branch locations■ Swift Street

South Burlington

■ Lower Mountain View Drive Colchester

■ Carleton Boulevard East Montpelier

■ Center Street Lyndonville

■ Water Street Orleans

■ Airport Road Berlin

email: memberservices@northcountry.org

Call toll free: (800) 660-3258 www.northcountry.org2011 Annual Report

Federally insured to at least $250,000

Wherever you go, we’re there.

On my first day at the credit union, I walked into a one-room, two-desk financial institution with $6 million in assets. I and one other employee—the manager— were responsible for everything, but my focus was loans. It was a challenge I enjoyed because, although our loans were relatively small by today’s standards, I felt I could make a tangible difference in people’s lives.

Thirty years have passed, and 2011 was my final year as President/CEO of NorthCountry. As I retire, I reflect with pride on NorthCountry’s evolution into a multi-branch organization serving people throughout northern Vermont. Nearly 100 people work here,

earning incomes that pay their mortgages, feed their families, and heat their homes.

And while we’ve done well for ourselves, we’ve also done right by our members. We’ve made thousands of loans for life-changing investments such as homes, college educations, and reliable vehicles. People have also turned to us as a safe haven for their nest eggs, retirement funds, and savings accounts. I think it’s fair to say that as a financial institution, we’ve made a difference.

As you’ll see in this report, a neutral industry tracker ranked NorthCountry #1 among its peers for the value we provide you, our accountholders. I can’t think of a better note to end on as I hand the reins of this organization to Bob Morgan, your new CEO. I know he will continue to keep the credit union on its current course, letting our members’ best interests lead our decisions.

Many of you have worked with Bob. He joined our staff in 2000, bringing with him invaluable experience in lending, including creating loan programs for people of limited means. As our Executive Vice President, Bob has developed and refined

lending programs, launched a business lending program, obtained down payment assistance grants for people to purchase homes, and collaborated with local non-profits to create an easy financial solution for people of modest means who encounter emergency financing needs. He is an innovator, a problem solver, and a qualified leader. Under his direction, I am confident NorthCountry will continue to be a source of opportunity for its accountholders, communities, and staff.

I look forward to continuing with the credit union as its president while we complete some exciting projects, including the opening of at least two new branches.

John BenoitPresident/CEO

A Message from the President

People walking in First Night Burlington’s Drums and Dragons Parade.

A Message from the Chair

For many of us 2011 will be recalled as the year Tropical Storm Irene destroyed roads, washed away homes, and wreaked havoc in parts of Vermont. For some in our community, the damage was

devastating. To support flood relief efforts, NorthCountry provided $50,000 in grants to members affected by the flood.

The flooding affected the credit union, too. In October, our East Montpelier branch became nearly inaccessible when a main road had to be closed for repairs. Accessing the branch from the opposite direction involved an inconvenient, long and confusing detour. As a solution, your management team acquired a recreational vehicle specially equipped to provide financial services in a temporary, accessible, secure setting. The mobile branch arrived within days, and business continued as usual. Of everything that happened in 2011, I believe this is one of the best examples of how committed we are to ensuring you receive the best service possible in any situation.

2011 was also John Benoit’s final year as NorthCountry’s President/CEO before retiring after 30 years of service. On behalf of the Board, we thank him for his many years with the Credit Union, and for his strong, positive leadership. Such a significant transition can make or break some organizations, but after a rigorous national search of high quality candidates,

we were fortunate to find our new CEO right here at NCFCU. I know you will join us in congratulating our incoming CEO, Bob Morgan. Bob is a long-time NorthCountry employee with the intelligence, ingenuity, compassion, and leadership needed to maintain the credit union’s current direction. He is respected throughout the credit union industry as an innovator, and we are fortunate to have him at NorthCountry’s helm. We expect a seamless transfer of leadership that maintains our momentum, direction, and culture, and a continued focus on meeting the needs of our accountholders and community.

The credit union’s Board of Directors is comprised of member volunteers from varied professional backgrounds who work together to ensure your voice is heard. If you have questions, concerns, or suggestions for the credit union, please feel free to contact any one of us. We thank you for allowing us to serve you in 2011, and look forward to representing you in 2012.

Kathleen Sweeten Chair, Board of Directors

A Message from the Supervisory Committee

The charter of the NorthCountry Federal Credit Union supervisory committee is to safeguard the assets of the credit union and to protect the interests of our members. The committee met those obligations by collaborating with the board of directors, senior management, the internal auditor, external auditors and the National Credit Union Administration (NCUA) to ensure fulfillment of our fiduciary and control responsibilities and to advocate for our members.

The Supervisory Committee continued to safeguard member assets during the prior year by providing for:

■ The annual audit and opinion of the credit union’s financial condition in conjunction with the accounting firm, A.M. Peisch & Company, Certified Public Accountants.

■ The audit and verification of members’ accounts as required by NCUA regulation.

■ Internal audits and monthly reviews of credit union compliance with established policies, federal regulations and sound financial practices.

■ Representation at the Board of Directors meetings, conveying any concerns or recommendations of the committee.

■ The thorough and impartial research, analysis and resolution of member com-plaints in coordination with the NCUA.

NorthCountry’s operations were consis-tently healthy and well managed through-out 2011. The board of directors and the management team have established and maintained effective plans, policies and internal controls to achieve the credit union’s financial, as well as safety and security objectives. In spite of the slow and ongoing recovery in the overall economy, the credit union’s performance continued at a level indicative of a healthy, vibrant, well-managed organization. Further, the credit union adapted well to comply with a multitude of new federal regulations as that environment continued to evolve.

The supervisory committee, working closely with the management team, the internal auditor and the external audit firm throughout the past year, confirmed operational performance met the standards and practices that conform to federal guidelines for a sound financial institution. Further, the NCUA continued to express confidence in the leadership and financial performance of NorthCountry by giving the credit union an excellent rating in the last examination.

Steven E. Kirby Supervisory Committee Chair

NorthCountry Federal Credit Union

Statements of Financial ConditionYears Ended December 31, 2011 and 2010

ASSetS 2011 2010CASh AND CASh EqUIVALENTS

Cash and amounts due from depository institutions $4,871,323 $4,156,903Interest-bearing deposits in other financial institutions 23,978,814 15,139,064 Total cash and cash equivalents 28,850,137 19,295,967

Time deposits 12,067,000 12,088,000Interest-bearing deposits in other credit unions 250,000 458,051Investment securities available-for-sale 4,998,109 –Investment securities held-to-maturity 14,087,547 4,936,621Loans held for sale 3,996,200 4,291,862Loans to members (net of allowance for loan losses) 270,659,108 242,393,130Accrued interest receivable 972,353 872,343Property and equipment — Net 7,611,351 8,131,666NCUSIF deposit 2,744,154 2,250,743Federal home Loan Bank of Boston stock 1,266,408 1,266,300Tricorp investment 400,000 –Other real estate owned (net of allowance for losses) 752,855 281,190Other assets 1,428,423 1,191,220

Total assets $350,083,645 $297,457,093

LiAbiLitieS And equityLIABILITIES

Members’ shares and savings accounts $309,077,534 $259,900,200 Borrowed funds 7,000,000 8,487,468Accrued interest payable 49,343 65,931Accounts payable and accrued expenses 1,588,752 950,437Accrued deferred compensation 875,232 454,342Credit life and disability insurance 3,475 5,392

Total liabilities $318,594,336 $269,863,770

CoMMitMentS And ContingenCieSEqUITY

Retained earnings Appropriated $1,710,669 $1,710,669Unappropriated 29,781,528 25,882,654

Accumulated other comprehensive income (2,888) –

Total members’ equity 31,489,309 27,593,323

Total liabilities and members’ equity $350,083,645 $297,457,093

NorthCountry Federal Credit Union

Statements of incomeYears Ended December 31, 2011 and 2010

2011 2010INTEREST INCOME

Interest and fees on loans to members $16,617,639 $16,110,645Interest on investments and other deposits 466,720 356,779

Total interest income 17,084,359 16,467,424

INTEREST ExPENSEMembers’ shares and savings accounts 4,111,454 3,693,710Borrowed funds 352,042 702,259

Total interest expense 4,463,496 4,395,969

Net interest income 12,620,863 12,071,455

PROVISION FOR LOAN LOSSES 1,016,934 1,869,500 Net interest income after provision for loan losses 11,603,929 10,201,955

NON-INTEREST INCOMELoan charges and fees 1,728,571 1,833,283Deposit charges and fees 1,471,432 1,174,617Rental Income 192,002 208,088Insurance commissions 316,560 255,449Gain on sale of fixed assets 83,958 –Other 305,638 271,491

Total non-interest income 4,098,161 3,742,928

NON-INTEREST ExPENSECompensation and benefits 5,292,832 4,142,558Occupancy 1,244,318 1,099,350Loan processing 539,838 267,854Data processing 1,035,949 930,008Computer software 352,112 314,490Advertising and marketing 684,392 610,356Lender’s protection insurance 146,542 228,899Loss on sale of fixed assets – 19,135NCUA Member Insurance premium and assessment 686,039 574,313 Other 1,821,194 1,521,484

Total non-interest expenses 11,803,216 9,708,447

Net income $3,898,874 $4,236,436

In 2011, our overall Return of the Member —a measurement of how much value members receive by using our services—ranked us first out of the 331 credit unions in our category! This means North-Country members get more for their money than the members at any other participating credit union in the United States in the $250–$500 million asset range.

Return to the SaversOf the 331 credit unions that participated in Callahan’s market research in 2011, North-Country ranked in the top 1% for “Return to Savers.” The higher a credit union ranks, the more successfully it is passing along value to its members through its share account products. In addition to measuring the average dividends paid, “ Return to Savers” also considers the change in average share balance, the number of share accounts per members, and the credit unions three-year share growth.

Return to borrowersIn 2011, NorthCountry ranked in the top 7% of 331 credit unions measured in

“Return to borrowers.” Credit unions were created to provide credit to members at a reasonable cost. This measurement favors credit unions that offer lower rates on loans. It also considers the credit union’s historical loan growth and its product offerings. We are proud to have scored exceptionally well in this category.

Member Service usageIn 2011, NorthCountry scored in the top 6% of 331 credit unions for “Member Service usage.” “Member Service Usage” measures how efficiently a credit union provides and promotes services to its members. The leaders in this category have a high number of core account relationships with their members. The measurement also takes into account employee productivity based on the revenue generated per dollar of salary and benefit.

Service to Members When gauging the quality of service we provide, we often turn to unbiased third-party data that compares us to our credit union peers—those with assets between $250–$500 million. Callahan & Associates, a national research and consulting firm, has been providing such research data and analysis for decades. At the end of 2011, NorthCountry had nearly $350 million in assets, making it one of the smaller credit unions in the category.

Core Values These tenets were identified by NorthCountry’s staff. They underlie every transaction, interaction, and decision—internally and externally.

■ Caring: We are genuinely concerned about the financial well being of our members, the needs of our co- workers, and the quality of life within the communities we serve.

■ Community: The credit union shares its resources with the organizations that help create a better society for its members.

■ integrity: We do what is right for our membership and the community, even if it isn’t required.

■ Knowledgeable: We take the time and put forth the effort to learn the skills and find the information we need to perform our jobs and provide our members and co-workers with top-notch service. Our goal is to have or find a prompt, correct answer for any financial question a member may pose.

■ Professionalism: When we interact with our members, co-workers and business associates, our words, actions, appearance and demeanor convey maturity, security and ability.

■ Progressive: NorthCountry regularly adds new financial products and services in anticipation of future needs and wants.

■ quality: NorthCountry products and services function as promised and are of high value.

■ Respect: Our members, co-workers and business associates all contribute to NorthCountry’s success. We treat them accordingly by giving them our attention.

■ Service: When we interact with others, we do so in a way that contributes to their welfare and strengthens the credit union.

■ Solutions oriented: The credit union has a can-do attitude. Members and co-workers rely on us to find ways to do what needs to be done. In complex situations, we must work as a team.

NorthCountry again sponsored the American heart Association’s “Go Red for Women” campaign.

NorthCountry was the title sponsor for First Night Burlington.

In 2011, many areas of Vermont were devastated by spring flooding and Tropical Storm Irene. NorthCountry provided Flood Relief grants to thirteen local families who lost every thing in the wake of these natural disasters. The grants were used in the rebuilding of homes and lives for our members most affected by flooding. We also

donated to the Salvation Army, through a “stuff a truck” food and funds drive that provided much needed goods to families in Central Vermont. In addition, NorthCountry donated funds to the Vermont Community Foundation and the Phish concert both of which benefited Irene victims.

2011 was also the year that NorthCountry became the Hope Sponsor for Making Strides Against breast Cancer. As the Hope Sponsor we were involved in helping organize their annual walk in South Burlington and provided not only a large dona-tion, but over 25 NorthCountry staff volunteers as well. The event raised over $245,000.00 for Making Strides Against Breast Cancer.

The credit union also made a large contribution to March of dimes, enabling them to continue research to keep babies healthy and provide support to families with babies that are born prematurely.

Community involvementAnnually, NorthCountry sets aside funds to invest in non-profit organizations that benefit northern Vermont. Grants are given for many causes, but focus particularly on those that provide the credit union’s members and neighbors with the resources they need to become self-sufficient. We also support efforts that combat poverty, homelessness, and hunger, and other causes important to our members. Through grants, a corporate matching program, fundraising support, and employee involvement, the credit union provided support for over 100 organizations throughout northern Vermont.

ScholarshipsIn 2011, NorthCountry awarded 15 $2,000 scholarships to high school seniors across northern Vermont. Of the applications received, the Selection Committee at the Vermont Student Assistance Corporation felt that these 15 students best reflected the values of the credit union.

Kelsey Barry Middlebury Union High School Social Work, Xavier University

Derek Blood Champlain Valley Union High School Psychology, Salve Regina University

Danielle Cotnoir North Country Union High School Nursing, University of Vermont

Jennifer Cunningham Vergennes Union High School Business Administration, Castleton State College

Stephen Eddy Winooski High School Criminal Justice, Community College of Vermont

Kevin Eichler Essex High School Mechanical Engineering, Indiana University/Purdue University - Indianapolis

Emily Evans Missisquoi Valley Union High School English and Performing Arts, University of Vermont

John Hartnett Bellows Free Academy - Saint Albans Undeclared, Colby College

Gabrielle Headrick Burlington High School Undeclared, University of Vermont

Samantha Hoeltge Bellows Free Academy - Saint Albans Social Work, Champlain College

Sierra Klotz Hazen Union High School Athletic Training, University of Vermont

Darienne Martin-Baker Craftsbury Academy Psychology, University of Vermont

Jenna Munger Otter Valley Union High School Professional Nursing, University of Vermont

Rachel Pidgeon Essex High School Business, Bentley University

Claire Simons Saint Johnsbury Academy Chemistry, Washington University

top: NorthCountry was the hope Sponsor for Making Strides Against Breast Cancer.

bottom: NorthCountry sponsored a golf tournament at the Burlington Country Club to benefit the Greater Burlington Y.

Middlebury Union High School: Bronwyn Worrick

Hazen Union School: AJ Brochu

Capital/Assets

2011

2010

2009

2008

2007

total Assets (in millions)

2011

2010

2009

2008

2007

number of Members

2011

2010

2009

2008

2007

capital assets

total assets

number of members

capital assets

total assets

number of members

capital assets

total assets

number of members

9.07

9.28

8.82

9.08

9.96 total Loans: $276,628,489■ South Burlington 57%■ East Montpelier 19%■ Lyndonville 12%■ Colchester 8%■ Orleans 3%■ Berlin 1%

total Funds: $309,077,530■ South Burlington 41%■ East Montpelier 21%■ Colchester 15.5%■ Lyndonville 14.5%■ Orleans 5%■ Berlin 3%

total Member growth: 1,988■ South Burlington 51%■ Berlin 16%■ Lyndonville 11.5%■ Colchester 11%■ Orleans 10.5%■ East Montpelier 0%

$350.084

$297.457

$264.724

$230.049

$192.020

25,941

24,086

22,392

20,198

19,235

Community Service AwardsEach year, NorthCountry invites high schools throughout northern Vermont to nominate a senior for a Community Service Award. Each recipient receives $150, with an additional $100 going to the non-profit organization of his or her choice.

Above left: People watching the snow sculptures at the Winter Festival, sponsored by NorthCountry.

Above right: NorthCountry staff running into Lake Champlain for the Penguin Plunge!

Right: Some very cold NorthCountry Numb-brrr’s participating in the Penguin Plunge!

Barre Town Middle & Elementary School (Heather Battison): visual presenter

Barre Technical Center (Kathi Fuller): Smart Pens

Brighton Elementary School (Susan Vera): books

Crossett Brook Middle School (Nan Hathaway): art supplies

Crossett Brook Middle School (Jennifer Hill): eReaders

Doty Memorial School (Tracy Taylor): wellness program

E. Taylor Hatton Elementary School (Melissa Scherer): iPad

Folsom Educational Center (Sharon Hayes): books

Frederick H. Tuttle Middle School (Luke Guyette): strength & conditioning facility

Gilman Middle School (Barbara Connelly): guitars

Gilman Middle School (Helen Martin): laptop

Highgate Elementary School (Claire Dietsche): iPods

Lunenburg Elementary School (Jennifer Amadon): Dragon Naturally Speaking Program

Lunenburg Elementary School (Lucy Colby): books

Moretown Elementary School (Sarah Shackett): Classroom Guidance Program

northCountry Federal Credit union serves all of northern Vermont’s counties: Addison, Caledonia, Chittenden, essex, Franklin, grand isle, Lamoille, orange, orleans and Washington. if you know of a non-profit community project that benefits this area, consider submitting a grant request. For more infor mation, contact the credit union.

educator grantsIn 2010 NorthCountry continued its tradition of offering grants for public school classrooms in its service area. Educators were encouraged to apply for $500 awards to enhance their students’ learning experience. Of the wide variety of projects proposed for funding, the following were selected:

board of directorsKathleen Sweeten, ChairCharles Roumas, Vice ChairFrank Thompson, SecretaryBruce Towne, TreasurerVaughn Alonzo CarneyBill Cimonetti Greg Lambesis

Cody Blake and car #99.