Unassociated Document
United
States
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
Form
10-Q
x
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 for the quarterly period ended September
30, 2007.
|
or
o
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 for the transition period
from
to .
|
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
Not
applicable
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. xYes
oNo
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o
Accelerated
filer x
Non-accelerated
filer o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). oYes
xNo
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common
Stock, $5 par value
|
|
12,782,232
|
(Title
of Class)
|
|
(Number
of shares outstanding at 9/30/07)
|
UNIVEST
CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX
|
|
Page Number
|
|
|
|
Part
I.
|
Financial
Information:
|
|
|
|
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets at September 30, 2007 and December 31,
2006
|
1
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2007 and 2006
|
2
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2007 and 2006
|
3
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
4
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
9
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
28
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
28
|
|
|
|
|
Part
II.
|
Other
Information:
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
28
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
28
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
29
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
29
|
|
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Securities Holders
|
29
|
|
|
|
|
|
Item
5.
|
Other
Information
|
29
|
|
|
|
|
|
Item
6.
|
Exhibits
|
30
|
PART
I. FINANCIAL
INFORMATION
Item
1. Financial
Statements
UNIVEST
CORPORATION OF PENNSYLVANIA
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(UNAUDITED)
|
|
(SEE
NOTE)
|
|
|
|
September 30, 2007
|
|
December 31, 2006
|
|
|
|
($ in thousands, except per share data)
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
40,466
|
|
$
|
46,956
|
|
Interest-bearing
deposits with other banks
|
|
|
613
|
|
|
582
|
|
Federal
funds sold
|
|
|
13,260
|
|
|
22,817
|
|
Investment
securities held-to-maturity (market value $2,068 and $2,685 at
September 30, 2007 and December 31, 2006,
respectively)
|
|
|
2,012
|
|
|
2,619
|
|
Investment
securities available-for-sale
|
|
|
393,015
|
|
|
379,781
|
|
Loans
and leases
|
|
|
1,371,374
|
|
|
1,353,681
|
|
Less:
Reserve for loan and lease losses
|
|
|
(13,872
|
)
|
|
(13,283
|
)
|
Net
loans and leases
|
|
|
1,357,502
|
|
|
1,340,398
|
|
Premises
and equipment, net
|
|
|
22,747
|
|
|
21,878
|
|
Goodwill,
net of accumulated amortization of $2,942 at September 30, 2007 and
December 31, 2006
|
|
|
44,438
|
|
|
44,273
|
|
Other
intangibles, net of accumulated amortization of $5,692 and $5,113
at
September 30, 2007 and December 31, 2006,
respectively
|
|
|
2,813
|
|
|
3,335
|
|
Cash
surrender value of insurance policies
|
|
|
46,311
|
|
|
36,686
|
|
Accrued
interest and other assets
|
|
|
29,198
|
|
|
30,176
|
|
Total
assets
|
|
$
|
1,952,375
|
|
$
|
1,929,501
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Demand
deposits, noninterest-bearing
|
|
$
|
228,908
|
|
$
|
263,417
|
|
Demand
deposits, interest-bearing
|
|
|
531,468
|
|
|
508,140
|
|
Savings
deposits
|
|
|
217,428
|
|
|
195,126
|
|
Time
deposits
|
|
|
540,359
|
|
|
521,862
|
|
Total
deposits
|
|
|
1,518,163
|
|
|
1,488,545
|
|
Securities
sold under agreements to repurchase
|
|
|
77,381
|
|
|
99,761
|
|
Other
short-term borrowings
|
|
|
17,600
|
|
|
17,900
|
|
Accrued
expenses and other liabilities
|
|
|
32,344
|
|
|
30,505
|
|
Long-term
debt
|
|
|
85,696
|
|
|
77,036
|
|
Subordinated
notes
|
|
|
8,625
|
|
|
9,750
|
|
Company-obligated
mandatorily redeemable preferred securities of subsidiary trusts
holding
junior subordinated debentures of Univest ("Trust Preferred
Securities")
|
|
|
20,619
|
|
|
20,619
|
|
Total
liabilities
|
|
|
1,760,428
|
|
|
1,744,116
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
Common
stock, $5 par value: 24,000,000 shares authorized at September 30,
2007
and December 31, 2006; 14,873,904 shares issued at September 30,
2007 and
December 31, 2006; 12,782,232 and 13,005,329 shares outstanding at
September 30, 2007 and December 31, 2006, respectively
|
|
|
74,370
|
|
|
74,370
|
|
Additional
paid-in capital
|
|
|
22,573
|
|
|
22,459
|
|
Retained
earnings
|
|
|
139,144
|
|
|
128,242
|
|
Accumulated
other comprehensive loss, net of tax benefit
|
|
|
(4,011
|
)
|
|
(4,463
|
)
|
Treasury
stock, at cost; 2,091,672 and 1,868,575 shares at September 30, 2007
and
December 31, 2006, respectively
|
|
|
(40,129
|
)
|
|
(35,223
|
)
|
Total
shareholders’ equity
|
|
|
191,947
|
|
|
185,385
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
1,952,375
|
|
$
|
1,929,501
|
|
Note:
The
condensed consolidated balance sheet at December 31, 2006 has been derived
from
the audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. See accompanying notes
to the unaudited condensed consolidated financial statements.
UNIVEST
CORPORATION OF PENNSYLVANIA
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
For
the Three Months Ended
September
30,
|
|
For
the Nine Months Ended
September
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
($
in thousands, except per share data)
|
|
Interest
income
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans and leases:
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$
|
23,648
|
|
$
|
22,542
|
|
$
|
69,633
|
|
$
|
62,598
|
|
Exempt
from federal income taxes
|
|
|
1,028
|
|
|
1,003
|
|
|
3,080
|
|
|
2,860
|
|
Total
interest and fees on loans and leases
|
|
|
24,676
|
|
|
23,545
|
|
|
72,713
|
|
|
65,458
|
|
Interest
and dividends on investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
3,932
|
|
|
3,178
|
|
|
11,331
|
|
|
8,424
|
|
Exempt
from federal income taxes
|
|
|
981
|
|
|
959
|
|
|
2,899
|
|
|
2,907
|
|
Other
interest income
|
|
|
193
|
|
|
42
|
|
|
345
|
|
|
216
|
|
Total
interest income
|
|
|
29,782
|
|
|
27,724
|
|
|
87,288
|
|
|
77,005
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits
|
|
|
11,804
|
|
|
9,722
|
|
|
33,478
|
|
|
24,829
|
|
Interest
on long-term debt and capital securities
|
|
|
1,613
|
|
|
1,264
|
|
|
4,640
|
|
|
3,607
|
|
Interest
on short-term debt
|
|
|
572
|
|
|
1,091
|
|
|
2,294
|
|
|
2,375
|
|
Total
interest expense
|
|
|
13,989
|
|
|
12,077
|
|
|
40,412
|
|
|
30,811
|
|
Net
interest income
|
|
|
15,793
|
|
|
15,647
|
|
|
46,876
|
|
|
46,194
|
|
Provision
for loan and lease losses
|
|
|
456
|
|
|
568
|
|
|
1,733
|
|
|
1,594
|
|
Net
interest income after provision for loan and lease losses
|
|
|
15,337
|
|
|
15,079
|
|
|
45,143
|
|
|
44,600
|
|
Noninterest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
fee income
|
|
|
1,525
|
|
|
1,363
|
|
|
4,493
|
|
|
4,362
|
|
Service
charges on deposit accounts
|
|
|
1,706
|
|
|
1,748
|
|
|
5,058
|
|
|
5,091
|
|
Investment
advisory commission and fee income
|
|
|
647
|
|
|
545
|
|
|
2,012
|
|
|
1,701
|
|
Insurance
commission and fee income
|
|
|
1,385
|
|
|
1,233
|
|
|
4,576
|
|
|
3,534
|
|
Life
insurance income
|
|
|
391
|
|
|
433
|
|
|
1,125
|
|
|
1,054
|
|
Other
service fee income
|
|
|
913
|
|
|
893
|
|
|
2,709
|
|
|
2,437
|
|
Net
gain on sales of securities
|
|
|
259
|
|
|
3
|
|
|
310
|
|
|
50
|
|
Net
loss on disposition of fixed assets
|
|
|
─
|
|
|
─
|
|
|
(64
|
)
|
|
(67
|
)
|
Other
|
|
|
86
|
|
|
16
|
|
|
173
|
|
|
192
|
|
Total
noninterest income
|
|
|
6,912
|
|
|
6,234
|
|
|
20,392
|
|
|
18,354
|
|
Noninterest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
|
|
7,659
|
|
|
7,051
|
|
|
23,293
|
|
|
21,554
|
|
Net
occupancy
|
|
|
1,188
|
|
|
1,078
|
|
|
3,625
|
|
|
3,205
|
|
Equipment
|
|
|
793
|
|
|
829
|
|
|
2,396
|
|
|
2,406
|
|
Marketing
and Advertising
|
|
|
255
|
|
|
291
|
|
|
663
|
|
|
1,272
|
|
Other
|
|
|
3,187
|
|
|
3,083
|
|
|
9,598
|
|
|
8,890
|
|
Total
noninterest expense
|
|
|
13,082
|
|
|
12,332
|
|
|
39,575
|
|
|
37,327
|
|
Income
before income taxes
|
|
|
9,167
|
|
|
8,981
|
|
|
25,960
|
|
|
25,627
|
|
Applicable
income taxes
|
|
|
2,479
|
|
|
2,444
|
|
|
6,950
|
|
|
6,861
|
|
Net
income
|
|
$
|
6,688
|
|
$
|
6,537
|
|
$
|
19,010
|
|
$
|
18,766
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.52
|
|
$
|
0.50
|
|
$
|
1.47
|
|
$
|
1.45
|
|
Diluted
|
|
|
0.52
|
|
|
0.50
|
|
|
1.47
|
|
|
1.44
|
|
Dividends
declared
|
|
|
0.20
|
|
|
0.20
|
|
|
0.60
|
|
|
0.58
|
|
Note:
See
accompanying notes to the unaudited condensed consolidated financial
statements.
UNIVEST
CORPORATION OF PENNSYLVANIA
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Nine Months Ended
September
30,
|
|
|
|
2007
|
|
2006
|
|
|
|
($
in thousands)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
19,010
|
|
$
|
18,766
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
Provision
for loan and lease losses
|
|
|
1,733
|
|
|
1,594
|
|
Depreciation
of premises and equipment
|
|
|
1,495
|
|
|
1,627
|
|
Realized
gains on investment securities
|
|
|
(310
|
)
|
|
(50
|
)
|
Realized
losses on dispositions of fixed assets
|
|
|
64
|
|
|
67
|
|
Increase
in cash surrender value of insurance policies
|
|
|
(1,125
|
)
|
|
(1,054
|
)
|
Other
adjustments to reconcile net income to cash provided by operating
activities
|
|
|
(119
|
)
|
|
(446
|
)
|
Decrease
(increase) in interest receivable and other assets
|
|
|
668
|
|
|
(1,475
|
)
|
Increase
(decrease) in accrued expenses and other liabilities
|
|
|
1,563
|
|
|
(7,672
|
)
|
Net
cash provided by operating activities
|
|
|
22,979
|
|
|
11,357
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Net
cash paid due to acquisitions, net of cash acquired
|
|
|
(200
|
)
|
|
(4,330
|
)
|
Net
capital expenditures
|
|
|
(2,428
|
)
|
|
(2,327
|
)
|
Proceeds
from maturing securities held-to-maturity
|
|
|
608
|
|
|
827
|
|
Proceeds
from maturing securities available-for-sale
|
|
|
57,999
|
|
|
121,265
|
|
Proceeds
from sales and calls of securities available-for-sale
|
|
|
28,703
|
|
|
22,298
|
|
Purchases
of investment securities available-for-sale
|
|
|
(98,781
|
)
|
|
(194,655
|
)
|
Proceeds
from sales of loans and leases
|
|
|
2,734
|
|
|
1,156
|
|
Purchases
of lease financings
|
|
|
(27,287
|
)
|
|
(10,412
|
)
|
Net
decrease (increase) in loans and leases
|
|
|
6,163
|
|
|
(113,420
|
)
|
Purchases
of bank owned life insurance
|
|
|
(8,500
|
)
|
|
(10,412
|
)
|
Net
increase in interest-bearing deposits
|
|
|
(31
|
)
|
|
(92
|
)
|
Net
decrease in federal funds sold
|
|
|
9,557
|
|
|
11,726
|
|
Net
cash used in investing activities
|
|
|
(31,463
|
)
|
|
(167,964
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
29,740
|
|
|
97,182
|
|
Net
(decrease) increase in short-term borrowings
|
|
|
(22,680
|
)
|
|
55,485
|
|
Issuance
of long-term debt
|
|
|
10,000
|
|
|
20,000
|
|
Repayment
of long-term debt
|
|
|
(1,000
|
)
|
|
(9,075
|
)
|
Repayment
of subordinated debt
|
|
|
(1,125
|
)
|
|
(1,125
|
)
|
Purchases
of treasury stock
|
|
|
(7,065
|
)
|
|
(3,397
|
)
|
Stock
issued under dividend reinvestment and employee stock purchase
plans
|
|
|
1,494
|
|
|
1,539
|
|
Proceeds
from exercise of stock options, including tax benefits
|
|
|
414
|
|
|
2,026
|
|
Cash
dividends paid
|
|
|
(7,784
|
)
|
|
(7,383
|
)
|
Net
cash provided by financing activities
|
|
|
1,994
|
|
|
155,252
|
|
Net
decrease in cash and due from banks
|
|
|
(6,490
|
)
|
|
(1,355
|
)
|
Cash
and due from banks at beginning of year
|
|
|
46,956
|
|
|
46,226
|
|
Cash
and due from banks at end of period
|
|
$
|
40,466
|
|
$
|
44,871
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
39,804
|
|
$
|
29,046
|
|
Income
taxes, net of refunds received
|
|
|
7,568
|
|
|
6,999
|
|
Note:
See
accompanying notes to the unaudited condensed consolidated financial
statements.
UNIVEST
CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
Notes
to the Unaudited Condensed Consolidated Financial
Statements
Note
1. Financial Information
The
accompanying unaudited condensed consolidated financial statements include
the
accounts of Univest Corporation of Pennsylvania (the “Corporation”) and its
wholly owned subsidiaries; the Corporation’s primary subsidiary is Univest
National Bank and Trust Co. (the “Bank”). The unaudited condensed consolidated
financial statements included herein have been prepared without audit pursuant
to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
in the United States have been condensed or omitted pursuant to such rules
and
regulations. The accompanying unaudited condensed consolidated financial
statements reflect all adjustments which are of a normal recurring nature and
are, in the opinion of management, necessary to present a fair statement of
the
results and condition for the interim periods presented. Operating results
for
the nine-month period ended September 30, 2007 are not necessarily indicative
of
the results that may be expected for the year ending December 31, 2007. It
is
suggested that these unaudited condensed consolidated financial statements
be
read in conjunction with the financial statements and the notes thereto included
in the registrant’s Annual Report on Form 10-K for the year ended December
31, 2006, which has been filed with the SEC on March 8, 2007.
Note
2. Loans
The
following is a summary of the major loan and lease categories:
($
in thousands)
|
|
At September 30,
2007
|
|
At December 31,
2006
|
|
Commercial,
financial and agricultural
|
|
$
|
376,898
|
|
$
|
442,182
|
|
Real
estate-commercial
|
|
|
399,574
|
|
|
352,596
|
|
Real
estate-construction
|
|
|
146,639
|
|
|
136,331
|
|
Real
estate-residential
|
|
|
311,616
|
|
|
305,306
|
|
Loans
to individuals
|
|
|
77,748
|
|
|
89,217
|
|
Lease
financings
|
|
|
63,665
|
|
|
30,186
|
|
Total
gross loans and leases
|
|
|
1,376,140
|
|
|
1,355,818
|
|
Less:
Unearned income
|
|
|
(4,766
|
)
|
|
(2,137
|
)
|
Total
loans and leases
|
|
$
|
1,371,374
|
|
$
|
1,353,681
|
|
Note
3. Reserve for Loan and Lease Losses
A
summary
of the activity in the reserve for loan and lease losses is as
follows:
|
|
Three
Months Ended
September
30,
|
|
Nine
Months Ended
September
30,
|
|
($
in thousands)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Reserve
for loan and lease losses at beginning of period
|
|
$
|
13,793
|
|
$
|
14,280
|
|
$
|
13,283
|
|
$
|
13,363
|
|
Provision
for loan and lease losses
|
|
|
456
|
|
|
568
|
|
|
1,733
|
|
|
1,594
|
|
Recoveries
|
|
|
166
|
|
|
110
|
|
|
522
|
|
|
512
|
|
Loans
charged off
|
|
|
(543
|
)
|
|
(1,961
|
)
|
|
(1,666
|
)
|
|
(2,472
|
)
|
Reserve
for loan and lease losses at period end
|
|
$
|
13,872
|
|
$
|
12,997
|
|
$
|
13,872
|
|
$
|
12,997
|
|
Information
with respect to loans and leases that are considered to be impaired under SFAS
114 at September 30, 2007 and December 31, 2006 is as
follows:
|
|
At
September 30, 2007
|
|
At
December 31, 2006
|
|
($
in thousands)
|
|
Balance
|
|
Specific
Reserve
|
|
Balance
|
|
Specific
Reserve
|
|
Recorded
investment in impaired loans and leases at period-end subject to
a
specific reserve for loan and lease losses and corresponding specific
reserve
|
|
$
|
6,861
|
|
$
|
2,426
|
|
$
|
5,606
|
|
$
|
1,576
|
|
Recorded
investment in impaired loans and leases at period-end requiring no
specific reserve for loan and lease losses
|
|
|
519
|
|
|
|
|
|
2,837
|
|
|
|
|
Recorded
investment in impaired loans and leases at period-end
|
|
$
|
7,380
|
|
|
|
|
$
|
8,443
|
|
|
|
|
Recorded
investment in nonaccrual and restructured loans and leases
|
|
$
|
7,380
|
|
|
|
|
$
|
8,443
|
|
|
|
|
The
following is an analysis of interest on nonaccrual and restructured loans and
leases:
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
($
in thousands)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Nonaccrual
and restructured loans and leases at period end
|
|
$
|
7,380
|
|
$
|
4,918
|
|
$
|
7,380
|
|
$
|
4,918
|
|
Average
recorded investment in impaired loans and leases
|
|
|
7,266
|
|
|
7,915
|
|
|
7,554
|
|
|
5,658
|
|
Interest
income that would have been recognized under original
terms
|
|
|
146
|
|
|
86
|
|
|
542
|
|
|
319
|
|
No
interest income was recognized on these loans for the three- and nine-month
periods ended September 30, 2007 and 2006.
Note
4. Earnings Per Share
The
following table sets forth the computation of basic and diluted earnings per
share:
|
|
Three
Months Ended
September
30,
|
|
Nine
Months Ended
September
30,
|
|
(in
thousands, except per share data)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Numerator
for basic and diluted earnings per share – Net
income
|
|
$
|
6,688
|
|
$
|
6,537
|
|
$
|
19,010
|
|
$
|
18,766
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings per share – weighted-average
shares outstanding
|
|
|
12,811
|
|
|
12,963
|
|
|
12,917
|
|
|
12,949
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock options
|
|
|
7
|
|
|
69
|
|
|
18
|
|
|
57
|
|
Denominator
for diluted earnings per share – adjusted weighted-average
shares outstanding
|
|
|
12,818
|
|
|
13,032
|
|
|
12,935
|
|
|
13,006
|
|
Basic
earnings per share
|
|
$
|
0.52
|
|
$
|
0.50
|
|
$$
|
1.47
|
|
$$
|
1.45
|
|
Diluted
earnings per share
|
|
$
|
0.52
|
|
$
|
0.50
|
|
$
|
1.47
|
|
$
|
1.44
|
|
Note
5. Accumulated Comprehensive Income
The
following shows the accumulated comprehensive income, net of income taxes,
for
the periods presented:
|
|
For
the Three Months
|
|
For
the Nine Months
|
|
|
|
Ended
September 30,
|
|
Ended
September, 30
|
|
($
in thousands)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Net
Income
|
|
$
|
6,688
|
|
$
|
6,537
|
|
$
|
19,010
|
|
$
|
18,766
|
|
Unrealized
gain on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gains arising during the period
|
|
|
─
|
|
|
41
|
|
|
─
|
|
|
45
|
|
Unrealized
gain (loss) on available-for-sale investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains arising during the period
|
|
|
2,363
|
|
|
2,823
|
|
|
574
|
|
|
977
|
|
Less:
reclassification adjustment for gains realized in net income
|
|
|
169
|
|
|
1
|
|
|
202
|
|
|
32
|
|
Defined
benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains (losses) arising during the period
|
|
|
(26
|
)
|
|
─
|
|
|
(65
|
)
|
|
─
|
|
Less:
amortization of net gain included in net periodic pension
costs
|
|
|
(67
|
)
|
|
─
|
|
|
(179
|
)
|
|
─
|
|
Less:
accretion of prior service cost included in net periodic pension
costs
|
|
|
9
|
|
|
─
|
|
|
33
|
|
|
─
|
|
Total
comprehensive income
|
|
$
|
8,914
|
|
$
|
9,400
|
|
$
|
19,463
|
|
$
|
19,756
|
|
Note
6. Pensions and Other Postretirement Benefits
Components
of net periodic benefit cost:
|
|
Three
Months Ended September
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
($
in thousands)
|
|
Retirement
Plans
|
|
Other
Postretirement
|
|
Service
cost
|
|
$
|
334
|
|
$
|
326
|
|
$
|
16
|
|
$
|
14
|
|
Interest
cost
|
|
|
426
|
|
|
406
|
|
|
19
|
|
|
20
|
|
Expected
return on plan assets
|
|
|
(456
|
)
|
|
(395
|
)
|
|
─
|
|
|
─
|
|
Amortization
of net loss
|
|
|
100
|
|
|
95
|
|
|
3
|
|
|
3
|
|
Amortization
of prior service cost
|
|
|
(8
|
)
|
|
(19
|
)
|
|
(5
|
)
|
|
(5
|
)
|
Net
periodic benefit cost
|
|
$
|
396
|
|
$
|
413
|
|
$
|
33
|
|
$
|
32
|
|
|
|
Nine
Months Ended September
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
($
in thousands)
|
|
Retirement
Plans
|
|
Other
Postretirement
|
|
Service
cost
|
|
$
|
1,020
|
|
$
|
1,013
|
|
$
|
48
|
|
$
|
43
|
|
Interest
cost
|
|
|
1,274
|
|
|
1,226
|
|
|
58
|
|
|
59
|
|
Expected
return on plan assets
|
|
|
(1,341
|
)
|
|
(1,171
|
)
|
|
─
|
|
|
─
|
|
Amortization
of net (gain) loss
|
|
|
268
|
|
|
261
|
|
|
8
|
|
|
9
|
|
Amortization
of prior service cost
|
|
|
(35
|
)
|
|
(55
|
)
|
|
(15
|
)
|
|
(15
|
)
|
Net
periodic benefit cost
|
|
$
|
1,186
|
|
$
|
1,274
|
|
$
|
99
|
|
$
|
96
|
|
The
Corporation previously disclosed in its financial statements for the year ended
December 31, 2006, that it expected to make payments of $1.7 million for its
qualified and non-qualified retirement plans and $92 thousand for its other
postretirement benefit plans in 2007. As of September
30,
2007,
$1.3 million and $73 thousand have been paid to participants from its
qualified and non-qualified retirement plans and other postretirement plans,
respectively. During the nine months ended September
30,
2007,
the Corporation contributed $390 thousand and $73 thousand to its
non-qualified retirement plans and other postretirement plans, respectively.
Note
7. SFAS
No. 133, “Accounting for Derivative Instruments and Hedging
Activities.”
At
September
30,
2006,
the total notional amount of the “Pay Floating, Receive Fixed” swap outstanding
was $20.0 million. The net payable or receivable from the interest-rate
swap agreement is accrued as an adjustment to interest income. The $20.0 million
in notional amount of interest-rate swap outstanding expired on November 2,
2006. There were no swaps outstanding at September 30, 2007 or December 31,
2006.
Note
8. Income Taxes
Effective
January 1, 2007 the Corporation adopted Financial Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement
No. 109” (“FIN 48”). FIN 48 provides guidance on financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return.
According to FIN 48, a tax position is recognized if it is
more-likely-than-not that the tax position will be sustained upon examination,
including resolution of any related appeals or litigation processes, based
on
the technical merits of the position. If the tax position meets the
more-likely-than-not recognition threshold, the position is measured to
determine the amount of benefit to recognize and should be measured at the
largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement. FIN 48 also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.
As
of
January 1, 2007 the Corporation had no material unrecognized tax benefits,
accrued interest or penalties. Penalties are recorded in non-interest expense
in
the year they are assessed and are treated as a non-deductible expense for
tax
purposes. Interest is recorded in non-interest expense in the year it is
assessed and is treated as a deductible expense for tax purposes. As of January
1, 2007, Tax Years 2003 through 2006 remain subject to Federal examination
as
well as examination by state taxing jurisdictions.
Note
9. Recent Accounting Pronouncements
In
September 2006, the Emerging Issues Task Force (“EITF”) reach a conclusion on
EITF No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” (“EITF 06-4.”)
EITF 06-4 is effective for fiscal years beginning after December 15, 2007.
Under EITF 06-4, if an
agreement is to provide the employee with a death benefit in a
postretirement/termination period, the employer should recognize a liability
for
the future death benefit in accordance with either Statement of Financial
Accounting Standard (“SFAS”) No. 106 or Accounting Principles Board Opinion No.
12. EITF
06-4
requires that recognition of the effects of adoption should be either by
(a) a change in accounting principle through a cumulative-effect adjustment
to retained earnings as of the beginning of the year of adoption or (b) a
change in accounting principle through retrospective application to all prior
periods.
The
potential impact to Univest will be a negative cumulative-effect adjustment
to
retained earnings of approximately $1.6 million and would not be tax
affected.
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a
framework for measuring fair value in GAAP, and enhances disclosures about
fair
value measurements. SFAS 157 applies when other accounting pronouncements
require fair value measurements; it does not require new fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and for interim periods within those
years. The Corporation does not anticipate the adoption of SFAS 157 to have
a
material impact on its financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities (Including an Amendment of FASB
Statement No. 115)” (“SFAS 159.”) SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value. The
objective of SFAS 159 is to improve financial reporting by allowing entities
to
minimize volatility in reported earnings caused by related assets and
liabilities being measured differently. Most of the provisions of SFAS 159
apply
only to entities that elect the fair value option. However, SFAS 159 includes
an
amendment to SFAS 115 which applies
to all entities with available-for-sale and trading securities. Entities
electing the fair value option will report unrealized gains and losses in
earnings and recognize upfront costs and fees related to those items in earnings
as they are incurred, not deferred. The following items are eligible for the
fair value measurement option established by SFAS 159: 1) Recognized financial
assets and financial liabilities, except (a) an investment in a subsidiary
that
is required to be consolidated, (b) an interest in a variable interest entity
that is required to be consolidated, (c) obligations (or assets representing
net
over funded positions) for pension plans, other postretirement benefits, post
employment benefits, employee stock option and stock purchase plans, and other
forms of deferred compensation arrangements, (d) financial assets and
liabilities recognized under leases, (e) demand deposit liabilities of financial
institutions, and (f) financial instruments classified by the issuer as a
component of shareholder’s equity; 2) firm commitments that would otherwise not
be recognized at inception and that involve only financial instruments; 3)
nonfinancial insurance contracts and warranties that the insurer can settle
by
paying a third party to provide those goods or services; and, 4) host financial
instruments resulting from separation of an embedded nonfinancial derivative
instrument from a nonfinancial hybrid instrument. The fair value option may
be
applied on an instrument-by-instrument basis, with a few exceptions, such as
investments otherwise accounted for by the equity method or multiple advances
made to one borrower under a single contract. The fair value option is
irrevocable unless a new election date occurs and applies only to entire
instruments and not to portions of instruments. Entities are permitted to elect
fair value option for any eligible item within the scope of SFAS 159 at the
date they initially adopt SFAS 159. The adjustment to reflect the difference
between the fair value and the current carrying amount of the assets and
liabilities for which an entity elects fair value option is reported as a
cumulative-effect adjustment to the opening balance of retained earnings upon
adoption. SFAS 159 is effective as of the beginning of an entity’s second fiscal
year that begins after November 15, 2007. Early adoption is permitted as of
the beginning of a fiscal year that begins on or before November 15, 2007,
provided the entity also elects to apply the provisions of SFAS 157. The
Corporation chose not to adopt SFAS 159 early. The Corporation does not
anticipate the adoption of SFAS 159 to have a material impact on its financial
statements.
Item
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking
Statements
The
information contained in this report may contain forward-looking statements.
When used or incorporated by reference in disclosure documents, the words
"believe," "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:
|
· |
Operating,
legal and regulatory risks
|
|
· |
Economic,
political and competitive forces impacting various lines of
business
|
|
· |
The
risk that our analysis of these risks and forces could be incorrect
and/or
that the strategies developed to address them could be
unsuccessful
|
|
· |
Volatility
in interest rates
|
|
· |
Other
risks and uncertainties
|
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 report. The Corporation expressly disclaims
any
obligation to publicly release any updates or revisions to reflect any change
in
the Corporation's expectations with regard to any change in events, conditions
or circumstances on which any such statement is based.
General
Univest
Corporation of Pennsylvania, (the “Corporation”), is a Financial Holding
Company. It owns all of the capital stock of Univest National Bank and Trust
Co.
(the “Bank”), Univest Realty Corporation, Univest Delaware, Inc., and Univest
Reinsurance Corporation.
The
Bank
is engaged in the general commercial banking business and provides a full range
of banking services and trust services to its customers. Vanguard Leasing,
Inc.,
a wholly owned subsidiary of the Bank, provides lease financing. Delview, Inc.,
a wholly owned subsidiary of the Bank, provides various financial services
including financial planning, investment management, insurance products and
brokerage services to individuals and businesses through its subsidiaries
Univest Investments, Inc. and Univest Insurance, Inc.
Executive
Overview
The
Corporation recorded net income for the nine months ended September
30,
2007 of
$19.0 million, a 1.3% increase over the September
30,
2006
period. Basic net income per share increased 1.4% and diluted net income per
share increased 2.1%.
Average
earning assets increased $99.8 million and average interest-bearing liabilities
increased $93.0 million when comparing the nine-month periods ended
September
30,
2007
and 2006. Increased rates on commercial business loans and commercial and
construction real estate loans, partially offset by increased rates on money
market savings and certificates of deposits, contributed to a $682 thousand
increase in net interest income. The tax-equivalent net interest margin declined
slightly to 3.73% for the nine-month period ended September 30, 2007 compared
to
3.92% for the same period in 2006.
Non-interest
income grew 11.1%, when comparing the nine-month periods ended September
30,
2007 to
2006, primarily due to increases in insurance commissions and fee income,
investment advisory commissions and fee income, and other service fee income.
Non-interest expense grew 6.0% primarily due to increases in salary and employee
benefits, capital shares tax, and public and community relations expense. These
increases were offset by a decrease in marketing and advertising
expense.
The
Corporation earns its revenues primarily from the margins and fees it generates
from loans and leases and depository services it provides as well as from trust,
insurance and investment commissions and fees. The Corporation seeks to achieve
adequate and reliable earnings by growing its business while maintaining
adequate levels of capital and liquidity and limiting its exposure to credit
and
interest rate risk to Board approved levels. As interest rates increase,
fixed-rate assets that banks hold will tend to decrease in value; conversely,
as
interest rates decline, fixed-rate assets that banks hold will tend to increase
in value. The Corporation maintains a relatively neutral interest rate risk
profile and anticipates that an increase or decrease within 200 basis points
in
interest rates would not significantly impact its net interest
margin.
The
Corporation seeks to establish itself as the financial provider of choice in
the
markets it serves. It plans to achieve this goal by offering a broad range
of
high quality financial products and services and by increasing market awareness
of its brand and the benefits that can be derived from its products. The
Corporation operates in an attractive market for financial services but also
is
in intense competition with domestic and international banking organizations
and
other insurance and investment providers for the financial services business.
The Corporation has taken initiatives to achieve its business objectives by
acquiring banks and other financial service providers in strategic markets,
through marketing, public relations and advertising, by establishing standards
of service excellence for its customers, and by using technology to ensure
that
the needs of its customers are understood and satisfied.
Results
of Operations – Three Months Ended September 30, 2007 Versus
2006
The
Corporation’s consolidated net income and earnings per share for the three
months ended September 30, 2007 and 2006 were as follows:
|
|
Three
Months Ended
September
30,
|
|
Change
|
|
($
in thousands, except per share data)
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Net
income
|
|
$
|
6,688
|
|
$
|
6,537
|
|
$
|
151
|
|
|
2.3
|
%
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.52
|
|
$
|
0.50
|
|
$
|
0.02
|
|
|
4.0
|
%
|
Diluted
|
|
|
0.52
|
|
|
0.50
|
|
|
0.02
|
|
|
4.0
|
|
Return
on
average shareholders' equity was 14.12% and return on average assets was 1.38%
for the three months ended September 30, 2007 compared to 14.36% and 1.39%,
respectively, for the same period in 2006.
Net
Interest Income
Net
interest income is the difference between interest earned on loans and leases,
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 revenue. The following table presents a summary of the
Corporation's average balances; the tax-equivalent yields earned on average
assets, and the cost of average liabilities for the three months ended September
30, 2007 and 2006. 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 reliable net interest
margin for the Corporation.
Net
interest income increased $146 thousand for the three months ended September
30,
2007 compared to 2006 primarily due to increased rates on commercial loans,
increased volume on lease financings and rate and volume increases on other
securities, partially offset by increased volume and rates on money market
savings and regular savings deposits as well as increased rates on certificates
of deposit. The tax-equivalent net interest margin, which is tax-equivalent
net
interest income as a percentage of average interest-earning assets, was 3.71%
and 3.80% for the three-month periods ended September 30, 2007 and 2006,
respectively. The tax-equivalent net interest spread, which represents the
difference between the weighted average tax-equivalent yield on interest-earning
assets and the weighted average cost of interest-bearing liabilities, was 3.13%
for the three months ended September 30, 2007 compared to 3.28% for the same
period in 2006. The effect of net interest free funding sources increased to
0.58% for the three months ended September 30, 2007 compared to 0.52% for the
same period in 2006; this represents the effect on the net interest margin
of
net funding provided by noninterest-earning assets, noninterest-bearing
liabilities and shareholders’ equity.
Table
1 — Distribution of Assets, Liabilities and Stockholders’
Equity; Interest
Rates and Interest Differential
|
|
For
the Three Months Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
Average
|
|
Income/
|
|
Avg.
|
|
Average
|
|
Income/
|
|
Avg.
|
|
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
3,739
|
|
$
|
50
|
|
|
5.31
|
%
|
$
|
663
|
|
$
|
7
|
|
|
4.19
|
%
|
U.S.
Government obligations
|
|
|
114,024
|
|
|
1,330
|
|
|
4.63
|
|
|
159,125
|
|
|
1,456
|
|
|
3.63
|
|
Obligations
of states and political subdivisions
|
|
|
84,992
|
|
|
1,509
|
|
|
7.04
|
|
|
83,566
|
|
|
1,474
|
|
|
7.00
|
|
Other
securities
|
|
|
191,574
|
|
|
2,577
|
|
|
5.34
|
|
|
131,419
|
|
|
1,697
|
|
|
5.12
|
|
Federal
Reserve bank stock
|
|
|
1,687
|
|
|
25
|
|
|
5.88
|
|
|
1,687
|
|
|
25
|
|
|
5.88
|
|
Federal
funds sold
|
|
|
10,886
|
|
|
143
|
|
|
5.21
|
|
|
2,815
|
|
|
35
|
|
|
4.93
|
|
Total
interest-earning deposits, investments and federal funds
sold
|
|
|
406,902
|
|
|
5,634
|
|
|
5.49
|
|
|
379,275
|
|
|
4,694
|
|
|
4.91
|
|
Commercial,
financial and agricultural loans
|
|
|
408,268
|
|
|
8,181
|
|
|
7.95
|
|
|
412,358
|
|
|
7,814
|
|
|
7.52
|
|
Real
estate─commercial and construction loans
|
|
|
431,901
|
|
|
8,668
|
|
|
7.96
|
|
|
430,982
|
|
|
8,564
|
|
|
7.88
|
|
Real
estate─residential loans
|
|
|
306,745
|
|
|
4,165
|
|
|
5.39
|
|
|
301,296
|
|
|
4,156
|
|
|
5.47
|
|
Loans
to individuals
|
|
|
79,684
|
|
|
1,402
|
|
|
6.98
|
|
|
107,359
|
|
|
1,872
|
|
|
6.92
|
|
Municipal
loans
|
|
|
92,096
|
|
|
1,349
|
|
|
5.81
|
|
|
90,710
|
|
|
1,357
|
|
|
5.94
|
|
Lease
financings
|
|
|
54,478
|
|
|
1,232
|
|
|
8.97
|
|
|
3,328
|
|
|
136
|
|
|
16.21
|
|
Gross
loans and leases
|
|
|
1,373,172
|
|
|
24,997
|
|
|
7.22
|
|
|
1,346,033
|
|
|
23,899
|
|
|
7.04
|
|
Total
interest-earning assets
|
|
|
1,780,074
|
|
|
30,631
|
|
|
6.83
|
|
|
1,725,308
|
|
|
28,593
|
|
|
6.58
|
|
Cash
and due from banks
|
|
|
40,499
|
|
|
|
|
|
|
|
|
42,330
|
|
|
|
|
|
|
|
Reserve
for loan and lease losses
|
|
|
(13,894
|
)
|
|
|
|
|
|
|
|
(14,278
|
)
|
|
|
|
|
|
|
Premises
and equipment, net
|
|
|
22,204
|
|
|
|
|
|
|
|
|
22,142
|
|
|
|
|
|
|
|
Other
assets
|
|
|
116,023
|
|
|
|
|
|
|
|
|
109,924
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,944,906
|
|
|
|
|
|
|
|
$
|
1,885,426
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
checking deposits
|
|
$
|
135,094
|
|
|
128
|
|
|
0.38
|
|
$
|
132,672
|
|
|
69
|
|
|
0.21
|
|
Money
market savings
|
|
|
385,243
|
|
|
4,009
|
|
|
4.13
|
|
|
330,013
|
|
|
3,187
|
|
|
3.83
|
|
Regular
savings
|
|
|
222,666
|
|
|
1,108
|
|
|
1.97
|
|
|
194,999
|
|
|
499
|
|
|
1.02
|
|
Certificates
of deposit
|
|
|
525,733
|
|
|
6,222
|
|
|
4.70
|
|
|
537,524
|
|
|
5,592
|
|
|
4.13
|
|
Time
open and club accounts
|
|
|
27,788
|
|
|
337
|
|
|
4.81
|
|
|
31,495
|
|
|
375
|
|
|
4.72
|
|
Total
time and interest-bearing deposits
|
|
|
1,296,524
|
|
|
11,804
|
|
|
3.61
|
|
|
1,226,703
|
|
|
9,722
|
|
|
3.14
|
|
Federal
funds purchased
|
|
|
4,582
|
|
|
61
|
|
|
5.28
|
|
|
12,853
|
|
|
172
|
|
|
5.31
|
|
Securities
sold under agreements to repurchase
|
|
|
83,436
|
|
|
497
|
|
|
2.36
|
|
|
92,623
|
|
|
516
|
|
|
2.21
|
|
Other
short-term borrowings
|
|
|
1,087
|
|
|
15
|
|
|
5.47
|
|
|
33,545
|
|
|
403
|
|
|
4.77
|
|
Long-term
debt
|
|
|
85,755
|
|
|
1,028
|
|
|
4.76
|
|
|
57,201
|
|
|
649
|
|
|
4.50
|
|
Subordinated
notes and capital securities
|
|
|
29,248
|
|
|
584
|
|
|
7.92
|
|
|
30,752
|
|
|
615
|
|
|
7.93
|
|
Total
borrowings
|
|
|
204,108
|
|
|
2,185
|
|
|
4.25
|
|
|
226,974
|
|
|
2,355
|
|
|
4.12
|
|
Total
interest-bearing liabilities
|
|
|
1,500,632
|
|
|
13,989
|
|
|
3.70
|
|
|
1,453,677
|
|
|
12,077
|
|
|
3.30
|
|
Demand
deposits, non-interest bearing
|
|
|
224,474
|
|
|
|
|
|
|
|
|
227,389
|
|
|
|
|
|
|
|
Accrued
expenses and other liabilities
|
|
|
30,380
|
|
|
|
|
|
|
|
|
22,239
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
1,755,486
|
|
|
|
|
|
|
|
|
1,703,305
|
|
|
|
|
|
|
|
Shareholders’
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
74,370
|
|
|
|
|
|
|
|
|
74,370
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
22,508
|
|
|
|
|
|
|
|
|
22,178
|
|
|
|
|
|
|
|
Retained
earnings and other equity
|
|
|
92,542
|
|
|
|
|
|
|
|
|
85,573
|
|
|
|
|
|
|
|
Total
shareholders’ equity
|
|
|
189,420
|
|
|
|
|
|
|
|
|
182,121
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
1,944,906
|
|
|
|
|
|
|
|
$
|
1,885,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
16,642
|
|
|
|
|
|
|
|
$
|
16,516
|
|
|
|
|
Net
interest spread
|
|
|
|
|
|
|
|
|
3.13
|
|
|
|
|
|
|
|
|
3.28
|
|
Effect
of net interest-free funding sources
|
|
|
|
|
|
|
|
|
0.58
|
|
|
|
|
|
|
|
|
0.52
|
|
Net
interest margin
|
|
|
|
|
|
|
|
|
3.71
|
%
|
|
|
|
|
|
|
|
3.80
|
%
|
Ratio
of average interest-earning assets to average interest-bearing
liabilities
|
|
|
118.62
|
%
|
|
|
|
|
|
|
|
118.69
|
%
|
|
|
|
|
|
|
Notes: |
Tax-equivalent
amounts have been calculated using the Corporation’s federal applicable
rate of 35 percent.
For
rate calculation purposes, average loan categories include unearned
discount.
Nonaccrual
loans have been included in the average loan balances. Certain
amounts have been reclassified to conform to the current-year
presentation.
|
Analysis
of Changes in Net Interest Income
The
rate-volume variance analysis set forth in the table below compares changes
in
tax-equivalent net interest for the periods indicated by their rate and volume
components. The change in interest income/expense due to both volume and rate
has been allocated to change in volume.
|
|
The
Three Months Ended September 30,
2007
Versus 2006
|
|
|
|
Volume
Change
|
|
Rate
Change
|
|
Total
|
|
Interest
income:
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
41
|
|
$
|
2
|
|
$
|
43
|
|
U.S.
Government obligations
|
|
|
(527
|
)
|
|
401
|
|
|
(126
|
)
|
Obligations
of states and political subdivisions
|
|
|
27
|
|
|
8
|
|
|
35
|
|
Other
securities
|
|
|
807
|
|
|
73
|
|
|
880
|
|
Federal
Reserve bank stock
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Federal
funds sold
|
|
|
106
|
|
|
2
|
|
|
108
|
|
Interest
on deposits, investments and federal funds sold
|
|
|
454
|
|
|
486
|
|
|
940
|
|
Commercial,
financial and agricultural loans and leases
|
|
|
(80
|
)
|
|
447
|
|
|
367
|
|
Real
estate─commercial and construction loans
|
|
|
17
|
|
|
87
|
|
|
104
|
|
Real
estate─residential loans
|
|
|
70
|
|
|
(61
|
)
|
|
9
|
|
Loans
to individuals
|
|
|
(486
|
)
|
|
16
|
|
|
(470
|
)
|
Municipal
loans
|
|
|
22
|
|
|
(30
|
)
|
|
(8
|
)
|
Lease
financings
|
|
|
1,157
|
|
|
(61
|
)
|
|
1,096
|
|
Interest
and fees on loans and leases
|
|
|
700
|
|
|
398
|
|
|
1,098
|
|
Total
interest income
|
|
|
1,154
|
|
|
884
|
|
|
2,038
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
Interest
checking deposits
|
|
|
2
|
|
|
57
|
|
|
59
|
|
Money
market savings
|
|
|
572
|
|
|
250
|
|
|
822
|
|
Regular
savings
|
|
|
142
|
|
|
467
|
|
|
609
|
|
Certificates
of deposit
|
|
|
(142
|
)
|
|
772
|
|
|
630
|
|
Time
open and club accounts
|
|
|
(45
|
)
|
|
7
|
|
|
(38
|
)
|
Interest
on deposits
|
|
|
529
|
|
|
1,553
|
|
|
2,082
|
|
Federal
funds purchased
|
|
|
(110
|
)
|
|
(1
|
)
|
|
(111
|
)
|
Securities
sold under agreement to repurchase
|
|
|
(54
|
)
|
|
35
|
|
|
(19
|
)
|
Other
short-term borrowings
|
|
|
(447
|
)
|
|
59
|
|
|
(388
|
)
|
Long-term
debt
|
|
|
342
|
|
|
37
|
|
|
379
|
|
Subordinated
notes and capital securities
|
|
|
(30
|
)
|
|
(1
|
)
|
|
(31
|
)
|
Interest
on borrowings
|
|
|
(299
|
)
|
|
129
|
|
|
(170
|
)
|
Total
interest expense
|
|
|
230
|
|
|
1,682
|
|
|
1,912
|
|
Net
interest income
|
|
$
|
924
|
|
$
|
(798
|
)
|
$
|
126
|
|
Notes: |
Tax-equivalent
amounts have been calculated using the Corporation’s federal applicable
rate of 35 percent.
Nonaccrual
loans and unearned discounts have been included in the average loan
and
lease balances.
|
Interest
Income
Interest
income on other securities increased primarily due to rate and volume increases
on mortgage-backed securities. Interest income on U.S. Government agency
obligations declined due to a decline in average volume that was offset slightly
by an average rate increase. Interest income increased on deposits with other
banks and federal funds sold primarily due to increases in average
volume.
The
growth in interest and fees on loans and leases is due primarily to rate
increases on commercial business loans and volume increases on lease financings.
These increases were offset by a decline in volume on loans to individuals.
The
average interest yield on the commercial loan portfolio increased 43 basis
points, primarily due to pricing disciplines in 2007; which, along with average
volume decline of $4.1 million, contributed to a $367 thousand
increase in interest income. The average volume on lease financings increased
$51.2 million; this contributed to a $1.1 million increase in interest
income. The average volume of loans to individuals decreased $27.7 million,
primarily contributing to a decrease in interest income of $470
thousand.
Interest
Expense
The
Corporation’s average rate on deposits increased 47 basis points for the three
months ended September 30, 2007 compared to the same period in 2006. The average
rate paid on money market savings increased 30 basis points and average
volume increased $55.2 million due to new products and promotions offered to
grow deposits in the Bank’s competitive marketplace; which contributed to an
$822 thousand increase in interest expense. Interest on certificates of deposit
increased $630 thousand, due to a 57 basis-point increase in average rate.
Average rate increases along with the average volume growth of $69.8 million,
contributed to a $2.1 million increase in interest expense on
deposits.
Interest
expense on short-term borrowings includes interest paid on federal funds
purchased and short-term FHLB borrowings. In addition, the Bank offers an
automated cash management checking account that sweeps funds daily into a
repurchase agreement account (“sweep accounts”). Interest expense on short-term
borrowings decreased $19 thousand during the three months ended September 30,
2007 compared to 2006 primarily due to an average volume decrease of $32.5
million in short-term FHLB borrowings.
Interest
expense on long-term debt increased $379 thousand primarily due to a volume
increase of $28.6 million and a 26 basis-point increase in the rate paid on
FHLB long term borrowings.
Provision
for Loan and Lease Losses
The
reserve for loan and lease losses is determined through a periodic evaluation
that takes into consideration the growth of the loan and lease 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 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 bank’s primary regulators, as an integral part of their
examination process, may require adjustments to the allowance. A decline in
commercial loan volume since June 30, 2007 warranted less of a provision to
be
recorded in the third quarter of 2007; this was partially offset by additions
to
the provision resulting from an increase in more secure commercial real estate
loans. The provision for the three months ended September 30, 2007 and 2006
was
$456 thousand and $568 thousand, respectively.
Non-interest
Income
Non-interest
income consists of trust department fee income, service charges on deposits
income, commission income, net gains on sales of securities, and other
miscellaneous types of income. It also includes various types of service fees,
such as ATM fees, and life insurance income which primarily represents changes
in the cash surrender value of bank-owned life insurance policies. Total
non-interest income increased during the three months ended September 30, 2007
compared to 2006 primarily due to an increase in trust fee income, higher
insurance commission and fee income and sales of securities.
|
|
For
the Three Months
Ended
September 30,
|
|
Change
|
|
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Trust
fee income
|
|
$
|
1,525
|
|
$
|
1,363
|
|
$
|
162
|
|
|
11.9
|
%
|
Service
charges on deposit accounts
|
|
|
1,706
|
|
|
1,748
|
|
|
(42
|
)
|
|
(2.4
|
)
|
Investment
advisory commission and fee income
|
|
|
647
|
|
|
545
|
|
|
102
|
|
|
18.7
|
|
Insurance
commission and fee income
|
|
|
1,385
|
|
|
1,233
|
|
|
152
|
|
|
12.3
|
|
Life
insurance income
|
|
|
391
|
|
|
433
|
|
|
(42
|
)
|
|
(9.7
|
)
|
Other
service fee income
|
|
|
913
|
|
|
893
|
|
|
20
|
|
|
2.2
|
|
Net
gain on sales of securities
|
|
|
259
|
|
|
3
|
|
|
256
|
|
|
─
|
|
Other
|
|
|
86
|
|
|
16
|
|
|
70
|
|
|
437.5
|
|
Total
non-interest income
|
|
$
|
6,912
|
|
$
|
6,234
|
|
$
|
678
|
|
|
10.9
|
|
Trust
fee
income increased in 2007 over 2006 primarily due to an increase in the number
and market value of managed accounts. Service charges on deposit accounts
declined slightly for the third quarter in 2007 compared to 2006 primarily
due
to a reduction in checking account service charges and checking non-sufficient
charges.
Investment
advisory commissions and fee income, the primary source of income for Univest
Investments, Inc., increased in 2007 over 2006 due to market activity and
volume. Life insurance income is primarily the change in the cash surrender
values of bank owned life insurance policies, which is affected by the market
value of the underlying assets. The increase recognized on these policies was
less in the third quarter of 2007 compared to 2006.
Other
service fee income primarily consists of fees from credit card companies for
a
portion of merchant charges paid to the credit card companies for the Bank’s
customer debit card usage (“Mastermoney fees”), non-customer debit card fees,
other merchant fees, mortgage servicing income and mortgage placement income.
Other service fee income increased for the third quarter of 2007 over 2006
primarily due to increases in Mastermoney fees and merchant fee income.
Other
non-interest income includes losses on investments in partnerships, gains on
sales of mortgages, gains on sales of other real estate owned, reinsurance
income and other miscellaneous income. Other non-interest income increased
over
prior year primarily due to a $60 thousand decline of losses recognized on
investments in partnerships.
Gains
on Sale of Assets
Sales
of
$972 thousand in loans and leases during the three months ended September 30,
2007 resulted in gains of $19 thousand compared to sales of $390 thousand
for gains of $12 thousand for the three months ended September 30,
2006.
During
the three months ended September 30, 2007, approximately $644 thousand of
securities were sold recognizing gains of $8 thousand. During the three months
ended September 30, 2007, the Corporation also received $251 thousand from
the sale of shares created through conversion of one of its vendor relationships
from a membership association to a private share corporation. During the three
months ended September 30, 2006, $31 thousand of securities were sold
recognizing gains of $3 thousand.
During
the three months ended September 30, 2007, one other real estate owned property
was sold recognizing a loss of $18 thousand. There were no sales of other real
estate owned for the three months ended September 30, 2006.
Non-interest
Expense
The
operating costs of the Corporation are known as non-interest expense, 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.
The
following table presents noninterest expense for the periods
indicated:
|
|
For
the Three Months
Ended
September 30,
|
|
Change
|
|
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Salaries
and benefits
|
|
$
|
7,659
|
|
$
|
7,051
|
|
$
|
608
|
|
|
8.6
|
%
|
Net
occupancy
|
|
|
1,188
|
|
|
1,078
|
|
|
110
|
|
|
10.2
|
|
Equipment
|
|
|
793
|
|
|
829
|
|
|
(36
|
)
|
|
(4.3
|
)
|
Marketing
and advertising
|
|
|
255
|
|
|
291
|
|
|
(36
|
)
|
|
(12.4
|
)
|
Other
|
|
|
3,187
|
|
|
3,083
|
|
|
104
|
|
|
3.4
|
|
Total
non-interest expense
|
|
$
|
13,082
|
|
$
|
12,332
|
|
$
|
750
|
|
|
6.1
|
|
Salaries
and benefits increased due to the normal annual merit increases and special
effort awards. These increases were offset slightly by a reduction of $49
thousand of stock-based compensation expense.
Occupancy
expense increased primarily due to the increase of rental obligations for the
Vernfield office. Equipment expense decreased primarily due to the reduction
of
computer software depreciation when compared to the same period in 2006.
Marketing and advertising expenses decreased primarily due to a reduction in
radio advertising, partially offset by increases in internet and newspaper
advertising. Other expenses increased primarily due to audit and examination
fees and amortization costs associated with customer lists.
Tax
Provision
The
provision for income taxes was $2.5 million for the three months ended September
30, 2007 compared to $2.4 million in 2006, at effective rates of 27.04% and
27.21%, respectively. The effective tax rates reflect the benefits of tax
credits generated from investments in low-income housing projects and tax-exempt
income from investments in municipal securities, loans and bank-owned life
insurance. The decrease in the effective tax rate between the three-month
periods is primarily due to income growth at entities not subject to state
income tax; therefore, state net income tax did not increase proportionately
to
the total increase in taxable income.
Results
of Operations - Nine Months Ended September 30, 2007 Versus 2006
The
Corporation’s consolidated net income and earnings per share for the nine months
ended September 30, 2007 and 2006 were as follows:
|
|
For
the Nine Months Ended
September
30,
|
|
Change
|
|
($
in thousands, except per share data)
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Net
income
|
|
$
|
19,010
|
|
$
|
18,766
|
|
$
|
244
|
|
|
1.3
|
%
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.47
|
|
$
|
1.45
|
|
$
|
0.02
|
|
|
1.4
|
|
Diluted
|
|
|
1.47
|
|
|
1.44
|
|
|
0.03
|
|
|
2.1
|
|
Return
on
average shareholders' equity was 13.43% and return on average assets was 1.32%
for the nine months ended September 30, 2007 compared to 14.04% and 1.37%,
respectively, for the same period in 2006.
Net
Interest Income
Net
interest income is the difference between interest earned on loans and leases,
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 revenue. The following table presents a summary of the
Corporation's average balances; the tax-equivalent yields earned on average
assets, and the cost of average liabilities for the nine months ended September
30, 2007 and 2006. 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 reliable net interest
margin for the Corporation.
Net
interest income increased $682 thousand for the nine months ended September
30,
2007 compared to 2006 primarily due to increased volume and rates on commercial
loans and commercial real estate and construction loans, increased volume on
lease financings, as well as rate and volume increases on other securities.
These increases were partially offset by increased volume and rate on money
market savings deposits and increased rates on regular savings and certificates
of deposit. The tax-equivalent net interest margin, which is tax-equivalent
net
interest income as a percentage of average interest-earning assets, was 3.73%
for the nine-month period ended September 30, 2007 and 3.92% for the same period
in 2006. The tax-equivalent net interest spread, which represents the difference
between the weighted average tax-equivalent yield on interest-earning assets
and
the weighted average cost of interest-bearing liabilities, was 3.15% for the
nine months ended September 30, 2007 compared to 3.43% for the same period
in
2006. The effect of net interest free funding sources increased to 0.58% for
the
nine months ended September 30, 2007 compared to 0.49% for the same period
in
2006; this represents the effect on the net interest margin of net funding
provided by noninterest-earning assets, noninterest-bearing liabilities and
shareholders’ equity.
Table
1 — Distribution of Assets, Liabilities and Stockholders’
Equity; Interest
Rates and Interest Differential
|
|
For
the Nine Months Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
Average
|
|
Income/
|
|
Avg.
|
|
Average
|
|
Income/
|
|
Avg.
|
|
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
1,655
|
|
$
|
65
|
|
|
5.25
|
%
|
$
|
647
|
|
$
|
19
|
|
|
3.93
|
%
|
U.S.
Government obligations
|
|
|
119,502
|
|
|
4,047
|
|
|
4.53
|
|
|
154,183
|
|
|
4,067
|
|
|
3.53
|
|
Obligations
of states and political subdivisions
|
|
|
84,186
|
|
|
4,460
|
|
|
7.08
|
|
|
84,210
|
|
|
4,467
|
|
|
7.09
|
|
Other
securities
|
|
|
181,067
|
|
|
7,208
|
|
|
5.32
|
|
|
115,106
|
|
|
4,281
|
|
|
4.97
|
|
Federal
Reserve bank stock
|
|
|
1,687
|
|
|
76
|
|
|
6.02
|
|
|
1,687
|
|
|
76
|
|
|
6.02
|
|
Federal
funds sold
|
|
|
7,287
|
|
|
280
|
|
|
5.14
|
|
|
5,525
|
|
|
197
|
|
|
4.77
|
|
Total
interest-earning deposits, investments and federal funds
sold
|
|
|
395,384
|
|
|
16,136
|
|
|
5.46
|
|
|
361,358
|
|
|
13,107
|
|
|
4.85
|
|
Commercial,
financial and agricultural loans leases
|
|
|
411,315
|
|
|
24,416
|
|
|
7.94
|
|
|
386,948
|
|
|
21,303
|
|
|
7.36
|
|
Real
estate─commercial and construction loans
|
|
|
433,756
|
|
|
25,561
|
|
|
7.88
|
|
|
418,428
|
|
|
23,585
|
|
|
7.54
|
|
Real
estate─residential loans
|
|
|
306,267
|
|
|
12,432
|
|
|
5.43
|
|
|
302,955
|
|
|
12,285
|
|
|
5.42
|
|
Loans
to individuals
|
|
|
83,313
|
|
|
4,336
|
|
|
6.96
|
|
|
106,821
|
|
|
5,266
|
|
|
6.59
|
|
Municipal
loans
|
|
|
92,711
|
|
|
3,894
|
|
|
5.62
|
|
|
88,285
|
|
|
3,926
|
|
|
5.95
|
|
Lease
financings
|
|
|
43,157
|
|
|
2,888
|
|
|
8.95
|
|
|
1,324
|
|
|
159
|
|
|
16.06
|
|
Gross
loans and leases
|
|
|
1,370,519
|
|
|
73,527
|
|
|
7.17
|
|
|
1,304,761
|
|
|
66,524
|
|
|
6.82
|
|
Total
interest-earning assets
|
|
|
1,765,903
|
|
|
89,663
|
|
|
6.79
|
|
|
1,666,119
|
|
|
79,631
|
|
|
6.39
|
|
Cash
and due from banks
|
|
|
40,024
|
|
|
|
|
|
|
|
|
40,707
|
|
|
|
|
|
|
|
Reserve
for loan and lease losses
|
|
|
(13,590
|
)
|
|
|
|
|
|
|
|
(13,964
|
)
|
|
|
|
|
|
|
Premises
and equipment, net
|
|
|
21,979
|
|
|
|
|
|
|
|
|
21,946
|
|
|
|
|
|
|
|
Other
assets
|
|
|
111,555
|
|
|
|
|
|
|
|
|
107,081
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,925,871
|
|
|
|
|
|
|
|
$
|
1,821,889
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
checking deposits
|
|
$
|
137,481
|
|
|
329
|
|
|
0.32
|
|
$
|
137,422
|
|
|
143
|
|
|
0.14
|
|
Money
market savings
|
|
|
374,038
|
|
|
11,520
|
|
|
4.12
|
|
|
310,291
|
|
|
8,099
|
|
|
3.49
|
|
Regular
savings
|
|
|
209,260
|
|
|
2,671
|
|
|
1.71
|
|
|
196,125
|
|
|
1,011
|
|
|
0.69
|
|
Certificates
of deposit
|
|
|
523,809
|
|
|
18,063
|
|
|
4.61
|
|
|
517,630
|
|
|
14,768
|
|
|
3.81
|
|
Time
open and club accounts
|
|
|
24,728
|
|
|
895
|
|
|
4.84
|
|
|
24,970
|
|
|
808
|
|
|
4.33
|
|
Total
time and interest-bearing deposits
|
|
|
1,269,316
|
|
|
33,478
|
|
|
3.53
|
|
|
1,186,438
|
|
|
24,829
|
|
|
2.80
|
|
Federal
funds purchased
|
|
|
11,065
|
|
|
447
|
|
|
5.40
|
|
|
5,947
|
|
|
234
|
|
|
5.26
|
|
Securities
sold under agreements to repurchase
|
|
|
86,537
|
|
|
1,547
|
|
|
2.39
|
|
|
94,996
|
|
|
1,517
|
|
|
2.14
|
|
Other
short-term borrowings
|
|
|
7,381
|
|
|
301
|
|
|
5.45
|
|
|
17,748
|
|
|
624
|
|
|
4.70
|
|
Long-term
debt
|
|
|
81,916
|
|
|
2,891
|
|
|
4.72
|
|
|
56,532
|
|
|
1,861
|
|
|
4.40
|
|
Subordinated
notes and capital securities
|
|
|
29,620
|
|
|
1,748
|
|
|
7.89
|
|
|
31,125
|
|
|
1,746
|
|
|
7.50
|
|
Total
borrowings
|
|
|
216,519
|
|
|
6,934
|
|
|
4.28
|
|
|
206,348
|
|
|
5,982
|
|
|
3.88
|
|
Total
interest-bearing liabilities
|
|
|
1,485,835
|
|
|
40,412
|
|
|
3.64
|
|
|
1,392,786
|
|
|
30,811
|
|
|
2.96
|
|
Demand
deposits, non-interest bearing
|
|
|
221,556
|
|
|
|
|
|
|
|
|
227,835
|
|
|
|
|
|
|
|
Accrued
expenses and other liabilities
|
|
|
29,711
|
|
|
|
|
|
|
|
|
23,078
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
1,737,102
|
|
|
|
|
|
|
|
|
1,643,699
|
|
|
|
|
|
|
|
Shareholders’
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
74,370
|
|
|
|
|
|
|
|
|
74,370
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
22,498
|
|
|
|
|
|
|
|
|
22,097
|
|
|
|
|
|
|
|
Retained
earnings and other equity
|
|
|
91,901
|
|
|
|
|
|
|
|
|
81,723
|
|
|
|
|
|
|
|
Total
shareholders’ equity
|
|
|
188,769
|
|
|
|
|
|
|
|
|
178,190
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
1,925,871
|
|
|
|
|
|
|
|
$
|
1,821,889
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
49,251
|
|
|
|
|
|
|
|
$
|
48,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest spread
|
|
|
|
|
|
|
|
|
3.15
|
|
|
|
|
|
|
|
|
3.43
|
|
Effect
of net interest-free funding sources
|
|
|
|
|
|
|
|
|
0.58
|
|
|
|
|
|
|
|
|
0.49
|
|
Net
interest margin
|
|
|
|
|
|
|
|
|
3.73
|
%
|
|
|
|
|
|
|
|
3.92
|
%
|
Ratio
of average interest-earning assets to average interest-bearing
liabilities
|
|
|
118.85
|
%
|
|
|
|
|
|
|
|
119.62
|
%
|
|
|
|
|
|
|
Notes: |
Tax-equivalent
amounts have been calculated using the Corporation’s federal applicable
rate of 35 percent.
For
rate calculation purposes, average loan categories include unearned
discount.
Nonaccrual
loans have been included in the average loan balances.
Certain
amounts have been reclassified to conform to the current-year
presentation.
|
Analysis
of Changes in Net Interest Income
The
rate-volume variance analysis set forth in the table below compares changes
in
tax-equivalent net interest for the periods indicated by their rate and volume
components. The change in interest income/expense due to both volume and rate
has been allocated to change in volume.
|
|
The
Nine Months Ended September 30,
2007
Versus 2006
|
|
|
|
Volume
Change
|
|
Rate
Change
|
|
Total
|
|
Interest
income:
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
40
|
|
$
|
6
|
|
$
|
46
|
|
U.S.
Government obligations
|
|
|
(1,173
|
)
|
|
1,153
|
|
|
(20
|
)
|
Obligations
of states and political subdivisions
|
|
|
(1
|
)
|
|
(6
|
)
|
|
(7
|
)
|
Other
securities
|
|
|
2,626
|
|
|
301
|
|
|
2,927
|
|
Federal
Reserve bank stock
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Federal
funds sold
|
|
|
68
|
|
|
15
|
|
|
83
|
|
Interest
on deposits, investments and federal funds sold
|
|
|
1,560
|
|
|
1,469
|
|
|
3,029
|
|
Commercial,
financial and agricultural loans and leases
|
|
|
1,434
|
|
|
1,679
|
|
|
3,113
|
|
Real
estate─commercial and construction loans
|
|
|
912
|
|
|
1,064
|
|
|
1,976
|
|
Real
estate─residential loans
|
|
|
124
|
|
|
23
|
|
|
147
|
|
Loans
to individuals
|
|
|
(1,226
|
)
|
|
296
|
|
|
(930
|
)
|
Municipal
loans
|
|
|
186
|
|
|
(218
|
)
|
|
(32
|
)
|
Lease
financings
|
|
|
2,799
|
|
|
(70
|
)
|
|
2,729
|
|
Interest
and fees on loans and leases
|
|
|
4,229
|
|
|
2,774
|
|
|
7,003
|
|
Total
interest income
|
|
|
5,789
|
|
|
4,243
|
|
|
10,032
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
Interest
checking deposits
|
|
|
1
|
|
|
185
|
|
|
186
|
|
Money
market savings
|
|
|
1,959
|
|
|
1,462
|
|
|
3,421
|
|
Regular
savings
|
|
|
164
|
|
|
1,496
|
|
|
1,660
|
|
Certificates
of deposit
|
|
|
198
|
|
|
3,097
|
|
|
3,295
|
|
Time
open and club accounts
|
|
|
(8
|
)
|
|
95
|
|
|
87
|
|
Interest
on deposits
|
|
|
2,314
|
|
|
6,335
|
|
|
8,649
|
|
Federal
funds purchased
|
|
|
207
|
|
|
6
|
|
|
213
|
|
Securities
sold under agreement to repurchase
|
|
|
(148
|
)
|
|
178
|
|
|
30
|
|
Other
short-term borrowings
|
|
|
(423
|
)
|
|
100
|
|
|
(323
|
)
|
Long-term
debt
|
|
|
895
|
|
|
135
|
|
|
1,030
|
|
Subordinated
notes and capital securities
|
|
|
(89
|
)
|
|
91
|
|
|
2
|
|
Interest
on borrowings
|
|
|
442
|
|
|
510
|
|
|
952
|
|
Total
interest expense
|
|
|
2,756
|
|
|
6,845
|
|
|
9,601
|
|
Net
interest income
|
|
$
|
3,033
|
|
$
|
(2,602
|
)
|
$
|
431
|
|
Notes: |
Tax-equivalent
amounts have been calculated using the Corporation’s federal applicable
rate of 35 percent.
Nonaccrual
loans and unearned discounts have been included in the average loan
balances.
|
Interest
Income
Interest
income on other securities increased primarily due to rate and volume increases
on mortgage-backed securities. Interest income on U.S. Government agency
obligations declined slightly due to a decline in average volume that was offset
by an average rate increase. Interest income increased on deposits with other
banks and federal funds sold primarily due to increases in average
volume.
The
growth in interest and fees on loans and leases is due primarily to increased
volume and rates on commercial business loans, increased volume in lease
financings and increased rates on commercial and construction real estate loans.
The average interest yield on the commercial loan portfolio increased 58 basis
points, primarily due to pricing disciplines in 2007; which, along with average
volume increases of $24.4 million, contributed to a $3.1 million
increase in interest income. The average yield on commercial and construction
real estate loans increased by 34 basis points; combined with average
volume increases of $15.3 million contributed to a $2.0 million increase in
interest income. The average volume on lease financings contributed to a $2.7
million increase in interest income. These increases were offset by a decrease
in the average volume on loans to individuals of $23.5 million offset slightly
by a 37 basis-point average rate increase, contributed to a $930 thousand
reduction in interest income.
Interest
Expense
The
Corporation’s average rate on deposits increased 73 basis points for the nine
months ended September 30, 2007 compared to the same period in 2006. The
average rate paid on money market savings increased 63 basis points due to
new products and promotions offered to grow deposits in the Bank’s competitive
marketplace; which contributed to a $3.4 million increase in interest expense.
Interest on regular savings increased $1.7 million primarily due to a 102
basis-point increase in average rate and average volume increases of $13.1
million. Interest on certificates of deposit increased $3.3 million, due to
an 80 basis-point increase in average rate and average volume increases of
$6.2
million.
Interest
expense on short-term borrowings includes interest paid on federal funds
purchased and short-term FHLB borrowings. In addition, the Bank offers an
automated cash management checking account that sweeps funds daily into a
repurchase agreement account (“sweep accounts”). Interest expense on short-term
borrowings decreased $80 thousand during the nine months ended September 30,
2007 compared to 2006 primarily due to average volume decreases on sweep
accounts and short-term FHLB borrowings of $18.8 million. These decreases were
offset slightly by an increase in average volume of $5.1 million and an average
rate increase of 14 basis points on federal funds purchased.
Interest
on long-term borrowings increased primarily due to an increase in average rate
of 32 basis points and an increase in volume of $25.4 million on long-term
FHLB
borrowings.
Provision
for Loan and Lease Losses
The
reserve for loan and lease losses is determined through a periodic evaluation
that takes into consideration the growth of the loan and lease 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 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 bank’s primary regulators, as an integral part of their
examination process, may require adjustments to the allowance. Continued growth
in loan and lease volumes and current economic conditions indicated the need
for
an increase to the reserve in 2007. The provision for the nine months ended
September 30, 2007 and 2006 was $1.7 million and $1.6 million,
respectively.
Non-interest
Income
Non-interest
income consists of trust department fee income, service charges on deposits
income, commission income, net gains on sales of securities, and other
miscellaneous types of income. It also includes various types of service fees,
such as ATM fees, and life insurance income which primarily represents changes
in the cash surrender value of bank-owned life insurance. Total non-interest
income increased during the nine months ended September 30, 2007 compared to
2006 primarily due to higher insurance commissions and fees, investment advisory
commission as well as trust commissions.
|
|
For
the Nine Months
Ended
September 30,
|
|
Change
|
|
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Trust
fee income
|
|
$
|
4,493
|
|
$
|
4,362
|
|
$
|
131
|
|
|
3.0
|
%
|
Service
charges on deposit accounts
|
|
|
5,058
|
|
|
5,091
|
|
|
(33
|
)
|
|
(0.6
|
)
|
Investment
advisory commission and fee income
|
|
|
2,012
|
|
|
1,701
|
|
|
311
|
|
|
18.3
|
|
Insurance
commission and fee income
|
|
|
4,576
|
|
|
3,534
|
|
|
1,042
|
|
|
29.5
|
|
Life
insurance income
|
|
|
1,125
|
|
|
1,054
|
|
|
71
|
|
|
6.7
|
|
Other
service fee income
|
|
|
2,709
|
|
|
2,437
|
|
|
272
|
|
|
11.2
|
|
Net
gain on sales of securities
|
|
|
310
|
|
|
50
|
|
|
260
|
|
|
520.0
|
|
Net
loss on dispositions of fixed assets
|
|
|
(64
|
)
|
|
(67
|
)
|
|
3
|
|
|
4.5
|
|
Other
|
|
|
173
|
|
|
192
|
|
|
(19
|
)
|
|
(9.9
|
)
|
Total
non-interest income
|
|
$
|
20,392
|
|
$
|
18,354
|
|
$
|
2,038
|
|
|
11.1
|
|
Trust
fee
income increased in 2007 over 2006 primarily due to an increase in the number
and market value of managed accounts. Service charges on deposit accounts
decreased slightly primarily due to a decrease in regular checking service
charges.
Investment
advisory commissions and fee income, the primary source of income for Univest
Investments, Inc., increased in 2007 over 2006 due to market activity and
volume. Insurance commission and fee income increased due to the acquisition
of
B. G. Balmer and Co. in the third quarter of 2006. Life insurance income is
primarily the change in the cash surrender values of bank owned life insurance
policies, which is primarily affected by the market value of the underlying
assets. The increase recognized on these policies was slightly more in 2007
compared to 2006.
Other
service fee income primarily consists of fees from credit card companies for
a
portion of merchant charges paid to the credit card companies for the Bank’s
customer debit card usage (“Mastermoney fees”), non-customer debit card fees,
other merchant fees, mortgage servicing income and mortgage placement income.
Other service fee income increased slightly in 2007 over 2006 primarily due
to
increases in Mastermoney fees, other merchant fees and mortgage servicing
income.
Other
non-interest income includes loss on investments in partnerships, gains on
sales
of mortgages, gains on sales of other real estate owned, reinsurance income
and
other miscellaneous income. Other non-interest income decreased over prior
year
primarily due to the $139 thousand gain on sales of other real estate owned
that
was recognized during the first nine months of 2006 and a $60 thousand decline
in miscellaneous income. These decreases were offset by a $180 decline in the
losses recognized on investments in partnerships.
Gains
on Sale of Assets
Sales
of
$2.7 million in loans and leases were sold during the first nine months ended
September 30, 2007 resulting in gains of $61 thousand compared to sales of
$1.1 million for gains of $30 thousand for the nine months ended September
30,
2006.
During
the nine months ended September 30, 2007 and 2006, approximately $8.5 million
and $7.2 million of securities were sold recognizing gains of $59 thousand
and
$4 thousand, respectively. During the nine months ended September 30, 2007
and
2006, the Corporation also received $251 thousand and $46 thousand,
respectively, resulting from the sale of shares created through conversion
of
one of its vendor relationships from a membership association to a private
share
corporation.
During
the nine months ended September 30, 2007, the Corporation relocated a banking
office within one of its supermarket locations to a traditional office,
recognizing a loss of $64 thousand. During the nine months ended September
30,
2006 the Corporation relocated a banking office within one of its Montgomery
county supermarket locations and recognized a loss of $65 thousand.
During
the nine months ended September 30, 2007, the Corporation sold one other real
estate owned property recognizing a loss of $18 thousand. During the nine months
ended September 30, 2006, the Corporation sold two other real estate owned
properties resulting in a gain of $139 thousand.
Non-interest
Expense
The
operating costs of the Corporation are known as non-interest expense, 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.
The
following table presents noninterest expense for the periods
indicated:
|
|
For
the Nine Months
Ended
September 30,
|
|
Change
|
|
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Salaries
and benefits
|
|
$
|
23,293
|
|
$
|
21,554
|
|
$
|
1,739
|
|
|
8.1
|
%
|
Net
occupancy
|
|
|
3,625
|
|
|
3,205
|
|
|
420
|
|
|
13.1
|
|
Equipment
|
|
|
2,396
|
|
|
2,406
|
|
|
(10
|
)
|
|
(0.4
|
)
|
Marketing
and advertising
|
|
|
663
|
|
|
1,272
|
|
|
(609
|
)
|
|
(47.9
|
)
|
Other
|
|
|
9,598
|
|
|
8,890
|
|
|
708
|
|
|
8.0
|
|
Total
non-interest expense
|
|
$
|
39,575
|
|
$
|
37,327
|
|
$
|
2,248
|
|
|
6.0
|
|
Salaries
and benefits increased due to the normal annual merit increases, special effort
awards and health benefits. These increases were offset slightly by a reduction
of $85 thousand of stock-based compensation expense and decreased payroll tax
expense of $71 thousand when compared to the same period in 2006.
Occupancy
expense increased primarily due to the increase of rental obligations for the
West Chester insurance office, Doylestown corporate office and the Vernfield
office. Equipment expense decreased slightly primarily due to the reduction
of
computer software depreciation offset by increases in depreciation of furniture
and equipment and computer software licenses and maintenance when compared
to
the same period in 2006.
Marketing
and advertising expenses decreased primarily due to a reduction in radio
advertising, direct mailings and sales promotion. This decrease was offset
by
increases in internet advertising. Other expenses increased primarily due to
audit and examination fees and amortization costs associated with customer
lists.
Tax
Provision
The
provision for income taxes was $7.0 million for the nine months ended September
30, 2007 compared to $6.9 million in 2006, at an effective rate of 26.77%
for both periods. The effective tax rates reflect the benefits of tax credits
generated from investments in low-income housing projects and tax-exempt income
from investments in municipal securities, loans and bank-owned life insurance.
The effective tax rate remained unchanged. Income growth was offset by a
decrease in non-deductible stock-based compensation expense and an increase
in
tax-exempt bank-owned life insurance income.
Financial
Condition
Assets
Total
assets increased $22.9 million since December 31, 2006. The increase was
primarily due to net growth in loans and investment securities. The following
table presents the assets for the periods indicated:
|
|
At September 30,
|
|
At December 31,
|
|
Change
|
|
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Cash,
deposits and federal funds sold
|
|
$
|
54,339
|
|
$
|
70,355
|
|
$
|
(16,016
|
)
|
|
(22.8
|
)%
|
Investment
securities
|
|
|
395,027
|
|
|
382,400
|
|
|
12,627
|
|
|
3.3
|
|
Total
loans and leases
|
|
|
1,371,374
|
|
|
1,353,681
|
|
|
17,693
|
|
|
1.3
|
|
Reserve
for loan and lease losses
|
|
|
(13,872
|
)
|
|
(13,283
|
)
|
|
(589
|
)
|
|
(4.4
|
)
|
Premises
and equipment, net
|
|
|
22,747
|
|
|
21,878
|
|
|
869
|
|
|
4.0
|
|
Goodwill
and other intangibles, net
|
|
|
47,251
|
|
|
47,608
|
|
|
(357
|
)
|
|
(0.7
|
)
|
Cash
surrender value of insurance policies
|
|
|
46,311
|
|
|
36,686
|
|
|
9,625
|
|
|
26.2
|
|
Other
assets
|
|
|
29,198
|
|
|
30,176
|
|
|
(978
|
)
|
|
(3.2
|
)
|
Total
assets
|
|
$
|
1,952,375
|
|
$
|
1,929,501
|
|
$
|
22,874
|
|
|
1.2
|
|
Investment
Securities
The
investment portfolio is managed as part of the overall asset and liability
management process to optimize income and market performance over an entire
interest rate cycle while mitigating risk. Activity in this portfolio is
undertaken primarily to manage liquidity and interest rate risk and to take
advantage of market conditions that create more economically attractive returns
on these investments. The securities portfolio consists primarily of U.S.
Government agency, mortgage-backed and municipal securities.
Total
investments increased primarily due to security purchases of $98.8 million
that
were partially offset by maturities of $58.6 million and sales and calls of
$28.4 million.
Loans
and Leases
Total
loans and leases increased in the nine months ended September 30, 2007 due
to
increases in commercial real estate loans of $47.0 million, real estate
construction loans of $10.3 million and lease financings of
$33.5 million, partially offset by decreases in commercial loans of $65.3
million
Asset
Quality
Performance
of the entire loan and lease 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 what actions should be taken when determining the
collectibility of interest for accrual purposes.
When
a
loan or lease, including a loan or lease impaired under SFAS No. 114, is
classified as nonaccrual, the accrual of interest on such a loan or lease is
discontinued. A loan or lease 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 or lease may remain on accrual
status if it is in the process of collection and is either guaranteed or well
secured. When a loan or lease is placed on nonaccrual status, unpaid interest
credited to income is reversed. Interest received on nonaccrual loans and leases
is either applied against principal or reported as interest income, according
to
management's judgment as to the collectibility of principal.
Loans
and
leases 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.
Cash
basis, restructured and nonaccrual loans and leases totaled $7.4 million at
September 30, 2007, $8.4 million at December 31, 2006 and $4.9 million
at September 30, 2006 and consist mainly of commercial loans and real estate
related commercial loans. For the nine months ended September 30, 2007 and
2006,
nonaccrual loans and leases resulted in lost interest income of $542 thousand
and $319 thousand, respectively. Loans and leases 90 days or more past due
totaled $1.7 million at September 30, 2007, $760 thousand at December 31, 2006
and $1.7 million at September 30, 2006. Other real estate owned totaled $732
thousand at September 30, 2006. There was no other real estate owned at
September 30, 2007 or at December 31, 2006. The Corporation's ratio of
nonperforming assets to total loans and leases and other real estate owned
was
0.66% at September 30, 2007, 0.68% at December 31, 2006 and .48% at September
30, 2006.
At
September 30, 2007, the recorded investment in loans and leases that are
considered to be impaired under SFAS No. 114 was $7.4 million, all of which
were on a nonaccrual basis; the related reserve for loan and lease losses for
those credits was $2.4 million. At December 31, 2006, the recorded
investment in loans and leases that are considered to be impaired under SFAS
No.
114 was $8.4 million, all of which were on a nonaccrual basis. The related
reserve for loan and lease losses for those credits was $1.6 million. At
September 30, 2006, the recorded investment in loans and leases that are
considered to be impaired under SFAS No. 114 was $4.9 million and the
related reserve for loan and lease losses for those credits was
$1.1 million. The amount of the specific reserve needed for these credits
could change in future periods subject to changes in facts and judgments related
to these credits. Specific reserves have been established based on current
facts
and management’s judgments about the ultimate outcome of these
credits.
Reserve
for Loan and Lease Losses
Management
believes the reserve for loan and lease losses is maintained at a level that
is
adequate to absorb losses in the loan and lease portfolio. Management's
methodology to determine the adequacy of and the provisions to the reserve
considers specific credit reviews, past credit loss experience, current economic
conditions and trends, and the volume, growth, and composition of the loan
and
lease portfolio.
The
reserve for loan and lease losses is determined through a monthly evaluation
of
reserve adequacy. Quarterly, this analysis takes into consideration the growth
of the loan and lease portfolio, the status of past-due credits, current
economic conditions, various types of lending activity, policies, real estate
and other loan commitments, and significant changes in charge-off activity.
Non-accrual loans and leases 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 or lease categories to develop the general or
allocated portion of the 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 reserve
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 loan and lease losses is based on management's evaluation of the
loan and lease portfolio under current economic conditions and such other
factors, which deserve recognition in estimating credit 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 credits that
may
be susceptible to significant change. Additions to the reserve arise from the
provision for loan and lease losses charged to operations or from the recovery
of amounts previously charged off. Loan and lease charge-offs reduce the
reserve. Loans and leases are charged off when there has been permanent
impairment or when in the opinion of management the full amount of the loan
or
lease, in the case of non-collateral dependent borrowings, will not be realized.
Certain impaired credits are reported at the present value of expected future
cash flows using the loan's initial effective interest rate, or at the credit's
observable market price or the fair value of the collateral if the credit is
collateral dependent.
The
specific reserve element is based on a regular analysis of impaired commercial
and real estate credits. For these credits, the specific reserve established
is
based on an analysis of related collateral value, cash flow considerations
and,
if applicable, guarantor capacity.
The
class
reserve element is determined by an internal credit grading process in
conjunction with associated allowance factors. The Corporation revises the
class
reserve factors whenever necessary in order to address improving or
deteriorating credit quality trends or specific risks associated with a given
loan or lease pool classification.
The
Corporation maintains a reserve in other liabilities for off-balance sheet
credit exposures that currently are unfunded.
The
reserve for loan and lease losses increased $589 thousand from December 31,
2006
to September 30, 2007 primarily due to total loan and lease growth. Management
believes that the reserve is maintained at a level that is adequate to absorb
losses in the loan and lease portfolio. The ratio of the reserve for loan and
lease losses to total loans and leases was 1.01% at September 30, 2007 and
0.98%
at December 31, 2006.
Goodwill
and Other Intangible Assets
On
January 1, 2002, the Corporation adopted SFAS No. 142, "Goodwill and Other
Intangible Assets" (“SFAS 142”). In accordance with the provisions of SFAS
142, the Corporation completes annual impairment tests during the fourth
quarter. There can be no assurance that future goodwill impairment tests will
not result in a charge to earnings.
The
Corporation has covenants not to compete, intangible assets due to bank and
branch acquisitions, core deposit intangibles, and mortgage servicing rights,
which are not deemed to have an indefinite life and therefore will continue
to
be amortized over their useful life. The Corporation also has goodwill of $44.4
million, which is deemed to be an indefinite intangible asset and will not
be
amortized but is tested for impairment annually.
Cash
Surrender Value of Insurance Policies
During
the third quarter of 2007, the Corporation purchased an additional $8.5 million
in separate account bank owned life insurance (BOLI). BOLI is a cost effective
and tax-advantageous method to financially offset a portion of employee benefit
expense. The intent of the separate account BOLI is not to formally fund the
Corporation’s benefit expenses, but to create an independent source of funds to
hedge against always increasing benefit expenses. The separate account BOLI
will
diversify the asset mix of the Corporation and create additional economic
performance.
Liabilities
Total
liabilities increased since December 31, 2006 primarily due to an increase
in
deposits, partially offset by a decrease in borrowings. The following table
presents the liabilities for the periods indicated:
|
|
At September 30,
|
|
At December 31,
|
|
Change
|
|
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Deposits
|
|
$
|
1,518,163
|
|
$
|
1,488,545
|
|
$
|
29,618
|
|
|
2.0
|
%
|
Borrowings
|
|
|
209,921
|
|
|
225,066
|
|
|
(15,145
|
)
|
|
(6.7
|
)
|
Accrued
expenses and other liabilities
|
|
|
32,344
|
|
|
30,505
|
|
|
1,839
|
|
|
6.0
|
|
Total
liabilities
|
|
$
|
1,760,428
|
|
$
|
1,744,116
|
|
$
|
16,312
|
|
|
0.9
|
|
Deposits
Total
deposits grew at the Bank primarily due to increases in money market savings
accounts of $35.6 million, regular savings of $23.4 million and PLGIT deposits
of $15.0 million. These increases were partially offset by decreases in
non-interest-bearing demand accounts of $34.5 million and interest-bearing
checking accounts of $12.3 million; a portion of these decreases was due to
movement into higher-yielding money market products.
Borrowings
Long-term
borrowings at September 30, 2007, included $8.6 million in Subordinated Capital
Notes, $20.6 million of Trust Preferred Securities, and $84.5 million in
long-term borrowings from the FHLB. The consolidated balance sheet also includes
a $1.2 million fair market value adjustment relating to FHLB long-term
borrowings acquired in the First County Bank and Suburban Community Bank
acquisitions. In April 2003, the Corporation secured $15.0 million in
subordinated capital notes that qualify for Tier 2 capital status. In August
2003, the Corporation issued $20.0 million of trust preferred securities that
qualify for Tier 1 capital status. Principal payments of $375 thousand are
made quarterly and reduce the Subordinated Capital Notes balance. The
Corporation deconsolidated its Capital Trust in the first quarter of 2004,
as a
result of the adoption of FIN 46. The result was an increase in the junior
debt
of $619 thousand. Long-term borrowings increased due to the issuance of an
additional $9.0 million in FHLB borrowings. Short-term borrowings typically
include federal funds purchased and short-term FHLB borrowings. In addition,
the
Bank offers an automated cash management checking account that sweeps funds
daily into a repurchase agreement account (“sweep accounts”). Short-term
borrowings decreased due to a decline in the sweep accounts of $22.4 million.
Shareholders'
Equity
Total
shareholders’ equity increased since December 31, 2006 primarily due to current
earnings, partially offset by cash dividends paid. The following table presents
the shareholders’ equity for the periods indicated:
|
|
At September 30,
|
|
At December 31,
|
|
Change
|
|
|
|
2007
|
|
2006
|
|
Amount
|
|
Percent
|
|
Common
stock
|
|
$
|
74,370
|
|
$
|
74,370
|
|
$
|
─
|
|
|
─
|
%
|
Additional
paid-in capital
|
|
|
22,573
|
|
|
22,459
|
|
|
114
|
|
|
0.5
|
|
Retained
earnings
|
|
|
139,144
|
|
|
128,242
|
|
|
10,902
|
|
|
8.5
|
|
Accumulated
other comprehensive loss
|
|
|
(4,011
|
)
|
|
(4,463
|
)
|
|
452
|
|
|
10.1
|
|
Treasury
stock
|
|
|
(40,129
|
)
|
|
(35,223
|
)
|
|
(4,906
|
)
|
|
(13.9
|
)
|
Total
shareholders’ equity
|
|
$
|
191,947
|
|
$
|
185,385
|
|
$
|
6,562
|
|
|
3.5
|
|
Retained
earnings were favorably impacted by nine months of net income of $19.0 million
partially offset by cash dividends of $7.7 million declared during the nine
months of 2007. Treasury stock increased primarily due to purchases. Effective
September 15, 2007, a new repurchase plan program was approved authorizing
the
Corporation to repurchase 643,782 shares of its outstanding common stock in
the
open market or in negotiated transactions.
Accumulated
other comprehensive income related to securities of $197 thousand, net of taxes,
is included in shareholders' equity as of September 30, 2007. Accumulated other
comprehensive loss related to securities of $175 thousand, net of taxes,
has been included in shareholders' equity as of December 31, 2006. Accumulated
other comprehensive income (loss) related to debt securities is the unrealized
gain (loss), or difference between the book value and market value, on the
available-for-sale investment portfolio, net of taxes. The period-to-period
increase in accumulated other comprehensive income (loss) was a result of
maturities of investment securities that had market values lower than cost
at
December 31, 2006.
Capital
Adequacy
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 1 and Tier 2. Minimum required total
risk-based capital is 8.0%. The Corporation and the Bank continue to be in
the
"well-capitalized" category under regulatory standards.
Critical
Accounting Policies
Management,
in order to prepare the Corporation's financial statements in conformity with
generally accepted accounting principles, is required to make estimates and
assumptions that effect the amounts reported in the Corporation's financial
statements. There are uncertainties inherent in making these estimates and
assumptions. Certain critical accounting policies, discussed below, could
materially affect the results of operations and financial position of the
Corporation should changes in circumstances require a change in related
estimates or assumptions. The Corporation has identified the reserve for loan
and lease losses, intangible assets, investment securities, mortgage servicing
rights, income taxes and benefit plans as its critical accounting policies.
For
more information on these critical accounting policies, please refer to our
2006
Annual Report on Form 10-K.
Asset/Liability
Management
The
primary functions of Asset/Liability Management are to assure adequate earnings,
capital and 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.
The
Corporation uses both static gap analysis and simulation techniques to quantify
its exposure to interest rate risk. The Corporation uses static gap analysis
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
non-maturity assets and liabilities.
The
Corporation had used an interest-rate swap agreement that converts a portion
of
its floating rate commercial loans to a fixed rate basis. In this swap, the
Corporation agreed to exchange, at specified intervals, the difference between
the 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 income. The impact of the interest-rate
swap on interest income for the nine months ended September 30, 2006 was a
negative $125 thousand. At September 30, 2007 and December 31, 2006 the
Corporation had no swaps outstanding.
Liquidity
The
Corporation, in its role as a financial intermediary, is exposed to certain
liquidity risks. Liquidity refers to the Corporation's ability to ensure that
sufficient cash flow and liquid assets are available to satisfy demand for
loans
and deposit withdrawals. The Corporation manages its liquidity risk by measuring
and monitoring its liquidity sources and estimated funding needs. The
Corporation has a contingency funding plan in place to address liquidity needs
in the event of an institution-specific or a systemic financial
crisis.
Sources
of Funds
Core
deposits and cash management repurchase agreements (“Repos”) have historically
been the most significant funding sources for the Corporation. These deposits
and Repos are generated from a base of consumer, business and public customers
primarily located in Bucks and Montgomery counties, Pennsylvania. The
Corporation faces increased competition for these deposits from a large array
of
financial market participants, including banks, thrifts, mutual funds, security
dealers and others.
The
Corporation supplements its core funding with money market funds it holds for
the benefit of various trust accounts. These funds are fully collateralized
by
the Bank’s investment portfolio and are at current money market mutual fund
rates. This funding source is subject to changes in the asset allocations of
the
trust accounts. Since August 2004, the Bank obtained deposits from PLGIT to
augment its fixed funding sources. The PLGIT deposits are public funds
collateralized with a letter of credit that PLGIT maintains with the FHLB;
therefore, the Bank is not required to provide collateral on these deposits.
These standby letters of credit are issued by the FHLB on behalf of the
Corporation, which is the account party on the letters of credit and therefore
is obligated to reimburse the FHLB for all payments made under the standby
letter of credit. At September 30, 2007, the Bank had $50.0 million in PLGIT
deposits.
The
Corporation, through its Bank, has short-term and long-term credit facilities
with the FHLB with a maximum borrowing capacity of approximately
$353.4 million. At September 30, 2007, under the FHLB credit facilities,
the Corporation's outstanding short-term and long-term borrowings totaled $84.5
million and PLGIT letters of credit totaled $52.4 million. The maximum borrowing
capacity changes as a function of the Bank’s qualifying collateral assets and
the amount of funds received may be reduced by additional required purchases
of
FHLB stock.
The
Corporation maintains federal fund lines with several correspondent banks
totaling $77.0 million. At September 30, 2007, there were $17.6 million in
outstanding borrowings under these lines. Future availability under these lines
is subject to the policies of the granting banks and may be
withdrawn.
The
Corporation, through the Bank, has an available line of credit at the Federal
Reserve Bank of Philadelphia, the amount of which is dependent upon the balance
of loans and securities pledged as collateral. At September 30, 2007, the
Corporation had no outstanding borrowings under this line.
Cash
Requirements
The
Corporation has cash requirements for various financial obligations, including
contractual obligations and commitments that require cash payments. The
contractual obligations and commitments table that follows presents, as of
September 30, 2007, significant fixed and determinable contractual obligations
and commitments to third parties. The most significant contractual obligation,
in both the under and over one year time period, is for the Bank to repay its
certificates of deposit. Securities sold under agreement to repurchase
constitute the next largest payment obligation which is short term in nature.
The Bank anticipates meeting these obligations by continuing to provide
convenient depository and cash management services through its branch network,
thereby replacing these contractual obligations with similar fund sources at
rates that are competitive in our market.
Commitments
to extend credit are the Bank’s most significant commitment in both the under
and over one year time periods. These commitments do not necessarily represent
future cash requirements in that these commitments often expire without being
drawn upon.
Contractual
Obligations and Commitments
The
Corporation enters into contractual obligations in the normal course of business
as a source of funds for its asset growth and its asset/liability management,
to
fund acquisitions and to meet required capital needs. These obligations require
the Corporation to make cash payments over time as detailed in the table below.
The
Corporation is a party to financial instruments with off-balance sheet risk
in
the normal course of business to manage the Corporation’s exposure to
fluctuation in interest rates. These financial instruments include commitments
to extend credit, standby and commercial letters of credit and forward
contracts. These financial instruments involve, to varying degrees, elements
of
credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional amounts of these financial
instruments reflect the extent of involvement the Corporation has in particular
classes of financial instruments.
The
Corporation’s exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit and
standby and commercial letters of credit is represented by the contractual
amount of those instruments. The Corporation uses the same credit policies
in
making commitments and conditional obligations as it does for on-balance sheet
instruments. Unless noted otherwise, the Corporation does not require and is
not
required to pledge collateral or other security to support financial instruments
with credit risk. These commitments expire over time as detailed in the
following table.
Pennsylvania
Local Government Investment Trust (“PLGIT”) deposits are public funds
collateralized with a letter of credit that PLGIT maintains with the FHLB;
therefore, the Corporation is not required to provide collateral on these
deposits. These standby letters of credit are issued by the FHLB on behalf
of
the Corporation, which is the account party on the letters of credit and
therefore is obligated to reimburse the FHLB for all payments made under the
standby letter of credit. The Corporation’s exposure is represented by the
contractual amount of these instruments.
Forward
contracts represent agreements for delayed delivery of financial instruments
or
commodities in which the buyer agrees to purchase and the seller agrees to
deliver, at a specified future date, a specified instrument or commodity at
a
specified price or yield. Forward contracts are not traded on organized
exchanges and their contractual terms are not standardized. The Corporation’s
forward contracts are commitments to sell loans secured by 1-to-4 family
residential properties whose predominant risk characteristic is interest rate
risk.
The
following table sets forth contractual obligations and other commitments
representing required and potential cash outflows, including interest payable,
as of September 30, 2007:
|
|
Payments Due by Period
|
|
|
|
|
|
Due in
One
|
|
Due in
One to
|
|
Due in
Four
|
|
Due in
Over
|
|
|
|
Total
|
|
Year or
Less
|
|
Three
Years
|
|
to Five
Years
|
|
Five
Years
|
|
Long-term debt
|
|
$
|
95,349
|
|
$
|
14,118
|
|
$
|
46,817
|
|
$
|
29,362
|
|
$
|
5,052
|
|
Subordinated
capital notes
|
|
|
10,887
|
|
|
2,050
|
|
|
3,842
|
|
|
3,435
|
|
|
1,560
|
|
Trust
preferred securities
|
|
|
65,889
|
|
|
1,707
|
|
|
3,414
|
|
|
3,414
|
|
|
57,354
|
|
Securities
sold under agreement to repurchase
|
|
|
77,396
|
|
|
77,396
|
|
|
─
|
|
|
─
|
|
|
─
|
|
Other
short-term borrowings
|
|
|
17,602
|
|
|
17,602
|
|
|
─
|
|
|
─
|
|
|
─
|
|
Time
deposits
|
|
|
575,005
|
|
|
463,592
|
|
|
101,223
|
|
|
9,881
|
|
|
309
|
|
Operating
leases
|
|
|
9,633
|
|
|
1,827
|
|
|
3,008
|
|
|
2,354
|
|
|
2,444
|
|
Standby
and commercial letters of credit
|
|
|
63,809
|
|
|
55,219
|
|
|
8,519
|
|
|
71
|
|
|
─
|
|
Forward
contracts
|
|
|
633
|
|
|
633
|
|
|
─
|
|
|
─
|
|
|
─
|
|
Commitments
to extend credit
|
|
|
468,748
|
|
|
153,036
|
|
|
43,020
|
|
|
16,363
|
|
|
256,329
|
|
Standby
letters of credit issued by FHLB on behalf of the
Corporation
|
|
|
52,416
|
|
|
52,416
|
|
|
─
|
|
|
─
|
|
|
─
|
|
Total
contractual obligations
|
|
$
|
1,437,367
|
|
$
|
839,596
|
|
$
|
209,843
|
|
$
|
64,880
|
|
$
|
323,048
|
|
Recent
Accounting Pronouncements
In
September 2006, the Emerging Issues Task Force (“EITF”) reach a conclusion on
EITF No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” (“EITF 06-4.”)
EITF 06-4 is effective for fiscal years beginning after December 15, 2007.
Under EITF 06-4, if an
agreement is to provide the employee with a death benefit in a
postretirement/termination period, the employer should recognize a liability
for
the future death benefit in accordance with either Statement of Financial
Accounting Standard (“SFAS”) No. 106 or Accounting Principles Board Opinion No.
12. EITF
06-4
requires that recognition of the effects of adoption should be either by
(a) a change in accounting principle through a cumulative-effect adjustment
to retained earnings as of the beginning of the year of adoption or (b) a
change in accounting principle through retrospective application to all prior
periods.
The
potential impact to Univest will be a negative cumulative-effect adjustment
to
retained earnings of approximately $1.6 million and would not be tax
affected.
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a
framework for measuring fair value in GAAP, and enhances disclosures about
fair
value measurements. SFAS 157 applies when other accounting pronouncements
require fair value measurements; it does not require new fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and for interim periods within those
years. The Corporation does not anticipate the adoption of SFAS 157 to have
a
material impact on its financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities (Including an Amendment of FASB
Statement No. 115)” (“SFAS 159.”) SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value. The
objective of SFAS 159 is to improve financial reporting by allowing entities
to
minimize volatility in reported earnings caused by related assets and
liabilities being measured differently. Most of the provisions of SFAS 159
apply
only to entities that elect the fair value option. However, SFAS 159 includes
an
amendment to SFAS 115 which applies
to all entities with available-for-sale and trading securities. Entities
electing the fair value option will report unrealized gains and losses in
earnings and recognize upfront costs and fees related to those items in earnings
as they are incurred, not deferred. The following items are eligible for the
fair value measurement option established by SFAS 159: 1) Recognized financial
assets and financial liabilities, except (a) an investment in a subsidiary
that
is required to be consolidated, (b) an interest in a variable interest entity
that is required to be consolidated, (c) obligations (or assets representing
net
over funded positions) for pension plans, other postretirement benefits, post
employment benefits, employee stock option and stock purchase plans, and other
forms of deferred compensation arrangements, (d) financial assets and
liabilities recognized under leases, (e) demand deposit liabilities of financial
institutions, and (f) financial instruments classified by the issuer as a
component of shareholder’s equity; 2) firm commitments that would otherwise not
be recognized at inception and that involve only financial instruments; 3)
nonfinancial insurance contracts and warranties that the insurer can settle
by
paying a third party to provide those goods or services; and, 4) host financial
instruments resulting from separation of an embedded nonfinancial derivative
instrument from a nonfinancial hybrid instrument. The fair value option may
be
applied on an instrument-by-instrument basis, with a few exceptions, such as
investments otherwise accounted for by the equity method or multiple advances
made to one borrower under a single contract. The fair value option is
irrevocable unless a new election date occurs and applies only to entire
instruments and not to portions of instruments. Entities are permitted to elect
fair value option for any eligible item within the scope of SFAS 159 at the
date they initially adopt SFAS 159. The adjustment to reflect the difference
between the fair value and the current carrying amount of the assets and
liabilities for which an entity elects fair value option is reported as a
cumulative-effect adjustment to the opening balance of retained earnings upon
adoption. SFAS 159 is effective as of the beginning of an entity’s second fiscal
year that begins after November 15, 2007. Early adoption is permitted as of
the beginning of a fiscal year that begins on or before November 15, 2007,
provided the entity also elects to apply the provisions of SFAS 157. The
Corporation chose not to adopt SFAS 159 early. The Corporation does not
anticipate the adoption of SFAS 159 to have a material impact on its financial
statements.
Item
3. Quantitative
and Qualitative Disclosure About Market Risk
No
material changes in the Corporation’s market risk or market strategy occurred
during the current period. A detailed discussion of market risk is provided
in
the Registrant’s Annual Report on Form 10-K for the period ended December 31,
2006.
Item
4.Controls
and Procedures
Management
is responsible for the disclosure controls and procedures of Univest Corporation
of Pennsylvania (“Univest”). Disclosure controls and procedures are in place to
assure that all material information is collected and disclosed in accordance
with Rule 13a - 15(e) and 15d-15(e) under the Securities Exchange Act of 1934.
Based on their evaluation Management believes that the financial information
required to be disclosed in accordance with the Securities Exchange Act of
1934
is presented fairly, recorded, summarized and reported within the required
time
periods.
As
of
September 30, 2007 an evaluation was performed under the supervision and with
the participation of the Corporation's management, including the CEO and CFO,
of
the effectiveness of the design and operation of the Corporation's disclosure
controls and procedures. Based on that evaluation, the Corporation's management,
including the CEO and CFO, concluded that the Corporation's disclosure controls
and procedures were effective and there have been no changes in the
Corporation's internal controls or in other factors that have materially
affected or are reasonably likely to materially affect internal controls
subsequent to December 31, 2006.
PART
II. OTHER
INFORMATION
Item
1. Legal
Proceedings
Management
is not aware of any litigation that would have a material adverse effect on
the
consolidated financial position of the Corporation. There are no proceedings
pending other than the ordinary routine litigation incident to the business
of
the Corporation. In addition, there are no material proceedings pending or
known
to be threatened or contemplated against the Corporation or the Bank by
government authorities.
Item
1A. Risk
Factors
There
were no material changes from the risk factors previously disclosed in the
Registrant’s Form 10-K, Part 1, Item 1A,
for the
Year Ended December 31, 2006 as filed with the Securities and Exchange
Commission on March 8, 2007.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
The
following table provides information on repurchases by the Corporation of its
common stock during the three months ended September 30, 2007.
ISSUER
PURCHASES OF EQUITY SECURITIES
|
|
Period
|
|
Total
Number
of Shares
Purchased
|
|
Average
Price
Paid per
share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
|
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (3)
|
|
July
1 — 31, 2007
|
|
|
18,476
|
|
$
|
22.78
|
|
|
18,476
|
|
|
526,571
|
|
August
1 — 31, 2007
|
|
|
106,946
|
|
|
20.23
|
|
|
106,946
|
|
|
526,571
|
|
September
1 — 30, 2007
|
|
|
─
|
|
|
─
|
|
|
─
|
|
|
643,782
|
|
Total
|
|
|
125,422
|
|
|
|
|
|
125,422
|
|
|
|
|
|
1.
|
Transactions
are reported as of settlement
dates.
|
|
2.
|
The
Corporation’s current stock repurchase program was approved by its Board
of Directors and announced on August 22, 2007. The repurchased shares
limit is net of normal Treasury activity such as purchases to fund
the
Dividend Reinvestment Program, Employee Stock Purchase Program and
the
equity compensation plan.
|
|
3.
|
The
number of shares originally approved for repurchase under the
Corporation’s stock repurchase program is 526,571. Effective September 15,
2007 a new repurchase program was approved authorizing the Corporation
to
repurchase 643,782 shares.
|
|
4.
|
The
Corporation’s current stock repurchase program does not have an expiration
date.
|
|
5.
|
No
stock repurchase plan or program of the Corporation expired during
the
period covered by the table.
|
|
6.
|
The
Corporation has no stock repurchase plan or program that it has determined
to terminate prior to expiration or under which it does not intend
to make
further purchases. The plans are restricted during certain blackout
periods in conformance with the Corporation’s Insider Trading Policy.
|
Item
3. Defaults
Upon Senior Securities
None.
Item
4. Submission
of Matters to a Vote of Security Holders
None.
Item
5. Other
Information
None.
Item
6. Exhibits
a.
|
Exhibits
|
|
|
|
|
|
Exhibit
31.1
|
Certification
of William S. Aichele, Chairman, President and Chief Executive Officer
of
the Corporation, pursuant to Rule 13a-14(a) of the Exchange Act,
as
enacted by Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
Exhibit
31.2
|
Certification
of Wallace H. Bieler, Senior Executive Vice President, Chief Operation
Officer and Corporate Secretary of the Corporation, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
Exhibit
32.1
|
Certification
of William S. Aichele, Chief Executive Officer of the Corporation,
pursuant to 18 United States Code Section 1350, as enacted by Section
906
of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
Exhibit
32.2
|
Certification
of Wallace H. Bieler, Chief Operation Officer of the Corporation,
pursuant
to 18 United States Code Section 1350, as enacted by Section 906
of the
Sarbanes-Oxley Act of 2002.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Univest
Corporation of Pennsylvania
|
|
(Registrant)
|
|
|
|
|
Date:
November 7, 2007
|
/s/
William S. Aichele
|
|
William
S. Aichele, Chairman, President
|
|
and
Chief Executive Officer
|
|
|
|
|
Date:
November 7, 2007
|
/s/
Wallace H. Bieler
|
|
Wallace
H. Bieler, Senior Executive Vice President,
|
|
Chief
Operation Officer and Corporate
Secretary
|