UVSP - Earnings call 3 2023 | Univest Financial Corporation

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Operator

Hello all, and welcome to Univest Financial Corporation's Third Quarter 2023 Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions]I'll now hand you over to your host, Jeffrey Schweitzer, President and CEO of Univest Financial Corporation to begin.

Jeff Schweitzer

Thank you, Lydia, and 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 would like to remind everyone of the forward-looking statements disclaimer. of during forward-looking of intentions, statements expectations the that management conference beliefs advised laws. within make securities may that meaning be the this course call, or Please federal the express management's Univest's actual those these statements. forward-looking materially contemplated by may results differ from you forward-looking our review I and from in yesterday. release cautionary earnings our to will refer our a SEC chance statements earnings in filings.Hopefully, to the everyone had release reported under can $X.XX it our found income the during Investor million be tab.We per or univest.net not, If website the Relations on net quarter $XX of at third share. quarter. our continue negatively cost which the Like industry, most the driven shift by mix be impacted rising our in funding, by primarily we the to net deposits, impacted interest in of during margin during We quarter shift third quarter. second see compared the this slow the to did

liquidity we by to rising our focus has on pricing the of the Given as experience quarter existing cost of fund significant design seasonal to growth we deposits. maintaining slowed increase loan during customers. due public deposit and continue on the full-service customers.We full and This lending capital did relationship build for lending funding, focus

margin pressures, us throughout management business the work like would cycle entire family model our continues the Univest well pass wealth X.X% they to for insurance great to with serve combined year-to-date.Before up day. I Brian, diversified this revenue do I the over Given it to every thank

a to discussion to positive further each our making Brian by over focus will our communities continues it other.I on results. on Our turn team and impact customers, now serving for

Brian Richardson

would X from for by thank on the earnings joining would I and like also items you, Thank to like touching everyone us start I to release. today. Jeff,

[ to reported and NIM continued increased shift pressure reduced million liquidity, betas.Reported averaged to mentioned, excludes which the net deposit as to points. Jeff ] of Core ongoing net the NIM, quarter. X.XX% we cost basis XX X.XX% the quarter. as First, deposits which for Excess quarter, of NIM second well compared primarily margin, due last X% as interest funding by liquidity on in points saw excess compared $XXX X basis was decreased

interest-bearing cycle-to-date deposits. when and XX% XX% deposit through Our beta total the quarter including third was

Our cost a in $XX.X quarter.Second, last increased million. deposits loan discuss I from deposit $XXX.X the Noninterest-bearing deposits. was like and seasonal $XXX.X the grew X.XX%, million deposits up activity $XX.X and public funds experienced of X.XX% broker by accounts, We quarter. our during increase would $XXX.X during in quarter. Loans million personal and $XXX.X million by deposits, of million decreased in business offset million decreases fund in by accounts million $X.X to

accounts June September deposit represented quarter, internal we deposits recorded excludes deposits, and XX, a of At provision collateralized to billion September total compared during and represented unprotected total $X.X XX. credit As XX.X% of $X noninterest-bearing million. XX.X% insured, losses deposits of of XX.X% which at deposits.Third, XX, totaled for the

Net quarter at Our September or X totaled annualized. points for which was basis consistent $XXX,XXX charge-offs XX. X.XX% with June coverage ratio the was XX,

$X.X loan XXXX. by and from X.X% or increased revenue of included million to million. sold driven business. lines $X.X Nonperforming a our that third compared increased September banking During assets of insurance quarter the nonperforming income increased was $XXX,XXX wealth assets XX the October quarter, nonperforming noninterest par.Fourth, on of mortgage by primarily as at was XX This management,

on diversified expense serve business.Fifth, a our rate and model resulting increased during by environment. primarily primarily driven plan current FDIC incremental of the includes costs said the business continues by $X.X million driven expense, third to rate pressure assessment cycle of noninterest As us which current we retirement This before, have or XXXX. well $XXX,XXX the rate spread interest interest the our increased X% and to compared quarter industry-wide $XXX,XXX incremental is of

Excluding the provide compared like earnings these XXXX.I of to X.X% third the our for release up the quarter million an believe update guidance. of items, now X I remainder to would expenses XXXX $X.X was or were straightforward, and

last loan year growth expected call, credit quarter's guidance $XX the of income million. net for I provision million up reduced year. our guidance flat and communicated being to for that to approximately to be on unchanged.Second, This First, remains X% we interest X%, $XX loss would the for is

assumptions economic-related performance credits.Third, our will the credit to to However, X% portfolio, X%. X% of event-driven, including year income the growth, is changes including continue being noninterest growth provision loan to and from be reduced for X% to the in specific the guidance

this $XX.X guidance to is of X%. X% growth our As $XXX,XXX being is benefits.Fourth, expense excludes which BOLI X% base a reminder, from to million, X% noninterest to of of reduced the death XXXX

Lastly, to expect current based XX% on income will as to continue concludes we tax it our prepared my effective relates remarks. taxes, approximately be that rate rates.That statutory

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

Brian Richardson

from today first KBW. [Operator Instructions] comes Switzer question Tim Our of

Timothy Switzer

So thing I to trajectory you from probably of with think is here. the NIM start the first the

you think the rates the on your possibly if select or here? last beginning 'XX. and stay Can and of guys, could possibility costs assume of static then that of we will you thoughts from when trend that guys end NIM and when how there's you it -- us 'XX and talked to deposit mentioned think update I we on stabilize you stabilizing towards

Brian Richardson

this Brian Richardson. Tim, is Sure,

kind Assuming expect the we to we environment increases XXXX. that we're kind and early that is rate operate of there in, be continue in trough in to that further of no

quarter you and trough thereafter. stabilization upside in the potential We expect the with see And a little and here then bit more then occur. to fourth compression contraction the

Timothy Switzer

Okay.

safe your kind at trajectory digits maybe expansion of expectations, us? could just growth have it's okay, loan to mid at you the high-single next to for that repricing on out, settle deposit the Can quarter-to-quarter you see quantify probably I least growth book stays NIM some by assume well. loan and what driven you Looking probably assuming economy year, the costs said once back as help

Brian Richardson

environment think you of one potential I occur some think the 'XX. slight you upside benefits that would that could an that in But about there into just prepayments Again, But to later operating think churn that growth be get with the get do in and in definitely that slow portfolio. it, we I down in like. as is and starts occurs the churn Sure. as in uprate environment

So while expect the say, I costs and normalize have meaningful, next incremental you'll don't side, over we X overly I on quarters. the expect would to deposit asset be to add that some

Mike Keim

loan XXXX. And Tim, our in growth you to should in mid-single digits expect the be

Timothy Switzer

slowdown seen that maybe you've Okay. the in Or just for Any year-over-year, something reason the caution? market?

Jeff Schweitzer

as what liquidity eat we actually, continue the we not last into so in to We we to would continue loan and also talk desire to are comes start pressures, in but be about, given is and slowing quarter this Jeff. we down we've buybacks capital like like. the utilization Tim, maintain. could -- And it our of that and growth forecasted with turn the do cost on liquidity to loan grow to when Yes. growth more to to start capital is to capital opportunistic deliberately

me, continues that can we capital, headwinds deliberately sure grown everybody to. on But strong economy the there this could trust at still wanted stronger if definitely have -- with all are other have we full we opportunities the that support them.There digits relationship we on out are customers than given making focused would this it have that of side. double and we loans sure with I we be point. thought The to So loan have think we liquidity, quarter making

making exist, do opportunities but after full and the So pretty relationships, relationships we're which and are focused prudent that and bringing services. deposits sure and there we other go being

Timothy Switzer

to And the sheet with of deposit your NIM. we're we that to costs have then in saw settle cuts, rate down how say, the think half once the rate 'XX, start, with is flip kind of about side move last question if in we scenario maybe a can back us you talk If I and the the and would balance NIM you cut? some sensitivity

Brian Richardson

in down range low-single has and our kind the is Our this downside, percentage digit what would baseline Brian, -- of scenario NII is expect. XXX drop baseline we

the peers. behavior to and it However, continues be as to behavior relates side our customer competitive happens wildcard on deposit the of what both

So scenario. that But in there through. a play say, continue of downward will pressure down slight XXX, itself be to will kind

Operator

[Operator comes next from question Sandler. Our Frank Instructions] Schiraldi of Piper

Frank Schiraldi

-- And the given a the Just on just you curious be of Just guys where given wondering if thoughts think would you likely what next loan-to-deposit there? XQ touch? that if up us and are the deposit seasonality increased your moves to in where the move, do you seasonality remind back kind side, the ratio in beyond?

Brian Richardson

wind of the out first into low being down the kind public for funds year. for seasonality, quarter tends quarter normal fourth QX see the a the you [ second slight being on And Based normally quarter at with quarter. ] then the point XXX end third to Yes. the in and the of and peak us

we our of deposit ratio XXX expect from where XX/XX it the to of when quarter offset range. forward during to ] you back look or at would with loan-to-deposit [ was compounded growth So that kind to kind increase into the X/XX that

Frank Schiraldi

point. are total said brokered Is those there a about do how quarter. curious How But in as a you're percentage you those CD? at are about brokered fell that as versus deposits? your percentage where to -- about of Okay. think then balances limitation brokered I'm thoughts sure total? just And where -- this a thinking And is just you of what I customer the not want be? think you

Brian Richardson

Sure.

ended the of assets. million So XX% is our total limits where a internal are policy $XXX we quarter,

in we that like. us in quarter. funds use We incremental in quarter we give of would opportunistically not, use $X.X on had kind that have will growth manage brokered to of that on help but So did second third liquidity always public based we the them in toolbox the something is the about billion the We side. the the capacity

Frank Schiraldi

curious then [indiscernible] good sold that Obviously, par par. sign just you more end. if could you color question, loan provide curious million $X.X a last provide after that little could a And at like seems if quarter was on at it Okay. -- pretty

give detail loan, on cycle a that? any story you just So can behind

Mike Keim

above. it's Mike. electrical in the and was was the in case real a ran the value loan which Basically, at project kind out to continue the the The and in time. finish point regard of delays to That development. actually panels estate with to the running Philadelphia. was property that development of in Frank, into Yes. this of city is hold common developer money up like, space They

So par. value our out value carrying we exceeded fair of got the

Frank Schiraldi

Okay.

was so sort any that before mark. And of

You it's -- didn't take -- par any

Mike Keim

mark, at par. sold no totally it's value our no fair just early third carrying There exceeded The was second value. quarter mark, quarter

Frank Schiraldi

Is it you is mean, asset the just Okay. And -- of it manager, I bank? who's can alternative loan? that that say, the buyer another of type is buyer who

Mike Keim

get was I say specifics. the It bank, alternate will into Yes, wasn't won't fund. I a it an alternative.

Operator

We have queue. in no questions further the

the Schweitzer turn Jeff call remarks. I'll for closing So to back

Jeff Schweitzer

to you, year-end. Lydia, look for talking and in great forward and you Thank everybody this to thank listening Have day. we a you again at to morning,

Operator

you joining. This concludes Thank for call. today's

disconnect now your may You lines.

Univest Financial (UVSP) 26 Oct 232023 Q3 Earnings call transcript