Union Bankshares, Inc.

                                                   A N N U A L  R E P O R T
                                                                    2 0 0 0


                              [Map of Vermont]


Citizens Savings Bank & Trust Company [logo]

Union Bank [logo]

Wholly Owned Subsidiaries

U N I O N  B A N K S H A R E S,  I N C.  A N D  S U B S I D I A R I E S


                      [Photograph of Walter M. Sargent]


                              WALTER M. SARGENT


                              SIXTY-EIGHT YEARS
                          OF SERVICE TO UNION BANK

                                   JANITOR
                                   TELLER
                                LOAN OFFICER
                                  DIRECTOR
                                  PRESIDENT
                              MENTOR AND FRIEND


U N I O N  B A N K S H A R E S,  I N C.  A N D  S U B S I D I A R I E S
L E T T E R  T O  O U R  S H A R E H O L D E R S

                   [Letterhead of Union Bankshares, Inc.]

Dear Shareholders,                                       March 21, 2001

The past twelve months have been important ones for your company.
Considerable time and effort was expended in bringing Union Bank and
Citizens Savings Bank and Trust Company backroom operations, policies and
procedures closer together. The highlights of the year 2000, located on
page three of this report, clearly indicate a year of much activity and
consolidation.

Many of the accomplishments noted were not undertaken to gain "immediate"
improvement in our financial results. In fact, some activities, such as
one-time costs associated with the conversion of Citizens' data processing
to Union Bank, added to current year expenses. Projects such as this will
lead to enhanced customer service and improved employee productivity over
the long term while retaining Union and Citizens as independent community
banks. We have established a number of sound foundations from which we will
build upon to further strengthen our financial performance. We are pleased
with the progress made during the past year and plan much more of the same
going forward.

The audited financial statements included in this report reveal some good
trends. Capital is in excess of 11%, placing us in the Well Capitalized
category according to regulatory standards. Loans Outstanding grew over $15
million (7.4%) reflecting our strategic decision to more actively seek good
loans and to hold loans "in house" rather than sell them into the secondary
market. Deposits, however, had minimal growth reflecting a problem most
banks are having by competing with Credit Unions and non-bank financial
institutions. We are always researching ways to attract core deposits as
well as alternative methods to fund loan demand.

Net income of $4.8 million and earnings per share of $1.58 both showed good
improvement over 1999. There are a number of reasons for this, which
include: increased net interest income, a substantial reduction in merger-
related costs and some early benefits from our consolidation efforts. We
look for continued growth and earnings improvement going forward.

The economy within our service area is doing quite well. Residential
construction lending was brisk this past year and indicators tell us 2001
will see more of the same. Small business continues to thrive and an almost
record snowfall this winter certainly has helped the travel and tourism
industry.

In the proxy statement you will notice three directors are not being
nominated for re-election, leaving a slate of nine directors. Last
November, Director Walter M. Sargent (Sarge, as we all knew him) passed
away. Sarge served the bank in various capacities during the past 68 years.
We felt it only fitting to include his picture (at left), taken a few years
back in his office at the bank, in our year 2000 annual report.

Two directors, Peter M. Haslam and William F. Kinney, have attained the
retirement age established by the Board of Directors in 1983. Mr. Kinney
has served as a director since 1967 and Mr. Haslam since 1972. All three of
these directors have had a substantial influence on the growth and
prosperity Union Bankshares has experienced during their tenure. On a
personal note, both of us have found their wisdom and candor very helpful
over the years.

Each year as we draft this letter and assemble the annual report it helps
us reflect on what has happened in the past year and, more importantly, on
what awaits us in the years ahead. As we move forward in this competitive
age, it is important to acknowledge the contributions made by and the
dedication of the people who work for your company. These folks, from the
tellers, clerks and the night shift operator to the managers and
supervisors and officers, in conjunction with thousands of satisfied
customers, are what make Union Bankshares successful.

We want to say thank you, we appreciate your dedication and business.

Sincerely,

/s/ W. Arlen Smith                     /s/ Kenneth D. Gibbons

W. Arlen Smith                         Kenneth D. Gibbons
Chairman                               President


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
T A B L E  O F  C O N T E N T S


                                                                       Page

ACCOMPLISHMENTS AND EVENTS OF 2000                                       3

SELECTED FINANCIAL INFORMATION                                           4

MANAGEMENT'S RESPONSIBILITY                                              5

INDEPENDENT AUDITOR'S REPORT                                             6

FINANCIAL STATEMENTS

Consolidated balance sheets                                              7
Consolidated statements of income                                        8
Consolidated statements of changes in stockholders' equity               9
Consolidated statements of cash flows                                   10
Notes to consolidated financial statements                              11

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
 OPERATIONS                                                             35

MARKET FOR UNION'S COMMON SHARES AND RELATED
 SHAREHOLDER MATTERS                                                    49

SHAREHOLDER ASSISTANCE AND INVESTOR INFORMATION                         50


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
H I G H L I G H T S  O F  T H E  Y E A R  2 0 0 0

The Year 2000 was one of accomplishments and events for Union Bank,
Citizens Savings Bank and Trust Company and Union Bankshares, Inc. The
following is a summary of some of those items:

January
*   Celebrated a successful millennium/Y2K changeover
*   Selected American Stock Exchange for listing UNB stock
*   Updated consolidation plans and finalized budgets for 2000
*   Citizens contracts with Union for loan review services

February
*   Successfully completed data processing conversion of Citizens to Union
    (This conversion took much effort and went well.)
*   Formed an Audit Committee for Union Bankshares, Inc.

March
*   B.U.I.L.D. construction loan program offered at Citizens (Both Union
    and Citizens eventually granted over 100 construction loans for over
    $13,000,000 in 2000.)
*   Prepared first annual 10-K filing for SEC

April
*   First annual meeting of combined shareholder groups
*   Genevieve Hovey retires from Citizens Board after 28 years of service
*   Oscar Churchill retires from Union Board after 42 years of service

May
*   Operational reorganization and staff adjustments at Citizens
*   Citizens offers merchant credit card services

June
*   Union installs its 17th ATM - located at Ben & Jerry's in Waterbury
*   Union converts merchant credit card processing to new vendor
*   Union recognized by SBA as #1 Small Business Lender in Vermont for
    6th year
*   Major addition to Union's Jeffersonville office

July
*   Union Bankshares, Inc. listed on AMEX under UNB ticker symbol
*   Citizens locates Trust Officer at Union in Morrisville

August
*   Citizens added to Union e-mail network allowing company-wide access

October
*   External auditors complete post-conversion Data Processing Review at
    both banks
*   Union and Citizens Boards meet for strategic planning retreat

November
*   Citizens introduces on-line banking through Net Teller
*   Union school savings program tops 1,900 accounts with over $350,000 in
    deposits

December
*   Citizens installs its 6th ATM - located at Burke Mountain Ski Area
*   Union installs its 18th ATM - located at Tafts Corner, Williston
*   Union Trust Department transferred to Citizens Trust Department
*   Citizens contracts with Union for Audit and Compliance services
*   Union and Citizens merge health care plans
*   Union Bankshares, Inc. reaches $300,000,000 in assets milestone


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
S E L E C T E D  F I N A N C I A L  I N F O R M A T I O N

<TABLE>
<CAPTION>
                                                            At or For The Years Ended December 31
                                               --------------------------------------------------------------
                                                  2000         1999         1998         1997         1996
                                               --------------------------------------------------------------
                                                        (Dollars in thousands, except per share data)

<S>                                        <C>           <C>           <C>           <C>           <C>
Balance Sheet Data:

  Total Assets                             $  303,394    $  295,476    $  290,129    $  273,280    $  255,747

  Investment Securities                        56,642        60,441        58,585        45,900        44,341

  Loans, net of unearned income               224,796       209,353       202,468       201,918       189,051

  Allowance for loan losses                    (2,863)       (2,870)       (2,845)       (2,811)       (2,844)

  Deposits                                    258,737       257,593       248,919       239,229       224,419

  Borrowed funds                                6,382         2,872         6,084         1,636         1,693

  Shareholders' equity (1)                     35,157        32,220        31,762        29,023        26,393

Income Statement Data:

  Total interest income                    $   24,126    $   22,868    $   22,626    $   21,666    $   21,061
  Total interest expense                       (9,877)       (9,122)       (9,252)       (8,782)       (8,770)
                                           ------------------------------------------------------------------
      Net interest and dividend income         14,249        13,746        13,374        12,884        12,291

  Provision for loan losses                      (250)         (359)         (400)         (425)         (580)
  Noninterest income                            2,569         2,568         2,911         2,412         2,555
  Noninterest expense                          (9,944)      (10,065)       (9,279)       (8,567)       (8,430)
                                           ------------------------------------------------------------------
      Income before income taxes                6,625         5,890         6,606         6,304         5,836

  Income tax expense                           (1,825)       (1,815)       (2,055)       (1,949)       (1,793)
                                           ------------------------------------------------------------------
      Net income                           $    4,800    $    4,075    $    4,551    $    4,355    $    4,043
                                           ==================================================================


Per Common Share Data: (2)

   Net income (3)                          $     1.58    $     1.35    $     1.51    $     1.44    $     1.31
   Cash dividends paid                           0.98          0.90          0.82          0.75          0.69
   Book value (1)                               11.60         10.64         10.50          9.60          8.72

Weighted average number of shares
 outstanding                                3,029,627     3,028,457     3,022,223     3,025,978     3,084,608
Number of shares outstanding                3,029,729     3,029,529     3,025,438     3,023,558     3,028,158

<FN>
-------------------
<F1>  Shareholders' equity includes unrealized gains or losses, net of
      applicable income taxes, on investment securities classified as
      "available-for-sale".
<F2>  Adjusted to reflect a two-for-one stock split of Union's common
      stock, completed June 6, 1997 and effected in the form of a 100%
      stock dividend.
<F3>  Computed using the weighted average number of shares outstanding for
      the period.
</FN>
</TABLE>


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
M A N A G E M E N T ' S  R E S P O N S I B I L I T Y

The management of Union Bankshares, Inc. is responsible for the integrity
and objectivity of the information and representations in this annual
report, including the consolidated financial statements. These statements
have been prepared in conformity with generally accepted accounting
principles, using informed estimates where appropriate, to reflect the
Company's financial condition and results of operations. The information in
other sections of the annual report is consistent with these statements.

The Company's Board of Directors has oversight responsibilities for
determining that management has fulfilled its obligation in the preparation
of the financial statements and in the ongoing examination of the Company's
established internal control structure over financial reporting. The Audit
Committee, which consists solely of outside directors and which reports
directly to the Board of Directors, meets regularly with management, A.M.
Peisch & Company Certified Public Accountants and the Company's internal
auditor to discuss accounting, auditing and reporting matters. To ensure
auditor independence, both A.M. Peisch & Company and the internal auditor
have unrestricted access to the Audit Committee.

The financial statements have been audited by A.M. Peisch & Company, whose
report appears on the next page. The auditors provide an objective,
independent review as to management's discharge of its responsibilities
insofar as they relate to the fairness of the Company's reported financial
condition and results of operations. Their audit includes procedures
believed by them to provide reasonable assurance that the financial
statements are free of material misstatement and includes a review of the
Company's internal control structure over financial reporting.

/s/ Marsha A. Mongeon                  /s/ Kenneth D. Gibbons

Marsha A. Mongeon                      Kenneth D. Gibbons
Chief Financial Officer                Chief Executive Officer


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
I N D E P E N D E N T  A U D I T O R ' S  R E P O R T
DECEMBER 31, 2000

Board of Directors
Union Bankshares, Inc. and Subsidiaries
Morrisville, Vermont

We have audited the accompanying consolidated balance sheets of Union
Bankshares, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, changes in stockholders' equity,
and cash flows for the years ended December 31, 2000, 1999, and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with U. S. generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Union Bankshares, Inc. and Subsidiaries as of December 31, 2000
and 1999, and the results of their operations and their cash flows for the
years ended December 31, 2000, 1999, and 1998 in conformity with U. S.
generally accepted accounting principles.

/s/ A.M. Peisch & Company LLP

January 12, 2001
St. Johnsbury, Vermont
VT Reg. No. 92-0000102


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
C O N S O L I D A T E D  B A L A N C E  S H E E T S
DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                             2000              1999
                                                        ------------------------------

<S>                                                     <C>               <C>
ASSETS
Cash and due from banks                                 $ 10,353,570      $ 11,627,481
Federal funds sold and overnight deposits                  1,070,000         3,474,064
                                                        ------------------------------

      Cash and cash equivalents                           11,423,570        15,101,545

Interest bearing deposits                                  1,721,408         1,956,999
Securities available-for-sale                             56,641,687        60,440,524
Federal Home Loan Bank stock                               1,016,800           938,800
Loans held for sale                                        9,153,305         8,101,815
Loans                                                    215,892,669       201,524,889
Allowance for loan losses                                 (2,862,707)       (2,869,983)
Unearned net loan fees                                      (250,374)         (273,305)
                                                        ------------------------------
      Net loans                                          212,779,588       198,381,601
Accrued interest receivable                                2,596,891         2,199,426
Premises and equipment, net                                3,964,314         4,043,036
Other real estate owned                                      116,293            26,667
Other assets                                               3,980,553         4,285,233
                                                        ------------------------------

      Total assets                                      $303,394,409      $295,475,646
                                                        ==============================

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
  Deposits:
    Noninterest bearing                                 $ 33,546,985      $ 32,988,892
    Interest bearing                                     225,189,595       224,603,911
                                                        ------------------------------
                                                         258,736,580       257,592,803
  Borrowed funds                                           6,381,778         2,871,929
  Accrued expenses and other liabilities                   3,118,996         2,790,900
                                                        ------------------------------
                                                         268,237,354       263,255,632
                                                        ------------------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Common stock, $2 par value; 5,000,000 shares
   authorized; 3,263,689 shares issued in 2000;
   3,263,489 shares in 1999                                6,527,378         6,526,978
  Paid-in capital                                            239,903           238,353
  Retained earnings                                       30,010,683        28,180,180
  Treasury stock at cost (233,960) shares at
   December 31, 2000 and 1999                             (1,592,451)       (1,592,451)
  Accumulated other comprehensive income (loss)              (28,458)       (1,133,046)
                                                        ------------------------------
                                                          35,157,055        32,220,014
                                                        ------------------------------

      Total liabilities and stockholders' equity        $303,394,409      $295,475,646
                                                        ==============================
</TABLE>

See notes to consolidated financial statements.


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
C O N S O L I D A T E D  S T A T E M E N T S  O F  I N C O M E
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                      2000             1999             1998
                                                  ---------------------------------------------

<S>                                               <C>              <C>              <C>
Interest income
  Interest and fees on loans                      $20,058,057      $18,635,371      $18,836,133
  Interest on debt securities
    Taxable                                         3,284,256        3,363,022        3,041,725
    Tax exempt                                        216,101          207,222           73,856
  Dividends                                           114,908          115,282          130,283
  Interest on federal funds sold                      333,105          425,389          461,541
  Interest on interest bearing deposits               119,898          122,300           82,641
                                                  ---------------------------------------------

      Total interest income                        24,126,325       22,868,586       22,626,179
                                                  ---------------------------------------------

Interest expense
  Interest on deposits                              9,455,437        8,833,767        8,958,729
  Interest on federal funds purchased                   4,955            1,796            1,647
  Interest on other borrowed money                    416,965          286,008          292,088
                                                  ---------------------------------------------

      Total interest expense                        9,877,357        9,121,571        9,252,464
                                                  ---------------------------------------------

      Net interest income                          14,248,968       13,747,015       13,373,715

Provision for loan losses                             250,000          359,496          400,000
                                                  ---------------------------------------------

      Net interest income after provision
       for loan losses                             13,998,968       13,387,519       12,973,715
                                                  ---------------------------------------------

Other income
  Trust department income                             181,611          165,770          120,410
  Service fees                                      2,209,651        2,228,873        2,145,998
  Gain on sale of securities                           24,648            2,976          150,038
  Gain on sale of loans                                33,747           39,991          301,919
  Other                                               119,603          130,602          192,588
                                                  ---------------------------------------------

                                                    2,569,260        2,568,212        2,910,953
                                                  ---------------------------------------------

Other expenses
  Salaries and wages                                4,493,992        4,233,731        4,111,063
  Pension and employee benefits                     1,122,965        1,082,679        1,057,568
  Occupancy expense, net                              560,477          534,813          502,549
  Equipment expense                                   993,943        1,124,755        1,005,109
  Other operating expense                           2,772,299        3,089,023        2,602,076
                                                  ---------------------------------------------

                                                    9,943,676       10,065,001        9,278,365
                                                  ---------------------------------------------

      Income before income taxes                    6,624,552        5,890,730        6,606,303
Income tax expense                                  1,825,010        1,815,259        2,054,907
                                                  ---------------------------------------------

      Net income                                  $ 4,799,542      $ 4,075,471      $ 4,551,396
                                                  =============================================

Earnings per common share                         $      1.58      $      1.35      $      1.51
                                                  =============================================
</TABLE>

See notes to consolidated financial statements.


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
C O N D O L I D A T E D  S T A T E M E N T S  O F  C H A N G E S  I N
  S T O C K H O L D E R S'  E Q U I T Y
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                                                      Accumulated
                                       Common Stock                                                      other           Total
                                  -----------------------    Paid-in      Retained       Treasury    comprehensive   stockholders'
                                   Shares        Amount      capital      earnings        stock      income (loss)      equity
                                  -------------------------------------------------------------------------------------------------

<S>                               <C>          <C>           <C>         <C>            <C>            <C>            <C>
Balances, December 31, 1997       3,023,558    $6,510,596    $182,619    $23,485,478    $(1,548,491)   $   392,704    $29,022,906

  Comprehensive income
    Net income                            0             0           0      4,551,396              0              0      4,551,396
    Change in net unrealized
     gain (loss) on securities
     available-for-sale, net of
     reclassification adjustment
     and tax effects                      0             0           0              0              0        202,425        202,425
                                                                                                                      ------------
    Total comprehensive income                                                                                          4,753,821
                                                                                                                      ------------
  Cash dividends declared                 0             0           0     (2,007,519)             0              0     (2,007,519)
  Treasury stock purchased           (2,220)            0           0              0        (43,960)             0        (43,960)
  Exercise of stock option            4,100         8,200      28,775              0              0              0         36,975
                                  ------------------------------------------------------------------------------------------------

Balances, December 31, 1998       3,025,438     6,518,796     211,394     26,029,355     (1,592,451)       595,129     31,762,223

  Comprehensive income
  Net income                              0             0           0      4,075,471              0              0      4,075,471
    Change in net unrealized
     gain (loss) on securities
     available-for-sale, net of
     reclassification adjustment
     and tax effects                      0             0           0              0              0     (1,728,175)    (1,728,175)
                                                                                                                      ------------
    Total comprehensive income                                                                                          2,347,296
                                                                                                                      ------------
  Cash dividends declared                 0             0           0     (1,924,646)             0              0     (1,924,646)
  Exercise of stock option            4,300         8,600      31,325              0              0              0         39,925
  Retirement of common stock           (209)         (418)     (4,366)             0              0              0         (4,784)
                                  ------------------------------------------------------------------------------------------------

Balances, December 31, 1999       3,029,529     6,526,978     238,353     28,180,180     (1,592,451)    (1,133,046)    32,220,014

  Comprehensive income
    Net income                            0             0           0      4,799,542              0              0      4,799,542
    Change in net unrealized
     gain (loss) on securities
     available-for-sale, net of
     reclassification adjustment
     and tax effects                      0             0           0              0              0      1,104,588      1,104,588
                                                                                                                      ------------
    Total comprehensive income                                                                                          5,904,130
                                                                                                                      ------------
  Cash dividends declared                 0             0           0     (2,969,039)             0              0     (2,969,039)
  Exercise of stock option              200           400       1,550              0              0              0          1,950
                                  ------------------------------------------------------------------------------------------------

Balances, December 31, 2000       3,029,729    $6,527,378    $239,903    $30,010,683    $(1,592,451)   $   (28,458)   $35,157,055
                                  ===============================================================================================
</TABLE>

See notes to consolidated financial statements.


U N I O N  B A N K S H A R E S, I N C.  A N D  S U B S I D I A R I E S
C O N S O L I D A T E D  S T A T E M E N T S  O F  C A S H  F L O W S
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                              2000             1999             1998
                                                                          ---------------------------------------------

<S>                                                                       <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                              $ 4,799,542      $ 4,075,471      $ 4,551,396
    Adjustments to reconcile net income to net cash provided by
     operating activities:
       Depreciation                                                           789,027          867,114          789,826
       Provision for loan losses                                              250,000          359,496          400,000
       (Credit) provision for deferred income taxes                           (18,339)          52,958           28,650
       Amortization, net                                                       51,389          123,705          108,818
       Write-downs of other real estate owned                                  12,008            7,421           77,578
       (Decrease) increase in unamortized loan fees                           (22,931)           7,837           11,361
       Increase in loans held for resale                                   (1,017,743)        (661,968)        (902,839)
       Increase in accrued interest receivable                               (397,465)         (93,724)         (82,907)
       Decrease (increase) in other assets                                    102,923         (339,262)         (65,736)
       (Increase) decrease in income taxes receivable                        (196,601)          24,281           75,689
       Increase (decrease) in accrued interest payable                        288,879         (107,210)         (79,649)
       Increase (decrease) in other liabilities                                39,217         (127,072)         (33,947)
       Gain on sale of securities                                             (24,648)          (2,976)        (150,038)
       Gain on sale of loans                                                  (33,747)         (39,991)        (301,919)
       Gain on sale of other real estate owned                                 (6,785)          (4,779)         (50,005)
       Loss on disposal of fixed assets                                         3,750           15,530            2,358
                                                                          ---------------------------------------------
         Net cash provided by operating activities                          4,618,476        4,156,831        4,378,636
                                                                          ---------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Interest bearing deposits
    Maturities and redemptions                                                892,024          982,000        1,586,000
    Purchases                                                                (656,330)      (1,065,999)      (3,459,000)
  Securities available-for-sale
    Sales and maturities                                                   11,353,211       18,581,808       16,616,681
    Purchases                                                              (5,907,600)     (23,176,008)     (28,953,788)
  Purchase of Federal Home Loan Bank stock                                    (78,000)         (34,800)         (46,600)
  Increase in loans, net                                                  (14,936,084)      (6,696,985)        (474,700)
  Recoveries of loans charged off                                             123,590           94,194          120,826
  Purchase of premises and equipment, net                                    (737,316)        (350,659)        (928,708)
  Investments in limited partnerships, net                                   (145,472)        (451,360)         (24,889)
  Proceeds from sales of premises and equipment                                23,261            2,200            4,660
  Proceeds from sales of other real estate owned                               42,241          559,498          629,855
  Proceeds from sales of repossessed property                                  43,487           73,930           87,243
                                                                          ---------------------------------------------
        Net cash used in investing activities                              (9,982,988)     (11,482,181)     (14,842,420)
                                                                          ---------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowings, net of repayments                                             3,509,849       (3,212,439)       4,448,484
  Proceeds from exercise of stock options                                       1,950           39,925           36,975
  Net increase in noninterest bearing deposits                                558,093           40,271        3,884,066
  Net increase in interest bearing deposits                                   585,684        8,634,316        5,804,527
  Purchase of stock                                                                 0           (4,784)         (43,960)
  Dividends paid                                                           (2,969,039)      (2,266,646)      (1,969,519)
                                                                          ---------------------------------------------
        Net cash provided by financing activities                           1,686,537        3,230,643       12,160,573
                                                                          ---------------------------------------------
        (Decrease) increase in cash and cash equivalents                   (3,677,975)      (4,094,707)       1,696,789
Cash and cash equivalents:
  Beginning                                                                15,101,545       19,196,252       17,499,463
                                                                          ---------------------------------------------
  Ending                                                                  $11,423,570      $15,101,545      $19,196,252
                                                                          =============================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid                                                           $ 9,588,478      $ 9,228,781      $ 9,332,113
                                                                          =============================================
  Income taxes paid                                                       $ 2,039,950      $ 1,738,020      $ 1,996,000
                                                                          =============================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
 FINANCING ACTIVITIES
  Other real estate acquired in settlement of loans                       $   137,090      $   102,658      $   636,934
                                                                          =============================================
  Repossessed property acquired in settlement of loans                    $   143,325      $   151,356      $   295,405
                                                                          =============================================
  Total change in unrealized gain (loss) on securities
   available-for-sale                                                     $ 1,673,618      $(2,618,447)     $   306,704
                                                                          =============================================
</TABLE>

See notes to consolidated financial statements.


U N I O N  B A N K S H A R E S , I N C .  A N D  S U B S I D I A R I E S
N O T E S  T O  C O N S O L I D A T E D  F I N A N C I A L  S T A T E M E N T S

Note 1.   Significant Accounting Policies

The accounting policies of Union Bankshares, Inc. and Subsidiaries (the
Company) are in conformity with U. S. generally accepted accounting
principles and general practices within the banking industry. The following
is a description of the more significant policies.

Basis of presentation and consolidation

The consolidated financial statements include the accounts of Union
Bankshares, Inc., and its wholly-owned subsidiaries, Union Bank (Union),
and Citizens Savings Bank and Trust Company (Citizens). All financial
information has been restated historically for the acquisition of Citizens
accounted for as pooling of interests as described in Note 19. All
significant intercompany transactions and balances have been eliminated.

Nature of operations

The Company provides a variety of financial services to individuals and
corporate customers through its branches, ATM's, telebanking, and Internet
systems in northern Vermont which encompasses primarily small businesses,
agriculture, and the tourism industry. The Company's primary deposit
products are checking, savings and money market accounts, and certificates
of deposit. Its primary lending products are commercial, real estate,
municipal, and consumer loans.

Concentration of risk

The Company's operations are affected by various risk factors, including
interest-rate risk, credit risk, and risk from geographic concentration of
lending activities. Management attempts to manage interest rate risk
through various asset/liability management techniques designed to match
maturities of assets and liabilities. Loan policies and administration are
designed to provide assurance that loans will only be granted to credit-
worthy borrowers, although credit losses are expected to occur because of
subjective factors and factors beyond the control of the Company. Although
the Company has a diversified loan portfolio and economic conditions are
stable, most of its lending activities are conducted within the geographic
area where it is located. As a result, the Company and its borrowers may be
especially vulnerable to the consequences of changes in the local economy.
Note 4 discusses the types of securities that the Bank invests in. Note 5
discusses the types of lending which the Bank engages in. In addition, a
substantial portion of the Company's loans are secured by real estate
and/or are SBA guaranteed.

Use of estimates

The preparation of consolidated financial statements in conformity with U.
S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for losses
on loans and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans and deferred tax assets. The
amount of the change that is reasonably possible cannot be estimated.

Presentation of cash flows

For purposes of presentation in the consolidated statements of cash flows,
cash and cash equivalents includes cash on hand, amounts due from banks
(including cash items in process of clearing), federal funds sold
(generally purchased and sold for one day periods), and overnight deposits.

Trust assets

Assets of the Trust Department, other than trust cash on deposit, are not
included in these consolidated financial statements because they are not
assets of the Company.

Investment securities

Investment securities purchased and held primarily for resale in the near
future are classified as trading securities and are carried at fair value
with unrealized gains and losses included in earnings. Debt securities the
Company has the positive intent and ability to hold to maturity are
classified as held to maturity and carried at cost, adjusted for
amortization of premium and accretion of discounts using methods
approximating the interest method. Debt and equity securities not
classified as either held-to-maturity or trading are classified as
available-for-sale. Investments classified as available-for-sale are
carried at fair value. Unrealized gains and losses on available-for-sale
securities are reported as a net amount in other comprehensive income, net
of tax and reclassification adjustment. Declines in the fair value of held-
to-maturity and available-for-sale securities below their cost that are
deemed to be other than temporary are reflected in earnings as realized
losses. The specific identification method is used to determine realized
gains and losses on sales of securities available-for-sale.

Federal Home Loan Bank stock

As members of the Federal Home Loan Bank, Union and Citizens are required
to invest in $100 par value stock of the Federal Home Loan Bank. The stock
is nonmarketable, and when redeemed, they would receive from the Federal
Home Loan Bank an amount equal to the par value of the stock.

Loans held for sale

Loans originated and intended for sale in the secondary market are carried
at the lower of cost or estimated fair value in the aggregate. All sales
are made without recourse. Net unrealized losses are recognized through a
valuation allowance by charges to income.

Loans

Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
unpaid principal adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans.

Loan interest income is accrued daily on outstanding balances. The accrual
of interest is discontinued when a loan is specifically determined to be
impaired or management believes, after considering collection efforts and
other factors, that the borrowers financial condition is such that
collection of interest is doubtful. Any unpaid interest previously accrued
on those loans is reversed from income. Interest income generally is not
recognized on specific impaired loans unless the likelihood of further loss
is remote. Interest payments received on such loans are generally applied
as a reduction of the loan principal balance. Interest income on other
nonaccrual loans is recognized only to the extent of interest payments
received.

Loan origination and commitment fees and certain direct loan origination
costs are being deferred and the net amount amortized as an adjustment of
the related loan's yield using methods that approximate the interest
method. The Company is generally amortizing these amounts over the
contractual life.

Allowance for loan losses

The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in the
loan portfolio. The amount of the allowance is based on management's
periodic evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical
loss experience, specific impaired loans, and economic conditions.
Allowances for impaired loans are generally determined based on collateral
values or the present value of estimated cash flows. The allowance is
increased by a provision for loan losses, which is charged to expense, and
reduced by charge-offs, net of recoveries.

Premises and equipment

Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed principally by the straight-line method over their
estimated useful lives. The cost of assets sold or otherwise disposed of
and the related allowance for depreciation is eliminated from the accounts
and the resulting gains or losses are reflected in the income statement.
Maintenance and repairs are charged to current expense as incurred and the
cost of major renewals and betterments are capitalized.

Other real estate owned

Real estate properties acquired through or in lieu of loan foreclosure are
to be sold and are initially recorded at fair value at the date of
foreclosure establishing a new carrying basis. After foreclosure,
valuations are periodically performed by management, and the real estate is
carried at the lower of carrying amount or fair value less cost to sell.
Revenue and expenses from operations and changes in the valuation are
included in other income and expenses.

Mortgage servicing

Servicing assets are recognized as separate assets when rights are acquired
through purchase or through sale of financial assets. Capitalized servicing
rights are reported in other assets and are amortized into noninterest
expense in proportion to, and over the period of, the estimated future net
servicing income of the underlying financial assets. Servicing assets are
evaluated for impairment based upon the fair value of the rights as
compared to amortized cost. Impairment is determined by stratifying rights
by predominant characteristics, such as interest rates and terms. Fair
value is determined using prices for similar assets with similar
characteristics, when available, or based upon discounted cash flows using
market-based assumptions. Impairment is recognized through a valuation
allowance for an individual stratum, to the extent that fair value is less
than the capitalized amount for the stratum.

Pension plans

Union maintains a non-contributory defined benefit pension plan covering
all eligible employees who meet certain service requirements. Union also
has a contributory 401(k) pension plan covering all employees who meet
certain service requirements. The plan is voluntary, and in 2000, 1999, and
1998, Union contributed fifty cents for every dollar contributed by
participants, up to six percent of each participant's salary.

Citizens has a contributory 401(k) pension plan covering all employees who
meet certain age and service requirements. The plan is voluntary, and
Citizens contributes fifty cents for every dollar contributed by
participants, up to six percent of each participant's salary.

Pension costs are charged to pension and other employee benefits expense
and are funded as accrued.

Advertising costs

The Company expenses advertising costs as incurred.

Earnings per common share

Earnings per common share are computed based on the weighted average number
of shares of common stock outstanding during the period, retroactively
adjusted for stock splits, stock dividends, and stock issues relating to
the acquisition of Citizens in a merger accounted for as a pooling of
interests as described in Note 19 and reduced for shares held in treasury.
The weighted average shares outstanding were 3,029,627, 3,028,457, and
3,022,223 for the years ended December 31, 2000, 1999, and 1998,
respectively.

Income taxes

The Company recognizes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are established for
the temporary differences between the accounting basis and the tax basis of
the Company's assets and liabilities at enacted tax rates expected to be in
effect when the amounts related to such temporary differences are realized
or settled. Adjustments to the Company's deferred tax assets are recognized
as deferred income tax expense or benefit based on management's judgment
relating to the realizability of such assets.

Off-balance-sheet financial instruments

In the ordinary course of business, the Company has entered into off-
balance-sheet financial instruments consisting of commitments to extend
credit, commitments under credit card arrangements, commercial letters of
credit and standby letters of credit. Such financial instruments are
recorded in the financial statements when they become payable.

Fair values of financial instruments

The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:

      Cash and cash equivalents: The carrying amounts reported in the balance
      sheet for cash and cash equivalents approximate those assets' fair
      values.

      Investment securities and interest bearing deposits: Fair
      values for investment securities and interest bearing deposits are
      based on quoted market prices, where available. If quoted market prices
      are not available, fair values are based on quoted market prices of
      comparable instruments or discounted present values of cash flows.

      Federal Home Loan Bank stock: The carrying amount of this stock
      approximates its fair value.

      Loans and loans held for sale: For variable-rate loans that reprice
      frequently and with no significant change in credit risk, fair values
      are based on carrying amounts. The fair values for other loans (for
      example, fixed-rate residential, commercial real estate, and rental
      property mortgage loans, and commercial and industrial loans) are
      estimated using discounted cash flow analysis, based on interest rates
      currently being offered for loans with similar terms to borrowers of
      similar credit quality. Loan fair value estimates include judgments
      regarding future expected loss experience and risk characteristics.
      The carrying amounts reported in the balance sheet for loans that are
      held for sale approximate their fair market values. Fair values for
      impaired loans are estimated using discounted cash flow analyses or
      underlying collateral values, where applicable.

      Deposits: The fair values disclosed for demand deposits (for example,
      checking and savings accounts) are, by definition, equal to the amount
      payable on demand at the reporting date (that is, their carrying
      amounts). The carrying amounts of variable rate certificates of deposit
      approximate their fair values at the reporting date. The fair values
      for fixed rate certificates of deposit and borrowed funds are estimated
      using a discounted cash flow calculation that applies interest rates
      currently being offered on certificates and debt to a schedule of
      aggregated contractual maturities on such time deposits and debt.

      Accrued interest: The carrying amounts of accrued interest approximates
      their fair values.

      Borrowed funds: The fair values of the Company's long term debt are
      estimated using discounted cash flow analysis based on interest rates
      currently being offered on similar debt instruments.

      Other liabilities: Commitments to extend credit were evaluated and fair
      value was estimated using the fees currently charged to enter into
      similar agreements, taking into account the remaining terms of the
      agreements and the present creditworthiness of the counterparties.
      For fixed-rate loan commitments, fair value also considers the
      difference between current levels of interest rates and the committed
      rates.

Comprehensive income

The Company adopted SFAS No. 130, Reporting Comprehensive Income, as of
January 1, 1998. Accounting principles generally require that recognized
revenue, expenses, gains, and losses be included in net income. Although
certain changes in assets and liabilities, such as unrealized gains and
losses on available-for-sale securities, are reported as a separate
component of the equity section of the balance sheet, such items, along
with net income, are components of comprehensive income. The adoption of
SFAS No. 130 had no effect on the Company's net income or stockholders'
equity.

The components of other comprehensive income and related tax effects at
December 31 are as follows:

<TABLE>
<CAPTION>
                                                       2000             1999            1998
                                                  --------------------------------------------

<S>                                               <C>              <C>               <C>
Unrealized holding gains (losses) on
 available-for-sale securities                    $ 1,698,266      $(2,615,471)      $ 456,742
Reclassification adjustment for gains
 realized in income                                   (24,648)          (2,976)       (150,038)
                                                  --------------------------------------------

Net unrealized gains (losses)                       1,673,618       (2,618,447)        306,704
Tax effect                                           (569,030)         890,272        (104,279)
                                                  --------------------------------------------

Net of tax amount                                 $ 1,104,588      $(1,728,175)      $ 202,425
                                                  ============================================
</TABLE>

Stock option plan

The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations. As such,
compensation expense is recorded on the date of grant only if the current
market price of the underlying stock exceeds the exercise price. FASB
Statement No. 123, "Accounting for Stock-Based Compensation", permits
entities to recognize as expense over the vesting period the fair value of
all stock-based awards on the date of grant. Alternatively, Statement No.
123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide proforma net income disclosures for employee stock-based
awards made in 1995 and future years as if the fair value based method
defined in Statement No. 123 had been applied. The Company has elected to
apply the provisions of APB Opinion No. 25 and provide the proforma
disclosures of Statement No. 123. See Note 18.

Transfers of financial assets

Transfers of financial assets are accounted for as sales when control over
the assets has been surrendered. Control over transferred assets is deemed
to be surrendered when (1) the assets have been isolated from the Company,
(2) the transferee obtains the right (free of conditions that constrain it
from taking advantage of that right) to pledge or exchange the transferred
assets, and (3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them before their
maturity.

Segment reporting

The FASB issued SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information, which establishes standards relative to public
companies for the reporting of certain information about operating segments
within their financial statements. Management has determined that the
Company has two reportable segments as defined within the Statement. These
segments are disclosed in Note 20 of the financial statements.

Recent accounting pronouncements

The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended by Statement No. 137, which becomes
effective for years beginning after June 15, 2000. This Statement
establishes new accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and
measure those derivatives at fair value. The accounting for the gains or
losses resulting in the changes of value of those derivatives will depend
on the intended use of the derivatives and whether it qualifies for hedge
accounting. Management is currently evaluating the impact of this Statement
on the Company's financial statements but does not anticipate it will have
a material impact.

Reclassifications

Certain amounts in the 1999 and 1998 financial statements have been
reclassified to conform to the current year presentation.

Note 2.   Restrictions on Cash and Due From Banks

The Company is required to maintain reserve balances in cash with Federal
Reserve Banks. The totals of those reserve balances were approximately
$2,819,000 and $2,513,000 at December 31, 2000 and 1999, respectively.

The nature of the Bank's business requires that it maintain amounts due
from banks which, at times, may exceed federally insured limits. The
balance in these accounts at December 31, is as follows:

<TABLE>
<CAPTION>
                                            2000            1999
                                         --------------------------

<S>                                      <C>             <C>
Noninterest-bearing accounts             $1,725,716      $1,004,524
Federal Reserve Bank                      5,732,135       4,873,648
Federal funds sold                        1,070,000       3,474,064
</TABLE>

No losses have been experienced in these accounts. In addition, the Company
was required to maintain contracted clearing balances of $750,000 and
$1,000,000 at December 31, 2000 and 1999, respectively.

Note 3.   Interest Bearing Deposits

Interest bearing deposits consist of certificates of deposit purchased from
various financial institutions. Deposits at each institution are maintained
at or below the FDIC insurable limits of $100,000. These certificates were
issued with rates ranging from 5.15% to 7.15% and mature at various dates
through 2005 with approximately $684,975 scheduled to mature in 2001.

Note 4.   Investment Securities

Securities available-for-sale consist of the following:

<TABLE>
<CAPTION>
                                                                              Gross         Gross
                                                            Amortized      Unrealized     Unrealized         Fair
                                                              Cost            Gains         Losses           Value
                                                           ----------------------------------------------------------

<S>                                                        <C>              <C>           <C>             <C>
December 31, 2000:
U.S. Government and agency and corporation securities      $30,168,563      $ 95,272      $  190,348      $30,073,487
State and political subdivisions                             4,914,973             0         117,777        4,797,196
Corporate debt securities                                   20,973,602        43,677         360,051       20,657,228
Marketable equity securities                                   627,667       486,109               0        1,113,776
                                                           ----------------------------------------------------------

                                                           $56,684,805      $625,058      $  668,176      $56,641,687
                                                           ==========================================================

December 31, 1999:
U.S. Government and agency and corporation securities      $35,506,095      $  5,881      $  781,225      $34,730,751
State and political subdivisions                             5,047,300             0         257,705        4,789,595
Corporate debt securities                                   21,043,240           432         802,391       20,241,281
Marketable equity securities                                   560,625       133,325          15,053          678,897
                                                           ----------------------------------------------------------

                                                           $62,157,260      $139,638      $1,856,374      $60,440,524
                                                           ==========================================================
</TABLE>

Included in the caption "U.S. Government and agency and corporation
securities" are mortgage-backed securities with a carrying amount of
$7,766,461 and $6,171,658 at December 31, 2000 and 1999, respectively.

Investment securities with a carrying amount of $7,494,231 and $9,919,532
at December 31, 2000 and 1999, respectively, were pledged as collateral on
public deposits and for other purposes as required or permitted by law.

All realized gains and losses in 2000, 1999, and 1998 were from the sale of
securities available-for-sale. Proceeds from the sale of securities
available-for-sale were $7,409,118, $9,651,088, and $2,350,035 in 2000,
1999, and 1998, respectively. Realized gains from sales of investments
available-for-sale were $69,765, $7,751, and $194,563 with realized losses
of $45,117, $4,775, and $44,525 for the years 2000, 1999, and 1998,
respectively.

The scheduled maturities of securities available-for-sale as of December
31, 2000 were as follows:

<TABLE>
<CAPTION>
                                         Amortized          Fair
                                           Cost             Value
                                       ----------------------------

<S>                                    <C>              <C>
Due in one year or less                $ 7,023,505      $ 7,009,850
Due from one to five years              27,728,312       27,576,937
Due from five to ten years              11,580,027       11,301,780
Due after ten years                      1,957,547        1,872,883
Mortgage-backed securities               7,767,747        7,766,461
Marketable equity securities               627,667        1,113,776
                                       ----------------------------

                                       $56,684,805      $56,641,687
                                       ============================
</TABLE>

Maturities may differ from contractual maturities in mortgage-backed
securities because the mortgages underlying the securities may be called or
repaid without any penalties. Therefore, these securities are not included
in the maturity categories in the above maturity summary.

Note 5.   Loans

The composition of net loans at December 31 is as follows:

<TABLE>
<CAPTION>
                                                2000              1999
                                           ------------------------------

<S>                                        <C>               <C>
Real estate                                $ 93,004,776      $ 87,153,823
Commercial real estate                       74,580,465        69,806,893
Commercial                                   20,594,333        16,246,118
Consumer                                     15,378,421        18,661,352
Municipal loans                              12,334,674         9,656,703
                                           ------------------------------
                                            215,892,669       201,524,889
                                           ------------------------------
Deduct:
Allowance for loan losses                     2,862,707         2,869,983
Net deferred loan fees, premiums,
 and discounts                                  250,374           273,305
                                           ------------------------------
                                              3,113,081         3,143,288
                                           ------------------------------
                                           $212,779,588      $198,381,601
                                           ==============================
</TABLE>

Commercial and mortgage loans serviced for others are not included in the
accompanying balance sheets. The unpaid principal balances of commercial
and mortgage loans serviced for others were $59,999,703, $59,590,014, and
$61,144,487 at December 31, 2000, 1999, and 1998, respectively. Mortgage
servicing rights of $44,283, $48,015, and $94,607 were capitalized in 2000,
1999, and 1998, respectively. Amortization of mortgage servicing rights was
$34,990, $52,334, and $64,611 in 2000, 1999, and 1998, respectively.

Impairment of loans having recorded investments of $1,323,938 at December
31, 2000 and $814,018 at December 31, 1999 has been recognized in
conformity with FASB Statement No. 114, as amended by FASB Statement No.
118. The average recorded investment in impaired loans during 2000, 1999,
and 1998 was $1,358,358, $693,000, and $796,566, respectively. The total
allowance for loan losses related to these loans was $217,577 and $67,217
on December 31, 2000 and 1999, respectively. Interest income on impaired
loans of $10,500, $2,835, and $11,993 was recognized for cash payments
received in 2000, 1999, and 1998, respectively.

The Company is not committed to lend additional funds to borrowers with
impaired loans.

Residential real estate loans aggregating $5,187,749 and $4,907,921 at
December 31, 2000 and 1999, respectively, were pledged as collateral on
deposits of municipalities.

Note 6.   Allowance for Loan Losses

Changes in the allowance for loan losses for the years ended December 31
are as follows:

<TABLE>
<CAPTION>
                                          2000            1999            1998
                                       ------------------------------------------

<S>                                    <C>             <C>             <C>
Balance, beginning                     $2,869,983      $2,844,929      $2,811,412
Provision for loan losses                 250,000         359,496         400,000
Recoveries of amounts charged off         123,590          94,194         120,826
                                       ------------------------------------------
                                        3,243,573       3,298,619       3,332,238
Amounts charged off                      (380,866)       (428,636)       (487,309)
                                       ------------------------------------------

Balance, ending                        $2,862,707      $2,869,983      $2,844,929
                                       ==========================================
</TABLE>

Note 7.   Premises and Equipment

The major classes of premises and equipment and accumulated depreciation at
December 31 are as follows:

<TABLE>
<CAPTION>
                                             2000             1999
                                         ----------------------------

<S>                                      <C>              <C>
Land and land improvements               $   614,244      $   573,249
Buildings and improvements                 3,958,379        3,726,227
Furniture and equipment                    6,211,970        6,223,285
                                         ----------------------------
                                          10,784,593       10,522,761
Less accumulated depreciation             (6,820,279)      (6,479,725)
                                         ----------------------------

                                         $ 3,964,314      $ 4,043,036
                                         ============================
</TABLE>

Depreciation included in occupancy and equipment expenses amounted to
$789,027, $867,114, and $789,826 for the years ended December 31, 2000,
1999, and 1998, respectively.

The Company is obligated under noncancelable operating leases for premises
expiring in various years through the year 2021. Options to renew for
additional periods are available with these leases. Future minimum rental
commitments for these leases with terms of one year or more at December 31,
2000 were as follows:

<TABLE>
      <S>                    <C>
      2001                   $   76,824
      2002                       90,303
      2003                       83,391
      2004                       75,626
      2005                       60,920
      2006 and thereafter       750,720
                             ----------

                             $1,137,784
                             ==========
</TABLE>

Rent expense for 2000, 1999, and 1998 amounted to $72,086, $69,555, and
$68,977, respectively.

Occupancy expense is shown in the consolidated statements net of rental
income of $55,025 in 2000, $55,585 in 1999, and $68,840 in 1998.

Note 8.   Other Real Estate Owned

A summary of foreclosed real estate at December 31 is as follows:

<TABLE>
<CAPTION>
                                              2000         1999
                                           ---------------------

<S>                                        <C>           <C>
Other real estate owned                    $120,250      $26,667
Less allowance for losses on OREO            (3,957)           0
                                           ---------------------

Other real estate owned, net               $116,293      $26,667
                                           =====================
</TABLE>

Changes in the allowance for losses on OREO for the years ended December 31
were as follows:

<TABLE>
<CAPTION>
                                2000          1999          1998
                              ------------------------------------

<S>                           <C>          <C>           <C>
Balance, beginning            $     0      $ 42,588      $  71,952
Provision for losses           12,008         7,421         77,578
Charge-offs, net               (8,051)      (50,009)      (106,942)
                              ------------------------------------

Balance, ending               $ 3,957      $      0      $  42,588
                              ====================================
</TABLE>

Note 9.   Investments Carried at Equity

The Company has purchased various partnership interests in low income
housing limited partnerships. These partnerships were established to
acquire, own and rent residential housing for low and moderate income
Vermonters located in northeastern Vermont. The investments are accounted
for under the equity method of accounting. These equity investments, which
are included in other assets, are recorded at cost and adjusted for the
Company's proportionate share of the partnerships' undistributed earnings
or losses. The carrying values of these investments were $621,721 and
$476,249 at December 31, 2000 and 1999, respectively. The provision for
undistributed net losses of the partnerships charged to earnings was
$45,103 and $21,523 for 2000 and 1999, respectively.

Note 10.   Deposits

The following is a summary of interest bearing deposits at December 31:

<TABLE>
<CAPTION>
                                  2000              1999
                              ------------------------------

<S>                           <C>               <C>
NOW accounts                  $ 38,353,841      $ 37,536,937
Savings and money market        85,919,417        91,284,331
Time, $100,000 and over         26,193,826        21,414,788
Other time                      74,722,511        74,367,855
                              ------------------------------

                              $225,189,595      $224,603,911
                              ==============================
</TABLE>

The following is a summary of time certificates of deposit by maturity at
December 31, 2000:

<TABLE>
      <S>                    <C>
      2001                   $ 84,663,729
      2002                      9,108,100
      2003                      5,483,941
      2004                      1,253,422
      2005 and thereafter         407,145
                             ------------

                             $100,916,337
                             ============
</TABLE>

A maturity distribution of time certificates of deposit in denominations of
$100,000 or more at December 31, 2000 is as follows:

<TABLE>
<S>                                              <C>
Three months or less                             $ 6,757,398
Over three months through six months              11,258,700
Over six months through twelve months              4,439,167
Over twelve months                                 3,738,561
                                                 -----------

                                                 $26,193,826
                                                 ===========
</TABLE>

Note 11.   Borrowed Funds

Borrowings from the Federal Home Loan Bank of Boston (FHLB) for the years
ended December 31, were as follows:

<TABLE>
<CAPTION>
                                                                                     2000            1999
                                                                                  --------------------------

<S>                                                                               <C>             <C>
Option Advances

  6.06% note payable to FHLB, payable in monthly installments of $11,178,
   including interest, through May 6, 2008                                        $  804,363      $  886,176

  6.06% note payable to FHLB, payable in monthly installments of $5,589,
   including interest, through March 24, 2008                                        395,113         436,443

  5.95% note payable to FHLB, payable in monthly installments of $13,354,
   including interest, through March 24, 2003                                        347,938         482,662

  6.06% note payable to FHLB, payable in monthly installments of $7,341,
   including interest, through March 23, 2005                                        334,364         399,648

  6.74% term borrowing from FHLB, maturing January 22, 2001                        2,000,000               0

  6.92% term borrowing from FHLB, maturing August 4, 2003                          2,500,000               0

  IDEAL Way advances payable monthly, various rates as determined by FHLB                  0         667,000
                                                                                  --------------------------

                                                                                  $6,381,778      $2,871,929
                                                                                  ==========================
</TABLE>

Principal maturities of borrowed funds as of December 31, 2000 are as
follows:

<TABLE>
      <S>                    <C>
      2001                   $2,343,274
      2002                      365,676
      2003                    2,779,723
      2004                      240,986
      2005                      196,576
      Thereafter                455,543
                             ----------

                             $6,381,778
                             ==========
</TABLE>

Additionally, Union and Citizens each maintain an IDEAL Way Line of Credit
with the Federal Home Loan Bank of Boston. As of December 31, 2000, the
total amounts of these lines approximated $3,356,000 and $3,040,000 for
Union and Citizens, respectively. Total borrowings against this line of
credit were $0 and $667,000 at December 31, 2000 and 1999, respectively.
Interest on these borrowings is chargeable at a rate determined by the
Federal Home Loan Bank and payable monthly.

Collateral on these borrowings consists of Federal Home Loan Bank stock
purchased by each Bank, all funds placed in deposit with the Federal Home
Loan Bank, and qualified first mortgages held by each Bank, and any
additional holdings which may be pledged as security.

Union Bank also maintains a line of credit with Fleet Bank for the purchase
of overnight Federal Funds. As of December 31, 2000, the total amount of
this line approximated $4,000,000 with outstanding borrowings of $0.
Interest on this borrowing is chargeable at the Federal Funds rate at the
time of the borrowing and payable daily.

Note 12.   Income Taxes

The Company prepares its Federal income tax return on a consolidated basis.
Federal income taxes are allocated to members of the consolidated group
based on taxable income.

Income taxes for the years ended December 31 were as follows:

<TABLE>
<CAPTION>
                                     2000            1999            1998
                                  ------------------------------------------

<S>                               <C>             <C>             <C>
Currently paid or payable         $1,843,349      $1,762,301      $2,026,257
Deferred                             (18,339)         52,958          28,650
                                  ------------------------------------------

                                  $1,825,010      $1,815,259      $2,054,907
                                  ==========================================
</TABLE>

Total income tax expense differs from the amounts computed at the statutory
federal income tax rate of 34% primarily due to the following at December
31:

<TABLE>
<CAPTION>
                                          2000            1999            1998
                                       ------------------------------------------

<S>                                    <C>             <C>             <C>
Computed "expected" tax expense        $2,252,348      $2,002,848      $2,246,143
Tax exempt interest                      (267,148)       (223,150)       (223,262)
Disallowed interest expense                36,851          29,902          31,557
Dividend exclusion                        (10,224)        (11,737)        (11,576)
Increase in CSV life                      (36,063)        (27,990)        (27,494)
Nondeductible acquisition costs               631         169,708          23,632
Tax credits on limited partnership
 investments                             (167,618)       (141,484)              0
Other                                      16,233          17,162          15,907
                                       ------------------------------------------

                                       $1,825,010      $1,815,259      $2,054,907
                                       ==========================================
</TABLE>

The deferred income tax provision consisted of the following for the years
ended December 31:

<TABLE>
<CAPTION>
                                    2000            1999            1998
                                  ----------------------------------------

<S>                               <C>             <C>             <C>
Bad debts                         $  3,491        $(50,219)       $(15,121)
Mark-to-market, loans              (41,506)         16,223            (130)
Deferred loan fees                   8,022          17,389          26,928
Nonaccrual loan interest           (36,007)        (24,371)         15,808
OREO                                (1,345)         14,480           9,984
Deferred compensation               37,575          57,208           4,626
Pension                              8,248           6,001         (31,762)
Depreciation                       (45,763)        (41,922)        (14,692)
Limited partnership tax credits     65,375          60,316               0
Mortgage servicing rights            3,160          (1,468)         10,199
Other                              (19,589)           (679)         22,810
                                  ----------------------------------------

                                  $(18,339)       $ 52,958        $ 28,650
                                  ========================================
</TABLE>

Listed below are the significant components of the net deferred tax asset
at December 31:

<TABLE>
<CAPTION>
                                                     2000             1999
                                                  ---------------------------

<S>                                               <C>              <C>
Components of the deferred tax asset:
  Bad debts                                       $  771,997       $  775,488
  Mark-to-market loans                                59,330           17,824
  Deferred loan fees                                  25,668           33,690
  Nonaccrual loan interest                            98,094           62,087
  OREO writedowns                                      1,345                0
  Deferred compensation                              524,082          561,657
  Pension                                             14,403           22,651
  Unrealized loss on securities
   available-for-sale                                 14,660          583,690
                                                  ---------------------------

Total deferred tax asset                           1,509,579        2,057,087

Valuation allowance                                        0                0
                                                  ---------------------------

Total deferred tax asset, net of valuation
 allowance                                         1,509,579        2,057,087
                                                  ---------------------------

Components of the deferred tax liability:
  Depreciation                                       (69,103)        (114,866)
  Mortgage servicing rights                          (32,054)         (28,894)
  Limited partnership tax credits                   (125,691)         (60,316)
  Other                                              (70,107)         (64,117)
                                                  ---------------------------

Total deferred tax liability                        (296,955)        (268,193)
                                                  ---------------------------

Net deferred tax asset                            $1,212,624       $1,788,894
                                                  ===========================
</TABLE>

FASB Statement No. 109 allows for recognition and measurement of deductible
temporary differences (including general valuation allowances) to the
extent that it is more likely than not that the deferred asset will be
realized.

Net deferred income tax assets are included in the caption "Other assets"
on the balance sheets at December 31, 2000 and 1999, respectively.

Note 13.   Employee Benefits

Union sponsors a non-contributory defined benefit pension plan covering all
eligible employees. Union's policy is to accrue annually an amount equal to
the actuarially calculated expense.

Net pension cost for Union's defined benefit pension plan consisted of the
following components at December 31:

<TABLE>
<CAPTION>
                                                         2000           1999
                                                      ------------------------

<S>                                                   <C>            <C>
Service cost                                          $ 195,070      $ 185,950
Interest cost on projected benefit obligation           293,450        270,765
Actual return on plan assets                           (263,794)      (269,861)
Net amortization and deferral                             3,642         (7,656)
                                                      ------------------------

                                                      $ 228,368      $ 179,198
                                                      ========================
</TABLE>

The following table sets forth the Plan's funded status and amounts
recognized in the accompanying consolidated balance sheets at December 31:

<TABLE>
<CAPTION>
                                                          2000             1999
                                                      ----------------------------

<S>                                                   <C>              <C>
Actuarial present value of benefit obligations:
   Vested benefits                                    $ 3,259,533      $ 2,954,924
   Nonvested benefits                                      38,432           46,980
                                                      ----------------------------

Accumulated benefits                                    3,297,965        3,001,904
                                                      ============================

Projected benefits                                     (4,621,211)      (4,269,543)
Plan assets at fair value                               4,136,716        3,645,807
                                                      ----------------------------
Projected benefit obligation in excess of
 plan assets                                             (484,495)        (623,736)
Unrecognized transition amount                            (22,961)         (30,617)
Unrecognized net loss                                     465,095          587,733
                                                      ----------------------------

Accrued pension                                       $   (42,361)     $   (66,620)
                                                      ============================
</TABLE>

Assumptions used by Union in the determination of pension plan information
consisted of the following:

<TABLE>
<CAPTION>
                                                        2000       1999
                                                        ----------------

<S>                                                     <C>        <C>
Discount rate                                           7.00%      7.00%
Rate of increase in compensation levels                 4.25%      4.25%
Expected long-term rate of return of plan assets        7.25%      7.25%
</TABLE>

Contributions to the plan are invested in diversified portfolios, mainly
corporate stocks and bonds.

Contributions to Union's defined contribution 401(k) plan, including
employer matching amounts, are at the discretion of the Board of Directors.
Employer contributions to the plan were $67,440, $65,785, and $63,375 for
2000, 1999, and 1998, respectively.

Additionally, the Company and Union have a non-qualified Deferred
Compensation Plan for Directors and certain key officers. Under the plan,
compensation may be deferred that would otherwise be currently payable.
Deferrals are made to an uninsured interest bearing account and are payable
upon attainment of a certain age or death over a 15 year period. The
Company and Union have purchased life insurance contracts for each
participant in order to fund these benefits. The benefits accrued under
this plan aggregated $1,541,417 and $1,651,932 at December 31, 2000 and
1999, respectively, and is included in the financial statement caption
"Accrued expenses and other liabilities". The cash surrender value of the
life insurance policies purchased to fund these plans aggregated $1,230,291
and $1,124,222 at December 31, 2000 and 1999, respectively. These amounts
are included in the financial statement caption "Other assets". The annual
net cost of the plan is immaterial to the financial statements of the
Company.

Citizens maintains separately a 401(k) plan and a discretionary profit
sharing plan. The 401(k) plan covers all employees meeting certain
eligibility requirements. Employees are permitted to contribute any amount,
up to 10% of their compensation, to the 401(k) plan. Citizens makes
matching contributions up to 6% of an employee's compensation. Matching
contributions to this plan were $30,800, $37,178, and $30,852 for 2000,
1999, and 1998, respectively.

Contributions to the profit sharing plan are at the discretion of Citizens'
Board of Directors. Contributions to this plan were $66,384, $42,003, and
$74,934 for 2000, 1999, and 1998, respectively.

Note 14.   Financial Instruments With Off-Balance-Sheet Risk

The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, standby
letters of credit, interest rate caps and floors written on adjustable rate
loans, and commitments to sell loans. Such instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the balance sheet. The contract or notional amounts of those
instruments reflect the extent of involvement the Company has in particular
classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual notional
amount of those instruments. The Company uses the same credit policies in
making commitments and conditional obligations as it does for on-balance-
sheet instruments. For interest rate caps and floors written on adjustable
rate loans, the contract or notional amounts do not represent exposure to
credit loss. The Company controls the risk of interest rate cap agreements
through credit approvals, limits, and monitoring procedures.

The Company generally requires collateral or other security to support
financial instruments with credit risk.

<TABLE>
<CAPTION>
                                                                 Contract or
                                                                  Notional
                                                                   Amount
                                                                    2000
                                                                 -----------

<S>                                                              <C>
Financial instruments whose contract amount represent
 credit risk:

   Commitments to extend credit                                  $23,237,926
                                                                 ===========

   Standby letters of credit and commercial letters of credit    $   789,360
                                                                 ===========

   Credit card arrangements                                      $ 2,005,998
                                                                 ===========

   Home equity lines                                             $ 3,731,920
                                                                 ===========
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee.

Since many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Company, upon extension of credit is based on management's credit
evaluation of the customer. Collateral held varies but may include real
estate, accounts receivables, inventory, property, plant and equipment, and
income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support private borrowing arrangements.
The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loans to customers.

Note 15.   Commitments and Contingencies

In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, after consulting with the
Company's legal counsel, any liability resulting from such proceedings
would not have a material adverse effect on the Company's financial
statements.

Note 16.   Fair Values of Financial Instruments

The estimated fair values of the Company's financial instruments at
December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                              Carrying          Estimated
                                               Amount           Fair Value
                                            ------------------------------

<S>                                         <C>               <C>
Financial assets:
   Cash and cash equivalents                $ 11,423,570      $ 11,423,570
   Interest bearing deposits                   1,721,408         1,721,590
   Securities available-for-sale              56,641,687        56,641,687
   Federal Home Loan Bank stock                1,016,800         1,016,800
   Loans and loans held for sale, net        221,932,893       218,612,116
   Accrued interest receivable                 2,596,891         2,596,891

Financial liabilities:
   Deposits                                  258,736,580       259,091,587
   Borrowed funds                              6,381,778         6,476,126
   Accrued interest payable                      838,592           838,592
</TABLE>

The estimated fair values of the Company's financial instruments at
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                              Carrying          Estimated
                                               Amount           Fair Value
                                            ------------------------------

<S>                                         <C>               <C>
Financial assets:
   Cash and cash equivalents                $ 15,101,545      $ 15,101,545

   Interest bearing deposits                   1,956,999         1,942,088
   Securities available-for-sale              60,440,524        60,440,524
   Federal Home Loan Bank stock                  938,800           938,800
   Loans and loans held for sale, net        206,483,416       204,026,180
   Accrued interest receivable                 2,199,426         2,199,426

Financial liabilities:
   Deposits                                  257,592,803       257,993,340
   Borrowed funds                              2,871,929         2,181,136
   Accrued interest payable                      549,712           549,712
</TABLE>

The estimated fair values of deferred fees on commitments to extend credit
and letters of credit were immaterial at December 31, 2000 and1999.

The carrying amounts in the preceding table are included in the balance
sheet under the applicable captions.

Note 17.   Transactions With Related Parties

The Company has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which they
are principal stockholders (commonly referred to as related parties), all
of which have been, in the opinion of management, on the same terms,
including interest rates and collateral, as those prevailing at the time
for comparable transactions with others.

Aggregate loan transactions with related parties for the year ended
December 31 were as follows:

<TABLE>
<CAPTION>
                                                  2000           1999
                                               ------------------------

<S>                                            <C>            <C>
Balance, beginning                             $ 863,663      $ 866,865
New loans                                        447,942        248,822
Repayments                                      (332,250)      (246,524)
Other, net                                             0         (5,500)
                                               ------------------------

Balance, ending                                $ 979,355      $ 863,663
                                               ========================

Balance available on lines of credit           $ 131,854      $ 217,908
                                               ========================
</TABLE>

Other activity consists of transactions with related parties who have been
newly elected and the sale of mortgage loans on the secondary market.

Deposit accounts with related parties approximated $706,318 and $2,015,213
at December 31, 2000 and 1999, respectively.

Note 18.   Incentive Stock Option Plan

Under the terms of a Stock Option Plan with certain key employees, options
to purchase shares of the Company's common stock are granted at a price
equal to the market price of the stock at the date of grant. These stock
options are exercisable within five years from the date of grant. Following
is a summary of transactions:

<TABLE>
<CAPTION>
                                                                 Shares Under Option
                                                            ------------------------------
                                                             2000        1999        1998
                                                            ------------------------------

<S>                                                         <C>         <C>         <C>
Outstanding, January 1                                      11,900      13,700      15,300
Granted during the year                                          0       2,500       2,500
Exercised during the year (200 shares at $9.75 per
 share in 2000; 4,000 shares at $9.25 per share and
 300 shares at $9.75 in 1999; 4,000 shares at $9.00
 per share and 100 shares at $9.75 in 1998)                   (200)     (4,300)     (4,100)
                                                            ------------------------------

Outstanding, December 31                                    11,700      11,900      13,700
                                                            ==============================
</TABLE>

<TABLE>
<CAPTION>
                                                                 Shares Under Option
                                                            ------------------------------
                                                             2000        1999        1998
                                                            ------------------------------

<S>                                                         <C>         <C>         <C>
Eligible, December 31, for exercise currently at:
   $ 9.25 per share                                              0           0       4,000
   $ 9.75 per share                                          4,200       4,400       4,700
   $18.00 per share                                          2,500       2,500       2,500
   $20.25 per share                                          2,500       2,500           0
   $22.00 per share                                          2,500       2,500       2,500
                                                            ------------------------------

                                                            11,700      11,900      13,700
                                                            ==============================
</TABLE>

Had compensation cost been determined on the basis of fair value pursuant
to FASB Statement No. 123, net income would have been reduced as follows at
December 31:

<TABLE>
<CAPTION>
                         2000            1999            1998
                      ------------------------------------------

<S>                   <C>             <C>             <C>
Net income

   As reported        $4,799,542      $4,075,471      $4,551,396

   Proforma           $4,795,130      $4,071,059      $4,547,953
</TABLE>

Note 19.   Acquisitions

Effective November 30, 1999, the Company acquired Citizens Savings Bank and
Trust Company in a merger accounted for in a tax-free transaction as a
pooling of interests with the exchange of 991,089 shares (net of 196
fractional shares redeemed for approximately $4,516) of newly-issued
Company common stock in exchange for all of the outstanding shares of
Citizens' common stock. Interest income, net income and earnings per share
(as restated) for the Company and Citizens Savings Bank and Trust Company
prior to the acquisition are as follows:

<TABLE>
<CAPTION>
                                                                         Eleven Months
                                                         Year Ended         Ended
                                                        December 31,     November 30,
                                                            1998             1999
                                                        ------------------------------

<S>                                                     <C>              <C>
Interest income
   Union Bankshares, Inc.                               $14,733,104      $13,694,631
   Citizens Savings Bank and Trust Company                7,893,075        7,178,879
                                                        ----------------------------

      Combined                                          $22,626,179      $20,873,510
                                                        ============================

Net income, giving effect to proforma income taxes
   Union Bankshares, Inc.                               $ 3,449,912      $ 2,937,645
   Citizens Savings Bank and Trust Company                1,101,484          987,109
                                                        ----------------------------

      Combined                                          $ 4,551,396      $ 3,924,754
                                                        ============================

Basic earnings per share
   Union Bankshares, Inc.                               $      1.70      $      1.44
   Citizens Savings Bank and Trust Company                     1.11             1.00
                                                        ----------------------------

      Combined                                          $      1.51      $      1.30
                                                        ============================
</TABLE>

Note 20.   Reportable Segments

The Company has two reportable operating segments, Union Bank (Union) and
Citizens Savings Bank and Trust Company (Citizens). The accounting
policies, including the operation of each, are the same as those described
in the summary of significant accounting policies in Note 1. Management
regularly evaluates separate financial information for each segment in
deciding how to allocate resources and in assessing performance.

The Company accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, that is, at current market prices.

Information about reportable segments, and reconciliation of such
information to the consolidated financial statements as of and for the
years ended December 31, follows:

<TABLE>
<CAPTION>
                                                                    Intersegment                  Consolidated
2000                                  Union          Citizens       Elimination      Other           Totals
--------------------------------------------------------------------------------------------------------------

<S>                               <C>               <C>              <C>           <C>            <C>
Interest income                   $ 16,331,233      $ 7,795,092      $      0      $       0      $ 24,126,325
Interest expense                     6,369,555        3,506,590             0          1,212         9,877,357
Provision for loan loss                      0          250,000             0              0           250,000
Service fee income                   1,696,478          513,173             0              0         2,209,651
Income tax expense (benefit)         1,420,800          479,000             0        (74,790)        1,825,010
Net income (loss)                    3,957,914          976,252             0       (134,624)        4,799,542
Assets                             204,051,287       98,844,191             0        498,931       303,394,409

<CAPTION>
                                                                    Intersegment                  Consolidated
1999                                  Union          Citizens       Elimination      Other           Totals
--------------------------------------------------------------------------------------------------------------

Interest income                   $ 15,035,945      $ 7,832,641      $      0      $       0      $ 22,868,586
Interest expense                     5,757,892        3,362,522             0          1,157         9,121,571
Provision for loan loss                 62,500          296,996             0              0           359,496
Service fee income                   1,666,244          562,629             0              0         2,228,873
Income tax expense (benefit)         1,277,950          560,195             0        (22,886)        1,815,259
Net income (loss)                    3,496,397          937,342             0       (358,268)        4,075,471
Assets                             197,648,845       97,512,372       (79,755)       394,184       295,475,646

<CAPTION>
                                                                    Intersegment                  Consolidated
1998                                  Union          Citizens       Elimination      Other           Totals
--------------------------------------------------------------------------------------------------------------

Interest income                   $ 14,733,104      $ 7,893,075     $      0      $       0      $ 22,626,179
Interest expense                     5,778,179        3,472,861            0          1,424         9,252,464
Provision for loan loss                100,000          300,000            0              0           400,000
Service fee income                   1,559,924          586,074            0              0         2,145,998
Income tax expense (benefit)         1,541,504          547,650            0        (34,247)        2,054,907
Net income (loss)                    3,540,023        1,101,484            0        (90,111)        4,551,396
Assets                             190,783,600       98,966,698            0        381,691       290,131,989
</TABLE>

Amounts in the "Other" column encompass activity in Union Bankshares, Inc.,
the "parent company". Holding company assets are stated after intercompany
eliminations.

Note 21.   Regulatory Capital Requirements

Union and Citizens (the Banks) are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could
have a direct material effect on the Banks' financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Banks must meet specific capital guidelines that
involve quantitative measures of the Banks' assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Banks' capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Banks to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of December 31, 2000,
that the Banks meet all capital adequacy requirements to which they are
subject.

As of December 31, 2000, the most recent notification from the FDIC
categorized the Banks as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized the
Banks must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
Banks' category.

The Banks' actual capital amounts (000's omitted) and ratios are also
presented in the table.

<TABLE>
<CAPTION>
                                                                                                    Minimums
                                                                                                   To be Well
                                                                             Minimums           Capitalized Under
                                                                            For Capital         Prompt Corrective
                                                      Actual                Requirements        Action Provisions
                                               ------------------------------------------------------------------
                                                Amount      Ratio        Amount      Ratio      Amount      Ratio
                                               ------------------------------------------------------------------

<S>                                            <C>          <C>         <C>          <C>       <C>          <C>
As of December 31, 2000:
   Total capital to risk weighted assets
      Union                                    $25,818      17.44%      $11,845      8.0%      $14,807      10.0%
      Citizens                                  11,975      18.06%        5,304      8.0%        6,630      10.0%
   Tier I capital to risk weighted assets
      Union                                     23,808      16.08%        5,923      4.0%        8,884       6.0%
      Citizens                                  11,143      16.81%        2,652      4.0%        3,978       6.0%
   Tier I capital to average assets
      Union                                     23,808      11.49%        8,287      4.0%       10,358       5.0%
      Citizens                                  11,143      11.00%        4,050      4.0%        5,063       5.0%

As of December 31, 1999:
   Total capital to risk weighted assets
      Union                                    $23,506      18.80%      $10,002      8.0%      $12,502      10.0%
      Citizens                                  12,057      17.35%        5,559      8.0%        6,949      10.0%
   Tier I capital to risk weighted assets
      Union                                     21,889      17.51%        5,001      4.0%        7,501       6.0%
      Citizens                                  11,188      16.10%        2,780      4.0%        4,169       6.0%
   Tier I capital to average assets
      Union                                     21,889      10.93%        8,010      4.0%       10,013       5.0%
      Citizens                                  11,188      11.43%        3,914      4.0%        4,893       5.0%
</TABLE>

Note 22.   Restrictions on Retained Earnings

The Company is subject to restrictions on the amount of dividends that it
may declare without prior regulatory approval. Also, Vermont state banking
regulations require each Bank to transfer, at a minimum, 10% of annual net
profits to restricted retained earnings until such amounts of capital equal
10% of each Bank's deposits and other liabilities.

Note 23.   Subsequent Events

On January 3, 2001, Union Bankshares, Inc. declared a $0.26 per share
dividend payable January 17, 2001 to stockholders of record on January 13,
2001.

Note 24.   Condensed Financial Information (Parent Company Only)

The following financial statements are for Union Bankshares, Inc. (Parent
Company Only), and should be read in conjunction with the consolidated
financial statements of Union Bankshares, Inc. and Subsidiaries.

                UNION BANKSHARES, INC. (PARENT COMPANY ONLY)
                          CONDENSED BALANCE SHEETS
                         DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                 2000             1999
                                             ----------------------------

<S>                                          <C>              <C>
ASSETS
Cash                                         $   144,411      $   344,714
Investment in Subsidiary-Union                23,823,428       21,176,978
Investment in Subsidiary-Citizens             11,100,606       10,768,302
Other assets                                     507,190          394,184
                                             ----------------------------

      Total assets                           $35,575,635      $32,684,178
                                             ============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
  Other liabilities                          $   418,580      $   464,164
                                             ----------------------------

      Total liabilities                          418,580          464,164
                                             ----------------------------

Stockholders' equity
  Common stock, $2 par value; 5,000,000
   shares authorized, 3,263,689 shares
   issued at 12/31/00 and 3,263,489
   shares issued at 12/31/99                   6,527,378        6,526,978
  Paid-in capital                                239,903          238,353
  Retained earnings (Note 21)                 30,010,683       28,180,180
  Less treasury stock, at cost 233,960
   shares; 2000 and 1999                      (1,592,451)      (1,592,451)
  Accumulated other comprehensive
   (loss) income                                 (28,458)      (1,133,046)
                                             ----------------------------

      Total stockholders' equity              35,157,055       32,220,014
                                             ----------------------------

      Total liabilities and stockholders'
       equity                                $35,575,635      $32,684,178
                                             ============================
</TABLE>

Note 24.   Condensed Financial Information (Parent Company Only)
(Continued)

The investment in the subsidiary banks is carried under the equity method
of accounting. The investment and cash, which is on deposit with the Bank,
has been eliminated in consolidation.

                UNION BANKSHARES, INC. (PARENT COMPANY ONLY)
                       CONDENSED STATEMENTS OF INCOME
                Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                  2000            1999            1998
                                               ------------------------------------------

<S>                                            <C>             <C>             <C>
Revenues
  Dividends
    Bank subsidiaries                          $3,060,000      $2,300,000      $1,850,000
    Loss on sale of securities                          0            (109)              0
                                               ------------------------------------------

      Total revenues                            3,060,000       2,299,891       1,850,000
                                               ------------------------------------------

Expenses
  Interest                                          1,212           1,157           1,424
  Merger and acquisition costs                      1,026         332,940          23,632
  Administrative and other                        207,176          46,948          99,302
                                               ------------------------------------------

      Total expenses                              209,414         381,045         124,358
                                               ------------------------------------------

Income before applicable income tax and
 equity in undistributed net income of
 subsidiaries                                   2,850,586       1,918,846       1,725,642
Applicable income tax (benefit)                   (74,790)        (22,886)        (34,247)
                                               ------------------------------------------

Income before equity (deficit) in
 undistributed net income of subsidiaries       2,925,376       1,941,732       1,759,889
Equity in undistributed net income-Union        1,917,914       1,196,398       1,690,023
Deficit in undistributed net income-Citizens      (43,748)        (49,768)              0
                                               ------------------------------------------

Net income                                     $4,799,542      $3,088,362      $3,449,912
                                               ==========================================
</TABLE>

Equity in undistributed net income of Citizens for the year ended December
31, 1999 represents earnings of Citizens subsequent to the merger occurring
November 30, 1999.

                UNION BANKSHARES, INC. (PARENT COMPANY ONLY)
                     CONDENSED STATEMENTS OF CASH FLOWS
                Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                       2000             1999             1998
                                                    --------------------------------------------

<S>                                                <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                       $ 4,799,542      $ 3,088,362      $ 3,449,912
  Adjustments to reconcile net income to
   net cash provided by operating
   activities
  Equity in undistributed net income of Union       (1,917,914)      (1,196,398)      (1,690,023)
  Deficit in undistributed net loss of Citizens         43,748           49,768                0
  Increase in income taxes receivable                  (76,353)          (6,404)          (2,078)
  Increase in other assets                             (36,653)         (23,891)         (33,203)
  Loss on sale of securities                                 0              109                0
  (Decrease) increase in other liabilities             (45,584)          21,974           42,116
                                                    --------------------------------------------

      Net cash provided by operating activities      2,766,786        1,933,520        1,766,724
                                                    --------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sale of securities                           0           17,693                0
  Purchases of securities                                    0                0          (17,802)
                                                    --------------------------------------------

      Net cash provided (used) by investing
       activities                                            0           17,693          (17,802)
                                                    --------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Purchase of treasury stock                                 0                0          (43,960)
  Dividends paid                                    (2,969,039)      (1,833,446)      (1,665,519)
  Proceeds from exercise of stock option                 1,950           39,925           36,975
  Purchase of fractional shares                              0           (4,516)               0
                                                    --------------------------------------------

      Net cash used by financing activities         (2,967,089)      (1,798,037)      (1,672,504)
                                                    --------------------------------------------

Net (decrease) increase in cash                       (200,303)         153,176           76,418
Cash
   Beginning                                           344,714          191,538          115,120
                                                    --------------------------------------------

   Ending                                          $   144,411      $   344,714      $   191,538
                                                   =============================================

SUPPLEMENTAL SCHEDULE OF CASH PAID (RECEIVED)
 DURING THE YEAR
   Interest                                        $     1,212      $     1,157      $     1,424
                                                   =============================================

   Income taxes                                    $     5,250      $   (34,247)     $   (28,395)
                                                   =============================================
</TABLE>

Note 25.   Quarterly Financial Data (Unaudited)

A summary of financial data for the four quarters of 2000, 1999, and 1998
is presented below (dollars in thousands):

UNION BANKSHARES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                Quarters in 2000 Ended
                                    -----------------------------------------------
                                    March 31,    June 30,     Sept. 30,    Dec. 31,
                                    -----------------------------------------------

<S>                                  <C>          <C>          <C>          <C>
Interest income                      $5,743       $5,912       $6,174       $6,297
Interest expense                      2,266        2,379        2,593        2,639
Provision for loan losses                62           63           63           62
Securities gains (loss)                  37           (3)           0           (9)
Other operating expenses              2,526        2,619        2,394        2,405
Net income                            1,078        1,168        1,247        1,307
Earnings per common share              0.36         0.38         0.41         0.43

<CAPTION>
                                                Quarters in 1999 Ended
                                    -----------------------------------------------
                                    March 31,    June 30,     Sept. 30,    Dec. 31,
                                    -----------------------------------------------

Interest income                      $5,525       $5,617       $5,824       $5,903
Interest expense                      2,248        2,249        2,302        2,323
Provision for loan losses               100           88           62          109
Securities gains (loss)                   0            3            0            0
Other operating expenses              2,426        2,426        2,450        2,763
Net income                              973        1,042        1,134          926
Earnings per common share              0.32         0.34         0.38         0.31

<CAPTION>
                                                Quarters in 1998 Ended
                                    -----------------------------------------------
                                    March 31,    June 30,     Sept. 30,    Dec. 31,
                                    -----------------------------------------------

Interest income                      $5,506       $5,672       $5,664       $5,784
Interest expense                      2,283        2,315        2,311        2,343
Provision for loan losses               113          112          100           75
Securities gains (loss)                 (41)           0           65          126
Other operating expenses              2,357        2,275        2,314        2,332
Net income                              978        1,180        1,096        1,297
Earnings per common share              0.33         0.39         0.36         0.43
</TABLE>

Note 26.   Other Income and Other Expenses

The components of other income and other expenses which are in excess of
one percent of total revenues in any of the three years disclosed are as
follows:

<TABLE>
<CAPTION>
                                2000            1999            1998
                             ------------------------------------------

<S>                          <C>             <C>             <C>
Expenses
   State franchise tax       $  296,321      $  281,480      $  266,009
   Legal fees                    60,200         280,503          33,438
   Professional fees            198,777         308,431         136,871
   Fees to directors            237,012         261,609         246,717
   Postage and shipping         242,987         246,321         253,634
   Other                      1,737,002       1,710,679       1,665,407
                             ------------------------------------------

                             $2,772,299      $3,089,023      $2,602,076
                             ==========================================
</TABLE>

U N I O N  B A N K S H A R E S,  I N C.  A N D  S U B S I D I A R I E S
M A N A G E M E N T ' S  D I S C U S S I O N  A N D  A N A L Y S I S  O F
  F I N A N C I A L  C O N D I T I O N  A N D  R E S U L T S  O F
  O P E R A T I O N S

                                   GENERAL

The following discussion and analysis by Management focuses on those
factors that had a material effect on Union Bankshares, Inc.'s (Union's)
financial position as of December 31, 2000 and 1999, and its results of
operations for the years ended December 31, 2000, 1999, and 1998. This
discussion should be read in conjunction with the consolidated Financial
Statements and related notes and with other financial data appearing
elsewhere. Management is not aware of the occurrence of any events after
December 31, 2000, which would materially affect the information presented
below.

The Company may from time to time make written or oral statements that are
considered "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may
include financial projections, statements of plans and objectives for
future operations, estimates of future economic performance and assumptions
relating thereto. The Company may include forward-looking statements in its
filings with the Securities and Exchange Commission, in its reports to
stockholders, including this Annual Report, in other written materials, and
in statements made by senior management to analysts, rating agencies,
institutional investors, representatives of the media and others.

By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risk exists that predictions,
forecasts, projections and other estimates contained in forward-looking
statements will not be achieved. Also when we use any of the words
"believes," "expects," "anticipates" or similar expressions, we are making
forward-looking statements. Many possible events or factors could affect
the future financial results and performance of our company. This could
cause results or performance to differ materially from those expressed in
our forward-looking statements. The possible events or factors that might
affect our forward-looking statements include, but are not limited to, the
following:

*   uses of monetary, fiscal and tax policy by various governments
*   political, legislative or regulatory developments in Vermont or the
    United States including changes in laws concerning taxes, banking and
    other aspects of the financial services industry
*   developments in general economic or business conditions, including
    interest rate fluctuations, market fluctuations and perceptions, and
    inflation
*   changes in the competitive environment for financial services
    organizations
*   the Company's ability to retain key personnel
*   changes in technology including demands for greater automation
*   unanticipated lower revenues, loss of customers or business, or higher
    operating expenses
*   adverse changes in the securities market

When relying on forward-looking statements to make decisions with respect
to the Company, investors and others are cautioned to consider these and
other risks and uncertainties.

                                 ACQUISITION

Effective November 30, 1999, following the receipt of all required
stockholder, state and federal regulatory approvals, Union Bankshares, Inc.
acquired Citizens Savings Bank and Trust Co. This makes Union a two bank
holding company. The accompanying consolidated financial statements reflect
the accounting for the acquisition as a pooling of interests and are
presented as if the companies were combined as of the earliest period
presented. However, the financial information is not necessarily indicative
of the results of operations, financial position or cash flows that would
have occurred had the acquisition been consummated for the periods for
which it is given effect, nor is it necessarily indicative of future
results of operations, financial position, or cash flows. The financial
statements reflect the conversion of each outstanding share of Citizens
common stock into 6.5217 shares of Union common stock. Additional
information with respect to this acquisition can be found in Note 19 to the
Financial Statements.

                            RESULTS OF OPERATIONS

The Company's net income for the year ended December 31, 2000 was $4.800
million compared with net income of $4.075 million for the year 1999.
Without merger related nondeductible expenses and Y2K expenses, 1999's net
income would have been $4.614 million. Net income per share was $1.58 for
2000 compared to $1.35 for 1999 and would have been $1.52 per share for
1999 without merger related and Y2K expenses.

Net Interest Income. The largest component of Union's operating income is
net interest income, which is the difference between interest and dividend
income received from interest-earning assets and the interest expense paid
on its interest-bearing liabilities.

Yields Earned and Rates Paid. The following table shows for the periods
indicated, the total amount of income recorded from interest-earning
assets, and the related average yields, the interest expense associated
with interest-bearing liabilities, expressed in dollars and average rates,
and the relative net interest spread and net interest margin. Yield and
rate information for a period is average information for the period, and is
calculated by dividing the income or expense item for the period by the
average balances of the appropriate balance sheet item during the period.
Net interest margin is net interest income divided by average interest-
earning assets. Nonaccrual loans are included in asset balances for the
appropriate periods, but recognition of interest on such loans is
discontinued and any remaining accrued interest receivable is reversed, in
conformity with federal regulations. The yields and net interest margins
appearing in the following table have been calculated on a pre-tax basis:

<TABLE>
<CAPTION>
                                                                     Years ended December 31
                               ---------------------------------------------------------------------------------------------------
                                             2000                              1999                              1998
                               ---------------------------------------------------------------------------------------------------
                               Average    Income/    Average     Average    Income/    Average     Average    Income/    Average
                               Balance    Expense   Yield/Rate   Balance    Expense   Yield/Rate   Balance    Expense   Yield/Rate
                               ---------------------------------------------------------------------------------------------------
                                                                      (Dollars in thousands)

<S>                            <C>        <C>         <C>        <C>        <C>         <C>        <C>        <C>         <C>
Average Assets:
Federal funds sold             $  5,379   $   333     6.19%      $  8,604   $   425     4.94%      $  8,799   $   461     5.24%
Interest bearing deposits         1,962       120     6.12%         2,223       122     5.49%         1,494        83     5.56%
Investments (1) (2)              58,680     3,615     6.34%        61,097     3,685     6.21%        51,663     3,246     6.35%
Loans, net (1), (3)             215,450    20,058     9.42%       202,674    18,636     9.31%       194,716    18,836     9.83%
                               ------------------                ------------------                ------------------
   Total interest-earning
    assets (1)                  281,471    24,126     8.69%       274,598    22,868     8.45%       256,672    22,626     8.95%

Cash and due from banks           9,042                             9,195                             8,507
Premises and equipment            3,989                             4,330                             4,596
Other assets                      5,204                             5,621                             6,227
                               --------                          --------                          --------
   Total assets                $299,706                          $293,744                          $276,002
                               ========                          ========                          ========

Average Liabilities and
 Stockholders' Equity:
NOW accounts                   $ 34,383   $   702     2.04%      $ 34,654   $   676     1.95%      $ 30,957   $   691     2.23%
Savings/money market accounts    90,923     3,375     3.71%        87,360     3,072     3.52%        75,579     2,712     3.59%
Certificates of deposit          98,571     5,378     5.46%        98,901     5,086     5.14%       101,578     5,556     5.47%
Borrowed funds                    6,340       422     6.66%         4,948       287     5.80%         5,027       294     5.85%
                               ------------------                ------------------                ------------------
   Total interest-bearing
    liabilities                 230,217     9,877     4.29%       225,863     9,121     4.04%       213,141     9,253     4.34%

Non-interest bearing
 deposits                        32,906                            32,505                            28,838
Other liabilities                 3,575                             3,292                             3,581
                               --------                          --------                          --------
   Total liabilities            266,698                           261,660                           245,560

Stockholders' equity             33,008                            32,084                            30,442
                               --------                          --------                          --------
   Total liabilities and
    stockholders equity        $299,706                          $293,774                          $276,002
                               ========                          ========                          ========

Net interest income (1)                   $14,249                           $13,747                           $13,373
                                          =======                           =======                           =======

Net interest spread                                   4.40%                             4.41%                             4.61%

Net interest margin                                   5.19%                             5.13%                             5.34%

<FN>
-------------------
<F1>  Average yield reported on a tax-equivalent basis.
<F2>  Average balance of investments calculated on the amortized cost
      basis.
<F3>  Net of unearned income and allowance for loan losses.
</FN>
</TABLE>

Union's net interest income increased by $502 thousand, or 3.65%, to $14.2
million for the year ended December 31, 2000, from $13.7 million for the
year ended December 31, 1999. This increase was primarily due to the growth
in our loan portfolio which had an average yield of 9.42% in 2000 while the
lower yielding investment, interest-bearing deposits and federal funds sold
average balances decreased. On average for the year 93.9% of our assets
were earning interest in 2000 versus 93.5% in 1999. The net interest spread
decreased by 1 basis point to 4.40% for the year ended December 31, 2000,
from 4.41% for the year ended December 31, 1999. The net interest margin
for the 2000 period increased by 6 basis points to 5.19% from 5.13% for the
1999 period.

Rate/Volume Analysis. The following table describes the extent to which
changes in interest rates and changes in volume of interest-earning assets
and interest-bearing liabilities have affected Union's interest income and
interest expense during the periods indicated. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to:

*   changes in volume (change in volume multiplied by prior rate);
*   changes in rate (change in rate multiplied by current volume); and
*   total change in rate and volume.

Changes attributable to both rate and volume have been allocated
proportionately to the change due to volume and the change due to rate. All
changes are expressed as Dollars in thousands.

<TABLE>
<CAPTION>
                                         Year Ended December 31, 2000           Year Ended December 31, 1999
                                            Compared to Year Ended                 Compared to Year Ended
                                          December 31, 1999 Increase/            December 31, 1998 Increase/
                                          (Decrease) Due to Change In            (Decrease) Due to Change In
                                       ------------------------------------------------------------------------
                                        Volume       Rate          Net         Volume       Rate          Net
                                       ------------------------------------------------------------------------

<S>                                    <C>          <C>          <C>          <C>          <C>          <C>
Interest-earning assets:
Federal funds sold                     $  (159)     $    67      $   (92)     $   (10)     $   (26)     $   (36)
Interest-bearing deposits                  (14)          12           (2)          41           (2)          39
Investments                               (150)          80          (70)         599         (160)         439
Loans, net                               1,189          233        1,422          782         (987)        (205)
                                       ------------------------------------------------------------------------

      Total interest-earning assets    $   866      $   392      $ 1,258      $ 1,412      $(1,175)     $   237

Interest-bearing liabilities:
NOW accounts                           $    (5)     $    31      $    26      $    83      $   (98)     $   (15)
Savings/money market accounts              125          178          303          423          (63)         360
Certificates of deposit                    (18)         310          292         (146)        (324)        (470)
Borrowed funds                              81           54          135           (5)          (2)          (7)
                                       ------------------------------------------------------------------------

      Total interest-bearing
       liabilities                     $   183      $   573      $   756      $   355      $  (487)     $  (132)
                                       ------------------------------------------------------------------------

Change in net interest income          $   683      $  (181)     $   502      $ 1,057      $  (688)     $   369
                                       ========================================================================
</TABLE>

Interest and Dividend Income. Union's interest and dividend income
increased by $1,258,000, or 5.5%, to $24.1 million for the year ended
December 31, 2000, from $22.9 million for the year ended December 31, 1999.
Average earning assets increased by $6.9 million, or 2.5%, to $281.5
million for the year ended December 31, 2000, from $274.6 million for the
year ended December 31, 1999. Average loans were $215.5 million for the
year ended December 31, 2000 up from $202.7 million for the year ended
December 31, 1999. Increases in commercial, municipal, construction and
real estate secured loans were partially offset by a decrease in average
installment loans. Increases in loan volume and interest rates led by the
average prime rate for 2000 being 9.23%, up from 7.99% in 1999, was
partially offset by the ever increasing competition, and the lower volume
of installment loans. This mainly accounted for the increase in loan
interest income of $1,423,000 or 7.6%.

The average balance of investment securities (including mortgage-backed
securities) decreased by $2.4 million, or 4.0%, to $58.7 million for the
year ended December 31, 2000, from $61.1 million for the year ended
December 31, 1999. Higher interest rates during 2000 partially offset the
volume decrease in the investment portfolio as total interest and dividend
income was down only 1.9%. Union extended the investment maturity window
during 2000 in order to take advantage of the higher interest rates. The
average level of federal funds sold decreased by $3.2 million, or 37.5%, to
$5.4 million for the year ended December 31, 2000, from $8.6 million for
the year ended December 31, 1999. The average balances invested in
interest-bearing deposits decreased to $2.0 million at December 31, 2000
from $2.2 million, or 11.7%, at December 31, 1999. These deposits are FDIC
insured.

Interest Expense. Union's interest expense increased by $756,000, or 8.3%,
to $9.9 million for the year ended December 31, 2000, from $9.1 million for
the year ended December 31, 1999. Average interest-bearing liabilities
increased by $4.4 million, or 1.9% to $230.2 million for the year ended
December 31, 2000, from $225.9 million for the year ended December 31,
1999. Average time deposits decreased $330 thousand, or .3%, to $98.6
million for the year ended December 31, 2000, from $98.9 million for the
year ended December 31, 1999. The average balances for NOW accounts
decreased by $271 thousand to $34.4 million for the year ended December 31,
2000, from $34.7 million for the year ended December 31, 1999. The average
balances in savings and money market accounts grew to $90.9 million in 2000
from $87.4 million in 1999 or a 4.1% increase. Higher interest rates
prevailed for all interest-bearing liabilities for the current year.

Noninterest Income. Union's noninterest income increased only $1,000 for
the year ended December 31, 2000. The results for the period reflected a
net gain of $34 thousand from the sale of loans compared to a net gain of
$40 thousand from these sales during 1999. The net gain on Sales of
Securities was $25 thousand for 2000 compared to $3 thousand for 1999.
These changes can be explained by management's decision to retain in
portfolio a higher percentage of loans that could be sold due to the
interest rate environment and the reinvestment rates available. Service
fees (sources of which include deposit fees, loan servicing fees, and ATM
fees) decreased by $19,000, or 0.9%, to $2.21 million for the year ended
December 31, 2000, from $2.23 million for the year ended December 31, 1999.
Trust income increased to $182,000 in 2000 from $166,000 in 1999 or a 9.6%
increase. Other noninterest income decreased by $11,000, or 8.4%, to $120
thousand for 2000 from $131 thousand for 1999.

Noninterest Expense. Union's noninterest expense decreased $121,000, or
1.2%, to $9.9 million for the year ended December 31, 2000, from $10.1
million for the year ended December 31, 1999. Salaries increased $260,000,
or 6.1%, to $4.5 million for the year ended December 31, 2000, from $4.2
million for the year ended December 31, 1999, reflecting normal salary
activity and severance pay to three former CSBT employees whose jobs were
eliminated as a result of the merger and the conversion of their EDP
processing to Union Bank. Pension and employee benefits increased $40
thousand or 3.7% to $1.12 million for the year ended December 31, 2000,
from $1.08 million for the year ended December 31, 1999 mainly due to the
increase in the accrual for the Defined Benefit Pension Plan caused by
anticipated increases in future salaries and the performance decline in the
underlying investment instruments. Office occupancy expense increased $26
thousand, or 4.8%, to $560,000 for the year ended December 31, 2000, from
$535,000 for the year ended December 31, 1999. Equipment expense decreased
$131 thousand to $994 thousand for the year ended December 31, 2000, from
$1.1 million for 1999 primarily resulting from decreased depreciation cost
on computer equipment and software purchases which are depreciated as an
expense over a time period of three to five years.

Other operating expense includes approximately $500 thousand for the year
ended December 31, 1999 and $1,900 for 2000, for expenses related to the
merger, including legal and advisory fees. The other one time only expense
in 1999 was for Year 2000 preparations. Union had $59 thousand of non-
payroll-related expenses in 1999 and $1.5 thousand in 2000. Netting out
these one-time only expenses would leave $2.77 million of other operating
expenses for the year ended December 31, 2000 compared to $2.53 million for
1999 or a 9.4% increase. The increase was mainly attributable to the
listing of the Company on the American Stock Exchange, increases in State
franchise taxes paid, FDIC assessments paid, communications expense,
charitable contributions, training expense, travel expense, and fees paid
to the Small Business Administration.

Income Tax Expense. Union's income tax expense increased by $10,000, or
0.5%, to $1.825 million for the year ended December 31, 2000, from $1.815
million for 1999 mainly due to increased taxable income offset by the low
income housing and historic rehabilitation credits that are available to us
in both the 2000 and 1999 tax years related to our partnership investments
in low income housing projects sponsored by Housing Vermont in our market
area. Our effective tax rate for 2000 was 27.5% compared to 30.8% for 1999.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.

Interest and Dividend Income. Union's interest and dividend income
increased by $242,000, or 1.07%, to $22.9 million for the year ended
December 31, 1999, from $22.6 million for the year ended December 31, 1998.
Average earning assets increased by $17.9 million, or 7.0%, to $274.6
million for the year ended December 31, 1999, from $256.7 million for the
year ended December 31, 1998. Average loans were $202.7 million for the
year ended December 31, 1999 up from $194.7 million for the year ended
December 31, 1998. Increases in commercial, construction and real estate
secured loans were partially offset by a decrease in average municipal
loans. Decreases in loan interest rates led by the average prime rate for
1999 being 7.9%, down from 8.35% in 1998, and ever increasing competition,
and the lower volume of municipal loans mainly accounted for the decrease
in loan interest income of $201,000 or 1.1%.

The average balance of investment securities (including mortgage-backed
securities) increased by $9.4 million, or 18.3%, to $61.1 million for the
year ended December 31, 1999, from $51.7 million for the year ended
December 31, 1998. Lower interest rates during 1999 partially offset the
volume increase in the investment portfolio as total interest and dividend
income was only up 13.5%. Union deliberately kept the investment maturity
window shorter in 1999 in order to be able to more quickly take advantage
of an increase in interest rates in the future. The average level of
federal funds sold decreased slightly by $195,000, or 2.2%, to $8.6 million
for the year ended December 31, 1999, from $8.8 million for the year ended
December 31, 1998. The average balances invested in interest-bearing
deposits increased to $2.2 million at December 31, 1999 from $1.5 million,
or 48.8%, at December 31, 1999. These deposits are FDIC insured and were an
under-utilized investment vehicle until 1998.

Interest Expense. Union's interest expense decreased by $131,000, or 1.4%,
to $9.1 million for the year ended December 31, 1999, from $9.2 million for
the year ended December 31, 1998. Average interest-bearing liabilities
increased by $12.7 million, or 6.0% to $225.9 million for the year ended
December 31, 1999, from $213.2 million for the year ended December 31,
1998. Average time deposits decreased $2.7 million, or 2.6%, to $98.9
million for the year ended December 31, 1999, from $101.6 million for the
year ended December 31, 1998. The average balances for NOW accounts
increased by $3.7 million to $34.7 million for the year ended December 31,
1999, from $31 million for the year ended December 31, 1998. The average
balances in savings and money market accounts grew to $87.4 million in 1999
from $75.6 million in 1998 or a 15.6% increase. Lower interest rates
prevailed for all interest bearing liabilities for the current year.

Noninterest Income. Union's noninterest income decreased $343,000, or
11.8%, to $2.6 million for the year ended December 31, 1999, from $2.9
million for the year ended December 31, 1998. The results for the period
reflected a net gain of $40 thousand from the sale of loans compared to a
net gain of $302 thousand from these sales during 1998. The net gain on
Sale of Securities was $3 thousand for 1999 compared to $150 thousand for
1998. These changes can be explained by management's decision to retain in
portfolio a higher percentage of loans and securities that could be sold
due to the dropping interest rate environment and the reinvestment rates
available. Service fees (sources of which include deposit fees, loan
servicing fees, and ATM fees) increased by $83,000, or 3.9%, to $2.2
million for the year ended December 31, 1999, from $2.1 million for the
year ended December 31, 1998. Trust income increased from $166,000 in 1999
from $120,000 in 1998 or a 37.7% increase. Other noninterest income
decreased by $62,000, or 32.2%, to $131,000 for the year ended December 31,
1999, from $193,000 for the previous year due mainly to the decrease in
Gain on Mortgage Servicing Rights because we decided to hold more loans
generated in portfolio in 1999 due to the rate environment.

Noninterest Expense. Union's noninterest expense increased $787,000, or
8.5%, to $10.1 million for the year ended December 31, 1999, from $9.3
million for the year ended December 31, 1998. Salaries increased $123,000,
or 3%, to $4.2 million for the year ended December 31, 1999, from $4.1
million for the year ended December 31, 1998, reflecting normal salary
activity. Pension and employee benefits increased $25 thousand or 2.4% or
$1.08 million for the year ended December 31, 1999, from $1.06 million for
the year ended December 31, 1998 mainly due to the increase in the accrual
for the Defined Benefit Pension Plan caused by anticipated increases in
future salaries and the performance decline in the underlying investment
instruments. Office occupancy expense increased $32 thousand, or 6.4%, to
$535,000 for the year ended December 31, 1999, from $503,000 for the year
ended December 31, 1998. Equipment expense increased $120 thousand to $1.1
million for the year ended December 31, 1999, from $1 million for 1998
primarily resulting from increased depreciation cost on computer equipment
and software purchases which are depreciated as an expense over a time
period of three to five years.

Other operating expense includes $500,000 for the year ended December 31,
1999, for expenses related to the merger, including legal and advisory
fees, compared to $34 thousand during 1998. The other one time only expense
in both 1999 and 1998 was for Year 2000 preparations. Union had $59
thousand of non-payroll-related expenses in 1999 and $18 thousand in 1998.
Netting out these one-time only expenses would leave $2.53 million of other
operating expenses for the year ended December 31, 1999 compared to $2.55
million for 1998 or a 2.8% decrease.

Income Tax Expense. Union's income tax expense decreased by $240,000, or
11.7%, to $1.8 million for the year ended December 31, 1999, from $2.05
million for 1998 mainly due to the low income housing and historic
rehabilitation credits that are available to us for the 1999 tax year
relating to our partnership investment in a low income housing project
sponsored by Housing Vermont in our market area. Our effective tax rate for
1999 was 30.8% compared to 31.1% for 1998.

                             FINANCIAL CONDITION

At December 31, 2000, Union had total consolidated assets of $303 million,
including net loans and loans held for sale of $222 million, deposits of
$259 million and shareholders' equity of $35 million. Based on the most
recent information published by the Vermont Banking Commissioner, in terms
of total assets at December 31, 1999, Union Bank ranked as the 11th largest
institution of the 26 commercial banks and savings institutions
headquartered in Vermont and Citizens ranked 20th.

Union's total assets increased by $7.9 million or 2.7% to $303.4 million at
December 31, 2000 from $295.5 million at December 31, 1999. Total net loans
and loans held for sale increased by $15.4 million or 7.5% to $221.9
million or 73.1% of total assets at December 31, 2000 as compared to $206.5
million or 69.9% of total assets at December 31, 1999, due to increases of
$4.8 million in commercial real estate loans, $5.9 million increase in real
estate loans, $4.3 million increase in commercial loans, $2.7 million
increase in municipal loans, partially offset by a $3.3 million decrease in
loans to consumers. Cash and Due from banks decreased from $11.6 million to
$10.4 million between year ends due to Y2K liquidity buildup at December
31, 1999. Federal funds sold decreased approximately $2.4 million or 69.2%
to $1.1 million at December 31, 2000 from $3.5 million at December 31,
1999, which was primarily attributable to an increase in loans. Total
deposits increased $1.1 million or 0.4% to $258.7 million at December 31,
2000 from $257.6 million at December 31, 1999. A $5.4 million or 5.9%
decrease in money market and savings accounts to $85.9 million from $91.3
million was offset by an increase in time deposits of $5.1 million or 5.4%
raising time deposits to $100.9 million at December 31, 2000 from $95.8
million at December 31, 1999. This change was partially Y2K related as
depositors were willing to commit their funds to term deposits once again.
Total borrowings increased approximately $3.5 million to $6.4 million at
December 31, 2000 from $2.9 million at December 31, 1999 due to the match
funding of certain loan commitments and the slow down in deposit growth.

Total equity increased by $2.9 million or 9.1% to $35.2 million at December
31, 2000 from $32.2 million at December 31, 1999 as a result of a decrease
of $1.1 million in the net unrealized holding loss on securities available-
for-sale and dividend payments of $3.0 million which were offset with net
income of $4.8 million and the exercise of employee stock options for
$2,000.

Loan Portfolio. Union's loan portfolio primarily consists of adjustable-
and fixed-rate mortgage loans secured by one-to-four family, multi-family
residential or commercial real estate. The composition of Union's gross
loan portfolio net of loans held for sale at December 31 for each of the
last five years was as follows:

<TABLE>
<CAPTION>
                              2000          1999          1998          1997          1996
                           ----------------------------------------------------------------

<S>                        <C>           <C>           <C>           <C>           <C>
Real Estate                $ 93,005      $ 87,154      $ 76,832      $ 81,760      $ 78,664
Commercial Real Estate       74,580        69,807        67,707        52,797        53,334
Commercial                   20,594        16,246        17,446        15,786        14,037
Consumer                     15,379        18,661        23,519        26,599        26,793
Term Federal Funds Sold           0             0         1,000         3,000             0
Municipal                    12,335         9,657         8,830        16,034        10,283
                           ----------------------------------------------------------------

      Total Loans          $215,893      $201,525      $195,344      $195,976      $183,111
                           ================================================================
</TABLE>

Union originates and sells residential mortgages into the secondary market,
with most such sales made to the Federal Home Loan Mortgage Corporation
(FHLMC). Union services a $130.8 million residential mortgage portfolio,
approximately $48 million of which is serviced for unaffiliated third
parties at December 31, 2000. Additionally, Union originates commercial
loans under various SBA programs that provide an agency guarantee for a
portion of the loan amount. Union occasionally will sell the guaranteed
portion of the loan to other financial concerns and will retain servicing
rights, which generates fee income. Union capitalizes mortgage servicing
rights on these fees and recognizes gains and losses on the sale of the
principal portion of these notes as they occur. Union services
approximately $13.6 million of commercial and commercial real estate loans
that have been previously sold.

Total loans not held for sale have increased $14.4 million or 7.1% since
December 31, 1999. The majority of this increase is due to management's
decision to hold in portfolio many loans that could be sold on the
secondary market. This strategy will increase our interest margin and
combined with our increased deposit base and overall borrowing capacity has
not affected our liquidity adversely.

The following table breaks down by loan type the maturities of the loans
held in portfolio and held for sale as of December 31, 2000:

<TABLE>
<CAPTION>
                       Within 1        2-5         Over 5
                         Year         Years        Years
                       ----------------------------------
                              (Dollars in thousands)

<S>                     <C>          <C>          <C>
Real Estate
  Fixed Rate            $14,678      $16,513      $ 42,657
  Variable Rate             904        4,013        18,475
Commercial
  Fixed Rate              8,011       18,927        14,067
  Variable Rate          10,433       12,485        36,079
Municipal
  Fixed Rate             11,601          547           187
  Variable Rate               0            0             0
Installment
  Fixed Rate              7,113        6,787           308
  Variable Rate             543           13            31
Other                       674            0             0
                        ----------------------------------

      Total             $53,957      $59,285      $111,804
                        ==================================
</TABLE>

Asset Quality. Union, like all financial institutions, is exposed to
certain credit risks related to the value of the collateral that secures
its loans and the ability of borrowers to repay their loans. Management
closely monitors Union's loan and investment portfolios and other real
estate owned for potential problems on a periodic basis and reports to
Union's Board of Directors at regularly scheduled meetings.

Union had loans on non-accrual status totaling $1.5 million at December 31,
2000 and $951,000 at December 31, 1999. The aggregate interest on non-
accrual loans not recognized through December 31, 2000 was $288,512,
through 1999 was $182,610, and through 1998 was $110,930.

Union had $2.9 million and $3.2 million in loans past due 90 days or more
and still accruing at December 31, 2000 and 1999, respectively. At December
31, 2000, Union had internally classified certain loans totaling $1.3
million and $1.6 million at December 31. 1999. In management's view, such
loans represent a higher degree of risk and could become nonperforming
loans in the future. While still on a performing status, in accordance with
Union's credit policy, loans are internally classified when a review
indicates any of the following conditions making the likelihood of
collection questionable:

*   the financial condition of the borrower is unsatisfactory;
*   repayment terms have not been met;
*   the borrower has sustained losses that are sizable, either in absolute
    terms or relative to net worth;
*   confidence is diminished;
*   loan covenants have been violated;
*   collateral is inadequate; or
*   other unfavorable factors are present.

At December 31, 2000, Union had acquired by foreclosure or through
repossession real estate worth $116,293, consisting of commercial property
and undeveloped land. The balance at December 31, 1999 was $26,667.

Allowance for Loan Losses. Some of Union's loan customers ultimately do not
make all of their contractually scheduled payments, requiring Union to
charge off the remaining principal balance due. Union maintains an
allowance for loan losses to absorb such losses. While Union allocates the
allowance for loan losses based on the percentage category to total loans,
the portion of the allowance for loan losses allocated to each category
does not represent the total available for future losses which may occur
within the loan category since the total allowance for possible loan losses
is a valuation reserve applicable to the entire portfolio.

The following table reflects activity in the allowance for loan losses for
the years ended December 31, 2000, 1999, 1998, 1997,
and 1996.

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                         ------------------------------------------------------
                                          2000        1999        1998        1997        1996
                                         ------------------------------------------------------
                                                         (Dollars in thousands)

<S>                                      <C>         <C>         <C>         <C>         <C>
Balance at the beginning of period       $2,870      $2,845      $2,811      $2,844      $2,710
Charge-offs:
  Real Estate                                 0          41          49          31          45
  Commercial                                152          49          67         150         148
  Consumer and other                        229         338         371         368         377
                                         ------------------------------------------------------
      Total charge-offs                     381         428         487         549         570
                                         ------------------------------------------------------
Recoveries:
  Real Estate                                 1           3           0           4          22
  Commercial                                 34          14          33          15          20
  Consumer and other                         77          77          88          72          68
                                         ------------------------------------------------------
      Total recoveries                      124          94         121          91         110
                                         ------------------------------------------------------

Net charge-offs                            (257)       (334)       (366)       (458)       (460)
Provision for loan losses                   250         359         400         425         580
Transfer from Other Reserve                   0           0           0           0          14
                                         ------------------------------------------------------
Balance at end of period                 $2,863      $2,870      $2,845      $2,811      $2,844
                                         ======================================================
</TABLE>

The following table shows the breakdown of Union's allowance for loan loss
by category of loan and the percentage of loans in each category to total
loans in the respective portfolios at the dates indicated:

<TABLE>
<CAPTION>
                                  December 31,        December 31,        December 31,        December 31,        December 31,
                                     2000                1999                1998                1997                1996
                               -------------------------------------------------------------------------------------------------
                               Amount    Percent   Amount    Percent   Amount    Percent   Amount    Percent   Amount    Percent
                               -------------------------------------------------------------------------------------------------
                                                                    (Dollars in thousands)

<S>                            <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Real Estate
  Residential                  $  595     40.5%    $  557     42.3%    $  255     39.5%    $  278     36.8%    $  230     36.7%
  Commercial                    1,193     32.3%     1,014     30.6%       754     29.5%       774     27.9%       949     30.7%
  Construction                    102      4.5%        77      3.7%        12      3.8%        10      2.1%         9      2.5%
Other Loans
  Commercial                      401      9.1%       416      8.1%       498      9.0%       601      9.3%       583      7.4%
  Consumer installment            319      6.5%       448      8.6%       545     11.3%       659     12.9%       662     13.8%
  Home equity loans                31      1.8%        28      1.8%        21      2.3%        25      2.8%        27      3.1%
  Municipal, Other and
   Unallocated                    221      5.3%       330      4.9%       760      4.6%       464      8.2%       384      5.8%
                               -----------------------------------------------------------------------------------------------
      Total                    $2,863    100.0%    $2,870    100.0%    $2,845    100.0%    $2,811    100.0%    $2,844    100.0%
                               ===============================================================================================
Ratio of Net Charge-Offs
 to Average Loans                          .12%                .16%                .19%                .24%                .25%
Ratio of Allowance for
 Loan Losses to Loans                     1.33%               1.42%               1.46%               1.39%               1.50%
</TABLE>

Investment Activities. At December 31, 2000, the reported value of
investment securities available-for-sale was $56.6 million or 18.7% of
assets. Union had no securities classified as held-to-maturity or trading.
The adoption of FASB No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," has had an impact on our investment portfolio. This
accounting standard, effective for 1994 statements, requires banks to
recognize all appreciation or depreciation of the investment portfolio
either on the balance sheet or through the income statement even though a
gain or loss has not been realized. These changes require securities
classified as "trading securities" to be marked to market with any gain or
loss charged to income. Securities classified as "available-for-sale" are
marked to market with any gain or loss after taxes charged to the equity
portion of the balance sheet. Securities classified as "held-to-maturity"
are to be held at book value. The reported value of securities available-
for-sale at December 31, 2000 reflects a negative valuation adjustment of
$43 thousand. The offset of this adjustment, net of income tax effect, was
a $28 thousand decrease in Union's other comprehensive income component of
shareholders' equity and an increase in net deferred tax assets of $15
thousand.

The following tables show as of December 31, 2000 and 1999 the amortized
cost of Union's investment portfolio maturing within the stated period.

<TABLE>
<CAPTION>
                                                                            At December 31, 2000
                                                ----------------------------------------------------------------------------
                                                                 Maturities
                                                ----------------------------------------------------------------------------
                                                 Within      One to      Five to       Over          Total       Weighted
                                                One Year   Five Years   Ten Years    Ten Years       Cost      Average Yield
                                                                           (Dollars in thousands)
                                                ----------------------------------------------------------------------------

<S>                                              <C>         <C>          <C>          <C>         <C>            <C>
Securities available-for-sale:
  U.S. Government, Agency and Corporation
   securities                                    $5,998      $10,706      $ 5,196      $  500      $22,400         6.23%
  Mortgage-backed securities                        137        1,155        3,039       3,437        7,768         6.54%
  State and political subdivisions                   25          682        3,993         215        4,915         6.19%
  Corporate debt securities                       1,001       15,840        2,890       1,243       20,974         6.39%
  Marketable equity securities                        0            0            0         628          628         8.47%
                                                 ----------------------------------------------------------------------
Total Investment Securities                      $7,161      $28,383      $15,118      $6,023      $56,685         6.35%
                                                 ======================================================================
Fair Value                                       $7,146      $28,740      $14,346      $6,410      $56,642
                                                 =========================================================

Weighted Average Yield                            5.62%        6.52%        6.12%       6.91%        6.35%

<CAPTION>
                                                                            At December 31, 1999
                                                ----------------------------------------------------------------------------
                                                                 Maturities
                                                ----------------------------------------------------------------------------
                                                 Within      One to      Five to       Over          Total       Weighted
                                                One Year   Five Years   Ten Years    Ten Years       Cost      Average Yield
                                                                           (Dollars in thousands)
                                                ----------------------------------------------------------------------------

Securities available-for-sale:
  U.S. Government, Agency and Corporation
   securities                                    $7,499      $13,235      $ 7,948      $  500      $29,182         5.96%
  Mortgage-backed securities                          0        2,298        1,827       2,199        6,324         6.48%
  State and political subdivisions                   25           73        3,743       1,206        5,047         6.24%
  Corporate debt securities                         751       13,837        4,312       2,143       21,043         6.33%
  Marketable equity securities                        0            0            0         558          558        10.94%
                                                 ----------------------------------------------------------------------
Total Investment Securities                      $8,275      $29,443      $17,830      $6,606      $62,154         6.20%
                                                 ======================================================================
Fair Value                                       $8,245      $28,810      $17,009      $6,377      $60,441
                                                 =========================================================

Weighted Average Yield                            5.52%        6.15%        6.32%       7.02%        6.20%
</TABLE>

Deposits. The following table shows information concerning Union's deposits
by account type, and the weighted average nominal rates at which interest
was paid on such deposits as of December 31, 2000 and December 31, 1999:

<TABLE>
<CAPTION>
                                              Year Ended December 31,               Year Ended December 31,
                                                       2000                                  1999
                                       -----------------------------------------------------------------------
                                                     Percent                               Percent
                                        Average      of Total    Average      Average      of Total    Average
                                        Amount       Deposits     Rate        Amount       Deposits     Rate
                                       -----------------------------------------------------------------------
                                                                  (Dollars in thousands)

<S>                                    <C>           <C>          <C>        <C>           <C>          <C>
Non-certificate deposits:
  Demand deposits                      $ 32,906       12.81%                 $ 32,505       12.83%
  Now accounts                           34,383       13.39%      2.04%        34,654       13.67%      1.95%
  Money Markets                          53,770       20.94%      4.45%        49,296       19.45%      4.14%
  Savings and other                      37,153       14.47%      2.72%        38,064       15.02%      2.71%
                                       --------------------                  --------------------
  Total non-certificate deposits        158,212       61.61%                  154,519       60.97%
                                       --------------------                  --------------------
Certificates of deposit:
  Less than $100,000                     75,483       29.40%      5.29%        78,031       30.79%      5.05%
  $100,000 and over                      23,088        8.99%      5.89%        20,870        8.24%      5.48%
                                       --------------------                  --------------------
      Total certificates of deposit      98,571       38.39%                   98,901       39.03%
                                       --------------------                  --------------------
Total deposits                         $256,783      100.00%      3.68%      $253,420      100.00%      3.49%
                                       =====================================================================
</TABLE>

The following table sets forth information regarding the amounts of Union's
certificates of deposit in amounts of $100,000 or more at December 31, 2000
and December 31, 1999 that mature during the periods indicated:

<TABLE>
<CAPTION>
                               December 31, 2000   December 31, 1999
                               -------------------------------------
                                     (Dollars in thousands)

<S>                                 <C>                 <C>
Within 3 months                     $ 6,757             $ 2,301
3 to 6 months                        11,259              11,872
6 to 12 months                        4,439               3,751
Over 12 months                        3,739               3,491
                                    ---------------------------
                                    $26,194             $21,415
                                    ===========================
</TABLE>

Borrowings. Borrowings from the Federal Home Loan Bank of Boston were $6.4
million at December 31, 2000 at a weighted average rate of 6.6%. Borrowings
totaled $2.9 million at December 31, 1999 have a weighted average rate of
5.77%. (See Footnote 11 to the Financial Statements for details.)

Other Financial Considerations

Market Risk and Asset and Liability Management. Market risk is the risk of
loss in a financial instrument arising from adverse changes in market
prices and rates, foreign currency exchange rates, commodity prices and
equity prices. Union's market risk arises primarily from interest rate risk
inherent in its lending, investing, and deposit taking activities. To that
end, management actively monitors and manages its interest rate risk
exposure. Union does not have any market risk sensitive instruments
acquired for trading purposes. Union attempts to structure its balance
sheet to maximize net interest income while controlling its exposure to
interest rate risk. Union's Asset/Liability Committee formulates strategies
to manage interest rate risk by evaluating the impact on earnings and
capital of such factors as current interest rate forecasts and economic
indicators, potential changes in such forecasts and indicators, liquidity,
and various business strategies. Union's Asset/Liability Committee's
methods for evaluating interest rate risk include an analysis of Union's
interest-rate sensitivity "gap", which provides a static analysis of the
maturity and repricing characteristics of Union's entire balance sheet, and
a simulation analysis, which calculates projected net interest income based
on alternative balance sheet and interest rate scenarios, including "rate
shock" scenarios involving substantial increases or decreases in market
rates of interest.

Union's Asset/Liability Committee meets at least weekly to set loan and
deposit rates, make investment decisions, monitor liquidity and evaluate
the loan demand pipeline. Deposit runoff is monitored daily and loan
prepayments evaluated monthly. Union historically has maintained a
substantial portion of its loan portfolio on a variable rate basis and
plans to continue this ALM strategy in the future. The investment portfolio
is all classified as available for sale and the modified duration is
relatively short. Union does not utilize any derivative products or invest
in any "high risk" instruments.

Our interest rate sensitivity analysis (simulation) as of December 1999 for
a flat rate environment projected a Net Interest Income of $13.7 million
for 2000 compared to actual results of $14.2 million or a 3.6% difference.
Interest rates were up in 2000 almost equally on both interest earning
assets and liabilities. We had higher demand for loans than anticipated
which resulted in our percentage of interest-earning assets to total assets
increasing to 93.9% and we shifted resources from lower yielding assets to
loans. Our net interest margin for 2000 was 5.19% and our net interest
spread was 4.40%. Net income was projected to be $4.3 million compared to
actual results of $4.8 million. Of the $451 thousand difference, $369
thousand relates to the increase in net interest income offset by $2
thousand in merger-related expense, $18 thousand for American Stock
Exchange listing expenses, and $2 thousand of Y2K expense, which were not
included in our analysis as they are unusual, one time expenses. The other
unanticipated factor was the Company's investment in a low-income housing
project which generated $128 thousand in Federal Income Tax credits for
2000. Return on Assets was 1.61% compared to our projection of 1.46%.
Return on Equity was 14.22% compared to our projection of 13.08%. These two
ratios were higher based on higher net income as explained above and higher
average balances than anticipated.

The Company generally requires collateral or other security to support
financial instruments with credit risk. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. (See Footnote 14 to the Financial Statements for details)

Interest Rate Sensitivity "Gap" Analysis. An interest rate sensitivity
"gap" is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time
period. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities.
A gap is considered negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets. During a
period of rising interest rates, a negative gap would tend to adversely
affect net interest income, while a positive gap would tend to result in an
increase in net interest income. During a period of falling interest rates,
a negative gap would tend to result in an increase in net interest income,
while a positive gap would tend to affect net interest income adversely.
Because different types of assets and liabilities with the same or similar
maturities may react differently to changes in overall market interest
rates or conditions, changes in interest rates may affect net interest
income positively or negatively even if an institution were perfectly
matched in each maturity category.

Union prepares its interest rate sensitivity "gap" analysis by scheduling
interest-earning assets and interest-bearing liabilities into periods based
upon the next date on which such assets and liabilities could mature or
reprice. The amounts of assets and liabilities shown within a particular
period were determined in accordance with the contractual terms of the
assets and liabilities,
except that:

*   adjustable-rate loans, securities, and FHLB advances are included in
    the period when they are first scheduled to adjust and not in the period
    in which they mature;

*   fixed-rate mortgage-related securities reflect estimated prepayments,
    which were estimated based on analyses of broker estimates, the results
    of a prepayment model utilized by Union, and empirical data;

*   fixed-rate loans reflect scheduled contractual amortization, with no
    estimated prepayments; and

*   NOW, money markets, and savings deposits, which do not have contractual
    maturities, reflect estimated levels of attrition, which are based on
    detailed studies by Union of the sensitivity of each such category of
    deposit to changes in interest rates.

Management believes that these assumptions approximate actual experience
and considers them reasonable. However, the interest rate sensitivity of
Union's assets and liabilities in the tables could vary substantially if
different assumptions were used or actual experience differs from the
historical experience on which the assumptions are based.

The following tables show Union's rate sensitivity analysis as of December
31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                               December 31, 2000
                                                                          Cumulative repriced within
                                                   -------------------------------------------------------------------------
                                                   3 Months     4 to 12       1 to 3       3 to 5       Over 5
                                                   or Less      Months        Years        Years        Years         Total
                                                   -------------------------------------------------------------------------
                                                                   (Dollars in thousands, by repricing date)

<S>                                                <C>          <C>          <C>          <C>          <C>          <C>
Interest sensitive assets:
  Federal funds sold                               $ 1,070      $     0      $     0      $     0      $     0      $  1,070
  Interest-bearing deposits                            174          586          770          191            0         1,721
  Investments available for sale (1)                 2,245        6,641       15,785       13,455       17,402        55,528
  FHLB / VBSC Stock                                      0            0            0            0        1,017         1,017
  Loans (2)                                         59,092       41,549       36,150       29,462       58,543       224,796
                                                   -------------------------------------------------------------------------
      Total interest sensitive assets              $62,581      $48,776      $52,705      $43,108      $76,962      $284,132
                                                   =========================================================================

Interest sensitive liabilities:
  Time deposits                                    $29,006      $56,150      $14,100      $ 1,658      $     2      $100,916
  Money markets                                     18,215            0            0            0       32,495        50,710
  Regular savings                                    4,297            0            0            0       30,913        35,210
  Now accounts                                      20,698            0            0            0       17,656        38,354
  Borrowed funds (3)                                 2,072          265        3,295          591          159         6,382
                                                   -------------------------------------------------------------------------
      Total interest sensitive liabilities         $74,288      $56,415      $17,395      $ 2,249      $81,225      $231,572
                                                   =========================================================================

Net interest rate sensitivity gap                  (11,707)      (7,639)      35,310       40,859       (4,263)       52,560
Cumulative net interest rate sensitivity gap       (11,707)     (19,346)      15,964       56,823       52,560
Cumulative net interest rate sensitivity gap
 as a percentage of total assets                    (3.86)%      (6.38)%      5.26%        18.73%       17.32%
Cumulative interest sensitivity gap as a
 percentage of total interest-earning assets        (4.12)%      (6.81)%      5.62%        20.00%       18.50%
Cumulative net interest earning assets as a
 percentage of cumulative interest-bearing
 liabilities                                        (5.06)%      (8.35)%      6.89%        24.54%       22.70%

<FN>
-------------------
<F1>  Investments available for sale exclude marketable equity securities
      with a fair value of $1,114,000 which may be sold by Union at any time.
<F2>  Balances shown net of unearned income of $250,374.
<F3>  Estimated repayment assumptions considered in Asset/Liability model.
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                                                               December 31, 1999
                                                                          Cumulative repriced within
                                                   -------------------------------------------------------------------------
                                                   3 Months     4 to 12       1 to 3       3 to 5       Over 5
                                                   or Less      Months        Years        Years        Years         Total
                                                   -------------------------------------------------------------------------
                                                                   (Dollars in thousands, by repricing date)

<S>                                                <C>          <C>          <C>          <C>          <C>           <C>
Interest sensitive assets:
  Federal funds sold                               $ 3,474      $     0      $     0      $     0      $      0      $  3,474
  Interest-bearing deposits                            297          793          673          194             0         1,957
  Investments available for sale (1)                 2,001        6,244       13,406       15,404        22,707        59,762
  FHLB / VBSC Stock                                      0            0            0            0           941           941
  Loans (2)                                         53,401       34,614       16,778       26,891        77,669       209,353
                                                   --------------------------------------------------------------------------
      Total interest sensitive assets              $59,173      $41,651      $30,857      $42,489      $101,317      $275,487
                                                   ==========================================================================

Interest sensitive liabilities:
  Time deposits                                    $21,242      $50,499      $22,867      $ 1,174      $      0      $ 95,782
  Money markets                                     43,825            0            0            0        10,952        54,777
  Regular saving                                     2,084        3,485            0            0        30,939        36,508
  Now accounts                                      15,533            0            0            0        22,004        37,537
  Borrowed funds (3)                                   745          235          685          755           452         2,872
                                                   --------------------------------------------------------------------------
      Total interest sensitive liabilities         $83,429      $54,219      $23,552      $ 1,929      $ 64,347      $227,476
                                                   ==========================================================================

Net interest rate sensitivity gap                  (24,256)     (12,568)       7,305       40,560        36,970        48,011
Cumulative net interest rate sensitivity gap       (24,256)     (36,824)     (29,519)      11,041        48,011
Cumulative net interest rate sensitivity gap
 as a percentage of total assets                   (8.21)%      (12.46)%     (9.99)%        3.74%        16.25%
Cumulative interest sensitivity gap as a
 percentage of total interest-earning assets       (8.80)%      (13.37)%    (10.72)%        4.01%        17.43%
Cumulative net interest earning assets as a
 percentage of cumulative interest-bearing
 liabilities                                      (10.66)%      (16.19)%    (12.98)%        4.85%        21.10%

<FN>
-------------------
<F1>  Investments available for sale exclude marketable equity securities
      with a fair value of $676,000 which may be sold by Union at any time.
<F2>  Balances shown net of unearned income of $273,305.
<F3>  Estimated repayment assumptions considered in Asset/Liability model.
</FN>
</TABLE>

Simulation Analysis. In its simulation analysis, Union uses computer
software to simulate the estimated impact on net interest income and
capital under various interest rate scenarios, balance sheet trends, and
strategies. These simulations incorporate assumptions about balance sheet
dynamics such as loans and deposit growth, product pricing, changes in
funding mix, and asset and liability repricing and maturity
characteristics. Based on the results of these simulations, Union is able
to quantify its interest rate risk and develop and implement appropriate
strategies.

The following chart reflects the results of our latest simulation analysis
for next year end on Net Interest Income, Net Income, Return on Assets,
Return on Equity and Capital Value. The projection utilizes a rate shock of
300 basis points from the year end prime rate of 9.5%; this is the highest
internal slope monitored and shows the best and worse scenarios analyzed.
This slope range was determined to be the most relevant during this
economic cycle.

                           UNION BANKSHARES, INC.
                  INTEREST RATE SENSITIVITY ANALYSIS MATRIX
                             DECEMBER 31, 2000
                               (in thousands)

<TABLE>
<CAPTION>
   Year          Prime   Net Interest   Change      Net      Return on   Return on    Capital      Change
  Ending         Rate       Income        %        Income    Assets %    Equity %      Value          %
---------------------------------------------------------------------------------------------------------

<S>              <C>        <C>         <C>        <C>         <C>         <C>        <C>          <C>
December-01      12.50      $16,791      8.10      $6,748      2.18        18.16      $22,048      (24.66)
                  9.50       15,533      0.00       5,907      1.91        16.06       29,265        0.00
                  6.50       14,203     (8.56)      5,018      1.63        13.80       36,162       23.56
</TABLE>

Liquidity. Liquidity is a measurement of Union's ability to meet potential
cash requirements, including ongoing commitments to fund deposit
withdrawals, repay borrowings, fund investment and lending activities, and
for other general business purposes. Union's principal sources of funds are
deposits, amortization and prepayment of loans and securities, maturities
of investment securities and other short-term investments, sales of
securities available-for-sale, and earnings and funds provided from
operations. In addition, as both subsidiary banks are members of the FHLB,
Union has access to preapproved lines of credit up to 2.1% of total assets.
Union also has a $4 million short term preapproved line of credit with one
of their correspondent banks.

The Banks maintain IDEAL Way Lines of Credit with the Federal Home Loan
Bank of Boston. The total line available to Union Bank was $3,356,000 as of
December 31, 2000 and December 31, 1999, respectively. The total line
available to Citizens Savings Bank and Trust Company was $3,040,000 as of
both December 31, 2000 and 1999. There were no borrowings against these
lines of credit at December 31, 2000 and $667,000 at December 31, 1999.
Interest on these borrowings is chargeable at a rate determined by the
Federal Home Loan Bank and payable monthly. Should the Company utilize
these lines of credit, qualified portions of the loan and investment
portfolios would collateralize these borrowings.

While scheduled loan and securities payments and FHLB advances are
relatively predictable sources of funds, deposit flows and prepayments on
loans and mortgage-backed securities are greatly influenced by general
interest rates, economic conditions, and competition. Union's liquidity is
actively managed on a daily basis, monitored by the Asset/Liability
Committee, and reviewed periodically with the Board of Directors. Union's
Asset/Liability Committee sets liquidity targets based on Union's financial
condition and existing and projected economic and market conditions. The
committee measures Union's net loan to deposit ratio, the 90 day and 1 year
maturity gaps and long term (>3 years) assets repricing compared to total
assets on a monthly basis. The committee's primary objective is to manage
Union's liquidity position and funding sources in order to ensure that it
has the ability to meet its ongoing commitment to its depositors, to fund
loan commitments, and to maintain a portfolio of investment securities.
Since many of the loan commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent
future cash requirements.

Union's management monitors current and projected cash flows and adjusts
positions as necessary to maintain adequate levels of liquidity. Although
approximately 83.9% of Union's time deposits will mature within twelve
months, management believes, based upon past experience, that Union will
retain a substantial portion of these deposits. Management will continue to
offer a competitive but prudent pricing strategy to facilitate retention of
such deposits. Any reduction in total deposits could be offset by purchases
of federal funds, short-term FHLB borrowings, or liquidation of investment
securities or loans held for sale. Such steps could result in an increase
in Union's cost of funds and adversely impact the net interest margin.

Regulatory Capital Requirements. As of December 31, 2000, the most recent
notification from the FDIC categorized Union Bank and Citizens Savings Bank
& Trust Co. as well-capitalized under the regulatory framework for prompt
corrective action. To be categorized as well-capitalized, the banks must
maintain a minimum total risk-based capital ratio of 10%, Tier I risk-based
capital ratio of 6% and Tier I leverage ratio of 5%. (See Footnote 21 to
the Financial Statements for details on the individual banks' capital
ratios). Union's total risk based capital ratio is 17.62%, Tier 1 risk
based capital ratio is 16.27%, and Tier 1 leverage ratio is 11.74% as of
December 31, 2000. There are no conditions or events since the date of the
most recent notification that management believes might result in an
adverse change to either bank's or Union's regulatory capital category.

Impact of Inflation and Changing Prices. Union's consolidated financial
statements, included in this document, have been prepared in accordance
with generally accepted accounting principles, which require the
measurements of financial position and results of operations in terms of
historical dollars, without considering changes in the relative purchasing
power of money over time due to inflation. Banks have asset and liability
structures that are essentially monetary in nature, and their general and
administrative costs constitute relatively small percentages of total
expenses. Thus, increases in the general price levels for goods and
services have a relatively minor effect on Union's total expenses. Interest
rates have a more significant impact on Union's financial performance than
the effect of general inflation. Interest rates do not necessarily move in
the same direction or change in the same magnitude as the prices of goods
and services, although periods of increased inflation may accompany a
rising interest rate environment.

U N I O N  B A N K S H A R E S,  I N C.  A N D  S U B S I D I A R I E S
M A R K E T  F O R  U N I O N ' S  C O M M O N  S H A R E S  A N D
S H A R E H O L D E R  M A T T E R S

On March 10, 2001 there were 3,029,729 shares of common stock outstanding
held by 730 shareholders of record. The number of shareholders does not
reflect the number of persons or entities who may hold the stock in nominee
or "street name."

Union common stock was listed on the American Stock Exchange on July 13,
2000. The Company's stock trades under the symbol UNB. Cranmer and Cranmer
of New York City are the market specialists for Union Bankshares, Inc.
stock. Prior to July 13, 2000 no broker made a market in Union common stock
and trading was sporadic. The trades that occurred cannot be characterized
as an established public trading market. The stock was traded from time to
time by holders in private transactions or through brokers, and information
on bid and ask prices was not publicly reported. Therefore, the stock
prices shown below for that period reflect only the transactions known to
management. Due to the limited information available, the stock prices
shown may not accurately reflect the actual market value of Union's common
stock. The high and low prices for shares of the Company's common stock for
2000 and 1999, as well as cash dividends paid thereon is presented below:

<TABLE>
<CAPTION>
                                  2000                               1999
                    -------------------------------------------------------------------
                     High         Low      Dividends    High         Low      Dividends
                    -------------------------------------------------------------------

<S>                 <C>         <C>         <C>        <C>         <C>         <C>
First Quarter       $21.00      $15.00      $ .24      $23.00      $18.50      $ .22

Second Quarter      $18.25      $15.00      $ .24      $22.25      $21.50      $ .22

Third Quarter       $18.75      $14.94      $ .24      $21.25      $20.00      $ .22

Fourth Quarter      $17.75      $16.00      $ .26      $22.00      $21.00      $ .24
</TABLE>

On January 3, 2001 the Company declared a dividend of $ .26 per share to
stockholders of record as of January 13, 2001, payable January 17, 2001.

U N I O N  B A N K S H A R E S,  I N C.  A N D  S U B S I D I A R I E S
S H A R E H O L D E R  A S S I S T A N C E  A N D
  I N V E S T O R  I N F O R M A T I O N

If you need assistance with a change in registration of certificates,
reporting lost certificates, non-receipt or loss of dividend checks,
information about the Company, or to receive copies of financial reports,
please contact:

      JoAnn A. Tallman, Assistant Secretary
      Union Bankshares, Inc.
      P.O. Box 667
      Morrisville, VT 05661-0667
      Phone: 802-888-6600
      Facsimile: 802-888-4921
      E-mail: ubexec@together.net

Union Bankshares, Inc. is listed on the American Stock Exchange under the
Symbol UNB.

Form 10-K

A copy of the Form 10-K Report filed with the Securities and Exchange
Commission may be obtained without charge upon written request to:

      Marsha A. Mongeon, Treasurer and Chief Financial Officer
      Union Bankshares, Inc.
      P.O. Box 667
      Morrisville, VT 05661-0667

      Corporate Name: Union Bankshares, Inc.
      Corporate Transfer Agent: Union Bank, P.O. Box 667,
                                Morrisville, VT 05661-0667


DIRECTORS OF
UNION BANKSHARES, INC.

W. Arlen Smith, Chairman
Cynthia D. Borck
William T. Costa, Jr.
Kenneth D. Gibbons
Peter M. Haslam
Franklin G. Hovey II
William F. Kinney
Richard C. Marron
Robert P. Rollins
Jerry S. Rowe
Richard C. Sargent

OFFICERS OF
UNION BANKSHARES, INC.

W. Arlen Smith   Chairman
Cynthia D. Borck   Vice President
Kenneth D. Gibbons   President
Peter M. Haslam   Secretary
Marsha A. Mongeon   Vice President/Treasurer
Jerry S. Rowe   Vice President

DIRECTORS OF CITIZENS SAVINGS
BANK AND TRUST COMPANY

Cynthia D. Borck
J.R. Alexis Clouatre
William T. Costa, Jr.
Dwight A. Davis
Kenneth D. Gibbons
Franklin G. Hovey II
Jerry S. Rowe
Joseph M. Sherman

OFFICERS OF CITIZENS SAVINGS BANK
AND TRUST COMPANY

John Dinsmore                Assistant Treasurer
Tracey D. Holbrook      Assistant Vice President
Susan O. Laferriere               Vice President
Dennis J. Lamothe                      Treasurer
Michelle Leighton                 Vice President
Barbara A. Olden        Assistant Vice President
Deborah J. Partlow                 Trust Officer
Jerry S. Rowe                          President
Wendy L. Somers                    Trust Officer
David A. Weed                     Vice President

DIRECTORS OF UNION BANK

W. Arlen Smith, Chairman
Cynthia D. Borck
Kenneth D. Gibbons
Peter M Haslam
William F. Kinney
Richard C. Marron
Robert P. Rollins
Richard C. Sargent

OFFICERS OF UNION BANK

Wanda L. Allaire        Assistant Vice President
Ethan A. Allen, Jr.               Vice President
Rhonda L. Bennett                 Vice President
Cynthia D. Borck           Senior Vice President
Fern C. Farmer          Assistant Vice President
Patsy S. French         Assistant Vice President
Kenneth D. Gibbons                     President
Nathaniel M. Hayward     Commercial Loan Officer
Claire A. Hindes             Assistant Treasurer
Patricia N. Hogan                 Vice President
Peter R. Jones                    Vice President
Margaret S. Lambert     Assistant Vice President
Marsha A. Mongeon         Senior Vice President/
                                       Treasurer
Freda T. Moody          Assistant Vice President
Karen Carlson Noyes     Assistant Vice President
Colleen D. Putvain           Assistant Treasurer
Ruth P. Schwartz                  Vice President
David S. Silverman         Senior Vice President
JoAnn A. Tallman             Assistant Secretary
Francis E. Welch        Assistant Vice President
Craig S. Wiltshire                Vice President

                             UNION BANK OFFICES

   Morrisville                                  Jeffersonville
   20 Lower Main Street*                        80 Main Street*
   (802) 888-6600                               (802) 644-6600

   Northgate Plaza*                             Hyde Park
   Route 100                                    250 Main Street
   (802) 888-6860                               (802) 888-6880

   Stowe                                        Remote ATM's at:
   Stowe Village*                               Smugglers' Notch Resort (2)
   Park and Pond Streets                        Johnson State College
   (802) 253-6600                               Copley Hospital
                                                Cold Hollow Cider Mill
   1857 Mountain Road                           Trapp Family Lodge
   Route 108                                    Stowe Mountain Resort (3)
   (802) 253-6642                               Big John's Riverside Store
                                                Taft Corners, Williston
   Johnson                                      Ben and Jerry's
   198 Lower Main Street*
   (802) 635-6600                               Express
                                                Telebanking
   Hardwick                                     (802) 888-6448
   103 VT Route 15*                             (800) 583-2869
   (802) 472-8100

                             www.unionbankvt.com
*   ATM's at these branches

CITIZENS SAVINGS BANK AND TRUST COMPANY OFFICES

   St. Johnsbury                                Remote ATM's at:
   364 Railroad Street*                         East Burke, Route 114
   (802) 748-3131                               Danville, Route 2
                                                Burke Mountain Ski Area
   325 Portland Street
   (802) 748-3121                               Express Phone
                                                Banking
   Lyndonville                                  (802) 748-0815
   183 Depot Street*                            (800) 748-1018
   (802) 626-3100

   St. Johnsbury
   Center
   Green Mountain Mall*
   1998 Memorial Drive
   (802) 748-2454

                                www.csbtc.com
*   ATM's at these branches