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 June
30, 2008.
|
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. RYes
£No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer £
|
|
Accelerated
filer R
|
Non-accelerated
filer £
(Do not check if a smaller reporting company)
|
Smaller
reporting company £
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). £Yes
RNo
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common
Stock, $5 par value
|
|
12,858,376
|
(Title
of Class)
|
|
(Number
of shares outstanding at 6/30/08)
|
UNIVEST
CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX
|
|
|
Page Number
|
|
|
|
|
Part
I.
|
Financial
Information:
|
|
|
|
|
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets at June 30, 2008 and December 31,
2007
|
1
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Income for the Three And Six Months
Ended June
30, 2008 and 2007
|
2
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended
June 30,
2008 and 2007
|
3
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
4
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results
of Operations
|
11
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
30
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
30
|
|
|
|
|
Part
II.
|
Other
Information:
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
31
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
31
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
31
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
31
|
|
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Securities Holders
|
31
|
|
|
|
|
|
Item
5.
|
Other
Information
|
31
|
|
|
|
|
|
Item
6.
|
Exhibits
|
32
|
PART
I. FINANCIAL
INFORMATION
Item
1. Financial
Statements
UNIVEST
CORPORATION OF PENNSYLVANIA
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(UNAUDITED) |
|
(SEE NOTE) |
|
|
|
June 30, 2008
|
|
December 31, 2007
|
|
|
|
($ in thousands, except per share data)
|
|
ASSETS
|
|
|
Cash
and due from banks
|
|
$
|
41,183
|
|
$
|
47,135
|
|
Interest-bearing
deposits with other banks
|
|
|
545
|
|
|
502
|
|
Federal
funds sold
|
|
|
3,288
|
|
|
11,748
|
|
Investment
securities held-to-maturity (fair value $1,703 and $1,933 at June
30, 2008
and December 31, 2007, respectively)
|
|
|
1,632
|
|
|
1,862
|
|
Investment
securities available-for-sale
|
|
|
428,212
|
|
|
421,586
|
|
Loans
and leases
|
|
|
1,398,269
|
|
|
1,355,442
|
|
Less:
Reserve for loan and lease losses
|
|
|
(13,713
|
)
|
|
(13,086
|
)
|
Net
loans and leases
|
|
|
1,384,556
|
|
|
1,342,356
|
|
Premises
and equipment, net
|
|
|
32,280
|
|
|
27,977
|
|
Goodwill,
net of accumulated amortization of $2,942 at June 30, 2008 and December
31, 2007
|
|
|
44,589
|
|
|
44,438
|
|
Other
intangibles, net of accumulated amortization of $4,905 and $4,596
at June
30, 2008 and December 31, 2007, respectively
|
|
|
2,361
|
|
|
2,643
|
|
Cash
surrender value of insurance policies
|
|
|
46,573
|
|
|
46,689
|
|
Accrued
interest and other assets
|
|
|
27,440
|
|
|
25,569
|
|
Total
assets
|
|
$
|
2,012,659
|
|
$
|
1,972,505
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Demand
deposits, noninterest-bearing
|
|
$
|
233,436
|
|
$
|
226,513
|
|
Demand
deposits, interest-bearing
|
|
|
506,324
|
|
|
582,528
|
|
Savings
deposits
|
|
|
281,853
|
|
|
233,766
|
|
Time
deposits
|
|
|
482,394
|
|
|
489,796
|
|
Total
deposits
|
|
|
1,504,007
|
|
|
1,532,603
|
|
Securities
sold under agreements to repurchase
|
|
|
89,065
|
|
|
94,276
|
|
Other
short term debt
|
|
|
62,799
|
|
|
—
|
|
Accrued
expenses and other liabilities
|
|
|
30,171
|
|
|
32,447
|
|
Long-term
debt
|
|
|
95,360
|
|
|
85,584
|
|
Subordinated
notes
|
|
|
7,500
|
|
|
8,250
|
|
Company-obligated
mandatorily redeemable preferred securities of subsidiary trusts
holding
junior subordinated debentures of Univest ("Trust Preferred
Securities")
|
|
|
20,619
|
|
|
20,619
|
|
Total
liabilities
|
|
|
1,809,521
|
|
|
1,773,779
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
Common
stock, $5 par value: 24,000,000 shares authorized at June 30, 2008
and
December 31, 2007; 14,873,904 shares issued at June 30, 2008 and
December
31, 2007; 12,858,376 and 12,830,609 shares outstanding at June 30,
2008
and December 31, 2007, respectively
|
|
|
74,370
|
|
|
74,370
|
|
Additional
paid-in capital
|
|
|
22,625
|
|
|
22,591
|
|
Retained
earnings
|
|
|
149,043
|
|
|
143,066
|
|
Accumulated
other comprehensive loss, net of tax benefit
|
|
|
(3,869
|
)
|
|
(1,768
|
)
|
Unearned
compensation—Restricted Stock Awards
|
|
|
(447
|
)
|
|
(380
|
)
|
Treasury
stock, at cost; 2,015,528 and 2,043,295 shares at June 30, 2008 and
December 31, 2007, respectively
|
|
|
(38,584
|
)
|
|
(39,153
|
)
|
Total
shareholders’ equity
|
|
|
203,138
|
|
|
198,726
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,012,659
|
|
$
|
1,972,505
|
|
Note:
The
condensed consolidated balance sheet at December 31, 2007 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
June 30,
|
|
For the Six Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
($
in thousands, except per share data)
|
|
Interest
income |
|
|
Interest
and fees on loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$
|
20,418
|
|
$
|
23,400
|
|
$
|
41,784
|
|
$
|
45,985
|
|
Exempt
from federal income taxes
|
|
|
920
|
|
|
1,033
|
|
|
1,853
|
|
|
2,052
|
|
Total
interest and fees on loans and leases
|
|
|
21,338
|
|
|
24,433
|
|
|
43,637
|
|
|
48,037
|
|
Interest
and dividends on investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
4,340
|
|
|
3,715
|
|
|
8,814
|
|
|
7,399
|
|
Exempt
from federal income taxes
|
|
|
1,208
|
|
|
970
|
|
|
2,266
|
|
|
1,918
|
|
Other
interest income
|
|
|
124
|
|
|
88
|
|
|
386
|
|
|
152
|
|
Total
interest income
|
|
|
27,010
|
|
|
29,206
|
|
|
55,103
|
|
|
57,506
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits
|
|
|
8,513
|
|
|
11,279
|
|
|
18,820
|
|
|
21,674
|
|
Interest
on long-term borrowings
|
|
|
1,402
|
|
|
1,561
|
|
|
2,901
|
|
|
3,027
|
|
Interest
on short-term borrowings
|
|
|
455
|
|
|
728
|
|
|
811
|
|
|
1,722
|
|
Total
interest expense
|
|
|
10,370
|
|
|
13,568
|
|
|
22,532
|
|
|
26,423
|
|
Net
interest income
|
|
|
16,640
|
|
|
15,638
|
|
|
32,571
|
|
|
31,083
|
|
Provision
for loan and lease losses
|
|
|
2,297
|
|
|
653
|
|
|
3,296
|
|
|
1,277
|
|
Net
interest income after provision for loan and lease losses
|
|
|
14,343
|
|
|
14,985
|
|
|
29,275
|
|
|
29,806
|
|
Noninterest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
fee income
|
|
|
1,628
|
|
|
1,481
|
|
|
3,255
|
|
|
2,968
|
|
Service
charges on deposit accounts
|
|
|
1,708
|
|
|
1,702
|
|
|
3,366
|
|
|
3,352
|
|
Investment
advisory commission and fee income
|
|
|
642
|
|
|
686
|
|
|
1,257
|
|
|
1,365
|
|
Insurance
commission and fee income
|
|
|
1,271
|
|
|
1,316
|
|
|
3,329
|
|
|
3,191
|
|
Life
insurance income
|
|
|
1,734
|
|
|
412
|
|
|
2,525
|
|
|
734
|
|
Other
service fee income
|
|
|
1,091
|
|
|
930
|
|
|
1,849
|
|
|
1,796
|
|
Net
(loss) gain on sales of and impairments on securities
|
|
|
(213
|
)
|
|
51
|
|
|
(157
|
)
|
|
51
|
|
Net
loss on disposition of fixed assets
|
|
|
(4
|
)
|
|
(64
|
)
|
|
(5
|
)
|
|
(64
|
)
|
Other
|
|
|
47
|
|
|
50
|
|
|
142
|
|
|
87
|
|
Total
noninterest income
|
|
|
7,904
|
|
|
6,564
|
|
|
15,561
|
|
|
13,480
|
|
Noninterest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
|
|
8,019
|
|
|
7,840
|
|
|
16,187
|
|
|
15,634
|
|
Net
occupancy
|
|
|
1,286
|
|
|
1,186
|
|
|
2,577
|
|
|
2,437
|
|
Equipment
|
|
|
799
|
|
|
828
|
|
|
1,565
|
|
|
1,603
|
|
Marketing
and Advertising
|
|
|
532
|
|
|
243
|
|
|
721
|
|
|
408
|
|
Other
|
|
|
4,449
|
|
|
3,234
|
|
|
7,643
|
|
|
6,411
|
|
Total
noninterest expense
|
|
|
15,085
|
|
|
13,331
|
|
|
28,693
|
|
|
26,493
|
|
Income
before income taxes
|
|
|
7,162
|
|
|
8,218
|
|
|
16,143
|
|
|
16,793
|
|
Applicable
income taxes
|
|
|
1,288
|
|
|
2,143
|
|
|
3,548
|
|
|
4,471
|
|
Net
income
|
|
$
|
5,874
|
|
$
|
6,075
|
|
$
|
12,595
|
|
$
|
12,322
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.46
|
|
$
|
0.47
|
|
$
|
0.98
|
|
$
|
0.95
|
|
Diluted
|
|
|
0.46
|
|
|
0.47
|
|
|
0.98
|
|
|
0.95
|
|
Dividends
declared
|
|
|
0.20
|
|
|
0.20
|
|
|
0.40
|
|
|
0.40
|
|
Note:
See
accompanying notes to the unaudited condensed consolidated financial
statements.
UNIVEST
CORPORATION OF PENNSYLVANIA
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Six Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
($
in thousands)
|
|
Cash
flows from operating activities:
|
|
|
Net
income
|
|
$
|
12,595
|
|
$
|
12,322
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
Provision
for loan and lease losses
|
|
|
3,296
|
|
|
1,277
|
|
Depreciation
of premises and equipment
|
|
|
1,053
|
|
|
1,014
|
|
Realized
losses (gains) on investment securities
|
|
|
157
|
|
|
(51
|
)
|
Realized
losses on dispositions of fixed assets
|
|
|
5
|
|
|
64
|
|
Increase
in life insurance income
|
|
|
(2,525
|
)
|
|
(734
|
)
|
Other
adjustments to reconcile net income to cash provided by operating
activities
|
|
|
(880
|
)
|
|
412
|
|
Decrease
in interest receivable and other assets
|
|
|
2,866
|
|
|
1,640
|
|
(Decrease)
increase in accrued expenses and other liabilities
|
|
|
(3,856
|
)
|
|
440
|
|
Net
cash provided by operating activities
|
|
|
12,711
|
|
|
16,384
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Net
cash paid due to acquisitions, net of cash acquired
|
|
|
(151
|
)
|
|
(198
|
)
|
Net
capital expenditures
|
|
|
(5,361
|
)
|
|
(1,017
|
)
|
Proceeds
from maturities of securities held-to-maturity
|
|
|
5,207
|
|
|
452
|
|
Proceeds
from maturities of securities available-for-sale
|
|
|
145,833
|
|
|
26,248
|
|
Proceeds
from calls of securities held-to-maturity
|
|
|
28,750
|
|
|
─
|
|
Proceeds
from sales and calls of securities available-for-sale
|
|
|
83,341
|
|
|
21,858
|
|
Purchases
of investment securities held-to-maturity
|
|
|
(33,725
|
)
|
|
─
|
|
Purchases
of investment securities available-for-sale
|
|
|
(239,200
|
)
|
|
(66,221
|
)
|
Proceeds
from sales of loans and leases
|
|
|
3,863
|
|
|
1,617
|
|
Purchases
of lease financings
|
|
|
(20,900
|
)
|
|
(20,488
|
)
|
Net
increase in loans and leases
|
|
|
(28,417
|
)
|
|
(8,736
|
)
|
Net
(decrease) increase in interest-bearing deposits
|
|
|
(43
|
)
|
|
109
|
|
Net
decrease (increase) in federal funds sold
|
|
|
8,460
|
|
|
(4,634
|
)
|
Net
cash used in investing activities
|
|
|
(52,343
|
)
|
|
(51,010
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Net
(decrease) increase in deposits
|
|
|
(28,590
|
)
|
|
68,247
|
|
Net
increase (decrease) in short-term borrowings
|
|
|
57,588
|
|
|
(30,301
|
)
|
Issuance
of long-term debt
|
|
|
10,000
|
|
|
10,000
|
|
Repayment
of long-term debt
|
|
|
─
|
|
|
(1,000
|
)
|
Repayment
of subordinated debt
|
|
|
(750
|
)
|
|
(750
|
)
|
Purchases
of treasury stock
|
|
|
(848
|
)
|
|
(4,478
|
)
|
Proceeds
from sales of treasury stock
|
|
|
122
|
|
|
─
|
|
Stock
issued under dividend reinvestment and employee stock purchase
plans
|
|
|
1,227
|
|
|
1,002
|
|
Proceeds
from exercise of stock options, including tax benefits
|
|
|
55
|
|
|
384
|
|
Cash
dividends paid
|
|
|
(5,124
|
)
|
|
(5,197
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
33,680
|
|
|
37,907
|
|
Net
(decrease) increase in cash and due from banks
|
|
|
(5,952
|
)
|
|
3,281
|
|
Cash
and due from banks at beginning of year
|
|
|
47,135
|
|
|
46,956
|
|
Cash
and due from banks at end of period
|
|
$
|
41,183
|
|
$
|
50,237
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
24,827
|
|
$
|
26,501
|
|
Income
taxes, net of refunds received
|
|
|
4,531
|
|
|
5,319
|
|
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 six-month period ended June 30, 2008 are not necessarily indicative of
the
results that may be expected for the year ending December 31, 2008. 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, 2007, which has been filed with the SEC on March 6, 2008.
Note
2. Loans and Leases
The
following is a summary of the major loan and lease categories:
($ in thousands)
|
|
At June 30,
2008
|
|
At December 31,
2007
|
|
Commercial,
financial and agricultural
|
|
$
|
420,792
|
|
$
|
381,826
|
|
Real
estate-commercial
|
|
|
387,465
|
|
|
393,686
|
|
Real
estate-construction
|
|
|
139,452
|
|
|
134,448
|
|
Real
estate-residential
|
|
|
304,262
|
|
|
310,571
|
|
Loans
to individuals
|
|
|
62,567
|
|
|
72,476
|
|
Lease
financings
|
|
|
90,751
|
|
|
68,100
|
|
Total
gross loans and leases
|
|
|
1,405,289
|
|
|
1,361,107
|
|
Less:
Unearned income
|
|
|
(7,020
|
)
|
|
(5,665
|
)
|
Total
loans and leases
|
|
$
|
1,398,269
|
|
$
|
1,355,442
|
|
Note
3. Reserve for Loan and Lease Losses
A
summary of the activity in the reserve for loan and
lease losses is as follows:
($ in thousands)
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Reserve
for loan and lease losses at beginning of period
|
|
$
|
12,997
|
|
$
|
13,414
|
|
$
|
13,086
|
|
$
|
13,283
|
|
Provision
for loan and lease losses
|
|
|
2,297
|
|
|
653
|
|
|
3,296
|
|
|
1,277
|
|
Recoveries
|
|
|
108
|
|
|
197
|
|
|
217
|
|
|
356
|
|
Loans
charged off
|
|
|
(1,689
|
)
|
|
(471
|
)
|
|
(2,886
|
)
|
|
(1,123
|
)
|
Reserve
for loan and lease losses at period end
|
|
$
|
13,713
|
|
$
|
13,793
|
|
$
|
13,713
|
|
$
|
13,793
|
|
Information
with respect to loans and leases that are considered to be impaired under SFAS
No. 114, “Accounting by Creditors for Impairment of a Loan” (“SFAS 114”) at
June 30, 2008 and December 31, 2007 is as follows:
|
|
At
June 30, 2008
|
|
At
December 31, 2007
|
|
|
|
|
|
Specific
|
|
|
|
Specific
|
|
($
in thousands)
|
|
Balance
|
|
Reserve
|
|
Balance
|
|
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
|
|
$
|
4,221
|
|
$
|
2,041
|
|
$
|
4,120
|
|
$
|
1,755
|
|
Recorded
investment in impaired loans and leases at period-end requiring
no
specific reserve for loan and lease losses
|
|
|
2,771
|
|
|
|
|
|
2,758
|
|
|
|
|
Recorded
investment in impaired loans and leases at period-end
|
|
$
|
6,992
|
|
|
|
|
$
|
6,878
|
|
|
|
|
Recorded
investment in nonaccrual and restructured loans and
leases
|
|
$
|
7,415
|
|
|
|
|
$
|
6,878
|
|
|
|
|
The
following is an analysis of interest on nonaccrual and restructured loans and
leases:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
($ in thousands)
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Nonaccrual
and restructured loans and leases at period end
|
|
$
|
7,415
|
|
$
|
7,878
|
|
$
|
7,415
|
|
$
|
7,878
|
|
Average
recorded investment in impaired loans and leases
|
|
|
6,243
|
|
|
7,868
|
|
|
6,458
|
|
|
7,756
|
|
Interest
income that would have been recognized under original
terms
|
|
|
155
|
|
|
198
|
|
|
297
|
|
|
396
|
|
No
interest income was recognized on these loans for the three- and six-month
periods ended June 30, 2008 and 2007.
Note
4. Earnings Per Share
The
following table sets forth the computation of basic and diluted earnings per
share:
($
in thousands, except per share data)
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator
for basic and diluted earnings per share – Income
available to common shareholders
|
|
$
|
5,874
|
|
$
|
6,075
|
|
$
|
12,595
|
|
$
|
12,322
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings per share – weighted-average
shares outstanding
|
|
|
12,855
|
|
|
12,936
|
|
|
12,847
|
|
|
12,970
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock options
|
|
|
29
|
|
|
22
|
|
|
13
|
|
|
33
|
|
Denominator
for diluted earnings per share - adjusted weighted-average
shares outstanding
|
|
|
12,884
|
|
|
12,958
|
|
|
12,860
|
|
|
13,003
|
|
Basic
earnings per share
|
|
$
|
0.46
|
|
$
|
0.47
|
|
$
|
0.98
|
|
$
|
0.95
|
|
Diluted
earnings per share
|
|
|
0.46
|
|
|
0.47
|
|
|
0.98
|
|
|
0.95
|
|
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 Six Months
|
|
|
|
Ended June 30,
|
|
Ended June 30,
|
|
($
in thousands)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net
Income
|
|
$
|
5,874
|
|
$
|
6,075
|
|
$
|
12,595
|
|
$
|
12,322
|
|
Unrealized
gain (loss) on available-for-sale investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
losses arising during the period
|
|
|
(4,047
|
)
|
|
(2,298
|
)
|
|
(2,367
|
)
|
|
(1,789
|
)
|
Less:
reclassification adjustment for (losses) and gains realized in net
income
|
|
|
(138
|
)
|
|
33
|
|
|
(102
|
)
|
|
33
|
|
Defined
benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains (losses) arising during the period
|
|
|
4
|
|
|
(54
|
)
|
|
9
|
|
|
(115
|
)
|
Less:
amortization of net gain included in net periodic pension
costs
|
|
|
(59
|
)
|
|
(65
|
)
|
|
(118
|
)
|
|
(112
|
)
|
Prior
service costs rising during the period
|
|
|
28
|
|
|
67
|
|
|
57
|
|
|
76
|
|
Less:
accretion of prior service cost included in net periodic pension
costs
|
|
|
10
|
|
|
9
|
|
|
20
|
|
|
24
|
|
Total
comprehensive income
|
|
$
|
2,046
|
|
$
|
3,813
|
|
$
|
10,494
|
|
$
|
10,549
|
|
Note
6. Pensions and Other Postretirement Benefits
Components
of net periodic benefit cost:
($ in thousands)
|
|
Three Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
Retirement Plans
|
|
Other Postretirement
|
|
Service
cost
|
|
$
|
295
|
|
$
|
324
|
|
$
|
17
|
|
$
|
16
|
|
Interest
cost
|
|
|
495
|
|
|
429
|
|
|
21
|
|
|
20
|
|
Expected
return on plan assets
|
|
|
(471
|
)
|
|
(470
|
)
|
|
─
|
|
|
─
|
|
Amortization
of net loss
|
|
|
89
|
|
|
98
|
|
|
1
|
|
|
2
|
|
Amortization
of prior service cost
|
|
|
(11
|
)
|
|
(9
|
)
|
|
(5
|
)
|
|
(5
|
)
|
Net
periodic cost
|
|
$
|
397
|
|
$
|
372
|
|
$
|
34
|
|
$
|
33
|
|
($ in thousands)
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
Retirement Plans
|
|
Other Postretirement
|
|
Service
cost
|
|
$
|
625
|
|
$
|
686
|
|
$
|
34
|
|
$
|
32
|
|
Interest
cost
|
|
|
957
|
|
|
848
|
|
|
42
|
|
|
39
|
|
Expected
return on plan assets
|
|
|
(929
|
)
|
|
(885
|
)
|
|
─
|
|
|
─
|
|
Amortization
of net loss
|
|
|
179
|
|
|
168
|
|
|
2
|
|
|
5
|
|
Amortization
of prior service cost
|
|
|
(21
|
)
|
|
(27
|
)
|
|
(10
|
)
|
|
(10
|
)
|
Net
periodic cost
|
|
$
|
811
|
|
$
|
790
|
|
$
|
68
|
|
$
|
66
|
|
The
Corporation previously disclosed in its financial statements for the year ended
December 31, 2007, that it expected to make payments of $2.1 million for its
qualified and non-qualified retirement plans and $97 thousand for its other
postretirement benefit plans in 2008. As of June 30,
2008,
$971
thousand and $45 thousand have been paid to participants from its qualified
and non-qualified retirement plans and other postretirement plans, respectively.
During the six months ended June 30,
2008,
the
Corporation contributed $274 thousand and $45 thousand to its non-qualified
retirement plans and other postretirement plans, respectively.
On
January 1, 2008, the Corporation adopted Emerging Issues Task Force No. 06-4,
“Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements” (“EITF 06-4”). Under
EITF 06-4, if an
agreement is to provide an employee with a death benefit in a postretirement/
termination period, the employer should recognize a liability for the future
death benefit in accordance with either Statement of Financial Accounting
Standard (“SFAS”) No. 106, “Employers’ Accounting for Postretirement Benefits
Other than Pensions” or Accounting Principles Board Opinion No. 12.
EITF 06-4
requires that recognition of the effects of adoption should be either by
(a) a change in accounting principle through a cumulative-effect adjustment
to retained earnings as of the beginning of the year of adoption or (b) a
change in accounting principle through retrospective application to all prior
periods.
The
Corporation chose option (a) as its method of adoption for EITF 06-4.
The
following table shows the incremental effect of applying EITF 06-4 on individual
line items in the Consolidated Balance Sheet at January 1, 2008:
($
in thousands)
|
|
Before
Application of
EITF 06-4
|
|
Adjustments
|
|
After
Application of
EITF 06-4
|
|
Cash
surrender value of insurance policies
|
|
$
|
46,689
|
|
$
|
123
|
|
$
|
46,812
|
|
Total
assets
|
|
|
1,972,505
|
|
|
123
|
|
|
1,972,628
|
|
Accrued
split-dollar life insurance payable
|
|
|
─
|
|
|
1,673
|
|
|
1,673
|
|
Total
liabilities
|
|
|
1,773,779
|
|
|
1,673
|
|
|
1,775,452
|
|
Retained
earnings
|
|
|
143,066
|
|
|
(1,550
|
)
|
|
141,516
|
|
Total
shareholders’ equity
|
|
|
198,726
|
|
|
(1,550
|
)
|
|
197,176
|
|
Total
liabilities and shareholders’ equity
|
|
|
1,972,505
|
|
|
123
|
|
|
1,972,628
|
|
Note
7. Income Taxes
As
of
January 1, 2008 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. Tax Years
2004
through 2007 remain subject to Federal examination as well as examination by
state taxing jurisdictions.
Note
8. Fair Value Disclosures
As
of
January 1, 2008 and effective for the reporting period ended June 30, 2008,
the
Corporation adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS
157 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. SFAS 157 defines fair value as the exchange
price
that would be received for an asset or paid to transfer a liability in the
principal or most advantageous market for the asset or liability. The
Corporation does not currently hold any trading assets, derivative contracts
or
other financial instruments that are measured at fair value on a recurring
basis
that were impacted by the adoption of SFAS 157.
SFAS
157
establishes a hierarchy for inputs used in measuring fair value that maximizes
the use of observable inputs and minimizes the use of unobservable inputs when
measuring fair value. Observable inputs are inputs that market participants
would use in pricing the asset or liability developed based on market data
obtained from sources independent of the Corporation. Unobservable inputs are
inputs that reflect the Corporation’s assumptions that the market participants
would use in pricing the asset or liability based on the best information
available in the circumstances. The hierarchy is broken down into three levels
based on the reliability of inputs as follows:
§ |
Level
1—Valuations are based on quoted prices in active markets for identical
assets or liabilities that the Corporation has the ability to access.
Since valuations are based on quoted prices that are readily and
regularly
available in an active market, valuation of these products does not
entail
a significant degree of judgment. Assets and liabilities utilizing
Level 1
inputs include: Exchange-traded equity and most U.S. Government
securities.
|
§ |
Level
2—Valuations are based on quoted prices in markets that are not active
or
for which all significant inputs are observable, either directly
or
indirectly. Assets and liabilities utilizing Level 2 inputs include:
most
U.S. Government agency mortgage-backed debt securities (“MBS”), corporate
debt securities, corporate and municipal bonds, asset-backed securities
(“ABS”), residential mortgage loans held for sale and mortgage servicing
rights.
|
§ |
Level
3—Valuations are based on inputs that are unobservable and significant
to
the overall fair value measurement. Assets and liabilities utilizing
Level
3 inputs include: financial instruments whose value is determined
using
pricing models, discounted cash-flow methodologies, or similar techniques,
as well as instruments for which the fair value calculation requires
significant management judgment or estimation. These assets and
liabilities include: certain commercial mortgage obligations (“CMOs”), MBS
and ABS securities; and not readily marketable equity
investments.
|
Following
is a description of the valuation methodologies used for instruments measured
at
fair value, as well as the general classification of such instruments pursuant
to the valuation hierarchy.
Investment
Securities
Where
quoted prices are available in an active market for identical instruments,
investment securities are classified within Level 1 of the valuation hierarchy.
Level 1 investment securities include highly liquid U.S. Treasury securities,
U.S. Government sponsored enterprises, and most equity securities. If quoted
market prices are not available, then fair values are estimated by using pricing
models, quoted prices of securities with similar characteristics or discounted
cash flows. Examples of such instruments, which would generally be classified
within Level 2 of the valuation hierarchy, include certain MBS, CMOs, ABS and
municipal bonds. In cases where there is limited activity or less transparency
around inputs to the valuation, investment securities are classified within
Level 3 of the valuation hierarchy. Investment securities classified within
Level 3 include certain equity securities that do not have readily available
market prices, certain municipal bonds, certain ABS and other less liquid
investment securities.
Loans
Held for Sale
The
fair
value of the Corporation’s loans held for sale are generally determined using a
pricing model based on current market information obtained from external
sources, including, interest rates, and bids or indications provided by market
participants on specific loans that are actively marketed for sale. The
Company’s loans held for sale are primarily residential mortgage loan and are
generally classified in Level 2 due to the observable pricing data.
Mortgage
Servicing Rights
The
Corporation estimates the fair value of Mortgage Servicing Rights (“MSRs”) using
discounted cash flow models that calculate the present value of estimated future
net servicing income. The model uses readily available prepayment speed
assumptions for the current interest rates of the portfolios serviced. MSRs
are
classified within level 2 of the valuation hierarchy. MSRs are carried at the
lower of amortized cost or estimated fair value.
Assets
and liabilities measured at fair value on a recurring basis, all of which were
measured at fair value prior to the adoption of SFAS 157, are summarized
below:
($ in thousands)
|
|
At June 30, 2008
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets/
Liabilities at
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
$
|
2,696
|
|
$
|
414,930
|
|
$
|
10,586
|
|
$
|
428,212
|
|
Mortgage
servicing rights
|
|
|
─
|
|
|
485
|
|
|
─
|
|
|
485
|
|
Total
assets
|
|
$
|
2,696
|
|
$
|
415,415
|
|
$
|
10,586
|
|
$
|
428,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
$
|
─
|
|
$
|
─
|
|
$
|
─
|
|
$
|
─
|
|
The
following table presents additional information about assets and liabilities
measured at fair value on a recurring basis and for which the Corporation
utilized Level 3 inputs to determine fair value:
|
|
For
the Three Months Ended June 30, 2008
|
|
($ in thousands)
|
|
Balance at
March 31,
2008
|
|
Total
Unrealized
Gains or
(Losses)
|
|
Total
Realized
Gains or
(Losses)
|
|
Purchases
(Sales or
Paydowns)
|
|
Balance at
June 30,
2008
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed
securities
|
|
$
|
1,949
|
|
$
|
(2
|
)
|
$
|
─
|
|
$
|
(263
|
)
|
$
|
1,684
|
|
Commercial
mortgage obligations
|
|
|
7,029
|
|
|
400
|
|
|
─
|
|
|
(108
|
)
|
|
7,321
|
|
Not
readily marketable equity securities
|
|
|
1,581
|
|
|
─
|
|
|
─
|
|
|
─
|
|
|
1,581
|
|
Total
Level 3 assets
|
|
$
|
10,559
|
|
$
|
398
|
|
$
|
─
|
|
$
|
(371
|
)
|
$
|
10,586
|
|
|
|
For
the Six Months Ended June 30, 2008
|
|
($
in thousands)
|
|
Balance
at
December
31,
2007
|
|
Total
Unrealized
Gains
or
(Losses)
|
|
Total
Realized
Gains
or
(Losses)
|
|
Purchases
(Sales
or
Paydowns)
|
|
Balance
at
June
30,
2008
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed
securities
|
|
$
|
1,995
|
|
$
|
18
|
|
$
|
─
|
|
$
|
(329
|
)
|
$
|
1,684
|
|
Commercial
mortgage obligations
|
|
|
7,644
|
|
|
37
|
|
|
─
|
|
|
(360
|
)
|
|
7,321
|
|
Not
readily marketable equity securities
|
|
|
1,581
|
|
|
─
|
|
|
─
|
|
|
─
|
|
|
1,581
|
|
Total
Level 3 assets
|
|
$
|
11,220
|
|
$
|
55
|
|
$
|
─
|
|
$
|
(689
|
)
|
$
|
10,586
|
|
Realized
gains or losses are recognized in the Consolidated Statement of Income. There
were no gains or losses recognized on Level 3 assets during the six-month period
ended June 30, 2008.
Note
9. Related-Party Transactions
During
the first quarter of 2008, Univest purchased $29.4 million in tax-free
municipal bonds issued on behalf of Grand View Hospital. These bonds were called
during the second quarter of 2008. William S. Aichele, Chairman, President
and
CEO of the Corporation, and P. Gregory Shelly, Director of the Corporation,
are
members of the Board of Trustees for Grand View Hospital.
Note
10. Recent Accounting Pronouncements
In
March
2008, the FASB issued SFAS No. 161, “Disclosures
about Derivative Instruments and Hedging Activities”
(“SFAS
161”). SFAS 161 enhances disclosures about fair value of derivative instruments
and their gains or losses and the company’s objectives and strategies for using
derivative instruments and whether or not they are designated as hedging
instruments. SFAS 161 is effective prospectively for interim periods and fiscal
years beginning after November 15, 2008. The Corporation does not
anticipate the adoption of SFAS 161 to have a material impact on its
consolidated financial statements.
In
May
2008, the FASB issued Statement No. 162, "The
Hierarchy of Generally Accepted Accounting
Principles" (“SFAS
162”).
This
standard identifies the sources of accounting principles and the framework
for
selecting the principles to be used in the preparation of financial statements
of nongovernmental entities that are presented in conformity with generally
accepted accounting principles ("GAAP") in the United States (the GAAP
hierarchy). The provisions of SFAS 162 did not have a material impact
on our financial condition and results of operations.
In
June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities”
(“EITF
03-6-1”). This FSP provides that unvested share-based payment awards that
contain nonforfeitable rights to dividends are participating securities and
shall be included in the computation of earnings per share pursuant to the
two
class method. This FSP is effective for financial statements issued for fiscal
years beginning after December 15, 2008 and interim periods within those
years. Upon adoption, a company is required to retrospectively adjust its
earnings per share data to conform to the provisions in this FSP. The provisions
of EITF 03-6-1 are effective for us retroactively in the first quarter ended
March 31, 2009. We are in the process of evaluating the impact of EITF
03-6-1 on the calculation and presentation of earnings per share in our
consolidated financial statements.
Note
11. Other Information
On
April
7, 2008 a retired key employee passed away. The Corporation held several BOLI
policies on this individual for which the death benefit exceeded the cash
surrender value. In the second quarter of 2008, the Corporation recorded an
additional $1.4 million of income related to these policies.
Item
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
(All
dollar amounts presented within tables are in thousands, except per share data.
“N/M” equates to “not meaningful”; “─“
equates to “zero” or “doesn’t round to a reportable number”; and “N/A” equates
to “not applicable”.)
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. Univest Capital, 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 six months ended June 30,
2008
of
$12.6 million, a 2.2% increase over the June 30, 2007 period. Basic and
diluted net income per share increased 3.2%.
Average
earning assets increased $97.4 million and average interest-bearing liabilities
increased $91.0 million when comparing the six-month periods ended June
30,
2008
and
2007. Increased volume on other securities, obligations of state and political
subdivision securities, federal funds sold and lease financings along with
decreased rates on money market savings were partially offset by decreased
rates
on commercial business loans and commercial and construction real estate loans;
this contributed to a $1.6 million increase in tax-equivalent net interest
income. The tax-equivalent net interest margin declined to 3.71% for the
six-month period ended June 30, 2008 compared to 3.74% for the same period
in
2007.
Non-interest
income grew 15.4%, when comparing the six-month periods ended June
30,
2008
to 2007,
primarily due to increases in trust fee income, insurance commissions and fee
income and life insurance income, which increased by $1.8 million due to
additional income resulting from death benefit claims.
Non-interest
expense grew 8.3% primarily due to increases in salary and employee benefits,
marketing and advertising expense, and other expense, which includes expense
associated with a claim under a rent-a-captive arrangement and fee expense
associated with student loans.
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 June 30, 2008 Versus 2007
The
Corporation’s consolidated net income and earnings per share for the three
months ended June 30, 2008 and 2007 were as follows:
($ in thousands, except per share data)
|
|
Three Months Ended
June 30,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Net income
|
|
$
|
5,874
|
|
$
|
6,075
|
|
$
|
(201
|
)
|
|
(3.3
|
)%
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.46
|
|
$
|
0.47
|
|
$
|
(0.01
|
) |
|
(2.1
|
)%
|
Diluted
|
|
|
0.46
|
|
|
0.47
|
|
|
(0.01
|
) |
|
(2.1
|
)%
|
Return
on
average shareholders' equity was 11.50% and return on average assets was 1.16%
for the three months ended June 30, 2008 compared to 12.86% and 1.26%,
respectively, for the same period in 2007.
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. Table 1 presents a summary of the Corporation's
average balances; the tax-equivalent yields earned on average assets, and the
cost of average liabilities, and shareholders’ equity on a tax-equivalent basis
for the three months ended June 30, 2008 and 2007. Table 2 analyzes the changes
in the tax-equivalent net interest income for the periods broken down by their
rate and volume components. 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 stable net interest
margin for the Corporation.
Tax-equivalent
net interest income increased $1.1 million for the three months ended June
30,
2008 compared to 2007 primarily due to increased volume on lease financings,
increased volume on obligations on state and political subdivision securities,
increased volume on other securities, decreased rates on money market savings
deposits and decreases in both rate and volume of certificates of deposit;
partially offset by decreased volume and rates on commercial loans and decreased
rates on real estate—commercial and construction loans. The decrease in rates is
attributable to the 200 basis point reduction in the prime interest rate that
occurred during the first quarter of 2008. The tax-equivalent net interest
margin, which is tax-equivalent net interest income as a percentage of average
interest-earning assets, was 3.75% and 3.71% for the three-month periods ended
June 30, 2008 and 2007, 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 3.34% for the three-months ended June 30,
2008
compared to 3.13% for the same period in 2007. The effect of net interest free
funding sources decreased to 0.41% for the three months ended June 30, 2008
compared to 0.58% for the same period in 2007; 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 Shareholders’
Equity; Interest
Rates and Interest Differential
|
|
For
the Three Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
Average
|
|
Income/
|
|
Avg.
|
|
Average
|
|
Income/
|
|
Avg.
|
|
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
758
|
|
$
|
3
|
|
|
1.59
|
|
$
|
612
|
|
$
|
8
|
|
|
5.24
|
%
|
U.S.
Government obligations
|
|
|
100,530
|
|
|
1,148
|
|
|
4.59
|
|
|
121,336
|
|
|
1,366
|
|
|
4.52
|
|
Obligations
of state and political subdivisions
|
|
|
109,035
|
|
|
1,679
|
|
|
6.19
|
|
|
84,560
|
|
|
1,493
|
|
|
7.08
|
|
Other
debt and equity securities
|
|
|
248,217
|
|
|
3,166
|
|
|
5.13
|
|
|
175,495
|
|
|
2,323
|
|
|
5.31
|
|
Federal
Reserve Bank stock
|
|
|
1,687
|
|
|
26
|
|
|
6.20
|
|
|
1,687
|
|
|
26
|
|
|
6.18
|
|
Federal
funds sold and securities purchased under agreement to
resell
|
|
|
21,431
|
|
|
121
|
|
|
2.27
|
|
|
5,717
|
|
|
80
|
|
|
5.61
|
|
Total
interest-earning deposits, investments and federal funds
sold
|
|
|
481,658
|
|
|
6,143
|
|
|
5.13
|
|
|
389,407
|
|
|
5,296
|
|
|
5.46
|
|
Commercial,
financial and agricultural loans
|
|
|
390,353
|
|
|
5,952
|
|
|
6.13
|
|
|
417,787
|
|
|
8,269
|
|
|
7.94
|
|
Real
estate─commercial and construction loans
|
|
|
477,482
|
|
|
7,780
|
|
|
6.55
|
|
|
436,640
|
|
|
8,561
|
|
|
7.86
|
|
Real
estate─residential loans
|
|
|
304,901
|
|
|
3,971
|
|
|
5.24
|
|
|
307,886
|
|
|
4,155
|
|
|
5.41
|
|
Loans
to individuals
|
|
|
64,642
|
|
|
1,121
|
|
|
6.97
|
|
|
83,577
|
|
|
1,447
|
|
|
6.94
|
|
Municipal
loans and leases
|
|
|
81,879
|
|
|
1,277
|
|
|
6.27
|
|
|
93,205
|
|
|
1,260
|
|
|
5.42
|
|
Lease
financings
|
|
|
72,920
|
|
|
1,594
|
|
|
8.79
|
|
|
43,303
|
|
|
964
|
|
|
8.93
|
|
Gross
loans and leases
|
|
|
1,392,177
|
|
|
21,695
|
|
|
6.27
|
|
|
1,382,398
|
|
|
24,656
|
|
|
7.15
|
|
Total
interest-earning assets
|
|
|
1,873,835
|
|
|
27,838
|
|
|
5.98
|
|
|
1,771,805
|
|
|
29,952
|
|
|
6.78
|
|
Cash
and due from banks
|
|
|
35,263
|
|
|
|
|
|
|
|
|
40,467
|
|
|
|
|
|
|
|
Reserve
for loan and lease losses
|
|
|
(13,173
|
)
|
|
|
|
|
|
|
|
(13,554
|
)
|
|
|
|
|
|
|
Premises
and equipment, net
|
|
|
31,463
|
|
|
|
|
|
|
|
|
21,842
|
|
|
|
|
|
|
|
Other
assets
|
|
|
117,599
|
|
|
|
|
|
|
|
|
109,717
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,044,987
|
|
|
|
|
|
|
|
$
|
1,930,277
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
checking deposits
|
|
$
|
147,206
|
|
|
111
|
|
|
0.30
|
|
$
|
140,731
|
|
$
|
110
|
|
|
0.31
|
%
|
Money
market savings
|
|
|
442,553
|
|
|
2,223
|
|
|
2.02
|
|
|
370,713
|
|
|
3,826
|
|
|
4.14
|
|
Regular
savings
|
|
|
268,757
|
|
|
981
|
|
|
1.47
|
|
|
206,698
|
|
|
846
|
|
|
1.64
|
|
Certificates
of deposit
|
|
|
465,789
|
|
|
5,163
|
|
|
4.46
|
|
|
529,630
|
|
|
6,136
|
|
|
4.65
|
|
Other
time deposits
|
|
|
5,739
|
|
|
35
|
|
|
2.45
|
|
|
29,113
|
|
|
361
|
|
|
4.97
|
|
Total
time and interest-bearing deposits
|
|
|
1,330,044
|
|
|
8,513
|
|
|
2.57
|
|
|
1,276,885
|
|
|
11,279
|
|
|
3.54
|
|
Federal
funds purchased
|
|
|
14,563
|
|
|
84
|
|
|
2.32
|
|
|
12,445
|
|
|
168
|
|
|
5.41
|
|
Securities
sold under agreements to repurchase
|
|
|
88,108
|
|
|
238
|
|
|
1.09
|
|
|
84,815
|
|
|
513
|
|
|
2.43
|
|
Other
short-term debt
|
|
|
23,254
|
|
|
133
|
|
|
2.30
|
|
|
3,446
|
|
|
47
|
|
|
5.47
|
|
Long-term
debt
|
|
|
95,419
|
|
|
1,017
|
|
|
4.29
|
|
|
83,010
|
|
|
980
|
|
|
4.74
|
|
Subordinated
notes and capital securities
|
|
|
28,119
|
|
|
385
|
|
|
5.51
|
|
|
29,623
|
|
|
581
|
|
|
7.87
|
|
Total
borrowings
|
|
|
249,463
|
|
|
1,857
|
|
|
2.99
|
|
|
213,339
|
|
|
2,289
|
|
|
4.30
|
|
Total
interest-bearing liabilities
|
|
|
1,579,507
|
|
|
10,370
|
|
|
2.64
|
|
|
1,490,224
|
|
|
13,568
|
|
|
3.65
|
|
Demand
deposits, non-interest bearing
|
|
|
229,971
|
|
|
|
|
|
|
|
|
221,200
|
|
|
|
|
|
|
|
Accrued
expenses and other liabilities
|
|
|
30,045
|
|
|
|
|
|
|
|
|
29,436
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
1,839,523
|
|
|
|
|
|
|
|
|
1,740,860
|
|
|
|
|
|
|
|
Shareholders’
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
74,370
|
|
|
|
|
|
|
|
|
74,370
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
22,633
|
|
|
|
|
|
|
|
|
22,501
|
|
|
|
|
|
|
|
Retained
earnings and other equity
|
|
|
108,461
|
|
|
|
|
|
|
|
|
92,546
|
|
|
|
|
|
|
|
Total
shareholders’ equity
|
|
|
205,464
|
|
|
|
|
|
|
|
|
189,417
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,044,987
|
|
|
|
|
|
|
|
$
|
1,930,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
17,468
|
|
|
|
|
|
|
|
$
|
16,384
|
|
|
|
|
Net
interest spread
|
|
|
|
|
|
|
|
|
3.34
|
|
|
|
|
|
|
|
|
3.13
|
|
Effect
of net interest-free funding sources
|
|
|
|
|
|
|
|
|
0.41
|
|
|
|
|
|
|
|
|
0.58
|
|
Net
interest margin
|
|
|
|
|
|
|
|
|
3.75
|
%
|
|
|
|
|
|
|
|
3.71
|
%
|
Ratio
of average interest-earning assets to average interest-bearing
liabilities
|
|
|
118.63
|
%
|
|
|
|
|
|
|
|
118.90
|
%
|
|
|
|
|
|
|
Notes: |
Tax-equivalent
amounts have been calculated using the Corporation’s federal applicable
rate of 35 percent.
|
For
rate
calculation purposes, average loan and lease categories include unearned
discount.
Nonaccrual
loans and leases have been included in the average loan and lease balances.
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 June 30,
2008
Versus 2007
|
|
|
|
Volume
Change
|
|
Rate
Change
|
|
Total
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
1
|
|
$
|
(6
|
)
|
$
|
(5
|
)
|
U.S.
Government obligations
|
|
|
(239
|
)
|
|
21
|
|
|
(218
|
)
|
Obligations
of state and political subdivisions
|
|
|
374
|
|
|
(188
|
)
|
|
186
|
|
Other
debt and equity securities
|
|
|
922
|
|
|
(79
|
)
|
|
843
|
|
Federal
Reserve Bank stock
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Federal
funds sold and securities purchased under agreement to
resell
|
|
|
89
|
|
|
(48
|
)
|
|
41
|
|
Interest
on deposits, investments and federal funds sold
|
|
|
1,147
|
|
|
(300
|
)
|
|
847
|
|
Commercial,
financial and agricultural loans and leases
|
|
|
(432
|
)
|
|
(1,885
|
)
|
|
(2,317
|
)
|
Real
estate─commercial and construction loans
|
|
|
645
|
|
|
(1,426
|
)
|
|
(781
|
)
|
Real
estate─residential loans
|
|
|
(54
|
)
|
|
(130
|
)
|
|
(184
|
)
|
Loans
to individuals
|
|
|
(332
|
)
|
|
6
|
|
|
(326
|
)
|
Municipal
loans and leases
|
|
|
(181
|
)
|
|
198
|
|
|
17
|
|
Lease
financings
|
|
|
645
|
|
|
(15
|
)
|
|
630
|
|
Interest
and fees on loans and leases
|
|
|
291
|
|
|
(3,252
|
)
|
|
(2,961
|
)
|
Total
interest income
|
|
|
1,438
|
|
|
(3,552
|
)
|
|
(2,114
|
)
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
Interest
checking deposits
|
|
|
5
|
|
|
(4
|
)
|
|
1
|
|
Money
market savings
|
|
|
356
|
|
|
(1,959
|
)
|
|
(1,603
|
)
|
Regular
savings
|
|
|
223
|
|
|
(88
|
)
|
|
135
|
|
Certificates
of deposit
|
|
|
(722
|
)
|
|
(251
|
)
|
|
(973
|
)
|
Other
time deposits
|
|
|
(143
|
)
|
|
(183
|
)
|
|
(326
|
)
|
Interest
on deposits
|
|
|
(281
|
)
|
|
(2,485
|
)
|
|
(2,766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Federal
funds purchased
|
|
|
12
|
|
|
(96
|
)
|
|
(84
|
)
|
Securities
sold under agreement to repurchase
|
|
|
8
|
|
|
(283
|
)
|
|
(275
|
)
|
Other
short-term debt
|
|
|
113
|
|
|
(27
|
)
|
|
86
|
|
Long-term
debt
|
|
|
130
|
|
|
(93
|
)
|
|
37
|
|
Subordinated
notes and capital securities
|
|
|
(22
|
)
|
|
(174
|
)
|
|
(196
|
)
|
Interest
on borrowings
|
|
|
241
|
|
|
(673
|
)
|
|
(432
|
)
|
Total
interest expense
|
|
|
(40
|
)
|
|
(3,158
|
)
|
|
(3,198
|
)
|
Net
interest income
|
|
$
|
1,478
|
|
$
|
(394
|
)
|
$
|
1,084
|
|
Notes: |
Tax-equivalent
amounts have been calculated using the Corporation’s federal applicable
rate of 35 percent.
|
Nonaccrual
loans and leases and unearned discounts have been included in the average loan
and lease balances.
Interest
Income
Interest
income on U. S. Government obligations decreased due to a decline in average
volume that was partially offset by an increase in average rates. Interest
income on obligations of state and political subdivisions increased due to
average volume increases that were partially offset by a decline in average
rates. Interest income on other securities increased primarily due to average
volume increases on mortgage-backed securities. Interest income increased on
federal funds sold was due primarily to increases in average
volume.
The
decline in interest and fees on loans and leases is due primarily to average
rate decreases on commercial business loans and real estate – commercial and
construction loans. The rate decreases are attributable to the 200 basis point
decline in prime rate which occurred during the first quarter of 2008. The
average interest yield on the commercial loan portfolio decreased 181 basis
points; which, along with average volume decline of $27.4 million,
contributed to a $2.3 million decrease in interest income. The average
yield on real estate—commercial and construction loans decreased 131 basis
points which contributed to a $781 thousand decline in interest income. The
average volume decline on loans to individuals of $18.9 million,
contributed to a $326 thousand decrease in interest income. These decreases
were offset by an increase in average volume on lease financings of $29.6
million; this contributed to a $630 thousand increase in interest income.
Interest
Expense
The
Corporation’s average rate on deposits decreased 97 basis points for the three
months ended June 30, 2008 compared to the same period in 2007. The average
rate
decrease is attributable to the 200 basis point decline in prime rate which
occurred during the first quarter of 2008. The average rate paid on money market
savings decreased 212 basis points while the average volume increased $71.8
million; the net effect contributed to a $1.6 million decrease in interest
expense. The increase in money market savings was primarily due to a
$92.6 million short-term deposit received from one customer. Interest on
regular savings increased $135 thousand due to an average volume increase of
$62.1 million that was offset by a 17 basis-point decrease in average rate.
Interest on certificates of deposit decreased $974 thousand, due to a $63.8
million average decrease in volume and a 19 basis-point decrease in average
rate. Interest on other time deposit accounts decreased $326 thousand due to
average rate decrease of 252 basis points and an average balance decrease of
$23.4 million. Average rate decreases along with the average volume growth
of
$53.2 million, contributed to a $2.8 million decrease in interest expense on
deposits.
Interest
expense on short-term borrowings includes interest paid on federal funds
purchased and short-term FHLB debt. 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 $272 thousand in the aggregate during the three months ended June
30, 2008 compared to 2007 primarily due to average volume increases of $25.2
million and a 145 basis-point decline in rates.
Interest
expense on long-term debt decreased $159 thousand primarily due to rate
decreases.
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 and leases, current economic conditions, various types
of lending activity, policies, real estate and other loan commitments, and
significant changes in charged-off activity. Loans and leases are also reviewed
for impairment based on discounted cash flows using the loans' an leases’
initial effective interest rates 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 reserve to fluctuate. The provision for the three
months ended June 30, 2008 and 2007 was $2.3 million and $653 thousand,
respectively. This increase was primarily due to an increase in net charge-offs
of $1.3 million for the three months ended June 30, 2008 compared to the same
period in 2007, loan growth, the deterioration of underlying collateral and
economic factors.
Non-interest
Income
Non-interest
income consists of trust department fee income, service charges on deposits,
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 represents changes in the cash surrender
value of bank-owned life insurance policies and any excess proceeds from death
benefit claims. Total non-interest income increased during the three months
ended June 30, 2008 compared to 2007 primarily due to death benefit claims
on
bank-owned life insurance resulting in additional income of $1.4 million,
increases in trust fee income and other service fee income resulting from
renegotiated contracts. These increases were offset by declines in investment
advisory commission and fee income, insurance commission and fee income and
other-than-temporary impairment losses on available-for-sale
securities.
|
|
For
the Three Months
Ended
June 30,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Trust
fee income
|
|
$
|
1,628
|
|
$
|
1,481
|
|
$
|
147
|
|
|
9.9
|
%
|
Service
charges on deposit accounts
|
|
|
1,708
|
|
|
1,702
|
|
|
6
|
|
|
0.4
|
|
Investment
advisory commission and fee income
|
|
|
642
|
|
|
686
|
|
|
(44
|
)
|
|
(6.4
|
)
|
Insurance
commission and fee income
|
|
|
1,271
|
|
|
1,316
|
|
|
(45
|
)
|
|
(3.4
|
)
|
Life
insurance income
|
|
|
1,734
|
|
|
412
|
|
|
1,322
|
|
|
320.9
|
|
Other
service fee income
|
|
|
1,091
|
|
|
930
|
|
|
161
|
|
|
17.3
|
|
Net
(loss) gain on sales of and impairments on securities
|
|
|
(213
|
)
|
|
51
|
|
|
(264
|
)
|
|
(517.6
|
)
|
Net
loss on dispositions of fixed assets
|
|
|
(4
|
)
|
|
(64
|
)
|
|
60
|
|
|
(93.8
|
)
|
Other
|
|
|
47
|
|
|
50
|
|
|
(3
|
)
|
|
(6.0
|
)
|
Total
non-interest income
|
|
$
|
7,904
|
|
$
|
6,564
|
|
$
|
1,340
|
|
|
20.4
|
|
Trust
fee
income increased in 2008 over 2007 primarily due to an increase in the number
and market value of managed accounts. Service charges on deposit accounts
remained relatively constant when comparing the second quarter of 2008 to the
same period in 2007.
Investment
advisory commissions and fee income, the primary source of income for Univest
Investments, Inc., decreased in 2008 over 2007 due to market fluctuations that
resulted in decreased fees and commissions received. Insurance commissions
and
fee income, the primary source of income for Univest Insurance, Inc. decreased
in 2008 over 2007 primarily due to market conditions.
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. Life insurance income may also be recognized as the result
of
a death benefit claim. The increase recognized in the second quarter of 2008
over 2007 was primarily due to additional income resulting from a death benefit
claim of $1.4 million.
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 second quarter of 2008 over 2007
primarily due to renegotiated contacts with service providers.
Gains
on Sale of Assets
Sales
of
$1.2 million in loans and leases during the three months ended June 30, 2008
resulted in gains of $29 thousand compared to sales of $1.3 million for
gains of $37 thousand for the three months ended June 30, 2007.
During
the three months ended June 30, 2008, approximately $7.0 million of securities
were sold recognizing gains of $22 thousand. Additionally, the Corporation
realized an impairment charge of $235 thousand on its equity portfolio during
the second quarter of 2008. The Corporation determined that it was more likely
than not that the equity securities would not regain market value due to the
financial stability of the underlying companies. The Corporation carefully
monitors all of its equity securities and has not taken impairment losses on
certain other under-water equity securities, at this time, as the financial
performance of the underlying companies is not indicative of the market
deterioration of their stock and it is more likely than not that the market
value of the equity securities will recover to the Corporation’s cost basis in
the individual securities. Additionally, the Corporation has the positive intent
and ability to hold those securities until such recovery occurs. During the
three months ended June 30, 2007, the Corporation sold $3.6 million in
securities that resulted in a gain of $51 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 Three Months
Ended
June 30,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Salaries
and benefits
|
|
$
|
8,019
|
|
$
|
7,840
|
|
$
|
179
|
|
|
2.3
|
%
|
Net
occupancy
|
|
|
1,286
|
|
|
1,186
|
|
|
100
|
|
|
8.4
|
|
Equipment
|
|
|
799
|
|
|
828
|
|
|
(29
|
)
|
|
(3.5
|
)
|
Marketing
and advertising
|
|
|
532
|
|
|
243
|
|
|
289
|
|
|
118.9
|
|
Other
|
|
|
4,449
|
|
|
3,234
|
|
|
1,215
|
|
|
37.6
|
|
Total
non-interest expense
|
|
$
|
15,085
|
|
$
|
13,331
|
|
$
|
1,754
|
|
|
13.2
|
|
Salaries
and benefits increased due to normal base pay increases and stock-based
compensation expense. Net occupancy costs increased due to increases in rental
expense on leased properties. This increase was offset slightly by an increase
in rental income on leased office space.
Equipment
expense decreased slightly due to the reduction of furniture and equipment
rental costs and depreciation expense of capitalized furniture and equipment.
These decreases were offset by increases in computer software licenses and
maintenance. Marketing and advertising expenses increased primarily due to
the
Corporation’s UnivestOne campaign which was launched in the second quarter of
2008 to increase awareness of its on-line banking website. Other expenses
increased primarily due to expense associated with a claim under a
rent-a-captive arrangement of $349 thousand and fee expense of
$257 thousand associated with student loans; both charges are not recurring
in nature. Increases in consulting fees also contributed to the increase in
other expenses.
Tax
Provision
The
provision for income taxes was $1.3 million for the three months ended June
30,
2008 compared to $2.1 million in 2007, at effective rates of 17.98% and
26.08%, respectively. The effective tax rates reflect the benefits of tax
credits generated from investments in low-income housing projects and tax-exempt
income from investments in municipal securities, loans and bank-owned life
insurance. The decrease in the effective tax rate between the three-month
periods is primarily due to death benefit claims on bank-owned life insurance,
as well as a decline in pre-tax income.
Results
of Operations – Six Months Ended June 30, 2008 Versus 2007
The
Corporation’s consolidated net income and earnings per share for the six months
ended June 30, 2008 and 2007 were as follows:
($
in thousands, except per share data)
|
|
For
the Six Months Ended
June
30,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Net
income
|
|
$
|
12,595
|
|
$
|
12,322
|
|
$
|
273
|
|
|
2.2
|
%
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.98
|
|
$
|
0.95
|
|
|
0.03
|
|
|
3.2
|
|
Diluted
|
|
|
0.98
|
|
|
0.95
|
|
|
0.03
|
|
|
3.2
|
|
Return
on
average shareholders' equity was 12.48% and return on average assets was 1.25%
for the six months ended June 30, 2008 compared to 13.19% and 1.30%,
respectively, for the same period in 2007.
Net
Interest Income
Net
interest income is the difference between interest earned on loans, investments
and other interest-earning assets and interest paid on deposits and other
interest-bearing liabilities. Net interest income is the principal source of
the
Corporation's 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 six months ended June 30,
2008 and 2007. 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.
Tax-equivalent
net interest income increased $1.6 million for the six months ended June 30,
2008 compared to 2007 primarily due to increased volume on other securities,
obligations of state and political subdivision securities, federal funds sold
and lease financings along with decreased rates on money market savings; these
increases were partially offset by decreased rates on commercial business loans
and real estate--commercial and construction loans. The tax-equivalent net
interest margin, which is tax-equivalent net interest income as a percentage
of
average interest-earning assets, was 3.71% for the six-month period ended
June 30, 2008 and 3.74% for the same period in 2007. The tax-equivalent net
interest spread, which represents the difference between the weighted average
tax-equivalent yield on interest-earning assets and the weighted average cost
of
interest-bearing liabilities, was 3.26% for the six months ended June 30, 2008
compared to 3.17% for the same period in 2007. The effect of net interest free
funding sources increased to 0.45% for the six months ended June 30, 2008
compared to 0.57% for the same period in 2007; this represents the effect on
the
net interest margin of net funding provided by noninterest-earning assets,
noninterest-bearing liabilities and shareholders’ equity.
Table
1 — Distribution of Assets, Liabilities and Shareholders’
Equity; Interest
Rates and Interest Differential
|
($
in thousands)
|
|
|
|
For
the Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
Average
|
|
Income/
|
|
Avg.
|
|
Average
|
|
Income/
|
|
Avg.
|
|
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Balance
|
|
Expense
|
|
Rate
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
729
|
|
$
|
8
|
|
|
2.21
|
%
|
$
|
603
|
|
$
|
15
|
|
|
5.02
|
%
|
U.S.
Government obligations
|
|
|
101,653
|
|
|
2,390
|
|
|
4.73
|
|
|
122,287
|
|
|
2,717
|
|
|
4.48
|
|
Obligations
of state & political subdivisions
|
|
|
101,074
|
|
|
3,230
|
|
|
6.43
|
|
|
83,776
|
|
|
2,951
|
|
|
7.10
|
|
Other
securities
|
|
|
250,235
|
|
|
6,373
|
|
|
5.12
|
|
|
175,726
|
|
|
4,631
|
|
|
5.31
|
|
Federal
Reserve bank stock
|
|
|
1,687
|
|
|
51
|
|
|
6.08
|
|
|
1,687
|
|
|
51
|
|
|
6.10
|
|
Federal
funds sold and securities purchased under agreement to
resell
|
|
|
27,385
|
|
|
378
|
|
|
2.78
|
|
|
5,458
|
|
|
137
|
|
|
5.06
|
|
Total
interest-earning deposits, investments and federal funds
sold
|
|
|
482,763
|
|
|
12,430
|
|
|
5.18
|
|
|
389,537
|
|
|
10,502
|
|
|
5.44
|
|
Commercial,
financial and agricultural loans
|
|
|
373,747
|
|
|
12,187
|
|
|
6.56
|
|
|
412,864
|
|
|
16,234
|
|
|
7.93
|
|
Real
estate─commercial and construction loans
|
|
|
476,287
|
|
|
16,120
|
|
|
6.81
|
|
|
434,697
|
|
|
16,895
|
|
|
7.84
|
|
Real
estate─residential loans
|
|
|
306,030
|
|
|
8,101
|
|
|
5.32
|
|
|
306,026
|
|
|
8,267
|
|
|
5.45
|
|
Loans
to individuals
|
|
|
66,986
|
|
|
2,344
|
|
|
7.04
|
|
|
85,159
|
|
|
2,932
|
|
|
6.94
|
|
Municipal
loans and leases
|
|
|
81,684
|
|
|
2,548
|
|
|
6.27
|
|
|
93,023
|
|
|
2,545
|
|
|
5.52
|
|
Lease
financings
|
|
|
68,646
|
|
|
3,032
|
|
|
8.88
|
|
|
37,401
|
|
|
1,657
|
|
|
8.93
|
|
Gross
loans and leases
|
|
|
1,373,380
|
|
|
44,332
|
|
|
6.49
|
|
|
1,369,170
|
|
|
48,530
|
|
|
7.15
|
|
Total
interest-earning assets
|
|
|
1,856,143
|
|
|
56,762
|
|
|
6.15
|
|
|
1,758,707
|
|
|
59,032
|
|
|
6.77
|
|
Cash
and due from banks
|
|
|
35,442
|
|
|
|
|
|
|
|
|
39,775
|
|
|
|
|
|
|
|
Reserve
for loan losses
|
|
|
(13,064
|
)
|
|
|
|
|
|
|
|
(13,435
|
)
|
|
|
|
|
|
|
Premises
and equipment, net
|
|
|
30,339
|
|
|
|
|
|
|
|
|
21,865
|
|
|
|
|
|
|
|
Other
assets
|
|
|
116,477
|
|
|
|
|
|
|
|
|
109,283
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,025,337
|
|
|
|
|
|
|
|
$
|
1,916,195
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
checking deposits
|
|
$
|
143,386
|
|
|
236
|
|
|
0.33
|
|
$
|
138,694
|
|
|
201
|
|
|
0.29
|
|
Money
market savings
|
|
|
465,077
|
|
|
5,870
|
|
|
2.54
|
|
|
368,343
|
|
|
7,511
|
|
|
4.11
|
|
Regular
savings
|
|
|
257,964
|
|
|
2,069
|
|
|
1.61
|
|
|
202,445
|
|
|
1,563
|
|
|
1.56
|
|
Certificates
of deposit
|
|
|
466,412
|
|
|
10,548
|
|
|
4.55
|
|
|
522,831
|
|
|
11,841
|
|
|
4.57
|
|
Time
open & club accounts
|
|
|
6,584
|
|
|
96
|
|
|
2.93
|
|
|
23,172
|
|
|
558
|
|
|
4.86
|
|
Total
time and interest-bearing deposits
|
|
|
1,339,423
|
|
|
18,819
|
|
|
2.83
|
|
|
1,255,485
|
|
|
21,674
|
|
|
3.48
|
|
Federal
funds purchased
|
|
|
9,179
|
|
|
115
|
|
|
2.52
|
|
|
14,360
|
|
|
386
|
|
|
5.42
|
|
Securities
sold under agreements to repurchase
|
|
|
84,682
|
|
|
533
|
|
|
1.27
|
|
|
88,114
|
|
|
1,050
|
|
|
2.40
|
|
Other
short-term debt
|
|
|
13,623
|
|
|
164
|
|
|
2.42
|
|
|
10,581
|
|
|
286
|
|
|
5.45
|
|
Long-term
debt
|
|
|
94,047
|
|
|
2,028
|
|
|
4.34
|
|
|
79,963
|
|
|
1,863
|
|
|
4.70
|
|
Subordinated
notes and capital securities
|
|
|
28,327
|
|
|
873
|
|
|
6.20
|
|
|
29,810
|
|
|
1,164
|
|
|
7.87
|
|
Total
borrowings
|
|
|
229,858
|
|
|
3,713
|
|
|
3.25
|
|
|
222,828
|
|
|
4,749
|
|
|
4.30
|
|
Total
interest-bearing liabilities
|
|
|
1,569,281
|
|
|
22,532
|
|
|
2.89
|
|
|
1,478,313
|
|
|
26,423
|
|
|
3.60
|
|
Demand
deposits, non-interest bearing
|
|
|
223,430
|
|
|
|
|
|
|
|
|
220,072
|
|
|
|
|
|
|
|
Accrued
expenses & other liabilities
|
|
|
29,672
|
|
|
|
|
|
|
|
|
29,371
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
1,822,383
|
|
|
|
|
|
|
|
|
1,727,756
|
|
|
|
|
|
|
|
Shareholders’
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
74,370
|
|
|
|
|
|
|
|
|
74,370
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
22,630
|
|
|
|
|
|
|
|
|
22,493
|
|
|
|
|
|
|
|
Retained
earnings and other equity
|
|
|
105,954
|
|
|
|
|
|
|
|
|
91,576
|
|
|
|
|
|
|
|
Total
shareholders’ equity
|
|
|
202,954
|
|
|
|
|
|
|
|
|
188,439
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,025,337
|
|
|
|
|
|
|
|
$
|
1,916,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
34,230
|
|
|
|
|
|
|
|
$
|
32,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest spread
|
|
|
|
|
|
|
|
|
3.26
|
|
|
|
|
|
|
|
|
3.17
|
|
Effect
of net interest-free funding sources
|
|
|
|
|
|
|
|
|
0.45
|
|
|
|
|
|
|
|
|
0.57
|
|
Net
interest margin
|
|
|
|
|
|
|
|
|
3.71
|
%
|
|
|
|
|
|
|
|
3.74
|
%
|
Ratio
of average interest-earning assets to average interest-bearing
liabilities
|
|
|
118.28
|
%
|
|
|
|
|
|
|
|
118.97
|
%
|
|
|
|
|
|
|
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 and leases have been included in the average loan and lease balances.
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.
($
in thousands)
|
|
The
Six Months Ended June 30,
2008
Versus 2007
|
|
|
|
Volume
Change
|
|
Rate
Change
|
|
Total
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
deposits with other banks
|
|
$
|
1
|
|
$
|
(8
|
)
|
$
|
(7
|
)
|
U.S.
Government obligations
|
|
|
(479
|
)
|
|
152
|
|
|
(327
|
)
|
Obligations
of state & political subdivisions
|
|
|
557
|
|
|
(278
|
)
|
|
279
|
|
Other
securities
|
|
|
1,908
|
|
|
(166
|
)
|
|
1,742
|
|
Federal
Reserve bank stock
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Federal
funds sold and securities purchased under agreement to
resell
|
|
|
303
|
|
|
(62
|
)
|
|
241
|
|
Interest
on deposits, investments and federal funds sold
|
|
|
2,290
|
|
|
(362
|
)
|
|
1,928
|
|
Commercial,
financial and agricultural loans
|
|
|
(1,248
|
)
|
|
(2,805
|
)
|
|
(4,053
|
)
|
Real
estate─commercial and construction loans
|
|
|
1,445
|
|
|
(2,220
|
)
|
|
(775
|
)
|
Real
estate─residential loans
|
|
|
31
|
|
|
(197
|
)
|
|
(166
|
)
|
Loans
to individuals
|
|
|
(630
|
)
|
|
42
|
|
|
(588
|
)
|
Municipal
loans and leases
|
|
|
(343
|
)
|
|
346
|
|
|
3
|
|
Lease
financings
|
|
|
1,385
|
|
|
(4
|
)
|
|
1,381
|
|
Interest
and fees on loans and leases
|
|
|
640
|
|
|
(4,838
|
)
|
|
(4,198
|
)
|
Total
interest income
|
|
|
2,930
|
|
|
(5,200
|
)
|
|
(2,270
|
)
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
Interest
checking deposits
|
|
|
7
|
|
|
28
|
|
|
35
|
|
Money
market savings
|
|
|
1,227
|
|
|
(2,868
|
)
|
|
(1,641
|
)
|
Regular
savings
|
|
|
456
|
|
|
50
|
|
|
506
|
|
Certificates
of deposit
|
|
|
(1,241
|
)
|
|
(52
|
)
|
|
(1,293
|
)
|
Time
open & club accounts
|
|
|
(240
|
)
|
|
(222
|
)
|
|
(462
|
)
|
Interest
on deposits
|
|
|
209
|
|
|
(3,064
|
)
|
|
(2,855
|
)
|
Federal
funds purchased
|
|
|
(64
|
)
|
|
(207
|
)
|
|
(271
|
)
|
Securities
sold under agreement to repurchase
|
|
|
(23
|
)
|
|
(494
|
)
|
|
(517
|
)
|
Other
short-term debt
|
|
|
37
|
|
|
(159
|
)
|
|
(122
|
)
|
Long-term
debt
|
|
|
308
|
|
|
(143
|
)
|
|
165
|
|
Subordinated
notes and capital securities
|
|
|
(44
|
)
|
|
(247
|
)
|
|
(291
|
)
|
Interest
on borrowings
|
|
|
214
|
|
|
(1,250
|
)
|
|
(1,036
|
)
|
Total
interest expense
|
|
|
423
|
|
|
(4,314
|
)
|
|
(3,891
|
)
|
Net
interest income
|
|
$
|
2,507
|
|
$
|
(886
|
)
|
$
|
1,621
|
|
Notes: |
Tax-equivalent
amounts have been calculated using the Corporation’s federal applicable
rate of 35 percent.
|
Nonaccrual
loan and lease unearned discounts have been included in the average loan
and
lease balances.
Interest
Income
Interest
income on U. S. Government obligations decreased due to a decline in average
volume that was partially offset by an increase in average rates. Interest
income on obligations of state and political subdivisions increased due to
average volume increases that were partially offset by a decline in average
rates. Interest income on other securities increased primarily due to average
volume increases on mortgage-backed securities. Interest income increased on
federal funds sold was due primarily to increases in average
volume.
The
decline in interest and fees on loans and leases is due primarily to average
rate decreases on commercial business loans and real estate--commercial and
construction loans. The rate decreases are attributable to the 200 basis point
decline in prime rate which occurred during the first quarter of 2008. The
average interest yield on the commercial loan portfolio decreased 137 basis
points for the six months ended June 30, 2008 compared to the same period in
2007; which, along with average volume decline of $39.1 million,
contributed to a $4.1 million decrease in interest income. The average
volume decline on loans to individuals of $18.2 million, contributed to a
$588 thousand decrease in interest income. These decreases were offset by
an increase in average volume on lease financings of $31.2 million; this
contributed to a $1.4 million increase in interest income. The average interest
yield increased on municipal loans and leases of 75 basis points, combined
with
the average volume decline of $11.3 million, contributed to a $3 thousand
increase in interest income.
Interest
Expense
The
Corporation’s average rate on deposits decreased 65 basis points for the six
months ended June 30, 2008 compared to the same period in 2007. The average
rate
paid on money market savings decreased 157 basis points while the average
volume increased $96.7 million; the net effect contributed to a $1.6 million
decrease in interest expense. The increase in money market savings was primarily
due to a $92.6 million short-term deposit received from one customer.
Interest on certificates of deposit decreased $1.3 million, primarily due
to a decrease in volume of $56.4 million.
Interest
expense on short-term borrowings includes interest paid on federal funds
purchased and short-term FHLB debt. In addition, the Bank offers a sweep
account. Interest expense on short-term borrowings decreased $910 thousand
in the aggregate during the six months ended June 30, 2008 compared to 2007
primarily due to a 155 basis-point decline in short-rates.
Interest
expense on long-term debt increased $165 thousand primarily due to a volume
increase of $14.1 million partially offset by a 36 basis-point decrease in
the rate paid on FHLB long term borrowings. Interest expense on subordinated
notes and capital securities decreased primarily due to a 167 basis-point
decline in rate.
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 and leases, current economic conditions, various types
of lending activities, 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 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.
The
provision for the six months ended June 30, 2008 and 2007 was $3.3 million
and $1.3 million, respectively. This increase was primarily due to an increase
in net charge-offs of $1.9 million for the six months ended June 30, 2008
compared to the same period in 2007, loan growth, the deterioration of
underlying collateral and economic factors.
Non-interest
Income
Non-interest
income consists of trust department fee income, service charges on deposits
income, commission income, net gains on sales of securities, and other
miscellaneous types of income. It also includes various types of service fees,
such as ATM fees, and life insurance income which primarily represents changes
in the cash surrender value of bank-owned life insurance. Total noninterest
income increased during the six months ended June 30, 2008 compared to 2007
primarily due to death benefit claims on bank-owned life insurance policies,
higher trust fees, and higher insurance commissions and fees
($
in thousands)
|
|
For
the Six Months
Ended
June 30,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Trust
fee income
|
|
$
|
3,255
|
|
$
|
2,968
|
|
$
|
287
|
|
|
9.7
|
%
|
Service
charges on deposit accounts
|
|
|
3,366
|
|
|
3,352
|
|
|
14
|
|
|
0.4
|
|
Investment
advisory commission and fee income
|
|
|
1,257
|
|
|
1,365
|
|
|
(108
|
)
|
|
(7.9
|
)
|
Insurance
commission and fee income
|
|
|
3,329
|
|
|
3,191
|
|
|
138
|
|
|
4.3
|
|
Life
insurance income
|
|
|
2,525
|
|
|
734
|
|
|
1,791
|
|
|
244.0
|
|
Other
service fee income
|
|
|
1,849
|
|
|
1,796
|
|
|
53
|
|
|
3.0
|
|
Net
(loss) gain on sales of and impairments on securities
|
|
|
(157
|
)
|
|
51
|
|
|
(208
|
)
|
|
(407.8
|
)
|
Net
loss on dispositions of fixed assets
|
|
|
(5
|
)
|
|
(64
|
)
|
|
59
|
|
|
(92.2
|
)
|
Other
|
|
|
142
|
|
|
87
|
|
|
55
|
|
|
63.2
|
|
Total
noninterest income
|
|
$
|
15,561
|
|
$
|
13,480
|
|
$
|
2,081
|
|
|
15.4
|
|
Trust
fee
income increased in 2008 over 2007 primarily due to an increase in the number
and market value of managed accounts. Service charges on deposit accounts
remained relatively constant when comparing the six months ended June 30, 2008
to the same period in 2007.
Investment
advisory commissions and fee income, the primary source of income for Univest
Investments, Inc., decreased in 2008 over 2007 due to market fluctuations that
resulted in decreased fees and commissions received. Insurance commissions
and
fee income, the primary source of income for Univest Insurance, Inc., increased
in 2008 over 2007 primarily due to an increase in contingent commissions
received from insurance carriers. This was partially offset by decreased fees
and commission due to market conditions.
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. Life insurance income may also be recognized as the result
of
a death benefit claim. The increase recognized in 2008 over 2007 was primarily
due to additional income resulting from death benefit claims of $1.9 million.
Other
service fee income primarily consists of Mastermoney fees, non-customer debit
card fees, other merchant fees, mortgage servicing income and mortgage placement
income. Other service fee income increased for the second quarter of 2008 over
2007 primarily due to increases in Mastermoney fees, merchant fees and
renegotiated contacts with service providers.
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
the prior year primarily due to a $69 thousand increase in the sale of loans
and
leases as detailed below.
Gains
on Sale of Assets
Sales
of
$3.9 million in loans and leases during the six months ended June 30, 2008
resulted in gains of $110 thousand compared to sales of $1.6 million for
gains of $41 thousand for the six months ended June 30, 2007.
During
the six months ended June 30, 2008, approximately $14.7 million of securities
were sold recognizing gains of $78 thousand. Additionally, the Corporation
realized an impairment charge of $235 thousand on its equity portfolio during
the six-month ended June 30, 2008. The Corporation determined that it was more
likely than not that the equity securities would not regain market value due
to
the financial stability of the underlying companies. The Corporation carefully
monitors all of its equity securities and has not taken impairment losses on
certain other under-water equity securities, at this time, as the financial
performance of the underlying companies is not indicative of the market
deterioration of their stock and it is more likely than not that the market
value of the equity securities will recover to the Corporation’s cost basis in
the individual securities. Additionally, the Corporation has the positive intent
and ability to hold those securities until such recovery occurs. During the
six
months ended June 30, 2007, the Corporation sold $21.8 million in
securities that resulted in $51 thousand in net gains.
Non-interest
Expense
The
operating costs of the Corporation are known as non-interest expense, and
include, but are not limited to, salaries and benefits, equipment expense,
and
occupancy costs. Expense control is very important to the management of the
Corporation, and every effort is made to contain and minimize the growth of
operating expenses.
The
following table presents noninterest expense for the periods
indicated:
($ in thousands)
|
|
For the Six Months Ended
June 30,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Salaries and benefits
|
|
$
|
16,187
|
|
$
|
15,634
|
|
$
|
553
|
|
|
3.5
|
%
|
Net
occupancy
|
|
|
2,577
|
|
|
2,437
|
|
|
140
|
|
|
5.7
|
|
Equipment
|
|
|
1,565
|
|
|
1,603
|
|
|
(38
|
)
|
|
(2.4
|
)
|
Marketing
and advertising
|
|
|
721
|
|
|
408
|
|
|
313
|
|
|
76.7
|
|
Other
|
|
|
7,643
|
|
|
6,411
|
|
|
1,232
|
|
|
19.2
|
|
Total
non-interest expense
|
|
$
|
28,693
|
|
$
|
26,493
|
|
$
|
2,200
|
|
|
8.3
|
|
Salaries
and benefits increased due to increases in special effort awards and stock-based
compensation expense. Net occupancy costs increased due to increases in rental
expense on leased properties. This increase was partially offset slightly by
an
increase in rental income on leased office space.
Equipment
expense decreased slightly due to the reduction of furniture and equipment
rental costs and depreciation expense of capitalized furniture and equipment.
These decreases were offset by increases in computer software licenses and
maintenance. Marketing and advertising expenses increased primarily due to
the
Corporation’s UnivestOne campaign which was launched in the second quarter of
2008 to increase awareness of its on-line banking website. Other expenses
increased primarily due to expense associated with a claim under a
rent-a-captive arrangement of $349 thousand and fee expense of
$257 thousand associated with student loans; both charges are not recurring
in nature. Increases in consultant fees also contributed to the increase in
other expenses.
Tax
Provision
The
provision for income taxes was $3.5 million for the first six months ended
June
30, 2008 compared to $4.5 million in 2007, at effective rates of 21.98% and
26.62%, 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 six-month periods
is primarily due to death benefit claims on bank-owned life insurance.
Financial
Condition
Assets
Total
assets increased $40.2 million since December 31, 2007. The increase was
primarily due to net growth in total loans and leases, investment securities
and
net premises and equipment. The following table presents the assets for the
periods indicated:
|
|
At June 30,
|
|
At December 31,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Cash,
deposits and federal funds sold
|
|
$
|
45,016
|
|
$
|
59,385
|
|
$ |
(14,369
|
)
|
|
(24.2
|
)
|
Investment
securities
|
|
|
429,844
|
|
|
423,448
|
|
|
6,396
|
|
|
1.5
|
|
Total
loans and leases
|
|
|
1,398,269
|
|
|
1,355,442
|
|
|
42,827
|
|
|
3.2
|
|
Reserve
for loan and lease losses
|
|
|
(13,713
|
)
|
|
(13,086
|
)
|
|
(627
|
)
|
|
4.8
|
|
Premises
and equipment, net
|
|
|
32,280
|
|
|
27,977
|
|
|
4,303
|
|
|
15.4
|
|
Goodwill
and other intangibles, net
|
|
|
46,950
|
|
|
47,081
|
|
|
(131
|
)
|
|
(0.3
|
)
|
Cash
surrender value of insurance policies
|
|
|
46,573
|
|
|
46,689
|
|
|
(116
|
)
|
|
(0.2
|
)
|
Accrued
interest and other assets
|
|
|
27,440
|
|
|
25,569
|
|
|
1,871
|
|
|
7.3
|
|
Total
assets
|
|
$
|
2,012,659
|
|
$
|
1,972,505
|
|
$
|
40,154
|
|
|
2.0
|
|
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
cash, deposits and federal funds sold decreased primarily due to a decrease
of
$28.6 million in customer deposits. Total investments increased primarily due
to
security purchases of $272.9 million that were partially offset by
maturities of $151.0 million and sales and calls of $112.2 million.
Loans
and Leases
Total
loans and leases increased in the six months ended June 30, 2008 due to
increases in commercial, financial and agricultural loans of $39.0 million,
real
estate construction loans of $5.0 million and lease financings of
$22.7 million. These increases were partially offset by decreases in real
estate commercial loans of $6.2 million, real estate residential loans of $6.3
million and loans to individuals of $9.9 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 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
June
30, 2008, $6.9 million at December 31, 2007 and $7.9 million at June 30,
2007 and consist mainly of commercial loans and real estate related commercial
loans. For the six months ended June 30, 2008 and 2007, nonaccrual loans and
leases resulted in lost interest income of $297 thousand and $396 thousand,
respectively. Loans and leases 90 days or more past due totaled $3.0 million
at
June 30, 2008, $1.9 million at December 31, 2007 and $1.4 million at June 30,
2007. There was no other real estate owned at June 30, 2008 and December 31,
2007. However, at June 30, 2007, other real estate owned totaled $333 thousand.
The Corporation's ratio of nonperforming assets to total loans and leases and
other real estate owned was 0.75% at June 30, 2008, 0.65% at December 31, 2007
and 0.69% at June 30, 2007.
At
June
30, 2008, the recorded investment in loans and leases that are considered to
be
impaired under SFAS 114 was $7.0 million, all of which were on a nonaccrual
basis; the related reserve for loan and lease losses for those credits was
$2.0 million. At December 31, 2007, the recorded investment in loans and
leases that are considered to be impaired under SFAS 114 was $6.9 million,
all
of which were on a nonaccrual basis. The related reserve for loan and lease
losses for those credits was $1.8 million. At June 30, 2007, the recorded
investment in loans and leases that are considered to be impaired under SFAS
114
was $7.9 million and the related reserve for loan and lease losses for
those credits was $2.5 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 loan and lease loss experience, current
economic conditions and trends, and the volume, growth, and composition of
the
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 loans and leases,
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 and leases 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 and 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 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.
Wholesale
leasing portfolios are purchased by the Bank’s subsidiary, Univest Capital, Inc.
Credit losses on these purchased portfolios are largely the responsibility
of
the seller up to pre-set dollar amounts initially equal to 10 to 20 percent
of
the portfolio purchase amount. The dollar amount of recourse for purchased
portfolios is inclusive of cash holdbacks and purchase discounts.
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 loan and lease losses. This
evaluation is inherently subjective, as it requires estimates including the
amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change. Additions to the reserve
arise from the provision for loan 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 loans and leases are reported at the present value
of
expected future cash flows using the loan's initial effective interest rate,
or
at the loan's observable market price or the fair value of the collateral if
the
loan is collateral dependent.
The
reserve for loan and lease losses consists of an allocated reserve and
unallocated reserve categories. The allocated reserve is comprised of reserves
established on specific loans and leases, and class reserves based on historical
loan and lease loss experience, current trends, and management assessments.
The
unallocated reserve is based on both general economic conditions and other
risk
factors in the Corporation’s individual markets and portfolios.
The
specific reserve element is based on a regular analysis of impaired commercial
and real estate loans. For these loans, 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 loan and lease grading process
in
conjunction with associated allowance factors. The Corporation revises the
class
allowance factors whenever necessary, but no less than quarterly, 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 in categories with historical
loss
experience.
The
reserve for loan and lease losses increased $627 thousand from December 31,
2007
to June 30, 2008 primarily due to loan growth, deterioration of underlying
collateral and economic factors. 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 0.98% at June 30, 2008 and 0.97% at December 31, 2007.
Goodwill
and Other Intangible Assets
The
Corporation has goodwill of $44.6 million, which is deemed to be an indefinite
intangible asset and in accordance with SFAS No. 142, “Goodwill and Other
Intangible Assets” (“SFAS 142”), is no longer amortized. The Corporation also
has intangible assets due to bank and branch acquisitions, core deposit
intangibles, covenants not to compete (in favor of the Corporation), customer
related 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.
In
accordance with SFAS 142, the Corporation conducts an annual impairment analysis
on all intangible assets during the fourth quarter to determine if impairment
of
the asset exists. Additionally, throughout the year, the Corporation reviews
its
intangible assets for indicators of impairment in accordance with SFAS 142.
At
June 30, 2008, there was no impairment indicated.
Liabilities
Total
liabilities increased since December 31, 2007 primarily due to an increase
in
borrowings, partially offset by a decrease in deposits. The following table
presents the liabilities for the periods indicated:
|
|
At June 30,
|
|
At December 31,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Deposits
|
|
$
|
1,504,007
|
|
$
|
1,532,603
|
|
$ |
(28,596
|
)
|
|
(1.9
|
)%
|
Borrowings
|
|
|
275,343
|
|
|
208,729
|
|
|
66,614
|
|
|
31.9
|
|
Accrued
expenses and other liabilities
|
|
|
30,171
|
|
|
32,447
|
|
|
(2,276
|
)
|
|
(7.0
|
)
|
Total
liabilities
|
|
$
|
1,809,521
|
|
$
|
1,773,779
|
|
$
|
35,742
|
|
|
2.0
|
|
Deposits
Total
deposits decreased at the Bank primarily due to decreases in money market
savings accounts of $69.8 million, and a decrease in time deposits of $7.4
million. These decreases were partially offset by increases in regular savings
of $48.1 million.
Borrowings
Long-term
borrowings at June 30, 2008, included $7.5 million in Subordinated Capital
Notes, $20.6 million of Trust Preferred Securities, and $94.5 million in
long-term borrowings from the FHLB. The consolidated balance sheet also includes
an $860 thousand fair market value adjustment relating to FHLB long-term
borrowings acquired in the First County Bank and Suburban Community Bank
acquisitions. Long-term borrowings increased due to the issuance of an
additional $10.0 million in FHLB borrowings. Short-term borrowings
typically include federal funds purchased and short-term FHLB borrowings.
Short-term borrowings increased due to advances in short-term FHLB borrowings
of
$36.1 million and advances in federal funds purchased of $26.7 million;
these increases were partially offset by decreases due to a decline in the
sweep
accounts of $5.2 million.
Shareholders'
Equity
Total
shareholders’ equity increased since December 31, 2007 primarily due to current
earnings; this increase was partially offset by cash dividends paid and an
increase in accumulated other comprehensive loss.
The
following table presents the shareholders’ equity for the periods
indicated:
|
|
At June 30,
|
|
At December 31,
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
Amount
|
|
Percent
|
|
Common
stock
|
|
$
|
74,370
|
|
$
|
74,370
|
|
$
|
─
|
|
|
─
|
%
|
Additional
paid-in capital
|
|
|
22,625
|
|
|
22,591
|
|
|
34
|
|
|
0.2
|
|
Retained
earnings
|
|
|
149,043
|
|
|
143,066
|
|
|
5,977
|
|
|
4.2
|
|
Accumulated
other comprehensive loss
|
|
|
(3,869
|
)
|
|
(1,768
|
)
|
|
(2,101
|
)
|
|
118.8
|
|
Unearned
Compensation – restricted stock awards
|
|
|
(447
|
)
|
|
(380
|
)
|
|
(67
|
)
|
|
(17.6
|
)
|
Treasury
stock
|
|
|
(38,584
|
)
|
|
(39,153
|
)
|
|
569
|
|
|
(1.5
|
)
|
Total
shareholders’ equity
|
|
$
|
203,138
|
|
$
|
198,726
|
|
$
|
4,412
|
|
|
2.2
|
|
Retained
earnings were favorably impacted by six months of net income of $12.6 million
partially offset by cash dividends of $5.1 million declared during the first
six
months of 2008. Treasury stock decreased primarily due to sales for the employee
stock purchase plan and restricted stock awards. There is a buyback program
in
place that allows the Corporation to purchase an additional 643,782 shares
of
its outstanding common stock in the open market or in negotiated transactions.
Accumulated
other comprehensive loss related to securities of $366 thousand, net of taxes,
is included in shareholders' equity as of June 30, 2008. Accumulated other
comprehensive income related to securities of $1.9 million, net of taxes,
has been included in shareholders' equity as of December 31, 2007. Accumulated
other comprehensive income (loss) related to securities is the unrealized gain
(loss), or the difference between the book value and market value, on the
available-for-sale investment portfolio, net of taxes. The period-to-period
reduction in accumulated other comprehensive income (loss) was primarily a
result of decreases in the market values of mortgage-backed government agency
debt securities, municipal bonds and equity securities.
Accumulated
other comprehensive loss related to pension and other post-retirement benefits
amounted to $3.5 million as of June 30, 2008. Accumulated other
comprehensive loss related to pension and other post-retirement benefits amount
to $3.7 million at December 31, 2007. The change in the accumulated other
comprehensive income loss related to pension and other post-retirement benefits
represent the changes in the actuarial gains and losses and the prior service
costs and credits that arise during the period.
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
2007
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 interest-sensitivity gap analysis and simulation
techniques to quantify its exposure to interest rate risk. The Corporation
uses
the gap analysis 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.
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.
The
Bank
purchases Certificates from PLGIT to augment its short-term fixed funding
sources. The PLGIT deposits are public funds collateralized with a letter of
credit that PLGIT maintains with the FHLB; therefore, Univest National Bank
is
not required to provide collateral on these deposits. At June 30, 2008, the
Bank
had $40.0 million in PLGIT deposits.
The
Corporation, through the Bank, has short-term and long-term credit facilities
with the FHLB with a maximum borrowing capacity of approximately
$294.1 million. At June 30, 2008, outstanding long-term borrowings with
FHLB totaled $94.5 million and there was an outstanding irrevocable standby
letter of credit of $40.5 million. The maximum borrowing capacity changes as
a
function of 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 June 30, 2008, there were no 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 June 30, 2008, 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 presents, as of June 30, 2008,
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.
Recent
Accounting Pronouncements
In
March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“SFAS 161”). SFAS 161 enhances disclosures about fair
value of derivative instruments and their gains or losses and the company’s
objectives and strategies for using derivative instruments and whether or not
they are designated as hedging instruments. SFAS 161 is effective prospectively
for interim periods and fiscal years beginning after November 15, 2008. The
Corporation does not anticipate the adoption of SFAS 161 to have a material
impact on its consolidated financial statements.
In
May
2008, the FASB issued Statement No. 162, "The
Hierarchy of Generally Accepted Accounting
Principles" (SFAS
162).
This
standard identifies the sources of accounting principles and the framework
for
selecting the principles to be used in the preparation of financial statements
of nongovernmental entities that are presented in conformity with generally
accepted accounting principles (GAAP) in the United States (the GAAP
hierarchy). The provisions of SFAS 162 did not have a material impact
on our financial condition and results of operations.
In
June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities”
(EITF
03-6-1). This FSP provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends are participating securities and shall be
included in the computation of earnings per share pursuant to the two class
method. This FSP is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and interim periods within those years.
Upon adoption, a company is required to retrospectively adjust its earnings
per
share data to conform to the provisions in this FSP. The provisions of EITF
03-6-1 are effective for us retroactively in the first quarter ended
March 31, 2009. We are in the process of evaluating the impact of EITF
03-6-1 on the calculation and presentation of earnings per share in our
consolidated 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,
2007.
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
June 30, 2008 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, 2007.
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, 2007 as filed with the Securities and Exchange
Commission on March 6, 2008.
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 June 30, 2008.
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)
|
|
April 1 ─ 30, 2008
|
|
|
20,995
|
|
$
|
20.76
|
|
|
20,995
|
|
|
643,782
|
|
May
1 ─ 31, 2008
|
|
|
16,090
|
|
|
25.63
|
|
|
16,090
|
|
|
643,782
|
|
June
1 ─ 30, 2008
|
|
|
─
|
|
|
─
|
|
|
─
|
|
|
643,782
|
|
Total
|
|
|
37,085
|
|
|
|
|
|
37,085
|
|
|
|
|
|
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 approved for repurchase under the Corporation’s stock
repurchase program is 643,782.
|
|
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
|
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 Jeffrey M. Schweitzer Executive Vice President and Chief Financial
Officer, 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 Jeffrey M. Schweitzer, Chief Financial 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:
August 7, 2008
|
/s/
William S. Aichele
|
|
William
S. Aichele, Chairman, President
|
|
and
Chief Executive Officer
|
|
|
Date:
August 7, 2008
|
/s/
Jeffrey M. Schweitzer
|
|
Jeffrey
M. Schweitzer, Executive Vice President,
|
|
and
Chief Financial Officer
|