SOUDERTON, PA — Univest Financial Corporation (NASDAQ: UVSP), the parent company of Univest Bank and Trust Co., announced a notable increase in net income for the second quarter of 2024. The company reported $18.1 million in net income, equating to $0.62 diluted earnings per share. This marks an improvement from the $16.8 million, or $0.57 per share, recorded in the same period last year.
Key Drivers and Financial Performance
One significant contributor to this increase was a $171,000 tax-free benefit from bank-owned life insurance claims, adding $0.01 per share to the earnings. Without this one-time item, earnings per share remained consistent at $0.61 for both periods.
Growth in Loans and Deposits
Gross loans and leases saw a healthy rise of $105.8 million from the previous quarter, largely driven by commercial and residential mortgage loans. This represents an annualized growth rate of 6.4%. Total deposits also increased by $90 million, with substantial gains in commercial and consumer deposits. However, decreases in brokered and public funds deposits slightly offset these gains. Noninterest-bearing deposits made up 21.5% of total deposits, down from 21.9% in the prior quarter.
As of June 30, 2024, Univest reported $190.9 million in cash and cash equivalents. The corporation maintained a committed borrowing capacity of $3.6 billion, with $2.3 billion available, alongside uncommitted funding sources of $459 million.
Challenges in Net Interest Income
Net interest income fell by 6.1% year-over-year to $51 million, reflecting pressures from higher deposit costs. This drop highlights a shift in balances from lower-cost to higher-cost deposit products, outpacing gains from asset yield expansion. The net interest margin, on a tax-equivalent basis, declined to 2.84%, compared to 3.14% in the previous year. Excess liquidity shaved approximately two basis points off the net interest margin for the quarter.
Noninterest Income and Expense
Noninterest income grew by 5.8% to $21 million. Gains in mortgage banking activities, which rose by 64.6%, and investment advisory fees, which increased by 11.3%, were key contributors. Bank-owned life insurance income also saw a significant increase of 37.6%.
Noninterest expenses decreased by 2.2%, amounting to $48.7 million. This reduction is partly attributed to restructuring charges incurred in the second quarter of 2023. Excluding these charges, noninterest expenses rose slightly by 0.5%, reflecting the benefits of cost management strategies implemented last year.
Asset Quality and Credit Losses
Nonperforming assets decreased to $36.6 million, down from $40 million in the previous quarter. The provision for credit losses stood at $707,000, reflecting a decline from $1.4 million in the previous quarter and $3.4 million a year earlier. Net loan and lease charge-offs were $809,000, down from $1.4 million in the first quarter.
Dividend and Share Repurchases
Univest declared a quarterly cash dividend of $0.21 per share, to be paid on August 21, 2024. During the quarter, the corporation repurchased 190,808 shares at an average price of $20.93 per share. After including brokerage fees and excise tax, the average price per share was $21.17. As of June 30, 2024, 696,374 shares remain available for repurchase under the Share Repurchase Plan.
Univest’s Q2 Performance and Strategic Outlook
Univest’s strong performance in Q2 demonstrates its resilience and strategic focus on growing its loan and deposit base. However, the decline in net interest income due to rising deposit costs presents a challenge. The bank’s ability to manage these costs while continuing to grow its noninterest income streams will be crucial for maintaining profitability.
The decrease in nonperforming assets and provision for credit losses indicates improved asset quality, which bodes well for future earnings stability. The ongoing share repurchases and dividend payments reflect the corporation’s commitment to returning value to shareholders.
As the financial landscape evolves, Univest’s strategic initiatives and cost management efforts will be pivotal in navigating economic uncertainties and sustaining growth.
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