Univest Financial Corporation Reports Third Quarter Results

Rhea-AI Summary

Univest Financial Corporation (UVSP) reported a net income of $18.1 million for Q3 2020, up from $17.7 million in Q3 2019. For the nine months ended September 30, net income was $21 million, significantly down from $50.2 million in the prior year. Key highlights include a 23.1% increase in gross loans, while total deposits rose by 28.1%. Noninterest income surged by 31.4%, reflecting strong mortgage banking activity. However, the corporation faces challenges with a rising provision for credit losses totaling $49.5 million, largely due to factors related to COVID-19.

Positive

• Net income for Q3 2020 increased to $18.1 million, up 2.3% year-over-year.
• Gross loans rose by $257.4 million (23.1%) from Q2 2020, and by $458.3 million (10.8%) from Q3 2019.
• Total deposits increased by $342.3 million (28.1%) from Q2 2020, and by $873.6 million (20.1%) from Q3 2019.
• Noninterest income grew by $5.2 million (31.4%) year-over-year, driven by strong mortgage banking activities.

Negative

• Net income for the first nine months of 2020 dropped to $21 million, down 58% from $50.2 million in the same period last year.
• Provision for credit losses reached $49.5 million for the first nine months, indicating potential future loan defaults.
• Net interest margin decreased to 3.02%, down from 3.18% in Q2 2020 and 3.52% in Q3 2019.

SOUDERTON, Pa., Oct. 28, 2020 (GLOBE NEWSWIRE) -- Univest Financial Corporation (“Univest” or the "Corporation") (NASDAQ: UVSP), parent company of Univest Bank and Trust Co. and its insurance, investments and equipment financing subsidiaries, today announced net income for the quarter ended September 30, 2020 of $18.1 million, or $0.62 diluted earnings per share, compared to net income of $17.7 million, or $0.60 diluted earnings per share, for the quarter ended September 30, 2019. Net income for the nine months ended September 30, 2020 was $21.0 million, or $0.72 diluted earnings per share, compared to net income of $50.2 million, or $1.71 diluted earnings per share, for the nine months ended September 30, 2019.

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

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

COVID-19
As a result of the impact of COVID-19, we have taken various actions to support our customers and the communities we collectively serve, including modifying outstanding loans and leases and waiving certain deposit service charges. Loans and leases that were modified via principal and/or interest deferrals were done so in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and have not been categorized as troubled debt restructurings. These loans and leases have a combined principal balance of approximately $191.0 million as of October 16, 2020, which represents approximately 4.1% of the loan portfolio, excluding Paycheck Protection Program ("PPP") loans. For more information on these loans, including a breakdown of such loans by type, please see the "Loan Portfolio Overview" table within this document.

CECL
The Corporation adopted Accounting Standard Update No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”) effective January 1, 2020. During the quarter ended September 30, 2020, the Corporation recorded provision for credit losses of $3.9 million, of which $280 thousand (after-tax charge of $221 thousand), or $0.01 diluted earnings per share, was attributable to changes in economic assumptions within the Corporation’s CECL model, which were predominately driven by COVID-19. During the nine months ended September 30, 2020, the Corporation recorded CECL related charges of $49.5 million, of which $40.5 million (after-tax charge of $32.0 million), or $1.10 diluted earnings per share, was attributable to changes in economic assumptions within the CECL model.

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

Net Interest Income and Margin
Net interest income of $43.9 million for the three months ended September 30, 2020 increased $336 thousand, or 0.8%, from the three months ended June 30, 2020, and $1.2 million, or 2.8%, from the three months ended September 30, 2019. Net interest income of $129.8 million for the nine months ended September 30, 2020 increased $3.0 million, or 2.4%, from the nine months ended September 30, 2019. The increase in net interest income for the three and nine months ended September 30, 2020 compared to the same period of 2019 was primarily due to lower deposit and borrowing costs and growth in loans partially offset by a decrease in yield on loans.

Net interest margin, on a tax-equivalent basis, was 3.02% for the third quarter of 2020, compared to 3.18% for the second quarter of 2020 and 3.52% for the third quarter of 2019. Excess liquidity reduced net interest margin by approximately eighteen basis points for the quarter ended September 30, 2020 compared to sixteen basis points for the quarter ended June 30, 2020 and thirteen basis points for the quarter ended September 30, 2019. This excess liquidity was primarily driven by strong deposit balance growth over the last year. PPP loans reduced net interest margin by ten basis points for the quarter ended September 30, 2020 compared to nine basis points for the quarter ended June 30, 2020. Excluding the impact of excess liquidity and the impact of PPP loans, the net interest margin, on a tax-equivalent basis, was 3.30% for the quarter ended September 30, 2020, 3.43% for the quarter ended June 30, 2020 and 3.65% for the quarter ended September 30, 2019.

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

Net gain on mortgage banking activities increased $4.2 million, or 259.7%, for the quarter and $9.2 million, or 316.7%, for the nine months ended September 30, 2020 from the comparable periods in the prior year, due to an increase in volume and expansion of margins. Net gain on sales of investment securities for the nine months ended September 30, 2020 increased $776 thousand from the comparable period in the prior year primarily due to a $652 thousand gain on the sale of $58.3 million of agency backed mortgage backed securities in the first quarter of 2020.

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

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

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

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

Salaries, benefits and commissions increased $1.3 million, or 5.7%, for the quarter ended September 30, 2020 and increased $3.2 million, or 4.9%, for the nine months ended September 30, 2020 from the comparable periods in the prior year. The increase was attributable to additional staff hired, primarily during 2019, to support revenue generation across all business lines, expansion of our commercial lending groups in the first and second quarters of 2019, annual merit increases and increased variable compensation due to strong mortgage banking activity. Deposit insurance premiums increased $1.2 million, or 259.2%, for the quarter ended September 30, 2020 and increased $1.4 million, or 316.9%, for the nine months ended September 30, 2020 from the comparable periods in the prior year primarily due to an FDIC small bank assessment credit of $988 thousand, which was recognized during the third quarter of 2019 and an increased assessment base for 2020 due to asset growth.

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

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

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

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

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

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

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

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

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 $6.4 billion in assets and $3.8 billion in assets under management and supervision through its Wealth Management lines of business at September 30, 2020. Headquartered in Souderton, Pa. and founded in 1876, the Corporation and its subsidiaries provide a full range of financial solutions for individuals, businesses, municipalities and nonprofit organizations primarily in the Mid-Atlantic Region. Univest delivers these services through a network of more than 50 offices in southeastern Pennsylvania extending to the Lehigh Valley and Lancaster, as well as in New Jersey and Maryland and online at www.univest.net.  

This 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 in that 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 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 high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase; (3) collateral for loans, especially real estate, may decline in value; (4) our allowance for loan losses may have to be increased if borrowers experience financial difficulties; (5) the net worth and 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)
September 30, 2020
(Dollars in thousands)
Balance Sheet (Period End)		09/30/20				06/30/20				03/31/20				12/31/19				09/30/19
Assets		$	6,382,831			$	6,125,312			$	5,464,768			$	5,380,924			$	5,353,611
Investment securities, net of allowance for credit losses			368,830				397,852				423,521				441,599				448,447
Loans held for sale			14,465				31,082				11,417				5,504				2,893
Loans and leases held for investment, gross			5,211,856				4,951,809				4,448,825				4,386,836				4,251,933
Allowance for credit losses, loans and leases			91,870				86,217				68,216				35,331				33,662
Loans and leases held for investment, net			5,119,986				4,865,592				4,380,609				4,351,505				4,218,271
Total deposits			5,211,603				4,869,329				4,407,303				4,360,075				4,337,991
Noninterest-bearing deposits			1,714,505				1,725,819				1,318,270				1,279,681				1,198,425
NOW, money market and savings			2,940,879				2,623,025				2,452,021				2,474,384				2,421,466
Time deposits			556,219				520,485				637,012				606,010				718,100
Borrowings			416,104				515,722				323,363				263,596				273,855
Shareholders' equity			669,107				654,873				651,551				675,122				664,299
Balance Sheet (Average)		For the three months ended,																				For the nine months ended,
		09/30/20				06/30/20				03/31/20				12/31/19				09/30/19				09/30/20				09/30/19
Assets		$	6,265,605			$	6,000,790			$	5,409,561			$	5,400,591			$	5,317,867			$	5,892,918			$	5,165,339
Investment securities, net of allowance for credit losses			385,221				411,957				441,900				445,932				460,099				412,924				467,202
Loans and leases, gross			5,070,037				4,836,858				4,388,584				4,280,430				4,170,485				4,766,274				4,104,198
Deposits			5,030,398				4,794,669				4,349,984				4,374,586				4,288,170				4,726,132				4,122,902
Shareholders' equity			661,947				660,950				673,460				672,647				659,523				665,439				645,647
Asset Quality Data (Period End)
		09/30/20				06/30/20				03/31/20				12/31/19				09/30/19
Nonaccrual loans and leases, including nonaccrual troubled debt restructured
loans and leases		$	30,019			$	26,141			$	36,626			$	38,578			$	37,368
Accruing loans and leases 90 days or more past due			3,573				1,193				1,777				143				2,488
Accruing troubled debt restructured loans and leases			53				53				54				54				54
Total nonperforming loans and leases			33,645				27,387				38,457				38,775				39,910
Other real estate owned			8,270				8,642				516				516				495
Total nonperforming assets			41,915				36,029				38,973				39,291				40,405
Nonaccrual loans and leases / Loans and leases held for investment			0.58	%			0.53	%			0.82	%			0.88	%			0.88	%
Nonperforming loans and leases / Loans and leases held for investment			0.65	%			0.55	%			0.86	%			0.88	%			0.94	%
Nonperforming assets / Total assets			0.66	%			0.59	%			0.71	%			0.73	%			0.75	%
Allowance for credit losses, loans and leases			91,870				86,217				68,216				35,331				33,662
Allowance for credit losses, loans and leases / Loans and leases held for investment			1.76	%			1.74	%			1.53	%			0.81	%			0.79	%
Allowance for credit losses, loans and leases / Loans and leases held for investment, excluding Paycheck Protection Program loans (1)			1.95	%			1.94	%			1.53	%			0.81	%			0.79	%
Allowance for credit losses, loans and leases / Nonaccrual loans and leases held for investment			306.04	%			329.82	%			186.25	%			91.58	%			90.08	%
Allowance for credit losses, loans and leases / Nonperforming loans and leases held for investment			273.06	%			314.81	%			177.38	%			91.12	%			84.34	%
		For the three months ended,																				For the nine months ended,
		09/30/20				06/30/20				03/31/20				12/31/19				09/30/19				09/30/20				09/30/19
Net loan and lease (recoveries) charge-offs		$	(35	)		$	3,576			$	489			$	558			$	468			$	4,030			$	1,993
Net loan and lease (recoveries) charge-offs (annualized)/Average loans and leases			(0.00	%)			0.30	%			0.04	%			0.05	%			0.04	%			0.11	%			0.06	%
(1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included within this document.

Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
September 30, 2020
(Dollars in thousands, except per share data)
		For the three months ended,																		For the nine months ended,
For the period:		09/30/20			06/30/20				03/31/20				12/31/19			09/30/19				09/30/20			09/30/19
Interest income		$	50,612		$	49,980			$	52,019			$	53,369		$	54,300			$	152,611		$	160,724
Interest expense			6,758			6,462				9,551				10,940			11,655				22,771			33,921
Net interest income			43,854			43,518				42,468				42,429			42,645				129,840			126,803
Provision for credit losses			3,935			23,737				21,843				2,225			1,533				49,515			6,286
Net interest income after provision for credit losses			39,919			19,781				20,625				40,204			41,112				80,325			120,517
Noninterest income:
Trust fee income			1,915			1,924				1,890				1,912			1,973				5,729			5,914
Service charges on deposit accounts			1,187			890				1,397				1,551			1,513				3,474			4,395
Investment advisory commission and fee income			4,005			3,540				4,255				4,064			4,032				11,800			11,876
Insurance commission and fee income			3,776			4,067				4,732				3,609			3,877				12,575			12,962
Other service fee income			2,093			1,488				1,870				2,229			2,255				5,451			7,112
Bank owned life insurance income			741			732				734				741			743				2,207			2,438
Net gain on sales of investment securities			57			65				695				13			33				817			41
Net gain on mortgage banking activities			5,860			3,515				2,744				1,038			1,629				12,119			2,908
Other income			2,171			1,779				67				1,013			544				4,017			1,606
Total noninterest income			21,805			18,000				18,384				16,170			16,599				58,189			49,252
Noninterest expense:
Salaries, benefits and commissions			24,059			21,700				23,836				21,933			22,758				69,595			66,356
Net occupancy			2,609			2,478				2,574				2,534			2,475				7,661			7,687
Equipment			972			923				995				1,027			1,088				2,890			3,143
Data processing			2,862			2,750				2,760				2,685			2,624				8,372			7,765
Professional fees			1,321			1,264				1,317				1,475			1,517				3,902			4,088
Marketing and advertising			463			535				402				710			558				1,400			1,884
Deposit insurance premiums			707			615				504				342			(444	)			1,826			438
Intangible expenses			283			321				330				374			378				934			1,221
Other expense			5,251			5,374				6,059				6,400			5,313				16,684			16,028
Total noninterest expense			38,527			35,960				38,777				37,480			36,267				113,264			108,610
Income before taxes			23,197			1,821				232				18,894			21,444				25,250			61,159
Income tax (benefit) expense			5,078			(264	)			(606	)			3,384			3,782				4,208			10,950
Net income		$	18,119		$	2,085			$	838			$	15,510		$	17,662			$	21,042		$	50,209
Net income per share:
Basic		$	0.62		$	0.07			$	0.03			$	0.53		$	0.60			$	0.72		$	1.71
Diluted		$	0.62		$	0.07			$	0.03			$	0.53		$	0.60			$	0.72		$	1.71
Dividends declared per share		$	0.20		$	0.20			$	0.20			$	0.20		$	0.20			$	0.60		$	0.60
Weighted average shares outstanding			29,226,627			29,187,197				29,286,200				29,327,169			29,305,524				29,233,317			29,290,309
Period end shares outstanding			29,241,302			29,201,985				29,164,782				29,334,629			29,312,534				29,241,302			29,312,534

Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
September 30, 2020
		For the three months ended,																				For the nine months ended,
Profitability Ratios (annualized)		09/30/20				06/30/20				03/31/20				12/31/19				09/30/19				09/30/20				09/30/19
Return on average assets			1.15	%			0.14	%			0.06	%			1.14	%			1.32	%			0.48	%			1.30	%
Return on average shareholders' equity			10.89	%			1.27	%			0.50	%			9.15	%			10.62	%			4.22	%			10.40	%
Return on average tangible common equity (1)			14.82	%			1.73	%			0.68	%			12.40	%			14.52	%			5.74	%			14.33	%
Net interest margin (FTE)			3.02	%			3.18	%			3.48	%			3.44	%			3.52	%			3.21	%			3.64	%
Efficiency ratio (2)			58.0	%			57.7	%			62.8	%			63.0	%			60.4	%			59.5	%			60.8	%
Capitalization Ratios
Dividends declared to net income			32.3	%			278.7	%			699.9	%			37.8	%			33.2	%			83.3	%			35.0	%
Shareholders' equity to assets (Period End)			10.48	%			10.69	%			11.92	%			12.55	%			12.41	%			10.48	%			12.41	%
Tangible common equity to tangible assets (1)			7.96	%			8.06	%			8.99	%			9.59	%			9.42	%			7.96	%			9.42	%
Common equity book value per share		$	22.88			$	22.43			$	22.34			$	23.01			$	22.66			$	22.88			$	22.66
Tangible common equity book value per share (1)		$	16.89			$	16.41			$	16.31			$	17.01			$	16.64			$	16.89			$	16.64
Regulatory Capital Ratios (Period End)
Tier 1 leverage ratio			8.97	%			9.15	%			9.90	%			10.02	%			9.97	%			8.97	%			9.97	%
Common equity tier 1 risk-based capital ratio			10.52	%			10.73	%			10.79	%			11.03	%			11.03	%			10.52	%			11.03	%
Tier 1 risk-based capital ratio			10.52	%			10.73	%			10.79	%			11.03	%			11.03	%			10.52	%			11.03	%
Total risk-based capital ratio			15.35	%			13.72	%			13.65	%			13.78	%			13.81	%			15.35	%			13.81	%
(1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included below.
(2) Noninterest expense to net interest income before loan loss provision plus noninterest income adjusted for tax equivalent income.
Non-GAAP to GAAP Reconciliation
	Management uses non-GAAP measures in its analysis of the Corporation's performance. These measures should not be considered a substitute for GAAP basis measures nor should they be viewed as a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the non-GAAP financial measures, which exclude the impact of the specified items, provides useful supplemental information that is essential to a proper understanding of the financial results of the Corporation. See the table below for additional information on non-GAAP measures used throughout this earnings release.
		For the three months ended,																				For the nine months ended,
		09/30/20				06/30/20				03/31/20				12/31/19				09/30/19				09/30/20				09/30/19
	Shareholders' equity	$	669,107			$	654,873			$	651,551			$	675,122			$	664,299			$	669,107			$	664,299
	Goodwill		(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)
	Other intangibles (a)		(2,736	)			(3,017	)			(3,333	)			(3,658	)			(4,026	)			(2,736	)			(4,026	)
	Tangible common equity	$	493,812			$	479,297			$	475,659			$	498,905			$	487,714			$	493,812			$	487,714
	Total assets	$	6,382,831			$	6,125,312			$	5,464,768			$	5,380,924			$	5,353,611			$	6,382,831			$	5,353,611
	Goodwill		(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)
	Other intangibles (a)		(2,736	)			(3,017	)			(3,333	)			(3,658	)			(4,026	)			(2,736	)			(4,026	)
	Tangible assets	$	6,207,536			$	5,949,736			$	5,288,876			$	5,204,707			$	5,177,026			$	6,207,536			$	5,177,026
	Average shareholders' equity	$	661,947			$	660,950			$	673,460			$	675,647			$	659,523			$	665,439			$	645,647
	Average goodwill		(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)			(172,559	)
	Average other intangibles (a)		(2,889	)			(3,185	)			(3,506	)			(3,853	)			(4,234	)			(3,193	)			(4,624	)
	Average tangible common equity	$	486,499			$	485,206			$	497,395			$	499,235			$	482,730			$	489,687			$	468,464
	Net income before taxes	$	23,197			$	1,821			$	232			$	18,894			$	21,444			$	25,250			$	61,159
	Provision for credit losses		3,935				23,737				21,843				2,225				1,533				49,515				6,286
	Pre-tax pre-provision income	$	27,132			$	25,558			$	22,075			$	21,119			$	22,977			$	74,765			$	67,445
	Loans and leases held for investment, gross	$	5,211,856			$	4,951,809			$	4,448,825			$	4,386,836			$	4,251,933			$	5,211,856			$	4,251,933
	Paycheck Protection Program ("PPP") loans		(501,580	)			(498,978	)			-				-				-				(501,580	)			-
	Gross loans and leases excluding PPP loans	$	4,710,276			$	4,452,831			$	4,448,825			$	4,386,836			$	4,251,933			$	4,710,276			$	4,251,933
	(a) Amount does not include servicing rights

Univest Financial Corporation
Average Balances and Interest Rates (Unaudited)
				For the Three Months Ended,
Tax Equivalent Basis	September 30, 2020							June 30, 2020
	Average			Income/		Average		Average			Income/		Average
(Dollars in thousands)	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-earning deposits with other banks	$	368,181		$	100	0.11	%	$	313,668		$	67	0.09	%
U.S. government obligations		6,998			36	2.05			7,236			36	2.00
Obligations of state and political subdivisions		18,004			167	3.69			26,546			240	3.64
Other debt and equity securities		360,219			1,610	1.78			378,175			2,182	2.32
Federal Home Loan Bank, Federal Reserve Bank and other stock		28,651			419	5.82			28,977			362	5.02
Total interest-earning deposits, investments and other interest-earning assets		782,053			2,332	1.19			754,602			2,887	1.54
Commercial, financial, and agricultural loans		807,376			7,330	3.61			816,976			7,330	3.61
Paycheck Protection Program loans		500,549			2,811	2.23			370,669			2,128	2.31
Real estate—commercial and construction loans		2,358,971			23,547	3.97			2,232,827			23,110	4.16
Real estate—residential loans		1,009,407			10,380	4.09			1,004,671			10,270	4.11
Loans to individuals		28,663			309	4.29			29,079			327	4.52
Municipal loans and leases		267,364			2,839	4.22			291,433			2,977	4.11
Lease financings		97,707			1,662	6.77			91,203			1,592	7.02
Gross loans and leases		5,070,037			48,878	3.84			4,836,858			47,734	3.97
Total interest-earning assets		5,852,090			51,210	3.48			5,591,460			50,621	3.64
Cash and due from banks		56,715							46,970
Allowance for credit losses, loans and leases		(87,046	)						(69,292	)
Premises and equipment, net		55,755							55,750
Operating lease right-of-use assets		33,875							34,419
Other assets		354,216							341,483
Total assets	$	6,265,605						$	6,000,790
Liabilities:
Interest-bearing checking deposits		725,580			468	0.26	%	$	617,927		$	372	0.24	%
Money market savings		1,116,628			897	0.32			1,063,463			853	0.32
Regular savings		901,716			449	0.20			872,422			475	0.22
Time deposits		525,656			2,214	1.68			577,462			2,672	1.86
Total time and interest-bearing deposits		3,269,580			4,028	0.49			3,131,274			4,372	0.56
Short-term borrowings		130,359			97	0.30			161,365			122	0.30
Long-term debt		208,776			742	1.41			210,040			762	1.46
Subordinated notes		155,945			1,891	4.82			94,890			1,206	5.11
Total borrowings		495,080			2,730	2.19			466,295			2,090	1.80
Total interest-bearing liabilities		3,764,660			6,758	0.71			3,597,569			6,462	0.72
Noninterest-bearing deposits		1,760,818							1,663,395
Operating lease liabilities		37,170							37,680
Accrued expenses and other liabilities		41,010							41,196
Total liabilities		5,603,658							5,339,840
Shareholders' Equity:
Common stock		157,784							157,784
Additional paid-in capital		296,272							295,681
Retained earnings and other equity		207,891							207,485
Total shareholders' equity		661,947							660,950
Total liabilities and shareholders' equity	$	6,265,605						$	6,000,790
Net interest income				$	44,452						$	44,159
Net interest spread						2.77							2.92
Effect of net interest-free funding sources						0.25							0.26
Net interest margin						3.02	%						3.18	%
Ratio of average interest-earning assets to average interest-bearing liabilities		155.45	%						155.42	%
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been
included in the average loan balances. Tax-equivalent amounts for the three months ended September 30, 2020 and June 30, 2020 have
been calculated using the Corporation’s federal applicable rate of 21.0%.

Univest Financial Corporation
Average Balances and Interest Rates (Unaudited)
				For the Three Months Ended September 30,
Tax Equivalent Basis					2020							2019
	Average			Income/		Average		Average			Income/		Average
(Dollars in thousands)	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-earning deposits with other banks	$	368,181		$	100	0.11	%	$	213,623		$	1,178	2.19	%
U.S. government obligations		6,998			36	2.05			14,154			62	1.74
Obligations of state and political subdivisions		18,004			167	3.69			42,465			316	2.95
Other debt and equity securities		360,219			1,610	1.78			403,480			2,519	2.48
Federal Home Loan Bank, Federal Reserve Bank and other stock		28,651			419	5.82			30,857			519	6.67
Total interest-earning deposits, investments and other interest-earning assets		782,053			2,332	1.19			704,579			4,594	2.59
Commercial, financial, and agricultural loans		807,376			7,330	3.61			800,006			9,952	4.94
Paycheck Protection Program loans		500,549			2,811	2.23			-			-	-
Real estate—commercial and construction loans		2,358,971			23,547	3.97			1,966,593			23,439	4.73
Real estate—residential loans		1,009,407			10,380	4.09			956,224			11,570	4.80
Loans to individuals		28,663			309	4.29			31,504			490	6.17
Municipal loans and leases		267,364			2,839	4.22			333,734			3,413	4.06
Lease financings		97,707			1,662	6.77			82,424			1,482	7.13
Gross loans and leases		5,070,037			48,878	3.84			4,170,485			50,346	4.79
Total interest-earning assets		5,852,090			51,210	3.48			4,875,064			54,940	4.47
Cash and due from banks		56,715							53,019
Allowance for credit losses, loans and leases		(87,046	)						(33,152	)
Premises and equipment, net		55,755							57,881
Operating lease right-of-use assets		33,875							35,238
Other assets		354,216							329,817
Total assets	$	6,265,605						$	5,317,867
Liabilities:
Interest-bearing checking deposits		725,580			468	0.26	%	$	497,185		$	678	0.54	%
Money market savings		1,116,628			897	0.32			1,004,806			4,112	1.62
Regular savings		901,716			449	0.20			805,632			963	0.47
Time deposits		525,656			2,214	1.68			715,520			3,681	2.04
Total time and interest-bearing deposits		3,269,580			4,028	0.49			3,023,143			9,434	1.24
Short-term borrowings		130,359			97	0.30			32,375			94	1.15
Long-term debt		208,776			742	1.41			167,338			866	2.05
Subordinated notes		155,945			1,891	4.82			94,724			1,261	5.28
Total borrowings		495,080			2,730	2.19			294,437			2,221	2.99
Total interest-bearing liabilities		3,764,660			6,758	0.71			3,317,580			11,655	1.39
Noninterest-bearing deposits		1,760,818							1,265,027
Operating lease liabilities		37,170							38,364
Accrued expenses and other liabilities		41,010							37,373
Total liabilities		5,603,658							4,658,344
Shareholders' Equity:
Common stock		157,784							157,784
Additional paid-in capital		296,272							294,138
Retained earnings and other equity		207,891							207,601
Total shareholders' equity		661,947							659,523
Total liabilities and shareholders' equity	$	6,265,605						$	5,317,867
Net interest income				$	44,452						$	43,285
Net interest spread						2.77							3.08
Effect of net interest-free funding sources						0.25							0.44
Net interest margin						3.02	%						3.52	%
Ratio of average interest-earning assets to average interest-bearing liabilities		155.45	%						146.95	%
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been
included in the average loan balances. Tax-equivalent amounts for the three months ended September 30, 2020 and 2019 have
been calculated using the Corporation’s federal applicable rate of 21.0%.

Univest Financial Corporation
Average Balances and Interest Rates (Unaudited)
				For the Nine Months Ended September 30,
Tax Equivalent Basis					2020							2019
	Average			Income/		Average		Average			Income/		Average
(Dollars in thousands)	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-earning deposits with other banks	$	267,023		$	492	0.25	%	$	120,231		$	2,016	2.24	%
U.S. government obligations		7,176			109	2.03			17,148			217	1.69
Obligations of state and political subdivisions		26,019			696	3.57			55,220			1,369	3.31
Other debt and equity securities		379,729			6,460	2.27			394,834			7,722	2.61
Federal Home Loan Bank, Federal Reserve Bank and other stock		29,689			1,308	5.88			31,713			1,640	6.91
Total interest-earning deposits, investments and other interest-earning assets		709,636			9,065	1.71			619,146			12,964	2.80
Commercial, financial, and agricultural loans		815,178			23,291	3.82			810,321			31,299	5.16
Paycheck Protection Program loans		291,173			4,939	2.27			-			-	-
Real estate—commercial and construction loans		2,244,143			70,574	4.20			1,900,901			68,108	4.79
Real estate—residential loans		1,001,904			31,702	4.23			945,477			34,465	4.87
Loans to individuals		29,251			1,043	4.76			31,985			1,518	6.35
Municipal loans and leases		291,845			9,081	4.16			333,816			9,939	3.98
Lease financings		92,780			4,808	6.92			81,698			4,376	7.16
Gross loans and leases		4,766,274			145,438	4.08			4,104,198			149,705	4.88
Total interest-earning assets		5,475,910			154,503	3.77			4,723,344			162,669	4.60
Cash and due from banks		51,544							48,231
Allowance for credit losses, loans and leases		(66,977	)						(31,714	)
Premises and equipment, net		55,967							58,640
Operating lease right-of-use assets		34,278							36,056
Other assets		342,196							330,782
Total assets	$	5,892,918						$	5,165,339
Liabilities:
Interest-bearing checking deposits		642,935			1,636	0.34	%	$	477,848		$	1,849	0.52	%
Money market savings		1,079,279			4,653	0.58			968,894			12,094	1.67
Regular savings		863,772			1,716	0.27			804,457			2,790	0.46
Time deposits		568,517			7,801	1.83			686,794			10,015	1.95
Total time and interest-bearing deposits		3,154,503			15,806	0.67			2,937,993			26,748	1.22
Short-term borrowings		110,689			325	0.39			65,804			949	1.93
Long-term debt		196,053			2,268	1.55			157,484			2,441	2.07
Subordinated notes		115,376			4,372	5.06			94,664			3,783	5.34
Total borrowings		422,118			6,965	2.20			317,952			7,173	3.02
Total interest-bearing liabilities		3,576,621			22,771	0.85			3,255,945			33,921	1.39
Noninterest-bearing deposits		1,571,629							1,184,909
Operating lease liabilities		37,538							39,103
Accrued expenses and other liabilities		41,691							39,735
Total liabilities		5,227,479							4,519,692
Shareholders' Equity:
Common stock		157,784							157,784
Additional paid-in capital		295,759							293,465
Retained earnings and other equity		211,896							194,398
Total shareholders' equity		665,439							645,647
Total liabilities and shareholders' equity	$	5,892,918						$	5,165,339
Net interest income				$	131,732						$	128,748
Net interest spread						2.92							3.21
Effect of net interest-free funding sources						0.29							0.43
Net interest margin						3.21	%						3.64	%
Ratio of average interest-earning assets to average interest-bearing liabilities		153.10	%						145.07	%
Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been
included in the average loan balances. Tax-equivalent amounts for the nine months ended September 30, 2020 and 2019 have
been calculated using the Corporation’s federal applicable rate of 21.0%.

Univest Financial Corporation
Loan Portfolio Overview (Unaudited)
(Dollars in thousands)	As of September 30, 2020												As of October 16, 2020
Industry Description	Total Outstanding Balance (excl PPP)			% of Commercial Loan Portfolio			PPP $ (1)			% of Portfolio with PPP Loans (2)			$ Balance of Modified Loans (3)			Modified Loans as a % of Portfolio (3) (4)
CRE - Retail	$	295,654		7.6	%		$	239		-	%		$	45,121		15.3	%
Animal Production		252,752		6.5				706		2.0				135		0.1
CRE - Office		240,521		6.2				-		-				1,702		0.7
CRE - 1-4 Family Residential Investment		237,378		6.1				1,282		0.2				212		0.1
CRE - Multi-family		204,488		5.3				-		-				1,281		0.6
Real Estate Lenders, Secondary Market Financing		189,743		4.9				4,318		27.8				-		-
Hotels & Motels (Accommodation)		175,894		4.5				2,407		49.6				56,288		32.0
Nursing and Residential Care Facilities		160,238		4.1				7,935		26.4				-		-
CRE - Industrial / Warehouse		158,356		4.1				139		3.8				-		-
CRE - Mixed-Use - Residential		111,613		2.9				-		-				15,440		13.8
Specialty Trade Contractors		111,201		2.9				67,508		14.3				-		-
Professional, Scientific, and Technical Services		93,463		2.4				70,163		29.4				63		0.1
CRE - Medical Office		88,557		2.3				-		-				9,864		11.1
Homebuilding (tract developers, remodelers)		85,177		2.2				15,049		5.2				-		-
Education		77,676		2.0				15,577		26.7				1,071		1.4
Merchant Wholesalers, Durable Goods		73,251		1.9				20,726		22.9				-		-
Fabricated Metal Product Manufacturing		65,549		1.7				12,860		3.5				-		-
Crop Production		62,689		1.6				289		0.5				-		-
Motor Vehicle and Parts Dealers		61,306		1.6				11,623		2.9				-		-
Food Services and Drinking Places		59,261		1.5				15,998		25.7				1,298		2.2
Administrative and Support Services		55,217		1.4				28,943		32.9				-		-
Industries with >$50 million in outstandings	$	2,859,984		73.7	%		$	275,762		11.1	%		$	132,475		4.6	%
Industries with <$50 million in outstandings	$	1,015,850		26.3	%		$	225,818		17.3	%		$	33,566		3.3	%
Total Commercial Loans	$	3,875,834		100.0	%		$	501,580		12.7	%		$	166,041		4.3	%
Consumer Loans and Lease Financings	Total Outstanding Balance						PPP $ (1)						$ Balance of Modified Loans (3)			Modified Loans as a % of Portfolio (3) (4)
Real Estate-Residential Secured for Personal Purpose	$	474,688					$	-					$	22,937		4.8	%
Real Estate-Home Equity Secured for Personal Purpose		172,448						-						1,633		0.9
Loans to Individuals		27,771						-						184		0.7
Lease Financings		159,535						-						232		0.1
Total - Consumer Loans and Lease Financings	$	834,442					$	-					$	24,986		3.0	%
Total	$	4,710,276					$	501,580					$	191,027		4.1	%
(1) Includes ($9.5) million of net deferred fees.
(2) Represents weighted average percent of the portfolio which received a PPP loan.
(3) Loan modifications referenced above were made in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and therefore were not classified as TDRs as of October 16, 2020.
(4) Balance of modified loans as of October 16, 2020 as a percentage of portfolio loans at September 30, 2020.

 

 

FAQ

What were Univest Financial Corporation's Q3 2020 net income figures?

Univest reported a net income of $18.1 million for Q3 2020.

How did Univest's net income for the first nine months of 2020 compare to 2019?

Net income for the nine months ended September 30, 2020, was $21 million, down from $50.2 million in the same period of 2019.

What were the main contributors to Univest's noninterest income growth?

Noninterest income increased by 31.4%, primarily due to a significant rise in mortgage banking activities.

How much did Univest's loans increase in Q3 2020?

Gross loans increased by $257.4 million, or 23.1%, from Q2 2020.

What is Univest's approach to handling COVID-19 impacts on loans?

Univest has modified loans per the CARES Act, with a principal balance of approximately $191 million, representing 4.1% of their loan portfolio.