<PAGE>
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Period Ended September 30, 1997.
-------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From to .
------- -------
UNIVEST CORPORATION OF PENNSYLVANIA
-----------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1886144
------------ ----------
(State or other jurisdiction of (IRS Employer Identification 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 3,852,353
- -------------------------- ---------
(Title of Class) (Number of shares outstanding
at 9/30/97)
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C> <C>
Part I. Financial Information:
Item 1: Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Income
Three and Nine Months Ended September 30, 1997 and 1996 2
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II. Other Information:
Other Information 12
Part III. Financial Data Schedule 14
</TABLE>
<PAGE>
Part I.
Item 1:
UNIVEST CORPORATION OF PENNSYLVANIA AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (SEE NOTE)
September 30, 1997 December 31, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $ 27,959 $ 38,934
INVESTMENT SECURITIES HELD-TO-MATURITY 139,174 173,145
(MARKET VALUE $139,364 AT 9/30/97
AND $173,373 AT 12/31/96)
INVESTMENT SECURITIES AVAILABLE-FOR-SALE 100,724 69,428
FEDERAL FUNDS SOLD AND OTHER
SHORT TERM INVESTMENTS -- 69
LOANS 628,656 607,069
LESS: RESERVE FOR POSSIBLE LOAN LOSSES (10,391) (9,801)
---------- ----------
NET LOANS 618,265 597,268
OTHER ASSETS 46,130 33,615
---------- ----------
TOTAL ASSETS $ 932,252 $ 912,459
========== ==========
LIABILITIES
DEMAND DEPOSITS, NON INTEREST BEARING $ 121,391 $ 122,087
DEMAND DEPOSITS, INTEREST BEARING 146,268 138,953
SAVINGS DEPOSITS 124,790 125,483
TIME DEPOSITS 355,660 347,245
---------- ----------
TOTAL DEPOSITS 748,109 733,768
SHORT-TERM BORROWINGS 57,768 60,716
OTHER LIABILITIES 14,127 13,633
LONG-TERM DEBT 9,075 7,075
---------- ----------
TOTAL LIABILITIES 829,079 815,192
SHAREHOLDERS' EQUITY
COMMON STOCK 19,636 19,636
ADDITIONAL PAID-IN CAPITAL 34,544 34,544
RETAINED EARNINGS 51,446 44,260
NET UNREALIZED SECURITIES GAINS 263 18
TREASURY STOCK (2,716) (1,191)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 103,173 97,267
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 932,252 $ 912,459
========== ==========
</TABLE>
NOTE: THE CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31,1996 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.
1
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPT. 30, ENDED SEPT. 30,
--------------- ---------------
1997 1996 1997 1996
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS
TAXABLE INTEREST AND FEES ON LOANS $13,190 $12,594 $38,812 $37,340
EXEMPT FROM FEDERAL INCOME TAXES 520 476 1,509 1,461
------- ------- ------- -------
TOTAL INTEREST AND FEES ON LOANS 13,710 13,070 40,321 38,801
INTEREST AND DIVIDENDS ON
INVESTMENT SECURITIES 3,671 3,765 11,110 10,714
OTHER INTEREST INCOME 111 14 174 182
------- ------- ------- -------
TOTAL INTEREST INCOME 17,492 16,849 51,605 49,697
------- ------- ------- -------
INTEREST EXPENSE
INTEREST ON DEPOSITS 6,726 6,440 19,691 19,119
OTHER INTEREST EXPENSE 575 565 1,669 1,512
------- ------- ------- -------
TOTAL INTEREST EXPENSE 7,301 7,005 21,360 20,631
------- ------- ------- -------
NET INTEREST INCOME 10,191 9,844 30,245 29,066
PROVISION FOR LOAN LOSSES 315 315 895 845
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 9,876 9,529 29,350 28,221
OTHER INCOME 2,075 1,450 5,693 4,569
GAINS ON SALES OF SECURITIES 41 2 99 12
------- ------- ------- -------
TOTAL OTHER INCOME 2,116 1,452 5,792 4,581
OTHER EXPENSES
SALARIES AND BENEFITS 3,852 3,503 11,359 10,546
OTHER EXPENSES 2,814 3,654 9,264 9,715
------- ------- ------- -------
TOTAL OTHER EXPENSE 6,666 7,157 20,623 20,261
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 5,326 3,824 14,519 12,541
APPLICABLE INCOME TAXES 1,653 936 4,550 3,622
------- ------- ------- -------
NET INCOME $ 3,673 $ 2,888 $ 9,969 $ 8,919
======= ======= ======= =======
PER COMMON SHARE DATA:
NET INCOME PER SHARE $ 0.95 $ 0.74 $ 2.58 $ 2.28
CASH DIVIDENDS DECLARED PER SHARE $ 0.25 $ 0.16 $ 0.71 $ 0.48
</TABLE>
2
<PAGE>
Univest Corporation of Pennsylvania and Consolidated Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the nine months ended,
(in thousands)
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,969 $ 8,919
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses in excess of net charge-offs 590 1,144
Depreciation of premises and equipment 1,782 1,654
Net discount accretion on investment securities (342) (445)
Deferred (tax benefit) income tax (5) (704)
Realized gains on investment securities (99) (12)
Realized gains on sales of mortgages (59) (15)
Decrease in net deferred loan fees (314) (187)
Increase in interest receivable and other assets (2,987) (1,545)
Increase (decrease) in accrued expenses and other liabilities 299 (1,204)
-------- --------
Net cash provided by operating activities 8,834 7,605
Cash flows from investing activities:
Proceeds from maturing time deposits -- 78
Proceeds from sales of securities available for sale 21,028 5,021
Proceeds from maturing securities held to maturity 61,748 21,228
Proceeds from maturing securities available for sale 7,624 3,340
Purchases of time deposits (1,321) --
Purchases of investment securities held to maturity (26,163) (29,622)
Purchases of investment securities available for sale (59,424) (17,115)
Premium paid to purchase Bank Owned Life Insurance (10,000) --
Net decrease in federal funds sold and other short-term investments 69 11,412
Proceeds from sales of mortgages 5,071 8,393
Net increase in loans (26,285) (23,298)
Capital expenditures (1,310) (2,056)
-------- --------
Net cash used in investing activities (28,963) (22,619)
Cash flows from financing activities:
Net increase in deposits 14,341 2,606
Net (decrease) increase in short-term borrowings (2,948) 15,279
Proceeds from long-term debt 2,000 7,000
Purchases of treasury stock (2,246) (591)
Treasury stock issued under dividend reinvestment and
employee stock purchase plans 625 --
Proceeds from exercise of stock options 59 11
Cash dividends (2,677) (2,462)
Repayments of long-term debt -- (4,010)
-------- --------
Net cash provided by financing activities 9,154 17,833
Net (decrease) increase in cash and due from banks (10,975) 2,819
Cash and due from banks at beginning of period 38,934 30,901
-------- --------
Cash and due from banks at end of period $ 27,959 $ 33,720
======== ========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 21,646 $ 20,579
Income taxes $ 4,375 $ 4,150
</TABLE>
3
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Financial Information
The accompanying condensed consolidated financial statements include the
accounts of Univest Corporation of Pennsylvania (Univest) and its wholly owned
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. Operating results for the nine-month period ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996, which has been filed with the
Securities and Exchange Commission.
2. Per Share Data
The following weighted average shares were used for the computation of earnings
per share:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Sept. 30, Ended Sept. 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Weighted Average Shares 3,861,047.4 3,907,484.7 3,871,418.2 3,914,927.2
</TABLE>
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Corporation will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of primary earnings per share and fully diluted earnings
per share for these quarters is not expected to be material.
4
<PAGE>
Item 2.
Management's Discussion and Analysis
------------------------------------
of Financial Condition and
--------------------------
Results of Operations
---------------------
Net Income
- ----------
Net income for the three months ended September 30, 1997 increased
27.6% or $0.8 million from $2.9 million for the three months ended September 30,
1996 to $3.7 million for the three months ended September 30, 1997. The increase
was due to higher net interest income, greater fee income and a decrease in
other expenses. The 1996 one-time SAIF assessment accounts for the 3rd quarter
1997 other expense reduction which was then, offset by an increase in the
provision for income taxes. Net income also increased $1.1 million or 12.4% to
$10.0 million for the nine months ended September 30, 1997 as compared to $8.9
million for the nine months ended September 30, 1996. This increase for the nine
month period was also improved by net interest income and fee income as noted
for the 1997 3rd quarter offset by increased operating expenses and the
provision for income taxes.
Net Interest Income
- -------------------
Interest and fees on loans increased $0.6 million from $13.1 million
for the three months ended September 30, 1996 to $13.7 million for the three
months ended September 30, 1997. For the nine months ended September 30, 1997,
interest and fees on loans increased $1.5 million from $38.8 million at
September 30, 1996 to $40.3 million at September 30, 1997. The increase in both
periods was due to greater loan volume.
Interest on investment securities decreased $0.1 million from $3.8
million for the three month period ended September 30, 1996 to $3.7 million for
the three month period ended September 30, 1997. This decrease resulted from
lower average investment security volume. For the nine months ended September
30, 1997, interest on investments grew by $0.4 million from $10.7 million for
the nine months ended September 30, 1996 to $11.1 million for the same period in
1997. The increase is attributed to higher average volume for the period.
Interest expense went from $7.0 million for the three months ended
September 30, 1996 to $7.3 million for the three months ended September 30,
1997, an increase of $0.3 million. Interest expense grew $0.8 million from $20.6
million for the nine months ended September 30, 1996 to $21.4 million for the
nine months ended September 30, 1997. This higher cost for both periods is
attributed more to volume than rate.
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 earnings assets
exceeds interest paid on interest bearing liabilities. The amount of net
interest income is affected by changes in interest
5
<PAGE>
rates, account balances or volume, and the mix of earning assets and interest
bearing liabilities. Nine months ended September 30, 1997 shows net interest
income of $30.2 million which is a $1.1 million increase over the $29.1 million
recorded for the nine months ended September 30, 1996. Improvement to the net
interest income was generated more by volume than rate because the net interest
spread for the nine months ended September 30, 1997 decreased by six basis
points while the net interest margin decreased by two basis points for the same
comparative period.
The following demonstrates the aforementioned effects:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
9/30/97 9/30/96
------- -------
AVG. BALANCE RATE AVG. BALANCE RATE
----------------- -----------------
<S> <C> <C> <C> <C>
Interest Earnings Assets $867,020 7.94% $830,533 7.98%
Interest Bearing Liabilities 691,647 4.12% 671,433 4.10%
Net Interest Income 30,245 29,066
Net Interest Spread 3.82% 3.88%
Net Interest Margin 4.65% 4.67%
</TABLE>
The Corporation is permitted to use interest-rate swap agreements. A
goal of the Corporation would be to convert a portion of its floating rate
commercial loans to a fixed basis, thus reducing the impact of interest changes
on future income. In these swaps, the Corporation agrees to exchange, at
specified intervals, the difference between fixed and floating-interest rates
calculated on an agreed upon notional principal amount. Because a large portion
of the Corporation's interest-earning assets tend to be short-term floating rate
instruments while the Corporation's interest-bearing liabilities tend to be
longer-term fixed rate instruments, interest rate swaps in which the Corporation
pays a floating rate and receives a fixed rate are used to reduce the impact of
changes in interest rates on the Corporation's net interest income.
During 1997, the Corporation entered into $30.0 million of "Pay
Floating, Receive Fixed" swaps. The net payable or receivable from interest rate
swap agreements is accrued as an adjustment to interest income. At September 30,
1996 and December 31, 1996, $30.0 million in notional amount interest rate swaps
were outstanding. These swaps are also "Pay Floating, Receive Fixed." During
third quarter 1997, one swap contract with a notional principal amount of $10.0
million expired. At September 30, 1997 $50.0 million in notional amount interest
rate swaps were outstanding. The remaining contracts entered into by the
Corporation expire as follows: $20.0 million in notional principal amount in
March 1998, $20.0 million in notional principal amount in first quarter 1999,
and $10.0 million in third quarter 1999. The impact of interest rate swaps on
net interest
6
<PAGE>
income for the quarter ended September 30, 1997 was a positive $14 thousand as
compared to a positive $19 thousand for the quarter ended September 30, 1996.
For the nine months ended September 30, 1997 the impact was a positive $58
thousand as compared to a positive $50 thousand for the nine months ended
September 30, 1996. The Corporation's current credit exposure on swaps is
limited to the value of interest-rate swaps that have become favorable to the
Corporation. As of September 30, 1997 the market value of interest-rate swaps in
a favorable position was $52 thousand, while the market value of interest rate
swaps in an unfavorable position totaled $15 thousand. Credit risk also exists
when the counterparty to a derivative contract with an unrealized gain fails to
perform according to the terms of the agreement.
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 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 adequacy of allowance for loan losses is determined through a
periodic evaluation 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 FASB Statement 114. Any of the
above criteria may cause the provision to fluctuate. For the three and nine
months ended September 30, 1997, the provisions for loan losses were $0.3
million and $0.9 million respectively. For the three and nine months ended
September 30, 1996 the provision was $0.3 million and $0.8 million,
respectively.
At September 30, 1997, the recorded investment in loans that are
considered to be impaired under FASB Statement 114 was $2.3 million (all of
which were on a non-accrual basis); the related allowance for credit losses for
those loans was $0.4 million. For the three and nine months ended September 30,
1997 and 1996, the Corporation did not recognize any interest income on those
impaired loans. At September 30, 1996, the recorded investment in loans
considered to be impaired was $3.0 million and the related allowance for credit
losses for these loans was $0.9 million.
Generally, a loan (including a loan impaired under FASB Statement 114)
is classified as non-accrual 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 non-accrual
7
<PAGE>
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 non-accrual loans 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 period of time and the ultimate
collectibility of the total contractual principal and interest is no longer in
doubt. Total cash basis, non-accrual and restructured loans at September 30,
1997, were $4.7 million and consist mainly of real estate related commercial
loans. Cash basis, non-accrual and restructured loans September 30, 1996 totaled
$4.1 million. For the quarter ended September 30, 1997, non-accrual loans
resulted in lost interest income of $48 thousand as compared to $55 thousand for
the quarter ended September 30, 1996. For the nine months ended September 30,
1997 lost interest totaled $216 thousand as compared to $200 thousand for the
same period in 1996. At September 30, 1997, the Corporation had no 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,
or specific industry problems.
At September 30, 1997, and December 31, 1996, the reserve for loan
losses remained constant at 1.6% of total loans.
The Corporation at September 30, 1997, has a total of $149 thousand of
Other Real Estate Owned ("OREO") consisting of two single family residences.
This amount is recorded in "Other Assets" at lower of cost or fair market value
in the accompanying consolidated balance sheets.
Other Income
- ------------
Other income which is non-interest related consists mainly of general
fee income, trust department fee income, and other miscellaneous non-recurring
types of income. Other income increased $0.6 million or 40.0% from $1.5 million
for the three months ended September 30, 1996 to $2.1 million for the three
months ended September 30, 1997. Other income for the nine months ended
September 30, 1997 increased $1.1 million or 23.9% from $4.6 million for the
nine months ended September 30, 1996 to $5.7 million for the nine months ended
September 30, 1997. Gains in both periods are attributed to increased trust
department commissions resulting from higher market value of assets under
management and growth to the number of trust accounts, along with greater fee
income, and for the three months ended September 30, 1997, earnings from the
purchase of Bank Owned Life Insurance. Other income for the nine month period
ended September 30, 1997 also includes a gain on the sale of a closed branch
office building and a gain on the sale of a piece of commercial real estate
which was being held in OREO. These gains totaled $230 thousand.
8
<PAGE>
During the quarter ended September 30, 1997, securities totaling
approximately $11 million were sold or matured resulting in a net gain of $41
thousand. The proceeds of sales were used mainly to fund the Corporation's
purchase of Bank Owned Life Insurance. Gain on sales of securities for the three
months ended September 30, 1996 totaled $2 thousand. For the nine months ended
September 30, 1997, gains on sale of securities totaled $99 thousand as compared
to $12 thousand for the nine months ended September 30, 1996.
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 net
of taxes 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 September 30, 1997, is $100.7 million as compared to $69.4 million at
December 31, 1996. At September 30, 1997, a net unrealized gain of $263 thousand
was recorded, compared to a net unrealized gain of $18 thousand at December 31,
1996.
Other Expenses
- --------------
Other expenses decreased from $7.2 million for the quarter ended
September 30, 1996 to $6.7 million for the quarter ended September 30, 1997 due
primarily to the one-time SAIF assessment in 1996 of $0.8 million. For the nine
months ended September 30, 1997 other expenses increased 1.5% or $0.3 million
from $20.3 million at September 30, 1996 to $20.6 million at September 30, 1997.
Increases occurred in both periods due to salary and staff increases and
occupancy costs associated with opening four additional offices since September
1996. Other expenses such as marketing, consultant fees, telephone costs, and
ATM fees also increased. This growth in other expenses, however, was offset in
both the three and nine month periods by the decrease of $0.8 million
representing the one-time SAIF special assessment paid in 1996.
Income Tax Expense
- ------------------
An income tax provision of $1.7 million was recorded for the quarter
ended September 30, 1997 and $1.0 million for the quarter ended September 30,
1996. The effective tax rates were 31.0% and 24.5% respectively. For the nine
months ended September 30, 1997 the provision was $4.6 million as compared to
$3.6 million for the nine months ended September 30, 1996 with effective tax
rates of 31.3% and 28.9% respectively. The effective tax rates for the three and
nine months ended September 30, 1996 reflects the recognition of $0.2 million of
tax benefits related to tax refunds received by Pennview Savings Bank. The
effective tax rate for all periods is less than the statutory rate of 35% due to
tax-free income.
9
<PAGE>
Financial Condition
- -------------------
Total assets grew $19.8 million or 2.2% from $912.5 million at December
31, 1996 to $932.3 million at September 30, 1997. Cash and due from banks
decreased $11.0 million while loans increased $21.6 million. Investments
decreased by $3.0 million and other assets increased $12.0 million. This change
was mainly due to the purchase of $10.0 million of bank-owned life insurance.
Total liabilities grew $13.9 million or 1.7% from $815.2 million at
December 31, 1996 to $829.1 million at September 30, 1997. Deposits increased
$14.3 million to $748.1 million at September 30, 1997 from $733.8 million at
December 31, 1996.
Shareholders' equity grew to $103.2 million at September 30, 1997 from
$97.3 million at December 31, 1996, an increase of $5.9 million or 6.17%. Book
value per share improved from $25.01 at December 31, 1996 to $26.78 at September
30, 1997, an increase of $1.77 per share or 7.1%.
Other
- -----
On July 31, 1997, Union National Bank entered into an agreement with
First Union National Bank for the purchase of its East Greenville, Montgomery
County, branch office.
Acquisition of the branch office will increase Union National's
deposits by approximately $15 million and certain loans by approximately one
million. Union National's scheduled date for assuming complete operations of the
branch is October 27, 1997.
The year 2000 date change issue that impacts almost every area of the
Corporation, is being actively worked on by a committee appointed by senior
management. A plan has been developed, software inventoried, hardware
identified, contracts and insurance issues are under review, and all business
units are involved in the process. Some testing of a few minor systems has been
completed. Testing will continue throughout 1998 with core applications.
Preliminary cost estimates have not been finalized, but remediation efforts will
be expensed.
Recent Accounting Pronouncements
- --------------------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Corporation will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of primary earnings per share and fully diluted earnings
per share for these quarters is not expected to be material.
10
<PAGE>
The FASB has issued Statement No. 129, "Disclosure of
Information about Capital Structure," which is applicable to all companies.
Statement No. 129 consolidates the existing guidance in authoritative literature
relating to a company's capital structure. The Statement is effective for
financial statements for periods ending after December 15, 1997. It is believed
that the adoption of this standard will have any impact on the Corporation's
financial statements.
In June 1997, the FASB issued Statement No. 130, "Reporting
Comprehensive Income," and Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information." Both Statements become effective for fiscal
periods beginning after December 15, 1997, with early adoption permitted. These
statements are being evaluated as to the effects they will have on the financial
statements and disclosures. The Statements are expected to have no effect on the
Corporation's results of operations, financial position, capital resources, or
liquidity.
11
<PAGE>
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
Exhibit 27 - Financial Data Schedule
No reports on Form 8-K were filed during the quarter for which this
report is filed.
12
<PAGE>
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
------------------- -------------------------------------------
Merrill S. Moyer, Chairman
Date
------------------- -------------------------------------------
Wallace H. Bieler, Executive Vice President
and Chief Financial Officer
13
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