Core NIM expanded by 12 basis points to 3.24% excluding excess liquidity impact.
Deposits decreased $75.8 million during the quarter mainly due to seasonal decline of public funds deposits and broker deposits, but excluding these, deposits increased $77.5 million.
Loan outstandings contracted by $31.9 million during the quarter despite solid loan production in the first half of the year.
Net interest margin (NIM) was 3.2%, up 11 basis points from the prior quarter, driven by increased asset yields and reduced cost of funds.
Noninterest expense increased $1.6 million or 3.3% compared to Q2 2024, mainly due to compensation costs including merit increases, medical costs, and variable incentives.
Noninterest income increased by $521,000 or 2.5% compared to Q2 2024, driven by investment management fees, SBA loan sales gains, and treasury management fees.
Recorded $7.8 million of net charge-offs predominantly related to one credit, with the remaining balance placed on nonaccrual and supported by real estate collateral appraisal.
Univest Financial Corporation reported net income of $20 million during the second quarter or $0.69 per share.
Year-to-date commercial loan production through June 30 was $507 million compared to $402 million in the prior year, but loan outstandings contracted by $25.4 million compared to growth of $117.6 million in the prior year.
Impact of Rising Interest Rates on Mortgage Portfolio and Earnings
Management highlighted that higher interest rates have positively influenced investment income and mortgage persistency, contributing to strong earnings despite a slight decline in net income from $204 million to $195 million year-over-year.
The company benefits from a high-quality insured portfolio with embedded equity, which reduces default-to-claim transition probability, providing a buffer against potential credit deterioration.
The second quarter saw a 3% increase in U.S. mortgage insurance in force to $247 billion, with a stable weighted average FICO score of 746, indicating maintained credit quality amid rising rates.
Persistency remained high at 86%, supported by nearly half of the portfolio having a note rate of 5% or lower, which is expected to sustain elevated levels in the near term.
Management emphasized that the macroeconomic environment, including interest rates, is favorable for the company's buy, manage, and distribute operating model, enabling high-quality earnings.
Accretive capital allocation included deploying more than $600 million year-to-date, including a $357 million acquisition of five shopping centers in South Orange County, California.
Expense recovery rates improved meaningfully, contributing to NOI growth, supported by higher average commenced occupancy.
Leased and commenced occupancy spread was 260 basis points, with an SNO pipeline of $38 million incremental base rent.
Leverage remains comfortably within target range of 5 to 5.5x, with a strong balance sheet and access to low-cost capital.
Regency Centers delivered another quarter of excellent results with strong same property NOI growth exceeding 7%, driven primarily by base rent growth of 4.5%.
The company achieved record low shop move-outs and sustained robust leasing activity with strong rent growth, including cash rent spreads of 10% and GAAP rent spreads of nearly 20%.
Total NOI growth and core operating earnings per share growth were robust, surpassing expectations.
Dafinchi