Univest Corporation of Pennsylvania - Univest Bank and Trust Co. - Reports Fourth Quarter and Year End Earnings

SOUDERTON, Pa., January 22, 2014 – Univest Corporation of Pennsylvania (“Univest”) (NASDAQ: UVSP), parent company of Univest Bank and Trust Co. and its insurance, investments and equipment financing subsidiaries, today announced financial results for the quarter and year ended December 31, 2013. Univest reported net income of $4.9 million or $0.30 diluted earnings per share for the quarter ended December 31, 2013, a 3% decrease from reported net income of $5.1 million or $0.30 diluted earnings per share for the quarter ended December 31, 2012. Net income for the year ended December 31, 2013 was $21.2 million or $1.27 diluted earnings per share, a 2% increase in net income compared to $20.9 million or $1.24 diluted earnings per share for the comparable period in the prior year.

 

Loans

Gross loans and leases increased $15.2 million or 1% from September 30, 2013 and $59.6 million or 4% from December 31, 2012. The growth in loans from September 30, 2013 and the prior year-end occurred in commercial and residential real estate loans and equipment financing. While the longer-term economic outlook remains positive, household income and spending levels continue to remain stagnant. In the short-term, we anticipate that this will restrain overall credit demand and the utilization of available credit lines by both businesses and consumers.

 

Deposits

Total deposits declined $44.5 million from September 30, 2013 primarily due to a decrease in public funds and deposits holding trust customer funds that were invested by Univest’s trust department in third party funds. Total deposits declined $20.8 million from December 31, 2012, primarily due to a $60.7 million decrease in time deposits and a $52.8 million decrease in interest-bearing deposits holding trust customer funds which were invested in third party funds. These declines were partially offset by a $42.8 million increase in noninterest-bearing demand deposits and a product change for existing business and municipal customers which resulted in $68.1 million of customer repurchase agreements, classified as borrowings, being transferred to interest-bearing demand deposits.

 

Net Interest Income and Margin

Net interest income of $18.1 million for the fourth quarter of 2013 was consistent with the fourth quarter of 2012. The net interest margin on a tax-equivalent basis for the fourth quarter of 2013 was 3.82%, compared to 3.83% for the third quarter of 2013 and 3.80% for the fourth quarter of 2012.  While the tax-equivalent yield on average interest-earning assets declined 13 basis points for the fourth quarter of 2013 compared to the same period in the prior year, the rate on interest-bearing liabilities for the same comparable period was down 17 basis points. The decline in rate on interest-bearing liabilities is attributable to Univest’s decision in the second quarter of 2013 to redeem its trust preferred securities and terminate the related interest rate swap and an overall decline
in rates paid on time and interest bearing deposits.

 

Net interest income of $72.5 million for the year ended December 31, 2013 was consistent with the same period in 2012. The net interest margin on a tax-equivalent basis for the year ended December 31, 2013 was 3.81% compared to 3.89% for the year ended December 31, 2012. The decline in the year-to-date net interest margin from the prior year was primarily due to the re-investment of maturing and called investment securities into lower yielding investments. In addition, lower rates on commercial and residential real estate loans, due to re-pricing and the competitive environment, contributed to the decline. Favorable re-pricing of savings accounts and certificates of deposit, along with maturities of higher yielding certificates of deposit and the redemption of the trust preferred securities and termination of the related interest rate swap partially offset the decline in the year-to-date net interest margin. 

 

Non-Interest Income

Non-interest income for the quarter ended December 31, 2013 was $11.1 million, an increase of $738 thousand or 7% from the comparable period in the prior year. Non-interest income for the year ended December 31, 2013 was $46.8 million, an increase of $6.5 million or 16% from the comparable period in the prior year. Insurance commission and fee income increased $313 thousand for the quarter and $1.7 million for the year ended December 31, 2013, primarily a result of the acquisitions of the John T. Fretz Insurance Agency, Inc. on May 1, 2013 and Javers Group on May 31, 2012. Investment advisory commission and fee income increased $362 thousand for the quarter and $1.5 million for the year ended December 31, 2013 as assets under supervision increased 22%, predominately market driven, over December 31, 2012. The net gain on sales of securities increased $425 thousand for the quarter and $3.1 million for the year ended December 31, 2013. The net gain on sales of other real estate owned was $176 thousand for the quarter resulting from an update to the usability of the property and $626 thousand for the year ended December 31, 2013. This compares favorably to a net loss on sales and write-downs of other real estate owned of $181 thousand and $1.9 million, respectively, for the comparable periods in the prior year.

 

These favorable increases were partially offset by a $1.9 million loss on the termination of an interest rate swap during the second quarter of 2013, which was used as a hedge of trust preferred securities. In addition, the net gain on mortgage banking activities decreased $1.1 million for the quarter and $1.6 million for the year ended December 31, 2013. The increase in interest rates beginning in the second quarter of 2013 contributed to a significant decline in refinance activity and lowered gain on sale margins. Mortgage banking funded loan volume declined 69% in the fourth quarter of 2013 and 18% for the year ended December 31, 2013, from the comparable periods in 2012.  

 

Non-Interest Expense

Non-interest expense for the fourth quarter of 2013 was $21.6 million, an increase of $1.9 million or 10% compared to the fourth quarter of 2012. Salaries and benefits expense increased $1.4 million primarily attributable to the Fretz acquisition, higher health insurance costs, performance-based salary and incentive increases and lower deferred loan origination costs. Other expenses increased primarily due to increased professional fees.

 

Non-interest expense for the year ended December 31, 2013 was $81.1 million, an increase of $4.9 million or 6% from the comparable period in the prior year. Salaries and benefits expense increased $2.2 million primarily attributable to the Fretz and Javers acquisitions, higher health insurance costs and performance-based salary and incentive increases. Commission expense increased $1.5 million mainly due to increased production activity and revenues generated in our equipment finance, investment and insurance businesses. Additionally, non-interest expense increased due to restructuring charges of $534 thousand recognized during the first quarter of 2013.

 

Asset Quality and Provision for Loan and Lease Losses

Non-accrual loans and leases, including non-accrual troubled debt restructured loans, decreased to $23.2 million at December 31, 2013, from $24.0 million at September 30, 2013 and $32.1 million at December 31, 2012. The $8.9 million decrease in non-accrual loans from December 31, 2012 was mainly due to charge-offs, foreclosures and pay-downs exceeding additions to non-accrual loans. Net loan and lease charge-offs were $2.0 million during the fourth quarter of 2013, down from $4.7 million for the fourth quarter of 2012. Non-accrual loans and leases as a percentage of total loans and leases held for investment were 1.51% at December 31, 2013 compared to 1.57% at September 30, 2013 and 2.17% at December 31, 2012.

 

Accruing troubled debt restructured loans decreased to $7.9 million at December 31, 2013 from $14.1 million at September 31, 2013 and $13.5 million at December 31, 2012. The decreases of $6.2 million and $5.6 million in accruing troubled debt restructured loans for the periods noted was primarily due to the payoff in December 2013 of a large shared national commercial real estate credit with an outstanding principal balance of $5.8 million.

 

The provision for loan and lease losses was $1.6 million for the fourth quarter of 2013, compared to $2.4 million for the fourth quarter of 2012. The provision for loan and lease losses was $11.2 million for the year ended December 31, 2013, compared to $10.0 million for the same period in the prior year. The allowance for loan and lease losses as a percentage of loans and leases held for investment was 1.59% at December 31, 2013 compared to 1.63% at September 30, 2013 and 1.67% at December 31, 2012. The allowance for loan and lease losses to nonaccrual loans and leases held for investment equaled 105.42% at December 31, 2013 compared to 103.59% at September 30, 2013 and 77.01% at December 31, 2012. 

 

Capital

Univest continues to remain well-capitalized at December 31, 2013. Total risk-based capital at December 31, 2013 was 13.90%, well in excess of the regulatory minimum for well capitalized status of 10%.

 

Dividend

On November 27, 2013, Univest declared a quarterly cash dividend of $0.20 per share, payable on January 2, 2014. This represented a 3.88% annualized yield based on the closing price of Univest’s stock on the date the dividend was paid.

 

About Univest Corporation of Pennsylvania

Univest Corporation of Pennsylvania (UVSP), including its wholly-owned subsidiary, Univest Bank and Trust Co., has $2.2 billion in assets and $2.6 billion in assets under management and supervision through its Wealth Management lines of business. Headquartered in Souderton, Pa. and founded in 1876, the Corporation and its subsidiaries provide a full range of financial solutions for individuals, businesses, municipalities and nonprofit organizations in the Mid-Atlantic Region. Univest delivers these services through a network of 40 offices in southeastern Pennsylvania extending to the Lehigh Valley, Maryland and online at www.univest.net.  

 

This press release of Univest Corporation of Pennsylvania and the reports Univest Corporation of Pennsylvania files with the Securities and Exchange Commission often contain "forward-looking statements" relating to present or future trends or factors affecting the banking industry and, specifically, the financial operations, markets and products of Univest Corporation of Pennsylvania. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause Univest Corporation of Pennsylvania’s future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) a significant increase in competitive pressures among financial institutions; (2) changes in the interest rate environment that may reduce net interest margins; (3) changes in prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions; (5) legislative or regulatory changes that may adversely affect the businesses in which Univest Corporation of Pennsylvania is engaged; (6) technological issues which may adversely affect Univest Corporation of Pennsylvania’s financial operations or customers; (7) changes in the securities markets or (8) risk factors mentioned in the reports and registration statements Univest Corporation of Pennsylvania files with the Securities and Exchange Commission. Univest Corporation of Pennsylvania undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.