United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Period Ended June 30, 1995
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 of 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 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 6/30/95)
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
Notes to Condensed Consolidated 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, 1994, which has been filed with the Securities and Exchange
Commission.
<TABLE>
UNIVEST CORPORATON OF PENNSYLVANIA AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(UNAUDITED) (SEE NOTE)<F1>
JUNE 30, 1995 DECEMBER 31, 1994
---------------- -----------------
(In Thousands)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $39,123 $35,177
INVESTMENT SECURITIES HELD-TO-MATURITY 153,686 172,227
(MARKET VALUE $154,166 AT 6/30/95
AND $168,106 AT 12/31/94)
INVESTMENT SECURITIES AVAILABLE-FOR-SALE 24,877 30,335
FEDERAL FUNDS SOLD AND OTHER
SHORT TERM INVESTMENTS 26,734 6,848
LOANS 584,810 580,779
LESS: RESERVE FOR POSSIBLE LOAN LOSSES (9,040) (8,876)
-------- -------
NET LOANS 575,770 571,903
OTHER ASSETS 30,974 30,664
-------- -------
TOTAL ASSETS $851,164 $847,154
======== ========
LIABILITIES
DEMAND DEPOSITS, NON INTEREST BEARING $110,214 $104,404
DEMAND DEPOSITS, INTEREST BEARING 141,916 155,636
REGULAR SAVINGS DEPOSITS 129,337 126,975
TIME DEPOSITS 327,014 312,058
-------- --------
TOTAL DEPOSITS 708,481 699,073
SHORT-TERM BORROWINGS 35,771 44,923
OTHER LIABILITIES 12,613 13,562
LONG-TERM DEBT 9,085 9,438
-------- --------
TOTAL LIABILITIES 765,950 766,996
SHAREHOLDERS' EQUITY
COMMON STOCK 15,717 15,717
ADDITIONAL PAID-IN CAPITAL 8,090 8,090
RETAINED EARNINGS 61,527 56,983
NET UNREALIZED SECURITIES GAINS (LOSSES) 30 (482)
TREASURY STOCK (150) (150)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 85,214 80,158
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $851,164 $847,154
======== =========
<FN>
<FN1>NOTE: THE BALANCE SHEET AT DECEMBER 31, 1994 HAS BEEN DERIVED FROM
THE AUDITED FINANCIAL STATEMENTS AT THAT DATE BUT 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 SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1995 1994 1995 1994
(In thousands, except per share data)
<S> <C> <C> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS
TAXABLE INTEREST AND FEES ON LOANS $12,214 $11,385 $24,296 $22,295
EXEMPT FROM FEDERAL INCOME TAXES 465 463 980 926
-------- -------- --------- -------
TOTAL INTEREST AND FEES ON LOANS 12,679 11,848 25,276 23,221
INTEREST AND DIVIDENDS ON
INVESTMENT SECURITIES 2,753 1,705 5,575 3,273
OTHER INTEREST INCOME 255 79 293 167
-------- -------- --------- -------
TOTAL INTEREST INCOME 15,687 13,632 31,144 26,661
-------- -------- --------- -------
INTEREST EXPENSE
INTEREST ON DEPOSITS 6,007 4,621 11,546 9,176
OTHER INTEREST EXPENSE 517 437 1,032 864
-------- -------- --------- -------
TOTAL INTEREST EXPENSE 6,524 5,058 12,578 10,040
-------- -------- --------- -------
NET INTEREST INCOME 9,163 8,574 18,566 16,621
PROVISION FOR LOAN LOSSES 423 645 845 1,290
-------- -------- --------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,740 7,929 17,721 15,331
-------- -------- --------- --------
OTHER INCOME 1,638 1,307 3,112 2,780
LOSSES ON SALES OF SECURITIES - - (1) (27)
-------- -------- --------- -------
TOTAL OTHER INCOME 1,638 1,307 3,111 2,753
OTHER EXPENSES
SALARIES AND BENEFITS 3,291 3,088 6,662 6,165
OTHER EXPENSES 3,003 2,706 6,061 5,358
-------- -------- --------- -------
TOTAL OTHER EXPENSES 6,294 5,794 12,723 11,523
-------- -------- --------- -------
INCOME BEFORE INCOME TAXES 4,084 3,442 8,109 6,561
APPLICABLE INCOME TAXES 1,267 1,056 2,499 2,008
-------- -------- --------- -------
NET INCOME $2,817 $2,386 $5,610 $4,553
======== ======== ========= =======
PER COMMON SHARE DATA (1):
NET INCOME $0.90 $0.76 $1.79 $1.45
CASH DIVIDENDS DECLARED $0.17 $0.15 $0.34 $0.30
<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>
For the six months ended
June 30, 1995 June 30, 1994
(In thousands)
<S> <C> <C>
Cash flows from operating activitites
Net income $5,610 $4,553
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses in excess of net charge-offs 164 1,608
Depreciation of premises and equipment 830 738
(Discount accretion) premium amortization on
investment securities (144) 253
Deferred income tax (183) (495)
Realized loss on investment securities 1 27
Realized (gains) losses on sales of mortgages (37) 16
Decrease in net deferred loan fees (158) (206)
Decrease (increase) in interest receivable and other
assets 87 (1,159)
(Decrease) increase in accrued expenses and other
liabilities (627) 1,139
-------- -------
Net cash provided by operating activities 5,543 6,474
Cash flows from investing activities
Proceeds from maturing time deposits 122 1,858
Proceeds from sales of securities available for sale 3,002 7,247
Proceeds from maturing securities held to maturity 24,118 15,002
Proceeds from maturing securities available for sale 3,388 18,356
Purchases of investment securities held to maturity (5,708) (29,694)
Purchases of investment securities available for sale - (8,569)
Net (increase) decrease in federal funds sold and other
short-term investments (19,886) 5,753
Net decrease in loans held for sale - 8,916
Proceeds from sales of mortgages 2,847 13,082
Net increase in loans (6,683) (44,967)
Capital expenditures (1,226) (1,550)
-------- -------
Net cash used in investing activities (26) (14,566)
Cash flows from financing activities
Assumption of deposits - 10,608
Net increase (decrease) in deposits 9,408 (5,716)
Net (decrease) increase in short-term borrowings (9,152) 2,340
Cash dividends (1,474) (1,349)
Repayments of long-term debt (353) (544)
-------- -------
Net cash (used in) provided by financing activities (1,571) 5,339
Net increase (decrease) in cash and due from banks 3,946 (2,753)
Cash and due from banks at beginning of period 35,177 34,702
-------- -------
Cash and due from banks at end of period $39,123 $31,949
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $11,260 $10,214
Income taxes $2,340 $2,281
</TABLE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Total assets increased approximately $4.0 million or 0.47% to $851.2
million at June 30, 1995 when compared to the $847.2 million at December
31, 1994. The increase was due to a $3.9 million increase in cash and due
from banks and a $3.9 million increase in net loans offset by a $4.1
million decrease in the investment and federal funds sold portfolios.
Deposits grew by $9.4 million due to an increase of $15 million in time
deposits, which resulted from increased rates. Short term borrowings,
(sweep repurchase accounts) decreased $9.2 million mainly due to normal
commercial business cycle volatility.
Shareholders' equity increased 6.23% or $5.0 million from $80.2
million at December 31, 1994 to $85.2 million at June 30, 1995. Cash
dividends increased $0.04 per share from $0.30 for the six months ended
June 30, 1994 to $0.34 for the six months ended June 30, 1995.
Net income for the three months ended June 30, 1995 grew $0.4 million
or 16.7% from $2.4 million at June 30, 1994 to $2.8 million at June 30,
1995. For the six months ended June 30, 1995 net income increased $1.0
million or 21.74% from $4.6 million at June 30, 1994 to $5.6 million at
June 30, 1995. Both increases were due mainly to increased net interest
income.
Interest and fees on loans grew from $11.8 million for the three
months ended June 30, 1994 to $12.7 million for the three months ended June
30, 1995. An increase of $0.9 million or 7.63%. For the six months ended
June 30, 1995 interest and fees on loans increased to $25.3 million as
compared to $23.2 million at June 30, 1994, representing an increase of
$2.1 million or 9.05%. The increase for both periods was due to prime rate
increases. The prime rate increased from 6.00% at January 1, 1994 to 9.00%
at June 30, 1995. Repricing of adjustable rate real estate loans also
contributed to the increase.
Interest on investment securities increased $1.1 million or 64.7% from
$1.7 million for the three months ended June 30, 1994 to $2.8 million for
the three months ended June 30, 1995. Interest on investment securities
also grew from $3.3 million for the six month period ended June 30, 1994 to
$5.6 million for the six month period ended June 30, 1995, an increase of
$2.3 million or 69.7%. The increase in both periods is attributed to
increased yields and volume.
Other interest income consists mainly of income received on federal
funds sold, which is the resulting daily investment activity that can be
volatile on both interest yield and volume. Second quarter 1995 shows
income of $255 thousand as compared to $79 thousand for second quarter
1994. For the six months ended June 30, 1995 income of $293 thousand was
recorded as compared to $167 thousand for the same period in 1994.
Increases in both periods were due to higher average balances and increased
yields.
Interest expense increased $1.4 million or 27.45% to $6.5 million for
the three months ended June 30, 1995 when compared to the $5.1 million
recorded for the same period in 1994. For the six month period ended June
30, 1995 interest increased $2.6 million or 26.0% to $12.6 million when
compared to the $10.0 million shown for the six months ended June 30, 1994.
The increases were mainly due to increased rates and volumes on
certificates of deposits.
As of August 4, 1995 the Corporation redeemed outstanding subordinated
debt of $5 million. The debt which did not permit prepayment without
penalty before the conversion date of July 31, 1995. The note carried a
fixed rate of 10.35% until the conversion date. This debt was incurred by
the Corporation in 1990 to partially finance the acquisition of Pennview
Savings Bank.
The asset/liability management process continues with its goal of
providing stable reliable earnings through varying interest rate
environments. Net interest income is the amount by which interest income
on earning assets exceeds interest paid on interest bearing liabilities.
The amount of net interest income is affected by changes in interest rates,
account balances or volume, and the mix of earning assets and interest
bearing liabilities. Six months ended June 30, 1995 shows $18.6 million
in net interest income which is $2.0 million or 12.05% higher than the
$16.6 million for the same period in 1994. A positive gap position is
maintained on a cumulative basis at three months and longer. For the six
months period ended June 30, 1995 increases in net interest income resulted
from rate rather than volume because the net interest spread for the period
increased 11 basis points and the net interest margin increased by 26 basis
points when compared to the six months ended June 30, 1994.
The following demonstrates the aforementioned effects:
<TABLE>
SIX MONTHS ENDED
<CAPTION>
6/30/95 6/30/94
AVG. BALANCE RATE AVG. BALANCE RATE
<S> <C> <C> <C> <C>
Interest Earning Assets $777,529 8.01% $735,284 7.25%
Interest Bearing Liabilities $639,841 3.93% $612,426 3.28%
Net Interest Income $ 18,566 $ 16,621
Net Interest Spread 4.08% 3.97%
Net Interest Margin 4.78% 4.52%
</TABLE>
ASSET QUALITY
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 change 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 for under FAS
114, which was adopted by the Corporation effective January 1, 1995. Any
of the above criteria may cause the provision to fluctuate. For the three
and six months ended June 30, 1995 the provisions for loan losses were $423
thousand and $845 thousand respectively. For the three and six month
periods ended June 30, 1994 the provisions were $645 thousand and $1.3
million respectively.
Effective January 1, 1995, the Corporation adopted Financial
Accounting Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan." Under the new standard, the 1995 allowance for
credit losses related to loans that are identified as impaired in
accordance with Statement 114 is based on discounted cash flows using the
loan's initial effective rate or the fair value of collateral for certain
collateral dependent loans. Prior to 1995 the allowance for credit losses
related to these loans was based on undiscounted cash flows or the fair
value of the collateral for collateral dependent loans. At June 30, 1995
the recorded investment in loans that are considered to be impaired under
Statement 114 was $4.0 million (all of which were on a nonaccrual basis);
the related allowance for credit losses for those loans is $1.0 million.
All loans considered impaired at June 30, 1995 have an allowance for credit
loss. For the six months ended June 30, 1995 the Corporation recognized
$135 thousand in interest income on those impaired loans.
Generally, a loan (including a loan impaired under Statement 114) is
classified as nonaccrual and the accrual of interest on such loan is
discontinued when the contractual payment of principal or interest has
become 90 days due or management has serious doubts about the further
collectibility of principal or interest, even though the loan is currently
performing. A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is placed
on nonaccrual status, unpaid interest credited to income in the current
year is reversed and unpaid interest accrued in prior years is charged
against "other expense." Interest received on nonaccrual loans generally
is either applied against principal or reported as interest income,
according to management's judgment as to the collectibility of principal.
Generally, loans are restored to accrual status when the obligation is
brought current, has performed in accordance with the contractual terms for
a reasonable periods of time and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt. Total cash basis
and nonaccrual loans at June 30, 1995 are $5.6 million and consist mainly
of real estate related commercial loans. Cash basis and nonaccrual loans
at June 30, 1994 aggregated $7.0 million. For the quarter ended June 30,
1995 nonaccrual loans resulted in lost interest income of $200 thousand as
compared to $205 thousand for the three months ended June 30, 1994. For
the six months ended June 30, 1995 lost interest income totaled $326
thousand as compared to $384 thousand for the same period in 1994. At June
30, 1995 the Corporation had 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 are dependent to a large extent on the economic environment.
At June 30, 1995 the Corporation has approximately $1.3 million of
Other Real Estate Owned ("OREO") consisting of two commercial properties.
This amount is recorded in "Other Assets" at the lower of cost or fair
market value in the accompanying consolidated balance sheets. Included in
other operating expenses for the six months ended June 30, 1995 were
adjustments of $300 thousand to the carrying value of these OREO properties
to approximate net realizable value. No adjustments to carrying value were
recorded for the six month ended June 30, 1994.
At June 30, 1995 the reserve for loan losses is 1.55% of total loans
as compared to 1.53% at December 31, 1994.
Other income which is not 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 quarter ended June 30, 1995 other income
totaled $1.6 million as compared to $1.3 million for the quarter ended June
30, 1994. For the six months ended June 30, 1995 other income increased to
$3.1 million from the $2.8 million recorded for the same period in 1994.
The increases in both periods were due to fluctuations in trust department
income due to improved investment performance, and general fee income in
the first and second quarters of 1995.
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
separate component of shareholders' equity. Unrealized holding gains and
losses on securities classified as trading are reported in earnings. The
total debt and equity securities held in the available-for-sale account as
of June 30, 1995 is $24.9 million as compared to $30.3 million at December
31, 1994. At June 30, 1995 a net unrealized gain of $30 thousand was
recorded, compared to a net unrealized loss of $482 thousand at December
31, 1994. This change was due to the increase in short-term rates during
the period.
Other expenses make up the operating costs 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 ongoing management attention in an attempt
to contain and minimize the growth of the various expense categories, while
encouraging technological innovation in conjunction with the expansion of
the Corporation. The quarter ended June 30, 1995 totals $6.3 million,
which is 8.62% or $0.5 million more than the $5.8 million reported for the
quarter ended June 30, 1994. For the six months ended June 30, 1995 other
expenses totaled $12.7 million, which is 10.43% or $1.2 million more than
the $11.5 million shown for the same period in 1994. Increases in both
periods were mainly due to normal salary and staff increases, and occupancy
and equipment expenses for three additional branch facilities opened since
June 30, 1994. Also, contributing to the increase was a $300 thousand loss
provision for OREO to reflect a decline in the fair market value of other
real estate owned. Real estate owned expenses also increased in both
periods.
An income tax provision of $1.3 million is shown for the quarter ended
June 30, 1995 and $1.1 million for the quarter ended June 30, 1994 with
effective tax rates of 31.0% for both periods. For the six months ended
June 30, 1995 the provision was $2.5 million as compared to $2.0 million
for the six months ended June 30, 1994. The effective tax rate for both
periods was 31.0%
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: 7/21/95 Merrill S. Moyer, Chairman
Date: 7/20/95 Wallace H. Bieler, Senior Vice
President & Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 39,123
<INT-BEARING-DEPOSITS> 379
<FED-FUNDS-SOLD> 26,734
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,877
<INVESTMENTS-CARRYING> 153,686
<INVESTMENTS-MARKET> 154,166
<LOANS> 584,810
<ALLOWANCE> 9,040
<TOTAL-ASSETS> 851,164
<DEPOSITS> 708,481
<SHORT-TERM> 35,771
<LIABILITIES-OTHER> 12,613
<LONG-TERM> 9,085
<COMMON> 15,717
0
0
<OTHER-SE> 69,497
<TOTAL-LIABILITIES-AND-EQUITY> 851,164
<INTEREST-LOAN> 25,276
<INTEREST-INVEST> 5,575
<INTEREST-OTHER> 293
<INTEREST-TOTAL> 31,144
<INTEREST-DEPOSIT> 11,546
<INTEREST-EXPENSE> 12,578
<INTEREST-INCOME-NET> 18,566
<LOAN-LOSSES> 845
<SECURITIES-GAINS> -1
<EXPENSE-OTHER> 12,723
<INCOME-PRETAX> 8,109
<INCOME-PRE-EXTRAORDINARY> 8,109
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,610
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
<YIELD-ACTUAL> 4.97
<LOANS-NON> 6,297
<LOANS-PAST> 219
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 431
<ALLOWANCE-OPEN> 8,876
<CHARGE-OFFS> 1,096
<RECOVERIES> 416
<ALLOWANCE-CLOSE> 9,040
<ALLOWANCE-DOMESTIC> 9,040
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,162
</TABLE>
