United States
Securties and Exchange Commission
Washington, DC 20549
10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Period Ended September 30, 1994.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Transition Period From _____ to _____ .
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 I.D. No.)
incorporation or organization)
10 West Broad Street, Souderton, Pennsylvania 18964
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 215-721-2400
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed reports
required to be filed by section 13 or 15(d) of the Securities and 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. .
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, $5 par value 3,137,016
(Title of Class) (Number of shares outstanding
at September 30, 1994)
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
Notes to Condensed Consolidates Financial Statements
(Unaudited)
Note 1. Financial Information
The consolidated financial statements include the accounts of Univest
Corporation of Pennsylvania (Univest) and its wholly owned subsidiaries,
including Union National Bank and Trust Company (Union) and Pennview
Savings Bank (Pennview), collectively referred to herein as the "Banks."
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, in the opinion of management, necessary to present a
fair statement of the results and condition for the interim periods
presented. It is suggested that these condensed 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, 1993, which has been filed with the Securities and Exchange
Commission.
Note 2. Investment Securities
Effective January 1, 1994, Univest Corporation adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under this agreement,
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 a trading account, and are carried at market
value. Securities not classified as investment or trading are designated
as securities available for sale and are carried at fair value with
unrealized gains and losses reflected in shareholders' equity. Prior to
the adoption of SFAS No. 115, securities available for sale were carried at
the lower of cost or fair value.
Note 3. Branch Acquisition
On April 30, 1994, Union National Bank completed the purchase of selected
fixed assets, valued at $25,000, and assumed deposit liabilities of
$11,255,153 of the Plumsteadville, Pennsylvania branch of the Continental
Bank. Union National also assumed the obligations of the seller under the
land lease of the branch. No loans were purchased in this transaction. A
premium of $647,461 was paid for the deposits, and will be amortized over 7
years using the straight line basis. The acquisition was accounted for
using the purchase method of accounting.
<TABLE>
UNIVEST CORPORATION OF PENNSYLVANIA AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(UNAUDITED) (SEE NOTE)<F1>
SEPTEMBER 30, 1994 DECEMBER 31, 1993
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $36,373,630 $34,701,868
TIME DEPOSITS WITH OTHER BANKS 1,483,230 3,299,273
INVESTMENT SECURITIES HELD-TO-MATURITY 126,817,561 91,056,109
(MARKET VALUE $124,585,000 AT 9/30/94
AND $91,405,253 AT 12/31/93)
INVESTMENT SECURITIES AVAILABLE-FOR-SALE 33,506,127 48,270,752
(MARKET VALUE $48,714,712 AT 12/31/93)
FEDERAL FUNDS SOLD AND OTHER
SHORT TERM INVESTMENTS 22,120,358 12,678,108
LOANS HELD FOR SALE 974,253 8,916,100
LOANS 587,511,121 570,782,161
LESS: RESERVE FOR POSSIBLE LOAN LOSSES (9,373,370) (7,198,213)
------------ ------------
NET LOANS 578,137,751 563,583,948
OTHER ASSETS 31,236,242 27,380,909
------------ ------------
TOTAL ASSETS $830,649,152 $789,887,067
============ ============
LIABILITIES
DEMAND DEPOSITS, NON INTEREST BEARING $98,636,279 $103,058,755
DEMAND DEPOSITS, INTEREST BEARING 156,069,037 165,429,430
REGULAR SAVINGS DEPOSITS 128,577,641 123,675,277
TIME DEPOSITS 306,571,077 276,687,978
------------ ------------
TOTAL DEPOSITS 689,854,034 668,851,440
SHORT-TERM BORROWINGS 41,357,471 29,278,589
OTHER LIABILITIES 11,598,411 8,607,251
LONG-TERM DEBT 9,461,142 10,277,129
------------ ------------
TOTAL LIABILITIES 752,271,058 717,014,409
SHAREHOLDERS' EQUITY
COMMON STOCK 15,716,728 15,716,728
ADDITIONAL PAID-IN CAPITAL 8,090,128 8,090,128
RETAINED EARNINGS 54,720,759 49,215,323
TREASURY STOCK (149,521) (149,521)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 78,378,094 72,872,658
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $830,649,152 $789,887,067
============ ============
<FN>
<F1>NOTE: THE BALANCE SHEET AT DECEMBER 31, 1993 HAS BEEN DERIVED FROM THE AUDITED FINANCIAL
STATEMENTS AT THAT DATE AND DOES NOT INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
UNIVEST CORPORATION OF PENNSYLVANIA AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
FOR THE QUARTER FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS
TAXABLE INTEREST AND FEES ON LOANS $11,780,794 $10,694,169 $34,075,217 $32,379,453
EXEMPT FROM FEDERAL INCOME TAXES 484,041 502,468 1,410,455 1,587,041
----------- ----------- ----------- -----------
TOTAL INTEREST AND FEES ON LOANS 12,264,835 11,196,637 35,485,672 33,966,494
INTEREST AND DIVIDENDS ON
INVESTMENT SECURITIES 1,820,768 2,013,831 5,008,243 6,359,183
INTEREST ON TIME DEPOSITS WITH OTHER BANKS 17,033 43,672 103,080 134,728
OTHER INTEREST INCOME 242,719 76,021 409,473 329,215
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 14,345,355 13,330,161 41,006,468 40,789,620
----------- ----------- ----------- -----------
INTEREST EXPENSE
INTEREST ON DEPOSITS 4,917,222 5,143,049 14,093,444 16,304,051
OTHER INTEREST EXPENSE 473,939 436,952 1,337,717 1,186,110
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 5,391,161 5,580,001 15,431,161 17,490,161
----------- ----------- ----------- -----------
NET INTEREST INCOME 8,954,194 7,750,160 25,575,307 23,299,459
PROVISION FOR LOAN LOSSES 345,000 545,000 1,635,000 1,835,000
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,609,194 7,205,160 23,940,307 21,464,459
----------- ----------- ----------- -----------
OTHER INCOME 1,433,560 1,537,725 4,229,858 4,047,255
LOSSES ON SALES OF SECURITIES - - (26,870) -
(LOSSES) GAINS ON SALES OF MORTGAGES - 131,930 (16,577) 409,324
----------- ----------- ----------- -----------
TOTAL OTHER INCOME 1,433,560 1,669,655 4,186,411 4,456,579
OTHER EXPENSES
SALARIES AND BENEFITS 3,112,366 3,077,486 9,276,908 8,846,038
OTHER EXPENSE 3,075,818 2,543,400 8,434,347 7,684,942
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSES 6,188,184 5,620,886 17,711,255 16,530,980
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE 3,854,570 3,253,929 10,415,463 9,390,058
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
APPLICABLE INCOME TAXES 1,194,637 990,269 3,202,245 2,818,509
----------- ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE 2,659,933 2,263,660 7,213,218 6,571,549
IN ACCOUNTING PRINCIPLE
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE, NET OF INCOME TAX BENEFIT OF $293,831 (570,379)
----------- ----------- ----------- -----------
NET INCOME $2,659,933 $2,263,660 $7,213,218 $6,001,170
=========== =========== =========== ===========
PER COMMON SHARE DATA (1):
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE $0.85 $0.72 $2.30 $2.09
IN ACCOUNTING PRINCIPLE
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING ($0.18)
PRINCIPLE
NET INCOME $0.85 $0.72 $2.30 $1.91
CASH DIVIDENDS DECLARED $0.15 $0.14 $0.45 $0.42
<FN>
<F1>(1) PER SHARE INFORMATION IS BASED ON THE WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING OF 3,137,016 FOR BOTH
PERIODS.
</TABLE>
<TABLE>
Univest Corporation of Pennsylvania
Consolidated Statement of Cash Flows (Unaudited)
<CAPTION>
9 MONTHS 9 MONTHS
ENDED ENDED
SEPT 30, 1994 SEPT 30, 1993
<S> <C> <C>
Cash flows from operating activitites
Net income $7,213,218 $6,001,170
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses in excess of (less than)
net charge-offs 2,175,157 (74,467)
Depreciation of premises and equipment 1,132,297 940,009
Cumulative effect of a change in accounting principle 570,379
Premium amortization on investment securities 303,062 354,611
Deferred income benefit (743,957) (283,621)
Realized loss on investment securities 26,870
Realized gains (losses) on sales of mortgages 16,577 (409,324)
(Decrease) increase in net deferred loan fees (466,257) 557,014
Increase in interest receivable and other assets (2,049,859) (3,921,782)
Increase in accrued expenses and other
liabilities 4,295,479 2,390,037
----------- -----------
Net cash provided by operating activities 11,902,587 6,124,026
Cash flows from investing activities
Proceeds from maturing time deposits 1,816,043 68,357
Proceeds from sales of securities available for sale 7,246,544
Proceeds from maturing securities held to maturity 19,986,269 74,560,586
Proceeds from maturing securities available for sale 23,114,577
Purchases of investment securities held to maturity (59,555,841) (53,287,383)
Purchases of investment securities available for sale (12,566,983)
Net (increase) decrease in federal funds sold and other
short-term investments (9,442,250) 9,629,569
Net decrease (increase) in loans held for sale 7,941,847 (7,856,700)
Proceeds from sales of mortgages 13,941,816 13,110,269
Net increase in loans (30,221,096) (29,961,813)
Capital expenditures (2,290,310) (1,075,958)
----------- -----------
Net cash (used in) provided by investing activities (40,029,384) 5,186,927
Cash flows from financing activities
Assumption of deposits 10,607,692
Net increase (decrease) in deposits 9,747,441 (20,046,177)
Net increase in short-term borrowings 12,078,882 6,751,144
Proceeds from long-term debt 4,491,004
Cash dividends (1,819,469) (1,662,618)
Repayments of long-term debt (815,987) (1,527,734)
----------- -----------
Net cash provided by (used in) financing activities 29,798,559 (11,994,381)
Net increase (decrease) in cash and due from banks 1,671,762 (683,428)
Cash and due from banks at beginning of period 34,701,868 34,852,819
----------- -----------
Cash and due from banks at end of period $36,373,630 $34,169,391
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $15,334,503 $18,212,018
Income taxes $3,551,823 $3,438,156
</TABLE>
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Shareholders' equity totaled $78,378,094 at September 30, 1994. This
represents an increase of 7.55% or $5,505,436 over the $72,872,658 reported
at December 31, 1993. The need for continued growth in shareholders'
equity and its importance is clearly understood, and for that reason,
management looks to shareholders for continued support. Stable earnings
and a continued conservative dividend payout ratio are needed to provide
the equity growth for the future. The Corporation has capital ratios
exceeding regulatory requirements as of September 30, 1994.
Interest and fees on loans for the third quarter ended September 30, 1994
increased 10.16% or $1,086,625 from $10,694,169 at September 30, 1993 to
$11,780,794 at September 30, 1994. For the nine months ended September 30,
1994 interest and fees on loans also increased $1,695,764 or 5.24% as
compared to the nine months ended September 30, 1993. The increase in both
periods was due to increased yields, which included three prime rate
increases from 6.0% to 7.75%, and increased volume. The interest and fees
on loans exempt from Federal income tax decreased $18,427 and $176,586
respectively for the three and nine months ended September 30, 1994, as
compared to same periods in 1993. The decrease in both periods was due to
lower volume.
Interest and dividends on investment securities decreased $193,063 or 9.59%
to $1,820,768, for the three months ended September 30, 1994 when compared
to the $2,013,831 for the quarter ended September 30, 1993. For the nine
months ended September 30, 1994 interest and dividends on securities also
decreased $1,350,940 or 21.24% from $6,359,183 at September 30, 1994 to
$5,008,243 at September 30, 1993. The decrease in both periods was due to
decreased yield offset somewhat by increased volume in the third quarter
ended September 30, 1994.
Interest on time deposits represents the Corporation's investment in other
bank certificates of deposits (CDs). Income on these CDs decreased
$26,639 from $43,672 at September 30, 1993 to $17,033 at September 30,
1994. Income also decreased for the nine month period ended September 30,
1994 by $31,648 when compared to the same period in 1993. The decrease in
both periods was due to lower volume.
Other interest consists mainly of Federal Funds sold, which is the
resulting daily investment activity that can be volatile in both interest
yield and volume. Third quarter ended September 30, 1994, shows income of
$242,719 as compared to $76,021 for the third quarter ended September 30,
1993. Nine months ended September 30, 1994, shows income of $409,473 as
compared to $329,215 for the same period in 1993. The differences of
$166,698 and $80,258, respectively are due mainly to increases in volume
and higher yields during both periods.
Total interest expense decreased 3.38% or $188,840 from $5,580,001 for the
third quarter ended September 30, 1993 to $5,391,161 for the third quarter
ended September 30, 1994. For the nine months ended September 30, 1994,
interest expense decreased $2,059,000 or 11.77% from $17,490,161 at
September 30, 1993 to $15,431,161 at September 30, 1994. Decreases were
due to lower yields, especially during the first and second quarters of
1994. Yields, mainly on certificates of deposit began to increase slightly
in third quarter 1994. The lower yields were offset by higher volumes,
again, mainly in third quarter 1994. The lower yields were further offset
by the assumption of deposits of the Plumsteadville Branch of Continental
Bank in the second quarter of 1994. (See note # 3).
The asset/liability management process continues with its goal of providing
stable, reliable earnings through varying interest rate environments. For
the three month period ended September 30, 1994, net interest income of
$8,954,194 increased $1,204,034 or 15.54% over the $7,750,160 reported for
the third quarter ended September 30, 1993. Net interest income for the
nine months ended September 30, 1994 also shows an increase of $2,275,848
or 9.77% from $23,299,459 at September 30, 1993 to $25,575,307 at
September 30, 1994. Management recognizes that with a relatively short
term investment portfolio and a significant floating rate loan portfolio
(loans mainly tied to prime rate), it is unrealistic to expect constant
improvement to net interest income throughout all economic rate cycles.
The Corporation does not utilize, nor is it a party to, any off balance
sheet derivative financial instruments.
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.
Each credit on the Company's internal loan "watchlist" is evaluated
periodically to estimate potential losses. In addition, minimum estimates
of loss for each category of watchlist credits also are provided based on
management's judgment which considers past loan loss experience and other
factors. For installment and real estate mortgage loans, specific
allocations are based on past loss experience adjusted for recent portfolio
growth and economic trends. The total reserves resulting from this
analysis are "allocated" reserves. The amounts specifically provided for
individual loans and pools of loans are supplemented by an unallocated
amount for loan losses. This unallocated amount is determined based on
judgments regarding risk of error in the specific allocation, and other
potential exposure in the loan portfolio, which is not easily identifiable.
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 any significant change in the charge-off activity - all of
which may cause the provision to fluctuate. The provision for loan losses
for the three and nine month periods ending September 30, 1994 was $345,000
and $1,635,000 respectively as compared to $545,000 and $1,835,000 for the
three and nine month period ended September 30, 1993 respectively. Total
nonaccrual loans at September 30, 1994 of $8,481,796 are mainly real estate
related which have slowed in performance due to the economy. Nonaccrual
loans at December 31, 1993 totaled $6,991,391, and at September 30, 1994
were $8,062,130. The increase is due to one commercial loan of
approximately $1,900,000 being added to nonaccrual during the quarter ended
September 30, 1994. This loan is currently in a workout position with
agreements almost complete that are expected to enable the Corporation to
recover the major portion of principal before year end 1994, with the
balance restructured for payback over time with no loss of principal
expected nor will it cause an increase in loan loss reserve provision.
For the quarter ended September 30, 1994 nonaccrual loans resulted in lost
interest income of $216,239 as compared to $144,862 for the three months
ended September 30, 1993. For the nine months ended September 30, 1994
nonaccrual loans accounted for lost interest income of $599,803 as compared
to $558,137 for the nine months ended September 30, 1993. The Corporation
currently has approximately $2,000,000 of "Other Real Estate Owned"
consisting of one commercial loan ($1,600,000) and one residential mortgage
loan ($400,000). These amounts are recorded in "Other Assets" at the lower
of cost or fair market value in the accompanying consolidated balance
sheets. During the three months ended September 30, 1994, the Corporation
charged-off $300,000 against current earnings to reflect a decline in fair
value for the commercial property. Based on a comprehensive evaluation,
management has determined that the level of the allowance for loan losses
is adequate at this time. At September 30, 1994, the Corporation has no
material commitments to lend additional funds with respect to nonperforming
loans. In management's evaluation of the loan portfolio risks, any
significant future increases in nonperforming loans is dependent to a large
extent on the economic environment. In a deteriorating or uncertain
economy, management applies more conservative assumptions when assessing
the future prospects of borrowers and when estimating collateral values.
This may result in a higher number of loans being classified as
nonperforming.
At September 30, 1994, the reserve for loan losses is 1.60% of total loans
as compared to 1.26% at December 31, 1993. The reserve increased due to
significant recoveries during the quarter ended September 30, 1994.
Management and the board of directors of the Corporation and affiliates
evaluate existing practices and procedures on an ongoing basis. In
addition, regulators often make recommendations during the course of their
examinations that relate to the operations of the Corporation and its
affiliates. As a matter of practice, management and the board of directors
of the Corporation and its subsidiaries consider such recommendations
promptly.
In May 1993, the Financial Accounting Standards Board issued FAS 114
"Accounting by Creditors for Impairment of a Loan." FAS 114, which becomes
effective for fiscal years beginning after December 15, 1994, requires
impairment of a loan be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate.
Univest is currently evaluating the impact from adoption of this standard,
and management does not expect that it will have a material impact on the
reserve position of the Corporation.
Other income which is non-interest related consists mainly of general fee
income, trust department commissions, and other miscellaneous non-recurring
types of income. Since these types of income are not tied directly to
volume or rate structure, noticeable fluctuations may occur on a quarterly
basis. For the third quarter ended September 30, 1994, other income
totaled $1,433,560 which is $104,165 less than the $1,537,725 recorded for
the quarter ended September 30, 1993. The difference for the quarter is
mainly due to prior period non-recurring income in third quarter 1993 which
is not present for third quarter 1994. For the nine months ended September
30, 1994 other income increased $182,603 from $4,047,255 at September 30,
1993 to $4,229,858 at September 30, 1994. This increase was due mainly to
increased trust department income.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," effective for fiscal years beginning after
December 15, 1993. Under the new rules, which were adopted by the
Corporation as of January 1, 1994, debt securities that the Corporation
has both the positive intent and ability to hold to maturity are carried at
amortized cost. All other debt securities and all marketable equity
securities are classified as available-for-sale or trading and carried at
fair value. Unrealized holding gains and losses on securities classified
as available-for-sale are carried as a component of shareholders' equity.
Unrealized holding gains and losses on securities classified as trading are
reported in earnings.
Previously the company classified most debt securities as held for
investment and carried them at amortized cost. The $91,056,109 recorded as
held for investment at December 31, 1993 was transferred to the held-to-
maturity account as of January 1, 1994 in accordance with the new rule.
Additionally, the $48,270,752 recorded as held-for-sale and carried at
lower of cost or market at December 31, 1993 was transferred to available-
for-sale as of January 1, 1994 and resulted in an increase of approximately
$300,000 in shareholders' equity at that date, representing the unrealized
appreciation, net of taxes, of the Corporation's investment in debt and
equity securities determined to be available-for-sale.
During the first quarter ended March 31, 1994 securities totaling
approximately $7,200,000 were sold from the available-for-sale account and
a net loss of $26,870 was recorded. The Corporation did not sell any
securities in the third quarter ended September 30, 1994, or for the three
and nine month periods ending September 30, 1993. The total of debt and
equity securities held in the available-for-sale account as of September
30, 1994, is $33,506,127. The unrealized loss in the available-for-sale of
$296,125 net of taxes is charged against equity at September 30, 1994. The
Corporation has not designated any of its securities as trading for the
nine months ended September 30, 1994.
Sales of mortgages during the nine months ended September 30, 1994
resulted in losses of $16,577. There were no gains on sales of mortgages
during the quarter ended September 30, 1994. For the comparable three and
nine month period ended September 30, 1993, sales of mortgages resulted in
gains of $131,930 and $409,324, respectively. The change was due to
variations of market prices caused by increasing long-term mortgage rates.
Because of the increase in long-term mortgage rates, mortgage lending,
especially in the area of refinancing decreased considerably. Due to these
conditions, during the second quarter of 1994, a Corporate decision was
made to discontinue holding loans for sale. All long-term fixed rate loans
that are not granted for a third party by prior commitment, from such third
party, will be held in portfolio. The Corporation has both the intent and
ability to hold these loans until maturity. The $974,253 reflected as
"Loans Held for Sale" on the accompanying Statement of Condition represents
the student loan portfolio of Pennview Savings Bank which is being sold to
the Student Loan Marketing Association under a prior agreement. These
loans are carried at the lower of cost or market.
Other expenses make up the operating cost of the Corporation, including but
not limited to salaries and benefits, equipment, data-processing and
occupancy costs. This category is usually referred to as noninterest
expense and receives continuing management attention in an attempt to
contain and minimize the growth of the various expense categories, while
encouraging technological innovation in conjunciton with the expansion of
the Corporation. The quarter ended September 30, 1994 totals $6,188,184
which is $567,298 or 10.09% more than the $5,620,886 reported at quarter
end September 30, 1993. The main reason for the increase was due to the
write down of other real estate owned of $300,000 and increased advertising
cost. For the nine months ended September 30, 1994 other expenses increased
$1,180,275 or 7.14% from $16,530,980 at September 30, 1993 to $17,711,255
at September 30, 1994. The increases were due to normal salary and staff
increases along with increasing benefit cost, also increases in advertising
and the write down of other real estate owned. Net occupancy costs,
especially utilities and maintenance, also increased mainly in the first
quarter of 1994 due to the severe winter weather conditions. An effort
toward cost control is an ongoing corporate goal in an attempt to minimize
the impact of noninterest expense.
Effective January 1, 1993, Univest adopted Statement of Financial
Accounting Standards No. 106," Employers' Accounting for Postretirement
Benefits Other Than Pensions" (FAS 106). FAS 106 requires that employers
accrue the costs associated with providing postretirement benefits during
the active service periods of employees, rather than previously accepted
accounting practice of recognizing these costs on a pay-as-you-go basis.
As permitted under FAS 106, Univest elected to recognize immediately a one-
time, non-cash charge for the January 1,1993 transitional liability of
$864,000, $570,000 after-tax, as the cumulative effect of a change in
accounting principle.
An income tax provision is shown for the quarter ended September 30, 1994
of $1,200,732 and for the quarter ended September 30, 1993 of $990,629 with
effective tax rates of 31.0% and 30.4%, respectively. For the nine months
ended September 30, 1994 the tax provision was $3,208,340 with an effective
tax rate of 30.8% as compared to the tax provision of $2,818,509 with an
effective tax rate of 30.0% for the nine months ended September 30, 1993.
If the Corporation's income which is exempt from federal income tax
continues to decline, and if the annual taxable income exceeds $10,000,000,
it is anticipated that the Corporation's effective tax rate will continue
to increase.
Net income for the quarter ended September 30, 1994 increased $396,273 or
17.5% from $2,263,660 ($0.72 per share) at September 30, 1993 to $2,659,933
($0.85 per share) at September 30, 1994. The increase was mainly due to
increased net interest income and the reduction in the provision for loan
losses, offset by increased other expense. For the nine months ended
September 30, 1994, net income increased by $1,212,048 or 20.20% from
$6,001,170 ($1.91 per share) at September 30, 1993 to $7,213,218 ($2.30 per
share) at September 30, 1994. The increase for the nine month period was
due to increased net interest income and the effect of the change in
accounting principle for the nine month period ended September 30, 1993.
PART II. OTHER INFORMATION
Item 1. Legal proceedings--None
Item 2. Changes in Securities--None
Item 3. Defaults upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--Not Applicable
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K--None
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.
Univest Corporation of Pennsylvania
(Registrant)
Date: October 26, 1994 Merrill S. Moyer
Merrill S. Moyer, Chairman
Date: October 26, 1994 Wallace H. Beiler
Wallace H. Bieler, Senior Vice President
and Chief Financial Officer
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