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Univest Financial Corporation Reports Second Quarter Results

Company Release - 7/28/2021

(Loan Growth (excluding PPP loans 1 ) for last twelve months of 14.0%)

SOUDERTON, Pa., July 28, 2021 (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, 2021 was $20.9 million, or $0.71 diluted earnings per share, compared to net income of $2.1 million, or $0.07 diluted earnings per share, for the quarter ended June 30, 2020. Net income for the six months ended June 30, 2021 was $53.5 million, or $1.81 diluted earnings per share, compared to net income of $2.9 million, or $0.10 diluted earnings per share, for the six months ended June 30, 2020.

Pre-tax pre-provision income1 for the quarter ended June 30, 2021 was $25.7 million, an increase of $143 thousand, or 0.6%, from the second quarter of 2020. Pre-tax pre-provision income1 for the six months ended June 30, 2021 was $54.8 million, an increase of $7.2 million, or 15.1%, from the comparable period in the prior year.

One-Time Items
The financial results for the three and six months ended June 30, 2021 included a tax-free bank owned life insurance ("BOLI") death benefit claim of $893 thousand, which represents $0.03 diluted earnings per share.

Paycheck Protection Program
On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law, which provides new COVID-19 relief funds, additional funding under the Paycheck Protection Program (the "PPP") and the establishment of PPP Second Draw Loans. The Small Business Administration (the "SBA") announced it was taking certain steps under the PPP to further promote equitable relief for smaller businesses. Under this program, we successfully originated 1,226 PPP loans and secured funding of approximately $169.5 million for our customers.

As of June 30, 2021, $252.8 million in PPP loan originations remain outstanding. During the quarter, we recorded income of $4.8 million within net interest income related to these loans, of which $3.7 million was the result of forgiveness and pay downs of PPP loans totaling $282.3 million. During the six months ended June 30, 2021, we recorded income of $9.3 million within net interest income related to these loans, of which $7.1 million was the result of forgiveness and pay downs of PPP loans totaling $402.0 million. As of June 30, 2021, we have $6.4 million of net deferred fees on our balance sheet, which represents approximately 35.2% of the initial deferred fee amount.

Loans
Gross loans and leases, excluding PPP loans1, increased $187.9 million, or 15.4% (annualized), from March 31, 2021, $251.4 million or 10.4% (annualized) from December 31, 2020 and $621.6 million, or 14.0%, from June 30, 2020 due to increases in commercial, construction, residential mortgage loans and lease financings.

Deposits
Total deposits increased $7.1 million, or 0.5% (annualized), from March 31, 2021 and $76.0 million, or 2.9% (annualized), from December 31, 2020 primarily due to increases in commercial and consumer deposits offset by a decrease in brokered deposits and a seasonal decrease in public funds deposits. Total deposits increased $449.4 million, or 9.2%, from June 30, 2020, primarily due to increases in commercial, consumer and public funds deposits.

Net Interest Income and Margin
Net interest income of $46.8 million for the three months ended June 30, 2021 increased $1.3 million, or 3.0%, from the three months ended March 31, 2021, and $3.2 million, or 7.4%, from the three months ended June 30, 2020. Net interest income of $92.2 million for the six months ended June 30, 2021 increased $6.2 million, or 7.2%, from the six months ended June 30, 2020. The increase in net interest income for the six months ended June 30, 2021 compared to the same period of 2020 was primarily due to an increase in PPP loan income of $7.2 million and lower deposit costs offset by a decrease in yield on loans and investment securities.

Net interest margin, on a tax-equivalent basis, was 3.15% for the second quarter of 2021, compared to 3.12% for the first quarter of 2021 and 3.18% for the second quarter of 2020. Excess liquidity reduced net interest margin by approximately ten basis points for the quarter ended June 30, 2021 compared to eleven basis points for the quarter ended March 31, 2021 and sixteen basis points for the quarter ended June 30, 2020. This excess liquidity was primarily driven by strong deposit balance growth during the last fifteen months, which was partially attributable to the various stimulus initiatives associated with the COVID-19 pandemic. As PPP loans are forgiven, the associated deferred fees are recognized in earnings, thus attaining yields in excess of 2020 run rates. PPP loans had a favorable impact on net interest margin of eleven basis points for the quarter ended June 30, 2021 compared to four basis points for the quarter ended March 31, 2021 and an unfavorable impact of nine basis points for the quarter ended June 30, 2020. Excluding the impact of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was 3.14% for the quarter ended June 30, 2021 compared to 3.19% for the quarter ended March 31, 2021 and 3.43% for the quarter ended June 30, 2020.

Noninterest Income
Noninterest income for the quarter ended June 30, 2021 was $20.2 million, an increase of $2.2 million, or 12.4%, compared to the second quarter of 2020. Noninterest income for the six months ended June 30, 2021 was $43.5 million, an increase of $7.1 million, or 19.5%, from the comparable period in the prior year.

Net gain on mortgage banking activities decreased $54 thousand, or 1.5%, for the quarter and increased $3.1 million, or 50.2% for the six months ended June 30, 2021 compared to the comparable periods in the prior year. The increase for the six months ended June 30, 2021 was primarily due to an increase in volume and expansion of margins. Investment advisory commission and fee income increased $1.0 million, or 28.8%, for the quarter and $1.5 million, or 18.7%, for the six months ended June 30, 2021 compared to the comparable periods in the prior year, due to increased assets under management driven by favorable market conditions and new customer relationships. BOLI income increased $888 thousand, or 121.3%, for the quarter and $871 thousand, or 59.4%, for the six months ended June 30, 2021 primarily due to proceeds from BOLI death benefits of $893 thousand as previously discussed.

Other service fee income increased $1.3 million, or 84.7%, for the quarter and $1.6 million, or 47.1%, for the six months ended June 30, 2021 compared to the comparable periods in the prior year. Mortgage servicing fees increased $599 thousand for the quarter and $692 thousand for the six months ended June 30, 2021 driven by an increase in retained servicing associated with elevated mortgage volume over the past fifteen months. Interchange fee income increased $494 thousand for the quarter and $672 thousand for the six months ended June 30, 2021 due to increased customer activity as the markets we operate in continue to re-open.

Other income decreased $1.3 million, or 73.1%, for the quarter due to a decrease of $1.4 million in fees on risk participation agreements for interest rate swaps driven by a decrease in customer demand.

Noninterest Expense
Noninterest expense for the quarter ended June 30, 2021 was $41.3 million, an increase of $5.3 million, or 14.8%, compared to the second quarter of 2020. Noninterest expense for the six months ended June 30, 2021 was $80.8 million, an increase of $6.1 million, or 8.1%, from the comparable period in the prior year.

Salaries, benefits and commissions increased $3.7 million, or 17.0%, for the quarter and $4.6 million, or 10.2%, for the six months ended June 30, 2021 from the comparable periods in the prior year. These increases reflect our continued investment in staff to support revenue generation across all business lines and annual merit increases. Variable compensation expenses increased $1.0 million and $1.7 million for the three and six months ended June 30, 2021, respectively, from the comparable periods in the prior year, due to increased profitability, specifically in our mortgage banking and wealth management lines of business. Additionally, capitalized compensation related to PPP origination activity was $1.2 million and $664 thousand lower in the three and six months ended June 30, 2021, respectively, from the comparable periods in the prior year.

Data processing expenses increased $314 thousand, or 11.4%, for the quarter and $604 thousand, or 11.0%, for the six months ended June 30, 2021 primarily due to continued investments in our end-to-end loan origination solution for loans below $1.0 million, customer relationship management software, internal infrastructure improvements and outsourced data processing solutions. Professional fees increased $751 thousand, or 59.4%, for the quarter and $1.2 million, or 45.8%, for the six months ended June 30, 2021, primarily attributable to increased consultant fees in support of our Diversity, Equity and Inclusion, training initiatives and treasury management product enhancements. During the first six months of 2021, we have spent $781 thousand on these initiatives and we expect to incur approximately $650 thousand of additional expenses related to these initiatives in the second half of the year. These expenses are not expected to re-occur in subsequent periods.

Other expense increased $390 thousand, or 7.3%, for the quarter primarily attributable to an increase in interchange fee expense and travel and entertainment expenses, which are beginning to normalize as the markets we operate in continue to re-open. Other expense decreased $557 thousand, or 4.9%, for the six months ended June 30, 2021 primarily due to a $656 thousand charge related to the extinguishment of long-term debt that occurred in the first quarter of 2020.

Asset Quality and Provision for Credit Losses
Nonperforming assets were $38.5 million at June 30, 2021, compared to $38.2 million at March 31, 2021 and $36.0 million at June 30, 2020.

Net loan and lease charge-offs were $243 thousand during the second quarter of 2021 compared to $3.6 million for the three months ended June 30, 2020. The reversal of provision for credit losses was $59 thousand for the second quarter of 2021, of which $2.8 million (after-tax benefit of $2.2 million), or $0.08 diluted earnings per share, was attributable to favorable changes in economic-related assumptions within the Corporation’s CECL model, partially offset by a reserve increase attributable to loan growth. The provision for credit losses was $23.7 million for the comparable period in the prior year, of which $19.9 million (after-tax charge of $15.7 million), or $0.54 diluted earnings per share, was attributable to adverse changes in economic-related assumptions, which were predominately driven by COVID-19.

Net loan and lease charge-offs were $531 thousand for the six months ended June 30, 2021 compared to $4.1 million for the same period in the prior year. The reversal of provision for credit losses was $11.3 million for the six months ended June 30, 2021, of which $15.8 million (after-tax benefit of $12.5 million), or $0.42 diluted earnings per share, was attributable to favorable changes in economic-related assumptions within the Corporation’s CECL model partially offset by a reserve increase attributable to loan growth. The provision for credit losses was $45.6 million for the comparable period in the prior year, of which $40.2 million (after-tax charge of $31.8 million), or $1.09 diluted earnings per share, was attributable to adverse changes in economic-related assumptions.

The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment was 1.34% at June 30, 2021, compared to 1.32% at March 31, 2021, and 1.74% at June 30, 2020. The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment, excluding PPP loans1, was 1.41% at June 30, 2021 compared to 1.46% at March 31, 2021 and 1.94% at June 30, 2020.

Tax Provision
The effective income tax rate was 19.0% for the quarter ended June 30, 2021, compared to an effective income tax rate of (14.5%) for the quarter ended June 30, 2020. The effective income tax rate was 19.2% for the six months ended June 30, 2021 compared to an effective income tax rate of (42.4%) for the six months ended June 30, 2020. The effective tax rate for the three and six months ended June 30, 2021 and 2020 reflects the level of pre-tax income and the benefits of tax-exempt income from investments in municipal securities and loans and leases.

Dividend
On July 28, 2021, Univest declared a quarterly cash dividend of $0.20 per share. The dividend will be paid on August 25, 2021 to shareholders of record as of August 11, 2021.

Conference Call
Univest will host a conference call to discuss second quarter 2021 results on Thursday, July 29, 2021 at 9:00 a.m. EST. Participants may preregister at https://dpregister.com/sreg/10158232/ea90430528. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through August 29, 2021 by dialing 1-877-344-7529; using Conference ID: 10158232.

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 $4.5 billion in assets under management and supervision through its Wealth Management lines of business at June 30, 2021. 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 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 trends or factors affecting the financial services industry and, specifically, the financial condition and results of operations, business and capital management strategies, 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 those expressed or implied by the forward-looking statements. These factors include, but are not limited to: (1) competition; (2) changes in interest rates; (3) changes in asset quality, prepayment speeds, loan sale volumes, charge-offs and credit loss provisions; (4) general economic conditions in our market; (5) economic conditions nationally that may impact the assumptions used to calculate our allowance for credit losses; (6) legislative, regulatory or tax changes that may adversely affect the businesses in which Univest is engaged; (7) technological issues that may adversely affect Univest financial operations or customers; (8) changes in the securities markets or (9) 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 continued reopening of businesses will result in a meaningful increase 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, financial condition, liquidity, and results of operations: (1) demand for our products and services may decline; (2) if the economy is unable to remain open, and higher 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 credit losses may have to be increased if borrowers experience financial difficulties; (5) the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; (6) a material decrease in net income or a net loss over several quarters could result in the elimination of or 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) Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs; and (11) further and sustained decline 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)
June 30, 2021
(Dollars in thousands)                            
                             
Balance Sheet (Period End)   06/30/21   03/31/21   12/31/20   09/30/20   06/30/20        
Assets   $ 6,356,305     $ 6,416,665     $ 6,336,496     $ 6,382,831     $ 6,125,312          
Investment securities, net of allowance for credit losses     397,426       377,506       373,176       368,830       397,852          
Loans held for sale     27,322       22,636       37,039       14,465       31,082          
Loans and leases held for investment, gross     5,327,313       5,415,006       5,306,841       5,211,856       4,951,809          
Allowance for credit losses, loans and leases     71,355       71,497       83,044       91,870       86,217          
Loans and leases held for investment, net     5,255,958       5,343,509       5,223,797       5,119,986       4,865,592          
Total deposits     5,318,704       5,311,592       5,242,715       5,211,603       4,869,329          
Noninterest-bearing deposits     1,872,031       1,857,547       1,690,663       1,714,505       1,725,819          
NOW, money market and savings     2,954,450       2,979,834       2,988,277       2,940,879       2,623,025          
Time deposits     492,223       474,211       563,775       556,219       520,485          
Borrowings     218,970       295,293       311,421       416,104       515,722          
Shareholders' equity     739,998       722,455       692,472       669,107       654,873          
                             
                             
Balance Sheet (Average)   For the three months ended,       For the six months ended,
    06/30/21   03/31/21   12/31/20   09/30/20   06/30/20   06/30/21   06/30/20
Assets     6,443,629     $ 6,383,463     $ 6,353,519     $ 6,265,605     $ 6,000,790       6,413,712     $ 5,704,527  
Investment securities, net of allowance for credit losses     385,694       374,369       369,511       385,221       411,957       380,063       426,928  
Loans and leases, gross     5,389,110       5,325,897       5,253,720       5,070,037       4,836,858       5,357,678       4,612,720  
Deposits     5,351,089       5,296,147       5,222,452       5,030,398       4,794,669       5,323,770       4,572,326  
Shareholders' equity     728,750       699,736       676,426       661,947       660,950       714,324       667,205  
                             
                             
Asset Quality Data (Period End)                            
    06/30/21   03/31/21   12/31/20   09/30/20   06/30/20        
Nonaccrual loans and leases, including nonaccrual troubled debt restructured                            
loans and leases and nonaccrual loans held for sale   $ 37,466     $ 29,996     $ 31,692     $ 30,019     $ 26,141          
Accruing loans and leases 90 days or more past due     750       664       1,392       3,573       1,193          
Accruing troubled debt restructured loans and leases     52       52       53       53       53          
Total nonperforming loans and leases     38,268       30,712       33,137       33,645       27,387          
Other real estate owned     279       7,481       7,355       8,270       8,642          
Total nonperforming assets   $ 38,547     $ 38,193     $ 40,492     $ 41,915     $ 36,029          
Nonaccrual loans and leases / Loans and leases held for investment and nonaccrual loans held for sale     0.70 %     0.55 %     0.60 %     0.58 %     0.53 %        
Nonperforming loans and leases / Loans and leases held for investment     0.72 %     0.57 %     0.62 %     0.65 %     0.55 %        
Nonperforming assets / Total assets     0.61 %     0.60 %     0.64 %     0.66 %     0.59 %        
                             
Allowance for credit losses, loans and leases   $ 71,355     $ 71,497     $ 83,044     $ 91,870     $ 86,217          
Allowance for credit losses, loans and leases / Loans and leases held for investment     1.34 %     1.32 %     1.56 %     1.76 %     1.74 %        
Allowance for credit losses, loans and leases / Loans and leases held for investment, excluding Paycheck Protection Program loans (1)     1.41 %     1.46 %     1.72 %     1.95 %     1.94 %        
Allowance for credit losses, loans and leases / Nonaccrual loans and leases held for investment     212.97 %     238.36 %     262.03 %     306.04 %     329.82 %        
Allowance for credit losses, loans and leases / Nonperforming loans and leases held for investment     208.00 %     232.80 %     250.61 %     273.06 %     314.81 %        
                             
    For the three months ended,       For the six months ended,
    06/30/21   03/31/21   12/31/20   09/30/20   06/30/20   06/30/21   06/30/20
Net loan and lease charge-offs (recoveries)   $ 243     $ 288     $ 618     $ (35 )   $ 3,576     $ 531     $ 4,065  
Net loan and lease charge-offs (annualized)/Average loans and leases     0.02 %     0.02 %     0.05 %     (0.00 %)     0.30 %     0.02 %     0.18 %
                             
(1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included at the end of this document.  
                             

 

 
Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
June 30, 2021
(Dollars in thousands, except per share data)                            
    For the three months ended,   For the six months ended,
For the period:   06/30/21   03/31/21   12/31/20   09/30/20   06/30/20   06/30/21   06/30/20
Interest income   $ 52,441     $ 51,457     $ 51,334     $ 50,612     $ 49,980     $ 103,898     $ 101,999  
Interest expense     5,684       6,043       6,813       6,758       6,462       11,727       16,013  
Net interest income     46,757       45,414       44,521       43,854       43,518       92,171       85,986  
(Reversal of provision) provision for credit losses     (59 )     (11,283 )     (8,721 )     3,935       23,737       (11,342 )     45,580  
Net interest income after provision for credit losses     46,816       56,697       53,242       39,919       19,781       103,513       40,406  
Noninterest income:                            
Trust fee income     2,157       2,034       1,974       1,915       1,924       4,191       3,814  
Service charges on deposit accounts     1,314       1,282       1,371       1,187       890       2,596       2,287  
Investment advisory commission and fee income     4,558       4,697       4,144       4,005       3,540       9,255       7,795  
Insurance commission and fee income     3,839       4,955       3,512       3,776       4,067       8,794       8,799  
Other service fee income     2,748       2,192       2,092       2,093       1,488       4,940       3,358  
Bank owned life insurance income     1,620       717       733       741       732       2,337       1,466  
Net gain on sales of investment securities     54       65       54       57       65       119       760  
Net gain on mortgage banking activities     3,461       5,938       4,323       5,860       3,515       9,399       6,259  
Other income     479       1,370       1,936       2,171       1,779       1,849       1,846  
Total noninterest income     20,230       23,250       20,139       21,805       18,000       43,480       36,384  
Noninterest expense:                            
Salaries, benefits and commissions     25,396       24,780       23,613       24,059       21,700       50,176       45,536  
Net occupancy     2,656       2,739       2,697       2,609       2,478       5,395       5,052  
Equipment     968       946       951       972       923       1,914       1,918  
Data processing     3,064       3,050       2,961       2,862       2,750       6,114       5,510  
Professional fees     2,015       1,748       1,436       1,321       1,264       3,763       2,581  
Marketing and advertising     561       280       575       463       535       841       937  
Deposit insurance premiums     613       636       765       707       615       1,249       1,119  
Intangible expenses     249       249       282       283       321       498       651  
Restructuring charges     -       -       1,439       -       -       -       -  
Other expense     5,764       5,112       7,015       5,251       5,374       10,876       11,433  
Total noninterest expense     41,286       39,540       41,734       38,527       35,960       80,826       74,737  
Income before taxes     25,760       40,407       31,647       23,197       1,821       66,167       2,053  
Income tax expense (benefit)     4,885       7,804       5,773       5,078       (264 )     12,689       (870 )
Net income   $ 20,875     $ 32,603     $ 25,874     $ 18,119     $ 2,085     $ 53,478     $ 2,923  
Net income per share:                            
Basic   $ 0.71     $ 1.11     $ 0.88     $ 0.62     $ 0.07     $ 1.82     $ 0.10  
Diluted   $ 0.71     $ 1.11     $ 0.88     $ 0.62     $ 0.07     $ 1.81     $ 0.10  
Dividends declared per share   $ 0.20     $ 0.20     $ -     $ 0.20     $ 0.20     $ 0.40     $ 0.40  
Weighted average shares outstanding     29,389,525       29,327,432       29,274,915       29,226,627       29,187,197       29,359,198       29,236,698  
Period end shares outstanding     29,411,731       29,379,575       29,295,052       29,241,302       29,201,985       29,411,731       29,201,985  
                             

 

 
Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
June 30, 2021
                             
                             
                             
    For the three months ended,   For the six months ended,
Profitability Ratios (annualized)   06/30/21   03/31/21   12/31/20   09/30/20   06/30/20   06/30/21   06/30/20
                             
Return on average assets     1.30 %     2.07 %     1.62 %     1.15 %     0.14 %     1.68 %     0.10 %
Return on average assets, excluding restructuring   1.30 %     2.07 %     1.69 %     1.15 %     0.14 %     1.68 %     0.10 %
charges (1)                            
Return on average shareholders' equity     11.49 %     18.90 %     15.22 %     10.89 %     1.27 %     15.10 %     0.88 %
Return on average shareholders' equity, excluding   11.49 %     18.90 %     15.89 %     10.89 %     1.27 %     15.10 %     0.88 %
restructuring charges (1)                            
Return on average tangible common equity (1)     15.11 %     25.20 %     20.54 %     14.82 %     1.73 %     19.99 %     1.20 %
Return on average tangible common equity, excluding   15.11 %     25.20 %     21.44 %     14.82 %     1.73 %     19.99 %     1.20 %
restructuring charges (1)                            
Net interest margin (FTE)     3.15 %     3.12 %     3.02 %     3.02 %     3.18 %     3.14 %     3.32 %
Efficiency ratio (2)     60.7 %     57.0 %     63.8 %     58.0 %     57.7 %     58.8 %     60.2 %
Efficiency ratio, excluding restructuring charges (1) (2)   60.7 %     57.0 %     61.6 %     58.0 %     57.7 %     58.8 %     60.2 %
                             
Capitalization Ratios                            
                             
Dividends declared to net income (3)     28.2 %     18.0 %     0.0 %     32.3 %     278.7 %     22.0 %     399.5 %
Shareholders' equity to assets (Period End)     11.64 %     11.26 %     10.93 %     10.48 %     10.69 %     11.64 %     10.69 %
Tangible common equity to tangible assets (1)     9.15 %     8.77 %     8.40 %     7.95 %     8.05 %     9.15 %     8.05 %
Common equity book value per share   $ 25.16     $ 24.59     $ 23.64     $ 22.88     $ 22.43     $ 25.16     $ 22.43  
Tangible common equity book value per share (1) $ 19.22     $ 18.64     $ 17.66     $ 16.88     $ 16.41     $ 19.22     $ 16.41  
                             
Regulatory Capital Ratios (Period End)                            
Tier 1 leverage ratio     9.64 %     9.45 %     9.08 %     8.97 %     9.15 %     9.64 %     9.15 %
Common equity tier 1 risk-based capital ratio     11.04 %     11.08 %     10.76 %     10.52 %     10.73 %     11.04 %     10.73 %
Tier 1 risk-based capital ratio     11.04 %     11.08 %     10.76 %     10.52 %     10.73 %     11.04 %     10.73 %
Total risk-based capital ratio     13.82 %     15.13 %     15.31 %     15.35 %     13.72 %     13.82 %     13.72 %
                             
(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.
(3) As announced in the September 30, 2020 Earnings Release, the Corporation changed the timing of future dividend declarations and payments.
                             

 

   
Univest Financial Corporation  
Average Balances and Interest Rates (Unaudited)  
    For the Three Months Ended,      
Tax Equivalent Basis June 30, 2021   March 31, 2021  
  Average Income/ Average   Average Income/ Average  
(Dollars in thousands) Balance Expense Rate   Balance Expense Rate  
Assets:                
Interest-earning deposits with other banks $ 215,349   $ 46   0.09 % $ 237,548   $ 56   0.10 %
U.S. government obligations   6,999     35   2.01     6,998     36   2.09  
Obligations of state and political subdivisions   6,070     58   3.83     11,544     105   3.69  
Other debt and equity securities   372,625     1,364   1.47     355,827     1,267   1.44  
Federal Home Loan Bank, Federal Reserve Bank and other stock   25,872     360   5.58     26,368     348   5.35  
Total interest-earning deposits, investments and other interest-earning assets   626,915     1,863   1.19     638,285     1,812   1.15  
      -          
Commercial, financial, and agricultural loans   826,464     6,910   3.35     782,208     6,798   3.52  
Paycheck Protection Program loans   408,928     4,778   4.69     506,939     4,524   3.62  
Real estate—commercial and construction loans   2,701,137     24,931   3.70     2,621,981     24,458   3.78  
Real estate—residential loans   1,065,065     9,836   3.70     1,037,000     9,873   3.86  
Loans to individuals   25,284     251   3.98     26,447     265   4.05  
Municipal loans and leases   251,311     2,598   4.15     245,638     2,530   4.18  
Lease financings   110,921     1,819   6.58     105,684     1,737   6.67  
Gross loans and leases   5,389,110     51,123   3.80     5,325,897     50,185   3.82  
Total interest-earning assets   6,016,025     52,986   3.53     5,964,182     51,997   3.54  
Cash and due from banks   52,948           55,311        
Allowance for credit losses, loans and leases   (73,052 )         (83,254 )      
Premises and equipment, net   55,903           55,826        
Operating lease right-of-use assets   33,992           34,033        
Other assets   357,813           357,365        
Total assets $ 6,443,629         $ 6,383,463        
                 
Liabilities:                
Interest-bearing checking deposits $ 786,931   $ 487   0.25 % $ 817,940   $ 490   0.24 %
Money market savings   1,219,375     831   0.27     1,243,673     853   0.28  
Regular savings   978,807     282   0.12     959,232     298   0.13  
Time deposits   485,060     1,559   1.29     525,800     1,759   1.36  
Total time and interest-bearing deposits   3,470,173     3,159   0.37     3,546,645     3,400   0.39  
                 
Short-term borrowings   19,109     3   0.06     17,894     2   0.05  
Long-term debt   95,000     321   1.36     101,333     348   1.39  
Subordinated notes   172,016     2,201   5.13     183,340     2,293   5.07  
Total borrowings   286,125     2,525   3.54     302,567     2,643   3.54  
Total interest-bearing liabilities   3,756,298     5,684   0.61     3,849,212     6,043   0.64  
Noninterest-bearing deposits   1,880,916           1,749,502        
Operating lease liabilities   37,426           37,415        
Accrued expenses and other liabilities   40,239           47,598        
Total liabilities   5,714,879           5,683,727        
                 
Shareholders' Equity:                
Common stock   157,784           157,784        
Additional paid-in capital   296,599           296,136        
Retained earnings and other equity   274,367           245,816        
Total shareholders' equity   728,750           699,736        
Total liabilities and shareholders' equity $ 6,443,629         $ 6,383,463        
Net interest income   $ 47,302         $ 45,954      
                 
Net interest spread     2.92       2.90  
Effect of net interest-free funding sources     0.23       0.22  
Net interest margin     3.15 %     3.12 %
Ratio of average interest-earning assets to average interest-bearing liabilities   160.16 %         154.95 %      
                 
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 June 30, 2021 and March 31, 2021 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 2021
  2020
 
  Average Income/ Average   Average Income/ Average  
(Dollars in thousands) Balance Expense Rate   Balance Expense Rate  
Assets:                
Interest-earning deposits with other banks $ 215,349   $ 46   0.09 % $ 313,668   $ 67   0.09 %
U.S. government obligations   6,999     35   2.01     7,236     36   2.00  
Obligations of state and political subdivisions   6,070     58   3.83     26,546     240   3.64  
Other debt and equity securities   372,625     1,364   1.47     378,175     2,182   2.32  
Federal Home Loan Bank, Federal Reserve Bank and other stock   25,872     360   5.58     28,977     362   5.02  
Total interest-earning deposits, investments and other interest-earning assets   626,915     1,863   1.19     754,602     2,887   1.54  
                 
Commercial, financial, and agricultural loans   826,464     6,910   3.35     816,976     7,330   3.61  
Paycheck Protection Program loans   408,928     4,778   4.69     370,669     2,128   2.31  
Real estate—commercial and construction loans   2,701,137     24,931   3.70     2,232,827     23,110   4.16  
Real estate—residential loans   1,065,065     9,836   3.70     1,004,671     10,270   4.11  
Loans to individuals   25,284     251   3.98     29,079     327   4.52  
Municipal loans and leases   251,311     2,598   4.15     291,433     2,977   4.11  
Lease financings   110,921     1,819   6.58     91,203     1,592   7.02  
Gross loans and leases   5,389,110     51,123   3.80     4,836,858     47,734   3.97  
Total interest-earning assets   6,016,025     52,986   3.53     5,591,460     50,621   3.64  
Cash and due from banks   52,948           46,970        
Allowance for credit losses, loans and leases   (73,052 )         (69,292 )      
Premises and equipment, net   55,903           55,750        
Operating lease right-of-use assets   33,992           34,419        
Other assets   357,813           341,483        
Total assets $ 6,443,629         $ 6,000,790        
                 
Liabilities:                
Interest-bearing checking deposits $ 786,931   $ 487   0.25 % $ 617,927   $ 372   0.24 %
Money market savings   1,219,375     831   0.27     1,063,463     853   0.32  
Regular savings   978,807     282   0.12     872,422     475   0.22  
Time deposits   485,060     1,559   1.29     577,462     2,672   1.86  
Total time and interest-bearing deposits   3,470,173     3,159   0.37     3,131,274     4,372   0.56  
                 
Short-term borrowings   19,109     3   0.06     161,365     122   0.30  
Long-term debt   95,000     321   1.36     210,040     762   1.46  
Subordinated notes   172,016     2,201   5.13     94,890     1,206   5.11  
Total borrowings   286,125     2,525   3.54     466,295     2,090   1.80  
Total interest-bearing liabilities   3,756,298     5,684   0.61     3,597,569     6,462   0.72  
Noninterest-bearing deposits   1,880,916           1,663,395        
Operating lease liabilities   37,426           37,680        
Accrued expenses and other liabilities   40,239           41,196        
Total liabilities   5,714,879           5,339,840        
                 
Shareholders' Equity:                
Common stock   157,784           157,784        
Additional paid-in capital   296,599           295,681        
Retained earnings and other equity   274,367           207,485        
Total shareholders' equity   728,750           660,950        
Total liabilities and shareholders' equity $ 6,443,629         $ 6,000,790        
Net interest income   $ 47,302         $ 44,159      
                 
Net interest spread     2.92       2.92  
Effect of net interest-free funding sources     0.23       0.26  
Net interest margin     3.15 %     3.18 %
Ratio of average interest-earning assets to average interest-bearing liabilities   160.16 %         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 June 30, 2021 and 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 Six Months Ended ,  
Tax Equivalent Basis 2021
  2020
 
  Average Income/ Average   Average Income/ Average  
(Dollars in thousands) Balance Expense Rate   Balance Expense Rate  
Assets:                
Interest-earning deposits with other banks $ 226,387   $ 102   0.09 % $ 215,888   $ 392   0.37 %
U.S. government obligations   6,999     71   2.05     7,267     73   2.02  
Obligations of state and political subdivisions   8,792     163   3.74     30,070     529   3.54  
Other debt and equity securities   364,272     2,631   1.46     389,591     4,850   2.50  
Federal Home Loan Bank, Federal Reserve Bank and other stock   26,119     708   5.47     30,214     889   5.92  
Total interest-earning deposits, investments and other interest-earning assets   632,569     3,675   1.17     673,030     6,733   2.01  
                 
Commercial, financial, and agricultural loans   804,458     13,708   3.44     819,121     15,961   3.92  
Paycheck Protection Program loans   457,663     9,302   4.10     185,334     2,128   2.31  
Real estate—commercial and construction loans   2,661,778     49,389   3.74     2,186,098     47,027   4.33  
Real estate—residential loans   1,051,110     19,709   3.78     998,111     21,322   4.30  
Loans to individuals   25,862     516   4.02     29,548     734   5.00  
Municipal loans and leases   248,490     5,128   4.16     304,219     6,242   4.13  
Lease financings   108,317     3,556   6.62     90,289     3,146   7.01  
Gross loans and leases   5,357,678     101,308   3.81     4,612,720     96,560   4.21  
Total interest-earning assets   5,990,247     104,983   3.53     5,285,750     103,293   3.93  
Cash and due from banks   54,123           48,931        
Allowance for credit losses, loans and leases   (78,125 )         (56,832 )      
Premises and equipment, net   55,865           56,074        
Operating lease right-of-use assets   34,013           34,482        
Other assets   357,589           336,122        
Total assets $ 6,413,712         $ 5,704,527        
                 
Liabilities:                
Interest-bearing checking deposits $ 802,350   $ 977   0.25 % $ 601,159   $ 1,168   0.39 %
Money market savings   1,231,457     1,684   0.28     1,060,399     3,756   0.71  
Regular savings   969,073     580   0.12     844,591     1,267   0.30  
Time deposits   505,318     3,318   1.32     590,183     5,587   1.90  
Total time and interest-bearing deposits   3,508,198     6,559   0.38     3,096,332     11,778   0.76  
                 
Short-term borrowings   18,506     5   0.05     100,745     228   0.46  
Long-term debt   98,149     669   1.37     189,623     1,526   1.62  
Subordinated notes   177,647     4,494   5.10     94,868     2,481   5.26  
Total borrowings   294,302     5,168   3.54     385,236     4,235   2.21  
Total interest-bearing liabilities   3,802,500     11,727   0.62     3,481,568     16,013   0.92  
Noninterest-bearing deposits   1,815,572           1,475,994        
Operating lease liabilities   37,419           37,724        
Accrued expenses and other liabilities   43,897           42,036        
Total liabilities   5,699,388           5,037,322        
                 
Shareholders' Equity:                
Common stock   157,784           157,784        
Additional paid-in capital   296,369           295,500        
Retained earnings and other equity   260,171           213,921        
Total shareholders' equity   714,324           667,205        
Total liabilities and shareholders' equity $ 6,413,712         $ 5,704,527        
Net interest income   $ 93,256         $ 87,280      
                 
Net interest spread     2.91       3.01  
Effect of net interest-free funding sources     0.23       0.31  
Net interest margin     3.14 %     3.32 %
Ratio of average interest-earning assets to average interest-bearing liabilities   157.53 %         151.82 %      
                 
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, 2021 and 2020 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 June 30, 2021  
Industry Description Total Outstanding
Balance (excl PPP)
  % of
Commercial
Loan Portfolio
  $ Balance of
Modified Loans (1)
  Modified Loans
as a % of
Portfolio (1)
 
CRE - Retail   365,096   8.7 %   -   - %
Animal Production   281,368   6.7     -   -  
CRE - 1-4 Family Residential Investment   250,694   6.0     605   0.2  
CRE - Office   249,692   5.9     -   -  
CRE - Industrial / Warehouse   217,874   5.2     -   -  
CRE - Multi-family   206,766   4.9     -   -  
Hotels & Motels (Accommodation)   170,730   4.1     26,036   15.2  
Nursing and Residential Care Facilities   158,292   3.8     -   -  
Education   152,983   3.6     -   -  
CRE - Mixed-Use - Residential   122,489   2.9     3,268   2.7  
Specialty Trade Contractors   121,303   2.9     36   -  
Real Estate Lenders, Secondary Market Financing   103,796   2.5     -   -  
CRE - Medical Office   96,075   2.3     -   -  
Homebuilding (tract developers, remodelers)   89,915   2.1     -   -  
Private Equity & Special Purpose Entities   87,111   2.1     -   -  
Merchant Wholesalers, Durable Goods   78,944   1.9     -   -  
Crop Production   72,558   1.7     -   -  
Motor Vehicle and Parts Dealers   67,371   1.6     -   -  
Rental and Leasing Services   63,142   1.5     -   -  
Wood Product Manufacturing   63,095   1.5     -   -  
Fabricated Metal Product Manufacturing   59,398   1.4     -   -  
Merchant Wholesalers, Nondurable Goods   53,783   1.3     -   -  
Food Services and Drinking Places   51,356   1.2     3,233   6.3  
Administrative and Support Services   50,296   1.1     101   0.2  
Industries with >$50 million in outstandings $ 3,234,127   76.9 % $ 33,279   1.0 %
Industries with <$50 million in outstandings $ 969,606   23.1 % $ 18,272   1.9 %
Total Commercial Loans $ 4,203,733   100.0 % $ 51,551   1.2 %
                 
                 
Consumer Loans and Lease Financings Total Outstanding
Balance
      $ Balance of
Modified Loans (1)
  Modified Loans
as a % of
Portfolio (1)
 
Real Estate-Residential Secured for Personal Purpose   513,330         2,429   0.5 %
Real Estate-Home Equity Secured for Personal Purpose   160,018         -   -  
Loans to Individuals   25,845         -   -  
Lease Financings   171,538         215   0.1  
Total - Consumer Loans and Lease Financings $ 870,731       $ 2,644   0.3 %
                 
Total $ 5,074,464       $ 54,195   1.1 %
                 
(1) 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 June 30, 2021.
                 

 

 
Univest Financial Corporation
Non-GAAP Reconciliation
June 30, 2021
                           
 
 
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 six months ended,
  06/30/21   03/31/21   12/31/20   09/30/20   06/30/20   06/30/21   06/30/20
Restructuring charges (a) $ -     $ -     $ 1,439     $ -     $ -     $ -     $ -  
Tax effect of restructuring charges   -       -       (302 )     -       -       -       -  
Restructuring charges, net of tax $ -     $ -     $ 1,137     $ -     $ -     $ -     $ -  
                           
Shareholders' equity $ 739,998     $ 722,455     $ 692,472     $ 669,107     $ 654,873     $ 739,998     $ 654,873  
Goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )
Other intangibles (b)   (2,073 )     (2,326 )     (2,580 )     (2,866 )     (3,147 )     (2,073 )     (3,147 )
Tangible common equity $ 565,366     $ 547,570     $ 517,333     $ 493,682     $ 479,167     $ 565,366     $ 479,167  
                           
Total assets $ 6,356,305     $ 6,416,665     $ 6,336,496     $ 6,382,831     $ 6,125,312     $ 6,356,305     $ 6,125,312  
Goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )
Other intangibles (b)   (2,073 )     (2,326 )     (2,580 )     (2,866 )     (3,147 )     (2,073 )     (3,147 )
Tangible assets $ 6,181,673     $ 6,241,780     $ 6,161,357     $ 6,207,406     $ 5,949,606     $ 6,181,673     $ 5,949,606  
                           
Average shareholders' equity $ 728,750     $ 699,736     $ 676,426     $ 661,947     $ 660,950     $ 714,324     $ 667,205  
Average goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )
Average other intangibles (b)   (2,209 )     (2,464 )     (2,734 )     (3,019 )     (3,321 )     (2,336 )     (3,490 )
Average tangible common equity $ 553,982     $ 524,713     $ 501,133     $ 486,369     $ 485,070     $ 539,429     $ 491,156  
                           
Net income before taxes $ 25,760     $ 40,407     $ 31,647     $ 23,197     $ 1,821     $ 66,167     $ 2,053  
Provision for credit losses   (59 )     (11,283 )     (8,721 )     3,935       23,737       (11,342 )     45,580  
Pre-tax pre-provision income $ 25,701     $ 29,124     $ 22,926     $ 27,132     $ 25,558     $ 54,825     $ 47,633  
                           
Loans and leases held for investment, gross $ 5,327,313     $ 5,415,006     $ 5,306,841     $ 5,211,856     $ 4,951,809     $ 5,327,313     $ 4,951,809  
Paycheck Protection Program ("PPP") loans   (252,849 )     (528,452 )     (483,773 )     (501,580 )     (498,978 )     (252,849 )     (498,978 )
Gross loans and leases excluding PPP loans $ 5,074,464     $ 4,886,554     $ 4,823,068     $ 4,710,276     $ 4,452,831     $ 5,074,464     $ 4,452,831  
                           
Allowance for credit losses, loans and leases $ 71,355     $ 71,497     $ 83,044     $ 91,870     $ 86,217     $ 71,355     $ 86,217  
Gross loans and leases excluding PPP loans   5,074,464       4,886,554       4,823,068       4,710,276       4,452,831       5,074,464       4,452,831  
Allowance for credit losses, loans and leases as a percentage of gross loans and leases excluding PPP loans   1.41 %     1.46 %     1.72 %     1.95 %     1.94 %     1.41 %     1.94 %
                           
(a) Associated with financial center optimization plan
(b) Amount does not include mortgage servicing rights
                           

 

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

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Source: Univest Financial Corporation