Skip Navigation Documents in Portable Document Format (PDF) require Adobe Acrobat Reader 5.0 or higher to view, download Adobe® Acrobat Reader.
man taking notes

UNIVEST CORPORATION OF PENNSYLVANIA - UNIVEST BANK AND TRUST CO. - REPORTS FOURTH QUARTER AND YEAR END RESULTS

Newsroom

SOUDERTON, Pa., January 25, 2017 - Univest Corporation of Pennsylvania (“Univest” or “Corporation”) ( NASDAQ: UVSP ), parent company of Univest Bank and Trust Co. ("Bank") and its insurance, investments and equipment financing subsidiaries, today announced financial results for the fourth quarter and year ended December 31, 2016. Univest reported net income of $6.9 million or $0.26 diluted earnings per share for the three months ended December 31, 2016, compared to net income of $7.2 million or $0.37 diluted earnings per share for the three months ended December 31, 2015. Net income for the year ended December 31, 2016 was $19.5 million or $0.84 diluted earnings per share, compared to net income of $27.3 million or $1.39 diluted earnings per share for the prior year.

The financial results for the fourth quarter and year ended December 31, 2016 included acquisition and integration costs related to the Fox Chase acquisition plus restructuring costs related to facility closures and staffing rationalization of $1.2 million and $11.8 million, net of tax, or $0.05 and $0.51, of diluted earnings per share, respectively. The results for the fourth quarter and year ended December 31, 2016 also included $1.2 million, net of tax, or $0.05 and $0.05, of diluted earnings per share, respectively, related to the Corporation’s agreement to settle its future obligations related to its acquisition of Girard Partners, Inc.

The financial results for the fourth quarter and year ended December 31, 2015 included acquisition, integration and restructuring costs related to the Fox Chase acquisition, the Valley Green acquisition and its new financial center model of $497 thousand and $2.9 million, net of tax, or $0.03 and $0.15, of diluted earnings per share, respectively.

Loans

Gross loans and leases increased $95.5 million or 12.0% (annualized) from September 30, 2016. Gross loans and leases increased $1.1 billion from December 31, 2015, including $776.3 million of loans acquired from Fox Chase Bank. Organic loan growth, which excludes the loans acquired from Fox Chase at June 30, 2016 was $330.6 million, or 11.2%, for the year ended December 31, 2016. The growth in loans was primarily in commercial business, commercial real estate and residential real estate loans. Loan growth in 2016 resulted from new and existing customer relationships, and Univest’s strategic move to expand its presence and hire a lending team in Lancaster County to seize opportunities as a result of market disruption caused by other bank acquisitions. Loan growth also resulted from opportunities brought by Univest’s new lending personnel in its core market and through the acquisition of Fox Chase.

Deposits

Total deposits increased $79.1 million or 10.0% (annualized) from September 30, 2016. Deposits increased $863.2 million from December 31, 2015 primarily due to $738.3 million of deposits acquired from Fox Chase. Organic deposit growth, which excludes the Fox Chase deposits at June 30, 2016, was $124.9 million or 4.0% for the year ended December 31, 2016.

Borrowings

Total borrowings increased $344.2 million from December 31, 2015, primarily due to long-term borrowings acquired from Fox Chase which consisted of $105.0 million of Federal Home Loan bank borrowings and commercial bank borrowings, the issuance by the Corporation of $45.0 million in subordinated notes on July 1, 2016 and an increase of $172.0 million in short-term borrowings.

Net Interest Income and Margin

Net interest income increased $10.7 million to $34.2 million for the fourth quarter of 2016 from the same period in 2015. Net interest income increased $20.3 million to $114.2 million for the year ended December 31, 2016 from the prior year. The increase in net interest income during the fourth quarter and year of 2016 was mainly due to the impact of the Fox Chase acquisition, which occurred on July 1, 2016.

Net interest income increased $1.3 million to $34.2 million for the fourth quarter of 2016 from the third quarter of 2016. The net interest margin on a tax-equivalent basis for the fourth quarter of 2016 was 3.81% compared to 3.68% for the third quarter of 2016. The favorable impact of purchase accounting accretion was 20 basis points for the quarter ended December 31, 2016 compared to 7 basis points for the quarter ended September 30, 2016. The increase in the favorable impact of purchase accounting accretion is primarily due to the Corporation’s ability to exit three purchased credit impaired commercial real estate loan relationships which totaled $7.1 million during the quarter. A detailed analysis comparing net interest margin and net interest income for the quarter ended December 31, 2016 and the quarter ended September 30, 2016 is included in the attached exhibits.

Noninterest Income

Noninterest income for the quarter ended December 31, 2016 was $14.0 million, an increase of $806 thousand or 6.1% from the fourth quarter of 2015. Noninterest income for the year ended December 31, 2016 was $56.0 million, an increase of $3.5 million or 6.7% from the prior year. Service charges on deposits increased $234 thousand or 22.1% for the quarter and $461 thousand or 10.9% for the year ended December 31, 2016 mostly due to fees on deposit accounts acquired from Fox Chase. Investment advisory commission and fee income increased $482 thousand or 18.7% for the quarter and $584 thousand or 5.4% for the year ended December 31, 2016 due to an increase in assets under management during 2016. This increase was primarily due to a combination of both increased new customer relationships and improvement in market performance during the second half of 2016. Insurance commission and fee income increased $202 thousand or 6.6% for the quarter and $718 thousand or 5.2% for the year ended December 31, 2016, primarily due to an increase in contingent commission income and growth in the group life and health and commercial product lines premiums. Bank owned life insurance (BOLI) income increased $790 thousand for the quarter and $1.6 million for the year ended December 31, 2016 primarily due to proceeds from bank owned life insurance death benefits of $450 thousand recognized in the fourth quarter of 2016 as well as $26.1 million of policies acquired from Fox Chase, the purchase of $8.0 million and the transfer of $9.8 million of policies to a higher yielding account structure during 2015. The net gain on mortgage banking increased $1.2 million or 24.5% for the year ended December 31, 2016, mainly due to an increase in mortgage volume during 2016. Mortgage loan closings increased $48.7 million, or 23.3% for the year ended December 31, 2016 compared to the same period in 2015. The net gain on mortgage banking activities decreased $914 thousand to $1.1 million for the quarter as compared to the third quarter of 2016 and was the same amount as the fourth quarter 2015. The link quarter decrease is due to seasonal slowdown in mortgage activity during the fourth quarter. These favorable increases were partially offset by a decline in the net gain on sales of investment securities for the quarter and year ended December 31, 2016 of $666 thousand and $747 thousand, respectively, compared to the same periods in 2015.

Noninterest Expense

Noninterest expense for the quarter ended December 31, 2016 was $38.4 million, an increase of $12.4 million or 47.6%, compared to the fourth quarter of 2015. Noninterest expense for the year ended December 31, 2016 was $142.0 million, an increase of $36.5 million or 34.6% from the prior year. Acquisition and integration costs related to the Fox Chase acquisition and restructuring costs related to facility closures and staffing rationalization totaled $2.2 million for the quarter and $17.7 million for the year ended December 31, 2016. Acquisition, integration and restructuring costs related to the Fox Chase acquisition, the Valley Green acquisition and new financial center model were $546 thousand for the quarter and $4.2 million for the year ended December 31, 2015.

Salaries and benefit expense increased $3.7 million for the quarter and $11.4 million for the year ended December 31, 2016, primarily attributable to higher staffing levels resulting from the Fox Chase acquisition, additional staff hired to support revenue generation across all business lines and the expansion into Lancaster County. Salaries and benefit expense decreased $164 thousand for the quarter as compared to the quarter ended September 30, 2016. Included in salaries and benefit expense for the quarter is the cost of a pension settlement of $1.4 million as the Corporation offered lump sum payouts to former employees in its noncontributory retirement plan. This amount was recorded as a reclassification with the accumulated other comprehensive income component of equity and had no impact on the Corporation’s reported equity. This pension distribution was partially offset by the Corporation’s modification of its paid time off policy which resulted in a non-cash reduction in expense of $1.3 million during the quarter. Commission expense increased $724 thousand for the quarter and $1.3 million for the year ended December 31, 2016, primarily due to commissions paid on increased mortgage banking activities, investment advisor fees and insurance revenues. Premises and equipment expenses increased $1.1 million for the quarter and $1.4 million for the year ended December 31, 2016, primarily due to higher premises expense related to Fox Chase locations and expansion into Philadelphia, Lancaster County and the Lehigh Valley. Data processing expense increased $757 thousand for the quarter and $2.3 million for the year ended December 31, 2016 due to increased investments in computer software as well as six months of Fox Chase processing expense. Intangible expenses increased $2.8 million for the quarter and $3.1 million for the year ended December 31, 2016 as the Corporation reached an agreement to settle its future obligation related to its acquisition of Girard Partners, Inc.

Asset Quality and Provision for Loan and Lease Losses

Non-accrual loans and leases, including non-accrual troubled debt restructured loans, were $17.9 million at December 31, 2016, compared to $15.1 million at September 30, 2016 and $14.2 million at December 31, 2015. Net loan and lease charge-offs were $1.7 million during the fourth quarter of 2016 and $5.0 million for the year ended December 31, 2016. The provision for loan and lease losses was $2.3 million for the fourth quarter of 2016 and $4.8 million for the year ended December 31, 2016.

The allowance for loan and lease losses as a percentage of loans and leases held for investment was 0.53% at December 31, 2016, compared to 0.53% at September 30, 2016 and 0.81% at December 31, 2015. The allowance for loan and lease losses as a percentage of loans and leases held for investment, excluding loans acquired in the Fox Chase and Valley Green Bank acquisitions which were recorded at fair value as of the acquisition date, was 0.73% at December 31, 2016, compared to 0.77% at September 30, 2016 and 0.94% at December 31, 2015.

Tax Provision

The effective income tax rate for the year ended December 31, 2016 was 16.6%, compared to 26.4% for the year ended December 31, 2015. These rates reflect the Corporation’s levels of tax exempt income for both periods relative to the overall level of taxable income.

Dividend

On November 23, 2016, Univest declared a quarterly cash dividend of $0.20 per share, payable on January 2, 2017. This represented a 2.59% annualized yield based on the closing price of Univest’s stock on the date the dividend was paid.

Termination of Shareholder Rights Plan

Finally, following a periodic review of corporate governance practices, and taking into account comments received as part of an ongoing dialogue with shareholders, the Corporation’s Board of Directors voted to terminate the Corporation’s shareholder rights plan, originally adopted in September 2011, effective January 25, 2017. The shareholders’ rights plan will terminate automatically as a result of the Board’s action, and shareholders do not have to take any action as a result of the termination.

Conference Call

Univest will host a conference call to discuss fourth quarter and year end 2016 results on Thursday, January 26, 2017 at 9:00 a.m. EST. Participants may preregister at http://dpregister.com/10099225. The general public can access the call by dialing 1-888-338-6515. A replay of the conference call will be available through February 26, 2017 by dialing 1-877-344-7529; using Conference ID: 10099225.

About Univest Corporation of Pennsylvania

Univest Corporation of Pennsylvania (UVSP), including its wholly-owned subsidiary, Univest Bank and Trust Co., has approximately $4.2 billion in assets and $3.2 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 more than 50 offices in southeastern Pennsylvania extending to the Lehigh Valley and Lancaster, as well as in New Jersey and 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 financial services 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.

to the
top