UNIVEST FINANCIAL Corp Q4 FY2024 earnings call

• Solid loan growth: Loans grew by $95.8 million (5.6% annualized) in Q4 and $259.4 million (3.9%) for the full year 2024.
• Deposit activity: Consumer and commercial deposits increased $104 million in Q4, offset by seasonal outflows in public funds and broker deposits. Noninterest-bearing deposits increased $90.7 million in Q4, representing 20.9% of total deposits.
• Noninterest income: Up $2.7 million (14.6%) compared to prior year, driven by growth in fee businesses like wealth management, mortgage banking, and service fees.
• Credit quality: Strong with nonperforming assets to total assets at 41 basis points, net charge-offs at 6 basis points for the year.
• Capital: Repurchased 139,492 shares in Q4 and 802,535 shares in 2024, representing 2.7% of shares outstanding, and tangible book value per share grew 9.01% in 2024.

During the fourth quarter, loans grew by $95.8 million or 5.6% annualized. Consumer and commercial deposits increased $104 million, offset by seasonal declines in public funds and broker deposits. Noninterest income was up $2.7 million or 14.6% compared to the prior year. Credit quality remained strong with nonperforming assets to total assets at 41 basis points. Loans grew by $259.4 million or 3.9% for the full year of 2024, and total deposits grew by $383.5 million or 6% for the full year.

• Loan growth: Expect 3% to 5% loan growth in 2025 with modest NIM expansion leading to net interest income growth of 5% to 7%.
• Provision for credit losses: Expected to be approximately $12 million to $14 million in 2025.
• Noninterest income: Expect growth of 4% to 6% off the $84.5 million 2024 base.
• Noninterest expense: Expect growth of approximately 4% to 5% in 2025.
• Effective tax rate: Expected to be approximately 20% to 20.5% based on current statutory rates.

Q: What are the factors driving your 2025 guide and what you think can drive it up or down in either direction?

A: The guide is based on current environment and strategic priorities. Any number of macro or micro variables could present upside or downside.

Q: Can you expand on deposit trends in Q4, where deposits decreased 6% QoQ but noninterest-bearing deposits increased 27%?

A: There was a seasonal outflow of approximately $200 million from broker deposits and public funds, but commercial and consumer deposits grew by $104 million. Seasonal outflow from public funds is expected to continue, with annual trough at end of second quarter and tax collections in third quarter bringing up deposits.

Q: On loan growth assumptions, is the 3% to 5% growth backloaded?

A: Second and fourth quarters are historically stronger for loan growth, but 3% to 5% growth is not dramatically different quarter-to-quarter, and they are off to a decent start in Q1.

Q: On net interest income guidance, any upside if yield curve steepens?

A: A steepening yield curve would benefit, but the 5% to 7% guide is based on modest NIM expansion and 3% to 5% loan growth; steepening could provide further upside.

Q: On stock buybacks, are they expected to be consistent?

A: Goal is to deploy excess capital via buybacks, being opportunistic when valuations are dislocated, with aim to not significantly grow regulatory capital on a quarterly basis