Univest Corporation of Pennsylvania Q4 2024 Earnings Report

Univest Corporation of Pennsylvania EPS Results

• Actual EPS: $0.65
• Consensus EPS: $0.57
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: N/A

Univest Corporation of Pennsylvania Revenue Results

• Actual Revenue: $21.58 million
• Expected Revenue: $73.45 million
• Beat/Miss: Missed by -$51.88 million
• YoY Revenue Growth: N/A

Univest Corporation of Pennsylvania Announcement Details

• Quarter: Q4 2024
• Date: 1/22/2025
• Time: After Market Closes
• Conference Call Date: Thursday, January 23, 2025
• Conference Call Time: 9:00AM ET

Univest Corporation of Pennsylvania (NASDAQ:UVSP) is a financial services holding company headquartered in Souderton, Pennsylvania. Through its principal subsidiary, Univest Bank and Trust Co., the company provides banking and related financial services to individuals, businesses, municipalities and nonprofit organizations.

Univest’s banking products and services include checking and savings accounts, consumer and commercial loans, mortgages, cash-management solutions, online and mobile banking, and treasury-management services. The company also offers wealth management, investment advisory and trust services through Univest Investments, as well as insurance products and services through its insurance operations.

Founded in 1876, Univest serves communities primarily in southeastern Pennsylvania, including the greater Philadelphia region and the Lehigh Valley. Its business is organized around community banking, wealth management and insurance, allowing the company to provide financial services to both retail and commercial customers.

Univest Corporation of Pennsylvania Q4 2024 Earnings Call Transcript

Key Takeaways

• We reported net income of $18.9 million in Q4, or $0.65 per share.
• Loans grew by $95.8 million (5.6% annualized) in Q4 and by $259.4 million (3.9%) for the full year 2024.
• Reported net interest margin stabilized at 2.88% (up 6 basis points) and core NIM reached 3.02% (up 11 basis points) in Q4.
• Noninterest income increased by 14.6% year-over-year, driven by strength in wealth management, mortgage banking and service fees.
• For 2025, Univest expects net interest income to grow approximately 5–7% based on 3–5% loan growth and modest NIM expansion in a stable rate environment.

Presentation

[Operator]

Good morning, all, and thank you for joining us for the Univest Financial Corporation Fourth Quarter 2024 Earnings Call. My name is Carly, and I'll be coordinating your call today. If you'd like to register a question during the call, you can do so by pressing star followed by one on your telephone keypad, and to remove yourself from the line of questioning will be star followed by two, and that is the handover to your host, Jeff Schweitzer, to begin. The floor is yours.

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

Thank you, Carly, and good morning, and thank you to all of our listeners for joining us. Joining me on the call this morning is Mike Keim, our Chief Operating Officer and President of Univest Bank and Trust, and Brian Richardson, our Chief Financial Officer. Before we begin, I would like to remind everyone of the forward-looking statements disclaimer. Please be advised that during the course of this conference call, management may make forward-looking statements that express management's intentions, beliefs, or expectations within the meaning of the federal securities laws. Univest's actual results may differ materially from those contemplated by these forward-looking statements. I will refer you to the forward-looking cautionary statements in our earnings release and in our SEC filings. Hopefully, everyone had a chance to review our earnings release from yesterday. If not, it can be found on our website at univest.net under the Investor Relations tab.

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

We reported net income of $18.9 million during the fourth quarter, or $0.65 per share. We were pleased with how we ended 2024, as we had solid loan growth during the quarter, with loans growing by $95.8 million, or 5.6% annualized. Additionally, consumer and commercial deposits increased $104 million during the quarter, which was offset by the seasonal decline of public funds deposits of $185 million and a slight decline in broker deposits. Our diversified business model continued to serve us well, as our non-interest income was up $2.7 million, or 14.6%, compared to the fourth quarter of the prior year, as we continue to see growth in our fee businesses.

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

Additionally, credit quality continues to remain strong, as non-performing assets to total assets declined four basis points during the quarter and 11 basis points during the year to 41 basis points, with minimal net charge-offs of six basis points for the year. With respect to capital, we continue to be active and plan on continuing to be active with stock buybacks, as we repurchased 139,492 shares of stock during the quarter and 802,535 shares in 2024, which represented 2.7% of shares outstanding as of December 31, 2023, while also growing tangible book value per share 9.01% during 2024. Before I pass it over to Brian, I would like to thank the entire Univest family for the great work they do every day and for their continued efforts serving our customers, communities, and each other.

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

I will now turn it over to Brian for further discussion on our results and our outlook for 2025.

[Brian Richardson, CFO at Univest Financial Corporation]

Thank you, Jeff. I would also like to thank everyone for joining us today. I would like to start by touching on five items from the earnings release. First, during the quarter, we saw continued NIM stabilization. Reported NIM of 2.88% increased six basis points from 2.82% in the third quarter. Additionally, core NIM, which excludes excess liquidity, of 3.02% increased 11 basis points compared to the third quarter. Second, as it relates to our loan and deposit activity, loans grew by $95.8 million, or 5.6% annualized, in the fourth quarter and grew by $259.4 million, or 3.9%, for the full year of 2024. During the quarter, deposits decreased by $94.9 million, but as Jeff mentioned, public funds decreased by $185.6 million and broker deposits decreased by $13.4 million. Offsetting these decreases was a $104.1 million increase in commercial and consumer accounts.

[Brian Richardson, CFO at Univest Financial Corporation]

During the fourth quarter, non-interest-bearing deposits increased by $90.7 million. As of December 31, non-interest-bearing deposits represented 20.9% of total deposits compared to 19.3% at September 30. For the full year of 2024, total deposits grew by $383.5 million, or 6%. Third, during the quarter, we recorded a provision for credit losses of $2.4 million. Our coverage ratio was at 1.28% at December 31, which was consistent with September 30. Net charge-offs for the quarter totaled $767,000, or 5 basis points annualized. Fourth, non-interest income increased by $2.7 million, or 14.6%, compared to the fourth quarter of 2023. This was primarily driven by increases in wealth management, mortgage banking, and service fee income. Fifth, non-interest expense increased by $1.6 million, or 3.3%, compared to the fourth quarter of 2023. For the full year of 2024, expenses increased by $2.1 million, or 1.1%, when excluding restructuring charges recorded in 2023.

[Brian Richardson, CFO at Univest Financial Corporation]

I believe the remainder of the earnings release was straightforward, and I would now like to focus on five items as it relates to 2025 guidance. First, for 2024, net interest income totaled $211.2 million. For 2025, we expect loan growth of approximately 3%-5%, with modest NIM expansion resulting in net interest income growth of approximately 5%-7%. This assumes a relatively stable rate environment with one or two 25 basis point rate decreases in 2025. However, modest Fed actions are not expected to have a material impact on our NII due to our overall ALM neutrality. Second, the provision for credit losses will continue to be driven by changes in economic forecasts and credit performance of the portfolio. At this time, we expect the provision for 2025 to be approximately $12 million-$14 million.

[Brian Richardson, CFO at Univest Financial Corporation]

Third, 2024 net non-interest income totaled $84.5 million when excluding the $3.4 million gain on sale of MSRs and $225,000 BOLI death benefit. For 2025, we expect non-interest income growth of approximately 4%-6% off of the $84.5 million base. Fourth, we reported non-interest expense of $198 million for 2024. For 2025, we expect growth of approximately 4%-5%. Lastly, as it relates to income taxes, we expect our effective tax rate to be approximately 20%-20.5% based on current statutory rates. That concludes my prepared remarks. We will be happy to answer any questions. Carly, would you please begin the question and answer session?

[Operator]

Of course. Thank you very much. We'd now like to open the lines for Q&A. If you'd like to ask a question, please press star followed by one on your telephone keypad, and to remove yourself from the line of questioning is star followed by two. Our first question comes from Emily Lee of KBW. Emily, your line is now open.

[Emily Lee, Equity Research Associate at KBW]

Hi. I'm on for Tim Switzer today. Thank you for taking my question. Good morning. I wanted to ask what the factors driving your 2025 guide are and what you think can drive it up or down in either direction?

[Brian Richardson, CFO at Univest Financial Corporation]

This is Brian. I'll take that one. The guidance really is based on everything we're seeing in the current environment and our strategic priorities and focuses. It's really where we think things will land. Anytime guidance is provided, of course, we pick the middle of the road of where we expect things to go, and that's why I provide ranges in accordance with that. So I mean, you can pick any number of possible variables that could present potential upside or downside, both macro or micro related, but I think there's kind of an infinite number of answers in all honesty.

[Emily Lee, Equity Research Associate at KBW]

Okay. Thank you, and another question is, it might be a little early for this, but with the change in administration occurring, there's a lot of different puts and takes on the macro outlook and the impact of tariffs and where rates will go. Are you seeing that result in any caution from some of your C&I borrowers at all, or maybe the other direction, certain industries where they're a little bit more bullish as it's impacted your loan pipeline in any way?

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

Yeah. Emily, this is Jeff. I would say that overall, there's a lot of optimism heading into 2025 from our customer base. As we all know, based on history, a lot of this will be shaken out over the next few months as far as tariffs, what products, what countries, amount, etc. But given a more regulatory-friendly environment that everybody's anticipating, probably a heated-up M&A environment as there's more appetite for that, our customer base overall is pretty excited. We don't have a lot of customers that deal internationally necessarily, so it's a little muted with our customer base, but overall, I would say that the optimism is there for what could be a solid 2025.

[Emily Lee, Equity Research Associate at KBW]

Great. Thank you. I have one more question. This quarter, deposits decreased 6% quarter-over-quarter in Q4, although non-interest-bearing deposits increased 27%. Can you expand a little bit on the drivers of what we saw in deposit trends in Q4?

[Brian Richardson, CFO at Univest Financial Corporation]

Sure. This is Brian. I'll take that one. Again, we saw a decrease between broker deposits and public funds of approximately $200 million in the quarter. That's a seasonal outflow, and just our intentional management of the broker deposit book was a combination of those two items there. We did see growth in commercial and consumer deposits across a wide population there. It wasn't one or two specific deposits that drove it, but we did see growth of $104 million during the quarter. So that's kind of what we saw occurring there. And I guess the next question logically would be what we would expect to occur going forward. There is continual seasonal outflow to be expected on the public funds book of anywhere from $50 million-$100 million per month. So we would expect that that continues to kind of wind down throughout the first quarter.

[Brian Richardson, CFO at Univest Financial Corporation]

As we've said in the past, you hit your annual trough that occurs at the end of the second quarter every year, then tax collections in the third quarter brings you back up to the high point.

[Emily Lee, Equity Research Associate at KBW]

Great. Thank you. That's all for me.

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

Thank you very much.

[Brian Richardson, CFO at Univest Financial Corporation]

Thank you very much.

[Operator]

Excuse me. As a reminder, if you'd like to raise a question, please press star followed by one on your telephone keypad, and to remove yourself from the line of questioning, it will be star followed by two. Our next question comes from Frank Schiraldi of Piper Sandler. Frank, your line's now open.

[Frank Schiraldi, Managing Director at Piper Sandler]

Morning. Just a quick thing.

[Brian Richardson, CFO at Univest Financial Corporation]

Morning, Frank.

[Frank Schiraldi, Managing Director at Piper Sandler]

The loan growth assumption is that 3%-5% growth in 2025 seems like most people who talk to in the industry are expecting or maybe hopeful that loan growth will pick up more in the second half of the year as maybe we get a better sense of where the new administration's policies sort of shake out. So just curious if that 3%-5%, does that also assume some pickup in the back half of the year? Is that more, I guess, backloaded for 2025?

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

Yeah, Frank, to some degree, I mean, the second and the fourth quarters historically are always our stronger quarters from a loan growth perspective. Given the 3%-5%, it's not that dramatically different quarter to quarter, and we are getting off to a decent start in the first quarter here. I wouldn't necessarily say that there could be the macro impact of that due to what the administration may or may not do. For us and for our perspective, we've always been able to source it. It is us managing the growth of the loan book now with our deposit growth to maintain our loan-to-deposit ratio and ultimately start to push down our loan-to-deposit ratio.

[Frank Schiraldi, Managing Director at Piper Sandler]

Okay. And then just on the net interest income guidance, Brian, you mentioned the pretty neutral, I guess, at this point. So rate cuts don't matter too much for expectations. I would assume a steeper yield curve is better. So just curious if the yield curve, there's been a lot of movement in the longer end. Would you say if we get rates staying at the longer end where they are currently, there could be some upside to that, or is that sort of the higher end of your guide, that 7%? Just trying to get a little more color on the potential drivers to maybe outperform there.

[Brian Richardson, CFO at Univest Financial Corporation]

Sure, Frank. This is Brian. So of course, a continued steepening of the curve would benefit us as well as the majority of the financial institutions.

[Brian Richardson, CFO at Univest Financial Corporation]

I think that would be a fair assessment, and that is not in any way kind of baked into the 5%-7% guide. The 5%-7% guide is simply just modest NIM expansion. Really, if you think about what happened to NIM both on a quarter and reported basis throughout 2024 and where we ended, if that just even held steady, you have inherent expansion year over year just because of the low points that we started with in 2024. You have a couple of basis points of NIM expansion that gives you a couple of % on potential NII lift. Then when you think about the 3%-5% loan growth, that provides the other component of what's baked into our guide currently. Of course, again, steepening yield curve could have further implications.

[Frank Schiraldi, Managing Director at Piper Sandler]

Okay. Just lastly on the buyback, do you get any color there in terms of should we anticipate maybe more consistent buybacks at sort of these levels? Would you say you continue to be, or would you say you continue to be more opportunistic on that front?

[Brian Richardson, CFO at Univest Financial Corporation]

Yeah. No, I would think what we've said previously, again, this is Brian. What we've said previously and we continue to operate with is our goal really is to deploy excess capital that is generated via buybacks. So we're not looking to grow regulatory capital just for the sake of growth. So therefore, that's kind of the guardrails that we're managing with. But from certain times when valuations have maybe dislocated, we are a little bit more opportunistic with an all-in goal of, on a quarterly basis, kind of buying at a level that doesn't result in significant growth of our regulatory capital.

[Frank Schiraldi, Managing Director at Piper Sandler]

Got it. Okay. I appreciate the color. Thank you.

[Brian Richardson, CFO at Univest Financial Corporation]

Thanks, Frank.

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

Thanks, Frank.

[Operator]

Thank you very much. We currently have no further questions, so I'd like to hand back to Jeff Schweitzer for any closing remarks.

[Jeff Schweitzer, President and CEO at Univest Financial Corporation]

Thank you, Carly, and I'd like to thank everybody for listening in today. As I said earlier, we're excited about the year we had in 2024 and the momentum we have heading into 2025, and we look forward to talking to everybody at the end of the first quarter. Have a great day.

[Operator]

As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.

Participants

Executives

• Brian Richardson, CFO

Analysts

• Jeff Schweitzer, President and CEO at Univest Financial Corporation
• Emily Lee, Equity Research Associate at KBW
• Frank Schiraldi, Managing Director at Piper Sandler