Table of Contents


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 March 31, 2019.
orFor the quarterly period ended September 30, 2019
or
¨☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from  to .
For the transition period from __________ to __________
Commission File Number: 0-7617


UNIVEST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Pennsylvania23-1886144
(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
Securities registered pursuant to Section 12(b) of the Act:
Title of classTrading symbolName of exchange on which registered
Common Stock, $5 par valueUVSPThe NASDAQ Stock Market
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of classTrading symbolName of exchange on which registered
Common Stock, $5 par valueUVSPThe NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx☒Accelerated filer¨☐
Non-accelerated filer¨☐Smaller reporting company¨☐
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with 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 value29,287,50929,326,748 
(Title of Class)(Number of shares outstanding at April 30,October 31, 2019)




Table of Contents
UNIVEST FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
 
Page Number
Part I.
Page Number
Part I.Item 1.
Item 1.
Financial Statements (Unaudited)
2
Condensed Consolidated Statements of Income for the Three and NineMonths Ended March 31,September 30, 2019 and 2018
3
Condensed Consolidated Statements of Comprehensive Income for the Three and NineMonths Ended March 31,September 30, 2019 and 2018
4
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and NineMonths Ended March 31,September 30, 2019 and 2018
56
Condensed Consolidated Statements of Cash Flows for the Three NineMonths Ended March 31,September30, 2019 and 2018
68
710
Item 2.
4351
Item 3.
5868
Item 4.
5868
Part II.
Item 1.
5968
Item 1A.
5968
Item 2.
5969
Item 3.
5969
Item 4.
5969
Item 5.
6069
Item 6.
6170
6271



1
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PART I. FINANCIAL INFORMATION
 
Item 1.Financial Statements
Item 1.
Financial Statements
UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)  (UNAUDITED)
(Dollars in thousands, except share data)At March 31, 2019 At December 31, 2018(Dollars in thousands, except share data)At September 30, 2019At December 31, 2018
ASSETS ASSETS
Cash and due from banks$46,465
 $61,573
Cash and due from banks$68,072  $61,573  
Interest-earning deposits with other banks19,676
 47,847
Interest-earning deposits with other banks157,262  47,847  
Cash and cash equivalents66,141
 109,420
Cash and cash equivalents225,334  109,420  
Investment securities held-to-maturity (fair value $148,960 and $141,575 at March 31, 2019 and December 31, 2018, respectively)148,470
 142,634
Investment securities held-to-maturity (fair value $186,644 and $141,575 at September 30, 2019 and December 31, 2018, respectively)Investment securities held-to-maturity (fair value $186,644 and $141,575 at September 30, 2019 and December 31, 2018, respectively)183,845  142,634  
Investment securities available-for-sale315,648
 328,507
Investment securities available-for-sale262,143  328,507  
Investments in equity securities2,765
 2,165
Investments in equity securities2,459  2,165  
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost32,699
 28,337
 Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost29,254  28,337  
Loans held for sale921
 1,754
Loans held for sale2,893  1,754  
Loans and leases held for investment4,067,879
 4,006,574
Loans and leases held for investment4,251,933  4,006,574  
Less: Reserve for loan and lease losses(31,602) (29,364)Less: Reserve for loan and lease losses(33,662) (29,364) 
Net loans and leases held for investment4,036,277
 3,977,210
Net loans and leases held for investment4,218,271  3,977,210  
Premises and equipment, net59,091
 59,559
Premises and equipment, net57,171  59,559  
Operating lease right-of-use assets36,099
 —
Operating lease right-of-use assets34,965  —  
Goodwill172,559
 172,559
Goodwill172,559  172,559  
Other intangibles, net of accumulated amortization11,530
 11,990
Other intangibles, net of accumulated amortization10,522  11,990  
Bank owned life insurance112,551
 111,599
Bank owned life insurance114,037  111,599  
Accrued interest receivable and other assets40,776
 38,613
Accrued interest receivable and other assets40,158  38,613  
Total assets$5,035,527
 $4,984,347
Total assets$5,353,611  $4,984,347  
LIABILITIES   LIABILITIES
Noninterest-bearing deposits$1,103,674
 $1,055,919
Noninterest-bearing deposits$1,198,425  $1,055,919  
Interest-bearing deposits:   Interest-bearing deposits:
Demand deposits1,441,540
 1,377,171
Demand deposits1,644,546  1,377,171  
Savings deposits819,255
 782,766
Savings deposits776,920  782,766  
Time deposits638,684
 670,077
Time deposits718,100  670,077  
Total deposits4,003,153
 3,885,933
Total deposits4,337,991  3,885,933  
Short-term borrowings73,185
 189,768
Short-term borrowings18,970  189,768  
Long-term debt145,263
 145,330
Long-term debt160,128  145,330  
Subordinated notes94,635
 94,574
Subordinated notes94,757  94,574  
Operating lease liabilities39,102
 —
Operating lease liabilities38,116  —  
Accrued interest payable and other liabilities42,583
 44,609
Accrued interest payable and other liabilities39,350  44,609  
Total liabilities4,397,921
 4,360,214
Total liabilities4,689,312  4,360,214  
SHAREHOLDERS’ EQUITY   SHAREHOLDERS’ EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at March 31, 2019 and December 31, 2018; 31,556,799 shares issued at March 31, 2019 and December 31, 2018; 29,272,502 and 29,270,852 shares outstanding at March 31, 2019 and December 31, 2018, respectively157,784
 157,784
Common stock, $5 par value: 48,000,000 shares authorized at September 30, 2019 and December 31, 2018; 31,556,799 shares issued at September 30, 2019 and December 31, 2018; 29,312,534 and 29,270,852 shares outstanding at September 30, 2019 and December 31, 2018, respectivelyCommon stock, $5 par value: 48,000,000 shares authorized at September 30, 2019 and December 31, 2018; 31,556,799 shares issued at September 30, 2019 and December 31, 2018; 29,312,534 and 29,270,852 shares outstanding at September 30, 2019 and December 31, 2018, respectively157,784  157,784  
Additional paid-in capital293,255
 292,401
Additional paid-in capital294,556  292,401  
Retained earnings256,746
 248,167
Retained earnings279,158  248,167  
Accumulated other comprehensive loss, net of tax benefit(24,238) (28,416)Accumulated other comprehensive loss, net of tax benefit(22,008) (28,416) 
Treasury stock, at cost; 2,284,297 and 2,285,947 shares at March 31, 2019 and December 31, 2018, respectively(45,941) (45,803)
Treasury stock, at cost; 2,244,265 and 2,285,947 shares at September 30, 2019 and December 31, 2018, respectivelyTreasury stock, at cost; 2,244,265 and 2,285,947 shares at September 30, 2019 and December 31, 2018, respectively(45,191) (45,803) 
Total shareholders’ equity637,606
 624,133
Total shareholders’ equity664,299  624,133  
Total liabilities and shareholders’ equity$5,035,527
 $4,984,347
Total liabilities and shareholders’ equity$5,353,611  $4,984,347  
Note: See accompanying notes to the unaudited condensed consolidated financial statements.

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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months EndedNine Months Ended
Three Months Ended 
 March 31,		 September 30,September 30,
(Dollars in thousands, except per share data)2019 2018(Dollars in thousands, except per share data)2019201820192018
Interest income Interest income
Interest and fees on loans and leases:   Interest and fees on loans and leases:
Taxable$45,682
 $37,950
Taxable$46,933  $43,066  $139,766  $121,653  
Exempt from federal income taxes2,683
 2,347
Exempt from federal income taxes2,774  2,501  8,216  7,269  
Total interest and fees on loans and leases48,365
 40,297
Total interest and fees on loans and leases49,707  45,567  147,982  128,922  
Interest and dividends on investment securities:   Interest and dividends on investment securities:
Taxable2,713
 2,189
Taxable2,581  2,348  7,939  6,805  
Exempt from federal income taxes431
 468
Exempt from federal income taxes315  459  1,147  1,404  
Interest on deposits with other banks269
 76
Interest on deposits with other banks1,178  397  2,016  621  
Interest and dividends on other earning assets586
 504
Interest and dividends on other earning assets519  484  1,640  1,497  
Total interest income52,364
 43,534
Total interest income54,300  49,255  160,724  139,249  
Interest expense   Interest expense
Interest on deposits8,203
 3,691
Interest on deposits9,434  6,278  26,748  14,511  
Interest on short-term borrowings638
 645
Interest on short-term borrowings94  584  949  2,187  
Interest on long-term debt and subordinated notes2,000
 1,926
Interest on long-term debt and subordinated notes2,127  1,970  6,224  5,866  
Total interest expense10,841
 6,262
Total interest expense11,655  8,832  33,921  22,564  
Net interest income41,523
 37,272
Net interest income42,645  40,423  126,803  116,685  
Provision for loan and lease losses2,685
 2,053
Provision for loan and lease losses1,530  2,745  6,291  20,207  
Net interest income after provision for loan and lease losses38,838
 35,219
Net interest income after provision for loan and lease losses41,115  37,678  120,512  96,478  
Noninterest income   Noninterest income
Trust fee income1,887
 1,996
Trust fee income1,973  1,960  5,914  6,000  
Service charges on deposit accounts1,435
 1,327
Service charges on deposit accounts1,513  1,454  4,395  4,116  
Investment advisory commission and fee income3,789
 3,683
Investment advisory commission and fee income4,032  3,785  11,876  11,246  
Insurance commission and fee income5,144
 4,888
Insurance commission and fee income3,877  3,643  12,962  12,243  
Other service fee income2,267
 2,169
Other service fee income2,255  2,284  7,112  6,884  
Bank owned life insurance income952
 669
Bank owned life insurance income743  865  2,438  2,744  
Net gain on sales of investment securities1
 10
Net gain on sales of investment securities33  —  41  10  
Net gain on mortgage banking activities483
 716
Net gain on mortgage banking activities1,629  754  2,908  2,412  
Other income339
 124
Other income544  116  1,606  102  
Total noninterest income16,297
 15,582
Total noninterest income16,599  14,861  49,252  45,757  
Noninterest expense   Noninterest expense
Salaries, benefits and commissions21,564
 20,647
Salaries, benefits and commissions22,785  20,321  66,438  61,033  
Net occupancy2,611
 2,757
Net occupancy2,475  2,515  7,687  7,805  
Equipment990
 1,023
Equipment1,088  1,042  3,143  3,132  
Data processing2,514
 2,232
Data processing2,624  2,339  7,765  6,662  
Professional fees1,264
 1,355
Professional fees1,517  1,370  4,088  4,056  
Marketing and advertising316
 381
Marketing and advertising558  646  1,884  1,987  
Deposit insurance premiums452
 391
Deposit insurance premiums(444) 544  438  1,387  
Intangible expenses426
 612
Intangible expenses378  479  1,221  1,685  
Restructuring charges—
 571
Restructuring charges—  —  —  571  
Other expense5,420
 5,156
Other expense5,289  5,115  15,941  15,525  
Total noninterest expense35,557
 35,125
Total noninterest expense36,270  34,371  108,605  103,843  
Income before income taxes19,578
 15,676
Income before income taxes21,444  18,168  61,159  38,392  
Income tax expense3,499
 2,826
Income tax expense3,782  3,204  10,950  6,221  
Net income$16,079
 $12,850
Net income$17,662  $14,964  $50,209  $32,171  
Net income per share:   Net income per share:
Basic$0.55
 $0.44
Basic$0.60  $0.51  $1.71  $1.10  
Diluted0.55
 0.44
Diluted0.60  0.51  1.71  1.09  
Note: See accompanying notes to the unaudited condensed consolidated financial statements.

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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended September 30,
(Dollars in thousands)20192018
Before
Tax
Amount		Tax
Expense
(Benefit)		Net of
Tax
Amount		Before
Tax
Amount		Tax
Expense
(Benefit)		Net of
Tax
Amount
Income$21,444  $3,782  $17,662  $18,168  $3,204  $14,964  
Other comprehensive loss:
Net unrealized losses on available-for-sale investment securities:
Net unrealized holding losses arising during the period(219) (46) (173) (1,122) (236) (886) 
Less: reclassification adjustment for net gains on sales realized in net income (1)(33) (7) (26) —  —  —  
Total net unrealized losses on available-for-sale investment securities(252) (53) (199) (1,122) (236) (886) 
Net unrealized (losses) gains on interest rate swaps used in cash flow hedges:
Net unrealized holding (losses) gains arising during the period(68) (14) (54) 79  17  62  
Less: reclassification adjustment for net (gains) losses realized in net income (2)(4) (1) (3) 1  —  1  
Total net unrealized (losses) gains on interest rate swaps used in cash flow hedges(72) (15) (57) 80  17  63  
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3)294  62  232  281  60  221  
Accretion of prior service cost included in net periodic pension costs (3)(45) (10) (35) (70) (15) (55) 
Total defined benefit pension plans249  52  197  211  45  166  
Other comprehensive loss(75) (16) (59) (831) (174) (657) 
Total comprehensive income$21,369  $3,766  $17,603  $17,337  $3,030  $14,307  
 Three Months Ended March 31,
(Dollars in thousands)2019 2018
Before
Tax
Amount
 
Tax
Expense
(Benefit)
 
Net of
Tax
Amount
 
Before
Tax
Amount
 
Tax
Expense
(Benefit)
 
Net of
Tax
Amount
Income$19,578
 $3,499
 $16,079
 $15,676
 $2,826
 $12,850
Other comprehensive income:           
Net unrealized gains (losses) on available-for-sale investment securities:           
Net unrealized holding gains (losses) arising during the period5,120
 1,075
 4,045
 (6,338) (1,331) (5,007)
Less: reclassification adjustment for net gains on sales realized in net income (1)(1) —
 (1) (10) (2) (8)
Total net unrealized gains (losses) on available-for-sale investment securities5,119
 1,075
 4,044
 (6,348) (1,333) (5,015)
Net unrealized (losses) gains on interest rate swaps used in cash flow hedges:
           
Net unrealized holding (losses) gains arising during the period(168) (36) (132) 212
 45
 167
Less: reclassification adjustment for net (gains) losses realized in net income (2)(16) (3) (13) 20
 4
 16
Total net unrealized (losses) gains on interest rate swaps used in cash flow hedges(184) (39) (145) 232
 49
 183
Defined benefit pension plans:           
Amortization of net actuarial loss included in net periodic pension costs (3)294
 62
 232
 281
 59
 222
Accretion of prior service cost included in net periodic pension costs (3)(45) (9) (36) (71) (15) (56)
Total defined benefit pension plans249
 53
 196
 210
 44
 166
Other comprehensive income (loss)5,184
 1,089
 4,095
 (5,906) (1,240) (4,666)
Total comprehensive income$24,762
 $4,588
 $20,174
 $9,770
 $1,586
 $8,184

(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 8, "Retirement Plans and Other Postretirement Benefits" for additional details.

Note: See accompanying notes to the unaudited condensed consolidated financial statements.
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 Nine Months Ended September 30,
(Dollars in thousands)20192018
Before
Tax
Amount		Tax
Expense
(Benefit)		Net of
Tax
Amount		Before
Tax
Amount		Tax
Expense
(Benefit)		Net of
Tax
Amount
Income$61,159  $10,950  $50,209  $38,392  $6,221  $32,171  
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized holding gains (losses) arising during the period7,834  1,645  6,189  (9,371) (1,968) (7,403) 
Less: reclassification adjustment for net gains on sales realized in net income (1)(41) (9) (32) (10) (2) (8) 
Total net unrealized gains (losses) on available-for-sale investment securities7,793  1,636  6,157  (9,381) (1,970) (7,411) 
Net unrealized (losses) gains on interest rate swaps used in cash flow hedges:
Net unrealized holding (losses) gains arising during the period(499) (105) (394) 445  93  352  
Less: reclassification adjustment for net (gains) losses realized in net income (2)(34) (7) (27) 27  6  21  
Total net unrealized (losses) gains on interest rate swaps used in cash flow hedges(533) (112) (421) 472  99  373  
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3)882  186  696  844  177  667  
Accretion of prior service cost included in net periodic pension costs (3)(136) (29) (107) (212) (44) (168) 
Total defined benefit pension plans746  157  589  632  133  499  
Other comprehensive income (loss)8,006  1,681  6,325  (8,277) (1,738) (6,539) 
Total comprehensive income$69,165  $12,631  $56,534  $30,115  $4,483  $25,632  



(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 8, "Retirement Plans and Other Postretirement Benefits" for additional details.
Note: See accompanying notes to the unaudited condensed consolidated financial statements.

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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)

(Dollars in thousands, except per share data)Common
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Treasury
Stock		Total
Three Months Ended September 30, 2019
Balance at June 30, 201929,294,942  $157,784  $293,947  $267,357  $(21,949) $(45,469) $651,670  
Net income—  —  —  17,662  —  —  17,662  
Other comprehensive loss, net of income tax benefit—  —  —  —  (59) —  (59) 
Cash dividends declared ($0.20 per share)—  —  —  (5,861) —  —  (5,861) 
Stock issued under dividend reinvestment and employee stock purchase plans20,943  —  37  —  —  497  534  
Exercise of stock options19,045  —  (68) —  —  382  314  
Stock-based compensation—  —  640  —  —  —  640  
Purchases of treasury stock(22,396) —  —  —  —  (601) (601) 
Balance at September 30, 201929,312,534  $157,784  $294,556  $279,158  $(22,008) $(45,191) $664,299  

(Dollars in thousands, except per share data)Common
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Three Months Ended September 30, 2018
Balance at June 30, 201829,406,450  $157,784  $291,238  $226,574  $(28,007) $(42,295) $605,294  
Net income—  —  —  14,964  —  —  14,964  
Other comprehensive loss, net of income tax benefit—  —  —  —  (657) —  (657) 
Cash dividends declared ($0.20 per share)—  —  —  (5,880) —  —  (5,880) 
Stock issued under dividend reinvestment and employee stock purchase plans20,332  —  42  —  —  524  566  
Exercise of stock options22,760  —  (29) —  —  449  420  
Stock-based compensation—  —  660  —  —  —  660  
Purchases of treasury stock(39,624) —  —  —  —  (1,125) (1,125) 
Cancellations of restricted stock awards(2,842) —  81  —  —  (81) —  
Balance at September 30, 201829,407,076  $157,784  $291,992  $235,658  $(28,664) $(42,528) $614,242  


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(Dollars in thousands, except per share data)Common
Shares
Outstanding		 Common
Stock		 Additional
Paid-in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Treasury
Stock		 Total
Three Months Ended March 31, 2019            
Balance at December 31, 201829,270,852
 $157,784
 $292,401
 $248,167
 $(28,416) $(45,803) $624,133
Adjustment to initially apply ASU No. 2016-02 for leases (1)—
 —
 —
 (1,525) —
 —
 (1,525)
Adjustment to initially apply ASU No. 2017-12 for derivatives (1)—
 —
 —
 (83) 83
 —
 —
Adjustment to initially apply ASU No. 2017-08 for premium amortization on purchased callable debt securities (1)—
 —
 —
 (39) —
 —
 (39)
Net income—
 —
 —
 16,079
 —
 —
 16,079
Other comprehensive income, net of income tax—
 —
 —
 —
 4,095
 —
 4,095
Cash dividends declared ($0.20 per share)—
 —
 —
 (5,853) —
 —
 (5,853)
Stock issued under dividend reinvestment and employee stock purchase plans25,743
 —
 30
 —
 —
 541
 571
Exercise of stock options30,500
 —
 (91) —
 —
 612
 521
Stock-based compensation—
 —
 574
 —
 —
 —
 574
Purchases of treasury stock(37,244) —
 —
 —
 —
 (950) (950)
Cancellations of performance-based restricted stock awards(17,349) —
 341
 —
 —
 (341) —
Balance at March 31, 201929,272,502
 $157,784
 $293,255
 $256,746
 $(24,238) $(45,941) $637,606
(Dollars in thousands, except share and per share data)Common
Shares
Outstanding		 Common
Stock		 Additional
Paid-in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Treasury
Stock		 Total
Three Months Ended March 31, 2018            
Balance at December 31, 201729,334,859
 $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—
 —
 —
 433
 (433) —
 —
Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges—
 —
 —
 3,921
 (3,921) —
 —
Net income—
 —
 —
 12,850
 —
 —
 12,850
Other comprehensive loss, net of income tax benefit—
 —
 —
 —
 (4,666) —
 (4,666)
Cash dividends declared ($0.20 per share)—
 —
 —
 (5,868) —
 —
 (5,868)
Stock issued under dividend reinvestment and employee stock purchase plans20,253
 —
 44
 —
 —
 525
 569
Exercise of stock options14,158
 —
 (9) —
 —
 277
 268
Stock-based compensation—
 —
 847
 —
 —
 —
 847
Purchases of treasury stock(23,539) —
 —
 —
 —
 (655) (655)
Restricted stock awards granted, net of cancellations46,203
 —
 (920) —
 —
 920
 —
Balance at March 31, 201829,391,934
 $157,784
 $290,095
 $228,097
 $(26,791) $(42,466) $606,719
(Dollars in thousands, except per share data)Common
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Treasury
Stock		Total
Nine Months Ended September 30, 2019
Balance at December 31, 201829,270,852  $157,784  $292,401  $248,167  $(28,416) $(45,803) $624,133  
Adjustment to initially apply ASU No. 2016-02 for leases (1)—  —  —  (1,525) —  —  (1,525) 
Adjustment to initially apply ASU No. 2017-12 for derivatives (1)—  —  —  (83) 83  —  —  
Adjustment to initially apply ASU No. 2017-08 for premium amortization on purchased callable debt securities (1)—  —  —  (39) —  —  (39) 
Net income—  —  —  50,209  —  —  50,209  
Other comprehensive income, net of income tax—  —  —  —  6,325  —  6,325  
Cash dividends declared ($0.60 per share)—  —  —  (17,572) —  —  (17,572) 
Stock issued under dividend reinvestment and employee stock purchase plans69,126  —  114  1  —  1,554  1,669  
Exercise of stock options58,545  —  (170) —  —  1,175  1,005  
Stock-based compensation—  —  1,870  —  —  —  1,870  
Purchases of treasury stock(68,640) —  —  —  —  (1,776) (1,776) 
Cancellations of performance-based restricted stock awards(17,349) —  341  —  —  (341) —  
Balance at September 30, 201929,312,534  $157,784  $294,556  $279,158  $(22,008) $(45,191) $664,299  
(1) See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2019" for additional information.
Note: See accompanying notes to the unaudited condensed consolidated financial statements.

UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended March 31,
(Dollars in thousands)2019 2018
Cash flows from operating activities:   
Net income$16,079
 $12,850
Adjustments to reconcile net income to net cash provided by operating activities:   
Provision for loan and lease losses2,685
 2,053
Depreciation of premises and equipment1,318
 1,408
Net amortization of investment securities premiums and discounts379
 402
Net gain on sales of investment securities(1) (10)
Net gain on mortgage banking activities(483) (716)
Bank owned life insurance income(952) (669)
Net accretion of acquisition accounting fair value adjustments(60) (146)
Stock-based compensation577
 847
Intangible expenses426
 612
Other adjustments to reconcile net income to cash used in operating activities(145) (18)
Originations of loans held for sale(30,422) (35,151)
Proceeds from the sale of loans held for sale31,745
 37,003
Contributions to pension and other postretirement benefit plans(66) (67)
Increase in accrued interest receivable and other assets(3,709) (3,307)
(Decrease) increase in accrued interest payable and other liabilities(316) 2,805
Net cash provided by operating activities17,055
 17,896
Cash flows from investing activities:   
Net capital expenditures(850) (1,009)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity4,288
 1,721
Proceeds from maturities, calls and principal repayments of securities available-for-sale17,085
 19,423
Proceeds from sales of securities available-for-sale491
 1,010
Purchases of investment securities held-to-maturity(10,309) (30,641)
Purchases of investment securities available-for-sale—
 (1,487)
Proceeds from sales of money market mutual funds10
 1,016
Purchases of money market mutual funds(606) (6,205)
Net increase in other investments(4,362) (5,597)
Net increase in loans and leases(61,582) (69,830)
Proceeds from sales of other real estate owned599
 —
Purchases of bank owned life insurance—
 (777)
Net cash used in investing activities(55,236) (92,376)
Cash flows from financing activities:   
Net increase (decrease) in deposits117,239
 (57,575)
Net (decrease) increase in short-term borrowings(116,583) 110,995
Payment of contingent consideration on acquisitions(33) (34)
Purchases of treasury stock(950) (655)
Stock issued under dividend reinvestment and employee stock purchase plans571
 569
Proceeds from exercise of stock options521
 268
Cash dividends paid(5,863) (5,866)
Net cash (used in) provided by financing activities(5,098) 47,702
Net decrease in cash and cash equivalents(43,279) (26,778)
Cash and cash equivalents at beginning of year109,420
 75,409
Cash and cash equivalents at end of period$66,141
 $48,631
Supplemental disclosures of cash flow information:   
Cash paid for interest$10,629
 $6,361
Cash paid for income taxes, net of refunds25
 145
(Dollars in thousands, except per share data)Common
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Nine Months Ended September 30, 2018
Balance at December 31, 201729,334,859  $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—  —  —  433  (433) —  —  
Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges—  —  —  3,921  (3,921) —  —  
Net income—  —  —  32,171  —  —  32,171  
Other comprehensive loss, net of income tax benefit—  —  —  —  (6,539) —  (6,539) 
Cash dividends declared ($0.60 per share)—  —  —  (17,629) —  —  (17,629) 
Stock issued under dividend reinvestment and employee stock purchase plans62,271  —  140  1  —  1,598  1,739  
Exercise of stock options59,750  —  (43) —  —  1,174  1,131  
Stock-based compensation—  —  2,379  —  —  —  2,379  
Purchases of treasury stock(83,977) —  —  —  —  (2,384) (2,384) 
Restricted stock awards granted, net of cancellations34,173  —  (617) —  —  617  —  
Balance at September 30, 201829,407,076  $157,784  $291,992  $235,658  $(28,664) $(42,528) $614,242  
Note: See accompanying notes to the unaudited condensed consolidated financial statements.

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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
(Dollars in thousands)20192018
Cash flows from operating activities:
Net income$50,209  $32,171  
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses6,291  20,207  
Depreciation of premises and equipment3,983  4,180  
Net amortization of investment securities premiums and discounts1,375  1,193  
Net gain on sales of investment securities(41) (10) 
Net gain on mortgage banking activities(2,908) (2,412) 
Bank owned life insurance income(2,438) (2,744) 
Net accretion of acquisition accounting fair value adjustments(312) (838) 
Stock-based compensation1,918  2,379  
Intangible expenses1,221  1,685  
Other adjustments to reconcile net income to cash (used in) provided by operating activities(599) 117  
Originations of loans held for sale(139,744) (118,106) 
Proceeds from the sale of loans held for sale140,906  122,283  
Contributions to pension and other postretirement benefit plans(199) (3,199) 
(Increase) decrease in accrued interest receivable and other assets(3,259) 379  
(Decrease) increase in accrued interest payable and other liabilities(2,491) 4,021  
Net cash provided by operating activities53,912  61,306  
Cash flows from investing activities:
Net capital expenditures(1,647) (2,596) 
Proceeds from maturities, calls and principal repayments of securities held-to-maturity20,903  7,846  
Proceeds from maturities, calls and principal repayments of securities available-for-sale49,127  44,603  
Proceeds from sales of securities available-for-sale24,987  1,010  
Purchases of investment securities held-to-maturity(62,919) (60,784) 
Purchases of investment securities available-for-sale(997) (1,986) 
Proceeds from sales of money market mutual funds1,032  11,215  
Purchases of money market mutual funds(1,314) (6,392) 
Net increase in other investments(917) (5,867) 
Net increase in loans and leases(246,453) (260,012) 
Proceeds from sales of other real estate owned670  362  
Purchases of bank owned life insurance—  (776) 
Proceeds from bank owned life insurance—  1,374  
Net cash used in investing activities(217,528) (272,003) 
Cash flows from financing activities:
Net increase in deposits452,101  265,260  
Net decrease in short-term borrowings(170,798) (18,666) 
Proceeds from issuance of long-term debt25,000  —  
Repayment of long-term debt(10,000) (10,000) 
Payment of contingent consideration on acquisitions(97) (67) 
Purchases of treasury stock(1,776) (2,384) 
Stock issued under dividend reinvestment and employee stock purchase plans1,669  1,739  
Proceeds from exercise of stock options1,005  1,131  
Cash dividends paid(17,574) (17,615) 
Net cash provided by financing activities279,530  219,398  
Net increase in cash and cash equivalents115,914  8,701  
Cash and cash equivalents at beginning of year109,420  75,409  
Cash and cash equivalents at end of period$225,334  $84,110  
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 Nine Months Ended September 30,
(Dollars in thousands)20192018
Supplemental disclosures of cash flow information:
Cash paid for interest$33,724  $21,647  
Cash paid for income taxes, net of refunds14,148  1,315  
Non cash transactions:
Transfer of loans to other real estate owned$—  $477  
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
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UNIVEST FINANCIAL CORPORATION 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 Financial Corporation (the Corporation) and its wholly owned subsidiaries. The Corporation’s direct subsidiary is Univest Bank and Trust Co. (the Bank). All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited interimcondensed 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-month or nine-month period ended March 31,September 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019 or for any other period. It is suggested that theseThese unaudited consolidated financial statements should 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, 2018, which was filed with the SEC on February 28, 2019.
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 the calculation of the reserve for loan and lease losses.
Accounting Pronouncements Adopted in 2019
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, "Leases (Topic 842)" and subsequent related updates to revise the accounting for leases. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for all leases based on the present value of future lease payments using an estimated incremental borrowing rate. Lessor accounting activities are largely unchanged from existing lease accounting. Disclosures are 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. This new guidance was effective for the first interim period within annual periods beginning after December 15, 2018, or January 1, 2019 for the Corporation.


The Corporation adopted this guidance, and subsequent related updates, on a modified retrospective basis through a cumulative-effect adjustment to retained earnings, representing the difference between the value of the Corporation’s lease liabilities and related right-of-use assets and the existing deferred rent liability, at January 1, 2019. The Corporation elected the package of practical expedients, which includes a provision which allows for the grandfathering of lease classification, among other items, and the hindsight practical expedient to determine the lease term. All leases in which the Corporation is the lessee were classified as operating leases and continue to be classified as such. On January 1, 2019, the Corporation recorded $39.6 million of operating lease liabilities and $36.6 million of related right-of-use assets and released $1.0 million of existing deferred rent liability. The resulting cumulative effect adjustment of $1.5 million, net of tax, was recorded to retained earnings at January 1, 2019. The initial and continued impact of the recording of operating lease assets had and will continue to have a negative impact on all Corporation and Bank regulatory capital ratios. Additionally, the Corporation early adopted (ASU) No. 2019-01, "Codification Improvements", as of January 1, 2019, which serves as an an update to (ASU) No. 2016-02, and is effective for the first interim period within annual periods beginning after December 15, 2019, or January 1, 2020, for the Corporation. See Note 4, "Loans and Leases" and Note 14, "Leases" for applicable disclosures including quantitative and qualitative information about the Corporation’s leases.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" and subsequent related updates. 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. The ASU amends the presentation and disclosure requirements and changes how entities assess effectiveness. The ASU eliminates the requirement to separately measure and
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report hedge ineffectiveness and requires all items that affect earnings be presented in the same income statement line as the hedged items. The

amendments in this guidance permit the use of the Overnight Index Swap rate based on Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes to facilitate the LIBOR to SOFR transition. This guidance was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities, or January 1, 2019 for the Corporation. The amended presentation and disclosure guidance was required only prospectively. The Corporation adopted this guidance on a modified retrospective basis through a cumulative-effect adjustment to retained earnings effective January 1, 2019. The Corporation recorded a cumulative-effect adjustment of $83 thousand related to ineffectiveness on a cash flow hedge, which was reclassified from retained earnings to accumulated other comprehensive income, effective January 1, 2019.
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 rather than the maturity of the security. Securities within the scope of this guidance are those that have explicit, non-contingent call features that are callable at fixed prices and on preset dates. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, or January 1, 2019 for the Corporation. At December 31, 2018, the Corporation had $11.3 million of callable debt securities. The Corporation adopted this guidance on a modified retrospective basis through a cumulative-effect adjustment to retained earnings effective January 1, 2019. The Corporation recorded a cumulative-effect adjustment resulting in a reduction in the unamortized premium balance for certain callable debt securities of $49 thousand and a reduction in retained earnings of approximately $39 thousand, net of tax, for the incremental amortization.  
Recent Accounting Pronouncements Yet to Be Adopted
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”Instruments” and subsequent related updates. 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 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 reserve for loan and lease losses will increase upon adoption of CECL and that the increased reserve level will decrease shareholders' equity and impact regulatory capital and ratios. The Corporation anticipates that the Corporation and the Bank will continue to be well capitalized after the adoption of CECL.
In April 2019, the FASB issued ASU No. 2019-04, "Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Financial Instruments (Topic 825)." The amendments to Topic 326 are the most significant and address how a company considers recoveries and extension options when estimating expected credit losses. The ASU clarifies that a company’s estimate of expected credit losses should include expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off. The ASU clarifies that a company should consider contractual extension or renewal options that it cannot unconditionally cancel when determining the contractual term over which expected credit losses are measured. ASU No. 2019-04 is effective for the Corporation for reporting periods beginning January 1, 2020. The Corporation does not expect the adoption of the amendments related to Topics 815 and 825 will have a material impact on the Corporation's financial statements. For additional detail related to amendments to Topic 326, see previous discussion of ASU No. 2016-13.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement." This ASU applies to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. Disclosures removed by this ASU are the amount and reasons for transfers between Level 1 and Level 2, the policy for timing of transfers between levels and the valuation processes for Level 3 measurements. This ASU modifies disclosures relating to investments in certain entities
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that calculate net asset value. Additional disclosures required by this ASU include: 1) change in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and 2) range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The prospective method of transition is required for the new disclosure requirements. The other amendments should be applied retrospectively. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years or January 1, 2020 for the Corporation. Early adoption is permitted. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements but will result in revised disclosures for fair value.
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. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.
In August 2018, the FASB issued ASU No. 2018-14, "Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans." The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit plans or other postretirement plans. Disclosures removed by this ASU include the following: 1) amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year; 2) amount and timing of plan assets expected to be returned to the employer; and 3) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for postretirement health care benefits. Additional disclosures required by this ASU include: 1) the weighted-average interest crediting rates used in an entity's cash balance pension plans and other similar plans and 2) explanations for reasons for significant changes in the benefit obligation or plan assets. All amendments should be applied retrospectively. This ASU is effective for fiscal years ending after December 15, 2020 or December 31, 2020 for the Corporation. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statement disclosures but will result in revised disclosures for retirement plans and other postretirement benefits.
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Note 2. Earnings per Share
The Corporation uses the two-class method to calculate earnings per share as the unvested restricted stock awards outstanding 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. Diluted earnings per share reflect additional common shares that would have been outstanding if options on common shares had been exercised, as well as any adjustment to income that would result from the assumed issuance, and if restricted stock units were vested. Potential common shares that may be issued by the Corporation relate to outstanding stock options and restricted stock units, and are determined using the treasury stock method. The effects of options to issue common stock and unvested restricted stock units are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.Anti-dilutive options are those options with weighted average exercise prices in excess of the weighted average market value.Anti-dilutive restricted stock units are those with hypothetical repurchases of shares, under the treasury stock method, exceeding the average restricted stock units outstanding for the periods presented.
The following table sets forth the computation of basic and diluted earnings per share:
Three Months EndedNine Months Ended
 September 30,September 30,
(Dollars and shares in thousands, except per share data)2019201820192018
Numerator:
Net income$17,662  $14,964  $50,209  $32,171  
Net income allocated to unvested restricted stock awards(58) (86) (186) (225) 
Net income allocated to common shares$17,604  $14,878  $50,023  $31,946  
Denominator:
Weighted average shares outstanding29,306  29,402  29,290  29,387  
Average unvested restricted stock awards(95) (170) (111) (204) 
Denominator for basic earnings per share—weighted-average shares outstanding
29,211  29,232  29,179  29,183  
Effect of dilutive securities—employee stock options and restricted stock units74  86  64  92  
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding
29,285  29,318  29,243  29,275  
Basic earnings per share$0.60  $0.51  $1.71  $1.10  
Diluted earnings per share$0.60  $0.51  $1.71  $1.09  
Average anti-dilutive options and restricted stock units excluded from computation of diluted earnings per share323  359  326  315  

 Three Months Ended 
 March 31,
(Dollars and shares in thousands, except per share data)2019 2018
Numerator:   
Net income$16,079
 $12,850
Net income allocated to unvested restricted stock awards(67) (97)
Net income allocated to common shares$16,012
 $12,753
Denominator:   
Weighted average shares outstanding29,277
 29,355
Average unvested restricted stock awards(131) (215)
Denominator for basic earnings per share—weighted-average shares outstanding
29,146
 29,140
Effect of dilutive securities—employee stock options and restricted stock units59
 94
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding
29,205
 29,234
Basic earnings per share$0.55
 $0.44
Diluted earnings per share$0.55
 $0.44
Average anti-dilutive options and restricted stock units excluded from computation of diluted earnings per share348
 217
13

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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 March 31,September 30, 2019 and December 31, 2018, by contractual maturity within each type:
At March 31, 2019 At December 31, 2018 At September 30, 2019At December 31, 2018
(Dollars in thousands)Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair Value Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair Value(Dollars in thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair ValueAmortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
Securities Held-to-Maturity               Securities Held-to-Maturity
U.S. government corporations and agencies:               U.S. government corporations and agencies:
After 1 year to 5 years$6,997
 $—
 $(46) $6,951
 $6,996
 $—
 $(104) $6,892
After 1 year to 5 years$6,997  $60  $—  $7,057  $6,996  $—  $(104) $6,892  
6,997
 —
 (46) 6,951
 6,996
 —
 (104) 6,892
6,997  60  —  7,057  6,996  —  (104) 6,892  
Residential mortgage-backed securities:               Residential mortgage-backed securities:
After 5 years to 10 years11,005
 23
 (54) 10,974
 11,573
 —
 (135) 11,438
After 5 years to 10 years9,720  116  —  9,836  11,573  —  (135) 11,438  
Over 10 years130,468
 852
 (285) 131,035
 124,065
 287
 (1,107) 123,245
Over 10 years167,128  2,770  (147) 169,751  124,065  287  (1,107) 123,245  
141,473
 875
 (339) 142,009
 135,638
 287
 (1,242) 134,683
176,848  2,886  (147) 179,587  135,638  287  (1,242) 134,683  
Total$148,470
 $875
 $(385) $148,960
 $142,634
 $287
 $(1,346) $141,575
Total$183,845  $2,946  $(147) $186,644  $142,634  $287  $(1,346) $141,575  
Securities Available-for-Sale               Securities Available-for-Sale
U.S. government corporations and agencies:               U.S. government corporations and agencies:
Within 1 year$10,067
 $—
 $(41) $10,026
 $15,108
 $—
 $(90) $15,018
Within 1 year$301  $—  $(2) $299  $15,108  $—  $(90) $15,018  
After 1 year to 5 years302
 —
 (5) 297
 303
 —
 (6) 297
After 1 year to 5 years—  —  —  —  303  —  (6) 297  

10,369
 —
 (46) 10,323
 15,411
 —
 (96) 15,315
301  —  (2) 299  15,411  —  (96) 15,315  
State and political subdivisions:               State and political subdivisions:
Within 1 year3,483
 6
 —
 3,489
 5,900
 4
 (6) 5,898
Within 1 year350  1  —  351  5,900  4  (6) 5,898  
After 1 year to 5 years17,439
 83
 (1) 17,521
 15,459
 36
 (56) 15,439
After 1 year to 5 years5,809  42  —  5,851  15,459  36  (56) 15,439  
After 5 years to 10 years40,506
 458
 —
 40,964
 43,923
 318
 (163) 44,078
After 5 years to 10 years33,809  375  —  34,184  43,923  318  (163) 44,078  

61,428
 547
 (1) 61,974
 65,282
 358
 (225) 65,415
39,968  418  —  40,386  65,282  358  (225) 65,415  
Residential mortgage-backed securities:               Residential mortgage-backed securities:
Within 1 yearWithin 1 year48  2  —  50  —  —  —  —  
After 1 year to 5 years6,204
 11
 (75) 6,140
 5,799
 3
 (70) 5,732
After 1 year to 5 years1,082  14  (2) 1,094  5,799  3  (70) 5,732  
After 5 years to 10 years46,409
 14
 (711) 45,712
 49,904
 6
 (1,381) 48,529
After 5 years to 10 years36,892  78  (130) 36,840  49,904  6  (1,381) 48,529  
Over 10 years97,524
 52
 (1,663) 95,913
 100,873
 26
 (3,398) 97,501
Over 10 years87,317  404  (468) 87,253  100,873  26  (3,398) 97,501  

150,137
 77
 (2,449) 147,765
 156,576
 35
 (4,849) 151,762
125,339  498  (600) 125,237  156,576  35  (4,849) 151,762  
Collateralized mortgage obligations:               Collateralized mortgage obligations:
After 5 years to 10 years1,589
 —
 (60) 1,529
 1,677
 —
 (78) 1,599
After 5 years to 10 years1,403  —  (23) 1,380  1,677  —  (78) 1,599  
Over 10 years1,260
 —
 (3) 1,257
 1,305
 —
 (16) 1,289
Over 10 years1,131  12  —  1,143  1,305  —  (16) 1,289  

2,849
 —
 (63) 2,786
 2,982
 —
 (94) 2,888
2,534  12  (23) 2,523  2,982  —  (94) 2,888  
Corporate bonds:               Corporate bonds:
Within 1 year8,299
 —
 (42) 8,257
 7,806
 —
 (68) 7,738
Within 1 year11,303  —  (13) 11,290  7,806  —  (68) 7,738  
After 1 year to 5 years16,512
 7
 (104) 16,415
 18,508
 1
 (332) 18,177
After 1 year to 5 years29,109  536  (45) 29,600  18,508  1  (332) 18,177  
After 5 years to 10 years15,139
 —
 (289) 14,850
 16,146
 —
 (392) 15,754
After 5 years to 10 years—  —  —  —  16,146  —  (392) 15,754  
Over 10 years60,000
 —
 (6,722) 53,278
 60,000
 —
 (8,542) 51,458
Over 10 years60,000  —  (7,192) 52,808  60,000  —  (8,542) 51,458  

99,950
 7
 (7,157) 92,800
 102,460
 1
 (9,334) 93,127
100,412  536  (7,250) 93,698  102,460  1  (9,334) 93,127  
Total$324,733
 $631
 $(9,716) $315,648
 $342,711
 $394
 $(14,598) $328,507
Total$268,554  $1,464  $(7,875) $262,143  $342,711  $394  $(14,598) $328,507  


Expected maturities may differ from contractual maturities because debt issuers may have the right to call or prepay obligations without call or prepayment penalties and mortgage-backed securities typically prepay at a rate faster than contractually due.
Securities with a carrying value of $374.5$363.4 million and $344.5$344.2 million at March 31,September 30, 2019 and December 31, 2018, respectively, were pledged to secure public deposits and other contractual obligations. In addition, securities of $298 thousand$14.1 million and $296 thousand were pledged to secure credit derivatives and interest rate swaps at March 31,September 30, 2019 and December 31, 2018, respectively. See Note 11, "Derivative Instruments and Hedging Activities" for additional information.

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The following table presents information related to sales of securities available-for-sale during the threenine months ended March 31,September 30, 2019 and 2018:
 Nine Months Ended September 30,
(Dollars in thousands)20192018
Securities available-for-sale:
Proceeds from sales$24,987  $1,010  
Gross realized gains on sales65  10  
Gross realized losses on sales24  —  
Tax expense related to net realized gains on sales9  2  
 Three Months Ended March 31,
(Dollars in thousands)2019 2018
Securities available-for-sale:   
Proceeds from sales$491
 $1,010
Gross realized gains on sales1
 10
Tax expense related to net realized gains on sales—
 2

At March 31,September 30, 2019 and December 31, 2018, there were no0 reportable investments in any single 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 March 31,September 30, 2019 and December 31, 2018 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 and are notthere is no other-than temporary impairment of the securities. 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 investments before a recovery of carrying value.
 Less than
Twelve Months		Twelve Months
or Longer		Total
(Dollars in thousands)Fair ValueUnrealized
Losses		Fair ValueUnrealized
Losses		Fair ValueUnrealized
Losses
At September 30, 2019
Securities Held-to-Maturity
Residential mortgage-backed securities$20,960  $(147) $—  $—  $20,960  $(147) 
Total$20,960  $(147) $—  $—  $20,960  $(147) 
Securities Available-for-Sale
U.S. government corporations and agencies$—  $—  $299  $(2) $299  $(2) 
Residential mortgage-backed securities33,830  (147) 51,166  (453) 84,996  (600) 
Collateralized mortgage obligations—  —  1,380  (23) 1,380  (23) 
Corporate bonds1,000  —  68,553  (7,250) 69,553  (7,250) 
Total$34,830  $(147) $121,398  $(7,728) $156,228  $(7,875) 
At December 31, 2018
Securities Held-to-Maturity
U.S. government corporations and agencies$—  $—  $6,892  $(104) $6,892  $(104) 
Residential mortgage-backed securities48,192  (472) 34,501  (770) 82,693  (1,242) 
Total$48,192  $(472) $41,393  $(874) $89,585  $(1,346) 
Securities Available-for-Sale
U.S. government corporations and agencies$—  $—  $15,315  $(96) $15,315  $(96) 
State and political subdivisions9,311  (61) 15,302  (164) 24,613  (225) 
Residential mortgage-backed securities7,099  (106) 141,924  (4,743) 149,023  (4,849) 
Collateralized mortgage obligations1,289  (16) 1,599  (78) 2,888  (94) 
Corporate bonds16,896  (235) 75,730  (9,099) 92,626  (9,334) 
Total$34,595  $(418) $249,870  $(14,180) $284,465  $(14,598) 
 Less than
Twelve Months		 Twelve Months
or Longer		 Total
(Dollars in thousands)Fair Value Unrealized
Losses		 Fair Value Unrealized
Losses		 Fair Value Unrealized
Losses
At March 31, 2019           
Securities Held-to-Maturity           
U.S. government corporations and agencies$—
 $—
 $6,951
 $(46) $6,951
 $(46)
Residential mortgage-backed securities8,054
 (2) 40,353
 (337) 48,407
 (339)
Total$8,054
 $(2) $47,304
 $(383) $55,358
 $(385)
Securities Available-for-Sale           
U.S. government corporations and agencies$—
 $—
 $10,323
 $(46) $10,323
 $(46)
State and political subdivisions1,045
 —
 1,018
 (1) 2,063
 (1)
Residential mortgage-backed securities—
 —
 141,650
 (2,449) 141,650
 (2,449)
Collateralized mortgage obligations—
 —
 2,786
 (63) 2,786
 (63)
Corporate bonds1,489
 (10) 88,304
 (7,147) 89,793
 (7,157)
Total$2,534
 $(10) $244,081
 $(9,706) $246,615
 $(9,716)
At December 31, 2018           
Securities Held-to-Maturity           
U.S. government corporations and agencies$—
 $—
 $6,892
 $(104) $6,892
 $(104)
Residential mortgage-backed securities48,192
 (472) 34,501
 (770) 82,693
 (1,242)
Total$48,192
 $(472) $41,393
 $(874) $89,585
 $(1,346)
Securities Available-for-Sale           
U.S. government corporations and agencies$—
 $—
 $15,315
 $(96) $15,315
 $(96)
State and political subdivisions9,311
 (61) 15,302
 (164) 24,613
 (225)
Residential mortgage-backed securities7,099
 (106) 141,924
 (4,743) 149,023
 (4,849)
Collateralized mortgage obligations1,289
 (16) 1,599
 (78) 2,888
 (94)
Corporate bonds16,896
 (235) 75,730
 (9,099) 92,626
 (9,334)
Total$34,595
 $(418) $249,870
 $(14,180) $284,465
 $(14,598)


At March 31,September 30, 2019, gross unrealized losses for securities available-for-sale in an unrealized loss position for twelve months or longer, totaled $9.7$7.7 million. ThreeNaN federal agency bonds, thirty-threebond, 13 investment grade corporate bonds, 12240 federal agency residential mortgage securities two investment grade municipal bonds and two1 collateralized mortgage obligation bondsbond had respective unrealized loss positions of $46$2 thousand, $7.1$7.3 million, $2.4 million, $1$453 thousand and $63$23 thousand, respectively. The fair value of these 162NaN 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
15
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recognize any other-than-temporary impairment charges on debt securities for the threenine months ended March 31,September 30, 2019 andor 2018.


The Corporation recognized a $4$12 thousand net gain and $4$26 thousand net lossgain on equity securities during the threenine months ended March 31,September 30, 2019 and 2018, respectively, in other noninterest income. There were no0 sales of equity securities during the threenine months ended March 31,September 30, 2019 or March 31,September 30, 2018.
Note 4. Loans and Leases
Summary of Major Loan and Lease Categories
At September 30, 2019
(Dollars in thousands)Originated  Acquired  Total  
Commercial, financial and agricultural$943,713  $15,440  $959,153  
Real estate-commercial1,736,904  191,946  1,928,850  
Real estate-construction221,845  —  221,845  
Real estate-residential secured for business purpose315,984  44,737  360,721  
Real estate-residential secured for personal purpose388,643  43,545  432,188  
Real estate-home equity secured for personal purpose170,486  7,168  177,654  
Loans to individuals30,575  140  30,715  
Lease financings140,807  —  140,807  
Total loans and leases held for investment, net of deferred income$3,948,957  $302,976  $4,251,933  
Imputed interest on lease financings, included in the above table$(15,369) $—  $(15,369) 
Net deferred costs, included in the above table6,243  —  6,243  
Overdraft deposits included in the above table149  —  149  
 At March 31, 2019
(Dollars in thousands)Originated Acquired Total
Commercial, financial and agricultural$910,493
 $17,145
 $927,638
Real estate-commercial1,576,250
 222,955
 1,799,205
Real estate-construction216,964
 —
 216,964
Real estate-residential secured for business purpose304,574
 56,348
 360,922
Real estate-residential secured for personal purpose361,488
 47,652
 409,140
Real estate-home equity secured for personal purpose172,587
 8,311
 180,898
Loans to individuals32,462
 141
 32,603
Lease financings140,509
 —
 140,509
Total loans and leases held for investment, net of deferred income$3,715,327
 $352,552
 $4,067,879
Imputed interest on lease financings, included in the above table$(15,082) $—
 $(15,082)
Net deferred costs, included in the above table4,426
 —
 4,426
Overdraft deposits included in the above table208
 —
 208


At December 31, 2018At December 31, 2018
(Dollars in thousands)Originated Acquired Total(Dollars in thousands)Originated  Acquired  Total  
Commercial, financial and agricultural$913,166
 $24,519
 $937,685
Commercial, financial and agricultural$913,166  $24,519  $937,685  
Real estate-commercial1,507,579
 233,625
 1,741,204
Real estate-commercial1,507,579  233,625  1,741,204  
Real estate-construction215,513
 —
 215,513
Real estate-construction215,513  —  215,513  
Real estate-residential secured for business purpose302,393
 60,403
 362,796
Real estate-residential secured for business purpose302,393  60,403  362,796  
Real estate-residential secured for personal purpose338,451
 49,959
 388,410
Real estate-residential secured for personal purpose338,451  49,959  388,410  
Real estate-home equity secured for personal purpose177,523
 8,728
 186,251
Real estate-home equity secured for personal purpose177,523  8,728  186,251  
Loans to individuals32,617
 142
 32,759
Loans to individuals32,617  142  32,759  
Lease financings141,956
 —
 141,956
Lease financings141,956  —  141,956  
Total loans and leases held for investment, net of deferred income$3,629,198
 $377,376
 $4,006,574
Total loans and leases held for investment, net of deferred income$3,629,198  $377,376  $4,006,574  
Imputed interest on lease financings, included in the above table$(15,118) $—
 $(15,118)Imputed interest on lease financings, included in the above table$(15,118) $—  $(15,118) 
Net deferred costs, included in the above table3,930
 —
 3,930
Net deferred costs, included in the above table3,930  —  3,930  
Overdraft deposits included in the above table139
 —
 139
Overdraft deposits included in the above table139  —  139  
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 March 31,September 30, 2019 totaled $352.6$303.0 million, including $301.3$268.2 million of loans from the Fox Chase acquisition and $51.3$34.8 million from the Valley Green Bank acquisition. At March 31,September 30, 2019, loans acquired with deteriorated credit quality, or acquired credit impaired loans, totaled $693$568 thousand representing $62$60 thousand from the Fox Chase acquisition and $631$508 thousand from the Valley Green Bank acquisition. Acquired credit impaired loans are accounted for in accordance with Accounting Standards Codification (ASC) Topic 310-30.

16
Table of Contents
The outstanding principal balance and carrying amount for acquired credit impaired loans at March 31,September 30, 2019 and December 31, 2018 were as follows:
(Dollars in thousands)At March 31, 2019 At December 31, 2018(Dollars in thousands)At September 30, 2019At December 31, 2018
Outstanding principal balance$871
 $893
Outstanding principal balance$664  $893  
Carrying amount693
 695
Carrying amount568  695  
Reserve for loan losses—
 —
Reserve for loan losses—  —  
The following table presents the changes in accretable yield on acquired credit impaired loans:
Nine Months Ended September 30,
(Dollars in thousands)20192018
Beginning of period$—  $11  
Reclassification from nonaccretable discount317  453  
Accretable yield amortized to interest income(317) (464) 
End of period$—  $—  

17
 Three Months Ended March 31,
(Dollars in thousands)2019 2018
Beginning of period$—
 $11
Reclassification from nonaccretable discount142
 81
Accretable yield amortized to interest income(142) (87)
End of period$—
 $5
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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, acquired credit impaired loans and the recorded investment innonaccrual loans and leases 90 days or more past due which are accruing interest at March 31,September 30, 2019 and December 31, 2018:
Accruing Loans and Leases
(Dollars in thousands)30-59
Days
Past Due		60-89
Days
Past Due		90 Days
or more
Past Due		Total
Past Due		CurrentTotal Accruing Loans and LeasesAcquired Credit ImpairedNonaccrual Loans and LeasesTotal Loans
and Leases
Held for
Investment
At September 30, 2019
Commercial, financial and agricultural$1,591  $751  $—  $2,342  $954,578  $956,920  $—  $2,233  $959,153  
Real estate—commercial real estate and construction:
Commercial real estate4,556  1,102  760  6,418  1,894,202  1,900,620  206  28,024  1,928,850  
Construction185  —  —  185  221,404  221,589  —  256  221,845  
Real estate—residential and home equity:
Residential secured for business purpose2,293  1,441  1,109  4,843  352,689  357,532  302  2,887  360,721  
Residential secured for personal purpose1,553  133  —  1,686  428,355  430,041  60  2,087  432,188  
Home equity secured for personal purpose665  —  —  665  175,610  176,275  —  1,379  177,654  
Loans to individuals156  48  129  333  30,380  30,713  —  2  30,715  
Lease financings534  1,394  490  2,418  137,889  140,307  —  500  140,807  
Total$11,533  $4,869  $2,488  $18,890  $4,195,107  $4,213,997  $568  $37,368  $4,251,933  
At December 31, 2018
Commercial, financial and agricultural$1,043  $122  $—  $1,165  $933,155  $934,320  $—  $3,365  $937,685  
Real estate—commercial real estate and construction:
Commercial real estate4,995  1,538  —  6,533  1,716,251  1,722,784  206  18,214  1,741,204  
Construction2,163  —  —  2,163  213,244  215,407  —  106  215,513  
Real estate—residential and home equity:
Residential secured for business purpose2,497  728  —  3,225  357,827  361,052  426  1,318  362,796  
Residential secured for personal purpose2,334  —  —  2,334  384,426  386,760  63  1,587  388,410  
Home equity secured for personal purpose305  96  —  401  184,402  184,803  —  1,448  186,251  
Loans to individuals207  29  55  291  32,468  32,759  —  —  32,759  
Lease financings2,460  411  137  3,008  138,778  141,786  —  170  141,956  
Total$16,004  $2,924  $192  $19,120  $3,960,551  $3,979,671  $695  $26,208  $4,006,574  

18
(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
At March 31, 2019               
Commercial, financial and agricultural$1,661
 $210
 $1,952
 $3,823
 $923,815
 $—
 $927,638
 $—
Real estate—commercial real estate and construction:               
Commercial real estate2,133
 647
 5,518
 8,298
 1,790,701
 206
 1,799,205
 —
Construction341
 —
 106
 447
 216,517
 —
 216,964
 —
Real estate—residential and home equity:               
Residential secured for business purpose1,521
 515
 1,138
 3,174
 357,323
 425
 360,922
 —
Residential secured for personal purpose3,346
 —
 1,811
 5,157
 403,921
 62
 409,140
 325
Home equity secured for personal purpose304
 90
 1,389
 1,783
 179,115
 —
 180,898
 —
Loans to individuals173
 94
 54
 321
 32,282
 —
 32,603
 54
Lease financings723
 438
 477
 1,638
 138,871
 —
 140,509
 257
Total$10,202
 $1,994
 $12,445
 $24,641
 $4,042,545
 $693
 $4,067,879
 $636
At December 31, 2018               
Commercial, financial and agricultural$1,043
 $270
 $2,228
 $3,541
 $934,144
 $—
 $937,685
 $—
Real estate—commercial real estate and construction:               
Commercial real estate5,425
 1,538
 1,599
 8,562
 1,732,436
 206
 1,741,204
 —
Construction2,163
 106
 —
 2,269
 213,244
 —
 215,513
 —
Real estate—residential and home equity:               
Residential secured for business purpose2,497
 777
 1,164
 4,438
 357,932
 426
 362,796
 —
Residential secured for personal purpose2,334
 —
 1,586
 3,920
 384,427
 63
 388,410
 —
Home equity secured for personal purpose305
 96
 1,341
 1,742
 184,509
 —
 186,251
 —
Loans to individuals207
 29
 55
 291
 32,468
 —
 32,759
 55
Lease financings2,460
 411
 307
 3,178
 138,778
 —
 141,956
 137
Total$16,434
 $3,227
 $8,280
 $27,941
 $3,977,938
 $695
 $4,006,574
 $192
Table of Contents


Nonperforming Loans and Leases
The following presents, by class of loans and leases, nonperforming loans and leases at March 31,September 30, 2019 and December 31, 2018. Nonperforming loans exclude acquired credit impaired loans from Fox Chase and Valley Green.
 At September 30, 2019At December 31, 2018
(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 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$2,233  $—  $—  $2,233  $3,365  $382  $—  $3,747  
Real estate—commercial real estate and construction:
Commercial real estate28,024  —  760  28,784  18,214  —  —  18,214  
Construction256  —  —  256  106  —  —  106  
Real estate—residential and home equity:
Residential secured for business purpose2,887  —  1,109  3,996  1,318  160  —  1,478  
Residential secured for personal purpose2,087  —  —  2,087  1,587  —  —  1,587  
Home equity secured for personal purpose1,379  54  —  1,433  1,448  —  —  1,448  
Loans to individuals2  —  129  131  —  —  55  55  
Lease financings500  —  490  990  170  —  137  307  
Total$37,368  $54  $2,488  $39,910  $26,208  $542  $192  $26,942  
 At March 31, 2019 At December 31, 2018
(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 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$2,904
 $270
 $—
 $3,174
 $3,365
 $382
 $—
 $3,747
Real estate—commercial real estate and construction:               
Commercial real estate18,361
 —
 —
 18,361
 18,214
 —
 —
 18,214
Construction106
 —
 —
 106
 106
 —
 —
 106
Real estate—residential and home equity:               
Residential secured for business purpose1,232
 —
 —
 1,232
 1,318
 160
 —
 1,478
Residential secured for personal purpose1,636
 —
 325
 1,961
 1,587
 —
 —
 1,587
Home equity secured for personal purpose1,493
 —
 —
 1,493
 1,448
 —
 —
 1,448
Loans to individuals—
 —
 54
 54
 —
 —
 55
 55
Lease financings220
 —
 257
 477
 170
 —
 137
 307
Total$25,952
 $270
 $636
 $26,858
 $26,208
 $542
 $192
 $26,942
* Includes nonaccrual troubled debt restructured loans of $3.2$2.3 million and $1.3 million at March 31,September 30, 2019 and December 31, 2018, respectively.


Credit Quality Indicators
The following tables present by class, the recorded investment in loans and leases held for investment by credit quality indicator at March 31,September 30, 2019 and December 31, 2018.
The Corporation employs a risk rating system related to the credit quality of commercial loans and residential real estate loans secured for a business purpose. 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). Loans with relationships greater than $1 million are reviewed at least annually.  Loan relationships exceeding $15 millionwith a higher risk profile or classified as special mention or substandard are reviewed at least quarterly, or more frequently based on management’s discretion. 

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



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

19
Table of Contents
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
At September 30, 2019
Grade:
1. Pass$907,186  $1,690,123  $219,656  $310,514  $3,127,479  
2. Special Mention18,924  23,667  1,932  1,541  46,064  
3. Substandard17,603  23,114  257  3,929  44,903  
4. Doubtful—  —  —  —  —  
Total$943,713  $1,736,904  $221,845  $315,984  $3,218,446  
At December 31, 2018
Grade:
1. Pass$882,736  $1,455,234  $215,407  $298,356  $2,851,733  
2. Special Mention23,287  31,791  —  721  55,799  
3. Substandard7,143  20,554  106  3,316  31,119  
4. Doubtful—  —  —  —  —  
Total$913,166  $1,507,579  $215,513  $302,393  $2,938,651  
(Dollars in thousands)Commercial,
Financial and
Agricultural		 Real Estate—
Commercial		 Real Estate—
Construction		 Real Estate—
Residential Secured
for Business Purpose		 Total
At March 31, 2019         
Grade:         
1. Pass$871,541
 $1,528,969
 $216,858
 $300,736
 $2,918,104
2. Special Mention16,680
 26,608
 —
 755
 44,043
3. Substandard22,272
 20,673
 106
 3,083
 46,134
4. Doubtful—
 —
 —
 —
 —
Total$910,493
 $1,576,250
 $216,964
 $304,574
 $3,008,281
At December 31, 2018         
Grade:         
1. Pass$882,736
 $1,455,234
 $215,407
 $298,356
 $2,851,733
2. Special Mention23,287
 31,791
 —
 721
 55,799
3. Substandard7,143
 20,554
 106
 3,316
 31,119
4. Doubtful—
 —
 —
 —
 —
Total$913,166
 $1,507,579
 $215,513
 $302,393
 $2,938,651

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(Dollars in thousands)Commercial,
Financial and
Agricultural		Real Estate—
Commercial		Real Estate—
Construction		Real Estate—
Residential Secured
for Business Purpose		Total
At March 31, 2019         
At September 30, 2019At September 30, 2019
Grade:         Grade:
1. Pass$17,145
 $210,240
 $—
 $55,598
 $282,983
1. Pass$15,440  $178,997  $—  $44,220  $238,657  
2. Special Mention—
 —
 —
 —
 —
2. Special Mention—  1,316  —  —  1,316  
3. Substandard—
 12,715
 —
 750
 13,465
3. Substandard—  11,633  —  517  12,150  
4. Doubtful—
 —
 —
 —
 —
4. Doubtful—  ��  —  —  —  
Total$17,145
 $222,955
 $—
 $56,348
 $296,448
Total$15,440  $191,946  $—  $44,737  $252,123  
December 31, 2018         December 31, 2018
Grade:         Grade:
1. Pass$24,450
 $220,911
 $—
 $59,567
 $304,928
1. Pass$24,450  $220,911  $—  $59,567  $304,928  
2. Special Mention—
 —
 —
 —
 —
2. Special Mention—  —  —  —  —  
3. Substandard69
 12,714
 —
 836
 13,619
3. Substandard69  12,714  —  836  13,619  
4. Doubtful—
 —
 —
 —
 —
4. Doubtful—  —  —  —  —  
Total$24,519
 $233,625
 $—
 $60,403
 $318,547
Total$24,519  $233,625  $—  $60,403  $318,547  
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.

20
Table of Contents
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
Financings		Total
At September 30, 2019
Performing$387,449  $170,062  $30,444  $139,817  $727,772  
Nonperforming1,194  424  131  990  2,739  
Total$388,643  $170,486  $30,575  $140,807  $730,511  
At December 31, 2018
Performing$337,762  $177,139  $32,562  $141,649  $689,112  
Nonperforming689  384  55  307  1,435  
Total$338,451  $177,523  $32,617  $141,956  $690,547  
(Dollars in thousands)Real Estate—
Residential
Secured for
Personal Purpose		 Real Estate—
Home Equity
Secured for
Personal Purpose		 Loans to
Individuals		 Lease
Financings		 Total
At March 31, 2019         
Performing$360,486
 $172,143
 $32,408
 $140,032
 $705,069
Nonperforming1,002
 444
 54
 477
 1,977
Total$361,488
 $172,587
 $32,462
 $140,509
 $707,046
At December 31, 2018         
Performing$337,762
 $177,139
 $32,562
 $141,649
 $689,112
Nonperforming689
 384
 55
 307
 1,435
Total$338,451
 $177,523
 $32,617
 $141,956
 $690,547


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
Financings		Total
At September 30, 2019
Performing$42,652  $6,159  $140  $—  $48,951  
Nonperforming893  1,009  —  —  1,902  
Total$43,545  $7,168  $140  $—  $50,853  
At December 31, 2018
Performing$49,061  $7,664  $142  $—  $56,867  
Nonperforming898  1,064  —  —  1,962  
Total$49,959  $8,728  $142  $—  $58,829  

21
(Dollars in thousands)Real Estate—
Residential
Secured for
Personal Purpose		 Real Estate—
Home Equity
Secured for
Personal Purpose		 Loans to
Individuals		 Lease
Financings		 Total
At March 31, 2019         
Performing$46,693
 $7,262
 $141
 $—
 $54,096
Nonperforming959
 1,049
 —
 —
 2,008
Total$47,652
 $8,311
 $141
 $—
 $56,104
At December 31, 2018         
Performing$49,061
 $7,664
 $142
 $—
 $56,867
Nonperforming898
 1,064
 —
 —
 1,962
Total$49,959
 $8,728
 $142
 $—
 $58,829
Table of Contents


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 nine months ended March 31,September 30, 2019 and 2018:
(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(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		UnallocatedTotal
Three Months Ended March 31, 2019               
Three Months Ended September 30, 2019Three Months Ended September 30, 2019
Reserve for loan and lease losses:               Reserve for loan and lease losses:
Beginning balance$7,983
 $13,903
 $2,236
 $3,199
 $484
 $1,288
 $271
 $29,364
Beginning balance$9,129  $15,478  $2,478  $3,518  $481  $1,241  $275  $32,600  
Charge-offs(468) (41) —
 (11) (85) (104) N/A
 (709)Charge-offs(283) (251) —  (183) (73) (54) N/A(844) 
Recoveries82
 91
 4
 5
 22
 58
 N/A
 262
Recoveries182  1  98  4  20  71  N/A376  
Provision (recovery of provision)1,353
 1,028
 62
 185
 48
 33
 (25) 2,684
Provision (recovery of provision)222  593  103  273  47  (24) 310  1,524  
Provision for acquired credit impaired loans—
 —
 —
 1
 —
 —
 —
 1
Provision for acquired credit impaired loans—  —  6  —  —  —  —  6  
Ending balance$8,950
 $14,981
 $2,302
 $3,379
 $469
 $1,275
 $246
 $31,602
Ending balance$9,250  $15,821  $2,685  $3,612  $475  $1,234  $585  $33,662  
Three Months Ended March 31, 2018               
Three Months Ended September 30, 2018Three Months Ended September 30, 2018
Reserve for loan and lease losses:Reserve for loan and lease losses:
Beginning balanceBeginning balance$7,258  $12,327  $2,004  $2,494  $447  $1,071  $51  $25,652  
Charge-offsCharge-offs(904) —  (30) —  (82) (123) N/A(1,139) 
RecoveriesRecoveries22  1  8  6  25  51  N/A113  
ProvisionProvision813  906  72  527  82  138  206  2,744  
Provision for acquired credit impaired loansProvision for acquired credit impaired loans—  —  —  1  —  —  —  1  
Ending balanceEnding balance$7,189  $13,234  $2,054  $3,028  $472  $1,137  $257  $27,371  
Nine Months Ended September 30, 2019Nine Months Ended September 30, 2019
Reserve for loan and lease losses:               Reserve for loan and lease losses:
Beginning balance$6,742
 $9,839
 $1,661
 $1,754
 $373
 $1,132
 $54
 $21,555
Beginning balance$7,983  $13,903  $2,236  $3,199  $484  $1,288  $271  $29,364  
Charge-offs(601) (40) —
 —
 (92) (136) N/A
 (869)Charge-offs(1,769) (325) —  (198) (209) (268) N/A(2,769) 
Recoveries226
 73
 251
 57
 30
 34
 N/A
 671
Recoveries283  92  108  16  58  219  N/A776  
Provision (recovery of provision)575
 1,306
 (41) 96
 61
 49
 6
 2,052
Provision (recovery of provision)2,753  2,151  335  594  142  (5) 314  6,284  
Provision for acquired credit impaired loans—
 —
 —
 1
 —
 —
 —
 1
Provision for acquired credit impaired loans—  —  6  1  —  —  —  7  
Ending balance$6,942
 $11,178
 $1,871
 $1,908
 $372
 $1,079
 $60
 $23,410
Ending balance$9,250  $15,821  $2,685  $3,612  $475  $1,234  $585  $33,662  
Nine Months Ended September 30, 2018Nine Months Ended September 30, 2018
Reserve for loan and lease losses:Reserve for loan and lease losses:
Beginning balanceBeginning balance$6,742  $9,839  $1,661  $1,754  $373  $1,132  $54  $21,555  
Charge-offsCharge-offs(14,553) (40) (30) —  (253) (428) N/A(15,304) 
RecoveriesRecoveries271  74  266  71  71  160  N/A913  
ProvisionProvision14,729  3,361  157  1,201  281  273  203  20,205  
Provision for acquired credit impaired loansProvision for acquired credit impaired loans—  —  —  2  —  —  —  2  
Ending balanceEnding balance$7,189  $13,234  $2,054  $3,028  $472  $1,137  $257  $27,371  
N/A – Not applicable

22
Table of Contents
Charge-offs for the nine months ended September 30, 2018 included a charge-off of $12.7 million during the second quarter of 2018 for a commercial loan relationship related to fraudulent activities perpetrated by employees of a borrower. The Bank owned a participating interest which originally totaled $13.0 million in an approximately $80.0 million commercial lending facility. The charge-off represented the entire principal amount owed to the Bank.

23
Table of Contents
The following presents, by portfolio segment, 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 at March 31,September 30, 2019 and 2018:
(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		UnallocatedTotal
At September 30, 2019
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment$390  $1,485  $414  $155  $—  $—  N/A$2,444  
Ending balance: collectively evaluated for impairment8,860  14,332  2,271  3,457  475  1,234  585  31,214  
Ending balance: acquired non-credit impaired loans evaluated for impairment—  4  —  —  —  —  —  4  
Total ending balance$9,250  $15,821  $2,685  $3,612  $475  $1,234  $585  $33,662  
Loans and leases held for investment:
Ending balance: individually evaluated for impairment (1)$2,233  $28,280  $2,887  $3,520  $2  $306  $37,228  
Ending balance: collectively evaluated for impairment941,480  1,941,575  313,307  557,512  30,573  140,501  3,924,948  
Loans measured at fair value—  349  —  —  —  —  349  
Acquired non-impaired loans15,440  180,285  44,225  48,750  140  —  288,840  
Acquired credit impaired loans—  206  302  60  —  —  568  
Total ending balance$959,153  $2,150,695  $360,721  $609,842  $30,715  $140,807  $4,251,933  
At September 30, 2018
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment$211  $645  $—  $192  $—  $—  N/A$1,048  
Ending balance: collectively evaluated for impairment6,978  12,504  2,014  2,836  472  1,137  257  26,198  
Ending balance: acquired non-credit impaired loans evaluated for impairment—  85  40  —  —  —  —  125  
Total ending balance$7,189  $13,234  $2,054  $3,028  $472  $1,137  $257  $27,371  
Loans and leases held for investment:
Ending balance: individually evaluated for impairment (1)$4,889  $18,970  $1,588  $3,275  $—  $1,250  $29,972  
Ending balance: collectively evaluated for impairment862,856  1,623,458  278,588  504,381  32,096  134,758  3,436,137  
Loans measured at fair value—  1,801  —  —  —  —  1,801  
Acquired non-impaired loans26,395  245,345  65,707  59,770  142  —  397,359  
Acquired credit impaired loans182  206  448  64  —  —  900  
Total ending balance$894,322  $1,889,780  $346,331  $567,490  $32,238  $136,008  $3,866,169  
(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 March 31, 2019               
Reserve for loan and lease losses:               
Ending balance: individually evaluated for impairment$243
 $925
 $—
 $335
 $—
 $—
 N/A
 $1,503
Ending balance: collectively evaluated for impairment8,707
 14,049
 2,302
 3,044
 469
 1,275
 246
 30,092
Ending balance: acquired non-credit impaired loans evaluated for impairment—
 7
 —
 —
 —
 —
 —
 7
Total ending balance$8,950
 $14,981
 $2,302
 $3,379
 $469
 $1,275
 $246
 $31,602
Loans and leases held for investment:               
Ending balance: individually evaluated for impairment$3,174
 $18,467
 $1,232
 $3,129
 $—
 $—
   $26,002
Ending balance: collectively evaluated for impairment907,319
 1,772,999
 303,342
 530,946
 32,462
 140,509
   3,687,577
Loans measured at fair value—
 1,748
 —
 —
 —
 —
   1,748
Acquired non-credit impaired loans17,145
 222,749
 55,923
 55,901
 141
 —
   351,859
Acquired credit impaired loans—
 206
 425
 62
 —
 —
   693
Total ending balance$927,638
 $2,016,169
 $360,922
 $590,038
 $32,603
 $140,509
   $4,067,879
At March 31, 2018               
Reserve for loan and lease losses:               
Ending balance: individually evaluated for impairment$34
 $684
 $14
 $—
 $—
 $—
 N/A
 $732
Ending balance: collectively evaluated for impairment6,776
 10,378
 1,815
 1,908
 372
 1,079
 60
 22,388
Ending balance: acquired non-credit impaired loans evaluated for impairment132
 116
 42
 —
 —
 —
 —
 290
Total ending balance$6,942
 $11,178
 $1,871
 $1,908
 $372
 $1,079
 $60
 $23,410
Loans and leases held for investment:               
Ending balance: individually evaluated for impairment$6,560
 $30,573
 $2,173
 $1,284
 $—
 $1,250
   $41,840
Ending balance: collectively evaluated for impairment849,690
 1,441,709
 249,015
 449,827
 28,112
 128,490
   3,146,843
Loans measured at fair value—
 1,895
 —
 —
 —
 —
   1,895
Acquired non-credit impaired loans51,310
 295,420
 81,587
 69,325
 143
 —
   497,785
Acquired credit impaired loans378
 356
 586
 205
 —
 —
   1,525
Total ending balance$907,938
 $1,769,953
 $333,361
 $520,641
 $28,255
 $129,740
   $3,689,888
(1) Includes $13.6 million and $15.3 million of acquired loans which were individually evaluated for impairment at September 30, 2019 and 2018, respectively.
N/A – Not applicable

24
Table of Contents
The Corporation does not provide a reserve for loan loss for acquired loans unless 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.
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 March 31,September 30, 2019 and December 31, 2018. The impaired loans exclude acquired credit impaired loans.
 At September 30, 2019At December 31, 2018
(Dollars in thousands)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$1,223  $1,835  $2,776  $3,361  
Real estate—commercial real estate16,343  17,277  6,578  7,516  
Real estate—construction256  261  106  111  
Real estate—residential secured for business purpose797  978  1,478  1,660  
Real estate—residential secured for personal purpose1,533  1,731  863  911  
Real estate—home equity secured for personal purpose1,433  1,524  1,373  1,404  
Loans to individuals2  2  —  —  
Total impaired loans with no related reserve recorded$21,587  $23,608  $13,174  $14,963  
Impaired loans with a reserve recorded:
Commercial, financial and agricultural$1,010  $1,010  $390  $971  $1,024  $413  
Real estate—commercial real estate11,681  12,436  1,485  11,637  12,162  675  
Real estate—residential secured for business purpose2,090  2,095  414  —  —  —  
Real estate—residential secured for personal purpose554  554  155  724  724  252  
Real estate—home equity secured for personal purpose—  —  —  75  75  75  
Total impaired loans with a reserve recorded$15,335  $16,095  $2,444  $13,407  $13,985  $1,415  
 At March 31, 2019 At December 31, 2018
(Dollars in thousands)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$2,581
 $3,195
   $2,776
 $3,361
  
Real estate—commercial real estate5,600
 6,569
   6,578
 7,516
  
Real estate—construction106
 111
   106
 111
  
Real estate—residential secured for business purpose1,232
 1,417
   1,478
 1,660
  
Real estate—residential secured for personal purpose911
 975
   863
 911
  
Real estate—home equity secured for personal purpose1,418
 1,469
   1,373
 1,404
  
Total impaired loans with no related reserve recorded$11,848
 $13,736
   $13,174
 $14,963
  
Impaired loans with a reserve recorded:           
Commercial, financial and agricultural$593
 $939
 $243
 $971
 $1,024
 $413
Real estate—commercial real estate12,761
 13,423
 925
 11,637
 12,162
 675
Real estate—residential secured for personal purpose725
 725
 260
 724
 724
 252
Real estate—home equity secured for personal purpose75
 75
 75
 75
 75
 75
Total impaired loans with a reserve recorded$14,154
 $15,162
 $1,503
 $13,407
 $13,985
 $1,415

Total impaired loans:           Total impaired loans:
Commercial, financial and agricultural$3,174
 $4,134
 $243
 $3,747
 $4,385
 $413
Commercial, financial and agricultural$2,233  $2,845  $390  $3,747  $4,385  $413  
Real estate—commercial real estate18,361
 19,992
 925
 18,215
 19,678
 675
Real estate—commercial real estate28,024  29,713  1,485  18,215  19,678  675  
Real estate—construction106
 111
 —
 106
 111
 —
Real estate—construction256  261  —  106  111  —  
Real estate—residential secured for business purpose1,232
 1,417
 —
 1,478
 1,660
 —
Real estate—residential secured for business purpose2,887  3,073  414  1,478  1,660  —  
Real estate—residential secured for personal purpose1,636
 1,700
 260
 1,587
 1,635
 252
Real estate—residential secured for personal purpose2,087  2,285  155  1,587  1,635  252  
Real estate—home equity secured for personal purpose1,493
 1,544
 75
 1,448
 1,479
 75
Real estate—home equity secured for personal purpose1,433  1,524  —  1,448  1,479  75  
Loans to individualsLoans to individuals2  2  —  —  —  —  
Total impaired loans$26,002
 $28,898
 $1,503
 $26,581
 $28,948
 $1,415
Total impaired loans$36,922  $39,703  $2,444  $26,581  $28,948  $1,415  
Impaired loans include nonaccrual loans and accruing troubled debt restructured 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.

25
Table of Contents
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 an accruing troubled debt restructured loan or 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 September 30, 2019Three Months Ended September 30, 2018
(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
Commercial, financial and agricultural$2,082  $—  $43  $5,671  $31  $58  
Real estate—commercial real estate19,818  —  284  19,878  22  261  
Real estate—construction219  —  8  108  —  2  
Real estate—residential secured for business purpose2,248  —  76  1,844  4  32  
Real estate—residential secured for personal purpose2,185  —  30  1,850  —  26  
Real estate—home equity secured for personal purpose1,313  —  19  1,507  —  21  
Total$27,865  $—  $460  $30,858  $57  $400  
 Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
(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
Commercial, financial and agricultural$3,650
 $5
 $54
 $7,703
 $40
 $77
Real estate—commercial real estate18,245
 3
 254
 19,916
 172
 287
Real estate—construction106
 —
 1
 183
 —
 2
Real estate—residential secured for business purpose1,277
 —
 20
 2,217
 5
 24
Real estate—residential secured for personal purpose1,619
 —
 25
 544
 1
 11
Real estate—home equity secured for personal purpose1,426
 —
 23
 549
 —
 8
Total$26,323
 $8
 $377
 $31,112
 $218
 $409
*
Includes interest income recognized on a cash basis for nonaccrual loans of $3 thousandand$6 thousand for the three months ended March 31, 2019 and 2018, respectively, and interest income recognized on the accrual method for accruing impaired loans of $5 thousand and $212 thousand for the three months ended March 31, 2019 and 2018, respectively.
* Includes interest income recognized on a cash basis for nonaccrual loans of $0 thousandand$5 thousand for the three months ended September 30, 2019 and 2018, respectively, and interest income recognized on the accrual method for accruing impaired loans of $0 thousand and $52 thousand for the three months ended September 30, 2019 and 2018, respectively.
 Nine Months Ended September 30, 2019Nine Months Ended September 30, 2018
(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
Commercial, financial and agricultural$2,764  $17  $146  $6,589  $103  $269  
Real estate—commercial real estate18,839  3  780  19,935  212  813  
Real estate—construction151  —  11  128  —  7  
Real estate—residential secured for business purpose1,750  —  132  2,018  14  79  
Real estate—residential secured for personal purpose1,907  —  84  1,064  3  70  
Real estate—home equity secured for personal purpose1,364  1  62  1,026  —  60  
Total$26,775  $21  $1,215  $30,760  $332  $1,298  
* Includes interest income recognized on a cash basis for nonaccrual loans of $15 thousandand$13 thousand for the nine months ended September 30, 2019 and 2018, respectively, and interest income recognized on the accrual method for accruing impaired loans of $6 thousand and $319 thousand for the nine months ended September 30, 2019 and 2018, respectively.

Impaired Leases
The Corporation had noimpaired leases of $306 thousand with 0 related reserves at September 30, 2019. The Corporation had 0 impaired leases at March 31, 2019 and December 31, 2018.
26
Table of Contents
Troubled Debt Restructured Loans
The following presents, by class of loans, information regarding accruing and nonaccrual loans that were restructured:
 Three Months Ended September 30, 2019Three Months Ended September 30, 2018
(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:
Total—  $—  $—  $—  —  $—  $—  $—  
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural1  $19  $19  $—  —  $—  $—  $—  
Total1  $19  $19  $—  —  $—  $—  $—  
 Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
(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:               
Total—
 $—
 $—
 $—
 —
 $—
 $—
 $—
Nonaccrual Troubled Debt Restructured Loans:               
Commercial, financial and agricultural*2
 $956
 $956
 $—
 —
 $—
 $—
 $—
Real estate—commercial real estate*1
 1,313
 1,313
 —
 —
 —
 —
 —
Total3
 $2,269
 $2,269
 $—
 —
 $—
 $—
 $—

 Nine Months Ended September 30, 2019Nine Months Ended September 30, 2018
(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—home equity secured for personal purpose1  $55  $55  $—  —  $—  $—  $—  
Total1  $55  $55  $—  —  $—  $—  $—  
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural*3  $975  $975  $—  —  $—  $—  $—  
Real estate—commercial real estate*1  1,313  1,313  —  —  —  —  —  
Real estate—residential secured for personal purpose—  —  —  —  1  66  66  —  
Total4  $2,288  $2,288  $—  1  $66  $66  $—  
* The threeThree nonaccrual troubled debt restructured loans in the above table totaling $2.3 million were modified via the execution of a forbearance agreement.agreement during the nine months ended September 30, 2019. These loans relate to one borrower and were on nonaccrual status at the time of modification.

The Corporation grants concessions to existing borrowers primarily related to extensions of interest-only payment periods and an occasional payment modification. These modifications typically are for up to one year. The goal when restructuring a credit is to 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.


27
Table of Contents
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 nine months ended March 31,September 30, 2019 and 2018.
 Maturity Date
Extension		Amortization Period ExtensionTotal Concessions
Granted
(Dollars in thousands)No. of
Loans		AmountNo. of
Loans		AmountNo. of
Loans		Amount
Three Months Ended September 30, 2019
Accruing Troubled Debt Restructured Loans:
Total—  $—  —  $—  —  $—  
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural1  $19  —  $—  1  $19  
Total1  $19  —  $—  1  $19  
Three Months Ended September 30, 2018
Accruing Troubled Debt Restructured Loans:
Total—  $—  —  $—  —  $—  
Nonaccrual Troubled Debt Restructured Loans:
Total—  $—  —  $—  —  $—  
Nine Months Ended September 30, 2019
Accruing Troubled Debt Restructured Loans:
Real estate—home equity secured for personal purpose—  —  1  $55  1  $55  
Total—  $—  1  $55  1  $55  
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural1  $19  2  $956  3  $975  
Real estate—commercial real estate—  —  1  1,313  1  1,313  
Total1  $19  3  $2,269  4  $2,288  
Nine Months Ended September 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  
 Amortization Period Extension Total Concessions
Granted
(Dollars in thousands)No. of
Loans		 Amount No. of
Loans		 Amount
Three Months Ended March 31, 2019       
Accruing Troubled Debt Restructured Loans:       
Total—
 $—
 —
 $—
Nonaccrual Troubled Debt Restructured Loans:       
Commercial, financial and agricultural2
 $956
 2
 $956
Real estate—commercial real estate1
 1,313
 1
 1,313
Total3
 $2,269
 3
 $2,269
Three Months Ended March 31, 2018       
Accruing Troubled Debt Restructured Loans:       
Total—
 $—
 —
 $—
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 September 30,Nine Months Ended September 30,
 2019201820192018
(Dollars in thousands)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:
Total—  $—  —  $—  —  $—  —  $—  
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural—  $—  —  $—  —  $—  1  $953  
Total—  $—  —  $—  —  $—  1  $953  
28
 Three Months Ended March 31,
 2019 2018
(Dollars in thousands)Number
of Loans		 Recorded
Investment		 Number
of Loans		 Recorded
Investment
Accruing Troubled Debt Restructured Loans:       
Total—
 $—
 —
 $—
Nonaccrual Troubled Debt Restructured Loans:       
Commercial, financial and agricultural—
 $—
 1
 $953
Total—
 $—
 1
 $953
Table of Contents
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 March 31,September 30, 2019 and December 31, 2018:
(Dollars in thousands)At September 30, 2019At December 31, 2018
Real estate-residential secured for personal purpose$714  $563  
Real estate-home equity secured for personal purpose1,134  1,134  
Total$1,848  $1,697  
(Dollars in thousands)At March 31, 2019 At December 31, 2018
Real estate-residential secured for personal purpose$563
 $563
Real estate-home equity secured for personal purpose1,134
 1,134
Total$1,697
 $1,697

The Corporation held no0 foreclosed residential real estate property at March 31,September 30, 2019 and December 31, 2018.
Lease Financings

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", and subsequent related updates, to revise the accounting for leases. The Corporation adopted this guidance effective January 1, 2019 on a modified retrospective basis at January 1, 2019. Additionally, the Corporation early adopted (ASU) No. 2019-01, "Codification Improvements", as of January 1, 2019, which serves as an an update to (ASU) No. 2016-02, and is effective for the first interim period within annual periods beginning after December 15, 2019, or January 1, 2020, for the Corporation. See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2019" for additional information. Lessor accounting was largely unchanged as a result of the standard. Additional disclosures required under the standard are included in the following section.
The Corporation, through Univest Capital, Inc., an equipment financing business and a subsidiary of the Bank, provides lease financing to customers primarily in the form of sales-type leases with fixed payment terms and $1.00 dollar buyout clauses. A minor number of contracts are classified as either direct financing leases or operating leases. The fair value of the identified assets

within sales-type and direct financing leases are equal to the carrying amount such that there is no profit or loss recorded or deferred upon lease commencement. All receivables related to the equipment financing business are recorded within lease financings as of March 31,September 30, 2019.
The primary risks that are involved with lease financing receivables are credit underwriting and borrower industry concentrations. The Corporation has strict underwriting, review and monitoring procedures in place to mitigate this risk. Risk also lies in the residual value of the underlying equipment. Residual values are subject to judgments as to the value of the underlying equipment that can be affected by changes in economic and market conditions and the financial viability of the residual guarantors and insurers. To the extent not guaranteed or assumed by a third party, or otherwise insured against, the Corporation bears the risk of ownership of the leased assets. This includes the risk that the actual value of the leased assets at the end of the lease term will be less than the residual value. The Corporation greatly reduces this risk by primarily by using $1.00 buyout leases, in which the entire cost of the leased equipment is included in the contractual payments, leaving no residual payment at the end of the lease term for the majority of its lease portfolio.
Lease financings are stated at net investment amount, consisting of the present value of lease payments and unguaranteed residual value, plus initial direct costs. Initial direct costs, comprised of commissions paid that would not have been incurred if the lease had not been obtained, are deferred and amortized over the life of the contract, and are presented within net interest income on leases.
The following presents the schedule of minimum lease payments receivable:
(Dollars in thousands)At September 30, 2019At December 31, 2018
2019 (excluding the nine months ended September 30, 2019)$13,440  $55,201  
202053,183  43,355  
202140,004  29,678  
202227,048  17,687  
202314,254  6,674  
Thereafter5,374  1,975  
Total future minimum lease payments receivable153,303  154,570  
Plus: Unguaranteed residual817  600  
Plus: Initial direct costs2,056  1,904  
Less: Imputed interest(15,369) (15,118) 
Lease financings$140,807  $141,956  
29
(Dollars in thousands)At March 31, 2019 At December 31, 2018
2019 (excluding the three months ended March 31, 2019)$42,206
 $55,201
202046,128
 43,355
202132,719
 29,678
202220,447
 17,687
20238,895
 6,674
Thereafter2,647
 1,975
Total future minimum lease payments receivable153,042
 154,570
Plus: Unguaranteed residual672
 600
Plus: Initial direct costs1,877
 1,904
Less: Imputed interest(15,082) (15,118)
Lease financings$140,509
 $141,956
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Included within the "2019 (excluding the threenine months ended March 31,September 30, 2019)" line item above as of March 31,September 30, 2019 and December 31, 2018 are $7$37 thousand and $0 thousand, respectively, of receivables related to an operating lease contract.contracts.
For the threenine months ended March 31,September 30, 2019 and 2018, the Corporation recognized $2.0$6.0 million and $1.8$5.6 million, respectively, of interest income on lease financings within total interest and fees on loans and leases on the condensed consolidated statements of income. The Corporation did not record any profit or loss upon the commencement date of its leases or any lease income related to variable lease payments.
Note 5. Goodwill and Other Intangible Assets
The Corporation has 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 threenine months ended March 31,September 30, 2019 were as follows:
(Dollars in thousands)BankingWealth ManagementInsuranceConsolidated
Balance at December 31, 2018$138,476  $15,434  $18,649  $172,559  
Addition to goodwill from acquisitions—  —  —  —  
Balance at September 30, 2019$138,476  $15,434  $18,649  $172,559  
(Dollars in thousands)Banking Wealth Management Insurance Consolidated
Balance at December 31, 2018$138,476
 $15,434
 $18,649
 $172,559
Addition to goodwill from acquisitions—
 —
 —
 —
Balance at March 31, 2019$138,476
 $15,434
 $18,649
 $172,559

The following table reflects the components of intangible assets at the dates indicated:
At March 31, 2019 At December 31, 2018At September 30, 2019At December 31, 2018
(Dollars in thousands)Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount(Dollars in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortized intangible assets:           Amortized intangible assets:
Covenants not to compete$—
 $—
 $—
 $710
 $710
 $—
Covenants not to compete$—  $—  $—  $710  $710  $—  
Core deposit intangibles6,788
 3,376
 3,412
 6,788
 3,143
 3,645
Core deposit intangibles6,788  3,818  2,970  6,788  3,143  3,645  
Customer related intangibles8,819
 7,426
 1,393
 12,381
 10,804
 1,577
Customer related intangibles8,819  7,763  1,056  12,381  10,804  1,577  
Servicing rights17,639
 10,914
 6,725
 17,314
 10,546
 6,768
Servicing rights18,424  11,928  6,496  17,314  10,546  6,768  
Total amortized intangible assets$33,246
 $21,716
 $11,530
 $37,193
 $25,203
 $11,990
Total amortized intangible assets$34,031  $23,509  $10,522  $37,193  $25,203  $11,990  
The estimated aggregate amortization expense for core deposit and customer-related intangibles for the remainder of 2019 and the succeeding fiscal years is as follows:
Year(Dollars in thousands)AmountYear(Dollars in thousands)Amount
Remainder of 2019 $1,148
Remainder of 2019$368  
2020 1,200
20201,200  
2021 923
2021923  
2022 666
2022666  
2023 409
2023409  
Thereafter 459
Thereafter460  
The Corporation has originated mortgage servicing rights, which are included in other intangible assets on the consolidated balance sheet. 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 $10.3$8.4 million at March 31,September 30, 2019 and $11.5 million at December 31, 2018. The fair value of mortgage servicing rights was determined using a discount rate of 10.0% at March 31,September 30, 2019 and December 31, 2018. The Corporation also records servicing rights on small business administration (SBA) loans. The value
30
Table of these servicing rights was $62 thousand and $42 thousand at March 31, 2019 and December 31, 2018, respectively.Contents
Changes in the servicing rights balance are summarized as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2019201820192018
Beginning of period$6,599  $6,650  $6,768  $6,573  
Servicing rights capitalized464  406  1,051  1,093  
Amortization of servicing rights(585) (341) (1,320) (951) 
Changes in valuation allowance18  —  (3) —  
End of period$6,496  $6,715  $6,496  $6,715  
Loans serviced for others$1,055,823  $1,024,229  $1,055,823  $1,024,229  
 Three Months Ended March 31,
(Dollars in thousands)2019 2018
Beginning of period$6,768
 $6,573
Servicing rights capitalized266
 337
Amortization of servicing rights(309) (305)
End of period$6,725
 $6,605
Residential mortgage and SBA loans serviced for others$1,037,948
 $1,012,677
Activity in the valuation allowance for mortgage servicing rights was as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2019201820192018
Valuation allowance, beginning of period$(21) $—  $—  $—  
Additions—  —  (3) —  
Reductions18  —  —  —  
Valuation allowance, end of period$(3) $—  $(3) $—  
The estimated amortization expense of servicing rights for the remainder of 2019 and the succeeding fiscal years is as follows:
Year(Dollars in thousands)Amount
Remainder of 2019$1,208  
20201,019  
2021833  
2022678  
2023549  
Thereafter2,209  
Year(Dollars in thousands)Amount
Remainder of 2019 $1,017
2020 883
2021 759
2022 650
2023 555
Thereafter 2,861


Note 6. Deposits

Deposits and their respective weighted average interest rate at March 31,September 30, 2019 and December 31, 2018 consist of the following:
At March 31, 2019 At December 31, 2018At September 30, 2019At December 31, 2018
Weighted Average Interest Rate Amount Weighted Average Interest Rate AmountWeighted Average Interest RateAmountWeighted Average Interest RateAmount
(Dollars in thousands)(Dollars in thousands)
Noninterest-bearing deposits—% $1,103,674
 —% $1,055,919
Noninterest-bearing deposits— %$1,198,425  — %$1,055,919  
Demand deposits1.17
 1,441,540
 1.01
 1,377,171
Demand deposits1.17  1,644,546  1.01  1,377,171  
Savings deposits0.45
 819,255
 0.33
 782,766
Savings deposits0.39  776,920  0.33  782,766  
Time deposits1.86
 638,684
 1.76
 670,077
Time deposits2.02  718,100  1.76  670,077  
Total0.81% $4,003,153
 0.73% $3,885,933
Total0.85 %$4,337,991  0.73 %$3,885,933  
The aggregate amount of time deposits in denominations of $100 thousand or more was $252.4$388.1 million at March 31,September 30, 2019 and $283.4 million at December 31, 2018. 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 $102.1$232.8 million at March 31,September 30, 2019 and $129.5 million at December 31, 2018.


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At March 31,September 30, 2019, the scheduled maturities of time deposits are as follows:
Year(Dollars in thousands)Amount  
Remainder of 2019$171,421  
2020309,488  
202195,356  
202245,339  
202371,942  
Thereafter24,554  
Total$718,100  
Year(Dollars in thousands)Amount
Remainder of 2019 $285,656
2020 167,034
2021 66,896
2022 37,394
2023 72,105
Thereafter 9,599
Total $638,684

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 September 30, 2019At December 31, 2018
(Dollars in thousands)Balance at End of PeriodWeighted Average Interest Rate at End of PeriodBalance at End of PeriodWeighted Average Interest Rate at End of Period
Short-term borrowings:
FHLB borrowings$—  — %$108,300  2.62 %
Federal funds purchased—  —  60,000  2.60  
Customer repurchase agreements18,970  0.05  21,468  0.05  
Long-term debt:
FHLB advances$150,000  1.99 %$125,000  1.92 %
Security repurchase agreements10,128  2.60  20,330  2.71  
Subordinated notes$94,757  5.32 %$94,574  5.33 %
 At March 31, 2019 At December 31, 2018
(Dollars in thousands)Balance at End of Period Weighted Average Interest Rate at End of Period Balance at End of Period Weighted Average Interest Rate at End of Period
Short-term borrowings:       
FHLB borrowings$—
 —% $108,300
 2.62%
Federal funds purchased55,000
 2.55
 60,000
 2.60
Customer repurchase agreements18,185
 0.05
 21,468
 0.05
        
Long-term debt:       
FHLB advances$125,000
 1.92% $125,000
 1.92%
Security repurchase agreements20,263
 2.83
 20,330
 2.71
        
Subordinated notes$94,635
 5.33% $94,574
 5.33%
The Corporation, through the Bank, has a credit facility with the Federal Home Loan Bank (FHLB) with a maximum borrowing capacity of approximately $1.7$1.8 billion. Advances from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets. At March 31,September 30, 2019 and December 31, 2018, the Bank had outstanding short-term letters of credit with the FHLB totaling $336.9$692.8 million and $347.5 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 that totaled $504.0 million and $367.0 million at March 31,September 30, 2019 and December 31, 2018.2018, respectively. 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, holds collateral at the Federal Reserve Bank of Philadelphia in order to access the Discount Window Lending program. The collateral consisting of investment securities was valued at $104.9$101.4 million and $69.5 million at March 31,September 30, 2019 and December 31, 2018, respectively. At March 31,September 30, 2019 and December 31, 2018, the Corporation had no0 outstanding borrowings under this program.
The Corporation has a $10.0 million committed line of credit with a correspondent bank. At March 31,September 30, 2019 and December 31, 2018, the Corporation had no0 outstanding borrowings under this line.
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Long-term advances with the FHLB of Pittsburgh mature as follows:
(Dollars in thousands)As of March 31, 2019 Weighted Average Rate(Dollars in thousands)As of September 30, 2019Weighted Average Rate
Remainder of 2019$10,000
 1.35%Remainder of 2019$10,000  1.35 %
202040,000
 1.70
202040,000  1.70  
202155,000
 1.94
202180,000  2.07  
202210,000
 2.09
202210,000  2.09  
202310,000
 3.02
202310,000  3.02  
Thereafter—
 —
Thereafter—  —  
Total$125,000
 1.92%Total$150,000  1.99 %
Long-term debt under security repurchase agreements with large commercial banks mature as follows:
(Dollars in thousands)As of March 31, 2019 Weighted Average Rate(Dollars in thousands)As of September 30, 2019Weighted Average Rate
Remainder of 2019$10,076
 2.83%Remainder of 2019$—  — %
202010,187
 2.82
202010,128  2.60  
2021—
 —
2021—  —  
2022—
 —
2022—  —  
2023—
 —
2023—  —  
Thereafter—
 —
Thereafter—  —  
Total$20,263
 2.83%Total$10,128  2.60 %
Long-term debt under security repurchase agreements totaling $20.3$10.1 million are variable based on the one-month LIBOR rate plus a spread.
Note 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 and 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 the 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 September 30,
 2019201820192018
(Dollars in thousands)Retirement PlansOther Post Retirement
Benefits
Service cost$109  $140  $17  $22  
Interest cost476  440  23  23  
Expected return on plan assets(772) (849) —  —  
Amortization of net actuarial loss294  280  —  1  
Accretion of prior service cost(45) (70) —  —  
Net periodic benefit cost (income)$62  $(59) $40  $46  

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 Three Months Ended March 31,
 2019 2018 2019 2018
(Dollars in thousands)Retirement Plans Other Post Retirement
Benefits
Service cost$109
 $140
 $17
 $22
Interest cost476
 441
 23
 23
Expected return on plan assets(771) (796) —
 —
Amortization of net actuarial loss294
 280
 —
 1
Accretion of prior service cost(45) (71) —
 —
Net periodic benefit cost (income)$63
 $(6) $40
 $46
 Nine Months Ended September 30,
 2019201820192018
(Dollars in thousands)Retirement PlansOther Post Retirement
Benefits
Service cost$328  $420  $50  $66  
Interest cost1,428  1,320  70  69  
Expected return on plan assets(2,313) (2,440) —  —  
Amortization of net actuarial loss882  841  —  3  
Accretion of prior service cost(136) (212) —  —  
Net periodic benefit cost (income)$189  $(71) $120  $138  
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 previously disclosed in its financial statements for the year ended December 31, 2018 that it expected to make contributions of $157 thousand to its non-qualified retirement plans and $89 thousand to its other postretirement benefit plans in 2019. During the threenine months ended March 31,September 30, 2019, the Corporation contributed $40$120 thousand to its non-qualified retirement plans and $26$79 thousand to its other postretirement plans. During the threenine months ended March 31,September 30, 2019, $647 thousand$2.0 million was paid to participants from the retirement plans and $26$79 thousand was paid to participants from the other postretirement plans.
Note 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. In December 2018, the Corporation's Board of Directors approved an Amended and Restated Univest 2013 Long-Term Incentive Plan (the Plan) to allow for the issuance of restricted stock units.


During the three months ended March 31, 2019, the Corporation issued to directors and employees (“grantees”) restricted stock units rather than restricted stock awards or stock options, which were issued to grantees in prior reporting periods. Restricted stock units differ from restricted stock awards in that Corporation stock is not issued to grantees at the date of the grant and the grantee does not have voting or dividend rights during the vesting period. In the following schedules, issued restricted stock units have been combined with restricted stock awards, as the determination of the value at the grant date and methodology for recording stock-based compensation expense is the same for restricted stock units and restricted stock awards. 
The following is a summary of the Corporation's stock option activity and related information for the threenine months ended March 31,September 30, 2019:
(Dollars in thousands, except per share data)Shares Under OptionWeighted Average Exercise Price Per ShareWeighted Average Remaining Contractual Life (Years)Aggregate Intrinsic Value at September 30, 2019
Outstanding at December 31, 2018597,405  $23.98  
Expired(11,256) 24.23  
Forfeited(8,000) 26.06  
Exercised(58,545) 17.16  
Outstanding at September 30, 2019519,604  24.72  6.9$1,323  
Exercisable at September 30, 2019355,343  23.02  6.31,323  
34
(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 March 31, 2019
Outstanding at December 31, 2018597,405
 $23.98
    
Expired(7,756) 22.99
    
Forfeited(6,500) 25.53
    
Exercised(30,500) 17.06
    
Outstanding at March 31, 2019552,649
 24.36
 7.2 $1,321
Exercisable at March 31, 2019384,220
 22.65
 6.6 1,312
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The following is a summary of nonvested stock options at March 31,September 30, 2019 including changes during the threenine months then ended:
(Dollars in thousands, except per share data) Nonvested Stock Options  Weighted Average Grant Date Fair Value(Dollars in thousands, except per share data) Nonvested Stock Options Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2018344,230
 $6.48
Nonvested stock options at December 31, 2018344,230  $6.48  
Vested(169,301) 6.44
Vested(171,969) 6.42 ��
Forfeited(6,500) 6.40
Forfeited(8,000) 6.43  
Nonvested stock options at March 31, 2019168,429
 6.52
Nonvested stock options at September 30, 2019Nonvested stock options at September 30, 2019164,261  6.54  
The following aggregated assumptions were used to estimate the fair value of options granted during the threenine months ended March 31,September 30, 2018. The Corporation did not issue stock options during the threenine months ended March 31,September 30, 2019.
ThreeNine Months Ended March 31,September 30, 2018
2018
Actual
Expected option life in years6.6
6.6
Risk free interest rate2.802.80 %
Expected dividend yield2.812.81 %
Expected volatility27.1527.15 %
Fair value of options$6.46
The following is a summary of nonvested restricted stock awards and nonvested restricted stock units at March 31,September 30, 2019 including changes during the threenine months then ended:
(Dollars in thousands, except per share data) Nonvested Stock Awards and Units  Weighted Average Grant Date Fair Value(Dollars in thousands, except per share data) Nonvested Stock Awards and Units Weighted Average Grant Date Fair Value
Nonvested stock awards at December 31, 2018157,579
 $25.33
Nonvested stock awards at December 31, 2018157,579  $25.33  
Granted113,729
 25.66
Granted113,729  25.66  
Vested(32,965) 21.86
Vested(44,807) 21.65  
Cancelled(17,349) 19.68
Cancelled(17,736) 19.82  
Nonvested stock awards and units at March 31, 2019220,994
 26.46
Nonvested stock awards and units at September 30, 2019Nonvested stock awards and units at September 30, 2019208,765  26.77  
The fair value of restricted stock awards and units is equivalent to the fair value of the Corporation's stock on the date of grant and is amortized over the vesting period. Certain information regarding restricted stock awards and units is summarized below for the periods indicated:
Three Months Ended March 31,Nine Months Ended September 30,
(Dollars in thousands, except per share data)2019 2018(Dollars in thousands, except per share data)20192018
Restricted stock awards and units granted113,729
 59,953
Restricted stock awards and units granted113,729  59,953  
Weighted average grant date fair value$25.66
 $28.39
Weighted average grant date fair value$25.66  $28.39  
Intrinsic value of awards vested$809
 $1,193
Intrinsic value of awards vested$1,119  $2,648  
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 and units at March 31,September 30, 2019 is presented below:
(Dollars in thousands)Unrecognized Compensation CostWeighted-Average Period Remaining (Years)
Stock options$624  1.3
Restricted stock awards and units3,127  2.1
$3,751  1.9
35
(Dollars in thousands)Unrecognized Compensation Cost Weighted-Average Period Remaining (Years)
Stock options$965
 1.6
Restricted stock awards and units4,148
 2.4
 $5,113
 2.3
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The following table presents information related to the Corporation’s compensation expense related to stock incentive plans recognized for the periods indicated:
Nine Months Ended September 30,
(Dollars in thousands)20192018
Stock-based compensation expense:
Stock options$546  $797  
Restricted stock awards and units1,372  1,582  
Employee stock purchase plan54  51  
Total$1,972  $2,430  
Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options$444  $624  
 Three Months Ended March 31,
(Dollars in thousands)2019 2018
Stock-based compensation expense:   
Stock options$216
 $228
Restricted stock awards and units361
 619
Employee stock purchase plan17
 15
Total$594
 $862
Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options$165
 $243

Note 10. Accumulated Other Comprehensive (Loss) Income
The following table shows the components of accumulated other comprehensive (loss) income, net of taxes, for the periods presented:
(Dollars in thousands)Net Unrealized
(Losses) 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		(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
Balance, December 31, 2018$(11,221) $81
 $(17,276) $(28,416)Balance, December 31, 2018$(11,221) $81  $(17,276) $(28,416) 
Adjustment to initially apply ASU No. 2017-12 for derivatives (1)—
 83
 —
 83
Adjustment to initially apply ASU No. 2017-12 for derivatives (1)—  83  —  83  
Other comprehensive income (loss)4,044
 (145) 196
 4,095
Other comprehensive income (loss)6,157  (421) 589  6,325  
Balance, March 31, 2019$(7,177) $19
 $(17,080) $(24,238)
Balance, September 30, 2019Balance, September 30, 2019$(5,064) $(257) $(16,687) $(22,008) 
       
Balance, December 31, 2017$(4,061) $9
 $(13,719) $(17,771)Balance, December 31, 2017$(4,061) $9  $(13,719) $(17,771) 
Adjustment to initially apply ASU No. 2016-01 for equity securities measured at fair value(433) —
 —
 (433)Adjustment to initially apply ASU No. 2016-01 for equity securities measured at fair value(433) —  —  (433) 
Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges(968) 2
 (2,955) (3,921)Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges(968) 2  (2,955) (3,921) 
Other comprehensive (loss) income(5,015) 183
 166
 (4,666)Other comprehensive (loss) income(7,411) 373  499  (6,539) 
Balance, March 31, 2018$(10,477) $194
 $(16,508) $(26,791)
Balance, September 30, 2018Balance, September 30, 2018$(12,873) $384  $(16,175) $(28,664) 
(1) See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2019" for additional information.


Note 11. Derivative Instruments and Hedging Activities
Interest Rate Swaps
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" and subsequent related updates. The Corporation adopted this guidance effective January 1, 2019, on a modified retrospective basis through a cumulative-effect adjustment to retained earnings at January 1, 2019. See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2019" for additional information.
The Corporation may use 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-rateinterest 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 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 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
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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. At March 31,September 30, 2019, approximately $81$49 thousand in net deferred gains,losses, net of tax, recorded in accumulated other comprehensive loss are 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 March 31,September 30, 2019. At March 31,September 30, 2019, the notional amount of the interest rate swap was $16.9$16.5 million, with a positivenegative fair value of $24$326 thousand.
The Corporation hashad an interest rate swap classified as a fair value hedge with a current notional amount of $1.3 million to hedgefor a 10-year fixed rate loan that iswas earning interest at 5.83%. The interest rate swap was terminated due to early payoff of the loan during the third quarter of 2019. The Corporation payspaid a fixed rate of 5.83% and receivesreceived a floating rate based on the one-month LIBOR plus 350 basis points. The swap matureswas due to mature in October 2021. Effective January 1, 2019, the entire change in the fair values of the interest rate swap and the hedged loan included in the assessment of hedge effectiveness iswas recorded in interest income in the consolidated statements of operations.income. Prior to January 1, 2019, the difference between changes in the fair values of the interest rate swap agreement and the hedged loan represented hedge ineffectiveness and was recorded in other noninterest income in the consolidated statements of operations.income.
The Corporation has an interest rate swap with a current notional amount of $390$332 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 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 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 March 31,September 30, 2019, the Corporation has twenty-twoNaN variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of $150.1$221.4 million and remaining maturities ranging from less than one year to 10 years. At March 31,September 30, 2019, the fair value of the swaps to the customers was a net liability of $2.8$11.9 million and $87.7$187.2 million of notional amount of the swaps were in paying positions while $62.4$34.2 million were in receiving positions to the third-party financial institution. At March 31,September 30, 2019, the fair value of the Corporation's interest rate swap credit derivatives was a liability of $79$263 thousand.
The maximum potential payments by the Corporation to the third-party financial institution under these credit derivatives are not estimable as they are contingent on future interest rates and the agreement does not provide for a limitation of the maximum potential payment amount.
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.

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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 March 31,September 30, 2019 and December 31, 2018. 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 AssetsDerivative Liabilities
(Dollars in thousands)Notional
Amount		 Balance Sheet
Classification		 Fair
Value		 Balance Sheet
Classification		 Fair
Value		(Dollars in thousands)Notional
Amount		Balance Sheet
Classification		Fair
Value		Balance Sheet
Classification		Fair
Value
At March 31, 2019     
At September 30, 2019At September 30, 2019
Interest rate swap - cash flow hedge$16,881
 Other assets $24
   $—
Interest rate swap - cash flow hedge$16,487   $—  Other liabilities$326  
Interest rate swap - fair value hedge1,335
   —
 Other liabilities 4
Interest rate swap - fair value hedge—   —   —  
Total$18,216
 $24
 $4
Total$16,487  $—  $326  
At December 31, 2018     At December 31, 2018
Interest rate swap - cash flow hedge$17,076
 Other assets $185
   $—
Interest rate swap - cash flow hedge$17,076  Other assets$185   $—  
Interest rate swap - fair value hedge1,346
 Other assets 4
   —
Interest rate swap - fair value hedge1,346  Other assets4   —  
Total$18,422
 $189
 $—
Total$18,422  $189  $—  
The following table presents the notional amounts and fair values of derivatives not designated as hedging instruments recorded on the consolidated balance sheets at March 31,September 30, 2019 and December 31, 2018:
  Derivative AssetsDerivative Liabilities
(Dollars in thousands)Notional
Amount		Balance Sheet
Classification		Fair
Value		Balance Sheet
Classification		Fair
Value
At September 30, 2019
Interest rate swap$332   $—  Other liabilities  $17  
Credit derivatives221,384   —  Other liabilities  263  
Interest rate locks with customers57,727  Other assets  907     —  
Forward loan sale commitments60,469  Other assets  169   —  
Total$339,912  $1,076  $280  
At December 31, 2018
Interest rate swap$418  $—  Other liabilities  $20  
Credit derivatives122,410  —  Other liabilities  72  
Interest rate locks with customers21,494  Other assets  490     —  
Forward loan sale commitments23,227   —  Other liabilities  150  
Total$167,549  $490  $242  
   Derivative Assets Derivative Liabilities
(Dollars in thousands)Notional
Amount		 Balance Sheet
Classification		 Fair
Value		 Balance Sheet
Classification		 Fair
Value
At March 31, 2019         
Interest rate swap$390
   $—
 Other liabilities $19
Credit derivatives150,118
   —
 Other liabilities 79
Interest rate locks with customers21,904
 Other assets 455
   —
Forward loan sale commitments22,814
   —
 Other liabilities 121
Total$195,226
   $455
   $219
At December 31, 2018         
Interest rate swap$418
 
 $—
 Other liabilities $20
Credit derivatives122,410
 
 —
 Other liabilities 72
Interest rate locks with customers21,494
 Other assets 490
   —
Forward loan sale commitments23,227
   —
 Other liabilities 150
Total$167,549
   $490
   $242


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 EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2019201820192018
Interest rate swap—cash flow hedge—net interest paymentsInterest expense$(4) $1  $(34) $27  
Interest rate swap—fair value hedge—effectivenessInterest income(6) —  (5) —  
Interest rate swap—fair value hedge—ineffectivenessOther noninterest income—  1  —  3  
Total net (loss) gain$(2) $—  $29  $(24) 

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 Statement of Income
Classification		 Three Months Ended 
 March 31,
(Dollars in thousands)2019 2018
Interest rate swap—cash flow hedge—net interest paymentsInterest expense $(16) $20
Interest rate swap—fair value hedge—effectivenessInterest income 1
 —
Total net gain (loss)  $17
 $(20)


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 ClassificationThree Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2019201820192018
Credit derivativesOther noninterest income$186  $48  $768  $87  
Interest rate locks with customersNet gain (loss) on mortgage banking activities109  (328) 417  (223) 
Forward loan sale commitmentsNet gain (loss) on mortgage banking activities366  144  319  (8) 
Total net gain (loss)$661  $(136) $1,504  $(144) 
 Statement of Income Classification Three Months Ended 
 March 31,
(Dollars in thousands)2019 2018
Credit derivativesOther noninterest income $264
 $4
Interest rate locks with customersNet loss on mortgage banking activities (35) (132)
Forward loan sale commitmentsNet gain (loss) on mortgage banking activities 29
 (49)
Total net gain (loss)  $258
 $(177)


The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at March 31,September 30, 2019 and December 31, 2018:
(Dollars in thousands)Accumulated Other
Comprehensive (Loss) Income		At September 30, 2019At December 31, 2018
Interest rate swap—cash flow hedgeFair value, net of taxes$(257) $80  
Total$(257) $80  

(Dollars in thousands)Accumulated Other
Comprehensive Income		 At March 31, 2019 At December 31, 2018
Interest rate swap—cash flow hedgeFair value, net of taxes $19
 $80
Total  $19
 $80

Note 12. Fair Value Disclosures
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Corporation determines the fair value of financial instruments based on the fair value hierarchy. The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Corporation. Unobservable inputs are inputs that reflect the Corporation’s assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances, including assumptions about risk. Three levels of inputs are used to measure fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement. Transfers between levels are recognized at the end of the reporting 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. 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

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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 bonds owned by the Corporation are classified as Level 3 as they are not traded in active markets. The fair value of each 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 March 31,September 30, 2019.

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.
TwoOne commercial loansloan associated with an interest rate swaps areswap is classified in Level 3 of the valuation hierarchy at September 30, 2019 since lending credit risk is not an observable input for these loans.this loan. The unrealized gain on the two loans1 loan was $28$17 thousand at March 31,September 30, 2019.


Contingent Consideration Liability
The Corporation estimates the fair value of the contingent consideration liability by using a discounted cash flow model of future contingent payments based on projected revenue related to the acquired business. The estimated fair value of the contingent consideration liability is reviewed on a quarterly basis and any valuation adjustments resulting from a change of estimated future contingent payments based on projected revenue of the acquired business affecting the contingent consideration liability will be recorded through noninterest expense. Due to the significant unobservable input related to the projected revenue, the contingent consideration liability is classified within Level 3 of the valuation hierarchy. An increase in the projected revenue may result in a higher fair value of the contingent consideration liability. Alternatively, a decrease in the projected revenue may result in a lower estimated fair value of the contingent consideration liability.

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The following table presents the assets and liabilities measured at fair value on a recurring basis at March 31,September 30, 2019 and December 31, 2018, classified using the fair value hierarchy:
 At September 30, 2019
(Dollars in thousands)Level 1Level 2Level 3Assets/
Liabilities at
Fair Value
Assets:
Available-for-sale securities:
U.S. government corporations and agencies$—  $299  $—  $299  
State and political subdivisions—  40,386  —  40,386  
Residential mortgage-backed securities—  125,237  —  125,237  
Collateralized mortgage obligations—  2,523  —  2,523  
Corporate bonds—  67,294  26,404  93,698  
Total available-for-sale securities—  235,739  26,404  262,143  
Equity securities:
Equity securities - financial services industry936  —  —  936  
Money market mutual funds1,523  —  —  1,523  
Total equity securities2,459  —  —  2,459  
Loans*—  —  349  349  
Interest rate locks with customers*—  907  —  907  
Forward loan sale commitments*—  169  —  169  
Total assets$2,459  $236,815  $26,753  $266,027  
Liabilities:
Contingent consideration liability$—  $—  $186  $186  
Interest rate swaps*—  343  —  343  
Credit derivatives*—  —  263  263  
Total liabilities$—  $343  $449  $792  
 At March 31, 2019
(Dollars in thousands)Level 1 Level 2 Level 3 Assets/
Liabilities at
Fair Value
Assets: 
Available-for-sale securities:       
U.S. government corporations and agencies$—
 $10,323
 $—
 $10,323
State and political subdivisions—
 61,974
 —
 61,974
Residential mortgage-backed securities—
 147,765
 —
 147,765
Collateralized mortgage obligations—
 2,786
 —
 2,786
Corporate bonds—
 66,161
 26,639
 92,800
Total available-for-sale securities—
 289,009
 26,639
 315,648
Equity securities:       
Equity securities - financial services industry927
 —
 —
 927
Money market mutual funds1,838
 —
 —
 1,838
Total equity securities2,765
 —
 —
 2,765
Loans*—
 —
 1,748
 1,748
Interest rate swaps*—
 24
 —
 24
Interest rate locks with customers*—
 455
 —
 455
Total assets$2,765
 $289,488
 $28,387
 $320,640
Liabilities:       
Contingent consideration liability$—
 $—
 $235
 $235
Interest rate swaps*—
 23
 —
 23
Credit derivatives*—
 —
 79
 79
Forward loan sale commitments*—
 121
 —
 121
Total liabilities$—
 $144
 $314
 $458


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 At December 31, 2018
(Dollars in thousands)Level 1Level 2Level 3Assets/
Liabilities at
Fair Value
Assets:
Available-for-sale securities:
U.S. government corporations and agencies$—  $15,315  $—  $15,315  
State and political subdivisions—  65,415  —  65,415  
Residential mortgage-backed securities—  151,762  —  151,762  
Collateralized mortgage obligations—  2,888  —  2,888  
Corporate bonds—  67,398  25,729  93,127  
Total available-for-sale securities—  302,778  25,729  328,507  
Equity securities:
Equity securities - financial services industry924  —  —  924  
Money market mutual funds1,241  —  —  1,241  
Total equity securities2,165  —  —  2,165  
Loans*—  —  1,779  1,779  
Interest rate swap*—  189  —  189  
Interest rate locks with customers*—  490  —  490  
Total assets$2,165  $303,457  $27,508  $333,130  
Liabilities:
Contingent consideration liability$—  $—  $259  $259  
Interest rate swaps*—  20  —  20  
Credit derivatives*—  —  72  72  
Forward loan sale commitments*—  150  —  150  
Total liabilities$—  $170  $331  $501  
* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."
The following table includes a 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 threenine months ended March 31,September 30, 2019 and 2018:
 Nine Months Ended September 30, 2019
(Dollars in thousands)Balance at
December 31,
2018		Purchases/additionsSalesPayments receivedPremium amortization, netIncrease (decrease) in valueBalance at September 30, 2019
Corporate bonds$25,729  $—  $—  $—  $—  $675  $26,404  
Loans1,779  —  —  (1,432) —  2  349  
Credit derivatives(72) (958) —  —  —  767  (263) 
Net total$27,436  $(958) $—  $(1,432) $—  $1,444  $26,490  
 Three Months Ended March 31, 2019
(Dollars in thousands)Balance at
December 31,
2018		 Purchases/additions Sales Payments received Premium amortization, net Increase (decrease) in value Balance at March 31, 2019
Corporate bonds$25,729
 $—
 $—
 $—
 $—
 $910
 $26,639
Loans1,779
 —
 —
 (39) —
 8
 1,748
Credit derivatives(72) (271) —
 —
 —
 264
 (79)
Net total$27,436
 $(271) $—
 $(39) $—
 $1,182
 $28,308

 Nine Months Ended September 30, 2018
(Dollars in thousands)Balance at
December 31,
2017		Purchases/additionsSalesPayments receivedPremium amortization, net(Decrease) increase in valueBalance at September 30, 2018
Corporate bonds$27,986  $—  $—  $—  $—  $(1,579) $26,407  
Loans1,958  —  —  (110) —  (47) 1,801  
Credit derivatives(36) (75) —  —  —  87  (24) 
Net total$29,908  $(75) $—  $(110) $—  $(1,539) $28,184  
42
 Three Months Ended March 31, 2018
(Dollars in thousands)Balance at
December 31,
2017		 Purchases/additions Sales Payments received Premium amortization, net (Decrease) increase in value Balance at March 31, 2018
Corporate bonds$27,986
 $—
 $—
 $—
 $—
 $(1,064) $26,922
Loans1,958
 —
 —
 (37) —
 (26) 1,895
Credit derivatives(36) —
 —
 —
 —
 5
 (31)
Net total$29,908
 $—
 $—
 $(37) $—
 $(1,085) $28,786
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The following table presents the change in the balance of the contingent consideration liability related to acquisitions for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the threenine months ended March 31,September 30, 2019 and 2018:
 Nine Months Ended September 30, 2019
(Dollars in thousands)Balance at
December 31,
2018		Contingent
Consideration
from New
Acquisition		Payment of
Contingent
Consideration		Adjustment
of Contingent
Consideration		Balance at September 30, 2019
Girard Partners$259  $—  $97  $24  $186  
Total contingent consideration liability$259  $—  $97  $24  $186  
 Three Months Ended March 31, 2019
(Dollars in thousands)Balance at
December 31,
2018		 Contingent
Consideration
from New
Acquisition		 Payment of
Contingent
Consideration		 Adjustment
of Contingent
Consideration		 Balance at March 31, 2019
Girard Partners$259
 $—
 $33
 $9
 $235
Total contingent consideration liability$259
 $—
 $33
 $9
 $235

Three Months Ended March 31, 2018 Nine Months Ended September 30, 2018
(Dollars in thousands)Balance at
December 31,
2017		 Contingent
Consideration
from New
Acquisition		 Payment of
Contingent
Consideration		 Adjustment
of Contingent
Consideration		 Balance at March 31, 2018(Dollars in thousands)Balance at
December 31,
2017		Contingent
Consideration
from New
Acquisition		Payment of
Contingent
Consideration		Adjustment
of Contingent
Consideration		Balance at September 30, 2018
Girard Partners$339
 $—
 $34
 $17
 $322
Girard Partners$339  $—  $67  $38  $310  
Total contingent consideration liability$339
 $—
 $34
 $17
 $322
Total contingent consideration liability$339  $—  $67  $38  $310  
The Corporation may be required to periodically measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or market accounting or impairment charges of individual assets. The following table represents assets measured at fair value on a non-recurring basis at March 31,September 30, 2019 and December 31, 2018:
 At September 30, 2019
(Dollars in thousands)Level 1Level 2Level 3Assets at
Fair Value
Impaired loans held for investment$—  $—  $34,478  $34,478  
Impaired leases held for investment—  —  306  306  
Other real estate owned—  —  495  495  
Total$—  $—  $35,279  $35,279  
 At March 31, 2019
(Dollars in thousands)Level 1 Level 2 Level 3 Assets at
Fair Value
Impaired loans held for investment$—
 $—
 $24,499
 $24,499
Other real estate owned—
 —
 540
 540
Total$—
 $—
 $25,039
 $25,039

 At December 31, 2018
(Dollars in thousands)Level 1Level 2Level 3Assets at
Fair Value
Impaired loans held for investment$—  $—  $25,166  $25,166  
Other real estate owned—  —  1,187  1,187  
Total$—  $—  $26,353  $26,353  

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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 March 31,September 30, 2019 and December 31, 2018. The disclosed fair values are classified using the fair value hierarchy.
At March 31, 2019 At September 30, 2019
(Dollars in thousands)Level 1 Level 2 Level 3 Fair
Value		 Carrying
Amount		(Dollars in thousands)Level 1Level 2Level 3Fair
Value		Carrying
Amount
Assets:         Assets:
Cash and short-term interest-earning assets$66,141
 $—
 $—
 $66,141
 $66,141
Cash and short-term interest-earning assets$225,334  $—  $—  $225,334  $225,334  
Held-to-maturity securities—
 148,960
 —
 148,960
 148,470
Held-to-maturity securities—  186,644  —  186,644  183,845  
Federal Home Loan Bank, Federal Reserve Bank and other stockNA
 NA
 NA
 NA
 32,699
Federal Home Loan Bank, Federal Reserve Bank and other stockNA  NA  NA  NA  29,254  
Loans held for sale—
 948
 —
 948
 921
Loans held for sale—  2,912  —  2,912  2,893  
Net loans and leases held for investment—
 —
 4,020,771
 4,020,771
 4,010,030
Net loans and leases held for investment—  —  4,203,743  4,203,743  4,183,138  
Servicing rights—
 —
 10,362
 10,362
 6,725
Servicing rights—  —  8,522  8,522  6,496  
Total assets$66,141
 $149,908
 $4,031,133
 $4,247,182
 $4,264,986
Total assets$225,334  $189,556  $4,212,265  $4,627,155  $4,630,960  
Liabilities:         Liabilities:
Deposits:         Deposits:
Demand and savings deposits, non-maturity$3,364,469
 $—
 $—
 $3,364,469
 $3,364,469
Demand and savings deposits, non-maturity$3,619,891  $—  $—  $3,619,891  $3,619,891  
Time deposits—
 635,255
 —
 635,255
 638,684
Time deposits—  722,151  —  722,151  718,100  
Total deposits3,364,469
 635,255
 —
 3,999,724
 4,003,153
Total deposits3,619,891  722,151  —  4,342,042  4,337,991  
Short-term borrowings—
 73,185
 —
 73,185
 73,185
Short-term borrowings—  18,970  —  18,970  18,970  
Long-term debt—
 144,717
 —
 144,717
 145,263
Long-term debt—  161,361  —  161,361  160,128  
Subordinated notes—
 96,394
 —
 96,394
 94,635
Subordinated notes—  96,500  —  96,500  94,757  
Total liabilities$3,364,469
 $949,551
 $—
 $4,314,020
 $4,316,236
Total liabilities$3,619,891  $998,982  $—  $4,618,873  $4,611,846  
Off-Balance-Sheet:         Off-Balance-Sheet:
Commitments to extend credit$—
 $(7,988) $—
 $(7,988) $—
Commitments to extend credit$—  $(8,081) $—  $(8,081) $—  
 At December 31, 2018
(Dollars in thousands)Level 1 Level 2 Level 3 Fair
Value		 Carrying
Amount
Assets:         
Cash and short-term interest-earning assets$109,420
 $—
 $—
 $109,420
 $109,420
Held-to-maturity securities—
 141,575
 —
 141,575
 142,634
Federal Home Loan Bank, Federal Reserve Bank and other stockNA
 NA
 NA
 NA
 28,337
Loans held for sale—
 1,798
 —
 1,798
 1,754
Net loans and leases held for investment—
 —
 3,924,329
 3,924,329
 3,950,265
Servicing rights—
 —
 11,496
 11,496
 6,768
Total assets$109,420
 $143,373
 $3,935,825
 $4,188,618
 $4,239,178
Liabilities:         
Deposits:         
Demand and savings deposits, non-maturity$3,215,856
 $—
 $—
 $3,215,856
 $3,215,856
Time deposits—
 664,738
 —
 664,738
 670,077
Total deposits3,215,856
 664,738
 —
 3,880,594
 3,885,933
Short-term borrowings—
 189,768
 —
 189,768
 189,768
Long-term debt—
 144,021
 —
 144,021
 145,330
Subordinated notes—
 95,113
 —
 95,113
 94,574
Total liabilities$3,215,856
 $1,093,640
 $—
 $4,309,496
 $4,315,605
Off-Balance-Sheet:         
Commitments to extend credit$—
 $(2,516) $—
 $(2,516) $—





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 At December 31, 2018
(Dollars in thousands)Level 1Level 2Level 3Fair
Value		Carrying
Amount
Assets:
Cash and short-term interest-earning assets$109,420  $—  $—  $109,420  $109,420  
Held-to-maturity securities—  141,575  —  141,575  142,634  
Federal Home Loan Bank, Federal Reserve Bank and other stockNA  NA  NA  NA  28,337  
Loans held for sale—  1,798  —  1,798  1,754  
Net loans and leases held for investment—  —  3,924,329  3,924,329  3,950,265  
Servicing rights—  —  11,496  11,496  6,768  
Total assets$109,420  $143,373  $3,935,825  $4,188,618  $4,239,178  
Liabilities:
Deposits:
Demand and savings deposits, non-maturity$3,215,856  $—  $—  $3,215,856  $3,215,856  
Time deposits—  664,738  —  664,738  670,077  
Total deposits3,215,856  664,738  —  3,880,594  3,885,933  
Short-term borrowings—  189,768  —  189,768  189,768  
Long-term debt—  144,021  —  144,021  145,330  
Subordinated notes—  95,113  —  95,113  94,574  
Total liabilities$3,215,856  $1,093,640  $—  $4,309,496  $4,315,605  
Off-Balance-Sheet:
Commitments to extend credit$—  $(2,516) $—  $(2,516) $—  

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 no0 valuation adjustments for loans held for sale at March 31,September 30, 2019 and December 31, 2018.
Loans and leases held for investment: The fair values for loans and leases held for investment are estimated using discounted cash flow analyses, using a discount rate based on current interest rates at which similar loans with similar terms would be made to borrowers, adjusted as appropriate to consider credit, liquidity and marketability factors to arrive at a fair value that represents the Corporation's exit price at which these instruments would be sold or transferred.Loans and leases are classified within Level 3 in the fair value hierarchy since credit risk is not an observable input.
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
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cash flows, and analyzing market data that the Corporation may adjust due to specific characteristics of the loan/lease or collateral. At March 31,September 30, 2019, impaired loans held for investment had a carrying amount of $24.5$36.9 million with a valuation allowance of $1.5$2.4 million. At December 31, 2018, impaired loans held for investment had a carrying amount of $26.6 million with a valuation allowance of $$1.4$1.4 million. The Corporation had noimpaired leases of $306 thousand with 0 reserve at September 30, 2019. The Corporation had 0 impaired leases at March 31, 2019 and December 31, 2018.
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 March 31,September 30, 2019, and December 31, 2018, servicing rights had a carrying amount of $6.5 million with a valuation allowance of $3 thousand. At December 31, 2018, servicing rights carrying amount of $6.7 million and $6.7 million, respectively, with no0 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 threenine months ended March 31,September 30, 2019, 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 at the lower of the original cost or the current 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. New appraisals are generally obtained on an annual basis if an agreement of sale does not exist. During the threenine months ended March 31,September 30, 2019, one property was2 properties were sold with total proceeds of $599$670 thousand. At March 31,September 30, 2019 and December 31, 2018, OREO had a carrying amount of $540$495 thousand and $1.2 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 13. Segment Reporting
At March 31,September 30, 2019, the Corporation has three3 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 mortgage banking as well as lease financing. The Wealth Management segment consists of investment advisory services, retirement plan services, trust, municipal pension
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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.
●The Banking segment provides financial services to individuals, businesses, municipalities and nonprofit organizations. These services include a full range of banking services such as deposit taking, loan origination and servicing, mortgage banking, other general banking services and equipment lease financing.
●The Wealth Management segment offers 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.
●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 March 31, 2019 At December 31, 2018 At March 31, 2018(Dollars in thousands)At September 30, 2019At December 31, 2018At September 30, 2018
Banking$4,942,539
 $4,895,732
 $4,519,423
Banking$5,256,435  $4,895,732  $4,711,093  
Wealth Management40,910
 39,090
 36,848
Wealth Management43,305  39,090  38,042  
Insurance31,837
 30,117
 28,651
Insurance33,239  30,117  29,299  
Other20,241
 19,408
 29,037
Other20,632  19,408  23,564  
Consolidated assets$5,035,527
 $4,984,347
 $4,613,959
Consolidated assets$5,353,611  $4,984,347  $4,801,998  
The following tables provide reportable segment-specific information and reconciliations to consolidated financial information for the three and nine months ended March 31,September 30, 2019 and 2018.
Three Months Ended
September 30, 2019
(Dollars in thousands)BankingWealth ManagementInsuranceOtherConsolidated
Interest income$54,280  $12  $—  $8  $54,300  
Interest expense10,394  —  —  1,261  11,655  
Net interest income43,886  12  —  (1,253) 42,645  
Provision for loan and lease losses1,530  —  —  —  1,530  
Noninterest income6,491  6,049  4,039  20  16,599  
Intangible expenses209  103  66  —  378  
Other noninterest expense28,999  3,757  2,990  146  35,892  
Intersegment (revenue) expense*(307) 177  130  —  —  
Income (expense) before income taxes19,946  2,024  853  (1,379) 21,444  
Income tax expense (benefit)3,719  391  72  (400) 3,782  
Net income (loss)$16,227  $1,633  $781  $(979) $17,662  
Capital expenditures$52  $5  $24  $134  $215  

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Three Months EndedThree Months Ended
March 31, 2019September 30, 2018
(Dollars in thousands)Banking Wealth Management Insurance Other Consolidated(Dollars in thousands)BankingWealth ManagementInsuranceOtherConsolidated
Interest income$52,346
 $10
 $—
 $8
 $52,364
Interest income$49,238  $9  $—  $8  $49,255  
Interest expense9,580
 —
 —
 1,261
 10,841
Interest expense7,571  —  —  1,261  8,832  
Net interest income42,766
 10
 —
 (1,253) 41,523
Net interest income41,667  9  —  (1,253) 40,423  
Provision for loan and lease losses2,685
 —
 —
 —
 2,685
Provision for loan and lease losses2,745  —  —  —  2,745  
Noninterest income4,971
 5,720
 5,353
 253
 16,297
Noninterest income5,070  5,795  3,845  151  14,861  
Intangible expenses233
 105
 88
 —
 426
Intangible expenses240  136  103  —  479  
Other noninterest expense27,779
 3,794
 3,126
 432
 35,131
Other noninterest expense26,542  3,547  3,087  716  33,892  
Intersegment (revenue) expense*(299) 166
 133
 —
 —
Intersegment (revenue) expense*(512) 377  135  —  —  
Income (expense) before income taxes17,339
 1,665
 2,006
 (1,432) 19,578
Income (expense) before income taxes17,722  1,744  520  (1,818) 18,168  
Income tax (benefit) expense3,120
 314
 193
 (128) 3,499
Income tax expense (benefit)Income tax expense (benefit)3,171  493  156  (616) 3,204  
Net income (loss)$14,219
 $1,351
 $1,813
 $(1,304) $16,079
Net income (loss)$14,551  $1,251  $364  $(1,202) $14,964  
Capital expenditures$765
 $39
 $25
 $21
 $850
Capital expenditures$570  $73  $16  $86  $745  

Three Months EndedNine Months Ended
March 31, 2018September 30, 2019
(Dollars in thousands)Banking Wealth Management Insurance Other Consolidated(Dollars in thousands)BankingWealth ManagementInsuranceOtherConsolidated
Interest income$43,522
 $5
 $—
 $7
 $43,534
Interest income$160,667  $33  $—  $24  $160,724  
Interest expense5,001
 —
 —
 1,261
 6,262
Interest expense30,138  —  —  3,783  33,921  
Net interest income38,521
 5
 —
 (1,254) 37,272
Net interest income130,529  33  —  (3,759) 126,803  
Provision for loan and lease losses2,053
 —
 —
 —
 2,053
Provision for loan and lease losses6,291  —  —  —  6,291  
Noninterest income4,789
 5,740
 5,086
 (33) 15,582
Noninterest income17,476  17,924  13,537  315  49,252  
Intangible expenses329
 142
 141
 —
 612
Intangible expenses675  313  233  —  1,221  
Restructuring charges
571
 —
 —
 —
 571
Other noninterest expense27,661
 3,658
 3,245
 (622) 33,942
Other noninterest expense84,876  11,339  9,188  1,981  107,384  
Intersegment (revenue) expense*(291) 153
 138
 —
 —
Intersegment (revenue) expense*(901) 504  397  —  —  
Income (expense) before income taxes12,987
 1,792
 1,562
 (665) 15,676
Income (expense) before income taxes57,064  5,801  3,719  (5,425) 61,159  
Income tax expense (benefit)1,998
 545
 456
 (173) 2,826
Income tax expense (benefit)10,499  1,115  334  (998) 10,950  
Net income (loss)$10,989
 $1,247
 $1,106
 $(492) $12,850
Net income (loss)$46,565  $4,686  $3,385  $(4,427) $50,209  
Capital expenditures$970
 $49
 $7
 $55
 $1,081
Capital expenditures$1,187  $80  $88  $292  $1,647  

Nine Months Ended
September 30, 2018
(Dollars in thousands)BankingWealth ManagementInsuranceOtherConsolidated
Interest income$139,204  $22  $—  $23  $139,249  
Interest expense18,781  —  —  3,783  22,564  
Net interest income120,423  22  —  (3,760) 116,685  
Provision for loan and lease losses20,207  —  —  —  20,207  
Noninterest income15,320  17,397  12,835  205  45,757  
Intangible expenses898  415  372  —  1,685  
Restructuring charges571  —  —  —  571  
Other noninterest expense80,790  10,969  9,425  403  101,587  
Intersegment (revenue) expense*(1,098) 686  412  —  —  
Income (expense) before income taxes34,375  5,349  2,626  (3,958) 38,392  
Income tax expense (benefit)5,006  1,636  775  (1,196) 6,221  
Net income (loss)$29,369  $3,713  $1,851  $(2,762) $32,171  
Capital expenditures$2,360  $162  $25  $151  $2,698  
*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.

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Note 14. Leases

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", and subsequent related updates, to revise the accounting for leases. The Corporation adopted this guidance effective January 1, 2019, on a modified retrospective basis through a cumulative-effect adjustment to retained earnings at January 1, 2019. Additionally, the Corporation early adopted (ASU) No. 2019-01, "Codification Improvements", as of January 1, 2019, which serves as an an update to (ASU) No. 2016-02, and is effective for the first interim period within annual periods beginning after December 15, 2019, or January 1, 2020, for the Corporation. See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2019" for additional information.


The Corporation and its subsidiaries are obligated under non-cancelable operating leases for premises for certain financial centers and other office locations The Corporation determines if an arrangement is a lease at inception by assessing whether a contract contains a right to control an identified asset for a period of time in exchange for consideration. Operating leases are included in operating lease right-of-use assets and operating lease liabilities in the consolidated balance sheet commencing at January 1, 2019. For purposes of calculating operating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that the Corporation will exercise that option and begins when the Corporation has control and possession of the leased property, which may be before rental payments are due under the lease. Right-of use assets and operating lease liabilities are recognized based on the present value of lease payments, discounted using the Corporation’s incremental

borrowing rate, over the lease term at the commencement date. The Corporation determines its incremental borrowing rate using publicly available information available for debt issuers with similar credit ratings as the Bank, as the majority of the Corporation’s leases are related to properties of the Bank. The Corporation continues to separately account for lease and non-lease components (such as property taxes, insurance, and maintenance costs) as historically reported. Rent expense for the Corporation's leases, which generally have escalating rental payments over the term of the lease, is recognized on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms generally containing one or more five-year renewal options. At March 31,September 30, 2019, the Corporation's leases have remaining terms of 1 to 24 years. The Corporation does not currently have any leases with an initial term of 12 months or less, including reasonably certain renewal terms; any such future leases will be recorded on the balance sheet.


Information with respect to operating leases for the under FASB ASC 842 "Leases" follows:
(Dollars in thousands)Three months ended September 30, 2019Nine months ended September 30, 2019
Operating lease cost$948  $2,842  
Cash paid for amounts included in the measurement of lease liabilities:
    Operating cash flows from leases2,636  
At September 30, 2019
Weighted-average remaining lease term in years15.0
Weighted-average discount rate4.24 %
 Three Months Ended March 31,
(Dollars in thousands)2019
Lease cost$947
Cash paid for amounts included in the measurement of lease liabilities: 
    Operating cash flows from leases873
  
  
 At March 31, 2019
Weighted-average remaining lease term in years15.4
Weighted-average discount rate4.23%


At March 31,September 30, 2019, maturities of lease liabilities under FASB ASC 842 "Leases" are as follows:
Maturity of Lease Liabilities(Dollars in thousands)Amount
Remainder of 2019$900  
20203,633  
20213,689  
20223,662  
20233,611  
Thereafter37,298  
Total lease payments52,793  
Less: imputed interest(14,677) 
Present value of lease liabilities$38,116  

49
Maturity of Lease Liabilities(Dollars in thousands)Amount
Remainder of 2019 $2,663
2020 3,632
2021 3,688
2022 3,660
2023 3,610
Thereafter 37,389
Total lease payments 54,642
Less: imputed interest (15,540)
Present value of lease liabilities $39,102
Table of Contents

At December 31, 2018, a summary of the future minimum rental commitments under non-cancelable operating leases with original or remaining terms greater than one year under FASB ASC 840 "Leases" was as follows:
Year(Dollars in thousands)Amount
2019$3,536  
20203,632  
20213,688  
20223,660  
20233,610  
Thereafter37,389  
Total$55,515  



Note 15. Contingencies
The Corporation is periodically subject to various pending and threatened legal actions, which involve claims for monetary relief. Based upon information presently available to the Corporation, it is the Corporation's opinion that any legal and financial responsibility arising from such claims will not have a material adverse effect on the Corporation's results of operations, financial position or cash flows.





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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
(All dollar amounts presented in tables are in thousands, except per share data. “BP” equates to “basis points”; “N/ M”NM equates to “not meaningful”; “—” equates to “zero” or “doesn’t round to a reportable number”; and “N/A” equates to “not applicable.” Certain prior period amounts have been reclassified to conform to the current-year presentation.)
Forward-Looking Statements
The information contained in this report may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words “believe,” “anticipate,” “estimate,” “expect,” “project,” “target,” “goal” and similar expressions are intended to identify forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. 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;
•Economic, political and competitive forces impacting various lines of business;
•Legislative, regulatory and accounting changes;
•Demand for our financial products and services in our market area;
•Volatility in interest rates;
•Fluctuations in real estate values in our market area;
•The composition and credit quality of our loan and investment portfolios;
•Changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loans losses;
•Our ability to access cost-effective funding;
•Our ability to continue to implement our business strategies;
•Our ability to manage market risk, credit risk and operational risk;
•Timing of revenues and expenditures;
Returns•Return on investment decisions;
•System failures or cyber-security breaches of our information technology infrastructure and those of our third-party service providers;
•Our ability to retain key employees;
•Other risks and uncertainties, including those occurring in the U.S. and world financial systems; and
•The risk that our analysis of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected. These and other risk factors are more fully described in this report and in the Univest Financial Corporation (the Corporation) Annual Report on Form 10-K for the year ended December 31, 2018 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 the calculation of the reserve for loan and lease losses as areas with critical accounting policies. For more information on these critical accounting policies, please refer to the Corporation’s 2018 Annual Report on Form 10-K.

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General
The Corporation is a Pennsylvania corporation organized in 1973 and registered as a bank holding company pursuant to the
Bank Holding Company Act of 1956. Effective January 1, 2019, the name of the Corporation was changed from Univest Corporation of Pennsylvania to Univest Financial Corporation. The Corporation owns all of the capital stock of Univest Bank and Trust Co. The consolidated financial statements include the accounts of the Corporation and the Bank.


Through its wholly-owned subsidiaries, the Bank provides a variety of financial services for individuals, businesses, municipalities and non-profit organizations. Effective January 1, 2019, the Bank's wealth management segment was re-branded under the Girard name with associated name changes of several subsidiaries while continuing to provide fiduciary services, investment management, and financial and retirement planning. The Bank is the parent company of Girard Investment Services, LLC (formerly Univest Investments, Inc.), a full-service registered broker-dealer and a licensed insurance agency, Girard Advisory Services, LLC (formerly Girard Partners Ltd.), a registered investment advisory firm, and Girard Pension Services, LLC (formerly TCG Investment Advisory, Inc.), a registered investment advisor, which provides investment consulting and management services to municipal entities. The Bank is also the parent company of Univest Insurance, LLC, an independent insurance agency and Univest Capital, Inc., an equipment financing business. The Bank's former subsidiary, Delview, Inc. was dissolved effective January 1, 2019.
The Corporation earns 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.
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 and services. The Corporation operates in attractive markets for financial services but also faces intense competition from domestic and international banking organizations and other insurance and wealth management providers. The Corporation has taken initiatives to achieve its business objectives by acquiring banks, and other financial service providers and lending teams 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 EndedNine Months Ended
 September 30,ChangeSeptember 30,Change
(Dollars in thousands, except per share data)20192018AmountPercent20192018AmountPercent
Net income$17,662  $14,964  $2,698  18.0 %$50,209  $32,171  $18,038  56.1 %
Net income per share:
Basic$0.60  $0.51  $0.09  17.6  $1.71  $1.10  $0.61  55.5  
Diluted0.60  0.51  0.09  17.6  1.71  1.09  0.62  56.9  
Return on average assets1.32 %1.23 %9 BP7.3  1.30 %0.92 %38 BP41.3  
Return on average equity10.62  9.70  92 BP9.5  10.40  7.05  335 BP47.5  
 Three Months Ended 
 March 31,		 Change
(Dollars in thousands, except per share data)2019 2018 Amount Percent
Net income$16,079
 $12,850
 $3,229
 25.1%
Net income per share:       
Basic$0.55
 $0.44
 $0.11
 25.0
Diluted0.55
 0.44
 0.11
 25.0
Return on average assets1.30% 1.14% 16 BP
 14.0
Return on average equity10.32
 8.60
 172 BP
 20.0


The Corporation reported net income of $16.1$17.7 million, or $0.55$0.60 diluted earnings per share, for the three months ended March 31,September 30, 2019, compared to net income of $12.9$15.0 million, or $0.44$0.51 diluted earnings per share, for the three months ended March 31,September 30, 2018. Net income for the nine months ended September 30, 2019 was $50.2 million, or $1.71 diluted earnings per share, compared to net income of $32.2 million, or $1.09 diluted earnings per share, for the nine months ended September 30, 2018.


The firstfinancial results for the three and nine months ended September 30, 2019 included a Federal Deposit Insurance Corporation (FDIC) small bank assessment credit of $988 thousand (after tax benefit of $781 thousand), which represented a favorable impact to earnings per share in each period of $0.03. The FDIC notified the Bank during September 2019 that the required deposit insurance fund reserve ratio was met at June 30, 2019, triggering the application of small bank credits. The Bank's total FDIC small bank assessment credit was $1.1 million, with the remaining credit of $114 thousand expected to be applied to the fourth quarter of 2019.
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The financial results for the nine months ended September 30, 2018 included a pre-tax charge to the provision for loan and lease losses of $12.7 million (after-tax charge of $10.1 million) in the second quarter of 2018, which represented $0.34 diluted earnings per share, related to fraudulent activities by employees of a borrower. In addition, the nine months ended September 30, 2018 included a tax-free bank owned life insurance (BOLI) death benefit of $446 thousand during the second quarter of 2018, which represented $0.02 diluted earnings per share. The nine months ended September 30, 2018 included restructuring costs related to financial center closures of $451 thousand, net of tax, orrecognized in the first quarter of 2018, which represented $0.02 of diluted earnings per share. There were no restructuring costs during the quarter ended March 31, 2019.




Results of 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, interest expense, the tax-equivalent yields earned on average assets, the cost of average liabilities, and shareholders’ equity on a tax-equivalent basis for the three and nine months ended March 31,September 30, 2019 and 2018. 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- freeinterest-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,Three 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.
Threenine months ended March 31,September 30, 2019 versus 2018
Net interest income on a tax-equivalent basis for the three months ended March 31,September 30, 2019 was $42.2$43.3 million, an increase of $4.2$2.2 million, or 11.2%5.4%, compared to the three months ended March 31,September 30, 2018. Net interest income on a tax-equivalent basis for the nine months ended September 30, 2019 was $128.7 million, an increase of $10.1 million, or 8.5%, compared to the same period in 2018. The increase in tax-equivalent net interest income for the three and nine months ended March 31,September 30, 2019 compared to the same periodperiods in 2018 was primarily due to the growth in average loans of 10.5% as well as modest net interest margin expansion.8.8% and 9.8%, respectively.
The net interest margin on a tax-equivalent basis for the firstthird quarter of 2019 was 3.75%3.52%, compared to 3.71% for the third quarter of 2018. The net interest margin on a tax-equivalent basis for the nine months ended September 30, 2019 was 3.64%, compared to 3.72% for the first quarter ofnine months ended September 30, 2018. During the three and nine months ended September 30, 2019, excess liquidity reduced net interest margin by approximately 13 basis points and 7 basis points, respectively, compared to 3 basis points and no impact for the three and nine months ended September 30, 2018, respectively. The excess liquidity during 2019 was primarily driven by strong deposit growth. Purchase accounting accretion had no impact on the net interest margin for the three or nine months ended September 30, 2019 compared to a favorable impact of purchase accounting accretion wasapproximately three basis points and one basis point for the three and nine months ended March 31, 2019, compared to two basis points for the three months ended March 31, 2018.September 30, 2018, respectively.

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Table 1—Average Balances and Interest Rates—Tax-Equivalent Basis
Three Months Ended March 31, Three Months Ended September 30,
2019 2018 20192018
(Dollars in thousands)Average
Balance		 Income/
Expense		 Average
Rate		 Average
Balance		 Income/
Expense		 Average
Rate		(Dollars in thousands)Average
Balance		Income/
Expense		Average
Rate		Average
Balance		Income/
Expense		Average
Rate
Assets:           Assets:
Interest-earning deposits with other banks$42,566
 $269
 2.56% $19,184
 $76
 1.61%Interest-earning deposits with other banks$213,623  $1,178  2.19 %$80,678  $398  1.96 %
U.S. government obligations20,039
 82
 1.66
 23,921
 94
 1.59
U.S. government obligations14,154  62  1.74  22,331  90  1.60  
Obligations of states and political subdivisions64,167
 546
 3.45
 74,554
 593
 3.23
Obligations of states and political subdivisions42,465  316  2.95  68,703  581  3.36  
Other debt and equity securities385,990
 2,631
 2.76
 359,451
 2,095
 2.36
Other debt and equity securities403,480  2,519  2.48  362,388  2,258  2.47  
Federal funds sold and other earning assets32,360
 586
 7.34
 29,057
 504
 7.03
Total interest-earning deposits, investments, federal funds sold and other earning assets545,122
 4,114
 3.06
 506,167
 3,362
 2.69
Federal Home Loan Bank, Federal Reserve Bank and other stockFederal Home Loan Bank, Federal Reserve Bank and other stock30,857  519  6.67  31,107  484  6.17  
Total interest-earning deposits, investments and other interest-earning assetsTotal interest-earning deposits, investments and other interest-earning assets704,579  4,594  2.59  565,207  3,811  2.68  
Commercial, financial and agricultural loans811,071
 10,758
 5.38
 782,200
 8,900
 4.61
Commercial, financial and agricultural loans800,006  9,952  4.94  796,593  10,184  5.07  
Real estate—commercial and construction loans1,822,276
 21,559
 4.80
 1,600,394
 17,618
 4.46
Real estate—commercial and construction loans1,966,593  23,439  4.73  1,729,538  20,527  4.71  
Real estate—residential loans938,299
 11,412
 4.93
 837,495
 9,675
 4.69
Real estate—residential loans956,224  11,570  4.80  880,589  10,447  4.71  
Loans to individuals32,524
 518
 6.46
 27,960
 413
 5.99
Loans to individuals31,504  490  6.17  32,057  499  6.18  
Municipal loans and leases332,299
 3,221
 3.93
 311,752
 2,892
 3.76
Municipal loans and leases333,734  3,413  4.06  316,149  3,037  3.81  
Lease financings80,893
 1,435
 7.19
 74,709
 1,344
 7.30
Lease financings82,424  1,482  7.13  77,369  1,409  7.23  
Gross loans and leases4,017,362
 48,903
 4.94
 3,634,510
 40,842
 4.56
Gross loans and leases4,170,485  50,346  4.79  3,832,295  46,103  4.77  
Total interest-earning assets4,562,484
 53,017
 4.71
 4,140,677
 44,204
 4.33
Total interest-earning assets4,875,064  54,940  4.47  4,397,502  49,914  4.50  
Cash and due from banks44,714
     42,506
    Cash and due from banks53,019  48,737  
Reserve for loan and lease losses(30,111)     (22,022)    Reserve for loan and lease losses(33,152) (26,099) 
Premises and equipment, net59,179
     61,738
    Premises and equipment, net57,881  60,622  
Operating lease right-of-use assets37,129
     —
    Operating lease right-of-use assets35,238  —  
Other assets330,858
     333,078
    Other assets329,817  336,559  
Total assets$5,004,253
     $4,555,977
    Total assets$5,317,867  $4,817,321  
Liabilities:           Liabilities:
Interest-bearing checking deposits$478,927
 $714
 0.60
 $425,027
 $292
 0.28
Interest-bearing checking deposits$497,185  $678  0.54  $465,992  $541  0.46  
Money market savings918,487
 3,748
 1.65
 658,367
 1,343
 0.83
Money market savings1,004,806  4,112  1.62  813,769  2,664  1.30  
Regular savings789,033
 814
 0.42
 834,375
 557
 0.27
Regular savings805,632  963  0.47  787,383  581  0.29  
Time deposits655,303
 2,927
 1.81
 541,478
 1,499
 1.12
Time deposits715,520  3,681  2.04  633,552  2,492  1.56  
Total time and interest-bearing deposits2,841,750
 8,203
 1.17
 2,459,247
 3,691
 0.61
Total time and interest-bearing deposits3,023,143  9,434  1.24  2,700,696  6,278  0.92  
Short-term borrowings117,664
 638
 2.20
 175,824
 645
 1.49
Short-term borrowings32,375  94  1.15  129,365  584  1.79  
Long-term debt145,299
 739
 2.06
 155,765
 665
 1.73
Long-term debt167,338  866  2.05  148,323  709  1.90  
Subordinated notes94,603
 1,261
 5.41
 94,359
 1,261
 5.42
Subordinated notes94,724  1,261  5.28  94,480  1,261  5.30  
Total borrowings357,566
 2,638
 2.99
 425,948
 2,571
 2.45
Total borrowings294,437  2,221  2.99  372,168  2,554  2.72  
Total interest-bearing liabilities3,199,316
 10,841
 1.37
 2,885,195
 6,262
 0.88
Total interest-bearing liabilities3,317,580  11,655  1.39  3,072,864  8,832  1.14  
Noninterest-bearing deposits1,089,449
     1,024,797
    Noninterest-bearing deposits1,265,027  1,091,931  
Operating lease liabilities40,090
     —
    Operating lease liabilities38,364  —  
Accrued expenses and other liabilities43,824
     40,012
    Accrued expenses and other liabilities37,373  40,723  
Total liabilities4,372,679
     3,950,004
    Total liabilities4,658,344  4,205,518  
Shareholders’ Equity:           Shareholders’ Equity:
Common stock157,784
     157,784
    Common stock157,784  157,784  
Additional paid-in capital292,746
     290,209
    Additional paid-in capital294,138  291,499  
Retained earnings and other equity181,044
     157,980
    Retained earnings and other equity207,601  162,520  
Total shareholders’ equity631,574
     605,973
    Total shareholders’ equity659,523  611,803  
Total liabilities and shareholders’ equity$5,004,253
     $4,555,977
    Total liabilities and shareholders’ equity$5,317,867  $4,817,321  
Net interest income  $42,176
     $37,942
  Net interest income$43,285  $41,082  
Net interest spread    3.34
     3.45
Net interest spread3.08  3.36  
Effect of net interest-free funding sources    0.41
     0.27
Effect of net interest-free funding sources0.44  0.35  
Net interest margin    3.75%     3.72%Net interest margin3.52 %3.71 %
Ratio of average interest-earning assets to average interest-bearing liabilities142.61%     143.51%    Ratio of average interest-earning assets to average interest-bearing liabilities146.95 %143.11 %
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 March 31,September 30, 2019 and 2018 have been calculated using the Corporation's federal applicable rate of 21%.


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 Nine Months Ended September 30,
 20192018
(Dollars in thousands)Average
Balance		Income/
Expense		Average
Rate		Average
Balance		Income/
Expense		Average
Rate
Assets:
Interest-earning deposits with other banks$120,231  $2,016  2.24 %$45,931  $622  1.81 %
U.S. government obligations17,148  217  1.69  23,139  275  1.59  
Obligations of states and political subdivisions55,220  1,369  3.31  71,429  1,777  3.33  
Other debt and equity securities394,834  7,722  2.61  359,324  6,530  2.43  
Federal Home Loan Bank, Federal Reserve Bank and other stock31,713  1,640  6.91  30,992  1,497  6.46  
Total interest-earning deposits, investments and other interest-earning assets619,146  12,964  2.80  530,815  10,701  2.70  
Commercial, financial and agricultural loans810,321  31,299  5.16  796,520  28,834  4.84  
Real estate—commercial and construction loans1,900,901  68,108  4.79  1,664,183  57,189  4.59  
Real estate—residential loans945,477  34,465  4.87  857,442  30,168  4.70  
Loans to individuals31,985  1,518  6.35  29,683  1,356  6.11  
Municipal loans and leases333,816  9,939  3.98  313,710  8,890  3.79  
Lease financings81,698  4,376  7.16  75,853  4,106  7.24  
Gross loans and leases4,104,198  149,705  4.88  3,737,391  130,543  4.67  
Total interest-earning assets4,723,344  162,669  4.60  4,268,206  141,244  4.42  
Cash and due from banks48,231  45,490  
Reserve for loan and lease losses(31,714) (24,027) 
Premises and equipment, net58,640  61,194  
Operating lease right-of-use assets36,056  —  
Other assets330,782  335,433  
Total assets$5,165,339  $4,686,296  
Liabilities:
Interest-bearing checking deposits$477,848  $1,849  0.52  $451,542  $1,216  0.36  
Money market savings968,894  12,094  1.67  722,859  5,765  1.07  
Regular savings804,457  2,790  0.46  808,276  1,720  0.28  
Time deposits686,794  10,015  1.95  576,540  5,810  1.35  
Total time and interest-bearing deposits2,937,993  26,748  1.22  2,559,217  14,511  0.76  
Short-term borrowings65,804  949  1.93  174,002  2,187  1.68  
Long-term debt157,484  2,441  2.07  153,211  2,083  1.82  
Subordinated notes94,664  3,783  5.34  94,420  3,783  5.36  
Total borrowings317,952  7,173  3.02  421,633  8,053  2.55  
Total interest-bearing liabilities3,255,945  33,921  1.39  2,980,850  22,564  1.01  
Noninterest-bearing deposits1,184,909  1,055,456  
Operating lease liabilities39,103  —  
Accrued expenses and other liabilities39,735  40,154  
Total liabilities4,519,692  4,076,460  
Shareholders’ Equity:
Common stock157,784  157,784  
Additional paid-in capital293,465  290,746  
Retained earnings and other equity194,398  161,306  
Total shareholders’ equity645,647  609,836  
Total liabilities and shareholders’ equity$5,165,339  $4,686,296  
Net interest income$128,748  $118,680  
Net interest spread3.21  3.41  
Effect of net interest-free funding sources0.43  0.31  
Net interest margin3.64 %3.72 %
Ratio of average interest-earning assets to average interest-bearing liabilities145.07 %143.19 %
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 nine months ended September 30, 2019 and 2018 have been calculated using the Corporation's federal applicable rate of 21%.
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Table 2—Analysis of Changes in Net Interest Income
The rate-volume variance analysis set forth in the table below compares changes in tax-equivalent net interest income for the periods indicated by their rate and volume components. The change in interest income/expense due to both volume and rate has been allocated proportionately.
Three Months EndedNine Months Ended
 September 30, 2019 Versus 2018September 30, 2019 Versus 2018
(Dollars in thousands)Volume
Change		Rate
Change		TotalVolume
Change		Rate
Change		Total
Interest income:
Interest-earning deposits with other banks$728  $52  $780  $1,215  $179  $1,394  
U.S. government obligations(35) 7  (28) (74) 16  (58) 
Obligations of states and political subdivisions(201) (64) (265) (397) (11) (408) 
Other debt and equity securities252  9  261  681  511  1,192  
Federal Home Loan Bank, Federal Reserve Bank and other stock(4) 39  35  36  107  143  
Interest on deposits, investments and other earning assets740  43  783  1,461  802  2,263  
Commercial, financial and agricultural loans42  (274) (232) 512  1,953  2,465  
Real estate—commercial and construction loans2,825  87  2,912  8,359  2,560  10,919  
Real estate—residential loans918  205  1,123  3,178  1,119  4,297  
Loans to individuals(8) (1) (9) 108  54  162  
Municipal loans and leases173  203  376  589  460  1,049  
Lease financings93  (20) 73  315  (45) 270  
Interest and fees on loans and leases4,043  200  4,243  13,061  6,101  19,162  
Total interest income4,783  243  5,026  14,522  6,903  21,425  
Interest expense:
Interest-bearing checking deposits38  99  137  74  559  633  
Money market savings707  741  1,448  2,391  3,938  6,329  
Regular savings13  369  382  (8) 1,078  1,070  
Time deposits352  837  1,189  1,265  2,940  4,205  
Interest on time and interest-bearing deposits1,110  2,046  3,156  3,722  8,515  12,237  
Short-term borrowings(332) (158) (490) (1,524) 286  (1,238) 
Long-term debt97  60  157  60  298  358  
Interest on borrowings(235) (98) (333) (1,464) 584  (880) 
Total interest expense875  1,948  2,823  2,258  9,099  11,357  
Net interest income$3,908  $(1,705) $2,203  $12,264  $(2,196) $10,068  

 Three Months Ended
 March 31, 2019 Versus 2018
(Dollars in thousands)Volume
Change		 Rate
Change		 Total
Interest income:     
Interest-earning deposits with other banks$130
 $63
 $193
U.S. government obligations(16) 4
 (12)
Obligations of states and political subdivisions(86) 39
 (47)
Other debt and equity securities162
 374
 536
Federal funds sold and other earning assets59
 23
 82
Interest on deposits, investments, federal funds sold and other earning assets249
 503
 752
Commercial, financial and agricultural loans336
 1,522
 1,858
Real estate—commercial and construction loans2,543
 1,398
 3,941
Real estate—residential loans1,219
 518
 1,737
Loans to individuals71
 34
 105
Municipal loans and leases195
 134
 329
Lease financings111
 (20) 91
Interest and fees on loans and leases4,475
 3,586
 8,061
Total interest income4,724
 4,089
 8,813
Interest expense:     
Interest-bearing checking deposits42
 380
 422
Money market savings687
 1,718
 2,405
Regular savings(32) 289
 257
Time deposits363
 1,065
 1,428
Interest on time and interest-bearing deposits1,060
 3,452
 4,512
Short-term borrowings(255) 248
 (7)
Long-term debt(47) 121
 74
Interest on borrowings(302) 369
 67
Total interest expense758
 3,821
 4,579
Net interest income$3,966
 $268
 $4,234
56

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Interest Income
Three and nine months ended March 31,September 30, 2019 versus 2018
Interest income on a tax-equivalent basis for the three months ended March 31,September 30, 2019 was $53.0$54.9 million, an increase of $8.8$5.0 million, or 19.9%10.1%, from the same period in 2018. Interest income on a tax-equivalent basis for the nine months ended September 30, 2019 was $162.7 million, an increase of $21.4 million, or 15.2%, from the same period in 2018. The increase in interest income for the three and nine months ended March 31,September 30, 2019 was primarily due to organic loan growth in commercial real estate and residential real estate loans and an increase inloans. In addition, loan yields increased during the nine months ended September 30, 2019 primarily for commercial business and commercial real estate loans as the Federal Reserve increased interest rates 100 basis points in 2018. The2018 partially offset by a 50 basis point reduction in interest rates in the third quarter of 2019. Purchase accounting accretion had no impact on the rate on interest-earning assets for the three and nine months ended September 30, 2019, compared to a favorable impact of purchase accounting accretion on interest-earning assets was one basis point for the three and nine months ended March 31, 2019, compared to no impact on the yield on interest-earning assets for the same period in the prior year.September 30, 2018.
Interest Expense
Three and nine months ended March 31,September 30, 2019 versus 2018
Interest expense for the three months ended March 31,September 30, 2019 was $10.8$11.7 million, an increase of $4.6$2.8 million, or 73.1%32.0%, from the same period in 2018. Interest expense for the nine months ended September 30, 2019 was $33.9 million, an increase of $11.4 million, or 50.3%, from the same period in 2018. The increase in interest expense for the three and nine months ended March 31,September 30, 2019 was primarily due to higher deposit costs, which were impacted by the Federal Reserve interest rate increases in 2018.2018 partially offset by the reduction in interest rates in the third quarter of 2019. In addition, average interest-bearing deposits grew 15.6%11.9% and 14.8%, respectively, for the three and nine months ended March 31, 2019September 30, 219 compared to the same periodperiods in 2018. The favorable impact of purchase accounting amortization on the rate on interest-bearing liabilities was one basis point for the three and nine months ended March 31,September 30, 2019, compared to a favorable impact of two basis points and three basis points for the same period in the prior year.three and nine months ended September 30, 2018, respectively.
Provision for Loan and Lease Losses
The provision for loan and lease losses for the three months ended March 31,September 30, 2019 was $2.7$1.5 million compared to $2.1$2.7 million for the same period in 2018. The provision for 2019 includes the impact of downgrading one $14.6 million shared national credit loan from pass to substandard. Incremental provision and general reserve recorded during the first quarter of 2019 was $1.5 million for this loan.prior year. Net loan and lease charge-offs for the three months ended March 31,September 30, 2019 were $447$468 thousand compared to $198 thousand$1.0 million for the same period in the prior year.
The provision for loan and leases losses for the nine months ended September 30, 2019 was $6.3 million compared to $20.2 million for the same period in 2018. Net loan and lease charge-offs for the nine months ended September 30, 2019 were $2.0 million compared to $14.4 million for the same period in the prior year. Both net loan and lease charge-offs and the provision for loan and lease losses during 2018 included the previously discussed $12.7 million commercial loan charge-off.
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Noninterest Income
The following table presents noninterest income for the three and nine months ended March 31,September 30, 2019 and 2018:
Three Months EndedNine Months Ended
Three Months Ended 
 March 31,		 Change September 30,ChangeSeptember 30,Change
(Dollars in thousands)2019 2018 Amount Percent(Dollars in thousands)20192018AmountPercent20192018AmountPercent
Trust fee income$1,887
 $1,996
 $(109) (5.5)%Trust fee income$1,973  $1,960  $13  0.7 %$5,914  $6,000  $(86) (1.4 %)
Service charges on deposit accounts1,435
 1,327
 108
 8.1
Service charges on deposit accounts1,513  1,454  59  4.1  4,395  4,116  279  6.8  
Investment advisory commission and fee income3,789
 3,683
 106
 2.9
Investment advisory commission and fee income4,032  3,785  247  6.5  11,876  11,246  630  5.6  
Insurance commission and fee income5,144
 4,888
 256
 5.2
Insurance commission and fee income3,877  3,643  234  6.4  12,962  12,243  719  5.9  
Other service fee income2,267
 2,169
 98
 4.5
Other service fee income2,255  2,284  (29) (1.3) 7,112  6,884  228  3.3  
Bank owned life insurance income952
 669
 283
 42.3
Bank owned life insurance income743  865  (122) (14.1) 2,438  2,744  (306) (11.2) 
Net gain on sales of investment securities1
 10
 (9) (90.0)Net gain on sales of investment securities33  —  33  N/M   41  10  31  N/M   
Net gain on mortgage banking activities483
 716
 (233) (32.5)Net gain on mortgage banking activities1,629  754  875  N/M   2,908  2,412  496  20.6  
Other income339
 124
 215
 N/M
Other income544  116  428  N/M   1,606  102  1,504  N/M   
Total noninterest income$16,297
 $15,582
 $715
 4.6 %Total noninterest income$16,599  $14,861  $1,738  11.7 %$49,252  $45,757  $3,495  7.6 %

Three and nine months ended March 31,September 30, 2019 versus 2018

Noninterest income for the three months ended March 31,September 30, 2019 was $16.3$16.6 million, an increase of $715 thousand,$1.7 million, or 4.6%11.7%, from the three months ended March 31,September 30, 2018. Noninterest income for the nine months ended September 30, 2019 was $49.3 million, an increase of $3.5 million, or 7.6%, from the comparable period in the prior year.

The net gain on mortgage banking activities increased $875 thousand for the three months and $496 thousand for the nine months ended September 30, 2019, primarily due to an increase in mortgage volume partially offset by contraction in margins to remain price competitive. Investment advisory commission and fee income increased $106$247 thousand, or 2.9%6.5%, for the three months and $630 thousand, or 5.6%, for the nine months ended March 31,September 30, 2019, primarily due to new customer relationships, which were partially offset by market declines in the fourth quarter of 2018.relationships. Insurance commission and fee income increased $256$234 thousand, or 5.2%6.4%, for the three months and $719 thousand, or 5.9%, for the nine months ended March 31,September 30, 2019, primarily due to an increase in contingent commission income of $203 thousand for the three months and $323 thousand for the nine months ended September 30, 2019 as well as an increase in premiums for commercial lines and group life and health and commercial lines and an increase in contingent commission income of $111 thousand, which was $1.5 million for the threenine months ended March 31, 2019 compared to $1.4 million for the three months ended March 31, 2018. Contingent commission income is largely recognized in the first quarter of the year.September 30, 2019. Service charges on deposit accounts increased $108$59 thousand, or 8.1%4.1%, for the three months and $279 thousand, or 6.8%, for the nine months ended March 31,September 30, 2019, primarily due to increased fee income on commercial cash management accounts.

Other service fee income increased $98$428 thousand or 4.5%, for the three months and $1.5 million for the nine months ended March 31, 2019, primarily due to increases in debit card interchange income, wire transfer fees and human resource consulting services within the insurance line of business. BOLI incomeSeptember 30, 2019. Fees on risk participation agreements increased $283$137 thousand or 42.3%, for the three months and $681 thousand for the nine months ended March 31,September 30, 2019 primarily due to an increase in valuedriven by increased customer activity. Gain on sale of our non-qualified annuity portfolio of $249 thousand in the first quarter of 2019 compared to a decrease of $29small business administration (SBA) loans increased $55 thousand in the first quarter of 2018. The value of the non-qualified annuity portfolio declined $287 thousand in the fourth quarter of 2018. During the first quarter of 2019, in order to reduce future volatility, the Corporation transferred the funds invested within the non-qualified annuity portfolio to a stable fund investment strategy. Other income increased $215 thousand, or 173.4%, for the three months and $368 thousand for the nine months ended March 31,September 30, 2019 primarily due to fees on risk participation agreements of $264 thousand related to increased customer activitySBA loan sale activity. Net loss on valuations and sales of other real estate owned was $28 thousand for the nine months ended September 30, 2019 compared to fees of $4$507 thousand infor the same period of the prior year.nine months ended September 30, 2018.


These increases were partially offset by a decrease in net gain on mortgage banking activitiesBOLI income of $233$306 thousand, or 32.5%11.2%, for the threenine months ended March 31,September 30, 2019 primarily due to proceeds from BOLI death benefits of $446 thousand recognized in the Bank retaining, on balance-sheet, a higher percentagesecond quarter of its mortgage originations, as well as a contraction in margins to remain price competitive. Such on balance-sheet loans are predominantly hybrid adjustable rate mortgages. Trust fee income decreased $109 thousand, or 5.5%, for the three months ended March 31, 2019 compared to March 31, 2018 primarily due to a decrease in activity-based trust estate fees and assets under management..

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Noninterest Expense
The following table presents noninterest expense for the three and nine months ended March 31,September 30, 2019 and 2018:
Three Months EndedNine Months Ended
 September 30,ChangeSeptember 30,Change
(Dollars in thousands)20192018AmountPercent20192018AmountPercent
Salaries, benefits and commissions$22,785  $20,321  $2,464  12.1 %$66,438  $61,033  $5,405  8.9 %
Net occupancy2,475  2,515  (40) (1.6) 7,687  7,805  (118) (1.5) 
Equipment1,088  1,042  46  4.4  3,143  3,132  11  0.4  
Data processing2,624  2,339  285  12.2  7,765  6,662  1,103  16.6  
Professional fees1,517  1,370  147  10.7  4,088  4,056  32  0.8  
Marketing and advertising558  646  (88) (13.6) 1,884  1,987  (103) (5.2) 
Deposit insurance premiums(444) 544  (988) N/M   438  1,387  (949) (68.4) 
Intangible expenses378  479  (101) (21.1) 1,221  1,685  (464) (27.5) 
Restructuring charges—  —  —  —  —  571  (571) N/M   
Other expense5,289  5,115  174  3.4  15,941  15,525  416  2.7  
Total noninterest expense$36,270  $34,371  $1,899  5.5 %$108,605  $103,843  $4,762  4.6 %
 Three Months Ended 
 March 31,		 Change
(Dollars in thousands)2019 2018 Amount Percent
Salaries, benefits and commissions$21,564
 $20,647
 $917
 4.4 %
Net occupancy2,611
 2,757
 (146) (5.3)
Equipment990
 1,023
 (33) (3.2)
Data processing2,514
 2,232
 282
 12.6
Professional fees1,264
 1,355
 (91) (6.7)
Marketing and advertising316
 381
 (65) (17.1)
Deposit insurance premiums452
 391
 61
 15.6
Intangible expenses426
 612
 (186) (30.4)
Restructuring charges—
 571
 (571) N/M
Other expense5,420
 5,156
 264
 5.1
Total noninterest expense$35,557
 $35,125
 $432
 1.2 %

Three and nine months ended March 31,September 30, 2019 versus 2018


Noninterest expense for the three months ended March 31,September 30, 2019 was $35.6$36.3 million, an increase of $432 thousand,$1.9 million, or 1.2%5.5%, from the three months ended March 31,September 30, 2018. Noninterest expense for the nine months ended September 30, 2019 was $108.6 million, an increase of $4.8 million, or 4.6%, from the comparable period in the prior year.

Salaries, benefits and commissions increased $917 thousand,$2.5 million, or 4.4%12.1%, for the three months and $5.4 million, or 8.9%, for the nine months ended September 30, 2019, primarily attributable to additional staff hired to support revenue generation across all business lines, expansion of our commercial lending group in Lancaster Countygroups and annual merit increases. During the first quarter ended March 31,of 2019, the CorporationUnivest hired a team of eight commercial lenders and support staff which willto focus on increasing the Bank'sUnivest’s presence in Western Lancaster and York Counties. During the second quarter of 2019, a team of three commercial lenders was hired to help expand Univest’s presence in the New Jersey suburbs of Philadelphia. Data processing expense increased $282$285 thousand, or 12.6%12.2%, for the three months and $1.1 million, or 16.6%, for the nine months ended March 31,September 30, 2019, primarily due to continued investments in customer relationship management software and internal infrastructure improvements andas well as outsourced

data processing solutions. Other expense increased $264 thousand, or 5.1%,solutions for the threenine months ended March 31, 2019, primarily due to increases in interchange expense and corporate development expense.September 30, 2019.


These increases were partially offset by a decrease in net occupancydeposit insurance premiums of $988 thousand for the three months and equipment expense totaling $179$949 thousand or 4.7%, primarilyfor the nine months ended September 30, 2019 due to the closurepreviously discussed FDIC small bank assessment credit of three financial service locations$988 thousand which was recognized during April 2018. Intangiblesthe third quarter of 2019. Intangible expense decreased $186by $101 thousand, or 30.4%21.1%, for the three months and $464 thousand, or 27.5%, for the nine months ended September 30, 2019 due to run-off of the intangible assets. In addition, restructuring costs related to financial center closures and staffing rationalization were $571 thousand during the three months ended March 31,first quarter of 2018. There were no restructuring costs during the three months ended March 31, 2019.

Tax Provision
The provision for income taxes for the three months ended March 31,September 30, 2019 and 2018 was $3.5$3.8 million and $2.8$3.2 million, at an effective rate of 17.6% for both periods. The provision for income taxes for the nine months ended September 30, 2019 and 2018 was $11.0 million and $6.2 million, at effective rates of 17.9% and 18.0%16.2%, respectively. The Corporation's effective income tax rates for the three months ended March 31, 2019 and 2018 were favorably impacted by discrete tax benefits. Excluding these items, the effective tax rate was 18.2% and 18.8%18.3% for the threenine months ended March 31,September 30, 2019 and 2018, respectively.2018.


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Financial Condition
Assets
The following table presents assets at the dates indicated:
At March 31, 
 2019		 At December 31, 
 2018		 Change At September 30, 2019At December 31, 2018Change
(Dollars in thousands)Amount Percent(Dollars in thousands)AmountPercent
Cash and interest-earning deposits$66,141
 $109,420
 $(43,279) (39.6)Cash and interest-earning deposits$225,334  $109,420  $115,914  N/M %
Investment securities466,883
 473,306
 (6,423) (1.4)Investment securities448,447  473,306  (24,859) (5.3) 
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost32,699
 28,337
 4,362
 15.4
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost29,254  28,337  917  3.2  
Loans held for sale921
 1,754
 (833) (47.5)Loans held for sale2,893  1,754  1,139  64.9  
Loans and leases held for investment4,067,879
 4,006,574
 61,305
 1.5
Loans and leases held for investment4,251,933  4,006,574  245,359  6.1  
Reserve for loan and lease losses(31,602) (29,364) (2,238) (7.6)Reserve for loan and lease losses(33,662) (29,364) (4,298) (14.6) 
Premises and equipment, net59,091
 59,559
 (468) (0.8)Premises and equipment, net57,171  59,559  (2,388) (4.0) 
Operating lease right-of-use assets36,099
 —
 36,099
 N/M
Operating lease right-of-use assets34,965  —  34,965  N/M   
Goodwill and other intangibles, net184,089
 184,549
 (460) (0.2)Goodwill and other intangibles, net183,081  184,549  (1,468) (0.8) 
Bank owned life insurance112,551
 111,599
 952
 0.9
Bank owned life insurance114,037  111,599  2,438  2.2  
Accrued interest receivable and other assets40,776
 38,613
 2,163
 5.6
Accrued interest receivable and other assets40,158  38,613  1,545  4.0  
Total assets$5,035,527
 $4,984,347
 $51,180
 1.0 %Total assets$5,353,611  $4,984,347  $369,264  7.4 %
Investment Securities
Total investments securities at March 31,September 30, 2019 decreased $6.4$24.9 million from December 31, 2018. Maturities and pay-downs of $20.6$65.3 million, sales of $25.0 million, calls of $770 thousand, sales of $491 thousand,$5.8 million and net amortization of purchased premiums and discounts of $537 thousand$1.8 million were partially offset by purchases of $10.9$65.2 million and increases in the fair value of available-for-sale investment securities of $5.1$7.8 million. The increase in the fair value of available-for-sale investment securities was due to the flattening of the yield curve.
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 $18.0$14.5 million and $13.6 million at March 31,September 30, 2019 and December 31, 2018, respectively. FHLB stock increased $4.4 million$900 thousand mainly due to purchase requirements related to the increase in FHLB borrowing volume during the quarter.year.
The Bank held $14.6 million in Federal Reserve Bank stock as required by the Federal Reserve Bank at March 31,September 30, 2019 and December 31, 2018.

Loans and Leases
Gross loans and leases held for investment grew $61.3$245.4 million, or 1.5%6.1%, from December 31, 2018. 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.

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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 and 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 March 31,September 30, 2019, the recorded investment in loans and leases held for investment that were considered to be impaired was $26.0$37.2 million. The related reserve for loan and lease losses was $1.5$2.4 million. At December 31, 2018, the recorded investment in loans that were considered to be impaired was $26.6 million. The related reserve for loan losses was $1.4 million. The impaired loan balances consisted mainlyDuring the third quarter of 2019, one commercial real estate loans and business loans.banking relationship totaling $11.6 million was placed on non-accrual status. Impaired loans include nonaccrual loans and leases and accruing troubled debt restructured loans and lease modifications 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 $540$495 thousand at March 31,September 30, 2019, compared to $1.2 million at December 31, 2018. During the first quarter ofnine months ended September 30, 2019, a commercial real estate property with a carrying value of $654 thousand was sold for a loss of $55 thousand and two parcels of land with a carrying value of $44 thousand were sold for a gain of $27 thousand.
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 in the portfolio. The Corporation does not provide a reserve for loan losses for acquired loans unless 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 losses.

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 $421 thousand and $426 thousand at March 31,September 30, 2019 and December 31, 2018, respectively.


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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 nonperforming assets at the dates indicated. Nonperforming loans and assets exclude acquired credit impaired loans from Fox Chase and Valley Green.
(Dollars in thousands)At September 30, 2019At December 31, 2018
Commercial, financial and agricultural$2,233  $3,365  
Real estate—commercial28,024  18,214  
Real estate—construction256  106  
Real estate—residential6,353  4,353  
Loans to individuals2  —  
Lease financings500  170  
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*37,368  26,208  
Accruing troubled debt restructured loans and lease modifications not included in the above54  542  
Accruing loans and leases 90 days or more past due:
Real estate—commercial760  —  
Real estate—residential1,109  —  
Loans to individuals129  55  
Lease financings490  137  
Total accruing loans and leases, 90 days or more past due2,488  192  
Total nonperforming loans and leases39,910  26,942  
Other real estate owned495  1,187  
Total nonperforming assets$40,405  $28,129  
Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment0.88 %0.65 %
Nonperforming loans and leases / loans and leases held for investment0.94 %0.67 %
Nonperforming assets / total assets0.75 %0.56 %
Allowance for loan and lease losses$33,662  $29,364  
Allowance for loan and lease losses / loans and leases held for investment0.79 %0.73 %
Allowance for loan and lease losses / loans and leases held for investment (excluding acquired loans at period-end)0.85 %0.81 %
Allowance for loan and lease losses / nonaccrual loans and leases held for investment90.08 %112.04 %
Allowance for loan and lease losses / nonperforming loans and leases held for investment84.34 %108.99 %
Acquired credit impaired loans$568  $695  
Nonperforming loans and leases and acquired credit impaired loans / loans and leases held for investment0.95 %0.69 %
Nonperforming assets and acquired credit impaired loans / total assets0.77 %0.58 %
* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table$2,305  $1,284  

62
(Dollars in thousands)At March 31, 2019 At December 31, 2018
Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*:   
Commercial, financial and agricultural$2,904
 $3,365
Real estate—commercial18,361
 18,214
Real estate—construction106
 106
Real estate—residential4,361
 4,353
Lease financings220
 170
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*25,952
 26,208
Accruing troubled debt restructured loans and lease modifications not included in the above270
 542
Accruing loans and leases 90 days or more past due:   
Real estate—residential325
 —
Loans to individuals54
 55
Lease financings257
 137
Total accruing loans and leases, 90 days or more past due636
 192
Total nonperforming loans and leases26,858
 26,942
Other real estate owned540
 1,187
Total nonperforming assets$27,398
 $28,129
Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment0.64% 0.65%
Nonperforming loans and leases / loans and leases held for investment0.66
 0.67
Nonperforming assets / total assets0.54
 0.56
    
Allowance for loan and lease losses$31,602
 $29,364
Allowance for loan and lease losses / loans and leases held for investment0.78% 0.73%
Allowance for loan and lease losses / loans and leases held for investment (excluding acquired loans at period-end)0.85
 0.81
Allowance for loan and lease losses / nonaccrual loans and leases held for investment121.77
 112.04
Allowance for loan and lease losses / nonperforming loans and leases held for investment117.66
 108.99
Acquired credit impaired loans$693
 $695
    
Nonperforming loans and leases and acquired credit impaired loans / loans and leases held for investment0.68% 0.69%
Nonperforming assets and acquired credit impaired loans / total assets0.56
 0.58
* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table$3,240
 $1,284
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The following table provides additional information on the Corporation’s nonaccrual loans held for investment:
(Dollars in thousands)At March 31, 2019 At December 31, 2018(Dollars in thousands)At September 30, 2019At December 31, 2018
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications$25,952
 $26,208
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications$37,368  $26,208  
Nonaccrual loans and leases with partial charge-offs2,730
 2,210
Nonaccrual loans and leases with partial charge-offs2,052  2,210  
Life-to-date partial charge-offs on nonaccrual loans and leases1,612
 1,320
Life-to-date partial charge-offs on nonaccrual loans and leases1,428  1,320  
Charge-off rate of nonaccrual loans and leases with partial charge-offs37.1% 37.4%
Specific reserves on impaired loans$1,503
 $1,415
Specific reserves on impaired loans2,444  1,415  
Goodwill and Other Intangible Assets
Goodwill and other intangible assets have been recorded on the books of the Corporation in connection with acquisitions. The Corporation has core deposit and customer-related intangibles 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 $725$955 thousand and $899$812 thousand for the three months ended March 31,September 30, 2019 and 2018, respectively. The amortization of intangible assets was $2.5 million and $2.6 million for the nine months ended September 30, 2019 and 2018, respectively. See Note 5 to the Condensed Consolidated Financial Statements, "Goodwill and Other Intangible Assets," for a summary of intangible assets at March 31,September 30, 2019 and December 31, 2018.

The Corporation also has goodwill with a net carrying value of $172.6 million at March 31,September 30, 2019 and December 31, 2018, 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 threenine months ended March 31,September 30, 2019 and 2018. Since the last annual impairment analysis during 2018, 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 September 30, 2019At December 31, 2018Change
AmountPercent
Deposits$4,337,991  $3,885,933  $452,058  11.6 %
Short-term borrowings18,970  189,768  (170,798) (90.0) 
Long-term debt160,128  145,330  14,798  10.2  
Subordinated notes94,757  94,574  183  0.2  
Operating lease liabilities38,116  —  38,116  N/M   
Accrued interest payable and other liabilities39,350  44,609  (5,259) (11.8) 
Total liabilities$4,689,312  $4,360,214  $329,098  7.5 %
(Dollars in thousands)At March 31, 2019 At December 31, 2018 Change
Amount Percent
Deposits$4,003,153
 $3,885,933
 $117,220
 3.0 %
Short-term borrowings73,185
 189,768
 (116,583) (61.4)
Long-term debt145,263

145,330
 (67) —
Subordinated notes94,635
 94,574
 61
 0.1
Operating lease liabilities39,102
 —
 39,102
 N/M
Accrued interest payable and other liabilities42,583
 44,609
 (2,026) (4.5)
Total liabilities$4,397,921
 $4,360,214
 $37,707
 0.9 %


Deposits
Total deposits increased $117.2$452.1 million, or 3.0%11.6%, from December 31, 2018, primarily due to an increase in public funds deposits of $368.1 million and increases in commercial and consumer deposits. The growth in public funds resulted from seasonal increases and new customer relationships.
Borrowings
Total borrowings decreased $116.6$155.8 million, or 27.1%36.3%, from December 31, 2018, primarily due to a decrease in short-term borrowings of $116.6$170.8 million. The increase in deposits reduced the need to borrow short-term funds.

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Shareholders’ Equity
The following table presents total shareholders’ equity at the dates indicated:
(Dollars in thousands)At September 30, 2019At December 31, 2018Change
AmountPercent
Common stock$157,784  $157,784  $—  N/M %
Additional paid-in capital294,556  292,401  2,155  0.7  
Retained earnings279,158  248,167  30,991  12.5  
Accumulated other comprehensive loss(22,008) (28,416) 6,408  22.6  
Treasury stock(45,191) (45,803) 612  1.3  
Total shareholders’ equity$664,299  $624,133  $40,166  6.4 %
(Dollars in thousands)At March 31, 2019 At December 31, 2018 Change
Amount Percent
Common stock$157,784
 $157,784
 $—
 — %
Additional paid-in capital293,255
 292,401
 854
 0.3
Retained earnings256,746
 248,167
 8,579
 3.5
Accumulated other comprehensive loss(24,238) (28,416) 4,178
 14.7
Treasury stock(45,941) (45,803) (138) (0.3)
Total shareholders’ equity$637,606
 $624,133
 $13,473
 2.2 %


The increase in shareholder'sshareholders' equity at March 31,September 30, 2019 of $13.5$40.2 million, or 2.2%6.4%, from December 31, 2018 was primarily related to an increase in retained earnings of $8.6$31.0 million. Retained earnings at March 31,September 30, 2019 was impacted by the threenine months of net income of $16.1$50.2 million partially offset by the related adjustments to the January 1, 2019 adoption of ASU No. 2016-02 of $1.5 million and cash dividends declared of $5.9$17.6 million. Accumulated other comprehensive loss decreased by $4.2$6.4 million mainly attributable to increases in the fair value of available-for-sale investment securities of $4.0$6.2 million, net of tax.


Discussion of Segments


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


The Banking segment as presented in Note 13 in the Notes to the Consolidated Financial Statements, reportsreported pre-tax income of $17.3$19.9 million and $13.0$17.7 million for the three months ended March 31,September 30, 2019 and 2018, respectively, and $57.1 million and $34.4 million for the nine months ended September 30, 2019 and 2018, respectively. See the section of this MD&A under the heading “Net Interest Income", “Interest Income”, “Interest Expense”, and “Provision for Loan and Lease Losses” for a discussion of the Banking Segment.


The Wealth Management segment as presented in Note 13 in the Notes to the Consolidated Financial Statements, reportsreported pre-tax income of $1.7$2.0 million and $1.8$1.7 million for the three months ended March 31,September 30, 2019 and 2018, respectively, and $5.8 million and $5.3 million for the nine months ended September 30, 2019 and 2018, respectively. Noninterest income was $6.0 million and $5.8 million for the three months ended September 30, 2019 and 2018, respectively, and $17.9 million and $17.4 million for the nine months ended September 30, 2019 and 2018, respectively. The decreaseincrease in pre-tax income is primarily attributable to higherand noninterest expense inincome for the three and nine months ended March 31,September 30, 2019 as compared to the three and nine months ended March 31, 2018. Noninterest income remained flat at $5.7 million for bothSeptember 30, 2018 was primarily due to a shift in the three months ended March 31, 2019composition of assets under management and 2018. Wealth Managementsupervision from trust portfolio assets with lower earnings yield to investment advisory portfolio assets with higher earnings yield. Assets under management and supervision were $3.6 billion as of March 31,September 30, 2019, and $3.4$3.3 billion as of MarchDecember 31, 2018. The increase in assets under management2018 and supervision$3.6 billion as of March 31, 2019, as compared to March 31, 2018, was primarily driven by new customer relationships and an increase in the equity markets as of each respective period-end.September 30, 2019.


The Insurance segment as presented in Note 13 in the Notes to the Consolidated Financial Statements, reportsreported pre-tax income of $2.0$853 thousand and $520 thousand for the three months ended September 30, 2019 and 2018, respectively, and $3.7 million and $1.6$2.6 million for the nine months ended September 30, 2019 and 2018, respectively. Noninterest income was $4.0 million and $3.8 million for the three months ended March 31,September 30, 2019 and 2018, respectively, and noninterest income of $5.4$13.5 million and $5.1$12.8 million for the threenine months ended March 31,September 30, 2019 and 2018, respectively. Noninterest income has increased primarily due to increasesan increase in contingent commission income for the three and nine months ended September 30, 2019 as well as an increase in commercial lines and group life and health premiums and contingent commission income.for the nine months ended September 30, 2019.


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.
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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 newcurrent 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 began to be phased in beginning January 1, 2016 and were fully applicable on January 1, 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 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. Beginning in the first quarter of 2019, the Corporation and the Bank must hold a capital conservation buffer greater than 2.50% above its minimum risk-based capital requirements in order to avoid limitations on capital distributions. The Corporation's and Bank's intent is 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. The Corporation and the Bank were in compliance with these requirements at March 31, 2019, June 30, 2019 and September 30, 2019.


Table 4—Regulatory Capital
The Corporation's and Bank's actual and required capital ratios as of March 31,September 30, 2019 and December 31, 2018 under regulatory capital rules were as follows.
Actual For Capital Adequacy
Purposes		 To Be Well-Capitalized
Under Prompt
Corrective Action
Provisions		 ActualFor Capital Adequacy
Purposes		To Be Well-Capitalized
Under Prompt
Corrective Action
Provisions
(Dollars in thousands)Amount Ratio Amount Ratio Amount   Ratio  (Dollars in thousands)AmountRatioAmountRatioAmount  Ratio  
At March 31, 2019       
At September 30, 2019At September 30, 2019
Total Capital (to Risk-Weighted Assets):           Total Capital (to Risk-Weighted Assets):
Corporation$616,154
 13.77% $357,939
 8.00% $447,424
 10.00%Corporation$642,396  13.81 %$372,212  8.00 %$465,266  10.00 %
Bank517,223
 11.61
 356,329
 8.00
 445,412
 10.00
Bank541,735  11.70  370,573  8.00  463,216  10.00  
Tier 1 Capital (to Risk-Weighted Assets):           Tier 1 Capital (to Risk-Weighted Assets):
Corporation489,197
 10.93
 268,454
 6.00
 357,939
 8.00
Corporation513,253  11.03  279,159  6.00  372,212  8.00  
Bank484,901
 10.89
 267,247
 6.00
 356,329
 8.00
Bank507,349  10.95  277,930  6.00  370,573  8.00  
Tier 1 Common Capital (to Risk-Weighted Assets):           Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation489,197
 10.93
 201,341
 4.50
 290,825
 6.50
Corporation513,253  11.03  209,370  4.50  302,423  6.50  
Bank484,901
 10.89
 200,435
 4.50
 289,518
 6.50
Bank507,349  10.95  208,447  4.50  301,091  6.50  
Tier 1 Capital (to Average Assets):           Tier 1 Capital (to Average Assets):
Corporation489,197
 10.10
 193,769
 4.00
 242,211
 5.00
Corporation513,253  9.97  206,021  4.00  257,526  5.00  
Bank484,901
 10.05
 192,972
 4.00
 241,215
 5.00
Bank507,349  9.89  205,208  4.00  256,510  5.00  
At December 31, 2018           At December 31, 2018
Total Capital (to Risk-Weighted Assets):           Total Capital (to Risk-Weighted Assets):
Corporation$604,213
 13.70% $352,764
 8.00% $440,955
 10.00%Corporation$604,213  13.70 %$352,764  8.00 %$440,955  10.00 %
Bank506,728
 11.54
 351,220
 8.00
 439,026
 10.00
Bank506,728  11.54  351,220  8.00  439,026  10.00  
Tier 1 Capital (to Risk-Weighted Assets):           Tier 1 Capital (to Risk-Weighted Assets):
Corporation479,550
 10.88
 264,573
 6.00
 352,764
 8.00
Corporation479,550  10.88  264,573  6.00  352,764  8.00  
Bank476,639
 10.86
 263,415
 6.00
 351,220
 8.00
Bank476,639  10.86  263,415  6.00  351,220  8.00  
Tier 1 Common Capital (to Risk-Weighted Assets):           Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation479,550
 10.88
 198,430
 4.50
 286,621
 6.50
Corporation479,550  10.88  198,430  4.50  286,621  6.50  
Bank476,639
 10.86
 197,561
 4.50
 285,367
 6.50
Bank476,639  10.86  197,561  4.50  285,367  6.50  
Tier 1 Capital (to Average Assets):           Tier 1 Capital (to Average Assets):
Corporation479,550
 10.13
 189,374
 4.00
 236,718
 5.00
Corporation479,550  10.13  189,374  4.00  236,718  5.00  
Bank476,639
 10.12
 188,487
 4.00
 235,609
 5.00
Bank476,639  10.12  188,487  4.00  235,609  5.00  
At March 31,September 30, 2019 and December 31, 2018, 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 and Total 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. Beginning in the first quarter of 2019, 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 2.50% of total risk-weighted assets in order to avoid limitations on capital distributions. The Corporation and the Bank were in compliance with these requirements at March 31, 2019. For a depository institution to be considered “well capitalized” under the regulatory
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framework for prompt corrective action, Tier 1 and Total capital ratios must be at least 8.0% and 10.0% on a risk-adjusted basis, respectively. At March 31,September 30, 2019, 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 January 1, 2019 adoption of ASU No. 2016-02 had and will continue to have a negative impact on all Corporation and Bank regulatory capital ratios. The Corporation will continue to analyze the impact of new accounting rules, such as CECL (ASU No. 2016-13) on its regulatory capital ratios.
In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as the beginning of the fiscal year in which CECL is adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts would be calculated for the following items: retained earnings, temporary

difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital. The election must be made in the first reporting period that CECL is adopted. See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Yet to Be Adopted" 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. Management's objective with regard to interest rate risk is to understand the Corporation's sensitivity to changes in interest rates and develop and implement strategies to minimize volatility while maximizing net interest income.


The Corporation uses gap analysis and earnings at risk simulation modeling to quantify exposure to interest rate risk. The Corporation uses the gap analysis to identify and monitor long-term rate exposure and uses a 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,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 certificates of deposit at maturity, operating expense, and capital expenditures. The Corporation manages liquidity risk by measuring and monitoring liquidity sources and estimated funding needs on a daily basis. The Corporation has a contingency funding plan in place to address liquidity needs in the event of an institution-specific or a systemic financial crisis.
Sources of Funds
Core deposits continue to be the largest significant funding source for the Corporation. These deposits are primarily generated from a base of individuals, businesses, municipalities and non-profit customers located in our primary service areas. The Corporation faces increased competition for these deposits from a large array of financial market participants, including banks, credit unions, savings institutions, mutual funds, security dealers and others.
As part of its diversified funding strategy, the Corporation also utilizes a mix of short-term and long-term wholesale funding providers. Wholesale funding includes federal funds purchases from correspondent banks, secured borrowing lines from the Federal Home Loan Bank of Pittsburgh, the Federal Reserve Bank of Philadelphia and, 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 $1.7$1.8 billion. At March 31,September 30, 2019 and December 31, 2018, the carrying amount of overnight borrowings with the FHLB was $0 and $108.3 million, respectively. At March 31,September 30, 2019 and December 31, 2018, the carrying amount of long-term borrowings with the FHLB was $150.0 million and $125.0 million.million, respectively. At March 31,September 30, 2019 and December 31, 2018, the Bank had outstanding short-term letters of credit with the FHLB totaling $336.9$692.8 million and $347.5
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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 that totaled $504.0 million and $367.0 million at March 31,September 30, 2019 and December 31, 2018.2018, respectively. At March 31,September 30, 2019 and December 31, 2018, the Corporation had $55.0 million$0 and $60.0 million, respectively, of 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.

The Corporation, through the Bank, holds collateral at the Federal Reserve Bank of Philadelphia in order to access the Discount Window Lending program. The collateral consisting of investment securities was valued at $104.9$101.4 million and $69.5 million at March 31,September 30, 2019 and December 31, 2018, respectively. At March 31,September 30, 2019 and December 31, 2018, the Corporation had no outstanding borrowings under this program.

The Corporation has a $10.0 million committed line of credit with a correspondent bank. At March 31,September 30, 2019 and December 31, 2018, the Corporation had no outstanding borrowings under this line.
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 yearone-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 yearone-year time periods. These commitments do not necessarily represent future cash requirements in that these commitments often expire without being drawn upon.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, refer to Note 1 to the Condensed Consolidated Financial Statements, “Summary of Significant Accounting Policies.”


Recent Regulatory and Legislative Developments
Regulatory Capital Rule: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996

On July 9, 2019, the federal banking agencies issued a final rule to simplify certain aspects of regulatory capital rules for non-advanced approaches institutions. The rule increases common equity tier 1 capital threshold deductions from 10% to 25% for mortgage servicing assets, deferred tax assets arising from temporary differences, and investments in the capital of unconsolidated financial institutions. The rule also removes the aggregate 15% common equity tier 1 capital threshold deduction for mortgage servicing assets, deferred tax assets, and significant investments in the capital of unconsolidated financial institutions. In addition, the rule simplifies the determination of the amount of minority interests includable in regulatory capital and retains the 250% risk weight for non-deducted amounts of mortgage servicing assets and temporary difference deferred tax assets. The rule takes effect April 1, 2020 for the threshold deductions and minority interests. The Corporation does not expect that the rule changes will materially impact the Bank's and Corporation’s capital calculations.

SEC FAST Act Modernization and Simplification of Regulation S-K


On April 2, 2019, the SEC issued Release No. 33-10618; 34-85381, "FAST Act Modernization and Simplification of Regulation S-K." The amendments under this rule modernize and simplify certain disclosure requirements in a manner that reduces the costs and burdens on registrants while continuing to provide material information to investors. The amendments are also intended to improve the readability and navigability of disclosure documents and discourage repetition and disclosure of immaterial information. The amendments arewere effective on May 2, 2019, except for specific amendments that are effective after May 2, 2019 as cited in the rule. The Corporation provided the additional disclosures on the Form 10-Q cover page for the quarter endingended March 31, 2019. The Corporation continues to analyze the amended disclosure requirements under this rule which have not become effective, but does not believe that such changes will materially impact the Corporation’s disclosures.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 3.Quantitative and Qualitative Disclosures About Market Risk
No material changes in the Corporation’s market risk 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 year ended December 31, 2018.


Item 4.Controls and Procedures
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 March 31,September 30, 2019.
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 March 31,September 30, 2019 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

Item 1.Legal Proceedings

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.


Item 1A.Risk Factors
Item 1A.Risk Factors
There have been no material changes in risk factors from those disclosed under Item 1A, “Risk Factors” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018.


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Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
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
PeriodTotal 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
JanuaryJuly 1 – 31, 2019—
$—
—
864,246
February 1 – 28, 2019—
—
—
864,246
MarchAugust 1 – 31, 2019—
—
—
864,246
TotalSeptember 1 – 30, 2019—
$— —
— —
864,246 

Total— $— — 
1.On October 23, 2013, the Corporation’s Board of Directors approved a 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 plan 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.


1.On October 23, 2013, the Corporation’s Board of Directors approved a 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 plan 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.

In addition to the repurchases disclosed above, participants in the Corporation's stock-based incentive plans may have shares withheld to cover income taxes forupon the vesting of restricted stock awards vests and may use a stock swap to exercise non-qualified stock options. Shares withheld to pay income taxes onupon the vesting of restricted stock awards vests and stock swaps to exercise stock options are repurchased pursuant to the terms of the applicable plan and not under the Corporation's share repurchase program. SharesShare repurchased pursuant to these plans during the three months ended March 31,September 30, 2019 were as follows:

PeriodTotal Number of Shares PurchasedAverage Price Paid per Share
July 1 – 31, 20193,351  $26.14  
August 1 – 31, 2019—  —  
September 1 – 30, 2019—  —  
Total3,351  $26.14  

PeriodTotal Number of Shares Repurchased Average Price Paid per Share
January 1 – 31, 2019—
 $—
February 1 – 28, 20197,110
 24.93
March 1 – 31, 20191,085
 25.62
Total8,195
 $25.02


Item 3.Defaults Upon Senior Securities
Item 3.Defaults Upon Senior Securities
None.


Item 4.Mine Safety Disclosures
Item 4.Mine Safety Disclosures
Not Applicable.



Item 5.Other Information
Item 5.Other Information
None.

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Item 6.Exhibits
Item 6.a.Exhibits
a.Exhibits
Exhibit 3.1
Amended and Restated Articles of Incorporation are incorporated by reference to Exhibit 3.1 of Form 10-K, filed with the SEC on February 28, 2019.
Exhibit 3.2
Amended By-Laws are incorporated by reference to Exhibit 3.2 of Form 10-K, filed with the SEC on February 28, 2019.
Exhibit 10.131.1 
Form of Restricted Stock Unit Agreement for Directors (Service Based) Subject to the Amended and Restated Univest 2013 Long-Term Incentive Plan.
Exhibit 10.2
Form of Performance Based Restricted Stock Unit Agreement for Employees Subject to the Amended and Restated Univest 2013 Long-Term Incentive Plan.
Exhibit 10.3
Form of Restricted Stock Unit Agreement for Employees (Service Based) Subject to the Amended and Restated Univest 2013 Long-Term Incentive Plan.
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, SeniorBrian J. Richardson, 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, SeniorBrian J. Richardson, 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.INS101 XBRL Instance DocumentThe following financial statements from the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Changes in Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Unaudited Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
Exhibit 101.SCH104 XBRL Taxonomy Extension Schema Document
Exhibit 101.CALXBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LABXBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PREXBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentThe cover page from the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL.



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Univest Financial Corporation
(Registrant)
Date: November 1, 2019Univest Financial Corporation
(Registrant)
Date: May 3, 2019/s/ Jeffrey M. Schweitzer
Jeffrey M. Schweitzer

President and Chief Executive Officer

(Principal Executive Officer)
Date: May 3,November 1, 2019/s/ Roger S. DeaconBrian J. Richardson
Roger S. Deacon
Senior Brian J. Richardson
Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)



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