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Dear Shareholder: | November 12, 2009 |
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The fall foliage season this year appears to have given a lift to the travel and tourism sector. The weather was cooperative, for the most part, and brilliant colors were plentiful as were the tourists who came to experience a North Country fall. We are now awaiting the winter snows and, hopefully, an influx of skiers, snowmobilers and the like. The U.S. is still experiencing a slowdown in the economy; however, Vermont and New Hampshire have fared better than most. A Wall Street Journal front page article recently cited Vermont for the lowest percentage of residential foreclosure actions in the country. Our loan portfolio has actually performed reasonably well with 2.5% growth, yet a reduction in the amount of past due loans. Last year we experienced securities write downs of $512,000, while this year our F.D.I.C. insurance costs increased $530,000. In addition, the cost of funding our employee pension plan rose $372,000, income tax expense increased $403,000, and a $204,000 increase in loan “delivery” fees assessed by FHLMC continue to make the art of cost containment a challenge. Net income year to date increased $185,000 or 4.93% fueled mainly by the sale (with servicing retained) of $53.5 million in residential mortgage loans to FHLMC. This is an increase of $38 million over the same period in 2008. The low interest rate environment has prompted many individuals to refinance or become first-time home owners. These activities have generated $800,000 in gains year to date paid to us by the secondary market. Management has determined it is prudent to sell the majority of these residential loans to shed the interest rate risk. We do not believe it is advisable to hold in portfolio fixed rate, 30 year mortgages yielding approximately 5%. We also benefit from a continuing service fee by retaining the servicing rights on these sold loans. There is much happening in the regulatory environment. As a state chartered commercial bank and publicly traded bank holding company, we are regulated by the Federal Reserve, F.D.I.C., S.E.C., HUD and Vermont Department of Banking to name only a few. So you can bet we have seen a large number of new regulations with many more proposed. One such new regulation is the proposed Consumer Federal Protection Agency (CFPA). Yes, there were deceptive, sometimes unbelievable, loan products offered mainly by non-banks and accepted by consumers. However, the vast majority of these products were not offered by community banks, as we are highly regulated. There is a need for CFPA in some form; however community banks do not need another regulator. As a shareholder of a community bank, if you have the opportunity, you should let your legislators know how regulated we already are. Recently, we were notified by Sandler O’Neill + Partners, LP, a Wall Street investment banking firm, Union Bankshares, Inc. was added to their list of 2009 SM-ALL STARS. Their list identifies the 30 top performing small cap banks and thrifts in the U.S. All 509 publicly traded banks and thrifts with a market cap of under $2 billion were evaluated with the top 30 placing in the 94th percentile or above. While the current economic conditions do present some challenges, we also see there are opportunities for growth and diversification. We manage the bank for the long term, recognize the economy will improve and are taking the necessary steps to ensure we are prepared for those opportunities. Enclosed is your dividend check or advice of deposit, representing a dividend of $0.25 per share to shareholders of record October 31, 2009, and payable November 12, 2009. Sincerely, |
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| Richard C. Sargent Chairman | Kenneth D. Gibbons President & CEO |
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3rdQuarter Report - September 30, 2009 |
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Consolidated Balance Sheets (unaudited) |
| Consolidated Statements of Income (unaudited) |
ASSETS | September 30, 2009 | September 30, 2008 |
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| 9/30/2009 | 9/30/2008 | 9/30/2009 | 9/30/2008 | ||||||||
Cash and Due from Banks | $5,088,099 | $15,789,158 |
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| (3 months ended) | (9 months ended) | ||||||||||
Federal Funds Sold & Overnight Deposits | 25,261,335 | 3,636,551 |
| Interest Income | $5,847,966 | $6,204,605 | $17,511,306 | $18,563,358 | ||||||||
Interest Bearing Deposits in Banks | 20,679,714 | 14,948,753 |
| Interest Expense | 1,276,759 | 1,790,709 | 4,123,016 | 5,491,582 | ||||||||
Investment Securities Available-for-Sale | 23,967,690 | 27,416,861 |
| Net Interest Income | 4,571,207 | 4,413,896 | 13,388,290 | 13,071,776 | ||||||||
Loans Held for Sale | 6,387,293 | 1,817,993 |
| Provision for Loan Losses | 75,000 | 45,000 | 245,000 | 185,000 | ||||||||
Loans, net | 345,532,704 | 341,474,913 |
| Net Interest Income after |
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Reserve for Loan Losses | (3,555,792) | (3,440,152) |
| Provision for Loan Losses | 4,496,207 | 4,368,896 | 13,143,290 | 12,886,776 | ||||||||
Premises and Equipment, net | 7,505,881 | 7,391,523 |
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Other Real Estate Owned | 575,000 | 1,392,411 |
| Trust Income | 96,286 | 94,827 | 277,995 | 287,609 | ||||||||
Accrued Interest & Other Assets | 12,498,952 | 12,640,042 |
| Noninterest Income | 1,411,710 | 1,261,314 | 3,853,464 | 3,382,090 | ||||||||
Total Assets |
| $443,940,876 |
| $423,068,053 |
| Noninterest Expenses: |
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| Salaries & Wages | 1,561,969 | 1,636,661 | 4,541,522 | 4,825,380 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Pension & Employee Benefits | 759,456 | 480,556 | 2,174,668 | 1,855,107 | ||||||||
Noninterest Bearing Deposits | $59,120,311 | $56,181,159 |
| Occupancy Expense, net | 223,963 | 214,823 | 741,435 | 705,262 | ||||||||
Interest Bearing Deposits | 310,323,524 | 292,439,197 |
| Equipment Expense | 264,643 | 286,902 | 844,910 | 895,952 | ||||||||
Borrowed Funds | 25,756,627 | 27,639,743 |
| Loss on Impaired Securities | 0 | 511,598 | 0 | 511,598 | ||||||||
Accrued Interest & Other Liabilities | 8,490,296 | 5,625,028 |
| FDIC Insurance | 101,067 | 13,291 | 566,390 | 36,543 | ||||||||
Common Stock | 9,843,572 | 9,843,820 |
| Other Expenses | 1,214,581 | 1,217,430 | 3,403,781 | 3,313,078 | ||||||||
Paid in Capital | 216,419 | 206,853 |
| Total | 4,125,679 | 4,361,261 | 12,272,706 | 12,142,920 | ||||||||
Retained Earnings | 36,329,615 | 35,778,764 |
| Income before Taxes | 1,878,524 | 1,363,776 | 5,002,043 | 4,413,555 | ||||||||
Accumulated Other Comprehensive Loss | (2,429,097) | (1,320,425) |
| Income Tax Expense | 433,762 | 197,867 | 1,055,393 | 652,203 | ||||||||
Treasury Stock at Cost | (3,710,391) | (3,326,086) |
| Net Income |
| $1,444,762 |
| $1,165,909 |
| $ 3,946,650 |
| $ 3,761,352 | ||||
Total Liabilities and Shareholders’ Equity |
| $443,940,876 |
| $423,068,053 |
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| Earnings per Share | $0.32 | $0.26 | $0.88 | $0.84 | ||||||||
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| Book Value per Share |
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| $9.02 | $9.14 |
Standby letters of credit were $2,361,000 and $1,772,000 at September 30, 2009 and 2008, respectively.
Directors -UNION BANKSHARES, INC & UNION BANK | OfficersUNION BANK | OfficersUNION BANK (continued) | |||||
Richard C. Sargent, Chairman | Franklin G. Hovey II | Rhonda L. Bennett | Vice President | Morrisville | Robyn A. Masi | Assistant Vice President | Stowe |
Cynthia D. Borck | Richard C. Marron | Therese H. Butler | Assistant Treasurer | Morrisville | Thomas J. Meshako | Senior Vice President | Morrisville |
Steven J. Bourgeois | Robert P. Rollins | Stacey L.B. Chase | Assistant Treasurer | Morrisville | Marsha A. Mongeon | Senior Vice President & CFO | Morrisville |
Kenneth D. Gibbons | John H. Steel | Jeffrey G. Coslett | Senior Vice President | Morrisville | Mildred R. Nelson | Vice President | Littleton |
| Schuyler W. Sweet | Michael C. Curtis | Vice President | St. Albans | Karen Carlson Noyes | Assistant Vice President | Morrisville |
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| Peter J. Eley | Senior Vice President | Morrisville | Barbara A. Olden | Vice President | Lyndonville |
Officers -UNION BANKSHARES, INC. | Kenneth D. Gibbons | President & CEO | Morrisville | Deborah J. Partlow | Asst. V.P., Senior Trust Officer | Morrisville | |
Richard C. Sargent | Chairman | Don D. Goodhue | Information Systems Officer | Morrisville | Lois J. Pigeon | Branch Manager | St. Albans |
Kenneth D. Gibbons | President & CEO | Melissa A. Greene | Assistant Vice President | Hardwick | Bradley S. Prior | Assistant Treasurer | Morrisville |
Marsha A. Mongeon | Vice President/Treasurer | Karyn J. Hale | Vice President | Morrisville | Craig S. Provost | Vice President | Stowe |
Robert P. Rollins | Secretary | Claire A. Hindes | Assistant Vice President | Morrisville | Colleen D. Putvain | Assistant Treasurer | Morrisville |
David S. Silverman | Vice President | Patricia N. Hogan | Vice President | Morrisville | Suzanne L. Roberts | Vice President | St. Johnsbury |
JoAnn A. Tallman | Assistant Secretary | Tracey D. Holbrook | Regional Vice President | St. Johnsbury | Robert P. Rollins | Secretary | Morrisville |
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| Lura L. Jacques | Asst. V.P., Trust Officer | St. Albans | Ruth P. Schwartz | Vice President | Morrisville |
Regional Advisory Board Members | Lynne P. Jewett | Assistant Vice President | Morrisville | David S. Silverman | Senior Vice President | Morrisville | |
Judy F. Aydelott-Littleton | Stanley T. Fillion-Littleton | Stephen H. Kendall | Vice President | Morrisville | Curtis C. Swan | Assistant Vice President | Fairfax |
Steven J. Bourgeois-St. Albans | Kenneth D. Gibbons-All | Susan O. Laferriere | Vice President | St. Johnsbury | JoAnn A. Tallman | Assistant Secretary | Morrisville |
J. R. Alexis Clouatre-St. Johnsbury | Franklin G. Hovey II-St. Johnsbury | Dennis J. Lamothe | Vice President | St. Johnsbury | Francis E. Welch | Assistant Vice President | Morrisville |
Coleen K. Condon-St. Albans | Samuel H. Ruggiano-St. Albans | Susan F. Lassiter | Vice President | Jeffersonville | Lorraine G. Willett | Assistant Vice President | Morrisville |
Dwight A. Davis-St. Johnsbury | Schuyler W. Sweet-Littleton | Carrie R. Locklin | Assistant Treasurer | Morrisville |
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Kirk Dwyer-St. Johnsbury | Norrine A. Williams-Littleton |
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| cover photo: Early Autumn in Albany, Vermont |