10-K 1 g10k-27665.txt 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, 2001 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) 6,991,358 --------- (Number of shares outstanding at 2/28/02) The approximate aggregate market value of voting stock held by non affiliates of the registrant is $197,951,574 as of February 28, 2002. 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 9, 2002. Parts I, II, and IV incorporate information by reference from the annual report to shareholders for the year ended December 31, 2001. PAGE 1 OF 26 PART I ITEM 1. BUSINESS GENERAL Univest Corporation of Pennsylvania ("Univest") is a Pennsylvania corporation organized in 1973 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956. 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 Reinsurance Corporation, 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 the general public and investing such deposits primarily in loans secured by residential properties and consumer loans. Delview, Inc., a wholly owned subsidiary of Pennview, is a passive investment holding company operating in Delaware. Univest Financial Services Corporation, a subsidiary of Delview, provides various financial management services and insurance products to individuals and businesses through its subsidiaries Univest Investments, Inc. (formerly Fin Plan Group) and Univest Insurance, Inc. (formerly George Becker Associates). Univest Insurance Inc. acquired Gum Insurance on December 3, 2001. This will allow Univest Corporation to provide a broader range of insurance products. Univest Investments, Inc. allows Univest Corporation to provide a range of financial services including financial planning, investment management, insurance products and brokerage services. 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 Reinsurance Corporation (formerly 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-premise 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-premise 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, 2002, Univest and its subsidiaries employed four hundred and ninety-two (492) 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. 2 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, Univest Investments, Inc. and Univest Insurance Inc. SUPERVISION AND REGULATION Union National Bank is subject to supervision and is regularly examined by the Office of the 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 12.4% and 12.6%, and total risk-based capital ratios of 13.6% and 13.9% at December 31, 2001 and 2000, respectively. These ratios place Univest in the "well-capitalized" category under regulatory standards. Regulations promulgated under FDICIA also require that an institution monitor its capital levels closely and notify its appropriate federal banking regulators within 15 days of any material events that affect the capital position of the institution. FDICIA directs that each federal banking agency prescribe standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses, a minimum ratio of market value to book value for publicly traded shares (if feasible) and such other standards as the agency deems appropriate. 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 3 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 is wholly owned by Delview. Univest Insurance, Inc., (formerly George Becker Associates), is wholly owned by Univest Financial Service Corporation. Univest Insurance, Inc. acquired Gum Insurance on December 31, 2001. This will allow Univest Corporation to provide a broader range of insurance products. Univest Investments, Inc. (formerly Fin Plan Group) is wholly owned by Univest Financial Services Corporation 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
2001 2001/2000 2000 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 $ 36,260 $ 35,309 Time deposits with other banks 9,472 $ 345 3.6 $ 183 $ (123) $ 60 4,544 $ 285 6.3 $ 5 U.S. Government obligations 98,290 5,233 5.3 (1,470) (630) (2,100) 125,937 7,333 5.8 (2,244) Oblig. of states & political sub. 41,034 1,938 4.7 570 29 599 29,054 1,339 4.6 349 Other securities 192,616 12,483 6.5 2,442 (155) 2,287 154,777 10,196 6.6 2,134 Trading account 538 14 2.6 (2) 3 1 617 13 2.1 2 Federal Reserve bank stock 761 46 6.0 - - - 761 46 6.0 - Federal funds sold and other short-term investments 16,303 746 4.6 (436) (490) (926) 25,791 1,672 6.5 1,042 ------- ---- ------- ------ Total investments 349,542 20,460 5.9 336,937 20,599 6.1 -------- ------- -------- ------- Commercial loans 232,609 17,950 7.7 1,911 (2,493) (582) 207,766 18,532 8.9 2,110 Mortgage loans 336,952 25,930 7.7 601 (986) (385) 328,517 26,315 8.0 (569) Installment loans 119,414 10,002 8.4 535 - 535 112,784 9,467 8.4 701 Home equity loans 12,716 1,202 9.5 (55) (237) (292) 13,190 1,494 11.3 (30) Municipal loans 59,949 3,319 5.5 245 (111) 134 55,492 3,185 5.7 540 ------- ------ ------- ------ Gross loans 761,640 58,403 7.7 717,749 58,993 8.2 ------- ------- Less: valuation reserve (10,647) (10,242) -------- -------- Net loans 750,993 706,988 -------- -------- Property, net 15,551 15,520 Other assets 49,083 47,079 ------- ------- Total assets $ 1 ,210,901 $ 1,146,377 ------------ ------------ 2000/1999 1999 Rate Average Income Avg. ASSETS: CHANGE TOTAL BALANCE EXPENS RATE ------- ------ ------- ------ ---- Cash and due from banks $ 34,496 Time deposits with other banks $ 53 $ 58 4,415 $ 227 5.1 U.S. Government obligations - (2,244) 166,343 9,577 5.8 Oblig. of states & political sub. 43 392 21,684 947 4.4 Other securities 489 2,623 122,207 7,573 6.2 Trading account (8) (6) 548 19 3.5 Federal Reserve bank stock - - 761 46 6.0 Federal funds sold and other short-term investments 156 1,198 9,735 474 4.9 ------ --- Total investments 321,278 18,636 5.8 -------- ------ Commercial loans 552 2,662 184,019 15,870 8.6 Mortgage loans 337 (232) 337,153 26,547 7.9 Installment loans 209 910 104,348 8,557 8.2 Home equity loans 162 132 13,505 1,362 10.1 Municipal loans - 540 46,619 2,645 5.7 ------- ----- Gross loans 685,644 54,981 8.0 ------ Less: valuation reserve (10,577) -------- Net loans 674,548 -------- Property, net 15,684 Other assets 38,901 -------- Total assets $1,089,322 ----------
6
2001 2001/2000 2000 LIABILITIES: Average Income/ Avg. Volume Rate Average Income/ Avg. Volume Balance Expense Rate Change Change Total Balance Expense Rate Change Demand deposits $ 152,716 $ 150,911 Interest checking deposits 99,644 $ 1,015 1.0 $ 90 $ - $ 90 90,785 $ 925 1.0 $ 23 Money market savings 208,268 6,858 3.3 709 (2,826) (2,117) 188,394 8,975 4.8 1,401 Regular savings 134,073 2,555 1.9 29 (134) (105) 134,450 2,660 2.0 (116) Certificates of deposit 351,751 19,376 5.5 351 - 351 345,076 19,025 5.5 1,344 Time open & club accounts 22,666 972 4.3 (103) (277) (380) 25,163 1,352 5.4 (233) Total time, int., and inv. checking deposits 816,402 30,776 3.8 783,868 32,937 4.2 Total deposits 969,118 934,779 Federal funds purchased 876 25 2.9 10 (14) (4) 496 29 5.8 (176) Loans & securities sold under agreement to repurchase 75,386 2,174 2.9 304 (387) (83) 64,525 2,257 3.5 (88) Other borrowings 26,012 1,466 5.6 332 (102) 230 20,389 1,236 6.1 344 Subordinated notes - - - - - - - - 0.0 - ------- ------ Total borrowings 102,274 3,665 3.6 85,410 3,522 4.1 -------- ------ ------- ------ Accrued expenses & other liab. 20,298 19,224 ------- ------- Total liabilities 1,091,690 1,038,894 ---------- ---------- SHAREHOLDERS' EQUITY: -------------------- Common stock 41,037 40,608 Capital surplus 20,912 19,422 Retained earnings 57,262 47,453 ------- ------- Total shareholders' equity 119,211 107,483 -------- -------- Total liabilities and share- holders' equity $ 1,210,901 $ 1,146,377 ----------- ----------- Weighted avg. yield on interest-earning assets 7.1 7.5 Weighted avg. rate paid on interest-bearing liab. 3.7 4.2 Net yield 4.0 4.1 2000/1999 1999 LIABILITIES: Rate Average Income/ Avg. Change Total Balance Expense Rate Demand deposits $ 150,455 Interest checking deposits $ - $ 23 86,583 $ 902 1.0 Money market savings 1,422 2,823 158,014 6,152 3.9 Regular savings - (116) 140,313 2,776 2.0 Certificates of deposit 642 1,986 321,097 17,039 5.3 Time open & club accounts 234 1 29,253 1,351 4.6 Total time, int., and inv. checking deposits 735,260 28,220 3.8 Total deposits 885,715 Federal funds purchased 14 (162) 3,515 191 5.4 Loans & securities sold under agreement to repurchase 135 47 67,612 2,210 3.3 Other borrowings 132 476 14,695 760 5.2 Subordinated notes - - - - 0.0 Total borrowings 85,822 3,161 3.7 ------- ------ Accrued expenses & other liab. 15,536 ------- Total liabilities 986,554 ------- SHAREHOLDERS' EQUITY: -------------------- Common stock 39,272 Capital surplus 14,908 Retained earnings 48,588 ------- Total shareholders' equity 102,768 ------- Total liabilities and share- holders' equity $ 1,089,322 ----------- Weighted avg. yield on interest-earning assets 7.3 Weighted avg. rate paid on interest-bearing liab. 3.8 Net yield 4.2
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 $551 for 2001, $571 for 2000 and $683 for 1999. (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, 2001 (a) 2000 (a) 1999 (a) -------- -------- -------- U. S. Treasury, government corporations and agencies $ 90,823 $ 131,344 $ 150,096 State and political subdivisions 49,638 39,346 27,020 Mortgage-backed securities 152,159 122,601 111,516 Other 55,238 55,135 23,243 --------- --------- --------- Total $ 347,858 $ 348,426 $ 311,875 ========= ========= ========= MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELD December 31, December 31, December 31, December 31, December 31, December 31, 2001 2001 2000 2000 1999 1999 Amount (a) Yield (b) Amount (a) Yield (b) Amount (a) Yield (b) ---------- --------- ---------- --------- ---------- --------- 1 Year or less $ 16,180 4.71% $ 77,825 5.80% $ 54,249 5.68% 1 Year - 5 Years 125,258 5.54% 112,536 6.07% 139,357 5.64% 5 Years - 10 Years 47,606 6.20% 38,713 6.41% 35,094 6.26% After 10 Years 158,814 6.22% 119,352 6.42% 83,175 6.17% ---------- ----- ---------- ----- --------- ----- Total $ 347,858 5.90% $ 348,426 6.17% $ 311,875 5.86% ========== ===== ========== ===== ========= =====
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, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Real estate loans Construction and land development $ 34,774 $ 39,707 $ 33,632 $ 33,530 $ 30,951 Secured by 1-4 family residential properties 226,962 214,973 219,292 214,798 217,782 Other real estate loans 195,872 168,761 173,780 169,402 189,251 Commercial and industrial loans 254,032 221,101 212,656 171,699 138,812 Loans to individuals 71,212 79,320 72,658 64,306 53,500 All other loans 15,495 15,425 10,591 7,117 6,143 --------- --------- --------- --------- --------- Total loans $ 798,347 $ 739,287 $ 722,609 $ 660,852 $ 636,439 ========= ========= ========= ========= =========
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, 2001 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 $ 14,756 $ 16,197 $ 3,821 $ 34,774 Secured by 1-4 family residential properties 41,899 58,349 126,714 226,962 Other real estate loans 16,785 108,233 70,854 195,872 Commercial and industrial loans 121,076 99,206 33,750 254,032 Loans to individuals 19,113 47,364 4,735 71,212 All other loans 2,011 13,484 - 15,495 --------- --------- --------- --------- TOTAL LOANS $ 215,640 $ 342,833 $ 239,874 $ 798,347 ========= ========= ========= ========= Loans with a predetermined interest rate $ 29,803 $ 280,015 $ 165,663 $ 475,481 Loans with a floating or variable interest rate 185,837 62,818 74,211 322,866 --------- --------- --------- --------- $ 215,640 $ 342,833 $ 239,874 $ 798,347 ========= ========= ========= =========
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 2001 was $1,617. There was no interest income recognized on these loans. If nonaccrual loans had been performing in accordance with their contractual terms, additional income of $176 would have been recorded in 2001. At December 31, 2001, there were no other potential problem loans that causes management to have serious doubts as to the ability of the borrowers to comply with the present loan repayment terms. 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, 2001, there were no concentrations of loans exceeding 10% of total loans other than disclosed in Table III, Part A. OTHER ASSETS At December 31, 2001, there was no Other Real Estate Owned classified as nonperforming.
2001 2000 1999 1998 1997 Principal Principal Principal Principal Principal Balance Balance Balance Balance Balance -------- -------- -------- -------- ------- Nonaccruing loans $ 1,617 $ 1,865 $ 2,285 $ 3,424 $ 3,136 ======== ======== ======== ======== ======= ACCRUING LOANS 90 DAYS OR MORE PAST DUE: Real estate loans Construction and land development - - - - - Secured by 1-4 family dwellings 128 138 304 705 308 Other real estate - - - 14 36 Commercial and industrial loans 3 - 63 - 21 Loans to individuals 186 208 214 204 159 All other loans - - - - - -------- -------- -------- -------- ------- Total loans, 90 days or more past due 317 346 581 923 524 ======== ======== ======== ======== ======= Restructured loans, not included above - - 38 125 206 ======== ======== ======== ======== =======
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 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, 2001 2000 1999 ---- ---- ---- Allocated $ 8,920 $ 8,630 $ 8,786 Unallocated 1,374 1,578 1,918 -------- -------- --------- Total $ 10,294 $ 10,208 $ 10,704 ======== ======== ======== The $290,000 increase in the allocated portion of the reserve for the year ended December 31, 2001 occurred due to higher reserves for growing loan volume and migration of credit risk assessment towards weaker loan grades. Total loan outstandings increased by 8.0% as moderate growth amongst retail portfolios was accompanied by significant commercial portfolio growth of 11.6%. As weakness in the economy became apparent in the latter part of the year, the proportion of credits with identified credit issues also increased. The $204,000 reduction in the unallocated reserve position was reflective of the strong credit quality and favorable level of non-performing loans experienced throughout the first three quarters of the year. Analysis of unallocated adequacy is based on a stress testing model assessing loan grade migration as influenced by economic conditions and grading accuracy. The $156,000 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 $340,000 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. 13 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 2001 was $763 compared to $205 in 2000 and $1,052 in 1999. 14
2001 2000 1999 1998 ---- ---- ---- ---- Average amount of loans outstanding $751,030 $707,084 $674,798 $635,939 Loan loss reserve at beginning of period $ 10,208 $ 10,704 $ 10,019 $ 9,751 Charge-offs: Real estate loans 12 156 348 575 Commercial and industrial loans 602 794 1,105 370 Loans to individuals 603 423 304 427 Home equity - - - - Other - - - - -------- -------- -------- -------- Total charge-offs: 1,217 1,373 1,757 1,372 ======== ======== ======== ======== Recoveries: Real estate loans 143 98 857 324 Commercial and industrial loans 223 463 440 256 Loans to individuals 174 111 93 102 Home equity - - - - Other - - - - -------- -------- -------- -------- Total recoveries: 540 672 1,390 682 ======== ======== ======== ======== Net charge-offs: 677 701 367 690 Additions to loan loss reserve 763 205 1,052 958 Loan loss reserve at end of period $ 10,294 $ 10,208 $ 10,704 $ 10,019 ======== ======== ======== ======== Loan type Loan type Loan type Loan type as % as % as % as % Amount in reserve by category: of Loans of Loans of Loans of Loans -------- -------- -------- -------- Real estate loans 57.3 $ 3,515 57.3 $ 2,370 59.0 $ 2,571 63.2 $ 2,358 Commercial and industrial loans 31.8 3,939 29.9 4,848 29.4 5,356 26.0 3,575 Loans to individuals 8.9 1,455 10.7 1,401 10.1 848 9.7 1,049 All other loans 2.0 11 2.1 11 1.5 11 1.1 11 Unallocated portion 1,374 1,578 1,918 3,026 -------- -------- -------- -------- Total $ 10,294 $ 10,208 $ 10,704 $ 10,019 ======== ======== ======== ======== Ratio of net charge-offs versus average loans 0.1% 0.1% 0.1% 0.1%
1997 ---- Average amount of loans outstanding $617,082 Loan loss reserve at beginning of period $ 9,282 Charge-offs: Real estate loans 552 Commercial and industrial loans 319 Loans to individuals 286 Home equity - Other - -------- Total charge-offs: 1,157 ======== Recoveries: Real estate loans 167 Commercial and industrial loans 78 Loans to individuals 66 Home equity - Other 5 -------- Total recoveries: 316 ======== Net charge-offs: 841 Additions to loan loss reserve 1,310 Loan loss reserve at end of period $ 9,751 ======== Loan type as % Amount in reserve by category: of Loans -------- Real estate loans 68.8 $ 3,511 Commercial and industrial loans 21.8 610 Loans to individuals 8.4 617 All other loans 1.0 11 Unallocated portion 5,002 -------- Total $ 9,751 ======== Ratio of net charge-offs versus average loans 0.1% Total cash-basis and nonaccrual loans of $1,617 at December 31, 2001, were generally comprised of $242 in residential real estate loans, $617 in commercial real estate loans and $758 in commercial and other loans. 15 UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE V. DEPOSITS (THOUSANDS OF DOLLARS) 2001 2000 1999 ---- ---- ---- A. Average: Noninterest-bearing demand deposits $ 152,716 $ 150,911 $ 150,455 Interest checking 99,644 90,785 86,583 Money Market savings 208,268 188,394 158,014 Saving deposits 134,073 134,450 140,313 Time deposits 374,417 370,239 350,350 --------- --------- --------- TOTAL $ 969,118 $ 934,779 $ 885,715 ========= ========= ========= 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, 2001 ------- ------ ------ --------- Certificates of deposit $ 13,727 $ 8,376 $ 11,708 $ 4,056 Other time deposits $ 10,308 $ 1,829 $ 528 $ 649
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)
2001 2000 1999 ---- ---- ---- Return on assets 1.6 1.5 1.5 Return on equity 16.1 16.1 15.4 Dividend payout ratio* 30.6 31.3 30.4 Equity to assets ratio 9.8 9.4 9.4
*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
2001 2000 1999 ---- ---- ---- Balance at December 31 $ 73,745 $ 67,370 $ 70,943 Weighted average interest rate at year end 1.5% 3.7% 3.3% Maximum amount outstanding at any month's end $ 91,986 $ 71,830 $ 75,439 Average amount outstanding during the year $ 75,386 $ 64,525 $ 67,612 Weighted average interest rate during the year 2.9% 3.5% 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 24 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 9, 2002. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Incorporated by reference from the 2001 Annual Report to Shareholders (Exhibit 13), pages 46-47. Dividend and other restrictions are incorporated by reference from Note 16 of the 2001 Annual Report to Shareholders (Exhibit 13), pages 30 and 31. The number of shareholders as of February 28, 2002, was 2,060. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference from the 2001 Annual Report to Shareholders (Exhibit 13), page 36. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference from the 2001 Annual Report to Shareholders (Exhibit 13), pages 37 through 45. Dividend and other restrictions are incorporated by reference from Note 16 of the 2001 Annual Report to Shareholders (Exhibit 13), pages 30 and 31. ITEM 7 (A). QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Incorporated by reference from the 2001 Annual Report to Shareholders (Exhibit 13), page 45. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated balance sheets of the registrant at December 31, 2001 and 2000, and consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years ended December 31, 2001, and the independent auditors' report thereon are incorporated by reference from the 2001 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 9, 2002. 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 51 Corporation and Union National Bank Marvin A. Anders Chairman Chairman of the Corporation 62 And Union National Bank Norman L. Keller Executive Vice President and CEO of Pennview 64 President Savings Bank and Executive Vice President of the Corporation Wallace H. Bieler Executive Vice Executive Vice President 56 President and CFO of the Corporation and Union National Bank K. Leon Moyer Executive Vice Executive Vice President 52 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 9, 2002. 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 9, 2002. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 2001, the Corporation and its subsidiaries paid $70,767 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, 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 2001. (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 35 Consolidated balance sheets at 13 December 31, 2001 and 2000 Consolidated statements of income for each of the 14 three years in the period ended December 31, 2001 Consolidated statements of changes in shareholders' equity 15 for each of the three years in the period ended December 31, 2001 Consolidated statements of cash flows for 16 each of the three years in the period ended December 31, 2001 Notes to consolidated financial statements 17-34 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 2001 (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 27, 2002 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 27, 2002 Director, March 27, 2002 /s/ Marvin A. Anders /s/ H. Ray Mininger ------------------------------------------------ --------------------------------- Marvin A. Anders H. Ray Mininger Chairman and Director, March 27, 2002 Director, March 27, 2002 /s/ Wallace H. Bieler /s/ Paul G. Shelly ------------------------------------------------ --------------------------------- Wallace H. Bieler Paul G. Shelly Executive Vice President and CFO, March 27, 2002 Director, March 27, 2002 /s/ K. Leon Moyer /s/ R. Lee Delp ------------------------------------------------ --------------------------------- K. Leon Moyer R. Lee Delp Executive Vice President , March 27, 2002 Director, March 27, 2002 /s/ Charles H. Hoeflich /s/ Thomas K. Leidy ------------------------------------------------ --------------------------------- Charles H. Hoeflich Thomas K. Leidy Chairman Emeritus, March 27, 2002 Director, March 27, 2002 /s/ Merrill S. Moyer /s/ John U. Young --------------------------------- --------------------------------- Merrill S. Moyer John U. Young Director, March 27, 2002 Director, March 27, 2002
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