10-Q 1 a452825.txt 6-30-02 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 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 (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) ------------------------------------------------------------------- Not Changed ------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 August 13, 2002, there were 2,410,078 shares of common stock outstanding. UNION BANKSHARES, LTD. INDEX PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements.....................................1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................................6 Item 3. Quantitative and Qualitative Disclosures about Market Risk.......................................12 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.....13 Item 6. Exhibits and Reports on Form 8-K........................13 SIGNATURES................................................................18 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS UNION BANKSHARES, LTD. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements UNION BANKSHARES, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 UNAUDITED

See Notes to Consolidated Financial Statements UNION BANKSHARES, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED)

See Notes to Consolidated Financial Statements UNION BANKSHARES, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED (UNAUDITED)

See Notes to Consolidated Financial Statements UNION BANKSHARES, LTD. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002 NOTE 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q 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-K for the year ended December 31, 2001. 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 June 30, 2002 and the Company's results of operations for the three and six months ended June 30, 2002 and 2001, statements of comprehensive income for the three and six months ended June 30, 2002 and 2001, and statements of cash flows for the six months ended June 30, 2002 and 2001. The consolidated balance sheet of the Company as of December 31, 2001, has been derived from the audited consolidated balance sheet of the Company as of that date. Certain reclassifications have been made to the June 30, 2001 Consolidated Financial Statements to conform to the June 30, 2002 Consolidated Financial Statements. NOTE 2. RESULTS OF OPERATIONS The results of operations for the three and six months ended June 30, 2002 and 2001 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 251,989 shares purchasable pursuant to exercisable options during the three months ended June 30, 2002. Earnings per common share were affected by 253,999 shares purchasable pursuant to exercisable options during the three and six months ended June 30, 2001. 5 NOTE 4. NOTES PAYABLE During the first six months of 2002, the Company's subsidiary, Union Bank & Trust (the "Bank") entered into 7 advance agreements totaling $35.0 million with the Federal Home Loan Bank of Topeka bearing interest rates ranging from 1.90% to 3.39%. During this same period the Bank repaid $45.0 million of its advances from the FHLB. As of June 30, 2002, FHLB advances outstanding are $45.0 million with $5.0 million maturing each on July 26,2002, August 8, 2002, October 3, 2002 and December 31, 2002, January 31, 2003, July 22, 2003, October 15, 2003, October 17, 2003 and January 22, 2004. NOTE 5. GOODWILL The Company, effective January 1, 2002, adopted Statement of Financial Accounting Standard (SFAS) 142, "Goodwill and Other Intangible Assets." The impact of adopting SFAS 142 resulted in no longer being required to record amortization of goodwill. The effect is an increase in net income of $269,000 for the six months ended June 30, 2002. Additionally, the Standard requires a transitional evaluation of goodwill impairment. This evaluation was conducted using standard valuation methodologies the result of which indicated no impairment of goodwill. 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 second quarter and six months ended June 30, 2002. The discussion is a supplement to the unaudited Consolidated Financial Statements provided in Item 1 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-K for the year ended December 31, 2001, and should be read in conjunction therewith. GENERAL The Company's profitability, like that of most similar financial institutions, depends largely on the Bank's net interest income, which is the difference between its interest income on interest-earning assets, such as loans and investments, and its interest expense on interest-bearing liabilities, such as deposits and borrowings. Accordingly, the Company's results of operations and financial condition are largely dependent on movements in market interest rates and its ability to manage its assets and liabilities in response to such movements. The difference between the amount and rate of the total interest-bearing assets and the amount and rate of the total interest-bearing liabilities which reprice within a given time period could have a negative effect on the Bank's net interest income depending on whether such difference was positive or negative and whether interest rates are rising or falling. Results of operations for financial institutions, including the Company, may be materially and adversely affected by changes in prevailing economic conditions, including declines in real estate values, rapid changes in interest rates and the monetary and fiscal policies of the federal government and the Federal Reserve Bank. The profitability of the Company depends in part on the spread between the interest rates earned 6 on assets and the interest rates paid on deposits and other interest-bearing liabilities. Although management believes that the maturities of the Company's assets are moderately balanced in relation to maturities of liabilities ("asset/liability management"), asset/liability management involves estimates as to how changes in the general level of interest rates will impact the yields earned on assets and the rates paid on liabilities. A decrease in interest rate spreads has had, and may continue to have a negative effect on the net interest income and profitability of the Company, and we cannot give any assurance that this spread will not continue to decrease. Although economic conditions in the Denver metropolitan area have been generally strong in recent years, the Denver economy has slowed since early 2001, as has the national economy. Moreover, substantially all of the loans of the Company are to businesses and individuals in the Denver area, and any significant decline in the economy of this market area resulting in lower loan demand, or heightened credit risk within the Company's existing or prospective loan portfolio, could have an adverse impact on the Company. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001 OVERVIEW: The Company reported net income of $1,373,000 for the six months ended June 30, 2002, an increase of 6.3% from net income of $1,292,000 for the first six months of 2001. Earnings were positively impacted in the first six months of 2002 by a $376,000 gain on sale of securities available for sale, a $40,000 increase in service charge income, a $9,000 increase in other noninterest income, a $269,000 decrease in amortization of goodwill and a $227,000 decrease in income tax expense. These improvements were partially offset by a $74,000 decrease in net interest income, a $61,000 increase in provision for loan loss and a $705,000 increase in noninterest expense (other than the change in goodwill amortization). Net income per share (diluted) was $.52 for the six months ended June 30, 2002 compared to $.49 per share for the comparable 2001 period. Return on average assets and average equity were .62% and 9.76%, respectively, for the six months ended June 30, 2002 compared to .65% and 10.21%, respectively, for the first six months of 2001. During the first six months of 2002, the cash and Federal Funds sold at Union Bank & Trust (the "Bank") increased $26.2 million, its securities portfolio decreased $12.0 million, its net loan portfolio decreased $7.1 million, its deposits increased $11.1 million, and its notes payable to the FHLB decreased $10.0 million. See "Liquidity and Capital Resources" for a discussion of the Company's FHLB borrowings. INTEREST INCOME: Interest income decreased $1,509,000, or 10.2%, to $13,243,000 for the period ended June 30, 2002 from $14,752,000 for the comparable 2001 period. This decrease was primarily a result of the decrease in interest rates which reflected the Federal Reserve's aggressive reductions in the federal funds rate during 2001 and its stable interest rate policy in 2002, in response to general economic conditions, partially offset by the increase in total interest earning assets. The Company's net yield on interest earning assets on a fully tax equivalent basis was 6.65% for the first six months of 2002, which reflects a decrease of 170 basis points (each basis point equals 1/100 of 1%) from the comparable 2001 period. The average yield on loans decreased from 9.53% in the six months ended June 30, 2001 to 7.37% in the comparable 2002 period, and the average yield on securities held by the Company decreased from 6.67% in the 2001 period to 5.81% in the 2002 period. Interest income on loans was $1,706,000 lower in the six months ended June 30, 2002, interest income on securities increased $337,000 in the 2002 period and interest income on federal funds sold decreased $140,000 in the 2002 period, each when compared to the comparable 2001 period. 7 INTEREST EXPENSE: Interest expense decreased $1,435,000, or 25.0%, to $4,308,000 for the six months ended June 30, 2002 from $5,743,000 for the six months ended June 30, 2001. This decrease is primarily due to a decrease of $1,646,000 in interest expense on deposits partially offset by an increase of $152,000 in interest expense on federal funds purchased and an increase of $59,000 in interest expense on notes payable to the Federal Home Loan Bank of Topeka ("FHLB"). Average rates paid on interest bearing deposits decreased 155 basis points to 2.31% in the first six months of 2002 from 3.86% in the first six months of 2001. NET INTEREST INCOME: Net interest income before provision for loan loss was $8,935,000 for the six months ended June 30, 2002, a decrease of $74,000, or 0.8%, over the first six months of 2001. Net interest margin decreased 59 basis points from 5.15% in the 2001 period to 4.56% in the 2002 period, which led to decreased net interest income. The Company experienced a $1,706,000 decrease in interest income on loans and a $140,000 decrease in interest income on federal funds sold, which was partially offset by a $337,000 increase in interest income on investment securities and a $1,435,000 decrease in interest expense. The Company's average yield on interest earning assets decreased 170 basis points in the 2002 period compared to the 2001 period, from 8.35% to 6.65%. The Company's average cost of funds for the six months ended June 30, 2002 was 149 basis points lower than the comparable 2001 period. NONINTEREST INCOME: Noninterest income increased $425,000, or 47.0%, for the six months ended June 30, 2002 to $1,330,000 from $905,000 for the six months ended June 30, 2001. This increase was due to a $40,000 increase in service charge income, a $376,000 increase in gain on sale of securities available for sale and a $9,000 increase in other noninterest income. NONINTEREST EXPENSE: Noninterest expense increased $436,000, or 5.6%, for the first six months of 2002 to $8,276,000, compared to $7,840,000 in the first six months of 2001. This increase is primarily due to increases in salaries and benefits relating primarily to annual merit increases and professional fees offset by a $269,000 decrease in amortization of goodwill. The Company, effective January 1, 2002, adopted Statement of Financial Accounting Standard (SFAS) 142, "Goodwill and Other Intangible Assets." The impact of adopting SFAS 142 resulted in no longer being required to record amortization of goodwill. INCOME TAX EXPENSE: Income tax expense decreased $227,000, or 32.8%, for the first six months of 2002 to $466,000 compared to $693,000 in the first six months of 2001. This decrease is primarily due to lower pre-tax income and increases in tax exempt investments in 2002. THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001 OVERVIEW: The Company reported net income of $727,000 for the three months ended June 30, 2002, an increase of 9.5% from net income of $664,000 for the comparable 2001 period. Net income was $.28 per share (diluted) for the three month period ended June 30, 2002, compared to $.26 per share (diluted) for the 2001 period. Return on average assets and average equity were .66% and 10.34%, respectively, for the three month period ended June 30, 2002, compared to .65% and 10.24%, respectively, for the comparable 2001 period. 8 INTEREST INCOME: Interest income decreased $836,000, or 11.4%, to $6,513,000 for the three month period ended June 30, 2002 from $7,349,000 for the comparable 2001 period. This decrease was primarily a result of the decrease in interest rates which reflected the Federal Reserve's aggressive reductions in the federal funds rate during 2001 and its stable interest rate policy during 2002, in response to general economic conditions, partially offset by the increase in total interest earning assets. The Company's net yield on interest earning assets on a fully tax equivalent basis was 6.56% for the three month period ended June 30, 2002, which reflects a decrease of 147 basis points from the comparable 2001 period. The average yield on loans decreased from 9.23% in the 2001 period to 7.40% in the 2002 period, and the average yield on securities held by the Company decreased from 6.47% in the 2001 period to 5.62% in the three months ended June 30, 2002. Interest income on loans was $682,000 lower in the three months ended June 30, 2002, interest income on securities decreased $112,000 in the 2002 period and interest income on federal funds sold decreased $42,000 in the 2002 period. INTEREST EXPENSE: Interest expense decreased $796,000, or 27.5%, to $2,099,000 for the three months ended June 30, 2002 from $2,895,000 for the three months ended June 30, 2001. This decrease is due to a decrease of $898,000 in interest expense on deposits offset by an increase of $91,000 in interest expense on federal funds purchased and an increase of $11,000 in interest expense on notes payable to the FHLB. Average rates paid on interest bearing deposits decreased 155 basis points to 2.18% in the three months ended June 30, 2002 from 3.73% in the three months ended June 30, 2001. NET INTEREST INCOME: Net interest income before provision for loan loss was $4,414,000 for the three months ended June 30, 2002, a decrease of $40,000, or 0.9%, over the comparable period of 2001. Net interest margin decreased 38 basis points between the periods from 4.92% in the 2001 period to 4.54% in the 2002 period, leading to decreased net interest income. The Company experienced a $682,000 decrease in interest income on loans, a $112,000 decrease in interest income on securities, a $42,000 decrease in interest income on federal funds sold and a $796,000 decrease in interest expense. The Company's average yield on earning assets decreased 147 basis points in the 2002 period compared to the 2001 period, from 8.03% to 6.56%. The Company's average cost of funds for the three months ended June 30, 2002 was 141 basis points lower than in the comparable 2001 period. NONINTEREST INCOME: Noninterest income increased $240,000, or 46.5%, for the three months ended June 30, 2002 to $756,000 from $516,000 for the three months ended June 30, 2001. This increase was primarily due to a $238,000 increase in the gain on sale of securities available for sale and a $21,000 increase in service charge income, offset by a $19,000 decrease in other noninterest income. NONINTEREST EXPENSE: Noninterest expense increased $271,000, or 6.9%, for the three months ended June 30, 2002 to $4,179,000 compared to $3,908,000 in the three months ended June 30, 2001. This increase is primarily due to increases in salaries and benefits relating primarily to annual merit increases offset by a $134,000 decrease in amortization of goodwill. The Company, effective January 1, 2002, adopted Statement of Financial Accounting Standard (SFAS) 142, "Goodwill and Other Intangible Assets." The impact of adopting SFAS 142 resulted in no longer being required to record amortization of goodwill. INCOME TAX EXPENSE: Income tax expense decreased $209,000, or 52.5%, for the three months ended June 30, 2002 to $189,000 compared to $398,000 in the three months ended June 30, 2001. This decrease is primarily due to lower pre tax income and increases in tax exempt investments in 2002. 9 PROVISION FOR LOAN LOSS The Company charged $150,000 to the Provision for Loan Loss in the first six months of 2002 and $89,000 for the comparable period in 2001. The ratio of loan loss reserve to total loans was 1.48% at June 30, 2002 and 1.48% at June 30, 2001. 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 1.4% to $453.8 million at June 30, 2002 from $447.4 million at December 31, 2001. During the six months ended June 30, 2002 deposits increased $11.1 million to $344.3 million at June 30, 2002 from $333.2 million at December 31, 2001. None of the Company's deposits at June 30, 2002 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 is available for one year only, with renewals to be negotiated each year. There is currently no amount outstanding under this line of credit. During the second quarter of 2002, the Bank borrowed $15.0 million from the FHLB with rates ranging from 1.98% to 3.39% and maturities ranging from three days to six months. 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 securities portfolio is not believed to be advisable. The Company expects that these loans will be repaid with liquidity from normal increases in deposits coupled with liquidity from the Bank's securities portfolio. During the second quarter of 2002, the Bank repaid $20.0 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 a secondary 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 10 Company has no significant exposure to highly leveraged transactions and has no foreign credits in its loan portfolio. Total nonperforming assets were $4,481,000 and $2,557,000 at June 30, 2002 and December 31, 2001, respectively. This increase is primarily due to one credit. Management believes it has adequate reserves and collateral for this credit and should any loss be realized management does not expect this credit to have a material adverse effect on the Company's results of operations or financial condition. Other Real Estate Owned (OREO) was $0 and $0 at June 30, 2002 and December 31, 2001, respectively. At June 30, 2002, securities available for sale totaled $147.0 million, or 85.4% of the total portfolio, securities pledged to repurchase agreement totaled $22.3 million, or 13.0% and other securities (investment in FHLB stock) totaled $2.8 million, or 1.6% of the total portfolio. 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 stated at estimated market value. At June 30, 2002, the market value of investments available for sale exceeded amortized cost by approximately $2,637,000. MARKET RISK Market risk arises from changes in interest rates. The Company has risk management policies to monitor and limit exposure to market risk as discussed in the Company's Form 10-K for the year ended December 31, 2001. As noted in the Company's Form 10-K for the year ended December 31, 2001, 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" (i.e. the mix of assets and liabilities that generate a net interest margin that is least affected by interest rate changes). Accordingly, in addition to performing gap analysis, management also evaluates the impact of differing interest rates on net interest income using an earnings simulation model. The model incorporates the factors not captured by gap analysis by projecting income under a variety of interest rate scenarios. The following table shows the anticipated effect on net interest income with a 100 and 200 basis point parallel shift up or down interest rate scenario. Change in net Percent change in net Change in rate interest income interest income -------------- --------------- --------------------- +200 bp $124,000 0.7% +100 bp $ 67,000 0.4% -100 bp ($279.000) (1.5%) -200 bp ($591,000) (3.2%) The Company uses a measurement tool known as dollar duration to help maintain an earnings neutral position. As of June 30, 2002, the dollar duration of the investment portfolio was 4.27 compared to 5.34 at December 31, 2001. This decrease in dollar duration resulted from the replacement of securities which were sold, matured or called during the first six months of 2002 with securities with slightly higher yields and similar maturities. The Company may also engage in hedging transactions to control interest rate risk. 11 The effect of these efforts in any given period may be to negatively impact reported net non-interest 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 $2.9 million to $30.3 million at June 30, 2002 from $27.4 million at December 31, 2001. This increase in stockholders' equity was due to the retention of earnings in the current year and by the net effect of FAS 115 which requires financial institutions to mark their 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 12.63% at June 30, 2002 and its total qualifying capital to risk weighted assets was 14.16%. As of June 30, 2002 the Bank also exceeded the minimum regulatory risk based capital ratios. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Market Risk beginning on page 11. "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 area, the monetary policy of the Federal Reserve Board, changes in interest rates, inflation, instability in the financial markets relating to terrorist activities and the response thereto, 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-K,10-Q, 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-K 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. 12 UNION BANKSHARES, LTD. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders of Union Bankshares, Ltd. was held on May 30, 2002. At such meeting, the following proposals were voted on and approved: 1. Proposal No. 1: To elect to the Board three Class II directors. FOR WITHHOLD Bruce E. Hall 2,266,268 13,999 Charles B. Worthington 2,279,967 300 Ralph D. Johnson 2,277,967 2,300 2. Proposal No. 2: Approval of adoption of the Union Bankshares, Ltd. 2003 Equity Incentive Plan. FOR AGAINST ABSTAIN 1,601,043 222,811 1,200 3. Proposal No. 3: Ratify the selection of BKD, LLP as independent auditors for the Company for the fiscal year ending December 31, 2002. FOR AGAINST ABSTAIN 2,279,917 350 0 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits EXHIBIT NO. 99.1 Certification of Charles R. Harrison, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Bruce E. Hall, Vice President, Treasurer and Secretary (principal financial officer), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K. The Company filed no reports on Form 8-K during the quarter for which this request is filed. 13 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) August 13, 2002 /S/ BRUCE E. HALL --------------------------------------- Bruce E. Hall Vice President, Treasurer and Secretary (Authorized Officer and Principal Financial Officer of the Registrant) 14

UNION BANKSHARES LTD 10-Q