FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 No. 0-21078
Union Bankshares, Ltd.
(Exact name of Registrant as specified in its charter)
Delaware 84-0986148
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(State of other jurisdiction of (I.R.S Employer)
incorporation of organization) Identification No.)
1825 Lawrence Street, Suite 444, Denver, CO 80202
(Address of principal executive offices)
(Zip Code)
(303) 298-5352
(Registrant's telephone number, including area code)
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Not Changed
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Former name, former address and former fiscal year, if changed since last
report.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No .
---- ----
At October 24, 2000, there were 2,394,710 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes No X
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Union Bankshares, Ltd.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................. 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 9
PART II - OTHER INFORMATION......................... 16
SIGNATURES.......................................... 17
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
September 30, 2000
UNION BANKSHARES, LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 31, December 31,
ASSETS 2000 1999
(Unaudited)
------------- -------------
Cash and cash equivalents:
Cash and due from banks $ 18,459,000 $ 15,493,000
Total cash and cash equivalents 18,459,000 15,493,000
Investment securities:
Investment securities held to maturity -- 32,908,000
Investment securities available for sale 118,876,000 110,080,000
Other investments 2,430,000 1,984,000
Total investment securities 121,306,000 144,972,000
Loans:
Commercial 150,423,000 133,978,000
Real estate mortgage 5,735,000 5,780,000
Real estate construction 26,314,000 22,012,000
Consumer 31,842,000 22,855,000
Total loans 214,314,000 184,625,000
Less: allowance for loan losses (3,215,000) (2,892,000)
211,099,000 181,733,000
Excess of cost over fair value of net
assets acquired, net of amortization 6,227,000 6,630,000
Furniture, equipment and improvements, net 3,013,000 3,309,000
Accrued interest receivable 3,033,000 2,586,000
Other assets 3,870,000 3,863,000
TOTAL ASSETS $ 367,007,00 $ 358,586,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand (noninterest-bearing) $ 95,530,000 $ 88,392,000
NOW 28,439,000 27,348,000
Money Market 77,299,000 78,403,000
Savings 17,783,000 19,382,000
Time 90,276,000 76,530,000
Total deposits 309,327,000 290,055,000
Federal funds purchased -- 8,500,000
FHLB advances 23,600,000 28,600,000
Guaranteed preferred beneficial interests
in Company's debentures 10,304,000 10,304,000
Accrued interest payable 468,000 382,000
Other liabilities 1,533,000 1,362,000
Total liabilities 345,232,000 339,203,000
Stockholders' equity
Common stock 2,000 2,000
Additional paid in capital 9,952,000 9,822,000
Retained earnings 13,670,000 11,564,000
Unrealized depreciation on available
for sale securities, net of tax (1,849,000) (2,005,000)
Total stockholders' equity 21,775,000 19,383,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 367,007,00 $ 358,586,000
See notes to consolidated financial statements
<PAGE>
UNION BANKSHARES, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
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2000 1999 2000 1999
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 15,362,000 $ 11,033,00 $ 5,503,00 $ 3,982,000
Interest on investment securities:
U.S. government agencies and corporations 5,479,000 5,201,000 1,611,000 1,972,000
States and other political subdivisions 1,019,000 1,020,000 319,000 354,000
Interest on federal funds sold
and interest bearing deposits at other banks 302,000 334,000 253,000 107,000
Total interest income 22,162,00 17,588,000 7,686,000 6,415,000
INTEREST EXPENSE:
Interest on deposits 5,981,000 5,284,000 2,211,000 1,780,000
Interest on federal funds purchased 84,000 137,000 38,000 7,000
Interest on notes payable 2,824,000 1,458,000 961,000 700,000
Total interest expense 8,889,000 6,879,000 3,210,000 2,487,000
NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSS 13,273,000 10,709,000 4,476,000 3,928,000
PROVISION FOR LOAN LOSS 266,000 102,000 130,000 55,000
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSS 13,007,000 10,607,000 4,346,000 3,873,000
NONINTEREST INCOME:
Service charges 609,000 491,000 220,000 169,000
Gain (loss) on sale of securities available for sale (373,000) 266,000 14,000 --
Other 552,000 531,000 172,000 180,000
Total non interest income 788,000 1,288,000 378,000 349,000
NONINTEREST EXPENSE:
Salaries and employee benefits 5,878,000 5,387,000 1,997,000 1,837,000
Amortization of investment in subsidiary
over net assets acquired 404,000 404,000 135,000 135,000
Occupancy and equipment 1,531,000 1,513,000 507,000 536,000
Other 3,176,000 3,023,000 1,084,000 971,000
Total non interest expense 10,989,00 10,327,000 3,723,000 3,479,000
INCOME BEFORE INCOME TAX EXPENSE 2,806,000 1,568,000 1,001,000 743,000
INCOME TAX EXPENSE 698,000 514,000 329,000 280,000
NET INCOME $2,108,00 $ 1,054,000 $ 672,000 $ 463,000
EARNINGS PER COMMON SHARE BASIC
Net income per share $ 0.88 $ 0.45 $ 0.27 $ 0.20
Weighted average number of
common shares outstanding 2,385,540 2,348,875 2,392,439 2,350,514
EARNINGS PER COMMON SHARE DILUTED
Net income per share $ 0.81 $ 0.40 $ 0.26 $ 0.17
Weighted average number of
common shares outstanding 2,588,347 2,634,270 2,595,246 2,635,909
</TABLE>
See notes to consolidated financial statements
<PAGE>
UNION BANKSHARES, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
----------- ----------- ----------- -----------
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
NET INCOME $ 2,108,000 $ 1,054,000 $ 672,000 $ 463,000
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized appreciation (depreciation) on
available-for-sale securities, net of income
taxes of $214,000, $1,030,000, $527,000
and $(200,000) 362,000 (1,753,000) 898,000 (340,000)
Unrealized (depreciation) appreciation on
investments transferred from held-to-maturity
to available-for-sale, net of income taxes
of $260,000 (443,000) -- -- --
Reclassification adjustment for realized
(gain) losses included in net income, net of
income taxes of ($138,000), $(99,000) and $5,000 235,000 (167,000) 9,000 --
COMPREHENSIVE INCOME $ 2,262,000 $ (866,000) $ 1,579,00 $ 123,000
</TABLE>
See notes to consolidated financial statements
<PAGE>
UNION BANKSHARES, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(Unaudited)
<TABLE>
<CAPTION>
September 30,
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2000 1999
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<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 4,274,000 $ (1,591,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available-for-sale
securities 5,958,000 12,639,000
Proceeds from maturities of held-to-maturity
securities -- 5,996,000
Proceeds from sale of available-for-sale
securities 20,452,000 17,149,000
Purchase of available-for-sale securities (2,742,000) (75,320,000)
Purchase of held-to-maturity -- (3,958,000)
Purchase of mortgage loans held-for-sale (2,795,000) (9,389,000)
Proceeds from sale of mortgage loans
held-for-sale 2,416,000 13,674,000
Purchase of other investments (446,000) (961,000)
Net (increase) in loans (29,955,000) (20,674,000)
Purchase of furniture and equipment (96,000) (548,000)
Proceeds from sale of other real estate owned -- 150,000
Net cash provided by (used in) investing activities (7,208,000) (61,242,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits 19,272,000 20,509,000
(Decrease) in federal funds purchased (8,500,000) --
Proceeds from FHLB advances 125,000,000 33,600,000
Principal repayments of FHLB advances (130,000,000) (15,000,000)
Proceeds from issuance of common stock 128,000 33,000
Net cash provided by financing activities 5,900,000 39,142,000
Net increase in cash and cash equivalents 2,966,000 (23,691,000)
Cash and cash equivalents, beginning of year 15,493,000 45,419,000
Cash and cash equivalents, end of quarter $ 18,459,000 $ 21,728,000
</TABLE>
See notes to consolidated financial statements
<PAGE>
UNION BANKSHARES, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and do not include all the
information and note disclosures required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and related footnotes included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1999. In
the opinion of management, the consolidated financial statements presented
herein include all adjustments (consisting of normal recurring accruals)
necessary to present fairly, in all material respects, the consolidated
financial position of Union Bankshares, Ltd. (the "Company") as of September 30,
2000 and the Company's results of operations for the three and nine months ended
September 30, 2000 and 1999, statements of comprehensive income for the three
and nine months ended September 30, 2000 and 1999, and statements of cash flows
for the nine months ended September 30, 2000 and 1999.
The consolidated balance sheet of the Company as of December 31, 1999, has been
derived from the audited consolidated balance sheet of the Company as of that
date.
Certain reclassifications have been made to the September 30, 1999 Consolidated
Financial Statements to conform to the September 30, 2000 Consolidated Financial
Statements.
NOTE 2. RESULTS OF OPERATIONS
The results of operations for the three and nine months ended September 30, 2000
and 1999 are not necessarily indicative of the results to be expected for the
full year.
NOTE 3. EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income available for
common stockholders by the weighted average number of shares of common stock
outstanding during the period plus the equivalent number of shares purchasable
under common stock options, if dilutive. Earnings per common share were affected
by 202,807 shares purchasable pursuant to exercisable options during the three
and nine months ended September 30, 2000. Earnings per common share were
affected by 285,395 shares purchasable pursuant to exercisable options during
the three and nine months ended September 30, 1999.
<PAGE>
NOTE 4. NOTES PAYABLE
During the first nine months of 2000, the Bank entered into 15 advance
agreements totaling $125 million with the Federal Home Loan Bank of Topeka
bearing interest rates ranging from 5.82% to 7.04%. During this same period the
Bank repaid $130 million of its advances from the FHLB. As of September 30,
2000, FHLB advances outstanding are $23.6 million with $10.0 million maturing
each on October 10, 2000, and November 8, 2000. The remaining $3.6 million
matures July 14, 2001 and bears interest at a daily floating rate.
NOTE 5. SECURITIES HELD TO MATURITY
During June, 2000, in order to maximize the Company's liquidity flexibility, the
Company transferred its investment securities held to maturity portfolio with an
amortized cost of $31,263,445 and an unrealized loss of $704,434 to investment
securities available for sale.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following commentary presents management's discussion and analysis of the
Company's financial performance and financial condition for the third quarter
and nine months ended September 30, 2000. The discussion is a supplement to the
unaudited Consolidated Financial Statements and the consolidated financial
statements and the management's discussion and analysis of financial condition
and results of operations included in the Company's Form 10-KSB for the year
ended December 31, 1999, and should be read in conjunction therewith.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1999
OVERVIEW: The Company reported net income of $2,108,000 for the nine months
ended September 30, 2000, an increase of 100.0% from net income of $1,054,000
for the first nine months of 1999. Earnings were positively impacted in the
first nine months of 2000 by a $2,564,000 increase in net interest income and a
$139,000 increase in service charges and other noninterest income. These
improvements were partially offset by a $164,000 increase in provision for loan
loss, a $639,000 decrease in gain (loss) on sale of securities available for
sale, a $662,000 increase in noninterest expense and a $184,000 increase in
income tax expense for the period. Net income per share (diluted) was $.81 for
the nine months ended September 30, 2000 compared to $.40 per share for the 1999
period. Return on average assets and average equity were .75% and 14.22%,
respectively, for the nine months ended September 30, 2000 compared to .43% and
6.94%, respectively, for the first nine months of 1999.
During the first nine months of 2000, the Company's cash increased $3.0 million,
its securities portfolio decreased $23.7 million, its net loan portfolio
increased $29.4 million, its deposits increased $19.3 million, federal funds
purchased decreased $8.5 million and its notes payable to the FHLB decreased
$5.0 million. See "Liquidity and Capital Resources" for a discussion of the
Company's FHLB borrowings.
The Company's loan growth is a result of increased business development efforts,
including the hiring of four new loan officers over the last year, and the
continued strong local economy.
INTEREST INCOME: Interest income increased $4,574,000, or 26.0%, to $22,162,000
for the period ended September 30, 2000 from $17,588,000 for the comparable 1999
period. This increase results from a general rise in interest rates and an
increase in the Company's interest earning assets, primarily growth in loans,
absolutely and as a percentage of interest earning assets. The Company's net
yield on interest earning assets on a fully tax equivalent basis was 8.81% for
the first nine months of 2000, which reflects an increase of 80 basis points
(each basis point equals 1/100 of 1%) from the comparable 1999 period. The
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average yield on loans increased from 9.56% in the 1999 period to 10.23% in the
2000 period, and the average yield on securities held by the Company increased
from 6.49% in the 1999 period to 6.90% in the 2000 period. Interest income on
loans was $4,329,000 greater in the 2000 period, interest income on securities
increased $277,000 in the 2000 period and interest income on federal funds sold
decreased $32,000 in the 2000 period.
INTEREST EXPENSE: Interest expense increased $2,010,000, or 29.2%, to $8,889,000
for the nine months ended September 30, 2000 from $6,879,000 for the nine months
ended September 30, 1999. This increase is primarily due to an increase in notes
payable to the FHLB and an increase in interest bearing deposits. Average rates
paid on interest bearing deposits increased 34 basis points to 3.89% and on
notes payable to the FHLB increased 91 basis points to 6.56% in the nine month
period ended September 30, 2000, from 3.55% and 5.65%, respectively, in the nine
month period ended September 30, 1999.
NET INTEREST INCOME: Net interest income before provision for loan loss was
$13,273,000 for the nine months ended September 30, 2000, an increase of
$2,564,000, or 23.9%, over the first nine months of 1999. Net interest margin
increased 41 basis points from 4.96% in the 1999 period to 5.37% in the 2000
period. The increase in net interest income is primarily due to a $4,329,000
increase in interest income on loans and a $277,000 increase in interest income
on securities, offset by a $32,000 decrease in interest income on Federal Funds
sold and a $2,010,000 increase in interest expense. The Company's average cost
of funds for the nine months ended September 30, 2000 was 59 basis points higher
than the comparable 1999 period. The Company's average yield on interest earning
assets increased 80 basis points in the 2000 period compared to the 1999 period,
from 8.01% to 8.81%.
NONINTEREST INCOME: Noninterest income decreased $500,000, or 38.8%, for the
nine months ended September 30, 2000 to $788,000 from $1,288,000 for the nine
months ended September 30, 1999. This decrease was due to a $639,000 decrease in
the gain (loss) on sale of securities available for sale, offset by a $118,000
increase in service charge income and a $21,000 increase in other noninterest
income. The decrease in the gain (loss) on the sale of securities available for
sale was due to the decline in market value of the securities sold due to the
rise in interest rates between the periods.
NONINTEREST EXPENSE: Noninterest expense increased $662,000, or 6.4%, for the
first nine months of 2000 to $10,989,000 compared to $10,327,000 in the first
nine months of 1999. A significant portion of this increase is increases in
salaries and benefits relating primarily to annual merit increases. Average
rates paid on interest bearing deposits increased 34 basis points to 3.89% and
on notes payable to the FHLB increased 196 basis points to 7.03% in the nine
month period ended September 30, 2000, from 3.55% and %, respectively, in the
three month period ended September 30, 1999.
10
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THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
OVERVIEW: The Company reported net income of $672,000 for the three months ended
September 30, 2000, an increase of 45.1% from net income of $463,000 for the
comparable 1999 period. Net income was $.26 per share (diluted) for the three
month period ended September 30, 2000, compared to $.17 per share (diluted) for
the 1999 period. Return on average assets and average equity were .71% and
12.98%, respectively, for the three month period ended September 30, 2000,
compared to .53% and 9.48%, respectively, for the 1999 period.
INTEREST INCOME: Interest income increased $1,271,000, or 19.8%, to $7,686,000
for the three month period ended September 30, 2000 from $6,415,000 for the
comparable 1999 period. This increase results from a general rise in interest
rates and an increase in the Company's interest earning assets, primarily growth
in loans, absolutely and as a percentage of interest earning assets. The
Company's net yield on interest earning assets on a fully tax equivalent basis
was 9.00% for the three month period ended September 30, 2000, which reflects an
increase of 85 basis points from the comparable 1999 period. The average yield
on loans increased from 9.63% in the 1999 period to 10.38% in the 2000 period,
and the average yield on securities held by the Company increased from 6.69% in
the 1999 period to 6.88% in the 2000 period. Interest income on loans was
$1,521,000 greater in the 2000 period, interest income on securities decreased
$396,000 in the 2000 period and interest income on federal funds sold increased
$146,000 in the 2000 period.
INTEREST EXPENSE: Interest expense increased $723,000, or 29.1%, to $3,210,000
for the three month period ended September 30, 2000 from $2,487,000 for the
three month period ended September 30, 1999. This increase was primarily due to
the increase in average rates paid on interest bearing deposit accounts and
average notes payable to the FHLB and a $7.3 million increase in average notes
payable to the FHLB. Average rates paid on interest bearing deposits increased
63 basis points to 4.14% and on notes payable to the FHLB increased 155 basis
points to 7.03% in the three month period ended September 30, 2000, from 3.51%
and 5.48%, respectively, in the three month period ended September 30, 1999.
NET INTEREST INCOME: Net interest income before provision for loan loss was
$4,476,000 for the three month period ended September 30, 2000, an increase of
$548,000, or 14.0%, over the comparable period of 1999. Net interest margin
increased 24 basis points between the periods from 5.07% in the 1999 period to
5.31% in the 2000 period. The increase in net interest income is primarily due
to a $1,521,000 increase in interest income on loans and a $146,000 increase in
interest income on federal funds sold, offset by a $396,000 decrease in interest
income on securities and a $723,000 increase in interest expense. The Company's
average cost of funds for the three month period ended September 30, 2000 was 76
basis points higher than in the comparable 1999 period. The Company's average
yield on earning assets increased 85 basis points in the 2000 period compared to
the 1999 period, from 8.15% to 9.00%.
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NONINTEREST INCOME: Noninterest income increased $29,000, or 8.3%, for the three
month period ended September 30, 2000 to $378,000 from $349,000 for the three
month period ended September 30, 1999. This increase was primarily due to a
$51,000 increase in service charge income offset by an $8,000 decrease in other
noninterest income and a $14,000 decrease in the gain on sale of securities
available for sale.
NONINTEREST EXPENSE: Noninterest expense increased $244,000, or 7.0%, for the
three month period ended September 30, 2000 to $3,723,000 compared to $3,479,000
in the three month period ended September 30, 1999. A significant portion of
this increase is increases in salaries and benefits relating primarily to annual
merit increases.
PROVISION FOR LOAN LOSS
The Company charged $266,000 to Provision for Loan Loss in the first nine months
of 2000 and $102,000 for the same period in 1999. The ratio of loan loss reserve
to total loans was 1.50% at September 30, 2000 and 1.63% at September 30, 1999.
The Company sets its loan loss reserve at a level considered adequate to provide
for anticipated loan losses based on management's assessment of various factors
affecting the loan portfolio. These factors include a review of problem loans,
business conditions, loan loss experience and an overall evaluation of the
quality of the collateral, holding and disposal costs and costs of capital.
Provision for loan loss is a direct charge against income and is determined by
management based on the adequacy of the loan loss reserve.
LIQUIDITY AND SOURCES OF FUNDS
The Company's total assets increased 2.3% to $367.0 million at September 30,
2000 from $358.6 million at December 31, 1999. During the nine months ended
September 30, 2000 deposits increased $19.2 million to $309.3 million at
September 30, 2000 from $290.1 million at December 31, 1999. None of the
Company's deposits at September 30, 2000 were brokered deposits.
The Company has established a revolving line of credit with Gold Banc in an
amount not to exceed $3.0 million. Any monies advanced under this line would be
used solely for capital needs of the Company or to purchase the stock of banks
or bank holding companies. This line of credit will be available for one year
only, with renewals to be negotiated each year. There is currently no amount
outstanding under this line of credit.
At September 30, 2000, FHLB advances outstanding are $23.6 million with $10.0
million maturing each on October 10, 2000, and November 8, 2000. The remaining
$3.6 million matures July 14, 2001 and bears interest at a daily floating rate.
During the third quarter of 2000, the Bank did not borrow additional funds from
the FHLB. These borrowings serve as an alternative source of funding to fund
current loan growth at a time when the Bank's deposits have not increased and
liquidation of a portion of the Bank's bond portfolio was not believed to be
advisable. The Company
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expects that these loans will be repaid with liquidity from normal increases in
deposits coupled with liquidity from the Bank's bond portfolio.
During the third quarter of 2000, the Bank repaid $25.0 million of the FHLB
loans.
Management anticipates that the Company will continue to rely primarily on
customer deposits, sales and maturities of investment securities, loan sales and
loan repayments, as well as retained earnings to provide liquidity. These funds
are used to make loans, to acquire investment securities and other assets and to
fund continuing operations. The Company believes that its customer deposits will
continue to provide a strong source of liquidity because of the high percentage
of core deposits, many of which are held as compensating balances under
long-standing loan relationships. As another source of funds, management uses
federal funds and borrowings related to its membership in the FHLB.
ASSET QUALITY
The Company's lending activities are guided by its Statement of Lending Policies
and Procedures. These policies are annually reviewed and approved by the Bank's
Board of Directors. The Bank employs an internal auditor to monitor its internal
supervision and audits of its lending operation and the Company supplements
these internal procedures with independent examinations performed by
professional consultants and auditors. The Company monitors concentrations of
loans by collateral, purpose and industry. The Company has no significant
exposure to highly leveraged transactions and has no foreign credits in its loan
portfolio.
Total nonperforming assets were $54,000 and $4,000 at September 30, 2000 and
December 31, 1999, respectively. Other Real Estate Owned (OREO) was $0 at
September 30, 2000 and December 31, 1999. At September 30, 2000, securities
available for sale totaled $118.9 million, or 98.0% of the total portfolio and
other securities (investment in FHLB stock) totaled $2.4 million, or 2.0% of the
total portfolio. As of September 30, 2000, in order to maximize liquidity
flexibility, the Company has transferred all securities held to maturity to
available for sale. Securities available for sale are those securities which may
be sold in response to changes in interest rates, changes in the Company's short
term liquidity needs or changes in prepayment risk, and are carried at this
value. At September 30, 2000, the amortized cost of investments available for
sale exceeded market value by approximately $2,927,000.
U.S. government securities make up $74.5 million, or 61.4% of the investment
portfolio, mortgage backed securities make up $20.3 million, or 16.8% of the
investment portfolio, obligations of states and political subdivisions
(municipal securities), comprise $24.1 million, or 19.8% of the investment
portfolio, and other investments make up $2.4 million, or 2.0% of the investment
portfolio at September 30, 2000.
As noted in the Company's Form 10-KSB for the year ended December 31, 1999,
management has generally sought to control the exposure of the Company's
securities portfolio to rising interest rates by maintaining a position within a
narrow range around an "earnings neutral position"
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(i.e. the mix of assets and liabilities that generate a net interest margin that
is least affected by interest rate changes). The Company uses a measurement tool
known as dollar duration to help maintain an earnings neutral position. As of
September 30, 2000, the dollar duration of the investment portfolio was 4.81
compared to 4.50 at December 31, 1999. While the Company would typically seek to
decrease duration in a rising interest rate environment, as discussed above, the
Company elected to fund current loan growth through FHLB borrowings rather than
sales of investment securities which would have moderated the increase in
duration. The Company does not believe its present position results in a
material exposure to rising interest rates in view of the current stable
interest rate climate. The Company may also engage in hedging transactions to
control interest rate risk. The effect of these efforts in any given period may
be to negatively impact reported net noninterest income and the interest earned
on the securities.
CAPITAL RESOURCES
The Company's capital adequacy is a direct measurement of the overall financial
strength of the Company and its ability to absorb adverse market conditions. In
addition, the capital position of the Company provides a mechanism to promote
public confidence in the Company and the Bank.
The Company's total stockholders' equity increased $2,392,000 to $21.8 million
at September 30, 2000 from $19.4 million at December 31, 1999. This increase in
stockholders' equity was due to the retention of earnings in the current year,
the exercise of options to purchase 18,512 shares of common stock, and increased
by the net effect of FAS 115 which requires the Company to mark its available
for sale securities portfolio to market.
The Federal Reserve Board and FDIC guidelines require a minimum of a 4% Tier 1
core capital to risk-weighted assets ratio and an 8% total qualifying capital to
risk-weighted assets ratio. Due to the Company's high level of capital and the
level of risk in its current asset mix, the Company's risk based capital ratios
exceed the regulatory minimum ratios. The Company's Tier 1 core capital to risk
weighted assets was 9.57% at September 30, 2000 and its total qualifying capital
to risk weighted assets was 12.03%. As of September 30, 2000 the Bank also
exceeded the minimum regulatory risk based capital ratios.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Statements which are not historical facts contained in this document are forward
looking statements that involve risks and uncertainties that could cause actual
results to differ from projected results. Factors that could cause actual
results to differ materially include, among others: continued success of the
Bank's branching strategy, general economic conditions, economic conditions in
the Denver metropolitan
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area, the monetary policy of the Federal Reserve Board, changes in interest
rates, inflation, competition in the banking business, changes in the state and
federal regulatory regime applicable to the Company's and the Bank's operations,
the results of financing efforts and other risk factors detailed in the
Company's Forms 10-KSB, 10-QSB and 8-K filed with the Securities and Exchange
Commission.
Information included in this document includes "forward-looking statements"
which can be identified by the use of forward-looking terminology such as "may,"
"will," "anticipate," "believe," "estimate," or "continue," or the negative
thereof or other variations thereon or comparable terminology. The statements in
"risk factors" and other statements and disclaimers in the Company's Annual
Report on Form 10-KSB constitute cautionary statements identifying important
factors, including certain risks and uncertainties, with respect to such
forward-looking statements that could cause actual results to differ materially
from those reflected in such forward-looking statements.
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UNION BANKSHARES, LTD.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes In Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Securityholders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Exhibit 27. Financial Data Schedule
Reports on Form 8-K
None
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SIGNATURES
In accordance with 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, LTD.
(Registrant)
October 24, 2000 /s/ Bruce E. Hall
--------------------------------
Bruce E. Hall
Vice President, Treasurer and
Secretary
(Authorized Officer and Principal
Financial Officer of the Registrant)
