SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 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 ----------
incorporation of organization) (IRS Employer Identification No.)
14 North Main Street
Souderton, Pennsylvania 18964
----------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 721-2400
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $5 par value 7,080,397
- -------------------------- ---------
(Title of Class) (Number of shares outstanding
at 2/29/00)
The approximate aggregate market value of voting stock held by non
affiliates of the registrant is $138,313,342 as of February 29, 2000.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
form 10-K. |_|
Parts I and Part III incorporate information by reference from the proxy
statement for the annual meeting of shareholders on April 11, 2000. Parts I, II,
and IV incorporate information by reference from the annual report to
shareholders for the year ended December 31, 1999.
PAGE 1 OF 24
<PAGE>
PART I
Item 1. Business
General
Univest Corporation of Pennsylvania ("Univest") is a Pennsylvania
corporation organized in 1973 and registered as a bank holding company pursuant
to the Bank Holding Company Act of 1956. It owns all of the capital stock of
Union National Bank and Trust Company ("Union National Bank"), Pennview Savings
Bank, Univest Realty Corporation, Univest Leasing Corporation, Univest Delaware,
Inc., Univest Financial Planning Corporation, Univest Insurance Company, and
Univest Electronic Services Corporation.
Union National Bank is engaged in the general commercial banking business
and provides a full range of banking services and trust services to its
customers. Pennview Savings Bank is engaged in attracting deposits from general
public and investing such deposits primarily in loans secured by residential
properties and consumer loans. Univest Financial Services, a wholly owned
subsidiary of Pennview Savings Bank, acquired Fin-Plan Group on January 29,
1999. This will allow Univest Corporation to provide a broader range of
financial services including financial planning, investment management,
insurance products and brokerage services. Delview, Inc. a wholly owned
subsidiary of Pennview, is a passive investment holding company operating in
Delaware. Univest Realty Corporation was established to obtain, hold and operate
properties for the holding company and its subsidiaries. Univest Delaware, Inc.
is a passive investment holding company operating in Delaware. Univest Leasing
Corporation is inactive. Univest Insurance Company offers credit-related
reinsurance plans. Univest Electronic Services Corporation was established to
provide data processing services to Union National Bank in Souderton and other
subsidiaries of Univest Corporation of Pennsylvania.
Union National Bank and Trust Company, with its head office in Souderton,
Montgomery County, serves the area through twenty-seven (27) banking offices,
two off-premises automated teller machines, one work site office and provides
banking and trust services to the residents and employees of ten retirement
homes. Sixteen banking offices are in Montgomery County and eleven banking
offices are in Bucks County. A work site office is located in Montgomery County.
Four off-premises automated teller machines are located in Montgomery County and
one is located in Bucks County.
Pennview Savings Bank conducts operations through five (5) full-service
offices located in Souderton, Hatfield, Franconia, Silverdale and
Montgomeryville, Pennsylvania and provides banking services to the residents and
employees of two retirement homes.
As of January 31, 2000, Univest and its subsidiaries employed four hundred
and fifty-five (455) persons.
Competition
Univest's service areas are characterized by intense competition for
banking business among commercial banks, savings and loan associations, savings
banks and other financial institutions. Each of the Corporation's subsidiary
banks actively compete with such banks and financial institutions for local
retail and commercial accounts, in Bucks and Montgomery Counties, as well as
other financial institutions outside their primary service area.
In competing with other banks, savings and loan associations, and other
financial institutions, Union National Bank and Pennview Savings Bank seek to
provide personalized services through management's knowledge and awareness of
their service area, customers and borrowers.
Other competitors, including credit unions, consumer finance companies,
insurance companies and mutual funds, compete with certain lending and deposit
gathering services offered by Union National Bank, Pennview Savings Bank and
Fin-Plan Group.
2
<PAGE>
Supervision and Regulation
Union National Bank is subject to supervision and is regularly examined by
the Office of Comptroller of the Currency. Also, Union National Bank is subject
to examination by the Federal Deposit Insurance Corporation and by the Federal
Reserve System. Pennview Savings Bank is regulated by the Federal Deposit
Insurance Corporation and by the Department of Banking of the Commonwealth of
Pennsylvania.
Univest is subject to the provisions of the Bank Holding Company Act of
1956, as amended, and is registered pursuant to its provisions. The Act
prohibits the acquisition by a bank holding company of a direct or indirect
ownership of more than five percent of the voting shares of any bank within the
United States without prior approval of the Board of Governors of the Federal
Reserve System, and also prohibits the granting of such approval in respect to
any bank within the United States located outside of the state where the bank
holding company's principal operations are conducted, unless the acquisition is
specifically authorized by the statutes of the state in which the bank is
located. With certain exceptions, a bank holding company is prohibited from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank, and from engaging directly
or indirectly in businesses unrelated to the business of banking, or managing,
or controlling banks. Under the Bank Holding Company Act Amendments of 1970,
which became effective on December 3, 1970, the Federal Reserve Board may
approve the acquisition by bank holding companies of non bank subsidiaries to
engage in activities that are closely related to banking and are in the public
interest. The amendments include a provision which prohibits banks, bank holding
companies and subsidiaries from engaging in tie-in arrangements. Bank tie-ins
involving a loan, discount, deposit, or trust service are specifically exempted,
and the Federal Reserve Board is authorized to make exceptions by regulations.
As a bank holding company, Univest is subject to the reporting
requirements of the Board of Governors of the Federal Reserve System, and
Univest, together with its subsidiaries, is subject to examination by the Board.
The Federal Reserve Act limits the amount of credit which a member bank may
extend to its affiliates, and the amount of its funds which it may invest in or
lend on the collateral of the securities of its affiliates. Under the Federal
Deposit Insurance Act, insured banks are subject to the same limitations.
FDICIA
In December 1991, the Federal Deposit Insurance Corporation Improvement
Act ("FDICIA") was enacted, which substantially revised the bank regulatory and
funding provisions of the Federal Deposit Insurance Act and made revisions to
several other federal banking statutes.
Among other things, FDICIA requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements in order to minimize losses to the FDIC.
FDICIA establishes five capital tiers: "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", and
"critically undercapitalized" and imposes significant restrictions on the
operations of a bank that is not at least adequately capitalized. A depository
institution's capital tier will depend upon where its capital levels are in
relation to various relevant capital measures, which will include a risk-based
capital measure, a leverage ratio capital measure and certain other factors.
Under the requirements, Univest has Tier I capital ratios of 12.2% and 12.3%,
and total risk-based capital ratios of 13.5% and 13.4% at December 31, 1999 and
1998, respectively. These ratios place Univest in the "well-capitalized"
category under regulatory standards.
Regulations promulgated under FDICIA also require that an institution
monitor its capital levels closely and notify its appropriate federal banking
regulators within 15 days of any material events that affect the capital
position of the institution.
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, a
maximum ratio of classified assets to capital, minimum earnings sufficient to
absorb losses, a minimum ratio of market value to book value for publicly traded
shares (if feasible) and such other standards as the agency deems appropriate.
3
<PAGE>
FDICIA also contains a variety of other provisions that affect the
operations of the Corporation, including new reporting requirements, regulatory
standards for real estate lending, "truth in savings" provisions, certain
restrictions on investments and activities of state-chartered insured banks and
their subsidiaries and limitations on credit exposure between banks.
Finally, FDICIA limits the discretion of the FDIC with respect to deposit
insurance coverage by requiring that, except in very limited circumstances, the
FDIC's course of action in resolving a problem bank must constitute the "least
costly resolution" for the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"), as the case may be. The FDIC has
interpreted this standard as requiring it not to protect deposits exceeding the
$100,000 insurance limit in more situations than was previously the case. In
addition, FDICIA prohibits payments by the FDIC on uninsured deposits in foreign
branches of U.S. banks and will severely limit the "too big to fail" doctrine
under which the FDIC formerly protected deposits exceeding the $100,000
insurance limit in certain failed banking institutions.
Implementation of FDICIA has not had a material impact on the business or
operations of the Corporation.
Credit and Monetary Policies
Union National Bank is affected by the fiscal and monetary policies of the
federal government and its agencies, including the Federal Reserve System. An
important function of the policies is to curb inflation and control recessions
through control of the supply of money and credit. The Federal Reserve System
uses its powers to regulate reserve requirements of member banks, the discount
rate on member-bank borrowings, interest rates on time and savings deposits of
member banks, and to conduct open-market operations in United States Government
securities to exercise control over the supply of money and credit. The policies
have a direct effect on the amount of bank loans and deposits and on the
interest rates charged on loans and paid on deposits, with the result that the
policies have a material effect on bank earnings. Future policies of the Federal
Reserve Bank System and other authorities cannot be predicted, nor can their
effect on future bank earnings be predicted.
Pennview Savings Bank and Union National Bank are members of the Federal
Home Loan Bank System which consists of 12 regional Federal Home Loan Banks,
with each subject to supervision and regulation by the newly created Federal
Housing Finance Board. The Federal Home Loan Banks provide a central credit
facility primarily for member institutions. The Banks, as members of the Federal
Home Loan Bank of Pittsburgh, are required to acquire and hold shares of capital
stock in that Federal Home Loan Bank in an amount equal to at least 1% of the
aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or 5%
of its advances (borrowings) from the Federal Home Loan Bank of Pittsburgh,
whichever is greater.
Interstate Acquisitions
The Interstate Banking Act allows federal regulators to approve mergers
between adequately capitalized banks from different states regardless of whether
the transaction is prohibited under any state law, unless one of the banks' home
states has enacted a law expressly prohibiting out-of-state mergers before June
1997. This act also allows a state to permit out-of-state banks to establish and
operate new branches in this state. The Commonwealth of Pennsylvania has "opted
in" to this interstate merger provision. Therefore, the prior requirement that
interstate acquisitions would only be permitted when another state had
"reciprocal" legislation that allowed acquisitions by Pennsylvania-based bank
holding companies has been eliminated. The new Pennsylvania legislation,
however, retained the requirement that an acquisition of a Pennsylvania
institution by a Pennsylvania or a non-Pennsylvania-based holding company must
be approved by the Banking Department.
Statistical Disclosure
Univest was incorporated under Pennsylvania law in 1973 for the purpose of
acquiring the stock of Union National Bank and subsequently to engage in other
business activities permitted under the Bank Holding Company
4
<PAGE>
Act. On September 28, 1973, pursuant to an exchange offer, Univest acquired the
outstanding stock of Union National Bank and on August 1, 1990 acquired the
stock of Pennview Savings Bank. Two new subsidiaries were incorporated on
September 8, 1998 in the State of Delaware. Univest Delaware, Inc. and Delview,
Inc. were formed as passive investment companies. Univest Delaware, Inc. is
wholly owned by the Corporation and Delview, Inc. is wholly owned by Pennview.
Univest Financial Services Corporation, wholly owned by Pennview, acquired
Fin-Plan Group on January 29, 1999. This will allow Univest Corporation to
provide a broader range of financial services. The following financial data
appearing on pages 6 through 17 reflects consolidated information. Where
averages are reported, daily information has been used for all subsidiaries.
TABLE I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
<TABLE>
<CAPTION>
1999 1999/1998 1998
Average Income/ Avg. Volume Rate Average Income/ Avg.
ASSETS: Balance Expense Rate Change Change Total Balance Expense Rate
------- ------- ---- -------- -------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 34,496 $ 31,321
Time deposits with other banks 4,415 $ 227 5.1 $ (343) $ (56) $ (399) 11,273 $ 626 5.6
U.S. Government obligations 166,343 9,577 5.8 (1,829) (196) (2,025) 196,033 11,602 5.9
Oblig. of states & political sub. 21,684 947 4.4 647 (7) 640 6,858 307 4.5
Other securities 122,207 7,573 6.2 3,380 (135) 3,245 67,637 4,328 6.4
Trading Account 548 19 3.5 19 -- 19 -- -- --
Federal Reserve bank stock 761 46 6.0 -- -- -- 761 46 6.0
Federal funds sold and other
short-term investments 9,735 474 4.9 (406) (108) (514) 18,057 988 5.5
----- --- ------ ---
Total investments 321,278 18,636 5.8 289,346 17,271 6.0
------- ------ ------- ------
Commercial loans 184,019 15,870 8.6 2,412 (944) 1,468 157,363 14,402 9.2
Mortgage loans 337,153 26,547 7.9 (603) (1,729) (2,332) 345,781 28,879 8.4
Installment loans 104,348 8,557 8.2 1,467 (260) 1,207 86,505 7,350 8.5
Home equity loans 13,505 1,362 10.1 (114) (73) (187) 14,614 1,549 10.6
Municipal loans 46,619 2,645 5.7 262 -- 262 41,456 2,383 5.7
------ ----- ------ -----
Gross loans 685,644 54,981 8.0 645,719 54,563 8.4
------ ------
Less: reserve for loan losses (11,096) (10,439)
------- -------
Net loans 674,548 635,280
------- -------
Property, net 15,684 16,237
Other assets 38,901 32,711
------ ------
Total assets $ 1,089,322 $ 1,016,168
----------- -----------
<CAPTION>
1998/1997 1997
Rate Average Income/ Avg.
ASSETS: Change Total Balance Expense Rate
-------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Cash and due from banks $29,244
Time deposits with other banks $ 2 $ 543 1,522 $ 83 5.5
U.S. Government obligations (399) (672) 199,733 12,274 6.1
Oblig. of states & political sub. (5) 88 4,728 219 4.6
Other securities (37) 1,956 36,547 2,372 6.5
Trading Account -- -- 0 0 -
Federal Reserve bank stock -- -- 761 46 6.0
Federal funds sold and other
short-term investments 8 765 4,204 223 5.3
----- ---
Total investments 245,973 15,134 6.2
------- ------
Commercial loans -- 1,770 137,520 12,632 9.2
Mortgage loans (1,444) (2,733) 361,089 31,612 8.8
Installment loans -- 977 75,395 6,373 8.5
Home equity loans (31) (98) 15,300 1,647 10.8
Municipal loans 37 324 36,545 2,059 5.6
-----
Gross loans 625,849 54,323 8.7
------
Less: reserve for loan losses (10,159)
-------
Net loans 615,690
-------
Property, net 16,761
Other assets 20,047
------
Total assets $ 929,237
---------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
1999 1999/1998 1998
Average Income/ Avg. Volume Rate Average Income/ Avg.
LIABILITIES: Balance Expense Rate Change Change Total Balance Expense Rate
------- ------- ---- -------- -------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits $ 150,455 $ 132,132
Interest checking deposits 86,583 $ 902 1.0 $ 123 $ (322) $ (199) 80,524 $ 1,101 1.4
Money market savings 158,014 6,152 3.9 1,088 (258) 830 128,970 5,322 4.1
Regular savings 140,313 2,776 2.0 134 (528) (394) 132,012 3,170 2.4
Certificates of deposit 321,097 17,039 5.3 (254) (977) (1,231) 325,798 18,270 5.6
Time open & club accounts 29,253 1,351 4.6 (78) (123) (201) 30,800 1,552 5.0
Total time, int., and inv.
checking deposits 735,260 28,220 3.8 698,104 29,415 4.2
Total deposits 885,715 830,236
Federal funds purchased 3,515 191 5.4 178 (1) 177 234 14 6.0
Loans & securities sold under
agreement to repurchase 67,612 2,210 3.3 381 -- 381 56,181 1,829 3.3
Other borrowings 14,695 760 5.2 233 (30) 203 10,135 557 5.5
Subordinated notes 0 0 -- -- -- -- 0 0 0.0
-- -
Total borrowings 85,822 3,161 3.7 66,550 2,400 3.6
------ ----- ------ -----
Accrued expenses & other liab. 15,017 14,617
------ ------
Total liabilities 986,554 911,403
------- -------
SHAREHOLDERS' EQUITY:
- --------------------
Common stock 39,272 37,765
Capital surplus 14,908 19,696
Retained earnings 48,588 47,304
------ ------
Total shareholders' equity 102,768 104,765
------- -------
Total liabilities and share-
holders' equity $ 1,089,322 $ 1,016,168
------------ ------------
Weighted avg. yield on interest-earning assets 7.3 7.7
Weighted avg. rate paid on interest-bearing liab. 3.8 4.2
Net yield 4.2 4.3
<CAPTION>
1998/1997 1997
Volume Rate Average Income/ Avg.
LIABILITIES: Change Change Total Balance Expense Rate
-------- -------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 118,960
Interest checking deposits $ 36 $ 74 $ 110 73,521 $ 991 1.3
Money market savings 2,166 539 2,705 77,013 2,617 3.4
Regular savings 116 (129) (13) 128,546 3,183 2.5
Certificates of deposit 714 -- 714 312,517 17,556 5.6
Time open & club accounts (673) (44) (717) 44,447 2,269 5.1
Total time, int., and inv.
checking deposits 636,044 26,616 4.2
Total deposits 755,004
Federal funds purchased (200) 11 (189) 3,541 203 5.7
Loans & securities sold under
agreement to repurchase 221 -- 221 49,133 1,608 3.3
Other borrowings 81 (9) 72 8,592 485 5.6
Subordinated notes -- -- -- 0 0 0.0
Total borrowings 61,266 2,296 3.7
------ -----
Accrued expenses & other liab. 11,787
------
Total liabilities 828,057
-------
SHAREHOLDERS' EQUITY:
- --------------------
Common stock 19,636
Capital surplus 34,539
Retained earnings 47,005
------
Total shareholders' equity 101,180
-------
Total liabilities and share-
holders' equity $ 929,237
---------
Weighted avg. yield on
interest-earning assets 8.0
Weighted avg. rate paid
on interest-bearing liab. 4.1
Net yield 4.7
</TABLE>
6
<PAGE>
Note: (1) For rate calculation purposes, average loan categories include
unearned discount.
(2) Nonaccrual loans have been included in the average loan balances.
(3) Certain amounts have been reclassified to conform with the
current-year presentation.
(4) Included in interest income are loan fees of $683 for 1999, $1,106
for 1998 and $1,253 for 1997.
(5) Table I has not been tax equated.
* The change due to the volume/rate variance and average volume and percent
roundings have been allocated to volume.
7
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE II. INVESTMENT PORTFOLIO (BOOK VALUE)
(Thousands of Dollars)
<TABLE>
<CAPTION>
CARRYING AMOUNT OF INVESTMENT SECURITIES
December 31, December 31, December 31,
1999 (a) 1998 (a) 1997 (a)
-------- -------- --------
<S> <C> <C> <C>
U. S. Treasury, government corporations and agencies $150,096 $225,294 $195,048
State and political subdivisions 27,020 17,966 4,676
Mortgage-backed securities 111,516 74,233 53,996
Other 23,243 10,172 4,445
-------- -------- --------
Total $311,875 $327,665 $258,165
======== ======== ========
<CAPTION>
MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELD
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1999 1998 1998 1997 1997
Amount (a) Yield (b) Amount (a) Yield (b) Amount (a) Yield (b)
------------ ------------ ------------ ------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 Year or less $ 54,249 5.68% $ 93,671 5.78% $ 69,916 5.88%
1 Year - 5 Years 139,357 5.64% 158,938 5.64% 136,317 6.19%
5 Years - 10 Years 35,094 6.26% 20,781 6.33% 11,652 6.54%
After 10 Years 83,175 6.17% 54,275 6.24% 40,280 6.51%
-------- ---- -------- ---- -------- ----
Total $311,875 5.86% $327,665 5.82% $258,165 6.17%
======== ==== ======== ==== ======== ====
</TABLE>
Refer to Note 3 to the consolidated financial statements.
a. Held to maturity and available for sale portfolios are combined.
b. Weighted average yield is calculated by dividing income, which has not
been tax equated on tax-exempt obligations, within each maturity range by
outstanding amount of the related investment.
8
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE III. LOAN PORTFOLIO, PART A. TYPES OF LOANS
(Thousands of Dollars)
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real estate Loans
Construction and land development $ 33,632 $ 33,530 $ 30,951 $ 34,733 $ 54,840
Secured by 1-4 family residential properties 219,292 214,798 217,782 217,631 216,180
Other real estate loans 173,780 169,402 189,251 178,644 157,925
Commercial and industrial loans 212,656 171,699 138,812 124,788 120,692
Loans to individuals 72,658 64,306 53,500 47,466 40,648
All other loans 10,591 7,117 6,143 5,821 4,084
-------- -------- -------- -------- --------
Total loans $722,609 $660,852 $636,439 $609,083 $594,369
======== ======== ======== ======== ========
</TABLE>
9
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE III. LOAN PORTFOLIO, PART B. MATURITIES AND SENSITIVITY TO CHANGES IN
INTEREST RATES
(Thousands of Dollars)
The commercial mortgages and Industrial Development Authority mortgages
that are presently being written at both fixed and floating rates of interest
are written for a three (3) year term with a monthly payment based on a fifteen
(15) year amortization schedule. At each three-year anniversary date of the
mortgages, the interest rate is renegotiated and the term of the loan is
extended for an additional three years. At each three-year anniversary date of
the mortgages, the Bank also has the right to require payment in full. These are
included in the "Due in One to Five Years" category on issue. The borrower has
the right to prepay the loan at any time.
The residential mortgages are presently being written on a one (1) or
three (3) year rollover basis. The monthly payment on these mortgages is based
on a thirty (30) year amortization schedule, unless the borrower requests a
shorter payout period. These are included in the "Due in One to Five Years"
category on issue. Fixed rate residential mortgages are also being written for
terms of 15 and 30 years and are included in the "Due in over Five Years"
category.
<TABLE>
<CAPTION>
As of December 31, 1999 Due in One Due in One Due in Over
Year or Less to Five Years Five Years Total
------------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Real estate loans
Construction and land development $ 17,814 $ 11,834 $ 3,984 $ 33,632
Secured by 1-4 family residential properties 44,087 82,015 93,190 219,292
Other real estate loans 41,430 56,566 75,784 173,780
Commercial and industrial loans 159,719 36,389 16,548 212,656
Loans to individuals 26,859 41,480 4,319 72,658
All other loans 517 9,611 463 10,591
-------- -------- -------- --------
Total loans $290,426 $237,895 $194,288 $722,609
======== ======== ======== ========
Loans with a predetermined interest rate $111,950 $152,216 $184,548 $448,714
Loans with a floating or variable interest rate 178,476 85,679 9,740 273,895
-------- -------- -------- --------
$290,426 $237,895 $194,288 $722,609
======== ======== ======== ========
</TABLE>
10
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE III. LOAN PORTFOLIO, PART C. RISK ELEMENTS
(Thousands of Dollars)
Nonaccrual, Past-Due and Restructured Loans and Other Assets
Performance of the entire loan portfolio is reviewed on a regular basis by
bank management and loan officers. A number of factors regarding the borrower,
such as overall financial strength, collateral values, and repayment ability,
are considered in deciding on what actions should be taken when determining the
collectibility of interest for accrual purposes.
Potential Problem Loans
When collectibility of interest and/or principal on a particular loan is
questionable, the loan is placed on nonaccrual status. If, at the time a
decision is made to cease accruing interest, it is determined that the
collection of previously accrued but unpaid interest is uncertain, a stipulated
amount is charged against current income. Conversly, if a loan on nonaccrual
status is paid in full, including interest, a credit is made to current income.
The total of nonaccruing and restructured loans in 1999 was $2,323. There was no
interest income recognized on these loans. If nonaccrual loans had been
performing in accordance with their contractual terms, additional income of $246
would have been recorded in 1999. In management's evaluation of the loan
portfolio risks, any significant future increases in nonperforming loans are
dependent to a large extent on the economic environment, or specific industry
problems.
Loan Concentrations
At December 31, 1999, there were no concentrations of loans exceeding 10%
of total loans other than disclosed in Table III, Part A.
Other Assets
At December 31, 1999, $45 in Other Real Estate Owned was classified as
nonperforming. This amount represents all Other Real Estate Owned as of December
31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
Principal Principal Principal Principal Principal
Balance Balance Balance Balance Balance
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Nonaccruing loans $2,285 $3,424 $3,136 $4,671 $5,855
====== ====== ====== ====== ======
Accruing loans 90 days or more past due:
Real estate loans
Construction and land development -- -- -- -- --
Secured by 1-4 family dwellings 304 705 308 373 234
Other real estate -- 14 36 12 93
Commercial and industrial loans 63 -- 21 19 --
Loans to individuals 214 204 159 180 174
All other loans -- -- -- -- --
------ ------ ------ ------ ------
Total loans, 90 days or more past due 581 923 524 584 501
====== ====== ====== ====== ======
Restructured loans, not included above 38 125 206 281 352
====== ====== ====== ====== ======
</TABLE>
11
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE IV. SUMMARY OF LOAN LOSS EXPERIENCE
(Thousands of Dollars)
Management's methodology to determine the adequacy of and the provisions
to the reserve considers specific credit reviews, past loan loss experience,
current economic conditions and trends, and the volume, growth, and composition
of the loan portfolio.
12
<PAGE>
Reserve for possible loan losses is determined through a quarterly
evaluation of reserve adequacy which takes into consideration the growth of the
loan portfolio, the status of past-due loans, current economic conditions,
various types of lending activity, policies, real estate and other loan
commitments, and significant changes in the charge-off activity. Loans on the
"watch list" and all non-accrual loans are evaluated individually. All other
loans are evaluated as pools. Based on historical loss experience, loss factors
are determined giving consideration to the areas noted in the first paragraph
and applied to the pooled loan categories to develop the general or allocated
portion of reserve. Loans are also reviewed for impairment based on discounted
cash flows using the loans' initial effective interest rate or the fair value of
the collateral for certain collateral-dependent loans as provided under SFAS No.
114. Management also reviews the activity within the allowance to determine what
actions, if any, should be taken to address differences between estimated and
actual losses. Any of the above factors may cause the provision to fluctuate.
The methodology for establishing the loan loss reserve and provision has not
changed in recent years.
The reserve for possible loan losses is made up of the allocated or
general reserve and the unallocated portion, which is the remainder after
necessary allocations are made. The following table summarizes the two
categories for the periods indicated.
December 31,
1999 1998 1997
---- ---- ----
Allocated $ 8,786 $ 6,993 $ 4,749
Unallocated 2,437 3,545 5,521
------- ------- -------
Total $11,223 $10,538 $10,270
======= ======= =======
The increase of $1.8 million in the allocated portion of the reserve for
the year ended December 31, 1999 was due to a combination of portfolio growth
and higher estimation factors for several portfolio segments. The volume growth
occurred predominantly in the commercial and consumer loan portfolios, up 11.3%
and 12.4% respectively. Increases in loss factors applied to specific loan pools
effected the following portfolios. Higher loss experience from small business
loans, mostly unsecured commercial and industrial credits, caused the commercial
uncriticized factor to increase from 1.11% at 12/31/98 to 1.28% at 12/31/99,
continuing a trend from .15% at 12/31/97. An above average number of properties
categorized as OREO at some point during 1999, influenced the qualitative
component of the residential real estate factor, which rose from .28% to .77%.
The loss factor applied to industry concentrations was raised from .60% to .80%
to account for changes in loan structure practices for tract development
financing and to account for the decision to allow higher credit exposure to the
commercial investment property industry. The increase in allocated reserves
caused a related decline in the unallocated portion of the reserve. The dollar
difference between the allocated increase of $1.8 million and the unallocated
decrease of $1.1 million can be attributed to recoveries added back to the
reserve throughout 1999, largely the culmination of long standing action plans
to recoup losses from older commercial charge-offs.
The increase of $2.2 million in the allocated portion of the reserve for
the year ended December 31, 1998 was due mainly to a $2.0 million increase in
the uncriticized portion of the allowance related to the commercial loan pool.
This increase was caused by a higher volume of losses among small business
credits, which migrate more quickly from pass to loss than larger business
credit charge-offs. The historical loss factor for this segment of the
commercial loan portfolio increased from 0.15% at December 31, 1997 to 1.11% at
December 31, 1998. Volume also increased from $142 million at December 31, 1997
to $174 million at December 31, 1998. Industry concentrations increased in
volume by $32 million from $56 million at December 31, 1997 to $88 million at
December 31, 1998. This increase relates to a segment in the real estate
industry. The loss factor for calculating the reserve applicable to industry
concentration increased from 0.20% at December 31, 1997 to 0.60% at December 31,
1998. The change in volume and change in loss factor resulted in an increase of
$400 thousand in the allocated reserve. The approximate $2.2 million increase in
the allocated reserve for the year ended December 31, 1998 caused a
corresponding decrease in the unallocated portion of the reserve. Other
immaterial fluctuation occurred in both volumes and estimation factors of other
pools of loans.
13
<PAGE>
Management believes that both the allocated and unallocated portions of
the reserve are maintained at a level which is adequate to absorb potential
losses in the loan portfolio.
As the accompanying table indicates, the amount of loan loss provision
charged to expense for 1999 was $1,052 compared to $958 in 1998 and $1,310 in
1997.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average amount of loans outstanding $674,798 $635,939 $617,082 $590,144 $583,398
Loan loss reserve at beginning of period $ 10,538 $ 10,270 $ 9,801 $ 8,854 $ 8,876
Charge-offs:
Real estate loans 348 575 552 990 1,842
Commercial and industrial loans 1,105 370 319 20 416
Loans to individuals 304 427 286 175 236
Home equity -- -- -- -- --
Other -- -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs: 1,757 1,372 1,157 1,185 2,494
======== ======== ======== ======== ========
Recoveries:
Real estate loans 857 324 167 458 316
Commercial and industrial loans 440 256 78 529 157
Loans to individuals 93 102 66 76 75
Home equity -- -- -- -- --
Other -- -- 5 24 29
-------- -------- -------- -------- --------
Total recoveries: 1,390 682 316 1,087 577
======== ======== ======== ======== ========
Net charge-offs: 367 690 841 98 1,917
Additions to loan loss reserve 1,052 958 1,310 1,045 1,895
Loan loss reserve at end of period $ 11,223 $ 10,538 $ 10,270 $ 9,801 $ 8,854
======== ======== ======== ======== ========
<CAPTION>
Loan type Loan type Loan type Loan type Loan type
as % as % as % as % as %
Amount in reserve by category: of loans of loans of loans of loans of loans
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans 59.0 $ 2,571 63.2 $ 2,358 68.8 $ 3,511 70.8 $ 3,146 72.2 $ 817
Commercial and industrial loans 29.4 5,356 26.0 3,575 21.8 610 20.5 1,332 20.3 2,459
Loans to individuals 10.1 848 9.7 1,049 8.4 617 7.8 354 6.8 347
All other loans 1.5 11 1.1 11 1.0 11 0.9 11 0.7 11
Unallocated portion 2,437 3,545 5,521 4,958 5,220
------- ------- ------- ------- -------
Total $11,223 $10,538 $10,270 $ 9,801 $ 8,854
======= ======= ======= ======= =======
Ratio of Net charge-offs versus
average loans 0.1% 0.1% 0.1% 0.0% 0.3%
</TABLE>
Total cash-basis and nonaccrual loans of $2,285 at December 31, 1999, were
generally comprised of $480 in residential real estate loans, $744 in commercial
real estate loans and $1,061 in commercial and other loans.
14
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES \
<TABLE>
<CAPTION>
TABLE V. DEPOSITS
(Thousands of Dollars)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
A. Average: Noninterest-bearing demand deposits $150,455 $132,132 $118,960
Interest checking 86,583 80,524 73,521
Money Market savings 158,014 128,970 77,013
Saving deposits 140,313 132,012 128,546
Time deposits 350,350 356,598 356,964
-------- -------- --------
Total $885,715 $830,236 $755,004
======== ======== ========
<CAPTION>
Due 3 months Due 3 - 6 Due 6 - 12 Due over
B. Year-end balance: ($100 or more) outstanding as of or less months months 12 months
December 31, 1999 ------- ------ ------ ---------
<S> <C> <C> <C> <C>
Certificates of deposit $ 4,515 $ 3,680 $ 9,517 $ 7,688
Other time deposits $13,999 $ 5,301 $ 2,212 $ 2,092
</TABLE>
Note: Univest and its subsidiaries do not have any foreign offices or foreign
deposits
TABLE VI. RETURN ON EQUITY AND ASSETS (RATIOS)
(Shown as percentages)
1999 1998 1997
---- ---- ----
Return on assets 1.5 1.4 1.4
Return on equity 15.4 13.8 13.0
Dividend payout ratio 30.3 29.9 28.2
Equity to assets ratio 9.4 10.3 10.9
15
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE VII. SHORT TERM BORROWINGS
(Thousands of Dollars)
LOANS AND SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
1999 1998 1997
---- ---- ----
Balance at December 31 $70,943 $62,890 $48,389
Weighted average interest rate at year end 3.3% 3.2% 3.3%
Maximum amount outstanding at any month's end $75,439 $68,384 $58,521
Average amount outstanding during the year $67,612 $56,181 $49,133
Weighted average interest rate during the year 3.3% 3.3% 3.3%
16
<PAGE>
Item 2. Properties
Univest and its subsidiaries occupy thirty-two properties in Montgomery
and Bucks Counties in Pennsylvania, which are used principally as banking
offices. Note 6, appearing on page 22 of the Annual Report to Shareholders
(Exhibit 13), is hereby incorporated in this item.
Item 3. Legal Proceedings
There are no proceedings pending other than the ordinary routine
litigation incident to the business of the corporation.
Item 4. Submission of Matters to a Vote of Security Holders
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
PART II
17
<PAGE>
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), pages 43-44. Dividend and other restrictions are incorporated by
reference from Note 16 of the 1999 Annual Report to Shareholders (Exhibit 13),
pages 29 and 30. The number of shareholders as of February 29, 2000, was 2,078.
Item 6. Selected Financial Data
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), page 34.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), pages 35 through 42. Dividend and other restrictions are
incorporated by reference from Note 16 of the 1999 Annual Report to Shareholders
(Exhibit 13), pages 29 and 30.
Item 7 (a). Qualitative and Quantitative Disclosures About Market Risk
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), pages 41 and 42.
Item 8. Financial Statements and Supplementary Data
Consolidated balance sheets of the registrant at December 31, 1999 and
1998, and consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years ended December 31, 1999, and the
independent auditors' report thereon are incorporated by reference from the 1999
Annual Report to Shareholders (Exhibit 13), pages 13 through 16.
Item 9. Change in and Disagreements with Accountants on Accounting and Financial
Disclosures
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
Executive Officers
The names and ages of all executive officers of Univest are as follows:
Principal Occupation
Officer Title during past 5 years Age
Merrill S. Moyer Chairman Chairman of the Corporation 66
and Union National Bank
Norman L. Keller Executive Vice President and CEO of Pennview 62
18
<PAGE>
President Savings Bank and Executive
Vice President of the Corporation
Marvin A. Anders Vice Chairman Vice Chairman of the Corporation 60
and Union National Bank
William S. Aichele President President and CEO of the 49
Corporation and
Union National Bank
Wallace H. Bieler Executive Vice Executive Vice President 54
President and CFO of the Corporation
and Union National Bank
There is no family relationship among any of the executive officers of Univest.
Item 11. Executive Compensation
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
Item 13. Certain Relationships and Related Transactions
During 1999, the Corporation and its subsidiaries paid $344,561 to H.
Mininger & Son, Inc. for building expansion projects which were in the normal
course of business on substantially the same terms as available from others. H.
Ray Mininger, Alternate Director, is president of H. Mininger & Sons, Inc.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a) 1. & 2. Financial Statements and Schedules The financial
statements listed in the accompanying index to financial
statements are filed as part of this annual report.
3. Listing of Exhibits
The exhibits listed on the accompanying index to exhibits are
filed as part of this annual report.
(b) There were no reports on Form 8-K filed in the fourth quarter of
1999.
(c) Exhibits - The response of this portion of item 14 is submitted as a
separate section.
(d) Financial Statement Schedules - none.
19
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
[Item 14(a)]
Annual Report
to Shareholders*
----------------
Report of Independent Auditors 33
Consolidated balance sheets at 13
December 31, 1999 and 1998
Consolidated statements of income for each of the 14
three years in the period ended December 31, 1999
Consolidated statements of changes in shareholders' equity 15
for each of the three years in the period ended
December 31, 1999
Consolidated statements of cash flows for 16
20
<PAGE>
each of the three years in the period ended
December 31, 1999
Notes to consolidated financial statements 17-32
Financial statement schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
* Refers to page numbers in the Annual Report to Shareholders for 1999 (Exhibit
13) which is incorporated by references.
21
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA
AND SUBSIDIARIES
INDEX TO EXHIBITS
[Item 14(a)]
Description
-----------
(3) Articles of Incorporation and By-Laws
Articles of Incorporation and Charter are incorporated by reference to the
1973 Form 10-K.
(4) Instruments Defining the Rights of Security Holders, Including Debentures
Specimen Copy of Common Stock is incorporated herein by reference to the
1973 Form 10-K.
(10) Material Contracts - Not Applicable.
(11) Statement Re Computation of Per Share Earnings - See Footnote 13 in Item
(13).
(12) Statements Re Computation of Ratios - Not Applicable.
22
<PAGE>
(13) Annual Report to Shareholders
(18) Letter Re Change in Accounting Principles - Not Applicable.
(19) Previously Unfiled Documents - Not Applicable.
(21) Subsidiaries of the Registrant
(23) Consent of independent auditors
(24) Power of Attorney - Not Applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIVEST CORPORATION OF PENNSYLVANIA
Registrant
By: /s/ Norman L. Keller
---------------------------------
Norman L. Keller
Secretary and Executive Vice President, March 22, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ Merrill S. Moyer /s/ James L. Bergey
- ------------------------------------------ -----------------------------------
Merrill S. Moyer James L. Bergey
Chairman and Director, March 22, 2000 Director, March 22, 2000
/s/ Marvin A. Anders /s/ Harold M. Mininger
- ------------------------------------------ -----------------------------------
23
<PAGE>
Marvin A. Anders Harold M. Mininger
Vice Chairman and Director, March 22, 2000 Director, March 22, 2000
/s/ William S. Aichele /s/ Paul G. Shelly
- ------------------------------------------ -----------------------------------
William S. Aichele Paul G. Shelly
President, CEO and Director, March 22, 2000 Director, March 22, 2000
/s/ Wallace H. Bieler /s/ R. Lee Delp
- ------------------------------------------ -----------------------------------
Wallace H. Bieler R. Lee Delp
Executive Vice President and CFO, Director, March 22, 2000
March 22, 2000
/s/ Charles H. Hoeflich /s/ Clair W. Clemens
- ------------------------------------------ -----------------------------------
Charles H. Hoeflich Clair W. Clemens
Chairman Emeritus, March 22, 2000 Director, March 22, 2000
/s/ Thomas K. Leidy /s/ John U. Young
- ------------------------------------------ -----------------------------------
Thomas K. Leidy John U. Young
Director, March 22, 2000 Director, March 22, 2000
24
[UNIVEST LOGO]
Corporation of Pennsylvania
ANNUAL REPORT 1999
retrospective
A CENTURY OF CHANGE
IN OUR WORLD,
IN BANKING, AND
AT UNIVEST
<PAGE>
Table of Contents
Letter to Shareholders.................................................... 2-3
The Year in Review........................................................ 4-12
Consolidated Balance Sheets............................................... 13
Consolidated Statements of Income......................................... 14
Consolidated Statements of Changes in Shareholders' Equity................ 15
Consolidated Statements of Cash Flows..................................... 16
Notes to Consolidated Financial Statements................................ 17-32
Report of Independent Auditors............................................ 33
Five-Year Performance Highlights.......................................... 34
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 35-42
Supplementary Information................................................. 43-44
Directors................................................................. 45
Officers.................................................................. 46
Office Locations.......................................................... 47
Information for Shareholders.............................................. 48
Consolidated Financial Highlights
(in thousands, except per share data)
- --------------------------------------------------------------------------------
Percentage
1999 1998 Change
- --------------------------------------------------------------------------------
Earnings
Net interest income.............. $ 42,463 $ 40,645 4.47%
Income before income taxes....... 22,418 20,547 9.11
Applicable income taxes.......... 6,614 6,046 9.39
Net income....................... 15,804 14,501 8.99
Per Share
Average shares outstanding ...... 7,234 7,539 (4.05)
Income before income taxes ...... $ 3.10 $ 2.72 13.97
Applicable income taxes ......... $ .92 $ .80 15.00
Net income:
Basic ........................ $ 2.18 $ 1.92 13.54
Diluted ...................... $ 2.18 $ 1.91 14.14
Book Value ...................... $ 14.49 $ 14.02 3.35
Balance Sheets
Investments ..................... $ 311,875 $ 327,665 (4.82)
Net loans ....................... 711,251 649,911 9.44
Deposits ........................ 910,675 874,504 4.14
Shareholders' equity ............ 102,751 103,177 (.41)
Assets .......................... 1,120,992 1,070,470 4.72
<PAGE>
[PHOTO]
Through innovation, technological advancement and a competitive spirit, Univest
will continue to be a strong leader.
<PAGE>
LETTER TO SHAREHOLDERS
He gives strength to the weary and increases the power of the weak. ... but
those who hope in the Lord will renew their strength. They will soar on wings
like eagles; they will run and not grow weary, they will walk, and not faint.
Isaiah 40: 29, 31
Dear Univest Shareholder:
We are both pleased and grateful to report the year 1999 was one of
significant accomplishments and positive change for Univest Corporation of
Pennsylvania. Major achievements were attained towards becoming an integrated
financial services organization. We are pleased with all of our achievements,
most of which were made possible by the diligent efforts of our dedicated
employees. The complete story unfolds in the pages before you. Please take a few
moments to review the financial information as well as the retrospective look at
the last century and all the events that have impacted our lives, our
communities, our industry and Univest Corporation.
The 20th Century has seen remarkable economic evolution. The Industrial
Age has given way to the Information Age as investments in computers and
communications has spiraled. The current U.S. economic expansion is the longest
in peacetime history. These healthy economic times have created opportunities
for our communities and customers to change, grow and prosper.
Change is a way of life. At Univest Corporation we assume change will
continue to be rapid and constant. Univest is part of an industry in transition.
We know Univest must continue to strive for excellence in providing clients
highly personalized service and innovative products if we are to continue
competing successfully in this changing industry.
While change is required for our future success, a broad vision that
embraces our deeply held beliefs and philosophies continues to set the course
for Univest Corporation. Our thinking does not include complacency. Adaptability
and flexibility help us to understand; what may be current today, may not be
acceptable tomorrow.
Our vision of becoming an integrated financial services organization with
expanded services beyond traditional lines led to the acquisition of the
Fin-Plan Group by Univest early in 1999. The Fin-Plan Group is a financial
services company offering financial planning, investment management, insurance
products and brokerage services.
Fin-Plan was founded in 1960 and its staff members collectively provide
over one hundred years of experience. Fin-Plan brings a new dimension to
Univest's ability to meet the broader financial needs of our clients.
During the fourth quarter we announced the creation of the Wealth
Management Group. Our approach to wealth management is built on understanding
and serving the unique needs of our clients. Our financial advisors work closely
with each client to analyze individual needs, goals, risk tolerance, and tax
situations. Through our in-depth analysis, we are able to offer our clients a
variety of investment, lending and cash management solutions.
2
<PAGE>
Late in the year we announced plans to acquire George Becker Associates,
Inc., an insurance agency located in Doylestown, Pennsylvania. Founded in 1966,
George Becker Associates provides property and casualty insurance, employee
benefits, and disability and group insurance for individuals as well as
commercial clients. This acquisition was completed early in January 2000.
Changing regulatory requirements continue to provide new challenges and
opportunities for the banking industry. Final approval of the Gramm-Leach-Bliley
Act during the fourth quarter will help pave the way to more fully carry out
Univest's vision. Commonly referred to as the Financial Modernization Act, it
repeals key provisions of the 66 year-old Glass-Steagall Act and permits
commercial banks to affiliate with investment banks. It also substantially
modifies the Bank Holding Company Act of 1956 to permit companies that own
commercial banks to engage in any type of financial activity. While many details
of this new law need to be finalized, we are confident it will enhance Univest's
ability to offer an expanded product line to our customers.
Univest is entering one of the most exciting periods in its history. Our
recent acquisitions, coupled with a less stringent regulatory environment, will
provide opportunities for our vision to become a reality. Corporate objectives
have been established to build a leading-edge financial services organization,
with a balance between advancing technology and remaining close to our rich
history and community roots.
In May the Board of Directors announced moves to promote a new generation
into executive leadership positions. William S. Aichele, who held the title of
President of the Corporation, was elected Chief Executive Officer, Director of
Univest Corporation, and Director of Pennview Savings Bank. At the same time
Marvin A. Anders was elected Director of Univest Corporation, and Richard W.
Godshall and Margaret K. Zook were named Alternate Directors of Univest
Corporation.
The success and progress of 1999 is a result of the energy and commitment
of Univest employees at every level. We want to express our appreciation for
their fine efforts. On behalf of the entire Univest family, we want to say thank
you to our shareholders and customers for your loyal support and confidence.
Sincerely,
/s/ Merrill Moyer /s/ William S. Aichele
Chairman President
[PHOTO]
The management team at Univest is led by Chairman Merrill S. Moyer (right), Vice
Chairman Marvin A. Anders (left), and President and Chief Executive Officer
William S. Aichele (center).
3
<PAGE>
THE CENTURY IN REVIEW
In the space of 12 seconds, the Wright Brothers changed our concept of ourselves
and of our world
[PHOTO]
Univest's corporate headquarters are located in the former J.M. Landis and
Company General Store.
[GRAPHIC]
Banks that merged with Union National Bank issued the national currency shown
above between 1929 and 1935.
The photographs are familiar, black and white reminders of another era
when human flight was still a dream. Back in the early 1900s, Orville and Wilbur
Wright were simply two obscure brothers who believed it was possible for man to
fly. While others gained more fame, the Wright brothers patiently tested and
re-tested their "flying machine," teaching themselves the piloting skills so
important in controlled flight.
On the morning of December 17, 1903 the brothers, dressed in coats, ties
and bowler hats, stepped onto the isolated beach near Kill Devil Hills, North
Carolina where they had conducted their flying experiments. With solemn dignity
they shook hands and Orville took his place on the glider. Within moments, the
world changed forever. For the first time in history a manned machine left the
ground using its own power and landed on a point as high as the place where it
had taken off. Others had based their experiments on sheer power but the Wrights
showed that the pilot's expertise was the deciding factor in successful flight.
As they stood on that sandy beach and marveled at their achievement, the
Wrights could hardly be expected to understand the impact their flight would
have on the century. Within a few years planes would carry mail and crops would
be dusted. Charles Lindburgh would triumphantly celebrate the first
transatlantic flight, airlines would be created and Neil Armstrong would plant
an American flag on the moon and gaze back at a beautiful globe of blue and
green. Even our basic concept of time and distance would change dramatically -
all because Orville Wright stayed aloft in a flying machine for 12 seconds.
While planes were in their infancy, Henry Ford was revolutionizing the way
automobiles were manufactured, changing not only the way goods are produced but
also the very fabric of American life. In 1908 Ford introduced the Model T with
the express purpose of providing a car for the masses, not just the elite few.
Through Ford's genius, the modern assembly line reduced the amount of time it
took to build a car, enabling even factory workers to afford the $300 retail
price.
Since then, the automobile has defined America and changed the way we live
and work. Without the car as a catalyst, who can imagine sprawling housing
developments, the interstate highway system, drive-in banks, or the shopping
mall? At its core the automobile spelled freedom to most Americans. They could
live where they pleased, have more options for where they worked, and travel the
country in a way that had been impossible before. Never before had one invention
opened up so many possibilities to so many people in such a short period of
time.
If the automobile touched everyone in an obvious way, advances in health
and medicine had a more subtle impact on the century. Penicillin - our basic
defense against infection -- wasn't discovered by Alexander Fleming until 1928
and didn't receive widespread use until World War II. Sugar cubes containing a
polio vaccine, a childhood memory for millions of Americans in the 1950s, were
only possible because of the discoveries of Jonas Salk and Albert Sabin.
4
<PAGE>
[PHOTO]
1914: Henry Ford doubles the minimum wage of his autoworkers to an unprecedented
$5 per day.
The Panama Canal, called one of the greatest engineering feats ever, opens to
traffic. Construction cost $366 million and 6,000 workers died, mainly from
malaria and yellow fever.
1915: Einstein announces the general theory of relativity.
<PAGE>
[PHOTO]
Technological changes - in everything from medicine to communications -
accelerated in the late 20th century.
[PHOTO]
A ribbon cutting ceremony by Merrill Moyer (left) and Paul Witter inaugurates a
new ATM in the 1970s.
Today, medical debate centers on gene splicing and the ethical questions
surrounding cloning. Transplants, once the subject of front-page coverage, are
commonplace. Babies born prematurely now have amazing rates of survival and
medical technology and specialization have replaced the family doctor who made
house calls. Life expectancy, hovering around 45 in 1900, now approaches 77
years and the Census Bureau reports that over 65,000 Americans are more than 100
years old.
Although we can no longer expect to see a doctor at our door, we can
communicate instantly with someone in New Zealand or Caracas. Before 1919, phone
calls were made through a switchboard operator - a person who literally knew
everything that went on within a community. Now, through computer technology, an
individual can shop, bank, receive medical advice, and keep in touch with
friends without stepping outside their door.
Side by side with the computer, technological change accelerated in the
late 20th century. The first electronic computer, ENIAC, wasn't built until 1945
and commercial microprocessors were introduced in 1971. It took two young
college students - Steven Jobs and Bill Gates - to recognize the practical,
everyday potential of the computer. Information is now power and the computer
has taken its place in history alongside the printing press and the steam
engine.
Few industries have benefited from the computer revolution as much as
banking. For the first part of the century, economics and politics played a
greater role than technology in determining how banks operated. In the early
1900s it cost less to start a bank than to buy a good farm and hundreds of
national banks, along with thousands of state-chartered banks, were created.
Because branch offices were virtually non-existent, there was one single-office
bank for every 3,600 Americans as 1913 came to a close.
6
<PAGE>
[PHOTO]
During the influenza epidemic of 1918, messengers personally collect deposits
from Union National customers.
First successful kidney transplant is performed in 1954.
With so many banks available, competition was fierce and banks responded
by advertising new services like time deposits and investment banking.
Technology at a "modern" bank in 1914 meant adding machines, punched card
tabulators, automatic typewriters and checkwriting equipment. Although the
models improved over the years, no new equipment appeared until the mid-1950s.
In the Roaring Twenties personal loan departments were established and
banks reached out to households with the slogan, "Pay by check and receive a
receipt." The result was an onslaught of small checking accounts, most with
balances of less than $50. To recoup, banks began charging service fees of 50
cents for balances below $50.
The 1930s saw the development of branch banking as increasing automobile
traffic and a shortage of downtown parking made in-town banking less attractive.
Branch banking was originally viewed by bankers as "contrary to public policy"
because it would concentrate the power of money in the hands of fewer people.
The advantages of branch banking soon overcame such objections, fueled by the
growth of the suburbs and an increasingly mobile population.
The inexperience of many bankers and the sheer number of small banks
contributed to the bank failures of the 1930s. Between 1930 and 1932, loans
dropped 44% and deposits 30%. The world was reeling under the most severe
economic collapse in history and businesses and banks alike struggled to
survive. On March 6, 1933, two days after Franklin D. Roosevelt took office, a
"Bank Holiday" was declared and banking operations were suspended across the
country. To re-open, every bank had to apply for a license certifying its
soundness, a measure that restored the public's confidence. The landmark
Glass-Steagall Act of 1933 dealt with additional problems, created the Federal
Deposit Insurance Corporation and separated investment banking from commercial
banking.
[GRAPHIC]
Debit and ATM cards give customers 24-hour access to their bank funds.
1945 Check routing system developed to handle the growing number of checks being
written.
7
<PAGE>
[PHOTO]
Car radios are introduced in 1929; the first cellular phone network debuts in
Japan in 1979.
The photocopier is invented in 1937. Xerox sells the first fax machine - called
the Telecopier - in 1966.
Tim Berners-Lee invents the World Wide Web in 1992.
<PAGE>
Univest and its surrounding communities represent a microcosm of 20th century
changes.
With Americans spreading out into the suburbs following World War II,
mergers increased along with branch banking. Readily available mortgage loans
enabled millions of families to become homeowners and urban flight increased as
families bought single-family homes in the suburbs. As Americans demanded more
convenience and 24-hour access to their money, the number of ATMs mushroomed,
growing from 2,000 in 1973 to over 40,000 ten years later. Computer technology
also made point-of-sale terminals possible and more and more Americans thought
nothing of using "plastic" or charge cards to pay for everything.
Pressure to reduce costs in a competitive environment brought
computerization to all areas of banking. As early as 1961 one of the nation's
largest banks had a fully automated check processing and demand deposit
accounting system. While forecasts of a checkless, cashless society were
premature, transferring funds electronically became the norm in banking circles.
As the century came to a close, the repeal of portions of the
Glass-Steagall Act of 1933 is expected to have huge repercussions for banks and
financial institutions in the coming century. The Gramm-Leach-Bliley Act, also
known as the Financial Modernization Act, removes the lines separating banking,
securities and insurance and contains the potential for greater efficiency,
increased customer services and more innovation.
In many ways Univest and its surrounding communities represent a microcosm
of the changes of the 20th century. The first automobile arrived in Souderton in
1903 and autos soon changed the sound and feel of Main Street. A fascination
with speed gripped many young men and it was soon determined that anyone driving
faster than 12 miles an hour would be arrested. How that person would be caught
remained a matter for great debate.
As the first bank in Souderton, Union National Bank was at the center of
community life. Townspeople gathered in front of the original bank building on
Main Street to celebrate the end of World War I in 1918 and to watch parades
throughout the years. Bank officers actively participated in the community and
helped direct the economic growth of the area. When a second bank, Peoples
National Bank, elected its board of directors in 1928, the two banks raced to
open new headquarters across from each other on Broad Street. The "progressive"
design of the new Union National building generated considerable comment, as
customers admired its mahogany wainscots and expensive drinking fountain.
1965
Voting Rights Act passed by Congress.
Then as now, residents worried about the changing rural character of their
community and questioned how fast old patterns should change. As late as 1935,
Pennsylvania Dutch was still being spoken during bank meetings and officials
were struggling with the local impact of the Depression.
In 1942, as Churchill, Stalin and Roosevelt were meeting in Moscow to
discuss opening a second front in the war, officials at Union National Bank were
electing their fourth president, Russell Miller Hillegass. Soon after the end of
the war in 1945, the bank made its first loan under the GI Loan Act. The bank
also began writing auto loans - even though no new cars were available until
1946. The growing financial needs of returning soldiers dramatically
Trust departments and safe deposit boxes make their appearance in 1915.
The 19th Amendment (1920) gives American women the right to vote in national
elections.
Ration books limit the amount of sugar, gas, coffee and other basics available.
By 1943, Victory Gardens are plentiful and women are entering the workforce in
droves.
1958 - Revolving credit introduced.
Union National Bank assigns numerical account numbers to all accounts in the
early 1960s, doing away with the alphabetical system.
9
<PAGE>
[PHOTO]
1963 - Zip codes introduced.
By 1991 three out of four homes own a VCR, making it the fastest selling
appliance in history.
1980's
In the late 1980s, growth meant new branches and increased services.
[PHOTO]
affected the way banks did business. More families were being formed, housing
was booming and it was obvious that the flow of money from families, as opposed
to businesses, was going to become increasingly important.
The 1960s proved to be a pivotal period for Union National Bank. Mergers
with Telford National Bank in 1953 and Green Lane National Bank in 1956 hinted
at the bank's future direction and would accelerate under the leadership of
Charles H. Hoeflich.
Selected as the bank's fifth president, the 48-year-old Hoeflich brought
an extensive background in banking, as well as marketing expertise, to the
company. To meet the bank's goal of being the center of its own system, Union
National quickly merged with Schwenksville National Bank and opened new branches
in Kulpsville, Hilltown and Line Lexington. Bars separating tellers from
customers were removed, radio ads were aired, and innovations like TV drive-in
banking and computerization occurred. Instead of depending on a few large
accounts, the bank turned toward meeting the banking needs of a widespread
population through small loans and deposit and savings accounts.
Within four years of Hoeflich's arrival, the company had doubled in size
and merged with its rival across the street, Peoples National Bank. Its next
defining moment would arrive when Univest was formed as a bank holding company
in 1973. As a holding company, Univest expanded its range of financial services
and quickly developed subsidiary companies.
While the company grew beyond Souderton, it still maintained its social
consciousness and involvement in community affairs. "The bank," maintains
Charles Hoeflich, "has a character that is derived from its management and
reflected by its employees. Because we have professional bankers who want to
serve our customers, we constantly keep in touch and respond to customers'
concerns."
10
<PAGE>
[PHOTO]
As the baton passed to Merrill S. Moyer in the early 1980s Univest
continued serving its community and expanding its services and products. The
important acquisition of Pennview Savings Bank occurred in 1990 and branch
offices numbered 32 by the end of the century. Technological changes allowed
customers to conduct much of their banking business over the Internet and by
phone. Retail cross-selling became increasingly important and the company sought
on many levels to develop full financial relationships with its customers. The
addition of the Fin-Plan Group in 1999 cemented the company's commitment to
being a fully integrated financial services provider.
The final year of the century at Univest provided a fitting close to the
century. Working within a competitive financial environment, the corporation
concentrated on building relationships with customers through its array of
products and services. Computer enhancements continued to play an important role
and convenience and service remained paramount.
In 1999 the company's Internet banking service, called Anytime Banking
On-Line, added thousands of customers to its ranks and gave customers the
ability to order checks on-line. Business customers also gained the advantage of
sending ACH files via the Internet. In the area of consumer loans, a new
automated loan documentation system improved our ability to produce consistently
high quality documents and reduced the need to manually track various contracts.
These enhancements to the loan process reduced preparation time by 50%.
In our present Information Age, privacy remains a key concern. Univest is
pleased with the level of security existing within its systems and our secure
socket layer (SSL) protocol ensures that all data transmissions are encrypted,
preventing others from reading customer information as it travels over the
Internet. Through the use of firewalls, intruder-detection mechanisms and other
internal procedures like passwords and PINs, our systems are continually
evaluated and tested to make sure information is protected.
[PHOTO]
1998
The Univest web site provides information about the corporation and its
subsidiaries, as well as access to Anytime Banking On-Line.
11
<PAGE>
Many decisions at Univest in 1999 focused on the importance of maintaining
present relationships with customers and building new ones.
1999
Congress passes the Gramm-Leach-Bliley Act, also known as the Financial
Modernization Act of 1999.
A growing economy and the resulting tight labor market led our Human
Resources department to pursue new recruiting methods in 1999. Relationships
with over 30 high schools, colleges and universities, as well as the use of
Internet recruiting and an electronic resume database, are some of their
solutions. A new Tuition Reimbursement Program is also aimed at attracting and
retaining quality employees.
Maintaining present relationships with customers and clients, as well as
developing new relationships, fueled many decisions at Univest in 1999. Personal
checking accounts for Union National Bank and Pennview Savings Bank were refined
and consolidated, giving customers accounts that more aptly suit their
lifestyle. A marketing campaign called "Right Fit" explained Univest products
and services for growth-oriented small businesses and helped relationship
managers in corporate banking communicate Univest's capabilities as an
integrated financial services provider.
A new group called Wealth Management also emerged at year's end. Wealth
Management combines the business development functions of the Trust and Private
Banking Departments and its staff will serve as financial advisors versed in all
Univest products and services, including investments, trust, loans, and
deposits. The group will also serve the investment needs of the institutional
client segment, such as for-profit corporations and not-for-profit and
governmental organizations.
Univest was also pleased in 1999 to reach an agreement in principle to
acquire George Becker Associates, Inc. George Becker Associates is an agency
that provides property and casualty insurance, employee benefits and group
insurance for individuals and commercial clients.
Community involvement remains important at Univest, as it has throughout
the century. The Univest Grand Prix International Cycling Festival celebrated
its second year, attracting widespread attention from cycling enthusiasts and
local communities. Univest also entered into a partnership with the Montgomery
County Habitat for Humanity and is sponsoring the building of two new homes in
Norristown. Univest employees are donating their personal time and talents to
this ongoing project. Twenty Univest employees also helped construct new homes
in Honduras after the devastation from Hurricane Mitch.
As it has throughout the century, the organization conducted a seamless
transfer of responsibilities when William S. Aichele was elected Chief Executive
Officer and Director of Univest Corporation and of Pennview Savings Bank.
Merrill S. Moyer continues as chairman of the Corporation and Marvin A. Anders,
who was elected Director of Univest Corporation, remains vice chairman.
As we look forward to the new century it is difficult to imagine what lies
ahead. Perhaps we can only imitate Orville and Wilbur Wright, pioneers who stood
on a sandy beach in North Carolina knowing they had fulfilled their dream -- but
unaware of the magnitude of their accomplishment.
12
<PAGE>
Consolidated Balance Sheets
(in thousands, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------------------------
<S> <C> <C>
Assets
Cash and due from banks .............................................. $ 35,066 $ 26,011
Interest-bearing deposits with other banks ........................... 3,839 3,940
Investment securities held to maturity (market value $135,107
and $217,515 at December 31,1999 and 1998, respectively) .......... 137,461 216,404
Investment securities available for sale ............................. 174,414 111,261
Federal funds sold and other short-term investments .................. 1,800 12,700
Loans ................................................................ 722,474 660,449
Less: Reserve for possible loan losses ............................ (11,223) (10,538)
----------------------------------
Net loans ..................................................... 711,251 649,911
----------------------------------
Premises and equipment, net .......................................... 15,407 15,828
Accrued interest and other assets .................................... 41,754 34,415
----------------------------------
Total assets .................................................. $ 1,120,992 $ 1,070,470
==================================
Liabilities
Demand deposits, noninterest bearing ................................. $ 159,300 $ 152,094
Demand deposits, interest bearing .................................... 266,212 238,622
Savings deposits ..................................................... 136,387 138,936
Time deposits ........................................................ 348,776 344,852
----------------------------------
Total deposits .................................................... 910,675 874,504
----------------------------------
Securities sold under agreements to repurchase ....................... 70,943 62,890
Other short-term borrowings .......................................... 1,155 1,155
Accrued expenses and other liabilities ............................... 17,393 19,669
Long-term debt ....................................................... 18,075 9,075
----------------------------------
Total liabilities ................................................. 1,018,241 967,293
----------------------------------
Shareholders' equity
Common stock, $5 par value; 24,000,000 shares authorized at
December 31, 1999 and 1998 and 7,854,321 shares
issued at December 31, 1999 and 1998 and 7,092,699 and 7,360,912
shares outstanding at December 31, 1999 and 1998, respectively .... 39,272 39,272
Additional paid-in capital ........................................... 14,908 14,908
Retained earnings .................................................... 73,409 62,992
Accumulated other comprehensive income ............................... (2,672) 582
Treasury stock, at cost; 761,622 shares and 493,409 shares
at December 31, 1999 and 1998, respectively ....................... (22,166) (14,577)
----------------------------------
Total shareholders' equity ........................................ 102,751 103,177
----------------------------------
Total liabilities and shareholders' equity ........................ $ 1,120,992 $ 1,070,470
==================================
</TABLE>
See accompanying notes to consolidated financial statements.
Univest Corporation of Pennsylvania 13
<PAGE>
Consolidated Statements of Income
(in thousands, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans:
Taxable .............................................. $52,336 $52,180 $52,264
Exempt from federal income taxes ..................... 2,645 2,383 2,059
---------------------------------------------
Total interest and fees on loans ......................... 54,981 54,563 54,323
Interest and dividends on investment securities:
U.S. Government obligations .......................... 9,577 11,602 12,274
Obligations of state and political subdivisions ...... 947 307 219
Other securities ..................................... 7,638 4,374 2,418
Interest on time deposits with other banks ............... 227 626 83
Interest on federal funds sold and term federal funds .... 474 988 223
---------------------------------------------
Total interest income ................................ 73,844 72,460 69,540
---------------------------------------------
Interest expense
Interest on demand deposits .............................. 7,054 6,423 3,608
Interest on savings deposits ............................. 2,776 3,170 3,183
Interest on time deposits ................................ 18,390 19,822 19,825
Interest on long-term debt ............................... 711 500 425
Interest--all other ...................................... 2,450 1,900 1,871
---------------------------------------------
Total interest expense ............................... 31,381 31,815 28,912
---------------------------------------------
Net interest income .......................................... 42,463 40,645 40,628
Provision for loan losses .................................... 1,052 958 1,310
---------------------------------------------
Net interest income after provision for loan losses .......... 41,411 39,687 39,318
---------------------------------------------
Other income
Trust .................................................... 3,970 3,202 2,695
Service charges on demand deposits ....................... 3,450 3,032 1,924
Net gains on sales of securities ......................... 3 97 95
Net gains on sales of mortgages .......................... 51 250 95
Other .................................................... 8,075 4,113 3,078
---------------------------------------------
Total other income ................................... 15,549 10,694 7,887
---------------------------------------------
Other expenses
Salaries and benefits .................................... 19,204 15,703 15,476
Net occupancy ............................................ 2,464 2,244 2,178
Equipment ................................................ 2,570 2,697 2,500
Other .................................................... 10,304 9,190 7,887
---------------------------------------------
Total other expenses ................................. 34,542 29,834 28,041
---------------------------------------------
Income before income taxes ................................... 22,418 20,547 19,164
Applicable income taxes ...................................... 6,614 6,046 5,987
---------------------------------------------
Net income ................................................... $15,804 $14,501 $13,177
=============================================
Net income per share:
Basic .................................................... $ 2.18 $ 1.92 $ 1.70
=============================================
Diluted .................................................. $ 2.18 $ 1.91 $ 1.69
=============================================
</TABLE>
See accompanying notes to consolidated financial statements.
14 Univest Corporation of Pennsylvania
Consolidated Statements of Changes in Shareholders' Equity
(in thousands, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other Additional
Comprehensive Common Paid-in Retained Treasury
Income Stock Capital Earnings Stock Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 ................... $ 18 $19,636 $34,544 $44,260 $ (1,191) $ 97,267
---------
Comprehensive Income
Net Income for 1997 ........................ 13,177 13,177
Other comprehensive income, net of income
taxes of $179
Unrealized gains and (losses) on
investment securities
available-for-sale ..................... 332 332
---------
Total comprehensive income ..................... 13,509
---------
Cash dividends declared ($0.48 per share) . (3,707) (3,707)
100% stock dividend payable May 1, 1998 .... 19,636 (19,636) --
Stock issued under dividend reinvestment
and employee stock purchase plans ...... (7) 863 856
Exercise of stock options .................. (32) 91 59
Acquisition of treasury stock
(151,964 shares) ........................... (3,380) (3,380)
-------------------------------------------------------------------------------
Balance at December 31, 1997 ................... 350 39,272 14,908 53,691 (3,617) 104,604
---------
Comprehensive Income
Net Income for 1998 ........................ 14,501 14,501
Other comprehensive income, net of income
taxes of $125
Unrealized gains and (losses) on
investment securities
available-for-sale ..................... 232 232
---------
Total comprehensive income ..................... 14,733
---------
Cash dividends declared ($0.575 per share) (4,328) (4,328)
Stock issued under dividend reinvestment
and employee stock purchase plans ...... (4) 1,208 1,204
Exercise of stock options .................. (868) 1,524 656
Acquisition of treasury stock (346,137 shares) (13,692) (13,692)
-------------------------------------------------------------------------------
Balance at December 31, 1998 ................... 582 39,272 14,908 62,992 (14,577) 103,177
---------
Comprehensive Income
Net Income for 1999 ........................ 15,804 15,804
Other comprehensive income, net of income
tax benefit of $ (1,784)
Unrealized gains and (losses) on
investment securities
available-for-sale ..................... (3,254) (3,254)
---------
Total comprehensive income ..................... 12,550
---------
Cash dividends declared ($0.66 per share) ..... (4,762) (4,762)
Stock issued under dividend reinvestment
and employee stock purchase plans .......... (12) 1,282 1,270
Exercise of stock options ...................... (613) 1,312 699
Acquisition of treasury stock (360,253 shares) . (10,183) (10,183)
-------------------------------------------------------------------------------
Balance at December 31, 1999 ................... $ (2,672) $39,272 $14,908 $73,409 $ (22,166) $102,751
===============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Univest Corporation of Pennsylvania 15
<PAGE>
Consolidated Statements of Cash Flows
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income ................................................................. $ 15,804 $ 14,501 $ 13,177
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses in excess of net charge-offs ................. 685 268 469
Depreciation of premises and equipment ................................. 2,313 2,475 2,407
Premium amortization (discount accretion) on investment
securities .......................................................... 17 (249) (412)
Deferred income tax (benefit) .......................................... 31 (279) (162)
Realized gains on investment securities ................................ (3) (97) (95)
Realized gains on sales of mortgages ................................... (51) (250) (95)
(Decrease) increase in net deferred loan fees .......................... (39) 114 (497)
(Increase) decrease in interest receivable and other assets ............ (3,338) (1,673) 717
(Decrease) increase in accrued expenses and other liabilities .......... (622) 2,611 3,350
---------------------------------------------------
Net cash provided by operating activities ........................... 14,797 17,421 18,859
Cash flows from investing activities
Proceeds from maturing securities held to maturity ......................... 90,041 74,884 75,289
Proceeds from maturing securities available for sale ....................... 28,935 25,045 9,471
Proceeds from sales of securities available for sale ....................... 18,391 25,079 24,024
Decrease (increase) in interest-bearing deposits ........................... 101 1,061 (4,641)
Purchases of investment securities held to maturity ........................ (11,165) (149,181) (44,144)
Purchases of investment securities available for sale ...................... (115,466) (44,623) (79,576)
Premium paid to purchase bank-owned life insurance ......................... -- -- (15,000)
Net decrease (increase) in federal funds sold and
other short-term investments ........................................... 10,900 (10,700) (1,931)
Proceeds from sales of mortgages ........................................... 11,306 22,164 8,667
Net increase in loans ...................................................... (73,241) (46,914) (36,569)
Capital expenditures ....................................................... (1,893) (1,699) (2,168)
Other investing activities ................................................. (4,000) -- --
---------------------------------------------------
Net cash used in investing activities ............................... (46,091) (104,884) (66,578)
Cash flows from financing activities
Assumption of deposits ..................................................... -- -- 14,186
Net increase in deposits ................................................... 36,171 81,636 43,227
Net increase (decrease) in short-term borrowings ........................... 8,053 14,499 (11,170)
Proceeds from long-term debt ............................................... 9,000 -- 2,000
Purchases of treasury stock ................................................ (10,183) (13,692) (3,380)
Stock issued under dividend reinvestment and
employee stock purchase plans .......................................... 1,270 1,204 856
Proceeds from exercise of stock options .................................... 699 656 59
Cash dividends ............................................................. (4,661) (4,181) (3,641)
---------------------------------------------------
Net cash provided by financing activities ........................... 40,349 80,122 42,137
---------------------------------------------------
Net increase (decrease) in cash and due from banks ......................... 9,055 (7,341) (5,582)
Cash and due from banks at beginning of year ............................... 26,011 33,352 38,934
---------------------------------------------------
Cash and due from banks at end of year ..................................... $ 35,066 $ 26,011 $ 33,352
===================================================
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest ............................................................... $ 32,916 $ 31,693 $ 28,425
Income taxes ........................................................... $ 6,758 $ 6,041 $ 5,975
</TABLE>
16 Univest Corporation of Pennsylvania
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies
Organization
Univest Corporation of Pennsylvania (the Corporation) through its wholly
owned subsidiaries, Union National Bank and Trust Company (Union) and Pennview
Savings Bank (Pennview), is engaged in domestic commercial and retail banking
services and provides a full range of banking and trust services to its
customers. Univest Financial Services Corporation, a subsidiary of Pennview,
provides financial planning, investment management, insurance products and
brokerage services. Union and Pennview serve the Montgomery and Bucks Counties
of Pennsylvania through 32 banking offices and provide banking and trust
services to the residents and employees of 12 retirement communities and a work
site office at Moyer Packing Company. This office serves only to cash payroll
checks for Moyer Packing Company employees.
Principles of Consolidation
The consolidated financial statements include the accounts of Univest
Corporation of Pennsylvania and its wholly owned subsidiaries, including Union
National Bank and Trust Company and Pennview Savings Bank, collectively referred
to herein as the "Banks." All significant intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Investment Securities
Securities are classified as investments and carried at amortized cost if
management has the positive intent and ability to hold the securities to
maturity. Securities purchased with the intention of recognizing short-term
profits are placed in the trading account and are carried at market value.
Securities not classified as investment or trading are designated securities
available-for-sale and carried at fair value with unrealized gains and losses
reflected in accumulated other comprehensive income. The net unrealized loss on
available-for-sale securities included in accumulated other comprehensive income
was $2,672 at December 31, 1999 and a net unrealized gain of $582 at December
31, 1998.
Gains and losses on sales of securities are computed on a specific
security basis.
Loans
Loans are stated at the principal amount less net deferred loan fees and
unearned discount. Interest income on commercial, consumer, and mortgage loans
is recorded on the outstanding balance method, using actual interest rates
applied to daily principal balances. Accrual of interest income on loans ceases
when collectibility of interest and/or principal is questionable. If it is
determined that the collection of interest previously accrued is uncertain, such
accrual is reversed and charged to current earnings. Thereafter, income is only
recognized as payments are received for loans on which there is no uncertainty
as to the collectibility of principal.
Loan Fees
Fees collected upon loan origination and certain direct costs of
originating loans are deferred and recognized over the contractual lives of the
related loans as yield adjustments. Upon prepayment or other disposition of the
underlying loans before their contractual maturities, any associated unamortized
fees or costs are recognized.
Derivative Financial Instruments
The Corporation uses interest-rate swap agreements to manage the
interest-rate characteristics of its floating-rate loan portfolio to a
fixed-rate basis.
Interest-rate differentials to be paid or received as a result of
interest-rate swap agreements are accrued and recognized as an adjustment of
interest income related to the designated floating-rate loans. Recorded amounts
related to interest-rate swaps are included in other assets or liabilities. The
fair values of interest-rate swap agreements are not recognized in the financial
statements.
Univest Corporation of Pennsylvania 17
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Realized and unrealized gains or losses at the time of maturity,
termination, sale, or repayment of a derivative contract or designated item are
recorded in a manner consistent with the original designation of the derivative
in view of the nature of the termination, sale, or repayment transaction.
Amounts related to interest-rate swaps are deferred and amortized as an
adjustment to interest income over the original period of interest exposure,
provided the designated asset continues to exist or is probable of occurring.
Realized and unrealized changes in fair value of derivatives designated with
items that no longer exist or are no longer probable of occurring are recorded
as a component of the gain or loss arising from the disposition of the
designated item.
Reserve for Possible Loan Losses
The reserve for possible loan losses is based on management's evaluation
of the loan portfolio under current economic conditions and such other factors
which deserve recognition in estimating possible loan losses. This evaluation is
inherently subjective as it requires estimates including the amounts and timing
of future cash flows expected to be received on impaired loans that may be
susceptible to significant change. Additions to the reserve arise from the
provision for loan losses charged to operations or from the recovery of amounts
previously charged off. Loan charge-offs reduce the reserve. Loans are charged
off when there has been permanent impairment. Certain impaired loans are
reported at the present value of expected future cash flows using the loan's
initial effective interest rate, or as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent.
Premises and Equipment
Land is stated at cost, and bank premises and equipment are stated at cost
less accumulated depreciation. Depreciation is computed on the straight-line
method and charged to operating expenses over the estimated useful lives of the
assets (bank premises and improvements -- average life 25 years; furniture and
equipment -- average life 10 years).
Other Real Estate Owned
Other real estate owned represents properties acquired through customers'
loan defaults and is included in accrued interest and other assets. The real
estate is stated at an amount equal to the loan balance prior to foreclosure,
plus costs incurred for improvements to the property, but no more than the fair
market value of the property, less estimated costs to sell.
Stock Options
The Corporation grants stock options to employees with an exercise price
equal to the fair value of the shares at the date of grant. The Corporation has
elected to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) and related Interpretations in accounting
for its employee stock options because the alternative fair value accounting
provided for under Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123) requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123. The effect of applying SFAS No. 123 to the
Corporation's stock-based awards results in net income and earnings per share
that are not materially different from amounts reported.
Dividend Reinvestment and Employee Stock Purchase Plans
The Univest Dividend Reinvestment Plan (the "Reinvestment Plan") has
1,000,000 shares of common stock and the 1996 Employee Stock Purchase Plan (the
"Purchase Plan") has 500,000 shares of common stock available for issuance.
Employees may elect to make contributions to the Purchase Plan in an aggregate
amount not less than 2% nor more than 10% of such employee's total compensation.
These contributions are then used to purchase stock during an offering period
determined by the Corporation's Administrative Committee. The purchase price of
the stock is established by the Administrative Committee provided, however, that
the purchase price will not be less than 85% of the lesser of the market price
on the first day or last day of the offering period.
18 Univest Corporation of Pennsylvania
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
During 1999 and 1998, 37,875 and 32,160 shares, respectively, were issued
under the Reinvestment Plan, with 880,797 shares available for future purchase
as of December 31, 1999. During 1999 and 1998, 5,449 and 3,500 shares,
respectively, were issued under the Purchase Plan, with 482,835 shares available
for future purchase as of December 31, 1999.
Income Taxes
Deferred income taxes are provided on temporary differences between
amounts reported for financial statement and tax purposes in accordance with
SFAS No. 109, "Accounting for Income Taxes."
Intangible Assets
In connection with the acquisitions of Pennview and Fin-Plan, intangible
assets include goodwill and core deposit intangibles. Goodwill is being
amortized on a straight-line basis over a fifteen-year period. Core deposit
intangibles are being amortized over their estimated useful lives ranging from
seven to ten years. At December 31, 1999 the unamortized balance is
approximately $5.8 million ($3.4 million at December 31, 1998), net of
accumulated amortization of approximately $3.4 million ($2.6 million at December
31, 1998.)
Retirement Plan
Substantially all employees are covered by a noncontributory retirement
plan. The plan provides benefits based on a formula of each participant's final
average pay. The amount funded is not more than the maximum amount deductible
for federal income tax purposes. In addition, Univest sponsors a 401(k) deferred
salary savings plan, which is a qualified defined contribution plan, and which
covers all employees of Univest and its subsidiaries, and provides that the
Corporation make matching contributions as defined by the plan.
Postretirement Benefits Other Than Pensions
The Corporation provides certain postretirement health care and life
insurance benefits for retired employees. The Corporation accrues the costs
associated with providing these benefits during the active service periods of
employees in accordance with Statement of Financial Accounting Standard No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS
No. 106). The Corporation also provides supplemental executive retirement
benefits, a portion of which is in excess of limits imposed on qualified plans
by federal tax law.
Statement of Cash Flows
Univest has defined those items included in the caption "Cash and due from
banks" as cash and cash equivalents.
Trust Assets
Assets held by Union in a fiduciary or agency capacity for its customers
are not included in the consolidated financial statements since such items are
not assets of Union. Trust service income is reported on a cash basis. Reporting
such income on a cash basis instead of the accrual basis does not materially
affect net income or financial position.
Stock Split
On January 28, 1998, the Corporation's board of directors declared a 100%
stock dividend in the form of a stock split paid on May 1, 1998, to shareholders
of record as of April 14, 1998. All share and per share amounts have been
retroactively adjusted to give effect to the stock split.
Earnings Per Share
Basic net income per share is based on the weighted average number of
shares outstanding during each year.
Comprehensive Income
Unrealized gains or losses on the Corporation's available-for-sale
securities are included in comprehensive income.
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), as amended, which
is required to be adopted in years beginning after June 15, 2000. The Statement
will require
Univest Corporation of Pennsylvania 19
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
the Corporation to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. Because of the Corporation's minimal use of
derivatives, management does not anticipate that the adoption of the new
standard will have a significant effect on earnings or the financial position of
the Corporation.
Note 2. Restrictions on Cash and Due from Bank Accounts
Union is required to maintain reserve balances with the Federal Reserve
Bank. The average amount of those reserve balances for 1999 was $2.6 million and
for 1998 was $2.1 million.
Note 3. Investment Securities
Securities with a market value of $205.2 million and $164.7 million at
December 31, 1999 and 1998, respectively, were pledged to secure public deposits
and for other purposes as required by law. The following table shows the
amortized cost and approximate market value of the held-to-maturity securities
and available-for-sale securities at December 31, 1999 and 1998, by maturity
within each type:
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Held-to-Maturity Securities Cost Gains Losses Value
--------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury, government
corporations and agencies obligations:
Within 1 year .......................... $ 38,371 $ 4 $ (106) $ 38,269
1 to 5 years ........................... 58,044 -- (1,272) 56,772
--------------------------------------------------
96,415 4 (1,378) 95,041
--------------------------------------------------
State and political subdivisions:
Within 1 year .......................... 1,264 1 (1) 1,264
1 to 5 years ........................... 17,515 3 (370) 17,148
5 to 10 years .......................... 479 -- (14) 465
--------------------------------------------------
19,258 4 (385) 18,877
--------------------------------------------------
Mortgage-backed securities:
Within 1 year .......................... 772 -- (3) 769
1 to 5 years ........................... 2,663 -- (33) 2,630
5 to 10 years .......................... 6,523 -- (200) 6,323
Over 10 years .......................... 9,629 -- (356) 9,273
--------------------------------------------------
19,587 -- (592) 18,995
--------------------------------------------------
Other:
Within 1 year .......................... -- -- -- --
1 to 5 years ........................... 2,201 1 (8) 2,194
5 to 10 years .......................... -- -- -- --
--------------------------------------------------
2,201 1 (8) 2,194
--------------------------------------------------
Total .................................... $137,461 $ 9 $(2,363) $135,107
==================================================
<CAPTION>
December 31, 1998
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Held-to-Maturity Securities Cost Gains Losses Value
-------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury, government
corporations and agencies obligations:
Within 1 year .......................... $ 61,575 $ 164 $ -- $ 61,739
1 to 5 years ........................... 113,015 848 (190) 113,673
-------------------------------------------------
174,590 1,012 (190) 175,412
-------------------------------------------------
State and political subdivisions:
Within 1 year .......................... 780 9 -- 789
1 to 5 years ........................... 15,092 176 (5) 15,263
5 to 10 years .......................... 2,094 19 -- 2,113
-------------------------------------------------
17,966 204 (5) 18,165
-------------------------------------------------
Mortgage-backed securities:
Within 1 year .......................... 437 4 -- 441
1 to 5 years ........................... 3,536 22 -- 3,558
5 to 10 years .......................... 5,476 36 -- 5,512
Over 10 years .......................... 11,996 24 (17) 12,003
-------------------------------------------------
21,445 86 (17) 21,514
-------------------------------------------------
Other:
Within 1 year .......................... 200 -- -- 200
1 to 5 years ........................... 2,103 16 -- 2,119
5 to 10 years .......................... 100 5 -- 105
-------------------------------------------------
2,403 21 -- 2,424
-------------------------------------------------
Total .................................... $216,404 $1,323 $(212) $217,515
=================================================
</TABLE>
20 Univest Corporation of Pennsylvania
<PAGE>
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Securities Available for Sale Cost Gains Losses Value
--------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury, government corporations
and agencies obligations:
Within 1 year .......................... $ 9,537 $19 $ -- $ 9,556
1 to 5 years ........................... 44,581 -- (991) 43,590
5 to 10 years .......................... 550 -- (15) 535
--------------------------------------------------
54,668 19 (1,006) 53,681
--------------------------------------------------
State and political subdivisions:
5 to 10 years .......................... 976 -- (28) 948
Over 10 years .......................... 6,958 1 (145) 6,814
--------------------------------------------------
7,934 1 (173) 7,762
--------------------------------------------------
Mortgage-backed securities:
Within 1 year .......................... 1,392 -- (11) 1,381
1 to 5 years ........................... 3,290 -- (63) 3,227
5 to 10 years .......................... 25,663 7 (557) 25,113
Over 10 years .......................... 64,250 5 (2,047) 62,208
--------------------------------------------------
94,595 12 (2,678) 91,929
--------------------------------------------------
Other:
Within 1 year .......................... 2,905 -- -- 2,905
1 to 5 years ........................... 12,410 -- (293) 12,117
5 to 10 years .......................... 1,521 -- (25) 1,496
Over 10 years .......................... 4,524 -- -- 4,524
--------------------------------------------------
21,360 -- (318) 21,042
--------------------------------------------------
Total .................................... $178,557 $32 $(4,175) $174,414
==================================================
<CAPTION>
December 31, 1998
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Securities Available for Sale Cost Gains Losses Value
------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury, government corporations
and agencies obligations:
Within 1 year .......................... $ 26,988 $ 164 $ -- $ 27,152
1 to 5 years ........................... 23,409 264 (121) 23,552
5 to 10 years .......................... -- -- -- --
------------------------------------------------
50,397 428 (121) 50,704
------------------------------------------------
State and political subdivisions:
5 to 10 years .......................... -- -- -- --
Over 10 years .......................... -- -- -- --
------------------------------------------------
-- -- -- --
------------------------------------------------
Mortgage-backed securities:
Within 1 year .......................... -- -- -- --
1 to 5 years ........................... 1,637 3 -- 1,640
5 to 10 years .......................... 12,902 210 (1) 13,111
Over 10 years .......................... 37,661 381 (5) 38,037
------------------------------------------------
52,200 594 (6) 52,788
------------------------------------------------
Other:
Within 1 year .......................... 3,527 -- -- 3,527
1 to 5 years ........................... -- -- -- --
5 to 10 years .......................... -- -- -- --
Over 10 years .......................... 4,242 -- -- 4,242
------------------------------------------------
7,769 -- -- 7,769
------------------------------------------------
Total .................................... $110,366 $1,022 $(127) $111,261
================================================
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations without call or
prepayment penalties.
During the year ended December 31,1999, available-for-sale debt securities
with a fair value at the date of sale of $18,391 were sold ($25,079 in 1998).
Gross realized gains on such sales totaled $52 during 1999 ($97 in 1998 and $102
in 1997), and the gross realized losses totaled $49 during 1999 ($0 in 1998 and
$7 in 1997). Net unrealized losses on available-for-sale securities included in
accumulated other comprehensive income as a separate component of shareholders'
equity totaled $2,672 in 1999 and net unrealized gains totaled $582 in 1998.
Unrealized losses in investment securities at December 31,1999 and 1998 do
not represent permanent impairments.
At December 31, 1999 and 1998, there were no investments in any single
non-federal issuer representing more than 10% of shareholders' equity.
Note 4. Loans
The following is a summary of the major loan categories:
December 31,
1999 1998
-----------------------------
Real estate--construction .............. $ 33,632 $ 33,530
Real estate--commercial ................ 173,780 169,402
Real estate--residential ............... 219,292 214,798
Commercial and industrial .............. 212,656 171,699
Loans to individuals ................... 72,658 64,306
All other .............................. 10,591 7,117
-----------------------------
Total loans ............................ 722,609 660,852
Less: Unearned income .................. (135) (403)
-----------------------------
$ 722,474 $ 660,449
=============================
Univest Corporation of Pennsylvania 21
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
At December 31, 1999, loans to directors and executive officers of Univest
and companies in which directors have an interest aggregated $12,519. These
loans have been made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
same time for comparable transactions with customers and did not involve more
than the normal risk of collectibility or present other unfavorable terms. The
summary of activity for the past year is as follows:
Balance at Amounts Balance at
January 1, 1999 Additions Collected December 31, 1999
- --------------------------------------------------------------------------------
$9,806 $19,548 $16,835 $12,519
Note 5. Reserve for Possible Loan Losses
A summary of the transactions in the reserve for possible loan losses is
as follows:
1999 1998 1997
--------------------------------
Balance at beginning of year ............... $ 10,538 $ 10,270 $ 9,801
Provision charged to operating expenses .... 1,052 958 1,310
Recoveries ................................. 1,390 682 316
Loans charged off .......................... (1,757) (1,372) (1,157)
--------------------------------
Balance at end of year ..................... $ 11,223 $ 10,538 $ 10,270
================================
Under Statement of Financial Accounting Standard No. 114, "Accounting by
Creditors for Impairment of a Loan" (SFAS No. 114), the reserve for possible
loan losses related to loans that are identified for evaluation in accordance
with SFAS No. 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. Included in the total impaired loans is $2,043
($1,310 at December 31, 1998) against which $960 ($627 at December 31, 1998) of
the reserve for possible loan losses is allocated. Statement No. 118,
"Accounting by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures" (SFAS No. 118) amended SFAS No. 114's income recognition policy and
clarifies SFAS No. 114's disclosure requirements. At December 31, 1999, the
recorded investment in loans that are considered to be impaired under SFAS No.
114 was $2,072 all of which were on a nonaccrual basis, ($2,715 at December 31,
1998). The average recorded investment in impaired loans during the year ended
December 31, 1999 was approximately $2,088 ($2,719 at December 31, 1998). The
Corporation did not recognize any interest income on impaired loans in 1999 or
1998.
At December 31, 1999, the total of nonaccrual and restructured loans was
$2,110 ($2,839 at December 31, 1998 and $2,066 at December 31,1997). If these
loans had been performing in accordance with their contractual terms, additional
interest income of $246, $341, and $187 would have been recorded in 1999, 1998,
and 1997, respectively. In addition, Pennview had first residential mortgage
loans of $213 at December 31, 1999 ($710 at December 31, 1998) which were over
90 days delinquent.
The total of the real estate owned at December 31, 1999 was $45 ($393 at
December 31, 1998).
Note 6. Premises and Equipment
December 31,
1999 1998
-------------------------
Land and land improvements ................... $ 3,256 $ 3,339
Premises and improvements .................... 16,859 16,215
Furniture and equipment ...................... 16,129 15,384
-------------------------
36,244 34,938
Less: accumulated depreciation ............... (20,837) (19,110)
-------------------------
$ 15,407 $ 15,828
=========================
22 Univest Corporation of Pennsylvania
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
As of December 31, 1999, Univest and its subsidiaries were obligated under
noncancelable leases for various premises and equipment. A summary of the future
minimum rental commitments under noncancelable operating leases net of related
sublease revenue is as follows: 2000-$592; 2001-$478; 2002-$311; 2003-$251;
2004-$191. Rental expense charged to operations was $611, $525, and $487 for
1999, 1998, and 1997 respectively.
Note 7. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The assets and
liabilities giving rise to the Corporation's deferred tax assets and liabilities
as of December 31, 1999 and 1998 are as follows:
1999 1998
---------------------
Deferred tax assets:
Loan loss .................................... $3,898 $3,611
Deferred compensation ........................ 239 237
Postretirement benefits ...................... 448 427
Market-to-market adjustment .................. 1,460 --
---------------------
6,045 4,275
Deferred tax liabilities:
Accretion .................................... 186 199
Retirement plans ............................. 7 70
Depreciation ................................. 120 191
Intangible assets ............................ 301 312
Deferred Income .............................. 380 320
Market-to-market adjustment .................. -- 161
Other ........................................ 885 628
---------------------
Net deferred tax assets .......................... $4,166 $2,394
=====================
The provision for federal and state income taxes included in the
accompanying consolidated statements of income consists of the following:
1999 1998 1997
------------------------------------------
Current ................... $ 6,583 $ 6,325 $ 6,149
Deferred .................. 31 (279) (162)
------------------------------------------
$ 6,614 $ 6,046 $ 5,987
==========================================
The effective tax rates are less than the statutory federal rate of 35%
because interest on loans and investment securities of state and political
subdivisions is exempt from income tax. Deferred federal income taxes (benefit)
arise from timing differences in the recognition of income and expenses for tax
and financial reporting purposes. No valuation allowance was recognized for the
deferred tax assets at December 31,1999 and 1998.
Note 8. Retirement Plan
Information with respect to the Retirement Plan is as follows:
1999 1998
----------------------
Change in benefit obligation
Benefit obligation at beginning of year ............ $ 15,282 $ 12,706
Service cost--benefits earned during the period .... 684 568
Interest cost on projected benefit obligation ...... 1,013 915
Actuarial (gain) loss .............................. (1,827) 1,498
Benefits paid ...................................... (556) (405)
----------------------
Benefit obligation at end of year .................. $ 14,596 $ 15,282
======================
Univest Corporation of Pennsylvania 23
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
1999 1998
----------------------
Change in plan assets
Fair value of plan assets at beginning of year ..... $ 17,388 $ 15,084
Actual return on plan assets ....................... 2,258 2,708
Benefits paid ...................................... (556) (405)
----------------------
Fair value of plan assets at end of year ........... 19,090 17,387
----------------------
Funded status ...................................... 4,493 2,105
Unrecognized net actuarial gain .................... (3,180) (549)
Unrecognized prior service costs ................... (456) (533)
Unrecognized net transition asset .................. (126) (252)
----------------------
Prepaid pension expense ............................ $ 731 $ 771
======================
Weighted-average assumptions as of December 31
Assumed discount rate for obligation ............... 7.25% 6.30%
Assumed long-term rate of investment return ........ 8.50% 8.50%
Assumed salary increase rate ....................... 5.10% 5.10%
Net pension expense recognized in 1999, 1998, and 1997 amounted to $40,
$15, and $165, respectively, and is summarized as follows:
1999 1998 1997
-----------------------------
Service cost--benefits earned during the period $ 684 $ 568 $ 539
Interest cost on projected benefit obligation . 1,013 915 887
Expected return on plan assets ................ (1,455) (1,266) (1,059)
Amortization of net transition asset .......... (126) (126) (126)
Amortization of prior service cost ............ (76) (76) (76)
-----------------------------
$ 40 $ 15 $ 165
=============================
The unrecognized net asset at transition is being amortized on the
straight-line method over 15 years. Plan assets include marketable equity
securities, corporate and government debt securities, and certificates of
deposit.
Pension expense for the 401(k) deferred salary savings plan for the years
ended December 31, 1999, 1998, and 1997 was $290, $263, and $243, respectively.
Note 9. Other Postretirement Benefit Plans
Information with respect to other Postretirement Benefits is as follows:
1999 1998
--------------------
Change in benefit obligation
Benefit obligation at beginning of year .............. $ 1,399 $ 1,175
Service cost--benefits earned during the period ...... 30 22
Interest cost on projected benefit obligation ........ 61 82
Actuarial (gain) loss ................................ (545) 171
Benefits paid ........................................ (42) (50)
--------------------
Benefit obligation at end of year .................... $ 903 $ 1,400
====================
Fair value of plan assets ............................ -- --
--------------------
Funded status ........................................ (903) (1,400)
Unrecognized net actuarial loss ...................... 64 306
Unrecognized prior service cost ...................... (289) --
--------------------
Accrued pension expense .............................. $(1,128) $(1,094)
====================
24 Univest Corporation of Pennsylvania
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Net periodic postretirement benefit cost for the years ended December 31, 1999,
1998, and 1997 includes the following components:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------
<S> <C> <C> <C>
Service cost--benefits earned during the period .............. $ 30 $ 22 $ 19
Interest cost on accumulated postretirement benefit obligation 61 82 78
Prior service cost ........................................... (20) -- --
Amortization of actuarial loss ............................... 6 1 --
----------------------
$ 77 $ 105 $ 97
======================
</TABLE>
1999 1998
Weighted-average assumptions as of December 31 -----------------
Assumed discount rate for obligation ................... 7.25% 6.30%
Medical care cost trend on covered charges* ............ 7.00% 7.50%
*For measurement purposes, the medical care cost trend rate on covered
charges is assumed to decrease gradually by 1/2 percent per year, reaching 5
percent in 2003 and after. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, a
one-percentage-point change in the assumed health care cost trend rates would
have the following effects:
One Percentage Point
--------------------
Increase Decrease
--------------------
Effect on total of service and interest cost components ... $ 3 $ (3)
Effect on postretirement benefit obligation ............... 32 (31)
The Corporation provides supplemental executive retirement benefits
covering selected employees and retirees. These plans are nonqualified defined
benefit plans. Assumptions used in determining the net periodic pension costs
are similar to those used to determine the costs of the Corporation's retirement
plan. Expenses charged to salaries and benefits were not material to the
Corporation's consolidated financial statements.
Note 10. Long-Term Incentive Plan
The Corporation adopted the 1993 Long-Term Incentive Plan, whereby the
Corporation may grant options to employees to purchase up to 500,000 shares of
common stock. The plan provides for the issuance of options to purchase common
shares at prices not less than 100 percent of the fair market value at the date
of option grant. Options are exercisable as to 33 percent of the optioned shares
each year from the date of grant for a period not exceeding six years. 168,124
common shares were available for future options and 71,671 common shares were
exercisable at December 31, 1999. Transactions involving the plan are summarized
as follows:
Shares Option Price
Under Option Per Share
-----------------------------
Outstanding at December 31, 1996 ................ 164,092 $13.60-$15.50
Granted ......................................... 5,500 30.00
Exercised ....................................... (4,334) 13.60
-----------------------------
Outstanding at December 31, 1997 ................ 165,258 13.60- 30.00
Granted ......................................... -- --
Exercised ....................................... (20,880) 13.60
Exercised ....................................... (23,993) 15.50
-----------------------------
Outstanding at December 31, 1998 ................ 120,385 13.60- 30.00
Granted ......................................... 15,000 33.25
Granted ......................................... 139,250 25.50
Exercised ....................................... (29,252) 13.60
Exercised ....................................... (19,462) 15.50
-----------------------------
Outstanding at December 31, 1999 ................ 225,921 $13.60-$33.25
=============================
Univest Corporation of Pennsylvania 25
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Note 11. Time Deposits
The aggregate amount of certificates of deposit in denominations of $100
or more was $25,400 at December 31, 1999, and $21,669 at December 31, 1998, with
interest expense of $1,290 for 1999, and $1,307 for 1998. Other time deposits in
denominations of $100 or more were $23,604 at December 31, 1999, and $23,124 at
December 31, 1998, with interest expense of $1,270 for 1999 and $1,450 for 1998.
Note 12. Long-Term Debt
At December 31, 1999 and 1998, long-term debt consisted of the following:
<TABLE>
<CAPTION>
Description December 31, December 31,
1999 1998 Interest Rate Maturity
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank Advance $ 3,500 $ 3,500 5.27% (variable) May 2001
Federal Home Loan Bank Advance 3,500 3,500 5.51% (variable) March 2001
Federal Home Loan Bank Advance 5,000 - 6.30% November 2009
Federal Home Loan Bank Advance 2,000 2,000 5.52% (variable) September 2002
Federal Home Loan Bank Advance 4,000 - 4.99% January 2009
Federal Home Loan Bank Advance 75 75 4.00% September 2006
---------------------------
$ 18,075 $ 9,075
===========================
</TABLE>
Advances from the Federal Home Loan Bank are collateralized by Federal
Home Loan Bank stock and substantially all first mortgage loans of the Banks.
The advances are subject to the payment of a prepayment fee in the event of
repayment of the advance in whole or in part prior to maturity.
Note 13. Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands):
1999 1998 1997
---------------------------
Numerator:
Net income .................................... $15,804 $14,501 $13,177
Numerator for basic and diluted earnings per
share - income available to common
shareholders .................................. $15,804 $14,501 $13,177
Denominator:
Denominator for basic earnings per share-
weighted-average shares outstanding ............ 7,234 7,539 7,730
Effect of dilutive securities:
Employee stock options ..................... 19 54 45
---------------------------
Denominator for diluted earnings per share
adjusted weighted-average shares
outstanding .................................... 7,253 7,593 7,775
===========================
Basic earnings per share ......................... $ 2.18 $ 1.92 $ 1.70
===========================
Diluted earnings per share ....................... $ 2.18 $ 1.91 $ 1.69
===========================
For additional disclosures regarding the employee stock options, see Note 10.
26 Univest Corporation of Pennsylvania
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Note 14. Financial Instruments with Off-Balance-Sheet Risk and Commitments
Loan commitments are made to accommodate the financial needs of the Banks'
customers. Standby letters of credit commit the Banks to make payments on behalf
of customers when certain specified future events occur. They primarily are
issued to support commercial paper, medium and long-term notes and debentures,
including industrial revenue obligations. Historically, substantially all
standby letters of credit expire unfunded. Both arrangements have credit risk
essentially the same as that involved in extending loans to customers and are
subject to the Banks' normal credit policies. Collateral is obtained based on
management's credit assessment of the customer.
The Banks offer commercial, mortgage, and consumer credit products to
their customers in the normal course of business which are detailed in Note 4.
These products represent a diversified credit portfolio and are generally issued
to borrowers within the Banks' branch office systems in eastern Pennsylvania.
The ability of the customers to repay their credit is, to some extent, dependent
upon the economy in the Banks' market areas.
The Banks also control their credit risks by limiting the amount of credit
to any business, institution, or individual, but as of December 31, 1999, the
Banks have identified the due from banks' balance as a significant concentration
of credit risk because it contains a balance due from a single depository
institution in the amount of $16,579 which is unsecured. Management evaluates
the creditworthiness of the institution on at least a quarterly basis in an
effort to monitor its credit risk associated with this concentration.
The following schedule summarizes the Corporation's off-balance-sheet financial
instruments:
Contract or
Notional Amount
---------------
Financial instruments representing credit risk:
Commitments to extend credit ................................ $234,273
Standby letters of credit or commercial letters of credit ... 17,550
Interest rate swaps, notional principal amount .............. 40,000
The Corporation may enter into interest-rate swaps in managing its
interest-rate risk. In these swaps, the Corporation agrees to exchange, at
specified intervals, the difference between fixed and floating interest amounts
calculated on an agreed-upon notional principal amount. Many 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.
At December 31, 1999, $40 million in notional interest-rate swaps were
outstanding. The contracts entered into by the Corporation expire as follows:
$10 million in notional principal amount in first quarter 2000, $10 million in
second quarter 2000 and $20 million in second quarter 2001. The impact of the
interest-rate swaps on net interest income for the year ended December 31, 1999
was a positive $209 and for the year ended December 31, 1998, a positive $160.
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
December 31, 1999, the market value of interest-rate swaps in an unfavorable
position was $301. There were no interest-rate swaps with the market value in a
favorable position. At December 31, 1998, the market value of interest-rate
swaps in a favorable position was $341, while the market value of interest-rate
swaps in an unfavorable position totaled $0. 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.
Note 15. Fair Values of Financial Instruments
Statement of Financial Accounting Standard No. 107, "Disclosures about
Fair Value of Financial Instruments" (SFAS No. 107), requires all entities to
disclose the estimated fair value of its financial instruments whether or not
recognized in the balance sheet. For Univest, as for most financial
institutions, substantially all of its assets and liabilities are considered
financial instruments as defined in SFAS No. 107. Many of the Corporation's
financial instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in an exchange
transaction. It is also the Corporation's general practice and
Univest Corporation of Pennsylvania 27
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
intent to hold its financial instruments to maturity and not to engage in
trading or sales activities other than residential mortgage loans held-for-sale
and those investment securities classified as available-for-sale. Significant
estimations and present value calculations, which are significantly affected by
the assumptions used, including the discount rate and estimate of future cash
flows, were used by the Corporation for the purposes of this disclosure.
Estimated fair values have been determined by the Corporation using the
best available data, and an estimation methodology suitable for each category of
financial instruments. For those loans and deposits with floating interest
rates, it is presumed that estimated fair values generally approximate the
recorded book balances. Various methodologies are described in the accompanying
notes.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the
Corporation.
Management is concerned that reasonable comparability between financial
institutions may not be likely due to the wide range of permitted valuation
techniques and numerous estimates which must be made given the absence of
readily available active secondary market valuations for many of the financial
instruments. This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values. Certain estimated
fair values cannot be substantiated by comparison to independent valuation
sources and, in many cases, might not be realized in immediate settlement of the
instrument.
The following table represents the estimates of fair value of financial
instruments:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
-----------------------------------------------------------
Carrying or Carrying or
Notional/Contract Fair Notional/Contract Fair
Amount Value Amount Value
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and short-term assets ........... $ 40,705 $ 40,705 $ 42,651 $ 42,651
Investment securities ................ 311,875 309,520 327,665 328,776
Net loans ............................ 711,251 711,669 649,911 676,903
Liabilities:
Deposits ............................. $ 910,675 $ 909,851 $ 874,504 $ 881,755
Short-term borrowings ................ 72,098 72,098 64,045 64,045
Long-term debt ....................... 18,075 16,532 9,075 8,995
Off-Balance-Sheet:
Commitments to extend credit ......... $ 234,273 $ (582) $ 208,952 $ (308)
Letters of credit .................... 17,550 (263) 18,371 (276)
Interest-rate swap, notional principal
amount ........................... 40,000 (301) 50,000 341
</TABLE>
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:
Cash and due from banks and short-term investments: The carrying amounts
reported in the balance sheets for cash and due from banks, time deposits with
other banks, and federal funds sold and other short-term investments
approximates those assets' fair values.
Investment securities (including mortgage-backed securities): Fair values
for investment securities are based on quoted market prices.
Loans: The fair values for loans are estimated using discounted cash flow
analyses, using a discount rate consisting of an appropriate risk free rate, as
well as components for credit risk, operating expense, and imbedded prepayment
options.
Deposit liabilities: The fair values for deposits with fixed maturities
are estimated by discounting the final maturity, and the fair values for
non-maturity deposits are established using a decay factor estimate of cash
flows based upon industry-accepted assumptions. The discount rate applied to
deposits consists of an appropriate risk free rate, and included components for
credit risk, operating expense, and imbedded prepayment options.
28 Univest Corporation of Pennsylvania
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Short-term borrowings: The carrying amounts of securities sold under
repurchase agreements, and other short-term borrowings approximate their fair
values.
Long-term debt: The fair values of the Corporation's long-term borrowings
(other than deposits) are estimated using a discounted cash flow analysis using
a discount rate consisting of an appropriate risk free rate, as well as
components for credit risk, operating expense, and imbedded prepayment options.
Off-balance-sheet instruments: Fair values for the Corporation's
off-balance-sheet instruments are based on the fees currently charged to enter
into similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
Note 16. Regulatory Matters
The Banks are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Banks' financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Banks
must meet specific capital guidelines that involve quantitative measures of the
Banks' assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Banks' capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Banks to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1999, that the
Banks meet all capital adequacy requirements to which they are subject.
As of December 31, 1999, the most recent notification from the Office of
Comptroller of the Currency and Federal Deposit Insurance Corporation (FDIC)
categorized the Banks as well-capitalized under the regulatory framework for
prompt corrective action. To be categorized as well-capitalized, the Banks must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Banks' category.
The Banks' actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well-
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital (to Risk-Weighted Assets):
Consolidated ......................... $109,825 13.49% $ 65,149 8.00% $ 81,436 10.00%
Union National Bank .................. 93,040 12.87% 57,839 8.00% 72,298 10.00%
Pennview Savings Bank ................ 12,834 14.64% 7,015 8.00% 8,768 10.00%
Tier I Capital (to Risk-Weighted Assets):
Consolidated ......................... 99,633 12.23% 32,574 4.00% 48,861 6.00%
Union National Bank .................. 83,988 11.62% 28,919 4.00% 43,379 6.00%
Pennview Savings Bank ................ 11,886 13.56% 3,507 4.00% 5,261 6.00%
Tier I Capital (to Average Assets):
Consolidated ......................... 99,633 9.20% 32,499 3.00% 43,332 4.00%
Union National Bank .................. 83,988 8.94% 28,177 3.00% 37,569 4.00%
Pennview Savings Bank ................ 11,886 8.54% 4,174 3.00% 5,565 4.00%
</TABLE>
Univest Corporation of Pennsylvania 29
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Be Well-
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk-Weighted Assets):
Consolidated ......................... $108,097 13.44% $ 64,365 8.00% $ 80,457 10.00%
Union National Bank .................. 88,313 12.45% 56,755 8.00% 70,944 10.00%
Pennview Savings Bank ................ 14,955 17.07% 7,009 8.00% 8,762 10.00%
Tier I Capital (to Risk-Weighted Assets):
Consolidated ......................... 99,163 12.33% 32,183 4.00% 48,274 6.00%
Union National Bank .................. 80,563 11.36% 28,378 4.00% 42,567 6.00%
Pennview Savings Bank ................ 14,205 16.21% 3,505 4.00% 5,257 6.00%
Tier I Capital (to Average Assets):
Consolidated ......................... 99,163 9.79% 30,379 3.00% 40,505 4.00%
Union National Bank .................. 80,563 9.26% 26,096 3.00% 34,795 4.00%
Pennview Savings Bank ................ 14,205 10.28% 4,145 3.00% 5,526 4.00%
</TABLE>
Dividend and Other Restrictions
The approval of the Office of Comptroller of the Currency is required for
a national bank to pay dividends if the total of all dividends declared in any
calendar year exceeds the bank's net profits (as defined) for that year combined
with its retained net profits for the preceding two calendar years. Under this
formula, Union can declare dividends in 2000 without approval of the Office of
Comptroller of the Currency of approximately $2,437 plus an additional amount
equal to the Bank's net profits for 2000 up to the date of any such dividend
declaration.
The Federal Reserve Act requires that extension of credit by Union to
certain affiliates, including Univest (parent), be secured by readily marketable
securities, that extension of credit to any one affiliate be limited to 10% of
Union's capital and surplus as defined, and that extensions of credit to all
such affiliates be limited to 20% of Union's capital and surplus.
Note 17. Parent Company Financial Information
Condensed financial statements of Univest, parent company only, follow:
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------------
<S> <C> <C>
Assets:
Deposits with bank subsidiary ............................... $ 67 $ 91
Investments in U.S. Government obligations available for sale 1,542 1,000
Investments in U.S. Government obligations held to maturity . -- --
Investments in subsidiaries, at equity in net assets:
Banks ................................................... 99,053 98,782
Non-banks ............................................... 5,369 5,536
Other assets ................................................ 2,792 1,770
-------------------
Total assets ......................................... $108,823 $107,179
===================
Liabilities:
Dividends payable ........................................... $ 1,209 $ 1,108
Other liabilities ........................................... 4,863 2,894
-------------------
Total liabilities .................................... 6,072 4,002
-------------------
Shareholders' equity ............................................ 102,751 103,177
-------------------
Total liabilities and shareholders' equity ........... $108,823 $107,179
===================
</TABLE>
30 Univest Corporation of Pennsylvania
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Statements of Income
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
--------------------------------
<S> <C> <C> <C>
Dividends from banks ....................................... $ 12,991 $ 16,029 $ 5,150
Other income ............................................... 8,578 7,536 7,695
--------------------------------
Total operating income ................................. 21,569 23,565 12,845
Operating expenses ......................................... 9,839 8,242 8,105
--------------------------------
Income before income tax benefit and equity in
undistributed income of subsidiaries ................... 11,730 15,323 4,740
Applicable income tax (benefit) ............................ (365) (152) (57)
--------------------------------
Income before equity in undistributed income of subsidiaries 12,095 15,475 4,797
Equity in undistributed (loss) income of subsidiaries:
Banks .................................................. 3,439 (932) 8,260
Non-banks .............................................. 270 (42) 120
--------------------------------
Net income ................................................. $ 15,804 $ 14,501 $ 13,177
================================
</TABLE>
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
--------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income ....................................................... $ 15,804 $ 14,501 $ 13,177
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed net income/loss of subsidiaries ... (3,709) 974 (8,380)
Increase in other assets ............................... (1,592) (343) (135)
Depreciation of premises and equipment ................. 571 542 498
(Decrease) increase in other liabilities ............... 1,969 (91) (438)
--------------------------------
Net cash provided by operating activities ........... 13,043 15,583 4,722
Cash flows from investing activities
Proceeds from maturities of securities held to maturity .......... 1,000 1,000 2,638
Purchases of investment securities available for sale ............ (1,542) (1,000) (1,000)
Investment in non-bank subsidiaries .............................. -- (35) --
--------------------------------
Net cash provided by (used in) investing activities . (542) (35) 1,638
Cash flows from financing activities
Purchases of treasury stock ...................................... (10,183) (13,692) (3,380)
Stock issued under dividend reinvestment and
employee stock purchase plans ............................. 1,270 1,204 856
Proceeds from exercise of stock options ......................... 699 656 59
Repayment from subsidiary ....................................... 350 -- 275
Cash dividends .................................................. (4,661) (4,181) (3,641)
--------------------------------
Net cash used in financing activities ............... (12,525) (16,013) (5,831)
--------------------------------
Net increase (decrease) in deposits with bank subsidiary ........ (24) (465) 529
Deposits with bank subsidiary at beginning of year .............. 91 556 27
--------------------------------
Deposits with bank subsidiary at end of year .................... $ 67 $ 91 $ 556
================================
</TABLE>
During 1999, 1998, and 1997 the parent company made income tax payments of
$6,758, $6,041, and $5,975, respectively.
No interest payments were made.
Univest Corporation of Pennsylvania 31
<PAGE>
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except share data)
- --------------------------------------------------------------------------------
Note 18. Quarterly Data (Unaudited)
The unaudited results of operations for the quarters for the years ended
December 31, 1999 and 1998 were as follows:
1999 Quarterly Financial Data
<TABLE>
<CAPTION>
December 31 September 30 June 30 March 31
------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income ....................................... $18,834 $18,664 $18,325 $18,021
Interest expense ...................................... 8,059 7,922 7,773 7,627
------------------------------------------------------
Net interest income ............................... 10,775 10,742 10,552 10,394
Provision for loan losses ............................. 251 251 275 275
------------------------------------------------------
Net interest income after provision for loan losses 10,524 10,491 10,277 10,119
Other income .......................................... 4,574 3,837 3,563 3,575
Other expenses ........................................ 9,368 8,532 8,492 8,150
------------------------------------------------------
Income before income taxes ............................ 5,730 5,796 5,348 5,544
Applicable income taxes ............................... 1,719 1,681 1,580 1,634
------------------------------------------------------
Net income ........................................ $ 4,011 $ 4,115 $ 3,768 $ 3,910
======================================================
Per share data:
Net income:
Basic .......................................... $ .56 $ .57 $ .52 $ .53
======================================================
Diluted ........................................ $ .56 $ .57 $ .52 $ .53
======================================================
Dividends per share ................................. $ .17 $ .17 $ .17 $ .15
======================================================
<CAPTION>
1998 Quarterly Financial Data
December 31 September 30 June 30 March 31
------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income ....................................... $18,213 $18,460 $18,196 $17,591
Interest expense ...................................... 7,979 8,260 7,975 7,601
------------------------------------------------------
Net interest income ............................... 10,234 10,200 10,221 9,990
Provision for loan losses ............................. 75 275 275 333
------------------------------------------------------
Net interest income after provision for loan losses 10,159 9,925 9,946 9,657
Other income .......................................... 2,768 2,745 2,586 2,595
Other expenses ........................................ 8,079 7,224 7,373 7,158
------------------------------------------------------
Income before income taxes ............................ 4,848 5,446 5,159 5,094
Applicable income taxes ............................... 1,381 1,623 1,508 1,534
------------------------------------------------------
Net income ........................................ $ 3,467 $ 3,823 $ 3,651 $ 3,560
======================================================
Per share data:
Net income:
Basic .......................................... $ .47 $ .51 $ .48 $ .46
======================================================
Diluted ........................................ $ .47 $ .50 $ .48 $ .46
======================================================
Dividends per share ............................... $ .15 $ .15 $ .15 $ .125
======================================================
</TABLE>
32 Univest Corporation of Pennsylvania
<PAGE>
Report of Independent Auditors
- --------------------------------------------------------------------------------
Board of Directors and Shareholders
Univest Corporation of Pennsylvania
We have audited the accompanying consolidated balance sheets of
Univest Corporation of Pennsylvania as of December 31, 1999 and 1998, and
the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Univest Corporation of Pennsylvania at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 21, 2000
Univest Corporation of Pennsylvania 33
<PAGE>
Five-Year Performance Highlights
- --------------------------------------------------------------------------------
Basic Earnings Per Share
(In Dollars)
[The following table was depicted as a bar chart in the printed material.]
95 96 97 98 99
---- ---- ---- ---- ----
1.43 1.54 1.70 19.2 2.18
Average Deposits
(Millions of Dollars)
[The following table was depicted as a bar chart in the printed material.]
95 96 97 98 99
----- ----- ----- ----- -----
695.8 725.4 755.0 830.2 885.7
Average Loans
(Millions of Dollars)
[The following table was depicted as a bar chart in the printed material.]
95 96 97 98 99
----- ----- ----- ----- -----
583.8 594.8 625.8 645.7 685.6
Net Income
(Millions of Dollars)
[The following table was depicted as a bar chart in the printed material.]
95 96 97 98 99
----- ----- ----- ----- -----
11.23 12.04 13.18 14.50 15.80
Selected Financial Data
<TABLE>
<CAPTION>
(In Thousands, except per share data)
Year ended December 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets ............... $1,120,992 $1,070,470 $ 973,157 $ 912,459 $ 881,888
Long-term obligations ...... 18,075 9,075 9,075 7,075 4,085
Interest income ............ 73,844 72,460 69,540 66,682 63,545
Net interest income ........ 42,463 40,645 40,628 39,001 37,582
Provision for loan losses .. 1,052 958 1,310 1,045 1,895
Net income ................. 15,804 14,501 13,177 12,038 11,227
Net income per share:
Basic .................. $ 2.18 $ 1.92 $ 1.70 $ 1.54 $ 1.43
Diluted ................ $ 2.18 $ 1.91 $ 1.69 $ 1.54 $ 1.43
Dividends declared per share $ 0.66 $ 0.575 $ 0.48 $ 0.355 $ 0.355
</TABLE>
34 Univest Corporation of Pennsylvania
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Results of Operations
Univest Corporation of Pennsylvania consolidated net income (in thousands)
and earnings per share for 1999, 1998, and 1997 were as follows:
1999 1998 1997
------------------------------------
Net income .......... $ 15,804 $ 14,501 $ 13,177
Net income per share:
Basic ......... 2.18 1.92 1.70
Diluted ....... 2.18 1.91 1.69
1999 versus 1998
The 1999 results compared to 1998 include the following significant pretax
components:
-- Net interest income increased due to an increase in average earning
assets that was offset by a decrease in average yield and an
increase in interest-bearing liabilities with a decrease in yield.
The net interest margin decreased to 4.2% from 4.3%.
-- Total other income increased by $4.8 million or 44.9% due to
increased fee income and commission income. Commission income, which
is offset by commission expense, is the primary source of income for
the newly acquired Fin-Plan Group.
-- Salaries and benefits increased $3.5 million or 22.3% largely due to
the commissions and salaries of the newly acquired Fin-Plan Group
and the opening of another new supermarket branch.
-- Other expenses increased $1.1 million or 12.0% partly due to MAC
fees, contributions, community relations and intangible expenses.
1998 versus 1997
The 1998 results compared to 1997 include the following significant pretax
components:
-- Net interest income remained constant due to an increase in average
earning assets that was offset by a decrease in average yield and an
increase in interest-bearing liabilities with an increase in yield.
The net interest margin decreased to 4.3% from 4.7%.
-- The provision for loan losses decreased $0.4 million or 26.9% due to
higher than expected net recoveries which caused a lower fourth
quarter provision.
-- Total other income increased by $2.8 million or 35.4% due to
earnings from the purchase of Bank-Owned Life Insurance and
increased fee income.
-- Salaries and benefits increased only $0.2 million or 1.3% aided by
outsourcing.
-- Equipment expense increased $0.2 million or 8.0% primarily as a
result of software and equipment expenses needed for Y2K testing.
-- Other expenses increased $1.3 million or 16.5% partly due to a
write-off for Pennview Savings Bank's Franconia office, internal
audit fees, delivery service fees, marketing and advertising, and
intangible expenses.
Net Interest Income
Net interest income is the difference between interest earned on loans,
investments and other interest-earning assets and interest paid on deposits and
other interest-bearing liabilities. Net interest income is the principal source
of the Corporation's revenues. The following table demonstrates a trend of
increasing amounts for 1997 through 1999. Sensitivities associated with the mix
of assets and liabilities are numerous and very complex, thus the Corporation
commits significant time to maximizing the net interest margin. The
Asset/Liability Management and Investment Committees work to implement
strategies with the intent and effort to at least maintain or improve the net
interest margin.
It is important to again underscore the complexities associated with
asset/liability pricing noting that competition within the marketplace can
dramatically impact the margin results. For this reason, as we look to the
future, it must be understood that an improving or increasing net interest
income is not certain.
Univest Corporation of Pennsylvania 35
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
- --------------------------------------------------------------------------------
The following table presents a summary of Univest's average balances, the
yields earned on average assets, the cost of average liabilities, and
shareholders' equity for the years ended December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ------------------------------ ------------------------------
Interest Interest Interest
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate
---------- ---------- ------ ---------- ---------- ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Investments ............. $ 325,693 $ 18,863 5.8% $ 300,619 $ 17,897 6.0% $ 247,495 $ 15,217 6.1%
Loans ................... 685,644 54,981 8.0% 645,719 54,563 8.4% 625,849 54,323 8.7%
---------- ---------- ------ ---------- ---------- ----- ---------- ---------- -----
Total interest-earning assets 1,011,337 73,844 7.3% 946,338 72,460 7.7% 873,344 69,540 8.0%
Noninterest-earning assets .. 77,985 69,830 55,893
---------- ---------- ----------
Total assets ................ $1,089,322 $1,016,168 $ 929,237
========== ========== ==========
Interest-bearing liabilities:
Deposits ................ $ 735,260 $ 28,220 3.8% $ 698,104 29,415 4.2% $ 636,044 26,616 4.2%
Borrowings .............. 85,822 3,161 3.7% 66,550 2,400 3.6% 61,266 2,296 3.7%
--------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities ............. 821,082 31,381 3.8% 764,654 31,815 4.2% 697,310 28,912 4.1%
Noninterest-bearing
liabilities ............. 165,472 146,749 130,747
---------- ---------- ----------
Total liabilities ........... 986,554 911,403 828,057
Shareholders' equity ........ 102,768 104,765 101,180
---------- ---------- ----------
Total liabilities and
shareholders' equity .... $1,089,322 $1,016,168 $ 929,237
========== ---------- ========== ---------- ========== ----------
Net interest income ......... $ 42,463 $ 40,645 $ 40,628
========== ========== ==========
Interest-rate spread ........ 3.5% 3.5% 3.9%
===== ====== ======
Net interest margin on
weighted average
interest-earning assets . 4.2% 4.3% 4.7%
===== ====== ======
Ratio of average interest-
earning assets to average
interest-bearing liabilities 123.2% 123.8% 125.2%
===== ====== ======
</TABLE>
Interest Income
Interest and fees on loans increased .73% or $0.4 million from the $54.6
million recorded for the year ended December 31, 1998 as compared to the $55.0
million for the year ended December 31, 1999. The increase, due to increased
volume, was offset by a decrease in rate. Although the prime rate increased from
the 7.75% at January 1, 1999 to 8.00% in July, 8.25% in September and 8.50% in
November 1999, the average prime rate for the year 1999 was 8.0% as compared to
the average prime rate for the year 1998 of 8.3%. The average interest yield on
the portfolio decreased from 8.4% in 1998 to 8.0% in 1999. Interest and fees on
loans increased 0.6% or $0.3 million from the $54.3 million recorded for the
year ended December 31, 1997 as compared to the $54.6 million for the year ended
December 31, 1998. The increase, due to increased volume, was offset by a
decrease in rate. The prime rate decreased from the 8.50% at January 1, 1998 to
8.25% in September, 8.00% in October and 7.75% in November 1998, reducing the
average interest yield on the portfolio from 8.7% in 1997 to 8.4% 1998.
Tax-free interest shows an increasing trend when comparing the $2.6
million for December 31, 1999 with the $2.4 million recorded for December 31,
1998 and the $2.1 million for December 31, 1997.
Interest on U.S. Government obligations decreased from $11.6 million for
the year ended December 31, 1998 to $9.6 million at December 31, 1999. The
decrease was due to decreases in both volume and rate. Interest on government
obligations decreased from $12.3 million for the year ended December 31, 1997 to
$11.6 million at December 31, 1998. The decrease was due to decreases in both
volume and rate.
36 Univest Corporation of Pennsylvania
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
- --------------------------------------------------------------------------------
Interest and dividends on state and political subdivisions shows an
increasing trend from $0.2 million in 1997 to $0.3 million in 1998 and $0.9
million in 1999. The increase is a result of both rate and volume. During 1999,
interest rates increased by 175 basis points, while volumes in this category
increased 60%.
The other securities category consists mainly of U.S. Government Agency
mortgage-backed securities. Income on other securities has grown from $2.4
million in 1997 to $4.4 million in 1998 and $7.6 million in 1999. The increases
were all due to increased volume, especially in 1999 when average balances
increased from $67.6 million for 1998 to $122.2 million for 1999. The increase
in volume is due to higher yields in mortgage-backed security products relative
to other fixed income instruments in 1999.
Interest on federal funds sold is the resulting daily investment activity
that can be volatile in both rate and volume. Interest on federal funds sold
decreased from $1.0 million in 1998 to $0.5 million in 1999 due to both
decreased volume and rate. Income increased from $0.2 million in 1997 to $1.0
million in 1998 due to increased volume and rate. Included in this amount is
$274 thousand of interest on long term federal funds sold. Investment in long
term federal funds sold was for a five-month period in the last half of 1998.
Interest Expense
Interest expense on demand deposits increased 10.9% or $0.7 million from
$6.4 million in 1998 to $7.1 million in 1999. The growth was attributed to an
increase in volume in certain types of money market accounts. Interest on demand
deposits increased 77.8% or $2.8 million from $3.6 million in 1997 to $6.4
million in 1998. The growth was attributed to volume and rate increases in
certain types of money market accounts.
Interest expense on savings deposits decreased from $3.2 million in 1998
to $2.8 million in 1999. While there was an increase in volume it was offset by
a decrease in rate. Interest expense on savings deposits remained stable at $3.2
million when comparing years ended December 31, 1998 and 1997.
Interest expense on time deposits decreased from $19.8 million in 1998 to
$18.4 million in 1999. The reduction was due to decreases in both volume and
rate. Interest expense on time deposits remained a constant $19.8 million for
the years ended December 31, 1998 and 1997.
Interest expense--all other consists of interest paid on short-term
borrowings such as federal funds purchased, the corporate line of credit,
repurchase agreements and treasury tax and loan deposit. In addition, Union
National Bank offers an automated cash management checking account that sweeps
funds daily into a repurchase agreements account. Interest expense increased
from $1.9 million in 1998 to $2.5 million in 1999 due to increased volume.
Interest expense remained constant at $1.9 million for 1998 and 1997 due to
increasing volumes offset by decreasing rates.
Long-Term Debt
Interest on long-term debt increased from $0.5 million at December 31,
1998 to $0.7 million at December 31, 1999. This increase represents a full year
of interest on the additional $9.0 million borrowed from the Federal Home Loan
Bank of Pittsburgh by Pennview in 1999. Federal Home Loan Bank advances are
available to meet seasonal and other withdrawals from deposit accounts, to
purchase mortgage-backed securities and to expand lending. Interest on long-term
debt increased from $0.4 million at December 31, 1997 to $0.5 million at
December 31, 1998. This increase represents a full year of interest on the
additional $2.0 million borrowed from the Federal Home Loan Bank of Pittsburgh
by Union late in 1997.
Reserve For Possible Loan Losses
Management believes the reserve for possible loan losses is maintained at
a level that is adequate to absorb potential losses in the loan portfolio.
Management's methodology to determine the adequacy of and the provisions to the
reserve considers specific credit reviews, past loan loss experience, current
economic conditions and trends, and the volume, growth, and composition of the
loan portfolio.
The reserve for possible 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
changes in the charge-off activity. Loans are also reviewed for impairment based
on discounted cash flows using the loans' initial effective interest rate or the
fair value of the collateral for certain collateral dependent
Univest Corporation of Pennsylvania 37
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
- --------------------------------------------------------------------------------
loans as provided for under SFAS No. 114. Any of the above criteria may cause
the provision to fluctuate. The provision for loan losses for the years ended
December 31, 1999 and 1998 was $1.0 million. The provision for December 31, 1997
was $1.3 million. Due to higher than expected recoveries in the fourth quarter
of 1998, no provision was made for Union. The ratio of the reserve for possible
loan losses to total loans at December 31, 1999 and 1998 was 1.6%.
At December 31, 1999, the recorded investment in loans that are considered
to be impaired under SFAS No.114 was $2.1 million, all of which were on a
nonaccrual basis. The related reserve for possible loan losses for those loans
was $1.0 million. At December 31, 1998, the recorded investment in loans
considered to be impaired was $2.7 million and the related reserve for possible
loan losses for those loans was $0.6 million.
Generally, when a loan (including a loan impaired under SFAS No. 114) is
classified as nonaccrual, the accrual of interest on such a loan is
discontinued. A loan is classified as nonaccrual when the contractual payment of
principal or interest has become 90 days past 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 period of time, and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt. Total cash basis,
restructured and nonaccrual loans at December 31, 1999 total $2.3 million
(versus $3.5 million at December 31, 1998 and $3.3 million at December 31, 1997)
and consist mainly of real estate-related commercial loans. For the year ended
December 31, 1999, nonaccrual loans resulted in lost interest income of $0.2
million as compared to $0.3 million in 1998 and $0.2 million in 1997. 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. The Corporation's ratio of
nonperforming assets to total loans was .32% as of December 31, 1999 and .59% as
of December 31, 1998.
During the first quarter of 1999, the Office of Comptroller of the
Currency completed a safety and soundness examination at Union. During the first
quarter of 1999, the Federal Deposit Insurance Corporation completed a safety
and soundness examination at Pennview. The dollar value of identified potential
problem loans was not revised significantly as a result of the examination.
Examination procedures require individual judgments about the borrower's ability
to repay loans, sufficiency of collateral values, and the effects of changing
economic circumstances. The procedures are similar to those employed by the
Corporation in determining the adequacy of the allowance for loan losses and in
classifying loans. Judgments made by regulatory examiners may differ from those
made by management.
At December 31, 1999, the Corporation has $45 thousand of Other Real
Estate Owned ("OREO") 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 December 31, 1998, the Corporation
had $393 thousand in OREO. There were no adjustments to the carrying value of
OREO during 1997, 1998 or 1999.
Noninterest Income
Trust income continues to be a major source of noninterest income. Income
for the year ended December 31, 1999 of $4.0 million was $0.8 million or 25.0%
more than the $3.2 million reported for year ended December 31, 1998 versus an
increase of 18.5% or $0.5 million from 1997 to 1998. The increases are
attributed to higher market values of assets under management and growth in the
number of trust accounts.
Service charges on demand deposits increased $0.5 million from $3.0
million at December 31, 1998 to $3.5 million at December 31, 1999. The increase
was due mainly to increases in various transaction fees and deposit service
fees. Service charges for the year ended December 31, 1998 increased $1.1
million from $1.9 million for the year ended December 31, 1997 to $3.0 million
for the year ended December 31, 1998.
38 Univest Corporation of Pennsylvania
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
- --------------------------------------------------------------------------------
Other income that is noninterest related consists mainly of general fee
income and other miscellaneous nonrecurring types of income. It also includes
various types of service charges, such as ATM fees, increases in the cash
surrender value of Bank-Owned Life Insurance (BOLI) and commission income. Other
noninterest income of $8.1 million for 1999 is $4.0 million or 97.6% greater
than the $4.1 million earned in 1998. The increase is primarily due to
commission income of $2.3 million. Commission income, which is offset by
commission expense, is the primary source of income for the newly acquired
Fin-Plan Group. Refer to other expense. Also included in other income growth is
an increase in various transaction fees and deposit services fees of $1.4
million from $2.2 million at December 31, 1998 to $3.6 million at December 31,
1999. Other noninterest income of $4.1 million for 1998 is $1.0 million or 32.3%
greater than the $3.1 million earned in 1997. The increase is due to a $570
thousand increase in the net cash surrender value of a $15.0 million Bank-Owned
Life Insurance Policy and approximately $400 thousand of increased fee income.
Asset Sales
Sales of mortgage loans during the year ended December 31, 1999 resulted
in a gain of $51 thousand as compared to $250 thousand for the year ended
December 31, 1998. The decrease results from fewer sales due to increasing long
term rates during 1999 that caused a reduction in new loan volume. Sales of
mortgage loans during the year ended December 31, 1998 resulted in a gain of
$250 thousand as compared to $95 thousand for the year ended December 31, 1997.
The increase results from increased sales due to decreasing long-term interest
rates during 1998 that resulted in a large number of refinances.
During 1999, securities totaling approximately $18.4 million were sold
from the available-for-sale portfolio or matured, resulting in a net gain of $3
thousand. Short treasury securities were sold and reinvested in agency
securities to take advantage of the steepness of the yield curve and spread
between treasuries and agencies. In 1998, securities totaling approximately
$25.0 million were sold from the available-for-sale portfolio at a net gain of
$97 thousand. Treasury securities were sold to purchase agency securities and
therefore take advantage of the higher spreads between agency and treasuries in
the market. In 1997, securities totaling approximately $39.0 million were sold
from the available-for-sale portfolio at a net gain of $95 thousand. The total
of debt and equity securities held in the available-for-sale portfolio as of
December 31, 1999 is $174.4 million versus $111.3 million at December 31, 1998.
The accumulated other comprehensive loss of $2.7 million, net of taxes, has been
debited to shareholders' equity as of December 31, 1999.
Noninterest Expense
The operating costs of the Corporation are known as other expenses, and
include, but are not limited to, salaries and benefits, equipment expense, and
occupancy costs. Expense control is very important to the management of the
Corporation, and every effort is made to contain and minimize the growth of
operating expenses, attempting to provide technological innovation whenever
practical, as operations change or expand. Salaries and benefits increased $3.5
million or 22.3% from $15.7 million in 1998 to $19.2 million in 1999. The
increase is largely due to the commissions and salaries of the newly acquired
Fin-Plan Group and the opening of another new supermarket branch. Salaries and
benefits increased $0.2 million or 1.3% from $15.5 million in 1997 to $15.7
million in 1998. The small increase is offset in part to outsourcing several
departments including internal audit and delivery services.
Net occupancy expense increased from $2.2 million for the year ended
December 31, 1998 to $2.5 million for the year ended December 31, 1999. The
increase was due in part to the opening of an additional supermarket in 1999.
Net occupancy expense remained constant at $2.2 million for the years ended
December 31, 1998 and 1997. Equipment expense decreased $0.1 million from $2.7
million in 1998 to $2.6 million in 1999. Equipment expense increased $0.2
million or 8.0% from $2.5 million in 1997 to $2.7 million in 1998. Increased
software expense due to Year 2000 testing is the primary reason for the
increase.
Other expenses of $10.3 million increased $1.1 million or 12.0% for the
year ended December 31, 1999 as compared to $9.2 million expense for 1998. MAC
fees, contributions, community relations and intangible expense all contributed
to this increase. Other expenses of $9.2 million increased $1.3 million or 16.5%
for the year ended December 31, 1998 as compared to $7.9 million expense for
1997. This increase was due to increases in several expense areas. The largest
was a write-off for Pennview Savings
Univest Corporation of Pennsylvania 39
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
- --------------------------------------------------------------------------------
Bank's Franconia office. Audit fees and delivery service fees increased $125
thousand and $140 thousand, respectively, due to outsourcing. Increases in other
expenses such as marketing and advertising, fee expenses, and intangible
expenses explain the remaining increases.
Cautionary Statement for the Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The discussion regarding the Corporation's preparedness for Year 2000 as
discussed in the following section entitled "Year 2000" contains certain
forward-looking statements (as defined in the Private Securities Litigation
Reform Act of 1995). These forward-looking statements involve risks and
uncertainties including changes in the Corporations' ability to execute its plan
to address the Year 2000 issue, and the ability of third parties to effectively
address their Year 2000 issues. The Corporation wishes to advise readers not to
place undue reliance on any such forward-looking statements which reflect
Management's analysis only as of the date hereof. Although the Corporation
believes that the expectations reflected in such forward-looking statements are
reasonable, actual results may differ materially from the results discussed in
these forward-looking statements.
Year 2000 Disclosures
On January 1, 2000, all of the Corporation's computer systems ran as
normal. There were no major problems reported, just a few minor ones that were
easily fixed.
The Corporation is subject to risk in the event customers experience
disruptions in their operations and experience loss of business and liquidity
problems. The Corporation will continue to closely monitor those higher risk
customers to promptly determine the possible effects on the Corporation's
liquidity and loan loss reserves. The inability of customers to complete their
Y2K resolution process in a timely manner could impact the Corporation.
The total cost of the Y2K project was estimated at $400 thousand. At
December 31, 1999, the Corporation incurred a total cost for all three project
years of $371 thousand, all of which was expensed. For the year ended December
31, 1999, $162 thousand was expensed and for the year ended December 31, 1998,
$209 thousand was expensed.
Tax Provision
The provision for income taxes was $6.6 million for the year ended
December 31, 1999 and $6.0 million for the year ended December 31, 1998 and $6.0
million for the year ended December 31, 1997. The provision for income taxes for
1999, 1998, and 1997 was at effective rates of 29.5%, 29.4%, and 31.2%,
respectively. The effective tax rate reflects the benefits of tax credits
generated from investments in low-income housing tax projects and tax-free
income from investment of securities, loans, and bank-owned life insurance.
Financial Condition
During 1999, total assets increased to $1,121.0 million, an increase of
$50.5 million or 4.7% over the $1,070.5 million in 1998. Investment securities
decreased $15.8 million to $311.9 million as compared to the $327.7 million at
December 31, 1998. Federal funds sold decreased $10.9 million to $1.8 million as
compared to the $12.7 million at December 31, 1998. Total loans increased by
$62.1 million from $660.4 million at December 31, 1998 to $722.5 million at
December 31, 1999.
Total deposits grew from $874.5 million at December 31, 1998 to $910.7
million at December 31, 1999, an increase of $36.2 million. Deposit growth was
due mainly to increased activity in certain types of money market accounts
paying higher rates. Long-term debt increased $9.0 million from $9.1 million at
December 31, 1998 to $18.1 million at December 31, 1999 to expand lending.
Shareholders' equity decreased $0.4 million or 0.4% to $102.8 million at
December 31, 1999 compared to $103.2 million at December 31, 1998. The main
reason was increased activity in treasury stock purchases that increased to
$22.2 million from $14.6 million at December 31, 1998. On March 12,1999, the
Board of Directors approved the continuation of the Buyback Program for another
two years. This approval allows the Corporation to buy back up to 5% or
approximately 366,285 shares of its outstanding common stock in open market or
negotiated transactions. The net number of shares purchased since March 1999 is
212,711.
40 Univest Corporation of Pennsylvania
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
- --------------------------------------------------------------------------------
Asset/Liability Management, Liquidity
The primary functions of Asset/Liability Management are to assure adequate
liquidity while maintaining an appropriate balance between interest-earning
assets and interest-bearing liabilities. Liquidity management involves the
ability to meet cash flow requirements of customers. Interest-rate sensitivity
management seeks to avoid fluctuating net interest margins and to enhance
consistent growth of net interest income through periods of changing rates.
Univest uses both GAP and simulation techniques to quantify its exposure
to interest rate risk. The Company uses GAP techniques to identify and monitor
long term rate exposure and uses a simulation model to measure the short term
rate exposures. The Company runs various earnings simulation scenarios to
quantify the effect of declining or rising interest rates on the net interest
margin over a one year horizon. The simulation uses existing portfolio rate and
repricing information, combined with assumptions regarding future loan and
deposit growth, future spreads, prepayments on residential mortgages, and the
discretionary pricing of non-maturity assets and liabilities.
The Corporation is permitted to use interest-rate swap agreements that
convert a portion of its floating-rate commercial loans to a fixed-rate 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 amounts calculated on an agreed-upon
notional principal amount. 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.
At December 31, 1999, $40.0 million in notional interest-rate swaps were
outstanding. The contracts entered into by the Corporation expire as follows:
$10.0 million in notional principal amount in the first quarter 2000, $10.0
million in the second quarter 2000, $20.0 million in the second quarter 2001.
The impact of the interest-rate swaps on net interest income for the year ended
December 31, 1999 was a positive $0.2 million and for the year ended December
31, 1998 a positive $0.2 million.
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
December 31, 1999, the market value of interest-rate swaps in an unfavorable
value position was $0.3 million. At December 31, 1998, the market value of
interest-rate swaps in a favorable position was $0.3 million and there were no
interest-rate swaps with the market value in an unfavorable position. 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.
Capital Adequacy
Shareholders' equity at December 31, 1999 was $102.8 million or 9.2% of
total assets compared to shareholders' equity of $103.2 million or 9.6% as of
December 31, 1998. At December 31, 1999, shareholders' equity includes
accumulated other comprehensive loss of $2.7 million related to the unrealized
security gains, net of taxes on investment securities available for sale, while
shareholders' equity at December 31, 1998 includes accumulated other
comprehensive income of $0.6 million.
Capital guidelines which banking regulators have adopted assign minimum
capital requirements for categories of assets depending on their assigned risks.
The components of risk-based capital are Tier I and Tier II. Tier I is composed
of total shareholders' equity, excluding the adjustment for the unrealized
securities gains and losses, and also excluding any goodwill. Tier II includes
the applicable portion of the reserve for possible loan losses. Minimum required
total risk-based capital is 8.0%. Under the requirements, Univest has Tier I
capital ratios of 12.2% and 12.3 %, and total risk-based capital ratios of 13.5%
and 13.4 % at December 31, 1999 and 1998, respectively. These ratios place
Univest in the "well-capitalized" category under regulatory standards.
Market Risk
When used or incorporated by reference in disclosure documents, the words
"anticipate," "estimate," "expect," "project," "target," "goal" and similar
expressions are intended to identify forward-looking statements within the
meaning of section 27A of the Securities Act of 1933. Such forward-looking
statements are subject to certain risks, uncertainties and assumptions,
including those set forth below. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, expected
or projected. These forward-looking statements speak only as of the date of the
document. The Corporation expressly disclaims any obligation or undertaking to
publicly release
Univest Corporation of Pennsylvania 41
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
- --------------------------------------------------------------------------------
any updates or revisions to any forward-looking statement contained herein to
reflect any change in the Corporation's expectations with regard thereto to any
change in events, conditions or circumstances on which any such statement is
based.
Market risk is the risk of loss from adverse changes in market prices and
rates. In the course of its lending and deposit taking activities, Univest is
subject to changes in the economic value and/or earnings potential of these
assets and liabilities due to changes in interest rates. Univest's
Asset/Liability Management Committee (ALMC) manages interest rate risk in a
manner so as to provide adequate and predictable earnings. This is accomplished
through the establishment of policy limits on maximum risk exposures, as well as
the regular and timely monitoring of reports designed to quantify risk and
return levels.
Univest uses both GAP and simulation techniques to quantify its exposure
to interest rate risk. The company uses GAP techniques to identify and monitor
long term rate exposure and uses a simulation model to measure the short-term
rate exposures. The company runs various earnings simulation scenarios to
quantify the effect of declining or rising interest rates on the net interest
margin over a 1 year horizon. The simulation uses existing portfolio rate and
repricing information, combined with assumptions regarding future loan and
deposit growth, future spreads, prepayments on residential mortgages, and the
discretionary pricing of non-maturity assets and liabilities. The Corporation is
permitted to use interest-rate swaps and interest-rate caps/floors with indices
that correlate to on-balance sheet instruments, to modify its indicated net
interest sensitivity to levels deemed to be appropriate based on the
Corporation's current economic outlook. The effect of the interest rate swaps
that the bank uses to reduce its earnings volatility due to rate risk is also
included in the results of the simulation.
At December 31, 1999, the simulation, based upon forward-looking
assumptions, projects that Univest's greatest interest margin exposure to
interest-rate risk would occur if interest rates rise from present levels. Given
the assumptions, a 200 basis point parallel shift in the yield curve applied on
a ramp-up basis would cause Univest's interest margin, over a 1-year horizon, to
be approximately 1% less than it would be if market rates would remain
unchanged. At December 31, 1998, the simulation projects that Univest's greatest
interest margin exposure to interest-rate risk would occur if interest rates
decline from present levels. A 200 basis point parallel shift in the yield curve
applied on a ramp-down basis would cause Univest's interest margin, over a
1-year horizon, to be approximately 1% less than it would be if market rates
would remain unchanged. Policy limits have been established which allow a
tolerance for no more than approximately a 3.7% negative impact to the interest
margin resulting from a 200 basis point parallel yield curve shift over a
forward looking 12-month period. See Management's Discussion and Analysis of
Financial Condition and Results of Operations--"Net Interest Income" and
"Asset/Liability Management, Liquidity" and the table below:
Interest Sensitivity Analysis at December 31, 1999
<TABLE>
<CAPTION>
Within 1-5 Over
1 Year Years 5 Years
----------------------------------
<S> <C> <C> <C>
Rate Sensitive Interest Earning Assets
Federal funds sold ................................ $ 1,800 $ -- $ --
Investment securities ............................. 82,636 221,176 11,902
Loans ............................................. 353,689 309,855 58,930
Hedging Instruments ............................... (20,000) 20,000 --
----------------------------------
418,125 551,031 70,832
Rate Sensitive Liabilities
Interest bearing deposits ......................... 442,098 309,055 222
Borrowed funds .................................... 31,322 58,776 75
Net non-int.-bearing funds (a) .................... -- -- 198,440
----------------------------------
473,420 367,831 198,737
Excess int.-earning assets (liabilities) .............. (55,295) 183,200 (127,905)
Cumulative excess interest-earning assets (liabilities) $ (55,295) $ 127,905 $ --
==================================
</TABLE>
Notes to interest sensitivity analysis:
(a) Net non-interest bearing funds is the sum of non-interest bearing
liabilities and shareholder's equity minus non-interest earning assets.
42 Univest Corporation of Pennsylvania
<PAGE>
Supplementary Information
- --------------------------------------------------------------------------------
Range of Market Prices
The following table shows the range of market values of the Corporation's stock.
The Trust Department, Union National Bank and Trust Company, serves as the
Corporation's Stock Transfer Agent and Registrar and Dividend Disbursement Agent
pursuant to the trust powers of national banks. The prices shown on this page
represent transactions between dealers and do not include retail markups,
markdowns, or commissions.
High Low
----------------------
1999
January - March 34-3/4 31-1/4
April - June 33 28
July - September 29-1/2 23-1/2
October - December 26-1/2 24
High Low
----------------------
1998
January - March 35-1/2 29-3/4
April - June 37-1/4 34-1/8
July - September 37-1/2 34-1/8
October - December 35 33
Cash Dividends Paid Per Share
1999
January 2 $ 0.15
April 1 0.15
July 1 0.17
October 1 0.17
---------
$ 0.64 for the year 1999
=========
1998
January 2 $ 0.125
April 1 0.125
July 1 0.15
October 1 0.15
---------
$ 0.55 for the year 1998
=========
43
<PAGE>
Supplementary Information (continued)
- --------------------------------------------------------------------------------
Description of Business
Univest Corporation of Pennsylvania is a multibank holding company with banking
and financial subsidiaries operating in eastern Pennsylvania and Delaware.
Union National Bank and Trust Company of Souderton, Pennsylvania has 19
traditional offices and 8 supermarket branches offering all normal commercial
bank and trust services, and one work site office offering a payroll check
cashing service. Union National also provides banking and trust services for the
residents and employees of 10 retirement home communities.
Pennview Savings Bank has 5 offices and emphasizes deposits from the general
public and residential mortgage loans. Pennview also provides banking services
at 2 retirement home communities. Delview, Inc., a wholly owned subsidiary of
Pennview, is a passive investment holding company operating in Delaware. Univest
Financial Services Corporation, a subsidiary of Delview, provides various
financial management services to individuals and businesses within the holding
company's market area through Fin-Plan Group.
Univest Leasing Corporation offers services of leasing commercial, industrial,
and institutional equipment to firms and individuals in the same geographical
area.
Univest Realty Corporation owns and manages real estate for all subsidiaries of
the holding company.
Univest Insurance Company, as a reinsurer, offers life and disability insurance
to individuals in connection with credit extended to them by the bank.
Univest Electronic Services Corporation provides the data processing operation
and electronic development for all subsidiaries of the holding company.
Univest Delaware, Inc. is a passive investment holding company operating in
Delaware.
Securities Market
Univest Corporation of Pennsylvania stock is traded over the counter and
is generally held by individuals residing within the market area of the
Corporation as stated under Description of Business. The number of shareholders
as of December 31, 1999 was 2,088.
Securities and Exchange Commission Reports
The Corporation will provide at no charge a copy of the SEC Form 10-K
annual report for the year 1999 to each shareholder who requests one in writing
after March 31, 2000. Requests should be directed to: Norman L. Keller,
Secretary, Univest Corporation of Pennsylvania, 14 N. Main Street, Souderton, PA
18964.
44
<PAGE>
Directors
- --------------------------------------------------------------------------------
James L. Bergey *o
President,
Abram W. Bergey & Sons, Inc.
Clair W. Clemens *o
Director,
Hatfield Quality Meats, Inc.
R. Lee Delp *
President & Chief Executive Officer,
Moyer Packing Company
Richard W. Godshall #
Physician, M.D.,
Upper Bucks Orthopaedic Association
Charles H. Hoeflich *o
Chairman Emeritus,
Univest Corporation of Pennsylvania
Thomas K. Leidy *o
Chairman & President,
Leidy's, Inc.
Harold M. Mininger *o
Retired,
H. Mininger & Son, Inc.
H. Ray Mininger #
President,
H. Mininger & Son, Inc.
William G. Morral o
Senior Vice President & Chief
Financial Officer,
Moyer Packing Company
Paul Gregory Shelly *o
President,
Shelly Enterprises, Inc.
John U. Young *o
President,
Alderfer Bologna Co., Inc.
Margaret K. Zook #
Administrator,
Souderton Mennonite Homes
Merrill S. Moyer *oo
Chairman,
Univest Corporation of Pennsylvania;
Chairman,
Union National Bank & Trust Company
Marvin A. Anders *o
Vice Chairman,
Univest Corporation of Pennsylvania;
Vice Chairman,
Union National Bank & Trust Company
William S. Aichele *oo
President and Chief Executive Officer,
Univest Corporation of Pennsylvania;
President and Chief Executive Officer,
Union National Bank & Trust Company
Norman L. Keller *o
Executive Vice President,
Univest Corporation of Pennsylvania;
President & Chief Executive Officer,
Pennview Savings Bank
Laurence A. Moyer o
Executive Vice President & Secretary,
Pennview Savings Bank
* Director of Univest Corporation of Pennsylvania
o Director of Union National Bank & Trust Company
o Director of Pennview Savings Bank
# Alternate Director of Univest Corporation of Pennsylvania
Univest Corporation of Pennsylvania 45
<PAGE>
Officers
- --------------------------------------------------------------------------------
Univest Corporation of
Pennsylvania
Senior Management
Merrill S. Moyer, Chairman
Marvin A. Anders, Vice Chairman,
Trust and Financial Management Services
William S. Aichele, President and
Chief Executive Officer
Norman L. Keller, Executive Vice
President, Mortgage Services, and
Corporate Secretary
Wallace H. Bieler, Executive Vice President
and Chief Financial Officer, Finance and Accounting
K. Leon Moyer, Executive Vice President
and Credit Policy Officer
George D. Terry, Jr., Executive Vice
President, Electronic Services
Martin Renninger, Senior Vice President,
Financial Services
Senior Vice Presidents
Linda J. Bishop, Retail Services
Duane J. Brobst, Credit Quality
Kenneth D. Hochstetler,
Wealth Management
Diane L. Koehler, Compliance &
Community Reinvestment
Richard R. Swartley, Electronic Services
Vice Presidents
Gary E. Brown, Wealth Management
Richard L. Boaman, Electronic Services
Douglas R. Delp, Human Resources
David E. Grubb, Wealth Management
J. Matthew Holliday,
Wealth Management
T. Harry Hunter, Special Assets
Richard D. Juniper, Auditor
Garry R. Kuhnle, Credit Support
John J. Matlack, Consumer Lending
William B. Meyer, Loan Review
Timothy E. Mininger,
Wealth Management
Laurence A. Moyer, Residential
Mortgage Lending
Joseph J. Olenick, Wealth Management
Philip J. Rush, Finance and Accounting
Francis E. Varilla, Finance and
Accounting
Mavis D. Woulfe, Deposit Operations
Union National Bank
& Trust Company
Senior Management
Merrill S. Moyer, Chairman
William S. Aichele, President and
Chief Executive Officer
Marvin A. Anders, Vice Chairman
Wallace H. Bieler, Executive
Vice President and Chief
Financial Officer
K. Leon Moyer, Executive Vice President
George D. Terry Jr., Executive
Vice President
Senior Vice Presidents
Murray Y. Alderfer, Trust Division
Ernest R. Klee, Private Banking
Ronald S. Price, Corporate Banking
Barry L. Stoltzfus, Trust Division
Vice Presidents
Michael A. Baymor, Corporate Banking
John W. Duerksen, Corporate Banking
Patricia J. Kratz, Corporate Banking
John T. Landes, Corporate Banking
William F. Marks, Corporate Banking
Rose A. Radcliff, Corporate Banking
Stephen D. Robinson, Corporate
Banking
Ricky R. Schneider, Corporate Banking
Harry A. Wenzel, Corporate Banking
Gary S. Wolfer, Trust & Investment
Services
FernM. Zepp, Trust
Pennview Savings Bank
Senior Management
Norman L. Keller, President and Chief
Executive Officer
Laurence A. Moyer, Executive Vice President
and Secretary
Francis E. Varilla, Senior Vice President,
Chief Financial Officer and Treasurer
Vice Presidents
John J. Matlack, Consumer Lending
Fin-Plan Group
Robert J. Sims, Chairman
Ernest L. Sims, President
Martin Renninger, Executive Vice President
Other Principal Subsidiaries
of Univest Corporation of Pennsylvania
Univest Realty Corporation
Univest Leasing Corporation
Univest Electronic Services Corporation
Univest Insurance Company
Univest Delaware Inc.
46 Univest Corporation of Pennsylvania
<PAGE>
Office Locations
- --------------------------------------------------------------------------------
Union National Bank & Trust Company
Univest Plaza Office
Trust and Funds Management Division,
Corporate Banking, Private Banking,
Consumer Loan Department
14 North Main Street
Souderton, Pennsylvania 18964
215-721-2400
Buckingham Office
Hunt Acres Center
5006 York Road
Holicong, PA 18928
215-794-5916
Center Point Office
2960 Skippack Pike
Worcester, Pennsylvania 19490
610-584-8450
Center Square Office
Clover Mall
1301 Skippack Pike
Center Square, Pennsylvania 19422
610-279-3901
East Greenville Office
321 Main Street
East Greenville, PA 18041
215-679-7928
Franconia Office
503 Harleysville Pike
Franconia, Pennsylvania 18924
215-721-0707
Green Lane Office
101 Walnut Street
Green Lane, Pennsylvania 18054
215-234-4511
Harleysville Office
Clemens Market
611 Main Street
Harleysville, PA 19438
215-256-8048
Hilltown Office
786 Route 113
Souderton, Pennsylvania 18964
215-721-2471
Hilltown Supermarket Office
Route 113 & County Line Road
Souderton, Pennsylvania 18964
215-703-9933
Kulpsville Office
Sumneytown Pike
Kulpsville, Pennsylvania 19443
215-368-1666
Lansdale Area Office
2333 West Main Street, Suite 12
Lansdale, Pennsylvania 19446
215-362-8835
Lansdale East Office
620 East Main Street
Lansdale, Pennsylvania 19446
215-412-9750
Line Lexington Office
990 Bethlehem Pike
Line Lexington, Pennsylvania 18932
215-822-3314
Milford Office
Route 663 & Weiss Road
Milford Square, Pennsylvania 18935
215-536-4204
Montgomery Office
986 Bethlehem Pike
Montgomeryville, Pennsylvania 18936
215-699-3525
New Britain Office
202 Town Center
New Britain, Pennsylvania 18901
215-345-8259
Perkasie Office
545 Constitution Avenue
Perkasie, Pennsylvania 18944
215-257-6607
Plumsteadville Office
5859 Easton Road
Plumsteadville, Pennsylvania 18949
215-766-3701
Quakertown Office
Quakertown Shopping Plaza
Routes 313 & 309
Quakertown, Pennsylvania 18951
215-538-3407
Ralph's Corner
West Main Street & Forty Foot Road
Lansdale, PA 19446
215-393-5677
Schwenksville Office
415 Main Street
Schwenksville, Pennsylvania 19473
610-287-7811
Sellersville Office
835 Lawn Avenue
Sellersville, Pennsylvania 18960
215-257-8060
Solebury Office
Logan Square Shopping Center
6542D York Road
New Hope, PA 18938
215-862-3750
Souderton Office
10 West Broad Street
Souderton, Pennsylvania 18964
215-721-2464
Telford Office
50 Penn Avenue
Telford, Pennsylvania 18969
215-723-4515
Telford Supermarket Office
Inside Landis Market
2685 County Line Road
Telford, PA 18969
215-721-7412
Trappe Office
595 West MainStreet
Trappe, Pennsylvania 19426
610-454-0883
- --------------------------------------------------------------------------------
Pennview Savings Bank
Executive Offices
Univest Plaza
14 North Main Street
Souderton, Pennsylvania, 18964
215-721-2400
Franconia Office
503 Harleysville Pike
Franconia, Pennsylvania 18924
215-721-0707
Hatfield Office
115 East Broad Street
Hatfield, Pennsylvania 19440
215-855-4646
Montgomeryville Office
706 North Wales Road
Montgomeryville, Pennsylvania 18936
215-362-5130
Silverdale Office
103 Baringer Avenue
Silverdale, Pennsylvania 18962
215-257-9600
Souderton Office
15 Washington Avenue
Souderton, Pennsylvania 18964
215-721-2597
- --------------------------------------------------------------------------------
Fin-Plan Group
531 East Lancaster Avenue
Wayne, Pennsylvania 19087
610-687-5050
Univest Corporation of Pennsylvania 47
<PAGE>
Information For Shareholders
- --------------------------------------------------------------------------------
Corporate Headquarters
Univest Plaza
14 North Main Street
Souderton, PA 18964
Shareholders' Meeting
The Annual Shareholders' Meeting will take place
at 10:45 a.m., Tuesday, April 11, 2000, in the Board
Room at Univest Plaza, 14 N. Main Street,
Souderton, Pennsylvania.
Market Makers for Univest Corporation
of Pennsylvania Common Stock
Legg Mason Wood Walker, Inc.
1-800-221-8496
Ryan, Beck & Co.
1-800-223-8969
F.J. Morrissey & Co., Inc.
1-800-842-8928
Univest Shareholder Information Hotline
For more information on Univest Corporation of Pennsylvania Common Stock, please
call Marvin A. Anders, Vice Chairman, at (215)721-2434.
48 Univest Corporation of Pennsylvania
<PAGE>
[LOGO] UNIVEST
-----------------------------------
Union National Bank & Trust Company
Pennview Savings Bank
Univest Plaza - 14 North Main Street - Souderton, PA 18964
www.univest-corp.com
UNIVEST CORPORATION OF PENNSYLVANIA
AND SUBSIDIARIES
EXHIBIT
[Item 14(c)]
Subsidiaries
------------
(1) Union National Bank and Trust Company is chartered in the Commonwealth of
Pennsylvania.
(2) Pennview Savings Bank is chartered in the Commonwealth of Pennsylvania.
(3) Univest Leasing Corporation is chartered in the Commonwealth of
Pennsylvania.
(4) Univest Realty Corporation is chartered in the Commonwealth of
Pennsylvania.
(5) Univest Delaware, Inc. is chartered in the State of Delaware.
(6) Univest Financial Services Corporation is chartered in the Commonwealth of
Pennsylvania.
(7) Univest Insurance Company is chartered in the State of Arizona.
(8) Univest Electronic Services Corporation is chartered in the Commonwealth
of Pennsylvania.
(9) Delview, Inc. is a wholly owned subsidiary of Pennview Savings Bank that
is chartered in the State of Delaware.
(10) Fin Plan Group is chartered in the Commonwealth of Pennsylvania.
All the subsidiaries do business under the above names.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-02513) pertaining to the Univest 1996 Employee Stock Purchase Plan
of Univest Corporation of Pennsylvania and in the related Prospectus, in the
Registration Statement (Form S-8 No. 333-24987) pertaining to the Univest
Corporation of Pennsylvania 1993 Long Term Incentive Plan and in the related
Prospectus, and in the Registration Statement (Form S-3 No. 333-02509)
pertaining to the Univest Dividend Reinvestment and Stock Purchase Plan of
Univest Corporation of Pennsylvania of our report dated January 21, 2000, with
respect to the consolidated financial statements of Univest Corporation of
Pennsylvania included in this Annual Report (Form 10-K) for the year ended
December 31, 1999.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 23, 2000
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