Univest Corporation of Pennsylvania Q3 Earnings Call Highlights

Key Points

• Third-quarter net income was $21.6 million, or $0.78 per share, but results were significantly reduced by a $14.4 million charge-off tied to one commercial lending relationship. Management said the credit issue was isolated and expects criticized and classified loans to decline by $35 million to $40 million in the fourth quarter.
• Credit metrics improved overall, with nonperforming assets falling to $51.4 million from $63 million, while loans declined slightly and the full-year loan-growth outlook remained at 2% to 3%. Deposits rose 6.1%, although $100 million to $200 million of seasonal public-funds deposits is expected to run off each quarter through June.
• Core net interest margin increased to 3.55% excluding the effect of excess seasonal liquidity, and management expects modest margin expansion in the fourth quarter. Univest also reported stronger wealth-management and fee income, improved its efficiency ratio to 59.5%, and repurchased 301,127 shares during the quarter.

Univest Corporation of Pennsylvania NASDAQ: UVSP reported third-quarter net income of $21.6 million, or $0.78 per share, as results were affected by a $14.4 million charge-off tied to a single commercial lending relationship.

Chairman, President and Chief Executive Officer Jeff Schweitzer said the credit event had a significant effect on quarterly results, but said the company’s core operations, lending pipelines and broader asset-quality trends remained sound. He said criticized and classified loans are expected to decline in the fourth quarter.

The charge-off had carried a $9.8 million specific reserve as of June 30. The remaining balance associated with the credit is supported by a letter of intent to sell the business, Schweitzer said.

Credit metrics and loan trends

Chief Financial Officer Brian Richardson said total net charge-offs were $17.6 million during the quarter, with $14.4 million attributable to the commercial relationship previously discussed by management. The company recorded a $9 million provision for credit losses during the quarter.

Nonperforming assets declined to $51.4 million from $63 million at June 30. The allowance for credit losses totaled $81 million, or 1.15% of loans held for investment, compared with 1.28% at the end of the second quarter.

During the question-and-answer session, Chief Operating Officer Mike Keim described the charged-off credit as a commercial-and-industrial loan to a company in a cyclical industry. He said the borrower had been a company with roughly $70 million to $80 million in revenue and strong EBITDA when Univest entered the relationship, but management did not execute at the level needed to support its debt. The credit included both term debt and a working-capital line backed by inventory and receivables.

Keim said the issue was not indicative of conditions elsewhere in the company’s portfolio or the broader market. Schweitzer said Univest expects criticized and classified loans to decline by approximately $35 million to $40 million in the fourth quarter, with potential for further improvement as it works through other credits.

Loans declined slightly during the quarter, reflecting the planned payoff of a $35.3 million shared national credit and the commercial charge-off. Management maintained its full-year loan-growth outlook of approximately 2% to 3%.

Keim said the company’s lending pipeline remains strong but that changes in business mix are affecting reported loan growth. Univest has shifted its residential mortgage operation toward originating loans for sale through Fannie Mae, Freddie Mac and FHA channels, rather than retaining them in portfolio. It has also shifted its commercial real estate approach toward commercial construction lending rather than holding long-term CRE loans.

Those changes are intended to generate higher fees and higher rates while helping reduce the company’s long-term loan-to-deposit ratio, Keim said. Management is targeting a sustainable loan-to-deposit ratio of 95% to 100%.

Deposits, margins and rate competition

Total deposits increased $421.5 million, or 6.1%, during the quarter, largely driven by a seasonal increase in public-funds deposits and growth in commercial deposits. Richardson said a significant share of the increase came from public funds and that management expects approximately $100 million to $200 million of those deposits to run off in each quarter until June of next year.

Univest’s average loan-to-deposit ratio was 120 basis points lower year to date than during the first nine months of 2025, according to Schweitzer.

Net interest income increased $1.5 million, or 2.3%, from the second quarter and rose $6.4 million, or 10.5%, from the year-earlier period. Reported net interest margin was 3.42%, compared with 3.49% in the prior quarter, as seasonal public-funds balances increased excess liquidity. Excluding that liquidity impact, core net interest margin increased two basis points sequentially to 3.55%.

Richardson said the company expects core net interest margin to increase slightly in the fourth quarter. He said Univest is generally neutral to modestly asset-sensitive in an upward-rate environment and sees an opportunity for modest margin expansion, though deposit competition could limit that benefit.

Keim said customers increasingly expect higher deposit rates following Federal Reserve rate moves, while competition remains intense across certificates of deposit, money market accounts and checking-account promotions. Univest has offered a more competitive 25-month CD and has increased marketing around deposit-gathering initiatives, including a checking-account campaign.

Fees, expenses and outlook

Fee income, excluding bank-owned life insurance death benefits, rose 6.3% from the third quarter of 2025. Wealth-management revenue increased 10.3% year over year, Schweitzer said.

Noninterest expense totaled $54 million, up $3.3 million, or 6.6%, from a year earlier. Richardson attributed the increase to compensation, marketing and data-processing costs. The company added staff primarily in revenue-producing roles and data analytics, while also incurring higher variable compensation and medical costs. Marketing expenses included a sponsorship agreement with a local university and deposit-origination advertising.

Despite higher expenses, the efficiency ratio improved to 59.5%, compared with 62.3% in the second quarter and 60.2% a year earlier.

• Full-year net interest income growth is now expected to be 10% to 11%.
• Full-year provision expense is expected to be $15 million to $17 million.
• Noninterest income is expected to grow 5% to 7%, excluding BOLI death benefits and other-real-estate-owned valuation adjustments.
• Noninterest expense is expected to increase 5% to 6%, excluding restructuring charges.

Univest repurchased 301,127 shares during the quarter and 1.08 million shares year to date, representing 3.8% of shares outstanding at the beginning of the year. Schweitzer said the company expects to remain active in repurchases while retaining flexibility for strategic acquisitions or opportunities in its bank, wealth management and insurance businesses.

About Univest Corporation of Pennsylvania (NASDAQ:UVSP)

Univest Corporation of Pennsylvania 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, families and businesses.

Univest's banking services include checking and savings accounts, consumer and commercial lending, mortgages, cash-management and treasury services, online and mobile banking, and other deposit products. The company also offers wealth management, investment and trust services, as well as insurance products through affiliated operations.

Founded in 1876, Univest has historically focused on serving communities in southeastern Pennsylvania, including the Philadelphia suburbs and surrounding counties.

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