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Univest Financial Corporation Reports Third Quarter Results

Company Release - 10/28/2020

SOUDERTON, Pa., Oct. 28, 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 September 30, 2020 of $18.1 million, or $0.62 diluted earnings per share, compared to net income of $17.7 million, or $0.60 diluted earnings per share, for the quarter ended September 30, 2019. Net income for the nine months ended September 30, 2020 was $21.0 million, or $0.72 diluted earnings per share, compared to net income of $50.2 million, or $1.71 diluted earnings per share, for the nine months ended September 30, 2019.

Pre-tax pre-provision income1 for the quarter ended September 30, 2020 was $27.1 million, an increase of $4.2 million, or 18.1%, from the third quarter of 2019. Pre-tax pre-provision income1 for the nine months ended September 30, 2020 was $74.8 million, an increase of $7.3 million, or 10.9%, from the comparable period in the prior year.

On October 19, 2020, the Corporation announced Univest Bank and Trust Co.’s plan to optimize its financial service center footprint with the consolidation or relocation of eight locations. The plan is being executed in two phases with the first being completed on January 29, 2021 and the second being completed on June 30, 2021. The pre-tax one-time costs associated with this plan are estimated to be $1.7 million, which will primarily be recognized in the fourth quarter of 2020. The estimated pre-tax annualized savings will be approximately $2.4 million.

COVID-19
As a result of the impact of COVID-19, we have taken various actions to support our customers and the communities we collectively serve, including modifying outstanding loans and leases and waiving certain deposit service charges. Loans and leases that were modified via principal and/or interest deferrals were done so 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 been categorized as troubled debt restructurings. These loans and leases have a combined principal balance of approximately $191.0 million as of October 16, 2020, which represents approximately 4.1% of the loan portfolio, excluding Paycheck Protection Program ("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 September 30, 2020, the Corporation recorded provision for credit losses of $3.9 million, of which $280 thousand (after-tax charge of $221 thousand), or $0.01 diluted earnings per share, was attributable to changes in economic assumptions within the Corporation’s CECL model, which were predominately driven by COVID-19. During the nine months ended September 30, 2020, the Corporation recorded CECL related charges of $49.5 million, of which $40.5 million (after-tax charge of $32.0 million), or $1.10 diluted earnings per share, was attributable to changes in economic assumptions within the CECL model.

Loans
Gross loans and leases, excluding PPP loans, increased $257.4 million, or 23.1% (annualized), from June 30, 2020 primarily due to increases in commercial and commercial real estate loans. During the nine months ended September 30, 2020, gross loans and leases, excluding PPP loans, increased $323.4 million, or 9.8% (annualized), primarily due to increases in commercial real estate loans, partially offset by a decrease in commercial loans. Since September 30, 2019, gross loans and leases, excluding PPP loans, have increased $458.3 million, or 10.8%, primarily due to increases in commercial real estate loans.
  
Deposits
Total deposits increased $342.3 million, or 28.1% (annualized), from June 30, 2020 primarily due to increases in public funds deposits, and $851.5 million, or 26.0% (annualized), from December 31, 2019 primarily due to increases in commercial and consumer deposits. Total deposits increased $873.6 million, or 20.1%, from September 30, 2019 primarily due to increases in commercial and consumer deposits offset by a decrease in public funds. Deposits at September 30, 2020 were elevated by the PPP loans originated during the year.

Net Interest Income and Margin
Net interest income of $43.9 million for the three months ended September 30, 2020 increased $336 thousand, or 0.8%, from the three months ended June 30, 2020, and $1.2 million, or 2.8%, from the three months ended September 30, 2019. Net interest income of $129.8 million for the nine months ended September 30, 2020 increased $3.0 million, or 2.4%, from the nine months ended September 30, 2019. The increase in net interest income for the three and nine months ended September 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 3.02% for the third quarter of 2020, compared to 3.18% for the second quarter of 2020 and 3.52% for the third quarter of 2019. Excess liquidity reduced net interest margin by approximately eighteen basis points for the quarter ended September 30, 2020 compared to sixteen basis points for the quarter ended June 30, 2020 and thirteen basis points for the quarter ended September 30, 2019. This excess liquidity was primarily driven by strong deposit balance growth over the last year. PPP loans reduced net interest margin by ten basis points for the quarter ended September 30, 2020 compared to nine basis points for the quarter ended June 30, 2020. Excluding the impact of excess liquidity and the impact of PPP loans, the net interest margin, on a tax-equivalent basis, was 3.30% for the quarter ended September 30, 2020, 3.43% for the quarter ended June 30, 2020 and 3.65% for the quarter ended September 30, 2019.

Noninterest Income
Noninterest income for the quarter ended September 30, 2020 was $21.8 million, an increase of $5.2 million, or 31.4%, from the third quarter of 2019. Noninterest income for the nine months ended September 30, 2020 was $58.2 million, an increase of $8.9 million, or 18.1%, from the comparable period in the prior year.

Net gain on mortgage banking activities increased $4.2 million, or 259.7%, for the quarter and $9.2 million, or 316.7%, for the nine months ended September 30, 2020 from the comparable periods in the prior year, due to an increase in volume and expansion of margins. Net gain on sales of investment securities for the nine months ended September 30, 2020 increased $776 thousand from 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 $1.6 million, or 299.1%, for the quarter ended September 30, 2020 and $2.4 million, or 150.1%, for the nine months ended September 30, 2020 from the comparable periods in the prior year. Fees on risk participation agreements for interest rate swaps increased $2.2 million for the quarter ended September 30, 2020 and $3.4 million for the nine months ended September 30, 2020 from the comparable periods in the prior year, driven by increased customer activity due to the current rate environment. Net gains or losses related to valuations and sales of other real estate owned decreased $323 thousand for the quarter ended September 30, 2020 and $268 thousand for the nine months ended September 30, 2020 from the comparable periods in the prior year, primarily due to a $300 thousand valuation adjustment on other real estate owned for a property that is under agreement of sale and is expected to be sold in the fourth quarter of 2020. Gain on sale of small business administration (SBA) loans decreased $52 thousand for the quarter ended September 30, 2020 and $346 thousand for the nine months ended September 30, 2020 from the comparable periods in the prior year due to decreased SBA loan sale activity. Equity securities measured at fair value decreased $21 thousand for the quarter and $333 thousand for the nine months ended September 30, 2020.

Service charges on deposit accounts decreased $326 thousand, or 21.5%, for the quarter ended September 30, 2020 and $921 thousand, or 21.0%, for the nine months ended September 30, 2020 from the comparable periods in the prior year due to the waiving of certain deposit service charges for customers in response to COVID-19 during the second quarter of 2020 and a decline in customer activity in the third quarter of 2020.

Other service fee income decreased $1.7 million, or 23.4%, for the nine months ended September 30, 2020 from the comparable period in the prior year. Mortgage servicing right amortization increased $1.1 million for the nine months ended September 30, 2020 from the comparable period in the prior year driven by the decline in interest rates and their impact on prepayment activity. Additionally, valuation allowance adjustments of $206 thousand during the nine months ended September 30, 2020 were recorded against mortgage servicing right assets due to declines in fair value. Interchange income decreased $320 thousand for the nine months ended September 30, 2020 from the comparable period in the prior year due to decreased customer transaction activity.

Noninterest Expense
Noninterest expense for the quarter ended September 30, 2020 was $38.5 million, an increase of $2.3 million, or 6.2%, compared to the third quarter of 2019. Noninterest expense for the nine months ended September 30, 2020 was $113.3 million, an increase of $4.7 million, or 4.3% from the comparable period in the prior year.

Salaries, benefits and commissions increased $1.3 million, or 5.7%, for the quarter ended September 30, 2020 and increased $3.2 million, or 4.9%, for the nine months ended September 30, 2020 from the comparable periods in the prior year. The increase was 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 quarters of 2019, annual merit increases and increased variable compensation due to strong mortgage banking activity. Deposit insurance premiums increased $1.2 million, or 259.2%, for the quarter ended September 30, 2020 and increased $1.4 million, or 316.9%, for the nine months ended September 30, 2020 from the comparable periods in the prior year primarily due to an FDIC small bank assessment credit of $988 thousand, which was recognized during the third quarter of 2019 and an increased assessment base for 2020 due to asset growth.

Asset Quality and Provision for Credit Losses
Nonperforming assets were $41.9 million at September 30, 2020, compared to $39.3 million at December 31, 2019 and $40.4 million at September 30, 2019. Other real estate owned includes a $8.1 million property, which transferred to other real estate owned during the second quarter of 2020. The property is under an agreement of sale and is expected to be sold during the fourth quarter of 2020.

Net loan and lease recoveries were $35 thousand during the third quarter of 2020 compared to net loan and lease charge-offs of $4.0 million for the nine months ended September 30, 2020. The provision for credit losses was $3.9 million for the third quarter of 2020, due to a reserve increase of $5.6 million related to loans and leases, offset by a decrease of $1.5 million of reserves related to unfunded commitments and a decrease of $163 thousand of reserves related to investment securities. The provision for credit losses was $49.5 million for the nine months ended September 30, 2020, of which $47.6 million related to loans and leases, $1.5 million related to reserves for unfunded commitments, and $393 thousand related to investment securities.

Net loan and lease charge-offs were $468 thousand during the third quarter of 2019 and $2.0 million for the nine months ended September 30, 2019. The provision for loan and lease losses was $1.5 million for the third quarter of 2019 and $6.3 million for the nine months ended September 30, 2019.

The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment, was 1.76% at September 30, 2020, compared to 1.74% at June 30, 2020, 0.81% at December 31, 2019 and 0.79% at September 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 1.95%1 at September 30, 2020, compared to 1.94%1 at June 30, 2020.

Tax Provisio n
The effective income tax rate was 16.7% for the nine months ended September 30, 2020 compared to an effective income tax rate of 17.9% for the nine months ended September 30, 2019. The Corporation's effective income tax rate reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases.

D ividend
On August 24, 2020, Univest declared a quarterly cash dividend of $0.20 per share, payable on October 1, 2020. This represented a 5.56% annualized yield based on the closing price of Univest’s stock on the date the dividend was paid.

It is the Corporation's intention to change the timing of future dividend declarations and payments. Historically, the next dividend would have been declared in December and paid in early January. Under the new timing, the Corporation anticipates that the dividend would be declared in January, in conjunction with the fourth quarter 2020 earnings release, and paid in February. The Corporation also anticipates that future dividends would then be declared in conjunction with quarterly earnings releases and paid in the following month. It is important to note that this change is not anticipated to impact the number of potential dividends paid in a year. There were four dividend payments in 2020 and there would be potentially four payments in each subsequent years subject to declaration by the Corporation's Board of Directors.

Conference Call
Univest will host a conference call to discuss third quarter 2020 results on Thursday, October 29, 2020 at 9:00 a.m. EST. Participants may preregister at https://dpregister.com/sreg/10148562/da483081a6. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through November 29, 2020 by dialing 1-877-344-7529; using Conference ID: 10148562.

1 Non-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 $6.4 billion in assets and $3.8 billion in assets under management and supervision through its Wealth Management lines of business at September 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 pres s 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 finan cial operations, markets and products of Univest. These forward-looking statements involve certain risks and uncertainties in that there are a number of important factors that could cause Univest's future results to differ materially from historical perfor mance 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 credit 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.

Additionally, 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 whether the gradual reopening of businesses will result in a meaningful inc rease in economic activity. 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, fina ncial condition, liquidity, and results of operations: (1) demand for our products and services may decline; (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; (3) collateral for loans, especially real estate, may decline in value; (4) our allowance for loan losses may have to be increased if borrowers experience financial difficulties; (5) the net worth and liquidit y 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 dec line in our cost of interest-bearing liabilities; (7) 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; (8) our wealth management revenues may decline with continuin g market turmoil; (9) 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; (10) our cybe r security risks are increased as the result of an increase in the number of employees working remotely; (11) Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs; and (12) further and sustained d ecline in our stock price or other triggering event could result in an impairment charge being recorded. Univest undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.

(UVSP - ER)

   
Univest Financial Corporation  
Consolidated Selected Financial Data (Unaudited)  
September 30, 2020  
(Dollars in thousands)                              
                               
Balance Sheet (Period End)   09/30/20   06/30/20   03/31/20   12/31/19   09/30/19          
Assets   $ 6,382,831     $ 6,125,312     $ 5,464,768     $ 5,380,924     $ 5,353,611            
Investment securities, net of allowance for credit losses     368,830       397,852       423,521       441,599       448,447            
Loans held for sale     14,465       31,082       11,417       5,504       2,893            
Loans and leases held for investment, gross     5,211,856       4,951,809       4,448,825       4,386,836       4,251,933            
Allowance for credit losses, loans and leases     91,870       86,217       68,216       35,331       33,662            
Loans and leases held for investment, net     5,119,986       4,865,592       4,380,609       4,351,505       4,218,271            
Total deposits     5,211,603       4,869,329       4,407,303       4,360,075       4,337,991            
Noninterest-bearing deposits     1,714,505       1,725,819       1,318,270       1,279,681       1,198,425            
NOW, money market and savings     2,940,879       2,623,025       2,452,021       2,474,384       2,421,466            
Time deposits     556,219       520,485       637,012       606,010       718,100            
Borrowings     416,104       515,722       323,363       263,596       273,855            
Shareholders' equity     669,107       654,873       651,551       675,122       664,299            
                               
                               
Balance Sheet (Average)   For the three months ended,   For the nine months ended,  
    09/30/20   06/30/20   03/31/20   12/31/19   09/30/19   09/30/20   09/30/19  
Assets   $ 6,265,605     $ 6,000,790     $ 5,409,561     $ 5,400,591     $ 5,317,867     $ 5,892,918     $ 5,165,339    
Investment securities, net of allowance for credit losses     385,221       411,957       441,900       445,932       460,099       412,924       467,202    
Loans and leases, gross     5,070,037       4,836,858       4,388,584       4,280,430       4,170,485       4,766,274       4,104,198    
Deposits     5,030,398       4,794,669       4,349,984       4,374,586       4,288,170       4,726,132       4,122,902    
Shareholders' equity     661,947       660,950       673,460       672,647       659,523       665,439       645,647    
                               
                               
Asset Quality Data (Period End)                              
    09/30/20   06/30/20   03/31/20   12/31/19   09/30/19          
Nonaccrual loans and leases, including nonaccrual troubled debt restructured                              
  loans and leases   $ 30,019     $ 26,141     $ 36,626     $ 38,578     $ 37,368            
Accruing loans and leases 90 days or more past due     3,573       1,193       1,777       143       2,488            
Accruing troubled debt restructured loans and leases     53       53       54       54       54            
Total nonperforming loans and leases     33,645       27,387       38,457       38,775       39,910            
Other real estate owned     8,270       8,642       516       516       495            
Total nonperforming assets     41,915       36,029       38,973       39,291       40,405            
Nonaccrual loans and leases / Loans and leases held for investment     0.58 %     0.53 %     0.82 %     0.88 %     0.88 %          
Nonperforming loans and leases / Loans and leases held for investment     0.65 %     0.55 %     0.86 %     0.88 %     0.94 %          
Nonperforming assets / Total assets     0.66 %     0.59 %     0.71 %     0.73 %     0.75 %          
                               
Allowance for credit losses, loans and leases     91,870       86,217       68,216       35,331       33,662            
Allowance for credit losses, loans and leases / Loans and leases held for investment     1.76 %     1.74 %     1.53 %     0.81 %     0.79 %          
Allowance for credit losses, loans and leases / Loans and leases held for investment, excluding Paycheck Protection Program loans (1)     1.95 %     1.94 %     1.53 %     0.81 %     0.79 %          
Allowance for credit losses, loans and leases / Nonaccrual loans and leases held for investment     306.04 %     329.82 %     186.25 %     91.58 %     90.08 %          
Allowance for credit losses, loans and leases / Nonperforming loans and leases held for investment     273.06 %     314.81 %     177.38 %     91.12 %     84.34 %          
                               
    For the three months ended,   For the nine months ended,  
    09/30/20   06/30/20   03/31/20   12/31/19   09/30/19   09/30/20   09/30/19  
Net loan and lease (recoveries) charge-offs   $ (35 )   $ 3,576     $ 489     $ 558     $ 468     $ 4,030     $ 1,993    
Net loan and lease (recoveries) charge-offs (annualized)/Average loans and leases     (0.00 %)     0.30 %     0.04 %     0.05 %     0.04 %     0.11 %     0.06 %  
                               
(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)  
September 30, 2020  
(Dollars in thousands, except per share data)                              
    For the three months ended,   For the nine months ended,  
For the period:   09/30/20   06/30/20   03/31/20   12/31/19   09/30/19   09/30/20   09/30/19  
Interest income   $ 50,612   $ 49,980     $ 52,019     $ 53,369   $ 54,300     $ 152,611   $ 160,724  
Interest expense     6,758     6,462       9,551       10,940     11,655       22,771     33,921  
     Net interest income     43,854     43,518       42,468       42,429     42,645       129,840     126,803  
Provision for credit losses     3,935     23,737       21,843       2,225     1,533       49,515     6,286  
Net interest income after provision for credit losses     39,919     19,781       20,625       40,204     41,112       80,325     120,517  
Noninterest income:                              
     Trust fee income     1,915     1,924       1,890       1,912     1,973       5,729     5,914  
     Service charges on deposit accounts     1,187     890       1,397       1,551     1,513       3,474     4,395  
     Investment advisory commission and fee income     4,005     3,540       4,255       4,064     4,032       11,800     11,876  
     Insurance commission and fee income     3,776     4,067       4,732       3,609     3,877       12,575     12,962  
     Other service fee income     2,093     1,488       1,870       2,229     2,255       5,451     7,112  
     Bank owned life insurance income     741     732       734       741     743       2,207     2,438  
     Net gain on sales of investment securities     57     65       695       13     33       817     41  
     Net gain on mortgage banking activities     5,860     3,515       2,744       1,038     1,629       12,119     2,908  
     Other income     2,171     1,779       67       1,013     544       4,017     1,606  
Total noninterest income     21,805     18,000       18,384       16,170     16,599       58,189     49,252  
Noninterest expense:                              
Salaries, benefits and commissions     24,059     21,700       23,836       21,933     22,758       69,595     66,356  
Net occupancy     2,609     2,478       2,574       2,534     2,475       7,661     7,687  
Equipment     972     923       995       1,027     1,088       2,890     3,143  
Data processing     2,862     2,750       2,760       2,685     2,624       8,372     7,765  
Professional fees     1,321     1,264       1,317       1,475     1,517       3,902     4,088  
Marketing and advertising     463     535       402       710     558       1,400     1,884  
Deposit insurance premiums     707     615       504       342     (444 )     1,826     438  
Intangible expenses     283     321       330       374     378       934     1,221  
Other expense     5,251     5,374       6,059       6,400     5,313       16,684     16,028  
Total noninterest expense     38,527     35,960       38,777       37,480     36,267       113,264     108,610  
Income before taxes     23,197     1,821       232       18,894     21,444       25,250     61,159  
Income tax (benefit) expense     5,078     (264 )     (606 )     3,384     3,782       4,208     10,950  
Net income   $ 18,119   $ 2,085     $ 838     $ 15,510   $ 17,662     $ 21,042   $ 50,209  
Net income per share:                              
     Basic   $ 0.62   $ 0.07     $ 0.03     $ 0.53   $ 0.60     $ 0.72   $ 1.71  
     Diluted   $ 0.62   $ 0.07     $ 0.03     $ 0.53   $ 0.60     $ 0.72   $ 1.71  
Dividends declared per share   $ 0.20   $ 0.20     $ 0.20     $ 0.20   $ 0.20     $ 0.60   $ 0.60  
Weighted average shares outstanding     29,226,627     29,187,197       29,286,200       29,327,169     29,305,524       29,233,317     29,290,309  
Period end shares outstanding     29,241,302     29,201,985       29,164,782       29,334,629     29,312,534       29,241,302     29,312,534  
                               

 

Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
September 30, 2020
                             
                             
                             
    For the three months ended,   For the nine months ended,
Profitability Ratios (annualized) 09/30/20   06/30/20   03/31/20   12/31/19   09/30/19   09/30/20   09/30/19
                             
Return on average assets   1.15 %     0.14 %     0.06 %     1.14 %     1.32 %     0.48 %     1.30 %
Return on average shareholders' equity   10.89 %     1.27 %     0.50 %     9.15 %     10.62 %     4.22 %     10.40 %
Return on average tangible common equity (1)   14.82 %     1.73 %     0.68 %     12.40 %     14.52 %     5.74 %     14.33 %
Net interest margin (FTE)   3.02 %     3.18 %     3.48 %     3.44 %     3.52 %     3.21 %     3.64 %
Efficiency ratio (2)   58.0 %     57.7 %     62.8 %     63.0 %     60.4 %     59.5 %     60.8 %
                             
Capitalization Ratios                          
                             
Dividends declared to net income   32.3 %     278.7 %     699.9 %     37.8 %     33.2 %     83.3 %     35.0 %
Shareholders' equity to assets (Period End)   10.48 %     10.69 %     11.92 %     12.55 %     12.41 %     10.48 %     12.41 %
Tangible common equity to tangible assets (1)   7.96 %     8.06 %     8.99 %     9.59 %     9.42 %     7.96 %     9.42 %
Common equity book value per share $ 22.88     $ 22.43     $ 22.34     $ 23.01     $ 22.66     $ 22.88     $ 22.66  
Tangible common equity book value per share (1) $ 16.89     $ 16.41     $ 16.31     $ 17.01     $ 16.64     $ 16.89     $ 16.64  
                             
Regulatory Capital Ratios (Period End)                          
Tier 1 leverage ratio   8.97 %     9.15 %     9.90 %     10.02 %     9.97 %     8.97 %     9.97 %
Common equity tier 1 risk-based capital ratio   10.52 %     10.73 %     10.79 %     11.03 %     11.03 %     10.52 %     11.03 %
Tier 1 risk-based capital ratio   10.52 %     10.73 %     10.79 %     11.03 %     11.03 %     10.52 %     11.03 %
Total risk-based capital ratio   15.35 %     13.72 %     13.65 %     13.78 %     13.81 %     15.35 %     13.81 %
                             
(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.   
                             
    For the three months ended,   For the nine months ended,
    09/30/20   06/30/20   03/31/20   12/31/19   09/30/19   09/30/20   09/30/19
  Shareholders' equity $ 669,107     $ 654,873     $ 651,551     $ 675,122     $ 664,299     $ 669,107     $ 664,299  
  Goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )
  Other intangibles (a)   (2,736 )     (3,017 )     (3,333 )     (3,658 )     (4,026 )     (2,736 )     (4,026 )
  Tangible common equity $ 493,812     $ 479,297     $ 475,659     $ 498,905     $ 487,714     $ 493,812     $ 487,714  
                             
  Total assets $ 6,382,831     $ 6,125,312     $ 5,464,768     $ 5,380,924     $ 5,353,611     $ 6,382,831     $ 5,353,611  
  Goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )
  Other intangibles (a)   (2,736 )     (3,017 )     (3,333 )     (3,658 )     (4,026 )     (2,736 )     (4,026 )
  Tangible assets $ 6,207,536     $ 5,949,736     $ 5,288,876     $ 5,204,707     $ 5,177,026     $ 6,207,536     $ 5,177,026  
                             
  Average shareholders' equity $ 661,947     $ 660,950     $ 673,460     $ 675,647     $ 659,523     $ 665,439     $ 645,647  
  Average goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )
  Average other intangibles (a)   (2,889 )     (3,185 )     (3,506 )     (3,853 )     (4,234 )     (3,193 )     (4,624 )
  Average tangible common equity $ 486,499     $ 485,206     $ 497,395     $ 499,235     $ 482,730     $ 489,687     $ 468,464  
                             
  Net income before taxes $ 23,197     $ 1,821     $ 232     $ 18,894     $ 21,444     $ 25,250     $ 61,159  
  Provision for credit losses   3,935       23,737       21,843       2,225       1,533       49,515       6,286  
  Pre-tax pre-provision income $ 27,132     $ 25,558     $ 22,075     $ 21,119     $ 22,977     $ 74,765     $ 67,445  
                             
  Loans and leases held for investment, gross $ 5,211,856     $ 4,951,809     $ 4,448,825     $ 4,386,836     $ 4,251,933     $ 5,211,856     $ 4,251,933  
  Paycheck Protection Program ("PPP") loans   (501,580 )     (498,978 )     -       -       -       (501,580 )     -  
  Gross loans and leases excluding PPP loans $ 4,710,276     $ 4,452,831     $ 4,448,825     $ 4,386,836     $ 4,251,933     $ 4,710,276     $ 4,251,933  
                             
  (a) Amount does not include servicing rights                          
                             

 

Univest Financial Corporation  
Average Balances and Interest Rates (Unaudited)  
    For the Three Months Ended,      
Tax Equivalent Basis September 30, 2020   June 30, 2020  
  Average Income/ Average   Average Income/ Average  
(Dollars in thousands) Balance Expense Rate   Balance Expense Rate  
Assets:                
Interest-earning deposits with other banks $ 368,181   $ 100 0.11 % $ 313,668   $ 67 0.09 %
U.S. government obligations   6,998     36 2.05     7,236     36 2.00  
Obligations of state and political subdivisions   18,004     167 3.69     26,546     240 3.64  
Other debt and equity securities   360,219     1,610 1.78     378,175     2,182 2.32  
Federal Home Loan Bank, Federal Reserve Bank and other stock   28,651     419 5.82     28,977     362 5.02  
Total interest-earning deposits, investments and other interest-earning assets   782,053     2,332 1.19     754,602     2,887 1.54  
                 
Commercial, financial, and agricultural loans   807,376     7,330 3.61     816,976     7,330 3.61  
Paycheck Protection Program loans   500,549     2,811 2.23     370,669     2,128 2.31  
Real estate—commercial and construction loans   2,358,971     23,547 3.97     2,232,827     23,110 4.16  
Real estate—residential loans   1,009,407     10,380 4.09     1,004,671     10,270 4.11  
Loans to individuals   28,663     309 4.29     29,079     327 4.52  
Municipal loans and leases   267,364     2,839 4.22     291,433     2,977 4.11  
Lease financings   97,707     1,662 6.77     91,203     1,592 7.02  
     Gross loans and leases   5,070,037     48,878 3.84     4,836,858     47,734 3.97  
Total interest-earning assets   5,852,090     51,210 3.48     5,591,460     50,621 3.64  
Cash and due from banks   56,715           46,970        
Allowance for credit losses, loans and leases   (87,046 )         (69,292 )      
Premises and equipment, net   55,755           55,750        
Operating lease right-of-use assets   33,875           34,419        
Other assets   354,216           341,483        
      Total assets $ 6,265,605         $ 6,000,790        
                 
Liabilities:                
Interest-bearing checking deposits   725,580     468 0.26 % $ 617,927   $ 372 0.24 %
Money market savings   1,116,628     897 0.32     1,063,463     853 0.32  
Regular savings   901,716     449 0.20     872,422     475 0.22  
Time deposits   525,656     2,214 1.68     577,462     2,672 1.86  
     Total time and interest-bearing deposits   3,269,580     4,028 0.49     3,131,274     4,372 0.56  
                 
Short-term borrowings   130,359     97 0.30     161,365     122 0.30  
Long-term debt   208,776     742 1.41     210,040     762 1.46  
Subordinated notes   155,945     1,891 4.82     94,890     1,206 5.11  
     Total borrowings   495,080     2,730 2.19     466,295     2,090 1.80  
     Total interest-bearing liabilities   3,764,660     6,758 0.71     3,597,569     6,462 0.72  
Noninterest-bearing deposits   1,760,818           1,663,395        
Operating lease liabilities   37,170           37,680        
Accrued expenses and other liabilities   41,010           41,196        
     Total liabilities   5,603,658           5,339,840        
                 
Shareholders' Equity:                
Common stock   157,784           157,784        
Additional paid-in capital   296,272           295,681        
Retained earnings and other equity   207,891           207,485        
     Total shareholders' equity   661,947           660,950        
     Total liabilities and shareholders' equity $ 6,265,605         $ 6,000,790        
Net interest income   $ 44,452       $ 44,159    
                 
Net interest spread     2.77       2.92  
Effect of net interest-free funding sources     0.25       0.26  
Net interest margin     3.02 %     3.18 %
Ratio of average interest-earning assets to average interest-bearing liabilities   155.45 %         155.42 %      
                 
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 September 30, 2020 and June 30, 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 September 30,      
Tax Equivalent Basis     2020         2019    
  Average Income/ Average   Average Income/ Average  
(Dollars in thousands) Balance Expense Rate   Balance Expense Rate  
Assets:                
Interest-earning deposits with other banks $ 368,181   $ 100 0.11 % $ 213,623   $ 1,178 2.19 %
U.S. government obligations   6,998     36 2.05     14,154     62 1.74  
Obligations of state and political subdivisions   18,004     167 3.69     42,465     316 2.95  
Other debt and equity securities   360,219     1,610 1.78     403,480     2,519 2.48  
Federal Home Loan Bank, Federal Reserve Bank and other stock   28,651     419 5.82     30,857     519 6.67  
Total interest-earning deposits, investments and other interest-earning assets   782,053     2,332 1.19     704,579     4,594 2.59  
                 
Commercial, financial, and agricultural loans   807,376     7,330 3.61     800,006     9,952 4.94  
Paycheck Protection Program loans   500,549     2,811 2.23     -     - -  
Real estate—commercial and construction loans   2,358,971     23,547 3.97     1,966,593     23,439 4.73  
Real estate—residential loans   1,009,407     10,380 4.09     956,224     11,570 4.80  
Loans to individuals   28,663     309 4.29     31,504     490 6.17  
Municipal loans and leases   267,364     2,839 4.22     333,734     3,413 4.06  
Lease financings   97,707     1,662 6.77     82,424     1,482 7.13  
     Gross loans and leases   5,070,037     48,878 3.84     4,170,485     50,346 4.79  
Total interest-earning assets   5,852,090     51,210 3.48     4,875,064     54,940 4.47  
Cash and due from banks   56,715           53,019        
Allowance for credit losses, loans and leases   (87,046 )         (33,152 )      
Premises and equipment, net   55,755           57,881        
Operating lease right-of-use assets   33,875           35,238        
Other assets   354,216           329,817        
      Total assets $ 6,265,605         $ 5,317,867        
                 
Liabilities:                
Interest-bearing checking deposits   725,580     468 0.26 % $ 497,185   $ 678 0.54 %
Money market savings   1,116,628     897 0.32     1,004,806     4,112 1.62  
Regular savings   901,716     449 0.20     805,632     963 0.47  
Time deposits   525,656     2,214 1.68     715,520     3,681 2.04  
     Total time and interest-bearing deposits   3,269,580     4,028 0.49     3,023,143     9,434 1.24  
                 
Short-term borrowings   130,359     97 0.30     32,375     94 1.15  
Long-term debt   208,776     742 1.41     167,338     866 2.05  
Subordinated notes   155,945     1,891 4.82     94,724     1,261 5.28  
     Total borrowings   495,080     2,730 2.19     294,437     2,221 2.99  
     Total interest-bearing liabilities   3,764,660     6,758 0.71     3,317,580     11,655 1.39  
Noninterest-bearing deposits   1,760,818           1,265,027        
Operating lease liabilities   37,170           38,364        
Accrued expenses and other liabilities   41,010           37,373        
     Total liabilities   5,603,658           4,658,344        
                 
Shareholders' Equity:                
Common stock   157,784           157,784        
Additional paid-in capital   296,272           294,138        
Retained earnings and other equity   207,891           207,601        
     Total shareholders' equity   661,947           659,523        
     Total liabilities and shareholders' equity $ 6,265,605         $ 5,317,867        
Net interest income   $ 44,452       $ 43,285    
                 
Net interest spread     2.77       3.08  
Effect of net interest-free funding sources     0.25       0.44  
Net interest margin     3.02 %     3.52 %
Ratio of average interest-earning assets to average interest-bearing liabilities   155.45 %         146.95 %      
                 
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 September 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 Nine Months Ended September 30,    
Tax Equivalent Basis     2020         2019    
  Average Income/ Average   Average Income/ Average  
(Dollars in thousands) Balance Expense Rate   Balance Expense Rate  
Assets:                
Interest-earning deposits with other banks $ 267,023   $ 492 0.25 % $ 120,231   $ 2,016 2.24 %
U.S. government obligations   7,176     109 2.03     17,148     217 1.69  
Obligations of state and political subdivisions   26,019     696 3.57     55,220     1,369 3.31  
Other debt and equity securities   379,729     6,460 2.27     394,834     7,722 2.61  
Federal Home Loan Bank, Federal Reserve Bank and other stock   29,689     1,308 5.88     31,713     1,640 6.91  
Total interest-earning deposits, investments and other interest-earning assets   709,636     9,065 1.71     619,146     12,964 2.80  
                 
Commercial, financial, and agricultural loans   815,178     23,291 3.82     810,321     31,299 5.16  
Paycheck Protection Program loans   291,173     4,939 2.27     -     - -  
Real estate—commercial and construction loans   2,244,143     70,574 4.20     1,900,901     68,108 4.79  
Real estate—residential loans   1,001,904     31,702 4.23     945,477     34,465 4.87  
Loans to individuals   29,251     1,043 4.76     31,985     1,518 6.35  
Municipal loans and leases   291,845     9,081 4.16     333,816     9,939 3.98  
Lease financings   92,780     4,808 6.92     81,698     4,376 7.16  
     Gross loans and leases   4,766,274     145,438 4.08     4,104,198     149,705 4.88  
Total interest-earning assets   5,475,910     154,503 3.77     4,723,344     162,669 4.60  
Cash and due from banks   51,544           48,231        
Allowance for credit losses, loans and leases   (66,977 )         (31,714 )      
Premises and equipment, net   55,967           58,640        
Operating lease right-of-use assets   34,278           36,056        
Other assets   342,196           330,782        
      Total assets $ 5,892,918         $ 5,165,339        
                 
Liabilities:                
Interest-bearing checking deposits   642,935     1,636 0.34 % $ 477,848   $ 1,849 0.52 %
Money market savings   1,079,279     4,653 0.58     968,894     12,094 1.67  
Regular savings   863,772     1,716 0.27     804,457     2,790 0.46  
Time deposits   568,517     7,801 1.83     686,794     10,015 1.95  
     Total time and interest-bearing deposits   3,154,503     15,806 0.67     2,937,993     26,748 1.22  
                 
Short-term borrowings   110,689     325 0.39     65,804     949 1.93  
Long-term debt   196,053     2,268 1.55     157,484     2,441 2.07  
Subordinated notes   115,376     4,372 5.06     94,664     3,783 5.34  
     Total borrowings   422,118     6,965 2.20     317,952     7,173 3.02  
     Total interest-bearing liabilities   3,576,621     22,771 0.85     3,255,945     33,921 1.39  
Noninterest-bearing deposits   1,571,629           1,184,909        
Operating lease liabilities   37,538           39,103        
Accrued expenses and other liabilities   41,691           39,735        
     Total liabilities   5,227,479           4,519,692        
                 
Shareholders' Equity:                
Common stock   157,784           157,784        
Additional paid-in capital   295,759           293,465        
Retained earnings and other equity   211,896           194,398        
     Total shareholders' equity   665,439           645,647        
     Total liabilities and shareholders' equity $ 5,892,918         $ 5,165,339        
Net interest income   $ 131,732       $ 128,748    
                 
Net interest spread     2.92       3.21  
Effect of net interest-free funding sources     0.29       0.43  
Net interest margin     3.21 %     3.64 %
Ratio of average interest-earning assets to average interest-bearing liabilities   153.10 %         145.07 %      
                 
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 nine months ended September 30, 2020 and 2019 have 
               been calculated using the Corporation’s federal applicable rate of 21.0%.     
                 

 

Univest Financial Corporation    
Loan Portfolio Overview (Unaudited)    
     
                               
(Dollars in thousands) As of September 30, 2020     As of October 16, 2020
       
Industry Description Total 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) (4)    
CRE - Retail $ 295,654   7.6 %   $ 239   - %   $ 45,121   15.3 %  
Animal Production   252,752   6.5       706   2.0       135   0.1    
CRE - Office   240,521   6.2       -   -       1,702   0.7    
CRE - 1-4 Family Residential Investment   237,378   6.1       1,282   0.2       212   0.1    
CRE - Multi-family   204,488   5.3       -   -       1,281   0.6    
Real Estate Lenders, Secondary Market Financing   189,743   4.9       4,318   27.8       -   -    
Hotels & Motels (Accommodation)   175,894   4.5       2,407   49.6       56,288   32.0    
Nursing and Residential Care Facilities   160,238   4.1       7,935   26.4       -   -    
CRE - Industrial / Warehouse   158,356   4.1       139   3.8       -   -    
CRE - Mixed-Use - Residential   111,613   2.9       -   -       15,440   13.8    
Specialty Trade Contractors   111,201   2.9       67,508   14.3       -   -    
Professional, Scientific, and Technical Services   93,463   2.4       70,163   29.4       63   0.1    
CRE - Medical Office   88,557   2.3       -   -       9,864   11.1    
Homebuilding (tract developers, remodelers)   85,177   2.2       15,049   5.2       -   -    
Education   77,676   2.0       15,577   26.7       1,071   1.4    
Merchant Wholesalers, Durable Goods   73,251   1.9       20,726   22.9       -   -    
Fabricated Metal Product Manufacturing   65,549   1.7       12,860   3.5       -   -    
Crop Production   62,689   1.6       289   0.5       -   -    
Motor Vehicle and Parts Dealers   61,306   1.6       11,623   2.9       -   -    
Food Services and Drinking Places   59,261   1.5       15,998   25.7       1,298   2.2    
Administrative and Support Services   55,217   1.4       28,943   32.9       -   -    
Industries with >$50 million in outstandings $ 2,859,984   73.7 %   $ 275,762   11.1 %   $ 132,475   4.6 %  
Industries with <$50 million in outstandings $ 1,015,850   26.3 %   $ 225,818   17.3 %   $ 33,566   3.3 %  
Total Commercial Loans $ 3,875,834   100.0 %   $ 501,580   12.7 %   $ 166,041   4.3 %  
                               
                               
Consumer Loans and Lease Financings Total Outstanding Balance         PPP $ (1)         $ Balance of Modified Loans (3)   Modified Loans as a % of Portfolio (3) (4)    
Real Estate-Residential Secured for Personal Purpose $ 474,688         $ -         $ 22,937   4.8 %  
Real Estate-Home Equity Secured for Personal Purpose   172,448           -           1,633   0.9    
Loans to Individuals   27,771           -           184   0.7    
Lease Financings   159,535           -           232   0.1    
Total - Consumer Loans and Lease Financings $ 834,442         $ -         $ 24,986   3.0 %  
                               
Total $ 4,710,276         $ 501,580         $ 191,027   4.1 %  
                               
(1) Includes ($9.5) 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 as of October 16, 2020.  
 
(4) Balance of modified loans as of October 16, 2020 as a percentage of portfolio loans at September 30, 2020.          

 

 


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

Univest Corporation

Source: Univest Financial Corporation