Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
UVSP > SEC Filings for UVSP > Form 10-Q on 8-Aug-2013All Recent SEC Filings

Show all filings for UNIVEST CORP OF PENNSYLVANIA | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for UNIVEST CORP OF PENNSYLVANIA


8-Aug-2013

Quarterly Report


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. "BP" equates to "basis points"; "N/M" equates to "not meaningful"; "-" equates to "zero" or "doesn't round to a reportable number"; and "N/A" equates to "not applicable." Certain amounts have been reclassified to conform to the current-year presentation.)

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, including those occurring in the U.S. and world financial systems

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 at 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.

Critical Accounting Policies

Management, in order to prepare the Corporation's financial statements in conformity with U.S. generally accepted accounting principles, is required to make estimates and assumptions that affect 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 fair value measurement of investment securities available-for-sale and assessment for impairment of certain investment securities, reserve for loan and lease losses, valuation of goodwill and other intangible assets, mortgage servicing rights, deferred tax assets and liabilities, benefit plans and stock-based compensation as areas with critical accounting policies. For more information on these critical accounting policies, please refer to the Corporation's 2012 Annual Report on Form 10-K.

General

Univest Corporation of Pennsylvania, (the Corporation), is a Bank Holding Company. It owns all of the capital stock of Univest Bank and Trust Co. (the Bank). The Corporation's former subsidiary, Univest Delaware, Inc., was dissolved in the second quarter of 2013.

The Bank is engaged in the general commercial banking business and provides a full range of banking and trust services to its customers. The Bank is the parent company of Delview, Inc., which is the parent company of Univest Insurance, Inc., an independent insurance agency, and Univest Investments, Inc., a full-service broker-dealer and investment advisory firm. The Bank is also the parent company of Univest Capital, Inc., an equipment financing business, and TCG Investment Advisory, a registered investment advisor which provides discretionary investment consulting and management services. Through its wholly-owned subsidiaries, the Bank provides a variety of financial services to individuals, municipalities and businesses throughout its markets of operation.


Table of Contents

Executive Overview

The Corporation's consolidated net income, earnings per share and returns on
average assets and average equity were as follows:



                                                  Three Months Ended                                           Six Months Ended
                                                       June 30,                       Change                       June 30,                      Change
                                                  2013           2012        Amount           Percent         2013          2012        Amount           Percent
(Dollars in thousands, except per share data)

Net income                                      $   4,830       $ 4,763      $    67                 1 %    $ 10,228      $ 10,026      $   202                 2 %
Net income per share:
Basic                                           $    0.29       $  0.28      $  0.01                 4      $   0.61      $   0.60      $  0.01                 2
Diluted                                              0.29          0.28         0.01                 4          0.61          0.60         0.01                 2
Return on average assets                             0.86 %        0.88 %         (2 ) BP           (2 )        0.92 %        0.93 %         (1 ) BP           (1 )
Return on average equity                             6.81 %        6.90 %         (9 ) BP           (1 )        7.24 %        7.30 %         (6 ) BP           (1 )

Net interest income on a tax-equivalent basis for the three months ended June 30, 2013 decreased $107 thousand, or 1% compared to the same period in 2012. The second quarter 2013 net interest margin on a tax-equivalent basis was 3.84%, a decrease of 13 basis points from 3.97% for the second quarter of 2012. Net interest income on a tax-equivalent basis for the six months ended June 30, 2013 was down $399 thousand or 1% compared to the same period in 2012. The tax equivalent net interest margin for the first six months of 2013 was 3.83% compared to 3.96% for the first six months of 2012.

The provision for loan and lease losses increased by $2.1 million and $77 thousand for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012.

Non-interest income increased $3.0 million, or 37% and $3.4 million, or 18% during the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012. Non-interest expense increased $650 thousand, or 3% and $2.0 million, or 5% for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012.

Gross loans and leases grew $18.1 million from December 31, 2012 and deposits increased $7.7 million from December 31, 2012.

Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications decreased to $25.2 million at June 30, 2013 compared to $32.1 million at December 31, 2012 and $36.8 million at June 30, 2012. Nonaccrual loans and leases as a percentage of total loans and leases held for investment were 1.68% at June 30, 2013 compared to 2.17% at December 31, 2012 and 2.51% at June 30, 2012. Net loan and lease charge-offs increased to $4.0 million for the three months ended June 30, 2013 compared to $1.4 million for the same period in the prior year. Net charge-offs for the six months ended June 30, 2013 increased to $5.5 million compared to $4.8 million for the same period in the prior year. Charge-offs occurred primarily in the commercial, financial and agricultural and commercial real estate categories.

On May 1, 2013, the Corporation and its insurance subsidiary, Univest Insurance, Inc., completed the acquisition of John T. Fretz Insurance Agency, Inc., a full-service property and casualty insurance agency providing solutions to both personal and commercial clients. The Corporation paid $2.2 million in cash at closing with additional contingent consideration to be paid in annual installments over the three-year period ended April 30, 2016 based on the achievement of certain levels of revenue. At the acquisition date, the Corporation recorded the estimated fair value of the contingent consideration of $454 thousand in other liabilities. The potential cash payments that could result from the contingent consideration arrangement range from $0 thousand to a maximum of $930 thousand cumulative over the next three years. As a result of the John T. Fretz Insurance Agency, Inc. acquisition, the Corporation recorded goodwill of $1.3 million (inclusive of contingent consideration) and customer related intangibles of $1.3 million.

During the second quarter of 2013, the Corporation repurchased 84 thousand shares of common stock at a cost of $1.4 million under the board approved stock repurchase program. Shares available for future repurchases under the plan totaled 397 thousand at June 30, 2013. Total shares outstanding at June 30, 2013 were 16,683,009.


Table of Contents

Details of the changes in the various components of net income and the balance sheet are further discussed in the sections that follow.

The Corporation earns its revenues primarily from the margins and fees it generates from the lending and depository services it provides as well as fee-based income from trust, insurance, mortgage banking and investment services to customers. 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 of Directors 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 is in a more asset sensitive position; despite increases during the second quarter of 2013, interest rates remain at historically low levels, however, the Corporation anticipates further increases in interest rates over the longer term, which it expects would benefit 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

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 and six months ended June 30, 2013 and 2012. The tax-equivalent net interest margin is tax-equivalent net interest income as a percentage of average interest-earning assets. The tax-equivalent net interest spread represents the difference between the weighted average tax-equivalent yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. The effect of net interest free funding sources represents the effect on the net interest margin of net funding provided by noninterest-earning assets, noninterest-bearing liabilities and shareholders' equity. 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 Investment Asset/Liability Management Committee works to maintain an adequate and stable net interest margin for the Corporation.

Net interest income on a tax-equivalent basis for the three months ended June 30, 2013 decreased $107 thousand, or 1% compared to the same period in 2012. The tax-equivalent net interest margin for the three months ended June 30, 2013 decreased 13 basis points to 3.84% from 3.97% for the three months ended June 30, 2012. Net interest income on a tax-equivalent basis for the six months ended June 30, 2013 decreased $399 thousand, or 1% compared to the same period in 2012. The tax-equivalent net interest margin for the six months ended June 30, 2013 decreased 13 basis points to 3.83% from 3.96% for the six months ended June 30, 2012. The declines in net interest income and net interest margin from the comparable periods in the prior year were primarily due to the re-investment of maturing and called investment securities into lower yielding investments as a result of the lower interest rate environment and lower rates on commercial and residential real estate loans due to re-pricing and the competitive environment. The declines in net interest income and net interest margin were partially offset by favorable re-pricing of savings accounts, customer repurchase agreements and certificates of deposit along with maturities of higher yielding certificates of deposit.


Table of Contents

Table 1 - Average Balances and Interest Rates - Tax-Equivalent Basis



                                                                 Three Months Ended June 30,
                                                      2013                                         2012
                                       Average        Income/       Average         Average        Income/      Average
(Dollars in thousands)                 Balance        Expense        Rate           Balance        Expense        Rate

Assets:
Interest-earning deposits with
other banks                          $    41,903      $     46          0.44 %    $    54,443      $     38         0.28 %
U.S. government obligations              178,110           488          1.10          141,142           492         1.40
Obligations of states and
political subdivisions                   122,503         1,606          5.26          120,350         1,688         5.64
Other debt and equity securities         194,541           944          1.95          188,990           989         2.10

Total interest-earning deposits
and investments                          537,057         3,084          2.30          504,925         3,207         2.55

Commercial, financial and
agricultural loans                       403,490         4,355          4.33          442,385         4,786         4.35
Real estate-commercial and
construction loans                       574,288         6,846          4.78          530,163         6,949         5.27
Real estate-residential loans            252,443         2,436          3.87          249,456         2,597         4.19
Loans to individuals                      42,295           601          5.70           43,931           624         5.71
Municipal loans and leases               137,382         1,743          5.09          137,165         1,881         5.52
Lease financings                          68,411         1,571          9.21           57,175         1,457        10.25

Gross loans and leases                 1,478,309        17,552          4.76        1,460,275        18,294         5.04

Total interest-earning assets          2,015,366        20,636          4.11        1,965,200        21,501         4.40

Cash and due from banks                   61,669                                       37,518
Reserve for loan and lease losses        (26,229 )                                    (31,849 )
Premises and equipment, net               32,611                                       34,395
Other assets                             167,881                                      168,434

Total assets                         $ 2,251,298                                  $ 2,173,698

Liabilities:
Interest-bearing checking deposits   $   264,897            37          0.06      $   232,471            41         0.07
Money market savings                     322,808            78          0.10          309,712           122         0.16
Regular savings                          537,410            78          0.06          503,481           183         0.15
Time deposits                            302,896           962          1.27          364,306         1,308         1.44

Total time and interest-bearing
deposits                               1,428,011         1,155          0.32        1,409,970         1,654         0.47

Short-term borrowings                    100,632            15          0.06          108,233           156         0.58
Subordinated notes and capital
securities                                20,619           183          3.56           22,111           301         5.48

Total borrowings                         121,251           198          0.65          130,344           457         1.41

Total interest-bearing liabilities     1,549,262         1,353          0.35        1,540,314         2,111         0.55

Demand deposits, non-interest
bearing                                  384,089                                      316,471
Accrued expenses and other
liabilities                               33,456                                       39,292

Total liabilities                      1,966,807                                    1,896,077

Shareholders' Equity:
Common stock                              91,332                                       91,332
Additional paid-in capital                64,680                                       61,328
Retained earnings and other equity       128,479                                      124,961

Total shareholders' equity               284,491                                      277,621

Total liabilities and
shareholders' equity                 $ 2,251,298                                  $ 2,173,698

Net interest income                                   $ 19,283                                     $ 19,390

Net interest spread                                                     3.76                                        3.85
Effect of net interest-free
funding sources                                                         0.08                                        0.12

Net interest margin                                                     3.84 %                                      3.97 %

Ratio of average interest-earning
assets to average interest-bearing
liabilities                               130.09 %                                     127.58 %


Table of Contents
                                                                  Six Months Ended June 30,
                                                      2013                                         2012
                                       Average        Income/       Average         Average        Income/      Average
(Dollars in thousands)                 Balance        Expense        Rate           Balance        Expense        Rate

Assets:
Interest-earning deposits with
other banks                          $    41,231      $     81          0.40 %    $    56,948      $     76         0.27 %
U.S. government obligations              176,269           965          1.10          144,144         1,011         1.41
Obligations of states and
political subdivisions                   122,097         3,185          5.26          118,634         3,396         5.76
Other debt and equity securities         197,722         1,839          1.88          191,219         2,223         2.34

Total interest-earning deposits
and investments                          537,319         6,070          2.28          510,945         6,706         2.64

Commercial, financial and
agricultural loans                       420,865         9,031          4.33          441,646         9,528         4.34
Real estate-commercial and
construction loans                       559,657        13,504          4.87          532,121        13,937         5.27
Real estate-residential loans            254,926         4,891          3.87          248,375         5,202         4.21
Loans to individuals                      42,537         1,197          5.67           44,214         1,254         5.70
Municipal loans and leases               135,924         3,459          5.13          135,530         3,702         5.49
Lease financings                          67,251         3,128          9.38           56,911         2,829        10.00

Gross loans and leases                 1,481,160        35,210          4.79        1,458,797        36,452         5.03

Total interest-earning assets          2,018,479        41,280          4.12        1,969,742        43,158         4.41

Cash and due from banks                   50,929                                       36,237
Reserve for loan and lease losses        (25,740 )                                    (31,878 )
Premises and equipment, net               32,827                                       34,347
Other assets                             165,777                                      168,671

Total assets                         $ 2,242,272                                  $ 2,177,119

Liabilities:
Interest-bearing checking deposits   $   254,550            73          0.06      $   226,416            98         0.09
Money market savings                     324,235           158          0.10          310,295           270         0.17
Regular savings                          536,063           154          0.06          501,026           447         0.18
Time deposits                            313,381         2,010          1.29          382,370         2,692         1.42

Total time and interest-bearing
deposits                               1,428,229         2,395          0.34        1,420,107         3,507         0.50

Short-term borrowings                    101,533            32          0.06          113,244           262         0.47
Long-term debt                                -             -             -               220             4         3.66
Subordinated notes and capital
securities                                20,799           472          4.58           22,298           605         5.46

Total borrowings                         122,332           504          0.83          135,762           871         1.29

Total interest-bearing liabilities     1,550,561         2,899          0.38        1,555,869         4,378         0.57

Demand deposits, non-interest
bearing                                  372,936                                      305,269
Accrued expenses and other
liabilities                               33,754                                       39,635

Total liabilities                      1,957,251                                    1,900,773

Shareholders' Equity:
Common stock                              91,332                                       91,332
Additional paid-in capital                64,700                                       61,365
Retained earnings and other equity       128,989                                      123,649

Total shareholders' equity               285,021                                      276,346

Total liabilities and
shareholders' equity                 $ 2,242,272                                  $ 2,177,119

Net interest income                                   $ 38,381                                     $ 38,780

Net interest spread                                                     3.74                                        3.84
Effect of net interest-free
funding sources                                                         0.09                                        0.12

Net interest margin                                                     3.83 %                                      3.96 %

Ratio of average interest-earning
assets to average interest-bearing
liabilities                               130.18 %                                     126.60 %

Notes: 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.

Loans held for sale have been included in the average loan balances.

Tax-equivalent amounts for the three and six months ended June 30, 2013 and 2012 have been calculated using the Corporation's federal applicable rate of 35%.


Table of Contents

Table 2 - 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 income 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 proportionately.



                                            Three Months Ended June 30,                Six Months Ended June 30,
                                                  2013 Versus 2012                         2013 Versus 2012
                                         Volume           Rate                    Volume         Rate
(Dollars in thousands)                   Change          Change       Total       Change        Change        Total

Interest income:
Interest-earning deposits with other
banks                                   $    (10 )      $     18      $    8      $   (25 )    $     30      $      5
U.S. government obligations                  114            (118 )        (4 )        200          (246 )         (46 )
Obligations of states and political
subdivisions                                  30            (112 )       (82 )         95          (306 )        (211 )
Other debt and equity securities              28             (73 )       (45 )         72          (456 )        (384 )

Interest on deposits and investments         162            (285 )      (123 )        342          (978 )        (636 )

Commercial, financial and
agricultural loans                          (410 )           (21 )      (431 )       (474 )         (23 )        (497 )
Real estate-commercial and
construction loans                           562            (665 )      (103 )        682        (1,115 )        (433 )
Real estate-residential loans                 32            (193 )      (161 )        130          (441 )        (311 )
Loans to individuals                         (22 )            (1 )       (23 )        (50 )          (7 )         (57 )
Municipal loans and leases                     3            (141 )      (138 )         11          (254 )        (243 )
Lease financings                             271            (157 )       114          484          (185 )         299

Interest and fees on loans and leases        436          (1,178 )      (742 )        783        (2,025 )      (1,242 )

Total interest income                        598          (1,463 )      (865 )      1,125        (3,003 )      (1,878 )

Interest expense:
. . .
  Add UVSP to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for UVSP - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.