Univest Earnings Call: Record EPS, Cautious 2026 Outlook

Univest Corporation Of Pennsylvania ((UVSP)) has held its Q4 earnings call. Read on for the main highlights of the call.

Univest Corporation Delivers Record EPS Amid Mixed Margin Pressures

Univest Corporation of Pennsylvania’s latest earnings call struck a cautiously optimistic tone, highlighting record profitability and solid loan and deposit trends, while acknowledging emerging headwinds from deposit competition, excess liquidity, and higher expected credit costs. Management emphasized record full-year EPS, stronger loan growth exiting the year, improving core net interest margin (NIM), and stable asset quality, all underpinned by aggressive share repurchases. At the same time, they were clear that seasonal public fund volatility, reported NIM compression and higher provisions will weigh on reported metrics in the near term.

Record EPS and Strong Q4 Earnings

Univest reported fourth-quarter net income of $22.7 million, translating to diluted EPS of $0.79, a robust 21.5% increase compared with the prior year’s fourth quarter. For the full year 2025, the company delivered record EPS of $3.13, underscoring its ability to grow earnings despite a challenging rate and funding environment. Management framed these results as evidence that the core franchise remains resilient and profitable, providing a strong base heading into 2026.

Loan Growth Accelerates into Year-End

Loan growth picked up momentum in the fourth quarter, with balances rising $129.3 million, or 7.6% on an annualized basis. For the full year 2025, loans increased $88.2 million, or 1.3%, as softer early-year demand was offset by a stronger finish. The Q4 acceleration suggests that pipelines and customer activity are improving, even as the bank navigates runoff in certain residential products and shifts toward more commercial lending.

Core Margin Improvement and Strong NII Platform

While reported NIM showed some noise from excess liquidity, the underlying earnings engine strengthened. Core NIM, excluding excess liquidity, expanded 4 basis points in Q4 to 3.37%, reflecting better asset yields and disciplined pricing. Net interest income for 2025 totaled $240.2 million, and management guided to 4–6% NII growth in 2026, assuming modest rate cuts and an overall asset-liability neutral positioning. This guidance indicates confidence that the bank can grow its interest income base even as the rate cycle turns.

Improving Asset Quality Metrics

Credit quality trends remained a clear positive. Nonaccrual loans to total loans declined by 20 basis points to just 0.2%, and nonperforming assets to total assets fell 16 basis points to 0.45%. The allowance coverage ratio was steady at 1.28%, and net charge-offs in Q4 were only $1.1 million, or 7 basis points annualized. These low loss levels position Univest to absorb higher provisioning needs going forward without signaling any current deterioration in the loan book.

Shareholder Returns Boosted by Active Buybacks

Capital return was another highlight, with Univest leaning aggressively into share repurchases. The company bought back roughly 480,000 shares in Q4 at an average price of $32.17, and 1.1 million shares over 2025 at an average of $30.75, amounting to 3.9% of shares outstanding as of the end of 2024. The board approved an additional 2 million shares for repurchase, leaving 2.3 million shares authorized as of year-end 2025, and management is targeting $10–$12 million of buybacks per quarter in 2026. This program signals confidence in intrinsic value and should provide continued EPS support.

Full-Year Deposit Growth Despite Q4 Outflows

Despite a soft fourth quarter, Univest delivered healthy deposit growth for the year. Total deposits increased $328.1 million in 2025, up 4.9% year-over-year. This performance suggests that core deposit-gathering initiatives remain effective and that the franchise continues to attract and retain client balances, even in a competitive market for funding.

Seasonal Public Fund Volatility Drives Q4 Deposit Declines

The fourth quarter did see notable deposit outflows, with balances declining $130.8 million, largely driven by a $198.8 million reduction in public funds. Management explained that this volatility is seasonal and is likely to continue, guiding to public fund outflows of $100–$150 million per quarter in the first half of 2026. These swings create periods of excess liquidity that must be deployed efficiently, contributing to quarter-to-quarter fluctuations in reported margins and balance sheet metrics.

Reported NIM Compression from Excess Liquidity

Reported NIM fell 7 basis points sequentially in Q4 to 3.10%, down from 3.17% in the prior quarter, largely due to elevated excess liquidity associated with the seasonal build in public funds. While core NIM improved, this excess cash diluted reported margins and added volatility to headline numbers. Management emphasized that investors should focus on core NIM and the trajectory of NII growth, as they seek to put surplus liquidity to work in higher-yielding assets over time.

Higher Provision and Credit Cost Outlook

Univest recorded a $3.1 million provision for credit losses in the fourth quarter and signaled a higher provisioning run-rate going forward, guiding to $11–$13 million of provision expense in 2026. While current asset quality is strong, this outlook reflects more normalized credit costs and prudent reserve building rather than any acute problem loans. Still, the higher provision burden will be a drag on net earnings growth relative to recent years of unusually low credit costs.

Expense Growth and Seasonal Compensation Pressure

Noninterest expenses moved higher, reflecting both franchise investment and seasonal factors. Q4 noninterest expense rose $2.1 million, or 4.1%, versus the prior-year quarter, and full-year expenses increased $5.0 million, or 2.5%. Variable compensation contributed meaningfully to the fourth-quarter jump, adding roughly $1.3 million. Management is targeting modest expense growth in 2026, but the call acknowledged that incentive compensation and other volume-related costs can create quarterly noise while the bank invests to support growth and competitive positioning.

Competitive Deposit Pricing Tightens Funding Margins

Management highlighted a more intense competitive environment for deposits, particularly among municipal and public fund customers, where price sensitivity is elevated. To maintain and grow these balances, Univest must stay aggressive on deposit rates, which could pressure funding costs and constrain margin expansion if competition remains high. The bank is balancing the need to protect relationships and liquidity with the goal of preserving NIM, making pricing strategy a key lever to watch in the coming quarters.

Residential Mortgage Runoff and Loan Mix Shift

The loan portfolio is undergoing a structural shift as on-balance sheet residential construction and permanent loans continue to run off. Management expects to emphasize commercial lending and agency-directed residential products instead. While this mix shift may tighten overall loan growth and potentially lower blended yields versus prior years when higher-yielding residential balances were more prominent, it also reduces interest-rate and credit risk concentrations and aligns the balance sheet with strategic growth areas.

2026 Outlook: Moderate Growth, Stable Core, Active Buybacks

Looking ahead to 2026, Univest guided to loan growth of roughly 2–3% and modest NIM expansion, driving expected net interest income growth of about 4–6% from the 2025 base of $240.2 million, assuming two 25-basis-point Fed cuts and an asset-liability neutral position. The bank expects provision for credit losses between $11 million and $13 million, noninterest income growth of approximately 5–7% off an $85.7 million base, and noninterest expense growth of 3–5% from $203 million in 2025. The effective tax rate is projected at 20–21%. Importantly for shareholders, management plans to continue repurchasing $10–$12 million of stock per quarter, with 2.3 million shares remaining authorized at year-end 2025, reinforcing the commitment to capital return.

In summary, Univest’s earnings call painted a picture of a financially strong regional bank navigating a more challenging funding and rate environment with discipline and confidence. Record EPS, improving core margins, solid asset quality and a substantial buyback plan underscored the positives, while seasonal deposit volatility, deposit pricing pressure, and higher expected provisions were flagged as key headwinds. For investors, the story centers on whether Univest can execute on its 2026 guidance—growing NII, managing expenses and credit, and deploying excess liquidity—while continuing to enhance shareholder value through disciplined capital management.