United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For The Period Ended June 30, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period From to .
UNIVEST CORPORATION OF PENNSYLVANIA
| Pennsylvania | ||
| 23-1886144 | ||
| (State or other jurisdiction of incorporation of organization) |
(IRS Employer Identification No.) |
14 North Main Street, Souderton, Pennsylvania 18964
Registrant’s telephone number, including area code (215) 721-2400
Not applicable
Indicate by check mark whether the registrant (1) has filed 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes[X] No[ ].
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
| Common Stock, $5 par value | 8,527,491 | |||
|
|
||||
| (Title of Class) | (Number of shares
outstanding at 6/30/03) |
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX
| Page Number | |||||||||
| Part I. | Financial Information: |
||||||||
| Item 1: | Financial Statements (Unaudited) |
||||||||
Condensed Consolidated Balance Sheets
June 30, 2003 and December 31, 2002 |
1 | ||||||||
Condensed Consolidated Statements of Income
Three and Six Months Ended June 30, 2003 and 2002 |
2 | ||||||||
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2003 and 2002 |
3 | ||||||||
Notes to Condensed Consolidated Financial Statements |
4 | ||||||||
| Item 2: | Management’s
Discussion and Analysis of Financial Condition and Results of Operations |
10 | |||||||
| Item 3: | Quantitative
and Qualitative Disclosure About Market Risk |
23 | |||||||
| Item 4: | Controls and Procedures |
23 | |||||||
| Part II. | Other Information: |
24 | |||||||
Other Information |
|||||||||
2
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (UNAUDITED) | (SEE NOTE) | ||||||||||
| June 30, 2003 | December 31, 2002 | ||||||||||
| (In thousands) | |||||||||||
ASSETS |
|||||||||||
CASH AND DUE FROM BANKS |
$ | 45,426 | $ | 40,879 | |||||||
INTEREST BEARING DEPOSITS WITH OTHER BANKS |
1,384 | 741 | |||||||||
INVESTMENT
SECURITIES HELD-TO-MATURITY (MARKET VALUE $58,558 AT 6/30/03 AND $71,498 AT 12/31/02) |
56,999 | 68,871 | |||||||||
INVESTMENT SECURITIES AVAILABLE-FOR-SALE |
352,406 | 326,208 | |||||||||
FEDERAL FUNDS SOLD AND OTHER
SHORT TERM INVESTMENTS |
28,379 | 3,900 | |||||||||
LOANS |
957,219 | 825,378 | |||||||||
LESS: RESERVE FOR POSSIBLE LOAN LOSSES |
(12,134 | ) | (10,518 | ) | |||||||
NET LOANS |
945,085 | 814,860 | |||||||||
OTHER ASSETS |
94,997 | 70,406 | |||||||||
TOTAL ASSETS |
$ | 1,524,676 | $ | 1,325,865 | |||||||
LIABILITIES |
|||||||||||
DEMAND DEPOSITS, NONINTEREST BEARING |
$ | 213,573 | $ | 175,608 | |||||||
DEMAND DEPOSITS, INTEREST BEARING |
365,147 | 337,169 | |||||||||
SAVINGS DEPOSITS |
191,336 | 163,403 | |||||||||
TIME DEPOSITS |
406,254 | 366,926 | |||||||||
TOTAL DEPOSITS |
1,176,310 | 1,043,106 | |||||||||
SHORT-TERM BORROWINGS |
72,129 | 89,502 | |||||||||
OTHER LIABILITIES |
68,362 | 28,729 | |||||||||
LONG-TERM DEBT |
53,743 | 31,075 | |||||||||
SUBORDINATED CAPITAL NOTE |
15,000 | — | |||||||||
TOTAL LIABILITIES |
1,385,544 | 1,192,412 | |||||||||
SHAREHOLDERS’ EQUITY |
|||||||||||
COMMON STOCK |
49,580 | 49,587 | |||||||||
ADDITIONAL PAID-IN CAPITAL |
20,912 | 20,912 | |||||||||
RETAINED EARNINGS |
102,334 | 95,550 | |||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME |
6,860 | 7,240 | |||||||||
TREASURY STOCK |
(40,554 | ) | (39,836 | ) | |||||||
TOTAL SHAREHOLDERS’ EQUITY |
139,132 | 133,453 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 1,524,676 | $ | 1,325,865 | |||||||
NOTE: THE CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2002 HAS BEEN DERIVED FROM THE AUDITED FINANCIAL STATEMENTS AT THAT DATE BUT DOES NOT INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES.
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| THREE MONTHS | SIX MONTHS | |||||||||||||||||||
| ENDED JUNE 30 | ENDED JUNE 30 | |||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
INTEREST INCOME |
||||||||||||||||||||
INTEREST AND FEES ON LOANS |
||||||||||||||||||||
TAXABLE INTEREST AND FEES ON LOANS |
$ | 12,583 | $ | 12,679 | $ | 24,452 | $ | 25,200 | ||||||||||||
EXEMPT FROM FEDERAL INCOME TAXES |
690 | 805 | 1,372 | 1,628 | ||||||||||||||||
TOTAL INTEREST AND FEES ON LOANS |
13,273 | 13,484 | 25,824 | 26,828 | ||||||||||||||||
INTEREST AND DIVIDENDS ON INVESTMENT SECURITIES |
4,198 | 4,823 | 8,732 | 9,767 | ||||||||||||||||
OTHER INTEREST INCOME |
42 | 76 | 54 | 116 | ||||||||||||||||
TOTAL INTEREST INCOME |
17,513 | 18,383 | 34,610 | 36,711 | ||||||||||||||||
INTEREST EXPENSE |
||||||||||||||||||||
INTEREST ON DEPOSITS |
4,551 | 6,108 | 9,329 | 12,241 | ||||||||||||||||
OTHER INTEREST EXPENSE |
771 | 651 | 1,429 | 1,325 | ||||||||||||||||
TOTAL INTEREST EXPENSE |
5,322 | 6,759 | 10,758 | 13,566 | ||||||||||||||||
NET INTEREST INCOME |
12,191 | 11,624 | 23,852 | 23,145 | ||||||||||||||||
PROVISION FOR LOAN LOSSES |
— | 391 | 400 | 782 | ||||||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |
12,191 | 11,233 | 23,452 | 22,363 | ||||||||||||||||
NONINTEREST INCOME |
||||||||||||||||||||
TRUST |
1,147 | 1,065 | 2,295 | 2,102 | ||||||||||||||||
SERVICE CHARGES ON DEPOSIT ACCOUNTS |
1,418 | 1,367 | 2,784 | 2,754 | ||||||||||||||||
COMMISSION INCOME |
1,131 | 1,158 | 2,555 | 2,331 | ||||||||||||||||
OTHER INCOME |
1,805 | 1,503 | 3,261 | 3,031 | ||||||||||||||||
TOTAL NONINTEREST INCOME |
5,501 | 5,093 | 10,895 | 10,218 | ||||||||||||||||
NONINTEREST EXPENSE |
||||||||||||||||||||
SALARIES AND BENEFITS |
6,086 | 5,478 | 11,938 | 10,993 | ||||||||||||||||
NET OCCUPANCY |
856 | 724 | 1,681 | 1,457 | ||||||||||||||||
EQUIPMENT |
624 | 550 | 1,259 | 1,086 | ||||||||||||||||
OTHER EXPENSES |
2,570 | 2,547 | 4,999 | 5,348 | ||||||||||||||||
TOTAL NONINTEREST EXPENSE |
10,136 | 9,299 | 19,877 | 18,884 | ||||||||||||||||
INCOME BEFORE INCOME TAXES |
7,556 | 7,027 | 14,470 | 13,697 | ||||||||||||||||
INCOME TAXES |
2,051 | 1,872 | 3,916 | 3,679 | ||||||||||||||||
NET INCOME |
$ | 5,505 | $ | 5,155 | $ | 10,554 | $ | 10,018 | ||||||||||||
PER COMMON SHARE DATA: |
||||||||||||||||||||
NET INCOME PER SHARE:* |
||||||||||||||||||||
BASIC |
$ | 0.64 | $ | 0.60 | $ | 1.24 | $ | 1.16 | ||||||||||||
DILUTED |
$ | 0.64 | $ | 0.59 | $ | 1.22 | $ | 1.14 | ||||||||||||
CASH DIVIDENDS DECLARED PER SHARE |
$ | 0.20 | $ | 0.184 | $ | 0.40 | $ | 0.368 | ||||||||||||
* PER SHARE DATA HAS BEEN RESTATED TO GIVE EFFECT TO A FIVE FOR FOUR STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAID ON FEBRUARY 28, 2003.
Univest Corporation of Pennsylvania and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
| Six Months Ended | ||||||||||
| June 30, 2003 | June 30, 2002 | |||||||||
| (in thousands) | ||||||||||
Cash flows from operating activities: |
||||||||||
Net income |
$ | 10,554 | $ | 10,018 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||
Provision for loan losses in excess of net charge-offs |
390 | 230 | ||||||||
Depreciation of premises and equipment |
965 | 1,003 | ||||||||
Premium amortization (discount accretion) on investment securities |
172 | (135 | ) | |||||||
Deferred tax benefit |
(526 | ) | (403 | ) | ||||||
Realized gains on investment securities |
(462 | ) | (355 | ) | ||||||
Realized gains on sales of mortgages |
(374 | ) | (23 | ) | ||||||
Increase (decrease) in net deferred loan fees |
216 | (40 | ) | |||||||
Decrease in interest receivable and other assets |
1,431 | 952 | ||||||||
Increase (decrease) in accrued expenses and other liabilities |
38,562 | (4,641 | ) | |||||||
Net cash provided by operating activities |
50,928 | 6,606 | ||||||||
Cash flows from investing activities: |
||||||||||
Net cash paid due to acquisition, net of cash acquired |
(28,797 | ) | ||||||||
Proceeds from maturing securities held-to-maturity |
21,926 | 12,058 | ||||||||
Proceeds from maturing securities available-for-sale |
73,604 | 27,930 | ||||||||
Proceeds from sales of securities available-for-sale |
10,557 | 15,347 | ||||||||
Purchases of investment securities held-to-maturity |
(15,009 | ) | (11,988 | ) | ||||||
Purchases of investment securities available-for-sale |
(88,595 | ) | (47,149 | ) | ||||||
Decrease in interest-bearing deposits |
3,414 | 13,020 | ||||||||
Net increase in federal funds sold and
other short-term investments |
(5,866 | ) | (134 | ) | ||||||
Proceeds from sales of mortgages |
26,295 | 3,147 | ||||||||
Net increase in loans |
(60,101 | ) | (23,989 | ) | ||||||
Capital expenditures |
(1,229 | ) | (1,182 | ) | ||||||
Net cash used in investing activities |
(63,801 | ) | (12,940 | ) | ||||||
Cash flows from financing activities: |
||||||||||
Net increase in deposits |
20,113 | 34,737 | ||||||||
Net decrease in short-term borrowings |
(18,301 | ) | (9,383 | ) | ||||||
Increase in long-term debt |
4,967 | 7,000 | ||||||||
Issuance of subordinated debt |
15,000 | — | ||||||||
Purchases of treasury stock |
(2,604 | ) | (4,932 | ) | ||||||
Stock issued under dividend reinvestment and
employee stock purchase plans |
888 | 621 | ||||||||
Proceeds from exercise of stock options |
655 | 475 | ||||||||
Cash dividends |
(3,298 | ) | (3,090 | ) | ||||||
Net cash provided by financing activities |
17,420 | 25,428 | ||||||||
Net increase in cash and due from banks |
4,547 | 19,094 | ||||||||
Cash and due from banks at beginning of period |
40,879 | 39,107 | ||||||||
Cash and due from banks at end of period |
$ | 45,426 | $ | 58,201 | ||||||
Supplemental disclosures of cash flow information: |
||||||||||
Cash paid during the period for: |
||||||||||
Interest |
$ | 10,392 | $ | 13,362 | ||||||
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Financial Information
The accompanying condensed consolidated financial statements include the accounts of Univest Corporation of Pennsylvania (Univest) and its wholly owned subsidiary, Univest National Bank and Trust Company, referred to herein as the “Bank”. On January 18, 2003 the two banking subsidiaries, Union National Bank and Trust Company of Souderton, PA and Pennview Savings Bank, combined to form Univest National Bank and Trust Company. The condensed consolidated financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements reflect all adjustments which are of a normal recurring nature and are, in the opinion of management, necessary to present a fair statement of the results and condition for the interim periods presented. Operating results for the six-month period ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, which has been filed with the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to current year presentation.
Note 2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share. Per share data has been restated to give effect to a five for four stock split in the form of a stock dividend paid on February 28, 2003.
| For the Three Months | For the Six Months | |||||||||||||||||
| Ended June 30 | Ended June 30 | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Numerator: |
||||||||||||||||||
Net Income |
$ | 5,505 | $ | 5,155 | $ | 10,554 | $ | 10,018 | ||||||||||
Numerator for basic and diluted earnings per
share – income available to common
shareholders |
5,505 | 5,155 | 10,554 | 10,018 | ||||||||||||||
Denominator: |
||||||||||||||||||
4
| For the Three Months | For the Six Months | |||||||||||||||||
| Ended June 30 | Ended June 30 | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Denominator for basic earnings per share-
weighted-average shares outstanding |
8,543 | 8,643 | 8,545 | 8,673 | ||||||||||||||
Effect of dilutive securities: |
||||||||||||||||||
Employee stock options |
103 | 84 | 103 | 83 | ||||||||||||||