SEC Company Response from UNIVEST FINANCIAL Corp (UVSP) (CIK 0000102212) (UVSP) — Aug 24, 2007
UNIVEST FINANCIAL Corp (UVSP) (CIK 0000102212)
Date: Aug. 24, 2007 · CIK: 0000102212 · Accession: 0001144204-07-046319
AI Filing Summary & Sentiment
File numbers found in text: 000-07617
Letter
United States Securities and Exchange Commission Division of Corporation Finance Via EDGAR Univest Corp of Pennsylvania Form 10-K for Fiscal Year Ended December 31, 2006 Filed March 8, 2007 File No. 000-07617
Re:
Dear Mr. Walker:
Thank you for your most recent review and comment letter, dated August 16, 2007, on our Form 10-K for the year ended December 31, 2006. We have reviewed your comments; each is specifically addressed below in response to your numbered comments as presented in your letter. Registrant recognizes the importance of gaining clear explanation of changes for all aspects of Form 10-K reporting. As a result of the detailed clarification herein presented, be assured that these areas will be addressed in a clear and concise manner similar in presentation to these responses for all future Form 10-K reporting.
Form 10-K for the Fiscal Year ended December 31, 2006
Management’s Discussion and Analysis
Table 10 - Allocated, Other Loan Loss Reserves, page 30
SEC Comment 1:
We note the total nonperforming loans increased from 0.31% to 0.68% as of December 31, 2005 and 2006, respectively, while the allowance for loan losses to total loans decreased from 1.07% to 0.98% at December 31, and 2006, respectively. Please tell us and add disclosure to future filings to explain why the allowance for loan losses to total loans decreased when the nonperforming loans as a percentage of total loans increased significantly. Please quantify and explain:
●
how changes in loan concentrations, quality, and terms that occurred during the period are reflected in the allowance,
●
how changes in estimation methods and assumptions affected the allowance, if applicable,
●
why reallocations of the allowance among different parts of the portfolio or different elements of the allowance occurred,
●
how actual changes and expected trends in nonperforming loans affected the allowance.
Univest Plaza • 14 N. Main Street • P.O. Box 64197 • Souderton, Pennsylvania 18964-0197 • (215) 721-2400
www.univest-corp.com
Donald Walker, Senior Assistant Chief Accountant
United States Securities and Exchange Commission
August 24, 2007
Page
Response:
Nonperforming loans increased from 0.31% to 0.68% as of December 31, 2005 and 2006, respectively, while the allowance for loan losses to total loans decreased from 1.07% to 0.98% at December 31, 2005 and 2006, respectively. Management closely monitors the credit worthiness and the value of underlying collateral as a commercial credit becomes past-due; these factors along with historical and economic trends, and management’s assumptions, are taken into consideration in providing for the allowance for loan losses. When the loan becomes impaired and is placed on non-accrual, a specific allowance is created for the impaired loan. At December 31, 2005 the specific allowance on impaired loans was $1.1 million, or 33.0% of the balance of impaired loans of $3.3 million. At December 31, 2006 the specific allowance on impaired loans was $1.6 million, or 18.7% of the impaired loan balance of $8.4 million. The underlying value of the collateral and the borrowers’ individual abilities to pay-down the principal balance on these loans resulted in an overall decrease in the required reserve for impaired loans during 2006.
●
In determining the allowance for loan loss, management segregates its loan portfolio into the major categories as presented in Table 7 on Page 27 of its 2006 Form 10-K. There are no significant loan concentrations other than those presented in Table 7. These major categories are analyzed further based on similar risk and collateral characteristics. Impaired loans are segregated from these categories and reviewed separately.
●
Management updates it’s historical, qualitative and analytical factors on a quarterly basis. Non-performance trends are measured by the actual experience during the previous eight quarter-ends. The eight-quarter weighted-average delinquency trend of the commercial real estate portfolio improved from 1.59% at December 31, 2005 to 1.19% at December 31, 2006. The eight-quarter weighted-average non-accrual trend of the commercial real estate portfolio improved from 1.36% at December 31, 2005 to 0.74% at December 31, 2006. The overall risk factor on the “non-criticized” commercial real estate portfolio was favorably reduced by 25 basis points resulting in a $1.1 million reduction in reserve allocated to this portfolio, primarily due to these improved non-performance trends. There were no other significant changes in estimation methods and assumptions affecting the allowance in 2006 for any other loan portfolios.
●
Reallocations of the allowance among different parts of the portfolio were primarily related to growth or decline in the outstanding balances within the portfolios.
●
Management closely monitors actual changes and expected trends in nonperforming loans within the major loan categories. Actual historical nonperformance trends over an eight-quarter period, including delinquencies and non-accruals, are used to measure expected or anticipated performance; these significant factors, along with other quantitative, qualitative and analytical factors (that may change in level of importance quarter over quarter), are used in determining the necessary allowance for the major loan categories.
Donald Walker, Senior Assistant Chief Accountant
United States Securities and Exchange Commission
August 24, 2007
Page
SEC Comment 2:
You state that the $1.1 million real estate pool reserve “was attributed to a favorable reduction in the reserve factor for acceptable credit risks for the pool of loans” and was offset by $172 thousand of increased reserves for commercial and homogenous loan pools. With a view towards enhanced disclosure, please explain to us and provide further disclosure in future filings to discuss the underlying reasons for your adjustment to the allowance for loan losses. Please discuss any economic, environmental or other conditions that impacted the allowance.
Response:
Non-performance trends are measured by the actual experience during the previous eight quarter-ends. The eight-quarter weighted-average delinquency trend of the commercial real estate portfolio improved from 1.59% at December 31, 2005 to 1.19% at December 31, 2006. The eight-quarter weighted-average non-accrual trend of the commercial real estate portfolio improved from 1.36% at December 31, 2005 to 0.74% at December 31, 2006. Based on these improved non-performance trends, the overall risk factor on the “non-criticized” commercial real estate portfolio was favorably reduced by 25 basis points resulting in a $1.1 million reduction in reserve allocated to this portfolio. An enhanced credit culture resulting in the resolution of prior credit problems improved the non-performance trends which are measured by delinquencies and non-accruals within the commercial real estate loan portfolio. There were no other significant changes in estimation methods and assumptions affecting the allowance in 2006 for any other loan portfolios.
In connection with responding to your comments, I, Wallace H. Bieler, Senior Executive Vice President, Chief Operation Officer and Chief Financial Officer of Univest Corp of Pennsylvania, (the “Registrant”), acknowledge the following:
●
the Registrant is responsible for the adequacy and accuracy of the disclosure in the filing;
●
staff comments or changes to disclosure in response to staff comments do not preclude the Commission from taking any action with respect to the filing; and
●
the Registrant many not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you have any further questions, please feel free to contact me at 215-721-2463.
Sincerely,
Wallace
H. Bieler
Show Raw Text
CORRESP
1
filename1.htm
August
24, 2007
Donald
Walker, Senior Assistant Chief Accountant
United
States Securities and Exchange Commission
Division
of Corporation Finance
Mail
Stop
4561
Washington,
D.C. 20549
Via
EDGAR
upload
Re:
Univest
Corp of Pennsylvania
Form
10-K for Fiscal Year Ended December 31, 2006
Filed
March 8, 2007
File
No. 000-07617
Dear
Mr.
Walker:
Thank
you
for your most recent review and comment letter, dated August 16, 2007, on our
Form 10-K for the year ended December 31, 2006. We have reviewed your
comments; each is specifically addressed below in response to your numbered
comments as presented in your letter. Registrant recognizes the importance
of
gaining clear explanation of changes for all aspects of Form 10-K reporting.
As
a result of the detailed clarification herein presented, be assured that these
areas will be addressed in a clear and concise manner similar in presentation
to
these responses for all future Form 10-K reporting.
Form
10-K for the Fiscal Year ended December 31, 2006
Management’s
Discussion and Analysis
Table
10 - Allocated, Other Loan Loss Reserves, page 30
SEC
Comment 1:
We
note the total nonperforming loans increased from 0.31% to 0.68%
as of
December 31, 2005 and 2006, respectively, while the allowance for
loan
losses to total loans decreased from 1.07% to 0.98% at December 31,
2005
and 2006, respectively. Please tell us and add disclosure to future
filings to explain why the allowance for loan losses to total loans
decreased when the nonperforming loans as a percentage of total loans
increased significantly. Please quantify and
explain:
●
how
changes in loan concentrations, quality, and terms that occurred
during
the period are reflected in the
allowance,
●
how
changes in estimation methods and assumptions affected the allowance,
if
applicable,
●
why
reallocations of the allowance among different parts of the portfolio
or
different elements of the allowance
occurred,
●
how
actual changes and expected trends in nonperforming loans affected
the
allowance.
Univest
Plaza • 14 N. Main Street • P.O. Box 64197 • Souderton, Pennsylvania 18964-0197
• (215) 721-2400
www.univest-corp.com
Donald
Walker, Senior Assistant Chief Accountant
United
States Securities and Exchange Commission
August
24, 2007
Page
2
Response:
Nonperforming
loans increased from 0.31% to 0.68% as of December 31, 2005 and 2006,
respectively, while the allowance for loan losses to total loans
decreased
from 1.07% to 0.98% at December 31, 2005 and 2006, respectively.
Management closely monitors the credit worthiness and the value of
underlying collateral as a commercial credit becomes past-due; these
factors along with historical and economic trends, and management’s
assumptions, are taken into consideration in providing for the allowance
for loan losses. When the loan becomes impaired and is placed on
non-accrual, a specific allowance is created for the impaired loan.
At
December 31, 2005 the specific allowance on impaired loans was $1.1
million, or 33.0% of the balance of impaired loans of $3.3 million.
At December 31, 2006 the specific allowance on impaired loans was
$1.6 million, or 18.7% of the impaired loan balance of $8.4 million.
The underlying value of the collateral and the borrowers’ individual
abilities to pay-down the principal balance on these loans resulted
in an
overall decrease in the required reserve for impaired loans during
2006.
●
In
determining the allowance for loan loss, management segregates its
loan
portfolio into the major categories as presented in Table 7 on
Page 27 of its 2006 Form 10-K. There are no significant loan
concentrations other than those presented in Table 7. These major
categories are analyzed further based on similar risk and collateral
characteristics. Impaired loans are segregated from these categories
and
reviewed separately.
●
Management
updates it’s historical, qualitative and analytical factors on a quarterly
basis. Non-performance trends are measured by the actual experience
during
the previous eight quarter-ends. The eight-quarter weighted-average
delinquency trend of the commercial real estate portfolio improved
from
1.59% at December 31, 2005 to 1.19% at December 31, 2006. The
eight-quarter weighted-average non-accrual trend of the commercial
real
estate portfolio improved from 1.36% at December 31, 2005 to 0.74%
at
December 31, 2006. The overall risk factor on the “non-criticized”
commercial real estate portfolio was favorably reduced by 25 basis
points resulting in a $1.1 million reduction in reserve allocated
to this
portfolio, primarily due to these improved non-performance trends.
There
were no other significant changes in estimation methods and assumptions
affecting the allowance in 2006 for any other loan
portfolios.
●
Reallocations
of the allowance among different parts of the portfolio were primarily
related to growth or decline in the outstanding balances within the
portfolios.
●
Management
closely monitors actual changes and expected trends in nonperforming
loans
within the major loan categories. Actual historical nonperformance
trends
over an eight-quarter period, including delinquencies and non-accruals,
are used to measure expected or anticipated performance; these significant
factors, along with other quantitative, qualitative and analytical
factors
(that may change in level of importance quarter over quarter), are
used in
determining the necessary allowance for the major loan categories.
Donald
Walker, Senior Assistant Chief Accountant
United
States Securities and Exchange Commission
August
24, 2007
Page
3
SEC
Comment 2:
You
state that the $1.1 million real estate pool reserve “was attributed to a
favorable reduction in the reserve factor for acceptable credit risks
for
the pool of loans” and was offset by $172 thousand of increased reserves
for commercial and homogenous loan pools. With a view towards enhanced
disclosure, please explain to us and provide further disclosure in
future
filings to discuss the underlying reasons for your adjustment to
the
allowance for loan losses. Please discuss any economic, environmental
or
other conditions that impacted the
allowance.
Response:
Non-performance
trends are measured by the actual experience during the previous
eight
quarter-ends. The eight-quarter weighted-average delinquency trend
of the
commercial real estate portfolio improved from 1.59% at December
31, 2005
to 1.19% at December 31, 2006. The eight-quarter weighted-average
non-accrual trend of the commercial real estate portfolio improved
from
1.36% at December 31, 2005 to 0.74% at December 31, 2006. Based on
these
improved non-performance trends, the overall risk factor on the
“non-criticized” commercial real estate portfolio was favorably reduced by
25 basis points resulting in a $1.1 million reduction in reserve
allocated to this portfolio. An enhanced credit culture resulting
in the
resolution of prior credit problems improved the non-performance
trends
which are measured by delinquencies and non-accruals within the commercial
real estate loan portfolio. There were no other significant changes
in
estimation methods and assumptions affecting the allowance in 2006
for any
other loan portfolios.
In
connection with responding to your comments, I, Wallace H. Bieler, Senior
Executive Vice President, Chief Operation Officer and Chief Financial Officer
of
Univest Corp of Pennsylvania, (the “Registrant”), acknowledge the
following:
●
the
Registrant is responsible for the adequacy and accuracy of the disclosure
in the filing;
●
staff
comments or changes to disclosure in response to staff comments do
not
preclude the Commission from taking any action with respect to the
filing;
and
●
the
Registrant many not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
If
you
have any further questions, please feel free to contact me at 215-721-2463.
Sincerely,
Wallace
H. Bieler
Senior
Executive Vice President,
Chief
Operation Officer and
Chief
Financial Officer