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Univest Financial Corporation Reports Second Quarter Results

(Loan Growth of 19.6% (annualized) for the second quarter 2022 (excluding PPP loans1))

SOUDERTON, Pa., July 27, 2022 (GLOBE NEWSWIRE) -- Univest Financial Corporation (“Univest” or the "Corporation") (NASDAQ: UVSP), parent company of Univest Bank and Trust Co. and its insurance, investments and equipment financing subsidiaries, today announced net income for the quarter ended June 30, 2022 was $13.2 million, or $0.45 diluted earnings per share, compared to net income of $20.9 million, or $0.71 diluted earnings per share, for the quarter ended June 30, 2021. Net income for the six months ended June 30, 2022 was $33.5 million, or $1.13 diluted earnings per share, compared to net income of $53.5 million, or $1.81 diluted earnings per share, for the six months ended June 30, 2021.

Loans
Gross loans and leases, excluding Paycheck Protection Program ("PPP") loans1, increased $265.9 million, or 19.6% (annualized), from March 31, 2022, $378.2 million, or 14.4% (annualized), from December 31, 2021 and $582.0 million, or 11.5%, from June 30, 2021 primarily due to increases in commercial, commercial real estate, construction, residential mortgage loans, and lease financings. As of June 30, 2022, $5.4 million in PPP loans remained outstanding.

Deposits
Total deposits decreased $484.9 million, or 32.0% (annualized), from March 31, 2022 and $492.1 million, or 16.2% (annualized), from December 31, 2021 primarily due to a seasonal decrease in public funds deposits as well as decreases in commercial and consumer deposits. Total deposits increased $244.3 million, or 4.6%, from June 30, 2021, primarily due to increases in commercial, consumer and public funds deposits.

Net Interest Income and Margin
Net interest income of $51.5 million for the three months ended June 30, 2022 increased $4.8 million, or 10.3%, from the three months ended March 31, 2022, and $4.7 million, or 10.1%, from the three months ended June 30, 2021. The increase in net interest income for the three months ended June 30, 2022 compared to the same period of 2021 was due to an increase in the average balance of loans and investments, increased asset yields and a decrease in the cost of interest-bearing liabilities, partially offset by an increase in the average balance of interest-bearing liabilities and a decrease in PPP loan income.

Net interest income of $98.1 million for the six months ended June 30, 2022 increased $6.0 million, or 6.5%, from the six months ended June 30, 2021. The increase in net interest income for the six months ended June 30, 2022 compared to the same period of 2021 was due to loan and investment average balance growth outpacing declines in asset yields and a decrease in the cost of interest-bearing liabilities, offset by an increase in the average balance of interest-bearing liabilities and a decrease in PPP loan income.

Net interest margin, on a tax-equivalent basis, was 3.19% for the second quarter of 2022, compared to 2.89% for the first quarter of 2022 and 3.15% for the second quarter of 2021. Excess liquidity reduced net interest margin by approximately 23 basis points for the quarter ended June 30, 2022 compared to 33 basis points for the quarter ended March 31, 2022 and ten basis points for the quarter ended June 30, 2021. During the quarter ended June 30, 2022, our excess liquidity diminished and we returned to a pre-pandemic liquidity level at the end of the quarter. PPP loans had a favorable impact on net interest margin of one basis point for the quarter ended June 30, 2022 compared to three basis points for the quarter ended March 31, 2022 and eleven basis points for the quarter ended June 30, 2021. Excluding the impact of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was 3.41% for the quarter ended June 30, 2022 compared to 3.19% for the quarter ended March 31, 2022 and 3.14% for the quarter ended June 30, 2021.

During the second quarter, the Bank entered into a 4-year $250 million interest rate swap (representing approximately 13% of the Bank's variable rate loans), whereby the Bank receives a fixed rate of 5.99% and pays a variable rate equal to the Prime Rate. During the second quarter of 2022, the swap contributed $707 thousand to net interest income and four basis points to net interest margin.

Net interest margin, on a tax-equivalent basis, was 3.04% for the six months ended June 30, 2022, compared to 3.14% for the six months ended June 30, 2021. Excess liquidity reduced net interest margin by approximately 28 basis points for the six months ended June 30, 2022 compared to ten basis points for the six months ended June 30, 2021. PPP loans had a favorable impact on net interest margin of two basis points for the six months ended June 30, 2022 compared to seven basis points for the six months ended June 30, 2021. Excluding the impact of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was 3.30% for the six months ended June 30, 2022 compared to 3.17% for the six months ended June 30, 2021.

Noninterest Income
Noninterest income for the quarter ended June 30, 2022 was $19.0 million, a decrease of $1.2 million, or 6.1%, compared to the second quarter of 2021. Noninterest income for the six months ended June 30, 2022 was $39.5 million, a decrease of $4.0 million, or 9.2%, from the comparable period in the prior year.

Net gain on mortgage banking activities decreased $2.2 million, or 64.5%, for the quarter and $6.2 million, or 66.4%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year, primarily due to a decrease in loan sales and a contraction of margins. Bank owned life insurance ("BOLI") decreased $915 thousand, or 56.5%, for the quarter and $933 thousand, or 39.9%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year, primarily due to a death benefit claim of $893 thousand in the second quarter of 2021.

Insurance commission and fee income increased $790 thousand, or 20.6%, for the quarter and $1.4 million, or 16.0%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year, primarily due to incremental revenue attributable to the insurance agency the Corporation acquired in the fourth quarter of 2021. Investment advisory commission and fee income increased $254 thousand, or 5.6%, for the quarter and $709 thousand, or 7.7%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year, primarily due to new customer 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.

Other service fee income increased $561 thousand, or 20.4%, for the quarter and $1.1 million, or 22.8%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year. Mortgage servicing fees increased $357 thousand for the quarter and $619 thousand for the six months ended June 30, 2022 driven by reduced amortization as a result of a decrease in prepayment speeds. Interchange fee income increased $115 thousand for the quarter and $291 thousand for the six months ended June 30, 2022 due to increased customer activity.

Noninterest Expense
Noninterest expense for the quarter ended June 30, 2022 was $47.4 million, an increase of $6.1 million, or 14.7%, compared to the second quarter of 2021. Noninterest expense for the six months ended June 30, 2022 was $92.8 million, an increase of $12.0 million, or 14.8%, from the comparable period in the prior year. The results for the three and six months ended June 30, 2022 include approximately $1.4 million and $2.1 million, respectively, in expenses related to our digital transformation initiative, a comprehensive digital platform which will blend our core operating systems together and allow Univest to seamlessly sell existing products and services, digitally, across an expanded footprint.

Salaries, benefits and commissions increased $3.7 million, or 14.7%, for the quarter and $7.2 million, or 14.4%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year. These increases reflect our continued investment in revenue producing staff across all business lines, including the acquisition of the Paul I. Schaeffer insurance agency, and annual merit increases. Additionally, during the three and six months ended June 30, 2022, we incurred $353 thousand and $740 thousand, respectively, of short-term incremental guaranties related to the hiring of new producers in our mortgage banking line of business. Finally, during the six months ended June 30, 2021 salaries, benefits and commissions expense was benefited by $616 thousand of incremental capitalized compensation related to the origination of PPP loans.

Professional fees increased $829 thousand, or 41.1%, for the quarter and $1.2 million, or 32.4%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year. The increase for the three months ended June 30, 2022 was primarily attributable to $1.2 million of consultant fees spent related to the previously discussed digital transformation initiative, as compared to our $230 thousand investment in our Diversity, Equity and Inclusion training initiatives for the three months ended June 30, 2021. The increase for the six months ended June 30, 2022 was primarily attributable to $1.9 million of consultant fees spent related to the previously discussed digital transformation initiative, as compared to our $506 thousand investment in our Diversity, Equity and Inclusion training initiatives for the six months ended June 30, 2021. Deposit insurance premiums increased $199 thousand, or 32.5%, for the quarter and $456 thousand, or 36.5%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year, driven by an increased assessment base.

Data processing expenses increased $644 thousand, or 21.0%, for the quarter and $1.2 million, or 19.0%, for the six months ended June 30, 2022 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, outsourced data processing solutions, and $155 thousand and $258 thousand in support of the previously discussed digital transformation initiative for the respective periods.

Other expense increased $676 thousand, or 11.7%, for the quarter and $1.7 million, or 15.3%, for the six months ended June 30, 2022 compared to the comparable periods in the prior year. Recruiting costs increased $138 thousand and $420 thousand for the three and six months ended June 30, 2022, respectively, due to increased hiring activity, including the entry into our two new expansions markets. Travel and entertainment expenses increased $309 thousand and $574 thousand for the three and six months ended June 30, 2022, respectively, as related activities have largely returned to pre-pandemic levels. Additionally, the six months ended June 30, 2022 includes incurred costs of $330 thousand as a result of a customer who was defrauded.

Tax Provision
The effective income tax rate was 19.8% for the quarter ended June 30, 2022, compared to an effective income tax rate of 19.0% for the quarter ended June 30, 2021. The effective income tax rate was 19.5% for the six months ended June 30, 2022, compared to an effective income tax rate of 19.2% for the six months ended June 30, 2021.The effective tax rate for the three and six months ended June 30, 2022 and 2021 reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases.

Asset Quality and Provision for Credit Losses
Nonperforming assets were $34.8 million at June 30, 2022, compared to $31.5 million at March 31, 2022 and $38.5 million at June 30, 2021. During the quarter, a nonaccrual commercial real estate loan was transferred to other real estate owned ("OREO") with a carrying value of $18.3 million.

Net loan and lease charge-offs were $1.7 million and $1.8 million for the three and six months ended June 30, 2022, respectively. Net loan and lease charge-offs were $243 thousand and $531 thousand for the three and six months ended June 30, 2021, respectively. During the second quarter of 2022, a $1.7 million charge-off was recorded against an existing nonaccrual commercial real estate loan.

The provision for credit losses was $6.7 million for the second quarter of 2022 primarily driven by a $5.5 million increase (after-tax charge of $4.3 million), or $0.15 diluted earnings per share, in reserves due to loan growth, a specific reserve of $1.1 million related to a commercial real estate loan that was placed on nonaccrual status during the second quarter and an incremental provision of $736 thousand related to the previously mentioned $1.7 million charge-off. The reversal of provision for credit losses was $59 thousand for the second quarter of 2021 driven by a $2.7 million increase (after-tax charge of $2.1 million), or $0.07 diluted earnings per share, in reserves due to loan growth outpaced by favorable changes in economic-related assumptions within the Corporation’s CECL model.

The provision for credit losses was $3.2 million for the six months ended June 30, 2022 primarily driven by a $6.8 million increase (after-tax charge of $5.4 million), or $0.18 diluted earnings per share, in reserves due to loan growth and specific reserves of $2.8 million on two nonaccrual commercial real estate properties. These increases were partially offset by $7.3 million (after-tax benefit of $5.8 million), or $0.19 diluted earnings per share, of changes in economic-related assumptions within the Corporation’s CECL model. Additionally, reserves on unfunded commitments and investment securities increased $990 thousand during the six months ended June 30, 2022. The reversal of provision for credit losses was $11.3 million for the comparable period in the prior year, of which $15.8 million (after-tax benefit of $12.5 million), or $0.42 diluted earnings per share, was attributable to favorable changes in economic-related assumptions within the Corporation’s CECL model, partially offset by a reserve increase attributable to loan growth.

The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment was 1.27% at June 30, 2022, compared to 1.26% at March 31, 2022, and 1.34% at June 30, 2021. The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment, excluding PPP loans1, was 1.27% at June 30, 2022 compared to 1.27% at March 31, 2022 and 1.41% at June 30, 2021.

Share Repurchases
As previously announced, the Corporation began to repurchase its common stock on the open market. During the second quarter of 2022, the Corporation repurchased 300,000 shares at an average price of $25.23, for an aggregate cost of $7.6 million. As of June 30, 2022, the Corporation has 379,174 shares remaining to repurchase under the current approved plan.

Dividend
On July 27, 2022, Univest declared a quarterly cash dividend of $0.21 per share to be paid on August 24, 2022 to shareholders of record as of August 10, 2022.

Conference Call
Univest will host a conference call to discuss second quarter 2022 results on Thursday, July 28, 2022 at 9:00 a.m. EST. Participants may preregister at https://ige.netroadshow.com/registration/q4inc/11282/univest-financial-corporation-to-hold-second-quarter-2022-earnings-call/. The general public can access the call by dialing 1-844-200-6205; using Access Code 571585. A replay of the conference call will be available through August 27, 2022 by dialing 1-866-813-9403; using Access Code: 134898.

1Non-GAAP metric. A reconciliation of this and other non-GAAP financial 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 $6.7 billion in assets and $4.1 billion in assets under management and supervision through its Wealth Management lines of business at June 30, 2022. 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 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 strategies 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, business or strategies to differ materially from those expressed or implied by the forward-looking statements. These factors include, but are not limited to: (1) competition; (2) inflation and/or changes in interest rates, which may adversely impact our margins and yields, reduce the fair value of our financial instruments, reduce our loan originations or lead to higher operating costs; (3) changes in asset quality, prepayment speeds, loan sale volumes, charge-offs and/or credit loss provisions; (4) changes in 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; (7) technological issues that may adversely affect our operations or those of our customers; (8) changes in the securities markets; (9) the current or anticipated impact of military conflict, terrorism or other geopolitical events; or (10) risk factors mentioned in the reports and registration statements Univest files with the Securities and Exchange Commission.

Additionally, it is difficult to predict the continued effects 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. 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 economic conditions worsen, loan delinquencies, problem assets, and foreclosures may increase and our allowance for credit losses may have to be increased; (3) collateral for loans, especially real estate, may decline in value; (4) the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; (5) 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; (6) our wealth management revenues may decline with market turmoil; and (7) our cyber security risks may increase as the result of an increase in the number of employees working remotely. 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) 
June 30, 2022 
(Dollars in thousands)               
                
Balance Sheet (Period End) 06/30/22 03/31/22 12/31/21 09/30/21 06/30/21     
ASSETS               
Cash and due from banks $59,590  $57,307  $49,202  $67,517  $50,358      
Interest-earning deposits with other banks  35,187   716,474   840,948   834,840   153,091      
Cash and cash equivalents  94,777   773,781   890,150   902,357   203,449      
Investment securities held-to-maturity  159,808   166,339   176,983   112,643   119,692      
Investment securities available for sale, net of allowance for credit losses  351,382   349,994   317,007   277,773   274,862      
Investments in equity securities  2,934   2,569   2,999   2,961   2,872      
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost  29,116   26,330   28,186   28,679   25,228      
Loans held for sale  8,352   14,521   21,600   29,093   27,322      
Loans and leases held for investment  5,661,777   5,400,786   5,310,017   5,252,045   5,327,313      
Less: Allowance for credit losses, loans and leases  (72,011)  (68,286)  (71,924)  (70,146)  (71,355)     
Net loans and leases held for investment  5,589,766   5,332,500   5,238,093   5,181,899   5,255,958      
Premises and equipment, net  50,080   50,429   56,882   55,354   56,067      
Operating lease right-of-use assets  30,929   30,498   30,407   31,570   33,688      
Goodwill  175,510   175,510   175,510   172,559   172,559      
Other intangibles, net of accumulated amortization  11,728   11,784   11,848   9,359   9,396      
Bank owned life insurance  120,103   119,398   118,699   117,981   117,765      
Accrued interest and other assets  76,328   54,087   54,057   57,624   57,447      
Total assets $6,700,813  $7,107,740  $7,122,421  $6,979,852  $6,356,305      
                
LIABILITIES               
Noninterest-bearing deposits $2,062,538  $2,136,467  $2,065,423  $1,861,007  $1,872,031      
Interest-bearing deposits:  3,500,510   3,911,465   3,989,701   4,077,147   3,446,673      
Total deposits  5,563,048   6,047,932   6,055,124   5,938,154   5,318,704      
Short-term borrowings  97,606   18,976   20,106   14,101   25,251      
Long-term debt  95,000   95,000   95,000   95,000   95,000      
Subordinated notes  99,030   98,952   98,874   98,797   98,719      
Operating lease liabilities  33,951   33,566   33,453   34,641   37,131      
Accrued expenses and other liabilities  48,253   39,459   46,070   43,136   41,502      
Total liabilities  5,936,888   6,333,885   6,348,627   6,223,829   5,616,307      
                
SHAREHOLDER'S EQUITY               
Common stock, $5 par value: 48,000,000 shares authorized and 31,556,799 shares issued  157,784   157,784   157,784   157,784   157,784      
Additional paid-in capital  298,800   297,945   299,181   298,033   297,208      
Retained earnings  396,295   389,332   375,124   363,607   348,579      
Accumulated other comprehensive loss, net of tax benefit  (42,781)  (31,909)  (16,353)  (20,073)  (19,545)     
Treasury stock, at cost  (46,173)  (39,297)  (41,942)  (43,328)  (44,028)     
Total shareholders’ equity  763,925   773,855   773,794   756,023   739,998      
Total liabilities and shareholders’ equity $6,700,813  $7,107,740  $7,122,421  $6,979,852  $6,356,305      
                
                
  For the three months ended, For the six months ended, 
Balance Sheet (Average) 06/30/22 03/31/22 12/31/21 09/30/21 06/30/21 06/30/22 06/30/21 
Assets $6,962,401  $7,047,980  $7,088,289  $6,698,177  $6,443,629  7,004,954 $6,413,712 
Investment securities, net of allowance for credit losses  515,741   522,128   469,588   395,280   385,694  518,917  380,063 
Loans and leases, gross  5,520,580   5,344,698   5,255,279   5,320,411   5,389,110  5,433,125  5,357,678 
Deposits  5,903,173   5,984,815   6,041,798   5,666,725   5,351,089  5,943,769  5,323,770 
Shareholders' equity  771,410   774,358   762,334   746,185   728,750  772,876  714,324 

Univest Financial Corporation
Consolidated Summary of Loans by Type and Asset Quality Data (Unaudited)
June 30, 2022
(Dollars in thousands)              
               
Summary of Major Loan and Lease Categories (Period End) 06/30/22 03/31/22 12/31/21 09/30/21 06/30/21    
Commercial, financial and agricultural $1,028,354  $932,485  $956,396  $927,015  $920,621     
Paycheck Protection Program  5,358   10,298   31,748   85,601   252,849     
Real estate-commercial  2,870,286   2,816,737   2,718,535   2,669,898   2,600,919     
Real estate-construction  319,449   285,083   283,918   260,874   274,529     
Real estate-residential secured for business purpose  419,652   412,486   409,900   412,001   407,664     
Real estate-residential secured for personal purpose  629,144   568,735   540,566   535,705   513,330     
Real estate-home equity secured for personal purpose  168,536   160,134   158,909   159,029   160,018     
Loans to individuals  27,061   26,249   25,504   26,458   25,845     
Lease financings  193,937   188,579   184,541   175,464   171,538     
Total loans and leases held for investment, net of deferred income  5,661,777   5,400,786   5,310,017   5,252,045   5,327,313     
Less: Allowance for credit losses, loans and leases  (72,011)  (68,286)  (71,924)  (70,146)  (71,355)    
Net loans and leases held for investment $5,589,766  $5,332,500  $5,238,093  $5,181,899  $5,255,958     
               
               
Asset Quality Data (Period End)  06/30/22 03/31/22 12/31/21 09/30/21 06/30/21    
Nonaccrual loans and leases, including nonaccrual troubled debt restructured              
  loans and leases $13,355  $30,876  $33,210  $34,528  $37,466     
Accruing loans and leases 90 days or more past due  2,784   274   498   2,204   750     
Accruing troubled debt restructured loans and leases  50   51   51   51   52     
Total nonperforming loans and leases  16,189   31,201   33,759   36,783   38,268     
Other real estate owned  18,604   279   279   279   279     
Total nonperforming assets $34,793  $31,480  $34,038  $37,062  $38,547     
Nonaccrual loans and leases / Loans and leases held for investment and nonaccrual loans held for sale  0.24%  0.57%  0.63%  0.66%  0.70%    
Nonperforming loans and leases / Loans and leases held for investment  0.29%  0.58%  0.64%  0.70%  0.72%    
Nonperforming assets / Total assets  0.52%  0.44%  0.48%  0.53%  0.61%    
               
Allowance for credit losses, loans and leases $72,011  $68,286  $71,924  $70,146  $71,355     
Allowance for credit losses, loans and leases / Loans and leases held for investment  1.27%  1.26%  1.35%  1.34%  1.34%    
Allowance for credit losses, loans and leases / Loans and leases held for investment, excluding Paycheck Protection Program loans (1)  1.27%  1.27%  1.36%  1.36%  1.41%    
Allowance for credit losses, loans and leases / Nonaccrual loans and leases held for investment  539.21%  221.16%  216.57%  203.16%  212.97%    
Allowance for credit losses, loans and leases / Nonperforming loans and leases held for investment  444.81%  218.86%  213.05%  190.70%  208.00%    
               
  For the three months ended, For the six months ended,
  06/30/22 03/31/22 12/31/21 09/30/21 06/30/21 06/30/22 06/30/21
Net loan and lease charge-offs (recoveries) $1,715  $76  $(243) $(75) $243  $1,791  $531 
Net loan and lease charge-offs (recoveries) (annualized)/Average loans and leases  0.12%  0.01%  (0.02%)  (0.01%)  0.02%  0.07%  0.02%
               
(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)
June 30, 2022
(Dollars in thousands, except per share data)              
  For the three months ended, For the six months ended,
For the period: 06/30/22 03/31/22 12/31/21 09/30/21 06/30/21 06/30/22 06/30/21
Interest income $56,717 $51,198  $52,262 $53,571  $52,441  $107,915 $103,898 
Interest expense  5,246  4,538   4,737  4,884   5,684   9,784  11,727 
     Net interest income  51,471  46,660   47,525  48,687   46,757   98,131  92,171 
Provison (reversal of provision) for credit losses  6,674  (3,450)  1,392  (182)  (59)  3,224  (11,342)
Net interest income after provision for credit losses  44,797  50,110   46,133  48,869   46,816   94,907  103,513 
Noninterest income:              
     Trust fee income  1,998  2,102   2,086  2,126   2,157   4,100  4,191 
     Service charges on deposit accounts  1,574  1,504   1,486  1,422   1,314   3,078  2,596 
     Investment advisory commission and fee income  4,812  5,152   4,885  4,796   4,558   9,964  9,255 
     Insurance commission and fee income  4,629  5,570   3,726  3,837   3,839   10,199  8,794 
     Other service fee income  3,309  2,756   2,759  2,576   2,748   6,065  4,940 
     Bank owned life insurance income  705  699   719  925   1,620   1,404  2,337 
     Net gain on sales of investment securities  -  30   5  21   54   30  119 
     Net gain on mortgage banking activities  1,230  1,929   2,518  3,224   3,461   3,159  9,399 
     Other income  741  728   1,008  1,625   479   1,469  1,849 
Total noninterest income  18,998  20,470   19,192  20,552   20,230   39,468  43,480 
Noninterest expense:              
Salaries, benefits and commissions  29,133  28,245   27,374  26,641   25,396   57,378  50,176 
Net occupancy  2,422  2,716   2,477  2,525   2,656   5,138  5,395 
Equipment  977  982   985  1,000   968   1,959  1,914 
Data processing  3,708  3,567   3,355  3,274   3,064   7,275  6,114 
Professional fees  2,844  2,138   1,750  2,174   2,015   4,982  3,763 
Marketing and advertising  693  425   683  539   561   1,118  841 
Deposit insurance premiums  812  893   698  765   613   1,705  1,249 
Intangible expenses  342  341   267  214   249   683  498 
Other expense  6,440  6,105   5,746  6,116   5,764   12,545  10,876 
Total noninterest expense  47,371  45,412   43,335  43,248   41,286   92,783  80,826 
Income before taxes  16,424  25,168   21,990  26,173   25,760   41,592  66,167 
Income tax expense  3,258  4,851   4,578  5,262   4,885   8,109  12,689 
Net income $13,166 $20,317  $17,412 $20,911  $20,875  $33,483 $53,478 
Net income per share:              
     Basic $0.45 $0.69  $0.59 $0.71  $0.71  $1.14 $1.82 
     Diluted $0.45 $0.68  $0.59 $0.71  $0.71  $1.13 $1.81 
Dividends declared per share $0.21 $0.20  $0.20 $0.20  $0.20  $0.41 $0.40 
Weighted average shares outstanding  29,490,154  29,542,467   29,471,304  29,420,256   29,389,525   29,516,166  29,359,198 
Period end shares outstanding  29,365,775  29,636,425   29,500,542  29,438,402   29,411,731   29,365,775  29,411,731 
               

Univest Financial Corporation
Consolidated Selected Financial Data (Unaudited)
June 30, 2022
                  
     For the three months ended, For the six months ended,
Profitability Ratios (annualized)  06/30/22 03/31/22 12/31/21 09/30/21 06/30/21 06/30/22 06/30/21
                  
Return on average assets   0.76%  1.17%  0.97%  1.24%  1.30%  0.96%  1.68%
Return on average shareholders' equity  6.85%  10.64%  9.06%  11.12%  11.49%  8.74%  15.10%
Return on average tangible common equity (1)(3) 9.10%  14.04%  11.93%  14.63%  15.26%  11.56%  20.14%
Net interest margin (FTE)   3.19%  2.89%  2.86%  3.11%  3.15%  3.04%  3.14%
Efficiency ratio (2)    66.6%  67.0%  64.3%  61.8%  60.7%  66.8%  58.8%
                  
Capitalization Ratios                
                  
Dividends declared to net income   47.1%  29.1%  33.9%  28.1%  28.2%  36.2%  22.0%
Shareholders' equity to assets (Period End)  11.40%  10.89%  10.86%  10.83%  11.64%  11.40%  11.64%
Tangible common equity to tangible assets (1)  8.97%  8.58%  8.56%  8.55%  9.15%  8.97%  9.15%
Common equity book value per share $26.01  $26.11  $26.23  $25.68  $25.16  $26.01  $25.16 
Tangible common equity book value per share (1)$19.91  $20.06  $20.14  $19.75  $19.22  $19.91  $19.22 
                  
Regulatory Capital Ratios (Period End)               
Tier 1 leverage ratio    9.45%  9.35%  9.13%  9.53%  9.64%  9.45%  9.64%
Common equity tier 1 risk-based capital ratio  10.62%  11.07%  11.08%  11.15%  11.04%  10.62%  11.04%
Tier 1 risk-based capital ratio   10.62%  11.07%  11.08%  11.15%  11.04%  10.62%  11.04%
Total risk-based capital ratio   13.23%  13.73%  13.77%  13.87%  13.82%  13.23%  13.82%
                  
(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) Net income before amortization of intangibles to average tangible common equity.          

Univest Financial Corporation 
Average Balances and Interest Rates (Unaudited) 
  For the Three Months Ended,   
Tax Equivalent BasisJune 30, 2022 March 31, 2022 
 AverageIncome/Average AverageIncome/Average 
(Dollars in thousands)BalanceExpenseRate BalanceExpenseRate 
Assets:        
Interest-earning deposits with other banks$474,260 $8240.70%$733,173 $3570.20%
U.S. government obligations 2,000  112.21  5,222  262.02 
Obligations of state and political subdivisions* 2,302  172.96  2,332  193.30 
Other debt and equity securities 511,439  2,7272.14  514,574  2,3391.84 
Federal Home Loan Bank, Federal Reserve Bank and other stock 26,221  3445.26  27,115  3555.31 
Total interest-earning deposits, investments and other interest-earning assets 1,016,222  3,9231.55  1,282,416  3,0960.98 
         
Commercial, financial, and agricultural loans 937,846  9,0373.86  901,555  7,5713.41 
Paycheck Protection Program loans 7,644  1558.13  18,402  59113.02 
Real estate—commercial and construction loans 3,004,509  28,5273.81  2,904,602  25,8203.61 
Real estate—residential loans 1,166,201  10,7583.70  1,116,356  9,8823.59 
Loans to individuals 26,782  3054.57  25,799  2383.74 
Municipal loans and leases * 235,922  2,4044.09  242,508  2,4344.07 
Lease financings 141,676  2,1055.96  135,476  2,0756.21 
     Gross loans and leases 5,520,580  53,2913.87  5,344,698  48,6113.69 
Total interest-earning assets 6,536,802  57,2143.51  6,627,114  51,7073.16 
Cash and due from banks 55,634     53,698    
Allowance for credit losses, loans and leases (68,426)    (72,067)   
Premises and equipment, net 50,266     53,948    
Operating lease right-of-use assets 30,222     30,394    
Other assets 357,903     354,893    
      Total assets$6,962,401    $7,047,980    
         
Liabilities:        
Interest-bearing checking deposits$851,324 $5700.27%$881,462 $4430.20%
Money market savings 1,405,536  1,5520.44  1,542,581  9040.24 
Regular savings 1,070,480  2370.09  1,021,550  2380.09 
Time deposits 452,989  1,2271.09  473,589  1,3061.12 
     Total time and interest-bearing deposits 3,780,329  3,5860.38  3,919,182  2,8910.30 
         
Short-term borrowings 17,253  110.26  17,636  20.05 
Long-term debt 95,000  3211.36  95,000  3171.35 
Subordinated notes 98,988  1,3285.38  98,911  1,3285.45 
     Total borrowings 211,241  1,6603.15  211,547  1,6473.16 
     Total interest-bearing liabilities 3,991,570  5,2460.53  4,130,729  4,5380.45 
Noninterest-bearing deposits 2,122,844     2,065,633    
Operating lease liabilities 33,300     33,452    
Accrued expenses and other liabilities 43,277     43,808    
     Total liabilities 6,190,991     6,273,622    
         
Shareholders' Equity:        
Common stock 157,784     157,784    
Additional paid-in capital 298,241     298,975    
Retained earnings and other equity 315,385     317,599    
     Total shareholders' equity 771,410     774,358    
     Total liabilities and shareholders' equity$6,962,401    $7,047,980    
Net interest income $51,968   $47,169  
         
Net interest spread  2.98   2.71 
Effect of net interest-free funding sources  0.21   0.18 
Net interest margin  3.19%  2.89%
Ratio of average interest-earning assets to average interest-bearing liabilities 163.77%    160.43%   
         
* Obligations of states and political subdivisions and municipal loans and leases are tax-exempt earning assets.   
Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Net interest income includes net deferred costs of $(618) thousand and $(136) thousand for the three months ended June 30, 2022 and March 31, 2022, respectively. 
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the three months ended June 30, 2022 and March 31, 2022 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 June 30,   
Tax Equivalent Basis 2022   2021  
 AverageIncome/Average AverageIncome/Average 
(Dollars in thousands)BalanceExpenseRate BalanceExpenseRate 
Assets:        
Interest-earning deposits with other banks$474,260 $8240.70%$215,349 $460.09%
U.S. government obligations 2,000  112.21  6,999  352.01 
Obligations of state and political subdivisions* 2,302  172.96  6,070  583.83 
Other debt and equity securities 511,439  2,7272.14  372,625  1,3641.47 
Federal Home Loan Bank, Federal Reserve Bank and other stock 26,221  3445.26  25,872  3605.58 
Total interest-earning deposits, investments and other interest-earning assets 1,016,222  3,9231.55  626,915  1,8631.19 
         
Commercial, financial, and agricultural loans 937,846  9,0373.86  826,464  6,9103.35 
Paycheck Protection Program loans 7,644  1558.13  408,928  4,7784.69 
Real estate—commercial and construction loans 3,004,509  28,5273.81  2,701,137  24,9313.70 
Real estate—residential loans 1,166,201  10,7583.70  1,065,065  9,8363.70 
Loans to individuals 26,782  3054.57  25,284  2513.98 
Municipal loans and leases* 235,922  2,4044.09  251,311  2,5984.15 
Lease financings 141,676  2,1055.96  110,921  1,8196.58 
     Gross loans and leases 5,520,580  53,2913.87  5,389,110  51,1233.80 
Total interest-earning assets 6,536,802  57,2143.51  6,016,025  52,9863.53 
Cash and due from banks 55,634     52,948    
Allowance for credit losses, loans and leases (68,426)    (73,052)   
Premises and equipment, net 50,266     55,903    
Operating lease right-of-use assets 30,222     33,992    
Other assets 357,903     357,813    
      Total assets$6,962,401    $6,443,629    
         
Liabilities:        
Interest-bearing checking deposits$851,324 $5700.27%$786,931 $4870.25%
Money market savings 1,405,536  1,5520.44  1,219,375  8310.27 
Regular savings 1,070,480  2370.09  978,807  2820.12 
Time deposits 452,989  1,2271.09  485,060  1,5591.29 
     Total time and interest-bearing deposits 3,780,329  3,5860.38  3,470,173  3,1590.37 
         
Short-term borrowings 17,253  110.26  19,109  30.06 
Long-term debt 95,000  3211.36  95,000  3211.36 
Subordinated notes 98,988  1,3285.38  172,016  2,2015.13 
     Total borrowings 211,241  1,6603.15  286,125  2,5253.54 
     Total interest-bearing liabilities 3,991,570  5,2460.53  3,756,298  5,6840.61 
Noninterest-bearing deposits 2,122,844     1,880,916    
Operating lease liabilities 33,300     37,426    
Accrued expenses and other liabilities 43,277     40,239    
     Total liabilities 6,190,991     5,714,879    
         
Shareholders' Equity:        
Common stock 157,784     157,784    
Additional paid-in capital 298,241     296,599    
Retained earnings and other equity 315,385     274,367    
     Total shareholders' equity 771,410     728,750    
     Total liabilities and shareholders' equity$6,962,401    $6,443,629    
Net interest income $51,968   $47,302  
         
Net interest spread  2.98   2.92 
Effect of net interest-free funding sources  0.21   0.23 
Net interest margin  3.19%  3.15%
Ratio of average interest-earning assets to average interest-bearing liabilities 163.77%    160.16%   
         
* Obligations of states and political subdivisions and municipal loans and leases are tax-exempt earning assets.  
Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Net interest income includes net deferred (costs) fees of $(618)thousand and $2.7 million for the three months ended June 30, 2022 and 2021, respectively.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the three months ended June 30, 2022 and 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 Six Months Ended June 30,  
Tax Equivalent Basis 2022   2021  
 AverageIncome/Average AverageIncome/Average 
(Dollars in thousands)BalanceExpenseRate BalanceExpenseRate 
Assets:        
Interest-earning deposits with other banks$603,002 $1,1810.39%$226,387 $1020.09%
U.S. government obligations 3,602  372.07  6,999  712.05 
Obligations of state and political subdivisions* 2,317  363.13  8,792  1633.74 
Other debt and equity securities 512,998  5,0661.99  364,272  2,6311.46 
Federal Home Loan Bank, Federal Reserve Bank and other stock 26,665  6995.29  26,119  7085.47 
Total interest-earning deposits, investments and other interest-earning assets 1,148,584  7,0191.23  632,569  3,6751.17 
         
Commercial, financial, and agricultural loans 919,801  16,6083.64  804,458  13,7083.44 
Paycheck Protection Program loans 12,994  74611.58  457,663  9,3024.10 
Real estate—commercial and construction loans 2,954,831  54,3473.71  2,661,778  49,3893.74 
Real estate—residential loans 1,141,416  20,6403.65  1,051,110  19,7093.78 
Loans to individuals 26,293  5434.16  25,862  5164.02 
Municipal loans and leases* 239,197  4,8384.08  248,490  5,1284.16 
Lease financings 138,593  4,1806.08  108,317  3,5566.62 
     Gross loans and leases 5,433,125  101,9023.78  5,357,678  101,3083.81 
Total interest-earning assets 6,581,709  108,9213.34  5,990,247  104,9833.53 
Cash and due from banks 54,671     54,123    
Allowance for credit losses, loans and leases (70,237)    (78,125)   
Premises and equipment, net 52,097     55,865    
Operating lease right-of-use assets 30,308     34,013    
Other assets 356,406     357,589    
      Total assets$7,004,954    $6,413,712    
         
Liabilities:        
Interest-bearing checking deposits$866,310 $1,0130.24%$802,350 $9770.25%
Money market savings 1,473,680  2,4560.34  1,231,457  1,6840.28 
Regular savings 1,046,150  4750.09  969,073  5800.12 
Time deposits 463,232  2,5331.10  505,318  3,3181.32 
     Total time and interest-bearing deposits 3,849,372  6,4770.34  3,508,198  6,5590.38 
         
Short-term borrowings 17,443  130.15  18,506  50.05 
Long-term debt 95,000  6381.35  98,149  6691.37 
Subordinated notes 98,950  2,6565.41  177,647  4,4945.10 
     Total borrowings 211,393  3,3073.15  294,302  5,1683.54 
     Total interest-bearing liabilities 4,060,765  9,7840.49  3,802,500  11,7270.62 
Noninterest-bearing deposits 2,094,397     1,815,572    
Operating lease liabilities 33,375     37,419    
Accrued expenses and other liabilities 43,541     43,897    
     Total liabilities 6,232,078     5,699,388    
         
Shareholders' Equity:        
Common stock 157,784     157,784    
Additional paid-in capital 298,606     296,369    
Retained earnings and other equity 316,486     260,171    
     Total shareholders' equity 772,876     714,324    
     Total liabilities and shareholders' equity$7,004,954    $6,413,712    
Net interest income $99,137   $93,256  
         
Net interest spread  2.85   2.91 
Effect of net interest-free funding sources  0.19   0.23 
Net interest margin  3.04%  3.14%
Ratio of average interest-earning assets to average interest-bearing liabilities 162.08%    157.53%   
         
* Obligations of states and political subdivisions and municipal loans and leases are tax-exempt earning assets.  
Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
 Net interest income includes net deferred (costs) fees of $(754) thousand and $5.0 million for the six months ended June 30, 2022 and 2021, respectively.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the six months ended June 30, 2022 and 2021 have been calculated using the Corporation’s federal applicable rate of 21.0%. 

Univest Financial Corporation
Loan Portfolio Overview (Unaudited)
As of June 30, 2022
     
(Dollars in thousands)    
Industry DescriptionTotal Outstanding Balance (excl PPP) % of Commercial Loan Portfolio 
CRE - Retail379,935 8.2%
Animal Production315,801 6.8 
CRE - Multi-family262,182 5.7 
CRE - 1-4 Family Residential Investment240,887 5.2 
CRE - Office215,847 4.7 
Hotels & Motels (Accommodation)188,811 4.1 
CRE - Industrial / Warehouse185,241 4.0 
Education161,151 3.5 
Nursing and Residential Care Facilities154,034 3.3 
Specialty Trade Contractors143,724 3.1 
Homebuilding (tract developers, remodelers)118,877 2.6 
Motor Vehicle and Parts Dealers112,372 2.4 
CRE - Medical Office108,978 2.3 
CRE - Mixed-Use - Residential106,228 2.3 
Merchant Wholesalers, Durable Goods100,825 2.2 
Crop Production88,786 1.9 
Food Manufacturing85,953 1.9 
Administrative and Support Services75,587 1.6 
Rental and Leasing Services72,560 1.6 
Wood Product Manufacturing71,961 1.6 
Food Services and Drinking Places69,209 1.5 
Merchant Wholesalers, Nondurable Goods66,568 1.4 
Fabricated Metal Product Manufacturing63,016 1.4 
Personal and Laundry Services60,774 1.3 
Religious Organizations, Advocacy Groups58,409 1.3 
Miniwarehouse / Self-Storage54,761 1.2 
Repair and Maintenance53,472 1.2 
CRE - Mixed-Use - Commercial52,080 1.1 
Private Equity & Special Purpose Entities51,853 1.1 
Truck Transportation51,191 1.1 
Industries with >$50 million in outstandings3,771,073 81.3%
Industries with <$50 million in outstandings866,668 18.7%
Total Commercial Loans4,637,741 100.0%
     
     
Consumer Loans and Lease FinancingsTotal Outstanding Balance   
Real Estate-Residential Secured for Personal Purpose629,144   
Real Estate-Home Equity Secured for Personal Purpose168,536   
Loans to Individuals27,061   
Lease Financings193,937   
Total - Consumer Loans and Lease Financings1,018,678   
     
Total5,656,419   
     

Univest Financial Corporation
Non-GAAP Reconciliation
June 30, 2022
 
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 six months ended,
(Dollars in thousands)06/30/22 03/31/22 12/31/21 09/30/21 06/30/21 06/30/22 06/30/21
Net income$13,166  $20,317  $17,412  $20,911  $20,875  $33,483  $53,478 
Amortization of intangibles, net of tax 270   269   211   169   197   540   393 
Net income before amortization of intangibles$13,436  $20,586  $17,623  $21,080  $21,072  $34,023  $53,871 
                 
Shareholders' equity$763,925  $773,855  $773,794  $756,023  $739,998  $763,925  $739,998 
Goodwill (175,510)  (175,510)  (175,510)  (172,559)  (172,559)  (175,510)  (172,559)
Other intangibles (a)  (3,678)  (3,936)  (4,210)  (1,922)  (2,073)  (3,678)  (2,073)
Tangible common equity$584,737  $594,409  $594,074  $581,542  $565,366  $584,737  $565,366 
                 
Total assets$6,700,813  $7,107,740  $7,122,421  $6,979,852  $6,356,305  $6,700,813  $6,356,305 
Goodwill (175,510)  (175,510)  (175,510)  (172,559)  (172,559)  (175,510)  (172,559)
Other intangibles (a)  (3,678)  (3,936)  (4,210)  (1,922)  (2,073)  (3,678)  (2,073)
Tangible assets$6,521,625  $6,928,294  $6,942,701  $6,805,371  $6,181,673  $6,521,625  $6,181,673 
                 
Average shareholders' equity$771,410  $774,358  $762,334  $746,185  $728,750  $772,876  $714,324 
Average goodwill (175,510)  (175,510)  (173,553)  (172,559)  (172,559)  (175,510)  (172,559)
Average other intangibles (a)  (3,791)  (4,090)  (2,696)  (1,983)  (2,209)  (3,940)  (2,336)
Average tangible common equity$592,109  $594,758  $586,085  $571,643  $553,982  $593,426  $539,429 
                 
Loans and leases held for investment, gross$5,661,777  $5,400,786  $5,310,017  $5,252,045  $5,327,313  $5,661,777  $5,327,313 
Paycheck Protection Program ("PPP") loans  (5,358)  (10,298)  (31,748)  (85,601)  (252,849)  (5,358)  (252,849)
Gross loans and leases excluding PPP loans$5,656,419  $5,390,488  $5,278,269  $5,166,444  $5,074,464  $5,656,419  $5,074,464 
                 
Allowance for credit losses, loans and leases$72,011  $68,286  $71,924  $70,146  $71,355  $72,011  $71,355 
Gross loans and leases excluding PPP loans 5,656,419   5,390,488   5,278,269   5,166,444   5,074,464   5,656,419   5,074,464 
Allowance for credit losses, loans and leases as a percentage of gross loans and leases excluding PPP loans 1.27%  1.27%  1.36%  1.36%  1.41%  1.27%  1.41%
                 
(a) Amount does not include mortgage servicing rights             
                 

CONTACT: CONTACT: Brian J. Richardson
UNIVEST FINANCIAL CORPORATION
Chief Financial Officer
215-721-2446, [email protected]   

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