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 March 31, 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 3/31/95)
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 CORPORATION OF PENNSYLVANIA AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(UNAUDITED) (SEE NOTE)<F1>
MARCH 31, 1995 DECEMBER 31, 1994
(In thousands)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $33,696 $35,177
INVESTMENT SECURITIES HELD-TO-MATURITY 161,957 172,227
(MARKET VALUE $160,643 AT 3/31/95
AND $168,106 AT 12/31/94)
INVESTMENT SECURITIES AVAILABLE-FOR-SALE 25,675 30,335
FEDERAL FUNDS SOLD AND OTHER
SHORT TERM INVESTMENTS 11,270 6,848
LOANS 580,607 580,779
LESS: RESERVE FOR POSSIBLE LOAN LOSSES (8,623) (8,876)
----------- ----------
NET LOANS 571,984 571,903
OTHER ASSETS 31,678 30,664
----------- ----------
TOTAL ASSETS $836,260 $847,154
=========== ==========
LIABILITIES
DEMAND DEPOSITS, NON INTEREST BEARING $105,132 $104,404
DEMAND DEPOSITS, INTEREST BEARING 141,849 155,636
REGULAR SAVINGS DEPOSITS 127,417 126,975
TIME DEPOSITS 323,711 312,058
----------- ----------
TOTAL DEPOSITS 698,109 699,073
SHORT-TERM BORROWINGS 33,945 44,923
OTHER LIABILITIES 12,129 13,562
LONG-TERM DEBT 9,415 9,438
----------- -----------
TOTAL LIABILITIES 753,598 766,996
SHAREHOLDERS' EQUITY
COMMON STOCK 15,717 15,717
ADDITIONAL PAID-IN CAPITAL 8,090 8,090
RETAINED EARNINGS 59,243 56,983
NET UNREALIZED SECURITIES LOSSES (238) (482)
TREASURY STOCK (150) (150)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 82,662 80,158
----------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $836,260 $847,154
=========== ==========
<FN>
<F1>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 CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1995 1994
(In thousands, except per share data)
<S> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS
TAXABLE INTEREST AND FEES ON LOANS $12,082 $10,909
EXEMPT FROM FEDERAL INCOME TAXES 515 463
-------- --------
TOTAL INTEREST AND FEES ON LOANS 12,597 11,372
INTEREST AND DIVIDENDS ON
INVESTMENT SECURITIES 2,822 1,569
OTHER INTEREST INCOME 38 88
-------- --------
TOTAL INTEREST INCOME 15,457 13,029
-------- --------
INTEREST EXPENSE
INTEREST ON DEPOSITS 5,539 4,555
OTHER INTEREST EXPENSE 515 427
-------- --------
TOTAL INTEREST EXPENSE 6,054 4,982
-------- --------
NET INTEREST INCOME 9,403 8,047
PROVISION FOR LOAN LOSSES 422 645
-------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,981 7,402
-------- --------
OTHER INCOME 1,474 1,473
LOSSES ON SALES OF SECURITIES (1) (27)
-------- --------
TOTAL OTHER INCOME 1,473 1,446
OTHER EXPENSES
SALARIES AND BENEFITS 3,371 3,077
OTHER EXPENSE 3,058 2,652
-------- --------
TOTAL OTHER EXPENSES 6,429 5,729
-------- --------
INCOME BEFORE INCOME TAXES 4,025 3,119
APPLICABLE INCOME TAXES 1,232 952
-------- --------
NET INCOME $2,793 $2,167
======== ========
PER COMMON SHARE DATA <F1>:
NET INCOME $0.89 $0.69
CASH DIVIDENDS DECLARED $0.17 $0.15
<FN>
<F1> 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>
3 MONTHS 3 MONTHS
ENDED ENDED
MARCH 31, 1995 MARCH 31, 1994
(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $2,793 $2,167
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (less than) in excess
of net charge-offs (253) 890
Depreciation of premises and equipment 395 354
(Discount accretion) premium amortization on
investment securities (69) 160
Deferred income tax 167 117
Realized losses on investment securities 1 27
Realized gains on sales of mortgages (2) (1)
Decrease in net deferred loan fees (100) (69)
Increase in interest receivable and other assets (685) (1,992)
(Decrease) increase in accrued expenses and other
liabilities (1,318) 6,552
-------------- ---------------
Net cash provided by operating activities 929 8,205
Cash flows from investing activities
Purchases of time deposits - (25)
Proceeds from maturing time deposits 158
Proceeds from sales of securities available for sale 3,002 7,247
Proceeds from maturing securities held to maturity 10,738 9,976
Proceeds from maturing securities available for sale 2,186 11,015
Purchases of investment securities held to maturity (716) (21,712)
Purchases of investment securities available for sale - (7,571)
Net increase in federal funds sold and
other short-term investments (4,422) (1,612)
Net (increase) decrease in loans held for sale (414) 3,209
Proceeds from sales of mortgages 344 8,221
Net decrease (increase) in loans 344 (15,073)
Capital expenditures (724) (277)
-------------- ---------------
Net cash provided (used in) by investing activities 10,496 (6,602)
Cash flows from financing activities
Net (decrease) increase in deposits (964) 549
Net (decrease) increase in short-term borrowings (10,978) 4,988
Cash dividends (941) (878)
Repayments of long-term debt (23) (272)
-------------- ---------------
Net cash (used in) provided by financing activities (12,906) 4,387
Net (decrease) increase in cash and due from banks (1,481) 5,990
Cash and due from banks at beginning of period 35,177 34,702
-------------- ---------------
Cash and due from banks at end of period $33,696 $40,692
============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $5,286 $5,009
Income taxes $39 $51
</TABLE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Total assets decreased approximately $10.9 million or
1.29% to $836.2 million at March 31, 1995 when compared to
the $847.1 million at December 31, 1994. The decrease was
mainly due to a decline in the investment portfolio caused
by maturities of investments which were not reinvested.
Total loans remained constant at $581 million. Total
deposits, the Corporation's primary source of funds remained
fairly constant, decreasing slightly from $699.1 million at
December 31, 1994 to $698.1 million at March 31, 1995.
However time deposits, because of increased interest rates
increased $11.6 million, which was offset by a decrease of
$13.7 million in interest bearing demand deposits. Short
term borrowing, (sweep repurchase accounts) decreased $11.0
million mainly due to normal business cycle volatility.
Shareholders' equity increased 3.12% or $2.5 million
from $80.1 million at December 31, 1994 to $82.6 million at
March 31, 1995. Cash dividends increased $0.02 per share
from $0.15 at March 31, 1994 to $0.17 at March 31, 1995.
Net income for the three months ended March 31, 1995
increased 27.27% or $626 thousand from $2.2 million ($0.69
per share) to $2.8 million ($0.89 per share) at March 31,
1995. This increase was due mainly to an increase of $1.4
million net in interest income.
Interest and fees on loans increased 10.53% or $1.2
million from $11.4 million at March 31, 1994 to $12.6
million at March 31 ,1995. This change was due to prime
rate increases. The prime rate increased from 6.25% at
March 31, 1994 to 9.00% at March 31, 1995. Repricing of
adjustable rate real estate loans also contributed to the
increase.
Interest on investment securities increased $1.2
million or 75.00% from $1.6 million at March 31, 1994 to
$2.8 million at March 31, 1995. This increase 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. First quarter 1995 shows income of $88
thousand as compared to $38 thousand for first quarter ended
March 31, 1995. The change was due to decreased average
balances offset by increased yields.
Interest expense increased $1.1 million or 22.00% from
$5.0 million at March 31, 1994 to $6.1 million at March 31,
1995. The increase was due to increased interest rates and
volume.
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. First
quarter ended March 31, 1995 shows net interest income of
$9.4 million which is a $1.4 million or 17.50% increase over
the $8.0 million recorded for first quarter ended March 31,
1994. A positive gap position is maintained on a cumulative basis
at three months and longer. Increases in net interest income were
generated more by rate rather than volume because the net interest
spread for the first quarter of 1995 increased by 15 basis points and
the net interest margin increased by 36 basis points versus first quarter
1994 results.
The following demonstrates the aforementioned effects:
<TABLE>
1st QUARTER 1995 1st QUARTER 1994
AVG. BALANCE RATES AVG. BALANCE RATES
<CAPTION>
<S> <C> <C> <C> <C>
Interest Earning Assets $769,422 8.04% $710,164 7.34%
Interest Earning Liabilities $629,696 3.85% $603,030 3.30%
Net Interest Income $ 9,403 $ 8,047
Net Interest Spread 4.19% 4.04%
Net Interest Margin 4.89% 4.53%
</TABLE>
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 evaluation criteria may cause the
provision to fluctuate. For the quarter ended March 31,
1995, the provision was $422 thousand and for the quarter
ended March 31, 1994, the provision was $645 thousand.
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 for evaluation in
accordance with Statement 114 is based on discounted cash
flows using the loan's initial effective interest 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 March 31, 1995 the recorded investment
in loans that are considered to be impaired under Statement
114 was $3.9 million (all of which were on a nonaccrual
basis); the related allowance for credit losses for those
loans is $479 thousand. All loans considered impaired at
March 31, 1995 have an allowance for credit loss. For the
three months ended March 31, 1995 the Corporation did not
recognize any 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 March 31, 1995 are $7.1 million
and consist mainly of real estate related which have slowed
in performance due to local economic condition. Cash basis and nonaccrual
loans at March 31, 1994 totaled $6.8 million. For the
quarter ended March 31, 1995 nonaccrual loans resulted in
lost interest of $126 thousand as compared to $178 thousand
for the quarter ended March 31, 1994.
As of March 31, 1995 the Corporation has approximately
$1.6 million of "Other Real Estate Owned" consisting of one
commercial property. This amount is recorded in "Other
Assets" at the lower of cost or fair market value in the
accompanying consolidated balance sheets. At March 31, 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 March 31, 1995 the reserve for loan losses is 1.49%
of total loans as compared to 1.53% at December 31, 1994.
The reason for the decrease was due to a charge-off of
approximately $600 thousand for one commercial property
during the first quarter of 1995.
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 first quarter ended March 31, 1995
other income remained constant with first quarter ended
March 31, 1994 at $1.5 million.
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.
Other expenses make up the operation 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 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 March 31, 1995 totals $6.4 million which is
12.28% or $700 thousand more than the $5.7 million shown for
the same period in 1994. The increase was mainly due to
normal salary and staff increases, and occupancy expenses
for two additional branch facilities opened since March 31,
1994, and a estimated $150 thousand provision for possible
market value adjustment of real estate owned based on annual
appraisal review.
An income tax provision of $1.2 million is shown for
the quarter ended March 31, 1995 and $952 thousand for
quarter ended March 31, 1994. Effective tax rates remained fairly
consistent at 30.6% and 30.5% respectively.
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
4/20/95 Merrill S. Moyer
Date: ___________________ ______________________________
Merrill S. Moyer,Chairman
4/20/95 Wallace H. Bieler
Date: ___________________ ______________________________
Wallace H. Bieler, Senior Vice
President and 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> QTR-1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 33,696
<INT-BEARING-DEPOSITS> 343
<FED-FUNDS-SOLD> 11,270
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,675
<INVESTMENTS-CARRYING> 161,614
<INVESTMENTS-MARKET> 160,300
<LOANS> 580,607
<ALLOWANCE> 8,623
<TOTAL-ASSETS> 836,260
<DEPOSITS> 698,109
<SHORT-TERM> 33,945
<LIABILITIES-OTHER> 12,129
<LONG-TERM> 9,415
<COMMON> 15,717
0
0
<OTHER-SE> 66,945
<TOTAL-LIABILITIES-AND-EQUITY> 836,260
<INTEREST-LOAN> 12,597
<INTEREST-INVEST> 2,822
<INTEREST-OTHER> 38
<INTEREST-TOTAL> 15,457
<INTEREST-DEPOSIT> 5,539
<INTEREST-EXPENSE> 6,054
<INTEREST-INCOME-NET> 9,403
<LOAN-LOSSES> 422
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 6,429
<INCOME-PRETAX> 4,025
<INCOME-PRE-EXTRAORDINARY> 4,025
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,793
<EPS-PRIMARY> .89
<EPS-DILUTED> .89
<YIELD-ACTUAL> 5
<LOANS-NON> 7,050
<LOANS-PAST> 298
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,994
<ALLOWANCE-OPEN> 8,876
<CHARGE-OFFS> 735
<RECOVERIES> 60
<ALLOWANCE-CLOSE> 8,623
<ALLOWANCE-DOMESTIC> 8,623
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,139
</TABLE>
