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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004 Commission file number 001-15985
UNION BANKSHARES, INC.
VERMONT 03-0283552
P.O. BOX 667
MAIN STREET
MORRISVILLE, VT 05661
Registrant's telephone number: 802-888-6600
Former name, former address and former fiscal year,
if changed since last report: Not applicable
Securities registered pursuant to section 12(b) of the Act:
Common Stock, $2.00 par value
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(Title of class)
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. Yes X No
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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 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. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X
----- -----
The aggregate market value of the common stock held by non-affiliates of
the registrant on June 30, 2004 was $71,687,716, based on the closing price
on the American Stock Exchange on such date of $23.30 per share. For purposes
of this calculation, all directors and executive officers of the Registrant
are assumed to be affiliates. Such assumptions, however, shall not be deemed
to be an admission of such status as to any such individual.
As of March 15, 2005, there were 4,554,663 shares of the registrant's $2
par value common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Specifically designated portions of the following documents are
incorporated by reference in the indicated Part of this Annual Report on
Form 10-K:
Document Part
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Annual Report to Shareholders for the year ended December 31, 2004 I, II
Proxy Statement for the 2005 Annual Meeting of Shareholders III
1
UNION BANKSHARES, INC.
Table of Contents
Part I
Item 1-Business 3
Item 2-Properties 9
Item 3-Legal Proceedings 9
Item 4-Submission of Matters to a Vote of Security Holders 9
Part II
Item 5-Market for Registrant's Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities (a) 9
Item 6-Selected Financial Data 10
Item 7-Management's Discussion and Analysis of Financial Condition
and Results of Operations (a) 11
Item 7A-Quantitative and Qualitative Disclosures about Market Risk (a) 11
Item 8-Financial Statements and Supplementary Data (a) 11
Item 9-Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 11
Item 9A-Controls and Procedures (a) 11
Item 9B-Other Information 11
Part III
Item 10-Directors and Executive Officers of Registrant (a) (b) 12
Item 11-Executive Compensation (b) 12
Item 12-Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters (b) 12
Item 13-Certain Relationships and Related Transactions (b) 12
Item 14- Principal Accountant Fees and Services (b) 13
Part IV
Item 15-Exhibits, Financial Statement Schedules and
Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
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(a) The information required by Part I, Item 2 and Part II, Items 5, 7, 7A
and 8 is incorporated herein by reference, in whole or in part, from
the 2004 Annual Report to Shareholders
(b) The information required by Part III Items 10, 11, 12, 13 and 14 is
incorporated herein by reference, in whole or in part, from the
Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on May 18, 2005. The incorporation by reference herein of
portions of the Proxy Statement shall not be deemed to specifically
incorporate by reference the information referred to in Items 306(c),
306(d) and 402 (a)(8) and (9) of Regulation S-K.
2
Part I-Item 1 Business
General: Union Bankshares, Inc. (the "Company") is a one-bank holding
company whose subsidiary is Union Bank ("Union"). It was incorporated in the
State of Vermont in 1982. Union Bank was organized and chartered as a
State bank in 1891 and became a wholly owned subsidiary of the Company in
1982 upon its formation. Both Union Bankshares, Inc. and Union Bank are
headquartered in Morrisville, Vermont.
The Company has one definable business segment, Union Bank, which is a
commercial bank in Northern Vermont. Union is a community bank that
provides a full range of commercial and retail banking services. At
December 31, 2004, Union maintained 12 branch offices, a loan production
office in Littleton, New Hampshire, 28 automated teller machines ("ATMs"),
and also provided many of its services via telephone and the internet. Union
has 163 full time equivalent employees and considers its employee relations to
be satisfactory. The Company, itself, does not have any paid employees.
The Company's income is derived principally from interest on loans and
earnings on other investments. Its primary expenses arise from interest
paid on deposits and borrowings and general overhead expenses. The
consolidated assets of the Company have grown from $295 million to $360
million over the last five years or 22.0% while our total consolidated
deposits have grown from $258 million to $307 million or 19.0% during that
same period. Please refer to our schedule of Selected Financial Data,
which has been restated for all periods for the 3 for 2 stock split in
2003, at Item 6 of this annual report for further details.
The deposits of Union are insured by the Bank Insurance Fund of the Federal
Deposit Insurance Corporation ("FDIC") up to legal limits (generally
$100,000 per depositor).
In addition to its commercial banking business, Union offers a full line of
personal trust services to its customers. Assets held in fiduciary
capacity by Union's trust department are not included in the Company's
consolidated balance sheet for financial reporting purposes other than
trust cash on deposit with Union Bank.
Competition: The Company and its subsidiary face substantial competition
for loans and deposits in their market area from local commercial banks,
savings banks, tax-exempt credit unions, mortgage brokers, and financial
services affiliates of bank holding companies, as well as from national
financial service providers such as mutual funds, brokerage houses, consumer
finance companies and internet banks. The Company anticipates continued
strong competition from such financial institutions for the foreseeable
future. Within the Company's market area are branches of several commercial
and savings banks that are substantially larger than the Company. Union
focuses on its community banking niche and on providing convenient hours
and modes of delivery to provide superior customer service. In order to
compete with the larger financial institutions in its service area, Union
uses the flexibility and local autonomy which is accorded by its
independent status. This includes an emphasis on personal service, local
promotional activity, and personal contacts and community service by
Union's officers, directors and employees.
The Company competes for checking, savings, money market accounts and other
deposits by offering depositors competitive rates, personal service, local
area expertise, convenient locations and access, and an array of financial
services and products.
The competition in originating real estate and other loans comes
principally from commercial banks, mortgage banking companies and credit
unions. The Company competes for loan originations primarily through the
interest rates and loan fees it charges, the types of loans it offers, and
the efficiency and quality of services it provides. In addition to
residential mortgage lending and municipal loans, the Company also
emphasizes commercial real estate, construction, and both conventional and
Small Business Administration ("SBA") guaranteed commercial lending. Union
is a preferred SBA lender. Factors that affect the Company's ability to
compete for loans include general and local economic conditions, prevailing
interest rates including the "prime" rate, and pricing volatility of the
secondary loan markets. The Company attempts to promote an increased level
of personal service and expertise within the community to position itself
as a lender to small to middle market business and residential customers,
which tend to be under-served by larger institutions.
The Company competes for personal trust business with trust companies,
commercial banks having trust departments, investment advisory firms,
brokerage firms, mutual funds and insurance companies.
Management's operational strategy includes continued evaluation of changing
market needs and design and implementation of products and services to meet
those needs. These strategies include the opening of a new loan production
office in St. Albans, Vermont in January 2005 which is a further westward
expansion in Franklin County of our service area. The directors and
management of the Company intend to continue to offer products and services
that will allow the Company to manage responsibly the growth of its assets,
while building and enhancing stockholder value and preserve Union Bank's
image as a premiere Vermont community bank.
The competitive environment for financial institutions has undergone
significant change in recent years and that trend is likely to continue in
light of changes in applicable law (see "Financial Services Modernization"
below) which permit the integration of the historically separate banking,
insurance and securities industries. Tax-exempt credit unions are becoming
an increasingly significant source of competition. Credit union common bond
requirements and the definition of a credit union "member" have been
interpreted liberally by federal and state credit union regulators while at
the same time, the scope of products credit unions are permitted to offer has
steadily expanded, resulting in
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greater penetration of this tax-advantaged segment of the financial services
industry into traditional banking markets. In February of 2003, the SBA
expanded the eligibility of certain lenders programs to include all credit
unions.
Competitive change is also occurring due to rapid technological advances
which increasingly permit the delivery of financial products and services
without the need for a physical presence in the market area served and
which also are likely to diminish the importance of financial
intermediaries, such as banks, in the transfer of funds between parties.
As a result, our future success will depend in part on our ability to
address our customers' needs by using technology.
Regulation and Supervision: The following discussion describes certain
material elements of an extensive regulatory framework applicable to bank
holding companies and their subsidiaries and provides certain information
specific to the Company. This regulatory framework is intended primarily
for the protection of depositors, federal deposit insurance funds and the
banking system as a whole, and not for the protection of security holders.
To the extent that this information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those
provisions.
As a Vermont-chartered commercial bank, Union is subject to regulation,
examination, and supervision by the Vermont Banking Department and the
Federal Deposit Insurance Corporation ("FDIC"). Regular examinations of
Union by the Vermont Banking Department and the FDIC include examination
of the bank's financial condition and operations, including but not limited
to its capital adequacy, loan reserves, loans, investments, earnings,
liquidity, compliance with laws and regulations, record of performance under
the federal Community Reinvestment Act of 1997 ("CRA"), and the performance
of its management.
In addition the Company, as a bank holding company, is subject to
regulation, examination and supervision by the Federal Reserve Board
("FRB"). The regulations of these authorities govern certain of the
operations of the Company and its subsidiary. The following discussion
summarizes the material aspects of various federal and state banking laws
and regulations that apply to the Company and Union.
The Company is also under the jurisdiction of the Securities and Exchange
Commission ("SEC") for matters relating to the offering and sale of its
securities as well as investor reporting requirements. The Company's
common stock is listed on the American Stock Exchange ("AMEX") under the
trading symbol "UNB" and is therefore subject to the rules of AMEX for
listed companies.
Federal Reserve Board Policies and Reserve Requirements. The monetary
policies and regulations of the FRB have had a significant effect on the
operating results of banks in the past and are expected to continue to do
so in the future. FRB policies affect the levels of bank earnings on loans
and investments and the levels of interest paid on bank deposits through
the Federal Reserve System's open-market operations in United States
government securities, regulation of the discount rate on bank borrowings
from Federal Reserve Banks and regulation of non-earning reserve
requirements. Regulation D promulgated by the FRB requires all depository
institutions to maintain reserves against their transaction accounts
(generally, demand deposits, NOW accounts and certain other types of
accounts that permit payments or transfer to third parties) and non-
personal time deposits (generally, money market deposit accounts or other
savings deposits held by corporations or other depositors that are not
natural persons, and certain other types of time deposits), subject to
certain exemptions. Because required reserves must be maintained in the
form of either vault cash, non-interest bearing account at the Federal
Reserve Bank or a pass-through account as defined by the FRB, the
effect of this reserve requirement is to reduce the amount of Union's
interest-earning assets. As of December 31, 2004, Union's reserve
requirement was approximately $3.4 million.
Bank Holding Company Acquisitions and Activities. As a bank holding
company, the Company is subject to supervision and regulation by FRB
under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
Under the BHC Act, the activities of bank holding companies, such as Union
Bankshares, and those of companies that they control, such as Union, or in
which they hold more than 5% of the voting stock, are limited to banking,
managing or controlling banks, furnishing services to or performing
services for their subsidiaries, or certain activities that the FRB has
determined to be so closely related to banking, managing or controlling
banks as to be a proper incident thereto. As described below, a bank
holding company that has elected to become a "financial holding company"
under the federal Gramm-Leach-Bliley Financial Modernization Act of 1999
("Gramm-Leach-Bliley Act") may engage in certain additional activities.
Bank holding companies such as Union Bankshares that have not elected to
become financial holding companies, are required to obtain the prior
approval of the FRB to engage in any new activity or to acquire more than
5% of any class of voting stock of any bank or other company. Satisfactory
capital ratios, CRA ratings and anti-money laundering policies are
generally prerequisites to obtaining Federal regulatory approval to make
acquisitions.
The FRB has authority to issue cease and desist orders to prevent or
terminate unsafe or unsound banking practices or violations of law or
regulations and to assess civil money penalties against bank holding
companies and their subsidiaries and other affiliates. The FRB also has
the authority to remove officers, directors and other institution-
affiliated parties.
Financial Services Modernization. The Gramm-Leach-Bliley Act permits
eligible bank holding companies to elect to become financial holding
companies and thereby engage in a broader range of financial and other
activities than is permitted to bank holding companies generally. Under
the Gramm-Leach-Bliley Act, a financial holding company may engage in
activities that are not traditionally encompassed within the business of
banking but that are "financial in nature," including securities
underwriting, dealing and market making, sponsoring mutual funds and
investment companies, insurance underwriting, merchant banking and
additional activities that the FRB, in consultation with the Secretary of
the Treasury, determines to be financial in nature, or incident or
complementary to such financial activities, provided
4
that such activities do not pose a substantial risk to the safety and
soundness of depository institutions or the financial system generally. The
Gramm-Leach-Bliley Act effectively permits the integration, under a
financial holding company umbrella, of firms engaged in banking, insurance
and securities activities, and preempts state laws that purport to limit or
prohibit such affiliations. No regulatory approval is required for a
financial holding company to acquire a company, other than a bank or
savings association, engaged in permitted activities.
In order to become a financial holding company, all of the bank holding
company's bank subsidiaries must be well-capitalized and well-managed under
applicable regulatory guidelines, and each of such banks must have been
rated "Satisfactory" or better in its most recent evaluation under the
federal CRA. Once a bank holding company has elected to be treated as a
financial holding company, it may face significant consequences if it
subsequently fails to meet one or more of the criteria for eligibility.
For example, it may be required to enter into an agreement with the FRB
imposing limitations on its operations and requiring divestitures. In
addition, the need to maintain eligibility could hamper a financial holding
company's ability to expand or to acquire financial institutions that do
not meet the required criteria.
As of the date of this report, the Company had not elected to become a
financial holding company.
Source of Strength. Under FRB policy, bank holding companies, such as
Union Bankshares, are expected to act as a source of financial and
management strength to their subsidiary banks, such as Union, and to commit
resources to support them. This support may be called for at times when a
bank holding company may not have the required resources to do so.
Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 an adequately capitalized and managed bank holding
company is permitted to acquire banks based outside its home state,
generally without regard to whether the state's law would permit the
acquisition. The Act also authorizes banks to merge across state lines
thereby creating interstate branches. In addition, the Act permits banks
to acquire existing interstate branches (short of merger) or to establish
new interstate branches. States were given the right, exercisable before
June 1, 1997, to prohibit altogether or impose certain limitations on
interstate mergers and the acquisition or establishment of interstate
branches. None of the states contiguous to Vermont (New Hampshire, New
York and Massachusetts) has in effect any statute which would substantially
impede the ability of a Vermont bank to acquire or create interstate
branches directly or through an interstate merger. Similarly, Vermont law
does not limit the ability of out-of-state banks to acquire or create
branches in Vermont. Although interstate banking and branching may result
in increased competitive pressures in the markets in which the Company
operates, interstate branching may also present competitive opportunities
for locally-owned and managed banks, such as Union, that are familiar with
the local markets and that emphasize personal service and prompt, local
decision-making.
Affiliate Restrictions. Bank holding companies and their affiliates are
subject to certain restrictions under the Federal Reserve Act in their
dealings with each other, such as in connection with extensions of credit,
transfers of assets, and purchase of services among affiliated parties.
Generally, loans or extensions of credit, investments or purchases of
assets by a subsidiary bank from a bank holding company or its affiliates
are limited to 10% of the bank's capital and surplus with respect to each
affiliate and to 20% in the aggregate for all affiliates, and borrowings
are also subject to certain collateral requirements. These transactions,
as well as other transactions between a subsidiary bank and its holding
company or other affiliates must generally be on arms-length terms, that
is, on terms comparable to those involving nonaffiliated companies.
Further, under the Federal Reserve Act and FRB regulations, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-
in-arrangements in connection with extensions of credit or furnishing of
property or services to third parties. The Company and Union are subject
to these restrictions in their intercompany transactions.
Bank. The various laws and regulations applicable to Union that are
administered by the FDIC and the Vermont Banking Commissioner affect
Union's corporate practices, such as payment of dividends, incurring of
debt and acquisition of financial institutions and other companies. These
laws also affect its business practices, such as payment of interest on
deposits, the charging of interest on loans, privacy issues and the
location of offices. There are no outstanding regulatory orders resulting
from regulatory examinations of the Company or Union.
Dividend Limitations. As a holding company, Union Bankshares' ability to
pay dividends to its stockholders is largely dependent on the ability of
its subsidiary to pay dividends to it. Payment of dividends by Vermont-
chartered banks, such as Union, is subject to applicable state and federal
laws. Under Vermont banking laws, a Vermont-chartered bank may not
authorize dividends or other distributions which would reduce the bank's
capital below the amount of capital required in the bank's Certificate of
General Good or under any capital or surplus standards established by the
Vermont Banking Commissioner. Union does not have any capital restrictions
in its Certificate of General Good and, to date, the Vermont Banking
Commissioner has not adopted capital or surplus standards. Nevertheless,
the capital standards established by the FDIC, described below under
"Capital Requirements," apply to Union, and the capital standards of the
FRB apply to the Company on a consolidated basis. In addition, the FRB, the
FDIC and the Vermont Banking Commissioner are authorized under applicable
federal and state laws to prohibit payment of dividends that they determine
would be an unsafe or unsound practice. Payment of dividends that deplete
the capital of a bank or a bank holding company, or render it illiquid,
could be found to be an unsafe or unsound practice.
Loans to Related Parties. The Company's and Union's authority to extend
credit to their directors, executive officers and 10 percent stockholders,
as well as to entities controlled by such persons, is currently governed
by the requirements of the Federal Reserve Act and Regulation O of the FRB
thereunder. Among other things, these provisions require that extensions
of credit to insiders (i) be made on terms that are substantially the same
as, and follow credit underwriting procedures that are not less stringent
than, those prevailing for comparable transactions with unaffiliated
persons and that do not involve more than the normal risk of repayment or
present other unfavorable features
5
and (ii) not exceed certain limitations on the amount of credit extended to
such persons, individually and in the aggregate, which limits are based in
part, on the amount of the bank's capital. Under AMEX guidelines, any
related party transaction including loans must be approved by the Company's
Audit Committee. In addition under the federal Sarbanes-Oxley Act of 2002
(discussed below), the Company, itself, may not extend or arrange for any
personal loans to its directors and executive officers.
Capital Requirements. The FRB, the FDIC and other federal banking
regulators have issued substantially similar risk-based and leverage
capital guidelines for United States Banking organizations. Those
regulatory agencies are also authorized to require that a banking
organization maintain capital above the minimum levels, whether because of
its financial condition or actual or anticipated growth. The FRB's risk-
based capital guidelines define a three-tier capital framework and specify
three relevant capital ratios: Tier 1 Capital Ratio, a Total Capital Ratio
and a "Leverage Ratio." Tier 1 Capital consists of common and qualifying
preferred shareholders' equity, less certain intangibles and other
adjustments. The remainder (Tier 2 and Tier 3 Capital) consists of
subordinate and other qualifying debt, preferred stock that does not
qualify as Tier 1 Capital, and the allowance of credit losses up to 1.25%
of risk-weighted assets.
The sum of Tier 1, Tier 2 and Tier 3 Capital, less investments in
unconsolidated subsidiaries, represents qualifying "Total Capital," at
least 50% of which must consist of Tier 1 Capital. Risk-based capital
ratios are calculated by dividing Tier 1 Capital and Total Capital by risk-
weighted assets. Assets and off-balance sheet exposures are assigned to
one of four categories or risk weights, based primarily on relative credit
risk. The minimum Tier 1 Capital Ratio is 4% and the minimum Total Capital
Ratio is 8%. The Leverage Ratio is determined by dividing Tier 1 Capital
by adjusted average total assets. Although the minimum Leverage Ratio is
3%, most banking organizations are required to maintain Leverage Ratios of
at least 1 to 2 percentage points above 3%.
Federal bank regulatory agencies require banking organizations that engage
in significant trading activity to calculate a capital charge for market
risk. Significant trading activity means trading activity of at least 10%
of total assets or $1 billion, whichever is smaller, calculated on a
consolidated basis for bank holding companies. Federal bank regulators may
apply the market risk measure to other bank holding companies, as the
agency deems necessary or appropriate for safe and sound banking practices.
Each agency may exclude organizations that it supervises that otherwise
meet the criteria under certain circumstances. The market risk charge will
be included in the calculation of an organization's risk-based capital
ratio. Neither the Company nor Union is currently subject to this special
capital charge.
FRB policy provides that banking organizations generally, and, in
particular, those that are experiencing rapid internal growth or actively
making acquisitions, will be expected to maintain strong capital positions
substantially above the minimum supervisory levels, without significant
reliance on intangible assets, such as goodwill. Furthermore, the capital
guidelines indicate that the FRB will continue to consider a "Tangible Tier
1 Leverage Ratio" in evaluating proposals for expansion or new activities.
The Tangible Tier 1 Leverage Ratio is calculated by dividing a banking
organization's Tier 1 Capital less all intangible assets by its total
consolidated quarterly average assets less all intangible assets.
The FRB's capital adequacy guidelines generally provide that bank holding
companies with a ratio of intangible assets to tangible Tier 1 Capital in
excess of 25% will be subject to close scrutiny for certain purposes,
including the FRB's evaluation of acquisition proposals. The Company does
not have a material amount of intangibles in its capital base.
At December 31, 2004, the Company's consolidated Total and Tier I Risk-
Based Capital Ratios were 18.57% and 17.27%, respectively, and its Leverage
Capital Ratio was 11.62%, and it is considered well-capitalized under the
above regulatory guidelines. In addition, Union is considered well-
capitalized under such guidelines.
Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), among other things, identifies five
capital categories for insured depository institutions (well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized,
and critically undercapitalized) and requires the respective federal
banking agencies to implement systems for "prompt corrective action" for
insured depository institutions that do not meet minimum capital
requirements. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category
in which an institution is classified. Failure to meet the capital
guidelines could also subject a banking institution to capital raising
requirements. An "undercapitalized" bank must develop a capital restoration
plan and its parent holding company must guarantee that bank's compliance
with the plan. The liability of the parent holding company under any such
guarantee is limited to the lesser of 5% of the bank's assets at the time
it became undercapitalized or the amount needed to comply with the plan.
Furthermore, in the event of the bankruptcy of the parent holding company,
such guarantee would take priority over the parent's general unsecured
creditors. In addition, FDICIA requires the various federal banking
agencies to prescribe certain noncapital standards for safety and soundness
related generally to operations and management, asset quality and executive
compensation, and permits regulatory action against a financial institution
that does not meet such standards.
The various federal banking agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA,
using the Total Capital, Tier 1 Ratio and the Leverage Ratio as the
relevant capital measures. Such regulations establish various degrees of
corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution
must have a Tier 1 capital ratio of at least 6%, a total capital ratio of
at least 10% and a leverage ratio of at least 5% and not be subject to a
capital directive order. An "adequately capitalized" institution must have
a Tier 1 capital ratio of at least 4%, a total capital ratio of at least 8%
and a leverage ratio of at least 4%, or 3% in some cases.
6
Safety and Soundness Standard. FDICIA, as amended, directs each Federal
banking agency to prescribe safety and soundness standards for depository
institutions relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, asset-quality, earnings and stock
valuation. The Community Development and Regulatory Improvement Act of
1994 amended FDICIA by allowing Federal banking regulators to publish
guidelines rather than regulations concerning safety and soundness.
FDICIA also contains a variety of other provisions that may affect Union's
operations, including reporting requirements, regulatory guidelines for
real estate lending, "truth in savings" provisions, and the requirement
that a depository institution give 90 days prior notice to customers and
regulatory authorities before closing any branch.
Community Reinvestment Act. Union is subject to the federal CRA, which
requires banks to demonstrate their commitment to serving the credit needs
of low and moderate income residents of their communities. The bank
participates in a variety of direct and indirect lending programs and other
investments for the benefit of the low and moderate income residents in our
communities. The FDIC conducts examinations of insured banks' compliance
with CRA requirements and rates institutions as "Outstanding,"
"Satisfactory," "Needs to Improve," and "Substantial Non-Compliance."
Failure of an institution to receive at least a "Satisfactory" CRA rating
could adversely affect its ability to undertake certain activities, such as
acquisitions of other financial institutions, which require regulatory
approval based, in part, on the institution's record of CRA compliance. In
addition, failure of a bank subsidiary to receive at least a "Satisfactory"
rating would disqualify a bank holding company from eligibility to become
or remain a financial holding company under the Gramm-Leach-Bliley Act.
(See "Financial Modernization" above.) At its last CRA compliance
examination by the FDIC, Union received a rating of "Outstanding."
Deposit Insurance Premium Assessments. Under applicable federal laws and
regulations, deposit insurance premium assessments to the Bank Insurance
Fund ("BIF") and the Savings Association Insurance Fund ("SAIF") are based
on a supervisory risk rating system, with the most favorably rated
institutions paying the lowest premiums. The deposits of Union are insured
under the BIF. As a "well capitalized" institution, Union is presently
in the most favorable deposit insurance assessment category, and pays the
minimum deposit premium assessment.
Brokered Deposits. FDICIA restricts the ability of an FDIC-insured bank to
accept brokered deposits unless it is a well-capitalized institution under
FDICIA's prompt corrective action guidelines. Although eligible to do so,
Union has not accepted brokered deposits.
Consumer Protection Laws. In connection with its lending activities, Union
is subject to a variety of federal and state laws designed to protect
borrowers and to promote lending to various sectors of the economy and
population. In addition to the provisions of the CRA (discussed above),
Union is subject to, among other laws, the federal Home Mortgage Disclosure
Act, the federal Real Estate Settlement Procedures Act, the federal Truth-
in-Lending Act, the federal and Vermont Equal Credit Opportunity Acts, and
the federal and Vermont Fair Credit Reporting Acts.
Union is subject to the provisions of Title V of the Gramm-Leach-Bliley
Act, which requires it to notify their consumer customers of its
information collection and sharing practices and restrict those practices
in certain respects. In addition, Union is subject to similar but more
restrictive, requirements of the Vermont Banking Department. Generally
those Vermont requirements prohibit the disclosure of consumer information
to nonaffiliated third parties without the express written consent of the
consumer, except for disclosures permitted under specified regulatory
exceptions.
The deposit-taking activities of Union are subject to various federal and
state requirements, including those mandating uniform disclosures to
depositors with respect to rates of interest, fees and other terms of
consumer deposit accounts, and disclosure of its policy on the
availability of deposited funds.
Bank Secrecy Act. Union is subject to federal laws establishing certain
record keeping, customer identification and reporting requirements
pertaining to large cash transactions, sales of travelers checks and other
monetary instruments and the international transfer of cash or monetary
instruments. New provisions, designed to help combat international
terrorism, were added in 2001 to the Bank Secrecy Act by the USA Patriot
Act. These provisions require banks to avoid establishing or maintaining
correspondent accounts of foreign off-shore banks and banks in
jurisdictions that have been found to fall significantly below
international anti-money laundering standards. In addition, U.S. banks are
prohibited from opening correspondent accounts for off-shore shell banks,
defined as banks that have no physical presence and that are not part of a
regulated and recognized banking company. The USA Patriot Act requires all
financial institutions to adopt an anti-money laundering program. The act
requires banks to establish due diligence policies, procedures and controls
that are reasonably designed to detect and report instances of money
laundering in United States private banking accounts and correspondent
accounts maintained for non-U.S. persons or their representatives.
The Department of Treasury has issued regulations implementing the due
diligence requirements. These regulations require minimum standards to
verify customer identity and maintain accurate records, encourages
information-shareing cooperation among financial institutions, federal
banking agencies and law enforcement authorities regarding possible money
laundering or terrorist activities, prohibits the anonymous use of
"concentrations accounts" and requires all covered financial institutions
to have in place an anti-money laundering compliance program. In addition,
the USA Patriot Act amended certain provisions of the federal Right to
Financial Privacy Act to facilitate the access of law enforcement to bank
customer records in connection with investigating international terrorism.
7
The Act also amends the Bank Holding Company Act and the Bank Merger Act to
require the federal banking agencies to consider the effectiveness of a
financial institution's anti-money laundering program when reviewing an
application under these acts.
Sarbanes-Oxley Act of 2002. In 2002, federal legislation known as the
Sarbanes-Oxley Act of 2002" was enacted. This far-reaching legislation
was generally intended to protect investors by strengthening corporate
governance and improving the accuracy and reliability of corporate
disclosures made pursuant to securities law. The Sarbanes-Oxley Act
provides for, among other things:
* a prohibition on personal loans made or arranged by the issuer to
its directors and executive officers (except for loans made by a
bank subject to Regulation O);
* independence requirements for audit committee members;
* corporate governance requirements;
* independence requirements for company auditors;
* enhanced disclosure requirements pertaining to corporate
operations and internal controls;
* certification of financial statements on Forms 10-K and 10-Q
reports by the chief executive officer and the chief financial
officer;
* the forfeiture by the chief executive officer and the chief
financial officer of bonuses or other incentive-based compensation
and profits from the sale of an issuer's securities by such
officers in the twelve month period following initial publication
of any financial statements that later require restatement due to
corporate misconduct;
* disclosure of off-balance sheet transactions;
* two-business day filing requirements for insiders filing reports
on Form 4 of transactions in the issuer's securities;
* accelerated filing requirements for Forms 10-K and 10-Q by public
companies which qualify as "accelerated filers;"
* disclosure of a code of ethics for principal financial officers
and filing a Form 8-K for a change in or waiver of such code;
* the reporting of securities violations "up the ladder" by both in-
house and outside attorneys;
* restrictions on the use of non-GAAP financial measures in press
releases and SEC filings;
* the formation of a public accounting oversight board; and
* various increased criminal penalties for violations of securities
laws.
Not all of the final rules under the Act have gone into effect for the
Company since it is not an acceleratied filer. In particular, the Company
is not subject for 2004 to Section 404 of Sarbanes-Oxley, relating to
certification and attestation of internal controls. In order to be
considered an accelerated filer under the Sarbanes-Oxley Act, the market
value of the Company's outstanding class of stock registered under the
Exchange Act as of June 30 which is held by non-affiliates (so-called
"public float") must exceed $75,000,000.
AMEX. In response to the Sarbanes-Oxley Act, the AMEX, where the Company's
common stock is listed, has implemented new corporate governance listing
standards, including rules strengthening director independence requirements
for boards and committees of the board, the director nomination process and
shareholder communication avenues. These rules required the Company to
certify to the AMEX after the 2004 Annual Meeting that the Company was in
compliance and would continue to comply with AMEX corporate governance
requirements.
Other Proposals. Certain legislative and regulatory proposals that could
affect the Company or Union and the financial services business in general
are periodically introduced before the United States Congress, the Vermont
State Legislature and federal and state government agencies. It is not
known to what extent, if any, legislative proposals will be enacted and
what effect such legislation would have on the structure, regulation and
competitive relationships of financial institutions. Such legislation could
subject the Company and Union to increases in regulation, disclosure and
reporting requirements, competition and the cost of doing business.
In addition to legislative changes, the various federal and state financial
institution regulatory agencies frequently propose rules and regulations to
implement and enforce already existing legislation. It cannot be predicted
whether or in what form any such rules or regulations will be enacted or
the effect that such enactment may have on the Company or Union.
Available Information: The Company files annual, quarterly, and current
reports, proxy statements, and other documents with the SEC under the
Securities Exchange Act of 1934 (the "Exchange Act"). The public may read
and copy and materials that Union Bankshares, Inc. has filed with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC
maintains an Internet website that contains reports, proxy and information
statements, and other information regarding issuers, including Union
Bankshares, that file electronically with the SEC. The public can obtain
any documents that the Company has filed with the SEC at
http://www.sec.gov.
Part I-Item 2 Properties
As of December 31, 2004, the Company's subsidiary operated 12 community-
banking locations which are in Lamoille, Caledonia and Franklin counties of
Vermont. Union also has a loan production office in Littleton, New
Hampshire and opened a second loan production office in St. Albans, Vermont
in January 2005. Union also operates 28 ATMs in northern Vermont. Union
owns, free of encumbrances, nine of its branch locations and leases the
other branches, the loan production offices and certain ATM premises from
third parties under terms and conditions considered by management to be
favorable to the Bank.
8
Additional information relating to the Company's properties as of December
31, 2004, is set forth in Note 9 to the consolidated financial statements
and incorporated herein by reference.
Part I-Item 3 Legal Proceedings
There are no known pending legal proceedings to which the Company or its
subsidiary is a party, or to which any of their properties is subject,
other than ordinary litigation arising in the normal course of business
activities. Although the amount of any ultimate liability with respect to
such proceedings cannot be determined, in the opinion of management, any
such liability will not have a material effect on the consolidated
financial position of the Company and its subsidiary.
Part I-Item 4 Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders through a
solicitation of proxies or otherwise during the fourth quarter of 2004.
Part II-Item 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Please refer to page 67 of the Company's 2004 Annual Report to
Shareholders, which information is incorporated herein by reference.
There were no issuer stock repurchases during 2004.
During the quarter ended December 31, 2004, incentive stock options
previously granted pursuant to the Company's 1998 Stock Incentive Stock
Option Plan ("Plan") were exercised by two participants, with respect to an
aggregate of 3,450 shares, at an aggregate exercise price of $47,551.
Participation in the Plan is limited to those senior officers of the
corporation or its subsidiary (currently five active participants) selected
by the Board of Directors in its discretion. The exercise price of all
options granted under the Plan represents the fair market value of the
shares on the date of the grant. There were 3,250 options granted
under the Plan during 2004 at an option price of $26.60 per share.
the shares issued to Plan participants upon exercise of incentive stock
options have not been registered with the Securities and Exchange
Commission. Such shares are restriced securities, issued under statutory
exemptions available under the Securities Act of 1933, including Section
4(2) thereof, for offers and sales not involving a public offering.
9
Part II-Item 6 Selected Financial Data
At or For The Years Ended December 31
------------------------------------------------------------
2004 2003 2002 2001 2000
------------------------------------------------------------
(Dollars in thousands except per share data)
Balance Sheet Data:
Total Assets $359,529 $356,650 $343,492 $337,475 $303,394
Investment Securities 40,966 44,370 45,824 49,610 56,642
Loans Held for Sale 8,814 18,524 17,139 16,333 9,153
Loans, net of unearned income 271,255 253,037 238,768 234,610 215,642
Allowance for loan losses (3,067) (3,029) (2,908) (2,801) (2,863)
Total nonperforming loans 5,295 3,305 2,272 4,864 4,398
Total nonperforming assets 5,330 3,315 3,074 6,160 4,514
Other real estate owned 35 10 784 1,296 116
Deposits 306,598 305,379 293,004 285,722 258,737
Borrowed funds 7,934 7,223 7,536 10,344 6,382
Stockholders' equity (1) 42,403 40,987 39,169 37,215 35,157
Income Statement Data:
Net interest and dividend income $ 16,868 $ 16,163 $ 15,805 $ 14,559 $ 14,249
Provision for loan losses 30 114 356 320 250
Noninterest income 3,774 3,603 3,560 3,073 2,569
Noninterest expense 12,319 12,060 11,761 10,496 9,944
Net income 5,835 5,387 5,180 4,832 4,800
Per Common Share Data:
Net income (2)(4) $ 1.28 $ 1.18 $ 1.14 $ 1.06 $ 1.05
Cash dividends paid(4) 0.90 0.82 0.76 0.71 0.65
Book value (1)(4) 9.31 9.01 8.62 8.19 7.73
Selected Ratios:
Return on average assets (ROA) 1.65% 1.56% 1.52% 1.51% 1.61%
Return on average equity (ROE) 14.17% 13.50% 13.74% 13.34% 14.54%
Dividend payout ratio (3) 70.31% 69.49% 66.67% 66.67% 62.03%
Interest rate spread (5) 4.98% 4.91% 4.72% 4.29% 4.40%
Net interest margin (6) 5.24% 5.20% 5.14% 4.99% 5.19%
Operating expenses to average assets 3.48% 3.49% 3.46% 3.29% 3.32%
Efficiency ratio (7) 59.02% 60.19% 60.73% 60.06% 59.21%
Average interest earning assets to
average interest bearing liabilities 125.73% 121.87% 120.59% 122.11% 122.26%
Average stockholders' equity to
average assets 11.64% 11.56% 11.10% 11.35% 11.01%
Tier 1 leverage capital ratio 11.62% 11.38% 11.03% 11.06% 11.74%
Tier 1 risk-based capital ratio 17.27% 16.70% 16.74% 15.59% 16.27%
Total risk-based capital ratio 18.57% 17.99% 17.99% 16.83% 17.62%
Asset Quality Ratios:
Nonperforming loans to total loans 1.89% 1.22% .89% 1.94% 1.96%
Nonperforming assets to total assets 1.48% .93% .89% 1.83% 1.49%
Allowance for loan losses to
nonperforming loans 57.91% 91.65% 127.99% 57.59% 65.10%
Allowance for loan losses to
loans not held for sale 1.13% 1.20% 1.22% 1.19% 1.33%
- --------------------
Stockholders' equity includes unrealized gains or losses, net of
applicable income taxes, on investment securities classified as
"available-for-sale."
Computed using the weighted average number of shares outstanding for
the period.
Cash dividend declared and paid per share divided by consolidated net
income per share.
Per common share data for all periods have been restated to reflect
the three for two stock split effected in the form of a 50% stock
dividend distributed on August 8, 2003 to shareholders of record on
July 26, 2003.
The difference between the average rate earned on assets minus the
average rate paid on liabilities.
The ratio of tax equivalent net interest income to average earning
assets.
The ratio of noninterest expense to tax equivalent net interest income
and noninterest income excluding securities gains and losses.
10
Part II-Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Please refer to pages 42 to 65 of the Company's 2004 Annual Report to
Shareholders section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations", which information is
incorporated herein by reference.
Part II-Item 7A Quantitative and Qualitative Disclosures About Market Risk
Please refer to pages 57 to 65 of the Company's 2004 Annual Report to
Shareholders section entitled "Other Financial Considerations", which
information is incorporated herein by reference.
Part II-Item 8 Financial Statements and Supplementary Data
The consolidated balance sheets of Union Bankshares, Inc. as of December 31,
2004 and 2003, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 2004, together with related notes and the report
of UHY LLP, independent registered public accounting firm, with respect to
the financial statements for the year ended December 31, 2004, all as
contained on pages 12 to 41 of the Company's 2004 Annual Report to
Shareholders, are incorporated herein by reference.
The reissued report of the Company's predecessor independent accountants
with respect to the financial statements for the years ended December 31,
2003 and 2002 is filed as Exhibit 99 to this report and is incorporated
herein by reference.
Part II-Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
a) On June 1, 2004, the partners of Urbach Kahn & Werlin LLP announced
that they were joining UHY LLP, a newly-formed New York limited liability
partnership. UHY LLP is comprised of partners of four accounting firms with
offices in seven (7) states. UHY LLP is a legal entity that is separate
from Urbach Kahn & Werlin LLP. Urbach Kahn & Werlin LLP was in the process
of ceasing to provide audit services to public companies, and accordingly,
on November 17, 2004, resigned as the independent auditors of the Company.
b) None of the reports of Urbach Kahn & Werlin LLP on the Company's
financial statements for either of the past two fiscal years contained an
adverse opinion or disclaimer of opinion, or was qualified or modified as
to uncertainty, audit scope or accounting principles.
c) The decision to change principal accountants was approved by the Audit
Committee of the Company's Board of Directors.
d) During the Company's two most recent fiscal years and any subsequent
interim periods, there were no disagreements between the Company and Urbach
Kahn & Werlin LLP on any matter of accounting principles or practices,
financial statement disclosure, audit scope or procedure.
e) On November 17, 2004, the Company engaged UHY LLP as the Company's
independent public accountant for the Company's fiscal year ending December
31, 2004, and the interim period prior to such year-end. During the
Company's two most recent fiscal years or any subsequent interim period(s),
neither the Company nor anyone on its behalf has consulted with UHY LLP
regarding (1) the application of accounting principles to a specific
transaction, either completed or proposed, or (2) the type of audit opinion
that might be rendered on the Company's financial statements, or (3) any
matter that was the subject of a disagreement within the meaning of Item
304(a)(1)(iv) of Regulation S-K, or (4) any reportable event within the
meaning of Item 304(a)(1)(iv) of Regulation S-K.
f) There are not any disagreements with UHY LLP accountants on accounting
or financial disclosures.
Part II - Item 9A Controls and Procedures
The Company's chief executive officer and chief financial officer evaluated
the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange
Act) as of December 31, 2004. Based on this evaluation they concluded that
those disclosure controls and procedures are effective in alerting them in
a timely manner to material information about the Company and its
consolidated subsidiary required to be disclosed in the Company's periodic
reports filed with the Securities and Exchange Commission.
There have been no changes in the Company's internal controls or in other
factors known to the Company that could significantly affect these controls
subsequent to the date of the evaluation referred to above. While the
Company believes that its existing disclosure controls and procedures have
been effective to accomplish these objectives, the Company intends to
continue to examine, refine and formalize its disclosure controls and
procedures and to monitor ongoing developments in this area.
Part II-Item 9B Other Information
None
11
Part III-Item 10 Directors and Executive Officers of Registrant
The following information from the Company's Proxy Statement for the 2005
Annual Meeting of Shareholders is hereby incorporated by reference:
Listing of the names, ages, principal occupations and business experience
of the directors under the caption "PROPOSAL I: TO ELECT DIRECTORS"
Listing of the names, ages, titles and business experience of the executive
officers under the caption "EXECUTIVE OFFICERS"
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 under the caption "SHARE OWNERSHIP INFORMATION -
Section 16(a) Beneficial Ownership Reporting Compliance"
Information regarding the Company's Audit Committee under the caption
"Board Committees"
The Company has adopted a Code of Ethics for Senior Financial Officers and
the Chief Executive Officer, filed as Exhibit 14(i) to this report.
Part III-Item 11 Executive Compensation
The following information from the Company's Proxy Statement for the 2005
Annual Meeting of Shareholders is hereby incorporated by reference:
Information regarding compensation of directors under the caption "PROPOSAL
I: TO ELECT DIRECTORS - Directors' Compensation"
Information regarding executive compensation and benefit plans under the
caption "EXECUTIVE OFFICERS - Executive Compensation and Benefit Plans"
Information regarding management interlocks and certain transactions under
the caption "PROPOSAL I: TO ELECT DIRECTORS - Compensation Committee
Interlocks and Insider Participation"
Part III-Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The following information from the Company's Proxy Statement for the 2005
Annual Meeting of Shareholders is hereby incorporated by reference:
Information regarding the share ownership of management and principal
shareholders under the caption "SHARE OWNERSHIP INFORMATION - Share
Ownership of Management and Principal Holders"
The following table summarizes equity compensation under the Company's
Incentive Stock Option Plan, the only equity compensation plan of the
company.
Equity Compensation Plan Information as of December 31, 2004:
Number of securities
remaining available for future
Number of securities to be issuance under equity
issued upon exercise of Weighted-average exercise compensation plans
outstanding options, warrants price of outstanding options, (excluding securities reflected
and rights warrants and rights in column (a)
----------------------------- ----------------------------- --------------------------
Plan Category Column a Column b Column c
- ------------- -------- -------- --------
Equity compensation plans
approved by security holders 12,575 $20.08 51,950
Equity compensation plans
not approved by security
holders - - -
------ ------ ------
Total 12,575 $20.08 51,950
====== ====== ======
Part III-Item 13 Certain Relationships and Related Party Transactions
The following information from the Company's Proxy Statement for the 2005
Annual Meeting of Shareholders is hereby incorporated by reference:
12
Information regarding transactions with management under the caption
"PROPOSAL I: TO ELECT DIRECTORS - Transactions with Management and
Directors"
Part III-Item 14 Principal Accountant Fees and Services
The following information from the Company's Proxy Statement for the 2005
Annual Meeting of Shareholders is hereby incorporated by reference:
Information on fees paid to the Independent Auditors set forth under the
caption "Independent Auditors"
Part IV-Item 15 Exhibits and Financial Statement Schedules
Documents Filed as Part of this Report:
(1) The following consolidated financial statements, as included in
the 2004 Annual Report to Shareholders, are incorporated herein
by reference (See Exhibit 13.1):
1) Report of Independent Registered Public Accounting Firm
2) Consolidated Balance Sheet at December 31, 2004 and 2003
3) Consolidated Statement of Income for the years ended
December 31, 2004, 2003 and 2002
4) Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 2004, 2003 and 2002
5) Consolidated Statement of Cash Flows for the years ended
December 31, 2004, 2003 and 2002
6) Notes to the Consolidated Financial Statements
(2) Report of Former Independent Accountant (See Exhibit 99)
(3) The following exhibits are either filed herewith as part of
this report, or are incorporated herein by reference.
Item No:
3.1 Amended and Restated Articles of Incorporation of Union
Bankshares, Inc. (as of May 7, 1997), previously filed with the
Commission as Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (#333-82709) and incorporated herein by
reference.
3.2 Amendment filed May 19, 1998 to Amended and Restated Articles
of Association of Union Bankshares, Inc., adding new sections 8
and 9, previously filed with the Commission as Exhibit 3.1 to
the Company's Registration Statement on Form S-4 (#333-82709)
and incorporated herein by reference.
3.3 Amendment filed November 24, 1999 to Amended and Restated
Articles of Association of Union Bankshares, Inc. increasing
the authorized common shares to 5,000,000, previously filed
with the Commission on December 10, 1999 as Exhibit 3.3 to the
Company's Current Report on Form 8-K 12g3, and incorporated
herein by reference.
3.4 Bylaws of Union Bankshares, Inc., as amended, previously filed
with the Commission as Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (#333-82709) and
incorporated herein by reference.
10.1 Stock Registration Agreement dated as of February 16, 1999,
among Union Bankshares, Inc., Genevieve L. Hovey, individually
and as Trustee of the Genevieve L. Hovey Trust (U.A. dated
8/22/89), and Franklin G. Hovey, II, individually, previously
filed with the Commission as Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (#333-82709) and
incorporated herein by reference.
10.2 1998 Incentive Stock Option Plan of Union Bankshares, Inc. and
Subsidiary, previously filed with the Commission as Exhibit 3.1
to the Company's Registration Statement on Form S-4 (#333-
82709) and incorporated herein by reference.*
10.3 Form of Union Bankshares, Inc. Deferred Compensation Plan and
Agreement, previously filed with the Commission as Exhibit 10.3
to the Company's 2001 Form 10-K and incorporated herein by
reference.*
11 Statement re: Computation of per share earnings: See Note 1
to the consolidated financial statements for details on
earnings per share computations for 2004, 2003 and 2002
13 The following specifically designated portions of Union's 2004
Annual Report to Shareholders have been incorporated by
reference in this Report on Form 10-K, is filed herewith:
pages 11 to 67
14(i) Code of Ethics for Senior Financial Officers and the Chief
Executive Officer
14(ii) Code of Ethics (for all directors, officers and employees),
previously filed with the Commission as Exhibit 14(ii) to the
Company's 2003 Form 10-K and incorporated herein by reference.
16 Letter from Urbach Kahn & Werlin LLP, our former independent
accountants, dated November 17, 2004, previously filed with the
commission as Exhibit 16.1 to Form 8-K filed on November 17,
2004 and incorporated herein by reference.
21 Subsidiary of Union Bankshares, Inc.
Union Bank, Morrisville, Vermont
31.1 Certifications of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
31.2 Certifications of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99 Report of Former Independent Accountant
* denotes compensatory plan of agreement
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized, as of
March 30, 2005.
Union Bankshares, Inc.
By: /s/ Kenneth D. Gibbons By: /s/ Marsha A. Mongeon
------------------------- ------------------------------
Kenneth D. Gibbons Marsha A. Mongeon
President and Chief Treasurer and Chief Financial/
Executive Officer Accounting Officer
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 indicated as of March 30, 2005.
Name Title
/s/ Richard C. Sargent Director, Chairman of the Board
- -----------------------------
Richard C. Sargent
/s/ Kenneth D. Gibbons Director, President and Chief
- ----------------------------- Executive Officer
Kenneth D. Gibbons (Principal Executive Officer)
/s/ Marsha A. Mongeon Treasurer and Chief
- ----------------------------- Financial/Accounting Officer
Marsha A. Mongeon (Principal Financial/
Accounting Officer)
/s/ Cynthia D. Borck Director and Vice President
- -----------------------------
Cynthia D. Borck
/s/ William T. Costa Jr. Director
- -----------------------------
William T. Costa Jr.
/s/ Franklin G. Hovey II Director
- -----------------------------
Franklin G. Hovey II
/s/ Richard C. Marron Director
- -----------------------------
Richard C. Marron
/s/ Robert P. Rollins Director
- -----------------------------
Robert P. Rollins
/s/ John H. Steele Director
- -----------------------------
John H. Steele
14
EXHIBT INDEX*
13 Union Bankshares, Inc. 2004 Annual Report to Shareholders.
14 Code of Ethics for Senior Financial Officers and the Chief
Executive Officer.
31.1 Certifications of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certifications of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
99 Report of Former Independent Accountant.
* other than exhibits incorporated by reference to prior filings.
15