KBRA Affirms Ratings for Univest Financial Corporation

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Souderton, Pennsylvania-based Univest Financial Corporation (NASDAQ: UVSP) ("Univest" or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for Univest Bank and Trust Co., the main subsidiary. The Outlook for all long-term ratings is Stable.

The ratings are supported by Univest’s consistent earnings profile, underpinned by meaningful noninterest income contributions (~25%–30% of revenue) derived from diversified fee-based businesses, including wealth and trust, insurance, mortgage banking, and service charges. NIM improved through 2025, increasing 23 bps to 3.10% in 4Q25; excluding excess liquidity related to seasonal and transitory deposits, core NIM improved 27 bps to 3.37%. This expansion was driven by declining deposit costs following rate cuts and stable loan yields, as repricing of lower-yielding loans largely offset pressure on variable-rate loans. Prospectively, continued repricing of time deposits and gradual loan repricing are expected to support further margin expansion, underpinning stable to modestly improving earnings, complemented by low single-digit loan growth, consistent fee income, and ongoing expense management. Furthermore, asset quality remains sound, supported by conservative underwriting and a granular, diversified loan portfolio. While NPAs have at times trended modestly above peers, loss content has remained low, with NCOs averaging approximately 8 bps over the past five years. Moreover, investor CRE and C&D loan concentrations remain comfortably below regulatory guidance. Classified and criticized loan and lease levels are manageable at 2.05% of total loans and leases, though the mix has shifted more toward substandard classifications, largely reflecting proactive credit monitoring. Overall, UVSP is considered well-positioned to absorb reasonable credit costs, supported by reserves, solid earnings, and a sound capital base. While capital ratios have generally trailed peer averages, capital management is commensurate with the company’s risk profile. Moderate loan growth supported a modest improvement in capital metrics through 2025, with CET1 increasing 30 bps to 11.2% at YE25. Prospectively, management expects to maintain capital levels near current levels, balancing loan growth with share repurchase activity. The ratings are also supported by UVSP’s experienced management team, which maintains deep market knowledge and a relationship-driven approach. Although the company has a higher concentration of public fund deposits, contributing to somewhat elevated deposit costs and seasonal fluctuations, these relationships are long-standing. Given the seasonality of the deposit base, the company supplements its funding profile with wholesale sources, though utilization remains manageable at approximately 11% of total funding. Overall, UVSP maintains a sound funding profile, primarily comprised of core deposits (~85% of total funding), and management remains committed to maintaining a loan-to-deposit ratio in the 95%–100% range (98% as of 4Q25), consistent with its focus on full-relationship banking.

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