2 0 0 9 a n n u aL r e p o r t
Plan well.
Live well.
L e d ya r d n a t i o n aL b a n k 2 0 0 9 a n n u aL r e p o r t
1
m i s s i o n s t a t e m e n t
L e dya r d i s c o m m i t t e d to b e i n g t h e f i n a n c i aL s e rv i c e s i n s t i t u t i o n o f
c h o i c e b y c o m b i n i n g i n n ovat i o n w i t h u n pa r aL LeLe d p e r s o n aLi z e d
cLi e n t s e rv i c e . we o f f e r o u r e m pLoy e e s a c h aL Le n g i n g a n d r e wa r d i n g
wo r k e x p e r i e n c e . as a r e s uL t o f o u r e f f o rt s, L e dya r d cLi e n t s r e c e i v e
e x c e p t i o n aL f i n a n c i aL s e rv i c e s a n d o u r s h a r e h oLd e r s e x p e r i e n c e
c o n s i s t e n t a n d s u p e r i o r r e t u r n s.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
f i n a n c i aL h i g hLi g h t s
(dollars in thousands, except per share data)
years-ended december 31,
2009
2008
2007
2006
2005
financiaL condition d ata
assets
investments
net loans, including loans held-for-sale
deposits
federal home loan bank advances
shareholders’ equity
$ 393,615
152,473
197,593
320,129
24,718
33,082
$ 363,188
94,015
226,405
295,586
21,868
31,283
$ 325,803
53,706
228,879
276,933
1,551
30,517
$ 320,230
48,278
218,869
271,142
3,214
27,271
$ 285,495
60,601
194,893
240,828
8,857
24,391
operating data
net interest income
provision for loan loss
non-interest income
non-interest expense
income taxes
net income
$ 12,515
2,250
7,211
15,130
565
1,780
$ 12,892
3,123
6,569
13,270
1,040
2,028
$ 12,480
705
6,754
12,306
2,361
3,862
$ 12,099
525
6,282
11,894
2,176
3,787
$ 11,486
780
5,834
11,354
1,748
3,439
other data
earnings per share, basic
dividends per share
dividend payout ratio
book value per share
shares outstanding
return on average assets
return on average equity
equity to asset ratio
allowance for loan losses to total loans
$1.74
$1.24
71%
$ 32.37
1,021,931
0.47%
5.53%
8.40%
3.11%
$1.99
$1.24
62%
$ 30.61
1,021,510
0.62%
6.68%
8.61%
2.13%
$3.80
$1.16
31%
$ 29.95
1,018,996
1.20%
13.37%
9.37%
1.45%
$3.75
$1.08
29%
$ 26.99
1,010,246
1.31%
14.66%
8.52%
1.27%
$3.43
$0.98
29%
$ 24.16
1,009,746
1.25%
14.85%
8.54%
1.21%
1
L e t t e r f r o m t h e c e o & b o a r d c h a i r
To our fellow owners, our loyal clients and members of our community:
Plan well. Live well.
the above phrase captures the essence of Ledyard’s
the foundation of our success
mission. it serves as our call to action – an everyday
as we move into the new year, we remain focused
reminder that inspires us to deliver to our clients
on the core values and principles of community
the most relevant and insightful financial advice, as
banking – safety and soundness – while we continue
well as the innovative and comprehensive solutions
to build upon the strategy that elevated us in 2009.
that address all aspects of their financial well-being.
we believe that educating and guiding our clients to
a significant component of that strategy
includes enhancing our own expertise, skill-sets
plan their financial futures will ultimately put them
and professional designations so that we are better
in positions to enjoy the rewards of that careful
prepared to build and enhance our relationships
planning. in other words, our goal is to help each
with personal and commercial banking clients,
client fulfill the life that he or she envisions.
developing partnerships that touch all facets of
it is in this spirit that we proudly share with you our
the banking experience and helping our clients
2009 annual report. Ledyard’s full year results reflect
to achieve more than they thought possible. as
the strength of our two core businesses – community
we’ve always maintained, our success in this
banking and wealth management. our focus on and
endeavor relies on our people, the knowledge and
investment in these dual pillars resulted in record
experience that they offer, as well as the unique
revenue for Ledyard national bank. deposits at the
bonds they form with each client. in short, we
bank ended the year at an all-time high and our
believe in growing and succeeding together.
capital strength increased as shareholders’ equity
finished the year at $33.1 million. specific to Ledyard
financial advisors, the division secured record new
assets of $122 million and reported its highest annual
revenue figure since it was established in 1994.
our financials also reflect the realities of the current
economic environment and our proactive response to
it as we prudently built loan loss reserves to ensure we
had an appropriate safety net if the economy continued
its decline. as the actual level of charge-offs was not as
high as anticipated, we remain comfortable with our
level of reserves as of year-end.
emerging even stronger
despite the challenges presented by an uncertain
economy – perhaps because of the challenges –
we ended 2009 stronger, more confident and more
resilient than ever before. we responded to the
financial crisis by viewing it as an opportunity to
pursue elements of our strategic plan that focus on
enhancing knowledge and capabilities – elements that
position us well for future growth. we capitalized on
the turbulence in the employment market by hiring
several experienced and credentialed individuals. one
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
2
L e t t e r f r o m t h e c e o & b o a r d c h a i r
concluded
such addition, specific to the Ledyard financial
emphasis on the three foundational elements that
advisors division, was Larry draper. with more
make Ledyard a special institution – comprehensive
than 35 years of banking experience and deep
financial services, focus on personal relationships
connections to our community, Larry made an
and immersion in the community – we are poised
immediate impact. his knowledge of wealth
to take advantage of these opportunities. we are
management, along with his ability to provide
truly excited about our ability to deliver sustainable
advice and counsel to our clients, is a key element
growth for our shareholders, the most relevant
that reinforces the Ledyard promise – we help you
financial solutions for our clients and a rewarding
plan well so that you can live well.
work experience for our employees.
in order to achieve the ambitious goals set for
we thank our shareholders, clients, employees
the coming year, we created a new senior level
and board members for their trust, advice and
strategic position designed to better align the
counsel. your support has been, and will continue
organization and dedicated to business development
to be, the key to Ledyard’s success.
as well as client education. marty candon, our
senior retail banking officer since 1991, will
lead this effort and work across all lines of business.
in december 2009, chris taylor joined the bank
as senior vice president and retail banking Leader.
with over 30 years of banking experience, chris
will further develop a culture that puts the client
first and build the skill-sets across his team to
manage client relationships to their fullest capacity.
we’re confident that chris will achieve much success
at Ledyard in the coming years.
Looking ahead
we are mindful that 2010 will continue to present
new challenges. but we also know that these
unprecedented times can provide unprecedented
opportunity. as we place a new and sharper
Kathryn g. underwood dennis e. logue
president & ceo
Ledyard financiaL group/
Ledyard nationaL bank
chair
Ledyard financiaL group/
Ledyard nationaL bank
3
L e d y a r d f i n a n c i aL g r o u p
strengthening reLationships
with the famiLies, businesses and
communities we serve
at Ledyard, it’s often said that when you do business
with us, you get more than just bankers with knowledge,
expertise and local decision-making capabilities. you
client’s account – personal and/or business. having
this information, together with an understanding of an
individual’s financial goals and aspirations, allows us to
recommend the right mix of products and services. it also
provides us with a superior customer response platform
in order to assist clients with whatever they need.
get true partnerships.
since opening our doors nearly two decades ago,
new hampshire and vermont families, businesses and
communities have come to trust Ledyard because of
our commitment – to educate and advise our clients
on all aspects of their financial well-being, to develop
meaningful relationships that grow through the
years and to help make the communities we serve
better places to live, work and raise a family. our
comprehensive, consultative approach is designed with
one goal in mind: the success of our clients. Looking
back on 2009 and ahead to 2010, our strategy is clear –
continue to expand upon Ledyard’s brand promise and
deliver the best relationship-focused financial services
experience in the upper valley/Lake sunapee region.
we heLp you pLan weLL so that
you can Live weLL
Launching in 2010, Ledyard’s new brand positioning
statement “plan well. Live well.” is the embodiment
of our long held business philosophy and of our
continuing effort to provide a seamless and holistic
approach to banking and wealth management. as
we work to synthesize the new look and feel of our
brand during the coming year, our efforts to better
sometimes the greatest vaLue
we deLiver to our cLients is
our knowLedge
a big part of what differentiates Ledyard from our
competitors is our consultative, relationship-based
approach. we make it our responsibility to understand
our client’s financial goals and the challenges they face.
we act as a sounding board and proactively bring financial
solutions to the table that a client may not have considered
before. ultimately, our clients remain partners with us
because of the unique value we deliver in helping them
achieve their vision for financial well-being.
Michelle LeClair, Assistant Vice President, Commercial Loan
Officer, collaborates with a client on development of his business plan.
communicate and enhance our underlying promise
every member of the Ledyard team is also part of the
are already well on their way.
for example, we recently implemented a new contact
community, and thus uniquely qualified to discuss and
develop personalized solutions for our clients. as such,
and client management system, which provides our
Ledyard continues to work diligently to expand our
account managers with a complete snapshot of each
financial knowledge base, as well as that of our clients.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
4
during 2009, Ledyard sponsored a number of public
seminars focused on the critical financial issues of the
day, including the state of the economy, taxes and wealth
management strategies. we believe that by educating our
clients, we can help them gain a better understanding
for how to maximize their relationship with us.
internally, Ledyard put similar emphasis on expanding
and implementing employee education and skills
development initiatives. for example, Ledyard financial
advisors put into practice the training it began in 2008,
which focused on 13 key wealth management issues.
the program highlighted the importance of listening
to our client’s financial needs in order to design a
framework for managing their wealth. by understanding
those key wealth management issues, including
retirement planning, taxes and gifting, our financial
advisors are better able to engage clients in ways that
help them navigate through any financial situation.
Ledyard’s focus on knowledge building is equally
important within its personal and business banking
divisions. our employees are encouraged and trained
to become versatile in all facets of banking. this
comprehensive expertise helps them recommend
the right product mix and add more value to the
client relationship.
one such example is Ledyard’s partnership with
Jim umland, president, resource plastics, inc., of
west Lebanon, nh, a leading manufacturer of plastic
injection molded components.
Jim’s relationship with Ledyard began in 2001 with
a residential mortgage and commercial line of credit
for a new business. over the next nine years, Ledyard
remained committed to assisting Jim in achieving his
goals, and the partnership continued to evolve.
a few years ago, Jim shared with us his vision of
acquiring another manufacturer. with that in mind,
L e d y a r d f i n a n c i aL g r o u p
continued
(l-r) Larry Draper, Senior
Financial Advisor, and
Jon Molesworth, Director
of Portfolio Management,
discuss investment strategy
with clients
Diane Marchegiani,
Assistant Vice President,
Branch Manager (Route
120, Lebanon office),
reviewing account options
with a client.
we worked with Jim to position his company for its
next growth phase. so, when the opportunity presented
itself in 2009, we had a plan in place to move forward.
as part of Jim’s team, including lawyers, accountants
and other financing professionals, we played a key role
in structuring a financing package for this complex
acquisition that met the needs of both Jim and the
other stakeholders.
as Jim puts it, “to me, Ledyard’s philosophy of trust
and a willingness to go the extra mile is worth more
than a few additional basis points. it’s true value.”
today, Jim continues to grow his business with
Ledyard and places a premium on the value of his
relationship with us. in fact, Jim hopes to utilize even
more of our comprehensive financial services in the near
future, including those of Ledyard financial advisors.
5
L e d y a r d f i n a n c i aL g r o u p
continued
Raking and gardening at the Upper Valley Hostel
Photo: Guy Denechaud and Valley Business Journal
Painting the Upper Valley
Turning Point building for the
Second Wind Foundation
Preparing to paint and clean at the Upper Valley
Senior Center
community-b ased
community-focused
as a community bank, Ledyard has first-hand knowledge of
the difficulties and challenges facing individuals, businesses
and non-profit organizations. specific to non-profits, the
monetary donations that sustained them in years past have,
in large part, disappeared. now, more than ever, these local
groups need our support.
to bridge this gap, Ledyard is finding new ways to
help. one way is by supplementing monetary assistance
with physical assistance, including serving on boards and
volunteer activities. in 2009, these efforts amounted to over
3,500 volunteer hours by Ledyard employees and board
members. from a cost-savings standpoint, we estimate
that our work saved the organizations we helped thousands
of dollars that they would have otherwise had to pay
professionals in order to complete that same work.
Ledyard’s flagship volunteer event is called “Ledyard
Lend a hand day.” it is designed to deepen our
commitment to the community and provide employees
with hands-on opportunities to give back and to see
firsthand how our work affects the experience and lives
of those who depend on local non-profit organizations.
for example, our volunteers at the children’s hospital
at dartmouth (chad) saw how their work creating art
packs for the children receiving medical care brought
much needed distraction (and hopefully joy) during their
fight for improved health. similarly, our volunteers at
hannah house, an organization that provides residential
support services for pregnant and parenting youth,
witnessed how their home improvements lifted the
spirits of several teenage mothers without another place
to call “home”.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
6
L e d y a r d f i n a n c i aL g r o u p
concluded
VINS volunteers raked nature trails and planted bulbs
Painting at the Mascoma Area
Senior Center
each project we chose was unique and allowed us to
immerse ourselves in environments that were, in general,
not part of our employees’ daily lives. it helped us better
understand the communities we serve – and from a
business standpoint, may translate into enhanced products
and services in the long term.
our volunteers did everything from cleaning and
painting to raking and clearing trails. the projects were
chosen with an eye towards diversity in order to leverage
each volunteer’s interest and skill set and to ensure the
best possible outcomes.
“Ledyard Lend a hand day” 2009 was an over-
whelming success. Ledyard was able to assist 12
non-profit organizations across the six communities
we serve. our employee participation rate neared 60%.
additionally, we raised the interest of our own clients,
board members and family, incorporating several of them
into our work teams for the day.
Ledyard is committed to growing the “Ledyard Lend
a hand day” program in the years to come, with the
intent of making it top-of-mind and accessible for all
the area non-profits when they have a need. we want
to create a greater familiarity between Ledyard and the
community. we want the community to feel comfortable
working with Ledyard, however we can help. at Ledyard,
we believe this is nothing more than an extension of our
everyday business philosophy.
as we look back on 2009, we’re proud of the strides we’ve
made in living up to our brand promise. we look forward
to improving on those commitments in 2010 and building
even stronger relationships with our clients, shareholders
and the communities we serve.
Advance Transit volunteers
cleaned 13 bus shelters in
the Upper Valley
7
ma n a g e m e n t ’ s f i n a n c i aL di s c u s s i o n
NET INCOME
(in thousands)
NET INCOME
(in thousands)
$4,000
$4,000
3,500
review of financiaL statements
3,500
3,000
the discussion and analysis which follows focuses on the factors affecting the company’s
3,000
2,500
financial condition at december 31, 2009 and 2008, and its results of operations for the
years ended december 31, 2009 and 2008. the financial statements and notes to the
2,500
2,000
financial statements should be read in conjunction with this review.
2,000
1,500
statement of income
1,000
500
1,500
1,000
our results for the year continue to reflect the strength in our two basic businesses,
05 06 07 08 09
community banking and wealth management services. as in 2008, we continued to invest
500
in both during 2009 in terms of people, facilities and systems. total revenue for the year
05 06 07 08 09
ended december 31, 2009, was a record high of $19,725,953, compared to $19,460,800
for the same period in 2008. net interest income for the year ended december 31, 2009,
SHAREHOLDERS' EQUITY
(in thousands)
SHAREHOLDERS' EQUITY
(in thousands)
was $12,515,349, compared to $12,891,820 for the same period in 2008. net income
was $1,780,381, or $1.74 per share for the twelve months ended 2009 as compared to
$35,000
$2,027,744, or $1.99 per share for 2008, a decrease of $247,363, or 12.20%. the primary
$35,000
30,000
contributors to our income being down for the year were the continued build up of our
30,000
25,000
allowance for loan losses, the increased costs associated with fdic insurance and the
25,000
20,000
10,000
5,000
increase in salaries and employee benefits.
interest and fees on loans totaled $12,046,519 for the year ended december 31, 2009,
20,000
15,000
as compared to $14,818,873 for 2008. this decrease of $2,772,354, or 18.71%, was due
15,000
10,000
to a decrease in interest rates and the decrease in loans outstanding that occurred during
2009. investment income for the year ended december 31, 2009, totaled $4,762,210
as compared to $3,688,423 for 2008, an increase of $1,073,787, or 29.11%.
05 06 07 08 09
5,000
a decrease of $1,396,112, or 28.68%. deposit rates were lowered throughout the year to
BOOK VALUE PER SHARE
(in dollars)
reflect the changes in interest rates resulting in lower interest paid. interest expense on
BOOK VALUE PER SHARE
(in dollars)
borrowed funds increased $74,016, or 9.91% for the year ended december 31, 2009,
$35
totaling $820,891 as compared to $746,875 at december 31, 2008. the increase was
$35
30
primarily due to the increase in borrowings from the federal home Loan bank.
30
25
during 2009, the company added $2,250,000 to the allowance for loan losses (the
“allowance”) and realized net charge-offs of $829,911 resulting in a net increase in the
allowance of $1,420,089 and a total allowance of $6,345,589, or 3.11% of total loans.
20
15
Like most community banks, Ledyard saw an increase in non-performing loans and a
15
10
higher level of charge-offs during 2009, resulting in an increase in the allowance. the
25
20
10
5
determination of an appropriate level of allowance is based on management’s judgment
TOTAL ASSETS
(in thousands)
TOTAL ASSETS
(in thousands)
$400,000
$400,000
350,000
350,000
300,000
$4,000
300,000
250,000
3,500
250,000
200,000
3,000
200,000
150,000
2,500
150,000
100,000
2,000
100,000
50,000
1,500
50,000
1,000
500
$4.00
$4.00
3.50
3.50
3.00
$35,000
3.00
2.50
30,000
2.50
2.00
25,000
2.00
1.50
1.50
20,000
1.00
1.00
0.50
15,000
0.50
10,000
NET INCOME
(in thousands)
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
EARNINGS PER SHARE
(in dollars)
EARNINGS PER SHARE
(in dollars)
SHAREHOLDERS' EQUITY
(in thousands)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
EARNINGS PER SHARE
(in dollars)
$4.00
TOTAL DEPOSITS
(in thousands)
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
TOTAL ASSETS
(in thousands)
200,000
$400,000
05 06 07 08 09
100,000
05 06 07 08 09
50,000
TOTAL DEPOSITS
(in thousands)
$350,000
TOTAL DEPOSITS
(in thousands)
$250,000
$250,000
200,000
150,000
150,000
100,000
100,000
50,000
50,000
$350,000
300,000
300,000
250,000
250,000
200,000
200,000
150,000
150,000
100,000
100,000
50,000
50,000
350,000
300,000
250,000
200,000
150,000
3.50
3.00
2.50
2.00
1.50
1.00
0.50
05 06 07 08 09
05 06 07 08 09
Ledyard Financial Advisors
GROSS INCOME
05 06 07 08 09
(in thousands)
Ledyard Financial Advisors
$6,000
GROSS INCOME
(in thousands)
TOTAL REVENUE
(in thousands)
$6,000
5,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
$20,000
15,000
10,000
$250,000
200,000
150,000
100,000
50,000
$350,000
300,000
250,000
200,000
150,000
100,000
50,000
$6,000
5,000
4,000
3,000
2,000
1,000
05 06 07 08 09
Ledyard Financial Advisors
GROSS INCOME
(in thousands)
05 06 07 08 09
TOTAL REVENUE
(in thousands)
TOTAL REVENUE
(in thousands)
BOOK VALUE PER SHARE
(in dollars)
$20,000
$20,000
15,000
$35
15,000
30
10,000
25
10,000
5,000
20
5,000
15
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
5
05 06 07 08 09
8
05 06 07 08 09
10
05 06 07 08 09
05 06 07 08 09
5
05 06 07 08 09
5,000
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
the company’s interest expense on deposits was $3,472,489 for the year ended
05 06 07 08 09
december 31, 2009, as compared to $4,868,601 for the year ended december 31, 2008,
5,000
05 06 07 08 09
$4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
$35,000
30,000
25,000
20,000
15,000
10,000
5,000
$35
30
25
20
15
10
5
$4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
$35,000
30,000
25,000
20,000
15,000
10,000
5,000
$35
30
25
20
15
10
5
NET INCOME
(in thousands)
TOTAL ASSETS
(in thousands)
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
SHAREHOLDERS' EQUITY
(in thousands)
EARNINGS PER SHARE
(in dollars)
$4.00
TOTAL DEPOSITS
(in thousands)
$400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
3.50
3.00
2.50
2.00
1.50
1.00
0.50
$250,000
200,000
150,000
100,000
50,000
$350,000
300,000
250,000
200,000
150,000
100,000
50,000
05 06 07 08 09
05 06 07 08 09
ma n a g e m e n t ’ s f i n a n c i aL di s c u s s i o n
05 06 07 08 09
continued
Ledyard Financial Advisors
GROSS INCOME
(in thousands)
BOOK VALUE PER SHARE
(in dollars)
of the adequacy of the allowance based on various factors and a review of the company’s
TOTAL REVENUE
(in thousands)
loan portfolio. an evaluation of the adequacy of the allowance is performed each quarter
$20,000
$6,000
by management. management believes that the allowance at december 31, 2009, was
appropriate given the current economic conditions in the company’s service area.
15,000
non-interest income totaled a record high of $7,210,604 in 2009 as compared to
$6,568,980 in 2008, an increase of $641,624, or 9.77%. income from the company’s Ledyard
financial advisors division totaled an all time high of $5,124,844, up from $4,895,381 in
10,000
2008, an increase of $229,463, or 4.69%. this increase in revenue was a result of new business
activity and market conditions during 2009. service fees and other non-interest income
5,000
increased by $412,161 during 2009. non-interest expense totaled $15,130,330 for 2009
as compared to $13,269,856 in 2008, an increase of $1,860,474, or 14.02%.
5,000
4,000
3,000
2,000
1,000
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
financiaL condition
at year-end, total assets were $393,614,823 compared to $365,188,308 at december 31, 2008,
NET INCOME
(in thousands)
an increase of $28,426,515, or 7.78%. the change in assets consisted primarily of an increase
$4,000
of $53,059,616 in cash and cash equivalents, securities available-for-sale and held-to-maturity
3,500
(“investments”) and a decrease of $28,811,908 in net loans, including loans held-for-sale.
3,000
the company maintains investments in interest-bearing deposits and investment
securities in order to diversify its revenue, as well as to provide interest rate and credit
2,500
risk diversification. these investments also provide for liquidity and funding needs. as
2,000
mentioned above, total investments increased $53,059,616, or 45.17%. this increase
1,500
consisted of an increase in securities available-for-sale of $62,154,255, a decrease in
1,000
cash and cash equivalents of $5,395,070 and a decrease in securities held-to-maturity
500
of $3,699,569. during 2009, the company purchased $86,571,730 of available-for-sale
05 06 07 08 09
and held-to-maturity securities and realized proceeds from maturities and paydowns
of available-for-sale and held-to-maturity securities totaling $29,742,394.
NET INCOME
(in thousands)
the company provides loans primarily to customers located within its geographic
market area. net loans, including loans held-for-sale, totaled $197,593,247 at december
$400,000
SHAREHOLDERS' EQUITY
(in thousands)
350,000
31, 2009, a $28,811,908, or 12.73% decrease from a year ago. this decrease reflects the
increased competition to retain existing loans and a general slow-down in lending
$35,000
TOTAL ASSETS
(in thousands)
activity due to economic conditions.
30,000
300,000
commercial loans consist of 1) loans secured by various corporate assets, 2) loans
250,000
25,000
to provide working capital in the form of secured and unsecured lines of credit, and
3) commercial real estate loans secured by income-producing commercial real estate.
200,000
20,000
150,000
the company focuses on lending to financially-sound business customers within its
15,000
geographic marketplace. total commercial loans decreased by $28,900,093, or 22.20%,
10,000
100,000
50,000
during 2009.
5,000
05 06 07 08 09
05 06 07 08 09
SHAREHOLDERS' EQUITY
(in thousands)
05 06 07 08 09
EARNINGS PER SHARE
BOOK VALUE PER SHARE
(in dollars)
(in dollars)
$4.00
$35
3.50
3.00
2.50
2.00
1.50
1.00
0.50
30
25
20
15
10
5
$20,000
15,000
10,000
5,000
TOTAL ASSETS
(in thousands)
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
05 06 07 08 09
05 06 07 08 09
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
EARNINGS PER SHARE
(in dollars)
TOTAL DEPOSITS
(in thousands)
05 06 07 08 09
05 06 07 08 09
9
TOTAL DEPOSITS
TOTAL REVENUE
(in thousands)
(in thousands)
05 06 07 08 09
Ledyard Financial Advisors
GROSS INCOME
(in thousands)
$250,000
200,000
150,000
100,000
50,000
$350,000
300,000
250,000
200,000
150,000
100,000
50,000
$6,000
5,000
4,000
3,000
2,000
1,000
$400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
$250,000
$4.00
200,000
3.50
3.00
150,000
2.50
100,000
2.00
1.50
50,000
1.00
0.50
$350,000
$20,000
300,000
250,000
15,000
200,000
150,000
10,000
100,000
5,000
50,000
$6,000
5,000
4,000
3,000
2,000
1,000
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
BOOK VALUE PER SHARE
(in dollars)
TOTAL REVENUE
(in thousands)
05 06 07 08 09
05 06 07 08 09
Ledyard Financial Advisors
GROSS INCOME
(in thousands)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
$4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
$35,000
30,000
25,000
20,000
15,000
10,000
5,000
$35
30
25
20
15
10
5
NET INCOME
(in thousands)
TOTAL ASSETS
(in thousands)
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
$400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
$250,000
200,000
150,000
100,000
50,000
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
ma n a g e m e n t ’ s f i n a n c i aL di s c u s s i o n
SHAREHOLDERS' EQUITY
(in thousands)
residential real estate loans consist of loans secured by one-to-four family residences.
EARNINGS PER SHARE
(in dollars)
the company usually retains adjustable-rate mortgages in its portfolio and will generally
$4.00
sell fixed-rate mortgages. residential real estate loans increased by $87,656 in 2009.
3.50
consumer loans are originated by the company for a wide variety of purposes designed
3.00
to meet the needs of its customers. consumer loans include overdraft protection, automobile,
2.50
boat, recreation vehicles, home equity, and secured and unsecured personal loans.
2.00
consumer loans increased by $1,406,958, or 26.39%, in 2009.
deposits continue to represent the company’s primary source of funds. in 2009, total
1.50
deposits increased by $24,543,858, or 8.30% over 2008, ending the year at $320,129,428.
1.00
comparing year-end balances in 2009 to 2008, now accounts increased by $5,979,237,
0.50
time deposits increased by $10,877,938, money market and savings accounts increased by
05 06 07 08 09
05 06 07 08 09
$10,484,055 and demand deposits decreased by $2,797,372.
borrowings supplement deposits as a source of liquidity. in addition to borrowings from
the federal home Loan bank, the company purchases federal funds and sells securities
BOOK VALUE PER SHARE
(in dollars)
under agreements to repurchase. total borrowings were $38,431,680 at december 31,
TOTAL REVENUE
(in thousands)
2009, compared to $36,295,903 at december 31, 2008, an increase of $2,135,777. the
$20,000
borrowings were distributed between securities sold under agreements to repurchase and
advances from the federal home Loan bank. in addition to the liquidity sources discussed
15,000
above, the company believes the investment portfolio and residential loan portfolio
provide a significant amount of contingent liquidity that could be accessed in a reasonable
time period through sales or pledging, if needed. the company believes that the level of
10,000
liquidity is sufficient to meet current and future funding requirements.
shareholders’ equity was $33,081,984 on december 31, 2009, compared to $31,283,345
5,000
on december 31, 2008, an increase of $1,798,639. the increase was primarily attributable
to net income of $1,780,381 less $1,276,179 in cash
dividends to the company’s shareholders and an
05 06 07 08 09
increase in accumulated other comprehensive income
of $1,157,589. the company’s book value per share
on december 31, 2009, was $32.37 per share based on
1,021,931 shares outstanding, an increase of $1.75 per share
from a year earlier.
05 06 07 08 09
gregory d. steverson
executive vice president,
chief financiaL officer,
Ledyard financiaL group/
Ledyard nationaL b ank
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
10
$4,000
3,500
$4,000
3,000
$350,000
3,500
2,500
3,000
300,000
2,000
2,500
250,000
1,500
2,000
200,000
1,000
1,500
150,000
500
1,000
100,000
500
50,000
$35,000
30,000
$35,000
$6,000
25,000
30,000
5,000
20,000
25,000
4,000
15,000
20,000
10,000
15,000
3,000
5,000
10,000
2,000
5,000
1,000
$35
30
$35
25
30
20
25
15
20
10
15
5
10
5
NET INCOME
(in thousands)
concluded
NET INCOME
(in thousands)
TOTAL DEPOSITS
(in thousands)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
SHAREHOLDERS' EQUITY
(in thousands)
Ledyard Financial Advisors
SHAREHOLDERS' EQUITY
GROSS INCOME
(in thousands)
(in thousands)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
BOOK VALUE PER SHARE
(in dollars)
BOOK VALUE PER SHARE
(in dollars)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
TOTAL REVENUE
(in thousands)
$20,000
TOTAL REVENUE
(in thousands)
Ledyard Financial Advisors
GROSS INCOME
(in thousands)
Ledyard Financial Advisors
$6,000
GROSS INCOME
(in thousands)
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
TOTAL ASSETS
(in thousands)
TOTAL ASSETS
(in thousands)
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
$250,000
NET LOANS, INCLUDING
LOANS HELD FOR SALE
(in thousands)
50,000
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
05 06 07 08 09
EARNINGS PER SHARE
(in dollars)
EARNINGS PER SHARE
(in dollars)
TOTAL DEPOSITS
(in thousands)
TOTAL DEPOSITS
(in thousands)
$400,000
350,000
$400,000
300,000
350,000
250,000
300,000
200,000
250,000
150,000
200,000
100,000
150,000
50,000
100,000
$4.00
3.50
$4.00
3.00
3.50
2.50
3.00
2.00
2.50
1.50
2.00
1.00
1.50
0.50
1.00
0.50
$20,000
15,000
15,000
10,000
10,000
5,000
5,000
$250,000
200,000
200,000
150,000
150,000
100,000
100,000
50,000
50,000
$350,000
$350,000
300,000
250,000
300,000
200,000
250,000
150,000
200,000
100,000
150,000
100,000
50,000
50,000
$6,000
5,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
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
Board of Directors and Shareholders of Ledyard Financial Group, Inc. and Subsidiary
we have audited the accompanying consolidated balance sheets of Ledyard financial group, inc. and subsidiary
(the company) as of december 31, 2009 and 2008, and the related consolidated statements of income, changes
in shareholders’ equity and cash flows for the years then ended. 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 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 Ledyard financial group, inc. and subsidiary as of december 31, 2009 and 2008,
and the consolidated results of their operations and their consolidated cash flows for the years then ended in
conformity with u.s. generally accepted accounting principles.
berry, dunn, mcneil & parker
Portland, Maine
February 10, 2010
11
co n s oLi d a t e d b
aLa n c e sh e e t s
December 31, 2009 and 2008
assets
cash and due from banks
interest bearing deposits
total cash and cash equivalents
securities available-for-sale
securities held-to-maturity
nonmarketable equity securities
Loans held-for-sale
Loans receivable, net of allowance for loan losses of $6,345,589 in 2009
and $4,925,500 in 2008
other real estate owned
accrued interest receivable
premises and equipment, net
deferred income taxes
bank owned life insurance
prepaid fdic insurance
other assets
LiabiLities and sharehoLders’ eQ uity
deposits
demand
now accounts
money market accounts
savings
time, $100,000 and over
other time
total deposits
securities sold under agreements to repurchase
advances from federal home Loan bank
accrued expenses and other liabilities
total liabilities
commitments and contingencies (notes 5, 11, 12, 13, 14 and 15)
shareholders’ equity
common stock, $1.00 par value; 5,500,000 shares authorized; 1,021,931
and 1,021,510 shares issued at december 31, 2009 and 2008, respectively
additional paid-in capital
treasury stock, at cost; 5,500 shares at december 31, 2009
retained earnings
accumulated other comprehensive income
total shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
12
2009
2008
$ 8,887,901
11,175,252
$ 10,614,627
14,843,596
20,063,153
25,458,223
114,281,417
36,177,845
2,013,300
112,500
197,480,747
265,865
1,564,322
8,534,250
1,782,320
8,347,073
1,826,655
1,165,376
52,127,162
39,877,414
2,010,900
832,000
225,573,155
200,000
1,325,024
8,946,898
1,743,800
5,574,450
40,941
1,478,341
$ 393,614,823
$ 365,188,308
$ 48,586,114
52,258,226
120,334,539
14,760,272
44,210,203
39,980,074
320,129,428
13,713,739
24,717,941
1,971,731
$ 51,383,486
46,278,989
110,456,277
14,154,479
27,728,309
45,584,030
295,585,570
14,427,836
21,868,067
2,023,490
360,532,839
333,904,963
1,021,931
9,870,192
(223,805)
21,012,256
1,401,410
1,021,510
9,733,765
(223,805)
20,508,054
243,821
33,081,984
31,283,345
$ 393,614,823
$ 365,188,308
co n s oLi d a t e d st a t e m e n t s o f in c o m e
Years Ended December 31, 2009 and 2008
interest and dividend income
interest and fees on loans
investment securities
other interest-earning assets
total interest and dividend income
interest expense
deposits
borrowed funds
total interest expense
net interest income
provision for loan losses
net interest income after provision for loan losses
noninterest income
Ledyard financial advisors division income
service fees
other
total noninterest income
noninterest expense
salaries and employee benefits
occupancy and equipment
fdic insurance fees
other general and administrative
total noninterest expense
income before income taxes
income tax expense
net income
basic earnings per share
diluted earnings per share
weighted average numbers of shares outstanding
2009
2008
$ 12,046,519
4,699,435
62,775
$ 14,818,873
3,376,241
312,182
16,808,729
18,507,296
3,472,489
820,891
4,868,601
746,875
4,293,380
5,615,476
12,515,349
12,891,820
2,250,000
10,265,349
3,123,000
9,768,820
5,124,844
1,059,022
1,026,738
4,895,381
1,022,470
651,129
7,210,604
6,568,980
8,441,840
2,869,476
753,760
3,065,254
15,130,330
7,212,227
2,815,350
100,232
3,142,047
13,269,856
2,345,623
3,067,944
565,242
1,040,200
$ 1,780,381
$ 2,027,744
$ 1.74
$ 1.73
1,021,721
$ 1.99
$ 1.98
1,020,926
The accompanying notes are an integral part of these consolidated financial statements.
13
co n s oLi d a t e d st a t e m e n t s o f ch a n g e s i n sh a r e h oLd e r s ’ e Q
u i t y
Years Ended December 31, 2009 and 2008
Common
Stock
baLance, december 31, 2007 $ 1,018,996
Additional
Paid-in
Capital
$ 9,577,926
Treasury
Stock
$ -
Retained
Earnings
$ 19,747,532
Accumulated
Other
Comprehensive
Income
$ 172,884
Total
$ 30,517,338
comprehensive income
net income
change in net unrealized
appreciation on securities
available-for-sale, net of
tax of $36,543
total comprehensive
income
cash dividends paid,
$1.24 per share
stock repurchase
(5,500 shares)
stock-based
compensation expense
restricted stock issued,
150 shares
stock warrants exercised,
-
-
-
2,027,744
-
2,027,744
-
-
-
-
70,937
70,937
-
-
-
2,027,744
70,937
2,098,681
-
-
-
-
-
80,960
150
(150)
-
(1,267,222)
(223,805)
-
-
-
-
-
-
-
-
-
(1,267,222)
(223,805)
80,960
-
2,364 shares
77,393
75,029
baLance, december 31, 2008 $ 1,021,510 $ 9,733,765 $ (223,805) $ 20,508,054 $ 243,821 $ 31,283,345
2,364
-
-
-
comprehensive income
net income
change in net unrealized
appreciation on securities
available-for-sale, net of
tax of $596,334
total comprehensive
income
cash dividends paid,
$1.24 per share
stock-based
compensation expense
restricted stock issued,
421 shares
-
-
-
-
-
-
-
-
-
136,848
-
1,780,381
-
1,780,381
-
-
-
-
-
1,157,589
1,157,589
1,780,381
1,157,589
2,937,970
(1,276,179)
-
-
-
(1,276,179)
136,848
421
(421)
-
-
-
-
baLance, december 31, 2009 $ 1,021,931 $ 9,870,192 $ (223,805) $ 21,012,256 $ 1,401,410 $ 33,081,984
The accompanying notes are an integral part of these consolidated financial statements.
14
co n s oLi d a t e d st a t e m e n t s o f c
a s h f Lo w s
Years Ended December 31, 2009 and 2008
cash fLows from operating activities
net income
adjustments to reconcile net income to net cash provided
by operating activities
depreciation and amortization or accretion
provision for loan losses
deferred income tax benefit
fair value of stock warrants vested during the year
Loss on sale of other real estate owned, net
increase in accrued interest receivable
decrease in accrued expenses and other liabilities
(increase) decrease in other assets
net decrease (increase) in loans held-for-sale
net cash provided by operating activities
cash fLows from investing activities
proceeds from maturities of securities available-for-sale
proceeds from maturities and paydowns of securities held-to-maturity
net purchase of fhLb stock
purchase of securities available-for-sale
purchase of securities held-to-maturity
purchase of bank owned life insurance
net decrease in loans to customers
proceeds from sale of other real estate owned
purchase of premises and equipment
net cash used by investing activities
cash fLows from financing activities
net increase in deposits
proceeds from long-term fhLb borrowings
repayment of long-term fhLb borrowings
net decrease in securities sold under agreements to repurchase
purchase of treasury stock
proceeds from exercise of stock warrants
cash dividends paid on common stock
net cash provided by financing activities
net decrease in cash and cash equivalents
cash and cash equivalents, beginning of year
cash and cash equivalents, end of year
suppLementary cash fLow information
interest paid on deposits and borrowed funds
income taxes paid
2009
2008
$ 1,780,381
$ 2,027,744
727,925
2,250,000
(634,900)
136,848
57,149
(239,298)
(51,759)
(1,724,138)
719,500
3,021,708
19,140,578
10,601,816
(2,400)
(79,634,199)
(6,937,531)
(2,521,188)
25,326,313
393,081
(186,704)
(33,820,234)
24,543,858
7,500,000
(4,650,126)
(714,097)
-
-
(1,276,179)
25,403,456
(5,395,070)
25,458,223
$ 20,063,153
662,687
3,123,000
(741,600)
80,960
-
(29,644)
(1,863,424)
538,088
(632,000)
3,165,811
10,070,870
7,285,126
(919,800)
(31,539,751)
(25,080,580)
(5,000,000)
82,882
-
(1,286,380)
(46,387,633)
18,652,078
21,500,000
(1,183,388)
(331,390)
(223,805)
77,393
(1,267,222)
37,223,666
(5,998,156)
31,456,379
$ 25,458,223
$ 4,349,355
$ 5,579,872
$ 1,050,000
$ 1,875,000
non-cash transaction: Loans transferred to other real estate owned
$ 516,100
$ 200,000
The accompanying notes are an integral part of these consolidated financial statements.
15
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
nature of b usiness
Ledyard financial group, inc. (the company) is headquartered in hanover, new hampshire, and, as a bank holding
company, it provides financial services to its customers through its wholly-owned bank subsidiary, Ledyard national
bank (the bank). the bank provides retail and commercial banking and wealth management services through its
office locations in central new hampshire and vermont.
1. summary of significant accounting poLicies
the accounting policies of the company are in conformity with u.s. generally accepted accounting principles (gaap)
and general practices within the banking industry. the following is a description of the more significant policies.
Basis of Presentation
the company follows accounting standards as set by the financial accounting standards board, commonly referred
to as the fasb. the fasb sets gaap that management follows to consistently report the company’s financial
condition, results of operations and cash flows. in June 2009, the fasb issued fasb accounting standards
codification (asc) topic 105, Generally Accepted Accounting Principles, which establishes the fasb asc as the
sole source of authoritative gaap. pursuant to the provisions of fasb asc topic 105, the company has updated
references to gaap in its financial statements issued for the period ended december 31, 2009. the adoption of
fasb asc topic 105 did not impact the company’s financial position or results of operations.
Principles of Consolidation
the accompanying consolidated financial statements include the accounts of the company and its wholly-owned
bank subsidiary. all intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
in preparing financial statements in conformity with gaap, management is required 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 in the near term relate to the determination
of the allowance for loan losses and the valuation of other real estate owned. in connection with the determination of
the allowance and the carrying value of other real estate owned, management obtains independent appraisals for significant
properties and collateral securing significant loans. accordingly, the ultimate collectability of a substantial portion of the
bank’s loan portfolio is susceptible to changes in local market conditions.
while management uses available information to recognize losses on loans, future additions to the allowance may be
necessary based on changes in local economic conditions. in addition, regulatory agencies, as an integral part of their
examination process, periodically review the bank’s loan portfolio. such agencies may require the bank to recognize
additions to the allowance based on their judgments about information available to them at the time of their examination.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
16
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
1. summary of significant accounting poLicies continued
Significant Group Concentrations of Credit 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 creditworthy borrowers, although
credit losses are expected to occur because of subjective 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. in addition, a substantial portion of
the company’s loans are secured by real estate.
Cash and Cash Equivalents
for purposes of the statements of cash flows, cash and cash equivalents include cash and due from banks, and interest
bearing deposits.
the company’s due from bank accounts and interest bearing deposits, at times, may exceed federally insured limits.
the company has not experienced any losses in such accounts. the company believes it is not exposed to any
significant risk on cash and cash equivalents.
Investment Securities
debt securities that management has the positive intent and ability to hold to maturity are classified as held-to-maturity
and carried at cost, adjusted for amortization of premiums and accretion of discounts over the period to call or maturity
using methods approximating the interest method. securities not classified as held-to-maturity, including equity securities
with readily determinable fair values, are classified as available-for-sale and are carried at fair value. nonmarketable
equity securities, consisting of stock in the federal home Loan bank and federal reserve bank, are carried at cost
and evaluated for impairment. purchase premiums and discounts are recognized in interest income using the interest
method over the terms of the securities. unrealized gains and losses on securities available-for-sale are reported as a
net amount in other comprehensive income or loss, net of tax.
for declines in the fair value of individual debt securities available-for-sale below their cost that are deemed to be
other than temporary, where the company does not intend to sell the security and it is more likely than not that the
company will not be required to sell the security before recovery of its amortized cost basis, the other-than-temporary
decline in the fair value of the debt security related to 1) credit loss is recognized in earnings; and 2) other factors
is recognized in other comprehensive income or loss. credit loss is deemed to exist if the present value of expected
future cash flows using the effective rate at acquisition is less than the amortized cost basis of the debt security. for
individual debt securities where the company intends to sell the security or more likely than not will be required to
sell the security before recovery of its amortized cost, the other-than-temporary impairment is recognized in earnings
equal to the entire difference between the security’s cost basis and its fair value at the balance sheet date.
17
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
1. summary of significant accounting poLicies continued
in estimating other-than-temporary impairment losses, management considers 1) the length of time and the extent
to which the fair value has been less than cost; 2) the financial condition and near-term prospects of the issuer; and
3) the intent and ability of the company to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value. gains and losses on the sale of securities are recorded on the trade date and
are determined using the specific identification method.
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. net unrealized losses, if any, are recognized through a valuation allowance by charges to income.
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off
are stated at the amount of unpaid principal, reduced by deferred loan fees and an allowance for loan losses.
Loans past due 30 days or more are considered delinquent. management is responsible to initiate immediate
collection efforts to minimize delinquency and any eventual adverse impact on the company.
in general, consumer loans will be charged off if the loan is delinquent for 120 consecutive days. commercial
and real estate loans are charged off in part or in full if they are considered uncollectible.
Loan interest income is accrued daily on the outstanding balances. 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 borrower’s financial condition is such that collection of interest is doubtful. any unpaid interest previously
accrued on those loans is reversed from income. interest income is generally 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. Loans are returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably assured.
Loan origination and commitment fees and certain direct origination costs are being deferred and the net amount
amortized as an adjustment of the related loan’s yield. the company is generally amortizing these amounts over the
contractual life of the loan.
Allowance for Loan Losses
the allowance for loan losses is maintained at a level which, in management’s judgment, is appropriate to absorb
credit losses inherent in the loan portfolio. the amount of the allowance is based on management’s evaluation of the
collectability 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.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
18
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
1. summary of significant accounting poLicies continued
Credit Related Financial Instruments
in the ordinary course of business, the company has entered into commitments to extend credit, including commitments
under credit card arrangements, commercial letters of credit and standby letters of credit. such financial instruments
are recorded when they are funded.
Other Real Estate Owned
real estate properties acquired through or in lieu of loan foreclosure are initially recorded at fair value less estimated
selling cost at the date of foreclosure. any write-downs based on the asset’s fair value at the date of acquisition are
charged to the allowance for loan losses.
after foreclosure, these assets are carried at the lower of their new cost basis or fair value less cost to sell. costs of
significant property improvements are capitalized, whereas costs relating to holding property are expensed. valuations
are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations,
if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell.
Premises and Equipment
Land is carried at cost. premises and equipment are stated at cost, less accumulated depreciation. the provision for
depreciation is computed over the estimated useful life of the related asset, principally by the straight-line method.
improvements to leased property are amortized over the lesser of the term of the lease or life of the improvements.
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 book bases and the tax bases 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.
fasb asc topic 740, Income Taxes, defines the criteria that an individual tax position must satisfy for some or all
of the benefits of that position to be recognized in a company’s financial statements. topic 740 prescribes a recognition
threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on
a tax return, in order for those tax positions to be recognized in the financial statements. effective January 1, 2007, the
company has adopted these provisions and there was no material effect on the financial statements, and no cumulative
effect. the company is currently open to audit under the statute of limitations by the internal revenue service and
state tax authorities for the years ended december 31, 2006 through 2008.
19
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
1. summary of significant accounting poLicies continued
Earnings Per Share
basic earnings per share data is computed based on the weighted average number of the company’s common shares
outstanding during the year. potential common stock is considered in the calculation of weighted average shares
outstanding for diluted earnings per share, and is determined using the treasury stock method.
Stock Warrant Plans
fasb asc topic 718, Compensation-Stock Compensation, requires entities issuing stock options in exchange for services
to measure the fair value of the options at the grant date and to recognize the fair value of those options as expense,
generally over the period in which they vest. on January 1, 2006, the company adopted the provisions of fasb asc
topic 718 using a modified prospective application, which applies to options granted or modified in periods beginning
after december 15, 2005. additionally, compensation cost for the portion of outstanding options for which requisite service
has not been rendered as of the effective date shall be recognized as the service is rendered on or after the effective date.
Ledyard Financial Advisors Assets and Fees
assets held by Ledyard financial advisors (a division of Ledyard national bank) for its customers, other than trust
cash on deposit at the bank, are not included in these financial statements because they are not assets of the bank.
fees that Ledyard financial advisors earns are recorded on the accrual basis.
Comprehensive Income
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.
Recently Issued Accounting Pronouncements
in april 2009, the fasb issued a change to fasb asc topic 820, Fair Value Measurements and Disclosures, related
to determining fair values when there is no active market or where the price inputs being used represent distressed
sales. this update provides guidance in determining when and how to use modeled values, as opposed to broker
price quotes. the update should result in a greater use of models for estimating fair value, as well as more consistent
approaches in modeling. this change was effective for interim and annual reporting periods ending after June 15,
2009. this guidance does not require any new fair value measurements. management has adopted this guidance and
there was no material impact on the financial statements of the company.
in april 2009, the fasb issued a change to fasb asc topic 820, Fair Value Measurements and Disclosures, intended
to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors
about credit and noncredit components of impaired debt securities that are not expected to be sold. under the
guidance, for many securities with other-than-temporary impairment, only the amount of the estimated credit loss
is recorded through earnings, while the remaining mark-to-market loss is recognized through other comprehensive
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
20
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
1. summary of significant accounting poLicies continued
income or loss. the change is retroactive, meaning entities will reclassify amounts back into retained earnings related to
non-credit-related market losses on certain investments held at the beginning of the period of adoption. this guidance
was effective for interim and annual reporting periods ending after June 15, 2009. management has adopted the new
guidance for the year ended december 31, 2009.
in may 2009, the fasb issued fasb asc topic 855, Subsequent Events, which establishes general standards of,
and accounting for and disclosure of, events that occur after the balance sheet date but before financial statements
are issued. this guidance was effective for interim and annual periods ending after June 15, 2009. the company has
complied with the requirements of asc topic 855.
in June 2009, fasb issued to fasb asc topic 860, Transfers and Servicing, to improve the reporting for the
transfer of financial assets resulting from (1) practices that have developed since the issuance of guidance formally
known as fasb statement no. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, that are not consistent with the original intent and key requirements of that statement and (2) concerns
of financial statement users that many of the financial assets (and related obligations) that have been derecognized
should continue to be reported in the financial statements of transferors. this statement must be applied as of the
beginning of each reporting entity’s first annual reporting period that begins after november 15, 2009, for interim
periods within that first annual reporting period and for interim and annual reporting periods thereafter. earlier
application is prohibited. the company will review the requirements of the guidance and comply with its requirements.
the company does not expect that the adoption of this guidance will have a material impact on the company’s
financial statements.
in June 2009, fasb issued changes to fasb asc topic 810, Consolidation, to improve financial reporting by
enterprises involved with variable interest entities. this statement shall be effective as of the beginning of each
reporting entity’s first annual reporting period that begins after november 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods thereafter. earlier application is prohibited.
the company will review the guidance and comply with its requirements. the company does not expect that the
adoption of this guidance will have a material impact on the company’s financial statements.
in January 2010, the fasb issued guidance to amend the disclosure requirements related to recurring and
nonrecurring fair value measurements. the guidance requires new disclosures on the transfers of assets and liabilities
between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other
observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers.
additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the
assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). the guidance
will become effective with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward
activities for any Level 3 fair value measurements, which will become effective with the reporting period beginning
January 1, 2011. other than requiring additional disclosures, adoption of this new guidance will not have a material
impact on the company’s financial statements.
21
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
1. summary of significant accounting poLicies continued
Business Segments
gaap requires public companies to report (i) certain financial and descriptive information about “reportable operating
segments,” as defined, and (ii) certain enterprise-wide financial information. operating segment information is
reported using a “management approach” that is based on the way management organizes the segments for purposes
of making operating decisions and assessing performance.
the company’s two primary business segments are banking and wealth management services.
banking consists principally of lending to commercial and consumer customers, as well as deposit gathering activities.
wealth management services includes, as its principal business lines, financial planning services, investment
management services, personal tax services, trustee services and estate planning.
the company’s business segment disclosure is based on information generated by an internal profitability reporting
system, which generates information by business segment based on the needs of management responsible for
managing those segments. allocations between the business segments can be subjective in nature are reviewed and
refined as circumstances warrant. any allocations that may affect the reported results of any business segment will
not affect the consolidated financial position or results of operations of the company as a whole. the company does
not allocate assets by segment.
the following tables provide selected financial information for the company’s business segments:
year ended december 31, 2009
net interest income
provision for loan losses
noninterest income
noninterest expense
income before income taxes
income tax expense
net income
year ended december 31, 2008
net interest income
provision for loan losses
noninterest income
noninterest expense
income before income taxes
income tax expense
net income
Banking
Wealth Management
Services
Total Consolidated
$ 12,515,349
2,250,000
2,085,760
10,648,699
1,702,410
410,242
1,292,168
$ 12,891,820
3,123,000
1,673,599
9,574,239
1,868,180
633,415
1,234,765
$ -
-
5,124,844
4,481,631
643,213
155,000
488,213
$ -
-
4,895,381
3,695,617
1,199,764
406,785
792,980
$ 12,515,349
2,250,000
7,210,604
15,130,330
2,345,623
565,242
1,780,381
$ 12,891,820
3,123,000
6,568,980
13,269,856
3,067,944
1,040,200
2,027,744
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
22
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
1. summary of significant accounting poLicies conc luded
Subsequent Events
subsequent events represent events or transactions occurring after the balance sheet date but before the financial
statements are issued. financial statements are considered “issued” when they are widely distributed to shareholders
and others for general use and reliance in a form and format that complies with gaap.
specifically, there are two types of subsequent events:
n those comprising events or transactions providing additional evidence about conditions that existed at the
balance sheet date, including estimates inherentin the financial statement preparation process (referred to as
recognized subsequent events).
n those comprising events that provide evidence about conditions not existing at the balance sheet date but,
rather, that arose after such date (referred to as non-recognized subsequent events).
subsequent events have been evaluated through february 10, 2010, the issuance date of the december 31, 2009
financial statements. management believes there are no subsequent events to be reported in accordance with gaap.
2. cash and due from b anks
the bank is required to maintain certain reserves of vault cash or deposits with the federal reserve bank (frb).
the amount of this reserve requirement, included in cash and due from banks, was approximately $163,000 and
$96,000 as of december 31, 2009 and 2008, respectively.
3. securities
the amortized cost and fair value of securities, with gross unrealized gains and losses, follow:
2009
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
securities avaiLabLe-for-saLe
u.s. government sponsored enterprises
mortgage-backed securities
collateralized mortgage obligations
state and municipal
corporate bonds
total securities
available-for-sale
securities heLd-to-maturity
u.s. government sponsored enterprises
mortgage-backed securities
collateralized mortgage obligations
state and municipal
total securities
held-to-maturity
$ 56,246,114
34,287,637
1,222,684
15,471,301
4,930,332
$ 281,119
1,503,425
98,937
193,834
260,939
$ (96,464)
(54,322)
-
(64,119)
-
$ 56,430,769
35,736,740
1,321,621
15,601,016
5,191,271
$ 112,158,068
$ 2,338,254
(214,905)
$ 114,281,417
$ 997,004
32,369,866
786,797
2,024,178
$ 27,663
1,389,937
32,598
10,589
$ -
(4,962)
-
-
$ 1,024,667
33,754,841
819,395
2,034,767
$ 36,177,845
$ 1,460,787
$ (4,962)
$ 37,633,670
23
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
3. securities continued
2008
securities avaiLabLe-for-saLe
u.s. government sponsored enterprises
mortgage-backed securities
collateralized mortgage obligations
state and municipal
Amortized Cost
$ 4,499,448
33,134,848
1,502,335
12,621,106
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$ 60,870
826,294
48,657
48,591
$ -
(54,968)
-
(560,019)
Fair Value
$ 4,560,318
33,906,174
1,550,992
12,109,678
total securities
available-for-sale
securities heLd-to-maturity
u.s. government sponsored enterprises
mortgage-backed securities
collateralized mortgage obligations
state and municipal
total securities
held-to-maturity
$ 51,757,737
$ 984,412
$ (614,987)
$ 52,127,162
$ 992,146
35,539,028
786,365
2,559,875
$ 47,931
956,801
-
13,377
$ -
(88,167)
(15,246)
(40,174)
$ 1,040,077
36,407,662
771,119
2,533,078
$ 39,877,414
$ 1,018,109
$ (143,587)
$ 40,751,936
at december 31, 2009 and 2008, securities with a carrying value of $49,595,867 and $44,332,360, respectively,
were pledged to secure public deposits and for other purposes required or permitted by law.
the amortized cost and fair value of debt securities by contractual maturity at december 31, 2009, follow:
within one year
over one year through five years
over five years through ten years
over ten years
avaiLabLe-for-saLe
heLd-to-maturity
Amortized Cost
Fair Value
Amortized Cost
Fair Value
$ 2,746,573
59,735,197
5,726,125
8,439,852
$ 2,771,339
60,224,416
5,750,618
8,476,683
$ 997,004
-
1,785,991
238,187
$ 1,024,667
-
1,791,655
243,112
76,647,747
77,223,056
3,021,182
3,059,434
collateralized mortgage obligations
and mortgage-backed securities
35,510,321
37,058,361
33,156,663
34,574,236
total
$112,158,068
$114,281,417
$ 36,177,845
$ 37,633,670
there were no sales of securities available-for-sale or securities held-to-maturity during 2009 and 2008.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
24
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
3. securities conc luded
information pertaining to securities with gross unrealized losses at december 31, 2009 and 2008, aggregated by
investment category and length of time that individual securities have been in a continuous loss position, follows:
december 31, 2009
Less than
12 months
12 months
or greater
totaL
Gross
Unrealized
Losses
Gross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
Fair Value
Fair Value
u.s. government
sponsored enterprises $ 15,671,445
$ (96,464)
$ -
$ -
$15,671,445
$ (96,464)
mortgage-backed
securities
collateralized
mortgage obligations
6,361,469
(57,451)
152,350
(1,833)
6,513,819
(59,284)
state and municipal
3,145,205
(64,119)
-
-
3,145,205
(64,119)
total
$25,178,119
$(218,034)
$ 152,350
$ (1,833) $25,330,469
$(219,867)
december 31, 2008
Less than
12 months
12 months
or greater
totaL
Gross
Unrealized
Losses
Gross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
Fair Value
Fair Value
mortgage-backed
securities
collateralized
$ 10,748,153
$ (100,936)
$ 1,068,901
$ (42,199) $ 11,817,054
$ (143,135)
mortgage obligations
state and municipal
-
9,224,486
-
(511,148)
771,119
774,252
(15,246)
(89,045)
771,119
9,998,738
(15,246)
(600,193)
total
$19,972,639
$(612,084)
$2,614,272
$(146,490) $22,586,911
$(758,574)
management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more
frequently when economic or market concerns warrant such evaluation. consideration is given to (1) the length
of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term
prospects of the issuer; and (3) the intent and ability of the company to retain its investment in the issuer for a
period of time sufficient to allow for any anticipated recovery in fair value.
these unrealized losses related principally to current interest rates for similar types of securities. in analyzing an
issuer’s financial condition, management considers whether the securities are issued by the federal government or
its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s
financial condition. as management has the ability to hold debt securities until maturity, or for the foreseeable
future if classified as available-for-sale, no declines are deemed to be other-than-temporary.
25
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
4. Loans
the composition of net loans, including loans held-for-sale, at december 31, is as follows:
commercial
commercial real estate
residential real estate
consumer
Loans held-for-sale
subtotal
allowance for loan losses
net deferred loan costs
loans, net
2009
$ 27,117,069
74,142,880
95,742,622
6,739,165
112,500
2008
$ 34,723,875
95,436,167
94,935,466
5,332,207
832,000
203,854,236
231,259,715
(6,345,589)
84,600
$197,593,247
(4,925,500)
70,940
$ 226,405,155
at december 31, 2009 and 2008, nonaccrual loans were $5,535,866 and $3,502,128, respectively. there were no loans
90 days past due and still accruing interest at december 31, 2009 and 2008.
an analysis of the allowance for loan losses follows:
years ended december 31,
balance at beginning of year
provision for loan losses
Loans charged off
recoveries of loans previously charged off
balance at end of year
2009
$ 4,925,500
2,250,000
(1,087,757)
257,846
$ 6,345,589
the following is a summary of information pertaining to impaired loans:
years ended december 31,
impaired loans without a valuation allowance
impaired loans with a valuation allowance
total impaired loans
valuation allowance related to impaired loans
average investment in impaired loans
2009
$ 4,426,329
1,434,938
$ 5,861,267
$ 411,345
$ 5,014,589
2008
$ 3,360,003
3,123,000
(1,605,706)
48,203
$ 4,925,500
2008
$ 795,923
3,371,989
$ 4,167,912
$ 919,927
$ 3,381,165
interest income recognized on impaired loans during 2009 and 2008 amounted to $34,279 and $43,099,
respectively. no additional funds are committed to be advanced in connection with impaired loans.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
26
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
5. premises and eQ uipment
a summary of the cost and accumulated depreciation of premises and equipment follows:
Land and improvements
buildings and improvements
equipment
accumulated depreciation
2009
$ 1,922,993
7,765,037
4,934,459
14,622,489
(6,088,239)
$ 8,534,250
2008
$ 1,922,993
7,753,992
4,758,643
14,435,628
(5,488,730)
$ 8,946,898
depreciation, included in occupancy and equipment expense, amounted to $599,352 and $680,701 for the years
ended december 31, 2009 and 2008, respectively.
pursuant to the terms of noncancelable lease agreements in effect at december 31, 2009, pertaining to premises
and equipment, future minimum rent commitments under various operating leases are as follows
2010
2011
2012
2013
2014
thereafter
$ 593,647
474,430
449,910
415,410
413,910
1,204,655
$ 3,551,962
the leases contain options to extend for periods from three to ten years. the cost of such extensions is not included
above. total rent expense for the years ended december 31, 2009 and 2008 amounted to $496,945 and $449,397,
respectively.
6. deposits
at december 31, 2009, the scheduled maturities of time deposits are as follows:
2010
2011
2012
2013
2014
$ 71,809,946
9,337,179
596,379
1,547,760
899,013
$ 84,190,277
deposit accounts with related parties were $6,981,370 and $7,348,263 at december 31, 2009 and 2008, respectively.
27
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
7. securities soLd under agreements to repurchase
securities sold under repurchase agreements mature within twelve months and are collateralized by securities in the
company’s investment portfolio. all securities collateralizing the repurchase agreements are under the company’s
control. the maximum amount of repurchase agreements outstanding at any month-end during 2009 and 2008 was
$30,231,605 and $15,286,776, respectively. the average amount of repurchase agreements outstanding during 2009
and 2008 was $16,749,313 and $13,278,500, respectively. the weighted average interest rate on repurchase agreements
outstanding at december 31, 2009 and 2008 was .44% and 1.60%, respectively.
8. advances from federaL home Loan b ank
the company’s fixed-rate advances with the federal home Loan bank (fhLb) of $24,717,941 at december 31,
2009 mature through 2015. at december 31, 2009 and 2008, interest rates of fixed-rate advances ranged from 2.54%
to 4.33%.
outstanding fhLb borrowings are secured by a blanket lien on qualified collateral consisting primarily of loans
with first mortgages secured by one to four family properties, certain unencumbered investment securities, and other
qualified assets.
the contractual maturities of advances are as follows:
2009
2010
2011
2012
2013
2014
2015
total
2009
$ -
2,750,000
7,000,000
2,750,000
4,717,941
5,000,000
2,500,000
$ 24,717,941
2008
$ 6,599,037
4,750,000
5,000,000
2,750,000
2,769,030
-
-
$ 21,868,067
the bank has a long-term line of credit with the fhLb that does not expire, in the amount of $2.8 million.
there were no amounts outstanding at december 31, 2009 or 2008.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
28
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
9. income taxes
allocation of federal and state income taxes between current and deferred portions is as follows:
current tax expense
federal
state
deferred tax benefit
federal
state
2009
2008
$1,005,780
194,362
1,200,142
(513,900)
(121,000)
(634,900)
$ 565,242
$ 1,383,300
398,500
1,781,800
(601,100)
(140,500)
(741,600)
$1,040,200
the income tax provision differs from the expense that would result from applying federal statutory rates to
income before income taxes, as follows:
computed tax expense
increase (reduction) in income taxes resulting from:
tax exempt income
state tax expense, net of federal benefit
income from life insurance
incentive stock options
other
the components of the net deferred tax asset are as follows:
deferred tax assets
allowance for loan losses
employee benefit plans
other
deferred tax liabilities
net unrealized gain on securities available-for-sale
depreciation
deferred rent
other
net deferred tax asset
2009
$ 797,512
(186,880)
48,419
(92,692)
46,528
(47,645)
$ 565,242
2008
$1,043,101
(171,210)
170,281
(77,933)
27,528
48,433
$1,040,200
2009
2008
$2,273,339
397,085
198,286
2,868,710
721,939
179,844
49,918
134,689
1,086,390
$1,782,320
$1,681,000
325,800
131,200
2,138,000
125,604
134,100
5,768
128,728
394,200
$1,743,800
no valuation allowance is deemed necessary for the deferred income tax asset.
29
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
10. earnings per share
the following sets forth the computation of basic and diluted earnings per share for 2009 and 2008.
net income, as reported
weighted-average shares outstanding
effect of unvested stock grant
adjusted weighted-average shares and assumed conversion
basic earnings per share
diluted earnings per share
2009
$1,780,381
1,021,721
9,418
1,031,139
$ 1.74
$ 1.73
2008
$2,027,744
1,020,926
1,150
1,022,076
$ 1.99
$ 1.98
there are 34,300 and 38,300 employee stock options excluded from the computation of dilutive earnings per
share for 2009 and 2008, respectively, since inclusion of these common stock equivalents would be anti-dilutive.
11. financiaL instruments with off-b aLance-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 and commercial letters-of-credit, and interest rate caps
and floors written on adjustable rate loans. such instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance sheets. 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 losses.
the company generally requires collateral or other security to support financial instruments with credit risk.
at december 31, 2009 and 2008, the following financial instruments were outstanding whose contract amounts
represent credit risk:
contract amount
commitments to grant loans
commercial and standby letters-of-credit
2009
$43,130,754
$ 2,524,597
2008
$50,685,785
$ 3,298,627
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.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
30
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
11. financiaL instruments with off-b aLance-sheet risk
conc luded
the commitments for equity lines of credit may expire without being drawn upon. therefore, the total commitment
amounts do not necessarily represent future cash requirements. the amount of collateral obtained, if it is deemed
necessary by the company, is based on management’s credit evaluation of the customer.
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 creditworthiness 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 counterparty. collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and income-producing commercial property.
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 loan facilities to customers.
at times, the company places interest rate caps and floors on loans written by the company to enable customers
to transfer, modify, or reduce their interest rate risk.
12. LegaL contingencies
various legal claims arise from time to time in the normal course of business which, in the opinion of management,
will have no material effect on the company’s financial statements.
13. sharehoLders’ eQ uity and reguLatory matters
the company and its bank subsidiary are subject to various regulatory capital requirements administered by the
frb and the office of the comptroller of the currency (occ). failure to meet minimum capital requirements
can result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the company’s consolidated financial statements.
these capital requirements represent quantitative measures of the company’s assets, liabilities and certain off-balance-
sheet items as calculated under regulatory accounting practices. the company’s capital amounts and classification are
also subject to qualitative judgments by its regulators about components, risk-weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the company to maintain
minimum amounts and ratios of total and tier 1 capital (as defined in the regulations) to risk-weighted assets
(as defined) and of tier 1 capital to average assets (as defined). management believes that, as of december 31, 2009,
the company and its bank subsidiary meet all capital requirements to which they are subject. as of december 31,
2009, the most recent notification from the occ categorized the banking subsidiary as well capitalized under the
regulatory framework for prompt corrective action. to be categorized as well capitalized, a financial institution must
maintain minimum total risk-based, tier 1 risk-based and tier 1 leverage ratios as set forth in the following tables.
there are no conditions or events since the notification that management believes have changed the bank’s category.
prompt corrective action provisions are not applicable to bank holding companies.
31
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
13. sharehoLders’ eQ uity and reguLatory matters
conc luded
the actual capital amounts and ratios for the bank are presented below. the capital ratios for the company are not
materially different from those presented below.
(dollars in thousands)
Amount
Ratio
actuaL
december 31, 2009
total capital to
minimum capitaL
reQuirement
Amount
Ratio
minimum to be weLL
capitaLized under
prompt corrective
action provisions
Amount
Ratio
risk-weighted assets
$34,227
15.8%
$17,331
tier 1 capital to
risk-weighted assets
$31,474
14.5%
$ 8,665
tier 1 capital to
average assets
december 31, 2008
total capital to
$31,474
8.2%
$15,330
risk-weighted assets
$33,691
14.5%
$18,601
tier 1 capital to
risk-weighted assets
$30,753
13.2%
$ 9,301
tier 1 capital to
average assets
$30,753
8.9%
$13,823
8.0%
4.0%
4.0%
8.0%
4.0%
4.0%
$21,664
10.0%
$12,998
$19,162
6.0%
5.0%
$23,252
10.0%
$13,951
$17,279
6.0%
5.0%
the ability of the company to pay cash dividends depends on the receipt of dividends from its banking subsidiary.
the company, as the sole shareholder of the banking subsidiary, is entitled to dividends from legally available funds
when and as declared by the banking subsidiary’s board of directors.
in december 2007, the board of directors of the company approved the 2007 common stock repurchase program,
which permits the company to purchase 30,000 shares of its authorized and issued common stock for a one-year
period, expiring on december 13, 2008. the authority may be exercised from time to time and in such amounts as
market conditions warrant. any repurchases are intended to make appropriate adjustments to the company’s capital
structure, including meeting share requirements related to employee benefit plans and for general corporate purposes.
the company is dependent on dividends from its banking subsidiary to fund these share repurchases. the 2007
common stock repurchase program was not renewed upon expiration on december 13, 2008.
14. empLoyee benefits
the company sponsors a 401(k) profit sharing plan which covers all employees who are at least 21 years of age
and who have completed one year of employment. eligible employees contribute a percentage of their annual
compensation to the 401(k) plan and the company matches a certain portion of employee contributions. in addition,
the company may make discretionary contributions on behalf of employees under the plan. for the years ended
december 31, 2009 and 2008, expense attributable to the plan amounted to $268,485 and $322,556, respectively.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
32
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
14. empLoyee benefits
conc luded
included in accrued expenses and other liabilities in the balance sheets at december 31, 2009 and 2008, are
liabilities established pursuant to deferred compensation agreements with certain officers of the company of
$984,976 and $822,487, respectively. deferred compensation expense related to these plans amounted to
$180,000 and $179,316 for the years ended december 31, 2009 and 2008, respectively.
15. stock-b ased compensation
warrants to purchase shares of the company’s common stock at various exercise prices have been granted to
certain members of the organizing group, key management, and employees of the company prior to april 2006.
the warrants vest in three years and expire ten years from the date the warrant was granted.
on april 19, 2006, the shareholders of the company approved the 2006 stock option and incentive plan (the
“current plan”). the maximum number of shares of stock reserved and available for issuance under this plan is 50,000
shares. awards may be granted in the form of incentive stock options and restricted stock, or any combinations of the
preceding, and the exercise price shall not be less than 100% of the fair market value on the date of grant. no stock
options are exercisable more than ten years after the date the stock option is granted. the stock options vest over a
three-year period. the restricted stock awards granted through december 31, 2009, each vest over a three-year period.
on January 1, 2006, the company adopted fasb guidance for the incentive stock option and restricted stock
grants relating to the current plan and previous plans. in accordance with that guidance, the company recorded
$136,848 and $80,960 of compensation expense during the years ended december 31, 2009 and 2008, respectively.
total compensation expense related to nonvested awards not yet recognized is $268,893 as of december 31, 2009,
and is expected to be recognized over a weighted-average period of 1.6 years.
a summary of nonvested restricted stock awards as of december 31, 2009, and changes during the year ended
december 31, 2009, is presented below:
nonvested shares at december 31, 2008
granted
vested
nonvested shares at december 31, 2009
Shares
1,150
8,700
(432)
9,418
Weighted-Average
Grant-Date Fair Value
$ 47.82
35.00
47.37
36.00
the weighted-average grant-date fair value of restricted stock awards granted in 2008 was $49.19. fair value is based
on closing price of the stock.
the fair value of warrants granted during 2009 and 2008 was $4.01 and $4.02, respectively. the fair value of each
warrant granted is estimated on the date of grant using the black-scholes options-pricing model with the following
weighted-average assumptions:
dividend yield
risk-free interest rate
expected life
expected volatility
2009
3.54%
3.02%
10 years
11.45%
2008
3.35%
3.77%
10 years
10.62%
33
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
15. stock-b ased compensation conc luded
the expected volatility is based on historical volatility of a peer group of similar entities.
a summary of warrant activity as of december 31, 2009 and changes during the year then ended is presented below:
outstanding at beginning of year
granted
forfeited or expired
outstanding at december 31, 2009
exercisable at december 31, 2009
Weighted-Average
Exercise Price
$ 43.77
35.00
39.19
$ 44.24
Weighted-Average
Remaining
Contractual Life
Aggregate
Intrinsic Value
6.4 years
$ -
$ 43.43
6.1 years
$ -
Shares
38,300
500
(4,500)
34,300
29,033
the aggregate intrinsic value of warrants exercised during 2008 was $33,130.
the remaining number of warrants available to be granted was 55,911 and 51,911 at december 31, 2009 and
2008, respectively.
16. other noninterest income and expenses
the components of other noninterest income and expenses which are in excess of 1% of total revenues (total interest
and dividend income and noninterest income) and not shown separately in the statements of income are as follows
for the years ended december 31:
noninterest income
bank owned life insurance
gain on sale of loans
noninterest expenses
professional fees
Loan collection and workout expenses
advertising
2009
2008
$ 275,033
442,689
$ 717,722
$ 331,823
298,296
391,394
$1,021,513
$ 229,214
158,754
$ 387,968
$ 238,042
194,850
374,153
$ 807,045
17. reLated p arty transactions
the company has had, and may be expected to have in the future, transactions in the ordinary course of business
with directors, principal officers, their immediate families and affiliated companies in which they are principal share-
holders (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.
Loans granted to related parties amounted to $771,400 and $1,187,307 at december 31, 2009 and 2008, respectively.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
34
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
17. reLated p arty transactions conc luded
during January 2007, the banking subsidiary entered into a long-term lease with a company whose sole owner is
a director and shareholder of the company. this lease is for space that is the new headquarters for the bank’s
Ledyard financial advisors division. the lease has an initial term of ten years and calls for initial annual payments
of $320,000. the lease has three five-year options to renew.
18. fair vaLue of financiaL instruments
gaap defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about
fair value measurements.
fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. gaap also establishes a fair value hierarchy which requires an entity to
maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
the three levels of inputs that may be used to measure fair value are:
level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability
to access as of the measurement date.
level 2: significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be
corroborated by observable market data.
level 3: significant unobservable inputs that reflect a company’s own assumptions about the assumptions that
market participants would use in pricing an asset or liability.
assets and liabilities measured at fair value on a recurring basis are summarized below.
fair vaLue measurements at december 31, 2009, using
Significant
Unobservable
Inputs
(Level 3)
Quoted Prices In
Active Markets For
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Total
assets
securities available-for-sale
(market approach)
u.s. government sponsored
enterprises
mortgage-backed securities
collateralized mortgage obligations
state and municipal
corporate bonds
$ 56,430,769
$ 2,500,000
$ 53,930,769
$ -
35,736,740
1,321,621
15,601,016
5,191,271
-
-
-
-
35,736,740
1,321,621
15,601,016
5,191,271
-
-
-
-
$ 114,281,417
$ 2,500,000
$ 111,781,417
$ -
35
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
18. fair vaLue of financiaL instruments
continued
fair vaLue measurements at december 31, 2008, using
Significant
Unobservable
Inputs
(Level 3)
Quoted Prices In
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Total
assets
securities available-for-sale
(market approach)
u.s. government sponsored
enterprises
mortgage-backed securities
collateralized mortgage obligations
state and municipal
$ 4,560,318
$ -
$ 4,560,318
$ -
33,906,174
1,550,992
12,109,678
5,226,320
-
-
28,679,854
1,550,992
12,109,678
-
-
-
$ 52,127,162
$ 5,226,320
$ 46,900,842
$ -
assets and liabilities measured at fair value on a nonrecurring basis are summarized below.
fair vaLue measurements at december. 31, 2009, using
Significant
Unobservable
Inputs
(Level 3)
Quoted Prices In
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Total
assets
impaired loans (market approach)
Loans held-for-sale (market approach)
other real estate owned
(market approach)
$ 1,023,593
112,500
$ -
112,500
$ 1,023,593
-
$ -
-
265,865
-
265,865
-
fair vaLue measurements at december 31, 2008, using
Quoted Prices In
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Total
Significant
Unobservable
Inputs
(Level 3)
assets
impaired loans (market approach)
Loans held-for-sale (market approach)
other real estate owned
(market approach)
$ 2,452,062
832,000
$ -
832,000
$ 2,452,062
-
$ -
-
200,000
-
200,000
-
certain impaired loans were written down to their fair value of $1,023,593 and $2,452,062 at december 31, 2009
and 2008, respectively, resulting in an impairment charge through the provision for loan losses, which was included in
earnings for the period. Loans held-for-sale are recorded at the lower of cost or fair value with any resulting adjustment
to fair value included in earnings for the period. other real estate owned are initially recorded at fair value, then
carried at the lower of the new cost basis or fair value through a provision charge to earnings.
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
36
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
December 31, 2009 and 2008
18. fair vaLue of financiaL instruments
continued
the fair value of a financial instrument is the current amount that would be exchanged between willing parties,
other than in a forced liquidation. fair value is best determined based upon quoted market prices. however, in many
instances, there are no quoted market prices for the company’s various financial instruments. in cases where quoted
market prices are not available, fair values are based on estimates using present value or other valuation techniques.
those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future
cash flows. accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
certain financial and nonfinancial instruments are excluded from disclosure requirements. accordingly, the
aggregate fair value amounts presented may not necessarily represent the underlying fair value of the company.
the following methods and assumptions were used by the company in estimating fair value disclosures for
financial instruments:
Cash and cash equivalents
the carrying amounts of cash and short-term instruments approximate fair values.
Securities
fair values for securities, excluding federal home Loan bank stock and federal reserve bank stock, are determined
by obtaining quoted market prices on nationally recognized securities exchanges or matrix pricing, which is a
mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted
prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted
securities. the carrying value of federal home Loan bank stock and federal reserve bank stock approximates
fair value based on the redemption provisions of the federal home Loan bank and federal reserve bank.
Loans held-for-sale
fair values of loans held-for-sale are based on commitments on hand from investors or prevailing market prices.
Loans receivable
for variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on
carrying values. fair values for other loans are estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of similar credit quality. fair values for nonperforming
loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.
Deposit liabilities
the fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain
types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date
(i.e., their carrying amounts). the carrying amounts of variable-rate, fixed-term money market accounts and
certificates of deposit approximate their fair values at the reporting date. fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregate expected monthly maturities on time deposits.
37
no t e s t o co n s oLi d a t e d fi n a n c i aL st a t e m e n t s
Years Ended December 31, 2009 and 2008
18. fair vaLue of financiaL instruments
conc luded
Securities sold under agreements to repurchase
the carrying amounts of borrowings under repurchase agreements maturing within ninety days approximate
their fair values.
Advances from Federal Home Loan Bank
the fair values of these borrowings are estimated using discounted cash flow analyses based on the company’s
current incremental borrowing rates for similar types of borrowing arrangements.
Accrued interest
the carrying amounts of accrued interest approximate fair value.
Off-balance-sheet instruments
the company’s off-balance sheet instruments consist of loan commitments. fair values for loan commitments
have not been presented as the future revenue derived from such financial instruments is not significant.
the estimated fair values, and related carrying or notional amounts, of the company’s financial instruments are
as follows:
financiaL assets
cash and cash equivalents
securities available-for-sale
securities held-to-maturity
federal home Loan bank and
federal reserve bank stock
Loans and loans held-for-sale, net
accrued interest receivable
financiaL LiabiLities
deposits
repurchase agreements
advances from federal home
Loan bank
accrued interest payable
2009
2008
Carrying Amount
Fair Value Carrying Amount
Fair Value
$ 20,063,153
114,281,417
36,177,845
$ 20,063,153
114,281,417
37,633,670
$ 25,458,223
52,127,162
39,877,414
$ 25,458,223
52,127,162
40,751,936
2,013,300
197,593,247
1,564,322
2,013,300
197,577,403
1,564,322
2,010,900
226,405,155
1,325,024
2,010,900
227,973,766
1,325,024
320,129,428
13,713,739
319,661,357
13,713,739
295,585,570
14,427,836
295,768,990
14,427,836
24,717,941
208,556
24,338,502
208,556
21,868,067
264,532
21,590,165
264,532
L e d ya r d f i n a n c i aL g ro u p 2 0 0 9 a n n u aL r e p o r t
38
se n i o r m a n a g e m e n t t e a m
As of Marc h 8, 2010
Seated (l-r):
Christopher J. taylor
Senior Vice President
& Retail Banking Leader
Kathryn g. underwood
President & Chief Executive Officer
Jeffrey h. Marks
Senior Vice President
& Chief Marketing Officer
Martha P. Candon
Senior Vice President
& Business Development Officer
Standing (l-r):
robert t. Boon
Executive Vice President
& Managing Director,
Ledyard Financial Advisors
gregory d. steverson
Executive Vice President
& Chief Financial Officer
darlene e. romano
Senior Vice President,
Human Resources & Finance
d. rodman thomas
Senior Vice President
& Director of Client Relations,
Ledyard Financial Advisors
daniel X. stannard, Jr.
Senior Vice President
& Senior Loan Officer
darcy d. rogers
Senior Vice President
& Chief Operations Officer
39
bo a r d o f di r e c t o r s
As of Marc h 8, 2010
Seated (l-r):
dennis e. logue
Steven Roth Professor of Management Emeritus,
Tuck School of Business, Dartmouth College & Chair,
Ledyard Financial Group/Ledyard National Bank
adam M. Keller
Special Assistant to the President & Provost,
Dartmouth College
Kathryn g. underwood
President & Chief Executive Officer,
Ledyard Financial Group/Ledyard National Bank
Standing (l-r):
Frederick a. roesch
Retired, Senior Vice President,
Citigroup/Citibank & Co-Vice Chair,
Ledyard Financial Group/Ledyard National Bank
deirdre sheerr-gross
Principal, Sheerr and White,
Residential Architecture
douglas g. Britton
President, Britton Lumber Co., Inc. & Secretary,
Ledyard Financial Group/Ledyard National Bank
richard w. Couch, Jr.
Chairman, President & Chief Executive Officer,
Hypertherm, Inc.
Cotton M. Cleveland
President, Mather Associates
James w. varnum
Retired President, Dartmouth-Hitchcock Alliance and
Mary Hitchcock Memorial Hospital & Co-Vice Chair,
Ledyard Financial Group/Ledyard National Bank
andrew a. samwick
Professor of Economics & Director,
Nelson A. Rockefeller Center at Dartmouth College
Not pictured:
Bayne stevenson
President, Bayson Company
For a current list of Boards, Senior Management and Officers,
please visit the “About Us” section of our website at www.ledyardbank.com.
40
m i s s i o n s t a t e m e n t
Le dya rd NatioNaL B aNk
HaNov er
38 M a i n Street 603.643.22 44 Lobby, WaLk - U p & atM
Le b a no n Stree t at p a rk Street 603.643.7 45 7 Lobby, D ri ve - Up & atM
Da rtMoUth CoLLege CoL LiS Cente r atM
roUte 120 at o LD et na roaD 60 3. 44 8. 2220 Lobby, Dri ve -Up &
atM
LeBaNoN
on the gr een 603.795.2288 Lob by & atM
LyMe
178 CoUn ty ro aD 603.526.7725 Lobby, D ri ve - Up & atM
N e W L o N do N
320 M ai n Street 802.649.2050 Lobby, D ri ve - Up & atM
No rWiC H, v erMoNt
6 7 M a in S tre et 603.298.9444 Lobby, Dri ve - Up & atM
WeSt LeBaNoN
iNte rNet BaNkiNg
ledyardbank.com
kWikteL PHoNe B aNkiNg
1 .888.kWikteL (1.888.594.5835)
EQUAL HOUSING LENDER
MEMBER FDIC
Le dya r d FiNaNCi aL adv iSorS
HaNov er
2 MapLe Stree t 603.643.0044
N eW L oN do N
178 CoUnty roaD 603.526.9251
Personal and business banking relationships within the retail bank are subject to FDIC insurance
coverage limits. Investment, tax and wealth management services offered by Ledyard Financial Advisors
are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by the Bank or any
affiliate, and are subject to investment risk including the possible loss of principal amount invested.
Plan well.
Live well.