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Univest Financial Corporation Reports Year and Fourth Quarter Results

Company Release - 1/27/2021

(Loan Growth (excluding PPP loans1) for 2020 of 9.9%)

SOUDERTON, Pa., Jan. 27, 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 year ended December 31, 2020 of $46.9 million, or $1.60 diluted earnings per share, compared to net income of $65.7 million, or $2.24 diluted earnings per share, for the year ended December 31, 2019. Net income for the quarter ended December 31, 2020 was $25.9 million, or $0.88 diluted earnings per share, compared to net income of $15.5 million, or $0.53 diluted earnings per share, for the quarter ended December 31, 2019.

Pre-tax pre-provision income1 for the year ended December 31, 2020 was $97.7 million, an increase of $9.1 million, or 10.3%, from the comparable period in the prior year. Pre-tax pre-provision income1 for the quarter ended December 31, 2020 was $22.9 million, an increase of $1.8 million, or 8.6%, from the fourth quarter of 2019.

One-Time Items For the Quarter
The financial results for the quarter ended December 31, 2020 included a $1.4 million ($1.1 million after-tax), or $0.04 diluted earnings per share, restructuring charge associated with the Corporation's previously announced financial service center optimization plan. The financial results for the quarter ended December 31, 2020 also included a charge of $1.1 million ($877 thousand after-tax), or $0.03 diluted earnings per share, in other expense related to the extinguishment of long-term debt. During the fourth quarter of 2020, the Corporation modified the vesting criteria for outstanding performance-based restricted stock grants to better reflect the current operating environment. As a result of these modifications, a benefit of $928 thousand ($733 thousand after-tax), or $0.03 diluted earnings per share, was recognized in salaries, benefits and commissions for the quarter ended December 31, 2020.

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 had a combined principal balance of approximately $68.0 million as of December 31, 2020, which represents approximately 1.4% of the loan portfolio, excluding Paycheck Protection Program ("PPP") loans1. 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 December 31, 2020, the Corporation reduced its allowance for credit losses resulting in a reversal of provision for credit loss expense of $8.7 million, of which $11.6 million (after-tax benefit of $9.2 million), or $0.31 diluted earnings per share, was attributable to changes in economic-related assumptions within the Corporation’s CECL model offset by a reserve increase attributable to loan growth. During the year ended December 31, 2020, the Corporation recorded CECL related charges of $40.8 million, of which $27.4 million (after-tax charge of $21.6 million), or $0.74 diluted earnings per share, was attributable to changes in economic related assumptions within the CECL model.

Loans
Gross loans and leases, excluding PPP loans1, increased $436.2 million, or 9.9%, from December 31, 2019 primarily due to increases in commercial real estate loans. Gross loans and leases, excluding PPP loans1, increased $112.8 million, or 9.6% (annualized), from September 30, 2020 primarily due to increases in commercial real estate loans.
  
Deposits
Total deposits increased $882.6 million, or 20.2%, from December 31, 2019 primarily due to increases in commercial, consumer and public funds deposits. Total deposits increased $31.1 million, or 2.4% (annualized), from September 30, 2020 primarily due to an increase in consumer deposits offset by a decrease in commercial deposits.

Net Interest Income and Margin
Net interest income of $174.4 million for the year ended December 31, 2020 increased $5.1 million, or 3.0%, from the prior year primarily due to lower deposit costs and growth in loans partially offset by a decrease in loan and investment yields. Net interest margin, on a tax-equivalent basis, was 3.16% for the year ended December 31, 2020 compared to 3.59% for the year ended December 31, 2019. Excess liquidity reduced net interest margin by approximately fourteen basis points for the year ended December 31, 2020 compared to eight basis points for the year ended December 31, 2019. This excess liquidity was primarily driven by strong deposit balance growth during 2020. PPP loans reduced net interest margin by seven basis points for the year ended December 31, 2020 compared to no impact for the year ended December 31, 2019. Excluding the impacts of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was 3.37% for the year ended December 31, 2020 compared to 3.67% for the year ended December 31, 2019. For the year ended December 31, 2020, PPP loans contributed $7.9 million to net interest income. As of December 31, 2020, $7.7 million of net deferred fees remained on the balance sheet, which represents approximately 63% of the initial deferred fee amount.

Net interest margin, on a tax-equivalent basis, was 3.02% for the fourth quarter of 2020, compared to 3.02% for the third quarter of 2020 and 3.44% for the fourth quarter of 2019. Excess liquidity reduced net interest margin by approximately thirteen basis points for the quarter ended December 31, 2020 compared to eighteen basis points for the quarter ended September 30, 2020 and twelve basis points for the quarter ended December 31, 2019. This excess liquidity was primarily driven by strong deposit balance growth in 2020. PPP loans reduced net interest margin by seven basis points for the quarter ended December 31, 2020 compared to ten basis points for the quarter ended September 30, 2020 and had no impact for the quarter ended December 31, 2019. Excluding the impacts of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was 3.22%, 3.30% and 3.56% for the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively. For the quarter ended December 31, 2020, PPP loans contributed $3.1 million to net interest income, of which $369 thousand related to forgiveness activity.

Noninterest Income
Noninterest income for the quarter ended December 31, 2020 was $20.1 million, an increase of $4.0 million, or 24.6%, from the comparable period in the prior year. Noninterest income for the year ended December 31, 2020 was $78.3 million, an increase of $12.9 million, or 19.7%, from the comparable period in the prior year.

Net gain on mortgage banking activities increased $3.3 million, or 316.5%, for the quarter and $12.5 million, or 316.7%, for the year ended December 31, 2020 from the comparable periods in the prior year, due to an increase in volume and expansion of margins.

Other income increased $923 thousand, or 91.1%, for the quarter ended December 31, 2020 and $3.3 million, or 127.3%, for the year ended December 31, 2020 from the comparable periods in the prior year. Fees on risk participation agreements for interest rate swaps increased $1.0 million for the quarter ended December 31, 2020 and $4.4 million for the year ended December 31, 2020 from the comparable periods in the prior year, driven by increased customer activity due to the current rate environment. Gain on sale of small business administration (SBA) loans decreased $482 thousand for the year ended December 31, 2020 from the prior year due to decreased SBA loan sale activity. Equity securities measured at fair value decreased $266 thousand for the year ended December 31, 2020 from the prior year.

Service charges on deposit accounts decreased $1.1 million, or 18.5%, for the year ended December 31, 2020 from 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 reduced customer activity in the third and fourth quarters of 2020.

Other service fee income decreased $1.8 million, or 19.2%, for the year ended December 31, 2020 from the prior year. Mortgage servicing right amortization increased $1.4 million for the year ended December 31, 2020 from the prior year driven by the decline in interest rates and their impact on prepayment activity. Interchange income decreased $308 thousand for the year ended December 31, 2020 from the prior year due to decreased customer transaction activity.

Noninterest Expense
Noninterest expense for the quarter ended December 31, 2020 was $41.7 million, an increase of $4.3 million, or 11.4%, from the comparable period in the prior year. Noninterest expense for the year ended December 31, 2020 was $155.0 million, an increase of $8.9 million, or 6.1% from the prior year.

Salaries, benefits and commissions increased $1.7 million, or 7.7%, for the quarter ended December 31, 2020 and increased $4.9 million, or 5.6%, for the year ended December 31, 2020 from the comparable periods in the prior year. The increases were 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. The increases in salaries, benefits and commissions were offset by the benefit of the previously discussed performance-based restricted stock modifications and $1.3 million of incremental capitalized compensation related to origination of PPP loans. Deposit insurance premiums increased $423 thousand, or 123.7%, for the quarter and $1.8 million, or 232.2%, for the year ended December 31, 2020 from the comparable periods in the prior year primarily due to an FDIC small bank assessment credit of $1.1 million, of which $988 thousand was recognized during the third quarter of 2019 and $114 thousand was recognized during the fourth quarter of 2019, and an increased assessment base for 2020 due to asset growth. Restructuring charges increased $1.4 million for the quarter and year ended December 31, 2020 from the comparable periods in the prior year due to the impact of the financial service center optimization plan discussed previously. Other expense increased $615 thousand, or 9.6%, for the quarter and $1.3 million, or 5.7%, for the year ended December 31, 2020 from the comparable periods in the prior year primarily due to charges from the extinguishment of long-term debt discussed previously.

Asset Quality and Provision for Credit Losses
Nonperforming assets were $40.5 million at December 31, 2020, compared to $41.9 million at September 30, 2020 and $39.3 million at December 31, 2019. Other real estate owned includes a $7.1 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 first quarter of 2021.

Net loan and lease charge-offs were $618 thousand during the fourth quarter of 2020 and $4.6 million for the year ended December 31, 2020. The reversal of provision for credit losses was $8.7 million for the fourth quarter of 2020, due to a reserve decrease of $8.2 million related to loans and leases and $690 thousand related to unfunded commitments, offset by a reserve increase of $176 thousand related to investment securities. The provision for credit losses was $40.8 million for the year ended December 31, 2020, of which $39.4 million related to loans and leases, $786 thousand related to reserves for unfunded commitments, and $569 thousand related to investment securities.

Net loan and lease charge-offs were $558 thousand during the fourth quarter of 2019 and $2.6 million for the year ended December 31, 2019. The provision for loan and lease losses was $2.2 million for the fourth quarter of 2019 and $8.5 million for the year ended December 31, 2019.

The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment was 1.56% at December 31, 2020, compared to 1.76% at September 30, 2020, and 0.81% at December 31, 2019. The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment, excluding PPP loans1, was 1.72% at December 31, 2020, compared to 1.95% at September 30, 2020.

Tax Provision
The effective income tax rate was 17.5% for the year ended December 31, 2020 compared to an effective income tax rate of 17.9% for the year ended December 31, 2019. The Corporation's effective income tax rate reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases.

Dividend
On January 27, 2021, Univest declared a quarterly cash dividend of $0.20 per share. The dividend will be paid on February 24, 2021 to shareholders of record as of February 10, 2021.

Conference Call
Univest will host a conference call to discuss fourth quarter and year end 2020 results on Thursday, January 28, 2021 at 9:00 a.m. EST. Participants may preregister at https://dpregister.com/sreg/10150871/e00405b3c0. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through February 28, 2021 by dialing 1-877-344-7529; using Conference ID: 10150871.

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 $6.3 billion in assets and $4.1 billion in assets under management and supervision through its Wealth Management lines of business at December 31, 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 York, as well as in New Jersey and Maryland and online at www.univest.net.  

This press release of Univest and the reports Univest files with the Securities and Exchange Commission often contain "forward-looking statements" relating to trends or factors affecting the financial services industry and, specifically, the financial condition and results of 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 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; (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 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 substantially reopen, 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) as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities; (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 continuing 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 cyber 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 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)
December 31, 2020
(Dollars in thousands)                            
                             
Balance Sheet (Period End)   12/31/20   09/30/20   06/30/20   03/31/20   12/31/19        
Assets   $ 6,336,496     $ 6,382,831     $ 6,125,312     $ 5,464,768     $ 5,380,924          
Investment securities, net of allowance for credit losses     373,176       368,830       397,852       423,521       441,599          
Loans held for sale     35,529       14,465       31,082       11,417       5,504          
Loans and leases held for investment, gross     5,306,841       5,211,856       4,951,809       4,448,825       4,386,836          
Allowance for credit losses, loans and leases     83,044       91,870       86,217       68,216       35,331          
Loans and leases held for investment, net     5,223,797       5,119,986       4,865,592       4,380,609       4,351,505          
Total deposits     5,242,715       5,211,603       4,869,329       4,407,303       4,360,075          
Noninterest-bearing deposits     1,690,663       1,714,505       1,725,819       1,318,270       1,279,681          
NOW, money market and savings     2,988,277       2,940,879       2,623,025       2,452,021       2,474,384          
Time deposits     563,775       556,219       520,485       637,012       606,010          
Borrowings     311,421       416,104       515,722       323,363       263,596          
Shareholders' equity     692,472       669,107       654,873       651,551       675,122          
                             
                             
Balance Sheet (Average)   For the three months ended,   For the twelve months ended,
    12/31/20   09/30/20   06/30/20   03/31/20   12/31/19   12/31/20   12/31/19
Assets   $ 6,353,519     $ 6,265,605     $ 6,000,790     $ 5,409,561     $ 5,400,591     $ 6,006,877     $ 5,224,583  
Investment securities, net of allowance for credit losses     369,511       385,221       411,957       441,900       445,932       402,011       461,841  
Loans and leases, gross     5,253,720       5,070,037       4,836,858       4,388,584       4,280,430       4,888,801       4,148,619  
Deposits     5,222,452       5,030,398       4,794,669       4,349,984       4,374,586       4,850,890       4,186,339  
Shareholders' equity     676,426       661,947       660,950       673,460       672,647       668,201       652,453  
                             
                             
Asset Quality Data (Period End)                            
    12/31/20   09/30/20   06/30/20   03/31/20   12/31/19        
Nonaccrual loans and leases, including nonaccrual troubled debt restructured                            
  loans and leases   $ 31,692     $ 30,019     $ 26,141     $ 36,626     $ 38,578          
Accruing loans and leases 90 days or more past due     1,392       3,573       1,193       1,777       143          
Accruing troubled debt restructured loans and leases     53       53       53       54       54          
Total nonperforming loans and leases     33,137       33,645       27,387       38,457       38,775          
Other real estate owned     7,355       8,270       8,642       516       516          
Total nonperforming assets   $ 40,492     $ 41,915     $ 36,029     $ 38,973     $ 39,291          
Nonaccrual loans and leases / Loans and leases held for investment     0.60 %     0.58 %     0.53 %     0.82 %     0.88 %        
Nonperforming loans and leases / Loans and leases held for investment     0.62 %     0.65 %     0.55 %     0.86 %     0.88 %        
Nonperforming assets / Total assets     0.64 %     0.66 %     0.59 %     0.71 %     0.73 %        
                             
Allowance for credit losses, loans and leases   $ 83,044     $ 91,870     $ 86,217     $ 68,216     $ 35,331          
Allowance for credit losses, loans and leases / Loans and leases held for investment     1.56 %     1.76 %     1.74 %     1.53 %     0.81 %        
Allowance for credit losses, loans and leases / Loans and leases held for investment, excluding Paycheck Protection Program loans (1)     1.72 %     1.95 %     1.94 %     1.53 %     0.81 %        
Allowance for credit losses, loans and leases / Nonaccrual loans and leases held for investment     262.03 %     306.04 %     329.82 %     186.25 %     91.58 %        
Allowance for credit losses, loans and leases / Nonperforming loans and leases held for investment     250.61 %     273.06 %     314.81 %     177.38 %     91.12 %        
                             
    For the three months ended,   For the twelve months ended,
    12/31/20   09/30/20   06/30/20   03/31/20   12/31/19   12/31/20   12/31/19
Net loan and lease charge-offs (recoveries)   $ 618     $ (35 )   $ 3,576     $ 489     $ 558     $ 4,648     $ 2,551  
Net loan and lease charge-offs (annualized)/Average loans and leases     0.05 %     (0.00 %)     0.30 %     0.04 %     0.05 %     0.10 %     0.06 %
                             
(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)  
December 31, 2020  
(Dollars in thousands, except per share data)                              
    For the three months ended,   For the twelve months ended,  
For the period:   12/31/20   09/30/20   06/30/20   03/31/20   12/31/19   12/31/20   12/31/19  
Interest income   $ 51,334     $ 50,612   $ 49,980     $ 52,019     $ 53,369   $ 203,945   $ 214,093  
Interest expense     6,813       6,758     6,462       9,551       10,940     29,584     44,861  
     Net interest income     44,521       43,854     43,518       42,468       42,429     174,361     169,232  
(Reversal of Provision) provision for credit losses     (8,721 )     3,935     23,737       21,843       2,225     40,794     8,511  
Net interest income after provision for credit losses     53,242       39,919     19,781       20,625       40,204     133,567     160,721  
Noninterest income:                              
     Trust fee income     1,974       1,915     1,924       1,890       1,912     7,703     7,826  
     Service charges on deposit accounts     1,371       1,187     890       1,397       1,551     4,845     5,946  
     Investment advisory commission and fee income     4,144       4,005     3,540       4,255       4,064     15,944     15,940  
     Insurance commission and fee income     3,512       3,776     4,067       4,732       3,609     16,087     16,571  
     Other service fee income     2,092       2,093     1,488       1,870       2,229     7,543     9,341  
     Bank owned life insurance income     733       741     732       734       741     2,940     3,179  
     Net gain on sales of investment securities     54       57     65       695       13     871     54  
     Net gain on mortgage banking activities     4,323       5,860     3,515       2,744       1,038     16,442     3,946  
     Other income     1,936       2,171     1,779       67       1,013     5,953     2,619  
Total noninterest income     20,139       21,805     18,000       18,384       16,170     78,328     65,422  
Noninterest expense:                              
Salaries, benefits and commissions     23,613       24,059     21,700       23,836       21,933     93,208     88,289  
Net occupancy     2,697       2,609     2,478       2,574       2,534     10,358     10,221  
Equipment     951       972     923       995       1,027     3,841     4,170  
Data processing     2,961       2,862     2,750       2,760       2,685     11,333     10,450  
Professional fees     1,436       1,321     1,264       1,317       1,475     5,338     5,563  
Marketing and advertising     575       463     535       402       710     1,975     2,594  
Deposit insurance premiums     765       707     615       504       342     2,591     780  
Intangible expenses     282       283     321       330       374     1,216     1,595  
Restructuring charges     1,439       -     -       -       -     1,439     -  
Other expense     7,015       5,251     5,374       6,059       6,400     23,699     22,428  
Total noninterest expense     41,734       38,527     35,960       38,777       37,480     154,998     146,090  
Income before taxes     31,647       23,197     1,821       232       18,894     56,897     80,053  
Income tax expense (benefit)     5,773       5,078     (264 )     (606 )     3,384     9,981     14,334  
Net income   $ 25,874     $ 18,119   $ 2,085     $ 838     $ 15,510   $ 46,916   $ 65,719  
Net income per share:                              
     Basic   $ 0.88     $ 0.62   $ 0.07     $ 0.03     $ 0.53   $ 1.60   $ 2.24  
     Diluted   $ 0.88     $ 0.62   $ 0.07     $ 0.03     $ 0.53   $ 1.60   $ 2.24  
Dividends declared per share   $ -     $ 0.20   $ 0.20     $ 0.20     $ 0.20   $ 0.60   $ 0.80  
Weighted average shares outstanding     29,274,915       29,226,627     29,187,197       29,286,200       29,327,169     29,243,773     29,299,599  
Period end shares outstanding     29,295,052       29,241,302     29,201,985       29,164,782       29,334,629     29,295,052     29,334,629  
                               



Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
December 31, 2020
                                   
                                   
                                   
          For the three months ended,   For the twelve months ended,
Profitability Ratios (annualized)     12/31/20   09/30/20   06/30/20   03/31/20   12/31/19   12/31/20   12/31/19
                                   
Return on average assets       1.62 %     1.15 %     0.14 %     0.06 %     1.14 %     0.78 %     1.26 %
Return on average assets, excluding restructuring   1.69 %     1.15 %     0.14 %     0.06 %     1.14 %     0.80 %     1.26 %
charges (1)                                  
Return on average shareholders' equity     15.22 %     10.89 %     1.27 %     0.50 %     9.15 %     7.02 %     10.07 %
Return on average shareholders' equity, excluding   15.89 %     10.89 %     1.27 %     0.50 %     9.15 %     7.19 %     10.07 %
restructuring charges (1)                              
Return on average tangible common equity (1)     20.53 %     14.82 %     1.73 %     0.68 %     12.40 %     9.52 %     13.82 %
Return on average tangible common equity, excluding   21.44 %     14.82 %     1.73 %     0.68 %     12.40 %     9.76 %     13.82 %
restructuring charges (1)                              
Net interest margin (FTE)       3.02 %     3.02 %     3.18 %     3.48 %     3.44 %     3.16 %     3.59 %
Efficiency ratio (2)         63.8 %     58.0 %     57.7 %     62.8 %     63.0 %     60.6 %     61.4 %
Efficiency ratio, excluding restructuring charges (1) (2)   61.6 %     58.0 %     57.7 %     62.8 %     63.0 %     60.0 %     61.4 %
                                   
Capitalization Ratios                                
                                   
Dividends declared to net income (3)     0.0 %     32.3 %     278.7 %     699.9 %     37.8 %     37.4 %     35.7 %
Shareholders' equity to assets (Period End)     10.93 %     10.48 %     10.69 %     11.92 %     12.55 %     10.93 %     12.55 %
Tangible common equity to tangible assets (1)     8.40 %     7.96 %     8.06 %     8.99 %     9.59 %     8.40 %     9.59 %
Common equity book value per share   $ 23.64     $ 22.88     $ 22.43     $ 22.34     $ 23.01     $ 23.64     $ 23.01  
Tangible common equity book value per share (1) $ 17.66     $ 16.89     $ 16.41     $ 16.31     $ 17.01     $ 17.66     $ 17.01  
                                   
Regulatory Capital Ratios (Period End)                            
Tier 1 leverage ratio         9.08 %     8.97 %     9.15 %     9.90 %     10.02 %     9.08 %     10.02 %
Common equity tier 1 risk-based capital ratio     10.77 %     10.52 %     10.73 %     10.79 %     11.03 %     10.77 %     11.03 %
Tier 1 risk-based capital ratio       10.77 %     10.52 %     10.73 %     10.79 %     11.03 %     10.77 %     11.03 %
Total risk-based capital ratio       15.31 %     15.35 %     13.72 %     13.65 %     13.78 %     15.31 %     13.78 %
                                   
(1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included at the end of this document.        
(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 December 31, 2020   September 30, 2020  
  Average Income/ Average   Average Income/ Average  
(Dollars in thousands) Balance Expense Rate   Balance Expense Rate  
Assets:                
Interest-earning deposits with other banks $ 296,258   $ 82 0.11 % $ 368,181   $ 100 0.11 %
U.S. government obligations   6,998     36 2.05     6,998     36 2.05  
Obligations of state and political subdivisions   14,269     129 3.60     18,004     167 3.69  
Other debt and equity securities   348,244     1,237 1.41     360,219     1,610 1.78  
Federal Home Loan Bank, Federal Reserve Bank and other stock   29,838     438 5.84     28,651     419 5.82  
Total interest-earning deposits, investments and other interest-earning assets   695,607     1,922 1.10     782,053     2,332 1.19  
                 
Commercial, financial, and agricultural loans   824,374     7,366 3.55     807,376     7,330 3.61  
Paycheck Protection Program loans   497,035     3,133 2.51     500,549     2,811 2.23  
Real estate—commercial and construction loans   2,518,056     24,388 3.85     2,358,971     23,547 3.97  
Real estate—residential loans   1,025,818     10,345 4.01     1,009,407     10,380 4.09  
Loans to individuals   27,427     289 4.19     28,663     309 4.29  
Municipal loans and leases   258,627     2,776 4.27     267,364     2,839 4.22  
Lease financings   102,383     1,690 6.57     97,707     1,662 6.77  
Gross loans and leases   5,253,720     49,987 3.79     5,070,037     48,878 3.84  
Total interest-earning assets   5,949,327     51,909 3.47     5,852,090     51,210 3.48  
Cash and due from banks   53,360           56,715        
Allowance for credit losses, loans and leases   (92,766 )         (87,046 )      
Premises and equipment, net   55,653           55,755        
Operating lease right-of-use assets   34,272           33,875        
Other assets   353,673           354,216        
Total assets $ 6,353,519         $ 6,265,605        
                 
Liabilities:                
Interest-bearing checking deposits $ 838,323   $ 537 0.25 % $ 725,580   $ 468 0.26 %
Money market savings   1,213,585     898 0.29     1,116,628     897 0.32  
Regular savings   905,918     341 0.15     901,716     449 0.20  
Time deposits   582,782     2,034 1.39     525,656     2,214 1.68  
Total time and interest-bearing deposits   3,540,608     3,810 0.43     3,269,580     4,028 0.49  
                 
Short-term borrowings   15,091     2 0.05     130,359     97 0.30  
Long-term debt   169,623     611 1.43     208,776     742 1.41  
Subordinated notes   193,244     2,390 4.92     155,945     1,891 4.82  
Total borrowings   377,958     3,003 3.16     495,080     2,730 2.19  
Total interest-bearing liabilities   3,918,566     6,813 0.69     3,764,660     6,758 0.71  
Noninterest-bearing deposits   1,681,844           1,760,818        
Operating lease liabilities   37,616           37,170        
Accrued expenses and other liabilities   39,067           41,010        
Total liabilities   5,677,093           5,603,658        
                 
Shareholders' Equity:                
Common stock   157,784           157,784        
Additional paid-in capital   296,810           296,272        
Retained earnings and other equity   221,832           207,891        
Total shareholders' equity   676,426           661,947        
Total liabilities and shareholders' equity $ 6,353,519         $ 6,265,605        
Net interest income   $ 45,096       $ 44,452    
                 
Net interest spread     2.78       2.77  
Effect of net interest-free funding sources     0.24       0.25  
Net interest margin     3.02 %     3.02 %
Ratio of average interest-earning assets to average interest-bearing liabilities   151.82 %         155.45 %      
                 
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 December 31, 2020 and September 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 December 31,          
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 $ 296,258   $ 82 0.11 % $ 205,703   $ 860 1.66 %    
U.S. government obligations   6,998     36 2.05     7,297     37 2.01      
Obligations of state and political subdivisions   14,269     129 3.60     35,938     324 3.58      
Other debt and equity securities   348,244     1,237 1.41     402,697     2,684 2.64      
Federal Home Loan Bank, Federal Reserve Bank and other stock   29,838     438 5.84     30,653     514 6.65      
Total interest-earning deposits, investments and other interest-earning assets   695,607     1,922 1.10     682,288     4,419 2.57      
                     
Commercial, financial, and agricultural loans   824,374     7,366 3.55     830,757     9,197 4.39      
Paycheck Protection Program loans   497,035     3,133 2.51     -     - -      
Real estate—commercial and construction loans   2,518,056     24,388 3.85     2,040,442     23,526 4.57      
Real estate—residential loans   1,025,818     10,345 4.01     966,370     11,566 4.75      
Loans to individuals   27,427     289 4.19     31,694     458 5.73      
Municipal loans and leases   258,627     2,776 4.27     325,939     3,323 4.04      
Lease financings   102,383     1,690 6.57     85,228     1,528 7.11      
Gross loans and leases   5,253,720     49,987 3.79     4,280,430     49,598 4.60      
Total interest-earning assets   5,949,327     51,909 3.47     4,962,718     54,017 4.32      
Cash and due from banks   53,360           50,794            
Allowance for credit losses, loans and leases   (92,766 )         (34,392 )          
Premises and equipment, net   55,653           57,043            
Operating lease right-of-use assets   34,272           34,693            
Other assets   353,673           329,735            
Total assets $ 6,353,519         $ 5,400,591            
                     
Liabilities:                    
Interest-bearing checking deposits $ 838,323   $ 537 0.25 % $ 566,904   $ 941 0.66 %    
Money market savings   1,213,585     898 0.29     1,074,066     3,749 1.38      
Regular savings   905,918     341 0.15     798,145     870 0.43      
Time deposits   582,782     2,034 1.39     648,726     3,261 1.99      
Total time and interest-bearing deposits   3,540,608     3,810 0.43     3,087,841     8,821 1.13      
                     
Short-term borrowings   15,091     2 0.05     30,404     63 0.82      
Long-term debt   169,623     611 1.43     153,049     795 2.06      
Subordinated notes   193,244     2,390 4.92     94,786     1,261 5.28      
Total borrowings   377,958     3,003 3.16     278,239     2,119 3.02      
Total interest-bearing liabilities   3,918,566     6,813 0.69     3,366,080     10,940 1.29      
Noninterest-bearing deposits   1,681,844           1,286,745            
Operating lease liabilities   37,616           37,867            
Accrued expenses and other liabilities   39,067           37,252            
Total liabilities   5,677,093           4,727,944            
                     
Shareholders' Equity:                    
Common stock   157,784           157,784            
Additional paid-in capital   296,810           294,731            
Retained earnings and other equity   221,832           220,132            
Total shareholders' equity   676,426           672,647            
Total liabilities and shareholders' equity $ 6,353,519         $ 5,400,591            
Net interest income   $ 45,096       $ 43,077        
                     
Net interest spread     2.78       3.03      
Effect of net interest-free funding sources     0.24       0.41      
Net interest margin     3.02 %     3.44 %    
Ratio of average interest-earning assets to average interest-bearing liabilities   151.82 %         147.43 %          
                     
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 December 31, 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 Twelve Months Ended December 31,        
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 $ 274,372   $ 574 0.21 % $ 141,774   $ 2,876 2.03 %    
U.S. government obligations   7,132     145 2.03     14,665     254 1.73      
Obligations of state and political subdivisions   23,065     825 3.58     50,360     1,693 3.36      
Other debt and equity securities   371,814     7,697 2.07     396,816     10,406 2.62      
Federal Home Loan Bank, Federal Reserve Bank and other stock   29,726     1,746 5.87     31,446     2,154 6.85      
Total interest-earning deposits, investments and other interest-earning assets   706,109     10,987 1.56     635,061     17,383 2.74      
                     
Commercial, financial, and agricultural loans   817,489     30,657 3.75     815,472     40,496 4.97      
Paycheck Protection Program loans   342,920     8,072 2.35     -     - -      
Real estate—commercial and construction loans   2,312,996     94,962 4.11     1,936,073     91,634 4.73      
Real estate—residential loans   1,007,915     42,047 4.17     950,743     46,031 4.84      
Loans to individuals   28,792     1,332 4.63     31,912     1,976 6.19      
Municipal loans and leases   283,495     11,857 4.18     331,831     13,262 4.00      
Lease financings   95,194     6,498 6.83     82,588     5,904 7.15      
Gross loans and leases   4,888,801     195,425 4.00     4,148,619     199,303 4.80      
Total interest-earning assets   5,594,910     206,412 3.69     4,783,680     216,686 4.53      
Cash and due from banks   52,000           48,877            
Allowance for credit losses, loans and leases   (73,459 )         (32,389 )          
Premises and equipment, net   55,888           58,237            
Operating lease right-of-use assets   34,277           35,712            
Other assets   343,261           330,466            
Total assets $ 6,006,877         $ 5,224,583            
                     
Liabilities:                    
Interest-bearing checking deposits $ 692,049   $ 2,173 0.31 % $ 500,295   $ 2,790 0.56 %    
Money market savings   1,113,039     5,551 0.50     995,403     15,843 1.59      
Regular savings   874,366     2,057 0.24     802,865     3,660 0.46      
Time deposits   572,103     9,835 1.72     677,199     13,276 1.96      
Total time and interest-bearing deposits   3,251,557     19,616 0.60     2,975,762     35,569 1.20      
                     
Short-term borrowings   86,658     327 0.38     56,882     1,012 1.78      
Long-term debt   189,410     2,879 1.52     156,366     3,236 2.07      
Subordinated notes   134,949     6,762 5.01     94,695     5,044 5.33      
Total borrowings   411,017     9,968 2.43     307,943     9,292 3.02      
Total interest-bearing liabilities   3,662,574     29,584 0.81     3,283,705     44,861 1.37      
Noninterest-bearing deposits   1,599,333           1,210,577            
Operating lease liabilities   37,557           38,791            
Accrued expenses and other liabilities   39,212           39,057            
Total liabilities   5,338,676           4,572,130            
                     
Shareholders' Equity:                    
Common stock   157,784           157,784            
Additional paid-in capital   296,023           293,784            
Retained earnings and other equity   214,394           200,885            
Total shareholders' equity   668,201           652,453            
Total liabilities and shareholders' equity $ 6,006,877         $ 5,224,583            
Net interest income   $ 176,828       $ 171,825        
                     
Net interest spread     2.88       3.16      
Effect of net interest-free funding sources     0.28       0.43      
Net interest margin     3.16 %     3.59 %    
Ratio of average interest-earning assets to average interest-bearing liabilities   152.76 %         145.68 %          
                     
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 twelve months ended December 31, 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 December 31, 2020    
Industry Description Total Outstanding B
alance (excl PPP)
  % of Commercial
Loan Portfolio
  PPP $ (1)   $ Balance of Modified
Loans (2)
  Modified Loans
as a % of
Portfolio (2)
   
CRE - Retail $ 342,910   8.6 % $ 239   $ 3,950   1.2 %  
Animal Production   263,623   6.6     706     40   -    
CRE - 1-4 Family Residential Investment   245,022   6.2     1,282     -   -    
CRE - Office   237,752   6.0     -     -   -    
CRE - Multi-family   201,995   5.1     -     -   -    
Real Estate Lenders, Secondary Market Financing   181,493   4.6     4,318     52   -    
Hotels & Motels (Accommodation)   175,923   4.4     2,407     24,296   13.8    
CRE - Industrial / Warehouse   169,015   4.3     139     -   -    
Nursing and Residential Care Facilities   154,736   3.9     7,935     -   -    
Specialty Trade Contractors   117,301   2.9     67,267     109   0.1    
CRE - Mixed-Use - Residential   116,506   2.9     -     8,237   7.1    
Professional, Scientific, and Technical Services   92,857   2.3     -     -   -    
CRE - Medical Office   92,196   2.3     -     -   -    
Homebuilding (tract developers, remodelers)   87,027   2.2     12,931     -   -    
Merchant Wholesalers, Durable Goods   75,241   1.9     17,674     -   -    
Education   68,846   1.7     72,072     2,637   3.8    
Crop Production   66,998   1.7     270     -   -    
Motor Vehicle and Parts Dealers   66,516   1.7     11,391     -   -    
Fabricated Metal Production Manufacturing   62,077   1.6     12,760     -   -    
Administrative and Support Services   59,708   1.5     28,814     100   0.2    
Food Services and Drinking Places   58,067   1.5     15,971     2,893   5.0    
Woods Product Manufacturing   50,079   1.3     3,886     -   -    
Industries with >$50 million in outstandings $ 2,985,888   75.2 % $ 260,062   $ 42,314   1.4 %  
Industries with <$50 million in outstandings $ 990,450   24.8 % $ 223,711   $ 18,228   1.8 %  
Total Commercial Loans $ 3,976,338   100.0 % $ 483,773   $ 60,542   1.5 %  
                       
                       
Consumer Loans and Lease Financings Total Outstanding Balance       PPP $ (1)   $ Balance of Modified Loans (2)   Modified Loans
as a % of
Portfolio (2)
   
Real Estate-Residential Secured for Personal Purpose $ 487,600       $ -   $ 7,444   1.5 %  
Real Estate-Home Equity Secured for Personal Purpose   166,609         -     3   -    
Loans to Individuals   27,482         -     35   0.1    
Lease Financings   165,039         -     -   -    
Total - Consumer Loans and Lease Financings $ 846,730       $ -   $ 7,482   0.9 %  
                       
Total $ 4,823,068       $ 483,773   $ 68,024   1.4 %  
                       
(1) Includes ($7.7) million of net deferred fees.                      
(2) 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 December 31, 2020.  
 
                       



Univest Financial Corporation  
Non-GAAP Reconciliation  
December 31, 2020  
                                   
                                   
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 twelve months ended,  
        12/31/20   09/30/20   06/30/20   03/31/20   12/31/19   12/31/20   12/31/19  
Restructuring charges (a)   $ 1,439     $ -     $ -     $ -     $ -     $ 1,439     $ -    
Tax effect of restructuring charges   (302 )     -       -       -       -       (302 )     -    
Restructuring charges, net of tax   $ 1,137     $ -     $ -     $ -     $ -     $ 1,137     $ -    
                                   
Shareholders' equity $ 692,472     $ 669,107     $ 654,873     $ 651,551     $ 675,122     $ 692,472     $ 675,122    
Goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )  
Other intangibles (b)     (2,458 )     (2,736 )     (3,017 )     (3,333 )     (3,658 )     (2,458 )     (3,658 )  
Tangible common equity $ 517,455     $ 493,812     $ 479,297     $ 475,659     $ 498,905     $ 517,455     $ 498,905    
                                   
Total assets $ 6,336,496     $ 6,382,831     $ 6,125,312     $ 5,464,768     $ 5,380,924     $ 6,336,496     $ 5,380,924    
Goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )  
Other intangibles (b)     (2,458 )     (2,736 )     (3,017 )     (3,333 )     (3,658 )     (2,458 )     (3,658 )  
Tangible assets $ 6,161,479     $ 6,207,536     $ 5,949,736     $ 5,288,876     $ 5,204,707     $ 6,161,479     $ 5,204,707    
                                   
Average shareholders' equity $ 676,426     $ 661,947     $ 660,950     $ 673,460     $ 672,647     $ 668,201     $ 652,453    
Average goodwill   (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )     (172,559 )  
Average other intangibles (b)     (2,606 )     (2,889 )     (3,185 )     (3,506 )     (3,853 )     (3,045 )     (4,430 )  
Average tangible common equity $ 501,261     $ 486,499     $ 485,206     $ 497,395     $ 496,235     $ 492,597     $ 475,464    
                                   
Net income before taxes $ 31,647     $ 23,197     $ 1,821     $ 232     $ 18,894     $ 56,897     $ 80,053    
Provision for credit losses     (8,721 )     3,935       23,737       21,843       2,225       40,794       8,511    
Pre-tax pre-provision income $ 22,926     $ 27,132     $ 25,558     $ 22,075     $ 21,119     $ 97,691     $ 88,564    
                                   
Loans and leases held for investment, gross $ 5,306,841     $ 5,211,856     $ 4,951,809     $ 4,448,825     $ 4,386,836     $ 5,306,841     $ 4,386,836    
Paycheck Protection Program ("PPP") loans   (483,773 )     (501,580 )     (498,978 )     -       -       (483,773 )     -    
Gross loans and leases excluding PPP loans $ 4,823,068     $ 4,710,276     $ 4,452,831     $ 4,448,825     $ 4,386,836     $ 4,823,068     $ 4,386,836    
                                   
(a) Associated with financial center optimization plan                            
(b) Amount does not include 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