UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( x ) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to_________
Commission File Number 2-90679
UNION BANKSHARES COMPANY
(Exact name of registrant as specified in its charter)
MAINE 01-0395131
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation of organization).
66 Main Street, Ellsworth, Maine
(Address of Principal Executive Offices)
(Zip Code)
04605
Registrant's telephone number, including area code
(207) 667-2504
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES XXX NO
Indicate the number of shares outstanding of each of the issue's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1997
(Common stock, $25.00 Par value) 201,588
1 of 15 <PAGE>
UNION BANKSHARES COMPANY
INDEX TO FORM 10-Q
PART I Financial Information Page No.
Item 1: Financial Statements
Condensed consolidated balance sheets-
March 31, 1997, March 31, 1996,
December 31, 1996 3
Condensed consolidated statements of income-
three months ended March 31, 1997
and March 31, 1996 4
Condensed consolidated statements of cash flows-
three months ended March 31, 1997
and March 31, 1996 5
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-14
PART II Other information
Item 1: Legal Proceedings 14
Item 2: Changes in Securities 14
Item 3: Defaults Upon Senior Securities 14
Item 4: Submission of Matters to a Vote of
Security Holders 14
Item 5: Other Information 14
Item 6: Exhibits and Reports on Form 8-K 14
2 of 15 <PAGE>
UNION BANKSHARES COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
March 31 March 31 December 31
1997 1996 1996
(Unaudited) (Unaudited) (Audited)*
ASSETS
Cash and due from banks $ 6,431,468 $ 5,125,853 $ 9,458,971
Assets held for sale 83,959,798 83,522,985 80,022,554
(MARKET VALUE AT 3/31/97)
Held to maturity securities
at cost 10,299,224 4,113,413 4,786,800
Federal Funds Sold 145,060 137,691 143,209
Loans (net of unearned
discount) 99,086,724 94,253,799 100,970,391
Less: Allowance for
loan losses 2,109,739 1,966,490 2,083,831
Net Loans $ 96,976,985 $ 92,287,309 $ 98,886,560
Premises, furniture
& equip net 2,932,713 3,110,389 2,917,112
Other Assets 5,899,117 5,948,192 5,851,051
Total Assets $206,644,365 $194,245,832 $202,066,257
LIABILITIES & STOCKHOLDERS
INVESTMENTS
Deposits:
Demand $ 16,212,534 $ 16,141,029 $ 19,185,504
Savings 77,463,811 76,931,987 79,530,138
Time 71,955,435 65,841,515 70,113,369
Total Deposits 165,631,780 158,914,531 168,829,011
Borrowed Funds 11,333,000 9,465,000 6,173,000
Accrued Expenses & Other
Liabilities 6,440,914 3,981,271 3,350,388
Total Liabilities $183,405,694 $172,360,802 $178,352,399
STOCKHOLDERS INVESTMENT
Common Stock 5,062,875 5,062,875 5,062,875
Surplus 3,948,797 3,948,797 3,948,797
Retained Earnings 14,972,866 13,129,952 14,929,681
Net Unrealized Gain/(Loss) on
Securities Available for Sale (615,795) (202,391) (171,460)
Less: Treasury Stock 130,072 54,203 56,035
Total Stockholders
Investment $ 23,238,671 $ 21,885,030 $ 23,713,858
Total Liabilities & Stockholders
Investment $206,644,365 $194,245,832 $202,066,257
*Condensed from audited financial statements
The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned subsidiary. Minority interests, which
are not significant are included in other liabilities in the balance sheet
and other operating expenses in the consolidated statement of income.
3 of 15<PAGE>
UNION BANKSHARES COMPANY
Condensed Consolidated Statements of Income
(UNAUDITED)
Three Months Ended-March 31,
1997 1996
INTEREST INCOME
Interest and Fees on Loans $2,264,688 $2,133,990
Interest and Fees on Municipal
Loans and Bonds 120,611 145,222
Interest and Dividends on Securities 1,365,454 1,312,373
Interest on Federal Funds Sold 9,261 26,286
Amortization & Accretion - Net 21,992 5,908
Total Interest Earned 3,782,006 3,623,779
INTEREST EXPENSE
Interest on Deposits 1,399,310 1,349,453
Interest on Funds Purchased/Borrowed 71,674 34,435
Total Interest Expense 1,470,984 1,383,888
NET INTEREST INCOME 2,311,022 2,239,891
Provision for loan losses 30,000 30.000
NET INTEREST INCOME AFTER LOAN PROVISION 2,281,022 2,209,891
NONINTEREST INCOME
Exchange, Commission & Fees 165,097 179,860
Trust Department 129,677 115,502
Financial Service Fees 18,072 17,904
Other Income 168,992 161,393
Net Securities Gains (Losses) 2,400 (41)
Total Noninterest Income 484,238 474,618
NONINTEREST EXPENSE
Salaries and Employee Benefits 962,590 1,138,787
Building Maintenance & Operations 120,244 131,466
FDIC Insurance 10,152 500
Other Expenses 769,745 729,914
Total Noninterest Expense 1,862,731 2,000,667
INCOME BEFORE TAXES 902,529 683,842
Income Taxes 260,000 178,000
NET INCOME $ 642,529 $ 505,842
Per Share Data:
Net Income 3.19 2.51
Dividends Declared 1.00 1.00
4 of 15 <PAGE>
UNION BANKSHARES COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
for the Quarter Ended March 31, 1997 and 1996
1997 1996
Net Cash Flows Provided by Operating Activities:
Net Income $ 642,529 $ 505,842
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 97,662 93,381
Provision for loan losses 30,000 30,000
Net securities gains 0 0
Net change in other assets (369,985) (339,647)
Net change in other liabilities 3,090,526 (146,375)
Net amortization of premium
on investments (21,666) (275,078)
Net change in OREO 17,399 0
Net change in deferred loan
origination fees 95,078 (13,537)
Origination of loans held for sale (1,917,492) (3,046,595)
Proceeds from loans held for sale 1,562,706 2,481,209
Total adjustments 2,584,228 (1,216,642)
Net cash provided by operating
activities 3,226,757 (710,800)
Cash Flows From Investing Activities:
Purchase of investments (12,758,251) (22,948,788)
Proceeds from sales of investments 0 0
Proceeds from maturities
of investments 2,841,213 12,521,041
Net change in loans to customers 1,784,497 (1,156,215)
Capital expenditures 191,256 (49,920)
Net cash used in investing activities (7,941,285) (11,633,882)
Cash Flows From Financing Activities:
Net Increase in other Borrowed Funds 5,160,000 9,355,000
Net increase(decrease) in deposit (3,197,231) (5,699,245)
Transfer to Holding Company 0 472,000
Purchase of Treasury Stock (77,000) 0
Proceeds from sale of Treasury Stock 7,350 15,810
Proceeds from issuance Common Stock (4,387) 312
Payment to eliminate fractional shares 0 0
Dividends paid (199,856) (201,911)
Net cash provided by financing
activities 1,688,876 3,941,966
Net increase (decrease) in cash and
cash equivalents (3,025,652) (8,402,716)
Cash and cash equivalents at
beginning of year 9,602,180 13,666,260
Cash and cash equivalents
at 3/31/97 & 3/31/96 $ 6,576,528 $ 5,263,544
Supplemental Schedule of Non-Cash Investing and Financing Activities
Net increase (decrease) as a result of adopting Statement of Financial
Accounting Standards No. 115
Available for sale securities 615,795 (306,654)
Deferred income liability 317,228 104,263
Net unrealized gain(losses) on
available for sale securities $ 933,023 $ (202,391)
5 of 15<PAGE>
Notes to Consolidated Financial Statements
Unaudited
(A) Basis of Presentation
The accompanying consolidated financial statements of Union
Bankshares Company and its subsidiary (Union Trust Company) for the three-
month period ended March 31, 1997 and 1996 are unaudited. However, in the
opinion of the Company, all adjustments consisting of normal, recurring
accruals necessary for a fair presentation have been reflected therein.
Certain financial information which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which is not required for interim reporting
purposes, has been omitted. The accompanying consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1996.
(B) Earnings Per Share
Earnings per common share are computed by dividing the net income
available for common stock by the weighted average number of common shares
outstanding during this period. Weighted shares as of March 31, 1997 were
201,588.
(C) Off-Balance Sheet Items
In the normal course of business, the Bank is a party to financial
instruments with off balance sheet risk to meet the financing need of its
customers. These financial instruments include commitments to extend credit
and letters of credit. The instrument involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the statement of
financial position. The contract amounts of these instruments reflect the
extent of involvement the Bank has in particular classes of financial
instruments. At March 31, 1997 and March 31, 1996, the following financial
instruments, whose contract amounts represent credit risk, were outstanding.
March 31
(000's omitted)
1997 1996
1. Unused Commitments:
A. Revolving , open-end lines secured by
1-4 family residential properties,
e.g., Home Equity lines 5,976 5,666
B. Credit card lines 5,987 5,840
C. Secured real estate loans 1,747 3,233
D. Other 14,130 17,833
2. Financial Standby Letters of Credit: 61 42
3. Mortgages Transferred With Recourse: 0 0
6 of 15<PAGE>
(D) Regulatory Agencies
The Bank's primary regulator is the Federal Reserve Bank of Boston
and as a state chartered bank to the Bureau of Banking in Augusta, Maine.
(E) General
Any loans classified for regulatory purposes as loss, doubtful,
substandard or special mention do not (1) represent or result from trends or
uncertainties which management reasonably expects will materially impact
future operating results, liquidity or capital resources or (2) represent
material credits about which management is aware of any information which
causes management to have serious doubts as to the ability of such borrowers
to comply with the loan repayment terms.
(F) Impact of Inflation and Changing Prices
The Consolidated Financial Statements 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 considering 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 more significant impact on the Company's
performance than 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.
(G) Recent Accounting Developments
In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities", effective for financial statements for the fiscal year
beginning after December 31, 1996. SFAS No. 125 requires entities to
recognize (for each contract in existence before 1/1/97), previously
recognized servicing rights and "excess servicing" receivables that do not
exceed contractually specified servicing fees shall be combined, net of any
previously recognized servicing obligations under contract, as a servicing
asset or liability. The Company has not determined the impact of adopting
SFAS No. 125. It amends and extends to all servicing assets and liabilities
the accounting standards for mortgage servicing rights now in FASB Statement
No. 65 "Accounting for Certain Mortgage Banking Activities", and supercedes
FASB Statement No. 122, "Accounting for Mortgage Servicing Rights".
Effective December 1996, SFAS No. 127 "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125", defers for one year the
effective date (a) of paragraph 15 and (b) for repurchase agreements.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share" effective for financial statements for the fiscal year beginning
after December 15, 1997. The statement establishes standards for computing
and presenting earnings per share (EPS) and simplifies the standards for
computing EPS previously found in APB Opinion No. 15, "Earnings Per Share".
Also in February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 129,
"Disclosure of Information about Capital Structure" effective for financial
7 of 15 <PAGE>
statements for periods ending after December 15, 1997. The statement
establishes standards for disclosing information about an entity's capital
structure.
8 of 15 <PAGE>
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Earnings and Performance Overview
Net income increased $136,687 or 27.0% for the first three months
of 1997 versus the same period in 1996.
The following table summarizes the status of the bank's earnings
per share:
March 31,
1997 1996
Earnings Per Share 3.19 2.51
Return on Average Shareholders Equity 2.76A 2.39B
Return on Average Assets 0.32A 0.27B
Return on Average Earning Assets 0.34A 0.39B
A = annualized returns are: 11.04, 1.28%, and 1.36%, respectively.
B = annualized returns are: 9.56, 1.08%, and 1.56%, respectively.
The healthy increase in net income for the first quarter 1997
versus the first quarter 1996, results primarily from an increase in net
interest income, noninterest income and a decrease in noninterest expenses.
Due to increased loan and investment dollars and an increase in
interest rates in the first quarter of 1997, net interest income was up some
$71,000 from the same period last year.
The increase in noninterest income results primarily from
improvements in bankcard fees and trust fees offset by decreases in loan and
bank fee categories.
Noninterest expenses, consisting primarily of employee compensation
and benefits, occupancy and equipment expense and other general operating
expenses were down some $138,000 from the same period in 1996.
Major initiatives made in 1996 on streamlining the Bank's work
flows and redesigning processes and procedures with the goal of
significantly improving efficiencies continue to be a positive factor as
1997 unfolds.
A decrease in salaries and employee benefits, due to reduced staff
levels and improved productivity, and the payment of a 27th pay period in
1996 were major contributors for the decline in noninterest expense.
The Bank is constantly monitoring the economy and its effect on the
banking industry in New England, and in particular, in Maine, in Hancock and
Washington Counties (our service territories). The economy of this area
continues to be sluggish, inflation remains low and growth will be moderate
and as in years past, we will continue to operate in a conservatively
planned manner. We are growing according to our strategic plan, and remain
within the risk parameters we have set for ourselves, with the goals of
improved earnings and productivity.
NET INTEREST INCOME
Net interest income, the difference between interest income on
9 of 15<PAGE>
earning assets such as loans and investment securities and interest expense
on interest bearing liabilities such as funds on deposit and borrowed funds
continues to be the most significant determinant of the Company's earnings
performance. Because of the significance of net interest income, the
management of interest rate risk has become increasingly important to ensure
the continued profitability of the Bank. Interest rate risk results from
volatile interest rates, increased competition, and changes in the
regulatory environment. As a banking company, our exposure to interest rate
movements is controlled by matching the interest rates as well as the
maturities of assets and liabilities.
Net interest income for the first quarter of 1997 was $2,311,022;
up $71,131 or 3.18% over the same period in 1996.
The following table illustrates the bank's net interest spread
position:
Three Months Ended March 31,
1997 1996
Yield on Earning Assets 8.25% 8.29%
Cost of All Funds 3.23% 3.02%
Net Interest Spread 5.03% 5.27%
The Bank continues to monitor short and long-term interest rates,
balance sheet volumes and maturities in order to evaluate the potential
impact on its net interest spreads and capital.
PROVISION FOR LOAN LOSSES
The provision for loan losses remained consistent at $30,000 from
the same period last year, resulting from management's ongoing evaluation of
the allowance for loan losses. This was due to the desire to maintain the
Allowance for Loan Losses at 2.0% of gross loans. The process to evaluate
the adequacy of the allowance for loan losses involves a high degree of
management judgment. Such judgement is based, in part, on systematic
methods. These methods, which are generally quantitative measures, are
employed, not so the allowance will be the result of routine mathematical
exercises, but to help ensure that all relevant matters affecting loan
collectability will consistently be identified. Such methods at March 31,
1997 included a loan-by-loan analysis of all larger commercial loans and
commercial real estate loans which were non-performing or which were being
closely monitored by management for potential problems, and a quantitative
analysis of residential real estate and consumer loans. Based on these
analyses, an estimation of potential loss exposure was made and an allowance
allocated. The estimation of potential loss exposure reflects declining
real estate values, as evidenced by appraisals and other available
information.
Although management utilized its best judgement in providing for
possible losses, there can be no assurance that the Company will not have to
increase it provisions for possible loan losses in the future as a result of
increased loan demand in the Company's primary market areas, future
increases in non-performing assets or otherwise which would adversely affect
the Company's results of operations.
10 of 15 <PAGE>
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)
Three Months Ended
March 31,
1997 1996
1. Nonaccrual Loans 818 645
2. Loans past due 90 days & accruing 205 6
3. Restructured loans 0 0
4. Other real estate owned (including insubstance
foreclosure) 521 1,206
5. Total nonperforming assets 1,544 1,857
6. Ratio of total nonperforming loans to capital and the
allowance for loan losses (Texas ratio) 4.04 7.79
7. Ratio of net (recoveries) chargeoffs to loans .00004 (.00062)
8. Ratio of allowance for loan losses to loans 2.13 2.09
9. Coverage ratio(allowance for loan losses divided
by nonperforming assets) 136.64 105.87
10. Ratio of nonperforming assets to total assets .75 .96
11. Ratio of nonperforming loans to total loans .53 .71
It is important to note that the directors, officers and employees
of the Bank are proud of the above data and their efforts in serving its
community while simultaneously working hand-in-hand with state and federal
regulators in structuring its financial position during these times. Most
assuredly all parties concerned benefit from just such cooperative effort.
NONINTEREST INCOME
The Company receives noninterest income from trust fees, service
charges on deposit accounts and other income comprised of fees earned from a
variety of other services. Securities gains and losses are another major
component of this category.
Noninterest income, excluding security gains/(losses), increased
$7,179 or 1.51%, during the first quarter of 1997 versus 1996.
The increase is primarily due to an increase of credit card income
of $20,164 or 26.14%, and trust department income of $14,175 or 12.27%,
offset by decreases in loan and bank fees.
Net security gains/(losses) amounted to $2,400 and ($41) for the
three months ended March 31, 1997 and 1996, respectively.
NONINTEREST EXPENSES
Noninterest expenses consist of employee compensation and benefits,
occupancy and equipment expenses and miscellaneous expenses. Management is
continually reviewing expenses to control them and develop more efficient
delivery systems for all Bank services.
A generally flat economy in Maine and in particular in Downeast
Maine, has compelled or should compel banking institutions of our size to
manage their institutions prudently and conservatively. This we are
committed to do. Accordingly, a concerted effort in reducing noninterest
expenses was a major undertaking in fiscal 1996, and continues to be a
11 of 15<PAGE>
factor in 1997.
Noninterest expenses decreased $137,936 or 6.89% for the first
quarter of 1997 versus the first quarter of 1996. A decrease in salaries
and benefits, due to reduced staff levels and improved productivity, and the
payment of a 27th pay period in 1996 were major contributors for the
decline.
INCOME TAXES
Income taxes are provided in accordance with the comprehensive
income tax allocation method which recognizes the tax effects of all income
and expenses transactions in each year's statement of income, regardless of
the year the transactions are reported for tax purposes. The tax effects of
these timing differences are reflected in deferred income tax accounts in
the consolidated financial statements.
Effective January 1, 1993, the Company adopted Statement 109 and
has reported the cumulative effect of that change in the method of
accounting for income taxes in the 1993 consolidated statements of income.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1992, deferred income taxes are recognized for income and expense items that
are reported in different years for financial reporting purposes and income
tax purposes using the tax rate applicable for the year of the calculation.
Under the deferred method, deferred taxes are not adjusted for subsequent
changes in tax rates.
The status of the Bank's income tax expense is as follows:
Tax Expense Effective Rate
1997 1996 1997 1996
Three Months ended March 31, $260,000 $178,000 28.8 26.0
INTEREST RATE GAP ANALYSIS
Attention should be directed to the interest rate gap analysis as
of December 31, 1996 as provided on page 31 in the Bank's 1996 Annual
Report. Data as of March 31, 1997 is essentially identical to that reported
in the Form 10K.
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
Shareholders' Equity was as follows for the following periods:
SHAREHOLDER'S EQUITY
Amount Book Value
Per Share
March 31, 1997 $23,238,671 $115.28
March 31, 1996 $21,885,030 $108.56
December 31, 1996 $23,713,858 $114.88
During 1989, the Federal Reserve Board issued final guidelines for
a risk-based approach to measuring the capital adequacy of bank holding
companies and state-chartered banks that are members of the Federal Reserve
System. These capital requirements generally called for an 8% total capital
ratio by year-end 1992 of which 4% must be comprised of Tier 1 capital.
Risk-based capital ratios are calculated by weighing assets and off-balance
sheet instruments according to their relative credit risks. At March 31,
1997 the Company had met the minimum capital ratios. In fact, the Bank's
12 of 15<PAGE>
strong capital position at March 31, 1997 exceeded the minimums established
by the Federal Reserve Board as follows:
March 31, 1997 Minimum Regulatory
Requirements
Tier 1 Capital Ratio 21.2 4.0%
Total Capital Ratio 22.5 8.0%
Leverage Ratio 13.7
DIVIDENDS
The common stock is not actively traded and therefore, we are not
aware of the price of all trades. The price is established by determining
what a willing buyer will pay a willing seller.
Cash dividends per share declared on common stock were $1.00 for
the first quarter of 1997 and 1996.
STOCK DIVIDENDS
There has been no stock dividend declared since April 12, 1995.
LIQUIDITY MANAGEMENT
Liquidity management is the process by which the Bank structures
its cash flow to meet requirements of its customers as well as day-to-day
operating expenses.
Liquidity is provided from both assets and liabilities. The asset
side of the balance sheet provides liquidity through the regular maturities
on our securities portfolio, as well as the interest received on these
assets. In addition, U.S. Government securities may be readily converted to
cash by sale in the open market. On the liability side, liquidity comes
from deposit growth and the Bank's accessibility to other sources of
borrowed funds. In this respect, liquidity is enhanced by a significant
amount of core demand and savings deposits from a broad customer base.
As a part of the Bank's asset and liability management and
liquidity needs, management actively evaluates its funding resource and
strategies to reduce and manage the vulnerability of its operation to
changes in interest rates.
When a Company's ability to reprice interest-bearing liabilities
exceeds its ability to reprice interest-earning assets within shorter time
periods, material and prolonged increases in interest rates generally
adversely affect net interest income, while material and prolonged decreases
in interest rates generally have the opposite effect.
A principal objective of the Company is to reduce and manage the
vulnerability of its operations to changes in interest rates by managing the
ratio of interest-rate sensitive assets to interest-rate sensitive
liabilities within specified maturities or repricing dates.
Union Trust Company is liability-sensitive as a result of the
current interest rate environment and its callable bond portfolio. Income
cash flows indicate a more asset-sensitive condition. Bank earnings may be
negatively affected, should interest rates fall.
As of March 31, 1997, the Bank's ratio of rate-sensitive assets to
rate-sensitive liabilities at the one-year horizon was 63%, its one-year GAP
13 of 15<PAGE>
(measurement of interest sensitivity of interest-earning assets and
interest-bearing liabilities at a point in time) was -23%, and $123,590,000
in assets and $75,369,000 in liabilities will be repriceable in one year.
In addition to the "traditional" GAP calculation, the Company
analyzes future net interest income based on budget projections including
anticipated business activity, anticipated changes in interest rates and
other variables, which are adjusted periodically by management to take into
account current economic conditions, the current interest rate environment,
and other factors.
The status of the Bank's sources of cash to fund its operation are
as follows:
March 31,
1997 1996
Net cash from operations $ 3,226,757 $ (710,800)
Net cash from investing activities $ (7,941,285) $(11,633,882)
Net cash from financing activities $ 1,688,876 $ 3,941,966
Net increase $ (3,025,652) $ (8,402,716)
BALANCE SHEET ANALYSIS
The Bank experienced a healthy increase in loan demand during the
first three months of 1997; the quality and strength of the balance sheet
remains strong.
The following financial statistics give a general overview and
profile of the Company:
As of March 31,
Increase
1997 1996 (Decrease)
Total Assets $206,644,365 $194,245,832 $12,398,533
Total Earnings Assets $191,381,037 $180,061,398 $11,319,639
Loans $ 99,086,724 $ 94,253,799 $ 4,832,925
Securities $ 94,404,082 $ 83,897,365 $10,506,717
Deposits $165,631,780 $158,914,531 $ 6,717,249
Capital $ 23,238,671 $ 21,885,030 $ 1,353,641
SECURITIES PORTFOLIO
The objective of the securities portfolio is to provide for a
stable earnings base and the investment of excess liquidity. As shown under
the section "Balance Sheet Analysis", the securities portfolio increased
$10,506,717 or 12.5% as of March 31, 1997 as compared to a 12.6% increase at
March 31, 1996. The Bank continues its prefunding strategy for its security
portfolio during the first quarter of 1997 as evidenced by security and
borrowings balances.
The Company has reviewed its investment policy regarding
securities. In recognition of current economic conditions and the attendant
responsibility of management to consider known liquidity requirements and to
provide for capital planning, securities may be sold as part of prudent
asset/liability management.
LOANS
Loan demand was strong during the first quarter of 1997 and thus
14 of 15<PAGE>
the Bank experienced an increase of $4,832,925 or 5.13% at March 31, 1997
versus March 31, 1996.
It should be pointed out that the Bank has sold and serviced
$45,884,102 of real estate loans and $4,025,369 of commercial mortgages and
has over $3,595,840 of loans held for sale at March 31, 1997.
The section of management's discussion and analysis entitled
"Provision for Loan Losses" clearly indicates the quality of the loan
portfolio at March 31, 1997.
The Bank's loan-to-deposit ratio was 59.7% and the allowance for
loan losses 2.1% of total loans at March 31, 1997.
Managements approach to loan growth is to seek out and work with
borrowers whose financial condition, credit history, and performance would
warrant extensions of credit.
In brief, the Company's loan portfolio is driven by a desire to
maintain our credit standards while meeting the financial needs of qualified
borrowers in the community.
DEPOSITS
Total deposits increased $6,717,249 or 4.23% over the comparable
period in 1996, primarily due to competitive interest rates on products
offered and an active calling program. The proportion of interest-bearing
funds continues to place emphasis on the need for properly matching our
asset and liabilities to maintain stable net interest margins.
The Company has continued its overall asset and liability
management strategy which is to maintain flexibility in its interest
sensitivity gap in order to take advantage of both short-term and long-term
changes in market rates while minimizing the risk of adverse effects on
operations.
The Bank is not reliant on volatile liabilities as evidenced by
such comprising only 5.22% of its deposit base.
PART II
Item 1: N/A
Item 2: N/A
Item 3: N/A
Item 4: N/A
Item 5: N/A
Item 6: Exhibits, Financial Statement Schedules and Reports on Form 8-K.
A. Non-Applicable.
B. Reports on Form 8-K.
During the Registrant's fiscal Quarter Ended March 31, 1997, the
Registrant was not required to and did not file any reports on Form 8-K.
15 of 15<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNION BANKSHARES COMPANY
May 8, 1997 Peter A. Blyberg, President
Sally J. Hutchins, Vice President/Treasurer
16 of 15<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6431468
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 145060
<TRADING-ASSETS> 03959798
<INVESTMENTS-HELD-FOR-SALE> 83959798
<INVESTMENTS-CARRYING> 10299224
<INVESTMENTS-MARKET> 10243041
<LOANS> 99086724
<ALLOWANCE> 2109739
<TOTAL-ASSETS> 206644365
<DEPOSITS> 165631780
<SHORT-TERM> 11223000
<LIABILITIES-OTHER> 6440914
<LONG-TERM> 110000
0
0
<COMMON> 5062875
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 206644365
<INTEREST-LOAN> 2264688
<INTEREST-INVEST> 1517318
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3782006
<INTEREST-DEPOSIT> 1399310
<INTEREST-EXPENSE> 1470984
<INTEREST-INCOME-NET> 2311022
<LOAN-LOSSES> 30000
<SECURITIES-GAINS> 2400
<EXPENSE-OTHER> 769745
<INCOME-PRETAX> 902529
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 642529
<EPS-PRIMARY> 3.19
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 818000
<LOANS-PAST> 205000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2109739
<CHARGE-OFFS> 98
<RECOVERIES> 94
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
