UVSP - Earnings call transcript Q1 2022 | Univest Financial Corporation

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Jeff Schweitzer

Good morning, and thank you to all of our listeners for joining us.

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

Before we begin, I need to remind everyone of the forward-looking statements disclaimer. Please be advised that during the course of this conference call, management may make forward-looking statements that express management’s intentions, beliefs or expectations within the meaning of the federal securities laws. Univest’s actual results may differ materially from those contemplated by these forward-looking statements. to in cautionary our you earnings in refer and release SEC will the statements forward-looking our I filings. Hopefully, review everyone our to release from had yesterday. a chance our the If at found can not, on it univest.net, Relations Investor under tab. be website million We the or first during reported share. of per quarter income net $XX.X $X.XX

experience we loans. as loan loans annualized, grew the quarter, solid X.X% PPP During $XXX.X excluding continued to growth million or

markets expansion continue with Maryland quarter, to hiring we in are into our X announce to as growth addition presidents new In market the our the and of for our solid excited Pennsylvania strategy. results Western organic we

by We excited the Univest Chris the are and Matt to additions of family.

lines new addition they building working they their of experienced markets. growing teams, our be business serving and bankers, While and are these in to will all commercial with

platform the the as Additionally, off building in investments digital the we we during few less the be quarter, build this reliant past expand of physical years. initiative. allow technology a comprehensive locations been future out on platform, development digital in more efficient we will making over us and have and to the began This

will be will us as investment, well we a are position evolve. future preferences confident customer for it the continue and significant very expectations to this While

Finally, quarter. Directors and due the per of position, has to repurchase in XXX,XXX capital our quarterly of strong dividend cash performance targeted declared Board increase the and strong our a X% shares at

enabling that increase past our strong utilizing value with our us years, performance, have been capital is excited our return fund to the capital over While generated our position to strong shareholders. we few we to growth we are internally the along

for of as lot could serving further over there’s it their XXX of communities work my and the for Brian at excited family. our release possible grow. This not our in results. to now over continue our discussion about I will turn to Univest efforts I’d comments, hard to thank without other. members all a to the we the each customers, be be detailed like them As on Univest and

Brian Richardson

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

with As the our performance are Jeff said, we quarter. pleased during

incremental While transformation, totaling I customer on lenders the performed our quarter. associated associated X core mortgage touch of costs and who digital with onboarding well the new during our from with was incurred to we million would expenses defrauded, $X.X items earnings release. business like the

the the averaged by in points reported negatively First, of basis quarter fourth for X.XX%, quarter. was basis margin points to $XXX to Reported million XX $XXX compared down which liquidity, excess impacted NIM fourth X million compared quarter. of the

basis $XXX,XXX decrease This to increased X Core and compared the impact of During modest of weighted of XXXX the X of net when during quarter quarter. was points margin, incremental XXXX, first X.XX%, to excess is the quarter a PPP PPP income. X.X%. a $XXX million quarter, attributable and investment totaling basis decrease which contributed fourth yield of excludes average at purchases fourth the first to by and loans the NIM liquidity interest points

expand rates quarter. NIM XX raises in the points by Reserve XX Federal points we expect second core the in by Assuming to basis May, basis XX to approximately

December X.XX% allowance assumptions, driven growth of This of a The and $X.X coverage million. quarter, provisioning reversal at compared changes loss recorded by from by $X.X loan provision loans, PPP X.XX% and for offset on in economic-related specific the March credit to ratio, benefit During excluding credit reserves. for we XX. XX was September XX million was losses a for

from During leases year-end. the net of we and quarter, nonperforming experienced and charge-offs X.X% loans $XX,XXX decreased

management XX.X% offset quarter or million increased Fourth, of in XX% compared on Insurance activities the which who lines income $X quarter or our last by Paul was guarantees net gains customer mortgage $XXX,XXX This of defrauded. $XXX,XXX the of expense hired fee to December expense digital million I. to transformation the income $XXX,XXX other and service of inclusion investment acquired project, streams. compared $X.X Agency, which paid first first on recently our noninterest decrease a banking to includes the X was $XXX,XXX mortgage our business insurance producers Third, XXXX, driven noninterest and XXXX. Sheaffer increases related of to of million year; $X.X resulting was in of from decreased the to and by related

expenses these the and updates XXXX the to like release first straightforward, items, of believe I provide quarter remainder XXXX. was would million now our compared in X.X% Excluding earnings to the guidance. or of $X.X I to

First, of X% $XX net net income in to when of guided million originally reminder, PPP excluding XXXX, approximately income during interest million. PPP of to $XXX.X X% excluding X% and growth as growth a interest had XXXX, loan loans, income We totaled XX%.

PA Our Maryland the of addition mortgage and increased previously loan and markets guidance X% growth is to reflect producers. to expansion Western to XX% the the discussed being

expect million This annualized anticipated basis increase increase approximately of $X several first $X.X is net to approximately million XX XXXX. this interest to the increase basis in additional and the XX March the expected includes in XX point income result point basis Each million of $XXX.X income May. from in XX% base result rate impact We increase. the net for interest off point to to growth in of the XX% of

noninterest included of death $X.X XXXX income Second, million benefits. BOLI

income of full income year. benefits, noninterest for We to flat on and in the volume noninterest death for previously rate X% margins is these year line We saleable of XXXX interest had business reduced BOLI This environment. current mortgage $XX.X to Excluding the expected be million expect of the approximately X%. based primarily now by growth the slightly down. totaled driven noninterest income to

had $XXX.X expense growth noninterest previously reported for and approximately guided for we Third, X% to to of XXXX of X% million XXXX.

incur in million initiative. with $X.X transformation to conjunction roughly expect of digital $X expense to in We million XXXX our

off Western expansion markets million $X.X to $X year. Including to the investment the expect to to XX% approximately X these million expenses XXXX $XXX.X PA of base incur in Maryland related expenses from to of million XXXX. expect we investments, we increase and incremental during Additionally, the XX% our

to our Western markets, earnings X fully pre-provision these relates approximately in X.X to we again, to on months expect earned expansion in accretive back years, be it pre to and PA Maryland XX and As provisions. our investments

intangible this We markets continue value of as entering to acquisitions, bank with and book new whole prefer more method which tangible integration recognition include dilution. doing inherently compared risk,

range income to quarter’s higher based on our end That last relates updates, was call. during provided our increased the from pretax to these XX% my it XX% the remarks. concludes expect on as be Lastly, tax of rate we guidance earnings taxes, prepared effective that to

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

Operator

from Piper [Operator today Instructions] from Frank comes first Our Sandler. Schiraldi question

Frank Schiraldi

with from if how that start you initiative would line get size? need you of your in with just does that Jeff, give terms to more of If be you to you that could could Wanted color Or give us where you kind in digital great. a maybe differentiates a little others and us to detail on size? -- there, that be more of -- little others if the digital platform, the your

Mike Keim

Frank, I’m take this Mike. it’s So to one. going

both We’ve using the core Salesforce now and investments initiative, digital several made the And we a wrap to that the would which last is and what with expanded with made we’re all over ecostructure Salesforce the in into investments tools to a platforms is core Jeff those Salesforce, deliver platforms ultimately hopefully, human significant differentiator digital capability. in delivering touch the on years. be background the Brian So alluded it. doing

customers. is -- available So We want beyond to And will but perspective And making that personalize as it sure better to things at be customers to the for as deepen data. when that our customers we stated at we hours may goes with do that not well digital from look business that that. previously have to organization with us, had. relationships need continue make we much sure need a necessarily existing

on forward, of the our terms move peers our or to with We we size, is so relative enact competitors peers this thrive in move and that continue we this we are as our make we par In we future. how to initiative, I can larger peers, need that to will sure forward. used larger think

Frank Schiraldi

okay. -- And

how external investment? this of just how of is to sort going going of of And and run middleware be internal So in this IT? terms to external to consultant planned continue much is And implementation? in like much beyond and sort is it rate

Mike Keim

numbers the that alluded -- Brian So are external. Brian to

Brian Richardson

this Correct. associated our that’s there’s capitalization. you an that. expense like initiative Whenever And do with XXXX

through that year capitalizing I external those So But results to result is a be what expect for provided. actually future guidance tail the of we a there as P&L from periods in will costs. this the run that

Mike Keim

at X need serve with kind we beyond consulting to helping One that. and how who of to deeper back, serving, And then are build to step to we’re and we then the questions, content, we we would partnering we importantly, forward. branding your how partnering is are And the a together and move like also this with look the And how X for sure as deliver -- do with core infrastructure make said, be us about entities. them move the combined staff, firm. available forward. those marketing how to as just are customers and we I entities, our deliver internal digital how operate and we work our we and But changing will we solutions product company that so

customer our in care investment increased an be center. will there So

are sure we available serving our And at be get for more type a data. them. of need we of to So also that we can we approach and better much customers, to concierge make

we and data. so investment can a of be forward. tons have we sure experiences we need as personalized in that We company make has make but predictive of tons move that to data, Every we data significant

external combination resources. internal a be of will it and So

Frank Schiraldi

Okay. Got one sneak just in. if you. lastly, then I And could

markets -- expense? the XX% in I from expansion in any the and increase growth? the chance the building as to is Brian, initiative. didn’t XX% increase And XX%, inflationary digital general a I to -- to XX% to just expense if also to you not, for of noted out terms sorry, terms the that that do the is get math. Is X% well know a risk that the of there to X% In But

Brian Richardson

loss for things I defrauded bit these. item in Yes. The No, of inflation in that’s There’s the our as of as well some investment updated a expectation, kind well. as all considered. there spoke to mortgage little that

there, bit set kind and targets of that inflationary increase, we but of of had XXXX, our at to but for be is anticipated a and an seem pretty that little a to we there guidance close in point. that’s tracking baked this bit So when original fair things

Operator

question Tim KBW. next from from Switzer today The comes

Tim Switzer

If the about I’m Mike could we expansion talk on Perito. for quick. real markets

now and your billion you have you give press about this you the And PA about planning markets? in the going success want have really? but know out have presidents, you many the the XX the release with trajectory talked think, a and Are if similar Central just hired started any outstanding. entering employees with after to guidelines employees to? new you’ve $X.X lift of what’s loans about -- trajectory, you us You in of region I for And like they’re maybe just you how or exactly these starting year, do

Mike Keim

the team moving of of will level us have So was growing also process factors a in of trajectory lead teams was as expedite X which Pennsylvania. to talented there. time, couple the And there that We the to have forward that not allowed a we Tim, it’s of into get were think at played significant we extremely found markets. disruption that individuals Mike. our to both Central we that. in there had the and market No, business kind One, I size. we mean of of able same

of and be Jeff were will looking build those bring teams But services bear. all the to referenced actively on in products opening side. remarks, going to recruit We as to his out and commercial we our

So putting officers, hiring mortgage our be management in management marketplace. we person to a will each capabilities, treasury adding loan wealth

RMs that time point So quickly that marketplace. we targets give we many hire future and are how optimistic, because dependent in loan at upon this be in will prepared are to not but we how

Tim Switzer

market, strategy markets new your each entering winning real on Okay, about you business? talk great. strategy. go-to-market but quick, you that And plans your then in when could general if maybe could And please? talk it’s What’s about and your unique

Mike Keim

people we to certain community time, each it’s be Jeff -- -- in meeting individuals marketing It know grow investments. business that say, will need have need influence spend prospects, a first We leader foremost, over find current then team we I need basic. dollars, with market, we make can know to to most would myself in and and we and an then importantly, obviously, customers. building be of that. fairly We to talented Yes. is that extremely marketplace and talented supplement and and

So and who focus successful. we sure the need right in, as very time this and about is that the focused on and team the that customer of will making people a successful the we what be taking to that We each of know that a that’s that us make build us and We an to talent, we care day market. company. customer are investment of allow and that. feel know do, confident care thing are will on day taking doing of out, and can in We

Jeff Schweitzer

bank. leading very with commercial been we that’s the by we’ve successful mean, are. Tim, I who

small middle commercial is Our bread and business, lending. market lending, butter

And bankers commercial advisers top of digital like. successfully, out bringing mortgage and in grow on layering we X on and on can an market do it lending then it, think teams wealth impact a So these supplement have very the to efficient on good with but then the market, way. we the and initiative really build presidents it

So the of more being a and spoke, regional initiative, the being digital with of and type digital the presence. hub hub spoke headquarters the

individuals. we’re bringing these excited So X about

about it’s consumer and beginning, focused we what they commercial think we the we’ll on can as building going along. layer be But out to team. do, excited We’re a go at then really

Operator

[Operator next from Preston Instructions] from today Brody The question comes Stephens.

Body Preston

business kind And follow to if core Matthew. kind customer what they’ve Could give businesses with smaller with? the wanted your us sense Chris a historically just size done or cohort? than on for I that’s larger you and expansion regional of up of

Mike Keim

go where there I think of up wide bigger? broth. looking at couple could done. course, continue Revenue a something it with dollars to is we sizes be size in say. average, be that that’s to we’ve consistent size? $X would loans, million of of on Would that we that’s larger and But typical do play a But loan Yes. to $XX a well, and million will could. that. Could we Of what -- take And small you’re that million $XX million. of to we terms I

Jeff Schweitzer

was what’s well what target growing been prospect fit in with and very have in what is Yes, successful exciting the they that historically business. we

Body Preston

about anticipated Got maybe And long front, wanted a I think on XXX,XXX I capital shares it. the how repurchasing? management quarter. you just to it’s ask

Jeff Schweitzer

Yes.

available. we So have XXX-some-odd thousand

to to to as greatly how especially long makes -- good going We’re economically continue from that, rate increases a at the purchasing capital as the as that expect expect would sense. pace we coming and we with can those as generate are investment and long continue benefit we we is will

as to So we’ll right continue up, assess if I thousand that would we have at more start for we that authorization available. need And that we fill XXX-and-some now, get think shares. repurchase time to to to

Brian Richardson

less, X of current that. about And we levels, half us gives years we’re less earn kind targeting of that an or back as coverage. than of at Clearly, of a honestly, quite current look it, we’re worth at year’s

point at be for attractive that this us on front. to certainly active it’s So

Body Preston

Got it.

turning yields, yields could Okay. on what -- loan new see compression are started not the spread you’ve whether to us blended you or And a give sense just to and the any loan and compression? for

Brian Richardson

Yes.

kind still So quarter, from they -- saw kind in slightly the low to the fourth of new that up of but we at quarter, range. we were mid-X% looked first yields as in

deals, on. been locked know, rate as quarter. pretty really increased was closed throughout have of the expectations However, the drastically that then which we And earlier would

mid-X% of we’ve in recently, seen or low so. trending the most month over to range last and kind higher that So things

Body Preston

then me. last And just one Got for it.

so to rates exceptions it at to all any spot on prices a as some begun of basis, Just Have customers? for you make relates have pricing you on far? changed deposit your

Brian Richardson

honestly, that on No. foreseeable cost operate with a We’ve to deposit on future. the the quite think to liquidity gives held we really project steady level all continue have. room to have fronts bit the little on -- We of of side and excess for that us

Operator

The from Neuberger from Reynolds Berman. question today comes next Chris

Chris Reynolds

long-term my It’s up XX of quite you And your thought sort -- Yes. more. on dividend to increase. and the was is haven’t continue dividend you years a liquidity in this this to company function to that grow I excess just is I policy? a grows? discussed? positive. change as the of we Or or wanted expect that recollection, follow maybe your Should dividend the increased

Jeff Schweitzer

Chris, Yes, Yes, it’s Jeff. true. it’s

as during our like haven’t would the number XXXX, most looking then. and obviously, increase. didn’t increased time and a capital years. our through coming it benefit We steady are We that to from prudent for said, the at cycle in at some cut it it to of increases earnings in peers from dividend felt greatly value we shareholders. a our and done. have back But our We are rate I’ve dividend raise the where -- held projections position, quite return ‘XX the we’ll Fed, of this

will We assess on. time goes that to continue as

capital As that where with far and really going continue and earnings our with our growth shareholders we we’ll with to growth excess as earnings combined our Board. -- with more our position nothing to reward overall obviously, nothing going to it position do continue is, time to like forward, combined capital assess would to than is, as the our position. goes where had on we liquidity. But do strong It see had the with where

Operator

time. additional no are waiting at There Instructions] this questions [Operator

from have We from question, me, excuse Tim Switzer follow-up a KBW.

Tim Switzer

I just couple more. had a

at And excess investment current excited through about up just $XXX stepping the securities you And all? with growth? quarter, guys ended that the recent in cash the you purchases buying too talked plan not mind letting like increase at loan or rates, quarter, million But last the deployed be changed balances. yields. about on liquidity you On of your being do has

Brian Richardson

This is Brian.

one. bit in increase had excess $XXX work that of That liquidity. as We quarter in that million incremental we yield, at quarter, then advantage and the first of kind said, of in through quarter million purchased the to little ended Just the $XX fourth another $XXX taking incremental a described. you million

our based public seasonality roughly expect We as of that rundown million guidance million remainder the on loan well the year through utilization in $XXX $XXX as of to of of of funds. kind

X% total than like, said, the right we and liquidity investment But this to for much around that to you facts point excess further adjust X% have and current to of we’re based at plan right portfolio circumstances, the really when don’t So target bolster we the on assets. now. And tend X.X%

kind that range in we’re So of that operating like we be. to

Tim Switzer

Nice.

the sort related to a peers just Okay. a smaller TCE it the pretty rates minimal pretty hedging from are And then you but on portfolio, of your lot and have have getting it your Do impact portfolio that, guys you obviously that? and interest AOCI guys on the way any hard. higher you securities had of securities just hit and structured? Is

Brian Richardson

-- reported what Yes. and -- hit function for [indiscernible] have see and the strategies as have deterioration with extent we don’t the a We a others just much in hedging largely didn’t million portfolio a the $XX ratios same magnitude. our the you value, book you a We see for during to see of consistent why unrealized itself, that period, but why really That’s don’t maybe and seen, [indiscernible] that. our did have not offset of did quarter recognized was earnings that. any the between available increase mixed That’s sale. offset

Operator

this waiting time. questions additional at no are There

to like closing the over pass conference back I’d for to Jeff So Schweitzer remarks.

Jeff Schweitzer

Bailey, everybody, Thank and today. us you, thank for joining you,

stuff to of strongly on lot our you there’s see future. very to that I respect all on working us initiatives can position exciting continue to in think a going these for As the of with release, we’re

I have earnings. with everybody we So after second all quarter speaking we to look great release a hope forward day. you And

Univest Financial (UVSP) 30 Apr 222022 Q1 Earnings call transcript