Univest Corporation of Pennsylvania Q1 2025 Earnings Call Transcript

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April 24, 2025

Key Takeaways

  • Reported net income of $22.4 million, or $0.77 per share in Q1, marking a solid start to FY2025.
  • Net interest margin expanded 21 basis points to 3.09%, with core NIM (excess liquidity excluded) at 3.12%, up 10 basis points.
  • Noninterest income declined 12.4% quarter-over-quarter ($3.2 million), with core noninterest income down 3.6% after stripping nonrecurring items.
  • Credit quality remains strong: nonperforming assets at 0.43% of total assets and annualized net charge-offs of 0.10%.
  • Board raised the quarterly dividend by $0.01 to $0.22 and repurchased 221,760 shares, planning to maintain active buybacks.
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Earnings Conference Call
Univest Corporation of Pennsylvania Q1 2025
00:00 / 00:00

Transcript Sections

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Operator

Good morning all. Thank you for joining us for UniFest Financial Corporation first quarter twenty twenty five earnings call. My name is Carly, and I'll be coordinating the call today. If you'd to register a question during the call, you can do so by pressing star followed by one on your telephone keypad. And to read the first line of questioning, it will be star followed by 2.

Operator

I'd like to hand over to our host, Jeff Schweitzer, president and CEO of Universe Financial Corp. The floor is yours.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

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 Tyme, 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, even that actual results may differ materially from those contemplated by these looking statements.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

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 could be found on our website at univest.net under the Investor Relations tab. We reported net income of $22,400,000 during the first quarter or $0.77 per share. We're off to a solid start to 02/2025 in spite of the uncertainty in the economy with interest rates and geopolitical concerns.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

While loan growth was muted during the quarter, we actually saw solid production. However, we were hit with some larger payoffs, resulting in net growth of $6,500,000. With the recent uncertainty from the announcement of tariffs on April 2, we have witnessed commercial customers being more cautious, looking for more clarity on a number of items related to tariffs, taxes, interest rates and the overall economy. While deposits decreased to $100,800,000 during the quarter, this was predominantly due to the seasonal decline of public funds deposits. We continue to see a stabilization of noninterest bearing deposits, which combined with discipline on loan pricing, helped our margin improve to 3.09% during the quarter from 2.88% for the fourth quarter of twenty twenty four.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

Additionally, credit quality continues to remain strong as nonperforming assets to total assets increased slightly by two basis points during the quarter to 43 basis points with net charge offs remaining low at 10 basis points on an annualized basis. With respect to capital, yesterday, the Board of Directors announced a $01 increase in our quarterly dividend of $0.22 per share. Additionally, we repurchased 221,760 shares of stock during the quarter, and we plan on continuing to be active with stock buybacks going forward. 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. I will now turn it over to Brian for further discussion on our results.

Brian Richardson
Brian Richardson
CFO at Univest Financial

Thank you, Jeff. And I would also like to thank everyone for joining us today. I would like to start by touching on four items from the earnings release. First, as Jeff mentioned, we saw solid NIM expansion during the quarter with reported NIM increasing 21 basis points to 3.09%. Additionally, core NIM, which excludes excess liquidity of 3.12%, increased 10 basis points compared to the fourth quarter.

Brian Richardson
Brian Richardson
CFO at Univest Financial

Second, during the quarter, we recorded a provision for credit losses of $2,300,000 Our coverage ratio was 1.28% at March 31, which was consistent with December 31. Net charge offs for the quarter totaled $1,700,000 or 10 basis points annualized. Third, noninterest income decreased 3,200,000.0 or 12.4% compared to the February. Excluding the nonrecurring $3,400,000 gain on sale of MSRs in the February and the $1,000,000 BOLI death benefit in the current quarter, noninterest income decreased 797,000 or 3.6%. Contingent income in the insurance line of business decreased 700,000 compared to the February.

Brian Richardson
Brian Richardson
CFO at Univest Financial

As a reminder, contingent income totaled 2,300,000.0 in the first quarter of twenty four, which was an all time record for our insurance business. Fourth, noninterest expense decreased 746,000 or 1.5% compared to the February as we continue to prioritize prudent expense management. As it relates to 02/2025 guidance, when excluding the $1,000,000 bolt on only debt benefit recorded in the quarter, there are no changes to the information I provided on last quarter's call. That concludes my prepared remarks. We will be happy to answer any questions.

Brian Richardson
Brian Richardson
CFO at Univest Financial

Carly, would you please begin the question and answer session?

Operator

Of course. Thank you very much. We now have to open the lines for q and a. If you'd to ask a question, please press star followed by one on your telephone keypad now. And to move the star by the line of questioning, it will be star followed by two. As a reminder, three of the question will be star followed by one. Our first question comes from Frank Charlie of Piper Sandler. Frank, your line is now open.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Good morning.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

I thought Brian, correct me if I'm wrong and and maybe I missed it. But in terms of the fee income growth expectations, I thought it was mid single digits for the year. And if that's the case, can you just maybe talk about kind of drivers to get there?

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

Sure, Frank. Yes. 4% to six was our guidance range when we came into the year and we continue to hold that steady. Of course, we'll see what occurs on the mortgage banking side, which will provide potential opportunity and lift there or something that we'll continue to keep an eye on. And then you'll have inherently when you look at the year over year current growth, when you back out the pension income and the noise that, put into the first quarter, we'd again expect to fall into that low single digit percentage range.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. And then just on the loan to deposit ratio, there's some seasonality there on the public funds and and the deposits. And I think if correct me if I'm wrong, you guys continue to target like a 95% to 105% ratio. I guess, where do you see that trending to? And if you can just remind us the cadence of kind of those balances, public funds through the year.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

Yeah, Frank. So I'll start out there, and then we could elaborate if necessary or appropriate. But the well, on the longer term, we look to head towards 95 to a hundred. On that said, we realized that's going to be a process for us to navigate there. So we look to continually and methodically kinda ratchet that down over time knowing that the cyclicality and seasonality with public funds and how that presents at each quarter end from a loan to deposit ratio perspective.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

Yeah. So we'll hit a low point by June 30 on public funds, then they'll start to build in the second half of the year again.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. Great. And then just lastly, you mentioned capital returns. Just wondered if you could maybe size the potential for buybacks here in terms of payout ratio going forward.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

Sorry. Payout ratio as it relates to buyback. I mean, I think the the volume that you saw in the first quarter, just from an overall dollar perspective, if you look at it from that perspective, is something that we would continue to kind of target something in that general range. Again, that's the decision that we make though on a quarterly basis as we look forward to projections of earnings and loan growth and projections of our regulatory capital ratios such that we're looking to deploy any excess capital that would be generated while not overreacting in any specific quarter for any kind of short term blips, but looking over the longer term time horizon, call it, the next nine to twelve months of where we would expect capital to land. So so that's kind of the process that we go through.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. Alright. Great. Thanks for the color.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

Thank you, Frank.

Operator

Thank you very much. As a reminder to raise your question, please star followed by one on the telephone keypad. Our next question comes from Emily Lee of TPW. Emily, your line is now open. Emily, just confirming your line is now open.

Operator

It appears we're not able to get any connection from Emily's line. And we currently have no further questions. So I'd like to hand back to Jeff Schwarzer for any further remarks.

Jeff Schweitzer
Chairman, President & CEO at Univest Financial

Alright. Thank you, Carly, and thank you everyone for participating on the call today. You know, as we noted, we had a a very solid first quarter. While there's a lot of uncertainty in the environment, we are very well poised to navigate through anything that is thrown at us. And we look forward to talking to everybody who participates later today for our shareholders meeting and then at the end of the second quarter. Have a great day.

Operator

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

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