Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File number 0-7617
----------------- ------
UNIVEST CORPORATION OF PENNSYLVANIA
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1886144
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
14 North Main Street
Souderton, Pennsylvania 18964
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 721-2400
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $5 par value 3,877,015
- -------------------------- ------------------------------
(Title of Class) (Number of shares outstanding
at 2/28/97)
The approximate aggregate market value of voting stock held by non
affiliates of the registrant is $121,052,917 as of February 28,1997.
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 twelve 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 ninety days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this form 10-K. ( )
Parts I and Part III incorporate information by reference from the
proxy statement for the annual meeting of shareholders on April 8, 1997. Parts
I, II, and IV incorporate information by reference from the annual report to
shareholders for the year ended December 31, 1996.
PART I
Item 1. Business
General
Univest Corporation of Pennsylvania ("Univest") is a Pennsylvania
corporation organized in 1973 and registered as a bank holding company pursuant
to the Bank Holding Company Act of 1956. It owns all of the capital stock of
Union National Bank and Trust Company ("Union National Bank"), Pennview Savings
Bank, Univest Realty Corporation, Univest Leasing Corporation, Univest Mortgage
Company, Univest Financial Planning Corporation, Univest Insurance Company, and
Univest Electronic Services Corporation.
Union National Bank is engaged in the general commercial banking
business and provides a full range of banking services and trust services to its
customers. Pennview Savings Bank is engaged in attracting deposits from general
public and investing such deposits primarily in loans secured by residential
properties and consumer loans. The Realty Corporation was established to obtain,
hold and operate properties for the holding company and its subsidiaries. Both
the Leasing Corporation and Univest Mortgage Company are inactive. Univest
Insurance Company offers credit-related reinsurance plans. Univest Electronic
Services Corporation was established to provide data processing services to
Union National Bank in Souderton and other subsidiaries of Univest Corporation
of Pennsylvania.
Union National Bank and Trust Company, with its head office in
Souderton, Montgomery County, serves the area through twenty (23) banking
offices, two off-premises automated teller machines and provides banking and
trust services to the residents and employees of ten retirement homes. Fourteen
banking offices are in Montgomery County and nine banking offices are in Bucks
County. One off-premises automated teller machine is located in Bucks County and
the other is located in Montgomery County.
Pennview Savings Bank conducts operations through five full-service
offices located in Souderton, Hatfield, Franconia, Silverdale and
Montgomeryville, Pennsylvania and provides banking services to the residents and
employees of two retirement homes.
As of January 31, 1997, Univest and its subsidiaries employed four
hundred and thirty (430) persons.
Competition
Univest's service areas are characterized by intense competition for
banking business among commercial banks, savings and loan associations, savings
banks and other financial institutions. Each of the Corporation's subsidiary
banks actively compete with such banks and financial institutions for local
retail and commercial accounts, in Bucks and Montgomery Counties, as well as
other financial institutions outside their primary service area.
In competing with other banks, savings and loan associations, and other
financial institutions, Union National Bank and Pennview Savings Bank seek to
provide personalized services through management's knowledge and awareness of
their service area, customers and borrowers.
Other competitors, including credit unions, consumer finance companies,
insurance companies and mutual funds, compete with certain lending and deposit
gathering services offered by Union National Bank and Pennview Savings Bank.
Supervision and Regulation
Union National Bank is subject to supervision and is regularly examined
by the Office of the Comptroller of the Currency. Also, Union National Bank is
subject to examination by the Federal Deposit Insurance Corporation and by the
Federal Reserve System. Pennview Savings Bank is regulated by the Federal
Deposit Insurance Corporation and by the Pennsylvania Department of Banking.
Univest is subject to the provisions of the Bank Holding Company Act of
1956, as amended, and is registered pursuant to its provisions. The Act
prohibits the acquisition by a bank holding company of a direct or indirect
ownership of more than five percent of the voting shares of any bank within the
United States without prior approval of the Board of Governors of the Federal
Reserve System, and also prohibits the granting of such approval in respect to
any bank within the United States located outside of the state where the bank
holding company's principal operations are conducted, unless the acquisition is
specifically authorized by the statutes of the state in which the bank is
located. With certain exceptions, a bank holding company is prohibited from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank, and from engaging directly
or indirectly in businesses unrelated to the business of banking, or managing,
or controlling banks. Under the Bank Holding Company Act Amendments of 1970,
which became effective on December 3, 1970, the Federal Reserve Board may
approve the acquisition by bank holding companies of non bank subsidiaries to
engage in activities that are closely related to banking and are in the public
interest. The amendments include a provision which prohibits banks, bank holding
companies and subsidiaries from engaging in tie-in arrangements. Bank tie-ins
involving a loan, discount, deposit, or trust service are specifically exempted,
and the Federal Reserve Board is authorized to make exceptions by regulations.
As a bank holding company, Univest is subject to the reporting
requirements of the Board of Governors of the Federal Reserve System, and
Univest, together with its subsidiaries, is subject to examination by the Board.
The Federal Reserve Act limits the amount of credit which a member bank may
extend to its affiliates, and the amount of its funds which it may invest in or
lend on the collateral of the securities of its affiliates. Under the Federal
Deposit Insurance Act, insured banks are subject to the same limitations.
FDICIA
In December 1991, the Federal Deposit Insurance Corporation Improvement
Act ("FDICIA") was enacted, which substantially revised the bank regulatory and
funding provisions of the Federal Deposit Insurance Act and made revisions to
several other federal banking statutes.
Among other things, FDICIA requires the federal banking agencies to
take "prompt corrective action" in respect of depository institutions that do
not meet minimum capital requirements in order to minimize losses to the FDIC.
FDICIA establishes five capital tiers: "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", and
"critically undercapitalized" and imposes significant restrictions on the
operations of a bank that is not at least adequately capitalized. A depository
institution's capital tier will depend upon where its capital levels are in
relation to various relevant capital measures, which will include a risk-based
capital measure, a leverage ratio capital measure and certain other factors.
Under the requirements, Univest has Tier I capital ratios of 14.3% and 13.8%,
and total risk-based capital ratios of 15.5% and 15% at December 31, 1996 and
1995, respectively. These ratios place Univest in the "well-capitalized"
category under regulatory standards.
Regulations promulgated under FDICIA also require that an institution
monitor its capital levels closely and notify its appropriate federal banking
regulators within 15 days of any material events that affect the capital
position of the institution.
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, a
maximum ratio of classified assets to capital, minimum earnings sufficient to
absorb losses, a minimum ratio of market value to book value for publicly traded
shares (if feasible) and such other standards as the agency deems appropriate.
FDICIA also contains a variety of other provisions that affect the
operations of the Corporation, including new reporting requirements, regulatory
standards for real estate lending, "truth in savings" provisions, certain
restrictions on investments and activities of state-chartered insured banks and
their subsidiaries and limitations on credit exposure between banks.
Finally, FDICIA limits the discretion of the FDIC with respect to
deposit insurance coverage by requiring that, except in very limited
circumstances, the FDIC's course of action in resolving a problem bank must
constitute the "least costly resolution" for the Bank Insurance Fund ("BIF") or
the Savings Association Insurance Fund ("SAIF"), as the case may be. The FDIC
has interpreted this standard as requiring it not to protect deposits exceeding
the $100,000 insurance limit in more situations than was previously the case. In
addition, FDICIA prohibits payments by the FDIC on uninsured deposits in foreign
branches of U.S. banks and will severely limit the "too big to fail" doctrine
under which the FDIC formerly protected deposits exceeding the $100,000
insurance limit in certain failed banking institutions.
Implementation of FDICIA has not had a material impact on the business
or operations of the Corporation.
Credit and Monetary Policies
Union National Bank is affected by the fiscal and monetary policies of
the federal government and its agencies, including the Federal Reserve System.
An important function of the policies is to curb inflation and control
recessions through control of the supply of money and credit. The Federal
Reserve System uses its powers to regulate reserve requirements of member banks,
the discount rate on member-bank borrowings, interest rates on time and savings
deposits of member banks, and to conduct open-market operations in United States
Government securities to exercise control over the supply of money and credit.
The policies have a direct effect on the amount of bank loans and deposits and
on the interest rates charged on loans and paid on deposits, with the result
that the policies have a material effect on bank earnings. Future policies of
the Federal Reserve Bank System and other authorities cannot be predicted, nor
can their effect on future bank earnings be predicted.
Pennview Savings Bank and Union National Bank are members of the
Federal Home Loan Bank System which consists of 12 regional Federal Home Loan
Banks, with each subject to supervision and regulation by the newly created
Federal Housing Finance Board. The Federal Home Loan Banks provide a central
credit facility primarily for member institutions. The Banks, as members of the
Federal Home Loan Bank of Pittsburgh, are required to acquire and hold shares of
capital stock in that Federal Home Loan Bank in an amount equal to at least 1%
of the aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or 5%
of its advances (borrowings) from the Federal Home Loan Bank of Pittsburgh,
whichever is greater.
Interstate Banking
Legislation was passed, and signed by President Clinton on September
29, 1994, which will eliminate many currently existing restrictions on
interstate banking. The legislation will authorize interstate acquisition of
banks by bank holding companies without geographic limitations one year after
enactment. Beginning June 1, 1997, the legislation will allow interstate
branching in states that have not passed legislation prohibiting interstate
branching, except that de novo branching or acquisition of a branch in another
state without acquisition of the entire bank will only be permitted if expressly
permitted by the law of the state in which such branch would be located.
Interstate branching prior to June 1, 1997, will be possible in states that pass
laws affirmatively authorizing such interstate branching. The effect of this
legislation on Univest cannot be predicted at this time.
Statistical Disclosure
Univest was incorporated under Pennsylvania law in 1973 for the purpose
of acquiring the stock of Union National Bank and subsequently to engage in
other business activities permitted under the Bank Holding Company Act. On
September 28, 1973, pursuant to an exchange offer, Univest acquired the
outstanding stock of Union National Bank and on August 1, 1990 acquired the
stock of Pennview Savings Bank. The following financial data appearing on pages
6 through 17 reflects consolidated information. Where averages are reported,
daily information has been used for all subsidiaries.
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS'
EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
1996 1996/1995
Average Income/ Avg. Volume Rate Average
ASSETS: Balance Expense Rate Change Change Total Balance
--------- --------- ---- ------ ------ ----- -------
Cash and due from banks $ 30,866 $ 30,645
Time deposits with other banks 588 $ 30 5.1 $ 9 $ (2) $ 7 406
U.S. Government obligations 213,981 13,197 6.2 2,402 349 2,751 174,355
Oblig. of states & political sub. 3,967 172 4.3 64 (10) 54 2,535
Other securities 16,278 1,034 6.4 87 (29) 58 14,697
Federal Reserve bank stock 752 45 6.0 0 0 0 746
Federal funds sold and other
short-term investments 4,083 220 5.4 (343) (53) (396) 10,527
--------- -------- ---------
Total investments 239,061 14,668 6.1 202,860
--------- -------- ---- ---------
Commercial loans 124,372 11,517 9.3 (6,162) 0 (6,162) 190,451
Real estate loans 363,050 31,494 8.7 5,914 586 6,500 292,751
Installment loans 61,190 5,277 8.6 674 (54) 620 53,702
Home equity loans 16,393 1,758 10.7 (219) (93) (312) 18,501
Municipal loans 29,827 1,938 6.5 101 (85) 16 28,415
--------- -------- ---------
Gross loans 594,832 51,984 8.7 583,820
-------- ----
Less: valuation allowance (9,582) (8,965)
--------- ---------
Net loans 585,250 574,855
--------- ---------
Property and equipment, net 16,436 14,857
Other assets 17,656 20,409
--------- ---------
Total assets $889,857 $844,032
--------- ---------
1995 1995/1994 1994
ASSETS:
Income/ Avg. Volume Rate Average Income/ Avg.
Expense Rate Change Change Total Balance Expense Rate
------- ---- ------ ------ ----- ------- ------- ----
Cash and due from banks $ 32,914
Time deposits with other banks $ 23 5.7 $ (89) $ (6) $ (95) 1,955 $ 118 6.0
U.S. Government obligations 10,446 6.0 2,763 1,278 4,041 127,836 6,405 5.0
Oblig. of states & political sub. 118 4.7 19 4 23 2,091 95 4.5
Other securities 976 6.6 (243) 295 52 18,447 924 5.0
Federal Reserve bank stock 45 6.0 1 (1) 0 742 44 6.1
Federal funds sold and other
short-term investments 616 5.9 (290) 245 (45) 15,293 661 4.3
---------- --------- -------
Total investments 12,201 6.0 164,409 8,130 4.9
---------- ---- --------- ------- ---
Commercial loans 17,679 9.3 (650) 2,549 1,899 196,065 15,780 8.0
Real estate loans 24,994 8.5 60 589 649 294,251 24,345 8.3
Installment loans 4,657 8.7 674 230 904 45,934 3,753 8.2
Home equity loans 2,070 11.2 (188) 342 154 20,105 1,916 9.5
Municipal loans 1,922 6.8 (107) 149 42 29,851 1,880 6.3
----------
Gross loans 51,322 8.8 586,206 47,674 8.1
---------- ---- ------- ---
Less: valuation reserve (8,660)
---------
Net loans 577,546
---------
Property, net 13,346
Other assets 19,426
---------
Total assets $809,596
---------
1996 1996/1995
Average Income/ Avg. Volume Rate Average
LIABILITIES: Balance Expense Rate Change Change Total Balance
--------- --------- ---- ------ ------ ----- -------
Demand deposits $107,993 $ 99,547
-------- ---------
Interest checking deposits 73,973 $ 997 1.3 $ 23 $ (292) $ (269) 72,886
Money market savings 63,849 1,823 2.9 (113) 0 (113) 67,858
Regular savings 126,118 3,132 2.5 53 0 53 125,419
Certificates of deposit 313,867 17,639 5.6 872 599 1,471 299,498
Time open & club accounts 39,576 1,983 5.0 444 (61) 383 30,576
--------- -------- ---------
Total time, int., and inv.
checking deposits 617,383 25,574 4.1 596,237
--------- -------- --- ---------
Total deposits 725,376 695,784
--------- ---------
Federal funds purchased 4,433 245 5.5 185 (7) 178 1,093
Loans & securities sold under
agreement to repurchase 44,001 1,448 3.3 212 (38) 174 37,760
Other borrowings 7,612 414 5.4 125 21 146 5,338
Subordinated notes - - 0.0 0 (305) (305) 2,986
--------- -------- --- ---------
Total borrowings 56,046 2,107 3.8 47,177
--------- -------- --- ---------
Accrued expenses & other liab. 14,939 15,979
--------- ---------
Total liabilities 796,361 758,940
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 19,636 15,727
Capital surplus 34,545 8,163
Retained earnings 39,315 61,202
--------- ---------
Total shareholders' equity 93,496 85,092
--------- ---------
Total liabilities and share-
holders' equity $889,857 $844,032
--------- ---------
Weighted avg. yield on interest-earning assets 8.0%
Weighted avg. rate paid on interest-bearing liab. 4.1%
Net yield 4.7%
1995 1995/1994 1994
Income/ Avg. Volume Rate Average Income/ Avg.
LIABILITIES: Expense Rate Change Change Total Balance Expense Rate
------- ---- ------ ------ ----- ------- ------- ----
Demand deposits $ 97,750
Interest checking deposits $ 1,266 1.7 $ 13 $ (73) $ (60) 73,160 $ 1.326 1.8
Money market savings 1,936 2.9 (495) 339 (156) 84,874 2,092 2.5
Regular savings 3,079 2.5 (74) 0 (74) 128,674 3,153 2.5
Certificates of deposit 16,168 5.4 1,453 2,448 3,901 271,994 12,267 4.5
Time open & club accounts 1,600 5.2 769 256 1,025 15,988 575 3.6
---------- --------- -------
Total time, int., and inv.
checking deposits 24,049 4.0 574,690 19,413 3.4
---------- --- --------- ------- ---
Total deposits 672,440
---------
Federal funds purchased 67 6.1 25 17 42 690 25 3.6
Loans & securities sold under
agreement to repurchase 1,274 3.4 22 222 244 37,047 1,030 2.8
Other borrowings 268 5.0 (16) 17 1 5,654 267 4.7
Subordinated notes 305 10.2 (228) (5) (233) 5,229 538 10.3
---------- --------- -------
Total borrowings 1,914 4.1 48,620 1,860 3.8
---------- ---- --------- ------- ---
Accrued expenses & other liab. 12,072
---------
Total liabilities 733,132
---------
SHAREHOLDERS' EQUITY:
Common stock 15,717
Capital surplus 8,090
Retained earnings 52,657
---------
Total shareholders' equity 76,464
---------
Total liabilities and share-
holders' equity $809,596
---------
Weighted avg. yield on interest-earning assets 8.2% 7.5%
Weighted avg. rate paid on interest-bearing liab. 4.0% 3.4%
Net yield 4.8% 4.6%
Note:(1) For rate calculation purposes, average loan categories include
unearned discount.
(2) Nonaccrual loans have been included in the average loan balances.
(3) Certain amounts have been reclassified to conform with the
current-year presentation.
(4) Included in interest income are loan fees of $1,364,000 for 1996,
$1,310,000 for 1995 and $1,766,000 for 1994.
(5) Table I has not been tax equated.
* The change due to the volume/rate variance and average volume and percent
roundings have been allocated to volume.
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE II. INVESTMENT PORTFOLIO (BOOK VALUE)
(Thousands of Dollars)
CARRYING AMOUNT OF INVESTMENT SECURITIES
December 31, December 31, December 31,
1996 (a) 1995 (a) 1994 (a)
------------ ------------ ------------
U. S. Treasury, government corporations and agencies $213,360 $206,117 $183,580
State and political subdivisions 4,980 3,873 2,529
Mortgage-backed securities 18,529 9,256 10,843
Other 5,344 5,273 5,108
-------- -------- --------
Total $242,213 $224,519 $202,060
======== ======== ========
MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELD
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1996 1995 1995 1994 1994
Amount (a) Yield (b) Amount (a) Yield (b) Amount (a) Yield (b)
----------- ------------ ------------- ------------ ------------ ------------
1 Year or less $ 73,215 6.50% $ 52,749 5.85% $ 49,098 4.52%
1 Year - 5 Years 155,662 6.06% 159,807 6.19% 141,731 6.28%
5 Years - 10 Years 6,784 6.09% 5,315 5.65% 3,833 6.42%
After 10 Years 6,552 6.16% 6,648 6.44% 7,398 6.29%
-------- ---- -------- ---- -------- ----
Total $242,213 6.20% $224,519 6.10% $202,060 5.85%
======== ==== ======== ==== ======== ====
Refer to Note 3 to the consolidated financial statements.
a. Held to maturity and available for sale portfolios are combined.
b. Weighted average yield is calculated by dividing income, which has not been
tax equated on tax-exempt obligations, within each maturity range by
outstanding amount of the related investment.
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE III. LOAN PORTFOLIO, PART A. TYPES OF LOANS
(Thousands of Dollars)
December 31, December 31, December 31, December 31, December 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
Real estate Loans
Construction and land development $ 34,733 $ 54,840 $ 50,954 $ 60,437 $ 50,104
Secured by 1-4 family residential properties 217,631 216,180 221,098 200,018 165,313
Other real estate loans 178,644 157,925 160,234 164,304 174,333
Commercial and industrial loans 124,788 120,692 114,103 115,375 116,847
Loans to individuals 47,466 40,648 36,810 34,130 42,518
All other loans 5,821 4,084 5,639 4,402 2,918
-------- -------- -------- -------- --------
Total loans $609,083 $594,369 $588,838 $578,666 $552,033
======== ======== ======== ======== ========
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE III. LOAN PORTFOLIO, PART B.
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
(Thousands of Dollars)
The commercial mortgages and Industrial Development Authority mortgages
that are presently being written at both fixed and floating rates of interest
are written for a three (3) year term with a monthly payment based on a fifteen
(15) year amortization schedule. At each three-year anniversary date of the
mortgages, the interest rate is renegotiated and the term of the loan is
extended for an additional three years. At each three-year anniversary date of
the mortgages, the Bank also has the right to require payment in full. These are
included in the "Due in One to Five Years" category on issue. The borrower has
the right to prepay the loan at any time.
The residential mortgages are presently being written on a one (1) or three
(3) year rollover basis. The monthly payment on these mortgages is based on a
thirty (30) year amortization schedule, unless the borrower requests a shorter
payout period. These are included in the "Due in One to Five Years" category on
issue. Fixed rate residential mortgages are also being written for terms of 15
and 30 years and are included in the "Due in over Five Years" category.
As of December 31, 1996 Due in One Due in One Due in Over
Year or Less to Five Years Five Years Total
------------ ------------- ----------- -----
Real estate loans
Construction and land development $ 22,858 $ 9,690 $ 2,185 $ 34,733
Secured by 1-4 family residential properties 79,236 76,515 61,879 217,630
Other real estate loans 76,183 30,929 71,532 178,644
Commercial and industrial loans 92,170 23,488 9,130 124,788
Loans to individuals 19,262 21,824 6,380 47,466
All other loans 4,483 676 663 5,822
-------- -------- -------- --------
Total loans $294,192 $163,122 $151,769 $609,083
======== ======== ======== ========
Loans with a predetermined interest rate $ 72,702 $106,650 $150,784 $330,136
Loans with a floating or variable interest rate 221,490 56,472 985 278,947
-------- -------- -------- --------
$294,192 $163,122 $151,769 $609,083
======== ======== ======== ========
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE III. LOAN PORTFOLIO, PART C. RISK ELEMENTS
(Thousands of Dollars)
Nonaccrual, Past-Due and Restructured Loans and Other Assets
Performance of the entire loan portfolio is reviewed on a regular basis by
bank management and loan officers. A number of factors regarding the borrower,
such as overall financial strength, collateral values, and repayment ability,
are considered in deciding on what actions should be taken when determining the
collectibility of interest for accrual purposes.
Potential Problem Loans
When collectibility of interest and/or principal on a particular loan is
questionable, the loan is placed on nonaccrual status. If, at the time a
decision is made to cease accruing interest, it is determined that the
collection of previously accrued but unpaid interest is uncertain, the amount is
charged against current income. Conversly, if a loan on nonaccrual status is
paid in full, including interest, a credit is made to current income. The $4,952
of nonaccruing and restructured loans in 1996 includes $792 which although
nonaccruing is performing on current contractual status. If nonaccrual loans had
been performing in accordance with their contractual terms, additional income of
$275 would have been recorded in 1996. Interest income of $93 was recognized on
these loans. In management's evaluation of the loan portfolio risks, any
significant future increases in nonperforming loans are dependent to a large
extent on the economic environment, or specific industry problems.
Loan Concentrations
At December 31, 1996, there were no concentrations of loans exceeding 10%
of total loans other than disclosed in Table III, Part A.
Other Assets
At December 31, 1996, $553 in Other Real Estate Owned was classified as
nonperforming. This amount represents all of the Other Real Estate Owned.
1996 1995 1994 1993 1992
Principal Principal Principal Principal Principal
Balance Balance Balance Balance Balance
--------- --------- --------- --------- ---------
Nonaccruing loans $ 4,671 $ 5,855 5,149 $ 6,991 $14,969
------- ------- ----- ------- -------
Accruing loans 90 days or more past due:
Real estate loans
Construction and land development -- -- -- -- --
Secured by 1-4 family dwellings 373 234 76 87 108
Other real estate 12 93 172 36 259
Commercial and industrial loans 19 -- -- 67 345
Loans to individuals 180 174 247 108 177
All other loans -- -- -- -- --
------- ------- ------- ------- -------
Total loans, 90 days or more past due 584 501 495 298 889
------- ------- ------- ------- -------
Restructured loans, not included above 281 352 422 -- --
------- ------- ------- ------- -------
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE IV. SUMMARY OF LOAN LOSS EXPERIENCE
(Thousands of Dollars)
Management believes the allowance for loan losses is maintained at a
level which is adequate to absorb potential losses in the loan portfolio.
Management's methodology to determine the adequacy of and the provisions to the
allowance considers specific credit reviews, past loan loss experience, current
economic conditions and trends, and the volume, growth, and composition of the
loan portfolio.
The allowance for loan losses is determined through a quarterly
evaluation of reserve adequacy which takes into consideration the growth of the
loan portfolio, the status of past-due loans, current economic conditions,
various types of lending activity, policies, real estate and other loan
commitments, and significant changes in the charge-off activity. Loans are also
reviewed for impairment based on discounted cash flows using the loans' initial
effective interest rate or the fair value of the collateral for certain
collateral-dependent loans as provided under FAS 114, which was adopted by the
Corporation effective January 1, 1995. Any of the above factors may cause the
provision to fluctuate.
As the accompanying table indicates, the amount of loan loss provision
charged to expense for 1996 was $1,045 compared to $1,895 in 1995 and $1,950 in
1994.
1996 1995
---- ----
Average amount of loans outstanding $590,144 $583,398
Loan loss reserve at beginning of period $ 8,854 $ 8,876
Charge-offs:
Real estate loans 990 1,842
Commercial and industrial loans 20 416
Loans to individuals 175 236
Home equity -- --
Other -- --
--------- ---------
Total charge-offs: 1,185 2,494
--------- ---------
Recoveries:
Real estate loans 458 316
Commercial and industrial loans 529 157
Loans to individuals 76 75
Home equity -- --
Other 24 29
--------- ---------
Total recoveries: 1,087 577
--------- ---------
Net charge-offs: 98 1,917
Additions to loan loss reserve 1,045 1,895
Loan loss reserve at end of period $ 9,801 $ 8,854
--------- ---------
Loan type Loan type
as % as %
Amount in reserve by category: of loans of loans
-------- --------
Real estate loans 70.8 $3,146 72.2 $ 817
Commercial and industrial loans 20.5 1,332 20.3 2,459
Loans to individuals 7.8 354 6.8 347
All other loans 0.9 11 0.7 11
Unallocated portion 4,958 5,220
--------- ---------
Total $9,801 $ 8,854
--------- ---------
Ratio-Net charge-offs versus average loans 0.0% 0.3%
1994 1993 1992
---- ---- ----
Average amount of loans outstanding $585,644 $563,678 $550,649
Loan loss reserve at beginning of period $ 7,198 $ 8,240 $ 6,735
Charge-offs:
Real estate loans 701 1,367 624
Commercial and industrial loans 615 2,270 871
Loans to individuals 127 215 265
Home equity -- -- --
Other -- -- 71
-------- -------- --------
Total charge-offs: 1,443 3,852 1,831
-------- -------- --------
Recoveries:
Real estate loans 146 139 52
Commercial and industrial loans 816 9 298
Loans to individuals 170 114 75
Home equity -- -- --
Other 39 68 59
-------- -------- --------
Total recoveries: 1,171 330 484
-------- -------- --------
Net charge-offs: 272 3,522 1,347
Additions to loan loss reserve 1,950 2,480 2,852
Loan loss reserve at end of period $ 8,876 $ 7,198 $ 8,240
-------- -------- --------
Loan type Loan type Loan type
as % as % as %
Amount in reserve by category: of loans of loans of loans
-------- -------- --------
Real estate loans 73.4 $2,999 73.4 $2,468 70.6 $3,705
Commercial and industrial loans 19.4 2,495 19.9 2,384 21.2 3,408
Loans to individuals 6.3 490 5.9 402 7.7 548
All other loans 1 15 0.8 538 0.5 124
Unallocated portion 2,876 1,406 455
-------- -------- --------
Total $8,875 $ 7,198 $8,240
-------- -------- --------
Ratio-Net charge-offs versus average loans 0.0% 0.6% 0.2%
Total cash-basis and nonaccrual loans of $4,671 at December 31, 1996, were
generally comprised of $1,502 in residential real estate loans and $3,169 in
commercial real estate loans.
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE V. DEPOSITS
(Thousands of Dollars)
1996 1995 1994
-------- -------- --------
A. Average: Noninterest-bearing demand deposits $107,993 $ 99,547 $ 97,750
Interest checking 73,973 72,886 73,160
Money Market savings 63,849 67,858 84,874
Saving deposits 126,118 125,419 128,674
Time deposits 353,443 330,074 287,982
-------- -------- --------
Total $725,376 $695,784 $672,440
======== ======== ========
Due 3 months Due 3 - 6 Due 6 - 12 Due over
B. Year-end balance: ($100 or more) outstanding as of or less months months 12 months
December 31, 1996 ------------ --------- ---------- ----------
Certificates of deposit $ 4,822 $ 3,069 $ 2,953 $11,325
Other time deposits $23,114 $ 6,189 $ 1,107 $ 104
Note: Univest and its subsidiaries do not have any foreign offices or foreign
deposits
TABLE VI. RETURN ON EQUITY AND ASSETS (RATIOS)
(Shown as percentages)
1996 1995 1994
---- ---- ----
Return on assets 1.4 1.3 1.3
Return on equity 12.9 13.2 13.2
Dividend payout ratio 23.1 24.9 23.2
Equity to assets ratio 10.5 10.1 9.4
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INTEREST RATE SENSITIVITY ANALYSIS
(Thousands of dollars)
Within 1 - 5 Over
1 Year Years 5 Years
------ ----- -------
Rate Sensitive Interest Earnings Assets
Federal funds sold $ 69 $ -- $ --
Investment securities 92,907 145,344 4,391
Loans 345,155 214,558 48,465
Hedging instruments (20,000) 20,000 --
--------- --------- ---------
$ 418,131 $ 379,902 $ 52,856
Rate Sensitive Liabilities
Interest bearing deposits 317,441 286,081 1,189
Borrowed funds 67,708 -- --
Net non-interest bearing funds (a) -- -- 178,470
--------- --------- ---------
385,149 286,081 179,659
Excess interest-earning assets (liabilities) 32,982 93,821 (126,803)
Cumulative excess interest earning assets (liabilities) 32,982 126,803 --
========= ========= =========
Notes to interest sensitivity analysis:
(a) Net non-interest bearing funds is the sum of non-interest bearing
liabilities and shareholders; equity minus non-interest earning assets.
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE VII. SHORT TERM BORROWINGS
(Thousands of Dollars)
LOANS AND SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
1996 1995 1994
---- ---- ----
Balance at December 31 $48,661 $45,657 $43,768
Weighted average interest rate at year end 3.3% 3.4% 3.3%
Maximum amount outstanding at any month's end $53,109 $45,657 $43,768
Average amount outstanding during the year $44,001 $37,760 $37,047
Weighted average interest rate during the year 3.3% 3.4% 2.8%
Item 2. Properties
Univest and its subsidiaries occupy twenty-eight properties in
Montgomery and Bucks Counties in Pennsylvania, which are used principally as
banking offices. Note 6, appearing on page 22 of the Annual Report to
Shareholders (Exhibit 13), is hereby incorporated in this item.
Item 3. Legal Proceedings
There are no proceedings pending other than the ordinary routine
litigation incident to the business of the corporation.
Item 4. Submission of Matters to a Vote of Security Holders
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 8, 1997.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Incorporated by reference from the 1996 Annual Report to Shareholders
(Exhibit 13), pages 41-42. Dividend and other restrictions are incorporated by
reference from Note 15 of the 1996 Annual Report to Shareholders (Exhibit 13),
pages 28 and 29. The approximate number of shareholders as of February 28, 1997,
was 1,880.
Item 6. Selected Financial Data
Incorporated by reference from the 1996 Annual Report to Shareholders
(Exhibit 13), page 34.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated by reference from the 1996 Annual Report to Shareholders
(Exhibit 13), pages 35 through 40. Dividend and other restrictions are
incorporated by reference from Note 15 of the 1996 Annual Report to Shareholders
(Exhibit 13), pages 28 and 29.
Item 8. Financial Statements and Supplementary Data
Consolidated balance sheets of the registrant at December 31, 1996 and
1995, and consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years ended December 31, 1996, and the
independent auditors' report thereon are incorporated by reference from the 1996
Annual Report to Shareholders (Exhibit 13), pages 13 through 34.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 8, 1997.
Executive Officers
The names and ages of all executive officers of Univest are as follows:
Principal Occupation
Officer Title during past 5 years Age
------- ----- -------------------- ---
Merrill S. Moyer Chairman Chairman and President 63
of the Corporation and
Chairman of Union
National Bank
Norman L. Keller Executive Vice President of Pennview 59
President Savings Bank
Marvin A. Anders Vice Chairman Executive Vice President 57
and Senior Trust Officer
of Union National Bank
William S. Aichele Executive Vice Executive Vice President 46
President of the Corporation and
President and CEO of
Union National Bank
Wallace H. Bieler Senior Vice Senior Vice President 51
President and CFO of the Corporation
and Union National Bank
There is no family relationship among any of the executive officers of Univest.
Item 11. Executive Compensation
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 8, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 8, 1997.
Item 13. Certain Relationships and Related Transactions
During 1996, the Corporation and its subsidiaries paid $293,204 to H.
Mininger & Son, Inc. for building expansion projects which were in the normal
course of business on substantially the same terms as available from others. H.
Ray Mininger, Alternate Director, is president of H. Mininger & Sons, Inc.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a) 1. & 2. Financial Statements and Schedules
The financial statements listed in the accompanying index
to financial statements are filed as part of this annual
report.
3. Listing of Exhibits
The exhibits listed on the accompanying index to exhibits
are filed as part of this annual report.
(b) There were no reports on Form 8-K filed in the fourth quarter of
1996.
(c) Exhibits - The response of this portion of item 14 is submitted as
a separate section.
(d) Financial Statement Schedules - none.
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
[Item 14(a)]
Annual Report
to Shareholders*
----------------
Report of Independent Auditors 33
Consolidated balance sheets at 13
December 31, 1996 and 1995
Consolidated statements of income for each of the 14
three years in the period ended December 31, 1996
Consolidated statements of changes in shareholders' equity 15
for each of the three years in the period ended
December 31, 1996
Consolidated statements of cash flows for 16
each of the three years in the period ended
December 31, 1996
Notes to consolidated financial statements 17-32
Financial statement schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
* Refers to page numbers in the Annual Report to Shareholders for 1996 (Exhibit
13) which is incorporated by references.
UNIVEST CORPORATION OF PENNSYLVANIA
AND SUBSIDIARIES
INDEX TO EXHIBITS
[Item 14(a)]
Description
-----------
(3) Articles of Incorporation and By-Laws
Articles of Incorporation and Charter are incorporated by reference to
the 1973 Form 10-K.
(4) Instruments Defining the Rights of Security Holders, Including Debentures
Specimen Copy of Common Stock is incorporated herein by reference to
the 1973 Form 10-K.
(10) Material Contracts - Not Applicable.
(11) Statement Re Computation of Per Share Earnings - Not Applicable.
(12) Statements Re Computation of Ratios - Not Applicable.
(13) Annual Report to Shareholders
(18) Letter Re Change in Accounting Principles - Not Applicable.
(19) Previously Unfiled Documents - Not Applicable.
(21) Subsidiaries of the Registrant
(23) Consent of independent auditors
(24) Power of Attorney - Not Applicable.
UNIVEST CORPORATION OF PENNSYLVANIA
AND SUBSIDIARIES
EXHIBIT
[Item 14(c)]
Subsidiaries
------------
(1) Union National Bank and Trust Company is chartered in the Commonwealth
of Pennsylvania.
(2) Pennview Savings Bank is chartered in the Commonwealth of Pennsylvania.
(3) Univest Leasing Corporation is chartered in the Commonwealth of
Pennsylvania.
(4) Univest Realty Corporation is chartered in the Commonwealth of
Pennsylvania.
(5) Univest Mortgage Company is chartered in the Commonwealth of
Pennsylvania.
(6) Univest Financial Planning Company is chartered in the Commonwealth of
Pennsylvania.
(7) Univest Insurance Company is chartered in the State of Arizona.
(8) Univest Electronic Services Corporation is chartered in the
Commonwealth of Pennsylvania.
All the subsidiaries do business under the above names.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIVEST CORPORATION OF PENNSYLVANIA
Registrant
By: /s/ Robert H. Schong
----------------------
Robert H. Schong
Secretary, March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ Merrill S. Moyer /s/ James L. Bergey
-------------------------------------- ---------------------------------
Merrill S. Moyer James L. Bergey
Chairman, President and Director, March 26, 1997 Director, March 26, 1997
/s/ Marvin A. Anders /s/ Harold M. Mininger
-------------------------------------- ----------------------------------
Marvin A. Anders Harold M. Mininger
Vice Chairman, March 26,1997 Director, March 26, 1997
/s/ Wallace H. Bieler /s/ Paul G. Shelly
-------------------------------------- ----------------------------------
Wallace H. Bieler Paul G. Shelly
Chief Financial Officer, March 26, 1997 Director, March 26, 1997
/s/ Thomas K. Leidy /s/ R. Lee Delp
---------------------------------- ----------------------------------
Thomas K. Leidy R. Lee Delp
Director, March 26, 1997 March 26, 1997
/s/ John U. Young /s/ Clair W. Clemens
-------------------------------------- ----------------------------------
John U. Young Clair W. Clemens
Director, March 26, 1997 Director, March 26, 1997
Consolidated Balance Sheets
(in thousands, except share data)
- -------------------------------------------------------------------------------
December 31,
1996 1995
------------------------
Assets
Cash and due from banks ................................................ $ 38,934 $ 30,901
Time deposits with other banks ......................................... 360 456
Investment securities held to maturity (market value $173,013 and
$170,665 at December 31, 1996 and 1995, respectively) ............... 172,785 168,439
Investment securities available for sale ............................... 69,428 56,080
Federal funds sold and other short-term investments .................... 69 16,527
Loans .................................................................. 607,069 585,971
Less: Reserve for possible loan losses ................................ (9,801) (8,854)
------------------------
Net loans ............................................................ 597,268 577,117
------------------------
Premises and equipment, net ............................................ 16,843 16,200
Accrued interest and other assets ...................................... 16,772 16,168
------------------------
Total assets ......................................................... $912,459 $881,888
========================
Liabilities
Demand deposits, noninterest bearing ................................... $122,087 $100,300
Demand deposits, interest bearing ...................................... 138,953 154,642
Savings deposits ....................................................... 125,483 122,683
Time deposits .......................................................... 347,245 347,402
------------------------
Total deposits ....................................................... 733,768 725,027
------------------------
Securities sold under agreements to repurchase ......................... 48,661 45,657
Other short-term borrowings ............................................ 12,055 1,155
Accrued expenses and other liabilities ................................. 13,633 16,628
Long-term debt ......................................................... 7,075 4,085
------------------------
Total liabilities .................................................... 815,192 792,552
------------------------
Shareholders' equity
Common stock, $5 par value; 12,000,000 shares authorized at December 31,
1996 and 1995 and 3,927,161 shares issued at December 31, 1996 and
1995 and 3,888,594 and 3,920,831 shares outstanding at December 31,
1996 and December 31, 1995, respectively* ........................... 19,636 19,638
Additional paid-in capital ............................................. 34,544 34,559
Retained earnings ...................................................... 44,260 35,028
Net unrealized securities gains ........................................ 18 261
Treasury stock, 38,567 shares at cost at December 31, 1996 and 6,330
shares at cost at December 31, 1995 ................................. (1,191) (150)
------------------------
Total shareholders' equity ........................................... 97,267 89,336
------------------------
Total liabilities and shareholders' equity ............................. $912,459 $881,888
========================
See accompanying notes to consolidated financial statements.
*The number of shares outstanding and all per share amounts give effect to a
twenty-five percent stock dividend declared on November 22, 1995 to
shareholders of record as of February 15, 1996, payable on March 1, 1996.
13
Consolidated Statements of Income
(in thousands, except share data)
- ----------------------------------------------------------------------------------------------------------
Year ended December 31,
1996 1995 1994
-------------------------------------
Interest income
Interest and fees on loans:
Taxable ....................................... $50,046 $49,400 $45,794
Exempt from federal income taxes .............. 1,938 1,922 1,880
-------------------------------------
Total interest and fees on loans ................. 51,984 51,322 47,674
Interest and dividends on investment securities:
U.S. Government obligations ................... 13,197 10,445 6,405
Obligations of state and political subdivisions 172 118 95
Other securities .............................. 1,079 1,021 968
Interest on time deposits with other banks ....... 30 23 118
Interest on federal funds sold ................... 220 616 661
-------------------------------------
Total interest income ....................... 66,682 63,545 55,921
-------------------------------------
Interest expense
Interest on demand deposits ...................... 2,820 3,202 3,418
Interest on savings deposits ..................... 3,132 3,078 3,152
Interest on time deposits ........................ 19,622 17,769 12,843
Interest on long-term debt ....................... 358 314 565
Interest--all other .............................. 1,749 1,600 1,295
-------------------------------------
Total interest expense ...................... 27,681 25,963 21,273
-------------------------------------
Net interest income ................................ 39,001 37,582 34,648
Provision for loan losses .......................... 1,045 1,895 1,950
-------------------------------------
Net interest income after provision for loan losses 37,956 35,687 32,698
-------------------------------------
Other income
Trust ............................................ 2,290 2,032 1,828
Service charges on demand deposits ............... 1,814 1,629 1,633
Losses on sales of securities .................... (9) (66) (27)
Gains (losses) on sales of mortgages ............. 43 101 (12)
Other ............................................ 2,091 2,399 2,150
-------------------------------------
Total other income .......................... 6,229 6,095 5,572
-------------------------------------
Other expenses
Salaries and benefits ............................ 14,461 13,320 12,403
Net occupancy .................................... 2,073 1,856 1,665
Equipment ........................................ 2,428 1,898 1,724
Other ............................................ 8,157 8,484 7,821
-------------------------------------
Total other expenses ........................ 27,119 25,558 23,613
-------------------------------------
Income before income taxes ......................... 17,066 16,224 14,657
Applicable income taxes ............................ 5,028 4,997 4,537
-------------------------------------
Net income ......................................... $12,038 $11,227 $10,120
=====================================
Net income per share* .............................. $ 3.08 $ 2.86 $ 2.58
=====================================
See accompanying notes to consolidated financial statements.
*The weighted average number of shares outstanding and all per share amounts
give effect to a twenty-five percent stock dividend declared on November 22,
1995 to shareholders of record as of February 15, 1996, payable on March 1,
1996.
14
Consolidated Statements of Changes in Shareholders' Equity
(in thousands, except share data)
- ----------------------------------------------------------------------------------------------------------------------
Net
Unrealized
Additional Securities
Common Paid-in Retained Gains Treasury
Stock Capital Earnings (Losses) Stock Total
-------------------------------------------------------------------------------
Balance at December 31, 1993 ...... $15,717 $ 8,090 $ 49,215 $ -- $ (150) $72,872
Adjustment to beginning balance
for change in accounting
method, net of income taxes of
$151 ......................... 293 293
Change in unrealized gains and
(losses) on investment
securities available for sale,
net of income taxes of ($399) (775) (775)
Net income for 1994 ............. 10,120 10,120
Cash dividends declared* ($.60
per share) ................... (2,352) (2,352)
-------------------------------------------------------------------------------
Balance at December 31, 1994 ...... 15,717 8,090 56,983 (482) (150) 80,158
Change in unrealized gains and
(losses) on investment
securities available for sale,
net of income taxes of $394 .. 743 743
Net income for 1995 ............. 11,227 11,227
Cash dividends declared* ($.71
per share) ................... (2,792) (2,792)
25% stock dividend payable
March 1, 1996, 784,254 shares
at fair market value ......... 3,921 26,469 (30,390) --
-------------------------------------------------------------------------------
Balance at December 31, 1995 ...... 19,638 34,559 35,028 261 (150) 89,336
Change in unrealized gains and
(losses) on investment
securities available for sale,
net of income taxes of ($135) (243) (243)
Cash dividends declared ($.71 per
share) ....................... (2,773) (2,773)
Cash paid in lieu of fractional
shares ....................... (2) (15) (17)
Stock issued under dividend
reinvestment and employee
stock purchase plans ......... (2) 249 247
Exercise of stock options ....... (31) 140 109
Acquisition of treasury stock ... (1,430) (1,430)
Net income for 1996 ............. 12,038 12,038
-------------------------------------------------------------------------------
Balance at December 31, 1996 ...... $19,636 $34,544 $ 44,260 $ 18 $(1,191) $97,267
===============================================================================
See accompanying notes to consolidated financial statements.
*Cash dividends per share give effect to a twenty-five percent stock dividend
declared on November 22, 1995 to shareholders of record as of February 15,
1996, payable on March 1, 1996.
15
Consolidated Statements of Cash Flows
(in thousands)
- -----------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1996 1995 1994
-------------------------------------
Cash flows from operating activities
Net income ................................................................ $ 12,038 $ 11,227 $ 10,120
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses in excess of (less than) net charge-offs ..... 947 (22) 1,678
Depreciation of premises and equipment ................................. 2,239 1,725 1,527
(Discount accretion) premium amortization on investment securities and
time deposits ........................................................ (613) (346) 290
Deferred (benefit) income tax .......................................... (119) 353 139
Realized losses on investment securities ............................... 9 66 27
Realized (gains) losses on sales of mortgages .......................... (43) (101) 12
Decrease in net deferred loan fees ..................................... (116) (258) (552)
(Increase) decrease in interest receivable and other assets ............ (604) 1,115 (1,320)
(Decrease) increase in accrued expenses and other liabilities .......... (2,445) 2,069 5,000
-------------------------------------
Net cash provided by operating activities ............................ 11,293 15,828 16,921
Cash flows from investing activities
Proceeds from maturing time deposits ...................................... 96 45 2,798
Proceeds from maturing securities held to maturity ........................ 48,528 47,288 24,335
Proceeds from maturing securities available for sale ...................... 6,380 5,873 29,987
Proceeds from sales of securities available for sale ...................... 10,991 14,994 7,247
Purchases of investment securities held to maturity ....................... (52,329) (76,059) (108,784)
Purchases of investment securities available for sale ..................... (31,039) (13,138) (16,565)
Net decrease (increase) in federal funds sold and other
short-term investments................................................... 16,458 (9,679) 5,830
Net decrease in loans held for sale ....................................... -- -- 8,916
Proceeds from sales of mortgages .......................................... 10,356 8,276 14,918
Net increase in loans ..................................................... (31,295) (13,109) (24,374)
Capital expenditures ...................................................... (2,882) (3,976) (2,843)
-------------------------------------
Net cash used in investing activities ................................ (24,736) (39,485) (58,535)
Cash flows from financing activities
Assumption of deposits .................................................... -- 11,916 10,608
Net increase in deposits .................................................. 8,741 13,470 18,966
Net increase in short-term borrowings ..................................... 13,904 1,889 15,644
Proceeds from long-term debt .............................................. 7,000 -- --
Purchases of treasury stock ............................................... (1,430) -- --
Stock issued under dividend reinvestment and employee stock purchase plans. 249 -- --
Proceeds from exercise of stock options ................................... 109 -- --
Cash dividends ............................................................ (3,087) (2,541) (2,290)
Repayments of long-term debt .............................................. (4,010) (5,353) (839)
-------------------------------------
Net cash provided by financing activities ............................ 21,476 19,381 42,089
-------------------------------------
Net increase (decrease) in cash and due from banks ........................ 8,033 (4,276) 475
Cash and due from banks at beginning of year .............................. 30,901 35,177 34,702
-------------------------------------
Cash and due from banks at end of year .................................... $ 38,934 $ 30,901 $ 35,177
=====================================
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest .................................................................. $ 27,058 $ 23,899 $ 20,600
Income taxes .............................................................. $ 5,100 $ 4,290 $ 4,450
See accompanying notes to consolidated financial statements.
16
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Univest Corporation of Pennsylvania (the Corporation) through its wholly
owned subsidiaries, Union National Bank and Trust Company (Union) and
Pennview Savings Bank (Pennview), is engaged in general domestic commercial
and retail banking services and provides a full range of banking and trust
services to its customers. Union and Pennview serve the Montgomery and Bucks
Counties of Pennsylvania through 28 banking offices and provide banking and
trust services to the residents and employees of 12 retirement communities.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Univest
Corporation of Pennsylvania and its wholly owned subsidiaries, including
Union National Bank and Trust Company and Pennview Savings Bank, collectively
referred to herein as the "Banks." All significant intercompany balances and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVESTMENT SECURITIES
Effective January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standard ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Securities are classified as investments and
carried at amortized cost if management has the positive intent and ability to
hold the securities to maturity. Securities purchased with the intention of
recognizing short-term profits are placed in the trading account and are carried
at market value. Securities not classified as investment or trading are
designated securities available for sale and carried at fair value. Unrealized
gains and losses, net of applicable income taxes, are reflected in shareholders'
equity. The accumulated net unrealized gains on available-for-sale securities
included in retained earnings was $18 at December 31, 1996 and $261 at December
31, 1995.
Gains and losses on sales of securities are generally computed on a specific
security basis.
LOANS
Loans are stated at the principal amount less net deferred loan fees and
unearned discount. Interest income on commercial, consumer, and mortgage loans
is recorded on the outstanding balance method, using actual interest rates
applied to daily principal balances. Unearned discount on installment loans for
Pennview Savings Bank is recognized in income using the actuarial method, which
materially approximates the interest method. Accrual of interest income on loans
ceases when collectibility of interest and/or principal is questionable. If it
is determined that the collection of interest previously accrued is uncertain,
such accrual is reversed and charged to current earnings. Thereafter, income is
only recognized as payments are received for loans on which there is no
uncertainty as to the collectibility of principal.
NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1997, the Corporation will adopt Statement of Financial
Accounting Standard ("SFAS") No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." Statement 125 provides new
accounting and reporting standards for sales, securitizations, and servicing of
receivables and other financial assets, for certain secured borrowings, and
collateral transactions, and for extinguishments of liabilities. The adoption of
Statement 125 is not expected to have a material impact on the Corporation's
financial condition or results of operations.
17
Notes to Consolidated Financial Statements [Cont.]
(dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
LOAN FEES
Fees collected upon loan origination and certain direct costs of
originating loans are deferred and recognized over the contractual lives of
the related loans as yield adjustments. Upon prepayment or other disposition
of the underlying loans before their contractual maturities, any associated
unamortized fees or costs are recognized.
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for loan losses is based on management's evaluation of the loan
portfolio under current economic conditions and such other factors which deserve
recognition in estimating possible loan losses. This evaluation is inherently
subjective as it requires material estimates including the amounts and timing of
future cash flows expected to be received on impaired loans that may be
susceptible to significant change. Additions to the reserve arise from the
provision for loan losses charged to operations or from the recovery of amounts
previously charged off. Loan charge-offs reduce the reserve. Loans are charged
off when there has been permanent impairment.
The Corporation adopted Statement of Financial Accounting Standard ("SFAS")
No. 114, "Accounting by Creditors for Impairment of a Loan," and Statement No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," effective January 1, 1995. As a result of applying the rules,
certain impaired loans are reported at the present value of expected future cash
flows using the loan's initial effective interest rate, or as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The adoption of these standards
did not have any impact on the Corporation's financial position or results of
operations.
PREMISES AND EQUIPMENT
Land is stated at cost, and bank premises and equipment are stated at cost
less accumulated depreciation. Depreciation is computed on the straight-line
method and charged to operating expenses over the estimated useful lives of the
assets (bank premises and improvements - average life 25 years; furniture and
equipment - average life 10 years).
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through customers'
loan defaults, and is included in accrued interest and other assets. The real
estate is stated at an amount equal to the loan balance prior to foreclosure,
plus costs incurred for improvements to the property, but no more than the fair
market value of the property, less estimated costs to sell.
STOCK OPTIONS
The Corporation grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. The Corporation has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under Financial Accounting
Standard No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models in valuing employee stock options. Under APB 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is required
by Statement 123, however, the effect of applying SFAS No. 123 to the
Corporation's stock-based awards results in net income and earnings per share
that are not materially different from amounts reported.
DIVIDEND REINVESTMENT AND EMPLOYEE STOCK PURCHASE PLANS
In April 1996, the shareholders approved the Univest Dividend Reinvestment
Plan (the "Reinvestment Plan") and the 1996 Employee Stock Purchase Plan (the
"Purchase Plan"). 250,000 shares of common stock are available for issuance
under each of the plans. Employees may elect to make contributions to the
Purchase Plan in an aggregate amount not less than 2% nor more than 10% of such
employee's total compensation. These contributions are then used to purchase
stock during an offering period determined by the Corporation's Administrative
Committee. The purchase price of the stock is established by the Administrative
Committee, provided however that the purchase price will not be less than 85% of
the lesser of the market price on the first day or last day of the offering
period. During 1996, 6,517 and 1,301 shares were issued to employees under the
Reinvestment Plan and the Purchase Plan, respectively. As of December 31, 1996,
243,483 and 248,699 shares were available for future purchase under the
Reinvestment Plan and the Purchase Plan, respectively.
NET INCOME PER SHARE
Earnings (net income) per common share are calculated on the basis of the
weighted average number of shares outstanding of 3,910, 3,921, and 3,921 for
years ended December 31, 1996, 1995, and 1994, respectively. All share and per
share amounts have been retroactively adjusted to give effect to a twenty-five
percent stock dividend declared November 22, 1995 to shareholders of record as
of February 15, 1996, payable on March 1, 1996. The assumed exercise of the
options under the Long-Term Incentive Plan did not have a materially dilutive
effect on the earnings per share in 1996.
18
Notes to Consolidated Financial Statements [Cont.]
(dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
INCOME TAXES
Deferred income taxes are provided on temporary differences between amounts
reported for financial statement and tax purposes in accordance with SFAS No.
109, "Accounting for Income Taxes."
INTANGIBLE ASSETS
The purchase price of Pennview in excess of the fair value of the net assets
acquired was recorded as goodwill and is being amortized on a straight-line
basis over a 15-year period. At December 31, 1996, the unamortized balance is
approximately $1.5 million ($1.7 million at December 31, 1995), net of
accumulated amortization of approximately $1.2 million ($1 million at December
31, 1995).
RETIREMENT PLAN
Nearly all employees are covered by a noncontributory retirement plan. The
plan provides benefits based on a formula of each participant's final average
pay. The amount funded is not more than the maximum amount deductible for
federal income tax purposes. In addition, Univest sponsors a 401(k) deferred
salary savings plan, which is a qualified defined contribution plan, and which
covers all employees of Univest and its subsidiaries, and provides that the
Corporation make matching contributions as defined by the plan.
POSTRETIREMENT BENEFITS OTHER T