Company: UVSP
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000102212-25-000006
Chunk: 19

Company: UNIVEST FINANCIAL Corp
Filing Date: 2025-02-24
Form: 10-K
Item: Item 8
Chunk 19
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 in projecting the cash flows of a loan is based on the maturity date of a loan and is adjusted for prepayment or curtailment assumptions which may shorten that contractual time period. Options to extend are considered by management in determining the contractual term.The key inputs to the DCF model are (1) probability of default, (2) loss given default, (3) prepayment and curtailment rates, (4) recovery delay, (5) reasonable and supportable economic forecasts, (6) forecast reversion period, (7) expected recoveries on charged off loans, and (8) discount rate.Probability of Default ("PD")  In order to incorporate economic factors into forecasting within the DCF model, management uses the Loss Driver method to generate the PD rate inputs. The Loss Driver method analyzes how one or more economic factors change the default rate using a statistical regression analysis. Management selects economic factors for each loan pool that have strong correlations to historical default rates, and reviews the economic factors selected on an annual basis. For the period ended December 31, 2024, the factors management selected were unemployment rate, GDP, and the housing pricing index.Loss Given Default ("LGD")Management uses the Frye Jacobs parameter for determining the LGD input, which is an estimation technique that derives an LGD input from segment specific risk curves that correlates LGD with PD.Prepayment and Curtailment ratesPrepayment Rates: Loan and lease level transaction data is used to calculate quarterly prepayment rates using available historical loan and lease level data. Those quarterly rates are annualized, and the average of the annualized rates is used in the DCF calculation for fixed payment or term loans. Rates are calculated for each pool.

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Curtailment Rates: Loan level transaction data is used to calculate annual curtailment rates using available historical loan level data. The average of the historical rates is used in the DCF model for interest only payment or line of credit type loans. Rates are calculated for each pool.Recovery DelayThe recovery delay input within the DCF calculation represents an estimate of the period of time between when a modeled default occurs and the ultimate resolution of that default, specifically the portion of that default that does not result in a loss. Management analyzes historical recovery activity on previous default activity to determine an appropriate recovery delay for each pool.Reasonable and Supportable ForecastsThe forecast data used in the DCF model is obtained via a subscription to a widely recognized and relied upon company that publishes various forecast scenarios. Management evaluates