SOUDERTON, PA — Univest Financial Corp. (Nasdaq: UVSP) reported a 15.6% decline in third-quarter profit as losses on two commercial lending relationships drove a sharp increase in credit costs, offsetting stronger interest income and deposit growth at the Pennsylvania banking company.
Net income fell to $21.6 million, or 78 cents per diluted share, for the quarter ended September 30, 2026, compared with $25.6 million, or 89 cents per share, a year earlier.
The decline was primarily attributable to higher provisions for credit losses following $17.6 million in net loan and lease charge-offs, compared with $480,000 in the third quarter of 2025.
Univest recorded a $9 million provision for credit losses, up from $517,000 a year earlier and $2.7 million in the second quarter.
The largest loss involved an existing nonaccrual commercial loan relationship totaling $28.3 million. Univest charged off $14.4 million during the quarter after previously establishing a $9.8 million specific reserve against the relationship.
The company reported that the remaining carrying value was supported by a letter of intent for the sale of the borrower’s business.
A separate $6.9 million commercial loan relationship generated an additional $2.7 million charge-off. The remaining balance was subsequently repaid in full during the quarter.
Despite the elevated losses, nonperforming assets declined to $51.4 million at September 30 from $63 million at June 30. They totaled $52.1 million a year earlier.
The credit deterioration overshadowed improved revenue from the bank’s core lending operations.
Net interest income increased 10.5% to $67.8 million from $61.4 million a year earlier, supported by higher average loan balances and lower funding costs.
Compared with the second quarter, net interest income rose $1.5 million, or 2.3%, reflecting higher average balances in loans and interest-earning deposits, along with modest improvements in asset yields.
The tax-equivalent net interest margin increased to 3.42% from 3.17% a year earlier but declined from 3.49% in the second quarter.
Univest attributed part of the sequential margin decline to excess liquidity, which reduced the third-quarter margin by approximately 13 basis points.
Excluding that effect, the margin would have been 3.55%, compared with 3.53% in the preceding quarter and 3.33% a year earlier.
Total deposits increased $421.5 million, or 6.1%, from June 30, reflecting seasonal growth in public funds deposits and increased commercial balances.
Deposits were also up $267.2 million, or 3.8%, from December 31, 2025, and $136.4 million, or 1.9%, from September 30, 2025.
Growth in public funds and commercial deposits was partially offset by declines in consumer and brokered deposits during the quarter.
Gross loans and leases decreased $27.5 million, or 0.4%, from June 30, primarily because of a $35.3 million payoff of a shared national credit relationship and the $14.4 million commercial loan charge-off.
The portfolio nevertheless increased $229 million, or 3.4%, from a year earlier, driven largely by construction and commercial real estate lending.
Univest has also been reducing its residential mortgage portfolio as part of a strategy to concentrate balance-sheet growth on customers with broader banking relationships and improve its loan-to-deposit ratio.
Noninterest income totaled $22.3 million, up $346,000, or 1.6%, from the prior-year quarter.
Investment advisory commissions and fees increased $762,000, or 13.4%, supported by appreciation in assets under management and new customer relationships.
Other service fee income rose $479,000, or 19.8%, including a $393,000 increase in mortgage servicing fees.
Those gains were partly offset by a $920,000 decline in bank-owned life insurance income. The prior-year quarter included $967,000 in death benefit proceeds.
Operating expenses also increased, adding pressure to quarterly earnings.
Noninterest expense rose $3.3 million, or 6.6%, to $54 million, led by higher compensation, benefits and commissions.
Personnel-related costs increased $2.6 million, or 8.2%, reflecting annual salary increases, additional staffing, higher commissions and increased medical claims expenses.
Marketing and advertising expense increased $463,000, partly because of changes in expense classification and a new sponsorship agreement with a local university.
Data processing costs increased $340,000, or 8%, primarily because of annual price increases.
Univest’s effective income tax rate was 20.2%, compared with 20% a year earlier.
Separately, the company’s board declared a quarterly cash dividend of 23 cents per share on October 28, payable November 25 to shareholders of record as of November 11.
Univest repurchased 301,127 common shares during the third quarter at an average purchase price of $42.50 per share, or $42.96 including brokerage fees and excise tax.
As of September 30, approximately 1.19 million shares remained available for repurchase under the company’s existing authorization.
Univest Financial Corp. is the parent of Univest Bank and Trust Co. and operates insurance, investment and equipment financing subsidiaries.
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