Good morning, and welcome to the Univest Corporation of Pennsylvania First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jeff Schweitzer, President and CEO of Univest Corporation of Pennsylvania.

Thank you, Debbie. Good morning, and thank you to all of our listeners for joining us. Joining me on the call this morning is Mike Keim, President of Univest Bank and Trust; and Roger Deacon, our Chief Financial Officer. Before we begin, we 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 $12.9 million during the first quarter or $0.44 per share. This included a charge of $451,000 or $0.01 per share related to the closure of three of our financial centers as we continue to optimize our financial center network by consolidating centers in our historical core markets into other nearby centers and reinvesting these dollars in new technology and new centers in our newer expansion markets. We are pleased with loan growth during the quarter as loans increased $69.8 million during the quarter, or 7.7% annualized. The first quarter is typically a slower quarter for us. However, we saw solid activity. We are still comfortable with our previously communicated guidance of 8% to 10% growth in loans for the year. I will now turn it over to Roger for some additional discussion on our results.

Thank you, Jeff, and I would also like to thank everyone for joining us today. I'm going to highlight a couple of items from the earnings release. First, as it relates to earnings as Jeff mentioned we reported earnings of $0.44 per fully diluted share, including the restructuring costs related to the financial center closures and which was a penny a share. Second, as it relates to net interest margin, our core net interest margin was 3.70 for the quarter compared to 3.72 for the fourth quarter. However, I remind everyone that our net interest margin is presented in a fully tax-equivalent basis and therefore the current quarter reported margin was negatively impacted by the reduction of our federal tax rate from 35% to 21%. Using a 21% federal tax rate our pro forma fourth quarter 2017 and first quarter 2017, core net interest margins were both 3.64%. Accordingly, on an apple to apple basis this quarter's margin represents a 6 basis point increase than the fourth quarter of 2017. This improvement in margin compared to the prior quarter is primarily due to the benefit received from the December 2017 Federal Reserve 25 basis point rate increase, as our balance sheet continues to be slightly asset sensitive. We would note that, beginning in March of this past quarter we started to see increased price competition across all deposit lines, and accordingly, we would anticipate that our margins will be flat to possibly a slight decline for the second quarter. Additionally our reported net interest income increased 8.7% for the quarter as compared to the first quarter of last year. As noted in our press release the benefit of purchase accounting has declined significantly and our net interest income, excluding purchase accounting has increased a solid 10.8% from the first quarter…

[Operator Instructions] The first question comes from Michael Perito with KBW.

I wanted to start on the deposit side, so it sounds like things are -- continuing to be competitive there as per your comments, Roger, I was curious what the -- how you guys are thinking about growing incrementally here as some of that pricing pressure starting to manifest on the liability side? And obviously the loan growth was pretty good for the first quarter and your funding is top of mind here. So just curious if you have any updated thoughts around that?

Its Mike Keim. In terms of growing our deposit we have a series of strategic initiatives and it's really and all of the above type of strategy. Several of the initiatives are more time sensitive in terms of being able to make an immediate difference and some of them are more strategic that will add deposits over time. We are looking at it -- continue as we spoke in the past to grow our cash management business that generates most fee income and depository relationships. We are looking at our commercial customers and we are seeing how we can get additional share of their wallet for lack of a better term. We are currently running several CD specials in our market and we are seeing growth in CDs on the consumer side. And then we continue to go from there. I have some historical relationships on the mortgage servicing side that we are trying to tap into. We are working with Federal companies that we work with, as well as real estate brokers. So there's a series of initiatives that go across the board. And we will continue to focus on that. With regard to public funds. Roger alluded to pricing competition. Public fund market is getting very price sensitive, but we still have in the Lancaster market and the Lehigh Valley market opportunities to tap into public funds that we hadn't in the past. So like I said it's in all the above strategy and we continue to remain focused on it. We continue to be committed to keeping our loan to deposit ratio in the spectrum that it's at today.

Maybe switching to the expense side, I know you guys continue to invest for growth, and there were some things I think in the first quarter that you'd spoken to previously that that kind of impact to the expense numbers. I was just curious I guess two-part question. Are there any other major -- well maybe not major but are there any notable investment you guys plan to make over the balance of the year here? And I guess, secondly, I mean, is it fair to say that most of the 2018 expense growth within that first quarter, so to speak and the run rate should kind of flatten out a little bit from here or do you think there's more that could come through as you guys continue to invest for growth?

So its Roger, as I mentioned the first quarter is just elevated because of some seasonal expenses. I would say for the year back to the -- we are looking at a -- quite frankly it's about $138 million number it's about a -- between a 5.5% to 6% increase for the year. If you annualize the first quarter ignoring restructuring charges you're right at that 138. So the decline related to the seasonal step that will occur going forward will be offset by continued investment in the business. So we have kind of got that baked into our numbers.

And then just last one Jeff, it's been -- we had a full quarter here with the lower tax rate as we move through almost into May now. Are you starting to see any notable difference both from your competitors, or from your customers as it relates to tax reform? Just curious if you are starting to see anything manifest in the market as people react to that?

I wouldn't say anything notable other than our pipelines remain very strong on the lending side. I think customers are feeling good about the economy and about where their businesses are. I'd say right now there's a labor shortage, some of them could probably grow faster than they are currently if they could find quality labor to add to their businesses. So I'd say overall people are feeling good and the extra money in their pockets is just making them feel even better.

[Operator Instructions] Our next question comes from Matthew Breese with Piper Jaffray.

Maybe just touching base on the new hires that were noted in the press release related to revenue generation. Could you just give us a better idea of what areas they will be driving revenue?

We hired additional four RMs on the commercial banking side Matt, and then we did hire some additional we call home loan consultants with loan officers on the mortgage side. But quite frankly that was a net push in terms of the number of home loan consultants we have. We brought on stronger producers and we let go of several under producers -- under performance.

We added another new producer in wealth management, a couple of other business developers in our leasing business, but it's kind of across the board.

Now the four RMs on the commercial banking side going back to the capital raise some of that was due to potential for new hires. Does that fit into that bucket? And if we could just talk about the ramp up timeframe for those individuals and potential loan growth potential from them, that would be helpful?

At this point in time, look, we continue to look to add quality RMs and clearly that's one of the reasons that we added the capital and raised the capital in December. We are still committed to our 8% to 10% loan growth at this point in time. I would also add just a little bit of color. I think that we believe that that will be a little bit more even flowed through the year versus in the past we have had pretty good spike up in the second quarter. Jeff referenced, we have strong pipeline for the second quarter. We do, but I'd also think it's going to continue to trend a little bit more towards the 8% to 10% range throughout the year. In terms of what the ramp up time is, typically you are going to get somebody on board here and it's at least three to six months for them to get going, and then start to get a pipeline building and bring folks over.

And then maybe just talk about the loan to deposit ratio understanding the deposit competition dynamics of your market. But are there limits on how high you are willing to bring that loan to deposit ratio? And then maybe just talk about some of the success you've had with the promotional deposit efforts like the CD special?

Sure, so Matt its Roger. We have targeted and we have said this consistently a range of a 100% to 105% loan to deposit ratio, obviously we are at the higher end of that range. We do look at it on an average basis rather than spot because there is some volatility around commercial customers. So as it relates to the promotions that we did we are out there at the current time with a 59 month 3% CD supplemented with a 11 month 175. We started that like I said in the middle of March but we actually went print advertisement near the end of March. And we are seeing about you know $1 million a day of new CDs on that when you combine the two. And then if you look at a weighted average rate around 2.50 for 3.5 year money, which isn’t bad, which we had to go out and get 3.5 year money from -- if you had to borrow that you would be borrowing that at 2.80 or 2.90. So we have strategically did that promotion to extend the balance sheet with the retail customer CDs and the program is going very well so far.

And then maybe to the other side. Can you talk about the deposit datas are picking up but what about loan datas? Are you seeing any sort of spread compression, your typical commercial real estate loans? Is that going on to any extent?

We have seen a nominal pickup in rates on new loan production. If you think about it, we are getting a nice benefit on our variable rate loans. Fortunately, we do have 50% of our portfolio being variable or adjustable over time. We almost completely added the floors that existed. So it's almost somewhat by neutral between new production and where the current portfolio is. It's been a nominal increase. Where we've done well is on the variable-rate side of the equation and we do have a strategy that does target variable-rate and obviously when primes of 475 then you offer somebody a prime that's not bad. We are able to do fairly well on getting variable-rate new loans.

And then Jeff, one for you. Could you just talk about, your fee income businesses are doing really well in trust investment and insurance, what the outlook is from here over the next 12 months for those lines of business?

Yes, you know, though they have been performing very well, I'll say wealth management continues to grow absent the trust business. The trust business is pretty slow growth, you are talking 3% type of growth, but the rest of the wealth management, the RIA business, is really growing double digits. And I don't necessarily see that's going down. Volatility in the market is actually our friend. Everything keeps going up, everybody thinks they can manage their own money, but when you get some peaks and valleys everybody starts to realize they might need some advice. So I would say the wealth management on the RIA side that will still grow 10% to 12% probably for the next year. I would say that offset by trust, which is lower in the 3% type of range. So you are talking high single digits overall for loan. Insurance is more than that 5% to 7% type of growth. We have repositioned the business to really focus more on middle-market type of customers and we have been successful in doing that. We brought over a new Head of our Commercial Lines business on the sales side this first quarter. He is really starting to get some traction in managing that group and starting to get a good pipeline of business. So I'd say across the board those lines of business are doing well and I don't see that changing at least for the next 12 months.

At this time there are no further questions. So, I'll turn the conference back over to Jeff Schweitzer for any closing remarks.

Thank you Debbie, and thank you everybody for joining us this morning. If you have any further questions you can always reach out to Roger, Mike and myself. And we look forward to talking to everybody at the end of the second quarter. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.