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Univest Financial Corporation Reports Third Quarter Results
Source: Nasdaq GlobeNewswire / 27 Oct 2021 16:15:01 America/New_York
(Loan Growth of 9.7% for last twelve months (excluding PPP loans1))
SOUDERTON, Pa., Oct. 27, 2021 (GLOBE NEWSWIRE) -- Univest Financial Corporation (“Univest” or the "Corporation") (NASDAQ: UVSP), parent company of Univest Bank and Trust Co. and its insurance, investments and equipment financing subsidiaries, today announced net income for the quarter ended September 30, 2021 of $20.9 million, or $0.71 diluted earnings per share, compared to net income of $18.1 million, or $0.62 diluted earnings per share, for the quarter ended September 30, 2020. Net income for the nine months ended September 30, 2021 was $74.4 million, or $2.52 diluted earnings per share, compared to net income of $21.0 million, or $0.72 diluted earnings per share, for the nine months ended September 30, 2020.
Pre-tax pre-provision income1 for the quarter ended September 30, 2021 was $26.0 million, a decrease of $1.1 million, or 4.2%, from the third quarter of 2020. Pre-tax pre-provision income1 for the nine months ended September 30, 2021 was $80.8 million, an increase of $6.1 million, or 8.1%, from the comparable period in the prior year.
One-Time Items
The financial results for the three and nine months ended September 30, 2021 included tax-free bank owned life insurance ("BOLI") death benefit claims of $196 thousand and $1.1 million, respectively, which represents $0.01 and $0.04 diluted earnings per share, respectively.Paycheck Protection Program
As of September 30, 2021, $85.6 million in PPP loan originations remain outstanding. During the quarter, we recorded income of $4.2 million within net interest income related to these loans, of which $3.7 million was the result of recognition of associated net deferred loan fees upon forgiveness and pay downs of PPP loans totaling $171.4 million. During the nine months ended September 30, 2021, we recorded income of $13.5 million within net interest income related to these loans, of which $8.6 million was the result of recognition of associated net deferred loan fees upon forgiveness and pay downs of PPP loans totaling $575.3 million. As of September 30, 2021, we had $2.4 million of net deferred fees on our balance sheet, which represented approximately 13.2% of the initial deferred fee amount.Loans
Gross loans and leases, excluding PPP loans1, increased $92.0 million, or 7.3% (annualized), from June 30, 2021 due to increases in commercial real estate and residential mortgage loans. Gross loans and leases, excluding PPP loans, increased $343.4 million or 9.5% (annualized) from December 31, 2020 and $456.2 million, or 9.7%, from September 30, 2020 due to increases in commercial, construction, commercial real estate, and residential mortgage loans.Deposits
Total deposits increased $619.5 million, or 46.6% (annualized), from June 30, 2021 due to increases in commercial deposits and seasonal increases in public funds deposits. Total deposits increased $695.4 million, or 17.7% (annualized), from December 31, 2020 and $726.6 million, or 13.9%, from September 30, 2020, primarily due to increases in commercial, consumer and public funds deposits offset by a decrease in brokered deposits.Net Interest Income and Margin
Net interest income of $48.7 million for the three months ended September 30, 2021 increased $1.9 million, or 4.1%, from the three months ended June 30, 2021, and $4.8 million, or 11.0%, from the three months ended September 30, 2020. The increase in net interest income for the three months ended September 30, 2021 compared to the same period of 2020 was primarily due to an increase in PPP loan income of $1.4 million, a $1.9 million decrease in the cost of interest-bearing liabilities and growth in loans partially offset by a decrease in loan, excluding PPP, and investment yields.Net interest income of $140.9 million for the nine months ended September 30, 2021 increased $11.0 million, or 8.5%, from the nine months ended September 30, 2020. The increase in net interest income for the nine months ended September 30, 2021 compared to the same period of 2020 was primarily due to an increase in PPP loan income of $8.5 million, a $6.2 million decrease in the cost of interest-bearing liabilities and growth in loans partially offset by a decrease in loans and investment yields.
Net interest margin, on a tax-equivalent basis, was 3.11% for the third quarter of 2021, compared to 3.15% for the second quarter of 2021 and 3.02% for the third quarter of 2020. Excess liquidity reduced net interest margin by approximately 27 basis points for the quarter ended September 30, 2021 compared to ten basis points for the quarter ended June 30, 2021 and 18 basis points for the quarter ended September 30, 2020. This excess liquidity was primarily driven by strong growth of deposit balances since the beginning of the COVID-19 pandemic, primarily due to the various pandemic-related stimulus initiatives. PPP loans had a favorable impact on net interest margin of 20 basis points for the quarter ended September 30, 2021 compared to 11 basis points for the quarter ended June 30, 2021 and an unfavorable impact of ten basis points for the quarter ended September 30, 2020. As PPP loans are forgiven, the associated deferred fees are recognized in earnings, which occurred with greater frequency in 2021 as compared to 2020. Excluding the impact of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was 3.18% for the quarter ended September 30, 2021 compared to 3.14% for the quarter ended June 30, 2021 and 3.30% for the quarter ended September 30, 2020.
Net interest margin, on a tax-equivalent basis, was 3.13% for the nine months ended September 20, 2021, compared to 3.21% for the nine months ended September 30, 2020. Excess liquidity reduced net interest margin by approximately 16 basis points for the nine months ended September 30, 2021 compared to 14 basis points for the nine months ended September 30, 2020. This excess liquidity was primarily driven by strong growth of deposit balances since the beginning of the COVID-19 pandemic, primarily due to the various pandemic-related stimulus initiatives. PPP loans had a favorable impact on net interest margin of 12 basis points for the nine months ended September 30, 2021 compared to an unfavorable impact of seven basis points for the nine months ended September 30, 2020. Excluding the impact of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was 3.17% for the nine months ended September 30, 2021 compared to 3.42% for the nine months ended September 30, 2020.
Noninterest Income
Noninterest income for the quarter ended September 30, 2021 was $20.6 million, a decrease of $1.3 million, or 5.7%, compared to the third quarter of 2020. Noninterest income for the nine months ended September 30, 2021 was $64.0 million, an increase of $5.8 million, or 10.0%, from the comparable period in the prior year.Net gain on mortgage banking activities decreased $2.6 million, or 45.0%, for the quarter but increased $504 thousand, or 4.2%, for the nine months ended September 30, 2021 compared to the comparable periods in the prior year. The decrease for the three months ended September 30, 2021 was primarily due to a decrease in volume and a contraction of margins. Investment advisory commission and fee income increased $791 thousand, or 19.8%, for the quarter and $2.3 million, or 19.1%, for the nine months ended September 30, 2021 compared to the comparable periods in the prior year, due to increased assets under management driven by favorable market conditions and new customer relationships. BOLI income increased $184 thousand, or 24.8%, for the quarter and $1.1 million, or 47.8%, for the nine months ended September 30, 2021 compared to the comparable periods in the prior year, primarily due to proceeds from BOLI death benefits of $893 thousand and $196 thousand received in the second and third quarter of 2021, respectively.
Other service fee income increased $483 thousand, or 23.1%, for the quarter and $2.1 million, or 37.9%, for the nine months ended September 30, 2021 compared to the comparable periods in the prior year. Interchange fee income increased $290 thousand for the quarter and $962 thousand for the nine months ended September 30, 2021 compared to the comparable periods in the prior year, due to increased customer activity. Mortgage servicing fees increased $163 thousand for the quarter and $855 thousand for the nine months ended September 30, 2021 driven by an increase in retained servicing associated with elevated mortgage volume over the past eighteen months.
Other income decreased $546 thousand, or 25.1%, for the quarter and $543 thousand, or 13.5%, for the nine months ended September 30, 2021 compared to comparable periods in the prior year. Fees on risk participation agreements for interest rate swaps decreased $1.9 million and $2.3 million during the three and nine months ended September 30, 2021, respectively, compared to comparable periods in the prior year driven by a decrease in customer demand. Gain on the sale of SBA loans increased $897 thousand and $922 thousand during the three and nine months ended September 30, 2021, respectively. This increase was reflective of the Corporation's commitment to delivering comprehensive financial solutions to small businesses and the expansion of the SBA lending team during the first half of 2021. Net gains or losses related to valuations and sales of other real estate owned increased $297 thousand for the three and nine months ended September 30, 2021 compared to comparable periods in the prior year, primarily due to a $300 thousand valuation adjustment on other real estate owned during the third quarter of 2020. Other income increased $456 thousand for the nine months ended September 30, 2021 primarily driven by a gain on the value of equity securities measured at fair value of $164 thousand compared to a loss of $321 thousand for the nine months ended September 30, 2020.
Noninterest Expense
Noninterest expense for the quarter ended September 30, 2021 was $43.2 million, an increase of $4.7 million, or 12.3%, compared to the third quarter of 2020. Noninterest expense for the nine months ended September 30, 2021 was $124.1 million, an increase of $10.8 million, or 9.5%, from the comparable period in the prior year.Salaries, benefits and commissions increased $2.6 million, or 10.7%, for the quarter and $7.2 million, or 10.4%, for the nine months ended September 30, 2021 from the comparable periods in the prior year. These increases reflect our continued investment in revenue producing staff across all business lines and annual merit increases. Additionally, variable incentive compensation expenses increased $829 thousand and $2.6 million for the three and nine months ended September 30, 2021, respectively, from the comparable periods in the prior year, due to increased profitability.
Professional fees increased $853 thousand, or 64.6%, for the quarter and $2.0 million, or 52.2%, for the nine months ended September 30, 2021 from the comparable periods in the prior year, primarily attributable to increased consultant fees in support of our Diversity, Equity and Inclusion program, training initiatives and treasury management product enhancements. During the first nine months of 2021, we have spent $1.4 million on these initiatives and we expect to incur approximately $70 thousand of additional expenses related to these initiatives in the fourth quarter of 2021. These expenses are not expected to re-occur in subsequent periods. Data processing expenses increased $412 thousand, or 14.4%, for the quarter and $1.0 million, or 12.1%, for the nine months ended September 30, 2021 compared to the comparable periods in the prior year, primarily due to continued investments in our end-to-end loan origination solution for loans below $1.0 million, customer relationship management software, internal infrastructure improvements and outsourced data processing solutions.
Other expense increased $865 thousand, or 16.5%, for the quarter compared to the comparable period in the prior year, due to increases in professional liability insurance, bank shares tax expense, interchange fee expense and travel and entertainment expenses, which are beginning to normalize as the markets we operate in continue to remain open.
Asset Quality and Provision for Credit Losses
Nonperforming assets were $37.1 million at September 30, 2021, compared to $38.5 million at June 30, 2021 and $41.9 million at September 30, 2020.Net loan and lease recoveries were $75 thousand during the third quarter of 2021 compared to $35 thousand for the same period in the prior year. The reversal of provision for credit losses was $182 thousand for the third quarter of 2021, of which $2.9 million (after-tax benefit of $2.3 million), or $0.08 diluted earnings per share, was attributable to favorable changes in economic-related assumptions within the Corporation’s CECL model, partially offset by an increase in reserves for loans, unfunded commitments and investment securities. The provision for credit losses was $3.9 million for the comparable period in the prior year, of which $280 thousand (after-tax charge of $221 thousand), or $0.01 diluted earnings per share, was attributable to adverse changes in economic-related assumptions, which were predominately driven by COVID-19.
Net loan and lease charge-offs were $456 thousand for the nine months ended September 30, 2021 compared to $4.0 million for the same period in the prior year. The reversal of provision for credit losses was $11.5 million for the nine months ended September 30, 2021, of which $18.7 million (after-tax benefit of $14.8 million), or $0.50 diluted earnings per share, was attributable to favorable changes in economic-related assumptions within the Corporation’s CECL model partially offset by an increase in reserves for loans, unfunded commitments and investment securities. The provision for credit losses was $49.5 million for the comparable period in the prior year, of which $40.5 million (after-tax charge of $32.0 million), or $1.10 diluted earnings per share, was attributable to adverse changes in economic-related assumptions.
The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment was 1.34% at September 30, 2021, compared to 1.34% at June 30, 2021, and 1.76% at September 30, 2020. The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment, excluding PPP loans1, was 1.36% at September 30, 2021 compared to 1.41% at June 30, 2021 and 1.95% at September 30, 2020.
Tax Provision
The effective income tax rate was 19.4% for the nine months ended September 30, 2021 compared to an effective income tax rate of 16.7% for the nine months ended September 30, 2020. The effective tax rate for the nine months ended September 30, 2021 and 2020 reflects the level of pre-tax income and the benefits of tax-exempt income from investments in municipal securities and loans and leases. Additionally, the effective income tax rate for the nine months ended September 30, 2021 was favorably impacted by discrete tax benefits and proceeds from BOLI death benefits. Excluding these items, the effective tax rate was 19.9% for the nine months ended September 30, 2021.Dividend
On October 27, 2021, Univest declared a quarterly cash dividend of $0.20 per share. The dividend will be paid on November 24, 2021 to shareholders of record as of November 10, 2021.Conference Call
Univest will host a conference call to discuss third quarter 2021 results on Thursday, October 28, 2021 at 9:00 a.m. EST. Participants may preregister at https://dpregister.com/sreg/10160789/ee1d498407. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through November 28, 2021 by dialing 1-877-344-7529; using Conference ID: 10160789.1Non-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 $7.0 billion in assets and $4.6 billion in assets under management and supervision through its Wealth Management lines of business at September 30, 2021. Headquartered in Souderton, Pa. and founded in 1876, the Corporation and its subsidiaries provide a full range of financial solutions for individuals, businesses, municipalities and nonprofit organizations primarily in the Mid-Atlantic Region. Univest delivers these services through a network of more than 50 offices and online at www.univest.net.This press release of Univest and the reports Univest files with the Securities and Exchange Commission often contain "forward-looking statements" relating to trends or factors affecting the financial services industry and, specifically, the financial condition and results of operations, business and capital management strategies, markets and products of Univest. These forward-looking statements involve certain risks and uncertainties in that there are a number of important factors that could cause Univest's future results to differ materially from those expressed or implied by the forward-looking statements. These factors include, but are not limited to: (1) competition; (2) changes in interest rates; (3) changes in asset quality, prepayment speeds, loan sale volumes, charge-offs and credit loss provisions; (4) general economic conditions nationally and in our market; (5) economic assumptions that may impact our allowance for credit losses calculation; (6) legislative, regulatory or tax changes that may adversely affect the businesses in which Univest is engaged; (7) technological issues that may adversely affect Univest financial operations or those of our customers; (8) changes in the securities markets or (9) risk factors mentioned in the reports and registration statements Univest files with the Securities and Exchange Commission.
Additionally, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and whether the continued reopening of businesses will result in a meaningful increase in economic activity. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: (1) demand for our products and services may decline; (2) if the economy is unable to remain open, and higher levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase; (3) collateral for loans, especially real estate, may decline in value; (4) our allowance for credit losses may have to be increased if economic conditions worsen or if borrowers experience financial difficulties; (5) the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; (6) a material decrease in net income or a net loss over several quarters could result in the elimination of or a decrease in the rate of our quarterly cash dividend; (7) our wealth management revenues may decline with continuing market turmoil; (8) litigation, regulatory enforcement risk and reputation risk regarding our participation in the Paycheck Protection Program and the risk that the Small Business Administration may not fund some or all PPP loan guarantees; (9) our cyber security risks are increased as the result of an increase in the number of employees working remotely; and (10) Federal Deposit Insurance Corporation premiums may increase if the agency experiences 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.
(UVSP - ER)
Univest Financial Corporation Consolidated Selected Financial Data (Unaudited) September 30, 2021 (Dollars in thousands) Balance Sheet (Period End) 09/30/21 06/30/21 03/31/21 12/31/20 09/30/20 Assets $ 6,979,852 $ 6,356,305 $ 6,416,665 $ 6,336,496 $ 6,382,831 Cash and cash equivalents 902,357 203,449 187,317 219,858 387,676 Investment securities, net of allowance for credit losses 393,377 397,426 377,506 373,176 368,830 Loans held for sale 29,093 27,322 22,636 37,039 14,465 Loans and leases held for investment, gross 5,252,045 5,327,313 5,415,006 5,306,841 5,211,856 Allowance for credit losses, loans and leases 70,146 71,355 71,497 83,044 91,870 Loans and leases held for investment, net 5,181,899 5,255,958 5,343,509 5,223,797 5,119,986 Total deposits 5,938,154 5,318,704 5,311,592 5,242,715 5,211,603 Noninterest-bearing deposits 1,861,007 1,872,031 1,857,547 1,690,663 1,714,505 Interest-bearing demand, money market and savings 3,583,107 2,954,450 2,979,834 2,988,277 2,940,879 Time deposits 494,040 492,223 474,211 563,775 556,219 Borrowings 207,898 218,970 295,293 311,421 416,104 Shareholders' equity 756,023 739,998 722,455 692,472 669,107 Balance Sheet (Average) For the three months ended, For the nine months ended, 09/30/21 06/30/21 03/31/21 12/31/20 09/30/20 09/30/21 09/30/20 Assets $ 6,698,177 $ 6,443,629 $ 6,383,463 $ 6,353,519 $ 6,265,605 $ 6,509,576 $ 5,892,918 Investment securities, net of allowance for credit losses 395,280 385,694 374,369 369,511 385,221 385,192 412,924 Loans and leases, gross 5,320,411 5,389,110 5,325,897 5,253,720 5,070,037 5,345,119 4,766,274 Deposits 5,666,725 5,351,089 5,296,147 5,222,452 5,030,398 5,439,345 4,726,132 Shareholders' equity 746,185 728,750 699,736 676,426 661,947 725,061 665,439 Asset Quality Data (Period End) 09/30/21 06/30/21 03/31/21 12/31/20 09/30/20 Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and leases and nonaccrual loans held for sale $ 34,528 $ 37,466 $ 29,996 $ 31,692 $ 30,019 Accruing loans and leases 90 days or more past due 2,204 750 664 1,392 3,573 Accruing troubled debt restructured loans and leases 51 52 52 53 53 Total nonperforming loans and leases 36,783 38,268 30,712 33,137 33,645 Other real estate owned 279 279 7,481 7,355 8,270 Total nonperforming assets $ 37,062 $ 38,547 $ 38,193 $ 40,492 $ 41,915 Nonaccrual loans and leases / Loans and leases held for investment and nonaccrual loans held for sale 0.66 % 0.70 % 0.55 % 0.60 % 0.58 % Nonperforming loans and leases / Loans and leases held for investment 0.70 % 0.72 % 0.57 % 0.62 % 0.65 % Nonperforming assets / Total assets 0.53 % 0.61 % 0.60 % 0.64 % 0.66 % Allowance for credit losses, loans and leases $ 70,146 $ 71,355 $ 71,497 $ 83,044 $ 91,870 Allowance for credit losses, loans and leases / Loans and leases held for investment 1.34 % 1.34 % 1.32 % 1.56 % 1.76 % Allowance for credit losses, loans and leases / Loans and leases held for investment, excluding Paycheck Protection Program loans (1) 1.36 % 1.41 % 1.46 % 1.72 % 1.95 % Allowance for credit losses, loans and leases / Nonaccrual loans and leases held for investment 203.16 % 212.97 % 238.36 % 262.03 % 306.04 % Allowance for credit losses, loans and leases / Nonperforming loans and leases held for investment 190.70 % 208.00 % 232.80 % 250.61 % 273.06 % For the three months ended, For the nine months ended, 09/30/21 06/30/21 03/31/21 12/31/20 09/30/20 09/30/21 09/30/20 Net loan and lease (recoveries) charge-offs $ (75 ) $ 243 $ 288 $ 618 $ (35 ) $ 456 $ 4,030 Net loan and lease (recoveries) charge-offs (annualized)/Average loans and leases (0.01 %) 0.02 % 0.02 % 0.05 % (0.00 %) 0.01 % 0.11 % (1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included at the end of this document. Univest Financial Corporation Consolidated Selected Financial Data (Unaudited) September 30, 2021 (Dollars in thousands, except per share data) For the three months ended, For the nine months ended, For the period: 09/30/21 06/30/21 03/31/21 12/31/20 09/30/20 09/30/21 09/30/20 Interest income $ 53,571 $ 52,441 $ 51,457 $ 51,334 $ 50,612 $ 157,469 $ 152,611 Interest expense 4,884 5,684 6,043 6,813 6,758 16,611 22,771 Net interest income 48,687 46,757 45,414 44,521 43,854 140,858 129,840 (Reversal of provision) provision for credit losses (182 ) (59 ) (11,283 ) (8,721 ) 3,935 (11,524 ) 49,515 Net interest income after provision for credit losses 48,869 46,816 56,697 53,242 39,919 152,382 80,325 Noninterest income: Trust fee income 2,126 2,157 2,034 1,974 1,915 6,317 5,729 Service charges on deposit accounts 1,422 1,314 1,282 1,371 1,187 4,018 3,474 Investment advisory commission and fee income 4,796 4,558 4,697 4,144 4,005 14,051 11,800 Insurance commission and fee income 3,837 3,839 4,955 3,512 3,776 12,631 12,575 Other service fee income 2,576 2,748 2,192 2,092 2,093 7,516 5,451 Bank owned life insurance income 925 1,620 717 733 741 3,262 2,207 Net gain on sales of investment securities 21 54 65 54 57 140 817 Net gain on mortgage banking activities 3,224 3,461 5,938 4,323 5,860 12,623 12,119 Other income 1,625 479 1,370 1,936 2,171 3,474 4,017 Total noninterest income 20,552 20,230 23,250 20,139 21,805 64,032 58,189 Noninterest expense: Salaries, benefits and commissions 26,641 25,396 24,780 23,613 24,059 76,817 69,595 Net occupancy 2,525 2,656 2,739 2,697 2,609 7,920 7,661 Equipment 1,000 968 946 951 972 2,914 2,890 Data processing 3,274 3,064 3,050 2,961 2,862 9,388 8,372 Professional fees 2,174 2,015 1,748 1,436 1,321 5,937 3,902 Marketing and advertising 539 561 280 575 463 1,380 1,400 Deposit insurance premiums 765 613 636 765 707 2,014 1,826 Intangible expenses 214 249 249 282 283 712 934 Restructuring charges - - - 1,439 - - - Other expense 6,116 5,764 5,112 7,015 5,251 16,992 16,684 Total noninterest expense 43,248 41,286 39,540 41,734 38,527 124,074 113,264 Income before taxes 26,173 25,760 40,407 31,647 23,197 92,340 25,250 Income tax expense 5,262 4,885 7,804 5,773 5,078 17,951 4,208 Net income $ 20,911 $ 20,875 $ 32,603 $ 25,874 $ 18,119 $ 74,389 $ 21,042 Net income per share: Basic $ 0.71 $ 0.71 $ 1.11 $ 0.88 $ 0.62 $ 2.53 $ 0.72 Diluted $ 0.71 $ 0.71 $ 1.11 $ 0.88 $ 0.62 $ 2.52 $ 0.72 Dividends declared per share $ 0.20 $ 0.20 $ 0.20 $ - $ 0.20 $ 0.60 $ 0.60 Weighted average shares outstanding 29,420,256 29,389,525 29,327,432 29,274,915 29,226,627 29,379,774 29,233,317 Period end shares outstanding 29,438,402 29,411,731 29,379,575 29,295,052 29,241,302 29,438,402 29,241,302 Univest Financial Corporation Consolidated Selected Financial Data (Unaudited) September 30, 2021 For the three months ended, For the nine months ended, Profitability Ratios (annualized) 09/30/21 06/30/21 03/31/21 12/31/20 09/30/20 09/30/21 09/30/20 Return on average assets 1.24 % 1.30 % 2.07 % 1.62 % 1.15 % 1.53 % 0.48 % Return on average assets, excluding restructuring charges (1) 1.24 % 1.30 % 2.07 % 1.69 % 1.15 % 1.53 % 0.48 % Return on average shareholders' equity 11.12 % 11.49 % 18.90 % 15.22 % 10.89 % 13.72 % 4.22 % Return on average shareholders' equity, excluding restructuring charges (1) 11.12 % 11.49 % 18.90 % 15.89 % 10.89 % 13.72 % 4.22 % Return on average tangible common equity (1) 14.51 % 15.11 % 25.20 % 20.54 % 14.82 % 18.07 % 5.74 % Return on average tangible common equity, excluding restructuring charges (1) 14.51 % 15.11 % 25.20 % 21.44 % 14.82 % 18.07 % 5.74 % Net interest margin (FTE) 3.11 % 3.15 % 3.12 % 3.02 % 3.02 % 3.13 % 3.21 % Efficiency ratio (2) 61.8 % 60.7 % 57.0 % 63.8 % 58.0 % 59.8 % 59.5 % Efficiency ratio, excluding restructuring charges (1) (2) 61.8 % 60.7 % 57.0 % 61.6 % 58.0 % 59.8 % 59.5 % Capitalization Ratios Dividends declared to net income (3) 28.1 % 28.2 % 18.0 % 0.0 % 32.3 % 23.7 % 83.3 % Shareholders' equity to assets (Period End) 10.83 % 11.64 % 11.26 % 10.93 % 10.48 % 10.83 % 10.48 % Tangible common equity to tangible assets (1) 8.55 % 9.15 % 8.77 % 8.40 % 7.95 % 8.55 % 7.96 % Common equity book value per share $ 25.68 $ 25.16 $ 24.59 $ 23.64 $ 22.88 $ 25.68 $ 22.88 Tangible common equity book value per share (1) $ 19.75 $ 19.22 $ 18.64 $ 17.66 $ 16.88 $ 19.75 $ 16.89 Regulatory Capital Ratios (Period End) Tier 1 leverage ratio 9.53 % 9.64 % 9.45 % 9.08 % 8.97 % 9.53 % 8.97 % Common equity tier 1 risk-based capital ratio 11.15 % 11.04 % 11.08 % 10.76 % 10.52 % 11.15 % 10.52 % Tier 1 risk-based capital ratio 11.15 % 11.04 % 11.08 % 10.76 % 10.52 % 11.15 % 10.52 % Total risk-based capital ratio 13.87 % 13.82 % 15.13 % 15.31 % 15.35 % 13.87 % 15.35 % (1) Non-GAAP metric. A reconciliation of this and other non-GAAP to GAAP performance measures is included below. (2) Noninterest expense to net interest income before loan loss provision plus noninterest income adjusted for tax equivalent income. (3) As announced in the September 30, 2020 Earnings Release, the Corporation changed the timing of future dividend declarations and payments. Univest Financial Corporation Average Balances and Interest Rates (Unaudited) For the Three Months Ended, Tax Equivalent Basis September 30, 2021 June 30, 2021 Average Income/ Average Average Income/ Average (Dollars in thousands) Balance Expense Rate Balance Expense Rate Assets: Interest-earning deposits with other banks $ 530,191 $ 189 0.14 % $ 215,349 $ 46 0.09 % U.S. government obligations 6,999 36 2.04 6,999 35 2.01 Obligations of state and political subdivisions 2,992 24 3.18 6,070 58 3.83 Other debt and equity securities 385,289 1,516 1.56 372,625 1,364 1.47 Federal Home Loan Bank, Federal Reserve Bank and other stock 26,713 334 4.96 25,872 360 5.58 Total interest-earning deposits, investments and other interest-earning assets 952,184 2,099 0.87 626,915 1,863 1.19 Commercial, financial, and agricultural loans 880,986 7,412 3.34 826,464 6,910 3.35 Paycheck Protection Program loans 162,611 4,162 10.15 408,928 4,778 4.69 Real estate—commercial and construction loans 2,784,398 25,634 3.65 2,701,137 24,931 3.70 Real estate—residential loans 1,100,799 10,171 3.67 1,065,065 9,836 3.70 Loans to individuals 26,048 253 3.85 25,284 251 3.98 Municipal loans and leases 247,603 2,504 4.01 251,311 2,598 4.15 Lease financings 117,966 1,856 6.24 110,921 1,819 6.58 Gross loans and leases 5,320,411 51,992 3.88 5,389,110 51,123 3.80 Total interest-earning assets 6,272,595 54,091 3.42 6,016,025 52,986 3.53 Cash and due from banks 59,642 52,948 Allowance for credit losses, loans and leases (72,606 ) (73,052 ) Premises and equipment, net 55,685 55,903 Operating lease right-of-use assets 31,998 33,992 Other assets 350,863 357,813 Total assets $ 6,698,177 $ 6,443,629 Liabilities: Interest-bearing checking deposits $ 857,098 $ 537 0.25 % $ 786,931 $ 487 0.25 % Money market savings 1,382,832 922 0.26 1,219,375 831 0.27 Regular savings 998,568 281 0.11 978,807 282 0.12 Time deposits 496,702 1,490 1.19 485,060 1,559 1.29 Total time and interest-bearing deposits 3,735,200 3,230 0.34 3,470,173 3,159 0.37 Short-term borrowings 15,116 2 0.05 19,109 3 0.06 Long-term debt 95,000 324 1.35 95,000 321 1.36 Subordinated notes 98,754 1,328 5.34 172,016 2,201 5.13 Total borrowings 208,870 1,654 3.14 286,125 2,525 3.54 Total interest-bearing liabilities 3,944,070 4,884 0.49 3,756,298 5,684 0.61 Noninterest-bearing deposits 1,931,525 1,880,916 Operating lease liabilities 35,094 37,426 Accrued expenses and other liabilities 41,303 40,239 Total liabilities 5,951,992 5,714,879 Shareholders' Equity: Common stock 157,784 157,784 Additional paid-in capital 297,482 296,599 Retained earnings and other equity 290,919 274,367 Total shareholders' equity 746,185 728,750 Total liabilities and shareholders' equity $ 6,698,177 $ 6,443,629 Net interest income $ 49,207 $ 47,302 Net interest spread 2.93 2.92 Effect of net interest-free funding sources 0.18 0.23 Net interest margin 3.11 % 3.15 % Ratio of average interest-earning assets to average interest-bearing liabilities 159.04 % 160.16 % 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, 2021 and June 30, 2021 have been calculated using the Corporation’s federal applicable rate of 21.0%. Univest Financial Corporation Average Balances and Interest Rates (Unaudited) For the Three Months Ended September 30, Tax Equivalent Basis 2021 2020 Average Income/ Average Average Income/ Average (Dollars in thousands) Balance Expense Rate Balance Expense Rate Assets: Interest-earning deposits with other banks $ 530,191 $ 189 0.14 % $ 368,181 $ 100 0.11 % U.S. government obligations 6,999 36 2.04 6,998 36 2.05 Obligations of state and political subdivisions 2,992 24 3.18 18,004 167 3.69 Other debt and equity securities 385,289 1,516 1.56 360,219 1,610 1.78 Federal Home Loan Bank, Federal Reserve Bank and other stock 26,713 334 4.96 28,651 419 5.82 Total interest-earning deposits, investments and other interest-earning assets 952,184 2,099 0.87 782,053 2,332 1.19 Commercial, financial, and agricultural loans 880,986 7,412 3.34 807,376 7,330 3.61 Paycheck Protection Program loans 162,611 4,162 10.15 500,549 2,811 2.23 Real estate—commercial and construction loans 2,784,398 25,634 3.65 2,358,971 23,547 3.97 Real estate—residential loans 1,100,799 10,171 3.67 1,009,407 10,380 4.09 Loans to individuals 26,048 253 3.85 28,663 309 4.29 Municipal loans and leases 247,603 2,504 4.01 267,364 2,839 4.22 Lease financings 117,966 1,856 6.24 97,707 1,662 6.77 Gross loans and leases 5,320,411 51,992 3.88 5,070,037 48,878 3.84 Total interest-earning assets 6,272,595 54,091 3.42 5,852,090 51,210 3.48 Cash and due from banks 59,642 56,715 Allowance for credit losses, loans and leases (72,606 ) (87,046 ) Premises and equipment, net 55,685 55,755 Operating lease right-of-use assets 31,998 33,875 Other assets 350,863 354,216 Total assets $ 6,698,177 $ 6,265,605 Liabilities: Interest-bearing checking deposits $ 857,098 $ 537 0.25 % $ 725,580 $ 468 0.26 % Money market savings 1,382,832 922 0.26 1,116,628 897 0.32 Regular savings 998,568 281 0.11 901,716 449 0.20 Time deposits 496,702 1,490 1.19 525,656 2,214 1.68 Total time and interest-bearing deposits 3,735,200 3,230 0.34 3,269,580 4,028 0.49 Short-term borrowings 15,116 2 0.05 130,359 97 0.30 Long-term debt 95,000 324 1.35 208,776 742 1.41 Subordinated notes 98,754 1,328 5.34 155,945 1,891 4.82 Total borrowings 208,870 1,654 3.14 495,080 2,730 2.19 Total interest-bearing liabilities 3,944,070 4,884 0.49 3,764,660 6,758 0.71 Noninterest-bearing deposits 1,931,525 1,760,818 Operating lease liabilities 35,094 37,170 Accrued expenses and other liabilities 41,303 41,010 Total liabilities 5,951,992 5,603,658 Shareholders' Equity: Common stock 157,784 157,784 Additional paid-in capital 297,482 296,272 Retained earnings and other equity 290,919 207,891 Total shareholders' equity 746,185 661,947 Total liabilities and shareholders' equity $ 6,698,177 $ 6,265,605 Net interest income $ 49,207 $ 44,452 Net interest spread 2.93 2.77 Effect of net interest-free funding sources 0.18 0.25 Net interest margin 3.11 % 3.02 % Ratio of average interest-earning assets to average interest-bearing liabilities 159.04 % 155.45 % Note 1: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments. Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the three months ended September 30, 2021 and 2020 have been calculated using the Corporation’s federal applicable rate of 21.0%. Univest Financial Corporation Average Balances and Interest Rates (Unaudited) For the Nine Months Ended September 30, Tax Equivalent Basis 2021 2020 Average Income/ Average Average Income/ Average (Dollars in thousands) Balance Expense Rate Balance Expense Rate Assets: Interest-earning deposits with other banks $ 328,768 $ 291 0.12 % $ 267,023 $ 492 0.25 % U.S. government obligations 6,999 107 2.04 7,176 109 2.03 Obligations of state and political subdivisions 6,838 187 3.66 26,019 696 3.57 Other debt and equity securities 371,355 4,147 1.49 379,729 6,460 2.27 Federal Home Loan Bank, Federal Reserve Bank and other stock 26,319 1,042 5.29 29,689 1,308 5.88 Total interest-earning deposits, investments and other interest-earning assets 740,279 5,774 1.04 709,636 9,065 1.71 Commercial, financial, and agricultural loans 830,248 21,120 3.40 815,178 23,291 3.82 Paycheck Protection Program loans 358,231 13,464 5.03 291,173 4,939 2.27 Real estate—commercial and construction loans 2,703,100 75,023 3.71 2,244,143 70,574 4.20 Real estate—residential loans 1,067,855 29,880 3.74 1,001,904 31,702 4.23 Loans to individuals 25,925 769 3.97 29,251 1,043 4.76 Municipal loans and leases 248,191 7,632 4.11 291,845 9,081 4.16 Lease financings 111,569 5,412 6.49 92,780 4,808 6.92 Gross loans and leases 5,345,119 153,300 3.83 4,766,274 145,438 4.08 Total interest-earning assets 6,085,398 159,074 3.49 5,475,910 154,503 3.77 Cash and due from banks 55,983 51,544 Allowance for credit losses, loans and leases (76,265 ) (66,977 ) Premises and equipment, net 55,803 55,967 Operating lease right-of-use assets 33,334 34,278 Other assets 355,323 342,196 Total assets $ 6,509,576 $ 5,892,918 Liabilities: Interest-bearing checking deposits $ 820,800 $ 1,514 0.25 % $ 642,935 $ 1,636 0.34 % Money market savings 1,282,470 2,606 0.27 1,079,279 4,653 0.58 Regular savings 979,013 861 0.12 863,772 1,716 0.27 Time deposits 502,414 4,808 1.28 568,517 7,801 1.83 Total time and interest-bearing deposits 3,584,697 9,789 0.37 3,154,503 15,806 0.67 Short-term borrowings 17,363 7 0.05 110,689 325 0.39 Long-term debt 97,088 993 1.37 196,053 2,268 1.55 Subordinated notes 151,060 5,822 5.15 115,376 4,372 5.06 Total borrowings 265,511 6,822 3.44 422,118 6,965 2.20 Total interest-bearing liabilities 3,850,208 16,611 0.58 3,576,621 22,771 0.85 Noninterest-bearing deposits 1,854,648 1,571,629 Operating lease liabilities 36,636 37,538 Accrued expenses and other liabilities 43,023 41,691 Total liabilities 5,784,515 5,227,479 Shareholders' Equity: Common stock 157,784 157,784 Additional paid-in capital 296,744 295,759 Retained earnings and other equity 270,533 211,896 Total shareholders' equity 725,061 665,439 Total liabilities and shareholders' equity $ 6,509,576 $ 5,892,918 Net interest income $ 142,463 $ 131,732 Net interest spread 2.91 2.92 Effect of net interest-free funding sources 0.22 0.29 Net interest margin 3.13 % 3.21 % Ratio of average interest-earning assets to average interest-bearing liabilities 158.05 % 153.10 % 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, 2021 and 2020 have been calculated using the Corporation’s federal applicable rate of 21.0%. Univest Financial Corporation Loan Portfolio Overview (Unaudited) (Dollars in thousands) As of September 30, 2021 Industry Description Total Outstanding Balance (excl PPP) % of Commercial Loan Portfolio $ Balance of Modified Loans (1) Modified Loans as a % of Portfolio (1) CRE - Retail 365,379 8.6 % - - % Animal Production 291,723 6.8 - - CRE - 1-4 Family Residential Investment 255,116 6.0 - - CRE - Office 240,011 5.6 - - CRE - Multi-family 206,667 4.8 - - CRE - Industrial / Warehouse 180,421 4.2 - - Nursing and Residential Care Facilities 171,482 4.0 - - Hotels & Motels (Accommodation) 170,042 4.0 10,613 6.2 Education 156,395 3.7 - - Specialty Trade Contractors 122,222 2.9 - - CRE - Mixed-Use - Residential 120,873 2.8 - - CRE - Medical Office 103,553 2.4 - - Real Estate Lenders, Secondary Market Financing 98,983 2.3 - - Homebuilding (tract developers, remodelers) 92,782 2.2 - - Merchant Wholesalers, Durable Goods 87,849 2.1 - - Crop Production 75,439 1.8 - - Private Equity & Special Purpose Entities 74,026 1.7 - - Rental and Leasing Services 70,499 1.7 - - Motor Vehicle and Parts Dealers 66,880 1.6 - - Food Manufacturing 65,857 1.5 - - Wood Product Manufacturing 64,403 1.5 - - Fabricated Metal Product Manufacturing 60,991 1.4 - - Merchant Wholesalers, Nondurable Goods 60,276 1.4 - - Food Services and Drinking Places 57,794 1.3 - - Administrative and Support Services 53,430 1.3 104 0.2 Miniwarehouse / Self-Storage 52,815 1.2 - - Industries with >$50 million in outstandings $ 3,365,908 78.8 % $ 10,717 0.3 % Industries with <$50 million in outstandings $ 903,880 21.2 % $ 6,878 0.8 % Total Commercial Loans $ 4,269,788 100.0 % $ 17,595 0.4 % Consumer Loans and Lease Financings Total Outstanding Balance $ Balance of Modified Loans (1) Modified Loans as a % of Portfolio (1) Real Estate-Residential Secured for Personal Purpose 535,705 337 0.1 % Real Estate-Home Equity Secured for Personal Purpose 159,029 - - Loans to Individuals 26,458 15 0.1 Lease Financings 175,464 107 0.1 Total - Consumer Loans and Lease Financings $ 896,656 $ 459 0.1 % Total $ 5,166,444 $ 18,054 0.3 % (1) Loan modifications referenced above were made in accordance with Section 4013 of the CARES Act, the Consolidated Appropriations Act, 2021 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 September 30, 2021. Univest Financial Corporation Non-GAAP Reconciliation September 30, 2021 Non-GAAP to GAAP Reconciliation Management uses non-GAAP measures in its analysis of the Corporation's performance. These measures should not be considered a substitute for GAAP basis measures nor should they be viewed as a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the non-GAAP financial measures, which exclude the impact of the specified items, provides useful supplemental information that is essential to a proper understanding of the financial results of the Corporation. See the table below for additional information on non-GAAP measures used throughout this earnings release. As of or for the three months ended, As of or for the nine months ended, 09/30/21 06/30/21 03/31/21 12/31/20 09/30/20 09/30/21 09/30/20 Restructuring charges (a) $ - $ - $ - $ 1,439 $ - $ - $ - Tax effect of restructuring charges - - - (302 ) - - - Restructuring charges, net of tax $ - $ - $ - $ 1,137 $ - $ - $ - Shareholders' equity $ 756,023 $ 739,998 $ 722,455 $ 692,472 $ 669,107 $ 756,023 $ 669,107 Goodwill (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) Other intangibles (b) (1,922 ) (2,073 ) (2,326 ) (2,580 ) (2,866 ) (1,922 ) (2,866 ) Tangible common equity $ 581,542 $ 565,366 $ 547,570 $ 517,333 $ 493,682 $ 581,542 $ 493,682 Total assets $ 6,979,852 $ 6,356,305 $ 6,416,665 $ 6,336,496 $ 6,382,831 $ 6,979,852 $ 6,382,831 Goodwill (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) Other intangibles (b) (1,922 ) (2,073 ) (2,326 ) (2,580 ) (2,866 ) (1,922 ) (2,866 ) Tangible assets $ 6,805,371 $ 6,181,673 $ 6,241,780 $ 6,161,357 $ 6,207,406 $ 6,805,371 $ 6,207,406 Average shareholders' equity $ 746,185 $ 728,750 $ 699,736 $ 676,426 $ 661,947 $ 725,061 $ 665,439 Average goodwill (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) (172,559 ) Average other intangibles (b) (1,983 ) (2,209 ) (2,464 ) (2,734 ) (3,019 ) (2,217 ) (3,332 ) Average tangible common equity $ 571,643 $ 553,982 $ 524,713 $ 501,133 $ 486,369 $ 550,285 $ 489,548 Net income before taxes $ 26,173 $ 25,760 $ 40,407 $ 31,647 $ 23,197 $ 92,340 $ 25,250 Provision for credit losses (182 ) (59 ) (11,283 ) (8,721 ) 3,935 (11,524 ) 49,515 Pre-tax pre-provision income $ 25,991 $ 25,701 $ 29,124 $ 22,926 $ 27,132 $ 80,816 $ 74,765 Loans and leases held for investment, gross $ 5,252,045 $ 5,327,313 $ 5,415,006 $ 5,306,841 $ 5,211,856 $ 5,252,045 $ 5,211,856 Paycheck Protection Program ("PPP") loans (85,601 ) (252,849 ) (528,452 ) (483,773 ) (501,580 ) (85,601 ) (501,580 ) Gross loans and leases excluding PPP loans $ 5,166,444 $ 5,074,464 $ 4,886,554 $ 4,823,068 $ 4,710,276 $ 5,166,444 $ 4,710,276 Allowance for credit losses, loans and leases $ 70,146 $ 71,355 $ 71,497 $ 83,044 $ 91,870 $ 70,146 $ 91,870 Gross loans and leases excluding PPP loans 5,166,444 5,074,464 4,886,554 4,823,068 4,710,276 5,166,444 4,710,276 Allowance for credit losses, loans and leases as a percentage of gross loans and leases excluding PPP loans 1.36 % 1.41 % 1.46 % 1.72 % 1.95 % 1.36 % 1.95 % (a) Associated with financial center optimization plan (b) Amount does not include mortgage servicing rights 
CONTACT: Brian J. Richardson UNIVEST FINANCIAL CORPORATION Chief Financial Officer 215-721-2446, richardsonb@univest.net
