Univest Financial Corporation (UVSP) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Univest Financial Corporation Annual Meeting of Stockholders. [Operator Instructions] I'd now like to hand the conference over to your host today, Mr. Jeffrey Schweitzer. Sir, please begin.

Thank you, Howard, and good morning, everyone. Ladies and gentlemen, as fixed by the order of the Board of Directors, the hour has arrived for the 2020 Annual Shareholders Meeting of Univest Financial Corporation, pursuant to notice by mail to each shareholder. As President and CEO of the corporation, it is my privilege to call the meeting to order. Due to the public health concerns regarding the coronavirus and the restrictions on in-person gatherings and to support the health and well-being of our employees, directors and shareholders, we decided to hold this annual meeting via a live webcast. On behalf of the directors and the officers of Univest, let me welcome you and express my appreciation to you for participating in this online meeting today. You may submit written questions at any point online by entering them in the lower left corner of the meeting center screen. We will address questions that relate to the matters conducted at this meeting throughout the meeting. The Board has appointed William S. Aichele as Chairman of the meeting; and Megan D. Santana as secretary of the meeting. And now I'd like to introduce Mr. Aichele.

Thank you, Mr. Schweitzer. The next order of business is asked for the reading of the minutes of last year's Annual Meeting of Shareholders.

This is Director, Leon Moyer. I move the reading of the minutes of last year's annual shareholder meeting be waived.

This is Director, Charles Zimmerman, and I second the motion.

All those in favor signify by saying aye, and those opposed, signify by saying no.

Aye

Aye.

Aye.

Aye.

The ayes have it. [ Ms. Ludlow ] as meeting judge, will you report whether a quorum is present?

Thank you, Mr. Chairman. As the judge, I would like to report that a quorum is present. Approximately 86% of the outstanding shares are represented by proxy.

Ms. Santana, as meeting secretary, will you confirm that the notice of this meeting was properly provided?

A sample of the notice and proxy is available as part of the meeting materials in the lower right corner of the meeting center screen. It was mailed on March 13, 2020, to all shareholders of record as of February 14, 2020. Further, the following action was taken at the January 22, 2020 meeting of the Board of Directors as provided by ARTICLE III, Section 1 of the amended bylaws. Upon motion, duly seconded and unanimously passed, it was resolved to fix the number of directors to be elected at the Annual Shareholders Meeting on April 22, 2020, as 4 Class III directors to be elected for a 3-year term and 1 alternate director to be elected for a 1-year term.

The nominating committee has recommended that the following persons be elected as Class III directors for a 3-year term: Mr. Roger Ballou, Leon Moyer, Natalye Paquin, Robert Wonderling. The nominating committee has also recommended that Suzanne Keenan be elected as an Alternate Director for a 1-year term.

ARTICLE II, Section 17 of the bylaws requires other nominations to be in writing and be received by the corporation not less than 50 days prior to the meeting. As there are no such nominations, the nominations are closed.

I move that the nominations of 4 Class III directors and 1 alternate director be approved.

I second the motion.

Are there any questions with respect to the nominations of the 4 Class III Directors and 1 alternate Director.

Mr. Chairman, there are no questions in the queue.

Thank you. The next order of business is the ratification of KPMG LLP as our independent registered public accounting firm for 2020.

I move that KPMG LLP be ratified as the corporation's independent registered public accounting firm for 2020.

I second the motion.

Are there any questions with respect to the ratification of the independent registered public accounting firm?

Mr. Chairman, there are no questions in the queue.

Thank you. The next order of business is the approval on an advisory basis of the compensation of our named executive officers as presented in the proxy statement.

I move that the compensation of our named executive officers as presented in the proxy statement be approved.

I second the motion.

Are there any questions with respect to the approval on an advisory basis of the compensation of our named executive officers as presented in the proxy statement.

Mr. Chairman, there are no questions in the queue.

Thank you. Polls are open for voting for Class III directors and an alternate director, the ratification of KPMG LLP as Univest's independent registered public account firm for 2020 and the approval on an advisory basis of the compensation of our named executive officers as presented in the proxy statement. If you've already voted, there is no need for you to recast your vote. However, if you have not yet voted, I'll pause for a minute, so that you may do so by clicking on the lower right corner of the meeting center screen online. [Voting]

The polls for voting are hereby closed. Let me ask a report of the balloting.

This is the judge of election speaking. Based on the preliminary tone of proxies, each nominee for election as a director or alternate director has received a plurality of the votes cast and has been duly elected. KPMG LLP has been ratified by the majority of the votes cast as the corporation's independent registered public accounting firm for 2020. And the compensation of the named executive officers as presented in the proxy statement has been approved by the majority of the votes cast on an advisory basis. Thank you.

Thank you, [ Ms. Ludlow ]. The judge will provide a detailed report to the secretary. At this time, I'd like to ask Jeffrey Schweitzer, President and CEO, to present the Univest 2019 annual report and summarize our key highlights.

Thank you, Bill. And as I said earlier, thank you all for joining our annual meeting today. If there's any questions along the way, please don't hesitate to submit them, and we'll handle them after my prepared remarks. While we would prefer to be meeting with you in person today, we hope you are all staying safe at home. Before I review our 2019 financial performance, I'd like to take a moment to address how we are dealing with the COVID-19 pandemic at Univest. We are following the current guidance and recommendations from the government and regulatory agencies to protect the health and safety of our employees, customers and communities, which is our highest priority. We were the first financial institution in our market to institute drive-through only banking at our financial centers, and 95% of our nonbranch personnel are working remotely, at least part-time, with the vast majority working remotely full time. As the situation continues to evolve and the financial impact remains unknown, we continue to provide the service that Univest customers expect. We implemented new operating procedures at all of our financial centers and have reminded customers of the digital solutions available to them. We are offering assistance to our business and consumer customers who have been negatively impacted by the pandemic in the form of deferrals and waived fees. Additionally, we are one of the first banks in the market taking applications and approving loans through the SBA's $349 billion Paycheck Protection Program. We received over 2,850 applications for funding through this program. And before the initial funding was allocated, we got 1,051 applications approved by the SBA for $415.7 million. We will provide more details on this and other financial metrics on our earnings call tomorrow as we release earnings tonight after the market closes. While the short-term and long-term financial impact of the COVID-19 pandemic are unknown at this time, I would like to highlight some items from 2019. As you read in our annual report, Univest Financial Corporation achieved strong performance in 2019. This was achieved by a continued focus on organic growth while being opportunistic with strategic investments in our brand, people and technology. Guided by a robust strategic plan, we evolved the business, expanded into new markets, improved operational efficiency and strengthened our competitive position. We reported net income of $50.5 million for the year, thanks to an unwavering focus on strong organic growth, which earned us new relationships across all lines of business. Our loan portfolio grew more than $380 million, an increase of 9.5% for the year. Our goal continues to be funding our loan growth with deposits. And in 2019, we successfully grew deposits by more than $474 million or 12.2%. As part of our ongoing focus to grow the business organically, we expanded our commercial banking team in Central Pennsylvania, which we anticipate will be a significant driver of our growth in the future. Our Central Pennsylvania team saw loan growth increase 52.4% and deposits grew 42.5% for the year. As we continue to expand the Univest family in Central PA, the focus will be on increasing our presence in Western Lancaster County as well as extending our footprint to Cumberland, Dauphin and York counties. We also grew our commercial lending team in South Jersey and opened a loan production office in Moorestown, New Jersey, earlier this year to support this regional expansion. In the Lehigh Valley, we are focused on growing both our commercial and industrial and commercial real estate teams and see this as an area of continued growth in the future. As we expanded our teams and regional reach, we realigned our commercial banking markets. The East Penn and New Jersey market will be led by Mike Fitzgerald and the Central PA market will be led by Tom Jordan. On the consumer side of the bank, Dana Brown, Executive Vice President of Consumer Services, took over management of the 5 financial centers located in Lancaster County. This will ensure consistency of our consumer operation across our entire footprint and streamline our approach to service and sales. While the bank continues to be our largest subsidiary and delivered strong results, we also continue to see the benefit of our diversified business model with Univest Insurance and Girard, a Univest Wealth Division, contributing to our successful year with noninterest income totaling $65.4 million, an increase of 8.7% for the year. This solid performance was achieved because of the hard work and dedication of our workforce of more than 900 employees. Each day, they bring the Univest way to life through their expertise, commitment to customer service and loyalty to our mission and values. Throughout the year, we shared our success with our shareholders by paying consistent dividends. We also shared our success with our communities by offering strong financial and volunteer support through our committed to local philanthropic program. As you know, community is one of our core values. We truly lived this out in 2019, contributing more than $2 million to nonprofits in the communities we serve. Our employees' passion to give back also brought this core value to life as they volunteered 20,300 hours of their personal time over the course of the year. It is our employees who create our great story of servant leadership. The strength of our committed to local philanthropic program is one of the things that differentiates us in the markets we serve. Another exciting highlight for the year was being one of only 30 banks named to Sandler O'Neill Sm-All Stars Class of 2019. Sandler O'Neill explained the objective of the Sm-All Stars is to identify the top-performing small-cap banks and thrifts in the country. In doing this, they hope to uncover the next crop of stellar mid-cap banks before they are discovered by the rest of the world. To earn Sm-All Star status, companies needed to have a market cap below $2.5 billion and have superior performance metrics related to growth, profitability, credit quality and capital strength. We are proud of this recognition as it truly demonstrates the strength of our franchise and the value we provide our customers, employees, communities and shareholders. As we prepared for 2020, our robust plan to continue to move the business forward focused on 5 strategic initiatives. While recent events have diverted our short-term attention, our long-term goals are unchanged. Our 5 strategic initiatives we are working on are: commercial, innovation and automation; Phase 2 of the advancing sales force usage; Phase 2 of our digital evolution; gathering deposits; and attracting, developing and engaging human capital. Our first strategic initiative is commercial innovation and automation. These efforts will focus on analyzing our current commercial processes and developing a plan to increase productivity, optimize operations and gain efficiencies through the strategic deployment of technology, adoption of Encino, a commercial loan origination system, is the largest initiative underway. Encino standardizes the lending workflow process, increases efficiencies and improves the customer experience. Our goal for 2020 is to have all commercial lenders using Encino and for every loan less than $1 million to be processed, approved and loan documents generated through Encino. The next strategic initiative is advancing sales force usage. As we move into Phase 2 of our efforts, our focus shifts to deploying Salesforce to maximize marketing cloud and leveraging the system's data analytics capabilities. Maximizing marketing cloud will allow us to evolve our digital marketing strategy. By leveraging technology and automation, we can proactively develop and deliver personalized, relevant communications with content that entices conversation, fosters brand engagement and targets our existing consumer segment with the intention to further penetrate and enhance the profitability of these relationships. Driving further -- diving further into Salesforce's data analytic capabilities will provide users with actionable information as well as offer new efficiencies. Continuous improvement in how we maximize the data capabilities of Salesforce will be key to improving efficiency and driving sales. Our third strategic initiative is the continuation of our digital evolution as we work towards a unified digital experience for our consumer banking customers. Highlights include a secured chat, which allows customers to interact with the service center through both our mobile banking app and online banking. We also launched a cash back rewards checking account and look forward to a new digital account opening functionality. This focused expansion of our digital product and capability suite is aimed at new customer acquisition as well as customer retention. Again, in 2020, gathering deposits is a strategic priority. Our goal is to maintain a loan-to-deposit ratio within a range of 100% to 105%. This is important to ensure that we have core funding in place to support our loan growth. To do this, we must continue to drive traditional deposit growth across all our segments, commercial, consumer and public funds. And finally, we will again focus on attracting, developing and engaging human capital. To be successful, we need to not only retain our high-performing employees, but also attract new individuals so we can continue to grow. We are focused on attracting, training and retaining highly talented individuals who align with Univest business strategies and culture. We are proactively assessing our human capital needs, including what skills will be necessary in the next 3 to 5 years to ensure Univest is prepared for growth. We are happy to report that employee retention improved in 2019, with overall turnover at 14%, which is significantly better than the industry average of 19%. It is because of the more than 900 members of the Univest family that we had successful 2019 and have managed through the difficult times caused by the COVID-19 outbreak. I could not be more impressed or proud of the way our employees have handled the current environment. Their attitude, compassion, flexibility and willingness to jump in wherever needed, over the past 6 weeks, says a lot about them as individuals and about the culture at Univest. I would personally like to thank the entire Univest family for how they have handled these unprecedented times. As we get through the pandemic, Univest remains well positioned with strong capital and sufficient liquidity to serve our customers, our communities and our employees as we have for the past 143 years. On behalf of the entire Univest family, I would like to thank all of you for your continued support, confidence and investment. We are all in this together, and we'll get through this together. I hope you and your loved ones stay safe. Mr. Chairman, this concludes my formal remarks. At this time, I am happy to take any questions.

We actually do have 1 question right now in the queue, and I'll address. The question was, setting aside implications on earnings in light of the current state of the virus, at what size level is the bank a serious candidate for sale/merger? That's a great question. As a publicly traded company, technically, anybody could approach us at any time with an offer to acquire Univest. I will say that our goal at Univest is to remain independent, and we acknowledge that we have to earn that right to independence, and that would be our intention as we continue to drive performance going forward. However, with that said, the Board obviously understands their fiduciary responsibility as directors of a public company, and we would have to entertain any offer that came forward. But our goal would be to continue to grow, provide earnings, provide good return to our shareholders and continue to support our customers and our communities going forward. Any other questions?

There are no additional questions in the queue.

Bill?

If there are no other questions, thank you, Jeff, for your great remarks. Greatly appreciate you and the way the team is performing. This concludes the scheduled agenda for the meeting. As there appears to be no further business, the 2020 shareholder meeting of Univest Corporation is adjourned. Mr. Schweitzer, do you have any further comments?

Thank you, Bill, and thank you, everybody, for participating today. Hopefully, next year, we'll be back in-person and be able to enjoy a little more fellowship together. I would like to congratulate the directors, Roger, Leon, Natalye, Rob and Suzanne on their reelection. Congratulations. The management team looks forward to serving with you for the next 3 years. And then I would like to ask Charles Zimmerman, in accordance with our core values of spirituality and tradition, to offer a word of prayer. Charles?

Let's pray. Lord, these past few months have demonstrated how quickly things can change. The very things that we often trust and thought were secure have been rattled and shaken. And as a result, we are physically distant and relationally disconnected. Lord, there are some that are struggling, being alone with anxiety and fear. So we want to pray especially for those Univest family members that have been impacted very personally. We pray for those suffering with the virus. We pray for family members and friends, for first responders, we pray for our team members, for our leaders. But Lord, in the midst of all that and turbulence, we're also thankful. We're thankful that the Univest foundation is strong, that our team members are dedicated and resilient, that our leaders are wise and flexible, that our shareholders are faithful and supportive. And Lord, we ask that we would come through this stronger, and we ask Lord that we would use this threat or be able to use this threat as an opportunity to live out our mission, vision and values in a way that really does highlight the difference that Univest wants to communicate and the value that we bring, not only to our stakeholders, but to all the communities that we serve. Lord, we thank you for this meeting, for what you've done, and look forward to what you will do to [ bring cresting ]. Amen.

Thank you, Charles, and just like to thank all of our shareholders, please stay safe. I hope you are all healthy, and we'll talk to you again in the future.