~~0000102212 us-gaap:EquitySecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June~~September 30, 2019



☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 0-7617

UNIVEST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



Pennsylvania						23-1886144
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

14 North Main Street,, Souderton,, Pennsylvania18964

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (~~215~~) (215) 721-2400

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of class	Trading symbol	Name of exchange on which registered
Common Stock, $5 par value	UVSP	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Common Stock, $5 par value						~~29,305,447~~29,326,748
(Title of Class)						(Number of shares outstanding at ~~July~~October 31, 2019)

Table of Contents

UNIVEST FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX

Page Number

Part I.

Financial Information:

~~Page Number~~

~~Part I.~~Item 1.

~~Financial Information:~~

~~Item 1.~~

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at ~~June~~September 30, 2019 and December 31, 2018

Condensed Consolidated Statements of Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2019 and 2018

Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2019 and 2018

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2019 and 2018

Condensed Consolidated Statements of Cash Flows for the ~~Six~~ Nine Months Ended ~~June~~ September 30, 2019 and 2018

Notes to Condensed Consolidated Financial Statements

910

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4851

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

6368

Item 4.

Controls and Procedures

Part II.

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

6469

Item 3.

Defaults Upon Senior Securities

6569

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

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 June 30, 2019			At December 31, 2018			(Dollars in thousands, except share data)	At September 30, 2019		At December 31, 2018
ASSETS							ASSETS
Cash and due from banks	$	55,223		$	61,573		Cash and due from banks	$	68,072	$	61,573
Interest-earning deposits with other banks	29,344			47,847			Interest-earning deposits with other banks	157,262		47,847
Cash and cash equivalents	84,567			109,420			Cash and cash equivalents	225,334		109,420
Investment securities held-to-maturity (fair value $175,296 and $141,575 at June 30, 2019 and December 31, 2018, respectively)	172,946			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-sale	293,022			328,507			Investment securities available-for-sale	262,143		328,507
Investments in equity securities	2,865			2,165			Investments in equity securities	2,459		2,165
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	32,755			28,337			Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	29,254		28,337
Loans held for sale	1,498			1,754			Loans held for sale	2,893		1,754
Loans and leases held for investment	4,167,904			4,006,574			Loans and leases held for investment	4,251,933		4,006,574
Less: Reserve for loan and lease losses	(32,600		)	(29,364		)	Less: Reserve for loan and lease losses	(33,662)		(29,364)
Net loans and leases held for investment	4,135,304			3,977,210			Net loans and leases held for investment	4,218,271		3,977,210
Premises and equipment, net	58,292			59,559			Premises and equipment, net	57,171		59,559
Operating lease right-of-use assets	35,508			—			Operating lease right-of-use assets	34,965		—
Goodwill	172,559			172,559			Goodwill	172,559		172,559
Other intangibles, net of accumulated amortization	10,995			11,990			Other intangibles, net of accumulated amortization	10,522		11,990
Bank owned life insurance	113,294			111,599			Bank owned life insurance	114,037		111,599

Accrued interest receivable and other assets	40,693			38,613			Accrued interest receivable and other assets	40,158		38,613
Total assets	$	5,154,298		$	4,984,347		Total assets	$	5,353,611	$	4,984,347
LIABILITIES							LIABILITIES
Noninterest-bearing deposits	$	1,166,301		$	1,055,919		Noninterest-bearing deposits	$	1,198,425	$	1,055,919
Interest-bearing deposits:							Interest-bearing deposits:
Demand deposits	1,424,288			1,377,171			Demand deposits	1,644,546		1,377,171
Savings deposits	822,084			782,766			Savings deposits	776,920		782,766
Time deposits	709,437			670,077			Time deposits	718,100		670,077
Total deposits	4,122,110			3,885,933			Total deposits	4,337,991		3,885,933
Short-term borrowings	39,350			189,768			Short-term borrowings	18,970		189,768
Long-term debt	170,195			145,330			Long-term debt	160,128		145,330
Subordinated notes	94,696			94,574			Subordinated notes	94,757		94,574
Operating lease liabilities	38,608			—			Operating lease liabilities	38,116		—
Accrued interest payable and other liabilities	37,669			44,609			Accrued interest payable and other liabilities	39,350		44,609
Total liabilities	4,502,628			4,360,214			Total liabilities	4,689,312		4,360,214
SHAREHOLDERS’ EQUITY							SHAREHOLDERS’ EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at June 30, 2019 and December 31, 2018; 31,556,799 shares issued at June 30, 2019 and December 31, 2018; 29,294,942 and 29,270,852 shares outstanding at June 30, 2019 and December 31, 2018, respectively	157,784			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, respectively							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, respectively	157,784		157,784
Additional paid-in capital	293,947			292,401			Additional paid-in capital	294,556		292,401
Retained earnings	267,357			248,167			Retained earnings	279,158		248,167
Accumulated other comprehensive loss, net of tax benefit	(21,949		)	(28,416		)	Accumulated other comprehensive loss, net of tax benefit	(22,008)		(28,416)
Treasury stock, at cost; 2,261,857 and 2,285,947 shares at June 30, 2019 and December 31, 2018, respectively	(45,469		)	(45,803		)
Treasury stock, at cost; 2,244,265 and 2,285,947 shares at September 30, 2019 and December 31, 2018, respectively							Treasury 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’ equity	651,670			624,133			Total shareholders’ equity	664,299		624,133
Total liabilities and shareholders’ equity	$	5,154,298		$	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.

Table of Contents

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


												Three Months Ended						Nine Months Ended
	Three Months Ended June 30,					Six Months Ended June 30,						September 30,						September 30,
(Dollars in thousands, except per share data)	2019		2018			2019		2018			(Dollars in thousands, except per share data)	2019		2018		2019		2018
Interest income											Interest income
Interest and fees on loans and leases:											Interest and fees on loans and leases:
Taxable	$	47,151	$	40,637		$	92,833	$	78,587		Taxable	$	46,933	$	43,066	$	139,766	$	121,653
Exempt from federal income taxes	2,759		2,421			5,442		4,768			Exempt from federal income taxes	2,774		2,501		8,216		7,269
Total interest and fees on loans and leases	49,910		43,058			98,275		83,355			Total interest and fees on loans and leases	49,707		45,567		147,982		128,922
Interest and dividends on investment securities:											Interest and dividends on investment securities:
Taxable	2,645		2,268			5,358		4,457			Taxable	2,581		2,348		7,939		6,805
Exempt from federal income taxes	401		477			832		945			Exempt from federal income taxes	315		459		1,147		1,404
Interest on deposits with other banks	569		148			838		224			Interest on deposits with other banks	1,178		397		2,016		621
Interest and dividends on other earning assets	535		509			1,121		1,013			Interest and dividends on other earning assets	519		484		1,640		1,497
Total interest income	54,060		46,460			106,424		89,994			Total interest income	54,300		49,255		160,724		139,249
Interest expense											Interest expense
Interest on deposits	9,111		4,542			17,314		8,233			Interest on deposits	9,434		6,278		26,748		14,511
Interest on short-term borrowings	217		958			855		1,603			Interest on short-term borrowings	94		584		949		2,187
Interest on long-term debt and subordinated notes	2,097		1,970			4,097		3,896			Interest on long-term debt and subordinated notes	2,127		1,970		6,224		5,866
Total interest expense	11,425		7,470			22,266		13,732			Total interest expense	11,655		8,832		33,921		22,564
Net interest income	42,635		38,990			84,158		76,262			Net interest income	42,645		40,423		126,803		116,685
Provision for loan and lease losses	2,076		15,409			4,761		17,462			Provision for loan and lease losses	1,530		2,745		6,291		20,207
Net interest income after provision for loan and lease losses	40,559		23,581			79,397		58,800			Net interest income after provision for loan and lease losses	41,115		37,678		120,512		96,478
Noninterest income											Noninterest income
Trust fee income	2,054		2,044			3,941		4,040			Trust fee income	1,973		1,960		5,914		6,000
Service charges on deposit accounts	1,447		1,335			2,882		2,662			Service charges on deposit accounts	1,513		1,454		4,395		4,116
Investment advisory commission and fee income	4,055		3,778			7,844		7,461			Investment advisory commission and fee income	4,032		3,785		11,876		11,246
Insurance commission and fee income	3,941		3,712			9,085		8,600			Insurance commission and fee income	3,877		3,643		12,962		12,243
Other service fee income	2,590		2,431			4,857		4,600			Other service fee income	2,255		2,284		7,112		6,884
Bank owned life insurance income	743		1,210			1,695		1,879			Bank owned life insurance income	743		865		2,438		2,744
Net gain on sales of investment securities	7		—			8		10			Net gain on sales of investment securities	33		—		41		10
Net gain on mortgage banking activities	796		942			1,279		1,658			Net gain on mortgage banking activities	1,629		754		2,908		2,412
Other income (loss)	723		(138		)	1,062		(14		)

Other income											Other income	544		116		1,606		102
Total noninterest income	16,356		15,314			32,653		30,896			Total noninterest income	16,599		14,861		49,252		45,757
Noninterest expense											Noninterest expense
Salaries, benefits and commissions	22,089		20,065			43,653		40,712			Salaries, benefits and commissions	22,785		20,321		66,438		61,033
Net occupancy	2,601		2,533			5,212		5,290			Net occupancy	2,475		2,515		7,687		7,805
Equipment	1,065		1,067			2,055		2,090			Equipment	1,088		1,042		3,143		3,132
Data processing	2,627		2,091			5,141		4,323			Data processing	2,624		2,339		7,765		6,662
Professional fees	1,307		1,331			2,571		2,686			Professional fees	1,517		1,370		4,088		4,056
Marketing and advertising	622		526			938		907			Marketing and advertising	558		646		1,884		1,987
Deposit insurance premiums	430		452			882		843			Deposit insurance premiums	(444)		544		438		1,387
Intangible expenses	417		594			843		1,206			Intangible expenses	378		479		1,221		1,685

Restructuring charges	—		—			—		571			Restructuring charges	—		—		—		571
Other expense	5,620		5,688			11,040		10,844			Other expense	5,289		5,115		15,941		15,525
Total noninterest expense	36,778		34,347			72,335		69,472			Total noninterest expense	36,270		34,371		108,605		103,843
Income before income taxes	20,137		4,548			39,715		20,224			Income before income taxes	21,444		18,168		61,159		38,392
Income tax expense	3,669		191			7,168		3,017			Income tax expense	3,782		3,204		10,950		6,221
Net income	$	16,468	$	4,357		$	32,547	$	17,207		Net income	$	17,662	$	14,964	$	50,209	$	32,171
Net income per share:											Net income per share:
Basic	$	0.56	$	0.15		$	1.11	$	0.59		Basic	$	0.60	$	0.51	$	1.71	$	1.10
Diluted	0.56		0.15			1.11		0.58			Diluted	0.60		0.51		1.71		1.09

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

Table of Contents

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,
(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	$	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 plans	249			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 June 30,
(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 $ 20,137
$ 3,669
$ 16,468
$ 4,548
$ 191
$ 4,357
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized holding gains (losses) arising during the period 2,933
616
2,317
(1,911 ) (401 ) (1,510 )
Less: reclassification adjustment for net gains on sales realized in net income (1) (7 ) (2 ) (5 ) —
—
—
Total net unrealized gains (losses) on available-for-sale investment securities 2,926
614
2,312
(1,911 ) (401 ) (1,510 )
Net unrealized (losses) gains on interest rate swaps used in cash flow hedges:

Net unrealized holding (losses) gains arising during the period (263 ) (55 ) (208 ) 154
32
122
Less: reclassification adjustment for net (gains) losses realized in net income (2) (14 ) (3 ) (11 ) 6
1
5
Total net unrealized (losses) gains on interest rate swaps used in cash flow hedges (277 ) (58 ) (219 ) 160
33
127
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3) 294
62
232
282
58
224
Accretion of prior service cost included in net periodic pension costs (3) (46 ) (10 ) (36 ) (71 ) (14 ) (57 )
Total defined benefit pension plans 248
52
196
211
44
167
Other comprehensive income (loss) 2,897
608
2,289
(1,540 ) (324 ) (1,216 )
Total comprehensive income (loss) $ 23,034
$ 4,277
$ 18,757
$ 3,008
$ (133 ) $ 3,141

~~(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.~~

Six Months Ended June 30,
(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 $ 39,715
$ 7,168
$ 32,547
$ 20,224
$ 3,017
$ 17,207
Other comprehensive income:
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized holding gains (losses) arising during the period 8,053
1,691
6,362
(8,249 ) (1,732 ) (6,517 )
Less: reclassification adjustment for net gains on sales realized in net income (1) (8 ) (2 ) (6 ) (10 ) (2 ) (8 )
Total net unrealized gains (losses) on available-for-sale investment securities 8,045
1,689
6,356
(8,259 ) (1,734 ) (6,525 )
Net unrealized (losses) gains on interest rate swaps used in cash flow hedges:

Net unrealized holding (losses) gains arising during the period (431 ) (91 ) (340 ) 366
77
289
Less: reclassification adjustment for net (gains) losses realized in net income (2) (30 ) (6 ) (24 ) 26
5
21
Total net unrealized (losses) gains on interest rate swaps used in cash flow hedges (461 ) (97 ) (364 ) 392
82
310
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3) 588
124
464
563
117
446
Accretion of prior service cost included in net periodic pension costs (3) (91 ) (19 ) (72 ) (142 ) (29 ) (113 )
Total defined benefit pension plans 497
105
392
421
88
333
Other comprehensive income (loss) 8,081
1,697
6,384
(7,446 ) (1,564 ) (5,882 )
Total comprehensive income $ 47,796
$ 8,865
$ 38,931
$ 12,778
$ 1,453
$ 11,325

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

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

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

Table of Contents


	Nine Months Ended September 30,
(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	$	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 period	7,834			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 securities	7,793			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 plans	746			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).

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

Table of Contents

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, 2019	29,294,942	$	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 plans	20,943	—		37		—		—		497		534

Exercise of stock options	19,045	—		(68)		—		—		382		314
Stock-based compensation	—	—		640		—		—		—		640
Purchases of treasury stock	(22,396)	—		—		—		—		(601)		(601)

Balance at September 30, 2019	29,312,534	$	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, 2018	29,406,450	$	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 plans	20,332	—		42		—		—		524		566

Exercise of stock options	22,760	—		(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, 2018	29,407,076	$	157,784	$	291,992	$	235,658	$	(28,664)	$	(42,528)	$	614,242

Table of Contents

(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 June 30, 2019
Balance at March 31, 2019 29,272,502
$ 157,784
$ 293,255
$ 256,746
$ (24,238 ) $ (45,941 ) $ 637,606
Net income —
—
—
16,468
—
—
16,468
Other comprehensive income, net of income tax —
—
—
—
2,289
—
2,289
Cash dividends declared ($0.20 per share) —
—
—
(5,858 ) —
—
(5,858 )
Stock issued under dividend reinvestment and employee stock purchase plans 22,440
—
47
1
—
516
564
Exercise of stock options 9,000
—
(11 ) —
—
181
170
Stock-based compensation —
—
656
—
—
—
656
Purchases of treasury stock (9,000 ) —
—
—
—
(225 ) (225 )
Balance at June 30, 2019 29,294,942
$ 157,784
$ 293,947
$ 267,357
$ (21,949 ) $ (45,469 ) $ 651,670

(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 June 30, 2018
Balance at March 31, 2018 29,391,934
$ 157,784
$ 290,095
$ 228,097
$ (26,791 ) $ (42,466 ) $ 606,719
Net income —
—
—
4,357
—
—
4,357
Other comprehensive loss, net of income tax benefit —
—
—
—
(1,216 ) —
(1,216 )
Cash dividends declared ($0.20 per share) —
—
—
(5,881 ) —
—
(5,881 )
Stock issued under dividend reinvestment and employee stock purchase plans 21,686
—
54
1
—
549
604
Exercise of stock options 22,832
—
(5 ) —
—
448
443
Stock-based compensation —
—
872
—
—
—
872
Purchases of treasury stock (20,814 ) —
—
—
—
(604 ) (604 )
Cancellations of restricted stock awards (9,188 ) —
222
—
—
(222 ) —
Balance at June 30, 2018 29,406,450
$ 157,784
$ 291,238
$ 226,574
$ (28,007 ) $ (42,295 ) $ 605,294


(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			(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
Six Months Ended June 30, 2019
Nine Months Ended September 30, 2019																				Nine Months Ended September 30, 2019
Balance at December 31, 2018	29,270,852		$	157,784	$	292,401		$	248,167		$	(28,416	)	$	(45,803	)	$	624,133		Balance at December 31, 2018	29,270,852	$	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. 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. 2017-12 for derivatives (1)	—	—		—		(83)		83		—		—
Adjustment to initially apply ASU No. 2017-08 for premium amortization on purchased callable debt securities (1)	—		—		—			(39		)	—			—			(39		)	Adjustment to initially apply ASU No. 2017-08 for premium amortization on purchased callable debt securities (1)	—	—		—		(39)		—		—		(39)
Net income	—		—		—			32,547			—			—			32,547			Net income	—	—		—		50,209		—		—		50,209
Other comprehensive income, net of income tax	—		—		—			—			6,384			—			6,384			Other comprehensive income, net of income tax	—	—		—		—		6,325		—		6,325
Cash dividends declared ($0.40 per share)	—		—		—			(11,711		)	—			—			(11,711		)
Cash dividends declared ($0.60 per share)																				Cash dividends declared ($0.60 per share)	—	—		—		(17,572)		—		—		(17,572)
Stock issued under dividend reinvestment and employee stock purchase plans	48,183		—		77			1			—			1,057			1,135			Stock issued under dividend reinvestment and employee stock purchase plans	69,126	—		114		1		—		1,554		1,669

Exercise of stock options	39,500		—		(102		)	—			—			793			691			Exercise of stock options	58,545	—		(170)		—		—		1,175		1,005
Stock-based compensation	—		—		1,230			—			—			—			1,230			Stock-based compensation	—	—		1,870		—		—		—		1,870
Purchases of treasury stock	(46,244	)	—		—			—			—			(1,175		)	(1,175		)	Purchases of treasury stock	(68,640)	—		—		—		—		(1,776)		(1,776)
Cancellations of performance-based restricted stock awards	(17,349	)	—		341			—			—			(341		)	—			Cancellations of performance-based restricted stock awards	(17,349)	—		341		—		—		(341)		—
Balance at June 30, 2019	29,294,942		$	157,784	$	293,947		$	267,357		$	(21,949	)	$	(45,469	)	$	651,670
Balance at September 30, 2019																				Balance at September 30, 2019	29,312,534	$	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.

(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
Six Months Ended June 30, 2018
Balance at December 31, 2017 29,334,859
$ 157,784
$ 290,133
$ 216,761
$ (17,771 ) $ (43,533 ) $ 603,374
Adjustment to initially apply ASU No. 2016-01 for equity securities measured at fair value —
—
—
433
(433 ) —
—
Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges —
—
—
3,921
(3,921 ) —
—
Net income —
—
—
17,207
—
—
17,207
Other comprehensive loss, net of income tax benefit —
—
—
—
(5,882 ) —
(5,882 )
Cash dividends declared ($0.40 per share) —
—
—
(11,749 ) —
—
(11,749 )
Stock issued under dividend reinvestment and employee stock purchase plans 41,939
—
98
1
—
1,074
1,173
Exercise of stock options 36,990
—
(14 ) —
—
725
711
Stock-based compensation —
—
1,719
—
—
—
1,719
Purchases of treasury stock (44,353 ) —
—
—
—
(1,259 ) (1,259 )
Restricted stock awards granted, net of cancellations 37,015
—
(698 ) —
—
698
—
Balance at June 30, 2018 29,406,450
$ 157,784
$ 291,238
$ 226,574
$ (28,007 ) $ (42,295 ) $ 605,294


(Dollars in thousands, except 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, 2017	29,334,859	$	157,784	$	290,133	$	216,761	$	(17,771)	$	(43,533)	$	603,374
Adjustment to initially apply ASU No. 2016-01 for equity securities measured at fair value	—	—		—		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 plans	62,271	—		140		1		—		1,598		1,739

Exercise of stock options	59,750	—		(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 cancellations	34,173	—		(617)		—		—		617		—
Balance at September 30, 2018	29,407,076	$	157,784	$	291,992	$	235,658	$	(28,664)	$	(42,528)	$	614,242

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

Table of Contents

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(Dollars in thousands)	2019		2018
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 losses	6,291		20,207
Depreciation of premises and equipment	3,983		4,180
Net amortization of investment securities premiums and discounts	1,375		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 compensation	1,918		2,379
Intangible expenses	1,221		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 sale	140,906		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 activities	53,912		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-maturity	20,903		7,846
Proceeds from maturities, calls and principal repayments of securities available-for-sale	49,127		44,603
Proceeds from sales of securities available-for-sale	24,987		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 funds	1,032		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 owned	670		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 deposits	452,101		265,260
Net decrease in short-term borrowings	(170,798)		(18,666)
Proceeds from issuance of long-term debt	25,000		—
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 plans	1,669		1,739
Proceeds from exercise of stock options	1,005		1,131
Cash dividends paid	(17,574)		(17,615)
Net cash provided by financing activities	279,530		219,398
Net increase in cash and cash equivalents	115,914		8,701
Cash and cash equivalents at beginning of year	109,420		75,409
Cash and cash equivalents at end of period	$	225,334	$	84,110

~~(Unaudited)~~Table of Contents

Six Months Ended June 30,
(Dollars in thousands) 2019 2018
Cash flows from operating activities:
Net income $ 32,547
$ 17,207
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses 4,761
17,462
Depreciation of premises and equipment 2,651
2,795
Net amortization of investment securities premiums and discounts 834
779
Net gain on sales of investment securities (8 ) (10 )
Net gain on mortgage banking activities (1,279 ) (1,658 )
Bank owned life insurance income (1,695 ) (1,879 )
Net accretion of acquisition accounting fair value adjustments (247 ) (495 )
Stock-based compensation 1,256
1,719
Intangible expenses 843
1,206
Other adjustments to reconcile net income to cash (used in) provided by operating activities (461 ) 190
Originations of loans held for sale (69,323 ) (74,695 )
Proceeds from the sale of loans held for sale 70,603
76,263
Contributions to pension and other postretirement benefit plans (132 ) (133 )
Increase in accrued interest receivable and other assets (3,921 ) (3,089 )
(Decrease) increase in accrued interest payable and other liabilities (4,872 ) 814
Net cash provided by operating activities 31,557
36,476
Cash flows from investing activities:
Net capital expenditures (1,432 ) (1,347 )
Proceeds from maturities, calls and principal repayments of securities held-to-maturity 11,054
4,253
Proceeds from maturities, calls and principal repayments of securities available-for-sale 27,784
34,824
Proceeds from sales of securities available-for-sale 15,494
1,010
Purchases of investment securities held-to-maturity (41,808 ) (45,349 )
Purchases of investment securities available-for-sale (498 ) (1,485 )
Proceeds from sales of money market mutual funds 523
10,706
Purchases of money market mutual funds (1,203 ) (6,284 )
Net increase in other investments (4,418 ) (5,564 )
Net increase in loans and leases (162,169 ) (211,534 )
Proceeds from sales of other real estate owned 599
21
Purchases of bank owned life insurance —
(776 )
Proceeds from bank owned life insurance —
1,374
Net cash used in investing activities (156,074 ) (220,151 )
Cash flows from financing activities:
Net increase in deposits 236,213
65,963
Net (decrease) increase in short-term borrowings (150,418 ) 126,422
Proceeds from issuance of long-term debt 25,000
—
Payment of contingent consideration on acquisitions (65 ) (67 )
Purchases of treasury stock (1,175 ) (1,259 )
Stock issued under dividend reinvestment and employee stock purchase plans 1,135
1,173
Proceeds from exercise of stock options 691
711
Cash dividends paid (11,717 ) (11,734 )
Net cash provided by financing activities 99,664
181,209
Net decrease in cash and cash equivalents (24,853 ) (2,466 )
Cash and cash equivalents at beginning of year 109,420
75,409
Cash and cash equivalents at end of period $ 84,567
$ 72,943
Supplemental disclosures of cash flow information:
Cash paid for interest $ 22,002
$ 13,190
Cash paid for income taxes, net of refunds 9,883
1,060
Non cash transactions:
Transfer of loans to other real estate owned $ —
$ 402


	Nine Months Ended September 30,
(Dollars in thousands)	2019		2018
Supplemental disclosures of cash flow information:
Cash paid for interest	$	33,724	$	21,647
Cash paid for income taxes, net of refunds	14,148		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.

Table of Contents

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 ~~interim~~condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to 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 ~~six-month~~nine-month period ended ~~June~~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. These 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

Table of Contents

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” 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

Table of Contents

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.

Table of Contents

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 Ended						Nine Months Ended
	September 30,						September 30,
(Dollars and shares in thousands, except per share data)	2019		2018		2019		2018
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 outstanding	29,306		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 units	74		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 share	323		359		326		315

Three Months Ended
June 30, Six Months Ended
June 30,
(Dollars and shares in thousands, except per share data) 2019 2018 2019 2018
Numerator:
Net income $ 16,468
$ 4,357
$ 32,547
$ 17,207
Net income allocated to unvested restricted stock awards (60 ) (33 ) (128 ) (132 )
Net income allocated to common shares $ 16,408
$ 4,324
$ 32,419
$ 17,075
Denominator:
Weighted average shares outstanding 29,288
29,404
29,283
29,380
Average unvested restricted stock awards (107 ) (228 ) (119 ) (221 )
Denominator for basic earnings per share—weighted-average shares outstanding
29,181
29,176
29,164
29,159
Effect of dilutive securities—employee stock options and restricted stock units 62
95
59
95
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding
29,243
29,271
29,223
29,254
Basic earnings per share $ 0.56
$ 0.15
$ 1.11
$ 0.59
Diluted earnings per share $ 0.56
$ 0.15
$ 1.11
$ 0.58
Average anti-dilutive options and restricted stock units excluded from computation of diluted earnings per share 325
369
327
294

Table of Contents

Note 3. Investment Securities

The following table shows the amortized cost and the estimated fair value of the held-to-maturity securities and available-for-sale securities at ~~June~~September 30, 2019 and December 31, 2018, by contractual maturity within each type:


	At June 30, 2019									At December 31, 2018										At September 30, 2019														At 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 Value		Amortized 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	$	55	$	—		$	7,052	$	6,996	$	—	$	(104	)	$	6,892	After 1 year to 5 years	$	6,997	$	60	$	—	$	7,057	$	6,996	$	—	$	(104)	$	6,892
	6,997		55		—			7,052		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 years	10,379		102		—			10,481		11,573		—		(135		)	11,438		After 5 years to 10 years	9,720		116		—		9,836		11,573		—		(135)		11,438
Over 10 years	155,570		2,253		(60		)	157,763		124,065		287		(1,107		)	123,245		Over 10 years	167,128		2,770		(147)		169,751		124,065		287		(1,107)		123,245
	165,949		2,355		(60		)	168,244		135,638		287		(1,242		)	134,683			176,848		2,886		(147)		179,587		135,638		287		(1,242)		134,683

Total	$	172,946	$	2,410	$	(60	)	$	175,296	$	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	$	10,332	$	—	$	(16	)	$	10,316	$	15,108	$	—	$	(90	)	$	15,018	Within 1 year	$	301	$	—	$	(2)	$	299	$	15,108	$	—	$	(90)	$	15,018
After 1 year to 5 years	—		—		—			—		303		—		(6		)	297		After 1 year to 5 years	—		—		—		—		303		—		(6)		297

	10,332		—		(16		)	10,316		15,411		—		(96		)	15,315			301		—		(2)		299		15,411		—		(96)		15,315
State and political subdivisions:																			State and political subdivisions:
Within 1 year	1,395		3		—			1,398		5,900		4		(6		)	5,898		Within 1 year	350		1		—		351		5,900		4		(6)		5,898
After 1 year to 5 years	5,732		63		—			5,795		15,459		36		(56		)	15,439		After 1 year to 5 years	5,809		42		—		5,851		15,459		36		(56)		15,439
After 5 years to 10 years	36,550		429		—			36,979		43,923		318		(163		)	44,078		After 5 years to 10 years	33,809		375		—		34,184		43,923		318		(163)		44,078
	43,677		495		—			44,172		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 year																			Within 1 year	48		2		—		50		—		—		—		—
After 1 year to 5 years	5,420		20		(5		)	5,435		5,799		3		(70		)	5,732		After 1 year to 5 years	1,082		14		(2)		1,094		5,799		3		(70)		5,732
After 5 years to 10 years	43,799		52		(237		)	43,614		49,904		6		(1,381		)	48,529		After 5 years to 10 years	36,892		78		(130)		36,840		49,904		6		(1,381)		48,529
Over 10 years	93,324		172		(730		)	92,766		100,873		26		(3,398		)	97,501		Over 10 years	87,317		404		(468)		87,253		100,873		26		(3,398)		97,501
	142,543		244		(972		)	141,815		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 years	1,497		—		(31		)	1,466		1,677		—		(78		)	1,599		After 5 years to 10 years	1,403		—		(23)		1,380		1,677		—		(78)		1,599
Over 10 years	1,200		11		—			1,211		1,305		—		(16		)	1,289		Over 10 years	1,131		12		—		1,143		1,305		—		(16)		1,289
	2,697		11		(31		)	2,677		2,982		—		(94		)	2,888			2,534		12		(23)		2,523		2,982		—		(94)		2,888
Corporate bonds:																			Corporate bonds:
Within 1 year	10,817		—		(33		)	10,784		7,806		—		(68		)	7,738		Within 1 year	11,303		—		(13)		11,290		7,806		—		(68)		7,738
After 1 year to 5 years	29,115		320		(27		)	29,408		18,508		1		(332		)	18,177		After 1 year to 5 years	29,109		536		(45)		29,600		18,508		1		(332)		18,177
After 5 years to 10 years	—		—					—		16,146		—		(392		)	15,754		After 5 years to 10 years	—		—		—		—		16,146		—		(392)		15,754
Over 10 years	60,000		—		(6,150		)	53,850		60,000		—		(8,542		)	51,458		Over 10 years	60,000		—		(7,192)		52,808		60,000		—		(8,542)		51,458
	99,932		320		(6,210		)	94,042		102,460		1		(9,334		)	93,127			100,412		536		(7,250)		93,698		102,460		1		(9,334)		93,127
Total	$	299,181	$	1,070	$	(7,229	)	$	293,022	$	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 ~~$379.0~~$363.4 million and ~~$344.5~~$344.2 million at ~~June~~September 30, 2019 and December 31, 2018, respectively, were pledged to secure public deposits and other contractual obligations. In addition, securities of ~~$9.9~~$14.1 million and $296 thousand were pledged to secure credit derivatives and interest rate swaps at ~~June~~September 30, 2019 and December 31, 2018, respectively. See Note 11, "Derivative Instruments and Hedging Activities" for additional information.

Table of Contents

The following table presents information related to sales of securities available-for-sale during the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	Nine Months Ended September 30,
(Dollars in thousands)	2019		2018
Securities available-for-sale:
Proceeds from sales	$	24,987	$	1,010
Gross realized gains on sales	65		10
Gross realized losses on sales	24		—
Tax expense related to net realized gains on sales	9		2

Six Months Ended June 30,
(Dollars in thousands) 2019 2018
Securities available-for-sale:
Proceeds from sales $ 15,494
$ 1,010
Gross realized gains on sales 29
10
Gross realized losses on sales 21
—
Tax expense related to net realized gains on sales 2
2

At ~~June~~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 ~~June~~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 there 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 Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized 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 securities	33,830		(147)		51,166		(453)		84,996		(600)
Collateralized mortgage obligations	—		—		1,380		(23)		1,380		(23)
Corporate bonds	1,000		—		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 securities	48,192		(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 subdivisions	9,311		(61)		15,302		(164)		24,613		(225)
Residential mortgage-backed securities	7,099		(106)		141,924		(4,743)		149,023		(4,849)
Collateralized mortgage obligations	1,289		(16)		1,599		(78)		2,888		(94)
Corporate bonds	16,896		(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 June 30, 2019
Securities Held-to-Maturity
Residential mortgage-backed securities $ 15,022
$ (39 ) $ 3,652
$ (21 ) $ 18,674
$ (60 )
Total $ 15,022
$ (39 ) $ 3,652
$ (21 ) $ 18,674
$ (60 )
Securities Available-for-Sale
U.S. government corporations and agencies $ —
$ —
$ 10,316
$ (16 ) $ 10,316
$ (16 )
Residential mortgage-backed securities —
—
99,801
(972 ) 99,801
(972 )
Collateralized mortgage obligations —
—
1,466
(31 ) 1,466
(31 )
Corporate bonds 1,497
(4 ) 71,109
(6,206 ) 72,606
(6,210 )
Total $ 1,497
$ (4 ) $ 182,692
$ (7,225 ) $ 184,189
$ (7,229 )
At December 31, 2018
Securities Held-to-Maturity
U.S. government corporations and agencies $ —
$ —
$ 6,892
$ (104 ) $ 6,892
$ (104 )
Residential mortgage-backed securities 48,192
(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 subdivisions 9,311
(61 ) 15,302
(164 ) 24,613
(225 )
Residential mortgage-backed securities 7,099
(106 ) 141,924
(4,743 ) 149,023
(4,849 )
Collateralized mortgage obligations 1,289
(16 ) 1,599
(78 ) 2,888
(94 )
Corporate bonds 16,896
(235 ) 75,730
(9,099 ) 92,626
(9,334 )
Total $ 34,595
$ (418 ) $ 249,870
$ (14,180 ) $ 284,465
$ (14,598 )

At ~~June~~September 30, 2019, gross unrealized losses for securities available-for-sale in an unrealized loss position for twelve months or longer, totaled ~~$7.2~~$7.7 million. ~~Three~~NaN federal agency ~~bonds, sixteen~~bond, 13 investment grade corporate bonds, ~~ninety~~40 federal agency residential mortgage securities and ~~one~~1 collateralized mortgage obligation ~~bonds~~bond had respective unrealized loss positions of ~~$16~~$2 thousand, ~~$6.2~~$7.3 million, ~~$1.0 million~~$453 thousand and ~~$31~~$23 thousand, respectively. The fair value of these ~~110~~NaN 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

Table of Contents

recognize any other-than-temporary impairment charges on debt securities for the ~~six~~nine months ended ~~June~~September 30, 2019 or 2018.

The Corporation recognized a ~~$20~~$12 thousand net gain and ~~$33~~$26 thousand net gain on equity securities during the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively, in other noninterest income. There were no0 sales of equity securities during the ~~six~~nine months ended ~~June~~September 30, 2019 or ~~June~~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-commercial	1,736,904		191,946		1,928,850
Real estate-construction	221,845		—		221,845
Real estate-residential secured for business purpose	315,984		44,737		360,721
Real estate-residential secured for personal purpose	388,643		43,545		432,188
Real estate-home equity secured for personal purpose	170,486		7,168		177,654
Loans to individuals	30,575		140		30,715
Lease financings	140,807		—		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 table	6,243		—		6,243
Overdraft deposits included in the above table	149		—		149

At June 30, 2019
(Dollars in thousands) Originated Acquired Total
Commercial, financial and agricultural $ 921,182
$ 15,967
$ 937,149
Real estate-commercial 1,650,052
212,095
1,862,147
Real estate-construction 230,459
—
230,459
Real estate-residential secured for business purpose 314,629
51,011
365,640
Real estate-residential secured for personal purpose 373,792
46,017
419,809
Real estate-home equity secured for personal purpose 170,482
7,446
177,928
Loans to individuals 32,345
140
32,485
Lease financings 142,287
—
142,287
Total loans and leases held for investment, net of deferred income $ 3,835,228
$ 332,676
$ 4,167,904
Imputed interest on lease financings, included in the above table $ (15,415 ) $ —
$ (15,415 )
Net deferred costs, included in the above table 4,701
—
4,701
Overdraft deposits included in the above table 127
—
127

At December 31, 2018
(Dollars in thousands) Originated Acquired Total
Commercial, financial and agricultural $ 913,166
$ 24,519
$ 937,685
Real estate-commercial 1,507,579
233,625
1,741,204
Real estate-construction 215,513
—
215,513
Real estate-residential secured for business purpose 302,393
60,403
362,796
Real estate-residential secured for personal purpose 338,451
49,959
388,410
Real estate-home equity secured for personal purpose 177,523
8,728
186,251
Loans to individuals 32,617
142
32,759
Lease financings 141,956
—
141,956
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 )
Net deferred costs, included in the above table 3,930
—
3,930
Overdraft deposits included in the above table 139
—
139


	At December 31, 2018
(Dollars in thousands)	Originated		Acquired		Total
Commercial, financial and agricultural	$	913,166	$	24,519	$	937,685
Real estate-commercial	1,507,579		233,625		1,741,204
Real estate-construction	215,513		—		215,513
Real estate-residential secured for business purpose	302,393		60,403		362,796
Real estate-residential secured for personal purpose	338,451		49,959		388,410
Real estate-home equity secured for personal purpose	177,523		8,728		186,251
Loans to individuals	32,617		142		32,759
Lease financings	141,956		—		141,956
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)
Net deferred costs, included in the above table	3,930		—		3,930
Overdraft deposits included in the above table	139		—		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 ~~June~~September 30, 2019 totaled ~~$332.7~~$303.0 million, including ~~$289.2~~$268.2 million of loans from the Fox Chase acquisition and ~~$43.5~~$34.8 million from the Valley Green Bank acquisition. At ~~June~~September 30, 2019, loans acquired with deteriorated credit quality, or acquired credit impaired loans, totaled ~~$569~~$568 thousand representing ~~$61~~$60 thousand from the Fox Chase acquisition and $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.

Table of Contents

The outstanding principal balance and carrying amount for acquired credit impaired loans at ~~June~~September 30, 2019 and December 31, 2018 were as follows:


(Dollars in thousands)	At June 30, 2019		At December 31, 2018		(Dollars in thousands)	At September 30, 2019		At December 31, 2018
Outstanding principal balance	$	677	$	893	Outstanding principal balance	$	664	$	893
Carrying amount	569		695		Carrying amount	568		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)	2019		2018
Beginning of period	$	—	$	11

Reclassification from nonaccretable discount	317		453
Accretable yield amortized to interest income	(317)		(464)

End of period	$	—	$	—

Six Months Ended June 30,
(Dollars in thousands) 2019 2018
Beginning of period $ —
$ 11
Reclassification from nonaccretable discount 215
375
Accretable yield amortized to interest income (215 ) (386 )
End of period $ —
$ —

Table of Contents

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 nonaccrual loans and leases at ~~June~~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		Current		Total Accruing Loans and Leases		Acquired Credit Impaired		Nonaccrual Loans and Leases		Total 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 estate	4,556		1,102		760		6,418		1,894,202		1,900,620		206		28,024		1,928,850
Construction	185		—		—		185		221,404		221,589		—		256		221,845
Real estate—residential and home equity:
Residential secured for business purpose	2,293		1,441		1,109		4,843		352,689		357,532		302		2,887		360,721
Residential secured for personal purpose	1,553		133		—		1,686		428,355		430,041		60		2,087		432,188
Home equity secured for personal purpose	665		—		—		665		175,610		176,275		—		1,379		177,654
Loans to individuals	156		48		129		333		30,380		30,713		—		2		30,715
Lease financings	534		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 estate	4,995		1,538		—		6,533		1,716,251		1,722,784		206		18,214		1,741,204
Construction	2,163		—		—		2,163		213,244		215,407		—		106		215,513
Real estate—residential and home equity:
Residential secured for business purpose	2,497		728		—		3,225		357,827		361,052		426		1,318		362,796
Residential secured for personal purpose	2,334		—		—		2,334		384,426		386,760		63		1,587		388,410
Home equity secured for personal purpose	305		96		—		401		184,402		184,803		—		1,448		186,251
Loans to individuals	207		29		55		291		32,468		32,759		—		—		32,759
Lease financings	2,460		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

Accruing Loans and Leases
(Dollars in thousands) 30-59
Days
Past Due 60-89
Days
Past Due 90 Days
or more
Past Due Total
Past Due Current Total Accruing Loans and Leases Acquired Credit Impaired Nonaccrual Loans and Leases Total Loans
and Leases
Held for
Investment
At June 30, 2019
Commercial, financial and agricultural $ 527
$ 274
$ —
$ 801
$ 934,198
$ 934,999
$ —
$ 2,150
$ 937,149
Real estate—commercial real estate and construction:
Commercial real estate 2,057
6,190
516
8,763
1,835,439
1,844,202
206
17,739
1,862,147
Construction 500
1,158
230
1,888
228,465
230,353
—
106
230,459
Real estate—residential and home equity:
Residential secured for business purpose 919
2,284
434
3,637
360,105
363,742
302
1,596
365,640
Residential secured for personal purpose 1,529
258
—
1,787
415,794
417,581
61
2,167
419,809
Home equity secured for personal purpose 206
—
—
206
176,433
176,639
—
1,289
177,928
Loans to individuals 101
47
129
277
32,208
32,485
—
—
32,485
Lease financings 620
195
70
885
141,302
142,187
—
100
142,287
Total $ 6,459
$ 10,406
$ 1,379
$ 18,244
$ 4,123,944
$ 4,142,188
$ 569
$ 25,147
$ 4,167,904
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 estate 4,995
1,538
—
6,533
1,716,251
1,722,784
206
18,214
1,741,204
Construction 2,163
—
—
2,163
213,244
215,407
—
106
215,513
Real estate—residential and home equity:
Residential secured for business purpose 2,497
728
—
3,225
357,827
361,052
426
1,318
362,796
Residential secured for personal purpose 2,334
—
—
2,334
384,426
386,760
63
1,587
388,410
Home equity secured for personal purpose 305
96
—
401
184,402
184,803
—
1,448
186,251
Loans to individuals 207
29
55
291
32,468
32,759
—
—
32,759
Lease financings 2,460
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

Table of Contents

Nonperforming Loans and Leases

The following presents, by class of loans and leases, nonperforming loans and leases at ~~June~~September 30, 2019 and December 31, 2018. Nonperforming loans exclude acquired credit impaired loans from Fox Chase and Valley Green.


	At June 30, 2019								At December 31, 2018									At September 30, 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		(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	$	2,150	$	—	$	—	$	2,150	$	3,365	$	382	$	—	$	3,747	Commercial, financial and agricultural	$	2,233	$	—	$	—	$	2,233	$	3,365	$	382	$	—	$	3,747
Real estate—commercial real estate and construction:																	Real estate—commercial real estate and construction:
Commercial real estate	17,739		—		516		18,255		18,214		—		—		18,214		Commercial real estate	28,024		—		760		28,784		18,214		—		—		18,214
Construction	106		—		230		336		106		—		—		106		Construction	256		—		—		256		106		—		—		106
Real estate—residential and home equity:																	Real estate—residential and home equity:
Residential secured for business purpose	1,596		—		434		2,030		1,318		160		—		1,478		Residential secured for business purpose	2,887		—		1,109		3,996		1,318		160		—		1,478
Residential secured for personal purpose	2,167		—		—		2,167		1,587		—		—		1,587		Residential secured for personal purpose	2,087		—		—		2,087		1,587		—		—		1,587
Home equity secured for personal purpose	1,289		55		—		1,344		1,448		—		—		1,448		Home equity secured for personal purpose	1,379		54		—		1,433		1,448		—		—		1,448
Loans to individuals	—		—		129		129		—		—		55		55		Loans to individuals	2		—		129		131		—		—		55		55
Lease financings	100		—		70		170		170		—		137		307		Lease financings	500		—		490		990		170		—		137		307
Total	$	25,147	$	55	$	1,379	$	26,581	$	26,208	$	542	$	192	$	26,942	Total	$	37,368	$	54	$	2,488	$	39,910	$	26,208	$	542	$	192	$	26,942

* Includes nonaccrual troubled debt restructured loans of ~~$2.6~~$2.3 million and $1.3 million at ~~June~~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 ~~June~~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 with 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

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		(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total
At June 30, 2019
At September 30, 2019											At September 30, 2019
Grade:											Grade:
1. Pass	$	874,098	$	1,622,980	$	228,421	$	309,658	$	3,035,157	1. Pass	$	907,186	$	1,690,123	$	219,656	$	310,514	$	3,127,479
2. Special Mention	27,036		17,773		1,932		1,705		48,446		2. Special Mention	18,924		23,667		1,932		1,541		46,064
3. Substandard	20,048		9,299		106		3,266		32,719		3. Substandard	17,603		23,114		257		3,929		44,903
4. Doubtful	—		—		—		—		—		4. Doubtful	—		—		—		—		—
Total	$	921,182	$	1,650,052	$	230,459	$	314,629	$	3,116,322	Total	$	943,713	$	1,736,904	$	221,845	$	315,984	$	3,218,446
At December 31, 2018											At December 31, 2018
Grade:											Grade:
1. Pass	$	882,736	$	1,455,234	$	215,407	$	298,356	$	2,851,733	1. Pass	$	882,736	$	1,455,234	$	215,407	$	298,356	$	2,851,733
2. Special Mention	23,287		31,791		—		721		55,799		2. Special Mention	23,287		31,791		—		721		55,799
3. Substandard	7,143		20,554		106		3,316		31,119		3. Substandard	7,143		20,554		106		3,316		31,119
4. Doubtful	—		—		—		—		—		4. Doubtful	—		—		—		—		—
Total	$	913,166	$	1,507,579	$	215,513	$	302,393	$	2,938,651	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
At June 30, 2019
Grade:
1. Pass $ 15,967
$ 199,560
$ —
$ 50,446
$ 265,973
2. Special Mention —
—
—
—
—
3. Substandard —
12,535
—
565
13,100
4. Doubtful —
—
—
—
—
Total $ 15,967
$ 212,095
$ —
$ 51,011
$ 279,073
December 31, 2018
Grade:
1. Pass $ 24,450
$ 220,911
$ —
$ 59,567
$ 304,928
2. Special Mention —
—
—
—
—
3. Substandard 69
12,714
—
836
13,619
4. Doubtful —
—
—
—
—
Total $ 24,519
$ 233,625
$ —
$ 60,403
$ 318,547


(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	$	15,440	$	178,997	$	—	$	44,220	$	238,657
2. Special Mention	—		1,316		—		—		1,316
3. Substandard	—		11,633		—		517		12,150
4. Doubtful	—		��		—		—		—
Total	$	15,440	$	191,946	$	—	$	44,737	$	252,123
December 31, 2018
Grade:
1. Pass	$	24,450	$	220,911	$	—	$	59,567	$	304,928
2. Special Mention	—		—		—		—		—
3. Substandard	69		12,714		—		836		13,619
4. Doubtful	—		—		—		—		—
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.

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
Nonperforming	1,194		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
Nonperforming	689		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 June 30, 2019
Performing $ 372,578
$ 170,172
$ 32,216
$ 142,117
$ 717,083
Nonperforming 1,214
310
129
170
1,823
Total $ 373,792
$ 170,482
$ 32,345
$ 142,287
$ 718,906
At December 31, 2018
Performing $ 337,762
$ 177,139
$ 32,562
$ 141,649
$ 689,112
Nonperforming 689
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
Nonperforming	893		1,009		—		—		1,902
Total	$	43,545	$	7,168	$	140	$	—	$	50,853
At December 31, 2018
Performing	$	49,061	$	7,664	$	142	$	—	$	56,867
Nonperforming	898		1,064		—		—		1,962
Total	$	49,959	$	8,728	$	142	$	—	$	58,829

(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 June 30, 2019
Performing $ 45,064
$ 6,412
$ 140
$ —
$ 51,616
Nonperforming 953
1,034
—
—
1,987
Total $ 46,017
$ 7,446
$ 140
$ —
$ 53,603
At December 31, 2018
Performing $ 49,061
$ 7,664
$ 142
$ —
$ 56,867
Nonperforming 898
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 ~~six~~nine months ended ~~June~~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		Unallocated		Total
Three Months Ended June 30, 2019
Three Months Ended September 30, 2019																								Three Months Ended September 30, 2019
Reserve for loan and lease losses:																								Reserve for loan and lease losses:
Beginning balance	$	8,950		$	14,981		$	2,302	$	3,379		$	469		$	1,275		$	246		$	31,602		Beginning balance	$	9,129	$	15,478	$	2,478	$	3,518	$	481	$	1,241	$	275	$	32,600
Charge-offs	(1,018		)	(33		)	—		(4		)	(51		)	(110		)	N/A			(1,216		)	Charge-offs	(283)		(251)		—		(183)		(73)		(54)		N/A		(844)
Recoveries	19			—			6		7			16			90			N/A			138			Recoveries	182		1		98		4		20		71		N/A		376
Provision (recovery of provision)	1,178			530			170		136			47			(14		)	29			2,076			Provision (recovery of provision)	222		593		103		273		47		(24)		310		1,524
Provision for acquired credit impaired loans																								Provision for acquired credit impaired loans	—		—		6		—		—		—		—		6
Ending balance	$	9,129		$	15,478		$	2,478	$	3,518		$	481		$	1,241		$	275		$	32,600		Ending balance	$	9,250	$	15,821	$	2,685	$	3,612	$	475	$	1,234	$	585	$	33,662
Three Months Ended June 30, 2018
Reserve for loan and lease losses:
Beginning balance	$	6,942		$	11,178		$	1,871	$	1,908		$	372		$	1,079		$	60		$	23,410
Charge-offs	(13,048		)	—			—		—			(79		)	(169		)	N/A			(13,296		)
Recoveries	23			—			7		8			16			75			N/A			129
Provision (recovery of provision)	13,341			1,149			126		578			138			86			(9		)	15,409
Ending balance	$	7,258		$	12,327		$	2,004	$	2,494		$	447		$	1,071		$	51		$	25,652
Six Months Ended June 30, 2019
Three Months Ended September 30, 2018																								Three Months Ended September 30, 2018
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	$	7,258	$	12,327	$	2,004	$	2,494	$	447	$	1,071	$	51	$	25,652
Charge-offs	(1,486		)	(74		)	—		(15		)	(136		)	(214		)	N/A			(1,925		)	Charge-offs	(904)		—		(30)		—		(82)		(123)		N/A		(1,139)
Recoveries	101			91			10		12			38			148			N/A			400			Recoveries	22		1		8		6		25		51		N/A		113
Provision	2,531			1,558			232		321			95			19			4			4,760			Provision	813		906		72		527		82		138		206		2,744
Provision for acquired credit impaired loans	—			—			—		1			—			—			—			1			Provision for acquired credit impaired loans	—		—		—		1		—		—		—		1
Ending balance	$	9,129		$	15,478		$	2,478	$	3,518		$	481		$	1,241		$	275		$	32,600		Ending balance	$	7,189	$	13,234	$	2,054	$	3,028	$	472	$	1,137	$	257	$	27,371
Six Months Ended June 30, 2018
Nine Months Ended September 30, 2019																								Nine 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	(13,649		)	(40		)	—		—			(171		)	(305		)	N/A			(14,165		)	Charge-offs	(1,769)		(325)		—		(198)		(209)		(268)		N/A		(2,769)
Recoveries	249			73			258		65			46			109			N/A			800			Recoveries	283		92		108		16		58		219		N/A		776
Provision (recovery of provision)	13,916			2,455			85		674			199			135			(3		)	17,461			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	$	7,258		$	12,327		$	2,004	$	2,494		$	447		$	1,071		$	51		$	25,652		Ending balance	$	9,250	$	15,821	$	2,685	$	3,612	$	475	$	1,234	$	585	$	33,662
Nine Months Ended September 30, 2018																								Nine Months Ended September 30, 2018
Reserve for loan and lease losses:																								Reserve for loan and lease losses:
Beginning balance																								Beginning balance	$	6,742	$	9,839	$	1,661	$	1,754	$	373	$	1,132	$	54	$	21,555
Charge-offs																								Charge-offs	(14,553)		(40)		(30)		—		(253)		(428)		N/A		(15,304)
Recoveries																								Recoveries	271		74		266		71		71		160		N/A		913
Provision																								Provision	14,729		3,361		157		1,201		281		273		203		20,205
Provision for acquired credit impaired loans																								Provision for acquired credit impaired loans	—		—		—		2		—		—		—		2
Ending balance																								Ending balance	$	7,189	$	13,234	$	2,054	$	3,028	$	472	$	1,137	$	257	$	27,371

N/A – Not applicable

Table of Contents

Charge-offs for the ~~three and six~~nine months ended ~~June~~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.

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 ~~June~~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		Unallocated		Total
At June 30, 2019
At September 30, 2019																	At September 30, 2019
Reserve for loan and lease losses:																	Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	99	$	1,840	$	165	$	335	$	—	$	—	N/A		$	2,439	Ending balance: individually evaluated for impairment	$	390	$	1,485	$	414	$	155	$	—	$	—	N/A		$	2,444
Ending balance: collectively evaluated for impairment	9,030		13,630		2,313		3,183		481		1,241		275		30,153		Ending balance: collectively evaluated for impairment	8,860		14,332		2,271		3,457		475		1,234		585		31,214
Ending balance: acquired non-credit impaired loans evaluated for impairment	—		8		—		—		—		—		—		8		Ending balance: acquired non-credit impaired loans evaluated for impairment	—		4		—		—		—		—		—		4
Total ending balance	$	9,129	$	15,478	$	2,478	$	3,518	$	481	$	1,241	$	275	$	32,600	Total ending balance	$	9,250	$	15,821	$	2,685	$	3,612	$	475	$	1,234	$	585	$	33,662
Loans and leases held for investment:																	Loans and leases held for investment:
Ending balance: individually evaluated for impairment (1)	$	2,150	$	17,845	$	1,596	$	3,511	$	—	$	—			$	25,102	Ending balance: individually evaluated for impairment (1)	$	2,233	$	28,280	$	2,887	$	3,520	$	2	$	306			$	37,228
Ending balance: collectively evaluated for impairment	919,032		1,873,296		313,291		542,751		32,345		142,287				3,823,002		Ending balance: collectively evaluated for impairment	941,480		1,941,575		313,307		557,512		30,573		140,501				3,924,948
Loans measured at fair value	—		1,725		—		—		—		—				1,725		Loans measured at fair value	—		349		—		—		—		—				349
Acquired non-impaired loans	15,967		199,534		50,451		51,414		140		—				317,506		Acquired non-impaired loans	15,440		180,285		44,225		48,750		140		—				288,840
Acquired credit impaired loans	—		206		302		61		—		—				569		Acquired credit impaired loans	—		206		302		60		—		—				568
Total ending balance	$	937,149	$	2,092,606	$	365,640	$	597,737	$	32,485	$	142,287			$	4,167,904	Total ending balance	$	959,153	$	2,150,695	$	360,721	$	609,842	$	30,715	$	140,807			$	4,251,933
At June 30, 2018
At September 30, 2018																	At September 30, 2018
Reserve for loan and lease losses:																	Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	646	$	866	$	12	$	—	$	—	$	—	N/A		$	1,524	Ending balance: individually evaluated for impairment	$	211	$	645	$	—	$	192	$	—	$	—	N/A		$	1,048
Ending balance: collectively evaluated for impairment	6,612		11,420		1,951		2,494		447		1,071		51		24,046		Ending balance: collectively evaluated for impairment	6,978		12,504		2,014		2,836		472		1,137		257		26,198
Ending balance: acquired non-credit impaired loans evaluated for impairment	—		41		41		—		—		—		—		82		Ending balance: acquired non-credit impaired loans evaluated for impairment	—		85		40		—		—		—		—		125
Total ending balance	$	7,258	$	12,327	$	2,004	$	2,494	$	447	$	1,071	$	51	$	25,652	Total ending balance	$	7,189	$	13,234	$	2,054	$	3,028	$	472	$	1,137	$	257	$	27,371
Loans and leases held for investment:																	Loans and leases held for investment:
Ending balance: individually evaluated for impairment (1)	$	6,238	$	21,004	$	2,132	$	3,306	$	—	$	1,250			$	33,930	Ending balance: individually evaluated for impairment (1)	$	4,889	$	18,970	$	1,588	$	3,275	$	—	$	1,250			$	29,972
Ending balance: collectively evaluated for impairment	875,390		1,569,475		265,283		470,994		31,048		131,872				3,344,062		Ending balance: collectively evaluated for impairment	862,856		1,623,458		278,588		504,381		32,096		134,758				3,436,137
Loans measured at fair value	—		1,847		—		—		—		—				1,847		Loans measured at fair value	—		1,801		—		—		—		—				1,801
Acquired non-impaired loans	44,265		259,998		70,837		62,318		143		—				437,561		Acquired non-impaired loans	26,395		245,345		65,707		59,770		142		—				397,359
Acquired credit impaired loans	267		206		460		65		—		—				998		Acquired credit impaired loans	182		206		448		64		—		—				900
Total ending balance	$	926,160	$	1,852,530	$	338,712	$	536,683	$	31,191	$	133,122			$	3,818,398	Total ending balance	$	894,322	$	1,889,780	$	346,331	$	567,490	$	32,238	$	136,008			$	3,866,169

(1) Includes ~~$14.6~~$13.6 million and ~~$17.9~~$15.3 million of acquired loans which were individually evaluated for impairment at ~~June~~September 30, 2019 and 2018, respectively.

N/A – Not applicable

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 ~~June~~September 30, 2019 and December 31, 2018. The impaired loans exclude acquired credit impaired loans.


	At September 30, 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	$	1,223	$	1,835			$	2,776	$	3,361
Real estate—commercial real estate	16,343		17,277				6,578		7,516
Real estate—construction	256		261				106		111
Real estate—residential secured for business purpose	797		978				1,478		1,660
Real estate—residential secured for personal purpose	1,533		1,731				863		911
Real estate—home equity secured for personal purpose	1,433		1,524				1,373		1,404
Loans to individuals	2		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 estate	11,681		12,436		1,485		11,637		12,162		675
Real estate—residential secured for business purpose	2,090		2,095		414		—		—		—
Real estate—residential secured for personal purpose	554		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 June 30, 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 $ 1,980
$ 2,590
$ 2,776
$ 3,361

Real estate—commercial real estate 5,158
6,163
6,578
7,516

Real estate—construction 106
111
106
111

Real estate—residential secured for business purpose 829
1,006
1,478
1,660

Real estate—residential secured for personal purpose 1,443
1,516
863
911

Real estate—home equity secured for personal purpose 1,269
1,329
1,373
1,404

Total impaired loans with no related reserve recorded $ 10,785
$ 12,715
$ 13,174
$ 14,963

Impaired loans with a reserve recorded:
Commercial, financial and agricultural $ 170
$ 170
$ 99
$ 971
$ 1,024
$ 413
Real estate—commercial real estate 12,581
13,336
1,840
11,637
12,162
675
Real estate—residential secured for business purpose 767
769
165
—
—
—
Real estate—residential secured for personal purpose 724
724
260
724
724
252
Real estate—home equity secured for personal purpose 75
75
75
75
75
75
Total impaired loans with a reserve recorded $ 14,317
$ 15,074
$ 2,439
$ 13,407
$ 13,985
$ 1,415

Total impaired loans:
Commercial, financial and agricultural $ 2,150
$ 2,760
$ 99
$ 3,747
$ 4,385
$ 413
Real estate—commercial real estate 17,739
19,499
1,840
18,215
19,678
675
Real estate—construction 106
111
—
106
111
—
Real estate—residential secured for business purpose 1,596
1,775
165
1,478
1,660
—
Real estate—residential secured for personal purpose 2,167
2,240
260
1,587
1,635
252
Real estate—home equity secured for personal purpose 1,344
1,404
75
1,448
1,479
75
Total impaired loans $ 25,102
$ 27,789
$ 2,439
$ 26,581
$ 28,948
$ 1,415




Total impaired loans:


Commercial, financial and agricultural	$	2,233	$	2,845	$	390	$	3,747	$	4,385	$	413
Real estate—commercial real estate	28,024		29,713		1,485		18,215		19,678		675
Real estate—construction	256		261		—		106		111		—
Real estate—residential secured for business purpose	2,887		3,073		414		1,478		1,660		—
Real estate—residential secured for personal purpose	2,087		2,285		155		1,587		1,635		252
Real estate—home equity secured for personal purpose	1,433		1,524		—		1,448		1,479		75
Loans to individuals	2		2		—		—		—		—
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.

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, 2019										Three 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 estate	19,818		—		284		19,878		22		261
Real estate—construction	219		—		8		108		—		2
Real estate—residential secured for business purpose	2,248		—		76		1,844		4		32
Real estate—residential secured for personal purpose	2,185		—		30		1,850		—		26
Real estate—home equity secured for personal purpose	1,313		—		19		1,507		—		21

Total	$	27,865	$	—	$	460	$	30,858	$	57	$	400

Three Months Ended June 30, 2019 Three Months Ended June 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 $ 2,509
$ 12
$ 49
$ 6,394
$ 32
$ 134
Real estate—commercial real estate 18,058
—
242
22,914
18
265
Real estate—construction 106
—
2
56
—
3
Real estate—residential secured for business purpose 1,557
—
36
1,966
5
23
Real estate—residential secured for personal purpose 1,937
—
29
889
2
33
Real estate—home equity secured for personal purpose 1,358
1
20
1,033
—
31
Total $ 25,525
$ 13
$ 378
$ 33,252
$ 57
$ 489
* 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, 2019										Nine 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 estate	18,839		3		780		19,935		212		813
Real estate—construction	151		—		11		128		—		7
Real estate—residential secured for business purpose	1,750		—		132		2,018		14		79
Real estate—residential secured for personal purpose	1,907		—		84		1,064		3		70
Real estate—home equity secured for personal purpose	1,364		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.

~~Includes interest income recognized on a cash basis for nonaccrual loans of $12 thousandand~~$2 thousand for the three months ended June 30, 2019 and 2018, respectively, and interest income recognized on the accrual method for accruing impaired loans of $1 thousand and $55 thousand for the three months ended June 30, 2019 and 2018, respectively.

Six Months Ended June 30, 2019 Six Months Ended June 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 $ 3,066
$ 17
$ 103
$ 7,090
$ 72
$ 211
Real estate—commercial real estate 18,122
3
496
20,105
190
552
Real estate—construction 106
—
3
137
—
5
Real estate—residential secured for business purpose 1,443
—
56
2,107
10
47
Real estate—residential secured for personal purpose 1,792
—
54
720
3
44
Real estate—home equity secured for personal purpose 1,384
1
43
819
—
39
Total $ 25,913
$ 21
$ 755
$ 30,978
$ 275
$ 898


*	~~Includes interest income recognized on a cash basis for nonaccrual loans of $15 thousandand~~$8 thousand for the six months ended June 30, 2019 and 2018, respectively, and interest income recognized on the accrual method for accruing impaired loans of $6 thousand and $267 thousand for the six months ended June 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 ~~June 30, 2019 or~~ December 31, 2018.

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, 2019												Three 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 agricultural	1	$	19	$	19	$	—	—	$	—	$	—	$	—



Total	1	$	19	$	19	$	—	—	$	—	$	—	$	—

Three Months Ended June 30, 2019 Three Months Ended June 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:
Real estate—home equity secured for personal purpose 1
$ 55
$ 55
$ —
—
$ —
$ —
$ —
Total 1
$ 55
$ 55
$ —
—
$ —
$ —
$ —
Nonaccrual Troubled Debt Restructured Loans:
Real estate—residential secured for personal purpose —
$ —
$ —
$ —
1
$ 66
$ 66
$ —
Total —
$ —
$ —
$ —
1
$ 66
$ 66
$ —

Six Months Ended June 30, 2019 Six Months Ended June 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 purpose 1
$ 55
$ 55
$ —
—
$ —
$ —
$ —
Total 1
$ 55
$ 55
$ —
—
$ —
$ —
$ —
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural* 2
$ 956
$ 956
$ —
—
$ —
$ —
$ —
Real estate—commercial real estate* 1
1,313
1,313
—
—
—
—
—
Real estate—residential secured for personal purpose —
—
—
—
1
66
66
—
Total 3
$ 2,269
$ 2,269
$ —
1
$ 66
$ 66
$ —


	Nine Months Ended September 30, 2019												Nine 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 purpose	1	$	55	$	55	$	—	—	$	—	$	—	$	—
Total	1	$	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		—
Total	4	$	2,288	$	2,288	$	—	1	$	66	$	66	$	—

* ~~The three~~Three nonaccrual troubled debt restructured loans ~~during the six months ended June 30, 2019~~ 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.

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 ~~six~~nine months ended ~~June~~September 30, 2019 and 2018.


	Maturity Date Extension				Amortization Period Extension					Total Concessions Granted
(Dollars in thousands)	No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount
Three Months Ended September 30, 2019
Accruing Troubled Debt Restructured Loans:




Total	—	$	—	—	$	—	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	19	—	$	—	1	$	19


Total	1	$	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 agricultural	1	$	19	2	$	956	3	$	975
Real estate—commercial real estate	—	—		1	1,313		1	1,313


Total	1	$	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
(Dollars in thousands) No. of
Loans Amount
Three Months Ended June 30, 2019
Accruing Troubled Debt Restructured Loans:
Real estate—home equity secured for personal purpose 1
$ 55
Total 1
$ 55
Nonaccrual Troubled Debt Restructured Loans:
Total —
$ —
Three Months Ended June 30, 2018
Accruing Troubled Debt Restructured Loans:
Total —
$ —
Nonaccrual Troubled Debt Restructured Loans:
Real estate—residential secured for personal purpose 1
$ 66
Total 1
$ 66
Six Months Ended June 30, 2019
Accruing Troubled Debt Restructured Loans:
Real estate—home equity secured for personal purpose 1
$ 55
Total 1
$ 55
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural 2
$ 956
Real estate—commercial real estate 1
1,313
Total 3
$ 2,269
Six Months Ended June 30, 2018
Accruing Troubled Debt Restructured Loans:
Total —
$ —
Nonaccrual Troubled Debt Restructured Loans:
Real estate—residential secured for personal purpose 1
$ 66
Total 1
$ 66

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,
	2019				2018					2019			2018
(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

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(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:
Commercial, financial and agricultural —
$ —
—
$ —
—
$ —
1
$ 953
Total —
$ —
—
$ —
—
$ —
1
$ 953
Nonaccrual Troubled Debt Restructured Loans:
Total —
$ —
—
$ —
—
$ —
—
$ —

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 ~~June~~September 30, 2019 and December 31, 2018:


(Dollars in thousands)	At September 30, 2019		At December 31, 2018
Real estate-residential secured for personal purpose	$	714	$	563
Real estate-home equity secured for personal purpose	1,134		1,134
Total	$	1,848	$	1,697

(Dollars in thousands) At June 30, 2019 At December 31, 2018
Real estate-residential secured for personal purpose $ 714
$ 563
Real estate-home equity secured for personal purpose 1,134
1,134
Total $ 1,848
$ 1,697

The Corporation held no0 foreclosed residential real estate property at ~~June~~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 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 ~~June~~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 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, 2019		At December 31, 2018
2019 (excluding the nine months ended September 30, 2019)	$	13,440	$	55,201
2020	53,183		43,355
2021	40,004		29,678
2022	27,048		17,687
2023	14,254		6,674
Thereafter	5,374		1,975
Total future minimum lease payments receivable	153,303		154,570
Plus: Unguaranteed residual	817		600
Plus: Initial direct costs	2,056		1,904
Less: Imputed interest	(15,369)		(15,118)
Lease financings	$	140,807	$	141,956

(Dollars in thousands) At June 30, 2019 At December 31, 2018
2019 (excluding the six months ended June 30, 2019) $ 29,479
$ 55,201
2020 49,897
43,355
2021 36,433
29,678
2022 23,877
17,687
2023 11,722
6,674
Thereafter 3,478
1,975
Total future minimum lease payments receivable 154,886
154,570
Plus: Unguaranteed residual 823
600
Plus: Initial direct costs 1,993
1,904
Less: Imputed interest (15,415 ) (15,118 )
Lease financings $ 142,287
$ 141,956

Table of Contents

Included within the "2019 (excluding the ~~six~~nine months ended ~~June~~September 30, 2019)" line item above as of ~~June~~September 30, 2019 and December 31, 2018 are ~~$20~~$37 thousand and $0 thousand, respectively, of receivables related to an operating lease ~~contract.~~contracts.

For the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, the Corporation recognized ~~$4.0~~$6.0 million and ~~$3.7~~$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 ~~six~~nine months ended ~~June~~September 30, 2019 were as follows:

(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 June 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 September 30, 2019	$	138,476	$	15,434	$	18,649	$	172,559

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

At June 30, 2019 At December 31, 2018
(Dollars in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Amortized intangible assets:
Covenants not to compete $ —
$ —
$ —
$ 710
$ 710
$ —
Core deposit intangibles 6,788
3,609
3,179
6,788
3,143
3,645
Customer related intangibles 8,819
7,602
1,217
12,381
10,804
1,577
Servicing rights 17,960
11,361
6,599
17,314
10,546
6,768
Total amortized intangible assets $ 33,567
$ 22,572
$ 10,995
$ 37,193
$ 25,203
$ 11,990


	At September 30, 2019										At December 31, 2018
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets:
Covenants not to compete	$	—	$	—	$	—	$	710	$	710	$	—

Core deposit intangibles	6,788		3,818		2,970		6,788		3,143		3,645
Customer related intangibles	8,819		7,763		1,056		12,381		10,804		1,577
Servicing rights	18,424		11,928		6,496		17,314		10,546		6,768
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) Amount
Remainder of 2019 $ 739
2020 1,200
2021 923
2022 666
2023 409
Thereafter 459


Year	(Dollars in thousands)	Amount
Remainder of 2019		$	368
2020		1,200
2021		923
2022		666
2023		409
Thereafter		460

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 ~~$8.8~~$8.4 million at ~~June~~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 ~~June~~September 30, 2019 and December 31, 2018. ~~The Corporation also records servicing rights on small business administration (SBA) loans. The value~~

Table of ~~these servicing rights was $135 thousand and $42 thousand at June 30, 2019 and December 31, 2018, respectively.~~Contents

Changes in the servicing rights balance are summarized as follows:

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Beginning of period $ 6,725
$ 6,605
$ 6,768
$ 6,573
Servicing rights capitalized 321
350
587
687
Amortization of servicing rights (426 ) (305 ) (735 ) (610 )
Changes in valuation allowance (21 ) —
(21 ) —
End of period $ 6,599
$ 6,650
$ 6,599
$ 6,650
Residential mortgage and SBA loans serviced for others $ 1,042,438
$ 1,019,233
$ 1,042,438
$ 1,019,233


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2019		2018		2019		2018
Beginning of period	$	6,599	$	6,650	$	6,768	$	6,573
Servicing rights capitalized	464		406		1,051		1,093

Amortization of servicing rights	(585)		(341)		(1,320)		(951)
Changes in valuation allowance	18		—		(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

Activity in the valuation allowance for mortgage servicing rights was as follows:

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Valuation allowance, beginning of period $ —
$ —
$ —
$ —
Additions (21 ) —
(21 ) —
Valuation allowance, end of period $ (21 ) $ —
$ (21 ) $ —


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2019		2018		2019		2018
Valuation allowance, beginning of period	$	(21)	$	—	$	—	$	—
Additions	—		—		(3)		—
Reductions	18		—		—		—

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
2020		1,019
2021		833
2022		678
2023		549
Thereafter		2,209

Year (Dollars in thousands) Amount
Remainder of 2019 $ 1,174
2020 993
2021 822
2022 678
2023 535
Thereafter 2,397

Note 6. Deposits

Deposits and their respective weighted average interest rate at ~~June~~September 30, 2019 and December 31, 2018 consist of the following:

At June 30, 2019 At December 31, 2018
Weighted Average Interest Rate Amount Weighted Average Interest Rate Amount
(Dollars in thousands)
Noninterest-bearing deposits — % $ 1,166,301
— % $ 1,055,919
Demand deposits 1.20
1,424,288
1.01
1,377,171
Savings deposits 0.48
822,084
0.33
782,766
Time deposits 2.02
709,437
1.76
670,077
Total 0.86 % $ 4,122,110
0.73 % $ 3,885,933


	At September 30, 2019						At December 31, 2018
	Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount
	(Dollars in thousands)
Noninterest-bearing deposits	—	%	$	1,198,425	—	%	$	1,055,919
Demand deposits	1.17		1,644,546		1.01		1,377,171
Savings deposits	0.39		776,920		0.33		782,766
Time deposits	2.02		718,100		1.76		670,077
Total	0.85	%	$	4,337,991	0.73	%	$	3,885,933

The aggregate amount of time deposits in denominations of $100 thousand or more was ~~$339.3~~$388.1 million at ~~June~~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 ~~$177.2~~$232.8 million at ~~June~~September 30, 2019 and $129.5 million at December 31, 2018.

Table of Contents

At ~~June~~September 30, 2019, the scheduled maturities of time deposits are as follows:


Year	(Dollars in thousands)	Amount
Remainder of 2019		$	171,421
2020		309,488
2021		95,356
2022		45,339
2023		71,942
Thereafter		24,554
Total		$	718,100

Year (Dollars in thousands) Amount
Remainder of 2019 $ 280,027
2020 215,587
2021 79,504
2022 40,832
2023 72,125
Thereafter 21,362
Total $ 709,437

Note 7. Borrowings

The following is a summary of borrowings by type. Short-term borrowings consist of overnight borrowings and term borrowings with an original maturity of one year or less. The long-term debt balances and weighted average interest rates include purchase accounting fair value adjustments, net of related amortization, from the Fox Chase acquisition.

At June 30, 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 purchased 20,000
2.43
60,000
2.60
Customer repurchase agreements 19,350
0.05
21,468
0.05

Long-term debt:
FHLB advances $ 150,000
1.99 % $ 125,000
1.92 %
Security repurchase agreements 20,195
2.82
20,330
2.71

Subordinated notes $ 94,696
5.33 % $ 94,574
5.33 %


	At September 30, 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 purchased	—		—		60,000		2.60
Customer repurchase agreements	18,970		0.05		21,468		0.05


Long-term debt:
FHLB advances	$	150,000	1.99	%	$	125,000	1.92	%
Security repurchase agreements	10,128		2.60		20,330		2.71

Subordinated notes	$	94,757	5.32	%	$	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 ~~June~~September 30, 2019 and December 31, 2018, the Bank had outstanding short-term letters of credit with the FHLB totaling ~~$408.3~~$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 ~~June~~September 30, 2019 and December 31, 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 ~~$104.6~~$101.4 million and $69.5 million at ~~June~~September 30, 2019 and December 31, 2018, respectively. At ~~June~~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 ~~June~~September 30, 2019 and December 31, 2018, the Corporation had no0 outstanding borrowings under this line.

Table of Contents

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

(Dollars in thousands) As of June 30, 2019 Weighted Average Rate
Remainder of 2019 $ 10,000
1.35 %
2020 40,000
1.70
2021 80,000
2.07
2022 10,000
2.09
2023 10,000
3.02
Thereafter —
—
Total $ 150,000
1.99 %


(Dollars in thousands)	As of September 30, 2019		Weighted Average Rate
Remainder of 2019	$	10,000	1.35	%
2020	40,000		1.70
2021	80,000		2.07
2022	10,000		2.09
2023	10,000		3.02
Thereafter	—		—
Total	$	150,000	1.99	%

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

(Dollars in thousands) As of June 30, 2019 Weighted Average Rate
Remainder of 2019 $ 10,038
2.83 %
2020 10,157
2.81
2021 —
—
2022 —
—
2023 —
—
Thereafter —
—
Total $ 20,195
2.82 %


(Dollars in thousands)	As of September 30, 2019		Weighted Average Rate
Remainder of 2019	$	—	—	%
2020	10,128		2.60
2021	—		—
2022	—		—
2023	—		—
Thereafter	—		—
Total	$	10,128	2.60	%

Long-term debt under security repurchase agreements totaling ~~$20.2~~$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,
	2019		2018		2019		2018
(Dollars in thousands)	Retirement Plans						Other Post Retirement Benefits
Service cost	$	109	$	140	$	17	$	22
Interest cost	476		440		23		23
Expected return on plan assets	(772)		(849)		—		—
Amortization of net actuarial loss	294		280		—		1
Accretion of prior service cost	(45)		(70)		—		—
Net periodic benefit cost (income)	$	62	$	(59)	$	40	$	46

Table of Contents

Three Months Ended June 30,
2019 2018 2019 2018
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 110
$ 140
$ 16
$ 22
Interest cost 476
439
24
23
Expected return on plan assets (770 ) (795 ) —
—
Amortization of net actuarial loss 294
281
—
1
Accretion of prior service cost (46 ) (71 ) —
—
Net periodic benefit cost (income) $ 64
$ (6 ) $ 40
$ 46

Six Months Ended June 30,
2019 2018 2019 2018
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 219
$ 280
$ 33
$ 44
Interest cost 952
880
47
46
Expected return on plan assets (1,541 ) (1,591 ) —
—
Amortization of net actuarial loss 588
561
—
2
Accretion of prior service cost (91 ) (142 ) —
—
Net periodic benefit cost (income) $ 127
$ (12 ) $ 80
$ 92


	Nine Months Ended September 30,
	2019		2018		2019		2018
(Dollars in thousands)	Retirement Plans						Other Post Retirement Benefits
Service cost	$	328	$	420	$	50	$	66
Interest cost	1,428		1,320		70		69
Expected return on plan assets	(2,313)		(2,440)		—		—
Amortization of net actuarial loss	882		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 ~~six~~nine months ended ~~June~~September 30, 2019, the Corporation contributed ~~$80~~$120 thousand to its non-qualified retirement plans and ~~$52~~$79 thousand to its other postretirement plans. During the ~~six~~nine months ended ~~June~~September 30, 2019, ~~$1.3~~$2.0 million was paid to participants from the retirement plans and ~~$52~~$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 ~~six~~nine months ended ~~June~~September 30, 2019:


(Dollars in thousands, except per share data)	Shares Under Option	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value at September 30, 2019
Outstanding at December 31, 2018	597,405	$	23.98

Expired	(11,256)	24.23
Forfeited	(8,000)	26.06
Exercised	(58,545)	17.16
Outstanding at September 30, 2019	519,604	24.72		6.9	$	1,323
Exercisable at September 30, 2019	355,343	23.02		6.3	1,323

(Dollars in thousands, except per share data) Shares Under Option Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value at June 30, 2019
Outstanding at December 31, 2018 597,405
$ 23.98

Expired (9,756 ) 23.61

Forfeited (8,000 ) 26.06

Exercised (39,500 ) 17.48

Outstanding at June 30, 2019 540,149
24.44
7.0 $ 1,658
Exercisable at June 30, 2019 373,220
22.72
6.4 1,644

Table of Contents

The following is a summary of nonvested stock options at ~~June~~September 30, 2019 including changes during the ~~six~~nine months then ended:

(Dollars in thousands, except per share data) Nonvested Stock Options Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2018 344,230
$ 6.48
Vested (169,301 ) 6.44
Forfeited (8,000 ) 6.43
Nonvested stock options at June 30, 2019 166,929
6.52


(Dollars in thousands, except per share data)	Nonvested Stock Options	Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2018	344,230	$	6.48

Vested	(171,969)	6.42		��
Forfeited	(8,000)	6.43
Nonvested stock options at September 30, 2019	164,261	6.54

The following aggregated assumptions were used to estimate the fair value of options granted during the ~~six~~nine months ended ~~June~~September 30, 2018. The Corporation did not issue stock options during the ~~six~~nine months ended ~~June~~September 30, 2019.



	~~Six~~Nine Months Ended ~~June~~September 30, 2018
Expected option life in years	~~6.6~~	6.6
Risk free interest rate	~~2.80~~	2.80	%
Expected dividend yield	~~2.81~~	2.81	%
Expected volatility	~~27.15~~	27.15	%
Fair value of options		$6.46

The following is a summary of nonvested restricted stock awards and nonvested restricted stock units at ~~June~~September 30, 2019 including changes during the ~~six~~nine months then ended:

(Dollars in thousands, except per share data) Nonvested Stock Awards and Units Weighted Average Grant Date Fair Value
Nonvested stock awards at December 31, 2018 157,579
$ 25.33
Granted 113,729
25.66
Vested (32,965 ) 21.86
Cancelled (17,349 ) 19.68
Nonvested stock awards and units at June 30, 2019 220,994
26.46


(Dollars in thousands, except per share data)	Nonvested Stock Awards and Units	Weighted Average Grant Date Fair Value
Nonvested stock awards at December 31, 2018	157,579	$	25.33
Granted	113,729	25.66
Vested	(44,807)	21.65
Cancelled	(17,736)	19.82

Nonvested stock awards and units at September 30, 2019	208,765	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:

Six Months Ended June 30,
(Dollars in thousands, except per share data) 2019 2018
Restricted stock awards and units granted 113,729
59,953
Weighted average grant date fair value $ 25.66
$ 28.39
Intrinsic value of awards vested $ 809
$ 1,193


	Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2019		2018
Restricted stock awards and units granted	113,729		59,953
Weighted average grant date fair value	$	25.66	$	28.39
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 ~~June~~September 30, 2019 is presented below:


(Dollars in thousands)	Unrecognized Compensation Cost		Weighted-Average Period Remaining (Years)
Stock options	$	624	1.3
Restricted stock awards and units	3,127		2.1
	$	3,751	1.9

(Dollars in thousands) Unrecognized Compensation Cost Weighted-Average Period Remaining (Years)
Stock options $ 793
1.4
Restricted stock awards and units 3,631
2.3
$ 4,424
2.1

Table of Contents

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)	2019		2018
Stock-based compensation expense:
Stock options	$	546	$	797
Restricted stock awards and units	1,372		1,582
Employee stock purchase plan	54		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

Six Months Ended June 30,
(Dollars in thousands) 2019 2018
Stock-based compensation expense:
Stock options $ 378
$ 515
Restricted stock awards and units 878
1,204
Employee stock purchase plan 36
34
Total $ 1,292
$ 1,753
Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options $ 284
$ 413

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
Balance, December 31, 2018 $ (11,221 ) $ 81
$ (17,276 ) $ (28,416 )
Adjustment to initially apply ASU No. 2017-12 for derivatives (1) —
83
—
83
Other comprehensive income (loss) 6,356
(364 ) 392
6,384
Balance, June 30, 2019 $ (4,865 ) $ (200 ) $ (16,884 ) $ (21,949 )

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. 2018-02 for reclassification of stranded net tax charges (968 ) 2
(2,955 ) (3,921 )
Other comprehensive (loss) income (6,525 ) 310
333
(5,882 )
Balance, June 30, 2018 $ (11,987 ) $ 321
$ (16,341 ) $ (28,007 )


(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)
Adjustment to initially apply ASU No. 2017-12 for derivatives (1)	—		83		—		83
Other comprehensive income (loss)	6,157		(421)		589		6,325
Balance, September 30, 2019	$	(5,064)	$	(257)	$	(16,687)	$	(22,008)

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. 2018-02 for reclassification of stranded net tax charges	(968)		2		(2,955)		(3,921)
Other comprehensive (loss) income	(7,411)		373		499		(6,539)
Balance, 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-rate~~interest rate swaps are included in other assets or liabilities. The Corporation’s credit exposure on interest rate swaps includes fair value and any collateral that is held by a third party. Changes in the fair value of derivative instruments designated as hedges of future cash flows are recognized in accumulated other comprehensive income until the underlying 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

Table of Contents

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 ~~June~~September 30, 2019, approximately ~~$21~~$49 thousand in net deferred 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 ~~June~~September 30, 2019. At ~~June~~September 30, 2019, the notional amount of the interest rate swap was ~~$16.7~~$16.5 million, with a negative fair value of ~~$254~~$326 thousand.

The Corporation ~~has~~had an interest rate swap classified as a fair value hedge ~~with a current notional amount of $1.3 million to hedge~~for 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 ~~pays~~paid a fixed rate of 5.83% and ~~receives~~received a floating rate based on the one-month LIBOR plus 350 basis points. The swap ~~matures~~was 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 is

was recorded in interest income in the consolidated statements of 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 income.

The Corporation has an interest rate swap with a current notional amount of ~~$361~~$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 ~~June~~September 30, 2019, the Corporation has ~~twenty-eight~~NaN variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of ~~$186.7~~$221.4 million and remaining maturities ranging from less than one year to 10 years. At ~~June~~September 30, 2019, the fair value of the swaps to the customers was a net liability of ~~$8.2~~$11.9 million and ~~$119.7~~$187.2 million of notional amount of the swaps were in paying positions while ~~$67.0~~$34.2 million were in receiving positions to the third-party financial institution. At ~~June~~September 30, 2019, the fair value of the Corporation's interest rate swap credit derivatives was a liability of ~~$160~~$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.

Table of Contents

Derivatives Tables

The following table presents the notional amounts and fair values of derivatives designated as hedging instruments recorded on the consolidated balance sheets at ~~June~~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
(Dollars in thousands) Notional
Amount Balance Sheet
Classification Fair
Value Balance Sheet
Classification Fair
Value
At June 30, 2019
Interest rate swap - cash flow hedge $ 16,685
$ —
Other liabilities $ 254
Interest rate swap - fair value hedge 1,324
—
Other liabilities 20
Total $ 18,009
$ —
$ 274
At December 31, 2018
Interest rate swap - cash flow hedge $ 17,076
Other assets $ 185
$ —
Interest rate swap - fair value hedge 1,346
Other assets 4
—
Total $ 18,422
$ 189
$ —


			Derivative Assets				Derivative Liabilities
(Dollars in thousands)	Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
At September 30, 2019
Interest rate swap - cash flow hedge	$	16,487		$	—	Other liabilities	$	326
Interest rate swap - fair value hedge	—			—			—
Total	$	16,487		$	—		$	326
At December 31, 2018
Interest rate swap - cash flow hedge	$	17,076	Other assets	$	185		$	—
Interest rate swap - fair value hedge	1,346		Other assets	4			—
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 ~~June~~September 30, 2019 and December 31, 2018:


			Derivative Assets				Derivative 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 derivatives	221,384			—		Other liabilities	263
Interest rate locks with customers	57,727		Other assets	907			—
Forward loan sale commitments	60,469		Other assets	169			—
Total	$	339,912		$	1,076		$	280
At December 31, 2018
Interest rate swap	$	418		$	—	Other liabilities	$	20
Credit derivatives	122,410			—		Other liabilities	72
Interest rate locks with customers	21,494		Other assets	490			—
Forward loan sale commitments	23,227			—		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 June 30, 2019
Interest rate swap $ 361
$ —
Other liabilities $ 19
Credit derivatives 186,688
—
Other liabilities 160
Interest rate locks with customers 38,175
Other assets 798
—
Forward loan sale commitments 39,657
—
Other liabilities 197
Total $ 264,881
$ 798
$ 376
At December 31, 2018
Interest rate swap $ 418

$ —
Other liabilities $ 20
Credit derivatives 122,410

—
Other liabilities 72
Interest rate locks with customers 21,494
Other assets 490
—
Forward loan sale commitments 23,227
—
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 Ended						Nine Months Ended
				September 30,						September 30,
(Dollars in thousands)				2019		2018		2019		2018

Interest rate swap—cash flow hedge—net interest payments	Interest expense	$	(4)	$	1	$	(34)	$	27

Interest rate swap—fair value hedge—effectiveness	Interest income	(6)		—		(5)		—
Interest rate swap—fair value hedge—ineffectiveness	Other noninterest income	—		1		—		3
Total net (loss) gain		$	(2)	$	—	$	29	$	(24)

Statement of Income
Classification Three Months Ended
June 30, Six Months Ended
June 30,
(Dollars in thousands) 2019 2018 2019 2018
Interest rate swap—cash flow hedge—net interest payments Interest expense $ (14 ) $ 6
$ (30 ) $ 26
Interest rate swap—fair value hedge—effectiveness Interest income —
—
1
—
Interest rate swap—fair value hedge—ineffectiveness Other noninterest income —
2
—
2
Total net gain (loss) $ 14
$ (4 ) $ 31
$ (24 )

Table of Contents

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


	Statement of Income Classification	Three Months Ended						Nine Months Ended
				September 30,						September 30,
(Dollars in thousands)				2019		2018		2019		2018

Credit derivatives	Other noninterest income	$	186	$	48	$	768	$	87
Interest rate locks with customers	Net gain (loss) on mortgage banking activities	109		(328)		417		(223)
Forward loan sale commitments	Net gain (loss) on mortgage banking activities	366		144		319		(8)
Total net gain (loss)		$	661	$	(136)	$	1,504	$	(144)

Statement of Income Classification Three Months Ended
June 30, Six Months Ended
June 30,
(Dollars in thousands) 2019 2018 2019 2018
Credit derivatives Other noninterest income $ 318
$ 34
$ 582
$ 38
Interest rate locks with customers Net gain on mortgage banking activities 343
237
308
105
Forward loan sale commitments Net loss on mortgage banking activities (76 ) (104 ) (47 ) (153 )
Total net gain (loss) $ 585
$ 167
$ 843
$ (10 )

The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at ~~June~~September 30, 2019 and December 31, 2018:


(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At September 30, 2019		At December 31, 2018
Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(257)	$	80
Total		$	(257)	$	80

(Dollars in thousands) Accumulated Other
Comprehensive (Loss) Income At June 30, 2019 At December 31, 2018
Interest rate swap—cash flow hedge Fair value, net of taxes $ (201 ) $ 80
Total $ (201 ) $ 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

Table of Contents

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 ~~June~~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.

~~Two~~One commercial ~~loans~~loan associated with an interest rate ~~swaps are~~swap 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 loans~~1 loan was ~~$45~~$17 thousand at ~~June~~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.

Table of Contents

The following table presents the assets and liabilities measured at fair value on a recurring basis at ~~June~~September 30, 2019 and December 31, 2018, classified using the fair value hierarchy:


	At September 30, 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	$	—	$	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 industry	936		—		—		936
Money market mutual funds	1,523		—		—		1,523
Total equity securities	2,459		—		—		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

Table of Contents

At June 30, 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 $ —
$ 10,316
$ —
$ 10,316
State and political subdivisions —
44,172
—
44,172
Residential mortgage-backed securities —
141,815
—
141,815
Collateralized mortgage obligations —
2,677
—
2,677
Corporate bonds —
67,117
26,925
94,042
Total available-for-sale securities —
266,097
26,925
293,022
Equity securities:
Equity securities - financial services industry 943
—
—
943
Money market mutual funds 1,922
—
—
1,922
Total equity securities 2,865
—
—
2,865
Loans* —
—
1,725
1,725
Interest rate locks with customers* —
798
—
798
Total assets $ 2,865
$ 266,895
$ 28,650
$ 298,410
Liabilities:
Contingent consideration liability $ —
$ —
$ 211
$ 211
Interest rate swaps* —
293
—
293
Credit derivatives* —
—
160
160
Forward loan sale commitments* —
197
—
197
Total liabilities $ —
$ 490
$ 371
$ 861


	At December 31, 2018
(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	$	—	$	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 industry	924		—		—		924
Money market mutual funds	1,241		—		—		1,241
Total equity securities	2,165		—		—		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 ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	Nine Months Ended September 30, 2019
(Dollars in thousands)	Balance at December 31, 2018		Purchases/additions		Sales		Payments received		Premium amortization, net		Increase (decrease) in value		Balance at September 30, 2019
Corporate bonds	$	25,729	$	—	$	—	$	—	$	—	$	675	$	26,404
Loans	1,779		—		—		(1,432)		—		2		349
Credit derivatives	(72)		(958)		—		—		—		767		(263)
Net total	$	27,436	$	(958)	$	—	$	(1,432)	$	—	$	1,444	$	26,490

Six Months Ended June 30, 2019
(Dollars in thousands) Balance at
December 31,
2018 Purchases/additions Sales Payments received Premium amortization, net Increase (decrease) in value Balance at June 30, 2019
Corporate bonds $ 25,729
$ —
$ —
$ —
$ —
$ 1,196
$ 26,925
Loans 1,779
—
—
(78 ) —
24
1,725
Credit derivatives (72 ) (670 ) —
—
—
582
(160 )
Net total $ 27,436
$ (670 ) $ —
$ (78 ) $ —
$ 1,802
$ 28,490


	Nine Months Ended September 30, 2018
(Dollars in thousands)	Balance at December 31, 2017		Purchases/additions		Sales		Payments received		Premium amortization, net		(Decrease) increase in value		Balance at September 30, 2018
Corporate bonds	$	27,986	$	—	$	—	$	—	$	—	$	(1,579)	$	26,407
Loans	1,958		—		—		(110)		—		(47)		1,801
Credit derivatives	(36)		(75)		—		—		—		87		(24)
Net total	$	29,908	$	(75)	$	—	$	(110)	$	—	$	(1,539)	$	28,184

Six Months Ended June 30, 2018
(Dollars in thousands) Balance at
December 31,
2017 Purchases/additions Sales Payments received Premium amortization, net (Decrease) increase in value Balance at June 30, 2018
Corporate bonds $ 27,986
$ —
$ —
$ —
$ —
$ (1,600 ) $ 26,386
Loans 1,958
—
—
(73 ) —
(38 ) 1,847
Credit derivatives (36 ) (40 ) —
—
—
39
(37 )
Net total $ 29,908
$ (40 ) $ —
$ (73 ) $ —
$ (1,599 ) $ 28,196

Table of Contents

The following table presents the change in the balance of the contingent consideration liability related to acquisitions for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the ~~six~~nine months ended ~~June~~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

Six Months Ended June 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 June 30, 2019
Girard Partners $ 259
$ —
$ 65
$ 17
$ 211
Total contingent consideration liability $ 259
$ —
$ 65
$ 17
$ 211

Six Months Ended June 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 June 30, 2018
Girard Partners $ 339
$ —
$ 67
$ 28
$ 300
Total contingent consideration liability $ 339
$ —
$ 67
$ 28
$ 300


	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 September 30, 2018
Girard Partners	$	339	$	—	$	67	$	38	$	310
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 ~~June~~September 30, 2019 and December 31, 2018:


	At September 30, 2019
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets 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 June 30, 2019
(Dollars in thousands) Level 1 Level 2 Level 3 Assets at
Fair Value
Impaired loans held for investment $ —
$ —
$ 22,663
$ 22,663
Other real estate owned —
—
540
540
Total $ —
$ —
$ 23,203
$ 23,203

At December 31, 2018
(Dollars in thousands) Level 1 Level 2 Level 3 Assets 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


	At December 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets 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

Table of Contents

The following table presents assets and liabilities and off-balance sheet items not measured at fair value on a recurring or non-recurring basis in the Corporation’s consolidated balance sheets but for which the fair value is required to be disclosed at ~~June~~September 30, 2019 and December 31, 2018. The disclosed fair values are classified using the fair value hierarchy.


	At June 30, 2019													At September 30, 2019
(Dollars in thousands)	Level 1		Level 2			Level 3		Fair Value			Carrying Amount		(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:													Assets:
Cash and short-term interest-earning assets	$	84,567	$	—		$	—	$	84,567		$	84,567	Cash and short-term interest-earning assets	$	225,334	$	—	$	—	$	225,334	$	225,334

Held-to-maturity securities	—		175,296			—		175,296			172,946		Held-to-maturity securities	—		186,644		—		186,644		183,845
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA			NA		NA			32,755		Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		29,254
Loans held for sale	—		1,531			—		1,531			1,498		Loans held for sale	—		2,912		—		2,912		2,893
Net loans and leases held for investment	—		—			4,121,087		4,121,087			4,110,916		Net loans and leases held for investment	—		—		4,203,743		4,203,743		4,183,138
Servicing rights	—		—			8,911		8,911			6,599		Servicing rights	—		—		8,522		8,522		6,496

Total assets	$	84,567	$	176,827		$	4,129,998	$	4,391,392		$	4,409,281	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	$	3,412,673	$	—		$	—	$	3,412,673		$	3,412,673	Demand and savings deposits, non-maturity	$	3,619,891	$	—	$	—	$	3,619,891	$	3,619,891
Time deposits	—		712,030			—		712,030			709,437		Time deposits	—		722,151		—		722,151		718,100
Total deposits	3,412,673		712,030			—		4,124,703			4,122,110		Total deposits	3,619,891		722,151		—		4,342,042		4,337,991
Short-term borrowings	—		39,350			—		39,350			39,350		Short-term borrowings	—		18,970		—		18,970		18,970
Long-term debt	—		171,177			—		171,177			170,195		Long-term debt	—		161,361		—		161,361		160,128
Subordinated notes	—		96,572			—		96,572			94,696		Subordinated notes	—		96,500		—		96,500		94,757
Total liabilities	$	3,412,673	$	1,019,129		$	—	$	4,431,802		$	4,426,351	Total liabilities	$	3,619,891	$	998,982	$	—	$	4,618,873	$	4,611,846
Off-Balance-Sheet:													Off-Balance-Sheet:
Commitments to extend credit	$	—	$	(8,066	)	$	—	$	(8,066	)	$	—	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 stock NA
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 deposits 3,215,856
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 ) $ —

Table of Contents


	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 stock	NA		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 deposits	3,215,856		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 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 ~~June~~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

Table of Contents

cash flows, and analyzing market data that the Corporation may adjust due to specific characteristics of the loan/lease or collateral. At ~~June~~September 30, 2019, impaired loans held for investment had a carrying amount of ~~$25.1~~$36.9 million with a valuation allowance of $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 million. The Corporation had noimpaired leases of $306 thousand with 0 reserve at September 30, 2019. The Corporation had 0 impaired leases at ~~June 30, 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 ~~June~~September 30, 2019, servicing rights had a carrying amount of ~~$6.6~~$6.5 million with a valuation allowance of ~~$21~~$3 thousand. At December 31, 2018, servicing rights carrying amount of $6.7 million 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 ~~six~~nine months ended ~~June~~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 ~~six~~nine months ended ~~June~~September 30, 2019, ~~one property was~~2 properties were sold with total proceeds of ~~$599~~$670 thousand. At ~~June~~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 ~~June~~September 30, 2019, the Corporation has ~~three~~3 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

Table of Contents

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 June 30, 2019		At December 31, 2018		At June 30, 2018		(Dollars in thousands)	At September 30, 2019		At December 31, 2018		At September 30, 2018
Banking	$	5,059,733	$	4,895,732	$	4,656,201	Banking	$	5,256,435	$	4,895,732	$	4,711,093
Wealth Management	42,024		39,090		37,227		Wealth Management	43,305		39,090		38,042
Insurance	32,256		30,117		29,295		Insurance	33,239		30,117		29,299
Other	20,285		19,408		26,458		Other	20,632		19,408		23,564
Consolidated assets	$	5,154,298	$	4,984,347	$	4,749,181	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 ~~six~~nine months ended ~~June~~September 30, 2019 and 2018.


	Three Months Ended
	September 30, 2019
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	54,280	$	12	$	—	$	8	$	54,300
Interest expense	10,394		—		—		1,261		11,655
Net interest income	43,886		12		—		(1,253)		42,645
Provision for loan and lease losses	1,530		—		—		—		1,530
Noninterest income	6,491		6,049		4,039		20		16,599
Intangible expenses	209		103		66		—		378

Other noninterest expense	28,999		3,757		2,990		146		35,892
Intersegment (revenue) expense*	(307)		177		130		—		—
Income (expense) before income taxes	19,946		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

Table of Contents


	Three Months Ended													Three Months Ended
	June 30, 2019													September 30, 2018
(Dollars in thousands)	Banking			Wealth Management		Insurance		Other			Consolidated		(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	54,041		$	11	$	—	$	8		$	54,060	Interest income	$	49,238	$	9	$	—	$	8	$	49,255
Interest expense	10,164			—		—		1,261			11,425		Interest expense	7,571		—		—		1,261		8,832
Net interest income	43,877			11		—		(1,253		)	42,635		Net interest income	41,667		9		—		(1,253)		40,423
Provision for loan and lease losses	2,076			—		—		—			2,076		Provision for loan and lease losses	2,745		—		—		—		2,745
Noninterest income	6,014			6,155		4,145		42			16,356		Noninterest income	5,070		5,795		3,845		151		14,861
Intangible expenses	233			105		79		—			417		Intangible expenses	240		136		103		—		479

Other noninterest expense	28,098			3,788		3,072		1,403			36,361		Other noninterest expense	26,542		3,547		3,087		716		33,892
Intersegment (revenue) expense*	(295		)	161		134		—			—		Intersegment (revenue) expense*	(512)		377		135		—		—
Income (expense) before income taxes	19,779			2,112		860		(2,614		)	20,137		Income (expense) before income taxes	17,722		1,744		520		(1,818)		18,168
Income tax expense (benefit)	3,660			409		70		(470		)	3,669		Income tax expense (benefit)	3,171		493		156		(616)		3,204
Net income (loss)	$	16,119		$	1,703	$	790	$	(2,144	)	$	16,468	Net income (loss)	$	14,551	$	1,251	$	364	$	(1,202)	$	14,964

Capital expenditures	$	371		$	35	$	39	$	137		$	582	Capital expenditures	$	570	$	73	$	16	$	86	$	745


	Three Months Ended													Nine Months Ended
	June 30, 2018													September 30, 2019
(Dollars in thousands)	Banking			Wealth Management		Insurance		Other			Consolidated		(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	46,444		$	8	$	—	$	8		$	46,460	Interest income	$	160,667	$	33	$	—	$	24	$	160,724
Interest expense	6,209			—		—		1,261			7,470		Interest expense	30,138		—		—		3,783		33,921
Net interest income	40,235			8		—		(1,253		)	38,990		Net interest income	130,529		33		—		(3,759)		126,803
Provision for loan and lease losses	15,409			—		—		—			15,409		Provision for loan and lease losses	6,291		—		—		—		6,291
Noninterest income	5,461			5,862		3,904		87			15,314		Noninterest income	17,476		17,924		13,537		315		49,252
Intangible expenses	329			137		128		—			594		Intangible expenses	675		313		233		—		1,221

Other noninterest expense	26,723			3,628		3,093		309			33,753		Other noninterest expense	84,876		11,339		9,188		1,981		107,384
Intersegment (revenue) expense*	(295		)	156		139		—			—		Intersegment (revenue) expense*	(901)		504		397		—		—
Income (expense) before income taxes	3,530			1,949		544		(1,475		)	4,548		Income (expense) before income taxes	57,064		5,801		3,719		(5,425)		61,159
Income tax (benefit) expense	(162		)	597		163		(407		)	191
Income tax expense (benefit)													Income tax expense (benefit)	10,499		1,115		334		(998)		10,950
Net income (loss)	$	3,692		$	1,352	$	381	$	(1,068	)	$	4,357	Net income (loss)	$	46,565	$	4,686	$	3,385	$	(4,427)	$	50,209

Capital expenditures	$	820		$	40	$	2	$	10		$	872	Capital expenditures	$	1,187	$	80	$	88	$	292	$	1,647

Six Months Ended
June 30, 2019
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 106,387
$ 21
$ —
$ 16
$ 106,424
Interest expense 19,744
—
—
2,522
22,266
Net interest income 86,643
21
—
(2,506 ) 84,158
Provision for loan and lease losses 4,761
—
—
—
4,761
Noninterest income 10,985
11,875
9,498
295
32,653
Intangible expenses 466
210
167
—
843
Other noninterest expense 55,877
7,582
6,198
1,835
71,492
Intersegment (revenue) expense* (594 ) 327
267
—
—
Income (expense) before income taxes 37,118
3,777
2,866
(4,046 ) 39,715
Income tax expense (benefit) 6,780
723
263
(598 ) 7,168
Net income (loss) $ 30,338
$ 3,054
$ 2,603
$ (3,448 ) $ 32,547
Capital expenditures $ 1,136
$ 74
$ 64
$ 158
$ 1,432


	Six Months Ended													Nine Months Ended
	June 30, 2018													September 30, 2018
(Dollars in thousands)	Banking			Wealth Management		Insurance		Other			Consolidated		(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	89,966		$	13	$	—	$	15		$	89,994	Interest income	$	139,204	$	22	$	—	$	23	$	139,249
Interest expense	11,210			—		—		2,522			13,732		Interest expense	18,781		—		—		3,783		22,564
Net interest income	78,756			13		—		(2,507		)	76,262		Net interest income	120,423		22		—		(3,760)		116,685
Provision for loan and lease losses	17,462			—		—		—			17,462		Provision for loan and lease losses	20,207		—		—		—		20,207
Noninterest income	10,250			11,602		8,990		54			30,896		Noninterest income	15,320		17,397		12,835		205		45,757
Intangible expenses	658			279		269		—			1,206		Intangible expenses	898		415		372		—		1,685
Restructuring charges	571			—		—		—			571		Restructuring charges	571		—		—		—		571
Other noninterest expense	54,384			7,286		6,338		(313		)	67,695		Other noninterest expense	80,790		10,969		9,425		403		101,587
Intersegment (revenue) expense*	(586		)	309		277		—			—		Intersegment (revenue) expense*	(1,098)		686		412		—		—
Income (expense) before income taxes	16,517			3,741		2,106		(2,140		)	20,224		Income (expense) before income taxes	34,375		5,349		2,626		(3,958)		38,392
Income tax expense (benefit)	1,836			1,142		619		(580		)	3,017		Income tax expense (benefit)	5,006		1,636		775		(1,196)		6,221
Net income (loss)	$	14,681		$	2,599	$	1,487	$	(1,560	)	$	17,207	Net income (loss)	$	29,369	$	3,713	$	1,851	$	(2,762)	$	32,171

Capital expenditures	$	1,790		$	89	$	9	$	65		$	1,953	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.

Table of Contents

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 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 ~~June~~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, 2019			Nine 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 leases				2,636

	At September 30, 2019
Weighted-average remaining lease term in years	15.0
Weighted-average discount rate	4.24		%

(Dollars in thousands) Three months ended June 30, 2019 Six months ended June 30, 2019
Lease cost $ 947
$ 1,894
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from leases 1,739

At June 30, 2019
Weighted-average remaining lease term in years 15.2

Weighted-average discount rate 4.24 %

At ~~June~~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
2020		3,633
2021		3,689
2022		3,662
2023		3,611
Thereafter		37,298
Total lease payments		52,793
Less: imputed interest		(14,677)
Present value of lease liabilities		$	38,116

Maturity of Lease Liabilities (Dollars in thousands) Amount
Remainder of 2019 $ 1,797
2020 3,633
2021 3,689
2022 3,662
2023 3,611
Thereafter 37,298
Total lease payments 53,690
Less: imputed interest (15,082 )
Present value of lease liabilities $ 38,608

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
2020		3,632
2021		3,688
2022		3,660
2023		3,610
Thereafter		37,389
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.

Table of Contents

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

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

Forward-Looking Statements

The information contained in this report may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words “believe,” “anticipate,” “estimate,” “expect,” “project,” “target,” “goal” and similar expressions are intended to identify forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. 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;

•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 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 critical accounting policies. For more information on these critical accounting policies, please refer to the Corporation’s 2018 Annual Report on Form 10-K.

Table of Contents

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, 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 Ended													Nine Months Ended
	September 30,								Change								September 30,				Change
(Dollars in thousands, except per share data)	2019			2018			Amount		Percent		2019			2018			Amount		Percent
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
Diluted	0.60			0.51			0.09		17.6		1.71			1.09			0.62		56.9
Return on average assets	1.32		%	1.23		%	9 BP		7.3		1.30		%	0.92		%	38 BP		41.3
Return on average equity	10.62			9.70			92 BP		9.5		10.40			7.05			335 BP		47.5

Three Months Ended
June 30, Change Six Months Ended
June 30, Change
(Dollars in thousands, except per share data) 2019 2018 Amount Percent 2019 2018 Amount Percent
Net income $ 16,468
$ 4,357
$ 12,111
N/M $ 32,547
$ 17,207
$ 15,340
89.1 %
Net income per share:
Basic $ 0.56
$ 0.15
$ 0.41
N/M $ 1.11
$ 0.59
$ 0.52
88.1
Diluted 0.56
0.15
0.41
N/M 1.11
0.58
0.53
91.4
Return on average assets 1.28 % 0.37 % 91 BP
N/M 1.29 % 0.75 % 54 BP
72.0
Return on average equity 10.23
2.86
737 BP
N/M 10.28
5.70
458 BP
80.4

The Corporation reported net income of ~~$16.5~~$17.7 million, or ~~$0.56~~$0.60 diluted earnings per share, for the three months ended ~~June~~September 30, 2019, compared to net income of ~~$4.4~~$15.0 million, or ~~$0.15~~$0.51 diluted earnings per share, for the three months ended ~~June~~September 30, 2018. Net income for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$32.5~~$50.2 million, or ~~$1.11~~$1.71 diluted earnings per share, compared to net income of ~~$17.2~~$32.2 million, or ~~$0.58~~$1.09 diluted earnings per share, for the ~~six~~nine months ended ~~June~~September 30, 2018.

The financial results for the three and ~~six~~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.

Table of Contents

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, ~~in each period,~~ related to fraudulent activities by employees of a borrower. In addition, the ~~three and six~~nine months ended ~~June~~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 for each period.~~share. The ~~six~~nine months ended ~~June~~September 30, 2018 included restructuring costs related to financial center closures of $451 thousand, net of tax, recognized in the first quarter of 2018, which represented $0.02 diluted earnings per share.

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 ~~six~~nine months ended ~~June~~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- free~~interest-free funding sources represents the effect on the net interest margin of net funding provided by noninterest-earning assets, noninterest-bearing liabilities and shareholders’ equity. Table 2 analyzes the changes in the tax-equivalent net interest income for the periods broken down by their rate and volume components.

Three and ~~six~~nine months ended ~~June~~September 30, 2019 versus 2018

Net interest income on a tax-equivalent basis for the three months ended ~~June~~September 30, 2019 was $43.3 million, an increase of ~~$3.6~~$2.2 million, or ~~9.2%~~5.4%, compared to the three months ended ~~June~~September 30, 2018. Net interest income on a tax-equivalent basis for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$85.5~~$128.7 million, an increase of ~~$7.9~~$10.1 million, or ~~10.1%~~8.5%, compared to the same period in 2018. The increase in tax-equivalent net interest income for the three and ~~six~~nine months ended ~~June~~September 30, 2019 compared to the same periods in 2018 was primarily due to the growth in average loans of ~~10.1%~~8.8% and ~~10.3%~~9.8%, respectively.

The net interest margin on a tax-equivalent basis for the ~~second~~third quarter of 2019 was ~~3.67%~~3.52%, compared to ~~3.73%~~3.71% for the ~~second~~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 nine months ended September 30, 2018. During the three and ~~six~~nine months ended ~~June~~September 30, 2019, excess liquidity reduced net interest margin by approximately 513 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. ~~This~~The excess liquidity during 2019 was primarily driven by strong deposit growth. ~~The~~Purchase accounting accretion had no impact on the net interest margin ~~on a tax-equivalent basis~~ for the ~~six~~three or nine months ended ~~June~~September 30, 2019 ~~was 3.71%,~~ compared to ~~3.72% for the six months ended June 30, 2018. The~~a favorable impact of ~~purchase accounting accretion was~~approximately three basis points and one basis point for the three and nine months ended ~~June~~September 30, ~~2019, compared to three basis points for the three months ended June 30, 2018. The favorable impact~~2018, respectively.

Table of ~~purchase accounting accretion was one basis point for the six months ended June 30, 2019, compared to two basis points for the six months ended June 30, 2018.~~Contents

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


	Three Months Ended June 30,															Three Months Ended September 30,
	2019							2018								2019												2018
(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	$	102,623		$	569	2.22	%	$	37,254		$	148	1.59	%	Interest-earning deposits with other banks	$	213,623		$	1,178	2.19	%	$	80,678		$	398	1.96	%
U.S. government obligations	17,315			73		1.69		23,183			91		1.57		U.S. government obligations	14,154			62		1.74		22,331			90		1.60
Obligations of states and political subdivisions	59,267			507		3.43		71,092			603		3.40		Obligations of states and political subdivisions	42,465			316		2.95		68,703			581		3.36
Other debt and equity securities	394,840			2,572		2.61		356,100			2,177		2.45		Other debt and equity securities	403,480			2,519		2.48		362,388			2,258		2.47
Federal Home Loan Bank, Federal Reserve Bank and other stock	31,938			535		6.72		32,788			509		6.23		Federal Home Loan Bank, Federal Reserve Bank and other stock	30,857			519		6.67		31,107			484		6.17
Total interest-earning deposits, investments and other interest-earning assets	605,983			4,256		2.82		520,417			3,528		2.72		Total interest-earning deposits, investments and other interest-earning assets	704,579			4,594		2.59		565,207			3,811		2.68
Commercial, financial and agricultural loans	820,009			10,589		5.18		810,610			9,750		4.82		Commercial, financial and agricultural loans	800,006			9,952		4.94		796,593			10,184		5.07
Real estate—commercial and construction loans	1,912,248			23,110		4.85		1,661,198			19,044		4.60		Real estate—commercial and construction loans	1,966,593			23,439		4.73		1,729,538			20,527		4.71
Real estate—residential loans	941,712			11,483		4.89		853,769			10,046		4.72		Real estate—residential loans	956,224			11,570		4.80		880,589			10,447		4.71
Loans to individuals	31,939			510		6.40		28,985			444		6.14		Loans to individuals	31,504			490		6.17		32,057			499		6.18
Municipal loans and leases	335,399			3,305		3.95		313,181			2,961		3.79		Municipal loans and leases	333,734			3,413		4.06		316,149			3,037		3.81
Lease financings	81,762			1,459		7.16		75,452			1,353		7.19		Lease financings	82,424			1,482		7.13		77,369			1,409		7.23
Gross loans and leases	4,123,069			50,456		4.91		3,743,195			43,598		4.67		Gross loans and leases	4,170,485			50,346		4.79		3,832,295			46,103		4.77
Total interest-earning assets	4,729,052			54,712		4.64		4,263,612			47,126		4.43		Total interest-earning assets	4,875,064			54,940		4.47		4,397,502			49,914		4.50
Cash and due from banks	46,868							45,158							Cash and due from banks	53,019							48,737
Reserve for loan and lease losses	(31,847		)					(23,914		)					Reserve for loan and lease losses	(33,152)							(26,099)
Premises and equipment, net	58,873							61,234							Premises and equipment, net	57,881							60,622
Operating lease right-of-use assets	35,821							—							Operating lease right-of-use assets	35,238							—
Other assets	331,681							336,737							Other assets	329,817							336,559
Total assets	$	5,170,448						$	4,682,827						Total assets	$	5,317,867						$	4,817,321
Liabilities:															Liabilities:
Interest-bearing checking deposits	$	457,231		$	457	0.40		$	463,156		$	383	0.33		Interest-bearing checking deposits	$	497,185		$	678	0.54		$	465,992		$	541	0.46
Money market savings	982,440			4,234		1.73		694,734			1,758		1.01		Money market savings	1,004,806			4,112		1.62		813,769			2,664		1.30
Regular savings	818,523			1,013		0.50		803,586			582		0.29		Regular savings	805,632			963		0.47		787,383			581		0.29
Time deposits	688,897			3,407		1.98		553,579			1,819		1.32		Time deposits	715,520			3,681		2.04		633,552			2,492		1.56
Total time and interest-bearing deposits	2,947,091			9,111		1.24		2,515,055			4,542		0.72		Total time and interest-bearing deposits	3,023,143			9,434		1.24		2,700,696			6,278		0.92
Short-term borrowings	48,312			217		1.80		217,327			958		1.77		Short-term borrowings	32,375			94		1.15		129,365			584		1.79
Long-term debt	159,572			836		2.10		155,628			709		1.83		Long-term debt	167,338			866		2.05		148,323			709		1.90
Subordinated notes	94,663			1,261		5.34		94,420			1,261		5.36		Subordinated notes	94,724			1,261		5.28		94,480			1,261		5.30
Total borrowings	302,547			2,314		3.07		467,375			2,928		2.51		Total borrowings	294,437			2,221		2.99		372,168			2,554		2.72
Total interest-bearing liabilities	3,249,638			11,425		1.41		2,982,430			7,470		1.00		Total interest-bearing liabilities	3,317,580			11,655		1.39		3,072,864			8,832		1.14
Noninterest-bearing deposits	1,198,320							1,048,901							Noninterest-bearing deposits	1,265,027							1,091,931
Operating lease liabilities	38,873							—							Operating lease liabilities	38,364							—
Accrued expenses and other liabilities	38,079							39,829							Accrued expenses and other liabilities	37,373							40,723
Total liabilities	4,524,910							4,071,160							Total liabilities	4,658,344							4,205,518
Shareholders’ Equity:															Shareholders’ Equity:
Common stock	157,784							157,784							Common stock	157,784							157,784
Additional paid-in capital	293,496							290,517							Additional paid-in capital	294,138							291,499
Retained earnings and other equity	194,258							163,366							Retained earnings and other equity	207,601							162,520
Total shareholders’ equity	645,538							611,667							Total shareholders’ equity	659,523							611,803
Total liabilities and shareholders’ equity	$	5,170,448						$	4,682,827						Total liabilities and shareholders’ equity	$	5,317,867						$	4,817,321
Net interest income				$	43,287						$	39,656			Net interest income				$	43,285						$	41,082
Net interest spread						3.23							3.43		Net interest spread						3.08							3.36
Effect of net interest-free funding sources						0.44							0.30		Effect of net interest-free funding sources						0.44							0.35
Net interest margin						3.67	%						3.73	%	Net interest margin						3.52	%						3.71	%
Ratio of average interest-earning assets to average interest-bearing liabilities	145.53		%					142.96		%					Ratio of average interest-earning assets to average interest-bearing liabilities	146.95		%					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 ~~June~~September 30, 2019 and 2018 have been calculated using the Corporation's federal applicable rate of 21%.

Table of Contents


	Six Months Ended June 30,															Nine Months Ended September 30,
	2019							2018								2019												2018
(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	$	72,760		$	838	2.32	%	$	28,269		$	224	1.60	%	Interest-earning deposits with other banks	$	120,231		$	2,016	2.24	%	$	45,931		$	622	1.81	%
U.S. government obligations	18,669			155		1.67		23,550			185		1.58		U.S. government obligations	17,148			217		1.69		23,139			275		1.59
Obligations of states and political subdivisions	61,703			1,053		3.44		72,814			1,196		3.31		Obligations of states and political subdivisions	55,220			1,369		3.31		71,429			1,777		3.33
Other debt and equity securities	390,440			5,203		2.69		357,766			4,272		2.41		Other debt and equity securities	394,834			7,722		2.61		359,324			6,530		2.43
Federal Home Loan Bank, Federal Reserve Bank and other stock	32,148			1,121		7.03		30,933			1,013		6.60		Federal Home Loan Bank, Federal Reserve Bank and other stock	31,713			1,640		6.91		30,992			1,497		6.46
Total interest-earning deposits, investments and other interest-earning assets	575,720			8,370		2.93		513,332			6,890		2.71		Total interest-earning deposits, investments and other interest-earning assets	619,146			12,964		2.80		530,815			10,701		2.70
Commercial, financial and agricultural loans	815,565			21,347		5.28		796,483			18,650		4.72		Commercial, financial and agricultural loans	810,321			31,299		5.16		796,520			28,834		4.84
Real estate—commercial and construction loans	1,867,510			44,669		4.82		1,630,964			36,662		4.53		Real estate—commercial and construction loans	1,900,901			68,108		4.79		1,664,183			57,189		4.59
Real estate—residential loans	940,015			22,895		4.91		845,677			19,721		4.70		Real estate—residential loans	945,477			34,465		4.87		857,442			30,168		4.70
Loans to individuals	32,230			1,028		6.43		28,475			857		6.07		Loans to individuals	31,985			1,518		6.35		29,683			1,356		6.11
Municipal loans and leases	333,858			6,526		3.94		312,470			5,853		3.78		Municipal loans and leases	333,816			9,939		3.98		313,710			8,890		3.79
Lease financings	81,330			2,894		7.18		75,083			2,697		7.24		Lease financings	81,698			4,376		7.16		75,853			4,106		7.24
Gross loans and leases	4,070,508			99,359		4.92		3,689,152			84,440		4.62		Gross loans and leases	4,104,198			149,705		4.88		3,737,391			130,543		4.67
Total interest-earning assets	4,646,228			107,729		4.68		4,202,484			91,330		4.38		Total interest-earning assets	4,723,344			162,669		4.60		4,268,206			141,244		4.42
Cash and due from banks	45,797							43,839							Cash and due from banks	48,231							45,490
Reserve for loan and lease losses	(30,984		)					(22,973		)					Reserve for loan and lease losses	(31,714)							(24,027)
Premises and equipment, net	59,025							61,485							Premises and equipment, net	58,640							61,194
Operating lease right-of-use assets	36,472							—							Operating lease right-of-use assets	36,056							—
Other assets	331,272							334,879							Other assets	330,782							335,433
Total assets	$	5,087,810						$	4,619,714						Total assets	$	5,165,339						$	4,686,296
Liabilities:															Liabilities:
Interest-bearing checking deposits	$	468,019		$	1,171	0.50		$	444,197		$	675	0.31		Interest-bearing checking deposits	$	477,848		$	1,849	0.52		$	451,542		$	1,216	0.36
Money market savings	950,641			7,982		1.69		676,651			3,101		0.92		Money market savings	968,894			12,094		1.67		722,859			5,765		1.07
Regular savings	803,859			1,827		0.46		818,895			1,139		0.28		Regular savings	804,457			2,790		0.46		808,276			1,720		0.28
Time deposits	672,193			6,334		1.90		547,562			3,318		1.22		Time deposits	686,794			10,015		1.95		576,540			5,810		1.35
Total time and interest-bearing deposits	2,894,712			17,314		1.21		2,487,305			8,233		0.67		Total time and interest-bearing deposits	2,937,993			26,748		1.22		2,559,217			14,511		0.76
Short-term borrowings	82,796			855		2.08		196,690			1,603		1.64		Short-term borrowings	65,804			949		1.93		174,002			2,187		1.68
Long-term debt	152,475			1,575		2.08		155,697			1,374		1.78		Long-term debt	157,484			2,441		2.07		153,211			2,083		1.82
Subordinated notes	94,633			2,522		5.37		94,390			2,522		5.39		Subordinated notes	94,664			3,783		5.34		94,420			3,783		5.36
Total borrowings	329,904			4,952		3.03		446,777			5,499		2.48		Total borrowings	317,952			7,173		3.02		421,633			8,053		2.55
Total interest-bearing liabilities	3,224,616			22,266		1.39		2,934,082			13,732		0.94		Total interest-bearing liabilities	3,255,945			33,921		1.39		2,980,850			22,564		1.01
Noninterest-bearing deposits	1,144,185							1,036,916							Noninterest-bearing deposits	1,184,909							1,055,456
Operating lease liabilities	39,478							—							Operating lease liabilities	39,103							—
Accrued expenses and other liabilities	40,936							39,881							Accrued expenses and other liabilities	39,735							40,154
Total liabilities	4,449,215							4,010,879							Total liabilities	4,519,692							4,076,460
Shareholders’ Equity:															Shareholders’ Equity:
Common stock	157,784							157,784							Common stock	157,784							157,784
Additional paid-in capital	293,123							290,363							Additional paid-in capital	293,465							290,746
Retained earnings and other equity	187,688							160,688							Retained earnings and other equity	194,398							161,306
Total shareholders’ equity	638,595							608,835							Total shareholders’ equity	645,647							609,836
Total liabilities and shareholders’ equity	$	5,087,810						$	4,619,714						Total liabilities and shareholders’ equity	$	5,165,339						$	4,686,296
Net interest income				$	85,463						$	77,598			Net interest income				$	128,748						$	118,680
Net interest spread						3.29							3.44		Net interest spread						3.21							3.41
Effect of net interest-free funding sources						0.42							0.28		Effect of net interest-free funding sources						0.43							0.31
Net interest margin						3.71	%						3.72	%	Net interest margin						3.64	%						3.72	%
Ratio of average interest-earning assets to average interest-bearing liabilities	144.09		%					143.23		%					Ratio of average interest-earning assets to average interest-bearing liabilities	145.07		%					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 ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 have been calculated using the Corporation's federal applicable rate of 21%.

Table of Contents

Table 2—Analysis of Changes in Net Interest Income

The rate-volume variance analysis set forth in the table below compares changes in tax-equivalent net interest income for the periods indicated by their rate and volume components. The change in interest income/expense due to both volume and rate has been allocated proportionately.


	Three Months Ended										Nine Months Ended
	September 30, 2019 Versus 2018										September 30, 2019 Versus 2018
(Dollars in thousands)	Volume Change		Rate Change		Total		Volume 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 securities	252		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 assets	740		43		783		1,461		802		2,263
Commercial, financial and agricultural loans	42		(274)		(232)		512		1,953		2,465
Real estate—commercial and construction loans	2,825		87		2,912		8,359		2,560		10,919
Real estate—residential loans	918		205		1,123		3,178		1,119		4,297
Loans to individuals	(8)		(1)		(9)		108		54		162
Municipal loans and leases	173		203		376		589		460		1,049
Lease financings	93		(20)		73		315		(45)		270
Interest and fees on loans and leases	4,043		200		4,243		13,061		6,101		19,162
Total interest income	4,783		243		5,026		14,522		6,903		21,425
Interest expense:
Interest-bearing checking deposits	38		99		137		74		559		633
Money market savings	707		741		1,448		2,391		3,938		6,329
Regular savings	13		369		382		(8)		1,078		1,070
Time deposits	352		837		1,189		1,265		2,940		4,205
Interest on time and interest-bearing deposits	1,110		2,046		3,156		3,722		8,515		12,237
Short-term borrowings	(332)		(158)		(490)		(1,524)		286		(1,238)
Long-term debt	97		60		157		60		298		358

Interest on borrowings	(235)		(98)		(333)		(1,464)		584		(880)
Total interest expense	875		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 Six Months Ended
June 30, 2019 Versus 2018 June 30, 2019 Versus 2018
(Dollars in thousands) Volume
Change Rate
Change Total Volume
Change Rate
Change Total
Interest income:

Interest-earning deposits with other banks $ 343
$ 78
$ 421
$ 477
$ 137
$ 614
U.S. government obligations (25 ) 7
(18 ) (40 ) 10
(30 )
Obligations of states and political subdivisions (101 ) 5
(96 ) (188 ) 45
(143 )
Other debt and equity securities 247
148
395
409
522
931
Federal Home Loan Bank, Federal Reserve Bank and other stock (13 ) 39
26
41
67
108
Interest on deposits, investments and other earning assets 451
277
728
699
781
1,480
Commercial, financial and agricultural loans 113
726
839
453
2,244
2,697
Real estate—commercial and construction loans 2,991
1,075
4,066
5,555
2,452
8,007
Real estate—residential loans 1,065
372
1,437
2,266
908
3,174
Loans to individuals 46
20
66
118
53
171
Municipal loans and leases 216
128
344
416
257
673
Lease financings 112
(6 ) 106
219
(22 ) 197
Interest and fees on loans and leases 4,543
2,315
6,858
9,027
5,892
14,919
Total interest income 4,994
2,592
7,586
9,726
6,673
16,399
Interest expense:

Interest-bearing checking deposits (5 ) 79
74
40
456
496
Money market savings 909
1,567
2,476
1,591
3,290
4,881
Regular savings 11
420
431
(22 ) 710
688
Time deposits 521
1,067
1,588
875
2,141
3,016
Interest on time and interest-bearing deposits 1,436
3,133
4,569
2,484
6,597
9,081
Short-term borrowings (757 ) 16
(741 ) (1,098 ) 350
(748 )
Long-term debt 19
108
127
(28 ) 229
201
Interest on borrowings (738 ) 124
(614 ) (1,126 ) 579
(547 )
Total interest expense 698
3,257
3,955
1,358
7,176
8,534
Net interest income $ 4,296
$ (665 ) $ 3,631
$ 8,368
$ (503 ) $ 7,865

Table of Contents

Interest Income

Three and ~~six~~nine months ended ~~June~~September 30, 2019 versus 2018

Interest income on a tax-equivalent basis for the three months ended ~~June~~September 30, 2019 was ~~$54.7~~$54.9 million, an increase of ~~$7.6~~$5.0 million, or ~~16.1%~~10.1%, from the same period in 2018. Interest income on a tax-equivalent basis for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$107.7~~$162.7 million, an increase of ~~$16.4~~$21.4 million, or ~~18.0%~~15.2%, from the same period in 2018. The increase in interest income for the three and ~~six~~nine months ended ~~June~~September 30, 2019 was primarily due to organic loan growth in commercial real estate and residential real estate ~~loans and an increase in~~loans. 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. The~~2018 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 ~~six~~nine months ended ~~June 30, 2019, compared to one basis point for the three months ended June 30, 2018 and no impact on the yield on interest-earning assets for the six months ended June~~September 30, 2018.

Interest Expense

Three and ~~six~~nine months ended ~~June~~September 30, 2019 versus 2018

Interest expense for the three months ended ~~June~~September 30, 2019 was ~~$11.4~~$11.7 million, an increase of ~~$4.0~~$2.8 million, or ~~52.9%~~32.0%, from the same period in 2018. Interest expense for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$22.3~~$33.9 million, an increase of ~~$8.5~~$11.4 million, or

~~62.1%~~ 50.3%, from the same period in 2018. The increase in interest expense for the three and ~~six~~nine months ended ~~June~~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 ~~17.2%~~11.9% and ~~16.4%~~14.8%, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 219 compared to the same periods in 2018. The favorable impact of purchase accounting amortization on the rate on interest-bearing liabilities was one basis point for the three and ~~six~~nine months ended ~~June~~September 30, 2019, compared to a favorable impact of two basis points and three basis points for the three and ~~six~~nine months ended ~~June~~September 30, ~~2018.~~2018, respectively.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the three ~~and six~~ months ended ~~June~~September 30, 2019 was ~~$2.1~~$1.5 million ~~and $4.8 million, respectively,~~ compared to ~~$15.4~~$2.7 million ~~and $17.5 million, respectively,~~ for the same ~~periods~~period in the prior year. Net loan and lease charge-offs for the three months ended September 30, 2019 were $468 thousand compared to $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 ~~three and six~~nine months ended ~~June~~September 30, 2019 were ~~$1.1~~$2.0 million ~~and $1.5 million, respectively,~~ compared to ~~$13.2~~$14.4 million ~~and $13.4 million, respectively,~~ for the same ~~periods~~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.

Table of Contents

Noninterest Income

The following table presents noninterest income for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


																						Three Months Ended										Nine Months Ended
	Three Months Ended June 30,					Change					Six Months Ended June 30,					Change						September 30,						Change						September 30,				Change
(Dollars in thousands)	2019		2018			Amount			Percent		2019		2018			Amount			Percent		(Dollars in thousands)	2019		2018		Amount		Percent		2019		2018		Amount		Percent
Trust fee income	$	2,054	$	2,044		$	10		0.5	%	$	3,941	$	4,040		$	(99	)	(2.5	)%	Trust fee income	$	1,973	$	1,960	$	13	0.7	%	$	5,914	$	6,000	$	(86)	(1.4	%)
Service charges on deposit accounts	1,447		1,335			112			8.4		2,882		2,662			220			8.3		Service charges on deposit accounts	1,513		1,454		59		4.1		4,395		4,116		279		6.8
Investment advisory commission and fee income	4,055		3,778			277			7.3		7,844		7,461			383			5.1		Investment advisory commission and fee income	4,032		3,785		247		6.5		11,876		11,246		630		5.6
Insurance commission and fee income	3,941		3,712			229			6.2		9,085		8,600			485			5.6		Insurance commission and fee income	3,877		3,643		234		6.4		12,962		12,243		719		5.9
Other service fee income	2,590		2,431			159			6.5		4,857		4,600			257			5.6		Other service fee income	2,255		2,284		(29)		(1.3)		7,112		6,884		228		3.3
Bank owned life insurance income	743		1,210			(467		)	(38.6	)	1,695		1,879			(184		)	(9.8	)	Bank owned life insurance income	743		865		(122)		(14.1)		2,438		2,744		(306)		(11.2)
Net gain on sales of investment securities	7		—			7			N/M		8		10			(2		)	(20.0	)	Net gain on sales of investment securities	33		—		33		N/M		41		10		31		N/M
Net gain on mortgage banking activities	796		942			(146		)	(15.5	)	1,279		1,658			(379		)	(22.9	)	Net gain on mortgage banking activities	1,629		754		875		N/M		2,908		2,412		496		20.6
Other income (loss)	723		(138		)	861			N/M		1,062		(14		)	1,076			N/M

Other income																					Other income	544		116		428		N/M		1,606		102		1,504		N/M
Total noninterest income	$	16,356	$	15,314		$	1,042		6.8	%	$	32,653	$	30,896		$	1,757		5.7	%	Total noninterest income	$	16,599	$	14,861	$	1,738	11.7	%	$	49,252	$	45,757	$	3,495	7.6	%

Three and ~~six~~nine months ended ~~June~~September 30, 2019 versus 2018

Noninterest income for the three months ended ~~June~~September 30, 2019 was ~~$16.4~~$16.6 million, an increase of ~~$1.0~~$1.7 million, or ~~6.8%~~11.7%, from the three months ended ~~June~~September 30, 2018. Noninterest income for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$32.7~~$49.3 million, an increase of ~~$1.8~~$3.5 million, or ~~5.7%~~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 ~~$277~~$247 thousand, or ~~7.3%~~6.5%, for the three months and ~~$383~~$630 thousand, or ~~5.1%~~5.6%, for the ~~six~~nine months ended ~~June~~September 30, 2019, primarily due to new customer relationships. Insurance commission and fee income increased ~~$229~~$234 thousand, or ~~6.2%~~6.4%, for the three months and $719 thousand, or 5.9%, for the nine months ended ~~June~~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. Insurance commission and fee income increased $485 thousand, or 5.6%,~~health for the ~~six~~nine months ended ~~June~~September 30, ~~2019, primarily due to an increase in premiums for commercial lines, group life and health and contingent commission income.~~2019. Service charges on deposit accounts increased ~~$112~~$59 thousand, or ~~8.4%~~4.1%, for the three months and ~~$220~~$279 thousand, or ~~8.3%~~6.8%, for the ~~six~~nine months ended ~~June~~September 30, 2019, primarily due to increased fee income on commercial cash management accounts. Other service fee income increased $159 thousand, or 6.5%, for the three months and $257 thousand, or 5.6%, for the six months ended June 30, 2019, primarily due to increases in debit card interchange income.

Other income increased ~~$861~~$428 thousand for the three months and ~~$1.1~~$1.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019. Fees on risk participation agreements increased ~~$284~~$137 thousand for the three months and ~~$543~~$681 thousand for the ~~six~~nine months ended ~~June~~September 30, 2019 driven by increased customer activity. Gain on sale of small business administration (SBA) loans increased ~~$259~~$55 thousand for the three months and ~~$313~~$368 thousand for the ~~six~~nine months ended ~~June~~September 30, 2019 related to increased SBA loan sale activity. Net loss on valuations and sales of other real estate owned was ~~$55~~$28 thousand for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to ~~$482~~$507 thousand for the ~~three and six~~nine months ended ~~June~~September 30, 2018.

These increases were partially offset by a decrease in BOLI income of ~~$467~~$306 thousand, or ~~38.6%~~11.2%, for the ~~three months and $184 thousand, or 9.8%, for the six~~nine months ended ~~June~~September 30, ~~2019. These decreases were~~2019 primarily due to proceeds from BOLI death benefits of $446 thousand recognized in the second quarter of 2018. The net gain on mortgage banking activities decreased $146 thousand, or 15.5%, for the three months and $379 thousand, or 22.9% for the six months ended June 30, 2019, primarily due to contraction in margins to remain price competitive.2018.

Table of Contents

Noninterest Expense

The following table presents noninterest expense for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	Three Months Ended										Nine Months Ended
	September 30,						Change						September 30,				Change
(Dollars in thousands)	2019		2018		Amount		Percent		2019		2018		Amount		Percent
Salaries, benefits and commissions	$	22,785	$	20,321	$	2,464	12.1	%	$	66,438	$	61,033	$	5,405	8.9	%
Net occupancy	2,475		2,515		(40)		(1.6)		7,687		7,805		(118)		(1.5)
Equipment	1,088		1,042		46		4.4		3,143		3,132		11		0.4
Data processing	2,624		2,339		285		12.2		7,765		6,662		1,103		16.6
Professional fees	1,517		1,370		147		10.7		4,088		4,056		32		0.8
Marketing and advertising	558		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 expenses	378		479		(101)		(21.1)		1,221		1,685		(464)		(27.5)


Restructuring charges	—		—		—		—		—		571		(571)		N/M
Other expense	5,289		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
June 30, Change Six Months Ended
June 30, Change
(Dollars in thousands) 2019 2018 Amount Percent 2019 2018 Amount Percent
Salaries, benefits and commissions $ 22,089
$ 20,065
$ 2,024
10.1 % $ 43,653
$ 40,712
$ 2,941
7.2 %
Net occupancy 2,601
2,533
68
2.7
5,212
5,290
(78 ) (1.5 )
Equipment 1,065
1,067
(2 ) (0.2 ) 2,055
2,090
(35 ) (1.7 )
Data processing 2,627
2,091
536
25.6
5,141
4,323
818
18.9
Professional fees 1,307
1,331
(24 ) (1.8 ) 2,571
2,686
(115 ) (4.3 )
Marketing and advertising 622
526
96
18.3
938
907
31
3.4
Deposit insurance premiums 430
452
(22 ) (4.9 ) 882
843
39
4.6
Intangible expenses 417
594
(177 ) (29.8 ) 843
1,206
(363 ) (30.1 )
Restructuring charges —
—
—
—
—
571
(571 ) N/M
Other expense 5,620
5,688
(68 ) (1.2 ) 11,040
10,844
196
1.8
Total noninterest expense $ 36,778
$ 34,347
$ 2,431
7.1 % $ 72,335
$ 69,472
$ 2,863
4.1 %

Three and ~~six~~nine months ended ~~June~~September 30, 2019 versus 2018

Noninterest expense for the three months ended ~~June~~September 30, 2019 was ~~$36.8~~$36.3 million, an increase of ~~$2.4~~$1.9 million, or ~~7.1%~~5.5%, from the three months ended ~~June~~September 30, 2018. Noninterest expense for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$72.3~~$108.6 million, an increase of ~~$2.9~~$4.8 million, or ~~4.1%~~4.6%, from the comparable period in the prior year.

Salaries, benefits and commissions increased ~~$2.0~~$2.5 million, or ~~10.1%~~12.1%, for the three months and ~~$2.9~~$5.4 million, or ~~7.2%~~8.9%, for the ~~six~~nine months ended ~~June~~September 30, 2019, primarily attributable to additional staff hired to support revenue generation across all business

lines, expansion of our commercial lending groups and annual merit increases. During the first quarter of 2019, Univest hired a team of eight commercial lenders and support staff to focus on increasing Univest’s presence in Western Lancaster and York ~~Counties, Pennsylvania.~~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 ~~$536~~$285 thousand, or ~~25.6%~~12.2%, for the three months and ~~$818 thousand,~~$1.1 million, or ~~18.9%~~16.6%, for the ~~six~~nine months ended ~~June~~September 30, 2019, primarily due to continued investments in customer relationship management software and internal infrastructure improvements ~~and~~as well as outsourced data processing ~~solutions.~~solutions for the nine months ended September 30, 2019.

These increases were partially offset by a decrease in ~~intangibles~~deposit insurance premiums of $988 thousand for the three months and $949 thousand for the nine months ended September 30, 2019 due to the previously discussed FDIC small bank assessment credit of $988 thousand which was recognized during the third quarter of 2019. Intangible expense ~~of $177~~decreased by $101 thousand, or ~~29.8%~~21.1%, for the three months and ~~$363~~$464 thousand, or ~~30.1%~~27.5%, for the ~~six~~nine months ended ~~June~~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 first quarter of 2018.

Tax Provision

The provision for income taxes for the three months ended ~~June~~September 30, 2019 and 2018 was ~~$3.7~~$3.8 million and ~~$191 thousand,~~$3.2 million, at an effective ~~rates~~rate of ~~18.2% and 4.2%, respectively.~~17.6% for both periods. The provision for income taxes for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018

was ~~$7.2~~$11.0 million and ~~$3.0~~$6.2 million, at effective rates of ~~18.0%~~17.9% and ~~14.9%~~16.2%, respectively. The Corporation's effective income tax rates were favorably impacted by discrete tax benefits. Excluding these items, the effective tax rate was 18.3% ~~and 18.2%~~ for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~2018, respectively.~~2018.

Table of Contents

Financial Condition

Assets

The following table presents assets at the dates indicated:


	At June 30, 2019			At December 31, 2018			Change						At September 30, 2019		At December 31, 2018		Change
(Dollars in thousands)							Amount			Percent		(Dollars in thousands)									Amount	Percent
Cash and interest-earning deposits	$	84,567		$	109,420		$	(24,853	)	(22.7	)%	Cash and interest-earning deposits	$	225,334	$	109,420	$	115,914	N/M	%
Investment securities	468,833			473,306			(4,473		)	(0.9	)	Investment securities	448,447		473,306		(24,859)		(5.3)
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	32,755			28,337			4,418			15.6		Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	29,254		28,337		917		3.2
Loans held for sale	1,498			1,754			(256		)	(14.6	)	Loans held for sale	2,893		1,754		1,139		64.9
Loans and leases held for investment	4,167,904			4,006,574			161,330			4.0		Loans and leases held for investment	4,251,933		4,006,574		245,359		6.1
Reserve for loan and lease losses	(32,600		)	(29,364		)	(3,236		)	(11.0	)	Reserve for loan and lease losses	(33,662)		(29,364)		(4,298)		(14.6)
Premises and equipment, net	58,292			59,559			(1,267		)	(2.1	)	Premises and equipment, net	57,171		59,559		(2,388)		(4.0)
Operating lease right-of-use assets	35,508			—			35,508			N/M		Operating lease right-of-use assets	34,965		—		34,965		N/M
Goodwill and other intangibles, net	183,554			184,549			(995		)	(0.5	)	Goodwill and other intangibles, net	183,081		184,549		(1,468)		(0.8)
Bank owned life insurance	113,294			111,599			1,695			1.5		Bank owned life insurance	114,037		111,599		2,438		2.2

Accrued interest receivable and other assets	40,693			38,613			2,080			5.4		Accrued interest receivable and other assets	40,158		38,613		1,545		4.0
Total assets	$	5,154,298		$	4,984,347		$	169,951		3.4	%	Total assets	$	5,353,611	$	4,984,347	$	369,264	7.4	%

Investment Securities

Total investments securities at ~~June~~September 30, 2019 decreased ~~$4.5~~$24.9 million from December 31, 2018. Maturities and pay-downs of ~~$36.2~~$65.3 million, sales of $25.0 million, calls of ~~$3.1 million, sales of $15.5~~$5.8 million and net amortization of purchased premiums and discounts of ~~$1.2~~$1.8 million were partially offset by purchases of ~~$43.5~~$65.2 million and increases in the fair value of available-for-sale investment securities of ~~$8.0~~$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 ~~June~~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 year.

The Bank held $14.6 million in Federal Reserve Bank stock as required by the Federal Reserve Bank at ~~June~~September 30, 2019 and December 31, 2018.

Loans and Leases

Gross loans and leases held for investment grew ~~$161.3~~$245.4 million, or ~~4.0%~~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.

Table of Contents

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 ~~June~~September 30, 2019, the recorded investment in loans and leases held for investment that were considered to be impaired was ~~$25.1~~$37.2 million. The related reserve for loan and lease losses was $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 mainly~~During the third quarter of 2019, one commercial ~~real estate, residential real estate 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 ~~June~~September 30, 2019, compared to $1.2 million at December 31, 2018. During the ~~first quarter of~~nine 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 ~~$418~~$421 thousand and $426 thousand at ~~June~~September 30, 2019 and December 31, 2018, respectively.

Table of Contents

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, 2019			At December 31, 2018



Commercial, financial and agricultural	$	2,233		$	3,365
Real estate—commercial	28,024			18,214
Real estate—construction	256			106
Real estate—residential	6,353			4,353
Loans to individuals	2			—
Lease financings	500			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 above	54			542
Accruing loans and leases 90 days or more past due:

Real estate—commercial	760			—

Real estate—residential	1,109			—
Loans to individuals	129			55
Lease financings	490			137
Total accruing loans and leases, 90 days or more past due	2,488			192
Total nonperforming loans and leases	39,910			26,942
Other real estate owned	495			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 investment	0.88		%	0.65		%
Nonperforming loans and leases / loans and leases held for investment	0.94		%	0.67		%
Nonperforming assets / total assets	0.75		%	0.56		%

Allowance for loan and lease losses	$	33,662		$	29,364
Allowance for loan and lease losses / loans and leases held for investment	0.79		%	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 investment	90.08		%	112.04		%
Allowance for loan and lease losses / nonperforming loans and leases held for investment	84.34		%	108.99		%
Acquired credit impaired loans	$	568		$	695

Nonperforming loans and leases and acquired credit impaired loans / loans and leases held for investment	0.95		%	0.69		%
Nonperforming assets and acquired credit impaired loans / total assets	0.77		%	0.58		%
* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table	$	2,305		$	1,284

(Dollars in thousands) At June 30, 2019 At December 31, 2018
Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*:
Commercial, financial and agricultural $ 2,150
$ 3,365
Real estate—commercial 17,739
18,214
Real estate—construction 106
106
Real estate—residential 5,052
4,353
Lease financings 100
170
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications* 25,147
26,208
Accruing troubled debt restructured loans and lease modifications not included in the above 55
542
Accruing loans and leases 90 days or more past due:
Real estate—commercial 516
—
Real estate—construction 230
—
Real estate—residential 434
—
Loans to individuals 129
55
Lease financings 70
137
Total accruing loans and leases, 90 days or more past due 1,379
192
Total nonperforming loans and leases 26,581
26,942
Other real estate owned 540
1,187
Total nonperforming assets $ 27,121
$ 28,129
Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment 0.60 % 0.65 %
Nonperforming loans and leases / loans and leases held for investment 0.64
0.67
Nonperforming assets / total assets 0.53
0.56

Allowance for loan and lease losses $ 32,600
$ 29,364
Allowance for loan and lease losses / loans and leases held for investment 0.78 % 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 investment 129.64
112.04
Allowance for loan and lease losses / nonperforming loans and leases held for investment 122.64
108.99
Acquired credit impaired loans $ 569
$ 695

Nonperforming loans and leases and acquired credit impaired loans / loans and leases held for investment 0.65 % 0.69 %
Nonperforming assets and acquired credit impaired loans / total assets 0.54
0.58
* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table $ 2,573
$ 1,284

Table of Contents

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


(Dollars in thousands)	At June 30, 2019		At December 31, 2018		(Dollars in thousands)	At September 30, 2019		At December 31, 2018
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications	$	25,147	$	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-offs	2,302		2,210		Nonaccrual loans and leases with partial charge-offs	2,052		2,210
Life-to-date partial charge-offs on nonaccrual loans and leases	1,353		1,320		Life-to-date partial charge-offs on nonaccrual loans and leases	1,428		1,320
Specific reserves on impaired loans	$	2,439	$	1,415	Specific reserves on impaired loans	2,444		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 ~~$835~~$955 thousand and ~~$885~~$812 thousand for the three months ended ~~June~~September 30, 2019 and 2018, respectively. The amortization of intangible assets was ~~$1.6~~$2.5 million and ~~$1.8~~$2.6 million for the ~~six~~nine months ended ~~June~~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 ~~June~~September 30, 2019 and December 31, 2018.

The Corporation also has goodwill with a net carrying value of $172.6 million at ~~June~~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 ~~six~~nine months ended ~~June~~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, 2019		At December 31, 2018		Change
									Amount	Percent
Deposits	$	4,337,991	$	3,885,933	$	452,058	11.6	%
Short-term borrowings	18,970		189,768		(170,798)		(90.0)
Long-term debt	160,128		145,330		14,798		10.2
Subordinated notes	94,757		94,574		183		0.2
Operating lease liabilities	38,116		—		38,116		N/M
Accrued interest payable and other liabilities	39,350		44,609		(5,259)		(11.8)
Total liabilities	$	4,689,312	$	4,360,214	$	329,098	7.5	%

(Dollars in thousands) At June 30, 2019 At December 31, 2018 Change
Amount Percent
Deposits $ 4,122,110
$ 3,885,933
$ 236,177
6.1 %
Short-term borrowings 39,350
189,768
(150,418 ) (79.3 )
Long-term debt 170,195

145,330
24,865
17.1
Subordinated notes 94,696
94,574
122
0.1
Operating lease liabilities 38,608
—
38,608
N/M
Accrued interest payable and other liabilities 37,669
44,609
(6,940 ) (15.6 )
Total liabilities $ 4,502,628
$ 4,360,214
$ 142,414
3.3 %

Deposits

Total deposits increased ~~$236.2~~$452.1 million, or ~~6.1%~~11.6%, from December 31, 2018, primarily due to an increase in public funds deposits of $368.1 million and increases in commercial ~~public funds~~ and consumer deposits. The growth in public funds resulted from seasonal increases and new customer relationships.

Borrowings

Total borrowings decreased ~~$125.4~~$155.8 million, or ~~29.2%~~36.3%, from December 31, 2018, primarily due to a decrease in short-term borrowings of ~~$150.4~~$170.8 million. The increase in deposits reduced the need to borrow short-term funds.

Table of Contents

Shareholders’ Equity

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


(Dollars in thousands)	At September 30, 2019		At December 31, 2018		Change
									Amount	Percent
Common stock	$	157,784	$	157,784	$	—	N/M	%
Additional paid-in capital	294,556		292,401		2,155		0.7
Retained earnings	279,158		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 June 30, 2019 At December 31, 2018 Change
Amount Percent
Common stock $ 157,784
$ 157,784
$ —
— %
Additional paid-in capital 293,947
292,401
1,546
0.5
Retained earnings 267,357
248,167
19,190
7.7
Accumulated other comprehensive loss (21,949 ) (28,416 ) 6,467
22.8
Treasury stock (45,469 ) (45,803 ) 334
0.7
Total shareholders’ equity $ 651,670
$ 624,133
$ 27,537
4.4 %

The increase in ~~shareholder's~~shareholders' equity at ~~June~~September 30, 2019 of ~~$27.5~~$40.2 million, or ~~4.4%~~6.4%, from December 31, 2018 was primarily related to an increase in retained earnings of ~~$19.2~~$31.0 million. Retained earnings at ~~June~~September 30, 2019 was impacted by the ~~six~~nine months of net income of ~~$32.5~~$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 ~~$11.7~~$17.6 million. Accumulated other comprehensive loss decreased by ~~$6.5~~$6.4 million mainly attributable to increases in the fair value of available-for-sale investment securities of ~~$6.4~~$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,~~ reported pre-tax income of ~~$19.8~~$19.9 million and ~~$3.5~~$17.7 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~$37.1~~$57.1 million and ~~$16.5~~$34.4 million for the ~~six~~nine months ended ~~June~~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,~~ reported pre-tax income of ~~$2.1~~$2.0 million and ~~$1.9~~$1.7 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~$3.8~~$5.8 million and ~~$3.7~~$5.3 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. Noninterest income was ~~$6.2~~$6.0 million and ~~$5.9~~$5.8 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~$11.9~~$17.9 million and ~~$11.6~~$17.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. The increase in pre-tax income and noninterest income for the three and ~~six~~nine months ended ~~June~~September 30, 2019 compared to the three and ~~six~~nine months ended ~~June~~September 30, 2018 was primarily due to ~~an increase~~a shift in the composition of assets under ~~management.~~management and supervision from trust portfolio assets with lower earnings yield to investment advisory portfolio assets with higher earnings yield. Assets under management and supervision were ~~$3.7~~$3.6 billion as of ~~June~~September 30, 2019, ~~and $3.5~~$3.3 billion as of ~~June 30, 2018. The increase in assets under management~~December 31, 2018 and ~~supervision~~$3.6 billion as of ~~June~~September 30, ~~2019, as compared to June 30, 2018, was primarily driven by new customer relationships.~~2019.

The Insurance segment ~~as presented in Note 13 in the Notes to the Consolidated Financial Statements,~~ reported pre-tax income of ~~$860~~$853 thousand and ~~$544~~$520 thousand for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~$2.9~~$3.7 million and ~~$2.1~~$2.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. Noninterest income was ~~$4.1~~$4.0 million and ~~$3.9~~$3.8 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~$9.5~~$13.5 million and ~~$9.0~~$12.8 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. Noninterest income increased primarily due to ~~increases~~an 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.

Table of Contents

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.

Under current rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier 1 capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets. The Corporation's and Bank's intent is to maintain capital levels in excess of the capital conservation buffer which 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 ~~June~~September 30, 2019.

Table 4—Regulatory Capital

The Corporation's and Bank's actual and required capital ratios as of ~~June~~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					Actual						For Capital Adequacy Purposes						To Be Well-Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
At June 30, 2019
At September 30, 2019													At September 30, 2019
Total Capital (to Risk-Weighted Assets):													Total Capital (to Risk-Weighted Assets):
Corporation	$	629,324	13.79	%	$	364,990	8.00	%	$	456,238	10.00	%	Corporation	$	642,396	13.81	%	$	372,212	8.00	%	$	465,266	10.00	%
Bank	529,106		11.65		363,289		8.00		454,112		10.00		Bank	541,735		11.70		370,573		8.00		463,216		10.00
Tier 1 Capital (to Risk-Weighted Assets):													Tier 1 Capital (to Risk-Weighted Assets):
Corporation	501,310		10.99		273,743		6.00		364,990		8.00		Corporation	513,253		11.03		279,159		6.00		372,212		8.00
Bank	495,788		10.92		272,467		6.00		363,289		8.00		Bank	507,349		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):
Corporation	501,310		10.99		205,307		4.50		296,554		6.50		Corporation	513,253		11.03		209,370		4.50		302,423		6.50
Bank	495,788		10.92		204,350		4.50		295,173		6.50		Bank	507,349		10.95		208,447		4.50		301,091		6.50
Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Corporation	501,310		10.01		200,268		4.00		250,336		5.00		Corporation	513,253		9.97		206,021		4.00		257,526		5.00
Bank	495,788		9.95		199,407		4.00		249,258		5.00		Bank	507,349		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	%
Bank	506,728		11.54		351,220		8.00		439,026		10.00		Bank	506,728		11.54		351,220		8.00		439,026		10.00
Tier 1 Capital (to Risk-Weighted Assets):													Tier 1 Capital (to Risk-Weighted Assets):
Corporation	479,550		10.88		264,573		6.00		352,764		8.00		Corporation	479,550		10.88		264,573		6.00		352,764		8.00
Bank	476,639		10.86		263,415		6.00		351,220		8.00		Bank	476,639		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):
Corporation	479,550		10.88		198,430		4.50		286,621		6.50		Corporation	479,550		10.88		198,430		4.50		286,621		6.50
Bank	476,639		10.86		197,561		4.50		285,367		6.50		Bank	476,639		10.86		197,561		4.50		285,367		6.50
Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Corporation	479,550		10.13		189,374		4.00		236,718		5.00		Corporation	479,550		10.13		189,374		4.00		236,718		5.00
Bank	476,639		10.12		188,487		4.00		235,609		5.00		Bank	476,639		10.12		188,487		4.00		235,609		5.00

At ~~June~~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. For a depository institution to be considered “well capitalized” under the regulatory

Table of Contents

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

~~June~~ 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, market-based assumptions regarding growth, pricing, and optionality such as prepayment speeds. As interest rates increase, fixed-rate assets that banks hold tend to decrease in value; conversely, as interest rates decline, fixed-rate assets that banks hold 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 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 ~~June~~September 30, 2019 and December 31, 2018, the carrying amount of overnight borrowings with the FHLB was $0 and $108.3 million, respectively. At ~~June~~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, respectively. At ~~June~~September 30, 2019 and December 31, 2018, the Bank had outstanding short-term letters of credit with the FHLB totaling ~~$408.3~~$692.8 million and $347.5

Table of Contents

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 ~~June~~September 30, 2019 and December 31, 2018, respectively. At ~~June~~September 30, 2019 and December 31,

2018, the Corporation had ~~$20.0 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 has a $10.0 million committed line of credit with a correspondent bank. At ~~June~~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-year time period, is for the Bank to repay certificates of deposit and short-term and long-term borrowings. The Bank anticipates meeting these obligations by continuing to provide convenient depository and cash management services through its financial center network, thereby replacing these contractual obligations with similar fund sources at rates that are competitive in our market. The Bank will also use borrowings and brokered deposits to meet its obligations.

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

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, refer to Note 1 to the 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 were 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 ended 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.

Table of Contents


~~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 ~~June~~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 ~~June~~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


~~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.

Table of Contents


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

The following table provides information on repurchases by the Corporation of its common stock under the Corporation's Board approved program.



ISSUER PURCHASES OF EQUITY SECURITIES
Period		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs			Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
~~April~~July 1 – 31, 2019		—				$	—			—			864,246
August 1 – 31, 2019		—				—				—			864,246
September 1 – 30, 2019		—				$—		—		—	—		864,246	~~864,246~~
~~May 1 – 31, 2019~~Total		—				—$	—		—	—		~~864,246~~
~~June 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 upon the vesting of restricted stock awards and may use a stock swap to exercise non-qualified stock options. Shares withheld to pay income taxes upon the vesting of restricted stock awards and stock swaps to exercise stock options are repurchased pursuant to the terms of the applicable plan and not under the Corporation's share repurchase program. ~~There were no shares~~Share repurchased pursuant to these plans during the three months ended ~~June~~September 30, ~~2019.~~2019 were as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share
July 1 – 31, 2019	3,351	$	26.14
August 1 – 31, 2019	—	—
September 1 – 30, 2019	—	—
Total	3,351	$	26.14


~~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.

Table of Contents

Item 6.Exhibits


~~Item 6.~~a.			Exhibits

~~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 ~~10.1~~31.1

Form of Restricted Stock Unit Agreement for Directors (Service Based) under the Amended and Restated Univest 2013 Long-Term Incentive Plan is incorporated by reference to Exhibit 10.1 of Form 10-Q, filed with the SEC on May 3, 2019.

~~Exhibit 10.2~~

Form of Performance Based Restricted Stock Unit Agreement for Employees under the Amended and Restated Univest 2013 Long-Term Incentive Plan is incorporated by reference to Exhibit 10.2 of Form 10-Q, filed with the SEC on May 3, 2019.

~~Exhibit 10.3~~

Form of Restricted Stock Unit Agreement for Employees (Service Based) under the Amended and Restated Univest 2013 Long-Term Incentive Plan is incorporated by reference to Exhibit 10.3 of Form 10-Q, filed with the SEC on May 3, 2019.

~~Exhibit 10.4~~

~~Form of Change in Control Agreement, dated December 3, 2018, entered into between Univest Corporation of Pennsylvania and Brian J. Richardson.~~

~~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 Brian 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 Brian 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

The following financial statements from the Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~June~~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 ~~Shareholder's~~Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Unaudited Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

Exhibit 104

The cover page from the Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2019, formatted in Inline XBRL.

Table of Contents

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, 2019		~~Univest Financial Corporation~~
	~~(Registrant)~~

~~Date: August 2, 2019~~	/s/ Jeffrey M. Schweitzer
		Jeffrey M. Schweitzer President and Chief Executive Officer (Principal Executive Officer)

Date: ~~August 2,~~November 1, 2019		/s/ Brian J. Richardson
		Brian J. Richardson Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)



(Dollars in thousands)	As of June 30, 2019		Weighted Average Rate
Remainder of 2019	$	10,000	1.35	%
2020	40,000		1.70
2021	80,000		2.07
2022	10,000		2.09
2023	10,000		3.02
Thereafter	—		—
Total	$	150,000	1.99	%



	Three Months Ended									Six Months Ended
	June 30, 2019 Versus 2018									June 30, 2019 Versus 2018
(Dollars in thousands)	Volume Change			Rate Change			Total			Volume Change			Rate Change			Total
Interest income:
Interest-earning deposits with other banks	$	343		$	78		$	421		$	477		$	137		$	614
U.S. government obligations	(25		)	7			(18		)	(40		)	10			(30		)
Obligations of states and political subdivisions	(101		)	5			(96		)	(188		)	45			(143		)
Other debt and equity securities	247			148			395			409			522			931
Federal Home Loan Bank, Federal Reserve Bank and other stock	(13		)	39			26			41			67			108
Interest on deposits, investments and other earning assets	451			277			728			699			781			1,480
Commercial, financial and agricultural loans	113			726			839			453			2,244			2,697
Real estate—commercial and construction loans	2,991			1,075			4,066			5,555			2,452			8,007
Real estate—residential loans	1,065			372			1,437			2,266			908			3,174
Loans to individuals	46			20			66			118			53			171
Municipal loans and leases	216			128			344			416			257			673
Lease financings	112			(6		)	106			219			(22		)	197
Interest and fees on loans and leases	4,543			2,315			6,858			9,027			5,892			14,919
Total interest income	4,994			2,592			7,586			9,726			6,673			16,399
Interest expense:
Interest-bearing checking deposits	(5		)	79			74			40			456			496
Money market savings	909			1,567			2,476			1,591			3,290			4,881
Regular savings	11			420			431			(22		)	710			688
Time deposits	521			1,067			1,588			875			2,141			3,016
Interest on time and interest-bearing deposits	1,436			3,133			4,569			2,484			6,597			9,081
Short-term borrowings	(757		)	16			(741		)	(1,098		)	350			(748		)
Long-term debt	19			108			127			(28		)	229			201
Interest on borrowings	(738		)	124			(614		)	(1,126		)	579			(547		)
Total interest expense	698			3,257			3,955			1,358			7,176			8,534
Net interest income	$	4,296		$	(665	)	$	3,631		$	8,368		$	(503	)	$	7,865