UNIVEST FINANCIAL Corp UVSP

Univest reported net income of $23 million, or $0.82 per share, marking an 18.8% increase year-over-year. The reported net interest margin (NIM) expanded by 16 basis points from Q1 to 3.49%, with core NIM increasing 9 basis points to 3.53%. Net interest income grew $2.9 million (4.5%) quarter-over-quarter and $6.7 million (11.3%) year-over-year, driven by loan growth, improved asset yields, and reduced cost of funds.

The quarter's results were impacted by two significant credit-related items. A $5.2 million pre-tax valuation adjustment was recorded on an OREO property, reducing earnings by $4.1 million after-tax or $0.15 per diluted share. Additionally, a $28.6 million commercial loan was placed on nonaccrual status, leading to the establishment of a $9.8 million specific reserve. Net charge-offs for the quarter were $1.9 million, or 11 basis points annualized, while the allowance for credit losses coverage ratio remained stable at 1.28% of total loans held for investment.

The company achieved solid loan growth of $101.7 million, representing a 6% annualized increase, and total deposits grew by $119.2 million, or 7.2% annualized. Management continues its initiative to lower the loan-to-deposit ratio, which was 180 basis points lower year-to-date compared to the first six months of 2025. The lending environment is characterized by increased competition and narrowing spreads, prompting a pivot towards construction-oriented financing for better margins.

Noninterest income for the quarter was $18.1 million, a $3.4 million decrease compared to Q2 2025, primarily due to the OREO valuation adjustment. Excluding this item, underlying fee income trends remained solid. Investment advisory commission and fee income increased $583,000 (10.7%) year-over-year, driven by AUM appreciation and new customer relationships. Net gain on mortgage banking activities also rose $365,000 (37.2%) year-over-year due to increased salable volume and improved margins, complemented by $708,000 in BOLI death benefit proceeds.

Univest remained active in its stock buyback program, repurchasing 425,539 shares during the quarter, bringing the year-to-date total to 776,677 shares. The company intends to continue active buybacks, balancing capital deployment with M&A opportunities and balance sheet growth, aiming to manage capital ratios within a consistent range.

The company expects NIM to remain fairly neutral to rate changes, projecting stability in the 3.50% range, plus or minus 5 basis points, for the next several quarters. While there's some opportunity on the asset side, the ability to significantly reduce deposit costs is limited, especially with over $300 million in CDs maturing in Q3 at competitive offering rates. Longer-term NIM outlook beyond 2027 remains uncertain due to potential market changes.

Univest is open to M&A conversations on both the bank side and for wealth or insurance organizations, actively engaging in discussions though no imminent deals are expected. The company also remains active in the talent marketplace, hiring new relationship managers and seeking opportunities to add quality talent, particularly when market disruption^🌐s make talent available.