UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ending: March 31, 2002 Commission file number: 000-28449 UNION BANKSHARES, INC. VERMONT 03-0283552 P.O. BOX 667 MAIN STREET MORRISVILLE, VT 05661 Registrant's telephone number: 802-888-6600 Former name, former address and former fiscal year, if changed since last report: Not applicable Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of March 31, 2002: Common Stock, $2 par value 3,027,557 shares
UNION BANKSHARES, INC. TABLE OF CONTENTS <TABLE> <CAPTION> <s> <c> PART 1 FINANCIAL INFORMATION Financial Statements Union Bankshares, Inc. Consolidated Balance Sheets 3 Consolidated Statements of Income - Year to Date 4 Consolidated Statement of Changes in Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II OTHER INFORMATION Item 6 EXHIBITS AND REPORTS ON FORM 8-K 22 Signatures 22 </TABLE>
2 Union Bankshares, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) <TABLE> <CAPTION> March 31 December 31 (Dollars in Thousands) 2002 2001 -------- ----------- <s> <c> <c> Assets Cash and due from banks $ 15,077 $ 13,926 Federal funds sold and overnight deposits 4,380 7,630 ---------------------- Cash and cash equivalents 19,457 21,556 Interest bearing deposits 4,323 4,700 Securities available-for-sale 47,375 49,613 Federal Home Loan Bank stock 1,188 1,064 Loans held for sale 19,334 16,333 Loans 233,396 234,874 Unearned net loan fees (262) (263) Allowance for loan losses (2,834) (2,801) ---------------------- Loans, net 230,300 231,810 ---------------------- Accrued interest receivable 2,006 2,037 Premises and equipment, net 4,523 4,156 Other real estate owned, net 1,418 1,296 Other assets 4,924 4,910 ---------------------- Total assets $334,848 $337,475 ====================== Liabilities and Stockholders' equity: Liabilities: Deposits: Non-interest bearing $ 37,024 $ 39,547 Interest bearing 243,897 246,175 ---------------------- Total deposits 280,921 285,722 Borrowed funds 12,119 10,344 Accrued interest and other liabilities 4,494 4,194 ---------------------- Total liabilities 297,534 300,260 ---------------------- Stockholders' equity: Common stock, $2 par value; 5,000,000 shares authorized; 3,268,189 shares issued at 3/31/02 and 12/31/01 6,536 6,536 Paid-in capital 277 277 Retained earnings 31,950 31,629 Treasury stock at cost (240,632 shares at 3/31/02 and 12/31/01) (1,722) (1,722) Accumulated other comprehensive income 273 495 ---------------------- Total stockholders' equity 37,314 37,215 ---------------------- Total liabilities and stockholders' equity $334,848 $337,475 ====================== </TABLE> See accompanying notes to unaudited financial statements
3 Union Bankshares, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited) <TABLE> <CAPTION> March 31 March 31 (Dollars in Thousands) 2002 2001 -------- -------- <s> <c> <c> Interest income: Interest and fees on loans $ 4,780 $ 5,094 Interest and dividends on investment securities 672 825 Interest on federal funds sold and overnight deposits 30 78 Interest on interest bearing deposits 54 26 ----------------------- 5,536 6,023 ----------------------- Interest expense: Interest on deposits 1,623 2,414 Interest on federal funds purchased 1 2 Interest on borrowed funds 131 111 ----------------------- 1,755 2,527 ----------------------- Net interest income 3,781 3,496 Provision for loan losses 90 56 ----------------------- Net interest income after provision for loan losses 3,691 3,440 Other income: Trust income 67 87 Service fees 584 550 Loss on sale of securities (3) (2) Gain on sale of loans 27 73 Other 51 23 ----------------------- 726 731 ----------------------- Other expenses: Salaries and wages 1,260 1,160 Pension and employee benefits 398 339 Occupancy expense, net 161 165 Equipment expense 198 212 Other expenses 770 648 ----------------------- 2,787 2,524 ----------------------- Income before income tax expense 1,630 1,647 Income tax expense 461 479 ----------------------- Net income $ 1,169 $ 1,168 ======================= Earnings per common share $ .39 $ .39 ======================= Weighted average number of common shares outstanding 3,027,557 3,029,729 ======================= Dividends declared per share $ .28 $ .26 </TABLE> See accompanying notes to unaudited financial statements
4 Union Bankshares, Inc. and Subsidiaries Consolidated Statement of Changes in Stockholders' Equity (Unaudited) <TABLE> <CAPTION> Accumulated Paid-in Other Total Common Capital Retained Treasury Comprehensive Stockholders' Stock & Surplus Earnings Stock Income (Loss) Equity ------ --------- -------- -------- ------------- ------------- (Dollars in Thousands) <s> <c> <c> <c> <c> <c> <c> Balance, December 31, 2001 $6,536 $277 $31,629 $(1,722) $ 495 $37,215 Net income 0 0 1,169 0 0 1,169 Change in net unrealized gain on securities available-for-sale, net of reclassification adjustment and tax effects 0 0 0 0 (222) (222) ------- Comprehensive income 947 ------- Cash dividends declared ($.28 per share) 0 0 (848) 0 0 (848) -------------------------------------------------------------------------- Balance, March 31, 2002 $6,536 $277 $31,950 $(1,722) $ 273 $37,314 ========================================================================== </TABLE> See accompanying notes to unaudited financial statements
5 Union Bankshares, Inc. and Subsidiaries Consolidated Statements of Cash Flows (UNAUDITED) <TABLE> <CAPTION> March 31 March 31 (Dollars in Thousands) 2002 2001 -------- -------- <s> <c> <c> Cash Flows From Operating Activities Net Income $ 1,169 $ 1,168 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 147 160 Provision for loan losses 90 56 Provision (credit) for deferred income taxes 70 (39) Net amortization on securities 46 21 Equity in losses of limited partnerships 30 16 Write-downs of other real estate owned 41 0 Decrease in unamortized loan fees (1) (9) (Increase) decrease in loans held for sale (2,974) 563 Decrease in accrued interest receivable 31 240 Decrease in other assets 16 88 Increase in income taxes 445 517 (Decrease) increase in accrued interest payable (100) 156 Increase in other liabilities 1 64 Loss on securities 3 2 Gain on sale of loans (27) (73) Loss on sale of OREO 0 1 Loss on disposal of Fixed Assets 1 1 -------------------- Net cash provided (used) by operating activities (1,012) 2,932 Cash Flows From Investing Activities Interest bearing deposits Maturities and redemptions 972 99 Purchases (595) (99) Securities available for sale Sales and Maturities 6,721 12,250 Purchases (4,869) (5,969) Purchase of Federal Home Loan Bank Stock (124) (19) (Increase) decrease in loans, net 1,199 (2,172) Recoveries of loans charged off 38 29 Purchases of premises and equipment, net (515) (112) Investments in limited partnerships (45) 0 Proceeds from sale of OREO 0 19 Proceeds from sale of repossessed property 5 8 -------------------- Net cash provided by investing activities 2,787 4,034
6 Cash Flows From Financing Activities Borrowings, net of repayments 1,775 2,315 Net decrease in noninterest bearing deposits (2,523) (3,652) Net (decrease) increase in interest bearing deposits (2,278) 5,910 Dividends paid (848) (787) -------------------- Net cash provided (used) by financing activities (3,874) 3,786 Increase (decrease) in cash and cash equivalents (2,099) 10,752 Cash and cash equivalents Beginning 21,557 11,424 Ending 19,457 22,176 Supplemental Disclosure of Cash Flow Information: Interest Paid $ 1,855 $ 2,110 ==================== Income Taxes Paid $ 0 $ 0 ==================== </TABLE> See accompanying notes to unaudited financial statements
7 UNION BANKSHARES, INC. NOTES TO FINANCIAL STATEMENTS: Note 1. The accompanying interim unaudited consolidated financial statements of Union Bankshares, Inc. (the Company) for the interim periods ended March 31, 2002 and 2001 and for the quarters then ended have been prepared in accordance with the accounting policies described in the company's annual report to shareholders and Form 10K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information contained herein have been made. Certain amounts reported in prior periods have been reclassified for comparative purposes. This information should be read in conjunction with the Company's 2001 Annual report, Form 10K, and Form 8K. Note 2. Commitments and Contingencies In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, after consulting with Company's legal counsel, any liability resulting from such proceedings would not have a material adverse effect on the Company's financial condition or results of operations. Note 3. Earnings Per Share Earnings per common share amounts are computed based on the weighted average number of shares of common stock outstanding during the period (retroactively adjusted for stock dividends) and reduced for shares held in Treasury. The assumed conversion of available stock options does not result in material dilution. Note 4. Reportable Segments The company has two reportable operating segments, Union Bank (Union) and Citizens Savings Bank and Trust Company (Citizens). Management regularly evaluates separate financial information for each segment in deciding how to allocate resources and in assessing performance. The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. Information about reportable segments, and reconciliation of such information to the consolidated financial statements as of and for the period ended March 31, follows: <TABLE> <CAPTION> Intersegment Consolidated 2002 Union Citizens Elimination Other Totals - -------------------------------------------------------------------------------------------------- <s> <c> <c> <c> <c> <c> Interest income $ 3,797 $ 1,739 $ 0 $ 0 $ 5,536 Interest expense 1,142 613 0 0 1,755 Provision for loan losses 45 45 0 0 90 Service fee income 466 118 0 0 584 Income tax expense (benefit) 342 136 0 (17) 461 Net income (loss) 926 277 0 (34) 1,169 Assets 230,848 103,622 (45) 423 334,848 <CAPTION> Intersegment Consolidated 2001 Union Citizens Elimination Other Totals - -------------------------------------------------------------------------------------------------- <s> <c> <c> <c> <c> <c> Interest income $ 4,144 $ 1,879 $ 0 $ 0 $ 6,023 Interest expense 1,679 848 0 0 2,527 Provision for loan losses 0 56 0 0 56 Service fee income 426 124 0 0 550 Income tax expense (benefit) 373 121 0 (15) 479 Net income (loss) 950 245 0 (27) 1,168 Assets 211,075 98,027 (24) 241 309,319 </TABLE> Amounts in the "Other" column encompass activity in Union Bankshares, Inc., the "parent company." Holding company assets are stated after intercompany eliminations.
8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis provides information regarding Union Bankshares, Inc.'s (Union's) financial position as of March 31, 2002 and as of December 31, 2001, and its results of operations for the three months ended March 31, 2002 and 2001. This discussion should be read in conjunction with the information in this document under Financial Statements and related notes and with other financial data appearing elsewhere in this filing. In the opinion of Union's management, the unaudited interim data reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly present Union's consolidated financial position and results of operations to be expected for the interim period. Management is not aware of the occurrence of any events after March 31, 2002 except as described herein, which would materially affect the information presented. On April 29, 2002, we wrote down $135 thousand after tax on a commercial property in Other Real Estate Owned as a result of receiving a new appraisal and the auction results for the sale of the property. The impact on earnings per share for the first quarter would have been a negative $.05 if the information had been available to us earlier. Union's common stock was listed on the American Stock Exchange on July 13, 2000 with an opening price of $15.125 and it closed on May 13, 2002 at $24.25. In May of 2001, Citizens Savings Bank and Trust Company opened a loan production office in Littleton, New Hampshire. Littleton is 19 miles east of St. Johnsbury, Vermont where Citizens is based, and it is a rapidly growing community with a diverse economic base. This office generates loans for both consumer and commercial purposes. On October 17, 2001 we announced a stock repurchase plan. The Board of Directors has authorized the repurchase of up to 100,000 shares of common stock, or approximately 3.3% of the Company's outstanding shares. Shares are repurchased from time to time in the open market or in negotiated transactions as, in the judgement of management, market conditions warrant. The repurchase program is open for an unspecified period of time. To date, we have repurchased 6,672 shares. On April 15, 2002 we modified our Route 108 Branch in Stowe to a fully electronic branch. On April 22, 2002 our newest, full service branch was opened in Fairfax, Vermont, which is our first location in Franklin County. The Company may from time to time make written or oral statements that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include financial projections, statements of plans and objectives for future operations, estimates of future economic performance and assumptions relating thereto. The Company may include forward-looking statements in its filings with the Securities and Exchange Commission, in its reports to stockholders, including this Quarterly Report, in other written materials, and in statements made by senior management to analysts, rating agencies, institutional investors, representatives of the media and others. By their very nature, forward-looking statements are subject to uncertainties, both general and specific, and risk exists that predictions, forecasts, projections and other estimates contained in forward-looking statements will not be achieved. Also, when we use any of the words "believes," "expects," "anticipates" or similar expressions, we are making forward-looking statements. Many possible events or factors could affect the future financial results and performance of our company. This could cause results or performance to differ materially from those expressed in our forward-looking statements. The possible events or factors that might affect our forward-looking statements include, but are not limited to, the following: * uses of monetary, fiscal and tax policy by various governments * political, legislative or regulatory developments in Vermont, New Hampshire or the United States including changes in laws concerning taxes, banking and other aspects of the financial services industry * developments in general economic or business conditions, including interest rate fluctuations, market fluctuations and perceptions, and inflation
9 * changes in the competitive environment for financial services organizations * the Company's ability to retain key personnel * changes in technology including demands for greater automation * acts of terrorism * adverse changes in the securities market * unanticipated lower revenues, loss of customers or business or higher operating expenses When relying on forward-looking statements to make decisions with respect to the Company, investors and others are cautioned to consider these and other risks and uncertainties. RESULTS OF OPERATIONS The Company's net income for the quarter ended March 31, 2002 was $1.169 million, compared with net income of $1.168 million for the first quarter of 2001. Net income per share was $.39 for the first quarter of 2002 and 2001. Net Interest Income. The largest component of Union's operating income is net interest income, which is the difference between interest and dividend income received from interest-earning assets and the interest expense paid on its interest-bearing liabilities. Yields Earned and Rates Paid. The following tables show, for the periods indicated, the total amount of income recorded from interest-earning assets, and the related average yields, the interest expense associated with interest-bearing liabilities, expressed in dollars and average rates, and the relative net interest spread and net interest margin. All yield and rate information is calculated on an annualized basis. Yield and rate information for a period is average information for the period, and is calculated by dividing the income or expense item for the period by the average balance of the appropriate balance sheet item during the period. Net interest margin is net interest income divided by average interest- earning assets. Nonaccrual loans are included in asset balances for the appropriate periods, but recognition of interest on such loans is discontinued and any remaining accrued interest receivable is reversed, in conformity with federal regulations. The yields and net interest margins appearing in the following tables have been calculated on a pre-tax basis: <TABLE> <CAPTION> Three months ended March 31, 2002 2001 --------------------------------- --------------------------------- Interest Average Interest Average Average Earned/ Yield/ Average Earned/ Yield/ Balance Paid Rate Balance Paid Rate ------- -------- ------- ------- -------- ------- (dollars in thousands) <s> <c> <c> <c> <c> <c> <c> Average Assets: Federal funds sold and overnight deposits $ 7,805 $ 30 1.54% $ 5,869 $ 78 5.32% Interest bearing deposits 4,468 54 4.83% 1,647 26 6.31% Investments (1) (2) 47,552 672 5.89% 53,482 825 6.36% Loans, net (1) (3) 248,402 4,780 7.77% 222,613 5,094 9.26% t --------------------------------------------------------------------- Total interest-earning assets (1) 308,227 5,536 7.28% 283,611 6,023 8.62% Cash and due from banks 12,566 9,791 Premises and equipment 4,375 3,978 Other assets 8,169 5,994 -------- -------- Total assets $333,337 $303,374 ======== ======== Average Liabilities and Shareholders' Equity Now accounts $ 35,324 105 1.19% $ 33,365 164 1.97% Savings and Money market accounts 104,423 483 1.85% 87,675 792 3.61% Certificates of deposit 103,234 1,035 4.01% 103,596 1,458 5.63% Borrowed funds 12,299 132 4.29% 7,213 113 6.27% --------------------------------------------------------------------- Total interest-bearing liabilities 255,280 1,755 2.75% 231,849 2,527 4.36% Non-interest bearing deposits 37,365 33,097 Other liabilities 3,810 3,258 -------- -------- Total liabilities 296,455 268,204 Shareholders' equity 36,882 35,170 -------- -------- Total liabilities and shareholders' equity $333,337 $303,374 ======== ======== Net interest income (1) $3,781 $3,496 ====== ====== Net interest spread (1) 4.53% 4.26% Net interest margin (1) 5.00% 5.05% <FN> - -------------------- <F1> Average yield reported on a tax-equivalent basis. <F2> The average balance of investments is calculated using the amortized cost basis. <F3> Includes loans held for sale and is net of unearned income and allowance for loan losses. </FN> </TABLE> Union's net interest income increased by $285 thousand, or 8.1%, to $3.78 million for the three months ended March 31, 2002, from $3.50 million for the three months ended March 31, 2001. This increase was due to the spread between yields earned on assets versus paid on liabilities. The net interest spread increased by 27 basis points to 4.53% for the three months ended March 31, 2002, from 4.26% for the three months ended March 31, 2001. The net interest margin for the 2002 period decreased by 5 basis points to 5.00% from 5.05% for the 2001 period. Rate/Volume Analysis. The following table describes the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected Union's interest income and interest expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: * changes in volume (change in volume multiplied by prior rate); * changes in rate (change in rate multiplied by current volume); and * total change in rate and volume. Changes attributable to both rate and volume have been allocated proportionately to the change due to volume and the change due to rate. <TABLE> <CAPTION> Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001 ------------------------------------------ Increase/(Decrease) Due to Change In Volume Rate Net ------ ---- --- (dollars in thousands) <s> <c> <c> <c> Interest-earning assets: Federal funds sold and overnight deposits $ 25 $ (72) $ (47) Interest bearing deposits 45 (18) 27 Investments (97) (56) (153) Loans, net 602 (916) (314) ---------------------------- Total interest-earning assets 575 (1,062) (487) Interest-bearing liabilities: Now accounts 10 (69) (59) Savings and money market accounts 151 (456) (305) Certificates of deposit (5) (422) (427) Borrowed funds 80 (61) 19 ---------------------------- Total interest-bearing liabilities 236 (1,008) (772) ---------------------------- Net change in net interest income $339 $ (54) $ 285 ============================ </TABLE> Interest and Dividend Income. Union's interest and dividend income decreased by $487,000, or 8.1%, to $5.5 million for the three months ended March 31, 2002, from $6.0 million for the three months ended March 31, 2001. Average earning assets increased by $24.6 million, or 8.7%, to $308.2 million for the three months ended March 31, 2002, from $283.6 million for the three months ended March 31, 2001. Average loans approximated $248.4 million for the three months ended March 31, 2002 up from $222.6 million for the three months ended March 31, 2001. The $10.2 million, or 11.8% increase in residential real estate secured loans and the $19.5 million, or 19.1% increase in commercial and commercial real estate loans was partially offset by the $2.1 million, or 14.8% decrease in personal loans, the $1.4 million, or 11.5% decrease in municipal loans and the $352 thousand, or 3.5% decrease in construction loans. A conscious decision to retain a number of loans packaged for sale in our portfolio accounts for a portion of
11 the increase in both the residential real estate and commercial loan portfolios. The decrease in personal loans is due to a late 1998 decision to exit the indirect lending business at Citizens. The average balance of investment securities (including mortgage-backed securities) decreased by $5.9 million, or 11.1%, to $47.6 million for the three months ended March 31, 2002, from $53.5 million for the three months ended March 31, 2001. The average balance in Interest Bearing Deposits increased by $2.8 million to $4.5 million, or 171%. The average level of federal funds sold and overnight deposits increased by $1.9 million, or 33.0%, to $7.8 million for the three months ended March 31, 2002, from $5.9 million for the three months ended March 31, 2001. The net decrease in the investment portfolio, federal funds sold and overnight deposits, and interest bearing deposits in 2002 reflects the continuing growth in our loan portfolio. Interest income on non-loans was $756 thousand for 2002 and $929 thousand for 2001, which is explained by the $1.2 million decrease in volume and the drop in interest rates. Interest Expense. Union's interest expense decreased by $772 thousand, or 30.6%, to $1.75 million for the three months ended March 31, 2002 from $2.53 million for the three months ended March 31, 2001. Average interest- bearing liabilities increased by $23.4 million, or 10.1%, to $255.3 million for the three months ended March 31, 2002, from $231.8 million for the three months ended March 31, 2001. Average time deposits decreased $362 thousand, or .3%, to $103.2 million for the three months ended March 31, 2002, from $103.6 million for the three months ended March 31, 2001, while the average balances for money market and saving accounts increased by $16.7 million, or 19.0% to $104.4 million for the three months ended March 31, 2002, from $87.7 million for the three months ended March 31, 2001. Now accounts increased $2.0 million, or 5.9% mainly due to municipal account balances. Noninterest Income. Union's noninterest income decreased $5,000, or .7%, to $726 thousand for the three months ended March 31, 2002, from $731 thousand for the three months ended March 31, 2001. Trust department income dropped to $67,000 in the first quarter of 2002 from $87,000 in the same period of 2001, or a 23.0% decrease as there was not a repeat of estate settlements in the first quarter of 2002. Gain on Sale of Loans dropped $46,000 to $27,000 for the first quarter of 2002 from $73,000 for the first quarter of 2001. Other noninterest income and service fees (sources of which include deposit and loan servicing fees, ATM fees, and safe deposit fees) increased by $62,000, or 10.8%, to $635 thousand for the three months ended March 31, 2002, from $573 thousand for the three months ended March 31, 2001. Noninterest Expense. Union's noninterest expense increased $263,000, or 10.4%, to $2.787 million for the three months ended March 31, 2002, from $2.524 million for the three months ended March 31, 2001. Salaries increased $100,000, or 8.6%, to $1.26 million for the three months ended March 31, 2002, from $1.16 million for the three months ended March 31, 2001, reflecting normal salary activity and growth and the addition of the loan production office in Littleton, New Hampshire and the staff for the Fairfax, Vermont branch. Pension and employee benefits increased $59 thousand, or 17.4%, to $398 thousand for the three months ended March 31, 2002, from $339 thousand for the three months ended March 31, 2001 mainly due to the increase in payroll taxes attributable to the increase in salaries and the increased cost of health insurance. Net occupancy expense decreased $4 thousand, or 2.4%, to $161,000 for the three months ended March 31, 2002, from $165,000 for the three months ended March 31, 2001. Equipment expense decreased $14 thousand, or 6.6% to $198,000 for the three months ended March 31, 2002, from $212,000 for the same period in 2001, primarily resulting from decreased depreciation cost on computer equipment and purchased software, which are depreciated as an expense over a time period of three to five years. Other operating expenses increased $122,000, or 18.8%, to $770 thousand for the first quarter of 2002, from $648 thousand for the first quarter of 2001 as supplies, advertising and training costs increased due to the opening of two new locations. And, an increase of expenses related to Other Real Estate Owned to $84.5 thousand for the first three months of 2002 versus $12.0 thousand for the first three months of 2001.
12 FINANCIAL CONDITION At March 31, 2002, Union had total consolidated assets of $334.8 million, including net loans and loans held for sale of $249.6 million, deposits of $280.9 million and shareholders' equity of $37.3 million. Based on the most recent information published by the Vermont Banking Commissioner, in terms of total assets at December 31, 2000, Union Bank ranked as the 10th largest institution of the 23 commercial banks and savings institutions headquartered in Vermont, and Citizens ranked as the 19th. Union's total assets decreased by $2.6 million, or .8%, to $334.8 million at March 31, 2002 from $337.5 million at December 31, 2001. Total net loans and loans held for sale increased by $1.5 million, or .6%, to $249.6 million or 74.55% of total assets at March 31, 2002 as compared to $248.1 million or 73.5% of total assets at December 31, 2001. Cash and cash equivalents, including federal funds sold and overnight deposits, decreased approximately $2.1 million, or 9.7% to $19.5 million at March 31, 2002 from $21.6 million at December 31, 2001. Securities available for sale decreased from $49.6 million at December 31, 2001 to $47.4 million at March 31, 2002, a $2.2 million or 4.5% decrease. Securities maturing have not been replaced dollar for dollar and some securities have been sold in order to fund loan demand and our decision to hold in portfolio a portion of loans available for sale. Deposits decreased $4.8 million, or 1.7% to $280.9 million at March 31, 2002 from $285.7 million at December 31, 2001. Total borrowings increased $1.8 million, or 17.2% to $12.1 million at March 31, 2002 from $10.3 million at December 31, 2001. The increase was in borrowings from the Federal Home Loan Bank under existing lines of credit to fund loan demand. Loan Portfolio. Union's loan portfolio (including loans held for sale) primarily consists of adjustable- and fixed-rate mortgage loans secured by one-to-four family, multi-family residential or commercial real estate. As of March 31, 2002, Union's loan portfolio totaled $252.7 million, or 75.5%, of assets, of which $124.2 million, or 49.2% of gross loans, consisted of residential mortgages and construction loans, and $85.4 million, or 33.8%, of total loans consisted of commercial real estate loans. As of such date, Union's loan portfolio also included $21.0 million of commercial loans, $10.5 million of municipal loans, and $11.6 million of consumer loans representing, in order, 8.3%, 4.1% and 4.6% of total loans outstanding on March 31, 2002. The following table shows information on the composition of Union's loan portfolio as of March 31, 2002 and December 31, 2001. <TABLE> <CAPTION> March 31, December 31, Loan Type 2002 2001 - --------- --------- ------------ (dollars in thousands) <s> <c> <c> Real Estate $110,280 $112,563 Commercial real estate 80,371 78,898 Commercial 20,654 20,659 Consumer 11,639 12,201 Municipal loans 10,452 10,552 Loans held for sale 19,334 16,333 ---------------------- Total loans 252,730 251,206 Deduct: Allowance for loan losses (2,834) (2,801) Net deferred loan fees, premiums & discounts (262) (263) ---------------------- $249,634 $248,142 ====================== </TABLE> Union originates and sells residential mortgages into the secondary market, with most such sales made to the Federal Home Loan Mortgage Corporation (FHLMC). Union services a $155.1 million residential mortgage portfolio, approximately $44.8 million of which is serviced for unaffiliated third parties at March
13 31, 2002. Additionally, Union originates commercial loans under various SBA programs that provide an agency guarantee for a portion of the loan amount. Union sometimes sells the guaranteed portion of the loan to other financial concerns and will retain servicing rights, which generates fee income. Union capitalizes mortgage servicing rights on these fees and recognizes gains and losses on the sale of the principal portion of these notes as they occur in other income. As of March 31, 2002, Union serviced $5.7 million of commercial and commercial real estate loans for unaffiliated third parties. Gross loans and loans held for sale have increased $1.5 million or .6% since December 31, 2001. This increase was mitigated by the sale of $3.6 million of residential real estate loans during the first quarter of 2002. There was a decrease of $.8 million, or .6% in residential real estate loans, an increase of $66 thousand, or .3% in commercial loans and a $2.8 million, or 3.4% increase in commercial real estate loans. There was a $.6 million, or 4.6% decrease in consumer loans. Asset Quality. Union, like all financial institutions, is exposed to certain credit risks related to the value of the collateral that secures its loans and the ability of borrowers to repay their loans. Management closely monitors Union's loan and investment portfolios and other real estate owned for potential problems on a periodic basis and reports to Union's Board of Directors at regularly scheduled meetings. Union had loans on nonaccrual status totaling $1.9 million at March 31, 2002, $1.8 million at December 31, 2001 and $1.9 million at March 31, 2001. Interest income not recognized on such loans amounted to approximately $432 thousand and $420 thousand as of March 31, 2002 and 2001, respectively and $450 thousand as of December 31, 2001. Union had $327 thousand and $3.0 million in loans past due 90 days or more and still accruing at March 31, 2002 and December 31, 2001, respectively. At March 31, 2002, Union had internally classified certain loans totaling $1.8 million of which over half is one relationship which was added to the watch list in the first quarter of 2002. In management's view, such loans represent a higher degree of risk and could become nonperforming loans in the future. While still on a performing status, in accordance with Union's credit policy, loans are internally classified when a review indicates any of the following conditions making the likelihood of collection highly questionable: * the financial condition of the borrower is unsatisfactory; * repayment terms have not been met; * the borrower has sustained losses that are sizable, either in absolute terms or relative to net worth; * confidence is diminished; * loan covenants have been violated; * collateral is inadequate; or * other unfavorable factors are present. At March 31, 2002, Union had acquired by foreclosure or through repossession real estate worth $1.4 million consisting of three commercial properties, two residential properties and one parcel of land. Allowance for Loan Losses. Some of Union's loan customers ultimately do not make all of their contractually scheduled payments, requiring Union to charge off the remaining principal balance due. Union maintains an allowance for loan losses to absorb such losses. The allowance for loan losses is maintained at a level which, in management's judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management's evaluation of the collectibility 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. While Union allocates the allowance for loan losses based on the percentage category to total loans, the portion of the allowance for loan losses allocated to each category
14 does not represent the total available for future losses which may occur within the loan category since the total allowance for possible loan losses is a valuation reserve applicable to the entire portfolio. The following table reflects activity in the allowance for loan losses for the three months ended March 31, 2002 and 2001: <TABLE> <CAPTION> Three Months Ended, March 31 ---------------------------- 2002 2001 ---- ---- (dollars in thousands) <s> <c> <c> Balance at the beginning of period $2,801 $2,863 Charge-offs: Real Estate 0 0 Commercial 47 38 Consumer and other 48 51 ----------------- Total charge-offs 95 89 ----------------- Recoveries: Real Estate 6 0 Commercial 10 3 Consumer and other 22 26 ----------------- Total recoveries 38 29 ----------------- Net charge-offs (57) (60) Provision for loan losses 90 56 ----------------- Balance at end of period $2,834 $2,859 ================= </TABLE> The following table shows the breakdown of Union's allowance for loan loss by category of loan and the percentage of loans in each category to total loans in the respective portfolios at the dates indicated: <TABLE> <CAPTION> March 31, December 31, 2002 2001 ------------------ ------------------ (dollars in thousands) Amount Percent Amount Percent ------ ------- ------ ------- <s> <c> <c> <c> <c> Real Estate Residential $ 576 41.1% $ 610 41.3% Commercial 1,427 35.6% 1,342 34.1% Construction 93 3.7% 116 4.6% Other Loans Commercial 397 9.0% 421 9.1% Consumer installment 231 4.6% 253 4.9% Home equity loans 30 1.6% 29 1.6% Municipal, Other and Unallocated 80 4.4% 30 4.4% -------------------------------------- Total $2,834 100.0% $2,801 100.0% ====================================== Ratio of Net Charge Offs to Average Loans (1) .09% .16% ----- ----- Ratio of Allowance for Loan Losses to Loans 1.12% 1.12% ----- ----- <FN> - -------------------- <F1> Annualized </FN> </TABLE>
15 Investment Activities. At March 31, 2002 the reported value of investment securities available-for-sale was $47.4 million, or 14.15% of its assets down $2.2 million, or 4.5% from $49.6 million at December 31, 2001 as maturing investments have not been replaced. Union had no securities classified as held-to-maturity or trading securities. The reported value of securities available-for-sale at March 31, 2002 reflects a positive valuation adjustment of $414 thousand. The offset of this adjustment, net of income tax effect, was a $273 thousand increase in Union's other comprehensive income component of shareholders' equity and a decrease in net deferred tax assets of $141 thousand. Deposits. The following table shows information concerning Union's deposits by account type, and the weighted average nominal rates at which interest was paid on such deposits as of March 31, 2002 and December 31, 2001: <TABLE> <CAPTION> Three Months Ended, March 31 Year Ended December 31, 2002 2001 ------------------------------- -------------------------------- (dollars in thousands) Percent Percent Average of Total Average Average of Total Average Amount Deposits Rate Amount Deposits Rate ------------------------------------------------------------------ <s> <c> <c> <c> <c> <c> <c> Non-certificate deposits: Demand deposits $ 37,365 13.33% $ 35,251 13.07% Now accounts 35,324 12.60% 1.19% 36,320 13.47% 1.63% Money Markets 67,287 24.00% 2.10% 56,875 21.09% 3.50% Savings 37,136 13.25% 1.39% 35,642 13.21% 2.13% ------------------ ------------------ Total non-certificate deposits: 177,112 63.18% 164,088 60.84% ------------------ ------------------ Certificates of deposit: Less than $100,000 74,365 26.52% 3.81% 76,641 28.42% 5.03% $100,000 and over 28,869 10.30% 4.54% 28,954 10.74% 5.53% ------------------ ------------------ Total certificates of deposit 103,234 36.82% 105,595 39.16% ------------------ ------------------ Total deposits $280,346 100.00% 2.32% $269,683 100.00% 3.26% ================================================================= </TABLE> The following table sets forth information regarding the amounts of Union's certificates of deposit in amounts of $100,000 or more at March 31, 2002 and December 31, 2001 that mature during the periods indicated: <TABLE> <CAPTION> March 31, 2002 December 31, 2001 ----------------------------------- (dollars in thousands) <s> <c> <c> Within 3 months $13,497 $ 6,288 3 to 6 months 4,868 13,681 6 to 12 months 2,975 3,189 Over 12 months 6,125 6,711 -------------------------- $27,465 $29,869 ========================== </TABLE>
16 Borrowings. Borrowings from the Federal Home Loan Bank of Boston were $12.1 million at March 31, 2002 at a weighted average rate of 3.99%. Borrowings from the Federal Home Loan Bank of Boston were $10.3 million at December 31, 2001 at a weighted average rate of 5.06%. The change between year end 2001 and the end of the first quarter of 2002 is a net increase of $1.8 million in matched borrowings to fund loan demand. Other Financial Considerations Market Risk and Asset and Liability Management. Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices. Union's market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. To that end, management actively monitors and manages its interest rate risk exposure. Union does not have any market risk sensitive instruments acquired for trading purposes. Union attempts to structure its balance sheet to maximize net interest income while controlling its exposure to interest rate risks. Union's Asset/Liability Committee formulates strategies to manage interest rate risk by evaluating the impact on earnings and capital of such factors as current interest rate forecasts and economic indicators, potential changes in such forecasts and indicators, liquidity, and various business strategies. Union's Asset/Liability Committee's methods for evaluating interest rate risk include an analysis of Union's interest-rate sensitivity "gap", which provides a static analysis of the maturity and repricing characteristics of Union's entire balance sheet, and a simulation analysis, which calculates projected net interest income based on alternative balance sheet and interest rate scenarios, including "rate shock" scenarios involving immediate substantial increases or decreases in market rates of interest. Union's Asset/Liability Committee meets at least weekly to set loan and deposit rates, make investment decisions, monitor liquidity and evaluate the loan demand pipeline. Deposit runoff is monitored daily and loan prepayments evaluated monthly. Union historically has maintained a substantial portion of its loan portfolio on a variable rate basis and plans to continue this ALM strategy in the future. The investment portfolio is classified as available for sale and the modified duration is relatively short. Union does not utilize any derivative products or invest in any "high risk" instruments. Our interest rate sensitivity analysis (simulation) as of December 2001 for a flat rate environment projected a Net Interest Income of $3.7 million for the first three months of 2002 compared to actual results of $3.8 million, or a 1.4% difference. During the first quarter of 2002, the prime rate, which is used as the driver rate for our simulation analysis, remained constant at 4.75%. Net income was projected to be $1.2 million in a flat rate environment compared to actual results of $1.2 million. Return on Assets was projected to be 1.51% in a flat rate environment and actual results were 1.40%, which was lower than anticipated due to stronger asset growth than planned. Return on Equity was projected to be 13.82% in a flat rate environment compared to actual of 12.68%. The Company generally requires collateral or other security to support financial instruments with credit risk. As of March 31, 2002, the contract or notional amount of financial instruments whose contract amount represents credit risk were as follows rounded to the nearest thousand: <TABLE> <s> <c> Commitments to extend credit $24,702 ------- Standby letters of credit and commercial letters of credit $ 1,039 ------- Credit Card arrangements $ 2,036 ------- Home Equity Lines of Credit $ 3,803 ------- </TABLE> 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.
17 Interest Rate Sensitivity "Gap" Analysis. An interest rate sensitivity "gap" is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to affect net interest income adversely. Because different types of assets and liabilities with the same or similar maturities may react differently to changes in overall market interest rates or conditions, changes in interest rates may affect net interest income positively or negatively even if an institution were perfectly matched in each maturity category. Union prepares its interest rate sensitivity "gap" analysis by scheduling interest-earning assets and interest-bearing liabilities into periods based upon the next date on which such assets and liabilities could mature or reprice. The amount of assets and liabilities shown within a particular period were determined in accordance with the contractual terms of the assets and liabilities, except that: * adjustable-rate loans, securities, and FHLB advances are included in the period when they are first scheduled to adjust and not in the period in which they mature; * fixed-rate mortgage-related securities reflect estimated prepayments, which were estimated based on analyses of broker estimates, the results of a prepayment model utilized by Union, and empirical data; * fixed-rate loans reflect scheduled contractual amortization, with no estimated prepayments; and * Now, money markets, and savings deposits, which do not have contractual maturities, reflect estimated levels of attrition, which are based on detailed studies by Union of the sensitivity of each such category of deposit to changes in interest rates. Management believes that these assumptions approximate actual experience and considers them reasonable. However, the interest rate sensitivity of Union's assets and liabilities in the tables could vary substantially if different assumptions were used or actual experience differs from the historical experience on which the assumptions are based.
18 The following tables show Union's rate sensitivity analysis as of March 31, 2002: <TABLE> <CAPTION> March 31, 2002 Cumulative repriced within 3 Months 4 to 12 1 to 3 3 to 5 Over 5 or Less Months Years Years Total Total ---------------------------------------------------------------- (dollars in thousands, by repricing date) <s> <c> <c> <c> <c> <c> <c> Interest sensitive assets: Federal Funds Sold and overnight deposits $ 4,380 $ 0 $ 0 $ 0 $ 0 $ 4,380 Interest bearing deposits 596 1,481 1,654 592 0 4,323 Investments available for sale (1) 1,807 6,659 14,264 11,431 12,312 46,473 FHLB Stock 0 0 0 0 1,188 1,188 Loans (fixed and adjustable rate) 76,925 31,610 41,541 44,794 57,860 252,730 ---------------------------------------------------------------- Total interest sensitive assets $83,708 $39,750 $57,459 $56,817 $71,360 $309,094 ---------------------------------------------------------------- Interest sensitive liabilities: Certificates of deposit $33,539 $41,959 $22,414 $ 2,976 $ 2 $100,890 Money markets 30,224 0 0 0 38,775 68,999 Regular savings 4,866 0 0 0 33,518 38,384 Now accounts 25,602 0 0 0 10,023 35,625 Borrowed funds 363 4,120 3,823 3,774 39 12,119 ---------------------------------------------------------------- Total interest sensitive liabilities $94,594 $46,079 $26,237 $ 6,750 $82,357 $256,017 ---------------------------------------------------------------- Net interest rate sensitivity gap (10,886) (6,329) 31,222 50,067 (10,997) 53,077 Cumulative net interest rate sensitivity gap (10,886) (17,215) 14,007 64,074 53,077 Cumulative net interest rate sensitivity gap as a percentage of total assets (3.25%) (5.14%) 4.18% 19.14% 15.85% Cumulative interest sensitivity gap as a percentage of total interest-earning assets (3.52%) (5.57%) 4.53% 20.73% 17.17% Cumulative net interest earning assets as a percentage of cumulative interest-bearing liabilities (4.25%) (6.72%) 5.47% 25.03% 20.73% <FN> - -------------------- <F1> Investments available for sale exclude marketable equity securities with a fair value of $902,000 which may be sold by Union at any time. </FN> </TABLE> Simulation Analysis. In its simulation analysis, Union uses computer software to simulate the estimated impact on net interest income and capital under various interest rate scenarios, balance sheet trends, and strategies. These simulations incorporate assumptions about balance sheet dynamics such as loans and deposit growth, product pricing, changes in funding mix, and asset and liability repricing and maturity characteristics. Based on the results of these simulations, Union is able to quantify its interest rate risk and develop and implement appropriate strategies. The following chart reflects the results of our latest simulation analysis for the next two year ends on Net Interest Income, Net Income, Return on Assets, Return on Equity and Capital Value. The projection utilizes a rate shock of 300 basis points from the current prime rate of 4.75%, this is the highest internal slope monitored and shows the best and worse scenarios analyzed. This slope range was determined to be the most relevant during this economic cycle.
19 UNION BANKSHARES, INC. INTEREST RATE SENSITIVITY ANALYSIS MATRIX MARCH 31, 2002 (in thousands) <TABLE> <CAPTION> Return Return on on Year Prime Net Interest Change Net Assets Equity Capital Change Ending Rate Income % Income % % Value % - -------------------------------------------------------------------------------------------------- <s> <c> <c> <c> <c> <c> <c> <c> <c> December-02 7.75 13,172 10.58 4,795 1.75 15.91 20,837 (48.09) 4.75 11,912 0.00 3,939 1.50 13.75 40,141 0.00 1.75 10,323 (13.34) 2,865 1.19 10.98 59,929 49.30 December-03 7.75 19,134 14.62 7,578 2.16 18.57 20,309 (48.13) 4.75 16,272 0.00 5,649 1.61 14.47 39,154 0.00 1.75 12,310 (19.70) 2,995 .86 8.15 60,568 54.69 </TABLE> Liquidity. Liquidity is a measurement of Union's ability to meet potential cash requirements, including ongoing commitments to fund deposit withdrawals, repay borrowings, fund investment and lending activities, and for other general business purposes. Union's principal sources of funds are deposits, amortization and prepayment of loans and securities, maturities of investment securities and other short-term investments, sales of securities available-for-sale, and earnings and funds provided from operations. In addition, as members of the FHLB, Union's subsidiaries have access to preapproved lines of credit up to 17.4% of total assets. In addition, the subsidiaries maintain Federal Fund lines of credit with upstream correspondent banks and repurchase agreement lines with selected brokerage houses. While scheduled loan and securities payments and FHLB advances are relatively predictable sources of funds, deposit flows and prepayments on loans and mortgage-backed securities are greatly influenced by general interest rates, economic conditions, and competition. Union's liquidity is actively managed on a daily basis, monitored by the Asset/Liability Committee, and reviewed periodically with the Board of Directors. Union's Asset/Liability Committee sets liquidity targets based on Union's financial condition and existing and projected economic and market conditions. The committee measures Union's marketable assets and credit available to fund liquidity requirements and compares the adequacy of that aggregate amount against the aggregate amount of Union's sensitive or volatile liabilities, such as core deposits and time deposits in excess of $100,000, term deposits with short maturities, and credit commitments outstanding. The committee's primary objective is to manage Union's liquidity position and funding sources in order to ensure that it has the ability to meet its ongoing commitment to its depositors, to fund loan commitments, and to maintain a portfolio of investment securities. Since many of the loan commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Union's management monitors current and projected cash flows and adjusts positions as necessary to maintain adequate levels of liquidity. Although approximately 74.6% of Union's certificates of deposit will mature within twelve months, management believes, based upon past experience, that Union will retain a substantial portion of these deposits. Management will continue to offer a competitive but prudent pricing strategy to facilitate retention of such deposits. Any reduction in total deposits could be offset by
20 purchases of federal funds, short-term FHLB borrowings, or liquidation of investment securities or loans held for sale. Such steps could result in an increase in Union's cost of funds and adversely impact the net interest margin. Regulatory Capital Requirements. Union Bank and Citizens (the Banks) are subject to various regulatory capital requirements administered by the federal banking agencies. Management believes, as of March 31, 2002, that the Banks meet all capital adequacy requirements to which they are subject. As of March 31, 2002, the most recent notification from the FDIC categorized the Banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Banks must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below. There are no conditions or events since the notification that management believes have changed either Bank's category. The Banks' actual capital amounts (000's omitted) and ratios are presented in the table: <TABLE> <CAPTION> Minimums To Be Well Minimums Capitalized Under For Capital Prompt Corrective Actual Requirements Action Provisions ---------------- ---------------- ----------------- Amount Ratio Amount Ratio Amount Ratio ----------------------------------------------------------- <s> <c> <c> <c> <c> <c> <c> As of March 31, 2002: Total capital to risk weighted assets Union Bank $27,510 17.57% $12,524 8.0% $15,655 10.0% Citizens 11,842 16.78% 5,645 8.0% 7,056 10.0% Tier I capital to risk weighted assets Union Bank $25,576 16.34% $ 6,262 4.0% $ 9,393 6.0% Citizens 10,958 15.53% 2,822 4.0% 4,233 6.0% Tier I capital to average assets Union Bank $25,576 11.16% $ 9,165 4.0% $11,457 5.0% Citizens 10,958 10.57% 4,148 4.0% 5,185 5.0% </TABLE> Impact of Inflation and Changing Prices. Union's consolidated financial statements, included in this document, have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurements of financial position and results of operations in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Banks have asset and liability structures that are essentially monetary in nature, and their general and administrative costs constitute relatively small percentages of total expenses. Thus, increases in the general price levels for goods and services have a relatively minor effect on Union's total expenses. Interest rates have a more significant impact on Union's financial performance than the effect of general inflation. Interest rates do not necessarily move in the same direction or change in the same magnitude as the prices of goods and services, although periods of increased inflation may accompany a rising interest rate environment.
21 PART II OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS IN FORM 10-Q A. Current Reports on Form 8-K 1. Press Release on First Quarter Results and Dividend Announcement filed on April 5, 2002 2. Dividend Announcement filed on April 5, 2002 3. First quarter Report to Shareholders filed April 18, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. May 14, 2002 Union Bankshares, Inc. ------------------------------------ Kenneth D. Gibbons Director and Chief Executive Officer ------------------------------------ Marsha A. Mongeon Chief Financial Officer and Treasurer
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