Univest Financial Corporation

Hello everyone and thank you for joining the Univest Financial Corporation fourth quarter 2025 earnings call. My name is Gabrielle and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad. I will now hand over to your host, Jeff Schweitzer, President, Chairman, and CEO of Univest Financial Corporation. Please go ahead.

Thank you, Gabrielle. 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 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. The best 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 had a strong fourth quarter reporting net income of $22.7 million or 79 cents per share, which was a 21.5% increase compared to earnings per share in Q4 of 2024, resulting in record earnings per share for Univest for the year of $3.13. While loan production remained solid throughout 2025, we were impacted in the first three quarters by early payoffs and paydowns. These pressures eased back to more normal levels in the fourth quarter, and as a result, we had solid loan growth during the fourth quarter as loan outstandings grew by $129.3 million. During the quarter, loans totaling $13.9 million related to a non-accrual commercial loan relationship were paid off and a $449,000 recovery was recognized. This relationship had been placed on non-accrual during the second quarter of 2025. As of December 31st, 2025, a residential property related to this relationship remains in other real estate owned with a carrying value of $1.4 million. As a result of this payoff, our non-accrual loans to total loans declined 20 basis points to 0.2% and our non-performing assets to total assets declined 16 basis points during the quarter to 0.45%. 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 the 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, Jim, and I would also like to thank everyone for joining us today. We were very pleased to carry the momentum from the first three quarters into the fourth quarter and finish the year strong. I would now like to touch on five items from the earnings release. First, during the quarter, we saw slight compression in our reported NIM due to increased excess liquidity resulting from our seasonal public fund build during the third quarter. Reported NIM of 3.10% decreased seven basis points compared to 3.17% in the third quarter, while core NIM, which excludes excess liquidity, increased four basis points from the third quarter to 3.37%. As it relates to our loan and deposit activity, loans grew by 129.3 million during the quarter, or 7.6% annualized. For the full year of 2025, loans grew by 88.2 million, or 1.3%. During the quarter, deposits decreased by 130.8 million, which was primarily driven by a $198.8 million decrease in public funds, partially offset by an $84 million increase in consumer balances. For the full year of 2025, total deposits grew by 328.1 million, or 4.9%. Third, during the quarter, we recorded a provision for credit losses of $3.1 million. Our coverage ratio was 1.28% at December 31st, which was consistent with September 30th. Net charge-offs for the quarter totaled 1.1 million, or seven basis points annualized. Fourth, Non-interest expense increased $2.1 million, or 4.1%, compared to the fourth quarter of 2024. For the full year of 2025, expenses increased by $5 million, or 2.5%. Lastly, during the fourth quarter, the corporation repurchased approximately 480,000 shares of common stock at an average cost of $32.17 per share, including brokerage fees and excise taxes. During 2025, we repurchased 1.1 million shares at an average cost of $30.75. This represents 3.9% of shares that were outstanding as of December 31st, 2024. On December 10th, 2025, we were pleased to announce that the board of directors of the corporation approved the repurchase of an additional 2 million shares. As of December 31st, 2025, 2.3 million shares are available for repurchase under the share repurchase plan. As it relates to 2026, we are targeting repurchases of $10 to $12 million per quarter. I believe the remainder of the earnings release was straightforward, and I would now like to focus on five items as it relates to 2026 guidance. First, for 2025, net interest income totaled $240.2 million. For 2026, we expect loan growth of approximately 2% to 3% and modest NIM expansion, resulting in net interest income growth of approximately 4% to 6%. This assumes a relatively stable environment with two 25 basis point rate decreases in 2026. However, modest Fed actions are not expected to have a material impact on our NII due to our overall ALM neutrality. Second, the provision for credit losses will continue to be driven by changes in economic forecasts and the credit performance of the portfolio. At this time, we expect the provision for 2026 to be in the range of $11 to $13 million. Third, 2025 non-insured income totaled $85.7 million when excluding $2.1 million of BOLI death benefits. For 2026, we expect non-interest income growth of approximately 5 to 7% off the $85.7 million base. Fourth, we reported non-interest expense of $203 million for 2025. For 2026, we expect growth of approximately 3 to 5%. Lastly, as it relates to income taxes, we expect our effective tax rate to be in the range of 20 to 21% based off current statutory rates. That concludes my prepared remarks. We will be happy to answer any questions. Gabrielle, would you please begin the question and answer session?