‘13
Y E A R
I N R E V I E W
APRIL 15, 2014
Market for Union Bankshares Common Stock
On March 17, 2014, there were 4,458,262 shares of common stock outstanding held
by 592 stockholders of record. The number of stockholders does not refl ect the
number of benefi cial owners, including persons or entities who may hold the stock
in nominee or “street name.” Union Bankshares’ common stock is listed on the
NASDAQ Global Market trading under the symbol UNB. For shareholder assistance
please contact us at 802-888-6600 or our Transfer Agent, Registrar and Transfer
Company, at 800-368-5948.
Union Bankshares
Again Recognized for High Performance
In 2013, for the second year in a row, Union Bankshares was recognized as one of
the top performing small-cap banks and thrifts in the United States by investment
fi rm Sandler O’Neill. The ranking methodology evaluated publicly traded banks and
thrifts with market capitalizations between $25 million and $2.5 billion. Assessment
focused on growth, profi tability, credit quality and capital strength. In order to
qualify as a Sm-All Star, Union Bank needed to achieve results at or above their peer
median for all of the metrics listed in the chart below.
In addition, Union Bank was again recognized by investment fi rm, Raymond James
in its Community Bankers Cup awards for being in the top 10% of community banks
(with assets of $500 million to $10 Billion) based on various profi tability, operational
effi ciency and balance sheet metrics. Union Bank was the only bank in the country
with assets under $1 Billion to earn this distinction.
Performance Metrics:
2013 Sm-All Stars vs. Industry Medians
Last Twelve
Months
Union Bankshares
Sm-All
Stars
All Banks
and Thrifts
EPS Growth
Loan Growth
Deposit Growth
ROAE
NPAs1 / Loans and OREO
NCOs / Avg. Loans
Reserves / NPAs1
32.1%
5.6%
3.2%
17.5%
0.6%
0.06%
174%
16.6%
11.8%
9.0%
11.3%
1.0%
0.16%
129%
5.6%
4.2%
2.4%
7.4%
1.8%
0.36%
68%
UNION BANKSHARES
COMMON STOCK
2013
HIGH
LOW
DIVIDENDS
First Quarter
$22.15
$19.25
$0.25
Second Quarter
$22.00
$20.21
$0.25
Third Quarter
$22.08
$20.73
$0.25
Fourth Quarter
$23.00
$21.03
$0.26
2012
HIGH
LOW
DIVIDENDS
First Quarter
$20.00
$18.56
$0.25
Second Quarter
$19.90
$18.75
$0.25
Third Quarter
$21.00
$18.80
$0.25
Fourth Quarter
1 Accruing TDRs are excluded from NPAs.
Source: SNL Financial and Sandler O’Neill
$20.09
$19.26
$0.25
2013 Year In Review 1
APRIL 15 , 201 4
to our
S H A R E H O L D E R S
Kenneth D. Gibbons
CHAIRMAN
UNION BANKSHARES, INC.
AND UNION BANK
David S. Silverman
PRESIDENT & CEO
UNION BANKSHARES, INC.
AND UNION BANK
We are pleased to report the fi nancial results for your
company for the year ended December 31, 2013. Net
Income was $7.1 million compared to Net Income for the
year ended December 31, 2012 of $6.8 million. Results for
2013 refl ect a year to year increase in net interest income
of $345 thousand, a decrease in noninterest expenses of $1.8
million, and a decrease in noninterest income of $2.0 million.
The decrease in noninterest income was primarily due to a
reduction in gain on sale of real estate loans of $1.2 million
and a decrease in gain on sale of securities of $673 thousand
compared to 2012.
Total assets grew to $585.4 million as of December 31, 2013
compared to $577.3 million as of December 31, 2012. Total
loans increased $9.8 million to $465.1 million, as of December
31, 2013 compared to $455.3 million, as of December 31, 2012.
The 2013 loan growth was net of $123.1 million of residential
mortgage loans sold to the secondary market during the
year to manage long-term interest rate risk, compared to
sales of $125.7 million in 2012. Total deposits reached $518.4
million compared to the prior year of $510.0 million, an
increase of $8.4 million. The company had total capital
of $49.8 million with a book value per share of $11.17 as of
December 31, 2013 compared to $45.0 million with a book
value of $10.11 as of December 31, 2012.
2013 was a year of modest growth in loans, deposits, and
assets. Infl ation has been very low and the local economy
has been tepid, though slowly improving. We would like
to grow our assets at a brisker pace to allow us to spread
regulatory and compliance costs over a larger base, but
we resist “growth for growth’s sake.”
There are several items of note that occurred in 2013. After
careful analysis we chose to close our Green Mountain Mall
branch offi ce in St. Johnsbury. This was done to make our
branch delivery system more effi cient and without material
attrition in customer accounts. We continue to evaluate
our entire organization seeking areas where we can be
more effi cient.
Final Basel III Capital Standard Regulations were issued
in July of 2013 with a January 1, 2015 eff ective date for the
Company. We have since tested our balance sheet under
the new Capital Standards and found ourselves compliant
with the new regulations in the initial year through full
implementation in 2019. Considering our compliance with
Basel III and our earnings, the Board of Directors voted to
increase the dividend 4% on an annual basis beginning in
the third quarter. Of course, future dividends are dependent
on future fi nancial performance.
During the autumn of 2013 we had a team from the FDIC
perform an examination of our compliance with the Community
Reinvestment Act (CRA). The CRA measures a bank’s respon-
siveness in meeting the credit needs of the communities it
serves. We again received the top CRA rating of Outstanding.
According to FDIC data less than 5% of the banks examined in the
past three years have received the “Outstanding” designation.
Finally, we wish to recognize two long time staff members
who have recently retired and who have been important
factors in our success for many years. JoAnn Tallman has
served the bank for almost 28 years holding several positions
before becoming the President’s Executive Secretary and
Board Meeting Recorder. JoAnn’s calm, quiet demeanor
has been a welcome counterpoint to two Presidents and
19 diff erent Board Members. Marsha Mongeon has served
as the bank’s Chief Financial Offi cer for 24 years. Marsha
will be remembered for her knowledge, professionalism,
and dedication to the bank. Both of these fi ne individuals
will be missed both personally and professionally. We are
happy for both to enjoy well deserved retirement years.
Sincerely,
Kenneth D. Gibbons
Chairman
David S. Silverman
President & Chief Executive Offi cer
2 2013 Year In Review
FINANCIAL HIGHLIGHTS
RETURN ON AVERAGE EQUITY
SOURCE: SNL FINANCIAL LC
SNL BANK $500M - $1B
20%
15%
10%
5%
0%
-5%
2008
2009
2010
2011
2012
2013
Year Ending December 31,
RETURN ON AVERAGE ASSETS
SOURCE: SNL FINANCIAL LC
1.5%
SNL BANK $500M - $1B
Balance Sheet Data
Total assets
Investment securities
Loans, net of
unearned income
Allowance for
loan losses
Deposits
Borrowed funds
Stockholders’ equity1
Income Statement Data
Total interest and
dividend income
Total interest expense
Net interest and
dividend income
Provision for loan losses
Noninterest income
Noninterest expenses
Income before provision
for income taxes
AT OR FOR THE YEARS ENDED DECEMBER 31
2013
2012
2011
2010
2009
(Dollars in thousands, except per share data)
$585,443
45,492
$577,256
26,126
$552,751
46,954
$452,995
24,280
$447,522
24,649
465,123
455,298
429,384
382,071
358,167
(4,647)
518,354
13,216
49,820
(4,657)
509,993
15,747
45,046
(4,226)
473,439
29,015
40,339
(3,755)
376,660
28,986
41,725
(3,493)
368,827
30,993
41,180
$24,481
(2,459)
22,022
(305)
8,501
(21,221)
8,997
$25,028
(3,351)
$23,669
(3,908)
$22,907
(4,117)
$23,217
(5,294)
21,677
19,761
18,790
17,923
(660)
10,525
(23,035)
(775)
7,125
(19,773)
8,507
(1,663)
6,338
(1,119)
(520)
5,649
(16,630)
7,289
(1,702)
(400)
5,521
(16,397)
6,647
(1,420)
Provision for income taxes
(1,862)
1.0%
.5%
0%
-.5%
-1%
2013 Year In Review 3
2008
2009
2010
2011
2012
2013
Year Ending December 31,
Net income
$7,135
$6,844
$5,219
$5,587
$5,227
Per Common Share Data
Net income2
Cash dividends paid
Book value1
Weighted average number
of shares outstanding
Number of shares
outstanding
$1.60
1.01
11.17
$1.54
1.00
10.11
$1.17
1.00
9.05
$1.25
1.00
9.36
$1.17
1.00
9.23
4,457,261
4,457,029 4,456,842
4,458,193 4,466,760
4,458,359
4,456,081 4,457,204
4,455,704
4,461,208
1Stockholders’ equity includes unrealized gains or losses, net of
applicable income taxes, on investment securities classifi ed as
“available-for-sale” and includes the unfunded liability for pension
benefi ts, net of taxes for the defi ned benefi t pension plan.
2Computed using the weighted average number of shares
outstanding for the period.
AT OR FOR THE YEARS ENDED DECEMBER 31
BUSINESS
HIGHLIGHTS
Union Bank is fortunate to have
a varied set of successful business
lines that helped contribute to the
bank’s strong performance and
position the organization to meet
customer needs in the coming
years. A sampling of the services
provided can be found here
>
Commercial Services
Over many decades, Union Bank has earned a reputation
as a reliable, experienced and responsive commercial lender.
With seasoned staff and in-market lending decisions, we are
able to provide borrowers with a more rapid and personalized
loan process than is customary from large banks.
Union Bank provides prospective borrowers with an excellent
blend of attractive services, knowledgeable lenders and a
formidable lending capacity with a singular focus on serving
clients in our local market areas. As a Preferred Lender with
the US Small Business Administration, Union Bank off ers a
variety of loan options to prospective applicants.
These positive attributes and welcome referrals from existing
commercial customers helped Union Bank achieve record
levels in our commercial loan portfolio during 2013.
this market with both our traditional branch network and our
very successful Mortgage Loan Center in South Burlington, VT.
Our lenders are knowledgeable and versatile enough to serve
a range of customers from those needing customized jumbo
mortgages or BUILD construction loans to those seeking to buy
a fi rst home with the assistance of an aff ordable housing program.
The positive impact that Union Bank has made in the lives of
such fi rst time home buyers has been recognized by the FDIC
with a rating of Outstanding for our Community Reinvestment
activities. Additionally, in 2013 Union Bank has been recognized
by the US Department of Agriculture as its Rural Development
Home Loan Lender of the Year for Vermont.
Union Bank is extremely proud of these distinctions and
believes our varied business eff orts have a direct benefi t for our
customers, our communities, our staff and our shareholders.
Municipal Services
Much of the same can be said of our service to towns, villages,
school districts and other municipal entities. Union Bank
is extremely well positioned to serve local municipal and
non-profi t clients who value both the fi nancial services which
the bank off ers and the readily-accessible personal service.
Our staff regularly advises customers in determining the
optimal deposit, lending and electronic banking products to
meet their particular needs. The Bank is proud to serve the
towns, school districts, hospitals, nursing homes, medical
practices, social service agencies and other non-profi ts that
are such an important part of the fabric of our communities.
Mortgage Lending
2013 marked a banner year for Union Bank’s vibrant residential
lending business despite the increase in long term interest
rates slowing the refi nance market. Repeat customers, client
referrals, attractive products and outstanding service also
characterize our mortgage business line. While the increase
in rates began to impact the refi nance market in the last
quarter of the year, we attained excellent results lending to
families looking to buy or build a new residence throughout
the entire year. Union Bank is well positioned to serve
Consumer Banking
Gathering deposits to fund our lending activities is a core
function of the bank. During 2013 we introduced Advantage
Banking, a package of banking services to reward customers
who maintain higher deposit balances with Union Bank. We
view deposits as a sign of commitment to the bank and this
is our eff ort to reward and retain these important depositors
who contribute substantially to our overall success. Advantage
Banking has proven to be extremely popular with hundreds
of customers signing up in just the fi rst few months. These
participating customers gain enhanced value through the
special pricing off ered on popular bank services. Advantage
Checking and Advantage Checking Plus are our fl agship
checking accounts and reward individuals who maintain de-
posit relationships of $25,000 or more with enhanced value
and discounts on popular bank services. From complementary
checks and ATM fee waivers to no-cost services and higher
rates on CD’s, Advantage Banking provides special pricing,
allowing these customers to take full advantage of their
banking relationship with Union Bank. The qualifying deposit
relationship is a combination of all personal deposit accounts
held individually or jointly by the primary account holder on
the Advantage Checking Account. This includes checking
accounts, CD’s, IRAs, Savings and Money Market accounts.
4 2013 Year In Review
Asset Management Group
Union Bank’s Asset Management Group off ers a full range
of investment management and trust services to individual
investors, corporations and non-profi t organizations. Our
team has the expertise to oversee fully managed investment
accounts as well as advisory and custodial relationships. In
addition to counseling clients in or approaching retirement,
we are experts at advising organizations on eff ective asset
management strategies. For those looking to control the
distribution of their estate, we have the expertise to guide
clients through the intricacies of personal trust and estate
planning. We also serve as advisor to individuals who have
assumed the important roles of trustee and executor.
We are pleased to announce that Lura Jacques has been
named Managing Trust Offi cer for the Asset Management
Group. Lura has been with Union Bank for the past 6 years in
the capacity of Trust Offi cer in the Western Region. Overall,
she has a total of 25 years’ asset management experience. In
addition; we have expanded our Asset Management services
into our Eastern Region with the hiring of Joseph (JJ) Ilacqua.
JJ brings over 17 years of investment management experience
to the position.
Our network of offi ce locations allows us to off er local,
personalized services to our clients and conduct regular
investment and life reviews to assist in evaluating a client’s
investing and asset management strategies. These person-
alized reviews consider each investor’s risk tolerance, time
horizon, tax circumstances and income needs.
There has never been a more important time for clients
to have access to objective, insightful and personalized
investment advice. Union Bank off ers the broad expertise,
long term perspective and focused customer service to
provide our customers with an investment strategy that
best meets their needs.
Lura Jacques
MANAGING
TRUST OFFICER
Joseph (JJ) Ilacqua
TRUST OFFICER
2013 Year In Review 5
DIRECTORS
Kenneth D. Gibbons - Chairman
Cynthia D. Borck
Steven J. Bourgeois
Timothy W. Sargent
David S. Silverman
John H. Steel
Schuyler W. Sweet
Neil J. Van Dyke
OFFICERS
Kenneth D. Gibbons - Chairman
David S. Silverman - President & CEO
Marsha A. Mongeon - Vice President/Treasurer/CFO
John H. Steel - Secretary
JoAnn A. Tallman - Assistant Secretary
Jeff rey G. Coslett - Vice President
DIRECTORS
Kenneth D. Gibbons - Chairman
Cynthia D. Borck
Steven J. Bourgeois
John M. Goodrich
Timothy W. Sargent
David S. Silverman
John H. Steel
Schuyler W. Sweet
Neil J. Van Dyke
REGIONAL ADVISORY
BOARD MEMBERS
Michael R. Barrett – St. Johnsbury
Joel S. Bourassa - Northern New Hampshire
Steven J. Bourgeois - St. Albans
Dwight A. Davis - St. Johnsbury
Stanley T. Fillion - Northern New Hampshire
Rosemary H. Gingue - St. Johnsbury
Coleen K. Kohaut - St. Albans
Justin P. Lavely - St. Johnsbury
Daniel J. Luneau - St. Albans
Alexandra S. MacLean – St. Johnsbury
Mary K. Parent – St. Johnsbury
Samuel H. Ruggiano - St. Albans
David S. Silverman - All
Schuyler W. Sweet - Northern New Hampshire
Norrine A. Williams - Northern New Hampshire
TOP TO BOTTOM
Cynthia D. Borck
OWNER
CONSULTING SERVICES
INFORMATION
Steven J. Bourgeois
CEO
STRATEGIC INITIATIVES
FOR BUSINESS LLC
Kenneth D. Gibbons
CHAIRMAN
UNION BANKSHARES, INC.
AND UNION BANK
David S. Silverman
PRESIDENT & CEO
UNION BANKSHARES, INC.
AND UNION BANK
John H. Steel
FOUNDER
STEEL CONSTRUCTION
Timothy W. Sargent
ATTORNEY/OWNER
SARGENT LAW OFFICE
Schuyler W. Sweet
OWNER
STONY RIVER
PROPERTIES, LLC
Neil J. Van Dyke
PRESIDENT
GOLDEN EAGLE RESORT
OFFICERS
Tracy Pierce Ash - Assistant Treasurer
Diana M. Ashley - Assistant Treasurer
Rhonda L. Bennett - Vice President
Sherrie A. Bull - Vice President
Stacey L. B. Chase - Assistant Vice President
Barbara J. Churchill - Assistant Treasurer
Everett C. Comstock - Assistant Treasurer
Jeff rey G. Coslett - Senior Vice President
Michael C. Curtis - Vice President
Jennifer M. Degree - Assistant Treasurer
Ronald C. Dion - Assistant Treasurer
Jessica M. Eastman - Assistant Vice President
Kenneth D. Gibbons - Chairman
Don D. Goodhue - Vice President
Melissa A. Greene - Vice President
Paul E. Grogan - Facilities Offi cer
Karyn J. Hale - Vice President
Claire A. Hindes - Vice President
Robert D. Hofmann - Senior Vice President
Patricia N. Hogan - Senior Vice President
Tracey D. Holbrook - Regional Vice President
Joseph J. Ilacqua - Assistant Vice President
Lura L. Jacques - Assistant Vice President
Lynne P. Jewett - Vice President
Stephen H. Kendall - Senior Vice President
Susan F. Lassiter - Vice President
Christine S. Latulip - Regional Vice President
R. Ryan Leap - Senior Vice President
Edward L. Levite - Senior Loan Originator
Carrie R. Locklin - Assistant Vice President
Bonnie J. Losty - Vice President
John L. Malm - Vice President
Robyn A. Masi - Vice President
Marsha A. Mongeon - Senior Vice President & CFO
Samantha A. Norrie - Assistant Treasurer
Karen Calson Noyes - Vice President
Barbara A. Olden - Vice President
Deborah J. Partlow - Assistant Vice President
Bradley S. Prior - Assistant Vice President
Craig S. Provost - Vice President
Robert J. Richardson - Vice President
David S. Silverman - President & CEO
Judy R. Smith - Vice President
Karen Blanchard Smith - Assistant Treasurer
John H. Steel - Secretary
Curtis C. Swan - Assistant Vice President
JoAnn A. Tallman - Assistant Secretary
Melyssa S. Whitcomb - Assistant Treasurer
Martha J. Wilkins - Assistant Treasurer
Lorraine G. Willett - Assistant Vice President
Littleton
Fairfax
Morrisville
Morrisville
Morrisville
Morrisville
Morrisville
Morrisville
St. Albans
Morrisville
Morrisville
S. Burlington
Morrisville
Morrisville
Hardwick
Morrisville
Morrisville
Morrisville
Morrisville
Morrisville
St. Johnsbury
Littleton
St. Albans
Morrisville
Morrisville
Jeff ersonville
Littleton
Morrisville
S. Burlington
Morrisville
Morrisville
Littleton
Stowe
Morrisville
Littleton
Morrisville
St. Johnsbury
Morrisville
Morrisville
Stowe
Morrisville
Morrisville
St. Albans
Morrisville
Morrisville
St. Albans
Morrisville
Lyndonville
St. Johnsbury
Morrisville
6 2013 Year In Review
Market for Union Bank share’s Common Stock
On March 18, 2013, there were 4,455,406 shares of common stock outstanding held
by 616 stockholders of record. The number of stockholders does not refl ect the
number of benefi cial owners, including persons or entities who may hold the stock in
nominee or “street name.” Union Bankshares’ common stock is listed on the NASDAQ
Global Market trading under the symbol UNB. On January 16, 2013, the Company
declared a regular dividend of $0.25 per share to stockholders of record as of
Jan uary 26, 2013 payable February 7, 2013.
Union Bank shares Awarded
Sm-All Star Status by Sandler O’Neill
In 2012, for the second time, Sandler O’Neill recognized Union Bankshares as one
of the top performing small-cap banks and thrifts in the United States. The fi rst
VERMONT
time was in 2009. Ranking methodology begins with a list of publicly traded banks
and thrifts with market caps between $25 million and $2 billion. Further evaluation
421 Route 2 East
802-684-2211
Danville
focused on growth, profi tability, credit quality and capital strength. Eight fi nancial
Jct. Routes 104 & 128
802-849-2600
Fairfax
variables were evaluated to determine performance as well as growth trends that
103 VT Route 15 West
Hardwick
802-472-8100
measure momentum. In order to qualify, the banks and thrifts needed to be at or
44 Main Street
Jeff ersonville
802-644-6600
above the peer median for these seven metrics: growth in earnings per share, loans
198 Lower Main Street
802-635-6600
Johnson
and deposits; and in the following ratios —return on average equity; nonperforming
183 Depot Street
Lyndonville
802-626-3100
assets to loans plus OREO (Other Real Estate Owned) ratio; net charge-off ratio and
20 Lower Main Street
802-888-6600
Morrisville
reserve to nonperforming assets ratio; plus be Well Capitalized per the Tier 1 risk-
65 Northgate Plaza
802-888-6860
based capital ratio.
St. Albans
15 Mapleville Depot
802-524-9000
St. Johnsbury
364 Railroad Street
802-748-3131
Performance Metrics:
2012 Sm-All Stars vs. Industry Medians
30 Kimball Avenue
Stowe
47 Park Street
S. Burlington
Loan Center
325 Portland Street
802-748-3121
802-865-1000
802-253-6600
NEW HAMPSHIRE
Groveton
Littleton
3 State Street
263 Dells Road
76 Main Street
N. Woodstock
155 Main Street
603-636-1611
603-444-7136
603-444-5321
603-745-2488
WWW.UNIONBANKVT.COM WWW.UNIONBANKNH.COM
1-866-862-1891 (toll free)