PUBLIC DISCLOSURE. June 22, 2009 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION. The Bank of Monroe. 39 Main Street. Union, West Virginia 24983

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1 PUBLIC DISCLOSURE June 22, 2009 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION The Bank of Monroe Main Street Union, West Virginia Federal Reserve Bank of Richmond P. O. Box Richmond, Virginia NOTE: This document is an evaluation of this institution s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion or opinion of the Federal financial supervisory agency concerning the safety and soundness of this financial institution.

2 TABLE OF CONTENTS Institution s CRA Rating... 1 Scope of Examination... 1 Description of Institution... 1 Description of Assessment Area... 2 Conclusions with Respect to Performance Criteria... 3

3 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION INSTITUTION'S CRA RATING: This institution is rated Outstanding. The major factors supporting this rating include: The bank s loan-to-deposit ratio is considered reasonable in relation to demand for credit in its assessment area. A substantial majority of the institution s sampled small business and consumer loans were originated within the bank s assessment area. Lending to borrowers of different income levels and to businesses of different sizes is considered excellent. The geographic distribution of lending is considered excellent. The bank has extended loans and provided services that qualify as community development activities. The bank has not received any complaints regarding its CRA performance since the previous evaluation. SCOPE OF EXAMINATION Based on The Bank of Monroe s loan volume during a recent 12-month period, small business loans and consumer loans (not secured by real estate) were identified as primary credit products and both were considered in the evaluation. The evaluation included analyses of 120 small business loans selected from 209 such transactions extended during 2007 and 115 consumer loans selected from 271 such transactions extended during the second half of Area demographic data based on 2000 census information, Dun & Bradstreet (D&B) business data, and 2007 market aggregate information are used as proxies for demand when evaluating the bank s performance. DESCRIPTION OF INSTITUTION The Bank of Monroe is headquartered in Union, West Virginia, and also operates a branch office in Lewisburg, West Virginia. The bank is a subsidiary of Union Bankshares, Inc., a single-bank holding company also headquartered in Union, West Virginia. The Bank of Monroe does not have any affiliate relationships. The following table reflects the composition of the loan portfolio as of March 31, Composition of Loan Portfolio Loan Type 3/31/2009 $(000s) % Secured by 1-4 Family dwellings 27, Multifamily Construction and Development 1, Commercial & Industrial/ NonFarm NonResidential Consumer Loans and Credit Cards 22,633 6, Agricultural Loans/ Farmland 2, All Other Total 61, As of March 31, 2009, the bank reported assets of $98.7 million, of which 60.4% were loans. The institution offers a variety of credit and deposit products including loans for consumer, residential mortgage, and business purposes. The institution s previous CRA rating, dated May 2, 2005, was Satisfactory.

4 Description of Assessment Area The bank s assessment area is located in the southeastern portion of West Virginia in the Alleghany Mountains and includes all of Greenbrier and Monroe Counties, West Virginia. All eight of the middle-income census tracts (five located in Greenbrier County, West Virginia, and three located in Monroe County, West Virginia) have been designated as underserved areas as provided in the definition of community development. According to the 2000 census data, the assessment area has a population of 49,036 and a median housing value of $65,583. The owner-occupancy rate for the market equals 63.2%, which is lower than both the rates for nonmetropolitan areas of West Virginia (65.6%) and the state (65.6%). The percentage of families living below the poverty level in the assessment area (14%) is slightly lower than the percentage in all nonmetropolitan areas of West Virginia (16.4%) and nearly identical to the state percentage (13.9%). The 2007 median family income for nonmetropolitan areas of West Virginia equals $40,300. The following table contains detailed demographic information for the assessment area based on the 2000 census. The table provides demographic data for the assessment area by the income level of families and households, the distribution of owner-occupied housing units, and the distribution of local businesses.

5 Assessment Area Demographics Greenbrier and Monroe Counties NonMSA WV Income Categories* Tract Distribution Families by Tract Families < Poverty as a % of Families by Tract Families by Family Income Low Moderate Middle Upper NA Total Low Moderate Middle Upper NA Total # % # % # % # % , , , , , , , , , , Owner Occupied Units by Tract # % # % # % # % , , , , , , , , , , , , , Total Businesses by Tract Households HHs by Tract HHs < Poverty by Tract HHs by HH Income Businesses by Tract and Revenue Size Less than or = $1 Million Over $1 Million Revenue not Reported Low Moderate Middle Upper NA Total The assessment area is primarily rural and the local economy is dependent on the forestry, agricultural, and livestock industries. Major area employers in the counties include local area school systems, Greenbrier Valley Medical Center, Goodrich Corporation, and Wal-Mart Stores, Inc. As of May 2009, the unemployment rates for Greenbrier and Monroe Counties, West Virginia, were 10.1% and 7.7%, respectively. The unemployment rate for West Virginia was 8.3% during the same time period. A local economic development official was contacted during the examination to discuss area economic conditions and credit needs. The contact indicated that local financial institutions are adequately serving the credit needs of the community. CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA: Loan-To-Deposit Ratio # % # % # % # % , , Percentage of Total Businesses: *NA Tracts are tracts without household or family income as applicable. A bank s loan-to-deposit ratio is one measure of its lending relative to its capacity. The Bank of Monroe s loan-to-deposit ratio, as of March 31, 2009, equaled 70.4% and averaged 64.5% for the 16-quarter period ending March 31, 2009.

6 In comparison, the average of quarterly loan-to-deposit ratios for all banks headquartered in nonmetropolitan areas of West Virginia and of similar asset size to The Bank of Monroe ranged from 66.2% to 72.8% during the same 16-quarter period ending March 31, Since June 30, 2005, bank assets and loans have increased by 0.4% and 13.4%, respectively, and bank deposits have decreased 3.7%. The bank s loan-to-deposit ratio is considered reasonable given the institution s capacity and local economic conditions. Lending In Assessment Area As previously indicated, the analysis of the bank s lending is based on samples of 120 small business and 115 consumer loans. The following table reflects the number and percentage of loans extended within the bank s assessment area. Comparison of Credit Extended Inside and Outside of Assessment Area(s) Loan Type Inside Outside # % $(000) % # % $(000) % Small Business * , Consumer * TOTAL LOANS , *The number and dollar amount of loans reflects a sample of such loans originated during the evaluation period and does not reflect loan data collected or reported by the institution. As illustrated in the preceding chart, a substantial majority of both the number and dollar amount of analyzed loans was provided to borrowers within the assessment area. The bank s level of lending within its assessment area is considered highly responsive to community credit needs. Lending to Borrowers of Different Incomes and To Businesses of Different Sizes To evaluate the level of lending to borrowers of varying income and revenue levels, the samples of 109 small business and 110 consumer loans extended within the bank s assessment area were analyzed and are reflected in the following tables. Discussion of the bank s performance follows each table. Greenbrier and Monroe Counties NonMSA WV Bank Aggregate* by Revenue # % $(000s) % $ # % $(000s) % $ $1 Million or Less , , Over $1 Million NA NA NA NA Unknown NA NA NA NA by Loan Size Distribution of Lending by Loan Amount and Size of Business $100,000 or less , , , $100,001-$250, , , $250,001-$1 Million , , Total , , , * No data is available for Aggregate loans with Revenues over $1 million and those with Unknown revenues Based on recent D&B demographic data, 89.8% of local businesses have annual revenues of $1 million or less. As presented in the preceding table, the bank s small business lending to businesses with revenues of $1 million or less significantly exceeds both the demographic data and the 2007 aggregate lending level also presented in the table. This level of lending is considered excellent.

7 The 2000 census data indicates that 24.1% and 14.9% of area households are low- and moderate-income, respectively. As presented in the preceding table, the bank s level of lending to low-income borrowers is nearly identical to the demographic proxy, and the level of lending to moderate-income borrowers significantly exceeds the demographic proxy. This level of lending is considered excellent. Overall, the distribution of loans to borrowers of different income levels and businesses of different sizes is considered excellent when using area demographic, D&B business, and aggregate data as proxies for demand. Geographic Distribution of Loans As noted previously, the assessment area consists of eight middle- and two upperincome census tracts. Of the 109 sampled small business loans in the assessment area, 85 (78%) were located in middle-income census tracts. This figure significantly exceeds both the 2007 aggregate lending level (49.4%) in middleincome tracts and the proportion of businesses located in middle-income census tracts (59.6%). Additionally, 89.1% of the bank s sampled consumer loans were extended within middle-income census tracts while only 76.3% of the assessment area households are located in middle-income census tracts. Overall, the geographic distribution of lending in the assessment area is considered excellent when using area demographics and 2007 aggregate small business data as proxies for demand. Community Development Activities Distribution of Consumer Loans by Income Level of Borrower Greenbrier and Monroe Counties NonMSA WV Income Consumer Loans Categories # % $(000s) % $ Low Moderate Middle Upper Total Unknown 0 0 Percentage's (%) are calculated on all loans where incomes are known As previously mentioned, all tracts within Monroe County have been designated as underserved middle-income census tracts. Since the previous evaluation, the bank has funded six community development loans totaling approximately $298,000. These loans were provided to local organizations providing emergency services within the county. Additionally, two executive officers provided financial expertise by serving as members of the board of directors of the Greenbrier Valley Economic Development Corporation (GVEDC). The GVEDC operates a Micro Revolving Loan Program and a Rural Business Enterprise Program which provide assistance to small businesses operating in Greenbrier and Monroe Counties. These community development activities enhance credit availability within the bank s assessment area. Fair Lending Or Other Illegal Credit Practices Review No evidence of discriminatory or other illegal credit practices inconsistent with helping to meet community credit needs was identified. Adequate policies,

8 procedures, and training programs have been developed to support nondiscrimination in lending activities.

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