Univest Financial Corporation

Good morning, everyone. Thank you for joining us for the Junior Best Financial Corporation first quarter 2025 earnings call. My name is Carly. I'll be coordinating the 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 question, you'll be star followed by two. And that's handover to our host, Jeff Schweitzer, President and CEO of Junior Best Financial Corp. The call 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 Time, 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 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 law. 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 head income of $22.4 million during the first quarter, or 77 cents per share. We're off to a solid start to 2025 in spite of the uncertainty in the economy with interest rates and geopolitical concerns. While loan growth was muted during the quarter, we actually saw solid production. However, we were hit with some larger payoffs, resulting in net growth of $6.5 million. With the recent uncertainty from the announcement of tariffs on April 2nd, we have witnessed commercial customers being more cautious, looking for more clarity on a number of items related to tariffs, taxes, interest rates, and the overall economy. While deposits decreased to $100.8 million during the quarter, this was predominantly due to the seasonal decline of public funds deposits. We continue to see a stabilization of non-interest-bearing deposits, which combined with discipline on loan pricing, helped our margin improve to 3.09% during the quarter from 2.88% for the fourth quarter of 2024. Additionally, credit quality continues to remain strong as non-performing assets, the total assets, increased slightly by two basis points during the quarter to 43 basis points, with net charge-offs remaining low at 10 basis points on an annualized basis. With respect to capital, yesterday the Board of Directors announced a one-cent increase in our quarterly dividend to 22 cents per share. Additionally, we repurchased 221,760 shares of stock during the quarter, and we plan on continuing to be active with stock buybacks going forward. Before I pass it over to Brian, I would like to thank the entire Unibeth 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.

Thank you, Jeff, and I would also like to thank everyone for joining us today. I would like to start by touching on four items from the earnings release. First, as Jeff mentioned, we saw solid NIM expansion during the quarter, with reported NIM increasing 21 basis points to 3.09%. Additionally, core NIM, which excludes excess liquidity of 3.12%, increased 10 basis points compared to the fourth quarter. Second, during the quarter, we recorded a provision for credit losses of $2.3 million. Our coverage ratio was 1.28% at March 31st, which was consistent with December 31st. Net charge-offs for the quarter totaled $1.7 million for 10 basis points annualized. Third, non-interest income decreased $3.2 million, or 12.4%, compared to the first quarter of 2024. Excluding the non-returning $3.4 million gain on sale at MSRs in the first quarter of 2024 and the $1 million bully death benefit in the current quarter, non-interest income decreased $797,000, or 3.6%. Contingent income in the insurance line of business decreased $700,000 compared to the first quarter of 2024. As a reminder, contingent income sold $2.3 million in the first quarter of 2024, which was an all-time record for our insurance business. Fourth, non-interest expense decreased $746,000, or 1.5% compared to the first quarter of 2024, as we continue to have prioritized prudent expense management. As it relates to the 2025 guidance, including the $1,000,000 Bolton Holy Death Benefit recorded in the quarter, there are no changes to the information I provided on the last quarter's call. That concludes my prepared remarks. We will be happy to answer any questions. Carly, would you please begin the question and answer session?

Of course. Thank you very much. We now open the lines for Q&A. If you'd like to ask a question, please press star followed by 1 on your telephone keypad now, and to move yourself up by the question, please star followed by 2. As a reminder, the question will be started by one. Our first question comes from Frank. Frank, your line is open.

Good morning. I thought, Brian, correct me if I'm wrong, and maybe I missed it, but in terms of the fee income growth expectations, I thought it was mid-single digits for the year. And if that's the case, can you just maybe talk about kind of drivers to get there.

Sure, Frank. Yeah, four to six would our guidance range when we kind of came into the year and things to hold that steady. Of course, we'll see what occurs on the mortgage banking side, which will provide potential opportunity and lift there or something that we'll continue to keep an eye on. And then you'll have, inherently, when you look at the year-over-year current growth, when you back out the extended income and the way that that went into the first quarter, we would, again, expect to fall into that low single-digit percentage range.

Okay. And then just on the loan-to-deposit ratio, I think there's some seasonality there on the public funds and the deposits. And I think if partners among you guys continue to target like a 95% to 105% ratio, I guess where do you see that trending to? And if you could just remind us the cadence of kind of those balances, public funds through the year.

Yeah, Frank, I'll start out there, and we can elaborate if necessary or appropriate. But on a longer term, we look to head towards 95 to 100. That said, we realize that's going to be a process for us to navigate there, so we look to continually and methodically kind of ratchet that down over time, knowing that the cyclicality and seasonality with public funds and how that presents at each quarter end from a loan to deposit ratio perspective.

yeah so we'll hit a low point by June 30th on public funds then they'll start to build in the second half of the year again okay great and then just lastly you know you mentioned capital returns just wondering if you could maybe size the potential for buybacks here in terms of you know payout ratio going forward thanks

Sorry, payout ratio as it relates to buyback. I mean, I think the volume that you saw in the first quarter, just from an overall dollar perspective, if you look at it from that perspective, is something that we would continue to kind of target something in that general range. Again, that's a decision that we make, though, on a quarterly basis as we look forward to projections of earnings and loan growth and projections of our regulatory capital ratio such that we're looking to deploy any excess capital that would be generated while not overreacting in anything in the fall of the next nine to 12 months of where we would expect capital to land. So that's kind of the process that we go through.

Okay. All right, great. Thanks for the call. Thank you, Frank.

Thank you very much. As a reminder, to raise a question, please start followed by one on your telephone keypad. Our next question comes from Emily of TPW. Emily, your line is now open. Emily just confirming your line is now open. It appears we're not able to get any connections from Emily's line and we currently have no further questions so I'd like to hand back to Jeff Schweitzer for any further remarks.

All right, thank you, Carly, and thank you, everyone, for participating on the call today. As we noted, we had a very solid first quarter. While there's a lot of uncertainty in the environment, we are very well poised to navigate through anything that is thrown at us. And we look forward to talking to everybody who participates later today for a shareholders meeting and then at the end of the second quarter. Have a great day.

As we conclude today's call, we'd like to thank everyone for joining. You may disconnect your lines.