UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~(Mark One)~~

ý☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ~~__________to____________~~__________ to __________

Commission file number 001-34245

THE YORK WATER ~~COMPANY~~COMPANY

(Exact name of registrant as specified in its charter)

~~PENNSYLVANIA~~ Pennsylvania	23-1242500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

130 ~~EAST MARKET STREET, YORK, PENNSYLVANIA~~East Market Street, York, Pennsylvania	17401
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code ~~(717)~~ (717) 845-3601

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

Common Stock, No par value	YORW	The Nasdaq Global Select Market
(Title of Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)

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.

ý ~~YES~~NO

⌧ Yes

☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

ý ~~YES~~NO

⌧ Yes

☐ No

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

Large accelerated filer ☐	Accelerated filer ý ☐		Non-accelerated filer ☐⌧
			~~(Do not check if a smaller reporting company)~~
~~Small Reporting~~Smaller reporting company ☐☒		Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~YES~~ý NO

☐ 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, No par value	~~12,860,400~~14,276,321 Shares outstanding as of November ~~2, 2017~~ 3, 2022

TABLE OF CONTENTS

PART I	Financial Information

Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1617
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2427
Item 4.	Controls and Procedures	2527

PART II	Other Information

Item 6.	Exhibits	2628

~~Exhibit Index~~		27

Signatures		2829

Page 2

THE YORK WATER COMPANY

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

	Sep. 30, 2022			Dec. 31, 2021
ASSETS
UTILITY PLANT, at original cost	$	526,229		$	485,750
Plant acquisition adjustments		(3,586	)		(3,637	)
Accumulated depreciation		(104,816	)		(99,204	)
Net utility plant		417,827			382,909

OTHER PHYSICAL PROPERTY, net of accumulated depreciation of $493 in 2022 and $483 in 2021		733			717

CURRENT ASSETS:
Cash and cash equivalents		1			1
Accounts receivable, net of reserves of $834 in 2022 and $855 in 2021		5,461			4,634
Unbilled revenues		3,084			2,784
Recoverable income taxes		870			894
Materials and supplies inventories, at cost		2,347			1,917
Prepaid expenses		1,557			1,032
Total current assets		13,320			11,262

OTHER LONG-TERM ASSETS:
Prepaid pension cost		17,182			14,054
Note receivable		255			255
Deferred regulatory assets		39,821			45,280
Other assets		4,517			4,376
Total other long-term assets		61,775			63,965

Total Assets	$	493,655		$	458,853

The accompanying notes are an integral part of these statements.

Table of Contents~~Item 1. Financial Statements~~

Page 3

THE YORK WATER COMPANY

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

Sept. 30, 2017 Dec. 31, 2016

ASSETS
UTILITY PLANT, at original cost $ 364,053 $ 343,412
Plant acquisition adjustments (3,249 ) (3,667 )
Accumulated depreciation (73,194 ) (68,838 )
Net utility plant 287,610 270,907

OTHER PHYSICAL PROPERTY, net of accumulated depreciation
of $373 in 2017 and $353 in 2016
750 745

CURRENT ASSETS:
Cash and cash equivalents 2 4,209
Accounts receivable, net of reserves of $322 in 2017
and $305 in 2016
4,377 4,296
Unbilled revenues 2,425 2,429
Recoverable income taxes - 282
Materials and supplies inventories, at cost 881 746
Prepaid expenses 909 658
Total current assets 8,594 12,620

OTHER LONG-TERM ASSETS:
Notes receivable 255 255
Deferred regulatory assets 34,386 33,027
Other assets 3,184 2,940
Total other long-term assets 37,825 36,222

Total Assets $ 334,779 $ 320,494

	Sep. 30, 2022		Dec. 31, 2021
STOCKHOLDERS' EQUITY AND LIABILITIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, no par value, authorized 46,500,000 shares, issued and outstanding 14,275,456 shares in 2022 and 13,112,948 shares in 2021	$	133,730	$	88,230
Retained earnings		70,846		64,392
Total common stockholders' equity		204,576		152,622

PREFERRED STOCK, authorized 500,000 shares, no shares issued		–		–

LONG-TERM DEBT, excluding current portion		116,788		138,869

COMMITMENTS		–		–

CURRENT LIABILITIES:
Current portion of long-term debt		7,500		7,500
Accounts payable		12,076		6,712
Dividends payable		2,523		2,293
Accrued compensation and benefits		1,585		1,575
Accrued interest		1,084		959
Deferred regulatory liabilities		588		607
Other accrued expenses		400		440
Total current liabilities		25,756		20,086

DEFERRED CREDITS:
Customers' advances for construction		15,331		12,820
Deferred income taxes		46,317		49,590
Deferred employee benefits		4,597		4,530
Deferred regulatory liabilities		37,699		36,374
Other deferred credits		717		2,086
Total deferred credits		104,661		105,400

Contributions in aid of construction		41,874		41,876

Total Stockholders' Equity and Liabilities	$	493,655	$	458,853

The accompanying notes are an integral part of these statements.

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Page 34

THE YORK WATER COMPANY

~~Balance Sheets (Unaudited)~~

~~(In thousands of dollars, except per share amounts)~~

Sept. 30, 2017 Dec. 31, 2016

STOCKHOLDERS' EQUITY AND LIABILITIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, no par value, authorized 46,500,000 shares,
shares issued 12,859,432 in 2017 and 12,852,295 in 2016,
shares outstanding 12,859,432 in 2017 and 12,852,295 in 2016
$ 78,753 $ 78,513
Retained earnings 38,820 35,548
Total common stockholders' equity 117,573 114,061

PREFERRED STOCK, authorized 500,000 shares, no shares issued - -

LONG-TERM DEBT, excluding current portion 88,930 84,609

COMMITMENTS - -

CURRENT LIABILITIES:
Short-term borrowings 1,000 -
Current portion of long-term debt 44 44
Accounts payable 3,992 3,669
Dividends payable 1,810 1,803
Accrued compensation and benefits 1,133 1,233
Accrued income taxes 184 -
Accrued interest 1,432 921
Other accrued expenses 483 514
Total current liabilities 10,078 8,184

DEFERRED CREDITS:
Customers' advances for construction 7,950 7,102
Deferred income taxes 58,809 54,169
Deferred employee benefits 7,967 8,990
Other deferred credits 6,639 6,725
Total deferred credits 81,365 76,986

Contributions in aid of construction 36,833 36,654

Total Stockholders' Equity and Liabilities $ 334,779 $ 320,494

~~The accompanying notes are an integral part of these statements.~~

~~Table of Contents~~

~~Page 4~~

~~THE YORK WATER COMPANY~~

Statements of Income (Unaudited)

(In thousands of dollars, except per share amounts)

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30						Nine Months Ended September 30
	2017			2016			2017			2016			2022			2021			2022			2021

OPERATING REVENUES:
Residential	$	8,102		$	7,911		$	23,247		$	22,633
Commercial and industrial		3,673			3,777			10,262			10,357
Other		917			913			2,727			2,709
		12,692			12,601			36,236			35,699
OPERATING REVENUES													$	15,811		$	14,503		$	44,950		$	41,385

OPERATING EXPENSES:
Operation and maintenance		2,362			2,098			6,650			6,019			3,746			2,997			10,112			8,752
Administrative and general		2,236			2,217			7,118			6,705			2,328			2,292			7,564			7,144
Depreciation and amortization		1,697			1,614			5,064			4,796			2,572			2,223			7,545			6,595
Taxes other than income taxes		250			258			871			856			309			307			1,001			954
		6,545			6,187			19,703			18,376			8,955			7,819			26,222			23,445

Operating income		6,147			6,414			16,533			17,323			6,856			6,684			18,728			17,940

OTHER INCOME (EXPENSES):
Interest on debt		(1,346	)		(1,320	)		(3,988	)		(3,941	)		(1,204	)		(1,237	)		(3,706	)		(3,673	)
Allowance for funds used during construction		311			51			630			151			382			310			902			883
Other pension costs														(318	)		(304	)		(956	)		(911	)
Other income (expenses), net		(73	)		(196	)		(293	)		(458	)		(117	)		(34	)		(546	)		(179	)
		(1,108	)		(1,465	)		(3,651	)		(4,248	)		(1,257	)		(1,265	)		(4,306	)		(3,880	)

Income before income taxes		5,039			4,949			12,882			13,075			5,599			5,419			14,422			14,060

Income taxes		1,108			1,378			3,435			4,171			(82	)		625			(147	)		1,077

Net Income	$	3,931		$	3,571		$	9,447		$	8,904		$	5,681		$	4,794		$	14,569		$	12,983

Basic Earnings Per Share	$	0.31		$	0.27		$	0.74		$	0.69		$	0.40		$	0.36		$	1.05		$	0.99

Diluted Earnings Per Share	$	0.31		$	0.27		$	0.74		$	0.69		$	0.40		$	0.36		$	1.05		$	0.99

Cash Dividends Declared Per Share	$	0.1602		$	0.1555		$	0.4806		$	0.4665

The accompanying notes are an integral part of these statements.

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Page 5

THE YORK WATER COMPANY

Statements of Common Stockholders' Equity (Unaudited)

(In thousands of dollars, except per share amounts)

For the Periods Ended September 30, ~~2017~~2022 and ~~2016~~2021

Common
Stock
Shares

Common
Stock
Amount

Retained
Earnings
Total

Balance, December 31, 2016 12,852,295 $ 78,513 $ 35,548 $ 114,061
Net income - - 9,447 9,447
Dividends - - (6,175 ) (6,175 )
Retirement of common stock (37,229 ) (1,263 ) - (1,263 )
Issuance of common stock under
dividend reinvestment, direct stock and
employee stock purchase plans
42,861 1,462 - 1,462
Stock-based compensation 1,505 41 - 41
Balance, September 30, 2017 12,859,432 $ 78,753 $ 38,820 $ 117,573

	Common Stock Shares			Common Stock Amount		Retained Earnings			Total

Balance, June 30, 2022		14,264,763		$	133,239	$	67,945		$	201,184
Net income		–			–		5,681			5,681
Cash dividends declared, $0.1949 per share		–			–		(2,780	)		(2,780	)
Issuance of common stock		–			–		–			–
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		11,160			441		–			441
Stock-based compensation		(467	)		50		–			50
Balance, September 30, 2022		14,275,456		$	133,730	$	70,846		$	204,576

Balance, December 31, 2021		13,112,948		$	88,230	$	64,392		$	152,622
Net income		–			–		14,569			14,569
Cash dividends declared, $0.5847 per share		–			–		(8,115	)		(8,115	)
Issuance of common stock		1,121,940			43,970		–			43,970
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		33,016			1,322		–			1,322
Stock-based compensation		7,552			208		–			208
Balance, September 30, 2022		14,275,456		$	133,730	$	70,846		$	204,576

Common
Stock
Shares

Common
Stock
Amount

Retained
Earnings
Total

Balance, December 31, 2015 12,812,377 $ 77,317 $ 31,753 $ 109,070
Net income - - 8,904 8,904
Dividends - - (5,994 ) (5,994 )
Retirement of Common Stock (16,849 ) (474 ) - (474 )
Issuance of common stock under
dividend reinvestment, direct stock and
employee stock purchase plans
74,168 2,113 - 2,113
Balance, September 30, 2016 12,869,696 $ 78,956 $ 34,663 $ 113,619

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, June 30, 2021		13,090,055	$	87,100	$	60,606		$	147,706
Net income		–		–		4,794			4,794
Cash dividends declared, $0.1874 per share		–		–		(2,454	)		(2,454	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		12,869		568		–			568
Stock-based compensation		–		46		–			46
Balance, September 30, 2021		13,102,924	$	87,714	$	62,946		$	150,660

Balance, December 31, 2020		13,060,817	$	85,935	$	57,317		$	143,252
Net income		–		–		12,983			12,983
Cash dividends declared, $0.5622 per share		–		–		(7,354	)		(7,354	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		35,937		1,612		–			1,612
Stock-based compensation		6,170		167		–			167
Balance, September 30, 2021		13,102,924	$	87,714	$	62,946		$	150,660

The accompanying notes are an integral part of these statements.

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Page 6

THE YORK WATER COMPANY

Statements of Cash Flows (Unaudited)

(In thousands of dollars, except per share amounts)

	Nine Months Ended September 30
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,569		$	12,983
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,545			6,595
Stock-based compensation		208			167
Increase (decrease) in deferred income taxes		(170	)		53
Other		38			46
Changes in assets and liabilities:
(Increase) decrease in accounts receivable and unbilled revenues		(1,431	)		745
Decrease in recoverable income taxes		24			700
(Increase) decrease in materials and supplies, prepaid expenses, prepaid pension cost, regulatory and other assets		771			(6,911	)
Increase (decrease) in accounts payable, accrued compensation and benefits, accrued expenses, deferred employee benefits, regulatory liabilities, and other deferred credits		(4,368	)		3,989
Increase in accrued interest		125			109
Net cash provided by operating activities		17,311			18,476

CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions, including debt portion of allowance for funds used during construction of $504 in 2022 and $493 in 2021		(34,050	)		(27,434	)
Acquisitions of water and wastewater systems		(2,826	)		–
Net cash used in investing activities		(36,876	)		(27,434	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Customers' advances for construction and contributions in aid of construction		3,281			1,955
Repayments of customer advances		(772	)		(772	)
Proceeds of long-term debt issues		26,000			37,452
Repayments of long-term debt		(48,213	)		(28,960	)
Changes in cash overdraft position		1,862			14
Issuance of common stock		45,292			1,612
Dividends paid		(7,885	)		(7,344	)
Net cash provided by financing activities		19,565			3,957

Net change in cash, cash equivalents, and restricted cash		–			(5,001	)
Cash, cash equivalents, and restricted cash at beginning of period		1			5,002
Cash and cash equivalents at end of period	$	1		$	1

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	2,976		$	2,936
Income taxes		–			217

Supplemental disclosure of non-cash investing and financing activities: Accounts payable includes $5,536 in 2022 and $3,562 in 2021 for the construction of utility plant.

Nine Months
Ended September 30

2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,447 $ 8,904
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,064 4,796
Stock-based compensation 41 -
Increase in deferred income taxes 2,102 1,050
Other 59 245
Changes in assets and liabilities:
Increase in accounts receivable and unbilled revenues (306 ) (830 )
Decrease in recoverable income taxes 282 973
Increase in materials and supplies, prepaid expenses, regulatory and other assets (4,642 ) (2,343 )
Increase in accounts payable, accrued compensation and benefits,
accrued expenses, deferred employee benefits, and other deferred credits
2,674 1,093
Increase in accrued interest and taxes 695 128
Net cash provided by operating activities 15,416 14,016

CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions, including debt portion of allowance for funds used during
construction of $352 in 2017 and $84 in 2016
(20,628 ) (8,302 )
Acquisitions of water and wastewater systems (472 ) (29 )
Cash received from surrender of life insurance policies - 642
Net cash used in investing activities (21,100 ) (7,689 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Customers' advances for construction and contributions in aid of construction 1,315 1,720
Repayments of customer advances (288 ) (373 )
Proceeds of long-term debt issues 15,896 -
Repayments of long-term debt (11,683 ) (33 )
Borrowings under short-term line of credit agreements 1,000 -
Change in cash overdraft position 1,206 -
Repurchase of common stock (1,263 ) (474 )
Issuance of common stock 1,462 2,113
Dividends paid (6,168 ) (5,960 )
Net cash provided by (used in) financing activities 1,477 (3,007 )

Net change in cash and cash equivalents (4,207 ) 3,320
Cash and cash equivalents at beginning of period 4,209 2,879
Cash and cash equivalents at end of period $ 2 $ 6,199

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 3,018 $ 3,623
Income taxes 379 1,662

Supplemental disclosure of non-cash investing and financing activities:
Accounts payable includes $1,719 in 2017 and $475 in 2016 for the construction of utility plant.

The accompanying notes are an integral part of these statements.

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Page 7

THE YORK WATER COMPANY

Notes to Interim Financial Statements

(In thousands of dollars, except per share amounts)

1.	~~Basis of Presentation~~

1. Basis of Presentation

The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of results for such periods. Because the financial statements cover an interim period, they do not include all disclosures and notes normally provided in annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

Operating results for the three and nine ~~month periods~~months ended September 30, ~~2017~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2022. Additionally, based on the duration and severity of the novel coronavirus ("COVID-19") pandemic, the Company is uncertain of the ultimate impact it could have on the business.

2.	~~Common Stock and Earnings Per Share~~

2. Acquisitions

On August 11, 2022, the Company completed the acquisition of the water assets and wastewater collection and treatment assets of Country View Manor Community, LLC in York County, Pennsylvania. The Company began operating the existing water assets and wastewater collection and treatment assets on August 15, 2022. The acquisition resulted in the addition of approximately 50 water and wastewater customers with purchase price and acquisition costs of approximately $39. This acquisition is immaterial to Company results.

On August 25, 2022, the Company completed the acquisition of the water assets and wastewater collection and treatment assets jointly owned by Letterkenny Industrial Development Authority and Franklin County General Authority in Franklin County, Pennsylvania. The Company began operating the existing water assets and wastewater collection and treatment assets on August 29, 2022. The acquisition resulted in the addition of approximately 90 water and wastewater customers with purchase price and acquisition costs of approximately $2,787. This acquisition is immaterial to Company results.

3. Accounts Receivable and Contract Assets

Accounts receivable and contract assets are summarized in the following table:

	As of Sep. 30, 2022			As of Dec. 31, 2021			Change

Accounts receivable – customers	$	5,873		$	5,034		$	839
Other receivables		422			455			(33	)
		6,295			5,489			806
Less: allowance for doubtful accounts		(834	)		(855	)		21
Accounts receivable, net	$	5,461		$	4,634		$	827

Unbilled revenue	$	3,084		$	2,784		$	300

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Page 8

Differences in timing of revenue recognition, billings, and cash collections result in receivables and contract assets. Generally, billing occurs subsequent to revenue recognition, resulting in a contract asset reported as unbilled revenue on the balance sheet. The Company does not receive advances or deposits from customers before revenue is recognized so no contract liabilities are reported. Accounts receivable are recorded when the right to consideration becomes unconditional and are presented separately on the balance sheet. The changes in accounts receivable – customers and in unbilled revenue were primarily due to normal timing difference between performance and the customer’s payments.

4. Common Stock and Earnings Per Share

Net income of ~~$3,931~~$5,681 and ~~$3,571~~$4,794 for the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$9,447~~$14,569 and ~~$8,904~~$12,983 for the nine months ended September 30, ~~2017~~2022 and ~~2016 ,~~2021, respectively, is used to calculate both basic and diluted earnings per share. Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus potentially dilutive shares. The dilutive effect of employee stock-based compensation is included in the computation of diluted earnings per share and is calculated using the treasury stock method and expected proceeds upon exercise or issuance of the stock-based compensation.

The following table summarizes the shares used in computing basic and diluted earnings per ~~share.~~share:

									Three Months Ended September 30				Nine Months Ended September 30
	Three Months Ended September 30				Nine Months Ended September 30				2022		2021		2022		2021
	2017		2016		2017		2016
Weighted average common shares, basic		12,847,135		12,868,333		12,845,388		12,846,521		14,254,570		13,083,762		13,853,816		13,069,582
Effect of dilutive securities:
Employee stock-based compensation		121		-		74		-		703		563		407		347
Weighted average common shares, diluted		12,847,256		12,868,333		12,845,462		12,846,521		14,255,273		13,084,325		13,854,223		13,069,929

On April 5, 2022, the Company closed an underwritten public offering of 975,600 shares of its common stock, with an offering price of $41 per share. On April 7, 2022, the Company closed on the full exercise of the underwriter’s option to purchase an additional 146,340 shares of its common stock at the same price. Janney Montgomery Scott LLC was the underwriter in the offering. The Company received net proceeds in the offering, after deducting offering expenses and underwriters’ discounts and commissions, of $43,970. The net proceeds were used to repay the Company’s borrowings under its line of credit agreement incurred to fund capital expenditures and acquisitions, and for general corporate purposes.

On March 11, 2013, the Board of Directors, or the Board, authorized a share repurchase program granting the Company authority to repurchase up to 1,200,000 shares of the Company's common stock from time to time. The stock repurchase program has no specific end date and the Company may repurchase shares in the open market or through privately negotiated transactions. The Company may suspend or discontinue the repurchase program at any time. ~~During~~No shares were repurchased during the three ~~months ended September 30, 2017 and 2016, the Company repurchased 0 and 16,849 shares, respectively. During the~~or nine months ended September 30, ~~2017~~2022 and ~~2016, the Company repurchased 37,229 and 16,849 shares, respectively.~~2021. As of September 30, ~~2017,~~2022, 618,004 shares remain authorized for repurchase.

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3.	~~Commitments~~

The Company has committed to capital expenditures of approximately $11,998 for an additional raw water pumping station and force main, of which $1,056 remains to be incurred as of September 30, 2017. The Company may make additional commitments for this project in 2017.

During its triennial testing completed in 2016, the Company determined it exceeded the action level for lead as established by the Lead and Copper Rule, or LCR, issued by the U.S. Environmental Protection Agency. The rule allows the Company to have five samples of the 50 high-risk homes tested exceed the action level of 15 parts per billion, or PPB. The testing found that six properties with lead service lines, all built before 1935, exceeded the action level, and the reported exceedance amount was 1 PPB. The Company determined that only 3% of the company-owned service lines in the system were lead. The Company is required, per the LCR, to engage in more frequent testing for lead, public education, and annually replace 7% of the remaining company-owned lead service lines in its distribution system. The Company completed two rounds of compliance testing at the customer's tap in 2017 and the water samples did not exceed the action level either time. As a result, the Company expects to reduce its monitoring from semi-annual to annual beginning in 2018.

The Company is performing in excess of the required actions under the LCR. Specifically, the Company is providing the affected customers with a free water test and a 200 gallon per month credit to flush their line in order to reduce any lead content until their lead service line has been replaced. The cost of the water tests and flushing credits was $2 for the three months ended September 30, 2017 and $13 for the nine months ended September 30, 2017. Additional amounts for water tests and flushing credits are not expected to have a material impact on the financial position of the Company over the remaining three and a half years.

In addition, the Company entered into a consent order agreement with the Pennsylvania Department of Environmental Protection in December 2016. Under the agreement, the Company committed to exceed the LCR replacement schedule by replacing all of the remaining company-owned lead service lines within four years from the agreement. The cost for these service line replacements was approximately $1,478 through September 30, 2017 and is included in utility plant. Additional costs of approximately $1,082 are expected until the replacements are complete, and will be integrated into the Company's annual capital budgets.

Finally, the Company was granted approval by the PPUC to modify its tariff to include the cost of the replacement of lead customer-owned service lines that are discovered when the Company replaces its lead service lines over the next three and a half years, and to include the cost of the annual replacement of up to 400 lead customer-owned service lines whenever they are discovered, regardless of the material used for the Company-owned service line over nine years. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a reasonable period of at least four but not more than six years. The cost for the customer-owned lead service line replacements under the four-year tariff modification was approximately $110 through September 30, 2017 and is included as a regulatory asset. Additional replacements are expected to be approximately $79 under the four-year tariff modification, assuming the average percentage of customer-owned lead service lines that were replaced when company-owned lead service lines were replaced through September 30, 2017 remains consistent over the entire replacement period. The Company is unable to predict how many lead customer-owned service lines are in use, and, therefore, its current estimate of $1,040 for replacements under the nine-year tariff modification is subject to adjustment as more facts become available.

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~~Page 9~~5. Debt

	As of Sep. 30, 2022			As of Dec. 31, 2021

8.43% Senior Notes, Series D, due 2022	$	7,500		$	7,500
Variable Rate Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2008A, due 2029		12,000			12,000
3.00% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series A of 2019, due 2036		10,500			10,500
3.10% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series B of 2019, due 2038		14,870			14,870
3.23% Senior Notes, due 2040		15,000			15,000
4.00% - 4.50% York County Industrial Development Authority Exempt Facilities Revenue Bonds, Series 2015, due 2029 - 2045		10,000			10,000
4.54% Senior Notes, due 2049		20,000			20,000
3.24% Senior Notes, due 2050		30,000			30,000
Committed Line of Credit, due September 2024		7,107			29,320
Total long-term debt		126,977			149,190
Less discount on issuance of long-term debt		(161	)		(169	)
Less unamortized debt issuance costs		(2,528	)		(2,652	)
Less current maturities		(7,500	)		(7,500	)
Long-term portion	$	116,788		$	138,869

4.	~~Pensions~~

~~Components of Net Periodic Pension Cost~~

Three Months
Ended September 30

Nine Months
Ended September 30

2017 2016 2017 2016

Service cost $ 270 $ 254 $ 810 $ 763
Interest cost 398 399 1,194 1,199
Expected return on plan assets (599 ) (558 ) (1,796 ) (1,675 )
Amortization of actuarial loss 123 141 369 421
Amortization of prior service cost (3 ) (3 ) (9 ) (9 )
Rate-regulated adjustment 386 342 1,157 1,026
Net periodic pension expense $ 575 $ 575 $ 1,725 $ 1,725

~~Employer Contributions~~

~~The Company previously disclosed in its financial statements for the year ended December 31, 2016 that it expected to contribute $2,300 to its pension plans in 2017. For the nine months ended~~ ~~September 30, 2017, contributions of $1,725 had been made. The Company expects to contribute the remaining $575 during the final quarter of 2017.~~

~~Debt~~

As of
Sept. 30, 2017

As of
Dec. 31, 2016

10.17% Senior Notes, Series A, due 2019 $ 6,000 $ 6,000
9.60% Senior Notes, Series B, due 2019 5,000 5,000
1.00% Pennvest Note, due 2019 85 118
10.05% Senior Notes, Series C, due 2020 6,500 6,500
8.43% Senior Notes, Series D, due 2022 7,500 7,500
Variable Rate Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2008A, due 2029 12,000 12,000
4.75% York County Industrial Development Authority Revenue Bonds, Series 2006, due 2036 10,500 10,500
4.50% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2014, due 2038 14,870 14,870
5.00% Monthly Senior Notes, Series 2010A, due 2040 15,000 15,000
4.00% - 4.50% York County Industrial Development Authority Exempt Facilities Revenue Bonds, Series 2015, due 2029 - 2045 10,000 10,000
Committed Line of Credit, due 2019 4,246 -
Total long-term debt 91,701 87,488
Less discount on issuance of long-term debt (218 ) (226 )
Less unamortized debt issuance costs (2,509 ) (2,609 )
Less current maturities (44 ) (44 )
Long-term portion $ 88,930 $ 84,609

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~~Page 10~~

In the second quarter of 2017, the Company renewed its $13,000 and $11,000 committed lines of credit and extended the maturity date of each to May 2019. In addition, the Company renewed its $7,500 committed line of credit and extended the maturity date to June 2018.

In the third quarter of ~~2017,~~2022, the Company renewed its ~~$10,000~~ committed line of credit and extended the maturity date to September ~~2018.~~2024. As part of the renewal, the interest rate will change from LIBOR plus 1.05% to a successor rate of the Secured Overnight Financing Rate, or SOFR, plus 1.17% on January 1, 2023, in advance of the likely discontinuation of LIBOR in 2023. No other terms or conditions of the line of credit agreement were modified.

6.	6. Interest Rate Swap Agreement

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. The Company utilizes an interest rate swap agreement to effectively convert the Company's $12,000 variable-rate debt issue to a fixed rate. Interest rate swaps are contracts in which a series of interest rate cash flows are exchanged over a prescribed period. The notional amount on which the interest payments are based ($12,000) is not exchanged. The interest rate swap provides that the Company pays the counterparty a fixed interest rate of 3.16% on the notional amount of $12,000. In exchange, the counterparty pays the Company a variable interest rate based on 59% of the U.S. Dollar one-month LIBOR rate on the notional amount. The intent is for the variable rate received from the swap counterparty to approximate the variable rate the Company pays to bondholders on its variable rate debt issue, resulting in a fixed rate being paid to the swap counterparty and reducing the Company's interest rate risk. The ~~Company's~~Company’s net payment rate on the swap was ~~2.43%~~1.78% and ~~2.94% during~~3.13% for the three months ~~that~~ ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~2.53%~~2.43% and ~~2.87%~~3.06% for the nine months ~~that~~ ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

The interest rate swap agreement is classified as a financial derivative used for non-trading activities. The accounting standards regarding accounting for derivatives and hedging activities require companies to recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. In accordance with the standards, the interest rate swap is recorded on the balance sheet in other deferred credits at fair value (see Note 7).

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The Company uses regulatory accounting treatment rather than hedge accounting to defer the unrealized gains and losses on its interest rate swap. ~~Instead of the effective portion being recorded as other comprehensive income or loss~~These unrealized gains and ~~the ineffective portion being recognized in earnings using the cash flow hedge accounting rules provided by the derivative accounting standards, the entire unrealized swap value is~~losses are recorded as a regulatory asset. Based on current ratemaking treatment, the Company expects the unrealized gains and losses to be recognized in rates as a component of interest expense as the swap settlements occur. Swap settlements are recorded in the income statement with the hedged item as interest expense. Swap settlements resulted in the reclassification from regulatory assets to interest expense of ~~$74~~$52 and ~~$86 during~~$94 for the three ~~month period~~months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$229~~$220 and ~~$259~~$278 for the nine ~~month period~~months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. The overall swap result was a ~~loss~~gain of ~~$44~~$357 and ~~$25~~$31 for the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~a loss of $173~~$1,132 and ~~$868~~$250 for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. The Company expects to reclassify ~~$274~~$70 from regulatory assets to interest expense as a result of swap settlements over the next 12 months.

The interest rate swap agreement contains provisions that require the Company to maintain a credit rating of at least BBB- with Standard & Poor's. If the Company's rating were to fall below this rating, it would be in violation of these provisions, and the counterparty to the derivative could request immediate payment if the derivative was in a liability position. On ~~April 21, 2017,~~August 9, 2022, Standard & Poor's affirmed the Company's credit rating at A-, with a stable outlook and adequate liquidity. The Company's interest rate swap was in a liability position as of September 30, ~~2017.~~2022. If a violation due to credit rating, or some other default provision, were triggered on September 30, ~~2017,~~2022, the Company would have been required to pay the counterparty approximately ~~$2,367.~~$701.

The interest rate swap will expire on October 1, 2029. Other than the interest rate swap, the Company has no other derivative instruments.

~~Table~~7. Fair Value of ~~Contents~~

Financial Instruments

~~Page 11~~

7.	~~Fair Value Measurements~~

The accounting standards regarding fair value measurements establish a fair value hierarchy which indicates the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include ~~management's~~management’s own judgments about the assumptions market participants would use in pricing the asset or liability.

The Company has recorded its interest rate swap liability at fair value in accordance with the standards. The liability is recorded under the caption ~~"Other~~“Other deferred ~~credits"~~credits” on the balance sheet. The table below illustrates the fair value of the interest rate swap as of the end of the reporting period.

Description		September 30, 2017		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)		September 30, 2022		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$2,232		$2,232		$717		$717

Fair values are measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curve as of the date of the valuation. These inputs to this calculation are deemed to be Level 2 inputs. The balance sheet carrying value reflects the Company's credit quality as of September 30, ~~2017.~~2022. The rate used in discounting all prospective cash flows anticipated to be made under this swap reflects a representation of the yield to maturity for 30-year debt on utilities rated A- as of September 30, ~~2017. The use of the Company's credit rating resulted in a reduction in the fair value of the swap liability of $135 as of September 30, 2017.~~2022. The fair value of the swap reflecting the Company's credit quality as of December 31, ~~2016~~2021 is shown in the table below.

Description		December 31, 2016		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)		December 31, 2021		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$2,292		$2,292		$2,086		$2,086

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The carrying amount of current assets and liabilities that are considered financial instruments approximates fair value as of the dates presented. The Company's total long-term debt, with a carrying value of ~~$91,701~~$126,977 at September 30, ~~2017,~~2022, and ~~$87,488~~$149,190 at December 31, ~~2016,~~2021, had an estimated fair value of approximately ~~$103,000~~$105,000 and ~~$99,000,~~$168,000, respectively. The estimated fair value of debt was calculated using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. These inputs to this calculation are deemed to be Level 2 inputs. The Company recognized its credit rating in determining the yield curve and did not factor in ~~third party~~third-party credit enhancements including ~~bond insurance on the 2006 York County Industrial Development Authority issue and~~ the letter of credit on the 2008 Pennsylvania Economic Development Financing Authority Series A issue.

Customers' advances for construction and ~~notes~~note receivable had carrying values at September 30, ~~2017~~2022 of ~~$7,950~~$15,331 and $255, respectively. At December 31, ~~2016,~~2021, customers' advances for construction and ~~notes~~note receivable had carrying values of ~~$7,102~~$12,820 and $255, respectively. The relative fair values of these amounts cannot be accurately estimated since the timing of future payment streams is dependent upon several factors, including new customer connections, customer consumption levels and future rate increases.

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~~Page 12~~8. Commitments

8.	~~Income Taxes~~

The Company ~~filed~~has committed to capital expenditures of approximately $39,205 to armor and replace the spillway of the Lake Williams dam, of which $29,626 remains to be incurred as of September 30, 2022. The Company may make additional commitments for this project in the future.

The Company entered into a ~~change~~consent order agreement with the Pennsylvania Department of Environmental Protection, or DEP, in ~~accounting method under the Internal Revenue Service tangible property regulations effective in 2014. Under the change in accounting method,~~December 2016 after the Company ~~is permitted~~determined it exceeded the action level for lead as established by the Lead and Copper Rule, or LCR, issued by the U.S. Environmental Protection Agency. The Company did not have an exceedance in any subsequent compliance test and successfully completed its commitment to ~~deduct~~exceed the ~~costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in~~LCR replacement schedule by replacing all the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions. As a result, the Company's effective tax rate was 22.0% and 27.8% for the three months ended September 30, 2017 and 2016, respectively, and 26.7% and 31.9% for the nine months ended September 30, 2017 and 2016, respectively. The effective tax rate will vary depending on the level of eligible asset improvements that are placed in service each period, which level was higher during the first nine months of 2017 as compared to the first nine months of 2016, mainly due to replacement ofknown company-owned lead service lines ~~(see Note 3) which qualify for tangible property regulation treatment.~~

9.	~~Acquisitions~~

~~On January 6, 2017,~~within four years from the agreement. In June 2022, DEP determined the Company had completed all requirements and terminated the ~~acquisition of the water assets of Stockham's Village Mobile Home Park in Adams County, Pennsylvania.~~ consent order agreement.

The Company began operating the existing system through an interconnection with its current distribution system on January 9, 2017. The acquisition resulted in the addition of approximately 80 new water customers with purchase price and acquisition costs of approximately $24. The purchase price and acquisition costs were more than the depreciated original cost of the assets. The Company recorded an acquisition adjustment of approximately $17 and will seekwas granted approval ~~from~~by the Pennsylvania Public Utility Commission, or PPUC, to ~~amortize~~modify its tariff to include the ~~acquisition adjustment over the remaining life of the acquired assets.~~

On February 23, 2017, the Company completed the acquisition of the wastewater collection assets of West York Borough in York County, Pennsylvania. The Company began operating the existing collection facilities on February 27, 2017. The acquisition resulted in the addition of approximately 1,700 wastewater customers, representing more than 2,200 units, with purchase price and acquisition costs of approximately $448. The purchase price and acquisition costs were more than the depreciated original cost of the ~~assets.~~annual replacement of up to 400 lead customer-owned service lines over nine years from the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company ~~recorded~~will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $1,501 and $1,351 through September 30, 2022 and December 31, 2021, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $1,700. This estimate is subject to adjustment as more facts become available.

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9. Revenue

The following table shows the Company’s revenues disaggregated by service and customer type.

	Three Months Ended September 30				Nine Months Ended September 30
	2022		2021		2022		2021
Water utility service:
Residential	$	9,282	$	8,872	$	26,548	$	25,560
Commercial and industrial		4,208		3,952		11,692		10,891
Fire protection		856		827		2,528		2,428
Wastewater utility service:
Residential		976		481		2,830		1,426
Commercial and industrial		209		79		434		237
Billing and revenue collection services		149		121		363		360
Collection services		3		18		151		29
Other revenue		6		18		25		38
Total Revenue from Contracts with Customers		15,689		14,368		44,571		40,969
Rents from regulated property		122		135		379		416
Total Operating Revenue	$	15,811	$	14,503	$	44,950	$	41,385

Utility Service

The Company provides utility service as a distinct and single performance obligation to each of its water and wastewater customers. The transaction price is detailed in the tariff pursuant to an ~~acquisition adjustment~~order by the PPUC and made publicly available. There is no variable consideration and no free service, special rates, or subnormal charges to any customer. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of ~~approximately $358~~utility service through a stand-ready obligation to perform and ~~will seek approval~~the transfer of water or the collection of wastewater through a series of distinct transactions that are identical in nature and have the same pattern of transfer to the customer. The Company uses an output method to recognize the utility service revenue over time. The stand-ready obligation is recognized through the passage of time in the form of a fixed charge and the transfer of water or the collection of wastewater is recognized at a per unit rate based on the actual or estimated flow through the meter. Each customer is invoiced every month and the invoice is due within twenty days. The utility service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for the passage of time and the actual or estimated usage from the ~~PPUC~~latest meter reading to ~~amortize~~ the ~~acquisition adjustment over the remaining life~~end of the ~~acquired assets.~~accounting period. The methodology is standardized and consistently applied to reduce bias and the need for judgment.

Billing and Revenue Collection Service

The ~~result of these acquisitions has been immaterial~~Company provides billing and revenue collection service as distinct performance obligations to ~~total Company results.~~

~~10.~~

~~Stock-Based Compensation~~

~~On May 2, 2016,~~two municipalities within the Company's stockholders approved The York Water Company Long-Term Incentive Plan, or LTIP. The LTIP was adopted to provide the incentive of long-term stock-based awards to officers, directors and key employees. The LTIP provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, performance restricted stock grants and units, restricted stock grants and units, and unrestricted stock grants. A maximum of ~~100,000~~ ~~shares of common stock may be issued under the LTIP over the~~ ~~ten-year~~ ~~life of the plan. The maximum number of shares of common stock subject to awards that may be granted to any participant in any one calendar year is~~ ~~2,000.~~ Shares of common stock issued under the LTIP may be treasury shares or authorized but unissued shares. The LTIP will be administered by the Compensation Committee of the Board, or the full Board, provided that the full Board will administer the LTIP as it relates to awards to non-employee directorsservice territory of the Company. The municipalities provide service to their residents and the Company ~~filed~~acts as the billing and revenue collection agent for the municipalities. The transaction price is a ~~registration statement~~fixed amount per bill prepared as established in the contract. There is no variable consideration. Due to the fact that both the billing performance obligation and the revenue collection performance obligation are materially complete by the end of the reporting period, the Company does not allocate the transaction price between the two performance obligations. The performance obligations are satisfied at a point in time when the bills are sent as the municipalities receive all the benefits and bears all of the risk of non-collection at that time. Each municipality is invoiced when the bills are complete and the invoice is due within thirty days. The billing and revenue collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the ~~Securities and Exchange Commission on May 11, 2016 covering~~end of the ~~offering of stock under the LTIP. The LTIP was effective on July 1, 2016.~~reporting period.

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Collection Service

~~On April 26, 2017,~~The Company provides collection service as a distinct and single performance obligation to several municipalities within the ~~Board awarded stock to non-employee directors effective May 1, 2017. This stock award vested immediately. On April 26, 2017,~~service territory of the ~~Compensation Committee awarded restricted stock to officers and key employees effective May 1, 2017. This restricted stock award vests ratably over~~ ~~three~~ ~~years beginning May 1, 2017. In addition, the Board of Directors accelerated the vesting period for restricted stock granted in 2016 to two retiring officers from three years~~Company. The municipalities provide wastewater service to their ~~2017 retirement dates.~~residents. If those residents are delinquent in paying for their wastewater service, the municipalities request that the Company post for and shut off the supply of water to the premises of those residents. When the resident is no longer delinquent, the Company will restore water service to the premises. The ~~stock grant was fully~~transaction price for each posting, each shut off, and each restoration is a fixed amount as established in the contract. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied at a point in time when the posting, shut off, or restoration is completed as the municipalities receive all the benefits in the form of payment or no longer providing wastewater service. Each municipality is invoiced periodically for the posting, shut offs, and restorations that have been completed since the last billing and the invoice is due within thirty days. The collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for postings, shut offs, and restorations that have been completed from the ~~officer who retired on September 30, 2017.~~ last billing to the end of the accounting period.

Service Line Protection Plan

The Company ~~continues~~provides service line protection as a distinct and single performance obligation to current water customers that choose to participate. The transaction price is detailed in the plan’s terms and conditions and made publicly available. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of service line protection through a stand-ready obligation to perform. The Company uses an output method to recognize the ~~acceleration on~~service line protection revenue over time. The stand-ready obligation is recognized through the ~~books~~passage of time. A customer has a choice to prepay for an entire year or to pay in advance each month. The service line protection plan has no returns or extended warranties associated with it. No revenue is recognized from ~~the approval date to the retirement date for the other officer.~~

~~The restricted stock awards provide the grantee with the rights of a shareholder, including the right to receive dividends~~performance obligations satisfied in prior periods and to vote such shares, but not the right to sell or otherwise transfer the shares during the restriction period. As a result, the awards are included in common shares outstanding on the balance sheet. Restricted stock awards result in compensation expense valued at the fair market valueno material performance obligations remain unsatisfied as of the ~~stock on the date~~end of the ~~grant and are amortized ratably over the restriction~~reporting period.

~~The following tables summarize the stock grant amounts and activity for the nine months ended September 30, 2017.~~

10. Rate Matters

Number of Shares

Grant Date Weighted
Average Fair Value
Nonvested at beginning of the period 660 $37.20
Granted 1,505 $38.00
Vested (778) $37.93
Forfeited - �� -
Nonvested at end of the period 1,387 $37.66

For the three months ended September 30, 2017, the statement of income includes $7 of stock-based compensation and related recognized tax benefits of $3. For the nine months ended September 30, 2017, the statement of income includes $41 of stock-based compensation and related recognized tax benefits of $17. The total fair value of the shares vested in the three and nine months ended September 30, 2017 was $2 and $29. Total stock-based compensation related to nonvested awards not yet recognized is $41 which will be recognized over the remaining three year vesting period.

~~11.~~

~~Rate Matters~~

From time to time, the Company files applications for rate increases with the PPUC and is granted rate relief as a result of such requests. ~~Most recently,~~The most recent rate request was filed by the Company on May 27, 2022 and seeks an annual increase in water rates of $18,854, which would represent a 33.8% increase, and an annual increase in wastewater rates of $1,457, which would represent a 35% increase. The request is currently under review by the PPUC ~~authorized an~~and other interested parties. Any rate increase approved by the PPUC will be effective no later than March 1, 2023. There can be no assurance that the PPUC will grant the Company's rate increase in ~~rates effective February 28, 2014.~~the amount requested, if at all.

The PPUC permits water utilities to collect a distribution system improvement charge, or DSIC. The DSIC allows the Company to add a charge to customers' bills for qualified replacement costs of certain infrastructure without submitting a rate filing. This surcharge mechanism typically adjusts periodically based on additional qualified capital expenditures completed or anticipated in a future period. The DSIC is capped at 5% of base rates and is reset to zero when new base rates that reflect the costs of those additions become effective or when a utility's earnings exceed a regulatory benchmark. The Company's earnings are currently below the regulatory benchmark allowing the Company to collect DSIC. The DSIC provided revenues of ~~$405~~$661 and ~~$467~~$255 for the three months ended September 30, 2022 and 2021, respectively, and $1,623 and $280 for the nine months ended September 30, 2022 and 2021, respectively.

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11. Pensions

Components of Net Periodic Pension Cost

	Three Months Ended September 30						Nine Months Ended September 30
	2022			2021			2022			2021

Service cost	$	257		$	271		$	769		$	814
Interest cost		334			302			1,002			906
Expected return on plan assets		(1,054	)		(913	)		(3,163	)		(2,739	)
Amortization of actuarial loss		–			121			–			363
Amortization of prior service cost		(4	)		(3	)		(10	)		(9	)
Rate-regulated adjustment		1,042			797			3,127			2,390
Net periodic pension expense	$	575		$	575		$	1,725		$	1,725

Pension service cost is recorded in operating expenses. All other components of net periodic pension cost are recorded as other pension costs in other income (expenses).

Employer Contributions

The Company previously disclosed in its financial statements for the year ended December 31, 2021 that it expected to contribute $2,300 to its pension plans in 2022. For the nine months ended September 30, 2022, contributions of $1,725 have been made. The Company expects to contribute the remaining $575 during the final quarter of 2022.

12. Stock-Based Compensation

On May 2, 2016, the Company’s stockholders approved The York Water Company Long-Term Incentive Plan, or LTIP. The LTIP was adopted to provide the incentive of long-term stock-based awards to officers, directors and key employees. The LTIP provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, performance restricted stock grants and units, restricted stock grants and units, and unrestricted stock grants. A maximum of 100,000 shares of common stock may be issued under the LTIP over the ten-year life of the plan. The maximum number of shares of common stock subject to awards that may be granted to any participant in any one calendar year is 2,000. Shares of common stock issued under the LTIP may be treasury shares or authorized but unissued shares. The LTIP will be administered by the Compensation Committee of the Board, or the full Board, provided that the full Board will administer the LTIP as it relates to awards to non-employee directors of the Company. The Company filed a registration statement with the Securities and Exchange Commission on May 11, 2016 covering the offering of stock under the LTIP. The LTIP was effective on July 1, 2016.

On May 2, 2022, the Board awarded stock to non-employee directors effective May 2, 2022. This stock award vested immediately. On May 2, 2022, the Compensation Committee awarded restricted stock to officers and key employees effective May 2, 2022. This stock award vests ratably over three years beginning May 2, 2022.

The restricted stock awards provide the grantee with the rights of a shareholder, including the right to receive dividends and to vote such shares, but not the right to sell or otherwise transfer the shares during the restriction period. As a result, the awards are included in common shares outstanding on the balance sheet. Restricted stock awards result in compensation expense valued at the fair market value of the stock on the date of the grant and are amortized ratably over the restriction period.

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The following tables summarize the stock grant amounts and activity for the nine months ended September 30, 2022.

	Number of Shares		Grant Date Weighted Average Fair Value

Nonvested at beginning of the period	8,804		$46.91
Granted	8,052		$38.87
Vested	(5,591	)	$42.60
Forfeited	(500	)	$44.61
Nonvested at end of the period	10,765		$43.24

For the three months ended September 30, 2022 and 2021, the statement of income includes $50 and $46 of stock-based compensation, respectively, and related recognized tax benefits of $14 and $13, respectively. For the nine months ended September 30, 2022 and 2021, the statement of income includes $208 and $167 of stock-based compensation, respectively, and related recognized tax benefits of $60 and $48, respectively. The total fair value of the shares vested in the nine months ended September 30, 2022 was $238. Total stock-based compensation related to nonvested awards not yet recognized is $465 which will be recognized over the remaining three year vesting period.

13. Income Taxes

Under the Internal Revenue Service tangible property regulations, or TPR, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions.

The Company’s effective tax rate was (1.5)% and 11.5% for the three months ended September 30, 2022 and 2021, respectively, and (1.0)% and 7.7% for the nine months ended September 30, 2022 and 2021, respectively. The lower effective tax rate is primarily due to higher deductions from the TPR. The effective tax rate will vary depending on the level of eligible asset improvements expensed for tax purposes under TPR each period.

On July 8, 2022, the Pennsylvania budget for the fiscal year ending June 30, 2023 was signed into law. A provision within the tax code bill included with the budget provides for an annual phase-down of the Pennsylvania corporate net income tax rate of one percentage point in the first year beginning January 1, 2023 from 9.99% to 8.99%, and a one-half percentage point each year thereafter until it reaches 4.99% beginning January 1, 2031. The Company has remeasured the state portion of the Company’s deferred income taxes as of September 30, 2022. The effect, net of the federal benefit, of $18 was recognized in income for the three and nine months ended September 30, ~~2017, respectively,~~2022. Deferred income taxes for differences that are recognized for ratemaking purposes on a cash or flow-through basis were remeasured with offsetting changes to regulatory assets and ~~revenues~~liabilities on the balance sheet as of ~~$0 for the three and nine months ended~~ September 30, ~~2016.~~2022. The Company expects any savings in its Pennsylvania current income taxes to be returned to its customers through the rate making process or as a future negative surcharge on their bills.

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~~12.~~

~~Impact of Recent Accounting Pronouncements~~

~~In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-09,~~ ~~Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting~~. This ASU clarifies when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption available. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations and cash flows.

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost~~. This ASU requires employers to report the service cost component in the same line item as other compensation costs arising from services rendered by employees during the reporting period. The other components of net benefit costs will be presented in the income statement separately from the service cost and outside of a subtotal of income from operations. In addition, only the service cost component may be eligible for capitalization where applicable. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption available. The Company is currently assessing the impact of the adoption of the standard.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers.~~ This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605—Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~, deferring the effective date of this amendment for public companies by one year to fiscal years beginning after December 15, 2017. Early adoption is permitted for fiscal years beginning after December 15, 2016, the original effective date. The standard permits the use of either a retrospective or cumulative effect transition method. The Company has not yet selected a transition method and is in the process of assessing the impact of the adoption of the standard on its financial position, results of operations and cash flows. Based on its evaluation of ASU 2014-09 to date, which is still ongoing, the Company does not expect it to have a material impact on its results of operations or cash flows in the periods after adoption. This evaluation may be updated if new authoritative or interpretive guidance is issued. In 2017, the American Institute of Certified Public Accountants (AICPA) power and utility entities revenue recognition task force recommended that contributions in aid of construction are not in the scope of the new standard and submitted its determination to the AICPA revenue recognition working group for approval. Under ASU 2014-09, revenue is recognized as control transfers to the customer. As such, revenue from the Company's water and wastewater contracts, which is a significant percentage of the Company's revenue, are generally from a single performance obligation that will be recognized consistent with the revenue recognition model the Company currently uses for its contracts. The Company will comply with the new disclosure requirements included in ASU 2014-09 which will have a significant impact on disclosures upon adoption. The Company will complete its assessment of the expected impact of adoption, including selecting a transition method for adoption, in 2017, and continue to evaluate ASU 2014-09 through the date of adoption including the impact of adoption if contributions in aid of construction are determined to be in scope.

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Item 2.

Management's Discussion and Analysis of

Financial Condition and Results of ~~Operations~~Operations.

(In thousands of dollars, except per share amounts)

Forward-looking Statements

Certain statements contained in this report on Form 10-Q constitute ~~"forward-looking statements"~~“forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Words such as "may," "should," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. These forward-looking statements include certain information relating to the ~~Company's~~Company’s business strategy; statements including, but not limited to:

·•	the amount and timing of rate ~~increases~~changes and other regulatory matters including the recovery of costs recorded as regulatory assets;
·•	expected profitability and results of operations;
·•	trends;
·•	goals, priorities and plans for, and cost of, growth and expansion;
·•	strategic initiatives;
·•	availability of water supply;
·•	water usage by customers; and
·•	the ability to pay dividends on common stock and the rate of those dividends.

The forward-looking statements in this report reflect what the Company currently anticipates will happen. What actually happens could differ materially from what it currently anticipates will happen. The Company does not intend to make a public announcement when forward-looking statements in this report are no longer accurate, whether as a result of new information, what actually happens in the future or for any other reason. Important matters that may affect what will actually happen include, but are not limited to:

·•	changes in weather, including drought conditions or extended periods of heavy rainfall;
·•	natural disasters, including pandemics such as the current outbreak of the novel strain of coronavirus known as “COVID-19” and the effectiveness of the Company’s pandemic plans;
•	levels of rate relief granted;
·•	the level of commercial and industrial business activity within the Company's service territory;
·•	construction of new housing within the Company's service territory and increases in population;
·•	changes in government policies or regulations, including the tax code;
·•	the ability to obtain permits for expansion projects;
·•	material changes in demand from customers, including the impact of conservation efforts which may ~~impact~~reduce the demand of customers for water;
·•	changes in economic and business conditions, including interest ~~rates, which are less favorable than expected;~~rates;
·•	loss of customers;
·•	changes in, or unanticipated, capital requirements;
·•	the impact of acquisitions;
·•	changes in accounting pronouncements;
·•	changes in the ~~Company's~~Company’s credit rating or the market price of its common stock; and
·•	the ability to obtain ~~financing; and~~
·	~~other matters set forth in Item 1A, "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2016.~~financing.

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General Information

The primary business of the Company is to impound, purify to meet or exceed safe drinking water standards and distribute water. The Company also owns and operates three wastewater collection systems and ~~two~~seven wastewater collection and treatment systems. The Company operates within its franchised water and wastewater territory, which covers 39portions of 54 municipalities within ~~York County, Pennsylvania and nine municipalities within Adams County, Pennsylvania. The Company's wastewater operations include portions of four municipalities~~three counties in ~~York County,~~south-central Pennsylvania. The Company is regulated by the Pennsylvania Public Utility Commission, or PPUC, for both water and wastewater in the areas of billing, payment procedures, dispute processing, terminations, service territory, debt and equity financing and rate setting. The Company must obtain PPUC approval before changing any practices associated with the aforementioned areas.

Water service is supplied through the Company's own distribution system. The Company obtains the bulk of its water supply for its primary system for York and Adams Counties from both the South Branch and East Branch of the Codorus Creek, which together have an average daily flow of approximately 73.0 million ~~gallons. This~~gallons from a combined watershed area isof approximately 117 square miles. The Company has two reservoirs on this primary system, Lake Williams and Lake Redman, which together hold up to approximately 2.2 billion gallons of water. The Company supplements ~~its~~these reservoirs with a 15-mile pipeline from the Susquehanna River to Lake Redman which provides access to an additional supply of 12.0 million gallons of untreated water per day. The Company obtains its water supply for its system for Franklin County from the Roxbury Dam on the Conodoquinet Creek, which has an average daily flow of approximately 26.0 million gallons from a watershed area of approximately 33 square miles. The Company has a reservoir on this system which holds up to approximately 330 million gallons of water. The Company also owns ~~seven~~11 wells which are capable of providing a safe yield of approximately ~~366,000~~637,000 gallons per day to supply water to the customers of its ~~customers~~satellite systems in ~~Carroll Valley Borough~~York and ~~Cumberland Township,~~ Adams ~~County.~~Counties. As of September 30, ~~2017,~~2022, the Company's average daily availability was ~~35.4~~37.5 million gallons, and average daily consumption was approximately ~~18.5~~21.1 million gallons. The Company's service territory had an estimated population of ~~196,000~~204,000 as of December 31, ~~2016.~~2021. Industry within the Company's service territory is diversified, manufacturing such items as fixtures and furniture, electrical machinery, food products, paper, ordnance units, textile products, air conditioning systems, laundry detergent, barbells, and motorcycles.

The Company's water business is somewhat dependent on weather conditions, particularly the amount and timing of rainfall. Revenues are particularly vulnerable to weather conditions in the summer months. Prolonged periods of hot and dry weather generally cause increased water usage for watering lawns, washing cars, and keeping golf courses and sports fields irrigated. Conversely, prolonged periods of dry weather could lead to drought restrictions from governmental authorities. Despite the ~~Company's~~Company’s adequate water supply, customers may be required to cut back water usage under such drought restrictions which would negatively impact revenues. The Company has addressed some of this vulnerability by instituting minimum customer charges which are intended to cover fixed costs of operations under all likely weather conditions.

The ~~Company's~~Company’s business does not require large amounts of working capital and is not dependent on any single customer or a very few customers for a material portion of its business. Increases in revenues are generally dependent on the ~~Company's~~Company’s ability to obtain rate increases from the PPUC in a timely manner and in adequate amounts and to increase volumes of water sold through increased consumption and increases in the number of customers served. The Company continuously looks for water and wastewater acquisition and expansion opportunities both within and outside its current service territory as well as additional opportunities to enter into bulk water contracts with municipalities and other entities to supply water.

The Company has agreements with several municipalities to provide ~~sewer~~ billing and collection services. The Company also has a service line protection program on a targeted basis in order to further diversify its business. Under this optional program, customers pay a fixed monthly fee, and the Company will repair or replace damaged customer service lines, as needed, subject to an annual maximum dollar amount. ~~Opportunities~~The Company continues to review and consider opportunities to expand both ~~initiatives are being pursued.~~initiatives.

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Impact of COVID-19

On March 11, 2020, the World Health Organization characterized an outbreak of a novel strain of coronavirus (“COVID-19”) as a pandemic. The Company has taken steps, consistent with directions from federal, state, and local authorities, to mitigate known risks with the health and safety of its employees and customers as its first priority.

The Company is an essential, life-sustaining business and has continued normal operations. Although most restrictions have been lifted, the Company continues to monitor guidance from federal, state, and local authorities. Any new restrictions are not expected to materially impede the Company’s ability to complete its planned capital expenditures or acquisitions. The Company has not experienced any material supply chain disruptions. The Company has been informed of longer lead times for some items, although this does not impact daily operating supplies. The Company maintains an adequate inventory of critical repair parts which are available as needed. The Company continues to maintain relationships with its vendors to identify issues in a timely manner while also seeking out additional vendor relationships to diversify its supply chain. The Company has addressed the longer lead times by placing orders proactively with its vendors to align with current lead times. If the delays increase materially or if certain materials and supplies become unavailable, the Company may re-prioritize some of its capital projects or experience higher operating expenses or capital costs. The Company believes it has sufficient liquidity and access to the capital markets if needed.

To date, there has been no material impact on the Company’s workforce, operations, financial performance, liquidity, or supply chain as a result of COVID-19. However, the ultimate duration and severity of the pandemic or its effects on the economy, the capital and credit markets, or the Company’s workforce, customers, and suppliers, as well as governmental and regulatory responses, are uncertain.

Results of Operations

Three Months Ended September 30, ~~2017~~2022 Compared

With Three Months Ended September 30, ~~2016~~2021

Net income for the third quarter of ~~2017~~2022 was ~~$3,931,~~$5,681, an increase of ~~$360,~~$887, or ~~10.1%~~18.5%, from net income of ~~$3,571~~$4,794 for the same period of ~~2016.~~2021. The primary contributing factors to the increase were higher operating revenues and lower income taxes ~~an increased allowance for funds used during construction, higher earnings on life insurance policies and higher revenues,~~ which were partially offset by higher ~~operating~~ expenses.

Operating revenues for the third quarter of ~~2017,~~2022 increased ~~$91,~~$1,308, or ~~0.7%~~9.0%, from ~~$12,601~~$14,503 for the three months ended September 30, ~~2016~~2021 to ~~$12,692~~$15,811 for the corresponding ~~2017~~2022 period. The ~~primary reasons for~~increase was primarily due to growth in the ~~increase were~~customer base and revenues from the distribution system improvement charge, or DSIC, allowed by the PPUC of ~~$405 and the recent West York Borough~~$661. The average number of wastewater ~~acquisition of $188. The DSIC allows the Company~~customers served in 2022 increased as compared to ~~add a charge~~2021 by 2,308 customers, from 3,333 to ~~customers' water bills for qualified replacement costs of certain infrastructure without submitting a rate filing. Growth in the water customer base also added~~5,641 customers, primarily due to ~~revenues.~~acquisitions. The average number of water customers served in ~~the 2017 period~~2022 increased as compared to ~~the 2016 period~~2021 by ~~1,186~~805 customers, from ~~66,102~~69,756 to ~~67,288~~70,561 customers. The average number of wastewater customers served in the 2017 period increased as compared to the 2016 period by 1,645 customers, from 645 to 2,290 customers, due to the acquisition. The increase in revenue was partially offset by lower per capita consumption. Total per capita consumption for ~~the third quarter of 2017~~2022 was approximately ~~9.5% lower~~2.1% higher than the same period of last year.

Operating expenses for the third quarter of ~~2017~~2022 increased ~~$358,~~$1,136, or ~~5.8%~~14.5%, from ~~$6,187~~$7,819 for the third quarter of ~~2016~~2021 to ~~$6,545~~$8,955 for the corresponding ~~2017~~2022 period. The increase was primarily due to higher expenses of approximately ~~$218~~$372 for ~~West York~~ wastewater ~~operating expenses, $93~~treatment, $349 for depreciation, $172 for water treatment, $131 for billing and revenue collection services, $84 for distribution system maintenance, and ~~$83~~$58 for ~~depreciation.~~wages. Other expenses increased by a net of ~~$38.~~$56. The ~~increase was~~increased expenses were partially offset by ~~lower expense~~reduced expenses of ~~approximately $74~~$86 for ~~water treatment chemicals.~~outside services.

Interest on debt for the third quarter of ~~2017 increased $26,~~2022 decreased $33, or ~~2.0%~~2.7%, from ~~$1,320~~$1,237 for the third quarter of ~~2016~~2021 to ~~$1,346~~$1,204 for the corresponding ~~2017~~2022 period. The ~~increase~~decrease was primarily due ~~to interest on~~a decrease in long-term debt outstanding. Upon the completion of the underwritten common stock offering in April 2022, the Company repaid its line of ~~credit borrowings.~~credit. The average debt outstanding under the ~~lines~~line of credit was ~~$4,944~~$2,587 for the third quarter of ~~2017~~2022 and $0$12,911 for the third quarter of ~~2016.~~2021. The weighted average interest rate on the ~~lines~~line of credit was ~~2.44%~~2.29% for the quarter ended September 30, ~~2017.~~2022 and 1.30% for the quarter ended September 30, 2021.

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Allowance for funds used during construction increased ~~$260,~~$72, from ~~$51~~$310 in the third quarter of ~~2016~~2021 to ~~$311~~$382 in the corresponding ~~2017~~2022 period due to a higher volume of eligible ~~construction mainly related to the pumping station and force main project.~~construction.

Other income (expenses), net for the third quarter of ~~2017~~2022 reflects ~~a decrease in~~increased expenses of ~~$123~~$83 as compared to the same period of ~~2016. Higher~~2021. Lower earnings on life insurance policies of approximately ~~$113~~$57 were the primary reason for the decrease. Other expenses ~~decreased~~increased by a net of ~~$10.~~$26.

Income taxes for the third quarter of ~~2017~~2022 decreased ~~$270,~~$707, or ~~19.6%~~113.1%, compared to the same period of ~~2016~~2021 primarily due to a higher ~~volume of asset improvements eligible for the tax benefit under~~deductions from the Internal Revenue Service, or IRS, tangible property regulations, or ~~TPR, including the replacement of company-owned lead service lines.~~TPR. The ~~Company's~~Company’s effective tax rate was ~~22.0%~~(1.5)% for the third quarter of ~~2017~~2022 and ~~27.8%~~11.5% for the third quarter of ~~2016.~~2021.

Nine Months Ended September 30, ~~2017~~2022 Compared

With Nine Months Ended September 30, ~~2016~~2021

Net income for the first nine months of ~~2017~~2022 was ~~$9,447,~~$14,569, an increase of ~~$543,~~$1,586, or ~~6.1%~~12.2%, from net income of ~~$8,904~~$12,983 for the same period of ~~2016.~~2021. The primary contributing factors to the increase were higher operating revenues and lower income taxes ~~higher revenues and an increased allowance for funds used during construction,~~ which were partially offset by higher ~~operating~~ expenses.

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Operating revenues for the first nine months of ~~2017~~2022 increased ~~$537,~~$3,565, or ~~1.5%~~8.6%, from ~~$35,699~~$41,385 for the nine months ended September 30, ~~2016~~2021 to ~~$36,236~~$44,950 for the corresponding ~~2017~~2022 period. The ~~primary reasons for~~increase was primarily due to growth in the ~~increase were $467 of~~customer base and revenues from the DSIC ~~and $438~~of $1,623. The average number of wastewater customers served in 2022 increased as compared to 2021 by 2,231 customers, from 3,316 to 5,547 customers, primarily due to the ~~recent~~ West ~~York Borough wastewater~~Manheim Township acquisition. ~~Growth in the water customer base also added to revenues.~~ The average number of water customers served in ~~the 2017 period~~2022 increased as compared to ~~the 2016 period~~2021 by ~~1,092~~723 customers, from ~~65,885~~69,565 to ~~66,977~~70,288 customers. The average number of wastewater customers served in the 2017 period increased as compared to the 2016 period by 1,279 customers, from 641 to 1,920 customers, due to the acquisition. The increase in revenue was partially offset by lower per capita consumption. Total per capita consumption for ~~the first nine months of 2017~~2022 was approximately ~~4.8% lower~~1.1% higher than the same period of last year. For the remainder of the year, the Company expects revenues to increase due to ~~the DSIC and the continued~~an increase in the number of water and wastewater customers from acquisitions and growth within the ~~Company's~~Company’s service ~~territory.~~territory and the DSIC. The duration and severity of the COVID-19 pandemic including any resulting economic slowdown or changes in consumption patterns could impact results. Other regulatory actions and weather patterns could also impact ~~results, although weather is typically not a significant factor during the fourth quarter.~~results.

Operating expenses for the first nine months of ~~2017~~2022 increased ~~$1,327,~~$2,777, or ~~7.2%~~11.8%, from ~~$18,376~~$23,445 for the first nine months of ~~2016~~2021 to ~~$19,703~~$26,222 for the corresponding ~~2017~~2022 period. The increase was primarily due to higher expenses of approximately ~~$450 for West York wastewater operating expenses, $268~~$950 for depreciation, $452 for wastewater treatment, $335 for water treatment, $240 for distribution system maintenance, $239 for wages, $178 for billing and ~~$220~~revenue collection services, and $169 for health insurance. Also adding to the increase were $110 for maintenance, $80 for legal expenses for a tariff modification and lead disclosure, $74 for decreased wages and benefits that were able to be capitalized and $66 for wages.outside services. Other expenses increased by a net of ~~$116. The increase was partially offset by approximately $57 for the absence of rate case expenses.~~$214. For the remainder of the year, the Company expects depreciation expense to continue to rise due to additional investment in utility plant, and other expenses to increase at a moderate rate as costs to treat water and wastewater, and to maintain and extend the distribution system, continue to ~~rise and the full cost to operate the West York Borough wastewater collection system are incurred.~~rise.

Interest on debt for the first nine months of ~~2017~~2022 increased ~~$47,~~$33, or ~~1.2%~~0.9%, from ~~$3,941~~$3,673 for the first nine months of ~~2016~~2021 to ~~$3,988~~$3,706 for the corresponding ~~2017~~2022 period. The increase was primarily due to ~~interest on line of credit borrowings and higher short-term interest rates on the variable rate debt.~~an increase in long-term debt outstanding. The average debt outstanding under the lines of credit was ~~$2,124~~$12,102 for the first nine months of ~~2017~~2022 and $0$9,405 for the first nine months of ~~2016.~~2021. The weighted average interest rate on the lines of credit was ~~1.51%~~1.22% for the nine months ended September 30, ~~2017.~~2022 and 1.30% for the nine months ended September 30, 2021. Interest expense for the remainder of the year is expected to ~~remain higher~~increase due to continued borrowings under ~~lines~~the line of ~~credit.~~credit and higher interest rates.

Allowance for funds used during construction increased ~~$479,~~$19, from ~~$151~~$883 in the first nine months of ~~2016~~2021 to ~~$630~~$902 in the corresponding ~~2017~~2022 period due to a higher volume of eligible ~~construction mainly related to the pumping station and force main project.~~construction. Allowance for funds used during construction for the remainder of the year is expected to ~~decrease as the project is expected to be completed~~increase based on a projected increase in the ~~fourth quarter~~amount of ~~2017.~~eligible construction.

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Other income (expenses), net for the first nine months of ~~2017~~2022 reflects ~~decreased~~increased expenses of ~~$165~~$367 as compared to the same period of ~~2016.~~2021. Higher charitable contributions of approximately $259, lower earnings on life insurance policies of ~~approximately $150~~$87, and ~~outside services in 2016 not repeated in 2017~~higher retirement expenses of ~~$28~~$20 were the primary reasons for the ~~decrease.~~increase. Other expenses increased by a net of ~~$13.~~ $1. For the remainder of the year, other income (expenses) will be largely determined by the change in market returns and discount rates for retirement programs and related assets.

Income taxes for the first nine months of ~~2017~~2022 decreased ~~$736,~~$1,224, or ~~17.6%~~(113.6)%, compared to the same period of ~~2016~~2021 primarily due to a higher ~~volume of asset improvements eligible for the tax benefit under~~deductions from the IRS ~~TPR, including the replacement of company-owned lead service lines.~~TPR. The ~~Company's~~Company’s effective tax rate was ~~26.7%~~(1.0)% for the first nine months of ~~2017~~2022 and ~~31.9%~~7.7% for the first nine months of ~~2016.~~ The Company expects the effective tax rate to be approximately 25% to 30% for 2017 due to the continued expensing of asset improvements that would have been capitalized for tax purposes prior to the implementation of the TPR.2021. The Company's effective tax rate for the remainder of 2022 will ~~vary depending on~~be largely determined by the level of eligible ~~assets~~asset improvements ~~that are placed in service~~expensed for tax purposes under TPR each period.

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Rate Matters

See Note 1110 to the financial statements included herein for a discussion of rate matters.

Effective October 1, ~~2017,~~2022, the Company's tariff included a ~~distribution system improvement charge~~DSIC on revenues of ~~3.72%~~4.91%.

~~The benefit from the implementation of the IRS TPR impacts the rate matters of the Company. Reduced taxes have contributed to increased earnings, lengthening the amount of time between rate increase requests.~~ When the Company does file for its next rate increase, the PPUC will take into account the lower income taxes which resulted from the implementation of the IRS TPR, effectively reducing the amount of revenue required in future years and lowering the Company's rate increase request. The Company does not expect to file a rate increase request in 2017.

Acquisitions and Growth

~~See Note 9 to the financial statements included herein for a discussion of completed acquisitions included in financial results.~~

On ~~October 8, 2013,~~June 9, 2022, the Company signed an agreement to purchase the wastewater collection and treatment assets of ~~SYC WWTP, L.P.~~MESCO, Inc. in ~~Shrewsbury and Springfield Townships,~~Monaghan Township, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in ~~2018,~~the first half of 2023 at which time the Company will add approximately 180 wastewater customers.

On April 28, 2022, the Company signed an agreement to purchase the water assets and wastewater collection and treatment assets of Conewago Industrial Park Water & Sewer Company in Donegal Township, Lancaster County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the first half of 2023 at which time the Company will add approximately 30 commercial and industrial water and wastewater customers.

~~This~~On July 30, 2021, the Company signed an agreement to purchase the water assets of Scott Water Company in Greene Township, Franklin County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in 2022 at which time the Company will add approximately 25 water customers.

On October 8, 2013, the Company signed an agreement to purchase the wastewater collection and treatment assets of SYC WWTP, L.P. in Shrewsbury and Springfield Townships, York County, Pennsylvania. On July 1, 2020, the Company signed an agreement to purchase the Albright Trailer Park water assets and wastewater collection assets of R.T. Barclay, Inc. in Springfield Township, York County, Pennsylvania. Completion of the acquisitions is contingent upon receiving approval from all required regulatory authorities. Closing is expected in 2022, at which time the Company will add approximately 90 combined wastewater customers and approximately 60 water customers through an interconnection with its current water distribution system. The wastewater customers of the Albright Trailer Park are currently served by SYC WWTP, L.P. and the water customers are currently served by the Company, each through a single customer connection to the park.

In total, these acquisitions are expected to be immaterial to Company results. The Company is also pursuing other bulk water contracts and acquisitions in and around its service territory to help offset any ~~further~~potential declines in per capita water consumption and to grow its business.

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On May 10, 2017, the Company signed an emergency interconnect agreement with Dallastown-Yoe Water Authority. The effectiveness of this agreement is contingent upon receiving approval from all required regulatory authorities. Approval is expected to be granted in ~~2018~~2023 at which time the Company will ~~construct~~begin construction of a water main extension to a single point of interconnection and either supply ana minimum agreed upon amount of water to the authority, receive a payment in lieu of water, or provide water during an emergency, at current tariff rates.

Capital Expenditures

For the nine months ended September 30, ~~2017,~~2022, the Company invested ~~$20,628~~$34,050 in construction expenditures for routine items, armoring and ~~an additional raw water pumping station~~replacing the spillway of the Lake Williams dam, and ~~force main,~~wastewater treatment plant construction as well as various replacements and improvements to infrastructure including company-owned lead service lines as discussed in Note 3 to the financial statements included herein. In addition, the Company invested $472 in the acquisition of water and wastewater systems.infrastructure. The Company was able to fund construction expenditures using internally-generated funds, line of credit borrowings, cash generated from the underwritten common stock offering, proceeds from its stock purchase plans and customer advances and ~~contributions.~~contributions from developers, municipalities, customers, or builders.

The Company anticipates construction expenditures for the remainder of ~~2017~~2022 of approximately ~~$4,200~~$11,000 exclusive of any potential acquisitions not yet approved. In addition to routine transmission and distribution projects, a portion of the anticipated expenditures will be for armoring and replacing the spillway of the Lake Williams dam,additional main extensions, ~~completion of the additional raw water pumping station and force main,~~ and various replacements and improvements to ~~infrastructure including company-owned lead service lines.~~infrastructure. The Company intends to use primarily internally-generated funds for its anticipated construction and fund the remainder through line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions. Customer advances and contributions are expected to account for between 5% and 10% of funding requirements during the remainder of ~~2017.~~2022. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary, to ~~meet its~~fund anticipated capital ~~needs~~and acquisition expenditures in ~~2017~~2022 and ~~2018.~~2023.

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Liquidity and Capital Resources

Cash

The Company manages its cash through a cash management account that is directly connected to ~~one of~~ its ~~lines~~line of credit. Excess cash generated automatically pays down outstanding borrowings under the line of credit arrangement. If there are no outstanding borrowings, the cash is used as an earnings credit to reduce banking fees. Likewise, if additional funds are needed beyond what is generated internally for payroll, to pay suppliers, to fund capital expenditures, or to pay debt service, funds are automatically borrowed under the line of credit. ~~The~~As of September 30, 2022, the Company ~~fully utilized~~borrowed $7,107 on its ~~cash on hand during the first nine months~~line of ~~2017 primarily as a result of higher capital expenditures~~credit and ~~repurchase of common stock, incurring~~incurred a cash overdraft on its cash management account of ~~$1,206 as of September 30, 2017. In addition, the Company borrowed $5,246 under its lines of credit in 2017.~~$3,608. The cash and cash management facility ~~and other lines~~connected to the line of credit are expected to provide the necessary liquidity and funding for the Company's operations, capital expenditures, ~~acquisitions~~ and ~~potential buybacks of stock~~acquisitions for the foreseeable future.

Accounts Receivable

The accounts receivable balance tends to follow the change in revenues but is also affected by the timeliness of payments by customers and the level of the reserve for doubtful accounts. In the three months ended September 30, ~~2017,~~2022, higher revenue levels as compared to the end of ~~2016~~2021 resulted in an increase in accounts receivable ~~as reflected on the statement of cash flows. Timeliness of payments and the level of the reserve were not significant factors to the change.~~– customers. A reserve is maintained at a level considered adequate to provide for losses that can be reasonably anticipated based on inactive accounts with outstanding balances. Management periodically evaluates the adequacy of the reserve based on past experience, agings of the receivables, adverse situations that may affect a ~~customer's~~customer’s ability to pay, current economic conditions, and other relevant factors. During 2022, management’s assessment included consideration of the COVID-19 pandemic along with past trends during times of economic instability and regulations from the PPUC regarding customer collections, including the aging of balances in payment agreements, and determined its allowance for doubtful accounts should remain elevated compared to historical norms. If the status of these factors deteriorates, the Company may incur additional expenses for uncollectible accounts and experience a reduction in its internally-generated funds.

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Internally-generated Funds

The amount of internally-generated funds available for operations and construction depends on the ~~Company's~~Company’s ability to obtain timely and adequate rate relief, changes in regulations including taxes, ~~customers'~~customers’ water usage, weather conditions, customer growth and controlled expenses. During the first nine months of ~~2017,~~2022, the Company generated ~~$15,416~~$17,311 internally from operations as compared to the ~~$14,016~~$18,476 it generated during the first nine months of ~~2016~~2021. The decrease was primarily due ~~primarily~~ to ~~lower income taxes paid and an~~the increase in ~~depreciation~~accounts receivable – customers.

Common Stock

On April 5, 2022, the Company closed an underwritten public offering of 975,600 shares of its common stock, with an offering price of $41 per share. On April 7, 2022, the Company closed on the full exercise of the underwriter’s option to purchase an additional 146,340 shares of its common stock at the same price. Janney Montgomery Scott LLC was the underwriter in the offering. The Company received net proceeds in the offering, after deducting offering expenses and ~~amortization,~~underwriters’ discounts and commissions, of $43,970. The net proceeds were used to repay the Company’s borrowings under its line of credit agreement incurred to fund capital expenditures and acquisitions, and for general corporate purposes.

Common stockholders’ equity as a ~~non-cash expense.~~percent of the total capitalization was 61.7% as of September 30, 2022, compared with 50.6% as of December 31, 2021. Based on the equity percentage falling to fifty percent, the Company completed the underwritten common stock offering, increasing equity as a percentage of total capitalization. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward until it approaches fifty percent before considering additional equity. It is the Company’s general intent to target equity between fifty and fifty-four percent of total capitalization.

The Company has the ability to issue approximately $4,000 of additional shares of its common stock or debt securities remaining under an effective “shelf” Registration Statement on Form S-3 on file with the Securities and Exchange Commission subject to market conditions at the time of any such offering.

Credit ~~Lines~~Line

Historically, the Company has borrowed ~~$15,000 to $20,000~~ under its ~~lines~~line of credit before refinancing with long-term debt or equity capital. As of September 30, ~~2017,~~2022, the Company maintained an unsecured ~~lines~~line of credit ~~aggregating $41,500 with four banks~~in the amount of $50,000 at an interest ~~rates~~rate of LIBOR plus ~~1.20%~~1.05% with an unused commitment fee and ~~LIBOR plus 1.25%.~~an interest rate floor. The Company had ~~$5,246~~$7,107 in outstanding borrowings under its ~~lines~~line of credit as of September 30, ~~2017.~~ 2022. The ~~weighted average~~ interest rate on the line of credit borrowings as of September 30, ~~2017~~2022 was ~~2.44%~~3.61%. In the ~~second~~third quarter of ~~2017,~~2022, the Company renewed ~~two of~~ its ~~committed lines of credit aggregating $24,000 and extended the maturity date to May 2019. In addition, the Company renewed its $7,500~~ committed line of credit and extended the maturity date to ~~June 2018.~~ InSeptember 2024. As part of the ~~third quarter~~renewal, the interest rate will change from LIBOR plus 1.05% to a successor rate of ~~2017,~~ the ~~Company renewed its $10,000 committed~~Secured Overnight Financing Rate, or SOFR, plus 1.17% on January 1, 2023, in advance of the likely discontinuation of LIBOR in 2023. No other terms or conditions of the line of credit ~~and extended the maturity to September 2018~~.agreement were modified.

The Company has taken steps to manage the risk of reduced credit availability. It has ~~maintained~~established a committed ~~lines~~line of credit with a 2-year revolving maturity that cannot be called on ~~demand and obtained a 2-year revolving maturity on its larger facilities.~~demand. There is no guarantee that the Company will be able to obtain sufficient lines of credit with favorable terms in the future. If the Company is unable to obtain sufficient lines of credit or to refinance its line of credit borrowings with long-term debt or equity when necessary, it may have to eliminate or postpone capital expenditures. Management believes the Company will have adequate capacity under its current ~~lines~~line of credit ~~and access to capital markets, if necessary,~~ to meet anticipated financing needs throughout ~~2017~~2022 and ~~2018.~~2023.

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Long-term Debt

The ~~Company's~~Company’s loan agreements contain various covenants and restrictions. Management believes it is currently in compliance with all of these restrictions. See Note 46 to the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 for additional information regarding these restrictions.

The ~~Company's~~Company’s total long-term debt as a percentage of the total capitalization, defined as total common ~~stockholders'~~stockholders’ equity plus total long-term debt, was ~~43.8%~~38.3% as of September 30, ~~2017 and 43.4%~~2022, compared with 49.4% as of December 31, ~~2016. The~~2021. Based on the debt percentage reaching fifty percent, the Company ~~began using~~completed an underwritten common stock offering in April 2022 and repaid its line of credit, ~~in 2017 which increased the~~decreasing long-term debt toas a percentage of total ~~capitalization ratio.~~capitalization. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend ~~upward until it approaches fifty percent before considering additional equity.~~upward. A debt to total capitalization ratio between forty-six and fifty percent has historically been acceptable to the PPUC in rate filings. ~~Due to its ability to generate cash internally,~~

The variable rate line of credit and the interest rate swap of the Company use the London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing the rates. The United Kingdom’s Financial Conduct Authority (UK FCA), which regulates LIBOR, has previously announced that it intends to stop encouraging or compelling banks to submit rates for the calculation of LIBOR rates after 2021. On January 4, 2022, the UK FCA announced that certain dollar denominated LIBOR settings, including the 1-month setting used by the Company’s variable line of credit and interest rate swap, would be calculated through June 30, 2023. This indicates that the continuation of LIBOR on the current basis is not guaranteed after that date and based on the foregoing, it appears likely that LIBOR will be discontinued or modified. As part of the renewal of its line of credit in the third quarter of 2022, the agreement has been ~~able~~amended to ~~keep~~change the reference rate from LIBOR to SOFR on January 1, 2023. The margin was established at the historical spread between LIBOR and SOFR to minimize the impact on the Company’s financial position, results of operations and cash flows upon this change. The Company believes that it is implicit in its ~~ratio below fifty percent.~~other agreements that a successor rate to LIBOR may be used. The Company is not yet aware what successor rate will be used in those agreements and therefore cannot estimate the impact to the Company’s financial position, results of operations and cash flows, but it could include an increase in the cost of the variable rate indebtedness.

Income Taxes, Deferred Income Taxes and Uncertain Tax Positions

The Company has a substantial deferred income tax asset primarily due to the differences between the book and tax balances of the pension and deferred compensation plans. The Company does not believe a valuation allowance is required due to the expected generation of future taxable income during the periods in which those temporary differences become deductible.

The Company has seen an increase in its deferred income tax liability amounts primarily as a result of the accelerated and bonus depreciation and TPR deductions available for federal tax purposes which creates differences between book and tax depreciation expense. The Company expects this trend to continue as it makes significant investments in capital expenditures subject to accelerated and bonus depreciation or TPR deductions.

~~The Company filed for a change in accounting method under the IRS TPR effective in 2014.~~ Under the ~~change in accounting method,~~Internal Revenue Service TPR, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions. The Company expects ~~an effective tax rate of 28%~~ to ~~32% each year based on normal~~continue to expense these asset ~~improvement estimates.~~ improvements in the future.

The Company’s effective tax rate will ~~vary depending on~~largely be determined by the level of eligible ~~assets~~asset improvements expensed for tax purposes that would have been capitalized for tax purposes prior to the implementation of TPR.

On July 8, 2022, the Pennsylvania budget for the fiscal year ending June 30, 2023 was signed into law. A provision within the tax code bill included with the budget provides for an annual phase-down of the Pennsylvania corporate net income tax rate of one percentage point in the first year beginning January 1, 2023 from 9.99% to 8.99%, and a one-half percentage point each year thereafter until it reaches 4.99% beginning January 1, 2031. The Company has remeasured the state portion of the Company’s deferred income taxes as of September 30, 2022. The effect, net of the federal benefit, of $18 was recognized in income for the three and nine months ended September 30, 2022. Deferred income taxes for differences that are ~~placed~~recognized for ratemaking purposes on a cash or flow-through basis were remeasured with offsetting changes to regulatory assets and liabilities on the balance sheet as of September 30, 2022. The Company expects any savings in ~~service each period. In~~its Pennsylvania current income taxes to be returned to its customers through the ~~first three quarters of 2017, the~~rate making process or as a future negative surcharge on their bills.

The Company has ~~experienced an increased level of TPR deductions mainly~~a substantial deferred income tax asset primarily due to ~~increased replacement~~the excess accumulated deferred income taxes on accelerated depreciation from the 2017 Tax Act and the differences between the book and tax balances of ~~company-owned lead service lines reducing~~ the ~~tax rate below~~customers’ advances for construction and contributions in aid of construction and deferred compensation plans. The Company does not believe a valuation allowance is required due to the expected ~~rate~~generation of ~~28%.~~future taxable income during the periods in which those temporary differences become deductible.

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The Company has seen an increase in its deferred income tax liability amounts primarily as a result of the accelerated depreciation deduction available for federal tax purposes which creates differences between book and tax depreciation expense. The Company expects this trend to continue ~~until replacement of company-owned lead service lines is materially complete. See Note 3~~as it makes significant investments in capital expenditures subject to ~~the financial statements included herein for additional information regarding company-owned lead service line replacement.~~accelerated depreciation or TPR.

The Company has determined there are no uncertain tax positions that require recognition as of September 30, ~~2017.~~2022.

~~Common Stock~~

Common stockholders' equity as a percent of the total capitalization was 56.2% as of September 30, 2017 and 56.6% as of December 31, 2016. The ratio decreased during the nine months ended September 30, 2017 due to share repurchases and higher debt from increased capital expenditures. Similar transactions, among other things, could further reduce this percentage in the future. It is the Company's general intent to target a ratio between fifty and fifty-four percent.

Credit Rating

On ~~April 21, 2017,~~August 9, 2022, Standard & ~~Poor's~~Poor’s affirmed the ~~Company's~~Company’s credit rating at A-, with a stable outlook and adequate liquidity. The ~~Company's~~Company’s ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, which it has been successful in obtaining, its ability to fund capital expenditures in a balanced manner using both debt and equity and its ability to generate cash flow. The ~~Company's~~Company’s objectives are to continue to maximize its funds provided by operations and maintain a strong capital structure in order to be able to attract capital.

Physical and Cyber Security

The Company maintains security measures at its facilities, and collaborates with federal, state, and local authorities and industry trade associations regarding information on possible threats and security measures for water and wastewater utility operations. The costs incurred are expected to be recoverable in water and wastewater rates and are not expected to have a material impact on its business, financial condition, or results of operations.

The Company relies on information technology systems in connection with the operation of the business, especially with respect to customer service, billing, accounting, and in some cases, the monitoring and operation of treatment, storage, and pumping facilities. In addition, the Company relies on these systems to track utility assets and to manage maintenance and construction projects, materials and supplies, and human resource functions. The information technology systems may be vulnerable to damage or interruption from cyber security attacks or other cyber-related events, including, but not limited to, power loss, computer systems failures, internet, telecommunications or data network failures, physical and electronic loss of data, computer viruses, intentional security breaches, hacking, denial of service actions, misappropriation of data, and similar events. In some cases, administration of certain functions may be outsourced to third-party service providers that could also be targets of cyber security attacks. A loss of these systems, or major problems with the operation of these systems, could harm the business, financial condition, and results of operations of the Company through the loss or compromise of customer, financial, employee, or operational data, disruption of billing, collections or normal field service activities, disruption of electronic monitoring and control of operational systems, and delays in financial reporting and other normal management functions.

Possible impacts associated with a cyber security attack or other events may include remediation costs related to lost, stolen, or compromised data, repairs to data processing systems, increased cyber security protection costs, adverse effects on our compliance with regulatory and environmental laws and regulation, including standards for drinking water, litigation, and reputational damage.

The Company has implemented processes, procedures, and controls to prevent or limit the effect of these possible events and maintains insurance to help defray costs associated with cyber security attacks. The Company has not experienced a material impact on business or operations from these attacks. Although the Company does not believe its systems are at a materially greater risk of cyber security attacks than other similar organizations and despite the implementation of robust security measures, the Company cannot provide assurance that the insurance will fully cover the costs of a cyber security event, and its robust security measures do not guarantee that reputation and financial results will not be adversely affected by such an incident.

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Environmental Matters

~~During its triennial testing completed~~

The Company entered into a consent order agreement with the Pennsylvania Department of Environmental Protection, or DEP, in December 2016 after the Company determined it exceeded the action level for lead as established by the Lead and Copper Rule, or LCR, issued by the U.S. Environmental Protection Agency. The ~~rule allows the~~ Company to have five samples of the 50 high-risk homes tested exceed the action level of 15 parts per billion, or PPB. The testing found that six properties with lead service lines, all built before 1935, exceeded the action level, and the reported exceedance amount was 1 PPB. The Company determined that only 3% of the company-owned service lines in the system were lead. The Company is required, per the LCR, to engage in more frequent testing for lead, public education, and annually replace 7% of the remaining company-owned lead service lines in its distribution system. The Company completed two rounds of compliance testing at the customer's tap in 2017 and the water samples did not ~~exceed the action level either time. As a result, the Company expects to reduce its monitoring from semi-annual to annual beginning~~have an exceedance in ~~2018.~~

~~The Company is performing in excess of the required actions under the LCR. Specifically, the Company is providing the affected customers with a free water~~any subsequent compliance test and a 200 gallon per month credit to flush their line in order to reduce any lead content until their lead service line has been replaced. The cost of the water tests and flushing credits was $2 for the three months ended September 30, 2017 and $13 for the nine months ended September 30, 2017. Additional amounts for water tests and flushing credits are not expected to have a material impact on the financial position of the Company over the remaining three and a half years.

~~In addition, the Company entered into a consent order agreement with the Pennsylvania Department of Environmental Protection in December 2016. Under the agreement, the Company committed~~successfully completed its commitment to exceed the LCR replacement schedule by replacing all of the ~~remaining~~known company-owned lead service lines within four years from the agreement. ~~The cost for these service line replacements was approximately $1,478 through September 30, 2017~~In June 2022, DEP determined the Company had completed all requirements and ~~is included in utility plant. Additional costs of approximately $1,082 are expected until~~terminated the ~~replacements are complete, and will be integrated into the Company's annual capital budgets.~~consent order agreement.

~~Finally, the~~The Company was granted approval by the Pennsylvania Public Utility Commission, or PPUC, to modify its tariff ~~to include the cost of the replacement of lead customer-owned service lines that are discovered when the Company replaces its lead service lines over the next three and a half years, and~~ to include the cost of the annual replacement of up to 400 lead customer-owned service lines ~~whenever they are discovered, regardless of the material used for the Company-owned service line~~ over nine ~~years.~~years from the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a ~~reasonable period of at least four but not more than six years.~~four-year period. The cost for the customer-owned lead service line replacements ~~under the four-year tariff modification~~ was approximately ~~$110~~$1,501 and $1,351 through September 30, ~~2017~~2022 and December 31, 2021, respectively, and is included as a regulatory asset. ~~Additional replacements are expected to be approximately $79 under~~Based on its experience, the ~~four-year tariff modification, assuming the average percentage of customer-owned lead service lines~~Company estimates that ~~were replaced when company-owned lead service lines were replaced through September 30, 2017 remains consistent over the entire replacement period. The Company is unable to predict how many~~ lead customer-owned service lines ~~are in use, and, therefore, its current~~replacements will cost $1,700. This estimate ~~of $1,040 for replacements under the nine-year tariff modification~~ is subject to adjustment as more facts become available.

~~Labor Relations~~

The current union contract expired on April 30, 2017. Management and the union leadership have agreed to honor the expired contract and continue to work under its terms. Both sides are negotiating in good faith and the Company expects to reach an operationally and fiscally responsible agreement with no interruption of service.

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Critical Accounting Estimates

The methods, estimates, and judgments the Company used in applying its accounting policies have a significant impact on the results reported in its financial statements. The ~~Company's~~Company’s accounting policies require management to make subjective judgments because of the need to make estimates of matters that are inherently uncertain. The ~~Company's~~Company’s most critical accounting estimates include regulatory assets and liabilities, revenue recognition, ~~and~~ accounting for its pension ~~plans.~~plans, and income taxes. There has been no significant change in accounting estimates or the method of estimation during the quarter ended September 30, ~~2017.~~2022.

Off-Balance Sheet Arrangements

The Company does not use off-balance sheet transactions, arrangements or obligations that may have a material current or future effect on financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses. The Company does not use securitization of receivables or unconsolidated entities. For risk management purposes, the Company uses a derivative financial instrument, an interest rate swap agreement discussed in Note 6 to the financial statements included herein. The Company does not engage in trading or other risk management activities, does not use other derivative financial instruments for any purpose, has no ~~material lease obligations, no~~ guarantees and does not have material transactions involving related parties.

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Item 3.

Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.

The Company's operations are exposed to market risks primarily as a result of changes in interest rates under its lines of credit. The Company has unsecured lines of credit with four banks having a combined maximum availability of $41,500. The first line of credit, in the amount of $13,000, is a committed line of credit with a revolving 2-year maturity (currently May 2019), and carries an interest rate of LIBOR plus 1.20%. The second line of credit, in the amount of $11,000, is a committed line of credit, which currently matures in May 2019 and carries an interest rate of LIBOR plus 1.25%. The third line of credit, in the amount of $7,500, is a committed line of credit, which matures in June 2018 and carries an interest rate of LIBOR plus 1.25%. The fourth line of credit, in the amount of $10,000, is a committed line of credit, which matures in September 2018 and carries an interest rate of LIBOR plus 1.20%. The Company had outstanding borrowings of $4,246 under its $13,000 line of credit and $1,000 under its $10,000 line of credit as of September 30, 2017. ~~The weighted average interest rate on line of credit borrowings as of September 30, 2017 was 2.44%.~~ Other than lines of credit, the Company has long-term fixed rate debt obligations that are not subject to interest rate risk as shown in Note 5 to the financial statements included herein, and a variable rate PEDFA loan agreement, which is subject to minimal market risk, described below.Not applicable.

In May 2008, the PEDFA issued $12,000 aggregate principal amount of PEDFA Exempt Facilities Revenue Bonds, Series A (the "2008 Bonds"). The proceeds of this bond issue were used to refund the $12,000 PEDFA Exempt Facilities Revenue Bonds, Series B of 2004 which were refunded due to bond insurer downgrading issues. The PEDFA then loaned the proceeds to the Company pursuant to a variable interest rate loan agreement with a maturity date of October 1, 2029. The interest rate under this loan agreement averaged 0.86% during the three months ended September 30, 2017 and 0.81% during the nine months ended September 30, 2017. In connection with the loan agreement, the Company retained its interest rate swap agreement whereby the Company exchanged its floating rate obligation for a fixed rate obligation. The purpose of the interest rate swap is to manage the Company's exposure to fluctuations in the interest rate. If the interest rate swap agreement works as intended, the receive rate on the swap should approximate the variable rate the Company pays on the PEDFA Series A 2008 Bond Issue, thereby minimizing its risk. See Note 6 to the financial statements included herein for additional information regarding the interest rate swap.

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In addition to the interest rate swap agreement, the Company entered into a Reimbursement, Credit and Security Agreement with PNC Bank, National Association ("the Bank"), dated as of May 1, 2008, in order to enhance the marketability of and to minimize the interest rate on the 2008 Bonds. This agreement provides for a direct pay letter of credit issued by the Bank to the trustee for the 2008 Bonds. The current expiration date of the letter of credit is June 30, 2019. It is reviewed annually for a potential extension of the expiration date. The Company's responsibility under this agreement is to reimburse the Bank on a timely basis for interest payments made to the bondholders and for any tendered bonds that could not be remarketed. The Company has fourteen months from the time bonds are tendered to reimburse the Bank. If the direct pay letter of credit is not renewed, the Company would be required to pay the Bank immediately for any tendered bonds and reclassify a portion of the bonds as current liabilities. In addition, the interest rate swap agreement would terminate causing a potential payment by the Company to the counterparty. Both the letter of credit and the swap agreement can potentially be transferred upon this type of event.

Item 4.

Controls and ~~Procedures~~Procedures.

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Company's President and Chief Executive Officer along with the Chief Financial Officer concluded that the Company's disclosure controls and procedures as of the end of the period covered by this report are effective such that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the ~~Company's~~Company’s management, including the President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 6.

~~Exhibits~~Exhibits.

Exhibit No.		Description

~~Exhibit No.~~	~~Description~~
3		Amended and Restated Articles of Incorporation. Incorporated herein by reference to Exhibit 3.1 of the ~~Company's~~Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2010.

3.1		Amended and Restated By-Laws. Incorporated herein by reference to Exhibit 3.1 of the ~~Company's~~Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2012.

31.1		Certification of Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.

31.2		Certification of Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.

32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002..

32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH		Inline XBRL Taxonomy Extension ~~Schema~~ Schema.

101.CAL		Inline XBRL Taxonomy Extension Calculation ~~Linkbase~~ Linkbase.

101.DEF		Inline XBRL Taxonomy Extension Definition ~~Linkbase~~ Linkbase.

101.LAB		Inline XBRL Taxonomy Extension Label ~~Linkbase~~ Linkbase.

101.PRE		Inline XBRL Taxonomy Extension Presentation ~~Linkbase~~ Linkbase.

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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~~EXHIBIT INDEX~~

~~Exhibit No.~~	~~Description~~
3	Amended and Restated Articles of Incorporation. Incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2010.
~~3.1~~	~~Amended and Restated By-Laws. Incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2012.~~
~~31.1~~	~~Certification of Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.~~
~~31.2~~	~~Certification of Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.~~
~~32.1~~	~~Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~32.2~~	~~Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~101.INS~~	~~XBRL Instance Document~~
~~101.SCH~~	~~XBRL Taxonomy Extension Schema~~
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase~~
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase~~
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase~~
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE YORK WATER COMPANY


	/s/~~Jeffrey R. Hines~~ Joseph T. Hand
Date: November ~~2, 2017~~3, 2022	~~Jeffrey R. Hines~~Joseph T. Hand Principal Executive Officer



	/s/~~Kathleen M. Miller~~ Matthew E. Poff
Date: November ~~2, 2017~~3, 2022	~~Kathleen M. Miller~~Matthew E. Poff Principal Financial and Accounting Officer

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