Univest(US:UVSP)2022-02-25 19:52Economic Conditions - The unemployment rate decreased from 7.70% at December 31, 2020, to 6.29% at December 31, 2021, suggesting an improvement in the labor market conditions[139]. - The Corporation's economic forecast for GDP rates showed a slight decrease from 2.29% in 2020 to 2.13% in 2021, indicating a modest economic growth outlook[139]. - The House Price Index (HPI) increased by 3.04% in 2021, a significant improvement compared to a decrease of (0.16)% in 2020, reflecting a positive trend in the housing market[139]. - The Corporation's sensitivity analysis indicates that a 100 basis point increase in unemployment rates could increase the ACL by $10,643,000, highlighting the impact of economic factors on credit loss estimates[141]. Credit Losses and Allowance - The Corporation's Allowance for Credit Losses (ACL) on loans and leases decreased from $83,044,000 at December 31, 2020, to $71,924,000 at December 31, 2021, reflecting a provision attributed to economic conditions of $(18,339,000)[138]. - The provision attributed to other impacts in the ACL calculation was $7,432,000, indicating adjustments made for factors beyond economic conditions[138]. - The allowance for credit losses on loans and leases was $71.9 million, representing 1.35% of loans and leases held for investment, down from 1.56% in 2020[206]. - The allowance for credit losses to nonaccrual loans and leases ratio was 216.57%, down from 262.03% in 2020[206]. - The reversal of provision for credit losses for the year ended December 31, 2021 was $10.1 million, compared to provisions of $40.8 million and $8.5 million for 2020 and 2019, respectively[168]. Financial Performance - The Corporation reported net income of $91.8 million for 2021, a 95.7% increase from $46.9 million in 2020, with diluted earnings per share rising to $3.11 from $1.60[145]. - Net interest income after provision for credit losses increased to $198.5 million in 2021, compared to $133.6 million in 2020, reflecting a significant recovery in financial performance[144]. - The average return on average assets improved to 1.38% in 2021 from 0.78% in 2020, indicating enhanced asset utilization[145]. - Noninterest income rose to $83.2 million in 2021, up from $78.3 million in 2020, reflecting growth in service fees and other income sources[144]. - Total comprehensive income for 2021 was $121,661,000, compared to $56,072,000 in 2020, indicating a significant increase of 116.5%[274]. Asset and Liability Management - The Corporation's total assets increased to $7.1 billion in 2021, up from $6.3 billion in 2020, demonstrating growth in the balance sheet[144]. - Cash and cash equivalents at year-end 2021 were $890.2 million, a significant increase from $219.9 million in 2020, indicating strong liquidity[144]. - Total liabilities as of December 31, 2021 were $5,920,987 thousand, with total shareholders' equity of $734,456 thousand[158]. - The total shareholders' equity increased by $81.3 million, or 11.7%, from December 31, 2020, reaching $773.8 million[221]. - The Corporation's Tier 1 risk-based capital ratio improved to 11.08% in 2021 from 10.76% in 2020, while the total risk-based capital ratio decreased to 13.77% from 15.31%[227]. Loan and Deposit Growth - Total deposits increased by $812.4 million, or 15.5%, from December 31, 2020, primarily due to increases in commercial, consumer, and public fund deposits[216]. - The total average deposits for 2021 were $5,591.2 million, compared to $4,850.9 million in 2020[217]. - Noninterest-bearing deposits increased to $1,891,330 thousand in 2021, contributing to the overall deposit growth[158]. - The total outstanding balance of commercial loans, excluding PPP loans, was $4.37 billion, with 80.7% concentrated in industries with over $50 million in outstandings[209]. Operational Efficiency - The efficiency ratio improved slightly to 60.9% in 2021 from 60.6% in 2020, suggesting better cost management relative to revenue[145]. - Noninterest expense for the year ended December 31, 2021 was $167.4 million, an increase of $12.4 million, or 8.0%, compared to 2020[181]. - Salaries, benefits, and commissions increased by $11.0 million, or 11.8%, for the year ended December 31, 2021, reflecting continued investment in revenue-producing staff[182]. - Professional fees rose by $2.3 million, or 44.0%, primarily due to consulting fees for Diversity, Equity, and Inclusion programs[183]. Strategic Acquisitions - The acquisition of Paul I. Sheaffer Insurance Agency was completed for $3.8 million in cash, with potential additional payments of up to $1.9 million based on EBITDA performance over three years[153][154]. - The company made a net cash payment of $3.820 million due to acquisitions in 2021, marking a strategic move towards growth through acquisitions[279]. Risk Management - The Corporation's strategy for credit risk management includes well-defined credit policies and regular monitoring of loan performance[201]. - Management utilizes a discounted cash flow (DCF) model to calculate the present value of expected cash flows for pools of loans and leases, incorporating factors such as probability of default and loss given default[312][316]. - A loan or lease is considered impaired when it is probable that the Bank will be unable to collect future payments, with an impairment analysis performed quarterly[328].