
Chairman of the Board President and
Chief Executive Officer
Five-Year Summary (000's Omitted)
2000 1999 1998 1997 1996
Deposits $245,581 $192,848 $188,029 $177,386 $166,445
Loans 205,019 127,623 110,399 107,062 101,044
Securities *109,958 *107,509 *111,304 *96,065 *81,568
Shareholders' equity **31,586 **29,771 **27,577 **25,565 **23,885
Total assets 348,242 257,850 251,195 222,560 202,066
Net earnings 3,000 3,355 3,090 2,700 2,452
Earnings per share 5.19 5.80 5.34 4.66 4.22
Equity Ratios
Equity expressed as a percentage of average:
**2000 **1999 **1998 **1997 **1996
Deposits 14.4% 15.6% 15.1% 14.9% 14.4%
Loans 19.0% 25.0% 25.4% 24.6% 24.6%
Total assets 10.4% 11.7% 11.6% 12.0% 12.1%
Earning assets 11.4% 12.7% 12.8% 13.0% 13.3%
Other Financial Highlights
2000 1999 1998 1997 1996
Return on average
shareholders' equity** 9.5% 11.7% 11.6% 10.9% 10.6%
Return on average assets 1.0% 1.3% 1.3% 1.3% 1.2%
Return on average
earning assets 1.1% 1.4% 1.4% 1.4% 1.4%
*Carrying value. Includes available for sale securities with cost of
$100,678, $102,488, $101,610, $59,983 and $75,095 at December 31, 2000,
1999, 1998, 1997 and 1996, respectively.
**Excluding net unrealized gain (loss) net of deferred taxes on available
for sale securities of ($466,522), ($2,128,324), $1,162,032, $437,749 and
($171,460) at December 31, 2000, 1999, 1998, 1997 and 1996, respectively.
SERVING THE CUSTOMER, CREATING A COMMUNITY
Every day Union Trust receives comments from our customers, from the
people and businesses who are part of our community. We use this
information to improve the level of service we provide, our aim is always
to serve our customers better.
We want to share some of these remarkable comments with you. They
emphasize what is most important to our success: serving our customers,
and the community of which we are all a part. They are words of support,
from the people who matter most: our customers.
Insert photo of Ellsworth
Insert the following 5 year bar charts:
Earnings Per Share
Book Value Per Share
Dividends Per Share
Total Assets
Net Income
Shareholders' Equity
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 2000
Overview of Company
Union Bankshares Company ("the Company") is a one-bank holding
company, organized under the laws of the State of Maine and headquartered
in Ellsworth, Maine. The Company's only subsidiary is Union Trust
Company, (`the Bank") wholly owned and established in 1887. On August
31, 2000, the Company completed the acquisition of Mid-Coast Bancorp,
Inc., a bank holding company with one principal subsidiary, Waldoboro
Bank, FSB. On September 29, 2000, Waldoboro Bank, FSB was merged with
and into Union Trust Company. The acquisition of Mid-Coast Bancorp, Inc.
was accounted for under the purchase method of accounting. 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.
Business
Union Trust Company is a full-service, independent, community bank
that is locally owned and operated. Having acquired The Waldoboro Bank
FSB during 2000, Union Trust now has fifteen offices located along
Maine's coast, stretching from Waldoboro to Machias. Union Trust
continues to provide banking, retirement, employee benefit, investment
and personal trust services to individuals, businesses, municipalities,
and non-profit organizations in its market area and throughout the state.
To this broad list of services Union Trust added Financial Planning
services during 2000. Offering financial advice to our customers is
something we have been doing for many years. Financial Planning
formalizes this by looking at a person's entire financial situation and
providing a written plan with objectives for the customer to implement in
order to reach their financial goals.
During 2000, many of our services were enhanced or upgraded. Having
introduced Internet banking, known as NetBankingr, in September 1999, Net
Bankingr Cash Management was unveiled in spring 2000. Net Bankingr Cash
Management provides the same functionality as NetBankingr plus additional
system enhancements designed specifically for the needs of small
businesses. These include ACH origination services for direct deposit of
payroll, stop payments and wire transfer initiation.
Hardware and software was purchased and implemented to provide
Relationship Managers with the ability to complete a mortgage loan
application on a laptop computer either in or out of the office. This
mobility and efficiency enhances the already exceptional service we
provide to our mortgage customers.
The merger with The Waldoboro Bank FSB further necessitated service
enhancements already on the year's docket. In June 2000, Check Imaging
was installed with overwhelming success and customer acceptance. This
has enabled customers to more easily reconcile their monthly statements
and conveniently organize, store and reference their records. For the
Bank, Check Imaging has brought all the operational efficiencies we hoped
it would. Now customers receive images of their checks with their
monthly statements, can view them on-line using NetBankingr, and can
request them on CD-ROM for additional storage and retrieval convenience.
In July 2000, a new on-line teller system was installed. BankLiner
telephone banking was also brought on-line. With both of these systems
on-line, a customer can make a deposit at the branch and upon returning
home can call BankLiner or log onto NetBankingr and have that deposit
already reflected in their account balance. Or, if the customer were to
make a transfer using BankLiner and then call Customer Service to verify
their balance, the transfer would be reflected on their account.
The merger with The Waldoboro Bank FSB expanded our market. Union
Trust's market area now covers five counties including Hancock and
Washington plus Knox, Lincoln and Waldo. There are 192,000 people within
this five county market area, representing a 125% expansion of the
population base that Union Trust serves. The number of business
establishments in this new expanded market area is 6,500 - a 116%
increase. The Bank's products that are positioned to be most effective
in this newly expanded market are NetBankingr, home mortgages, small
business banking and trust and investment services. However, this new
growth opportunity also brings new challenges, including new competitors.
As we capitalize on the opportunity that the acquisition of The Waldoboro
Bank FSB provides, during 2001 and beyond, we will also be positioning
the Bank for product expansion. By peering in the window of the new
Union Trust storefront on Main Street in Ellsworth, one can see Union
Trust's future emerging, becoming a true provider of financial services
in the broadest sense.
REVIEW OF FINANCIAL STATEMENTS
The following discussion and analysis focus on the factors affecting
Union Bankshares Company's financial condition at December 31, 2000 and
1999, and the financial results of operations during 2000, 1999 and 1998.
The consolidated financial statements and related notes beginning on page
25 of this report should be read in conjunction with this review.
RESULTS OF OPERATIONS
The operating results of the Company depend primarily on its net
interest income, which is the difference between interest income on
earning assets (primarily loans and investments) and interest expense
(primarily deposits and borrowings). The Company's results are also
affected by the provision for loan losses, which reflects management's
assessment of the adequacy of the allowance for loan losses; noninterest
income, including gains and losses on the sales of loans and securities;
noninterest expenses; and income tax expense. Each of these major
components of the Company's operating results is highlighted below.
NET INCOME
The Company reported net income in 2000 of $3,000,493, a decrease of
$354,229 or 10.6% over 1999, as compared to an increase of $264,694 or
8.6% and $389,556 or 14.4% for 1999 and 1998, respectively.
The following table summarizes the status of the Company's earnings
and performance for the periods stated.
December 31
2000 1999 1998
Earnings per share $5.19 $5.80 $5.34
Return on average shareholders' equity* 9.5% 11.7% 11.6%
Return on average assets 1.0% 1.3% 1.3%
Return on average earning assets 1.1% 1.4% 1.4%
*Excluding net unrealized gain (loss) net of deferred taxes on available
for sale securities of ($466,522), ($2,128,324) and $1,162,032 at
December 31, 2000, 1999 and 1998, respectively.
The decrease in net income for the twelve months ending December 31,
2000 versus the same period in 1999 was not unexpected due to significant
one time expenses associated with the Mid-Coast acquisition during 2000
and several one time events that occurred in 1999, including one time
gains on a sale of bank owned property and security gains realized on the
Company's security portfolio.
WE GET TO KNOW OUR CUSTOMERS SO WE CAN SERVE THEM BETTER
"My Relationship Manager, Tina Torres-York, has bent over backwards to
get me what I need for my business. She does a great job, knows my needs
and negotiates on my behalf. She has worked so hard for us and we trust
her completely. I couldn't ask for better service from Union Trust. The
staff in Waldoboro is truly customer service friendly - a quality not
usually found in the public today."
Insert photo of Waldoboro
NET INTEREST INCOME
Net interest income continues to be the most significant determinant
of the Company's earnings performance. Net interest income, when
expressed as a percentage of average assets, is referred to as net
interest margin. Management of interest rate risk has become paramount in
ensuring the Bank's continued profitability. Changes in net interest
income are the results of interest rate movements, changes in the balance
sheet mix of earning assets and interest bearing liabilities, and changes
in the level of nonearning assets and liabilities.
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) nonaccrual loans
have been included in the appropriate average balance loan category, but
unpaid interest on nonaccrual 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)
2000 1999 1998
Average Int Yield/ Average Int Yield/ Average Int Yield/
Balance Earned Rate Balance Earned Rate Balance Earned Rate
/Paid /Paid /Paid
Assets
Interest Earning Assets:
Securities available for
sale $101,234 $ 6,980 6.89 $105,663 $ 6,913 6.54 $ 77,517 $ 5,278 6.81
Securities held to
maturity 4,184 315 7.53 4,311 333 7.72 23,968 1,510 6.30
Federal funds
sold 821 44 5.36 5,705 294 5.15 6,384 326 5.11
Loans
(net) 149,169 13,656 9.15 115,825 10,237 8.83 108,057 10,241 9.47
Total interest earning
assets 255,408 $20,995 8.22 231,504 $17,777 7.68 215,926 $17,355 8.04
Other nonearning
assets 26,891 20,069 19,699
$282,299 $251,573 $235,625
Liabilities
Interest Bearing Liabilities:
Savings dep-
osits $100,245 $ 1,321 1.32 $ 67,766 $ 1,082 1.60 $ 69,656 $ 1,131 1.62
Time
deposits 84,012 4,540 5.40 77,139 3,784 4.91 77,545 4,223 5.44
Money market
accounts 22,192 808 3.64 21,262 728 3.42 11,765 560 4.76
Borrowings 32,328 2,629 8.13 20,969 1,502 7.16 18,077 1,260 6.97
Total interest bearing liabil-
ities 238,777 $ 9,298 3.89 187,136 $ 7,096 3.79 177,043 $ 7,174 4.05
Other noninterest bearing liabilities
& shareholders'
equity 43,522 64,437 58,582
$282,299 $251,573 $235,625
Net interest
income $11,697 $10,681 $10,181
Net interest rate spread 4.33 3.89 3.99
Net interest margin 4.58 4.61 4.72
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, 2000, 1999 and 1998
(In Thousands)
Year Ended December 31, 2000 vs. 1999
Increase (Decrease)
Due to Change In
Volume Rate Rate/Volume* Total
Interest Earning Assets
Securities available for sale $ (292) $ 300 $ 53 $ 61
Securities held to maturity (10) 10 (11) (11)
Federal funds sold (252) 262 (259) (249)
Loans, net 2,935 (3,058) 3,531 3,408
Total interest earning assets 2,381 (2,486) 3,314 3,209
Interest Bearing Liabilities
Savings deposits 522 (433) 150 239
Time deposits 341 (374) 790 757
Money market accounts 31 (34) 82 79
Borrowed funds 813 (924) 1,238 1,127
Total interest bearing liabilities 1,707 (1,765) 2,260 2,202
Net change in net interest income $ 674 $ (721) $1,054 $1,007
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
*Represents the change not solely attributable to change in rate or
change in volume but a combination of these two factors.
Net interest income increased by $1,007,607 or 9.9% during 2000.
This increase was primarily due to increases in interest earning assets,
in particular, loans of $77,396,131 and investments of $2,449,320, offset
in part by an increase in interest paying liabilities, in particular, an
increase in deposits of $52,732,883 and borrowings of $34,610,888.
During 1999, net interest income increased by $242,224 or 2.4% compared
to 1998. This increase was attributed to increases in loans of
$17,223,368, offset in part by a decrease in investments of $3,795,339
and an increase in savings and money market accounts. During 1998, net
interest income increased by $474,448 or 5.0% compared to 1997. This
increase was attributed to higher loan and investment volumes, offset by
a higher cost of funds (interest on deposits and borrowings). The
weighted average yield on a tax equivalent basis on interest earning
assets was 8.22% for 2000, up slightly over 1999 of 7.68%. In 1998, the
weighted average yield was 8.04%. The Company's net interest margin was
4.58%, 4.61% and 4.72% for 2000, 1999 and 1998, respectively, and the net
interest income spread was 4.33% in 2000, 3.89% in 1999 and 3.99% in
1998. Overall margin compression, the Federal Reserve reducing the
Federal Funds rate, increased competition from bank and non-bank
institutions in our service area and pricing pressures continue to be
significant factors in the Bank's ability to grow net interest income at
a faster pace.
Interest and dividend income increased $3,209,006 or 18.6% during
2000, primarily due to growth in the loan portfolio and investment
securities, and an increase in the yield on average earning assets to
8.22% in 2000 from 7.68% in 1999.
Loan increases, particularly in real estate loans, were primarily
the result of the acquisition of The Waldoboro Bank FSB, the business
development program conducted by the Bank's Relationship Managers,
attractive interest rates and a strong local economy. Interest and
dividend income increased slightly by $164,574 or 1.0% in 1999 and
$914,358 or 5.7% in 1998, primarily due to increased interest on loans
and investments due to volume growth offset in part by narrowing margins.
The average balances of non-accrual loans can also affect the
average yield earned on all outstanding loans. Nonaccrual loans as of
December 31, 2000 were $3,390,000 and lowered the average yield on loans
by 35 basis points for 2000. The average balances on nonaccrual loans in
1999 and 1998 were minimal and, therefore, had an insignificant effect on
average loan yield.
Interest expense on deposits and borrowings increased $2,201,399 or
31.0% in 2000 compared to 1999. This increase was the result of acquired
deposits and borrowings of $77,379,205. The cost of borrowings increased
by $1,127,000 or 97 basis points on average during the year. The overall
cost of deposits increased by $1,075,000 or 19 basis points due primarily
to the increase in interest expense of certificates of deposit. Interest
expense on deposits and borrowings decreased $77,650 or 1.1% in 1999
compared to 1998. The cost of borrowings increased by $242,000 or 19
basis points on average during the year. The overall cost of deposits
decreased by $319,000. Interest expense in 1998 increased $439,910 or
6.5% over 1997. This increase was primarily driven by the expense of
short-term borrowings and certificates of deposit.
PROVISION 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 include a loan by loan analysis of all
larger commercial and commercial real estate loans as well as those that
were nonperforming or under close monitoring by management for potential
problems. 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 originations; and other
asset quality considerations. The Company has an independent loan review
program that supports the Company's lending strategies, monitors
compliance with established loan policies and procedures and identifies
credit trends.
During 2000, the Company provided $371,000 to the allowance for
possible loan losses, compared to $200,000 and $285,000 in 1999 and 1998,
respectively. During 2000, the allowance was increased because of loans
acquired from The Waldoboro Bank FSB, overall loan growth and an increase
in nonaccrual loans, in particular, in the commercial loan category.
Overall loan mix can be seen on page 14 of this section and additional
information concerning the level of the allowance and historical charge-
off experience can be found in footnote 6 on page 30.
The following table sets forth information concerning the allocation
of the Company's allowance for loan losses by category:
Allowance for Loan Losses
December 31,
2000 1999 1998
Loan Category Amount % of Amount % of Amount % of Loans
Loans in Loans in in Each
Each Each Category
Category Category to Total
to Total to Total Loans
Loans Loans
Commercial $2,695 10.2% $2,176 12.7% $1,933 14.4%
Residential 647 78.2% 449 69.0% 454 66.4%
Real Estate
Municipal 0 1.8% 0 6.9% 0 5.3%
Installment 34 9.8% 4 11.4% 47 13.9%
Totals $3,376 100.0% 2,629 100.0% $2,434 100.0%
Management believes that the allowance for loan losses and the
carrying value of real estate owned are adequate. While management uses
available information to recognize losses on loans and real estate owned,
future additions to the allowances might be necessary based on changes in
economic conditions, particularly in northern New England. In addition,
various regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for loan losses.
The following table reflects the quality of the Bank's loan
portfolio and the emphasis placed upon the management of credit risk:
(000's omitted)
December 31,
2000 1999
Nonaccrual loans $3,390 $ 437
Loans past due 90 days and accruing 21 314
Total nonperforming assets 3,411 751
Ratio of total nonperforming loans to capital and the
allowance for loan losses (Texas ratio) .098 .025
Ratio of net recoveries (charge-offs) to loans 0 0
Ratio of allowance for loan losses to loans .02 .02
Coverage ratio (allowance for loan losses divided by
nonperforming assets) .990 3.501
Ratio of nonperforming assets to total assets .010 .003
Ratio of nonperforming loans to total loans .017 .006
NONINTEREST INCOME
Total noninterest income was $3,639,548, $3,426,328 and $3,155,412
for the years ended December 31, 2000, 1999 and 1998, respectively. The
$213,221 or 6.2% increase in non-interest income during 2000 was
primarily attributable to a $245,914 or 27.1% increase in trust
department income, a $105,720 or 14.9% increase in VISA income offset by
a decrease of $114,937 or 22.3% in loan department income. The $270,916
or 8.6% increase in noninterest income during 1999 was primarily
attributable to a $180,816 or 24.9% increase in trust department income,
a $153,984 gain on other real estate owned and a $69,458 or 10.8%
increase in VISA income. The $547,206 or 21.0% increase during 1998 was
primarily due to increases in trust department income, loan department
income, and mortgage servicing rights.
The following table summarizes information relating to the Company's
noninterest income:
Year Ended December 31,
2000 1999 1998
Net security gains (losses) $ (13,545) $ (15,728) $ 31,842
Trust department income 1,152,910 906,996 726,180
Service income 291,195 314,268 331,574
VISA income 817,275 711,555 642,097
Loan department income 399,414 514,351 554,120
Gain on other real estate owned 0 153,984 0
Other noninterest income 992,299 840,901 869,599
Total noninterest income $3,639,548 $3,426,327 $3,155,412
NONINTEREST EXPENSE
Total noninterest expenses, which consist primarily of employee
compensation and benefits, occupancy and equipment expenses and other
general operating expenses, increased $1,704,412 or 19.7% during 2000,
$250,090 or 3.0% during 1999 and $397,098 or 4.9% during 1998. The
increase in non-interest expenses in 2000 was primarily attributable to
increased staffing, the expenses related to upgrading equipment and
facilities and non-recurring acquisition related costs, in particular,
those costs related to obsolete systems and contracts. The increase in
noninterest expenses in 1999 was attributable to salary and staffing
increases, in particular in the Trust and Investment Services department
and expenses related to new technology and access channels to the Bank
and its services. The increase in 1998 was attributable to salary and
staffing increases, depreciation, taxes and rent expenses related to our
newest branch in Bar Harbor and expenses related to strategic
initiatives.
INCOME TAXES
The Company recognized $1,077,000, $1,377,355 and $1,294,000 in
income tax expense for the years ended December 31, 2000, 1999 and 1998,
respectively. The effective tax rate was 26.4% for 2000, 29.1% for 1999
and 29.5% for 1998. The Bank has sufficient refundable taxes paid in
available carry back years to fully realize its recorded deferred tax
asset of $2,014,124 at December 31, 2000.
FINANCIAL CONDITION
Set forth below is a discussion of the material changes in the
Company's financial condition for the periods indicated.
BALANCE SHEET REVIEW
OVERVIEW
The year 2000 was highlighted by the acquisition of Mid-Coast
Bancorp, Inc. on August 31, 2000. Its only subsidiary, The Waldoboro
Bank, FSB, had branch locations in Belfast, Rockland, Jefferson and
Waldoboro. These branch locations represent a logical expansion of the
Company's service area. The acquisition was accounted for under the
purchase method of accounting for business combinations. On September
29, 2000, the Company assumed $63.4 million in deposits, $14.0 million in
borrowings, $65.9 million in loans and $10.2 million in securities.
Total assets at December 31, 2000 were $348,242,126, an increase of
$90,392,461 or 35.1% from December 31, 1999. The change in assets
consisted primarily of a $76,535,015 increase in net loans, an increase
in investment securities of $2,468,674, an increase of $1,278,699 in cash
and due from banks and federal funds sold, and an increase in other
assets of $7,000,520. The asset growth was supported by an increase of
$52,732,883 in deposits and $34,610,888 in borrowings. Total assets
increased $6,654,860 or 2.6% in 1999.
INVESTMENT SECURITIES
Securities available for sale, which include U.S. Government
securities, callable agency bonds, municipals, mortgage backed securities
and certificates of deposit, increased $2,449,320 or 2.3%. During 2000,
the Bank elected to maintain the level of the securities portfolio to
enhance its contribution to net interest income, maximize yields, reduce
exposure of continuously callable agencies, manage cash flow, control
risk and to provide diversification. Those securities acquired from The
Waldoboro Bank FSB of $10.2 million were allowed to mature or were sold.
As of December 31, 2000, the Company has a net unrealized loss of
$706,851 in this portfolio.
In 1999, securities available for sale increased $3,655,862 or 3.5%
due primarily to planned portfolio growth. As of December 31, 1999, the
Company had a net unrealized gain of $3,224,735 in this portfolio.
Securities held to maturity, which include in-state municipals,
decreased $385,043 or 9.1% in 2000, compared to a $139,477 or 3.2%
decrease in 1999.
The changes in the securities portfolio reflect the Company's
efforts to meet asset and liability objectives and otherwise manage its
liquidity and funding needs within the parameters of the Company's
policies. For further discussion, see the Risk Management section, page
16.
LOANS
Union Trust offers a wide variety of loan products to serve the
financial needs of individuals, businesses, municipalities and nonprofit
organizations. Total loans (which excludes loans held for sale) reached
a record high of $205,018,708 (which includes $65,945,392 in loans
acquired from The Waldoboro Bank FSB) at December 31, 2000, a 60.6%
increase from total loans of $127,622,577 at December 31, 1999. As of
December 31, 1999, loans increased $17,223,368 or 15.6% over 1998.
Real estate mortgage loans, which consist of loans secured by real
estate (commercial, residential and home equity loans), increased by
$72.3 million or 82.1% in 2000. During 1999, real estate loans increased
$14.8 million or 20.1% from $73.2 million to $88.0 million. The Company
generally retains adjustable rate mortgages in its portfolio, but will
from time to time, retain fixed rate mortgages. With a relatively low
interest rate environment, it has been the Company's asset/liability
strategy for 2000 to hold fixed rate mortgages in its portfolio. The
yields on these interest earning assets have been higher than yields
available in the investment portfolio. The Company also originates fixed
rate residential loans for sale to investors in the secondary market.
However, during 2000, volumes were down from 1999.
Commercial loans increased by $4.8 million or 29.5% during 2000. In
1999, commercial loans increased from $16.0 million to $16.2 million, an
increase of $242,850 or 1.5%. Commercial loans consist of loans secured
by various corporate assets, as well as loans to provide working capital
in the form of lines of credit.
Consumer loans increased by $5.5 million or 37.6% in 2000. In 1999,
consumer loans decreased from $15.3 million to $14.5 million, a decrease
of $819,298 or 5.4%. Consumer loans include credit card, overdraft
protection, automobile, boat, recreation vehicle, mobile home and
personal loans.
Municipal loans decreased by $5.1 million or 58.0% in 2000 due mainly to
a large municipal loan payoff in late fall. In 1999, municipal loans
increased from $5,798,085 to $8,845,000, an increase of $3,046,915 or
52.5%.
Loan mix and growth trends, as of December 31, 2000, are illustrated
in the graphs below:
INSERT 5 YEAR BAR CHART
LOAN GROWTH TRENDS
INSERT PIE CHART
LOAN MIX
DEPOSITS
Deposits represent the Company's primary source of funds for
lending, investing and as a general source of liquidity for the Bank. In
2000, total deposits increased by $52.7 million (including $63,414,205 in
deposits acquired from The Waldoboro Bank FSB) or 27.3% over 1999, ending
the year at $245,580,717. The Company experienced growth in all deposit
categories in 2000 with savings accounts increasing 23.5%, money market
accounts increasing 6.2%, demand deposits increasing 11.6% and time
deposits increasing 42.5%. The Company offers a wide array of deposit
products in its market area, including checking accounts, money market
accounts, savings accounts, certificates of deposit and retirement
savings plans. In 1999, total deposits increased by $4,818,818 or 2.6%.
In the Bank's market area, the banking business is somewhat seasonal
due to an influx of tourist 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. This
deposit swing is predictable and does not have a material adverse effect
on the Bank.
Deposit mix and growth trends, as of December 31, 2000, are
illustrated in the graphs below:
INSERT 5 YEAR BAR CHART
DEPOSIT GROWTH TRENDS
INSERT PIE CHART
DEPOSIT MIX
BORROWINGS
Borrowings supplement deposits as a source of funds for the Bank.
In addition to borrowing from the Federal Home Loan Bank (FHLB), the Bank
uses securities sold under agreement to repurchase accounts to provide
additional liquidity. Total borrowings as of December 31, 2000 were
$66,202,561, an increase of $34,610,888. In 1999, total borrowings
increased $2,174,446 over 1998.
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
The Federal Reserve Board's capital requirement generally calls for
an 8% total capital ratio, of which 3% must be comprised of Tier I
capital. Risk based capital ratios are calculated by weighting assets
and off balance sheet instruments according to the relative credit risk.
As of December 31, 2000, the Company's Tier I ratio of 11.64% far exceeds
the Federal Reserve Board's guidelines.
Total shareholders' equity, excluding a net unrealized loss on
available for sale securities of $466,522 in 2000 and $2,128,324 in 1999,
increased $1,814,880 in 2000, primarily as a result of net income of
$3,000,493, offset by dividends declared of $1,155,375.
During 1999, the Company declared a 20% stock dividend. Dividends
of $1,107,916 were declared on the Company's common stock and represented
a 14.9% increase over 1998. The dividend payouts for 2000, 1999 and 1998
were 38.5%, 33.0% and 31.2% of net income, respectively.
Union Bankshares Company 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 2000 and 1999 are listed in the
following table. Prices have been adjusted to reflect a 20% stock
dividend distributed in May 1999.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
2000 107.00 to 107.00 97.50 to 107.00 95.00 to 97.50 85.00 to 85.00
1999 108.33 to 108.33 106.63 to 106.67 106.63 to 108.00 108.00 to 110.00
As of December 31, 2000, there were 737 holders of record of Union
Bankshares Company common stock.
Quarterly dividends per share paid by the Company in 2000 and 1999
were as follows:
2000 1999
1st Quarter $ .50 $ .41
2nd Quarter $ .50 $ .41
3rd Quarter $ .50 $ .50
4th Quarter $ .50 $ .50
Total $2.00 $1.82
RISK MANAGEMENT
The Company's continued success is primarily dependent upon its
ability to strategically manage financial and nonfinancial risks.
Nonfinancial risks facing the Company include:
Competition from banks and nonbank financial service companies
Changing regulatory and political environments
Rapid change in technology
Demographic changes
Economic changes
Financial risks managed by the Company include:
Credit risk
Interest rate risk (including asset/liability management)
Market risk
Liquidity risk
Off balance sheet risks/commitments
CREDIT RISK MANAGEMENT
The Company's net loan portfolio as of December 31, 2000 accounted
for 58% of total assets and represents its primary source of credit risk.
Substantial amounts of time and resources have been dedicated to the
management of credit risk within the Bank's loan portfolio. Future
emphasis will be applied toward enhancing the already proven systems of
checks and balances to manage the origination, processing and collection
of loans. Additional information relating to credit risk may be found on
page 11, "Provision for Loan Losses," and Note 16 to the consolidated
financial statements.
QUANTITATIVE 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 AND ASSET/LIABILITY MANAGEMENT
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, 2000 and 1999.
Estimated
Rate Change NII Sensitivity
2000 1999
+200 bp + 1.6% + 3.3%
-200 bp - 2.8% - 6.2%
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,
2000, 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.
LIQUIDITY RISK MANAGEMENT
Liquidity management is the process by which the Company structures
its liquidity to meet the cash flow requirements of its customers as well
as day to day operating expenses. Many factors affect the Company's
ability to meet its liquidity needs, including its mix of assets and
liabilities, interest rates and local economic conditions. The Company's
actual inflow and outflow of funds is detailed in the Consolidated
Statement of Cash Flows on pages 23-24.
Liquidity comes from both assets and liabilities. The assets of the
balance sheet provide liquidity through prepayment and maturities of
outstanding loans, investments and mortgage backed securities and the
sale of mortgage loans. The liability side provides liquidity through
deposits and borrowings from Federal Home Loan Bank of Boston. During
2000 and 1999, the Company used its sources of funds primarily to meet
ongoing commitments to pay maturing certificates of deposit and savings
withdrawals, fund loan originations and maintain a substantial securities
portfolio.
The Company's liquidity policy currently includes requirements that
the Company maintain liquidity as a percentage of total assets at a
minimum of 5%. Access to Federal Home Loan Bank advances allows the
Company to maintain a lower liquidity level than might otherwise be
required. As of December 31, 2000, the Company had a 7.4% liquidity
ratio.
OFF BALANCE SHEET RISKS AND COMMITMENTS
As of December 31, 2000 and 1999, the total approved loan
commitments outstanding, the commitment under unused lines of credit and
the unadvanced portion of loans amounted to $36,980,000 and $35,990,000,
respectively.
REGULATORY ENVIRONMENT
REGULATORY CAPITAL REQUIREMENTS
Under Federal Reserve Board guidelines, the Company is required to
maintain capital based on "risk adjusted" assets. Under risk based
capital guidelines, categories of assets with potentially higher credit
risk require more capital than assets with lower risk. In addition to
balance sheet assets, the Company is required to maintain capital, on a
risk adjusted basis, to support off balance sheet activities such as loan
commitments. The Federal Reserve guidelines classify capital into two
tiers, Tier I and Total Capital. Tier I risk based capital consists
primarily of shareholders' equity. Total risk based capital consists of
Tier I capital plus a portion of the general allowance for loan losses.
In addition to risk based capital requirements, the Federal Reserve
requires the Company to maintain a minimum leverage capital ratio of Tier
I capital to total assets.
The Company as of December 31, 2000 and 1999 exceeds all applicable
federal and state laws and regulations regarding minimum regulatory
capital and is categorized as a well-capitalized bank.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related notes presented in
this Annual Report have been prepared in accordance with generally
accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars
without consideration of changes in the relative purchasing power of
money over time due to inflation.
Unlike many industrial companies, substantially all of the assets
and virtually all of the liabilities of the Company are monetary in
nature. As a result, interest rates have a more significant impact on
the Company's performance than has the general level of inflation. Over
short periods of time, interest rates may not necessarily move in the
same direction or in the same magnitude as inflation.
RECENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board recently issued the
following Statement of Financial Accounting Standards (SFAS):
SFAS No. 137 Accounting for Derivative Instruments and Hedging Activities
SFAS No. 138 Accounting for Certain Derivative Instruments and Certain
Hedging Activities
SFAS No. 140 Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities
SFAS No. 133, establishes accounting and reporting standards for
derivative instruments and for hedging activity. The Company adopted
SFAS No. 133 effective July 1, 1998. During the years ended December 31,
2000 and 1999, the Company did not hold any derivative instruments and
management does not expect to enter into derivative transactions in the
near future. The effect of adopting SFAS No. 133 on the consolidated
financial statements of the Company was limited to the transfer of
securities from held to maturity to available for sale.
SFAS No. 137 and 138, which amend SFAS No. 133 and establish accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging
activities, are effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company does not expect these
statements to have any material impact to its consolidated financial
condition and results of operations.
SFAS No. 140 replaces SFAS No. 125. It is effective for transfers
occurring after March 31, 2001. The Company does not expect this
statement to have any material impact to its consolidated financial
condition and results of operations.
IT'S ABOUT PROVIDING YOU WITH THE BEST CUSTOMER SERVICE, ALL THE TIME
"I deal with banks every single day in my profession and I can assure you
that the exceptional treatment I received from Jane Dagley in Rockland is
not standard operating procedure. For a bank employee to go out of their
way to assist me with my little problem? Unheard of! Ms. Dagley's
response: "Just doing my job." Well I appreciated what felt like
special treatment. Once in a while you find someone who'll go that extra
mile. You appreciate it of course but this experience simply could not
pass with just a thank you. Jane was totally professional,
understanding, and pleasant!"
Insert photo of Rockland
UNION BANKSHARES COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
ASSETS
Cash and due from banks (note 2) $ 10,309,649 $ 9,035,081
Federal funds sold 43,829 39,698
Available for sale securities, at market
value (note 3) 101,138,345 99,714,632
Held to maturity securities, at cost (note 4)
(market value $3,830,800 and $4,142,076 at
December 31, 2000 and 1999, respectively) 3,851,461 4,236,504
Other investment securities at cost, which
approximates market value 4,968,350 3,557,700
Loans held for sale 320,125 594,464
LOANS (note 5):
Real estate 160,333,395 88,047,637
Commercial and industrial 21,001,790 16,221,882
Municipal 3,717,912 8,845,000
Consumer 19,965,611 14,508,058
205,018,708 127,622,577
Deferred loan costs (fees) (87,619) 26,574
Less allowance for loan losses (note 6) 3,376,395 2,629,472
Net loans 201,554,694 125,019,679
Premises, furniture and equipment,
net (note 8) 6,371,464 2,987,572
Core deposit intangible (note 9) 307,619 0
Goodwill (note 9) 6,572,652 0
Other assets (notes 7, 9, 13 and 14) 12,803,938 12,664,335
Total assets $348,242,126 $257,849,665
LIABILITIES
DEPOSITS
Demand deposits $ 28,313,749 $ 25,368,731
Savings deposits (including NOW deposits
totaling $45,991,547 in 2000 and
$38,170,328 in 1999) 85,946,245 69,602,376
Money market accounts 23,854,901 22,465,087
Time deposits (note 10) 107,465,822 75,411,640
Total deposits 245,580,717 192,847,834
Advances from Federal Home Loan
Bank (note 11) 51,123,250 18,451,250
Other borrowed funds (note 12) 15,079,311 13,140,423
Other liabilities (notes 13 and 14) 5,339,174 5,767,167
Total liabilities 317,122,452 230,206,674
Contingent liabilities and commitments
(notes 8, 15, 16 and 17)
SHAREHOLDERS' EQUITY
Common stock, $12.50 par value. Authorized
1,200,000 shares, issued 582,394
shares in 2000 and 1999 7,279,925 7,279,925
Surplus 3,963,472 3,963,533
Retained earnings (note 15) 20,682,146 18,837,028
Accumulated other comprehensive loss
Net unrealized loss on available for
sale securities net of deferred tax
asset of $240,329 and $1,096,409 at
December 31, 2000 and 1999,
respectively (note 3) (466,522) (2,128,324)
Treasury stock, at cost (4,900 shares
in 2000 and 4,546 shares in 1999) (339,347) (309,171)
Total shareholders' equity 31,119,674 27,642,991
Total liabilities and shareholders' equity $348,242,126 $257,849,665
The accompanying notes are an integral part of these consolidated
financial statements.
UNION BANKSHARES COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $13,441,308 $10,032,349 10,240,991
Interest on securities available for sale 6,770,631 6,709,940 5,113,775
Interest on securities held to maturity 217,794 229,221 1,420,204
Interest on federal funds sold 44,557 293,774 325,740
Total interest income 20,474,290 17,265,284 17,100,710
INTEREST EXPENSE
Interest on savings deposits 1,321,363 1,082,132 1,131,252
Interest on money market accounts 807,451 728,408 560,186
Interest on time deposits 4,539,942 3,783,922 4,222,178
Interest on borrowings 2,629,096 1,501,991 1,260,487
Total interest expense 9,297,852 7,096,453 7,174,103
Net interest income 11,176,438 10,168,831 9,926,607
Provision for loan losses (note 6) 371,000 200,000 285,000
Net interest income after provision
for loan losses 10,805,438 9,968,831 9,641,607
NONINTEREST INCOME
Net securities gains (losses) (note 3) (13,545) (15,728) 31,842
Trust department income 1,152,910 906,996 726,180
Service charges on deposit accounts 291,195 314,268 331,574
VISA income 817,275 711,555 642,097
Loan department income 399,414 514,351 554,120
Gain on other real estate owned 0 153,984 0
Other income 992,299 840,901 869,599
Total noninterest income 3,639,548 3,426,327 3,155,412
Income before noninterest expenses 14,444,986 13,395,158 12,797,019
NONINTEREST EXPENSE
Salaries and wages 4,100,498 3,445,803 3,182,478
Pension and other employee
benefits (note 13) 1,057,498 909,087 976,522
Insurance 122,786 110,065 97,853
FDIC insurance 44,851 21,414 20,859
Net occupancy expenses 1,206,485 975,143 955,316
Equipment expenses 450,104 373,208 289,376
Advertising 156,278 179,148 176,649
Supplies 372,911 265,919 272,239
Postage 187,435 175,031 154,161
Telephone 116,974 125,330 141,738
Other professional fees 200,922 297,018 319,975
Other expenses 2,350,751 1,785,915 1,825,825
Total noninterest expenses 10,367,493 8,663,081 8,412,991
Income before income taxes 4,077,493 4,732,077 4,384,028
Income taxes (note 14) 1,077,000 1,377,355 1,294,000
Net income $3,000,493 $3,354,722 $3,090,028
Net income per common share $ 5.19 $ 5.80 $ 5.34
Cash dividends declared per common share $ 2.00 $ 1.82 $ 1.64
Weighted average common shares outstanding 577,716 578,086 578,211
The accompanying notes are an integral part of these consolidated
financial statements.
UNION BANKSHARES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 2000, 1999 and 1998
ACCUMULATED TOTAL
OTHER SHARE-
COMMON TREASURY RETAINED COMPREHENSIVE HOLDERS'
STOCK SURPLUS STOCK EARNINGS INCOME (LOSS) EQUITY
Balance at December 31,
1997 $7,279,925 $3,948,797 $(160,695) $14,497,464 $ 437,749 $26,003,240
Net income,
1998 0 0 0 3,090,028 0 3,090,028
Change in net unrealized
gain (loss) on available
for sale securities,
net of tax of
$373,116 0 0 0 0 724,283 724,283
Total comprehensive
income 0 0 0 3,090,028 724,283 3,814,311
Sale of 510 shares treasury
stock 0 0 53,546 0 0 53,546
Repurchase of 1,742 shares treasury
stock 0 0 (181,870) 0 0 (181,870)
Redeem minority interest
shareholders 0 14,635 0 0 0 14,635
Cash dividends
declared 0 0 0 (964,144) 0 (964,144)
Balance at December 31,
1998 $7,279,925 $3,963,432 $(289,019) $16,623,348 $1,162,032 $28,739,718
Net income,
1999 0 0 0 3,354,722 0 3,354,722
Change in net unrealized gain
(loss) on available for sale
securities, net of tax of
$(1,695,031) 0 0 0 0 (3,290,356) (3,290,356)
Total comprehensive
income 0 0 0 3,354,722 (3,290,356) 64,366
Sale of 556 shares treasury
stock 0 101 60,316 0 0 60,417
Repurchase of 726 shares treasury
stock 0 0 (80,468) 0 0 (80,468)
Payment for fractional
shares totaling 258.80
shares 0 0 0 (33,126) 0 (33,126)
Cash dividends
declared 0 0 0 (1,107,916) 0 (1,107,916)
Balance at December 31,
1999 $7,279,925 $3,963,533 $(309,171) $18,837,028 $(2,128,324) $27,642,991
Net income,
2000 0 0 0 3,000,493 0 3,000,493
Change in net unrealized gain
(loss) on available for sale
securities, net of tax of
$856,080 0 0 0 0 1,661,802 1,661,802
Total comprehensive
income 0 0 0 3,000,493 1,661,802 4,662,295
Sale of 516 shares treasury
stock 0 (61) 55,084 0 0 55,023
Repurchase of 870 shares treasury
stock 0 0 (85,260) 0 0 (85,260)
Cash dividends
declared 0 0 0 (1,155,375) 0 (1,155,375)
Balance at December 31,
2000 $7,279,925 $3,963,472 $(339,347) $20,682,146 $ (466,522) $31,119,674
The accompanying notes are an integral part of these consolidated financial
statements.
UNION BANKSHARES COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH
FLOWS
Years ended December 31, 2000, 1999 and 1998
2000 1999 1998
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income $ 3,000,493 $ 3,354,722 $ 3,090,028
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Goodwill amortization 162,406 0 0
Depreciation 662,742 478,466 460,820
Net amortization of premium (accretion
of discount) on investments (93,650) (62,422) 8,252
Provision for loan losses 371,000 200,000 285,000
Net (gain) loss on sale of available
for sale securities 13,545 15,728 (31,842)
Net loss on sale of equipment 0 1,867 6,467
Gain on sale of other real estate owned 0 (153,984) 0
Originations of loans held for sale (4,129,490) (18,010,986) (23,861,002)
Proceeds from loans held for sale 4,403,829 18,589,135 20,861,264
Net change in other assets 1,185,273 (943,556) (16,783)
Net change in other liabilities (1,487,982) 1,954,816 24,910
Net change in deferred loan
origination fees 114,193 (3,352) (47,382)
Provision for deferred income tax expense 0 0 211,280
Net cash provided by operating
activities $ 4,202,359 $ 5,420,434 $ 991,012
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs $ (1,564,452) $ 0 $ 0
Cash paid to Mid-Coast stockholders in
connection with Mid-Coast
acquisition (11,809,047) 0 0
Cash received through Mid-Coast
acquisition 4,403,785 0 0
Proceeds from sale of available
for sale securities 8,278,721 33,240,067 13,525,454
Purchase of available for sale
securities (10,821,602) (48,397,100) (54,796,618)
Proceeds from maturities and principal
payments on available for sale
securities 12,535,982 13,888,678 28,548,951
Purchase of held to maturity securities (50,000) (100,000) (4,804,544)
Proceeds from maturities and principal payments
on held to maturity securities 421,250 225,000 4,347,687
Purchase of other investment securities 0 0 (939,000)
Purchase of life insurance policies 0 (5,600,000) 0
Proceeds from sales of other real
estate owned 0 529,490 0
Net increase in loans to customers (11,074,816) (12,263,189) (3,400,185)
Proceeds from sales of fixed assets 0 0 7,900
Capital expenditures (2,022,435) (814,130) (286,810)
Net cash used by investing
activities $(11,702,614) $(19,291,184) $(17,797,165)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in demand, savings and
money market accounts $ (8,660,189) $ 9,064,716 $ 7,627,294
Increase (decrease) in time deposits (2,021,133) (4,245,898) 3,015,857
Net change in advances from Federal
Home Loan Bank 18,707,000 (2,000,000) 11,178,000
Net change in other borrowed funds 1,938,888 4,174,446 3,275,002
Payment to eliminate fractional shares 0 (33,126) 0
Purchase of treasury stock (85,260) (80,468) (181,870)
Sale of treasury stock 55,023 60,417 53,546
Elimination of minority shares 0 0 14,635
Dividends declared (1,155,375) (1,107,916) (964,144)
Net cash provided by financing
activities $ 8,778,954 $ 5,832,171 $ 24,018,320
Net increase (decrease) in cash
and cash equivalents 1,278,699 (8,038,579) 7,212,167
Cash and cash equivalents at
beginning of year 9,074,779 17,113,358 9,901,191
Cash and cash equivalents at
end of year $ 10,353,478 $ 9,074,779 $ 17,113,358
The accompanying notes are an integral part of these consolidated financial
statements.
2000 1999 1998
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Interest paid $ 8,900,821 $ 7,278,946 $ 7,174,676
Income taxes paid $ 1,185,800 $ 1,431,000 $ 1,518,991
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Net increases (decreases) required
by Statement of Financial Accounting
Standards No. 115 "Available for
Sale Securities" $ 2,517,882 $ (4,985,387) $ 1,097,399
Deferred income tax assets
(liabilities) thereon $ (856,080) $ 1,695,031 $ (373,116)
Cost of held to maturity securities
transferred to available
for sale $ 0 $ 0 $ 28,502,694
Unrealized gain on securities transferred to
available for sale, net of deferred taxes
of $138,627 $ 0 $ 0 $ 269,100
Loans held for sale transferred
to loan portfolio $ 0 $ 4,965,343 $ 0
The accompanying notes are an integral part of these consolidated financial
statements.
WHEN YOU CARE ABOUT YOUR CUSTOMERS, THEY CARE ABOUT YOU
"Part of the difficulty in moving from Machias was leaving my friends at
Union Trust-Lisa, Lori, Becky, and Donna. I learned, through this
wonderful group of people, what "relationship banking" really means. In
over thirty years of banking it has become evident that a special human
chemistry operates at Union Trust, a rare combination of good will, smiling
faces and total professionalism."
Insert photo of Machias
UNION BANKSHARES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Union Bankshares Company (the Company) provides a full range of
banking services to individual and corporate customers through its
subsidiary and branches in Maine. It is subject to regulations of certain
federal agencies and undergoes periodic examinations by those regulatory
authorities.
Operating Segments
Operations are managed and financial performance is evaluated on a
corporate-wide basis. Accordingly, all the Company's banking operations
are considered by management to be aggregated in one reportable operating
segment.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Material estimates that are particularly susceptible to significant
change in the future relate to the determination of the allowance for loan
losses and valuation of other real estate owned. In connection with the
determination of the allowance for loan losses and the carrying value of
other real estate owned, management obtains independent appraisals for
significant properties.
Management believes that the allowance for loan losses and the
carrying value of other real estate owned are adequate. While management
uses available information to recognize losses on loans and other real
estate owned, future additions to the allowances might be necessary based
on changes in economic conditions, particularly in northern New England.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses. These agencies may require the Company to recognize additions to
the allowances based on their judgments about information available to them
at the time of their examination.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Union Trust
Company (the Bank). All significant intercompany balances and transactions
have been eliminated in the accompanying financial statements.
Earnings and Cash Dividends per Share
Earnings per share is based upon the average number of common shares
outstanding during each year. In 1999, the Company declared a stock split
effected in the form of a 20% stock dividend. Common share amounts,
earnings per share and dividends per share, common stock and retained
earnings for all years presented have been restated to reflect this
transaction.
Investments
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities," on
July 1, 1998. The Company does not hold any derivative instruments or
engage in hedging activities; therefore, adoption of SFAS No. 133 on the
financial statements of the Company is limited to the transfer of held to
maturity securities to available for sale upon adoption of the standard.
Available for Sale Securities
Available for sale securities consist of marketable securities that
the Company anticipates could be made available for sale in response to
changes in market interest rates, liquidity needs, changes in funding
sources and similar factors. These assets are specifically identified and
are carried at fair value. Amortization of premiums and accretion of
discounts are recorded as an adjustment to yield. Unrealized holding gains
and losses for these assets, net of related income taxes, is excluded from
earnings and is reported as a net amount in a separate component of
shareholders' equity. When a decline in market value is considered other
than temporary, the loss is recognized in the consolidated statements of
income, resulting in the establishment of a new cost basis. Gains and
losses on the sale of available for sale securities are determined using
the specific identification method.
Held to Maturity Securities
Held to maturity securities consist of debt securities that the
Company has the positive intent and ability to hold until maturity. Debt
securities classified as held to maturity are carried at amortized cost,
adjusted for amortization of premiums and accretion of discounts. When a
decline in market value is considered other than temporary, the loss is
recognized in the consolidated statements of income, resulting in the
establishment of a new cost basis for the security.
Other Investment Securities
Other investment securities consist of Federal Home Loan Bank (FHLB)
stock and Federal Reserve Bank stock. These securities are carried at
cost, which approximates market value at December 31, 2000 and 1999.
Loans Held for Sale
Loans held for sale are loans originated for the purpose of potential
subsequent sale. These loans are carried at the lower of aggregate cost or
market value as determined by current investor yield requirements. Gains
and losses on the sale of these loans are computed on the basis of specific
identification.
Loans
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff generally are reported at
their outstanding unpaid principal balances adjusted for charge-offs, the
allowance for loan losses and any deferred fees or costs on originated
loans. Interest income is accrued on the unpaid principal balances. Loan
commitments are recorded when funded.
Loan Servicing
Mortgage loans serviced for others are not included in the
accompanying balance sheets. The Bank recognizes a loan servicing fee for
the difference between the principal and interest payment collected on the
loan and the payment remitted to the investor.
The cost of mortgage servicing rights is amortized in proportion to,
and over the period of, estimated net servicing revenues. Impairment of
mortgage servicing rights is assessed based on the fair value of those
rights. Fair values are estimated using discounted cash flows based on a
current market interest rate. For purposes of measuring impairment, the
rights are stratified based on the following risk characteristics of the
underlying loans; interest rate, fixed versus variable rate, and period of
origination. The amount of impairment recognized is the amount by which
the capitalized mortgage servicing rights for a stratum exceed their fair
value.
Premises, Furniture and Equipment
Premises, furniture and equipment are stated at cost less accumulated
depreciation. Depreciation expense is computed by accelerated and straight-
line methods over the estimated useful life of each type of asset.
Leasehold improvements are amortized over the lesser of the terms of the
respective leases or the service lives of the improvements. Maintenance
and repairs are charged to expense as incurred; betterments are
capitalized.
Intangible Assets
Goodwill is amortized on a straight-line basis over 15 years. The
core deposit intangible is amortized on a straight-line basis over 7 years.
Goodwill and the core deposit intangible are reviewed for possible
impairment when it is determined that events or changed circumstances may
affect the underlying basis of the asset.
Allowance for Loan Losses
The allowance for loan losses is established by management to absorb
charge-offs of loans deemed uncollectible. This allowance is increased by
provisions charged to operating expense and by recoveries on loans
previously charged off. The amount of the provision is based on
management's evaluation of the loan portfolio. Considerations include past
and anticipated loan loss experience, current economic conditions, the
character and size of the loan portfolio and the need to maintain the
allowance at a level adequate to absorb anticipated future losses.
Loans considered to be impaired are reduced to the present value of
expected future cash flows or to the fair value of collateral, by
allocating a portion of the allowance for loan losses to such loans. If
these allocations cause the allowance to increase, the increase is reported
as loan loss provision.
Other Real Estate Owned
Other real estate owned, which is included in other assets, is
recorded at the lower of cost or fair value less estimated costs to sell at
the time the Company takes possession of the property. Losses arising from
the acquisition of such properties are charged against the allowance for
loan losses. Operating expenses and any subsequent provisions to reduce
the carrying value are charged to operations. Gains and losses upon
disposition are reflected in earnings as realized.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Accrual of Interest Income and Expense
Interest on loans and investment securities is taken into income using
methods that relate the income earned to the balances of loans outstanding
and investment securities. Interest expense on liabilities is derived by
applying applicable interest rates to principal amounts outstanding. The
recording of interest income on problem loan accounts ceases when
collectibility within a reasonable period of time becomes doubtful.
Interest income accruals are resumed only when they are brought fully
current with respect to principal and interest and when management expects
the loan to be fully collectible.
The carrying values of impaired loans are periodically adjusted to
reflect cash payments, revised estimates of future cash flows and increases
in the present value of expected cash flows due to the passage of time.
Cash payments representing interest income are reported as such. Other
cash payments are reported as reductions in carrying value, while increases
or decreases due to changes in estimates of future payments and due to the
passage of time are reflected in the loan loss provision.
Loan Origination Fees and Costs
Loan origination fees and certain direct loan origination costs are
recognized over the life of the related loan as an adjustment to or
reduction of the loan's yield.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods.
Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
effective January 1, 1998. The required disclosures for all periods
presented are included in the consolidated statement of changes in
shareholders' equity. Comprehensive income includes both net income and
other comprehensive income. The only component of other comprehensive
income is net unrealized gains and losses on available for sale securities,
net of deferred taxes.
2. CASH AND DUE FROM BANKS
The Federal Reserve Board requires the Bank to maintain a reserve
balance. The amount of this reserve balance as of December 31, 2000 was
$3,968,000. In the normal course of business, the Bank has funds on
deposit at other financial institutions in amounts in excess of the
$100,000 insured by Federal Deposit Insurance Corporation.
3. AVAILABLE FOR SALE SECURITIES
The Company carries available for sale securities at fair value. A
summary of the cost and fair values of available for sale securities at
December 31, 2000 and 1999 is as follows:
Gross Gross
Amortized Unrealized Unrealized Carrying &
Cost Gains Losses Fair Value
2000 2000 2000 2000
Mortgage-backed securities $ 34,881,652 $152,546 $ (422,245) $ 34,611,953
U.S. Treasury securities and other
U.S. Government agencies 51,551,788 191,310 (502,800) 51,240,298
Obligations of state and
political subdivisions 11,339,127 50,724 (112,841) 11,277,010
Other securities 4,072,631 0 (63,547) 4,009,084
Totals $101,845,198 $394,580 $(1,101,433) $101,138,345
1999 1999 1999 1999
Mortgage-backed securities $ 35,198,891 $ 7,092 $(1,206,514) $ 33,999,469
U.S. Treasury securities and other
U.S. Government agencies 55,921,382 21,812 (1,540,225) 54,402,969
Obligations of state and
political subdivisions 8,454,479 2,023 (389,361) 8,067,141
Other securities 3,364,615 0 (119,562) 3,245,053
Totals $102,939,367 $30,927 $(3,255,662) $ 99,714,632
The amortized cost and fair value of available for sale debt
securities at December 31, 2000, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Amortized Fair
Cost Value
Due in one year or less $ 2,000,787 $ 2,001,271
Due in one year through five years 21,066,978 21,066,825
Due after five years through ten years 35,838,332 35,539,704
Due after ten years 41,772,271 41,383,069
Totals $100,678,368 $99,990,869
Upon adoption of SFAS No. 133, an entity is allowed to change the
classification of its securities from held to maturity to available for
sale. The Company reclassified certain held to maturity investments to
available for sale with a cost of $28,502,694 and an unrealized gain of
$407,727 upon adoption of SFAS No. 133 on July 1, 1998.
Proceeds from the sale of securities were $8,278,721, $33,240,067 and
$13,525,454 in 2000, 1999 and 1998, respectively. Gross realized gains
were $37,472, $197,312 and $58,719 in 2000, 1999 and 1998, respectively.
Gross realized losses were $51,017, $213,040 and $26,877 in 2000, 1999 and
1998, respectively.
4. HELD TO MATURITY SECURITIES
The carrying amounts of held to maturity securities for 2000 and 1999
as shown in the Company's consolidated balance sheets, and their
approximate fair values at December 31, are as follows:
Gross Gross
Book Unrealized Unrealized Fair
Value Gains Losses Value
2000 2000 2000 2000
Obligations of state and
political subdivisions $3,851,461 $ 33,070 $(53,731) $3,830,800
1999 1999 1999 1999
Obligations of state and
political subdivisions $4,236,504 $ 20,001 $(114,429) $4,142,076
The amortized cost and fair value of held to maturity securities at
December 31, 2000, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Cost Value
Due in one year or less $ 421,031 $ 424,654
Due after one year through five years 1,530,442 1,547,435
Due after five years through ten years 584,988 595,484
Due after ten years 1,315,000 1,263,227
Totals $3,851,461 $3,830,800
Nontaxable interest income on municipal investments was $597,258,
$596,061 and $507,771 for 2000, 1999 and 1998, respectively.
5. LOANS
At December 31, 2000 and 1999, loans on nonaccrual status totaled
approximately $3,390,000 and $437,000, respectively. If interest had been
accrued on such loans, interest income on loans would have been
approximately $332,622, $31,000 and $40,000 higher in 2000, 1999 and 1998,
respectively. Loans delinquent by 90 days or more that were still on
accrual status at December 31, 2000 and 1999 totaled approximately $21,000
and $313,000, respectively.
In the ordinary course of business, the Company's subsidiary granted
loans to the executive officers and directors of the Company and its
subsidiary, and to affiliates of directors. These loans were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons
and did not involve more than normal risk of uncollectibility.
The balance of loans to related parties amounted to $2,773,611 and
$2,350,837 at December 31, 2000 and 1999, respectively. New loans granted
to related parties in 2000 and 1999 totaled $2,251,599 and $1,879,937,
respectively; payments and reductions amounted to $1,927,713 and $1,487,205
in 2000 and 1999, respectively.
6. ALLOWANCE FOR LOAN LOSSES
Analysis of the allowance for loan losses is as follows for the years
ended December 31, 2000, 1999 and 1998:
2000 1999 1998
Balance, beginning of year $2,629,472 $2,434,636 $2,212,740
Provision for loan losses 371,000 200,000 285,000
Allowance on acquired loans 520,019 0 0
Balance before loan charge-offs 3,520,491 2,634,636 2,497,740
Loans charged off 179,903 148,354 112,810
Less recoveries on loans charged off 35,807 143,190 49,706
Net loan charge-offs 144,096 5,164 63,104
Balance, end of year $3,376,395 $2,629,472 $2,434,636
Impairment of loans having recorded investments of $2,661,402 at
December 31, 2000 and $14,978 at December 31, 1999 has been recognized in
conformity with SFAS No. 114, as amended by SFAS No. 118. The average
recorded investment in impaired loans during 2000 and 1999 was $2,938,516
and $111,332, respectively. The total allowance for loan losses related to
these loans was $256,588 and $150 on December 31, 2000 and 1999,
respectively. There was $126,100 interest income recognized on impaired
loans in 2000, and none in 1999 and 1998.
7. LOAN SERVICING
The Bank services loans for others amounting to $71,835,641 and
$61,202,606 at December 31, 2000 and 1999, respectively. Mortgage
servicing rights of $144,081 and $233,848 were capitalized in 2000 and
1999, respectively, and have been written to their fair value of $222,389
and $279,896 through a valuation allowance at December 31, 2000 and 1999,
and are included in other assets. Amortization of mortgage servicing
rights was $198,092, $110,792 and $53,613 in 2000, 1999 and 1998,
respectively.
8. PREMISES, FURNITURE AND EQUIPMENT
Detail of bank premises, furniture and equipment is as follows:
2000 1999
Land $ 409,275 $ 133,378
Buildings and improvements 6,308,996 3,973,759
Furniture and equipment 4,642,315 3,630,574
Leasehold improvements 715,881 478,259
$12,076,467 $8,215,970
Less accumulated depreciation 5,705,003 5,228,398
$ 6,371,464 $2,987,572
At December 31, 2000, the Bank was obligated under a number of
noncancellable leases for premises and equipment that are accounted for as
operating leases. Leases for real property contain original terms from 2
to 20 years with renewal options up to 20 years. Management expects that,
in the normal course of business, most leases will be renewed or replaced
by other leases, or, when available, purchase options may be exercised.
Rental expense was $142,420 in 2000, $124,412 in 1999 and $127,953 in
1998.
The minimum annual lease commitments under noncancellable leases in
effect at December 31, 2000 are as follows:
Year Ending December 31, Amount
2001 $ 184,191
2002 105,280
2003 81,964
2004 77,549
2005 73,470
Thereafter 549,205
Total $1,071,659
9. ACQUISITION of MID-COAST BANCORP, INC.
On August 31, 2000, the Bank 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 following is a summary of the transaction.
Cash and equivalents $ 4,403,785
Loans acquired 65,945,392
Investments 10,215,683
Premises, furniture and equipment 2,024,200
Goodwill 5,155,225
Other assets 1,899,664
Deposits and accrued interest assumed (63,414,205)
Borrowings (13,965,000)
Other liabilities (455,697)
Net cash paid to the Stockholders of Mid-Coast Bancorp 11,809,047
Acquisition costs (goodwill) 1,564,452
Net cash paid $13,373,499
Goodwill, including acquisition costs, is being amortized using the
straight line method over 15 years. The core deposit intangible of
$323,000 is being amortized using the straight line method over 7 years.
Amortization charged to operations was $162,406 in 2000. Results of
operations from the date of acquisition are included in the Company's
Consolidated Statement of Income.
Following are proforma results of operations for the years ended
December 31, 2000 and 1999, as though Union Bankshares Company and Mid-
Coast Bancorp, Inc. had been combined at the beginning of each period.
December 31,
2000 1999
Net Interest Income $13,230,742 $12,921,831
Net Income $ 3,317,787 $ 3,414,722
Earnings Per Share $ 5.74 $ 5.91
10. DEPOSITS
The aggregate amount of jumbo certificates of deposit, each with a
minimum denomination of $100,000, was $13,831,249 and $10,614,011 in 2000
and 1999, respectively.
At December 31, 2000, the scheduled maturities of time deposits were
as follows:
2001 $ 98,728,148
2002 6,519,729
2003 1,416,407
2004 731,851
2005 61,186
Thereafter 8,501
Total $107,465,822
11. ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank are summarized as follows:
Interest Rates at
December 31, 2000 2000 1999
Fixed advances 5.05% to 6.67% $30,000,000 $ 451,250
Variable advances 2.00% to 7.23% 21,123,250 18,000,000
$51,123,250 $18,451,250
Pursuant to the collateral agreements with the Federal Home Loan Bank
(FHLB), advances are collateralized by stock in the FHLB, qualifying first
mortgage loans and available for sale securities.
Advances at December 31, 2000 mature as follows:
2001 $38,957,000
2002 1,000,000
2003 1,000,000
2005 1,055,000
Thereafter 9,111,250
Total $51,123,250
12. OTHER BORROWED FUNDS
Securities sold under agreements to repurchase generally mature within
one day from the transaction date. The Bank provides collateral based upon
the par value of the underlying securities. At December 31, 2000,
securities with a fair value of $37,336,385 were pledged to collateralize
other borrowed funds. Information concerning securities sold under
agreements to repurchase at December 31, 2000 is summarized as follows:
Average balance during the year $13,870,855
Average interest rate during the year 5.11%
Maximum month-end balance during the year $18,555,654
13. EMPLOYEE BENEFITS
The Company adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," in 1998. This statement,
which revises employers' disclosures about pension and postretirement
benefits, is effective for years beginning after December 31, 1997.
Pension Plan
The Company's subsidiary has a noncontributory defined benefit pension
plan covering substantially all permanent full-time employees. The
benefits are based on employees' years of service and the average of their
three highest consecutive rates of annual salary preceding retirement.
It is the subsidiary's policy to fund the plan sufficiently to meet
the minimum requirements set forth in the Employee Retirement Income
Security Act of 1974, plus such additional amounts as the Company may
determine to be appropriate from time to time.
Pension expense amounted to $60,279, $53,480 and $39,145 for the years
ended December 31, 2000, 1999 and 1998, respectively.
Postretirement Benefits Other Than Pensions
The Company 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.
The following table sets forth the benefit obligations, fair value of
plan assets and funded status for the Company's pension and other
postretirement benefit plans at December 31, 2000 and 1999.
2000 1999
Pension Other Pension Other
Benefits Benefits Benefits Benefits
Change in Benefit Obligations
Benefit obligations at beginning
of year $4,489,648 $ 1,124,843 $4,609,135 $ 1,597,863
Service cost 175,039 37,433 185,348 37,622
Interest cost 331,444 74,206 310,869 78,873
Actuarial (gain) loss 223,969 (87,362) (381,284) (542,761)
Benefits paid (242,435) (42,740) (234,420) (46,754)
Benefit obligations at end
of year $4,977,665 $ 1,106,380 $4,489,648 $ 1,124,843
Change in Plan Assets
Fair value of plan assets at
beginning of year $5,372,984 $ 0 $5,259,015 $ 0
Actual return on plan assets 266,199 0 348,389 0
Employer contributions 0 42,740 0 46,754
Benefits paid (242,435) (42,740) (234,420) (46,754)
Fair value of plan assets at
end of year $5,396,748 $ 0 $5,372,984 $ 0
Funded Status $ 419,083 $(1,106,380) $ 883,336 $(1,124,843)
Unrecognized net actuarial
gain (209,894) (408,706) (587,544) (339,792)
Unamortized prior service cost (25,758) 0 (28,304) 0
Unrecognized transition (net
asset) net obligation (60,708) 548,700 (84,486) 594,300
Prepaid (accrued) benefit cost,
included in other assets or
other liabilities $ 122,723 $ (966,386) $ 183,002 $ (870,335)
Net periodic benefit cost includes the following components:
2000 1999 1998
Pension Other Pension Other Pension Other
Benefits Benefits Benefits Benefits Benefits Benefits
Service cost $175,039 $ 37,433 $185,348 $ 37,622 $151,631 $ 63,635
Interest cost 331,444 74,206 310,869 78,873 288,111 97,391
Expected return on
plan assets (419,880) 0 (416,413) 0 (374,273) 0
Recognized net actuarial
gain 0 (18,448) 0 (8,258) 0 0
Amortization (accretion) of
unrecognized transition asset
or obligation (23,778) 45,600 (23,778) 45,600 (23,778) 45,600
Amortization of prior
service cost (2,546) 0 (2,546) 0 (2,546) 0
Net periodic benefit
cost $ 60,279 $138,791 $ 53,480 $153,837 $ 39,145 $206,626
Weighted-average assumptions as of December 31
Discount rate 6.75% 6.75% 6.75% 6.75% 7.00% 7.00%
Expected return on
plan assets 8.00% - 8.00% - 8.00% -
Rate of compensation
increase 4.00% 4.00% 4.00% 5.00% 4.00% 5.00%
For measurement purposes, the annual rates of increase in the per
capita health care cost of covered benefits were 12%, 12% and 11% for 2000,
1999 and 1998, respectively. The annual rate of increase in per capita
health care costs is assumed to decrease annually by 1% until the year 2006
(which at that time will be 6%) and later.
The effects of a one-percentage-point change in the assumed health
care cost trend rate on the aggregate service and interest cost components
of the net periodic postretirement health care benefit cost and on the
postretirement benefit obligation would be:
1 Percentage 1 Percentage
Point Increase Point Decrease
2000 1999 1998 2000 1999 1998
Effect on total service and
interest
components $ 161,157 $ 177,080 $ 43,505 $(121,746) $ (136,112) $ (33,525)
Effect on postretirement
benefit
obligation $1,269,267 $1,363,639 $344,334 $(977,805) $(1,055,423) $(274,276)
401(k) Plan
The Company has a noncontributory 401(k) plan for employees who meet
certain service requirements.
Stock Purchase Plan
The Bank maintains a stock purchase plan which allows qualified
employees and directors to acquire stock at fair market value.
14. INCOME TAXES
Income tax expense consists of the following:
Current Deferred Total
2000
Federal $1,019,000 $ 0 $1,019,000
State 58,000 0 58,000
$1,077,000 $ 0 $1,077,000
1999
Federal $1,317,355 $ 0 $1,317,355
State 60,000 0 60,000
$1,377,355 $ 0 $1,377,355
1998
Federal $1,023,720 $211,280 $1,235,000
State 59,000 0 59,000
$1,082,720 $211,280 $1,294,000
The actual tax expense for 2000, 1999 and 1998 differs from the
"expected" tax expense for those years (computed by applying the applicable
U.S. Federal Corporate Tax Rate to income before income taxes) due to the
following:
2000 1999 1998
Amount % of Amount % of Amount % of
Pretax Pretax Pretax
Earnings Earnings Earnings
Computed "expected" tax
expense $1,386,350 34.0% $1,608,910 34.0% $1,490,570 34.0%
Nontaxable income on
obligations of states
and political
subdivisions (285,624) (7.0%) (286,523) (6.1%) (247,762) (5.7%)
Cash surrender value of life
insurance (118,118) (2.9%) 0 .0% 0 .0%
Other 94,392 2.3% 54,968 1.2% 51,192 1.2%
$1,077,000 26.4% $1,377,355 29.1% $1,294,000 29.5%
HELPING OUR CUSTOMERS IN NEW WAYS MAKES US A BETTER BANK
"The service at Union Trust is outstanding. Donna Sawyer, the Castine
branch manager, came to my house to show me how to use the Netbanking
program. Where else but at the Castine Branch of Union Trust would you get
such wonderful help."
Insert photo of Castine
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented as follows:
DEFERRED TAX ASSETS 2000 1999
Unrealized loss on available for sale securities $ 240,329 $1,096,409
Allowance for loan losses 1,147,974 894,020
Deferred compensation 247,812 230,225
Post-retirement benefits 327,911 295,308
Other 50,098 71,242
Deferred tax assets $2,014,124 $2,587,204
DEFERRED TAX LIABILITIES
Allowance for loan losses $ 127,965 $ 146,903
Premises, furniture and equipment, principally due to
differences in depreciation 404,055 242,659
Prepaid pension expense 41,998 62,493
Mortgage servicing rights 109,051 95,164
Cash surrender value of life insurance 36,386 36,386
Other 149,240 (22,413)
Deferred tax liabilities $ 868,695 $ 561,192
The Bank has sufficient refundable taxes paid in available carryback
years to fully realize its recorded deferred tax asset of $2,014,124 at
December 31, 2000. The deferred tax asset and liability are included in
other assets and other liabilities in the balance sheet at December 31,
2000 and 1999.
15. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory (and possibly additional
discretionary) actions by regulators that could have a direct material
effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities and certain off balance sheet
items as calculated under regulatory accounting practices. The Bank's
capital amounts and classification are also subject to qualitative
judgments by the regulators regarding components, risk weightings and other
factors.
Quantitive measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth
in the following table) of total and Tier I capital (as defined in the
regulations) to risk weighted assets (as defined), and of Tier I capital
(as defined) to average assets (as defined). Management believes, as of
December 31, 2000, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 2000, the most recent notification from the Federal
Reserve Board categorized the Bank as well capitalized under the regulatory
framework. To be so categorized, the Bank must maintain minimum total risk
based, Tier I risk based and Tier I leverage ratios as set forth in the
table. Management believes no conditions or events that would alter the
Bank's categorization have occurred since the Board's notification.
The actual capital amounts and ratios for the Company and the Bank as
of December 31, 2000 and for the Bank as of December 31, 1999 are presented
in the table below:
December 31, 2000
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
Total capital (to risk weighted assets)
Consolidated $27,263,000 13.3% >$16,352,000 >8.0% >$20,401,000 >10.0%
Union Trust
Company $26,279,000 12.9% >$16,305,000 >8.0% >$20,381,000 >10.0%
Tier I capital (to risk weighted assets)
Consolidated $24,705,000 12.1% >$ 8,176,000 >4.0% >$12,264,000 > 6.0%
Union Trust
Company $23,721,000 11.6% >$ 8,152,000 >4.0% >$12,229,000 > 6.0%
Tier I capital (to average assets)
Consolidated $24,705,000 7.1% >$10,470,000 >3.0% >$17,450,000 > 5.0%
Union Trust
Company $23,721,000 6.8% >$10,452,000 >3.0% >$17,420,000 > 5.0%
December 31, 1999
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
Total capital
(to risk weighted
assets) $31,061,000 21.2% >$11,705,000 >8.0% >$14,631,300 >10.0%
Tier I capital
(to risk weighted
assets) $29,222,000 20.0% >$ 5,853,000 >4.0% >$ 8,778,780 > 6.0%
Tier I capital
(to average
assets) $29,222,000 11.2% >$ 7,854,000 >3.0% >$13,223,500 > 5.0%
The actual capital amounts and ratios for the Company for 1999 were
not materially different from those for the Bank. The Company may not
declare or pay a cash dividend on or repurchase any of its capital stock if
the effect thereof would cause the capital of the Company to be reduced
below the capital requirements imposed by the Federal Reserve.
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATION
OF CREDIT RISK
In the normal course of business, the Bank is a party to financial
instruments with off-balance sheet risk to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and letters of credit. The instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the
consolidated balance sheet. The contract amounts of these instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments. At December 31, 2000 and 1999, the following
financial instruments, whose contract amounts represent credit risk, were
outstanding:
Contract Amount
2000 1999
Commitments to extend credit $33,359,000 $33,241,000
Standby letters of credit $ 51,000 $ 82,000
Unadvanced portions of construction loans $ 3,570,000 $ 2,667,000
Total $36,980,000 $35,990,000
The Bank's exposure to credit loss in the event of nonperformance by
the other parties to the above financial instruments is represented by the
contractual amounts of the instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's creditworthiness on a case by case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon the
credit extension, is based on management's credit evaluation of the
counterparty. The types of collateral held include residential and
commercial real estate and, to a lesser degree, personal property, business
inventory and accounts receivable.
Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party.
Expiration dates are usually within one year. The credit risk involved in
issuing letters of credit is essentially the same as that involved in
extending loans to customers.
The Bank grants residential, commercial and consumer loans principally
to customers in Maine's Hancock, Washington, Waldo, Knox and Lincoln
counties. Although the loan portfolio is diversified, a substantial
portion of the debtors' ability to honor their contracts depends upon local
economic conditions, especially in the real estate sector. At December 31,
2000, there were no borrowers whose total indebtedness to the Bank exceeded
regulatory limits.
The consolidated balance sheets do not include various contingent
liabilities such as liabilities for assets held in trust. Management does
not anticipate any loss as a result of these contingencies.
17. LITIGATION
At December 31, 2000, the Company was involved in litigation arising
from normal banking, financial and other activities of the Bank.
Management, after consultation with legal counsel, does not anticipate that
the ultimate liability, if any, arising out of these matters will have a
material effect on the Company's financial condition.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, methods and assumptions are set forth below for
the Bank's financial instruments. Fair values are calculated based on the
value of one unit without regard to any premium or discount that may result
from concentrations of ownership of a financial instrument, possible tax
ramifications or estimated transaction costs. If these considerations had
been incorporated into the fair value estimates, the aggregate fair value
amount could have changed.
Cash, Due from Banks and Federal Funds Sold
The fair value of cash, due from banks and federal funds sold
approximates their relative book values at December 31, 2000 and 1999, as
these financial instruments have short maturities.
Available for Sale Securities and Held to Maturity Securities
Fair values are estimated based on bid prices published in financial
newspapers or bid quotations received from securities dealers. The fair
value of certain state and municipal securities is not readily available
through market sources other than dealer quotations, so fair value
estimates are based on quoted market prices of similar instruments,
adjusted for differences between the quoted instruments and the instruments
being valued.
Loans
Fair values are estimated for portfolios of loans with similar
financial characteristics. Management has determined that the fair value
approximates book value on all loans with maturities of one year or less or
variable interest rates. The fair values of all other loans are estimated
based on bid quotations received from securities dealers. The estimates of
maturity are based on the Bank's historical experience with repayments for
each loan classification, modified, as required, by an estimate of the
effect of current economic and lending conditions and the effects of
estimated prepayments.
Loans Held for Sale
The fair market value of this financial instrument approximates the
book value as the instrument has a short maturity.
Accrued Interest Receivable
The fair market value of this financial instrument approximates the
book value as the instrument has a short maturity. It is the Bank's policy
to stop accruing interest on loans past due by more than 90 days.
Other Investment Securities, Federal Home Loan Bank Stock and Federal
Reserve Bank Stock
The fair market value of these financial instruments approximates the
book value as these instruments do not have a market, nor is it practical
to estimate their fair value without incurring excessive costs.
Deposits
Fair value of deposits with no stated maturity, such as noninterest
bearing demand deposits, savings deposits, NOW accounts and money market
and checking accounts, equals the amount payable on demand. The fair
values of certificates of deposit are based on the discounted value of
contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.
The fair value estimates do not include the benefit that results from
the low cost funding provided by the deposit liabilities compared to the
cost of borrowing funds in the market. If that value was considered, the
fair value of the Bank's net assets could increase.
Accrued Interest Payable
The fair value of this financial instrument approximates the book
value as the instrument has a short maturity.
Advances from Federal Home Loan Bank
The fair values of advances are estimated using discounted cash flow
analyses based on the Bank's current incremental borrowing rates for
similar types of borrowing arrangements.
Other Borrowed Funds
The carrying amount of borrowings under repurchase agreements maturing
within 90 days approximates their fair value.
Commitments to Extend Credit
The Bank has not estimated the fair values of commitments to originate
loans due to their short-term nature and their relative immateriality.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instruments. These values do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Because no market exists
for a significant portion of the Company's financial instruments, fair
value estimates are based on judgments regarding future expected loss,
current economic conditions, risk characteristics of various financial
instruments and other factors. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment, and
therefore cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. The latter may include deferred
tax assets, bank premises and equipment and other real estate owned. In
addition, tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and
have not been considered in any of the estimates.
A summary of the fair values of the Company's significant financial
instruments at December 31, 2000 and 1999 follows:
2000 1999
Carrying Estimate of Carrying Estimate of
Value Fair Value Value Fair Value
ASSETS
Cash, due from banks and federal
funds sold $ 10,353,478 $ 10,353,478 $ 9,074,779 $ 9,074,779
Available for sale securities 101,138,345 101,138,345 99,714,632 99,714,632
Held to maturity securities 3,851,461 3,830,300 4,236,504 4,142,076
Other investment securities 4,968,350 4,968,350 3,557,700 3,557,700
Loans 201,554,694 201,750,000 125,019,679 123,904,819
Loans held for sale 320,125 320,125 594,464 594,464
Accrued interest receivable 2,592,044 2,592,044 2,294,145 2,294,145
LIABILITIES
Deposits 245,580,717 245,676,000 192,847,834 194,258,313
Accrued interest payable 1,220,287 1,220,287 823,256 823,256
Advances from Federal Home
Loan Bank 51,123,250 51,123,250 18,451,250 18,451,250
Other borrowed funds 15,079,311 15,079,311 13,140,423 13,140,423
OUR COMMUNITY IS WHO WE ARE
"In my many years of doing business with banks everywhere, I have never
encountered a bank such as this. The Cherryfield branch of Union Trust is
remarkable and for many in town, a truly hometown bank. Community-
mindedness is reflected by every single employee and shines inside and
outside the bank's doors. When friends or family in the community are in
need, we are never turned away by anyone at the bank. We have come to
expect that the staff will always say `yes' to helping with local benefit
events. Everyone is treated with respect, served with efficiency and
benefits from the mutual relationship."
Insert photo of Cherryfield
19. PARENT-ONLY CONDENSED FINANCIAL STATEMENTS
The condensed financial statements of Union Bankshares Company as of
December 31, 2000 and 1999 and for each of the years ended December 31,
2000, 1999 and 1998 are presented as follows:
BALANCE SHEET
December 31, 2000 and 1999 2000 1999
ASSETS
Cash $ 354,375 $ 49,635
Investment in subsidiary 23,488,599 27,125,055
Core deposit intangible 307,619 0
Goodwill 6,572,652 0
Other assets 685,176 757,225
Total assets $31,408,421 $27,931,915
LIABILITIES AND SHAREHOLDERS' EQUITY
Dividends payable $ 288,747 $ 288,924
Other liabilities 0 0
Shareholders' equity 31,119,674 27,642,991
Total liabilities and shareholders' equity $31,408,421 $27,931,915
STATEMENTS OF INCOME
Years ended December 31, 2000, 1999, and 1998
2000 1999 1998
Dividend income $ 14,704,600 $1,149,726 $ 971,354
Equity in undistributed earnings
of subsidiary (1) (11,519,371) 2,214,170 1,945,460
Other income 11,754 0 181,870
Total income 3,196,983 3,363,896 3,098,684
Operating expenses 196,490 9,174 8,656
Net income $ 3,000,493 $3,354,722 $3,090,028
(1) Amount in parenthesis represents the excess of dividends over net
income of subsidiary.
STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 1999 and 1998
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,000,493 $ 3,354,722 $ 3,090,028
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Undistributed earnings
of subsidiary 11,519,371 (2,214,170) (1,945,460)
Goodwill amortization 162,406 0 0
(Increase) decrease in other assets 156,367 (48,000) (173)
Net cash provided by operating
activities $14,838,637 $ 1,092,552 $ 1,144,395
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs $(1,560,759) $ 0 $ 0
Cash paid to Mid-Coast stockholders
in connection with
Mid-Coast acquisition (11,809,047) 0 0
Cash received through Mid-Coast
acquisition 21,698 0 0
Net cash used by investing
activities $(13,348,108) $ 0 $ 0
CASH FLOWS FROM FINANCING ACTIVITIES
Payment to eliminate fractional
shares $ 0 $ (33,126) $ 0
Increase (decrease) in dividends payable (177) 47,978 (515)
Dividends declared (1,155,375) (1,107,916) (964,144)
Purchase of treasury stock (85,260) (80,468) (181,870)
Sale of treasury stock 55,023 60,417 53,546
Net cash used by financing
activities $(1,185,789) $(1,113,115) $(1,092,983)
Net increase (decrease) in cash and cash
equivalents 304,740 (20,563) 51,412
Cash at beginning of year 49,635 70,198 18,786
Cash at end of year $ 354,375 $ 49,635 $ 70,198
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Net increase (decrease) in net unrealized gain (loss)
on available for sale securities $ 1,661,802 $ (3,290,356) $ 724,283
Elimination of minority shares 0 0 14,635
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Union Bankshares Company
We have audited the accompanying consolidated balance sheets of Union
Bankshares Company and Subsidiary as of December 31, 2000 and 1999, and the
related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above represent
fairly, in all material respects, the consolidated financial position of
Union Bankshares Company and Subsidiary as of December 31, 2000 and 1999,
and the consolidated results of their operations and their consolidated
cash flows for each of the three years in the period ended December 31,
2000 in conformity with generally accepted accounting principles.
Berry, Dunn, McNeil & Parker
Portland, Maine
January 19, 2001
UNION BANKSHARES COMPANY &
UNION TRUST COMPANY DIRECTORS
Arthur J. Billings
President, Barter Lumber Company
Peter A. Blyberg
President
Robert S. Boit
Retired, Former President
Blake B. Brown
President & Owner, Brown's Appliance and TV
Richard C. Carver
Owner, Carver Oil Co.& Carver Shellfish
Peter A. Clapp
President, Blue Hill Garage
Samuel G. Cohen
Attorney, Cohen & Cohen
Sandra H. Collier
Attorney at Law, Sandra Hylander Collier Law Offices
Robert B. Fernald
Treasurer, A. C. Fernald Sons, Inc.& Jordan Fernald
Douglas A. Gott
Owner, Douglas A. Gott & Sons
James L. Markos, Jr.
General Manager, Maine Shellfish Company, Inc.
Casper G. Sargent, Jr.
Owner, Sargent's Real Estate Corp.
John V. Sawyer II
Chairman of the Board; Retired President, Worcester-Sawyer Agency
Stephen C. Shea
Treasurer, E. L. Shea, Inc.; President, Shea Leasing
Robert W. Spear
Commissioner of Agriculture - State of Maine
Richard W. Teele
Secretary; Retired Former Executive Vice President & Treasurer
Paul L. Tracy
President, Owner, Winter Harbor Agency; Vice President,
Co-Owner, Schoodic Insurance Agency;
Vice President, Co-Owner, MDI Insurance Agency;
Co-Owner, Grindstone Financial Group LLC
Co-Owner, Insurance Source of ME
Richard W. Whitney
Dentist
UNION BANKSHARES COMPANY
DIRECTORY OF OFFICERS
John V. Sawyer II
Chairman of the Board
Peter A. Blyberg
President
John P. Lynch
Executive Vice President
Peter F. Greene
Senior Vice President
Sally J. Hutchins
Senior Vice President & Clerk
Rebecca J. Sargent
Senior Vice President, Senior Trust Officer
Richard W. Teele
Secretary
UNION BANKSHARES COMPANY
& UNION TRUST COMPANY
HONORARY DIRECTORS
Franklin L. Beal
Retired
David E. Honey
Retired, Former Manager Swan's Island Electric Co-op
Delmont N. Merrill
President, Merrill Blueberry Farms, Inc.
Thomas R. Perkins
Retired Pharmacy Owner, Retired Maine Legislator (Senator),
Retired Legislative Liaison MSHA
John E. Raymond
President, Bimbay, Inc.
Mary T. Slaven
Realtor
Douglas N. Smith
Retired
I Frank Snow
Retired
UNION TRUST COMPANY
DIRECTORY OF OFFICERS
John V. Sawyer II
Chairman of the Board
Peter A. Blyberg
President, Chief Executive Officer
John P. Lynch
Executive Vice President, Senior Banking Officer
Robert E. Carter
Senior Vice President, Branch Administrator
Peter F. Greene
Senior Vice President, Senior Bank Services Officer
Sally J. Hutchins
Senior Vice President, Treasurer & Clerk
Rebecca J. Sargent
Senior Vice President, Senior Trust Officer
Edwin Bonenfant
Vice President, Investment Officer
Janis Guyette
Vice President, Trust Operations Officer
David A. Krech
Vice President, Investment Officer
Peter G. Lawrence
Vice President, Senior Relationship Manager
Bette B. Pierson
Vice President, Mortgage Loan Officer
Geddes Simpson, Jr.
Vice President, Trust Officer
Craig Worcester
Vice President, Financial Services Officer
Michelle Bannister
AVP, Training and Development Officer
James M. Callnan
AVP, Senior Information Services Officer
Debra A. Ehrlenbach
AVP, Auditor
Laurence D. Fernald, Jr.
AVP, Relationship Manager and Appraisal Review Officer
Lynda C. Hamblen
AVP, Relationship Manager
Phyllis C. Harmon
AVP, Relationship Manager
Patti S. Herrick
AVP, Information Services Officer
Mary Lou Lane
AVP, Mortgage Underwriter Officer
Harold L. Metcalf
AVP, Relationship Manager
Peter C. O'Brien
AVP, Loan Support Manager and CRA Officer
Lorraine S. Ouellette
AVP, Trust Officer
Catherine M. Planchart
AVP, Marketing Officer
Deborah F. Preble
AVP, Controller
Susan A. Saunders
AVP, Project Management Officer
Stephen L. Tobey
AVP, Cash Management & Security Officer
Tina Torres-York
AVP, Relationship Manager
Linda Carter
Deposit Services Officer
Helen J. Condon
Electronic Services Officer
Cynthia Davis
Teller Services Officer
Monica Grady
Relationship Manager
Sylvia Joy
Trust Officer
Bonnie Poland
Loan Services Officer
Annette Russell
Financial Planning Officer
Sandy Salsbury
Human Resource Officer
Scott Shields
Financial Planning Officer
William Sneed
Information Specialist Officer
Brenda Strout
Trust Officer
Tina St. Pierre
Collections Officer
Julie C. Vittum
Audit Specialist
UNION TRUST COMPANY OFFICES
Bar Harbor
Christopher H. Keefe
Vice President, Senior Relationship Manager
Belfast
Pamela Dalfonso
Relationship Manager
Blue Hill
Pamela G. Hutchins
AVP, Relationship Manager
Dianne Thompson
Assistant Branch Manager
Castine
Pamela G. Hutchins
AVP, Relationship Manager
Cherryfield
C. Foster Mathews
AVP, Relationship Manager
Ellsworth Shopping Center
Melody L. Wright
Branch Manager
Jefferson
Dianne Lawrence
AVP, Branch Manager
Jonesport
Wendy W. Beal
AVP, Relationship Manager
Machias
Lisa A. Holmes
AVP, Relationship Manager
Milbridge
James E. Haskell
AVP, Relationship Manager
Rockland
Jane Dagley
AVP, Relationship Manager
Somesville
Andrea G. Leonard
Vice President, Relationship Manager
Stonington
Harry R. Vickerson III
AVP, Relationship Manager
Waldoboro
April Murray
Branch Manager
UNION TRUST COMPANY PERSONNEL
Abruzese, Candi
Allen, Deborah
Allen, Tabatha
Anderson, Rebecca
Archer, Ruby
Armstrong, Rebecca
Ashmore, Valeri
Austin, Lois
Babson, William
Batson, Harold
Billings, Holly
Bonville, Melissa
Boyce, Katrina
Buzzard, Toni
Carter, Glendon
Carver, Lisa
Chatto, Elizabeth
Clark, Maegan
Clark, Theresa
Cole, Richard
Colson, Sylvia
Crane, Sarah
Curtis, Kristen
Davis, Rachael
Davis, Sharon
Dillon, Patricia
Dorr, Peggy
Douglass, Joanne
Dyer, Shari
Elliott, Linda
Emery, Sherry
Faulkner, Kathy
Gellerson, Tracy
Grant, Victoria
Gray, Shelley
Grindle, Eugene
Hall, Maria
Handy, Louise
Hauck, Faye
Hennigan, Robin
Hills, Darlene
Hinkel, Scott
Howlett, Joni
Hustus, Gayle
Hutchins, Rebecca
Hutchinson, Elwell
Ingalls, Laurea
Jacobs, Aaron
Jewell, Beth
Johnson, Mindy
Jones, Maryellen
Kalloch, Debra
Kaspala, Tammy
Kelley, Cindy
Kimball, Brandi
Leonard, Kathy
Libby, Gretta
Look, Cheryl
Look, Lisa
MacLaughlin, Wendy
Madden, Anita
Marshall, Carol
McCormick, Bernadette
Merritt, Caroline
Miller, Michelle
Norton, Clifford III
Otis-Anderson, Sandra
Owen, Doris
Perry, Ann
Philbrook, Michelle
Pineo, Muriel
Podlubny, Helene
Raybourn, Dawn
Reardon, Rhonda
Rice, Kerry
Rose, Brenda
Sackett, Jacqueline
Salisbury, Jane
Sargent, Lucinda
Sargent, Tammy
Sawyer, Donna
Scott, Marsha
Scoville, Clark
Servetas, Dana
Shields, Valerie
Sinford, Nicole
Sinford, Stacey
Spaulding, Virginia
Spear, Annette
Sprague, Donna
Sproul, Bonnie
Sprowl, Kelly
Starr, Allana
Storer, Jessica
Strout, Jessica
Swett, Andrea
Thibodeau, Mary
Treadwell, Mattie
Tripp, Jody
Tyler, Kimberly
Wallace, Jayne
Wilson, Stephanie
Woodward, Cheryl
Worster, Nancy
Youngblood, Mary
Union Trust Company is committed to offering equal opportunity in regard to
employment, training, benefits, salary administration and promotional
opportunities to all employees, regardless of race, color, religion, sex,
age or national origin. The Bank has implemented an Affirmative Action
Plan.
Upon written request, the Company will provide, without charge, a copy of
its 2000 Annual Report on SEC Form 10K, including the financial statements
and schedules required to be filed with the Securities and Exchange
Commission. Interested persons should write to:
Sally J. Hutchins, Senior Vice President
Union Bankshares Company
P.O. Box 479
Ellsworth, Maine 04605