Univest Financial Corporation

Good morning and welcome everyone to the Univest Financial Corporation second quarter 2026 earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Jeff Schweitzer, Chairman, President, and CEO of Univest Financial Corporation. Please go ahead.

Thank you, Audra, 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 U of 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. We had a solid second quarter as we reported net income of $23 million, or 82 cents per share, which was an 18.8% increase compared to earnings per share in Q2 of 2025. Our results for the quarter were impacted by a $5.2 million valuation adjustment on an Oriel property due to an updated appraisal, which impacted earnings per share for the quarter by 15 cents. Excluding this adjustment, our core operating results for the quarter were strong. Loan growth for the quarter was solid as we grew loans by $101.7 million, or 6% annualized. and all of our total deposits for the quarter increased $119.2 million or 7.2% annualized. We continue to execute on our initiative to lower our loan to deposit ratio, which on average was 180 basis points lower year to date than through the first six months of 2025. We also continue to be active with respect to stock buybacks, buying back 425,539 shares of our stock during the quarter. Here to date, we have repurchased 776,677 shares. 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 thank you to everyone for joining us today. I would like to start by touching on three items from the earnings release. Thank you for joining us. Net interest income increased 2.9 million, or 4.5%, compared to the first quarter, and increased 6.7 million, or 11.3%, compared to the second quarter of 2025, driven by continued growth in average loan balances, improved asset yields, and a reduction in our overall cost of funds. Second, as it relates to credit, the quarter included two notable items. Thank you for joining us. Net charge-offs for the quarter were $1.9 million, or 11 basis points annualized. And our allowance for credit losses remains, coverage ratio remains stable at a 1.28% of total loans held for investment. Third, non-insurance income was $18.1 million for the quarter, a decrease of $3.4 million compared to the second quarter of 2025, primarily due to the $5.2 million REO valuation adjustment. Excluding that item, Underlying fee income trends remain solid as these businesses continue to perform well. Investment Advisory Commission and fee income increased 583,000, or 10.7%, compared to the prior year, driven by appreciation in assets under management and new customer relationships. Net gain on mortgage banking activities increased 365,000, or 37.2%, compared to the prior year, primarily due to increased saleable volume and improved margins. We also recognized $708,000 of tax-free BOLI death benefit proceeds during the quarter. Turning briefly to our outlook for the remainder of 2026, based on our performance during the first half of the year and our current assumptions, we are maintaining our outlook for loan growth of approximately 2-3%, non-interest income growth of approximately 6-8%, excluding BOLI death benefits and REO valuation adjustments. Non-interest expense growth of 3% to 5% and provisioning of $11 to $13 million. However, as I've said in the past, our provisioning is event-driven and may be impacted in the second half of the year depending on the final resolution of the $28.6 million loan that was placed on non-accrual during the second quarter, as well as other charge-off activity, loan growth, changes in economic conditions, and the resulting impact on our coverage ratio. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.