Univest Financial Corporation Reports Second Quarter Results

Rhea-AI Summary

Univest Financial Corporation (UVSP) reported a net income of $2.1 million for Q2 2020, down from $16.5 million in Q2 2019. For the first half of 2020, net income was $2.9 million compared to $32.5 million in 2019. Pre-tax pre-provision income increased by 15.1% in Q2 year-over-year, reaching $25.6 million. The company modified approx. 1,420 loans totaling $720 million due to COVID-19. CECL-related charges were $23.7 million in Q2, impacting earnings by $0.54 per share. Total deposits rose by 41.9% annualized since March, driven by increased commercial and consumer deposits.

Positive

• Pre-tax pre-provision income rose by 15.1% to $25.6 million in Q2 2020.
• Total deposits increased by 41.9% annualized since March 31, 2020, reaching significant growth.
• Net interest income for Q2 2020 was $43.5 million, a slight increase from the prior quarter.

Negative

• Net income plunged to $2.1 million in Q2 2020, a significant decrease from $16.5 million in Q2 2019.
• CECL-related charges of $23.7 million detracted from earnings, impacting EPS by $0.54.
• Nonperforming assets increased to $36 million as of June 30, 2020.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
June 30, 2020
					For the three months ended,		For the six months ended,
Profitability Ratios (annualized)		06/30/20		03/31/20		12/31/19		09/30/19		06/30/19		06/30/20		06/30/19
Return on average assets		0.14	%			0.06	%			1.14	%			1.32	%			1.28	%			0.10	%			1.29	%
Return on average shareholders' equity		1.27	%			0.50	%			9.15	%			10.62	%			10.23	%			0.88	%			10.28	%
Return on average tangible common equity (1)		1.73	%			0.68	%			12.40	%			14.52	%			14.10	%			1.20	%			14.23	%
Net interest margin (FTE)		3.18	%			3.48	%			3.44	%			3.52	%			3.67	%			3.32	%			3.71	%
Efficiency ratio (2)		57.7	%			62.8	%			63.0	%			60.4	%			61.5	%			60.2	%			61.0	%
Capitalization Ratios
Dividends declared to net income		278.7	%			699.9	%			37.8	%			33.2	%			35.6	%			399.5	%			36.0	%
Shareholders' equity to assets (Period End)		10.69	%			11.92	%			12.55	%			12.41	%			12.64	%			10.69	%			12.64	%
Tangible common equity to tangible assets (1)		8.06	%			8.99	%			9.59	%			9.42	%			9.54	%			8.06	%			9.54	%
Common equity book value per share	$	22.43			$	22.34			$	23.01			$	22.66			$	22.25			$	22.43			$	22.25
Tangible common equity book value per share (1)	$	16.41			$	16.31			$	17.01			$	16.64			$	16.20			$	16.41			$	16.20
Regulatory Capital Ratios (Period End)
Tier 1 leverage ratio		9.15	%			9.90	%			10.02	%			9.97	%			10.01	%			9.15	%			10.01	%
Common equity tier 1 risk-based capital ratio		10.73	%			10.79	%			11.03	%			11.03	%			10.99	%			10.73	%			10.99	%
Tier 1 risk-based capital ratio		10.73	%			10.79	%			11.03	%			11.03	%			10.99	%			10.73	%			10.99	%
Total risk-based capital ratio		13.72	%			13.65	%			13.78	%			13.81	%			13.79	%			13.72	%			13.79	%
(1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included below.
(2) Noninterest expense to net interest income before loan loss provision plus noninterest income adjusted for tax equivalent income.
Non-GAAP to GAAP Reconciliation
	Management uses non-GAAP measures in its analysis of the Corporation's performance. These measures should not be considered a substitute for GAAP basis measures nor should they be viewed as a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the non-GAAP financial measures, which exclude the impact of the specified items, provides useful supplemental information that is essential to a proper understanding of the financial results of the Corporation. See the table below for additional information on non-GAAP measures used throughout this earnings release.
	Shareholders' equity	$	654,873			$	651,551			$	675,122			$	664,299			$	651,670			$	654,873			$	651,670
	Goodwill		(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)
	Other intangibles (a)			(3,017	)			(3,333	)			(3,658	)			(4,026	)			(4,396	)			(3,017	)			(4,396	)
	Tangible common equity	$	479,297			$	475,659			$	498,905			$	487,714			$	474,715			$	479,297			$	474,715
	Total assets	$	6,125,312			$	5,464,768			$	5,380,924			$	5,353,611			$	5,154,298			$	6,125,312			$	5,154,298
	Goodwill		(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)
	Other intangibles (a)			(3,017	)			(3,333	)			(3,658	)			(4,026	)			(4,396	)			(3,017	)			(4,396	)
	Tangible assets	$	5,949,736			$	5,288,876			$	5,204,707			$	5,177,026			$	4,977,343			$	5,949,736			$	4,977,343
	Average shareholders' equity	$	660,950			$	673,460			$	675,647			$	659,523			$	645,538			$	667,205			$	638,595
	Average goodwill		(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)
	Average other intangibles (a)			(3,185	)			(3,506	)			(3,853	)			(4,234	)			(4,615	)			(3,346	)			(4,821	)
	Average tangible common equity	$	485,206			$	497,395			$	499,235			$	482,730			$	468,364			$	491,300			$	461,215
	Net income before taxes	$	1,821			$	232			$	18,894			$	21,444			$	20,137			$	2,053			$	39,715
	Provision for credit losses			23,737				21,843				2,227				1,530				2,073				45,580				4,753
	Pre-tax pre-provision income	$	25,558			$	22,075			$	21,121			$	22,974			$	22,210			$	47,633			$	44,468
	Loans and leases held for investment, gross	$	4,951,809			$	4,448,825			$	4,386,836			$	4,251,933			$	4,167,904			$	4,951,809			$	4,167,904
	Paycheck Protection Program ("PPP") loans		498,978				-				-				-				-				498,978				-
4%; width:4%; min-width:4%;">	25%; width:25%; min-width:25%;">Gross loans and leases excluding PPP loans	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">4,452,831	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,448,825	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,386,836	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,251,933	2%; width:2%; min-width:2%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">4,167,904	2%; width:2%; min-width:2%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	5%; width:5%; min-width:5%;">4,452,831	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	5%; width:5%; min-width:5%;">4,167,904	1%; width:1%; min-width:1%;">
	(a) Amount does not include servicing rights

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Univest Financial Corporation
Average Balances and Interest Rates (Unaudited)
		For the Three Months Ended,
Tax Equivalent Basis	June 30, 2020		March 31, 2020
	Average	Income/	Average		Average	Income/	Average
(Dollars in thousands)	Balance	Expense	Rate		Balance	Expense	Rate
Assets:
Interest-earning deposits with other banks	$	313,668		$	67	0.09	%	$	118,108		$	325	1.11	%
U.S. government obligations		7,236			36	2.00			7,298			37	2.04
Obligations of state and political subdivisions		26,546			240	3.64			33,595			289	3.46
Other debt and equity securities		378,175			2,182	2.32			401,007			2,668	2.68
Federal Home Loan Bank, Federal Reserve Bank and other stock		28,977			362	5.02			31,450			527	6.74
Total interest-earning deposits, investments and other interest-earning assets		754,602			2,887	1.54			591,458			3,846	2.62
Commercial, financial, and agricultural loans		816,976			7,330	3.61			821,267			8,631	4.23
Paycheck Protection Program loans		370,669			2,128	2.31			-			-	-
Real estate—commercial and construction loans		2,232,827			23,110	4.16			2,139,369			23,917	4.50
Real estate—residential loans		1,004,671			10,270	4.11			991,550			11,052	4.48
Loans to individuals		29,079			327	4.52			30,016			407	5.45
Municipal loans and leases		291,433			2,977	4.11			317,006			3,265	4.14
Lease financings		91,203			1,592	7.02			89,376			1,554	6.99
Gross loans and leases		4,836,858			47,734	3.97			4,388,584			48,826	4.47
Total interest-earning assets		5,591,460			50,621	3.64			4,980,042			52,672	4.25
Cash and due from banks		46,970						50,891
Reserve for credit losses, loans and leases		(69,292	)					(44,372	)
Premises and equipment, net		55,750						56,399
Operating lease right-of-use assets		34,419						34,545
Other assets		341,483						332,056
Total assets	$	6,000,790					$	5,409,561
Liabilities:
Interest-bearing checking deposits	$	617,927		$	372	0.24	%	$	584,391		$	796	0.55	%
Money market savings		1,063,463			853	0.32			1,057,336			2,903	1.10
Regular savings		872,422			475	0.22			816,760			792	0.39
Time deposits		577,462			2,672	1.86			602,903			2,915	1.94
Total time and interest-bearing deposits		3,131,274			4,372	0.56			3,061,390			7,406	0.97
Short-term borrowings		161,365			122	0.30			40,126			106	1.06
Long-term debt		210,040			762	1.46			169,205			764	1.82
Subordinated notes		94,890			1,206	5.11			94,847			1,275	5.41
Total borrowings		466,295			2,090	1.80			304,178			2,145	2.84
Total interest-bearing liabilities		3,597,569			6,462	0.72			3,365,568			9,551	1.14
Noninterest-bearing deposits		1,663,395						1,288,594
Operating lease liabilities		37,680						37,766
Accrued expenses and other liabilities		41,196						44,173
Total liabilities		5,339,840						4,736,101
Shareholders' Equity:
Common stock		157,784						157,784
Additional paid-in capital		295,681						295,318
Retained earnings and other equity		207,485						220,358
Total shareholders' equity		660,950						673,460
Total liabilities and shareholders' equity	$	6,000,790					$	5,409,561
Net interest income		$	44,159				$	43,121
Net interest spread			2.92				3.11
Effect of net interest-free funding sources			0.26				0.37
Net interest margin			3.18	%			3.48	%
Ratio of average interest-earning assets to average interest-bearing liabilities		155.42	%					147.97	%
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been
included in the average loan balances. Tax-equivalent amounts for the three months ended June 30, 2020 and March 31, 2020 have
been calculated using the Corporation’s federal applicable rate of 21.0%.

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Univest Financial Corporation
Average Balances and Interest Rates (Unaudited)
		For the Three Months Ended June 30,
Tax Equivalent Basis		2020				2019
	Average	Income/	Average		Average	Income/	Average
(Dollars in thousands)	Balance	Expense	Rate		Balance	Expense	Rate
Assets:
Interest-earning deposits with other banks	$	313,668		$	67	0.09	%	$	102,623		$	569	2.22	%
U.S. government obligations		7,236			36	2.00			17,315			73	1.69
Obligations of state and political subdivisions		26,546			240	3.64			59,267			507	3.43
Other debt and equity securities		378,175			2,182	2.32			394,840			2,572	2.61
Federal Home Loan Bank, Federal Reserve Bank and other stock		28,977			362	5.02			31,938			535	6.72
Total interest-earning deposits, investments and other interest-earning assets		754,602			2,887	1.54			605,983			4,256	2.82
Commercial, financial, and agricultural loans		816,976			7,330	3.61			820,009			10,589	5.18
Paycheck Protection Program loans		370,669			2,128	2.31
Real estate—commercial and construction loans		2,232,827			23,110	4.16			1,912,248			23,110	4.85
Real estate—residential loans		1,004,671			10,270	4.11			941,712			11,483	4.89
Loans to individuals		29,079			327	4.52			31,939			510	6.40
Municipal loans and leases		291,433			2,977	4.11			335,399			3,305	3.95
Lease financings		91,203			1,592	7.02			81,762			1,459	7.16
Gross loans and leases		4,836,858			47,734	3.97			4,123,069			50,456	4.91
Total interest-earning assets		5,591,460			50,621	3.64			4,729,052			54,712	4.64
Cash and due from banks		46,970						46,868
Reserve for credit losses, loans and leases		(69,292	)					(31,847	)
Premises and equipment, net		55,750						58,873
Operating lease right-of-use assets		34,419						35,821
Other assets		341,483						331,681
Total assets	$	6,000,790					$	5,170,448
Liabilities:
Interest-bearing checking deposits	$	617,927		$	372	0.24	%	$	457,231		$	457	0.40	%
Money market savings		1,063,463			853	0.32			982,440			4,234	1.73
Regular savings		872,422			475	0.22			818,523			1,013	0.50
Time deposits		577,462			2,672	1.86			688,897			3,407	1.98
Total time and interest-bearing deposits		3,131,274			4,372	0.56			2,947,091			9,111	1.24
Short-term borrowings		161,365			122	0.30			48,312			217	1.80
Long-term debt		210,040			762	1.46			159,572			836	2.10
Subordinated notes		94,890			1,206	5.11			94,663			1,261	5.34
Total borrowings		466,295			2,090	1.80			302,547			2,314	3.07
Total interest-bearing liabilities		3,597,569			6,462	0.72			3,249,638			11,425	1.41
Noninterest-bearing deposits		1,663,395						1,198,320
Operating lease liabilities		37,680						38,873
Accrued expenses and other liabilities		41,196						38,079
Total liabilities		5,339,840						4,524,910
Shareholders' Equity:
Common stock		157,784						157,784
Additional paid-in capital		295,681						293,496
Retained earnings and other equity		207,485						194,258
Total shareholders' equity		660,950						645,538
Total liabilities and shareholders' equity	$	6,000,790					$	5,170,448
Net interest income		$	44,159				$	43,287
Net interest spread			2.92				3.23
Effect of net interest-free funding sources			0.26				0.44
Net interest margin			3.18	%			3.67	%
Ratio of average interest-earning assets to average interest-bearing liabilities		155.42	%					145.53	%
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been
included in the average loan balances. Tax-equivalent amounts for the three months ended June 30, 2020 and 2019 have
been calculated using the Corporation’s federal applicable rate of 21.0%.

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Univest Financial Corporation
Average Balances and Interest Rates (Unaudited)
		For the Six Months Ended June 30,
Tax Equivalent Basis		2020				2019
	Average	Income/	Average		Average	Income/	Average
(Dollars in thousands)	Balance	Expense	Rate		Balance	Expense	Rate
Assets:
Interest-earning deposits with other banks	$	215,888		$	392	0.37	%	$	72,760		$	838	2.32	%
U.S. government obligations		7,267			73	2.02			18,669			155	1.67
Obligations of state and political subdivisions		30,070			529	3.54			61,703			1,053	3.44
Other debt and equity securities		389,591			4,850	2.50			390,440			5,203	2.69
Federal Home Loan Bank, Federal Reserve Bank and other stock		30,214			889	5.92			32,148			1,121	7.03
Total interest-earning deposits, investments and other interest-earning assets		673,030			6,733	2.01			575,720			8,370	2.93
Commercial, financial, and agricultural loans		819,121			15,961	3.92			815,565			21,347	5.28
Paycheck Protection Program loans		185,334			2,128	2.31
Real estate—commercial and construction loans		2,186,098			47,027	4.33			1,867,510			44,669	4.82
Real estate—residential loans		998,111			21,322	4.30			940,015			22,895	4.91
Loans to individuals		29,548			734	5.00			32,230			1,028	6.43
Municipal loans and leases		304,219			6,242	4.13			333,858			6,526	3.94
Lease financings		90,289			3,146	7.01			81,330			2,894	7.18
Gross loans and leases		4,612,720			96,560	4.21			4,070,508			99,359	4.92
Total interest-earning assets		5,285,750			103,293	3.93			4,646,228			107,729	4.68
Cash and due from banks		48,931						45,797
Reserve for credit losses, loans and leases		(56,832	)					(30,984	)
Premises and equipment, net		56,074						59,025
Operating lease right-of-use assets		34,482						36,472
Other assets		336,122						331,272
Total assets	$	5,704,527					$	5,087,810
Liabilities:
Interest-bearing checking deposits	$	601,159		$	1,168	0.39	%	$	468,019		$	1,171	0.50	%
Money market savings		1,060,399			3,756	0.71			950,641			7,982	1.69
Regular savings		844,591			1,267	0.30			803,859			1,827	0.46
Time deposits		590,183			5,587	1.90			672,193			6,334	1.90
Total time and interest-bearing deposits		3,096,332			11,778	0.76			2,894,712			17,314	1.21
Short-term borrowings		100,745			228	0.46			82,796			855	2.08
Long-term debt		189,623			1,526	1.62			152,475			1,575	2.08
Subordinated notes		94,868			2,481	5.26			94,633			2,522	5.37
Total borrowings		385,236			4,235	2.21			329,904			4,952	3.03
Total interest-bearing liabilities		3,481,568			16,013	0.92			3,224,616			22,266	1.39
Noninterest-bearing deposits		1,475,994						1,144,185
Operating lease liabilities		37,724						39,478
Accrued expenses and other liabilities		42,036						40,936
Total liabilities		5,037,322						4,449,215
Shareholders' Equity:
Common stock		157,784						157,784
Additional paid-in capital		295,500						293,123
Retained earnings and other equity		213,921						187,688
Total shareholders' equity		667,205						638,595
Total liabilities and shareholders' equity	$	5,704,527					$	5,087,810
Net interest income		$	87,280				$	85,463
Net interest spread			3.01				3.29
Effect of net interest-free funding sources			0.31				0.42
Net interest margin			3.32	%			3.71	%
Ratio of average interest-earning assets to average interest-bearing liabilities		151.82	%					144.09	%
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been
included in the average loan balances. Tax-equivalent amounts for the six months ended June 30, 2020 and 2019 have
been calculated using the Corporation’s federal applicable rate of 21.0%.

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Univest Financial Corporation
Loan Portfolio Overview
(Dollars in millions)
Industry Description	Total Outstanding Balance (excl PPP)		% of Commercial Loan Portfolio		PPP $ (1)		% of Portfolio with PPP Loans (2)		$ Balance of Modified Loans (3)		Modified Loans as a % of Portfolio (3)
37%; width:37%; min-width:37%;">CRE - Retail	2%; width:2%; min-width:2%;">$	8%; width:8%; min-width:8%;">260.7	1%; width:1%; min-width:1%;">	8%; width:8%; min-width:8%;">7.1	1%; width:1%; min-width:1%;">%	2%; width:2%; min-width:2%;">$	8%; width:8%; min-width:8%;">0.2	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">-	1%; width:1%; min-width:1%;">%	2%; width:2%; min-width:2%;">$	9%; width:9%; min-width:9%;">124.7	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">47.8	2%; width:2%; min-width:2%;">%
Animal Production		240.3		6.6			0.7		2.1			20.7		8.6
CRE - 1-4 Family Residential Investment		238.7		6.5			1.3		0.2			26.9		11.3
CRE - Office		208.0		5.7			-		0.0			16.4		7.9
CRE - Multi-family		182.3		5.0			-		0.0			11.8		6.5
Hotels & Motels (Accommodation)		171.7		4.7			2.4		50.4			146.6		85.4
Nursing and Residential Care Facilities		155.4		4.3			7.9		27.4			-		-
CRE - Industrial / Warehouse		125.4		3.5			0.1		4.8			26.3		21.0
Real Estate Lenders, Secondary Market Financing		116.9		3.2			4.3		18.6			-		-
Specialty Trade Contractors		114.7		3.2			66.9		15.3			6.0		5.3
CRE - Mixed-Use - Residential		107.2		3.0			-		-			34.5		32.1
Professional, Scientific, and Technical Services		100.4		2.8			70.1		30.4			11.6		11.6
Homebuilding (tract developers, remodelers)		91.1		2.5			15.0		6.7			3.3		3.7
Education		89.9		2.5			15.6		39.8			6.7		7.4
Merchant Wholesalers, Durable Goods		71.7		2.0			20.7		21.0			9.7		13.5
Fabricated Metal Product Manufacturing		68.4		1.9			12.9		3.7			6.1		8.9
Crop Production		61.9		1.7			0.3		0.6			3.2		5.2
Food Services and Drinking Places		61.1		1.7			15.9		25.5			33.9		55.5
CRE - Medical Office		59.8		1.6			-		-			14.7		24.7
Administrative and Support Services		54.4		1.5			28.8		33.0			1.6		2.9
Motor Vehicle and Parts Dealers		51.8		1.4			11.6		5.5			18.0		34.8
Food Manufacturing		51.0		1.4			3.0		1.4			17.5		34.4
Total Commercial Loans >$50M	$	2,682.8		73.8	%	$	277.7		11.6	%	$	540.2		20.1	%
Industries with <$50 million in outstandings	$	951.0		26.2	%	$	221.3		19.2	%	$	126.2		13.3	%
Total Commercial Loans	$	3,633.8		100.0	%	$	499.0		13.6	%	$	666.4		18.3	%
Consumer Loans and Lease Financings	Total Outstanding Balance				PPP $ (1)				$ Balance of Modified Loans (3)		Modified Loans as a % of Portfolio (3)
Real Estate-Residential Secured for Personal Purpose	$	462.5				$	-				$	35.5		7.7	%
Real Estate-Home Equity Secured for Personal Purpose		173.1					-					4.1		2.4
Loans to Individuals		29.2					-					0.5		1.7
Lease Financings		154.2					-					13.6		8.8
Total - Consumer Loans and Lease Financings	$	819.0				$	-				$	53.7		6.6	%
Total	$	4,452.8				$	499.0				$	720.1		16.2	%
(1) Includes ($11.0) million of net deferred fees.
(2) Represents weighted average percent of the portfolio which received a PPP loan.
(3) Loan modifications referenced above were made in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and therefore were not classified as TDRs.

 

CONTACT:
Brian J. Richardson
UNIVEST FINANCIAL CORPORATION
Chief Financial Officer
215-721-2446

FAQ

What was Univest Financial Corporation's net income for Q2 2020?

Univest reported a net income of $2.1 million for Q2 2020.

How much did total deposits increase at Univest Financial Corporation?

Total deposits increased by 41.9% annualized from March 31, 2020.

What were the CECL-related charges reported by Univest for Q2 2020?

Univest recorded CECL-related charges of $23.7 million for Q2 2020.

What is the impact of COVID-19 on Univest's loan modifications?

Univest modified approximately 1,420 loans totaling $720 million due to COVID-19.

What is the significance of the pre-tax pre-provision income reported by Univest?

Pre-tax pre-provision income rose by 15.1% to $25.6 million in Q2 2020.