UNIVEST FINANCIAL Corp Q3 FY2024 earnings call

• Net income for the third quarter was $18.6 million or $0.63 per share.
• Deposits increased by $358.8 million due to seasonal public funds build.
• Loan growth was $45.9 million, but impacted by declining line usage and payoff activity.
• Non-interest income up $1.5 million (7.8%) with wealth management and insurance growing.
• Non-interest expenses down $436,000 (0.9%).
• Actively repurchasing stock, with 156,728 shares repurchased during the quarter and Board approving an increase of 1 million shares available for repurchase.

During the third quarter, Univest saw a large increase in deposits of $358.8 million due to seasonal public funds. Loan growth was $45.9 million (2.8% annualized), though muted by declining line usage and payoff activity. Non-interest income was up $1.5 million (7.8%) with wealth management up 9.8% and insurance up 8% compared to the prior year. Non-interest expenses were down $436,000 (0.9%). The company repurchased 156,728 shares during the quarter, with year-to-date repurchases at 663,043 shares, representing 2.25% of shares outstanding as of December 31, 2023, and tangible book value per share grew 7.32% year-to-date.

• Full year 2024 loan growth expected at approximately 4%, net interest income to contract 4%-5% vs 2023.
• Provision for credit loss guidance reduced to 6-8 million, event-driven.
• Non-interest income growth guidance 7%-9% excluding $3.4 million pre-tax gain on MSR sale. Including gain, non-interest expense growth 11%-13%.
• Non-interest expense expected to grow 1%-2% off 2023 base of $195.8 million.
• Effective tax rate expected at approximately 20.5%.

• Factors affecting guidance: competition in deposit pricing, valuation allowance on MSRs, and event-driven expenses.
• Loan pricing competition could impact NIM as variable price credits may not be sustainable.

Q: Just on the expense front, Brian, you mentioned 1% to 2% growth. What's linked quarter growth and drivers?

A: It would put in the $50 million range for Q4, driven by normalization of some small benefits in current quarter.

Q: How much of $350 million inflows are seasonal muni and timing?

A: Build in Q3, with $100 million or so outflows in Q4, winding down into Q1.

Q: What factors could drive upside or downside to guidance?

A: Deposit pricing competition, MSR valuation allowance, and event-driven expenses.

Q: Impact of Fed cuts on margin?

A: Viewed as neutral with potential upside from loan book repricing.

Q: Competition in loans and deposits?

A: Deposit pricing down with Fed moves, competition stiff; loan pricing disciplined with some tighter spreads.

Q: Buyback activity and capital for M&A?

A: Excess capital used for buybacks, with no immediate plan for M&A war chest.

Q: Cash and excess cash normalization?

A: Excess liquidity expected stable Q3 to Q4, with some running out in late Q4, remaining available for other assets.

Q: Loan pipeline and pricing?

A: Healthy pipeline in C&I and full relationship CRE, maintaining pricing discipline.

Q: Fed cuts and deposit actions?

A: ~$2 billion deposits auto-reprice, ~$325 million exception priced with 50 basis point reduction, expecting similar actions going forward.

Q: Fed cut impact on deposits and loans?

A: Expect deposit beta ~30% initially, similar to last hiking cycle.