株探米国株
英語
エドガーで原本を確認する
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 Form 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2023
or
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 0-7617

 UNIVEST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1886144
(State or other jurisdiction of
incorporation or organization)		 (IRS Employer
Identification No.)
14 North Main Street, Souderton, Pennsylvania 18964
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (215) 721-2400
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of class Trading symbol Name of exchange on which registered
Common Stock, $5 par value UVSP The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer
 ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $5 par value 29,508,128
(Title of Class) (Number of shares outstanding at October 31, 2023)


Table of Contents

UNIVEST FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
 
    Page Number
Part I.
Item 1.
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

1
Table of Contents
PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements
UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share data) At September 30, 2023 At December 31, 2022
ASSETS
Cash and due from banks $ 68,900  $ 84,176 
Interest-earning deposits with other banks 221,441  68,623 
Cash and cash equivalents 290,341  152,799 
Investment securities held-to-maturity (fair value $123,760 and $134,068 at September 30, 2023 and December 31, 2022, respectively)
 149,451  154,727 
Investment securities available-for-sale (amortized cost $396,804 and $402,111, net of allowance for credit losses of $1,537 and $1,140 at September 30, 2023 and December 31, 2022, respectively)
 334,538  350,256 
Investments in equity securities 4,054  2,579 
       Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost 42,417  33,841 
Loans held for sale 16,473  5,037 
Loans and leases held for investment 6,574,958  6,123,230 
Less: Allowance for credit losses, loans and leases (83,837) (79,004)
Net loans and leases held for investment 6,491,121  6,044,226 
Premises and equipment, net 51,287  50,939 
Operating lease right-of-use assets 31,053  30,059 
Goodwill 175,510  175,510 
Other intangibles, net of accumulated amortization 11,079  11,384 
Bank owned life insurance 130,522  120,297 
Accrued interest receivable and other assets 100,220  90,362 
Total assets $ 7,828,066  $ 7,222,016 
LIABILITIES
Noninterest-bearing deposits $ 1,432,559  $ 2,047,263 
Interest-bearing deposits 5,006,606  3,866,263 
Total deposits 6,439,165  5,913,526 
Short-term borrowings 14,676  197,141 
Long-term debt 320,000  95,000 
Subordinated notes 148,636  148,260 
Operating lease liabilities 34,017  33,153 
Accrued interest payable and other liabilities 64,374  58,436 
Total liabilities 7,020,868  6,445,516 
SHAREHOLDERS’ EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at September 30, 2023 and December 31, 2022; 31,556,799 shares issued at September 30, 2023 and December 31, 2022; 29,508,128 and 29,271,915 shares outstanding at September 30, 2023 and December 31, 2022, respectively
 157,784  157,784 
Additional paid-in capital 300,171  300,808 
Retained earnings 464,634  428,637 
Accumulated other comprehensive loss, net of tax benefit (71,586) (62,104)
Treasury stock, at cost; 2,048,671 and 2,284,884 shares at September 30, 2023 and December 31, 2022, respectively
 (43,805) (48,625)
Total shareholders’ equity 807,198  776,500 
Total liabilities and shareholders’ equity $ 7,828,066  $ 7,222,016 
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
2
Table of Contents
UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
  September 30, September 30,
(Dollars in thousands, except per share data) 2023 2022 2023 2022
Interest income
Interest and fees on loans and leases $ 90,974  $ 63,162  $ 254,949  $ 164,065 
Interest and dividends on investment securities:
Taxable 3,540  3,013  10,547  8,116 
Exempt from federal income taxes 15  15  44  44 
Interest on deposits with other banks 1,865  252  2,856  1,433 
Interest and dividends on other earning assets 712  435  2,102  1,134 
Total interest income 97,106  66,877  270,498  174,792 
Interest expense
Interest on deposits 37,082  6,451  82,885  12,928 
Interest on short-term borrowings 1,117  524  7,094  537 
Interest on long-term debt and subordinated notes 5,317  1,652  13,282  4,946 
Total interest expense 43,516  8,627  103,261  18,411 
Net interest income 53,590  58,250  167,237  156,381 
Provision for credit losses 2,024  3,558  8,839  6,782 
Net interest income after provision for credit losses 51,566  54,692  158,398  149,599 
Noninterest income
Trust fee income 1,910  1,835  5,789  5,935 
Service charges on deposit accounts 1,816  1,522  5,088  4,600 
Investment advisory commission and fee income 4,843  4,199  14,303  14,163 
Insurance commission and fee income 4,852  4,442  16,447  14,641 
Other service fee income 3,020  3,124  9,414  9,189 
Bank owned life insurance income 806  1,153  2,362  2,557 
Net gain on sales of investment securities —  —  —  30 
Net gain on mortgage banking activities 1,216  817  2,880  3,976 
Other income 228  867  1,921  2,336 
Total noninterest income 18,691  17,959  58,204  57,427 
Noninterest expense
Salaries, benefits and commissions 29,978  29,400  90,867  86,778 
Net occupancy 2,594  2,504  7,935  7,642 
Equipment 1,087  968  3,066  2,927 
Data processing 4,189  3,901  12,355  11,176 
Professional fees 1,763  2,521  5,373  7,503 
Marketing and advertising 555  605  1,548  1,723 
Deposit insurance premiums 1,258  662  3,475  2,367 
Intangible expenses 220  309  726  992 
Restructuring charges —  —  1,330  — 
Other expense 7,344  5,795  21,641  18,340 
Total noninterest expense 48,988  46,665  148,316  139,448 
Income before income taxes 21,269  25,986  68,286  67,578 
Income tax expense 4,253  5,185  13,436  13,294 
Net income $ 17,016  $ 20,801  $ 54,850  $ 54,284 
Net income per share:
Basic $ 0.58  $ 0.71  $ 1.86  $ 1.85 
Diluted 0.58  0.71  1.86  1.84 
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
3
Table of Contents
UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended September 30,
(Dollars in thousands) 2023 2022
Before
Tax
Amount		 Tax
Expense
(Benefit)		 Net of
Tax
Amount		 Before
Tax
Amount		 Tax
Expense
(Benefit)		 Net of
Tax
Amount
Income $ 21,269  $ 4,253  $ 17,016  $ 25,986  $ 5,185  $ 20,801 
Other comprehensive loss:
Net unrealized losses on available-for-sale investment securities:
Net unrealized holding losses arising during the period (12,622) (2,651) (9,971) (18,093) (3,800) (14,293)
Reversal of provision for credit losses —  —  —  (393) (82) (311)
Total net unrealized losses on available-for-sale investment securities (12,622) (2,651) (9,971) (18,486) (3,882) (14,604)
Net unrealized losses on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period (2,541) (534) (2,007) (9,418) (1,978) (7,440)
Less: reclassification adjustment for net losses (gains) realized in net income (1) 1,558  327  1,231  (422) (89) (333)
Total net unrealized losses on interest rate swaps used in cash flow hedges (983) (207) (776) (9,840) (2,067) (7,773)
Defined benefit pension plans:
Amortization of net actuarial gains included in net periodic pension costs (2) 247  52  195  219  46  173 
Total defined benefit pension plans 247  52  195  219  46  173 
Other comprehensive loss (13,358) (2,806) (10,552) (28,107) (5,903) (22,204)
Total comprehensive income (loss) $ 7,911  $ 1,447  $ 6,464  $ (2,121) $ (718) $ (1,403)
(1) Included in interest expense on demand deposits on the condensed consolidated statements of income (before tax amount).
(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (before tax amount). See Note 8, "Retirement Plans and Other Postretirement Benefits" for additional details.
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
4
Table of Contents
Nine Months Ended September 30,
(Dollars in thousands) 2023 2022
Before
Tax
Amount		 Tax
Expense
(Benefit)		 Net of
Tax
Amount		 Before
Tax
Amount		 Tax
Expense
(Benefit)		 Net of
Tax
Amount
Income $ 68,286  $ 13,436  $ 54,850  $ 67,578  $ 13,294  $ 54,284 
Other comprehensive income (loss):
Net unrealized losses on available-for-sale investment securities:
Net unrealized holding losses arising during the period (10,411) (2,186) (8,225) (53,798) (11,298) (42,500)
Provision for credit losses 397  83  314  370  78  292 
Less: reclassification adjustment for net gains on sales realized in net income (1) —  —  —  (30) (6) (24)
Total net unrealized losses on available-for-sale investment securities (10,014) (2,103) (7,911) (53,458) (11,226) (42,232)
Net unrealized losses on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period (6,716) (1,411) (5,305) (7,716) (1,621) (6,095)
Less: reclassification adjustment for net losses (gains) losses realized in net income (2) 3,989  838  3,151  (1,040) (218) (822)
Total net unrealized losses on interest rate swaps used in cash flow hedges (2,727) (573) (2,154) (8,756) (1,839) (6,917)
Defined benefit pension plans:
Amortization of net actuarial gains included in net periodic pension costs (3) 739  156  583  655  138  517 
Total defined benefit pension plans 739  156  583  655  138  517 
Other comprehensive loss (12,002) (2,520) (9,482) (61,559) (12,927) (48,632)
Total comprehensive income $ 56,284  $ 10,916  $ 45,368  $ 6,019  $ 367  $ 5,652 
(1) Included in net gain on sales of investment securities on the condensed consolidated statements of income (before tax amount).
(2) Included in interest expense on demand deposits on the condensed consolidated statements of income (before tax amount).
(3) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (before tax amount). See Note 8, "Retirement Plans and Other Postretirement Benefits" for additional details.
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except per share data) Common
Shares
Outstanding		 Common
Stock		 Additional
Paid-in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Treasury
Stock		 Total
Three Months Ended September 30, 2023
Balance at June 30, 2023 29,471,124  $ 157,784  $ 299,212  $ 453,806  $ (61,034) $ (44,546) $ 805,222 
Net income —  —  —  17,016  —  —  17,016 
Other comprehensive loss, net of income tax benefit —  —  —  —  (10,552) —  (10,552)
Cash dividends declared ($0.21 per share)
 —  —  —  (6,190) —  —  (6,190)
Stock-based compensation —  —  1,031  2  —  —  1,033 
Stock issued under dividend reinvestment and employee stock purchase plans 36,766  —  (65) —  —  735  670 
Vesting of restricted stock units, net of shares withheld to cover taxes 238  —  (7) —  —  6  (1)
Balance at September 30, 2023 29,508,128  $ 157,784  $ 300,171  $ 464,634  $ (71,586) $ (43,805) $ 807,198 
(Dollars in thousands, except per share data) Common
Shares
Outstanding		 Common
Stock		 Additional
Paid-in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Treasury
Stock		 Total
Three Months Ended September 30, 2022
Balance at June 30, 2022 29,365,775  $ 157,784  $ 298,800  $ 396,295  $ (42,781) $ (46,173) $ 763,925 
Net income —  —  —  20,801  —  —  20,801 
Other comprehensive loss, net of income tax benefit —  —  —  —  (22,204) —  (22,204)
Cash dividends declared ($0.21 per share)
 —  —  —  (6,153) —  —  (6,153)
Stock-based compensation —  —  973  (1) —  —  972 
Stock issued under dividend reinvestment and employee stock purchase plans 26,438  —  25  —  —  634  659 
Vesting of restricted stock units, net of shares withheld to cover taxes 238  —  (7) —  —  5  (2)
Purchases of treasury stock (150,000) —  —  —  —  (3,811) (3,811)
Balance at September 30, 2022 29,242,451  $ 157,784  $ 299,791  $ 410,942  $ (64,985) $ (49,345) $ 754,187 
(Dollars in thousands, except per share data) Common
Shares
Outstanding		 Common
Stock		 Additional
Paid-in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Treasury
Stock		 Total
Nine Months Ended September 30, 2023
Balance at December 31, 2022 29,271,915  $ 157,784  $ 300,808  $ 428,637  $ (62,104) $ (48,625) $ 776,500 
Net income —  —  —  54,850  —  —  54,850 
Other comprehensive loss, net of income tax benefit —  —  —  —  (9,482) —  (9,482)
Cash dividends declared ($0.63 per share)
 —  —  —  (18,521) —  —  (18,521)
Stock-based compensation —  —  3,322  (332) —  —  2,990 
Stock issued under dividend reinvestment and employee stock purchase plans 98,402  —  (84) —  —  2,063  1,979 
Vesting of restricted stock units, net of shares withheld to cover taxes 131,601  —  (3,857) —  —  2,625  (1,232)
Exercise of stock options 6,210  —  (18) —  —  132  114 
Balance at September 30, 2023 29,508,128  $ 157,784  $ 300,171  $ 464,634  $ (71,586) $ (43,805) $ 807,198 
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(Dollars in thousands, except per share data) Common
Shares
Outstanding		 Common
Stock		 Additional
Paid-in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Treasury
Stock		 Total
Nine Months Ended September 30, 2022
Balance at December 31, 2021 29,500,542  $ 157,784  $ 299,181  $ 375,124  $ (16,353) $ (41,942) $ 773,794 
Net income —  —  —  54,284  —  —  54,284 
Other comprehensive loss, net of income tax benefit —  —  —  —  (48,632) —  (48,632)
Cash dividends declared ($0.62 per share)
 —  —  —  (18,258) —  —  (18,258)
Stock-based compensation —  —  2,982  (208) —  —  2,774 
Stock issued under dividend reinvestment and employee stock purchase plans 74,055  —  129  —  —  1,805  1,934 
Vesting of restricted stock units, net of shares withheld to cover taxes 92,073  —  (2,551) —  —  1,648  (903)
Exercise of stock options 25,781  —  50  —  —  525  575 
Purchases of treasury stock (450,000) —  —  —  —  (11,381) (11,381)
Balance at September 30, 2022 29,242,451  $ 157,784  $ 299,791  $ 410,942  $ (64,985) $ (49,345) $ 754,187 
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Nine Months Ended September 30,
(Dollars in thousands) 2023 2022
Cash flows from operating activities:
Net income $ 54,850  $ 54,284 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 8,839  6,782 
Depreciation of premises and equipment 3,752  3,323 
Net amortization of investment securities premiums and discounts 873  1,168 
Net gain on sales of investment securities —  (30)
Net gain on mortgage banking activities (2,880) (3,976)
Bank owned life insurance income (2,362) (2,557)
Stock-based compensation 3,229  2,998 
Intangible expenses 726  992 
Other adjustments to reconcile net income to cash used in operating activities (1,455) (2,896)
Originations of loans held for sale (165,076) (198,547)
Proceeds from the sale of loans held for sale 162,728  215,424 
Contributions to pension and other postretirement benefit plans (186) (189)
(Increase) decrease in accrued interest receivable and other assets (8,200) 2,252 
Increase in accrued interest payable and other liabilities 7,029  4,449 
Net cash provided by operating activities 61,867  83,477 
Cash flows from investing activities:
Proceeds from sale of premises and equipment 1,032  6,844 
Purchases of premises and equipment (5,220) (3,673)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity 11,225  27,700 
Proceeds from maturities, calls and principal repayments of securities available-for-sale 24,052  25,132 
Proceeds from sales of securities available-for-sale —  1,530 
Purchases of investment securities held-to-maturity (6,253) (10,427)
Purchases of investment securities available-for-sale (19,348) (111,611)
Proceeds from sales of money market mutual funds 252  3,506 
Purchases of money market mutual funds (1,845) (3,708)
Net increase in other investments (8,576) (1,289)
Proceeds from sale of loans originally held-for-investment 19,631  2,500 
Net increase in loans and leases (481,200) (562,235)
Proceeds from sales of other real estate owned 260  — 
Purchases of bank owned life insurance (7,862) — 
Proceeds from bank owned life insurance —  1,221 
Net cash used in investing activities (473,852) (624,510)
Cash flows from financing activities:
Net increase (decrease) in deposits 525,619  (268,171)
Net (decrease) increase in short-term borrowings (182,465) 60,605 
Proceeds from issuance of long-term debt 250,000  — 
Repayment of long-term debt (25,000) — 
Payment of contingent consideration on acquisitions (635) — 
Payment for shares withheld to cover taxes on vesting of restricted stock units (1,232) (903)
Purchases of treasury stock —  (11,381)
Stock issued under dividend reinvestment and employee stock purchase plans 1,979  1,934 
Proceeds from exercise of stock options 114  575 
Cash dividends paid (18,853) (18,466)
Net cash provided by (used in) financing activities 549,527  (235,807)
Net increase (decrease) in cash and cash equivalents 137,542  (776,840)
Cash and cash equivalents at beginning of year 152,799  890,150 
Cash and cash equivalents at end of period $ 290,341  $ 113,310 
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  Nine Months Ended September 30,
(Dollars in thousands) 2023 2022
Supplemental disclosures of cash flow information:
Cash paid for interest $ 93,435  $ 20,095 
Cash paid for income taxes, net of refunds 13,232  6,629 
Non cash transactions:
Transfer of loans to other real estate owned $ 79  $ 18,325 
Transfer of loans to loans held for sale 25,646  2,500 
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
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UNIVEST FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Univest Financial Corporation (the Corporation) and its wholly owned subsidiaries. The Corporation’s direct subsidiary is Univest Bank and Trust Co. (the Bank). All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations for interim financial information. The accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature and are, in the opinion of management, necessary for a fair presentation of the financial statements for the interim periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three-month or nine-month period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ended December 31, 2023 or for any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 24, 2023.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes include the fair value measurement of investment securities available-for-sale and the determination of the allowance for credit losses.

Modified Loans

A loan is classified as a modified loan to a borrower experiencing financial difficulty when a contractual loan modification in the form of principal forgiveness, an interest rate reduction, an other-than-significant payment delay or a term extension (or a combination thereof) has been granted to an existing borrower experiencing financial difficulties. The goal when modifying a credit is to provide relief to customers experiencing cash flow difficulties. Accruing modified loans to borrowers experiencing financial difficulty are primarily comprised of loans on which interest is being accrued under the modified terms, and the loans are current or less than 90 days past due.

Loans and Leases - Prior to ASU No. 2022-02 Adoption

The Corporation adopted ASU No. 2022-02 effective January 1, 2023. The following section was carried forward from the Annual Report of Form 10-K for the year ended December 31, 2022.

A loan or lease is classified as a troubled debt restructuring when a concession has been granted to an existing borrower experiencing financial difficulties. The Corporation grants concessions to existing borrowers primarily related to extensions of interest-only payment periods and an occasional payment modification. These modifications typically are for up to one year. The goal when restructuring a credit is to provide relief to customers experiencing cash flow difficulties. Accruing troubled debt restructured loans are primarily comprised of loans on which interest is being accrued under the restructured terms, and the loans are current or less than 90 days past due.

Accounting Pronouncements Adopted in 2023

In March 2022, the FASB issued ASU No. 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases in the existing vintage disclosures. This ASU became effective on January 1, 2023 for the Corporation.
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The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Corporation's financial statements.

Recent Accounting Pronouncements Yet to Be Adopted

In March 2023, the FASB issued ASU No. 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)". This ASU allows entities to elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in tax credit programs meeting the eligibility criteria in Accounting Standards Codification (ASC) 323-740-25-1. While the ASU does not significantly alter the existing eligibility criteria, it does provide clarifications to address existing interpretive issues. It also prescribes specific information reporting entities must disclose about tax credit investments each period. This ASU is effective for reporting periods beginning after December 15, 2023, for public business entities, or January 1, 2024 for the Corporation. The Corporation does not expect the adoption of this ASU to have a material impact on the Corporation's financial statements.

In July 2023, the FASB issued ASU No. 2023-03, "Presentation Of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities From Equity (Topic 480), Equity (Topic 505), And Compensation—Stock Compensation (Topic 718)". The ASU amends or supersedes various SEC paragraphs within the codification to conform to past SEC announcements and guidance issued by the SEC. The ASU does not provide new guidance and therefore there is no transition or effective date for implementation.

Note 2. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share. For additional information on the calculation of basic and diluted earnings per share, see Note 1, "Summary of Significant Accounting Policies - Earnings per Share" of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022.
Three Months Ended Nine Months Ended
  September 30, September 30,
(Dollars and shares in thousands, except per share data) 2023 2022 2023 2022
Numerator for basic and diluted earnings per share—net income available to common shareholders
 $ 17,016  $ 20,801  $ 54,850  $ 54,284 
Denominator for basic earnings per share—weighted-average shares outstanding
 29,479  29,291  29,411  29,440 
Effect of dilutive securities—stock options and restricted stock units 79  141  95  148 
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding
 29,558  29,432  29,506  29,588 
Basic earnings per share $ 0.58  $ 0.71  $ 1.86  $ 1.85 
Diluted earnings per share $ 0.58  $ 0.71  $ 1.86  $ 1.84 
Average antidilutive options and restricted stock units excluded from computation of diluted earnings per share 540  250  432  250 

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Note 3. Investment Securities

The following table shows the amortized cost, the estimated fair value and the allowance for credit losses of the held-to-maturity securities and available-for-sale securities at September 30, 2023 and December 31, 2022, by contractual maturity within each type:
  At September 30, 2023
(Dollars in thousands) Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Allowance for Credit Losses Fair Value
Securities Held-to-Maturity
Residential mortgage-backed securities:
After 1 year to 5 years $ 2,077  $ —  $ (95) $ —  $ 1,982 
After 5 years to 10 years 10,100  —  (763) —  9,337 
Over 10 years 137,274  —  (24,833) —  112,441 
149,451  —  (25,691) —  123,760 
Total $ 149,451  $ —  $ (25,691) $ —  $ 123,760 
Securities Available-for-Sale
State and political subdivisions:
Within 1 year $ 1,030  $ —  $ (5) $ —  $ 1,025 
After 1 year to 5 years 1,298  —  (56) —  1,242 
2,328  —  (61) —  2,267 
Residential mortgage-backed securities:
After 1 year to 5 years 632  —  (27) —  605 
After 5 years to 10 years 14,257  —  (1,818) —  12,439 
Over 10 years 286,909  —  (50,788) —  236,121 
301,798  —  (52,633) —  249,165 
Collateralized mortgage obligations:
After 5 years to 10 years 262  —  (16) —  246 
Over 10 years 2,030  —  (242) —  1,788 
2,292  —  (258) —  2,034 
Corporate bonds:
Within 1 year 16,518  —  (147) (117) 16,254 
After 1 year to 5 years 13,868  —  (987) (74) 12,807 
After 5 years to 10 years 60,000  —  (6,643) (1,346) 52,011 
90,386  —  (7,777) (1,537) 81,072 
Total $ 396,804  $ —  $ (60,729) $ (1,537) $ 334,538 

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  At December 31, 2022
(Dollars in thousands) Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Allowance for Credit Losses Fair Value
Securities Held-to-Maturity
Residential mortgage-backed securities:
After 1 year to 5 years $ 1,654  $ —  $ (70) $ —  $ 1,584 
After 5 years to 10 years 6,076  —  (342) —  5,734 
Over 10 years 146,997  —  (20,247) —  126,750 
154,727  —  (20,659) —  134,068 
Total $ 154,727  $ —  $ (20,659) $ —  $ 134,068 
Securities Available-for-Sale
State and political subdivisions:
After 1 year to 5 years $ 2,327  $ —  $ (42) $ —  $ 2,285 
2,327  —  (42) —  2,285 
Residential mortgage-backed securities:
After 1 year to 5 years 864  —  (37) —  827 
After 5 years to 10 years 10,399  —  (815) —  9,584 
Over 10 years 294,261  7  (41,291) —  252,977 
305,524  7  (42,143) —  263,388 
Collateralized mortgage obligations:
After 5 years to 10 years 324  —  (22) —  302 
Over 10 years 2,257  —  (237) —  2,020 
2,581  —  (259) —  2,322 
Corporate bonds:
Within 1 year 1,000  —  —  —  1,000 
After 1 year to 5 years 30,679  3  (1,516) (152) 29,014 
After 5 years to 10 years 60,000  —  (6,765) (988) 52,247 
91,679  3  (8,281) (1,140) 82,261 
Total $ 402,111  $ 10  $ (50,725) $ (1,140) $ 350,256 

Gross unrealized gains and losses on available-for-sale securities are recognized in accumulated other comprehensive income (loss) and changes in the allowance for credit loss are recorded in provision for credit loss expense. Expected maturities may differ from contractual maturities because debt issuers may have the right to call or prepay obligations without call or prepayment penalties and mortgage-backed securities typically prepay at a rate faster than contractually due.

Securities with a carrying value of $413.2 million and $429.4 million at September 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds deposits and contingency funding. There were no pledged securities to secure credit derivatives and interest rate swaps at September 30, 2023 or December 31, 2022. See Note 11, "Derivative Instruments and Hedging Activities" for additional information.

The following table presents information related to sales of securities available-for-sale during the nine months ended September 30, 2023 and 2022:

  Nine Months Ended September 30,
(Dollars in thousands) 2023 2022
Securities available-for-sale:
Proceeds from sales $ —  $ 1,530 
Gross realized gains on sales —  30 
Tax expense related to net realized gains on sales —  6 

At September 30, 2023 and December 31, 2022, there were no reportable investments in any single issuer representing more than 10% of shareholders’ equity.
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The following table shows the fair value of securities that were in an unrealized loss position for which an allowance for credit losses has not been recorded at September 30, 2023 and December 31, 2022, by the length of time those securities were in a continuous loss position.
  Less than
Twelve Months		 Twelve Months
or Longer		 Total
(Dollars in thousands) Fair Value Unrealized
Losses		 Fair Value Unrealized
Losses		 Fair Value Unrealized
Losses
At September 30, 2023
Securities Held-to-Maturity
Residential mortgage-backed securities $ 5,771  $ (350) $ 117,989  $ (25,341) $ 123,760  $ (25,691)
Total $ 5,771  $ (350) $ 117,989  $ (25,341) $ 123,760  $ (25,691)
Securities Available-for-Sale
State and political subdivisions $ —  $ —  $ 1,242  $ (56) $ 1,242  $ (56)
Residential mortgage-backed securities 21,292  (942) 227,657  (51,691) 248,949  (52,633)
Collateralized mortgage obligations —  —  2,034  (258) 2,034  (258)
Corporate bonds —  —  280  (1) 280  (1)
Total $ 21,292  $ (942) $ 231,213  $ (52,006) $ 252,505  $ (52,948)
At December 31, 2022
Securities Held-to-Maturity
Residential mortgage-backed securities $ 65,044  $ (5,894) $ 69,024  $ (14,765) $ 134,068  $ (20,659)
Total $ 65,044  $ (5,894) $ 69,024  $ (14,765) $ 134,068  $ (20,659)
Securities Available-for-Sale
State and political subdivisions $ 1,255  $ (42) $ —  $ —  $ 1,255  $ (42)
Residential mortgage-backed securities 128,831  (13,843) 133,902  (28,300) 262,733  (42,143)
Collateralized mortgage obligations 302  (22) 2,020  (237) 2,322  (259)
Corporate bonds 500  (1) —  —  500  (1)
Total $ 130,888  $ (13,908) $ 135,922  $ (28,537) $ 266,810  $ (42,445)

At September 30, 2023, the fair value of held-to-maturity securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $123.8 million, including unrealized losses of $25.7 million. These holdings were comprised of 88 federal agency mortgage-backed securities, which are U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The Corporation did not recognize any credit losses on held-to-maturity debt securities for the nine months ended September 30, 2023.

At September 30, 2023, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $252.5 million, including unrealized losses of $52.9 million. These holdings were comprised of (1) 112 federal agency mortgage-backed securities, which are U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses, (2) two collateralized mortgage obligation bonds, (3) two investment grade corporate bonds, and (4) one state and political subdivision bond. The Corporation does not intend to sell the securities in an unrealized loss position and is unlikely to be required to sell these securities before a recovery of fair value, which may be maturity. The Corporation concluded that the decline in fair value of these securities was not indicative of a credit loss. Accrued interest receivable on available-for-sale debt securities totaled $1.2 million at September 30, 2023 and is included within Accrued interest receivable and other assets on the condensed consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

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The table below presents a rollforward by major security type for the nine months ended September 30, 2023 and September 30, 2022 of the allowance for credit losses on securities available-for-sale.

(Dollars in thousands) Corporate Bonds
Nine months ended September 30, 2023
Securities Available-for-Sale
Beginning balance $ (1,140)
Additions for securities for which no previous expected credit losses were recognized (2)
Change in securities for which a previous expected credit loss was recognized (395)
Ending balance $ (1,537)
Nine months ended September 30, 2022
Securities Available-for-Sale
Beginning balance $ (929)
Additions for securities for which no previous expected credit losses were recognized (153)
Change in securities for which a previous expected credit loss was recognized (217)
Ending balance $ (1,299)

At September 30, 2023, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has been recorded was $81.8 million, including unrealized losses of $8.9 million, and allowance for credit losses of $1.5 million. These holdings were comprised of 39 investment grade corporate bonds which fluctuate in value based on changes in market conditions. For these securities, fluctuations were primarily due to changes in the interest rate environment. The Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell the securities before their anticipated recovery. The underlying issuers continue to make timely principal and interest payments on the securities.

The Corporation recognized a $118 thousand and a $207 thousand net loss on equity securities during the nine months ended September 30, 2023 and 2022, respectively, in other noninterest income. There were no sales of equity securities during the nine months ended September 30, 2023 or 2022.

Note 4. Loans and Leases

Summary of Major Loan and Lease Categories

(Dollars in thousands) At September 30, 2023 At December 31, 2022
Commercial, financial and agricultural $ 1,050,004  $ 1,088,928 
Real estate-commercial 3,275,140  3,027,955 
Real estate-construction 427,561  381,811 
Real estate-residential secured for business purpose 516,471  478,254 
Real estate-residential secured for personal purpose 861,122  730,395 
Real estate-home equity secured for personal purpose 176,855  176,699 
Loans to individuals 27,331  27,873 
Lease financings 240,474  211,315 
Total loans and leases held for investment, net of deferred income $ 6,574,958  $ 6,123,230 
Less: Allowance for credit losses, loans and leases (83,837) (79,004)
Net loans and leases held for investment $ 6,491,121  $ 6,044,226 
Imputed interest on lease financings, included in the above table $ (28,625) $ (21,932)
Net deferred costs, included in the above table 7,568  6,053 
Overdraft deposits included in the above table 97  93 
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Age Analysis of Past Due Loans and Leases

The following presents, by class of loans and leases held for investment, an aging of past due loans and leases, loans and leases which are current and nonaccrual loans and leases at September 30, 2023 and December 31, 2022:
Accruing Loans and Leases
(Dollars in thousands) 30-59
Days
Past Due		 60-89
Days
Past Due		 90 Days
or more
Past Due		 Total
Past Due		 Current Total Accruing Loans and Leases Nonaccrual Loans and Leases Total Loans
and Leases
Held for
Investment
At September 30, 2023
Commercial, financial and agricultural $ 9,134  $ 249  $ 1,733  $ 11,116  $ 1,037,477  $ 1,048,593  $ 1,411  $ 1,050,004 
Real estate—commercial real estate and construction:
Commercial real estate 5,548  335  220  6,103  3,264,174  3,270,277  4,863  3,275,140 
Construction 9,450  —  —  9,450  418,111  427,561  —  427,561 
Real estate—residential and home equity:
Residential secured for business purpose 2,155  650  —  2,805  512,730  515,535  936  516,471 
Residential secured for personal purpose 4,042  41  —  4,083  852,793  856,876  4,246  861,122 
Home equity secured for personal purpose 445  251  —  696  175,406  176,102  753  176,855 
Loans to individuals 175  25  26  226  27,105  27,331  —  27,331 
Lease financings 854  784  156  1,794  238,623  240,417  57  240,474 
Total $ 31,803  $ 2,335  $ 2,135  $ 36,273  $ 6,526,419  $ 6,562,692  $ 12,266  $ 6,574,958 
Accruing Loans and Leases
(Dollars in thousands) 30-59
Days
Past Due		 60-89
Days
Past Due		 90 Days
or more
Past Due		 Total
Past Due		 Current Total Accruing Loans and Leases Nonaccrual Loans and Leases Total Loans
and Leases
Held for
Investment
At December 31, 2022
Commercial, financial and agricultural $ 1,616  $ 343  $ —  $ 1,959  $ 1,081,897  $ 1,083,856  $ 5,072  $ 1,088,928 
Real estate—commercial real estate and construction:
Commercial real estate 3,281  290  20  3,591  3,019,827  3,023,418  4,537  3,027,955 
Construction 315  —  —  315  381,496  381,811  —  381,811 
Real estate—residential and home equity:
Residential secured for business purpose 375  203  263  841  476,400  477,241  1,013  478,254 
Residential secured for personal purpose 4,127  162  319  4,608  723,798  728,406  1,989  730,395 
Home equity secured for personal purpose 953  225  —  1,178  174,781  175,959  740  176,699 
Loans to individuals 32  153  39  224  27,649  27,873  —  27,873 
Lease financings 3,555  341  234  4,130  207,183  211,313  2  211,315 
Total $ 14,254  $ 1,717  $ 875  $ 16,846  $ 6,093,031  $ 6,109,877  $ 13,353  $ 6,123,230 

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Nonperforming Loans and Leases

The following presents, by class of loans and leases, nonperforming loans and leases at September 30, 2023 and December 31, 2022.
  At September 30, 2023 At December 31, 2022
(Dollars in thousands) Nonaccrual
Loans and
Leases		 Loans and
Leases
90 Days
or more
Past Due
and
Accruing
Interest		 Total Nonperforming
Loans and
Leases		 Nonaccrual
Loans and
Leases		 Loans and
Leases
90 Days
or more
Past Due
and
Accruing
Interest		 Total Nonperforming
Loans and
Leases
Loans held for sale * $ 5,819  $ —  $ 5,819  $ —  $ —  $ — 
Loans and leases held for investment:
Commercial, financial and agricultural $ 1,411  $ 1,733  $ 3,144  $ 5,072  $ —  $ 5,072 
Real estate—commercial real estate and construction:
Commercial real estate 4,863  220  5,083  4,537  20  4,557 
Real estate—residential and home equity:
Residential secured for business purpose 936  —  936  1,013  263  1,276 
Residential secured for personal purpose 4,246  —  4,246  1,989  319  2,308 
Home equity secured for personal purpose 753  —  753  740  —  740 
Loans to individuals —  26  26  —  39  39 
Lease financings 57  156  213  2  234  236 
Total $ 18,085  $ 2,135  $ 20,220  $ 13,353  $ 875  $ 14,228 
*Includes one construction loan at September 30, 2023.

The following table presents the amortized cost basis of loans and leases held for investment on nonaccrual status and loans and leases held for investment 90 days or more past due and still accruing as of September 30, 2023 and December 31, 2022.
(Dollars in thousands) Nonaccrual With No Allowance for Credit Losses Nonaccrual With Allowance for Credit Losses Total Nonaccrual Loans and Leases 90 Days or more Past Due and Accruing Interest
At September 30, 2023
Commercial, financial and agricultural $ 297  $ 1,114  $ 1,411  $ 1,733 
Real estate-commercial 4,841  22  4,863  220 
Real estate-residential secured for business purpose 936  —  936  — 
Real estate-residential secured for personal purpose 4,246  —  4,246  — 
Real estate-home equity secured for personal purpose 753  —  753  — 
Loans to individuals —  —  —  26 
Lease financings —  57  57  156 
Total $ 11,073  $ 1,193  $ 12,266  $ 2,135 
At December 31, 2022
Commercial, financial and agricultural $ 225  $ 4,847  $ 5,072  $ — 
Real estate-commercial 4,537  —  4,537  20 
Real estate-residential secured for business purpose 1,013  —  1,013  263 
Real estate-residential secured for personal purpose 1,989  —  1,989  319 
Real estate-home equity secured for personal purpose 740  —  740  — 
Loans to individuals —  —  —  39 
Lease financings —  2  2  234 
Total $ 8,504  $ 4,849  $ 13,353  $ 875 

For the nine months ended September 30, 2023, $70 thousand of interest income was recognized on nonaccrual loans and leases.
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The following table presents, by class of loans and leases, the amortized cost basis of collateral-dependent nonaccrual loans and leases and type of collateral as of September 30, 2023 and December 31, 2022.

(Dollars in thousands) Real Estate
Other (1)
 None Total
At September 30, 2023
Commercial, financial and agricultural $ 1,362  $ 49  $ —  $ 1,411 
Real estate-commercial 4,863  —  —  4,863 
Real estate-residential secured for business purpose 936  —  —  936 
Real estate-residential secured for personal purpose 4,246  —  —  4,246 
Real estate-home equity secured for personal purpose 753  —  —  753 
Lease financings —  57  —  57 
Total $ 12,160  $ 106  $ —  $ 12,266 
(Dollars in thousands) Real Estate
Other (1)
None (2)
 Total
At December 31, 2022
Commercial, financial and agricultural $ 2,743  $ —  $ 2,329  $ 5,072 
Real estate-commercial 4,537  —  —  4,537 
Real estate-residential secured for business purpose 1,013  —  —  1,013 
Real estate-residential secured for personal purpose 1,989  —  —  1,989 
Real estate-home equity secured for personal purpose 740  —  —  740 
Lease financings —  2  —  2 
Total $ 11,022  $ 2  $ 2,329  $ 13,353 
(1) Collateral consists of business assets, including accounts receivable, personal property and equipment.
(2) Loans fully guaranteed by the SBA or fully reserved given lack of collateral.

Credit Quality Indicators

The Corporation categorizes risk based on relevant information about the ability of the borrower to service their debt. Loans with a relationship balance of less than $1 million are reviewed when necessary based on their performance, primarily when such loans are delinquent. Loans with relationships greater than $1 million are reviewed at least annually. Loan relationships with a higher risk profile or classified as special mention or substandard are reviewed at least quarterly. The Corporation reviews credit quality key risk indicators on at least an annual basis and last completed this review in conjunction with the period ended December 31, 2022. The following is a description of the internal risk ratings and the likelihood of loss related to the credit quality of commercial, financial and agricultural loans, real estate-commercial loans, real estate-construction loans and real estate-residential secured for a business purpose loans.

1.Pass—Loans considered satisfactory with no indications of deterioration
2.Special Mention—Potential weakness that deserves management's close attention
3.Substandard—Well-defined weakness or weaknesses that jeopardize the liquidation of the debt
4.Doubtful—Collection or liquidation in-full, on the basis of current existing facts, conditions and values, highly questionable and improbable

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Based on the most recent analysis performed, the following table presents the recorded investment in loans and leases held for investment for commercial, financial and agricultural loans, real estate-commercial loans, real estate-construction loans and real estate-residential secured for a business purpose loans by credit quality indicator at September 30, 2023 and December 31, 2022.
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
At September 30, 2023
Commercial, Financial and Agricultural
Risk Rating
1. Pass $ 128,857  $ 151,968  $ 139,953  $ 29,147  $ 21,655  $ 59,173  $ 473,162  $ 1,416  $ 1,005,331 
2. Special Mention —  1,390  645  —  6,118  —  13,628  —  21,781 
3. Substandard —  852  8,804  —  589  —  12,647  —  22,892 
Total $ 128,857  $ 154,210  $ 149,402  $ 29,147  $ 28,362  $ 59,173  $ 499,437  $ 1,416  $ 1,050,004 
Current period gross charge-offs $ 6  $ 50  $ 296  $ 67  $ —  $ 151  $ 3,321  $ —  $ 3,891 
Real Estate-Commercial
Risk Rating
1. Pass $ 391,320  $ 854,572  $ 644,754  $ 621,144  $ 339,709  $ 332,824  $ 63,383  $ —  $ 3,247,706 
2. Special Mention 1,250  231  8,899  5,873  —  1,420  —  —  17,673 
3. Substandard —  1,036  1,948  1,687  226  1,911  2,953  —  9,761 
Total $ 392,570  $ 855,839  $ 655,601  $ 628,704  $ 339,935  $ 336,155  $ 66,336  $ —  $ 3,275,140 
Current period gross charge-offs $ —  $ —  $ —  $ —  $ —  $ 50  $ —  $ —  $ 50 
Real Estate-Construction
Risk Rating
1. Pass $ 100,825  $ 274,531  $ 5,633  $ 2,649  $ 244  $ 2,241  $ 18,117  $ —  $ 404,240 
2. Special Mention —  —  3,132  —  —  5,266  9,599  —  17,997 
3. Substandard 2,761  —  —  —  —  —  2,563  —  5,324 
Total $ 103,586  $ 274,531  $ 8,765  $ 2,649  $ 244  $ 7,507  $ 30,279  $ —  $ 427,561 
Current period gross charge-offs $ —  $ 207  $ —  $ —  $ —  $ —  $ —  $ —  $ 207 
Real Estate-Residential Secured for Business Purpose
Risk Rating
1. Pass $ 89,444  $ 153,772  $ 122,981  $ 62,977  $ 39,173  $ 18,243  $ 28,944  $ —  $ 515,534 
2. Special Mention —  —  —  —  —  —  —  —  — 
3. Substandard —  —  —  621  —  316  —  —  937 
Total $ 89,444  $ 153,772  $ 122,981  $ 63,598  $ 39,173  $ 18,559  $ 28,944  $ —  $ 516,471 
Totals By Risk Rating
1. Pass $ 710,446  $ 1,434,843  $ 913,321  $ 715,917  $ 400,781  $ 412,481  $ 583,606  $ 1,416  $ 5,172,811 
2. Special Mention 1,250  1,621  12,676  5,873  6,118  6,686  23,227  —  57,451 
3. Substandard 2,761  1,888  10,752  2,308  815  2,227  18,163  —  38,914 
Total $ 714,457  $ 1,438,352  $ 936,749  $ 724,098  $ 407,714  $ 421,394  $ 624,996  $ 1,416  $ 5,269,176 
Total current period gross charge-offs $ 6  $ 257  $ 296  $ 67  $ —  $ 201  $ 3,321  $ —  $ 4,148 

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Table of Contents
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
At December 31, 2022
Commercial, Financial and Agricultural
Risk Rating
1. Pass $ 233,064  $ 148,033  $ 41,091  $ 28,269  $ 28,209  $ 48,631  $ 487,818  $ 125  $ 1,015,240 
2. Special Mention 2,732  28,220  9,623  8,104  26  —  19,829  —  68,534 
3. Substandard —  13  —  —  —  —  5,141  —  5,154 
Total $ 235,796  $ 176,266  $ 50,714  $ 36,373  $ 28,235  $ 48,631  $ 512,788  $ 125  $ 1,088,928 
Real Estate-Commercial
Risk Rating
1. Pass $ 877,703  $ 680,432  $ 724,941  $ 332,702  $ 118,034  $ 208,974  $ 54,139  $ —  $ 2,996,925 
2. Special Mention 869  8,173  11,582  944  85  3,002  1,838  —  26,493 
3. Substandard —  —  1,770  —  2,222  495  50  —  4,537 
Total $ 878,572  $ 688,605  $ 738,293  $ 333,646  $ 120,341  $ 212,471  $ 56,027  $ —  $ 3,027,955 
Real Estate-Construction
Risk Rating
1. Pass $ 243,983  $ 52,485  $ 8,341  $ 34,670  $ 191  $ 442  $ 30,223  $ —  $ 370,335 
2. Special Mention —  5,781  —  5,695  —  —  —  —  11,476 
3. Substandard —  —  —  —  —  —  —  —  — 
Total $ 243,983  $ 58,266  $ 8,341  $ 40,365  $ 191  $ 442  $ 30,223  $ —  $ 381,811 
Real Estate-Residential Secured for Business Purpose
Risk Rating
1. Pass $ 165,844  $ 128,669  $ 67,955  $ 39,794  $ 21,226  $ 23,324  $ 29,239  $ —  $ 476,051 
2. Special Mention —  —  247  —  —  941  —  —  1,188 
3. Substandard —  211  27  —  38  594  145  —  1,015 
Total $ 165,844  $ 128,880  $ 68,229  $ 39,794  $ 21,264  $ 24,859  $ 29,384  $ —  $ 478,254 
Totals By Risk Rating
1. Pass $ 1,520,594  $ 1,009,619  $ 842,328  $ 435,435  $ 167,660  $ 281,371  $ 601,419  $ 125  $ 4,858,551 
2. Special Mention 3,601  42,174  21,452  14,743  111  3,943  21,667  —  107,691 
3. Substandard —  224  1,797  —  2,260  1,089  5,336  —  10,706 
Total $ 1,524,195  $ 1,052,017  $ 865,577  $ 450,178  $ 170,031  $ 286,403  $ 628,422  $ 125  $ 4,976,948 

The Corporation had no loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at September 30, 2023 or December 31, 2022.

The Corporation monitors the credit risk profile by payment activity for the following classifications of loans and leases: real estate-residential secured for personal purpose loans, real estate-home equity secured for personal purpose loans, loans to individuals and lease financings. The Corporation reviews credit quality indicators on at least an annual basis and last completed this review in conjunction with the period ended December 31, 2022. Loans and leases past due 90 days or more and loans and leases on nonaccrual status are considered nonperforming. Nonperforming loans and leases are reviewed monthly. Performing loans and leases are reviewed only if the loan becomes 60 days or more past due.



20
Table of Contents
Based on the most recent analysis performed, the following table presents the recorded investment in loans and leases held for investment for real estate-residential secured for personal purpose loans, real estate-home equity secured for personal purpose loans, loans to individuals and lease financings by credit quality indicator at September 30, 2023 and December 31, 2022.
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
At September 30, 2023
Real Estate-Residential Secured for Personal Purpose
Payment Performance
1. Performing $ 118,896  $ 290,452  $ 211,229  $ 130,133  $ 23,124  $ 83,042  $ —  $ 856,876 
2. Nonperforming —  156  44  2,805  —  1,241  —  4,246 
Total $ 118,896  $ 290,608  $ 211,273  $ 132,938  $ 23,124  $ 84,283  $ —  $ 861,122 
Real Estate-Home Equity Secured for Personal Purpose
Payment Performance
1. Performing $ 380  $ 2,626  $ 558  $ 427  $ 172  $ 1,563  $ 170,376  $ 176,102 
2. Nonperforming —  —  —  —  —  —  753  753 
Total $ 380  $ 2,626  $ 558  $ 427  $ 172  $ 1,563  $ 171,129  $ 176,855 
Current period gross charge-offs $ —  $ —  $ —  $ —  $ 85  $ —  $ —  $ 85 
Loans to Individuals
Payment Performance
1. Performing $ 1,460  $ 1,038  $ 593  $ 129  $ 89  $ 1,167  $ 22,829  $ 27,305 
2. Nonperforming —  —  —  —  —  26  —  26 
Total $ 1,460  $ 1,038  $ 593  $ 129  $ 89  $ 1,193  $ 22,829  $ 27,331 
Current period gross charge-offs $ 155  $ 33  $ —  $ 5  $ 28  $ 21  $ 98  $ 340 
Lease Financings
Payment Performance
1. Performing $ 86,834  $ 76,340  $ 46,368  $ 21,533  $ 7,684  $ 1,502  $ —  $ 240,261 
2. Nonperforming —  85  —  44  78  6  —  213 
Total $ 86,834  $ 76,425  $ 46,368  $ 21,577  $ 7,762  $ 1,508  $ —  $ 240,474 
Current period gross charge-offs $ —  $ 143  $ 133  $ 31  $ 6  $ 1  $ —  $ 314 
Totals by Payment Performance
1. Performing $ 207,570  $ 370,456  $ 258,748  $ 152,222  $ 31,069  $ 87,274  $ 193,205  $ 1,300,544 
2. Nonperforming —  241  44  2,849  78  1,273  753  5,238 
Total $ 207,570  $ 370,697  $ 258,792  $ 155,071  $ 31,147  $ 88,547  $ 193,958  $ 1,305,782 
Total current period gross charge-offs $ 155  $ 176  $ 133  $ 36  $ 119  $ 22  $ 98  $ 739 
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Table of Contents
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
At December 31, 2022
Real Estate-Residential Secured for Personal Purpose
Payment Performance
1. Performing $ 258,293  $ 211,638  $ 140,822  $ 23,827  $ 18,273  $ 75,126  $ 108  $ 728,087 
2. Nonperforming —  48  466  319  306  1,169  —  2,308 
Total $ 258,293  $ 211,686  $ 141,288  $ 24,146  $ 18,579  $ 76,295  $ 108  $ 730,395 
Real Estate-Home Equity Secured for Personal Purpose
Payment Performance
1. Performing $ 2,945  $ 642  $ 491  $ 192  $ 205  $ 1,565  $ 169,870  $ 175,910 
2. Nonperforming —  —  —  —  157  3  629  789 
Total $ 2,945  $ 642  $ 491  $ 192  $ 362  $ 1,568  $ 170,499  $ 176,699 
Loans to Individuals
Payment Performance
1. Performing $ 1,581  $ 857  $ 554  $ 247  $ 138  $ 1,340  $ 23,117  $ 27,834 
2. Nonperforming —  —  —  —  —  39  —  39 
Total $ 1,581  $ 857  $ 554  $ 247  $ 138  $ 1,379  $ 23,117  $ 27,873 
Lease Financings
Payment Performance
1. Performing $ 94,430  $ 61,680  $ 33,468  $ 15,164  $ 5,569  $ 768  $ —  $ 211,079 
2. Nonperforming 41  56  17  21  90  11  —  236 
Total $ 94,471  $ 61,736  $ 33,485  $ 15,185  $ 5,659  $ 779  $ —  $ 211,315 
Totals by Payment Performance
1. Performing $ 357,249  $ 274,817  $ 175,335  $ 39,430  $ 24,185  $ 78,799  $ 193,095  $ 1,142,910 
2. Nonperforming 41  104  483  340  553  1,222  629  3,372 
Total $ 357,290  $ 274,921  $ 175,818  $ 39,770  $ 24,738  $ 80,021  $ 193,724  $ 1,146,282 

The Corporation had no revolving loans which were converted to term loans included within recorded investment in loans and leases held for investment at September 30, 2023 or December 31, 2022.

22
Table of Contents
Allowance for Credit Losses on Loans and Leases and Recorded Investment in Loans and Leases

The following presents, by portfolio segment, a summary of the activity in the allowance for credit losses, loans and leases, for the three and nine months ended September 30, 2023 and 2022. There were no changes to the reasonable and supportable forecast period, the reversion period, or any significant methodology changes during the nine months ended September 30, 2023.
(Dollars in thousands) Beginning balance Provision (reversal of provision) for credit losses Charge-offs Recoveries Ending balance
Three Months Ended September 30, 2023
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural $ 13,871  $ 979  $ (744) $ 30  $ 14,136 
Real estate-commercial 44,757  519  —  3  45,279 
Real estate-construction 5,433  298  —  1  5,732 
Real estate-residential secured for business purpose 8,696  (44) —  4  8,656 
Real estate-residential secured for personal purpose 5,588  254  —  —  5,842 
Real estate-home equity secured for personal purpose 1,296  (38) —  33  1,291 
Loans to individuals 560  (61) (124) 12  387 
Lease financings 2,508  190  (189) 5  2,514 
Unallocated —  —  N/A N/A — 
Total $ 82,709  $ 2,097  $ (1,057) $ 88  $ 83,837 
Three Months Ended September 30, 2022
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural $ 13,004  $ 2,110  $ (310) $ 181  $ 14,985 
Real estate-commercial 41,678  1,286  (999) 3  41,968 
Real estate-construction 4,223  (376) —  —  3,847 
Real estate-residential secured for business purpose 6,420  433  —  2  6,855 
Real estate-residential secured for personal purpose 2,937  419  —  —  3,356 
Real estate-home equity secured for personal purpose 1,074  73  —  49  1,196 
Loans to individuals 376  54  (79) 21  372 
Lease financings 2,299  115  (70) 6  2,350 
Unallocated —  —  N/A N/A — 
Total $ 72,011  $ 4,114  $ (1,458) $ 262  $ 74,929 
N/A – Not applicable
23
Table of Contents
(Dollars in thousands) Beginning balance Provision (reversal of provision) for credit losses Charge-offs Recoveries Ending balance
Nine Months Ended September 30, 2023
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural $ 16,920  $ 937  $ (3,891) $ 170  $ 14,136 
Real estate-commercial 41,673  3,647  (50) 9  45,279 
Real estate-construction 4,952  986  (207) 1  5,732 
Real estate-residential secured for business purpose 7,054  1,417  —  185  8,656 
Real estate-residential secured for personal purpose 3,685  2,157  —  —  5,842 
Real estate-home equity secured for personal purpose 1,287  6  (85) 83  1,291 
Loans to individuals 351  314  (340) 62  387 
Lease financings 3,082  (308) (314) 54  2,514 
Unallocated —  —  N/A N/A — 
Total $ 79,004  $ 9,156  $ (4,887) $ 564  $ 83,837 
Nine Months Ended September 30, 2022
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural $ 13,538  $ 1,560  $ (524) $ 411  $ 14,985 
Real estate-commercial 41,095  3,559  (2,689) 3  41,968 
Real estate-construction 4,575  (728) —  —  3,847 
Real estate-residential secured for business purpose 6,482  320  —  53  6,855 
Real estate-residential secured for personal purpose 2,403  953  —  —  3,356 
Real estate-home equity secured for personal purpose 1,028  130  —  38  1,196 
Loans to individuals 363  125  (181) 65  372 
Lease financings 2,290  223  (187) 24  2,350 
Unallocated 150  (150) N/A N/A — 
Total $ 71,924  $ 5,992  $ (3,581) $ 594  $ 74,929 
N/A – Not applicable
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Table of Contents
The following presents, by portfolio segment, the balance in the allowance for credit losses on loans and leases disaggregated on the basis of whether the loan or lease was measured for credit loss as a pooled loan or lease or if it was individually analyzed for a reserve at September 30, 2023 and 2022:
Allowance for credit losses, loans and leases Loans and leases held for investment
(Dollars in thousands) Ending balance: individually analyzed Ending balance: pooled Total ending balance Ending balance: individually analyzed Ending balance: pooled Loans measured at fair value Total ending balance
At September 30, 2023
Commercial, financial and agricultural $ 814  $ 13,322  $ 14,136  $ 1,754  $ 1,048,250  $ —  $ 1,050,004 
Real estate-commercial 20  45,259  45,279  4,863  3,270,277  —  3,275,140 
Real estate-construction —  5,732  5,732  —  427,561  —  427,561 
Real estate-residential secured for business purpose —  8,656  8,656  936  515,535  —  516,471 
Real estate-residential secured for personal purpose —  5,842  5,842  4,246  856,876  —  861,122 
Real estate-home equity secured for personal purpose —  1,291  1,291  753  176,102  —  176,855 
Loans to individuals —  387  387  —  27,331  —  27,331 
Lease financings —  2,514  2,514  —  240,474  —  240,474 
Total $ 834  $ 83,003  $ 83,837  $ 12,552  $ 6,562,406  $ —  $ 6,574,958 
At September 30, 2022
Commercial, financial and agricultural $ 1,407  $ 13,578  $ 14,985  $ 2,630  $ 1,052,310  $ —  $ 1,054,940 
Real estate-commercial 250  41,718  41,968  7,527  2,928,677  —  2,936,204 
Real estate-construction —  3,847  3,847  —  329,915  —  329,915 
Real estate-residential secured for business purpose —  6,855  6,855  1,009  442,828  —  443,837 
Real estate-residential secured for personal purpose —  3,356  3,356  1,868  683,903  —  685,771 
Real estate-home equity secured for personal purpose —  1,196  1,196  522  175,321  —  175,843 
Loans to individuals —  372  372  —  26,679  —  26,679 
Lease financings —  2,350  2,350  —  196,070  —  196,070 
Total $ 1,657  $ 73,272  $ 74,929  $ 13,556  $ 5,835,703  $ —  $ 5,849,259 

Modified Loans to Borrowers Experiencing Financial Difficulty

The following presents, by class of loans, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023.

  Three Months Ended September 30, 2023
(Dollars in thousands) Number
of
Loans		 Amortized Cost Basis % of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Total —  $ — 
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Total —  $ — 
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  Nine Months Ended September 30, 2023
(Dollars in thousands) Number
of
Loans		 Amortized Cost Basis* % of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—commercial real estate 1  $ 1,948  0.06  %
Total 1  $ 1,948 
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—commercial real estate 1  $ 1,741  0.05  %
Total 1  $ 1,741 
*Amortized cost excludes $15 thousand of accrued interest receivable on modified loans.

During the first quarter of 2023, a $5.8 million construction loan was modified. During the second quarter of 2023, the modified loan was placed on nonaccrual status. During the third quarter of 2023, the nonaccrual modified loan was transferred to held for sale.

The following presents, by class of loans, information regarding the financial effect on accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023.
  Term Extension
(Dollars in thousands) No. of
Loans		 Financial Effect
Three Months Ended September 30, 2023
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Total — 
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Total — 
Nine Months Ended September 30, 2023
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—commercial real estate 1  Extended loan maturity by 5 months to give borrower time to seek refinance.
Total 1 
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—commercial real estate 1  Extended loan maturity by 16 months to give borrower time to seek refinance.
Total 1 

There were no accruing or nonaccrual modified loans to borrowers experiencing financial difficulty for which there were payment defaults during the period that were modified in the 12 months before default for the three and nine months ended September 30, 2023.
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The following presents, by class of loans, the amortized cost and performance status of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty that have been modified in the last 12 months.
At September 30, 2023
(Dollars in thousands) Current 30-89 Days Past Due 90 Days or More Past Due Total
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—commercial real estate $ 1,948  $ —  $ —  $ 1,948 
Total $ 1,948  $ —  $ —  $ 1,948 
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—commercial real estate $ 1,741  $ —  $ —  $ 1,741 
Total $ 1,741  $ —  $ —  $ 1,741 

As of September 30, 2023, the Bank had no commitments to extend credit to borrowers experiencing financial difficulty whose terms had been modified.

The following presents the amount of consumer mortgages collateralized by residential real estate property that were in the process of foreclosure at September 30, 2023 or December 31, 2022.
(Dollars in thousands) At September 30, 2023 At December 31, 2022
Real estate-residential secured for personal purpose $ 3,140  $ 822 
Real estate-home equity secured for personal purpose 22  72 
Total $ 3,162  $ 894 

The following presents foreclosed residential real estate property included in other real estate owned at September 30, 2023 or December 31, 2022.
(Dollars in thousands) At September 30, 2023 At December 31, 2022
Foreclosed residential real estate $ 79  $ — 

Lease Financings

The following presents the schedule of minimum lease payments receivable:
(Dollars in thousands) At September 30, 2023 At December 31, 2022
2023 (excluding the nine months ended September 30, 2023) $ 26,581  $ 75,900 
2024 76,785  61,793 
2025 63,625  45,738 
2026 49,774  29,902 
2027 32,846  13,091 
Thereafter 15,011  2,552 
Total future minimum lease payments receivable 264,622  228,976 
Plus: Unguaranteed residual 1,079  1,387 
Plus: Initial direct costs 3,398  2,884 
Less: Imputed interest (28,625) (21,932)
Lease financings $ 240,474  $ 211,315 

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Note 5. Goodwill and Other Intangible Assets

The Corporation has goodwill from acquisitions which is deemed to be an indefinite intangible asset and is not amortized. Changes in the carrying amount of the Corporation's goodwill by business segment for the nine months ended September 30, 2023 were as follows:
(Dollars in thousands) Banking Wealth Management Insurance Consolidated
Balance at December 31, 2022 $ 138,476  $ 15,434  $ 21,600  $ 175,510 
Addition to goodwill from acquisitions —  —  —  — 
Balance at September 30, 2023 $ 138,476  $ 15,434  $ 21,600  $ 175,510 

The Corporation also has core deposit and customer-related intangibles, which are not deemed to have an indefinite life and therefore will continue to be amortized over their useful life using the present value of projected cash flows. The following table reflects the components of intangible assets at the dates indicated:
At September 30, 2023 At December 31, 2022
(Dollars in thousands) Gross Carrying Amount
Accumulated Amortization (1)
 Net Carrying Amount Gross Carrying Amount
Accumulated Amortization (1)
 Net Carrying Amount
Amortized intangible assets:
Core deposit intangibles $ 6,788  $ 6,244  $ 544  $ 6,788  $ 5,939  $ 849 
Customer related intangibles 4,162  2,548  1,614  8,493  6,530  1,963 
Servicing rights 30,360  21,439  8,921  28,904  20,332  8,572 
Total amortized intangible assets $ 41,310  $ 30,231  $ 11,079  $ 44,185  $ 32,801  $ 11,384 
(1) Included within accumulated amortization is a valuation allowance of $12 thousand and $5 thousand on servicing rights at September 30, 2023 and December 31, 2022, respectively.

The estimated aggregate amortization expense for core deposit and customer-related intangibles for the remainder of 2023 and the succeeding fiscal years is as follows:
Year (Dollars in thousands) Amount
Remainder of 2023 $ 190 
2024 648 
2025 469 
2026 319 
2027 216 
Thereafter 316 
Total $ 2,158 
The aggregate fair value of servicing rights was $19.0 million and $16.8 million at September 30, 2023 and December 31, 2022, respectively. The fair value of these rights was determined using a discount rate of 12.2% at September 30, 2023 and a range of 10.1% to 12.0% at December 31, 2022.
Changes in the servicing rights balance are summarized as follows:
  Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2023 2022 2023 2022
Beginning of period $ 8,568  $ 8,372  $ 8,572  $ 7,878 
Servicing rights capitalized 707  578  1,456  1,969 
Amortization of servicing rights (350) (383) (1,100) (1,290)
Changes in valuation allowance (4) 2  (7) 12 
End of period $ 8,921  $ 8,569  $ 8,921  $ 8,569 
Loans serviced for others $ 1,568,817  $ 1,484,738  $ 1,568,817  $ 1,484,738 

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Activity in the valuation allowance for servicing rights was as follows:
  Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2023 2022 2023 2022
Valuation allowance, beginning of period $ (8) $ (3) $ (5) $ (13)
Additions (4) —  (7) — 
Reductions —  2  —  12 
Valuation allowance, end of period $ (12) $ (1) $ (12) $ (1)

The estimated amortization expense of servicing rights for the remainder of 2023 and the succeeding fiscal years is as follows:
Year (Dollars in thousands) Amount
Remainder of 2023 $ 1,042 
2024 943 
2025 850 
2026 765 
2027 687 
Thereafter 4,634 
Total $ 8,921 

Note 6. Deposits

Deposits and their respective weighted average interest rate at September 30, 2023 and December 31, 2022 consisted of the following:
At September 30, 2023 At December 31, 2022
Weighted Average Interest Rate Amount Weighted Average Interest Rate Amount
(Dollars in thousands)
Noninterest-bearing deposits —  % $ 1,432,559  —  % $ 2,047,263 
Demand deposits 3.40  3,021,009  2.02  2,321,748 
Savings deposits 0.48  817,078  0.25  1,025,431 
Time deposits 4.08  1,168,519  2.07  519,084 
Total 2.40  % $ 6,439,165  1.02  % $ 5,913,526 

Deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC, which is currently $250 thousand per account owner. The aggregate amount of time deposits in denominations over $250 thousand was $176.4 million at September 30, 2023 and $95.0 million at December 31, 2022.

At September 30, 2023, the scheduled maturities of time deposits were as follows:
Year (Dollars in thousands) Amount
Remainder of 2023 $ 213,065 
2024 411,122 
2025 301,253 
2026 39,288 
2027 69,372 
Thereafter 134,419 
Total $ 1,168,519 

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Note 7. Borrowings

The following is a summary of borrowings by type. Short-term borrowings consist of overnight borrowings and term borrowings with an original maturity of one year or less.
At September 30, 2023 At December 31, 2022
(Dollars in thousands) Balance at End of Period Weighted Average Interest Rate at End of Period Balance at End of Period Weighted Average Interest Rate at End of Period
Short-term borrowings:
FHLB borrowings $ —  —  % $ 125,000  4.45  %
Federal funds purchased —  —  60,000  4.63 
Customer repurchase agreements 14,676  0.05  12,141  0.05 
Long-term debt:
FHLB advances $ 320,000  3.71  % $ 95,000  1.34  %
Subordinated notes 148,636  6.08  148,260  6.09 

The Corporation, through the Bank, has a credit facility with the Federal Home Loan Bank (the FHLB) with a maximum borrowing capacity of approximately $3.1 billion. All borrowings and letters of credit from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets. At September 30, 2023 and December 31, 2022, the Bank had outstanding short-term letters of credit with the FHLB totaling $1.3 billion and $690.5 million, respectively, which were utilized to collateralize public funds deposits and other secured deposits. The maximum borrowing capacity with the FHLB changes as a function of the Bank’s qualifying collateral assets as well as the FHLB’s internal credit rating of the Bank. The available borrowing capacity from the FHLB totaled $1.5 billion at September 30, 2023.    

The Corporation, through the Bank, holds collateral at the Federal Reserve Bank of Philadelphia to provide access to the Discount Window Lending program. The collateral, consisting of investment securities, was valued at $127.9 million and $98.1 million at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023 and December 31, 2022, the Corporation had no outstanding borrowings under the Discount Window Lending program.

The Corporation has a $10.0 million committed line of credit with a correspondent bank. At September 30, 2023 and December 31, 2022, the Corporation had no outstanding borrowings under this line.

The Corporation and the Bank had $3.3 billion and $3.0 billion of committed borrowing capacity at September 30, 2023 and December 31, 2022, respectively, of which $1.7 billion and $2.1 billion was available as of September 30, 2023 and December 31, 2022, respectively. The Corporation, through the Bank, also maintained unused uncommitted funding sources from correspondent banks of $369.0 million at September 30, 2023 and $410.0 million at December 31, 2022, of which $369.0 million and $350.0 million were unused as of September 30, 2023 and December 31, 2022, respectively. Future availability under these lines is subject to the prerogatives of the granting banks and may be withdrawn at will.
Long-term advances with the FHLB of Pittsburgh mature as follows:
(Dollars in thousands) As of September 30, 2023 Weighted Average Rate
Remainder of 2023 $ 10,000  3.02  %
2024 85,000  2.10 
2025 75,000  4.46 
2026 100,000  4.29 
2027 25,000  3.99 
Thereafter 25,000  4.61 
Total $ 320,000  3.71  %

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Note 8. Retirement Plans and Other Postretirement Benefits

Information with respect to the Retirement Plans and Other Postretirement Benefits follows: 
  Three Months Ended September 30,
  2023 2022 2023 2022
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 133  $ 140  $ 19  $ 30 
Interest cost 590  393  32  25 
Expected loss on plan assets (762) (940) —  — 
Amortization of net actuarial loss (gain) 250  205  (3) 14 
Net periodic benefit cost (income) $ 211  $ (202) $ 48  $ 69 

  Nine Months Ended September 30,
  2023 2022 2023 2022
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 399  $ 419  $ 57  $ 92 
Interest cost 1,774  1,180  96  73 
Expected loss on plan assets (2,293) (2,818) —  — 
Amortization of net actuarial loss (gain) 750  614  (11) 41 
Net periodic benefit cost (income) $ 630  $ (605) $ 142  $ 206 

The components of net periodic benefit cost, other than the service cost component, are included in other noninterest expense in the condensed consolidated statements of income.

The Corporation expects to make total contributions of $156 thousand to the Retirement Plans and $130 thousand to Other Postretirement Benefit Plans in 2023. During the nine months ended September 30, 2023, the Corporation contributed $117 thousand to its Non-Qualified Retirement Benefit Plans and $69 thousand to its Other Postretirement Benefit Plans. During the nine months ended September 30, 2023, $2.1 million was paid to participants from the Retirement Plans and $69 thousand was paid to participants from the Other Postretirement Benefit Plans.

Note 9. Stock-Based Incentive Plan

The Corporation maintains the 2023 Long-Term Incentive Plan (the Plan), which replaced the expired 2013 Long-Term Incentive Plan. On April 26, 2023, the Plan was approved by shareholders at the Corporation's annual meeting.

The following is a summary of the Corporation's stock option activity and related information for the nine months ended September 30, 2023:
(Dollars in thousands, except per share data) Shares Under Option Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value at September 30, 2023
Outstanding at December 31, 2022 294,111  $ 26.11 
Forfeited (14,487) 28.35 
Exercised (6,210) 18.48 
Outstanding at September 30, 2023 273,414  26.16  3.4 $ — 
Exercisable at September 30, 2023 273,414  26.16  3.4 — 
The Corporation did not issue stock options during the nine months ended September 30, 2023 or September 30, 2022.
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The following is a summary of nonvested restricted stock units at September 30, 2023 including changes during the nine months then ended:
(Dollars in thousands, except per share data)  Nonvested Stock Units  Weighted Average Grant Date Fair Value
Nonvested stock units at December 31, 2022 408,264  $ 25.57 
Granted 213,429  25.04 
Added by performance factor 814  19.20 
Vested (181,508) 22.21 
Forfeited (28,396) 27.20 
Nonvested stock units at September 30, 2023 412,603  $ 26.65 

Certain information regarding restricted stock units is summarized below for the periods indicated:
Nine Months Ended September 30,
(Dollars in thousands, except per share data) 2023 2022
Restricted stock units granted 213,429  184,863 
Weighted average grant date fair value $ 25.04  $ 28.07 
Intrinsic value of units granted $ 5,345  $ 5,189 
Restricted stock units vested 181,508  124,167 
Weighted average grant date fair value $ 22.21  $ 23.53 
Intrinsic value of units vested $ 4,512  $ 3,519 

The total unrecognized compensation expense and the weighted average period over which unrecognized compensation expense is expected to be recognized related to nonvested restricted stock units at September 30, 2023 is presented below:
(Dollars in thousands) Unrecognized Compensation Cost Weighted-Average Period Remaining (Years)
Restricted stock units $ 6,844  1.9

The following table presents information related to the Corporation’s compensation expense related to stock incentive plans recognized for the periods indicated:
Nine Months Ended September 30,
(Dollars in thousands) 2023 2022
Stock-based compensation expense:
Restricted stock units $ 3,229  $ 2,998 
Employee stock purchase plan 83  78 
Total $ 3,312  $ 3,076 
Tax benefit on nonqualified stock option expense and disqualifying dispositions of incentive stock options $ 492  $ 436 

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Note 10. Accumulated Other Comprehensive (Loss) Income

The following table shows the components of accumulated other comprehensive (loss) income, net of taxes, for the periods presented:
(Dollars in thousands) Net Unrealized
Losses on
Available-for-Sale
Investment
Securities		 Net Change
Related to
Derivatives Used for Cash Flow Hedges		 Net Change
Related to
Defined Benefit
Pension Plans		 Accumulated
Other
Comprehensive
Loss
Balance, December 31, 2022 $ (40,066) $ (6,831) $ (15,207) $ (62,104)
Other comprehensive (loss) income (7,911) (2,154) 583  (9,482)
Balance, September 30, 2023 $ (47,977) $ (8,985) $ (14,624) $ (71,586)
Balance, December 31, 2021 $ (1,216) $ (159) $ (14,978) $ (16,353)
Other comprehensive (loss) income (42,232) (6,917) 517  (48,632)
Balance, September 30, 2022 $ (43,448) $ (7,076) $ (14,461) $ (64,985)

Note 11. Derivative Instruments and Hedging Activities

Interest Rate Swaps

The Corporation periodically uses interest rate swap agreements to modify interest rate characteristics from variable to fixed or fixed to variable in order to reduce the impact of interest rate changes on future net interest income. The Corporation’s credit exposure on interest rate swaps includes changes in fair value and any collateral that is held by a third party.

In May 2022, the Corporation entered into an interest rate swap classified as a cash flow hedge with a notional amount of $250.0 million to hedge the interest payments received on a pool of variable rate loans. Under the terms of the swap agreement, the Corporation pays a variable rate equal to the Prime Rate and receives a fixed rate of 5.99%. The swap matures in May 2026. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and performs an assessment on a recurring basis and determined that the derivative currently is and is expected to be highly effective in offsetting changes in cash flows of the hedged item. At September 30, 2023, approximately $5.1 million, net of tax, which is recorded in accumulated other comprehensive loss, is expected to be reclassified into earnings during the next twelve months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to September 30, 2023. At September 30, 2023, the notional amount of the interest rate swap was $250.0 million and the fair value was a liability of $11.4 million.

Credit Derivatives

The Corporation has agreements with third-party financial institutions whereby the third-party financial institution enters into interest rate derivative contracts with loan customers referred to them by the Corporation. By the terms of the agreements, the third-party financial institution has recourse to the Corporation for any exposure created under each swap contract in the event the customer defaults on the swap agreement and the agreement is in a paying position to the third-party financial institution. These transactions represent credit derivatives and are a customary arrangement that allows the Corporation to provide access to interest rate swap transactions for customers without issuing the swap.

At September 30, 2023, the Corporation had exposure to 137 variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of $880.9 million and remaining maturities ranging from 7 months to 11 years. At September 30, 2023, the fair value of the Corporation's interest rate swap credit derivatives was a liability of $167 thousand. At September 30, 2023, the fair value of the swaps to the customers was a net gain of $88.0 million. At September 30, 2023, the Corporation's credit exposure related to the customer totaled $106 thousand.

The maximum potential payments by the Corporation to the third-party financial institution under these credit derivatives are not estimable as they are contingent on future interest rates and the agreement does not provide for a limitation of the maximum potential payment amount.

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Table of Contents
Mortgage Banking Derivatives

Derivative loan commitments represent agreements for delayed delivery of financial instruments in which the buyer agrees to purchase and the seller agrees to deliver, at a specified future date, a specified instrument at a specified price or yield. The Corporation’s derivative loan commitments are commitments to sell loans secured by 1- to 4-family residential properties whose predominant risk characteristic is interest rate risk.

Derivatives Tables

The following table presents the notional amounts and fair values of derivatives designated as hedging instruments recorded on the condensed consolidated balance sheets at September 30, 2023 and December 31, 2022. The Corporation pledges cash or securities to cover the negative fair value of derivative instruments. Cash collateral associated with derivative instruments are not added to or netted against the fair value amounts.
    Derivative Assets Derivative Liabilities
(Dollars in thousands) Notional
Amount		 Balance Sheet
Classification		 Fair
Value		 Balance Sheet
Classification		 Fair
Value
At September 30, 2023
Interest rate swap - cash flow hedge $ 250,000    $ —  Other liabilities $ 11,374 
Total $ 250,000  $ —  $ 11,374 
At December 31, 2022
Interest rate swap - cash flow hedge $ 250,000    $ —  Other liabilities $ 8,647 
Total $ 250,000  $ —  $ 8,647 
The following table presents the notional amounts and fair values of derivatives not designated as hedging instruments recorded on the condensed consolidated balance sheets at September 30, 2023 and December 31, 2022:
    Derivative Assets Derivative Liabilities
(Dollars in thousands) Notional
Amount		 Balance Sheet
Classification		 Fair
Value		 Balance Sheet
Classification		 Fair
Value
At September 30, 2023
Credit derivatives $ 880,933    $ —  Other liabilities $ 167 
Interest rate locks with customers 28,744  Other assets 136    — 
Forward loan sale commitments 39,467  Other assets 148    — 
Total $ 949,144  $ 284  $ 167 
At December 31, 2022
Credit derivatives $ 815,469  $ —  Other liabilities $ 360 
Interest rate locks with customers 10,269  Other assets 119    — 
Forward loan sale commitments 15,306  Other assets 29    — 
Total $ 841,044  $ 148  $ 360 

The following table presents amounts included in the condensed consolidated statements of income for derivatives designated as hedging instruments for the periods indicated:
Statement of Income
Classification		 Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2023 2022 2023 2022
Interest rate swap—cash flow hedge—net interest payments Interest expense (income) $ 1,558  $ (422) $ 3,989  $ (1,040)
Total net (loss) gain $ (1,558) $ 422  $ (3,989) $ 1,040 

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The following table presents amounts included in the condensed consolidated statements of income for derivatives not designated as hedging instruments for the periods indicated:
Statement of Income Classification Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2023 2022 2023 2022
Credit derivatives Other noninterest income $ 263  $ 316  $ 1,170  $ 1,355 
Interest rate locks with customers Net (loss) gain on mortgage banking activities (66) (862) 16  (1,189)
Forward loan sale commitments Net (loss) gain on mortgage banking activities (13) 640  119  584 
Total net gain $ 184  $ 94  $ 1,305  $ 750 

The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at September 30, 2023 and December 31, 2022:
(Dollars in thousands) Accumulated Other
Comprehensive (Loss) Income		 At September 30, 2023 At December 31, 2022
Interest rate swap—cash flow hedge Fair value, net of taxes $ (8,985) $ (6,831)
Total $ (8,985) $ (6,831)

Note 12. Fair Value Disclosures

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Corporation determines the fair value of financial instruments based on the fair value hierarchy. The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Corporation. Unobservable inputs are inputs that reflect the Corporation’s assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances, including assumptions about risk. Three levels of inputs are used to measure fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement. Transfers between levels are recognized at the end of the reporting periods.
Level 1: Valuations are based on quoted prices in active markets for identical assets or liabilities that the Corporation can access at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2: Valuations are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Assets and liabilities utilizing Level 3 inputs include: financial instruments whose value is determined using pricing models, discounted cash-flow methodologies, or similar techniques, as well as instruments for which the fair value calculation requires significant management judgment or estimation.
Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities

Where quoted prices are available in an active market for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include U.S. Treasury securities, most equity securities and money market mutual funds. Mutual funds are registered investment companies which are valued at net asset value of shares on a market exchange at the end of each trading day. Level 2 of the valuation hierarchy includes securities issued by U.S. Government sponsored enterprises, mortgage-backed securities, collateralized mortgage obligations, corporate and municipal bonds and certain equity securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy.

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Fair values for securities are determined using independent pricing services and market-participating brokers. The Corporation’s independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information for structured securities, cash flow and, when available, loan performance data. Because many fixed income securities do not trade on a daily basis, the pricing service’s evaluated pricing applications apply information as applicable through processes, such as benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations. If at any time, the pricing service determines that it does not have sufficient verifiable information to value a particular security, the Corporation will utilize valuations from another pricing service. Management has a sufficient understanding of the third-party service’s valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control.

On a quarterly basis, the Corporation reviews changes, as submitted by the pricing service, in the market value of its security portfolio. Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities. If, upon the Corporation’s review or in comparing with another service, a material difference between pricing evaluations were to exist, the Corporation may submit an inquiry to the current pricing service regarding the data used to determine the valuation of a particular security. If the Corporation determines there is market information that would support a different valuation than from the current pricing service’s evaluation, the Corporation may utilize and change the security's valuation. There were no material differences in valuations noted at September 30, 2023.

Loans Held for Sale

The fair value of our mortgage loans held for sale is based on estimates using Level 2 inputs. These inputs are based on pricing information obtained from wholesale mortgage banks and brokers and applied to loans with similar interest rates and maturities. At September 30, 2023, loans held for sale included a $5.8 million nonperforming construction loan. The fair value of this loan was measured based on the estimated sale price of the loan and is classified within Level 2 in the fair value hierarchy.

Derivative Financial Instruments

The fair values of derivative financial instruments are based upon the estimated amount the Corporation would receive or pay to terminate the contracts or agreements, taking into account current interest rates and, when appropriate, the current creditworthiness of the counterparties. Interest rate swaps and mortgage banking derivative financial instruments are classified within Level 2 of the valuation hierarchy. Credit derivatives are valued based on credit worthiness of the underlying borrower which is a significant unobservable input and therefore classified in Level 3 of the valuation hierarchy.

Contingent Consideration Liability

The Corporation estimates the fair value of the contingent consideration liability by using a discounted cash flow model of future contingent payments based on projected revenue related to the acquired business. The estimated fair value of the contingent consideration liability is reviewed on a quarterly basis and any valuation adjustments resulting from a change of estimated future contingent payments based on projected revenue of the acquired business affecting the contingent consideration liability will be recorded through noninterest expense. Due to the significant unobservable input related to the projected revenue, the contingent consideration liability is classified within Level 3 of the valuation hierarchy. An increase in the projected revenue may result in a higher fair value of the contingent consideration liability. Alternatively, a decrease in the projected revenue may result in a lower estimated fair value of the contingent consideration liability.
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The following table presents the assets and liabilities measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022, classified using the fair value hierarchy:
  At September 30, 2023
(Dollars in thousands) Level 1 Level 2 Level 3 Assets/
Liabilities at
Fair Value
Assets:
Available-for-sale securities:
State and political subdivisions $ —  $ 2,267  $ —  $ 2,267 
Residential mortgage-backed securities —  249,165  —  249,165 
Collateralized mortgage obligations —  2,034  —  2,034 
Corporate bonds —  81,072  —  81,072 
Total available-for-sale securities —  334,538  —  334,538 
Equity securities:
Equity securities - financial services industry 663  —  —  663 
Money market mutual funds 3,391  —  —  3,391 
Total equity securities 4,054  —  —  4,054 
Loans held for sale —  16,473  —  16,473 
Interest rate locks with customers* —  136  —  136 
Forward loan sale commitments* —  148  —  148 
Total assets $ 4,054  $ 351,295  $ —  $ 355,349 
Liabilities:
Contingent consideration liability $ —  $ —  $ 1,203  $ 1,203 
Interest rate swaps* —  11,374  —  11,374 
Credit derivatives* —  —  167  167 
Total liabilities $ —  $ 11,374  $ 1,370  $ 12,744 
* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."

The $167 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which is obtained from real-time financial market data, of 137 interest rate swaps with a notional amount of $880.9 million. The September 30, 2023 CVA is calculated using a 40% loss given default rate on the most recent investment grade curve calculated by a third party.

The contingent consideration liability resulting from the Sheaffer acquisition was calculated using a discount rate of 8.3% on the acquisition date. During the nine months ended September 30, 2023, the Corporation paid $635 thousand in contingent consideration related to this acquisition. The contingent consideration liability was $1.2 million at September 30, 2023. The remaining potential cash payments that could result from the contingent consideration arrangement for the Sheaffer acquisition range from $0 to a maximum of $1.3 million through the period ending November 30, 2024.

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  At December 31, 2022
(Dollars in thousands) Level 1 Level 2 Level 3 Assets/
Liabilities at
Fair Value
Assets:
Available-for-sale securities:
State and political subdivisions $ —  $ 2,285  $ —  $ 2,285 
Residential mortgage-backed securities —  263,388  —  263,388 
Collateralized mortgage obligations —  2,322  —  2,322 
Corporate bonds —  82,261  —  82,261 
Total available-for-sale securities —  350,256  —  350,256 
Equity securities:
Equity securities - financial services industry 780  —  —  780 
Money market mutual funds 1,799  —  —  1,799 
Total equity securities 2,579  —  —  2,579 
Loans held for sale —  5,037  —  5,037 
Interest rate locks with customers* —  119  —  119 
Forward loan sale commitments* —  29  —  29 
Total assets $ 2,579  $ 355,441  $ —  $ 358,020 
Liabilities:
Contingent consideration liability $ —  $ —  $ 1,765  $ 1,765 
Interest rate swaps* —  8,647  —  8,647 
Credit derivatives* —  —  360  360 
Total liabilities $ —  $ 8,647  $ 2,125  $ 10,772 
* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."
The $360 thousand of credit derivatives liability represented the CVA, which is obtained from real-time financial market data, of 127 interest rate swaps with a notional amount of $815.5 million. The December 31, 2022 CVA assumed a zero-deal recovery percentage based on the most recent index credit curve.

The contingent consideration liability resulting from the Sheaffer acquisition was $1.6 million, which was calculated using a discount rate of 8.3%. The potential cash payments that could result from the contingent consideration arrangement for the Sheaffer acquisition range from $0 to a maximum of $1.9 million over the three-year period ending November 30, 2024.
The following table includes a roll forward of loans and credit derivatives for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the nine months ended September 30, 2023 and 2022:
  Nine Months Ended September 30, 2023
(Dollars in thousands) Balance at
December 31,
2022		 Additions Payments received Increase in value Balance at September 30, 2023
Credit derivatives $ (360) $ (973) $ —  $ 1,166  $ (167)
Net total $ (360) $ (973) $ —  $ 1,166  $ (167)
  Nine Months Ended September 30, 2022
(Dollars in thousands) Balance at
December 31,
2021		 Additions Payments received Increase in value Balance at September 30, 2022
Loans $ 48  $ —  $ (48) $ —  $ — 
Credit derivatives (381) (1,332) —  1,355  (358)
Net total $ (333) $ (1,332) $ (48) $ 1,355  $ (358)

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The following table presents the change in the balance of the contingent consideration liability related to acquisitions for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the nine months ended September 30, 2023 and 2022:
  Nine Months Ended September 30, 2023
(Dollars in thousands) Balance at
December 31,
2022		 Payment of
Contingent
Consideration		 Adjustment
of Contingent
Consideration		 Balance at September 30, 2023
Paul I. Sheaffer Insurance Agency $ 1,765  $ 635  $ 73  $ 1,203 
Total contingent consideration liability $ 1,765  $ 635  $ 73  $ 1,203 
  Nine Months Ended September 30, 2022
(Dollars in thousands) Balance at
December 31,
2021		 Payment of
Contingent
Consideration		 Adjustment
of Contingent
Consideration		 Balance at September 30, 2022
Paul I. Sheaffer Insurance Agency $ 1,629  $ —  $ 105  $ 1,734 
Total contingent consideration liability $ 1,629  $ —  $ 105  $ 1,734 

The Corporation may be required to periodically measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or market accounting or changes in the value of loans held for investment analyzed on an individual basis. The following table represents assets measured at fair value on a non-recurring basis at September 30, 2023 and December 31, 2022:
  At September 30, 2023
(Dollars in thousands) Level 1 Level 2 Level 3 Assets at
Fair Value
Individually analyzed loans held for investment $ —  $ —  $ 11,718  $ 11,718 
Other real estate owned —  —  19,916  19,916 
Total $ —  $ —  $ 31,634  $ 31,634 
  At December 31, 2022
(Dollars in thousands) Level 1 Level 2 Level 3 Assets at
Fair Value
Individually analyzed loans held for investment $ —  $ —  $ 10,586  $ 10,586 
Other real estate owned —  —  19,258  19,258 
Total $ —  $ —  $ 29,844  $ 29,844 

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The following table presents assets and liabilities not measured at fair value on a recurring or non-recurring basis in the Corporation’s condensed consolidated balance sheets but for which the fair value is required to be disclosed at September 30, 2023 and December 31, 2022. The disclosed fair values are classified using the fair value hierarchy.
  At September 30, 2023
(Dollars in thousands) Level 1 Level 2 Level 3 Fair
Value		 Carrying
Amount
Assets:
Cash and short-term interest-earning assets $ 290,341  $ —  $ —  $ 290,341  $ 290,341 
Held-to-maturity securities —  123,760  —  123,760  149,451 
Federal Home Loan Bank, Federal Reserve Bank and other stock NA NA NA NA 42,417 
Net loans and leases held for investment —  —  6,213,204  6,213,204  6,479,403 
Servicing rights —  —  18,963  18,963  8,921 
Total assets $ 290,341  $ 123,760  $ 6,232,167  $ 6,646,268  $ 6,970,533 
Liabilities:
Deposits:
Demand and savings deposits, non-maturity $ 5,270,646  $ —  $ —  $ 5,270,646  $ 5,270,646 
Time deposits —  1,153,897  —  1,153,897  1,168,519 
Total deposits 5,270,646  1,153,897  —  6,424,543  6,439,165 
Short-term borrowings —  14,676  —  14,676  14,676 
Long-term debt —  316,366  —  316,366  320,000 
Subordinated notes —  135,000  —  135,000  148,636 
Total liabilities $ 5,270,646  $ 1,619,939  $ —  $ 6,890,585  $ 6,922,477 

  At December 31, 2022
(Dollars in thousands) Level 1 Level 2 Level 3 Fair
Value		 Carrying
Amount
Assets:
Cash and short-term interest-earning assets $ 152,799  $ —  $ —  $ 152,799  $ 152,799 
Held-to-maturity securities —  134,068  —  134,068  154,727 
Federal Home Loan Bank, Federal Reserve Bank and other stock NA NA NA NA 33,841 
Net loans and leases held for investment —  —  5,912,050  5,912,050  6,033,640 
Servicing rights —  —  16,826  16,826  8,572 
Total assets $ 152,799  $ 134,068  $ 5,928,876  $ 6,215,743  $ 6,383,579 
Liabilities:
Deposits:
Demand and savings deposits, non-maturity $ 5,394,442  $ —  $ —  $ 5,394,442  $ 5,394,442 
Time deposits —  503,576  —  503,576  519,084 
Total deposits 5,394,442  503,576  —  5,898,018  5,913,526 
Short-term borrowings —  197,141  —  197,141  197,141 
Long-term debt —  91,926  —  91,926  95,000 
Subordinated notes —  147,250  —  147,250  148,260 
Total liabilities $ 5,394,442  $ 939,893  $ —  $ 6,334,335  $ 6,353,927 

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The following valuation methods and assumptions were used by the Corporation in estimating the fair value for financial instruments measured at fair value on a non-recurring basis and financial instruments not measured at fair value on a recurring or non-recurring basis in the Corporation’s condensed consolidated balance sheets but for which the fair value is required to be disclosed:

Cash and short-term interest-earning assets: The carrying amounts reported in the balance sheet for cash and due from banks, interest-earning deposits with other banks and other short-term investments is their stated value. Cash and short-term interest-earning assets are classified within Level 1 in the fair value hierarchy.

Held-to-maturity securities: Fair values for the held-to-maturity investment securities are estimated by using pricing models or quoted prices of securities with similar characteristics and are classified in Level 2 in the fair value hierarchy.

Federal Home Loan Bank, Federal Reserve Bank and other stock: It is not practical to determine the fair values of Federal Home Loan Bank, Federal Reserve Bank and other stock, due to restrictions placed on their transferability.

Loans held for sale: Loans held for sale are carried at the lower of cost or estimated fair value. The fair value of the Corporation’s mortgage loans held for sale are generally determined using a pricing model based on current market information obtained from external sources, including interest rates, bids or indications provided by market participants on specific loans that are actively marketed for sale. These loans are primarily residential mortgage loans and are generally classified in Level 2 due to the observable pricing data. At September 30, 2023, loans held for sale also included a $5.8 million nonperforming loan. The fair value of this loan was measured based on the estimated sale price of the loan and is classified within Level 2 in the fair value hierarchy.

Loans and leases held for investment: The fair values for loans and leases held for investment are estimated using discounted cash flow analyses, using a discount rate based on current interest rates at which similar loans with similar terms would be made to borrowers, adjusted as appropriate to consider credit, liquidity and marketability factors to arrive at a fair value that represents the Corporation's exit price at which these instruments would be sold or transferred. Loans and leases are classified within Level 3 in the fair value hierarchy since credit risk is not an observable input.

Individually analyzed loans and leases held for investment: For individually analyzed loans and leases, the Corporation uses a variety of techniques to measure fair value, such as using the current appraised value of the collateral, agreements of sale, discounting the contractual cash flows, and analyzing market data that the Corporation may adjust due to specific characteristics of the loan/lease or collateral. At September 30, 2023, individually analyzed loans held for investment had a carrying amount of $12.6 million with a valuation allowance of $834 thousand. At December 31, 2022, individually analyzed loans held for investment had a carrying amount of $13.4 million with a valuation allowance of $2.8 million. The Corporation had no individually analyzed leases at September 30, 2023 or December 31, 2022.

Servicing rights: The Corporation estimates the fair value of servicing rights using discounted cash flow models that calculate the present value of estimated future net servicing income. The model uses readily available prepayment speed assumptions for the interest rates of the portfolios serviced. Servicing rights are classified within Level 3 in the fair value hierarchy based upon management's assessment of the inputs. The Corporation reviews the servicing rights portfolio on a quarterly basis for impairment and the servicing rights are carried at the lower of amortized cost or estimated fair value. At September 30, 2023, servicing rights had a net carrying amount of $8.9 million, which included a valuation allowance of $12 thousand. At December 31, 2022, servicing rights had a net carrying amount of $8.6 million, which included a valuation allowance of $5 thousand.

Goodwill and other identifiable assets: Certain non-financial assets subject to measurement at fair value on a non-recurring basis include goodwill and other identifiable intangible assets. During the nine months ended September 30, 2023, there were no required valuation adjustments of goodwill and other identifiable intangible assets.

Other real estate owned: Other real estate owned (OREO) represents properties that the Corporation has acquired through foreclosure by either accepting a deed in lieu of foreclosure, or by taking possession of assets that were used as loan collateral. The Corporation reports OREO at the lower of cost or fair value less cost to sell, adjusted periodically based on a current appraisal or an executed agreement of sale. Capital improvement expenses associated with the construction or repair of the property are capitalized as part of the cost of the OREO asset. Write-downs and any gain or loss upon the sale of OREO is recorded in other noninterest income. OREO is reported in other assets on the condensed consolidated balance sheet. At September 30, 2023 and December 31, 2022, OREO had a carrying amount of $19.9 million and $19.3 million, respectively. During the nine months ended September 30, 2023, one property was transferred to OREO with a carrying value of $79 thousand and an additional property had $558 thousand of capitalized improvements.
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Other real estate owned is classified within Level 3 in the fair value hierarchy based on appraisals, letters of intent or agreement of sale received from third parties.

Deposit liabilities: The fair values for demand and savings accounts, with no stated maturities, is the amount payable on demand at the reporting date (carrying value) and are classified within Level 1 in the fair value hierarchy. The fair values for time deposits with fixed maturities are estimated by discounting the final maturity using interest rates currently offered for deposits with similar remaining maturities. Time deposits are classified within Level 2 in the fair value hierarchy.

Short-term borrowings: The fair value of short-term borrowings are estimated using current market rates for similar borrowings and are classified within Level 2 in the fair value hierarchy.

Long-term debt: The fair value of long-term debt is estimated by using discounted cash flow analysis, based on current market rates for debt with similar terms and remaining maturities. Long-term debt is classified within Level 2 in the fair value hierarchy.

Subordinated notes: The fair value of the subordinated notes are estimated by discounting the principal balance using the treasury yield curve for the term to the call date as the Corporation has the option to call the subordinated notes. The subordinated notes are classified within Level 2 in the fair value hierarchy.

Note 13. Segment Reporting

At September 30, 2023, the Corporation had three reportable business segments: Banking, Wealth Management and Insurance. The Corporation determines the segments based primarily upon product and service offerings, through the types of income generated and the regulatory environment. This is strategically how the Corporation operates and has positioned itself in the marketplace. Accordingly, significant operating decisions are based upon analysis of each of these segments. The parent holding company and intercompany eliminations are included in the "Other" segment.
Each segment generates revenue from a variety of products and services it provides. Examples of products and services provided for each reportable segment are indicated as follows:
● The Banking segment provides financial services to individuals, businesses, municipalities and nonprofit organizations. These services include a full range of banking services such as deposit taking, loan origination and servicing, mortgage banking, other general banking services and equipment lease financing.
● The Wealth Management segment offers investment advisory, financial planning, trust and brokerage services. The Wealth Management segment serves a diverse client base of private families and individuals, municipal pension plans, retirement plans, trusts and guardianships.
● The Insurance segment includes a full-service insurance brokerage agency offering commercial property and casualty insurance, employee benefit solutions, personal insurance lines and human resources consulting.
The following table provides total assets by reportable business segment as of the dates indicated.
(Dollars in thousands) At September 30, 2023 At December 31, 2022 At September 30, 2022
Banking $ 7,706,141  $ 7,104,727  $ 6,793,567 
Wealth Management 57,845  58,239  55,771 
Insurance 47,507  44,728  43,547 
Other 16,573  14,322  14,512 
Consolidated assets $ 7,828,066  $ 7,222,016  $ 6,907,397 
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The following tables provide reportable segment-specific information and reconciliations to consolidated financial information for the three and nine months ended September 30, 2023 and 2022.
Three Months Ended
September 30, 2023
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 97,079  $ 18  $ —  $ 9  $ 97,106 
Interest expense 41,235  —  —  2,281  43,516 
Net interest income (expense) 55,844  18  —  (2,272) 53,590 
Provision for credit losses 2,024  —  —  —  2,024 
Noninterest income 6,950  6,803  4,912  26  18,691 
Noninterest expense 39,299  5,130  3,987  572  48,988 
Intersegment (revenue) expense* (236) 114  122  —  — 
Income (loss) before income taxes 21,707  1,577  803  (2,818) 21,269 
Income tax expense (benefit) 4,452  284  185  (668) 4,253 
Net income (loss) $ 17,255  $ 1,293  $ 618  $ (2,150) $ 17,016 
Net capital expenditures $ 560  $ 9  $ 5  $ 33  $ 607 

Three Months Ended
September 30, 2022
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 66,862  $ 6  $ —  $ 9  $ 66,877 
Interest expense 7,299  —  —  1,328  8,627 
Net interest income (expense) 59,563  6  —  (1,319) 58,250 
Provision for credit losses 3,558  —  —  —  3,558 
Noninterest income 7,216  6,082  4,642  19  17,959 
Noninterest expense 37,452  4,298  3,879  1,036  46,665 
Intersegment (revenue) expense* (432) 210  222  —  — 
Income (loss) before income taxes 26,201  1,580  541  (2,336) 25,986 
Income tax expense (benefit) 5,407  241  108  (571) 5,185 
Net income (loss) $ 20,794  $ 1,339  $ 433  $ (1,765) $ 20,801 
Net capital expenditures $ 1,128  $ 269  $ 15  $ 171  $ 1,583 

Nine Months Ended
September 30, 2023
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 270,422  $ 49  $ —  $ 27  $ 270,498 
Interest expense 96,417  —  —  6,844  103,261 
Net interest income (expense) 174,005  49  —  (6,817) 167,237 
Provision for credit losses 8,839  —  —  —  8,839 
Noninterest income 21,139  20,246  16,846  (27) 58,204 
Noninterest expense 119,984  14,790  11,877  1,665  148,316 
Intersegment (revenue) expense* (709) 344  365  —  — 
Income (loss) before income taxes 67,030  5,161  4,604  (8,509) 68,286 
Income tax expense (benefit) 13,913  580  1,015  (2,072) 13,436 
Net income (loss) $ 53,117  $ 4,581  $ 3,589  $ (6,437) $ 54,850 
Net capital expenditures $ 3,595  $ 15  $ 124  $ 454  $ 4,188 
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Nine Months Ended
September 30, 2022
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 174,758  $ 8  $ —  $ 26  $ 174,792 
Interest expense 14,428  —  —  3,983  18,411 
Net interest income (expense) 160,330  8  —  (3,957) 156,381 
Provision for credit losses 6,782  —  —  —  6,782 
Noninterest income (expense) 22,066  20,249  15,234  (122) 57,427 
Noninterest expense 112,119  13,398  11,626  2,305  139,448 
Intersegment (revenue) expense* (1,299) 632  667  —  — 
Income (loss) before income taxes 64,794  6,227  2,941  (6,384) 67,578 
Income tax expense (benefit) 13,038  1,169  612  (1,525) 13,294 
Net income (loss) $ 51,756  $ 5,058  $ 2,329  $ (4,859) $ 54,284 
Net capital expenditures $ (3,944) $ 495  $ 53  $ 225  $ (3,171)
*Includes an allocation of general and administrative expenses from both the parent holding company and the Bank. These expenses are generally allocated based upon number of employees and square footage utilized.

Note 14. Contingencies

The Corporation is periodically subject to various pending and threatened legal actions, which involve claims for monetary relief. Based upon information presently available to the Corporation, it is the Corporation's opinion that any legal and financial responsibility arising from such claims will not have a material adverse effect on the Corporation's results of operations, financial position or cash flows.

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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

(All dollar amounts presented in tables are in thousands, except per share data. “BP” equates to “basis points”; "NM" equates to “not meaningful”; “—” equates to “zero” or “doesn’t round to a reportable number”; and “N/A” equates to “not applicable.” Certain prior period amounts have been reclassified to conform to the current-year presentation.)

Forward-Looking Statements

The information contained in this report may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words "believe" "anticipate," "estimate," "expect," "project," "target," "goal" and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may include but are not limited to: statements of our goals, intentions and expectations; statements regarding our business plans, prospects, growth and operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. These forward-looking statements are based on current beliefs and expectations of our management and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to certain risks, uncertainties and assumptions, including but not limited to those set forth below:
 
•Operating, legal and regulatory risks;
•Economic, political and competitive forces;
•General economic conditions, either nationally or in our market areas, that are worse than expected included as a result of employment levels and labor shortages, and the effect of inflation, a potential recession or slowed economic growth caused by supply chain disruptions or otherwise;
•Legislative, regulatory and accounting changes, including increased assessments by the Federal Deposit Insurance Corporation;
•Monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
•Demand for our financial products and services in our market area;
•Major catastrophes such as earthquakes, floods or other natural or human disasters and infectious disease outbreaks, the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on us and our customers and other constituencies;
•The effects of a government shutdown;
•Inflation or volatility in interest rates that reduce our margins and yields, the fair value of financial instruments or our level of loan originations or prepayments on loans we have made and make;
•Fluctuations in real estate values in our market area;
•A failure to maintain adequate levels of capital and liquidity to support our operations;
•The composition and credit quality of our loan and investment portfolios;
•Changes in the level and direction of loan delinquencies, classified and criticized loans and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;
•Changes in the economic assumptions utilized to calculate the allowance for credit losses;
•Our ability to access cost-effective funding;
•Changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
•Our ability to implement our business strategies;
•Our ability to manage market risk, credit risk and operational risk;
•Timing and amount of revenue and expenditures;
•Adverse changes in the securities markets;
•The impact of any military conflict, terrorist act or other geopolitical acts;
•Our ability to enter new markets successfully and capitalize on growth opportunities;
•Competition for loans, deposits and employees;
•System failures or cyber-security breaches of our information technology infrastructure and those of our third-party service providers;
•The failure to maintain current technologies and/or to successfully implement future information technology enhancements;
•Our ability to retain key employees;
•Other risks and uncertainties, including those occurring in the U.S. and world financial systems; and
•The risk that our analysis of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.
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Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected. These and other risk factors are more fully described in this report and in the Univest Financial Corporation Annual Report on Form 10-K for the year ended December 31, 2022 under the section entitled "Item 1A - Risk Factors," and from time to time in other filings made by the Corporation with the SEC.

These forward-looking statements speak only at the date of the report. The Corporation expressly disclaims any obligation to publicly release any updates or revisions to reflect any change in the Corporation’s expectations with regard to any change in events, conditions or circumstances on which any such statement is based.

Critical Accounting Policies

Management, in order to prepare the Corporation’s financial statements in conformity with U.S. generally accepted accounting principles, is required to make estimates and assumptions that affect the amounts reported in the Corporation’s financial statements. There are uncertainties inherent in making these estimates and assumptions. Certain critical accounting policies could materially affect the results of operations and financial condition of the Corporation should changes in circumstances require a change in related estimates or assumptions. The Corporation has identified the fair value measurement of investment securities available-for-sale and the calculation of the allowance for credit losses on loans and leases as critical accounting policies. For more information on these critical accounting policies, please refer to the Corporation’s 2022 Annual Report on Form 10-K.

General

The Corporation is a Pennsylvania corporation, organized in 1973, and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956. The Corporation owns all of the capital stock of Univest Bank and Trust Co. The consolidated financial statements include the accounts of the Corporation, the Bank and its subsidiaries.

The Bank is engaged in domestic banking services for individuals, businesses, municipalities and non-profit organizations. Through its wholly-owned subsidiaries, the Bank provides a variety of financial services throughout its markets of operation. The Bank is the parent company of Girard Investment Services, LLC, a full-service registered introducing broker-dealer and a licensed insurance agency, Girard Advisory Services, LLC, a registered investment advisory firm and Girard Pension Services, LLC, a registered investment advisor, which provides investment consulting and management services to municipal entities. The Bank is also the parent company of Univest Insurance, LLC, an independent insurance agency, and Univest Capital, Inc., an equipment financing business.

The Corporation earns revenue primarily from the margins and fees generated from lending and depository services as well as fee-based income from trust, insurance, mortgage banking and investment services. The Corporation seeks to achieve adequate and reliable earnings through business growth while maintaining adequate levels of capital and liquidity and limiting exposure to credit and interest rate risk.

Executive Overview

The Corporation’s consolidated net income, earnings per share and return on average assets and average equity were as follows:
Three Months Ended Nine Months Ended
  September 30, Change September 30, Change
(Dollars in thousands, except per share data) 2023 2022 Amount Percent 2023 2022 Amount Percent
Net income $ 17,016  $ 20,801  $ (3,785) (18.2) % $ 54,850  $ 54,284  $ 566  1.0  %
Net income per share:
Basic $ 0.58  $ 0.71  $ (0.13) (18.3) $ 1.86  $ 1.85  $ 0.01  0.5 
Diluted 0.58  0.71  (0.13) (18.3) 1.86  1.84  0.02  1.1 
Return on average assets 0.88  % 1.21  % (33 BP) (27.3) 0.98  % 1.05  % (7 BP) (6.7)
Return on average equity 8.32  % 10.67  % (235 BP) (22.0) 9.14  % 9.39  % (25 BP) (2.7)

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Results of Operations

Net Interest Income

Net interest income is the difference between interest earned primarily on loans, leases and investment securities and interest paid on deposits, borrowings, long-term debt and subordinated notes. Net interest income is the principal source of the Corporation’s revenue. Table 1 presents the Corporation’s average balances, tax-equivalent interest income, interest expense, tax-equivalent yields earned on average assets, cost of average liabilities, and shareholders' equity on a tax-equivalent basis for the three and nine months ended September 30, 2023 and 2022. The tax-equivalent net interest margin is tax-equivalent net interest income as a percentage of average interest-earning assets. The tax-equivalent net interest spread represents the weighted average tax-equivalent yield on interest-earning assets less the weighted average cost of interest-bearing liabilities. The effect of net interest-free funding sources represents the effect on the net interest margin of net funding provided by noninterest-earning assets, noninterest-bearing liabilities and shareholders' equity. Table 2 analyzes the changes in the tax-equivalent net interest income for the periods broken down by their rate and volume components.

Three and nine months ended September 30, 2023 versus 2022

Net interest income on a tax-equivalent basis for the three months ended September 30, 2023 was $53.9 million, a decrease of $4.9 million, or 8.3%, compared to $58.7 million for the three months ended September 30, 2022. The decrease in tax-equivalent net interest income for the three months ended September 30, 2023 compared to the comparable period in the prior year was largely due to increases in the cost of funds and the average balance of interest-bearing liabilities, partially offset by increases in the yield and average balance of interest-earning assets. The increase in the yield on interest-earning assets and the cost of funds was primarily driven by the increase in market interest rates. The increase in the cost of funds also reflected a higher proportion of deposits in higher-costing certificates of deposit and money market savings accounts.

Net interest income on a tax-equivalent basis for the nine months ended September 30, 2023 was $168.2 million, an increase of $10.3 million, or 6.5%, compared to $157.9 million for the nine months ended September 30, 2022. The increase in tax-equivalent net interest income for the nine months ended September 30, 2023 compared to the comparable period in the prior year was largely due to an increase in average loan balances and asset yields, offset by increases in the average balance of interest bearing liabilities and the cost of funds. The increase in the yield on interest-earning assets and the cost of funds was primarily driven by the increase in market interest rates. The increase in the cost of funds also reflected a higher proportion of deposits in higher-costing certificates of deposit and money market savings accounts.

The net interest margin, on a tax-equivalent basis, was 2.96% and 3.22% for the three and nine months ended September 30, 2023, respectively, compared to 3.67% and 3.25% for the three and nine months ended September 30, 2022, respectively. Excess liquidity reduced net interest margin by approximately four and one basis points for the three and nine months ended September 30, 2023, respectively, and approximately one and 20 basis points for the three and nine months ended September 30, 2022, respectively.
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Table 1—Average Balances and Interest Rates—Tax-Equivalent Basis
  Three Months Ended September 30,
  2023 2022
(Dollars in thousands) Average
Balance		 Income/
Expense		 Average
Rate		 Average
Balance		 Income/
Expense		 Average
Rate
Assets:
Interest-earning deposits with other banks $ 143,109  $ 1,865  5.17  % $ 49,476  $ 252  2.02  %
U.S. government obligations —  —  —  565  3  2.11 
Obligations of states and political subdivisions* 2,281  16  2.78  2,308  18  3.09 
Other debt and equity securities 504,060  3,540  2.79  514,462  3,010  2.32 
Federal Home Loan Bank, Federal Reserve Bank and other stock 40,406  712  6.99  28,368  435  6.08 
Total interest-earning deposits, investments and other interest-earning assets 689,856  6,133  3.53  595,179  3,718  2.48 
Commercial, financial and agricultural loans 995,355  17,545  6.99  981,303  12,036  4.87 
Real estate—commercial and construction loans 3,552,709  49,548  5.53  3,105,821  34,100  4.36 
Real estate—residential loans 1,543,360  18,270  4.70  1,256,509  12,492  3.94 
Loans to individuals 26,538  525  7.85  27,197  381  5.56 
Municipal loans and leases* 234,685  2,430  4.11  235,433  2,432  4.10 
Lease financings 184,522  2,928  6.30  145,856  2,195  5.97 
Gross loans and leases 6,537,169  91,246  5.54  5,752,119  63,636  4.39 
Total interest-earning assets 7,227,025  97,379  5.35  6,347,298  67,354  4.21 
Cash and due from banks 62,673  62,930 
Allowance for credit losses, loans and leases (83,827) (72,355)
Premises and equipment, net 52,071  50,476 
Operating lease right-of-use assets 31,647  30,740 
Other assets 404,394  378,377 
Total assets $ 7,693,983  $ 6,797,466 
Liabilities:
Interest-bearing checking deposits $ 1,070,063  $ 6,703  2.49  % $ 881,395  $ 1,251  0.56  %
Money market savings 1,645,210  17,850  4.30  1,246,795  3,709  1.18 
Regular savings 828,672  861  0.41  1,086,191  302  0.11 
Time deposits 1,140,622  11,668  4.06  416,539  1,189  1.13 
     Total time and interest-bearing deposits 4,684,567  37,082  3.14  3,630,920  6,451  0.70 
Short-term borrowings 93,028  1,117  4.76  104,453  524  1.99 
Long-term debt 320,000  3,036  3.76  95,000  324  1.35 
Subordinated notes 148,568  2,281  6.09  99,065  1,328  5.32 
Total borrowings 561,596  6,434  4.55  298,518  2,176  2.89 
Total interest-bearing liabilities 5,246,163  43,516  3.29  3,929,438  8,627  0.87 
Noninterest-bearing deposits 1,538,143  2,014,371 
Operating lease liabilities 34,788  33,786 
Accrued expenses and other liabilities 63,374  46,772 
Total liabilities 6,882,468  6,024,367 
Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds") 6,784,306  2.54  5,943,809  0.58 
Shareholders’ Equity:
Common stock 157,784  157,784 
Additional paid-in capital 299,575  299,135 
Retained earnings and other equity 354,156  316,180 
Total shareholders’ equity 811,515  773,099 
Total liabilities and shareholders’ equity $ 7,693,983  $ 6,797,466 
Net interest income $ 53,863  $ 58,727 
Net interest spread 2.06  3.34 
Effect of net interest-free funding sources 0.90  0.33 
Net interest margin 2.96  % 3.67  %
Ratio of average interest-earning assets to average interest-bearing liabilities 137.76  % 161.53  %
*Obligations of states and political subdivisions and municipal loans and leases are tax-exempt earning assets.
Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Net interest income includes net deferred costs amortization of $563 thousand and $498 thousand for the three months ended September 30, 2023 and 2022, respectively.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the three months ended September 30, 2023 and 2022 have been calculated using the Corporation's federal applicable rate of 21%.
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  Nine Months Ended September 30,
  2023 2022
(Dollars in thousands) Average
Balance		 Income/
Expense		 Average
Rate		 Average
Balance		 Income/
Expense		 Average
Rate
Assets:
Interest-earning deposits with other banks $ 79,630  $ 2,856  4.80  % $ 416,466  $ 1,433  0.46  %
U.S. government obligations —  —  —  2,578  40  2.07 
Obligations of states and political subdivisions* 2,284  48  2.81  2,314  54  3.12 
Other debt and equity securities 511,420  10,547  2.76  513,491  8,076  2.10 
Federal Home Loan Bank, Federal Reserve Bank and other stock 39,664  2,102  7.09  27,239  1,134  5.57 
Total interest-earning deposits, investments and other interest-earning assets 632,998  15,553  3.29  962,088  10,737  1.49 
Commercial, financial and agricultural loans 997,590  50,002  6.70  949,141  29,390  4.14 
Real estate—commercial and construction loans 3,447,551  137,929  5.35  3,005,714  88,447  3.93 
Real estate—residential loans 1,478,871  51,216  4.63  1,180,202  33,132  3.75 
Loans to individuals 26,859  1,453  7.23  26,598  924  4.64 
Municipal loans and leases* 233,211  7,159  4.10  237,928  7,270  4.09 
Lease financings 175,416  8,128  6.20  141,041  6,375  6.04 
Gross loans and leases 6,359,498  255,887  5.38  5,540,624  165,538  3.99 
Total interest-earning assets 6,992,496  271,440  5.19  6,502,712  176,275  3.62 
Cash and due from banks 59,811  57,455 
Allowance for credit losses, loans and leases (81,829) (70,950)
Premises and equipment, net 52,067  51,551 
Operating lease right-of-use assets 31,384  30,453 
Other assets 399,141  363,810 
Total assets $ 7,453,070  $ 6,935,031 
Liabilities:
Interest-bearing checking deposits $ 980,725  $ 15,259  2.08  % $ 871,393  $ 2,264  0.35  %
Money market savings 1,532,318  43,020  3.75  1,397,220  6,165  0.59 
Regular savings 900,448  2,375  0.35  1,059,644  777  0.10 
Time deposits 845,635  22,231  3.51  447,497  3,722  1.11 
     Total time and interest-bearing deposits 4,259,126  82,885  2.60  3,775,754  12,928  0.46 
Short-term borrowings 195,606  7,094  4.85  46,765  537  1.54 
Long-term debt 245,366  6,438  3.51  95,000  962  1.35 
Subordinated notes 148,444  6,844  6.16  98,989  3,984  5.38 
Total borrowings 589,416  20,376  4.62  240,754  5,483  3.04 
Total interest-bearing liabilities 4,848,542  103,261  2.85  4,016,508  18,411  0.61 
Noninterest-bearing deposits 1,709,533  2,067,428 
Operating lease liabilities 34,548  33,514 
Accrued expenses and other liabilities 57,906  44,630 
Total liabilities 6,650,529  6,162,080 
Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds") 6,558,075  2.11  6,083,936  0.40 
Shareholders’ Equity:
Common stock 157,784  157,784 
Additional paid-in capital 299,550  298,784 
Retained earnings and other equity 345,207  316,383 
Total shareholders’ equity 802,541  772,951 
Total liabilities and shareholders’ equity $ 7,453,070  $ 6,935,031 
Net interest income $ 168,179  $ 157,864 
Net interest spread 2.34  3.01 
Effect of net interest-free funding sources 0.88  0.24 
Net interest margin 3.22  % 3.25  %
Ratio of average interest-earning assets to average interest-bearing liabilities 144.22  % 161.90  %
*Obligations of states and political subdivisions and municipal loans and leases are tax-exempt earning assets.
Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.
Net interest income includes net deferred costs amortization of $1.7 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively.
Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the nine months ended September 30, 2023 and 2022 have been calculated using the Corporation's federal applicable rate of 21%.
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Table 2—Analysis of Changes in Net Interest Income

The rate-volume variance analysis set forth in the table below compares changes in tax-equivalent net interest income for the periods indicated by their rate and volume components. The change in interest income/expense due to both volume and rate has been allocated proportionately.
Three Months Ended Nine Months Ended
  September 30, 2023 Versus 2022 September 30, 2023 Versus 2022
(Dollars in thousands) Volume
Change		 Rate
Change		 Total Volume
Change		 Rate
Change		 Total
Interest income:
Interest-earning deposits with other banks $ 884  $ 729  $ 1,613  $ (2,023) $ 3,446  $ 1,423 
U.S. government obligations (3) —  (3) (40) —  (40)
Obligations of states and political subdivisions —  (2) (2) (1) (5) (6)
Other debt and equity securities (63) 593  530  (33) 2,504  2,471 
Federal Home Loan Bank, Federal Reserve Bank and other stock 205  72  277  606  362  968 
Interest on deposits, investments and other earning assets 1,023  1,392  2,415  (1,491) 6,307  4,816 
Commercial, financial and agricultural loans 175  5,334  5,509  1,572  19,040  20,612 
Real estate—commercial and construction loans 5,392  10,056  15,448  14,309  35,173  49,482 
Real estate—residential loans 3,132  2,646  5,778  9,383  8,701  18,084 
Loans to individuals (9) 153  144  9  520  529 
Municipal loans and leases (8) 6  (2) (131) 20  (111)
Lease financings 607  126  733  1,581  172  1,753 
Interest and fees on loans and leases 9,289  18,321  27,610  26,723  63,626  90,349 
Total interest income 10,312  19,713  30,025  25,232  69,933  95,165 
Interest expense:
Interest-bearing checking deposits 318  5,134  5,452  321  12,674  12,995 
Money market savings 1,525  12,616  14,141  653  36,202  36,855 
Regular savings (86) 645  559  (134) 1,732  1,598 
Time deposits 4,205  6,274  10,479  5,395  13,114  18,509 
     Total time and interest-bearing deposits 5,962  24,669  30,631  6,235  63,722  69,957 
Short-term borrowings (63) 656  593  3,913  2,644  6,557 
Long-term debt 1,547  1,165  2,712  2,723  2,753  5,476 
Subordinated notes 739  214  953  2,217  643  2,860 
Interest on borrowings 2,223  2,035  4,258  8,853  6,040  14,893 
Total interest expense 8,185  26,704  34,889  15,088  69,762  84,850 
Net interest income $ 2,127  $ (6,991) $ (4,864) $ 10,144  $ 171  $ 10,315 

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Provision for Credit Losses

The provision for credit losses for the three months ended September 30, 2023 and 2022 was $2.0 million and $3.6 million, respectively. The provision for credit losses for the nine months ended September 30, 2023 and 2022 was $8.8 million and $6.8 million, respectively. The following table details information pertaining to the Corporation’s allowance for credit losses on loans and leases as a percentage of loans and leases held for investment at the dates indicated.

(Dollars in thousands) September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022
Allowance for credit losses, loans and leases $ 83,837  $ 82,709  $ 80,034  $ 79,004  $ 74,929  $ 72,011 
Loans and leases held for investment 6,574,958  6,462,238  6,239,804  6,123,230  5,849,259  5,661,777 
Allowance for credit losses, loans and leases / loans and leases held for investment 1.28  % 1.28  % 1.28  % 1.29  % 1.28  % 1.27  %

Noninterest Income

The following table presents noninterest income for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended Nine Months Ended
  September 30, Change September 30, Change
(Dollars in thousands) 2023 2022 Amount Percent 2023 2022 Amount Percent
Trust fee income $ 1,910  $ 1,835  $ 75  4.1  % $ 5,789  $ 5,935  $ (146) (2.5  %)
Service charges on deposit accounts 1,816  1,522  294  19.3  5,088  4,600  488  10.6 
Investment advisory commission and fee income 4,843  4,199  644  15.3  14,303  14,163  140  1.0 
Insurance commission and fee income 4,852  4,442  410  9.2  16,447  14,641  1,806  12.3 
Other service fee income 3,020  3,124  (104) (3.3) 9,414  9,189  225  2.4 
Bank owned life insurance income 806  1,153  (347) (30.1) 2,362  2,557  (195) (7.6)
Net gain on sales of investment securities —  —  —  N/A —  30  (30) N/M
Net gain on mortgage banking activities 1,216  817  399  48.8  2,880  3,976  (1,096) (27.6)
Other income 228  867  (639) (73.7) 1,921  2,336  (415) (17.8)
Total noninterest income $ 18,691  $ 17,959  $ 732  4.1  % $ 58,204  $ 57,427  $ 777  1.4  %

Three and nine months ended September 30, 2023 versus 2022

Noninterest income for the three months ended September 30, 2023 was $18.7 million, an increase of $732 thousand, or 4.1%, from the three months ended September 30, 2022. Noninterest income for the nine months ended September 30, 2023 was $58.2 million, an increase of $777 thousand, or 1.4%, from the nine months ended September 30, 2022.

Investment advisory commission and fee income increased $644 thousand, or 15.3%, for the three months ended September 30, 2023 from the comparable period in the prior year primarily due to new customer relationships and appreciation of assets under management, as a majority of investment advisory fees are billed based on the prior quarter-end assets under management.

Insurance commission and fee income increased $410 thousand, or 9.2%, for the three months ended September 30, 2023 and $1.8 million, or 12.3%, for the nine months ended September 30, 2023 from the comparable periods in the prior year. The increases were primarily due to increased revenue from commercial lines. In addition, the increase for the nine months ended September 30, 2023 included an increase in contingent commission income of $592 thousand, which was $1.9 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively. Contingent income is largely recognized in the first quarter of the year.

Net gain on mortgage banking activities increased $399 thousand, or 48.8%, for the three months ended September 30, 2023 and decreased $1.1 million, or 27.6%, for the nine months ended September 30, 2023 from the comparable periods in the prior year. The increase for the three months ended September 30, 2023 was due to increased volume, and the decrease for the nine months ended September 30, 2023 was due to a decrease in loan sales and a contraction of margins due to the higher interest rate environment in 2023.
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Bank owned life insurance decreased $347 thousand, or 30.1%, for the three months ended September 30, 2023 and $195 thousand, or 7.6%, for the nine months ended September 30, 2023 from the comparable periods in the prior year, primarily due to a death benefit claim of $446 thousand received in the third quarter of 2022.

Other income decreased $639 thousand, or 73.7%, for the three months ended September 30, 2023 and $415 thousand, or 17.8%, for the nine months ended September 30, 2023 from the comparable periods in the prior year primarily due to a $412 thousand and $230 thousand decrease in the gain on sale of Small Business Administration loans for the respective periods due to less activity.

Noninterest Expense

The following table presents noninterest expense for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended Nine Months Ended
  September 30, Change September 30, Change
(Dollars in thousands) 2023 2022 Amount Percent 2023 2022 Amount Percent
Salaries, benefits and commissions $ 29,978  $ 29,400  $ 578  2.0  % $ 90,867  $ 86,778  $ 4,089  4.7  %
Net occupancy 2,594  2,504  90  3.6  7,935  7,642  293  3.8 
Equipment 1,087  968  119  12.3  3,066  2,927  139  4.7 
Data processing 4,189  3,901  288  7.4  12,355  11,176  1,179  10.5 
Professional fees 1,763  2,521  (758) (30.1) 5,373  7,503  (2,130) (28.4)
Marketing and advertising 555  605  (50) (8.3) 1,548  1,723  (175) (10.2)
Deposit insurance premiums 1,258  662  596  90.0  3,475  2,367  1,108  46.8
Intangible expenses 220  309  (89) (28.8) 726  992  (266) (26.8)
Restructuring charges —  —  —  N/A 1,330  —  1,330  N/M
Other expense 7,344  5,795  1,549  26.7  21,641  18,340  3,301  18.0 
Total noninterest expense $ 48,988  $ 46,665  $ 2,323  5.0  % $ 148,316  $ 139,448  $ 8,868  6.4  %
Three and nine months ended September 30, 2023 versus 2022

Noninterest expense for the three months ended September 30, 2023 was $49.0 million, an increase of $2.3 million, or 5.0%, from the three months ended September 30, 2022. Noninterest expense for the nine months ended September 30, 2023 was $148.3 million, an increase of $8.9 million, or 6.4%, from the nine months ended September 30, 2022.

Salaries, benefits and commissions increased $578 thousand, or 2.0%, for the three months ended September 30, 2023 and $4.1 million, or 4.7%, for the nine months ended September 30, 2023 from the comparable periods in the prior year. These increases reflect our expansion into Maryland and Western Pennsylvania and annual merit increases, increases in medical claims and decreases in compensation capitalized driven by lower loan production, offset by decreases due to the staff reduction that was announced during the second quarter, and a reduction in incentive compensation due to decreased profitability.

Deposit insurance premiums increased $596 thousand, or 90.0%, for the three months ended September 30, 2023 and $1.1 million, or 46.8%, for the nine months ended September 30, 2023 from the comparable periods in the prior year, primarily driven by an increased industry-wide assessment rate and an increase in our assessment base.

Restructuring charges increased $1.3 million for the nine months ended September 30, 2023 as a result of the Corporation's financial service center optimization and expense management strategies deployed during the second quarter of 2023 in response to macroeconomic headwinds.

Other expense increased $1.5 million, or 26.7%, for the three months ended September 30, 2023 and $3.3 million, or 18.0%, for the nine months ended September 30, 2023 from the comparable periods in the prior year, primarily due to increases in retirement plan costs of $527 thousand and $1.2 million, respectively. Other increases included $324 thousand and $769 thousand of loan processing and workout fees for the three and nine months ended September 30, 2023, respectively.
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Federal Home Loan Bank letter of credit fees increased by $138 thousand and $244 thousand for the three and nine months ended September 30, 2023, respectively, due to increases in public fund deposits and related collateral costs.

Professional fees decreased $758 thousand, or 30.1%, and $2.1 million, or 28.4%, for the three and nine months ended September 30, 2023 primarily due to consultant fees incurred in the second quarter of 2022 related to our digital transformation initiative.

Tax Provision

The Corporation recognized a tax expense of $4.3 million and $5.2 million for the three months ended September 30, 2023 and 2022, respectively, resulting in an effective rate of 20.0% for both periods. The Corporation recognized a tax expense of $13.4 million and $13.3 million for the nine months ended September 30, 2023 and 2022, respectively, resulting in an effective rate of 19.7% for both periods. The effective tax rates for the three and nine months ended September 30, 2023 and 2022 reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases. Additionally, the effective tax rate for the nine months ended September 30, 2022 was favorably impacted by discrete tax benefits and proceeds from BOLI death benefits.

Financial Condition

Assets

The following table presents assets at the dates indicated:
  At September 30, 2023 At December 31, 2022 Change
(Dollars in thousands) Amount Percent
Cash, interest-earning deposits and federal funds sold $ 290,341  $ 152,799  $ 137,542  90.0  %
Investment securities 488,043  507,562  (19,519) (3.8)
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost 42,417  33,841  8,576  25.3 
Loans held for sale 16,473  5,037  11,436  227.0 
Loans and leases held for investment 6,574,958  6,123,230  451,728  7.4 
Allowance for credit losses, loans and leases (83,837) (79,004) (4,833) 6.1 
Premises and equipment, net 51,287  50,939  348  0.7 
Operating lease right-of-use assets 31,053  30,059  994  3.3 
Goodwill and other intangibles, net 186,589  186,894  (305) (0.2)
Bank owned life insurance 130,522  120,297  10,225  8.5 
Accrued interest receivable and other assets 100,220  90,362  9,858  10.9 
        Total assets $ 7,828,066  $ 7,222,016  $ 606,050  8.4  %
Cash and Interest-Earning Deposits

Cash and interest-earning deposits increased $137.5 million, or 90.0%, from December 31, 2022, primarily due to increased interest earning deposits at the Federal Reserve Bank of $151.6 million due to increased long-term debt and deposit growth outpacing loan funding, offset by decreased borrowings.

Investment Securities

Total investment securities at September 30, 2023 decreased $19.5 million, or 3.8%, from December 31, 2022. Maturities and pay-downs of $34.8 million, net amortization of purchased premiums and discounts of $907 thousand, calls of $500 thousand, a provision for credit losses of $397 thousand, sales of $252 thousand and and decreases in the fair value of available-for-sale investment securities of $10.0 million, which were partially offset by purchases of $27.4 million, which were primarily residential mortgage-backed securities.

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Loans and Leases Held for Sale

Gross loans and leases held for sale increased $11.4 million, or 227.0%, from December 31, 2022. During the third quarter of 2023, a $5.8 million nonperforming construction loan was transferred to held for sale and was sold on October 16, 2023.

Loans and Leases

Gross loans and leases held for investment increased $451.7 million, or 7.4%, from December 31, 2022. The growth in gross loans and leases held for investment was primarily due to increases in commercial real estate, construction, residential mortgage loans and lease financings.

Asset Quality

The Bank's strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans and leases. Performance of the loan and lease portfolio is monitored on a regular basis by Bank management and lending officers.

Nonaccrual loans and leases are loans or leases for which it is probable that not all principal and interest payments due will be collectible in accordance with the original contractual terms. Factors considered by management in determining accrual status include payment status, borrower cash flows, collateral value and the probability of collecting scheduled principal and interest payments when due.

At September 30, 2023, nonaccrual loans and leases were $18.1 million and had a related allowance for credit losses on loans and leases of $834 thousand. At December 31, 2022, nonaccrual loans and leases were $13.4 million and had a related allowance for credit losses on loans and leases of $2.8 million. During the second quarter of 2023, a $5.8 million construction loan was placed on nonaccrual status and a $2.5 million nonaccrual commercial loan was paid off, with a related allowance of $448 thousand. Based on the value of the underlying collateral, an individual reserve was not recorded for the $5.8 million construction loan as of June 30, 2023. Subsequently, during the third quarter of 2023, the loan was transferred to held for sale and was sold on October 16, 2023. Individual reserves have been established based on current facts and management's judgements about the ultimate outcome of these credits, including the most recent known data available on any related underlying collateral and the borrower's cash flows. The amount of individual reserve needed for these credits could change in future periods subject to changes in facts and judgements related to these credits.

Net loan and lease charge-offs for the three months ended September 30, 2023 were $969 thousand compared to $1.2 million for the same period in the prior year. Net loan and lease charge-offs for the nine months ended September 30, 2023 were $4.3 million compared to $3.0 million for the same period in the prior year. The increase in charge-offs for the nine months ended September 30, 2023 was primarily due to $2.4 million of charge-offs recorded against two existing nonaccrual commercial loans to one borrower in the first quarter of 2023. As of December 31, 2022, the allowance for credit losses included a $2.1 million individual reserve for this relationship.

Other real estate owned ("OREO") was $19.9 million at September 30, 2023 compared to $19.3 million at December 31, 2022, primarily due to capitalized improvements on an existing OREO property and the transfer of a residential real estate property with a carrying value of $79 thousand.

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Table 3—Nonaccrual and Past Due Loans and Leases; Other Real Estate Owned; and Related Ratios

The following table details information pertaining to the Corporation’s nonperforming assets at the dates indicated.
(Dollars in thousands) At September 30, 2023 At December 31, 2022
Nonaccrual loans held for sale $ 5,819  $ — 
Nonaccrual loans and leases held for investment 12,266  13,353 
Accruing loans and leases, 90 days or more past due 2,135  875 
Total nonperforming loans and leases $ 20,220  $ 14,228 
Other real estate owned 19,916  19,258 
Total nonperforming assets $ 40,136  $ 33,486 
Loans and leases held for investment $ 6,574,958  $ 6,123,230 
Allowance for credit losses, loans and leases 83,837  79,004 
Allowance for credit losses, loans and leases / loans and leases held for investment 1.28  % 1.29  %
Nonaccrual loans and leases / loans and leases held for investment 0.28  % 0.22  %
Allowance for credit losses, loans and leases / nonaccrual loans and leases 463.57  % 591.66  %

The following table provides additional information on the Corporation’s nonaccrual loans held for investment:
(Dollars in thousands) At September 30, 2023 At December 31, 2022
Nonaccrual loans and leases, held for investment $ 12,266  $ 13,353 
Nonaccrual loans and leases with partial charge-offs 702  928 
Life-to-date partial charge-offs on nonaccrual loans and leases 519  448 
Reserves on individually analyzed loans 834  2,765 

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Table 4—Loan Portfolio Overview

The following table provides summarized detail related to outstanding commercial loan balances segmented by industry description as of September 30, 2023:
(Dollars in thousands) September 30, 2023
Industry Description Total Outstanding Balance % of Commercial Loan Portfolio
CRE - Retail $ 466,862  8.9  %
Animal Production 359,814  6.8 
CRE - Multi-family 304,289  5.8 
CRE - Office 301,949  5.7 
CRE - 1-4 Family Residential Investment 282,333  5.4 
CRE - Industrial / Warehouse 244,107  4.6 
Hotels & Motels (Accommodation) 190,698  3.6 
Nursing and Residential Care Facilities 173,781  3.3 
Specialty Trade Contractors 164,837  3.1 
Education 157,875  3.0 
Homebuilding (tract developers, remodelers) 153,490  2.9 
Motor Vehicle and Parts Dealers 134,118  2.5 
Merchant Wholesalers, Durable Goods 125,105  2.4 
CRE - Mixed-Use - Residential 109,187  2.1 
Crop Production 101,973  1.9 
Repair and Maintenance 94,011  1.8 
Private Equity & Special Purpose Entities (except 52592) 86,549  1.6 
Administrative and Support Services 86,053  1.6 
Rental and Leasing Services 82,213  1.6 
Wood Product Manufacturing 81,813  1.6 
Real Estate Lenders, Secondary Market Financing 79,310  1.5 
CRE - Mixed-Use - Commercial 75,797  1.4 
Religious Organizations, Advocacy Groups 73,665  1.4 
Fabricated Metal Product Manufacturing 71,827  1.4 
Personal and Laundry Services 71,060  1.3 
Amusement, Gambling, and Recreation Industries 70,759  1.3 
Merchant Wholesalers, Nondurable Goods 69,919  1.3 
Miniwarehouse / Self-Storage 65,069  1.2 
Food Services and Drinking Places 63,662  1.2 
Food Manufacturing 59,897  1.1 
Truck Transportation 55,250  1.0 
Industries with >$50 million in outstandings $ 4,457,272  84.6  %
Industries with <$50 million in outstandings $ 811,904  15.4  %
Total Commercial Loans $ 5,269,176  100.0  %
Consumer Loans and Lease Financings Total Outstanding Balance
Real Estate-Residential Secured for Personal Purpose $ 861,122 
Real Estate-Home Equity Secured for Personal Purpose 176,855 
Loans to Individuals 27,331 
Lease Financings 240,474 
Total Consumer Loans and Lease Financings $ 1,305,782 
Total $ 6,574,958 

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Goodwill and Other Intangible Assets

Goodwill and other intangible assets have been recorded on the books of the Corporation in connection with acquisitions. The Corporation has core deposit and customer-related intangibles, which are not deemed to have an indefinite life and therefore will continue to be amortized over their useful life using the present value of projected cash flows. The amortization of core deposit and customer-related intangibles was $229 thousand and $274 thousand for the three months ended September 30, 2023 and 2022, respectively. The amortization of core deposit and customer-related intangibles was $458 thousand and $888 thousand for the nine months ended September 30, 2023 and 2022, respectively. See Note 5 to the Condensed Unaudited Consolidated Financial Statements, "Goodwill and Other Intangible Assets," for a summary of intangible assets at September 30, 2023 and December 31, 2022.

The Corporation also has goodwill with a net carrying value of $175.5 million at September 30, 2023 and December 31, 2022, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation completes a goodwill impairment analysis on an annual basis, or more often if events and circumstances indicate that there may be impairment. The Corporation also completes an impairment test for other identifiable intangible assets on an annual basis or more often if events and circumstances indicate there may be impairment. There was no impairment of goodwill or identifiable intangibles during the nine months ended September 30, 2023 or 2022. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

Bank Owned Life Insurance

The Bank purchases bank owned life insurance to protect itself against the loss of key employees due to death and to offset or finance the Corporation's future costs and obligations to employees under its benefits plans. Bank owned life insurance increased $10.2 million, or 8.5%, from December 31, 2022, primarily due to $7.9 million of policies purchased during the first quarter of 2023.

Liabilities
The following table presents liabilities at the dates indicated:
(Dollars in thousands) At September 30, 2023 At December 31, 2022 Change
Amount Percent
Deposits $ 6,439,165  $ 5,913,526  $ 525,639  8.9  %
Short-term borrowings 14,676  197,141  (182,465) (92.6)
Long-term debt 320,000  95,000  225,000  236.8 
Subordinated notes 148,636  148,260  376  0.3 
Operating lease liabilities 34,017  33,153  864  2.6 
Accrued interest payable and other liabilities 64,374  58,436  5,938  10.2 
Total liabilities $ 7,020,868  $ 6,445,516  $ 575,352  8.9  %

Deposits

Total deposits increased $525.6 million, or 8.9%, from December 31, 2022, primarily due to increases in brokered deposits and seasonal public funds deposits partially offset by decreases in commercial and consumer deposits. At September 30, 2023, noninterest bearing deposits represented 22.2% of total deposits, down from 34.6% at December 31, 2022. At September 30, 2023, unprotected deposits, which excludes insured, internal, and collateralized deposit accounts, represented 20.8% of total deposits, down from 31.0% at December 31, 2022.

Borrowings

Total borrowings increased $42.9 million, or 9.7%, from December 31, 2022, due to increases of $225.0 million in long-term debt, partially offset by decreases of $125.0 million in short-term FHLB overnight borrowings and $60.0 million in federal funds purchased.

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Shareholders’ Equity

The following table presents total shareholders’ equity at the dates indicated:
(Dollars in thousands) At September 30, 2023 At December 31, 2022 Change
Amount Percent
Common stock $ 157,784  $ 157,784  $ —  —  %
Additional paid-in capital 300,171  300,808  (637) (0.2)
Retained earnings 464,634  428,637  35,997  8.4 
Accumulated other comprehensive loss (71,586) (62,104) (9,482) 15.3 
Treasury stock (43,805) (48,625) 4,820  (9.9)
Total shareholders’ equity $ 807,198  $ 776,500  $ 30,698  4.0  %

Total shareholders' equity increased $30.7 million, or 4.0%, from December 31, 2022. Retained earnings at September 30, 2023 increased by $36.0 million primarily due to net income of $54.9 million offset by $18.5 million in cash dividends paid for the nine months ended September 30, 2023. Accumulated other comprehensive loss increased by $9.5 million, primarily attributable to decreases in the fair value of available-for-sale investment securities of $7.9 million, net of tax and a decrease in the fair value of derivatives of $2.2 million, net of tax. Treasury stock decreased $4.8 million from December 31, 2022 primarily due to stock issued under the dividend reinvestment and employee stock purchase plans and stock-based incentive plan activity.

Discussion of Segments

The Corporation has three operating segments: Banking, Wealth Management and Insurance. Detailed segment information appears in Note 13, "Segment Reporting" included in the Notes to the Condensed Unaudited Consolidated Financial Statements under Item 1 of this Quarterly Report on Form 10-Q.

The Banking segment reported pre-tax income of $21.7 million and $26.2 million for the three months ended September 30, 2023 and 2022, respectively, and pre-tax income of $67.0 million and $64.8 million for the nine months ended September 30, 2023 and 2022, respectively. See the section of this Management's Discussion & Analysis under the headings "Results of Operations" and "Financial Condition" for a discussion of key items impacting the Banking Segment.

The Wealth Management segment reported noninterest income of $6.8 million and $6.1 million for the three months ended September 30, 2023 and 2022, respectively, and $20.2 million for the nine months ended September 30, 2023 and 2022. Noninterest expense was $5.1 million and $4.3 million for the three months ended September 30, 2023 and 2022, respectively, and $14.8 million and $13.4 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in noninterest income for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was due to new customer relationships and appreciation of assets under management and supervision as a majority of investment advisory fees are billed based on the prior quarter-end assets under management and supervision balance. Assets under management and supervision were $4.3 billion as of September 30, 2023, $4.5 billion as of June 30, 2023, $4.0 billion as of September 30, 2022 and $4.1 billion as of June 30, 2022. The increase in noninterest expense for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 was primarily driven by increases in salaries, benefits and commissions due to annual merit increases and additional staffing.

The Insurance segment reported noninterest income of $4.9 million and $4.6 million for the three months ended September 30, 2023 and 2022, respectively, and $16.8 million and $15.2 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in noninterest income for the three and nine months ended September 30, 2023 was primarily due to increased revenue from commercial lines. In addition, the increase for the nine months ended September 30, 2023 included an increase in contingent commission income of $592 thousand, which was $1.9 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively. Contingent income is largely recognized in the first quarter of the year.

Capital Adequacy

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum capital amounts and ratios as set forth in the following table. To comply with the regulatory definition of well capitalized, a depository institution must maintain minimum capital amounts and ratios as set forth in the following table.

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Under current rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier 1 capital above its minimum risk-based capital requirements in an amount greater than 2.50% of total risk-weighted assets. The Corporation's and Bank's intent is to maintain capital levels in excess of the capital conservation buffer, which requires Tier 1 Capital to Risk Weighted Assets to exceed 8.50% and Total Capital to Risk Weighted Assets to exceed 10.50%. The Corporation and the Bank were in compliance with these requirements at September 30, 2023.
Table 5—Regulatory Capital

The Corporation's and Bank's actual and required capital ratios as of September 30, 2023 and December 31, 2022 under regulatory capital rules were as follows.
  Actual For Capital Adequacy
Purposes		 To Be Well-Capitalized
Under Prompt
Corrective Action
Provisions
(Dollars in thousands) Amount Ratio Amount Ratio Amount   Ratio  
At September 30, 2023
Total Capital (to Risk-Weighted Assets):
Corporation $ 940,654  13.58  % $ 554,045  8.00  % $ 692,556  10.00  %
Bank 795,341  11.51  552,738  8.00  690,923  10.00 
Tier 1 Capital (to Risk-Weighted Assets):
Corporation 715,035  10.32  415,533  6.00  554,045  8.00 
Bank 718,358  10.40  414,554  6.00  552,738  8.00 
Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation 715,035  10.32  311,650  4.50  450,161  6.50 
Bank 718,358  10.40  310,915  4.50  449,100  6.50 
Tier 1 Capital (to Average Assets):
Corporation 715,035  9.43  303,270  4.00  379,087  5.00 
Bank 718,358  9.50  302,525  4.00  378,157  5.00 
At December 31, 2022
Total Capital (to Risk-Weighted Assets):
Corporation $ 894,343  13.67  % $ 523,498  8.00  % $ 654,372  10.00  %
Bank 740,936  11.35  522,370  8.00  652,962  10.00 
Tier 1 Capital (to Risk-Weighted Assets):
Corporation 678,403  10.37  392,623  6.00  523,498  8.00 
Bank 673,256  10.31  391,777  6.00  522,370  8.00 
Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation 678,403  10.37  294,467  4.50  425,342  6.50 
Bank 673,256  10.31  293,833  4.50  424,426  6.50 
Tier 1 Capital (to Average Assets):
Corporation 678,403  9.81  276,586  4.00  345,732  5.00 
Bank 673,256  9.76  276,014  4.00  345,017  5.00 
At September 30, 2023 and December 31, 2022, the Corporation and the Bank continued to meet all capital adequacy requirements to which they are subject. At September 30, 2023, the Bank was categorized as "well capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events since that management believes have changed the Bank’s category.

In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as of the beginning of the fiscal year in which CECL was adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts are calculated for the following items: retained earnings, temporary difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital.
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Additionally, in March 2020, the Office of the Comptroller of the Currency, the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation announced the 2020 CECL interim final rule (IFR) designed to allow eligible firms to better focus on supporting lending to creditworthy households and businesses in light of the then-recent strains on the U.S. economy as a result of the coronavirus (COVID-19). The 2020 CECL IFR allows corporations that adopt CECL before December 31, 2020 to defer 100 percent of the day-one transitional amounts described above through December 31, 2021 for regulatory capital purposes. Additionally, the 2020 CECL IFR allows electing firms to defer through December 31, 2021 the approximate portion of the post day-one allowance attributable to CECL relative to the incurred loss methodology. This is calculated by applying a 25% scaling factor to the CECL provision.
The Corporation adopted the transition guidance and the 2020 CECL IFR relief and applied these effects to regulatory capital.

Asset/Liability Management

The primary functions of Asset/Liability Management are to ensure adequate earnings, capital and liquidity while maintaining an appropriate balance between interest-earning assets and interest-bearing liabilities. Management's objective with regard to interest rate risk is to understand the Corporation's sensitivity to changes in interest rates and develop and implement strategies to minimize volatility while maximizing net interest income.

The Corporation uses gap analysis and earnings at risk simulation modeling to quantify exposure to interest rate risk. The Corporation uses the gap analysis to identify and monitor long-term rate exposure and uses a risk simulation model to measure short-term rate exposure. The Corporation runs various earnings simulation scenarios to quantify the impact of declining or rising interest rates on net interest income over a one-year and two-year horizon. The simulations use expected cash flows and repricing characteristics for all financial instruments at a point in time and incorporates company-developed, market-based assumptions regarding growth, pricing, and optionality such as prepayment speeds. As interest rates increase, fixed-rate assets tend to decrease in value; conversely, as interest rates decline, fixed-rate assets tend to increase in value.

Liquidity

The Corporation, in its role as a financial intermediary, is exposed to certain liquidity risks. Liquidity refers to the Corporation’s ability to ensure that sufficient cash flows and liquid assets are available to satisfy demand for loans, deposit withdrawals, repayment of borrowings, certificates of deposit at maturity, operating expenses and capital expenditures. The Corporation manages liquidity risk by measuring and monitoring liquidity sources and estimated funding needs on a daily basis. The Corporation has a contingency funding plan in place to address liquidity needs in the event of an institution-specific or a systemic financial crisis.

The Corporation and its subsidiaries maintain ample ability to meet the liquidity needs of its customers. Our most liquid asset, cash and cash equivalents, were $290.3 million at September 30, 2023. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $334.5 million at September 30, 2023. Further, the Corporation and its subsidiaries had committed borrowing capacity from the Federal Home Loan Bank and Federal Reserve Bank of $3.3 billion at September 30, 2023, of which $1.7 billion was available. The Corporation and its subsidiaries also maintained unused uncommitted funding sources from correspondent banks of $369.0 million at September 30, 2023. Future availability under these uncommitted funding sources is subject to the prerogatives of the granting banks and may be withdrawn at will.

Sources of Funds

Core deposits continue to be the largest significant funding source for the Corporation. These deposits are primarily generated from individuals, businesses, municipalities and non-profit customers located in our primary service areas. The Corporation faces increased competition for these deposits from a large array of financial market participants, including banks, credit unions, savings institutions, mutual funds, security dealers and others.

As part of its diversified funding strategy, the Corporation also utilizes a mix of short-term and long-term wholesale funding providers. Wholesale funding includes federal funds purchases from correspondent banks, secured borrowing lines from the Federal Home Loan Bank of Pittsburgh, the Federal Reserve Bank of Philadelphia and brokered deposits and other similar sources.

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Cash Requirements

The Corporation has cash requirements for various financial obligations, including contractual obligations and commitments that require cash payments. The most significant contractual obligations, in both the under and over one-year time period, are for the Bank to repay certificates of deposit and long-term borrowings. The Bank anticipates meeting these obligations by utilizing on-balance sheet liquidity and continuing to provide convenient depository and cash management services through its financial center network, thereby replacing these contractual obligations with similar funding sources at rates that are competitive in our market. The Bank will also use borrowings and brokered deposits to meet its obligations.

Commitments to extend credit are the Bank’s most significant commitment in both the under and over one-year time periods. These commitments do not necessarily represent future cash requirements in that these commitments often expire without being drawn upon.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, refer to Note 1 to the Condensed Consolidated Financial Statements, "Summary of Significant Accounting Policies."

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

No material changes in the Corporation’s market risk occurred during the period ended September 30, 2023. A detailed discussion of market risk is provided in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management is responsible for the disclosure controls and procedures of the Corporation. Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be so disclosed by an issuer is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in the Corporation's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended September 30, 2023 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II. OTHER INFORMATION
 
Item 1.    Legal Proceedings

The Corporation is periodically subject to various pending and threatened legal actions that involve claims for monetary relief. Based upon information presently available to the Corporation, it is the Corporation's opinion that any legal and financial responsibility arising from such claims will not have a material adverse effect on the Corporation's results of operations, financial position or cash flows.

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Item 1A. Risk Factors

There have been no material changes in risk factors applicable to the Corporation from those disclosed in "Risk Factors" in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022 and Item 1A of the Corporation's Quarterly Report of Form 10-Q for the quarter ended March 31, 2023.


Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on repurchases by the Corporation of its common stock under the Corporation's Board approved program.
ISSUER PURCHASES OF EQUITY SECURITIES
Period Total Number
of Shares
Purchased		 Average
Price Paid
per Share		 Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs		 Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
July 1 – 31, 2023 —  $ —  —  1,229,174 
August 1 – 31, 2023 —  —  —  1,229,174 
September 1 – 30, 2023 —  —  —  1,229,174 
Total —  $ —  — 

1.On May 27, 2015, the Corporation's Board of Directors approved the repurchase of 1,000,000 shares, or approximately 5% of the Corporation's common stock outstanding as of May 27, 2015. On October 26, 2022, the Corporation's Board of Directors approved the repurchase of 1,000,000 additional shares, or approximately 3.4% of the Corporation's common stock outstanding as of September 30, 2022. The stock repurchase plans do not include normal treasury activity such as purchases to fund the dividend reinvestment, employee stock purchase and equity compensation plans. The plans have no scheduled expiration date and the Board of Directors has the right to suspend or discontinue the plans at any time.

In addition to the repurchases disclosed above, participants in the Corporation's stock-based incentive plans may have shares withheld to cover income taxes upon the vesting of restricted stock awards and may use a stock swap to exercise stock options. Shares withheld to cover income taxes upon the vesting of restricted stock awards and stock swaps to exercise stock options are repurchased pursuant to the terms of the applicable plan and not under the Corporation's share repurchase program. Shares repurchased pursuant to these plans during the three months ended September 30, 2023 were as follows:

Period Total Number of Shares Purchased Average Price Paid per Share
July 1 – 31, 2023 —  $ — 
August 1 – 31, 2023 —  — 
September 1 – 30, 2023 —  — 
Total —  $ — 

Item 3.    Defaults Upon Senior Securities
None.

Item 4.    Mine Safety Disclosures
Not Applicable.

 Item 5.    Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended September 30, 2023, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Corporation's securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."
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Item 6.    Exhibits
 
a. Exhibits
Exhibit 3.1
Exhibit 3.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101
The following financial statements from the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Changes in Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Unaudited Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
Exhibit 104
The cover page from the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Univest Financial Corporation
(Registrant)
Date: November 1, 2023 /s/ Jeffrey M. Schweitzer
Jeffrey M. Schweitzer
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 1, 2023 /s/ Brian J. Richardson
Brian J. Richardson
Senior Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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EX-31.1 2 uvsp093023ex311.htm EX-31.1 Document


Exhibit 31.1
CERTIFICATION
I, Jeffrey M. Schweitzer, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q of Univest Financial Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Date: November 1, 2023
/s/ Jeffrey M. Schweitzer
Jeffrey M. Schweitzer
President and Chief Executive Officer
(Principal Executive Officer)


EX-31.2 3 uvsp093023ex312.htm EX-31.2 Document

Exhibit 31.2
CERTIFICATION
I, Brian J. Richardson, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q of Univest Financial Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Date: November 1, 2023
/s/ Brian J. Richardson
Brian J. Richardson
Senior Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


EX-32.1 4 uvsp093023ex321.htm EX-32.1 Document


Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Univest Financial Corporation on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Corporation.
A signed original of this written statement required by Section 906 has been provided to Univest Financial Corporation and will be retained by Univest Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Jeffrey M. Schweitzer
Jeffrey M. Schweitzer
President and Chief Executive Officer
(Principal Executive Officer)
November 1, 2023


EX-32.2 5 uvsp093023ex322.htm EX-32.2 Document


Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Univest Financial Corporation on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Corporation.
A signed original of this written statement required by Section 906 has been provided to Univest Financial Corporation and will be retained by Univest Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Brian J. Richardson
Brian J. Richardson
Senior Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
November 1, 2023