-----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, Q1zXRzhTr62wucfNfZQiNcoU6ImE2Sslgx6AY5XNWe6qsZz5fkIhvll6U3THIaDd XSOY8hmIg3Jpwl4iskpelQ== 0001005477-01-002244.txt : 20010329 0001005477-01-002244.hdr.sgml : 20010329 ACCESSION NUMBER: 0001005477-01-002244 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVEST CORP OF PENNSYLVANIA CENTRAL INDEX KEY: 0000102212 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 231886144 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-07617 FILM NUMBER: 1582854 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-K 1 0001.txt FORM 10-K 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, 2000 Commission File number 0-7617 ----------------- ------ UNIVEST CORPORATION OF PENNSYLVANIA ----------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-1886144 ------------ ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation of organization) 14 North Main Street 18964 Souderton, Pennsylvania ----- ----------------------- (Zip Code) (Address of principal executive offices) 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 - -------------------------- (Title of Class) 7,173,518 --------- (Number of shares outstanding at 2/28/01) The approximate aggregate market value of voting stock held by non affiliates of the registrant is $134,787,520 as of February 28, 2001. 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 10, 2001. Parts I, II, and IV incorporate information by reference from the annual report to shareholders for the year ended December 31, 2000. PAGE 1 OF 26 PART I ITEM 1. BUSINESS GENERAL Univest Corporation of Pennsylvania ("Univest") is a Pennsylvania corporation in 1973 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956. Univest elected to become a Financial Holding Company in 2000 as provided under Title I of the Gramm-Leach-Bliley Act. 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 Services 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 George Becker Associates on January 3, 2000. This will allow Univest Corporation to provide a broader range of insurance products. Fin-Plan Group, a wholly owned subsidiary of Pennview, allows Univest Corporation to provide a 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 offers services of leasing commercial, industrial, and institutional equipment to firms and individuals. 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, five 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. Three off-premises automated teller machines are located in Montgomery County and two are 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, 2001, Univest and its subsidiaries employed four hundred and sixty-six (466) 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, Fin-Plan Group and George Becker Associates. 2 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. 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 that a member bank may extend to its affiliates, and the amount of its funds that 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. Univest elected to become a Financial Holding Company in 2000 as provided under Title I of the Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act provides a new regulatory framework for regulation through the financial holding company, which has as its umbrella regulator the Federal Reserve Board. The Gramm-Leach-Bliley Act requires "satisfactory" or higher Community Reinvestment Act compliance for insured depository institutions and their financial holding companies in order for them to engage in new financial activities. The Gramm-Leach-Bliley Act provides a federal right to privacy of non-public personal information of individual customers. 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 12.6% and 12.2%, and total risk-based capital ratios of 13.9% and 13.5% at December 31, 2000 and 1999, 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, 3 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. 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. 4 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 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 George Becker Associates on January 3, 2000. This will allow Univest Corporation to provide a broader range of insurance products. Fin-Plan Group is wholly owned by Pennview and allows Univest Corporation to provide a 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. 5
TABLE I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL 2000 2000/1999 1999 Average Income/ Avg. Volume Rate Average Income/ Avg. Volume ASSETS: Balance Expense Rate Change Change Total Balance Expense Rate Change ------- ------- ---- -------- -------- ------- ------- ------- ---- -------- Cash and due from banks $ 35,309 $ 34,496 Time deposits with other banks 4,544 $ 285 6.3 $ 5 $ 53 $ 58 4,415 $ 227 5.1 $ (343) U.S. Government obligations 125,937 7,333 5.8 (2,244) - (2,244) 166,343 9,577 5.8 (1,829) Oblig. of states & political sub. 29,054 1,339 4.6 349 43 392 21,684 947 4.4 647 Other securities 154,777 10,196 6.6 2,134 489 2,623 122,207 7,573 6.2 3,380 Trading Account 617 13 2.1 2 (8) (6) 548 19 3.5 19 Federal Reserve bank stock 761 46 6.0 - - - 761 46 6.0 - Federal funds sold and other short-term investments 25,791 1,672 6.5 1,042 156 1,198 9,735 474 4.9 (406) ------ ----- ----- --- Total investments 336,937 20,599 6.1 321,278 18,636 5.8 ------- ------ ------- ------ Commercial loans 207,766 18,532 8.9 2,110 552 2,662 184,019 15,870 8.6 2,412 Mortgage loans 328,517 26,315 8.0 (569) 337 (232) 337,153 26,547 7.9 (603) Installment loans 112,784 9,467 8.4 701 209 910 104,348 8,557 8.2 1,467 Home equity loans 13,190 1,494 11.3 (30) 162 132 13,505 1,362 10.1 (114) Municipal loans 55,492 3,185 5.7 540 - 540 46,619 2,645 5.7 262 ------ ----- ------ ----- Gross loans 717,749 58,993 8.2 685,644 54,981 8.0 ------ ------ Less: valuation reserve (10,761) (11,096) -------- -------- Net loans 706,988 674,548 ------- ------- Property, net 15,520 15,684 Other assets 47,079 38,901 ------ ------ Total assets $ 1,146,377 $ 1,089,322 ------------ ------------
1999/1998 1998 ASSETS: Rate Average Income/ Avg. Change Total Balance Expense Rate -------------- ------- ------- ---- Cash and due from banks $ 31,321 Time deposits with other banks $ (56) $ (399) 11,273 $ 626 5.6 U.S. Government obligations (196) (2,025) 196,033 11,602 5.9 Oblig. of states & political sub. (7) 640 6,858 307 4.5 Other securities (135) 3,245 67,637 4,328 6.4 Trading Account - 19 0 0 - Federal Reserve bank stock - - 761 46 6.0 Federal funds sold and other short-term investments (108) (514) 18,057 988 5.5 ------ --- Total investments 289,346 17,271 6.0 ------- ------
Commercial loans (944) 1,468 157,363 14,402 9.2 Mortgage loans (1,729) (2,332) 345,781 28,879 8.4 Installment loans (260) 1,207 86,505 7,350 8.5 Home equity loans (73) (187) 14,614 1,549 10.6 Municipal loans -- 262 41,456 2,383 5.7 ----- Gross loans 645,719 54,563 8.4 ------ Less: valuation reserve (10,439) -------- Net loans 635,280 ------- Property, net 16,237 Other assets 32,711 ------ Total assets $1,016,168 ---------- 6
2000 2000/1999 1999 LIABILITIES: Average Income/ Avg. Volume Rate Average Income/ Avg. Volume Balance Expense Rate Change Change Total Balance Expense Rate Change Demand deposits $ 150,911 $ 150,455 Interest checking deposits 90,785 $ 925 1.0 $ 23 $ - $ 23 86,583 $ 902 1.0 $ 123 Money market savings 188,394 8,975 4.8 1,401 1,422 2,823 158,014 6,152 3.9 1,088 Regular savings 134,450 2,660 2.0 (116) - (116) 140,313 2,776 2.0 134 Certificates of deposit 345,076 19,025 5.5 1,344 642 1,986 321,097 17,039 5.3 (254) Time open & club accounts 25,163 1,352 5.4 (233) 234 1 29,253 1,351 4.6 (78) Total time, int., and inv. checking deposits 783,868 32,937 4.2 735,260 28,220 3.8 Total deposits 934,779 885,715 Federal funds purchased 496 29 5.8 (176) 14 (162) 3,515 191 5.4 178 Loans & securities sold under agreement to repurchase 64,525 2,257 3.5 (88) 135 47 67,612 2,210 3.3 381 Other borrowings 20,389 1,236 6.1 344 132 476 14,695 760 5.2 233 Subordinated notes 0 0 - - - - 0 0 0.0 - - - Total borrowings 85,410 3,522 4.1 85,822 3,161 3.7 ------ ----- ------ ----- Accrued expenses & other liab. 18,705 15,017 ------ ------ Total liabilities 1,038,894 986,554 --------- ------- SHAREHOLDERS' EQUITY: - -------------------- Common stock 40,608 39,272 Capital surplus 19,422 14,908 Retained earnings 47,453 48,588 ------ ------ Total shareholders' equity 107,483 102,768 ------- ------- Total liabilities and share- holders' equity $ 1,146,377 $ 1,089,322 ------------ ------------ Weighted avg. yield on interest-earning assets 7.5 7.3 Weighted avg. rate paid on interest-bearing liab. 4.2 3.8 Net yield 4.1 4.2 1999/1998 1998 LIABILITIES: Rate Average Income/ Avg. Change Total Balance Expense Rate Demand deposits $ 132,132 Interest checking deposits (322) $(199) 80,524 $ 1,101 1.4 Money market savings (258) 830 128,970 5,322 4.1 Regular savings (528) (394) 132,012 3,170 2.4 Certificates of deposit (977) (1,231) 325,798 18,270 5.6 Time open & club accounts (123) (201) 30,800 1,552 5.0 Total time, int., and inv. checking deposits 698,104 29,415 4.2 Total deposits 830,236 Federal funds purchased (1) 177 234 14 6.0 Loans & securities sold under agreement to repurchase - 381 56,181 1,829 3.3 Other borrowings (30) 203 10,135 557 5.5 Subordinated notes - - 0 0 0.0 Total borrowings 66,550 2,400 3.6 ------ ----- Accrued expenses & other liab. 14,617 ------ Total liabilities 911,403 ------- SHAREHOLDERS' EQUITY: - -------------------- Common stock 37,765 Capital surplus 19,696 Retained earnings 47,304 ------ Total shareholders' equity 104,765 ------- Total liabilities and share- holders' equity $1,016,168 ---------- Weighted avg. yield on interest-earning assets 7.7 Weighted avg. rate paid on interest-bearing liab. 4.2 Net yield 4.3
7 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 $571 for 2000, $683 for 1999 and $1,106 for 1998. (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. 8
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE II. INVESTMENT PORTFOLIO (BOOK VALUE) (Thousands of Dollars) CARRYING AMOUNT OF INVESTMENT SECURITIES December 31, December 31, December 31, 2000 (a) 1999 (a) 1998 (a) -------- -------- -------- U. S. Treasury, government corporations and agencies $ 131,344 $ 150,096 $ 225,294 State and political subdivisions 39,346 27,020 17,966 Mortgage-backed securities 122,601 111,516 74,233 Other 55,135 23,243 10,172 ------- ------- ------ Total $ 348,426 $ 311,875 $ 327,665 ========== =========== ========== MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELD December 31, December 31, December 31, December 31, December 31, December 31, 2000 2000 1999 1999 1998 1998 Amount (a) Yield (b) Amount (a) Yield (b) Amount (a) Yield (b) ---------- --------- ---------- --------- ---------- --------- 1 Year or less $ 77,825 5.80% $ 54,249 5.68% $ 93,671 5.78% 1 Year - 5 Years 112,536 6.07% 139,357 5.64% 158,938 5.64% 5 Years - 10 Years 38,713 6.41% 35,094 6.26% 20,781 6.33% After 10 Years 119,352 6.42% 83,175 6.17% 54,275 6.24% -------- ----- ------- ----- ------- ----- Total $ 348,426 6.17% $ 311,875 5.86% $ 327,665 5.82% ========== ===== ========== ===== ========== =====
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. 9
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE III. LOAN PORTFOLIO, PART A. TYPES OF LOANS (Thousands of Dollars) December 31, December 31, December 31, December 31, December 31, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Real estate Loans Construction and land development $ 39,707 $ 33,632 $ 33,530 $ 30,951 $ 34,733 Secured by 1-4 family residential properties 214,973 219,292 214,798 217,782 217,631 Other real estate loans 168,761 173,780 169,402 189,251 178,644 Commercial and industrial loans 221,101 212,656 171,699 138,812 124,788 Loans to individuals 79,320 72,658 64,306 53,500 47,466 All other loans 15,425 10,591 7,117 6,143 5,821 ------- ------- ------ ------ ----- Total loans $ 739,287 $ 722,609 $ 660,852 $ 636,439 $ 609,083 ========== ========== ========== ========== =========
10 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.
AS OF DECEMBER 31, 2000 DUE IN ONE DUE IN ONE DUE IN OVER YEAR OR LESS TO FIVE YEARS FIVE YEARS TOTAL ------------ ------------- ---------- ----- Real estate loans Construction and land development $ 15,074 $ 20,800 $ 3,833 $ 39,707 Secured by 1-4 family residential properties 39,896 66,539 108,538 214,973 Other real estate loans 21,897 80,290 66,574 168,761 Commercial and industrial loans 96,665 95,592 28,844 221,101 Loans to individuals 16,673 57,078 5,569 79,320 All other loans 502 14,923 - 15,425 ---- ------- -- ------ Total loans $ 190,707 $ 335,222 $ 213,358 $739,287 ========== ========== ========== ======== Loans with a predetermined interest rate $ 54,852 $ 243,417 $ 140,656 $438,925 Loans with a floating or variable interest rate 135,855 91,805 72,702 300,362 -------- ------- ------- ------- $ 190,707 $ 335,222 $ 213,358 $739,287 ========== ========== ========= ========
11 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 2000 was $1,865. There was no interest income recognized on these loans. If nonaccrual loans had been performing in accordance with their contractual terms, additional income of $229 would have been recorded in 2000. 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, 2000, there were no concentrations of loans exceeding 10% of total loans other than disclosed in Table III, Part A. OTHER ASSETS At December 31, 2000, there was no Other Real Estate Owned classified as nonperforming.
2000 1999 1998 1997 1996 Principal Principal Principal Principal Principal Balance Balance Balance Balance Balance ------- ------- ------- ------- ------- Nonaccruing loans $ 1,865 $ 2,285 $ 3,424 $ 3,136 $ 4,671 ======== ======== ======== ======== ======= Accruing loans 90 days or more past due: Real estate loans Construction and land development - - - - - Secured by 1-4 family dwellings 138 304 705 308 373 Other real estate - - 14 36 12 Commercial and industrial loans - 63 - 21 19 Loans to individuals 208 214 204 159 180 All other loans - - - - - -- -- -- -- -------- Total loans, 90 days or more past due 346 581 923 524 584 ========= ======== ========= ========= ======== Restructured loans, not included above - 38 125 206 281 == === ==== ==== ========
12 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. Reserve for possible loan losses is determined through a monthly evaluation of reserve adequacy. Quarterly, this analysis 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. 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 has been enhanced to evaluate and support the range of loss factors produced (i.e. normalizing unusual influences, establishment of factor floors). The results of these changes in the methodology are immaterial. The reserve for possible loan losses is made up of the allocated or general reserve and the unallocated portion. The following table summarizes the two categories for the periods indicated. December 31, ------------ 2000 1999 1998 ---- ---- ---- Allocated $ 8,619 $ 8,786 $ 6,993 Unallocated 2,108 2,437 3,545 -------- -------- -------- Total $ 10,727 $ 11,223 $ 10,538 ======== ======== ======== The $167,000 decrease in the allocated portion of the reserve for the year ended December 31, 2000 occurred as higher loan volume was more than offset by the favorable impact of continuing portfolio quality improvements. Despite a $13.6 million increase in Commercial & Industrial (C&I) loans, fewer dollars were allocated to this loan pool due to a more favorable migration of losses associated with Uncriticized C&I loans. Lower allocations were also recognized for the residential mortgage, industry concentration and unfunded commitment pools, each reflecting improved portfolio quality. These allocation reductions combined to offset a rise in consumer installment allocations associated with weakening consumer trends across the industry and the introduction of additional risk in product offerings. The $329,000 reduction in the unallocated reserve position reflects the diminishing potential of losses attributable to Y2K-related business interruption, which offset consideration given to a stress testing model designed to measure the impact of a slowing economy. 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 13 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. 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 2000 was $205 compared to $1,052 in 1999 and $958 in 1998. 14
2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- Average amount of loans outstanding $707,084 $674,798 $635,939 $617,082 $590,144 Loan loss reserve at beginning of period $ 11,223 $ 10,538 $ 10,270 $ 9,801 $ 8,854 Charge-offs: Real estate loans 156 348 575 552 990 Commercial and industrial loans 794 1,105 370 319 20 Loans to individuals 423 304 427 286 175 Home equity -- -- -- -- -- Other -- -- -- -- -- -------- -------- -------- -------- -------- Total charge-offs: 1,373 1,757 1,372 1,157 1,185 ======== ======== ======== ======== ======== Recoveries: Real estate loans 98 857 324 167 458 Commercial and industrial loans 463 440 256 78 529 Loans to individuals 111 93 102 66 76 Home equity -- -- -- -- -- Other -- -- -- 5 24 -------- -------- -------- -------- -------- Total recoveries: 672 1,390 682 316 1,087 ======== ======== ======== ======== ======== Net charge-offs: 701 367 690 841 98 Additions to loan loss reserve 205 1,052 958 1,310 1,045 Loan loss reserve at end of period $ 10,727 $ 11,223 $ 10,538 $ 10,270 $ 9,801 ======== ======== ======== ======== ======== 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 -------- -------- -------- --------- -------- Real estate loans 57.3 $ 2,370 59.0 $ 2,571 63.2 $ 2,358 68.8 $ 3,511 70.8 $ 3,146 Commercial and industrial loans 29.9 4,848 29.4 5,356 26.0 3,575 21.8 610 20.5 1,332 Loans to individuals 10.7 1,401 10.1 848 9.7 1,049 8.4 617 7.8 354 All other loans 2.1 11 1.5 11 1.1 11 1.0 11 0.9 11 Unallocated portion 2,097 2,437 3,545 5,521 4,958 -------- ------- ------- ------ -------- Total $ 10,727 $ 11,223 $ 10,538 $ 10,270 $ 9,801 ======== ========= ======== ========= ======== Ratio of Net charge-offs versus average loans 0.1% 0.1% 0.1% 0.1% 0.0%
Total cash-basis and nonaccrual loans of $1,865 at December 31, 2000, were generally comprised of $368 in residential real estate loans, $174 in commercial real estate loans and $1,323 in commercial and other loans. 15 UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE V. DEPOSITS (THOUSANDS OF DOLLARS) 2000 1999 1998 ---- ---- ---- A. Average: Noninterest-bearing demand deposits $ 150,911 $ 150,455 $ 132,132 Interest checking 90,785 86,583 80,524 Money Market savings 188,394 158,014 128,970 Saving deposits 134,450 140,313 132,012 Time deposits 370,239 350,350 356,598 -------- -------- ------- Total $ 934,779 $ 885,715 $ 830,236 ========== ========== ========= 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, 2000 ------- ------ ------ --------- Certificates of deposit $ 6,326 $ 7,556 $ 11,866 $ 5,914 Other time deposits $ 12,525 $ 4,230 $ 1,949 $ 1,352
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) 2000 1999 1998 ---- ---- ---- Return on assets 1.5 1.5 1.4 Return on equity 16.1 15.4 13.8 Dividend payout ratio* 31.3 30.4 30.1 Equity to assets ratio 9.4 9.4 10.3
*The payout ratios have been restated to give effect to a 5% stock dividend paid May 1, 2000. 16 UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE VII. SHORT TERM BORROWINGS (Thousands of Dollars) LOANS AND SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE 2000 1999 1998 ---- ---- ---- Balance at December 31 $ 67,370 $ 70,943 $ 62,890 Weighted average interest rate at year end 3.7% 3.3% 3.2% Maximum amount outstanding at any month's end $ 71,830 $ 75,439 $ 68,384 Average amount outstanding during the year $ 64,525 $ 67,612 $ 56,181 Weighted average interest rate during the year 3.5% 3.3% 3.3% 17 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 10, 2001. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Incorporated by reference from the 2000 Annual Report to Shareholders (Exhibit 13), pages 43-44. Dividend and other restrictions are incorporated by reference from Note 16 of the 2000 Annual Report to Shareholders (Exhibit 13), pages 29 and 30. The number of shareholders as of February 28, 2001, was 2,073. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference from the 2000 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 2000 Annual Report to Shareholders (Exhibit 13), pages 35 through 42. Dividend and other restrictions are incorporated by reference from Note 16 of the 2000 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 2000 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, 2000 and 1999, and consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years ended December 31, 2000, and the independent auditors' report thereon are incorporated by reference from the 2000 Annual Report to Shareholders (Exhibit 13), pages 13 through 16. ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None 18 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 10, 2001. EXECUTIVE OFFICERS The names and ages of all executive officers of Univest are as follows:
PRINCIPAL OCCUPATION OFFICER TITLE DURING PAST 5 YEARS AGE William S. Aichele President President and CEO of the 50 Corporation and Union National Bank Marvin A. Anders Chairman Chairman of the Corporation 61 and Union National Bank Norman L. Keller Executive Vice President and CEO of Pennview 63 President Savings Bank and Executive Vice President of the Corporation Wallace H. Bieler Executive Vice Executive Vice President 55 President and CFO of the Corporation and Union National Bank K. Leon Moyer Executive Vice Executive Vice President 51 President 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 10, 2001. 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 10, 2001. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 2000, the Corporation and its subsidiaries paid $707,942 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. 19 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 2000. (c) Exhibits - The response of this portion of item 14 is submitted as a separate section. (d) Financial Statement Schedules - none. 20 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, 2000 and 1999 Consolidated statements of income for each of the 14 three years in the period ended December 31, 2000 Consolidated statements of changes in shareholders' equity 15 for each of the three years in the period ended December 31, 2000 Consolidated statements of cash flows for 16 each of the three years in the period ended December 31, 2000 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 2000 (Exhibit 13) which is incorporated by references. 21 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. (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. 22 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 28, 2001 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/ William S. Aichele /s/ James L. Bergey - ----------------------------------------- --------------------------------- William S. Aichele James L. Bergey President, CEO and Director, March 28, 2001 Director, March 28, 2001 /s/ Marvin A. Anders /s/ H. Ray Mininger - ----------------------------------------- --------------------------------- Marvin A. Anders H. Ray Mininger Chairman and Director, March 28, 2001 Director, March 28, 2001 /s/ Wallace H. Bieler /s/ Paul G. Shelly - ----------------------------------------- --------------------------------- Wallace H. Bieler Paul G. Shelly Executive Vice President and CFO, March 28, 2001 Director, March 28, 2001 /s/ K. Leon Moyer /s/ R. Lee Delp - ----------------------------------------- --------------------------------- K. Leon Moyer R. Lee Delp Executive Vice President , March 28, 2001 Director, March 28, 2001 /s/ Charles H. Hoeflich /s/ Clair W. Clemens - ----------------------------------------- --------------------------------- Charles H. Hoeflich Clair W. Clemens Chairman Emeritus, March 28, 2001 Director, March 28, 2001 /s/ Merrill S. Moyer /s/ John U. Young - --------------------------------- --------------------------------- Merrill S. Moyer John U. Young Director, March 28, 2001 Director, March 28, 2001 23 /s/ Thomas K. Leidy Thomas K. Leidy Director, March 28, 2001 24 EX-13 2 0002.txt EXHIBIT 13 CONSOLIDATED FINANCIAL HIGHLIGHTS (IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------------------------------------------- PERCENTAGE 2000 1999 CHANGE - --------------------------------------------------------------------------------------------------------------------- EARNINGS Net interest income ................................... $ 43,418 $ 42,463 2.25% Income before income taxes ............................ 24,139 22,418 7.68 Applicable income taxes ............................... 6,791 6,614 2.68 Net income ............................................ 17,348 15,804 9.77 PER SHARE* Average shares outstanding ............................ 7,394 7,587 (2.54) Income before income taxes ............................ $ 3.27 $ 2.95 10.85 Applicable income taxes ............................... $ .92 $ .87 5.75 Net income: Basic ............................................. $ 2.35 $ 2.08 12.98 Diluted ........................................... $ 2.34 $ 2.07 13.04 Book Value ............................................ $ 15.76 $ 13.80 14.20 BALANCE SHEETS Investments ........................................... $ 348,426 $ 311,875 11.72 Net loans ............................................. 728,501 711,251 2.43 Deposits .............................................. 971,924 910,675 6.73 Shareholders' equity .................................. 115,240 102,751 12.15 Assets ................................................ 1,204,195 1,120,992 7.42
*Per share data has been restated to give effect to a five percent stock dividend paid May 1, 2000. 2 Consolidated Balance Sheets (in thousands,except share data
DECEMBER 31, 2000 1999 ---------------------------------------------- Assets Cash and due from banks.................................................... $ 40,517 $ 35,066 Interest-bearing deposits with other banks................................. 5,131 3,839 Investment securities held to maturity (market value $159,325 and $135,107 at December 31, 2000 and 1999, respectively)................ 158,499 137,461 Investment securities available for sale................................... 189,927 174,414 Federal funds sold and other short-term investments........................ 16,190 1,800 Loans...................................................................... 739,228 722,474 Less: Reserve for possible loan losses................................... (10,727) (11,223) ------------------------------------------------ Net loans................................................................ 728,501 711,251 Premises and equipment, net................................................ 15,538 15,407 Accrued interest and other assets.......................................... 49,892 41,754 ------------------------------------------------ Total assets............................................................. $ 1,204,195 $ 1,120,992 Liabilities Demand deposits, noninterest bearing....................................... $ 168,796 $ 159,300 Demand deposits, interest bearing.......................................... 298,304 266,212 Savings deposits........................................................... 130,594 136,387 Time deposits.............................................................. 374,230 348,776 Total deposits........................................................... 971,924 910,675 ------------------------------------------------ Securities sold under agreements to repurchase............................. 67,370 70,943 Other short-term borrowings................................................ 1,129 1,155 Accrued expenses and other liabilities..................................... 22,457 17,393 Long-term debt, current.................................................... 7,000 -- Long-term debt............................................................. 19,075 18,075 ------------------------------------------------ Total liabilities........................................................ 1,088,955 1,018,241 Shareholders' equity Common stock, $5 par value; 24,000,000 shares authorized at December 31, 2000 and 1999 and 8,207,496 shares issued at December 31, 2000 and 1999 and 7,313,556 and 7,445,874 shares outstanding at December 31, 2000 and 1999, respectively........... 41,037 39,272 Additional paid-in capital................................................. 20,912 14,908 Retained earnings.......................................................... 77,498 73,409 Accumulated other comprehensive income..................................... 848 (2,672) Treasury stock, at cost; 893,940 shares and 761,622 shares at December 31, 2000 and 1999, respectively.............................. (25,055) (22,166) ------------------------------------------------ Total shareholders' equity............................................... 115,240 102,751 ------------------------------------------------ Total liabilities and shareholders' equity............................... $ 1,204,195 $1,120,992 ================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. *COMMON STOCK DATA HAS BEEN RESTATED TO GIVE EFFECT TO A FIVE PERCENT STOCK DIVIDEND PAID MAY 1, 2000. Univest Corporation of Pennsylvania 3 Consolidated Statements of Income (in thousands,except share data)
YEAR ENDED DECEMBER 31, 2000 1999 1998 -------------------------------------------------- INTEREST INCOME Interest and fees on loans: Taxable $ 55,808 $ 52,336 $ 52,180 Exempt from federal income taxes 3,185 2,645 2,383 ---------------------------------------------- Total interest and fees on loans 58,993 54,981 54,563 Interest and dividends on investment securities: U.S. Government obligations 7,333 9,577 11,602 Obligations of state and political subdivisions 1,339 947 307 Other securities 10,255 7,638 4,374 Interest on time deposits with other banks 285 227 626 Interest on federal funds sold and term federal funds 1,672 474 988 ---------------------------------------------- Total interest income 79,877 73,844 72,460 ---------------------------------------------- INTEREST EXPENSE Interest on demand deposits 9,900 7,054 6,423 Interest on savings deposits 2,660 2,776 3,170 Interest on time deposits 20,377 18,390 19,822 Interest on long-term debt 1,171 711 500 Interest-all other 2,351 2,450 1,900 ------------------------------------------------ Total interest expense 36,459 31,381 31,815 ------------------------------------------------ Net interest income 43,418 42,463 40,645 Provision for loan losses 205 1,052 958 Net interest income after provision for loan losses 43,213 41,411 39,687 ------------------------------------------------ OTHER INCOME Trust 4,404 3,970 3,202 Service charges on demand deposits 3,690 3,450 3,032 Commission income 2,776 2,068 - Net gains on sales of securities 1 3 97 Net gains on sales of mortgages 14 51 250 Other 5,856 6,007 4,113 ------------------------------------------------ Total other income 16,741 15,549 10,694 ------------------------------------------------ OTHER EXPENSES Salaries and benefits 20,887 19,204 15,703 Net occupancy 2,652 2,464 2,244 Equipment 2,556 2,570 2,697 Other 9,720 10,304 9,190 --------------------------------------------- Total other expenses 35,815 34,542 29,834 --------------------------------------------- Income before income taxes 24,139 22,418 20,547 Applicable income taxes 6,791 6,614 6,046 --------------------------------------------- Net income $ 17,348 $ 15,804 $ 14,501 ============================================= NET INCOME PER SHARE:* Basic $ 2.35 $ 2.08 $ 1.84 ============================================= Diluted $ 2.34 $ 2.07 $ 1.82 =============================================
* SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. PER SHARE DATA HAS BEEN RESTATED TO GIVE EFFECT TO A FIVE PERCENT STOCK DIVIDEND PAID MAY 1, 2000. Univest Corporation of Pennsylvania 4 Consolidated Statements of Changes in Shareholders' Equity (in thousands,except share data)
ACCUMULATED OTHER ADDITIONAL COMPREHENSIVE COMMON PAID-IN RETAINED TREASURY INCOME STOCK CAPITAL EARNINGS STOCK TOTAL ----------------------------------------------------------------------------- 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 *($0.548 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* ($0.629 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 --------- Comprehensive Income Net Income for 2000........................... 17,348 17,348 Other comprehensive income, net of income taxes of $1,927 Unrealized gains and (losses) on investment securities available-for-sale.... 3,520 3,520 --------- Total comprehensive income....................... 20,868 --------- Cash dividends declared* ($0.732 per share)...... (5,420) (5,420) 5% stock dividend paid May 1, 2000............ 1,765 6,004 (7,769) Stock issued under dividend reinvestment and employee stock purchase plans........... (27) 1,266 1,239 Exercise of stock options........................ (43) 109 66 Acquisition of treasury stock (192,921 shares)... (4,264) (4,264) ---------------------------------------------------------------------------------- Balance at December 31, 2000..................... $ 848 $ 41,037 $ 20,912 $ 77,498 $(25,055) $ 115,240
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. * PER SHARE DATA HAS BEEN RESTATED TO GIVE EFFECT TO A FIVE PERCENT STOCK DIVIDEND PAID MAY 1, 2000. Univest Corporation of Pennsylvania 5 Consolidated Statements of Cash Flows (in thousands)
YEAR ENDED DECEMBER 31, 2000 1999 1998 -------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income ........................................................................ $ 17,348 $ 15,804 $ 14,501 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses (less than) in excess of net charge-offs .............. (496) 685 268 Depreciation of premises and equipment .......................................... 2,284 2,313 2,475 (Discount accretion) premium amortization on investment securities .................................................................... (338) 17 (249) Deferred tax (benefit) income tax ............................................... (458) 31 (279) Realized gains on investment securities ......................................... (1) (3) (97) Realized gains on sales of mortgages ............................................ (14) (51) (250) (Decrease) increase in net deferred loan fees ................................... (315) (39) 114 Decrease (increase) in interest receivable and other assets ..................... 60 (3,338) (1,673) Increase (decrease) in accrued expenses and other liabilities ................... 3,409 (622) 2,611 -------------------------------------- Net cash provided by operating activities ..................................... 21,479 14,797 17,421 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturing securities held to maturity ................................ 61,707 90,041 74,884 Proceeds from maturing securities available for sale .............................. 20,114 28,935 25,045 Proceeds from sales of securities available for sale .............................. 9,041 18,391 25,079 Purchases of investment securities held to maturity ............................... (82,671) (11,165) (149,181) Purchases of investment securities available for sale ............................. (38,956) (115,466) (44,623) (Increase) decrease in interest-bearing deposits .................................. (1,292) 101 1,061 Premium paid to purchase bank-owned life insurance ................................ (8,000) -- -- Net (increase) decrease in federal funds sold and other short-term investments .......................................................... (14,390) 10,900 (10,700) Proceeds from sales of mortgages .................................................. 2,362 11,306 22,164 Net increase in loans ............................................................. (18,787) (73,241) (46,914) Capital expenditures .............................................................. (2,414) (1,893) (1,699) Other investing activities ........................................................ (200) (4,000) -- -------------------------------------- Net cash used in investing activities ......................................... (73,486) (46,091) (104,884) Cash flows from financing activities Net increase in deposits .......................................................... 61,249 36,171 81,636 Net (decrease) increase in short-term borrowings .................................. (3,599) 8,053 14,499 Proceeds from long-term debt ...................................................... 8,000 9,000 -- Purchases of treasury stock ....................................................... (4,264) (10,183) (13,692) Stock issued under dividend reinvestment and employee stock purchase plans .................................................................. 1,239 1,270 1,204 Proceeds from exercise of stock options ........................................... 66 699 656 Cash dividends .................................................................... (5,233) (4,661) (4,181) -------------------------------------- Net cash provided by financing activities ..................................... 57,458 40,349 80,122 -------------------------------------- Net increase (decrease) in cash and due from banks ................................ 5,451 9,055 (7,341) Cash and due from banks at beginning of year ...................................... 35,066 26,011 33,352 -------------------------------------- Cash and due from banks at end of year ............................................ $ 40,517 $ 35,066 $ 26,011 ====================================== Supplemental disclosures of cash flow information Cash paid during the year for: Interest ........................................................................ $ 34,497 $ 32,916 $ 31,693 Income taxes .................................................................... $ 7,077 $ 6,758 $ 6,041
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Univest Corporation of Pennsylvania 6 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 gain on available-for-sale securities included in accumulated other comprehensive income was $848 at December 31, 2000 and a net unrealized loss of $2,672 at December 31, 1999. 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 in 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 risk of its floating-rate loan portfolio. 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. 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. When a contract is terminated the resulting gain or loss is deferred and amortized into net interest income based upon the shorter of the contract's life or the underlying hedged item. If the underlying hedged item is disposed, the deferred gain or loss is immediately recognized as part of the gain or loss on the disposed item. Univest Corporation of Pennsylvania 7 Notes to Consolidated Financial Statements (dollars in thousands,except share data 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 or when in the opinion of management the full amount of the loan, in the case of non-collateral dependent borrowings, will not be realized. 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. During 2000 and 1999, 48,850 and 37,875 shares, respectively, were issued under the Reinvestment Plan, with 875,987 shares available for future purchase as of December 31, 2000. During 2000 and 1999, 8,700 and 5,449 shares, respectively, were issued under the Purchase Plan, with 498,277 shares available for future purchase as of December 31, 2000. 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." Univest Corporation of Pennsylvania 8 Notes to Consolidated Financial Statements (dollars in thousands, except share data) INTANGIBLE ASSETS The Corporation incurred intangible assets in connection with the acquisitions of Pennview, Fin-Plan, and George Becker Associates which include goodwill and core deposits intangibles. Goodwill is being amortized on a straight-line basis over a fifteen-year period. Core deposit intangibles have been fully amortized over their estimated useful lives of ten years. At December 31, 2000 the unamortized balance is approximately $5.3 million ($5.8 million at December 31, 1999), net of accumulated amortization of approximately $4.2 million ($3.4 million at December 31, 1999.) Mortgage servicing rights are recognized as separate assets when rights are acquired through the sale of mortgage loans. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing period of the underlying mortgage loans. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Fair value is based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance, to the extent that fair value is less than the capitalized amount. The balance of capitalized servicing rights, net of valuation allowances, included in other assets at December 31, 2000 and 1999, was $.5 million and $.6 million, respectively. The fair values of these rights approximates the carrying value at December 31, 2000 and 1999. The fair value of servicing rights was determined using discount rates and prepayment speeds ranging from 6.8% to 7.9%. Amortization of mortgage servicing rights of approximately $0.06 million was recorded during 2000. The valuation allowance was immaterial to the financial statements. RETIREMENT PLAN, SUPPLEMENTAL PLANS, AND OTHER POSTRETIREMENT BENEFIT PLANS 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. 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. These plans are nonqualified benefit plans. 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. 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). 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. STOCK DIVIDEND On March 22, 2000, the Corporation's board of directors declared a 5% stock dividend paid on May 1, 2000 to all shareholders of record as of April 14, 2000. All share and per share amounts have been retroactively adjusted to give effect to the stock dividend. 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 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. Univest Corporation of Pennsylvania 9 Notes to Consolidated Financial Statements (dollars in thousands, except share data) 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 2000 was $2.7 million and for 1999 was $2.6 million. NOTE 3. INVESTMENT SECURITIES Securities with a market value of $207.0 million and $205.2 million at December 31, 2000 and 1999, 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, 2000 and 1999, by maturity within each type:
December 31, 2000 December 31, 1999 ------------------------------------------- ------------------------------------------- Gross Gross Gross Gross Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Held-to-Maturity Securities Cost Gains Losses Value Cost Gains Losses Value ------------------------------------------- ------------------------------------------- U.S. Treasury, government corporations and agencies obligations: Within 1 year......................... $ 47,142 $ 15 $ (70) $ 47,087 $ 38,371 $ 4 $ (106) $38,269 1 to 5 years.......................... 30,998 25 (178) 30,845 58,044 -- (1,272) 56,772 ---------------------------------------- ------------------------------------------ 78,140 40 (248) 77,932 96,415 4 (1,378) 95,041 ---------------------------------------- ------------------------------------------ State and political subdivisions: Within 1 year......................... 5,020 1 (8) 5,013 1,264 1 (1) 1,264 1 to 5 years.......................... 12,721 -- (113) 12,608 17,515 3 (370) 17,148 5 to 10 years......................... -- -- -- -- 479 -- (14) 465 Over 10 years......................... 1,154 -- -- 1,154 -- -- -- -- ---------------------------------------- ------------------------------------------ 18,895 1 (121) 18,775 19,258 4 (385) 18,877 ---------------------------------------- ------------------------------------------ Mortgage-backed securities: Within 1 year......................... 794 -- (4) 790 772 -- (3) 769 1 to 5 years.......................... 837 -- (5) 832 2,663 -- (33) 2,630 5 to 10 years......................... 3,130 20 (8) 3,142 6,523 -- (200) 6,323 Over 10 years......................... 36,609 684 (57) 37,236 9,629 -- (356) 9,273 ---------------------------------------- ------------------------------------------ 41,370 704 (74) 42,000 19,587 -- (592) 18,995 ---------------------------------------- ------------------------------------------ Other: Within 1 year......................... 491 -- -- 491 -- -- -- -- 1 to 5 years.......................... 9,195 271 -- 9,466 2,201 1 (8) 2,194 5 to 10 years......................... 6,542 140 -- 6,682 -- -- -- -- Over 10 years......................... 3,866 113 -- 3,979 -- -- -- -- 20,094 524 -- 20,618 2,201 1 (8) 2,194 ---------------------------------------- ------------------------------------------ Total ............................ $ 158,499 $1,269 $ (443) $159,325 $137,461 $ 9 $(2,363) $135,107 ======================================== ==========================================
Univest Corporation of Pennsylvania 10 Notes to Consolidated Financial Statements (dollars in thousands, except share data)
December 31, 2000 December 31, 1999 ------------------------------------------- ------------------------------------------- Gross Gross Gross Gross Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market SECURITIES AVAILABLE FOR SALE Cost Gains Losses Value Cost Gains Losses Value ------------------------------------------- ------------------------------------------- U.S. Treasury, government corporations and agencies obligations: Within 1 year.......................... $ 20,939 $ 1 $ (55) $20,885 $ 9,537 $19 $ -- $ 9,556 1 to 5 years........................... 31,677 147 (56) 31,768 44,581 -- (991) 43,590 5 to 10 years.......................... 550 1 -- 551 550 -- (15) 535 --------------------------------------- ------------------------------------------ 53,166 149 (111) 53,204 54,668 19 (1,006) 53,681 --------------------------------------- ------------------------------------------ State and political subdivisions: 1 to 5 years........................... 414 -- (6) 408 -- - -- -- 5 to 10 years.......................... 560 2 -- 562 976 -- (28) 948 Over 10 years.......................... 18,753 729 (1) 19,481 6,958 1 (145) 6,814 --------------------------------------- ------------------------------------------ 19,727 731 (7) 20,451 7,934 1 (173) 7,762 --------------------------------------- ------------------------------------------ Mortgage-backed securities: Within 1 year.......................... -- -- -- -- 1,392 -- (11) 1,381 1 to 5 years........................... 2,225 12 (2) 2,235 3,290 -- (63) 3,227 5 to 10 years.......................... 27,836 154 (62) 27,928 25,663 7 (557) 25,113 Over 10 years.......................... 51,057 196 (185) 51,068 64,250 5 (2,047) 62,208 --------------------------------------- ------------------------------------------- 81,118 362 (249) 81,231 94,595 12 (2,678) 91,929 --------------------------------------- ------------------------------------------- Other: Within 1 year.......................... 3,493 -- -- 3,493 2,905 -- -- 2,905 1 to 5 years........................... 23,936 469 (31) 24,374 12,410 -- (293) 12,117 5 to 10 years.......................... -- -- -- -- 1,521 -- (25) 1,496 Over 10 years.......................... 7,183 -- (9) 7,174 4,524 -- -- 4,524 --------------------------------------- ------------------------------------------- .............................. 34,612 469 (40) 35,041 21,360 -- (318) 21,042 --------------------------------------- ------------------------------------------- Total .............................. $ 188,623 $1,711 $ (407) $189,927 $178,557 $32 $(4,175) $174,414 ======================================= ===========================================
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, 2000, available-for-sale debt securities with a fair value at the date of sale of $9,041 were sold ($18,391 in 1999). Gross realized gains on such sales totaled $9 during 2000 ($52 in 1999 and $97 in 1998), and the gross realized losses totaled $8 during 2000 ($49 in 1999 and $0 in 1998). Net unrealized gains on available-for-sale securities included in accumulated other comprehensive income as a separate component of shareholders' equity totaled $848 in 2000 and net unrealized losses totaled $2,672 in 1999. Unrealized losses in investment securities at December 31, 2000 and 1999 do not represent permanent impairments. At December 31, 2000 and 1999, 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, 2000 1999 ---------------------------------------------- Real estate-construction........................................................ $ 39,707 $ 33,632 Real estate-commercial.......................................................... 168,761 173,780 Real estate-residential......................................................... 214,973 219,292 Commercial and industrial....................................................... 221,101 212,656 Loans to individuals............................................................ 79,320 72,658 All other....................................................................... 15,425 10,591 ---------------------------------------------- Total loans..................................................................... 739,287 722,609 Less: Unearned income........................................................... (59) (135) ---------------------------------------------- ....................................................................... $ 739,228 $ 722,474 ==============================================
Univest Corporation of Pennsylvania 11 Notes to Consolidated Financial Statements (dollars in thousands, except share data) At December 31, 2000, loans to directors and executive officers of Univest and companies in which directors have an interest aggregated $13,964. 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, 2000 ADDITIONS COLLECTED DECEMBER 31, 2000 ------------------------------------------------------------------------ $12,519 $17,921 $16,476 $13,964
NOTE 5. RESERVE FOR POSSIBLE LOAN LOSSES A summary of the activity in the reserve for possible loan losses is as follows:
2000 1999 1998 ------------------------------------------ Balance at beginning of year............................................... $ 11,223 $ 10,538 $ 10,270 Provision charged to operating expenses.................................... 205 1,052 958 Recoveries................................................................. 672 1,390 682 Loans charged off.......................................................... (1,373) (1,757) (1,372) ------------------------------------------ Balance at end of year..................................................... $ 10,727 $ 11,223 $ 10,538 ==========================================
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 $1,485 ($2,043 at December 31, 1999) against which $1,035 ($960 at December 31, 1999) 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, 2000, the recorded investment in loans that are considered to be impaired under SFAS No. 114 was $1,653 all of which were on a nonaccrual basis, ($2,072 at December 31, 1999). The average recorded investment in impaired loans during the year ended December 31, 2000 was approximately $2,096 ($2,088 at December 31, 1999). The Corporation did not recognize any interest income on impaired loans in 2000 or 1999. At December 31, 2000, the total of nonaccrual and restructured loans was $1,653 ($2,110 at December 31, 1999 and $2,839 at December 31, 1998). If these loans had been performing in accordance with their contractual terms, additional interest income of $229, $246, and $341 would have been recorded in 2000, 1999, and 1998, respectively. In addition, Pennview had first residential mortgage loans of $212 at December 31, 2000 ($213 at December 31, 1999) which were over 90 days delinquent. At December 31, 2000, there was no other real estate owned. The total other real estate owned at December 31, 1999 was $45. NOTE 6. PREMISES AND EQUIPMENT
DECEMBER 31, 2000 1999 -------------------------------- Land and land improvements................................................. $ 3,411 $ 3,256 Premises and improvements.................................................. 17,853 16,859 Furniture and equipment.................................................... 16,996 16,129 -------------------------------- 38,260 36,244 Less: accumulated depreciation............................................. (22,722) (20,837) -------------------------------- $ 15,538 $ 15,407 ================================
Univest Corporation of Pennsylvania 12 Notes to Consolidated Financial Statements (dollars in thousands, except share data) As of December 31, 2000, 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: 2001 - $565; 2002 - $399; 2003 - $341; 2004 - $281; 2005 - $144. Rental expense charged to operations was $685, $611, and $525 for 2000, 1999, and 1998, 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, 2000 and 1999 are as follows:
2000 1999 ---------------------------------------------- Deferred tax assets: Loan loss.................................................................. $ 3,772 $ 3,898 Deferred compensation...................................................... 403 239 Postretirement benefits.................................................... 407 448 Marked-to-market adjustment................................................ -- 1,460 Depreciation............................................................... 82 -- ------------------------------------------------ $ 4,664 6,045 Deferred tax liabilities: Accretion.................................................................. 234 186 Retirement plans........................................................... 56 7 Depreciation............................................................... -- 120 Intangible assets.......................................................... 290 301 Deferred Income............................................................ 408 380 Marked-to-market adjustment................................................ 493 - Other...................................................................... 525 885 ------------------------------------------------ Net deferred tax assets......................................................... $ 2,658 $ 4,166 ================================================
The provision for federal and state income taxes included in the accompanying consolidated statements of income consists of the following:
2000 1999 1998 --------------------------------------------------------------------- Current .............................................. $ 7,249 $ 6,583 $ 6,325 Deferred .............................................. (458) 31 (279) ---------------------------------------------------------------------- $ 6,791 $ 6,614 $ 6,046 ======================================================================
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, 2000 and 1999. Note 8. Retirement Plan and Supplemental Retirement Plans Information with respect to the Retirement Plan and the Supplemental Retirement Plans is as follows:
2000 1999 --------------------------------- Change in benefit obligation Benefit obligation at beginning of year .......................................... $ 17,944 $ 17,845 Service cost-benefits earned during the period ................................... 1,221 1,648 Interest cost on projected benefit obligation .................................... 1,322 1,039 Actuarial (gain) loss ............................................................ 30 (1,816) Benefits paid .................................................................... (902) (772) --------------------------------- Benefit obligation at end of year ................................................ $ 19,615 $ 17,944 =================================
Univest Corporation of Pennsylvania 13 Notes to Consolidated Financial Statements (dollars in thousands, except share data)
2000 1999 --------------------------------- Change in plan assets Fair value of plan assets at beginning of year ................................... $ 19,090 $ 17,388 Actual return on plan assets ..................................................... (888) 2,258 Benefits paid .................................................................... (902) (772) Employer contribution ............................................................ 283 216 --------------------------------- Fair value of plan assets at end of year ......................................... 17,583 19,090 --------------------------------- Funded status .................................................................... (2,032) 1,146 Unrecognized net actuarial gain .................................................. (489) (3,083) Unrecognized prior service costs ................................................. (343) (403) Unrecognized net transition asset ................................................ -- (126) --------------------------------- Pension liability ................................................................ $ (2,864) $ (2,466) ================================= Weighted-average assumptions as of December 31 Assumed discount rate for obligation............................................ 7.25%-8.00% 7.25% Assumed long-term rate of investment return..................................... 8.50% 8.50% Assumed salary increase rate.................................................... 4.00%-5.10% 5.10% Expense recognized in 2000, 1999, and 1998 amounted to $680, $1,045, and $15, respectively, and is summarized as follows: 2000 1999 1998 ------------------------------------------------ Service cost-benefits earned during the period.................... $ 1,221 $ 1,648 $ 568 Interest cost on projected benefit obligation .................... 1,322 1,039 915 Expected return on plan assets.................................... (1,593) (1,455) (1,266) Amortization of net transition asset.............................. (126) (126) (126) Amortization of prior service cost................................... (144) (61) (76) ------------------------------------------------ $ 680 $ 1,045 $ 15 ================================================
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. The Corporation has invested in bank-owned life insurance contracts to meet its future obligations under the supplemental retirement plans. For the nonqualified supplemental retirement plans, the projected benefit obligation in excess of plan assets was $3,884 and $3,348 for December 31, 2000 and 1999 respectively. Pension expense for the 401(k) deferred salary savings plan for the years ended December 31, 2000, 1999, and 1998 was $306, $290, and $263, respectively. Note 9. Other Postretirement Benefit Plans Information with respect to other Postretirement Benefits is as follows:
2000 1999 ---------------------------------------------- Change in benefit obligation Benefit obligation at beginning of year......................................... $ 903 $ 1,399 Service cost-benefits earned during the period.................................. 32 30 Interest cost on projected benefit obligation................................... 64 61 Actuarial (gain) loss........................................................... (31) (545) Benefits paid................................................................... (39) (42) ---------------------------------------------- Benefit obligation at end of year............................................... $ 929 $ 903 ============================================== Fair value of plan assets....................................................... -- -- ---------------------------------------------- Funded status................................................................... (929) (903) Unrecognized net actuarial loss................................................. 33 64 Unrecognized prior service cost................................................. (269) (289) ---------------------------------------------- Accrued pension expense......................................................... $ (1,165) $ (1,128) ==============================================
Univest Corporation of Pennsylvania 14 Notes to Consolidated Financial Statements (dollars in thousands, except share data) Net periodic postretirement benefit cost for the years ended December 31, 2000, 1999, and 1998 includes the following components:
2000 1999 1998 ------------------------------------ Service cost-benefits earned during the period ...................................... $ 32 $ 30 $ 22 Interest cost on accumulated postretirement benefit obligation ...................... 64 61 82 Prior service cost .................................................................. (20) (20) -- Amortization of actuarial loss ...................................................... -- 6 1 ------------------------------------ $ 76 $ 77 $105 ==================================== Weighted-average assumptions as of December 31 2000 1999 ---------------------------------------------- Assumed discount rate for obligation............................................ 7.25% 7.25% Medical care cost trend on covered charges*..................................... 6.50% 7.00%
*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..................................... 33 (32)
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 525,000 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. 113,030 common shares were available for future options and 296,226 common shares were exercisable at December 31, 2000. Transactions involving the plan are summarized as follows:
SHARES OPTION PRICE UNDER OPTION PER SHARE ---------------------------------------------- Outstanding at December 31, 1997................................................ 173,521 $ 12.95-$28.57 Granted ....................................................................... -- -- Exercised....................................................................... (21,924) 12.95 Exercised....................................................................... (25,193) 14.76 ---------------------------------------------- Outstanding at December 31, 1998................................................ 126,404 $ 12.95-$28.57 Granted ....................................................................... 15,750 31.67 Granted ....................................................................... 146,213 24.29 Exercised....................................................................... (30,715) 12.95 Exercised....................................................................... (20,435) 14.76 ---------------------------------------------- Outstanding at December 31, 1999................................................ 237,217 $ 12.95-$31.67 Granted ....................................................................... 10,500 24.40 Granted ....................................................................... 53,000 22.25 Exercised....................................................................... (4,491) 14.76 Outstanding at December 31, 2000................................................ 296,226 $ 14.76-$31.67 ==============================================
Univest Corporation of Pennsylvania 15 Notes to Consolidated Financial Statements (dollars in thousands, except share data) NOTE 11. TIME DEPOSITS The aggregate amount of certificates of deposit in denominations of $100 or more was $31,662 at December 31, 2000, and $25,400 at December 31, 1999, with interest expense of $1,736 for 2000 and $1,290 for 1999. Other time deposits in denominations of $100 or more were $20,055 at December 31, 2000, and $23,604 at December 31, 1999, with interest expense of $1,230 for 2000 and $1,270 for 1999. NOTE 12. LONG-TERM DEBT At December 31, 2000 and 1999, long-term debt consisted of the following:
DESCRIPTION DECEMBER 31, DECEMBER 31, 2000 1999 INTEREST RATE MATURITY - ------------------------------------------------------------------------------------------------------------------------------------ Federal Home Loan Bank Advance $ 3,500 $ 3,500 6.60% (variable) May 2001 Federal Home Loan Bank Advance 3,500 3,500 6.58% (variable) March 2001 Federal Home Loan Bank Advance 5,000 5,000 6.30% November 2009 Federal Home Loan Bank Advance -- 2,000 5.52% (variable) September 2002 Federal Home Loan Bank Advance 4,000 4,000 4.99% January 2009 Federal Home Loan Bank Advance 75 75 4.00% September 2006 Federal Home Loan Bank Advance 5,000 -- 6.10% September 2010 Federal Home Loan Bank Advance 5,000 -- 5.89% December 2010 ------------------------------- $ 26,075 $ 18,075 ===============================
Advances from the Federal Home Loan Bank are collateralized by Federal Home Loan Bank stock and substantially all first mortgage loans of the Banks. On September 26, 2000 Pennview Savings Bank exercised a put option on the $2.0 million borrowing that was due to mature on September 26, 2002, which retired that debt. The remaining advances may be subject to a prepayment fee. Note 13. Earnings per Share The following table sets forth the computation of basic and diluted earnings per share (in thousands):
2000 1999 1998 --------------------------------- Numerator: Net income $17,348 $ 15,804 $ 14,501 Numerator for basic and diluted earnings per share - income available to common shareholders $17,348 $ 15,804 $ 14,501 Denominator:* Denominator for basic earnings per share- weighted-average shares outstanding 7,394 7,587 7,892 Effect of dilutive securities: Employee stock options 20 48 74 --------------------------------- Denominator for diluted earnings per share adjusted weighted-average shares outstanding 7,414 7,635 7,966 =============================== Basic earnings per share* $ 2.35 $ 2.08 $ 1.84 ================================= Diluted earnings per share* $ 2.34 $ 2.07 $ 1.82 =================================
For additional disclosures regarding the employee stock options, see Note 10. *The weighted average number of shares outstanding as well as per share data have been restated to give effect to a five percent stock dividend paid May 1, 2000. Univest Corporation of Pennsylvania 16 Notes to Consolidated Financial Statements (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. As of December 31, 2000, the Banks have identified the due from banks' balance of $25,379 as a significant concentration of credit risk because it contains a balance due from a single depository institution 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............................................................... $251,622 Standby letters of credit or commercial letters of credit.................................. 18,902 Interest rate swaps, notional principal amount............................................. 30,000
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. 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, 2000, $30 million in notional interest-rate swaps were outstanding. The contracts entered into by the Corporation expire as follows: $20 million in notional principal amount in second quarter 2001 and $10 million in first quarter 2002. The impact of the interest-rate swaps on net interest income for the year ended December 31, 2000 was a negative $187 and for the year ended December 31, 1999, a positive $209. 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, 2000, the market value of interest-rate swaps in a favorable position is $107 and the market value of interest-rate swaps in an unfavorable position is $66. At December 31, 1999, the market value of interest-rate swaps in an unfavorable position was $301, there were no interest-rate swaps in a favorable 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. 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 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. Univest Corporation of Pennsylvania 17 Notes to Consolidated Financial Statements (dollars in thousands, except share data) 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:
DECEMBER 31, 2000 DECEMBER 31, 1999 --------------------------------------------------------------------- CARRYING OR CARRYING OR NOTIONAL/CONTRACT FAIR NOTIONAL/CONTRACT FAIR AMOUNT VALUE AMOUNT VALUE ASSETS: ---------------------------------------------------------------------- Cash and short-term assets .................. $ 61,838 $ 61,838 $ 40,705 $ 40,705 Investment securities ....................... 348,426 349,252 311,875 309,520 Net loans ................................... 728,501 747,361 711,251 711,669 LIABILITIES: Deposits .................................... $971,924 $ 973,372 $910,675 909,851 Short-term borrowings ....................... 68,499 68,499 72,098 72,098 Long-term debt .............................. 26,075 26,551 18,075 16,532 OFF-BALANCE-SHEET: Commitments to extend credit ................ $251,622 $ (724) $234,273 (582) Letters of credit ........................... 18,902 (284) 17,550 (263) Interest-rate swap, notional principal amount 30,000 41 40,000 (301)
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. 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. Univest Corporation of Pennsylvania 18 Notes to Consolidated Financial Statements (dollars in thousands, except share data) 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, 2000, that the Banks meet all capital adequacy requirements to which they are subject. As of December 31, 2000, 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.
TO BE WELL- CAPITALIZED UNDER FOR CAPITAL PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS -------------------------------------------------------------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO -------------------------------------------------------------------------- As of December 31, 2000: TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS): CONSOLIDATED...................................... $ 119,782 13.89% $ 69,005 8.00% $ 86,256 10.00% Union National Bank............................... 102,785 13.45% 61,121 8.00% 76,401 10.00% Pennview Savings Bank............................. 13,598 15.16% 7,175 8.00% 8,969 10.00% TIER I CAPITAL (TO RISK-WEIGHTED ASSETS): CONSOLIDATED...................................... 109,055 12.64% 34,502 4.00% 51,753 6.00% Union National Bank............................... 93,232 12.20% 30,560 4.00% 45,841 6.00% Pennview Savings Bank............................. 12,664 14.12% 3,588 4.00% 5,382 6.00% TIER I CAPITAL (TO AVERAGE ASSETS): CONSOLIDATED...................................... 109,055 9.56% 34,219 3.00% 45,626 4.00% Union National Bank............................... 93,232 9.39% 29,786 3.00% 39,715 4.00% Pennview Savings Bank............................. 12,664 8.96% 4,241 3.00% 5,655 4.00%
TO BE WELL- CAPITALIZED UNDER FOR CAPITAL PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS -------------------------------------------------------------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO -------------------------------------------------------------------------- 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%
Univest Corporation of Pennsylvania 19 Notes to Consolidated Financial Statements (dollars in thousands, except share data) 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 2001 without approval of the Office of Comptroller of the Currency of approximately $11,998 plus an additional amount equal to the Bank's net profits for 2001 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 DECEMBER 31, 2000 1999 ---------------------------------------------- Assets: Deposits with bank subsidiary.............................................. $ 67 $ 67 Investments in U.S. Government obligations available for sale.............. 1,570 1,542 Investments in U.S. Government obligations held to maturity................ -- -- Investments in subsidiaries, at equity in net assets: Banks.................................................................... 112,075 99,053 Non-banks................................................................ 5,469 5,369 Other assets............................................................... 2,817 2,792 ---------------------------------------------- Total assets........................................................... $ 121,998 $ 108,823 ============================================== Liabilities: Dividends payable.......................................................... $ 1,395 $ 1,209 Other liabilities.......................................................... 5,363 4,863 ---------------------------------------------- Total liabilities.......................................................... 6,758 6,072 ---------------------------------------------- Shareholders' equity............................................................ 115,240 102,751 ---------------------------------------------- Total liabilities and shareholders' equity............................. $ 121,998 $ 108,823 ============================================== Statements of Income YEAR ENDED DECEMBER 31, 2000 1999 1998 ----------------------------------------------------------- Dividends from banks.............................................. $ 8,139 $ 12,991 $ 16,029 Other income...................................................... 9,500 8,578 7,536 ----------------------------------------------------------- Total operating income................................... 17,639 21,569 23,565 Operating expenses................................................ 9,975 9,839 8,242 ----------------------------------------------------------- Income before income tax benefit and equity in undistributed income of subsidiaries......................... 7,664 11,730 15,323 Applicable income tax (benefit)................................... (81) (365) (152) ----------------------------------------------------------- Income before equity in undistributed income of subsidiaries...... 7,745 12,095 15,475 Equity in undistributed income (loss) of subsidiaries: Banks........................................................ 9,503 3,439 (932) Non-banks.................................................... 100 270 (42) ----------------------------------------------------------- Net income........................................................ $ 17,348 $ 15,804 $ 14,501 ===========================================================
Univest Corporation of Pennsylvania 20
STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 2000 1999 1998 ---------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 17,348 $ 15,804 $ 14,501 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income/loss of subsidiaries (9,603) (3,709) 974 Increase in other assets (545) (1,592) (343) Depreciation of premises and equipment 520 571 542 Increase (decrease) in other liabilities 500 1,969 (91) ---------------------------------- Net cash used in operating activities 8,220 13,043 15,583 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of securities held to maturity 1,542 1,000 1,000 Purchases of investment securities available for sale (1,570) (1,542) (1,000) Investment in non-bank subsidiaries -- -- (35) ---------------------------------- Net cash used in investing activities (28) (542) (35) CASH FLOWS FROM FINANCING ACTIVITIES Purchases of treasury stock (4,264) (10,183) (13,692) Stock issued under dividend reinvestment and employee stock purchase plans 1,239 1,270 1,204 Proceeds from exercise of stock options 66 699 656 Repayment from subsidiary -- 350 -- Cash dividends (5,233) (4,661) (4,181) ---------------------------------- Net cash used in financing activities (8,192) (12,525) (16,013) ---------------------------------- Net increase (decrease) in deposits with bank subsidiary 0 (24) (465) Deposits with bank subsidiary at beginning of year 67 91 556 ---------------------------------- Deposits with bank subsidiary at end of year $ 67 $ 67 $ 91 ==================================
During 2000, 1999, and 1998, the parent company made income tax payments of $7,077, $6,758, and $6,041, respectively. No interest payments were made. Univest Corporation of Pennsylvania 21 Notes to Consolidated Financial Statements (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, 2000 and 1999 were as follows: 2000 QUARTERLY FINANCIAL DATA
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 ------------------------------------------------------------ Interest income $ 20,488 $ 20,330 $ 19,881 $ 19,178 Interest expense 9,752 9,453 8,931 8,323 ------------------------------------------------------------ Net interest income 10,736 10,877 10,950 10,855 Provision for loan losses 148 215 15 (173) ------------------------------------------------------------ Net interest income after provision for loan losses 10,588 10,662 10,935 11,028 Other income 4,108 4,157 4,112 4,364 Other expenses 8,899 8,846 8,567 9,503 ------------------------------------------------------------ Income before income taxes 5,797 5,973 6,480 5,889 Applicable income taxes 1,524 1,641 1,862 1,764 ------------------------------------------------------------ Net income $ 4,273 $ 4,332 $ 4,618 $ 4,125 ============================================================ Per share data: Net income: Basic $ .58 $ .59 $ .62 $ .55 ============================================================ Diluted $ .58 $ .59 $ .62 $ .55 ============================================================ Dividends per share* $ .19 $ .19 $ .19 $ .162 ============================================================ 1999 Quarterly Financial Data DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 ------------------------------------------------------------- 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 $ .54 $ .54 $ .49 $ .51 ============================================================= Diluted $ .53 $ .54 $ .49 $ .50 ============================================================= Dividends per share* $ .162 $ .162 $ .162 $ .143 =============================================================
*PER SHARE DATA HAS BEEN RESTATED TO GIVE EFFECT TO A 5% STOCK DIVIDEND PAID MAY 1, 2000. Univest Corporation of Pennsylvania 22 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, 2000 and 1999, 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, 2000. 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, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Philadelphia, Pennsylvania January 19, 2001 Univest Corporation of Pennsylvania 23 Five Year Performance Highlights [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] - -------------------------------------------------------------------------------- 96 ................................................................ 1.47 97 ................................................................ 1.62 98 ................................................................ 1.84 99 ................................................................ 2.08 00 ................................................................ 2.35 [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] - -------------------------------------------------------------------------------- 96 ................................................................ 725.4 97 ................................................................ 755.0 98 ................................................................ 830.2 99 ................................................................ 885.7 00 ................................................................ 934.8 [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] - -------------------------------------------------------------------------------- 96 ................................................................ 594.8 97 ................................................................ 625.8 98 ................................................................ 645.7 99 ................................................................ 685.6 00 ................................................................ 717.7 [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] - -------------------------------------------------------------------------------- 96 ................................................................ 12.04 97 ................................................................ 13.18 98 ................................................................ 14.50 94 ................................................................ 15.80 95 ................................................................ 17.35 - --------------------------------------------------------------------------------
.................................................................................................................................... SELECTED FINANCIAL DATA (In thousands, except per share data) Year ended December 31, 2000 1999 1998 1997 1996 Total assets.............................. $ 1,204,195 $ 1,120,992 $ 1,070,470 $ 973,157 $ 912,459 Long-term obligations..................... 26,075 18,075 9,075 9,075 7,075 Interest income........................... 79,877 73,844 72,460 69,540 66,682 Net interest income....................... 43,418 42,463 40,645 40,628 39,001 Provision for loan losses................. 205 1,052 958 1,310 1,045 Net income................................ 17,348 15,804 14,501 13,177 12,038 Net income per share:* Basic ................................. $ 2.35 $ 2.08 $ 1.84 $ 1.62 $ 1.47 Diluted ................................. $ 2.34 $ 2.07 $ 1.82 $ 1.61 $ 1.47 Dividends declared per share.............. $ 0.732 $ 0.629 $ 0.548 $ 0.457 $ 0.338
* PER SHARE DATA HAS BEEN RESTATED TO GIVE EFFECT TO A 5% STOCK DIVIDEND PAID MAY 1, 2000. Univest Corporation of Pennsylvania 24 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 2000, 1999, and 1998 were as follows: 2000 1999 1998 ------------------------------------------------ Net income $ 17,348 $ 15,804 $ 14,501 Net income per share: Basic 2.35 2.08 1.84 Diluted 2.34 2.07 1.82 2000 VERSUS 1999 The 2000 results compared to 1999 include the following significant pretax components: -- Net interest income increased due to growth in average earning assets and an increase in average yield that was offset by growth in interest-bearing liabilities with an increase in yield. The net interest margin decreased to 4.1% from 4.2%. -- Total other income increased by $1.2 million or 7.7% due to growth in fee income and commission income. Commission income, which is offset by commission expense, is the primary source of income for Fin-Plan Group and the newly acquired George Becker Associates, Inc. -- Salaries and benefits increased $1.7 million or 8.9% largely due to bonuses and the commissions and salaries of Fin-Plan Group and the newly acquired George Becker Associates, Inc. 1999 VERSUS 1998 The 1999 results compared to 1998 include the following significant pretax components: -- Net interest income increased due to growth in average earning assets that was offset by a decrease in average yield and growth 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 additional 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. 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 1998 through 2000. Sensitivities associated with the mix of assets and liabilities are numerous and complex. The Asset/Liability Management and Investment Committees work to maintain an adequate and predictable net interest margin for the Corporation. Univest Corporation of Pennsylvania 25 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The following table presents a summary (in thousands) 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, 2000, 1999, and 1998:
2000 1999 1998 ------------------------------- ------------------------------- ----------------------------- Interest Interest Interest Average Income/ Average Average Income/ Average Average Income/ Average Balance Expense Rate Balance Expense Rate Balance Expense Rate -------------------------------------------------------------------------------------------------- Interest-earning assets: Investments $ 341,481 $20,884 6.1% $ 325,693 $18,863 5.8% $ 300,619 $17,897 6.0% Loans 717,749 58,993 8.2% 685,644 54,981 8.0% 645,719 54,563 8.4% -------------------------------------------------------------------------------------------------- Total interest-earning assets 1,059,230 79,877 7.5% 1,011,337 73,844 7.3% 946,338 72,460 7.7 Noninterest-earning assets 87,147 77,985 69,830 ---------- ---------- ------------ Total assets $1,146,377 $1,089,322 $ 1,016,168 ========== ========== ============ Interest-bearing liabilities: Deposits $ 783,868 $32,937 4.2% $ 735,260 $28,220 3.8% $ 698,104 $29,415 4.2% Borrowings 85,410 3,522 4.1% 85,822 3,161 3.7% 66,550 2,400 3.6% -------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 869,278 36,459 4.2% 821,082 31,381 3.8% 764,654 31,815 4.2% Noninterest-bearing liabilities 169,616 165,472 146,749 ---------- ---------- ------------ Total liabilities 1,038,894 986,554 911,403 Shareholders' equity 107,483 102,768 104,765 ---------- ---------- ------------ Total liabilities and shareholders' equity $1,146,377 $1,089,322 $ 1,016,168 ========== ------- ========== ------- ============ ------- Net interest income $43,418 $42,463 $40,645 ======= ======= ======= Interest-rate spread 3.3% 3.5% 3.5% ======= ======= ====== Net interest margin on weighted average interest-earning assets 4.1% 4.2% 4.3% ======= ======= ====== Ratio of average interest- earning assets to average interest-bearing liabilities 121.9% 123.2% 123.8% ======= ======= ======
INTEREST INCOME Interest and fees on loans increased 7.3% or $4.0 million from the $55.0 million recorded for the year ended December 31, 1999 as compared to the $59 million for the year ended December 31, 2000. The growth was due to increased volume and an increase in rate. 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 remained at 9.50% at December 2000. The average prime rate for the year 2000 was 9.27% compared to 8.00% for the year 1999. The average interest yield on the portfolio increased from 8.0% in 1999 to 8.2% in 2000. Interest and fees on loans increased 0.7% 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 8.00% as compared to the average prime rate for the year 1998 of 8.30%. The average interest yield on the portfolio decreased from 8.4% in 1998 to 8.0% in 1999. Univest Corporation of Pennsylvania 26 Management's Discussion and Analysis of Financial Condition and Results of Operations Tax-free interest on loans shows an increasing trend when comparing the $3.2 million for December 31, 2000 with the $2.6 million recorded for December 31, 1999 and the $2.4 million for December 31, 1998. Interest on U.S. Government obligations decreased from $9.6 million for the year ended December 31, 1999 to $7.3 million at December 31, 2000. The decline was due to a decrease in volume. As treasury securities matured, they were replaced with corporate and asset-backed securities. Interest on government obligations decreased from $11.6 million for the year ended December 31, 1998 to $9.6 million at December 31, 1999. The decline was due to decreases in both volume and rate. Interest and dividends on state and political subdivisions shows an increasing trend from $0.3 million in 1998 to $0.9 million in 1999 and $1.3 million in 2000. The increase is a result of both rate and volume. During 2000, the Corporation acquired tax-exempt securities with a term of greater than ten years and at yields substantially higher than portfolio yields. The other securities category consists mainly of U.S. Government Agency mortgage-backed securities. Income on other securities has grown from $4.4 million in 1998 to $7.6 million in 1999 and $10.2 million in 2000. The increases were all due to increased volume, especially in 2000 when average balances increased from $122.2 million for 1999 to $154.8 million for 2000. Corporate and asset-backed securities were purchased to take advantage of the historical wide spreads. Interest on federal funds sold is the result of daily investment activity that can be volatile in both rate and volume. Interest on federal funds sold increased from $0.5 million in 1999 to $1.7 million in 2000 due to both increased volume and rate. Income decreased from $1.0 million in 1998 to $0.5 million in 1999 due to decreased volume and rate. Included in this amount is $274 thousand of interest on term federal funds sold. Investment in term federal funds sold was for a five-month period in the last half of 1998. INTEREST EXPENSE Interest expense on demand deposits increased 39.4% or $2.8 million from $7.1 million in 1999 to $9.9 million in 2000. The growth continues to be attributed to an increase in volume and rate in certain types of money market accounts. Interest 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 volume and rate increases in certain types of money market accounts. Interest expense on savings deposits decreased from $2.8 million in 1999 to $2.7 million in 2000. A reduction in volume caused the decrease. 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 time deposits increased from $18.4 million in 1999 to $20.4 million in 2000. Certificates of deposit volumes and rates grew due to special rate promotions. 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-all other consists of interest paid on short-term borrowings such as federal funds purchased, repurchase agreements and a treasury tax and loan note. In addition, Union National Bank offers an automated cash management checking account that sweeps funds daily into a repurchase agreement account. Interest expense decreased from $2.5 million in 1999 to $2.4 million in 2000 due to a reduction in volume that was partly offset by an increase in rate. Interest expense increased from $1.9 million in 1998 to $2.5 million in 1999 due to increased volume. LONG-TERM DEBT Interest on long-term debt increased from $0.7 million at December 31, 1999 to $1.2 million at December 31, 2000. This increase represents interest on the additional $8.0 million borrowed from the Federal Home Loan Bank of Pittsburgh by Pennview in 2000. 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 $0.5 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. 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, also the volume, growth, and composition of the loan portfolio. Univest Corporation of Pennsylvania 27 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The reserve for possible loan losses is determined through a periodic evaluation that 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. The provision for December 31, 2000 was $0.2 million and for December 31, 1999 was $1.1 million. Due to an improvement in the results of the above criteria and recoveries in the fourth quarter of 2000, a minimal provision was made. The provision for loan losses for the year ended December 31, 1998 was $1.0 million. The ratio of the reserve for possible loan losses to total loans at December 31, 2000 and 1999 was 1.5% and 1.6%, respectively. At December 31, 2000, the recorded investment in loans that are considered to be impaired under SFAS No.114 was $1.7 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, 1999, the recorded investment in loans considered to be impaired was $2.1 million and the related reserve for possible loan losses for those loans was $1.0 million. 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 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, restructured and nonaccrual loans total $1.9 million at December 31, 2000 and $2.3 million at December 31, 1999 and $3.5 million at December 31, 1998 and consist mainly of commercial loans and real estate-related commercial loans. For each of the years ended December 31, 2000 and 1999, nonaccrual loans resulted in lost interest income of $0.2 million as compared to $0.3 million in 1998. 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 .26% as of December 31, 2000 and .32% as of December 31, 1999. At December 31, 2000, the Corporation had no Other Real Estate Owned ("OREO"). At December 31, 1999, the Corporation had $45 thousand in OREO consisting of one commercial property. This amount was recorded in "Other Assets" at the lower of cost or fair market value in the accompanying consolidated balance sheets. There were no adjustments to the carrying value of OREO during 1998, 1999, or 2000. During the first quarter of 2000, the Office of Comptroller of the Currency completed a safety and soundness examination at Union. During the third quarter of 2000, the State Department of Banking 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. NONINTEREST INCOME Trust income continues to be a major source of noninterest income. Income for the year ended December 31, 2000 of $4.4 million was $0.4 million or 10.0% more than the $4.0 million reported for year ended December 31, 1999 versus an increase of 25.0% or $0.8 million from 1998 to 1999. The increases are attributed to growth in the number of trust accounts and a higher dollar value of assets under management, the basis for determining trust income. Service charges on demand deposits increased $0.2 million from $3.5 million at December 31, 1999 to $3.7 million at December 31, 2000. The realignment of checking account products resulted in an increase of deposit service fees. Service charges for the year ended December 31, 1999 increased $0.5 million from $3.0 million for the year ended December 31, 1998 to $3.5 million for the year ended December 31, 1999. The growth was due mainly to increases in various transaction fees and deposit service fees. Commission income, which is offset by commission expense, is the primary source of income for Fin-Plan Group and the newly acquired insurance sales agency, George Becker Associates, Inc. Commission income grew from $2.1 million at December 31, 1999 to $2.8 million at December 31, 2000. This is an increase of $0.7 million or 33.3%. The majority of the growth was due to the new company, George Becker Associates, Inc. Univest Corporation of Pennsylvania 28 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 types of income. Other noninterest income of $5.9 million for 2000 is $0.1 million or 1.7% lower than the $6.0 million earned in 1999. An increase in debit card commission and bank-owned life insurance policy cash surrender value offset by a decrease in the fair value of mortgage servicing rights is the reason for the slight decline. Other noninterest income of $6.0 million for 1999 is $1.9 million or 46.3% greater than the $4.1 million earned in 1998. The increase is due to approximately $1.4 million of increased various transaction fees and other deposit service fees and a $0.3 million increase in the cash surrender value on the bank-owned life insurance policy. ASSET SALES Sales of mortgage loans during the year ended December 31, 2000 resulted in a gain of $14 thousand as compared to $51 thousand for the year ended December 31, 1999. Increasing long-term rates during 2000 caused a reduction in new loan volume and resulted in fewer 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. During 1999, increasing long-term rates caused a reduction in new loan volume and resulted in fewer sales. During 2000, securities totaling approximately $9.0 million were sold from the available-for-sale portfolio or matured, resulting in a net gain of $1 thousand. These securities were sold and reinvested in bank-owned life insurance. In 1999, securities totaling approximately $18.4 million were sold from the available-for-sale portfolio or matured at 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 $25.1 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. The total of debt and equity securities held in the available-for-sale portfolio as of December 31, 2000 is $189.9 million versus $174.4 million at December 31, 1999. The accumulated other comprehensive income of $0.8 million, net of taxes, has been credited to shareholders' equity as of December 31, 2000. A comprehensive loss of $2.7 million, net of taxes, was debited 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 $1.7 million or 8.9% from $19.2 million in 1999 to $20.9 million in 2000. Salary increases of $1.1 million, which include bonuses and commission expense generated by Fin-Plan Group and the newly acquired George Becker Associates, Inc., contributed to this increase. The vacation and paid time off program was revised in 2000 which resulted in $0.4 million of additional expense. 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. Net occupancy expense increased $0.2 million or 8.0% from $2.5 million for the year ended December 31, 1999 to $2.7 million for the year ended December 31, 2000. The new Franconia office and a full year's expense for the new supermarket branch opened in 1999 contributed to the higher expense. 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 branch in 1999. Equipment expense remained constant at $2.6 million for December 31, 1999 and December 31, 2000. Equipment expense decreased $0.1 million from $2.7 million in 1998 to $2.6 million in 1999. Other expenses of $9.7 million decreased $0.6 million or 5.8% for the year ended December 31, 2000 from $10.3 million for the year ended December 31, 1999. A decrease in intangible expense and certain retail sales incentives posted to salaries and benefits in 2000 instead of marketing expense in 1999 contributed to the decrease. 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 for 1998. MAC fees, contributions, community relations and intangible expense all contributed to this increase. TAX PROVISION The provision for income taxes was $6.8 million for the year ended December 31, 2000, $6.6 million for the year ended December 31, 1999, and $6.0 million for the year ended December 31, 1998. The provision for income taxes for 2000, 1999, and 1998, was at effective rates of 28.2%, 29.5%, and 29.4%, 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. Univest Corporation of Pennsylvania 29 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) FINANCIAL CONDITION During 2000, total assets increased to $1,204.2 million, a growth of $83.2 million or 7.4% over the $1,121.0 million in 1999. Investment securities increased $36.5 million to $348.4 million as compared to the $311.9 million at December 31, 1999. Federal funds sold increased $14.4 million to $16.2 million as compared to the $1.8 million at December 31, 1999. Total loans increased by $16.7 million from $722.5 million at December 31, 1999 to $739.2 million at December 31, 2000. Accrued interest and other assets increased $8.1 million. Securities totaling approximately $9.0 million were sold and $8.0 million was reinvested in bank-owned life insurance to fund a non-qualified plan. The increase in deposits and long-term debt provided funds for the increases in investment securities, federal funds sold, and loans. Total deposits grew from $910.7 million at December 31, 1999 to $971.9 million at December 31, 2000, an increase of $61.2 million or 6.7%. Deposit growth was due mainly to an increase in certificates of deposit resulting from special rate promotions and certain types of money market accounts paying higher rates. Long-term debt increased $8.0 million from $18.1 million at December 31, 1999 to $26.1 million at December 31, 2000 to expand lending. Shareholders' equity increased $12.4 million or 12.1% to $115.2 million at December 31, 2000 compared to $102.8 million at December 31, 1999. The 5% stock dividend paid May 1, 2000 increased common stock and additional paid-in capital while reducing retained earnings. Unrealized gains on investment securities available-for-sale increased accumulated other comprehensive income by $3.5 million. Treasury stock increased to $25.1 million from $22.2 million at December 31, 1999. On November 22, 2000, 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 367,228 shares of its outstanding common stock in open market or negotiated transactions. The net number of shares purchased since November 2000 through December 31, 2000 is 26,013. 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 and corporate needs. 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 Corporation uses GAP techniques to identify and monitor long-term rate exposure and uses a simulation model to measure the short-term rate exposures. The Corporation 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 nonmaturity 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. 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 December 31, 2000, $30.0 million in notional interest-rate swaps were outstanding. The contracts entered into by the Corporation expire as follows: $20.0 million in notional principal amount in the second quarter 2001, $10.0 million in the first quarter 2002. The impact of the interest-rate swaps on net interest income for the year ended December 31, 2000 was a negative $0.2 million and for the year ended December 31, 1999 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, 2000, the market value of interest-rate swaps in a favorable value position was $0.1 million and the market value of interest-rate swaps in an unfavorable value position was $0.1 million. At December 31, 1999, the market value of interest-rate swaps in an unfavorable value position was $0.3 million. Credit risk exists when the counterparty to a derivative contract with an unrealized gain fails to perform according to the terms of the agreement. Univest Corporation of Pennsylvania 30 Management's Discussion and Analysis of Financial Condition and Results of Operations (condition) CAPITAL ADEQUACY Shareholders' equity at December 31, 2000 was $115.2 million or 9.6% of total assets compared to shareholders' equity of $102.8 million or 9.2% as of December 31, 1999. At December 31, 2000, shareholders' equity includes accumulated other comprehensive income of $0.8 million related to the unrealized security gains, net of taxes, on investment securities available-for-sale, while shareholders' equity at December 31, 1999 includes accumulated other comprehensive loss of $2.7 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 12.6% and 12.2%, and total risk-based capital ratios of 13.9% and 13.5% at December 31, 2000 and 1999, 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 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 Corporation uses GAP techniques to identify and monitor long-term rate exposure and uses a simulation model to measure the short-term rate exposures. The Corporation 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 nonmaturity 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, 2000, the simulation, based upon forward-looking assumptions, projects that Univest's greatest interest margin exposure to interest-rate risk would occur if interest rates decline from present levels. Given the assumptions, 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. At December 31, 1999, the simulation projects that Univest's greatest interest margin exposure to interest-rate risk would occur if interest rates rise from present levels. 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. Policy limits have been established which allow a tolerance for no more than approximately a 3.5% 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 following table: Univest Corporation of Pennsylvania 31 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) INTEREST SENSITIVITY ANALYSIS AT DECEMBER 31, 2000
WITHIN 1-5 OVER 1 YEAR YEARS 5 YEARS ------------------------------------------ Rate-Sensitive Interest-Earning Assets: Federal funds sold $16,190 $ -- $ -- Investment securities 98,317 226,001 29,239 Loans 364,840 319,628 54,760 Hedging instruments (10,000) 10,000 -- ------------------------------------------- 469,347 555,629 83,999 Rate-Sensitive Liabilities: Interest-bearing deposits 472,411 330,623 94 Borrowed funds 27,585 62,315 4,674 Net noninterest-bearing funds (a) -- -- 211,273 ------------------------------------------- 499,996 392,938 216,041 Excess interest-earning assets (liabilities) (30,649) 162,691 (132,042) Cumulative excess interest-earning assets (liabilities) $(30,649) $ 132,042 $ -- ===========================================
Notes to interest sensitivity analysis: (a) Net noninterest-bearing funds are the sum of noninterest-bearing liabilities and shareholders' equity minus noninterest-earning assets. Univest Corporation of Pennsylvania 32 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 -------------- 2000 January-March 26.19 19.19 April-June 25.25 19.53 July-September 21.50 19.50 October-December 21.88 21.00 HIGH LOW -------------- 1999 January-March 34.75 31.25 April-June 33.00 28.00 July-September 29.50 23.50 October-December 26.50 24.00 CASH DIVIDENDS PAID PER SHARE* 2000 January 2 $ 0.162 April 1 0.162 July 1 0.190 October 1 0.190 ------- $ 0.704 for the year 2000 ======= 1999 January 2 $ 0.143 April 1 0.143 July 1 0.162 October 1 0.162 ------- $ 0.610 for the year 1999 ======= *THE CASH DIVIDENDS PAID PER SHARE HAVE BEEN RESTATED TO GIVE EFFECT TO A FIVE PERCENT STOCK DIVIDEND PAID ON MAY 1, 2000. Univest Corporation of Pennsylvania 33 Supplementary Information DESCRIPTION OF BUSINESS Univest Corporation of Pennsylvania is a financial 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 located in Delaware. Univest Financial Services Corporation, a subsidiary of Delview, provides various financial management services and insurance products to individuals and businesses within the holding company's market area through Fin-Plan Group and George Becker Associates. 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 located 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, 2000 was 2,080. 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 2000 to each shareholder who requests one in writing after March 31, 2001. Requests should be directed to: Norman L. Keller, Secretary, Univest Corporation of Pennsylvania, 14 N. Main Street, Souderton, PA 18964. Univest Corporation of Pennsylvania 34 Directors JAMES L. BERGEY A,B President, Abram W. Bergey & Sons, Inc. CLAIR W. CLEMENS A,B Retired, Hatfield Quality Meats, Inc. R. LEE DELP A President & Chief Executive Officer, Moyer Packing Company, Inc. RICHARD W. GODSHALL D Physician, M.D., Upper Bucks Orthopaedic Association CHARLES H. HOEFLICH A,B Chairman Emeritus, Univest Corporation of Pennsylvania THOMAS K. LEIDY A,B Chairman & President, Leidy's, Inc. H. RAY MININGER A President, H. Mininger & Son, Inc. WILLIAM G. MORRAL C Senior Vice President & Chief Financial Officer, Moyer Packing Company, Inc. MERRILL S. MOYER A,B,C Retired Chairman, Univest Corporation of Pennsylvania; and Retired Chairman, Union National Bank & Trust Company PAUL GREGORY SHELLY A,B President, Shelly Enterprises, Inc. JOHN U. YOUNG A,C President, Alderfer, Inc. MARGARET K. ZOOK D Administrator, Souderton Mennonite Homes, Inc. MARVIN A. ANDERS A,B Chairman, Univest Corporation of Pennsylvania; and Chairman, Union National Bank & Trust Company WILLIAM S. AICHELE A,B,C President & Chief Executive Officer, Univest Corporation of Pennsylvania; and President & Chief Executive Officer, Union National Bank & Trust Company NORMAN L. KELLER A,C Executive Vice President, Univest Corporation of Pennsylvania; and President & Chief Executive Officer, Pennview Savings Bank LAURENCE A. MOYER C Executive Vice President & Secretary, Pennview Savings Bank LEGEND A Director of Univest Corporation of Pennsylvania B Director of Union National Bank & Trust Company C Director of Pennview Savings Bank D Alternate Director of Univest Corporation of Pennsylvania Univest Corporation of Pennsylvania 35 Officers UNIVEST CORPORATION OF PENNSYLVANIA SENIOR MANAGEMENT Marvin A. Anders, CHAIRMAN William S. Aichele, PRESIDENT & CHIEF EXECUTIVE OFFICER Norman L. Keller, EXECUTIVE VICE PRESIDENT & CORPORATE SECRETARY Wallace H. Bieler, EXECUTIVE VICE PRESIDENT, TREASURER & CHIEF FINANCIAL OFFICER K. Leon Moyer, EXECUTIVE VICE PRESIDENT & CREDIT POLICY OFFICER George D. Terry, Jr., EXECUTIVE VICE PRESIDENT, ELECTRONIC SERVICES Martin Renninger, SENIOR VICE PRESIDENT, FINANCIAL SERVICES & INSURANCE SENIOR VICE PRESIDENTS Linda J. Bishop, RETAIL SERVICES Richard L. Boaman, ELECTRONIC SERVICES Duane J. Brobst, CREDIT QUALITY Douglas R. Delp, HUMAN RESOURCES Kenneth D. Hochstetler, WEALTH MANAGEMENT Diane L. Koehler, COMPLIANCE & COMMUNITY REINVESTMENT Richard R. Swartley, ELECTRONIC SERVICES VICE PRESIDENTS Gary E. Brown, WEALTH MANAGEMENT Patricia S. Coleman, ELECTRONIC SERVICES T. Harry Hunter, SPECIAL ASSETS Richard D. Juniper, AUDITOR Garry R. Kuhnle, CREDIT SUPPORT Mary L. Marger, ELECTRONIC SERVICES John J. Matlack, CONSUMER LENDING William B. Meyer, LOAN REVIEW Timothy E. Mininger, WEALTH MANAGEMENT Laurence A. Moyer, RESIDENTIAL MORTGAGE LENDING Philip J. Rush, Finance & Accounting Keith C. Thomas, ASSET RECOVERY Francis E. Varilla, FINANCE & ACCOUNTING UNION NATIONAL BANK & TRUST COMPANY SENIOR MANAGEMENT Marvin A. Anders, CHAIRMAN William S. Aichele, PRESIDENT & CHIEF EXECUTIVE OFFICER Wallace H. Bieler, EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER K. Leon Moyer, EXECUTIVE VICE PRESIDENT & CREDIT POLICY OFFICER George D. Terry, Jr., EXECUTIVE VICE PRESIDENT SENIOR VICE PRESIDENTS Murray Y. Alderfer, TRUST DIVISION Linda J. Bishop, RETAIL SERVICES Diane L. Koehler, COMPLIANCE & COMMUNITY REINVESTMENT John T. Landes, CORPORATE BANKING Ronald S. Price, CORPORATE BANKING Barry L. Stoltzfus, TRUST DIVISION VICE PRESIDENTS Michael A. Baymor, CORPORATE BANKING John W. Duerksen, CORPORATE BANKING J. MATTHEW HOLLIDAY, TRUST & INVESTMENT SERVICES Patricia J. Kratz, 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 Fern M. Zepp, TRUST DIVISION PENNVIEW SAVINGS BANK SENIOR MANAGEMENT Norman L. Keller, PRESIDENT & CHIEF EXECUTIVE OFFICER Laurence A. Moyer, EXECUTIVE VICE PRESIDENT & SECRETARY Francis E. Varilla, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER & TREASURER VICE PRESIDENTS John J. Matlack, CONSUMER LENDING FIN-PLAN GROUP Robert J. Sims, CHAIRMAN Ernest L. Sims, PRESIDENT Martin Renninger, EXECUTIVE VICE PRESIDENT GEORGE BECKER ASSOCIATES, INC. George Becker Jr., CHAIRMAN & PRESIDENT Martin Renninger, EXECUTIVE VICE PRESIDENT George Becker III, 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. Univest Corporation of Pennsylvania 36 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, Pennsylvania 18928 215-794-5916 CENTER POINT OFFICE 2960 Skippack Pike Worcester, Pennsylvania 19490 610-584-8450 CENTER SQUARE OFFICE Clemens Market Routes 202 & 73 Center Square, Pennsylvania 19422 610-279-3901 EAST GREENVILLE OFFICE 321 Main Street East Greenville, Pennsylvania 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, Pennsylvania 19438 215-256-8048 HILLTOWN TRADITIONAL OFFICE Routes 113 & 309 Souderton, Pennsylvania 18964 215-721-2471 HILLTOWN SUPERMARKET OFFICE Clemens Market 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 Clemens Market 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 Clemens Market 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 Clemens Market Routes 313 & 309 Quakertown, Pennsylvania 18951 215-538-3407 RALPH'S CORNER OFFICE Clemens Market West Main Street & Forty Foot Road Lansdale, Pennsylvania 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, Pennsylvania 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 Landis Market 2685 County Line Road Telford, Pennsylvania 18969 215-721-7412 TRAPPE OFFICE 595 West Main Street Trappe, Pennsylvania 19426 610-454-0883 Univest Corporation of Pennsylvania 37 PENNVIEW SAVINGS BANK EXECUTIVE OFFICES 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 GEORGE BECKER ASSOCIATES, INC. 54 West State Street Doylestown, Pennsylvania 18901 215-348-3056 Univest Corporation of Pennsylvania 38 Information for Shareholders CORPORATE HEADQUARTERS Univest Plaza 14 North Main Street Souderton, Pennsylvania 18964 SHAREHOLDERS' MEETING The Annual Shareholders' Meeting will take place at 10:45 a.m., Tuesday April 10, 2001, in the Board Room at Univest Plaza,14 North 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 the Univest Corporation of Pennsylvania Common Stock, please call 215-721-2434. Univest Corporation of Pennsylvania 39 EX-21 3 0003.txt EXHIBIT 21 UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES EXHIBIT 21 [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. (11) George Becker Associates is chartered in the Commonwealth of Pennsylvania. All the subsidiaries do business under the above names. EX-23 4 0004.txt EXHIBIT 23 EXHIBIT 23 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 19, 2001, 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, 2000. /s/ Ernst & Young LLP Philadelphia, Pennsylvania March 23, 2001 EX-27 5 0005.txt FDS --
9 Univest Corporation of Pennsylvania and Subsidiaries Financial Data Schedule as of December 31, 2000 12-MOS DEC-31-2000 DEC-31-2000 40,517 5,131 16,190 0 189,927 158,499 159,325 739,228 10,727 1,204,195 971,924 68,499 22,457 26,075 41,037 0 0 74,203 1,204,195 58,993 18,927 1,957 79,877 32,937 36,459 43,418 205 1 35,815 24,139 24,139 0 0 17,348 2.35 2.34 4.26 1,865 346 0 0 11,223 1,373 672 10,727 10,727 0 2,108
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