-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SeAMGoUhEQH07HOj+R4rX+RrgWXiDcxWcj/eRY+YzKgFTX2k3qCw3OQ8ug9XGnPi 0OdeQEFb476Rh7XwdQiLhA== /in/edgar/work/0001005477-00-007640/0001005477-00-007640.txt : 20001110 0001005477-00-007640.hdr.sgml : 20001110 ACCESSION NUMBER: 0001005477-00-007640 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVEST CORP OF PENNSYLVANIA CENTRAL INDEX KEY: 0000102212 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 231886144 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07617 FILM NUMBER: 756781 BUSINESS ADDRESS: STREET 1: 10 W BROAD ST CITY: SOUDERTON STATE: PA ZIP: 18964 BUSINESS PHONE: 2157212400 MAIL ADDRESS: STREET 1: 10 W BROAD STREET CITY: SOUDERTON STATE: PA ZIP: 18964 10-Q 1 0001.txt FORM 10-Q United States SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For The Period Ended September 30, 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 --------------------------------------------------- (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 7,364,969 -------------------------- --------- (Title of Class) (Number of shares outstanding at 9/30/00) UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES INDEX Page Number ----------- Part I. Financial Information: Item 1: Financial Statements (Unaudited) Condensed Consolidated Balance Sheets September 30, 2000 and December 31, 1999 1 Condensed Consolidated Statements of Income Three and Nine Months Ended September 30, 2000 and 1999 2 Consolidated Statements of Cash Flows Nine Months Ended September 30, 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 UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (SEE NOTE) September 30, 2000 December 31, 1999 ------------------ ----------------- (In thousands) ASSETS CASH AND DUE FROM BANKS $ 44,625 $ 35,066 INTEREST BEARING DEPOSITS WITH OTHER BANKS 4,871 3,839 INVESTMENT SECURITIES HELD-TO-MATURITY 141,466 137,461 (MARKET VALUE $140,456 AT 9/30/00 AND $135,107 AT 12/31/99) INVESTMENT SECURITIES AVAILABLE-FOR-SALE 188,085 174,414 FEDERAL FUNDS SOLD AND OTHER SHORT TERM INVESTMENTS 13,200 1,800 LOANS 712,059 722,474 LESS: RESERVE FOR POSSIBLE LOAN LOSSES (10,603) (11,223) ----------------- ----------------- NET LOANS 701,456 711,251 OTHER ASSETS 67,093 57,161 ----------------- ----------------- TOTAL ASSETS $ 1,160,796 $ 1,120,992 ================= ================= LIABILITIES DEMAND DEPOSITS, NON INTEREST BEARING $ 161,202 $ 159,300 DEMAND DEPOSITS, INTEREST BEARING 275,833 266,212 SAVINGS DEPOSITS 128,897 136,387 TIME DEPOSITS 380,016 348,776 ----------------- ----------------- TOTAL DEPOSITS 945,948 910,675 SHORT-TERM BORROWINGS 59,506 72,098 OTHER LIABILITIES 22,897 17,393 LONG-TERM DEBT 21,075 18,075 ----------------- ----------------- TOTAL LIABILITIES 1,049,426 1,018,241 SHAREHOLDERS' EQUITY COMMON STOCK 41,037 39,272 ADDITIONAL PAID-IN CAPITAL 20,912 14,908 RETAINED EARNINGS 74,624 73,409 ACCUMULATED OTHER COMPREHENSIVE LOSS (1,263) (2,672) TREASURY STOCK (23,940) (22,166) ----------------- ----------------- TOTAL SHAREHOLDERS' EQUITY 111,370 102,751 ----------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,160,796 $ 1,120,992 ================= =================
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 UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPT. 30, ENDED SEPT. 30, 2000 1999 2000 1999 (in thousands, except per share data) INTEREST INCOME INTEREST AND FEES ON LOANS TAXABLE INTEREST AND FEES ON LOANS $14,220 $13,159 $41,843 $38,943 EXEMPT FROM FEDERAL INCOME TAXES 800 686 2,361 1,906 ------- ------- ------- ------- TOTAL INTEREST AND FEES ON LOANS 15,020 13,845 44,204 40,849 INTEREST AND DIVIDENDS ON INVESTMENT SECURITIES 4,729 4,691 13,825 13,508 OTHER INTEREST INCOME 581 128 1,360 653 ------- ------- ------- ------- TOTAL INTEREST INCOME 20,330 18,664 59,389 55,010 ------- ------- ------- ------- INTEREST EXPENSE INTEREST ON DEPOSITS 8,537 7,134 24,156 21,142 OTHER INTEREST EXPENSE 916 788 2,551 2,180 ------- ------- ------- ------- TOTAL INTEREST EXPENSE 9,453 7,922 26,707 23,322 ------- ------- ------- ------- NET INTEREST INCOME 10,877 10,742 32,682 31,688 PROVISION FOR LOAN LOSSES 215 251 57 801 ------- ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,662 10,491 32,625 30,887 OTHER INCOME TRUST 1,150 937 3,450 2,892 SERVICE CHARGES ON DEMAND DEPOSITS 915 899 2,763 2,524 COMMISSION INCOME 662 472 2,056 1,440 OTHER INCOME 1,430 1,529 4,364 4,119 ------- ------- ------- ------- TOTAL OTHER INCOME 4,157 3,837 12,633 10,975 OTHER EXPENSES SALARIES AND BENEFITS 5,114 4,686 15,829 13,810 NET OCCUPANCY 661 606 1,975 1,843 EQUIPMENT 407 416 1,228 1,227 OTHER EXPENSES 2,664 2,824 7,884 8,294 ------- ------- ------- ------- TOTAL OTHER EXPENSES 8,846 8,532 26,916 25,174 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 5,973 5,796 18,342 16,688 APPLICABLE INCOME TAXES 1,641 1,681 5,267 4,895 ------- ------- ------- ------- NET INCOME $ 4,332 $ 4,115 $13,075 $11,793 ======= ======= ======= ======= PER COMMON SHARE DATA: NET INCOME PER SHARE: BASIC $ 0.59 $ 0.54 $ 1.76 $ 1.55 DILUTED $ 0.59 $ 0.54 $ 1.76 $ 1.54 CASH DIVIDENDS DECLARED PER SHARE $ 0.19 $ 0.162 $ 0.542 $ 0.467
2 Univest Corporation of Pennsylvania and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
For the nine months ended, Sept. 30, 2000 Sept 30, 1999 -------------- ------------- (in thousands) Cash flows from operating activities: Net income $ 13,075 $ 11,793 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses (less than) in excess of net charge-offs (620) 683 Depreciation of premises and equipment 1,735 1,737 (Discount accretion) premium amortization on investment securities (97) 14 Deferred tax benefit (132) (212) Realized gains on investment securities -- (52) Realized gains on sales of mortgages (2) (42) Decrease in net deferred loan fees (58) (39) Increase in interest receivable and other assets (1,582) (2,725) Increase (decrease) in accrued expenses and other liabilities 4,653 (3,360) --------- --------- Net cash provided by operating activities 16,972 7,797 Cash flows from investing activities: Proceeds from sales of securities available for sale 8,549 17,919 Proceeds from maturing securities held to maturity 55,475 81,022 Proceeds from maturing securities available for sale 11,175 25,372 (Increase) decrease in interest-bearing deposits (1,032) 1,731 Purchases of investment securities held to maturity (59,485) (11,165) Purchases of investment securities available for sale (31,095) (108,581) Premium paid to purchase bank-owned life insurance (8,000) -- Net (increase) decrease in federal funds sold and other short-term investments (11,400) 12,700 Proceeds from sales of mortgages 1,034 9,933 Net decrease (increase) in loans 9,441 (47,438) Capital expenditures (1,884) (1,536) Other investing activities (200) (4,000) --------- --------- Net cash used in investing activities (27,422) (24,043) Cash flows from financing activities: Net increase in deposits 35,273 2,631 Net (decrease) increase in short-term borrowings (12,592) 27,927 Proceeds from long-term debt 3,000 4,000 Purchases of treasury stock (2,892) (8,561) Stock issued under dividend reinvestment and employee stock purchase plans 996 936 Proceeds from exercise of stock options 57 633 Cash dividends (3,833) (3,433) --------- --------- Net cash provided by financing activities 20,009 24,133 Net increase in cash and due from banks 9,559 7,887 Cash and due from banks at beginning of period 35,066 26,011 --------- --------- Cash and due from banks at end of period $ 44,625 $ 33,898 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 24,099 $ 24,591
3 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 of a normal recurring nature and are, in the opinion of management, necessary to present a fair statement of the results and condition for the interim periods presented. Operating results for the nine-month period ended September 30, 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 consolidated 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 For the Nine Months Ended Sept. 30, Ended Sept. 30, 2000 1999 2000 1999 ---- ---- ---- ---- Numerator: Net Income $4,332 $4,115 $13,075 $11,793 Numerator for basic and diluted earnings per share - income available to common shareholders 4,332 4,115 13,075 11,793 Denominator:
4 Denominator for basic earnings per share- weighted-average shares outstanding 7,384 7,573 7,412 7,627 Effect of dilutive securities: Employee stock options 19 33 21 48 -------------------- -------------------- Denominator for diluted earnings per share adjusted weighted-average shares outstanding 7,403 7,606 7,433 7,675 ==================== ==================== Basic earnings per share $ .59 $ .54 $ 1.76 $ 1.55 ==================== ==================== Diluted earnings per share $ .59 $ .54 $ 1.76 $ 1.54 ==================== ====================
Note 3. Stock Dividend The Corporation paid a 5% stock dividend on May 1, 2000 to all shareholders of record as of April 14, 2000. All share and per share information has been restated to reflect the dividend. Note 4. Comprehensive Income Statement No. 130, "Reporting Comprehensive Income" (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, net of income taxes, for the periods presented:
Three Months Nine Months Ended Sept. 30, Ended Sept. 30 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands) Net income $ 4,332 $ 4,115 $ 13,075 $ 11,793 Change in unrealized gain (loss) on available for sale investment securities 1,550 (504) 1,409 (2,701) -------- -------- -------- -------- Total comprehensive income $ 5,882 $ 3,611 $ 14,484 $ 9,092 ======== ======== ======== ========
5 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 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income Net income increased 4.9% or $0.2 million from $4.1 million for the three months ended September 30, 1999 to $4.3 million for the three months ended September 30, 2000. Net income for the nine months ended September 30, 2000 increased 11.0% or $1.3 million from $11.8 million for the nine months ended September 30, 1999 to $13.1 million for the nine months ended September 30, 2000. The net income growth was due mainly to increases in net interest income and other income. The increases were offset by a slight rise in other expenses. Net Interest Income Interest and fees on loans increased $1.2 million from $13.8 million for the three months ended September 30, 1999 to $15.0 million for the three months ended September 30, 2000. For the nine months ended September 30, 2000, interest and fees on loans increased $3.4 million from $40.8 million to $44.2 million at September 30, 2000. The growth is due to an increase in average loan volume and an increase in prime rate. At September 30, 2000, prime rate averaged 9.19%, but at September 30, 1999 it averaged 7.86%. Prime rate was increased from 8.50% in January 2000 to 8.75% in February 2000, 9.00% in March 2000 and 9.50% in May 2000 and currently remains at 9.50%. Interest on investment securities remained constant at $4.7 million for the three-month periods ended September 30, 2000 and September 30, 1999. For the nine months ended September 30, 2000 interest on investments increased by $0.3 million from $13.5 million for the nine months ended September 30, 1999 to $13.8 million for the same period in 2000. The increase was due to both a higher average volume and a higher average yield. Other interest income increased $0.5 million for the three-month period ended September 30, 2000 and $0.7 million for the nine-month period ended September 30, 2000 due to an increase in federal funds sold. Interest expense increased $1.6 from $7.9 million for the three months ended September 30, 1999 to $9.5 million for the three-month period ended September 30, 2000. Interest expense increased $3.4 million from $23.3 million for the nine months ended September 30, 1999 to $26.7 million for the nine-month period ended September 7 30, 2000. The increase in both periods is primarily attributed to volume growth with a small rise in average rate. Money market savings and certificates of deposit volumes grew due to special rate promotions. 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 nine months ended September 30, 2000 shows net interest income of $32.7 million, which is an increase of $1.0 million over the $31.7 million recorded for the nine months ended September 30, 1999. Average interest earning assets increased by $45.9 million for the nine months ended September 30, 2000 as compared to the nine months ended September 30, 1999. An increase in deposits provided the funds for investment growth. Average interest bearing liabilities increased $47.7 million for the nine months ended September 30, 2000 as compared to the same period in 1999. Interest earning assets yielded 20 basis points more than last year. This was offset by an increase of 30 basis points paid on interest bearing liabilities. The net interest margin decreased to 4.1%. The following table demonstrates the aforementioned effects:
NINE MONTHS ENDED ----------------- 9/30/00 9/30/99 ------- ------- AVG. BALANCE RATE AVG. BALANCE RATE ----------------- ----------------- Interest Earnings Assets $1,052,631 7.5% $1,006,707 7.3% Interest Bearing Liabilities 864,393 4.1% 816,676 3.8% Net Interest Income 32,682 31,688 Net Interest Spread 3.4% 3.5% Net Interest Margin 4.1% 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. 8 At September 30, 2000, September 30, 1999 and December 31, 1999, the notional amount of "Pay Floating, Receive Fixed" swaps outstanding were $30.0 million, $40.0 million and $40.0 million respectively. The net payable or receivable from interest rate swap agreements is accrued as an adjustment to interest income. The $30.0 million in notional amount interest rate swaps outstanding at September 30, 2000 expire as follows: $20.0 million in notional principal amount in second quarter 2001 and $10.0 million in first quarter 2002. The impact of interest rate swaps on net interest income for the quarter ended September 30, 2000 was a negative $54 thousand as compared to a positive $48 thousand for the quarter ended September 30, 1999. For the nine months ended September 30, 2000 the impact was a negative $128 thousand as compared to a positive $208 thousand for the nine months ended September 30, 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 September 30, 2000, the market value of interest-rate swaps in a favorable position was $44 thousand and the market value of interest-rate swaps in an unfavorable position was $155 thousand. As of September 30, 1999, the market value of interest-rate swaps in a favorable position was $5 thousand and the market value of interest-rate swaps in an unfavorable position was $207 thousand. Credit risk exists when the counterparty to a derivative contract with an unrealized gain fails to perform according to the terms of the agreement. Asset Quality Management believes the 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 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 quarter ended March 31, 2000, the improvement in these criteria resulted in a provision of ($200) thousand. For the three and nine months ended September 30, 2000, the provisions for possible loan losses were $215 thousand and $57 thousand, respectively. For the three and nine months ended September 30, 1999, the provisions for possible loan losses were $251 thousand and $801 thousand, respectively. 9 At September 30, 2000, the recorded investment in loans that are considered to be impaired under SFAS No. 114 was $2.3 million, all of which were on a non-accrual basis. The related reserve for credit losses for those loans was $1.2 million. At September 30, 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 $1.2 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 September 30, 2000 and September 30, 1999 were $2.6 million and consist mainly of commercial loans and real estate related commercial loans. At September 30, 2000, non-accrual loans resulted in lost interest income of $170 thousand as compared to $66 thousand at September 30, 1999. At September 30, 2000, the Corporation had no commitments to lend additional funds with respect to nonperforming loans. In management's evaluation of the loan portfolio risks, any significant future increases in nonperforming loans are dependent to a large extent on the economic environment, or specific industry problems. At September 30, 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 Registrant's Annual Report on Form 10-K for the period ended December 31, 1999. At September 30, 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, less estimated costs to sell, in the accompanying condensed consolidated balance sheets. Other Income 10 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 $0.4 million or 10.5% from $3.8 million for the three months ended September 30, 1999 to $4.2 million for the three months ended September 30, 2000. The increase is primarily attributed to trust income and commission income. For the nine months ended September 30, 2000, other income increased $1.6 million or 14.6% from $11.0 million for the nine months ended September 30, 1999 to $12.6 million for the nine months ended September 30, 2000. The increase is attributed to trust income, service charges on demand deposits, commission income and other income. Trust income for the three months ended September 30, 2000 of $1.2 million was $0.3 million more than the $0.9 million reported for the three months ended September 30, 1999. Trust income for the nine months ended September 30, 2000 of $3.5 million was $0.6 million more than the $2.9 million reported for the nine months ended September 30, 1999. Service charges on demand deposits remained constant at $0.9 million for the three months ended September 30, 2000 and September 30, 1999. Service charges on demand deposits increased $0.3 million from $2.5 million for the nine months ended September 30, 1999 to $2.8 million for the nine months ended September 30, 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 September 30, 2000 of $0.7 million was $0.2 million or 40.0% more than the $0.5 million reported for the three months ended September 30, 1999. Commission income for the nine months ended September 30, 2000 of $2.1 million was $0.7 million or 50.0% more than the $1.4 million reported for the nine months ended September 30, 1999. The majority of the growth was due to the new company, George Becker Associates, Inc. Other income decreased $0.1 million from $1.5 million for the three months ended September 30, 1999 to $1.4 million for the three months ended September 30, 2000. The three-month period ending September 30, 1999 had some one-time recovered items. For the nine-month period, other income grew $0.3 million from $4.1 million at September 30, 1999 to $4.4 million at September 30, 2000. The growth is attributed to increased activities in other service fee areas and the cash surrender value adjustments of certain bank owned life insurance policies. Other Expense 11 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 $8.5 million for the quarter ended September 30, 1999 to $8.8 million for the quarter ended September 30, 2000 and from $25.2 million for the nine months ended September 30, 1999 to $26.9 million for the nine months ended September 30, 2000. Salary increases, which include bonuses and commission expense generated by Fin-Plan Group and the new subsidiary, George Becker Associates, Inc., contributed to this increase in both the three and nine month periods. Tax Provision The provision for income taxes was $1.6 million for the quarter ended September 30, 2000 and $1.7 million for the quarter ended September 30, 1999. The effective tax rates were 27.5% and 29.0% respectively. For the nine months ended September 30, 2000 the provision was $5.3 million as compared to $4.9 million for the nine months ended September 30, 1999. The effective tax rates were 28.7% and 29.3% respectively. The effective tax rates reflect the benefits of tax credits generated from investments in low-income housing projects and tax-free income from investment in municipal securities, loans and bank-owned life insurance. Financial Condition Total assets increased $39.8 million or 3.6% from $1,121.0 million at December 31, 1999 to $1,160.8 million at September 30, 2000. An increase in deposits of $35.2 million provided funds for the increase in cash, investment in securities and federal funds sold. Other assets increased $9.9 million with $8.0 million of this for the purchase of bank-owned life insurance to fund a non-qualified plan. Shareholders' equity increased to $111.4 million at September 30, 2000 from $102.8 million at December 31, 1999, an increase of $8.6 million or 8.4%. Treasury stock increased to $23.9 million from $22.2 million at December 31, 1999. Book value per share increased from $13.80 at December 31, 1999 to $15.12 at September 30, 2000, an increase of $1.32 per share or 9.6%. On May 1, 2000, the Corporation paid a 5% stock dividend 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. 12 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 September 30, 2000, is $188.1 million as compared to $174.4 million at December 31, 1999. The accumulated other comprehensive loss of $1.3 million, net of taxes, has been included in shareholders' equity as of September 30, 2000. At December 31, 1999, the accumulated other comprehensive loss included in 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 Registrant's Annual Report on Form 10-K for the period ended December 31, 1999. Recent Accounting Pronouncements In September 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. Due to the nature of the Corporation's 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 provide a broader range of insurance products. The impact on the Corporation's financial position and results of operations was immaterial for the nine months ended September 30, 2000. 13 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 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: 10/23/00 /s/ William S. Aichele -------------------------------------------- William S. Aichele, President and Chief Executive Officer Date: 10/23/00 /s/ Wallace H. Bieler -------------------------------------------- Wallace H. Bieler, Executive Vice President and Chief Financial Officer 15 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 9-MOS DEC-31-2000 SEP-30-2000 44,625 4,871 13,200 0 188,085 141,466 140,456 712,059 10,603 1,160,796 945,948 59,506 22,897 21,075 0 0 41,037 70,333 1,160,796 44,204 13,825 1,360 59,389 24,156 26,707 32,682 57 0 26,916 18,342 18,342 0 0 13,075 1.76 1.76 4.30 2,568 330 0 0 11,223 1,117 440 10,603 10,603 0 1,606
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