Univest Financial Corporation

Welcome to the Unifest Financial Corporation first quarter 2024 earnings call. My name is Carla and I'll be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host, Jeff Schweitzer, President and CEO of Unifest Financial Corporation, to begin. Jeff, please go ahead.

Thank you, Carla, and good morning, and thank you to all of our listeners for joining us. Joining me on the call this morning is Mike Keim, our Chief Operating Officer and President of Univest Bank and Trust, and Brian Richardson, our Chief Financial Officer. Before we begin, I would like to remind everyone of the forward-looking cautionary statements. Disclaimer, please be advised that during the course of this conference call, management may make forward-looking statements that express management's intentions, beliefs, or expectations within the meaning of the federal securities laws. Univest's actual results may differ materially from those contemplated by these forward-looking statements. I refer you to the forward-looking cautionary statements in our earnings release and in our SEC filings. Hopefully everyone had a chance to review our earnings release from yesterday. If not, it can be found on our website at univest.net under the Investor Relations tab. We reported net income of $20.3 million during the first quarter, or 69 cents per share. During the quarter, we continued to see stabilization in the shift in the mix of deposits along with the cost of deposits. This resulted in stabilization in our net interest margin. Loan growth was muted during the quarter as loans grew $11.9 million. This is due to a combination of lower loan demand from customers given the higher interest rate environment, payoff activity of some problem credits, remaining disciplined on pricing, and focusing on relationship customers and prospects. With that said, Q1 is historically a slower quarter, and we are seeing pipelines grow as we head into the second quarter. Our diversified business model served as well as the insurance and wealth management lines of business had strong performance in the quarter. We were also active with stock buybacks during the quarter as we repurchased 315,507 shares of stock while still growing tangible book value. Before I pass it over to Brian, I would like to thank the entire Univest family for the great work they do every day and for their continued efforts serving our customers, communities, and each other. I'll now turn it over to Brian for further discussion on our results.

Thank you, Jeff, and I would also like to thank everyone for joining us today. I would like to highlight a few items from the earnings release. First, during the quarter, we continued to see signs of NIM stabilization. Reported NIM of 2.88% increased four basis points from 2.84% in the fourth quarter of 2023. Core NIM of 2.91%, which excludes the impact of excess liquidity, declined three basis points compared to the fourth quarter. This compares to a six basis point decline experienced during the last quarter. Second, as it relates to our loan and deposit activity, loans grew 11.9 million and deposits grew 29.6 million during the first quarter. Third, during the quarter, we recorded a provision for credit losses of $1.4 million. Our coverage ratio was 1.3% at March 31st, which was consistent with December 31st. Net charge-offs for the quarter totaled $1.4 million, or nine basis points annualized. During the quarter, we saw decreases in delinquent loans, criticizing classified loans, and stability in non-performing assets. Fourth, non-interest income increased $5.9 million, or 30.1%, compared to the first quarter of 2023. This includes a $3.4 million net gain on sale of mortgage servicing rates. Insurance commission and fee income increased $714,000, primarily due to a $484,000 increase in contingent income. As a reminder, contingent income is largely recognized in the first quarter of each year. Additionally, we saw notable increases in investment advisory, commission and fee income, treasury management fees, net gains on mortgage banking, and the sale of SBA loans. These year-over-year increases continue to highlight the benefit of our diversified business model. Fifth, non-interest expense increased 545,000, or 1.1%, compared to the first quarter of 2023. This reflects the various expense management strategies deployed over the last year. Lastly, during the first quarter, as Jeff said, we repurchased 315,507 shares of stock, and we plan to remain active with regard to buybacks. As it relates to 2024 guidance, when excluding the $3.4 million pre-tax gain on the sale of mortgage servicing rights, there are no changes to the information I provided on last quarter's call. That concludes my prepared remarks. We will be happy to answer any questions. Carla, would you please begin the question and answer session?