SOUDERTON, Pa., April 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 March 31, 2020 of $838 thousand, or $0.03 diluted earnings per share, compared to net income of $16.1 million, or $0.55 diluted earnings per share, for the quarter ended March 31, 2019.
During these challenging times, we continue to responsibly serve the needs of our customers while prioritizing the health and safety of our employees. We have implemented drive-through only banking at all our locations that have drive-through capabilities. Additionally, we have controlled and limited access at our financial centers to allow customers to access their safe deposit boxes and to serve customers at locations without drive-through capabilities. We have enabled approximately 95% of our non-financial center personnel to work remotely. Our employees, systems and processes have managed this unprecedented change seamlessly and with great success.As a direct 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 waiving certain deposit service charges. As of April 16, 2020, we have modified, or were in the process of modifying, approximately 1,100 loans 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 will not be categorizing these modifications as troubled debt restructurings. These loans had current principal balances of approximately $540 million. Additionally, we successfully processed approximately 1,050 Paycheck Protection Program (PPP) applications and secured SBA funding of approximately $415 million for our customers prior to the allocated funding being exhausted on April 16, 2020. We will continue to support our customers during these challenging times.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. Upon adoption, the reserve for credit losses on loans and leases increased by $12.9 million, the reserve for credit losses on investments increased by $300 thousand and the reserve for unfunded commitments increased by $1.1 million. This resulted in an after-tax retained earnings adjustment of $11.3 million. During the quarter ended March 31, 2020, the Corporation recorded CECL related charges of $21.8 million, including a provision for credit losses on loans and leases of $20.4 million, a provision for credit losses on investment securities of $597 thousand and a reserve for unfunded commitments of $794 thousand. The financial results for the quarter ended March 31, 2020, included $20.3 million (after-tax charge of $16.1 million), or $0.55 diluted earnings per share, of expense related to COVID-19, which was the result of economic assumptions within the Corporation’s CECL model. This charge included a provision for credit losses on loans and leases of $19.4 million, a provision for credit losses on investment securities of $536 thousand and a reserve for unfunded commitments of $384 thousand.One-Time Items
The results for the quarter ended March 31, 2020, included a $652 thousand ($515 thousand after-tax), or $0.02 diluted earnings per share, gain on sale of investments securities and a $656 thousand ($518 thousand after-tax), or $0.02 diluted earnings per share, charge in other expense related to the extinguishment of long-term debt. Both of these items resulted from opportunistic balance sheet trades that were executed during the quarter ended March 31, 2020 based on market conditions.Loans
Gross loans and leases increased $62.0 million, or 5.7% (annualized), from December 31, 2019 and $380.9 million, or 9.4%, from March 31, 2019. The growth in loans from December 31, 2019 and March 31, 2019 was primarily in commercial real estate and residential real estate loans.Deposits
Total deposits increased $47.2 million, or 4.3% (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 $404.2 million, or 10.1%, from March 31, 2019 primarily due to increases in commercial, public fund and consumer deposits.Net Interest Income and Margin
Net interest income of $42.5 million for the first quarter of 2020 increased $945 thousand, or 2.3%, from the first quarter of 2019. The increase in net interest income for the first quarter of 2020 compared to the first quarter 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 3.48% for the first quarter of 2020, compared to 3.44% for the fourth quarter of 2019 and 3.75% for the first quarter of 2019. Purchase accounting accretion had no impact on the quarter ended March 31, 2020 compared to a favorable impact of three basis points for the quarter ended December 31, 2019 and one basis point for the quarter ended March 31, 2019. Excess liquidity reduced net interest margin by approximately six basis points for the quarter ended March 31, 2020 compared to twelve basis points for the quarter ended December 31, 2019 and had no impact on the quarter ended March 31, 2019. This excess liquidity was primarily driven by strong deposit balance growth over the last year. Excluding purchase accounting accretion and the impact of excess liquidity, the net interest margin, on a tax-equivalent basis, was 3.54% for the quarter ended March 31, 2020, 3.53% for the quarter ended December 31, 2019 and 3.74% for the quarter ended March 31, 2019.Noninterest Income
Noninterest income for the quarter ended March 31, 2020 was $18.4 million, an increase of $2.1 million, or 12.8%, from the first quarter of 2019.Net gain on mortgage banking activities increased $2.3 million, or 468.1%, for the quarter primarily due to an increase in mortgage volume and expansion of margins. Net gain on sales of investment securities increased $694 thousand for the quarter primarily due to a $652 thousand gain on the sale of $58.3 million of agency backed mortgage backed securities. Investment advisory commission and fee income increased $466 thousand, or 12.3%, for the quarter primarily due to new client relationships and appreciation of assets under management, as a majority of investment advisory fees are billed based on the prior quarter-end assets under management balance.Insurance commission and fee income decreased $412 thousand, or 8.0%, for the quarter primarily due to a decrease in contingent commission income of $389 thousand, which was $1.1 million for the quarter ended March 31, 2020 compared to $1.5 million for the quarter ended March 31, 2019. Other service fee income decreased $397 thousand, or 17.5%, primarily due to an increase of $331 thousand of mortgage servicing rights amortization for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019. The increase in amortization for the quarter was primarily driven by the decline in interest rates and their impact on prepayment activity. BOLI income decreased $218 thousand, or 22.9%, for the quarter ended March 31, 2020 primarily due to income on our non-qualified annuity portfolio of $26 thousand in the first quarter of 2020 compared to income of $249 thousand in the first quarter of 2019. During the first quarter of 2019, in order to reduce future volatility, the Corporation transferred the funds invested within the non-qualified annuity portfolio to a stable fund investment strategy. Other income decreased $272 thousand, 80.2%, for the quarter ended March 31, 2020, primarily driven by a loss in the value of equity securities measured at fair value of $268 thousand for the quarter ended March 31, 2020 compared to a gain of $4 thousand for the quarter ended March 31, 2019.Noninterest Expense
Noninterest expense for the quarter ended March 31, 2020 was $39.6 million, an increase of $4.0 million, or 11.3%, compared to the first quarter of 2019.Salaries, benefits and commissions increased $2.3 million, or 10.6%, for the quarter 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. Data processing expense increased $246 thousand, or 9.8%, for the quarter primarily due to continued investments in customer relationship management software and internal infrastructure improvements as well as outsourced data processing solutions. Other expense increased $1.6 million, or 31.4%, for the quarter primarily due to a one-time $656 thousand charge related to the extinguishment of long-term debt and an increase of $794 thousand in the reserve for unfunded commitments, which resulted from the adoption of CECL.Asset Quality and Provision for Credit Losses on Loans and Leases
Nonperforming assets were $39.0 million at March 31, 2020, compared to $39.3 million at December 31, 2019 and $27.4 million at March 31, 2019. The increase in nonperforming assets at March 31, 2020 compared to March 31, 2019 was primarily due to one commercial banking relationship, totaling $11.8 million as of March 31, 2020, which was placed on non-accrual status during 2019.Net loan and lease charge-offs were $489 thousand during the first quarter of 2020. The provision for credit losses on loans and leases was $20.4 million for the first quarter of 2020, compared to $2.7 million for the first quarter of 2019, as explained earlier in this release.The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment was 1.53% at March 31, 2020, compared to 0.81% at December 31, 2019 and 0.78% at March 31, 2019.Tax Provision
The effective income tax rate was (261.2%) for the quarter ended March 31, 2020, compared to an effective income tax rate of 17.9% for the quarter ended March 31, 2019. The negative effective tax rate for the quarter ended March 31, 2020 reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases.Dividend
On February 24, 2020, Univest declared a quarterly cash dividend of $0.20 per share, payable on April 1, 2020. This represented a 5.24% 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 first quarter 2020 results on Thursday, April 23, 2020 at 9:00 a.m. EST. Participants may preregister at http://dpregister.com/10141755. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through May 23, 2020 by dialing 1-877-344-7529; using Conference ID: 10141755.About Univest Financial Corporation
Univest Financial Corporation (UVSP), including its wholly-owned subsidiary Univest Bank and Trust Co., Member FDIC, has approximately $5.5 billion in assets and $3.3 billion in assets under management and supervision through its Wealth Management lines of business at March 31, 2020. Headquartered in Souderton, Pa. and founded in 1876, the Corporation and its subsidiaries provide a full range of financial solutions for individuals, businesses, municipalities and nonprofit organizations primarily in the Mid-Atlantic Region. Univest delivers these services through a network of more than 50 offices in southeastern Pennsylvania extending to the Lehigh Valley and Lancaster, as well as in New Jersey and Maryland and online at www.univest.net. CONTACT: Brian J. Richardson
UNIVEST FINANCIAL CORPORATION
Chief Financial Officer
215-721-2446,
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