UVSP - Earnings call transcript Q1 2020 | Univest Financial Corporation

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Operator

Good morning, and welcome to the Univest Financial Corp.

First Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please note the event is being recorded.

Now I'd like to turn the conference over to CEO, Mr. Schweitzer. Jeff ahead. go Please

Jeffrey Schweitzer

and listeners and for Nick, all you of our joining good you, thank morning, to Thank us.

Richardson, and Joining morning me and Bank is this Financial Brian Trust; Mike Keim, on President of the our Chief call Officer. Univest

start need forward-looking like listening safe of forward-looking to and remind Before you I are families conference be staying that advised the saying statements call, to everyone begin, laws. hope securities by that intentions, we management or healthy. express statements this and beliefs meaning make Please your management's I'd everyone disclaimer. is I of the course also the may during within of federal expectations the

from our Hopefully, everyone actual in could to refer the our be from found contemplated filings. you -- univest.net by earnings tab. our Investor our from forward-looking SEC chance at I it a Univest's earnings materially If those statements under cautionary release release will may yesterday. website the results and Relations in these review to these differ had contemplated forward-looking on statements. not,

during share net to which the fourth impacted within assumptions of was $XX.X significantly model. result quarter $XXX,XXX $X.XX Earnings sorry, the per related reported We quarter, were quarter -- for or million of economic by of or $X.XX expense income per first share. the COVID-XX, our CECL

would briefly discuss to earnings, our like get the we I discussions to COVID-XX further Before pandemic. on into response

is has the have to approach we customers priority. pandemic safety their the and our been employees foremost, as focus, our and that say made highest this first me safety of first to Let and on our decisions

part centers, remotely communities. protect market our XX% vast with of and personnel regulatory institute remotely, customers institution employees, only service financial and drive-through and guidance working full banking non-branch to time. are at time the our working health first the current recommendations from safety the least at were our majority the our to and following of in We financial the agencies are government We and

service customers the we continues We financial Univest the all new them. that have of implemented impact As the reminded customers our provide remains and at to unknown, solutions evolve to expect. available of situation and centers procedures financial the continue to digital operating

business have impacted We pandemic deferrals customers and are and the been fees. consumer negatively our form by in who to assistance waived the offering of

we modifying As with of over noted earnings principal deferrals or balance in million. $XXX principal interest process principal our and modified in release, X,XXX are loans the an or aggregate of with have

loans the the X,XXX program. are funding banks Protection through we Program. in Paycheck the funding applications first We billion one SBA's received $XXX initial before and the through Additionally, of market over And this approving taking for applications is we we usage X,XXX as the of of total fully SBA not line got where seen and million. it was usage $XXX.X with have was in January approved for credit utilized, by applications lines Interestingly, February. notable consistent

million $XX solid in and million annualized deposits and were $XX.X ended into in or and stay-at-home our recorded the provision for loan quarter. annualized COVID-XX, quarter grew we had with our quarter. X.X% the the first the quarter effect expense Excluding orders loan for results of markets, growth pleased to with generated first to going the financial Prior related we growth the we X.X% or

refinances quarter environment. $X.X the rate interest to year quarter revenue, the or bright was to as XXX.X% in compared increased prior Another picked million in spot for due the up growth mortgage first banking which the the low

interest the with Federal Brian to Reserve's Additionally, pricing rate quarter, our we in further deposit comments. the took reacting aggressive action margin will to discuss respect cuts. his during

allowed of or things stay-at-home the which know still to the be markets orders will in into duration calls reopen. world for many However, knows, relaxed when will be do the our as March, everyone We changed year. in question when not businesses

the of result, As the the timing at is guidance more the remainder communities and operations return we time, to original are the local unknown. of guidance the normal businesses for as business on giving not of year resending local this for XXXX and will a impact for be pandemic our our

individuals Brian, Before in want Their and compassion, family. Univest. willingness members customers, I communities throw thank all past amazing to current other. handled could X of their culture it Univest a be at and them over I impressed the I our the employees about or weeks over needed the have to I about proud and them flexibility and to to the wherever of each attitude, jump just for says thank not lot way our more environment. the efforts service as the

on I Brian discussion our to results. for will over now turn additional some it

Brian Richardson

Thank challenging time. you, your like of and joining I also thank us each for I this are to everyone hope families friends Jeff, would today. and safe your you, during

COVID-XX we credit related of mentioned, share earnings by Jeff impacted reported was the As costs. $X.XX quarter, per for of $X.XX which

our increase This retained in increased adjustment a an with $XX.X of for investments reserve January was conjunction adoption, commitments and loan We leases and In reserves loans by losses million, total earnings million, $XX.X in increased this for reserve which effective CECL after-tax unfunded $XXX,XXX by million. our reserve of $XX.X XXXX. for adopted resulted by $X.X million. lease X, and -- our increased

of impact related for quarter share charges per included This were forecasts and model. or COVID-XX economic million. our on within expense to million used $X.XX the Total CECL $XX.X the $XX.X related resulting

losses commitments million. or December XXX% for quarter of XX, $X.X in and our adoption since XXXX. the credit provisioning, our CECL been impact, increased Excluding the have the unfunded million for first have $XX.X quarter cost would CECL Through by the COVID-XX reserves credit

loans for allowance is and leases. credit our XX, March X.XX% of of losses As total

related the now to touch like release. on items X to would I earnings

a rate cuts net portion than and faster excess quarter despite LIBOR-based First, XXXX. result basis Reserve's of the certain liabilities This to our in compared liquidity, of margin, point variable the the emergency rate purchase Federal excluding accounting increased interest March, of was repricing X early fourth loans.

and expect NIM variable continue we on short-term quarter. reprice our loans was benefit, NII the this However, to in as second a continued pressure and

million of and $XXX,XXX extinguished partially at the X-year slightly million than with we able with funded a investments $XX borrowing. a were at a a points During basis a approximately higher lower-yielding gain opportunistically cost less quarter, $XX replacement borrowing we onetime Subsequently, which yield, of sold $XXX,XXX. borrowing purchase of XXX to were with a extinguished the rate investments

of activities mortgage our when quarter activity, $X.X which had increase banking of Second, compared quarter. $X.X banking which was strong the XXXX. million by XX% million, origination refi volume for for accounted to an gain the mortgage very driven of This business Net quarter. strong a on represented totaled the first approximately

on current it we to of the ability a approximately economic XXXX, on quarterly intention when we calls, our to elected its expressed redeem those basis, evaluate the and anniversary. $XX the XX, on we'll previous to On March had conditions options X-year hit as now million redeem sub Based not conditions, sub redeem debt debt. have it We normalize. economic

due I resending to related guidance mentioned, from directives Jeff -- the social and last uncertainty on stay-at-home we distancing our our and as that impact XXXX the quarter's provided call. could businesses, on are orders COVID-XX customers on Lastly, and have

is us operating are questions. times, remarks. and be prepared to well uncertain it We'll happy That our While for challenging positions environment. in to liquidity my capital answer navigate this we strong any

question-and-answer begin please the Operator, session. would you

Operator

Instructions]. [Operator

KBW. comes of from Michael question First Perito

Michael Perito

drive reasonably start you can wanted the what of doing the Glad level unemployment drive of under your that peers the similar like you some everyone utilize? I seems assumptions. credit on a that the lay that well some It reserve to of to more quarter? the hear is the to in underlying up I is guess, you using in Moody's a And your put forecast to bit adopted baseline maybe CECL the of circumstances. macro that assumptions kind guys and lot are first side out of using GDP to local of what house. you're detail kind

Brian Richardson

Mike, from We use et we forecast unemployment, baseline cetera. GDP, XX do is use Sure, XX. various price March segments, the for index, Moody's purposes retail housing use factors We And our Moody's. economic March sales, across including calculation, this loan of Brian.

Michael Perito

Okay.

mean said there's proactive. conservative what right. there, it's the guys think did to obviously, it's quarter, of fair you still I having out a lot So and in classify I of kind unknowns reasonable. But that, Obviously, first as

now So after as that weeks it's for it hard to probably that. there's more you mean, not little that given I see you of know? even used, know you sentiment I kind really this to fair provision ask that I a see go later room second point, bit four that so quarter. March mean, I'm the you at to is XX think a But what consensus in far, beyond going

Brian Richardson

we of out relates end the of focus don't to real the it's will exactly use that second most I the sheet mean, matter our forecast practice date. quarter, And June. is said, recent the the subsequent as balance those tell at is That on where early come land. And forecast what quarter. where to certainly to forecast too to it as really ends the

Michael Perito

as of factor and coming is guess loss of it make there's but today of of rates other guess, when the that stimulus mean, on you deferring. I did a strong, of as have things a going I reserve a seems you to at of decide sense. level? That many and right. how not bit those clients in how All kind the you stimulus role. mean, idea get And around. that side nature? and do reserve an But kind my guys quite you look are How Okay. guys little the it's I guys a trying of deferrals could ultimate risk like lot the, against balance of tight lines kind

Brian Richardson

using perspective, over that Well, on of said, will are determining a loans currently. cash but contemplation XX-day to forecast. I we deferral, of that assumption type little baseline cycle at here, it baked loss of a the in we there of as an life isn't under mean, where life bit we more a XXX-day includes a of a or early of what presume the loan will large do forecast, shift flows, price the overwhelmingly deferral can part go the That

Michael Perito

Okay. Couple more quickly. I of things to hit want

quarter of wondering impact there'll On NIM? it's amount decent enough Or had do listening thoughts, the hold of would basis with idea on I be was of the second you apologize I from it, pressure second down extinguishment the full if the the was missed points? the in all an on a only the I margin, think NIM if be but of kind do your think quarter? to few you And to those just you I a quarter's margin impact debt what comments.

Brian Richardson

in of NII NIM the second lot moving Obviously, and quarter. and parts the PPP... even a There's look in when at you third

Michael Perito

yes. clarify, should I

end the at Sorry, that's bring excluding up because Brian, I could know obviously, PPP of... lot going PPP. to end a

Brian Richardson

of holding of from bring volatility But LIBOR that there's -- is There's to of going loans the a slight also benefit on debt. will expense conversely, pricing by with extinguishment Lot to volatility. some inherently the an to along that. sub debt, goes come that

be think will to forward loans So there just of downward that kind pressure I going would assuming resetting. due LIBOR

quarter, Just as the during reminder, basis LIBOR first XXX points. X-month a averaged

yesterday, basis at XX it points. of was As

So there will pressure be resulting from that.

Michael Perito

Yes.

and first just lastly you point? quarter step Okay. me, capital What the this was on Obviously, perspective. are a capital. little And a thinking for just onerous guys from Jeff, then at back. I'll

bit thoughts probably the there, maybe little the dividend capital [Technical was robust. capital levels feel the and forward that quarter. you I how CECL second when and growth of and higher growth this the with out point whether just on comfortable And take onetime still big going in the But are levels comment general you around kind those slower items today? there just some the imagine had you uncertainty? and in had a Difficulty] sheet balance keeping provision at bit be you're will in pretty can a of you You

Jeffrey Schweitzer

as comfortable all and Mike. and capital capital we we Sure, obviously perspective, position is where about feel that a are we the to levels our a good that our with at feel capital consistent where forward. and going We be perspective, something least given uncertainties pretty for point, that where basis. aware the Board in near-term capital is of, we looks solid capital feel we're the comfortable But dividend we stress this doing dividend a is. forward, obviously any quarterly good everybody at much have liquidity go on from else and We we a everybody industry. aren't going good levels buybacks, given our where about are, from at the And we are,

Operator

Piper Sandler. Frank question Next Schiraldi of from comes

Frank Schiraldi

little in the a then bit you of I and Brian, have your wondered could like about energy, of just hotel, is concentrations extent that sensitive a you of currently? to restaurant, percentage deferral total loan maybe some the more as if, the amount book talk in each the areas

Brian Richardson

Frank. Sure,

So the like, million. motels is $XXX our from a like, around exposure hospitality, outstanding perspective. million and if an we service and from look there at the we're hotels, around $XX Food we're

kind of you that sense So that on gives side. a

On retail $XXX roughly side, the CRE outstandings million. are

So is orders. these we But that we higher type about have -- in now, tend I have everything that's space, and really hospitality kind and the risk the right current in be when retail that's shutdown the of right higher the commonly know that exposures are and talked deemed now. stay-at-home to book be ones can

have exposures we side, don't energy significant at all. the On

Frank Schiraldi

this at And would do of those point, imagine? I Okay. all have elevated deferrals areas

Brian Richardson

XX% rate. is deferral Yes. around I our hospitality on side, mean, the

level So XX% range. in to And then of XX% book some remaining retail, has that deferrals. XX% on of the we're our CRE

Frank Schiraldi

that And you that? food do have service mentioned, you

Brian Richardson

Yes. in XX% that's That's service. and a -- net sorry, XX% total my hospitality XX% between for food aggregate no, to included hotels

Frank Schiraldi

you. Got

Okay. And just sector. up another on that, following

curious are color you Any the feeling in you can this environment? guys Just offer ag how there? book about

Michael Keim

milk the ag it need Mike. well frankly, quite to serve for And be be and, book it's the being cetera. some it perform it uses at there's can cetera. Stanley continues products, for though speaking, to because cheese, ice level and be there such we their is continues are schools the because a be as milk Generally to a Frank, poultry, be declining that it that grow diversified. type used, et alternative factors, our eggs, cream, et milk, even farms And continues largely other are closed

feel what side. good on continue the we doing ag about to we're So

Frank Schiraldi

of Okay. the sounded just in of It like X XXX. plenty Great. And you the then when just out thinking that government guys finally, the had PPP. about hotter Phase ran

for you So do you would see I do opportunity imagine, How plenty large of good that there's think opportunity there? Univest?

Michael Keim

about ready get Right or And work approved now, believe we a to House the to have the point. continue this ready have later go, approved to formally large XXX the Frank, when We and hit as many through loans as we team acts FDA Congress allocates we'll process. at when money, today. that go

X,XXX bring XXX equates that which neighborhood million $XXX very close to loans of in and So somewhere funding, us the million. will $XX of to additional

Operator

I'd Mr. conference closing question-and-answer to any session. Please Jeff Instructions]. Schweitzer like [Operator the ahead. This concludes remarks. for our go to turn over

Jeffrey Schweitzer

said, world. great day. clarity have uncertain Thank the to going all, I that today. of care joining everybody of participating at Have And forward look everybody a healthy. as your taking more second distancing and in staying stay you, safe and We yourself end of thank challenging again today. social times we and hopefully, Nick, most talking the you quarter. is you, a little on to everyone, what's everybody appreciate until the then, for on is But and And us just hope These families are and and I listening obviously very safe, times.

Operator

for has you attending conference presentation. concluded. now The today's Thank

You disconnect. may now

Univest Financial (UVSP) 23 Apr 202020 Q1 Earnings call transcript