United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Period Ended March 31, 2000.
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From ______ to ______.
UNIVEST CORPORATION OF PENNSYLVANIA
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1886144
------------ ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
10 West Broad Street, Souderton, Pennsylvania 18964
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (215) 721-2400
Not applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $5 par value 7,423,550
- -------------------------- -----------------------------------------
(Title of Class) (Number of shares outstanding at 3/31/00)
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX
Page Number
-----------
Part I. Financial Information:
Item 1: Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 31, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Income
Three Months Ended March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 3
Notes to Condensed Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information: 14
Other Information
Part III. Financial Data Schedule 16
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (SEE NOTE)
March 31, 2000 December 31, 1999
-------------- -----------------
(In thousands)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $ 38,423 $ 35,066
INTEREST BEARING DEPOSITS WITH OTHER BANKS 3,901 3,839
INVESTMENT SECURITIES HELD-TO-MATURITY 128,496 137,461
(MARKET VALUE $125,718 AT 3/31/00
AND $135,107 AT 12/31/99)
INVESTMENT SECURITIES AVAILABLE-FOR-SALE 172,970 174,414
FEDERAL FUNDS SOLD AND OTHER
SHORT TERM INVESTMENTS 24,700 1,800
LOANS 721,237 722,474
LESS: RESERVE FOR POSSIBLE LOAN LOSSES (10,579) (11,223)
----------- -----------
NET LOANS 710,658 711,251
OTHER ASSETS 59,582 57,161
----------- -----------
TOTAL ASSETS $ 1,138,730 $ 1,120,992
=========== ===========
LIABILITIES
DEMAND DEPOSITS, NON INTEREST BEARING $ 154,083 $ 159,300
DEMAND DEPOSITS, INTEREST BEARING 275,375 266,212
SAVINGS DEPOSITS 138,025 136,387
TIME DEPOSITS 363,309 348,776
----------- -----------
TOTAL DEPOSITS 930,792 910,675
SHORT-TERM BORROWINGS 65,463 72,098
OTHER LIABILITIES 19,991 17,393
LONG-TERM DEBT 18,075 18,075
----------- -----------
TOTAL LIABILITIES 1,034,321 1,018,241
SHAREHOLDERS' EQUITY
COMMON STOCK 41,039 39,272
ADDITIONAL PAID-IN CAPITAL 20,653 14,908
RETAINED EARNINGS 68,776 73,409
ACCUMULATED OTHER COMPREHENSIVE LOSS (3,332) (2,672)
TREASURY STOCK (22,727) (22,166)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 104,409 102,751
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,138,730 $ 1,120,992
=========== ===========
</TABLE>
NOTE: THE CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999 HAS BEEN
DERIVED FROM THE AUDITED FINANCIAL STATEMENTS AT THAT DATE BUT DOES NOT INCLUDE
ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES.
1
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2000 1999
---- ----
(In thousands, except per share data)
<S> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS
TAXABLE INTEREST AND FEES ON LOANS $ 13,670 $ 12,834
EXEMPT FROM FEDERAL INCOME TAXES 774 577
-------- --------
TOTAL INTEREST AND FEES ON LOANS 14,444 13,411
INTEREST AND DIVIDENDS ON
INVESTMENT SECURITIES 4,519 4,459
OTHER INTEREST INCOME 215 151
-------- --------
TOTAL INTEREST INCOME 19,178 18,021
-------- --------
INTEREST EXPENSE
INTEREST ON DEPOSITS 7,474 6,950
OTHER INTEREST EXPENSE 849 677
-------- --------
TOTAL INTEREST EXPENSE 8,323 7,627
-------- --------
NET INTEREST INCOME 10,855 10,394
PROVISION FOR LOAN LOSSES (173) 275
-------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,028 10,119
TRUST 1,150 1,145
SERVICE CHARGES ON DEMAND DEPOSITS 939 815
COMMISSION INCOME 701 394
OTHER INCOME 1,574 1,221
-------- --------
TOTAL OTHER INCOME 4,364 3,575
OTHER EXPENSES
SALARIES AND BENEFITS 5,798 4,502
NET OCCUPANCY 660 600
EQUIPMENT 414 394
OTHER EXPENSES 2,631 2,654
-------- --------
TOTAL OTHER EXPENSES 9,503 8,150
-------- --------
INCOME BEFORE INCOME TAXES 5,889 5,544
INCOME TAXES 1,764 1,634
-------- --------
NET INCOME $ 4,125 $ 3,910
======== ========
PER COMMON SHARE DATA*:
NET INCOME PER SHARE:
BASIC $ 0.55 $ 0.51
DILUTED $ 0.55 $ 0.50
CASH DIVIDENDS DECLARED PER SHARE $ 0.162 $ 0.143
</TABLE>
*PER SHARE AMOUNTS HAVE BEEN ADJUSTED TO REFLECT ALL STOCK DIVIDENDS DECLARED
THROUGH MARCH 31, 2000.
2
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended,
(in thousands)
---------------------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,125 $ 3,910
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (less than) in excess
of net charge-offs (644) 447
Depreciation of premises and equipment 584 578
Premium amortization (discount accretion) on
investment securities 18 (23)
Deferred tax benefit 78 44
Realized gains on investment securities (7) --
Realized gains on sales of mortgages (1) (17)
Increase in net deferred loan fees 20 33
Increase in interest receivable and other assets (2,135) (944)
Increase (decrease) in accrued expenses and other liabilities 2,849 (2,805)
-------- --------
Net cash provided by operating activities 4,887 1,223
Cash flows from investing activities:
Proceeds from sales of securities available for sale 4,557 2,974
Proceeds from maturing securities held to maturity 12,937 59,844
Proceeds from maturing securities available for sale 3,881 11,874
Increase in interest-bearing deposits (62) (1,923)
Purchases of investment securities held to maturity (3,997) (5,075)
Purchases of investment securities available for sale (7,965) (30,214)
Net increase in federal funds sold and
other short-term investments (22,900) (17,300)
Proceeds from sales of mortgages 554 3,469
Net decrease (increase) in loans 664 (15,473)
Capital expenditures (669) (513)
Other investing activities (200) (4,000)
-------- --------
Net cash used in investing activities (13,200) 3,663
Cash flows from financing activities:
Net increase in deposits 20,117 5,373
Net decrease in short-term borrowings (6,635) (4,584)
Proceeds from long-term debt -- 4,000
Purchases of treasury stock (983) (1,794)
Stock issued under dividend reinvestment and
employee stock purchase plans 323 333
Proceeds from exercise of stock options 57 96
Cash dividends (1,209) (1,504)
-------- --------
Net cash provided by financing activities 11,670 1,920
Net increase in cash and due from banks 3,357 6,806
Cash and due from banks at beginning of period 35,066 26,011
-------- --------
Cash and due from banks at end of period $ 38,423 $ 32,817
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,318 $ 7,910
</TABLE>
3
<PAGE>
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Financial Information
The accompanying condensed consolidated financial statements include the
accounts of Univest Corporation of Pennsylvania (Univest) and its wholly owned
subsidiaries, including Union National Bank and Trust Company (Union) and
Pennview Savings Bank (Pennview), collectively referred to herein as the
"Banks". The condensed consolidated financial statements included herein have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The accompanying condensed consolidated financial
statements reflect all adjustments which are, in the opinion of management,
necessary to present a fair statement of the results and condition for the
interim periods presented. Operating results for the three-month period ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the registrant's Annual Report on
Form 10-K for the year ended December 31, 1999, which has been filed with the
Securities and Exchange Commission.
Note 2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share (in thousands):
For the Three Months
Ended March 31,
2000 1999
---- ----
Numerator:
Net Income $4,125 $3,910
Numerator for basic and diluted earnings per
share - income available to common
shareholders 4,125 3,910
4
<PAGE>
Denominator:
Denominator for basic earnings per share-
weighted-average shares outstanding 7,436 7,705
Effect of dilutive securities:
Employee stock options 7 54
------ ------
Denominator for diluted earnings per share
adjusted weighted-average shares
outstanding 7,443 7,759
====== ======
Basic earnings per share $ .55 $ .51
====== ======
Diluted earnings per share $ .55 $ .50
====== ======
Note 3. Stock Dividend
On March 22, 2000, the Corporation declared a 5% stock dividend to be paid on
May 1, 2000 to all shareholders of record as of April 14, 2000. All share
information has been restated to reflect the dividend.
Note 4. Comprehensive Income
As of January 1, 1998, the Corporation adopted Statement No. 130, "Reporting
Comprehensive Income" (SFAS No. 130). SFAS No. 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Corporation's net income or
shareholders' equity. SFAS No. 130 requires unrealized gains or losses on the
Corporation's available-for-sale securities, which prior to adoption were
reported separately in shareholders' equity, to be included in accumulated other
comprehensive income. The following shows the comprehensive income for the
periods presented:
Three months
ended March 31,
2000 1999
---- ----
(in thousands)
Net income $ 4,125 $ 3,910
Change in unrealized (loss) gain on available
for sale investment securities (660) (337)
------- -------
Total comprehensive income $ 3,465 $ 3,573
======= =======
5
<PAGE>
Note 5. 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 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.
6
<PAGE>
Item 2.
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Net Income
Net income for the three months ended March 31, 2000 increased 5.1% or
$0.2 million from $3.9 million for the three months ended March 31, 1999 to $4.1
million for the three months ended March 31, 2000. The net income growth was due
mainly to increases in net interest income and other income. The increases were
offset by a rise in other expenses.
Net Interest Income
Interest and fees on loans increased $1.0 million from $13.4 million for
the three months ended March 31, 1999 to $14.4 million for the three months
ended March 31, 2000. This growth is due primarily to an increase in loan
volume.
Interest on investment securities remained constant at $4.5 million for
the three-month period ended March 31, 2000 and March 31, 1999. Other interest
income also remained constant at $0.2 million for the three-month period ended
March 31, 2000 and March 31, 1999.
Interest expense increased $0.7 million from $7.6 million for the three
months ended March 31, 1999 to $8.3 million for the three-month period ended
March 31, 2000. The increase is primarily attributed to volume growth with a
small rise in average rate.
The asset/liability management process continues with its goal of
providing stable reliable earnings through varying interest rate environments.
Net interest income is the amount by which interest income on earning assets
exceeds interest paid on interest bearing liabilities. Changes in interest
rates, account balances or volume, and the mix of earning assets and interest
bearing liabilities affect the amount of net interest income. The three months
ended March 31, 2000 shows net interest income of $10.9 million, which is an
increase of $0.5 million over the $10.4 million recorded for the three months,
ended March 31, 1999. Average interest earning assets increased by $47.9 million
for the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999. An increase in deposits provided the funds for loan growth.
Average interest bearing liabilities increased $50.4 million for the three
months ended March 31, 2000 as compared to the same period in 1999. Net interest
earning assets decreased $2.5 million for the three months ended March 31, 2000
as compared to the three months ended March 31, 1999. Interest earning assets
paid 10 basis points more than last year. This was offset by the same increase
of 10 basis points paid on interest bearing liabilities. The net interest margin
remained the same at 4.2%.
7
<PAGE>
The following table demonstrates the aforementioned effects:
THREE MONTHS ENDED
------------------
3/31/00 3/31/99
------- -------
AVG. BALANCE RATE AVG. BALANCE RATE
----------------- -----------------
Interest Earnings
Assets $1,038,729 7.4% $ 990,840 7.3%
Interest Bearing
Liabilities 852,911 3.9% 802,518 3.8%
Net Interest Income 10,855 10,394
Net Interest Spread 3.5% 3.5%
Net Interest Margin 4.2% 4.2%
The Corporation uses interest-rate swap agreements that convert a portion
of its floating rate commercial loans to a fixed rate basis. In these swaps, the
Corporation agrees to exchange, at specified intervals, the difference between
fixed and floating-interest rates calculated on an agreed upon notional
principal amount. 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 March 31, 2000, March 31, 1999 and December 31, 1999, $40.0 million in
notional amount of "Pay Floating, Receive Fixed" swaps were outstanding. The net
payable or receivable from interest rate swap agreements is accrued as an
adjustment to interest income. The $40.0 million in notional amount interest
rate swaps outstanding at March 31, 2000 expire as follows: $10.0 million in
notional principal amount in second quarter 2000, $20.0 million in second
quarter 2001 and $10.0 million in the first quarter 2002. The impact of interest
rate swaps on net interest income for the quarter ended March 31, 2000 was a
negative $16 thousand as compared to a positive $99 thousand for the quarter
ended March 31, 1999. The cost of the swaps increased by the same amount as the
income on the floating loans being hedged. Both increases resulted from a rise
in the prime rate.
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
March 31, 2000 there were no interest-rate swaps with a market value in a
favorable position. The market value of interest-rate swaps in a negative
position was $304 thousand. As of March 31, 1999, the market value of
interest-rate swaps in a favorable position was $193 thousand and the market
value of interest-rate swaps in a negative position was $17 thousand. Credit
risk also exists when the counterparty to a derivative contract with an
unrealized gain fails to perform according to the terms of the agreement.
8
<PAGE>
Asset Quality
Management believes the reserve for possible loan losses is maintained at
a level that is adequate to absorb potential losses inherent 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, non-accrual and non-performing 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 loans as provided for under SFAS No.114. Any of the above
criteria may cause the provision to fluctuate and for the three months ended
March 31, 2000, the improvement in this criteria resulted in a negative
provision of $0.2 million.
At March 31, 2000, the recorded investment in loans that are considered to
be impaired under SFAS No. 114 was $2.0 million, all of which were on a
non-accrual basis. The related reserve for credit losses for those loans was
$0.9 million. At March 31, 1999, the recorded investment in loans considered to
be impaired was $2.2 million and the related reserve for credit losses for these
loans was $0.6 million.
When a loan, including a loan impaired under SFAS No. 114, is classified
as non-accrual, the accrual of interest on such 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
non-accrual status, unpaid interest credited to income in the current year is
reversed and unpaid interest accrued in prior years are charged against "other
expense." Interest received on nonaccrual loans is either applied against
principal or reported as interest income, according to management's judgment as
to the collectibility of principal.
Loans are usually restored to accrual status when the obligation is
brought current, has performed in accordance with the contractual terms for a
reasonable period of time and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt. Total cash basis,
non-accrual and restructured loans at March 31, 2000 was $2.2 million and
consist mainly of commercial loans and real estate related commercial loans.
Cash basis, non-accrual and restructured loans at March 31, 1999 were $3.1
million. For the quarter ended March 31, 2000, non-accrual loans resulted in
lost interest income of $61 thousand as compared to $73 thousand for the quarter
ended March 31, 1999. At March 31, 2000, the Corporation had no commitments to
lend additional funds with respect to nonperforming loans. In management's
evaluation of the loan portfolio risks,
9
<PAGE>
any significant future increases in nonperforming loans are dependent to a large
extent on the economic environment, or specific industry problems.
At March 31, 2000 and December 31, 1999, the reserve for possible loan
losses was 1.5% and 1.6% of total loans, respectively. For more information on
the reserve, please refer to the Corporation's SEC Form 10-K for the period
ended December 31, 1999.
At March 31, 2000, the Corporation has a total of $40 thousand of Other
Real Estate Owned ("OREO") consisting of one commercial property. This amount is
recorded in "Other Assets" at lower of cost or fair market value in the
accompanying consolidated balance sheets.
Other Income
Other income which is non-interest related consists mainly of general fee
income, trust department fee income, commission income and other miscellaneous
non-recurring types of income. It also includes various types of service
charges, such as ATM fees and increases in the cash surrender value of
Bank-Owned Life Insurance (BOLI). Other income increased $0.8 million or 22.2%
from $3.6 million for the three months ended March 31, 1999 to $4.4 million for
the three months ended March 31, 2000. The increase is primarily attributed to
trust income, commission income and other income.
Trust income for the three months ended March 31, 2000 of $1.2 million was
$0.1 million more than the $1.1 million reported for the three months ended
March 31, 1999.
Service charges on demand deposits increased $0.1 million from $0.8
million for the three months ended March 31, 1999 to $0.9 million for the three
months ended March 31, 2000. The growth was due mainly to increases in various
transactions for demand deposit service products.
Commission income is the primary source of income for Fin-Plan Group and
the newly acquired insurance sales agency, George Becker Associates, Inc.
Commission income for the three months ended March 31, 2000 of $0.7 million was
$0.3 million or 75.0% more than the $0.4 million reported for the three months
ended March 31, 1999. About half of the growth was due to Fin-Plan Group and the
other half to the new company, George Becker Associates, Inc.
Other income grew from $1.2 million for the three months ended March 31,
1999 to $1.6 million for the three months ended March 31, 2000, an increase of
$0.4 million. The growth is attributed to increased activities in other service
fee areas and cash surrender value adjustments of certain corporate owned life
insurance policies.
10
<PAGE>
Other Expense
The operating costs of the Corporation include but are not limited to,
salaries and benefits, equipment expense, and occupancy costs. This category is
usually referred to as non-interest expense and receives ongoing management
attention in an attempt to contain and minimize the growth of the various
expense categories, while encouraging technological innovation in conjunction
with the expansion of the Corporation. Other expenses increased from $8.2
million for the quarter ended March 31, 1999 to $9.5 million for the quarter
ended March 31, 2000. Salary increases, which include commission expense
generated by Fin-Plan Group and the new subsidiary, George Becker Associates,
Inc., bonuses and other expenses such as travel and entertainment, MAC fees, and
telephone expense contributed to this increase.
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 Disclosures" 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.
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.
Tax Provision
The provision for income taxes was $1.8 million for the quarter ended
March 31, 2000 and $1.6 million for the quarter ended March 31, 1999. The
effective tax rates were 30.0% and 29.5% respectively. The effective tax rates
reflect the benefits of tax credits
11
<PAGE>
generated from investments in low-income housing projects and tax-free income
from investment in securities, loans and bank-owned life insurance.
Financial Condition
Total assets increased $17.7 million or 1.6% from $1,121.0 million at
December 31, 1999 to $1,138.7 million at March 31, 2000. Federal funds sold
increased $22.9 million because there was an increase in deposits of $20.1
million.
Shareholders' equity increased to $104.4 million at March 31, 2000 from
$102.8 million at December 31, 1999, an increase of $1.6 million or 1.6%. Book
value per share increased from $13.80 at December 31, 1999 to $14.06 at March
31, 2000, an increase of $.26 per share or 1.9 %. On March 22, 2000, the
Corporation declared a 5% stock dividend to be paid on May 1, 2000 to all
shareholders of record as of April 14, 2000. All per share data has been
restated to reflect the dividend.
Debt securities that the Corporation has both the positive intent and
ability to hold to maturity are carried at amortized cost. All other debt
securities and all marketable equity securities are classified as
available-for-sale or trading and carried at fair value. Unrealized holding
gains and losses on securities classified as available-for-sale are carried net
of taxes and included in Accumulated Other Comprehensive Income. Unrealized
holding gains and losses on securities classified as trading are reported in
earnings. The total of debt and equity securities held in the available-for-sale
portfolio, as of March 31, 2000, is $173.0 million as compared to $174.4 million
at December 31, 1999. The accumulated other comprehensive loss of $3.3 million,
net of taxes, has been debited to shareholders' equity as of March 31, 2000. At
December 31, 1999, the accumulated other comprehensive loss debited to
shareholders' equity was $2.7 million.
Market Risk
No material changes in the Corporation's market risk or market strategy
occurred during the current period. A detailed discussion of market risk is
provided in the SEC Form 10-K for the period ended December 31, 1999.
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 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
12
<PAGE>
fair value will be immediately recognized in earnings. Due to 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.
Other
Univest Financial Services Corporation acquired George Becker Associates,
Inc. on January 3, 2000. This will allow Univest Corporation to provided a
broader range of insurance products. The impact on the Corporation's financial
position and results of operations was immaterial for the three months ended
March 31, 2000.
13
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings--None
Item 2. Changes in Securities--None
Item 3. Defaults upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--Not applicable
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
No reports on Form 8-K were filed during the quarter for which this report
is filed.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Univest Corporation of Pennsylvania
----------------------------------------
(Registrant)
Date: 4/21/00 /s/ Merrill S. Moyer
----------------------------------------
Merrill S. Moyer, Chairman
Date: 4/21/00 /s/ Wallace H. Bieler
----------------------------------------
Wallace H. Bieler, Executive Vice
President and Chief Financial Officer
15
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