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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File number 0-7617
UNIVEST CORPORATION OF PENNSYLVANIA
-----------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania
------------ 23-1886144
(State or other jurisdiction of ----------
incorporation of organization) (IRS Employer Identification No.)
14 North Main Street
Souderton, Pennsylvania 18964
----------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 721-2400
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $5 par value 7,080,397
- -------------------------- ---------
(Title of Class) (Number of shares outstanding
at 2/29/00)
The approximate aggregate market value of voting stock held by non
affiliates of the registrant is $138,313,342 as of February 29, 2000.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
form 10-K. |_|
Parts I and Part III incorporate information by reference from the proxy
statement for the annual meeting of shareholders on April 11, 2000. Parts I, II,
and IV incorporate information by reference from the annual report to
shareholders for the year ended December 31, 1999.
PAGE 1 OF 24
PART I
Item 1. Business
General
Univest Corporation of Pennsylvania ("Univest") is a Pennsylvania
corporation organized in 1973 and registered as a bank holding company pursuant
to the Bank Holding Company Act of 1956. It owns all of the capital stock of
Union National Bank and Trust Company ("Union National Bank"), Pennview Savings
Bank, Univest Realty Corporation, Univest Leasing Corporation, Univest Delaware,
Inc., Univest Financial Planning Corporation, Univest Insurance Company, and
Univest Electronic Services Corporation.
Union National Bank is engaged in the general commercial banking business
and provides a full range of banking services and trust services to its
customers. Pennview Savings Bank is engaged in attracting deposits from general
public and investing such deposits primarily in loans secured by residential
properties and consumer loans. Univest Financial Services, a wholly owned
subsidiary of Pennview Savings Bank, acquired Fin-Plan Group on January 29,
1999. This will allow Univest Corporation to provide a broader range of
financial services including financial planning, investment management,
insurance products and brokerage services. Delview, Inc. a wholly owned
subsidiary of Pennview, is a passive investment holding company operating in
Delaware. Univest Realty Corporation was established to obtain, hold and operate
properties for the holding company and its subsidiaries. Univest Delaware, Inc.
is a passive investment holding company operating in Delaware. Univest Leasing
Corporation is inactive. Univest Insurance Company offers credit-related
reinsurance plans. Univest Electronic Services Corporation was established to
provide data processing services to Union National Bank in Souderton and other
subsidiaries of Univest Corporation of Pennsylvania.
Union National Bank and Trust Company, with its head office in Souderton,
Montgomery County, serves the area through twenty-seven (27) banking offices,
two off-premises automated teller machines, one work site office and provides
banking and trust services to the residents and employees of ten retirement
homes. Sixteen banking offices are in Montgomery County and eleven banking
offices are in Bucks County. A work site office is located in Montgomery County.
Four off-premises automated teller machines are located in Montgomery County and
one is located in Bucks County.
Pennview Savings Bank conducts operations through five (5) full-service
offices located in Souderton, Hatfield, Franconia, Silverdale and
Montgomeryville, Pennsylvania and provides banking services to the residents and
employees of two retirement homes.
As of January 31, 2000, Univest and its subsidiaries employed four hundred
and fifty-five (455) persons.
Competition
Univest's service areas are characterized by intense competition for
banking business among commercial banks, savings and loan associations, savings
banks and other financial institutions. Each of the Corporation's subsidiary
banks actively compete with such banks and financial institutions for local
retail and commercial accounts, in Bucks and Montgomery Counties, as well as
other financial institutions outside their primary service area.
In competing with other banks, savings and loan associations, and other
financial institutions, Union National Bank and Pennview Savings Bank seek to
provide personalized services through management's knowledge and awareness of
their service area, customers and borrowers.
Other competitors, including credit unions, consumer finance companies,
insurance companies and mutual funds, compete with certain lending and deposit
gathering services offered by Union National Bank, Pennview Savings Bank and
Fin-Plan Group.
2
Supervision and Regulation
Union National Bank is subject to supervision and is regularly examined by
the Office of Comptroller of the Currency. Also, Union National Bank is subject
to examination by the Federal Deposit Insurance Corporation and by the Federal
Reserve System. Pennview Savings Bank is regulated by the Federal Deposit
Insurance Corporation and by the Department of Banking of the Commonwealth of
Pennsylvania.
Univest is subject to the provisions of the Bank Holding Company Act of
1956, as amended, and is registered pursuant to its provisions. The Act
prohibits the acquisition by a bank holding company of a direct or indirect
ownership of more than five percent of the voting shares of any bank within the
United States without prior approval of the Board of Governors of the Federal
Reserve System, and also prohibits the granting of such approval in respect to
any bank within the United States located outside of the state where the bank
holding company's principal operations are conducted, unless the acquisition is
specifically authorized by the statutes of the state in which the bank is
located. With certain exceptions, a bank holding company is prohibited from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank, and from engaging directly
or indirectly in businesses unrelated to the business of banking, or managing,
or controlling banks. Under the Bank Holding Company Act Amendments of 1970,
which became effective on December 3, 1970, the Federal Reserve Board may
approve the acquisition by bank holding companies of non bank subsidiaries to
engage in activities that are closely related to banking and are in the public
interest. The amendments include a provision which prohibits banks, bank holding
companies and subsidiaries from engaging in tie-in arrangements. Bank tie-ins
involving a loan, discount, deposit, or trust service are specifically exempted,
and the Federal Reserve Board is authorized to make exceptions by regulations.
As a bank holding company, Univest is subject to the reporting
requirements of the Board of Governors of the Federal Reserve System, and
Univest, together with its subsidiaries, is subject to examination by the Board.
The Federal Reserve Act limits the amount of credit which a member bank may
extend to its affiliates, and the amount of its funds which it may invest in or
lend on the collateral of the securities of its affiliates. Under the Federal
Deposit Insurance Act, insured banks are subject to the same limitations.
FDICIA
In December 1991, the Federal Deposit Insurance Corporation Improvement
Act ("FDICIA") was enacted, which substantially revised the bank regulatory and
funding provisions of the Federal Deposit Insurance Act and made revisions to
several other federal banking statutes.
Among other things, FDICIA requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements in order to minimize losses to the FDIC.
FDICIA establishes five capital tiers: "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", and
"critically undercapitalized" and imposes significant restrictions on the
operations of a bank that is not at least adequately capitalized. A depository
institution's capital tier will depend upon where its capital levels are in
relation to various relevant capital measures, which will include a risk-based
capital measure, a leverage ratio capital measure and certain other factors.
Under the requirements, Univest has Tier I capital ratios of 12.2% and 12.3%,
and total risk-based capital ratios of 13.5% and 13.4% at December 31, 1999 and
1998, respectively. These ratios place Univest in the "well-capitalized"
category under regulatory standards.
Regulations promulgated under FDICIA also require that an institution
monitor its capital levels closely and notify its appropriate federal banking
regulators within 15 days of any material events that affect the capital
position of the institution.
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, a
maximum ratio of classified assets to capital, minimum earnings sufficient to
absorb losses, a minimum ratio of market value to book value for publicly traded
shares (if feasible) and such other standards as the agency deems appropriate.
3
FDICIA also contains a variety of other provisions that affect the
operations of the Corporation, including new reporting requirements, regulatory
standards for real estate lending, "truth in savings" provisions, certain
restrictions on investments and activities of state-chartered insured banks and
their subsidiaries and limitations on credit exposure between banks.
Finally, FDICIA limits the discretion of the FDIC with respect to deposit
insurance coverage by requiring that, except in very limited circumstances, the
FDIC's course of action in resolving a problem bank must constitute the "least
costly resolution" for the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"), as the case may be. The FDIC has
interpreted this standard as requiring it not to protect deposits exceeding the
$100,000 insurance limit in more situations than was previously the case. In
addition, FDICIA prohibits payments by the FDIC on uninsured deposits in foreign
branches of U.S. banks and will severely limit the "too big to fail" doctrine
under which the FDIC formerly protected deposits exceeding the $100,000
insurance limit in certain failed banking institutions.
Implementation of FDICIA has not had a material impact on the business or
operations of the Corporation.
Credit and Monetary Policies
Union National Bank is affected by the fiscal and monetary policies of the
federal government and its agencies, including the Federal Reserve System. An
important function of the policies is to curb inflation and control recessions
through control of the supply of money and credit. The Federal Reserve System
uses its powers to regulate reserve requirements of member banks, the discount
rate on member-bank borrowings, interest rates on time and savings deposits of
member banks, and to conduct open-market operations in United States Government
securities to exercise control over the supply of money and credit. The policies
have a direct effect on the amount of bank loans and deposits and on the
interest rates charged on loans and paid on deposits, with the result that the
policies have a material effect on bank earnings. Future policies of the Federal
Reserve Bank System and other authorities cannot be predicted, nor can their
effect on future bank earnings be predicted.
Pennview Savings Bank and Union National Bank are members of the Federal
Home Loan Bank System which consists of 12 regional Federal Home Loan Banks,
with each subject to supervision and regulation by the newly created Federal
Housing Finance Board. The Federal Home Loan Banks provide a central credit
facility primarily for member institutions. The Banks, as members of the Federal
Home Loan Bank of Pittsburgh, are required to acquire and hold shares of capital
stock in that Federal Home Loan Bank in an amount equal to at least 1% of the
aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or 5%
of its advances (borrowings) from the Federal Home Loan Bank of Pittsburgh,
whichever is greater.
Interstate Acquisitions
The Interstate Banking Act allows federal regulators to approve mergers
between adequately capitalized banks from different states regardless of whether
the transaction is prohibited under any state law, unless one of the banks' home
states has enacted a law expressly prohibiting out-of-state mergers before June
1997. This act also allows a state to permit out-of-state banks to establish and
operate new branches in this state. The Commonwealth of Pennsylvania has "opted
in" to this interstate merger provision. Therefore, the prior requirement that
interstate acquisitions would only be permitted when another state had
"reciprocal" legislation that allowed acquisitions by Pennsylvania-based bank
holding companies has been eliminated. The new Pennsylvania legislation,
however, retained the requirement that an acquisition of a Pennsylvania
institution by a Pennsylvania or a non-Pennsylvania-based holding company must
be approved by the Banking Department.
Statistical Disclosure
Univest was incorporated under Pennsylvania law in 1973 for the purpose of
acquiring the stock of Union National Bank and subsequently to engage in other
business activities permitted under the Bank Holding Company
4
Act. On September 28, 1973, pursuant to an exchange offer, Univest acquired the
outstanding stock of Union National Bank and on August 1, 1990 acquired the
stock of Pennview Savings Bank. Two new subsidiaries were incorporated on
September 8, 1998 in the State of Delaware. Univest Delaware, Inc. and Delview,
Inc. were formed as passive investment companies. Univest Delaware, Inc. is
wholly owned by the Corporation and Delview, Inc. is wholly owned by Pennview.
Univest Financial Services Corporation, wholly owned by Pennview, acquired
Fin-Plan Group on January 29, 1999. This will allow Univest Corporation to
provide a broader range of financial services. The following financial data
appearing on pages 6 through 17 reflects consolidated information. Where
averages are reported, daily information has been used for all subsidiaries.
TABLE I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
1999 1999/1998 1998
Average Income/ Avg. Volume Rate Average Income/ Avg.
ASSETS: Balance Expense Rate Change Change Total Balance Expense Rate
------- ------- ---- -------- -------- ------- ------- ------- ----
Cash and due from banks $ 34,496 $ 31,321
Time deposits with other banks 4,415 $ 227 5.1 $ (343) $ (56) $ (399) 11,273 $ 626 5.6
U.S. Government obligations 166,343 9,577 5.8 (1,829) (196) (2,025) 196,033 11,602 5.9
Oblig. of states & political sub. 21,684 947 4.4 647 (7) 640 6,858 307 4.5
Other securities 122,207 7,573 6.2 3,380 (135) 3,245 67,637 4,328 6.4
Trading Account 548 19 3.5 19 -- 19 -- -- --
Federal Reserve bank stock 761 46 6.0 -- -- -- 761 46 6.0
Federal funds sold and other
short-term investments 9,735 474 4.9 (406) (108) (514) 18,057 988 5.5
----- --- ------ ---
Total investments 321,278 18,636 5.8 289,346 17,271 6.0
------- ------ ------- ------
Commercial loans 184,019 15,870 8.6 2,412 (944) 1,468 157,363 14,402 9.2
Mortgage loans 337,153 26,547 7.9 (603) (1,729) (2,332) 345,781 28,879 8.4
Installment loans 104,348 8,557 8.2 1,467 (260) 1,207 86,505 7,350 8.5
Home equity loans 13,505 1,362 10.1 (114) (73) (187) 14,614 1,549 10.6
Municipal loans 46,619 2,645 5.7 262 -- 262 41,456 2,383 5.7
------ ----- ------ -----
Gross loans 685,644 54,981 8.0 645,719 54,563 8.4
------ ------
Less: reserve for loan losses (11,096) (10,439)
------- -------
Net loans 674,548 635,280
------- -------
Property, net 15,684 16,237
Other assets 38,901 32,711
------ ------
Total assets $ 1,089,322 $ 1,016,168
----------- -----------
1998/1997 1997
Rate Average Income/ Avg.
ASSETS: Change Total Balance Expense Rate
-------- ------- ------- ------- ----
Cash and due from banks $29,244
Time deposits with other banks $ 2 $ 543 1,522 $ 83 5.5
U.S. Government obligations (399) (672) 199,733 12,274 6.1
Oblig. of states & political sub. (5) 88 4,728 219 4.6
Other securities (37) 1,956 36,547 2,372 6.5
Trading Account -- -- 0 0 -
Federal Reserve bank stock -- -- 761 46 6.0
Federal funds sold and other
short-term investments 8 765 4,204 223 5.3
----- ---
Total investments 245,973 15,134 6.2
------- ------
Commercial loans -- 1,770 137,520 12,632 9.2
Mortgage loans (1,444) (2,733) 361,089 31,612 8.8
Installment loans -- 977 75,395 6,373 8.5
Home equity loans (31) (98) 15,300 1,647 10.8
Municipal loans 37 324 36,545 2,059 5.6
-----
Gross loans 625,849 54,323 8.7
------
Less: reserve for loan losses (10,159)
-------
Net loans 615,690
-------
Property, net 16,761
Other assets 20,047
------
Total assets $ 929,237
---------
5
1999 1999/1998 1998
Average Income/ Avg. Volume Rate Average Income/ Avg.
LIABILITIES: Balance Expense Rate Change Change Total Balance Expense Rate
------- ------- ---- -------- -------- ------- ------- ------- ----
Demand deposits $ 150,455 $ 132,132
Interest checking deposits 86,583 $ 902 1.0 $ 123 $ (322) $ (199) 80,524 $ 1,101 1.4
Money market savings 158,014 6,152 3.9 1,088 (258) 830 128,970 5,322 4.1
Regular savings 140,313 2,776 2.0 134 (528) (394) 132,012 3,170 2.4
Certificates of deposit 321,097 17,039 5.3 (254) (977) (1,231) 325,798 18,270 5.6
Time open & club accounts 29,253 1,351 4.6 (78) (123) (201) 30,800 1,552 5.0
Total time, int., and inv.
checking deposits 735,260 28,220 3.8 698,104 29,415 4.2
Total deposits 885,715 830,236
Federal funds purchased 3,515 191 5.4 178 (1) 177 234 14 6.0
Loans & securities sold under
agreement to repurchase 67,612 2,210 3.3 381 -- 381 56,181 1,829 3.3
Other borrowings 14,695 760 5.2 233 (30) 203 10,135 557 5.5
Subordinated notes 0 0 -- -- -- -- 0 0 0.0
-- -
Total borrowings 85,822 3,161 3.7 66,550 2,400 3.6
------ ----- ------ -----
Accrued expenses & other liab. 15,017 14,617
------ ------
Total liabilities 986,554 911,403
------- -------
SHAREHOLDERS' EQUITY:
- --------------------
Common stock 39,272 37,765
Capital surplus 14,908 19,696
Retained earnings 48,588 47,304
------ ------
Total shareholders' equity 102,768 104,765
------- -------
Total liabilities and share-
holders' equity $ 1,089,322 $ 1,016,168
------------ ------------
Weighted avg. yield on interest-earning assets 7.3 7.7
Weighted avg. rate paid on interest-bearing liab. 3.8 4.2
Net yield 4.2 4.3
1998/1997 1997
Volume Rate Average Income/ Avg.
LIABILITIES: Change Change Total Balance Expense Rate
-------- -------- ------- ------- ------- ----
Demand deposits $ 118,960
Interest checking deposits $ 36 $ 74 $ 110 73,521 $ 991 1.3
Money market savings 2,166 539 2,705 77,013 2,617 3.4
Regular savings 116 (129) (13) 128,546 3,183 2.5
Certificates of deposit 714 -- 714 312,517 17,556 5.6
Time open & club accounts (673) (44) (717) 44,447 2,269 5.1
Total time, int., and inv.
checking deposits 636,044 26,616 4.2
Total deposits 755,004
Federal funds purchased (200) 11 (189) 3,541 203 5.7
Loans & securities sold under
agreement to repurchase 221 -- 221 49,133 1,608 3.3
Other borrowings 81 (9) 72 8,592 485 5.6
Subordinated notes -- -- -- 0 0 0.0
Total borrowings 61,266 2,296 3.7
------ -----
Accrued expenses & other liab. 11,787
------
Total liabilities 828,057
-------
SHAREHOLDERS' EQUITY:
- --------------------
Common stock 19,636
Capital surplus 34,539
Retained earnings 47,005
------
Total shareholders' equity 101,180
-------
Total liabilities and share-
holders' equity $ 929,237
---------
Weighted avg. yield on
interest-earning assets 8.0
Weighted avg. rate paid
on interest-bearing liab. 4.1
Net yield 4.7
6
Note: (1) For rate calculation purposes, average loan categories include
unearned discount.
(2) Nonaccrual loans have been included in the average loan balances.
(3) Certain amounts have been reclassified to conform with the
current-year presentation.
(4) Included in interest income are loan fees of $683 for 1999, $1,106
for 1998 and $1,253 for 1997.
(5) Table I has not been tax equated.
* The change due to the volume/rate variance and average volume and percent
roundings have been allocated to volume.
7
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,
1999 (a) 1998 (a) 1997 (a)
-------- -------- --------
U. S. Treasury, government corporations and agencies $150,096 $225,294 $195,048
State and political subdivisions 27,020 17,966 4,676
Mortgage-backed securities 111,516 74,233 53,996
Other 23,243 10,172 4,445
-------- -------- --------
Total $311,875 $327,665 $258,165
======== ======== ========
MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELD
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1999 1998 1998 1997 1997
Amount (a) Yield (b) Amount (a) Yield (b) Amount (a) Yield (b)
------------ ------------ ------------ ------------------------- ------------
1 Year or less $ 54,249 5.68% $ 93,671 5.78% $ 69,916 5.88%
1 Year - 5 Years 139,357 5.64% 158,938 5.64% 136,317 6.19%
5 Years - 10 Years 35,094 6.26% 20,781 6.33% 11,652 6.54%
After 10 Years 83,175 6.17% 54,275 6.24% 40,280 6.51%
-------- ---- -------- ---- -------- ----
Total $311,875 5.86% $327,665 5.82% $258,165 6.17%
======== ==== ======== ==== ======== ====
Refer to Note 3 to the consolidated financial statements.
a. Held to maturity and available for sale portfolios are combined.
b. Weighted average yield is calculated by dividing income, which has not
been tax equated on tax-exempt obligations, within each maturity range by
outstanding amount of the related investment.
8
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,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Real estate Loans
Construction and land development $ 33,632 $ 33,530 $ 30,951 $ 34,733 $ 54,840
Secured by 1-4 family residential properties 219,292 214,798 217,782 217,631 216,180
Other real estate loans 173,780 169,402 189,251 178,644 157,925
Commercial and industrial loans 212,656 171,699 138,812 124,788 120,692
Loans to individuals 72,658 64,306 53,500 47,466 40,648
All other loans 10,591 7,117 6,143 5,821 4,084
-------- -------- -------- -------- --------
Total loans $722,609 $660,852 $636,439 $609,083 $594,369
======== ======== ======== ======== ========
9
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, 1999 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 $ 17,814 $ 11,834 $ 3,984 $ 33,632
Secured by 1-4 family residential properties 44,087 82,015 93,190 219,292
Other real estate loans 41,430 56,566 75,784 173,780
Commercial and industrial loans 159,719 36,389 16,548 212,656
Loans to individuals 26,859 41,480 4,319 72,658
All other loans 517 9,611 463 10,591
-------- -------- -------- --------
Total loans $290,426 $237,895 $194,288 $722,609
======== ======== ======== ========
Loans with a predetermined interest rate $111,950 $152,216 $184,548 $448,714
Loans with a floating or variable interest rate 178,476 85,679 9,740 273,895
-------- -------- -------- --------
$290,426 $237,895 $194,288 $722,609
======== ======== ======== ========
10
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE III. LOAN PORTFOLIO, PART C. RISK ELEMENTS
(Thousands of Dollars)
Nonaccrual, Past-Due and Restructured Loans and Other Assets
Performance of the entire loan portfolio is reviewed on a regular basis by
bank management and loan officers. A number of factors regarding the borrower,
such as overall financial strength, collateral values, and repayment ability,
are considered in deciding on what actions should be taken when determining the
collectibility of interest for accrual purposes.
Potential Problem Loans
When collectibility of interest and/or principal on a particular loan is
questionable, the loan is placed on nonaccrual status. If, at the time a
decision is made to cease accruing interest, it is determined that the
collection of previously accrued but unpaid interest is uncertain, a stipulated
amount is charged against current income. Conversly, if a loan on nonaccrual
status is paid in full, including interest, a credit is made to current income.
The total of nonaccruing and restructured loans in 1999 was $2,323. There was no
interest income recognized on these loans. If nonaccrual loans had been
performing in accordance with their contractual terms, additional income of $246
would have been recorded in 1999. In management's evaluation of the loan
portfolio risks, any significant future increases in nonperforming loans are
dependent to a large extent on the economic environment, or specific industry
problems.
Loan Concentrations
At December 31, 1999, there were no concentrations of loans exceeding 10%
of total loans other than disclosed in Table III, Part A.
Other Assets
At December 31, 1999, $45 in Other Real Estate Owned was classified as
nonperforming. This amount represents all Other Real Estate Owned as of December
31, 1999.
1999 1998 1997 1996 1995
Principal Principal Principal Principal Principal
Balance Balance Balance Balance Balance
------- ------- ------- ------- -------
Nonaccruing loans $2,285 $3,424 $3,136 $4,671 $5,855
====== ====== ====== ====== ======
Accruing loans 90 days or more past due:
Real estate loans
Construction and land development -- -- -- -- --
Secured by 1-4 family dwellings 304 705 308 373 234
Other real estate -- 14 36 12 93
Commercial and industrial loans 63 -- 21 19 --
Loans to individuals 214 204 159 180 174
All other loans -- -- -- -- --
------ ------ ------ ------ ------
Total loans, 90 days or more past due 581 923 524 584 501
====== ====== ====== ====== ======
Restructured loans, not included above 38 125 206 281 352
====== ====== ====== ====== ======
11
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE IV. SUMMARY OF LOAN LOSS EXPERIENCE
(Thousands of Dollars)
Management's methodology to determine the adequacy of and the provisions
to the reserve considers specific credit reviews, past loan loss experience,
current economic conditions and trends, and the volume, growth, and composition
of the loan portfolio.
12
Reserve for possible loan losses is determined through a quarterly
evaluation of reserve adequacy which takes into consideration the growth of the
loan portfolio, the status of past-due loans, current economic conditions,
various types of lending activity, policies, real estate and other loan
commitments, and significant changes in the charge-off activity. Loans on the
"watch list" and all non-accrual loans are evaluated individually. All other
loans are evaluated as pools. Based on historical loss experience, loss factors
are determined giving consideration to the areas noted in the first paragraph
and applied to the pooled loan categories to develop the general or allocated
portion of reserve. Loans are also reviewed for impairment based on discounted
cash flows using the loans' initial effective interest rate or the fair value of
the collateral for certain collateral-dependent loans as provided under SFAS No.
114. Management also reviews the activity within the allowance to determine what
actions, if any, should be taken to address differences between estimated and
actual losses. Any of the above factors may cause the provision to fluctuate.
The methodology for establishing the loan loss reserve and provision has not
changed in recent years.
The reserve for possible loan losses is made up of the allocated or
general reserve and the unallocated portion, which is the remainder after
necessary allocations are made. The following table summarizes the two
categories for the periods indicated.
December 31,
1999 1998 1997
---- ---- ----
Allocated $ 8,786 $ 6,993 $ 4,749
Unallocated 2,437 3,545 5,521
------- ------- -------
Total $11,223 $10,538 $10,270
======= ======= =======
The increase of $1.8 million in the allocated portion of the reserve for
the year ended December 31, 1999 was due to a combination of portfolio growth
and higher estimation factors for several portfolio segments. The volume growth
occurred predominantly in the commercial and consumer loan portfolios, up 11.3%
and 12.4% respectively. Increases in loss factors applied to specific loan pools
effected the following portfolios. Higher loss experience from small business
loans, mostly unsecured commercial and industrial credits, caused the commercial
uncriticized factor to increase from 1.11% at 12/31/98 to 1.28% at 12/31/99,
continuing a trend from .15% at 12/31/97. An above average number of properties
categorized as OREO at some point during 1999, influenced the qualitative
component of the residential real estate factor, which rose from .28% to .77%.
The loss factor applied to industry concentrations was raised from .60% to .80%
to account for changes in loan structure practices for tract development
financing and to account for the decision to allow higher credit exposure to the
commercial investment property industry. The increase in allocated reserves
caused a related decline in the unallocated portion of the reserve. The dollar
difference between the allocated increase of $1.8 million and the unallocated
decrease of $1.1 million can be attributed to recoveries added back to the
reserve throughout 1999, largely the culmination of long standing action plans
to recoup losses from older commercial charge-offs.
The increase of $2.2 million in the allocated portion of the reserve for
the year ended December 31, 1998 was due mainly to a $2.0 million increase in
the uncriticized portion of the allowance related to the commercial loan pool.
This increase was caused by a higher volume of losses among small business
credits, which migrate more quickly from pass to loss than larger business
credit charge-offs. The historical loss factor for this segment of the
commercial loan portfolio increased from 0.15% at December 31, 1997 to 1.11% at
December 31, 1998. Volume also increased from $142 million at December 31, 1997
to $174 million at December 31, 1998. Industry concentrations increased in
volume by $32 million from $56 million at December 31, 1997 to $88 million at
December 31, 1998. This increase relates to a segment in the real estate
industry. The loss factor for calculating the reserve applicable to industry
concentration increased from 0.20% at December 31, 1997 to 0.60% at December 31,
1998. The change in volume and change in loss factor resulted in an increase of
$400 thousand in the allocated reserve. The approximate $2.2 million increase in
the allocated reserve for the year ended December 31, 1998 caused a
corresponding decrease in the unallocated portion of the reserve. Other
immaterial fluctuation occurred in both volumes and estimation factors of other
pools of loans.
13
Management believes that both the allocated and unallocated portions of
the reserve are maintained at a level which is adequate to absorb potential
losses in the loan portfolio.
As the accompanying table indicates, the amount of loan loss provision
charged to expense for 1999 was $1,052 compared to $958 in 1998 and $1,310 in
1997.
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Average amount of loans outstanding $674,798 $635,939 $617,082 $590,144 $583,398
Loan loss reserve at beginning of period $ 10,538 $ 10,270 $ 9,801 $ 8,854 $ 8,876
Charge-offs:
Real estate loans 348 575 552 990 1,842
Commercial and industrial loans 1,105 370 319 20 416
Loans to individuals 304 427 286 175 236
Home equity -- -- -- -- --
Other -- -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs: 1,757 1,372 1,157 1,185 2,494
======== ======== ======== ======== ========
Recoveries:
Real estate loans 857 324 167 458 316
Commercial and industrial loans 440 256 78 529 157
Loans to individuals 93 102 66 76 75
Home equity -- -- -- -- --
Other -- -- 5 24 29
-------- -------- -------- -------- --------
Total recoveries: 1,390 682 316 1,087 577
======== ======== ======== ======== ========
Net charge-offs: 367 690 841 98 1,917
Additions to loan loss reserve 1,052 958 1,310 1,045 1,895
Loan loss reserve at end of period $ 11,223 $ 10,538 $ 10,270 $ 9,801 $ 8,854
======== ======== ======== ======== ========
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 59.0 $ 2,571 63.2 $ 2,358 68.8 $ 3,511 70.8 $ 3,146 72.2 $ 817
Commercial and industrial loans 29.4 5,356 26.0 3,575 21.8 610 20.5 1,332 20.3 2,459
Loans to individuals 10.1 848 9.7 1,049 8.4 617 7.8 354 6.8 347
All other loans 1.5 11 1.1 11 1.0 11 0.9 11 0.7 11
Unallocated portion 2,437 3,545 5,521 4,958 5,220
------- ------- ------- ------- -------
Total $11,223 $10,538 $10,270 $ 9,801 $ 8,854
======= ======= ======= ======= =======
Ratio of Net charge-offs versus
average loans 0.1% 0.1% 0.1% 0.0% 0.3%
Total cash-basis and nonaccrual loans of $2,285 at December 31, 1999, were
generally comprised of $480 in residential real estate loans, $744 in commercial
real estate loans and $1,061 in commercial and other loans.
14
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES \
TABLE V. DEPOSITS
(Thousands of Dollars)
1999 1998 1997
---- ---- ----
A. Average: Noninterest-bearing demand deposits $150,455 $132,132 $118,960
Interest checking 86,583 80,524 73,521
Money Market savings 158,014 128,970 77,013
Saving deposits 140,313 132,012 128,546
Time deposits 350,350 356,598 356,964
-------- -------- --------
Total $885,715 $830,236 $755,004
======== ======== ========
Due 3 months Due 3 - 6 Due 6 - 12 Due over
B. Year-end balance: ($100 or more) outstanding as of or less months months 12 months
December 31, 1999 ------- ------ ------ ---------
Certificates of deposit $ 4,515 $ 3,680 $ 9,517 $ 7,688
Other time deposits $13,999 $ 5,301 $ 2,212 $ 2,092
Note: Univest and its subsidiaries do not have any foreign offices or foreign
deposits
TABLE VI. RETURN ON EQUITY AND ASSETS (RATIOS)
(Shown as percentages)
1999 1998 1997
---- ---- ----
Return on assets 1.5 1.4 1.4
Return on equity 15.4 13.8 13.0
Dividend payout ratio 30.3 29.9 28.2
Equity to assets ratio 9.4 10.3 10.9
15
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
TABLE VII. SHORT TERM BORROWINGS
(Thousands of Dollars)
LOANS AND SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
1999 1998 1997
---- ---- ----
Balance at December 31 $70,943 $62,890 $48,389
Weighted average interest rate at year end 3.3% 3.2% 3.3%
Maximum amount outstanding at any month's end $75,439 $68,384 $58,521
Average amount outstanding during the year $67,612 $56,181 $49,133
Weighted average interest rate during the year 3.3% 3.3% 3.3%
16
Item 2. Properties
Univest and its subsidiaries occupy thirty-two properties in Montgomery
and Bucks Counties in Pennsylvania, which are used principally as banking
offices. Note 6, appearing on page 22 of the Annual Report to Shareholders
(Exhibit 13), is hereby incorporated in this item.
Item 3. Legal Proceedings
There are no proceedings pending other than the ordinary routine
litigation incident to the business of the corporation.
Item 4. Submission of Matters to a Vote of Security Holders
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
PART II
17
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), pages 43-44. Dividend and other restrictions are incorporated by
reference from Note 16 of the 1999 Annual Report to Shareholders (Exhibit 13),
pages 29 and 30. The number of shareholders as of February 29, 2000, was 2,078.
Item 6. Selected Financial Data
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), page 34.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), pages 35 through 42. Dividend and other restrictions are
incorporated by reference from Note 16 of the 1999 Annual Report to Shareholders
(Exhibit 13), pages 29 and 30.
Item 7 (a). Qualitative and Quantitative Disclosures About Market Risk
Incorporated by reference from the 1999 Annual Report to Shareholders
(Exhibit 13), pages 41 and 42.
Item 8. Financial Statements and Supplementary Data
Consolidated balance sheets of the registrant at December 31, 1999 and
1998, and consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years ended December 31, 1999, and the
independent auditors' report thereon are incorporated by reference from the 1999
Annual Report to Shareholders (Exhibit 13), pages 13 through 16.
Item 9. Change in and Disagreements with Accountants on Accounting and Financial
Disclosures
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
Executive Officers
The names and ages of all executive officers of Univest are as follows:
Principal Occupation
Officer Title during past 5 years Age
Merrill S. Moyer Chairman Chairman of the Corporation 66
and Union National Bank
Norman L. Keller Executive Vice President and CEO of Pennview 62
18
President Savings Bank and Executive
Vice President of the Corporation
Marvin A. Anders Vice Chairman Vice Chairman of the Corporation 60
and Union National Bank
William S. Aichele President President and CEO of the 49
Corporation and
Union National Bank
Wallace H. Bieler Executive Vice Executive Vice President 54
President and CFO of the Corporation
and Union National Bank
There is no family relationship among any of the executive officers of Univest.
Item 11. Executive Compensation
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference from the registrant's definitive proxy
statement for the annual meeting of shareholders on April 11, 2000.
Item 13. Certain Relationships and Related Transactions
During 1999, the Corporation and its subsidiaries paid $344,561 to H.
Mininger & Son, Inc. for building expansion projects which were in the normal
course of business on substantially the same terms as available from others. H.
Ray Mininger, Alternate Director, is president of H. Mininger & Sons, Inc.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a) 1. & 2. Financial Statements and Schedules The financial
statements listed in the accompanying index to financial
statements are filed as part of this annual report.
3. Listing of Exhibits
The exhibits listed on the accompanying index to exhibits are
filed as part of this annual report.
(b) There were no reports on Form 8-K filed in the fourth quarter of
1999.
(c) Exhibits - The response of this portion of item 14 is submitted as a
separate section.
(d) Financial Statement Schedules - none.
19
UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
[Item 14(a)]
Annual Report
to Shareholders*
----------------
Report of Independent Auditors 33
Consolidated balance sheets at 13
December 31, 1999 and 1998
Consolidated statements of income for each of the 14
three years in the period ended December 31, 1999
Consolidated statements of changes in shareholders' equity 15
for each of the three years in the period ended
December 31, 1999
Consolidated statements of cash flows for 16
20
each of the three years in the period ended
December 31, 1999
Notes to consolidated financial statements 17-32
Financial statement schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
* Refers to page numbers in the Annual Report to Shareholders for 1999 (Exhibit
13) which is incorporated by references.
21
UNIVEST CORPORATION OF PENNSYLVANIA
AND SUBSIDIARIES
INDEX TO EXHIBITS
[Item 14(a)]
Description
-----------
(3) Articles of Incorporation and By-Laws
Articles of Incorporation and Charter are incorporated by reference to the
1973 Form 10-K.
(4) Instruments Defining the Rights of Security Holders, Including Debentures
Specimen Copy of Common Stock is incorporated herein by reference to the
1973 Form 10-K.
(10) Material Contracts - Not Applicable.
(11) Statement Re Computation of Per Share Earnings - See Footnote 13 in Item
(13).
(12) Statements Re Computation of Ratios - Not Applicable.
22
(13) Annual Report to Shareholders
(18) Letter Re Change in Accounting Principles - Not Applicable.
(19) Previously Unfiled Documents - Not Applicable.
(21) Subsidiaries of the Registrant
(23) Consent of independent auditors
(24) Power of Attorney - Not Applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIVEST CORPORATION OF PENNSYLVANIA
Registrant
By: /s/ Norman L. Keller
---------------------------------
Norman L. Keller
Secretary and Executive Vice President, March 22, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ Merrill S. Moyer /s/ James L. Bergey
- ------------------------------------------ -----------------------------------
Merrill S. Moyer James L. Bergey
Chairman and Director, March 22, 2000 Director, March 22, 2000
/s/ Marvin A. Anders /s/ Harold M. Mininger
- ------------------------------------------ -----------------------------------
23
Marvin A. Anders Harold M. Mininger
Vice Chairman and Director, March 22, 2000 Director, March 22, 2000
/s/ William S. Aichele /s/ Paul G. Shelly
- ------------------------------------------ -----------------------------------
William S. Aichele Paul G. Shelly
President, CEO and Director, March 22, 2000 Director, March 22, 2000
/s/ Wallace H. Bieler /s/ R. Lee Delp
- ------------------------------------------ -----------------------------------
Wallace H. Bieler R. Lee Delp
Executive Vice President and CFO, Director, March 22, 2000
March 22, 2000
/s/ Charles H. Hoeflich /s/ Clair W. Clemens
- ------------------------------------------ -----------------------------------
Charles H. Hoeflich Clair W. Clemens
Chairman Emeritus, March 22, 2000 Director, March 22, 2000
/s/ Thomas K. Leidy /s/ John U. Young
- ------------------------------------------ -----------------------------------
Thomas K. Leidy John U. Young
Director, March 22, 2000 Director, March 22, 2000
24