UNIVEST FINANCIAL Corp Q2 FY26 Results

The financial results for the quarter included a pre-tax charge of $5.2 million ($4.1 million after-tax), or $0.15 diluted earnings per share, related to a valuation adjustment on an other real estate owned ("OREO") property. The adjustment was recorded based on an updated appraisal which reflects the property's estimated fair value less costs to sell. The property was initially transferred to OREO during the quarter ended June 30, 2022 and was listed for sale during the quarter ended June 30, 2025. The financial results for the quarter also included tax-free bank owned life insurance ("BOLI") death benefit proceeds of $708 thousand, which represented $0.03 diluted earnings per share. Gross loans and leases increased $101.7 million, or 1.5% (6.0% annualized), from March 31, 2026, $127.2 million, or 1.8% (3.6% annualized), from December 31, 2025, and $240.8 million, or 3.5%, from June 30, 2025. The increases during these periods were primarily driven by growth in commercial, construction and commercial real estate loans. This growth was partially offset by a decline in residential mortgage loans, which is consistent with our strategy to focus balance sheet growth on full-relationship customers, which will improve our loan-to-deposit ratio. Total deposits increased $119.2 million, or 1.8% (7.2% annualized), from March 31, 2026, primarily due to increases in commercial, consumer and brokered deposits, partially offset by a seasonal decrease in public funds deposits. Total deposits decreased $154.3 million, or 2.2% (4.4% annualized), from December 31, 2025, primarily due to decreases in consumer and public funds deposits, partially offset by increases in commercial and brokered deposits. Total deposits increased $350.3 million, or 5.3%, from June 30, 2025, primarily due to increases in commercial and brokered deposits. Noninterest-bearing deposits totaled $1.5 billion and represented 21.1% of total deposits at June 30, 2026, compared to $1.5 billion representing 21.7% of total deposits at March 31, 2026. Unprotected deposits, which excludes insured, internal, and collateralized deposit accounts, totaled $1.7 billion and $1.6 billion at June 30, 2026 and March 31, 2026, respectively. This represented 24.6% of total deposits at June 30, 2026, compared to 23.7% at March 31, 2026. As of June 30, 2026, the Corporation and its subsidiaries held cash and cash equivalents totaling $195.3 million. The Corporation and its subsidiaries had committed borrowing capacity of $3.7 billion, of which $2.4 billion was available. The Corporation and its subsidiaries also maintained uncommitted funding sources from correspondent banks of $422.0 million at June 30, 2026. Future availability under these uncommitted funding sources is subject to the prerogatives of the granting banks and may be withdrawn at will. Net interest income of $66.2 million for the second quarter of 2026 increased $6.7 million, or 11.3%, from the second quarter of 2025 and $2.9 million, or 4.5%, from the first quarter of 2026. The increase in net interest income for the second quarter of 2026 compared to the second quarter of 2025 was driven by higher average balances of loans, coupled with a reduction in our cost of funds, as lower rates paid on interest‑bearing liabilities more than offset the impact of higher average balances of these liabilities. The increase in net interest income for the second quarter of 2026 compared to the first quarter of 2026 was driven by higher average balances and yields on loans, coupled with a modest reduction in our cost of funds and a decrease in the average balance of interest-bearing liabilities, partially offset by lower average balances of interest-earning deposits with other banks. Net interest margin, on a tax-equivalent basis, was 3.49% for the second quarter of 2026, compared to 3.33% for the first quarter of 2026 and 3.20% for the second quarter of 2025. Excess liquidity reduced net interest margin by approximately four basis points for the quarter ended June 30, 2026 compared to approximately 11 basis points for the quarter ended March 31, 2026 and approximately four basis points for the quarter ended June 30, 2025. Excluding the impact of excess liquidity, the net interest margin, on a tax-equivalent basis, would have been 3.53% for the quarter ended June 30, 2026 compared to 3.44% for the first quarter of 2026 and 3.24% for the quarter ended June 30, 2025. Noninterest income for the quarter ended June 30, 2026 was $18.1 million, a decrease of $3.4 million, or 15.8%, from the comparable period in the prior year, primarily due to the net loss on the sale and write-down of OREO of $5.2 million for the quarter ended June 30, 2026, due to the valuation adjustment recorded during the quarter as previously mentioned. BOLI income increased $686 thousand, or 67.8%, for the quarter ended June 30, 2026 compared to the comparable period in the prior year. The financial results for the three months ended June 30, 2026 included $708 thousand in BOLI death benefit proceeds compared to $71 thousand for the three months ended June 30, 2025. Investment advisory commission and fee income increased $583 thousand, or 10.7%, for the quarter ended June 30, 2026 compared to the comparable period in the prior year, driven by appreciation in assets under management and new customer relationships. Net gain on mortgage banking activities increased $365 thousand, or 37.2%, for the quarter ended June 30, 2026 compared to the comparable period in the prior year, primarily due to increased salable volume and increased margins. Noninterest expense for the quarter ended June 30, 2026 was $53.1 million, an increase of $2.8 million, or 5.5%, from the comparable period in the prior year. Salaries, benefits and commissions increased $1.7 million, or 5.3%, for the quarter ended June 30, 2026 compared to the comparable period in the prior year, primarily driven by higher salary expense of $1.3 million due to annual merit increases and an increase of $375 thousand in medical claims expenses. Marketing and advertising expense increased $490 thousand, or 98.4%, for the quarter ended June 30, 2026 compared to the comparable period in the prior year. This increase was primarily driven by the inclusion of certain sponsorship activities that were historically reported in Other Expense and the Corporation's entry into a sponsorship agreement with a local university, enhancing community engagement and visibility. Professional fees increased $432 thousand, or 27.1%, for the quarter ended June 30, 2026 compared to the comparable period in the prior year, primarily due to increased marketing consultant fees. The effective income tax rate was 19.6% for the quarter ended June 30, 2026, compared to an effective tax rate of 20.1% for the quarter ended June 30, 2025. The effective tax rates for the three months ended June 30, 2026 and 2025 were favorably impacted by proceeds of BOLI death benefit proceeds. Excluding the BOLI death benefit proceeds, the effective tax rate was 20.1% for the three months ended June 30, 2026 compared to 20.2% for the three months ended June 30, 2025. The effective tax rate for the quarter ended June 30, 2026, also reflected a discrete tax benefit related to equity compensation awards. Nonperforming assets totaled $63.0 million at June 30, 2026, $41.2 million at March 31, 2026, and $50.6 million at June 30, 2025. During the second quarter, a commercial loan relationship totaling $28.6 million was placed on nonaccrual status with a specific reserve of $9.8 million. This increase was partially offset by the valuation adjustment recorded on OREO during the quarter. Net loan and lease charge-offs were $1.9 million for the three months ended June 30, 2026 compared to $1.3 million and $7.8 million for the three months ended March 31, 2026 and June 30, 2025, respectively. Net loan and lease charge-offs for the three months ended June 30, 2025 included a $7.3 million charge-off associated with a nonaccrual commercial loan relationship. The provision for credit losses was $2.7 million for the three months ended June 30, 2026 compared to $1.3 million and $5.7 million for the three months ended March 31, 2026 and June 30, 2025, respectively. The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment was 1.28% at June 30, 2026, March 31, 2026, and June 30, 2025. On July 22, 2026, Univest declared a quarterly cash dividend of $0.23 per share to be paid on August 19, 2026 to shareholders of record as of August 5, 2026. During the quarter ended June 30, 2026, the Corporation repurchased 425,539 shares of common stock at an average price of $38.71 per share. Including brokerage fees and excise tax, the average cost per share was $39.13. As of June 30, 2026, 1,494,260 shares are available for repurchase under the Share Repurchase Plan.