UVSP - Univest Financial Corporation Reports First Quarter Results

SOUDERTON, Pa., April 24, 2019 (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, 2019 of $16.1 million, or $0.55 diluted earnings per share, compared to net income of $12.9 million, or $0.44 diluted earnings per share, for the quarter ended March 31, 2018. 

The first quarter of 2018 included restructuring costs related to financial center closures of $451 thousand, net of tax, or $0.02 of diluted earnings per share. There were no restructuring costs during the quarter ended March 31, 2019. Excluding these restructuring costs, earnings per share increased 19.6% for the first quarter of 2019 compared to the first quarter of 2018.

Loans
Gross loans and leases increased $61.3 million, or 6.1% (annualized), from December 31, 2018 and $378.0 million, or 10.2%, from March 31, 2018. The growth in loans from December 31, 2018 and March 31, 2018 was primarily in commercial real estate and residential real estate loans.

Deposits
Total deposits increased $117.2 million, or 12.1% (annualized), from December 31, 2018 and increased $505.9 million, or 14.5%, from March 31, 2018. The growth in deposits from December 31, 2018 was primarily due to increases in commercial and consumer deposits. The growth in deposits from March 31, 2018 was primarily due to increases in commercial, public funds and consumer time deposits.

Net Interest Income and Margin
Net interest income of $41.5 million for the first quarter of 2019 increased $4.3 million, or 11.4%, from the first quarter of 2018. The increase in net interest income for the first quarter of 2019 compared to the first quarter of 2018 was primarily due to the growth in loans during the last year as well as modest net interest margin expansion.

Net interest margin, on a tax-equivalent basis, was 3.75% for the first quarter of 2019, compared to 3.72% for both the fourth quarter of 2018 and the first quarter of 2018. The favorable impact of purchase accounting accretion was one basis point for the quarter ended March 31, 2019 compared to one basis point for the quarter ended December 31, 2018 and two basis points for the quarter ended March 31, 2018. Excluding the impact of purchase accounting accretion, the net interest margin, on a tax-equivalent basis, was 3.74% for the quarter ended March 31, 2019 compared to 3.71% for the quarter ended December 31, 2018 and 3.70% for the quarter ended March 31, 2018.

Noninterest Income
Noninterest income for the quarter ended March 31, 2019 was $16.3 million, an increase of $715 thousand, or 4.6%, from the first quarter of 2018. Investment advisory commission and fee income increased $106 thousand, or 2.9%, for the quarter ended March 31, 2019, primarily due to new customer relationships, which was partially offset by market declines in the fourth quarter of 2018. Insurance commission and fee income increased $256 thousand, or 5.2%, for the quarter ended March 31, 2019, primarily due to an increase in premiums for group life and health and commercial lines and an increase in contingent commission income of $111 thousand, which was $1.5 million for the quarter ended March 31, 2019 compared to $1.4 million for the quarter ended March 31, 2018. Contingent commission income is largely recognized in the first quarter of the year. Service charges on deposit accounts increased $108 thousand, or 8.1%, for the quarter ended March 31, 2019, primarily due to increased fee income on cash management accounts. Other service fee income increased $98 thousand, or 4.5%, for the quarter ended March 31, 2019, primarily due to increases in debit card interchange income, wire transfer fees and human resource consulting services within the insurance line of business. BOLI income increased $283 thousand, or 42.3%, for the quarter ended March 31, 2019, primarily due to an increase in value of our non-qualified annuity portfolio of $249 thousand in the first quarter of 2019 compared to a decrease of $29 thousand in the first quarter of 2018. The value of the non-qualified annuity portfolio declined $287 thousand in the fourth quarter of 2018. 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 increased $215 thousand, or 173.4%, for the quarter ended March 31, 2019, primarily due to fees on risk participation agreements of $264 thousand related to increased customer activity compared to fees of $4 thousand in the same period of the prior year.

These increases were partially offset by a decrease in net gain on mortgage banking activities of $233 thousand, or 32.5%, for the quarter ended March 31, 2019, primarily due to the Bank retaining, on balance-sheet, a higher percentage of its mortgage originations, as well as a contraction in margins to remain price competitive. Such on balance-sheet loans are predominantly hybrid adjustable rate mortgages. Trust fee income decreased $109 thousand, or 5.5%, for the quarter ended March 31, 2019 compared to March 31, 2018, primarily due to a decrease in activity based trust estate fees and assets under management.

Noninterest Expense
Noninterest expense for the quarter ended March 31, 2019 was $35.6 million, an increase of $432 thousand, or 1.2%, compared to the first quarter of 2018. Salaries, benefits and commissions increased $917 thousand, or 4.4%, primarily attributable to additional staff hired to support revenue generation across all business lines, expansion of our commercial lending group in Lancaster County and annual merit increases. During the quarter ended March 31, 2019, Univest hired a team of eight commercial lenders and support staff which will focus on increasing Univest’s presence in Western Lancaster and York Counties.  Data processing expense increased $282 thousand, or 12.6%, for the quarter ended March 31, 2019, primarily due to continued investments in customer relationship management software, internal infrastructure improvements and outsourced data processing solutions. Other expense increased $264 thousand, or 5.1%, for the quarter ended March 31, 2019, primarily due to increases in interchange expense and corporate development expense.

These increases were partially offset by a decrease in net occupancy and equipment expense totaling $179 thousand, or 4.7%, primarily due to the closure of three financial service locations during April 2018. Intangibles expense decreased $186 thousand, or 30.4%, due to run-off of the intangible assets. In addition, restructuring costs related to financial center closures and staffing rationalization were $571 thousand during the first quarter of 2018. There were no restructuring costs during the first quarter of 2019.

Asset Quality and Provision for Loan and Lease Losses
Nonperforming assets were $27.4 million at March 31, 2019, compared to $28.1 million at December 31, 2018 and $32.9 million at March 31, 2018.

Net loan and lease charge-offs were $447 thousand during the first quarter of 2019. The provision for loan and lease losses was $2.7 million for the first quarter of 2019 compared to $2.1 million for the first quarter of 2018. The provision includes the impact of downgrading one $14.6 million shared national credit loan from pass to substandard. Incremental provision and general reserve recorded during the quarter was $1.5 million for this loan.

The allowance for loan and lease losses as a percentage of loans and leases held for investment, excluding covered loans acquired in the Fox Chase and Valley Green Bank acquisitions, which were recorded at fair value as of the acquisition date, was 0.85% at March 31, 2019, compared to 0.81% at December 31, 2018 and 0.73% at March 31, 2018.

Tax Provision  
The effective income tax rate was 17.9% for the quarter March 31, 2019 compared to an effective income tax rate of 18.0% for the quarter ended March 31, 2018. The Corporation's effective income tax rate for the quarter ended March 31, 2019 was favorably impacted by discrete tax benefits. Excluding these items, the effective tax rate was 18.2% for the quarter ended March 31, 2019.

Dividend
On February 27, 2019, Univest declared a quarterly cash dividend of $0.20 per share, payable on April 1, 2019. This represented a 3.20% 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 2019 results on Thursday, April 25, 2019 at 9:00 a.m. EDT. Participants may preregister at http://dpregister.com/10130260. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through May 25, 2019 by dialing 1-877-344-7529; using Conference ID: 10130260.

About Univest Financial Corporation 
Univest Financial Corporation (UVSP), including its wholly-owned subsidiary Univest Bank and Trust Co., Member FDIC, has approximately $5.0 billion in assets and $3.6 billion in assets under management and supervision through its Wealth Management lines of business at March 31, 2019. 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 in the Mid-Atlantic Region. Univest delivers these services through a network of more than 50 offices in southeastern Pennsylvania extending to the Lehigh Valley and Lancaster, as well as in New Jersey and Maryland and online at www.univest.net.

This press release of Univest and the reports Univest files with the Securities and Exchange Commission often contain "forward-looking statements" relating to present or future trends or factors affecting the financial services industry and, specifically, the financial operations, markets and products of Univest. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause Univest’s future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) competitive pressures among financial institutions; (2) changes in the interest rate environment; (3) changes in prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions; (5) legislative or regulatory changes that may adversely affect the businesses in which Univest is engaged; (6) technological issues that may adversely affect Univest financial operations or customers; (7) changes in the securities markets or (8) risk factors mentioned in the reports and registration statements Univest files with the Securities and Exchange Commission. Univest undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.