SOUDERTON, PA — Univest Financial Corporation (NASDAQ: UVSP) posted second-quarter net income of $20.0 million, or $0.69 per diluted share, up from $18.1 million, or $0.62 per share, in the same period last year. The earnings boost came largely from growth in net interest income and stable noninterest revenues, even as the bank navigated declining loan volumes and a sizable commercial loan charge-off.
Lending and Deposits
Total gross loans and leases declined 0.5% from the prior quarter, led by reductions in commercial real estate, residential mortgage loans, and lease financing. However, on a year-over-year basis, loans increased 1.7%, driven by gains in commercial real estate and home equity loans.
Deposits also declined by 1.1% in the quarter, mostly due to seasonal decreases in public fund balances and brokered deposits. Stripping out these variables, core deposits rose by $77.5 million. Noninterest-bearing deposits accounted for 22.2% of total deposits as of June 30.
Liquidity and Capital
As of quarter-end, Univest reported $160.4 million in cash and cash equivalents and had access to $2.3 billion in available committed borrowing capacity. The bank also held $469 million in uncommitted funding sources from correspondent banks.
Net Interest Income and Margin
Net interest income grew 16.7% year-over-year to $59.5 million, supported by higher loan yields and lower funding costs. Compared to the first quarter, net interest income rose 4.9%. Net interest margin improved to 3.20%, up from 2.84% a year earlier. Excess liquidity modestly reduced the margin by four basis points.
Noninterest Income
Noninterest income totaled $21.5 million, up 2.5% from the same quarter last year. Growth in service charges, investment advisory fees, and gains on SBA loan sales offset a sharp 42.6% drop in mortgage banking revenue due to lower salable volume.
Expense and Credit Quality
Noninterest expense rose 3.3% to $50.3 million, primarily reflecting higher salary and benefits costs tied to compensation and medical claims.
Asset quality deteriorated during the quarter. Nonperforming assets climbed to $50.6 million from $34.0 million the previous quarter, driven by a $23.7 million commercial loan moved to nonaccrual status amid suspected fraud. A $7.3 million charge-off was recognized on the loan, contributing to total net charge-offs of $7.8 million for the quarter. Provision for credit losses increased to $5.7 million, up from $707,000 a year earlier. Despite the uptick in loss reserves, the allowance remained steady at 1.28% of loans and leases.
Capital Returns
Univest declared a $0.22 per share dividend, payable August 20 to shareholders of record as of August 6. The bank also repurchased 172,757 shares at an average cost of $28.77 per share during the quarter. More than 1 million shares remain authorized for repurchase under the current buyback plan.
While challenged by loan softness and credit issues, Univest’s core earnings performance remained strong in Q2, aided by expanding margins and disciplined expense management.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.