Univest(US:UVSP)2021-10-30 00:46Financial Data and Key Metrics Changes - The company reported net income of $20.9 million for Q3 2021, equating to $0.71 per share, reflecting strong loan production despite customer payoffs [7] - Net loan growth was $92 million or 7.3% annualized during the quarter, with total growth over the past 12 months reaching $456 million or 9.7%, excluding PPP loans [7] - The reported margin was 3.1%, down 4 basis points from the previous quarter, while the net interest margin (NIM) was negatively impacted by 27 basis points due to excess liquidity [9][10] - The allowance for credit loss coverage ratio, excluding PPP loans, was 1.36% at September 30, down from 1.41% at June 30 and 1.95% at September 30, 2020 [12] Business Line Data and Key Metrics Changes - Investment advisory income increased by 19.8% during the quarter and 19.1% for the first nine months compared to the same period last year [8] - Noninterest expense rose by $4.7 million or 12.3% for the quarter and $10.8 million or 9.5% for the first nine months compared to 2020 [13] Market Data and Key Metrics Changes - Public funds increased by approximately $350 million year-over-year, attributed to excess liquidity in the marketplace from various stimulus initiatives [21] - The company experienced net recoveries of $75,000 during the quarter, with net charge-offs for the first nine months totaling $456,000 or 1 basis point on an annualized basis [12] Company Strategy and Development Direction - The company is focused on aggressive hiring of revenue-producing talent across various lines of business, including commercial and wealth management [32][33] - The company expects to finish the year with net interest income growth on the higher end of the previously guided range of 2% to 4%, and noninterest income growth is now expected to be 4% to 5% for the year [17] Management's Comments on Operating Environment and Future Outlook - Management noted that the success of customers in terms of payoffs is a significant factor moderating net loan growth, but new loan production remains strong [35] - The company anticipates that excess liquidity levels will decrease as loan growth continues and expects a seasonal decline in public funds [21] Other Important Information - The company has incurred $1.4 million in expenses related to various initiatives, including DE&I and treasury management enhancements, with an expectation that these costs will not continue into 2022 [16][28] Q&A Session Summary Question: Was the surge in deposits this quarter stronger than normal seasonality? - Management confirmed that the growth in public funds was outsized compared to prior years, driven by excess liquidity from stimulus initiatives, and expects a decline in the first and second quarters of next year [21][22] Question: What are the main drivers behind the core NIM expansion? - Management indicated a reduction in deposit costs and the redemption of subordinated debt contributed to the NIM expansion [23] Question: What is the current competitive landscape for loans? - Management acknowledged aggressive competition but emphasized their ability to maintain appropriate pricing levels due to a strong team and sourcing capabilities [24] Question: How much of the training initiative costs occurred this quarter? - Management clarified that about $500,000 was related to various initiatives this quarter, and they do not expect these costs to repeat in 2022 [27][28] Question: What is the size of the loan pipeline and expected growth? - Management reported a strong loan pipeline, with new loan production remaining robust, although customer payoffs are moderating net loan growth [34][35] Question: How are gain on sale margins holding up for the mortgage pipeline? - Management expects gain on sale margins to remain consistent with Q3 levels, with seasonal impacts anticipated due to rising rates [36]