UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NO. 0-20293
UNION BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1598552
(State of Incorporation) (I.R.S. Employer I.D. No.)
211 NORTH MAIN STREET
P.O. BOX 446
BOWLING GREEN, VIRGINIA 22427
(Address of principal executive officers)
(804) 633-5031
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON
STOCK, $4 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The Aggregate Market Value of the Voting Stock Held by Nonaffiliates of the
Registrant was $74,270,382 as of February 29, 1996.
As of February 29, 1996, Union Bankshares Corporation had 3,286,970 shares of
Common Stock outstanding.
Portions of the Registrant's Annual Report to Shareholders for the year ended
December 31, 1995 are incorporated into Part II of this Form 10-K and portions
of the Proxy Statement for the 1996 annual meeting are incorporated into Part
III.
UNION BANKSHARES CORPORATION
FORM 10-K
INDEX
PART 1
Page
Item 1. Business................................................... 1
Item 2. Properties................................................. 7
Item 3. Legal Proceedings.......................................... 8
Item 4. Submission of Matters to a Vote of
Security Holders.......................................... 8
PART II
Item 5. Market for the Common Equity and
Related Stockholder Matters............................... 9
Item 6. Selected Financial Data.................................... 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................10
Item 8. Financial Statements and Supplementary
Data......................................................10
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure......................................10
PART III
Item 10. Directors and Executive Officers...........................10
Item 11. Executive Compensation.....................................11
Item 12. Security Ownership of Certain Beneficial
Owners and Management.................................11
Item 13. Certain Relationships and Related
Transactions..........................................11
PART IV
Item 14. Exhibits, Financial Statements Schedules
and Reports on Form 8-K..................................12
PART I
ITEM 1. - BUSINESS
GENERAL
Union Bankshares Corporation (the "Company") is a bank holding company
organized under Virginia law which conducts a financial services business
through its wholly-owned subsidiaries, Union Bank & Trust Company ("Union
Bank"), Northern Neck State Bank ("Northern Neck"), and Union Investment
Services, Inc. ("Union Investment").
The Company was formed in connection with the July 12, 1993 merger of
Northern Neck Bankshares Corporation with and into Union Bancorp, Inc. to form
Union Bankshares Corporation. Each outstanding share of common stock of Northern
Neck Bankshares Corporation was converted to 1.4 shares of Union Bankshares
Corporation and each share of Union Bancorp, Inc. was converted to one share of
Union Bankshares Corporation.
Union Bank had assets of $328 million, deposits of $265 million and
shareholders' equity of $31 million on December 31, 1995. The bank was organized
and chartered under the laws of Virginia in 1902. Union Bank is a full service
retail commercial bank offering a wide range of banking and related financial
services, including checking, savings, certificates of deposit and other
depository services, commercial, industrial, residential mortgage and consumer
loans.
Union Bank's primary trade area is Caroline County, Hanover County, King
William County, Spotsylvania County and the City of Fredericksburg, Virginia.
The main office is located in Bowling Green, Caroline County, Virginia. The Bank
operates ten other branches in its primary trade area.
Northern Neck State Bank was organized and chartered under the laws of
Virginia in 1909 as successor to the Warsaw, Virginia office of the L.E. Mumford
Banking Company. As of December 31, 1995, Northern Neck State Bank had assets of
$129 million, deposits of $111 million, and shareholders' equity of $16 million.
The Bank provides a full range of banking and related financial services,
including checking, savings, certificates of deposit and other depository
services, commercial, industrial, residential mortgage and consumer loans.
Northern Neck State Bank primarily serves the Northern Neck area of the State
of Virginia, in a trade area which encompasses the counties of Richmond,
Westmoreland, Essex and Northumberland. In addition to its main office, the Bank
operates three branches in its primary trade area.
Union Investment began providing securities brokerage and investment advisory
services in February, 1993. It is a full service discount brokerage company
which offers a full range of investment services, and sells mutual funds, bonds
and stocks.
The Company announced on March 13, 1996 that it has entered into a definitive
agreement providing for the affiliation of King George State Bank, Inc. with the
Company. King George State Bank is a single branch bank with approximately $46
million in assets at December 31, 1995. Under the terms of the agreement, the
Company will exchange 5.5 shares of its common stock for each outstanding share
of King George State Bank, Inc. stock. The agreement requires the approval of
various regulatory agencies and the shareholders of King George State Bank and
satisfaction of other standard conditions. The transaction is intended to
qualify as a tax-free exchange and to be accounted for as a pooling of
interests. A special meeting of King George's shareholders to consider the
affiliation is anticipated to be held in the third quarter of 1996.
COMPETITION
The banking business in Virginia and nationally is very competitive. In its
market area the Company competes with large regional financial institutions,
savings and loans and other independent community banks, as well as credit
unions, mutual funds and life insurance companies. Competition for deposits and
loans is affected by factors such as interest rates offered, the number and
location of branches and types of products offered, as well as the reputation of
the institution.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both federal
and state law. The following description briefly discusses certain provisions of
federal and state laws and certain regulations and proposed regulations and the
potential impact of such provisions on the Company and its subsidiary banks,
Union Bank and Northern Neck Bank (collectively, the "Subsidiary Banks").
BANK HOLDING COMPANIES
As a bank holding company registered under the Bank Holding Company Act of
1956 (the "BHCA"), the Company is subject to regulation by the Federal Reserve
Board. The Federal Reserve Board has jurisdiction under the BHCA to approve any
bank or nonbank acquisition, merger or consolidation proposed by a bank holding
company. The BHCA generally limits the activities of a bank holding company and
its subsidiaries to that of banking, managing or controlling banks, or any other
activity which is so closely related to banking or to managing or controlling
banks as to be a proper incident thereto.
The BHCA currently prohibits the Federal Reserve Board from approving an
application from a bank holding company to acquire shares of a bank located
outside the state in which the operations of the holding company's banking
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by statute of the state in which the bank whose shares
are to be acquired is located. However, under recently enacted federal
legislation, the restriction on interstate acquisitions will be abolished
effective one year from enactment of such legislation, and thereafter, bank
holding companies from any state will be able to acquire banks and bank holding
companies located in any other state, subject to certain conditions, including
nationwide and state concentration limits. Banks also will be able to branch
across state lines effective June 1, 1997 (unless state law would permit such
interstate branching at an earlier date), provided certain conditions are met,
including that applicable state law must expressly permit such interstate
branching. Virginia has adopted legislation that will permit branching across
state lines effective July 1, 1995, provided there is reciprocity with the state
in which the out-of-state bank is based.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in the
event the depository institution becomes in danger of default or in default. For
example, under a policy of the Federal Reserve Board with respect to bank
holding company operations, a bank holding company is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such policy. In addition, the "cross-guarantee" provisions of
federal law, require insured depository institutions under common control to
reimburse the FDIC for any loss suffered or reasonably anticipated by either the
Savings Association Insurance Fund
("SAIF") or the Bank Insurance Fund ("BIF") as a result of the default of a
commonly controlled insured depository institution in danger of default. The
FDIC may decline to enforce the cross-guarantee provisions if it determines that
a waiver is in the best interest of the SAIF or the BIF or both. The FDIC's
claim for damages is superior to claims of stockholders of the insured
depository institution or its holding company but is subordinate to claims of
depositors, secured creditors and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institutions.
The Federal Deposit Insurance Act ("FDIA") also provides that amounts
received from the liquidation or other resolution of any insured depository
institution by any receiver must be distributed (after payment of secured
claims) to pay the deposit liabilities of the institution prior to payment of
any other general creditor or stockholder. This provision would give depositors
a preference over general and subordinated creditors and stockholders in the
event a receiver is appointed to distribute the assets of the bank.
The Company is registered under the bank holding company laws of Virginia.
Accordingly, the Company and the Subsidiary Banks are subject to regulation and
supervision by the State Corporation Commission of Virginia (the "SCC").
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of the Currency (the
"OCC") and the FDIC have issued substantially similar risk-based and leverage
capital guidelines applicable to United States banking organizations. In
addition, those regulatory agencies may from time to time require that a banking
organization maintain capital above the minimum levels because of its financial
condition or actual or anticipated growth. Under the risk-based capital
requirements of these federal bank regulatory agencies, the Company and each of
the Subsidiary Banks are required to maintain a minimum ratio of total capital
to risk-weighted assets of at least 8%. At least half of the total capital is
required to be "Tier 1 capital", which consists principally of common and
certain qualifying preferred shareholders' equity, less certain intangibles and
other adjustments. The remainder ("Tier 2 capital") consists of a limited amount
of subordinated and other qualifying debt (including certain hybrid capital
instruments) and a limited amount of the general loan loss allowance. The Tier 1
and total capital to risk-weighted asset ratios of the Company as of December
31, 1995 were 14.91% and 16.07%, respectively, exceeding the minimum
requirements.
In addition, each of the federal regulatory agencies has established a
minimum leverage capital ratio (Tier 1 capital to average tangible assets).
These guidelines provide for a minimum ratio of 3% for banks and bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory examination rating and are not contemplating significant
growth or expansion. All other institutions are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the minimum. The leverage ratio
of the Company as of December 31, 1995, was 11.10%, which is above the minimum
requirements. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets.
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
The Company is a legal entity, separate and distinct from its subsidiary
institutions. Substantially all of the revenues of the Company result from
dividends paid to it by the Subsidiary Banks. There are various legal
limitations applicable to the payment of dividends to the Company, as well as
the payment of dividends by the Company to its respective shareholders.
Under federal law, the Subsidiary Banks may not, subject to certain limited
exceptions, make loans or extensions of credit to, or investments in the
securities of, the Company or take securities of the Company as collateral for
loans to any borrower. The Subsidiary Banks are also subject to collateral
security requirements for any loans or extensions of credit permitted by such
exceptions.
The Subsidiary Banks are subject to various statutory restrictions on their
ability to pay dividends to the Company. Under the current supervisory practices
of the Subsidiary Banks' regulatory agencies, prior approval from those agencies
is required if cash dividends declared in any given year exceed net income for
that year plus retained earnings of the two proceeding years. The payment of
dividends by the Subsidiary Banks or the Company may also be limited by other
factors, such as requirements to maintain capital above regulatory guidelines.
Bank regulatory agencies have the authority to prohibit the Subsidiary Banks or
the Company from engaging in an unsafe or unsound practice in conducting their
business. The payment of dividends, depending on the financial condition of the
subsidiary banks, or the Company, could be deemed to constitute such an unsafe
or unsound practice.
Under the FDIA, insured depository institutions such as the Subsidiary Banks
are prohibited from making capital distributions, including the payment of
dividends, if, after making such distribution, the institution would become
"undercapitalized" (as such term is used in the statute). Based on the
Subsidiary Banks' current financial condition, the Company does not expect that
this provision will have any impact on its ability to obtain dividends from the
Subsidiary Banks.
THE SUBSIDIARY BANKS
The Subsidiary Banks are supervised and regularly examined by the Federal
Reserve Board and the SCC. The various laws and regulations administered by the
regulatory agencies affect corporate practices, such as the payment of
dividends, incurring debt and acquisition of financial institutions and other
companies, and affect business practices, such as the payment of interest on
deposits, the charging of interest on loans, types of business conducted and
location of offices.
The Subsidiary Banks are also subject to the requirements of the Community
Reinvestment Act (the "CRA"). The CRA imposes on financial institutions an
affirmative and ongoing obligation to meet the credit needs of the local
communities, including low- and moderate-income neighborhoods, consistent with
the safe and sound operation of those institutions. Each financial institution's
efforts in meeting community credit needs currently are evaluated as part of the
examination process pursuant to twelve assessment factors. These factors also
are considered in evaluating mergers, acquisitions and applications to open a
branch or facility.
As an institution with deposits insured by the BIF, the Bank also is subject
to insurance assessments imposed by the FDIC. The FDIC has implemented a
risk-based assessment schedule, imposing assessments ranging from 0.0% to 0.27%
of an institution's average assessment base. The actual assessment to be paid by
each BIF member is based on the institution's assessment risk classification,
which is determined based on whether the institution is considered "well
capitalized," "adequately capitalized" or "undercapitalized," as such terms have
been defined in applicable federal regulations, and whether such institution is
considered by its supervisory agency to be financially sound or to have
supervisory concerns. Under this structure, the Subsidiary Banks will pay no
deposit insurance premiums other than the $2,000 statutory minimum assessment.
OTHER SAFETY AND SOUNDNESS REGULATIONS
The federal banking agencies have broad powers under current federal law to
make prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." All such terms are defined under uniform regulations defining
such capital levels issued by each of the federal banking agencies.
ITEM 2. - PROPERTIES
The Company, through its subsidiaries, owns or leases buildings that are used
in the normal course of business. The main office is located at 211 N. Main
Street, Bowling Green, Virginia, in a building owned by Union Bank. The
Company's subsidiaries own or lease various other offices in the counties and
cities in which they operate. Northern Neck State Bank has its main office in
Warsaw, Virginia and operates three branches; Union Bank has its main office in
Bowling Green, Virginia and operates 10 branches. Union Investment's office is
located in Bowling Green, Virginia. See Notes to Consolidated Financial
Statements for information with respect to the amounts at which bank premises
and equipment are carried and commitments under long-term leases.
The properties on the following page are those owned or leased by the Company
and its subsidiaries as of December 31, 1995.
LOCATIONS
CORPORATE HEADQUARTERS
211 North Main Street, Bowling Green, Virginia
BANKING OFFICES - UNION BANK & TRUST COMPANY
211 North Main Street, Bowling Green, Virginia
Route 1, Ladysmith, Virginia
Route 301, Port Royal, Virginia
4540 Lafayette Boulevard, Fredericksburg, Virginia
Route 1 & Ashcake Road, Ashland, Virginia
4210 Plank Road, Fredericksburg, Virginia
10415 Courthouse Road, Fredericksburg, Virginia
10374 Leadbetter Road, Ashland, Virginia
700 Kenmore Avenue, Fredericksburg, Virginia
Route 360, Manquin, Virginia
Route 301, Hanover, Virginia
BANKING OFFICES - NORTHERN NECK STATE BANK
2 East Richmond Road, Warsaw, Virginia
Route 360, Warsaw, Virginia
Route 3, Kings Highway, Montross, Virginia
Routes 17 & 360, Tappahannock, Virginia
UNION INVESTMENT SERVICES, INC.
111 Davis Court, Bowling Green, Virginia
ITEM 3. - LEGAL PROCEEDINGS
In the ordinary course of its operations, the Company and its subsidiaries
are parties to various legal proceedings. Based on the information presently
available, and after consultation with legal counsel, management believes that
the ultimate outcome in such proceedings, in the aggregate, will not have a
material adverse effect on the business or the financial condition or results of
operations.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter.
PART II
ITEM 5. - MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded on the over-the-counter market and is
quoted on the NASDAQ National Market System of (where under the symbol "UBSH".
The following table sets forth the high and low sale prices of the Company's
common stock and the dividends paid:
SALES PRICE
HIGH LOW DIVIDEND
1995:
First Quarter $27.00 $22.00 ----
Second Quarter 26.50 22.00 $.28
Third Quarter 27.50 23.50 ----
Fourth Quarter 28.00 24.25 .28
1994:
First Quarter $30.00 $22.00 ----
Second Quarter 29.00 22.00 $.25
Third Quarter 28.00 23.00 ----
Fourth Quarter 28.00 23.00 .27
As of December 31, 1995, there were 1,657 shareholders of record of common
stock. The Company expects to continue its policy of paying regular dividends,
although there is no assurance as to future dividends because they are dependent
upon future earnings, capital requirements and financial condition, and certain
regulatory restrictions.
ITEM 6. - SELECTED FINANCIAL DATA
This information is incorporated herein by reference from the section
captioned "Selected Financial Data" on page 1 in the Annual Report to
Shareholders for the year ended December 31, 1995.
ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This information is incorporated herein by reference from the section
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 5 through 16 in the Annual Report to
Shareholders for the year ended December 31, 1995.
ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is incorporated herein by reference from the Consolidated
Financial Statements on pages 17 through 32 and the Quarterly Earnings Summary
on page 1 in the Annual Report to Shareholders for the year ended December 31,
1995.
ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no disagreements between the Company and its independent
accountants, KPMG Peat Marwick LLP.
PART III
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS
This information, as applicable to directors, is incorporated herein by
reference to the Proxy Statement for the Annual Meeting of Shareholders held
March 26, 1996 from the section entitled "Election of Directors" and "Executive
Compensation". Executive officers of the Company as of December 31, 1995 are
listed on the following page:
TITLE AND PRINCIPAL OCCUPATION
NAME (AGE) DURING PAST FIVE YEARS
G.William Beale (46) President and Chief Executive Officer of the Company
since its inception; President of Union Bank & Trust
since 1991; formerly served as Executive Vice
President (1990-91)
E.Peyton Motley (51) Executive Vice President and Chief Operating Officer
of the Company since its inception; President of
Northern Neck State Bank.
D.Anthony Peay (36) Vice President and Chief Financial Officer
since December 1994; Certified Public Accountant,
Senior Manager - Deloitte & Touche (1990-94)
ITEM 11 - EXECUTIVE COMPENSATION
This information is incorporated herein by reference to the Proxy Statement
for the Annual Meeting of Shareholders held March 26, 1996 from the section
entitled "Executive Compensation".
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated herein by reference to the Proxy Statement
for the Annual Meeting of Shareholders held March 26, 1996 from sections
entitled "Principal Shareholders" and "Election of Directors".
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated herein by reference to the Proxy Statement
for the Annual Meeting of Shareholders held March 26, 1996 from the sections
entitled "Loans to Officers and Directors" and "Transactions with Management".
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements of Union Bankshares
Corporation and subsidiaries included in the 1995 Annual Report to
Shareholders are incorporated by reference in this report:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted since they are not required, are not applicable,
or the required information is shown in the consolidated financial
statements or notes thereto.
(3) EXHIBITS
Exhibit No. Description
3.1 Articles of Incorporation (incorporated by
reference to Form S-4 Registration
Statement - 33-60458)
3.2 By-Laws (incorporated by reference to
Form S-4 Registration Statement - 33-60458)
13 1995 Annual Report to Shareholders
22 Subsidiaries of the Registrant
(4) REPORTS ON FORM 8-K
No reports were filed on Form 8-K during the fourth quarter ended December
31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amended report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Union Bankshares Corporation
By: /s/ G. WILLIAM BEALE Date: March 26, 1996
G. William Beale President and Chief Executive Office
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on March 26, 1996.
SIGNATURE TITLE
/s/ G. WILLIAM BEALE
- ------------------------- President, Chief Executive Officer and
G. William Beale Director
- ------------------------- Executive Vice President, Chief Operating
E. Peyton Motley Officer and Director
/s/ D. ANTHONY PEAY Vice President and Chief Financial Officer
- -------------------------
D. Anthony Peay
/s/ WALTON MAHON Chairman of the Board of Directors
- -------------------------
Walton Mahon
Vice Chairman of the Board of Directors
- -------------------------
Charles H. Ryland
Director
- -------------------------
W. Tayloe Murphy, Jr.
/s/ RONALD L. HICKS Director
- -------------------------
Ronald L. Hicks
/s/ M. RAYMOND PILAND, III Director
- -------------------------
M. Raymond Piland, III
/s/ A.D. WHITTAKER Director
- -------------------------
A.D. Whittaker