Univest Financial Q4 2024 Earnings Report

Univest Financial EPS Results

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

Univest Financial Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $73.45 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Univest Financial 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 Financial (NASDAQ:UVSP) operates as the bank holding company for Univest Bank and Trust Co. that provides banking products and services primarily in the United States. It operates through three segments: Banking, Wealth Management, and Insurance. The Banking segment offers a range of banking services, such as deposit taking, loan origination and servicing, mortgage banking, other general banking, and equipment lease financing services for individuals, businesses, municipalities, and nonprofit organizations. Its Wealth Management segment provides investment advisory, financial planning, and trust and brokerage services for private families and individuals, municipal pension plans, retirement plans, and trusts and guardianships. The Insurance segment offers commercial property and casualty insurance, employee benefits solutions, personal insurance lines, and human resources consulting services. The company was formerly known as Univest Corporation of Pennsylvania and changed its name to Univest Financial Corporation in January 2019. The company was founded in 1876 and is headquartered in Souderton, Pennsylvania.

Univest Financial Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning, all, and thank you for joining us for the Univest Financial Corporation 4th Quarter 20 24 Earnings Call. My name is Carlin. I'll be coordinating your call today. I'd now like to hand over to your host, Jeff Schweitzer to begin. 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 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.

[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 can be found on our website at univest.netundertheinvestorrelations tab. We reported net income of $18,900,000 during the Q4 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 $95,800,000 or 5.6 percent annualized.

[Jeff Schweitzer, Chairman, President & CEO at Univest Financial]

Additionally, consumer and commercial deposits increased $104,000,000 during the quarter, which was offset by the seasonal decline of public funds deposits of $185,000,000 and a slight decline in brokerage deposits. Our diversified business model continued to serve us well as our non interest income was up $2,700,000 or 14.6 percent compared to the Q4 of the prior year as we continue to see growth in our fee businesses. Additionally, credit quality continues to remain strong as non performing assets to total assets declined 4 basis points during the quarter and 11 basis points during the year to 41 basis points with minimal net charge offs of 6 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, Chairman, President & CEO at Univest Financial]

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

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

Thank you, Jeff. I would also like to thank everyone for joining us today. I would like to start by touching on 5 items from the earnings release. First, during the quarter, we saw continued NIM stabilization. Reported NIM of 2.88 percent increased 6 basis points from 2.82% in the 3rd quarter.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

Additionally, core NIM, which excludes excess liquidity of 3.02% increased 11 basis points compared to the 3rd quarter. 2nd, as it relates to our loan and deposit activity, loans grew by $95,800,000 or 5.6 percent annualized in the 4th quarter and grew by $259,400,000 or 3.9 percent for the full year of 2024. During the quarter, deposits decreased by $94,900,000 but as Jeff mentioned, public funds decreased by $185,600,000 and broker deposits decreased by $13,400,000 Offsetting these decreases was $104,100,000 increase in commercial and consumer accounts. During the Q4, non interest bearing deposits increased by $90,700,000 As of December 31, non interest bearing deposits represented 20.9 percent of total deposits compared to 19.3% at September 30. For the full year of 2024, total deposits grew by $383,500,000 or 6%.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

3rd, during the quarter, we recorded a provision for credit losses of $2,400,000 Our coverage ratio was at 1.28 percent at December 31st, which was consistent with September 30th. Net charge offs for the quarter totaled $767,000 or 5 basis points annualized. 4th, non interest income increased by $2,700,000 or 14.6 percent compared to the Q4 of 2023. This was primarily driven by increases in wealth management, mortgage banking and service fee income. 5th, non interest expense increased by $1,600,000 or 3.3 percent compared to the Q4 of 2023.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

For the full year of 2024, expenses increased by $2,100,000 or 1.1 percent when excluding restructuring charges recorded in 2023. I believe the remainder of the earnings release was straightforward, and I would now like to focus on 5 items as it relates to 2025 guidance. First, for 2024, net interest income totaled $211,200,000 For 2025, we expect loan growth of approximately 3% to 5% with modest NIM expansion resulting in net interest income growth of approximately 5% to 7%. This assumes a relatively stable rate environment with 1 or 2 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.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

2nd, the provision for credit losses will continue to be driven by changes in economic forecast and credit performance of the portfolio. At this time, we expect the provision for 2025 to be approximately $12,000,000 to $14,000,000 3rd, 2024 net non interest income totaled $84,500,000 when excluding the $3,400,000 gain on sale of MSRs and 225,000 dollars BOLI death benefit. For 2025, we expect non interest income growth of approximately 4% to 6% off of the $84,500,000 base. 4th, we reported non interest expense of $198,000,000 for 2024. For 2025, we expect growth of approximately 4% to 5%.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

Lastly, as it relates to income taxes, we expect our effective tax rate to be approximately 20% to 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.

[Operator]

Thank you very much.

[Operator]

We'd now like to open

[Operator]

the lines for Q and A. Our first question comes from Emily Lee with ABW. Emily, your line is now open.

[Emily Lee, Analyst at Keefe, Bruyette & Woods (KBW)]

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

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

This is Brian. I'll take that one. The guide 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, there we pick the middle of the road of where we expect things to go.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

And that's why I provide ranges in accordance with that. So I mean, maybe 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 that's an infinite number of answers in all honesty.

[Emily Lee, Analyst at Keefe, Bruyette & Woods (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 and I borrowers at all or maybe the other direction, certain industries where they're a little bit more bullish as it impacted like your loan pipeline in any way?

[Jeff Schweitzer, Vice Chairman, President & CEO at Univest Financial]

Yes. 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, etcetera. But given a more regulatory friendly environment that everybody is anticipating, probably a heated up M and A environment as there's more appetite for that.

[Jeff Schweitzer, Vice Chairman, President & CEO at Univest Financial]

We are 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, Analyst at Keefe, Bruyette & Woods (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, Senior Executive VP & CFO at Univest Financial]

Sure. This is Brian. I'll take that one. Again, we saw a decrease between broker deposits and public funds that are approximately $200,000,000 in the quarter. That's a seasonal outflow and just our intentional management of the broker deposit book was a combination of those 2 items there.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

We did see growth in commercial and consumer deposits across a wide population there. It wasn't 1 or 2 specific deposits that drove it, but we did see growth of $104,000,000 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 anywhere from $50,000,000 to $100,000,000 per month.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

So we would expect that that continue to kind of wind down throughout the Q1. And as we've said in the past, you hit your annual trough first at the end of the second quarter every year, then tax collections in the Q3 brings you back up to the high point.

[Emily Lee, Analyst at Keefe, Bruyette & Woods (KBW)]

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

[Operator]

Thank you very much.

[Jeff Schweitzer, Vice Chairman, President & CEO at Univest Financial]

Thank you very much.

[Operator]

Our next question comes from Frank Schiraldi of Piper Sandler.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Just

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

on

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

the loan growth. The loan growth assumption, the 3% to 5% growth in 2025, seems like most people I 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% to 5%, is that does that also assume some pickup in the back half of the year? Is that more, I guess, back loaded for 2025?

[Jeff Schweitzer, Vice Chairman, President & CEO at Univest Financial]

Frank,

[Jeff Schweitzer, Vice Chairman, President & CEO at Univest Financial]

to some degree, I mean, there's the second and the 4th quarters historically are always our stronger quarters from a loan growth perspective. Given the 3% to 5%, it's not that dramatically different quarter to quarter and we are getting off to a decent start in the Q1 here. I wouldn't necessarily say that like 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 Companies]

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.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

So just curious if the yield curve there's been a lot of movement in the longer end. Are you 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 guidance 7%. Just trying to get a little more color on the potential drivers to maybe outperform there?

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

Sure, Frank. This is Brian. So of course, the steepening continued steepening of the curve would benefit us as well as majority of the financial institutions. So I think that would be a fair assessment and that is not in any way kind of baked into the 5% to 7% guide. The 5% to 7% guide is simply just modest NIM expansion.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

And really if you think about what happened to NIM both on a core and reported basis throughout 'twenty four 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. So you have a couple of basis points of NIM expansion that gives you a couple of percent on potential NII lift. And then when you think about the 3% to 5% loan growth that provides the other component of what's baked into our guide currently. But of course, again, seeping yield curve could have further implications.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Okay. And so just lastly on the buyback, You got 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, Senior Executive VP & CFO at Univest Financial]

Yes. No, I would think and 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.

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

But we will from certain times when valuations may be 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 that doesn't result in significant growth of our regulatory capital.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

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

[Brian Richardson, Senior Executive VP & CFO at Univest Financial]

Thanks, Frank. Thanks, Frank.

[Operator]

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

[Jeff Schweitzer, Vice Chairman, President & CEO at Univest Financial]

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 Q1. 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

• Jeff Schweitzer, Chairman, President & CEO
• Brian Richardson, Senior Executive VP & CFO
• Jeff Schweitzer, Vice Chairman, President & CEO

Analysts

• Emily Lee, Analyst at Keefe, Bruyette & Woods (KBW)
• Frank Schiraldi, Managing Director at Piper Sandler Companies