SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission File number 0-7617 UNIVEST CORPORATION OF PENNSYLVANIA (Exact name of registrant as specified in its charter) Pennsylvania 23-1886144 (State or other jurisdiction of (IRS Employer Identification No.) incorporation of organization) Broad & Main Streets Souderton, Pennsylvania 18964 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (215) 721-2400 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $5 par value 3,137,016 (Title of Class) (Number of shares outstanding at 2/29/96) The approximate aggregate market value of voting stock held by non affiliates of the registrant is $91,280,305 as of February 29, 1996. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has bee subject to such filing requirements for the past ninety days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10- K or any amendment to this form 10-K. ( ) Parts I and Part III incorporate information by reference from the proxy statement for the annual meeting of shareholders on April 9, 1996. Parts I, II, IV incorporate information by reference from the annual report to shareholders for the year ended December 31, 1995. PART I Item 1. Business General Univest Corporation of Pennsylvania ("Univest") is a Pennsylvania corporation organized in 1973 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956. It owns all of the capital stock of Union National Bank and Trust Company ("Union National Bank"), Pennview Savings Bank, Univest Realty Corporation, Univest Leasing Corporation, Univest Mortgage Company, Univest Financial Planning Corporation, Univest Insurance Company, and Univest Electronic Services Corporation. Union National Bank is engaged in the general commercial banking business and provides a full range of banking services and trust services to its customers. Pennview Savings Bank is engaged in attracting deposits from general public and investing such deposits primarily in loans secured by residential properties, consumer loans, and to a lesser extent, loans secured by commercial real estate and in commercial business loans. The Realty Corporation was established to obtain, hold and operate properties for the holding company and its subsidiaries. Both the Leasing Corporation and Univest Mortgage Company are inactive. Univest Insurance Company offers credit-related reinsurance plans. Univest Electronic Services Corporation was established to provide data processing services to Union National Bank in Souderton and other subsidiaries of Univest Corporation of Pennsylvania. Union National Bank and Trust Company, with its head office in Souderton, Montgomery County, serves the area through twenty (20) banking offices, two off-premises automated teller machines and offices located in ten retirement homes. Thirteen banking offices are in Montgomery County and seven banking offices are in Bucks County. One off-premises automated teller machine is located in Bucks County and the other is located in Montgomery County. Pennview Savings Bank conducts operations through five full-service offices located in Souderton, Hatfield, Franconia, Silverdale and Montgomeryville, Pennsylvania and offices located in two retirement homes. As of January 31, 1996, Univest and its subsidiaries employed four hundred and twenty-two (422) persons. Competition Univest's service areas are characterized by intense competition for banking business among commercial banks, savings and loan associations, mutual savings banks and other financial institutions. Each of the Corporation's subsidiary banks actively compete with such banks and financial institutions for local retail and commercial accounts. Union National Bank and Pennview Savings Bank are also subject to competition from other local banks and financial institutions in Bucks and Montgomery Counties, as well as other financial institutions outside their primary service area. In competing with other banks, savings and loan associations, and other financial institutions, Union National Bank and Pennview Saving Bank seek to provide personalized services through management's knowledge and awareness of their service area, customers and borrowers. Management believes this knowledge and awareness provides a business advantage in serving the retail depositors and the small and mid-sized commercial borrowers that comprise Union National Bank's and Pennview Savings Bank's customer base. Other competitors, including credit unions, consumer finance companies, insurance companies and mutual funds, compete with certain lending and deposit gathering services offered by Union National Bank and Pennview Savings Bank. Supervision and Regulation Union National Bank is subject to supervision and is regularly examined by the Office of the Comptroller of the Currency. Also, Union National Bank is subject to examination by the Federal Deposit Insurance Corporation and by the Federal Reserve System. Pennview Savings Bank is regulated by the Federal Deposit Insurance Corporation and by the Pennsylvania Department of Banking. Univest is subject to the provisions of the Bank Holding Company Act of 1956, as amended, and is registered pursuant to its provisions. The Act prohibits the acquisition by a bank holding company of a direct or indirect ownership of more than five percent of the voting shares of any bank within the United States without prior approval of the Board of Governors of the Federal Reserve System, and also prohibits the granting of such approval in respect to any bank within the United States located outside of the state where the bank holding company's principal operations are conducted, unless the acquisition is specifically authorized by the statutes of the state in which the bank is located. With certain exceptions, a bank holding company is prohibited from acquiring direct or indirect ownership or control of more than five percent of the voting shares of any company which is not a bank, and from engaging directly or indirectly in businesses unrelated to the business of banking, or managing, or controlling banks. Under the Bank Holding Company Act Amendments of 1970, which became effective on December 3, 1970, the Federal Reserve Board may approve the acquisition by bank holding companies of non bank subsidiaries to engage in activities that are closely related to banking and are in the public interest. The amendments include a provision which prohibits banks, bank holding companies and subsidiaries from engaging in tie-in arrangements. Bank tie-ins involving a loan, discount, deposit, or trust service are specifically exempted, and the Federal Reserve Board is authorized to make exceptions by regulations. As a bank holding company, Univest is subject to the reporting requirements of the Board of Governors of the Federal Reserve System, and Univest, together with its subsidiaries, is subject to examination by the Board. The Federal Reserve Act limits the amount of credit which a member bank may extend to its affiliates, and the amount of its funds which it may invest in or lend on the collateral of the securities of its affiliates. Under the Federal Deposit Insurance Act, insured banks are subject to the same limitations. FDICIA In December 1991, FDICIA was enacted, which substantially revised the bank regulatory and funding provisions of the Federal Deposit Insurance Act and made revisions to several other federal banking statutes. Among other things, FDICIA requires the federal banking agencies to take "prompt corrective action" in respect of depository institutions that do not meet minimum capital requirements in order to minimize losses to the FDIC. FDICIA establishes five capital tiers: "well capitalized", "adequately capitalized", "undercapitalized", "significantly undercapitalized" and "critically undercapitalized" and imposes significant restrictions on the operations of a bank that is not at least adequately capitalized. A depository institution's capital tier will depend upon where its capital levels are in relation to various relevant capital measures, which will include a risk-based capital measure, a leverage ratio capital measure and certain other factors. Under the requirements, Univest has Tier I capital ratios of 13.8% and 12.7%, and total risk-based capital ratio of 15.0% and 14.3% at December 31, 1995 and 1994, respectively. These ratios place Univest in the "well-capitalized" category under regulatory standards. Regulations promulgated under FDICIA also require that an institution monitor its capital levels closely and notify its appropriate federal banking regulators within 15 days of any material events that affect the capital position of the institution. FDICIA directs that each federal banking agency prescribe standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses, a minimum ratio of market value to book value for publicly traded shares (if feasible) and such other standards as the agency deems appropriate. FDICIA also contains a variety of other provisions that affect the operations of the Corporation, including new reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, certain restrictions on investments and activities of state-chartered insured banks and their subsidiaries and limitations on credit exposure between banks. Finally, FDICIA limits the discretion of the FDIC with respect to deposit insurance coverage by requiring that, except in very limited circumstances, the FDIC's course of action in resolving a problem bank must constitute the "least costly resolution" for the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF"), as the case may be. The FDIC has interpreted this standard as requiring it not to protect deposits exceeding the $100,000 insurance limit in more situations than was previously the case. In addition, FDICIA prohibits payments by the FDIC on uninsured deposits in foreign branches of U.S. banks and will severely limit the "too big to fail" doctrine under which the FDIC formerly protected deposits exceeding the $100,000 insurance limit in certain failed banking institutions. Implementation of FDICIA has not had a material impact on the business or operations of the Corporation. SAIF Legislation Spurred by pressures of the budget reconciliation process, both the House and Senate Banking Committees approved separate bills during the week of September 18, 1995 that include, among other items, a special one- time assessment to recapitalize the Savings Association Insurance Fund (SAIF) of which Pennview Savings Bank is a member. The one-time assessment of 85 basis points of insured deposits as of March 31, 1995 is intended to recapitalize the SAIF to the required 1.25% of insured deposits and could be payable in early 1996. Should the bill pass in its present form, the Corporation would be required to make a one-time pretax charge to earnings of approximately $1.1 million. Succeeding deposit premiums beginning in 1996 may be reduced from the current level of 23 basis points to 4.5 basis points which will benefit the Corporation in future periods. Credit and Monetary Policies Union National Bank is affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve System. An important function of the policies is to curb inflation and control recessions through control of the supply of money and credit. The Federal Reserve System uses its powers to regulate reserve requirements of member banks, the discount rate on member-bank borrowings, interest rates on time and savings deposits of member banks, and to conduct open-market operations in United States Government securities to exercise control over the supply of money and credit. The policies have a direct effect on the amount of bank loans and deposits and on the interest rates charged on loans and paid on deposits, with the result that the policies have a material effect on bank earnings. Future policies of the Federal Reserve Bank System and other authorities cannot be predicted, nor can their effect on future bank earnings be predicted. Pennview Savings Bank is a member of the Federal Home Loan Bank System which consists of 12 regional Federal Home Loan Banks, with each subject to supervision and regulation by the newly created Federal Housing Finance Board. The Federal Home Loan Banks provide a central credit facility primarily for member institutions. The Bank, as a member of the Federal Home Loan Bank of Pittsburgh, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank in an amount equal to at least 1% of the aggregate principal amount of its unpaid residential mortgage loans, home purchase contracts and similar obligations at the beginning of each year, or 5% of its advances (borrowings) from the Federal Home Loan Bank of Pittsburgh, whichever is greater. Interstate Banking Legislation was passed, and signed by President Clinton on September 29, 1994, which will eliminate many currently existing restrictions on interstate banking. The legislation will authorize interstate acquisition of banks by bank holding companies without geographic limitations one year after enactment. Beginning June 1, 1997, the legislation will allow interstate branching in states that have not passed legislation prohibiting interstate branching, except that de novo branching or acquisition of a branch in another state without acquisition of the entire bank will only be permitted if expressly permitted by the law of the state in which such branch would be located. Interstate branching prior to June 1, 1997 will be possible in states that pass laws affirmatively authorizing such interstate branching. The effect of this legislation on Univest cannot be predicted at this time. Statistical Disclosure Univest was incorporated under Pennsylvania law in 1973 for the purpose of acquiring the stock of Union National Bank and subsequently to engage in other business activities permitted under the Bank Holding Company Act. On September 28, 1973, pursuant to an exchange offer, Univest acquired the outstanding stock of Union National Bank. The following financial data appearing on pages 6 through 17 reflects consolidated information. Where averages are reported, daily information has been used for all subsidiaries. <TABLE> <CAPTION> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE I. DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL 1995 1995/1994 1994 Average Income/ Avg. Volume Rate Average Income/ Avg. ASSETS: Balance Expense Rate Change Change Total Balance Expense Rate <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Cash and due from banks 30,645 $ 32,914 Time deposits with other banks 406 23 5.7 $ (89) (6) (95) 1,955 $ 118 6.0 U.S. Government obligations 174,355 10,445 6.0 2,763 1,278 4,041 127,836 6,405 5.0 Oblig. of states & political sub. 2,535 118 4.7 19 4 23 2,091 95 4.5 Other securities 14,697 976 6.6 (243) 295 52 18,447 924 5.0 Federal Reserve bank stock 746 45 6.0 1 (1) 0 742 45 6.1 Federal funds sold and other short-term investments 10,527 616 5.9 (290) 245 (45) 15,293 661 4.3 ------- ------- ------ ------ Total investments 202,860 12,200 6.0 164,409 8,130 4.9 ------- ------- --- ------- ------- --- Commercial loans 190,451 17,679 9.3 (650) 2,549 1,899 196,065 15,780 8.0 Mortgage loans 292,751 24,994 8.5 60 589 649 294,251 24,345 8.3 Installment loans 53,702 4,657 8.7 674 230 904 45,934 3,753 8.2 Home equity loans 18,501 2,070 11.2 (188) 342 154 20,105 1,916 9.5 Municipal loans 28,415 1,922 6.8 (107) 149 42 29,851 1,880 6.3 -------- ------- -------- ------ Gross loans 583,820 51,322 8.8 586,206 47,674 8.1 -------- ------- ---- ------ --- Less: valuation reserve (8,965) (8,660) --------- ------- Net loans 574,855 577,546 -------- Property, net 14,857 13,346 Other assets 20,409 19,426 --------- -------- Total assets $844,032 $809,596 --------- -------- <CAPTION> 1995 1995/ 1994 1994 LIABILITIES: Average Income/ Avg. Volume Rate Average Income/ Avg. Balance Expense Rate Change Change Total Balance Expense Rate <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Demand deposits 99,547 $ 97,750 -------- -------- Interest checking deposits 72,886 1,266 1.7 $ 13 (73) $ (60) 73,160 $1,326 1.8 Money market savings 67,858 1,936 2.9 (494) 339 (155) 84,874 2,092 2.5 Regular savings 125,362 3,078 2.5 (74) 0 (74) 128,628 3,152 2.5 Unifund savings 57 1 1.8 0 (0) 0 46 1 2.2 Certificates of deposit 299,498 16,168 5.4 1,452 2,448 3,900 271,994 12,267 4.5 Time open & club accounts 30,576 1,600 5.2 769 256 1,025 15,988 575 3.6 -------- -------- -------- -------- Total time, int., and inv. checking deposits 596,237 24,049 4.0 574,690 19,413 3.4 -------- ------ --- ------- -------- Total deposits 695,784 672,440 -------- ------- Federal funds purchased 1,093 67 6.1 25 17 42 690 25 3.6 Loans & securities sold under agreement to repurchase 37,760 1,274 3.4 22 222 244 37,047 1,030 2.8 Other borrowings 5,338 268 5.0 (16) 17 1 5,654 267 4.7 Subordinated notes 2,986 305 10.2 (228) (5) (233) 5,229 538 10.3 ------- ------- -------- -------- Total borrowings 47,177 1,914 4.1 48,620 1,860 3.8 ------- ------- --- -------- -------- ---- Accrued expenses & other liab. 15,979 12,072 ------- -------- Total liabilities 758,940 733,132 -------- -------- SHAREHOLDERS' EQUITY: - -------------------- Common stock 15,727 15,717 Capital surplus 8,163 8,090 Retained earnings 61,202 52,657 -------- -------- Total shareholders' equity 85,092 76,464 -------- -------- Total liabilities and share- holders' equity $844,032 $809,596 -------- -------- Weighted avg. yield on interest-earning assets 8.2 % 7.5 % Weighted avg. rate paid on interest-bearing liab. 4.0 % 3.4 % Net interest margin on weighted average interest- 4.8 % 4.6 % earning assets <CAPTION> 1994 1994/1993 1993 Average Income/ Avg. Volume Rate Average Income/ Avg. ASSETS: Balance Expense Rate Change Change Total Balance Expense Rate <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Cash and due from banks $ 32,914 $ 33,927 Time deposits with other banks 1,955 $ 118 6.0 $ (73) 11 (62) 3,146 $ 180 5.7 U.S. Government obligations 127,836 6,405 5.0 881 (98) 783 109,629 5,622 5.1 Oblig. of states & political sub. 2,091 95 4.5 (40) 10 (30) 2,964 125 4.2 Other securities 18,447 924 5.0 (1,087) (196) (1,283) 39,903 2,207 5.5 Federal Reserve bank stock 742 45 6.1 6 0 6 649 39 6.0 Federal funds sold and other short-term investments 15,293 661 4.3 75 179 254 13,528 407 3.0 -------- ------ ------- -------- Total investments 164,409 8,130 4.9 166,673 8,400 5.0 -------- ------ ---- ------- -------- ---- Commercial loans 196,065 15,780 8.0 155 875 1,030 195,244 14,750 7.6 Mortgage loans 294,251 24,345 8.3 1,549 (898) 651 275,165 23,694 8.6 Installment loans 45,934 3,753 8.2 558 (130) 428 39,302 3,325 8.5 Home equity loans 20,105 1,916 9.5 (278) 214 (64) 22,958 1,980 8.6 Municipal loans 29,851 1,880 6.3 (129) (64) (193) 31,726 2,073 6.5 -------- ------- ------- ------- --- Gross loans 586,206 47,674 8.1 564 ,395 45,822 8.1 -------- ------ --- Less: valuation reserve (8,660) (8,507) -------- -------- Net loans 577,546 555,888 -------- --------- Property, net 13,346 12,150 Other assets 19,426 15,016 -------- --------- Total assets $809,596 $786,800 -------- 1994 1994/ 1993 1993 <CAPTION> LIABILITIES: Average Income/ Avg. Volume Rate Average Income/ Avg. Balance Expense Rate Change Change Total Balance Expense Rate <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Demand deposits 97,750 $ 90,485 -------- ------- Interest checking deposits 73,160 $ 1,326 1.8 $ 75 (197) (122) 68,444 $ 1,448 2.1 Money market savings 84,874 2,092 2.5 (422) (236) (658) 100,351 2,750 2.7 Regular savings 128,628 3,152 2.5 345 (285) 60 114,261 3,092 2.7 Unifund savings 46 1 2.2 (10) (5) (15) 499 16 3.2 Certificates of deposit 271,994 12,267 4.5 (432) (811) (1,243) 279,627 13,510 4.8 Time open & club accounts 15,988 575 3.6 153 83 236 11,864 339 2.9 -------- -------- -------- -------- Total time, int., and inv. checking deposits 574,690 19,413 3.4 575,046 21,155 3.7 -------- -------- --------- ------ --- Total deposits 672,440 665,531 -------- --------- Federal funds purchased 690 25 3.6 10 1 11 427 14 3.3 Loans & securities sold under agreement to repurchase 37,047 1,030 2.8 130 124 254 32,515 776 2.4 Other borrowings 5,654 267 4.7 35 6 41 4,898 226 4.6 Subordinated notes 5,229 538 10.3 (103) 43 (60) 6,235 598 9.6 -------- -------- -------- ------ Total borrowings 48,620 1,860 3.8 44,075 1,614 3.7 -------- -------- ---- -------- ------ --- Accrued expenses & other liab. 12,072 7,877 -------- -------- Total liabilities 733,132 717,483 -------- -------- SHAREHOLDERS' EQUITY: - -------------------- Common stock 15,717 13,822 Capital surplus 8,090 8,090 Retained earnings 52,657 47,405 -------- -------- Total shareholders' equity 76,464 69,317 -------- -------- Total liabilities and share- holders' equity 809,596 $786,800 -------- -------- Weighted avg. yield on interest-earning assets 7.5 % 7.5 % Weighted avg. rate paid on interest-bearing liab. 3.4 % 3.7 % Net interest margin on weighted average interest- 4.6 % 4.3 % earning assets </TABLE> Note: (1) For rate calculation purposes, average loan categories include unearned discount. (2) Nonaccrual loans have been included in the average loan balances. (3) Certain amounts have been reclassified to conform with the current-year presentation. (4) Included in interest income are loan fees of $1,310,000 for 1995 $1,766,000 for 1994 and $1,897,000 for 1993. (5) Table I has not been tax equated. *The change due to the volume/rate variance and average volume and percent roundings have been allocated to volume. <TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE II. INVESTMENT PORTFOLIO (BOOK VALUE) (Thousands of dollars) <CAPTION> CARRYING AMOUNT OF INVESTMENT SECURITIES December 31, December 31, December 31, 1995 (a) 1994 (a) 1993 ------------- ------------ ------------ <S> <C> <C> <C> U.S. Treasury, government corporations $206,117 $183,580 $108,551 and agencies State and political subdivisions 3,873 2,529 1,505 Mortgage-backed securities 9,256 10,843 24,399 Other 5,273 5,108 4,872 -------- --------- --------- Total $224,519 $202,060 $139,327 <CAPTION> MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELD December 31, December 31, December 31, December 31, December 31, December 31, 1995 1995 1994 1994 1993 1993 AMOUNT (a) YIELD (b) AMOUNT (a) YIELD (b) AMOUNT YIELD (b) <S> <C> <C> <C> <C> <C> <C> 1 YEAR OR LESS $52,749 5.85% $49,098 4.52% $43,725 5.01% 1 YEAR - 5 YEARS 159,807 6.19% 141,731 6.28% 73,264 4.83% 5 YEARS - 10 YEARS 5,315 5.65% 3,833 6.42% 1,229 5.58% AFTER 10 YEARS 6,648 6.44% 7,398 6.29% 21,109 5.59% -------- --------- ---------- --------- --------- -------- Total $224,519 6.10% $202,060 5.85% $139,327 5.01% </TABLE> Refer to Note 3 to the consolidated financial statements. a. Held to maturity and available for sale portfolio's are combined. b. Weighted average yield is calculated by dividing income, which has not been tax equated on tax-exempt obligations, within each maturity range by outstanding amount of the related investment. <TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE III. LOAN PORTFOLIO, PART A. TYPES OF LOANS (Thousands of Dollars) <CAPTION> December 31, December 31, December 31, December 31, December 31, 1995 1994 1993 1992 1991 <S> <C> <C> <C> <C> <C> Real estate loans Construction and land development $54,840 $50,954 $60,437 $50,104 $46,753 Secured by 1-4 family residential properties 216,180 221,098 200,018 165,313 159,387 Other real estate loans 157,925 160,234 164,304 174,333 166,656 Commercial and industrial loans 120,692 114,103 115,375 116,847 124,014 Loans to individuals 40,648 36,810 34,130 42,518 48,458 All other loans 4,084 5,639 4,402 2,918 6,087 --------- --------- -------- -------- -------- Total loans $594,369 $588,838 $578,666 $552,033 $551,355 </TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE III. LOAN PORTFOLIO, PART B, MATURITIES AND SENSITIVITY CHANGES IN INTEREST RATES (Thousands of Dollars) The commercial mortgages and Industrial Development Authority mortgages that are presently being written for a three (3) year term with a monthly payment based on a fifteen (15) year amortization schedule. At each three- year anniversary date of the mortgages, the interest rate is renegotiated and the term of the loan is extended for an additional three years. At each three-year anniversary date of the mortgages, the Bank also has the right to require payment in full. These are included in the "Due in One to Five Years" category on issue. The borrower has the right to prepay the loan at any time. The residential mortgages are presently being written on a one (1) or three (3) year rollover basis. These are included in the "Due in One to Five Years" category on issue. Fixed rate residential mortgages are also being written for terms of 15 and 30 years and are included in the "Due in Over Five Years" category. <TABLE> <CAPTION> As of December 31, 1995 Due in One Due in One Due in Over Year or Less to Five Years Five Years Total <S> <C> <C> <C> <C> Real estate loans Construction and land development $17,781 $24,699 $12,360 $54,840 Secured by 1-4 family residential property 50,220 71,578 94,382 216,180 Other real estate loans 45,742 60,680 51,503 157,925 Commercial and industrial loans 68,094 44,490 8,108 120,692 Loans to individuals 20,669 10,876 9,103 40,648 All other loans 3,495 299 290 4,084 -------- -------- ------- -------- Total loans $206,001 $212,622 $175,746 $594,369 Loans with a predetermined interest rate $68,226 $129,642 $133,413 $331,281 Loans with a floating interest rate 137,775 82,980 42,333 263,088 -------- -------- -------- -------- $206,001 $212,622 $175,746 $594,369 </TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE III. LOAN PORTFOLIO, PART C. RISK ELEMENTS (Thousands of Dollars) Nonaccrual, Past-Due and Restructured Loans and Other Assets Performance of the entire loan portfolio is reviewed on a regular basis by bank management and loan officers. A number of factors regarding the borrower, such as overall financial strength, collateral values, and repayment ability, are considered in deciding on what actions should be taken when determining the collectibility of interest for accrual purposes. Potential Problem Loans When collectibility of interest and/or principal on a particular loan is questionable, the loan is placed on nonaccrual status. If, at the time a decision is made to cease accruing interest, it is determined that the collection of perviously accrued but unpaid interest is uncertain, unpaid interest is charged against current income. Conversly, if a loan on nonaccrual status is paid in full, including interest, a credit is made to current income. The $6,207 of nonaccruing and restructured loans in 1995 includes $885 which are in accordance with contractual terms. If nonaccrual loans had performed in accordance with their contractual terms, additional interest income of $530 would have been recorded in 1995. Interest income of $43 was recognized on these loans. It should be noted that loans classified as substandard could move into nonaccrual status if the economy continues to slow. It is not possible to estimate a dollar figure that would be added to this problem loan category. Loan Concentrations At December 31, 1995, there were no concentrations of loans exceeding 10% of total loans other than disclosed in Table III, Part A. Other Assets At December 31, 1995, $735 in Other Real Estate Owned was classified as nonperforming. This amount represents all the Other Real Estate Owned. At December 31, 1994 the Corporation had $1,750 in Other Real Estate Owned. <TABLE> <CAPTION> 1995 1994 1993 1992 1991 Principal Principal Principal Principal Principal Balance Balance Balance Balance Balance <S> <C> <C> <C> <C> <C> Nonaccruing loans $5,855 $5,149 $6,991 $14,969 $12,440 ======== ======== ======= ======= ======= Accruing loans 90 days or more past due: Real estate loans Construction and land development 0 0 0 0 59 Secured by 1-4 family dwellings 234 76 87 108 373 Other real estate 93 172 36 259 65 Commercial and industrial loans 0 0 67 345 475 Loans to individuals 174 247 108 177 319 All other loans 0 0 0 0 0 --------- --------- ---------- -------- -------- Total loans, 90 days or more past due 501 495 298 889 1,291 ========= ========= ========== ======== ======== Restructured loans, not included above 352 422 0 0 0 </TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE IV. SUMMARY OF LOAN LOSS EXPERIENCE (Thousands of Dollars) The loan loss reserve is established at a level which management believes is adequate to absorb potential loan losses on the current portfolio. Loans which are currently performing that may pose collectibility problems in the future are considered in the determination of the loan loss reserve as described in Table IV. For financial reporting purposes, the provision for loan losses charged to operating expenses is based upon several factors, including: 1. A continuing review by management and the Bank's Loan Review Committee of the loan portfolio. Loans are reviewed on a individual basis with special attention give to those loans which are believed to possess the possibility of loss exposure, with regard to either principal or interest. 2. The analysis of historical loan loss experience in relation to various types of outstanding loans, particularly in the consumer loan portfolio. 3. Requirements of the Federal Regulatory examinations, at which time certain loans are required to be charged against reserve for loan losses. If, after applying these factors, it is management's opinion that reserves must be increased, additional amounts are provided through a charge to operating expenses. As the accompanying table indicates, the amount of loan loss provision charged to expense for 1995 was $1,895 compared to $1,950 in 1994 and $2,480 in 1993. <TABLE> <CAPTION> 1995 1994 1993 1992 1991 <S> <C> <C> <C> <C> <C> Average amount of loans outstanding $583,398 $585,644 $563,678 $550,649 $532,501 --------- -------- -------- -------- -------- Loan loss reserve at beginning of period $8,876 $7,198 $8,240 $6,735 $6,353 Charge-offs: Real estate loans 1,842 701 1,367 624 198 Commercial and industrial loans 416 615 2,270 871 1,193 Loans to individuals 236 127 215 265 265 Home equity Other 71 ---------- ------------- ----------- ----------- ----------- Total charge-offs 2,494 1,443 3,852 1,831 1,656 ---------- ------------- ----------- ----------- ----------- Recoveries: Real estate loans 316 146 139 52 24 Commercial and industrial loans 157 816 9 298 40 Loans to individuals 75 170 114 75 62 Home equity Other 29 39 68 59 17 ---------- ------------- ----------- ----------- ----------- Total recoveries 577 1,171 330 484 143 ---------- ------------- ----------- ----------- ----------- Net charge-offs 1,917 272 3,522 1,347 1,513 Additions to loan loss reserve 1,895 1,950 2,480 2,852 1,895 --------- ------------- ----------- ----------- ------- Loan loss reserve at end of period $8,854 $8,876 $7,198 $8,240 $6,735 <CAPTION> Loan type Loan type Loan type Loan type Loan type as % as % as % as % as % of loans of loans of loans of loans of loans <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> Amount in reserve by category: Real estate loans 72.2 $817 73.4 $2,999 73.4 $2,468 70.6 $3,705 67.6 $2,355 Commercial and industrial loan 20.3 2,459 19.4 2,495 19.9 2,384 21.2 3,408 22.4 2,807 Loans to individuals 6.8 347 6.3 490 5.9 402 7.7 548 8.8 885 All other loans 0.7 11 1.0 15 0.8 538 0.5 124 1.2 391 Unallocated portion 5,220 2,876 1,406 455 297 Total $8,854 $8,875 $7,198 $8,240 $6,735 Ratio - Net charge-offs versus average loans 0.3% 0.0% 0.6% 0.2% 0.3% </TABLE> Total cash-basis and nonaccrual loans of $5,855 at December 31, 1995, were generally comprised of $1,645 in residential real estate loans, $200 in commercial and industrial loans, and $4,010 in commercial real estate loans. <TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE V. DEPOSITS (Thousands of Dollars) <CAPTION> 1995 1994 1993 <S> <C> <C> <C> A. Average: Noninterest-bearing demand deposits $99,547 $97,750 $90,485 Interest checking 72,886 73,160 68,444 Money Market savings 67,858 84,874 100,351 Savings deposits 125,362 128,628 114,261 Time deposits 330,131 288,028 291,990 ------------ ----------- ----------- Total $695,784 $672,440 $665,531 ============ =========== =========== <CAPTION> B. Year-end balance: ($100 or more) outstanding as of Due 3 months Due 3 - 6 Due 6-12 Due over December 31, 1995 or less months months 12 months ------------ ---------- ----------- ---------- <S> <C> <C> <C> <C> Certificates of deposit $3,441 $3,308 $3,958 $10,269 Other time deposits $25,504 $5,341 $402 $1,338 </TABLE> Note: Univest and its subsidiaries do not have foreign offices or foreign deposits. <TABLE> TABLE VI. RETURN ON EQUITY AND ASSETS (RATIOS) (Shown as percentage) <CAPTION> 1995 1994 1993 ------- ------ ------- <S> <C> <C> <C> Return on assets 1.3 1.3 1.1 Return on equity 13.2 13.2 13.3 Dividend payout ratio 24.9 23.2 23.3 Equity to assets ratio 10.1 9.4 8.2 </TABLE> <TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES INTEREST RATE SENSITIVITY GAP (Thousands of dollars) <CAPTION> Within 1-5 Over 1 Year Years 5 Years <S> <C> <C> <C> Rate Sensitive Interest Earnings Assets Federal funds sold $16,527 Investment securities 62,910 $157,385 $423 Loans 325,676 187,337 75,567 Interest rate swap (10,000) 10,000 ------- ------- ------- 395,113 354,722 75,990 Rate Sensitive Liabilities Interest bearing deposits 326,363 294,405 2,132 Borrowed funds 50,822 Net non-interest bearing funds (a) 152,103 ------- ------- ------- 377,185 294,405 154,235 Excess interest-earning assets (liabilities) 17,928 60,317 (78,245) Cumulative excess interest earning assets (liabilities) $17,928 $78,245 $0 </TABLE> Notes to interest sensitivity analysis: (a) Net non-interest bearing funds is the sum of non-interest bearing liabilities and shareholders' equity minus non-interest earning assets. <TABLE> UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES TABLE VII. SHORT-TERM BORROWINGS (Thousands of Dollars) LOANS AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE <CAPTION> 1995 1994 1993 --------- -------- -------- <S> <C> <C> <C> Balance at December 31 $45,657 $43,768 $28,124 Weighted average interest rate at year end 3.4% 3.3% 2.4% Maximum amount outstanding at any month's end $45,657 $43,768 $39,055 Average amount outstanding during the year $37,760 $37,047 $32,515 Weighted average interest rate during the year 3.4% 2.8% 2.4% </TABLE> Item 2. Properties Univest and its subsidiaries occupy twenty-five properties in Montgomery and Bucks Counties in Pennsylvania, which are used principally as banking offices. Note 6, appearing on page 21 of the Annual Report to Shareholders (Exhibit 13), is hereby incorporated in this item. Item 3. Legal Proceedings There are no proceedings pending other than the ordinary routine litigation incident to the business of the corporation. Item 4. Submission of Matters to a Vote of Security Holders Incorporated herein by reference from the registrant's definitive proxy statement for the annual meeting of shareholders on April 9, 1996. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters Incorporated by reference from the 1995 Annual Report to Shareholders (Exhibit 13), pages 39-40. Dividend and other restrictions are incorporated by reference from Note 15 of the 1995 Annual Report to Shareholders (Exhibit 13), pages 27 and 29. The approximate number of shareholders as of February 29, 1996, was 1,743. Item 6. Selected Financial Data Incorporated by reference from the 1995 Annual Report to Shareholders (Exhibit 13), page 31. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Incorporated by reference from the 1995 Annual Report to Shareholders (Exhibit 13), pages 32 through 38. Dividend and other restrictions are incorporated by reference from Note 15 of the 1995 Annual Report to Shareholders (Exhibit 13), pages 27 and 29. Item 8. Financial Statements and Supplementary Data Consolidated balance sheets of the registrant at December 31, 1995 and 1994, and consolidated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 1995, 1994 and 1993, and the independent auditors' report thereon are incorporated by reference from the 1995 Annual Report to Shareholders (Exhibit 13), pages 13 through 31. Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant Incorporated herein by reference from the registrant's definitive proxy statement for the annual meeting of shareholders on April 9, 1996. Executive Officers The names and ages of all executive officers of the Corporation are as follows: <TABLE> <CAPTION> Principal Occupation Officer Title during past 5 years Age <S> <C> <C> <C> Merrill S. Moyer Chairman Chairman and President 62 of the Corporation and President of Union National Bank Norman L. Keller Executive Vice President of Pennview 58 President Savings Bank Marvin A. Anders Vice Chairman Executive Vice President 56 and Senior Trust Officer of Union National Bank William S. Aichele Executive Vice Executive Vice President 45 President of the Corporation and President and CEO of Union National Bank Wallace H. Bieler Senior Vice Senior Vice President 50 President and CFO of the Corporation and Union National Bank </TABLE> There is no family relationship among any of the executive officers of Univest. Item 11. Executive Compensation Incorporated herein by reference from the registrant's definitive proxy statement for the annual meeting of shareholders on April 9, 1996. Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated herein by reference from the registrant's definitive proxy statement for the annual meeting of shareholders on April 9, 1996. Item 13. Certain Relationships and Related Transactions During 1995, the Corporation and its subsidiaries paid $512,651 to H. Mininger & Son, Inc. for building expansion projects which were in the normal course of business on substantially the same terms as available from others. H. Ray Mininger, Alternate Director, is president of H. Mininger & Son, Inc. The law firm of Brunner, Conver and Conver, in which Neil L. Conver, a director of Pennview Savings Bank, is a partner, performs legal services for Pennview Savings Bank, in the ordinary course of business. For the year ended December 31, 1995, fees received by Brunner, Conver, and Conver for services performed for Pennview Savings Bank, amounted to less than 5% of the firm's gross revenues. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. & 2. Financial Statements and Schedules The financial statements listed in the accompanying index to financial statements are filed as part of this annual report. 3. Listing of Exhibits The exhibits listed on the accompanying index to exhibits are filed as part of this annual report. (b) There were no reports on Form 8-K filed in the fourth quarter of 1995. (c) Exhibits - The response of this portion of item 14 is submitted as a separate section. (d) Financial Statement Schedules - none. UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES [Item 14(a)] <TABLE> <CAPTION> Annual Report to Shareholders* <S> <C> Report of Independent Auditors 30 Consolidated balance sheets at 13 December 31, 1995 and 1994 Consolidated statements of income for each of the three years in the period ended December 31, 1995 14 Consolidated statements of changes in shareholders' equity for each of the three years in the period ended December 31, 1995 15 Consolidated statements of cash flows for each of the three years in the period ended December 31, 1995 16 Notes to consolidated financial statements 17-29 </TABLE> Financial statement schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. *Refers to page numbers in the Annual Report to Shareholders for 1995 (Exhibit 13) which is incorporated by reference. UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES INDEX TO EXHIBITS [Item 14(a)] Description (3) Articles of Incorporation and By-Laws Articles of Incorporation and Charter are incorporated herein by reference to the 1973 Form 10-K. (4) Instruments Defining the Rights of Security Holders, Including Debentures Specimen Copy of Common Stock is incorporated herein by reference to the 1973 Form 10-K. (10) Material Contracts - Not Applicable. (11) Statement Re Computation of Per Share Earnings - Not Applicable. (12) Statements Re Computation of Ratios - Not Applicable. (13) Annual Report to Shareholders (18) Letter Re Change in Accounting Principles - Not Applicable. (19) Previously Unfiled Documents - Not Applicable. (21) Subsidiaries of the Registrant (23) Consent of independent auditors (24) Power of Attorney - Not Applicable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. UNIVEST CORPORATION OF PENNSYLVANIA Registrant By: Robert H. Schong Secretary, March 27, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Merrill S. Moyer Norman G. Good Chairman, President and Directer, March 27, 1996 Director, March 27, 1996 Charles H. Hoeflich Thomas K. Leidy Chairman Emeritus and Director, March 27, 1996 Director, March 27, 1996 Marvin A. Anders Jules Pearlstine Vice Chairman, March 27, 1996 Director, March 27, 1996 William S. Aichele Paul G. Shelly Executive Vice President, Director, March 27, 1996 March 27, 1996 Norman L. Keller R. Lee Delp Executive Vice President, Director, March 27, 1996 March 27, 1996 Wallace H. Bieler SVP and Chief Financial Officer, March 27, 1996 John U. Young Director, March 27, 1996 James L. Bergey Director, March 27, 1996 Harold M. Mininger Director, March 27, 1996