UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, ~~2017.~~2018.



¨	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 CORPORATION OF PENNSYLVANIA

(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)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨x	Accelerated filer	x¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	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 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 x

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		~~26,664,157~~29,403,651
(Title of Class)		(Number of shares outstanding at July 31, ~~2017)~~2018)

UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES

INDEX



			Page Number
Part I.	Financial Information:

	Item 1.	Financial Statements (Unaudited)

		Condensed Consolidated Balance Sheets at June 30, ~~2017~~2018 and December 31, ~~2016~~2017	2

		Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, ~~2017~~2018 and ~~2016~~2017	3

		Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, ~~2017~~2018 and ~~2016~~2017	4

		Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, ~~2017~~2018 and ~~2016~~2017	6

		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2017~~2018 and ~~2016~~2017	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4448

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5963

	Item 4.	Controls and Procedures	5963

Part II.	Other Information

	Item 1.	Legal Proceedings	6065

	Item 1A.	Risk Factors	6065

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6065

	Item 3.	Defaults Upon Senior Securities	6065

	Item 4.	Mine Safety Disclosures	6065

	Item 5.	Other Information	6065

	Item 6.	Exhibits	6166

Signatures			6267

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

UNIVEST CORPORATION OF PENNSYLVANIA

CONDENSED CONSOLIDATED BALANCE SHEETS


	(UNAUDITED)						(UNAUDITED)
(Dollars in thousands, except share data)	At June 30, 2017			At December 31, 2016			At June 30, 2018			At December 31, 2017
ASSETS
Cash and due from banks	$	48,821		$	48,757		$	54,409		$	46,721
Interest-earning deposits with other banks	12,236			9,068			18,534			28,688
Investment securities held-to-maturity (fair value $43,737 and $24,871 at June 30, 2017 and December 31, 2016, respectively)	43,717			24,881
Investment securities held-to-maturity (fair value $94,642 and $55,320 at June 30, 2018 and December 31, 2017, respectively)							96,457			55,564
Investment securities available-for-sale	425,590			443,637			347,804			391,457
Investments in equity securities							2,672			7,061
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	31,506			24,869			32,768			27,204
Loans held for sale	2,259			5,890			1,778			1,642
Loans and leases held for investment	3,510,170			3,285,886			3,818,398			3,620,067
Less: Reserve for loan and lease losses	(20,910		)	(17,499		)	(25,652		)	(21,555		)
Net loans and leases held for investment	3,489,260			3,268,387			3,792,746			3,598,512
Premises and equipment, net	65,581			63,638			60,529			61,797
Goodwill	172,559			172,559			172,559			172,559
Other intangibles, net of accumulated amortization and fair value adjustments of $19,743 and $17,597 at June 30, 2017 and December 31, 2016, respectively	15,235			16,651
Other intangibles, net of accumulated amortization and fair value adjustments of $23,613 and $21,825 at June 30, 2018 and December 31, 2017, respectively							12,809			13,909
Bank owned life insurance	99,437			99,948			109,527			108,246
Accrued interest receivable and other assets	47,326			52,243			46,589			41,502
Total assets	$	4,453,527		$	4,230,528		$	4,749,181		$	4,554,862
LIABILITIES
Noninterest-bearing deposits	$	963,790		$	918,337		$	1,055,479		$	1,040,026
Interest-bearing deposits:
Demand deposits	990,930			909,963			1,163,451			1,109,438
Savings deposits	846,522			803,078			807,461			830,706
Time deposits	546,838			626,189			594,395			574,749
Total deposits	3,348,080			3,257,567			3,620,786			3,554,919
Short-term borrowings	231,726			196,171			231,853			105,431
Long-term debt	216,610			127,522			155,556			155,828
Subordinated notes	94,209			94,087			94,453			94,331
Accrued interest payable and other liabilities	41,596			49,972			41,239			40,979
Total liabilities	3,932,221			3,725,319			4,143,887			3,951,488
SHAREHOLDERS’ EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at June 30, 2017 and December 31, 2016; 28,911,799 shares issued at June 30, 2017 and December 31, 2016; 26,667,991 and 26,589,353 shares outstanding at June 30, 2017 and December 31, 2016, respectively	144,559			144,559
Common stock, $5 par value: 48,000,000 shares authorized at June 30, 2018 and December 31, 2017; 31,556,799 shares issued at June 30, 2018 and December 31, 2017; 29,406,450 and 29,334,859 shares outstanding at June 30, 2018 and December 31, 2017, respectively							157,784			157,784
Additional paid-in capital	231,289			230,494			291,238			290,133
Retained earnings	206,498			194,516			226,574			216,761
Accumulated other comprehensive loss, net of tax benefit	(17,182		)	(19,454		)	(28,007		)	(17,771		)
Treasury stock, at cost; 2,243,808 and 2,322,446 shares at June 30, 2017 and December 31, 2016, respectively	(43,858		)	(44,906		)
Treasury stock, at cost; 2,150,349 and 2,221,940 shares at June 30, 2018 and December 31, 2017, respectively							(42,295		)	(43,533		)
Total shareholders’ equity	521,306			505,209			605,294			603,374
Total liabilities and shareholders’ equity	$	4,453,527		$	4,230,528		$	4,749,181		$	4,554,862

Note: See accompanying notes to the unaudited condensed consolidated financial statements.

UNIVEST CORPORATION OF PENNSYLVANIA

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands, except per share data)	2017		2016		2017		2016		2018			2017		2018			2017
Interest income
Interest and fees on loans and leases:
Taxable	$	35,102	$	22,311	$	68,802	$	44,161	$	40,637		$	35,102	$	78,587		$	68,802
Exempt from federal income taxes	2,084		1,774		4,119		3,490		2,421			2,084		4,768			4,119
Total interest and fees on loans and leases	37,186		24,085		72,921		47,651		43,058			37,186		83,355			72,921
Interest and dividends on investment securities:
Taxable	1,833		1,188		3,521		2,462		2,268			1,833		4,457			3,521
Exempt from federal income taxes	576		710		1,175		1,444		477			576		945			1,175
Interest on deposits with other banks	38		9		55		37		148			38		224			55
Interest and dividends on other earning assets	397		120		754		252		509			397		1,013			754
Total interest income	40,030		26,112		78,426		51,846		46,460			40,030		89,994			78,426
Interest expense
Interest on deposits	2,461		1,458		4,652		2,991		4,542			2,461		8,233			4,652
Interest on short-term borrowings	325		320		587		323		958			325		1,603			587
Interest on long-term debt and subordinated notes	1,944		673		3,604		1,348		1,970			1,944		3,896			3,604
Total interest expense	4,730		2,451		8,843		4,662		7,470			4,730		13,732			8,843
Net interest income	35,300		23,661		69,583		47,184		38,990			35,300		76,262			69,583
Provision for loan and lease losses	2,766		830		5,211		1,156		15,409			2,766		17,462			5,211
Net interest income after provision for loan and lease losses	32,534		22,831		64,372		46,028		23,581			32,534		58,800			64,372
Noninterest income
Trust fee income	2,016		1,997		3,923		3,862		2,044			2,016		4,040			3,923
Service charges on deposit accounts	1,313		1,056		2,556		2,054		1,335			1,313		2,662			2,556
Investment advisory commission and fee income	3,333		2,776		6,514		5,447		3,778			3,333		7,461			6,514
Insurance commission and fee income	3,628		3,503		8,038		8,061		3,712			3,628		8,600			8,038
Other service fee income	2,245		1,931		4,232		3,762		2,431			2,245		4,600			4,232
Bank owned life insurance income	1,622		535		2,405		1,005		1,210			1,622		1,879			2,405
Net gain on sales of investment securities	21		413		36		457		—			21		10			36
Net gain on mortgage banking activities	1,537		1,711		2,650		2,929		942			1,537		1,658			2,650
Other income	294		79		625		255
Other (loss) income									(138		)	294		(14		)	625
Total noninterest income	16,009		14,001		30,979		27,832		15,314			16,009		30,896			30,979
Noninterest expense
Salaries and benefits	16,353		14,080		33,010		28,262
Commissions	2,374		2,363		4,424		4,258
Salaries, benefits and commissions									20,065			18,730		40,712			37,467
Net occupancy	2,684		2,096		5,349		4,196		2,533			2,684		5,290			5,349
Equipment	1,031		750		2,024		1,526		1,067			1,031		2,090			2,024
Data processing	2,081		1,530		4,139		2,811		2,091			2,081		4,323			4,139
Professional fees	1,248		947		2,487		1,967		1,331			1,248		2,686			2,487
Marketing and advertising	475		513		854		1,051		526			475		907			854
Deposit insurance premiums	451		418		853		865		452			451		843			853
Intangible expenses	446		991		1,205		1,757		594			446		1,206			1,205
Acquisition-related costs	—		1,158		—		1,372
Integration costs	—		27		—		33
Restructuring charges									—			—		571			—
Other expense	5,405		4,673		10,233		8,387		5,688			5,402		10,844			10,200
Total noninterest expense	32,548		29,546		64,578		56,485		34,347			32,548		69,472			64,578
Income before income taxes	15,995		7,286		30,773		17,375		4,548			15,995		20,224			30,773
Income taxes	4,217		2,046		8,139		4,846
Income tax expense									191			4,217		3,017			8,139
Net income	$	11,778	$	5,240	$	22,634	$	12,529	$	4,357		$	11,778	$	17,207		$	22,634
Net income per share:
Basic	$	0.44	$	0.27	$	0.85	$	0.64	$	0.15		$	0.44	$	0.59		$	0.85
Diluted	0.44		0.27		0.85		0.64		0.15			0.44		0.58			0.85
Dividends declared	0.20		0.20		0.40		0.40		0.20			0.20		0.40			0.40

Note: See accompanying notes to the unaudited condensed consolidated financial statements.

UNIVEST CORPORATION OF PENNSYLVANIA

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,																		Three Months Ended June 30,
(Dollars in thousands)	2017									2016									2018									2017
	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount			Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount			Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount			Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Income	$	15,995		$	4,217		$	11,778		$	7,286		$	2,046		$	5,240		$	4,548		$	191		$	4,357		$	15,995		$	4,217		$	11,778
Other comprehensive income:
Net unrealized gains on available-for-sale investment securities:
Net unrealized holding gains arising during the period	2,632			921			1,711			2,084			730			1,354
Other comprehensive (loss) income:																												��
Net unrealized (losses) gains on available-for-sale investment securities:
Net unrealized holding (losses) gains arising during the period																			(1,911		)	(401		)	(1,510		)	2,632			921			1,711
Less: reclassification adjustment for net gains on sales realized in net income (1)	(21		)	(8		)	(13		)	(413		)	(145		)	(268		)	—			—			—			(21		)	(8		)	(13		)
Total net unrealized gains on available-for-sale investment securities	2,611			913			1,698			1,671			585			1,086
Net unrealized losses on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period	(92		)	(31		)	(61		)	(300		)	(105		)	(195		)
Total net unrealized (losses) gains on available-for-sale investment securities																			(1,911		)	(401		)	(1,510		)	2,611			913			1,698
Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
Net unrealized holding gains (losses) arising during the period																			154			32			122			(92		)	(31		)	(61		)
Less: reclassification adjustment for net losses realized in net income (2)	36			12			24			80			28			52			6			1			5			36			12			24
Total net unrealized losses on interest rate swaps used in cash flow hedges	(56		)	(19		)	(37		)	(220		)	(77		)	(143		)
Total net unrealized gains (losses) on interest rate swaps used in cash flow hedges																			160			33			127			(56		)	(19		)	(37		)
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3)	299			104			195			329			115			214			282			58			224			299			104			195
Accretion of prior service cost included in net periodic pension costs (3)	(71		)	(25		)	(46		)	(70		)	(24		)	(46		)	(71		)	(14		)	(57		)	(71		)	(25		)	(46		)
Total defined benefit pension plans	228			79			149			259			91			168			211			44			167			228			79			149
Other comprehensive income	2,783			973			1,810			1,710			599			1,111
Total comprehensive income	$	18,778		$	5,190		$	13,588		$	8,996		$	2,645		$	6,351
Other comprehensive (loss) income																			(1,540		)	(324		)	(1,216		)	2,783			973			1,810
Total comprehensive income (loss)																			$	3,008		$	(133	)	$	3,141		$	18,778		$	5,190		$	13,588

(1) Included in net gain on sales of investment securities on the consolidated statements of income (before tax amount).

(2) Included in interest expense on deposits on the 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 ~~7—Retirement~~8, "Retirement Plans and Other Postretirement ~~Benefits~~Benefits" for additional details.

Note: See accompanying notes to the unaudited condensed consolidated financial statements.


	Six Months Ended June 30,																		Six Months Ended June 30,
(Dollars in thousands)	2017									2016									2018									2017
	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount			Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount			Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount			Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Income	$	30,773		$	8,139		$	22,634		$	17,375		$	4,846		$	12,529		$	20,224		$	3,017		$	17,207		$	30,773		$	8,139		$	22,634
Other comprehensive income:
Net unrealized gains on available-for-sale investment securities:
Net unrealized holding gains arising during the period	3,052			1,068			1,984			4,302			1,506			2,796
Other comprehensive (loss) income:
Net unrealized (losses) gains on available-for-sale investment securities:
Net unrealized holding (losses) gains arising during the period																			(8,249		)	(1,732		)	(6,517		)	3,052			1,068			1,984
Less: reclassification adjustment for net gains on sales realized in net income (1)	(36		)	(13		)	(23		)	(457		)	(160		)	(297		)	(10		)	(2		)	(8		)	(36		)	(13		)	(23		)
Total net unrealized gains on available-for-sale investment securities	3,016			1,055			1,961			3,845			1,346			2,499
Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period	(85		)	(29		)	(56		)	(926		)	(324		)	(602		)
Total net unrealized (losses) gains on available-for-sale investment securities																			(8,259		)	(1,734		)	(6,525		)	3,016			1,055			1,961
Net unrealized gains on interest rate swaps used in cash flow hedges:
Net unrealized holding gains (losses) arising during the period																			366			77			289			(85		)	(29		)	(56		)
Less: reclassification adjustment for net losses realized in net income (2)	107			37			70			161			56			105			26			5			21			107			37			70
Total net unrealized gains (losses) on interest rate swaps used in cash flow hedges	22			8			14			(765		)	(268		)	(497		)
Total net unrealized gains on interest rate swaps used in cash flow hedges																			392			82			310			22			8			14
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3)	598			209			389			658			230			428			563			117			446			598			209			389
Accretion of prior service cost included in net periodic pension costs (3)	(141		)	(49		)	(92		)	(141		)	(49		)	(92		)	(142		)	(29		)	(113		)	(141		)	(49		)	(92		)
Total defined benefit pension plans	457			160			297			517			181			336			421			88			333			457			160			297
Other comprehensive income	3,495			1,223			2,272			3,597			1,259			2,338
Other comprehensive (loss) income																			(7,446		)	(1,564		)	(5,882		)	3,495			1,223			2,272
Total comprehensive income	$	34,268		$	9,362		$	24,906		$	20,972		$	6,105		$	14,867		$	12,778		$	1,453		$	11,325		$	34,268		$	9,362		$	24,906

(1) Included in net gain on sales of investment securities on the consolidated statements of income (before tax amount).

(2) Included in interest expense on deposits on the consolidated statements of income (before tax amount).

Note: See accompanying notes to the unaudited condensed consolidated financial statements.

UNIVEST CORPORATION OF PENNSYLVANIA

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(Dollars in thousands, except share and per share data)	Common Shares Outstanding		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total			Common Shares Outstanding		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Six Months Ended June 30, 2017
Balance at December 31, 2016	26,589,353		$	144,559	$	230,494		$	194,516		$	(19,454	)	$	(44,906	)	$	505,209
Six Months Ended June 30, 2018																				Six Months Ended June 30, 2018
Balance at December 31, 2017																				29,334,859		$	157,784	$	290,133		$	216,761		$	(17,771	)	$	(43,533	)	$	603,374
Adjustment to initially apply ASU No. 2016-01 for equity securities measured at fair value (1)																				—		—		—			433			(433		)	—			—
Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges (1)																				—		—		—			3,921			(3,921		)	—			—
Net income	—		—		—			22,634			—			—			22,634			—		—		—			17,207			—			—			17,207
Other comprehensive income, net of income tax	—		—		—			—			2,272			—			2,272
Other comprehensive loss, net of income tax benefit																				—		—		—			—			(5,882		)	—			(5,882		)
Cash dividends declared ($0.40 per share)	—		—		—			(10,652		)	—			—			(10,652		)	—		—		—			(11,749		)	—			—			(11,749		)
Stock issued under dividend reinvestment and employee stock purchase plans	43,415		—		72			—			—			1,157			1,229			41,939		—		98			1			—			1,074			1,173
Exercise of stock options	73,870		—		(105		)	—			—			1,433			1,328			36,990		—		(14		)	—			—			725			711
Repurchase of cancelled restricted stock awards	(14,000	)	—		271			—			—			(271		)	—
Stock-based compensation	—		—		1,708			—			—			—			1,708			—		—		1,719			—			—			—			1,719
Purchases of treasury stock	(83,970	)	—		—			—			—			(2,422		)	(2,422		)	(44,353	)	—		—			—			—			(1,259		)	(1,259		)
Restricted stock awards granted	59,323		—		(1,151		)	—			—			1,151			—
Balance at June 30, 2017	26,667,991		$	144,559	$	231,289		$	206,498		$	(17,182	)	$	(43,858	)	$	521,306
Restricted stock awards granted, net of cancellations																				37,015		—		(698		)	—			—			698			—
Balance at June 30, 2018																				29,406,450		$	157,784	$	291,238		$	226,574		$	(28,007	)	$	(42,295	)	$	605,294


(Dollars in thousands, except share and per share data)	Common Shares Outstanding		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total			Common Shares Outstanding		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total
Six Months Ended June 30, 2016
Balance at December 31, 2015	19,530,930		$	110,271	$	121,280		$	193,446		$	(16,708	)	$	(46,715	)	$	361,574
Six Months Ended June 30, 2017																				Six Months Ended June 30, 2017
Balance at December 31, 2016																				26,589,353		$	144,559	$	230,494		$	194,516		$	(19,454	)	$	(44,906	)	$	505,209
Net income	—		—		—			12,529			—			—			12,529			—		—		—			22,634			—			—			22,634
Other comprehensive income, net of income tax	—		—		—			—			2,338			—			2,338			—		—		—			—			2,272			—			2,272
Cash dividends declared ($0.40 per share)	—		—		—			(7,819		)	—			—			(7,819		)	—		—		—			(10,652		)	—			—			(10,652		)
Stock issued under dividend reinvestment and employee stock purchase plans	61,281		—		25			—			—			1,206			1,231			43,415		—		72			—			—			1,157			1,229
Exercise of stock options	22,667		—		(8		)	—			—			422			414			73,870		—		(105		)	—			—			1,433			1,328
Repurchase of cancelled restricted stock awards	(14,250	)	—		241			—			—			(241		)	—
Stock-based compensation	—		—		944			—			—			—			944			—		—		1,708			—			—			—			1,708
Purchases of treasury stock	(101,250	)	—		—			—			—			(2,051		)	(2,051		)	(83,970	)	—		—			—			—			(2,422		)	(2,422		)
Restricted stock awards granted	58,580		—		(1,083		)	—			—			1,083			—
Balance at June 30, 2016	19,557,958		$	110,271	$	121,399		$	198,156		$	(14,370	)	$	(46,296	)	$	369,160
Restricted stock awards granted, net of cancellations																				45,323		—		(880		)	—			—			880			—
Balance at June 30, 2017																				26,667,991		$	144,559	$	231,289		$	206,498		$	(17,182	)	$	(43,858	)	$	521,306

(1) See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2018" for additional information.

Note: See accompanying notes to the unaudited condensed consolidated financial statements.

UNIVEST CORPORATION OF PENNSYLVANIA

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2017			2016			2018			2017
Cash flows from operating activities:
Net income	$	22,634		$	12,529		$	17,207		$	22,634
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses	5,211			1,156			17,462			5,211
Depreciation of premises and equipment	2,730			1,912			2,795			2,730
Net amortization of investment securities premiums and discounts	959			582			779			959
Net gain on sales of investment securities	(36		)	(457		)	(10		)	(36		)
Net gain on mortgage banking activities	(2,650		)	(2,929		)	(1,658		)	(2,650		)
Bank owned life insurance income	(2,405		)	(1,005		)	(1,879		)	(2,405		)
Net accretion of acquisition accounting fair value adjustments	(1,508		)	(303		)	(495		)	(1,508		)
Stock-based compensation	1,708			944			1,719			1,708
Intangible expenses	1,205			1,757			1,206			1,205
Other adjustments to reconcile net income to cash provided by operating activities	(293		)	218
Deferred tax (benefit) expense	(39		)	1,619
Other adjustments to reconcile net income to cash (used in) provided by operating activities							190			(293		)
Originations of loans held for sale	(64,035		)	(104,668		)	(61,508		)	(64,035		)
Proceeds from the sale of loans held for sale	69,847			106,685			63,076			69,847
Contributions to pension and other postretirement benefit plans	(138		)	(121		)	(133		)	(138		)
Decrease (increase) in accrued interest receivable and other assets	1,340			(4,249		)
(Decrease) increase in accrued interest payable and other liabilities	(1,926		)	1,784
(Increase) decrease in accrued interest receivable and other assets							(3,089		)	1,340
Increase (decrease) in accrued interest payable and other liabilities							814			(1,965		)
Net cash provided by operating activities	32,604			15,454			36,476			32,604
Cash flows from investing activities:
Funds advanced for merger settlement	—			(98,885		)
Net capital expenditures	(4,622		)	(4,195		)	(1,347		)	(4,622		)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity	10,595			8,000			4,253			10,595
Proceeds from maturities, calls and principal repayments of securities available-for-sale	41,623			54,156			34,824			29,603
Proceeds from sales of securities available-for-sale	3,032			73,991			1,010			3,032
Purchases of investment securities held-to-maturity	(29,498		)	—			(45,349		)	(29,498		)
Purchases of investment securities available-for-sale	(25,244		)	(48,647		)	(1,485		)	(8,476		)
Proceeds from sales of money market mutual funds							10,706			12,020
Purchases of money market mutual funds							(6,284		)	(16,768		)
Net increase in other investments	(6,637		)	(7,283		)	(5,564		)	(6,637		)
Net increase in loans and leases	(225,682		)	(169,417		)	(211,534		)	(225,682		)
Net (increase) decrease in interest-earning deposits	(3,168		)	20,157
Net decrease (increase) in interest-earning deposits							10,154			(3,168		)
Proceeds from sales of other real estate owned	3,612			—			21			3,612
Net decrease in federal funds sold	—			(48,500		)
Purchases of bank owned life insurance							(776		)	—
Proceeds from bank owned life insurance	2,916			—			1,374			2,916
Net cash used in investing activities	(233,073		)	(220,623		)	(209,997		)	(233,073		)
Cash flows from financing activities:
Net increase (decrease) in deposits	90,796			(17,162		)
Net increase in deposits							65,963			90,796
Net increase in short-term borrowings	35,555			235,752			126,422			35,555
Proceeds from issuance of long-term debt	95,000			—			—			95,000
Repayment of long-term debt	(5,000		)	—			—			(5,000		)
Payment of contingent consideration on acquisitions	(5,317		)	(1,160		)	(67		)	(5,317		)
Purchases of treasury stock	(2,422		)	(2,051		)	(1,259		)	(2,422		)
Stock issued under dividend reinvestment and employee stock purchase plans	1,229			1,231			1,173			1,229
Proceeds from exercise of stock options	1,328			414			711			1,328
Cash dividends paid	(10,636		)	(7,807		)	(11,734		)	(10,636		)
Net cash provided by financing activities	200,533			209,217			181,209			200,533
Net increase in cash and due from banks	64			4,048			7,688			64
Cash and due from banks at beginning of year	48,757			32,356			46,721			48,757
Cash and due from banks at end of period	$	48,821		$	36,404		$	54,409		$	48,821
Supplemental disclosures of cash flow information:
Cash paid for interest	$	9,685		$	5,033		$	13,190		$	9,685
Cash paid for income taxes, net of refunds	5,942			4,348			1,060			5,942
Non cash transactions:
Transfer of loans to other real estate owned	$	653		$	1,952		$	402		$	653

Note: See accompanying notes to the unaudited condensed consolidated financial statements.

UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES

Notes to the Condensed Unaudited Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Univest Corporation of Pennsylvania (the Corporation or Univest) and its wholly owned ~~subsidiaries; the~~subsidiaries. The Corporation’s ~~primary~~direct subsidiary is Univest Bank and Trust Co. (the Bank). All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited interim 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 such 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-year presentation. Operating results for the ~~three and~~ six-month ~~periods~~period ended June 30, ~~2017~~2018 are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2017.~~2018 or for any other period. It is suggested that these unaudited consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in the registrant’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, which was filed with the SEC on March ~~3, 2017.~~1, 2018.

Use of Estimates

The preparation of the unaudited 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 fair value measurement of investment securities available-for-sale, ~~and assessment for impairment of certain investment securities,~~ reserve for loan and lease losses ~~valuation of goodwill~~ and ~~other intangible assets, servicing rights, deferred tax assets and liabilities, benefit plans and stock-based compensation expense.~~purchase accounting.

~~Recent~~ Accounting Pronouncements Adopted in 2018

In ~~May 2017,~~February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. ~~2017-09,~~2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This ASUclarifies the accounting treatment of the reclassification of certain income tax effects within accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act. The Corporation elected to early adopt this guidance effective January 1, 2018 for all stranded tax effects resulting from tax reform and reclassified stranded tax effects, totaling $3.9 million, from accumulated other comprehensive income to retained earnings. The Corporation's policy for releasing income tax effects from accumulated other comprehensive income is to release such effects on an individual basis as each item is liquidated, sold or extinguished. See Note 10, "Accumulated Other Comprehensive (Loss) Income" for additional detail.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The amendments in this ASU require that an employer that sponsors defined benefit pension plans and other postretirement plans present the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The Corporation adopted this guidance effective January 1, 2018 with retrospective application for prior period presentation. Effective January 1, 2018, components of net benefit income other than the service cost component are presented in the Corporation's statement of income in other noninterest expense rather than in salaries, benefits and commission expense. Prior period components of net benefit income other than the service cost component were reclassed to other noninterest expense in the Corporation's statement of income.

In January 2016, the FASB issued ASU No. 2016-01, “~~Compensation~~Financial Instruments – ~~Stock Compensation (Topic 718)~~Overall (Subtopic 825-10): ~~Scope~~Recognition and Measurement of ~~Modification Accounting.~~Financial Assets and Financial Liabilities." This ASU ~~provides clarification~~addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The ASU requires equity investments to be measured at fair value with changes in fair value recognized in net income. At December 31, 2017, the Corporation had financial services equity securities with a carrying value of $1.1 million which included an unrealized net gain of $666 thousand. At December 31, 2017, $433 thousand

was recorded in accumulated other comprehensive income which represented the unrealized net gain, net of income taxes, based on ~~when modification accounting should be used for changes~~the Corporation’s statutory tax rate as of December 31, 2017. In addition, at December 31, 2017, the Corporation had money market mutual funds with a fair value and amortized cost of $6.0 million which were reclassified to equity securities under this guidance. The Corporation adopted this guidance effective January 1, 2018 with a cumulative-effect adjustment to the ~~terms~~balance sheet as of January 1, 2018. The balance in accumulated other comprehensive income of $433 thousand was reclassified to retained earnings effective January 1, 2018. The carrying value of the equity securities, at January 1, 2018, did not change; however, any future increases or ~~conditions~~decreases in fair value is recorded as an increase or decrease to the carrying value and recognized in other noninterest income. During the six months ended June 30, 2018, the Corporation recognized a $33 thousand net gain on equity securities in other noninterest income.

Recent Accounting Pronouncements Yet to Be Adopted

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The amendments in this update expand and refine hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Additional hedging strategies permitted for hedge accounting include: hedges of contractually-specified price components of commodity purchases or sales, hedges of the benchmark rate component of the contractual coupon cash flows of fixed-rate assets or liabilities, hedges of the portion of a ~~share-based payment award.~~closed portfolio of prepayable assets not expected to prepay, and partial-term hedges of fixed-rate assets or liabilities. The ASU ~~does not change~~amends the ~~accounting~~presentation and disclosure requirements and changes how entities assess effectiveness. The ASU eliminates the requirement to separately measure and report hedge ineffectiveness and requires all items that affect earnings be presented in the same income statement line as the hedged items. After initial qualification, the new guidance permits a qualitative effectiveness assessment for ~~modifications but clarifies~~certain hedges instead of a quantitative test, such as a regression analysis, if the entity can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that ~~modification accounting guidance should only be applied if there~~the hedge relationship is ~~a change to the value, vesting conditions, or award classification. This~~highly effective is still required. The ASU is effective for fiscal years beginning after December 15, ~~2017,~~2018, including interim periods within those fiscal years for public business entities, or January 1, ~~2018~~2019 for the Corporation. Early adoption is permitted, including an interim period. The ~~amendments in this ASU should be applied prospectively to an award modified on or after the adoption.~~amended presentation and disclosure guidance is required only prospectively. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.

In March 2017, the FASB issued ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, or January 1, 2019 for the Corporation. Early adoption is permitted, including an interim period. This ASU is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of ~~adoption.The~~adoption. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.

~~In March 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-07,~~ ~~"Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost."~~ The amendments in this ASU require that an employer that sponsors defined benefit pension plans and other postretirement plans present the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit

cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization, when applicable. This ASU is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods, or January 1, 2018 for the Corporation. This ASU should be applied retrospectively for the presentation requirements and prospectively for the capitalization of the service cost component requirements. The amendments allow a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Disclosure that the practical expedient was used is required. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." This ASU eliminates Step 2 of the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Public business entities that are SEC filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, or for the Corporation's goodwill impairment test in 2020. Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~"Business Combinations (Topic 805): Clarifying the Definition of a Business."~~ The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business – inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs. The amendments in this ASU provide a screen to determine when a set is not a business. If the screen is not met, the amendments (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output, and (2) remove the evaluation of whether a market participant could replace missing elements. The ASU provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, or January 1, 2018 for the Corporation. The amendments in this ASU should be applied prospectively on or after the effective date. The Corporation does not anticipate the adoption of this ASU will have a material impact on the Corporation's financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires businesses and other organizations to measure the current expected credit losses (CECL) on financial assets, such as loans, net investments in leases, certain debt securities, bond insurance and other receivables. The amendments affect entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. Current GAAP requires an incurred loss methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The amendments in this ASU replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonableness and supportable information to inform credit loss estimates. An entity should apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified-retrospective approach). Acquired credit impaired loans for which the guidance in Accounting Standards Codification (ASC) Topic 310-30 has been previously applied should prospectively apply the guidance in this ASU. A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those years for public business entities that are SEC filers, or January 1, 2020 for the Corporation. The Corporation is in the process of evaluating the impact of the adoption of this guidance on the Corporation's financial statements; however, it is anticipated that the ~~allowance~~reserve for loan and lease losses will increase upon adoption of CECL and that the increased ~~allowance~~reserve level will decrease shareholders' equity and regulatory capital and ratios.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" to revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. Disclosures will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Lessees and lessors are required to recognize and measure

leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The ASU is effective for the first interim period within annual periods beginning after December 15, 2018, or January 1, 2019, with early adoption permitted. The Corporation is in the process of evaluating the impact of the adoption of this guidance on the Corporation's financial statements; however, the adoption of this ASU will impact the balance sheet ~~for~~by the recording of lease liabilities and right-of-use assets ~~and liabilities for~~associated with operating leases; any initial or continued impact of the recording of assets will have a negative impact on ~~risk-based~~all Corporation and Bank capital ratios under current regulatory guidance and possibly equity ratios.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~“Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities."~~ This ASU addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The ASU will require equity investments to be measured at fair value with changes in fair value recognized in net income. When fair value is not readily determinable, an entity may elect to measure the equity investment at cost, minus impairment, plus or minus any change in the investment’s observable price. The ASU will simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. A valuation allowance on a deferred tax asset related to available-for-sale securities will need to be included. For financial liabilities that are measured at fair value, the ASU requires an entity to present separately, in other comprehensive income, any change in fair value resulting from a change in instrument-specific credit risk. An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The amendments in this ASU are effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017 or January 1, 2018 for the Corporation. At June 30, 2017, the Corporation's equity portfolio had a carrying value of $978 thousand which included an unrealized net gain of $568 thousand. This unrealized net gain, net of income taxes, amounted to $369 thousand and was recorded in accumulated other comprehensive income. Upon implementation using the prospective approach, the balance in accumulated other comprehensive income will be reclassed to retained earnings. The carrying value of the equity securities, upon implementation, will not change; however, any future increases or decreases in fair value will be recorded as an increase or decrease to the carrying value and recognized in non-interest income.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~"Revenue from Contracts with Customers (Topic 606)."~~ This ASU clarifies the principles for recognizing revenue and develops a common standard for U.S. GAAP and International Financial Reporting Standards. The ASU establishes a core principle that would require an entity to identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. The ASU provides for improved disclosure requirements that require entities to disclose sufficient information that enables users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross Versus Net),” which instructs the participants in the sale to determine whether they control the good or service and are entitled to the gross amount of the transaction or are acting as an agent and should collect only a fee or commission for arranging the sale. In April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing" to provide clarification on these areas. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients” providing some limited improvements and practical expedients. The original effective date of the guidance relating to revenue from contracts with customers was deferred by one year as a result of the issuance of ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which was issued by the FASB in August 2015. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, or January 1, 2018 for the Corporation. The Corporation is in the process of evaluating the impact of the adoption of this guidance on the Corporation's financial statements; however, it is anticipated the impact will be only related to timing of the recognition of revenue.

Note 2. Earnings per Share

The Corporation uses the two-class method to calculate earnings per share as the unvested restricted stock issued under the Corporation's equity incentive plans are participating shares with nonforfeitable rights to dividends. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the number of weighted average shares outstanding during the period. The table also notes anti-dilutive options which are those options with weighted average exercise prices in excess of the weighted average market value for the periods presented.

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
(Dollars and shares in thousands, except per share data)	2017			2016			2017			2016			2018			2017			2018			2017
Numerator:
Net income	$	11,778		$	5,240		$	22,634		$	12,529		$	4,357		$	11,778		$	17,207		$	22,634
Net income allocated to unvested restricted stock	(122		)	(40		)	(234		)	(98		)	(33		)	(122		)	(132		)	(234		)
Net income allocated to common shares	$	11,656		$	5,200		$	22,400		$	12,431		$	4,324		$	11,656		$	17,075		$	22,400
Denominator:
Weighted average shares outstanding													29,404			26,661			29,380			26,647
Average unvested restricted stock													(228		)	(281		)	(221		)	(284		)
Denominator for basic earnings per share—weighted-average shares outstanding	26,380			19,434			26,363			19,418			29,176			26,380			29,159			26,363
Effect of dilutive securities—employee stock options	97			35			100			33			95			97			95			100
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	26,477			19,469			26,463			19,451			29,271			26,477			29,254			26,463
Basic earnings per share	$	0.44		$	0.27		$	0.85		$	0.64		$	0.15		$	0.44		$	0.59		$	0.85
Diluted earnings per share	$	0.44		$	0.27		$	0.85		$	0.64		$	0.15		$	0.44		$	0.58		$	0.85
Average anti-dilutive options and awards excluded from computation of diluted earnings per share	302			619			272			603
Average anti-dilutive options excluded from computation of diluted earnings per share													369			188			294			157

Note 3. Investment Securities

The following table shows the amortized cost and the estimated fair value of the held-to-maturity securities and available-for-sale securities at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, by contractual maturity within each type:


	At June 30, 2017									At December 31, 2016									At June 30, 2018									At December 31, 2017
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Held-to-Maturity
U.S. government corporations and agencies:
After 1 year to 5 years	$	5,000	$	1	$	—		$	5,001	$	—	$	—	$	—		$	—	$	6,996	$	—	$	(183	)	$	6,813	$	6,995	$	—	$	(77	)	$	6,918
	5,000		1		—			5,001		—		—		—			—		6,996		—		(183		)	6,813		6,995		—		(77		)	6,918
Residential mortgage-backed securities:
After 5 years to 10 years	9,849		—		(10		)	9,839		—		—		—			—		12,838		—		(206		)	12,632		8,944		—		(51		)	8,893
Over 10 years	18,868		50		(19		)	18,899		5,071		—		(3		)	5,068		76,623		—		(1,426		)	75,197		39,625		44		(160		)	39,509
	28,717		50		(29		)	28,738		5,071		—		(3		)	5,068
Corporate bonds:
Within 1 year	10,000		—		(2		)	9,998		19,810		2		(9		)	19,803
	10,000		—		(2		)	9,998		19,810		2		(9		)	19,803		89,461		—		(1,632		)	87,829		48,569		44		(211		)	48,402
Total	$	43,717	$	51	$	(31	)	$	43,737	$	24,881	$	2	$	(12	)	$	24,871	$	96,457	$	—	$	(1,815	)	$	94,642	$	55,564	$	44	$	(288	)	$	55,320
Securities Available-for-Sale
U.S. government corporations and agencies:
Within 1 year	$	11,498	$	1	$	(4	)	$	11,495	$	15,000	$	20	$	—		$	15,020	$	5,020	$	—	$	(31	)	$	4,989	$	1,499	$	—	$	(3	)	$	1,496
After 1 year to 5 years	15,679		—		(27		)	15,652		17,265		—		(19		)	17,246		10,482		—		(132		)	10,350		15,590		—		(125		)	15,465
	27,177		1		(31		)	27,147		32,265		20		(19		)	32,266		15,502		—		(163		)	15,339		17,089		—		(128		)	16,961
State and political subdivisions:
Within 1 year	1,560		—		—			1,560		964		—		(1		)	963		5,562		—		(5		)	5,557		2,721		1		(6		)	2,716
After 1 year to 5 years	18,115		63		(23		)	18,155		18,705		38		(75		)	18,668		14,538		29		(43		)	14,524		16,787		33		(44		)	16,776
After 5 years to 10 years	52,312		1,076		(39		)	53,349		55,541		829		(426		)	55,944		46,800		436		(438		)	46,798		54,846		897		(73		)	55,670
Over 10 years	8,533		201		(20		)	8,714		12,663		226		(114		)	12,775		3,120		—		(89		)	3,031		3,120		15		—			3,135
	80,520		1,340		(82		)	81,778		87,873		1,093		(616		)	88,350		70,020		465		(575		)	69,910		77,474		946		(123		)	78,297
Residential mortgage-backed securities:
After 1 year to 5 years	5,214		14		(15		)	5,213		6,086		—		(66		)	6,020		5,496		—		(93		)	5,403		3,913		12		(26		)	3,899
After 5 years to 10 years	51,520		6		(774		)	50,752		23,479		—		(622		)	22,857		56,238		8		(2,082		)	54,164		51,428		5		(852		)	50,581
Over 10 years	129,141		108		(2,253		)	126,996		174,388		99		(4,794		)	169,693		110,422		29		(4,409		)	106,042		133,237		87		(2,383		)	130,941
	185,875		128		(3,042		)	182,961		203,953		99		(5,482		)	198,570		172,156		37		(6,584		)	165,609		188,578		104		(3,261		)	185,421
Collateralized mortgage obligations:
After 5 years to 10 years																			1,883		—		(105		)	1,778		2,103		—		(82		)	2,021
Over 10 years	4,123		—		(62		)	4,061		4,659		—		(105		)	4,554		1,414		—		(21		)	1,393		1,567		14		—			1,581
	4,123		—		(62		)	4,061		4,659		—		(105		)	4,554		3,297		—		(126		)	3,171		3,670		14		(82		)	3,602
Corporate bonds:
Within 1 year	9,027		—		(14		)	9,013		250		—		—			250		2,510		—		(18		)	2,492		10,006		—		(5		)	10,001
After 1 year to 5 years	32,402		79		(94		)	32,387		35,923		34		(241		)	35,716		23,835		17		(471		)	23,381		24,885		20		(147		)	24,758
After 5 years to 10 years	15,182		—		(223		)	14,959		15,193		—		(516		)	14,677		15,657		5		(532		)	15,130		16,669		71		(296		)	16,444
Over 10 years	60,000		—		(3,226		)	56,774		60,000		27		(2,472		)	57,555		60,000		—		(7,228		)	52,772		60,000		—		(4,027		)	55,973
	116,611		79		(3,557		)	113,133		111,366		61		(3,229		)	108,198		102,002		22		(8,249		)	93,775		111,560		91		(4,475		)	107,176
Money market mutual funds:
No stated maturity	15,532		—		—			15,532		10,784		—		—			10,784
	15,532		—		—			15,532		10,784		—		—			10,784
Equity securities:
Equity securities:*
No stated maturity	410		569		(1		)	978		411		504		—			915		N/A		N/A		N/A			N/A		6,395		667		(1		)	7,061
	410		569		(1		)	978		411		504		—			915		N/A		N/A		N/A			N/A		6,395		667		(1		)	7,061
Total	$	430,248	$	2,117	$	(6,775	)	$	425,590	$	451,311	$	1,777	$	(9,451	)	$	443,637	$	362,977	$	524	$	(15,697	)	$	347,804	$	404,766	$	1,822	$	(8,070	)	$	398,518

* Equity securities at December 31, 2017 include $6.0 million of money market mutual funds and $1.1 million of financial services equity securities. In accordance with ASU 2016-01, beginning January 1, 2018, such amounts were reclassified from investment securities available-for-sale to investments in equity securities on the Corporation's Condensed Consolidated Balance Sheets.

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. ~~Unrealized losses in investment securities at June 30, 2017 and December 31, 2016 do not represent other-than-temporary impairments in management's judgment.~~

Securities with a carrying value of ~~$354.0~~$355.0 million and ~~$356.7~~$345.1 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, were pledged to secure public deposits and other contractual obligations. In addition, securities of ~~$1.3 million~~$295 thousand and ~~$1.4~~$1.8 million were pledged to secure credit derivatives and interest rate swaps at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. See Note ~~10,~~11, "Derivative Instruments and Hedging Activities" for additional information.

The following table presents information related to sales of securities available-for-sale during the six months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	Six Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2017		2016		2018		2017
Securities available-for-sale:
Proceeds from sales	$	3,032	$	73,991	$	1,010	$	3,032
Gross realized gains on sales	36		539		10		36
Gross realized losses on sales	—		82
Tax expense related to net realized gains on sales	13		160		2		13

Management evaluates debt securities, which are comprised of U.S. government, government sponsored agencies, municipalities, corporate bonds and other issuers, for other-than-temporary impairment by considering the current economic conditions, the length of time and the extent to which the fair value has been less than cost, market interest rates and the credit rating of each security. The Corporation does not have the intent to sell the debt securities and believes it is more likely than not, that it will not have to sell the securities before recovery of their cost basis. The Corporation did not recognize any other-than-temporary impairment charges on debt securities for the six months ended June 30, 2017 and 2016.

At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, there were no investments in any single non-federal issuer representing more than 10% of shareholders’ equity.

The following table shows the fair value of securities that were in an unrealized loss position at June 30, ~~2017~~2018 and December 31, ~~2016~~2017 by the length of time those securities were in a continuous loss position. For the investment securities in an unrealized loss position, the Corporation has concluded, based on its analysis, that the unrealized losses are primarily caused by the movement of interest rates and current market conditions. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment. It is more likely than not that the Corporation will not be required to sell the ~~investment~~investments before a recovery of carrying value.


	Less than Twelve Months					Twelve Months or Longer					Total					Less than Twelve Months					Twelve Months or Longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
At June 30, 2017
At June 30, 2018
Securities Held-to-Maturity
U.S. government corporations and agencies																$	6,813	$	(183	)	$	—	$	—		$	6,813	$	(183	)
Residential mortgage-backed securities	$	12,820	$	(29	)	$	—	$	—		$	12,820	$	(29	)	87,829		(1,632		)	—		—			87,829		(1,632		)
Total																$	94,642	$	(1,815	)	$	—	$	—		$	94,642	$	(1,815	)
Securities Available-for-Sale
U.S. government corporations and agencies																$	5,121	$	(58	)	$	10,218	$	(105	)	$	15,339	$	(163	)
State and political subdivisions																29,012		(521		)	7,449		(54		)	36,461		(575		)
Residential mortgage-backed securities																35,367		(931		)	128,118		(5,653		)	163,485		(6,584		)
Collateralized mortgage obligations																1,393		(21		)	1,778		(105		)	3,171		(126		)
Corporate bonds	9,998		(2		)	—		—			9,998		(2		)	22,589		(534		)	67,665		(7,715		)	90,254		(8,249		)
Total																$	93,482	$	(2,065	)	$	215,228	$	(13,632	)	$	308,710	$	(15,697	)
At December 31, 2017
Securities Held-to-Maturity
U.S. government corporations and agencies																$	6,919	$	(77	)	$	—	$	—		$	6,919	$	(77	)
Residential mortgage-backed securities																40,881		(211		)	—		—			40,881		(211		)
Total	$	22,818	$	(31	)	$	—	$	—		$	22,818	$	(31	)	$	47,800	$	(288	)	$	—	$	—		$	47,800	$	(288	)
Securities Available-for-Sale
U.S. government corporations and agencies	$	22,146	$	(31	)	$	—	$	—		$	22,146	$	(31	)	$	5,213	$	(38	)	$	11,749	$	(90	)	$	16,962	$	(128	)
State and political subdivisions	13,306		(74		)	1,706		(8		)	15,012		(82		)	18,457		(91		)	6,332		(32		)	24,789		(123		)
Residential mortgage-backed securities	169,466		(3,042		)	—		—			169,466		(3,042		)	32,217		(210		)	141,371		(3,051		)	173,588		(3,261		)
Collateralized mortgage obligations	1,763		(1		)	2,298		(61		)	4,061		(62		)	—		—			2,021		(82		)	2,021		(82		)
Corporate bonds	67,448		(1,675		)	33,118		(1,882		)	100,566		(3,557		)	18,464		(1,016		)	71,957		(3,459		)	90,421		(4,475		)
Equity securities	3		(1		)	—		—			3		(1		)	—		(1		)	4		—			4		(1		)
Total	$	274,132	$	(4,824	)	$	37,122	$	(1,951	)	$	311,254	$	(6,775	)	$	74,351	$	(1,356	)	$	233,434	$	(6,714	)	$	307,785	$	(8,070	)
At December 31, 2016
Securities Held-to-Maturity
Residential mortgage-backed securities	$	5,068	$	(3	)	$	—	$	—		$	5,068	$	(3	)
Corporate bonds	9,779		(9		)	—		—			9,779		(9		)
Total	$	14,847	$	(12	)	$	—	$	—		$	14,847	$	(12	)
Securities Available-for-Sale
U.S. government corporations and agencies	$	11,850	$	(19	)	$	—	$	—		$	11,850	$	(19	)
State and political subdivisions	40,771		(610		)	423		(6		)	41,194		(616		)
Residential mortgage-backed securities	192,782		(5,482		)	—		—			192,782		(5,482		)
Collateralized mortgage obligations	2,012		(26		)	2,542		(79		)	4,554		(105		)
Corporate bonds	58,535		(1,333		)	33,104		(1,896		)	91,639		(3,229		)
Total	$	305,950	$	(7,470	)	$	36,069	$	(1,981	)	$	342,019	$	(9,451	)

At June 30, 2018, gross unrealized losses for securities in an unrealized loss position for twelve months or longer, totaled $13.6 million. Three federal agency bonds, twelve investment grade corporate bonds, 105 federal agency residential mortgage securities, nine investment grade municipal bonds and one collateralized mortgage obligation bond had respective unrealized loss positions of $105 thousand, $7.7 million, $5.7 million, $54 thousand and $105 thousand, respectively. The fair value of these 130 securities fluctuate with changes in market conditions which for these underlying securities is primarily due to changes in the interest rate environment. 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. Upon review of the attributes of the individual securities, the Corporation concluded these securities were not other-than-temporarily impaired. The Corporation did not recognize any other-than-temporary impairment charges on debt securities for the six months ended June 30, 2018 and 2017.

In conjunction with the adoption of ASU 2016-01, the Corporation recognized a $33 thousand net gain on equity securities during the six months ended June 30, 2018 in other noninterest income and the net unrealized gain on equity securities held at June 30, 2018 was $33 thousand. See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2018" for additional information.

Note 4. Loans and Leases

Summary of Major Loan and Lease Categories


	At June 30, 2017								At June 30, 2018
(Dollars in thousands)	Originated			Acquired		Total			Originated			Acquired		Total
Commercial, financial and agricultural	$	819,487		$	85,680	$	905,167		$	880,961		$	45,199	$	926,160
Real estate-commercial	1,128,602			375,122		1,503,724			1,373,093			270,551		1,643,644
Real estate-construction	162,323			8,476		170,799			204,602			4,284		208,886
Real estate-residential secured for business purpose	194,369			99,734		294,103			267,014			71,698		338,712
Real estate-residential secured for personal purpose	235,782			70,599		306,381			296,734			54,689		351,423
Real estate-home equity secured for personal purpose	159,868			12,386		172,254			175,351			9,909		185,260
Loans to individuals	27,442			146		27,588			31,048			143		31,191
Lease financings	130,154			—		130,154			133,122			—		133,122
Total loans and leases held for investment, net of deferred income	$	2,858,027		$	652,143	$	3,510,170		$	3,361,925		$	456,473	$	3,818,398
Unearned lease income, included in the above table	$	(15,224	)	$	—	$	(15,224	)	$	(14,700	)	$	—	$	(14,700	)
Net deferred costs, included in the above table	4,389			—		4,389			4,060			—		4,060
Overdraft deposits included in the above table	68			—		68			98			—		98


	At December 31, 2016								At December 31, 2017
(Dollars in thousands)	Originated			Acquired		Total			Originated			Acquired		Total
Commercial, financial and agricultural	$	663,221		$	160,045	$	823,266		$	833,100		$	63,111	$	896,211
Real estate-commercial	909,581			465,368		1,374,949			1,235,681			306,460		1,542,141
Real estate-construction	142,891			31,953		174,844			171,244			4,592		175,836
Real estate-residential secured for business purpose	151,931			142,137		294,068			250,800			91,167		341,967
Real estate-residential secured for personal purpose	210,377			80,431		290,808			260,654			60,920		321,574
Real estate-home equity secured for personal purpose	147,982			14,857		162,839			171,884			12,386		184,270
Loans to individuals	30,110			263		30,373			28,156			144		28,300
Lease financings	134,739			—		134,739			129,768			—		129,768
Total loans and leases held for investment, net of deferred income	$	2,390,832		$	895,054	$	3,285,886		$	3,081,287		$	538,780	$	3,620,067
Unearned lease income, included in the above table	$	(15,970	)	$	—	$	(15,970	)	$	(14,243	)	$	—	$	(14,243	)
Net deferred costs, included in the above table	4,503			—		4,503			4,669			—		4,669
Overdraft deposits included in the above table	84			—		84			222			—		222

Overdraft deposits are re-classified as loans and are included in the total loans and leases on the balance sheet.

The carrying amount of acquired loans at June 30, ~~2017~~2018 totaled ~~$652.1~~$456.5 million, including ~~$510.8~~$368.6 million of loans from the Fox Chase acquisition and ~~$141.3~~$87.9 million from the Valley Green Bank acquisition. At June 30, ~~2017,~~2018, loans acquired with deteriorated credit quality, or acquired credit impaired loans, totaled ~~$6.5 million~~$998 thousand representing ~~$5.7 million~~$332 thousand from the Fox Chase acquisition and ~~$789~~$666 thousand from the Valley Green Bank acquisition. Acquired credit impaired loans are accounted for in accordance with Accounting Standards Codification (ASC) Topic 310-30.

The outstanding principal balance and carrying amount for acquired credit impaired loans at June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:


(Dollars in thousands)	At June 30, 2017		At December 31, 2016		At June 30, 2018		At December 31, 2017
Outstanding principal balance	$	7,811	$	8,993	$	1,378	$	2,325
Carrying amount	6,485		7,352		998		1,583
Allowance for loan losses	—		—		—		—

The following table presents the changes in accretable yield on acquired credit impaired loans:


	Six Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2017			2016			2018			2017
Beginning of period	$	50		$	144		$	11		$	50
Reclassification from nonaccretable discount	279			133			375			279
Accretable discount amortized to interest income	(297		)	(184		)	(386		)	(297		)
Disposals	(4		)	(34		)	—			(4		)
End of period	$	28		$	59		$	—		$	28

Age Analysis of Past Due Loans and Leases

The following presents, by class of loans and leases, an aging of past due loans and leases, loans and leases which are current and the recorded investment in loans and leases 90 days or more past due which are accruing interest at June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Acquired Credit Impaired		Total Loans and Leases Held for Investment		Recorded Investment 90 Days or more Past Due and Accruing Interest		30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Acquired Credit Impaired		Total Loans and Leases Held for Investment		Recorded Investment 90 Days or more Past Due and Accruing Interest
At June 30, 2017
At June 30, 2018
Commercial, financial and agricultural	$	987	$	652	$	1,741	$	3,380	$	901,285	$	502	$	905,167	$	—	$	1,777	$	141	$	2,240	$	4,158	$	921,735	$	267	$	926,160	$	—
Real estate—commercial real estate and construction:
Commercial real estate	2,332		557		1,956		4,845		1,493,694		5,185		1,503,724		—		1,543		1,145		1,619		4,307		1,639,131		206		1,643,644		—
Construction	—		—		365		365		170,434		—		170,799		—		364		—		—		364		208,522		—		208,886		—
Real estate—residential and home equity:
Residential secured for business purpose	1,378		245		1,635		3,258		290,262		583		294,103		—		1,750		782		1,173		3,705		334,547		460		338,712		—
Residential secured for personal purpose	1,661		310		285		2,256		303,910		215		306,381		271		2,896		88		1,561		4,545		346,813		65		351,423		—
Home equity secured for personal purpose	308		100		104		512		171,742		—		172,254		35		672		698		1,205		2,575		182,685		—		185,260		—
Loans to individuals	215		106		130		451		27,137		—		27,588		130		137		49		101		287		30,904		—		31,191		101
Lease financings	534		277		5,797		6,608		123,546		—		130,154		136		1,383		646		1,575		3,604		129,518		—		133,122		49
Total	$	7,415	$	2,247	$	12,013	$	21,675	$	3,482,010	$	6,485	$	3,510,170	$	572	$	10,522	$	3,549	$	9,474	$	23,545	$	3,793,855	$	998	$	3,818,398	$	150
At December 31, 2016
At December 31, 2017
Commercial, financial and agricultural	$	1,536	$	256	$	1,335	$	3,127	$	819,550	$	589	$	823,266	$	—	$	2,182	$	1,440	$	1,509	$	5,131	$	890,658	$	422	$	896,211	$	—
Real estate—commercial real estate and construction:
Commercial real estate	1,482		1,560		2,591		5,633		1,363,606		5,710		1,374,949		—		733		548		1,410		2,691		1,539,094		356		1,542,141		—
Construction	202		—		—		202		174,642		—		174,844		—		1,970		—		365		2,335		173,501		—		175,836		—
Real estate—residential and home equity:
Residential secured for business purpose	1,390		428		1,539		3,357		289,927		784		294,068		—		1,651		315		1,355		3,321		338,061		585		341,967		162
Residential secured for personal purpose	3,243		905		879		5,027		285,512		269		290,808		481		4,368		1,118		23		5,509		315,845		220		321,574		—
Home equity secured for personal purpose	717		142		521		1,380		161,459		—		162,839		171		1,414		333		464		2,211		182,059		—		184,270		148
Loans to individuals	324		95		142		561		29,812		—		30,373		142		221		139		195		555		27,745		—		28,300		195
Lease financings	1,731		1,418		729		3,878		130,861		—		134,739		193		1,143		392		1,855		3,390		126,378		—		129,768		256
Total	$	10,625	$	4,804	$	7,736	$	23,165	$	3,255,369	$	7,352	$	3,285,886	$	987	$	13,682	$	4,285	$	7,176	$	25,143	$	3,593,341	$	1,583	$	3,620,067	$	761

~~Non-Performing~~Nonperforming Loans and Leases

The following presents, by class of loans and leases, ~~non-performing~~nonperforming loans and leases at June 30, ~~2017~~2018 and December 31, ~~2016:~~2017. Nonperforming loans exclude acquired credit impaired loans from Fox Chase and Valley Green.


	At June 30, 2017								At December 31, 2016								At June 30, 2018								At December 31, 2017
(Dollars in thousands)	Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Non- Performing Loans and Leases		Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Non- Performing Loans and Leases		Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases		Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases
Commercial, financial and agricultural	$	5,002	$	942	$	—	$	5,944	$	5,746	$	967	$	—	$	6,713	$	4,084	$	607	$	—	$	4,691	$	4,448	$	921	$	—	$	5,369
Real estate—commercial real estate and construction:
Commercial real estate	4,681		10,257		—		14,938		5,651		1,519		—		7,170		19,584		—		—		19,584		4,285		10,266		—		14,551
Construction	365		—		—		365		—		—		—		—		110		—		—		110		365		—		—		365
Real estate—residential and home equity:
Residential secured for business purpose	3,540		229		—		3,769		4,898		766		—		5,664		1,538		183		—		1,721		2,843		206		162		3,211
Residential secured for personal purpose	662		42		271		975		560		—		481		1,041		1,741		—		—		1,741		466		42		—		508
Home equity secured for personal purpose	263		—		35		298		525		—		171		696		1,565		—		—		1,565		511		—		148		659
Loans to individuals	—		—		130		130		—		—		142		142		—		—		101		101		—		—		195		195
Lease financings	5,661		—		136		5,797		536		—		193		729		1,526		—		49		1,575		1,599		—		256		1,855
Total	$	20,174	$	11,470	$	572	$	32,216	$	17,916	$	3,252	$	987	$	22,155	$	30,148	$	790	$	150	$	31,088	$	14,517	$	11,435	$	761	$	26,713

* Includes nonaccrual troubled debt restructured loans and lease modifications of $1.8 million and ~~$1.8~~$2.5 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

~~The increase in nonaccrual lease financings represents software leases totaling $5.0~~Accruing troubled debt restructuring loans of $11.4 million ~~under a vendor referral program.~~at December 31, 2017 includes balances of $10.3 million related to one borrower which were classified as troubled debt restructurings as the related loans were granted amortization period extensions. These ~~leases are personally guaranteed by high net worth individuals. During~~troubled debt restructured loans were returned to performing status during the first quarter of ~~2017,~~2018 as the ~~lessees stopped making payments due to disputes~~borrower was in compliance with the ~~vendor, and Univest Capital, Inc., a subsidiary~~modified terms of the ~~Corporation, filed legal complaints to pursue collection~~restructurings for the required time period. At June 30, 2018, commercial real estate nonaccrual loans and leases includes a $12.0 million loan that was placed on nonaccrual status during the first quarter of ~~all amounts owed.~~2018. A ~~complaint~~specific reserve of $650 thousand was ~~subsequently filed against Univest Capital Inc. and certain other defendants on March 28, 2017 by one~~recorded for this loan as of the lessees in federal court in Texas seeking, among other things, class action certification and a declaration that the contracts and related guarantees are null and void. Univest Capital, Inc. has not been served with the complaint, and the plaintiff has been directed to file an amended complaint on or before August 7, 2017. As of the filing date, the outcome of the matter is neither probable nor estimable.June 30, 2018.

Credit Quality Indicators

The following tables present by class, the recorded investment in loans and leases held for investment by credit quality indicator at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

The Corporation employs a ten (10) grade risk rating system related to the credit quality of commercial loans and residential real estate loans secured for a business purpose of which the first six categories are pass categories (credits not adversely rated). The following is a description of the internal risk ratings and the likelihood of loss related to each risk rating. Loans with a relationship balance of less than $1 million are reviewed on a performance basis, with the primary monitored metrics being delinquency (60 days or more past due) and revolving stagnancy. Loans with relationships greater than $1 million are reviewed at least annually. Loan relationships exceeding $15 million or classified as special mention or substandard are reviewed at least quarterly, or more frequently based on management’s discretion.


1.	Cash Secured—No credit risk


2.	Fully Secured—Negligible credit risk


3.	Strong—Minimal credit risk


4.	Satisfactory—Nominal credit risk


5.	Acceptable—Moderate credit risk


6.	Pre-Watch—Marginal, but stable credit risk


7.	Special Mention—Potential weakness


8.	Substandard—Well-defined weakness


9.	Doubtful—Collection in-full improbable


10.	Loss—Considered uncollectible

Commercial Credit Exposure Credit Risk by Internally Assigned Grades

The following table presents classifications for originated loans:


(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total		Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total
At June 30, 2017
At June 30, 2018
Grade:
1. Cash secured/ 2. Fully secured	$	1,755	$	—	$	18,890	$	—	$	20,645	$	2,846	$	—	$	24,304	$	—	$	27,150
3. Strong	13,329		1,976		—		—		15,305		13,926		612		—		—		14,538
4. Satisfactory	26,506		38,637		—		354		65,497		21,425		25,860		—		268		47,553
5. Acceptable	586,849		862,417		89,804		169,678		1,708,748		606,047		1,045,630		74,818		225,971		1,952,466
6. Pre-watch	160,548		180,794		52,380		16,437		410,159		204,593		249,505		103,970		36,000		594,068
7. Special Mention	3,949		11,860		884		2,205		18,898		23,203		41,286		1,400		984		66,873
8. Substandard	26,551		32,918		365		5,695		65,529		8,921		10,200		110		3,791		23,022
9. Doubtful	—		—		—		—		—		—		—		—		—		—
10.Loss	—		—		—		—		—		—		—		—		—		—
Total	$	819,487	$	1,128,602	$	162,323	$	194,369	$	2,304,781	$	880,961	$	1,373,093	$	204,602	$	267,014	$	2,725,670
At December 31, 2016
At December 31, 2017
Grade:
1. Cash secured/ 2. Fully secured	$	272	$	—	$	13,714	$	162	$	14,148	$	2,521	$	—	$	20,420	$	—	$	22,941
3. Strong	14,980		2,045		—		—		17,025		9,206		1,821		—		—		11,027
4. Satisfactory	35,529		38,861		—		367		74,757		30,283		26,950		—		274		57,507
5. Acceptable	465,675		676,212		110,650		133,716		1,386,253		593,205		960,258		76,899		215,750		1,846,112
6. Pre-watch	113,499		128,646		18,213		12,025		272,383		179,990		209,844		72,168		29,738		491,740
7. Special Mention	8,820		22,439		314		1,199		32,772		4,027		12,974		1,392		296		18,689
8. Substandard	24,446		41,378		—		4,462		70,286		13,868		23,834		365		4,742		42,809
9. Doubtful	—		—		—		—		—		—		—		—		—		—
10.Loss	—		—		—		—		—		—		—		—		—		—
Total	$	663,221	$	909,581	$	142,891	$	151,931	$	1,867,624	$	833,100	$	1,235,681	$	171,244	$	250,800	$	2,490,825

The following table presents classifications for acquired loans:


(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total		Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total
At June 30, 2017
At June 30, 2018
Grade:
1. Cash secured/ 2. Fully secured	$	1,110	$	—	$	—	$	—	$	1,110	$	—	$	—	$	—	$	—	$	—
3. Strong	—		—		—		—		—		—		—		—		—		—
4. Satisfactory	139		676		—		—		815		—		—		—		—		—
5. Acceptable	71,674		226,616		689		79,192		378,171		42,051		164,915		—		61,566		268,532
6. Pre-watch	6,770		132,194		7,787		16,071		162,822		1,229		86,041		4,284		8,784		100,338
7. Special Mention	—		2,153		—		1,920		4,073		865		4,462		—		—		5,327
8. Substandard	5,987		13,483		—		2,551		22,021		1,054		15,133		—		1,348		17,535
9. Doubtful	—		—		—		—		—		—		—		—		—		—
10.Loss	—		—		—		—		—		—		—		—		—		—
Total	$	85,680	$	375,122	$	8,476	$	99,734	$	569,012	$	45,199	$	270,551	$	4,284	$	71,698	$	391,732
December 31, 2016
December 31, 2017
Grade:
1. Cash secured/ 2. Fully secured	$	583	$	—	$	—	$	—	$	583	$	1,120	$	—	$	—	$	—	$	1,120
3. Strong	—		—		—		—		—		—		—		—		—		—
4. Satisfactory	4,399		1,018		—		—		5,417		125		482		—		—		607
5. Acceptable	113,512		282,199		20,565		117,322		533,598		49,949		183,490		—		73,402		306,841
6. Pre-watch	31,697		163,623		11,388		14,405		221,113		6,183		98,977		4,592		15,861		125,613
7. Special Mention	73		7,705		—		6,245		14,023		1,007		17,028		—		—		18,035
8. Substandard	9,781		10,823		—		4,165		24,769		4,727		6,483		—		1,904		13,114
9. Doubtful	—		—		—		—		—		—		—		—		—		—
10.Loss	—		—		—		—		—		—		—		—		—		—
Total	$	160,045	$	465,368	$	31,953	$	142,137	$	799,503	$	63,111	$	306,460	$	4,592	$	91,167	$	465,330

Credit Exposure—Real Estate—Residential Secured for Personal Purpose, Real Estate—Home Equity Secured for Personal Purpose, Loans to individuals, Lease Financing Credit Risk Profile by Payment Activity

The Corporation monitors the credit risk profile by payment activity for the following classifications of loans and leases: residential real estate loans secured for a personal purpose, home equity loans secured for a personal purpose, loans to individuals and lease financings. Nonperforming loans and leases are loans and leases past due 90 days or more, loans and leases on nonaccrual of interest and troubled debt restructured loans and lease modifications. Performing loans and leases are reviewed only if the loan becomes 60 days or more past due. Nonperforming loans and leases are reviewed monthly. Performing loans and leases have a nominal to moderate risk of loss.

The following table presents classifications for originated loans:


(Dollars in thousands)	Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financing		Total		Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financings		Total
At June 30, 2017
At June 30, 2018
Performing	$	235,330	$	159,570	$	27,312	$	124,357	$	546,569	$	296,127	$	174,866	$	30,947	$	131,547	$	633,487
Nonperforming	452		298		130		5,797		6,677		607		485		101		1,575		2,768
Total	$	235,782	$	159,868	$	27,442	$	130,154	$	553,246	$	296,734	$	175,351	$	31,048	$	133,122	$	636,255
At December 31, 2016
At December 31, 2017
Performing	$	210,208	$	147,286	$	29,968	$	134,010	$	521,472	$	260,589	$	171,527	$	27,961	$	127,913	$	587,990
Nonperforming	169		696		142		729		1,736		65		357		195		1,855		2,472
Total	$	210,377	$	147,982	$	30,110	$	134,739	$	523,208	$	260,654	$	171,884	$	28,156	$	129,768	$	590,462

The following table presents classifications for acquired loans:


(Dollars in thousands)	Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financing		Total		Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financings		Total
At June 30, 2017
At June 30, 2018
Performing	$	70,076	$	12,386	$	146	$	—	$	82,608	$	53,555	$	8,829	$	143	$	—	$	62,527
Nonperforming	523		—		—		—		523		1,134		1,080		—		—		2,214
Total	$	70,599	$	12,386	$	146	$	—	$	83,131	$	54,689	$	9,909	$	143	$	—	$	64,741
At December 31, 2016
At December 31, 2017
Performing	$	79,559	$	14,857	$	263	$	—	$	94,679	$	60,477	$	12,084	$	144	$	—	$	72,705
Nonperforming	872		—		—		—		872		443		302		—		—		745
Total	$	80,431	$	14,857	$	263	$	—	$	95,551	$	60,920	$	12,386	$	144	$	—	$	73,450

Reserve for Loan and Lease Losses and Recorded Investment in Loans and Leases

The following presents, by portfolio segment, a summary of the activity in the reserve for loan and lease losses for the three and six months ended June 30, 2018 and 2017:



(Dollars in thousands)	Commercial, Financial and Agricultural			Real Estate— Commercial and Construction			Real Estate— Residential Secured for Business Purpose			Real Estate— Residential and Home Equity Secured for Personal Purpose			Loans to Individuals			Lease Financings			Unallocated			Total
Three Months Ended June 30, 2018
Reserve for loan and lease losses:
Beginning balance	$	6,942		$	11,178		$	1,871		$	1,908		$	372		$	1,079		$	60		$	23,410
Charge-offs	(13,048		)	—			—			—			(79		)	(169		)	N/A			(13,296		)
Recoveries	23			—			7			8			16			75			N/A			129
Provision (recovery of provision)	13,341			1,149			126			578			138			86			(9		)	15,409
Ending balance	$	7,258		$	12,327		$	2,004		$	2,494		$	447		$	1,071		$	51		$	25,652
Three Months Ended June 30, 2017
Reserve for loan and lease losses:
Beginning balance	$	7,890		$	7,624		$	1,345		$	1,001		$	335		$	1,329		$	4		$	19,528
Charge-offs	(108		)	(30		)	(1,139		)	—			(114		)	(327		)	N/A			(1,718		)
Recoveries	210			—			8			4			46			66			N/A			334
Provision (recovery of provision)	321			874			915			(30		)	62			592			33			2,767
Recovery of provision for acquired credit impaired loans	—			—			—			(1		)	—			—			—			(1		)
Ending balance	$	8,313		$	8,468		$	1,129		$	974		$	329		$	1,660		$	37		$	20,910
Six Months Ended June 30, 2018
Reserve for loan and lease losses:
Beginning balance	$	6,742		$	9,839		$	1,661		$	1,754		$	373		$	1,132		$	54		$	21,555
Charge-offs	(13,649		)	(40		)	—			—			(171		)	(305		)	N/A			(14,165		)
Recoveries	249			73			258			65			46			109			N/A			800
Provision (recovery of provision)	13,916			2,455			85			674			199			135			(3		)	17,461
Provision for acquired credit impaired loans	—			—			—			1			—			—			—			1
Ending balance	$	7,258		$	12,327		$	2,004		$	2,494		$	447		$	1,071		$	51		$	25,652
Six Months Ended June 30, 2017
Reserve for loan and lease losses:
Beginning balance	$	7,037		$	7,505		$	774		$	993		$	364		$	788		$	38		$	17,499
Charge-offs	(286		)	(30		)	(1,181		)	(94		)	(240		)	(584		)	N/A			(2,415		)
Recoveries	397			3			18			21			81			95			N/A			615
Provision (recovery of provision)	1,165			990			1,518			52			124			1,361			(1		)	5,209
Provision for acquired credit impaired loans	—			—			—			2			—			—			—			2
Ending balance	$	8,313		$	8,468		$	1,129		$	974		$	329		$	1,660		$	37		$	20,910

N/A – Not applicable

Charge-offs for the three and six months ended June 30, 2018 include a charge-off of $12.7 million for a commercial loan relationship related to alleged fraudulent activities believed to be perpetrated by one or more employees of the borrower. The Bank owns a participating interest which originally totaled $13.0 million in an approximately $80.0 million commercial lending facility. The charge-off represents the entire principal amount owed to the Bank.

The following presents, by portfolio segment, a summary of the balance in the reserve for loan and lease losses disaggregated on the basis of impairment method and the recorded investment in loans and leases disaggregated on the basis of impairment method ~~for the three and six months ended~~at June 30, ~~2017~~2018 and ~~2016:~~2017:

(Dollars in thousands) Commercial,
Financial
and
Agricultural Real Estate—
Commercial
and
Construction Real Estate—
Residential
Secured for
Business
Purpose Real Estate—
Residential
and Home
Equity
Secured for
Personal
Purpose Loans to
Individuals Lease
Financings Unallocated Total
Three Months Ended June 30, 2017
Reserve for loan and lease losses:
Beginning balance $ 7,890
$ 7,624
$ 1,345
$ 1,001
$ 335
$ 1,329
$ 4
$ 19,528
Charge-offs (108 ) (30 ) (1,139 ) —
(114 ) (327 ) N/A
(1,718 )
Recoveries 210
—
8
4
46
66
N/A
334
Provision (recovery of provision) 321
874
915
(30 ) 62
592
33
2,767
Recovery of provision for acquired credit impaired loans —
—
—
(1 ) —
—
—
(1 )
Ending balance $ 8,313
$ 8,468
$ 1,129
$ 974
$ 329
$ 1,660
$ 37
$ 20,910
Three Months Ended June 30, 2016
Reserve for loan and lease losses:
Beginning balance $ 5,630
$ 6,471
$ 747
$ 1,312
$ 356
$ 922
$ 1,014
$ 16,452
Charge-offs (346 ) (179 ) (27 ) (10 ) (108 ) (160 ) N/A
(830 )
Recoveries 515
9
34
34
30
79
N/A
701
(Recovery of provision) provision (11 ) 1,070
(698 ) (34 ) 133
280
(87 ) 653
Provision (recovery of provision) for acquired credit impaired loans —
178
—
(1 ) —
—
—
177
Ending balance $ 5,788
$ 7,549
$ 56
$ 1,301
$ 411
$ 1,121
$ 927
$ 17,153
Six Months Ended June 30, 2017
Reserve for loan and lease losses:
Beginning balance $ 7,037
$ 7,505
$ 774
$ 993
$ 364
$ 788
$ 38
$ 17,499
Charge-offs (286 ) (30 ) (1,181 ) (94 ) (240 ) (584 ) N/A
(2,415 )
Recoveries 397
3
18
21
81
95
N/A
615
Provision (recovery of provision) 1,165
990
1,518
52
124
1,361
(1 ) 5,209
Provision for acquired credit impaired loans —
—
—
2
—
—
—
2
Ending balance $ 8,313
$ 8,468
$ 1,129
$ 974
$ 329
$ 1,660
$ 37
$ 20,910
Six Months Ended June 30, 2016
Reserve for loan and lease losses:
Beginning balance $ 6,418
$ 6,572
$ 763
$ 1,575
$ 346
$ 1,042
$ 912
$ 17,628
Charge-offs (1,827 ) (205 ) (265 ) (56 ) (184 ) (365 ) N/A
(2,902 )
Recoveries 965
16
53
51
63
123
N/A
1,271
Provision (recovery of provision) 232
988
(495 ) (267 ) 186
321
15
980
Provision (recovery of provision) for acquired credit impaired loans —
178
—
(2 ) —
—
—
176
Ending balance $ 5,788
$ 7,549
$ 56
$ 1,301
$ 411
$ 1,121
$ 927
$ 17,153



(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial and Construction		Real Estate— Residential Secured for Business Purpose		Real Estate— Residential and Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financings		Unallocated		Total
At June 30, 2018
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	646	$	866	$	12	$	—	$	—	$	—	N/A		$	1,524
Ending balance: collectively evaluated for impairment	6,612		11,420		1,951		2,494		447		1,071		51		24,046
Ending balance: acquired credit impaired loans evaluated for impairment	—		41		41		—		—		—		—		82
Total ending balance	$	7,258	$	12,327	$	2,004	$	2,494	$	447	$	1,071	$	51	$	25,652
Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	6,238	$	21,004	$	2,132	$	3,306	$	—	$	1,250			$	33,930
Ending balance: collectively evaluated for impairment	874,723		1,554,844		264,882		468,779		31,048		131,872				3,326,148
Loans measured at fair value	—		1,847		—		—		—		—				1,847
Acquired non-credit impaired loans	44,932		274,629		71,238		64,533		143		—				455,475
Acquired credit impaired loans	267		206		460		65		—		—				998
Total ending balance	$	926,160	$	1,852,530	$	338,712	$	536,683	$	31,191	$	133,122			$	3,818,398
At June 30, 2017
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	10	$	59	$	37	$	25	$	—	$	886	N/A		$	1,017
Ending balance: collectively evaluated for impairment	8,303		8,409		1,092		949		329		774		37		19,893
Total ending balance	$	8,313	$	8,468	$	1,129	$	974	$	329	$	1,660	$	37	$	20,910
Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	9,794	$	20,735	$	5,196	$	967	$	—	$	5,021			$	41,713
Ending balance: collectively evaluated for impairment	809,693		1,268,132		189,173		394,683		27,442		125,133				2,814,256
Loans measured at fair value	—		2,058		—		—		—		—				2,058
Acquired non-credit impaired loans	85,178		378,413		99,151		82,770		146		—				645,658
Acquired credit impaired loans	502		5,185		583		215		—		—				6,485
Total ending balance	$	905,167	$	1,674,523	$	294,103	$	478,635	$	27,588	$	130,154			$	3,510,170

N/A – Not applicable

(Dollars in thousands) Commercial,
Financial
and
Agricultural Real Estate—
Commercial
and
Construction Real Estate—
Residential
Secured for
Business
Purpose Real Estate—
Residential
and Home
Equity
Secured for
Personal
Purpose Loans to
Individuals Lease
Financings Unallocated Total
At June 30, 2017
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment $ 10
$ 59
$ 37
$ 25
$ —
$ 886
N/A
$ 1,017
Ending balance: collectively evaluated for impairment 8,303
8,409
1,092
949
329
774
37
19,893
Total ending balance $ 8,313
$ 8,468
$ 1,129
$ 974
$ 329
$ 1,660
$ 37
$ 20,910
Loans and leases held for investment:
Ending balance: individually evaluated for impairment $ 9,794
$ 20,735
$ 5,196
$ 967
$ —
$ 5,021
$ 41,713
Ending balance: collectively evaluated for impairment 809,693
1,268,132
189,173
394,683
27,442
125,133
2,814,256
Loans measured at fair value —
2,058
—
—
—
—
2,058
Acquired non-credit impaired loans 85,178
378,413
99,151
82,770
146
—
645,658
Acquired credit impaired loans 502
5,185
583
215
—
—
6,485
Total ending balance $ 905,167
$ 1,674,523
$ 294,103
$ 478,635
$ 27,588
$ 130,154
$ 3,510,170
At June 30, 2016
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment $ 390
$ 4
$ 16
$ —
$ —
$ —
N/A
$ 410
Ending balance: collectively evaluated for impairment 5,398
7,545
40
1,301
411
1,121
927
16,743
Total ending balance $ 5,788
$ 7,549
$ 56
$ 1,301
$ 411
$ 1,121
$ 927
$ 17,153
Loans and leases held for investment:
Ending balance: individually evaluated for impairment $ 12,472
$ 26,761
$ 3,772
$ 1,029
$ —
$ —
$ 44,034
Ending balance: collectively evaluated for impairment 546,892
885,131
118,601
333,887
30,880
128,796
2,044,187
Acquired non-credit impaired loans 20,096
114,965
107,087
13,420
306
—
255,874
Acquired credit impaired loans —
180
762
—
—
—
942
Total ending balance $ 579,460
$ 1,027,037
$ 230,222
$ 348,336
$ 31,186
$ 128,796
$ 2,345,037

~~N/A – Not applicable~~

The Corporation records a provision for loan loss for the acquired non-impaired loans only when additional deterioration of the portfolio is identified over the projections utilized in the initial fair value analysis. After the acquisition measurement period, the present value of any decreases in expected cash flows of acquired credit impaired loans will generally result in an impairment charge recorded as a provision for loan loss, resulting in an increase to the allowance.

Impaired Loans (excludes Lease Financings)

The following presents, by class of loans, the recorded investment and unpaid principal balance of impaired loans, the amounts of the impaired loans for which there is not a reserve for credit losses and the amounts for which there is a reserve for credit losses at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. The impaired loans exclude acquired credit impaired loans.


	At June 30, 2017						At December 31, 2016						At June 30, 2018						At December 31, 2017
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Reserve		Recorded Investment		Unpaid Principal Balance		Related Reserve		Recorded Investment		Unpaid Principal Balance		Related Reserve		Recorded Investment		Unpaid Principal Balance		Related Reserve
Impaired loans with no related reserve recorded:
Commercial, financial and agricultural	$	9,629	$	10,947			$	10,911	$	12,561			$	4,122	$	4,848			$	7,019	$	8,301
Real estate—commercial real estate	19,164		20,029				24,469		25,342				7,489		8,336				15,621		16,507
Real estate—construction	365		365				—		—				110		113				365		365
Real estate—residential secured for business purpose	4,655		5,673				5,704		6,253				1,926		2,062				3,430		4,620
Real estate—residential secured for personal purpose	703		764				560		594				1,741		1,784				508		566
Real estate—home equity secured for personal purpose	238		244				525		528				1,565		1,595				511		523
Total impaired loans with no related reserve recorded	$	34,754	$	38,022			$	42,169	$	45,278			$	16,953	$	18,738			$	27,454	$	30,882
Impaired loans with a reserve recorded:
Commercial, financial and agricultural	$	165	$	166	$	10	$	166	$	166	$	19	$	2,116	$	2,180	$	646	$	60	$	60	$	31
Real estate—commercial real estate	1,206		1,206		59		597		597		25		13,405		13,645		866		933		933		99
Real estate—residential secured for business purpose	541		542		37		983		1,105		191		206		272		12		35		37		1
Real estate—residential secured for personal purpose	26		26		25		—		—		—
Total impaired loans with a reserve recorded	$	1,938	$	1,940	$	131	$	1,746	$	1,868	$	235	$	15,727	$	16,097	$	1,524	$	1,028	$	1,030	$	131


	At June 30, 2017						At December 31, 2016
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Reserve		Recorded Investment		Unpaid Principal Balance		Related Reserve
Total impaired loans:
Commercial, financial and agricultural	$	9,794	$	11,113	$	10	$	11,077	$	12,727	$	19	$	6,238	$	7,028	$	646	$	7,079	$	8,361	$	31
Real estate—commercial real estate	20,370		21,235		59		25,066		25,939		25		20,894		21,981		866		16,554		17,440		99
Real estate—construction	365		365		—		—		—		—		110		113		—		365		365		—
Real estate—residential secured for business purpose	5,196		6,215		37		6,687		7,358		191		2,132		2,334		12		3,465		4,657		1
Real estate—residential secured for personal purpose	729		790		25		560		594		—		1,741		1,784		—		508		566		—
Real estate—home equity secured for personal purpose	238		244		—		525		528		—		1,565		1,595		—		511		523		—
Total impaired loans	$	36,692	$	39,962	$	131	$	43,915	$	47,146	$	235	$	32,680	$	34,835	$	1,524	$	28,482	$	31,912	$	131

Impaired loans include nonaccrual loans, accruing troubled debt restructured loans and other accruing impaired loans for which it is probable that not all principal and interest payments due will be collectible in accordance with the original contractual terms. These loans are individually measured to determine the amount of potential impairment. The loans are reviewed for impairment based on the fair value of the collateral for collateral dependent loans and for certain loans based on discounted cash flows using the loans’ initial effective interest rates. Impaired loans include other accruing impaired loans of ~~$10.7~~$3.3 million and ~~$23.3~~$4.1 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. Specific reserves on other accruing impaired loans were ~~$95~~$25 thousand and ~~$84~~$99 thousand at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

The following presents by class of loans, the average recorded investment in impaired loans and an analysis of interest on impaired loans. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Therefore, interest income on accruing impaired loans is recognized using the accrual method.


	Three Months Ended June 30, 2017						Three Months Ended June 30, 2016						Three Months Ended June 30, 2018						Three Months Ended June 30, 2017
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms
Commercial, financial and agricultural	$	11,470	$	64	$	86	$	13,387	$	74	$	78	$	6,394	$	32	$	134	$	11,470	$	64	$	86
Real estate—commercial real estate	20,777		184		81		27,691		281		58		22,914		18		265		20,777		184		81
Real estate—construction	274		—		10		—		—		—		56		—		3		274		—		10
Real estate—residential secured for business purpose	4,184		21		61		3,740		9		60		1,966		5		23		4,184		21		61
Real estate—residential secured for personal purpose	699		1		15		392		—		5		889		2		33		699		1		15
Real estate—home equity secured for personal purpose	354		—		5		431		—		9		1,033		—		31		354		—		5
Total	$	37,758	$	270	$	258	$	45,641	$	364	$	210	$	33,252	$	57	$	489	$	37,758	$	270	$	258


*	Includes interest income recognized on a cash basis for nonaccrual loans of $3$2 thousandand $0$3 thousand for the three months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and interest income recognized on the accrual method for accruing impaired loans of ~~$268~~$55 thousand and ~~$364~~$267 thousand for the three months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively.


	Six Months Ended June 30, 2017						Six Months Ended June 30, 2016						Six Months Ended June 30, 2018						Six Months Ended June 30, 2017
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms
Commercial, financial and agricultural	$	11,506	$	110	$	171	$	13,421	$	142	$	173	$	7,090	$	72	$	211	$	11,506	$	110	$	171
Real estate—commercial real estate	22,464		417		154		28,389		586		128		20,105		190		552		22,464		417		154
Real estate—construction	156		—		10		—		—		—		137		—		5		156		—		10
Real estate—residential secured for business purpose	4,302		37		105		4,120		36		107		2,107		10		47		4,302		37		105
Real estate—residential secured for personal purpose	636		1		23		496		2		9		720		3		44		636		1		23
Real estate—home equity secured for personal purpose	431		—		10		329		—		11		819		—		39		431		—		10
Total	$	39,495	$	565	$	473	$	46,755	$	766	$	428	$	30,978	$	275	$	898	$	39,495	$	565	$	473


*	Includes interest income recognized on a cash basis for nonaccrual loans of $4$8 thousandand $7$4 thousand for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and interest income recognized on the accrual method for accruing impaired loans of ~~$561~~$267 thousand and ~~$759~~$561 thousand for the six months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively.

Impaired Leases

The Corporation had impaired leases of ~~$5.0~~$1.3 million ~~with related reserves of $886 thousand~~ at June 30, ~~2017. The Corporation had no impaired leases at~~2018 and December 31, ~~2016.~~2017 with no related reserves. See discussion in ~~Non-Performing~~Reserve for Loan and Lease Losses and Recorded Investment in Loans and Leases.

Troubled Debt Restructured Loans

The following presents, by class of loans, information regarding accruing and nonaccrual loans that were restructured:

Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
(Dollars in thousands) Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment Related
Reserve Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment Related
Reserve
Accruing Troubled Debt Restructured Loans:
Real estate—commercial real estate 3
$ 9,206
$ 9,206
$ —
—
$ —
$ —
$ —
Real estate—residential secured for business purpose —
—
—
—
1
415
415
—
Total 3
$ 9,206
$ 9,206
$ —
1
$ 415
$ 415
$ —
Nonaccrual Troubled Debt Restructured Loans:
Real estate—commercial real estate 1
$ 328
$ 328
$ —
—
$ —
$ —
$ —
Total 1
$ 328
$ 328
$ —
—
$ —
$ —
$ —

Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
(Dollars in thousands) Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment Related
Allowance Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment Related
Allowance
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural —
$ —
$ —
$ —
1
$ 1,545
$ 1,545
$ —
Real estate—commercial real estate 3
9,206
9,206
—
—
—
—
—
Real estate—residential secured for business purpose —
—
—
—
1
415
415
—
Total 3
$ 9,206
$ 9,206
$ —
2
$ 1,960
$ 1,960
$ —
Nonaccrual Troubled Debt Restructured Loans:
Real estate—commercial real estate 1
$ 328
$ 328
$ —
—
$ —
$ —
$ —
Total 1
$ 328
$ 328
$ —
—
$ —
$ —
$ —



	Three Months Ended June 30, 2018							Three Months Ended June 30, 2017
(Dollars in thousands)	Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Reserve		Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Reserve
Accruing Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	$	—	$	—	3	$	9,206	$	9,206	$	—
Total	—	$	—	$	—	$	—	3	$	9,206	$	9,206	$	—
Nonaccrual Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	$	—	$	—	1	$	328	$	328	$	—
Real estate—residential secured for personal purpose	1	66		66		—		—	—		—		—
Total	1	$	66	$	66	$	—	1	$	328	$	328	$	—



	Six Months Ended June 30, 2018							Six Months Ended June 30, 2017
(Dollars in thousands)	Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Allowance		Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Allowance
Accruing Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	$	—	$	—	3	$	9,206	$	9,206	$	—
Total	—	$	—	$	—	$	—	3	$	9,206	$	9,206	$	—
Nonaccrual Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	$	—	$	—	1	$	328	$	328	$	—
Real estate—residential secured for personal purpose	1	66		66		—		—	—		—		—
Total	1	$	66	$	66	$	—	1	$	328	$	328	$	—

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 ~~a short-term basis~~ up to one year. The goal when restructuring a credit is to establish a reasonable period of time to provide cash flow 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 ninety days past due.

The following presents, by class of loans, information regarding the types of concessions granted on accruing and nonaccrual loans that were restructured during the three and six months ended June 30, ~~2017~~2018 and ~~2016.~~2017.


	Interest Only Term Extension			Maturity Date Extension			Amortization Period Extension			Total Concessions Granted			Maturity Date Extension			Amortization Period Extension			Total Concessions Granted
(Dollars in thousands)	No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount
Three Months Ended June 30, 2018
Accruing Troubled Debt Restructured Loans:
Total													—	$	—	—	$	—	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Real estate—residential secured for personal purpose													—	$	—	1	$	66	1	$	66
Total													—	$	—	1	$	66	1	$	66
Three Months Ended June 30, 2017
Accruing Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	—	$	—	3	$	9,206	3	$	9,206	—	$	—	3	$	9,206	3	$	9,206
Total	—	$	—	—	$	—	3	$	9,206	3	$	9,206	—	$	—	3	$	9,206	3	$	9,206
Nonaccrual Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	1	$	328	—	$	—	1	$	328	1	$	328	—	$	—	1	$	328
Real estate—residential secured for personal purpose	—	—		—	—		—	—		—	—
Total	—	$	—	1	$	328	—	$	—	1	$	328	1	$	328	—	$	—	1	$	328
Three Months Ended June 30, 2016
Six Months Ended June 30, 2018
Accruing Troubled Debt Restructured Loans:
Real estate—residential secured for business purpose	1	$	415	—	$	—	—	$	—	1	$	415
Total	1	$	415	—	$	—	—	$	—	1	$	415	—	$	—	—	$	—	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Real estate—residential secured for personal purpose													—	$	—	1	$	66	1	$	66
Total	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	1	$	66	1	$	66
Six Months Ended June 30, 2017
Accruing Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	—	$	—	3	$	9,206	3	$	9,206	—	$	—	3	$	9,206	3	$	9,206
Total	—	$	—	—	$	—	3	$	9,206	3	$	9,206	—	$	—	3	$	9,206	3	$	9,206
Nonaccrual Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	1	$	328	—	$	—	1	$	328	1	$	328	—	$	—	1	$	328
Total	—	$	—	1	$	328	—	$	—	1	$	328	1	$	328	—	$	—	1	$	328
Six Months Ended June 30, 2016
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	—	$	—	1	$	1,545	1	$	1,545
Real estate—residential secured for business purpose	1	415		—	—		—	—		1	415
Total	1	$	415	—	$	—	1	$	1,545	2	$	1,960
Nonaccrual Troubled Debt Restructured Loans:
Total	—	$	—	—	$	—	—	$	—	—	$	—

The following presents, by class of loans, information regarding accruing and nonaccrual troubled debt restructured loans, for which there were payment defaults within twelve months of the restructuring date:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
(Dollars in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural													—	$	—	—	$	—	1	$	953	—	$	—
Total	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	1	$	953	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	—	$	—	—	$	—	1	$	50
Total	—	$	—	—	$	—	—	$	—	1	$	50	—	$	—	—	$	—	—	$	—	—	$	—

The following presents, by class of loans, information regarding consumer mortgages collateralized by residential real estate property that are in the process of foreclosure at June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


(Dollars in thousands)	At June 30, 2017		At December 31, 2016		At June 30, 2018		At December 31, 2017
Real estate-residential secured for personal purpose					$	—	$	31
Real estate-home equity secured for personal purpose	$	—	$	180	812		—
Total	$	—	$	180	$	812	$	31

The ~~Corporation held no~~following presents foreclosed ~~consumer~~ residential real estate property included in other real estate owned at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.



(Dollars in thousands)	At June 30, 2018		At December 31, 2017
Foreclosed residential real estate	$	440	$	80

Note 5. Goodwill and Other Intangible Assets

The Corporation has ~~covenants not to compete,~~ core deposit and customer-related intangibles and servicing rights, 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 Corporation also has goodwill 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 six months ended June 30, ~~2017~~2018 were as follows:


(Dollars in thousands)	Banking		Wealth Management		Insurance		Consolidated		Banking		Wealth Management		Insurance		Consolidated
Balance at December 31, 2016	$	138,476	$	15,434	$	18,649	$	172,559
Balance at December 31, 2017									$	138,476	$	15,434	$	18,649	$	172,559
Addition to goodwill from acquisitions	—		—		—		—		—		—		—		—
Balance at June 30, 2017	$	138,476	$	15,434	$	18,649	$	172,559
Balance at June 30, 2018									$	138,476	$	15,434	$	18,649	$	172,559

The following table reflects the components of intangible assets at the dates indicated:


	At June 30, 2017						At December 31, 2016						At June 30, 2018						At December 31, 2017
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount
Amortized intangible assets:
Covenants not to compete	$	710	$	409	$	301	$	710	$	205	$	505	$	710	$	710	$	—	$	710	$	580	$	130
Core deposit intangibles	6,788		1,593		5,195		6,788		1,004		5,784		6,788		2,663		4,125		6,788		2,135		4,653
Customer related intangibles	12,381		9,190		3,191		12,381		8,504		3,877		12,381		10,347		2,034		12,381		9,828		2,553
Servicing rights	15,099		8,551		6,548		14,369		7,884		6,485		16,543		9,893		6,650		15,855		9,282		6,573
Total amortized intangible assets	$	34,978	$	19,743	$	15,235	$	34,248	$	17,597	$	16,651	$	36,422	$	23,613	$	12,809	$	35,734	$	21,825	$	13,909

The estimated aggregate amortization expense for ~~covenants not to compete and~~ core deposit and customer related intangibles for the remainder of ~~2017~~2018 and the succeeding fiscal years is as follows:


Year	(Dollars in thousands)	Amount		(Dollars in thousands)	Amount
Remainder of 2017		$	1,350
2018		2,114
Remainder of 2018					$	937
2019		1,565			1,565
2020		1,200			1,200
2021		924			923
2022					666
Thereafter		1,534			868

The Corporation has originated mortgage servicing rights, which are included in other intangible assets on the consolidated balance sheets. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income on a basis similar to the interest method and an accelerated amortization method for loan payoffs. Mortgage servicing rights are subject to impairment testing on a quarterly basis. The aggregate fair value of these rights was ~~$9.6 million and $9.5~~$11.6 million at June 30, ~~2017~~2018 and $10.0 million at December 31, ~~2016, respectively.~~2017. The fair value of mortgage servicing rights was determined using a discount

rate of 10.0% at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. The Corporation also records servicing rights on small business administration (SBA) loans. The value of these servicing rights was ~~$17~~$22 thousand and $21 thousand at June 30, ~~2017.~~2018 and December 31, 2017, respectively.

Changes in the servicing rights balance are summarized as follows:

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2017 2016 2017 2016
Beginning of period $ 6,502
$ 5,839
$ 6,485
$ 5,877
Servicing rights capitalized 387
466
730
777
Amortization of servicing rights (341 ) (409 ) (667 ) (758 )
Changes in valuation allowance —
—
—
—
End of period $ 6,548
$ 5,896
$ 6,548
$ 5,896
Residential mortgage and SBA loans serviced for others $ 984,846
$ 889,639
$ 984,846
$ 889,639

~~There was no activity in the valuation allowance for the three and six months ended June 30, 2017 and June 30, 2016.~~



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2018			2017			2018			2017
Beginning of period	$	6,605		$	6,502		$	6,573		$	6,485
Servicing rights capitalized	350			387			687			730
Amortization of servicing rights	(305		)	(341		)	(610		)	(667		)
End of period	$	6,650		$	6,548		$	6,650		$	6,548
Residential mortgage and SBA loans serviced for others	$	1,019,233		$	984,846		$	1,019,233		$	984,846

The estimated amortization expense of servicing rights for the remainder of ~~2017~~2018 and the succeeding fiscal years is as follows:


Year	(Dollars in thousands)	Amount		(Dollars in thousands)	Amount
Remainder of 2017		$	955
2018		833
Remainder of 2018					$	863
2019		722			769
2020		624			680
2021		538			601
2022					530
Thereafter		2,876			3,207

Note 6. Deposits

Deposits and their respective weighted average interest rate at June 30, 2018 and December 31, 2017 consist of the following:



	At June 30, 2018				At December 31, 2017
	Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount
	(Dollars in thousands)
Noninterest-bearing deposits	—	%	$	1,055,479	—	%	$	1,040,026
Demand deposits	0.57		1,163,451		0.43		1,109,438
Savings deposits	0.34		807,461		0.26		830,706
Time deposits	1.46		594,395		1.12		574,749
Total	0.50	%	$	3,620,786	0.38	%	$	3,554,919

The aggregate amount of time deposits in denominations of $100 thousand or more was $208.9 million at June 30, 2018 and $250.0 million at December 31, 2017. Deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Deposit insurance per account owner is currently up to $250 thousand. The aggregate amount of time deposits in denominations over $250 thousand was $65.8 million at June 30, 2018 and $118.4 million at December 31, 2017.

At June 30, 2018, the scheduled maturities of time deposits are as follows:



Year	(Dollars in thousands)	Amount
Remainder of 2018		$	154,611
2019		233,501
2020		99,450
2021		26,170
2022		32,233
Thereafter		48,430
Total		$	594,395

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. The long-term debt balances and weighted average interest rates include purchase accounting fair value adjustments, net of related amortization, from the Fox Chase acquisition.


	At June 30, 2017				At December 31, 2016				At June 30, 2018				At December 31, 2017
(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		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	$	124,500	1.24	%	$	91,300	0.74	%	$	138,530	2.10	%	$	30,225	1.54	%
Federal funds purchased	85,000		1.31		80,000		0.81		65,000		2.03		55,000		1.56
Customer repurchase agreements	22,226		0.05		24,871		0.05		28,323		0.05		20,206		0.05

Long-term debt:
FHLB advances	$	185,577	1.45	%	$	96,248	0.94	%	$	125,005	1.73	%	$	125,036	1.73	%
Security repurchase agreements	31,033		1.26		31,274		0.91		30,551		2.04		30,792		1.52

Subordinated notes	$	94,209	5.35	%	$	94,087	5.36	%	$	94,453	5.34	%	$	94,331	5.35	%

The Corporation, through the Bank, has a credit facility with the Federal Home Loan Bank (FHLB) with a maximum borrowing capacity of approximately ~~$1.3~~$1.5 billion. Advances from the FHLB are collateralized by a blanket floating lien on all first mortgage loans of the Bank, FHLB capital stock owned by the Bank and any funds on deposit with the FHLB. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Bank had outstanding short-term letters of credit with the FHLB totaling ~~$104.9~~$178.9 million and ~~$148.5~~$234.2 million, respectively, which were utilized to collateralize public funds 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 Corporation, through the Bank, maintains uncommitted federal fund credit lines with several correspondent banks totaling $367.0 million ~~and $302.0 million~~ at June 30, ~~2017~~2018 and December 31, ~~2016, respectively.~~2017. Future availability under these lines is subject to the prerogatives of the granting banks and may be withdrawn at will.

The Corporation, through the Bank, ~~has an available line of credit~~holds collateral at the Federal Reserve Bank of Philadelphia ~~which was collateralized by~~in order to access their Discount Window Lending program. The collateral consisting of investment securities ~~totaling $55.5~~was valued at $69.4 million and ~~$55.7~~$52.0 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Corporation had no outstanding borrowings ~~from~~under this ~~line.~~program.

The Corporation has a $10.0 million line of credit with a correspondent bank. At June 30, 2018 and December 31, 2017, the Corporation had no outstanding borrowings under this line.

Long-term advances with the FHLB of Pittsburgh mature as follows:

(Dollars in thousands) As of June 30, 2017 Weighted Average Rate
Remainder of 2017 $ 60,509
0.86 %
2018 10,068
0.69
2019 10,000
1.35
2020 40,000
1.70
2021 55,000
1.94
Thereafter 10,000
2.09
Total $ 185,577
1.45 %

FHLB borrowings totaling $50.5 million that mature in the fourth quarter of 2017 have a "Call Date"; if the borrowing is called, the Corporation has the option to either pay off the borrowing without penalty or the fixed rate borrowing resets to a variable three-month LIBOR based rate. Subsequent to the call date, the borrowings are callable by the FHLB quarterly. Accordingly, the contractual maturities may differ from actual maturities.



(Dollars in thousands)	As of June 30, 2018		Weighted Average Rate
Remainder of 2018	$	10,005	0.70	%
2019	10,000		1.35
2020	40,000		1.70
2021	55,000		1.94
2022	10,000		2.09
Thereafter	—		—
Total	$	125,005	1.73	%

Long-term debt under security repurchase agreements with large commercial banks mature as follows:


(Dollars in thousands)	As of June 30, 2017		Weighted Average Rate		As of June 30, 2018		Weighted Average Rate
Remainder of 2017	$	—	—	%
2018	10,298		0.97
Remainder of 2018					$	10,085	1.46	%
2019	10,342		1.40		10,190		2.33
2020	10,393		1.41		10,276		2.33
2021	—		—		—		—
2022					—		—
Thereafter	—		—		—		—
Total	$	31,033	1.26	%	$	30,551	2.04	%

Long-term debt under security repurchase agreements totaling ~~$25.8~~$25.5 million are variable based on the one-month LIBOR rate plus a ~~spread; one~~spread. One borrowing for ~~$5.2~~$5.0 million has a fixed interest rate and may be called by the lender based on the underlying agreement.

On April 25, 2017, Kroll Bond Rating Agency ("KBRA") reaffirmed its credit ratings for the Corporation and the Bank with a stable outlook. Specifically, KBRA reaffirmed the Corporation's senior unsecured debt rating of BBB+, subordinated debt rating of BBB and short-term rating of K2. With regard to the Bank, KBRA reaffirmed the Bank's deposit rating of A-, short-term debt rating of K2 and short-term deposit rating of K2 while also assigning the Bank a senior unsecured debt rating of A-. Additionally, on April 25, 2017, KBRA initiated the Bank's subordinated debt rating of BBB+.

Note 7.8. Retirement Plans and Other Postretirement Benefits

Substantially all employees who were hired before December 8, 2009 are covered by a noncontributory retirement plan. Employees hired on or after December 8, 2009 are not eligible to participate in the noncontributory retirement plan. The Corporation also provides supplemental executive retirement benefits to certain former executives, a portion of which is in excess of limits imposed on qualified plans by federal tax law; these plans are non-qualified benefit plans. These non-qualified benefit plans are not offered to new participants; all current participants are now retired. Information on these plans are aggregated and reported under “Retirement Plans” within this footnote.

The Corporation also provides certain postretirement healthcare and life insurance benefits for retired employees. Information on these benefits is reported under “Other Postretirement Benefits” within this footnote.

The Corporation sponsors a Supplemental Non-Qualified Pension Plan, which was established in 1981 prior to the existence of a 401(k) deferred salary savings plan, employee stock purchase plan and long-term incentive plans and therefore is not offered to new participants; all current participants are now retired.

Components of net periodic benefit cost (income) were as follows:


	Three Months Ended June 30,										Three Months Ended June 30,
	2017			2016			2017		2016		2018			2017			2018		2017
(Dollars in thousands)	Retirement Plans						Other Post Retirement Benefits				Retirement Plans						Other Post Retirement Benefits
Service cost	$	124		$	170		$	12	$	11	$	140		$	124		$	22	$	12
Interest cost	487			519			30		33		439			487			23		30
Expected return on plan assets	(748		)	(753		)	—		—		(795		)	(748		)	—		—
Amortization of net actuarial loss	289			322			10		7		281			289			1		10
Accretion of prior service cost	(71		)	(70		)	—		—		(71		)	(71		)	—		—
Net periodic benefit cost	$	81		$	188		$	52	$	51
Net periodic benefit (income) cost											$	(6	)	$	81		$	46	$	52


	Six Months Ended June 30,										Six Months Ended June 30,
	2017			2016			2017		2016		2018			2017			2018		2017
(Dollars in thousands)	Retirement Plans						Other Post Retirement Benefits				Retirement Plans						Other Post Retirement Benefits
Service cost	$	275		$	341		$	24	$	23	$	280		$	275		$	44	$	24
Interest cost	952			1,037			59		66		880			952			46		59
Expected return on plan assets	(1,501		)	(1,507		)	—		—		(1,591		)	(1,501		)	—		—
Amortization of net actuarial loss	577			645			21		13		561			577			2		21
Accretion of prior service cost	(141		)	(141		)	—		—		(142		)	(141		)	—		—
Net periodic benefit cost	$	162		$	375		$	104	$	102
Net periodic benefit (income) cost											$	(12	)	$	162		$	92	$	104

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

The Corporation made a contribution of ~~$2.0~~$3.0 million to its qualified retirement plan on July ~~24, 2017.~~5, 2018. The Corporation previously disclosed in its financial statements for the year ended December 31, ~~2016,~~2017 that it expected to make contributions of ~~$160~~$158 thousand to its non-qualified retirement plans and ~~$121~~$80 thousand to its other postretirement benefit plans in ~~2017.~~2018. During the six months ended June 30, ~~2017,~~2018, the Corporation contributed $80 thousand to its non-qualified retirement plans and ~~$58~~$53 thousand to its other postretirement plans. During the six months ended June 30, ~~2017,~~2018, $1.3 million was paid to participants from the retirement plans and ~~$58~~$53 thousand was paid to participants from the other postretirement plans.

Note 8.9. Stock-Based Incentive Plan

The Corporation has a shareholder approved 2013 Long-Term Incentive Plan, which replaced the expired 2003 Long-Term Incentive Plan. Under the 2013 Long-Term Incentive Plan, the Corporation may grant up to 3,698,974 options and ~~share awards~~restricted stock to employees and non-employee directors, ~~up to 3,355,786~~which includes 330,625 shares as a result of the Corporation's common stock ~~which includes~~issuance in 2017, 857,191 shares as a result of the completion of the acquisition of Fox Chase ~~on July 1,~~in 2016 and 473,483 shares as a result of the completion of the acquisition of Valley Green Bank ~~on January 1,~~in 2015.

The following is a summary of the Corporation's stock option activity and related information for the six months ended June 30, ~~2017:~~2018:


(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 June 30, 2017		Shares Under Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value at June 30, 2018
Outstanding at December 31, 2016	504,908		$	19.06
Outstanding at December 31, 2017								512,735		$	21.90
Granted	191,297		28.15					193,778		28.50
Expired	(73,000	)	22.70					—		—
Forfeited	(6,500	)	23.34					(12,537	)	25.48
Exercised	(73,870	)	17.97					(36,990	)	19.21
Outstanding at June 30, 2017	542,835		21.84		7.8	$	4,403
Exercisable at June 30, 2017	177,025		17.87		5.9	2,138
Outstanding at June 30, 2018								656,986		23.93		7.7	$	2,648
Exercisable at June 30, 2018								279,627		20.26		6.0	2,063

The following is a summary of nonvested stock options at June 30, ~~2017~~2018 including changes during the six months then ended:


(Dollars in thousands, except per share data)	Nonvested Stock Options		Weighted Average Grant Date Fair Value		Nonvested Stock Options		Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2016	308,940		$	6.15
Nonvested stock options at December 31, 2017					352,142		$	6.47
Granted	191,297		6.72		193,778		6.46
Vested	(127,927	)	6.08		(156,024	)	6.45
Forfeited	(6,500	)	6.47		(12,537	)	6.48
Nonvested stock options at June 30, 2017	365,810		6.46
Nonvested stock options at June 30, 2018					377,359		6.48

The following aggregated assumptions were used to estimate the fair value of options granted during the six months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	Six months ended June 30,									Six months ended June 30,
	2017			2016						2018		2017
	Actual			Range			Weighted Average			Actual
Expected option life in years	6.9			7.9	-	8.2	7.9			6.6		6.9
Risk free interest rate	2.30		%	1.81%	-	1.89%	1.89		%	2.80	%	2.30	%
Expected dividend yield	2.84		%	4.07%	-	4.19%	4.07		%	2.81	%	2.84	%
Expected volatility	29.75		%	46.13%	-	46.22%	46.13		%	27.15	%	29.75	%
Fair value of options	$	6.72		$5.98	-	$6.27	$	6.26		$6.46		$6.72

The following is a summary of nonvested restricted stock awards at June 30, ~~2017~~2018 including changes during the six months then ended:


(Dollars in thousands, except per share data)	Nonvested Share Awards		Weighted Average Grant Date Fair Value		Nonvested Share Awards		Weighted Average Grant Date Fair Value
Nonvested share awards at December 31, 2016	285,158		$	19.74
Nonvested share awards at December 31, 2017					229,026		$	21.93
Granted	61,823		28.08		59,953		28.39
Vested	(48,289	)	18.38		(43,200	)	18.59
Forfeited	(14,000	)	19.37		(22,938	)	20.80
Nonvested share awards at June 30, 2017	284,692		21.80
Nonvested share awards at June 30, 2018					222,841		24.44

The fair value of restricted stock is equivalent to the fair value on the date of grant and is amortized over the vesting period. Certain information regarding restricted stock is summarized below for the periods indicated:


	Six months ended June 30,				Six months ended June 30,
(Dollars in thousands, except per share data)	2017		2016		2018		2017
Shares granted	61,823		58,580		59,953		61,823
Weighted average grant date fair value	$	28.08	$	19.68	$	28.39	$	28.08
Intrinsic value of awards vested	$	1,367	$	971	$	1,193	$	1,367

The total unrecognized compensation expense and the weighted average period over which unrecognized compensation expense is expected to be recognized related to nonvested stock options and nonvested restricted stock awards at June 30, ~~2017~~2018 is presented below:


(Dollars in thousands)	Unrecognized Compensation Cost		Weighted-Average Period Remaining (Years)	Unrecognized Compensation Cost		Weighted-Average Period Remaining (Years)
Stock options	$	1,807	2.1	$	1,935	2.1
Restricted stock awards	3,612		1.7	2,566		2.0
	$	5,419	1.9	$	4,501	2.0

The following table presents information related to the Corporation’s compensation expense related to stock incentive plans recognized for the periods indicated:


	Six months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2017		2016		2018		2017
Stock-based compensation expense:
Stock options	$	454	$	338	$	515	$	454
Restricted stock awards	1,254		606		1,204		1,254
Employee stock purchase plan	32		33		34		32
Total	$	1,740	$	977	$	1,753	$	1,740
Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options	$	828	$	270	$	413	$	828

Note 9.10. 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) Gains 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) Income			Net Unrealized (Losses) Gains 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) Income
Balance, December 31, 2017													$	(4,061	)	$	9		$	(13,719	)	$	(17,771	)
Adjustment to initially apply ASU No. 2016-01 for equity securities measured at fair value (1)													(433		)	—			—			(433		)
Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges (1)													(968		)	2			(2,955		)	(3,921		)
Other comprehensive (loss) income													(6,525		)	310			333			(5,882		)
Balance, June 30, 2018													$	(11,987	)	$	321		$	(16,341	)	$	(28,007	)


Balance, December 31, 2016	$	(4,988	)	$	(141	)	$	(14,325	)	$	(19,454	)	$	(4,988	)	$	(141	)	$	(14,325	)	$	(19,454	)
Net Change	1,961			14			297			2,272			1,961			14			297			2,272
Balance, June 30, 2017	$	(3,027	)	$	(127	)	$	(14,028	)	$	(17,182	)	$	(3,027	)	$	(127	)	$	(14,028	)	$	(17,182	)
Balance, December 31, 2015	$	(592	)	$	(285	)	$	(15,831	)	$	(16,708	)
Net Change	2,499			(497		)	336			2,338
Balance, June 30, 2016	$	1,907		$	(782	)	$	(15,495	)	$	(14,370	)

(1) See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2018" for additional information.

Note ~~10.~~11. Derivative Instruments and Hedging Activities

Interest Rate Swaps

The Corporation may use ~~interest-rate~~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. Recorded amounts related to interest-rate swaps are included in other assets or liabilities. The Corporation’s credit exposure on interest rate swaps includes fair value and any collateral that is held by a third party. Changes in the fair value of derivative instruments designated as hedges of future cash flows are recognized in accumulated other comprehensive income until the underlying forecasted transactions occur, at which

time the deferred gains and losses are recognized in earnings. For a qualifying fair value hedge, the gain or loss on the hedging instrument is recognized in earnings, and the change in fair value of the hedge item, to the extent attributable to the hedged risk, adjusts the carrying amount of the hedge item and is recognized in earnings.

In 2014, the Corporation entered into an amortizing interest rate swap classified as a cash flow hedge with a notional amount of $20.0 million to hedge a portion of the debt financing of a pool of 10-year maturity fixed rate loans with balances totaling $29.1 million, at time of the hedge, that were originated in 2013. A brokered money market demand account with a balance exceeding the amortizing interest rate swap balance is being used for the cash flow hedge. Under the terms of the swap agreement, the Corporation pays a fixed rate of 2.10% and receives a floating rate of one-month LIBOR. The swap matures in November 2022. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and on a recurring basis to determine that the derivative has been and is expected to continue to be highly effective in offsetting changes in cash flows of the hedged item. The Corporation expects that there will be no ineffectiveness over the life of the interest rate swap. At June 30, ~~2017, approximately $138 thousand in net deferred losses, net of tax,~~2018, there is no gain or loss recorded in accumulated other comprehensive loss ~~are~~that 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 June 30, ~~2017.~~2018. At June 30, ~~2017,~~2018, the notional amount of the interest rate swap was ~~$18.2~~$17.5 million, with a ~~negative~~positive fair value of ~~$195~~$407 thousand.

The Corporation has an interest rate swap classified as a fair value hedge with a current notional amount of $1.4 million to hedge a 10-year fixed rate loan that is earning interest at 5.83%. The Corporation pays a fixed rate of 5.83% and receives a floating rate based on the one-month LIBOR plus 350 basis points. The swap matures in October 2021. The difference between changes in the fair values of the interest rate swap agreement and the hedged loan represents hedge ineffectiveness and is recorded in other noninterest income in the consolidated statements of operations.

The Corporation has an interest rate swap with a current notional amount of ~~$574~~$471 thousand, for a 15-year fixed rate loan that is earning interest at 7.43%. The Corporation pays a fixed rate of 7.43% and receives a floating rate based on the one-month LIBOR plus 224 basis points. The swap matures in April 2022. The interest rate swap is carried at fair value in accordance with

FASB ASC 815 "Derivatives and Hedging." The loan is carried at fair value under the fair value option as permitted by FASB ASC 825 "Financial Instruments."

Credit Derivatives

The Corporation has agreements with third-party financial institutions whereby the third-party financial institution enters into interest rate derivative ~~contracts and foreign currency swap~~ 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 ~~and foreign currency swap~~ transactions for customers without creating the swap. The Corporation records the fair value of credit derivatives in other liabilities on the consolidated balance sheets. The Corporation recognizes changes in the fair value of credit derivatives, net of any fees received, in other noninterest income in the consolidated statements of income.

At June 30, ~~2017,~~2018, the Corporation has ~~fourteen~~fifteen variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of ~~$66.6~~$75.7 million, and remaining maturities ranging from one to 10 years. At June 30, ~~2017,~~2018, the fair value of the swaps to the customers was a liability of ~~$157~~$37 thousand and all swaps were in paying positions to the third-party financial institution.

~~At June 30, 2017, there were no foreign currency swap transactions between the third-party institution and loan customers.~~

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 exchange~~ rates and the agreement does not provide for a limitation of the maximum potential payment amount.

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. The fair values of these derivative loan commitments 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.

Derivatives Tables

The following table presents the notional amounts and fair values of derivatives designated as hedging instruments recorded on the consolidated balance sheets at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. 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					Derivative Assets			Derivative Liabilities
(Dollars in thousands)	Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value		Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
At June 30, 2017
At June 30, 2018
Interest rate swap - cash flow hedge	$	18,204		$	—	Other liabilities	$	195	$	17,460	Other assets	$	407		$	—
Interest rate swap - fair value hedge	1,408			—		Other liabilities	31		1,367		Other assets	15			—
Total	$	19,612		$	—		$	226	$	18,827		$	422		$	—
At December 31, 2016
At December 31, 2017
Interest rate swap - cash flow hedge	$	18,566		$	—	Other liabilities	$	217	$	17,836	Other assets	$	13		$	—
Interest rate swap - fair value hedge	1,427			—		Other liabilities	37		1,388			—		Other liabilities	12
Total	$	19,993		$	—		$	254	$	19,224		$	13		$	12

The following table presents the notional amounts and fair values of derivatives not designated as hedging instruments recorded on the consolidated balance sheets at June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


			Derivative Assets			Derivative Liabilities					Derivative Assets			Derivative Liabilities
(Dollars in thousands)	Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value		Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
At June 30, 2017
At June 30, 2018
Interest rate swap	$	574		$	—	Other liabilities	$	52	$	471		$	—	Other liabilities	$	25
Credit derivatives	66,599			—		Other liabilities	157		75,734			—		Other liabilities	37
Interest rate locks with customers	42,955		Other assets	1,363			—		29,737		Other assets	632			—
Forward loan sale commitments	45,168		Other assets	164			—		31,469			—		Other liabilities	91
Total	$	155,296		$	1,527		$	209	$	137,411		$	632		$	153
At December 31, 2016
At December 31, 2017
Interest rate swap	$	622		$	—	Other liabilities	$	65	$	523		$	—	Other liabilities	$	38
Credit derivatives	27,919			—		Other liabilities	9		75,622			—		Other liabilities	36
Interest rate locks with customers	36,541		Other assets	801			—		27,411		Other assets	527			—
Forward loan sale commitments	42,366		Other assets	257			—		29,037		Other assets	61			—
Total	$	107,448		$	1,058		$	74	$	132,593		$	588		$	74

The following table presents amounts included in the consolidated statements of income for derivatives designated as hedging instruments for the periods indicated:


	Statement of Income Classification	Three Months Ended June 30,						Six Months Ended June 30,						Statement of Income Classification	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	Statement of Income Classification	2017			2016			2017			2016			Statement of Income Classification	2018			2017			2018			2017
Interest rate swap—cash flow hedge—net interest payments	Interest expense	$	36		$	80		$	107		$	161		Interest expense	$	6		$	36		$	26		$	107
Interest rate swap—fair value hedge—ineffectiveness	Other noninterest income	2			—			5			—			Other noninterest income	2			2			2			5
Net loss		$	(34	)	$	(80	)	$	(102	)	$	(161	)		$	(4	)	$	(34	)	$	(24	)	$	(102	)

The following table presents amounts included in the consolidated statements of income for derivatives not designated as hedging instruments for the periods indicated:


	Statement of Income Classification	Three Months Ended June 30,					Six Months Ended June 30,						Statement of Income Classification	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands)	Statement of Income Classification	2017		2016			2017			2016			Statement of Income Classification	2018			2017		2018			2017
Credit derivatives	Other noninterest income	$	53	$	—		$	124		$	—		Other noninterest income	$	34		$	53	$	38		$	124
Interest rate locks with customers	Net gain on mortgage banking activities	155		711			562			1,343			Net gain on mortgage banking activities	237			155		105			562
Forward loan sale commitments	Net loss on mortgage banking activities	162		(267		)	(92		)	(408		)	Net loss on mortgage banking activities	(104		)	162		(153		)	(92		)
Total		$	370	$	444		$	594		$	935			$	167		$	370	$	(10	)	$	594

The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At June 30, 2017			At December 31, 2016			Accumulated Other Comprehensive (Loss) Income	At June 30, 2018		At December 31, 2017
Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(127	)	$	(141	)	Fair value, net of taxes	$	321	$	9
Total		$	(127	)	$	(141	)		$	321	$	9

Note ~~11.~~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 period.

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. Examples of instruments, which would generally be classified within Level 2 of the valuation hierarchy, include securities issued by U.S. Government sponsored enterprises, mortgage-backed securities, collateralized mortgage obligations, corporate and municipal bonds and certain equity securities. 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.

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.

Certain corporate ~~securities~~bonds owned by the Corporation are classified as Level 3 as they are not traded in active markets. The fair value of each ~~security~~bond is estimated by benchmarking similar transactions of structure, yield and credit which are owned by the Corporation and are actively traded in the market.

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 June 30, ~~2017.~~2018.

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.

Two commercial loans associated with interest rate swaps are classified in Level 3 of the valuation hierarchy since lending credit risk is not an observable input for these loans. The unrealized gain on the two loans was ~~$84~~$15 thousand at June 30, ~~2017.~~2018.

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. ~~Changes in the original assumptions utilized at the time the acquisition closes and identified during the measurement period are recorded in accordance with ASC Topic 805 as an adjustment to goodwill.~~ 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.

For the Sterner Insurance Associates acquisition, the conclusion for the earn-out period ending June 30, 2017 resulted in a reversal of a prior noninterest expense accrual of $303 thousand during the second quarter of 2017.

The following table presents the assets and liabilities measured at fair value on a recurring basis at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, classified using the fair value hierarchy:


	At June 30, 2017								At June 30, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value		Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:
U.S. government corporations and agencies	$	—	$	27,147	$	—	$	27,147	$	—	$	15,339	$	—	$	15,339
State and political subdivisions	—		81,778		—		81,778		—		69,910		—		69,910
Residential mortgage-backed securities	—		182,961		—		182,961		—		165,609		—		165,609
Collateralized mortgage obligations	—		4,061		—		4,061		—		3,171		—		3,171
Corporate bonds	—		84,746		28,387		113,133		—		67,389		26,386		93,775
Total available-for-sale securities									—		321,418		26,386		347,804
Equity securities:
Equity securities - financial services industry									1,109		—		—		1,109
Money market mutual funds	15,532		—		—		15,532		1,563		—		—		1,563
Equity securities	978		—		—		978
Total available-for-sale securities	16,510		380,693		28,387		425,590
Total equity securities									2,672		—		—		2,672
Loans*	—		—		2,058		2,058		—		—		1,847		1,847
Interest rate swaps*									—		422		—		422
Interest rate locks with customers*	—		1,363		—		1,363		—		632		—		632
Forward loan sale commitments*	—		164		—		164
Total assets	$	16,510	$	382,220	$	30,445	$	429,175	$	2,672	$	322,472	$	28,233	$	353,377
Liabilities:
Contingent consideration liability	$	—	$	—	$	407	$	407	$	—	$	—	$	300	$	300
Interest rate swaps*	—		278		—		278		—		25		—		25
Credit derivatives*	—		—		157		157		—		—		37		37
Forward loan sale commitments*									—		91		—		91
Total liabilities	$	—	$	278	$	564	$	842	$	—	$	116	$	337	$	453


	At December 31, 2016								At December 31, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value		Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:
U.S. government corporations and agencies	$	—	$	32,266	$	—	$	32,266	$	—	$	16,961	$	—	$	16,961
State and political subdivisions	—		88,350		—		88,350		—		78,297		—		78,297
Residential mortgage-backed securities	—		198,570		—		198,570		—		185,421		—		185,421
Collateralized mortgage obligations	—		4,554		—		4,554		—		3,602		—		3,602
Corporate bonds	—		79,420		28,778		108,198		—		79,190		27,986		107,176
Total available-for-sale securities									—		363,471		27,986		391,457
Equity securities:
Equity securities - financial services industry									1,076		—		—		1,076
Money market mutual funds	10,784		—		—		10,784		5,985		—		—		5,985
Equity securities	915		—		—		915
Total available-for-sale securities	11,699		403,160		28,778		443,637
Total equity securities									7,061		—		—		7,061
Loans*	—		—		2,138		2,138		—		—		1,958		1,958
Interest rate swap*									—		13		—		13
Interest rate locks with customers*	—		801		—		801		—		527		—		527
Forward loan sale commitments*	—		257		—		257		—		61		—		61
Total assets	$	11,699	$	404,218	$	30,916	$	446,833	$	7,061	$	364,072	$	29,944	$	401,077
Liabilities:
Contingent consideration liability	$	—	$	—	$	5,999	$	5,999	$	—	$	—	$	339	$	339
Interest rate swaps*	—		319		—		319		—		50		—		50
Credit derivatives*	—		—		9		9		—		—		36		36
Total liabilities	$	—	$	319	$	6,008	$	6,327	$	—	$	50	$	375	$	425

* Such financial instruments are recorded at fair value as further described in Note ~~10 - Derivative Instruments.~~

11, "Derivative Instruments and Hedging Activities."

The following table includes a ~~rollfoward~~rollforward of corporate bonds, loans and credit derivatives for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the six months ended June 30, ~~2017.~~2018 and 2017:


	Six Months Ended June 30, 2017																			Six Months Ended June 30, 2018
(Dollars in thousands)	Balance at December 31, 2016			Purchases/additions			Sales		Payments received			Premium amortization, net		(Decrease) increase in value			Balance at June 30, 2017			Balance at December 31, 2017			Purchases/additions			Sales		Payments received			Premium amortization, net		(Decrease) increase in value			Balance at June 30, 2018
Corporate bonds	$	28,778		$	—		$	—	$	—		$	—	$	(391	)	$	28,387		$	27,986		$	—		$	—				$	—	$	(1,600	)	$	26,386
Loans	2,138			—			—		(67		)	—		(13		)	2,058			1,958			—			—		(73		)	—		(38		)	1,847
Credit derivatives	(9		)	(272		)	—		—			—		124			(157		)	(36		)	(40		)	—		—			—		39			(37		)
Net total	$	30,907		$	(272	)	$	—	$	(67	)	$	—	$	(280	)	$	30,288		$	29,908		$	(40	)	$	—	$	(73	)	$	—	$	(1,599	)	$	28,196



	Six Months Ended June 30, 2017
(Dollars in thousands)	Balance at December 31, 2016			Purchases/additions			Sales		Payments received			Premium amortization, net		(Decrease) increase in value			Balance at June 30, 2017
Corporate bonds	$	28,778		$	—		$	—	$	—		$	—	$	(391	)	$	28,387
Loans	$	2,138		$	—		$	—	$	(67	)	$	—	$	(13	)	$	2,058
Credit derivatives	(9		)	(272		)	—		—			—		124			(157		)
Net total	$	30,907		$	(272	)	$	—	$	(67	)	$	—	$	(280	)	$	30,288

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 six months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	Six Months Ended June 30, 2017											Six Months Ended June 30, 2018
(Dollars in thousands)	Balance at December 31, 2016		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration			Balance at June 30, 2017		Balance at December 31, 2017		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at June 30, 2018
Sterner Insurance Associates	$	331	$	—	$	—	$	(303	)	$	28
Girard Partners	5,668		—		5,317		28			379		$	339	$	—	$	67	$	28	$	300
Total contingent consideration liability	$	5,999	$	—	$	5,317	$	(275	)	$	407	$	339	$	—	$	67	$	28	$	300


	Six Months Ended June 30, 2016										Six Months Ended June 30, 2017
(Dollars in thousands)	Balance at December 31, 2015		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at June 30, 2016		Balance at December 31, 2016		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration			Balance at June 30, 2017
Sterner Insurance Associates	$	1,144	$	—	$	—	$	490	$	1,634	$	331	$	—	$	—	$	(303	)	$	28
Girard Partners	4,241		$	—	$	900	$	238	3,579		5,668		$	—	5,317		28			379
John T. Fretz Insurance Agency	192		—		260		68		—
Total contingent consideration liability	$	5,577	$	—	$	1,160	$	796	$	5,213	$	5,999	$	—	$	5,317	$	(275	)	$	407

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 impairment charges of individual assets. The following table represents assets measured at fair value on a non-recurring basis at June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	At June 30, 2017								At June 30, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value		Level 1		Level 2		Level 3		Assets at Fair Value
Impaired loans held for investment	$	—	$	—	$	36,561	$	36,561	$	—	$	—	$	31,156	$	31,156
Impaired leases held for investment	—		—		4,135		4,135		—		—		1,250		1,250
Other real estate owned	—		—		2,202		2,202		—		—		1,742		1,742
Total	$	—	$	—	$	42,898	$	42,898	$	—	$	—	$	34,148	$	34,148


	At December 31, 2016								At December 31, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value		Level 1		Level 2		Level 3		Assets at Fair Value
Impaired loans held for investment	$	—	$	—	$	43,680	$	43,680	$	—	$	—	$	28,351	$	28,351
Impaired leases held for investment									—		—		1,250		1,250
Other real estate owned	—		—		4,969		4,969		—		—		1,843		1,843
Total	$	—	$	—	$	48,649	$	48,649	$	—	$	—	$	31,444	$	31,444

The following table presents assets and liabilities and off-balance sheet items not measured at fair value on a recurring or non-recurring basis in the Corporation’s consolidated balance sheets but for which the fair value is required to be disclosed at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. The disclosed fair values are classified using the fair value hierarchy.


	At June 30, 2017												At June 30, 2018
(Dollars in thousands)	Level 1		Level 2			Level 3		Fair Value			Carrying Amount		Level 1		Level 2			Level 3		Fair Value			Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	61,057	$	—		$	—	$	61,057		$	61,057	$	72,943	$	—		$	—	$	72,943		$	72,943
Held-to-maturity securities	—		43,737			—		43,737			43,717		—		94,642			—		94,642			96,457
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA			NA		NA			31,506		NA		NA			NA		NA			32,768
Loans held for sale	—		2,315			—		2,315			2,259		—		1,815			—		1,815			1,778
Net loans and leases held for investment	—		—			3,469,648		3,469,648			3,446,506		—		—			3,742,808		3,742,808			3,758,493
Servicing rights	—		—			9,666		9,666			6,548		—		—			11,619		11,619			6,650
Total assets	$	61,057	$	46,052		$	3,479,314	$	3,586,423		$	3,591,593	$	72,943	$	96,457		$	3,754,427	$	3,923,827		$	3,969,089
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	2,801,242	$	—		$	—	$	2,801,242		$	2,801,242	$	3,026,391	$	—		$	—	$	3,026,391		$	3,026,391
Time deposits	—		546,457			—		546,457			546,838		—		597,146			—		597,146			594,395
Total deposits	2,801,242		546,457			—		3,347,699			3,348,080		3,026,391		597,146			—		3,623,537			3,620,786
Short-term borrowings	—		231,726			—		231,726			231,726		—		231,853			—		231,853			231,853
Long-term debt	—		217,376			—		217,376			216,610		—		156,868			—		156,868			155,556
Subordinated notes	—		96,900			—		96,900			94,209		—		96,538			—		96,538			94,453
Total liabilities	$	2,801,242	$	1,092,459		$	—	$	3,893,701		$	3,890,625	$	3,026,391	$	1,082,405		$	—	$	4,108,796		$	4,102,648
Off-Balance-Sheet:
Commitments to extend credit	$	—	$	(2,317	)	$	—	$	(2,317	)	$	—	$	—	$	(2,469	)	$	—	$	(2,469	)	$	—


	At December 31, 2016												At December 31, 2017
(Dollars in thousands)	Level 1		Level 2			Level 3		Fair Value			Carrying Amount		Level 1		Level 2			Level 3		Fair Value			Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	57,825	$	—		$	—	$	57,825		$	57,825	$	75,409	$	—		$	—	$	75,409		$	75,409
Held-to-maturity securities	—		24,871			—		24,871			24,881		—		55,320			—		55,320			55,564
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA			NA		NA			24,869		NA		NA			NA		NA			27,204
Loans held for sale	—		5,943			—		5,943			5,890		—		1,676			—		1,676			1,642
Net loans and leases held for investment	—		—			3,193,886		3,193,886			3,222,569		—		—			3,547,451		3,547,451			3,566,953
Servicing rights	—		—			9,548		9,548			6,485		—		—			10,046		10,046			6,573
Total assets	$	57,825	$	30,814		$	3,203,434	$	3,292,073		$	3,342,519	$	75,409	$	56,996		$	3,557,497	$	3,689,902		$	3,733,345
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	2,631,378	$	—		$	—	$	2,631,378		$	2,631,378	$	2,980,170	$	—		$	—	$	2,980,170		$	2,980,170
Time deposits	—		628,096			—		628,096			626,189		—		574,737			—		574,737			574,749
Total deposits	2,631,378		628,096			—		3,259,474			3,257,567		2,980,170		574,737			—		3,554,907			3,554,919
Short-term borrowings	—		195,572			—		195,572			196,171		—		105,431			—		105,431			105,431
Long-term debt	—		130,157			—		130,157			127,522		—		156,834			—		156,834			155,828
Subordinated notes	—		95,188			—		95,188			94,087		—		98,075			—		98,075			94,331
Total liabilities	$	2,631,378	$	1,049,013		$	—	$	3,680,391		$	3,675,347	$	2,980,170	$	935,077		$	—	$	3,915,247		$	3,910,509
Off-Balance-Sheet:
Commitments to extend credit	$	—	$	(2,218	)	$	—	$	(2,218	)	$	—	$	—	$	(2,414	)	$	—	$	(2,414	)	$	—

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 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, federal funds sold 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: 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. Loans held for sale are carried at the lower of cost or estimated fair value. There were no valuation adjustments for loans held for sale at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

Loans and leases held for investment: ~~The~~As of June 30, 2018, 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. As of December 31, 2017, the fair values for loans and leases held for investment were 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 and include components for credit risk, operating expense and embedded prepayment options. An overall valuation adjustment iswas made for specific credit risks in addition to general portfolio risk and is significant to the valuation. ~~As permitted, the fair value of the loans and leases are not based on the exit price concept as discussed in the first paragraph of this note.~~ Loans and leases are classified within Level 3 in the fair value hierarchy.

Impaired loans and leases held for investment: For impaired 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 June 30, 2018, impaired loans held for investment had a carrying amount of $32.7 million with a valuation allowance of $1.5 million. At December 31, 2017, impaired loans held for investment had a carrying amount of ~~$36.7~~$28.5 million with a valuation allowance of $131 thousand. ~~At December 31, 2016, impaired loans held for investment had a carrying amount of $43.9 million with a valuation allowance of $235 thousand.~~ The Corporation had impaired leases of ~~$5.0~~$1.3 million with ~~related reserves of $886 thousand~~no reserve at June 30, ~~2017. The Corporation had no impaired leases at~~2018 and December 31, ~~2016.~~2017.

Servicing rights: The Corporation estimates the fair value of mortgage 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. Mortgage servicing rights are classified within Level 3 in the fair value hierarchy based upon management's assessment of the inputs. The Corporation reviews the mortgage servicing rights portfolio on a quarterly basis for impairment and the mortgage servicing rights are carried at the lower of amortized cost or estimated fair value. The Corporation also records servicing rights on SBA loans. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, servicing rights had a carrying amount of ~~$6.5~~$6.7 million and $6.6 million, respectively, with no valuation allowance.

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 six months ended June 30, ~~2017,~~2018, there were no triggering events that required valuation of goodwill and other identifiable intangible assets.

Other real estate owned: The fair value of other real estate owned (OREO) is originally estimated based upon the appraised value less estimated costs to sell. The fair value less cost to sell becomes the "original cost" of the OREO asset. Subsequently, OREO is reported as the lower of the original cost and the current the fair value less cost to sell. Capital improvement expenses associated with the construction or repair of the property are capitalized as part of the cost of the OREO asset; however, the capitalized expenses may not increase the OREO asset's recorded value to an amount greater than the asset's fair value after improvements and less cost to sell. ~~During 2017, two properties had write-downs totaling $199 thousand which were included in other noninterest income in the statement of income.~~ New appraisals are generally obtained on an annual ~~basis.~~basis if an agreement of sale does not exist. During the six months ended June 30, 2018, two properties had write-downs totaling $503 thousand and two properties were transferred into OREO with a fair value of $402 thousand. At June 30, 2018 and December 31, 2017, OREO had a carrying amount

of $1.7 million and $1.8 million, respectively. Other real estate owned is classified within Level 3 of the valuation hierarchy due to the unique characteristics of the collateral for each loan.

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.

Off-balance-sheet instruments: Fair values for the Corporation’s off-balance-sheet instruments are based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing and are classified within Level 2 in the fair value hierarchy.

Note ~~12.~~13. Segment Reporting

At June 30, ~~2017,~~2018, the Corporation has 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.

The Corporation's Banking segment consists of commercial, consumer and ~~consumer banking.~~mortgage banking as well as lease financing. The Wealth Management segment consists of investment advisory services, retirement plan services, trust, municipal pension services and broker/dealer services. The Insurance segment consists of commercial lines, personal lines, benefits and human resources consulting.

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 below.



Ÿ	The Banking segment provides financial services to ~~consumers, businesses~~consumer and commercial customers and governmental units. 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.
Ÿ	The Wealth Management segment offers trust and investment advisory services, guardian and custodian of employee benefits and other trust and brokerage services, as well as a registered investment advisory managing private investment accounts for both individuals and institutions.
Ÿ	The Insurance segment includes a full-service insurance brokerage agency offering commercial property and casualty insurance, group life and health coverage, 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 June 30, 2017		At December 31, 2016		At June 30, 2016		At June 30, 2018		At December 31, 2017		At June 30, 2017
Banking	$	4,366,362	$	4,137,873	$	2,925,285	$	4,656,201	$	4,466,301	$	4,366,362
Wealth Management	32,806		35,061		31,392		37,227		34,600		32,806
Insurance	25,241		24,472		25,309		29,295		27,846		25,241
Other	29,118		33,122		125,631		26,458		26,115		29,118
Consolidated assets	$	4,453,527	$	4,230,528	$	3,107,617	$	4,749,181	$	4,554,862	$	4,453,527

The following tables provide reportable segment-specific information and reconciliations to consolidated financial information for the three and six months ended June 30, ~~2017~~2018 and ~~2016.~~2017.


	Three Months Ended													Three Months Ended
	June 30, 2017													June 30, 2018
(Dollars in thousands)	Banking			Wealth Management		Insurance			Other			Consolidated		Banking			Wealth Management		Insurance		Other			Consolidated
Interest income	$	40,022		$	1	$	—		$	7		$	40,030	$	46,444		$	8	$	—	$	8		$	46,460
Interest expense	4,730			—		—			—			4,730		6,209			—		—		1,261			7,470
Net interest income	35,292			1		—			7			35,300		40,235			8		—		(1,253		)	38,990
Provision for loan and lease losses	2,766			—		—			—			2,766		15,409			—		—		—			15,409
Noninterest income	6,790			5,399		3,746			74			16,009		5,461			5,862		3,904		87			15,314
Intangible expenses	398			168		(120		)	—			446		329			137		128		—			594
Other noninterest expense	22,949			3,462		2,846			2,845			32,102		26,723			3,628		3,093		309			33,753
Intersegment (revenue) expense*	(491		)	195		296			—			—		(295		)	156		139		—			—
Income (expense) before income taxes	16,460			1,575		724			(2,764		)	15,995		3,530			1,949		544		(1,475		)	4,548
Income tax expense (benefit)	4,279			627		305			(994		)	4,217
Income tax (benefit) expense														(162		)	597		163		(407		)	191
Net income (loss)	$	12,181		$	948	$	419		$	(1,770	)	$	11,778	$	3,692		$	1,352	$	381	$	(1,068	)	$	4,357
Capital expenditures	$	2,019		$	11	$	192		$	34		$	2,256	$	820		$	40	$	2	$	10		$	872


	Three Months Ended													Three Months Ended
	June 30, 2016													June 30, 2017
(Dollars in thousands)	Banking			Wealth Management		Insurance			Other			Consolidated		Banking			Wealth Management		Insurance			Other			Consolidated
Interest income	$	26,104		$	1	$	—		$	7		$	26,112	$	40,022		$	1	$	—		$	7		$	40,030
Interest expense	2,163			—		—			288			2,451		3,469			—		—			1,261			4,730
Net interest income	23,941			1		—			(281		)	23,661		36,553			1		—			(1,254		)	35,300
Provision for loan and lease losses	830			—		—			—			830		2,766			—		—			—			2,766
Noninterest income	5,492			4,812		3,620			77			14,001		6,790			5,399		3,746			74			16,009
Intangible expenses	61			304		626			—			991		398			168		(120		)	—			446
Acquisition-related and integration costs	38			—		—			1,147			1,185
Other noninterest expense	19,700			3,247		2,937			1,486			27,370		24,160			3,512		2,846			1,584			32,102
Intersegment (revenue) expense*	(479		)	211		268			—			—		(264		)	146		118			—			—
Income (expense) before income taxes	9,283			1,051		(211		)	(2,837		)	7,286		16,283			1,574		902			(2,764		)	15,995
Income tax expense (benefit)	2,291			395		(81		)	(559		)	2,046		4,193			639		379			(994		)	4,217
Net income (loss)	$	6,992		$	656	$	(130	)	$	(2,278	)	$	5,240	$	12,090		$	935	$	523		$	(1,770	)	$	11,778
Capital expenditures	$	1,481		$	9	$	11		$	515		$	2,016	$	2,019		$	11	$	192		$	34		$	2,256


	Six Months Ended												Six Months Ended
	June 30, 2017												June 30, 2018
(Dollars in thousands)	Banking			Wealth Management		Insurance		Other			Consolidated		Banking			Wealth Management		Insurance		Other			Consolidated
Interest income	$	78,414		$	2	$	—	$	10		$	78,426	$	89,966		$	13	$	—	$	15		$	89,994
Interest expense	8,843			—		—		—			8,843		11,210			—		—		2,522			13,732
Net interest income	69,571			2		—		10			69,583		78,756			13		—		(2,507		)	76,262
Provision for loan and lease losses	5,211			—		—		—			5,211		17,462			—		—		—			17,462
Noninterest income	11,952			10,537		8,293		197			30,979		10,250			11,602		8,990		54			30,896
Intangible expenses	794			338		73		—			1,205		658			279		269		—			1,206
Restructuring charges													571			—		—		—			571
Other noninterest expense	46,694			6,932		5,915		3,832			63,373		54,384			7,286		6,338		(313		)	67,695
Intersegment (revenue) expense*	(1,058		)	432		626		—			—		(586		)	309		277		—			—
Income (expense) before income taxes	29,882			2,837		1,679		(3,625		)	30,773		16,517			3,741		2,106		(2,140		)	20,224
Income tax expense (benefit)	7,920			1,127		709		(1,617		)	8,139		1,836			1,142		619		(580		)	3,017
Net income (loss)	$	21,962		$	1,710	$	970	$	(2,008	)	$	22,634	$	14,681		$	2,599	$	1,487	$	(1,560	)	$	17,207
Capital expenditures	$	6,339		$	22	$	199	$	84		$	6,644	$	1,790		$	89	$	9	$	65		$	1,953


	Six Months Ended												Six Months Ended
	June 30, 2016												June 30, 2017
(Dollars in thousands)	Banking			Wealth Management		Insurance		Other			Consolidated		Banking			Wealth Management		Insurance		Other			Consolidated
Interest income	$	51,829		$	3	$	—	$	14		$	51,846	$	78,414		$	2	$	—	$	10		$	78,426
Interest expense	4,374			—		—		288			4,662		6,321			—		—		2,522			8,843
Net interest income	47,455			3		—		(274		)	47,184		72,093			2		—		(2,512		)	69,583
Provision for loan and lease losses	1,156			—		—		—			1,156		5,211			—		—		—			5,211
Noninterest income	10,040			9,384		8,340		68			27,832		11,952			10,537		8,293		197			30,979
Intangible expenses	124			607		1,026		—			1,757		794			338		73		—			1,205
Acquisition-related and integration costs and restructuring charges	48			—		—		1,357			1,405
Other noninterest expense	38,436			6,305		6,056		2,526			53,323		49,216			6,932		5,915		1,310			63,373
Intersegment (revenue) expense*	(990		)	430		560		—			—		(528		)	292		236		—			—
Income (expense) before income taxes	18,721			2,045		698		(4,089		)	17,375		29,352			2,977		2,069		(3,625		)	30,773
Income tax expense (benefit)	4,648			778		296		(876		)	4,846		7,721			1,164		871		(1,617		)	8,139
Net income (loss)	$	14,073		$	1,267	$	402	$	(3,213	)	$	12,529	$	21,631		$	1,813	$	1,198	$	(2,008	)	$	22,634
Capital expenditures	$	3,320		$	24	$	21	$	829		$	4,194	$	6,339		$	22	$	199	$	84		$	6,644

*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. Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)” and subsequent related updates. The Corporation adopted the guidance effective January 1, 2018 using the modified retrospective method though no adjustments were made to retained earnings as a result of the adoption. The Corporation’s revenue is the sum of net interest income and noninterest income. Revenues are recognized when obligations under the terms of contracts with customers are satisfied, including the transfer of control of the promised goods or services to customers, in an amount that reflects the consideration the Corporation expects to be entitled to in exchange for those goods or services. The Corporation provides services to customers which have related performance obligations that are completed to recognize revenue. The Corporation's revenues are generally recognized either immediately upon the completion of the services or over time as the services are performed. Any services performed over time generally require services to be rendered each period and therefore progress in completing these services is measured based upon the passage of time.

The following tables disaggregate the Corporation's revenue by major source for the three and six months ended June 30, 2018 and 2017.



	Three Months Ended
	June 30, 2018
(Dollars in thousands)	Banking			Wealth Management			Insurance		Other			Consolidated
Net interest income (1)	$	40,235		$	8		$	—	$	(1,253	)	$	38,990

Noninterest income:
Trust fee income	—			2,044			—		—			2,044
Service charges on deposit accounts	1,335			—			—		—			1,335
Investment advisory commission and fee income	—			3,778			—		—			3,778
Insurance commission and fee income	—			—			3,712		—			3,712
Other service fee income (2)	2,198			41			192		—			2,431
Bank owned life insurance income (1)	1,161			—			—		49			1,210
Net gain on mortgage banking activities (1)	942			—			—		—			942
Other (loss) income (2)	(175		)	(1		)	—		38			(138		)
Total noninterest income	$	5,461		$	5,862		$	3,904	$	87		$	15,314



	Three Months Ended
	June 30, 2017
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other			Consolidated
Net interest income (1)	$	36,553	$	1	$	—	$	(1,254	)	$	35,300

Noninterest income:
Trust fee income	—		2,016		—		—			2,016
Service charges on deposit accounts	1,313		—		—		—			1,313
Investment advisory commission and fee income	—		3,333		—		—			3,333
Insurance commission and fee income	—		—		3,628		—			3,628
Other service fee income (2)	2,077		50		118		—			2,245
Bank owned life insurance income (1)	1,549		—		—		73			1,622
Net gain on sales of investment securities (1)	20		—		—		1			21
Net gain on mortgage banking activities (1)	1,537		—		—		—			1,537
Other income (2)	294		—		—		—			294
Total noninterest income	$	6,790	$	5,399	$	3,746	$	74		$	16,009



	Six Months Ended
	June 30, 2018
(Dollars in thousands)	Banking			Wealth Management		Insurance			Other			Consolidated
Net interest income (1)	$	78,756		$	13	$	—		$	(2,507	)	$	76,262

Noninterest income:
Trust fee income	—			4,040		—			—			4,040
Service charges on deposit accounts	2,662			—		—			—			2,662
Investment advisory commission and fee income	—			7,461		—			—			7,461
Insurance commission and fee income	—			—		8,600			—			8,600
Other service fee income (2)	4,107			101		392			—			4,600
Bank owned life insurance income (1)	1,859			—		—			20			1,879
Net gain on sales of investment securities (1)	10			—		—			—			10
Net gain on mortgage banking activities (1)	1,658			—		—			—			1,658
Other (loss) income (2)	(46		)	—		(2		)	34			(14		)
Total noninterest income	$	10,250		$	11,602	$	8,990		$	54		$	30,896



	Six Months Ended
	June 30, 2017
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other			Consolidated
Net interest income (1)	$	72,093	$	2	$	—	$	(2,512	)	$	69,583

Noninterest income:
Trust fee income	—		3,923		—		—			3,923
Service charges on deposit accounts	2,556		—		—		—			2,556
Investment advisory commission and fee income	—		6,514		—		—			6,514
Insurance commission and fee income	—		—		8,038		—			8,038
Other service fee income (2)	3,878		100		254		—			4,232
Bank owned life insurance income (1)	2,211		—		—		194			2,405
Net gain on sales of investment securities (1)	33		—		—		3			36
Net gain on mortgage banking activities (1)	2,650		—		—		—			2,650
Other income (2)	624		—		1		—			625
Total noninterest income	$	11,952	$	10,537	$	8,293	$	197		$	30,979


(1)	Net interest income as well as many other revenues for financial assets and liabilities including loans, leases, securities, and derivatives are excluded from the scope of the standard. Noninterest income streams that are out-of-scope of the standard include bank owned life insurance income, sales of investment securities and mortgage banking activities.


(2)	Other service fee income and other income include certain items that are in scope and certain items that are out of scope of the standard and are described further in the following paragraphs.

Banking Segment

The Banking segment provides financial services to consumer and commercial customers and governmental units. 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.

Service charges on deposit accounts are generally earned on depository accounts for commercial and consumer customers and primarily includes fees for account services, overdraft services, and cash management services for commercial customers. Account services include fees for event-driven services such as ATM transactions and fees for periodic account maintenance activities. Cash management services for commercial customers include fees for event-driven services such as lockbox processing and line sweep services and fees for periodic account maintenance activities. The Corporation's obligation for event-driven services is satisfied at the time of the event when the service is delivered, while the obligation for periodic services is satisfied over the course of each month. Obligations for overdraft services is satisfied at the time of the overdraft.

Other service fee income is earned from commercial and consumer customers and primarily includes credit and debit card interchange and merchant revenues, mortgage servicing income, which is out of scope of the standard, and other deposit related service fee income such as wire transfers, check services and safe deposit boxes. Interchange and merchant revenues are recognized concurrently with the delivery of services on a monthly basis. Other deposit related service fee income include fees for event-driven services, such as wire transfers and check services, and fees for periodic services such as safe deposit box services. The obligation for event-driven services is satisfied at the time of the event when the service is delivered, while the obligation for periodic services is satisfied over the course of each month.

Other income primarilyincludes net gains or losses from the sales of loans and leases, net gains or losses from the sales or disposition of fixed assets and net gains or losses on interest rate swaps, all of which are out of scope of the standard, and net gains or losses on sales and write-downs of other real estate owned. Net gains or losses on sales of other real estate owned are recognized at the point in time in which control of the other real estate owned is transferred.

Wealth Management Segment

The wealth management segment offers trust and investment advisory services, guardian and custodian of employee benefits and other trust and brokerage services, as well as a registered investment advisory managing private investment accounts for both individuals and institutions.

Trust fee income is earned for providing trust, investment management and other related services. Obligations for trust and other related services are generally satisfied over time but may be satisfied at points in time for certain activities that are transactional in nature and obligations for investment management services are generally performed over time. Fees for trust fee income are typically based on a tiered scale relative to the market value of assets under management and are recognized in conjunction with the delivery of services.

Investment advisory commission and fee income include fees for financial planning, guardian and custodian of employee benefits, investment advisory, and brokerage services. Obligations for financial planning, guardian and custodian of employee benefits, and investment advisory services are generally satisfied over time and fees, typically based on a tiered scale relative to the market value of assets under management are recognized in conjunction with the delivery of services. Brokerage services are typically event driven and are based on the size and number of transactions executed at the client’s direction and recognized on the trade date.

Insurance Segment

The insurance segment includes a full-service insurance brokerage agency offering commercial property and casualty insurance, group life and health coverage, employee benefit solutions, personal insurance lines and human resources consulting.

Insurance commission and fee income is derived primarily from commissions from the sale of insurance policies, which are generally calculated as a percentage of the policy premium, and contingent income, which is calculated based on the performance of the policies held by each carrier. Obligations for the sale of insurance policies are generally satisfied at the point in time which the policy is executed and are recognized at the point in time in which the amounts are knownand collection is reasonably assured. Obligations for contingent income are generally satisfied over time and are recognized at the point in time in which the amounts are known and collection is reasonably assured.

Other service fee income is earned from human resources consulting services. These obligations are generally satisfied over time and are recognized on a periodic basis.

Note ~~13.~~15. Restructuring Charges

During ~~2015 and 2016,~~January 2018, the Corporation ~~exited five~~announced the closure of two owned financial centers ~~a lease for a new~~and one leased financial center and ~~two administrative offices, and~~ reduced staff ~~due to rationalization;~~associated with these financial centers, resulting in ~~accrued expenses totaling $3.4 million, primarily~~accruing a loss of $571 thousand related to the Banking business segment. These financial centers were closed in April 2018. The remaining accrued restructuring expense at January 1, 2018 of $23 thousand relates to 2016 restructuring charges.

A roll-forward of the remaining accrued restructuring expense for the six months ended June 30, ~~2017~~2018 is as follows:


(Dollars in thousands)	Severance expenses			Write-downs and retirements of fixed assets		Lease cancellations			Total			Severance expenses			Write-downs and retirements of fixed assets			Lease cancellations			Total
Accrued at January 1, 2017	$	901		$	228	$	81		$	1,210
Accrued at January 1, 2018												$	—		$	—		$	23		$	23
Restructuring charges												366			48			157			571
Payments	(713		)	—		(44		)	(757		)	(197		)	—			(22		)	(219		)
Accrued at June 30, 2017	$	188		$	228	$	37		$	453
Non-cash settlement												—			(48		)	—			(48		)
Accrued at June 30, 2018												$	169		$	—		$	158		$	327

Note ~~14.~~16. 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.

As discussed in Note 4, during the first quarter of 2017, certain lessees stopped making payments and Univest Capital, Inc., a subsidiary of the Corporation, filed legal complaints to pursue collection of all amounts owed. A complaint was subsequently filed against Univest Capital, Inc. and certain other defendants on March 28, 2017 by one of the lessees in federal court in Texas seeking, among other things, class action certification and a declaration that the contracts and related guarantees are null and void. Univest Capital, Inc. has not been served with the complaint, and the plaintiff has been directed to file an amended complaint on or before August 7, 2017. As of the filing date, the outcome of the matter is neither probable nor estimable.

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

(All dollar amounts presented ~~within~~in tables are in thousands, except per share data. “BP” equates to “basis points”; “N/ M” 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. Such 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~~risks;

Economic, political and competitive forces impacting various lines of ~~business~~business;

Legislative, regulatory and accounting changes;

Demand for our financial products and services in our market area;

Volatility in interest rates;

The quality and composition of our loan and investment portfolios;

Timing of revenues and expenditures;

Returns on investment decisions;

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~~

~~Volatility in interest rates~~

~~Other risks and uncertainties, including those occurring in the U.S. and world financial systems~~unsuccessful.

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 ~~Corporation’s~~Univest Corporation of Pennsylvania (the Corporation) Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 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, discussed below, could materially affect the results of operations and financial position 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 assessment for impairment of certain investment securities,~~ reserve for loan and lease losses and purchase accounting ~~valuation of goodwill and other intangible assets, servicing rights, deferred tax assets and liabilities, benefit plans and stock-based compensation~~ as areas with critical accounting policies. For more information on these critical accounting policies, please refer to the Corporation’s ~~2016~~2017 Annual Report on Form 10-K.

General

~~Univest~~The Corporation ~~of Pennsylvania (the Corporation),~~ is a ~~Bank Holding Company owning~~bank holding company and owns all of the capital stock of Univest Bank and Trust Co. (the Bank).

The Bank is engaged in the commercial and consumer banking business and provides a full range of banking and trust services to customers. The Bank is the parent company of Delview, Inc., which is the parent company of Univest Insurance, Inc., an independent insurance agency, Univest Investments, Inc., a full-service broker-dealer and investment advisory firm, and Girard Partners ~~(Girard)~~Ltd. (Girard Partners), a registered investment advisory firm. The Bank is also the parent company of Univest Capital, Inc., an equipment financing business, and TCG Investment Advisory, a registered investment advisor, which provides discretionary investment consulting and management services. Through its wholly-owned subsidiaries, the Bank provides a variety of financial services to individuals, municipalities and businesses throughout the Bank's markets of operation.

The Corporation earns ~~revenues~~revenue primarily from the margins and fees generated from lending and depository services to customers as well as fee-based income from trust, insurance, mortgage banking and investment services to customers. 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 to Board of Directors approved levels.

The Corporation seeks to establish itself as the financial provider of choice in the markets it serves. The Corporation plans to achieve this goal by offering a broad range of high quality financial products and services and by increasing market awareness of its brand and the benefits that can be derived from its products. The Corporation operates in an attractive market for financial services but also ~~is in~~faces intense competition ~~with~~from domestic and international banking organizations and other insurance and wealth management ~~providers for the financial services business.~~providers. The Corporation has taken initiatives to achieve its business objectives by acquiring banks and other financial service providers in strategic markets, through marketing, public relations and advertising, by establishing standards of service excellence for customers, and by using technology to ensure that the needs of customers are understood and satisfied.

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 June 30,						Change				Six Months Ended June 30,						Change				Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
(Dollars in thousands, except per share data)	2017			2016			Amount		Percent		2017			2016			Amount		Percent		2018			2017			Amount			Percent		2018			2017			Amount			Percent
Net income	$	11,778		$	5,240		$	6,538	124.8	%	$	22,634		$	12,529		$	10,105	80.7	%	$	4,357		$	11,778		$	(7,421	)	(63.0	)%	$	17,207		$	22,634		$	(5,427	)	(24.0	)%
Net income per share:
Basic	$	0.44		$	0.27		$	0.17	63.0		$	0.85		$	0.64		$	0.21	32.8		$	0.15		$	0.44		$	(0.29	)	(65.9	)	$	0.59		$	0.85		$	(0.26	)	(30.6	)
Diluted	0.44			0.27			0.17		63.0		0.85			0.64			0.21		32.8		0.15			0.44			(0.29		)	(65.9	)	0.58			0.85			(0.27		)	(31.8	)
Return on average assets	1.09		%	0.74		%	35 BP		47.3		1.07		%	0.89		%	18 BP		20.2		0.37		%	1.09		%	(72 BP)			(66.1	)	0.75		%	1.07		%	(32 BP)			(29.9	)
Return on average equity	9.13			5.72			341 BP		59.6		8.89		%	6.88		%	201 BP		29.2		2.86			9.13			(627 BP)			(68.7	)	5.70			8.89			(319 BP)			(35.9	)

The Corporation reported net income of $4.4 million, or $0.15 diluted earnings per share, for the three months ended June 30, 2018, compared to net income of $11.8 million, or $0.44 diluted earnings per share, for the three months ended June 30, ~~2017, compared to net income of $5.2 million, or $0.27 diluted earnings per share, for the three months ended June 30, 2016.~~2017. Net income for the six months ended June 30, ~~2017~~2018 was $17.2 million, or $0.58 diluted earnings per share, compared to net income of $22.6 million, or $0.85 diluted earnings per share, ~~compared to $12.5 million, or $0.64 diluted earnings per share,~~ for the ~~comparable period in the prior year.~~ six months ended June 30, 2017.

The financial results for the three and six months ended June 30, ~~2017~~2018 included a charge to the provision for loan and lease losses of $12.7 million, which represented $0.34 of diluted earnings per share in each period, related to alleged fraudulent activities believed to be perpetrated by one or more employees of a borrower. The Bank owns a participating interest which originally totaled $13.0 million in an approximately $80.0 million commercial lending facility. The $12.7 million represents the entire principal amount owed to the Bank and this amount was fully charged-off as of June 30, 2018.

In addition, the financial results for the three and six months ended June 30, 2018 included tax-free bank owned life insurance ~~(BOLI)~~("BOLI") death benefit ~~claim~~claims of ~~$889~~$446 thousand, which ~~represents $0.03 per~~represented $0.02 diluted earnings per share in each period. The financial results for the three and six months ended June 30, ~~2016~~2017 included ~~acquisition and integration~~a tax-free BOLI death benefit claim of $889 thousand, which represented $0.03 diluted earnings per share in each period. The six months ended June 30, 2018 included restructuring costs related to ~~the acquisition~~financial center closures of ~~Fox Chase Bancorp (Fox Chase)~~$451 thousand, net of ~~$1.2 million and $1.4 million,~~tax, or ~~$0.06 and $0.07~~$0.02 of diluted earnings per share, ~~net~~recognized in the first quarter of ~~tax, respectively.~~2018. There were no ~~acquisition and integration~~restructuring costs during the six months ended June 30, 2017.

~~Results of Operations~~

~~On July 1, 2016, the Corporation acquired Fox Chase.~~ The ~~comparative~~financial results ~~of operations~~ for the three and six months ended June 30, 2018 also included a reduction in the Corporation's statutory federal income tax rate from 35% to 21% effective January 1, 2018 in accordance with the Tax Cuts and Jobs Act of 2017 ~~include the impact~~(“TCJA”).

Results of ~~this acquisition.~~Operations

Net Interest Income

Net interest income is the difference between interest earned on loans and leases, investments and other interest-earning assets and interest paid on deposits and other interest-bearing liabilities. Net interest income is the principal source of the Corporation’s revenue. Table 1 presents a summary of the Corporation’s average balances, tax-equivalent interest income and interest expense and the tax-equivalent yields earned on average assets, and the cost of average liabilities, and shareholders’ equity on a tax-equivalent basis for the three and six months ended June 30, ~~2017~~2018 and ~~2016.~~2017. 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.

Table 1, Table 2, and the interest income and net interest income analysis contain tax-equivalent financial information and measures determined by methods other than in accordance with U.S. GAAP. The management of the Corporation uses this non-GAAP financial information and measures in its analysis of the Corporation's performance. This financial information and measures should not be considered a substitute for GAAP basis financial information or measures nor should they be viewed as a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the non-GAAP financial information and measures provide useful information that is essential to a proper understanding of the financial results of the Corporation.

The statutory federal tax rate utilized in the respective tables and analyses was 21% for the three and six months ended June 30, 2018 and was 35% for the three and six months ended June 30, 2017.

Three and six months ended June 30, ~~2017~~2018 versus ~~2016~~2017

Reported net interest income for the three months ended June 30, 2018 was $39.0 million, an increase of $3.7 million, or 10.5%, compared to the three months ended June 30, 2017. Net interest income on a tax-equivalent basis for the three months ended June 30, ~~2017~~2018 was ~~$36.7~~$39.7 million, an increase of ~~$11.7~~$2.9 million, or ~~46.9%~~8.0%, compared to the three months ended June 30, 2017. Reported net interest income for the six months ended June 30, 2018 was $76.3 million, an increase of $6.7 million, or 9.6%, compared to the same period in ~~2016.~~2017. Net interest income on a tax-equivalent basis for the six months ended June 30, ~~2017~~2018 was ~~$72.4~~$77.6 million, an increase of ~~$22.6~~$5.2 million, or ~~45.3%~~7.2%, compared to the same period in ~~2016.~~ 2017.

The increase in reported and tax-equivalent net interest income for the first six months of 2018 compared to the first six months of 2017 was primarily due to the growth in average loans of 10.0% and interest free funding through a combination of growth in average noninterest-bearing deposits of 9.7% and average equity of 18.6%.

The net interest margin on a tax-equivalent basis for the second quarter of ~~2017~~2018 was ~~3.76%~~3.73%, compared to ~~3.93%~~3.76% for the second quarter of ~~2016.~~2017. The ~~increase in net interest income and decrease in~~ net interest margin ~~(tax-equivalent)~~on a tax-equivalent basis for the first six months of 2018 was ~~mainly due~~3.72%, compared to 3.78% for the ~~impact~~first six months of ~~the acquisition of Fox Chase, which occurred on July 1, 2016.~~2017. The favorable impact of ~~acquisition~~purchase accounting ~~adjustments~~accretion was three basis points ($349 thousand) for the three months ended June 30, 2018, compared to eight basis points ($742 thousand) for the three ~~and~~months ended June 30, 2017. The favorable impact of purchase accounting accretion was two basis points ($494 thousand) for the six months ended June 30, ~~2017 ($742 thousand and $1.5 million, respectively)~~2018, compared to ~~three~~eight basis points ($1.5 million) for the ~~three and~~ six months ended June 30, ~~2016 ($203 thousand and $303 thousand, respectively).~~2017.

Table 1—Average Balances and Interest Rates—Tax-Equivalent Basis


	Three Months Ended June 30,														Three Months Ended June 30,
	2017							2016							2018							2017
(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate
Assets:
Interest-earning deposits with other banks	$	17,951		$	39	0.87	%	$	7,654		$	9	0.47	%	$	37,254		$	148	1.59	%	$	17,951		$	39	0.87	%
U.S. government obligations	33,453			113		1.35		57,776			176		1.23		23,183			91		1.57		33,453			113		1.35
Obligations of states and political subdivisions	83,356			886		4.26		101,241			1,092		4.34		71,092			603		3.40		83,356			886		4.26
Other debt and equity securities	351,792			1,720		1.96		143,475			1,012		2.84		356,100			2,177		2.45		351,792			1,720		1.96
Federal funds sold and other earning assets	29,860			396		5.32		11,018			120		4.38		32,788			509		6.23		29,860			396		5.32
Total interest-earning deposits, investments, federal funds sold and other earning assets	516,412			3,154		2.45		321,164			2,409		3.02		520,417			3,528		2.72		516,412			3,154		2.45
Commercial, financial and agricultural loans	761,544			8,172		4.30		436,189			4,132		3.81		810,610			9,750		4.82		761,544			8,172		4.30
Real estate—commercial and construction loans	1,501,258			16,629		4.44		898,494			10,106		4.52		1,661,198			19,044		4.60		1,501,258			16,629		4.44
Real estate—residential loans	750,149			8,479		4.53		557,733			6,141		4.43		853,769			10,046		4.72		750,149			8,479		4.53
Loans to individuals	27,850			406		5.85		30,301			408		5.42		28,985			444		6.14		27,850			406		5.85
Municipal loans and leases	283,129			3,185		4.51		241,507			2,723		4.53		313,181			2,961		3.79		283,129			3,185		4.51
Lease financings	77,395			1,416		7.34		75,450			1,524		8.12		75,452			1,353		7.19		77,395			1,416		7.34
Gross loans and leases	3,401,325			38,287		4.51		2,239,674			25,034		4.50		3,743,195			43,598		4.67		3,401,325			38,287		4.51
Total interest-earning assets	3,917,737			41,441		4.24		2,560,838			27,443		4.31		4,263,612			47,126		4.43		3,917,737			41,441		4.24
Cash and due from banks	43,804							32,647							45,158							43,804
Reserve for loan and lease losses	(20,474		)					(16,789		)					(23,914		)					(20,474		)
Premises and equipment, net	65,690							43,990							61,234							65,690
Other assets	326,932							233,875							336,737							326,932
Total assets	$	4,333,689						$	2,854,561						$	4,682,827						$	4,333,689
Liabilities:
Interest-bearing checking deposits	$	445,830		118		0.11		$	351,011		75		0.09		$	463,156		383		0.33		$	445,830		118		0.11
Money market savings	560,350			694		0.50		337,250			322		0.38		694,734			1,758		1.01		560,350			694		0.50
Regular savings	835,495			446		0.21		644,199			199		0.12		803,586			582		0.29		835,495			446		0.21
Time deposits	547,115			1,203		0.88		374,936			862		0.92		553,579			1,819		1.32		547,115			1,203		0.88
Total time and interest-bearing deposits	2,388,790			2,461		0.41		1,707,396			1,458		0.34		2,515,055			4,542		0.72		2,388,790			2,461		0.41
Short-term borrowings	139,146			325		0.94		53,874			320		2.39		217,327			958		1.77		139,146			325		0.94
Long-term debt	200,207			683		1.37		—			—		—		155,628			709		1.83		200,207			683		1.37
Subordinated notes	94,176			1,261		5.37		49,431			673		5.48		94,420			1,261		5.36		94,176			1,261		5.37
Total borrowings	433,529			2,269		2.10		103,305			993		3.87		467,375			2,928		2.51		433,529			2,269		2.10
Total interest-bearing liabilities	2,822,319			4,730		0.67		1,810,701			2,451		0.54		2,982,430			7,470		1.00		2,822,319			4,730		0.67
Noninterest-bearing deposits	957,619							633,563							1,048,901							957,619
Accrued expenses and other liabilities	36,054							41,831							39,829							36,054
Total liabilities	3,815,992							2,486,095							4,071,160							3,815,992
Shareholders’ Equity:
Common stock	144,559							110,271							157,784							144,559
Additional paid-in capital	230,683							121,070							290,517							230,683
Retained earnings and other equity	142,455							137,125							163,366							142,455
Total shareholders’ equity	517,697							368,466							611,667							517,697
Total liabilities and shareholders’ equity	$	4,333,689						$	2,854,561						$	4,682,827						$	4,333,689
Net interest income				$	36,711						$	24,992						$	39,656						$	36,711
Net interest spread						3.57							3.77							3.43							3.57
Effect of net interest-free funding sources						0.19							0.16							0.30							0.19
Net interest margin						3.76	%						3.93	%						3.73	%						3.76	%
Ratio of average interest-earning assets to average interest-bearing liabilities	138.81		%					141.43		%					142.96		%					138.81		%

Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs, purchase accounting adjustments,

and unearned discount.

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 June 30, ~~2017~~2018 and ~~2016~~2017 have been calculated using the

Corporation’s federal applicable rate of 21% and 35%., respectively.


	Six Months Ended June 30,														Six Months Ended June 30,
	2017							2016							2018							2017
(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate
Assets:
Interest-earning deposits with other banks	$	13,297		$	55	0.83	%	$	13,637		$	37	0.55	%	$	28,269		$	224	1.60	%	$	13,297		$	55	0.83	%
U.S. government obligations	33,744			219		1.31		70,132			426		1.22		23,550			185		1.58		33,744			219		1.31
Obligations of states and political subdivisions	84,598			1,808		4.31		101,151			2,221		4.42		72,814			1,196		3.31		84,598			1,808		4.31
Other debt and equity securities	351,104			3,302		1.90		151,072			2,036		2.71		357,766			4,272		2.41		351,104			3,302		1.90
Federal funds sold and other earning assets	27,896			754		5.45		12,919			252		3.92		30,933			1,013		6.60		27,896			754		5.45
Total interest-earning deposits, investments, federal funds sold and other earning assets	510,639			6,138		2.42		348,911			4,972		2.87		513,332			6,890		2.71		510,639			6,138		2.42
Commercial, financial and agricultural loans	741,409			16,013		4.36		424,094			8,146		3.86		796,483			18,650		4.72		741,409			16,013		4.36
Real estate—commercial and construction loans	1,480,757			32,369		4.41		892,806			20,025		4.51		1,630,964			36,662		4.53		1,480,757			32,369		4.41
Real estate—residential loans	744,213			16,715		4.53		549,855			12,117		4.43		845,677			19,721		4.70		744,213			16,715		4.53
Loans to individuals	28,707			806		5.66		29,889			807		5.43		28,475			857		6.07		28,707			806		5.66
Municipal loans and leases	281,264			6,305		4.52		236,503			5,348		4.55		312,470			5,853		3.78		281,264			6,305		4.52
Lease financings	78,011			2,899		7.49		75,235			3,066		8.20		75,083			2,697		7.24		78,011			2,899		7.49
Gross loans and leases	3,354,361			75,107		4.52		2,208,382			49,509		4.51		3,689,152			84,440		4.62		3,354,361			75,107		4.52
Total interest-earning assets	3,865,000			81,245		4.24		2,557,293			54,481		4.28		4,202,484			91,330		4.38		3,865,000			81,245		4.24
Cash and due from banks	42,878							32,156							43,839							42,878
Reserve for loan and lease losses	(19,344		)					(17,280		)					(22,973		)					(19,344		)
Premises and equipment, net	65,102							43,431							61,485							65,102
Other assets	328,707							228,677							334,879							328,707
Total assets	$	4,282,343						$	2,844,277						$	4,619,714						$	4,282,343
Liabilities:
Interest-bearing checking deposits	$	436,155		223		0.10		$	376,586		159		0.08		$	444,197		675		0.31		$	436,155		223		0.10
Money market savings	546,083			1,257		0.46		349,519			662		0.38		676,651			3,101		0.92		546,083			1,257		0.46
Regular savings	821,725			795		0.20		635,546			373		0.12		818,895			1,139		0.28		821,725			795		0.20
Time deposits	569,341			2,377		0.84		396,741			1,797		0.91		547,562			3,318		1.22		569,341			2,377		0.84
Total time and interest-bearing deposits	2,373,304			4,652		0.40		1,758,392			2,991		0.34		2,487,305			8,233		0.67		2,373,304			4,652		0.40
Short-term borrowings	144,620			587		0.82		40,631			323		1.60		196,690			1,603		1.64		144,620			587		0.82
Long-term debt	174,263			1,082		1.25		—			—		—		155,697			1,374		1.78		174,263			1,082		1.25
Subordinated notes	94,146			2,522		5.40		49,412			1,348		5.49		94,390			2,522		5.39		94,146			2,522		5.40
Total borrowings	413,029			4,191		2.05		90,043			1,671		3.73		446,777			5,499		2.48		413,029			4,191		2.05
Total interest-bearing liabilities	2,786,333			8,843		0.64		1,848,435			4,662		0.51		2,934,082			13,732		0.94		2,786,333			8,843		0.64
Noninterest-bearing deposits	945,198							587,995							1,036,916							945,198
Accrued expenses and other liabilities	37,413							41,567							39,881							37,413
Total liabilities	3,768,944							2,477,997							4,010,879							3,768,944
Shareholders’ Equity:
Common stock	144,559							110,271							157,784							144,559
Additional paid-in capital	230,395							120,947							290,363							230,395
Retained earnings and other equity	138,445							135,062							160,688							138,445
Total shareholders’ equity	513,399							366,280							608,835							513,399
Total liabilities and shareholders’ equity	$	4,282,343						$	2,844,277						$	4,619,714						$	4,282,343
Net interest income				$	72,402						$	49,819						$	77,598						$	72,402
Net interest spread						3.60							3.77							3.44							3.60
Effect of net interest-free funding sources						0.18							0.15							0.28							0.18
Net interest margin						3.78	%						3.92	%						3.72	%						3.78	%
Ratio of average interest-earning assets to average interest-bearing liabilities	138.71		%					138.35		%					143.23		%					138.71		%

Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs, purchase accounting adjustments,

and unearned discount.

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 six months ended June 30, ~~2017~~2018 and ~~2016~~2017 have been calculated using the

Corporation’s federal applicable rate of 21% and 35%., respectively.

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									Six Months Ended									Three Months Ended									Six Months Ended
	June 30, 2017 Versus 2016									June 30, 2017 Versus 2016									June 30, 2018 Versus 2017									June 30, 2018 Versus 2017
(Dollars in thousands)	Volume Change			Rate Change			Total			Volume Change			Rate Change			Total			Volume Change			Rate Change			Total			Volume Change			Rate Change			Total
Interest income:
Interest-earning deposits with other banks	$	18		$	12		$	30		$	(1	)	$	19		$	18		$	62		$	47		$	109		$	93		$	76		$	169
U.S. government obligations	(79		)	16			(63		)	(236		)	29			(207		)	(38		)	16			(22		)	(74		)	40			(34		)
Obligations of states and political subdivisions	(187		)	(19		)	(206		)	(359		)	(54		)	(413		)	(119		)	(164		)	(283		)	(230		)	(382		)	(612		)
Other debt and equity securities	1,102			(394		)	708			2,024			(758		)	1,266			21			436			457			64			906			970
Federal funds sold and other earning assets	245			31			276			376			126			502			41			72			113			88			171			259
Interest on deposits, investments, federal funds sold and other earning assets	1,099			(354		)	745			1,804			(638		)	1,166			(33		)	407			374			(59		)	811			752
Commercial, financial and agricultural loans	3,448			592			4,040			6,704			1,163			7,867			549			1,029			1,578			1,249			1,388			2,637
Real estate—commercial and construction loans	6,704			(181		)	6,523			12,800			(456		)	12,344			1,804			611			2,415			3,385			908			4,293
Real estate—residential loans	2,194			144			2,338			4,322			276			4,598			1,202			365			1,567			2,357			649			3,006
Loans to individuals	(34		)	32			(2		)	(33		)	32			(1		)	17			21			38			(7		)	58			51
Municipal loans and leases	474			(12		)	462			993			(36		)	957			316			(540		)	(224		)	651			(1,103		)	(452		)
Lease financings	39			(147		)	(108		)	109			(276		)	(167		)	(35		)	(28		)	(63		)	(107		)	(95		)	(202		)
Interest and fees on loans and leases	12,825			428			13,253			24,895			703			25,598			3,853			1,458			5,311			7,528			1,805			9,333
Total interest income	13,924			74			13,998			26,699			65			26,764			3,820			1,865			5,685			7,469			2,616			10,085
Interest expense:
Interest-bearing checking deposits	24			19			43			25			39			64			5			260			265			4			448			452
Money market savings	252			120			372			433			162			595			203			861			1,064			356			1,488			1,844
Regular savings	70			177			247			129			293			422			(18		)	154			136			(3		)	347			344
Time deposits	379			(38		)	341			727			(147		)	580			14			602			616			(94		)	1,035			941
Interest on time and interest-bearing deposits	725			278			1,003			1,314			347			1,661			204			1,877			2,081			263			3,318			3,581
Short-term borrowings	284			(279		)	5			487			(223		)	264			246			387			633			269			747			1,016
Long-term debt	683			—			683			1,082			—			1,082			(173		)	199			26			(125		)	417			292
Subordinated notes	602			(14		)	588			1,196			(22		)	1,174
Interest on borrowings	1,569			(293		)	1,276			2,765			(245		)	2,520			73			586			659			144			1,164			1,308
Total interest expense	2,294			(15		)	2,279			4,079			102			4,181			277			2,463			2,740			407			4,482			4,889
Net interest income	$	11,630		$	89		$	11,719		$	22,620		$	(37	)	$	22,583		$	3,543		$	(598	)	$	2,945		$	7,062		$	(1,866	)	$	5,196

Interest Income

Three and six months ended June 30, ~~2017~~2018 versus ~~2016~~2017

Interest income on a tax-equivalent basis for the three months ended June 30, ~~2017~~2018 was ~~$41.4~~$47.1 million, an increase of ~~$14.0~~$5.7 million, or 13.7%, from the same period in ~~2016.~~2017. Interest income on a tax-equivalent basis for the six months ended June 30, ~~2017~~2018 was ~~$81.2~~$91.3 million, an increase of ~~$26.8~~$10.1 million, or 12.4% from the same period in ~~2016.~~2017. The increase in interest income (tax-equivalent) for the three and six months ended June 30, 2018 was ~~mainly~~primarily due to ~~the impact of the Fox Chase acquisition and~~ organic loan growth in commercial real estate, commercial business and residential real estate loans. In addition, loan yields increased as the Federal Reserve increased interest rates 75 basis points in 2017 and 50 basis points in 2018. The favorable impact of ~~acquisition~~purchase accounting ~~fair value adjustments~~accretion on ~~interest-earnings~~interest-earning assets was ~~two~~one basis ~~points~~point ($~~162~~167 thousand) for the three months ended June 30, ~~2017~~2018, compared to a favorable impact of ~~three~~one basis ~~points~~point ($~~154~~162 thousand) for the same period in the prior year. The favorable impact of ~~acquisition~~purchase accounting ~~fair value adjustments~~accretion on ~~interest-earnings~~interest-earning assets was ~~two~~0 basis ~~points~~point ($~~314~~126 thousand) for the six months ended June 30, ~~2017~~2018, compared to a favorable impact of two basis points ($~~189~~314 thousand) for the same period in the prior year.

Interest Expense

Three and six months ended June 30, ~~2017~~2018 versus ~~2016~~2017

Interest expense for the three months ended June 30, ~~2017~~2018 was ~~$4.7~~$7.5 million, an increase of ~~$2.3~~$2.7 million, or 57.9%, from the same period in ~~2016.~~2017. Interest expense for the six months ended June 30, ~~2017~~2018 was ~~$8.8~~$13.7 million, an increase of ~~$4.2~~$4.9 million, or 55.3%, from the same period in ~~2016.~~2017. The increase in interest expense for the three months ended June 30, 2018 was ~~mainly~~primarily due to higher deposit and borrowing costs which were impacted by the ~~impact~~Federal Reserve interest rate increases in 2017 and the first and second quarters of ~~the Fox Chase acquisition and increased borrowings.~~2018. The favorable impact of ~~acquisition~~purchase accounting ~~fair value adjustments~~accretion on interest-bearing liabilities was ~~eight~~three basis points ($~~580~~182 thousand) for the three months ended June 30, ~~2017~~2018, compared to a favorable impact of ~~one~~nine basis ~~point~~points ($49580 thousand) for the same period in the prior year. The favorable impact of ~~acquisition~~purchase accounting ~~fair value adjustments~~accretion on interest-bearing liabilities was ~~nine~~three basis points ($~~1.2 million)~~368 thousand) for the six months ended June 30, ~~2017~~2018, compared to a favorable impact of ~~one~~nine basis ~~point~~points ($~~114 thousand)~~1.2 million) for the same period in the prior year.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the three ~~months ended June 30, 2017 was $2.8 million compared to $830 thousand for the same period in 2016. The provision for loan~~ and ~~lease losses for the~~ six months ended June 30, ~~2017~~2018 was $15.4 million and $17.5 million, respectively, compared to $2.8 million and $5.2 million, ~~compared to $1.2 million~~respectively, for the same ~~period~~periods in ~~2016. The increase in~~2017. Net loan and lease charge-offs for the ~~provision for loan losses was primarily due to an increase in originated loans in the amount of $467.2 million during the~~three and six months ended June 30, ~~2017, net charge-offs of~~2018 were $13.2 million and $13.4 million, respectively, compared to $1.4 million and $1.8 million, respectively, for the same periods in the prior year. The increase in both the provision for loan and ~~a $844 thousand reserve~~leases losses and loan and lease charge-offs for ~~impaired leases.~~2018 is primarily due to the $12.7 million commercial loan charge-off during the second quarter of 2018 previously discussed in the Executive Overview.

Noninterest Income

The following table presents noninterest income for the three and six months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change					Three Months Ended June 30,					Change					Six Months Ended June 30,					Change
(Dollars in thousands)	2017		2016		Amount			Percent		2017		2016		Amount			Percent		2018			2017		Amount			Percent		2018			2017		Amount			Percent
Trust fee income	$	2,016	$	1,997	$	19		1.0	%	$	3,923	$	3,862	$	61		1.6	%	$	2,044		$	2,016	$	28		1.4	%	$	4,040		$	3,923	$	117		3.0	%
Service charges on deposit accounts	1,313		1,056		257			24.3		2,556		2,054		502			24.4		1,335			1,313		22			1.7		2,662			2,556		106			4.1
Investment advisory commission and fee income	3,333		2,776		557			20.1		6,514		5,447		1,067			19.6		3,778			3,333		445			13.4		7,461			6,514		947			14.5
Insurance commission and fee income	3,628		3,503		125			3.6		8,038		8,061		(23		)	(0.3	)	3,712			3,628		84			2.3		8,600			8,038		562			7.0
Other service fee income	2,245		1,931		314			16.3		4,232		3,762		470			12.5		2,431			2,245		186			8.3		4,600			4,232		368			8.7
Bank owned life insurance income	1,622		535		1,087			N/M		2,405		1,005		1,400			N/M		1,210			1,622		(412		)	(25.4	)	1,879			2,405		(526		)	(21.9	)
Net gain on sales of investment securities	21		413		(392		)	(94.9	)	36		457		(421		)	(92.1	)	—			21		(21		)	N/M		10			36		(26		)	(72.2	)
Net gain on mortgage banking activities	1,537		1,711		(174		)	(10.2	)	2,650		2,929		(279		)	(9.5	)	942			1,537		(595		)	(38.7	)	1,658			2,650		(992		)	(37.4	)
Other income	294		79		215			N/M		625		255		370			N/M
Other (loss) income																			(138		)	294		(432		)	N/M		(14		)	625		(639		)	N/M
Total noninterest income	$	16,009	$	14,001	$	2,008		14.3	%	$	30,979	$	27,832	$	3,147		11.3	%	$	15,314		$	16,009	$	(695	)	(4.3	)%	$	30,896		$	30,979	$	(83	)	(0.3	)%

Three and six months ended June 30, ~~2017~~2018 versus ~~2016~~2017

Noninterest income for the three months ended June 30, ~~2017~~2018 was ~~$16.0~~$15.3 million, ~~an increase~~a decrease of ~~$2.0 million,~~$695 thousand, or ~~14.3%~~4.3%, from the ~~same period in the prior year.~~three months ended June 30, 2017. Noninterest income for the six months ended June 30, ~~2017~~2018 was ~~$31.0~~$30.9 million, ~~an increase of $3.1 million, or 11.3%, from~~consistent with the same period in the prior year. ~~Service charges on deposits~~

Investment advisory commission and fee income increased ~~$257~~$445 thousand, or ~~24.3%~~13.4%, for the three months and ~~$502~~$947 thousand, or ~~24.4%~~14.5%, for the six months ended June 30, ~~2017, mostly~~2018, primarily due to ~~fees on deposit accounts acquired from Fox Chase. Investment advisory~~new customer relationships and continued favorable market performance. Insurance commission and fee income increased ~~$557~~$562 thousand, or ~~20.1%, for the three months and $1.1 million, or 19.6%~~7.0%, for the six months ended June 30, ~~2017~~2018, primarily due to ~~a combination~~an increase in contingent commission income of ~~increased new customer relationships and favorable market performance during 2016 and the first half of 2017. Other service fee income increased $314~~$377 thousand, or 16.3%, for the three months and $470 thousand, or 12.5%, for the six months primarily due to interchange fee income, partially related to Fox Chase customers. BOLI income increased $1.1 million for the three months and $1.4 million for the six months ended June 30, 2017, primarily due to proceeds from bank owned life insurance death benefits of $889 thousandwhich is largely recognized in the ~~second~~first quarter of ~~2017~~the year and ~~policies acquired from Fox Chase. Other~~due to an increase in group life and health premiums.

BOLI income ~~included net gains on sales of other real estate owned of $121~~decreased $412 thousand for the three months and ~~$235~~$526 thousand for the six months ended June 30, 2018, primarily due to proceeds from the previously mentioned BOLI death benefits of $446 thousand in the second quarter of 2018 as compared to $889 thousand in the second quarter of 2017. ~~These increases were partially offset by~~The net gain on mortgage banking decreased $595 thousand, or 38.7%, for the three months and $992 thousand, or 37.4%, for the six months ended June 30, 2018, primarily due to a decrease in refinance mortgage volume, a shortage of housing supply and the ~~net gain~~Bank retaining, on ~~sale~~balance-sheet, a higher percentage of ~~securities of $392~~its mortgage originations. Such on balance-sheet loans are predominantly hybrid adjustable rate mortgages. Other income decreased $432 thousand for the three months and ~~$421~~$639 thousand for the six months ended June 30, ~~2017. In addition, the net gain on mortgage banking decreased $174 thousand, or 10.2%, for the three months and $279 thousand, or 9.5%, for~~2018. The decrease in the six months ended June 30, ~~2017~~2018 is primarily due to a ~~decrease~~net loss of $300 thousand related to valuations and sales of other real estate owned and sales of closed branches as compared to a net gain of $289 thousand of such assets in ~~mortgage volume.~~the six months ended June 30, 2017.

Noninterest Expense

The following table presents noninterest expense for the three and six months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change					Three Months Ended June 30,				Change					Six Months Ended June 30,				Change
(Dollars in thousands)	2017		2016		Amount			Percent		2017		2016		Amount			Percent		2018		2017		Amount			Percent		2018		2017		Amount			Percent
Salaries and benefits	$	16,353	$	14,080	$	2,273		16.1	%	$	33,010	$	28,262	$	4,748		16.8	%
Commissions	2,374		2,363		11			0.5		4,424		4,258		166			3.9
Salaries, benefits and commissions																			$	20,065	$	18,730	$	1,335		7.1	%	$	40,712	$	37,467	$	3,245		8.7	%
Net occupancy	2,684		2,096		588			28.1		5,349		4,196		1,153			27.5		2,533		2,684		(151		)	(5.6	)	5,290		5,349		(59		)	(1.1	)
Equipment	1,031		750		281			37.5		2,024		1,526		498			32.6		1,067		1,031		36			3.5		2,090		2,024		66			3.3
Data processing	2,081		1,530		551			36.0		4,139		2,811		1,328			47.2		2,091		2,081		10			0.5		4,323		4,139		184			4.4
Professional fees	1,248		947		301			31.8		2,487		1,967		520			26.4		1,331		1,248		83			6.7		2,686		2,487		199			8.0
Marketing and advertising	475		513		(38		)	(7.4	)	854		1,051		(197		)	(18.7	)	526		475		51			10.7		907		854		53			6.2
Deposit insurance premiums	451		418		33			7.9		853		865		(12		)	(1.4	)	452		451		1			0.2		843		853		(10		)	(1.2	)
Intangible expenses	446		991		(545		)	(55.0	)	1,205		1,757		(552		)	(31.4	)	594		446		148			33.2		1,206		1,205		1			0.1
Acquisition-related costs	—		1,158		(1,158		)	N/M		—		1,372		(1,372		)	N/M
Integration costs	—		27		(27		)	N/M		—		33		(33		)	N/M
Restructuring charges																			—		—		—			—		571		—		571			N/M
Other expense	5,405		4,673		732			15.7		10,233		8,387		1,846			22.0		5,688		5,402		286			5.3		10,844		10,200		644			6.3
Total noninterest expense	$	32,548	$	29,546	$	3,002		10.2	%	$	64,578	$	56,485	$	8,093		14.3	%	$	34,347	$	32,548	$	1,799		5.5	%	$	69,472	$	64,578	$	4,894		7.6	%

Three and six months ended June 30, ~~2017~~2018 versus ~~2016~~2017

Noninterest expense for the three months ended June 30, ~~2017~~2018 was ~~$32.5~~$34.3 million, an increase of ~~$3.0~~$1.8 million, or ~~10.2%~~5.5%, from the ~~same period in the prior year.~~three months ended June 30, 2017. Noninterest expense for the six months ended June 30, ~~2017~~2018 was ~~$64.6~~$69.5 million, an increase of ~~$8.1~~$4.9 million, or ~~14.3%~~7.6%, from the same period in the prior year.

Salaries, benefits and ~~benefit expense~~commissions increased ~~$2.3~~$1.3 million, or 7.1%, for the three months and ~~$4.7~~$3.2 million, or 8.7%, for the six months ended June 30, ~~2017,~~2018, primarily attributable to ~~higher staffing levels resulting from the Fox Chase acquisition,~~ additional staff hired to support revenue generation across all business lines, ~~and the~~ expansion into Lancaster County. Premises and equipment expenses increased $869 thousand for the three months and $1.7 million for the six months ended June 30, 2017, primarily due to higher premises expense related to Fox Chase locations and expansion into Philadelphia,of our financial center footprint in Lancaster County and the Lehigh ~~Valley.~~Valley and annual merit increases. Data processing expense increased $551 thousand for the three months and $1.3 million for the six months ended June 30, 2017 due to increased investments in computer software and our outsourced data processing solution as well as the addition of Fox Chase processing expense. Other expense increased $732 thousand for the three months and $1.8 million for the six months ended June 30, 2017 primarily due to inclusion of Fox Chase related expenses and an increase of $289 thousand for the three months and $705$184 thousand for the six months ended June 30, ~~2017 related to Bank shares tax as a result of a statutory rate increase in 2017 and the Corporation's growth~~2018, primarily due to ~~the Fox Chase acquisition. These increases were partially offset by acquisition~~increased investments in customer relationship management software, internal infrastructure improvements and ~~integration costs during 2016 related to the Fox Chase acquisition totaling $1.2 million for the~~

three months and $1.4 million for the six months ended June 30, 2016. There were no acquisition or integration costs during the three or six months ended June 30, 2017. In addition, intangible expense decreased $545 thousand for the three months and $552outsourced data processing solutions. Professional fees increased $199 thousand for the six months ended June 30, ~~2017 as a result of the settlement of the Girard Partners Inc. acquisition earn-out in the fourth quarter of 2016 and the conclusion of the earn-out period~~2018, primarily due to increased consultant fees. Other expense increased $286 thousand for the ~~Sterner Insurance Associates acquisition, which resulted~~three months and $644 thousand for the six months ended June 30, 2018, primarily due to increases in ~~a reversal of a prior accrual of $303~~Bank shares tax and employment related expense. Restructuring costs related to financial center closures and

staffing rationalization were $571 thousand during the ~~second~~first quarter of 2018. There were no restructuring costs during the six months ended June 30, 2017.

Tax Provision

The provision for income taxes for the three months ended June 30, 2018 and 2017 was $191 thousand and ~~2016 was~~ $4.2 ~~million and $2.0~~ million, at effective rates of ~~26.4%~~4.2% and ~~28.1%~~26.4%, respectively. The provision for income taxes for the six months ended June 30, 2018 and 2017 ~~and 2016~~ was ~~$8.1~~$3.0 million and ~~$4.8~~$8.1 million, at effective rates of ~~26.4%~~14.9% and ~~27.9%~~26.4%, respectively. ~~During~~As previously discussed, the ~~three months ended June 30, 2017, the Corporation recognized a BOLI death benefit of $889 thousand and a $90 thousand discrete~~Corporation's statutory federal tax ~~benefit related~~rate was reduced to ~~the vesting of restricted stock and exercise of stock options, which provided a tax deduction greater than previously recorded. This change was~~21% effective January 1, 2018 in accordance with ~~ASU No. 2016-09, which was implemented by~~ the ~~Corporation in the fourth quarter of 2016 and requires the tax impact of such equity-based compensation activities to be recorded as an adjustment to the~~TCJA. The Corporation's effective income tax ~~provision in the period incurred, rather than an adjustment to equity. During~~rate for the six months ended June 30, ~~2017, the Corporation recognized the previously discussed~~2018 was favorably impacted by discrete tax benefits and proceeds from BOLI death ~~benefit of $889 thousand and a $378 thousand discrete tax benefit related to the vesting of restricted stock and exercise of stock options.~~benefits. Excluding these ~~two~~discrete items, the effective ~~income~~ tax rate was ~~28.5%~~18.2% for the ~~three and~~ six months ended June 30, ~~2017,~~2018, which reflects the impact of the Corporation's level of tax-exempt income for the period relative to the overall level of taxable ~~income. The effective tax rates reflect the benefits of tax-exempt income from investments in municipal securities, loans and bank-owned life insurance~~ income.

Financial Condition

Assets

The following table presents assets at the dates indicated:


	At June 30, 2017			At December 31, 2016			Change					At June 30, 2018			At December 31, 2017			Change
(Dollars in thousands)	At June 30, 2017			At December 31, 2016			Amount			Percent		At June 30, 2018			At December 31, 2017			Amount			Percent
Cash and interest-earning deposits	$	61,057		$	57,825		$	3,232		5.6		$	72,943		$	75,409		$	(2,466	)	(3.3	)
Investment securities	469,307			468,518			789			0.2		446,933			454,082			(7,149		)	(1.6	)
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	31,506			24,869			6,637			26.7		32,768			27,204			5,564			20.5
Loans held for sale	2,259			5,890			(3,631		)	(61.6	)	1,778			1,642			136			8.3
Loans and leases held for investment	3,510,170			3,285,886			224,284			6.8		3,818,398			3,620,067			198,331			5.5
Reserve for loan and lease losses	(20,910		)	(17,499		)	(3,411		)	(19.5	)	(25,652		)	(21,555		)	(4,097		)	(19.0	)
Premises and equipment, net	65,581			63,638			1,943			3.1		60,529			61,797			(1,268		)	(2.1	)
Goodwill and other intangibles, net	187,794			189,210			(1,416		)	(0.7	)	185,368			186,468			(1,100		)	(0.6	)
Bank owned life insurance	99,437			99,948			(511		)	(0.5	)	109,527			108,246			1,281			1.2
Accrued interest receivable and other assets	47,326			52,243			(4,917		)	(9.4	)	46,589			41,502			5,087			12.3
Total assets	$	4,453,527		$	4,230,528		$	222,999		5.3	%	$	4,749,181		$	4,554,862		$	194,319		4.3	%

Investment Securities

Total investments securities at June 30, ~~2017 increased $789 thousand~~2018 decreased $7.1 million from December 31, ~~2016. Purchases~~2017. Maturities and pay-downs of ~~$54.7~~$43.0 million, calls of $6.8 million, sales of $1.0 million and ~~increases~~decreases in the fair value of available-for-sale investment securities of ~~$3.0~~$8.3 million were partially ~~offset~~off-set by ~~maturities and pay-downs~~purchases of ~~$44.8 million, calls of $7.4 million and sales of $3.0~~$53.1 million. The ~~yield curve flattened~~decrease in the fair value of available-for-sale investment securities was due to increased interest rates during the ~~first half of 2017, resulting in lower long-term rates and an increased fair value on the available-for-sale investment securities.~~year.

Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost

The Bank is a member of the FHLB, and as such, is required to hold FHLB stock as a condition of membership as determined by the FHLB. The Bank is required to hold additional stock in the FHLB in relation to the level of outstanding borrowings. The Bank held FHLB stock of ~~$16.7~~$18.0 million and ~~$10.1~~$12.5 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. FHLB stock increased ~~$6.6~~$5.6 million mainly due to purchase requirements related to the increase in FHLB ~~borrowings.~~

borrowings during the year.

The Bank held $14.6 million in Federal Reserve Bank stock as required by the Federal Reserve Bank at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

Loans and Leases

Gross loans and leases held for investment grew ~~$224.3~~$198.3 million, or ~~6.8%~~5.5%, from December 31, ~~2016.~~2017. The growth in loans was primarily in commercial real estate, commercial business and residential real estate loans.

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.

Loans and leases are deemed impaired when, based on current information and events, it is probable that the Bank will be unable to collect all proceeds due according to the original contractual terms of the agreement or when a loan or lease is classified as a troubled debt restructuring. Factors considered by management in determining impairment include payment status, borrower cash flows, collateral value and the probability of collecting scheduled principal and interest payments when due.

When a loan or lease, including a loan or lease that is impaired, is classified as nonaccrual, the accrual of interest on such a loan or lease is discontinued. A loan or lease is typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest, even though the loan or lease is currently performing. A loan or lease may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan or lease is placed on nonaccrual status, unpaid interest credited to income is reversed and the amortization of net deferred ~~fees~~costs is suspended. Interest payments received on nonaccrual loans and leases are either applied against principal or reported as interest income, according to management’s judgment as to the ultimate collectability of principal.

Loans or leases are usually restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

At June 30, ~~2017,~~2018, the recorded investment in loans and leases held for investment that were considered to be impaired was ~~$41.7~~$33.9 million. The related reserve for loan and lease losses was ~~$1.0~~$1.5 million. At December 31, ~~2016,~~2017, the recorded investment in loans and leases that were considered to be impaired was ~~$43.9~~$29.7 million. The related reserve for loan and lease losses was ~~$235~~$131 thousand. During the first quarter of 2018, one commercial real-estate loan totaling $12.3 million was placed on non-accrual status. This was partially offset by troubled debt restructured commercial real estate loans for another borrower totaling $10.3 million being returned to performing status during the first quarter of 2018 as the borrower was in compliance with the modified terms of the restructuring for the required time period. The impaired loan and lease balances consisted mainly of commercial real estate loans and business loans. Impaired loans and leases include nonaccrual loans and leases, accruing troubled debt restructured loans and lease modifications and other accruing impaired loans for which it is probable that not all principal and interest payments due will be collectible in accordance with the original contractual terms. The amount of the specific reserve needed for these credits could change in future periods subject to changes in facts and judgments related to these credits. Specific reserves have been established based on current facts and management’s judgments about the ultimate outcome of these credits.

Other real estate owned was ~~$2.2~~$1.7 million at June 30, ~~2017,~~2018, compared to ~~$5.0~~$1.8 million at December 31, ~~2016.~~2017. During the ~~six~~three months ended June 30, ~~2017, four commercial real estate~~2018, two residential properties with a ~~total~~ carrying value of ~~$1.7 million~~$402 thousand were transferred to other real estate owned and one residential property with no carrying value was sold for a gain of ~~$203 thousand, six units~~$21 thousand. Additionally, the market value of a ~~condominium complex with~~parcel of land was written down by $460 thousand based on a ~~carrying~~potential agreement to sell the property and the market value of ~~$1.4 million were sold for~~ a ~~gain of $232~~residential property was written down by $43 thousand ~~and one commercial real estate property with a fair value of $653 thousand was transferred~~ to ~~other real estate owned.~~reflect current market conditions.

Reserve for Loan and Lease Losses

The reserve for loan and lease losses is maintained at a level representing management's best estimate of known risks and inherent losses in the portfolio, based upon management's evaluation of the portfolio's collectability. Management evaluates the need to establish reserves against losses on loans and leases on a quarterly basis. When changes in the reserve are necessary, an adjustment is made.

The reserve for loan and lease losses consists of a reserve for impaired loans and leases and a general valuation allowance on the remainder of the originated portfolio. Although management determines the amount of each element of the reserve separately, the entire reserve for loan and lease losses is available for losses on the portfolio. The Corporation records a provision for loan loss for the acquired non-impaired loans only when additional deterioration of the portfolio is identified over the projections utilized in the initial fair value analysis. After the acquisition measurement period, the present value of any decreases in expected cash flows of acquired credit impaired loans will generally result in an impairment charge recorded as a provision for loan loss, resulting in an increase to the allowance.

The Corporation maintains a reserve in other liabilities for off-balance sheet credit exposures that currently are unfunded in categories with historical loss experience. The reserve for these off-balance sheet credits was ~~$381~~$412 thousand and ~~$385~~$390 thousand at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

Table 3—Nonaccrual and Past Due Loans and Leases; Troubled Debt Restructured Loans and Lease Modifications; Other Real Estate Owned; and Related Ratios

The following table details information pertaining to the Corporation’s ~~non-performing~~nonperforming assets at the dates indicated. ~~Non-performing~~Nonperforming loans and assets exclude acquired credit impaired loans ~~for~~from Fox Chase and Valley Green.


(Dollars in thousands)	At June 30, 2017			At December 31, 2016			At June 30, 2018			At December 31, 2017
Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*:
Commercial, financial and agricultural	$	5,002		$	5,746		$	4,084		$	4,448
Real estate—commercial	4,681			5,651			19,584			4,285
Real estate—construction	365			—			110			365
Real estate—residential	4,465			5,983			4,844			3,820
Lease financings	5,661			536			1,526			1,599
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*	20,174			17,916			30,148			14,517
Accruing troubled debt restructured loans and lease modifications not included in the above	11,470			3,252			790			11,435
Accruing loans and leases 90 days or more past due:
Real estate—residential	306			652			—			310
Loans to individuals	130			142			101			195
Lease financings	136			193			49			256
Total accruing loans and leases, 90 days or more past due	572			987			150			761
Total non-performing loans and leases	32,216			22,155
Total nonperforming loans and leases							31,088			26,713
Other real estate owned	2,202			4,969			1,742			1,843
Total nonperforming assets	$	34,418		$	27,124		$	32,830		$	28,556
Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment	0.57		%	0.55		%	0.79		%	0.40		%
Nonperforming loans and leases / loans and leases held for investment	0.92			0.67			0.81			0.74
Nonperforming assets / total assets	0.77			0.64			0.69			0.63

Allowance for loan and lease losses	$	20,910		$	17,499		$	25,652		$	21,555
Allowance for loan and lease losses / loans and leases held for investment	0.60			0.53			0.67		%	0.60		%
Allowance for loan and lease losses / loans and leases held for investment (excluding acquired loans at period-end)	0.73			0.73			0.76			0.70
Allowance for loan and lease losses / nonaccrual loans and leases held for investment	103.65			97.67			85.09			148.48
Allowance for loan and lease losses / nonperforming loans and leases held for investment	64.91			78.98			82.51			80.69
Acquired credit impaired loans	6,485			7,352			$	998		$	1,583


Nonperforming loans and leases and acquired credit impaired loans/loans and leases held for investment	1.10		%	0.90		%
Nonperforming assets and acquired credit impaired loans/ total assets	0.92			0.81
Nonperforming loans and leases and acquired credit impaired loans / loans and leases held for investment							0.84		%	0.78		%
Nonperforming assets and acquired credit impaired loans / total assets							0.71			0.66
* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table	$	1,840		$	1,753		$	1,770		$	2,513

The following table provides additional information on the Corporation’s nonaccrual loans held for investment:


(Dollars in thousands)	At June 30, 2017			At December 31, 2016			At June 30, 2018			At December 31, 2017
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications	$	20,174		$	17,916		$	30,148		$	14,517
Nonaccrual loans and leases with partial charge-offs	4,562			5,000			3,789			5,397
Life-to-date partial charge-offs on nonaccrual loans and leases	2,760			2,857			2,810			4,107
Charge-off rate of nonaccrual loans and leases with partial charge-offs	37.7		%	36.4		%	42.6		%	43.2		%
Specific reserves on impaired loans	$	131		$	235		$	1,524		$	131

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 ~~covenants not to compete,~~ core deposit and customer-related intangibles and servicing rights, 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 intangible assets was $885 thousand and $1.1 million ~~and $884 thousand~~ for the three months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. The amortization of intangible assets was ~~$2.1~~$1.8 million and ~~$1.7~~$2.1 million for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. See Note 5 to the Consolidated Financial Statements, "Goodwill and Other Intangible ~~Assets"~~Assets," for a summary of intangible assets at June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. The Corporation also has goodwill with a net carrying value of $172.6 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, which is deemed to be an indefinite intangible asset and is not amortized.

The Corporation completes a goodwill impairment analysis at least 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 six months ended June 30, ~~2017~~2018 and ~~2016.~~2017. Since the last annual impairment analysis during ~~2016,~~2017, there have been no circumstances to indicate impairment. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

Liabilities

The following table presents liabilities at the dates indicated:


(Dollars in thousands)	At June 30, 2017		At December 31, 2016		Change					At June 30, 2018		At December 31, 2017		Change
(Dollars in thousands)	At June 30, 2017		At December 31, 2016		Amount			Percent		At June 30, 2018		At December 31, 2017		Amount			Percent
Deposits	$	3,348,080	$	3,257,567	$	90,513		2.8	%	$	3,620,786	$	3,554,919	$	65,867		1.9	%
Short-term borrowings	231,726		196,171		35,555			18.1		231,853		105,431		126,422			N/M
Long-term debt	216,610		127,522		89,088			69.6		155,556		155,828		(272		)	(0.2	)
Subordinated notes	94,209		94,087		122			0.1		94,453		94,331		122			0.1
Accrued interest payable and other liabilities	41,596		49,972		(8,376		)	(16.8	)	41,239		40,979		260			0.6
Total liabilities	$	3,932,221	$	3,725,319	$	206,902		5.6	%	$	4,143,887	$	3,951,488	$	192,399		4.9	%

Deposits

Total deposits increased ~~$90.5~~$65.9 million, or ~~2.8%~~1.9%, from December 31, ~~2016,~~2017, primarily due to ~~growth~~increases in consumer time deposits and commercial ~~customer relationships and the related~~deposits partially offset by a seasonal decline in public funds deposits.

Borrowings

Total borrowings increased ~~$124.8~~$126.3 million from December 31, ~~2016,~~2017, primarily due to an increase in short-term borrowings of ~~$35.6 million and long-term FHLB advances of $90.0~~$126.4 million. The Corporation increased its ~~long-term advances as part~~short-term borrowings to fund loan growth during the first six months of ~~a balance sheet management strategy to take advantage of the flattening yield curve and obtain relatively low cost longer term fixed rate borrowings.~~2018.

Shareholders’ Equity

The following table presents total shareholders’ equity at the dates indicated:


(Dollars in thousands)	At June 30, 2017			At December 31, 2016			Change				At June 30, 2018			At December 31, 2017			Change
(Dollars in thousands)	At June 30, 2017			At December 31, 2016			Amount		Percent		At June 30, 2018			At December 31, 2017			Amount			Percent
Common stock	$	144,559		$	144,559		$	—	N/M		$	157,784		$	157,784		$	—		N/M
Additional paid-in capital	231,289			230,494			795		0.3		291,238			290,133			1,105			0.4
Retained earnings	206,498			194,516			11,982		6.2		226,574			216,761			9,813			4.5
Accumulated other comprehensive loss	(17,182		)	(19,454		)	2,272		11.7		(28,007		)	(17,771		)	(10,236		)	(57.6	)
Treasury stock	(43,858		)	(44,906		)	1,048		2.3		(42,295		)	(43,533		)	1,238			2.8
Total shareholders’ equity	$	521,306		$	505,209		$	16,097	3.2	%	$	605,294		$	603,374		$	1,920		0.3	%

The increase in shareholder's equity at June 30, ~~2017~~2018 of ~~$16.1~~$1.9 million from December 31, ~~2016~~2017 was primarily related to an increase in retained earnings of ~~$12.0~~$9.8 million. Retained earnings at June 30, ~~2017~~2018 were impacted by the six months of net income of ~~$22.6~~$17.2 million and the reclassification of $3.9 million and $433 thousand from accumulated other comprehensive income related to the January 1, 2018 adoption of ASU 2016-01 and ASU 2018-02, respectively, partially offset by cash dividends declared of ~~$10.7~~$11.7 million. Accumulated other comprehensive loss ~~decreased~~increased by ~~$2.3~~$10.2 million mainly attributable to ~~increases~~decreases in the fair value of available-for-sale investment ~~securities.~~securities of $6.5 million, net of tax, and the reclassification to retained earnings from the previously discussed adoption of ASU 2016-01 and ASU 2018-02 ($3.0 million related to the defined benefit pension plans and $1.4 million related to investment securities). Treasury stock decreased by ~~$1.0~~$1.2 million primarily due to the issuance of restricted stock.

Capital Adequacy

The Corporation and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s and the Bank’s financial statements. Capital adequacy guidelines, and additionally for the Bank the prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios (set forth in the following table) of Total capital, Tier 1 capital and Tier 1 common capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined), or leverage ratio.

In July 2013, the federal bank regulatory agencies adopted final rules revising the agencies’ capital adequacy guidelines and prompt corrective action rules, designed to enhance such requirements and implement the revised standards of the Basel Committee on Banking Supervision, commonly referred to as Basel III. The new minimum capital requirements were effective on January 1, 2015. Under the new 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 2.5% of total risk-weighted assets. The capital conservation buffer requirements ~~phase~~began to be phased in over a four-year period beginning January 1, ~~2016.~~2016 with final phase in occurring 2019.

The Corporation adopted the new Basel III regulatory capital rules during the first quarter of 2015 under the transition rules, primarily relating to regulatory deductions and adjustments impacting common equity tier 1 capital and tier 1 capital, to be phased in over a ~~three-year~~four-year period beginning January 1, 2015. Under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. During ~~2017,~~2018, the Corporation and the Bank must hold a capital conservation buffer greater than ~~1.250%~~1.875% above its minimum risk-based capital requirements in order to avoid limitations on capital distributions. It is the Corporation's and Bank's intent to maintain capital levels in excess of the capital conservation buffer which would require Tier 1 Capital to Risk Weighted Assets to exceed 8.50% and Total Capital to Risk Weighted Assets to exceed 10.50% beginning in the first quarter of 2019.

Table 4—Regulatory Capital

The Corporation's and Bank's actual and required capital ratios as of June 30, ~~2017~~2018 and December 31, ~~2016~~2017 under ~~BASEL III~~ regulatory capital rules were as follows.


	Actual				For Capital Adequacy Purposes				To Be Well-Capitalized Under Prompt Corrective Action Provisions				Actual				For Capital Adequacy Purposes				To Be Well-Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
At June 30, 2017
At June 30, 2018
Total Capital (to Risk-Weighted Assets):
Corporation	$	479,159	12.15	%	$	315,575	8.00	%	$	394,469	10.00	%	$	580,048	13.76	%	$	337,246	8.00	%	$	421,557	10.00	%
Bank	450,545		11.50		313,298		8.00		391,622		10.00		475,914		11.36		335,137		8.00		418,922		10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation	363,370		9.21		236,682		6.00		315,575		8.00		459,235		10.89		252,934		6.00		337,246		8.00
Bank	428,965		10.95		234,973		6.00		313,298		8.00		449,554		10.73		251,353		6.00		335,137		8.00
Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation	363,370		9.21		177,511		4.50		256,405		6.50		459,235		10.89		189,701		4.50		274,012		6.50
Bank	428,965		10.95		176,230		4.50		254,554		6.50		449,554		10.73		188,515		4.50		272,299		6.50
Tier 1 Capital (to Average Assets):
Corporation	363,370		8.74		166,343		4.00		207,929		5.00		459,235		10.19		180,350		4.00		225,438		5.00
Bank	428,965		10.39		165,166		4.00		206,457		5.00		449,554		10.03		179,203		4.00		224,004		5.00
At December 31, 2016
At December 31, 2017
Total Capital (to Risk-Weighted Assets):
Corporation	$	462,198	12.44	%	$	297,284	8.00	%	$	371,604	10.00	%	$	563,797	14.00	%	$	322,148	8.00	%	$	402,685	10.00	%
Bank	436,435		11.85		294,679		8.00		368,349		10.00		464,851		11.62		320,003		8.00		400,004		10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation	349,942		9.42		222,963		6.00		297,284		8.00		447,228		11.11		241,611		6.00		322,148		8.00
Bank	418,266		11.36		221,010		6.00		294,679		8.00		442,613		11.07		240,002		6.00		320,003		8.00
Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation	349,942		9.42		167,222		4.50		241,543		6.50		447,228		11.11		181,208		4.50		261,745		6.50
Bank	418,266		11.36		165,757		4.50		239,427		6.50		442,613		11.07		180,002		4.50		260,002		6.50
Tier 1 Capital (to Average Assets):
Corporation	349,942		8.84		158,410		4.00		198,013		5.00		447,228		10.48		170,753		4.00		213,441		5.00
Bank	418,266		10.64		157,254		4.00		196,567		5.00		442,613		10.45		169,453		4.00		211,816		5.00

At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, management believes that the Corporation and the Bank continued to meet all capital adequacy requirements to which they are subject. The Corporation, like other bank holding companies, currently is required to maintain Tier 1 ~~Capital~~capital and Total ~~Capital~~capital equal to at least 6.0% and 8.0%, respectively, of total risk-weighted assets (including various off-balance-sheet items). The Bank, like other depository institutions, is required to maintain similar capital levels under capital adequacy guidelines. During ~~2017,~~2018, the Corporation and the Bank 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 ~~1.250%~~1.875% of total risk-weighted assets in order to avoid limitations on capital distributions. For a depository institution to be considered “well capitalized” under the regulatory framework for prompt corrective action, Tier 1 and Total ~~Capital~~capital ratios must be at least 8.0% and 10.0% on a risk-adjusted basis, respectively. At June 30, ~~2017,~~2018, the Bank is categorized as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Corporation will continue to analyze the impact of the ~~new rules as it grows and as~~phase in of the capital conservation buffer ~~requirements are phased in.~~as well as the impact of new accounting rules, such as Lease Accounting (ASU No. 2016-02) and CECL (ASU No. 2016-13) on its regulatory capital ratios. See Note 1 to the financial statements included in Part I, Item I of this Form 10-Q for additional information.

Asset/Liability Management

The primary functions of Asset/Liability Management are to assure adequate earnings, capital and liquidity while maintaining an appropriate balance between interest-earning assets and interest-bearing liabilities. Liquidity management involves the ability to meet cash flow requirements of customers and corporate needs. Management's objective to address ~~interest-rate~~interest rate risk is to understand the Corporation's ~~susceptibility~~sensitivity to changes in interest rates and develop and implement strategies to minimize volatility while maximizing net interest income.

The Corporation uses both interest-sensitivity gap analysis and 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 simulation model to measure the short-term rate exposures. 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 simulation uses 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 that banks hold will tend to decrease in value; conversely, as interest rates decline, fixed-rate assets that banks hold will 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 flow and liquid assets are available to satisfy demand for loans, deposit withdrawals, repayment of borrowings and ~~brokered~~ certificates of deposit at maturity, operating expenditures, and capital expansion. The Corporation manages liquidity risk by measuring and monitoring liquidity sources and estimated funding needs on a ~~weekly~~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.

Sources of Funds

Core deposits continue to be the largest significant funding ~~sources~~source for the Corporation. These deposits are primarily generated from a base of consumer, business, municipalities and ~~public~~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.

The Corporation also utilizes a mix of short-term and long-term wholesale funding providers. Wholesale funding includes correspondent bank borrowings, secured borrowing lines from the Federal Home Loan Bank, the Federal Reserve Bank of Philadelphia and, at times, brokered deposits and other similar sources.

The Corporation, through the Bank, has a credit facility with the FHLB with a maximum borrowing capacity of approximately ~~$1.3~~$1.5 billion. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the carrying amount of overnight borrowings with the FHLB was ~~$124.5~~$138.5 million and ~~$91.3~~$30.2 million, respectively. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the carrying amount of long-term borrowings with the FHLB was ~~$185.6 million and $96.2 million, respectively.~~$125.0 million. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Bank had outstanding short-term letters of credit with the FHLB totaling ~~$104.9~~$178.9 million and ~~$148.5~~$234.2 million, respectively, which were utilized to collateralize public funds deposits. The maximum borrowing capacity with the FHLB changes as a function of qualifying collateral assets as well as the FHLB’s internal credit rating of the Bank.

The Corporation, through the Bank, maintains uncommitted federal fund lines with several correspondent banks totaling $367.0 million ~~and $302.0 million~~ at June 30, ~~2017~~2018 and December 31, ~~2016, respectively.~~2017. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Corporation had ~~$85.0~~$65.0 million and ~~$80.0~~$55.0 million, respectively, outstanding federal funds purchased with these correspondent banks. Future availability under these lines is subject to the prerogatives of the granting banks and may be withdrawn at will.

program.

The Corporation has a $10.0 million line of credit with a correspondent bank. At June 30, 2018 and December 31, 2017, the Corporation had no outstanding borrowings under this line.

On April 25, 2017, Kroll Bond Rating Agency ("KBRA") reaffirmed its credit rating for the Corporation and the Bank with a stable outlook. Specifically, KBRA reaffirmed the Corporation's senior unsecured debt rating of BBB+, subordinated debt rating of BBB and short-term rating of K2. With regard to the Bank, KBRA reaffirmed the Bank's deposit rating of A-, short-term debt rating of K2 and short-term deposit rating of K2 while also assigning the Bank a senior unsecured debt rating of A-. Additionally, on April 25, 2017, KBRA initiated the Bank's subordinated debt rating of BBB+.

Cash Requirements

The Corporation has cash requirements for various financial obligations, including contractual obligations and commitments that require cash payments. The most significant contractual obligation, in both the under and over one year time period, is for the Bank to repay certificates of deposit and short-term and long-term borrowings. The Bank anticipates meeting these obligations by continuing to provide convenient depository and cash management services through its financial center network, thereby replacing these contractual obligations with similar fund 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 Consolidated Financial Statements, “Summary of Significant Accounting Policies.”

Recent Legislative Developments

Economic Growth, Regulatory Relief, and Consumer Protection Act

On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), which was designed to ease certain restrictions imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Most of the changes made by the new Act can be grouped into five general areas: mortgage lending; certain regulatory relief for “community” banks; enhanced consumer protections in specific areas, including subjecting credit reporting agencies to additional requirements; certain regulatory relief for large financial institutions, including increasing the threshold at which institutions are classified a systemically important financial institutions (from $50 billion to $250 billion) and therefore subject to stricter oversight, and revising the rules for larger institution stress testing; and certain changes to federal securities regulations designed to promote capital formation. Some of the key provisions of the Act as it relates to community banks and bank holding companies include, but are not limited to: (i) designating mortgages held in portfolio as “qualified mortgages” for banks with less than $10 billion in assets, subject to certain documentation and product limitations; (ii) exempting banks with less than $10 billion in assets from Volcker Rule requirements relating to proprietary trading; (iii) simplifying capital calculations for banks with less than $10 billion in assets by requiring federal banking agencies to establish a community bank leverage ratio of tangible equity to average consolidated assets of not less than 8% or more than 10%, and provide that banks that maintain tangible equity in excess of such ratio will be deemed to be in compliance with risk-based capital and leverage requirements; (iv) assisting smaller banks with obtaining stable funding by providing an exception for reciprocal deposits from FDIC restrictions on acceptance of brokered deposits; (v) raising the eligibility for use of short-form Call Reports from $1 billion to $5 billion in assets; and (vi) clarifying definitions pertaining to high volatility commercial real estate loans (HVCRE), which require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings. The Corporation continues to analyze the changes implemented by the Act, but does not believe that such changes will materially impact the Corporation’s business, operations, or financial results.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

No material changes in the Corporation’s market risk or market strategy occurred during the current period. A detailed discussion of market risk is provided in the Corporation's Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016.~~2017.


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 June 30, ~~2017.~~2018.

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 June 30, ~~2017~~2018 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

~~As discussed in Notes 4 and 14 to the financial statements included in Part I, Item I of this Form 10-Q, a complaint has been filed in federal court in Texas against Univest Capital, Inc.~~


Item 1A.	Risk Factors

There have been no material changes in risk factors from those disclosed under Item 1A, “Risk ~~Factors.”~~Factors” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.


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

April 1 – 30, ~~2017~~2018

—

~~1,080,246~~1,014,246

May 1 – 31, ~~2017~~2018

—

~~1,080,246~~1,014,246

June 1 – 30, ~~2017~~2018

—

~~1,080,246~~1,014,246

Total

—


1.	Transactions are reported as of trade dates.

On October 23, 2013, the Corporation’s Board of Directors approved a new stock repurchase plan for the repurchase of up to 800,000 shares, or approximately 5% of the shares outstanding. On May 27, 2015, the Corporation's Board of Directors approved an increase of 1,000,000 shares available for repurchase under the Corporation's share repurchase program, or approximately 5% of the Corporation's common stock outstanding as of May 27, 2015. The repurchased shares limit ~~is net of~~does not include normal treasury activity such as purchases to fund the dividend reinvestment, employee stock purchase and equity compensation plans. The program has no scheduled expiration date and the Board of Directors has the right to suspend or discontinue the program at any time.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not Applicable.


Item 5.	Other Information

None.


Item 6.	Exhibits



a.	Exhibits

	Exhibit 3.1	Amended and Restated Articles of Incorporation are incorporated by reference to Exhibit 3.1 of Form 8-K, filed with the SEC on April 22, 2015.

	Exhibit 3.2	Amended By-Laws effective November 23, 2016 are incorporated by reference to Exhibit 3.2 of Form 8-K, filed with the SEC on November 23, 2016.

	Exhibit 31.1	Certification of Jeffrey M. Schweitzer, President and Chief Executive Officer of the Corporation, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.

	Exhibit 31.2	Certification of Roger S. Deacon, Senior Executive Vice President and Chief Financial Officer of the Corporation, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.

	Exhibit 32.1	Certification of Jeffrey M. Schweitzer, President and Chief Executive Officer of the Corporation, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

	Exhibit 32.2	Certification of Roger S. Deacon, Senior Executive Vice President and Chief Financial Officer of the Corporation, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

	Exhibit 101.INS	XBRL Instance Document

	Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document

	Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

	Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document

	Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

	Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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 Corporation of Pennsylvania
	(Registrant)

Date: August ~~4, 2017~~3, 2018	/s/ Jeffrey M. Schweitzer
	Jeffrey M. Schweitzer President and Chief Executive Officer (Principal Executive Officer)

Date: August ~~4, 2017~~3, 2018	/s/ Roger S. Deacon
	Roger S. Deacon Senior Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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