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Univest Financial Corporation Reports Second Quarter Results

Company Release - 7/22/2020 4:15 PM ET

SOUDERTON, Pa., July 22, 2020 (GLOBE NEWSWIRE) -- Univest Financial Corporation (“Univest” or the "Corporation") (NASDAQ: UVSP), parent company of Univest Bank and Trust Co. and its insurance, investments and equipment financing subsidiaries, today announced net income for the quarter ended June 30, 2020 of  $2.1 million, or $0.07 diluted earnings per share, compared to net income of $16.5 million, or $0.56 diluted earnings per share, for the quarter ended June 30, 2019. Net income for the six months ended June 30, 2020 was $2.9 million, or $0.10 diluted earnings per share, compared to net income of $32.5 million, or $1.11 diluted earnings per share, for the six months ended June 30, 2019.

Pre-tax pre-provision income1 for the quarter ended June 30, 2020 was $25.6 million, an increase of $3.3 million, or 15.1%, from the second quarter of 2019. Pre-tax pre-provision income1 for the six months ended June 30, 2020 was $47.6 million, an increase of $3.2 million, or 7.1%, from the comparable period in the prior year.

During these challenging times, we continue to responsibly serve the needs of our customers while prioritizing the health and safety of our employees. For the majority of the second quarter we operated our financial centers as drive-through only where these capabilities existed. Additionally, we allowed for controlled and limited access to our financial centers to allow customers to access their safe deposit boxes and to serve customers at locations without drive-through capabilities. On June 22nd, we began the process of re-opening of financial center lobbies.  After the successful re-opening of six financial centers, we proceeded to the next stage of our re-opening plan on June 29th, by allowing for access to the lobbies of all Univest financial centers with the exception of our Souderton financial center which is being utilized by our customer support team as well as for employee training. Additional safety protocols have been put in place in accordance with orders and guidance issued by the Commonwealth of Pennsylvania and the State of New Jersey, as applicable. We enabled approximately 95% of our non-financial center personnel to work remotely and continue to encourage our employees to work remotely in accordance with recommendations from State authorities. Our employees, systems and processes have managed this unprecedented change seamlessly and with great success.

As a result of the impact of COVID-19, we have taken various actions to support our customers and the communities they live in and serve, including modifying outstanding loans and leases and waiving certain deposit service charges. As of June 30, 2020, we have modified approximately 1,420 loans and leases via principal and/or interest deferrals in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and have not categorized these modifications as troubled debt restructurings. These loans and leases have a combined principal balance of approximately $720 million as of June 30, 2020, which represents 16.2% of the loan portfolio, excluding PPP loans. For more information on these loans, including a breakdown of such loans by type, please see the "Loan Portfolio Overview" table within this document.

CECL
The Corporation adopted Accounting Standard Update No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”) effective January 1, 2020. During the quarter ended June 30, 2020, the Corporation recorded CECL related charges of $23.7 million of which $19.9 million (after-tax charge of $15.7 million), or $0.54 diluted earnings per share, which was attributable to changes in economic assumptions within the Corporation’s CECL model, which were predominately driven by COVID-19. During the six months ended June 30, 2020, the Corporation recorded CECL related charges of $45.6 million, of which $40.2 million (after-tax charge of $31.8 million), or $1.09 diluted earnings per share, was attributable to economic assumptions within the CECL model.  

Paycheck Protection Program
As a Small Business Administration (SBA) approved lender, the Corporation was well positioned to participate in the Paycheck Protection Program (PPP), which was enacted as a component of the CARES Act that was signed into law on March 27, 2020. Through this program, we successfully originated approximately 2,550 loans and secured funding of approximately $510 million for our customers. During the quarter we recorded income of $2.0 million within net interest income related to these loans. Additionally, during the quarter we recorded incremental capitalized compensation of $1.3 million related to origination of PPP loans. As of June 30, 2020, we have $11.0 million of net deferred fees on our balance sheet related to these loans.

Loans
Gross loans and leases, excluding PPP loans of $499.0 million, increased $4.0 million, or 0.4% (annualized), from March 31, 2020, despite a $94.5 million decrease in commercial line utilization.  During the six months ended June 30, 2020, gross loans and leases, excluding PPP loans, increased $66.0 million, or 3.0% (annualized), despite a $89.5 million decrease in commercial line utilization.  As of June 30, 2020 commercial line utilization was 29.8%.  Since June 30, 2019, gross loans and leases, excluding PPP loans, have increased $284.9 million, or 6.8%.  

Deposits
Total deposits increased $462.0 million, or 41.9% (annualized), from March 31, 2020 and $509.3 million, or 23.4% (annualized), from December 31, 2019 primarily due to increases in commercial and consumer deposits partially offset by a seasonal decrease in public funds deposits. Total deposits increased $747.2 million, or 18.1%, from June 30, 2019 primarily due to increases in commercial and consumer deposits partially offset by a decrease in public funds deposits. Deposits at June 30, 2020 were inherently elevated by the PPP loans originated during the quarter to the extent the funds were not utilized.

Net Interest Income and Margin
Net interest income of $43.5 million for the three months ended June 30, 2020 increased $1.1 million, or 2.5%, from the three months ended March 31, 2020, and $883 thousand, or 2.1%, from the three months ended June 30, 2019. Net interest income of $86.0 million for the six months ended June 30, 2020 increased $1.8 million, or 2.2%, from the six months ended June 30, 2019. The increase in net interest income for the six months ended June 30, 2020 compared to the same period of 2019 was primarily due to lower deposit and borrowing costs and growth in loans partially offset by a decrease in yield on loans.

Net interest margin, on a tax-equivalent basis, was 3.18% for the second quarter of 2020, compared to 3.48% for the first quarter of 2020 and 3.67% for the second quarter of 2019. Purchase accounting accretion had no impact on the quarter ended June 30, 2020 or March 31, 2020 compared to a favorable impact of one basis point for the quarter ended June 30, 2019. Excess liquidity reduced net interest margin by approximately sixteen basis points for the quarter ended June 30, 2020 compared to six basis points for the quarter ended March 31, 2020 and five basis points impact for the quarter ended June 30, 2019. This excess liquidity was primarily driven by strong deposit balance growth over the last year. PPP loans reduced net interest margin by nine basis points for the quarter ended June 30, 2020. Excluding purchase accounting accretion, the impact of excess liquidity, and the impact of PPP loans, the net interest margin, on a tax-equivalent basis, was 3.43% for the quarter ended June 30, 2020, 3.54% for the quarter ended March 31, 2020 and 3.71% for the quarter ended June 30, 2019.

Noninterest Income
Noninterest income for the quarter ended June 30, 2020 was $18.0 million, an increase of $1.6 million, or 10.1%, from the second quarter of 2019. Noninterest income for the six months ended June 30, 2020 was $36.4 million, an increase of $3.7 million, or 11.4%, from the comparable period in the prior year.

Net gain on mortgage banking activities increased $2.7 million, or 341.6%, for the quarter and $5.0 million, or 389.4%, for the six months ended June 30, 2020 compared to the comparable periods in the prior year, due to an increase in mortgage volume and expansion of margins. Net gain on sales of investment securities for the six months ended June 30, 2020 increased $752 thousand compared to the comparable period in the prior year primarily due to a $652 thousand gain on the sale of $58.3 million of agency backed mortgage backed securities in the first quarter of 2020.

Other income increased $1.1 million, or 146.1%, for the quarter and $784 thousand, or 73.8%, for the six months ended June 30, 2020 compared to the comparable period in the prior year. Fees on risk participation agreements for interest rate swaps increased $1.3 million for the quarter and $1.2 million for the six months ended June 30, 2020 compared to the comparable period in the prior year, driven by increased customer activity based on the current rate environment. Gain on sale of small business administration (SBA) loans decreased $239 thousand for the quarter and $294 thousand for the six months ended June 30, 2020 compared to the comparable period in the prior year due to decreased SBA loan sale activity.  Equity securities measured at fair value decreased $40 thousand for the quarter and $312 thousand for the six months ended June 30, 2020.

Other service fee income decreased $1.1 million, or 42.5%, for the quarter and $1.5 million, or 30.9%, for the six months ended June 30, 2020 compared to the comparable period in the prior year. Mortgage servicing rights amortization increased $484 thousand for the quarter and $814 thousand for the six months ended June 30, 2020 compared to the comparable period in the prior year driven by the decline in interest rates and their impact on prepayment activity. Additionally, a valuation allowance adjustment of $283 thousand for the quarter and $338 thousand for the six months ended June 30, 2020 was recorded against mortgage servicing right assets due to a decline in fair value.  Interchange income decreased $226 thousand for the quarter and $256 thousand for the six months ended June 30, 2020 compared to the comparable period in the prior year due to decreased customer activity.

Service charges on deposit accounts decreased $557 thousand, or 38.5%, for the quarter and $595 thousand, or 20.6%, for the six months ended June 30, 2020 compared to the comparable period in the prior year primarily due to the waiving of certain deposit service charges for customers in response to COVID-19. Investment advisory commission and fee income decreased $515 thousand, or 12.7%, for the quarter compared to the comparable period in the prior year, primarily due to a decline in the value of assets under management due to overall declines in the market, as a majority of investment advisory fees are billed based on the prior quarter-end assets under management balance.

Noninterest Expense
Noninterest expense for the quarter ended June 30, 2020 was $36.0 million, a decrease of $821 thousand, or 2.2%, compared to the second quarter of 2019. Noninterest expense for the six months ended June 30, 2020 was $74.7 million, an increase of $2.4 million, or 3.3% from the comparable period in the prior year.

Salaries, benefits and commissions decreased $352 thousand, or 1.6%, for the quarter and increased $1.9 million, or 4.4%, for the six months ended June 30, 2020 compared to the comparable period in the prior year. The increase for the six months ended June 30, 2020 was primarily attributable to additional staff hired, primarily during 2019, to support revenue generation across all business lines, expansion of our commercial lending groups in the first and second quarter of 2019, annual merit increases and increased variable compensation due to strong mortgage banking activity. The decrease for the quarter was the result of $1.3 million in compensation capitalized due to PPP loan originations which offset the previously discussed increases. Other expense increased $718 thousand, or 6.7%, for the six months ended June 30, 2020 due to a one-time $656 thousand charge related to the extinguishment of long-term debt in the first quarter of 2020. Marketing and advertising expense decreased $251 thousand, or 31.9%, for the quarter and decreased $389 thousand, or 29.3%, for the six months ended June 30, 2020, due to a decrease in advertising activities during the COVID-19 related stay at home orders.

Asset Quality and Provision for Credit Losses
Nonperforming assets were $36.0 million at June 30, 2020, compared to $39.3 million at December 31, 2019 and $27.1 million at June 30, 2019. The increase in nonperforming assets at June 30, 2020 compared to June 30, 2019 was primarily due to one commercial banking relationship, totaling $11.6 million as of June 30, 2020, which was placed on non-accrual status during 2019.

Net loan and lease charge-offs were $3.6 million during the second quarter of 2020 and $4.1 million for the six months ended June 30, 2020. The provision for credit losses was $23.7 million for the second quarter of 2020, of which $21.5 million related to loans and leases and $2.2 million related to unfunded commitments, and $45.6 million for the six months ended June 30, 2020, of which $42.0 million related to loans and leases, $3.0 million related to unfunded commitments, and $556 thousand related to investment securities. The second quarter of 2020 included a charge-off of $2.7 million and provision for credit losses of $1.3 million related to one commercial real estate loan, which was transferred to other real estate owned. As of June 30, 2020, the property was carried at $8.1 million, in other real estate owned, based on a letter of intent to sell the property. This loan was initially placed on nonaccrual during the first quarter of 2018.

Net loan and lease charge-offs were $1.1 million during the second quarter of 2019 and $1.5 million for the six months ended June 30, 2019. The provision for credit losses on loans and leases was $2.1 million for the second quarter of 2019 and $4.8 million for the six months ended June 30, 2019.

The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment, excluding PPP loans, was 1.94%1 at June 30, 2020, compared to 0.81% at December 31, 2019 and 0.78% at June 30, 2019.

Tax Provision
The effective income tax rate was (14.5)% for the quarter ended June 30, 2020, compared to an effective income tax rate of 18.2% for the quarter ended June 30, 2019. The effective income tax rate was (42.4%) for the six months ended June 30, 2020 compared to an effective income tax rate of 18.0% for the six months ended June 30, 2019. The negative effective tax rate for the quarter and six months ended June 30, 2020 reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases.

Dividend
On May 18, 2020, Univest declared a quarterly cash dividend of $0.20 per share, payable on July 1, 2020. This represented a 5.23% annualized yield based on the closing price of Univest’s stock on the date the dividend was paid.

Conference Call
Univest will host a conference call to discuss second quarter 2020 results on Thursday, July 23, 2020 at 9:00 a.m. EST. Participants may preregister at http://dpregister.com/10145862. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through August 23, 2020 by dialing 1-877-344-7529; using Conference ID: 10145862.

1Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included within this document.

About Univest Financial Corporation
Univest Financial Corporation (UVSP), including its wholly-owned subsidiary Univest Bank and Trust Co., Member FDIC, has approximately $6.1 billion in assets and $3.6 billion in assets under management and supervision through its Wealth Management lines of business at June 30, 2020. Headquartered in Souderton, Pa. and founded in 1876, the Corporation and its subsidiaries provide a full range of financial solutions for individuals, businesses, municipalities and nonprofit organizations primarily in the Mid-Atlantic Region. Univest delivers these services through a network of more than 50 offices in southeastern Pennsylvania extending to the Lehigh Valley and Lancaster, as well as in New Jersey and Maryland and online at www.univest.net.  

This press release of Univest and the reports Univest files with the Securities and Exchange Commission often contain "forward-looking statements" relating to present or future trends or factors affecting the financial services industry and, specifically, the financial operations, markets and products of Univest. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause Univest's future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) competitive pressures among financial institutions; (2) changes in the interest rate environment; (3) changes in asset quality, prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions; (5) legislative or regulatory changes that may adversely affect the businesses in which Univest is engaged; (6) technological issues that may adversely affect Univest financial operations or customers; (7) changes in the securities markets or (8) risk factors mentioned in the reports and registration statements Univest files with the Securities and Exchange Commission. It is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened.  As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: (1) demand for our products and services may decline, making it difficult to grow assets and income; (2) if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; (3) collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; (4) our allowance for loan losses may have to be increased if borrowers experience financial difficulties, which will adversely affect our net income; (5) the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; (6) as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; (6) a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend; (7) our wealth management revenues may decline with continuing market turmoil; (8) litigation, regulatory enforcement risk and reputation risk regarding our participation in the Paycheck Protection Program and the risk that the Small Business Administration may not fund some or all PPP loan guarantees; (9) our cyber security risks are increased as the result of an increase in the number of employees working remotely; (10) we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; (11); and Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs. Univest undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.

 



Univest Financial Corporation 
Consolidated Selected Financial Data (Unaudited) 
June 30, 2020 
(Dollars in thousands)               
                
Balance Sheet (Period End) 06/30/20 03/31/20 12/31/19 09/30/19 06/30/19     
Assets $6,125,312  $5,464,768  $5,380,924  $5,353,611  $5,154,298      
Investment securities, net of allowance for credit losses  397,852   423,521   441,599   448,447   468,833      
Loans held for sale  31,082   11,417   5,504   2,893   1,498      
Loans and leases held for investment, gross  4,951,809   4,448,825   4,386,836   4,251,933   4,167,904      
Allowance for credit losses, loans and leases  86,217   68,216   35,331   33,662   32,600      
Loans and leases held for investment, net  4,865,592   4,380,609   4,351,505   4,218,271   4,135,304      
Total deposits  4,869,329   4,407,303   4,360,075   4,337,991   4,122,110      
Noninterest-bearing deposits  1,725,819   1,318,270   1,279,681   1,198,425   1,166,301      
NOW, money market and savings  2,623,025   2,452,021   2,474,384   2,421,466   2,246,372      
Time deposits  520,485   637,012   606,010   718,100   709,437      
Borrowings  515,722   323,363   263,596   273,855   304,241      
Shareholders' equity  654,873   651,551   675,122   664,299   651,670      
                
                
Balance Sheet (Average) For the three months ended, For the six months ended, 
  06/30/20 03/31/20 12/31/19 09/30/19 06/30/19 06/30/20 06/30/19 
Assets $6,000,790  $5,409,561  $5,400,591  $5,317,867  $5,170,448  $5,704,527  $5,087,810  
Investment securities, net of allowance for credit losses  411,957   441,900   445,932   460,099   471,422   426,928   470,812  
Loans and leases, gross  4,836,858   4,388,584   4,280,430   4,170,485   4,123,069   4,612,720   4,070,508  
Deposits  4,794,669   4,349,984   4,374,586   4,288,170   4,145,411   4,572,326   4,038,897  
Shareholders' equity  660,950   673,460   672,647   659,523   645,538   667,205   638,595  
                
                
Asset Quality Data (Period End)                
  06/30/20 03/31/20 12/31/19 09/30/19 06/30/19     
Nonaccrual loans and leases, including nonaccrual troubled debt restructured               
  loans and leases $26,141  $36,626  $38,578  $37,368  $25,147      
Accruing loans and leases 90 days or more past due  1,193   1,777   143   2,488   1,379      
Accruing troubled debt restructured loans and leases  53   54   54   54   55      
Total nonperforming loans and leases  27,387   38,457   38,775   39,910   26,581      
Other real estate owned  8,642   516   516   495   540      
Total nonperforming assets  36,029   38,973   39,291   40,405   27,121      
Nonaccrual loans and leases / Loans and leases held for investment  0.53%  0.82%  0.88%  0.88%  0.60%     
Nonperforming loans and leases / Loans and leases held for investment  0.55%  0.86%  0.88%  0.94%  0.64%     
Nonperforming assets / Total assets  0.59%  0.71%  0.73%  0.75%  0.53%     
                
Allowance for credit losses, loans and leases  86,217   68,216   35,331   33,662   32,600      
Allowance for credit losses, loans and leases / Loans and leases held for investment  1.74%  1.53%  0.81%  0.79%  0.78%     
Allowance for credit losses, loans and leases / Loans and leases held for investment, excluding Paycheck Protection Program loans (1)  1.94%  1.53%  0.81%  0.79%  0.78%     
Allowance for credit losses, loans and leases / Nonaccrual loans and leases held for investment  329.82%  186.25%  91.58%  90.08%  129.64%     
Allowance for credit losses, loans and leases / Nonperforming loans and leases held for investment  314.81%  177.38%  91.12%  84.34%  122.64%     
                
  For the three months ended, For the six months ended, 
  06/30/20 03/31/20 12/31/19 09/30/19 06/30/19 06/30/20 06/30/19 
Net loan and lease charge-offs $3,576  $489  $558  $468  $1,078  $4,065  $1,525  
Net loan and lease charge-offs (annualized)/Average loans and leases  0.30%  0.04%  0.05%  0.04%  0.10%  0.18%  0.08% 
                
(1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included within this document.  
                



Univest Financial Corporation 
Consolidated Selected Financial Data (Unaudited) 
June 30, 2020 
(Dollars in thousands, except per share data)               
  For the three months ended, For the six months ended, 
For the period: 06/30/20 03/31/20 12/31/19 09/30/19 06/30/19 06/30/20 06/30/19 
Interest income $49,980  $52,019  $53,369 $54,300  $54,060 $101,999  $106,424 
Interest expense  6,462   9,551   10,940  11,655   11,425  16,013   22,266 
  Net interest income  43,518   42,468   42,429  42,645   42,635  85,986   84,158 
Provision for credit losses  23,737   21,843   2,227  1,530   2,073  45,580   4,753 
Net interest income after provision  19,781   20,625   40,202  41,115   40,562  40,406   79,405 
Noninterest income:               
Trust fee income  1,924   1,890   1,912  1,973   2,054  3,814   3,941 
Service charges on deposit accounts  890   1,397   1,551  1,513   1,447  2,287   2,882 
Investment advisory commission and fee income  3,540   4,255   4,064  4,032   4,055  7,795   7,844 
Insurance commission and fee income  4,067   4,732   3,609  3,877   3,941  8,799   9,085 
Other service fee income  1,488   1,870   2,229  2,255   2,590  3,358   4,857 
Bank owned life insurance income  732   734   741  743   743  1,466   1,695 
Net gain on sales of investment securities  65   695   13  33   7  760   8 
Net gain on mortgage banking activities  3,515   2,744   1,038  1,629   796  6,259   1,279 
Other income  1,779   67   1,013  544   723  1,846   1,062 
Total noninterest income  18,000   18,384   16,170  16,599   16,356  36,384   32,653 
Noninterest expense:               
Salaries, benefits and commissions  21,700   23,836   21,933  22,758   22,052  45,536   43,598 
Net occupancy  2,478   2,574   2,534  2,475   2,601  5,052   5,212 
Equipment  923   995   1,027  1,088   1,065  1,918   2,055 
Data processing  2,750   2,760   2,685  2,624   2,627  5,510   5,141 
Professional fees  1,264   1,317   1,475  1,517   1,307  2,581   2,571 
Marketing and advertising  535   402   710  558   786  937   1,326 
Deposit insurance premiums  615   504   342  (444)  430  1,119   882 
Intangible expenses  321   330   374  378   417  651   843 
Other expense  5,374   6,059   6,398  5,316   5,496  11,433   10,715 
Total noninterest expense  35,960   38,777   37,478  36,270   36,781  74,737   72,343 
Income before taxes  1,821   232   18,894  21,444   20,137  2,053   39,715 
Income tax (benefit) expense  (264)  (606)  3,384  3,782   3,669  (870)  7,168 
Net income $2,085  $838  $15,510 $17,662  $16,468 $2,923  $32,547 
Net income per share:               
Basic $0.07  $0.03  $0.53 $0.60  $0.56 $0.10  $1.11 
Diluted $0.07  $0.03  $0.53 $0.60  $0.56 $0.10  $1.11 
Dividends declared per share $0.20  $0.20  $0.20 $0.20  $0.20 $0.40  $0.40 
Weighted average shares outstanding  29,187,197   29,286,200   29,327,169  29,305,524   29,287,754  29,236,698   29,282,575 
Period end shares outstanding  29,201,985   29,164,782   29,334,629  29,312,534   29,294,942  29,201,985   29,294,942 



Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
June 30, 2020
                  
                  
                  
     For the three months ended, For the six months ended,
Profitability Ratios (annualized) 06/30/20 03/31/20 12/31/19 09/30/19 06/30/19 06/30/20 06/30/19
                  
Return on average assets  0.14%  0.06%  1.14%  1.32%  1.28%  0.10%  1.29%
Return on average shareholders' equity  1.27%  0.50%  9.15%  10.62%  10.23%  0.88%  10.28%
Return on average tangible common equity (1) 1.73%  0.68%  12.40%  14.52%  14.10%  1.20%  14.23%
Net interest margin (FTE)  3.18%  3.48%  3.44%  3.52%  3.67%  3.32%  3.71%
Efficiency ratio (2)  57.7%  62.8%  63.0%  60.4%  61.5%  60.2%  61.0%
                  
Capitalization Ratios               
                  
Dividends declared to net income  278.7%  699.9%  37.8%  33.2%  35.6%  399.5%  36.0%
Shareholders' equity to assets (Period End)  10.69%  11.92%  12.55%  12.41%  12.64%  10.69%  12.64%
Tangible common equity to tangible assets (1) 8.06%  8.99%  9.59%  9.42%  9.54%  8.06%  9.54%
Common equity book value per share $22.43  $22.34  $23.01  $22.66  $22.25  $22.43  $22.25 
Tangible common equity book value per share (1)$16.41  $16.31  $17.01  $16.64  $16.20  $16.41  $16.20 
                  
Regulatory Capital Ratios (Period End)               
Tier 1 leverage ratio  9.15%  9.90%  10.02%  9.97%  10.01%  9.15%  10.01%
Common equity tier 1 risk-based capital ratio 10.73%  10.79%  11.03%  11.03%  10.99%  10.73%  10.99%
Tier 1 risk-based capital ratio  10.73%  10.79%  11.03%  11.03%  10.99%  10.73%  10.99%
Total risk-based capital ratio  13.72%  13.65%  13.78%  13.81%  13.79%  13.72%  13.79%
                  
(1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included below.    
(2) Noninterest expense to net interest income before loan loss provision plus noninterest income adjusted for tax equivalent income.    
                  
Non-GAAP to GAAP Reconciliation              
 Management uses non-GAAP measures in its analysis of the Corporation's performance. These measures should not be considered a substitute for GAAP basis measures nor should they be viewed as a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the non-GAAP financial measures, which exclude the impact of the specified items, provides useful supplemental information that is essential to a proper understanding of the financial results of the Corporation. See the table below for additional information on non-GAAP measures used throughout this earnings release.   
                  
 Shareholders' equity$654,873  $651,551  $675,122  $664,299  $651,670  $654,873  $651,670 
 Goodwill (172,559)  (172,559)  (172,559)  (172,559)  (172,559)  (172,559)  (172,559)
 Other intangibles (a)  (3,017)  (3,333)  (3,658)  (4,026)  (4,396)  (3,017)  (4,396)
 Tangible common equity$479,297  $475,659  $498,905  $487,714  $474,715  $479,297  $474,715 
                  
 Total assets$6,125,312  $5,464,768  $5,380,924  $5,353,611  $5,154,298  $6,125,312  $5,154,298 
 Goodwill (172,559)  (172,559)  (172,559)  (172,559)  (172,559)  (172,559)  (172,559)
 Other intangibles (a)  (3,017)  (3,333)  (3,658)  (4,026)  (4,396)  (3,017)  (4,396)
 Tangible assets$5,949,736  $5,288,876  $5,204,707  $5,177,026  $4,977,343  $5,949,736  $4,977,343 
                  
 Average shareholders' equity$660,950  $673,460  $675,647  $659,523  $645,538  $667,205  $638,595 
 Average goodwill (172,559)  (172,559)  (172,559)  (172,559)  (172,559)  (172,559)  (172,559)
 Average other intangibles (a)  (3,185)  (3,506)  (3,853)  (4,234)  (4,615)  (3,346)  (4,821)
 Average tangible common equity$485,206  $497,395  $499,235  $482,730  $468,364  $491,300  $461,215 
                  
 Net income before taxes$1,821  $232  $18,894  $21,444  $20,137  $2,053  $39,715 
 Provision for credit losses  23,737   21,843   2,227   1,530   2,073   45,580   4,753 
 Pre-tax pre-provision income$25,558  $22,075  $21,121  $22,974  $22,210  $47,633  $44,468 
                  
 Loans and leases held for investment, gross$4,951,809  $4,448,825  $4,386,836  $4,251,933  $4,167,904  $4,951,809  $4,167,904 
 Paycheck Protection Program ("PPP") loans 498,978   -   -   -   -   498,978   - 
 Gross loans and leases excluding PPP loans$4,452,831  $4,448,825  $4,386,836  $4,251,933  $4,167,904  $4,452,831  $4,167,904 
                  
 (a) Amount does not include servicing rights             



Univest Financial Corporation 
Average Balances and Interest Rates (Unaudited) 
  For the Three Months Ended,   
Tax Equivalent BasisJune 30, 2020 March 31, 2020 
 AverageIncome/Average AverageIncome/Average 
(Dollars in thousands)BalanceExpenseRate BalanceExpenseRate 
Assets:        
Interest-earning deposits with other banks$313,668 $670.09%$118,108 $3251.11%
U.S. government obligations 7,236  362.00  7,298  372.04 
Obligations of state and political subdivisions 26,546  2403.64  33,595  2893.46 
Other debt and equity securities 378,175  2,1822.32  401,007  2,6682.68 
Federal Home Loan Bank, Federal Reserve Bank and other stock 28,977  3625.02  31,450  5276.74 
Total interest-earning deposits, investments and other interest-earning assets 754,602  2,8871.54  591,458  3,8462.62 
         
Commercial, financial, and agricultural loans 816,976  7,3303.61  821,267  8,6314.23 
Paycheck Protection Program loans 370,669  2,1282.31  -  -- 
Real estate—commercial and construction loans 2,232,827  23,1104.16  2,139,369  23,9174.50 
Real estate—residential loans 1,004,671  10,2704.11  991,550  11,0524.48 
Loans to individuals 29,079  3274.52  30,016  4075.45 
Municipal loans and leases 291,433  2,9774.11  317,006  3,2654.14 
Lease financings 91,203  1,5927.02  89,376  1,5546.99 
  Gross loans and leases 4,836,858  47,7343.97  4,388,584  48,8264.47 
Total interest-earning assets 5,591,460  50,6213.64  4,980,042  52,6724.25 
Cash and due from banks 46,970     50,891    
Reserve for credit losses, loans and leases (69,292)    (44,372)   
Premises and equipment, net 55,750     56,399    
Operating lease right-of-use assets 34,419     34,545    
Other assets 341,483     332,056    
  Total assets$6,000,790    $5,409,561    
         
Liabilities:        
Interest-bearing checking deposits$617,927 $3720.24%$584,391 $7960.55%
Money market savings 1,063,463  8530.32  1,057,336  2,9031.10 
Regular savings 872,422  4750.22  816,760  7920.39 
Time deposits 577,462  2,6721.86  602,903  2,9151.94 
  Total time and interest-bearing deposits 3,131,274  4,3720.56  3,061,390  7,4060.97 
         
Short-term borrowings 161,365  1220.30  40,126  1061.06 
Long-term debt 210,040  7621.46  169,205  7641.82 
Subordinated notes 94,890  1,2065.11  94,847  1,2755.41 
  Total borrowings 466,295  2,0901.80  304,178  2,1452.84 
  Total interest-bearing liabilities 3,597,569  6,4620.72  3,365,568  9,5511.14 
Noninterest-bearing deposits 1,663,395     1,288,594    
Operating lease liabilities 37,680     37,766    
Accrued expenses and other liabilities 41,196     44,173    
  Total liabilities 5,339,840     4,736,101    
         
Shareholders' Equity:        
Common stock 157,784     157,784    
Additional paid-in capital 295,681     295,318    
Retained earnings and other equity 207,485     220,358    
  Total shareholders' equity 660,950     673,460    
  Total liabilities and shareholders' equity$6,000,790    $5,409,561    
Net interest income $44,159   $43,121  
         
Net interest spread  2.92   3.11 
Effect of net interest-free funding sources  0.26   0.37 
Net interest margin  3.18%  3.48%
Ratio of average interest-earning assets to average interest-bearing liabilities 155.42%    147.97%   
         
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
             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 months ended June 30, 2020 and March 31, 2020 have
             been calculated using the Corporation’s federal applicable rate of 21.0%.     



Univest Financial Corporation 
Average Balances and Interest Rates (Unaudited) 
  For the Three Months Ended June 30,   
Tax Equivalent Basis 2020   2019  
 AverageIncome/Average AverageIncome/Average 
(Dollars in thousands)BalanceExpenseRate BalanceExpenseRate 
Assets:        
Interest-earning deposits with other banks$313,668 $670.09%$102,623 $5692.22%
U.S. government obligations 7,236  362.00  17,315  731.69 
Obligations of state and political subdivisions 26,546  2403.64  59,267  5073.43 
Other debt and equity securities 378,175  2,1822.32  394,840  2,5722.61 
Federal Home Loan Bank, Federal Reserve Bank and other stock 28,977  3625.02  31,938  5356.72 
Total interest-earning deposits, investments and other interest-earning assets 754,602  2,8871.54  605,983  4,2562.82 
         
Commercial, financial, and agricultural loans 816,976  7,3303.61  820,009  10,5895.18 
Paycheck Protection Program loans 370,669  2,1282.31     
Real estate—commercial and construction loans 2,232,827  23,1104.16  1,912,248  23,1104.85 
Real estate—residential loans 1,004,671  10,2704.11  941,712  11,4834.89 
Loans to individuals 29,079  3274.52  31,939  5106.40 
Municipal loans and leases 291,433  2,9774.11  335,399  3,3053.95 
Lease financings 91,203  1,5927.02  81,762  1,4597.16 
  Gross loans and leases 4,836,858  47,7343.97  4,123,069  50,4564.91 
Total interest-earning assets 5,591,460  50,6213.64  4,729,052  54,7124.64 
Cash and due from banks 46,970     46,868    
Reserve for credit losses, loans and leases (69,292)    (31,847)   
Premises and equipment, net 55,750     58,873    
Operating lease right-of-use assets 34,419     35,821    
Other assets 341,483     331,681    
  Total assets$6,000,790    $5,170,448    
         
Liabilities:        
Interest-bearing checking deposits$617,927 $3720.24%$457,231 $4570.40%
Money market savings 1,063,463  8530.32  982,440  4,2341.73 
Regular savings 872,422  4750.22  818,523  1,0130.50 
Time deposits 577,462  2,6721.86  688,897  3,4071.98 
  Total time and interest-bearing deposits 3,131,274  4,3720.56  2,947,091  9,1111.24 
         
Short-term borrowings 161,365  1220.30  48,312  2171.80 
Long-term debt 210,040  7621.46  159,572  8362.10 
Subordinated notes 94,890  1,2065.11  94,663  1,2615.34 
  Total borrowings 466,295  2,0901.80  302,547  2,3143.07 
  Total interest-bearing liabilities 3,597,569  6,4620.72  3,249,638  11,4251.41 
Noninterest-bearing deposits 1,663,395     1,198,320    
Operating lease liabilities 37,680     38,873    
Accrued expenses and other liabilities 41,196     38,079    
  Total liabilities 5,339,840     4,524,910    
         
Shareholders' Equity:        
Common stock 157,784     157,784    
Additional paid-in capital 295,681     293,496    
Retained earnings and other equity 207,485     194,258    
  Total shareholders' equity 660,950     645,538    
  Total liabilities and shareholders' equity$6,000,790    $5,170,448    
Net interest income $44,159   $43,287  
         
Net interest spread  2.92   3.23 
Effect of net interest-free funding sources  0.26   0.44 
Net interest margin  3.18%  3.67%
Ratio of average interest-earning assets to average interest-bearing liabilities 155.42%    145.53%   
         
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
             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 months ended June 30, 2020 and 2019 have 
             been calculated using the Corporation’s federal applicable rate of 21.0%.     



Univest Financial Corporation 
Average Balances and Interest Rates (Unaudited) 
  For the Six Months Ended June 30,  
Tax Equivalent Basis 2020   2019  
 AverageIncome/Average AverageIncome/Average 
(Dollars in thousands)BalanceExpenseRate BalanceExpenseRate 
Assets:        
Interest-earning deposits with other banks$215,888 $3920.37%$72,760 $8382.32%
U.S. government obligations 7,267  732.02  18,669  1551.67 
Obligations of state and political subdivisions 30,070  5293.54  61,703  1,0533.44 
Other debt and equity securities 389,591  4,8502.50  390,440  5,2032.69 
Federal Home Loan Bank, Federal Reserve Bank and other stock 30,214  8895.92  32,148  1,1217.03 
Total interest-earning deposits, investments and other interest-earning assets 673,030  6,7332.01  575,720  8,3702.93 
         
Commercial, financial, and agricultural loans 819,121  15,9613.92  815,565  21,3475.28 
Paycheck Protection Program loans 185,334  2,1282.31     
Real estate—commercial and construction loans 2,186,098  47,0274.33  1,867,510  44,6694.82 
Real estate—residential loans 998,111  21,3224.30  940,015  22,8954.91 
Loans to individuals 29,548  7345.00  32,230  1,0286.43 
Municipal loans and leases 304,219  6,2424.13  333,858  6,5263.94 
Lease financings 90,289  3,1467.01  81,330  2,8947.18 
Gross loans and leases 4,612,720  96,5604.21  4,070,508  99,3594.92 
Total interest-earning assets 5,285,750  103,2933.93  4,646,228  107,7294.68 
Cash and due from banks 48,931     45,797    
Reserve for credit losses, loans and leases (56,832)    (30,984)   
Premises and equipment, net 56,074     59,025    
Operating lease right-of-use assets 34,482     36,472    
Other assets 336,122     331,272    
Total assets$5,704,527    $5,087,810    
         
Liabilities:        
Interest-bearing checking deposits$601,159 $1,1680.39%$468,019 $1,1710.50%
Money market savings 1,060,399  3,7560.71  950,641  7,9821.69 
Regular savings 844,591  1,2670.30  803,859  1,8270.46 
Time deposits 590,183  5,5871.90  672,193  6,3341.90 
  Total time and interest-bearing deposits 3,096,332  11,7780.76  2,894,712  17,3141.21 
         
Short-term borrowings 100,745  2280.46  82,796  8552.08 
Long-term debt 189,623  1,5261.62  152,475  1,5752.08 
Subordinated notes 94,868  2,4815.26  94,633  2,5225.37 
Total borrowings 385,236  4,2352.21  329,904  4,9523.03 
Total interest-bearing liabilities 3,481,568  16,0130.92  3,224,616  22,2661.39 
Noninterest-bearing deposits 1,475,994     1,144,185    
Operating lease liabilities 37,724     39,478    
Accrued expenses and other liabilities 42,036     40,936    
Total liabilities 5,037,322     4,449,215    
         
Shareholders' Equity:        
Common stock 157,784     157,784    
Additional paid-in capital 295,500     293,123    
Retained earnings and other equity 213,921     187,688    
Total shareholders' equity 667,205     638,595    
Total liabilities and shareholders' equity$5,704,527    $5,087,810    
Net interest income $87,280   $85,463  
         
Net interest spread  3.01   3.29 
Effect of net interest-free funding sources  0.31   0.42 
Net interest margin  3.32%  3.71%
Ratio of average interest-earning assets to average interest-bearing liabilities 151.82%    144.09%   
         
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
             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 six months ended June 30, 2020 and 2019 have 
             been calculated using the Corporation’s federal applicable rate of 21.0%.     



Univest Financial Corporation 
Loan Portfolio Overview 
             
(Dollars in millions)            
Industry DescriptionTotal Outstanding
Balance (excl PPP)
 % of
Commercial
Loan Portfolio
 PPP $ (1) % of Portfolio
with PPP
Loans (2)
 $ Balance of
Modified Loans
(3)
 Modified
Loans as a % of
Portfolio (3)
 
CRE - Retail$260.7 7.1%$0.2 -%$124.7 47.8%
Animal Production 240.3 6.6  0.7 2.1  20.7 8.6 
CRE - 1-4 Family Residential Investment 238.7 6.5  1.3 0.2  26.9 11.3 
CRE - Office 208.0 5.7  - 0.0  16.4 7.9 
CRE - Multi-family 182.3 5.0  - 0.0  11.8 6.5 
Hotels & Motels (Accommodation) 171.7 4.7  2.4 50.4  146.6 85.4 
Nursing and Residential Care Facilities 155.4 4.3  7.9 27.4  - - 
CRE - Industrial / Warehouse 125.4 3.5  0.1 4.8  26.3 21.0 
Real Estate Lenders, Secondary Market Financing 116.9 3.2  4.3 18.6  - - 
Specialty Trade Contractors 114.7 3.2  66.9 15.3  6.0 5.3 
CRE - Mixed-Use - Residential 107.2 3.0  - -  34.5 32.1 
Professional, Scientific, and Technical Services 100.4 2.8  70.1 30.4  11.6 11.6 
Homebuilding (tract developers, remodelers) 91.1 2.5  15.0 6.7  3.3 3.7 
Education 89.9 2.5  15.6 39.8  6.7 7.4 
Merchant Wholesalers, Durable Goods 71.7 2.0  20.7 21.0  9.7 13.5 
Fabricated Metal Product Manufacturing 68.4 1.9  12.9 3.7  6.1 8.9 
Crop Production 61.9 1.7  0.3 0.6  3.2 5.2 
Food Services and Drinking Places 61.1 1.7  15.9 25.5  33.9 55.5 
CRE - Medical Office 59.8 1.6  - -  14.7 24.7 
Administrative and Support Services 54.4 1.5  28.8 33.0  1.6 2.9 
Motor Vehicle and Parts Dealers 51.8 1.4  11.6 5.5  18.0 34.8 
Food Manufacturing 51.0 1.4  3.0 1.4  17.5 34.4 
Total Commercial Loans >$50M$2,682.8 73.8%$277.7 11.6%$540.2 20.1%
Industries with <$50 million in outstandings$951.0 26.2%$221.3 19.2%$126.2 13.3%
Total Commercial Loans$3,633.8 100.0%$499.0 13.6%$666.4 18.3%
             
             
Consumer Loans and Lease FinancingsTotal Outstanding Balance   PPP $ (1)   $ Balance of Modified Loans (3) Modified Loans as a % of Portfolio (3) 
Real Estate-Residential Secured for Personal Purpose$462.5   $-   $35.5 7.7%
Real Estate-Home Equity Secured for Personal Purpose 173.1    -    4.1 2.4 
Loans to Individuals 29.2    -    0.5 1.7 
Lease Financings 154.2    -    13.6 8.8 
Total - Consumer Loans and Lease Financings$819.0   $-   $53.7 6.6%
             
Total$4,452.8   $499.0   $720.1 16.2%
             
(1) Includes ($11.0) million of net deferred fees.            
(2) Represents weighted average percent of the portfolio which received a PPP loan.         
(3) Loan modifications referenced above were made in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and therefore were not classified as TDRs.

 


CONTACT:
Brian J. RichardsonUNIVEST FINANCIAL CORPORATION
Chief Financial Officer
215-721-2446
richardsonb@univest.net

Univest Corporation

Source: Univest Financial Corporation
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