Univest Financial Corporation reported a $23 million net income for the second quarter of FY26, representing an 18.8% year-on-year increase. The bank’s net interest margin expanded by 16 basis points to 3.49%, supported by loan growth and improved asset yields.

The reported earnings included a $5.2 million pre-tax valuation adjustment on a real estate owned (REO) property, which reduced diluted earnings per share by $0.15. Excluding this non-recurring item, core operating performance remained robust as the bank navigated increased competition in loan pricing.

Financial Performance

Net interest income (NII) rose $6.7 million, or 11.3%, compared to Q2 of the prior fiscal year. This growth was driven by higher average loan balances and a reduction in the overall cost of funds. Core NIM, which excludes the impact of excess liquidity, increased by 9 basis points to 3.53%.

Noninterest income totaled $18.1 million, down $3.4 million from the prior year primarily due to the REO valuation adjustment. Underlying fee income trends remained solid, with investment advisory commission and fee income rising 10.7% to reflect appreciation in assets under management. Net gain on mortgage banking activities increased 37.2% due to higher saleable volume.

Credit Quality and Provisions

The bank placed a commercial loan relationship totaling $28.6 million on nonaccrual status during the quarter, establishing a specific reserve of $9.8 million. Net charge-offs were $1.9 million, or 11 basis points annualized. The allowance for credit losses coverage ratio remained stable at 1.28% of total loans held for investment.

Management noted that provisioning for the full year is event-driven and may be impacted by the resolution of the nonaccrual loan and other charge-off activity. The full-year provisioning guide remains at $11 million to $13 million.

Balance Sheet and Capital Allocation

Loan growth stood at $101.7 million (6% annualized), while deposits grew by $119.2 million (7.2% annualized). This dynamic contributed to a lower average loan-to-deposit ratio, which was 180 basis points lower year-to-date compared to the first six months of the prior fiscal year.

Univest repurchased 425,539 shares during the quarter, bringing the year-to-date total to 776,677 shares. Management intends to remain active in buybacks while balancing capital for potential M&A opportunities and balance sheet growth.

What the Numbers Show

The divergence between the reported NII growth of 11.3% and the flat-to-negative headline noninterest income highlights the bank's reliance on core lending operations for top-line expansion in this period. While fee-based segments like advisory and mortgage banking showed double-digit organic growth, the $5.2 million REO write-down obscured the underlying strength in noninterest revenue, suggesting that operational profitability was significantly higher than the reported bottom line indicated.

Outlook

For the remainder of FY26, Univest expects loan growth of 2% to 3% and noninterest expense growth of 3% to 5%. Noninterest income is projected to grow 6% to 8%, excluding BOLI death benefits and REO adjustments. The full-year net interest income growth outlook was updated to 8% to 10%, reflecting first-half strength. The effective tax rate is expected to remain in the 20% to 21% range.

Univest Financial Corporation reported net income of $23.0 million, or $0.82 diluted earnings per share, for the quarter ended June 30, 2026, compared to net income of $20.0 million, or $0.69 diluted earnings per share, for the quarter ended June 30, 2025. The year-over-year improvement was supported by a meaningful expansion in net interest income and net interest margin, though results were affected by a notable non-core valuation charge on an other real estate owned property.

Key Financial Highlights

The following table summarizes the Corporation's key income statement metrics for the second quarter of 2026 compared to the prior-year period and the first quarter of 2026.

Notable Non-Core Items

The second quarter of 2026 financial results included two notable non-core items. 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 reflecting 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. Additionally, the quarter included tax-free bank owned life insurance (BOLI) death benefit proceeds of $708 thousand, representing $0.03 diluted earnings per share.

Net Interest Income and Margin

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 year-over-year increase was driven by higher average balances of loans coupled with a reduction in the cost of funds, as lower rates paid on interest-bearing liabilities more than offset the impact of higher average balances of those liabilities. The sequential increase was driven by higher average balances and yields on loans, coupled with a modest reduction in the cost of funds and a decrease in the average balance of interest-bearing liabilities.

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.

Loans, Deposits, and Liquidity

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 were primarily driven by growth in commercial, construction, and commercial real estate loans, partially offset by a decline in residential mortgage loans consistent with the Corporation's strategy to focus balance sheet growth on full-relationship customers.

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 increased $350.3 million, or 5.3%, from June 30, 2025. 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.

As of June 30, 2026, the Corporation and its subsidiaries held cash and cash equivalents totaling $195.3 million. Committed borrowing capacity stood at $3.7 billion, of which $2.4 billion was available. Uncommitted funding sources from correspondent banks totaled $422.0 million at June 30, 2026.

Noninterest Income and Expense

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 resulting from the valuation adjustment. Partially offsetting this decline:

• BOLI income increased $686 thousand, or 67.8%, for the quarter ended June 30, 2026 compared to the prior-year period, including $708 thousand in BOLI death benefit proceeds versus $71 thousand in the prior-year period.
• Investment advisory commission and fee income increased $583 thousand, or 10.7%, driven by appreciation in assets under management and new customer relationships.
• Net gain on mortgage banking activities increased $365 thousand, or 37.2%, 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. Key drivers included:

• Salaries, benefits and commissions increased $1.7 million, or 5.3%, primarily due to higher salary expense of $1.3 million from annual merit increases and an increase of $375 thousand in medical claims expenses.
• Marketing and advertising expense increased $490 thousand, or 98.4%, driven by the inclusion of certain sponsorship activities and the Corporation's entry into a sponsorship agreement with a local university.
• Professional fees increased $432 thousand, or 27.1%, primarily due to increased marketing consultant fees.

Asset Quality and Credit Losses

Nonperforming assets totaled $63.0 million at June 30, 2026, compared to $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.

The provision for credit losses was $2.7 million for the three months ended June 30, 2026, compared to $1.3 million for the three months ended March 31, 2026 and $5.7 million for the three months ended June 30, 2025. The allowance for credit losses on loans and leases as a percentage of loans and leases held for investment remained at 1.28% at June 30, 2026, March 31, 2026, and June 30, 2025.

Capital, Dividends, and Share Repurchases

On July 22, 2026, Univest declared a quarterly cash dividend of $0.23 per share, payable 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 remained available for repurchase under the Share Repurchase Plan.

Key capitalization ratios at June 30, 2026 included a Tier 1 leverage ratio of 10.13%, a common equity Tier 1 risk-based capital ratio of 11.19%, and a total risk-based capital ratio of 13.81%. The tangible common equity to tangible assets ratio stood at 9.68%, and the common equity book value per share was $34.59.

About Univest Financial Corporation

Uniwest Financial Corporation, including its wholly-owned subsidiary Univest Bank and Trust Co., Member FDIC, has approximately $8.2 billion in assets and $6.2 billion in assets under management and supervision through its Wealth Management lines of business at June 30, 2026. Headquartered in Souderton, Pa. and founded in 1876, the Corporation and its subsidiaries provide a full range of financial solutions for individuals, businesses, municipalities, and nonprofit organizations primarily in the Mid-Atlantic Region, delivered through a network of more than 50 offices.