Univest Financial Corporation Reports First Quarter Results

SOUDERTON, Pa., April 24, 2024 (GLOBE NEWSWIRE) -- Univest Financial Corporation (“Univest” or the "Corporation") (NASDAQ: UVSP), parent company of Univest Bank and Trust Co. (the "Bank") and its insurance, investments and equipment financing subsidiaries, announced net income for the quarter ended March 31, 2024 was $20.3 million, or $0.69 diluted earnings per share, compared to net income of $21.0 million, or $0.71 diluted earnings per share, for the quarter ended March 31, 2023.

One-Time Items
The financial results for the quarter included a $3.4 million net gain ($2.7 million after-tax), or $0.09 diluted earnings per share, generated from the sale of mortgage servicing rights associated with $591.1 million of serviced loans.

Loans
Gross loans and leases increased $11.9 million, or 0.2% (0.8% annualized), from December 31, 2023, primarily due to increases in commercial loans and residential mortgage loans, partially offset by decreases in construction and commercial real estate loans. Gross loans and leases increased $339.3 million, or 5.4%, from March 31, 2023, primarily due to increases in commercial real estate, residential mortgage loans and lease financings, partially offset by a decrease in commercial loans.

Deposits, Borrowings and Liquidity
Total deposits increased $29.6 million, or 0.5% (2.0% annualized), from December 31, 2023, primarily due to increases in consumer and brokered deposits, partially offset by decreases in commercial and seasonal public funds deposits. Total deposits increased $570.7 million, or 9.8%, from March 31, 2023, primarily due to increases in consumer, public funds and brokered deposits, partially offset by a decrease in commercial deposits. Noninterest-bearing deposits represented 21.9% of total deposits at March 31, 2024, down from 23.0% at December 31, 2023. At March 31, 2024, unprotected deposits, which excludes insured, internal, and collateralized deposit accounts, represented 22.3% of total deposits, down from 23.3% at December 31, 2023.

Total borrowings decreased $61.4 million, or 13.2% (52.8% annualized), from December 31, 2023, primarily due to pay-downs of long-term FHLB advances of $60.0 million. These borrowings were replaced with $110.2 million of lower cost brokered deposits during the quarter.

As of March 31, 2024, the Corporation had cash and cash equivalents totaling $201.6 million. The Corporation and its subsidiaries had committed borrowing capacity of $3.4 billion at March 31, 2024, of which $2.1 billion was available. The Corporation and its subsidiaries also maintained uncommitted funding sources from correspondent banks of $334.0 million at March 31, 2024. Future availability under these uncommitted funding sources is subject to the prerogatives of the granting banks and may be withdrawn at will.

Net Interest Income and Margin
Net interest income of $51.5 million for the first quarter of 2024 decreased $7.9 million, or 13.2%, from the first quarter of 2023 and $1.3 million, or 2.5%, from the fourth quarter of 2023. The decrease in net interest income for the first quarter of 2024 compared to the first quarter of 2023 was due to an increase in the cost of funds and the average balance of interest-bearing liabilities, partially offset by an increase in asset yields and the average balance of interest-earning assets. The decrease in net interest income for the first quarter of 2024 compared to the fourth quarter of 2023 was due to a decrease in the average balance of interest-earning assets, including excess liquidity, and an increase in the cost of funds, partially offset by an increase in asset yields and a decrease in the average balance of interest-bearing liabilities.

Net interest margin, on a tax-equivalent basis, was 2.88% for the first quarter of 2024, compared to 2.84% for the fourth quarter of 2023 and 3.58% for the first quarter of 2023. Excess liquidity reduced net interest margin by approximately three basis points for the quarter ended March 31, 2024 compared to approximately ten basis points for the quarter ended December 31, 2023. Excess liquidity had no impact on net interest margin for the quarter ended March 31, 2023.

Noninterest Income
Noninterest income for the quarter ended March 31, 2024 was $25.6 million, an increase of $5.9 million, or 30.1%, from the comparable period in the prior year.

Other service fee income increased $3.3 million, or 108.6%, for the quarter ended March 31, 2024, primarily due to the net gain on the sale of mortgage servicing rights as previously mentioned.

Insurance commission and fee income increased $714 thousand, or 11.0%, for the quarter ended March 31, 2024, primarily due to increases in premiums for group life and health and commercial lines and an increase in contingent commission income of $484 thousand, which were $2.3 million and $1.8 million for the quarters ended March 31, 2024 and 2023, respectively. Contingent income is largely recognized in the first quarter of the year.

Investment advisory commission and fee income increased $442 thousand, or 9.3%, for the quarter ended March 31, 2024, primarily due to new customer relationships and appreciation of assets under management, as a majority of investment advisory fees are billed based on the prior quarter-end assets under management balance. Service charges on deposit accounts increased $324 thousand, or 20.9%, for the quarter ended March 31, 2024, primarily due to increased treasury management income. Net gain on mortgage banking activities increased $314 thousand, or 50.2%, for the quarter ended March 31, 2024, primarily due to increased salable volume.

Other income increased $554 thousand, or 117.6%, for the quarter ended March 31, 2024 compared to the three months ended March 31, 2023. Gains on the sale of Small Business Administration loans increased $239 thousand due to increased sale volume. Fees on risk participation agreements for interest rate swaps increased $141 thousand.

Noninterest Expense
Noninterest expense for the quarter ended March 31, 2024 was $50.1 million, an increase of $545 thousand, or 1.1%, from the comparable period in the prior year.

Data processing increased $466 thousand, or 11.6%, for the quarter ended March 31, 2024, primarily due to our investments in technology in recent years, including the launch of our online small business loan and deposit products, and general price increases incurred in the second half of 2023. Salaries, benefits and commissions increased $324 thousand, or 1.0%, for the quarter ended March 31, 2024, primarily driven by decreased capitalized compensation, resulting from lower loan production in the current period, and increased medical claims expense. These increases were partially offset by decreased salary expense primarily due to staff reductions over the last twelve months.

Other expense decreased $268 thousand, or 3.8%, for the quarter ended March 31, 2024, primarily due to decreases in retirement plan costs of $210 thousand. Professional fees decreased $253 thousand, or 13.0%, for the quarter ended March 31, 2024, primarily due to consultant fees incurred in the first quarter of 2023 related to our digital transformation initiative.

Tax Provision
The effective income tax rate was 20.5% for the quarter ended March 31, 2024, compared to an effective tax rate of 19.4% for the quarter ended March 31, 2023. The discrete tax effect of vested equity compensation awards unfavorably impacted the first quarter of 2024 by 74 basis points and favorably impacted the first quarter of 2023 by 76 basis points. Additionally, the effective tax rates for the three months ended March 31, 2024 and 2023 reflected the benefits of tax-exempt income from investments in municipal securities and loans and leases.

Asset Quality and Provision for Credit Losses
Nonperforming assets were $40.0 million at March 31, 2024, compared to $40.1 million at December 31, 2023 and $32.4 million at March 31, 2023.

Net loan and lease charge-offs were $1.4 million for the three months ended March 31, 2024 compared to $1.1 million and $2.8 million for the three months ended December 31, 2023 and March 31, 2023, respectively.

The provision for credit losses was $1.4 million for the three months ended March 31, 2024 compared to $1.9 million and $3.4 million for the three months ended December 31, 2023 and March 31, 2023, respectively. The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment was 1.30% at March 31, 2024 and December 31, 2023 and 1.28% March 31, 2023.

Dividend and Share Repurchases
On April 24, 2024, Univest declared a quarterly cash dividend of $0.21 per share to be paid on May 22, 2024 to shareholders of record as of May 8, 2024. During the quarter ended March 31, 2024, the Corporation repurchased 315,507 shares of common stock at an average price of $20.25 per share. Including brokerage fees and excise tax, the average price per share was $20.48. As of March 31, 2024, 887,182 shares are available for repurchase under the Share Repurchase Plan.

Conference Call
Univest will host a conference call to discuss first quarter 2024 results on Thursday, April 25, 2024 at 9:00 a.m. EST. Participants may preregister at https://www.netroadshow.com/events/login?show=1f74990c&confId=63330. The general public can access the call by dialing 1-833-470-1428; using Access Code 468018. A replay of the conference call will be available through May 25, 2024 by dialing 1-866-813-9403; using Access Code 450536.

About Univest Financial Corporation
Univest Financial Corporation (UVSP), including its wholly-owned subsidiary Univest Bank and Trust Co., Member FDIC, has approximately $7.7 billion in assets and $5.0 billion in assets under management and supervision through its Wealth Management lines of business at March 31, 2024. 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 primarily in the Mid-Atlantic Region. Univest delivers these services through a network of more than 50 offices and online at www.univest.net.  

This press release and the reports Univest files with the Securities and Exchange Commission often contain "forward-looking statements" relating to trends or factors affecting the financial services industry and, specifically, the financial condition and results of operations, business, prospects and strategies of Univest. These forward-looking statements involve certain risks and uncertainties in that there are a number of important factors that could cause Univest's future financial condition, results of operations, business, prospects or strategies to differ materially from those expressed or implied by the forward-looking statements. These factors include, but are not limited to: (1) competition; (2) inflation and/or changes in interest rates, which may adversely impact our margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and/or lead to higher operating costs; (3) changes in asset quality, prepayment speeds, loan sale volumes, charge-offs and/or credit loss provisions; (4) changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; (5) our ability to access cost-effective funding; (6) changes in economic conditions nationally and in our market; (7) economic assumptions that may impact our allowance for credit losses calculation; (8) legislative, regulatory, accounting or tax changes; (9) monetary and fiscal policies of the U.S. government, including the policies of the Board of Governors of the Federal Reserve System; (10) technological issues that may adversely affect our operations or those of our customers; (11) a failure or breach in our operational or security systems or infrastructure, including cyberattacks; (12) changes in the securities markets; (13) the current or anticipated impact of military conflict, terrorism or other geopolitical events; (14) our ability to enter into new markets successfully and capitalize on growth opportunities and/or (15) risk factors mentioned in the reports and registration statements Univest files with the Securities and Exchange Commission.

(UVSP - ER)

CONTACT:
Brian J. Richardson
UNIVEST FINANCIAL CORPORATION
Chief Financial Officer
215-721-2446, [email protected]