UVSP - Earnings call transcript Q3 2020 | Univest Financial Corporation

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Operator

Good day and welcome to the Univest Financial Corporation Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jeff Schweitzer, President and CEO of Univest Financial Corporation. ahead. go Please

Jeff Schweitzer

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

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

forward-looking disclaimer. to cautionary SEC those to net Before by under and during hope per these the remind safe, at materially and yesterday. contemplated everyone saying Relations statements staying tab. from healthy. are Hopefully, will our on filings. statements start your statements [indiscernible]. forward-looking release we website of is reported conference our would of of be families not, found If by refer earnings make advised Univest the earnings listening call, course had Please or or differ beliefs I review in our I I $X.XX this I you begin, during Investor to be like the release third everyone may laws. also meaning express forward-looking a the need chance quarter can that management our that expectations from the income of securities statements. $XX.X in actual everyone the univest.net forward-looking intentions, you results management's may within it We've the to million federal

of $XXX.X grow $XXX.X lines third as loans into As quarter have our our deposits local deposit million economy We seen opportunities reopened growth and increased of loan the quarter, and we the to the activity during quarter and experienced the increased million. second during end more strong and business.

up the million on set in internal prior same or year. mortgage continues XXX% unit banking with records banking to to net mortgage the quarter compared gain $X.X activities Our

result as in our a reopened economy has modified COVID-XX loans or X.X% loan the the release, see portfolio. decreasing Additionally, our modified of loans million as percentage we as of of $XXX in with to our improvement continue detailed

performance compared or return quarter the the assets as income for the average business quarter X.XX%. pleased of million model our pre-provision core be pre-provision the our prior our to XX.X% with third pre-tax to being pre-tax on $X.X continue We during increased with diversified year, the of quarter

XXth, financial or or our to the preferences. consolidation enhance business October service as on digital on adapt we centers we eight centers, to XX% efficiency customer of our relocation Additionally, our changing of offerings, focus and announced continue

the while team. now to Before I our over business other throw working Brian, to it Univest I serve to on a thank customers, adapted our Corporation environment, continuing I it our communities turn forward. the to the moving for Brian I'll further very be continue They want discussion to of have each the new this while just results. Brian? over and of part and growing to to proud be members family. a

Brian Richardson

Jeff. like you, would everyone also today. And Thank to I thank us for joining

touch release. mentioned, with efficiency X.XX%, I to Jeff on reported items the the XX.XX% earnings four per on on of return $X.XX we ratio tangible equity for and As would now of to assets the of common an related XX%. return of average specific earnings share like quarter

our was losses was which million $XXX.X increase the First, provision driven by primarily in for $X.X million credit for the quarter, loans.

assumptions in quarter, third we saw model. economic the our During stabilization the used within CECL

increase compared point when was represented excluding an of PPP of September basis X to X.XX% loans. As losses This total and of our XXth. June loans for credit allowance XXth, leases

liquidity, decrease of the points quarter margin and excluding the PPP the on X.XX%, points decreased Reported points compared the loans basis compared we sheet. balance averaged Second, during points XX the for $XXX experienced of which second million XX by of excess negatively XX impacted Reported XX third to a when as basis to when the PPP X.XX% liquidity compression due quarter. basis second NIM margin Core expected, NIM interest and basis net excess impact to quarter. low-yielding was quarter. was

As $XXX NIM a approximately sub-debt reminder, third August quarter the million due was Xth. on issuance points reduced X by basis to

relates to have continues income, Third, non-interest great our mortgage to banking it as business year. a

our quarter, million. which the net on mortgage For $X.X gain increase year-over-year totaled of banking a represented $X.X million,

For the of to $XX.X September nine months gain in XXXX. same when XXth, an XXXX, banking compared net our mortgage million, the increase million period ended totaled on $X.X

was $X.X included quarter of fees compared income of to million third the an the swap which million XXXX. of noninterest $X.X Additionally, for quarter, third increase

$X.X Fourth, business. representing the Variable business to For when X.XX% with for up third million, increase September expense this quarter ended expenses costs the the compensation XXXX. increase This normalize compensation XXXX, compared slightly fees of of and million variable $XXX,XXX the $X.X of banking totaled due of for associated the was cost recognized strong FDIC an noninterest When third nine third versus months mortgage to compensation are of totaled swap $XXX,XXX performance XXth, an year-over-year. quarter is these XXXX costs was assessment credit, expenses quarter. which in you for XXXX. the elevated

we It The recognized XXXX. Jeff the of Pretax to associated savings are with cost centers. close estimated quarter a As million, plan be one-time $X.X includes plan is pretax two to this XXth, to will primarily note million. estimated during financial $X.X October announced plan important phases. our of annualized on mentioned, the which are be approximately XX% or fourth relocate

inherent expected interest despite In the diversified strong business As COVID-XX third $X.X it for million. such, That rate strong diversification the prepared XXXX enables headwinds closing, This our of value environment. current model. is to approximately from performance my the pretax the is during remarks. us for our highlights results quarter the and savings produce

begin happy the answer questions. any be please question-and-answer Operator, We you would to will session?

Operator

Perito Instructions] first [Operator Our is go ahead. Please Michael from question with KBW.

Michael Perito

guys. Hey, you? are How Jeff, Brian morning, and Good Mike.

Brian Richardson

Good morning, Mike.

Jeff Schweitzer

Good Mike. morning,

Michael Perito

mortgage sure you record guys mentioned revenue the but I Thanks for fee you a few the side, the some quarter had Company. One, I'm that questions. on history for quickly. on the pretty obviously in income -- a stuff fee just taking of my what side, environmental guys is

Just for we run elevation year room of XQ? there's in are should any we about as still rates look core rate that next be the some how of thoughts of lines out could for what businesses. to and some thinking the My on is trend some growth guess

Brian Richardson

of side Mike, the internally. mortgage still believe also record the to third the we funded another quarter continue monthly this we set -- end On volume the for equation, the we'll of pipeline at month we was and strong

So continue. that will

bit mix a, a down dipped a seeing going purchase and now of the almost between here. little basis XX-XX We in business on You're was funded third refi. quarter that from a

to refi last week up pick over little refis to the two. are it's good with seasonality be through start purchase. that But November just on I would going some going strong the see to side did up expect start on again to just and bit a get we're will But you'll fact. And dry December. a fade we the -- or So regard of eventually for really if I the the purchase be purchase And that's borrowers our the we next what's available you're think, and the it strong, given in as the ultimately, still market happen down in what to volume in footprint. going to the place. pipeline comes will that well, first lose rates, to going year, quarter because mortgage refi have just inventory side is but in

to of it. and job in that continue done recruiting additional good good a about So, but We've officers loan we feel terms operation. grow we really

though longer normalized even to margins will refi term. that we a good the So lose back and will we do more side business feel on come of growing basis, about

Jeff Schweitzer

coming seen back we've Yes. customers the to talk. and wealth And side, on more open being

disruption up, has three as probably up. said, next we some branches now clear they a production. and there a But have significantly. quarter back slowed head the and open Schwab of up and Second down acquiring a But up. we things market recovered comes things start off the from with as way of low we things hopefully we to recent to closed headwinds we're asset should right balances when priced a basis TD TD in that having we that was way. seen adding year it arrangement really point also into us We're have to start what new as decent production quarters sell-off, of remain with big perspective the quarter-end on although for on amount, that the the opened ramp on that have as With that obviously quarterly back

change So third that the wealth pretty fourth be we quarter. Insurance, record expect to customers now. of seem than for right reason, brokers comparable, quarter will are maybe reluctant better more little whatever pretty -- for a

off. So we've had from customers employees that's being combined up from as with being pipelines off impacts building back far laid from or laid been comp premiums slower to workers' employees as --

a be we're we've some to that there So coming that to slower back. trying through, had work seems and headwinds little

Michael Perito

the in about, call kind But for with normalizing XXXX similar to -- think some items side. $XX.X noninterest the do with that gains, security if I are do of year, think guys on ballpark of we other Do be kind you you it's to next take think on or just pace normalize the give in mortgage million early? you the environment income even it,

Brian Richardson

No.

as not currently specific prepared are and process to guidance XXXX. we going our give it So, budget to are through relates

environment in the to However, well line on of this income nicely side favorability swap side mortgage on that know itself there lends the fee as mortgage -- The as things. as things, was item. we the year of

little bit a pressure noninterest look if at of into a income I you XXXX. year-over-year there'd on So be going it basis think overall from

Michael Perito

look about Curious, then from maybe pipelines, on quarter. the growth what And at forward, little PPP bit the and color the today. more the mortgage a the that really going growth guys wondered what if see you expecting perspective given about environment in Talk are you talked strong in you looks helpful. could commercial you third a Okay, provide I Mike, pipeline.

Mike Keim

Yes, sure.

you it quarter demand terms to quarter some need you you is look look level pent-up third of I was at second So related. there third at and also when of growth, that think, -- our in

is Our the of pipelines speak, made fourth quarter that lending. we're over quarter the things. frankly. being not to the the very couple we're of so people third third doing give the same we've would couple testament now anybody's also is, still third quarter It those you but I I be by years, lower still see made be quality we're good still historical what have here, teams and we'll know last that investment quarter, to the and about We a this in at a that fourth customers teams measure, that it we've a And of feel quarter our the end Traditionally, our the quarter sure what quite really our that is over still Mike. were good. bump will good would stronger. with of that

our, used call we've Now what COVID-XX we guidelines.

in not be fourth more run with regard COVID sure of early-XXXX. some an underlying traditionally that strong about in of good still LTVs have, quarter has conservative feel where track good time we've more as pulled you've that obviously a look, in and commercial is we what It done a in been about point what done a we've to and can to of we've out this I normalized we feel fourth us So but the less from at strong guarantor it is back, operation we've But record XX scenario just real we're we going. solid. the hopefully, from rate basis, emerge quarter, overall, overall we the seen what believe tenant borrowers that -- on making feel if and the thrive, tenant continue will estate

Michael Perito

peers activity year of you this think, cover, Okay. market I I depending not sit at bit think I regionally, a guys until growth year. there's level a and today, here of more mean, share we but to consistent seem on enough your there conservative in the is would point, next are -- drive pace we lot the per meaningful next on some but it opportunities economic and locally think pipeline growth loan And into like of as se, there's get

Mike Keim

we're that seeing complete the We right cases, the second early now, in see to going third the quarter. I don't but into Look, resurgence we're a of do. part shutdown of did like early we think a quarter

caution I vaccine to there's a completely think -- with So political of shutdown got got some get and will we'll is we how near continue regard But case counts closer you the grow. go. to to that don't economy, a level there to as to have

we're team has move conditions. is news contacts forward. look move on we to settings, able to open, they're our different is, in said are and and the incredibly we've under and we we underlying as that As good momentum looking this but also looking our And continue with and lend, and more have to good at conditions forward conservative willing factors those to lend

Michael Perito

you the get just lastly, to sorry, Great. it I'm I And repeat then expense Brian, didn't of comp component number? the QX can down. chance variable chart a

Brian Richardson

No Mike. problem,

simply variable I third relates would it quarter comp business, thought With quarter seasonality relevant That business, just the reference the of for in an increase As third quarter represented point $XXX,XXX. versus most to XXXX. the year. of mortgage the be inherent of the the that last the was $XXX,XXX

Michael Perito

so, you think And about Do over so are course there comp other consider? make how it of generally on annual forward, million in the year later moving it think things is third in an capture, as seeing call I $X.X variable we fair or today you assumption the expenses quarter it say, -- growth. a next is then of guys it, should expenses we core savings with inflation $XX.X mean, call to little that should and million, the mortgage

Brian Richardson

well, I comp variable mean, was a Yes. cost that $XXX,XXX. full of

So want I think when $XXX,XXX normalize, to to take $XXX,XXX, the might million, offer want $XX to you $XXX,XXX. you

around be from then million kind of you kind of and $XX you normalize can there. So

Michael Perito

Appreciate All right, thanks, it. guys. Okay.

Brian Richardson

you, Mike. Thank

Operator

next go will Sandler. come question with Please Frank from Schiraldi Our Piper ahead.

Justin Crowley

Good morning, for Justin Crowley on guys, actually today it's Frank.

Brian Richardson

Justin. morning, Good

Justin Crowley

at expense to sort savings, you off of the of to I'm that in? So expect other that of we of that environment made might I are the be see look kind asking anything just places pandemic guess, in, light what side have has -- drop it changing worthwhile you, much whether that you plan digital just savings what would bottom that you the caused commentary, the when and or guess, be how is or should seeing we're line I is, building there you're there the take a things, has this in look on that investing -- think at harder consolidation

Mike Keim

Yes.

good we to made Keim, and we've So, morning. On technology, basis, invest this an already. overall but investment significant is Mike in will continue a

incremental overly point So isn't significant. the at this investment going forward

fall additional just So, for things to well, data move on as big given as would the some step-up going we will I off processing that us, there not forward. a at and look make it investments is line be we'll

it would bit, be little picking So a nothing incrementally magnitude. but up of any

announced we that Brian fall also savings financial the bottom this, added business. footprint referenced we've centers, note our which the we the we've line, and when the Cumberland to York, So service County majority well are at look as in it's Mechanicsburg, as that of important will in in expanding grow to is as that to but and Berks and County, continue New

to will have expansion. we expenses So related that

Justin Crowley

a given just expecting that part in or Okay, be And locations helpful. the or consolidation, you eyes, as going to any this just of you're nature sort modeling of of that's is that are small consolidating? attrition just number your the

Mike Keim

low. have anything Look, historically, happen. very our Yes. rates attrition can But been

adoption to the of a the locations, center proximity see our expect we financial attrition. other amount do and in customers, investments of digital increased not by with significant Our coupled

Justin Crowley

back had curious growth discussion. Okay. that some believe the the that I running, was was called and just guess, circling breakdown, how if call the detail was on that on I way. of loan had the And good Lancaster. you helpful There any out on to getting was commentary you up there. then geography you I last spoke know the perhaps, I agricultural production much team to just quarter.

seeing growth if that this wasn't was quarter. I a the all So, that at in factor sure we're

Mike Keim

continues continues Ag be to to Central Yes. business; operates Pennsylvania, as solid. Pennsylvania the that it forward and team Ag to move refer in was in Central the We now and

the grew the footprint. So cetera. when themselves we and a said the of good terms deals et criteria the that did. the across that frankly in I tenants, question, portion what did like But we quite that loans deals was I of entire We Mike of borrower, Perito's answered CRE discussed in quality the underlying guarantor met

diversified solid was footprint our a also across and mix, it grew. good a loan across So mix book our

we believe continue. about will we really and that that good So feel that

Justin Crowley

Thank taking I Great. it. you. guys. appreciate my Thank question, you for

Mike Keim

You're welcome. you. Thank

Operator

question Breese ahead. Stephens. come from with Please next Matthew Our will go

Matthew Breese

morning. Good

Jeff Schweitzer

morning, Matt. Good

Mike Keim

Good morning, Matt.

Matthew Breese

One, X? plan, X Just what the from expect cost on we a what expect the from Phase and few from should we X new should me. phases, Phase

Brian Richardson

that of Yes, blended would that year be impact the for will savings. you of million overall anticipate next $X.X

X full year it is at those million basis. at incorporate you So look net when end is next at annualized the Phase pretax a Phase that of on fact savings items, impact end January, million $X.X June. of comes specific for of of X you kind the out the is the the $X.X When

Matthew Breese

just what's then to of on how the And blended today? compare loans, on does the new Okay. books that and pipeline the yield what's

Brian Richardson

production and as to fixed quarter, you X% X.XX%, average rate new kind of for our variable. the rate down look a currently. it break So, got books around a you fixed was at between perspective, our On

a So reference. point that's of

split X to got an about non-swap non-swap loans that of is it As variable, it over loans. to between On swap out X.XX% which relates call roughly of X.XX%, also you saw we're average rate to seeing X.XX% loans, month then points, about. about we average that line which spread I X.XX% item loans, and drive a income that about helped we XX swap fee LIBOR. fees received basis of spoke On

fee So, CETs you in, between of however, income the the pull income type split of quarter. when at side largely interest yes, that that looking X.XX%, you're course, the forward -- net our noninterest things spread, current X.XX% into aggregate and

Matthew Breese

Okay.

Do stabilize you head pipeline or knowing yields of and non-swap, feel the where you would or like swap lower? between heading? not how fixed here breakdown can rate they variable the are So loan characterize

Brian Richardson

kind inherently. X kind you're marks, little where when the on slide would Xs a of yield as going at bit be production have of forward. X%, continued will think, portfolio just mean, we inherently book I overall that yields below at be continue I Loan your is to would pressure to progress

Matthew Breese

then liquidity for you're side, And think holding you what's on over the you and timeframe? the on plan much us just deployment liquidity how Okay. could what excess remind to and

Brian Richardson

Yes.

we So $XXX up that's of for second the roughly million quarter. liquidity, the $XXX had million during from excess quarter,

we run to So out. continue expect to that

during we course, funds which a quarter. public Of built book, have the

outflows, growth So elevated that, $XXX is be the still But continue million have on [ph] loan adding that. added will as diminish. sub-debt to deposit in $XXX to that additionally quarter, honestly contributed expect we some It normal fourth that of and to to quite million we a peak. the

will to trend there I the think it from over quarters. continue down coming

Matthew Breese

Okay. And for then tying how kind provide but environment, of or quarters? this a together, the in it's would characterize I guidance just know would you coming this all you challenge what NIM

Brian Richardson

fourth it excess for be a benefit get you kind not expect basis a low-to-single to basis. of core reported I going the you're reasonable a think as So relates slightly quarter, on it'd of again, compression benefit basis, liquidity; get single-digit reported basis simply a just core on and to more to that on the -- low-to-mid reduced

that for XXXX. move think to be fourth the how here the guidance would we I into get So things quarter see and as forward continue

Matthew Breese

that's Okay, taking I you. questions. all Thank appreciate my had. I

Brian Richardson

Thanks, Matt.

Jeff Schweitzer

Thanks, Matt.

Operator

further this At questions. I'm Instructions] showing time, [Operator no

would So like the for session. to back this will over conference conclude closing any I remarks. our Schweitzer to Jeff question-and-answer turn

Jeff Schweitzer

quarter speaking months. the safe. good to Please trending forward that's everybody forward obviously, at the really our everyone, decrease to good stay of a a as also speaking about open in We good in always you, the participating in fourth -- look quarter. three things thank direction, to today. how Have another with really up. positive And you Thank that's to day. modified ended; feel Grant; for Look loans and you, end

Operator

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

may You disconnect. now

Univest Financial (UVSP) 31 Oct 202020 Q3 Earnings call transcript