Univest Financial Corporation

Good morning all and thank you for joining us for the Univest Financial Corporation Four Quarter 2024 Earnings Call. My name is Carly and I'll be coordinating your call today. If you'd like to register a question during the call, you can do so by pressing star followed by one on your telephone keypad and to remove yourself from the line of questioning will be star followed by two. And I'd like to hand over to your host, Jeff Schweitzer, to begin. The floor is yours.

Thank you, Carly, and good morning, and thank you to all of our listeners for joining us. Joining me on the call this morning is Mike Kime, our Chief Operating Officer and President of the Univest Bank and Trust, and Brian Richardson, our Chief Financial Officer. Before we begin, I would like to remind everyone of the forward-looking 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 will 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 $18.9 million during the fourth quarter, or $0.65 per share. We were pleased with how we ended 2024 as we had solid loan growth during the quarter, with loans growing by $95.8 million, or 5.6% annualized. Additionally, consumer and commercial deposits increased $104 million during the quarter, which was offset by the seasonal decline of public funds deposits of $185 million and a slight decline of brokerage deposits. Our diversified business model continued to serve us well as our non-interest income was up $2.7 million or 14.6% compared to the fourth quarter of the prior year as we continue to see growth in our fee businesses. Additionally, credit quality continues to remain strong as non-performing assets to total assets declined four basis points during the quarter and 11 basis points during the year to 41 basis points with minimal net charge-offs of six basis points for the year. With respect to capital, we continue to be active and plan on continuing to be active with stock buybacks as we repurchased 139,492 shares of stock during the quarter and 802,535 shares in 2024, which represented 2.7% of shares outstanding as of December 31, 2023, while also growing tangible book value per share 9.01% during 2024. 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 will now turn it over to Brian for further discussion on our results and our outlook for 2025.

Thank you, Jeff. I would also like to thank everyone for joining us today. I would like to start by touching on five items from the earnings release. First, during the quarter, we saw continued NIM stabilization. Reported NIM of 2.88% increased six basis points from 2.82% in the third quarter. Additionally, core NIM, which excludes excess liquidity of 3.02%, increased 11 basis points compared to the third quarter. Second, as it relates to our loan and deposit activity, loans grew by 95.8 million or 5.6% annualized in the fourth quarter and grew by 259.4 million or 3.9% for the full year of 2024. During the quarter, deposits decreased by 94.9 million, but as Jeff mentioned, public funds decreased by 185.6 million and broker deposits decreased by 13.4 million. Offsetting these decreases was a $104.1 million increase in commercial and consumer accounts. During the fourth quarter, non-interest-bearing deposits increased by $90.7 million. As of December 31st, non-interest-bearing deposits represented 20.9% of total deposits compared to 19.3% at September 30th. For the full year of 2024, total deposits grew by $383.5 million, or 6%. Third, during the quarter, we recorded a provision for credit losses of $2.4 million. Our coverage ratio was at 1.28% at December 31st, which was consistent with September 30th. Net charge-offs for the quarter totaled $767,000, or 5 basis points annualized. Fourth, non-interest income increased by $2.7 million, or 14.6%, compared to the fourth quarter of 2023. This was primarily driven by increases in wealth management, mortgage banking, and service fee income. Fifth, non-interest expense increased by $1.6 million, or 3.3%, compared to the fourth quarter of 2023. For the full year of 2024, expenses increased by $2.1 million, or 1.1%, when excluding restructuring charges recorded in 2023. I believe the remainder of the earnings release was straightforward, and I would now like to focus on five items as it relates to 2025 guidance. First, for 2024, net interest income totaled $211.2 million. For 2025, we expect loan growth of approximately 3% to 5%, with modest NIM expansion resulting in net interest income growth of approximately 5% to 7%. This assumes a relatively stable rate environment with one or two 25 basis point rate decreases in 2025. However, modest Fed actions are not expected to have a material impact on RNII due to our overall ALM neutrality. Second, the provision for credit losses will continue to be driven by changes in economic forecasts and credit performance of the portfolio. At this time, we expect the provision for 2025 to be approximately $12 to $14 million. Third, 2024 net non-interest income totaled $84.5 million when excluding the $3.4 million gain on sale of MSRs and $225,000 BOLI death benefits. For 2025, we expect non-interest income growth of approximately 4 to 6 percent off of the $84.5 million base. Fourth, we reported non-interest expense of $198 million for 2024. For 2025, we expect growth of approximately 4 to 5 percent. Lastly, as it relates to income taxes, we expect our effective tax rate to be approximately 20% to 20.5% based on current statutory rates. That concludes my prepared remarks. We will be happy to answer any questions. Carly, would you please begin the question and answer session?