Univest Financial Corporation · NASDAQ:UVSP
Univest Financial — Q2 2023 Earnings Presentation
50 slides from Univest Financial's earnings presentation, Jul 27, 2023
Slide 1: Investor Presentation
Investor Presentation September 13, 2023
Slide 2: Safe Harbor Statement
Safe Harbor Statement Cautionary Note Regarding Forward-Looking Statements The information contained in this report may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words "believe" "anticipate," "estimate," "expect," "project," "target," "go
Slide 3: Safe Harbor Statement (cont’d)
Safe Harbor Statement (cont’d) Cautionary Note Regarding Forward-Looking Statements • Our ability to enter new markets successfully and capitalize on growth opportunities; • Competition for loans, deposits and employees; • System failures or cyber-security breaches of our information technology infr
Slide 4: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These non-GAAP measures include tangible common equity, core net interest income excludi
Slide 5: Company Overview
COMPANY OVERVIEW
Slide 6: Univest Company Overview
Univest Company Overview • Headquartered in Souderton, Pennsylvania (Montgomery County) • Bank founded in 1876, holding company formed in 1973 • Engaged in financial services business, providing full range of banking, insurance and wealth management services ◦ Comprehensive financial solutions deliv
Slide 7: UVSP by the Numbers
UVSP by the Numbers 7th Largest Diversified Financial Institution Headquartered in PA 9.6% 1 Core PTPP-NCO 2 <---5-year CAGR---> 8.0% TBV/Share Conservatively Managed Organic ~25% - 30% Growth Engine Fee Income Business Revenue/Total 11.1% 5-yr CAGR 10.6% 5-yr CAGR 2nd 3rd Organic Loan Growth Larges
Slide 8: Deposits and Liquidity Highlights (As of June 30, 2023)
Deposits and Liquidity Highlights (As of June 30, 2023) Brokered deposits totaled $431 million or Uncommitted funding Committed borrowing 5.7% of total assets. sources of $410.0 capacity of $3.2 billion Additional available million ($285.0 million ($2.0 billion available1) liquidity from future unus
Slide 9: Deposit and Liquidity Update (As of September 11, 2023)
Deposit and Liquidity Update (As of September 11, 2023) Deposits Dollars in thousands 6/30/23 % 9/11/23 % Change % Noninterest-Bearing Deposits $ 1,582,767 26.4% $ 1,551,898 23.7% $ (30,869) (2.0)% Demand Deposits 2,433,585 40.6% 3,024,528 46.2% 590,943 24.3% Savings Deposits 866,687 14.5% 811,021 1
Slide 10: Expense Management Strategies
Expense Management Strategies In response to the current macroeconomic headwinds, certain expense management strategies, which are described below, were executed during the second quarter of 2023. • Estimated annual savings of ~$5.4 million. • Headcount Rationalization ◦ ~28 FTE reduction primarily
Slide 11: Executive Leadership Team
Executive Leadership Team Tenure (yrs) Name Age with Univest Title Jeffrey M. Schweitzer 50 15 President and CEO, Univest Financial Corporation Michael S. Keim 55 14 Chief Operating Officer, Univest Financial Corporation and President, Univest Bank and Trust Co. Brian J. Richardson 40 7 Senior Execu
Slide 12: Univest Primary Physical Service Area
Univest Primary Physical Service Area KEY Headquarters Financial Center Regional Center Regional Center (Deposit Taking) Insurance Expansion Markets Western PA Maryland 12
Slide 13: Market Opportunity
Market Opportunity • Univest is one of the two largest community focused financial institutions remaining headquartered in the Philadelphia market (WSFS being the other) • Univest Bank and Trust Co. primarily operates in thirteen counties in Pennsylvania including: Berks, Bucks, Chester, Cumberland,
Slide 14: 2023 Strategy
2023 Strategy Digital Transformation: ■ Leverage our previous technology investments and further enhance our ability to deliver our financial solutions digitally with a human touch; Focus on data analytics and personalization to increase capture from existing customers ■ Achieve the hub and spoke op
Slide 15: Attractive Investment Opportunity
Attractive Investment Opportunity Super-Community Diversified lines of Opportunity and Bank Headquartered business and revenue ability to scale and in attractive streams (i.e. Noninterest obtain operating Southeastern Income represents ~25% - leverage Pennsylvania market 30% of total revenue) Strong
Slide 16: Summary Financial Highlights
SUMMARY FINANCIAL HIGHLIGHTS
Slide 17: YTD Q2 2023 Results
YTD Q2 2023 Results Earnings Loans & Deposits Reported Earnings: $37.8 million $1.28 per Share Annualized Loan Growth: 11.0% Core PTPP-NCO1: $54.3 million Annualized Deposit Growth: 2.4% Reported ROAA: 1.04% Core PTPP-NCO ROAA1: 1.49% Reported ROATE 1: 12.45% Average Loan to Deposit Ratio: 107.3% Co
Slide 18: Core Pre-Tax Pre-Provision Income less Net Charge-Offs
1 Core Pre-Tax Pre-Provision Income less Net Charge-Offs $120,000 $108,434 $100,000 $87,236 $84,911 $85,340 $80,000 $68,620 $64,978 $60,000 $54,258 $40,000 $20,000 $— 2017 2018 2019 2020 2021 2022 YTD 2023 1. This is a non-GAAP financial measure. Refer to the Appendix for reconciliation. 18
Slide 19: Tangible Book Value Per Share
Tangible Book Value Per Share1 Target 8-10% Annual Growth 2 12/31/22 vs 6/30/23 2017 - 2023 CAGR = 7.3% $25.00 $30.00 $25.00 $1.29 $0.04 $21.27 $20.42 $20.00 $(0.48) $21.27 $20.00 $15.00 $20.42 $20.14 $10.00 $17.66 $5.00 $17.01 $15.00 $— $15.24 12/31/22 Earnings Buybacks, AOCI 6/30/2023 $14.44 Divid
Slide 20: Core PTPP-NCO ROAA & ROTE
Core PTPP- NCO ROAA & ROTE Core PTPP-NCO ROAA1 Core PTPP-NCO ROTE1 2.00% 22.00% 1.90% 21.00% 1.80% 20.00% 19.54% 1.70% 19.00% 1.63% 18.53% 18.20% 1.60% 18.00% 1.56% 17.58% 17.83% 1.49% 1.50% 1.51% 17.00% 1.49% 1.40% 1.45% 16.00% 16.33% 1.37% 15.77% 1.30% 15.00% 1.20% 14.00% 1.10% 13.00% 1.00% 12.00%
Slide 21: Net Interest Income
Net Interest Income Core Net Interest Margin 4.00% $220,000 3.80% 3.78% 3.72% $210,000 3.67% 0.08% $200,000 3.60% 3.52% 0.14% $190,000 3.40% 3.37% 3.35% $180,000 0.21% 3.20% 3.18% 3.78% $170,000 3.72% 0.12% 3.59% 3.00% $160,000 3.38% 3.35% 3.16% $150,000 2.80% 3.06% $140,000 2.60% $130,000 2017 2018
Slide 22: Efficiency Ratio
Efficiency Ratio 75.0% UVSP pays a Bank Share Tax rather than Bank Income Tax to the Commonwealth of Pennsylvania as a result of our type of charter. This amount is included in noninterest expense and increases our efficiency ratio by approximately 170 bps compared 72.5% to other banks that do not h
Slide 23: Non-Interest Income % of Total Revenue
Revenue (excluding PPP impact) Revenue Revenue by Line of Business (YTD Q2 2023) 350,000 50% Univest Capital, 300,000 Mortgage, 2.7% Wealth, 40% 13.1% 8.7% Non-Interest Income % of Total Revenue 250,000 Consumer, 0.7% Insurance, 30% 7.8% 200,000 $ (000) 150,000 20% 100,000 10% 50,000 — —% 17 18 19 (
Slide 24: Fee Income
Fee Income $96,000 50% $84,000 $83,224 $78,328 $77,885 40% $72,000 $65,422 33% $60,173 32% $60,000 $59,240 32% $55,963 30% 29% 28% 28% 26% 26% $48,000 $39,513 20% $36,000 $24,000 10% $12,000 $— —% 2016 2017 2018 2019 2020 2021 2022 YTD Q2 2023 Trust / Wealth Fee Income Insurance Fee Income Mortgage
Slide 25: Assets and Loans
Assets and Loans Assets Loans by Segment (excluding PPP) $8,000,000 $7,000,000 $7.6B CAGR = 11.0% $6.5B $7.1B $7.2B $6.1B $7,000,000 $6,000,000 $6.3B $5.3B $6,000,000 $5.4B $5,000,000 $4.8B $5.0B $4.4B $5,000,000 $4.6B $4.0B $4,000,000 $4.2B $3.6B $ (000) $4,000,000 $3.3B $3,000,000 $3,000,000 $2,00
Slide 26: Liabilities and Deposits
Liabilities and Deposits Liabilities Deposits $8,000,000 $7,000,000 CAGR = 9.8% $6.1B $7,000,000 $6.8B $6,000,000 $5.9B $6.0B $6.3B $6.4B $5.2B $6,000,000 $5.6B $5,000,000 $4.4B $5,000,000 $4.7B $4.4B $4,000,000 $3.9B $3.6B $ (000) $ (000) $4.0B $4,000,000 $3.7B $3.3B $3,000,000 $3,000,000 $2,000,00
Slide 27: Stable Asset Quality
Stable Asset Quality Nonperforming Assets Nonaccrual Loans & Leases $50,000 2.50% $50,000 2.25% 600.0% $40,000 2.00% $40,000 500.0% 1.75% $30,000 1.50% 400.0% 1.25% $30,000 $ (000) $ (000) $20,000 1.00% 300.0% 0.75% $20,000 $10,000 0.50% 200.0% 0.25% $10,000 $— —% 100.0% (0.25)% 2016 2017 2018 2019
Slide 28: Current Expected Credit Loss (CECL)
1 Current Expected Credit Loss (CECL) $100.0 $3.1 $1.0 $36.3 $6.1 $83.0 $6.7 $82.7 $79.0 $(4.6) $4.3 $(3.4) $75.0 $71.9 $(3.9) $(10.5) $(0.4) $(0.2) $(000) $50.0 $12.9 $35.3 $25.0 $— 2019 CECL Loan growth Specific Net 2020 Loan growth Specific Net 2021 Loan growth Specific Net 2022 Loan growth Speci
Slide 29: Liquidity and Capital
LIQUIDITY AND CAPITAL
Slide 30: Liquidity and Capital
Liquidity and Capital Liabilities & Shareholders’ Equity Borrowing Sources – as of 6/30/23 Other Borrowings, 7.4% Balance Unused Subordinated debt, 2.0% FHLB - Pittsburgh* $ 422.8 $ 1,817.7 Other Liabilities, 1.2% Federal Fund Lines (9 Lenders)** 125.0 285.0 Brokered Shareholders’ FRB - Philadelphia
Slide 31: Strong Capital Ratios Provide for Operating Flexibility
Strong Capital Ratios Provide for Operating Flexibility Tier 1 and Common Tier 1 (Leverage) Tier 1 (Common/RBC) Equity Tier 1 Capital 15.00% 15.00% Ratios are the same. 11.11% 10.88% 11.03% 10.76% 11.08% 10.48% 10.13% 10.02% 10.37% 10.26% 9.81% 9.59% 9.42% 10.00% 8.84% 9.08% 9.13% 10.00% 8.50% 5.00%
Slide 32: Largest Deposit Relationships – As of 6/30/23
1 Largest Deposit Relationships – As of 6/30/23 Deposits Balance Rank Type (000s) 1 Public Funds 75,152 2 Bus / Corp 68,340 3 Public Funds 54,237 4 Bus / Corp 51,984 5 Public Funds 43,425 6 Bus / Corp 40,772 7 Bus / Corp 40,519 8 Public Funds 35,214 9 Public Funds 34,017 10 Bus / Corp 65,432 11 Publ
Slide 33: Investments
Investments Investment Portfolio Investment Portfolio Details Corporate Other Bonds 0.7% 16.0% Municipal Municipal Bonds Corporate Bonds Bonds (in millions) (in millions) 0.4% Moody’s Rating State Moody’s Rating Aaa 1.0 PA 1.3 Aa3 1.0 Aa3 — TN 1.0 Aa2 1.5 Aa2 — Total 2.3 Aa1 — A1 — Aaa 0.5 A2 — A3 1
Slide 34: Loan Portfolio Detail and Credit Overview
LOAN PORTFOLIO DETAIL AND CREDIT OVERVIEW
Slide 35: Loan & Lease Detail
Loan & Lease Detail 2016 1,375 823 175 294 30 291 163 135 2017 1,542 896 176 342 28 322 184 130 2018 1,741 938 216 363 33 388 186 142 2019 2,040 947 233 374 30 439 174 149 2020 2,459 893 243 381 27 488 167 165 2021 2,719 956 284 410 26 541 159 185 2022 3,028 1,087 382 478 28 730 177 211 2023 3,222 1
Slide 36: Largest Loan Exposures – As of 6/30/23
Largest Loan Exposures – As of 6/30/23 Commercial Real Estate and Residential Real Estate Secured for Business Purposes Commercial & Industrial $4,153M | Avg Loan Size $618K $1,039M | Avg Loan Size $343K Risk Exposure Risk Exposure Rank Loan Type/Industry Rating (000s) Geography Rank Loan Type/Indus
Slide 37: Loan Portfolio Overview – As of 6/30/23
Loan Portfolio Overview – As of 6/30/23 % of Commercial Industry Description Total Outstanding Balance Loan Portfolio CRE - Retail $ 468,650 9.0 % Animal Production 350,654 6.8 CRE - Multi-family 306,508 5.9 CRE - Office 303,848 5.9 CRE - 1-4 Family Residential Investment 282,613 5.4 CRE - Industria
Slide 38: Credit Infrastructure
Credit Infrastructure Approval Process Significant Centralized Management Experienced Conservative credit oversight via credit team credit culture underwriting committee process approvals for $10 million or greater Line of Business Credit / Risk Owns Borrower Relationship Owns Borrower Risk Risk Ass
Slide 39: Credit Overview
Credit Overview • Limited single signature lending authority. Joint signature up to $10.0MM, then management level loan committee for the largest exposures. ◦ Itemized report of all closed loans of $500K or more reported weekly to Officers Loan Committee. • Robust independent loan review process, us
Slide 40: Line of Business Overview
BANK AND TRUST CO. Member FDIC GUNIVEST Guard LINE OF BUSINESS OVERVIEW amok WW g VUNIVEST UNIVES T HOME LOANS
Slide 41: Commercial Banking
Commercial Banking Commercial Banking Commercial Loan Detail as of 6/30/23 • 95 lenders, relationship managers and portfolio managers operating in four divisions established by geography (serving clients primarily in Pennsylvania, New Jersey, Delaware and Maryland) Tax-Exempt, 3.5% ◦ East Penn and N
Slide 42: Consumer Banking
Consumer Banking • 28 financial service centers located in Bucks, Lancaster, Lehigh, Montgomery, Northampton and Philadelphia counties in PA; also operating 14 retirement centers in Bucks and Montgomery counties and 11 Regional Centers (Deposit Taking) • Proactively addressed continued reduction in
Slide 43: Mortgage Banking
Mortgage Banking Mortgage Banking Residential Mortgage Originations • 63 Loan Officers predominately operating in $800,000 $9,000 Bank’s core footprint • Primarily agency lender: FNMA, FHLMC, FHA, $700,000 $8,500 VA and USDA ◦ FNMA and FHLMC eligible loans sold with $600,000 $8,000 servicing retaine
Slide 44: Univest Capital, Inc.
Univest Capital, Inc. Univest Capital Lease Financing • Equipment financing business with 280,000 10.00% $237 million in lease receivables as of 9.00% 6/30/23 240,000 8.00% • Average lease size $45,000 200,000 7.00% typically with four-year term 6.00% 160,000 • Primary industries served: health care
Slide 45: Wealth Management
Wealth Management Wealth Management Assets Under Management • Comprehensive wealth management platform 5,000,000 including broker / dealer, municipal pension services, registered investment advisor, 4,500,000 retirement plan services and trust 4,000,000 • The wealth management division operates unde
Slide 46: Insurance
Insurance Insurance Agent Written Premiums • Independent insurance agency with more 225,000 than 60 carrier relationships 200,000 • Full service agency providing commercial and personal lines, employee benefits and 175,000 HR consulting solutions 150,000 • Built via a series of eight acquisitions be
Slide 47: Appendix (Non-GAAP Reconciliations)
APPENDIX (Non-GAAP Reconciliations)
Slide 48: Appendix – Non-GAAP Reconciliations
Appendix – Non-GAAP Reconciliations $s in millions 2017 2018 2019 2020 2021 2022 YTD Q2 2023 1. Tangible Common Equity Shareholders' Equity $ 603,374 $ 624,133 $ 675,122 $ 692,472 $ 773,794 $ 776,500 $ 805,222 Less: Goodwill 172,559 172,559 172,559 172,559 175,510 175,510 175,510 1 Less: Other Intan
Slide 49: Appendix – Non-GAAP Reconciliations (cont.)
Appendix – Non-GAAP Reconciliations (cont.) $s in millions 2017 2018 2019 2020 2021 2022 YTD Q2 2023 5. Core Tax Equivalent Revenue Total Revenue $ 202,416 $ 218,235 $ 234,654 $ 252,689 $ 271,607 $ 296,182 $ 153,160 Plus: Tax Equivalent Adjustment 6,697 3,493 3,439 3,248 3,186 2,922 1,083 Tax Equiva
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